Economic and financial issues at the regional level

At present the region is still in a transition and its economy is in decline. This significantly undermines the possibilities for water authorities to maintain systems and facilities.

This is why the State has taken on itself the regulatory function of the transition process in Central Asian countries. To this end, water management, energy industry, agricultural and other installations have been privatized to a varying degree in the different countries. The reform has already had some positive results by stimulating entrepreneurial initiative. On the other hand, destructive processes have intensified, especially in agriculture. Without support from the State, independent agricultural companies are not in a position to cover the considerable cost of maintaining irrigation and drainage systems. Disorderly water use in agriculture has led to the waste of water. The need to develop new agricultural areas, especially in Tajikistan and Kyrgyzstan, involving the construction of new water supply systems, requires finance, which is scarce.

As a result of the disintegration of the unified economic system, there have been structural changes in the region, which sometimes result in unfounded ambitions on the part of some countries to develop inefficient and unprofitable ways of production, primarily in agriculture. The lack of a regional division of labour and economic cooperation, which indirectly leads to an increase in water use at the national level, gives rise to complaints and accusations that some countries’ demand for water is artificially high. The present practice of fuel and energy exchange has also come in for criticism.

Without additional external subsidies to their budgets, the countries of the region simply have to follow this destructive path. This applies both to the upstream countries, which are trying to add to their budget by intensifying the development of the hydropower production industries, and to the downstream countries, which encourage the development of agriculture and agricultural water use. All countries try to save money by restricting capital investment in repair, maintenance and purification of canals, irrigation systems of national importance, river bank and water protection.

Each State, depending on its national interests in the development of water-using economic sectors, formulates its own position with regard to cost distribution for water management facilities and water bodies. To legitimize these decisions, a legal basis for the country’s policies is created. In all countries water bodies have been declared State property. In Kyrgyzstan State ownership also includes water resources in the same way as State ownership covers mineral resources, e.g. fuel, in other countries. On this basis a concept of water sales has been developed for water formed on the territory of Kyrgyzstan to be sold to other countries as a commodity. This concept, which is reflected in the Law on the inter-State use of water bodies, water resources and water management facilities in Kyrgyzstan of 2001, has been negatively received by the downstream countries. These argue that in the broad practice of international cooperation water in a transboundary body of water is regarded as joint property of all countries of the watershed and therefore cannot be sold.

Notwithstanding all conflicting opinions, there is a common understanding that the solution to each country’s financial problems lies in inter-State cooperation, particularly on matters of joint financing of the upkeep of water management facilities, monitoring systems, etc. No principal objections have been recorded in the following areas:

  • Definition of methods and procedures of cost reimbursement for the maintenance of water management facilities according to the required technological standards;
  • Joint development of reimbursement mechanisms for the joint use of inter-State abstraction facilities and reservoirs;
  • Evaluation of the countries’ expenditure and incomes with regard to water use for agricultural purposes, energy and other industries in order to define each country’s share in the activities aiming to maintain inter-State water management facilities and water bodies;
  • Development of a harmonized evaluation method for damage resulting from water use and compensation procedures, including damage resulting from the violation of water allocation regimes, flooding of low-lying land and insufficient energy supply;
  • Definition of rights and responsibilities in the prevention of water pollution and other forms of water degradation and their harmful effects;
  • Establishment of agreements on the division of labour and a balanced development of economic sectors for the entire region based on the needs of each individual country;
  • Introduction, where possible, of economic mechanisms of water use at national levels, which would reduce State funding for water management activities by attracting funds from water users;
  • Development of protection mechanisms for the countries if agreements are breached, including a legal protection mechanism.

It is against this background that discussions are continuing about disputed initiatives by some of the countries applying market conditions to inter-State water relations. In the first place this applies to the main premise, i.e. recognition of water as a commodity. However, there are other disputed issues, such as:

  • Introduction of penalties for exceeding agreed quotas of national water consumption;
  • Application of what would be a precedent in international relations that one country could sell its own water consumption quota to another;
  • Introduction of payments for water as a natural resource belonging to a country;
  • Introduction of payments for seasonal or long-term flow regulation in favour of other countries.

It goes without saying that these proposals should be further discussed by the countries concerned. Payment for water use is each country’s own business. However, it should be noted that without a sensible and fair economic mechanism the countries would find it difficult to stimulate water conservation and, particularly, to introduce state-of-the-art technologies.

Selected bibliography