Countries and Regions

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p. 4 of 4 BACK | NEXT I. Development Situation II. Implementation of the Country Strategy and Program III. Portfolio Management Issues IV. Country Performance and Lending Levels

Country Strategy and Program Update 2002-2004: Uzbekistan

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IV. Country Performance and Lending Levels

A. Proposed Lending Level

26. The country’s current macroeconomic and policy environment, the limited absorptive and implementation capacities, the debt situation, and the requirements of sound project processing and portfolio management call for a cautious lending program for 2002-2004, focusing on a relatively small number of sectors and following phased and pilot-tested approaches. ADB will focus on the sectors where it can help advance the reform agenda and maximize its development impact and where Government ownership of reforms is clearly demonstrated. Close coordination and collaboration among major aid agencies¹⁰ will continue to be critical in assuring consistent policy advice and exploring cofinancing possibilities.

27. Processing the second and third loan projects in sectors where ADB has already been engaged (agriculture, education, transport, and SME development) is subject to (i) substantial progress in sector and institutional reforms with agreed upon time-bound action plans, and compliance with the loan covenants; (ii) substantial progress in institutional and capacity-building in the sector; and (iii) satisfactory portfolio and implementation performance of the existing loans.

28. At the Government’s request, ADB initiated the preparation of the Education Sector Development Program loan ($100 million, under processing in 2001) and the Corporate Governance Reform Program loan ($50 million, project preparatory TA under processing in 2001) to support major reforms in the sectors and mitigate the social costs of implementing the macroeconomic and SOE reforms. Conditions for and timing of these two sector development program loans will be determined by tangible progress in macroeconomic and structural reforms, including significant progress toward unification of the foreign exchange rates.

29. Due to a high degree of uncertainty in the pace and intensity of the key macroeconomic and structural reforms and the significant policy dialogue required in each project, the lending pipeline needs to be regularly reviewed and adjusted. The prospective lending level during 2002-2004 is within a range of $130 million (project lending only) to $280 million (including two sector development/program loans).

B. Loan Program

30. Four loan projects are being processed in 2001: Ak Altin Agriculture Development ($36 million), Urban Infrastructure Development ($40 million), Education Sector Development Program ($100 million), and Rural Savings and Credit Union Development ($10 million; loan amount tentative). Full processing of the latter two loan projects in 2001 is not likely.

31. The proposed loan program for 2002-2004 has six projects in key priority sectors and areas: Rural Savings and Credit Union Development ($10 million), Grain Productivity Improvement ($16 million), Water Resources Management ($50 million), Regional Railway Development ($50 million), Education Sector Development Program ($100 million), and Corporate Governance Reform Program ($50 million). The loan program is shown in Appendix 4, and the project selection briefs are in Appendix 6.

C. Technical Assistance and Economic and Sector Work Program

32. The TA and economic and sector work (ESW) program for 2002-2004 (shown in Appendix 4 and Appendix 5) aims to support lending operations; assist the Government in developing and implementing policy and institutional reforms, particularly facilitating the Government’s implementation of key macroeconomic and structural reforms; and achieve effective governance. The annual TA indicative planning figure (IPF) is $3.5 million. ESW to be undertaken will include (i) country economic review and update, (ii) poverty analysis under the proposed TA: Preparing a National Strategy to Improve the Living Standards of the People of Uzbekistan, and (iii) governance nexus poverty reduction assessment. The TA pipeline is tentative, due to the uncertainties associated with loan processing and the pace of the key macroeconomic and sector reforms, and will have to be reviewed.

D. Summary of Changes¹¹

33. Some difficulties related to processing ADB’s first loan to agriculture, Ak Altin Agricultural Development Project, have hampered the agriculture lending pipeline. While prolonged policy dialogue on the state procurement reform recently led to progress, a thorough assessment of the efficacy of policy and institutional reforms in the first pilot loan project in agriculture is required.

• Ak Altin Agricultural Development Project (in the lending pipeline since 1998). Scheduled to be submitted to the Board in the third quarter of 2001.
• Grain Productivity Improvement. Deferred from 2001 to 2002 as standby.
• Support for Agriculture Sector Restructuring (2002 lending pipeline in the previous country assistance plan [CAP]). Deferred until the major findings of the pilot project, Ak Altin Agriculture Development Project, and the Government’s comprehensive agriculture reform program (2001-2003) are reviewed.
• Water Resources Management. Deferred from 2002 to 2003.
• Rural Savings and Credit Union Development (2001 lending pipeline in the previous CAP). Full processing in 2001 unlikely. Deferred to 2002.
• Basic Education Staff Development (2001 lending pipeline in the previous CAP) and Education Sector Development (2002 lending pipeline) were merged into a comprehensive sector development program-Education Sector Development Program ($100 million, under processing in 2001).
• Second Senior Secondary Education (2003 lending pipeline in the previous CAP). Deferred until substantial progress in the sector and institutional reforms under the first loan project, which was approved in 2000, and satisfactory portfolio implementation performance of the existing education projects are demonstrated.
• Second Road Rehabilitation (2003 lending pipeline in the previous CAP). Deferred until substantial progress in the sector and institutional reforms under the first loan project, approved in 1998 and rated as unsatisfactory, is demonstrated.

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