World Bank – Uzbekistan Partnership: Country Program Snapshot October 2012 RECENT ECONOMIC AND considered a predominantly rural economy, as the SECTORAL DEVELOPMENTS contributions of industry and agriculture to GDP growth have been the same since 2006 and the Growth and External Performance share of industry in the GDP (24 percent) now exceeds that of agriculture (17.6 percent). Real GDP growth averaged Total investment grew by 7.9 percent in 2011 8.3 percent per and by 7.6 percent in the first half of 2012, year between sustaining the share of investment in GDP at 2009 and 2011. 25 percent. Foreign direct investment (FDI) stood Output expanded at around 3 percent of GDP in 2008–11, and by 8.1 percent in private investment benefited from lower corporate the first half of income taxes and moderate improvements in the 2012, following closely the good performance of business environment, including fewer business 2011 when the economy grew by 8.3 percent. inspections, improved access to bank financing, While output in 2011 reflected both strong and simplified customs certification and exports as well as buoyant domestic demand, registration and permits systems. The higher recent growth has largely been driven by demand- wages and salaries, which have increased by 20 boosting government policies and the stronger percent a year in nominal terms since 2006, and inflow of remittances. The good performance in steady remittance inflows at an average 4 percent the first half of 2012 stemmed mostly from robust of GDP have supported consumption. growth in services (by 9.9 percent), construction (by 8.6 percent), and agriculture (by 7.1 percent). The current account surplus in 2011 stood at Industry, by contrast, grew slower than GDP, 5.8 percent of GDP, aided by resiliently high primarily because of the high transportation costs international prices for gold, gas, metals, for imported machinery and equipment. Industry cotton, cars, and food, as well as by recovering grew by 3.8 percent a year on average during the remittance inflows. However, this surplus is much global and Eurozone crises in 2009–11 due to lower than the average registered during the slower export demand. GDP growth in 2012 is precrisis years of 2003–08 at 10 percent of GDP. projected to remain between 7 and 8 percent and Remittances grew by 15 percent in 2011 and slow in 2013 to 6.5 percent, due to a forecasted represented some 4.5 percent of GDP, down slowdown in economic activity among from the precrisis level of 7 percent. The external Uzbekistan’s major trade partners. current account surplus is projected to decline to 4.5 percent on average during 2012–13, due to the The structure of the Uzbekistan economy is above-mentioned likely economic slowdown in changing, as the shares of industry and services the country’s main trade partners. in the GDP increase and the share of agriculture decreases. The country can no longer be Total exports grew by 20.5 percent in 2011, but cotton and gas exports declined. Although Figure 1. GDP Structure by Sectors of Economy, commodity exports growth in 2011 continued to 2001-2011 (in percent) be high by historical standards, noncommodity exports also grew quickly, led by exports of foodstuffs, machinery, and chemicals, and the share of noncommodity exports has recently been expanding. In the first half of 2012, total exports grew by just 1.1 percent, due to slower growth in the major partner economies in 2012. Declining exports in foodstuffs (by 48 percent) and chemicals and metals (by 12 percent) were, however, compensated by the rising exports of gas (by 2.2 times), cotton fiber (by 47 percent), and machinery (by 2.5 percent). Source: Uzbek authorities. Total imports grew by 26.3 percent in 2011 and by Fiscal Performance 14.1 percent in the first half of 2012, but there has not been a significant change in the structure of Fiscal policy in 2011 was prudent. The imports, which remains dominated by capital consolidated fiscal surplus in 2011 widened to goods and the raw materials related to public 9.0 percent of GDP from 4.9 percent in 2010, investment projects. Food and energy represented despite the fact that growth remained broadly 6 and 12 percent, respectively, of total imports in unchanged. The impact of lower tax collections— 2011. reflecting cuts in corporate and personal income Figure 2. External Sector Indicators, 1998–2011 taxes, reductions in the unified tax rate for small (in percent of GDP) businesses, and 20 percent higher wage and salary expenditures—were more than offset by increased revenues, which stemmed from higher international commodity prices, value added tax (VAT) collections, and social security contributions, as well as lower than planned public investment. The authorities have successfully pursued a strategy to reduce the tax burden in the economy, and this is a step in the right direction. Further tax reductions continued in 2011 and 2012, reducing the overall tax revenue as a share of GDP to 21 percent. The authorities have been gradually Source: Uzbek authorities; IMF and Bank staff calculations. reducing marginal tax rates for a number of taxes, such as personal income (top rate down from 40 Gross external debt remained low at about 13.3 percent in 2000 to 22 percent in 2011), profit tax percent of GDP in 2011, while Uzbekistan (down from 31 percent in 2000 to 9 percent in continues to be classified as a net creditor to the 2011), and payroll tax (down from 40 percent in world. External debt (mostly public) has been 2000 to 25 percent in 2011). Commercial banks are serviced fully, with a debt service ratio of 3.9 percent still subject to a 15 percent rate, but small businesses of exports and 2.8 percent of gross international were taxed at 6 percent in 2011–12 and small reserves in 2011. Uzbekistan’s Government business in industry at 5 percent in 2012. conducted a prudent debt policy by following the path of zero net borrowing and as a result, external debt Restrained budget expenditures in 2011–12 stock declined from 64 percent of GDP in 2001 to 13 helped moderate official consumer price index percent of GDP in 2011. (CPI) inflation at 7.3 percent by end-2011 and in Figure 3. Debt and Debt Service, 2001–12 the first half of 2012. The increases in wages and (in percent) salaries, stipends, pensions, and social allowances in excess of the inflation rate were more than offset by subdued public investments. The US$47 billion investment program for 2011–15 adopted to alleviate the impact of the global crisis and strengthen infrastructure has continued, supported by resources from the Uzbekistan Fund for Reconstruction and Development (UFRD), but its spending is estimated to have been lower than budgeted. Relatively high and well-targeted spending in the road sector (approximately 1 percent of GDP) has resulted in a relatively well- Source: Uzbek authorities; IMF and Bank staff calculations maintained road network. Note: External debt includes public, publicly guaranteed, and nonguaranteed debt. Table 1. Main Economic Indicators of Uzbekistan, 2008–12 2008 2009 2010 2011 2012f GDP growth, % 9.0 8.1 8.5 8.3 8.0 GDP per capita, current US$ 1048 1205 1377 1545 1823 Population, million 27.3 27.8 28.6 29.3 29.8 Gross investment in fixed capital, % of GDP 24 26 25 24 25 Inflation (official CPI, eop), % change 7.4 7.8 7.2 7.3 7.5 Current account balance, % of GDP 8.7 2.2 6.2 5.8 4.5 Fiscal balance, % of GDP 10.7 2.8 4.9 9.0 3.6 FDI (net), million US$ 711 838 1628 1418 1410 FDI (net), % of GDP 2.5 2.6 4.2 3.1 2.6 External debt, % of GDP 13.1 15.0 14.8 13.3 12.8 Source: World Development Indicators 2011; IMF and Bank staff calculations Although total (external and domestic) public debt mechanism, the CBU’s close to zero real interest was reduced to 9.1 percent of GDP by end-2011, rate helped to maintain high credit growth at 38 domestic public debt remains low at US$33 million percent in 2011, as it guided lending under (2011), representing 0.07 percent of GDP. Given government programs. In order to keep inflation both budget and current account surpluses and under control, the CBU increased the sterilization growing international reserves, the Government has of excess liquidity, which led to a slowdown in the no intention of borrowing domestically in the growth of broad money (M2) and foreign reserves. medium term. To finance two-thirds of its public However, despite a sizeable accumulation of investment program for 2011–15, the Government government deposits (including fixed rate deposits will borrow externally, and its external debt to GDP [FRD]) with the CBU, the increased sterilization ratio is projected to increase to 20 percent of GDP was not sufficient to offset the effects of in 2015, which is still sustainable. expanded net foreign assets and credit growth, as inflation did not decline. Figure 4. Consolidated Budget, 2001–2012 (in percent of GDP The authorities continued with their policy of steady nominal exchange rate depreciation of the sum by preserving the export revenue surrender requirements and import restrictions. The official exchange rate depreciated by an average of 8.5 percent year-on-year in 2009–11. A challenge for monetary policy is the persistent gap between official and curb market exchange rates (the curb rate of the dollar is 40 percent more expensive in national currency than the official rate). This is primarily because the Government does not release enough foreign exchange to fully Source: Uzbek authorities; IMF and Bank staff calculations. meet the private demand and thus eliminate the curb foreign exchange market. As a result of foreign exchange restrictions, the import cover of Monetary Policy gross official reserves rose to 15.4 months by end- 2011. However, with strong fiscal and external Monetary policy was accommodative, which current account surpluses, this does not translate led to a build-up in inflationary pressures. to a serious macroeconomic imbalance, though it Because of concerns about liquidity, the Central does increase the import cost for some private Bank of Uzbekistan (CBU) cut its key policy rate businesses that are blocked from preferential from 14 to 12 percent in 2011, in spite of high access to foreign exchange by the official inflation. Even with a weak transmission exchange rate. Financial Sector loans; the moderate access to finance by the private sector and small and medium enterprises The banking sector’s exposure to global risks (SMEs); the low credit to economy in the GDP is limited, but the sector remains largely (half of other transition economies); the low size ineffective in deepening financial and diversity of financial markets; and the intermediation. Uzbek underdeveloped nonbank financial institutions. banks have limited exposure to foreign banks Poverty and Social Protection (around 6 percent of total liabilities in 2010–11) and Poverty has declined in recent years, due to have not accumulated the rapid economic growth and sustained kind of toxic assets that led increases in salaries and remittances. to the deterioration in According to official data, poverty, as measured bank balance sheets in by a national food-based norm of 2,100 other countries. Moreover, kilocalories per person per day, declined from 27.5 banks continue to benefit percent of the population in 2001 to 17.7 percent from strong economic growth, and the large in 2010 and an estimated 16 percent in 2011. capital injections by the Government after the global crisis increased their resilience to shocks. Figure 5. Selected Financial Indicators The banking sector dominates the financial sector 35 with about 95 percent of financial sector assets. The capital adequacy ratio of the banking sector 30 Capital adequacy ratio, % was 24.2 percent in 2011 and the first half of 25 23.8 23.2 23.2 23.4 23.8 2012, up from 23.4 percent in 2010. The loan to 18.7 23.1 20 22.6 Monetization deposit ratio was 99 percent in 2010, down from 16.7 17.3 21.1 (M2/GDP), % 117 percent in 2009. The main vulnerabilities in 15 18.5 16.4 the banking sector are the prolonged market 10 15.2 15.2 Loans/GDP, % dominance of the state-owned banks, which hold 50 percent of total banking assets. Related party 5 2.8 3.0 1.3 1.0 1.0 lending increased in 2011 and the concentration 0 NPLs/total loans, % and quality of banking assets remains a serious 2007 2008 2009 2010 2011 concern, as are continued receipt of public Source: Uzbek authorities funding and lagging loan loss provisions. Additional pro-poor Nonperforming loans (NPLs) appear understated, actions were taken in officially reported in 2011-12 at less than 1.0 response to the recent percent of total gross loans. According to global financial crisis. Moody’s, the actual level of NPLs is closer to 15 These included percent. However, the Moody’s report concludes supplementary wages, that the system is stable and banks’ capital buffers pension and benefit are adequate to absorb the expected credit losses. increases, hikes in targeted social assistance, improved Financial sector reforms are critical to access to micro-lending, the sustained growth. One main challenge involves provision of housing for discontinuing the non-core functions of banks and orphaned children, and social assistance to single eliminating the remaining de facto restrictions on citizens in need. All the regional authorities cash withdrawals and transactions. Other adopted additional measures for job creation in challenges include concerns about the public works, municipal infrastructure sustainability of recently observed credit growth improvements, construction, services, and cattle and the potential for possible future loan losses breeding in rural areas. due to directed lending; high state shares and weak risk management in banks, particularly for directed Although recent trends imply an accelerated converted to a per capita financing and decline in poverty since 2005, the elasticity of management system. poverty reduction to GDP growth remains • The Bank has been supporting Uzbekistan’s relatively low. Explanations include: the low efforts to implement agricultural reforms. productivity in the agriculture sector that still The credit line provided to newly established employs one-fifth of the population but is subject farms made it possible to improve irrigation to numerous hidden taxes and business and drainage on 100,000 hectares of land, restrictions; a high level of informality in the labor and 600 farmers and food-processing SMEs market; high and growing dependencies within obtained US$31 million in credit for households (i.e., few working adults per family); machinery, poultry, fishery, and other rural and regional divergences (i.e., richer regions are development activities. growing faster). • Some 2 million rural people in the western part of Uzbekistan now have safe and The social transfer system has gradually reliable water. This has helped to reduce the shifted from the granting of general privileges incidence of diseases, particularly near the to targeting social support. Total social safety Aral Sea. Similarly, the capacity of water net expenditures have increased from 8 percent utilities, regional health centers, and sanitary of GDP in 2004 to 11 percent in 2011. epidemiology stations has been strengthened. • Regular budget reporting and greater THE WORLD BANK PROGRAM IN comprehensiveness introduced as a result of UZBEKISTAN the Bank’s advice have increased transparency in public resource utilization. Uzbekistan joined the World Bank in 1992. Since Also in 2011, the Uzbekistan Treasury then, the Bank has provided commitments for 24 System adopted the International Monetary projects financed by the International Bank for Fund Government Finance Statistics Manual Reconstruction and Development (IBRD) and the (GFSM) 2001-based budget classification. International Development Association (IDA). Of • The leasing and housing finance sectors have these, 14 projects have been completed. The been developed in line with international Bank’s commitments as of June 30, 2011 were best practices, with the value of lease US$733 million. financing increasing from US$265 million in 2007 to over US$890 million in 2011. Impact on the Ground The list of ongoing projects can be found in table The results of country program implementation 2. show what client countries and the World Bank can achieve together as partners to improve Figure 6 shows yearly commitments of active people’s lives and make a difference. Key portfolio between FY1997–2012, in US$ million. accomplishments include: • The World Bank has been helping Uzbekistan to establish a health care system that is accessible, affordable, and efficient. For example, a Bank project has helped to improve the quality of primary health care in almost all regions of Uzbekistan. Also, the Bank has been financing the training of medical professionals and advising on health care finance. In total, 2,389 rural primary health care facilities and 29 city pilot polyclinics have been equipped under the “Health-2” project, and 100 percent of rural primary health care facilities have been Figure 7. Sector Breakdown of the Active Portfolio Vulnerability to Climate Change, as well as several Private Sector Development (PSD) reports related to the improvement of the business environment in Uzbekistan. Table 2. Active Loans/Credits Projects, FY11 Projects Commitments Loan/Credit Funded $US million Rural Enterprise Support - II 68 (IDA) Drainage, Irrigation and Wetlands Improvement 60 The Country Partnership Strategy (CPS) for (IBRD), (IDA) Uzbekistan, approved in December 2011, Second Basic Education (IDA) 28 provides the framework for World Bank Group Ferghana Water Resources 66 assistance to Uzbekistan between 2012 and 2015. Management (IDA) The new Strategy proposes a program linked to Bukhara and Samarkand 55 Uzbekistan’s development vision to reach high Sewerage (IDA) middle-income status by mid-century. Energy Efficiency Facility for 25 Industrial Enterprises (IDA) In support of the Government’s objective to Syrdarya Water Supply (IDA) 88 diversify the country’s economy, the CPS is Talimarjan Transmission designed to support the implementation of 110 Project (IBRD) infrastructure efficiency, economic Health System Improvement competitiveness, diversification, and the social 93 project (IDA) –Health III inclusion elements of the Government’s medium- Advanced Electricity Metering term development strategy. The new CPS’ 180 * Project financial envelope is US$1.35 billion for Lending Total 773 approximately 15 new projects. Grant Funded Karakalpakstan Silk In addition, the CPS envisages a high-level joint Development Pilot Project development exercise, “Uzbekistan Vision 2030.” 2 (Japanese Social Development This aims to help Uzbekistan define roadmaps to Fund Grant) achieve its development goals in collaboration with Uzbek research institutes. The “Vision 2030” Grand Total 775 kick-off Knowledge Sharing Workshop was held *pending signing of LA in October, in Tashkent on May 15–17, 2012. 2012 Technical assistance (TA), advice, During 2012–13, the following TAs are expected international expertise, and experience. The to be delivered: a Public Expenditure Review, Analytical and Advisory Program (AAA) is carried Higher Education Policy Notes, a Horticulture out with the Government and a broad range of Development Policy Note, a Transport Sector stakeholders. Recently completed Economic Review, an Energy Sector Strategy Note, Sector Works (ESW) include: Assessment of Primary Strengthening the Regulatory and Supervisory Health Care Reform: Transparency, Accountability, and Framework of the Central Bank, and Financial Efficiency; Methodology for Ranking Irrigation Reporting and Auditing Enhancement in the Infrastructure Investment Projects; Country Integrated Banking Sector. Fiduciary Assessment (CIFA) phases 1 and 2; Improving Water Supply and Sanitation Services Delivery through Better Customer Relationship Management; Water Sector, Agriculture Vulnerability to Climate Change; and Energy HUMAN DEVELOPMENT management of priority NCDs; and improving rayon hospital financing. Health Health outcomes in Education Uzbekistan are commensurate with Uzbekistan’s education system outperforms its socioeconomic peer countries in the lower middle-income development level as group. Public spending on education is high; a lower middle- pupil-teacher ratios in Uzbekistan are closer to income country those found in rich countries, and gender parity is (LMIC). nearly achieved in primary education. Currently, Noncommunicable diseases (NCDs) accounted an estimated 35 percent of the national budget for approximately 90 percent of all deaths in goes to education expenditures. Uzbekistan in 2009. Diseases related to the circulatory system were the most common cause Nine years of general of death, accounting for 65.6 percent of age- secondary education standardized mortality (WHO 2009). Life in Uzbekistan is expectancy at birth trended upwards according to compulsory and free. the Human Development Report, from 66 years in It is divided into 2003 to 68.3 years in 2011. primary (grades 1–4) and secondary Although NCDs are the greatest problem, (grades 5–9) Uzbekistan still has remaining challenges education. Preschool education is provided to related to maternal and child health outcomes. children until they are ages 6–7 at state or private In response, the Government has initiated several preschool educational establishments, and also policies and programs mobilizing both internal within the family. and external resources, with a resulting decline in infant mortality by 45 percent, from 18.3 per In 2004, the Government of Uzbekistan adopted 1,000 live births in 2001 to 10.1 per 1,000 live the School Education Development Program births in 2010. (SEDP) for 2004–09 to improve the conditions of school buildings and the learning resources and The World Bank has been providing strong equipment in schools. Donor financing has also support for the health sector of Uzbekistan. provided support to the SEDP, including Reforms in primary health care have been textbooks, information and communications supported by the Bank through two investment technology (ICT), distance education, teacher projects, Health I and Health II, which covered the training, equipment, and learning materials. SEDP years 1998–2011. These projects improved the has helped to pay for the rehabilitation, quality and cost effectiveness of primary health reconstruction, and construction of almost 8,500 care services; established 10-month doctor schools. retraining courses on general practice and family medicine; and strengthened the capacity of the World Bank involvement in Uzbekistan’s public health system. education sector started with the two-phased Basic Education Project that covers 2007–14. The project Further collaboration between the helps to implement interventions in the education Government of the Republic of Uzbekistan sector, including piloting and supporting several and the World Bank is planned for 2011–16. new initiatives: The recently approved Health III Project will focus • A new mode of engagement with the on enhancing secondary health care services by: Government, whereby communities are strategically investing in diagnostic and treatment more closely and directly involved in project equipment in the rationally designed hospitals at design and implementation; the rayon (district) level; improving clinical service • A new standardized national assessment of student learning; • A new school-based approach to teacher Figure 8. Land Use in Uzbekistan training; • A new approach to school financing. The project has shown significant achievements in the areas of assessing student learning, preparing for new teacher training, activating school boards, and especially in per capita financing. It is proposed to disseminate the successful experience of Uzbek experts in implementing per capita funding to the international level. In 2012, on the request of the Government, the World Bank started to explore options for partnership in the higher education sector and A large land area is used for agriculture in agreed to carry out an analytical study of the Uzbekistan, with natural pastures occupying 40 sector in Uzbekistan, in preparation for future percent of the country and rain-fed and irrigated collaboration. cropland accounting for an additional 12 percent (see figure 8). Due to the arid conditions, more Agriculture Development than 85 percent of Uzbekistan’s cropland is irrigated, an area that comprises approximately 10 The agriculture percent of the total land area of the country. The sector plays an most important crops are cotton and wheat, and important role in significant other products include fruits (apples, Uzbekistan’s apricots, peaches, and berries), vegetables economy, and (cucumbers, tomatoes, and potatoes), milk, silk, contributes over and livestock. 17.6 percent of the national GDP The CPS will support selected value chains in and 27 percent of employment. More importantly, agriculture and livestock by continuing to about 49.7 percent of the population live in rural provide financing opportunities with a areas and depend on agriculture and related particular focus on non-cotton-related activities. activities for their livelihoods. The country’s In addition, it will support the formulation of a agricultural systems went through significant horticultural strategy (FY13), paving the way for a structural changes that resulted in a drop in total possible horticultural project (FY14). agricultural output by 15.5 percent by 2010. However, with the implementation of land In order to achieve the strategic goals, the Bank distribution initiatives and the engagement of an and the Government joined efforts to implement increasing number of households in agriculture a US$74.55 million Drainage, Irrigation and Wetlands and crop diversification, the output has since Improvement Phase-I Project, a US$75.03 million Rural increased significantly and surpassed the output Enterprise Support Phase-II Project, and a US$81.85 levels attained in 1991. Structural changes to the million Ferghana Valley Water Resources Management type of land tenure available following the Phase-I Project. The funds are used to increase labor restructuring of large collective and state farms productivity, employment and incomes, the have resulted in the formation of private farms financial and environmental sustainability of and the expansion of small household plots, which agriculture, and the productivity of irrigated are now responsible for much of the growth in agriculture. The Bank-financed projects are also agricultural output in recent years, with strong designed to improve agricultural production in productivity gains leading to increased household areas affected by water logging, and to reduce incomes. damage to housing and infrastructure from rising ground water levels and salinity in the project procedures required for a business to obtain a covered areas. permanent electricity connection and supply for a standardized warehouse. Recognizing the reliable Energy and stable access to power supply as a key factor in business development, the Government has The country is assigned a priority to developing the power sector rich in energy- and is committed to achieving the following producing strategic objectives: (a) expanding and resources. It has modernizing the power system to provide a about 1.8 trillion reliable electricity supply to end users; (b) ensuring cubic meters of Uzbekenergo’s financial sustainability and proven natural gas developing its institutional capacity for reserves and 590 sustainability; (c) improving efficiency in power million barrels of generation, delivery, and end use, given the high oil reserves, as energy intensity of the economy; (d) reducing the well as 3 billion tons of coal reserves. The power environmental footprint of the energy sector; and sector of Uzbekistan is a vertically integrated (e) developing opportunities for exporting power monopoly. Uzbekenergo is the principal power to other countries, both in the region and in South sector utility, a state-owned holding consisting of Asia. 54 companies. The other power generation company, Uzsuvenergo, under the Ministry of In order to achieve these objectives, the Agriculture and Water Recourses (MAWR), Government of Uzbekistan has undertaken focuses on the development and operation of the several steps. These include: (a) approving an small hydropower plants on water reservoirs and investment program, which consists of 37 projects irrigation canals managed by the MAWR. to modernize and expand the Uzbek power sector; Uzbekenergo operates the power generation (b) allowing periodic tariff revisions and helping sector (seven thermal power plants, three heat and Uzbekenergo to power plants, and 28 hydropower plants), the implement the power transmission network, power distribution investment and supply (through 14 subsidiaries), and coal program by sector and auxiliary service companies (design borrowing from institutes and service companies). international financial The Uzbek power network is part of the larger institutions (IFIs) Central Asian power system (CAPS), which is and obtaining coordinated through a central dispatch their help in coordination center located in Tashkent. In the developing better institutional capacity; (c) past, the CAPS encompassed the five Central mandating energy-intensive industries to improve Asian countries, but it is currently operating with procedural efficiency in a fixed time frame and only three. The Uzbekenergo owned and operated selecting the most efficient technology in new power transmission network has 1,850 kilometers thermal generation projects; (d) assessing the of 500 kilovolt lines, 6,200 kilometers of 220 renewable energy potential; (e) maintaining a kilovolt lines, and 15,300 kilometers of 110 commitment to the preparation and kilovolt lines. The transmission network is implementation of an advanced metering project interconnected with the neighboring countries to improve energy accountability as well as data through 220 kilovolt and 500 kilovolt transmission and information on the power sector; and (f) lines. assessing power trade opportunities with Afghanistan and Pakistan. Uzbekistan ranks 170 among 183 countries on the Getting Electricity Indicator, according to The Bank’s cooperation with Uzbekistan in the Doing Business Report 2012 prepared by the World energy sector started recently through the Bank and the IFC. This indicator assesses all the establishment of the Energy Efficiency Facility for Industrial Enterprises, Advanced implementation since April 2010 and January 14, Electricity Metering, and the Talimarjan 2012, respectively. Transmission Project, aiming to improve the reliability of the electricity supply to residential The implementation of the BSWS project brought and business consumers in southwestern increased access to a reliable water supply to 98 Uzbekistan and strengthening the power percent in the project areas. It also resulted in the transmission network. replacement of 114.4 kilometers of mains in Bukhara and 130.1 kilometers in Samarkand, as Water Supply and Sanitation well as new customer data base, billing, and accounting programs in the two cities. There is The infrastructure now an improved water quality in the project situation in areas, as less than 5 percent of tested water Uzbekistan is samples failed chlorine residual standards in strongly influenced Bukhara, and 0 percent did so in Samarkand. In by the legacy of addition, nonrevenue water (NRW) is 31.5 percent Soviet central in Bukhara and 36.5 percent in Samarkand. planning. The Government has The current CPS support will include ongoing been steadfast in work designed to strengthen water sector assigning priority to governance and capacity. This will include studies the water sector, and on the financial and institutional aspects of water public capital supply and sanitation and the integrated investments in the management of water resources. It will also sector have never dropped. The portfolio of include lending for the water supply (Alat- public borrowing for water supply and sanitation Karakul, Jizzak, and Kashkadarya regions), projects and grant funds during 1995–2008 sewerage (Karakalpakstan), and district heating in amounted to US$291 million, the largest for any the cities of Andijan and Chirchik. country in the region. IFC Contribution to the Program The continuing deterioration in the delivery of basic municipal services has created serious The International Finance Corporation (IFC) public health risks and carries high economic is focused on strengthening the private sector costs for the population. Improving the quality through several Advisory Services projects and and coverage of water supply services is essential investments. IFC’s investments in Uzbekistan are for protecting public health, raising living mainly focused on the financial sector and standards, and achieving the ambitious agribusiness. IFC also aims to strengthen private Millennium Development Goal (MDG) target “to sector development in the country through micro, halve by 2015, the proportion of urban and rural small, and medium enterprise (MSME) financing population, which lacks access to safe drinking lines and trade finance facilities. water and adequate sanitation.” To date, IFC has committed US$88.2 million The World Bank has been active in the sector from its own sources to support the private sector since the early 1990s, mainly via support to the in Uzbekistan. IFC’s current committed portfolio Aral Sea recovery program, including the is US$17.1 million, which includes debt financing recently completed rural water supply and to a leading beverage producer IBT; equity sanitation project for Khorezm oblast and the investments in a leading regional private bank, Republic of Karakalpakstan (US$75 million). The Hamkorbank; SME credit lines to the first US$40 million Bukhara and Samarkand Water Supply international leasing company Uzbekleasing and Project (BSWS) has recently been completed, and Hamkorbank; and a Trade Finance Facility to the the Bukhara and Samarkand Sewerage Project and the second largest bank in the country, Asaka Bank, Syrdarya Water Supply Project have been under and to Hamkorbank. Besides investments, IFC is implementing the investment climate and private sector in Financial Markets Infrastructure Advisory Services Uzbekistan. Project, which is a part of the regional program of financial infrastructure development in Central On another front, IFC is supporting the Asia (Kyrgyz Republic, Tajikistan, and Government of Uzbekistan in attracting private Uzbekistan) and Azerbaijan (ACAFI Project). In investors to design, build, finance, and operate Uzbekistan, the project provided assistance in the cold storage facilities of a total capacity of up to development and adoption of the law On Sharing 30,500 metric tons in 2013–15. The Financial Credit Information, signed by the president on Advisory Services Agreement was signed by October 4, 2011. Currently, the project is engaged Uzmarkazimpex, a foreign trade company under in providing assistance in securing a strategic the Ministry for Foreign Economic Relations, international technical partner to develop a sound Investments and Trade of the Republic of credit bureau in the country, ands in reforming the Uzbekistan. At present, IFC is preparing to do the secured transaction system. Under the secured due diligence on the project. transaction reform, IFC will help in developing the draft law On Collateral Registry and in building IFC is also planning to attract private sector the capacity of financial institutions to use modern partners for state-owned enterprises in the secured transactions tools. This work is in line chemical sector to design, build, finance, and with the Government’s request to the World Bank operate a complex minerals fertilizer plant in the Group to assist in the further improvement of the Navoi region. To this end, IFC and the state joint- country’s investment climate and increasing its stock company “Uzkimyosanoat” signed a Doing Business rating. The project has also Memorandum of Understanding (MoU) on May concluded an agreement with the Global 10, 2012. Association of Risk Professionals (GARP) and implemented a Risk Certification Program in From 2001 to 2011, IFC also provided Advisory Uzbekistan through local training partners. Services in leasing, microfinance development, GARP’s Foundations of Banking Risk course is mortgage, the investment climate, water efficiency being used in this program. in agriculture, and the implementation of the PPP mechanism in the public health sector. IFC will IFC has launched the project’s preimplementation continue supporting the development of the stage on further improving tax administration as country through financial infrastructure part of the continued development of the improvement and the involvement of private partners in infrastructure projects. UZBEKISTAN: HEALTH SYSTEM IMPROVEMENT PROJECT (HEALTH III) Project P113349 Key Dates: Approved: April 7, 2011 Effective: November 2, 2011 Closing: December 31, 2016 Financing in million US Dollars: Financier Financing Disbursed Undisbursed IDA Credit 93.0 0.25 92.75 Government of Uzbekistan 7.97 Total Project Cost 100.97 *As of July 2012 Note: Disbursements may differ from financing due to exchange rate fluctuations at the time of disbursement. Challenges: Population health outcomes in Uzbekistan are commensurate with its socioeconomic development level as a lower middle- income country. Over the last several years, the greatest burden of disease in Uzbekistan has been attributed to noncommunicable diseases (NCDs) and other chronic diseases, with cardiovascular diseases and neuropsychiatric conditions among the highest causes of morbidity for both males and females. The current configuration for the provision of inpatient services is inefficient. Uzbekistan has a large, inefficient, and fragmented network of hospitals and specialized clinics, characterized by multiple vertical programs and many single- specialty facilities. There is a lack of clarity regarding the specific roles and linkages between the numerous hospitals and specialized care facilities. In addition, the organization of buildings and departments within each hospital is usually also very inefficient; there are multiple buildings on a hospital site, with a poor functional layout and connection. The management system is also unproductive, due to the many disconnected vertical chains of command and the reliance on vertical, technical routes for oversight. Project Objective: The overall Project Development Objectives are to (1) improve access to quality health care at the primary level and at rayon medical unions (RMUs); and (2) strengthen the Government’s public health response to the rise in NCDs. Expected results: • Increased the proportion of diabetic and hypertension patients referred from primary health care (PHC) facilities to RMUs, in accordance with treatment standards. • Improved perceived quality of PHC and secondary health care services in intervention areas. • Increased proportion of hospitals following NCD treatment standards (at least 20 treatment standards in all hospitals). • 100 percent of hospitals equipped with medical and waste management equipment in intervention areas (100 rayon hospitals). • 25 new treatment standards developed and adopted by the Ministry of Health (cardiovascular disease, diabetes, etc.). • The doctors in 3,670 urban polyclinics receiving training under the 10-month training general practitioner (GP) program. • Health personnel at PHCs (6,000 doctors and 57,000 nurses) receiving training under continuous professional education. • National Health Accounts developed and published. Key Partners: Ministry of Health (MOH) of Uzbekistan; Cabinet of Ministries; Ministry of Finance (MOF); Ministry of Economy; Central Project Implementation Bureau (CPIB). Key Development Partners: the Asian Development Bank (ADB) and the Bank team worked together and joined forces on a primary care partnership for financing Health II. The project successfully collaborated with the UK’s Department for International Development (DfID), The U.S. Agency for International Development (USAID), The World Health Organization (WHO), The United Nations Children’s Fund (UNICEF), and the United Nations Development Programme (UNDP). UZBEKISTAN: BASIC EDUCATION PROJECT PHASE II Project P107845 Key Dates: Approved: June 23, 2009 Effective: March 11, 2010 Closing: March 31, 2014 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed * IDA Credit 28.0 13.46 14.54 Government of Uzbekistan 8.0 Total Project Cost 36.0 *As of July 2012 Note: Disbursements may differ from financing due to exchange rate fluctuations at the time of disbursement. Challenges: The education sector of Uzbekistan is characterized by minimal data, little public participation in policy making at the national, oblast, and rayon levels, and limited involvement in school decisions at the local level. As a result, information on student learning outcomes has not been available and community and stakeholder participation as a way to encourage public accountability for school policies, resource allocation, and school management has not generally occurred. Recently, however, the Government has taken positive steps to address these issues through a national standardized assessment of student learning for students in grades four and eight, and through school board activation and community participation in school decisions in selected schools. Enrollment in general education in Uzbekistan is high, but learning outcomes and the quality of education are a concern. Project Objective: The Project Development Objective is to continue supporting the Government’s efforts to improve the effectiveness of teaching and learning through (1) targeted interventions in selected general secondary education schools and preschools in rural poor areas; (2) the development of the institutional capacity to assess student learning; and (3) the adoption of predictable and transparent school budgets. Key and Expected Results: • Improved the quality of teaching and learning in project schools through the effective use of learning materials and resources acquired under the project; • Changed teaching in project schools and preschools towards a more interactive, student-centered approach to improve learning outcomes; • Increased the further involvement of school boards in project schools and provided 500 competitive funding grants for school improvement; • Improved education financing, budgeting, and school management in project schools; • Provided support to project implementer on project management, implementing national standardized assessments of student learning, and evaluating project effectiveness. Key Partners: Ministry of Public Education of Uzbekistan; Ministry of Finance (MOF); Republican Institute for Teacher Training and Retraining named after A. Avloniy, and Republican Institute for Pre-school Teacher Training. Key Development Partners: The Asian Development Bank (ADB) and UNICEF. UZBEKISTAN: RURAL ENTERPRISE SUPPORT PROJECT, PHASE II Project P109126 Approved : June 12, 2008 Effective: December 30, 2008 Closing: March 31, 2015 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IDA Credit 67.96 34.1 28.1 Government of 6.58 Uzbekistan Beneficiary 0.49 Swiss parallel financing 6.0 Total Project Cost 81.03 *As of August 2012 Note: Disbursements may differ from financing due to exchange rate fluctuations at the time of disbursement. Challenges: The project responds directly to the Welfare Improvement Strategy of Uzbekistan in several areas: (a) supporting the further development of private sector farming; (b) strengthening the infrastructure and services required by private farmers; (c) increasing and encouraging commercial banking sector lending to agriculture; (d) developing an integrated sustainable water management system for the supply of irrigation water; and (e) addressing land quality problems associated with irrigation and drainage. The availability of financial services for rural areas remains an acute issue, as access is more limited than in urban areas, while rural demand is increasing dramatically (partly as a factor of the privatization of farmers). The provision of adequate financial services to the general agribusiness sector remains constrained. Project Objective: The Project Development Objective is to increase the productivity and financial and environmental sustainability of agriculture and the profitability of agribusiness in the project area. This will be achieved through the provision of (i) financial and capacity-building support to farmers and agribusinesses in seven regions of the Republic of Uzbekistan (covering around 65 percent of the total population of the country), and (ii) improved irrigation service delivery through the rehabilitation of the irrigation and drainage infrastructure and the strengthening of Water Users Associations (WUAs) in the project area. Key and expected results: • 370 agribusinesses have received financing for the procurement of agricultural machinery, processing equipment, packaging equipment and materials, and investments in tree-crops, poultry and fishery, and livestock production. • 36,300 farmers have been trained in 557 training seminars under the Rural Training and Advisory Component on the following subjects (a) principles of crop protection and pest control; (b) development of livestock production; (c) poultry production; (d) fish production; (e) preparation of business plans; (f) accountancy; (g) agricultural law and taxation; (h) water resource management; (i) orchard and vineyard production; (j) processing and marketing of products; and (k) products for domestic and export markets. • Farmers’ awareness has been raised on national child labor policies, and the International Labour Organization (ILO) convention restrictions have been ratified through the training workshops. • 62 new WUAs have been established to improve water management in the seven project districts. 10,214 water management specialists trained at 359 workshops within the training program for all new WUAs, Administration of Irrigation Systems (AIS), and BAIS (Basin Administration of Irrigation Systems). Key Partners Ministry of Agriculture and Water Resources; Rural Restructuring Agency; local commercial banks; Asian Development Bank. UZBEKISTAN: FERGHANA VALLEY WATER RESOURCES MANAGEMENT (PROJECT P110538) Key Dates: Approved: September 24, 2009 Effective: March 3, 2010 Closing: July 31, 2016 Financing from all co-financiers, million US Dollars*: Financier Financing Disbursed Undisbursed IDA Credit 65.54 14.72 49.35 Government of 16.31 Uzbekistan Total Project Cost 81.85 *As of August 2012 Note: Disbursements may differ from financing due to exchange rate fluctuations at the time of disbursement. Challenges: Primary agriculture is highly important for Uzbekistan. The sector constitutes 32 percent of GDP and is Uzbekistan’s major source of employment and income. Because of the country’s arid climate, almost all agriculture depends on the irrigation and drainage infrastructure. The irrigated areas are located in the valleys and plateaus near the Amu Darya and Syr Darya Rivers, and cover about 4 million hectares. Of this, more than 25 percent is within the Ferghana Valley (FV), a region shared by Uzbekistan, the Kyrgyz Republic, and Tajikistan. The FV has the most fertile soils in Central Asia and its highest population density. As a whole, the FV has an irrigated area covering about 1.4 million hectares, of which the Uzbek share is roughly two-thirds. The total population of the FV is about 10 million, 70 percent of whom reside in the Uzbek area, comprising about 28 percent of the population of Uzbekistan. Project Objective: The Project Development Objective is to improve agricultural production in areas affected by water-logging, and to reduce damage to housing and infrastructure from rising ground water levels and salinity in the project districts. The project finances improvements in the subsurface drainage network and irrigation systems and the rehabilitation and installation of vertical drainage networks. The project also provides support for the institutional strengthening of the public and private organizations involved in the enhancement of water resource management and agriculture production in the project area. Finally, the project supports operational expenditures for project management, consultancy services for auditing project expenditures, monitoring and evaluation (M&E) of project impacts, and preparation for a future project. Results achieved: • The project became effective in March 2010. Since then, a contract has been awarded for the rehabilitation of a collector and drainage network and groundwater management in the FV. This is the largest procurement package in the project. • Project staff has been recruited, and a contract has been awarded for M&E services under the project, as well as for the installation of financial management software. Key Partners: Ministry of Agriculture and Water Resources. Key Development Partners: ADB, Swiss Agency for Development and Cooperation (SDC), and the Scientific- Information Center of the Interstate Commission for Water Coordination of Central Asia (SIC-IWRC). UZBEKISTAN: DRAINAGE, IRRIGATION, AND WETLANDS IMPROVEMENT PROJECT (PROJECT P009127) Key Dates: Approved: June 19, 2003 Effective: February 20, 2004 Closing: June 13, 2013 Financing from all co-financiers, million US Dollars*: Financier Financing Disbursed Undisbursed IDA Credit 25.00 26.6 IBRD Loan 35.00 29.8 5.11 Government of Uzbekistan 14.55 Total Project Cost 74.55 *As of August 2012 Note: Disbursements may differ from financing due to exchange rate fluctuations at the time of disbursement. Challenges: The project is part of the Aral Sea Basin Program approved by the heads of the five Central Asian States in 1994. In Uzbekistan, particularly in the Amu Darya basin, the soils are salinated and drainage systems inadequate. The common practice is to apply large quantities of water for leaching the soils of salts. This practice results in high groundwater levels, and causes, through capillary action, the salts in the soil profile to be brought to the surface. By improving drainage, the project will break this vicious cycle of high water applications, water logging, and secondary soil salinization. Project Objective: The Project Development Objectives are to: (a) increase the productivity of irrigated agriculture, employment, and incomes in Karakalpakstan, one of the poorest regions in Central Asia; (b) improve the water quality of the Amu Darya River by the safe disposal of drainage effluents, and enhance the quality of wetlands in the Amu Darya delta; and (c) develop institutions for improving water management and the operation and maintenance of the irrigation and drainage systems; and (d) promote sustainable irrigated agriculture through participatory irrigation management. Results achieved: • Groundwater table lowered to an acceptable level in 90 percent of the project area. The lower groundwater table is resulting in the desalinization of irrigated lands and is preventing secondary soil salinity. • Arable land that was unfit for agriculture before the project because of its salinity is cultivated, helping to generate new employment and income in the project area. • Quality of water in the Amu Darya improved. Water salinity in the Amu Darya downstream of the project area has gone down considerably because drainage effluent no longer flows into the river. • 21 Water Users Associations (WUAs) established to improve water the management, operation, and maintenance of the irrigation and drainage systems. Farmers, members of WUAs, operators, staff of water management organizations, rural communities, and staff of local authorities (1,250 persons in total) have received training in improved agriculture and water management practices. • The civil works under the project to be completed before project closing date of June 2013. Key Partners: Ministry of Agriculture and Water Resources. Key Development Partners: ADB, SDC, and SIC-IWRC. UZBEKISTAN: ENERGY EFFICIENCY FACILITY FOR INDUSTRIAL ENTERPRISES Project P118737 Key Dates: Approved: June 17, 2010 Effective: December 16, 2011 Closing: January 31, 2016 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IDA Credit 25.0 4.7 20.30 Participating Banks 4.8 Sub-Borrowers (i.e. 4.8 Industrial Enterprises) Total Project Cost 34.6 * As of August 15, 2012 Note: Disbursements may differ from financing due to exchange rate fluctuations at the time of disbursement Challenges: Uzbekistan has a fast-growing economy and is a large producer and exporter of natural gas to Russia and Europe. At the same time, the country has one of the most energy-intensive industries worldwide and is a major greenhouse gas emitter. Today, the country uses twice as much energy to produce one unit of GDP compared to neighboring Kazakhstan, and six times as much as Germany. The largest energy consumers in Uzbekistan are industrial enterprises, which generally operate outdated equipment and machinery. Recognizing this, the Government of Uzbekistan has declared improving the energy efficiency (EE) and competitiveness of industrial enterprises to be among its key economic priorities, and has passed several relevant decrees that aim to incentivize energy savings. Uzbekistan has a relatively large number of banks that provide loans for certain types of industrial enterprises, but long-term funds for EE investments are currently not available. Improving EE and reducing energy consumption in the production process will improve Uzbek industries’ overall competitiveness, free up natural gas resources for exports, and reduce overall greenhouse gas emissions. Project Objective: The Project Development Objective is to improve EE in industrial enterprises by designing and establishing a financing mechanism for energy saving investments. Results to be achieved: • Annual energy consumption savings at least by 20 percent as a result of every subproject implementation. • Cumulative CO2 emissions reduction. • Development of an EE strategy for industrial enterprises. • Development of an EE communications strategy. • Establishment of the Permanent Energy Efficiency Improvement System in industrial associations. Key Partners: Ministry of Finance, Ministry of Economy; participating banks (Asaka, Hamkor, and Uzpromstroy), Association of Chemical Industry “Uzkhmimprom,” Food Industry Association, metallurgical plants, gas transportation company “Uztransgaz,” etc. UZBEKISTAN: TALIMARJAN TRANSMISSION PROJECT PROJECT P8009 Key Dates: Approved: March 15, 2011 Effective: November 11, 2011 Closing: December 31, 2015 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IBRD Loan 110.00 39.75 70.25 Uzbekenergo 61.04 25.4 34.64 Government - Other Donors Total Project Cost 171.04 *As of August 15, 2012 Note: Disbursements may differ from financing due to exchange rate fluctuations at the time of disbursement. Challenges: Uzbekistan has a fast-growing economy and is a major producer and exporter of natural gas to Russia and Europe. With more than 12 gigawatts of installed power generation capacity, Uzbekistan is the second largest producer of electricity in the Central Asia region. Given the growth of demand, with its associated increase in overloading and an aging infrastructure, the transmission system has been experiencing high losses and frequent, long power outages. In winter, outages are from two to six hours a day in the southern and western regions, creating serious bottlenecks for economic and social development. In the south, congestion in power transmission is acute, where electricity consumption during the winter peak increased by nearly 40 percent from 2,318 megawatts in 1999 to almost 3,000 megawatts in 2008. There are also constraints to frequency regulation due to the predominant thermal mix. Large investments are needed to improve the transmission network required to meet the growth in load demand, reduce losses, and increase the electricity trade. Project Objective: The Project Development Objective is to improve the reliability of electricity supply to residential and business consumers in southwest Uzbekistan. The project supports changes in utility governance and renewable energy development. Results to be achieved by the end of project: • Reduced number/duration of electricity outages in the project area. • Increased electricity supplied to consumers in the southwestern parts of Uzbekistan. • Reduced voltage variation range. • Transition from Soviet-era GOST standards to International Electrotechnical Commission (IEC) standards. • Enhanced capacity of Internal Audit Departments. • Identification of areas with wind power potential. Key Partners: State Joint Stock Company Uzbekenergo; Ministry of Finance (MOF). Key Development Partners: ADB, Japan International Cooperation Agency (JICA), and the Uzbekistan Fund for Reconstruction and Development (UFRD). UZBEKISTAN: ADVANCE ELECTRICITY METERING PROJECT PROJECT 122773 Key Dates: Approved: March 27, 2012 Expected effectiveness date: November 2012 Closing: June 30, 2017 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IBRD Loan 180.00 Uzbekenergo 66.1 Total Project Cost 246.1 *As of August 15, 2012 Note: Disbursements may differ from financing due to exchange rate fluctuations at the time of disbursement. Challenges: Uzbekistan has a wide national power transmission and distribution network: 1,850 kilometers of 500 kilovolt lines, 6,200 kilometers of 220 kilovolt lines, 15,300 kilometers of 110 kilovolt lines, and more than 11,000 0.6–35 kilovolt lines. Transmission and distribution system losses, both technical and commercial, are officially reported to be around 20 percent of electricity generated, around two–three times the losses experienced in advanced European power grids and some middle-income developing countries. Although the collection rates for power bills have improved in the past few years, there is still significant room for further improvement. Currently, a major focus of the Government’s energy strategy is to rapidly improve the energy efficiency of both the energy supply industries, and energy end users. A key action in the power sector is to implement a country-wide advanced electricity metering (AEM) program to improve the transparency and accountability of the sector. The program aims to implement modern technologies in electricity metering, billing, and payment collection to reduce commercial losses. It will also encourage electricity consumers to use electricity more efficiently by providing transparent and fair pricing signals, and information on electricity consumption. Project Objective: The Project Development Objective is to reduce commercial losses in Uzbekenergo’s three regional power distribution companies in Tashkent City and the oblasts of Tashkent and Syrdarya by improving their metering and billing infrastructure and the commercial management systems. Expected results: • Improvement of the energy balance management and power supply reliability. • Improvement of the billing system and collection rate in project areas. • Enhancement of the capacity of Uzbekenergo and the staff of the distribution companies. Key Partners: State Joint Stock Company Uzbekenergo; Ministry of Finance (MOF). Key Development Partners: ADB. UZBEKISTAN: BUKHARA AND SAMARKAND SEWERAGE PROJECT Project 112719 Key Dates: Approved: August 4, 2009 Effective: April 1, 2010 Closing: December 31, 2015 Financing in million US Dollars*: Financier Financing Disbursed Undisbursed IDA Credit 55.00 8.18 45.53 Government of Uzbekistan 11.16 Total Project Cost 66.16 *As ofAugust 16, 2012 Note: Disbursements may differ from financing due to exchange rate fluctuations at the time of disbursement. Challenges: Since independence in 1991, Uzbekistan’s municipal services have been largely decentralized to local governments. However, insufficient investment and deferred maintenance have badly affected the infrastructure, which is older than 20 years, has severely deteriorated, and is often energy inefficient. The decline in service reliability has reduced the public’s quality of life and constrained economic growth. The sewerage systems in Bukhara and Samarkand are more than 40 years old and will soon need to be replaced. Deferred maintenance must now be addressed through a combination of crash preventive maintenance and rehabilitation. Project Objective: The Project Development Objectives are to mitigate the environmental impact from wastewater pollution and improve the efficiency and sustainability of wastewater management in Bukhara and Samarkand. This will be achieved through: (a) rehabilitating select sections of the sewerage system that are deteriorated; (b) expanding (to a limited extent) the sewerage system into currently unconnected central historical areas; (c) installing more energy-efficient equipment such as wastewater pumps and aeration systems at the wastewater treatment plants and pumping stations; and (d) improving the capacity of the water utilities (vodokanals) in the areas of management, communications, and public outreach. Results achieved: • Project implementation progresses with a number of works and consultant services contracts currently underway. The first urgent investments civil works contract to rehabilitate selected sections of the sewers (2.2 kilometers) and construct a new sewer pumping station in Samarkand along Pendjikentskaya Str. is completed. A similar urgent sewers (5.8 kilometers) rehabilitation contract has been under implementation in Bukhara since January 2012, with 1.7 kilometers of sewers laid. • Detailed engineering designs are being developed by local design consultants for the further rehabilitation of wastewater treatment plants, sewers, and pumping stations in Samarkand and Bukhara. Operation and maintenance equipment has been procured for the vodokanals of both Bukhara and Samarkand. A number of packages to procure detailed designs for the rehabilitation/construction of the rest of the sewers, pumping stations, and wastewater treatment plants are under preparation. • Training of vodokanals’ staff on sewerage operation was procured and is underway in Bukhara and Samarkand. Key Partners: Uzkommunkhizmat (State Agency for Public Utilities); Bukhara Regional Governor’s office and Water Utility; Samarkand Regional Governor’s office and Water Utility. UZBEKISTAN: SYRDARYA WATER SUPPLY PROJECT PROJECT 111760 Key Dates: Approved: March 1, 2011 Effective: January 14, 2012 Closing: December 31, 2017 Financing in million US Dollars*: Financier Financin Disburse Undisburse g d d IDA Credit 88.00 0.39 85.81 Government of Uzbekistan 33.03 Total Project Cost 121.03 * As of August 16, 2012. Note: Disbursements may differ from financing due to exchange rate fluctuations at the time of disbursement. Challenges: Since independence in 1991, Uzbekistan’s municipal services have been largely decentralized to local governments. However, insufficient investment and deferred maintenance have badly affected the infrastructure, which is older than 20 years, has severely deteriorated and is often energy inefficient. The decline in service reliability has reduced the public’s quality of life and constrained economic growth. An estimated 82 percent of Uzbekistan’s population has access to potable water, with great disparities between urban and rural areas. The Government asked for Bank assistance to improve water supply services in small towns and villages in five districts in the Syrdarya oblast (region). The beneficiaries reside in about 1,100 small towns and villages over an area of about 4,000 kilometers. Currently, 2.25 percent of the project towns receive no piped water at all and have to rely on water tankers; another 55 percent receive piped water less than six hours daily, 10 percent receive it between six and 24 hours daily, and only about 10 percent have 24-hour service. Project Objective: The Project Development Objective is to improve the availability, quality, and sustainability of the public water supply service in selected districts of the Syrdarya region. The objective is to be achieved through the rehabilitation, replacement, and limited expansion of the water supply infrastructure and through the institutional capacity building of the Syrdarya Regional Suvokova (SVK) utility. Capacity building will in particular aim at improved operations and maintenance and at the systematic billing and collection of user charges, to cover annual cash operating expenses (including repairs and maintenance) and a marginal share of annual debt service as agreed with the Government. Expected results: • Water supply systems rehabilitated and expanded in five districts in the Syrdarya region: Akaltyn, Bayaut, Mirzaobad, Sardoba, and Khavast. • Capacity enhanced of the Syrdarya Regional Vodokanal (SVK) and its district level vodokanals staff. • Feasibility studies done for future financing of the wastewater infrastructure sector in the Syrdarya region. Results achieved: • Project Coordination Unit branch now fully staffed and functional. • Detailed design for the rehabilitation of 30-kilometer bulk pipeline has been completed. • Project implementation has been contracted. Key Partners: Uzkommunkhizmat (State Agency for Public Utilities); Syrdarya Regional Governor’s office and Water Utility.