1. Central Asia Regional Economic Cooperation (CAREC) Program CAREC Secretariat Asian Development Bank 9 March 2011 1

2. Overview of CAREC Sectoral overview: Transport and Trade facilitation Sectoral overview: Energy Other Initiatives CAREC Program in 2010-2011 Scope of Presentation 2

3. Overview of CAREC 3

4. Partnership −Member Countries: AFG, AZE, PRC, KAZ, KGZ, MON, PAK, TAJ, TKM, UZB −Multilateral Institution (MI) Partners: ADB, IMF, WB, EBRD, IsDB, UNDP −Informal arrangement but a serious commitment by all −Strong MI collaboration, but ownership by countries Action-oriented and Pragmatic approach −Based on clear strategies and action plans −Covers both hard and soft aspects of cooperation −Invests in transport, energy, and trade facilitation −Promotes capacity development and networking What is CAREC? 4

5. Good Neighbors, Good Partners, Good Prospects Vision Goal Development through cooperation, leading to accelerated economic growth and poverty reduction 5

6. CAREC Strategies and Action Plans CAREC Comprehensive Action Plan −Endorsed in 2006 at the 5 th CAREC Ministerial Conference (MC) in PRC Transport and Trade Facilitation Strategy and Action Plan −Strategy endorsed in 2007 at the 6 th MC in TAJ & Action Plan in 2008 at 7 th MC in AZE Trade Policy Strategic Action Plan −Endorsed in 2008 at 7 th MC in AZE Energy Strategy and Action Plan −Strategy endorsed in 2008 at the 7 th MC in AZE & Action Plan in 2009 at 8 th MC in MON 6

7. Approved CAREC-related Projects (as of Feb 2011; in US$ million) 7 Funding Source SectorADBEBRDIsDBWBGovtsOthersTotal Transport 3,480 615 625 4,039 2,584 741 12,084 Trade Facilitation 48 - 14 107 49 1 219 Energy 1,028 348 247 286 386 448 2,743 Total 4,556 963 886 4,431 3,019 1,189 15,046

8. Overall Institutional Framework (OIF) OIF supports: Broad-based dialogue and consensus building Identification and prioritization of regional cooperation initiatives Mobilization of financial and technical resources 8

9. Overall Institutional Framework (OIF) Ministerial Conference (MC) −Provides overall guidance to the CAREC Program and determines policy and strategic directions and goals. Senior Officials’ Meeting (SOM) −Ensure the effective implementation of the policy decisions made by the Ministerial Conference. −Its main responsibilities include: (i)reviewing and articulating issues that emerge from the operational level and making relevant recommendations to the Ministers (ii)preparing for the Ministerial Conference Sector Committees −Lead the program in four priority areas, Transport, Trade Facilitation, Trade Policy and Energy −These committees feed their outputs to the SOM and the MC. CAREC Secretariat - ADB 9

10. Role of NFPs and Sector Focal Points National Focal Points (NFPs) Ensure effective coordination (i) among concerned agencies and other interested parties in matters related to regional economic cooperation; and (ii) between the government and the CAREC secretariat. Sector Focal Points Act as focal points for the relevant sector works in the CAREC Program in close coordination with the NFPs and other concerned parties in the countries. 10

11. 11 CAREC Results Framework DESIRED LONG-TERM IMPACT OF CAREC PROGRAM 'Accelerated economic growth and poverty reduction' DESIRED LONG-TERM IMPACT OF CAREC PROGRAM 'Accelerated economic growth and poverty reduction' Level 1: CAREC COUNTRIES' DEVELOPMENT OUTCOMES Level 2: CAREC PRIORITY SECTOR OUTPUTS Level 2: CAREC PRIORITY SECTOR OUTPUTS Level 3: OPERATIONAL AND ORGANIZATIONAL EFECTIVENESS Aggregated data for macro-level indicators in: Poverty Reduction GDP, Trade and Business Environment Aggregated data for sectoral level indicators in: Transport Sector Trade Policy Sector Trade Facilitation Sector Energy Sector Aggregated data for input level indicators in: Operations Growth Knowledge Management Finance Mobilization Central Asia Regional Economic Results Framework

12. MINISTERIAL CONFERENCE SENIOR OFFICIALS’ MEETING (SPRING) 31 January Data Submission 31 January Data Submission Sector Coordinating Committees and CAREC Secretariat identify mechanisms to address the actions, and update work plans. SENIOR OFFICIALS’ MEETING (FALL) Quarter 1 Quarter 2Quarter 3 Quarter 4

13. Sectoral Overview Transport and Trade Facilitation 13

14. East Asia  Middle East 1995 = $57 billion 2008 = $454 billion EU  South Asia 1995 = $34 billion 2008 =$117 billion East Asia  EU 1995 = $244 billion 2008 = $795 billion CAREC—A Silk Route to Markets

15. Transport and Trade Facilitation: Strategic Priorities Upgrade the 6 transport corridors 1.Europe – East Asia Corridor4.Russian Federation – East Asia 2.Mediterranean – East Asia5.East Asia – Middle East and South Asia 3.Russian Federation – Middle6.Europe – Middle East and East and South AsiaSouth Asia Develop safe, people-friendly transport systems Ensure efficient movement of goods and people −simplify and harmonize regulations that govern cross- border trade 15

16. 16 Heading

17. 17 Text Heading Europe-East Asia Corridor

18. 18 Text Heading Mediterranean-East Asia Corridor

19. 19 Text Heading Russia-Middle East-South Asia Corridor

20. 20 Text Heading Russia-East Asia Corridor

21. 21 Text Heading East Asia-Middle East, South Asia Corridor

22. 22 Text Heading Europe-Middle East, South Asia Corridor

23. Improved the corridor network −Embarked on 65 projects worth over USD10 billion −32% of road and rail corridors completed (as of 10/2010) Promoted customs cooperation and transit −Capacity building and investments on customs reforms −Customs modernization, adoption of risk management and post-entry audit, and joint customs control started −Safe packet systems in KAZ and KGZ in place −Cross-border transport agreement signed by KGZ and TAJ for CAREC Corridor 5 Carried out integrated trade facilitation −Regional association of freight forwarders established −Corridor performance being monitored and measured −Single window systems being adopted Key Achievements in TTF 23

24. Key elements −Enables and makes easy international road transport along CAREC corridor o Allows entry of vehicles registered in the other country o Mutually recognizes driving licenses, transport operators’ license, and third-party motor vehicle liability insurance o Exempts goods, vehicles and containers in transit from customs formalities −Harmonizes design and construction standards of roads, bridges, road signs and signals, and road safety and border crossing infrastructure and equipment −Facilitates border crossing formalities o Promotes one-stop, single-window clearance; advance exchange of information; risk management/post-entry audit o Synchronizes border crossing point operating hours o Harmonizes cross-border trade documents Cross-Border Transport Agreement 24

25. Accelerate infrastructure investment Improve border infrastructure and facilities −Hard and soft aspects of border crossing points improvement Promote Cross Border Transport Agreement −Accession by other CAREC Countries −Follow-up activities for effective implementation Develop capacities −Establishment of efficient management systems and associated capacity building −framework to rationalize sustainable skills development Future Directions of TTF (1) 25

26. Maintain momentum of new institutions −National Joint Committees, CAREC Federation of Carrier and Forwarder Associations Address new areas −Sanitary/phyto-sanitary inspection; −Movement of people (particularly business people) Optimize use of Corridor Performance Measurement and Monitoring (CPMM) results −corridor analyses plus country level & project analyses −targeted work plan to tackle weakest link on corridors and worst bottlenecks at border crossing points Future Directions of TTF (2) 26

27. Sectoral Overview Energy 27

28. 28 5,400 5 2 68 82 2,700 5 5 2,610 1,674 16,000 580 507 0 2,851 24,100 590 514 2,678 4,607 Kazakhstan The Kyrgyz TajikistanTurkmenistan Uzbekistan Coal MTOE Gas MTOE Crude Oil MTOE Legend 27 163 317 2 15 Hydro Potential TWh/year Source: World Bank Republic

29. CAREC Energy Sector Strategy Long-Term Vision Ensure energy security Enhance economic growth through energy trade Strategic Elements Domestic and cross-border investments Capacity Building and Knowledge Sharing Policy measures Strategic Dimensions - 5 Energy Corridors Cooperation opportunities within Central Asia, Central Asia-PRC, Central Asia-South Asia, Central-Asia-Russia, & Central Asia-EU

30. Azerbaijan Uzbekistan Kazakhstan Turkmenistan Electricity Oil and Gas Tajikistan Kyrgyzstan Strategic Dimensions Coal Afghanistan PRC

31. 31 Energy Sector Action Plan (2010-2013) Regional Institutions  Energy Sector Coordinating Committee (ESCC)  Regional power dispatch center (CDC) Rich Energy Resources Oil, Gas, Water, Wind, Coal  Extensive reserves and renewables  Diversity of resources  Uneven distribution across countries Export Opportunities  South Asia  China  EU  Russia Energy Water Linkages CAREC Energy security and efficiency, affordability RESOURCES ACTIONS RESULTS Priority: - Central Asia - Electricity Energy Demand/ Supply Balance and Infrastructure Regional Dispatch and Regulatory Development Approved October 2009

32. Action Plan Objective  To promote regional trade by optimizing integrated transmission and generation expansion Why?  Uneven energy demand/supply balance  Infrastructure constraints (generation, transmission, distribution) How  Investment: Promote infrastructure investment  Capacity development & knowledge sharing: Conduct thematic capacity development program  Policy measures: Develop Regional Power Master Plan for 4 Central Asian countries + Afghanistan based on a diagnostic study Progress  Several investment projects completed and on going  Diagnostic study completed in 2010  Regional Master Plan to be delivered for the 10 th CAREC MC Pillar 1: Energy Demand/Supply Balance and Infrastructure Constraints 32

33. 33 Ongoing Proposed Afghanistan Tajikistan Regional Power Transmission

34. Action Plan Objective  To maximize the benefits of unified operation of the Central Asia Power System Why?  Substantial decline in regional energy trade  Ensure reliable power supply  Enable optimal utilization through balanced dispatch and regulatory How?  Investment: Phase investments based on diagnostic study  Capacity development & knowledge sharing: Strengthen CDC and national load dispatch centers and support for regulators  Policy measures: Develop an institutional platform and framework for regional power trade Progress  Diagnostic study completed in 2010  Next steps to be identified by the ESCC Pillar 2: Regional Dispatch and Regulatory Development 34

35. Action Plan Objective  To Strengthen cooperation by integrating energy and water analysis Why?  Transboundary water management  Need for integrating energy and water analysis How  Investment: Identify consensus projects to improve the rational and effective use of energy and water  Capacity development & knowledge sharing: Enhance integrated energy-water models, analytical tools, and shared databases  Policy measures: Strengthen Central Asian institutions to lead the dialogue and analysis on rational use of energy-water resources Progress  Initial consultations have been done in 2010  Detailed TORs for energy-water analytical and institutional framework to be developed in 2011 Pillar 3: Energy-Water Linkages 35

36. Proceed to next steps in work planProceed to next steps in work plan −Complete Regional Power Sector Master Plan (Pillar 1) −Identify priority activities in coordination with USAID and implement short term actions (Pillar 2) −Prepare detailed terms of reference for energy-water analytical and institutional frameworks (Pillar 3) Develop the rolling project pipelineDevelop the rolling project pipeline Conduct Capacity Building ProgramConduct Capacity Building Program Action plans focusing on other energy corridors to be considered in the medium termAction plans focusing on other energy corridors to be considered in the medium term Nominate and confirm alternate Focal PointsNominate and confirm alternate Focal Points Future Directions 36

37. Other Initiatives 37

38. Trade Policy Strategic Action Plan (TPSAP) Strategic goals −More open economies −WTO membership for all countries −Capacity development and knowledge transfer of trade and trade policy issues Operational strategy −Broad-based reduction in trade barriers, increased transparency, and simplification of trade regulations −Provide practical assistance to non-WTO members to build capacity and transfer knowledge −Capacity building and knowledge transfer activities 38

39. Key Achievements in 2010 WTO accession training −Seminars by countries −Seminars by World Bank −Analytical note Monitoring TPSAP implementation −Questionnaire formulated −Some progress but more efforts needed: ▪Simplification of trade tax regime ▪Reduction of tariffs −Trade Liberalization Index 2009: most 2010 targets met Institutional impediments to trade −Analytical study completed −Recommendations: ▪Simplify procedures for import and export ▪Improve general business environment ▪Deepen financial system −Next steps: ▪Countries’ specific agendas to be monitored by TPCC 39

40. Future Directions WTO accession −Impact of trade agreements and customs union −Knowledge sharing training program −Round Table on progress and impediments at next TPCC meeting Monitoring TPSAP implementation −Submit responses by end-February 2011 −Trade Liberalization Index for 2010 Institutional impediments to trade −Country-specific plans by end-February 2011 40

41. CAREC Institute (CI) Mission − Enhance the quality of regional cooperation by generating world-class knowledge resources in the priority areas of transport and trade facilitation, energy and trade policy. Structure − Initially “virtual” Main outputs − Professional development and training − Research program − Outreach program − CAREC Program Results Framework 41

42. CI Progress Report Key Developments:  Capacity Building: Leadership Dev’t Initiative (LDI); training/knowledge sharing for priority and Tier 2 sectors  Research: sector studies; research programs; issue-specific studies  Outreach: website; seminars Work plan for late 2010 - 2011:  CAREC 10-Year Commemorative Study (Part 2)  Preparation of CI work plan for 2012-2014, etc

43. Align with priority sectors’ needs, themes and projects Focus on in-depth and practical training Adopt guidelines/mechanisms for research programs: selection of participants; peer/external review etc. Target audience-message interface to communicate CAREC themes more effectively CI Performance Assessment Review: Activity-level Recommendations

44. Strengthen interface between CI, sector coordinating committees and in-country teams Strengthen interface with other partner multilateral and local institutions Enhance CAREC Secretariat functions Adopt quick response mechanisms Institutionalize post-program evaluation CI Performance Assessment Review: Broader-level Recommendations

45. CAREC Program in 2010-2011 45

46. Achievements in 2010 Sector-related progress (mentioned earlier) Completed part 1 of 10-year commemorative study – 10 year stock-take of CAREC’s progress Completed first Development Effectiveness Review Planned and agreed on 10-year anniversary activities Organized SOMs and 9 th MC Convened first-ever CAREC Ministerial Retreat 46

47. 2011 CAREC Deliverables Part 2 of 10-year commemorative study (“CAREC 2020”) Development Partners’ Meeting (DPM) CAREC video Signing of agreements SOMs and 10 th MC Sector Committee Meetings External relations plan Results framework and Development Effectiveness Review 47

48. CAREC 2020 Strategic framework for CAREC for 2011-2020 Vision and goal same as the Comprehensive Action Plan o Good neighbors, good partners, good prospects o Development through economic cooperation Focus on implementing projects in priority sectors Develop a medium-term rolling pipeline Strengthen country ownership and institutional arrangements Mobilize increased resources Monitor results 48

49. Indicative Calendar of Core Activities ActivityIndicative Date(s) Energy Sector Coordinating Committee (ESCC) Subcommittee Meetings March-April 2011 Third Executive Leadership Development Program under CAREC Institute 28 March-2 April 2011 1 st Subregional Workshop (Azerbaijan, Afghanistan, Turkmenistan, Uzbekistan) 19-20 April 2011 2 nd Subregional Workshop (Kazakhstan, Kyrgyz Republic, Tajikistan)25-26 April 2011 Transport Sector Coordinating Committee (TSCC) Meeting27-28 April 2011 ESCC Meeting10-12 May 2011 3 rd Subregional Workshop (PRC, Mongolia, Pakistan)17-18 May 2011 Trade Policy Coordinating Committee (TPCC) Meeting7-8 June 2011 Midterm Senior Officials’ Meeting (SOM)7-8 June 2011 Meetings of TSCC, ESCC, and/or CCCAugust-September 2011 Consultations with MI partners and other development partners on the Development Partners’ Meeting June-October 2011 10 th CAREC Ministerial Conference and 10-year Commemorative Activities Early November 2011 49