Project Number: 30457 Loan Number: 1631-UZB April 2006

Uzbekistan: Railway Rehabilitation Project

Completion Report

CURRENCY EQUIVALENTS

Currency Unit – sum (SUM)

At Appraisal At Project Completion (August 1998) (October 2005)

SUM1.00 = $0.00997 $0.00087 $1.00 = SUM100.24 SUM1,148.87

ABBREVIATIONS

ADB – Asian Development Bank CCR – certificate of contract registration EA – executing agency EIRR – economic internal rate of return ERSF – elastic rail-sleeper fastenings FIRR – financial internal rate of return ICB – international competitive bidding IDC – interest and other charges during construction IS – international shopping MFER – Ministry of Foreign Economic Relations O&M – operation and maintenance PCR – project completion review PIU – project implementation unit PPTA – project preparatory technical assistance TA – technical assistance TMD – Track Maintenance Department URM – Uzbekistan Resident Mission UTY – Uzbekistan Temir Yullari WACC – weighted average cost of capital

NOTE

In this report, "$" refers to US dollars.

2

Vice President S.L. Greenwood Jr., Operations 2 Director General H.S. Rao, East and Central Asia Department Country Director S.M. O’Sullivan, Uzbekistan Resident Mission Team leader D.A. Walton, Senior Portfolio Management Specialist, Uzbekistan

Resident Mission Team member R.R. Nadyrshin, Portfolio Management Officer, Uzbekistan Resident

Mission

CONTENTS Page

BASIC DATA i MAP vi

I. PROJECT DESCRIPTION 1

II. EVALUATION OF DESIGN AND IMPLEMENTATION 2 A. Relevance of Design and Formulation 2 B. Project Outputs 2 C. Project Costs 5 D. Disbursements 6 E. Project Schedule 6 F. Implementation Arrangements 7 G. Conditions and Covenants 8 H. Related Technical Assistance 8 I. Consultant Recruitment and Procurement 9 J. Performance of Consultants, Contractors, and Suppliers 11 K. Performance of the Borrower and the Executing Agency 12 L. Performance of ADB 13

III. EVALUATION OF PERFORMANCE 13 A. Relevance 13 B. Efficacy in Achievement of Purpose 13 C. Efficiency in Achievement of Outputs and Purpose 14 D. Preliminary Assessment of Sustainability 14 E. Environmental, Sociocultural, and Other Impacts 15

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 15 A. Overall Assessment 15 B. Lessons Learned 15 C. Recommendations 16

APPENDIXES 1. Project Framework 1 2. Chronology of Major Events 3 3. Track Rehabilitation Completed Works 8 4. Appraisal and Actual Project Costs 9 5. Currency Equivalents 10 6. Summary of Contracts Funded by Asian Development Bank 11 7. Projected and Actual Disbursements 12 8. Implementation Schedule 13 9. Organization Charts of Uzbekistan Temir Yullari 14 10. Status of Compliance with Major Loan Covenants 16 11. Financial Statements 23 12. Reform Framework for the Railway Sector 25 13. Actual Procurement Schedule 28 14. Performance Targets at Appraisal and Actual 29 15. Traffic Forecasts at Appraisal and Actual 30 16. Financial and Economic Reevaluation 31 17. Quantitative Assessment of Overall Project Performance 36

BASIC DATA

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

Uzbekistan 1631-UZB Railway Rehabilitation Project Republic of Uzbekistan Uzbekistan Temir Yullari $70.0 million

B. Loan Data 1. Appraisal – Date Started – Date Completed 2. Loan Negotiations – Date Started – Date Completed 3. Date of Board Approval 4. Date of Loan Agreement 5. Date of Loan Effectiveness – In Loan Agreement – Actual – Number of Extensions 6. Closing Date – In Loan Agreement – Actual – Number of Extensions

7. Terms of Loan – Interest Rate

– Service Charge – Maturity (number of years) – Grace Period (number of years) 8. Terms of Relending – Interest Rate – Maturity (number of years) – Grace Period (number of years) – Second-Step Borrower

27 May 1998 9 June 1998 10 August 1998 13 August 1998 15 September 1998 9 December 1998 9 March 1999 23 February 1999 - 31 December 2003 13 April 2005 1 Pool-based variable lending rate for US dollars 0.75% 25 5 0% 25 5 Uzbekistan Temir Yullari

ii

9. Disbursements a. Dates

Initial Disbursement

26 August 1999

Final Disbursement

13 April 2005

Time Interval

5 years, 8 months

Effective Date

23 February 1999

Original Closing Date

31 December 2003

Time Interval

4 years, 10 months

b. Amount ($ ’000)

Categorya

Or Subloan

Original Allocation

Last Revised

Allocation

Amount Increased/

(Decreased)

Net Amount Available

Amount

Disbursed

Undisbursedb Balance

01 25,900 35,400 9,500 35,400 32,105.4 3,294.6 02 35,500 32,800 (2,700) 32,800 29,470.8 3,329.2 03 1,800 1,800 0 1,800 1,034.2 765.8 04 6,800 0 (6,800) 0 0 0

Total 70,000 70,000 0 70,000 62,610.4 7,389.6 a 01 = equipment, 02 = materials, 03 = consulting services, 04 = unallocated. b An undisbursed loan amount of $7,389,622.32 was cancelled at loan closing date on 13 April 2005. 10. Local Costs (Financed) Item Appraisal Actual - Amount ($ million) 0.0 0.0 - Percent of Local Cost 0.0 0.0 - Percent of Total Cost 0.0 0.0

C. Project Data

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

Foreign Exchange Cost 100.00 92.97 Local Currency Cost 26.00 23.87 Total 126.00 116.84

iii

2. Financing Plan ($ million)

Cost Appraisal Estimate Actual Foreign Local Total Foreign Local Total Implementation Costs ADB Financed 70.00 0.00 70.00 62.61 0.00 62.61 UTY 19.30 26.00 45.30 16.83 23.87 40.70 Total 89.30 26.00 115.30 79.44 23.87 103.31 IDC Costs 10.70 0.00 10.70 13.53 0.00 13.53 Total 100.00 26.00 126.00 92.97 23.87 116.84

ADB = Asian Development Bank, IDC = interest during construction, UTY = Uzbekistan Temir Yullari.

3. Cost Breakdown by Project Component ($ million) Component Appraisal Estimate Actual Foreign Local Total Foreign Local Total A. Base Cost 1. Track Rehabilitation 48.00 14.30 62.30 40.17 20.29 60.46 2. Maintenance Track Equipment 29.50 3.30 32.80 38.17 3.08 41.25 3. Consulting Services,

Administration, and Miscellaneous

3.20 2.40 5.60 1.10 0.50 1.60

Subtotal (A) 80.70 20.00 100.70 79.44 23.87 103.31 B. Contingencies 1. Physical 2.40 1.00 3.40 0 0 0 2. Price 6.20 5.00 11.20 0 0 0 Subtotal (B) 8.60 6.00 14.60 0 0 0 C. Interest During Construction 10.70 0.00 10.70 13.53 0.00 13.53 Total Project Cost 100.00 26.00 126.00 92.97 23.87 116.84

iv

4. Project Schedule Item Appraisal Estimate Actual Date of Contract with Consultants C02 – Supervision Consultancy Services Start of Recruitment Jun 1998 22 Jul 1998 End of Recruitment Dec 1998 6 Jul 1999 Date of Contract Jan 1999 8 Feb 2000 Construction Supervision Jan 1999–Jul 2002 7 Jul 1999–6 Jul 2002 C023 – Elastic Rail-Sleeper Fastening Consultants Not Envisaged at Appraisal Start of Recruitment - 5 Mar 1999 End of Recruitment - 5 Apr 1999 Date of Contract - 2 Jul 1999 Consultant Services - 27 Sep 1999–24 Sep 2002 Procurement: B01 – Rails Jan 1999–Mar 2000 22 Jul 1998–27 Nov 2000 B021 – Base Plates, Clamps, Bolts Jan 1999-–Mar 2000 25 Nov 1998–4 Mar 2002 B022 – Rail Fastenings Jan 1999–Mar 2000 23 Sep 1999–29 Sep 2001 B03 – Weld Finishing Machinery Jan 1999–Oct 2000 11 Aug 1998–18 Sep 2003 B04 – Track Machines Jan 1999–Oct 2000 13 Nov 1998–4 Apr 2002 B05 – Track Maintenance Machines Jan 1999–Oct 2000 8 Jun 1999–20 Jan 2003 B06 – Concrete Sleepers Jan 1999–Dec 2001 11 May 1999–20 Sep 2001 B07 – Wooden Sleepers Jan 1999–Oct 2000 25 Jun 1999–17 Oct 2001 B081, B082, and B083- Experimental Fastenings Jan 1999–Mar 2000 24 Dec 1999–Jul 2001 B09 – Inspection Services Jan 1999–Feb 2000 20 Aug 1999–10 Apr 2000 B10 – Earthmoving Equipment Jan 1999–Oct 2000 23 Mar 2001–21 Jun 2002 B11 – Sleeper Changing Machine Jan 1999–Oct 2000 14 Aug 2001–18 Dec 2003 B12 – Spare Parts and Measurement Equipment Jan 1999–Oct 2000 18 Jun 2001–25 Sep 2003 Construction Start of Construction Jan 2000 Jan 2000 Completion of Construction Dec 2002 June 2004

. 5. Project Performance Report Ratings

Ratings Implementation Period

Development Objectives

Implementation Progress

From 15 September 1998 to 31 December 1998 Satisfactory Highly Satisfactory From 1 January 1999 to 31 December 1999 Satisfactory Highly Satisfactory From 1 January 2000 to 31 December 2000 Satisfactory Highly Satisfactory From 1 January 2001 to 31 December 2001 Satisfactory Satisfactory From 1 January 2002 to 31 December 2002 Satisfactory Partially Satisfactory From 1 January 2003 to 31 December 2003 Satisfactory Satisfactory From 1 January 2004 to 31 December 2004 Satisfactory Satisfactory From 1 January 2005 to 13 April 2005 Satisfactory Satisfactory

v

D. Data on Asian Development Bank Missions

Name of Mission

Date

No. of Persons

No. of Person-Days

Specialization of Membersa

Fact-Finding Mission 20 November–10 December 1997 5 89 a, b, c, d, h Appraisal Mission 27 May–9 June 1998 4 56 a, c, d, f Inception 1–7 December 1998 1 7 a Review Mission 1 6–13 September 1999 2 12 a, d Review Mission 2 15–23 November 1999 2 17 a, d Review Mission 3 (Mid-Term) 9–19 October 2000 2 22 b, d Review Mission 4 27 June–6 July 2001 1 10 d Review Mission 5 14–21 April 2003 2 16 g, i Review Mission 6 23 August–3 September 2004 2 24 e, i Project Completion Review 24 October–3 November 2005 2 16 i, j

Notes: a a – financial analyst, b – programs officer, c – economist, d – engineer, e – economist (Uzbekistan Resident Mission),

f – counsel, g – senior portfolio management specialist (Uzbekistan Resident Mission), h – social development specialist, i – portfolio management officer (Uzbekistan Resident Mission), j – staff consultant.

I. PROJECT DESCRIPTION

1. Uzbekistan’s geopolitical location makes the railway a key link in the strategic Eurasian Corridor linking Asia and Europe. The railway system, about 4,544 kilometers (km) of track, is Government owned and operated by Uzbekistan Temir Yullari (UTY), a state-owned joint-stock company responsible for planning, construction, operation, and maintenance of the railway system. Railways are the dominant transportation mode, presently carrying over 66% of all freight volume in ton-km, with road transport accounting for the rest. To compete on international markets, the country’s export-oriented industries need an efficient, economical, and reliable transport system. Furthermore, close cooperation with neighboring countries, both from commercial and infrastructure points of view, is necessary to facilitate integration and cost-effective use of infrastructure. The rail network has the potential to provide wide coverage and access to most of the country’s regions at relatively low prices. Overall, railway transport supports the country’s economic development as well as employment-creating and income-enhancing activities for raising the living standards of the people. 2. The Railway Rehabilitation Project (the Project) was formulated to concentrate on rehabilitating the main rail corridor from Chengeldy to Samarkand, which had been identified as carrying the highest volume of rail traffic.1 The Project was also to assist in policy reform and restructuring initiatives for the railway subsector, which would help to improve the operational efficiency. 3. The main objectives of the Project were to improve the operational efficiency and economic viability of the railway system through policy reform and restructuring of UTY and by focusing investments on track rehabilitation and maintenance. It was also to enable the railway system to operate efficiently in a market environment. The scope of the Project comprised (i) rehabilitation of 320 km of railway track on the high-density Chengeldy–Tashkent–Khavast–Dzhizak–Samarkand route, (ii) provision of equipment for rehabilitation and efficient maintenance, (iii) consulting services to assist UTY in project implementation, and (iv) institutional strengthening of UTY. The project framework at appraisal compared with the achievements of the Project is shown in Appendix 1. 4. In order to improve the operational efficiency and quality of service, as well as to make the railway subsector economically and financially viable, an advisory technical assistance (TA) was associated with the loan for the institutional strengthening of UTY. The objectives of the TA were to (i) prepare a master plan for institutional development of the subsector, (ii) prepare the necessary regulatory framework, (iii) assist the business units created under the restructuring program in formulating detailed plans for operating on a commercial basis, (iv) improve UTY’s financial management and introduce international accounting standards, (v) improve UTY’s marketing capabilities, and (vi) prepare mitigation measures to address the social impacts of staff reductions and other organizational reforms. 5. Uzbekistan was the Borrower, with UTY acting as the Executing Agency (EA). An Asian Development Bank (ADB) loan of $70 million from ordinary capital resources was approved on 15 September 1998.

1 Approximately 27 million tons of freight was transported along the project corridor in 1996, which was about 38% of

total rail freight movement in Uzbekistan.

2

II. EVALUATION OF DESIGN AND IMPLEMENTATION

A. Relevance of Design and Formulation

6. Since independence, there has been considerable underinvestment in the railway sector. This, combined with a shortage of materials and spare parts from the Russian Federation, Ukraine, and Eastern European countries, and scarcity of foreign exchange, have exacerbated the problem of maintaining the railway infrastructure. A result has been major operational inefficiencies and underutilization of the railway’s carrying capacity. To support domestic and international trade, efficient transport services are essential. Use of the existing transport infrastructure must be optimized and steps taken to stop its deterioration. The most important transport corridor in the country was the high-density rail route from Chengeldy to Samarkand. As Uzbekistan progresses to a market-oriented economy, the demand for traffic is changing, with increasing emphasis on service quality and cost-effectiveness. Competition from other transport modes, particularly road transport, is increasing. As a result, the railway subsector faces serious problems in the condition of physical infrastructure, its operations, and its ability to operate successfully in a free market environment. 7. The Government’s transport development strategy emphasized (i) developing a step-by-step approach to restructure institutions and reform sector policies to enable marked-based transport management and operations; (ii) establishing an appropriate policy, legal, and regulatory framework for the sector; and (iii) providing adequate transport infrastructure and maintenance to support the transition to a market-based economy. ADB’s policy dialogue with the Government in the transport sector has centered on (i) improving the policy and regulatory framework; (ii) restructuring of the Government organizations and state-owned enterprises to enable separation of policy and implementation functions; (iii) promoting competition in the provision and operation of the transport facilities and services; (iv) improving funding and cost recovery, including to increase transparency and accountability of the off-budget funds, and to eliminate subsidy-induced distortions in pricing of transport services; and (v) establishing sound operating and maintenance procedures. 8. ADB’s association with the Project started in 1996 during the Country Programming Mission, when the Government requested ADB’s assistance for preparing a sector investment program and carrying out urgently needed rehabilitation and improvement works. A project preparatory technical assistance2 examined the rail sector’s priority needs and prepared a feasibility study. The Project was based on the findings of ADB missions, information provided by the Government, and the findings of the TA. The overall scope and design of the Project were well defined. B. Project Outputs

9. Appendix 2 provides a chronology of major events during project implementation. The main project components are discussed below.

2 ADB. 1997. Technical Assistance to the Republic of Uzbekistan for the Railways Development Project (JSF-

Financed). Manila. The assistance (TA 2754-UZB) totaled $600,000.

3

1. Rehabilitation of Railway Track

10. A total of 320 km of track between Keles3 and Samarkand was rehabilitated as envisaged at appraisal (except for delays). The work on track rehabilitation commenced in June 2000 from both ends of the project section.4 The work was undertaken by the Tashkent and Bukhara track maintenance stations. UTY asked ADB for permission to substitute 34 km of railway sections originally included in the Project with the same length of alternative sections along the same railway line because the original sections had already been rehabilitated using UTY funds. ADB approved this, and the track sections were substituted for the original sections with no change in overall cost. 11. In October 2000, the EA requested ADB approval for a change of scope to include procurement of additional equipment to facilitate track rehabilitation and for additional consulting services. Loan savings were used to finance this. The change in scope covered (i) procurement of additional equipment (i.e., sleeper changing machine, spare parts for track machines, and testing equipment in the total estimated amount of $6 million to facilitate the rehabilitation of tracks as per the original scope); and (ii) additional consulting services of a specialist in railway track for 6 person-months to assist the EA to review and install modern track structure, comprising continuous welded rails and switch expansion joints.5 This was approved by ADB on 7 November 2000. The sections of rehabilitated track are shown in Appendix 3.

2. Provision of Equipment for Rehabilitation and Maintenance

12. It was envisaged at appraisal that the supply of equipment for rehabilitation and maintenance would be completed by mid-2000. Equipment that was to be supplied for the weld finishing center in Tashkent, however, could not be installed and commissioned due to considerable delays in completing the weld finishing center buildings, which had been due to be completed by UTY by September 2001. The equipment that was procured for the weld finishing center was eventually installed and commissioned 2 years later than originally scheduled, because UTY did not complete the foundations, building structure, services, and modifications to the existing mechanical systems in a timely fashion. Delays were due to the UTY Construction Department’s inability to implement in a timely manner the minor building works required for rehabilitating the weld finishing center and construction of the foundations required for the weld finishing equipment purchased with loan funds. The delay did not influence completing the Project because of the overriding delay in supplying concrete sleepers. Welding of rails with existing equipment continued during the rehabilitation works. In future, minor civil works (foundations) associated with project equipment should be included in the equipment supply contract to reduce the risk of delay to the Project. The equipment consists of a polishing machine, press equipment, and a rail-welding machine. Final acceptance of the equipment by UTY was on 13 March 2003. A total of 37 people in operations and service of track machines were trained by the supplier over a 1-month period. The center was commissioned in September 2003. It is fully operational and produces between 1 km - 1.5 km of welded rails per 3 The track rehabilitation was originally between Chengeldy and Samarkand. Chengeldy is in Kazakhstan. In 1999,

Chengeldy station and the track to the border of Uzbekistan were handed over to the responsibility of Kazakhstan Railways. The start of the track rehabilitation was at Keles station, approximately 15 km north of Tashkent.

4 Work at the Tashkent end was between Chinaz and Almazar stations, and at the Samarkand end between Raz 13 and Gallyaaral stations.

5 Item (i) procurement used surplus funds of $2.7 million from category 02 – materials and $3.3 million from category 04 – unallocated (a total of $6 million), which were reallocated to category 01 – equipment. Item (ii), the additional consulting services estimated to cost $100,000, was financed from the existing allocation for consulting services. UTY subsequently decided to pay for item (ii), the consultancy for welded rails, from their own resources and the facilities of the Tashkent Railway Institute.

4

day. Three sets of ballast equipment6 were also procured under the Project for track maintenance. 13. The track machine workshop in Bukhara was originally commissioned in 1992, and it was intended that the workshop’s equipment would be upgraded under the Project. However, UTY decided to implement modernization of the track machine workshop under a subsequent loan.7 UTY decided that modernization of the track maintenance workshop at the time was not urgent and that postponing this work did not hamper the workshop’s ongoing repair and maintenance functions.

3. Consulting Services for Project Implementation

14. As envisaged at appraisal, consultants were engaged for project implementation. The consultants’ duties were to (i) prepare tender documents for international procurement, (ii) undertake bid evaluation, (iii) monitor construction of the Project, (iv) compile the Project accounts, (v) prepare progress and completion reports, and (vi) liaise with ADB on Project implementation. The consultants commenced their work in July 1999 and completed their work in July 2002 (para. 34). 15. A minor change in scope was requested by the Government and approved by ADB in February 1999 for additional consulting services (para. 35) to conduct service trials on elastic rail-sleeper fastenings (ERSF) for railway track.

4. Institutional Strengthening of UTY

16. At appraisal, the need for institutional strengthening was identified and addressed through an advisory TA accompanying the loan.8 The TA required 23.9 person-months of international and 16.4 person-months of local consulting services, which were adequate. The TA was completed within the budget. The consultants engaged for the TA commenced work on 15 February 1999 and completed the study on 17 February 2000. The major objective of the TA was to provide institutional support for the railway sector so that railway operations would become financially viable and competitive in a market economy (para. 32). 17. In addition to the TA, the supervision consultants provided training for UTY through a series of seminars on procurement, finance, computers, and other topics. Financial training seminars were organized in March 2001 on capital investment topics for a total of 55 persons from various departments (e.g., departments of finance, capital works, economics). In the latter stages of the financial training seminars, financial aspects of computerizing the UTY accounts system were emphasized. A second phase of this training took place from May to June 2002 and provided further training sessions on computerizing the finance department. A total of 32 persons from 19 departments attended the seminars. From July 2000 through July 2002, the supervision consultants also provided on-the-job training in procurement and management. In 6 A set of ballast equipment includes separate machines for ballast cleaning, ballast planning, ballast tamping, and

ballast stabilizing. 7 ADB. 2000. Report and Recommendation of the President to the Board of Directors on a Proposed Loan and

Technical Assistance Grant to the Republic of Uzbekistan for the Railway Modernization Project. Manila. The loan (1773-UZB) was for $70 million and assistance (TA 3529-UZB) was for $600,000.

8 ADB. 1998. Report and Recommendation of the President to the Board of Directors on a Proposed Loan and Technical Assistance Grant to the Republic of Uzbekistan for the Railway Rehabilitation Project. Manila. The loan was for $70 million and Technical Assistance for Institutional Strengthening of Uzbekistan Temir Yullari (JSF-Financed) was for $850,000.

5

February 2002, training on procurement procedures was undertaken and attended by 16 UTY staff from various departments. The seminar was designed to improve the staff’s understanding of international procurement procedures, with a focus on supply contracts. The staff members that underwent training are still working for UTY, and UTY believes these training activities helped improve its management. However, the full impact of the training cannot be measured. 18. The Project Completion Review (PCR) Mission made visits to the rehabilitated rail line and examined the civil works components and the equipment that had been implemented during the loan. It was noted that at all the locations visited for the track rehabilitation component all the civil works had been installed in a satisfactory manner. The ballast equipment was also functioning well and the PCR Mission boarded the equipment during ballast maintenance work. The computer on one of the ballast tamping machines, however, was not functioning. UTY informed the PCR Mission that the supplier was to visit UTY in November 2005 to examine the equipment in order to determine and rectify the problem. However, UTY without waiting the supplier’s visit replaced the computer using its own resources. The PCR Mission made a visit to the weld finishing center in Tashkent and found that (i) all of the equipment had been installed in a satisfactory manner, and (ii) all the facilities were being well maintained. C. Project Costs

19. At appraisal, the project cost was estimated to be $126 million, of which $100 million (79%) was estimated to be the foreign exchange cost, and the total local currency cost was $26 million (21%). The ADB loan at appraisal was $70 million. This was to come from ordinary capital resources to finance 55.6% of the total project cost. ADB financed $70 million of the total foreign exchange cost (70%). The remaining foreign exchange costs of $30 million and local currency costs of $26 million were to be met by UTY. 20. The actual completion cost of the Project estimated by the PCR Mission was $116.84 million, with a foreign exchange cost of $92.97 million (80%) and a local currency cost of $23.87 million (20%). ADB financed $62.6 million of the foreign exchange costs (67.3%). The appraisal estimate included physical contingencies and provisions for price escalation on the foreign exchange and on the local currency costs. The actual completion cost of the Project was less than that envisaged at appraisal by $9.16 million, i.e., by overall 7%. Actual local costs were approximately 8% lower, and foreign costs were approximately 7% lower than at appraisal. The reduction in costs was attributable to lower-than-expected bid prices and changes in exchange rates. For example, a significant cost saving was made on contract B04 – Maintenance Machines. At the time of bid opening, the estimated value of the contract was $26.41 million (payable in euro at a rate of $1.10). After the bid opening, the euro rate slipped to $0.89 resulting in major savings of approximately $4.01 million. The cost of construction supervision was also lower than envisaged at appraisal. This was due to the fact that when the consultants’ contract ended in July 2002, the project implementation unit (PIU) decided it was not necessary to extend that contract because PIU personnel had received adequate training from the consultants to continue the construction supervision themselves (para. 29). Actual costs were also reduced by UTY’s decision to undertake the track maintenance workshop under Loan 1773-UZB (para. 45). 21. Detailed costs for each component of the Project compared with that estimated at appraisal are shown in Appendix 4. These costs are summarized also in the Basic Data. For cost comparison, the local currency costs incurred by UTY have been converted into dollars at the rate prevailing during each transaction. The average rates of exchange used are in Appendix 5. A summary of contracts financed by ADB is in Appendix 6.

6

D. Disbursements

22. Appendix 7 contains a comparison of projected annual disbursements at appraisal with actual disbursements during Project implementation. Loan proceeds were disbursed according to ADB procedures.9 Disbursement of loan proceeds was slower than expected at appraisal because of delays in project implementation caused by several factors (para. 25). The loan became effective on 23 February 1999. The original closing date of the loan was 31 December 2003, although this was extended at the request of the Borrower to 30 June 2004. Disbursements started in August 1999 and ended on 13 April 2005, when the loan was actually closed. Following the last disbursement on 13 April 2005, ADB cancelled the remaining balance of $7,389,622.32. This reduced the loan to $62,610,377.68. 23. Accelerated implementation led to disbursements being higher than planned in the first 2 years of implementation.10 UTY took advantage of advance procurement actions and used its own resources to hire an international consultant from July to December 1998 to prepare bidding documents for such large procurement packages as rails, weld finishing, and fixings before the loan became effective. This positively impacted the Project start-up and also permitted the training of PIU staff members. Nevertheless, formal contract awards were slowed later by very cumbersome bureaucratic work of the Tender Committee, which had to approve every contract. Disbursements slowed after 2000 due to delays in implementation. E. Project Schedule

24. Actual and appraisal implementation schedules for major project activities are compared in Appendix 8. At appraisal, it was envisaged that the Project would be implemented within 5 years, with procurement of materials and equipment starting in the second half of 1998,11 construction commencing at the end of 1999, and its being completed by mid-2003. ADB’s Board of Directors approved the loan on 15 September 1998. The date of the Loan Agreement and the Project Agreement was 9 December 1998. The loan became effective on 23 February 1999. The loan was extended once from the original closing date of 31 December 2003 to 30 June 2004 due to implementation delays. The major causes of implementation delays were (i) delays in effectiveness of contract awards awaiting issuance of a certificate of contract registration (CCR) from the Ministry of Foreign Economic Relations (MFER) (para. 38), and (ii) the redeployment of equipment and materials by the Government (para. 25). During project implementation, on 1 July 2001, administration of the loan was handed over by ADB Manila to Uzbekistan Resident Mission (URM) for administration under ADB’s Resident Mission Policy.12 25. The work on track rehabilitation commenced in June 2000. Based on the scheduled supply of materials and equipment, rehabilitation of about 50 km of track was expected to be completed by the end of December 2000 and a further 135 km of rehabilitation was planned for 2001. By July 2001, however, a total of only 38 km of track rehabilitation had been completed. Of this, 26 km was carried out in 2001. Just 12 km were rehabilitated during 2000. The delay

9 ADB. 2001. Loan Disbursement Handbook. Manila. 10 The projected disbursements at appraisal were estimated at $31.5 million through to the end of 2000. Actual

disbursements for that period amounted to $43.8 million. 11 The Government had requested to undertake advance action for procurement of materials, equipment, and

services under the loan, and this was approved by ADB on 14 May 1998. The advance action involved preparing bidding documents, issuing bid invitation notices, and evaluating bids.

12 ADB. 2000. Resident Mission Policy. Manila.

7

was caused mainly by redeployment of project equipment and materials to another railway construction project that had emerged as a high priority13 for the Government in the autumn of 2001. ADB missions objected to this redeployment.14 The equipment was eventually returned, in September 2002, but the supply of materials continued to be a problem (in particular of concrete sleepers and rail fixings) and one supplier was unable to fulfill its contract on time (paras. 43–44). After the equipment was returned, the progress on track rehabilitation was uneven because of bad weather conditions in the winter months. 26. By 31 March 2003, only 156.4 km of the total 320 km of planned track rehabilitation had been completed. Although ADB was assured by the chief engineer of UTY’s Track Maintenance Department (TMD) that the rehabilitation could progress at 20.5 km per month, past experience had shown that 20 km of track rehabilitation per month had never been achieved under the Project, even when the machinery and equipment were available and weather conditions were favorable.15 ADB suggested that an extension of the loan until 30 June 2004 should be requested, and the Ministry of Finance submitted such a request on 9 October 2003. ADB approved this on 16 February 2004, and physical completion was achieved on 30 June 2004. F. Implementation Arrangements

27. Apart from the implementation delays, implementing arrangements were as envisaged at appraisal, with UTY as the EA. An organization chart for UTY is shown in Appendix 9. The PIU was established16 with two engineering staff. The Government agreed engaging four additional technical and administration staff before ADB Inception Mission of the Project was fielded. By September 1999, the PIU staff consisted of a project manager, a deputy project manager, two engineers, an economist, and an accountant. With ADB assistance,17 PIU staff were provided training for a period of 5 months in procurement, including (i) preparing bidding documents, (ii) evaluating bids in accordance with ADB’s Procurement Guidelines,18 and (iii) contract administration. The TA commenced on 1 December 1998 and was completed by 30 April 1999. 28. To ensure timely project implementation, UTY used its own resources to recruit an international expert to prepare bidding documents for the procurement of (i) rails (contract B01-2 – Packages), (ii) rail fixings (contract B02), (iii) weld finishing center (contract B03), (iv) track maintenance machinery (contract B04), and (v) contract management consultancy (contract C2). In addition, ADB’s small-scale TA (SSTA 3040-UZB) for a period of 6 months commenced in December 1998. ADB provided a procurement expert under this TA to work from December 1998 to June 1999. It was used to train PIU staff on ADB procedures and policies for the international procurement of goods and services. 29. A Presidential Decree of 20 March 2001 approved strengthening the PIU from 6 to 12 staff members. It was increased to 10 by July 2001. Staff training was undertaken, and the PIU has the capability and capacity to undertake procurement of goods and services and contract administration. Due to the staff’s already having received adequate training, the contract for

13 A new rail line construction project from Uchkuduk to Mishkent in western Uzbekistan. 14 UTY management at that time maintained that UTY could not refuse to implement a project whose priority was

established by a government decree. 15 The rate of track rehabilitation from January to March 2003 averaged 10.7 km per month. 16 Under Government Resolution 456 of 28 October 1998 which states that the PIU is to be staffed by six officers,

excluding support staff. 17 ADB. 1998. Technical Assistance to the Republic of Uzbekistan for Building Project Implementation Capacity of

Uzbekistan Railways. Manila (TA 3040-UZB, for $150,000, approved on 7 July). 18 ADB. 1999. Guidelines for Procurement under Asian Development Bank Loans. Manila.

8

project management consultants that ended in July 2002 was not extended (para. 34). The PIU currently consists of 10 people, namely, the project director, deputy director, economist, financial specialist, procurement specialist, mechanical engineer, track specialist, accountant, general consultant, and a customs clearance specialist. G. Conditions and Covenants

30. There has generally been compliance with covenants related to project implementation and finance, as well as to those for reforms and restructuring. Compliance with the covenants under the loan is presented in Appendix 10, and UTY’s financial statements are in Appendix 11. Compliance with the timely submission of audited financial statements and project accounts was continually late, with delays ranging from 1 month to 9 months overdue. UTY has also not succeeded in settling accounts receivable that totaled approximately $170 million in 2004. 31. UTY’s restructuring under the Project progressed satisfactorily during implementation and was undertaken in accordance with cabinet of ministers resolutions of November 2002 and August 2004. UTY has divested most of its social functions (education, health, housing, and recreation) and has been corporatized. It has established profit centers and reorganized itself into five business units.19 In addition, UTY has decentralized the operational responsibilities of its department for freight and container transport at the central level to five regional railway junctions around the country. Appendix 12 shows the compliance with the reform framework for the railway sector that was established at appraisal. H. Related Technical Assistance

32. ADB included a TA grant in the Project (footnote 8). The consultants engaged for the TA commenced work on 15 February 1999 and completed the study on 17 February 2000. The major objective of the TA was to provide institutional support for the railway sector so that railway operations would become financially viable and competitive in a market economy. This objective was to be achieved through (i) preparing a master plan for institutional development of the sector; (ii) assisting railway business units to formulate commercial objectives, business plans, and initial preparation of a regulatory framework; (iii) helping them to undertake efficient commercial operations by improving their financial management and introducing internationally accepted accounting systems; (iv) improving marketing capabilities; and (v) preparing mitigation measures for social costs resulting from organizational restructuring. A TA completion report completed in September 2002 found that the TA was successful. The TA’s outputs were used in formulating the policy dialogue for the subsequent Railway Modernization Project (footnote 7). In particular, the outputs of the TA were incorporated into loan covenants concerning (i) accounting policies and practices, (ii) capital asset investment planning, (iii) government compensation for noncommercial transportation services, (iv) rationalizing UTY’s education and health facilities, (v) marketing and business planning, and (vi) reducing staff. In general, the overall outcome of the TA to improve rail transport efficiency and financial viability has been mixed. The TA has improved the operational efficiency of the railway (paras. 50–53 and Appendix 14), but the railway’s financial viability remains a problem (para. 54).

19 Namely passenger transport, container transport, refrigerated transport, passenger wagon repair plant, and freight

wagon repair plant.

9

I. Consultant Recruitment and Procurement

1. Consultant Recruitment

33. The engagement of consultants was undertaken in accordance with ADB’s guidelines, as envisaged at appraisal.20 34. The construction supervision consulting contract (contract C2) was for a period of 42 person-months (32 person-months of procurement specialist and engineer, 5 person-months of financial expert, and 5 person-months of directors’ inputs). The services of the procurement specialist commenced on 7 July 1999, while the consulting contract was still under negotiation with UTY. The consultants and UTY had agreed to use the services of a procurement specialist to assist in the ongoing procurement and contract administration activities. The input by the procurement specialist was considered necessary to cope with the momentum of procurement activities and to ensure implementation of the Project as per schedule. The contract between the consultants and UTY was signed on 8 February 2000, the services were completed on 6 July 2002, and final payment was made on 15 December 2002. During the initial phases of procurement and implementation, from July 1998 to July 1999, the PIU was supported by a procurement specialist initially provided using UTY’s own resources and subsequently under TA 3040-UZB (footnote 7). The delay in recruiting the consultants did not contribute to the implementation delays. From July 1998 to July 2002, UTY and the PIU were assisted by a consultant. 35. On 8 February 1999, the Government requested ADB for a change in the scope of the Project to provide consulting services in the selection of, and to conduct service trials for, ERSF. ADB approved this on 19 February 1999. The individual consultant was recruited by the EA under ADB’s Guidelines on the Use of Consultants. The contract was signed on 2 July 1999 for 3 months of services. The ERSF consultant commenced work on 26 October 1999 and submitted an interim report on 24 December 1999. Trials of fastenings recommended by the consultant were undertaken21 and the consultant was requested to mobilize for the second phase of the study on 20 June 2002. A final report was submitted by the consultant on 24 September 2002. The ERSF consultancy introduced UTY to modern track technology and enabled UTY’s management to understand the advantages of ERSF. This subsequently led to UTY’s decision to procure ERSF under the second ADB project.

2. Procurement

36. Procurement financed by ADB was undertaken in accordance with ADB’s Guidelines for Procurement. To facilitate timely implementation of the Project, ADB approved on 14 May 1998 advance action for procurement of materials, equipment, and services under the loan.22 In particular, advance procurement action on contracts B01 – Rails, B02 – Rail Fixings, B03 – Weld Finishing, and C2 – Consultant enabled good progress to be made in implementing the early stages of the Project. As envisaged at appraisal, procurement of materials and equipment, including special rails and fittings, fastenings, rail welding track equipment, and sleepers were procured using international competitive bidding (ICB) procedures. In order to save on

20 ADB. 1998. Guidelines on the Use of Consultants by ADB and Its Borrowers. Manila. 21 Pilot tests of three types of fastenings were undertaken to assist UTY in deciding which type to use under Loan

1773: Railway Modernization Project. 22 Advance procurement action involved (i) preparing bidding documents, (ii) issuing bid invitation notices, and

(iii) evaluating bids.

10

construction costs, some items were procured by UTY using its own resources, e.g., rails.23 Procurement was divided into seven contract packages, i.e.: B01 – Rails, B02 – Rail Fixings, B03 – Weld Finishing Center, B04 – Maintenance Machines, B05 – Maintenance Equipment, B6 – Track Sleepers, C2 – Consulting Services. A detailed list of all procurement packages and the procurement schedule are shown in Appendix 13. 37. As of 15 September 1999, five contracts (four for supply of goods and one for consultants) with total value of $46.4 million had been awarded. This was an impressive performance within 7 months of loan effectiveness. Prior to shipment of goods procured under ADB-financed contracts, a pre-shipment inspection was undertaken by an international inspection agency recruited by UTY.24 38. Each foreign currency contract in 1999 required a CCR to be issued by the MFER before the contract became effective. The CCR entitled the importation of goods and was a basis for levying customs duty. The registration process involved (i) submission of a signed contract to MFER and initial review by same; (ii) amendment to contract based on MFER’s comments; (iii) acceptance of amendment to contract by supplier; (iv) resubmission of amended contract to MFER; and (v) issuance of CCR by MFER. This entire process took 75 days for contract B01 – Rails and 40 days for contract B03 – Weld Finishing Center.25 In discussions with ADB in June 1999, the Government agreed that priority would be given to ADB projects and that the registration process would not take more than 10 days. Even though MFER then took 10 days for review, the registration process took much longer and delayed project implementation. Although issuance of the CCR was reduced, the process still delayed the effectiveness of contracts, as well as procurement and resource transfer.26 By October 2000, rationalization of the procedure for MFER to issue CCRs had substantially reduced the time taken for registering contracts, and that helped to expedite contract implementation. As a rationalization measure, the tender committee (in the cabinet of ministers) was reconstituted, and the chairman of UTY headed the new tender committee with members (of deputy minister status) drawn from other departments. This avoided the delays that had occurred in the previous tender committee. The contracts approval process was also rationalized such that contracts up to $50,000 each would be accepted by the chairman of UTY instead of going to the tender committee. This accelerated procurement substantially. 39. Based on the contracts awarded by November 1999, there were loan savings of about $8.5 million due to the competitive prices obtained under various contracts as a result of using international procurement27 as per ADB’s Procurement Guidelines. UTY advised ADB that funds from these loan savings would be needed to procure additional materials and equipment that were considered necessary for rehabilitation implementation. ADB made two loan reallocations enabling UTY to obtain additional equipment.28 These loan reallocations were approved by ADB on 3 May 2000 and on 7 November 2000.29 23 UTY imported these rails from non-ADB members and used these on straight tracks where there was less wear

and tear. ADB-financed rails were used on curved tracks where heavy wear was expected. 24 This arrangement was to insure quality control and enhance the integrity of the procurement process in line with

ADB’s Anti-Corruption Policy. 25 The majority of MFER’s comments were editorial relating to the Russian translation of the contracts it reviewed. 26 ADB had proposed that the Government should waive the CCR requirement for goods imported under ADB loans. 27 As well as due to depreciation of the euro and other European currencies in terms of the US dollar. 28 Sleeper changing machine, spare parts for track machines, and ballast equipment. 29 On 3 May 2000, $3.5 million was reallocated from category 04–unallocated to category 01–equipment. On

7 November 2000, $6.0 million was reallocated, consisting of $2.7 million from category 02–materials and $5.3 million from category 04–unallocated to category 01–equipment.

11

40. UTY financed contracts for track materials and equipment (e.g., rails, tie pads, rail pads, and panel layers). After three unsuccessful tenders, UTY awarded, on 15 August 1999, the contract for rails (35,000 tons) to a Russian supplier at the rate of $240 per ton.30 Tie pads and rail pads were procured through local competitive bidding. UTY used its own resources for procurement expertise in preparing bid documents for (i) rails (two packages), (ii) a weld finishing center, (iii) track maintenance machinery, (iv) rail fixings, and (v) contract management consultancy. On 10 March 2000, UTY had procured from its own resources three panel layers. Under the same contract, four platform wagons were supplied in November 2000. J. Performance of Consultants, Contractors, and Suppliers

1. Consultants

41. The EA reported that the performance of the consultants, both for construction supervision and for ERSF, was satisfactory and that they performed their tasks professionally and in accordance with their terms of reference.

2. Contractors

42. The contractor undertaking track rehabilitation was UTY’s TMD. The progress in track rehabilitation was slow due to redeployment of materials, equipment, and staff to the high-priority new railway line designated by the Government (para. 25) in 2001. TMD was only able to accomplish an average 0.9 km of track rehabilitation during a 10-hour daily block period on 2 days per week, i.e., 7–8 km per month. Although UTY had stated this would increase from July 2001 by blocking the track for a continuous period of 10 days, this did not occur. Due to the slow progress of track rehabilitation, the performance of the contractor has been rated only as partly satisfactory.

3. Suppliers

43. The performance of the various suppliers was generally satisfactory. Of 16 contracts in total, 10 were implemented satisfactorily, 3 were canceled for various reasons,31 1 contract had minor problems, and 2 contracts had major problems. With regard to these last two: The supplier under contract B06 – Concrete Sleepers had been penalized repeatedly for being unable to adhere to its delivery schedule, and it had only supplied 56% of its contract by 31 March 2003.32 The bid validity for contract B10 – Earthmoving Machines had expired after six extensions, mainly due to delays in submitting the signed bid evaluation report to ADB.33 This contract was terminated by ADB in February 2004, as it could not be fulfilled by 30 June 2004.34

30 The corresponding rate for supply of rails under the ADB-financed ICB contract was $609 per ton. 31 For example, because UTY wanted to procure from its own resources, due to a supplier’s nonperformance. 32 Compounding this problem was the fact that UTY owned 25% of the Uzbekistan company’s registered capital. At the time of the PCR Mission, the Government share has increased to 51% through a Presidential Decree of 14 March 2005. On 29 August 2005, the State Property Committee issued a special order to establish the Government’s majority ownership. 33 An internal investigation in May 2002 unrelated to the Project had sidelined UTY’s deputy chairman, who was

concurrently the project director. This made tender committee members reluctant to sign the bid evaluation report. In October 2002, the chairman of UTY and the project director were removed from office. In January 2003, the bid evaluation report was finally signed by all members and submitted to ADB.

34 This equipment is now, however, to be procured under Loan 1773-UZB: Railway Modernization Project, approved 17 May 2001, for $70 million.

12

44. Contract B06 was awarded in April 2000 and was due to be fulfilled by March 2003. This contract was eventually completed in June 2004 and all 690,000 sleepers35 were delivered. The supplier claimed the delay was due to instructions from UTY requiring priority delivery of goods to the new Uchkuduk–Mishkent line. The supplier’s lack of performance determined the rate of track rehabilitation. 45. The cancelled contracts were: (i) Contract B07 – Wooden Sleepers. The supplier cancelled the contract and forfeited his advance payment and performance guarantees. UTY then undertook the contract with finance from its own funds. (ii) Contract B082 – Pilot Fixings was terminated for nonperformance. The supplier forfeited his advance payment and performance guarantees. (iii) Contract B14-Maintenance Workshop was canceled at UTY’s official request, as it was to be covered under Loan 1773-UZB: Railway Modernization Project. The procurement of maintenance workshop equipment was envisaged in order to maintain and repair track machinery purchased under the Project. Given that the track machinery was new and did not require repair work, however, the cancellation was approved by ADB and did not negatively impact the Project. K. Performance of the Borrower and the Executing Agency

1. The Borrower

46. The performance of the Borrower overall was rated partly satisfactory. During project preparation, the Borrower’s performance was good and every effort was made to expedite the project preparation process, as this was a high-priority project for the Government. During the Project’s implementation phase, however, the Borrower’s performance was not so good. The Borrower reallocated the resources that had been procured for the Project to another project that was considered at the time to be of greater importance36 by instructing UTY to deploy resources to the high-priority line. This was first revealed to URM in March 2002. This delayed track rehabilitation work from August 2001 till September 2002. Apart from this, the delay in supplying concrete sleepers was another serious reason for the overall lag in physical completion. The Borrower also could have improved the situation with issuing CCRs needed for foreign currency contracts.37 ADB had previously asked the Borrower to waive this requirement for goods imported under ADB loans. Taking into account the Borrower’s performance during the Project’s preparation and the Borrower’s performance during project implementation, an overall rating of partly satisfactory has been given.

2. The Executing Agency

47. The EA’s performance is rated partly satisfactory. The Project’s objectives were achieved, although there were delays in project implementation due mainly to delays in track rehabilitation from reassigning resources to other projects and protracted supply of concrete sleepers. The EA also diverted the production of concrete sleepers under an ADB-financed contract to the new rail line project that had been given a higher priority by the Government. This resulted in the TMD only being able to rehabilitate track at a rate of 10 km per month. The EA was also not able consistently to meet some of its financial covenants, namely, (i) keeping overall accounts receivable from exceeding the equivalent of 3 months of billing, and (ii) timely submission of audited financial statements. 35 The contract was increased by 15% from 600,000 sleepers to 690,000 sleepers; the additional 90,000 were not

required for Project work. 36 The new railway line from Uchuduk to Mishkent in western Uzbekistan. 37 Slow issuance of CCRs delayed some contracts by 75 days.

13

L. Performance of ADB

48. Both the Borrower and the EA appreciated the assistance and cooperation extended to them by ADB and considered ADB’s performance fully satisfactory. ADB undertook one inception mission, five review missions, and one midterm review mission. ADB closely monitored progress and provided valuable assistance. These missions included visits to the project site and also to the EA’s headquarters in Tashkent, where coordination meetings were held to discuss and resolve problems. ADB had a total of four project officers handling the Project’s implementation. The Project was administered by ADB’s URM from 1 July 2001 onwards.38 After the hand-over mission ended on 6 July 2001, no formal review mission was conducted until 14 April 2003. Nevertheless, URM was in uninterrupted contact with UTY and assisted in all aspects of project implementation. Monthly progress reports were submitted to ADB regularly, and through these ADB monitored the project implementation. ADB also went through reorganization during project implementation, which did not aid smooth handling of the Project. This was particularly the case since there was no ADB railway specialist in Manila supporting implementation for a long period. The role performed by ADB missions in (i) providing advice regarding technical issues, (ii) preparing evaluation of bid documents, and (iii) matters of loan administration was recognized by the EA. The EA, however, indicated to the PCR Mission that ADB URM did not reply promptly to questions on some issues it had raised regarding the contract on earthmoving equipment (contract B10).39 Due to several delays, this contract was eventually cancelled. Several important documents on this contract were also found to be missing from ADB URM files. Overall, ADB’s performance was rated partly satisfactory.

III. EVALUATION OF PERFORMANCE

A. Relevance

49. The Project’s rationale- to assist in policy reform and restructuring of the railway subsector and commence the rehabilitation process in a structured manner by concentrating on critical railway components- was sound. The Project was in line with ADB’s operational strategy at the time of appraisal. ADB’s transport sector strategy supported the Government’s transition to a market-driven economy by helping to develop an efficient policy and regulatory framework and promote competition and private sector participation in transport facilities and services. The Project supported, and was in line with, the Government objectives of restructuring the railway subsector into a commercial and efficient organization responsive to the changing market conditions of the country. The Project is rated highly relevant. B. Efficacy in Achievement of Purpose

50. The Project is assessed as efficacious, as it generally achieved its main objective of improving the railway system’s operational efficiency and economic viability by focusing on investments in track rehabilitation and maintenance. The Project has provided a more efficient movement of freight and passenger traffic along the railroad between Tashkent and Samarkand.

38 The Review Mission noted in its aide memoire at the time of handing over project administration to URM that URM

would need time and effort (including the training of national staff at par with the project analyst at ADB HQ) to achieve reasonable proficiency in loan administration. It was the view of the Review Mission at the time that, in an age when internet and intranet allow universal communication at essentially zero cost, turning loan supervision over to resident missions would not appear to be the most efficient and cost-effective strategy.

39 ADB URM did not reply for 1 month to a fax sent by the PIU until reminded by the PIU on 23 June 2003 that it awaited a response from a fax sent on 23 May 2003.

14

Travel times have been reduced by between 33% and 42% for passenger trains. The travel time from Tashkent to Samarkand for passenger trains before the Project was between 6 and 7 hours. Since the Project has been implemented, the travel time has been reduced to 4 hours. Freight train travel times between Tashkent and Samarkand have been reduced by approximately 22%, whereas the savings in travel time envisaged at appraisal were about 30%. The performance targets set at appraisal compared with those actually met are shown in Appendix 14. 51. Staff levels have been reduced from 52,000 in 1996 to 33,473 in 2004, i.e., a 36% reduction. Staff productivity in terms of converted ton-km40 has increased from its 1996 level of 397,000 per employee to 802,600 per employee in 2004. Although the number of passengers has increased compared with the appraisal estimates for 2005, freight traffic has not increased as expected at appraisal. Traffic at appraisal compared with actual is shown in Appendix 15. 52. With the purchase of ballast equipment under the Project, the process of ballast maintenance has been made much faster. Before the Project, approximately 70 men would undertake ballast maintenance and complete approximately 1 km per day. Since the Project has been completed, the ballast equipment is used during a 5-hour block on the track in accordance with the train schedule. During this 5-hour window, the ballast-cleaning machine can cover 1–2 km, the ballast-planning machine 2–4 km, the ballast-tamping machine 3 km, and the ballast-stabilizing machine 3 km. Since the Project, the achievement over 5 hours is between 2 and 4 km with approximately 8–10 people. Overall, the Project provided a positive impact on UTY’s capability to use less staff for better maintenance of UTY’s entire railway network, and with commensurate savings. C. Efficiency in Achievement of Outputs and Purpose

53. The Project was considered efficient in achieving its outputs and purpose, despite delays in implementation. In estimating the financial internal rate of return (FIRR) and economic internal rate of return (EIRR) for this PCR, the Project was evaluated using a similar methodology to that used at appraisal. The FIRR was estimated at 4.5%, slightly above the weighted average cost of capital (WACC) of 4.0%. The FIRR at appraisal had been forecast at 12.7%. The recalculated EIRR was 14.3%, compared with 17% at appraisal. The EIRR is greater than the normal cutoff rate of 12%, and thus it enables the Project to be rated as efficient. Appendix 16 provides details on the methodology used, as well as the assumptions and calculations underlying and leading to the FIRR and EIRR estimates. The appendix also discusses the differences between the reevaluation results and those at appraisal. D. Preliminary Assessment of Sustainability

54. Although UTY showed an after-tax profit for 2004 of SUM85 billion, there was an unusually high level of receivables due (SUM201 billion). This financial position is problematic. In order for the Project to be maintained properly, UTY must improve its financial position and thereby ensure that resources are available for proper and adequate maintenance. The track rehabilitation has been carried out well, and it should last its economic life if regular maintenance is carried out. Similarly, the track maintenance equipment procured under the Project also needs to be maintained and serviced regularly. The PCR Mission noted on its site visits that, to date, both the rehabilitated track and procured equipment had been maintained satisfactorily. At this stage, the Project has been given a sustainability rating of likely.

40 Converted ton-km = ton-km + passenger-km.

15

E. Environmental, Sociocultural, and Other Impacts

55. The Project did not have any significant adverse environmental impacts as envisaged at appraisal. Under the TA, the potential adverse impacts were presented in an initial environmental examination. Track rehabilitation was carried out on the existing right-of-way, and there were no environmental issues of significance. It was observed during a site visit in 2001, however, that track machine operation, and particularly ballast cleaning, raised dust causing air pollution. The situation was exacerbated by the prevailing hot, dry, and windy conditions. Although air pollution occurred for short periods and its effect was limited to nearby areas only, UTY took appropriate measures to mitigate this type of adverse effect.41 The PCR Mission visited the project area and observed no adverse environmental impacts of significance. 56. The initial social assessment undertaken at appraisal identified two main types of social costs of UTY’s restructuring, namely, (i) costs related to staff reductions, and (ii) costs related to separating the ancillary social services from core railway operations. Overall, staff for core activities was reduced from 49,067 in 1998 to 33,861 by 2004. Mitigation of the social impacts of staff reduction and separating ancillary operations was undertaken in accordance with the Government’s standard rules under the labor code and also by incorporating gender-related mitigation measures.42 Some of the ancillary operations have been separated from UTY (e.g., hospitals, recreation facilities), others have been privatized (e.g., schools), and still others have been handed over to local authorities (e.g., housing facilities). There were previously a total of 29 different ancillary services, and these have now been reduced to 14. UTY retains ownership of four hospitals and several polyclinics both for its currently employees and for those retired in the staff cuts. UTY has also retained an institute of higher education, and technical college, for training staff.

IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment

57. The Project is given an overall rating of successful, based on a review of its relevance, efficacy, efficiency, sustainability, and impact on institutional development. Appendix 17 presents the quantitative assessment of project performance according to ADB's criteria. B. Lessons Learned

58. The Project was successful in many aspects, except for the delays in its implementation. An important lesson from the Project concerns the allocation of resources procured under the Project. The Government, by instructing UTY to reallocate materials and equipment being used for track rehabilitation to another project, considerably delayed the rate of track rehabilitation for about 1 year. This eventually led to an extension of the loan closing date. 59. ADB’s monitoring could be improved by ensuring, to the extent possible, continuity or overlap of ADB project officers and sector specialists throughout project implementation. In this regard, too, the handing over from ADB Manila to ADB URM on 1 July 2001 did not immediately improve implementation of the Project. As was noted at the handover of the Project to URM,

41 Dampening the ballast with water prior to cleaning reduced the amount of dust. 42 For example, single mothers were not retired in the staff cuts, and women working in the schools were reemployed

as staff when the schools were transferred to municipalities.

16

there was at that time a need for training national staff at URM to efficiently handle loan administration and implementation. Moreover, a railway sector focal point was lacking at ADB in Manila for some time. It should be ensured, therefore, before a project is handed over to a resident mission under ADB’s Resident Mission Policy, that the particular resident mission has both the staff resources and institutional capacity to administer the loan efficiently together with adequate sector support from Manila. URM has been developing its capacity for project implementation since this first project was delegated, particularly in terms of systems for project administration and developing local staff capacity. C. Recommendations

1. Project-Related

a. Financial Control

60. UTY has not always submitted audited project accounts and financial statements on time, as required by the loan covenants. The PCR Mission had difficulty determining how much UTY spent each year on each project component. Significant improvements must be made in UTY’s financial record keeping. Financial accounts need to be submitted promptly, in accordance with the covenants.

b. Future Monitoring

61. The rehabilitated track from Tashkent to Samarkand and the maintenance equipment procured under the Project are critical to economic development in the country, and maintaining these facilities is essential. The PCR Mission recommended that the facilities be operated and maintained properly so that they will be kept in good working condition and ensure the Project’s long-term success. ADB should keep in close contact with UTY through the ongoing Loan 1773-UZB and future loans to ensure that maintenance is being undertaken correctly.

c. Covenants

62. UTY has had difficulty complying with some of the financial loan covenants, such as submitting audited project accounts and audited financial statements to ADB within 6 months after the end of the fiscal year and keeping accounts receivable under the loan to not more than 3 months billings. Most of these accounts are due from state-owned shippers. Although these have been reduced in recent years, UTY still needs to strengthen its receivables management.

d. Further Action or Follow-Up

63. ADB should make it a priority to pursue close and sustained follow-up with the Government to ensure there will be sufficient maintenance funds for sustaining the Project. This can be undertaken through the ongoing Railway Modernization Project and during implementation of any subsequent loans.

e. Timing of Project Performance Audit Report Preparation

64. A mission to prepare a project performance audit report, if required, should be fielded following the completion of the second loan (1773) as the projects are part of the same corridor and the traffic is likely to pickup following the second stage work’s completion.

17

2. General

65. Although significantly developed under the Project, UTY’s institutional capacity should be further improved to insure that the Project’s facilities are operated and maintained satisfactorily.

Appendix 1 1

PROJECT FRAMEWORK

Design Summary

Performance Indicators/

Targets

Monitoring Mechanisms

Assumptions and Risks

Goal To promote economic development by (i) implementing policy reforms, (ii) restructuring the railway subsector, and (iii) rehabilitating operating assets

To increase per capita income

Review macroeconomic data before and after the Project, as well as during review missions Growth rates of major commodities transported by rail, e.g., oil and grain

17% increase in per capita income from 2001 to 2004

Purpose To improve the capacity and efficiency of railway operations, and to make them financially sustainable

Transport of forecast freight and passengers Commercialization of operations, achieving stipulated financial and operational performance targets

Project administration missions Benefit monitoring Financial statements of Uzbekistan Temir Yullari (UTY) Annual performance reports Management information system operational reports

Passenger traffic forecast at appraisal for 2003 was 15.8 million, actual was 16.1 million. Freight traffic forecast at appraisal for 2003 was 83,094 million tons, actual was 52,349 million tons. Several operational performance targets achieved (Appendix 14)

Outputs 1. Rehabilitation of 320 kilometers (km) of railway track on the main line

Preconstruction activities and designs to be completed by 2000. Construction to start in 2000 and be completed by December 2002

Contract awards Progress reports Project administration missions

As at appraisal Construction started in 2000 but was not completed until July 2004.

2. Procurement of equipment for operation and maintenance

Equipment to be procured by December 2000

Contract awards Progress reports Project administration missions

All equipment was not procured until December 2001.

3. Institutional development of UTY

Reorganization complete and operating as commercial enterprises by 2002 Introduction of management information system

Working ratio less than 0.95 by 2000 and 2001 and less than 0.85 from 2002 onward Debt service coverage not less than 1.2 times from 2002 onward Operational efficiency targets (Appendix 14)

Reorganization completed into separate business units. Working ratio 0.69 in 2000, 0.71 in 2003, and 0.77 in 2004. Debt service coverage exceeded 1.2 times for 2002 and 2003. Operational efficiency – about 13 out of 20 targets were achieved.

Activities 1. Preparatory activities

1.1 Approval of project proposal

Action by UTY Action completed As at appraisal

1.2 Arrangement of counterpart funds

Action by UTY Loan approved As at appraisal

1.3 Environmental impact assessment report

Prepared by technical assistance consultants

Approved by UTY As at appraisal

2 Appendix 1

Design Summary

Performance Indicators/

Targets

Monitoring Mechanisms

Assumptions and Risks

1.4 Feasibility study Action by UTY Approved by UTY As at appraisal

1.5 Preliminary survey and design

Completed by UTY Approved by UTY As at appraisal

1.6 Technical design and final survey

Action by UTY after 1.4 and 1.5

Approved by UTY As at appraisal

1.7 Construction design and drawing

Action by UTY after 1.6 Approved by UTY As at appraisal

1.8 Advance action for procurement

Request by Government Approved by Asian Development Bank (ADB)

As at appraisal

2. Civil works and equipment 2.1 Prequalification of bidders

Preparing prequalification documents Evaluating applications

ADB approval of prequalified bidders

ADB approved in a timely manner prequalified bidders.

2.2 Procurement of civil works

Action by UTY Government approval of contract packages

Government delays due to issue of certificates of contract registration and Tender Committee

2.3 Construction of civil works

Supervision by UTY Progress reports Project administration missions

Regular monthly reports and quarterly reports by consultants and project implementation unit

2.4 Environmental protection and mitigation measures

Action by UTY as per environmental impact assessment report

Annual environmental management reports Project administration missions

UTY monitored the environmental impact. The only environmental problem was dust from ballast cleaning, which UTY mitigated by using water on the ballast prior to cleaning.

2.5 Procurement of equipments

Bid invitation

Evaluation of bids

ADB approval of contract awards Progress reports Project administration missions

ADB approved bid evaluation reports and contract awards in a timely manner. One contract (B10 – Earthmoving Equipment), was prolonged in its approval. It had to be cancelled due to insufficient time to implement the contract prior to closing of the loan.

Input ($million)

Total Project $103.31 ADB Loan (OCR) $62.61 UTY $40.7 Key Expenditure Accounts: ADB: Equipment and materials $61.51; Consulting services $1.1 UTY: Civil work, equipment and materials $40.2; Consulting services $0.5

ADB = Asian Development Bank, UTY = Uzbekistan Temir Yullari.

Appendix 2 3

CHRONOLOGY OF MAJOR EVENTS

Date

Event

1997

28 Jan Approval of project preparatory technical assistance 20–28 Nov Fact-Finding Mission fielded 1998

21–30 April Project Specific Consultation Mission fielded

14 May Management review meeting approved appraisal mission

27 May–9 Jun Appraisal Mission fielded

10–13 Aug Loan negotiations, Asian Development Bank (ADB) headquarters, Manila

15 Sep ADB approved loan for $70 million

28 Oct Cabinet of Ministers Resolution No. 456 on project implementation issued

1–7 Dec Inception Mission fielded

9 Dec Loan Agreement signed

9 Sep Project Agreement signed

1999

5 Jan Subsidiary Loan Agreement between Ministry of Finance and UTY signed

23 Feb ADB loan became effective

6–9 Apr Mid-term report for Technical Assistance 3068-UZB: Institutional Strengthening of UTY

11 May ADB approved Contract B03 – Weld Finishing Center, valued at $1.238 million

13 May ADB approved Contract B01 – Rails, valued at $8.8 million

3 Jun ADB approved Contract C2 – Project Implementation Consulting Services

7 Jun ADB approved Contract C3 – Consulting Services for Piloting of Elastic Fasteners, valued at $0.06 million

10 Jun Contract B03 – Weld Finishing Center awarded, valued at $1.238 million

4 Appendix 2

Date

Event

17 Jun

Contract B01 – Rails awarded, in amount of $8.8 million

3 Jul Contract C3 – Consulting Services for Piloting of Elastic Fasteners awarded, valued at $0.06 million

6 Jul Contract C2 – Project Implementation Consulting Services awarded 4 Aug ADB approved Contract B021 – Rail Fixings, valued at $9.78 million

4 Aug ADB approved Contract B022 – Rail Fixings, valued at $0.292 million

4 Aug ADB approved Contract B04 – Track Maintenance Machines, valued at $26.41 million

25 Aug Contract B04 – Track Maintenance Machines awarded, in amount of $26.41 million

6–13 Sep First review mission fielded

10 Sep Contract B021 – Rail Fixings awarded, in amount of $9.78 million

24 Sep Contract B022 – Rail Fixings awarded, in amount of $0.292 million

15–23 Nov Second review mission fielded 2000

6 Jan Contract B09 – Inspection Services awarded, in amount of $0.97 million

8 Feb ADB approved Contract C2 – Project Implementation Consulting Services, valued at $0.04 million

14 Apr Execution of Contract B01 – Rails completed

19 Apr ADB approved Contract B06 – Concrete Sleepers, valued at $10.2 million

3 May ADB approved reallocation of loan proceeds

5 Jul Contract B083 – Pilot Fixings awarded, in amount of $0.38 million

31 Jul Contract B081 – Pilot Fixings awarded, in amount of $0.04 million

31 Jul Contract B082 – Pilot Fixings awarded, in amount of $0.12 million

8 Sep Execution of Contract B021 – Rail Fixings completed

16 Sep

Execution of Contract B04 – Maintenance Machines completed

Appendix 2 5

Date

Event

29 Sep Execution of Contract B022 – Rail Fixings completed

9–19 Oct Midterm Review Mission fielded

26 Oct ADB approved Contract B005 – Maintenance Equipment, valued at $3.47 million

7 Nov ADB approved reallocation of loan proceeds

7 Dec ADB approved Contract B07 – Wooden Sleepers, valued at $9.78 million

2001

2 Mar Presidential Decree “De-monopolization and Privatization Measures in Railway Transport” approved

3 Mar Resolution of the Cabinet of Ministers No. 108 “Administrative Organizational Improvement of the State Joint Stock Company Uzbekistan Temir Yullari” issued, thus implementing the Presidential Decree

9 Mar Resolution of the Cabinet of Ministers No. 119 issued, stipulating a planning schedule for privatization of enterprises and revising composition of UTY Board

30 Apr Execution of Contract B083 – Pilot Fixings completed

10 May Execution of Contract B081 – Pilot Fixings completed

27 Jun–6 Jul Fourth review mission fielded

1 Jul Administration of loan transferred to Uzbekistan Resident Mission

17 Oct Contract B07 – Wooden Sleepers terminated for supplier nonperformance

Oct 2001– Jul 2002

Track maintenance equipment diverted from project site to construction of new Uchkuduk–Misken railway line

2002

11 Jan Contract B082 – Pilot Fixings terminated for supplier nonperformance

6 Jul Contract C2 – Project Implementation Consultancy completed

20 Aug ADB approved Bid Evaluation Report for Contract B10 – Earthmoving Equipment

24 Sep Final report under Contract C3 – Elastic Fastenings submitted

6 Appendix 2

Date

Event

28 Oct Final Report under Contract C2 submitted

11 Dec Final payments made for Contracts C2 – Loan Consultancy and C3 – Elastic Fastenings

2003

23 Jan ADB approved Contract B11 – Sleeper Changing Machines valued at $2.88 million

28 Feb ADB approved Contract B12 – Spare Parts for Track Machines, valued at $2.2 million

14 Mar Execution of Contract B03 – Weld Finishing Center completed

21 Apr ADB approved reallocation of loan categories

14–21 Apr Fifth review mission fielded

16 Jun Advance payment made for Contract B11 – Sleeper Changing Machines

18 Jul ADB approved minor change in the project scope: substituting 19 km of track originally included in Project with same length of alternative section on same railway line

9 Oct Ministry of Finance submitted official request to extend project implementation period for one year

27 Oct Execution of Contract B12 – Spare Parts completed

2004

10 Feb Execution of Contract B11 – Sleeper Changing Machines completed

16 Feb ADB extended project implementation period until 30 June 2004

2 Apr ADB approved minor change in the project scope: substituting 15.5 km of track originally included in Project with same length of alternative section on same railway line

1 Jun Execution of Contract B06 – Concrete Ties completed

21 Jul New project implementation unit manager appointed

2 Jul UTY officially informed ADB on physical completion of Project

23 Aug–3 Sep

Sixth review mission fielded

Appendix 2 7

Date

Event

13 Apr

Loan account closed and undisbursed balance of $7,389,622.32 cancelled

24 Oct–3 Nov

Project Completion Review Mission fielded

ADB = Asian Development Bank, UTY = Uzbekistan Temir Yullari.

Source(s): Uzbekistan Resident Mission

TRACK REHABILITATION COMPLETED WORKS

Uzbek

istan

Sariag

ach

Nazarb

ek

Daligu

zar

U U

Uzbek

istan

Sariag

ach

Nazarb

ek

Daligu

zar

Up

DU

SARIAGACH-UZBEKISTAN

3,363.4

UD

Up

DownCompleted Sections

3,340.9

3,378.6

3,374.7 KEYSARIAGACH-UZBEKISTAN

3,363.4

Completed Sections

3,340.9

3,378.6

3,374.7 KEY

Kizil T

.

Uzbek

istan

Urta-A

ul

Sariag

ach

SARIAGACH-UZBEKISTAN

3,363.4

Almaz

ar

Pakhta

Cheng

eldy

Rakhim

ov

Tash

kent

Salar

Keles

3,340.9

3,378.6

3,374.7

KELES-TASHKENT-MEKHNAT

Chinaz

Mekhn

at

Navruz

Yangiy

ul

Kizil T

.

Uzbek

istan

Urta-A

ul

Sariag

ach

Almaz

ar

Pakhta

Cheng

eldy

Rakhim

ov

Tash

kent

Salar

Keles

UKELES-TASHKENT-MEKHNAT

Chinaz

Mekhn

at

3,340.9

3,395.5

3,388.3

D

3,384.9

3,367.7

3,376.1

3.289.7

3,420.0

3,410.5

3,403.7

3,349.8

U

3,438,3

3,429.3

KELES-TASHKENT-MEKHNAT

3,340.9

3,395.5

3,388.3

3,384.9

3,367.7

3,376.1

3.289.7

3,420.0

3,410.5

3,403.7

3,349.8

3,438,3

3,429.3

KELES-TASHKENT-MEKHNAT

3,340.9

3,395.5

3,388.3

MEKHNAT - KHAVAST

Khavas

t

3,384.9

3,367.7

3,376.1

3.289.7Mek

hnat

3,420.0

3,410.5Yan

giyer

3,403.7

Bayau

d

Bakht

Akaltin

Gulista

n

Sirdari

nska

ya

3,349.8

3,438,3

3,429.3

KELES-TASHKENT-MEKHNAT

MEKHNAT - KHAVAST

Khavas

t

Mekhn

at

U

Yangiy

er

Bayau

d

Bakht

Akaltin

Gulista

n

Sirdari

nska

ya

MEKHNAT - KHAVAST

3,447.9

3,438.3

3,463.0

3,473.4

UD

3,486.0

3,508.7

3,519.4

3,492.1

MEKHNAT - KHAVAST

3,447.9

3,438.3

3,463.0

3,473.4

3,486.0

3,508.7

3,519.4

3,492.1

MEKHNAT - KHAVAST

Djizza

k

Dashto

bod

3,447.9

Raz 3

3,438.3 Khav

ast

3,463.0

3,473.4

3,486.0

3,508.7

3,519.4

3,492.1KHAVAST - DJIZZAK

Raz 6

Raz 9

Zarbda

r

Zapad

niy

Djizza

k

Dashto

bod

Raz 3

Khavas

t

KHAVAST - DJIZZAK

Raz 6

Raz 9

Zarbda

r

3,608.9

3,549.5

3,531.1

3,519.4

KHAVAST - DJIZZAK

3,580.6

3,591.6

3,565.4

Appendix 3 8

Dzham

bay

Bulung

ur

3,608.9

Raz 19

Raz 16

3,549.5

Djizza

k

Gallya

aral

Raz 13

3,531.1

3,519.4

KHAVAST - DJIZZAK

3,580.6

3,591.6

3,565.4

Samar

kand

Zeravs

han

Appendix 3 8

Dzham

bay

Bulung

ur

Raz 19

Raz 16

Djizza

k

Gallya

aral

Raz 13

U

Appendix 3 8

3,722,0

3,714.6

3,690.5

3,706.6 DJIZZAK - SAMARKAND

3,634.0

3,646.1

3,620.6

3,608.9

UD

Source(s): UTY progress reports

Appendix 3 8

3,722,0

3,714.6

3,690.5

3,706.6 DJIZZAK - SAMARKAND

3,634.0

3,646.1

3,620.6

3,608.9

Appendix 4 9

APPRAISAL AND ACTUAL PROJECT COSTS ($ million)

Appraisal Actual Item Foreign Local Total Foreign Local Total A. Base Cost 1. Track Rehabilitation a. Rails 22.6 1.1 23.7 18.95 0.77 19.72 b. Concrete sleepers 12.1 4.7 16.8 10.20 2.85 13.05 c. Wooden sleepers 1.9 0.3 2.2 0.09 0.0 0.09 d. Track materials 11.4 4.2 15.6 10.93 2.84 13.77 e. Track laying 4.0 4.0 0.0 13.83 13.83

Subtotal (A1) 48.0 14.3 62.3 40.17 20.29 60.46 2. Track Machinery and Equipment 27.7 2.1 29.8 36.88 2.60 39.48 3. Rail Welding Equipment 1.8 1.2 3.0 1.29 0.48 1.77 4. Consulting Services 1.8 0.6 2.4 1.10 0.30 1.40 5. Administration and Miscellaneous 1.4 1.8 3.2 0.0 0.20 0.20

Subtotal (A) 80.7 20.0 100.7 79.44 23.87 103.31 B. Contingencies 1. Physical 2.4 1.0 11.2 0.0 0.0 0.0 2. Price 6.2 5.0 11.2 0.0 0.0 0.0 Subtotal (B) 8.6 6.0 14.6 0.0 0.0 0.0 C. IDC and Other Charges 10.7 0.0 10.7 13.53 0.0 13.53

Total 100.0 26.0 126.0 92.97 23.87 116.84 IDC = interest during construction. Source: Asian Development Bank estimates.

10 Appendix 5

CURRENCY EQUIVALENTS

FY (1 January–31 December) SUM to $1.00

1997 80.17 1998 110.00 1999 140.00 2000 325.00 2001 686.90 2002 970.00 2003 980.00 2004 1058.00 2005a 1148.87

FY = fiscal year, SUM = Uzbekistan sum. a 2005 exchange rate is as at 18 October 2005. Sources: Asian Development Bank and Uzbekistan Temir Yullari estimates.

Appendix 6 11

SUMMARY OF CONTRACTS FUNDED BY THE ASIAN DEVELOPMENT BANK

Source: Uzbekistan Temir Yullari

PCSS No.

Category Contractor Supplier Description Currency of Contract

Contract Amount US Dollar Equivalent

01 – Equipment

0002 Geismar, France Contract B03: Rail weld finishing center (ICB)

FF 7,282,204 1,104,270

0004 Plasser & Theurer, Austria Contract B04: Maintenance machines packages 1–6 (ICB)

EUR 24,009,097 22,399,580

0007 SGS Controll Co. GMBH, Austria

Contract B09: Inspection service (IS)

$ 53,805 53,805

0013 Societe L. Geismar, France Contract B05: Maintenance equipment (ICB)

FF 25,794,576 3,471,043

0015 Geismar, France Sleeper changing machine (ICB)

$ 2,881,470 2,881,470

0016 Plasser & Theurer, Austria Spare parts for track machines (DP)

EUR 1,984,291 2,195,201

Total - Category 01 32,105,368 02 - Materials

0001 Voest-Alpine Schienen GMBH, Austria

Contract B01: Supply and delivery of rails (ICB)

$ 8,716,977 8,716,977

0004 Plasser & Theurer, Austria Contract B04: Maintenance machines packages 1–6 (ICB)

$ 15,920 15,920

0005 China Natl Trans.Machine E/I, People’s Republic of China

Contract B02-1&2 : Rail fixings -baseplates clamps, and bolts (ICB)

$ 9,775,097 9,775,097

0006 China Wanbao Engineering Corporation, People’s Republic of China

Contract B02: 2 Rail fixings package 3 – Fishplates and bolts (ICB)

$ 269,600 269,600

0009 Eivalek Makhsus Temir Beton, Republic of Uzbeksitan

Contract B06: Procurement of concrete sleepers (ICB)

$ 10,195,201 10,195,201

0010 Pandrol UK Ltd., United Kingdom

Contract B083: Pilot fixings (IS) $ 380,000 380,000

0011 Railtech International, France

Contract B082: Stedef pilot fixings (IS)

$ 28,000 28,000

0012 Vossloh Rail Systems GMBH, Germany

Contract B081: Vossloh pilot fixings (ICB)

$ 118,000 118,000

0014 Lachmi Enterprise, Singapore

Contract B07: Procurement of wooden sleepers (ICB)

$ 28,000 28,000

Total - Category 02 29,470,794 03 - Consulting

Services

0003 Rites, India Contract C3: ERSF (ICB) $ 60,000 60,000 0008 Pacific Asia Consultants

PTY, Republic of Uzbeksitan

Contract C2: Consultancy services (ICB)

$ 974,215 974,215

Total - Category 03 1,034,215 04 – Unallocated $ 0 0 Total - Category 04 0 0 Total under Categories 62,610,377

12 Appendix 7

PROJECTED AND ACTUAL DISBURSEMENTS ($ million)

Year Projected Actual 1998 2.80 1999 9.10 7.43 2000 19.60 36.35 2001 22.40 6.30 2002 12.60 1.95 2003 3.50 7.89 2004 2.69

Total 70.00 62.61

Source: Asian Development Bank loans financial information system.

IMPLEMENTATION SCHEDULE

Component and/or Activity J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J F MA MJ J A S O N D J F MA MJ J A S O N D

Tendering

1 Rails, fittings, fasteners, wooden sleepers, andsmall machines

2 Track machines and welding equipment

3 Concrete sleepers

Supply1 Rails, fittings, fasteners, wooden sleepers,

small machines

2 Track machines and welding equipment

3 Concrete sleepers

Track Rehabilitation

Normal Operations for Sections of Track Completed

Legend: Appraisal Actual

20021998 1999 2000 2001

Appendix 8

13

2003 2004

Appendix 9 1

4

ORGANIZATION CHARTS OF UZBEKISTAN TEMIR YULLARI

- Before trusting the block of shares to the professional management companies * - Structural divisions without formation a legal entity RRA - regional railway administration {List and define, in alphabetical order, all abbreviations here. Font is Arial 9 pt.} Source(s): {Please provide source(s) here.}

Board of the Company

Directorate

Transportation Process Maintaining Divisions

Track Facilities Administration*

Power Supply Center *

Administration on Locomotives Operation*

Technical and Technological Supervision Administration*

Unified Dispatching Center*

Security Guard Administration*

Fuel and Lubricants Administration*

Signaling and Communications Center*

Wagon Facilities Administration*

Freight and Commercial Operations Administration*

Freight Operations Settlement Center*

Data Processing Computer Center*

Statistics and Record Keeping Administration*

Regional Railway Administrations

RRA Tashkent RRA Kokand RRA Bukhara RRA Kungrad RRA Karshi-Termez

Enterprises Providing

Services in

JSC Passenger

JSC Refrigerator Carsans”

JSC Container

UE Freight Forwarding

Repair and Production

Units

Locomotive Repair Plant

JSC Wagon Repair Plant

JSC “Tashkent Coaches Repair

Plant”

Buildings and Facilities Maintenance Management

Repair, Construction and Production Infrastructure

Social Infrastructure

Capital Construction Management

JSC Railway Design Institute

JSC Sleeper Factory

JSC Granite

16 Health Service Establishments

Four Education Establishments

Central Cultural Center of Railroaders

Sanatorium

STRUCTURE OF MANAGEMENT PERSONNEL OF UZBEKISTAN TEMIR YULLARI

RF MCL = Russian Federation Ministry of Communication Lines, ORC = Organization of Railway Cooperation, RRA = Regional Railway Administration. {Please alphabetize abbreviations, and add others in the chart, which are not here.} Source(s): {Please provide source(s) here.}

Chairman of the Board

First Deputy Chairman

Economic Analysis and Forecasts Administration (15 units )

Finance and Accounting Administration (21 units )

Privatization and Securities Administration (6 units )

Marketing Administration (6 units )

Chief Manager–Chief Engineer

Strategic Development Administration (8 units )

Works Safety and Safety Engineering Department (3 units)

Managed Divisions

Regional Railway Administrations Statistics and Record Keeping Administration

Deputy Chairman

Transportations Organization

Administration (11 units )

Deputy Chairman

Investment Programs

Department 3 units

External Economic Relations

Administration (8 units)

Capital Construction Management Buildings and Facilities Maintenance Management JSC “Toshtemiryulloyikha”

Senior Assistant on Regime (1 unit)

Juridical Administration (5 units )

Special Service (8 units)

Personnel and Educational

Establishments Administration 11 units

Track Facilities Administration Signaling and Communication Center Power Supply Center Administration on Locomotives Operation Wagon Facilities Administration “Uzzheldormash” Plant JSC “Uzvagonteamir” JSC “Tashkent Coaches Repair Plant” Data Processing Computer Center “Temiryulyonilgitamin” Administration Technical and Technological Supervision Administration

Unified Dispatching Center Freight and Commercial Operations Administration Security Guard Administration JSC “Uztemiryulyulovchi” JSC “Yulreftrans” JSC “Uztemiryulconteyner” “Uzbekzheldor-exspediciya” Enterprise

Representative of the Company at the ORC

(1 unit)

Representative of the Company at the CRC and

RF MCL (1 unit)

Secretariat at the Chairman of the Board

(7 units)

Health Service Establishments (16 units ) Education Establishments (4 units) Sanatorium “Nazarbek”

Total manpower ceiling is 154 units, including managerial personnel (120 units)

Appendix 9 15

16 Appendix 10

STATUS OF COMPLIANCE WITH MAJOR LOAN COVENANTS

Covenant

Reference in Loan

Agreement

Status of Compliance

1. Conditions for Loan Effectiveness:

(i) The Subsidiary Loan Agreement, in form and substance satisfactory to the Bank, shall have been duly executed and delivered on behalf of the Borrower and Uzbekistan Temir Yullari (UTY) and shall have become fully effective and binding upon the Borrower and UTY in accordance with its terms, subject only to the effectiveness of the Loan Agreement.

Loan Agreement Sec. 6.01

Complied with.

(ii) The Subsidiary Loan Agreement, in form and substance satisfactory to the Bank, has been duly authorized or ratified by, and executed and delivered on behalf of, the Borrower and UTY and is legally binding upon the Borrower and UTY in accordance with its terms, subject only to the effectiveness of the Loan Agreement.

Loan Agreement, Sec. 6.02

Complied with.

2. The Borrower shall cause UTY to apply the proceeds of the Loan to the financing of expenditures on the Project in accordance with the provisions of the Loan Agreement and the Project Agreement.

Loan Agreement, Sec. 3.01 (b)

Complied with.

3. All goods and services to be financed out of the proceeds of the Loan shall be procured in accordance with the provisions of the Loan Agreement.

Loan Agreement, Sec. 3.03

Complied with.

4. The Borrower shall cause all goods and services financed out of the proceeds of the Loan to be used exclusively in the carrying out of the Project.

Loan Agreement, Sec. 3.04 Project Agreement, Sec. 2.13

Partially complied with. Equipment, machinery, and materials were diverted to a new railway line given high priority by Government from autumn 2001 to September 2002. The equipment and machinery were returned to the Project in August 2002, but some materials were still outstanding.

5. The Borrower shall make available to UTY, promptly as needed and on terms and conditions acceptable to the Bank, the funds, facilities, services, land and other resources which are required, in addition to the proceeds of the Loan, for the carrying out of the Project.

Loan Agreement, Sec. 4.02

Complied with.

Appendix 10 17

Covenant

Reference in Loan

Agreement

Status of Compliance

6. The Borrower shall cause UTY to furnish to the Bank quarterly reports on the execution of the Project. Such reports shall be submitted in such form and in such detail and within such a period as the Bank shall reasonably request.

Loan Agreement, Sec. 4.04 (b) Project Agreement, Sec. 2.08 (b)

Complied with.

7. Promptly after the closing date for withdrawals from the Loan Account, but in any event not later than three (3) months after the said closing date or such later date as may be agreed for this purpose between the Bank and the Borrower, the Borrower shall cause UTY to prepare and furnish to the Bank a report, in such form and in such detail as the Bank shall reasonably request, on the utilization of the Loan, the economic benefits generated and the accomplishment of the purposes of the Loan.

Loan Agreement, Sec. 4.04 (c) Project Agreement, Sec. 2.08 (c)

Complied with.

8. The Borrower shall cause UTY to (i) maintain separate accounts for the Project; (ii) have such accounts and financial statements audited annually, in accordance with sound international auditing standards, by independent auditors whose qualifications, experience and terms of reference are acceptable to the Bank; (iii) furnish to the Bank, as soon as available but in any event not later than six (6) months after the end of each related fiscal year, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors’ opinion on the use of the Loan proceeds and compliance with the covenants of the Loan Agreement), all in the English language.

Loan Agreement, Sec. 4.04 (d) Project Agreement, Sec. 2.09 (a)

Complied with.

9. Project Implementation Unit: Commencing from the effective date, the Borrower shall cause the Project Executing Agency to establish and maintain a Project Implementation Unit (PIU). The PIU shall plan project implementation and monitor the progress of the Project, including procurement, construction, and commissioning.

Loan Agreement, Schedule 6, para. 1

Complied with.

18 Appendix 10

Covenant

Reference in Loan

Agreement

Status of Compliance

10. Regulatory Framework: The Borrower shall: (i) by 30 June 1999 prepare a plan for the separation of regulatory functions from operations in the railway sector, and (ii) by 30 June 2000 fully implement the said plan.

Loan Agreement, Schedule 6, para. 2

Complied with. (Resolution No. 108-3 March 2001)

11. Restructuring: Core Operations (i) Beginning in 1998, the Borrower and UTY shall implement in a timely manner the restructuring action plan as formulated by the Railway Restructuring Commission. (ii) Following the separation of passenger operations, the Borrower shall cause other business units such as freight, infrastructure, rolling stock and construction to be created in one-year intervals during the period 1999-2002 (iii) The Bank shall be forwarded a copy of the Railway Restructuring Commission’s report on the progress of the organizational restructuring program for Bank review and comment every six months, commencing 1 July 1999. (iv) By 31 December 2000, UTY and the Borrower shall prepare a long-term privatization program for selected core operations.

Loan Agreement, Schedule 6, para. 3

Complied with. (Resolution No. 378-5 November 2002, which became effective on 1 January 2003)

12. Ancillary Operations Health and Recreation Facilities: The Borrower, in conjunction with UTY, shall (i) prepare a plan for separation of all health and recreational facilities by 31 December 1998, and (ii) fully implement the said plan by 31 December 2001.

Loan Agreement, Schedule 6, para. 4 (a)

Partly complied with. UTY still maintains ownership in four hospitals and one polyclinic that are used by current and former workers of UTY.

13. Housing and Other Facilities: The Borrower and UTY shall (i) prepare a plan for the separation of the housing and other facilities from UTY’s core operations by 31 December 1998, and (ii) fully implement the said plan by 31 December 2001.

Loan Agreement, Schedule 6, para. 4 (b)

Complied with.

14. Educational Facilities: The Borrower and UTY, by 31 December 2002, shall fully implement the existing plan for separation of educational facilities owned and operated by UTY.

Loan Agreement, Schedule 6, para. 4 (c)

Complied with. (Resolution No. 458-9 September 2002, which became effective on 1 January 2003)

Appendix 10 19

Covenant

Reference in Loan

Agreement

Status of Compliance

15. Social Impact: As part of the review of the separation of ancillary activities, the Borrower and UTY shall: (i) include provisions for a range of options for continuing health, education and housing services in a new form, and (ii) manage the divestiture of social services to preserve social and institutional capital.

Loan Agreement, Schedule 6, para. 4 (d)

Complied with. Early retired workers have free access to UTY's four hospitals and one polyclinic for 2 years. Small Business Fund was set up to provide loans to early retirees on the basis of small and medium enterprise business plans.

16. Compensation for Non-Commercial Services: By 31 December of each year, the Borrower shall prepare a plan for budgetary compensation for UTY for projected losses for non-commercial transportation services mandated by the Borrower for the ensuing year. (ii) The Borrower shall make budgetary allocations with respect to such projected losses and effect budgetary transfers on a quarterly basis.

Loan Agreement, Schedule 6, para. 4 (d)

Partly complied with. Instead of budgetary allocations, UTY gets soft loan concessions from the Government.

17. Financial Performance: The Borrower shall ensure that UTY maintains its tariff rates at sufficient levels, and receives allocations from the Borrower’s annual budget, to (i) achieve a working ratio of less than 0.95:1 by 2000 and 2001, and of less than 0.85:1 from 2002 onward; and (ii) achieve a debt service ratio of not less than 1.2:1 from 2002 onward.

Loan Agreement, Schedule 6, para. 6 (a) Project Agreement, Schedule, para. 2 (a)

Partly complied with. Tariff rates based on Swiss francs per ton-km have increased. Working ratio targets were met. Debt service coverage exceeded 1.2 times for 2002 and 2003.

18. The Borrower shall ensure that UTY prepares pro forma accounts which shall show the actual position and situation that will be required to comply with above financial ratios. The pro forma accounts shall comprise an income and expenditures statement, funds flow statement, and balance sheet. In the periods where deficits are projected, the Borrower shall make provision for budgetary allocations and effect budgetary transfers on a quarterly basis.

Loan Agreement, Schedule 6, para. 6 (b)

Partly complied with. Some financial ratios were not provided, i.e., debt-service ratio. Pro forma accounts were not always in the same format and did not always include income, funds flow, and balance sheet statements.

19. Accounts Receivable: The Borrower, in conjunction with UTY, shall, commencing from the Effective Date, (i) implement an action plan, acceptable to the Bank, to ensure that overdue accounts are settled by 31 August 1999, and (ii) ensure that future accounts receivable do not exceed three months’ billings.

Loan Agreement, Schedule 6, para. 7 Project Agreement, Schedule, para. 3

Not complied with. Accounts receivable have always been above 3 months billings.

20 Appendix 10

Covenant

Reference in Loan

Agreement

Status of Compliance

20. (i) The Borrower and the Bank shall jointly undertake annual reviews of the Project to assess progress, identify constraints and agree on strategies for resolving constraints. (ii) The Borrower and the Bank shall undertake a midterm review of the Project in the year 2000.

Loan Agreement, Schedule 6, para. 7

Complied with.

21. UTY shall make available, promptly as needed, the funds, facilities, services, equipment, land and other resources which are required, in addition to proceeds of the Loan, for carrying out of the Project.

Project Agreement, Sec. 2.02

Complied with. However, the machinery and equipment that were diverted from autumn 2001 to September 2002 left inadequate resources and delayed the Project.

22. By 31 December 1999, UTY shall submit to the Bank for review UTY’s first five-year business plan specifying financial and operational performance, service quality and safety targets, and shall undertake an annual review and updating of the business plan by 31 March of each year from 2001 onwards. UTY and the Borrower shall together ensure that the business plan is prepared in accordance with generally accepted international accounting standards and practices.

Project Agreement, Schedule, para. 1

Complied with.

23. Starting in 1999, and by 31 March of each year thereafter, UTY shall review its capital asset investment program to ensure that (i) it complies with the financial targets enumerated above, and (ii) each investment has an adequate financial and economic internal rate of return.

Project Agreement, Schedule, para. 4

Partly complied with. Capital asset investment program reviewed but UTY did not assess each investment to determine adequacy of financial and economic rates of return.

24. Commencing from the effective date, UTY shall carry out regular reviews of its freight and passenger tariffs to ensure that such tariffs are based on cost and market considerations and are at levels sufficient to ensure UTY is at all times in compliance with the specified financial ratios (working ratio and debt-service ratio). The tariff-setting reviews shall be conducted on at least an annual basis, and UTY shall make application to the Ministry of Finance for any necessary tariff adjustment or adjustments promptly after the end of each review. Commencing in 1999, UTY shall submit reports of its tariff-setting reviews to the Bank each year by 31 March.

Project Agreement, Schedule, para. 5 (a), (b)

Partly complied with Tariffs are reviewed but not always on a yearly basis and these have not always been submitted to Asian Development Bank.

Appendix 10 21

Covenant

Reference in Loan

Agreement

Status of Compliance

25. (i) By 31 December 1998, UTY shall prepare an asset downsizing program, and (ii) by 31 December 2000 shall implement the aforesaid asset downsizing program to ensure that an appropriate number and size of assets are maintained for efficient railway operations.

Project Agreement, Schedule, para. 6

Complied with.

26. UTY shall, through a combination of a freeze on recruitment (except for areas in which the necessary expertise is not available within the organization), natural attrition, and voluntary staff separation, achieve a reduction in its staff levels for its existing core railway operations, to not more than 46,000 by 31 December 2000, and to not more than 40,000 by 31 December 2003.

Project Agreement, Schedule, para. 7

Complied with.

27. By 30 June 1999, UTY in conjunction with the Borrower shall have prepared measures to mitigate the social impact of the staff reduction and ancillary operations separation. The Bank’s policy on Gender and Development shall be complied with as part of the formulation of the mitigating measures for social impacts.

Project Agreement, Schedule, para. 8

Complied with.

28. In accordance with the recommendations contained in the Initial Environmental Examination for the Project dated September 1997, UTY shall ensure that appropriate mitigation measures are undertaken to minimize adverse environmental impacts during implementation of the Project, and that environmental monitoring is carried out in accordance with the Borrower’s relevant environmental regulations and laws and the Bank’s guidelines.

Project Agreement, Schedule, para. 9

Partly complied with. Dust pollution was caused by ballast cleaning. To mitigate this, the surface of the ballast was moistened before cleaning.

22 Appendix 10

Covenant

Reference in Loan

Agreement

Status of Compliance

29. UTY shall monitor and evaluate the Project benefits by compiling and analyzing traffic data for the Project railway sections. The data to be collected shall include but not be limited to: (i) freight traffic in net tons and ton-km, and average distance traveled per trip; (ii) number of passengers and volume of passenger-km and average trip distance; (iii) average load and turnaround time of wagons; (iv) yearly km run by locomotives in service and locomotive-km per failure; (v) total number of staff and staff productivity; (vi) financial and operational performance indicators of UTY; (vii) project costs; and (viii) freight tariffs and passenger fares. The operational performance indicators shall be compared with the operational targets agreed upon with the Bank.

Project Agreement, Schedule, para. 10

Complied with.

PIU = project implementation unit, UTY = Uzbekistan Temir Yullari. Source(s): Project Performance Report

Appendix 11 23

FINANCIAL STATEMENTS

1. The financial statements for Uzbekistan Temir Yullari (UTY) are included here to highlight the agency’s performance in recent years. Income statements and balance sheets are provided for the 2000–2005 period. 2. UTY is profitable, with an estimated after-tax profit in 2004 of approximately SUM85 billion. The balance sheet, however, shows an unusually high level of receivables of about SUM245 billion, or approximately 59% of revenue. Given the need to finance future investments, low cash flow is a cause for concern. UTY needs to take action to (i) collect the outstanding receivables, and (ii) maintain the amount and average age of receivables at normal levels.

Table A11.1: Income Statement (SUM million)

Item 2000 2001 2002 2003 2004 2005

A. Income (estimated)

1. Freight 59,227 102,087 191,091 269,175 296,895 360,400

2. Passenger 3,743 5,789 8,894 11,480 16,482 18,918

3. Ancillary 18,116 18,765 28,246 42,910 82,602 81,454

4. Net Revenue 81,086 126,641 28,231 323,565 395,979 460,772

5. Other Operating Revenue 4,480 5,491 6,421 12,324 9,410 11,342

6. Other Revenue from Financial Activities 8,947 82,905 1 2,937 23,188 7,292 5,994

Total (A) 94,513 215,037 247,589 359,077 412,681 478,108

B. Expenses

1. Operating Cost 42,839 60,755 115,828 180,961 250,255 272,076

2. Administrative Cost 13,886 21,737 35,279 60,557 62,026 66,220

3. Other Costs on Financial Activities 8,791 83,379 10,681 14,197 7,190 8,688

Total (B) 65,516 49,166 161,788 255,715 319,471 346,984

Profit Before Tax 28,997 49,166 85,801 103,362 93,210 131,124

Income Tax 8,834 9,536 11,967 11,028 8,266 8,974

Profit After Tax 20,163 39,630 73,834 92,334 84,944 122,150

Source(s): Uzbekistan Temir Yullari

24 Appendix 11

Table A11.2: Balance Sheet

(SUM million)

Item 2000 2001 2002 2003 2004 2005

A. Assets (estimate)

1.Long-Term Assets

a. Fixed Assets 30,431 159,156 166,576 255,147 377,028 854,518

b. Intangible Assets 9.0 10.0 6,115 22,798 17,389 30,732

c. Capital Investments 45,742 55,693 67,487 121,412 124,911 312,038

d. Other Long-Term Assets 16,209 1,516 3,707 5,664 6,035 13,626

2.Current Assets

a. Production Stock 9,904 15,282 26,153 39,926 52,439 97,068

d. Deferrals 147.0 40,249 48,662 50,666 52,830 107,244

c. Cash 2,689 5,082 3,934 19,657 87,802

d. Other Current Assets 3,732 3,048 5,939 18,663 808.0 12,852

e. Accounts Receivable 49,054 106,836 163,948 186,693 244,984 504,574

Total (A) 155,228 384,479 493,669 704,903 896,081 2,020,454

B. Liabilities

1.Equity Source

a. Chartered Capital 44,154 197,257 164,015 157,596 190,071 374,498

b. Reserved Capital 63,284 213,391 343,065 738,338

c. Unallocated Profit 19,272 44,784 61,943 104,958 98,239 180,564

d. Other Sources 29,159 9,483 40,937 77,390 52,888 254,370

2. Liabilities

a. Bank Long-Term Credits 27,792 76,611 84,881 100,712 137,795 297,476

b. Advance from Buyers 2,456 5,306 2,145 16,594 7,746 178.0

c. Accounts Payable 32,395 51,038 76,464 34,262 65,884 173,830

d. Other Liabilities 393.0 1,200

Total (B) 155,228 384,479 493,669 704,903 896,081 2,020,454

Source(s): Uzbekistan Temir Yullari

Appendix 12 25

REFORM FRAMEWORK FOR THE RAILWAY SECTOR

Component Action Target Achieved A. Regulatory Framework 1. Railway Law

Submit Railway Law to Parliament

Prior to loan negotiations, submit Railway Law to Parliament.

Achieved

2. Regulations

Separate regulatory functions from operations

The Government prepares a plan, acceptable to Asian Development Bank (ADB), by 30 June 1999 and fully implements the plan by 30 June 2000.

Achieved

B. Railway Restructuring 1. Core Operations

Reorganize into business units

Separate passenger operations. Create other business units within Uzbekistan Temir Yullari (UTY) in one-year intervals during the period 1999–2002.

Five business units established, i.e., passenger transport, container transport, refrigerated transport, passenger wagon repair plant, and freight wagon repair plant.

Prepare business plans

Submit first 5-year business plan specifying financial and operational performance, service quality, and safety targets for ADB’s comments by 31 December 1999 and annual review, and update plan by 31 March of each year from 2001 onward.

In 2000, UTY established a marketing department to undertake a study of rail tariffs, analyze market conditions, and prepare a marketing strategy. The first business plan was for the period 2000–2005.

Reduce staff numbers

Implement a program to reduce staff to no more than 46,000 by 31 December 2000 and 40,000 by 31 December 2003.

Staff numbers reduced to 32,730 by 31 December 2003.

Downsize asset

UTY to prepare an asset downsizing program by 31 December 1998 and completely implement it by 31 December 2000.

Asset downsizing program implemented in a timely fashion.

Establish market-based pricing Review UTY tariffs by 31 March of each year to ensure their adequacy, taking into account cost and market conditions, and adjustment of tariffs, if necessary.

On 17 July 2002, the Ministry of Finance approved the tariff level for freight and passenger transport in Swiss francs. An annual review of tariff levels based on costs, and inflation is undertaken.

26 Appendix 12

Component Action Target Achieved Compensate for

noncommercial operations By 31 October each year, the Government will prepare a plan for budgetary compensation for UTY for projected losses for noncommercial transportation services as mandated by the Government, for the ensuing year. The Government will make budgetary allocations for the projected losses and effect budgetary transfers on a quarterly basis.

In 1999, UTY approached the Ministry of Finance to request compensation of noncommercial transport services. Although the issue was raised several times with the cabinet of ministers, compensation was not undertaken. Instead the Government (i) provides general budget support, (ii) finances investments, and (iii) provides long-term low-interest loans.

Reduce accounts receivable The Government and UTY will prepare an action plan, acceptable to ADB, to ensure that overdue accounts are settled within 12 months, and future accounts receivable do not exceed 3 months of billings.

Although an action plan was prepared, it was not shared with ADB. Accounts receivable, although reduced, still remain at high levels and exceed 3 months billings.

Achieve a sustainable financial performance

Attain a working ratio of less than 0.95 in 2000 and 2001, and less than 0.85 from 2002 onward, and debt-service ratio of not less than 1.2 times from 2002 onward. In addition, the Government will ensure that UTY prepares pro forma accounts that will show the actual position and the situation that will be required to meet the above requirements. The pro forma accounts will comprise (i) an income and expenditure statement, (ii) funds flow statement, and (iii) balance sheet. In the periods when deficits are projected, the Government will make provision for budgetary allocations and effect budgetary transfers on a quarterly basis.

A working ratio of less than 0.95 was achieved in 2000 (i.e., 0.69) and a ratio of less than 0.85 from 2002 onwards was also achieved (i.e., 0.71 in 2003). The debt-service ratio was never calculated by UTY. Pro forma accounts for income statements have been prepared on a regular basis, but not for funds flow statements and balance sheets. The Government did not make budgetary allocations on a quarterly basis where deficits were projected.

Establish a sustainable capital asset investment program

Review the program by 31 March of each year, starting in 1999, to avoid violation of the above financial targets and to ensure that each investment has adequate financial and economic internal rates of return.

The capital asset investment program was formulated in accordance with the investment program of the Government drafted by the Ministry of Economy.

Privatize selected operations The Government and UTY will prepare a long-term privatization program by 31 December 2000.

Container transport is privatized. Freight operations are undertaken by a transport agency.

Appendix 12 27

Component Action Target Achieved 2. Ancillary Operations Separate ancillary operations

from core operations Transfer all educational facilities to the Government by 31 December 2002. By 31 December 1998, the Government will have a plan for the transfer of health and recreational facilities. The plan will be fully implemented by 31 December 2001. By 31 December 1998, the Government and UTY will determine if any other ancillary activities, including housing, are to be separated from UTY’s core operations by 31 December 2001.

Transfer of education facilities was completed by 1 December 2002 (a total of 30 secondary schools, and 91 kindergartens). UTY, however, retains one institute, one college, and a technical school for staff training. Health and recreational facilities have been transferred to municipalities. UTY has retained four hospitals for its staff.

3. Social Impact Institute mitigating measures By 30 June 1999, the Government and UTY will prepare measures to mitigate the social impact of the staff reduction and ancillary operations separation.

Completed

ADB = Asian Development Bank, UTY = Uzbekistan Temir Yullari. Source(s): Asian Development Bank

To Bank No Objection D BER No Objection Bid Validity Bid Security Award Registration Advance CompleteC2 Loan Consultancy 22/Jul/98 05/Oct/98 09/Oct/98 09/Oct/98 01/Mar/00 09/Dec/98 09/Dec/98 01/Apr/99 03/Jun/99 Technical DNC 06-Jul-99 20/Mar/00 05/Apr/00 11/Dec/02

08/Oct/99 Final 08/Feb/00 23000469PCSS 0008

C3 ERSF Consultancy Invite 05-Mar-99 05/Apr/99 05/Apr/99 07/Jun/99 02/Jul/99 10/Sep/99 27/Sep/99 11/Dec/02(Individual Consultancy) (6 Firms) PCSS 0003 23902284

C4 CWR ConsultancyB01 Rails 14,428 t 22/Jul/98 24/Sep/98 24/Sep/98 24/Sep/98 01/Mar/00 24/Nov/98 24/Nov/98 30/Jan/99 13/May/99 24/Mar/99 23/Apr/99 17/Jun/99 31/Aug/99 22/Sep/99 14/Apr/00

06/Apr/99 05/May/99 04/Jun/99 PCSS 0001 2390220116/Jun/99 16/Jul/9909/Jul/99 08/Aug/99 B021 10-Sep 21/Sep/99 15/Oct/99 08/Sep/00

03/Sep/99 03/Oct/99 PCSS 0005 2390234106/Aug/99 B022 23-Sep 08/Oct/99 03/Nov/99 29/Sep/00

PCSS 0006 23902479B03 Weld Finishing 11/Aug/98 24/Sep/98 01/Oct/98 01/Oct/98 01/Mar/00 01/Dec/98 01/Dec/98 24/Feb/99 11/May/99 31/Mar/99 30/Apr/99 10/Jun/99 20/Jul/99 27/Aug/99 14/Mar/03

06/Apr/99 12/May/99 11/Jun/99 PCSS 0002 2390168623/Jun/99 23/Jul/99

B04 Maint Machines 13/Nov/98 09/Dec/98 17/Dec/98 17/Dec/98 15/Mar/00 02/Mar/99 02/Mar/99 14/Jun/99 04/Aug/99 30/Jun/99 30/Jul/99 25/Aug/99 21/Sep/99 18/Oct/99 16/Sep/0011/Aug/99 10/Sep/99 PCSS 0004 2390234222/Sep/99 22/Oct/99

B05 Maint Equipment 08/Jun/99 26/Jul/99 05/Aug/99 05/Aug/99 03/Mar/00 07/Oct/99 07/Oct/99 20/Jun/00 19/Jul/00 04/Feb/00 05/Mar/00 26/Oct/00 06/Dec/00 16/Feb/01 16/Feb/01PCSS 0013 23002621

B06 Concrete Sleepers 11/May/99 07/Jun/99 17/Jun/99 17/Jun/99 18/Mar/00 03/Sep/99 03/Sep/99 24/Dec/99 16/Feb/00 01/Jan/00 31/Jan/00 19/Apr/00 10/May/00 28/Jul/00 01/Jun/0426/Feb/00 27/Mar/00 PCSS 0009 23000908

B07 Wooden Sleepers 25/Jun/99 05/Aug/99 16/Sep/99 16/Sep/99 11/Mar/00 26/Nov/99 26/Nov/99 22/Aug/00 01/Sep/00 25/Mar/00 24/Apr/00 07/Dec/00 27/Dec/00 14/Feb/01 TerminatedNew Bids 11/Apr/00 11/Apr/00 13/Feb/00 25/May/00 25/May/00 30/Oct/00 PCSS 0014 23002759 17/Oct/01

B08 Pilot Fixings Invite 13-Mar-00 B081 31-Jul PCSS 0012

20-Oct-00 23002251 07/Dec/00 10/May/01

(International Shopping) (3 suppliers) B082 31-Jul PCSS 0011

14-Dec-00 23002672 18/Jan/01 Terminated 11-

Jan-02B083 05-Jul PCSS 0010

20-Oct-00 23002252 07/Dec/00 30/Apr/01

B09 Inspection Agency 02/Aug/99 09/Aug/99 20/Aug/99 20/Aug/99 01/Feb/00 21/Sep/99 21/Sep/99 06/Jan/00 25/Jan/00 10/Apr/00 14/Mar/03(International Shopping) PCSS 0007 23900268

B10 Earthmoving 23/Mar/01 19/Apr/01 17/May/01 17/May/01 29/Mar/00 14/Aug/01 14/Aug/01 29/Mar/02B11 Sleeper Change 14/Aug/01 23/Oct/01 01/Nov/01 08/Jan/02 04/Jun/02 26/Jun/02 28/Feb/03 12/Jun/03 16/Jun/03 10/Feb/04B12 Spares 18/Jun/01 28/Jun/01 02/Jul/01 07/Aug/01 23/Jan/02 14/Mar/02 28/Feb/03 12/Jun/03 16/Jun/03 27/Oct/03B14 Maint Workshop 21/Jul/02 21/Aug/02 21/Sep/02 21/Nov/02 20/Jan/03 19/Feb/03 21/Mar/03B15 Ballast Cleaning 15/Feb/04 16/Mar/04 31/Mar/04 30-May-04 29/Jul/04 28/Aug/04 27/Sep/04 27/Oct/04 06/Nov/04 05/Jan/05

Appendix 13 28

Undertaken under Loan 1773

Source: Uzbekistan Temir Yullari

11/Mar/99 14/Jun/99 4-Aug-99

Cancelled in Feb 2004

Thu 07/Jan/99 63 ThuB02 Rail Fixings 25/Nov/98 16/Dec/98

ACTUAL PROCUREMENT SCHEDULE

Contract Issue Open

Appendix 14 29

PERFORMANCE TARGETS AT APPRAISAL AND ACTUAL

Performance Indicators 1996 2000 2003 2004 Actual Appraisal Actual Appraisal Actual Actual

Prime Targets 1. Traffic Net tons (million) 53,996 76,672 48,204 83,094 52,349 53,843 Ton-km (million) 17,539 20,181 15,442 21,871 18,887 18,007 Passenger-km (million) 2,029 2,029 2,163 2,029 2,077 2,012 Converted ton-km (ctkm) (million) 19,559 22,210 17,605 23,900 20,964 20,019 2. Staff Staff level 52,000 46,000 32,163 40,000 32,730 33,473 3. Overall Operating Performance Staff productivity (ctkm per employee) 397,000 439,000 614,000 597,500 673,000 802,600 Freight ton-km per route km (million) 5.091 5.521 8.828 5.984 8.197 8.383 Net ton km/freight train km 1,623 1,704 1,712 1,785 1,971 1,982 4. Traction and Rolling Stock Yearly km performance per diesel locomotive 161,900 170,000 151,268 178,000 154,614 161,294 Yearly km performance per electric locomotive 180,900 190,000 168,214 199,000 169,689 167,718 Number of operational wagons 16,000 16,000 11,234 16,000 10,281 10,155 Yearly net ton km per wagon 1.163 – 3.75 1.367 4.8 4.9 5. Overall Financial Targets Working ratio 0.75 <0.95 0.69 <0.85(2002) 0.71 0.77 6. Additional Parameters Average speed of freight train (kph) 32 – – 45 41 41.3 Average time per wagon at each intermediate terminal (hours)

14 – 3 6 4 3

7. Freight Traffic Wagon km/wagon day 108 – 121 153 153 154 8. Passenger Traffic Number of passengers (million) 15.828 15.828 16.271 15.828 16.062 16.110 Passenger kms/passenger train km 245 294 352 343 333 313 9. General Monthly locomotive km/locomotive (km) 22,700 34,050 12,483 39,725 13,059 13,599 Locomotive km/locomotive day (km) 797 – 1,358 1,395 1,568 1,570 “–“ = data not available or not calculated. ctkm = converted ton-km = ton-km + passenger km, km = kilometer, kph = kilometers per hour. Sources: Uzbekistan Temir Yullari and ADB estimates.

TRAFFIC FORECASTS APPRAISAL AND ACTUAL

App

rais

al

Act

ual

App

rais

al

Act

ual

App

rais

al

Fore

cast

App

rais

al

Fore

cast

App

rais

al

Fore

cast

App

rais

al

Fore

cast

Commodity (tons' 000)

Oil and Oil Products 31,095 13,536 32,998 14,520 34,331 13,225 37,905 14,600 41,850 16,119 48,072 18,504Construction Materials 16,668 9,297 18,214 7,189 19,323 7,534 22,401 8,318 25,969 9,183 31,939 10,542Grain 7,948 4,275 8,434 2,354 8,775 2,949 9,688 3,256 10,697 3,594 12,287 4,126Coal 4,404 3,100 4,404 2,237 4,404 3,079 4,404 3,399 4,404 3,753 4,404 4,308Fertilizers 3,844 3,333 4,079 3,439 4,244 4,552 4,685 5,025 5,173 5,548 5,942 6,369Ferrous metals 1,532 1,288 1,674 1,657 1,776 1,871 2,058 2,066 2,386 2,280 2,935 2,618Ore 1,288 NA 1,367 881 1,422 705 1,570 778 1,734 859 1,992 986Other 7,994 12,112 8,735 19,968 9,267 19,571 10,743 21,606 12,454 23,853 15,317 27,384

Total (tons '000) 75,960 48,204 81,092 53,230 84,729 54,548 94,641 60,221 105,854 66,484 124,075 76,324

Total (ton-km million) 19,993 15,442 21,344 18,887 22,301 18,007 24,911 19,880 27,632 21,947 32,657 25,195

Passengers ('000) 15,828 16,271 15,828 16,062 15,828 16,110 15,828 16,110 15,828 16,110 15,828 16,110

Passenger-km (million) 2,029 2,163 2,029 2,077 2,029 2,012 2,029 2,012 2,029 2,012 2,029 2,012Sources: Uzbekistan Temir Yullari, Staff estimates.

App

rais

al

Act

ual

App

rais

al

Act

ual

App

rais

al

Fore

cast

App

rais

al

Fore

cast

App

rais

al

Fore

cast

App

rais

al

Fore

cast

Commodity (tons '000)

Oil and Oil Products 12,868 5,191 13,656 5,568 14,207 5,091 15,686 5,620 17,319 6,204 19,894 7,123Construction Materials 4,545 3,565 4,967 2,757 5,269 2,900 6,109 3,202 7,082 3,535 8,709 4,058Grain 2,227 1,639 2,363 903 2,458 1,135 2,714 1,253 2,997 1,384 3,442 1,588Coal 3,187 1,189 3,187 858 3,187 1,185 3,187 1,308 3,187 1,445 3,187 1,658Fertilizers 1,572 1,278 1,668 1,319 1,735 1,752 1,916 1,934 2,116 2,136 2,430 2,452Ferrous metals 572 494 625 635 663 720 768 795 891 878 1,095 1,008 Ore 258 NA 274 338 285 271 315 300 347 331 399 380Cotton 284 484 284 378 284 409 284 451 284 498 284 572Other 3,617 4,645 3,952 7,658 4,193 7,533 4,861 8,317 5,635 9,182 6,930 10,541

Total (tons '000) 29,130 18,486 30,976 20,413 32,281 20,997 35,840 23,180 39,858 25,591 46,370 29,379

Total (ton-km million) 7,193 4,797 7,648 4,112 7,971 4,608 8,850 5,087 9,841 5,616 11,450 6,448

Passengers ('000) 7,086 15,000 7,086 15,300 7,086 15,400 7,086 15,400 7,086 15,400 7,086 15,400

Passenger-km (million) 137 146 137 140 137 145 137 145 137 145 137 145Source: Uzbekistan Temir Yullari, Staff estimates

Item

Table A15.2: Traffic Forecasts Appraisal and Actual on the Keles--Samarkand Section

2000 2003 2005 2010 2015 2022

Appendix 15 30

Table A15.1: Traffic Forecasts Appraisal and Actual on UTY network

2000 2003 2005 2010 2015 2022

Item

Appendix 16 31

FINANCIAL AND ECONOMIC REEVALUATION A. General

1. The methodology and assumptions adopted for the overall financial and economic reevaluation of the Project generally follow those carried out at appraisal. The financial and economic benefits were quantified by comparing the with- and without-project cases. Costs and benefits are measured at border price equivalent values, using world price numeraire, and are expressed in 2004 constant prices in Uzbekistan sum (SUM). The Manufacturing Unit Value Index, published by the International Monetary Fund, was used for converting costs and benefits into 2004 prices. The costs and benefits of the nontraded components were converted to the world price numeraire by using a standard conversion factor of 0.75 and expressed in 2004 constant prices. The Project’s life is assumed to be 20 years of full operation, as at appraisal. B. Costs

2. The costs of construction were the actual costs incurred, excluding interest and other charges during construction. The economic costs are derived from their financial costs by (i) excluding taxes and duties, and (ii) converting the nontraded components to the world price numeraire using the standard conversion factor of 0.75, as at appraisal. They were expressed in 2004 constant prices. Track maintenance costs were adjusted in a similar way to obtain economic costs. The residual value of the project components (e.g., rails, sleepers, and machinery) at the end of 20 years was calculated based on the average life of each component as at appraisal. C. Benefits

1. Financial Benefits

3. The financial benefits from the Project consist of (i) cost savings in track maintenance, (ii) cost savings in fuel and operations, and (iii) incremental revenues. The cost savings in track maintenance have been calculated as the difference between the forecast expected costs associated with the rehabilitated rail tracks and the costs if the rail tracks in the without-project case were to be maintained. There are also cost savings in terms of reduced locomotive fuel and operating expenses due to the improved efficiency provided by the rehabilitated track (i.e., speed increases). Incremental revenues for the Project are based on real tariff increases for the improved quality of service provided by Uzbekistan Temir Yullari (UTY). This improved quality of service is derived from (i) improved delivery time for transporting freight cargoes, (ii) reduced storage time for customer merchandise, (iii) overall improved efficiency in handling and transporting freight cargo, and (iv) reduced travel times for passengers.

2. Economic Benefits

4. The analysis of project benefits has used assumptions similar to those used at appraisal1 but updated using the most recently available data and prices. The main economic benefits of the Project are (i) savings in track maintenance and repair costs that without the Project would be necessary for maintaining the track, (ii) savings in inventory costs, (iii) savings in operating costs, (iv) revenue from increased tariffs on transit traffic in the corridor, (v) investment savings

1 ADB.1998. Report and Recommendations of the President to the Board of Directors on Proposed Loan to the Republic of

Uzbekistan for the Railway Rehabilitation Project. Manila

32 Appendix 16

in rolling stock resulting from effective utilization of railway assets, and (vi) savings from the avoidance of traffic diverting to road. 5. Savings in track maintenance and repair costs are the difference between those costs that would have been necessary and incurred (e.g., replacement of rails) had the Project not been implemented and the costs that would have been necessary and incurred had the Project been implemented. The cost of track maintenance and repair costs for the without-project case were estimated by UTY. 6. Inventory cost savings are derived from two components, namely (i) improved operational efficiency, and (ii) increased operational speed. Improved operational efficiency saves approximately one day of trip time. These improved operational efficiency benefits are attributable to several factors that have been implemented under the Project, including new track maintenance equipment (e.g., ballast equipment) and efficient use of labor resources through redeployment. Before the Project, for example, the ballast maintenance procedure required approximately 70 people to maintain up to 2 km of track per day, while since implementing the Project only 6–8 people are required to maintain 3–4 km of track in a 5-hour period. The time savings from efficiency improvements have been applied to the tonnage carried on the rehabilitated line and multiplied by the freight delay costs. The increased operational speed for passenger times saves around 3 hours of trip time. The speed has increased by about 28% for freight trains, thus reducing trip times by approximately 3 hours. This reduction in travel time has been applied to both the increase in passengers and the number of tons of freight traveling on the rehabilitated line. 7. Operating cost savings are obtained from the lower costs for fuel and power and for the maintenance and repair of rolling stock for both passenger and freight trains due to the rehabilitated sections of the track. Operating costs in the with-project case were obtained from UTY and compared with operating costs in the without-project case. Operating costs are approximately 22% lower for freight trains and 25% lower for passenger trains. The operating cost savings per gross ton-km were applied to freight and passenger trains operating on the rehabilitated track. 8. Tariffs on freight transit traffic have also been calculated. This benefit is only calculated on freight transit traffic on the rehabilitated track sections. Revenue is not calculated for domestic freight traffic, as this is not an economic benefit because it represents the financial revenue of the service. 9. Savings from rolling stock investment consist of the amount of additional investment in freight wagons and locomotives that would have been necessary had the Project not been implemented. The savings result from (i) improved operational efficiency, and (ii) increased operating speed. These two aspects result in decreasing the total wagon cycle time by 50% The rolling stock investment avoided is calculated for that portion of rolling stock applicable to corridor traffic only, and it has been allocated over a 6-year period beginning in 2004. As at appraisal, it is estimated that additional investment will be avoided during next 5 years. 10. It has been estimated that the traffic diversion to roads that is avoided is 10% of the traffic for coal and grain on the rehabilitated track. This is the only traffic that would probably divert to road transport in the absence of the Project. The cost savings have been calculated by subtracting the economic rail freight transport costs from road transport costs over the average haul distance.

Appendix 16 33

D. Financial and Economic Analysis

1. Financial Analysis

11. The financial internal rate of return (FIRR) for the Project was estimated at 4.5%. Project sustainability was assessed by comparing the weighted average cost of capital (WACC) with the FIRR calculated for the Project. The WACC has been estimated to be 4.0%.2 The financial net present value, discounted at the WACC, was SUM7.53 billion. Since the Project had an FIRR of 4.5%, which is slightly above the WACC of 4.0%, the Project should be considered financially viable, although only marginally. Calculation of the Project’s FIRR is shown in Table A16.1. At appraisal, the FIRR was calculated as 12.7%. The financial viability of the Project is lower due to UTY’s financial status and lower than expected traffic volumes.

2. Economic Analysis

12. The Project’s economic internal rate of return (EIRR) has been calculated based upon a project life of 20 years from the completion of the Project. The EIRR of the Project was estimated to be 14.3%. When compared with the opportunity cost of capital of 12%, the recalculated EIRR shows that the Project is economically viable. The recalculated EIRR of 14.3% was lower than that calculated at appraisal (17%), because the forecast levels of traffic are lower than originally estimated. Although the capital cost of the Project was lower than that estimated at appraisal, that factor was not sufficient to outweigh that of the lower traffic levels and to boost the EIRR to higher than estimated at appraisal. Calculation of the Project’s EIRR is shown in Table A16.2.

2 The WACC has been calculated in accordance with the Guidelines for the Financial Governance and Management

of Investment Projects Financed by the Asian Development Bank, January 2002, Chapter 3, paragraph 3.5.2, page 24. As the calculated WACC for each of the categorized financing components of the loan does not exceed 4%, the Minimum Rate Test of 4% is applied, and hence the WACC derived is 4%.

34 Appendix 16

Cost Cost IncrementalYear Project Savings in Savings in Revenue Net Benefit

Cost Track Fuel and IncreasesMaintenance Operations

Cost

1999 1,390 (1,390)2000 13,089 (13,089)2001 8,609 (8,609)2002 4,391 171 2,195 (2,025)2003 19,430 244 3,221 (15,964)2004 14,985 244 3,308 (11,432)2005 244 3,559 157 3,9602006 244 3,628 167 4,0402007 244 3,700 186 4,1302008 244 3,772 173 4,1902009 244 3,847 189 4,2802010 244 3,922 205 4,3712011 244 3,999 213 4,4562012 244 4,078 247 4,5702013 244 4,158 322 4,7242014 244 4,240 397 4,8812015 244 4,323 471 5,0392016 244 4,408 546 5,1982017 244 4,495 582 5,3222018 244 4,584 619 5,4472019 244 4,674 656 5,5752020 244 4,766 692 5,7032021 244 4,860 730 5,8342022 244 4,956 744 5,9452023 (16,575) 244 5,054 759 22,633

Financial Internal Rate of Return = 4.5%

Source: ADB Staff estimates.

Table A 16.1: Financial Internal Rate of Return(SUM million in 2004 constant prices)

Table A 16.2: Economic Internal Rate of Return(SUM million)

Costs NetTrack Inventory Operating Increased Avoided Avoided Benefits

Year Constr. Track Total Maint. and Cost Cost Transit Rolling Diverted TotalMaint. Costs Repair Savings Savings Tariff Stock Traffic BenefitsWith Without Revenue Investmt.

Project Project

1999 1,356 1,356 (1,356)2000 13,016 13,016 (13,016)2001 8,382 8,382 (8,382)2002 4,259 83 4,342 154 1,795 1,975 373 566 4,863 5222003 18,813 118 18,931 220 2,636 2,899 373 851 6,979 (11,952)2004 14,349 118 14,467 220 2,709 2,978 373 894 7,173 (7,293)2005 118 118 220 2,918 3,203 500 373 937 8,150 8,0322006 118 118 220 2,976 3,266 546 373 955 8,336 8,2182007 118 118 220 3,036 3,330 557 373 974 8,490 8,3722008 118 118 220 3,097 3,395 568 994 8,273 8,1552009 118 118 220 3,158 3,462 579 1,014 8,433 8,3152010 118 118 220 3,222 3,530 591 1,098 8,660 8,5422011 118 118 220 3,286 3,599 602 1,120 8,827 8,7092012 118 118 220 3,352 3,670 615 336 1,142 9,334 9,2162013 118 118 220 3,419 3,742 627 1,165 9,173 9,0552014 118 118 220 3,487 3,816 639 1,188 9,351 9,2332015 118 118 220 3,557 3,891 649 1,212 9,528 9,4102016 118 118 220 3,628 3,968 665 1,236 9,716 9,5982017 118 118 220 3,700 4,046 678 336 1,261 10,241 10,1232018 118 118 220 3,774 4,125 692 1,286 10,097 9,9792019 118 118 220 3,850 4,207 706 1,312 10,294 10,1762020 118 118 220 3,927 4,290 720 1,338 10,494 10,3762021 118 118 220 4,005 4,374 734 1,365 10,698 10,5802022 118 118 220 4,085 4,461 749 336 1,142 10,993 10,8752023 (13,671) 118 (13,553) 220 4,167 4,549 764 1,165 10,864 24,417

Economic Internal Rate of Return = 14.3%

Source: ADB Staff estimates

Benefits

Appendix 16 35

36 Appendix 17

QUANTITATIVE ASSESSMENT OF OVERALL PROJECT PERFORMANCE

Table A17.1: Overall Rating

Criteria Assessment Rating (0–3) Weight (%)

Weighted Rating

Relevance Highly Relevant 3 20 0.60 Efficacy Efficacious 2 25 0.50 Efficiency Efficient 2 20 0.40 Sustainability Likely 2 20 0.40 Institutional Development Significant 2 15 0.30

Overall Rating

Successful

2.20

Notes: Relevance: - Project objectives and outputs were relevant to strategic

objectives of the Government and the Asian Development Bank. Efficacy: - Project achieved its targets and objectives. Efficiency: - Project achieved objectives in an efficient manner. Sustainability: - Project benefits and development impacts are sustainable. Institutional Development: - Project had beneficial impacts on government policy and

institutional capacity, and other positive social impacts.

Table A17.2: Rating System

Rating Value

Relevance Efficacy Efficiency Sustainability Institutional Development

3 Highly

Relevant Highly

Efficacious Highly

Efficient Most Likely Substantial

2 Relevant Efficacious Efficient Likely Significant 1 Partly

Relevant Less

Efficacious Less

Efficient Less Likely Moderate

0 Irrelevant Inefficacious Inefficient Unlikely Negligible

Rating: > 2.5, and no rating less than 2 = Highly Successful 1.6–2.5, and no rating of 0 = Successful 0.6–1.6, and no more than 2 ratings of 0 = Partly Successful < 0.6, or 3 or more ratings of 0 = Unsuccessful