I. Some facts:

The livelihood of roughly 22 million persons in Central Asia depends on water. 1.5 billion dollars get lost in South-Eastern Central Asia because of bad water management.
Water is a non-substitutable resource. The production of energy based on water is ten times less costly than production of energy based on oil, gas or coal. After the production of electricity the water is still drinkable, while oil, gas, and coal are transformed into CO2 with negative environmental impact. Kyrgyzstan's 7821 glaciers contain 700 billion cubic meters of water.

II. The "magic quadrangle":

Kyrgyzstan's water and energy policies are confronted with a so-called magic quadrangle implying potential conflict of objectives that are to be solved by optimization:

a. Water for human consumption and in a not too distant future for export in pipeline systems,
b. Water as a basis for environmental policies in a fragile mountain ecosystems (reforestation, ecological tourism),
c. Water as a basis for elite-agriculture (elaborate irrigation),
d. Water as a basis for electricity production.

Kyrgyzstan and Tajikistan are "water powers". So far only 10% of hydropower-electricity are exploited in Kyrgyzstan. Thus, there remains a huge potential for future electricity pro-duction. The project CASAREM-1000 with high voltage transmission of electricity to Afghani-stan and Pakistan is a pilot project that highlights what is likely to happen in future. The feasibility study for CASAREM-1000 will be finished by the 15th of October, 2007. The perti-nent agreements and arrangements are likely to be signed soon.

III. Power stations: Big or small ?

A strategic question is whether Kyrgyzstan needs many more "Toktoguls" or whether such giant power stations should be in the future complemented by small hydropower stations? Should Kyrgyzstan opt for environmentally-friendly networks of small, inter-linked hydro electric power generation stations as a basis for exploiting a substantial amount of the 90% of untapped electric-generation potential? I believe that the latter is the right way to go, and I believe this for a number of reasons.

This country has a vocation for high quality tourism. If, in Kyrgyzstan's beautiful mountain valleys small state-of-the-art hydro-electric power stations are constructed, this may also entail the infrastructure needed for new hotels and sanatoria, for agriculture and reforesta-tion. Hydro-electric power may be combined with high-quality agriculture in the valleys. If roads are built that lead to the dam, then these may also serve as roads leading to new holiday resorts. Electricity for hotels and sanatoria can be produced on the spot.

As soon as possible, some pilot projects should be developed. If they are successful, they should be expanded. The idea would be to reach an optimum mix of hydro-electricity export (Kyrgyzstan's cash driver), high-quality tourism, agriculture, irrigation and human con-sumption, i.e. an optimization of the aforementioned "magic quadrangle". Therefore, in the future, tenders for water-related projects should not be limited to single projects, but should contain multi-system developments comprising the elements "water-energy-agriculture-tourism and recreation".

IV. Financing:

How would such integrated projects be financed? This question is very well-known to me. While I was on leave from the German Foreign Office serving as executive vice president for international business of a major telecommunications enterprise - I was building telecom-munication networks in Eastern-European countries, such as the Ukraine and the Baltic's. In this framework, I always had to deal with the question of financing. To achieve sound fi-nancing of big projects, I recommend a syndication of commercial banks, public-private partnership funds and development banks, - if possible with participation of operators and suppliers. Would banks and other partners be ready to take such risk? I do believe so.

To put it simply, it is a matter of converting the water and electricity of tomorrow into the money of today. I have done this in the telecommunications business, converting the phone calls of tomorrow into the money of today. Such monies were used for financing net-works, equipment and services.
Thus, on all levels - construction, operation and financing - there must be interesting mix-tures, conglomerates and syndicates. Agriculture must be combined with dams, turbines, high voltage long distance transmission technology, transport, hotels/medical recreation centers and environmental design and operation. In particular, financiers need to under-stand that the money to be paid back will not just come from one product, but - possibly at graduated times - from a combination of products and services. Kyrgyzstan could become a pilot in conceptualizing "multi-product and multi-finance water & energy-schemes".

V. Regulation by the Kyrgyz administration:

I think the Kyrgyz are invited to better understand that the question is not "privatization - yes or no?" The question rather is "how can we use foreign capital for national purposes?" This is a matter of decent regulation - regulation under the rule of law and in the interest of the country. And it is also a matter of understanding that for foreign investors to be at-tracted and secured for the long term, there must be foreign investment protection and rea-sonable amounts of profit to reward the investment. Decent regulation comprises both "mo-nopoly regulation" (to avoid that the public monopoly is being succeeded by a private mo-nopoly) and ex-ante (or prior) "sector specific regulation". At the same time some sort of in-ternational regulation (public international law) is needed to avoid "water-conflicts" and maintain peace and stability in the region.

The public international water law is still in its infancy. There are some basic principles such as the principle of limited sovereignty, the principle of ‘adequate use", the principle of com-pensation for damage, and the principle of cooperation and exchange of information. Since the emerging international water law is based on treaties, but also on general international law and state practice, the Kyrgyz have a good chance to influence the content of the future international water law. This requires an attitude in terms of "functional duplication", i.e. safeguarding one's own interests and at the same time the common international public good.

VI. A Bishkek Water Academy for Central Asia:

A "Bishkek Water Academy for Central Asia" should become a center of excellence for top-experts in the field of hydroelectric power production & transmission (high-voltage grids), biodiversity, agriculture and irrigation, innovative financing of water-related projects includ-ing modeling in the field of decertification, hygiene and sanitation. Further, the best interna-tional water lawyers addressing such issues such as trans-boundary river basin manage-ment should work in Bishkek. In the framework of the recently adopted European Union's "EU - Central Asian Strategy for Partnership", Kyrgyzstan has put forward the plan of an "Energy and Water Conference" and particularly of an "Energy and Water Academy". Such an "Energy and Water Academy for Central Asia" will be a major component of Kyrgyzstan's successful future and a vital element for peace and stability in the South-Eastern Central Asian region.