Regions and Countries

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p. 10 of 20 BACK | NEXT I. Country Performance Assessment II. Country Operational Strategy III. Sector Strategies A. Agriculture and Rural Development B. Infrastructure C. Social Infrastructure and Environment D. Governance Dimensions of ADB Operations E. Gender Dimensions of ADB Operations F. Private Sector Operations 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 : III. Sector Strategies

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B. Infrastructure

1. Energy

29. In the power sector, there is a critical need to rationalize the tariff levels for electricity and district heating since low tariffs have led to uneconomical consumption patterns and weak financial performance of the national power utility, Kyrgyzenergo. In the energy sector the COS aims at (i) encouraging fiscally responsible operations of SOEs; (ii) promoting the active involvement of the private sector in production and conservation; (iii) rationalizing, rehabilitating, and maintaining the infrastructure supply system; and (iv) reducing pollution as a result of sector activities. ADB has also carried out two regional studies that indicate the possibility of developing a transmission line between Naryn in the Kyrgyz Republic and Kashgar in Xinjiang Uygur Autonomous Region in the PRC. The proposed 220 kV transmission line would provide 150-200 GWh annually for the development of Kashgar region and provide export earnings to the Kyrgyz Republic without having to build new generating capacity. Provided satisfactory understandings are reached between the two sides on the tariff rates at which electricity would be sold, ADB would support the proposal for implementation.

2. Transport

30. ADB's operations in the transport sector in the Kyrgyz Republic focus on the road subsector. Provision of reliable road transport network and services will promote sustainable economic development, providing more employment opportunities and generating additional incomes in poor areas thus contributing to poverty reduction. In the road sector, the country operational strategy aims at (i) developing an efficient policy and regulatory framework; (ii) corporatizing/commercializing and, where appropriate, privatizing operations of state-owned enterprises; (iii) promoting competition and private sector participation in the provision and operations of road infrastructure facilities and services; (iv) improving road funding by improving tax and duties collection, developing a user-pay approach to roads funding, and removing of subsidy-induced distortions in pricing of transport networks; (v) rehabilitating and improving operations, maintenance, and safety standards of the transport networks; (vi) human resource development; (vii) improving environmental standards; and (viii) developing regional transport links. Future ADB assistance in the road sector will continue to bring about improvements in these areas as it has done through the First and Second Road Rehabilitation Projects. ADB support was extended in October 2000 for the rehabilitation of the regional road between Bishkek and Almaty and the improvement of cross-border procedures and regulations; in addition, assistance is planned in 2001 for the third and final phase of improving the Bishkek-Osh road.

3. Industry and Finance

31. The operational strategy eschews active involvement in industry with the exception of program-based lending to further basic policy reform. In making this decision, the relatively limited resources of ADB, the needs of the country, and the programs of other funding agencies have been taken into account. The strategy also says that as long as ADB does not become directly involved in private sector support projects, the scope for long-term ADB operations in industry and finance through loans to the public sector is limited. However, recent events have necessitated some re-alignments being made to this position. ADB-financed technical assistance associated with pension reform studied the development of capital and insurance markets to enhance financial markets development through greater financial intermediation, and promotion of a wider range of financial instruments. These studies identified serious weaknesses in the financial sector and an unfinished reform agenda. While a World Bank-financed structural adjustment credit (FINSAC) initiated a comprehensive reform agenda for the Kyrgyz banking sector, the Russian crisis brought to light new areas to be strengthened. ADB has coordinated closely with the World Bank and the EBRD to ensure that there is full understanding and agreement for ADB to build upon the work done under the FINSAC. The World Bank and the EBRD has supported fully ADB's initiative in this matter and the former has clarified that it is not planning a FINSAC II. Accordingly, ADB extended support for a Financial Intermediation and Resource Mobilization Program Loan in 1999, the key objective of which is to improve the efficiency of financial intermediation by promoting a sound, well-functioning, and resilient banking system, and enhancing the role of capital markets. Assistance has been sought from ADB for a second phase of corporate governance and enterprise reform program loan which will concentrate on: (a) strengthening the legal and regulatory framework for corporate governance and bankruptcy procedures; (b) support for post privatization initiatives to facilitate enterprise restructuring; and (c) strengthening the industrial and competition policy environment, supporting accounting reforms, and streamlining government policy and legal interventions in business activities.

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