uzbekistan: water supply and sanitation services ... · completion report project number: 42489-023...

Completion Report

Project Number: 42489-023 Loan Number: 2564 January 2020

Uzbekistan: Water Supply and Sanitation Services Investment Program (Tranche 1)

This document is being disclosed to the public in accordance with ADB’s Access to Information Policy.

CURRENCY EQUIVALENTS

Currency unit – sum (SUM)

At Appraisal At Project Completion 14 August 2009 31 March 2018

SUM1.00 = $0.000670 $0.000309 $1.00 = SUM1,491.73 SUM8,114.86

ABBREVIATIONS ABS – automated billing system ADB – Asian Development Bank APFS – audited project financial statement AFS – audited financial statement DMF – design and monitoring framework EIRR – economic internal rate of return EMP – environmental management plan EMR – environmental monitoring report FIRR – financial internal rate of return GAP – gender action plan IEE – initial environmental examination IRTM – interregional trunk main km – kilometer LARP – land acquisition and resettlement plan m3 – cubic meter MHCS – Ministry of Housing and Communal Services MOF – Ministry of Finance O&M – operation and maintenance PCU – project coordination unit PIU – project implementation unit PMC – project management consultant PPMS – project performance and monitoring system PPMU – program preparation and management unit TA – technical assistance WSS – water supply and sanitation WWTP – wastewater treatment plant

GLOSSARY makhalla – local self-governing community suvokava state unitary enterprise vodokanal water supply and sanitation institution

NOTES

(i) This fiscal year (FY) of the Government of Uzbekistan ends on 31 December. (ii) In this report, “$” refers to United States dollars.

Vice-President Shixin Chen, Operations 1 Director General Werner Liepach, Central and West Asia Department (CWRD) Director Cindy Malvicini, Uzbekistan Resident Mission (URM), CWRD Team leader Doniyor Mukhammadaliyev, Social Sector Officer, URM, CWRD Team members Feruza Insavalieva, Associate Project Analyst, URM, CWRD Mekhri Khudayberdiyeva, Senior Social Development Officer (Gender),

URM, CWRD Umida Rasul-Zade, Operations Assistant, URM, CWRD In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

Page

BASIC DATA i

I. PROJECT DESCRIPTION 1

II. DESIGN AND IMPLEMENTATION 2

A. Project Design and Formulation 2 B. Project Outputs 3 C. Project Costs and Financing 5 D. Disbursements 5 E. Project Schedule 6 F. Implementation Arrangements 6 G. Technical Assistance 6 H. Consultant Recruitment and Procurement 7 I. Gender Equity 8 J. Safeguards 8 K. Monitoring and Reporting 8

III. EVALUATION OF PERFORMANCE 10

A. Relevance 10 B. Effectiveness 10 C. Efficiency 11 D. Sustainability 11 E. Development Impact 12 F. Performance of the Borrower and the Executing Agency 13 G. Performance of the Asian Development Bank 13 H. Overall Assessment 13

IV. ISSUES, LESSONS, AND RECOMMENDATIONS 14

A. Issues and Lessons 14 B. Recommendations 14

APPENDIXES

1. Design and Monitoring Framework 16

2. Project Cost at Appraisal and Actual 20

3. Disbursement of ADB Loan Proceeds 21

4. Contract Awards of ADB Loan Proceeds 22

5. Status of Compliance with Loan Covenants 23

6. Project Implementation Schedule 50

7. Project Organizational Structure 51

8. Contract Packages and Procurement Procedures 54

9. Economic and Financial Reevaluation 61

10. Safeguards Compliance 71

11. Achievements on Gender Action Plan Targets 74

12. Water Supply and Sanitation Sector Overview 84

BASIC DATA A. Loan Identification

1. Country Republic of Uzbekistan

2. Loan number and financing source 2564-UZB (concessional ordinary capital resources)

3. Project title Water Supply and Sanitation Services Investment Program (Tranche 1)

4. Borrower Republic of Uzbekistan

5. Executing agency Agency “Kommunhizmat”

6. Amount of loan SDR38,338,000

7. Financing modality Multitranche financing facility

B. Loan Data

1. Appraisal

– Date started 31 July 2009

– Date completed 14 August 2009

2. Loan negotiations

– Date started 26 August 2009

– Date completed 27 August 2009

3. Date of Board approval 8 October 2009

4. Date of loan agreement 1 December 2009

5. Date of loan effectiveness

– In loan agreement 15 January 2010

– Actual 21 April 2010

– Number of extensions 2

6. Project completion date

– Appraisal 31 December 2014

– Actual 30 September 2017

7. Loan closing date

– In loan agreement 30 June 2015

– Actual 31 March 2018

– Number of extensions 2

8. Financial closing date

– Actual 9 January 2019

9. Terms of loan

– Interest rate 1.0% during the grace period and 1.5% thereafter

– Maturity (number of years) 32

– Grace period (number of years) 8

10. Terms of relending (if any)

– Interest rate 1.0% during the grace period and 1.5% thereafter plus 0.2% per year

– Maturity (number of years) 32

– Grace period (number of years) 8

ii

– Second-step borrower Bukhara, Navoi, and Surkhandarya provincial governments

11. Disbursements

a. Dates Initial Disbursement

26 July 2010

Final Disbursement

23 November 2018

Time Interval

100 months

Effective Date

21 April 2010

Actual Closing Date

31 March 2018

Time Interval

95 months

b. Amount (SDR ‘000)

Category

Original Allocation

(1)

Increased during

Implementation

(2)

Canceled during

Implementation

(3)

Last Revised

Allocation

(4=1+2–3)

Amount Disbursed

(5)

Undisbursed Balance

(6 = 4–5)

1. Works 21,981 762 22,743 22,728 15

2. Equipment 10,543 481 11,024 10,982 42

3. Land acquisition and resettlement

447 447 0

4. Training and capacity building

128 4 132 132

5. Consulting services

2,300 502 1,798 1,796 2

6. Incremental administration

447 256 703 702 1

7. Interest charge

2,492 554 1,938 1,603 335

Total 38,338 1,503 1,503 38,338 37,811 527

Note: Numbers may not sum precisely because of rounding.

C. Project Data

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

Foreign exchange cost 60.0 56.7

Local currency cost 15.0 11.3

Total 75.0 68.0

2. Financing plan ($ million) Cost Appraisal Estimate Actual

Implementation cost

Borrower financed 15.0 11.3

ADB financed 56.1 56.7

Other external financing 0.0 0.0

Total implementation cost 71.1 68.0

Interest during construction costs

Borrower financed 0.0 0.0

ADB financed 3.9 2.3

Total interest during construction cost 3.9 2.3

ADB = Asian Development Bank.

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3. Cost breakdown by project component ($ million) Component Appraisal Estimate Actual

A. Part I: Water Supply and Sanitation Infrastructure Improvement

1. Civil works 45.100 44.300

2. Mechanical and equipment 19.900 17.600

3. Land and resettlement 0.700 0.000

Subtotal (A) 65.700 61.900

B. Part II: Capacity Development and Investment Program Management

1. Consultants 4.400 2.600

2. Training 0.200 0.000

3. Incremental administration 0.800 1.300

Subtotal (B) 5.400 3.900

C. Interest during implementation 3.900 2.300

Total (A+B+C) 75.000 68.100

4. Project schedule Item Appraisal Estimate Actual

Consulting services

Completion of detailed designs

Damkhoja and Bukhara Q1 2011 Q2 2012

Navoi and Termez Q4 2011 Q2 2012

Civil works contract

Date of award



Completion of civil works



Equipment and supplies

Date of first contract award Q2 2011 Q3 2011

Date of contract completion Q2 2012 Q4 2012

Project management

Date of commencement of services Q4 2008 Q2 2013

Date of completion of services Q4 2014 Q1 2018

Q = quarter.

5. Project performance report ratings Implementation Period Single Project Rating

From 21 April 2010 to 31 December 2010 Satisfactory

From 1 January 2011 to 31 December 2011 Actual problem

From 1 January 2012 to 31 December 2012 On track






From 1 January 2018 to 31 March 2018 On track

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D. Data on Asian Development Bank Missions

Name of Mission Date No. of

Persons No. of

Person-Days Specialization of

Members

Fact-finding 27 May–3 July 2009 8 120 a, b, c, d, e, f, g, h

Appraisal 31 July–14 August 2009 7 98 i, e, j, f, g, h, k

Loan inception 14–19 July 2010 2 12 b, l

Review 1 2–9 December 2010 3 24 b, m, n

Review 2 1014 May 2011 2 10 o, n

Review 3 2027 October 2011 3 17 o, p, q

Midterm review 1021 May 2012 6 17 o, e, p, r, q, s

Review 4 18–27 March 2013 5 15 o, t, d, r, q

Review 5 25 October–8 November 2013 7 24 o, t, u, p, d, r, v

Special loan administration 31 October 2014 3 3 d, v, w

Review 6 1123 March 2015 3 24 d, d, v

Review 7 1728 June 2015 3 27 r, s, v

Review 8 17–23 July 2015 1 4 d

Review 9 26 October12 November 2015 4 28 v, x, s, f, y

Review 10 627 April 2016 5 21 v, x, s, f, y

Project completion review 15 October19 November 2018 4 16 v, s, f, y

a = urban economist; b = principal urban development specialist; c = senior environment specialist; d = urban development specialist; e = principal social development specialist; f = associate project analyst; g = gender consultant; h = water supply and sanitation staff consultant; i = senior urban economist; j = counsel; k = environmental staff consultant; l = project officer; m = senior portfolio management specialist; n = project management officer; o = principal economist; p = water supply and sanitation specialist; q = senior social sector officer; r = senior project officer; s = senior social development officer (gender); t = principal safeguards specialist; u = senior urban development specialist; v = social sector officer; w = Operations, Services, and Financial Management Department (now referred to as the Procurement, Portfolio, and Financial Management Department) special representative; x = portfolio management specialist; y = operations assistant.

I. PROJECT DESCRIPTION 1. The Government of Uzbekistan identified improving water supply and sanitation (WSS) services as a national priority, noting in its poverty reduction and welfare improvement strategy that improving the quality of WSS services and expanding coverage to all residents were essential to protect public health, raise living standards, and achieve economic development and poverty reduction.1 The government intended to reach 100% service coverage in urban areas and 85% in rural areas through a $2.9 billion policy framework and sector investment plan.2 ADB aligned the Water Supply and Sanitation Services Investment Program with the national WSS policy framework, calling for greater institutional effectiveness, better service performance and management, improved operational and commercial efficiencies, higher cost recovery rates, and tighter financial controls. 2. Project appraisal studies showed that the Damkhoja interregional trunk main (IRTM)—the primary groundwater water source for the Bukhara and Navoi subprojects—faced serious challenges caused by (i) severely deteriorated submersible pumps with an 8-month average operating life before repair or replacement; (ii) insufficient operation and maintenance (O&M) of boreholes; (iii) frequent power outages; (iv) high leakages on borehole-to-collector main sections; (v) poor water quality at source from lack of regular monitoring; and (vi) poor chlorination, pumping station, and water reservoir conditions in the Kurpa and Navoi water distribution units. Neither the water production facilities nor customer connections were metered, and consumption and tariffs followed nominal rates. As a result, the Damkhoja IRTM was poorly managed and underfunded and was operating at an average of 65% of its design capacity of 210,000 cubic meters (m3)/day. 3. Despite relatively high urban water supply coverage, reliability and duration of supply were low. Residents of urban centers in Bukhara and Navoi had intermittent water supply, lasting for less than 2 hours/day in some cases. Treated water was rationed for many consumers in project areas because the Damkhoja IRTM lacked capacity.3 Up to 70% of water supply systems, including water distribution centers and networks, had not been maintained regularly and needed replacement. Estimated unaccounted-for water from the deteriorated infrastructure, nonpayment of bills, and administrative expenses was 60%. Distribution network inefficiencies led to high water losses, which intensified existing shortages and increased operating costs. Most vodokanals (water supply and sanitation institutions) did not recover their operating and capital costs because of tariff constraints and poor commercial practices: low billing and collection efficiency, and high costs because of operating inefficiencies.4 4. Termez’s wastewater treatment plant (WWTP) and sewerage network system were first commissioned in 1984 with a design capacity of 10,000 m3/day. The city built 25,000 m3/day wastewater treatment facilities in 1989 to increase the overall design capacity to 35,000 m3/day, but this did not address the WWTP’s malfunctioning pumping stations, sand straps, aeration tanks, and primary settlers and clarifiers; and frequent power outages.5 Overloaded sewage collectors and networks malfunctioned because of (i) poor structural conditions from corroded

1 Government of Uzbekistan. 2007. Welfare Improvement Strategy (20082010). Tashkent. 2 ADB. 2009. Report and Recommendation of the President to the Board of Directors: Proposed Multitranche

Financing Facility tor the Republic of Uzbekistan for the Water Supply and Sanitation Services Investment Program. Manila.

3 Consumers incurred substantial direct costs when buying tanker or bottled water. 4 Government of Uzbekistan. 2015. Cabinet of Ministers Resolution No. 306: On Measures to Implement the Main

Directions of Development of the Organizations of Water Supply and Sanitation. Tashkent. 5 Wastewater buildup in the city’s sewerage system reduced flow velocities, resulting in sedimentation, decomposition

of organic material, gas generation, and sewer corrosion.

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pipelines; (ii) sedimentation buildup; and (iii) joint failures that allowed root intrusion, water infiltration, and wastewater exfiltration. At appraisal, only 39% of the city’s population had centralized sewage services, and the rest used pit latrines or septic tanks. 5. ADB and the government prepared and implemented Project 1 of the Water Supply and Sanitation Services Investment Program to improve the living standards, environment, and public health of urban centers in Bukhara, Navoi, and Surkhandarya provinces. The expected outcomes were (i) safe, reliable, and sustainable water supply for 360,000 residents in 11 district centers in Bukhara and Navoi; and (ii) improved sanitation services and hygiene for people living in Termez. ADB designed the project to (i) provide access to safe, reliable, and sustainable water supply; (ii) improve sanitation services and hygiene for the targeted population in the project towns; and (iii) provide the executing and implementing agencies with necessary support in project management and institutional strengthening of WSS operators. The design and monitoring framework (DMF) and project achievements are in Appendix 1. 6. On 28 August 2009, ADB and the government signed a framework financing agreement for the multitranche financing facility in an amount not exceeding $300 million from ADB’s Special Funds resources (Asian Development Fund) to finance the investment program (footnote 2). On 28 August 2009, the government submitted a periodic financing request for tranche 1 to ADB for SDR38.388 million ($60 million equivalent at approval). The ADB President approved tranche 1 on 8 October 2009. ADB and the government designated Agency “Kommunhizmat” as the executing agency for this project. Uzbekistan and ADB signed the loan agreement on 1 December 2009, with an effectivity date of 21 April 2010.

II. DESIGN AND IMPLEMENTATION 7. The project encountered significant delays from the lengthy government feasibility approval process, recruitment of detailed design and project management consultants (PMCs), and long procurement of civil works contracts. To ensure completion of project activities, ADB approved the borrower’s requests to extend the loan closing date to 31 March 2018.6 The project was completed within the extended period, and the originally envisaged physical outputs were fully achieved. Its nonphysical outputs were only partially achieved (paras. 14–16). With the project intervention, the water supply systems of district centers in Bukhara and Navoi and the wastewater treatment and sewage network systems in Termez were substantially improved. A. Project Design and Formulation 8. The project was relevant at appraisal and completion as it improved living standards, the environment, and public health by rehabilitating and constructing WSS facilities in the project regions. The project was consistent with ADB’s (i) country strategy and program, 2006–2010 for Uzbekistan, with a focus on sustainable WSS for its rapidly growing urban population;7 and (ii) water policy focusing on poverty reduction, cost recovery and tariff reform, improvement and expansion of water service delivery, enterprise reform, and private sector participation.8 With close consultation and participation of stakeholders, ADB formulated the project in line with the government’s Welfare Improvement Strategy, 2008–2010; and national investment program for

6 On 6 August 2015, the borrower requested to extend the loan closing date to 30 June 2017 to complete the remaining

civil works for the Galaasiya and Termez subprojects and to implement institutional strengthening and capacity development. On 17 October 2017, the borrower requested a second extension until 31 March 2018 to complete the development and implementation of the unified automated billing system.

7 ADB. 2006. Country Strategy and Program: Uzbekistan (20062010). Manila. 8 ADB. 2003. Water for All: The Water Policy of the Asian Development Bank. Manila (adopted in 2001).

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2008–2012.9 Through technical assistance (TA), ADB mobilized consultants to prepare the project jointly with various stakeholders, which generated a great level of government ownership of the project (para. 25). Project readiness was strengthened with the assistance of technical consultants and the establishment of a program preparation and management unit (PPMU) and project implementation units (PIU) in subproject areas. The project design did not have any changes as it was sound and adequately formulated, and the financing modality was appropriate to deliver the project objectives. B. Project Outputs 9. The project had two parts: (i) physical rehabilitation and construction works; and (ii) institutional strengthening and capacity building for the WSS operators, and effective support for program implementation. A detailed description of outputs and achievements is in Appendix 1. 10. Part I: Water supply and sanitation infrastructure improvement. This output aimed to (i) rehabilitate the Damkhoja IRTM to increase production capacity to 210,000 m3/day; (ii) improve water supply systems in 11 district centers in Bukhara and Navoi; (iii) rehabilitate WWTP and sewerage networks in Termez; and (iv) construct toilets and promote good hygiene and practices in selected schools in the project towns. 11. The executing agency achieved the output as originally planned and completed the following within the original and extended project closing period: (i) 12 reservoirs, 9 pumping stations, 75 boreholes, 1.1 kilometer (km) of trunk main, and 245 km of distribution networks rehabilitated; (ii) 11 reservoirs, 8 boreholes, 4 pumping stations, 24.5 km of trunk mains, and 73 km of distribution networks constructed; (iii) Termez WWTP with a capacity of up to 35,000 m3/day rehabilitated; (iv) 8.9 km sewer collectors and 1 sewage pump station rehabilitated; (v) 9.3 km sewage collectors and 3 new pump stations constructed; (vi) 10 lavatories in schools in Bukhara and Navoi constructed and connected to piped water supply; and (vii) hygiene-promotion activities completed in schools in project areas. Water meters were installed for all bulk customers, but the installation of household meters was not effectively implemented by project vodokanals. Appendix 1 details the project’s physical achievements. 12. The executing agency implemented the sanitation and hygiene promotion program as envisaged under the project’s gender action plan (GAP). It conducted training programs on efficient water use, sanitary practices, and hygiene awareness in close collaboration with the makhallas (local self-governing communities), schools, and state sanitary epidemiological stations in the project towns. The PPMU also disseminated about 485 learning materials—booklets on sanitary practices and hygiene promotion—to trainees from the makhallas. With financial assistance from local trade unions, 1,865 students in the project cities received personal hygiene items.10 The PPMU conducted training activities in schools for 10,992 students and 793 members of the makhallas, 55% of whom were women. Women participated in the planning process and awareness-raising campaigns. Key stakeholders, including suvokava (state unitary enterprise) staff, received gender sensitivity training on women’s needs, preferences, and roles in household water management, sanitation, and hygiene. Women’s involvement in management and planning increased, and they participated in the sanitation and hygiene promotion program and in local monitoring groups. The program targeted primary schools to ensure that girls learn good practices in water handling, personal hygiene, and sanitation.

9 Government of Uzbekistan. 2008. Presidential Resolution No. 890: On Measures to Further Improve the Provision

of Quality WSS and Natural Gas Distribution Services to Urban and Rural Population. Tashkent. 10 Trade unions provided SUM24 million for the purchase of personal hygiene items, such as soap and cleaning fluids.

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13. Part II: Capacity development and investment program management. The project team designed this output to help implement the (i) institutional strengthening and capacity development, and (ii) assistance to the PPMU and the PIUs on effective project implementation and management. 14. Institutional strengthening and capacity development. The designed activities—implementation of the performance-based service contracts and lease contracts, district water utility rationalization study, performance benchmarking, tariff study, and capacity development of responsible government agencies—were partially achieved largely for technical and systemic reasons. Those were (i) significant delays in recruiting the PMCs that would develop the package for this assignment; (ii) the executing agency’s insufficient capacity for this component;11 (iii) larger changes instituted by the government for the WSS institutional and legal framework; (iv) availability of grant funding for institutional reforms in the WSS sector from the Swiss government, resulting in the executing agency’s reluctance to use loan funds for the same purposes; and (v) the government’s evolving priorities, particularly toward reform efforts in billing, collection, and fiscal discipline and controls. Most design activities were complex and could not be implemented comprehensively within the given circumstances. However, the executing agency could have exerted more effort to achieve better results through efficient coordination of the activities of the donors engaged in the sector. 15. Under ADB guidance, the terms of reference for a unified automated billing system (ABS) were further refined based on the requirements set by the government, and the executing agency selected the information technology company for this assignment. The expected outcome from the ABS was a modern and functional information systems platform built through system integration and automation that allows secure, reliable, and efficient reporting, monitoring, and information sharing on the operational and financial performance of the suvokavas. At project completion, the ABS was commissioned in all the project suvokavas. The government has adopted the ABS for nationwide implementation, replacing all billing systems of all the suvokavas in the country and enabling central data management from the billing center in Tashkent. 16. Government’s sector strategy. Starting from 2015, the government undertook the following significant WSS sector reforms: (i) nationwide reorganization of the suvokavas and sector-wide implementation of management, operational, financial, and cost-recovery reforms;12 (ii) enhanced WSS sector governance by establishing the Ministry of Housing and Communal Services (MHCS);13 (iii) additional measures on WSS sector development priorities; and (iv) new tariff regulations for WSS services. The reorganization of the vodokanals was largely driven by Cabinet of Ministers Resolution No. 306, which completely transformed the structure and governance of the WSS institutions to enhance the availability and quality of WSS services nationwide. The resolution (i) established one suvokava in each region as the legal successor of the vodokanals; (ii) prioritized high-level WSS oversight; and (iii) mandated the completion of

11 ADB (CWRD). 2013. Review Mission for Tranche 1 and Tranche 2. Aide-mémoire. 18–27 March (internal, para 6).

Delays in the recruitment of the PMC meant that the PMU capacity for all its functions was not there, and the first priority was to award civil works contracts. The PMC consultants’ contract was awarded in December 2012.

12 Government of Uzbekistan. 2015. Cabinet of Ministers Resolution No. 306: On Measures to Implement the Main Directions of Development of the Organizations of Water Supply and Sanitation. Tashkent.

13 Government of Uzbekistan. 2015. Presidential Resolution No. 5017: On Measures of Further Development of the Management of the Housing and Communal Services Sector. Tashkent; and Government of Uzbekistan. 2015. Presidential Resolution No. PP-2900: On Operational Arrangements of the Ministry of Housing and Communal Services of the Republic of Uzbekistan. Tashkent.

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more than 40 defined and time-bound sector improvement actions.14 To ensure the fundamental improvement of the coverage and quality of communal services, the MHCS was established and mandated to pursue uniform state policy and inter-sector coordination in housing and public utility services. The WSS sector overview is in Appendix 12. 17. Investment program management. ADB designed this output to support project management and implementation activities, including incremental administrative costs associated with the PPMU and the PIUs. The government established the PPMU under Project 1, and the PPMU implemented Projects 2 and 3. The executing agency established and adequately staffed and equipped one PIU each in Bukhara, Navoi, and Termez. The PMCs supported the PPMU and the PIUs to ensure smooth implementation of procurement and construction supervision, particularly in (i) project management and monitoring; (ii) preparation of bidding documents and bid evaluation; (iii) financial management and accounting; (iv) construction supervision; and (v) social, environment, and resettlement management and monitoring. In November 2015, the government adopted a resolution to streamline the implementation of projects funded by international financial institutions, and with prior ADB approval, the executing agency restructured the PPMU and the PIUs into a new project coordination unit (PCU). C. Project Costs and Financing 18. The executing agency implemented the project within the original budget. The total estimated cost at the original loan appraisal was $75.0 million, including taxes, duties, and interest charges on the loan during implementation. ADB’s share of financing was estimated at $60.0 million or 80% of total costs at appraisal, including $3.9 million for interest charges. Government financing was estimated at $15.0 million or 20% of total costs, comprising $10.7 million for civil works, $3.4 million for mechanical and equipment, $0.7 million for consultants, and $0.2 million for incremental administration expenses. 19. The actual project cost at completion was $68.0 million, 91% of the appraised cost estimates. ADB’s financing totaled $56.7 million or 95% of the appraisal estimate, including $2.3 million in interest charges, which was lower than the appraisal estimate because of slow disbursement of loan funds during the early stages of project implementation. Loan savings of $3.2 million for the ADB-financed portion resulted from lower-than-estimated bids for civil works, mechanical equipment, and consulting services; and low interest charges because of slow disbursement. The government financed $11.3 million, or 75% of the appraisal estimate. The project cost estimated at appraisal and the actual cost are in Appendix 2. D. Disbursements 20. ADB disbursed the loan proceeds following its Loan Disbursement Handbook (2007, as amended from time to time). ADB adopted financing and disbursement arrangements for the project, including direct payment, reimbursement, imprest fund procedures, liquidation and replenishment, and statement of expenditure procedures. The appraisal disbursement schedule was generally realistic. While loan disbursements were not significant in 2010, they increased considerably in 2011. Loan funds were largely disbursed during 2012–2014, followed by smaller residual disbursements during 2015–2018. The direct payment procedure was used for the

14 These improvement actions include (i) managing and monitoring the development and modernization program, (ii)

building the suvokavas’ management capacity, (iii) upgrading the suvokavas’ physical infrastructure, (iv) improving tariff policy and accounting systems, (v) strengthening personnel and human resources, (vi) integrating information and communication technologies, (vii) connecting commercial consumers, and (viii) implementing public awareness activities.

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contractors and consultants, and the advance fund procedure was used for project management expenditures. Using the statement of expenditure procedure under the advance fund procedure facilitated disbursements as no supporting documents were required for submission. All disbursements were made for the intended purpose of the loan following ADB’s Loan Disbursement Handbook, and verified and confirmed by the audit reports for each financial year. 21. ADB set up an imprest account with a maximum amount of $100,000. In July 2010, ADB released the initial advance of $100,000 to the PPMU imprest account to finance PPMU and PIU recurrent costs. In December 2018, the executing agency refunded the outstanding advance to ADB, and the loan financially closed on 9 January 2019. Using the imprest account was found to be effective for timely payments of administration expenses and small-value contracts. E. Project Schedule 22. ADB approved the loan on 8 October 2009, and the loan agreement was signed on 1 December 2009. The loan did not become effective until 21 April 2010 because of longer-than-expected internal government procedures for the approval of the project feasibility study.15 ADB expected the project to be physically completed by 30 June 2015, but actual completion was on 31 December 2017. Financial closure of the loan was delayed by about one month from the extended wind-up period of 30 November 2018.16 23. The project encountered initial delays in engaging the PMCs, detailed design consultants, and contractors (paras. 26 and 28). To address these delays, ADB agreed with the executing agency’s proposal to recruit two additional staff for the PPMU for 2 months to assist in preparing procurement and consultant recruitment documents before the start of services of the PMCs.17 The project was able to catch up at a later stage to ensure the execution of project activities was timely completed against the extended closure. F. Implementation Arrangements 24. The project implementation arrangements were appropriate for delivering the project’s envisaged design outputs. The executing agency had overall responsibility for coordinating and implementing projects and for liaising with government agencies, ADB, and other development partners. The PPMU (i) undertook due diligence, procurement, and evaluation; (ii) supervised detailed designs and construction; (iii) oversaw project accounting and auditing; (iv) monitored implementation of the institutional strengthening and capacity development action plan; (v) implemented hygiene and sanitation activities; (vi) checked and guided safeguards compliance; and (vii) prepared progress reports. The project implementation structure is in Appendix 6. G. Technical Assistance 25. ADB project preparatory TA assessed the technical, environmental, financial, economic, social, and institutional feasibility of the project.18 The TA was well detailed and identified the

15 Government of Uzbekistan. 2010. Presidential Resolution No. 1324: On the Measures of Implementation of the

Project “Modernization of IRTM Damkhoja and Bukhara and Navoi District Centers. Reconstruction of Termez City Sewerage System” with the Participation of Asian Development Bank. Tashkent.

16 ADB received the borrower’s letter dated 31 October 2018 requesting the (i) loan reallocation, and (ii) extension of the loan winding-up period. The final payment was made on 23 November 2018, but the loan financially closed on 9 January 2019 due longer time required to complete ADB’s statement of expenditure review of project accounts.

17 ADB concurred with the proposal during the loan review mission conducted on 11–18 October 2012. 18 ADB provided project preparatory TA for Water Supply and Sanitation Services (TA 7240-UZB).

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specific WSS infrastructure needs in project areas. The project design required a high level of stakeholder participation and ownership by the beneficiary communities. It incorporated previous ADB in-country experience and addressed critical and operational challenges and investment gaps. The TA consultants closely collaborated with various project stakeholders. H. Consultant Recruitment and Procurement 26. Project management consultants. Recruitment of the consulting firms followed ADB’s Guidelines on the Use of Consultants (2010, as amended from time to time). The executing agency recruited an international consulting firm for project management using quality- and cost-based selection. The executing agency and the PMCs signed the contract on 12 March 2013, and the consultants were mobilized by the end of April 2013. PMC recruitment was delayed by 28 months because of the (i) lengthy evaluation of proposals, which was required to settle a conflict of interest of the first-ranked firm; and (ii) lengthy government contract registration procedures. The PMCs provided support for preparing feasibility studies, bid documentation, procurement, construction supervision, safeguards, social and community development, and project and financial management. Overall, the performance of the PMCs was satisfactory except for frequent changes of team leaders and the lack of comprehensive progress reporting, which covered mostly physical progress. 27. Of the PMCs’ $2.83 million contract, $1.70 million was to be financed from Project 1. Total actual services consisted of 45.6 person-months of international consultant inputs and 1,050.0 person-months of national consultant inputs for all four tranches of the investment program. At completion, the project financed $1.59 million or 56% of the PMCs’ original contract amount. 28. Detailed design consultant. The original procurement plan included one detailed design consulting package for the Bukhara, Damkhoja, Navoi, and Termez subprojects. Additional scope for the detailed design of the Kokand subproject (tranche 2) was included during the selection process. The design consultant prepared the technical design in line with national standards and the bidding documents for civil works for each subproject. Completion of the design works was constrained because of PMC recruitment delays; some initial design institute capacity issues; and the longer time required by local agencies to collect data on sites, connections, and topography. Nonetheless, the overall efficiency of the design was acceptable and post-design services were timely provided. 29. Civil works. During the early stage of project implementation, ADB emphasized its strategies to improve project implementation and proposed to increase operational efficiency by rationalizing and consolidating civil works contracts. The project had more than 10 initially planned civil works contracts, which the executing agency and ADB found inefficient and had to be consolidated into fewer packages. The executing agency proposed to consolidate (i) two Termez WWTP and sewerage network rehabilitation contracts; (ii) four Damkhoja IRTM reconstruction; and Gijduvan, Vabkent, and Yagibazar WSS rehabilitation contracts; and (iii) two Beshrabat and Kiziltepa WSS rehabilitation contracts. ADB agreed with the revised civil works packages, which proved to be effective and efficient. Despite delays caused by the lengthy detailed design works, six of eight civil works contracts were accomplished within the original loan closing date of 30 June 2015, while the remaining two were completed in December 2015. 30. Procurement of civil works, goods, and related services followed ADB’s Procurement Guidelines (2010, as amended from time to time). All contractors completed construction activities and delivered relevant equipment according to design and technical specifications. Equipment

8

suppliers performed their obligations effectively and timely delivered equipment with O&M training and services. The list of contract packages and procurement procedures is in Appendix 8. I. Gender Equity 31. The project was classified effective gender mainstreaming. ADB incorporated gender and development in the project design within the poverty and social analysis undertaken for all project regions. To enhance the impact and mitigate risks to women and children, the executing agency developed and implemented a GAP to promote equal participation of female and male stakeholders. The GAP aimed to increase women’s representation in all project-related and hygiene-promotion activities under its sanitation and hygiene promotion program. The project team widely discussed GAP indicators and targets with the beneficiaries during the design phase and adequately reflected them in the DMF. The project benefited more than 790,000 residents, about 49% of whom are women, including 26% of households headed by women with an average household size of 4.8 people. A gender assessment carried out during project preparation (i) appraised men’s and women’s capacity to participate in the project, (ii) identified government agencies and community-based organizations that could assist during project preparation and implementation, and (iii) incorporated gender findings in the project design. Overall, the project team completed 9 of 11 GAP activities (81%) and 9 of 11 targets (81%). The preliminary GAP rating is successful. More details are in Appendix 11. J. Safeguards 32. The project was classified category B for the environment at appraisal, and an environmental assessment and review framework was prepared to meet ADB safeguard requirements. The government prepared initial environmental examination (IEE) reports for each subproject. However, the framework and the IEE reports were disclosed on ADB’s website only at a later stage of project implementation. In line with national requirements, the project was classified low risk on environmental impact. All civil works contracts included the environmental management plans (EMPs) with the mitigation measures proposed in the IEE reports. The PCU coordinated the implementation of the EMPs. The PMCs supervised environmental protection activities at all construction sites. The contractor prepared a site-specific EMP with a safety, health, and environment control plan, which was endorsed by the engineer and approved by the PCU. The PCU and the PMCs organized training programs on management, site audits, identification and solving issues, and preparation of environmental monitoring reports (EMRs). Safeguards reporting began to improve in 2012, and the PCU prepared and disclosed seven EMRs on ADB’s website. The final EMR covered a post-construction environmental audit, and the PCU confirmed that environmental measures were implemented to the required standard (Appendix 10). The project was classified category C for indigenous peoples as no ethnic minority or indigenous people lived in the project areas or were affected by the project. The project was classified category B for involuntary resettlement at appraisal. The draft land acquisition and resettlement plan (LARP) was prepared at project preparatory TA stage for one of the subprojects for water supply pipes. There was no new construction or expansion of the facilities under the project, which did not require acquisition of land. Detailed design avoided land acquisition and involuntary resettlement impact on the networks indicated in the draft LARP. There was no impact on any land, households, farms, agriculture and business, entities, and buildings. K. Monitoring and Reporting 33. The project team complied with 26 of the 29 covenants in the loan agreement, including six that were partially complied with at project completion; and 30 of the 37 covenants in the

9

project agreement, including seven that were partially complied with at completion. Appendix 5 shows the status of compliance with loan covenants at completion. The following main covenants achieved partial compliance and require close monitoring and mitigation measures in future WSS projects:

(i) Loan agreement: Schedule 5, collection efficiency and tariffs, para. 10 (b). The project suvokavas have adjusted the tariffs to reflect full O&M, debt servicing, and capital depreciation costs. However, the executing agency did not provide to ADB the results of the reviews and tariff adjustments.

(ii) Loan agreement: Schedule 5, policy and institutional reforms, para. 12 (b). The original design aimed to (a) provide the suvokavas more autonomy, (b) introduce performance-based management practices, and (c) establish modern accrual-based accounting systems. Accrual-based accounting systems were established, but the first two undertakings were not implemented because of the government’s decision to restructure the WSS system with greater centralized management to ensure better service provision, address major problems,19 and introduce key reform actions (para. 16).

(iii) Loan agreement: Schedule 5, maintenance plan, para. 19. The suvokavas developed arrangements for using and sharing equipment, but a comprehensive O&M manual for the project facilities was not developed because the executing agency and the suvokavas lacked capacity. After the executing agency’s latest reorganization under the MHCS, this technical gap is being addressed gradually.

(iv) Loan agreement: Schedule 5, project performance monitoring system, para. 23. Although the PPMU established a project performance and monitoring system (PPMS), it did not maintain regular PPMS updates on project progress. Progress reports were limited to PMC quarterly reports, mostly on physical progress.

(v) Project agreement: Article II, section 2.08 (c). The executing agency did not furnish the completion report within the agreed period. However, the PCU provided necessary data and information as requested by ADB’s project completion report mission.

(vi) Project agreement: Article II, section 2.09 (a). The executing agency furnished unqualified audited project financial statements (APFSs) that ADB found acceptable, but its audited financial statements (AFSs) were found unacceptable. To help the executing agency prepare AFSs in an acceptable form, ADB engaged two local finance and accounting specialists who developed comprehensive guidelines on appropriate accounting for loan funds. However, the executing agency did not provide AFSs to ADB.

34. At midterm and subsequent review missions, ADB identified lapses in the compliance with loan covenants—policy and institutional, PPMU and PMC quarterly progress reports, water tariff review results, maintenance plan, PPMS—and requested the executing agency to take specific time-bound actions to ensure timely compliance. ADB continuously reminded the executing agency that the PPMS should be in place as an important tool that needed regular updates to better monitor actual progress, and identify and undertake preventive actions as needed. 35. The PCU submitted APFSs for 2010–2019, which were free from material misstatements (para. 33 (iv)). The management letters identified insignificant shortcomings and inaccuracies that were rectified by the PCU.

19 Key challenges were (i) incomplete vodokanal management structures, (ii) inadequate capacity of vodokanal staff,

(iii) absence of a fully operational financial management system, and (iv) huge accumulated accounts receivable.

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III. EVALUATION OF PERFORMANCE A. Relevance 36. The project is rated relevant for the consistency of its impact, outcome, and outputs with the government’s development strategy and ADB’s strategic objectives both at formulation and at completion. The project financing modality was appropriate, as its design was indicative for the entire facility. The overall design and formulation were appropriate, as they covered construction and rehabilitation of the whole chain of water supply intake facilities, including transmission, treatment, distribution centers, distribution networks, and metering at bulk supply, as well as at the household end. The DMF indicators were well-formulated and defined. The project supported the government’s Welfare Improvement Strategy, which aimed to improve and sustain the welfare of the population through further development, social sector support, and improvement of public service quality (footnote 1). Overall, the project design was appropriate, as it covered the entire network of water supply facilities through boreholes, transmission mains, and distribution networks, including metered household connections and sanitation through renewed and more extended sewerage networks and treatment. B. Effectiveness 37. The project is rated less than effective in achieving its intended target outcomes. Of the nine outcome indicators, two were partially achieved. Despite significant improvements in water supply infrastructure and the number of beneficiaries served, water is being supplied only for six hours in some Bukhara and Navoi subprojects.20 Because of the suvokavas’ insufficient efforts to install household meters, they are supplying water intermittently to prevent excessive use of water for irrigation. The project contributed to improved operational capacity of the Termez WWTP up to 35,000 m3/day, but only 61% of the city’s wastewater is collected and treated.21 38. Physical outputs were fully achieved as planned. The project slightly exceeded its WSS infrastructure improvement targets by expanding the water trunk mains from 13.2 to 25.6 km and the water distribution networks from 286.0 to 318.1 km. With large physical improvements, the project suvokavas’ water treatment and distribution capacity substantially increased, and system leakage in all the project suvokavas dropped to less than 30%. Water quality has improved significantly and is compliant with national drinking water standards. The project contributed to adequate wastewater treatment and sewage collection for Termez by rehabilitating the WWTP. 39. Nonphysical outputs were partially achieved for reasons explained in para. 14. 40. The likely adverse environmental impacts were managed through site-specific EMPs with safety, health, and environmental plans. Regional representatives of the State Nature Protection Committee conducted regular site-specific ecological inspections during construction to ensure environmental compliance with national environmental legislation. At project completion, local authorities recorded no residual environmental impact, and people living along the project sites neither submitted nor voiced complaints. ADB loan review and project completion missions identified no significant environmental issues. The project enhanced social and gender benefits for schoolchildren, women, local communities, and the project suvokava staff through public

20 For example, the Gijduvan district suvokava only supplies water for 6 hours/day because of frequent breakages

caused by the highly deteriorated water distribution networks constructed in the 1970s. Under the Romitan district suvokava, only one 1,000 m3 water reservoir is functioning while a 2,000 m3 water reservoir is being rehabilitated.

21 Based on suvokava information, household connections are ongoing. Cesspool trucks provided under the project are being used to collect and transport sewage to WWTPs for further treatment.

11

awareness and hygiene-promotion activities. The project introduced a women’s representation quota of 30% in all subproject areas and women actively raised WSS-related concerns and complaints. The PPMU established water consumer groups (48.7% female members) in the makhallas and information consultancy centers in the suvokavas (48% female members) to inform the public on project objectives, social and gender issues, and policies (Appendix 11). C. Efficiency 41. The project is rated efficient. ADB reevaluated its economic internal rates of return (EIRRs) and financial internal rates of return (FIRRs) based on final cost estimates, the financing plan, O&M costs, and tariffs. The reevaluated EIRRs for three sample subprojects ranged from 12.9% to 14.4%, lower than the appraisal estimates given higher costs incurred due to relatively prolonged project implementation period. The overall project EIRR was recalculated at 13.7%,which is lower than the EIRR of 17.3% at appraisal, but higher than the 12% discount rate used at project appraisal, and the current economic opportunity cost of capital of 9%. This confirms that the project is economically viable with anticipated economic benefits greater than the estimated economic costs (Appendix 9). A sensitivity analysis, undertaken to test economic viability, ascertained that the project will remain economically viable under the following scenarios: (i) a 20% increase in capital cost; (ii) a 20% increase in O&M costs; (iii) a 20% decrease in benefits; and (iv) a one-year delay in project benefits. 42. Following the analysis and consultations with the government, the rehabilitation and modernization of the existing Termez WWTP was selected as the most viable technical option. A feasible alternative of least cost evaluation was considered most relevant evaluation option for the Termez WWTP. At project completion, the total cost of rehabilitation and modernization of the Termez WWTP was $11.9 million, indicating that the selected technical option was the least cost, most suitable and viable option. The economic reevaluation results are in Appendix 9. D. Sustainability 43. The project is rated likely sustainable. The recalculated FIRR for all four subprojects ranged from 3.9% to 14.5%. The overall project is 6.7% and is considerably higher than the weighted average cost of capital of 1.26%, suggesting that the project is financially viable (Appendix 9). A sensitivity analysis show that under assumed increase of O&M cost, all four subprojects remain financially viable. However, Galaasiya (0.8%), Karmana (0.6%) and Termez (1.3%) are most sensitive to a 20% reduction in revenues. The revenue base for all suvokavas is expected to improve significantly with government’s strong commitment to increase the tariffs for WSS services with consideration of full cost recovery and future capital investments. The financial reevaluation is in Appendix 9. 44. Constructed in line with required standards and specifications, the project WSS facilities were of good quality, ensuring sufficient capacity to supply safe drinking water to project beneficiaries for the next 20 years. Management and technical personnel training improved the institutional capacity of the suvokavas, but O&M staff capacity needs further strengthening. With the project intervention, the project suvokavas gained improved operational and technical capacity to meet long-term demand for WSS services, resulting in financially sustainable suvokavas through (i) sustained revenue generation by periodic tariff adjustments, (ii) reduced system leakages in water production and distribution systems, (iii) increased tariff collection efficiency using unified billing systems (para. 15), and (iv) reduced electricity costs using energy-efficient technologies.

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45. The government’s strong commitment to improve the WSS situation and its ongoing institutional reform actions ensure that the technical, operational, and financial capabilities of the suvokavas will be further strengthened through the introduction of various modern management and O&M technologies. This is articulated in the National Development Strategy, 2017–2021, which aims to (i) improve utility services; (ii) provide safe and clean drinking water in rural areas through the construction of new water pipelines; and (iii) introduce modern, cost-effective, and efficient technologies.22 In line with the National Development Strategy objectives, the government adopted the Comprehensive Development and Modernization Program of Water Supply and Sanitation Systems for 2017–2021.23 The program sets the major WSS development priorities and the consolidated investment and financing parameters, which will ensure the sustainability of the achieved results and raise the resilience of sector development to potential risks. A detailed WSS sector overview is in Appendix 12. E. Development Impact 46. The development impact of the project was satisfactory. Provision of safe and reliable drinking water to more than 790,000 beneficiaries in the project areas and to those connected to the Damkhoja IRTM has improved. The project WSS infrastructure is operational and continues to provide improved WSS services, which has increased the beneficiaries’ willingness to pay for such services. Health benefits from improved WSS services are maximized as beneficiaries become more knowledgeable about health and hygiene issues. The government reported a major decline in the incidence of infectious diseases in project regions from 2011 to 2016, partly because of the project: cases of bacterial dysentery dropped by 53.6% in Bukhara province and 44.1% in Navoi province, while cases of hepatitis A dropped by 32.2% in Bukhara and 10.5% in Navoi.24 The project has improved the quality of life and health of urban residents in project areas, including those living below the official poverty line,25 by (i) addressing the water shortage and providing safe and reliable piped water; (ii) reducing environmental degradation of river water resources in Termez by improving wastewater collection and treatment; and (iii) protecting public health by reducing the frequency of diarrhea and other preventable waterborne intestinal diseases. 47. All project interventions had direct and indirect positive impacts on the poor. During field visits, the mission team interviewed project beneficiaries and noted that the newly operationalized WSS systems made a significant impact on cost and time savings among the targeted population. Because the installation of household water connections provided access to a safe and reliable water supply, women and children no longer fetch, bring, or buy water from elsewhere. During the interviews, women pointed out that the quality of the water is significantly better than the untreated tapped water they consumed before the project. The interviews helped assess the satisfaction of demand, affordability, gender, and community participation issues in the project cities. In particular, the Khatirchi district suvokava now supplies safe water six hours/day to four rural settlements with nearly 2,000 households, which previously consumed untreated canal water that caused the spread of waterborne diseases among local people.

22 Government of Uzbekistan. 2017. Presidential Decree No. 4947: Strategy of Actions for Further Development of the

Republic of Uzbekistan. Tashkent. 23 Government of Uzbekistan. 2017. Presidential Resolution No. 2910: On Comprehensive Development and

Modernization Program of Water Supply and Sanitation Systems for 2017–2021. Tashkent. The government increased state financing from SUM0.5 trillion in 2018 to SUM1.1 trillion in 2019.

24 Government of Uzbekistan. 2016. Health Statistics. Tashkent. The DMF did not specify the type of waterborne diseases, and no baseline data were provided. Regional indicators are used because of data constraints at city and district levels.

25 Official correspondence with the Ministry of Economy and Industry. As of 2018, 11.4% of the population lived below the national poverty line. Because of limited availability of meta data on poverty, poverty information at the provincial and district levels is not stated.

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F. Performance of the Borrower and the Executing Agency 48. The performance of the borrower and the executing agency is rated satisfactory in general. The Ministry of Finance (MOF) collaborated with the executing agency and ADB on project implementation and its management was available for meetings both during ADB’s loan review missions and the working meetings upon request. The Ministry of Economy, which monitors investment projects financed by international financial institutions, also closely collaborated with the executing agency and ADB. ADB staff attended regular Ministry of Economy meetings for all ADB-financed projects, which proved to be informative, constructive, and efficient in addressing major project implementation issues and producing appropriate solutions. Although the MOF was responsive to the executing agency’s requests, the project suffered considerable delays in obtaining approvals for minor changes in project implementation and reallocation of loan proceeds. 49. The executing agency and the PCU had previously implemented WSS projects financed by ADB and other development partners, and their capability to manage projects financed by international financial institutions was generally effective. However, the executing agency failed to produce quarterly project progress reports using the PPMS approved by ADB, and its financial management supervision was less than satisfactory because of the low capacity of its accounting staff, which resulted in the submission of unacceptable AFS for FY2012–FY2018. G. Performance of the Asian Development Bank 50. The performance of ADB was satisfactory. ADB headquarters initially administered the project in close liaison with the Uzbekistan Resident Mission, and on 1 February 2015, the Urban Development and Water Division of ADB’s Central and West Asia Department delegated administration to the resident mission. ADB supported the executing agency in project implementation by fielding regular review missions and responding to government requests for changes in project implementation and loan funds reallocation to keep the project design relevant and the implementation efficient. The May 2012 midterm review mission captured major project-related issues and provided clear guidance and time-bound action plans to resolve pending procurement, consultant recruitment, institutional and capacity development, progress reporting, project audit, and environment and resettlement monitoring and reporting issues. 51. ADB supported the executing agency’s proposal to consolidate and repackage civil works contracts, which proved to be effective. It also engaged an international technical supervision consultant in 2015 to support local contractors in executing the works to acceptable quality. The consultant produced a final report in Russian and disseminated it to the PPMU and contractors. H. Overall Assessment 52. Overall, the project is rated successful. It was appropriate for the government development strategy and ADB’s country strategy and program, and remained so at completion. The project is less than effective because of partial achievements of the planned outcomes and outputs (paras. 14 and 37). Although the completed project WSS facilities are of good quality, well maintained, and operational, the project did not fully achieve the target indicators (para. 37). The executing agency prepared LARPs, complied with applicable loan covenants, and encountered no serious land acquisition or resettlement issues during implementation. The environmental impact and the immediate social and gender impacts are all positive. The project is rated efficient as the FIRRs and EIRRs reconfirmed its financial and economic viability, with significant benefits through the

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improved water supply and sewerage network, resulting in better health and improved urban environment. Institutional development is likely to be sustainable as the government remains committed to sector improvement and continues to initiate reforms in a phased manner.

Overall Ratings Criteria Rating

Relevance Relevant

Effectiveness Less than effective

Efficiency Efficient

Sustainability Likely sustainable

Overall Assessment Successful

Development impact Satisfactory

Borrower and executing agency Satisfactory

Performance of the Asian Development Bank Satisfactory

Source: Asian Development Bank.

IV. ISSUES, LESSONS, AND RECOMMENDATIONS A. Issues and Lessons 53. The project encountered major implementation issues because of the lengthy government approval for the project feasibility studies and long delays in consultant engagement, contract registration, and civil works procurement. The project has yielded the following important lessons:

(i) The PCU should recruit and skilled staff with strong ownership and commitment to ensure proper and timely delivery of project outcomes.

(ii) The project design should avoid a complex agenda to enable greater manageability and concentration of efforts.

(iii) Adequate monitoring and reporting systems at all levels should be in place to assess the real-time progress of project implementation.

(iv) Major implementation delays could be minimized if project feasibility, consultant recruitment, procurement review, and approval procedures are streamlined.

(v) Policy and institutional reform, tariff structure review and collection efficiency, project performance monitoring system, O&M, and financial management covenants should be efficiently implemented to ensure the suvokavas’ operational and financial sustainability and be properly addressed during project preparation.

(vi) ADB performance could be improved by delegating project management to the resident mission at the early stages of project implementation.

B. Recommendations 54. General and project-specific recommendations include the following:

(i) Strengthening the institutional capacity of the PCU and provide mentoring and training.

(ii) Promotion of good governance and incentives to attract and retain qualified people with necessary skills set.

(iii) Introduction of various ADB products and services (PRF) to increase project readiness.

(iv) Local governments should closely monitor the operations of the project WSS facilities and take immediate action to provide at least 20 hours of water supply in subproject areas, specifically in Gijduvan and Romitan.

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(v) Innovative and practical O&M capacity strengthening should be taken into account at project design and implementation. Knowledge and technical expertise should be shared with the suvokavas through state-of-the-art O&M tools.

(vi) The MHCS, the MOF and the project suvokavas should ensure that tariffs for WSS services strictly follow new tariff regulations to ensure their operational and financial sustainability and the affordability of WSS services for the poor;

(vii) Installation of household meters should be included in a more effective manner to enable the project suvokavas to continuously supply water services.

(viii) The government should remain committed to further upgrading WSS facilities, especially distribution networks, in view of ongoing sector reforms.

(ix) Sanitation and hygiene practices learned during project implementation should be scaled up to include schools in non-project areas.

(x) Job creation targets for women in the sector should be feasible, with a sufficient level of executing agency ownership and responsibility.

55. Future monitoring. Agency “Kommunhizmat” and local governments should closely monitor the completed water supply systems and ensure that they are operating as viable stand-alone commercial operations, delivering safe and reliable piped water supply and sanitation services to consumers. 56. Covenants. A long-term plan should support full compliance of key covenants with partial compliance, particularly policy and institutional reform, tariff structure review, O&M, financial management, and collection efficiency covenants, with immediate steps for the next 5-10 years to reach full cost recovery. 57. Further action or follow-up. The government will remain committed to continuing the implementation of WSS institutional and legal reforms by setting up a platform for adopting international best practices in managing the suvokavas, i.e., (i) human resource management, (ii) extensive modernization of managerial and operating systems, (iii) PPP arrangements, (iv) an effective public accountability system, and (v) a tariff setting methodology that is in line with international best practices. 58. Additional assistance. It is imperative that international development partners remain committed to providing additional financial assistance for strengthening the WSS institutional and legal framework. 59. Timing of the project performance evaluation report. ADB should prepare the project performance evaluation report by the end of 2021. By that time, the project facilities will have been operating for more than 5 years and their use, maintenance, physical condition, benefits provided, and impact on environment and poverty reduction can be properly assessed.

16 Appendix 1

DESIGN AND MONITORING FRAMEWORK

Design Summary Performance

Targets/Indicators Achievements at project completion

Impact Improved living

standards, environment, and public health in urban centers of Uzbekistan

100% of urban population is provided with safe and reliable water supply at least 24 hours a day by 2020

Waterborne infections are reduced by 40% by 2020

Likely to be achieved. As of 2018, project suvokavas are supplying water to 100% of targeted urban population, from six to 20 hours compared to none or unreliable water supply before the project.

Partially achieved. The incidence of

infectious diseases1 in project regions declined from 2011 to 2016: (i) in Bukhara province, bacterial dysentery by 53.6%, and hepatitis A (32.2%); and (ii) in Navoi province, bacterial dysentery by 44.1%, and hepatitis A (10.5%).

Outcome

Safe, reliable, and sustainable water supply and sanitation services in about 11 district centers in Bukhara and Navoi provinces

Water production at

Damkhodja source increases to 210,000 m3/day

Safe, reliable water is provided to 360,000 people by 2015

Water supply is available at

least 20 hours a day by 2015

System leakage is reduced

to less than 30% by 2015

Water quality complies with national drinking water

Achieved. Damkhodja IRTM water production capacity increased to 210,000 m3/day

Achieved. Water is supplied to nearly 797,000 people, including (i) around 108,000 people in Bukhara subprojects and around 278,000 people in Bukhara city;2 (ii) around 93,000 people in Navoi subprojects and 134,000 people in Navoi city;3 and (iii) around 184,000 people in Samarkand province4. Not less than 49% of population benefitted from the project are women5

Partially achieved. Water is available (i) 6-20 hours per day in Bukhara subprojects6 and (ii) 6-24 hours per day in Navoi subprojects7

Achieved. Project suvokavas reported that system leakages reduced to less than 30%8

Achieved.

1 DMF did not specify the type of waterborne diseases and no baseline data was availed. Due to the data constraint

at city and district level, the regional indicators are used. 2 32.5% of total water supply in Bukhara city was from Damkhodja IRTM. 3 45% of total water supply in Navoi City was from Damkhodja IRTM. 4 Damkhodja IRTM also provides water to Pakhtachi and Narpay districts in Samarkand province. 5 State Statistics Committee. Population data for 2015. 6 Galaasiya – 20 hours, Gijduvan – 6 hours, Peshku – 20 hours, Romitan – 6 hours, Vobkent – 20 hours. 7 Kanimekh – 20 hours, Karmana – 24 hours, Khatirchi – 6 hours, Kiziltepa – 6 hours, Navbahor – 10 hours. 8 Bukhara subprojects: Galaasiya – 11%, Gijduvan – 26%, Peshku – 12%, Romitan – 29.8%, Vabkent – 10%. Navoi subprojects: Kanimekh – 10%, Karmana – 25%, Khatirchi – 16%, Kiziltepa – 14%, Navbahor – 22%.

Appendix 1 17



standards from 2015 onward

70% of wastewater in

Termez city is collected and treated by 2015

Suvokavas cover O&M and

depreciation costs for water supply and at least O&M costs for wastewater treatment from 2015 onward

Collection rate of water

supply and sanitation charges increases to 90%

Public satisfaction with the quality of water supply and sanitation increases to 90%

Partially achieved. 61% of total wastewater in Termez city is collected and treated according to national standards.

Achieved. O&M and depreciation costs for

both water supply and wastewater treatment are covered in accordance with MOF’s Guidelines.

Achieved. Tariff collection rates for WSS

services increased to nearly 100% in all subprojects.

Achieved. Project beneficiaries interviewed during PCR mission expressed their full satisfaction with quality of WSS services.

Outputs 1.1 Water supply and sanitation systems rehabilitated and improved

12 reservoirs, 75 boreholes,

7 pumping stations, 0.15 km of trunk mains, and 214 km of distribution networks are rehabilitated

11 reservoirs, 8 boreholes, 3

pumping stations, 13 km of trunk mains, and 72 km of distribution networks are constructed

Water meters are installed to all bulk and consumers in project towns

Wastewater treatment plant in Termez is rehabilitated with a total treatment capacity of 25,000 m3/day

8.9 km of trunk sewer collectors are rehabilitated

1 sewage pump station is rehabilitated, and 3 new pump stations are constructed

Achieved. 12 reservoirs, 75 boreholes, 9

pumping stations, 1.1 km of trunk mains, and 245.02 km of distribution networks were rehabilitated

Achieved. 11 reservoirs, 8 boreholes, 4

pumping stations, 24.45 km of trunk mains, and 73.05 km of distribution networks were constructed

Achieved. Bulk meters installed in Damkhodja IRTM and water distribution centers in all project towns. Consumer meters envisaged under the project installed.

Achieved. Termez city WWTP with a total treatment capacity of 35,000 m3/day rehabilitated

Achieved.

Achieved.

18 Appendix 1



1.2 Management structure and capacity for water supply operation improved

9.1 km of new sewage

collection mains constructed with service connections to serve 6,250 new connections/properties

At least 10 schools are

provided with improve latrine facilities. All schools in project areas are provided with piped water supply

Hygiene promotion activities

are carried out in all schools in the project areas with at least 5 women are trained in each makhalla

Selection of WSS operators on a competitive basis is piloted in at least two subproject towns by 2015

All technical and financial

management trainings are available to WSS operators with equal access by men and women in subproject towns by 2015

A customer care unit is

established by WSS operator in each subproject town by 2015

Sex-disaggregated

consumer databases are developed and all consumers are registered by 2015

Computerized financial

management systems are adopted by 2015

Achieved. 9.3 km of new sewage collection mains constructed. The number of new services connections to be checked.

Partially achieved. 10 separate latrine facilities for girls and boys constructed in subprojects towns. However, lavatories are not adequately connected to piped water supply

Achieved. Hygiene promotion activities carried out for 10,992 students in schools in the project areas. Total of 793 people of which 55.6% were women, attended trainings on efficient use of water, personal hygiene and sanitation promotion which exceedingly surpassed the project target of 380 participants with 30.0% represented by women

Achieved. WSS operators were selected based on selection criteria specified in project documents

Achieved. Training on operations, customer services management, financial management and engineering with equal participation for men and women was conducted

Achieved. Following Cabinet of Ministers Resolution No. 306, customer care units were established in all suvokavas

Achieved. Sex-disaggregated consumer databases developed as part of Automated Billing System (ABS) and installed in all project suvokavas as of December 2017

Achieved. Majority of suvokavas use 1C-Accounting software which is widely used in Uzbekistan. suvokavas have fully adopted 1C-Accounting to their needs and have 24/7 access to technical support by authorized software companies.

Appendix 1 19



1.3 Effective support provided to program development, implementation and management

An O&M manual is developed by each WSS operator and adopted by 2015

Performance benchmarking

systems are developed and adopted by WSS operators by 2015

All tranche 1 subprojects and investment are timely implemented

Partially achieved. Equipment use and sharing arrangements were developed by suvokavas. However, a comprehensive O&M manual for the project facilities was not developed.

Partially achieved. In 2014, the team of national and international consultants was engaged by SECO for the development of performance benchmarking indicators and public services contracts as part of the institutional strengthening component under World Bank’s Syrdarya Water Supply Project.9 In close collaboration with MOF and EA, the consultants developed a preliminary set of 33 performance benchmarking indicators based on local and international best industry practices which were later incorporated into the annual business plans of suvokavas.

Partially achieved. The project was extended for 33 months beyond original loan closing date of 30 June 2015. Six out of eight civil works contracts were completed within the original loan closing date while two were completed in December 2015.

Source: Executing Agency and Project Management Consultants.

9 SECO, on behalf of the Government of Switzerland, approved a grant in the amount of CHF 12 million comprising

technical (CHF 8 million) and institutional strengthening (CHF 4 million) components.

20

Ap

pe

ndix

2

PR

OJE

CT

CO

ST

AT

AP

PR

AIS

AL

AN

D A

CT

UA

L

($'0

00)

Cate

go

ries

A

pp

rais

al

A

ctu

al

To

tal

Co

sts

A

DB

F

inan

cin

g

Go

vern

men

t F

inan

cin

g

To

tal

Co

sts

A

DB

F

inan

cin

g

Go

vern

men

t

Fin

an

cin

g

Part

1:

Wate

r S

up

ply

an

d S

an

itati

on

In

frastr

uctu

re Im

pro

vem

en

t

1.

Civ

il W

ork

s 45.1

34.4

10.7

44.3

34.3

10.0

1

2.

Mechanic

al and E

quip

ment

19.9

16.5

3.4

17.5

16.4

1.1

3.

Land a

nd R

esett

lem

ent

0.7

0.7

-

0.0

0.0

0.0

S

ub

-to

tal

65.7

51.6

14.1

61.8

50.7

11.1

Part

2:

Cap

acit

y D

evelo

pm

en

t an

d In

vestm

en

t P

rog

ram

Man

ag

em

en

t

1.

Consultants

4.3

3.6

0.7

2.6

2.6

0.0

2.

Tra

inin

g

0.1

8

0.2

-

0.0

0.0

0.0

3.

Incre

menta

l Adm

inis

tratio

n

0.9

0.7

0.2

1.3

1.1

0.2

S

ub

-to

tal

5.4

4.5

0.9

3.9

3.7

0.2

Inte

rest

Du

rin

g Im

ple

men

tati

on

3.9

3.9

-

2.3

2.3

0.0

To

tal

75.0

60.0

15.0

68.0

56.7

11.3

So

urc

e:

Lo

an

Fin

an

cia

l In

form

atio

n S

erv

ice

s.

Asia

n D

eve

lop

me

nt

Bank.

A

ud

it P

roje

ct

Fin

ancia

l S

tate

me

nts

.

1

As o

f 3

1 D

ece

mb

er

20

17

.

Appendix 3 21

DISBURSEMENT OF ADB LOAN PROCEEDS

Table 3.1: Annual and Cumulative Disbursement of ADB Loan Proceeds ($ million)

Annual Disbursement Cumulative Disbursement

Year Amount

($ million) % of Total Amount

($ million) % of Total 2010 0.51 0.9 0.51 0.9 2011 4.12 7.3 4.62 8.2 2012 9.82 17.3 14.44 25.5 2013 17.46 30.8 31.90 56.2 2014 15.98 28.2 47.88 84.4 2015 4.16 7.3 52.03 91.7 2016 2.16 3.8 54.20 95.5 2017 1.03 1.8 55.23 97.4 2018 1.50 2.6 56.73 100.0 Total 56.73 100.0

Source: Loan Financial Information Services. Asian Development Bank.

Figure 3.1: Projection and Cumulative Disbursement of ADB Loan Proceeds ($ million)

Projected Disbursement Actual Cumulative Disbursement

Year Amount


($ million) % of Total 2010 - - 0.51 0.9 2011 3.00 5.0 4.62 8.2 2012 15.00 25.0 14.44 25.5 2013 33.00 55.0 31.90 56.2 2014 51.00 85.0 47.88 84.4 2015 57.00 95.0 52.03 91.7 2016 60.00 100.0 54.20 95.5 2017 - - 55.23 97.4 2018 - - 56.73 100.0 Total 60.00 100.0 56.73


22 Appendix 4

CONTRACT AWARDS OF ADB LOAN PROCEEDS

Table 4.1: Annual and Cumulative Contract Awards of ADB Loan Proceeds ($ million)

Annual Contract Awards Cumulative Contract Awards

Year Amount


($ million) % of Total 2010 1.24 2.3 1.24 2.3 2011 14.21 26.1 15.45 28.4 2012 25.16 46.3 40.61 74.7 2013 12.21 22.4 52.82 97.1 2014 0.45 0.8 53.27 97.9 2015 0.45 0.8 53.72 98.7 2016 0.17 0.3 53.89 99.0 2017 0.55 1.0 54.44 100.0 2018 0.00 0.0 Total 54.44 100.0 54.44 100.0


Figure 4.1: Projection and Cumulative Contract Awards of ADB Loan Proceeds ($ million)

Projected Contract Awards Actual Cumulative Contract Awards

Year Amount


($ million) % of Total 2010 6.00 10.0 1.24 2.3 2011 21.00 35.0 15.45 28.4 2012 36.00 60.0 40.61 74.7 2013 51.00 85.0 52.82 97.1 2014 60.00 100.0 53.27 97.9 2015 60.00 100.0 53.72 98.7 2016 53.89 99.0 2017 54.44 100.0 2018 54.44 100.0 Total 60.00 100.0


Ap

pe

ndix

5

23

ST

AT

US

OF

CO

MP

LIA

NC

E W

ITH

LO

AN

CO

VE

NA

NT

S

Pro

du

ct

Sch

ed

ule

P

ara

N

o.

Descri

pti

on

R

em

ark

s/Issu

es

Pro

ject

Man

ag

em

en

t an

d Im

ple

men

tati

on

Loan 2

564

Schedule

5

1

The B

orr

ow

er

shall

desi

gnate

U

CS

A as th

e P

roje

ct

Executing A

gency

with r

esponsib

ility

for

overa

ll P

roje

ct

coord

ination and im

ple

menta

tion and fo

r lia

ison w

ith

AD

B

and

rele

vant

govern

ment

agencie

s.

Each

part

icip

ating

pro

vin

cia

l govern

ment

shall

be

the

imple

menting

agency

for

Pro

ject

act

ivitie

s

in

their

pro

vin

ces.

Co

mp

lied

wit

h.

Loan 2

564

Schedule

5

2

The B

orr

ow

er

shall

cause U

CS

A to

ensure

th

at

the

PP

MU

is

re

sponsib

le

for

managin

g,

executing

and

monitoring P

roje

ct

imple

menta

tion.

The P

PM

U s

hall

be

headed b

y a f

ull-

time p

rogra

m d

irect

or

and c

om

prise o

f te

chnic

al,

financia

l, pro

cure

ment,

socia

l and

environm

ent,

and a

dm

inis

trative u

nits.

Each o

f th

ese

units s

hall

have a

dequate

sta

ff w

ith r

ele

vant

expert

ise.

Such sta

ff shall

inclu

de:

(a)

a W

SS

engin

eer;

(b

) a

financia

l m

anagem

ent

specia

list;

(c)

an a

ccounta

nt; (

d)

a p

rocure

ment specia

list; (

e)

an e

nvironm

ent speci

alis

t;

(f)

a s

ocia

l safe

guard

s s

pecia

list;

(g)

a m

onitoring a

nd

evalu

ation specia

list; (h

) an in

terp

rete

r; (i)

a tr

ain

ing

off

icer;

and

(j)

a

managem

ent

info

rmation

syste

m

specia

list.

U

CS

A

shall

ensure

th

at

the

socia

l and

environm

ent

unit

of

the

PP

MU

is

st

affed

with

th

e

environm

ent

specia

list

and

the

socia

l safe

guard

s specia

list

within

3 m

onth

s o

f th

e E

ffective D

ate

.

Co

mp

lied

wit

h.

Loan 2

564

Schedule

5

3

The P

PM

U s

hall

be r

esp

onsib

le f

or:

(a)

sele

cting a

nd

appra

isin

g

subpro

jects

; (b

) undert

akin

g

feasib

ility

stu

die

s;

(c)

pre

paring

and

subm

ittin

g

PF

Rs;

(d)

superv

isin

g

deta

iled

desig

ns;

(e)

pro

cure

ment;

(f

) directing

const

ruct

ion

superv

isio

n;

(g)

overs

eein

g

Co

mp

lied

wit

h.

24

A

pp

en

dix

5

imple

menta

tion of

the in

stitu

tional

str

ength

enin

g and

capacity d

evelo

pm

ent

action p

lan;

(h)

monito

ring a

nd

evalu

ating t

he im

ple

menta

tion p

rogre

ss a

nd im

pact;

(i)

ensuring c

om

plia

nce w

ith s

afe

guard

s r

equirem

ents

; (j)

coord

inating

am

ong

govern

ment

agencie

s;

and

(k)

consolid

ating

and

pre

paring

periodic

re

port

s.

The

PP

MU

shall

be support

ed by consultants

under

the

PM

F.

Loan 2

564

Schedule

5

4

The B

orr

ow

er

shall

cause

UC

SA

to e

nsure

that

a P

IU

shall

be

est

ablis

hed

by

the

part

icip

ating

pro

vin

cia

l govern

ments

in e

ach o

f th

eir r

espective p

rovin

ces.

The

PIU

s

shall

be

responsib

le

for

day-t

o-d

ay

imple

menta

tion

of

the

Pro

ject

act

ivitie

s

in

their

pro

vin

ces.

Each P

IU shall

be headed by a fu

ll-tim

e

pro

ject

manager

and c

om

prise o

f a t

echnic

al, f

inancia

l,

socia

l and e

nvironm

ent, a

nd a

dm

inis

trative u

nits.

Each

PIU

shall

inclu

de:

(a)

a W

SS

engin

eer

or

a w

ast

ew

ate

r m

anagem

ent

engin

eer;

(b

) a

financia

l m

anagem

ent

specia

list;

(c

) an

accounta

nt;

(d)

an

environm

ent

specia

list;

(e

) a

socia

l safe

guard

s specia

list;

(f)

an

inte

rpre

ter;

and (

g)

an o

ffic

er

manager.

Co

mp

lied

wit

h.

Loan 2

564

Schedule

5

5

The P

IUs

shall

be r

esponsib

le f

or:

(a)

part

icip

atin

g i

n

subpro

jects

pla

nnin

g,

deta

iled

desig

n

and

bid

evalu

ation;

(b)

coord

inatin

g t

he a

ctivitie

s of

consultants

and c

ontr

acto

rs;

(c)

overs

eein

g c

onstr

uct

ion a

ctivi

ties;

(d)

coord

inating r

esett

lem

ent

act

ivitie

s;

(e)

monitoring

the e

nvironm

enta

l, s

ocia

l and g

ender

impact

of

Pro

ject

activitie

s;

(f)

superv

isin

g l

ocal

inst

itutional

refo

rm a

nd

capacity d

evelo

pm

ent

act

ivitie

s;

and (

g)

pre

paring a

nd

consolid

ating

accounts

and

monitoring

report

s

for

subm

issio

n t

o t

he P

PM

U.

The P

IUs s

hall

be s

upport

ed

by c

onsultants

under

the P

MF

.

Co

mp

lied

wit

h.

Ap

pe

ndix

5

25

Pro

gra

m C

oo

rdin

ati

on

Loan 2

564

Schedule

5

6

The

Inte

r-A

gency

Council

shall

be

responsib

le

for

overa

ll polic

y d

irection a

nd g

uid

ance for

the Investm

ent

Pro

gra

m.

Co

mp

lied

wit

h.

Loan 2

564

Schedule

5

7

The Inte

r-A

gency C

ouncil

shall

meet at le

ast on a

sem

i-annual

basis

to r

evie

w i

mple

menta

tion o

f, a

nd d

ecid

e

on a

ll m

ajo

r is

sues

rela

ting to, th

e Investm

ent P

rogra

m.

Specific

ally

, it s

hall:

(a)

pro

vid

e s

trate

gic

guid

ance o

n,

and

overs

ee

the

imple

menta

tion

of,

the

Invest

ment

Pro

gra

m,

inclu

din

g r

ela

ted l

egis

lative,

regula

tory

and

institu

tional

refo

rms;

(b)

facili

tate

the e

ndors

em

ent

of

the s

ubpro

ject

s and P

FR

s;

(c)

appro

ve t

he c

reation o

f posts

in t

he P

PM

U a

nd t

he r

ecru

itment

of

key P

PM

U

sta

ff

(inclu

din

g

the

pro

gra

m

directo

r,

the

financia

l m

anagem

ent

specia

list

and

the

pro

cure

ment

specia

list)

; and (d) ensure

com

plia

nce w

ith e

nvironm

ent

and s

ocia

l safe

guard

s and r

ela

ted r

equirem

ents

.

Co

mp

lied

wit

h.

Su

bp

roje

ct

Sele

cti

on

an

d A

pp

roval

Loan 2

564

Schedule

5

8

The B

orr

ow

er

shall

cause U

CS

A to

ensure

th

at

all

candid

ate

subpro

jects

are

sele

cted and appro

ved in

accord

ance w

ith t

he e

ligib

ility

crite

ria a

nd p

rocedure

s agre

ed b

etw

een t

he B

orr

ow

er

and A

DB

and a

s se

t out

in S

chedule

4 to the F

FA

.

Co

mp

lied

wit

h.

Co

un

terp

art

Fu

nd

s

Loan 2

564

Schedule

5

9

Without

limitin

g t

he g

enera

lity o

f S

ect

ion 6

.06 o

f th

e

Loan R

egula

tions,

the B

orr

ow

er

shall

make

adequate

annual budget

allo

cations f

or,

and h

ave t

hem

rele

ased

in a

tim

ely

manner,

the c

ounte

rpart

funds a

nd o

ther

resourc

es,

in a

dditio

n t

o t

he p

roce

eds o

f th

e L

oan,

for

the s

ucc

essfu

l im

ple

menta

tion o

f th

e P

roje

ct.

Co

mp

lied

wit

h.

26

A

pp

en

dix

5

Co

llecti

on

Eff

icie

ncy a

nd

Tari

ffs

Loan 2

564

Schedule

5

10

The B

orr

ow

er

shall

cause

:

(a)

UC

SA

, th

e

part

icip

ating

pro

vin

cia

l govern

ments

and

rela

ted

vodokanals

to

ta

ke

necess

ary

m

easure

s fo

r im

pro

vin

g c

olle

ction e

ffic

iency t

o a

chie

ve a

colle

ction

rate

of

90%

for

each v

odokanal by s

uch t

arg

et

year

to

be a

gre

ed f

or

the P

roje

ct;

(b)

UC

SA

and t

he p

art

icip

atin

g p

rovin

cia

l govern

ments

to

revie

w s

em

iannually

and a

dju

st a

s n

ecess

ary

the level

and

str

uct

ure

of

wate

r ta

riffs

to

ensure

th

at

by

com

ple

tion o

f physic

al in

vestm

ents

for

the P

roje

ct,

the

vodokanals

shall

have:

(i)

incorp

ora

ted f

ull

O&

M c

osts

in

th

e ta

riffs;

and (ii) se

rvic

ed th

eir debts

, in

clu

din

g

pro

ceeds o

f th

e L

oan o

nle

nt

to t

he v

odokanals

by t

he

pro

vin

cia

l govern

ments

. R

esults

of

the

revie

ws

and

adju

stm

ents

shall

be r

eport

ed b

y U

CS

A t

o A

DB

within

3 m

onth

s o

f each r

evie

w; and

(c)

UC

SA

and t

he p

art

icip

atin

g p

rovin

cia

l govern

ments

to:

(i)

take

appro

priate

m

easure

s,

inclu

din

g

financia

l in

centives a

nd p

enaltie

s, to r

educe

the le

vel o

f paym

ent

arr

ears

fo

r w

ate

r bill

s;

and

(ii)

pro

tect

their

wate

r re

sourc

es

and

facili

ties

thro

ugh

the

vig

oro

us

pro

secution o

f vio

lations s

uch a

s w

ate

r m

ete

r ta

mpering

and w

ate

r th

eft.

Co

mp

lied

wit

h.

Part

iall

y c

om

pli

ed

wit

h.

Tariff

s fo

r W

SS

serv

ices are

re

vis

ed o

n a

sem

iannual b

asis

in

accord

ance

with

MO

F’s

G

uid

elin

es on S

ettin

g T

ariff

s fo

r W

SS

serv

ices

and i

nclu

de

O&

M,

debt

serv

ice a

nd c

apital

depre

cia

tion.

How

ever,

th

e

results

of

the

revie

w

and

adju

stm

ents

were

not re

port

ed

to A

DB

.

Co

mp

lied

wit

h.

Loan 2

564

Schedule

5

11

The B

orr

ow

er

shall

cause U

CS

A to

ensure

th

at

the

costs

of

household

connections f

or

wate

r supply

shall

be inclu

ded u

nder

the P

roje

ct

and t

hat

such c

ost

s shall

be c

harg

ed to these h

ouse

hold

s o

n a

n in

sta

llment basis

over

a 3

-year

period.

Co

mp

lied

wit

h.

Under

Rule

s for

WS

S s

erv

ices

to

consu

mers

, w

ate

r m

ete

rs

are

in

sta

lled

upon

100%

advance

paym

ent

for

wate

r m

ete

rs.

Ap

pe

ndix

5

27

Po

licy a

nd

In

sti

tuti

on

al R

efo

rms

Loan 2

564

Schedule

5

12

The

Borr

ow

er

shall

ensure

th

at

the

polic

ies

and

institu

tional

refo

rms r

equired t

o m

ake t

he v

odokanals

m

ore

auto

nom

ous a

nd e

ffic

ient

are

im

ple

mente

d.

Such

refo

rms

inclu

de:

(a)

regula

r re

vis

ion a

nd a

dju

stm

ent of W

SS

tariff

s to

reflect

actu

al cost

of O

&M

and c

apital depre

cia

tion;

and

(b)

ensuring th

at

US

CA

and

the

part

icip

ating

pro

vincia

l govern

ments

: (i)

revie

w a

nd a

dju

st

the r

esponsib

ilities

of th

e v

odokanals

to p

rovi

de them

with m

ore

auto

nom

y;

(ii) i

ntr

oduce p

erf

orm

ance

-based m

anagem

ent

for

the

vodokanals

; and (

iii)

esta

blis

h m

odern

accr

ual-based

accounting s

yste

m in the v

odokanals

.

Co

mp

lied

wit

h.

Part

iall

y c

om

pli

ed

wit

h.

Thro

ugh C

abin

et

of

Min

iste

rs

Resolu

tion

No.

306,

the

Govern

ment

undert

ook

a

majo

r W

SS

sect

or

refo

rm

whic

h

envis

aged

transf

orm

ation

of

city

, to

wn

and

dis

tric

t vodokanals

in

to

Sta

te

Unitary

E

nte

rprise

“Suvokava”

in e

ach p

rovin

ce.

The fo

llow

ing w

ere

in

stitu

ted

in Q

1 2

016:

(i)

alig

nm

ent

and

inte

gra

tion

of

the

SU

E

str

uct

ure

and its

bra

nches;

(ii)

develo

pm

ent

of

busi

ness

pla

ns;

(iii)

appro

val by M

OF

of

the

first

harm

oniz

ed

and

unifie

d

tariff

rate

s

for

wate

r and w

aste

wate

r serv

ices th

e

pro

vin

ces;

(iv)

sta

ffin

g S

UE

s

with

qualif

ied

pers

onnel

(continuin

g);

(v

) im

ple

menta

tion

of

pra

ctical

measure

s to

im

pro

ve

skill

s

(continuin

g);

and (

vi) c

onduct

of

invento

ries (

opera

tions a

nd

financia

l data

) and

tech

nic

al

28

A

pp

en

dix

5

audits o

f fa

cili

ties a

nd a

ssets

. P

erf

orm

ance-b

ased

managem

ent

is

yet

to

be

imple

mente

d.

En

vir

on

men

t

Loan 2

564

Schedule

5

13

The B

orr

ow

er

shall

cause

UC

SA

to e

nsure

that:

(a)

all

subpro

ject

fa

cili

ties

are

desig

ned,

const

ructe

d,

opera

ted, m

ain

tain

ed a

nd m

onito

red in

com

plia

nce w

ith

applic

able

law

s a

nd r

egula

tions i

n U

zbekis

tan,

AD

B’s

E

nvironm

ent

Polic

y (

2002)

and t

he E

AR

F.

Subpro

jects

encro

achin

g o

n n

ational p

ark

s o

r oth

er

environm

enta

lly

pro

tect

ed a

reas

shall

not be fin

anced u

nder

the P

roje

ct;

how

ever,

subpro

jects

clo

se to e

nvironm

enta

lly s

ensitiv

e

are

as

may

be

inclu

ded

pro

vid

ed

that

UC

SA

has

obta

ined

all

sta

tuto

ry

cle

ara

nces

and

that

the

requirem

ents

set

fort

h in

th

is Loan A

gre

em

ent

have

been a

dhere

d t

o;

(b)

only

cate

gory

B s

ubpro

jects

(based o

n c

ate

gorization

under

AD

B’s

E

nvironm

ent

Polic

y

(2002))

shall

be

financed u

nder

the P

roje

ct;

(c)

for

each s

ubpro

ject

, an IE

E s

hall

be p

repare

d (

incl

udin

g

an E

MP

with a

budget

for

the c

ost

of

imple

menta

tion

and w

ith public

consulta

tion)

in accord

ance w

ith th

e

EA

RF

and such IE

Es shall

be subm

itted fo

r A

DB

's

revie

w a

nd a

ppro

val;

(d)

all

mitig

ation a

nd m

onitoring m

easure

s identified in t

he

IEE

and t

he r

ela

ted E

MP

for

each s

ubpro

ject

shall

be

incorp

ora

ted in t

he d

eta

iled d

esig

n (

such E

MP

shall

be

update

d a

nd m

ade s

ite-s

pecific

as

appro

priate

), c

arr

ied

out

during c

onst

ruct

ion,

opera

tions

and m

ain

tenance,

and b

e d

isclo

sed to s

take

hold

ers

. T

hese m

itig

ating a

nd

Co

mp

lied

wit

h.

Co

mp

lied

wit

h.

Co

mp

lied

wit

h.

Co

mp

lied

wit

h.

Ap

pe

ndix

5

29

monitoring m

easure

s shall

als

o b

e i

ncorp

ora

ted i

n t

he

bid

din

g d

ocum

ents

and c

ivil

work

s c

ontr

act

s;

(e)

if t

here

are

any c

hanges

aft

er

com

ple

tion o

f th

e I

EE

in

specific

lo

cations

or

alig

nm

ents

of

any

subpro

ject

facili

ties,

or

changes

in deta

iled desig

n th

at

has an

environm

enta

l im

pact

pre

vio

usly

unid

entified,

an

additio

nal

environm

enta

l assess

ment

shall

be c

arr

ied

out

in a

ccord

ance w

ith t

he A

DB

’s E

nvironm

ent

Polic

y

(2002)

and the E

AR

F, and a

ppro

ved b

y th

e A

DB

befo

re

furt

her

imple

menta

tion o

f th

at

subpro

ject;

(f)

all

environm

enta

l cle

ara

nces

required

by

applic

able

la

ws a

nd r

egula

tions

in U

zbekis

tan s

hall

be o

bta

ined b

y U

CS

A p

rior

to c

om

mencem

ent

of

civ

il w

ork

s f

or

the

rele

vant

subpro

ject. I

f a s

ubpro

ject

is e

xpect

ed h

ave

advers

e e

nvironm

enta

l im

pact, n

o c

ivil

work

s contr

act

shall

be a

ward

ed for

such

subpro

ject

until t

he B

orr

ow

er

and

AD

B

have

appro

ved

the

environm

enta

l assessm

ent

for

such

subpro

ject

in

accord

ance

w

ith

their r

equirem

ents

; and

(g)

pro

gre

ss

report

s o

n im

ple

menta

tion o

f m

itig

ation a

nd

monitoring m

easure

s fo

r subpro

jects

shall

be

subm

itted to A

DB

on a

sem

i-annual basis

.

Co

mp

lied

wit

h.

Co

mp

lied

wit

h.

Co

mp

lied

wit

h.

Invo

lun

tary

Resett

lem

en

t

Loan 2

564

Schedule

5

14

The B

orr

ow

er

shall

cause U

CS

A t

o e

nsure

that

land

acquis

itio

n

for

the

Gala

siy

a

subpro

ject

shall

be

imple

mente

d

in

accord

ance

with

the

appro

ved

land

acquis

itio

n

and

resett

lem

ent

pla

n

for

the

Gala

siy

a

subpro

ject.

If

during

deta

iled

desig

n

and

imple

menta

tion,

there

are

m

odific

ations

requirin

g

additio

nal

land acquis

itio

n or

changes

in in

volu

nta

ry

resettle

ment

impacts

, th

e

land

acquis

itio

n

and

resettle

ment

pla

n s

hall

be u

pdate

d a

nd s

ubm

itted t

o

Co

mp

lied

wit

h.

30

A

pp

en

dix

5

AD

B

for

appro

val.

If

any

land

acquis

itio

n

and/o

r re

settle

ment

act

ivity a

rise

in a

ny o

ther

subpro

ject

, th

e

Borr

ow

er

shall

cause U

CS

A to e

nsure

that such a

ctivity

shall

be c

arr

ied o

ut

in a

ccord

ance w

ith a

pplic

able

law

s

and

regula

tions

in

Uzb

ekis

tan,

AD

B’s

In

volu

nta

ry

Resett

lem

ent

Polic

y (

1995)

and t

he L

AR

F.

Loan 2

564

Schedule

5

15

No im

pact on e

thnic

min

ority

is e

xpecte

d for

the P

roje

ct.

How

ever,

if

any such im

pact

is id

entified during th

e

pla

nnin

g,

desig

n o

r im

ple

menta

tion o

f a s

ubpro

ject

, th

e

Borr

ow

er shall

cause U

CS

A to e

nsure

that: (a) an e

thnic

m

inority

develo

pm

ent

pla

n i

s p

repare

d;

or

(b)

specific

actions r

ela

ting t

o t

he e

thnic

min

ority

are

inte

gra

ted i

n

the r

esett

lem

ent

pla

n,

in a

ccord

ance w

ith A

DB

's P

olic

y

on I

ndig

enous P

eople

(1998)

and t

he E

MD

F.

Co

mp

lied

wit

h.

Gen

der

an

d L

ab

or

Loan 2

564

Schedule

5

16

The

Borr

ow

er

shall

cause

UC

SA

to

: (a

) pre

pare

a

gender

action p

lan for

the P

roje

ct u

sin

g P

roje

ct-s

pecific

ta

rgets

and i

n a

ccord

ance w

ith t

he g

ender

act

ion p

lan

for

the I

nvestm

ent

Pro

gra

m;

(b)

ensure

that

the g

ender

action p

lan f

or

the P

roje

ct

is i

mple

mente

d i

n a

tim

ely

m

anner

(inclu

din

g ensuring th

at

adequate

re

sourc

es

are

allo

cate

d);

and (

c) m

onitor

imple

menta

tion o

f th

e

gender

act

ion

pla

n

for

the

Pro

ject

and

report

its

pro

gre

ss

in the q

uart

erly r

eport

s s

ubm

itted to A

DB

.

Co

mp

lied

wit

h.

Loan 2

564

Schedule

5

17

The B

orr

ow

er

shall

cause U

CS

A t

o e

nsure

that

civ

il w

ork

s

contr

act

s

under

the

Pro

ject

shall

follo

w

all

applic

able

law

s a

nd r

egula

tions in U

zbekis

tan, and t

hat

civ

il w

ork

s contr

act

ors

: (a

) to

th

e

exte

nt

possib

le,

em

plo

y

wom

en

and

local

people

, in

clu

din

g

dis

advanta

ged

people

, liv

ing

in

the

vic

inity

of

the

rele

vant

subpro

ject

; (b

) pro

vid

e e

qual

pay t

o m

en a

nd

wom

en f

or

work

of

equal ty

pe;

(c)

pro

vid

e s

afe

work

ing

conditio

ns fo

r m

ale

and fe

male

w

ork

ers

; (d

) absta

in

Co

mp

lied

wit

h.

Ap

pe

ndix

5

31

from

child

labor;

and (

e)

carr

y out H

IV/A

IDS

aw

are

ness

pro

gra

ms fo

r la

bore

r and dis

sem

inate

in

form

atio

n at

work

sites

on r

isks o

f sexu

ally

tra

nsm

itted d

iseases a

nd

HIV

/AID

S for

constr

uct

ion w

ork

ers

, as

part

of th

e h

ealth

and

safe

ty

pro

gra

m

at

cam

psites

during

the

constr

uction p

eriod.

Com

plia

nce s

hall

be m

onitore

d b

y U

CS

A d

uring P

roje

ct im

ple

menta

tion a

nd b

reaches b

y

contr

act

ors

can r

esult

in term

ination o

f contr

act

s.

Go

od

Go

vern

an

ce a

nd

An

ti-C

orr

up

tio

n

Loan 2

564

Schedule

5

18

The

Borr

ow

er

and

UC

SA

acknow

ledge

that

AD

B,

consis

tent

with its

com

mitm

ent

to good govern

ance,

accounta

bili

ty,

and t

ransp

are

ncy,

reserv

es t

he r

ight

to

investigate

directly,

or

thro

ugh its

agents

, any

possib

le

corr

upt,

fraudule

nt,

collu

siv

e,

or

coerc

ive

pra

ctices

rela

ting t

o t

he investm

ent

pro

gra

m.

In s

upport

of

these

eff

ort

s and purs

uant

to A

DB

's A

nti-C

orr

uption P

olic

y

(1998,

as

am

ended t

o d

ate

), t

he B

orr

ow

er

shall

cause

UC

SA

to e

nsure

that

(a)

the b

iddin

g d

ocum

ents

for

the

Pro

ject

, and a

ll contr

act

s fi

nanced b

y A

DB

in c

onnection

with P

roje

ct, i

nclu

de p

rovis

ions s

pecifyin

g t

he r

ight

of

AD

B t

o a

udit

and e

xam

ine t

he r

ecord

s and a

ccounts

of

UC

SA

(P

PM

U),

PIU

s a

nd s

ubpro

ject

vodokanals

, and

all

contr

act

ors

, supplie

rs, consultants

, and o

ther

serv

ice

pro

vid

ers

as t

hey

rela

te to t

he I

nvestm

ent

Pro

gra

m;

(b)

periodic

inspections o

f the c

ontr

acto

r’s a

ctivitie

s rela

ting

to f

und w

ithdra

wals

and s

ett

lem

ents

are

carr

ied o

ut

by

the P

PM

U;

and (

c) t

he a

uditors

, appoin

ted b

y U

CS

A,

have th

e right

to conduct

random

or

spot

audits of

contr

act

im

ple

menta

tion a

ctivitie

s u

nder

the P

roje

ct.

All

costs

re

late

d

to

such

investigations

shall

be

born

e

under

the Invest

ment

Pro

gra

m.

Co

mp

lied

wit

h.

32

A

pp

en

dix

5

Main

ten

an

ce P

lan

Loan 2

564

Schedule

5

19

The B

orr

ow

er

shall

cause U

CS

A to

ensure

th

at

for

cra

nes,

excavato

rs a

nd m

ajo

r re

pair e

quip

ment

to b

e

share

d

by

the

vodokanals

w

ithin

a

part

icip

ating

pro

vin

ce,

the p

art

icip

ating p

rovin

cia

l govern

ment

shall

pre

pare

, in

consultation

with

the

vodokanals

, a

main

tenance p

lan f

or

these m

achin

ery

and e

quip

ment,

inclu

din

g

the

sta

ndard

s,

pro

cedure

s and

oth

er

arr

angem

ents

for

their m

ain

tenance a

nd u

sage.

UC

SA

shall

send t

he d

raft m

ain

tenance p

lan t

o A

DB

by t

he

date

to b

e a

gre

ed f

or

the P

roje

ct.

Part

iall

y

co

mp

lied

w

ith

. M

achin

ery

and e

quip

ment

for

larg

e r

epair w

ere

pro

cure

d f

or

each

Suvokava.

Suvokavas

have

equip

ment

usage

and

sharing am

ong th

e bra

nches

put

in pla

ce.

Com

pre

hensiv

e

O&

M m

anual fo

r fa

cili

ties w

as

not

pre

pare

d.

Hyg

ien

e C

on

su

ltati

on

an

d P

rom

oti

on

Loan 2

564

Schedule

5

20

The B

orr

ow

er

shall

cause U

CS

A to

ensure

th

at

the

imple

menta

tion

arr

angem

ents

and

pla

ns

for

the

hygie

ne pro

motion activi

ties to

be carr

ied out

in all

schools

in t

he P

roje

ct

are

as a

re p

repare

d,

and t

hat

the

hygie

ne baselin

e surv

eys and fo

llow

-up surv

eys

are

carr

ied o

ut

accord

ing t

o t

he t

arg

et

years

to b

e a

gre

ed

for

the P

roje

ct.

Co

mp

lied

wit

h.

Loan 2

564

Schedule

5

21

The

Borr

ow

er

shall

cause

UC

SA

to

ensure

im

ple

menta

tion

of

the

consultation

and

part

icip

ation

pla

n of

the In

vest

ment

Pro

gra

m in

th

e P

roje

ct.

The

consultative

pro

cess

shall

involv

e

household

s,

institu

tions s

uch

as s

chools

, clin

ics a

nd b

usin

esse

s, th

e

vodokanals

and o

ther

stakehold

ers

fro

m g

overn

ment

agencie

s a

nd t

he p

rivate

secto

r. U

CS

A s

hall

engage

NG

Os

where

appro

priate

to

im

ple

ment

the

hyg

iene

pro

gra

m.

Co

mp

lied

wit

h.

Info

rmati

on

Dis

sem

inati

on

Loan 2

564

Schedule

5

22

The B

orr

ow

er shall

cause U

CS

A to m

ain

tain

and u

pdate

in

U

CS

A's

w

ebsite in

form

ation on th

e P

roje

ct.

Such

info

rmation

shall

inclu

de

the

subpro

ject

sele

ction

Part

iall

y c

om

pli

ed

wit

h.

Although

UC

SA

ra

n

the

website,

it d

id n

ot

conta

in a

ll

Ap

pe

ndix

5

33

crite

ria and appro

val

pro

cedure

s,

wate

r ta

riff re

vie

w

pro

cedure

s, r

esults

of annual r

evie

ws

and a

dju

stm

ents

, colle

ction

eff

icie

ncy,

deta

ils

on

the

adopte

d

bid

din

g

pro

cedure

s, a

mounts

of

the c

ontr

act

s aw

ard

ed a

nd a

lis

t of goods a

nd s

erv

ices

purc

hased (and their in

tended

and a

ctu

al utiliz

ation).

the

deta

ils

on

subpro

ject

sele

ction c

rite

ria a

nd a

ppro

val

pro

cedure

s, w

ate

r ta

riff r

evie

w

pro

cedure

s, r

esults

of

annual

revie

ws

and

adju

stm

ents

, colle

ction e

ffic

iency, deta

ils o

n

the

adopte

d

bid

din

g

pro

cedure

s,

am

ounts

of

the

contr

act

s aw

ard

ed a

nd a

list of

goods

and

serv

ices

purc

hased (

and t

heir inte

nded

and a

ctu

al utiliz

ation).

Pro

ject

Perf

orm

an

ce M

on

ito

rin

g S

yste

m

Loan 2

564

Schedule

5

23

The

Borr

ow

er

shall

cause

UC

SA

to

ensure

th

at

imple

menta

tion o

f th

e P

roje

ct, o

pera

tion o

f th

e P

roje

ct

facili

ties a

nd t

he b

enefits

derived f

rom

the P

roje

ct

are

m

onitore

d a

nd e

valu

ate

d a

nnually

by t

he P

PM

U.

This

in

clu

des e

sta

blis

hin

g a

PP

MS

within

6 m

onth

s of

the

Eff

ect

ive D

ate

and p

rovid

ing r

esults for

incorp

ora

tion in

the P

roje

ct p

rogre

ss a

nd c

om

ple

tion r

eport

s.

Part

iall

y c

om

pli

ed

wit

h.

AD

B

help

ed

the

PP

MU

to

esta

blis

h a P

PM

S.

How

ever,

P

PM

U

did

not

update

th

e

PP

MS

w

ith

rele

vant

info

rmation

and

data

on

pro

ject

pro

gre

ss

regula

rly.

The

pro

gre

ss

report

s w

ere

lim

ited

to

PM

C

quart

erly

report

s w

hic

h w

ere

most

ly o

n

physic

al pro

gre

ss.

Pro

ject

Revie

ws

Loan 2

564

Schedule

24

The B

orr

ow

er

shall

cause U

CS

A to

subm

it to

A

DB

quart

erly P

roje

ct p

rogre

ss r

eport

s. F

ollo

win

g r

evie

w o

f such r

eport

s,

AD

B s

hall

carr

y out

revie

w m

issio

ns t

o

dis

cuss w

ith t

he B

orr

ow

er

and U

CS

A p

rogre

ss

of

the

Pro

ject

, in

clu

din

g a

ny c

hanges i

n t

he i

mple

menta

tion

arr

angem

ents

, or

rem

edia

l m

easure

s t

hat

are

needed,

to

achie

ve

Pro

ject

obje

ctives.

Rele

vant

PIU

s shall

part

icip

ate

in t

he r

evie

w m

issio

ns.

Part

iall

y c

om

pli

ed

wit

h.

The

pro

gre

ss

report

s w

ere

lim

ited

to

PM

C

quart

erly

report

s w

hic

h w

ere

most

ly o

n

physic

al pro

gre

ss.

34

A

pp

en

dix

5

Loan 2

564

Schedule

5

25

The B

orr

ow

er,

UC

SA

and A

DB

shall

carr

y o

ut a m

idte

rm

revie

w

for

the

Pro

ject.

Such

mid

term

re

vie

w

shall

evalu

ate

th

e

Pro

ject

activitie

s,

imple

menta

tion

arr

angem

ents

, environm

ent

and

socia

l safe

guard

is

sues,

achie

vem

ent

of

schedule

d

targ

ets

, contr

act

m

anagem

ent

and s

uch o

ther

issues a

s appro

priate

.

Co

mp

lied

wit

h.

Part

icu

lar

Co

ven

an

ts (

Lo

an

Ag

reem

en

t)

Loan 2

564

Art

icle

IV

S

ection

4.0

1

In t

he c

arr

yin

g o

ut

of

the P

roje

ct a

nd o

pera

tion o

f th

e

Pro

ject

facili

ties,

the B

orr

ow

er

shall

perf

orm

, or

cause

to b

e p

erf

orm

ed,

all

oblig

ations s

et

fort

h in S

chedule

5

to this

Loan A

gre

em

ent.

Co

mp

lied

wit

h.

Loan 2

564

Art

icle

IV

S

ection

4.0

2

The B

orr

ow

er

shall

enable

A

DB

’s re

pre

senta

tive

s to

in

spect

the P

roje

ct,

the G

oods a

nd W

ork

s finance

d o

ut

of

the p

roceeds o

f th

e L

oan a

nd a

ny r

ele

vant

record

s and d

ocum

ents

.

Co

mp

lied

wit

h.

Loan 2

564

Art

icle

IV

S

ection

4.0

3

The B

orr

ow

er

shall

take a

ll action n

ecessary

on its

part

to

enable

UC

SA

to p

erf

orm

its

oblig

ations u

nder

the

Pro

ject

A

gre

em

ent,

inclu

din

g

the

est

ablis

hm

ent

and

main

tenance o

f ta

riffs

as

stipula

ted i

n p

ara

gra

ph 1

0 o

f S

chedule

5 t

o t

his

Loan A

gre

em

ent,

and s

hall

not

take

or

perm

it any

action w

hic

h w

ould

in

terf

ere

w

ith th

e

perf

orm

ance o

f such o

blig

ations.

Co

mp

lied

wit

h.

Loan 2

564

Art

icle

IV

S

ection

4.0

4

(a)

The

Borr

ow

er

shall

exerc

ise

its

rights

under

the

Subsid

iary

Loan A

gre

em

ent

in s

uch a

manner

as t

o

pro

tect

the i

nte

rest

s of

the B

orr

ow

er

and A

DB

and t

o

accom

plis

h the p

urp

oses

of th

e L

oan.

(b)

No

rights

or

oblig

ations

under

the

Subsid

iary

Loan

Agre

em

ent

shall

be

ass

igned,

am

ended

or

waiv

ed

without th

e p

rior

concurr

ence o

f A

DB

.

Co

mp

lied

wit

h.

Co

mp

lied

wit

h.

Ap

pe

ndix

5

35

Part

icu

lar

Co

ven

an

ts (

Pro

ject

Ag

reem

en

t)

Loan 2

564

Art

icle

II

Section

2.0

1

(a)

UC

SA

shall

carr

y out th

e P

roje

ct w

ith d

ue d

iligence a

nd

eff

icie

ncy,

and in c

onfo

rmity

with s

ound a

dm

inis

trative,

financia

l,

engin

eering,

environm

enta

l and

socia

l safe

guard

s pra

ctices.

(b)

In t

he c

arr

yin

g o

ut

of

the P

roje

ct

and o

pera

tion o

f th

e

Pro

ject

facili

ties,

UC

SA

shall

perf

orm

all

oblig

ations s

et

fort

h in the S

chedule

to this

Pro

ject

Agre

em

ent.

Co

mp

lied

wit

h.

Co

mp

lied

wit

h.

Loan 2

564

Art

icle

II

Section

2.0

2

UC

SA

shall

make a

vaila

ble

, pro

mptly a

s needed,

the

funds,

facili

ties,

serv

ices,

equip

ment,

la

nd and oth

er

resourc

es

whic

h

are

re

quired,

in

additio

n

to

the

pro

ceeds o

f th

e L

oan, fo

r th

e c

arr

yin

g o

ut th

e P

roje

ct.

Co

mp

lied

wit

h.

Loan 2

564

Art

icle

II

Section

2.0

3

(a)

In t

he c

arr

yin

g o

ut

of

the P

roje

ct, U

CS

A s

hall

em

plo

y com

pete

nt

and q

ualif

ied c

onsultants

and c

ontr

acto

rs,

accepta

ble

to A

DB

, to

an e

xte

nt

and u

pon t

erm

s a

nd

conditio

ns s

atisf

acto

ry t

o A

DB

.

(b

) E

xcept as A

DB

may o

therw

ise a

gre

e, all

Goods, W

ork

s and

consultin

g

serv

ices

to

be

financed

out

of

the

pro

ceeds o

f th

e L

oan s

hall

be p

rocure

d in a

ccord

ance

with

the

pro

vis

ions

of

Schedule

4

to

the

Loan

Agre

em

ent.

AD

B

may

refu

se

to

finance

a

contr

act

w

here

Goods,

Work

s or

consultin

g s

erv

ices

have

not

been

pro

cure

d

under

pro

cedure

s

subst

antia

lly

in

accord

ance w

ith t

hose a

gre

ed b

etw

een t

he B

orr

ow

er

and A

DB

or

where

th

e te

rms and conditio

ns of

the

contr

act

are

not satisf

acto

ry to A

DB

.

Co

mp

lied

wit

h.

Co

mp

lied

wit

h.

Loan 2

564

Art

icle

II

Section

2.0

4

UC

SA

shall

carr

y o

ut

the P

roje

ct

in a

ccord

ance w

ith

pla

ns, desig

n s

tandard

s, s

pecific

ations, w

ork

schedule

s

and c

onstr

uction m

eth

ods a

ccepta

ble

to A

DB

. U

CS

A

shall

furn

ish, or

cause to b

e furn

ished, to

AD

B, pro

mptly

Co

mp

lied

wit

h.

36

A

pp

en

dix

5

aft

er

their p

repara

tion,

such p

lans,

desig

n s

tandard

s,

specific

ations a

nd w

ork

schedule

s, and any

mate

rial

modific

ations

subsequently m

ade there

in, in

such d

eta

il as A

DB

shall

reasonably

request

.

Loan 2

564

Art

icle

II

Section

2.0

5

(a)

UC

SA

shall

take out

and m

ain

tain

w

ith re

sponsib

le

insure

rs,

or

make o

ther

arr

angem

ents

satisfa

ctory

to

AD

B for,

insura

nce o

f the P

roje

ct fa

cili

ties to s

uch e

xte

nt

and a

gain

st such r

isks

and in

such a

mounts

as

shall

be

consis

tent w

ith s

ound p

ractice.

(b

) W

ithout

limitin

g t

he g

enera

lity o

f th

e f

ore

goin

g U

CS

A

undert

akes

to in

sure

, or

cause to b

e in

sure

d, th

e G

oods

to b

e im

port

ed f

or

the P

roje

ct

and t

o b

e f

inanced o

ut

of

the p

roceeds

of t

he L

oan a

gain

st hazard

s in

cid

ent t

o the

acquis

itio

n,

transport

ation a

nd d

eliv

ery

there

of

to t

he

pla

ce o

f use o

r in

sta

llatio

n, and for

such in

sura

nce a

ny

indem

nity

shall

be p

ayable

in a

curr

ency

freely

usable

to

repla

ce o

r re

pair s

uch G

oods.

Co

mp

lied

wit

h.

Co

mp

lied

wit

h.

Loan 2

564

Art

icle

II

Section

2.0

6

UC

SA

shall

main

tain

, or

cause

to

be

main

tain

ed,

record

s and a

cco

unts

adequate

to i

dentify

the G

oods,

Work

s,

consultin

g

serv

ices

and

oth

er

item

s

of

expenditure

fin

anced o

ut

of

the p

roceeds

of

the L

oan,

to d

isclo

se t

he u

se t

here

of

in t

he P

roje

ct,

to r

ecord

the

pro

gre

ss

of

the P

roje

ct (

inclu

din

g t

he c

ost

there

of)

and

to r

eflect, i

n a

ccord

ance w

ith c

onsis

tently m

ain

tain

ed

sound a

ccounting p

rincip

les, its

opera

tions a

nd fi

nancia

l conditio

n.

Co

mp

lied

wit

h.

Loan 2

564

Art

icle

II

Section

2.0

7

(a)

AD

B a

nd U

CS

A s

hall

coopera

te f

ully

to e

nsure

that

the

purp

oses o

f th

e L

oan w

ill b

e a

ccom

plis

hed.

(b

) U

CS

A s

hall

pro

mptly in

form

AD

B o

f any

conditio

n w

hic

h

inte

rfere

s

with,

or

thre

ate

ns

to

inte

rfere

w

ith,

the

pro

gre

ss

of

the

Pro

ject,

the

perf

orm

ance

of

its

Co

mp

lied

wit

h.

Co

mp

lied

wit

h.

Ap

pe

ndix

5

37

oblig

ations

under

this

P

roje

ct

Agre

em

ent,

or

the

accom

plis

hm

ent

of th

e p

urp

oses o

f th

e L

oan.

(c

) A

DB

and U

CS

A s

hall

from

tim

e t

o t

ime,

at

the r

equest

of

eith

er

part

y,

exc

hange

vie

ws

thro

ugh

their

repre

senta

tives

with r

egard

to a

ny

matters

rela

ting t

o

the P

roje

ct, U

CS

A a

nd the L

oan.

Co

mp

lied

wit

h.

Loan 2

564

Art

icle

II

Section

2.0

8

(a)

UC

SA

shall

furn

ish

to

AD

B

all

such

report

s and

info

rmation

as

AD

B

shall

reasonably

re

quest

concern

ing:

(i)

the Loan and th

e expenditure

of

the

pro

ceeds

there

of;

(ii)

the

Goods,

W

ork

s,

consultin

g

serv

ices a

nd o

ther

3 ite

ms o

f expenditure

fin

ance

d o

ut

of

such

pro

ceeds;

(iii)

th

e

Pro

ject

; (iv)

the

adm

inis

tration,

opera

tions

and

financia

l conditio

n

of

UC

SA

; and

(v)

any

oth

er

matters

re

lating

to

the

purp

oses o

f th

e L

oan.

(b

) W

ithout

limitin

g t

he g

enera

lity o

f th

e f

ore

goin

g U

CS

A

shall

furn

ish t

o A

DB

quart

erly

report

s on t

he e

xecution

of th

e P

roje

ct and o

n the o

pera

tion a

nd m

anagem

ent of

the P

roje

ct f

acili

ties.

Such

report

s shall

be s

ubm

itted in

such f

orm

and i

n s

uch d

eta

il and w

ithin

such a

period

as A

DB

shall

reasonably

request

, and s

hall

indic

ate

, am

ong

oth

er

thin

gs,

pro

gre

ss

made

and

pro

ble

ms

encounte

red during th

e quart

er

under

revie

w,

ste

ps

taken

or

pro

posed

to

be

taken

to

rem

edy

these

pro

ble

ms,

and

pro

posed

pro

gra

m

of

act

ivitie

s

and

expecte

d p

rogre

ss d

uring t

he f

ollo

win

g q

uart

er.

(c)

Pro

mptly a

fter

physic

al c

om

ple

tion o

f th

e P

roje

ct, but in

any e

vent

not

late

r th

an 3

month

s th

ere

after

or

such

late

r date

as

AD

B m

ay a

gre

e f

or

this

purp

ose,

UC

SA

shall

pre

pare

and f

urn

ish t

o A

DB

a r

eport

, in

such f

orm

and in s

uch d

eta

il as

AD

B s

hall

reasonably

request, o

n

the

execution

and

initia

l opera

tion

of

the

Pro

ject,

Co

mp

lied

wit

h.

Part

iall

y c

om

pli

ed

wit

h.

Part

iall

y c

om

pli

ed

wit

h.

The

EA

did

not

furn

ish

govern

ment

PC

R

as

requeste

d. H

ow

ever,

it a

vaile

d

all

necessary

info

rmation a

nd

38

A

pp

en

dix

5

inclu

din

g

its

cost,

the

perf

orm

ance

by

UC

SA

of

its

oblig

ations

under

this

P

roje

ct

Agre

em

ent

and

the

accom

plis

hm

ent

of th

e p

urp

oses o

f th

e L

oan.

data

to p

roje

ct te

am

to p

repare

th

e P

CR

.

Loan 2

564

Art

icle

II

Section

2.0

9

(a)

UC

SA

shall

(i)

main

tain

separa

te

acc

ounts

fo

r th

e

Pro

ject

and fo

r its overa

ll opera

tions;

(ii) have such

accounts

and

rela

ted

financia

l sta

tem

ents

(b

ala

nce

sheet, s

tate

ment

of

incom

e a

nd e

xpenses,

and r

ela

ted

sta

tem

ents

) audite

d

annually

, in

accord

ance

with

appro

priate

auditi

ng s

tandard

s c

onsis

tently a

pplie

d,

by

independent

auditors

whose q

ualif

ications,

experience

and t

erm

s o

f re

fere

nce a

re a

ccepta

ble

to A

DB

; and (

iii)

furn

ish t

o A

DB

, pro

mptly

aft

er

their p

repara

tion b

ut

in

any e

vent

not

late

r th

an 6

month

s a

fter

the c

lose o

f th

e

fiscal year

to w

hic

h t

hey

rela

te,

cert

ifie

d c

opie

s o

f such

audited

accounts

and

financia

l sta

tem

ents

and

the

report

of

the audito

rs re

lating th

ere

to (inclu

din

g th

e

auditors

' opin

ion o

n t

he u

se o

f th

e L

oan p

roceeds a

nd

com

plia

nce w

ith t

he f

inancia

l covenants

of

the L

oan

Agre

em

ent

as w

ell

as

on t

he u

se o

f th

e p

rocedure

s f

or

the im

pre

st account and s

tate

ment of expenditure

s),

all

in t

he E

nglis

h l

anguage.

UC

SA

shall

furn

ish t

o A

DB

such f

urt

her

info

rmation c

oncern

ing s

uch a

ccounts

and

financia

l sta

tem

ents

and the a

udit there

of

as A

DB

shall

from

tim

e t

o t

ime r

easonably

request

.

(b)

UC

SA

shall

enable

A

DB

, upon

AD

B's

re

quest,

to

dis

cuss U

CS

A's

fin

ancia

l sta

tem

ents

and i

ts f

inancia

l aff

airs

from

tim

e t

o t

ime w

ith t

he a

uditors

appoin

ted b

y U

CS

A p

urs

uant

to S

ect

ion 2

.09 (

a)

above,

and s

hall

auth

orize

and

require

any

repre

senta

tive

of

such

auditors

to

part

icip

ate

in

any

such

dis

cuss

ions

requeste

d b

y A

DB

, pro

vid

ed t

hat

any s

uch d

iscussio

n

shall

be

conducte

d

only

in

th

e

pre

sence

of

an

auth

orized

offic

er

of

UC

SA

unle

ss

UC

SA

shall

oth

erw

ise a

gre

e.

Part

iall

y

co

mp

lied

w

ith

. U

nqualif

ied

AP

FS

s

were

subm

itted

to

AD

B.

UC

SA

’s

AF

Ss

were

fo

und

unaccepta

ble

by

AD

B.

Co

mp

lied

wit

h.

AD

B

engaged

two

local

finance

and

accounting

specia

lists

w

ho

develo

ped

com

pre

hensiv

e g

uid

elin

es o

n

main

tain

ing

appro

priate

accounting for

loan f

unds.

Ap

pe

ndix

5

39

Loan 2

564

Art

icle

II

Section

2.1

0

UC

SA

shall

enable

AD

B's

repre

senta

tives

to in

spect th

e

Pro

ject

, th

e

Goods

and

Work

s financed

out

of

the

pro

ceeds

of

the Loan and any

rele

vant

record

s and

docum

ents

.

Co

mp

lied

wit

h.

Loan 2

564

Art

icle

II

Section

2.1

1

(a)

UC

SA

shall,

pro

mptly a

s r

equired, ta

ke a

ll action w

ithin

its p

ow

ers

to m

ain

tain

its

corp

ora

te e

xis

tence,

to c

arr

y on i

ts o

pera

tions,

and t

o a

cquire,

main

tain

and r

enew

all

rights

, pro

pert

ies,

pow

ers

, privile

ges a

nd f

ranchis

es

whic

h a

re n

ecessa

ry in

the c

arr

yin

g o

ut of th

e P

roje

ct or

in t

he c

onduct of its

busin

ess.

(b

) U

CS

A

shall

at

all

tim

es

conduct

its

busin

ess

in

accord

ance

with

sound

adm

inis

trative,

financia

l,

environm

enta

l and

socia

l safe

guard

s

pra

ctic

es,

and

under

the s

uperv

isio

n o

f com

pete

nt

and e

xperienced

managem

ent

and p

ers

onnel.

(c

) U

CS

A s

hall

at all

tim

es

opera

te a

nd m

ain

tain

its

pla

nts

, equip

ment

and o

ther

pro

pert

y, a

nd f

rom

tim

e t

o t

ime,

pro

mptly a

s needed,

make a

ll necessary

repairs a

nd

renew

als

th

ere

of,

all

in

accord

ance

with

sound

adm

inis

trative,

financia

l, engin

eering,

environm

enta

l, socia

l safe

guard

s,

and m

ain

tenance and opera

tional

pra

ctices.

Co

mp

lied

wit

h.

Co

mp

lied

wit

h.

Co

mp

lied

wit

h.

Loan 2

564

Art

icle

II

Section

2.1

2

Except

as A

DB

may

oth

erw

ise a

gre

e,

UC

SA

shall

not

sell,

lease o

r oth

erw

ise d

ispose o

f any o

f its a

ssets

w

hic

h s

hall

be r

equired for

the e

ffic

ient carr

yin

g o

n o

f its

opera

tions

or

the d

isposa

l of

whic

h m

ay

pre

judic

e i

ts

abili

ty to

perf

orm

satisfa

cto

rily

any of

its oblig

ations

under

this

Pro

ject

Agre

em

ent.

Co

mp

lied

wit

h.

Loan 2

564

Art

icle

II

Section

2.1

3

Except as

AD

B m

ay o

therw

ise a

gre

e, U

CS

A s

hall

apply

th

e

pro

ceeds

of

the

Loan

to

the

financin

g

of

Co

mp

lied

wit

h.

40

A

pp

en

dix

5

expenditure

s on

the

Pro

ject

in

accord

ance

with

th

e

pro

vis

ions

of

the

Loan

Agre

em

ent

and

this

P

roje

ct

Agre

em

ent, a

nd s

hall

ensure

that all

Goods, W

ork

s a

nd

Consultin

g S

erv

ices f

inanced o

ut

of

such p

roceeds a

re

used e

xclu

siv

ely

in the c

arr

yin

g o

ut

of th

e P

roje

ct.

Loan 2

564

Art

icle

II

Section

2.1

4

Except

as A

DB

may o

therw

ise a

gre

e,

UC

SA

shall

duly

perf

orm

all

its o

blig

ations u

nder

the S

ubsid

iary

Loan

Agre

em

ent, a

nd s

hall

not

take,

or

concur

in,

any

action

whic

h w

ould

have t

he e

ffect

of

assig

nin

g,

am

endin

g,

abro

gating o

r w

aiv

ing a

ny r

ights

or

oblig

ations o

f th

e

part

ies u

nder

the S

ubsid

iary

Loan A

gre

em

ent.

Co

mp

lied

wit

h.

Loan 2

564

Art

icle

II

Section

2.1

5

UC

SA

shall

pro

mptly notify

A

DB

of

any

pro

posal

to

am

end,

suspend o

r re

peal

any p

rovis

ion o

f its c

hart

er

and

shall

aff

ord

A

DB

an

adequate

opport

unity

to

com

ment

on s

uch p

roposal

prior

to t

akin

g a

ny a

ction

there

on.

Co

mp

lied

wit

h.

Sch

ed

ule

to

Pro

ject

Ag

reem

en

t

Pro

ject

Man

ag

em

en

t an

d Im

ple

men

tati

on

Loan 2

564

P

ara

1

UC

SA

as

the

Pro

ject

Executing

Agency

shall

be

responsib

le

for

overa

ll P

roje

ct

coord

ination

and

imple

menta

tion a

nd f

or

liais

on w

ith A

DB

and r

ele

vant

govern

ment

agencie

s.

Co

mp

lied

wit

h.

Loan 2

564

P

ara

2

UC

SA

shall

ensure

that th

e P

PM

U s

hall

be r

esponsib

le

for

managin

g,

executin

g

and

monitoring

Pro

ject

im

ple

menta

tion.

The P

PM

U s

hall

be h

eaded b

y a

full-

tim

e

pro

gra

m

direct

or

and

com

prise

of

tech

nic

al,

financia

l,

pro

cure

ment,

socia

l and

environm

ent,

and

adm

inis

trative

units

. E

ach

of

these

units

shall

have

adequate

sta

ff w

ith r

ele

vant

expert

ise.

Such s

taff s

hall

inclu

de:

(a)

a

WS

S

engin

eer;

(b

) a

financia

l m

anagem

ent

specia

list;

(c)

an

accounta

nt;

(d

) a

pro

cure

ment

specia

list; (

e)

an e

nvironm

ent

specia

list;

Co

mp

lied

wit

h.

Ap

pe

ndix

5

41

(f)

a s

ocia

l safe

guard

s s

pecia

list;

(g)

a m

onitoring a

nd

evalu

ation specia

list; (h

) an in

terp

rete

r; (i)

a tr

ain

ing

off

icer;

and

(j)

a

managem

ent

info

rmation

syste

m

specia

lists

. U

CS

A

shall

ensure

th

at

the

socia

l and

environm

ent

unit

of

the

PP

MU

is

st

affed

with

th

e

environm

ent

specia

list

and

the

socia

l safe

guard

s specia

list

within

3 m

onth

s o

f th

e E

ffective D

ate

.

Loan 2

564

P

ara

3

The P

PM

U s

hall

be r

esp

onsib

le f

or:

(a)

sele

cting a

nd

appra

isin

g

subpro

jects

; (b

) undert

akin

g

feasib

ility

stu

die

s;

(c)

pre

paring

and

subm

ittin

g

PF

Rs;

(d)

superv

isin

g d

eta

iled d

esi

gns;

(e)

pro

curing t

he g

oods

and s

erv

ices;

(f)

direct

ing c

onstr

uction s

uperv

isio

n;

(g)

overs

eein

g

imple

menta

tion

of

the

instit

utional

str

ength

enin

g a

nd c

apacity

develo

pm

ent

action p

lan;

(h)

monitoring

and

eva

luating

the

imple

menta

tion

pro

gre

ss

and

impact

; (i)

ensuring

com

plia

nce

with

safe

guard

s re

quirem

ents

; (j)

coord

inating

am

ong

govern

ment

agencie

s;

and

(k)

consolid

ating

and

pre

paring

periodic

re

port

s.

The

PP

MU

shall

be

support

ed b

y c

onsultants

under

the P

MF

.

Co

mp

lied

wit

h.

Loan 2

564

P

ara

4

UC

SA

shall

ensure

that

a P

IU s

hall

be e

sta

blis

hed b

y th

e p

art

icip

ating p

rovin

cia

l govern

ments

in e

ach o

f th

eir

respective p

rovin

ces. T

he P

IUs s

hall

be r

esponsib

le for

day-t

o-d

ay

imple

menta

tion o

f th

e P

roje

ct a

ctivitie

s i

n

their p

rovin

ces.

Each P

IU s

hall

be h

eaded b

y a full-

tim

e

pro

ject

manager

and c

om

prise o

f a t

echnic

al, f

inancia

l,

socia

l and e

nvironm

ent, a

nd a

dm

inis

trative u

nits.

Each

PIU

shall

inclu

de: (a

) a W

SS

engin

eer

or

a w

aste

wate

r m

anagem

ent

engin

eer;

(b

) a

financia

l m

anagem

ent

specia

list;

(c

) an

accounta

nt;

(d)

an

environm

ent

specia

list;

(e

) a

socia

l safe

guard

s specia

list;

(f)

an

inte

rpre

ter

and (

g)

an o

ffic

er

manager.

Co

mp

lied

wit

h.

Loan 2

564

P

ara

5

The P

IUs

shall

be r

esponsib

le f

or:

(a)

part

icip

atin

g i

n

Co

mp

lied

wit

h.

42

A

pp

en

dix

5

subpro

jects

pla

nnin

g,

deta

iled

desig

n

and

bid

evalu

ation;

(b)

coord

inatin

g t

he a

ctivitie

s of

consultants

and

contr

act

ors

in

th

e

pro

vin

ce;

(c)

overs

eein

g

constr

uction

act

ivitie

s;

(d)

coord

inating

resett

lem

ent

activitie

s;

(e)

monitoring t

he e

nvironm

enta

l, socia

l and

gender

impact

of

Pro

ject

activitie

s;

(f)

superv

isin

g local

institu

tional r

efo

rm a

nd c

apacity d

evelo

pm

ent act

ivitie

s;

and

(g)

pre

paring

and

consolid

ating

accounts

and

monitoring r

eport

s f

or

subm

issio

n t

o t

he P

PM

U.

The

PIU

s s

hall

be s

upport

ed b

y c

onsultants

under

the P

MF

.

Su

bp

roje

ct

Sele

cti

on

an

d Im

ple

men

tati

on

Loan 2

564

P

ara

6

UC

SA

shall

ensure

that

all

candid

ate

subpro

ject

s are

sele

cte

d a

nd a

ppro

ved in

accord

ance w

ith the e

ligib

ility

crite

ria a

nd p

rocedure

s a

gre

ed b

etw

een t

he B

orr

ow

er

and A

DB

and a

s set

out

in S

chedule

4 to the F

FA

.

Co

mp

lied

wit

h.

Co

llecti

on

Eff

icie

ncy a

nd

Tari

ffs

Loan 2

564

P

ara

7

UC

SA

, th

e

part

icip

ating

pro

vin

cia

l govern

ments

and

rela

ted v

odokanals

shall

take n

ecess

ary

measure

s f

or

impro

vin

g c

olle

ction e

ffic

iency t

o a

chie

ve a

colle

ction

rate

of

90%

for

each v

odokanal

by

such t

arg

et

year

to

be a

gre

ed f

or

the P

roje

ct;

Co

mp

lied

wit

h.

Loan 2

564

P

ara

8

US

CA

and

the

part

icip

ating

pro

vin

cia

l govern

ments

shall:

(a)

revie

w s

em

iannually

and a

dju

st as

necess

ary

the le

vel

and

str

uctu

re

of

wate

r ta

riffs

to

ensure

th

at

by

com

ple

tion o

f phys

ical in

vestm

ents

for

the P

roje

ct, the

vodokanals

shall

have:

(i)

incorp

ora

ted f

ull

O&

M c

osts

in

the t

ariffs;

and (

ii) s

erv

iced t

heir d

ebts

, in

clu

din

g

repaym

ent of A

DB

loan p

rincip

al a

nd in

tere

st c

harg

es.

UC

SA

shall

report

to A

DB

the r

esults

of

the r

evie

ws

and a

dju

stm

ents

within

3 m

onth

s o

f each r

evie

w; and

Part

iall

y c

om

pli

ed

wit

h.

Tariff

s fo

r W

SS

serv

ices are

re

vis

ed o

n a

sem

iannual b

asis

in

accord

ance

with

MO

F’s

G

uid

elin

es on S

ettin

g T

ariff

s fo

r W

SS

serv

ices

and i

nclu

de

O&

M,

debt

serv

ice a

nd c

apital

depre

cia

tion.

How

ever,

th

e

results

of

the

revie

w

and

Ap

pe

ndix

5

43

(b

) ta

ke

appro

priate

m

easure

s,

inclu

din

g

financia

l in

centives

and

penaltie

s,

to

reduce

the

level

of

paym

ent

arr

ears

for

wate

r bill

s;

and (

ii) p

rote

ct t

heir

wate

r re

sourc

es

and fa

cili

ties th

rough th

e vig

oro

us

pro

secution

of

vio

lations

such

as

wate

r m

ete

r ta

mpering a

nd w

ate

r th

eft.

adju

stm

ents

were

not re

port

ed

to A

DB

.

Co

mp

lied

wit

h.

Loan 2

564

P

ara

9

UC

SA

shall

ensure

th

at

the

cost

s

of

house

hold

connections

for w

ate

r supply

shall

be in

clu

ded u

nder th

e

Pro

ject

and t

hat

such c

osts

shall

be c

harg

ed t

o t

hese

household

s

on

an

insta

llment

basis

over

a

3-y

ear

period.

Co

mp

lied

wit

h.

Under

Rule

s for

WS

S s

erv

ices

to

consu

mers

, w

ate

r m

ete

rs

are

in

sta

lled

upon

100%

advance

paym

ent

for

wate

r m

ete

rs.

En

vir

on

men

t

Loan 2

564

P

ara

10

UC

SA

shall

ensure

that:

(a)

all

subpro

ject

fa

cili

ties

are

desig

ned,

const

ructe

d,

opera

ted, m

ain

tain

ed a

nd m

onito

red in

com

plia

nce w

ith

applic

able

law

s a

nd r

egula

tions i

n U

zbekis

tan,

AD

B’s

E

nvironm

ent

Polic

y (

2002)

and t

he E

AR

F.

Subpro

jects

encro

achin

g o

n n

ational p

ark

s o

r oth

er

environm

enta

lly

pro

tect

ed a

reas

shall

not be fin

anced u

nder

the P

roje

ct;

how

ever,

subpro

jects

clo

se to e

nvironm

enta

lly s

ensitiv

e

are

as

may

be

inclu

ded

pro

vid

ed

that

UC

SA

has

obta

ined

all

sta

tuto

ry

cle

ara

nces

and

that

the

requirem

ents

set

fort

h in

th

is Loan A

gre

em

ent

have

been a

dhere

d t

o;

(b

) only

cate

gory

B s

ubpro

jects

(based o

n c

ate

gorization

under

AD

B’s

E

nvironm

ent

Polic

y

(2002))

shall

be

financed u

nder

the P

roje

ct;

Co

mp

lied

wit

h.

Co

mp

lied

wit

h.

44

A

pp

en

dix

5

(c)

for

each s

ubpro

ject

, an IE

E s

hall

be p

repare

d (

incl

udin

g

an E

MP

with a

budget

for

the c

ost

of

imple

menta

tion

and w

ith public

consulta

tion)

in accord

ance w

ith th

e

EA

RF

and such IE

Es shall

be subm

itted fo

r A

DB

's

revie

w a

nd a

ppro

val;

(d)

all

mitig

ation a

nd m

onitoring m

easure

s identified in t

he

IEE

and t

he r

ela

ted E

MP

for

each s

ubpro

ject

shall

be

incorp

ora

ted in t

he d

eta

iled d

esig

n (

such E

MP

shall

be

update

d a

nd m

ade s

ite-s

pecific

as

appro

priate

), c

arr

ied

out

during c

onst

ruct

ion,

opera

tions

and m

ain

tenance,

and b

e d

isclo

sed to s

take

hold

ers

. T

hese m

itig

ating a

nd

monitoring m

easure

s shall

als

o b

e i

ncorp

ora

ted i

n t

he

bid

din

g d

ocum

ents

and c

ivil

work

s c

ontr

act

s;

(e

) if t

here

are

any c

hanges

aft

er

com

ple

tion o

f th

e I

EE

in

specific

lo

cations

or

alig

nm

ents

of

any

subpro

ject

facili

ties,

or

changes

in deta

iled desig

n th

at

has an

environm

enta

l im

pact

pre

vio

usly

unid

entified,

an

additio

nal

environm

enta

l assess

ment

shall

be c

arr

ied

out

in a

ccord

ance w

ith t

he A

DB

’s E

nvironm

ent

Polic

y

(2002)

and the E

AR

F, and a

ppro

ved b

y th

e A

DB

befo

re

furt

her

imple

menta

tion o

f th

at

subpro

ject;

(f

) all

environm

enta

l cle

ara

nces

required

by

applic

able

la

ws a

nd r

egula

tions

in U

zbekis

tan s

hall

be o

bta

ined b

y U

CS

A p

rior

to c

om

mencem

ent

of

civ

il w

ork

s f

or

the

rele

vant

subpro

ject. I

f a s

ubpro

ject

is e

xpect

ed h

ave

advers

e e

nvironm

enta

l im

pact, n

o c

ivil

work

s contr

act

shall

be a

ward

ed for

such

subpro

ject

until t

he B

orr

ow

er

and

AD

B

have

appro

ved

the

environm

enta

l assessm

ent

for

such

subpro

ject

in

accord

ance

w

ith

their r

equirem

ents

; and

Co

mp

lied

wit

h.

Co

mp

lied

wit

h.

Co

mp

lied

wit

h.

Co

mp

lied

wit

h.

Ap

pe

ndix

5

45

(g)

pro

gre

ss

report

s on i

mple

menta

tion o

f m

itig

ation a

nd

monitoring m

easure

s fo

r subpro

jects

shall

be s

ubm

itte

d

to A

DB

on a

sem

i-annual b

asis

.

Co

mp

lied

wit

h.

Invo

lun

tary

Resett

lem

en

t

Loan 2

564

P

ara

11

UC

SA

shall

ensure

th

at

the la

nd acquis

itio

n fo

r th

e

Gala

siy

a

subpro

ject

shall

be

imple

mente

d

in

accord

ance

with

the

appro

ved

land

acquis

itio

n

and

resettle

ment

pla

n f

or

the G

ala

siy

a s

ubpro

ject. I

f during

deta

iled

desig

n

and

imple

menta

tion,

there

are

m

odific

ations

requirin

g

additio

nal

land

acquis

itio

n

or

changes i

n i

nvolu

nta

ry r

esett

lem

ent

impact

s,

the l

and

acquis

itio

n a

nd r

esett

lem

ent

pla

n s

hall

be u

pdate

d a

nd

subm

itted t

o A

DB

for

appro

val.

If a

ny

land a

cquis

itio

n

and/o

r re

sett

lem

ent

activity

arise

in

any

oth

er

subpro

ject, U

CS

A s

hall

ensure

that

such a

ctivity

shall

be c

arr

ied o

ut

in a

ccord

ance w

ith a

pplic

able

law

s a

nd

regula

tions

in

Uzbekis

tan,

AD

B’s

In

volu

nta

ry

Resett

lem

ent

Polic

y (

1995)

and t

he L

AR

F.

Co

mp

lied

wit

h.

Loan 2

564

P

ara

12

No im

pact on e

thnic

min

ority

is e

xpecte

d for

the P

roje

ct.

How

ever,

if

any such im

pact

is id

entified during th

e

pla

nnin

g,

desig

n

or

imple

menta

tion

of

a

subpro

ject

, U

CS

A

shall

ensure

th

at:

(a

) an

eth

nic

m

inority

develo

pm

ent

pla

n i

s p

repare

d;

or

(b)

specific

act

ions

rela

ting t

o t

he indig

enous p

eople

or

eth

nic

min

ority

are

in

tegra

ted in t

he r

esett

lem

ent

pla

n,

in a

ccord

ance

with

AD

B's

P

olic

y on In

dig

enous P

eople

(1

998)

and th

e

EM

DF

.

Co

mp

lied

wit

h.

Gen

der

an

d L

ab

or

Loan 2

564

P

ara

13

UC

SA

shall:

(a)

pre

pare

a g

ender

action p

lan f

or

the

Pro

ject

usin

g P

roje

ct s

pecific

targ

ets

and b

ased o

n t

he

gender

action

pla

n fo

r th

e In

vest

ment

Pro

gra

m;

(b)

ensure

that

the g

ender

action p

lan f

or

the P

roje

ct

is

imple

mente

d in

a ti

mely

manner (inclu

din

g e

nsuring that

Co

mp

lied

wit

h.

46

A

pp

en

dix

5

adequate

re

sourc

es

are

allo

cate

d);

and

(c)

monitor

imple

menta

tion o

f th

e g

ender

action p

lan for

the P

roje

ct

and report

its

pro

gre

ss

in th

e q

uart

erly report

s subm

itte

d

to A

DB

.

Loan 2

564

P

ara

14

UC

SA

shall

ensure

that

civ

il w

ork

s c

ontr

acts

under

the

Pro

ject

shall

follo

w a

ll applic

able

law

s a

nd r

egula

tions

in U

zbekis

tan, and that civ

il w

ork

s contr

act

ors

: (a

) to

the

exte

nt

possib

le

em

plo

y

wom

en

and

local

people

, in

clu

din

g d

isadvanta

ged p

eople

, liv

ing in t

he v

icin

ity o

f th

e r

ele

vant

subpro

ject

; (b

) pro

vid

e e

qual

pay t

o m

en

and w

om

en f

or

work

of

equal

type;

(c)

pro

vid

e s

afe

w

ork

ing c

onditio

ns f

or

male

and f

em

ale

work

ers

; (d

) absta

in f

rom

child

labor;

and (

e)

carr

y out

HIV

/AID

S

aw

are

ness

pro

gra

ms

for

labore

r and

dis

sem

inate

in

form

ation a

t w

ork

sites o

n r

isks

of sexually

tra

nsm

itte

d

dis

eases and H

IV/A

IDS

fo

r constr

uction w

ork

ers

, as

part

of

the health and safe

ty pro

gra

m at

cam

psites

during th

e constr

uction period.

Com

plia

nce shall

be

monitore

d b

y U

CS

A d

uring P

roje

ct

imple

menta

tion a

nd

bre

aches by contr

act

ors

can re

sult

in te

rmin

ation of

contr

act

s.

Co

mp

lied

wit

h.

Go

od

Go

vern

an

ce a

nd

An

ti-C

orr

up

tio

n

Loan 2

564

P

ara

15

UC

SA

acknow

ledges

that

AD

B,

consis

tent

with

its

com

mitm

ent

to g

ood g

overn

ance,

accounta

bili

ty,

and

transpare

ncy,

reserv

es

the r

ight

to i

nvest

igate

directly,

or

thro

ugh i

ts a

gents

, any p

ossib

le c

orr

upt, f

raudule

nt,

collu

siv

e,

or

coerc

ive

pra

ctic

es

rela

ting

to

the

investm

ent

pro

gra

m.

In support

of

these effort

s and

purs

uant

to

AD

B's

A

nti-

Corr

uption

Polic

y (1

998,

as

am

ended

to

date

),

UC

SA

shall

ensure

th

at

(a)

the

bid

din

g docum

ents

fo

r th

e P

roje

ct,

and all

contr

acts

financed by

AD

B in

connection w

ith P

roje

ct, in

clu

de

pro

vis

ions

specifyin

g th

e

right

of

AD

B

to

audit

and

exam

ine t

he r

ecord

s a

nd a

ccounts

of

UC

SA

(P

PM

U),

Co

mp

lied

wit

h.

Ap

pe

ndix

5

47

PIU

s a

nd s

ubpro

ject

vodokanals

, and a

ll contr

acto

rs,

supplie

rs,

consulta

nts

, and o

ther

serv

ice p

rovid

ers

as

they

rela

te

to

the

Investm

ent

Pro

gra

m;

(b)

periodic

in

spections o

f th

e c

ontr

acto

r’s

act

ivitie

s r

ela

ting t

o f

und

withdra

wals

and

sett

lem

ents

are

carr

ied

out

by

the

PP

MU

; and (

c)

the a

udito

rs,

appoin

ted b

y U

CS

A,

have

the r

ight

to c

onduct

random

or

spot

audits

of

contr

act

im

ple

menta

tion act

ivitie

s under

the P

roje

ct. A

ll costs

re

late

d t

o s

uch

invest

igations s

hall

be b

orn

e u

nder

the

Investm

ent

Pro

gra

m.

M

ain

ten

an

ce P

lan

Loan 2

564

P

ara

16

UC

SA

shall

ensure

th

at

for

cra

nes,

excavato

rs and

majo

r re

pair e

quip

ment to

be s

hare

d b

y th

e v

odokanals

w

ithin

a

part

icip

ating

pro

vin

ce,

the

part

icip

ating

pro

vin

cia

l govern

ment

shall

pre

pare

, in

consultation

with

the

vodokanals

, a

main

tenance

pla

n

for

these

machin

ery

and

equip

ment,

inclu

din

g

the

standard

s,

pro

cedure

s and

oth

er

arr

angem

ents

fo

r th

eir

main

tenance and usage.

UC

SA

shall

send th

e dra

ft

main

tenance p

lan t

o A

DB

by t

he d

ate

to b

e a

gre

ed f

or

the P

roje

ct.

Part

iall

y c

om

pli

ed

wit

h.

Machin

ery

and e

quip

ment

for

larg

e r

epair w

ere

pro

cure

d f

or

each

Suvokava.

Suvokavas

have

equip

ment

usage

and

sharing a

rrangem

ents

am

ong

the b

ranches.

Com

pre

hensiv

e

O&

M

manual

was

not

pre

pare

d.

Hyg

ien

e C

on

su

ltati

on

an

d P

rom

oti

on

Loan 2

564

P

ara

17

UC

SA

shall

ensure

th

at

the

imple

menta

tion

arr

angem

ents

and

pla

ns

for

the

hygie

ne

pro

motion

activitie

s t

o b

e c

arr

ied o

ut

in a

ll schools

in t

he P

roje

ct

are

as

are

pre

pare

d,

and

that

the

hygie

ne

base

line

surv

eys

and follo

w-u

p s

urv

eys a

re c

arr

ied o

ut acco

rdin

g

to the targ

et

years

to b

e a

gre

ed for

the P

roje

ct.

Co

mp

lied

wit

h.

Loan 2

564

P

ara

18

UC

SA

shall

ensure

im

ple

menta

tion o

f th

e c

onsultation

and p

art

icip

ation p

lan o

f th

e I

nvest

ment

Pro

gra

m in t

he

Pro

ject

. T

he

consulta

tive

pro

cess

shall

involv

e

household

s,

institu

tions such as

schools

, clin

ics

and

busin

esses, th

e s

erv

ice p

rovid

ers

(i.e. vodokanals

) and

Co

mp

lied

wit

h.

48

A

pp

en

dix

5

oth

er

stakehold

ers

fro

m g

overn

ment

org

aniz

ations a

nd

the p

rivate

sect

or.

UC

SA

shall

engage N

GO

s w

here

appro

priate

to im

ple

ment th

e h

ygie

ne p

rogra

m.

In

form

ati

on

Dis

sem

inati

on

Loan 2

564

P

ara

. 19

UC

SA

shall

main

tain

and

update

in

its

website

info

rmation

on

the

Pro

ject.

Such

info

rmation

shall

inclu

de t

he s

ubpro

ject

sele

ction c

rite

ria a

nd a

ppro

val

pro

cedure

s, w

ate

r ta

riff r

evie

w p

rocedure

s,

results o

f annual

revie

ws a

nd a

dju

stm

ents

, colle

ction e

ffic

iency,

deta

ils o

n t

he a

dopte

d b

iddin

g p

rocedure

s,

am

ounts

of

the c

ontr

acts

aw

ard

ed, and a

lis

t of goods

and s

erv

ices

purc

hased (

and their inte

nded a

nd a

ctual utiliz

ation).

Part

iall

y c

om

pli

ed

wit

h.

Although

UC

SA

ra

n

the

website,

it d

id n

ot

conta

in a

ll th

e

deta

ils

on

subpro

ject

sele

ction c

rite

ria a

nd a

ppro

val

pro

cedure

s, w

ate

r ta

riff r

evie

w

pro

cedure

s, r

esults

of

annual

revie

ws

and

adju

stm

ents

, colle

ction e

ffic

iency, deta

ils o

n

the

adopte

d

bid

din

g

pro

cedure

s,

am

ounts

of

the

contr

act

s aw

ard

ed a

nd a

list of

goods

and

serv

ices

purc

hased (

and t

heir inte

nded

and a

ctu

al utiliz

ation).

Pro

ject

Perf

orm

an

ce M

on

ito

rin

g S

yste

m

Loan 2

564

P

ara

20

UC

SA

shall

ensure

th

at

the

imple

menta

tion

of

the

Pro

ject

, th

e o

pera

tion o

f th

e P

roje

ct

facili

ties,

and t

he

benefits

derived fr

om

th

e P

roje

ct are

m

onitore

d and

evalu

ate

d

annually

by

the

PP

MU

. T

his

in

cludes

esta

blis

hin

g a

PP

MS

with

in 6

month

s of

the E

ffective

Date

and

pro

vid

ing

resu

lts

for

incorp

ora

tion

in

the

Pro

ject

pro

gre

ss a

nd c

om

ple

tion r

eport

s.

Part

iall

y c

om

pli

ed

wit

h.

AD

B

help

ed

the

PP

MU

to

esta

blis

h a P

PM

S.

How

ever,

P

PM

U

did

not

update

th

e

PP

MS

w

ith

rele

vant

info

rmation

and

data

on

pro

ject

pro

gre

ss

regula

rly.

The

pro

gre

ss

report

s w

ere

lim

ited

to

PM

C

quart

erly

report

s w

hic

h w

ere

most

ly o

n

physic

al pro

gre

ss.

Pro

ject

Revie

ws

Ap

pe

ndix

5

49

Loan 2

564

P

ara

21

UC

SA

shall

subm

it t

o A

DB

quart

erly P

roje

ct

pro

gre

ss

report

s.

Follo

win

g r

evie

w o

f such r

eport

s,

AD

B s

hall

carr

y out

revie

w m

issio

ns t

o d

iscuss

with t

he B

orr

ow

er

and

UC

SA

pro

gre

ss

of

the

Pro

ject

, in

clu

din

g

any

changes

in

the

imple

menta

tion

arr

angem

ents

, or

rem

edia

l m

easure

s th

at

are

needed,

to achie

ve th

e

Pro

ject

obje

ctives.

Rele

vant P

IUs

shall

part

icip

ate

in the

revie

w m

issio

ns.

Co

mp

lied

wit

h.

Loan 2

564

P

ara

22

The B

orr

ow

er,

UC

SA

and A

DB

shall

carr

y out a m

idte

rm

revie

w

for

the

Pro

ject.

Such

mid

term

re

vie

w

shall

evalu

ate

th

e

Pro

ject

activitie

s,

imple

menta

tion

arr

angem

ents

, any

outs

tandin

g

issues,

environm

ent

and s

ocia

l safe

guard

issu

es, achie

vem

ent of sc

hedule

d

targ

ets

, contr

act

m

anagem

ent

pro

gre

ss,

and

oth

er

issues,

as

appro

priate

.

Co

mp

lied

wit

h.

50

Ap

pe

ndix

6

PR

OJE

CT

IM

PL

EM

EN

TA

TIO

N S

CH

ED

UL

E

Ap

pe

ndix

7

51

PR

OJE

CT

OR

GA

NIZ

AT

ION

AL

ST

RU

CT

UR

E

1.

Investm

en

t P

rog

ram

Im

ple

men

tati

on

Str

uctu

re

PIU

= p

roje

ct

imp

lem

en

tation u

nit,

PP

MU

= p

rogra

m p

repara

tion a

nd

ma

nag

em

ent un

it

Sourc

e:

Asia

n D

evelo

pm

en

t B

ank

2.

Pro

gra

m P

rep

ara

tio

n a

nd

Man

ag

em

en

t U

nit

Str

uctu

re

BM

E =

be

ne

fit m

on

itori

ng

and

eva

lua

tion

, M

IS =

man

ag

em

ent

info

rma

tion

sys

tem

, P

PM

U p

rog

ram

pre

pa

ratio

n a

nd

ma

na

ge

me

nt

unit,

WS

S =

wa

ter

su

pp

ly a

nd

sa

nita

tio

n,

WW

M =

waste

wa

ter

man

ag

em

en

t S

ou

rce:

Asia

n D

eve

lopm

en

t B

an

k

Uzbekis

tan C

om

mun

al S

erv

ices A

ge

ncy

(PP

MU

)

- B

ME

Offic

er

- T

rain

ing

Coord

inato

r -

MIS

Offic

er

- In

terp

rete

r -

Offic

e M

anager

- S

upport

Sta

ff

Asia

n D

eve

lop

me

nt B

ank

Investm

en

t P

rogra

m S

teeri

ng C

om

mitt

ee

(Inte

r-A

gency C

ou

ncil)

Min

istr

y o

f F

inance

P

art

icip

atin

g P

rovin

cia

l Govern

me

nt

(PIU

s)

PP

MU

-

Pro

gra

m D

irecto

r

- S

oci

al S

pecia

list

- E

nvi

ronm

enta

l S

pecia

list

- S

oci

al S

pecia

list

- E

nvi

ronm

enta

l S

pecia

list

- S

oci

al S

pecia

list

- E

nvi

ronm

enta

l S

pecia

list

- F

inanci

al

Managem

ent

Specia

list

- A

ccounta

nts

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menta

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54 Appendix 8

CONTRACT PACKAGES AND PROCUREMENT PROCEDURES Information No.1

Cat. Description Procure

ment Method

Contract Date

Contractor Contract Value in '000 USD equivalent

at Appraisal at Completion Difference

1 Works

1.1

RECONSTRUCTION OF WATER SUPPLY SYSTEM IN D/C GALAASIYA (PCSS 0015)

ICB 26.10.2011 JV LLC

KIMYOHIMOYATA’MINOT

3,331,000.0 3,140,259.0 -190,741.0

1.2

REHABILITATION OF WATER SUPPLY SYSTEM IN D/C KARMANA (PCSS 0016)

ICB 12.11.2011 LLC

NAVOIQISHLOQQURILISH

3,164,000.0 2,929,298.5 -234,701.5

1.3

REHABILITATION OF WATER SUPPLY SYSTEM IN D/C YANGIRABAT (PCSS 0017)

ICB 12.11.2011 DM PMK-9 OJSC NAVOISUVQURI

LISH 2,714,000.0 2,512,963.4 -201,003.0

1.4

REHABILITATION OF WATER SUPPLY SYSTEM IN D/C KANIMEKH (PCSS0018)

ICB 12.11.2011 LLC SHARQ QURILISH SERVIS

2,192,000.0 2,032,925.5 -201,036.6

1.5

RECONSTRUCTION OF WATER SUPPLY SYSTEM D/C ROMITAN (PCSS 0019)

ICB 14.11.2011 LLC OBI HAYOT ENGINEERING

3,294,000.0 2,917,354.0 -376,646.0

1.6

REHABILITATION OF WATER SUPPLY SYSTEM OF KIZILTEPA AND BESHRABAT CITIES (PCSS 0023)

ICB 24.02.2012

LLC TEMUR MALIK AND

OJSC NAVOISUVQURI

LISH

5,036,000.0 4,730,508.4 -305,491.6

1.7

MODERNIZATION OF INTERREGIONAL DAMKHODJA TRUNK MAIN AND REHABILITATION OF WATER SUPPLY SYSTEMS IN GIJDUVAN, VABKENT AND YANGIBAZAR D/Cs (PCSS 0036)

ICB 19.12.2012 LLC OBI HAYOT ENGINEERING

17,700,000.0 17,614,342.0 -85,658.0

1.8

REHABILITATION OF SEWERAGE SYSTEM OF TERMEZ CITY. SEWERAGE TREATMENT PLANT AND SEWERAGE NETWORKS (PCSS 0040)

ICB 21.02.2013 SHINDONG

ENERCOM INC. 12,230,000.0 11,980,203.2 -249,796.8

2 Equipment and Machines

2.1 PROCUREMENT OF LIGHT VEHICLE (PCSS 0001)

S 27.08.2010 JSC

AVTOTEHHIZMAT

15,261.16 15,261.16 0.00


S 16.08.2010 JSC

AVTOTEHHIZMAT

7,521.71 7,521.71 0.00

2.3 SUPPLY OFFICE FURNITURE (PCSS 0003)

S 27.09.2010 JV TUS BUERO 9,857.23 9,857.23 0.00


S 27.09.2010 LLC MAFTUNA SAVDO SERVIS

2,454.63 2,454.63 0.00

Appendix 8 55


ment Method

Contract Date



2.5 SUPPLY OFFICE EQUIPMENT (PCSS 0005)

S 27.09.2010 LLC ASIA-FAVORITE

GROUP 19,894.38 19,894.38 0.00


S 26.11.2010 LLC GALAXY

ORION 9,136.22 9,136.22 0.00


S 26.11.2010 LLC

ATK TURON 43,050.50 43,050.50 74,400.00


S 5.01.2011 C/O PMU 2,542.41 2,542.41 500.00

2.9 SUPPLY OF OFFICE EQUIPMENT (PCSS 0010)

S 27.06.2011 LLC TAURUS

TRADING GROUP

19,442.29 19,442.29

2.10

PROCUREMENT OF DRINKING WATER TANKER (PCSS 0011)

S 2.08.2011

YILI YONGXIANG MECHANICAL &

ELECTRICAL EQUIPT.

CONTRACT TERMINATED

2.11

PROCUREMENT OF HYDRODYNAMIC MACHINE (PCSS 0012)

S 2.08.2011

2.12 PROCUREMENT OF CESSPOOLAGE TRUCK (PCSS 0013)

S 2.08.2011

2.13 SUPPLY TRUCK CRANES (PCSS 0021)

NCB 14.09.2011

2.14 SUPPLY EQUIPMENT (PCSS 0022)

NCB 20.09.2011 POWER GLOBAL ENGINEERING

INC. 83,282.25 83,282.25 0.00

2.15 SUPPLY GENERATORS (PCSS 0024)

S 1.03.2012 BIRJA IMPEKS

LTD 21,574.87 21,574.87 0.00

2.16 SUPPLY TOOLS (PCSS 0025)

S 21.02.2012 BIRJA IMPEKS

LTD 50,931.21 50,931.21 0.00

2.17 SUPPLY DUMP TRUCKS AND LORRIES (PCSS 0026)

NCB 14.12.2011

SHANGHAI VOSTOSUN

INDUSTRIAL CO. LTD

CONTRACT TERMINATED

2.18 SUPPLY OF TRUCKS CRANES (PCSS 0027)

NCB 9.08.2012 TTEMZ LTD 330,576.00 330,576.0 0.00

2.19 PROCUREMENT 2 BOARD LORRIES (PCSS 0028)

S 13.08.2012 TOSHDEUAVTO

LTD 79,007.85 79,007.85 0.00

2.20 SUPPLY MOBILE WELDING MACHINE (PCSS 0029)

S 8.04.2012 WIDE

TECHNICAL SERVICE LTD

0.00 0.00 0.00

2.21

SUPPLY OF EXCAVATORS, EXCAVATOR-LOADERS (PCSS 0030)

NCB 10.08.2012 POWER GLOBAL ENGINEERING

INC. 356,325.89 356,325.89 0.00


S 8.04.2013 WIDE

TECHNICAL SERVICE LTD

29,229.64 29,229.64 0.00

2.23

SUPPLY OF DUMP TRUCKS, BOARD LORRY AND SPARE PARTS (PCSS 0041)

NCB 24.02.2014 UZBEK CHINESE

TRADING HOUSE LTD

142,733.00 131,422.50 -7,633.00

2.24

SUPPLY OF GENERATORS AND SPARE PARTS (PCSS 0042)

NCB 24.02.2014 UZBEK CHINESE

TRADING HOUSE LTD

93,672.00 79,560.0 -12,072.00

56 Appendix 8


ment Method

Contract Date



2.25 PROCUREMENT ONE LIGHT VEHICLE (PCSS 0043)

S 17.12.2014 JSC

BUKHARAAVTOTEHHIZMAT

9,200.00 11,695.02 2,495.02

2.26

WATER CARRIER TRUCK, CESSPOOLAGE TRUCK, HYDRODYNAMIC MACHINE FOR PIPE FLUSHING (PCSS 0044)

NCB 17.09.2014 NEWBOARD ENERGY LLP

134,129.00 140,457.48 6,328.48

2.27

"MECHANICALLY DRIVEN DRILL & SPARE PARTS DAMKHODJA INTERREGIONAL TRUNK MAIN (PCSS 0045)

NCB 25.09.2014 COLAHEN

MANAGEMENT LLP

165,682.00 166,959.17 1,277.17

2.28

5 SERVICE VANS FOR NAVOI PROVINCIAL VODOKANAL (PCSS 0046)

S 27.08.2015 JSC

NAVOIAVTOTEHHIZMAT

98,000.00 61,676.28 -36,323.72

2.29

5 SERVICE VANS FOR NAVOI PROVINCIAL VODOKANAL (PCSS 0047)

S 30.05.2016 LLC SHAR QURILISH SERVIS

58,800.00 35,400.00 -22,600.00

2.30

2564/S/4-5.4 5 SERVICE VANS FOR NAVOI PROVINCIAL VODOKANAL (PCSS 0048)


98,000.00 59,000.0 -39,000.00

2.31

PORTABLE COMPRESSORS AND SPARE PARTS FOR THE OPERATION OF THE OFFICE OF DAMKHODJA IRTM (PCSS 0049)


77,313.00 68,550.00 -8,763.00

3 Consulting Services

3.1 DETAILED ENGINEERING DESIGN (PCSS 0006)

QCBS 8.11.2010 PC LOYIHA MASLAHAT

1,253,000.00 1,039,194.55 -213,805.45

3.2

DEVELOPMENT OF FEASIBILITY STUDY OF TRANCHE 3 (PCSS 0014)

QCBS 31.05.2011 DONG IL

ENGNEERING CONSULTANTS

380,000.00 344,302.27 -35,697.73

3.3

FINANCIAL AUDIT OF PROJECT ACCOUNTS FOR 2010-2015 FISCAL YEARS (PCSS 0020)

LCS 24.11.2011 LLC TSIAR

FINANS 70,000.00 57,600.0 -12,400.0

3.4

INDIVIDUAL TECHNICAL SUPERVISION CONSULTANT (PCSS 0031)

ICS 23.08.2012 KHAZRAT

UTAMURODOV 11,600.00 14,130.40 2,530.40

3.5


ICS 23.08.2012 OLIMJON JURAEV

11,600.00 13,730.38 2,130.38

3.6


ICS 23.08.2012 BAHROM

MUSLIMOV 11,600.00 11,520.0 -80.0

3.7


ICS 23.08.2012 DAVRON RUZIEV

11,600.00 11,520.0 -80.0

Appendix 8 57


ment Method

Contract Date



3.8

PROJECT MANAGEMENT AND CONSTRUCTION SUPERVISION (PCSS 0037)

QCBS 5.12.2012 EPTISA

SERVICIOS DE INGENIERIA S.L.

1,820,000.00 1,590,440.95 -229,559.05

3.9


ICS 14.12.2012 VALERY KHAN 11,600.00 11,520.0 -80.0

3.10

INSTITUTIONAL STRENGTHENING & CAPACITY DEVELOPMENT (PCSS 0050)

QCBS 9.03.2017 LLC INTELLEKT

SERVICE 600,000.00 548,643.55 -51,356.45

Information No.2

Cat. Description Contract

Date

Contract period

Commencement date

Planned completion date (PCD)

Extended completion date (ECD)

Actual Completion

date

Delay from PCD

(months)

Delay from ECD

(months)

1 Works

1.1

RECONSTRUCTION OF WATER SUPPLY SYSTEM IN D/C GALAASIYA (PCSS 0015)

26.10.2011 19.12.2011 - 28.12.2015 - -

1.2

REHABILITATION OF WATER SUPPLY SYSTEM IN D/C KARMANA (PCSS 0016)

12.11.2011 19.12.2011 - 2.01.2014 - -

1.3

REHABILITATION OF WATER SUPPLY SYSTEM IN D/C YANGIRABAT (PCSS 0017)

12.11.2011 19.12.2011 - 2013 - -

1.4

REHABILITATION OF WATER SUPPLY SYSTEM IN D/C KANIMEKH (PCSS0018)

12.11.2011 19.12.2011 - 2013 - -

1.5

RECONSTRUCTION OF WATER SUPPLY SYSTEM D/C ROMITAN (PCSS 0019)

14.11.2011 19.12.2011 5.06.2013

1.6

REHABILITATION OF WATER SUPPLY SYSTEM OF KIZILTEPA AND BESHRABAT CITIES (PCSS 0023)

24.02.2012 23.03.2012 15.01.2014

1.7

MODERNIZATION OF INTERREGIONAL DAMKHODJA TRUNK MAIN AND REHABILITATION OF WATER SUPPLY SYSTEMS IN GIJDUVAN, VABKENT AND YANGIBAZAR D/Cs (PCSS 0036)

19.12.2012 18.01.2013 15.12.2014

1.8

REHABILITATION OF SEWERAGE SYSTEM OF TERMEZ CITY. SEWERAGE TREATMENT PLANT AND SEWERAGE NETWORKS (PCSS 0040)

21.02.2013 3.07.2013 15.07.2015

58 Appendix 8


Date

Contract period

Commencement date



Actual Completion

date

Delay from PCD

(months)

Delay from ECD

(months)

2 Equipment and Machines


27.08.2010 27.08.2010 27.11.2010 - 27.11.2010 - -


16.08.2010 16.08.2010 16.11.2010 - 16.11.2010 - -


27.09.2010 27.09.2010 27.11.2010 - 27.11.2010 - -


27.09.2010 27.09.2010 27.11.2010 - 27.11.2010 - -


27.09.2010 27.09.2010 27.11.2010 - 27.11.2010 - -


26.11.2010 26.11.2010 26.01.2011 - 26.01.2011 - -


26.11.2010 26.11.2010 26.01.2011 - 26.01.2011 - -


05.01.2011 5.01.2011 5.03.2011 - 1.07.2011 Contract was

submitted to ADB in June 2011

2.9 SUPPLY OF OFFICE EQUIPMENT (PCSS 0010)

27.06.2011 27.06.2011 27.08.2011 - 27.08.2011 - -

2.10 PROCUREMENT OF DRINKING WATER TANKER (PCSS 0011)

02.08.2011

CONTRACT TERMINATED

2.11 PROCUREMENT OF HYDRODYNAMIC MACHINE (PCSS 0012)

02.08.2011

2.12 PROCUREMENT OF CESSPOOLAGE TRUCK (PCSS 0013)

02.08.2011

2.13 SUPPLY TRUCK CRANES (PCSS 0021)

14.09.2011

2.14 SUPPLY EQUIPMENT (PCSS 0022)

20.09.2011 20.09.2011 20.12.2011 - 14.11.2012 Contract was

submitted to ADB in June 2011

2.15 SUPPLY GENERATORS (PCSS 0024)

01.03.2012 01.03.2012 01.05.2012 - 24.04.2012 - -

2.16 SUPPLY TOOLS (PCSS 0025)

21.02.2012 21.02.2012 21.05.2012 - 13.08.2012 - -

2.17 SUPPLY DUMP TRUCKS AND LORRIES (PCSS 0026)

14.12.2011 03.04.2012 03.07.2012 - 03.07.2012 - -

2.18 SUPPLY OF TRUCKS CRANES (PCSS 0027)

09.08.2012 09.08.2012 09.11.2012 - 03.10.2013 - -

2.19 PROCUREMENT 2 BOARD LORRIES (PCSS 0028)

13.08.2012 13.08.2012 13.11.2012 - 05.11.2012 - -


08.04.2012 08.04.2012 08.07.2012 - 08.07.2012 - -

2.21

SUPPLY OF EXCAVATORS, EXCAVATOR-LOADERS (PCSS 0030)

10.08.2012 05.11.2012 05.02.2012 - 11.04.2014 - -


08.04.2013 08.04.2013 08.07.2013 - 28.05.2013 - -

2.23

SUPPLY OF DUMP TRUCKS, BOARD LORRY AND SPARE PARTS (PCSS 0041)

24.02.2014 03.06.2014 03.09.2014 - 21.10.2014 - -

Appendix 8 59


Date

Contract period

Commencement date



Actual Completion

date

Delay from PCD

(months)

Delay from ECD

(months)

2.24

SUPPLY OF GENERATORS AND SPARE PARTS (PCSS 0042)

24.02.2014 11.07.2014 11.10.2014 - 03.03.2015 - -

2.25 PROCUREMENT ONE LIGHT VEHICLE (PCSS 0043)

17.12.2014 17.12.2014 17.03.2015 - 13.02.2015 - -

2.26

WATER CARRIER TRUCK, CESSPOOLAGE TRUCK, HYDRODYNAMIC MACHINE FOR PIPE FLUSHING (PCSS 0044)

17.09.2014 06.04.2015 06.07.2015 - 03.06.2016 - -

2.27

"MECHANICALLY DRIVEN DRILL & SPARE PARTS DAMKHODJA INTERREGIONAL TRUNK MAIN (PCSS 0045)

25.09.2014 25.09.2014 25.12.2014 - 07.12.2015 Delays due to long contract registration

2.28 5 SERVICE VANS FOR NAVOI PROVINCIAL VODOKANAL (PCSS 0046)

27.08.2015 27.08.2015 27.11.2015 - 18.08.2016 Delays due to

Supplier’s delivery conditions

2.29 5 SERVICE VANS FOR NAVOI PROVINCIAL VODOKANAL (PCSS 0047)

30.05.2016 30.05.2016 30.08.2016 - 12.09.2016 Delays due to


2.30

2564/S/4-5.4 5 SERVICE VANS FOR NAVOI PROVINCIAL VODOKANAL (PCSS 0048)

30.05.2016 30.05.2016 30.08.2016 - 12.09.2016 Delays due to


2.31

PORTABLE COMPRESSORS AND SPARE PARTS FOR THE OPERATION OF THE OFFICE OF DAMKHODJA IRTM (PCSS 0049)

12.07.2016 12.07.2016 12.10.2016 - 16.12.2016 - -

3 Consulting Services

3.1 DETAILED ENGINEERING DESIGN (PCSS 0006)

08.11.2010 26.12.2012 30.05.2013 29.05.2013 - -

3.2 DEVELOPMENT OF FEASIBILITY STUDY OF TRANCHE 3 (PCSS 0014)

31.05.2011 01.01.2016 31.12.2016 31.12.2016 - -

3.3

FINANCIAL AUDIT OF PROJECT ACCOUNTS FOR 2010-2019 FISCAL YEARS (PCSS 0020)

24.11.2011 07.05.2013 31.12.2013 - 31.12.2013 - -

3.4


23.08.2012 23.08.2012 31.12.2013 - 18.12.2013 - -

3.5


23.08.2012 23.08.2012 31.12.2013 - 18.12.2013 - -

3.6


23.08.2012 23.08.2012 31.12.2013 - 07.10.2013 - -

3.7


23.08.2012 23.08.2012 31.12.2013 - 07.10.2013 - -

3.8 PROJECT MANAGEMENT AND CONSTRUCTION SUPERVISION

05.12.2012 07.06.2013 31.03.2018 - 31.03.2018 - -

60 Appendix 8


Date

Contract period

Commencement date



Actual Completion

date

Delay from PCD

(months)

Delay from ECD

(months)

(PCSS 0037)

3.9


14.12.2012 14.12.2012 31.12.2013 - 18.12.2013 - -

3.10

INSTITUTIONAL STRENGTHENING & CAPACITY DEVELOPMENT (PCSS 0050)

09.03.2017 21.04.2017 31.03.2018 - 31.03.2018 - -

1 Extension approved by the Client and Engineer 2 Completion date as per Certificate of Work Completion

Appendix 9 61

ECONOMIC AND FINANCIAL REEVALUATION A. Introduction and methodology 1. The purpose of the analysis is to determine the economic and financial efficiency of the project. The economic and financial analysis covered four sample subprojects1 and were undertaken in accordance with Asian Development Bank (ADB) guidelines, including Guidelines for the Economic Analysis of Projects, and Handbook for the Economic Analysis of Water Supply Projects. The post-project economic and financial analyses were prepared for four subprojects to reevaluate expected economic and financial returns, based on real costs, and to compare them with the returns projected during project appraisal. Reevaluation, which was based on the methodology accepted during appraisal, allows for a comparison of projected indicators with the indicators after project completion. 2. The economic and financial reevaluation was carried out in accordance with the Asian Development Bank (ADB) guidelines.2 The economic internal rate of return (EIRR) was calculated based on the actual investment costs, and actual and projected operating and maintenance (O&M) expenses. To calculate the EIRR, benefit and cost streams were discounted in the economic analysis, taking into account the economic opportunity cost of capital (EOCC) of 9% at the time of reevaluation. A subproject is deemed economically beneficial when the EIRR is greater than the EOCC. The financial internal rate of return (FIRR) was calculated taking into account costs and revenue flows and measured against the weighted average cost of capital (WACC). A subproject is considered sustainable when the FIRR exceeds the WACC. B. Demand Analysis 3. The population in the subproject areas is projected to grow by around 0.9% per year in line with the general increase in population. An average water demand per capita is projected to grow gradually to 150 liters per capita per day (lpcd), with adjustments for institutional, commercial, and industrial use for each subproject. This figure is based on the standard adopted by the government and is in line with experience of other cities with improved water supply. Service coverage is also projected to increase in line with the government’s objective to expand access to safe and reliable water supply services. Given this per capita demand, the designed capacity is projected to meet water demand up to 2040. While the introduction of comprehensive metering of consumption combined with increasing tariffs is expected to result in a lower overall consumption rate, the effects of increased income are likely to offset those impacts. C. Economic Analysis Results 4. Economic Costs. Costs were prepared based on the prices applicable in November 2018. Taxes, duties, price inflation, and other market distortions were excluded from financial expenditures. Financial costs were converted to economic costs through the use of conversion factors that were applied in recently approved Second Tashkent Province Water Supply Development Project.3 The shadow exchange rate factor (SERF) was assumed to be 1.1. The shadow wage rate for unskilled labor (SWRF) was assumed to be 0.87.

1 Economic analysis covered the three sample subprojects–Damkhodja IRTM, Karmana, and Galaasiya subprojects. 2 ADB. 2017. Guidelines for the Economic Analysis of Projects; ADB. 1994. Framework for the Economic and Financial

Appraisal of Urban Development Sector Projects. Manila; and ADB. 1999. Handbook for Economic Analysis of Water Supply Projects. Manila.

3 ADB. 2017. Technical Assistance to the Republic of Uzbekistan for Preparing the Second Tashkent Province Water Supply Development Project. Manila.

62 Appendix 9

5. Economic Benefits. The major economic benefits of improved water supply services are based on (i) non-incremental water consumption valued at the average economic supply price of water from alternative non-piped sources (canals, shallow wells, water vendors and tanker supply); and (ii) incremental water consumption valued at the price the consumers are willing to pay for the improved water supply services. Although project yields considerable secondary benefits from an improved WSS infrastructure through reduced medical costs, fewer sick days, increased productivity and fire protection, these have not been included in the analysis as they are too difficult to quantify in monetary terms in a meaningful and comparable manner and hence not included in the benefits. 6. Incremental Benefits. Incremental benefits are generated from additional consumption of water provided by the subprojects to serve the un-met demands and increased demand of consumers. The economic value of this water is based on the willingness to pay as determined during the interviews of project households as well as makhallas. Face-to-face interviews as well as focus group discussions with beneficiaries were conducted in makhallas in subproject areas which indicated a high willingness-to-pay of up to SUM2,500/m3 for safe, reliable and continuous water supply services. 7. Non-incremental Benefits. These benefits are those accruing to consumers as a result of their switching from non-piped sources of water to the new piped water system to meet existing consumption levels. The provision of piped water is assumed to reduce in the future without the project situation as the distribution network deteriorates further. Other non-piped sources of water will increase with an increasing volume of water purchased from water vendors and supply from tankers, at a higher cost. 8. EIRR and Sensitivity Analysis. The economic effectiveness of the proposed project was measured using the EIRR for three subprojects. A subproject is considered economically viable if the EIRR is greater than the ADB recommended EOCC of 9%. The resulting base case EIRRs for the subprojects are between 12.9% and 16.8% which exceeds the prescribed minimum discount rate of 9%. The overall project EIRR was recalculated at 14.7% which is lower than the EIRR of 17.3% at appraisal,4 but higher than the 12% discount rate used at project appraisal, and the current EOCC of 9%.5 This confirms that the project is economically viable, with anticipated economic benefits greater than the estimated economic costs. A sensitivity analysis, undertaken to test economic viability, ascertained that the project will remain economically viable under the following scenarios: (i) a 20% increase in capital cost; (ii) a 20% increase in O&M costs; (iii) a 20% decrease in benefits; and (iv) a one-year delay in project benefits. As demonstrated in Tables E4-E6, the reevaluation under the various scenarios show that subprojects are still economically feasible but most sensitive to a 20% reduction in the benefits. 9. Least Cost Analysis. At project appraisal, the least cost evaluation was found as most relevant to the evaluation of options for the subproject for improving wastewater and sanitation services for Termez city. After analysis and consultations with the government, the rehabilitation and modernization of the existing wastewater treatment plant was selected as the most viable option. A feasible alternative of constructing a modern wastewater treatment plant was ruled out on account of its higher capital costs, inevitable delays and complications associated with land acquisition and resettlement.

4 Reevaluated EIRRs are lower given the significantly higher costs incurred due to relatively prolonged project

implementation periods. 5 ADB. 2009. Report and Recommendations of the President to the Board of Directors. Proposed Multitranche

Financing Facility for the Republic of Uzbekistan: Water Supply and Sanitation Services Investment Program. Manila.

Appendix 9 63

10. At project completion, the total cost of rehabilitation and modernization of WWTP of Termez city wastewater treatment plant was $11.9 million which proves that the technical option agreed between ADB and the government was the least cost, most suitable and viable option.6

Table E1: Summary of Economic Analysis of Subprojects – Damkhoja IRTM

6 Option 1 was a construction of wastewater treatment plant next to the existing one with total cost of $12.8 million. Option 1 was construction of new modern modular plant on site of existing plant with total cost of $26.4 million.

64 Appendix 9

Table E2: Summary of Economic Analysis of Subprojects – Karmana Vodokanal

Appendix 9 65

Table E3: Summary of Economic Analysis of Subprojects – Galaasiya Vodokanal

66 Appendix 9

Table E4. EIRR and Sensitivity Analysis – Damkhoja IRTM

Appendix 9 67

Table E5. EIRR and Sensitivity Analysis – Karmana Vodokanal

68 Appendix 9

Table E6: EIRR and Sensitivity Analysis – Galaasiya Vodokanal

Appendix 9 69

D. Financial Analysis 11. The financial internal rate of return (FIRR) was recalculated for the sample subprojects under the project. The reevaluation followed the approaches applied at appraisal and was based on financial and operational information obtained from the suvokavas and revenue and cost assumptions. Capital costs included all incremental capital expeditures, including interest during construction. Operation and maintenance costs included annual incremental expenses incurred in operating the subprojects. The subporjects are considered financially viable when (i) FIRR is higher than weighted average cost of capital (WACC), and (ii) affordable tariff, which is acceptable up to 5% of the average household income. 12. Subproject revenues. Revenues were calculated based on actual domestic and non-domestic demand, including demand arising from public standpipes. Subproject forecasts assume that water supply from existing alternative sources will eventually be replaced by subproject supplies. Sales revenues are based on tariffs designed for full-cost recovery, but in accordance with tariff reforms that ensure social acceptability. 13. Subproject costs. Capital investments include all infrastructure costs. O&M costs include staff wages, and administration, water treatment, power and fuel, and maintenance costs. The annual depreciation expense was calculated at 2% for civil works (50-year useful life), and 6.7% for equipment (15-year useful life). 14. Tariffs and cost recovery. Current subproject tariffs for house connections, budget organizations (i.e., institutional connections, including schools, hospitals, government offices, etc.) and other enterprises were used in the analysis. Future tariffs were determined to satisfy certain cost recovery options based on projected O&M costs, including depreciation, loan interest, and profit margins. Following the government reforms on introduction of advance payments for WSS services, the collection rate has substantially improved to average of 96% and in the reevaluation it was assumed that the tariff collection rate would be 100% during the economic life of the project. In the financial analysis, tariffs are proportionately corrected to account for inflation as the costs are expressed nominally. In the discounted cash flows, tariffs are reflected in real terms. Initial tariff increases start two years after subproject completion to give users time to adapt to tariff reforms, including tariffs adjusted biennially, and are in line with user willingness-to-pay. 15. Affordability analysis. Sustainability of subproject operation ultimately depends on ability of households to pay water bills for the WSS services. Affordability analysis was undertaken to ensure households, particularly those in the low-income group, can afford the tariffs for WSS services. In principle, when the expenditures on WSS services do not exceed 5% of household income, the projected water tariffs are considered affordable. Current subproject water tariffs are a fixed monthly payment based on constant consumption norms. Part of the tariff reforms is to apply volumetric tariffs based on metered usage. Reviews during appraisal showed a high willingness to have an individual service connection and pay for it because of difficulties related to existing supply sources, e.g. water delivery or collection from remote sources. 16. Water tariffs affordability for all subprojects improved as opposed to the projections made at appraisal. Table F1 demonstrates levels of tariff affordability at project appraisal and completion. Average income data7 were used to assess the affordability of tariffs for WSS services. The analysis shows applied tariffs in subprojects throughout the study period to be within defined maximum affordability of 5%.

7 State Statistics Committee. Regional average household income data for 2017.

70 Appendix 9

Table F1. Analysis of Tariff Affordability

Subprojects At Appraisal At Completion

from to from to

Beshrabot 0.30% 1.55% 0.14% 0.93% Kanimekh 0.20% 2.50% 0.23% 0.97% Karmana 0.30% 3.40% 0.19% 0.84% Kiziltepa 0.14% 1.74% 0.13% 1.35% Yangirabot 0.30% 2.50% 0.18% 0.92% Galaasiya 0.30% 4.00% 0.18% 1.26% Gijduvan 0.20% 1.20% 0.04% 0.83% Romitan 0.40% 3.00% 0.18% 1.13% Vobkent 0.30% 2.00% 0.10% 0.84% Yangibazar 0.30% 2.60% 0.16% 1.15% Termez 0.30% 4.00% 0.43% 4.19%

17. WACC and FIRR. The WACC is calculated in real terms and used as a basis for measuring subproject financial viability. Funding sources are the ADB loan and capital and in-kind contributions from the government, with a weighting of 83.4% and 16.6%, respectively. The rates are computed on an after-tax basis, resulting in the WACC in real terms being estimated at 1.26%, as given in Table F2.

Table F2. Weighted Average Cost of Capital (WACC)

Item ADB

Share Government

Share Total

A. Project Cost, US$ million 56.70 11.30 68.0 B. Weight, % 83.40 16.60 100.0 C. Nominal Cost, % 1.70 25.00 D. Tax Rate, % 14.00 0.00 E. Tax-adjusted nominal cost 1.46 25.00 F. Inflation rate, % 1.50 16.00 G. Real cost, % -0.04 7.76 H. Real WACC, % -0.03 1.29 Weighted Average Cost of Capital (Real), % 1.26

ADB= Asian Development Bank, WACC = weighted average cost of capital. Note: Cost of government financing is based on the commercial rate of financing.

18. Based on the results of the reevaluation, all four subproject FIRRs exceeded the WACC and ranged between 3.9% and 14.5%. The overall project FIRR was reevaluated at 6.7% which is considerably higher than the WACC of 1.26%. Sensitivity analysis showed that under assumed 20% increase of O&M cost, all four subprojects remain financially viable. However, Galaasiya (0.8%), Karmana (0.6%) and Termez (1.3%) are most sensitive to a 20% reduction in revenues.

Table F3. Summary of FIRR

Subproject

FIRR

At appraisal (base case)

At completion (base case)

Damkhoja IRTM 8.3% 14.5% Galaasiya 4.4% 3.9% Karmana 5.0% 4.1% Termez 4.4% 4.6%

Average 5.5% 6.7%

Appendix 10 71

SAFEGUARDS COMPLIANCE Environment 1. The project was classified as category B for environment at appraisal. Considering MFF modality an environmental assessment and review framework (EARF) and an initial environmental examination (IEE) including environmental management plans (EMP) for the subprojects were prepared in accordance with the requirements of Environment Policy 2002.1 The subprojects were not expected to cause significant environmental problems and the likely adverse impacts associated with construction works were manageable. According to national classifications, the project was categorized as “low risk environmental impact". Mitigation measures set out in IEE reports were compiled during construction. A poor occupational health and safety was a key concern during project construction, which is more general for the country and not limited to the project. The EMP included the relevant mitigation measures proposed in the IEE for identified site-specific environmental impacts. 19. The EA established a PCU responsible for coordinating the overall project implementation. However, the PCU capacity was weak to implement the environmental management system and hence, ADB provided continuous guidance and support in conducting inspection, evaluation and recording of compliance with the EMP requirements. Later, a dedicated PCU environmental expert trained by ADB coordinated the implementation of EMP and environmental mitigation activities including obtaining permissions as needed in compliance with government regulations. The project supervision engineer’s environmental consultant supervised environmental protection activities at the construction sites. The contractor prepared a site-specific EMP with a safety, health, and environment control plan, which was approved by the engineer. Additionally, the regional representatives of the State Nature Protection Committee regularly conducted site inspections during construction works to ensure compliance with national environmental legislation. A training series covering environmental management, carrying out site audits, identifying and resolving environmental issues, and preparing the environmental monitoring reports were held for contractors and engineers. 20. The implementation of EMP was the responsibility of the contractors during the construction and no major non-compliance was reported. However, construction safety and occupational health remained as an issue due to low safety culture, especially regular use of personal protective equipment. No serious occupational accident reported during project implementation. The main anticipated construction related impacts were dust, noise, solid waste management, and temporary traffic disturbance during pipe laying. The PMC environmental consultant regularly monitored the contractors compliance with the EMPs. ADB staff also conducted monitoring of compliance with EMPs during the loan review missions. A post-construction environmental audit conducted in 2016 determined that adverse environmental impacts during construction were minor and were mitigated to acceptable levels. Construction materials were supplied from licensed quarries. Community safety was generally satisfactory. Construction sites were fenced where necessary, and signs were posted at construction sites to warn residents about the construction hazards. There were no temporary camps on the construction sites as workforce was hired from local communities. Construction waste were stored in designated area in special containers and disposed to contracted landfills. Hazardous waste was collected in the containers which were disposed as per national requirements. Demolished asbestos roofing materials in subproject for rehabilitation of Gijduvan water distribution center were transported and disposed of in designated area in accordance with national regulations.

1 SPS 2009 was not applied at appraisal as the project was prepared in 2009.

72 Appendix 10

21. Continuous PCU’s project team’s supervisory insistence, by project closing, improvements in contractor compliance with the EMP were noted, particularly regarding the occupational health and safety of workers. At completion loan covenants on environmental aspects were generally been complied with. The state hand-over commission accepted the project in accordance with the existing laws, regulations, and standards of the government concerning environmental protection. There are no outstanding issues regarding environmental safeguards and grievances. 22. Quarterly progress reports contained environmental section highlighting environmental concerns and follow-up activities in compliance with environmental safeguards. A submission of environmental monitoring reports to ADB was initially not satisfactory. Following the 2012 review mission, semiannual safeguards monitoring reports for 2012-2016 were prepared and submitted to ADB. Overall, six environmental monitoring reports were received and disclosed on ADB’s website in 2016. The final environmental monitoring report (EMR) covered post construction environmental audit, and the PCU confirmed that majority of the environmental measures were implemented to the required standards. 23. At completion, local authorities recorded no residual environmental impact and people living along the project sites had submitted nor voiced complaints. Previous ADB missions and the project completion review mission identified no significant environmental issues. The completed sites were approved by the government’s inspection committee which assessed all parameters including environmental protection measures as compliant, a prerequisite for full acceptance by the authorities. 24. The state hand-over commission accepted the project in accordance with the existing laws, regulations, and standards of the government concerning environmental protection. The project was categorized as category C for indigenous people safeguards. No ethnic minority or indigenous people lived in the project area or were affected by the project. Land Acquisition and Involuntary Resettlement 25. The project was classified category B for involuntary resettlement safeguards at appraisal. The draft land acquisition and resettlement plan (LARP) was prepared at PPTA stage for one of the subprojects. There was no new construction, or the expansion of the existing facilities rehabilitated under the project. Detailed design avoided land acquisition and involuntary resettlement impact on the networks works that were indicated in the draft LARP. There was no impact on any land, households, farms, agriculture and business entities and buildings. Grievance Redress Mechanism 26. A separate grievance redress mechanism had been developed for each subproject to address any grievances or decisions not agreeable to the affected people, particularly with compensation or disbursement of payment. The affected people had been fully informed about their entitlements and the procedures for addressing their complaints, grievances during public consultation and census survey. The procedure of grievance redress had been incorporated in the disclosure pamphlet that was distributed prior to the LARP implementation. The PCU closely monitored GRM’s implementation at the sub-project level. 27. Additionally, the government legal system to resolve complaints was also elaborated to the affected people so that they could address complaints through the court system at any time to enforce and strengthen the project level GRM.

Appendix 10 73

Capacity Building 28. ADB provided training on strengthening PCU’s capacity to comply with IEEs and EMPs. A series of training sessions covering ADB’s safeguards policy requirements, national environmental laws and regulations were conducted. During loan review missions, ADB staff and consultants provided hands-on training and guidance to PCU staff and contractors on complying with approved EMPs, occupational health and safety. On the-job support was provided by the CWOD-PSG RETA consultant to clarify any queries from PCU or CSC. Recommendations 29. Overall, mitigation measures related to environmental management and occupational health and safety should be strengthened through contractual obligations and penalties. Increased attention to construction safety is required for future projects, especially if these involve small works contracts which often recruit local workforce with very limited awareness on construction safety. Environmental safeguards supervision and monitoring frequency shall be improved by the all relevant parties. Resources specifically allocated to EMP implementation, construction safety should be allocated to ensure continuous capacity building, supervision and enforcement.

74 Appendix 11

ACHIEVEMENTS ON GENDER ACTION PLAN TARGETS 1. The weaknesses of the WSS system impact both men and women in substantially similar ways and improving access to safe water and sanitation is directly related to reducing poverty and improving public health overall. However, women are the primary collectors, transporters, users, and managers of domestic water and promoters of home and community-based sanitation activities. Women are the major users of water in the household (for preparing meals, cleaning, laundering, bathing children, tending household gardens and livestock etc.) and experience the impact of limited and poor water quality more acutely. They also have different needs in terms of water and sanitation in public places (such as schools and clinics) and more responsibilities for childcare and family hygiene. Women are the most vocal advocates for an improved water supply and link the benefits of a better supply to significant health improvement, convenience and time-saving benefits. In the urban areas’ women are responsible for family hygiene and sanitation and for providing care in the event of family sickness. 2. To address relevant gender issues, the project design phase included a social and gender analysis and determined specific concerns and the need for ensuring women’s access to the project delivered services and participation in the capacity building and hygiene promotion activities. It was anticipated that women will benefit from the Project in terms of increased representation within water consumer groups, customer care units, Suvokavas and hygiene promotion activities. A gender action plan (GAP) was included in the Period Financing Request (PFR), facility administration manual and maximized women’s participation in project activities. This was covenanted by the Loan Agreement by ensuring that (a) the Borrower will implement GAP in a timely manner, (b) adequate resources will be allocated for this purpose, and (c) the implementation of the GAP will be closely monitored and reported to ADB through quarterly progress reports. GAP was prepared to ensure gender equality in the distribution of project benefits and to enable active engagement of women in subproject design and implementation. The project GAP includes the following main features to ensure that:

(i) urban women leaders, poor women and households headed by women are included as participating members of all water consumer groups which are formed in sub-project areas

(ii) GAD issues are included in socio-economic profiles (iii) women leaders are included as participating members in seminars / workshops /

meetings conducted to discuss wastewater and sanitation plans (iv) women are represented in hygiene promotion teams to carry out activities in schools

and makhallas (v) women take part in Suvokavas training activities and study tours by choosing suitable

venues and timing (vi) women in water consumer groups and school teaching staff participate in training

activities (vii) women representation and participation in the development of the customer contract

between the Suvokavas and the public (viii) collection of sex-disaggregated information is done to monitor and evaluate trends (ix) GAD issues are included in the social profile at implementation and completion

phases, and others. 3. Selected key gender indicators and targets were integrated into the project’s design and monitoring framework (DMF). GAP enhanced the inclusivity of project benefits by ensuring women participation in the hygiene promotion activities and trainings conducted under the Project. GAP implementation contributed to achieving overall project gender equality goals and outputs

Appendix 11 75

and was facilitated by the PPMU gender specialist engaged on full time basis. A comparison of the actual achievements against GAP targets shows that GAP implementation could be rated as “successful”. In total there are 11 GAP activities of which 9 were completed (82%) and 11 targets of which 2 were not achieved (82%). More details are in Table below. 4. Women’s reduced drudgery in water collection, more leisure time, time for family and productive activities. With improved access to water supply and sanitation at the household level, the project has relieved mainly women and children, especially young girls from time consuming and tiring water collection duties. The interviews with the beneficiaries (especially women) indicate that they are satisfied with the supplies and services and appreciate all projects’ activities. This enabled them to use their free time (an average of 2-3 hours a day) and energy for more beneficial and productive activities and devote time for family members. These include helping their children with homework and assisting their elders. They also became more active in the community and in socialization activities. Women in Bukhara and Navoi provinces started to engage in entrepreneurship activities and such as beauty salons, bakery, small trade, etc.

5. Women’s, men’s, and children’s increased awareness on good hygiene, better hygiene practices, and decline in incidents of water-borne diseases. About 485 distribution materials–booklets on sanitary behavior and hygiene promotion were provided to training participants from makhallas conducted in collaboration with State Sanitary Epidemiological Stations (SES). On the initiative of the project gender specialist, personal hygiene products in the amount of SUM24.0 million were distributed to 1,865 schoolchildren. Trainings on efficient use of water, hygiene and sanitation were conducted in schools for 10,992 schoolchildren and for 240 participants in makhallas of which more than half were women. The men, women, and schoolchildren who participated in these trainings developed capacities to advocate good hygiene practices in the communities. These produced positive result in terms of improved health indicators such as decline in incidents of water borne diseases in schools, reduced expenditure on treatment and medicines, as well as improvement in school attendance. For example, in Karmana district of Navoi province, the water-borne diseases were in 2011 – 145 cases; in 2012 -132; 2013 -123; 2014 - 89; 2016 - 67 and in 2017 – 66 cases accordingly. There were no sex-disaggregated data at the local level.

6. Women’s participation in decision-making. Some 238 women leaders from the localities in the project area who participated in trainings on water handling and hygiene promotion. They also actively participated in consultative workshops where they raised issues on irregular water supply, water quality, water distribution norms, and water supply schemes to households. They took part in the Sanitation and Hygiene Promotion Program’s activities and involved themselves in local monitoring groups.

7. Improved relationships among women in the family. Prior to the project, mothers-in-law and daughters-in law had conflicts regarding collection of water, performance of household duties. The regular supply of water to the households as a result of the project significantly reduced water related conflicts among the women members in the households. 8. Most of the GAP quantitative targets were achieved. However, the gender target on allocating 20% of jobs created in vodokanals to the women could not be achieved due to the structural reorganization of the PPMU/PIUs in 2016 which brought about changes in the gender composition of staff. The number of women working at various levels was less than 20%. Female employees in project Suvokavas constitute less than 20% representatives. At the PCU, there were four females out of 15 employees which comprise 26%. I It is not as gender balanced as it

76 Appendix 11

was originally envisaged. Existing gender stereotypes, professional gender segregation and lack of relevant female staff in the sector influenced the GAP’ implementation. 9. Recommendations

(i) Gender capacity building activities and hygiene trainings included in GAP were satisfactorily conducted at different levels but were lacking a systematic approach. Understanding of gender issues varied in different regions and agencies. Thus, training on gender issues must be systematically provided starting with the implementers at the central level and moving down to the community facilitators. In addition, capacity of the project team should be built to collect and analyze sex-disaggregated data from all relevant project activities and integrate the data in the information management system on a regular basis.

(ii) Knowledge product’s dissemination mechanism was limited to Suvokava system and schools in the project area. To further improve and expand the coverage more local mass media’s facilities (centralized TV programs, radio, newspapers, leaflets, visual methods, etc.) should be employed to reach more project beneficiaries of all social strata and increase publicity;

(iii) Community-based organizations were involved and consulted on an ad hoc basis depending on the GAP implementation schedule and availability of funds. It is recommended that mobilization and organization of CBOs precede all other activities and community leaders be identified and contacted early. Also, communities should be consulted at all stages on the gender and development strategy/approaches starting from project identification, and through the design, implementation and completion processes;

(iv) In order to sustain the GAP results and to further increase women’s participation after project completion in the hygiene and sanitation activities and awareness campaigns, a quota system should be continuously implemented (at least 30% of women) as an important factor to achieve a better result and full and equal coverage;

(v) Sector restructuring and staff limits have impacted on the implementation of the GAP. Relevant and adequate Project implementation staff should be ensured and selected on merit and their capacity built in gender mainstreaming and community participation and hired on a full-time basis;

(vi) Gender equality should be further promoted in collaboration with the Women’s Committees and women’s NGOs at lateral learning events to (i) improve gender awareness and capacity of national, district, and local government staff; and (ii) encourage systematic addressing of gender issues in all programs and projects. In addition, relevant PPMU staff should be trained as gender focal points in their institutions to initiate a gender-working group in USCA, Suvokavas and to continue promotion of the gender agenda.

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Table: Achievements of the Gender Action Plan (GAP) Implementation

TOTAL NUMBER OF ACTIVITIES (SDTC-GEN COUNT): 11 NUMBER OF ACTIVITIES COMPLETED: 9 (81%) TOTAL NUMBER OF TARGETS: 111 NUMBER OF TARGETS ACHIEVED: 9 (81%)

Activities Indicators and Targets GAP Achievements

Component 1. Water Supply and Sanitation System Rehabilitation and Improvement

Ensure that urban women leaders, poor women and households headed by women are included as participating members of all water consumer groups which are formed in sub-project areas2 (5 districts of Navoi province, 5 in Bukhara province and Termez city)

Target 1 At least 20-30% of water consumer group members are women representing different social strata3

Target 1 achieved. 78 water consumer groups (WCG) were formed in makhallas of project areas. WCGs consisted of women leaders, engineers, makhalla representatives, women’s committees (average 5-6 members in WCG). They conducted awareness campaign on project objectives, gender, sanitary and hygiene. 230 or 57% members of WCGs were women, including those from low income families.

Ensure that there is female representation and participation during consultations with the public during public hearings, decision-making processes and in any local decision-making bodies / structures

Target 2 At least 30% of participants in public meetings on water supply interventions are women

Target 2 achieved. 19 Information Consultancy Centers (ICC) established in project Suvokavas in cooperation with PIUs to inform the public on project objectives, social and gender policies. Each ICC had 5-6 members of which 62 (54%) were women who participated in all ICC activities and influenced a decision-making process to address women’s needs.

Ensure that the gender-sensitive approach is taken when analyzing affordability of household water connections and water tariffs for each subproject

Activity 1 Affordability analysis is disaggregated by sex and incorporated into subproject reporting

Activity 1 completed. During the consultation meeting and trainings affordability and tariffs issues were discussed with male and female participants and sex-disaggregated affordability

1 Target 8 could not be achieved because customer contracts were done prior to the project. 2 Number of GAP’ activities 3 Number of GAP’s quantitative indicators/targets

78 Appendix 11


analysis conducted and included in subproject reporting. The men and women voiced their specific preferences on tariffs to ensure inclusion and consideration of their suggestions during the tariff’s formation. Information on number of family members, eligibility for social benefits provided to multi-child mothers and women on maternity leave was provided by females for consideration.

Promote the creation of jobs opportunities for women during and after project implementation, and provide appropriate training

Target 3 At least 20% of jobs created in vodokanals are for women

Target 3 not achieved. After the restructuring of project vodokanals into State Unitary Enterprise “Suvokava”, women representation is less than 20% of total Suvokava staff (average 16-18%).

1.1. GAD Activities on Wastewater Management Subcomponent

Ensure the inclusion of GAD issues in socio-economic profiles

Activity 2 Sex-disaggregated baseline and end-line information is available

Activity 2 completed. Sex-disaggregated baseline and end-line information in wastewater subproject areas is available; socioeconomic and gender issues incorporated into reporting of wastewater subprojects. Sex-disaggregated information (number of students by gender in the schools of the project area in Termez city, Navoi and Bukhara and others relevant) is collected and available. In addition, information on economic employment, the number of employees of relevant organizations, the number of boys and girls in schools, the number of women receiving maternity leave allowances, the number and composition of households - is presented regularly and is included in the project reporting and socio-economic profiles with the trends by years.

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Ensure that women leaders are included as participating members in seminars / workshops / meetings conducted to discuss wastewater and sanitation plans

Target 4 At least 30% of participants in consultative workshops are local female leaders / makhalla representatives

Target 4 achieved. 6 seminars on sanitation plans and consultative workshops were conducted in Bukhara, Navoi provinces and Termez city covering 793 participants from makhallas of which 436 were women (55%). Women leaders discussed the issues of irregular water supply, water distribution norms, water quality, water supply schemes to households, timely payment issues, access to water for vulnerable groups of the population, especially women, wastewater plans and hygiene promotion activities in makhallas.

1.2. GAD Activities on Sanitation and Hygiene Subcomponent

Hygiene baseline and follow up surveys in schools disaggregated by sex (including information on water borne diseases and number of separate sewerage and sanitation facilities for both boys and girls in schools)

Activity 3 Sex- disaggregated baseline information and follow up survey reports (including trends of water borne diseases) Number of separate sanitation facilities

Activity 3 not completed. Sex disaggregated data not available. The surveys on available sanitation and toilet facilities, students by sex and water borne diseases conducted in 37 schools. PMC prepared and submitted the relevant reports on waterborne diseases (intestinal diseases). For example, in Karmana district of Navoi province, the water-borne diseases were in 2011 – 145 cases; in 2012 -132; 2013 -123; 2014 - 89; 2016 - 67 and in 2017 – 66 cases accordingly.

Activity 4 Hygiene promotion activities including provision with the basic hygiene materials (soap, cleaning fluids, etc) and distribution of basic hygiene reference sources that target girls and their caregivers (mothers)

Evidence of hygiene materials that target girls and boys in schools Number of hygiene materials provided to schools, makhallas (young mothers)

Activity 4 completed. 114 hygiene promotion activities conducted during project implementation. The PPMU gender specialist explored opportunities of sponsorship for the provision of the basic hygiene materials to students in schools of project cities. 1,865 schoolchildren in project cities were provided with personal

80 Appendix 11


hygiene products for the amount of SOM 24 million. 485 materials (booklets on sanitary and hygiene promotion) were distributed to participants from makhallas and schools during the sanitary trainings conducted in collaboration with Sanitary Epidemiological Stations (SES).

Ensure women are represented in hygiene promotion teams to carry out activities in schools and makhallas

Target 5 Women comprise 30% of members in hygiene promotion teams

Target 5 achieved. 238 (30%) women out of 793 persons were trained on hygiene promotion to carry out activities in schools and makhallas and became members of hygiene promotion teams.

Activity 5 Training on water handling, hygiene and sanitation carried out for selected schools (mixed groups) and makhallas in a form easily accessible to home-bound women in the selected pilot areas (especially for young mothers)

Number of training materials developed and distributed to participants; Number of trained pupils by gender; Number of women trained in makhallas

Activity 5 completed. Trainings on water handling, hygiene and sanitation conducted in schools and covered 10,992 students (mixed groups) and in makhallas for 793 people of which 436 (55%) were females-- women (238) and girls (198) . More than 400 materials (booklets on sanitary and hygiene promotion) were provided to participants. This helped women and girls to improve their hygiene practices by using more effective hygiene and cleaning products, to comply with medical guidance on hygiene on critical days, to clean and disinfect water, to properly care for babies.

Component 2. Management Improvement and Capacity Development

Ensure women take part in vodokanals training activities and study tours by choosing suitable venues and timing

Target 6 At least 20% of participants in all training activities and study tours are women

Target 6 achieved. More than 30% of women took part in Suvokava trainings: 436 women out of 793 participants (55%). Note: Study tours were not conducted – not valid.

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Ensure that women in water consumer groups and school teaching staff participate in training activities

Target 7 At least 20.0% of participants in community level training activities are women

Target 7 achieved. 53 teaching staff (out of 265 total participants) were involved in the project awareness campaigns in makhallas and included in the water consumer groups comprising 20%.

Ensure women representation and participation in the development of the customer contract between the vodokanal and the public

Target 8 At least 30% of participants in consultation groups are women from makhallas and leader groups

Target 8 could not be completed. The customer contracts between the Suvokavas and households have been developed before project’ commencement date thus this activity could not be completed.

Ensure that the vodokanal customer complaints service is gender sensitive and produces complaints records disaggregated by sex

Target 9 Gender focal point in each customer care unit established to receive/record and address women’s complaints

Target 9 Achieved. The existing customer complaints handling mechanism in Suvokavas, makhallas, Khokimiyats is sex-disaggregated at all levels and gender focal point in each customer care unit identified.

Activity 6 Gender awareness training carried out for vodokanal, PIU and PPMU staff in the mixed groups (50:50)

GAD awareness training materials, Training data / attendance/reporting

Activity 6 completed. 23 GAD awareness trainings were conducted for Suvokavas, PPMU/PIUs in the mixed groups (50:50).

Ensure women representation and participation in performance monitoring reporting and workshops

Target 10 At least 30% of participants at these monitoring workshops are women

Target 10 Achieved. 32 women (30%) are involved in the reporting and monitoring workshops at makhalla level in Bukhara, Navoi provinces and Termez city out of 106 workshop participants.

Component 3. Program Management Facility (PMF)

A separate GAP for each Tranche to be prepared

Target 11 GAPs produced for each tranche

Target 11 Achieved. A separate GAP was prepared for each Tranche.

82 Appendix 11


Activity 7 Recruit local Social/Poverty & Gender Specialists in the PPMU (UCSA) and PIUs on an intermittent basis

Specialists available for 30 months over project period

Activity 7 completed. Social Specialist in the PPMU (UCSA) recruited to deal with social/gender, sanitary and hygiene, resettlement issues. Gender Focal Points (GFP) identified/nominated in all PIUs in charge of social/environment issues (combined responsibilities)

Ensure collection of sex-disaggregated baseline information and monitor and evaluate trends. Ensure inclusion of GAD issues in the social profile at implementation and completion phases

Activity 8 Sex- disaggregated baseline information available and M&E reports. Social/gender profile in the reports,

Activity 8 completed. The social sex-disaggregated baseline information (selected social indicators) was regularly collected by the gender specialists GAP monitoring was included in the social profile of the project. Information on economic employment, the number of employees of relevant sector organizations, the number of boys and girls in schools, the number of women receiving maternity leave allowances, the number and composition of households data regularly collected by the project and included in the reporting and socio-economic profiles.

Activity 9 Identify Gender focal points for adequate implementation, M&E of gender targets and GAP at PIU levels

Availability of GAD focal points in PIU during project implementation

Activity 9 completed. Gender Focal Points (GFP) identified/nominated in 3 PIUs (in Bukhara, Navoi and Termez) in charge of social/environment issues.

Ensure gender-balanced composition (and equal pay) of the staff in PPMU and PIU

Activity 10 Gender-balanced PPMU and PIU Number of women at decision making level

Activity 10 not completed. 4 out of 15 PCU staff (26%) are women working in the capacity of procurement specialist, water supply and wastewater specialist, social and environmental specialist, and office manager/interpreter.

Appendix 11 83


Activity 11 Capacity development training and consultation with EA, PPMU, and PIU on the implementation of the GAP

Progress toward meeting the GAP indicators and targets

Activity 11 completed. Progress toward meeting the GAP indicators and targets were reported regularly on a semi-annual basis.

GAD–Gender and Development; PPMU–program preparation and management unit; M&E–monitoring and evaluation; PIU–project implementation unit; UCSA–Uzbekistan Communal Services Agency, Makhalla–community based local organization; Khokimiyat–local government administration; WCU–Women's Committee of Uzbekistan (public organization Chaired by the Deputy Prime Minister).

84 Appendix 12

WATER SUPPLY AND SANITATION SECTOR OVERVIEW A. Territorial and Administrative Settings of the Country 1. Water Supply and Sanitation (WSS) sector operations are defined and structured along territorial and administrative settings. Uzbekistan is divided into fourteen administrative units (collectively, “provinces”):

- Republic of Karakalpakstan; - Tashkent city; - 12 viloyats (provinces)

2. These provinces are further divided into districts (tumans or rayons) and cities of republican, provincial or district significance, depending on their size and importance. Each of administrative units is headed by a municipal authority (khokimiyat), which comprises of a mayor (khokim), municipal council (kenghash) of elected deputies, and the apparatus. Thus, there is a Khokim of a province, which is appointed by the President of Republic of Uzbekistan and endorsed by the municipal council of the province; and a khokim of a city and/or district, which is appointed by the provincial khokim and endorsed by the municipal council of the city and/or district. The next level of administrative organization, below district and town levels, would be Village Conglomerations and Mahallas. These are semi-formal self-governing institutions typically run by elected “elders”. 3. Khokimiyat apparatus has a matrix organizational structure, with khokimiyat’s functional units being simultaneously a part of a corresponding national ministry. Thus, the Department on Finance of a Khokimiyat is simultaneously a territorial unit of the Ministry of Finance. The same is the case with the Ministry of Health, Ministry of Economy and Industry and other ministries. Such dual reporting arrangement embedded into the organizational structure of khokimiyats requires extensive inter-institutional cooperation in decision making, with continual involvement of central government institutions. Respectively, decision-making tends to be relatively centralized, with prevalence in top to down approach in reformation and development. 4. The Water Supply and Sanitation (WSS) services are considered to be a part of communal services, which historically had been governed primarily by municipal authorities. With the establishment of the Ministry of Housing and Communal Services in 2017, the primary sector governance responsibility has shifted to the central government, in particular, the ministry and its provincial departments. 5. Provincial khokimiyats are still responsible for the WSS sector of the province and report to the central government. The city/district/town level khokimiyats are responsible for the WSS sector within their domain and report to the provincial khokimiyats. B. Background and Context 6. The current WSS infrastructure of Uzbekistan for the most part was built in 1950s-1970s under the Soviet Union, often as a part of the state’s grand industrial and/or urban development plans. The height of investments into the WSS infrastructure came to the post-World War II period of reconstruction and development, with a gradual decline in volumes by 1980s. After the demise of the Soviet Union in 1991 financing for the WSS infrastructure development and upkeep has fallen into substandard levels, resulting in accelerated deterioration and decline. 7. The WSS infrastructure of the Soviet Union was characterized by the following features:

Appendix 12 85

- design of facilities with high energy intensity, based on the Soviet paradigm of heavily subsidized and respectively low-cost electricity;

- extensive government subsidies in the sector, with little regard to commercial aspects of operations;

- reliance on steal, asbestos pipes and other materials with a relatively short durability;

- preference for grand design projects, often with extensive and massive transportation of water to large distances;

- low priority for commercial viability and sustainability of operations, often at the expense of gravity driven solutions;

- prioritized attention to the WSS infrastructure of industrial and urban centers, and marginal attention to rural WSS, which were often left to discretion of state-owned collective farms;

8. Respectively, the Soviet-designed WSS infrastructure was ill-fitted to the realities of free market economy, with rapidly growing costs of electricity and declining government subsidies. After the independence, the already aged WSS infrastructure was chronically mismanaged, especially in terms of Operations and Maintenance, resulting in fastened infrastructure deterioration. 9. After the independence, responsibility for urban water supply operations was transferred to municipal authorities, which had neither means nor methods for proper management of the sector. Previously, the sector management was handled by the designated ministry, which did not transfer skills, know-how, and expertise to municipalities. Efficacy of the sector governance and management has respectively declined. 10. In rural areas, decline in the WSS operations was even more severe, due to dissolution of the state-owned collective farms, which were the institutional backbone of rural settings in the USSR. The replacing private farms had neither capacity nor interest in communal infrastructure development and upkeep. 11. ADB and other development partners provided assistance to Uzbekistan with sizeable and growing financing into the WSS infrastructure. However, given the scale and gravity of the underlying problems, the WSS infrastructure of Uzbekistan can still be characterized as dilapidated and flawed in design. C. Institutional Framework 12. Aged, flawed in design, and actively falling apart WSS infrastructure posed great challenges, requiring efficacious and capable institutional settings. However, for the first two decades of independence, institutional settings of the sector were weak, with nominal technical lead from the Uzbekistan Agency for Communal Services. Until 2015, the country had 131 water utilities with occasionally overlapping mandates, varied scales and capabilities, and no clear public reporting arrangements. 13. Starting from 2015, the government realized inadequacy of the institutional framework of the sector and had initiated series of reforms. The Cabinet of Ministers Resolution No. 306 dated 30 October 2015 consolidated all water utilities of the country into 14 provincial utilities and 4 inter-regional water mains. The Decrees of the President of the Republic of Uzbekistan No. UP-5017 and No. PP-2900 dated 18 April 2017 established the Ministry for Housing and Communal Services (MHCS) to enable centralized and systematic sector governance and management. The

86 Appendix 12

current reform progress in the WSS sector is outlined in the section below. Here it would suffice to summarize that the institutional framework of the sector historically has been weak and is currently under development. D. The Sector Performance and Issues 14. The WSS sector of Uzbekistan could be characterized with the following features:

- decrepit and obsolete infrastructure; - ineffective and often fundamentally flawed infrastructure design; - water utilities with unsustainable financial position and performance, heavily

dependent on the government support and subsidized financing from the IFIs and donor organizations;

- low level, quality and reliability of services; - prevalence of archaic methodological approaches and technological tools; - low level of effectiveness and efficiency in operations; - ow level of technological and operational discipline; - severe and widespread capacity deficiencies;

15. Most importantly, the water utilities are locked in the vicious circle arresting their development. The vicious circle comprises of the following self-entertaining phases with continual destructive effects. 16. Context-less Minimalism, whereas the regulatory oversight of the sector is primarily focused on keeping tariffs and subsidies on the levels of the “necessary minimum”, without considering adequately the operational context, especially in terms of asset management and performance management. This phenomenon arose during the first decades of independence due to the leadership vacuum on technical aspects of operations and the substandard institutional framework. 17. Institutional Dystrophy, whereas utilities find themselves chronically and severely undersupplied with resources in all areas of operations, including critical aspects of operations. Protracted operations with severely constrained means and resources had starving effect on institutions, systematically and continually undermining functionality and viability of the utilities. Unreasonable scarcities in levels of remuneration, financing for operational equipment and tools, management systems and other critical aspects of operations had lasting detrimental effect on the water utilities. 18. Institutional Degradation, whereas underpaid, underequipped and unmotivated human resources, archaic management systems, and systematically neglected technical capabilities result in lasting system failures. At this stage institutional deterioration reaches critical points of no return, with permanent loss of perspective and faith in rational and responsible mode of operations. The utilities befall into dysfunctional and dystopian regimes, immune to constructive influences. 19. Financial Pitfalls, whereas utilities stop making sense as commercial going concerns. Collapsing control environment, discipline, diligence, and efficacy in operations preclude sound revenue management and prudent cost controls. This phenomenon inevitably leads back to the Institutional Dystrophy phase, effectively locking the vicious circle. 20. Disruption of the vicious circle with comprehensive and well-coordinated reform measures would be critically and strategically important for the sector’s development and sustainability.

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Attempting reforms without transforming the vicious circle into the virtuous circle of continuous improvements would be futile and for naught. E. Current Reforms in the Sector 21. The government’s recent reform in the WSS sector commenced in 2015 and had the following phases:

- institutional framework overhaul in 2015; - sector governance overhaul in 2017.

22. Currently the government is initiating the next phase, relating to adoption of Public-Private Partnership (PPP) arrangements in the WSS sector. This phase is still at the early stages of development, although the government’s priorities and ambitions about PPP prospects had been widely popularized. F. Institutional Framework Overhaul 23. The Cabinet of Ministers Resolution No. 306 consolidated the 131 WSS utilities of the country into 18 enterprises with standardized organizational structure. The decree further introduced a broad set of reforms in the sector, including:

- stock taking of regulations and development of the Program on the improvement of the regulatory framework of the WSS;

- development of the Concept of Comprehensive Development and Modernization of WSS systems of Uzbekistan till 2035;

- adoption of modern methods of utilities’ management by introducing Public Service Contracts for clear delineation of responsibilities between local state authorities and the utilities;

- adoption of Key Performance Indicators for monitoring performance of the utilities; - formulation of the uniform set of requirements for customer databases and billing

systems to be used in customer stock taking; - installation of modern meters at production sites, distribution hubs, and customer

connections; - delivery of annual training programs for water utility management and other key

personnel; - adoption by the utilities of Geographic Information Systems (GIS) “Asset

Management”; - universal adoption of billing system software at the utilities; - creation of appropriate information sources (Internet sites) for public accountability

and customer grievances; - adoption of Information Technology (IT) based solutions for Water Balance

reporting; - broad information campaign with regular reporting in mass media and the Internet

on content and purpose of reforms in the WSS sector. 24. Not all the measures of the COM Resolution 306 were completed by targeted dates, but the decree had some groundbreaking accomplishments, including:

- complete overhaul of the institutional framework, with consolidation of disperse small water utilities into larger, more capable and more manageable institutions.

- instituting service mandate for water utilities across the country. Previously, water utilities intuitively defined service zones at own discretion, leaving out of the WSS service mandate many rural areas.

88 Appendix 12

- instituting proper context for operations, including asset and performance management considerations. Previously such conceptual notions were not covered by legislation of the country.

- necessitating a comprehensive reform of the regulatory framework. G. The WSS Sector Governance Overhaul 25. In April 2017, the government established a number of new institutions with extensive sector governance mandates:

- The Ministry of Housing and Communal Services (MHCS); - The State Inspectorate for Control on Usage of Drinking Water under the Cabinet

of Ministers; - The Bureau of Enforcements under the General Prosecutor's Office; - The National Agency for Project Management; - The State Committee for Investments; - The Ministry of Investments and Foreign Trade

26. The Ministry of Housing and Communal Services (MHCS). The MHCS was instituted by the Decrees of the President of the Republic of Uzbekistan No. UP-5017 and No. PP-2900 dated 18 April 2017. The Ministry’s structure includes:

- The MHCS of the Republic of Karakalpakstan, Departments on Housing and Communal Services at provinces and Tashkent City, with branch offices at district and city levels;

- Agency Kommunhizmat (CSA), formerly known as Uzbekistan Communal Services Agency (UCSA), which was the main the government body in overseeing the WSS sector and implementing IFI-financed projects, prior to creation of the MHCS;

- The Inspection on Control in Exploitation of Multistory Buildings; - State Owned Enterprises:

- Engineering Company on Construction of Multistory Buildings and Heating Facilities;

- Engineering Company on Construction of Water Supply and Sanitation Facilities;

- Engineering Design Institute “Uzbekkommunalloyikhakurilish”; - Training and Methodology Centre “Kommunalukuv”; - Department for Management of the Inter-Regional Water Main Chimgan -

Charvak Recreation Zone at Tashkent Province; - Department for Management of Inter-Regional Water Main “Damkhodja”; - Research and Design Institute Joint Stock Company “TashuyjohLITI”.

27. The Ministry has a broad mandate, including:

- implementing uniform state policy and inter-regional coordination in sphere of housing and communal services;

- implementation of state programs on construction of affordable housing and facilities for water supply, sanitation, and heating services;

- monitoring technical conditions of multistory buildings, including undertaking capital and current repairs;

- coordination of activities of Household Owners Associations, including control and oversight of technical compliance with applicable norms and standards;

- design and implementation of programs on development, modernization and reconstruction of water supply, sanitation and heating infrastructure;

Appendix 12 89

- introduction into housing and communal services energy saving technologies and equipment, including installing modern metering devices;

- proposing improvements in the regulatory framework of housing and communal services, including adoption of modern international best practices;

- formulating, together with the Ministry of Finance, a tariff setting policy for water supply, sanitation and heating services;

- implementing series of measures on strengthening economic sustainability of utilities;

- proposing improvements in preparation of cadres, capacity building and enhancement measures, adoption of modern Information and Communication Technologies, etc.

28. The State Inspectorate for Control on Usage of Drinking Water under the Cabinet of Ministers. The Presidential Decree No. UP-5018 dated 18 April 2017 established the State Inspectorate for Control on Usage of Drinking Water under the Cabinet of Ministers (“Uzdavinspeksiya”). The inspectorate is the leading institution for strengthening control environment within the sector. It has branch offices across the country. The main objectives of the inspectorate are:

- ensuring compliance with applicable regulations, norms and standards in water supply and sanitation;

- conducting technical audits of the WSS infrastructure towards improving technological processes and energy efficiency;

- ensuring compliance with technical specifications and conditions for WSS network connections, and prevention of unauthorized connections;

- monitoring conditions and usage of the WSS infrastructure, including efficacy of preventive measures and compliance with norms on water losses;

- conditions and usage of ground water wells. 29. The Bureau of Enforcements under the General Prosecutor's Office. Inadequate financial position and performance of natural monopolies had been subject to the government’s intensive scrutiny for a number of years. After numerous unsuccessful attempts to improve fiscal discipline and commercial performance by institutional reforms and changes in management at the utilities’ level, the government decided to establish the central collection agency with extraordinary powers. 30. The Presidential Decree No. UP-5059 “On Further Measures for Strengthening Payment Discipline in Supply and Consumption of Electric Power and Natural Gas, and On Fundamental Reform of Collection Administration” dated 29 May 2017 stipulated the creation of the Bureau of Enforcements under the General Prosecutor's Office (the Bureau). Pursuant to the Clause 41 of the Decree No. UP-5059 the Bureau was tasked with the following rights and responsibilities:

- inspection of completeness and correctness of accounting for supply, consumption and timely payment for services, without the need to coordinate such inspections with the Republican Council on Coordination of Activities of All Controlling Bodies2;

- issuance of mandatory collection orders3 on bank accounts of delinquent customers, who are legal entities or private entrepreneurs;

1 Subsequently, the Presidential Decree No. UP-5241 dated 16 October 2017 made this clause applicable to water

and wastewater services as well. 2 Practically all other government auditors, including tax inspectors, are required to coordinate their inspection with

this Committee. 3 Such collection orders are mandatory for executing by all commercial banks of the country.

90 Appendix 12

- issuance of mandatory orders to employers to withhold from employees’ salaries up to two monthly minimum wages towards payments for communal services incurred by an employee;

- charging customers’ plastic cards up to two monthly minimum wages per months for the rendered services;

- demanding from ministries, agencies, other organizations, and citizens information, required for control and monitoring of energy consumption, as well as completeness and timeliness of payments;

- issuing to physical and legal entities mandatory orders for settlements of debts; - applying financial sanctions to legal entities for violations of rules of service; - issuing orders to ministries, agencies, and other organizations, including self-

governing associations, to eliminate reasons and/or conditions enabling violations in supply and consumption of communal services, as well as to sanction public influence on delinquent customers;

- disconnecting customers from service networks in cases of delinquency, non-compliance with mandatory orders, theft, and illegal connections;

- reconnecting previously disconnected customers upon elimination of non-compliances;

- applying administrative sanctions to persons responsible for violation of rules of service;

- monitoring metering, controlling and accounting devices and systems. 31. The Presidential Decree No. PP-3016 dated 30 May 2017 “On Organization of Activity of the Bureau Enforcements under the General Prosecutor's Office of the Republic of Uzbekistan” stipulated that the Bureau is the independent law enforcement agency under auspices of the General Prosecutor’s Office. The head of the Bureau is appointed by the President of Uzbekistan. The decree further expanded mandate of the Bureau to include:

- undertaking search and surveillance activities; - monitoring accounting of customers, consumptions, billings, and payments; - applying sanctions to public officers, who are not ensuring timely and proper

implementation of projects and programs on adoption of modern automated systems of control and accounting;

- regular meter readings; - applying sanctions to public officers violating rules of service, billing and collection; - analyzing and summarizing prevailing practices in billings and collections; - issuing mandatory orders to government institutions and other organizations,

public officials and ordinary citizens; - entering facilities of debtors, including residential housing, offices and storage

facilities, with application of force, if necessary, and with the right to unseal vaults and storages, in presence of attending witnesses;

- entering facilities not belonging to debtors in case of availability of either a documentary evidence linking the debtor to the facilities or the court order;

- arrest, seizure, custody, valuation and sale of property and monetary funds of debtors;

- summoning persons of interest; - charging fees, penalties and expenses relating to collection of debts; - publishing wanted lists; - Imposing temporary bans for travels abroad.

Appendix 12 91

32. The Bureau’s mandate was further expanded by the Presidential Decree No. UP-5241 issued on 16 November 2017 “On Measures of Cardinal Reformation of Payment Discipline in Water Supply and Sanitation Services”, to include:

- Exposing and preventing illegal connections and usage of services; - Ensuring full and timely payments for rendered services; - Monitoring implementation of management information systems for billing.

33. The Presidential Decree No. UP-5241 required utilities by the middle of January 2018 to lay off their collection officers, with transfer of collection functions to the Bureau. Respectively, the Bureau became the sole institution entrusted with billing and collection for all communal services, making it de factor the centralized collection agency. The reform is still at a relatively early stage, and many procedures and instructions required for effective operations have not yet been established. 34. The National Agency for Project Management under the President of the Republic of Uzbekistan (NAPM). The NAPM under the President of the Republic of Uzbekistan was instituted by the Decrees of the President No. UP-5120 “On Measures for Implementation of Systems of Project Management in the Republic of Uzbekistan” dated 24 July 2017 and the Decree of the President No. PP-3150 “About Organization of Activities of the National Agency for Project Management under the President of the Republic of Uzbekistan” dated 27 July 2017. Initially, the NAPM had extraordinary broad and powerful mandate. By early 2019, the NAPM’s role was streamlined with new mandates, including development of digital economy and blockchain as well as the management of projects in Djizzak province. 35. The Ministry of Investments and Foreign Trade (MIFT). The MIFT was established by the Decree of the President of Uzbekistan No. UP-5643 dated 28 January 2019. “On Measures to Improve the Management System in the Areas of Investment and Foreign Trade”. The MIFT has territorial units across the country at the provincial, district and city/town levels. The ministry is responsible for:

- implementation of the uniform investment policy of the state; - coordination of investment projects with direct foreign investors and the IFIs; - forming and coordinating the uniform state policy on foreign trade and international

economic cooperation; - coordinating preparation of regional and sectoral development concepts; - development and implementation of strategies for exports promotion; - efficient usage of resources mobilized with foreign loans and technical assistance

programs; - liaising with investors and protecting their interests; - organizing monitoring of foreign trade and investment activities with regular

analysis and public reporting on the “Investment Portal”; - investigating impediments to investments and international trade, including

problems with implementation of investment projects; - a broad range of other tasks related to international investment and trade.

36. The MIFT’s primary mandate is coordinating and formulating a uniform investment policy of the country, as well as overseeing investment programs and projects. Respectively, the MIFT has a pivotal role in managing investment activities of the utilities, liaising with the IFIs in formulation and implementation of investment projects, staffing and supervising project implementation units, participating in key capacity in tender committees, and in other investment related activities.

92 Appendix 12

37. Other Governing Bodies. The WSS sector is subject to routine oversight by various ministries, including the Ministry of Health overseeing drinking water quality, the State Committee on Ecology and Environmental Protection overseeing emissions and pollutants, the State Committee for Assistance to Privatized Enterprises and Development of Competing conducting oversight over natural monopolies and other state bodies. These institutions have also been intensifying their oversight within the government’s general efforts for strengthened discipline and control environment. H. Current Institutional Set-up of Water Utilities 38. Provincial utilities are state-owned enterprises established pursuant to the COM Resolution 306 by amalgamation of all water utilities in the province. They have branches, which are utilities at city and district levels offering urban and rural water supply and sanitation services. 39. District and city level branches vary significantly in size and capacity, depending on serviced territory and population base. The COM Resolution 306 contains prescribed organizational structures for district and city level utilities.

1. Accounting and Financial Management 40. Accounting is centralized at the provincial level and is computerized using local software, typically based on the Russian software “1S”. The branch offices have own accounting personnel handling: payrolls, inventories, fixed assets and depreciation, accounts receivables, and accounts payables. Accounting departments of provincial utilities and their branches are connected by the network. The utilities produce financial statements per National Accounting Standards, which resemble International Financial Reporting Standards (IFRS). 41. Financial management is handled by the Financial and Economic Analysis Department, which produces annual business plans, quarterly and monthly projections. On the revenue side the planning is based on estimated demand volumes and approved tariffs. The remaining projections are mostly based on extrapolation of historic trends. The two main budgeting tools of the utility are:

- Business Plans produced annually, containing annual plans of activities and budgets;

- Monthly disbursement plans, subject to review and approval by the MHCS. 42. Every provincial utility has one main accumulating bank account for all inflows, and one current account for outflows. Provincial utilities also have auxiliary bank accounts for accumulating funds towards loan repayments. Each of the branch offices has two accounts for inflows (one for payments from residential customers, and another for payments from institutional customers) and the separate bank account for disbursements, limited to salaries and miscellaneous expenses. The flowchart of funds between the accounts is presented below.

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Figure 1. Fund Flows of Water Utilities 43. Most of outgoing payments of the branch offices are handled by provincial utilities. The provincial utilities' bank accounts are monitored in real time by provincial departments of the MHCS and the Bureau of Enforcements under the General Prosecutor's Office. In order for a provincial utility to be able to disburse funds from its account, it should submit monthly budget proposals to a provincial department of the MHCS and should receive preapprovals for disbursements.

2. Billing and Collection 44. Prior to 2018 provincial and district level utilities used various billing solutions, including “FoxPro” billing software for residential customers, “Water Bill” for legal entities, billing software developed based on 1S accounting software, and Excel based tools. Some software was provided free of charge by Tashkent City Water Utility. The software was rather obsolete, especially “FoxPro”, which appeared to be developed for DOS operating system. 45. Starting from 2018 all utilities in the country began adopting the new billing software “Water Control”, which was developed within the ADB funded project covering 26 districts in 8 provinces of Uzbekistan. However, per terms of the contract with the software developer, the license owner of the billing software is the MHSC. The ministry provided the software to all utilities of the country with instructions for its adoption into use. 46. The main server of the “Water Control” billing system is based at the premises of the MHCS in Tashkent. Utilities personnel and all other users of the billing system are operating under remote access modality, based on the level of authorization assigned to them. Presumably, the Bureau will be regularly testing completeness of customer databases within the “Water Control” system by comparison with customer databases of electricity and other utility providers.

3. Asset Management 47. Utilities do not have hydraulic models of their networks, and most do not have Geographic Information Systems. Assets are tracked only within the accounting system. 48. Repair works are primarily based on reactive practices. The central dispatcher collects information on breakages and technical faults, which the repair crews and technicians should

District or City Branch

Monthly Expenses

Budget

Main

Accumulative Account

Accumulative Account for Residential

Customers

Accumulative Account for

Institutional Customers

Disbursement Account

P r o v i n c ia l

D e p a r t m e n t o f

M H S C

Monthly Budget

Proposal

Expenses of

the Branch

Utility

Approved

Budget

Na

tio

na

l A

ge

nc

y

for

Pro

jec

t

Imp

lem

en

tati

on

Salary,

Miscellaneous

Expenses

Monthly Budget

Proposal

Approved

Budget

The Bureau of

Enforcements under the

General Prosecutor’s Office

Provincial

utility

Expenses of the TPS:

Salary,

Miscellaneous

Expenses

Current

Account

Payments

from

Customers

94 Appendix 12

respond to. There are no comprehensive schedules of O&M activities for preventive maintenance and service.

4. Public Accountability and Grievances Systems 49. Provincial utilities report primarily to the MHCS, with additional reporting to the municipality. All utilities also provide reports to tax and statistics authorities. There are no public reporting arrangements. The grievances system is archaic, reliant on telephone calls to the despatchers and walk-in complaints. At the moment, the Virtual Reception of the President of the Republic of Uzbekistan, commonly referred to as “the portal”, appears to be the only functional grievances redress system in place.

5. Performance Management System 50. The Performance Management based on 33 Key Performance Indicators (KPIs) was introduced by the Ministry of Finance in 2016, as a part of the annual Business Plan preparation and approval processes. Such KPI reports are still prepared annually, mostly by inertia. There does not appear to be an interested target audience for such KPI-based reporting, nor decision-making modality using KPIs as inputs. In general, performance management is still handled primarily by intuitive means. 51. There are no formal service zones established for each branch utility and/or for each of the networks. Service obligations to a particular territory are defined intuitively and somewhat ambiguously. 52. Continuity and reliability of water supply, especially in rural areas, does not appear to be systematically tracked and monitored. The same relates to quality of water supplied and other parameters of operations.

6. Management Information Systems (MIS) 53. All utilities have networks connecting headquarters and branch offices in real time. The basic Information and Communication Technologies (ICT) are in place, although in a rather simple and underdeveloped format. MIS hardware and lines of communication are in need of modernization and capacity enhancement.

7. Human Resources Management 54. The Department of Cadres handles human resources management using means and methods mostly based on old Soviet practices. Such practices primarily focus on ensuring compliance of employment and related paperwork with regulatory requirements. 55. Apart from obsolete methodological approaches, the main impediment for effective human resources management is low level of salaries. The average salary at a water utility in 2018 was around 800 thousand soum (about USD 100), with the General Director salary around 2.5 million UZS (approximately USD 300). Incentive payments and additional social benefits are negligible. Such levels of remuneration would not afford attraction of qualified professionals, given the cost of living in Uzbekistan. Utilities face particular difficulties with staffing positions requiring higher education and substantial work experience, such as senior accountants, economists, lawyers, and senior WSS specialists.

Appendix 12 95

56. Annual performance evaluation forms are not used. Every five years the utility’s personnel are subjected to attestation by external committees of regulators. I. INSTITUTIONAL SETTINGS OVERVIEW 57. The current institutional settings are defined by transitional volatility and uncertainty. The main regulatory institutions are still in the process of establishing core operational modalities. The utilities are still in process of finalizing amalgamations and entailing institutional realignments. The sector governance framework and ideology are still under deliberation. Massive paradigm-shifting change management processes are in progress in the WSS sector, warranting respective considerations. J. PROGRESS ACHIEVED WITH REFORMS 58. The WSS sector reforms have already yielded considerable improvements, including:

- consolidation of 131 water utilities of the country into 18 larger, more manageable enterprises;

- comprehensives stock tacking of customers, resulting in substantially improved customer databases;

- strengthening public accountability of utilities by mandating systematic reporting to the MHCS and other public institutions;

- strengthening fiscal discipline and transparency over billing and collection practices by creating the national Bureau on Collection Enforcements;

- adopting regular reporting on Key Performance Indicators, financial and operating parameters;

- overhauling practices on annual budgeting, external budget reviews, and business planning;

- modernizing management systems based on Information and Communication Technologies, especially in billing, collection, financial management, and asset management.

59. Prior to the reforms, the utilities were operating under closed information circuits, with only insiders in the utility having access to reliable information on quality and scale of the utility’s operations. The reforms have introduced open information circuits on utility operations, with authoritative external audiences continually present and active in overseeing performance of the utilities. Respectively, transparency and accountability of operations, as well as the general control environment have improved significantly. Nevertheless, the reforms are still at a relatively early stage of development, requiring greater efforts and investments for turning around the WSS sector into a sustainable and well-performing one. 60. The Presidential Decree No. 4040 dated 30 November 2018 “On Further Measures in Development of Water Supply and Sanitation Sector of Uzbekistan” instituted the following priority areas for development of the WSS sector:

- Gradual implementation of advanced international practices in management and operation of water utilities, including PPP modalities;

- Adoption of modern IT and energy saving technologies, as well as comprehensive metering of all customers;

- Design, construction and rehabilitation of wastewater systems simultaneously with works on drinking water supply systems;

96 Appendix 12

- Strengthening financial sustainability of water utilities by adoption of the new tariff setting policy enabling full cost recovery and attraction of private sector investors;

- Improving the system for preparing, retraining and improving human resources based on best international practices.

61. The Presidential Decree No. 4040 inter alia instituted:

a. series investment programs funded from various sources; b. upscaling successes with community managed rural water utilities piloted within

SECO projects in Andijan, Namangan, Syrdarya and Ferghana provinces; c. adopting PPP schemes in Samarkand, Bukhara, Namangan and Karshi cities; d. exception from all custom duties and taxes, except for the social security charge,

for companies participating in PPP contracts. 62. The Cabinet of Ministers Decree No. 309 “On Measures for Improving the System for Calculating, Declaring (Validating) and Setting Tariffs for Water and Wastewater services” was adopted on 13 April 2019. The decree was prepared with technical assistance from the World Bank and instituted the new approach and protocols for tariff setting, based on best international practices. K. SECTOR REFORM AGENDA 63. In general, the WSS sector of Uzbekistan is in a dire state and is facing major challenges. The government is fully aware of the situation and is commanding a massive reform initiative with instrumental support from a number of the ADB projects. In particular, the MHCS is finalizing the WSS Sector Development Concept formulated within the ADB TA 9481-UZB: Water and Sanitation Strategy Development and Capacity Building. Based on the WSS sector assessment undertaken within the TA the following initiatives had been identified for the policy dialogue and reform assistance in Uzbekistan: 64. Institutionalizing proper operational context by segregation of asset management from performance management. Specifically, it is recommended:

- To concentrate operations of provincial utilities on asset management and foreign debt service;

- Outsourcing utility operations by means of Performance Based Contracts (PBC) to district level utilities, town or village units of district level utilities, private operators, water-user associations or other operators;

- Directing the Bureau of Enforcements under the General Prosecutor's Office, which handles collections for all communal services, to allocate funds between the provincial utility (for asset management and debt service), the operator, and sanitary control laboratories independently contracted for water quality monitoring;

65. Adopting modern international best practices in human resource management, including:

- Substantially improved remunerations and incentives system, enabling development and sustainment of professionalism, diligence and constructive motivation;

- Certification of operators of networks and treatment plans; - Continuous training and capacity development with various grades of

qualifications; - Adopting standardized operational procedures and modalities.

Appendix 12 97

66. Extensive modernization of managerial and operating systems, especially in terms of: - Geographic Information Systems (GIS); - Hydraulic modelling; - SCADA; - Management Information Systems for billing and accounting; - Performance management; - Public accountability.

67. Enabling Public-Private Partnership (PPP) arrangements for attracting investments into the sector and improving performance of utilities. 68. Instituting efficacious public accountability system towards emancipation of customers, communities and the public in general in oversight of utilities and operators. 69. Refining and improving tariff setting methodology in line with international best practices.

uzbekistan: water supply and sanitation services ... · completion report project number: 42489-023...

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