The local economy in the pilot sites is dominated by subsistence agricultural and livestock production. Remoteness, high transport costs and lack of investment constrain the establishment of small enterprises for product processing and of alternative income sources in the second or third sector. Although tourism is ascribed to have high potential for the development of this region, infrastructure and entrepreneurial know-how are not adequate.
Local Product Processing and Alternative Source of Income
After the collapse of the Soviet Union people were forced to resort again to arable land and livestock as their main livelihood assets. The relatively large population compared to the scarce natural resource base is hardly able to produce sufficient yields for subsistence let alone for local markets. However, agricultural products are often the only possibility to generate cash income. Long distances to markets and disadvantageous transport conditions constrain the selling of unprocessed wheat, legumes, meat or dairy products. Only processed products can be traded to economically viable conditions and sold on more distant markets. Still, infrastructure, technical equipment and know-how for local product processing, storing and trading are often lacking. At present, only few processing or storing methods are applied such as drying apples and mulberries, manufacturing of sour-milk products and fresh cheese or vegetable conservation in vinegar. As stated by the local population there is an urgent need for alternative income sources and diversification of the local economy. Local processing of agricultural and livestock products, establishment of manufacturing workshops and mining, as well as income sources from services provided to tourists and traders may relieve the dependence on scarce land resources and prevent intensification of its use. A great variety of ideas for the processing of local resources was mentioned in the field reports: Collection and processing of medical plants, mining of geological resources (coal, gold, silver, lime, gravel and minerals), commercial exploitation of hot springs, establishment of iron workshops for horse accessories (Alai), bee-keeping for honey production, processing of fruits, legumes, meat and dairy products, produce apple wine or vodka, wool processing, production of household goods and souvenirs for tourists, cultivation of trees and wood processing, sewing enterprises, development of poultry and fish breeding, or manufacturing of leather products. The development of such micro enterprises demands investment, new technologies, reliable energy supply, entrepreneurial know-how, eased access to markets and transport means.
Access to Markets
The construction and maintenance of transportation infrastructure in mountain regions characterized by steep slopes, high altitudes and extreme landscapes are very costly. Snow fall in winter and frequent natural hazards threaten the traffic routes resulting in occasional or seasonal inaccessibility. Long distances, poor road conditions, slow transport and high fuel prices considerable increase prices for traded goods. Not only the spatial remoteness, but also lack of information about market prices and bad terms of trade including border controls, bribes and taxes hinder access to more distant markets. Selling unprocessed agricultural or livestock products in large markets several hundred kilometers away is economically not viable. Moreover, local markets offer only low prices for primary products and lack purchasing power for handcrafts. To strengthen alternative income and local product processing in the Pamir-AlaiMountains improved access to the markets in Osh, Khorog or Dushanbe with sufficient demand and purchasing power is essential. Abolition of trade barriers, transparent customs regulations and eased cross-border trade between Kyrgyzstan, Tajikistan and China could expand the opportunities to access new markets for realizing locally processed products from remote areas.
Investment Climate and Access to Credits
Larger investment in infrastructure (such as bridges, water channels or hydropower) and their rehabilitation as well as in the establishment of small scale enterprises is highly dependent on financial flows from aid agencies and external actors. For example, the construction of micro hydropower plants in the Tajik Pamirs is only feasible with capital costs borne by external donors since local purchasing power does not allow paying back loans within the project's lifetime. Thus, investment in public infrastructure at local level is generally made without interest rate and as some kind of charity. Several institutions and associations in Kyrgyzstan and Tajikistan provide micro-credits to small scale entrepreneurs for private initiatives. However, people complain about difficult access to credits and unacceptable contract terms; Examination of credit request may last two to three months, interest rates reach up to 25%, loans are coupled to dollar exchange rate, often only short-time credits are available, and long-term credits are only provided to richer families. Such strict contract conditions may be explained by weak payback rate for micro-credits. Because of failed trading strategies and unawareness of market mechanism the debtors are often not able to serve the loans at time. Provision of micro-credits as an important means for business development and local initiatives would be certainly more successful if linked with training in financial management and marketing.