Report and Recommendation of the President to the Board of Directors Project Number: 50022-002 April 2017 Proposed Results-Based Loan and Technical Assistance Grant Republic of Uzbekistan: Affordable Rural Housing Program Distribution of this document is restricted until it has been approved by the Board of Directors. Following such approval, ADB will disclose the document to the public in accordance with ADB’s Public Communications Policy 2011.
Transcript
Report and Recommendation of the President to the Board of Directors
Project Number: 50022-002 April 2017
Proposed Results-Based Loan and Technical Assistance Grant Republic of Uzbekistan: Affordable Rural Housing Program Distribution of this document is restricted until it has been approved by the Board of Directors. Following such approval, ADB will disclose the document to the public in accordance with ADB’s Public Communications Policy 2011.
CURRENCY EQUIVALENTS (28 April 2017)
Currency unit – sum (SUM)
SUM1.00 = $0.00027
$1.00 = SUM3,706.22
ABBREVIATIONS ADB
ARHP DLI ESMS FPR MMU MOE MOF NBU PAP QQB QQI RBL
– – – – – – – – – – – – –
Asian Development Bank Affordable Rural Housing Program disbursement-linked indicator environmental and social management system financing for prior results management and monitoring unit Ministry of Economy Ministry of Finance National Bank of Uzbekistan Program Action Plan Qishloq Qurilish Bank Qishloq Qurilish Invest results-based lending
SARHP TA
– –
State Affordable Rural Housing Program technical assistance
NOTE
In this report, “$” refers to US dollars.
Vice-President W. Zhang, Operations 1 Director General S. O’ Sullivan, Central and West Asia Department (CWRD) Country Director T. Konishi, Uzbekistan Resident Mission (URM) Team leaders A. Sumbal, Principal Economist (Public Finance), URM
M. Hodge, Economist (Public Finance), CWRD Team members M. Ajmeera, Senior Social Development Specialist (Safeguards), CWRD
B. Gafurov, Senior Private Sector Development Officer, URM M. Khudayberdiyeva, Senior Social Development Officer (Gender), URM
A. Qadir, Principal Counsel, Office of the General Counsel L. Raquipiso, Senior Economics Officer, CWRD
N. Rive, Climate Change Specialist, CWRD M. Sual, Operations Assistant, CWRD
F. Teves, Project Analyst, CWRD T. Tran, Senior Environment Specialist, CWRD Peer reviewers S. Shakil, Senior Education Specialist, East Asia Department
J. Torres, Senior Financial Sector Specialist (Capital Markets & Infrastructure), South Asia Department
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 PROGRAM AT A GLANCE
I. THE PROPOSAL 1
II. THE PROGRAM 1
A. Strategic Context 1 B. Program Rationale 1 C. Program Scope 4 D. Program Results 5 E. Expenditure Framework and Financing Plan 7 F. Capacity Development and Program Action Plan 8 G. Technical Assistance 8 H. Implementation Arrangements 9
III. SUMMARY OF ASSESSMENTS 9
A. Program Technical Assessments 9 B. Program Systems Assessments 10 C. Integrated Risk Assessment and Mitigating Measures 11
IV. ASSURANCES 12
V. RECOMMENDATION 12
APPENDIXES
1. Design and Monitoring Framework 13 2. List of Linked Documents 16 3. Disbursement-Linked Indicators, Verification Protocols, and Disbursement Schedule 17
5. Poverty and SDG Targeting Location ImpactGeographic TargetingHousehold TargetingSDG Targeting
NoYesYes
Rural High Urban Low
SDG Goals SDG8, SDG11
6. Risk Categorization: Complex.
7. Safeguard Categorization Environment: B Involuntary Resettlement: C Indigenous Peoples: C.
8. Financing
Modality and Sources Amount ($ million)
ADB 500.00 Sovereign Results Based Lending (Regular Loan): Ordinary capital resources 500.00
Cofinancing 0.00 None 0.00
Counterpart 563.60 Beneficiaries 175.20 Government 239.80 Others 148.60
Total 1,063.60Note: An attached technical assistance will be financed on a grant basis by the Technical Assistance Special Fund
(TASF-6) in the amount of $750,000; Government in the amount of $50,000.
I. THE PROPOSAL
1. I submit for your approval the following report and recommendation on a proposed results-based loan to the Republic of Uzbekistan for the Affordable Rural Housing Program (ARHP or the “program”). The report also describes proposed technical assistance (TA) for the ARHP, and if the Board approves the proposed loan, I, acting under the authority delegated to me by the Board, approve the TA.1 2. The proposed ARHP will support a portion of the Government of Uzbekistan’s State Affordable Rural Housing Program (SARHP),2 which aims to improve the quality of life in rural areas of Uzbekistan through rural housing construction, employment generation, and private sector development. The ARHP will focus on rural housing financing and on leveraging institutional improvements in the associated sectors. 3 Under the ARHP, three state-owned banks will provide loans to construct at least 29,000 dwelling units in nine regions of the country. The construction will be undertaken by private contractors and supervised by (i) a state-owned engineering company, Qishloq Qurilish Invest (QQI), (ii) the State Design Institute, Qishloq Qurilish Loyiha, and (iii) the State Committee for Architecture and Construction.
II. THE PROGRAM
A. Strategic Context
3. Sector strategy. The SARHP is guided by the national goal of rural development and improved quality of life in rural areas.4 Although rural incomes have increased in nominal terms (2013–2015) with average annual inflation of 9.8%, especially among the poor,5 poverty rates remain higher in rural (17.3%) than in urban (10.6%) areas. Unemployment is a concern, given continuing population growth, returning migrants, and the agricultural sector’s limited labor absorption capacity. 6 The SARHP is a proven government strategy for generating rural employment through housing construction and public–private partnerships for social and market infrastructure development.7 The government provides incentives for small and medium-sized enterprises and promotes local manufacturing hubs for construction materials. B. Program Rationale
4. Despite high economic growth in recent years8 and reduced aggregate poverty levels,
1 The design and monitoring framework is in Appendix 1. 2 Officially (translated from Russian) the “Program for Construction of Affordable Housing with Upgraded Standard
Designs in Rural Areas, 2017–2021.” 3 The Asian Development Bank (ADB) provided program preparatory technical assistance for the Supporting
Affordable Rural Housing Program (TA 9108-UZB). 4 Presidential Resolution No. 1957 (17 April 2013): Accelerated Development of the Service Sphere in Rural Areas
2013–2016. The state rural housing program, initiated in 2009 and authorized annually by presidential resolution, was supported by ADB from 2012–2015 through a multitranche financing facility. ADB. 2011. Report and Recommendation of the President to the Board of Directors for the Proposed Multitranche Financing Facility to the Republic of Uzbekistan for the Housing for Integrated Rural Development Investment Program. Manila.
5 During 2013–2015, average rural incomes increased by 21.8% per annum, and by 26.6% per annum in the lowest quintile of the household income distribution (State Committee on Statistics).
6 In 2014–2015, 330,000 migrant workers returned to Uzbekistan. ADB. 2016. Asian Development Outlook. Manila. 7 Each 10,000 houses constructed under the state rural housing program created an estimated 150,000 jobs,
including 44,600 in construction. Government of Uzbekistan, Ministry of Economy. 2014. Housing Sector–Brief Report. Tashkent, p. 22.
8 The economy grew by 8% in 2015, the ninth consecutive year of expansion at 8% or higher.
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the disparity between rural and urban poverty continues to widen. The agricultural sector’s share of gross domestic product continues to decline, which is reflected in the share of the workforce employed in the sector. The situation is exacerbated by an increasing rural labor force from new entrants and returning labor migrants from the Russian Federation. Rural housing conditions are generally of a lower quality compared to urban accommodation. Rural housing is on average smaller, older, and has more occupants due to multi-family arrangements in a single location. In 2014, only 50% of rural housing had direct access to potable water, 9% had sanitary human waste disposal, 26% had modern heating, and 72% had access to natural gas. 5. SARHP addresses these development problems in three broad ways:
(i) Inclusive growth and rural job creation centered on agglomeration economies. The earlier rural housing clusters, built with Asian Development Bank (ADB) support, have grown into thriving communities with local industries and small and medium-sized enterprises. 9 Expanding mortgage lending and other financial products into rural areas has benefitted financial sector growth and small entrepreneurs, including women. Other benefits include significant employment generation (footnote 7) and a strengthened construction industry.
(ii) Affordability. This is addressed by: (a) introducing smaller and lower-cost designs for dwelling units, including duplexes and apartments; (b) applying the ARHP beneficiary selection criteria (para. 19[i]); (c) allowing co-borrowers, based on the Uzbek tradition of financial burden sharing by extended families; and (d) benefit transfers, whereby the government provides land at no cost, bears the cost of associated infrastructure, and provides income tax exemption for loan repayment. These measures make the dwelling units affordable for vulnerable low-income and single-parent families.
(iii) Improved rural well-being. The SARHP improves access to improved water and sanitation, provides modern cooking and heating facilities, lowers the health risks faced by rural households, and brings other social benefits (para. 30), helping to retain social sector professionals in rural areas.
6. The government has requested a loan of $500 million from ADB’s ordinary capital resources to finance a portion of the SARHP during 2017–2021. The 2016–2018 Uzbekistan country operations business plan includes the proposed ARHP.10 Within the 2012–2016 country partnership strategy for Uzbekistan, the ARHP contributes to industrial and private sector development and the creation of jobs for women and men.11 7. Housing for Integrated Rural Development Investment Program (HIRDIP). In 2009, the government started a rural housing program to improve the living conditions of rural residents and provide jobs. To support this program, ADB approved a multitranche financing facility (MFF) in 2011.12 Under the MFF, ADB provided $500 million in financial intermediation loans to fund the issuance by participating commercial banks of loans to targeted creditworthy
9 Incentives include tax exemption privileges for vocational graduates for the first 6 months of private
entrepreneurship. 10 ADB. 2015. Country Operations Business Plan: Uzbekistan, 2016–2018. Manila. 11 ADB. 2012. Country Partnership Strategy: Uzbekistan, 2012–2016. Manila. 12 ADB. 2011. Report and Recommendation of the President to the Board of Directors on the Proposed Multitranche
Financing Facility for the Republic of Uzbekistan: Housing for Integrated Rural Development Investment Program. Manila.
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borrowers to purchase new homes in rural areas.13 8. Results-based lending. The ARHP encompasses a number of elements that cut across sectors, i.e. construction of new dwelling units in compliance with national quality standards; screening of eligible applicants to target low-income and vulnerable families; provision and management of mortgage financing; improved procurement systems; and effective program management and monitoring. The need to align the incentives and ensure effective coordination among the multiple entities involved in the program (Appendix 4) is considered critical for program success. Results-based lending (RBL), through use of disbursement-linked indicators (DLIs), therefore is the most suitable lending modality for the ARHP. 9. RBL is also the best instrument for the ARHP because: (i) the government is strongly committed to the program and has demonstrated the capacity to plan and execute large programs; (ii) it incentivizes the government to ensure institutional improvements by linking disbursements to a diverse set of indicators, including the achievement of gender targets, appropriate adaptation measures for climate change risks, the institutional strengthening of key government agencies, and the implementation of improvements in the government’s procurement procedures, as well as the completion of physical outputs; (iii) by focusing on achieving results, which requires greater engagement and attitudinal changes from all stakeholders, the RBL modality enhances coordination among all stakeholders; (iv) it removes the need for ADB to monitor annually hundreds of small-value and small-scale transactions, discrete activities, and expenditures, which would incur extremely high transaction costs in an investment project; and (v) ADB’s experience and knowledge of the rural housing sector in Uzbekistan lays a technically sound and robust basis for the first RBL for the country. 10. The ARHP design reflects the following lessons learned in implementing the HIRDIP MFF:14 (i) the government has an extremely strong commitment; (ii) the demand for dwelling units is high; (iii) the construction targets are met each year; (iv) the use of ADB procurement procedures increases transaction costs significantly; (v) procurement weaknesses can be reduced through capacity building; and (vi) the MFF modality is not suitable for construction periods of less than one year.
11. Value of ADB interventions. ADB interventions will complement the government’s efforts and add value through: (i) improved sustainability of rural housing financing; (ii) institutional strengthening of procurement systems and of government planning and monitoring systems; and (iii) incorporation of climate change risk assessments into the rural housing sector and capacity building of regional governments on climate change risk factors and site selection.
12. The ARHP will contribute to rural housing financing sustainability by requiring each of the three banks participating in the ARHP to have a portfolio of state rural housing loans in which not more than 10% of the total principal amount of such loans is delinquent more than 90 days. 13. The program will strengthen the governance, transparency, and efficiency of government
13 Loans of $200 million, $200 million, and $100 million were approved in 2011, 2013, and 2015, respectively. ADB.
2013. Periodic Financing Request Report for the Republic of Uzbekistan: Housing for Integrated Rural Development Investment Program (Project 2). Manila; ADB. 2015. Periodic Financing Request Report for the Republic of Uzbekistan: Housing for Integrated Rural Development Investment Program (Project 3). Manila.
14 ADB. 2016. Completion Report: Housing for Integrated Rural Development Investment Program (Tranche 1) in Uzbekistan. Manila.
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procurement systems that encompass the broader SARHP. For example, as part of the procurement action plan, new standard bidding documents and bid evaluation report templates based on improved procurement procedures will be issued. In addition, an e-procurement system for the selection of local contractors will be introduced. 14. The program envisages improving the governance and financial management capacity of the construction supervisor, QQI, by designing and implementing an action plan and conducting regular audits throughout program implementation. The audits will include information regarding the entire SARHP. 15. Climate change risk is not presently taken into account in selecting housing sites. As part of the ARHP, a government institution (Uzhydromet)15 will assess the climate change risk of proposed sites and participate as a member of site selection commissions, with relevant expertise and support provided by ADB if required. As part of the process, potential climate change adaptation measures will be identified so they can be incorporated into dwelling unit designs.
16. Alignment with ADB strategic priorities. The government’s strategy of expanding rural employment opportunities through infrastructure aligns well with the strategic priorities of ADB for 2014–2020, notably inclusive economic growth through infrastructure development, financial inclusion, private sector development through public–private partnerships, and enhanced gender equity.16 C. Program Scope
17. The ARHP will support a portion of the SARHP in the following regions: Bukhara, Fergana, Karakalpakstan, Kashkadarya, Khorezm, Namangan, Samarkand, Surkhandarya, and Tashkent. Three banks will provide mortgage financing for the construction of dwelling units under the ARHP: Ipoteka Bank, National Bank of Uzbekistan (NBU), and Qishloq Qurilish Bank (QQB).17 The scope of the SARHP and the RBL program are summarized in Table 1. The ARHP will exclude activities that would be classified as category A for environmental impacts or category A or B for involuntary resettlement impact under ADB’s Safeguard Policy Statement (2009) (SPS) and activities that would involve procurement of works, goods, and services under contracts whose estimated value exceeds specified amounts.18
Table 1: Program Scope Item SARHP ARHP
Outcome Increased number of rural families meeting the social equity criteria benefit from affordable housing
Increased number of rural families meeting the social equity criteria benefit from affordable housing constructed in accordance with national quality
15 Uzhydromet is the Center of Hydrometeorological Service under the Cabinet of Ministers of the Republic of
Uzbekistan. 16 ADB. 2014. Midterm Review of Strategy 2020: Meeting the Challenges of a Transforming Asia and Pacific. Manila. 17 Mortgage loans will have a tenor of 15 years and a grace period for principal repayment of 3 years; bear interest at
rates of 7% for the first five years and not less than the refinancing rate of the Central Bank of Uzbekistan (currently 9%) for the remaining 10 years. The government will extend long-term loans to the banks to provide them with funds to make the mortgage loans.
18 The amounts are currently $50 million equivalent or more per contract for procurement of works, turnkey and supply, and installation contracts; $30 million equivalent or more per contract for procurement of goods contracts; $20 million equivalent or more per contract for information technology or non-consulting services contracts; and $15 million equivalent or more per contract for consulting services contracts. ADB. 2013. Piloting Results-Based Lending for Programs. Manila, para. 66. These amounts may change from time to time.
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Item SARHP ARHP
constructed in accordance with national quality standards
standards
Key outputs 75,000 dwelling units and associated infrastructure, employment creation, private sector partnerships, provision of social and market infrastructure
29,000 dwelling units and associated infrastructure. Beneficiary selection, site selection, and housing construction in accordance with social equity criteria and national quality standards. Improved policies and systems for the rural housing sector. Strengthened program management and performance monitoring.
Geographic coverage
Rural areas in all 13 regions Rural areas in nine regions: Bukhara, Fergana, Karakalpakstan, Kashkadarya, Khorezm, Namangan, Samarkand, Surkhandarya, and Tashkent
Participating banks
Asaka Bank, Ipoteka Bank, NBU, QQB, Uzpromstroybank (Industrial and Construction Bank), and Xalq Bank (People's Bank)
Ipoteka Bank, NBU, and QQBa
Program expenditure
$2,725 million $1,064 million of which: Government: $240 million (23%) Homeowners: $175 million (16%) Commercial banks: $149 million (14%) ADB: $500 million (47%)
Implementation Period
2017–2021 2017–2021
ADB = Asian Development Bank, ARHP = Affordable Rural Housing Program, NBU = National Bank of Uzbekistan, QQB = Qishloq Qurilish Bank, RBL = results-based lending, SARHP = State Affordable Rural Housing Program. a All three banks have passed integrity and anti-money laundering due diligence. Sources: Asian Development Bank and Ministry of Economy.
D. Program Results
18. Results-based lending program impact and outcome. The impact of the ARHP is aligned with improved quality of life in rural areas of Uzbekistan by providing affordable housing. The outcome of the ARHP will be an increased number of rural families meeting the social equity criteria (para. 19[i]) benefit from affordable housing constructed in accordance with national quality standards. Quality housing means that the dwelling units meet government standards with completed infrastructure for associated services, notably roads, improved sanitation, clean piped water, electricity, and gas. 19. Program outputs. The design and monitoring framework (Appendix 1) includes the following outputs:
(i) Output 1. Beneficiary selection, site selection, and housing construction are in accordance with social equity criteria and national quality standards. This output addresses social equity and transparency concerns in beneficiary selection. Among creditworthy applicants, priority will be given to low-income families, families with a disabled person, single parents, those living in crowded houses, and renters. Periodic audits of the selection process will ensure adherence to the criteria. Under output 1, the program will also support the issuance of mortgage loans, incorporation of climate change risk assessment into site selection, the construction of dwelling units, quality assurance of the construction process, and coordination of onsite infrastructure and services.
(ii) Output 2. Improved policies and systems for the rural housing sector. This output supports institutional strengthening, enhanced sustainability, and improved governance. The program will work with the government and the participating banks to enhance asset quality in bank loan portfolios and improve the gender sensitivity of bank strategies and policies. Based on a procurement system assessment, the program will strengthen the governance, transparency,
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and efficiency of government procurement systems for the program and the broader SARHP. The governance and financial management capacity of QQI will be strengthened through an action plan and regular audits.19
(iii) Output 3. Strengthened program management and performance monitoring. This output will strengthen the capacity and mandate of the Ministry of Economy (MOE) to track key performance indicators and manage and coordinate the program across the different entities involved.
20. Disbursement-linked indicators. The government and ADB have selected eight DLIs from the design and monitoring framework (Table 2). Each DLI was selected to evaluate achievement of a critical project element, from targeting and loan application to the eventual outcome. The outcome indicator (DLI 1) will track the new dwelling units built under the ARHP in accordance with national quality standards for rural families who meet social equity criteria.20 DLI 2 will monitor the issuance of mortgage loans to the targeted beneficiaries. DLI 3 will provide incentives to increase the share of women home buyers over 2018–2021. DLI 4 will ensure that climate change risk assessments are incorporated into site selection for the ARHP by supporting a government institution (Uzhydromet) to assess the proposed sites and identify adaptation and mitigation measures. DLI 5 contributes to rural housing financing sustainability by supporting bank reforms and reducing nonperforming state rural housing loans. DLI 6 will strengthen governance and financial management in QQI through an action plan and regular audits, which will also benefit the broader government program. DLI 7 will improve the government procurement system for the SARHP and the program, through annual targets for strengthening governance, transparency, and efficiency. DLI 8 will improve management and performance monitoring. 21. DLIs 4–8 will lead to improved quality and sustainability of rural housing construction.21 Quality assurance of the construction process will be tracked using government standards and systems. Indicators linked to financing for prior results (FPR) relate to the improved procurement procedures (FPR 1) and program planning and management (FPR 2) (Appendix 3).
22. Disbursement allocation and schedule. Financing under the loan will be disbursed subject to the verification of achievement of targets for each DLI. The amount allocated to each DLI (Table 2) depends on its importance. Verification mechanisms and protocols were established according to the nature of the DLIs. The protocols allow partial disbursement for certain DLIs and specify whether late or early achievement is allowed (Appendix 3).
Table 2: Disbursement-Linked Indicators
Indicator
Disbursement Allocated
($ million)
Share of Total ADB
Financing (%) DLI 1. By 2021, at least 29,000 habitable dwelling units are constructed
in accordance with national quality standards for rural families meeting the social equity criteria.
168.0 33.6
DLI 2. By 2021, at least 29,000 mortgage loan agreements are executed with the selected beneficiaries for the construction of habitable
95.0 19.0
19 QQI, established in 2009, is a state-owned construction company with a supervisory board of government
representatives. It is responsible for supervising the construction of houses under the state rural housing program. 20 See verification protocols (Appendix 3) and paras 18 and 19(i) for definitions of national quality standards and
social equity criteria. 21 The selection of these five DLIs is consistent with the midterm review recommendation to include more
institutional-strengthening DLIs. ADB. 2016. Midterm Review of Results-based Lending for Programs. Manila.
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Indicator
Disbursement Allocated
($ million)
Share of Total ADB
Financing (%) dwelling units.
DLI 3. By 2021, the average share of women among home buyers in the ARHP is increased to at least 30%.
15.0 3.0
DLI 4. By 2021, climate change risk assessments are an integral part of the site selection process under the ARHP.
40.0 8.0
DLI 5. By 2021, Ipoteka Bank, NBU, and QQB implement policies and actions to improve their collection procedures and governance structure.
25.0 5.0
DLI 6. By 2021, governance and financial management and institutional capacity of QQI are strengthened through a time-bound action plan relating to accounting, financial reporting, and internal and external audits.
57.0 11.4
DLI 7. By 2021, the procurement action plan for the SARHP and the ARHP is fully implemented.
70.0 14.0
DLI 8. By 2021, the program management and performance monitoring system is strengthened.
30.0 6.0
Total 500.0 100.0
ADB = Asian Development Bank, ARHP = Affordable Rural Housing Program, DLI = disbursement-linked indicator, NBU = National Bank of Uzbekistan, QQB = Qishloq Qurilish Bank, QQI = Qishloq Qurilish Invest engineering company, SARHP = State Affordable Rural Housing Program. Sources: Asian Development Bank, Ministry of Economy, and Ministry of Finance.
E. Expenditure Framework and Financing Plan
23. Program expenditures. The SARHP program expenditures are estimated to be $2,725 million during 2017–2021, including an estimated $1,064 million in ARHP expenditures in 2018–2021 (Table 3).
Table 3: Summary of Program Expenditure Framework, 2017–2021 ($ million)
Total 2,445.6 100.0% 278.1 100.0% 2,724.7d 100.0% 1,063.6d 100.0% ARHP = Affordable Rural Housing Program, SARHP = State Affordable Rural Housing Program. Note: Numbers may not sum precisely because of rounding. Percentages may not total 100% because of rounding. a Includes $0.72 million for the management and monitoring unit (MMU) at the Ministry of Economy. b Includes $0.02 million for the MMU. c Includes $0.26 million for the MMU. d Includes $1 million in expenses for the MMU to be financed from the ADB loan. Sources: Ministry of Economy and Ministry of Finance, recalculated by ADB.
24. Program financing. The government has requested a regular loan of $500,000,000 from ADB’s ordinary capital resources to help finance the program. The loan will have an 18-year term, including a grace period of 3 years; an annual interest rate determined in accordance with ADB’s London interbank offered rate (LIBOR)-based lending facility; a commitment charge of 0.15% per year; and such other terms and conditions as are set forth in the draft loan
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agreement. Based on the straight-line method, the average maturity is 10.75 years and there is no maturity premium payable to ADB. Table 4 summarizes the financing plan. The government may request advance financing from time to time.22 A disbursement of 7.0% ($35 million) will be made for financing prior results,23 which are to be achieved not earlier than 12 months before the signing of the loan agreement, and which will support the initial actions required to achieve the 2017 and 2018 DLIs. A number of development partners are in the process of financing the SARHP. ADB will work with all partners to capture their inputs as collaborative cofinancing.
Table 4: Program Financing Plan ($ million)
Source
SARHP ARHP
Amount Share Amount Share
Home buyers (down payments and additional payments)a
476.6 17.5%
175.2 16.5%
Government of Uzbekistan (state budget and state-owned enterprises)b, c 1,071.4 39.3% 239.8 22.5%
Commercial banks (mortgage loan financing)d 376.7 13.8% 148.6 14.0% Development partners Asian Development Bank
Ordinary capital resources (loan) 500.0 18.4% 500.0 47.0% Islamic Development Bank 300.0 11.0% - -
Total 2,724.7 100.0% 1,063.6 100.0%
ARHP = Affordable Rural Housing Program, SARHP = State Affordable Rural Housing Program. a Down payments vary from at least 15% for the two lower cost designs to at least 25% for the two higher cost
designs. Additional payments are transaction costs associated with formal loan documentation, such as notary fees. b Joint Stock Company (JSC) Uzbekenergo for electricity, JSC Uztransgaz for gas supply, and the Republican Road
Fund under the Cabinet of Ministers of the Republic of Uzbekistan for road construction. c The government is discussing two $30 million loans with the Kuwait Fund for Arab Economic Development. These
loans, which are expected to be approved in 2017 and 2018, would co-finance water supply and road infrastructure.
d The amount of each mortgage loan provided by the banks will not exceed 1,000 times the minimum monthly wage set by the government.
Source: Ministry of Economy and Ministry of Finance, recalculated by ADB.
25. Disbursement arrangements. The MOE will submit to ADB evidence on DLI achievement according to the verification protocols. ADB will then arrange for verification of the achievements. Once verified, the Ministry of Finance (MOF) will submit a withdrawal application for release of loan proceeds, which will be disbursed to the bank account(s) specified by the MOF. F. Capacity Development and Program Action Plan
26. The program action plan (PAP) outlines actions to help achieve the DLIs by strengthening capacity and addressing constraints and risks identified through the technical and system assessments conducted during program preparation. The PAP includes actions relating to performance monitoring, procurement, financial management and oversight, environmental management, gender, and capacity strengthening for climate risk assessments. G. Technical Assistance
27. Technical assistance (TA) is estimated to cost $800,000, of which $750,000 will be
22 In order to meet its financing needs, the government is expected to request advance financing of $20 million in
2017 and $30 million in 2018. 23 Ceilings are 25% for advance financing and 20% for financing for prior results. The combined outstanding balance
of advance financing and amount of financing for prior results will not exceed 30% of the loan.
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financed on a grant basis by ADB’s Technical Assistance Special Fund (TASF-6). The government will support the TA in the form of counterpart staff, logistics support, office accommodation, and other in-kind contributions. The TA will fund consultants to (i) independently verify DLI achievement; (ii) provide technical support to QQI in implementing its action plan to strengthen governance and financial management capacity; (iii) help the government implement the procurement action plan; and (iv) assist the government in monitoring safeguards compliance, the environmental and social management systems (ESMSs) of the implementing agencies (para. 36), the PAP, the gender-related DLIs (DLI 2, 3, and 8), and the other indicators. The TA will be implemented from June 2017 to March 2022. The MOE will be the executing agency of the TA. H. Implementation Arrangements
28. The MOE will be the executing agency, while QQI, Ipoteka Bank, NBU, and QQB will be the implementing agencies (Appendix 4). The MOE will be given the mandate to coordinate the ARHP across different ministries and entities. As requested by the MOE, and as a condition of DLI 8 achievement, a dedicated management and monitoring unit (MMU) will be established within the MOE to monitor the ARHP and regularly report on the DLIs, non-DLI indicators, and PAP actions. Close cooperation will be maintained with the MOF, which will lead financial reforms, and the State Committee for Architecture and Construction, which will lead procurement reforms.
III. SUMMARY OF ASSESSMENTS
A. Program Technical Assessments
29. Program soundness, results, and efficiency. Assessments showed that the design of the ARHP is sound, the program outcome is based on a robust results chain, and the DLIs mark critical points in the results chain. The dwelling units are deemed the most cost-effective strategy to achieve the national priority of rural well-being and employment. The program’s institutional reforms will lead to greater transparency, efficiency, and cost savings in the rural housing sector. 30. Economic and social analysis. The benefits from the program at the outcome level are improved well-being (increased living space, cleaner environment, and pleasure in ownership), and increased economic output and employment. A comparative economic analysis of the ARHP and the SARHP concluded that an annual $100 million investment in rural housing by ADB in the program would lead to an additional 20,718 person-years of employment per year, including 6,165 in the construction sector.24 The ARHP will have other social benefits: (i) the alleviation of rural housing shortages and crowding; (ii) clean piped water and toilets with septic tanks,25 providing health benefits by reducing disease;26 (iii) energy-efficient components in construction to alleviate the impact of temperature extremes;27 and (iv) modern heating and cooking facilities with natural gas, to lighten women’s work burden and avoid harmful solid fuels
24 Program Soundness Assessment (available from the list of linked documents in Appendix 2). 25 Nationwide, only 26% of the rural population have access to piped water. (World Health Organization and UNICEF.
2013. Progress on Sanitation and Drinking Water−2013 Update). 26 A. Prüss-Ustün et al. 2014. Burden of disease from inadequate water, sanitation, and hygiene in low- and middle-
income settings. Tropical Medicine and International Health. 19(8): pp. 894–905. 27 For example, locally produced insulation materials in walls, ceilings, and floors and double glazed plastic windows.
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linked to respiratory diseases.28 The SARHP enjoys strong political support29 and there is high demand for dwelling units from the rural population. The government’s investment in the SARHP is less than 1.0% of gross domestic product and the high level of benefit transfers can be maintained in the medium term. 31. Gender. The ARHP is classified as effective gender mainstreaming. The ARHP’s annual public information campaign will have a focus on women. Three of the eight DLIs have a gender element. At least 25% of the mortgage loans issued under the program each year must be issued to women (DLI 2), and over 2018–2021, the average share of mortgage loans issued to women must be at least 30% (DLI 3). Banks participating in the ARHP will implement a gender strategy to improve outreach to women and enhance women’s role in bank management. The MMU will monitor the progress of the ARHP towards gender targets (DLI 8). B. Program Systems Assessments
32. Monitoring and evaluation system. An assessment of monitoring and evaluation (M&E) systems for the SARHP identified key actions to address weaknesses. The SARHP M&E operates through three systems: (i) the QQI system for procurement and construction; (ii) real-time bank information systems for mortgage loans; and (iii) the management information system under the Cabinet of Ministers to monitor the entire SARHP, including social and market infrastructure. The MMU and MOE’s new mandate (para. 28) will ensure effective M&E across these three systems. 33. Fiduciary systems. ADB conducted financial assessments and financial management assessments of the implementing agencies. All four agencies have the financial capacity to execute their roles in the SARHP. QQI, the main implementing agency for the ARHP, will ensure close technical coordination; oversee site selection and procurement of construction materials and civil works; undertake effective construction supervision of dwelling units, roads, and on-site infrastructure; and ensure timely delivery of the SARHP and the ARHP. The financial management action plan resulting from the assessments focuses on QQI and will provide assurance to the government on the quality of QQI's expenditures. Key actions include developing an internal audit manual, implementing a comprehensive staff training program, and adopting a code of ethics. The action plan will be regularly monitored and updated as required. External audits of QQI will be conducted annually (DLI 6). QQI’s capacity will be strengthened to enable it to implement the required changes. 34. A procurement risk assessment of the SARHP procurement system identified risks linked to transparency, capacity, and efficiency. Mitigating measures incorporated in DLI 7, and agreed among QQI, the MOE, and the State Committee for Architecture and Construction, include (i) an improved procurement procedure; (ii) measures to strengthen the procurement capacity of the government, QQI procurement staff, and tender commission members; (iii) institutionalization of training arrangements on procurement, contract management, and construction supervision; and (iv) measures to ensure greater transparency and efficiency of the procurement and contract management process, including construction materials procurement. 35. The Guidelines to Prevent or Mitigate Fraud, Corruption, and Other Prohibited Activities in Results-Based Lending for Programs were explained to and discussed with the government
28 World Health Organization. 2016. Fact sheet No. 292. Household air pollution and health. 29 Presidential Resolution No. 2639 (21 October 2016).
11
and the MOE.30 36. Safeguard systems. Construction of dwelling units will take place only on vacant land owned by the government, on sites selected by regional commissions. The sites will be screened against environmental, social, and climate change risks using a screening checklist in the ESMS manual.31 No land will be acquired and no one will be displaced physically or economically in anticipation of ADB funding or during implementation. The loan is classified as category C for involuntary resettlement and indigenous peoples and B for environment. QQB, NBU, and Ipoteka Bank will sign mortgage loans with home buyers. A program safeguard systems assessment, prepared with stakeholder consultation, has identified gaps between the national environmental regulatory framework and the SPS. The program safeguard action plan, which forms part of the PAP, will address these gaps. An ESMS manual has been developed to guide the MMU and the implementing agencies. NBU and QQB have ESMSs in place, while QQI and Ipoteka Bank will establish ESMSs acceptable to ADB. The attached TA will provide capacity-building assistance to the MMU and the implementing agencies to ensure effective operations of the ESMS in compliance with the SPS. The ARHP will exclude all environment category A activities and category A and B involuntary resettlement activities. Uzbekistan has no indigenous peoples. 37. The ARHP will introduce climate change risk assessment in site selection. Climate change risks will be assessed by Uzhydromet, which will become a member of the site selection commissions. This is designed to ensure the identification and avoidance of sites that may be at high risk and vulnerable to major threats; in cases with no alternatives, climate change adaptation and mitigation measures will be put in place to ensure resilience to climate change. C. Integrated Risk Assessment and Mitigating Measures
38. Major risks and mitigating measures are summarized in Table 5. The overall benefits and impacts are expected to outweigh the risks and costs.
Table 5: Summary of Integrated Risk Assessment and Mitigating Measures
Risks Ratings Key Mitigating Measures Results. Dwelling units may not reach the intended beneficiaries, while poor coordination and monitoring may impede achievement of results.
Substantial Beneficiary selection criteria will be implemented (DLIs 1 and 2). A mandate will be given to the MOE to coordinate, with a dedicated MMU charged with M&E (DLI 8).
Fiduciary (financial management). QQI’s internal audit is nonfunctional, and its financial statements are inadequate in terms of transparency, quality, and consistency. Its external audit is undertaken by a licensed local firm according to national standards, which are not fully aligned with International Standards on Auditing.
Substantial A plan to address these shortcomings will be fully implemented and monitored, including the strengthening of the internal audit unit and the conduct of external audits by an auditor acceptable to ADB.
Staffing. QQI has no certified or qualified accountants among its accounting staff and no operational training program. It has no code of ethics or guidance to staff on implementing relevant standards.
High QQI will develop and implement enhanced qualification requirements for accounting staff, systematic training, and a code of ethics.
Fiduciary (procurement). There is limited Substantial The procurement action plan (DLI 7) includes
30 ADB. 2013. Piloting Results-Based Lending for Programs. Manila, Appendix 7. 31 Environmental and Social Management System Manual (available from the list of linked documents in Appendix 2).
12
Risks Ratings Key Mitigating Measures competition among civil works contractors. Uncompetitive and nontransparent procurement arrangements are used for procurement of construction materials and equipment. Contracts are awarded to unqualified contractors and suppliers. Contracts are not effectively managed. Potential conflicts of interest and other potentially fraudulent and corrupt practices may not be detected.
to high more efficient contract packaging to improve competition; improved procurement procedures, including transparency and efficiency in procurement of construction materials; training on good practices; more efficient monitoring of construction progress and invoice processing; and better M&E of the performance of suppliers, manufacturers, and contractors. The QQI website will be made functional and SCAC will improve the system for registration of contractors and handling complaints. Contract opportunities and awards will be publicly posted.
Safeguards (environment). Neither QQI nor Ipoteka Bank has an ESMS to ensure compliance with environmental safeguards. ZVOS reports (national reports equivalent to IEEs) are inadequate.
Moderate QQI and Ipoteka Bank will each develop and effectively implement an ESMS. Technical assistance will be provided to QQI to ensure that it can operate its ESMS effectively and adequately deliver and monitor environmental safeguard performance.
Overall RBL program risk Substantial ADB = Asian Development Bank, ESMS = environmental and social management system, IEE = initial environmental examination, M&E = monitoring and evaluation, MMU = management and monitoring unit, MOE = Ministry of Economy, QQI = Qishloq Qurilish Invest state engineering company, RBL = results-based lending, SCAC = State Committee for Architecture and Construction, ZVOS = initial environmental examination report. Note: Risk factors are assessed against two dimensions: (i) the likelihood that the risk will occur, and (ii) the impact of the risk on the outcome. Rating scale: low = low likelihood and low impact; moderate = substantial to high likelihood but low to moderate impact; substantial = low to moderate likelihood but substantial to high impact; and high = high likelihood and high impact. Source: Asian Development Bank.
IV. ASSURANCES
39. The government and the MOE have agreed with ADB on certain covenants for the program, which are set forth in the loan agreement.
V. RECOMMENDATION
40. I am satisfied that the proposed results-based loan would comply with the Articles of Agreement of the Asian Development Bank (ADB) and recommend that the Board approve the loan of $500,000,000 to the Republic of Uzbekistan for the Affordable Rural Housing Program, from ADB’s ordinary capital resources, in regular terms, with interest to be determined in accordance with ADB’s London interbank offered rate (LIBOR)-based lending facility; for a term of 18 years, including a grace period of 3 years; and such other terms and conditions as are substantially in accordance with those set forth in the draft loan agreement presented to the Board. Takehiko Nakao President 28 April 2017
Appendix 1 13
DESIGN AND MONITORING FRAMEWORK
Impact the RBL Program Is Aligned with Improved quality of life in rural areas of Uzbekistan by providing affordable housinga
Results Chain Performance Indicators with Targets and
Baselines
Data Sources and
Reporting Risks
Outcome Increased number of rural families meeting the social equity criteria benefit from affordable housing constructed in accordance with national quality standards
a. By 2021, at least 29,000 habitable dwelling units are constructed in accordance with national quality standardsb for rural families meeting the social equity criteriac (2016 baseline: 0 additional dwelling units). b. By 2021, the average share of women among home buyers in the ARHP is increased to at least 30% (Baseline: 2011–2015 five-year average: 23%).
a. QQI, Ipoteka Bank, NBU, QQB, MOE b. Ipoteka Bank, NBU, and QQB
Slower than projected economic growth lowers demand in rural areas.
Output 1. Beneficiary selection, site selection, and housing construction are in accordance with social equity criteria and national quality standards
1a. By 2021, at least 29,000 mortgage loan agreements are executed with the selected beneficiariesc for the construction of habitable dwelling units (2016 baseline: 0 additional mortgage loans). 1b. By 2017, an amendment to Annex 1 of Inter-agency Resolution No. 2464 is issued with Uzhydromet as member of the regional commissions for site selection (2016 baseline: none). 1c. By 2021, 100% of sites for construction of the ARHP dwelling units are screened by Uzhydromet for climate change risks (2016 baseline: 0) 1d. By 2021, 100% of housing construction met national quality standards (2016 baseline: 100%). 1e. By 2021, at least 604 additional km of roads are built or upgraded according to government standards, for access to and within new rural housing complexes. (2016 baseline: 0 additional km). 1f. By 2021, at least 29,000 additional households: (i) are connected to electricity, (ii) have access to gas for cooking or heating, and (iii) are connected to a piped water supply. (2016 baseline: 0 additional households)
Dwelling units may not reach the intended beneficiaries, while poor coordination and monitoring may impede achievement of results Institutional bottlenecks and inertia associated with political factors may delay changes required for achievement of results relating to institutional reforms.
Output 2. Improved policies and systems for the rural housing
2a. By 2020, at least 2 independent directors are on the supervisory boards of at least 2 out of 3 banks participating in the ARHP (2016 baseline: 1 director in 1 bank).
2a. MOF, CBU, Ipoteka Bank, NBU, and QQB 2b. CBU,
14 Appendix 1
Results Chain Performance Indicators with Targets and
Baselines
Data Sources and
Reporting Risks sector 2b. By 2019, Ipoteka Bank, QQB, and NBU each
has a portfolio of state rural housing loans not more than 10% of the total principal amount of which is delinquent more than 90 days (2016 baseline: Ipoteka Bank: 4%; NBU 2%; QQB 10%). 2c. The government’s rural housing budget allocation and actual expenditure for 2017 and onwards are published on a government website by 31 December of each year (2016 baseline: None). 2d. By 2018, gender policies are implemented by Ipoteka Bank, NBU, and QQB (2016 baseline: NBU and QQB have initiated implementation). 2e. By 2017, a time-bound action plan to improve governance, financial management, and institutional capacity of QQI is approved by the government (2016 baseline: NA).d 2f. From 2017, QQI’s annual financial statements and related audit reports are posted on QQI’s website within 6 months of the end of the financial year (2016 baseline: NA) 2g. By 2018, an annual updated list of construction materials and procurement methods in compliance with the improved procurement procedures of the SARHP is issued by the government (2016 baseline: None). 2h. By 2017, a resolution which (i) sets out improved principles and procedures for procurement under the SARHP; and (ii) prescribes the procedures (using market-based criteria) for identification of construction materials and modes of procurement is issued by COM (2016 baseline: None). 2i. By 2017, necessary procurement rules, regulations, or guidelines which: (i) include improved standard bidding documents for civil works and goods; and (ii) contain an improved bid evaluation manual are issued by SCAC.
Ipoteka Bank, NBU, and QQB 2c. MOF 2d. Ipoteka Bank, NBU, and QQB 2e and 2f. QQI, Supervisory Board, MOF, MOE, audit firm 2g. QQI, SCAC, MOE, COM 2h. COM 2i. SCAC
Output 3 Strengthened program management and performance monitoring
3a. By 2017, a detailed 5-year program with expenditure, financing, and results frameworks, site selection and beneficiary selection criteria, and climate change considerations is issued by the government (2016 baseline: None). 3b. By 2017, a Management and Monitoring Unit (MMU), under the MOE, with a mandate to undertake the monitoring and evaluation of the ARHP, is established by the government (2016 baseline: None). 3c. By 2017, a Coordination Committee comprising key responsible agencies is
3a and 3b. MOE 3c. COM
Appendix 1 15
Results Chain Performance Indicators with Targets and
Baselines
Data Sources and
Reporting Risks established to monitor and coordinate the implementation of the SARHP (2016 baseline: NA).
Key Program Actions 1. Output 1: Beneficiary selection, site selection, and housing construction are in accordance
with social equity criteria and national quality standards. 1.1 Post beneficiary selection criteria on government’s website by 1 May 2017. 1.2 Execute mortgage loans annually to finance construction of rural dwelling units (2018–2021). 1.3 Implement climate change risk assessments for all potential rural housing sites (2018–2021). 1.4 Implement construction of housing according to detailed 5-year government program (2018–2021). 1.5 Implement quality assurance of construction process on a regular basis by QQL, QQI, and SCAC
(2018–2021). 1.6 Implement construction of onsite infrastructure and services (roads, water, gas, electricity) (2018–
2021). 2. Output 2: Improved policies and systems for the rural housing sector 2.1 Initiate agreed reforms in banks (2017–2021). 2.2 Approve and implement gender policies (2017–2021). 2.3 Implement and monitor the QQI action plan aimed to improve corporate governance and financial
and institutional management at QQI (2017–2021). 2.4 Implement procurement reforms according to procurement action plan, including approval of
annually updated list of construction materials and procurement methods in compliance with the improved procurement procedures of the SARHP (2017–2021).
2.5 Implement contractor registration criteria and make them publicly accessible (2018–2021). 2.6 Institute more efficient contract packaging, with average size of a contract package not less than 12
dwelling units (2017–2021). 2.7 Implement procurement rules, regulations, or guidelines which: (i) include improved standard
bidding documents for civil works and goods; and (ii) contain improved bid evaluation manual issued by SCAC (2017–2021).
3. Output 3: Strengthened program management and performance monitoring 3.1 By 1 April 2017, issue detailed 5-year government program with financing and results frameworks as
defined. 3.2 Set up MMU in MOE with ICT-driven M&E system, prepare and implement 5-year and annual plans
for program management and M&E (2017–2021). Inputs Total RBL program financing: $1,063.6 million Government: $239.8 million Ipoteka Bank, NBU, and QQB: $148.6 million Home buyers: $175.2 million ADB: $500 million (ordinary capital resources) ADB $750,000 (TA Special Fund)
Assumptions for Partner Financing: Not applicable ADB = Asian Development Bank, CBU = Central Bank of Uzbekistan, COM = Cabinet of Ministers, DLI = disbursement-linked indicator, ICT = information and communication technology, km = kilometer, M&E = monitoring and evaluation, MMU = management and monitoring unit, MOE = Ministry of Economy, MOF = Ministry of Finance, QQI = Qishloq Qurilish Invest Engineering Company, QQL = Qishloq Qurilish Lohiya, RBL = results-based lending, SCAC = State Committee for Architecture and Construction, SARHP = State Affordable Rural Housing Program, TA = technical assistance. a Presidential Resolution No. 2812 (2 March 2017): On Additional Measures on Implementation of the Program for
Construction of Affordable Housing under Revised Standard Design in Rural Areas for 2017–2021 with Participation of the Asian Development Bank.
b National quality standards mean that the dwelling units meet national quality assurance standards in construction and that the dwelling units have access to electricity, gas, piped water, and improved sanitation facilities.
c Social equity criteria are met when from among creditworthy applicants, priority is given to (i) low-income families; (ii) families with a disabled person; (iii) single parents; (iv) those living in crowded houses; and (v) those who are currently renters.
d Table 1 in Appendix 3 provides details on baselines and targets, and on targets for prior results.
Sources: Asian Development Bank, Ministry of Economy, and Ministry of Finance.
16 Appendix 2
LIST OF LINKED DOCUMENTS http://www.adb.org/Documents/RRPs/?id=50022-002-3
1. Loan Agreement
2. Country Economic Indicators
3. Summary Sector Assessment: Rural Housing
4. Program Soundness Assessment
5. Program Results Assessment
6. Program Results Framework
7. Program Expenditure and Financing Assessment
8. Program Monitoring and Evaluation System Assessment
9. Program Fiduciary Systems Assessment
10. Program Safeguard Systems Assessment
11. Integrated Risk Assessment and Mitigating Measures
12. Program Action Plan
13. Attached Technical Assistance
14. Contribution to the ADB Results Framework
15. Development Coordination
16. Summary Poverty Reduction and Social Strategy
17. Program Implementation Document
Supplementary Documents
18. Economic Analysis
19. Environmental and Social Management System Manual
Appendix 3 17
DISBURSEMENT-LINKED INDICATORS, VERIFICATION PROTOCOLS, AND DISBURSEMENT SCHEDULE
Table 1: Disbursement-Linked Indicators
Results Indicators
Baseline and Year
2017 Prior Results
Indicators 2017
2018 2019 2020 2021
Outcome. Increased number of rural families meeting the social equity criteria benefit from affordable housing constructed in accordance with national quality standards. DLI 1. By 2021, at least 29,000 habitable dwelling units are constructed in accordance with national quality standards for rural families meeting the social equity criteria.a
0 additionalb
dwelling units (2016).
At least 7,250 dwelling units constructed.
At least 7,250 dwelling units constructed.
At least 14,500 dwelling units constructed.
DLI 3. By 2021, the average share of women among home buyers in the ARHP is increased to at least 30%.
Average share of women home buyers from 2011 to 2015 was 23%.
Average share of women among home buyers increased to at least 30%.
Output 1. Beneficiary selection, site selection, and housing construction are in accordance with social equity criteria and national quality standards.
DLI 2. By 2021, at least 29,000 mortgage loan agreements are executed with the selected beneficiaries for the construction of habitable dwelling units.
0 additional
mortgage loan agreements (2016).
Social equity criteria are developed and released on government’s website.
At least 7,250 mortgage loan agreements are executed with the selected beneficiaries, including at least 25% women home buyers.
At least 7,250 mortgage loan agreements are executed with the selected beneficiaries, including at least 25% women home buyers.
At least 7,250 mortgage loan agreements are executed with the selected beneficiaries, including at least 25% women home buyers.
At least 7,250 mortgage loan agreements are executed with the selected beneficiaries, including at least 25% women home buyers.
DLI 4. By 2021, climate change risk assessments
Climate change risk assessments are not part of
Uzhydromet has the mandate to participate in Site
To assess the climate change risk, Uzhydromet
To assess the climate change risk, Uzhydromet
To assess the climate change risk, Uzhydromet
To assess the climate change risk, Uzhydromet
18 Appendix 3
Results Indicators
Baseline and Year
2017 Prior Results
Indicators 2017
2018 2019 2020 2021
are an integral part of the Sitec selection process under the ARHP.
Site selection (2016).
selection as a member of the regional commissions.
screens the Sites for construction in 2018.
screens the Sites for construction in 2019.
screens the Sites for construction in 2020.
screens the Sites for construction in 2021.
Output 2. Improved policies and systems for the rural housing sector.
DLI 5. By 2021, Ipoteka Bank, NBU, and QQB implement policies and actions to improve their collection procedures and governance structure.
2016 baselines: Number of independent directors on supervisory boards: Ipoteka Bank 1 and QQB 0; Share of delinquent loansd in Ipoteka Bank, NBU, and QQB portfolios: Ipoteka Bank 2%, NBU 4%, and QQB 10%; Capital adequacy ratios of Ipoteka Bank, NBU, and QQB: Exceed the minimum specified by the CBU; Return on average assets ratios of Ipoteka Bank, NBU, and QQB: Exceed 0.5%.
Ipoteka Bank, NBU, and QQB each has (i) a portfolio of state rural housing loans in which not more than 10% of the total principal amount of such loans is delinquent more than the IFRS standard of 90 days; (ii) a capital adequacy ratio no less than the minimum specified by the CBU; and (iii) a ratio of return on average assets of not less than 0.5%.
At least two independent directors on the supervisory board of each of Ipoteka Bank and QQB.
Ipoteka Bank, NBU, and QQB each has (i) a portfolio of state rural housing loans in which not more than 10% of the total principal amount of such loans is delinquent more than the IFRS standard of 90 days; (ii) a capital adequacy ratio no less than the minimum specified by the CBU; and (iii) a ratio of return on average assets of not less than 0.5%.
DLI 6. By 2021, 2016: QQI (i) The (i) QQI’s (i) QQI’s annual (i) QQI’s annual (i) QQI’s annual
Appendix 3 19
Results Indicators
Baseline and Year
2017 Prior Results
Indicators 2017
2018 2019 2020 2021
governance and financial management and institutional capacity of QQI are strengthened through a time-bound action plan relating to accounting, financial reporting, and internal and external audits.
financial management system assessed and areas for improvement identified.
government approves a time-bound action plan to improve governance, financial management, and institutional capacity of QQI; (ii) QQI prepares and submits to MOE and ADB audited financial statements for 2016 that are in line with financial reporting standards acceptable to ADB; (iii) Internal Audit Unit submits quarterly reports to QQI’s Supervisory Board, based on its approved annual work plan; and (iv) Audit Committee set up under the Supervisory Board and is fully functional.
accounting manual updated and internal control guidelines developed and disseminated; (ii) QQI’s annual financial statements for 2017 that are in line with financial reporting standards acceptable to ADB are audited by independent auditors acceptable to ADB; and (iii) QQI’s financial statements and the related audit report are published on QQI’s website.
financial statements for 2018 that are in line with financial reporting standards acceptable to ADB are audited by independent auditors acceptable to ADB; and (ii) QQI’s financial statements and the related audit report are published on QQI’s website.
financial statements for 2019 that are in line with financial reporting standards acceptable to ADB are audited by independent auditors acceptable to ADB; and (ii) QQI’s financial statements and the related audit report are published on QQI’s website.
financial statements for 2020 that are in line with financial reporting standards acceptable to ADB are audited by independent auditors acceptable to ADB; and (ii) QQI’s financial statements and the related audit report are published on QQI’s website.
DLI 7. By 2021, the procurement action plan for the SARHP and the ARHP is fully implemented.
2016: Internationally accepted procurement principles and practices are not
(FPR 1) By 15 May 2017, COM issues a resolution which: (i) sets out improved principles and
SCAC issues necessary rules, regulations, or guidelines which include: (i) improved
(i) Annually updated list of construction materials and procurement methods is
(i) Clear and improved contractor registration criteria implemented and made publicly
(i) Annually updated list of construction materials and procurement methods is
(i) Annually updated list of construction materials and procurement methods is
20 Appendix 3
Results Indicators
Baseline and Year
2017 Prior Results
Indicators 2017
2018 2019 2020 2021
consistently applied. The average size of a contract package is 10 houses.
procedures for procurement under the SARHP; and (ii) prescribes the procedures (using market-based criteria) for identification of construction materials and modes of procurement.
standard bidding documents for civil works and goods; and (ii) improved bid evaluation manual.
approved in compliance with the improved procurement procedures of the SARHP; and (ii) more efficient contract packaging, with the average size of a contract package not less than 12 dwelling units.
accessible; (ii) annually updated list of construction materials and procurement methods is approved in compliance with the improved procurement procedures of the SARHP; and (iii) more efficient contract packaging, with the average size of a contract package not less than 12 dwelling units.
approved in compliance with the improved procurement procedures of the SARHP; and (ii) more efficient contract packaging, with the average size of a contract package not less than 12 dwelling units.
approved in compliance with the improved procurement procedures of the SARHP; and (ii) more efficient contract packaging, with the average size of a contract package not less than 12 dwelling units.
Output 3. Strengthened program management and performance monitoring.
DLI 8. By 2021, program management and performance monitoring system is strengthened.
2016: Government’s system for management and performance monitoring of all rural housing programs is fragmented and is unable to track the DLI indicators in a timely manner.
(FPR 2) (i) The government issues a detailed 5-year program with expenditure, financing and results frameworks, Site selection and beneficiary selection criteria, and climate change considerations; and (ii) the government establishes the Management and Monitoring Unit
MMU reports on time to MOE, MOF, and ADB on all DLIs, non-DLIs and Program Actions for 2018, including progress on achievement of the ARHP’s gender targets.
MMU reports on time to MOE, MOF, and ADB on all DLIs, non-DLIs and Program Actions for 2019, including progress on achievement of the ARHP’s gender targets.
MMU reports on time to MOE, MOF, and ADB on all DLIs, non-DLIs and Program Actions for 2020, including progress on achievement of the ARHP’s gender targets.
MMU reports on time to MOE, MOF, and ADB on all DLIs, non-DLIs and Program Actions for 2021, including progress on achievement of the ARHP’s gender targets.
Appendix 3 21
Results Indicators
Baseline and Year
2017 Prior Results
Indicators 2017
2018 2019 2020 2021
(MMU) under MOE, with a mandate to undertake the monitoring and evaluation of the ARHP.
ADB = Asian Development Bank, ARHP = Affordable Rural Housing Program, CBU = Central Bank of Uzbekistan, COM = Cabinet of Ministers, DLI = disbursement-linked indicator, FPR = financing for prior results, IFRS = international financial reporting standards, MMU = management and monitoring unit, MOE = Ministry of Economy, MOF = Ministry of Finance, NBU = National Bank of Uzbekistan, QQB = Qishloq Qurilish Bank, QQI = Qishloq Qurilish Invest engineering company, RBL = results-based lending, SARHP = State Affordable Rural Housing Program. a National quality standards mean that the dwelling units meet national quality assurance standards in construction and that the dwelling units have access to
electricity, gas, piped water and improved sanitation facilities. Meeting social equity criteria means that from among creditworthy applicants, priority is given to low-income families, families with a disabled person, single parents, those living in crowded houses, and renters.
b Baseline is zero for additional dwelling units, i.e., new dwelling units for 2018–2021. c “Site” means a site in Bukhara, Fergana, Karakalpakstan, Kashkadarya, Khorezm, Namangan, Samarkand, Surkhandarya, or Tashkent regions where dwelling
units under the ARHP will be constructed; and “Sites” means all of them. d Delinquent loans mean delinquent more than the IFRS standard of 90 days. Sources: Asian Development Bank, Ministry of Economy, and Ministry of Finance.
22 Appendix 3
Table 2: Disbursement-Linked Indicators and Verification Protocols
Disbursement-Linked Indicator Definition and Description of Achievement and
Verification Information Source Verification and
Procedure
DLI 1: By 2021, at least 29,000 habitable dwelling units are constructed in accordance with national quality standards for rural families meeting the social equity criteria.
2016 baseline: 0 additional dwelling units constructed Targets: 2019: Number of habitable dwelling units constructed is at least 7,250; 2020: Number of habitable dwelling units constructed is at least 7,250; 2021: Number of habitable dwelling units constructed is at least 14,500.
Definitions: “habitable dwelling units” mean dwelling units constructed under the ARHP which (a) meet the national quality standards for construction; (b) have access to electricity, gas, piped water, and improved sanitation facilities; and (c) have access roadsa to and within the Sites. “Site” means a site in Bukhara, Fergana, Karakalpakstan, Kashkadarya, Khorezm, Namangan, Samarkand, Surkhandarya, or Tashkent regions where dwelling units under the ARHP will be constructed; and “Sites” means all of them. “national quality standards” mean standards, norms, and regulations set by SCAC to govern construction in Uzbekistan, which will be enforced and monitored by QQI, QQL, and SCAC under the ARHP. QQI, QQL, and SCAC will regularly conduct Site visits of the ongoing construction, and will record their findings in the General Journal of Works. Upon completion of construction of each dwelling unit, SCAC Inspectorate will issue the “Technical Report on the Quality of Construction”, which will indicate whether the national quality standards have been met throughout construction. “improved sanitation facilities” mean sanitation facilities that are likely to ensure hygienic separation of human excreta from human contact. These include flush/pour flush (to piped sewer system, septic tank, pit latrine), ventilated improved pit (VIP) latrine, pit latrine with slab, and composting toilet. “social equity criteria” mean the criteria established by the government, which prioritize: (i) low-income families; (ii) families with a disabled person; (iii) single parents; (iv) those living in crowded houses; and (v) renters. Conditions for disbursement are met when the number of dwelling units constructed with loans from Ipoteka Bank,
Data for annual MOE/MMU reports to ADB will be drawn from the management information systems of QQI, Ipoteka Bank, NBU, and QQB.
MOE/MMU will confirm to ADB that the DLI is met and will attach the relevant reports drawn from the management information systems of QQI, Ipoteka Bank, NBU, and QQB. Verification of the DLI will be conducted by an IVA. Following the MOE/MMU confirmation, the IVA will verify the reported achievement for the DLI by: (a) checking QQI, Ipoteka Bank, NBU, and QQB databases; (b) conducting random sampling and spot checks to confirm that: (i) home buyers are prioritized using the social equity criteria; and (ii) dwelling units are constructed in accordance with national quality standards by reviewing construction records, including: (1) General Journal of Works; (2) SCAC Inspectorate’s Technical Reports on the Quality of Construction; and (3) the Commissioning Certificates for the dwelling units issued by the Regional Commissioning
Appendix 3 23
Disbursement-Linked Indicator Definition and Description of Achievement and
Verification Information Source Verification and
Procedure
NBU, and QQB are equal to or exceed the target specified for each year. Partial disbursement: The DLI is scalable and partial disbursement is allowed as long as 80% of the target for that year is achieved. Formula for partial disbursement:
Partial DLI disbursement = planned DLI disbursement for the year × actual achievement for the year / targeted achievement for the year. Example: Target: 7,250 habitable dwelling units Planned Disbursement: $55,000,000 Actual Achievement: 5,800 habitable dwelling units Partial DLI Disbursement: $44,000,000 = $55,000,000 × 5,800 / 7,250 Late or early achievement: Disbursements are allowed for early or late achievement of the DLI. This means that the planned disbursement amount for a given year can be released when the set target is fully achieved, even if the achievement is a year or more late, as long as the achievement is during the ARHP’s duration.
Committees; and (c) conducting focus group discussions with home buyers. Upon the IVA’s certification (with supporting evidence) to the satisfaction of ADB that the DLI is met, ADB will initiate the process of disbursement.
DLI 2: By 2021, at least 29,000 mortgage loan agreements are executed with the selected beneficiaries for the construction of habitable dwelling units.
2017: Social equity criteria are developed and released on government’s website. Annual targets for number of mortgage loan agreements executed with the home buyers, including at least 25% women home buyers: 2018: At least 7,250 mortgage loan agreements;
Definitions: “mortgage loan agreements” mean the agreements entered into between the selected beneficiaries and Ipoteka Bank, NBU, and QQB for the purchase of dwelling units constructed under the ARHP. “selected beneficiaries” are those who were successful in obtaining a mortgage loan to buy a new dwelling unit following social prioritization. Conditions for disbursement: Disbursement for achieving the 2017 target will be made when the social equity criteria are posted on a government website and accessible to the public. From 2018 to 2021, the condition for disbursement is met when the annual target for mortgage loan agreements and the annual target for women home buyers are achieved
Data for annual MOE/MMU reports will be drawn from the management information systems of Ipoteka Bank, NBU, and QQB.
MOE/MMU will confirm to ADB that the DLI is met and will attach the relevant reports drawn from the management information systems of Ipoteka Bank, NBU, and QQB. Achievement of the DLI for 2017 will be verified by ADB staff. Verification of the DLI for 2018 through 2021 will be conducted by an IVA. Following the MOE/MMU
24 Appendix 3
Disbursement-Linked Indicator Definition and Description of Achievement and
Verification Information Source Verification and
Procedure
2019: At least 7,250 mortgage loan agreements; 2020: At least 7,250 mortgage loan agreements; 2021: At least 7,250 mortgage loan agreements.
or exceeded. Partial disbursement: The DLI is scalable and partial disbursement is allowed for the annual targets over 2018–2021 as long as 80% of the target for that year is achieved. Formula for partial disbursement:
Partial DLI disbursement = planned DLI disbursement for the year × actual achievement for the year / targeted achievement for the year Example: Target: 7,250 mortgage loan agreements Planned Disbursement: $30,000,000 Actual Achievement: 5,800 mortgage loan agreements Partial DLI Disbursement: $24,000,000= $30,000,000 × 5,800 / 7,250 “actual achievement for the year” means the number of mortgage loan agreements executed provided that the percentage of women home buyers is at least 25%. If the percentage of women home buyers is less than 25%, then “actual achievement for the year” means the number of mortgage loan agreements executed multiplied by a fraction the numerator of which is the percentage of women home buyers and the denominator of which is 25%. Example: Target: At least 25% of 7,250 mortgage loan agreements executed with women home buyers Planned Disbursement: $30,000,000 Actual Achievement: 24% of 5,800 mortgage loan agreements executed with women home buyers Partial DLI Disbursement: $23,040,000= ($30,000,000 × 5,800 / 7,250) × 24% / 25% Disbursements are allowed for early or late achievement of the DLI. This means that the planned disbursement amount for a given year can be released when the set target is fully achieved, even if the achievement is a year or more late, as long as the achievement is during the ARHP’s duration.
confirmation, the IVA will verify the reported achievement for the DLI each year by conducting random sampling and spot checks to confirm the number of mortgage loan agreements executed with home buyers, including women home buyers. Upon the IVA’s certification (with supporting evidence) to the satisfaction of ADB that the DLI is met, ADB will initiate the process of disbursement.
Appendix 3 25
Disbursement-Linked Indicator Definition and Description of Achievement and
Verification Information Source Verification and
Procedure
DLI 3: By 2021, the average share of women among home buyers in the ARHP is increased to at least 30%.
Baseline: Average share of women home buyers from 2011 to 2015 was 23%. 2021: Average share of women among home buyers increased to at least 30% over the 2018–2021 period.
Definitions: “home buyers” mean the buyers who executed the mortgage loan agreements with Ipoteka Bank, NBU, and QQB under the ARHP. Conditions for disbursement: There is only one disbursement point for this indicator over the life of the ARHP, in 2021. The condition for disbursement is met when the average share of women among home buyers under the ARHP is at least 30% over 2018–2021. Partial disbursement: The DLI is scalable and partial disbursement is allowed as long as 80% of the target is achieved.
Formula for partial disbursement:
Partial DLI disbursement = planned DLI disbursement for 2021 x actual achievement / 30% target Example:
Target: 30% women’s share among home buyers in 2018–2021 Planned Disbursement: $15,000,000 Actual Achievement: 24% of mortgage loan agreements executed with women home buyers Partial DLI Disbursement: $12,000,000 = $15,000,000 × 24% / 30%
Data for MOE/MMU reports to ADB will be drawn from the management information systems of Ipoteka Bank, NBU, and QQB.
MOE/MMU will confirm to ADB that the DLI is met and will attach the relevant reports drawn from the management information systems of Ipoteka Bank, NBU, and QQB. Verification of the DLI will be conducted by an IVA. Following the MOE/MMU confirmation, the IVA will verify the reported achievement of the DLI in the internal management information systems of Ipoteka Bank, NBU, and QQB. Upon the IVA’s certification (with supporting evidence) to the satisfaction of ADB that the DLI is met, ADB will initiate the process of disbursement.
DLI 4. By 2021, climate change risk assessments are an integral part of the Site selection process under the ARHP.
2016 baseline: Climate change risk assessments are not part of Site selection. 2017: Uzhydromet has the mandate to participate in site selection as a member of the regional commissions for Site selection. 2018: To assess the climate change risk, Uzhydromet screens the Sites for construction in 2018.
Definitions: “climate change risk assessments” are the assessments based on climate change risk scenarios undertaken by Uzhydromet. Based on its assessment, Uzhydromet will recommend selection or rejection of a Site or propose adaptation measures on climate change risks. “regional commissions” are commissions set up by the local government in each region with the mandate to select Sites each year for rural housing massifs in line with relevant national regulations.
Data for MOE/MMU reports to ADB will be drawn from QQI. Reporting on this indicator will be in 2017, 2018, 2019, 2020, and 2021.
MOE/MMU will confirm to ADB that the DLI is met and will attach the relevant documentation. Following the MOE/MMU confirmation, verification of the DLI will be conducted by an IVA by examining the protocols and other documents as required.
26 Appendix 3
Disbursement-Linked Indicator Definition and Description of Achievement and
Verification Information Source Verification and
Procedure
2019: To assess the climate change risk, Uzhydromet screens the Sites for construction in 2019. 2020: To assess the climate change risk, Uzhydromet screens the Sites for construction in 2020. 2021: To assess the climate change risk, Uzhydromet screens the Sites for construction in 2021.
“Site” means a site in Bukhara, Fergana, Karakalpakstan, Kashkadarya, Khorezm, Namangan, Samarkand, Surkhandarya, or Tashkent regions where dwelling units under the ARHP will be constructed; and “Sites” means all of them. Conditions for disbursement:
Disbursement for achieving the 2017 target is made when Uzhydromet becomes part of the regional commissions for Site selection by the issuance of an amendment to Annex 1 of Inter-agency (Cadaster, Ministry of Agriculture and Water Resources, and SCAC) Resolution No. 2464 (3 June 2013). Disbursement for achieving the target in 2018, 2019, 2020, and 2021 is made upon confirmation of Uzhydromet’s (i) participation in the Site selection process as evidenced in the regional commissions’ protocols and (ii) screening of the Sites for climate change risks. Partial disbursement: The DLI is not scalable and partial disbursement is not allowed.
Upon the IVA’s certification (with supporting evidence) to the satisfaction of ADB that the DLI is met, ADB will initiate the process of disbursement.
DLI 5. By 2021, Ipoteka Bank, NBU, and QQB implement policies and actions to improve their collection procedures and governance structure.
2016 baselines: (i) Number of independent directors on supervisory boards: Ipoteka Bank 1 and QQB 0; (ii) share of loans in state rural housing portfolio delinquent more than 90 days: Ipoteka Bank 2%, NBU 4%, and QQB 10%; (iii) Capital adequacy ratios of Ipoteka Bank, NBU, and QQB: Exceed the minimum specified by the CBU; and (iv) Return on average assets ratios of Ipoteka Bank, NBU, and QQB: Exceed 0.5%.
Definitions: “policies and actions to improve their collection procedures and governance structure ” are policies and actions set out under the various targets for this DLI in 2019, 2020, and 2021. “capital adequacy ratio” means the ratio of regulatory capital to risk weighted assets. Conditions for disbursement:
Conditions for disbursement are met when the targets for the years 2019, 2020, and 2021 are met. For 2019 and 2021, the targets are measured as of the end of the preceding calendar year. Partial disbursement:
This indicator is not scalable and partial disbursement is not allowed.
Data for MOE/MMU reports for 2019, 2020, and 2021 to ADB will be based on the reports from MOF, Ipoteka Bank, NBU, QQB, and CBU. The reports from the three banks for 2019 and 2021 shall include copies of their audited financial statements for 2018 and 2020, respectively.
MOE/MMU will confirm to ADB that the DLI is met and will attach the relevant documentation. Following the MOE/MMU confirmation, verification of the DLI will be conducted by an IVA. Upon the IVA’s certification (with supporting evidence) to the satisfaction of ADB that the DLI is met, ADB will initiate the process of disbursement.
Appendix 3 27
Disbursement-Linked Indicator Definition and Description of Achievement and
Verification Information Source Verification and
Procedure
2019: Ipoteka Bank, NBU, and QQB each has (i) a portfolio of state rural housing loans in which not more than 10% of the total principal amount of such loans are delinquent more than the IFRS standard of 90 days; (ii) a capital adequacy ratio not less than the minimum specified by the CBU; and (iii) a ratio of return on average assets of not less than 0.5%. 2020: Corporate governance is improved by appointing at least two independent directors on the supervisory board of each of Ipoteka Bank and QQB. 2021: Ipoteka Bank, NBU, and QQB each has (i) a portfolio of state rural housing loans in which not more than 10% of the total principal amount of such loans are delinquent more than the IFRS standard of 90 days; (ii) a capital adequacy ratio not less than the minimum specified by the CBU; and (iii) a ratio of return on average assets of not less than 0.5%.
Disbursement is allowed for early or late achievement of the DLI for 2020 (but not for early or late achievement of the DLIs for 2019 and 2021). This means that the planned disbursement amount for 2020 can be released when the set target is fully achieved, even if the achievement is a year or more late, as long as the achievement is during the ARHP’s duration.
DLI 6. By 2021, governance and financial management and institutional capacity of QQI are strengthened through a time-bound action plan relating to accounting, financial reporting, and internal and external audits.
2016 baseline: QQI financial management system assessed and areas for improvement identified. 2017: (i) The government approves a time-bound action plan to improve governance, financial management, and institutional capacity of QQI; (ii) QQI prepares and submits to
Definitions: “time-bound action plan” is the action plan that responds to the recommendations made by the financial management assessment conducted by ADB in the following areas: accounting, financial reporting, internal audit, and external audit. The action plan will be revised from time to time in consultation with ADB. For the 2017 DLI, Internal Audit Unit submits quarterly reports to QQI’s Supervisory Board which are reviewed by
Data for MOE/MMU annual reports to ADB will be drawn from QQI.
MOE/MMU will confirm to ADB that the DLI is met and will attach the relevant documentation. Following the MOE/MMU confirmation, verification of the DLI will be conducted by an IVA.
28 Appendix 3
Disbursement-Linked Indicator Definition and Description of Achievement and
Verification Information Source Verification and
Procedure
MOE and ADB audited financial statements for 2016 that are in line with financial reporting standards acceptable to ADB; (iii) Internal Audit Unit submits quarterly reports to QQI’s Supervisory Board based on its approved annual work plan; and (iv) Audit Committee is set up under the Supervisory Board and is fully functional. 2018: (i) QQI’s accounting manual is updated and internal control guidelines are developed and disseminated; (ii) QQI’s annual financial statements for 2017 that are in line with financial reporting standards acceptable to ADB are audited by independent auditors acceptable to ADB; and (iii) QQI’s financial statements and the related audit report are published on QQI’s website. 2019: (i) QQI’s annual financial statements for 2018 that are in line with financial reporting standards acceptable to ADB are audited by independent auditors acceptable to ADB; and (ii) QQI’s financial statements and the related audit report are published on QQI’s website. 2020: (i) QQI’s annual financial statements for 2019 that are in line with financial reporting standards acceptable to ADB are audited by
the Supervisory Board. A “functional” Audit Committee set up under the Supervisory Board means the following conditions are met: a) the regulation on the Audit Committee is approved and issued, b) members with adequate expertise and experience are appointed to the Committee, and c) the Committee has an annual work plan and budget. Conditions for disbursement: The conditions for disbursement will be met when actions specified for each year are implemented. Partial disbursement: This indicator is not scalable and partial disbursement is not allowed. For disbursement each year, all institutional actions must be implemented. Disbursements are allowed for late achievement of the DLI. This means that the planned disbursement amount for a given year can be released when the set target is fully achieved, even if the achievement is a year or more late, as long as the achievement is during the ARHP’s duration.
Upon the IVA’s certification (with supporting evidence) to the satisfaction of ADB that the DLI is met, ADB will initiate the process of disbursement.
Appendix 3 29
Disbursement-Linked Indicator Definition and Description of Achievement and
Verification Information Source Verification and
Procedure
independent auditors acceptable to ADB; and (ii) QQI’s financial statements and the related audit report are published on QQI’s website. 2021: (i) QQI’s annual financial statements for 2020 that are in line with financial reporting standards acceptable to ADB are audited by independent auditors acceptable to ADB; and (ii) QQI’s financial statements and the related audit report are published on QQI’s website. DLI 7. By 2021, the procurement action plan for the SARHP and the ARHP is fully implemented.
2016 baseline: Internationally accepted procurement principles and practices are not consistently applied. The average size of a contract package is 10 houses. Prior results (FPR 1): By 15 May 2017, COM issues a resolution which, including without limitation: (i) sets out improved principles and procedures for procurement under SARHP; and (ii) prescribes the procedures (using market-based criteria) for identification of construction materials and modes of procurement. 2017: SCAC issues necessary rules, regulations, or guidelines which include: (i) improved standard bidding documents for civil works and goods; and (ii) improved bid evaluation manual.
Definitions: “procurement action plan” is an action plan based on the recommendations of the procurement assessment conducted by ADB in June−July 2016. It will be updated regularly by ADB and the government. Conditions for disbursement: Conditions for 2017 disbursement are met when prior results indicators and DLI have been achieved. For subsequent years, disbursements will be made when the annual DLI targets are achieved. Partial disbursement: This indicator is not scalable and partial disbursement is not allowed.
Data for MOE/MMU annual reports to ADB will be drawn from QQI/ SCAC/TCC/MOF.
MOE/MMU will confirm to ADB that the DLI is met and will attach the relevant documentation. Achievement of the FPR will be verified by ADB staff. Following the MOE/MMU confirmation, verification of the DLI will be conducted by an IVA through spot checks of contract packages, review of the list of materials and procurement methods used each year, and review of the contractor registration criteria, as applicable. Upon the IVA’s certification (with supporting evidence) to the satisfaction of ADB
30 Appendix 3
Disbursement-Linked Indicator Definition and Description of Achievement and
Verification Information Source Verification and
Procedure
2019: Clear and improved contractor registration criteria implemented and made publicly accessible. 2018–2021: (i) Annually updated list of construction materials and procurement methods is approved in compliance with the improved procurement procedures of the SARHP; and (ii) annual implementation of more efficient contract packaging, with average size of a contract package not less than 12 dwelling units.
that the DLI is met, ADB will initiate the process of disbursement.
DLI 8. By 2021, the program management and performance monitoring system is strengthened.
2016 baseline: Government system for management and performance monitoring of the state rural housing program is fragmented and is unable to track DLI indicators in a timely manner. Prior results (FPR 2):
(i) The government issues a detailed 5-year program with expenditure, financing and results frameworks, site selection and beneficiary selection criteria, and climate change considerations. (ii) The government establishes the Management and Monitoring Unit (MMU) under the MOE with a mandate to undertake the monitoring and evaluation of the ARHP. 2018, 2019, 2020, 2021: MMU reports on time to MOE,
Definitions: A “detailed 5-year program” means a government document containing expenditure, financing, and results frameworks covering 2017–2021, with the level of detail agreed upon with ADB. The proposed MMU is a unit under the MOE. “Mandate” means a government resolution that authorizes the MOE to request other ministries and entities involved in the rural housing sector to submit reports on progress of the ARHP and, if necessary, the SARHP. “DLI and non-DLI indicators and Program Actions” mean all indicators that are in the Design and Monitoring Framework and actions set up in the Program Action Plan of the ARHP, Procurement Action Plan, and QQI Action Plan. The progress of these indicators must be captured in reports of relevant agencies to the MOE, MOF, and ADB. Conditions for disbursement: Conditions for disbursement are met when (i) the 5-year program is issued (2017), (ii) MMU is created and authorized with the required mandate (2017), and (iii) MMU’s quarterly and annual M&E reports containing information on status of all DLIs, non-
MMU/MOE quarterly and annual reports to ADB.
For the prior results, MOE/MMU will confirm that the DLI is met and will attach the 5-year program with relevant government resolution. Achievement of the FPR will be verified by ADB staff. Following the MOE/MMU confirmation, verification of the DLI will be conducted by ADB staff. Upon ADB staff’s confirmation (with supporting evidence) that the DLI is met, ADB will initiate the process of disbursement.
Appendix 3 31
Disbursement-Linked Indicator Definition and Description of Achievement and
Verification Information Source Verification and
Procedure
MOF, and ADB on all DLIs, non-DLIs and Program Actions, including progress on achievement of the ARHP’s gender targets.
DLIs, and Program Actions are received and accepted by ADB (2018–2021). Partial disbursement: For the prior results indicators, partial disbursement is not possible. For the annual DLI targets, partial disbursement is allowed as long as 80% of the target for the year is achieved. Formula for partial disbursement:
Partial DLI disbursement = planned DLI disbursement x actual number of reported DLIs, non-DLIs, and Program Actions for the year / total number of DLIs, non-DLIs, and Program Actions for the year Example:
Planned Disbursement: $5,000,000 Actual number of reported DLIs, non-DLIs, and Program Actions for the year: 8 Total number of DLIs, non-DLIs, and Program Actions for the year: 10 Partial DLI Disbursement: $4,000,000 = $5,000,000 × 8 / 10 Late disbursement is allowed for reports on indicators not submitted on time.
ADB = Asian Development Bank, ARHP = Affordable Rural Housing Program, CBU = Central Bank of Uzbekistan, COM = Cabinet of Ministers, DLI = disbursement-linked indicator, FPR = financing for prior results, IFRS = international financial reporting standards, IVA = independent verification agent, M&E = monitoring and evaluation, MMU = management and monitoring unit, MOE = Ministry of Economy, MOF = Ministry of Finance, NBU = National Bank of Uzbekistan, QQB = Qishloq Qurilish Bank, QQI = Qishloq Qurilish Invest Engineering Company, RBL = results-based lending, SCAC = State Committee for Architecture and Construction, SARHP = State Affordable Rural Housing Program. a All roads leading to and within the Sites will be completed for dwelling units constructed under the ARHP from 2018 to 2021. Road completion is monitored
separately through an indicator not linked to disbursement. Sources: Asian Development Bank, Ministry of Economy and Ministry of Finance.
32 Appendix 3
Table 3: Disbursement Schedule ($ million)
Indicator
Total ADB Financing Allocation
Share of ADB
Financing
(%)
Financing for Prior Results (2017) 2017 2018 2019 2020 2021 Total
DLI 1 By 2021, at least 29,000 habitable dwelling units are constructed in accordance with national quality standards for rural families meeting the social equity criteria.
168.0 33.6 0.0 0.0 0.0 55.0 55.0 58.0 168.0
DLI 2 By 2021, at least 29,000 mortgage loan agreements are executed with the selected beneficiaries for the construction of habitable dwelling units.
95.0 19.0 0.0 10.0 30.0 28.0 22.0 5.0 95.0
DLI 3 By 2021, the average share of women among home buyers in the ARHP is increased to at least 30%.
15.0 3.0 0.0 0.0 0.0 0.0 0.0 15.0 15.0
DLI 4 By 2021, climate risk assessments are an integral part of the Site selection process under the ARHP.
40.0 8.0 0.0 5.0 10.0 15.0 5.0 5.0 40.0
DLI 5 By 2021, Ipoteka Bank, NBU, and QQB implement policies and actions to improve their collection procedures and governance structure.
25.0 5.0 0.0 0.0 0.0 15.0 5.0 5.0 25.0
DLI 6 By 2021, governance and financial management and institutional capacity of QQI are strengthened through a time-bound action plan relating to accounting, financial reporting, and internal and external audits
57.0 11.4 0.0 20.0 20.0 7.0 5.0 5.0 57.0
DLI 7 By 2021, the procurement action plan for the SARHP and the ARHP is fully implemented.
70.0 14.0 20.0 10.0 25.0 5.0 5.0 5.0 70.0
DLI 8 By 2021, the program management and performance monitoring system is strengthened.
30.0 6.0 15.0 0.0 5.0 5.0 3.0 2.0 30.0
Total 500.0 100.0 35.0 45.0 90.0 130.0 100.0 100.0 500.0
ADB = Asian Development Bank, ARHP = Affordable Rural Housing Program, DLI = disbursement-linked indicator, QQI = Qishloq Qurilish Invest engineering company, RBL = results-based lending, SARHP = State Affordable Rural Housing Program. Sources: Asian Development Bank, Ministry of Economy, and Ministry of Finance.
Appendix 4 33
DIAGRAM OF ENTITIES INVOLVED IN THE AFFORDABLE RURAL HOUSING PROGRAM
Down payment
Approved list of housing sites
Construction services and payments to contractors • Signs pre-purchase
agreements with applicants approved by mahallas’ selection commissions
• Advertises and procures civil works contractors and some construction materials
• Supervises construction works • Issues instructions to
participating commercial banks for payment to construction contractors through special deposit account
• Coordinates supply of electricity and gas
• Procures civil works contractors and monitors construction of roads and water supply connections
• Establishes Environmental and Social Management System (ESMS)
• Prepares Environmental Management Plans and incorporates in civil works contracts
Qishloq Qurilish Invest
(QQI)
3. Housing Construction 1. Site Selection
Construction Contracts
• Check construction progress • Transfer funds to QQI’s
special deposit account • Pay contractors from QQI’s
account
100% of housing cost on admeasurement payments
Participating Commercial Banks • Conduct
creditworthiness assessments of applicants approved by mahallas
• Establish ESMS
2. Financing
Homebuyer
Participating Commercial Banks
Ipoteka Bank Qishloq Qurilish
Bank
National Bank of
Uzbekistan
Site identification and due diligence • Approve sites • Consider climate
change risk assessments conducted by Uzhydromet
• Issue requisite certificates
• Review initial environmental examinations (prepared by Qishloq Qurilish Invest)
QQI Special Deposit Account
Mortgage loan and down payment
= Process Flow
= Funds Flow
Selection commissions under mahallas
(local communities)
• Receive and formally register applications from potential home buyers
• Screen applications to validate whether applicants meet the eligibility criteria
• Prioritize applications based on social equity criteria
