Policy paper

UK–Central Asia region development partnership summary, July 2023

Published 17 July 2023

This was published under the 2022 to 2024 Sunak Conservative government

Introduction

The Strategy for International Development (IDS) places development at the heart of the UK’s foreign policy. It sets out a new approach to development, anchored in patient, long-term partnerships tailored to the needs of the countries we work with, built on mutual accountability and transparency. This approach goes beyond aid and brings the combined power of the UK’s global economic, scientific, security and diplomatic strengths to our development partnerships. Our four priorities are to deliver honest, reliable investment, provide women and girls with the freedom they need to succeed, step up our life-saving humanitarian work, and take forward our work on climate change, nature and global health. The Integrated Review Refresh (IR23) reiterates that sustainable development is central to UK foreign policy and sets out how the UK will go further and faster on development to reduce poverty and reinvigorate progress towards the Sustainable Development Goals (SDGs). This Country Development Partnership Summary details how the IDS and IR23 will be put into practice with Central Asia.

Regional context

Central Asia is a diverse region with a mix of upper and lower middle-income countries with major strategic importance, due to their geographic location, and natural resource endowments. Countries in Central Asia share more than just geography, they also share a similar Soviet legacy. Recent global events such as the US withdrawal from Afghanistan, the war in Ukraine as well COVID-19 have impacted the region.

The region has achieved significant socio-economic progress since 2000 and has wide ranging growth potential. Central Asia’s aggregate GDP totalled $397 billion in 2022^{[footnote 1]} and in four of the five countries in the region, the average annual GDP per capita growth rate has been greater than 4.5%^{[footnote 2]}. Average growth rates in Kyrgyzstan have been significantly lower at 2.3%. In 2022, the region’s foreign trade in goods totalled $211.2 billion, increasing by a factor of 8.4^{[footnote 3]}. Trade between countries in this landlocked region is also increasing^{[footnote 4]}. Across the region, there are significant variances in economic development. There remain challenges, for example, economic diversification, bottlenecks in regional transport networks, and insufficient harmonization in regional trade and economic relations. The region is also vulnerable to Russian economic exposure. Over 30% of Kyrgyzstan’s and Tajikistan’s GDP comes from remittances from workers in Russia.

There has been variable progress on SDG targets^{[footnote 5]}. Whilst poverty rates^{[footnote 6]} have fallen significantly in Kyrgyzstan, Kazakhstan and Tajikistan^{[footnote 7]} over the last 20 years, there is a rural urban divide, for example, in Kyrgyzstan where over 60% of the rural population are poor and in Tajikistan where 73% of the country’s poor people live in rural areas and one-third of its population suffers from undernourishment^{[footnote 8]}. This was exacerbated by the pandemic and the impact of rising food and energy prices in some countries which threatens stability. The Global Gender Gap report shows that Central Asia has stagnated in progress on gender equality, while other indices highlight declines, including a growing gender gap in labour-force participation rates^{[footnote 9]}, widening wage disparity in the region^{[footnote 10]} continued high levels of gender-based violence and low political participation. For example, in Turkmenistan one in six women had experienced abuse from a partner and one in eight had experienced physical or sexual violence^{[footnote 11]}.

The region faces multiple and complex drivers of conflict and insecurity including:

• geopolitical competition
• disputed territories & borders
• political and economic grievances fuelled by disinformation
• energy and water insecurity
• the global economic downturn
• inequality, impacted by historical injustices as well as vested interests and corruption which are a drag on development

World Bank data suggests a downward trend on the quality of governance^{[footnote 12]} in some countries in the region, for example, in Kyrgyzstan and Tajikistan, and low scores across all dimensions in Turkmenistan. In Uzbekistan and Kazakhstan there have been some improvements over the last decade. For example, in Kazakhstan in governance effectiveness and regulatory quality. Weak state capacity and corruption remain areas for concern across the region. There is also a trend of restrictions in civic space and media freedom according to global indices^{[footnote 13]}.

Central Asia has some of the most energy-intensive economies globally^{[footnote 14]}. The energy sector is generally dependent on fossil fuels (above 70%) yet renewable potential is relatively underdeveloped, especially hydropower, which currently supplies about 98% of electricity in Tajikistan. Consumption per unit of GDP is 50% above the world average, exacerbated by heavily subsidised tariffs. Demand for power is set to increase by at least 30% by 2030 and to double by 2050. The Syr Darya and Amu Darya rivers account for 90% of Central Asia’s freshwater of which 75% is needed for its irrigated agriculture^{[footnote 15]}. The economic cost of climate change inaction resulting from drought and flood damage in Central Asia is projected to rise by 1.3% of GDP per annum affecting 75% of jobs in heavily or moderately water-dependent sectors^{[footnote 16]}. Crop yields are expected to decrease by 30% by 2050, leading to around 5.1 million internal climate migrants by that time. As countries set out to decarbonise their economies there is potential to boost prosperity by addressing climate risks.

Central Asia matters to the UK in our efforts to foster an open and stable international order, and support UK security, trade, climate, development, and prosperity interests. UK engagement aims to promote the regions’ sovereignty, integration, prosperity and resilience. UK interventions align with existing host country strategies.

Why and how: UK’s development offer

In Central Asia, the UK aims to support a more resilient, independent, stable, prosperous and connected region, a more open, inclusive society and a greener economy. The UK has the biggest ODA footprint in Tajikistan,Kyrgyzstan and Uzbekistan, with limited, small-scale, assistance in Turkmenistan and Kazakhstan – given the trajectory of development. His Majesty’s Government’s work in Central Asia directly contributes to the IR23 and the four priority areas of the IDS as well as the delivery of the SDGs.^{[footnote 17]} Our priority areas of focus on development include:

Reform

We work with partner governments to enable evidence-based reforms to support inclusive and sustainable economic development. This includes:

• building statistical systems
• supporting improvements in regional socio-economic planning/budgeting
• labour market reforms
• investments in e-commerce
• service delivery
• development of social protection systems

We invest in accountability through working with civil society and implementing perceptions surveys to inform policymaking. We work to promote open societies and human rights, advocating for the development and implementation of legislation governing rights and freedoms and supporting efforts to counter disinformation by strengthening the capacity of the media to carry out data driven journalism. We continue to develop programme work to tackle illicit financial flows.

Prosperity

We champion Small Medium Enterprise (SME) development across the region as part of diversifying and strengthening the private sector. By building small business capacity we create jobs, reducing the regions dependency on migrant labour and exposure to economic shocks, while driving inclusive sustainable growth.

The UK supports countries in the region to prosper, through the Developing Countries Trading Scheme (DCTS), which harnesses the power of trade to support long-lasting development. We also support multilateral efforts to address market distortions that detract from development, including liberalising trade in green goods. We aim to enable strategic projects and build government-to-government trade cooperation relationships especially on the green economy/renewables (solar, wind, green hydrogen) and critical minerals.

We also leverage the ministerial G2G trade platform to advocate for changes in regulation, legislation, and business environment practices and support privatisation reforms. We support education reforms as an enabler of inclusive growth.

Stability

We work with multi-lateral partners to enable integrated responses to regional drivers of instability, increase resilience and reduce dependency on China and Russia. Recognising climate change is a driver of instability, we will work to promote regional cooperation across Central Asia in relation to energy security/connectivity & water security, including with the Multilateral Development Banks (MDBs) and International Finance Institutions (IFIs). This will include strengthening the enabling environment and greening infrastructure investments.

The UK works to support alignment with the Paris Agreement and COP26 outcomes and implementation of regional and national climate/nature plans towards a credible pathway to net zero. We work with the private sector, civil society and communities to advocate on climate issues and support climate vulnerable communities to become more resilient. We lobby to support improvements in environmental protection/biodiversity. We are designing new climate programming which should come online in 2024/25.

We promote gender and inclusion across all work areas. We are supporting governments in the region to develop and implement gender equality legislation, strategies, and plans and ensure a more sustainable response to Gender Based Violence (GBV) as well as greater access to GBV services.

Who we work with

In Central Asia we work closely with the International Financial Institutions (IFI), especially the World Bank, International Finance Corporation (IFC) and the European Bank for Reconstruction and Development (EBRD) as well as United Nations (UN) agencies. We are active members of donor coordination forums across the region. We also work closely with like-minded countries, including:

• the US
• EU countries
• EU institutions
• Switzerland
• Japan
• Korea

Other major donors include Turkey and the UAE.

The UK is a contributor to the UN and Multilateral Development Banks (MDB) through core contributions. The IFIs have significant investments in regional co-operation, connectivity, and integration. This includes infrastructure, for example, on transport, water and energy as well as supporting wider investment on governance, digital innovation, inclusive growth, private sector development and climate change which are critical to the development of the region. We also work closely with the British Council on education and prosperity initiatives.

Key programmes

The UK works through a regional lens recognising the interconnectivity of issues like infrastructure, water, energy, and trade. The table below provides an overview of the in-region portfolio. The UK is also a core contributor to multilateral institutions, for example, the World Bank and the International Monetary Fund (IMF) and therefore can leverage the significant IFI spend^{[footnote 18]}.

Table 1: Key programmes in the regional portfolio

Programme	Outcome	Total budget	Timeframe
CASA 1000 (FCDO)	Construction of major energy infrastructure project connecting this region – that will allow countries to trade and transmit renewable, hydropower electricity[footnote 19].	£31 million	2016 to 2025
Effective Governance for Economic Development (FCDO)	Improved effectiveness, accountability, and transparency of economic policy delivery, for example, on regional development, labour market reform, e-government, e-commerce and social protection.	£25 million	2020 to 2025
Central Asia (CSSF)	Addressing conflict and instability in hotspots such as the Ferghana Valley and Afghanistan/Central Asia borders. Promoting Central Asian regionalism and integrated responses to threats, for example, disinformation. Reducing Gender Based Violence (GBV).	Data to be verified at the end of the fiscal year	2022 to 2025
Policy and Innovation Facility (PIF) (FCDO)	High-quality economic development policies, strategies, programmes, and implementation plans developed and implemented by the Governments of Kyrgyzstan and Tajikistan.	£2.8 million	2019 to 2023
Enterprise and Innovation Programme (FCDO)	Increase innovation and growth in start-ups and SMEs, providing support and training through the establishment of business innovation centres in Tajikistan and Kyrgyzstan.	£19 million	2019 to 2024

Results highlights

In Tajikistan, UK support enabled the revision of the Government’s social protection benefits policy to target poor households with higher benefits. The new policy is expected to lift between 100,000 and 200,000 people out of poverty in the next 3 years. In Uzbekistan, the UK supported the revision of the Labour Code, which sets out the ‘equal pay for equal job’ principle to drive away gender-based discrimination in labour markets. In the Kyrgyz Republic, UK support and expertise enabled tax and other regulatory incentives for creative industries, which are expected to grow from 1% to 3% of GDP by 2025, reducing country’s dependence on mining revenues and remittances. We have also trained 666 businesses in Kyrgyzstan and Tajikistan, 62% of which are women-led. This has led to creating 1,890 new jobs in the two countries, 69% filled by women. In Turkmenistan, the UK co-funded the first-ever national survey on gender-based violence that provides data on crucial issues affecting the lives of women. This has laid the foundation for the development of Turkmenistan’s first-ever domestic/gender-based violence legislation.

The UK implements programmes using centrally managed funds (CMPs) as well as through international programme/challenge funds. Priority CMPs are outlined below. International funds are targeted towards small scale interventions on civic space, illicit financial flows and countering disinformation.

Table 2: Centrally managed programmes which complement the regional portfolio

Key centrally managed programme	Outcome	Total budget	Timeframe
Trade and Investment Advocacy Fund (TAF2 Plus)	TAF2 Plus aims to improve the skills of developing country governments to effectively participate in international trade negotiations and integrate with the global trade system.	£16 million[footnote 20]	2015 to 2023
GPE multiplier grant	Improving access and quality to early childhood education. Implemented in Uzbekistan/Tajikistan.	£10 million (16.5% UK contribution) £10 million (15% UK contribution)	Uzbekistan (2019 to 2024) Tajikistan (2023 to 2027)
Global tax activities and Public Goods (GTP)	The Global Tax Programme focuses on strengthening tax institutions and mobilizing revenues at the international and domestic levels. Implemented in Tajikistan/Uzbekistan.	£3.2 million[footnote 21]	Ends 2024

Financial information

Initial allocations have been set internally to deliver the priorities set out in the International Development Strategy (May 2022) and the Integrated Review Refresh 2023, based on the FCDO’s Spending Review 2021 settlement.

The department’s spending plans for the period 2022-23 to 2024-25 have been revisited to ensure His Majesty’s Government continues to spend around 0.5% of Gross National Income (GNI) on ODA. This was in the context of the significant and unexpected costs incurred to support the people of Ukraine and Afghanistan escape oppression and conflict and find refuge in the UK, and others seeking asylum. The Government provided additional resources of £1 billion in 2022 to 2023 and £1.5 billion in 2023 to 2024 to help meet these unanticipated costs. The Government remains committed to returning ODA spending to 0.7% of GNI when the fiscal situation allows, in line with the approach confirmed by the House of Commons in July 2021.

The CDPSs include the breakdown of programme budgets allocated to individual countries for 2023 to 2024 and 2024 to 2025. These allocations are indicative and subject to revision as, by its nature, the department’s work is dynamic. Programme allocations are continually reviewed to respond to changing global needs, including humanitarian crises, fluctuations in GNI and other ODA allocation decisions.

These figures do not reflect the full range of UK ODA spending in each individual country/region. This is because they do not include spend delivered through core contributions to multilateral organisations - and country allocations do not include regional programmes delivered by the FCDO’s central departments. Other UK Government departments also spend a large amount of ODA overseas. Details of ODA spent by other UK government departments can be found in their Annual Report and Accounts and the Statistics for International Development.

FCDO Official Development Assistance allocation

Financial information for the region for 2023 to 2024 is outlined below. Of ODA spend in Central Asia in 2022 to 2023, approximately 22% is marked as being principally or significantly focused on promoting gender equality. 0.22% of the portfolio focuses on persons with disabilities.

Figure 1. In Country Spend by IDS Priorities: Investment, 73%; Women and Girls, 22%; Climate, 5%

Allocated ODA budget financial year 2022 to 2023	Indicative ODA budget financial year 2024 to 2025
£3.6 million	£4 million

Note: This figure does not include CSSF spend, or Centrally Managed Programme Fund spend. For accuracy, these figures are confirmed at the end of the financial year. The imputed share of UK multi-lateral funding for the region is around £67.9 million^{[footnote 22]}, with the largest share being spent through the World Bank and the IMF.

It should be noted that a new regional climate programme is also under design which will focus on regional co-ordination and provide direct support to vulnerable communities. A new regional private sector development programme will continue support to the development of small and medium enterprises, returning migrants and the economic empowerment of women and people with disabilities.

Supporting information sources

• Development tracker
• D-portal
• FCDO Evaluation Repository

1. European Bank of Reconstruction and Development (EBRD) data, based on data from national statistics agencies (2022). ↩

2. World Bank data 2000 - 2021 ↩

3. Ibid. ↩

4. The share of mutual commodities trade in Central Asia’s total foreign trade increased from 6.4 percent in 2014 to 10.6 percent in 2022 (EBRD data 2022). ↩

5. https://dashboards.sdgindex.org/rankings ↩

6. Data not available for Turkmenistan and Uzbekistan. ↩

7. World Bank Poverty Indicators ↩

8. https://www.ifad.org/en/web/operations/w/country/tajikistan ↩

9. The labour force participation rate for men is 66%, compared to 50.6% for women in the region (World Bank) ↩

10. Women earn about 60% of what men earn in Tajikistan, 61% in Uzbekistan, 75% in the Kyrgyz Republic, and 78% in Kazakhstan, all below the global average of 80%. (World Bank) ↩

11. Survey on the Health and Status of Women in the Family. Government of Turkmenistan data (2022) ↩

12. World Bank Worldwide Governance Indicators, 2021. ↩

13. Freedom House 2023 ↩

14. IEA (2022), SDG7: Data and Projections, IEA, Paris https://www.iea.org/reports/sdg7-data-and-projections, License: CC BY 4.0 ↩

15. Climate Change in Europe and Central Asia (worldbank.org) ↩

16. Unger-Shayesteh, Katy & Vorogushyn, S. & Merz, B. & Frede, Hans-Georg. (2013). Introduction to “Water in Central Asia — Perspectives under global change”. Global and Planetary Change. 110. 1–3. 10.1016/j.gloplacha.2013.09.016 ↩

17. The UK is contributing to: SDG 1: No Poverty; SDG 4: Quality Education; SDG 5: Gender; SDG 7: Affordable and Green Energy; SDG 8: Decent Work and Economic Growth; SDG 9: Industry, Infrastructure and Innovation; SDG 10: Reduced Inequalities; SDG 11: Sustainable Cities and Communities; SDG 13: Climate Action; SDG 16: Peace, Justice and Strong Institutions; SDG 17: Partnerships. ↩

18. The World Bank spent USD 4.9 billion in the region in 2022. ↩

19. UK support will deliver a critical infrastructure component – a high voltage power converter in Tajikistan. It will also help ensure CASA 1000 delivers real benefits and improved livelihoods for local communities. ↩

20. £50,000 allocation for Uzbekistan for FY 23/24 ↩

21. Allocation for CA 22/23: Kyrgyzstan: $131,039; Tajikistan: $665,000; Uzbekistan: $520,000 ↩

22. Latest data 2020. ↩