Qush-Tepa canal to significantly impact Uzbekistan’s agriculture

As a result, the land area under cultivation in the Amu Darya basin will decrease by 18.9%. The estimated impact would be equal to 0.7% of GDP and about 250,000 jobs will be lost in crop production. To mitigate these impacts, the adoption of water saving technologies should be incentivised and water tariffs introduced that reflect the scarcity. In addition, we see the need for a faster liberalisation of land allocation policies to enable a more efficient use of arable land.

Background

Uzbekistan has little own water resources – 85% of the water used originates in its neighbouring countries – which makes it vulnerable to actions of its neighbours. Around 90% of water usage in Uzbekistan occurs in the agricultural sector, which accounts for about 25% of GDP.

In 2022, Afghanistan started the construction of the Qush-Tepa canal, which will be used for irrigation purposes. The canal will take in water from the Amu Darya, the larger of the two main rivers in Uzbekistan. This will reduce the water availability in Uzbekistan and will have an impact on its agricultural production.

Methodology

The Amu Darya river is a key source of water supply in five regions of Uzbekistan: Surkhandarya, Kashkadarya, Bukhara, Khorezm and Karakalpakstan. We model the reduced water availability due to the canal’s construction as well as climate change for each of the five regions in Uzbekistan. Afterwards, we take these estimations as inputs for an agricultural model to assess the economic impact. We estimate the reduction of cropland area, cropping value added and employment in crop production.

Impact of the Qush-Tepa canal on water availability

The Qush-Tepa canal is expected to be built in three stages and with each construction phase, the amount of water intake of the canal will increase. By 2025, we estimate a water intake of 5%, by 2028, 15%, and upon planned completion in 2030, water intake is estimated to be 25%.

We estimate the total reduction in available surface water in the Amu Darya basin taking into account the Qush-Tepa canal as well as climate change to amount to 7.4% in 2025, 18.9% in 2028 and 29.4% in 2030.

Impact of reduced water availability on agriculture

The reduced water availability will have economic implications in Uzbekistan. As available water declines, assuming all other factors remain constant, the land area, which can be cultivated in the Amu Darya basin is expected to decrease by 18.9% under the 25% intake scenario.

However, some regions will be more adversely affected by cropland reduction than others. In the Kashkadarya region, usable cropland is expected to decline by 25.6% for the 25% water intake scenario.

As the cropland area under cultivation shrinks, the value added realised from crop production also decreases. On average, the value added from crop production in the Amu Darya basin is expected to decline by 12.9% for the 25% water intake scenario.

When these reductions in value added are considered in relation to national cropping value added in Uzbekistan, the reduction would be about 6.2% for the 25% water intake scenario. This implies a drop of 2022 GDP by 0.7%. While the national impact is not large, regionally, the impacts are severe. For Kashkadarya, in our model, the 25% water intake scenario corresponds to a reduction in crop production value added of 18.2%.

Furthermore, negative impacts on employment in crop production are expected. For the entire Amu Darya basin, a reduction of employment in crop production of 27.6% is expected under a Qush-Tepa intake scenario of 25%, which would signify a loss of almost 250,000 jobs. Again, the Kashkadarya region is worst affected with an estimated loss of about 97,000 jobs. These large negative impacts in Kashkadarya can be explained by the current crop structure in the region, particularly the fact that it does not grow rice. Due to the high water-intensity of rice, the area grown with this crop declines most strongly as water availability is reduced. In other regions, a small reduction in rice growing area frees up relatively large amounts of water, which can be used for other crops. Due to the absence of rice in Kashkadarya, such a substitution is not possible in the region, leading to the overall largest decline in cropland area, value added from crop production and jobs.

Policy recommendations

Considering that the construction of the Qush-Tepa canal has already begun, the policy response should focus on measures that will help the regions located in the Amu Darya basin adapt to the new resource restrictions.

A key measure of adapting to less available water would be a reduction of the water used per hectare through water saving technologies and more efficient irrigation. To incentivise farmers’ adoption of more water-efficient technologies, we recommend subsidies, targeted especially at small farmers. We also see the need for an expansion of extension services to increase awareness of the benefits of these technologies among farmers.

Another important aspect is the reform of current water tariffs. Tariffs need to be linked to actual consumption and increased to a level, where they adequately reflect water scarcity.

In addition to the introduction of effective tariffs, a faster liberalisation of the current land allocation policies is highly recommended. With current policies, farmers are not able to adapt to the water reduction shock via a change of crop allocations. Particularly the area grown with cotton is currently larger than it would be under a liberalised regime.

Lastly, the modelling results showed large variations between the economic impacts on the regions. Thus, the policy response should take a regional development approach, focusing especially on those regions most adversely affected such as Kashkadarya.

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This newsletter is based on the Policy Study Impact of the Qush-Tepa canal on the agricultural sector in Uzbekistan (forthcoming)

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