Regions and Countries

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p. 6 of 20 BACK | NEXT I. Country Performance Assessment A. Economic Performance Assessment B. Poverty Assessment C. Assessment of Socio-Environmental Performance D. Governance E. Implementation Assessment II. Country Operational Strategy III. Sector Strategies IV. Regional Cooperation V. Donor Activities and Aid Coordination VI. Cofinancing and Catalyzing External Resources VII. ADB’s Operational Program VIII. Economic and Sector Work Program IX. Local Cost Financing

Country Assistance Plans - Kyrgyz Republic : I. Country Performance Assessment

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D. Implementation Assessment

1. The Portfolio

16. ADB activities in the Kyrgyz Republic began in 1994. As of 31 March 2000, ADB had approved 15 loans for 12 projects totaling $386.2 million, all from the Asian Development Fund (ADF). In addition, 35 technical assistance (TA) grants have been approved amounting to $22.34 million. Three loans have been closed. Thirteen advisory technical assistance (ADTA) projects have been completed. As is to be expected in the case of a country that experienced such a severe decline in output since 1991, the major part of ADB’s lending so far has been for projects aimed at fostering economic growth. Despite economic difficulties, fiscal constraints, and institutional weaknesses, ADB’s portfolio in the Kyrgyz Republic is performing well and the implementation of approved loans and TAs is proceeding substantially on schedule, except for one project in the energy sector which has experienced difficulties (see para. 17). In the short period of time since its operations in the country began, ADB has emerged as a major source of development assistance to the Kyrgyz Republic. ADB has been requested by the Government to take the lead role in the education sector. ADB has also responded promptly to the Government’s requests for supporting priority interventions in the areas of roads, rural finance, corporate governance and enterprise reform, and banking sector reform.

17. ADB, along with the World Bank, the Nordic Development Fund, and the Swiss Government, is implementing the Power and District Heating Rehabilitation Project to strengthen the district heating network in Bishkek and increase the availability of power for sale. There were delays in the implementation of the project, but of greater concern was weak financial performance by the national power utility, Kyrgyzenergo. As of the beginning of 1999, not all the loan covenants related to the improvement of Kyrgyzenergo's financial operations were complied with. A joint-mission from the World Bank, ADB and the European Bank for Reconstruction and Development (EBRD) helped the national power utility draw up an Action Plan in January 1999 to halt the deterioration of its financial operations and accelerate its institutional reform. Review of the Action Plan by the World Bank and the ADB in March 2000 indicates that considerable progress has been achieved. Collection of accounts receivable by Kyrgyzenergo have improved as have the utility’s financial performance during 1999. Actions have been initiated (i) to review and increase tariff levels; and (ii) to restructure Kyrgyzenergo and privatize distribution. However there is still a need for close monitoring to ensure that Kyrgyzenergo’s financial recovery is sustained and kept on track.

18. ADB’s portfolio of projects in the Kyrgyz Republic is characterized by a significant proportion of policy-based lending (around 45 percent). It is, however, a young portfolio in which most projects are still in the early or middle stages of implementation. As such, their development impact is yet to be fully realized. A special assistance loan extended in 1994 and an agriculture sector program loan extended in 1995 have been fully disbursed. The former intervention helped stabilize the economy during a very difficult period in the country’s history. The agriculture sector program was implemented substantially on schedule and has brought about significant changes in the transition of the sector to a market-based one (see para. 28). A ADB-supported corporate governance and enterprise reform program and an education sector development program were successfully completed and will bring far-reaching results in the concerned sectors. ADB-financed technical assistance has had considerable development impact in supporting capacity building, institution strengthening, regional cooperation, and improving the legal and regulatory framework in various sectors as well as creating the environment for private sector-led growth. In view of the Government’s fiscal constraints, local cost financing is expected to be an important feature of ADB operations in the country (see para. 50). Detailed portfolio performance indicators are given in Appendix 2.

2. Issues in Project Implementation

19. The following constraints are likely to limit the country's absorptive capacity: (i) the scarcity of counterpart funds for project-type investments (see para. 50); (ii) an administrative and implementation structure with weak institutional responsibilities and capacities for decentralized and social market-oriented planning; (iii) problems in formulating coherent development and sectoral policies both at the central as well as the decentralized level; (iv) lack of experience with policies and procedures of external donors; and (v) communication, cultural, and language barriers. Considerable emphasis will need to be placed on capacity building and on strengthening the Government machinery, particularly for the implementation of development projects. Capacity building and human resource development will need to be key components in all ADB investment projects and technical assistance. Recently, there have been delays in the Government’s fulfilling conditions to make ADB loans effective. The Parliament’s approval of individual loans is a part of the Government’s internal requirements in this regard. ADB has been requesting the Government to take all necessary actions in time so that project implementation is not adversely affected. ADB’s Kyrgyz operations have grown in complexity and size and a sizeable portfolio of ongoing projects has been built up. The Kyrgyz loan portfolio has the largest number of ongoing projects among the Central Asian republics (CARs), and accounts for 33 percent of the overall value and 43 percent of ongoing loans to the CARs. The effects of the Russian crisis are still working their way through the Kyrgyz economy and ADB's operations in the country will be faced with considerable challenges in the coming years. ADB’s Kyrgyz Resident Mission which opened on 3 April 2000, is expected to be a significant support for operations in the country and will help facilitate project implementation.

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