Central Asia Regional Risk Assessment

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Publication Title

Central Asia Regional Risk Assessment: Responding to Water, Energy and Food Insecurity

Publication Type

Final report from a joint initiative by UN partners, under the leadership of UNDP-RBEC.

Author(s)

UNDP Regional Bureau for Europe and CIS (RBEC), New York

Prepared by an Advisory Committee composed of representatives from ADB, the Brookings institution, DFID, OCHA, UNECE, UNDP, UNICEF, the Regional Centre for Preventative Diplomacy in Central Asia (UNRCCA), USAID, WFP and the World Bank.

Publication Date

January 2009

ISBN-ISSN-EAN

Publication URL

Contact

Ben Slay, Senior Economist, UNDP-RBEC

Contents

Summary

The Central Asia Regional Risk Assessment:

  • Examines the risks facing Central Asia associated with the possible deepening and widening of the “compound crisis” phenomena that took hold in Tajikistan during the winter of 2008, in terms of threats to water, energy, and food security;
  • Considers some of the issues raised by the response to these insecurities in Tajikistan and the Kyrgyz Republic, by governments and the international community; and
  • Suggests some initial conclusions concerning possible improvements in how the United Nations system, and international community more broadly, manages the nexus of development and humanitarian programming, in light of crisis situations with the potential to transform chronic water, energy, and food insecurities into acute emergency situations.

This report does not pretend to assess all the short- and longer-term risks to sustainable development prospects across the entirety of the Central Asian region. The focus is on water, energy, and food insecurities in the Tajikistan and the Kyrgyz Republic. The assessment touches on other issues and other Central Asian countries to the extent that some of the risks discussed here (e.g., those associated with water governance or remittance flows) have cross-border dimensions.


Water, energy, and food insecurity in Central Asia

Central Asia’s exceptionally cold winter of 2007-2008 caused breakdowns in Tajikistan’s energy infrastructure, reducing winter crop yields and livestock herds. According to the National Bank of Tajikistan, winter-related damages reached $250 million[1], some 7% of 2007 GDP. Economic growth slowed, and food and energy security were adversely affected. Despite a history of annual appeals for donor assistance, the response to these developments by the government of Tajikistan, United Nations agencies, and the international community was unable to prevent millions of people from spending weeks without access to heat and electricity in severe winter conditions. These problems were exacerbated by global food and energy price trends, and subsequently by the onset of drought in the spring and summer, across Central Asia. The drought conditions in turn exacerbated the low water levels in the hydropower stations that generate the bulk of the electricity consumed in Tajikistan and the Kyrgyz Republic—where generation capacities had been under great strain by high winter demand for heat and electricity.

Developments during the second half of 2008 have regrettably shown that concerns about the possible repeat and spread of Tajikistan’s compound crisis have not been misplaced. It has instead become clear that:

Water, energy, and food insecurities remain significant in Tajikistan, and have become a serious problem in the Kyrgyz Republic.
in particular:
  • Water levels in the Toktogul (Kyrgyz Republic) and Nurek (Tajikistan) hydropower stations remained well below historical levels throughout 2008. According to data from the Scientific Information Centre of the Interstate Commission on Water Coordination (ICWC), water volumes at Toktogul and Nurek ended last year some 20% and 9% below historical averages, respectively. These low levels reflect the continuing importance of drought conditions in the Aral Sea basin, which both constrain “upstream” winter electricity production in Tajikistan and the Kyrgyz Republic and raise uncertainties about the availability of irrigated water for agriculture in the “downstream” Central Asian countries (particularly Uzbekistan and Turkmenistan) during the spring and summer of 2009.
  • Low water levels in Central Asia’s hydropower stations have socio-economic consequences, depressing electric power generation and industrial production, and reducing household access to heat and electricity. Official data for 2008 show electric power generation dropping by 18.5% in the Kyrgyz Republic during the first eleven months of 2008, and by 8% in Tajikistan for the year as a whole[2]. This “electric shock” essentially stopped industrial growth in both countries: in Tajikistan, the volume of industrial production was reported down 2.5% during the first nine months of 2008; while (with the exception of gold output) industrial production stayed flat in the Kyrgyz Republic[3]. In both countries, electricity users are suffering from planned and unplanned electricity cut-offs. Electricity and water tariffs for households and other users have either risen sharply, or are expected to do so in the next 12-24 months. Despite efforts to reduce and rationalise electricity demand, water volumes at the Toktogul, Nurek, and other hydropower stations were well below normal levels during 2008—trends that are continuing into 2009. The Kyrgyz government has been working to prevent water reserves at Toktogul from dropping to “dead levels” before the winter is over—a scenario that would deprive millions of people of access to heat and electricity. Difficulties in concluding an agreement in the new year between the governments of Uzbekistan and Tajikistan on the transmission of Turkmenistani electricity through Uzbekistan to Tajikistan, which led to the cessation of these transmissions in late January 2009, have heightened “dead level” fears about Nurek as well.
  • Water and energy insecurities in 2008 were exacerbated by growing concerns about food security. While both Tajikistan and the Kyrgyz Republic seem to have avoided declines in food production in 2008, prices for foodstuffs (and consumer goods in general) rose sharply last year. In Tajikistan, consumer prices rose by nearly 21%, thanks to a 26% increase in food prices. In the Kyrgyz Republic, consumer prices in 2008 rose 25%, with food prices rising 32%. While physical availability is not an issue generally, rising prices have made food affordability an increasing concern. Food security monitoring conducted by WFP in October-November 2008 found that 1.5 million in Tajikistan were food insecure, while 650,000 were severely food insecure. In the Kyrgyz Republic, the assessment that underpinned the flash appeal developed by the government and the UN country team found that 1 million people were vulnerable to higher food prices. Concerns about the possible continuation of 2008’s drought conditions have led the US Department of Agriculture to forecast 25% declines for the 2009 winter wheat harvest in Tajikistan and Turkmenistan; a 3% decline is forecast for Uzbekistan.
Macroeconomic uncertainties

Somewhat surprisingly, GDP growth close to 7% was reported in both countries for the first three quarters of 2008. This seems to have been due largely to continuing inflows of remittances from Russia, which during the first three quarters of 2008 were nearly double year-earlier levels. The industrial slowdown was apparently offset by growth in agriculture (increases in acreage planted seem to have offset declines in yields due to drought conditions and locust infestation), construction (due in part to large investment outlays to construct new hydropower stations) and services. Global food and energy prices have fallen sharply since their mid-2008 peaks; and while these price cuts were not fully passed on to consumers, annual inflation rates in Tajikistan and the Kyrgyz Republic dropped sharply in the second half of the year. Regional cooperation seems to have come back into focus: the Central Asian heads of state used the CIS Summit meeting in Bishkek in October to announce an expanded regional cooperation programme, with a special focus on “hydro-energy support, fuel resources supply, water accumulation in the Toktogul and Nurek reservoirs”. Thanks in part to these efforts, Tajikistan was able to boost electricity imports by some 18% in 2008, limiting the decline in electricity consumption to just 3%.

On the other hand, these trends may not bring immediate relief to hard-pressed Central Asian households. For one thing, Central Asia’s under-developed transport and trade infrastructures can deprive isolated communities of access to foodstuffs, fuels, and other necessities even when central stock piles are full. Moreover, the global economic crisis—with its negative implications for remittances, export revenues, and bank financing from Russia and Kazakhstan, as well as for prices of gold and aluminium exports—casts a long shadow over growth prospects in 2009-2010. Following a September 2008 IMF mission that produced a cautiously positive assessment, worrisome mid-January statements from the National Bank of Tajikistan suggest that Tajikistan’s external position deteriorated sharply in the fourth quarter. IMF missions to Bishkek in July-August and October 2008 produced a more sober assessment of the Kyrgyz Republic’s economic prospects. Both governments are seeking expanded IMF support in 2009, under the Exogenous Shocks Facility (Kyrgyz Republic) and a new Poverty Reduction and Growth Facility (Tajikistan)[4].

Should significant deterioration in Tajikistan’s and the Kyrgyz Republic’s external position combine with drought-induced bad harvests and continuing electricity shortages in 2009, significant socio-economic dislocation would almost inevitably follow. As promising as the October Bishkek regional cooperation agreement may sound, Central Asia’s post-Soviet history is replete with dozens of such (often unimplemented) agreements.


Responses: Governments and the international community

With support from the international community, the governments of Tajikistan and the Kyrgyz Republic have introduced programmes to respond to these threats, with a focus on energy security. In particular:

  • In the Kyrgyz Republic, planned blackouts were introduced in March 2008, lifted in mid- June, and then re-imposed in August, once it became clear that water volumes at Toktogul would not be restored to planned levels by the end of the summer. On 7 October, it was announced that power cuts would be extended to 12 hours per day in most provinces. Only nine hours of electricity per day would be supplied in Batken province; in Bishkek, only 14 hours of electricity per day is guaranteed. Further reductions in energy demand are to result from the closure of schools that use electricity for heating from 25 December through to 1 March 2009 (coal-heating systems are to be installed in new schools). Generation capacity of the Bishkek Heating and Power Plant is to be upgraded via refurbishing; additional fuel has been procured, thanks to a $5 million World Bank emergency energy assistance grant.
  • In rural areas across Tajikistan (except for Gorno Badakhshan), households only have access to electricity (provided by the Barqi Tojik utility) for six hours per day. Access is further reduced for other users (businesses, schools, hospitals) who don’t have their own generation systems. This is despite the introduction of an additional 670 megawatts in annual generation capacity from the Sangtuda-1 hydropower plant, elements of which came on line in January, July, and November 2008. In addition to improving food stocks for health facilities, kindergartens, retirement homes and boarding schools, the response in Tajikistan has emphasised the repair of irrigation systems, drainage systems and pumping stations. Contracts for increased imports of gas (from Turkmenistan and Uzbekistan) and electricity (from Turkmenistan, transmitted via Uzbekistan) have been concluded. However, while the power agreement allowed Tajikistan to significantly increase electricity imports in 2008 (they rose by some 39% in the fourth quarter alone), Turkmenistani electricity exports via Uzbekistan stopped in January 2009, due to the failure to conclude an electricity transit agreement with Uzbekistan for the new year. This halt in electricity imports from Turkmenistan exacerbated pressures on water levels at the Nurek hydropower station, and led the authorities in Tajikistan to tighten electricity rationing in late January 2009.
  • Longer term, both countries anticipate significant additions to power generation capacity, in the form of power stations running both on hydro and fossil fuels. The expansion of the Sangtuda-1 hydropower plant on the Vakhsh river cascade in 2008, which increased Tajikistan’s electric power generation capacity by some 10%, is symbolic of both countries’ emphasis on more hydropower generation assets, rather than on encouraging energy efficiency or other forms of renewable energy (e.g., small hydro). A similar orientation is apparent in the Kyrgyz Republic’s emphasis on expanding generation capacity via the Kambarata hydropower stations along the Naryn river cascade. But while the energy tensions now affecting Central Asia have increased government willingness to pursue alternative and energy efficiency solutions, questions about the cost-effectiveness of such initiatives have not been fully resolved. Reconciling this increased reliance on fossil fuels with longer-term imperatives of reducing carbon emissions may also prove difficult.

Unfortunately, the energy sector measures that have been introduced have been unable to push the water levels at the Toktogul and Nurek hydropower stations back to historical averages. While energy imports were well above average levels in 2008[5], they were not able to offset declines in domestic power generation and consumption. Neither country has yet robustly pursued reforms that have been successfully introduced in many other transition economies, which have both rationalized energy demand and significantly increased energy supply, while shielding low- and middle-income households from the worst impact of the higher tariffs that come with progress toward longer-term energy security. There is a risk that energy tensions will force governments in both countries to significantly raise electricity (and water) tariffs, without putting in place the accompanying measures needed to increase energy supplies and improve household access to energy—especially for poor households. Tariff hikes without improvements in access could lead to significant investments in expensive generators for the businesses and households who can afford them—and to more heating with firewood and animal dung for those who can’t—with well known unfortunate deforestation and health consequences.

Three appeals have been launched by the UN system since the onset of the 2008 winter crisis: flash appeals by both Tajikistan (in February 2008) and the Kyrgyz Republic (in December 2008); and the September 2008 food security appeal (in Tajikistan). In both countries these appeals have emphasised food security, reflecting both large numbers of food insecure households and the relatively strong UN humanitarian response capacity in this area (from FAO and WFP). Government actions have played the most important role in the response in the energy sector, with support from the World Bank and other donors, largely outside the UN humanitarian response framework. The developments of 2008 underscore the importance of increasing effectiveness and cooperation within and between the UN humanitarian and other emergency response mechanisms.


Initial conclusions

The above analysis suggests the following conclusions:

  • Over the course of 2008 water, energy, and food insecurities remained significant in Tajikistan and intensified in the Kyrgyz Republic. Fortunately, they did not lead to general macroeconomic instability; nor have these tensions spread across Central Asia. Whether these favourable trends continue—particularly in light of the unfolding global economic crisis, and the possible impact of drought conditions on agriculture in 2009—remains to be seen.
  • Progress has been made by these countries’ national responses, particularly in terms of augmenting supplies of fossil fuels and increasing electricity imports. However, there are clearly reasons for concern about the response, in light of the declines in electricity production in 2008, as well as of indications that the response measures put in place in Tajikistan have yet to fully “trickle down” to schools, hospitals, and water systems.
  • The 2008 winter crisis in Tajikistan pointed to ways in which UN emergency response mechanisms are not ideally suited to deal with the humanitarian dimensions of a compound crisis. Difficulties encountered in integrating the global clusters with national emergency response mechanisms underscored the importance of flexibly applying global processes that were designed for acute humanitarian disasters in tropical climates, rather than chronic, development-based combinations of water, energy, and food insecurity. Surge personnel sent to support humanitarian responses in Central Asia need to be Russian speakers and be able to stay for longer than three-month stints. UN Country Team staff need to be trained in the cluster system, in areas ranging from unloading trains and trucks, managing inventories of humanitarian supplies, drafting appeals, accessing CERF funds, and reporting on the impacts of humanitarian and early recovery activities.
  • While short-term programmes are needed to assist the most vulnerable people through the winter, the solutions to the crisis need to come from longer-term development programming. Opportunities for closer alignment of UNDAF, JCSS, CDS/NDS processes need to be more closely examined by governments and donors—particularly in terms of their links between (potential) humanitarian and development activities, in the following areas:
    • The closer alignment of energy and environment programming (as undertaken by the World Bank, Asian Development Bank, European Commission, UNDP, and others) with on-going threats to water and energy security, particularly in terms of more strongly promoting renewable energy production and consumption; and
    • Strengthening the emphasis in long-term rural development programming on increasing rural families’ productive assets (e.g., livestock), without denying food or cash support to vulnerable households living in difficult winter conditions.
  • Development agencies active in Central Asia should increase their human resources and other capacities to engage in disaster prevention programming, either on a permanent or surge capacity basis. Water and sanitation expertise is particularly lacking in the region. UNDP’s decision to create a regional office for Central Asia in Almaty (thereby joining the World Bank, USAID, the European Commission, and other UN agencies) and to outpost staff from its Bureau for Crisis Prevention and Recovery there, should where possible be followed by other organisations. Alternatively, different agencies could second staff to a single coordinating agency in Central Asia, to form a response unit.
  • While the most important elements of the response to water, energy, and food insecurities in Central Asia should have a national character, the regional focus represented by the work on this report should be continued, to inter alia provide continual monitoring of, and early warning concerning, these risks. Such cross-border dimensions as remittance flows, water levels at power stations of regional significance, and the possible impact of the global economic crisis, are particularly important in this respect.

Content

References

  1. Source: National Bank of Tajikistan (http://www.nbt.tj/en/?c=44&id=44&a=134)
  2. Unless specified otherwise, all socio-economic data used in this report are taken from national statistical office web sites.
  3. The overall volume of industrial output in the Kyrgyz Republic was reported up 15.2% during this time. However, production from the Kumtor gold mine complex (which has its own generators) was responsible for much of this increase. Without Kumtor output, industrial production during January-November 2008 was reported down 1.2%.
  4. The December 2008 IMF report on the Kyrgyz Republic begins by noting that “Several exogenous shocks have hit the Kyrgyz economy that undermine macroeconomic stability, erode the gains made in poverty reduction, and create balance of payments difficulties.” See International Monetary Fund, “Kyrgyz Republic: Request for an 18-Month Arrangement Under the Exogenous Shocks Facility”, IMF Country Report No. 08/381; and “Republic of Tajikistan: First Assessment under the 2008 Staff-Monitored Programme”, IMF Country Report 08/382, December 2008.
  5. In addition to the 18% increase in electricity imports reported by Tajikistan in 2008, the volume of the Kyrgyz Republic’s imports of coal during the first ten months of the year was reported up 70%

See also

Central Asia Water Sector Coordination Initiative (CAWSCI)

External Resources

Attachments

 UNDP CARRA Jan09.pdf

 CARRA letter Jan09.pdf

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