Almaty–Bishkek Regional Road Rehabilitation Project

Completion Report

Project Numbers: 29568 and 32463 Loan Numbers: 1774 and 1775 December 2007

Kazakhstan and Kyrgyz Republic: Almaty–Bishkek Regional Road Rehabilitation Project

CURRENCY EQUIVALENTS

KAZAKHSTAN

Currency Unit – tenge (T)

At Appraisal At Project Completion 31 August 2000 31 October 2007

T1.00 = $0.0070 $0.0082 $1.00 = T142.4000 T120.8550

KYRGYZ REPUBLIC

Currency Unit – som (Som)

At Appraisal At Project Completion 31 August 2000 31 October 2007

Som1.00 = $0.0208 $0.02895 $1.00 = Som47.9900 Som34.5400

ABBREVIATIONS

ADB – Asian Development Bank ACCS – Automated Customs Clearance System CAREC – Central Asia Regional Economic Cooperation CBA – cross-border agreement CTID – Committee of Transport Infrastructure Development EA – executing agency EBRD – European Bank for Reconstruction and Development KAZMOTC – Kazakhstan Ministry of Transport and Communications KGZMOTC – Kyrgyz Ministry of Transport and Communications PIU – project implementation unit PRC – People’s Republic of China RRP – Report and Recommendation of the President RSS – Road Safety Secretariat TA – technical assistance

NOTES

(i) The fiscal year (FY) of the Kazakh and Kyrgyz governments ends on 31

December.

(ii) In this report, "$" refers to US dollars.

Vice President L. Jin, Operations Group 1 Director General J. Miranda, Central and West Asia Department (CWRD) Director S. O’Sullivan, Infrastructure Division, CWRD Team leader R. Ishenaliev, Transport Specialist, CWRD Team members L. Protacio, Assistant Project Analyst, CWRD P. Seneviratne, Principal Transport Specialist, CWRD

CONTENTS Page

BASIC DATA i Kazakhstan Component i Kyrgyz Component iv MAP I. PROJECT DESCRIPTION 1 II. EVALUATION OF DESIGN AND IMPLEMENTATION 1

A. Formulation and Design 1 B. Project Outputs 2 C. Project Costs 5 D. Disbursements 5 E. Project Schedule 6 F. Implementation Arrangements 7 G. Conditions and Covenants 7 H. Related Technical Assistance 8 I. Consultant Recruitment and Procurement 8 J. Performance of Consultants and Contractors 9 K. Performance of the Borrowers and the Executing Agencies 10 L. Performance of the Asian Development Bank 10

III. EVALUATION OF PERFORMANCE 11

A. Relevance 11 B. Effectiveness in Achieving Outcome 12 C. Efficiency in Achieving Outcome and Outputs 13 D. Preliminary Assessment of Sustainability 13 E. Impact 13

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 14

A. Overall Assessment 14 B. Lessons Learned 14 C. Recommendations 15

APPENDIXES 1. Project Framework 18 2. Chronology of Main Events 21 3. Description of Contracts and Procurement 23 4. List of Procured Road Maintenance Equipment 26 5. List of Equipment for Customs Control 27 6. Project Costs and Financing Plan 28 7. Annual Disbursements 29 8. Loan Covenants 30 9. Kazakhstan Ministry of Transport and Communication Organizational Structure 39 10. Economic Analyses 40 11. Trade and Transport 42 SUPPLEMENTARY APPENDIXES A. Technical Assistance Completion Reports

BASIC DATA

Kazakh Component A. Loan Identification 1. Country 2. Loan Number 3. Project Title 4. Borrower 5. Executing Agency 6. Amount of Loan 7. Project Completion Report Number

Kazakhstan 1774 Almaty–Bishkek Regional Road Rehabilitation Republic of Kazakhstan Ministry of Transport and Communications $65.0 million (reduced to $52.0 million on 2 March 2001 and $49.8 million at 30 June 2007 closing) 1009

B. Loan Data 1. Appraisal – Date Started – Date Completed 2. Loan Negotiations – Date Started – Date Completed 3. Date of Board Approval 4. Date of Loan Agreement 5. Date of Loan Effectiveness – In Loan Agreement – Actual – Number of Extensions 6. Closing Date – In Loan Agreement – Actual – Number of Extensions 7. Terms of Loan – Interest Rate – Maturity (number of years) – Grace Period (number of years) – Commitment charge – Front-end fee

14 June 1999 26 July 1999 4 September 2000 7 September 2000 31 October 2000 4 June 2001 2 September 2001 31 May 2002 4 30 June 2005 31 December 2006 4 Pool-based variable lending rate 24 4 0.75% per annum 1% per annum

9. Disbursements a. Dates Initial Disbursement

20 November 2002 Final Disbursement

30 January 2007 Time Interval

50 months

Effective Date 31 May 2002

Original Closing Date 30 June 2005

Time Interval 37 months

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b. Amount ($ million)

Category Allocation at

Loan Approval Allocation at Loan Signing

Revised Allocation

Amount Disbursed

Amount Cancelled

Civil Works 31.800 31.800 41.080 39.578 1.502 Project Management 0.500 0.500 0.000 0.000 0.000 Equipment 10.300 10.300 6.200 5.669 0.532 Consulting Services 3.850 3.850 4.200 4.037 0.162 Interest & Commitment Charges

11.500 0.000 0.000 0.000 0.000

Front End Fee 0.650 0.520 0.520 0.520 0.000 Unallocated 6.400 5.030 0.000 0.000 0.000 Total 65.000 52.000 52.000 49.804 2.196

10. Local Costs (Financed) - Amount ($) 16,518,496 - Percent of Local Costs 86.71% - Percent of Total Cost 7.09% C. Project Data

1. Project Cost ($ million) Cost Appraisal Estimate Actual

Foreign Exchange Cost 58.9 77.5 Local Currency Cost 53.5 45.3 Total 112.4 122.8

2. Financing Plan ($ million)

Cost Appraisal Estimate Actual Implementation Costs Borrower Financed 22.0 44.1 ADB Financed 65.0 49.8 EBRD Financed 25.0 28.5 EU TRACECA Financed 0.4 0.4 Total 112.4 122.8 IDC Costs Borrower Financed 0.0 0.0 ADB Financed 12.1 0.5 EBRD Financed 3.5 3.5 Total 15.6 4.0 ADB = Asian Development Bank, EBRD = European Bank for Reconstruction and Development, EU TRACECA = European Union Transport Corridor Europe Caucasus Asia Program, IDC = interest during construction.

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3. Project Schedule

Item Appraisal Estimate Actual Effectiveness of Loan and Cross-Border Agreement 3 September 2001 31 May 2002Date of Supervision Contract with Consultants 1 May 2001 19 August 2002Civil Works Contracts Date of Award 1 February 2002 21 August 2003 Completion of Work 31 June 2004 1 December 2006Road Maintenance Equipment First Procurement 31 March 2002 17 December 2004 Last Procurement 28 February 2004 23 November 2005

4. Project Performance Report Ratings

Ratings Implementation Period

Development Objectives

Implementation Progress

From 1 January 2007 to 31 May 2007 Satisfactory Satisfactory From 1 January 2006 to 31 December 2006 Satisfactory Satisfactory From 1 January 2005 to 31 December 2005 Satisfactory Partly Satisfactory From 1 January 2004 to 31 December 2004 Satisfactory Satisfactory From 1 January 2003 to 31 December 2003 Satisfactory Satisfactory From 1 January 2002 to 31 December 2002 Satisfactory Satisfactory

D. Data on Asian Development Bank Missions

Name of Mission

Date

No. of Persons

No. of Person-Days

Specialization of Membersa

Loan Fact-Finding Mission 1–16 March 1999 3 35 a, d, e Loan Appraisal Mission 14–26 June 1999 6 60 a, c, d, g, e, f Loan Inception Mission 29 August 2001 to

5 September 2001 2 16 a, a

Loan Review Mission 1 22–26 April 2002 1 5 a Loan Review Mission 2 27 August 2002 to

6 September 2002 1 11 a

Loan Review Mission 3 10–16 July 2003 4 24 a, h, i Loan Review Mission 4 25–31 August 2004 2 14 a, i Loan Midterm Review Mission 9–19 October 2004 2 20 a, h Loan Review Mission 5 1–7 October 2005 2 12 a, i Project Completion Review 15–19 October 2007 4 24 a, d, h, i

a a - engineer, b - financial analyst, c - counsel, d - economist, e - social development specialist, f - cofinancing officer, g - programs officer, h - portfolio, analyst, i - resident mission staff

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BASIC DATA Kyrgyz Component

A. Loan Identification 1. Country 2. Loan Number 3. Project Title 4. Borrower 5. Executing Agency 6. Amount of Loan 7. Project Completion Report Number

Kyrgyz Republic 1775 Almaty–Bishkek Regional Road Rehabilitation Kyrgyz Republic Ministry of Transport and Communications SDR 3,832,000 1009

B. Loan Data 1. Appraisal – Date Started – Date Completed 2. Loan Negotiations – Date Started – Date Completed 3. Date of Board Approval 4. Date of Loan Agreement 5. Date of Loan Effectiveness – In Loan Agreement – Actual – Number of Extensions 6. Closing Date – In Loan Agreement – Actual – Number of Extensions 7. Terms of Loan – Interest Rate – Maturity (number of years) – Grace Period (number of years)

27 June 1999 2 July 1999 4 September 2000 7 September 2000 31 October 2000 31 May 2001 2 September 2001 31 May 2002 3 30 June 2004 31 Dec 2007 4 1% per annum during grace period; 1.5% thereafter 32 8

9. Disbursements a. Dates Initial Disbursement

15 March 2004 Final Disbursement prior to 31 Dec 2007


Effective Date

31 May 2002 Original Closing Date

30 June 2004


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b. Amount (SDR million)

Category Allocation at

Loan Approval Allocation at Loan Signing

Revised Allocation

Amount Disbursed

Undisbursed Balance

Civil Works 2.912 2.912 3.127 2.449 0.678 Project Management 0.077 0.077 0.084 0.084 0.000 Consulting Services 0.306 0.306 0.557 0.557 0.000 Interest Charge 0.077 0.077 0.064 0.064 0.000 Unallocated 0.460 0.460 0.000 0.000 0.000 Total 3.832 3.832 3.832 3.154 0.678

10. Local Costs (Financed) - Amount ($) 1,298,269 - Percent of Local Costs 66.8% - Percent of Total Cost 23.2% C. Project Data

1. Project Cost ($ million) Cost Appraisal Estimate Actual

Foreign Exchange Cost 3.7 3.8 Local Currency Cost 3.0 2.4 Total 6.7 6.2

2. Financing Plan ($ million) Cost Appraisal Estimate Actual Implementation Costs Borrower Financed 1.3 1.0 ADB Financed 5.0 4.6 EU TRACECA Financed 0.4 0.4 Total 6.7 6.0 IDC Costs Borrower Financed 0.0 0.0 ADB Financed 0.1 0.1 Total 0.1 0.1 ADB = Asian Development Bank, EU TRACECA = European Union Transport Corridor Europe Caucasus Asia Program, IDC = interest during construction. 3. Project Schedule

Item Appraisal Estimate Actual Effectiveness of Loan and Cross-Border Agreement 2 September 2001 31 May 2002Date of Supervision Contract with Consultants 1 May 2001 7 June 2002Civil Works Contract Date of Award 1 April 2002 11 August 2003 Completion of Work 31 June 2003 expected 31 Dec 07

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4. Project Performance Report Ratings

Ratings Implementation Period

Development Objectives

Implementation Progress

From 1 January 2007 to 30 September 2007 Satisfactory Satisfactory From 1 January 2006 to 31 December 2006 Satisfactory Partly Satisfactory From 1 January 2005 to 31 December 2005 Satisfactory Partly Satisfactory From 1 January 2004 to 31 December 2004 Satisfactory Partly Satisfactory From 1 January 2003 to 31 December 2003 Satisfactory Satisfactory From 1 January 2002 to 31 December 2002 Satisfactory Satisfactory D. Data on Asian Development Bank Missions

Name of Mission

Date

No. of Persons

No. of Person-Days

Specialization of Membersa

Loan Fact-Finding Mission 17–24 March 1999 3 24 a, d, e Loan Appraisal Mission 28 June 1999 to

2 July 1999 5 25 a, c, d, g, e

Loan Inception Mission 23–28 August 2001 2 12 a, a Loan Review Mission 1 15–18 July 2002 2 8 a, i Loan Review Mission 2 6–8 December 2002 1 6 a Loan Review Mission 3 17–21 July 2003 3 15 a, h, i Loan Review Mission 4 16–22 January 2004 1 7 a Loan Review Mission 5 2–10 December 2004 4 9 a, a, h, i Loan Midterm Review Mission 8–10 August 2005 2 6 a, h Loan Review Mission 5 22–26 March 2006 2 10 a, i Special Loan Administration Mission

14–16 February 2007 3 9 a, b, i

Project Completion Review 10–14 October 2007 4 20 a, d, h, i a a - engineer, b - financial analyst, c - counsel, d - economist, e - social development specialist, f - cofinancing

officer, g - programs officer, h - portfolio, analyst, i - resident mission staff

I. PROJECT DESCRIPTION

1. The rationale for the Almaty–Bishkek Regional Road Rehabilitation Project defined in the Report and recommendation of the President (RRP)1 stated that “Regional cooperation among the countries of Central Asia is required to develop their economies. The transport sector contributes substantially toward this end through the development of adequate transport infrastructure that allows new markets to be opened up, and through the emergence of efficient transport modes that facilitate the restructuring of trade and industry and expanding the scope for international trade in goods and services. Cross-border cooperation improves the efficiency of road transport. Safer and better-maintained roads reduce road accidents and travel costs. The Almaty–Bishkek road is at a cross-link between the road corridors that connect the Far East with Europe and Fergana Valley with Russia. Its rehabilitation, combined with removal of the physical and nonphysical barriers impeding cross-border transport, complements earlier assistance by the Asian Development Bank (ADB) in Kazakhstan, the Kyrgyz Republic, and Uzbekistan to create an improved regional road network and will contribute to regional economic cooperation. The Project has been given high priority by the Governments of Kazakhstan and the Kyrgyz Republic.” 2. The objective of the Project was to improve the efficiency and safety of the principal subregional road transport link between Almaty and Bishkek by (i) rehabilitating road infrastructure, (ii) modernizing border control policies and procedures, (iii) upgrading cross-border facilities, (iv) improving the coordination and management of road safety, and (v) introducing an efficient road maintenance system. The main expected outputs of the Project were (i) rehabilitation of about 245 kilometers (km) of the Almaty–Bishkek road (about 204 km in Kazakhstan and 41 km in the Kyrgyz Republic), (ii) improved customs facilities at the Akzhol-Chu border point, (iii) new road maintenance equipment for Kazakhstan, and (iv) a cross-border agreement (CBA) and specific road safety initiatives ratified and implemented by Kazakhstan and the Kyrgyz Republic. The Project also included an advisory technical assistance (TA)2 to help implement the CBA and provide transport advisory support to Kazakhstan.

II. EVALUATION OF DESIGN AND IMPLEMENTATION

A. Formulation and Design

3. The Project concept was formulated consistent with (i) the governments’ strategies focusing on improvement of transport as one of the critical means to alleviate poverty; (ii) ADB’s 1999–2001 country strategies and programs for Kazakhstan and the Kyrgyz Republic3 that focused on the rehabilitation and improvement in maintenance operations and the safety standards of transport networks; and (iii) ADB’s program for Central Asia Regional Economic Cooperation (CAREC) that emphasized regional cooperation in the areas of transport, energy, and trade facilitation. Regional cooperation became increasingly relevant as the Project progressed, particularly due to the growing importance of regional cooperation for landlocked Central Asian countries. Moreover, the European Bank for Reconstruction and Development

1 ADB. 2000. Report and Recommendation of the President to the Board of Directors on Proposed Loans and

Technical Assistance Grants to the Republic of Kazakhstan and the Kyrgyz Republic for the Almaty-Bishkek Regional Road Rehabilitation Project. Manila.

2 ADB. 2000. Technical Assistance to the Republic of Kazakhstan and the Kyrgyz Republic, Road Sector Efficiency. Manila (TAs 3530-REG and 3531-REG, approved on 31 October 2000).

3 ADB. 1998. Country Assistance Plan (1999–2001): the Kyrgyz Republic. Manila, and ADB. 1998. Country Assistance Plan (1999–2001): Kazakhstan. Manila.

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(EBRD), and the European Union under its support for transition economies, had agreed to cofinance specific components and subcomponents of the Project. 4. The Project was designed and appraised in 2000. The cofinanciers and the governments agreed that deficiencies in the physical and nonphysical aspects of cross-border transport and trade needed to be corrected simultaneously to achieve the required levels of transport efficiency in order to enhance regional trade and travel. Accordingly, the Project was designed with distinct investment and noninvestment components. 5. The project framework in Appendix 1 clearly defined the Project’s goal, purpose, outputs, and inputs. The performance targets set for the Project were generally sufficient to monitor the achievement of its intended development impact. Inclusion of trade indicators and targets could possibly have strengthened monitoring of the Project’s intended goal and its regional dimension. The main drawback of the design was that the project risks associated with the complex cross-border issues arising from intercountry arrangements that delayed project implementation were not fully considered. The chronology of the Project’s main events is in Appendix 2. B. Achievement of Project Outputs

6. Overall, the Project achieved its required outputs as follows: (i) 221 km of the Almaty–Bishkek regional road rehabilitated, (ii) customs facilities at Akzhol-Chu border point equipped with an automated system for customs clearance, (iii) road maintenance equipment provided to Kazakhstan, and (iv) the CBA was signed and made effective. Two main issues had a somewhat negative effect on achieving the Project purpose. Firstly, the rehabilitation works were completed with substantial delays (paras. 24–28) and significant cost overruns (para. 20). This has lessened the Project benefits and savings to road users. Secondly, the number of fatalities along the Project road has increased threefold (para. 53 discusses this aspect in detail).

1. Road Rehabilitation

7. Road rehabilitation works included separate civil works and construction supervision packages for the Kazakh and Kyrgyz components. A description of contracts and procurement is in Appendix 3. The Kazakh component was completed, passed the Government’s technical committee inspections, and was fully operational by August 2007. However, the length of the rehabilitated road in the Kyrgyz Republic was reduced from 40.8 km to 19.2 km due to the increased works on the main road sections as a result of very poor condition of the pavement and major bridges.4 The works are now substantially complete with some minor finishing works remaining on the main road. 8. Road design standards adopted for different sections of the road were adequate (i) to forecast traffic levels, (ii) for existing road and structures conditions, and (iii) for selected design speeds. While the existing width and category of the road was generally retained, some improvements to the vertical and horizontal profile of the road were made to improve riding quality and eliminate hazardous and substandard sections. Provisions specified in the bid documents for quality of rehabilitation works, road safety and environment have been followed. After rehabilitation, the length of the road was reduced by about 2.5 km due to the realignment 4 This reduction was approved by ADB through minor changes in project scope as follows: (i) on 2 May 2003, a

reduction in the length of the Bishkek bypass from 24 km to 11 km as a result of a change in road design to rehabilitate the most deteriorated road sections rather than focusing on the entire length; (ii) on 9 July 2003, further reducing the length of the Bishkek bypass to 3–4 km in order to include additional bridge reconstruction works that became necessary due to road safety concerns.

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of the Kurdai pass section (refer to para. 71 of the Project’s RRP). This eliminated a formerly narrow, steep, and hazardous road section passing through a winding mountain valley that often caused blockages to traffic due to frequent road accidents, especially in winter. This section has been substantially improved with dedicated climbing lanes for heavy commercial vehicles and gentle gradients to allow a high level of service. The lapse of 4–5 years between the assessment and the mobilization of actual works negatively affected already degraded road pavements and bridges at the time of project appraisal and led to subsequent changes in project scope and cost overruns. Most of the pavement and bridge surveys leading to the appraisal of the Project were undertaken in 1998–99 but contracts were not awarded until 2003. This led to full-depth reconstruction of pavements along two thirds of the road length, compared to the length at appraisal which was limited to only where the road embankment had failed. Similarly, the rehabilitation of bridges in a number of locations was upgraded to either full reconstruction or replacement of girders where originally this was not provided for. The standard of the rehabilitated road is now that of a well-maintained international road allowing adequate ride quality and travel speeds.

2. Road Maintenance

9. The Project included procurement of road maintenance equipment and associated technical assistance for Kazakhstan. Procurement of road maintenance equipment followed ADB’s Procurement Guidelines using international competitive bidding procedures. The list of procured equipment is in Appendix 4. The loan for the Kyrgyz Republic did not include any specific component for road maintenance. 10. In addition, the Project envisioned the introduction of a system for road maintenance by contract and the establishment of an equipment pool in Kazakhstan. With support from ADB-financed consultants, this component aimed to help establish the equipment hire system and the related servicing and repair workshop, and provide guidance and on-the-job training to equipment operators, workshop mechanics, and the foreman. A precondition for implementation of maintenance by contract was (i) the preparation of a maintenance manual and contracts, and (ii) training of both government supervisors and contractors. 11. The equipment pool was not established as the private sector in Kazakhstan has developed rapidly during project implementation and today there are more opportunities in the domestic market for the direct sourcing of needed resources. However, both governments increased financing for road maintenance substantially in recognition of the need for preserving the road assets. Kazakhstan increased financing for the entire road network to the current level of T6.8 billion ($60 million equivalent), while the Kyrgyz Republic is funding its road network at about Som900 million ($25 million equivalent), i.e., $1,200–$1,500 per km, which is an acceptable level of funding for a country where the network is predominantly two-lane carriageway roads. Further, the governments have moved to introduce road maintenance by contract through outsourcing periodic maintenance activities to the private sector. The governments are willing to further introduce international best practices in managing the road assets such as (i) the supervision of maintenance activities by private sector consultants, (ii) the implementation of pavement management and road asset management systems, (iii) the implementation of performance-based road maintenance contracts, and (iv) international tendering procedures.

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3. Customs Facilities

12. The improvement of customs facilities envisioned the introduction of an automated customs clearance system (ACCS) and computerized cargo registration on a pilot basis to improve transparency and remove physical barriers, including unauthorized payments at the Akzhol–Chu border crossing, and thus give impetus to an overall reform of the customs departments in the two countries. The equipment required for ACCS and related training for the customs officials was financed under the European Union’s Transport Corridor Europe Caucasus Asia Program grant. The supply contracts were completed in March 2004 and training for six customs personnel was completed in October 2004. The list of equipment is in Appendix 5. 13. The ACCS introduced under the Project was timely and supported the customs operations at the Akzhol–Chu border, especially given the rapid increase in traffic volume throughout the project implementation. However, during the project completion review mission, it was observed that border infrastructure in its current state is not sufficient to allow for speedy and smooth movement of vehicles, passengers, and goods; further expansion of the border facilities is needed, as well as further streamlining of border crossing procedures. Expansion of the physical capacity of the border facilities is either planned (in 2008 for the Kazakh side) or has already started (a new terminal is being built on the Kyrgyz side).5 These works could almost double the practical capacity of the border facilities.

4. Cross-Border Agreement and Institutional Components

14. Cross-Border Agreement. The CBA, as intended under the Project, was signed and made effective in 2002. While it significantly delayed the loan effectiveness (as explained in para. 25), the initiatives under the CBA made the border crossing procedures much easier and more transparent. Vehicle weights and dimensions and customs documentation were harmonized. However, challenges still exist to further improve the border procedures due to differences in the legal and procedural requirements of the two countries. Kazakhstan and the Kyrgyz Republic are now discussing the introduction of a joint customs inspection and clearance (one-window clearance system) at the Akzhol–Chu border and plan to enforce vehicle weight and dimension controls through inland control points and advance vehicles clearance procedures. Draft documents are being considered by the parliaments of the two countries. 15. Standards and Specifications. The Project required both governments to implement the standards prepared under an ADB-financed TA project.6 Kazakhstan issued a series of road construction specifications and harmonized standards in 2003. They were further updated and new ones added since then. The Kyrgyz Republic adopted new road design and construction standards in July 2006. These standards are either updates of the ones inherited from the former Soviet Union 7 or new standards which have been adopted from internationally recognized standards by American Association of State Highway and Transportation Officials, British Standards Institution, and others. 16. To support the introduction of the new standards, Kazakhstan was to receive laboratory equipment under the Project. However, this did not happen under the Project because the 5 The Government of Kazakhstan has provisioned in the budget of 2008 a sum of T90 million to expand the border

facilities and build a new bridge to increase the capacity of the existing two-lane bridge to four lanes. Kyrgyz Customs has already started the expansion of the facilities on the Kyrgyz side of the border.

6 ADB. 1997. Technical Assistance for Review of Road Design and Construction Standards. Manila. 7 Such as GOSTs and SNiPs. http://en.wikipedia.org/wiki/GOST.

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Djambul and Almaty regional road maintenance departments have been equipped with necessary laboratory equipment using internal resources. 17. The road maintenance manuals and associated training were delivered under the supervision consultant’s contract. However, the countries still prefer to use the standards and schedule of unit rates inherited from the former Soviet Union. This is partly due to the regulatory requirements of government agencies8 that impose standards and unit rates. These agencies traditionally had little involvement in new trends and practices in the industry. However, the road sector professionals recognize the need for changing to more market-based principles. C. Project Costs

18. The total appraised project cost was $119.1 million, comprising $112.4 million for the Kazakh component and $6.7 million for the Kyrgyz component. The approved loan amounts were $65 million for the Kazakh component from ADB’s ordinary capital resources and SDR 3.832 million ($5 million equivalent) for the Kyrgyz component from ADB’s Special Funds resources. 19. The total project cost is expected to be $131 million,9 comprising Kazakh component completed in August 2007 at total cost of $123 million and the Kyrgyz component expected to close at $8 million in December 2007. The ADB loan to Kazakhstan closed at $49.8 million10 and the loan to the Kyrgyz Republic is expected to close at $5.6 million. 20. Due to the reasons indicated in paras. 7 and 8, both components encountered significant cost overruns. The civil works cost for the Kazakh component increased 70% from an estimated $68.7 million to about $107 million. Despite the reduced scope of the Kyrgyz component from 40 km to 19.2 km, the cost of civil works was still 35% higher than the originally estimated $4.92 million. A contributing factor to cost overruns was the higher than expected price escalation for major construction inputs over a longer implementation period. Particularly, the cost of bitumen increased by 50% per annum during the period 2003–2007, and the rate of price escalation was high for steel, cement, and labor. The price escalation of 2.4% per annum estimated at appraisal was, therefore, far exceeded. The appraised versus actual cost by financiers is in Appendix 6. 21. Delivery of the road maintenance equipment for Kazakhstan has been completed under three supply contracts for $5.6 million, compared with the $10 million provided under the loan. The remaining balance was reallocated to the civil works and consulting services due to associated cost overruns in the road rehabilitation component. D. Disbursements

22. Of the $65 million loan for Kazakhstan, $49.8 million was disbursed with the cancellations indicated in footnote 10. Disbursement of loan proceeds took 16 months longer than envisaged during appraisal (72 months actual versus 56 months estimated) mainly

8 The Ministry of Construction or its equivalent in each country impose standards that are mandatory for the locally

offered contracts. 9 This assumes the completion of contract under the Kyrgyz component which is valued at $2 million. 10 The loan amount was reduced to $52 million through cancellation of $13 million allocated for interest and

commitment charges, and corresponding reduction of the front-end fee and unallocated amounts approved by ADB’s Board on 2 March 2001. Further, the undisbursed amount of $2.2 million was cancelled effective 30 June 2007.

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because of the delay in loan effectiveness. To allow for disbursement of loan proceeds, the original loan closing date of 30 June 2005 was extended to 31 December 2006. Disbursement of counterpart funds has not been delayed in general and closed at $44.1 million, which was double the appraised amount. 23. Of the $5 million loan proceeds under the Kyrgyz component, disbursements reached $4.65 million, with about $1 million still remaining under the loan accounts as of November 2007.11 However, due to the cost overruns, the counterpart funding will almost double from $1.3 million to $2.3 million once the counterpart funds are fully disbursed in December 2007 as expected. Because of the contractor’s failure to complete the contract in time, the loan closing date was extended until 31 December 2007. The annual disbursement of ADB loan proceeds and the governments’ counterpart funds are presented in Appendix 7. E. Project Schedule

24. Overall, the Project was implemented in nearly 7 years as compared to the estimated 4 years. The delays were caused by (i) delayed loan effectiveness, (ii) delayed procurement, and (iii) delayed construction due to poor performance by the contractors. Subsequently, the loan closing dates were extended to 31 December 2006 for the Kazakh component and to 31 December 2007 for the Kyrgyz component. Cumulative delays in project completion and loan closing dates are 12 months for the Kazakh component and 42 months for the Kyrgyz component. 25. Loan Signing and Effectiveness. Effectiveness of the CBA was set as a precondition for the loan effectiveness. It was understood that unless effective border crossing procedures were instituted and implemented, the investment component of the Project might not bring the intended Project benefits to road users and the economies of the countries. Both governments required the CBA and loans to be ratified through their parliaments. Due to external difficulties—such as differences in the legal, judiciary, and regulatory systems of the two countries—the CBA had to go through rounds of discussions and bilateral talks before it could be presented to the two parliaments. This significantly delayed loan effectiveness. Although approved in October 2000, the two loans did not become effective until 18 months later, in May 2002. Given the complexity of cross-border issues, it was ambitious to expect the loans to be ratified by the countries’ parliaments in 90 days as specified in the loan documents. 26. Procurement and Road Rehabilitation. The road rehabilitation works under the Kazakh component, completed in December 2006, were delayed by 24 months from the original schedule of December 2004. Apart from loan effectiveness delays, the 12-month delay was due to (i) inexperience of the Executing Agency (EA) in ADB procurement procedures; (ii) frequent changes in project management arrangements; (iii) the timing of the awarding of contracts, which coincided with the start of winter; and (iv) increased quantities of works. The EBRD-financed contract was delayed due to poor performance of the contractor (para. 40). 27. The civil works contract under the Kyrgyz component, currently expected for completion in December 2007, was delayed by 48 months from the original schedule of December 2003. This was mainly due to internal factors other than the effectiveness of the CBA, and included (i) inadequate assessment of the local contracting industry’s capacity at the project design stage, (ii) delays in procurement of civil works due to changes in the road design and scope of works,

11 The difference is due exchange rate fluctuations between the dollar and special drawing rights.

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(iii) contractor’s inexperience with the requirements of ADB and FIDIC contracts 12, (iv) delays in mobilizing equipment, (v) poor site management, and (vi) contractor’s cash-flow deficit and inability to raise funds from local banks to fund cash-flow requirements. 28. Consulting services for the Kazakh component commenced in August 2002 and were completed in October 2006. Consulting services for the Kyrgyz component commenced in June 2002. Delays in the civil works necessitated extensions of the consultants’ contracts, with a total overrun of more than 30 months for the Kazakh component and nearly 50 months for the Kyrgyz component. F. Implementation Arrangements

29. Ministries of Transport and Communications of Kazakhstan (KAZMOTC) and the Kyrgyz Republic (KGZMOTC) executed the Project. The existing project implementation unit (PIU) for the ongoing ADB-financed project13 in the Kyrgyz Republic was assigned to implement the Kyrgyz component of the project. In Kazakhstan the new PIU was required to be established by 1 November 2000 under KAZMOTC’s Committee of Roads and Road Transport. In addition, for implementing the maintenance component of the project, KAZMOTC was required to create a maintenance supervision unit under the PIU. 30. The PIU under KAZMOTC was not established.14 This, coupled with reorganization and reshuffling of officers within ADB, caused frequent changes of supervising officers on both sides and contributed to the procurement delays. The PIU under KGZMOTC remained unchanged throughout the project implementation with low staff turnover. However, it became evident during the project implementation that the PIU lacked experience and skills in dealing with the contractor. Stronger support from ADB through closer monitoring and expert audit of the contractor’s technical and financial standing could have helped the PIU better identify measures to resolve the issue of nonperformance by the contractor. G. Conditions and Covenants

31. The condition for loan effectiveness was too restrictive and delayed the Project unnecessarily. 15 Covenants set under the loans generally support the achievement of the Project goal and both countries have complied with most of them (Appendix 8). The establishment of an equipment hire system, as discussed in para. 11, did not succeed,16 and therefore the condition should have been waived. The concept was new to the countries and the implementation lacked close follow-through from ADB.

12 Standard contract conditions produced by International Federation of Consulting Engineers. http://www.fidic.org/ 13 ADB. 1998. Report and Recommendation of the President to the Board of Directors on a Proposed Loan and

Technical Assistance Grant to the Kyrgyz Republic for the Second Road Rehabilitation Project. Manila. 14 The Government abolished all PIUs funded by external loans in 2001 and consolidated them under the sectoral

project implementation divisions. The project implementation division for road sector projects was then established under the Board for Investment Projects of the Committee of Roads, which was renamed the Committee of Transport Infrastructure Development in 2005.

15 ADB had similar experience on the Regional Power Transmission Modernization Project, approved by ADB in November 2002, where it required the countries to sign a bilateral Power Trade Relations Agreement as a condition for loan effectiveness, which led to the cancellation of the loans for Tajikistan and Uzbekistan.

16 A similar initiative in the Kyrgyz Republic under the ADB-financed project (footnote 13) was not a success either.

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H. Related Technical Assistance

32. Approved together with the respective loans, two advisory TA projects were evaluated as successful by the respective TA completion reports (Supplementary Appendix A). The TA projects were to (i) assist the governments to implement the CBA (phase I); (ii) focus on improving coordination and management of road safety (phase II); and (iii) help KAZMOTC streamline its functions and responsibilities, define sector objectives, and prepare the 3-year national transport investment plan (phase III). 33. Phase I helped the two countries to (i) streamline customs documentation and procedures for cross-border traffic; (ii) harmonize weights and dimension standards for vehicles; and (iii) remove inland checkpoints, thus removing the cause of unauthorized payments. 34. Phase II activities led to the establishment of the Permanent Secretariat for Road Safety in the Kyrgyz Republic in 2004. It also provided a detailed analysis of all aspects of road safety and developed a comprehensive plan. Further, revisions were made to the Road Traffic Regulations (the road safety guidelines under the Road Transport Act) in the Kyrgyz Republic. The following positive developments have taken place since then.

(i) The Road Safety Secretariat (RSS) now has five full-time staff members. (ii) The RSS has revised the road safety guidelines and they are expected to be

approved by the Government before the end of 2007. (iii) The accident database of the traffic police is shared with the RSS. (iv) Through investigative data analysis and safety audits, the RSS has contributed to

the improvement of certain safety features of the project road. (v) New provisions which increase the liability of public transport operators are being

proposed by the RSS for introduction into the Road Transport Act. (vi) The RSS is initiating preparation of the Road Safety Act and a traffic safety

strategy to be submitted to the Government for consideration in 2008. 35. Phase III has provided recommendations to KAZMOTC with regard to the organizational changes and an action plan for the improvement of the management of the road sector administration. I. Consultant Recruitment and Procurement

36. Estimated at $5 million, the contract under the Kyrgyz component was awarded using ADB’s local competitive bidding procedures to a joint venture of former state-owned contractors, Aziyadorinter. The contractor was not able to complete the contract, mainly because of its inability to undertake a contract of this size. It lacked financial capacity and was not commercially managed, but rather was run in the same manner as a state-owned enterprise (see para. 39). Although the threshold for local competitive bidding contracts under ADB’s Procurement Guidelines was set at less than $1 million at the time of project appraisal, the Project’s RRP justified the use of local competitive bidding because (i) the contract was small and therefore not attractive to international contractors, (ii) rehabilitation works involved mostly overlays and drainage works for which local contractors had adequate capacity, and (iii) the Kyrgyz Republic was keen to provide employment opportunities to its people. 37. The bidding process took about 8 months from the date of first submission of draft bidding documents to the signing of contract. This was mainly due to the substandard quality of bidding documents and bid evaluation report, which were repeatedly revised. Further, there

9

were extensive deliberations on the use of postqualification rather than prequalification procedures and inclusion of a price adjustment provision under the contract. As a result, postqualification procedure was adopted and the qualification criteria for annual turnover and availability of credit line were slightly relaxed from ADB’s standard requirements to allow for more participation from local contractors. As the local competitive bidding process did not preclude foreign firms to bid for the contract, four out of seven bidders were from Turkey and the People’s Republic of China (PRC). However, arguably due to the higher mobilization cost, foreign bidders submitted higher-priced bids and the contract was awarded to a local contractor with the lowest price. Given the contractor’s default under the contract, it was probably premature for the contractor to undertake a contract of this size, and, more importantly, the contractor did not fully understand the principles of international contracting and commercial operation and management. More rigorous assessment of the local contracting industry at the time of project design could have identified these weaknesses and proposed an appropriate procurement method for the Project. J. Performance of Consultants and Contractors

38. ADB financed three contracts under the Project and EBRD financed one contract. Two ADB-financed contracts under the Kazakh component have generally been completed without major problems and contractors performed satisfactorily overall. Minor defects have been remedied by the contractors in a timely manner and the Government of Kazakhstan took over the sections for operation in December 2006. These contracts were completed in 24 months, or 6 months behind the originally planned construction period. The reasons for delay were discussed in para. 26, items (iii) and (iv). 39. The original contract with Aziyadorinter joint venture under the Kyrgyz component was terminated at 79.5% physical completion. The contractor could not resolve its serious cash-flow problems despite all available support from KZGMOTC (as the EA) and ADB. Further, the management of the joint venture could not come to a consensus on contract-related decisions and had disputes among themselves. It also unnecessarily interfered with on-site decisions and the EA had to involve the top management of the joint venture on every technical issue arising during the contract execution. Subsequently, the decisions were not taken effectively and in a timely way. Overall, the duration of this contract could take 53 months including the renegotiated contract, or exceed the original contract period by 32 months. 40. The EBRD-financed contract had a major delay that led to the termination of the contract and the EA directly awarded the new contract to the contractor working under the ADB-financed section. This caused a more than 30% cost increase of the EBRD-financed road section and a 19-month overrun. The assessment of the EBRD-financed contract is mainly based on the feedback received from the EA and EBRD staff as it was under parallel financing arrangements and therefore it was not possible to directly assess the contract. It is thought, however, that problems in this case were similar to those faced by Aziyadorinter joint venture, i.e., the lack of commercially well-structured management and an inability to efficiently allocate resources to the Project. Clearly the management style in both instances had major deficiencies and this could be due to the relatively recent exposure of both contractors to international contracting practices. 41. All four contracts under the Project, including the one financed by EBRD, were supervised by ADB-financed consultants, and the Kazakh and Kyrgyz components were supervised separately. To a certain extent, both consultants supervising the project activities in each country have not performed to the highest professional level. In both cases where the

10

contracts were terminated, the consultants took a passive role in resolving the implementation delays and were not able to promptly advise the EAs of the decisions to be taken. In the case of the Halcrow-Temelsu joint venture, ADB expressed concerns over the performance of the consultant’s project manager due to his inability to effectively supervise the works. Despite the improved performance after the collective efforts of ADB and the EA, the project manager left the site without notifying the EA. Moreover, the review of the consultant’s progress reports indicate that they differ significantly in content, subjects covered, and quality, some being merely a record of project financial status. Clearly, the reports did not reflect the consultant’s strength in how the issues were dealt with. K. Performance of the Borrowers and the Executing Agencies

42. The borrowers and the EAs under the Project were relatively new to internationally funded projects, and had little experience in ADB-financed projects in particular.17 While the PIU established under KGZMOTC had advanced knowledge of ADB’s policies and procedures, the PIU under KAZMOTC was never established and Committee of Transport Infrastructure Development (CTID) staff assigned to administer the Project were frequently changed. This resulted in Project delays. 43. KGZMOTC has generally advanced in its capability to handle internationally funded projects and is now familiar with ADB’s policies and procedures. Also, KGZMOTC has managed to retain most of the PIU staff and thus the institutional memory is kept at the project implementation level. In contrast, CTID lost the institutional memory at the middle and lower level as most of the personnel who implemented the Project have resigned. 44. The success in implementing the institutional changes that were recommended under the advisory technical assistance attached to the Project varies. While the recommendations related to road safety in the Kyrgyz Republic seem to have found support and are being implemented, the recommendations on the improvement of management structure of KAZMOTC were not acted upon. However, CTID generally improved its capacity at the management level, but needs to streamline its functioning and clearly define its structure and responsibilities as there seems to be conflicting responsibilities between its departments (see organizational structure in Appendix 9). 45. Given that project delays were mainly caused by factors out of the reasonable control of the EAs and borrowers, and that they were also relatively new to ADB’s policies and procedures, the EAs and borrowers have demonstrated satisfactory performance. L. Performance of the Asian Development Bank

46. The Project has been supervised by different officers and ADB did not closely monitor the Project activities due to frequent staff changes.18 This undoubtedly affected the overall performance of the Project and did not allow ADB to provide the EAs with timely advice and oversight of the problems encountered during the project implementation. Although the project

17 Kazakhstan and the Kyrgyz Republic became members of ADB in 1994 and the Project was the second and third

ADB operation, respectively, in the road sector. 18 There were six to seven different project officers involved in processing and administration of the Project on each

component.

11

officers warned the EAs of the potential problems,19 ADB could have undertaken more diligent review of the problems as explained in para. 47. 47. ADB administered project implementation activities through reviews of the project progress reports and fielding project administration missions. Seven missions were fielded to Kazakhstan and nine missions to the Kyrgyz Republic. The ADB mission fielded in December 2004 to the Kyrgyz Republic identified the reasons for the contractor’s unsatisfactory performance as (i) being unfamiliar with ADB procedures and FIDIC conditions of contract, (ii) poor site work management, and (iii) cash-flow deficit. Efforts by ADB and the EA to help the contractor improve its performance and cash-flow situation had no effect. The ADB mission advised the EA to terminate the contract in April 2006. After continued nonperformance by the contractor, the contract was finally terminated in February 2007 and a new contract was signed in April 2007. The time lapse between when the problem was first identified and when it finally came to a conclusion had a major impact on the project performance. More in-depth analysis of the contractor’s management structure and its financial standing by ADB, and conclusive advice to the EA early in the process, could possibly have resolved the problem. ADB’s performance based on the above can be rated “partly satisfactory”.

III. EVALUATION OF PERFORMANCE

A. Relevance

48. The Project is assessed “highly relevant” for the two countries involved and the entire CAREC region. As mentioned in para. 3, the Project’s goal (currently impact) and purpose (currently outcome) were consistent with the governments’ development strategies and ADB’s country strategies and programs and remained to be so throughout the project implementation. It improved the regional transport link between Almaty and Bishkek and was instrumental in promoting regional cooperation. Its regional dimension gained momentum with the entire CAREC region reviving after a decade-long economic downturn, and an increase in trade and transport. 49. The Project was the first completed road project linking the two CAREC countries. Its rehabilitated sections form an integral part of the six priority corridors identified under the new CAREC Regional Transport Sector Strategy approved by the 6th Ministerial Conference in Dushanbe on 2 November 2007. It is also one of the important links under the Regional Corridor Project linking western PRC to Europe through Kazakhstan, for which the Government of Kazakhstan is now actively seeking financing from international financial institutions including ADB. 50. All project components were relevant. The Project inputs were generally sufficient to produce the planned outputs. However, the road safety assurances under the Kazakh component were weak and required practically no action from the Government of Kazakhstan. In contrast, the covenant requiring the Government of the Kyrgyz Republic to establish a National Road Safety Council has been successful, although its long-term contribution to overall road safety remains to be seen. A similar covenant under the Kazakh component could have benefited road safety in Kazakhstan.

19 In the case of the Kyrgyz component, the ADB mission advised the EA to terminate the civil works contract,

whereas other ADB missions to Kazakhstan advised the EA to replace the consultant’s project manager.

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B. Effectiveness in Achieving Outcome

51. Varying level of success towards achieving the Project outcomes suggest that overall the Project was effective. The outcome expected of the Project was the improved efficiency and safety of the regional road transport link (the Project road). To achieve this, the Project was to contribute to (i) streamlined customs procedures and documents, (ii) reduced road roughness, (iii) harmonized axle load limits, (iv) reduced road accidents, and (v) the elimination of unauthorized payments for travel on the road. 52. The CBA under the Project helped initiate and implement the documents and equipment needed to expedite the processing of freight and passengers traveling between the two countries, as well as harmonize the axle load limits and reduce the number of checkpoints along the road, which formerly were the points of unauthorized fee collection. Consequently, the processing time appears to have decreased, as has journey time. However, due to the increase in traffic and the limited capacity of the facilities at the border, the waiting time remains as high as 60 minutes. As explained in para. 13, some positive developments are underway to further expand the border facilities and improve border procedures. The CBA prepared under the Project has played an important role in this process and could be used as a model document in other similar regional initiatives. 53. The Project was expected to lower the annual fatality rate, which was 36 fatalities per 10,000 vehicles at the time of project appraisal. As the ride quality improved because of rehabilitation, road accidents have increased due to the increased travel speeds and vehicle overtaking opportunities. The data on road accidents for 2006 suggests that the number of fatalities had increased threefold. Although the Project road was designed and rehabilitated to international road safety standards, the problem appears to stem from driver behavior and cultural aspects. Moreover, enforcement of traffic rules has been lacking in Central Asian countries, and for most drivers it is relatively easy to obtain a driving license without going through a proper driver education program. On the legal side, the current road safety regulations do not clearly define the liability of parties, particularly third-party liability.20 54. Improvement to the alignment and pavement as mentioned in para. 8 has allowed the average travel speed to increase from 40 km per hour to 80 km per hour (the speed limit on one third of the road is 60 km per hour). Therefore, the benefits to the road users from travel time savings and vehicle operating cost savings have exceeded the appraisal targets. However, from the perspective of average journey time (travel time including involuntary stops), benefits are much less due to the minimal reduction in time for crossing the border. The average journey time on the Project road has decreased by about 1 hour as projected during appraisal. This decrease could be expected to lower freight rates and public transport fares and/or lead to an increase in frequency of services, thereby providing more convenient and faster access to market for the people in Almaty and Bishkek as well as the rural communities in between. 55. The loan took more than a year to become effective, mainly due to the need to ratify the CBA in both Kazakhstan and the Kyrgyz Republic. Consequently, the delays in the main component—road rehabilitation—have had a negative effect on the overall effectiveness of the Project.

20 Current regulations in the Kyrgyz Republic do not define third-party liability and liability of transport carriers

resulting from traffic accidents.

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C. Efficiency in Achieving Outcome and Outputs

56. Considering the substantial delays in implementation, the increase in financial cost, and the lost benefits to road users, the Project is rated “less efficient”. The increase in the number of accidents has had a negative impact on the efficiency of the Project’s outcome. Although the reductions in accidents anticipated at appraisal were not included in the quantified benefits, the overall efficiency of the outcomes has been lowered by the decline in road safety. Moreover, the start-up delays due to the late declaration of effectiveness of the loan and subsequent implementation delays of the physical works (which led to a 24-month delay in the road becoming fully operational in Kazakhstan and a 48-month delay in the Kyrgyz Republic) have almost halved the net benefit of the Project, and the economic internal rate of return (EIRR) has dropped to 16.7% from 23.8% at appraisal. If the higher financial cost of state funds and the economic cost of resource reallocation from the other projects are considered, the net benefit could be further reduced. Finally, part of the road awaiting completion on the Kyrgyz side has a minor effect on travel time, which may have a minor influence on the overall efficiency of the Project. The comparative economic analyses are shown in Appendix 10. D. Preliminary Assessment of Sustainability

57. The rehabilitated project facilities will last for the designed service life of 20 years or more, provided that adequate financing and timely routine and periodic maintenance are ensured. In recognition of the urgency for an improved maintenance system, the countries have now focused on introducing best international practices and increased financing for the roads sector (para. 11). To protect the road pavements from premature deterioration, both countries have harmonized vehicle dimension and weight controls and have started collecting vehicle overloading fees. 21 These developments greatly contribute to the sustainability of the investments made. To support the above, it is critical that human and institutional resources are developed to match the growing demand for better-managed and maintained roads. The Project’s contribution to these aspects has been adequate, and together with other donor-financed projects it has contributed to a greater exposure of the EAs and the borrowers to (i) the principles of economy, efficiency, and transparency in contracting through an open bidding process; (ii) the practices of independent construction supervision; and (iii) various contractual matters and how they are regulated in the international marketplace. Given these developments, the Project facilities are likely to sustain over the intended project life. E. Impact

58. The socioeconomic activities along the Project road have more than doubled in recent years and traffic, especially cross-border traffic, has increased substantially. The Project generated about 3,000 jobs for the local population directly on the road rehabilitation activities. About 50% of these workers were unskilled and 10% were women. Although there is no reliable data on the number of jobs created through the development of roadside services, it is apparent from the number of commercial outlets along the road that the number is quite impressive. Additionally, the project road links two major markets in Central Asia, one on the outskirts of Bishkek and the other near Almaty, which employ a significant proportion of the Bishkek population. As most of the goods are transported along the project road between these two markets in order to obtain the best possible return, the Project has also positively contributed to this group of beneficiaries, which has more than doubled since the project appraisal. Overall,

21 Both governments now collect vehicle overloading fees, which represent 3–5% of all revenues collected in the road

sector.

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the Project impact on the socioeconomic development of the two countries is assessed moderate to high. 59. The Project was reported to have negligible impact on the environment. However, the lack of effective monitoring and reporting does not allow for verification of this and whether all risks were mitigated during construction. Some of the diversion roads built during rehabilitation have been kept because (i) they were built on unused state-owned land, (ii) the land used had no agricultural or residential value, and (iii) local authorities whished to use them as service roads during the harvesting season. For similar reasons, the impact of the Project on health and human trafficking was not monitored effectively. It is reported that cases of HIV/AIDS infections have generally increased in the project area but it was not possible to determine how much the Project contributed to such increase. 60. Kazakhstan is a principal trading partner of the Kyrgyz Republic. Trade between the two countries has increased by 4–5 times since the project appraisal (Appendix 11, Table A11.1). While it was not possible to directly asses the impact of the Project on regional cooperation as its design framework did not require the monitoring of such indicators, it is quite evident that the Project helped lower the transport costs and remove some of the official and unofficial payments at the Kyrgyz–Kazakh borders (Appendix 11, Table A11.2).

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment

61. ADB’s strategy to support the road subsector and focus on one of the main subregional road links was most appropriate at the time and the Project remains highly relevant after its completion. Because the achievement of the Project effectiveness, efficiency, and sustainability are considered lower than those anticipated at project preparation, the Project is rated “satisfactory”. 62. The Project was among ADB’s first interventions (footnote 17) in road subsector in the two countries, which were at the early stages of transition to market economies. The capacity of the EAs and the understanding of international bidding and/or contracting practices, as well as ADB procedures among technocrats and bureaucrats, was limited. Constraints were not fully recognized and factored into implementation arrangements and schedules during the project design. Consequently, rather ambitious performance targets and milestones were set at the project design stage. B. Lessons Learned

63. The requirement for effectiveness of the CBA delayed the loan effectiveness in both countries. The issues involved in dealing with transborder infrastructure projects may be broad and complex and one has to bear in mind the limitations of the host countries to overcome the political and bureaucratic difficulties that such initiatives may trigger. While provision of adequate mechanisms to regulate the common, efficient, and fair usage of the project facilities under such regional projects is a prerequisite for ADB financing, it is also not quite in the spirit of client orientation. A flexible approach is advisable with necessary technical support throughout the project life and continued patronage under ADB’s regional cooperation programs, such as CAREC.

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64. Particular to this Project, and applicable to other ADB-financed projects in general, the scope of the improvement works increase substantially between when they were appraised and by the time actual works have started. This often necessitates reduction or revision to project scope and results in cost and time overruns. The time lapse between the appraisal and start of works has to be kept to a minimum, and current ADB policy on advance contracting and retroactive financing makes this possible. The client countries tend to ignore the maintenance of the existing facilities once improvements to the facilities have been programmed and funding identified. To ensure that the existing facilities are kept maintained by the client country until the mobilization of works, an adequate provision for maintenance may be considered as a condition for loan approval by ADB. 65. The project progress reports mainly lack structure and they differ very much in substance. Environmental and social monitoring was also ineffective and so it was not possible to assess the efficiency of the environmental management or social mitigation measures. This further affects the quality of the ADB project and TA performance reports and consequently effective monitoring by ADB. ADB should design a standard, user-friendly reporting template containing all required details. Technology allows for the sharing of information instantly over the internet or by email and so information could be interactively shared between the EA, ADB, and the consultants. 66. More rigorous assessment by ADB of the local contracting industry is needed whereby the project envisions a deviation from the standard procurement procedures. Frequent changes of supervising officers also negatively affects the project and more staff continuity is advisable. C. Recommendations

1. Project Related

67. Future Monitoring. Although the borrowers and the EAs have gained considerable experience in procurement of goods and services following international practices, they lack in-depth knowledge. Moreover, the administration of contracts after procurement is largely left to supervision consultants, with minimal oversight by the EA. ADB must develop user-friendly and efficient information sharing and project management systems that run from a common server and are accessible to the EA and the consultants. This will help monitor the progress of key inputs, outputs, and outcomes, and minimize the need for paper-based submissions and communication delays. More interactive and instant information sharing would help the EA and borrowers better understand ADB’s procedures. In addition, environmental and social monitoring can be improved considerably by providing clear guidance to the EAs as to what monitoring is required, the parameters to be measured, and frequency of the monitoring. 68. Covenants. The covenant requiring the Government of Kazakhstan to establish an equipment pool for road maintenance is no longer relevant. In general, projects advocating establishment of equipment hire systems for road maintenance need to carefully examine the need for such arrangements, given that ADB’s similar initiatives have not succeeded in the past. Initiatives such as this require a good level of knowledge and adequate staff input to ensure success. 69. The Government of Kazakhstan did not furnish ADB with the financial audit report for 2006 and requested to extend the submission date to 2008 whereby it intends to carry out audit of the three ADB-financed projects in Kazakhstan. Given that project accounts are closed, it is suggested that this is a condition for approval of the next loan to Kazakhstan.

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70. Further Action or Follow Up. Approximately 10% of the physical works component in the Kyrgyz Republic is incomplete. Although these works are on a spur section of the main Almaty–Bishkek road, it serves a major regional distribution center and trading place and will contribute to the Project’s benefits. Close monitoring by ADB is needed in this case to ensure funds are available on time to complete these works as programmed for December 2007. 71. Fine tuning will be required of cross-border transport policies and procedures implemented with assistance from the Project to ensure their relevance in the dynamic economies of Kazakhstan and the Kyrgyz Republic. These include changing immigration procedures of the two countries, which would allow passengers to cross the border without having to alight from their vehicle on one side of the border, walk to the inspection point, and board the vehicle on the other side. This procedure presently adds 20–40 minutes to a trip under normal conditions and greatly inconveniences passengers. 72. While the Project played a significant role in furthering regional cooperation, it is recommended that future developments are monitored and further measures to accelerate further integration are discussed at the country levels in support of already ongoing discussions between Kazakhstan and the Kyrgyz Republic. The appropriate venue for this could be the Transport and Customs Committee Group meetings under the CAREC framework. 73. Additional Assistance. Although it is a very important regional link, the Almaty–Bishkek road is only small part of the road network needed to integrate the regional economies and enable seamless east-west trade and travel. ADB’s support for a regional road link from the PRC to Tajikistan through the south of the Kyrgyz Republic, as well as the ring road in Afghanistan, could be supplemented by collaborating on Kazakhstan’s plan to develop its north-south and east-west road corridors (with private sector participation). This plan would enable major commercial centers in the region to be linked by good roads while enabling intermediate rural areas to benefit from faster access to markets. Given that the schedule and financing arrangements for implementing this plan are as yet uncertain, ADB, with its experience in regional cooperation and project financing, could play a leading role as facilitator to help Kazakhstan coordinate with its neighbors and mobilize private financing. 74. The sustainability of past and planned road investment will depend on the timeliness of the reform of maintenance procedures which the transport ministries in the two countries have initiated. While outsourcing is one of the means of increasing the efficiency of maintenance activities, its value depends on the types of contracts and adequate oversight by the ministries. ADB, based on its recent experiences, could play a important role in creating an enabling environment for performance-based contracting and public-private partnerships. 75. Road safety is a critical element where large-scale road network improvement is being undertaken and it may significantly add to a social cost if appropriate measures are not integrated into the overall road network development agenda. Therefore, if ADB is to play a role in safe and reliable roads in the region, it is strongly recommended to further support the road safety initiatives already taking place in the Kyrgyz Republic and start extensive dialogue with Kazakhstan. Further, it is recommended to take a closer look at how effectively ADB can facilitate institutional improvements and bring client-oriented knowledge and experience to its developing member countries. 76. Timing of the Project Performance Evaluation Report. ADB and EBRD expressed interest to jointly review the project performance. The timing of the review should be coordinated

17

if joint review is undertaken, and preferably by the end of 2010. By then, the Kazakh component will be 4 years into operation and the Kyrgyz component 3 years, which should allow an in-depth analysis of the project benefits and impacts.

2. General

77. In preparing future projects it is recommended that the following points are taken into account.

(i) Bilateral agreements and requirement for their effectiveness should not be a precondition for ADB’s loan approval or loan effectiveness, and a flexible approach is recommended.

(ii) Project risks and assumptions should give due consideration to complex issues that may arise due to the political and bureaucratic differences among the countries involved and reflected in implementation plans.

(iii) Performance targets in the design and monitoring framework must be easily measurable and quantifiable.

(iv) The possible risk of cost overruns needs to be assessed based on current and prospective indicators, past experience of the particular country, and appropriate contingencies made.

(v) The packaging and procurement methods, if different from standard ADB practices, should be given thorough analysis, including a particular industry analysis within the sector.

(vi) If any of the project components require a set of loan covenants, these have to be clearly aligned with its outcomes and formulated in a consistent manner.

78. Administration of the project and review by ADB should focus on

(i) close performance monitoring of the consultants, contractors, and the executing agencies;

(ii) streamlining of project reporting and ensuring the quality of reports; (iii) keeping continuity in the project processing and administration teams and

minimizing staff changes; and (iv) involvement of sectoral subcommittees under CAREC in project performance

monitoring for similar regional initiatives.

18 Appendix 1

PROJECT FRAMEWORK

Design Summary Performance Targets Project Achievements

Monitoring Mechanisms

Key Issues and Recommendations

Goals • Improved

regional transport link and cooperation to promote economic growth.

• Physical and nonphysical road transport barriers removed

Partially • Transport documents, road safety programs and adoption of regulations on axle loads

Trade indicators may have strengthened the monitoring of the Project’s goal.

• Vehicle operating costs (VOC) reduced

Increased 20% • ADB’s project completion report

VOC reduction is difficult to measure as vehicle running costs are subject to inflation.

• Road accidents reduced

Increased • Road accident data

Purpose • Improved

efficiency and safety of an important regional road transport link.

• Customs and transport policies, procedures, and documents streamlined at the Georgievka border

Streamlined • Travel time reduced by about 1 hour and the procedures are made simple and transparent.

Interviews with commuters confirm reduction by 1 hour, but due to the limited border facilities, border crossing time is increasing.

• International road roughness index (IRI) reduced from 6/7 m/km IRI to less than 3 m/km IRI

Reduced • ADB’s project completion report

• Axle load limits harmonized

Harmonized under CBA

• Axle load standards

• Road accidents reduced substantially from existing 36 fatalities per 10,000 vehicles on the Almaty–Bishkek road

Increased about three times

• Road accident data

Road safety target is not likely to be achieved unless further assistance and policy dialogue takes place.

• Unauthorized payments eliminated

Eliminated • Random sample survey

Outputs • Improved 245

km of roads between Almaty and Bishkek

• Civil works completed by 2004.

203 km improved in Kazakhstan (2km reduction due to realignment) and 20 km in the Kyrgyz Republic (20 km reduction due to change in scope).

• Project implementation progress reports

Shorten the time period between the appraisal and mobilization of civil works to avoid significant changes in scope and cost overrun.

Appendix 1

19




• Reduced number of control points

• Three out of five control points removed from the Almaty-Bishkek road.

Three control points in Kazakhstan removed.

• ADB’s project implementation missions

• Standardized axle load limits

• Cross-Border Agreement and revised road design standards adopted.

Cross-Border Agreement was ratified by the governments in 2002. Road designs standards prepared under the ADB TA have not been adopted but axle load limits are standardized under the CBA.

• Governments’ resolution adopting the standard

Both countries have introduced national standards that are either updates of the former Soviet Union standards or new standards which have been adopted from AASHTO, ASTM, BS and other internationally recognized standards organizations.

• Cross-Border Agreement

• Completed Under implementation. Proposal for “one window” customs clearance is being considered by the parliaments of the two countries.

• Completed ADB can further assist this process by supporting the implementation of a “one window” system, if passed by the parliaments.

• Transport and Customs Document streamlined.

• Simplified revised documents introduced.

Customs authorities of two countries use similar documentation.

• Transport and customs documents

Further simplification and harmonization may be considered under the “one window” customs clearance, if implemented.

• Organized Kazakh road sector institutions

• Ministerial and departmental functions defined.

Not accomplished. • Advisory consultants reports

Further policy dialogue with Government is needed in future ADB transport sector operations.

• Maintenance by contract system

• Maintenance works awarded to private contractors.

Both countries have started contracting out periodic maintenance to the private sector.

• Tender and contract documents

Introduction of long-term performance-based contracts is recommended.

• Equipment pool • Private sector able to hire equipment from the pool.

Equipment pool was not established.

• Tender and contract documents

ADB needs to review its experience in this area.

• National Road Safety Councils (NRSCs) and full-time secretariats, and Road Safety Acts

• NRSCs operational and Road Safety Acts adopted.

Established in 2004 and operational.

• Road safety audit reports

Further ADB support needed to ensure the effectiveness of the NRSCs.

20 Appendix 1




Inputs • Civil works • Consultants • Salaries and

other input from the Government

Kazakhstan ($ million) Civil works 68.70 Equipment 10.80 Consultants 4.45 Contingencies 12.80 IDC 15.65 Total 112.40 Kyrgyz Republic ($ million) Civil works 4.9 Equipment 0.3 Consultants 0.6 Contingencies 0.8 IDC 0.1 Total 6.7

Kazakhstan ($ million) Civil works 107.22Equipment 6.95Consultants 4.60Contingencies 0.00IDC 4.02 Total 122.79Kyrgyz Republic ($ million) Civil works 4.65Equipment 0.30Consultants 1.03Contingencies 0.00IDC 0.09 Total 6.07

• Project implementation progress reports.

• Audited project

accounts

Civil works under the Kyrgyz component is expected to be completed in December 2007. Cost of remaining works is $2 million, which is expected to be financed 50% by ADB from remaining loan balance.

AASHTO = American Association of State Highway and Transportation Officials, ADB = Asian Development Bank, ASTM = American Society for Testing and Materials, BS = British Standards, CBA = cross-border agreement, IDC = Interest During Construction, NRSC = National Road Safety Councils, TA = technical assistance, VOC = vehicle operating cost.

Appendix 2

21

CHRONOLOGY OF MAIN EVENTS KAZAKHSTAN

Date Event 12 May 1999 ADB President approved (i) advance action for consulting services and (ii)

commercial cofinancing supported by ADB’s partial credit guarantee during Management Review Meeting.

15 November 1999 CBA between Kazakhstan and the Kyrgyz Republic signed. 4–7 September 2000 Loan negotiations held.

31 October 2000 ADB approved $65.0 million OCR loan for the Kazakhstan component of the Almaty–Bishkek Regional Road Rehabilitation Project. (Loan amount later reduced to $52 million and closed at $49.8 million after final cancellation.)

2 March 2001 Board approved reduction of approved loan amount to $52 million through cancellation of $11.5 million allocated for interest and commitment charges, and corresponding reduction in front-end fee and unallocated categories.

4 June 2001 Loan Agreement signed reflecting the $52.0 million revised loan amount. 18 April 2002 CBA between Kazakhstan and the Kyrgyz Republic ratified. 31 May 2002 Loan declared effective (after four extensions due to delays in ratifying the

Loan Agreement and the CBA). 31 May 2002 ADB debited loan account with $520,000 representing capitalization of

front-end fee. 22 October 2003 Reallocated $5.03 million from unallocated category to civil works as

requested by Borrower on 7 October 2003. 8 July 2005 ADB approved extension of loan closing date to 31 December 2006.

18 May 2006 Major change in implementation arrangements approved by ADB, increasing the local cost ceiling under the loan from $17.50 million to $19.05 million.

30 January 2007 Last loan amount disbursed ($57,315.52). 22 June 2007 and

8 August 2007 ADB advised EA of the financial closing of loan account and cancellation of undisbursed loan balance.

30 June 2007 Effective date of ADB’s cancellation of the undisbursed balance of $2,196,077.57, reducing the loan amount to $49,803,923, and effective date of loan account financial closing.

15 August 2007 ADB’s controller officially advised Borrower of loan cancellation and loan account closing.

ADB = Asian Development Bank, CBA = cross-border agreement, EA = executing agency, OCR = ordinary capital resources. Note: For project processing and administration missions refer to Table D of the Basic Data, Page iii

22 Appendix 2

CHRONOLOGY OF MAIN EVENTS KYRGYZ REPUBLIC

Date Event 12 May 1999 ADB President approved (i) advance action for consulting services and (ii)

commercial cofinancing supported by ADB’s partial credit guarantee during Management Review Meeting.

15 November 1999 CBA between Kazakhstan and the Kyrgyz Republic signed. 4–7 September 2000 Loan negotiations held.

31 October 2000 ADB approved a loan of SDR 3.832 million ($5.0 million equivalent) from ADB’s Special Funds resources for the Kyrgyz component of the Almaty–Bishkek Regional Road Rehabilitation Project.

31 May 2001 Loan Agreement signed. 31 May 2002 Loan declared effective (after three extensions due to delays in ratifying the

Loan Agreement and the CBA). 2 May 2003 ADB approved minor change in scope: reduction of the Bishkek Bypass

(Section 2) from 24 km to 12 km. 9 July 2003 ADB approved minor change in scope: further reduction of the Bishkek

Bypass (Section 2) from 12 km to 3–4 km and additional construction works for two bridges.

14 July 2003 Road Safety Commission was established by the Government of the Kyrgyz.

1 October 2003 ADB approved use of $30,000 imprest fund for payment of salaries and operational expenses of the PIU.

25 February 2004 Road Safety Secretariat was established by the Government of the Kyrgyz Republic to assist the Road Safety Commission and to carry out monitoring of the road safety sector.

17 March 2004 Change in scope approved: utilization of $31,000 loan funds to finance domestic consulting services for auditing of the project accounts for fiscal years 2003–2005.

31 October 2004 ADB approved first extension of loan closing date to 31 October 2005 14 July 2005 ADB approved category reallocation of $139,260 from unallocated to

consulting services to finance 6.6 person-months extension of construction supervision consultant.

16 September 2005 ADB approved increase of $470,000 imprest fund to prefinance ADB portion of civil works expenditure.

16 September 2005 ADB approved second extension of loan closing date to 30 June 2006. 4 August 2006 ADB approved third extension of loan closing date to 31 December 2006.

27 November 2006 ADB approved change in scope approved, reallocation of loan funds, and extension of civil works contract period.

3 April 2007 ADB approved (i) change in procurement mode for remaining works under Package 1 from LCB to LIB, (ii) fourth extension of loan closing date to 31 December 2007, and (iii) reallocation of loan proceeds.

ADB = Asian Development Bank, CBA = cross-border agreement, LCB = local competitive bidding, LIB = Limited International Bidding, PIU = project implementation unit. Note: For project processing and administration missions refer to Table D of the Basic Data, Page vi

Appendix 3

23

DESCRIPTION OF CONTRACTS AND PROCUREMENT 1. As required, the Asian Development Bank (ADB)-financed part of the road rehabilitation works were procured as three packages: one package (contract 1) for the Kyrgyz component (Loan 1775-KGZ) and two packages (contracts 2 and 3) for the Kazakh component (Loan 1774-KAZ). Contract 1 was awarded following ADB’s local competitive bidding procedures, and contracts 2 and 3 were tendered following ADB’s international competitive bidding procedures, all in accordance with ADB’s Procurement Guidelines (2007, as amended from time to time). Works on the Kazakh component financed by the European Bank for Reconstruction and Development (EBRD) followed EBRD’s procurement guidelines. 2. Contract 1 was awarded to Aziyadorinter joint venture (Kyrgyzstan) on 10 July 2003 with the original completion date of 10 July 2005. Another component was added to this contract on 1 April 2004 for rehabilitation of two bridges on the Project road, which were completed on 30 April 2005. However, the contractor failed to complete the rehabilitation of the road, and the contract for the first component was terminated on 7 May 2007. A contract to complete the remaining works was awarded to Kulak Construction Company on 6 June 2007 with the completion date of 30 September 2007. Current overall progress is 90% and substantially complete. 3. Contract 2 (kilometer [km] 65 to km 165) was awarded to Eksen-Dogus joint venture (Turkey) and contract 3 (km 165 to km 205) was awarded to Alsim-Alarko joint venture (Turkey). Both contracts received notice to proceed on 4 September 2003 with completion dates of 4 September 2005. Both contracts have been completed and the taking-over certificates were issued on 1 December 2006, 15 months later than originally scheduled. Delays were due to major changes in work quantities and the award of contracts coinciding with the start of winter. 4. The EBRD-financed contract (km 9 to km 65) was awarded to Transstroy (Russia). Completion of the contract was delayed due to poor performance by the contractor. The contract was terminated on 11 May 2006, and remaining works were directly negotiated and awarded to Eksen-Dogus joint venture working under ADB-financed contract 2. Currently, this road section is under the defects liability period and some minor improvement works are ongoing. Complete hand over of the section by the contractor to the Ministry of Transport and Communication is expected by the end of 2008. 5. The project management and construction supervision consulting services for both countries were procured following international competitive recruitment. The consultant for contract 1, Dar Muhendislik Musavirlik, was engaged on 7 January 2002, and the consultant for contracts 2 and 3, Temelsu-Halcrow association, was engaged on 19 August 2002. Former is still mobilized and is expected to complete services on 31 December 2007, and latter completed services in October 2006 with the cumulative extension of more than 30 months.

CONTRACT PACKAGES Table A3.1: Kazakhstan

Contract Description

Estimated Contract

Value ($ million)

Number of

Contracts Awarded

Procurement Method

Actual Contract

Value ($ million)

Contract Approved

Works Completed Contractor

A. Road Rehabilitation EBRD Financing

Civil Works, Section km 11.6–62 22.5 1 PPE

—

— Aug 2007

Transstoy (Russian Federation) – Terminated

in May 2006 and new contract awarded to

Dogus-Eksen JV (Turkey) ADB Financing

Civil Works, Section km 65–165 30.6 21 Aug 2003 Dec 2006 Dogus-Eksen JV (Turkey) Civil Works, Section km 165–221 46.2 2 ICB 28.5 21 Aug 2003 Dec 2006 Alsim-Alarko Sanayi

(Turkey) B. Road Maintenance Equipment Contract 1 4.8 20 Oct 2004 Renault Trucks (France) Contract 2 3 ICB 1.0 23 Sep 2004 Wirtgen Int’l (Germany) Contract 3 10.0 0.2 07 Oct 2004 Grun GMBH (Germany)

C. Customs Facilities Equipment 0.3 1 IST — — Mar 2004 Procured under EU

TRACECA study D. Material Testing and Standards Laboratory Equipment 0.3 1 ISB Not procured

E. Consulting Services Project Supervision and Road

Maintenance 3.7 1 ICR 3.6 19 Aug 2002 Oct 2006 Halcrow-Temelsu

association (UK-Turkey)

PPE = procurement procedures of the European Bank for Reconstruction and Development (EBRD), ICB = international competitive bidding, IST = international shopping procedure of the Transport Corridor Europe Caucasus Asia (TRACECA), ISB = international shopping procedures of the Asian Development Bank, ICR = international competitive recruitment, LCB = local competitive bidding, JV = joint venture, UK = United Kingdom. Source: Asian Development Bank.

24 Appendix 3

Table A3.2: Kyrgyz Republic

Contract Description

Estimated Contract

Value ($ million)

Number of

Contracts Procurement

Method

Actual Contract

Value ($ million)

Contract Approved

Works Completed Contractor

A. Road Rehabilitation Civil Works

Bishkek–Georgievka Road 16.3 km, and Bishkek Bypass 3 km

4.3 10 Jul 2003 Ongoing Aziyadorinter JV (Kyrgyz Republic)

– Terminated in April 2007 and new contract awarded

to Kulak Construction Company (Turkey)

Rehabilitation/Reconstruction of Two Bridges

4.9 2 LCB

0.6 09 Feb 2004 31 Mar 2005

Aziyadorinter JV (Kyrgyz Republic)

B. Consulting Services Project Supervision and Road

Maintenance 0.4 1 ICR 0.4 02 Jun 2002 Ongoing Dar Muhendislik Musavirlik

(Turkey) ICR = international competitive recruitment, JV = joint venture, km = kilometer, LCB = local competitive bidding. Source: Asian Development Bank.

Appendix 3

25

26 Appendix 4

LIST OF PROCURED ROAD MAINTENANCE EQUIPMENT Table A4: Kazakhstan

No. Description Quantity 1 Multifunctional Truck for All Seasons Maintenance 19

2 Crack Repair (Sealing and Filling) Equipment 14

3 Road Marking Machine (Thermoplastic) 2

4 Vibratory Tandem Roller, 1,500kg operating weight 53

5 4 x 4 Pick-Up 15

6 Radio Communication System 14

7 Vibratory Combined Roller (7 tons) 15

Source: Asian Development Bank.

Appendix 5

27

LIST OF EQUIPMENT FOR CUSTOMS CONTROL Table A5.1: Kyrgyz Republic

No. Description Quantity 1 Cargo screening system (Rapiscan 532 H) 1

2 X-ray Equipment (Rapiscan 528 EPX with TIP) 1

3 Metal Detector Frame (Metor 200) 1

4 Hand Metal Detector (Metor 28) 4

5 Dosimeter-Radiometer (Polimaster PM1402) 8

6 Double Action Scanner (IOSCAN 400B) 1

7 Server (HP Proliant ML350T03) including Windows 2003 (Russian)

1

8 Computer (HP Compaq EVO D310) including Windows XP Pro (Russian)

6

9 Router for net (Bintec IP) 1


Table A5.2: Kazakhstan

No. Description Quantity 1 Rapiscan 532 H Cargo X-ray Screening System 1

2 SCANTRAK Portable X-ray System 1

3 HP Proliant ML350T01 Server including Windows 2003 Server (Russian)

2

4 HP Proliant ML350T03 Server including Windows 2003 Server (Russian)

2

5 HP Compaq EVO D310 including Windows XP Pro Server (Russian)

10

6 HP Compaq EVO N1020 Notebook including Windows XP Pro (Russian)

6


28 Appendix 6

PROJECT COSTS AND FINANCING PLAN (APPRAISED AND ACTUAL)

Table A6.1: Project Cost

($ million) Appraisal Estimate Actual Foreign Local Total Foreign Local Total

Item Exchange Currency Cost Exchange Currency Cost A. Kazakhstan Component

1. Base Cost Civil Works 25.80 42.90 68.70 63.13 43.72 106.85 Equipment 10.60 0.20 10.80 5.97 0.98 6.95 Consulting Services 2.40 2.05 4.45 4.04 0.56 4.60 Subtotal (A1) 38.80 45.15 83.95 73.14 45.26 118.40

2. Contingencies Physical 2.30 4.45 6.75 0.00 0.00 0.00 Price 2.15 3.90 6.05 0.00 0.00 0.00 Subtotal (A2) 4.45 8.35 12.80 0.00 0.00 0.00

3. Interest Charge/Front-end Fee

15.65 0.00 15.65 4.39 0.00 4.39

Subtotal (A) 58.90 53.50 112.40 77.53 45.26 122.79

B. Kyrgyz Republic Component 1. Base Cost Civil Works 2.57 2.35 4.92 3.58 1.07 4.65 Equipment 0.30 0.00 0.30 0.30 0.00 0.30 Consulting Servicesa 0.40 0.20 0.60 1.03 0.00 1.03 Subtotal (B1) 3.27 2.55 5.82 4.91 1.07 5.98

2. Contingencies Physical 0.20 0.25 0.45 0.00 0.00 0.00 Price 0.13 0.20 0.33 0.00 0.00 0.00 Subtotal (B2) 0.33 0.45 0.78 0.00 0.00 0.00

3. Interest Charge/Front-end Fee

0.10 0.00 0.10 0.09 0.00 0.09

Subtotal (B) 3.70 3.00 6.70 5.00 1.07 6.07 a includes project management, construction supervision, project audit and European Union Transport Corridor Europe Caucasus Asia. Sources: Project Report and Recommendation of the President and ADB loan financial information system, executing agencies project completion reports, and European Bank for Reconstruction and Development.

Table A6.2: Financing Plan ($ million)

Appraisal Estimate Actual Foreign Local Total Foreign Local Total

Item Exchange Currency Cost Exchange Currency Cost A. Kazakhstan Component

ADB 46.00 19.00 65.00 33.28 16.52 49.80 EU TRACECA 0.40 0.00 0.40 0.40 0.00 0.40 EBRD 12.50 12.50 25.00 19.95 8.55 28.50 Government 0.00 22.00 22.00 23.90 20.19 44.09 Total (A) 58.90 53.50 112.40 77.53 45.26 122.79

B. Kyrgyz Republic Component ADB 3.30 1.70 5.00 3.22 1.38 4.60 EU TRACECA 0.40 0.00 0.40 0.40 0.00 0.40 Government 0.00 1.30 1.30 0.00 1.07 1.07 Total (B) 3.70 3.00 6.70 3.62 2.45 6.07

ADB = Asian Development Bank, EBRD = European Bank for Reconstruction and Development, EU TRACECA = European Union Transport Corridor Europe Caucasus Asia. Sources: Project Report and Recommendation of the President and ADB loan financial information system, executing agencies project completion reports, and European Bank for Reconstruction and Development.

Appendix 7

29

ANNUAL DISBURSEMENTS

Table A7.1: Annual Disbursements of Asian Development Bank Loan Proceeds

Kazakhstan Component ($ million) Kyrgyz Republic Component (SDR million)

Year Disbursement % of Total Cumulative % Disbursement

% of Total Cumulative %

2002 0.883 1.77 0.883 1.77 0.077 2.45 0.077 2.45 2003 6.147 12.34 7.030 14.12 0.416 13.19 0.493 15.64 2004 20.581 41.32 27.611 55.44 0.840 26.65 1.334 42.29 2005 21.616 43.40 49.227 98.84 1.335 42.33 2.669 84.62 2006 0.519 1.04 49.747 99.88 0.428 13.57 3.097 98.18 2007 0.057 0.12 49.803 100.00 0.057 1.82 3.154 100.00Total 49.803 3.154 Source: Asian Development Bank.

Table A7.2: Annual Disbursements of Counterpart Funds ($ million)

Kazakhstan Component Kyrgyz Republic Component



2002 0.000 0.000 0.000 0.000 2003 7.818 17.73 7.818 17.73 0.178 14.28 0.178 14.282004 7.840 17.78 15.658 35.52 0.449 35.99 0.627 50.272005 19.934 45.22 38.592 80.73 0.440 35.27 1.067 85.542006 5.325 12.08 40.917 92.81 0.180 14.46 1.247 100.002007 3.168 7.19 44.085 100.00 0.000 1.247 Total 44.085 1.247 Sources: executing agencies project completion reports.

Table A7.3: Annual Disbursements of EBRD Funds ($ million)

Kazakhstan Component Kyrgyz Republic Component



2002 0.000 0.000 Not Applicable 2003 12.607 48.07 12.607 48.07 2004 9.534 36.35 22.142 84.42 2005 2.357 8.99 24.498 93.41 2006 1.729 6.59 26.227 100.00 2007 2.223 0.00 28.450 Total 28.450 Sources: executing agencies project completion reports.

30 Appendix 8

STATUS OF COMPLIANCE WITH MAJOR LOAN COVENANTS

KAZAKHSTAN

Covenant Reference in

Loan Agreement Status of Compliance Sector Covenants

Policy and Regulatory Framework The Borrower shall submit to the Parliament for its consideration a revised Automobiles Road Act taking into account the recommendations under TA 2631-KAZ and the transport policy adviser engaged under the advisory TA (3530-KAZ).

LA, Sch. 6, para. 3

Complied in 2001. Revisions were made in 2004. Transport code has been prepared and currently under Parliament’s consideration.

Cross-Border Issues The Borrower shall take all actions required to enable effective implementation of the Cross-Border Agreement (CBA) with the Kyrgyz Republic.

LA, Sch. 6, para. 4

Complied. CBA is under implementation.

The Borrower shall introduce revised transport and customs documentation and procedures for cross-border road transport at the Akzhol-Chu border crossing, in accordance with the CBA and taking into account the recommendations of the ADTA.

LA, Sch. 6, para. 5 Complied. Kyrgyz and Kazakh customs use harmonized transport and customs documentation and significant work is ongoing under CAREC’s Customs Cooperation Committee work.

Road Transport Regulations The Borrower shall (i) introduce the necessary regulations to control the movement of overweight vehicles and (ii) implement the vehicle weights and dimensions control as indicated in the Annex of the CBA.

LA, Sch. 6, para. 6

Complied. The Committee for Transport Control under CTID monitors vehicle weights and dimensions at the border and inland facilities. CTID collects fines for oversized and overloaded vehicles.

Road Safety and Maintenance, and Road Standards The Borrower shall, taking into account the recommendations of the ADTA, prepare and submit to its Parliament the amendments to the Borrower's Road Safety Act to promote safe driving, safety audit of road design, safety education, road safety publicity, vehicle safety standards, road safety research and emergency assistance to accident victims.

LA, Sch. 6, para. 7a

Complied. The Road Safety Act is currently being enacted.

The Borrower shall establish a state joint stock company to manage the road equipment pool, including renting out such equipment on a commercial basis.

LA, Sch. 6, para. 7b

Not complied. This initiative was not supported by the Government and became irrelevant. Kazavtodor’s Almaty and Zhambul oblast level road maintenance units are fully equipped and prepared to undertake the

Appendix 8

31


Loan Agreement Status of Compliance maintenance and keep the project road operational.

The Borrower shall ensure that contracts for road maintenance for the Project Road are awarded on a competitive bidding basis. The Borrower shall also, in consultation with ADB, establish appropriate supervision, monitoring and reporting procedures for such road maintenance.

LA, Sch. 6, para. 7c Not yet due, but periodic road maintenance and repairs are contracted to the private sector on competitive basis.

The Borrower shall adopt the Public Motor Roads: Design Standards and Regulation and Public Motor Roads: Construction Specifications prepared under RETA 5733.

LA, Sch. 6, para. 7d

Not complied. However, harmonized standards have been introduced in 2003 which are partly based on international standards (AASHTO, BS etc.) and mostly on former Soviet Union standards.

Social Covenants The Borrower shall ensure that (i) measures are taken to reduce the risk of socially transmitted diseases, including HIV-AIDS, (ii) MOTC assists the supervision consultants and the civil works contractors in organizing training and disseminating publicity materials targeted to road construction workers and users, and (iii) such information is also disseminated to transport operators, through MOTC, during operation of the Project Road.

LA, Sch. 6, para. 9b

Complied.

Gender and Development The Borrower shall ensure that women are actively involved in the job opportunities directly, or indirectly, arising from the Project. The Borrower shall ensure that the ADB’s Policy on Gender and Development is followed during Project implementation.

LA, Sch. 6, para. 10

Complied.

Financial Covenants Cofinancing In case the Borrower is unable to obtain the TRACECA grant and/or the EBRD loan within 12 months of the Effective Date, the Borrower shall (i) enter into other arrangements to obtain the required additional funding necessary for timely and effective implementation of the Project; or (ii) provide additional counterpart funds to finance any shortfall which results from the Borrower's inability to obtain the TRACECA grant and/or the EBRD loan.

LA, Sch. 6, para. 8

Cofinancing was made available. EBRD loan and TRACECA grants are fully disbursed.

32 Appendix 8


Loan Agreement Status of Compliance Audit of Accounts Proceeds of the loan may be used to finance expenditure for private sector auditors and translation of auditor's reports into English for the purpose of complying with the submission of audited financial statements under the Project, provided that (i) such auditors have qualifications, expertise and terms of reference acceptable to ADB and (ii) the recruitment process is acceptable to ADB.


Partly complied. MOTC did not submit financial audit report for FY 2006.

Others Established, Staffed, and Operating PMU/PIU

LA, Sch. 6, para. 1a

Not complied. PIU was not established. The Government abolished all PIUs funded by external loans in 2001 and consolidated them under the sectoral project implementation divisions.

Fielding of Consultants The Consultants shall be selected and engaged by the Borrower in accordance with para. 3, Schedule 5 of the Loan Agreement.

LA, Sch. 5, para. 3 Complied in 2002.

Establish an adequately staffed Maintenance Supervision Unit (MSU) headed by a Maintenance Manager with qualifications and expertise acceptable to the Bank.

LA, Sch. 6, paras. 1b and 1c

Not complied. Establishment of MSU under PIU was not considered necessary by MOTC. Kazavtodor performed intended functions and Almaty and Zhambul oblast level road maintenance units are fully equipped and prepared to undertake the maintenance and keep the project road operational.

Maintaining the Project Steering Committee (PSC) for the duration of the Project implementation period.

LA, Sch. 6, para. 2

Complied. PSC has been established under the chairmanship of Vice-Minister of Transport.

Tripartite Coordination Meeting The Borrower shall ensure MOTC and representatives of the Borrower's customs authorities meet with the Project Executing Agency for the Kyrgyz Component and the external financial institutions concerned (ADB, EBRD, and TRACECA) twice a year, alternately in Almaty and Bishkek, to discuss the Project implementation status, resolve common problems and in particular, ensure full


Complied. Meetings were held during the implementation of TA 3530-KAZ: Improvement of Road Sector Efficiency.

Appendix 8

33


Loan Agreement Status of Compliance implementation of the CBA. Midterm Review


Complied on 11-16 October 2004.

Monitoring and Evaluation The Borrower shall ensure that MOTC, with the assistance of the supervision consultants recruited under the Project, carries out benefit monitoring and evaluation of the Kazakh Component of the Project.


Not complied yet. CTID will submit BME report

EA should seek ADB's prior approval for contract variations exceeding $100,000.

Complied

34 Appendix 8

STATUS OF COMPLIANCE WITH MAJOR LOAN COVENANTS KYRGYZ REPUBLIC

Covenants Reference to

Loan Agreement

Status 1 The Borrower shall take all

actions required to enable effective implementation of the Cross-Border Agreement (CBA) with Kazahkstan.

Schedule 6, para. 3 Complied. CBA is under implementation.

2 The Borrower shall introduce revised transport and customs documentation and procedures for cross-border road transport at the Akzhol-Chu border crossing in accordance with the CBA and taking into account the recommendations of the ADTA (3531-KGZ: Improvement of the Road Sector Efficiency).

Schedule 6, para. 4 Complied. The Kyrgyz Republic signed on international transport and customs agreements including (i) Agreement on International Certification of Weighting of the Vehicles in the Territories of CIS; (ii) joining the TIR Convention; (iii) joining the Road Traffic and Road Signs and Signals Conventions; (iv) Agreement on the Joint Control at the Kazakh-Kyrgyz Border to provide smooth customs control (signed on 4.07.2006 and became effective on 1 November 2005 for border crossings at “Ak-Tilek” and “Akzhol-Chu”).

3 Road Transport Regulations. The Borrower shall (i) introduce the necessary regulations to control the movement of overweight vehicles and (ii) implement the vehicle weights and dimensions control as indicated in the Annex of the CBA.

Schedule 6, para. 5 Complied • According to the Government

decree No. 1025-111 of 2.06.2006 the order of fee collection and distribution to control the movement of overweight and large vehicles was approved.

• Thirteen control points have been identified. Four weighbridges were purchased, one was already installed and functioning. Two were purchased on September 2006 and installed on October 2006 (on Osh-Sary Tash road and Bishkek-Torugart road), and other five in 2007.

4 Road Safety and Maintenance, and Road Standards. The Borrower shall, taking into account the recommendations of the ADTA (3531-KGZ: Improvement of the Road Sector Efficiency), establish a multidisciplinary National Road Safety Council (NRSC) to assist in preparing safety action plans, improving

Schedule 6, para. 6a Complied • The NSRC, initially established on

30 November 1998 was revised on 28 August 2004 (changes in Commission staff but no changes in their functions) due to changes in Government of the KR.

• Under the NSRC, a Road Safety Secretariat (RSS) was formed on 25 February 2004 under Government decree No.104 comprising three persons (executive director, road safety

Appendix 8

35

Covenants

Reference to Loan Agreement

Status

collection and processing of road accident data, and coordinating and implementing road safety initiatives. The Borrower shall also ensure that the NRSC is supported by a full-time secretariat.

engineer, and office manager). • The RSS has prepared (i) a

national road safety program for the years 2006-2012, which was revised incorporating of comments received from concerned government’s ministries. The agreed program is under review of the Prime Minister’s office since January 2006. It was not approved. And the revised coordinated program was submitted to Government on 12.12.06.

5 Amendments to the Road

Safety Act (RSA) will be considered following the findings and the recommendations of the ADTA (3531-KGZ: Improvement of the Road Sector Efficiency). A schedule for amending and submitting the RSA to parliament will be provided to ADB before 1 January 2004.

Schedule 6, para. 6b Complied • The draft Decree of the Prime

Minister on Guidelines on the Road safety in the KR was already re-agreed with related ministries and agencies and currently is under Prime-Minister’ Office consideration.

• The Law of the KR on Alterations and Amendments to the Code of the KR on Managerial Responsibility was approved on 5.03.2007, No. 32.

• A paper concerning new members of NSRC was approved on 5.04.06 by the Government decree.

6 The Borrower shall ensure that

contracts for road maintenance for the Project Road are awarded on competitive bidding basis by December 2004. The Borrower shall, also establish appropriate supervision, monitoring and reporting procedures for such road maintenance.

Schedule 6, para. 6c Not yet due. Completion of rehabilitation works is expected in December 2007.

7 The Borrower shall adopt the Public Motor Roads: Design Standards and Regulations and the Public Motor Roads: Construction Specifications prepared under the ADB-finance RETA 5733.

Schedule 6, para. 6d Not complied. However new standards have been introduced in 2006 which are partly based on international standards (AASHTO, BS etc.) and mostly on former Soviet Union standards. • The design standards Snip KR 32-

01-2006 “Summary of typical technical rules on construction and repair of auto roads” are being used since 1 July 2006.

36 Appendix 8

Covenants


Status

ENVIRONMENTAL 8 The Borrower shall (i) ensure

that appropriate environmental protection and safety measures are included in the design of the Project facilities, and (ii) construct, operate and maintain the Project facilities in accordance with the findings and recommendations of the Initial Environmental Examination prepared for the Project and the ADB's Environmental Guidelines for Selected Infrastructure Projects.

Schedule 6, para. 7a Complied. • Incorporated in the design and

contracts and monitored by the supervision consultants.

SOCIAL 9 The Borrower shall ensure that

(i) measures are taken to reduce the risk of socially transmitted diseases, including HIV-AIDS, (ii) MOTC assists the supervision consutlants and the civil works contractors in organizing training and disseminating publicity materials targeted to road construction workers and users, and (iii) such information is also disseminated to transport operators, through MOTC, during operation

Schedule 6, para. 7b Complied • In road rehabilitation area the

syringe exchange office was opened by the Chyi regional center “AIDS.”

• The periodical works with drivers on route Bishkek-Georgievka is going on (HIV-AIDS preventive measures information documents distribution).

10 The Borrower shall ensure that women are actively involved in the job opportunities directly, or indirectly, arising from the Project. The Borrower shall ensure that the ADB's Policy on Gender and Development is followed during Project implementation.

Schedule 6, para. 8 Complied

FINANCIAL 11 Audit of Accounts.

Proceeds of the loan may be used to finance expenditure for private sector auditors and translation of auditor's reports into English

Schedule 6, para. 12 Complied • ADB approved on 17 Mar 2004 the

utilization of surplus loan proceeds for the auditing of the project accounts for fiscal years 2003, 2004, and 2005.

Appendix 8

37

Covenants


Status

for the purpose of complying with the submission of audited financial statements under the Project, provided that (i) such auditors have qualifications, expertise and terms of reference acceptable to ADB and (iii) the recruitment process is acceptable to ADB.

• As requested by the Borrower ADB has approved variation in amount of $4,939 to the contract for auditing of project account for fiscal year 2006 on 18 November 2005.

12 Furnish to ADB certified copies of audited accounts and financial statements and the report of the auditors relating thereto, including the auditor's opinion on the use of the loan proceeds and compliance with the covenants of the Loan Agreement as well as on the use of the procedures for statement of expenditures.

Section 4.06(b) Complied The Audit of Project Accounts for FY 2004 has been done and report was sent to ADB on 5.08.2005. The audit report for FY 2005 was completed and sent to Bank on 27.04.2006. The audit report for FY 2006 was completed and sent to Bank on 12.07.2007

13 Established, Staffed, and Operating PMU/PIU. The Borrower shall ensure that (i) the existing PIU and its staff shall be responsible for the day-to-day implementation of

Schedule 6, para. 1a and 1b

Complied. PIU adequately staffed and is being assisted by the supervision consultants. ADB will be notified about all staff changes in PIU and MOTC

the Kyrgyz Component of the Project and (ii) the PIU remains adequately staffed at all times throughout Project implementation and shall be assisted by the consultants to be engaged for detailed design and construction supervision.

14 Fielding of Consultants. The Consultants shall be selected and engaged by the Borrower in accordance with the procedures set forth in Schedule 5 of the Loan Agreement.

Schedule 5 Complied. Contract was signed on 7 June 2002 and services commenced on 18 June 2002.

15 Maintaining the Project Steering Committee (PSC) for the duration of the Project implementation period.

Schedule 6, para. 2 Complied. (i) By the Government decree a new members of PSC were approved on 18.08.2007.

38 Appendix 8

Covenants


Status

16 Tripartite Coordination Meeting. The Borrower shall ensure that MOTC and representatives of the Borrower's customs authorities meet with the Project Executing Agency for Kazahk Component and the external financial institutions concerned (ADB, EBRD and TRACECA) twice a year, alternately in Almaty and Bishkek, to discuss the Project implementation status, resolve common problems and, in particular, ensure full implementation of the CBA.

Schedule 6, para. 9 Partly complied. Two stakeholders meetings were held in September 2003 during the implementation of the ADTA but since then, no meetings have been held.

17 Midterm Review. The Borrower shall ensure that MOTC carries out, jointly with ADB and the Project Executing Agency for the Kazakh component, a midterm review of the implementation of the Kyrgyz component towards the end of 2002.

Schedule 6, para. 10 Complied. Midterm Review for the Kyrgyz component was undertaken in August 2005 while for the Kazakhstan component in October 2004.

18 Monitoring and Evaluation. The Borrower shall ensure that MOTC, with the assistance of the supervision consultants recruited under the Project, carries out benefit monitoring and evaluation of the Kyrgyz Component of the Project.

Schedule 6, para. 11 Pending compliance. Baseline data was received on 20 September 2005 but periodic monitoring was not done for all the agreed indicators. Final report is expected to be submitted in November 2007.

19 The Borrower shall furnish or cause to be furnished to ADB quarterly reports on the carrying out of the project and on the operation of the Project facilities.

Section 4.07(b) Complied.

20 Submission by the Borrower of Project Completion Report not later than 3 months after the physical completion of the project or such later date as may be agreed between the Borrower and ADB.

Section 4.07(c) Complied. Physical works are expected to be completed in December 2007. Borrower provided draft completion report to ADB.

Chairman

Deputy 1

Legal, Organizational, and Personal Board

10 persons

Head Deputy Head

Personnel and Official Language Department

4 persons

Legal and Organizational Department

4 persons

Board for Operation, Mobilization, Roads Development, and Railway Construction

13 persons

Head

Operation and Mobilization Department

4 persons

Road Construction and Repair Department

4 persons

Construction of Infrastructure Objects Department

4 persons

Board for External Loans and Investment Projects

10 persons

Board for Procurement, Design, and Documentation Analysis

10 persons

Board for Normative, Legal Security ,and Technical Policy

10 persons

Board for Planning, Economic Analysis, and Monitoring

10 persons

Head Deputy Head

Board for Financing, Accounting, and Reporting

13 persons

Borrowing and Projects Preparation Department

4 persons

Projects Implementation Department

4 persons

Head Deputy Head

Head Deputy Head

Head Deputy Head

Head

Monitoring and Procurement Department

4 persons

Methodology, Price Setting, and Designing Department

4 persons

Normative and Legal Security Department

4 persons

Technical Policy Department

4 persons

Planning Department

4 persons

Economic Analysis and Monitoring Department

4 persons

Department for Performance of Financial Procedures and Auditing

4 persons

Department for Accounting, Reporting, and Monitoring the Property Utilization

4 persons

Department for Financial Procedures of External Loans

4 persons

ORGANIZATIONAL CHART OF THE COMMITTEE FOR TRANSPORT INFRASTRUCTURE DEVELOPMENT (80 PERSONS)

Source: Committee for Transport Infrastructure Development, Ministry of Transport and Communications, Kazakhstan.

Appendix 937

40 Appendix 10

ECONOMIC REEVALUATION 1. Summary. The economic benefits of the Project after completion have been less than estimated at appraisal due to two main factors. First, the total cost of works and supervision of the Project was 62% higher than the estimated cost of $69 million. Secon, commencement of the Project was delayed by 2 years and completion was delayed by 1 year. The loss of benefits due to these two factors has been compensated for by the increase in benefits due to higher than estimated increases in traffic volume and lower maintenance costs. On the Project road in Kazakhstan, some sections have experienced annual growth of 11% compared to the estimated 6% annual growth. The annual cost of routine maintenance is $1,700 per kilometer (km) compared to more than $3,600 per km estimated at appraisal. The economic internal rates of return and net present values estimated at appraisal and after project completion are given in Table A10.1. The net benefits after Project completion were estimated on the basis that users incurred a loss of benefits due to the delays. 2. The following broad assumptions were made in performing the post implementation economic analysis.

(i) Regular traffic increases over project life uniformly at an average annual rate of 6.7% in Kazakhstan and 6% in the Kyrgyz Republic. Generated traffic will increase at the appraisal rates in both countries.

(ii) Unit costs of routine and periodic maintenance in both countries are similar at $1,700 per km per year and $30,000 per km respectively.

(iii) Routine maintenance including winter maintenance will be performed at the required level to sustain the international roughness index at 3 meter per km.

(iv) Periodic maintenance will be performed over 2 years at intervals ranging from 6 to 7 years.

(v) Average time for crossing the border for all types of vehicles will be 45 minutes and vehicle occupancy rates as well as passenger car equivalents are the same as assumed at appraisal.

(vi) Unit vehicle operating and travel time costs are the same as at appraisal. (vii) Regional benefits cannot be computed with reasonable accuracy due to the lack

of origin and destination data, and the quantities and types of freight and passenger traffic.

Table A10.1: Economic Reevaluation after Project Completion

Appraisal After Completion

Item KAZ KGZ Overall KAZ KGZ Overall EIRR (%) 23.7 25.9 23.8 17.9 16.3 16.7 NPV ($ million) 68.0 4.5 72.5 39.0 1.3 34.7

EIRR = economic internal rate of return, KAZ = Kazakhstan, KGZ = Kyrgyz Republic, NPV = net present value. Source: Asian Development Bank.

Appendix 10

41

Table A10.2: Economic Rate of Return for Almaty-Bishkek Road Rehabilitation Project Excluding Subregional Benefits

($ million)

Costs (km=245,700) Benefits

Year Construction Maintenance Total Cost

VOC Savings

Time Savings

Generated Traffic

Total Benefits

Net Benefits

2001 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 2002 1.510 0.000 1.510 0.000 0.000 0.000 0.000 (1.510) 2003 23.263 0.088 23.351 0.000 0.000 0.000 0.000 (23.351) 2004 33.256 0.224 33.481 0.000 0.000 0.000 0.000 (33.481) 2005 38.333 0.373 38.706 0.000 0.000 0.000 0.000 (36.706) 2006 6.978 0.406 7.383 0.000 0.000 0.000 0.000 (7.383) 2007 4.687 0.418 5.105 0.000 0.000 0.000 0.000 (5.105) 2008 0.000 0.417 0.417 16.449 5.067 0.430 21.946 21.529 2009 0.000 0.417 0.417 17.555 5.408 0.471 23.434 23.017 2010 0.000 0.417 0.417 18.736 5.771 0.516 25.023 24.606 2011 0.000 3.686 3.686 19.996 6.160 0.565 26.720 23.034 2012 0.000 3.686 3.686 21.340 6.574 0.618 28.532 24.847 2013 0.000 0.417 0.417 22.776 7.016 0.677 30.468 30.051 2014 0.101 0.417 0.518 24.307 7.488 0.741 32.536 32.018 2015 0.000 0.417 0.417 25.942 7.991 0.812 34.745 34.328 2016 0.000 0.417 0.417 27.687 8.529 0.889 37.104 36.687 2017 0.000 0.417 0.417 29.548 9.102 0.973 39.624 39.207 2018 0.000 3.686 3.686 31.536 9.714 1.066 42.316 38.630 2019 0.000 3.686 3.686 33.656 10.368 1.167 45.191 41.505 2020 0.000 0.417 0.417 35.920 11.065 1.278 48.262 47.845 2021 0.000 0.417 0.417 38.335 11.809 1.399 51.543 51.126 2022 0.000 0.417 0.417 40.913 12.603 1.532 55.049 54.632 2023 0.000 0.417 0.417 43.665 13.451 1.678 58.793 58.376 2024 0.000 0.417 0.417 46.601 14.355 1.837 62.793 62.376 Note: EIRR = 16.7% and NPV = $34.67. EIRR = economic internal rate of return, NPV = net present value, VOC = vehicle operating cost. Source: Asian Development Bank.

42 Appendix 10

Table A10.3: Summary for Kazakhstan Portion of the Project Road Excluding Subregional Benefits

($ million)

Costs (km=205,000) Savings


VOC Savings

Time Savings

Generated Traffic

Total Benefits

Net Benefits

2001 0.000 0.271 0.271 0.000 0.000 0.000 0.000 (0.271) 2002 0.733 0.000 0.733 0.000 0.000 0.000 0.000 (0.733) 2003 22.669 0.075 22.744 0.000 0.000 0.000 0.000 (22.744) 2004 31.967 0.190 32.157 0.000 0.000 0.000 0.000 (32.157) 2005 36.558 0.314 36.872 0.000 0.000 0.000 0.000 (36.872) 2006 6.370 0.339 6.709 0.000 0.000 0.000 0.000 (6.709) 2007 4.630 0.350 4.980 0.000 0.000 0.000 0.000 (4.980) 2008 0.000 0.350 0.350 16.213 5.408 0.513 22.133 21.784 2009 0.000 0.350 0.350 18.619 5.653 0.707 24.980 24.630 2010 0.000 0.350 0.350 21.285 5.911 0.975 28.171 27.822 2011 0.000 3.075 3.075 24.235 6.183 1.342 31.760 28.685 2012 0.000 3.075 3.075 13.499 6.410 0.892 20.801 17.726 2013 0.000 0.350 0.350 15.641 6.646 1.260 23.546 23.196 2014 0.000 0.350 0.350 17.971 6.892 1.519 26.382 26.033 2015 0.000 0.350 0.350 20.506 7.147 1.818 29.472 29.122 2016 0.000 0.350 0.350 23.260 7.414 2.166 32.840 32.491 2017 0.000 0.350 0.350 26.070 7.655 2.551 36.276 35.926 2018 0.000 0.350 0.350 29.091 7.905 2.993 39.989 39.640 2019 0.000 3.075 3.075 32.334 8.164 3.525 44.024 40.949 2020 0.000 3.075 3.075 35.817 8.431 4.141 48.389 45.314 2021 0.000 0.350 0.350 39.553 8.709 4.851 53.113 52.763 2022 0.000 0.350 0.350 43.559 8.995 5.670 58.224 57.874 2023 0.000 0.350 0.350 47.852 9.291 6.615 63.759 63.409 2024 0.000 0.350 0.350 21.881 9.598 2.950 34.429 34.079 Note: EIRR = 17.9% and NPV = $39. EIRR = economic internal rate of return, NPV = net present value, VOC = vehicle operating cost. Source: Asian Development Bank.

Appendix 10

43

Table A10.4: Summary for Kyrgyz Republic Portion of the Project Road

Excluding Subregional Benefits ($ million)

Costs (km=40,700) Savings


VOC Savings

Total Benefits

Net Benefits

2001 0.000 0.000 0.000 0.000 0.000 0.000 2002 0.777 0.030 0.807 0.000 0.000 (0.807) 2003 0.594 0.008 0.602 0.000 0.000 (0.602) 2004 1.289 0.026 1.315 0.000 0.000 (1.315) 2005 1.775 0.050 1.825 0.000 0.000 (1.825) 2006 0.608 0.058 0.666 0.000 0.000 (0.666) 2007 0.057 0.059 0.116 0.000 0.000 (0.116) 2008 0.000 0.069 0.069 1.258 1.258 1.189 2009 0.000 0.069 0.069 1.448 1.448 1.379 2010 0.000 0.069 0.069 1.579 1.579 1.510 2011 0.000 0.069 0.069 1.784 1.784 1.715 2012 0.000 0.611 0.611 1.898 1.898 1.288 2013 0.000 0.611 0.611 2.329 2.329 1.719 2014 0.000 0.069 0.069 2.708 2.708 2.639 2015 0.000 0.069 0.069 1.548 1.548 1.479 2016 0.000 0.069 0.069 1.090 1.090 1.021 2017 0.000 0.069 0.069 1.372 1.372 1.303 2018 0.000 0.069 0.069 1.515 1.515 1.446 2019 0.000 0.611 0.611 1.454 1.454 0.844 2020 0.000 0.611 0.611 1.351 1.351 0.741 2021 0.000 0.069 0.069 1.508 1.508 1.439 2022 0.000 0.069 0.069 1.988 1.988 1.919 2023 0.000 0.069 0.069 0.825 0.825 0.756 2024 0.000 0.069 0.069 1.658 1.658 1.589

Note: EIRR = 16.3% and NPV = $1.3. EIRR = economic internal rate of return, NPV = net present value, VOC = vehicle operating cost. Source: Asian Development Bank.

44 Appendix 11

TRADE AND TRANSPORT

Table A11.1: Major Trading Partners of the Kyrgyz Republic

Item 2000 2001 2002 2003 2004 2005 2006 Direction of Trade

Exports, fob 503.8 476.121 485.508 581.732 726.885 633.817 796.473

1. Russian Federation ($ million, ending 1,231) 65.1 64.562 80.036 97.0169 137.673 134.398 153.781

2. United Arab Emirates ($ million, ending 1,231) 1.4 .545 68.816 144.344 177.508 173.06 8.94528

3. Switzerland ($ million, ending 1,231) 34 124.16 96.372 117.869 101.76 28.0339 207.699

4. Kazakhstan ($ million, ending 1,231) 33.4 39.035 36.826 57.1334 86.3364 116.135 162.638

5. China, People's Republic of ($ million, ending 1,231) 44.1 19.381 41.259 23.342 39.4405 26.5722 38.1204

6. Afghanistan, Islamic Republic of ($ million, ending 1,231) 4.4 1.577 4.4061 6.1281 8.0234 12.3896 74.7521

7. Uzbekistan ($ million, ending 1,231) 89.4 47.939 27.836 16.2589 14.6906 17.0954 27.8565

8. Canada ($ million, ending 1,231) - 1.131 4.906 30.9773 42.7436 22.5069 .20193

9. Tajikistan, Republic of ($ million, ending 1,231) 7.4 6.701 10.193 18.866 22.073 22.9038 23.9342

10. Turkey ($ million, ending 1,231) 7.2 13.76 16.403 11.0024 17.0464 18.1779 27.2256

Imports, cif 555.2 464.656 587.166 711.855 942.446 1111.57 1710.52

1. Russian Federation ($ million, ending 1,231) 132.5 85.099 116.705 176.128 293.64 378.944 652.305

2. Kazakhstan ($ million, ending 1,231) 57.5 81.867 123.903 170.929 202.971 174.397 199.796

3. China, People's Republic of ($ million, ending 1,231) 36.9 48.55 59.115 72.6883 80.083 102.911 245.639

4. United States ($ million, ending 1,231) 53.8 26.708 47.384 47.9311 44.6059 67.2442 97.5245

5. Uzbekistan ($ million, ending 1,231) 75.2 66.752 60.144 39.2149 51.8163 60.1121 65.0003

6. Germany ($ million, ending 1,231) 25.1 24.302 31.398 38.2151 52.5542 37.5933 39.919

7. Turkey ($ million, ending 1,231) 26.7 15.77 17.006 25.9888 33.2423 33.4011 39.4667

8. Ukraine ($ million, ending 1,231) 7 6.245 7.842 12.5641 23.2926 40.0971 41.8815

9. Korea, Republic of ($ million, ending 1,231) 6.9 7.831 6.963 11.6749 25.0705 27.8037 24.299

10. Netherlands ($ million, ending 1,231) 4.8 3.888 16.104 12.3112 15.706 18.9102 27.6805 cif = cost, insurance, and freight, fob = freight on board. Source: Asian Development Bank statistical data base system.

Appendix 11

45

Table A11.2: Transport Costs for Exports of Fruits and Vegetables from the Kyrgyz Republic to Russian Federation

(For a refrigerated truck traveling from Bishkek to Novosibirsk, in US dollars)

Item 2001 2004

Cost of a transport permit 300 0Cost of TIR Carnet 0 124Payment to a customs broker on the Kazakhstan-Kyrgyz Republic border 50 0

Payment for a paper copy of the customs declaration 17 0Payment for an electronic copy of the customs declaration 30 0Unofficial payments to the Kyrgyz Republic customs on the Kazakhstan-Kyrgyz Republic border

48 48

Unofficial payments to Kazakhstan customs on the Kazakhstan-Kyrgyz Republic border

100 100

Payment for customs escort in Kazakhstan 410 0

Unofficial payments of appoximately $75 to each of the five weighting posts on the Kazakhstan territory (payments are to be made regardless of whether the truck is overloaded or not)

375 375

Unofficial payments to Kazakhstan customs on the Kazakhstan -Russian Federation border

37–75 37–75

Total official and unofficial payments for transit through Kazakhstan(excluding fixed costs of using the TIR transit system)

1,367–1,405 684–722

Other costs and transport operator’s profit (including fixed costs of using the TIR transit system)

2,333–2,495 2,816–2,978

Total 3,700–3,900 3,500–3,700TIR = Convention on the International Transport of Goods under the cover of TIR Carnets (TIR Convention, 1975). Source: B. Ganiev. 2005. Barriers to Transit Trade in Central Asia. Background paper for the October 2005 meeting of the Trade Policy Coordinating Committee of the Central Asia Regional Economic Cooperation Program. ADB. Manila.

Almaty–Bishkek Regional Road Rehabilitation Project

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