The Foreign Service Journal, April 2003

F O C U S A P R I L 2 0 0 3 / F O R E I G N S E R V I C E J O U R N A L 35 such as the Organization for Security and Cooperation in Europe and the U.N., and especially international non- governmental organizations should be leading internation- al community support in this area, although all donors can promote participatory approaches and a stronger civil soci- ety in their special spheres of involvement. Capacity-building. Technical assistance, training and programs and projects in support of reforms of public administration, the judiciary and market institutions, such as banking systems, and for the development of civil soci- ety are all areas that deserve enhanced support by devel- opment partners, by the U.N.’s specialized agencies and by international and regional financial institutions. Improving the investment environment. Technical assistance, training, and programs and projects for improvements in the regulatory framework for private sector development, such as enterprise registration, inspection and licensing, property rights and bankruptcy laws, are all essential prerequisites for private domestic and, especially, foreign investment. The international financial institutions may have a special role to play here. Investment in physical and social infrastructure. While direct financing and budget support for programs and pro- jects in these areas are essential, they need to be combined with policy reforms and institution-building within each sector for sustainability and effective targeting. Many development partners can contribute in this area, but they need to coordinate and cooperate better to assure consis- tency and synergy in their sectoral approaches. Concessional finance and debt relief. The international financial institutions have to date been the principal source of external financing, but their support in the future may be limited due to issues of debt-sustainability. For the poorest countries, Kyrgyzstan and Tajikistan, increased bilateral concessional, and if possible grant, finance linked to satisfactory performance may be essential. At the regional level, priorities for the international community include: Water management. The Aral Sea Basin Program, while not without its difficulties, provides an important analytical base, institutional lessons and a programmatic framework for further initiatives in helping to develop regional approaches to water allocation and management. Following the Sept. 11, 2001, terrorist attacks in the U.S., the increased frequency of high-level dialogue with the political leadership of Central Asia provides additional opportunities to encourage improved cooperation in this essential area. However, in the immediate future, practi- cal support will likely have to focus mainly on bilateral and trilateral arrangements between two or three countries, and on country-specific or river basin-specific reforms of and investments in improved water management and use. Energy. International development agencies will con- tinue to advise on energy transit and trade issues and to finance high-priority investments, preferably with private sector participation. However, energy sector reforms, including improved payments discipline, will need to be a key condition of such support. Attention is already direct- ed toward the potential for electricity supply from Central Asia to Afghanistan and the possibility of routing new international pipelines through Afghanistan. Trade and Transit. Uzbekistan’s currency and trade policies remain the key to resolving the physical and poli- cy obstacles to improved regional trade and transit. Also, investment and institution-building in trade and transit facilitation and infrastructure are of high priority. The Long Haul In considering strategies for support to the still newly independent countries of Central Asia, the international community first needs to plan for the long haul. The con- straints are daunting, especially the lack of a strong politi- cal umbrella for regional cooperation, such as the Stability Pact for South Eastern Europe (itself anchored in the European Union accession perspective) provided for the countries of that region. Second, the international community needs to build on country demand in developing pragmatic solutions, but stress performance and advocate change at the highest level. The appetite for vigorous reforms and/or regional cooperation is probably at best mixed, and in some areas is totally lacking. This will require “opportunistic” responses, including confidence-building measures, most likely resulting in only incremental change in the short term. Third, the international community needs to work in partnership and avoid duplication and redundancy. All countries receiving soft loans from the IMF’s Poverty Reduction and Growth Facility and the World Bank’s International Development Association are now required to prepare “Poverty Reduction Strategy Papers.” This process provides an appropriate instrument for interna- tional donor cooperation and coordination in the three IDA countries of Central Asia (Kyrgyzstan, Tajikistan and Uzbekistan).