The Asian Development Bank (ADB) is providing financial assistance to rehabilitate a key regional road network to reduce transport costs and foster trade and cooperation among Kyrgyz Republic, Tajikistan, other Central Asian nations, and neighboring People’s Republic of China (PRC).

ADB will provide US$79 million in loans and grants to cover most of the funding needs of the Central Asia Regional Economic Cooperation (CAREC) Regional Road Corridor Improvement Project, which is estimated to cost US$116 million. ADB will extend a US$40.9 million loan and a US$12.5 million grant to Tajikistan, while Kyrgyz Republic will receive a US$25.6 million grant for the project. The balance will be covered by the governments of the two countries.

In addition, ADB will extend a US$500,000 grant to help prepare the cross-border agreement among Kyrgyz Republic, Tajikistan and PRC that will facilitate smooth trans-border movement of people and goods and remove barriers to regional trade and transport.

The project involves the rehabilitation of 263 kilometers of the 550-kilometer road corridor linking the People’s Republic of China, Kyrgyz Republic and Tajikistan. The road corridor is a key transport artery for the two landlocked countries to trade with the People’s Republic of China and is also an integral part of the regional road network in Central Asia. More broadly, it forms part of the Asian highway network connecting, through Afghanistan, the ocean ports of Iran and Pakistan to Kazakhstan and the Russian Federation.

Kyrgyz Republic and Tajikistan face increasing demand for regional access and trade as they are strategically located to serve the transit needs of their rapidly growing neighbors, such as Kazakhstan and PRC. Both countries, however, are mountainous, landlocked and suffer from frequent natural calamities and their respective transport sectors operate inefficiently with minimal maintenance due to lack of funding.

"To realize their full potential as channels of regional trade, Kyrgyz Republic and Tajikistan must remove barriers to regional trade and cooperation, build efficient and integrated transport systems and catch up on the shortfall in sector financing and investment," said Rustam Ishenaliev, transport specialist of ADB’s Central and West Asia Department.

Trade volumes in the Central Asian Republics have more than doubled in recent years, from US$17.7 million in 1999 to US$44.5 million in 2005. The People’s Republic of China has emerged as a major trading partner for the region, but so far only as an exporter. Most of the traded goods are carried by rail, which is inexpensive but circuitous and slow.

The biggest increase in trade with PRC has been with Kyrgyz Republic and Tajikistan. In 2005, trade with PRC accounted for US$1.05 billion, or 35.4%, in Kyrgyz Republic and US$158 million, or 6.7%, in Tajikistan, representing a 15-fold and 20-fold increase, respectively, compared with levels in 2001. But in both countries, the rise has been mainly on the import side.

It is expected that once the road corridor and associated border infrastructure and procedures are improved, the road share of imports by the People’s Republic of China will grow significantly and the proportion of exports by Kyrgyz Republic and Tajikistan will pick up gradually.

The rehabilitation of the road network is a priority under the Transport Sector Strategy of the CAREC Program, which seeks to promote economic growth and raise living standards in Central Asia by encouraging economic cooperation. To date, the Program has focused on financing infrastructure projects and improving the region’s policy environment in the priority areas of transport, energy, trade policy, and trade facilitation. CAREC participants are the People’s Republic of China, Afghanistan, Azerbaijan, Kazakhstan, Kyrgyz Republic, Mongolia, Tajikistan, and Uzbekistan.