Supporting Large Hydropower Project Design and Planning in Tajikistan
Although Tajikistan enjoyed impressive economic growth in the first decade of the new millennium, most of the growth was based on good fortune and focused narrowly in a few sectors. Needing a strategy to sustain and diversify growth over the medium to long term, the government of Tajikistan (GOT) began the long process of developing its hydropower resources for domestic and export markets. After seven years of discussions, the GOT asked for assistance from the World Bank to learn how to better organize the complex Rogun hydropower project, including financing, designing, marketing to export markets, and managing hydropower revenue responsibly. In response, the World Bank’s South-South Experience Exchange Facility funded a knowledge exchange with the government of Laos, which had built Naum Thien 2 (NT2) in 2008, a similar hydropower plant that was successfully exporting energy to its neighbors.
“Tajikistan wanted to do this very quickly, and even had a turn-key implementation offer from Chinese investors,” explained Mr. R. Sudharsan Canagarajah, Lead Economist with the World Bank. “We got them to see that they needed to take their time, as the Laotians had, to manage the governance and social issues as carefully as the technical issues, and in an inclusive and transparent way.” As a result, construction has currently been put on hold, while a World-Bank financial assessment – due in February 2012 – is in progress.
The tour addressed the operational knowledge gaps facing Tajikistan regarding technical, economic, social, environmental, exporting, financing, and public financial management issues. Lessons learned from Laos contributed to better integration of the Tajik hydropower export-led growth strategy into the country’s national development strategy.
"The Laos trip … provided us with a comprehensive knowledge on how to treat a large energy project… taking into account the project's key challenges in terms of social, environmental, and financial management issues,” said Mr. Negmatdzhon Hikmatullaevich Buriev, Senior Adviser to the President of Tajikistan. “[The exchange] helped us to put Tajikistan's Rogun project at the center of our national development strategy and build all other priorities and challenges around it.”
Beneficiaries / Participants
Tajikistan enjoyed a decade of growth and poverty reduction from 1997 to 2008, with average annual growth around 8 percent.1 Poverty fell from 81 percent in 1999 to 41 percent in 2007,2 especially in rural areas. To diversify its economy and maintain growth, the country decided to exploit its abundant hydropower resources by placing the building of a US$3 billion dam and hydropower generation facility at the center of its economic development plan.
However, the country had weak governance capacity and faced some limitations in the knowledge required to develop such a large hydropower project. In addition to arranging financing from foreign investors through Public-Private Partnerships (PPPs) and addressing technical design issues, Tajikistan needed to secure hydropower export contracts from neighboring countries, where the government of Tajikistan (GOT) hoped to sell excess electrical capacity. It also needed to ensure transparent management of hydropower export revenue and appropriate spending policies to promote economic growth, employment, and poverty reduction.
“Rogun was very important to Tajikistan and the Government knew that it would become the center of everything [economically],” said Mr. Canagarajah.
Because of its limited knowledge in these areas, the GOT requested help from the World Bank to learn from the experiences of other countries that had pursued large and complex hydropower export-led growth strategies. In response, the World Bank facilitated a knowledge exchange between Tajikistan and Laos, a country in a similar situation---low-income, landlocked, and with weak government capacity---which had successfully completed the Naum Thien 2 (NT2) hydropower project in 2008. Laos had integrated the project into its country development framework and installed a transparent mechanism for managing proceeds from hydropower export revenue.
Funded by the World Bank’s South-South Facility, policymakers from Tajikistan (Presidential Administration, Prime Minister’s Office, and Ministry of Energy), as well as dam technicians working on the development of hydropower in Tajikistan, visited peers in Laos to learn how to address technical, economic, social, and environmental issues emerging from such a large hydropower project.
Follow-up activities continue as the government of Tajikistan (GOT) develops a comprehensive energy sector policy related to the economic, social, and environmental impact of hydropower construction, including mobilization of funds for construction of the hydropower plant and management of domestic and export revenue.
This grant was linked to Economic and Sector Work (Country Economic Memorandum) being done for Tajikistan by the World Bank, which focuses on helping the government develop policies to ensure sustainable growth. The grant is thus expected to contribute to the removal of constraints to sustainable economic growth, and to the reduction of poverty in Tajikistan.
Tajikistan is currently reviewing the financial sustainability of the project and possible externalities for the country and its neighbors. Additionally, two alternative dam designs are under consideration. Thus, construction has been put on hold, while a World Bank-financed assessment – due in February 2012 – is in progress.