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Central Asia Republics Regional
FY 2001 Program Description and Activity Data Sheets
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FY 2001 Program
USAID's CAR regional work will continue to focus on energy and environment. In energy, the objective is to establish a more economically sound and environmentally sustainable energy system to support regional economic growth. The regional program focuses on the reform of the energy sector's legal and regulatory environment and on the facilitation of foreign investment in critical energy infrastructure, such as Trans-Caspian and Trans-Eurasian export pipelines. Activities in Kazakhstan and Turkmenistan will shift to implementation and enforcement of the new oil and gas regulations. USAID will support environmental cleanup in areas adjacent to the Caspian Sea. In the electricity area, legal and regulatory reform will continue, albeit at a reduced level, along with work to strengthen national and regional power markets, to promote U.S. investment, and to facilitate intra-regional energy trade and a more reliable electricity system.In trans-boundary water management of the Aral Sea basin, USAID will continue to attempt to reduce the potential for political tension through regional long-term agreements for multipurpose (power and irrigation) management of dams, water sharing and water quality. USAID will put more emphasis on fostering cooperation among various regional water organizations and improving the ability to collect high quality data in water management operations. USAID will increase training programs that support the institutional development of NGO water user associations. In addition, USAID will cooperate closely with other donors working in the agricultural sector to ensure that irrigation methods increase productivity while using sustainable water and land practices.
USAID will continue to address U.S. concerns about global climate change and the reduction of greenhouse gases. In Kazakhstan, USAID will help evaluate individual energy and greenhouse gas projects for cost and emission savings, and then market these projects to potential investors. This will lay the foundation for Kazakhstan to participate in jointly implemented climate change projects as defined in the United Nations Framework Convention on Climate Change (UNFCCC). In Uzbekistan, USAID will train energy and environmental officials in the areas of emissions monitoring and forecasting as a first step in Uzbekistan's involvement in UNFCCC initiatives. FREEDOM Support Act funds will be provided to the U.S. Environmental Protection Agency for special environmental initiatives.
ACTIVITY DATA SHEET
PROGRAM: CAR Regional
TITLE: A More Economically Sound and Environmentally Sustainable Energy System, 176-015
PLANNED FY 2000 OBLIGATION AND FUNDING SOURCE: $500,000 FSA
PROPOSED FY 2001 OBLIGATION AND FUNDING SOURCE: $1,000,000 FSA
STATUS: Continuing
INITIAL OBLIGATION: FY 1999 ESTIMATED COMPLETION DATE: FY 2001 Summary: Despite major petroleum deposits in Central Asia, the region's remoteness from international markets, the lack of infrastructure for energy transport, and the underdeveloped legal and regulatory framework all contribute to predictable low oil and gas exports for the next two to five years. Overly optimistic expectations of windfall oil and gas revenues have unfortunately encouraged Central Asian governments to postpone urgently needed economic restructuring and privatization in the energy sector, as well as in other key economic areas.The power infrastructure of Kazakhstan and Kyrgyzstan rapidly deteriorated after independence, due to a lack of operating and maintenance expenditures. Since 1996, national energy systems have been in danger of collapse in these two countries. This situation, and the recognition of the immense outlays required to rehabilitate and maintain the systems, left the Kazakhstan and Kyrgyzstan governments with little alternative but to restructure and privatize in order to acquire needed international investment capital. Unfortunately, this energy sector privatization occurred in a piecemeal and non-transparent manner, before the requisite legal and regulatory framework was established. As a result, much of the benefits associated with restructuring and privatizing the energy sector have yet to be realized.
As Central Asia moves from state-run energy companies to private firms, the government's role will change from owner-operator to that of regulator. The challenge for USAID and the host governments is to create a legal and regulatory structure for the energy sector that promotes domestic and foreign private investment and a functioning market. Such a framework will offer incentives for efficiency, safety, and environmentally sound resource recovery. An important, but secondary, focus for USAID programs is the development of new oil and gas transportation routes, which would allow the region to become a major petroleum exporter.
Key Results: The key results necessary to accomplish this objective are: 1) increased investment by International financial Institutions and the private sector and 2) environmentally sound energy regulations and practices implemented in each country in the region.
In FY 2000 and FY 2001, USAID will continue to focus on the systemic changes necessary to bring about structural reform and sustained economic growth. This year, the AERA program will continue assistance that complements bilateral USAID programs in Indonesia and the Philippines. Assistance to Thailand also will be continued.
Performance and Prospects: Investments in oil and gas have been hampered by concerns about oil and gas prices and a lack of transportation systems to world markets. Customer non-payments and low tariffs that do not allow the recovery of costs negatively affect the energy sector. In spite of these and other variables, some of the Central Asia governments have privatized portions of these two sectors. After sustained USAID advocacy, Kazakhstan recently agreed to privatize all regional electricity distribution companies and the remaining state-owned and operated generation capacity. In return, International Bank for Reconstruction and Development (IBRD) is financing a $225 million Transmission Grid Rehabilitation project - the first tranche is due in late 1999.
In addition, USAID has completed work on developing an oil pipeline tariff methodology, and a retail electricity tariff methodology that regulators, pipeline companies, and electric distribution companies in Kazakhstan are now using.
The number of oil and gas firms operating in Central Asia dropped 13% from 1997 to 1998, largely explained by the depressed international oil and gas market which forced the closure of some of the smaller petroleum firms, and mergers between large international companies. However, international financial institutions (IFIs) investment in energy has been on the rise. USAID has worked in the power sub-sectors of the CAR for the past five years, and in the petroleum sub-sector for the past two and one-half years. No international companies or IFIs were actively involved in the energy sector when the USAID program was initiated in 1992. Since then, 45 private companies have invested in oil and gas, 18 in power, and five in coal; exceeding USAID goals in all but the last.
On the regional level, CAR Prime Ministers signed an international parallel operations agreement on electricity, which is a necessary step in the development of a regional wholesale market for energy.
In the area of environmental sustainability in energy, with USAID assistance, both Kazakhstan and Turkmenistan drafted and adopted extensive legislation on environmental rules and regulations associated with petroleum production and transportation. Many of the provisions of the legislation are aimed at offshore production in the Caspian Sea.
USAID will continue to assist in the privatization process by helping draft umbrella laws and rules and regulations for the energy sector and supporting the creation and development of independent regulatory agencies. USAID will also facilitate tariff methodologies and pricing mechanisms, establish market mechanisms, and trade and reform sector accounting and reporting. In addition, USAID will help the governments formulate restructuring and privatization programs and national strategic sector plans. Although some progress has been made in sector regulation, the establishment of truly independent regulatory bodies remains a challenge. USAID will establish partnerships with U.S. regulatory agencies to assist with demonstrations of environmental enforcement of laws and cleanup of damaged areas.
Possible Adjustments to Plans: As part of its planning and design for the next Strategic Assistance Plan, which covers the period from FY 2001 through FY 2004, USAID is reviewing program performance, directions, partner support, and U.S. and host country priorities. These will determine the direction of the FY 2000 and FY 2001 program. Resulting revisions to the strategic plan will be considered for approval in a formal review in late spring of FY 2000.
Other Donor Programs: Other donors working in the energy sector are the World Bank, the European Bank for Reconstruction and Development, the Asian Development Bank, the European Union, and numerous bilateral donors. Since 1994, USAID has been the primary donor working to effect improved conditions in the Central Asian energy sectors.
Principal Contractors, Grantees, and Implementing Agencies: Hagler-Bailly is the principal implementer for legal and regulatory reform, energy sector restructuring, and privatization. The U.S. Minerals Management Service, and the U.S. Energy Association are providing technical and training expertise. assistance. In addition, various U.S. firms and regulators are partners with organizations in the region. The Academy for Educational Development coordinates all participant training.
Selected Performance Measures: Baseline
(1995)Actual
(1998)Targets
(1999)Targets
(2000)Targets
(2001)Number of independent regulatory agencies established (cumulative) 0 1 2 2 4 Number of energy assets opened to private investment (cumulative) 0 18 20 30 40 Legislative rules or regulations adopted (cumulative) 0 7 6 10 14
ACTIVITY DATA SHEET
PROGRAM: CAR Regional
TITLE: Increased Environmental Management Capacity to Support Sustainable Economic Growth, 176-016
PLANNED FY 2000 OBLIGATION AND FUNDING SOURCE: $3,000,000 FSA
PROPOSED FY 2001 OBLIGATION AND FUNDING SOURCE: $4,000,000 FSA
STATUS: Continuing
INITIAL OBLIGATION: FY 1998 ESTIMATED COMPLETION DATE: FY 2005Summary: The work of this objective centers on trans-boundary environmental issues and the regional economic and political tensions that they generate. Activities focused on the management of Aral Sea tributaries, global climate change, and the protection of the Caspian Sea environment from petroleum sector exploration. A regional approach has been adopted because the most acute environmental issues are trans-boundary in nature; are a source of political tension and economic rivalry among the Central Asian republics; and defy resolution at the national level.
The most dramatic example of such an international environmental conflict is the Aral Sea basin, where five nations compete for water for irrigation, industrial, and urban use. During the Soviet era, a system of river basin structures was constructed primarily for the purpose of irrigation to downstream countries. Soviet mismanagement led to the shrinking of the Aral Sea, one of the worst ecological disasters on earth. Since the breakup of the Soviet Union, the five Central Asian countries have attempted to cooperatively allocate water and manage the system without effective agreements in place. The region lacks adequate legal and regulatory policies on water pricing and water quality standards. On the local level, there are no organizations to effectively operate local irrigation systems or to provide incentives for farmers to conserve water.
Kazakhstan and Uzbekistan are 14th and 27th respectively on the list of largest greenhouse gas emitters in the world; 80% of emissions are attributable to the energy sector. Most of the thermal power and district heating installations burn high-ash coal and thus discharge major amounts of greenhouse gases. Both countries would benefit from participating in global carbon trading programs, as outlined in the United Nations Framework Convention on Climate Change (UNFCCC), through cleaner air and increased foreign investment in their energy and industrial sectors.
Central Asian populations bordering the Caspian Sea fear that rapid development of massive oil and gas resources will cause major environmental damage, threaten public health, and damage economic livelihoods. Drilling and transporting of petroleum is slated to begin on a large scale in FY 2000. At present, the existing legal and regulatory framework is inadequate to provide needed environmental monitoring and protection. Also, institutions that can effectively assess environmental damages and enforce rules and standards have not been established.
Key Results: Key results necessary to accomplish this objective are: 1) establishment of sustainable water use management practices in the Aral Sea basin; 2) application of appropriate environmental policies and practices for the petroleum industry in the Caspian basin; and 3) adoption of greenhouse gas mitigation measures through national climate change plans and other environmental planning activities.
Performance and Prospects: Significant progress was achieved in strengthening the multi-year, multi-national 1998 Energy and Water Use Agreement for the Syr Darya river. The Central Asian Prime Ministers of Kazakhstan, Kyrgyzstan, and Uzbekistan formally invited Tajikistan to be a member of the Central Asian Economic Community and the agreement was amended to reflect the additional member. In addition, member states signed an agreement to share hydro-meteorological data, a necessary step in regional cooperation and shared resource management. Member states also signed a regional agreement on cooperation in the area of environmental protection and efficient natural resources use and a series of one-year bilateral and multilateral pacts on water and energy trades under the umbrella of the 1998 Agreement.
USAID trained local water-modeling experts on the development and use of an optimal water-planning model for the Syr Darya. USAID will soon present to the CAR governments a system to assess, calculate, and recover operation and maintenance costs for hydroelectric facilities. Water and energy officials continued to meet to discuss and negotiate several issues related to the trans-boundary cooperation of shared systems. To determine whether or not to sign the treaties, environmental officials reviewed two main United Nations trans-boundary water protocols.
USAID helped local water management representatives from Water User Associations (WUAs), as well as high level policymakers, become better informed about the functions and administration of these NGOs. Also, in Kazakhstan USAID drafted and presented to the government legislation that provides a legal foundation for WUAs to be formed, registered, and to carry out needed functions. Over the next year, USAID will complete the basin planning model for the Syr Darya, train CAR water and energy officials on an operations and maintenance cost recovery plan, improve the quality of data collection, and form a partnership with a water management institute.
Kazakhstan made significant progress in Global Climate Change in 1999. With USAID advice, Kazakh technical experts developed the economic and energy analysis needed to join the Annex 1 group of nations as defined by the UNFCCC. USAID worked with high-level groups of Kazakhstani decision-makers on the development of a national strategy for participation in the Kyoto Protocol, assisted in the modeling of industrial and economic forecasting, and helped the government prepare for global emissions trading and joint implementation projects. Over the next year, USAID will work with Kazakh officials on a projects-based program to lay the foundation for investments in joint implementation energy and/or industrial projects.
Possible Adjustments to Plans: As part of its planning and design for the next Strategic Assistance Plan, which covers the period from FY 2001 through FY 2004, USAID is reviewing program performance, directions, partner support, and the U.S. and host country priorities. These reviews will determine the direction of the program in FY 2001. Resulting proposals for change in strategic direction will be considered for approval in a formal review in the late spring of FY 2000.
Other Donor Programs: USAID works closely with the World Bank, which has a major Global Environment Facility project, on different components of the Global Environmental Fund project for the Aral Sea Basin. USAID will be leveraging World Bank loan funds in Kazakhstan as that nation implements the global climate change treaty, and trades emissions. The Asian Development Bank works in Uzbekistan to provide agricultural restructuring loans. There has also been good collaboration with European Union-TACIS on regional water management issues
Principal Contractors, Grantees, and Implementing Agencies: The major environment contractor is a consortium led by the International Resources Group. The U.S. Minerals Management service and Hagler-Bailly consulting work on enter-related environment issues. The U.S. Energy Association provides technical and training expertise on partnerships. The international Institute of Education is the contractor for the Eco-links project.
Selected Performance Measures: Baseline
(1997)Actual
(1998)Targets
(1999)Targets
(2000)Targets
(2001)Multilateral and bilateral agreements on sustainable water use management 0 4 0 10 15 GCC mitigation measures enacted
Water pricing measures enacted*0 4 7 5 10 Water user associations formed* Number of water experts trained in water system management modeling* Countries accede to Annex B* Joint implementation project is conducted* ___
* During FY 1998, USAID programs were being consolidated and a new strategy was being developed. Decisions were made subsequently about the relevance of the indicators for the program. Data collection on these indicators was discontinued as a result.
EXPLANATION FOR SPECIAL INITIATIVES and CROSS-CUTTING OBJECTIVES
Title: Special Initiatives, 176-041
Planned FY 2000 Obligation and Funding Source: NONE PROPOSED
Proposed FY 2001 Obligation and Funding Source: $1,000,000 FSASummary: This objective includes all of the 632 allocations and transfers to other USG entities. The funding in this objective goes to the Environmental Protection Agency.
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Last Updated on: February 05, 2001 |
