Kazakhstan: Central Asia Regional Economic Cooperation Corridor 1 (Taraz Bypass) Project

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Lessons

Procedural issues in loan effectiveness and procurement, which repeatedly cause startup delays in externally funded projects in Kazakhstan, need to be resolved.

The project closing date was extended by six months due to startup delays caused by (i) the lengthy process for making the loan effective and (ii) the lengthy procurement procedure. Compared with the average 7.6 month-interval between loan approval and loan effectiveness cited in the August 2017 project completion report for the investment program of which this project was a part ─ the Central Asia Regional Economic Cooperation (CAREC) Transport Corridor 1 (Zhambyl Oblast Section) (Western Europe−Western PRC International Transit Corridor) Investment Program ─ the 14-month time lag between loan approval and loan effectiveness experienced by this project was even worse. The lengthy process for making loans effective, which include (i) the issuance of a Presidential Decree before loan signing; (ii) Parliament ratification of the signed loan agreement; and (iii) a legal, scientific, and linguistic review of the loan agreement, may need to be addressed institutionally by Kazakhstan’s key road sector agencies. Similarly, the Ministry of Investment and Development and the Committee of Roads need to undertake more earnest efforts to shorten the procurement process, which for this project’s lone civil works contract took about nine months to be completed. Such institutional efforts will help minimize completion delays and promote the efficient management of externally funded projects in the country.

Project Cycle Stage:

Implementation

Updating road designs and safeguard documents completed long before project startup is essential.

Five variations had to be made to this project’s civil works contract to respond to issues that emerged during implementation. Similarly, even as construction works were already started, a supplementary environmental impact assessment (EIA) needed to be undertaken on the unauthorized solid waste dumping that encroached into the project road’s right-of-way. There would have been no need for these activities had updates been made on the road design and safeguard requirements, prior to finalizing the bid documents. Such updates would be particularly important for detailed designs and safeguards documents prepared very much ahead of project implementation ─ as was the case with this project for which the detailed design and EIA were completed respectively 4 years and 2 years ahead of project startup.

Project Cycle Stage:

Implementation

Loan covenants must be in place to ensure the setting up of a project performance management system (PPMS) and the submission of project periodic reports (PPRs).

No PPR was produced under the project. This may be due to the lack of a relevant covenant in the loan agreement. Future projects should not commit the same oversight, which could hamper the Asian Development Bank from taking corrective action on issues that could diminish the effectiveness and efficiency of the projects it supports. In addition to loan covenants, PPMS establishment and PPR submission should be incorporated in the deliverables of project implementation consultants.

Project Cycle Stage:

Preparation

Implementation

Background

In November 2008, the Asian Development Bank (ADB) approved a multitranche financing facility (MFF) of up to $700 million for the Central Asia Regional Economic Cooperation (CAREC)Transport Corridor I (Zhambyl Oblast Section) [Western Europe–Western People's Republic of China International Transit Corridor] Investment Program in Kazakhstan. The MFF was to improve a 301-kilometer (km) section of the corridor in Zhambyl Oblast, parallel to which, the Islamic Development Bank (IDB) and the Japan International Cooperation Agency would respectively finance 159 km and 20 km more of the road section. After IDB withdrew from financing 114 km of the road in 2010, the government requested ADB to finance the IDB balance. In response, ADB agreed to use the savings from tranche 1 of the MFF to finance a fourth tranche that would cover 49 km of the IDB balance.

This project represents the stand-alone $95 million loan approved by ADB in December 2011 to improve the remaining 65-km unfinanced portion of the IDB balance. Through the seamless completion of all road sections in Zhambyl Oblast, it sought to ensure the success of ADB and other development partner investments in CAREC corridor 1. Overall, it was expected to contribute to increased regional cooperation and trade in Kazakhstan. Its intended outcome was better connectivity for the Zhambyl Oblast section of CAREC transport corridor 1.

At completion, the project (i) upgraded a 7.7 km road from category II to category IB, and (ii) constructed a 56.7 km category-II road, which bypasses Taraz City. The project roads were opened to traffic in November 2015, and the defect liability period ended in November 2017.

Successful delivery of the project output, notwithstanding a 6-month delay, led to the attainment of the project outcome. Consequently, travel time from the Almaty–Zhambyl Oblast border to the Zhambyl–South Kazakhstan Oblast border fell to 7 hours in 2018, from 10 hours in 2009. Average traffic volume almost doubled, reaching 7,555 vehicles per day in 2016 from 4,000 in 2007.

Better connectivity also meant that people could move around more quickly and comfortably. This had a profound impact on the poor in terms of better access to income opportunities. Particularly, because of the bypass and improved road network, people in the outer areas of Taraz City, most of them farmers and cattle breeders, were enabled to bring their products faster to the markets and sell them in a better state and at higher prices, subsequently raising their incomes and improving their living conditions.

While only contributory, the project also benefited national trade. In 2011–2015, Kazakhstan’s national trade volume in monetary nominal terms continuously increased by about 70%, from Kazakhstani tenge (KZT) 3,865 trillion (about $114 billion) to KZT 6,556 trillion,(about $193 billion) , exceeding the 10% target by 2020.

Taken with all the related regional links, Zhambyl Oblast’s function as a vital transit hub of CAREC corridor 1 has been strengthened with the completion of the project.

The Ministry of Transport and Communications served as the first project executing agency and was replaced by the Ministry of Investment and Development, following government reorganization in August 2014. The Committee of Roads was the implementing agency all throughout.

Project Information

Project Name:

CAREC Corridor 1 (Taraz Bypass) Project

Report Date:

July, 2018

Main Sector:

Transport

Country:

Kazakhstan

Project Number:

45150-001

Report Type: