Regions and Countries

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p. 6 of 6 BACK | NEXT I. Current Development Trends and Issues II. The Government's Development Strategy III. ADB's Development Experience IV. ADB's Strategy V. ADB's Assistance Program VI. Risks and Performance Monitoring and Evaluation

Country Strategy and Program 2006–2010: Uzbekistan

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VI. Risks and Performance Monitoring and Evaluation

A. Risks

124. Political and Governance Risks. The country governance assessment notes that the underdeveloped nature of civil society could undermine human development and social stability. ADB will continue to engage in dialogue with the Government, encouraging it to view NGOs as a resource to help achieve the country’s civic and economic potential. ADB, along with other development partners, will help the Government forge partnerships with NGOs to develop and implement the WISP. Also, ADB will continue to work with NGOs to the extent feasible (para. 122) to design and implement innovative projects. Another dimension of governance risk is that subnational local governments have limited autonomy to deliver social services and maintain social safety nets, particularly in economically depressed rural areas. Through its interventions in the human capital sectors, ADB will ensure that rural-urban gaps are addressed and the quality of rural schools boosted. Implementation of rural reforms could run into vested interests embodied in hokimiyats (local governments), whose power base would be undercut with the dismantling of the state procurement system and related institutional changes. In its rural work, pilot ADB interventions designed for local implementation could help transform the role of hokimiyats from enforcer of state procurement system to facilitator of a diversified rural production system.

125. Regional Frictions. Regional frictions stemming from perceptions of conflicting national interests, including maintenance of border security and differential benefits from economic cooperation, could escalate and threaten the region’s quasi-stability. ADB involvement in regional transport and customs transit will seek to mitigate the perceived costs of regional cooperation and increase appreciation of the benefits of the cross-border flow of people and goods. The CAREC mechanism also provides a forum for inter-governmental dialogue and coordination.

126. Economic Management. Improved economic performance in 2004–2005 may engender complacency in economic management, resulting in policy slippage, particularly in tackling structural problems—in trade, the business environment, and finance—that could dampen long-term growth prospects. The policy and institutional environment will continue to be monitored through the annual country performance assessment exercise under the performance-based allocation policy and through economic and sector work. This, together with the results framework, will be used during CSP implementation to help assess whether implementation is on track and if not, why not.

127. Gaps in WISP Implementation Arrangements. The Government has indicated its intention to set up a high-level coordination council to support the WISP’s development. To implement the WISP, it is hoped that a system will be put in place, including dedicated staff with capacity to monitor progress. This will be particularly demanding since inter-ministerial coordination tends to be weak, as noted in the country governance assessment. Also, the M&E systems in Uzbekistan are weak. ADB will need to work with the Government and other external partners to ensure that enduring institutional arrangements are set up to implement and monitor the WISP.

128. Exogenous Economic Shocks. Risks on the external side include fluctuations in cotton and gold prices, and the banking system’s vulnerability to fluctuations in foreign capital inflow and to exchange rate risk. An improved policy framework could be important in mitigating the impact of shocks. Key CSP objectives are, among others, to diversify sources of rural growth and, thereby, reduce vulnerability to shocks.

B. Monitoring Process and Plan

129. The CSP results framework, that follows this section, identifies the outcomes and associated intermediate indicators that ADB expects to help Uzbekistan achieve. The results matrix under each strategic priority serves a dual purpose: (i) as a sector strategy or road map showing how ADB’s assistance over the medium term will contribute to long-term sector outcomes, and (ii) a framework for forging linkages within each thematic area, particularly in the cross-cutting areas of governance, private sector development, and gender.

130. Results-based M&E of the CSP. There are several challenges to developing and implementing a CSP M&E framework. The information environment is shaped by a legislative and institutional framework of secrecy provisions, where access to information, particularly economic and financial, is restricted.³⁶ The statistical system has improved in recent years, but international organizations remain concerned about data quality and integrity, and gaps in public dissemination of data. There are significant gaps in the fiscal, financial, and external sectors. Social sector data focus on inputs rather than outcomes. Data provision to international organizations is based on a special decree listing the data categories to be provided. Access to information even across and within government agencies can be problematic, imposing high transaction costs.

131. The I-WISP is grafted onto this restrictive information environment. It includes an assortment of indicators, many focusing on inputs rather than outcomes. The Government recognizes that effective WISP implementation will require clear performance indicators and an effective monitoring strategy. The chapter outline in the I-WISP includes a section on WISP monitoring indicators and mechanisms. The ADB TA for developing the living standards strategy included a poverty statistics component, which is soon to be activated. ADB will work with the Government, the World Bank, and other external development partners to ensure that the WISP M&E system focuses on outcomes.

132. ADB will engage the authorities and other stakeholders in systematic M&E of the CSP. In addition to supporting the annual review of the CSP results framework, the CSP monitoring for results TA will (i) support studies in each strategic priority area to establish baselines and refine targets; (ii) help the authorities pilot a results-oriented sector strategy in a key strategic priority area (e.g., basic education); and (iii) identify M&E training needs for resident mission staff.

133. Portfolio Management Targets and Monitoring. The 2005 country portfolio review mission has developed a series of results-oriented portfolio performance indicators and targets to monitor progress in resolving the outstanding portfolio issues (para 63). Future reviews including the quarterly portfolio review, loan review missions and the CPRM will monitor and support the Government in the achievement of these targets. The targets are as follows:

1. Project startup delays. The average length of time from approval to effectiveness should be reduced from 10.1 to 8 months by 2008 by encouraging advance preparation of the requirements for the Government resolution and other pre-project activities.
2. Contract award period. With more streamlined procurement processes expected and resolution of contract price verification issues, the time from bid notice to contract award should be reduced from 14.7 months to 9 months by 2008.
3. Submission of audited project accounts and agency financial statements. Timely and complete submission of audited accounts should be increased from the present 30% mainly a result of delayed compliance to near full timely submission by 2007 and maintained thereafter.
4. Projects “At Risk” (at year end). All efforts will be taken to maintain the status quo, where no projects are rated at risk in terms of either implementation progress or development objectives.

134. In addition to careful monitoring and support for project administration, to meet the targets, future project loan processing will endeavor to (i) carefully assess institutional capacity to implement the project and ensure that necessary capacity is in place; (ii) ensure project implementation unit staff are appointed through a competitive process, are properly qualified and remunerated; (iii) identify training needs in ADB procedures; (iv) develop a detailed procurement plan with monitoring framework; and (v) ensure that tender committees are appropriately staffed with technically qualified and experienced staff.

MATRIX: COUNTRY STRATEGY AND PROGRAM RESULTS FRAMEWORK 2006–2010

Long-term Country Development Outcomes       (I)	Development Issues and Opportunities         (II)	CSP Outcomes that ADB Expects to Influence (III)	Mile-stones and Indica-tors (IV)	ADB and Partner Interven-tions   (V)	As-sump-tions and Risks (VI)
Poverty Reduction. Poverty incidence reduced to 20% by 2010 -     GDP Growth. Average of 8.0–8.5% over 2007–2010   -    Industry growth (11–13% p.a. sector growth)	Since poverty is primarily rural, a pro-poor growth strategy should focus on sectors that benefit the rural poor.   Economic growth has not translated into significant poverty reduction because of limited opportunities for productive employment and returns to labor.	ADB support will focus on a holistic strategy for environmentally sustainable rural development.   See results framework for strategic priority 1 below.
Job Growth. Number of employed to rise to 13.2 million	Job growth in formal sector has been slow, with increasing informalization of economic activities because of high costs of operating in the formal economy.	ADB support will focus on an enabling environment for the private sector by improving public services for the private sector supported from ADB’s public sector window, and through private investment catalyzed through ADB’s Private Sector Operations Department   See results framework for strategic priority 2 below.
Private Sector Growth. Non-state sector share in GDP: 85%; share of SMEs in GDP: 45–50%	Significant state involvement in major spheres of economic activity, and governance issues have impeded job-creating private sector growth.
Regional Economic Cooperation. Realize trade potential by liberalizing the trade regime and regional economic cooperation. Export growth rate: 10–12% p.a.	Uzbekistan’s significant export potential can be realized by doing the following: -    Elimination of nontariff barriers to trade -    Modernization of customs administration -    Reduction of international transit costs -    Development of, and creation of an enabling environment for, regional infrastructure	ADB support will focus on regional transport and transit facilitation.   See results framework for strategic priority 3 below.
Human Development. Improving human development and social protection, focusing on access to public services, including education, health, and child welfare.	Human development challenges include the following:  -    Ensuring access to quality basic services -    Financing and sustainability of social service provision -    Deploying service providers in underserved rural areas -    Encouraging service demand and community participation -    Monitoring and evaluation of service delivery	ADB support will focus on improving access to quality early childhood development services, and, in basic education, reducing rural-urban differences in service quality, and improving its efficiency.   See results framework for strategic priority 4 below.

ADB = Asian Development Bank, CSP = country strategy and program, GDP = gross domestic product, I-WISP = Interim Welfare Improvement Strategy Paper, p.a. = per annum, SMEs = small and medium-sized enterprises.

Thematic Results Framework for Strategic Priority 1: Accelerate Environmentally Sustainable Rural Development

Long-term Country Development Outcomes   (I)	Sector Issues and Opportunities   (II)	CSP Outcomes that ADB Expects to Influence (III)	Milestones and Indicators   (IV)	ADB and Partner Interventions   (V)	Assumptions and Risks   (VI)
1.1. Agriculture
Agricultural productivity and farm profitability improved in a sustainable manner   Indicator: Agricultural value-added per worker   Baseline 2004: Agricultural valued added (current price): SUM3260.9 billion Number of agricultural workers: 3 million	Incentives. High level of state intervention in the inputs, financing, outputs, and marketing of cotton and wheat, dampening agricultural productivity and profitability       Institutions Land reform: Contingent nature and nontradability of leasehold rights that can be revoked with inadequate due process. Gaps in functioning cadastre system to demarcate and register land plots.   Infrastructure. Low investment and spending on O&M in land and water infrastructure and poor natural resource pricing policy contributing to land degradation and inefficient water usage	Pilot reforms in state procurement system scaled up. Role of local hokimiyats transformed from enforcer of state procurement system to facilitator of diversified rural production system.       Security of tenure improved in ADB-assisted areas with more transparent delineation of leasehold rights contributing to improved rural governance   Sustainability of land and water management practices in ADB-assisted areas improved WUAs are established and manage O&M in project areas contributing to improved rural governance	Increase in number of districts with reduced cotton and wheat procurement quotas (25% or less) Base: 2005 Number of ADB-assisted districts with reduced procurement quotas: 9     Increase in number of ADB-assisted districts covered under improved cadastre system Base: 2005 Number of ADB-assisted districts: 1     Hectares of reclaimed land with sustainable land and water management practices in ADB-assisted areas Baseline: TBD   Increase in number of functioning WUAs following norms of sustainable water management in ADB-assisted districts Base: 2005 Number of WUAs: 20	Ongoing Lending:AADP, GPIP, AZIRP Nonlending: Agriculture sector review, CACILM   Planned Lending:Land improvement (2006) Agriculture sector development (2008) Nonlending: Reform progress in land improvement policies   Other Partners: World Bank, TACIS, USAID, SDC	Central and local governments cooperate in implementation of reforms   WUAs allowed autonomy to manage on-farm irrigation and drainage services

Long-term Country Development Outcomes   (I)	Sector Issues and Opportunities   (II)	CSP Outcomes that ADB Expects to Influence (III)	Milestones and Indicators   (IV)	ADB and Partner Interventions   (V)	Assumptions and Risks   (VI)
	Gender Equity. Women are benefiting less than men from the restructuring of shirkats into private farms, and as dekhan farmers, the land allotted to them is of lesser quality.	Gender-equitable transformation of shirkats to private farms Quality land cultivated by women dekhan farmers improves.   Pilot development of agroprocessor links with emphasis on rural women entrepreneurs.	Baseline: TBD	Planned LIP MIPF PFSS
	Private Sector Development. Limited presence of privately run agricultural support enterprises	Expanded network of sustainable private agricultural support service providers	Increase in number of private agriculture service centers in ADB project areas Base: 2005 Number of private agricultural service providers in ADB-assisted project: 1	Ongoing Lending:AADP, GPIP, AZIRP Planned MIPF PFSS
1.2. Rural Nonfarm sector
Nonfarm employment and productivity increased   Baseline: 2004 Number of actively employed rural workers: 5.5 million	Private rural business linkages. Scope for bridging gap between rural producers and high-end markets with value-added business initiatives     Rural finance. Constraints on access to, and cost of, finance.   Gender. Better-paying RNFE of special importance for women	Rural business links strengthened in ADB-assisted project areas. Organizational and contractual arrangements for participating rural entrepreneurs improved   Rural financial services reach private rural SMEs   Capacity of rural entrepreneurs, especially rural women, enhanced	Registered active private agro-processors and private marketing enterprises in ADB-assisted areas Base: 2005 Number of active private processors and marketers: TBD under PPTA 4750	Ongoing Innovative Poverty Reduction In Karakalpakstan Pilot-Testing for Rural Savings and Credit Unions   Planned MIPF PFSS Rural small enterprises (2006) Market study for small private rural SMEs Microfinance (2008)	Government is committed to reforming the enabling environment for rural nonfarm business activity

Long-term Country Development Outcomes   (I)	Sector Issues and Opportunities   (II)	CSP Outcomes that ADB Expects to Influence (III)	Milestones and Indicators   (IV)	ADB and Partner Interventions   (V)	Assumptions and Risks   (VI)
1.3 Rural infrastructure
Access to and efficiency of rural infrastructure increased	Rural energy supply. Unreliable electricity supply in some rural areas affects agro-businesses and increases dependence on diesel power, which is polluting.	Help increase access and affordability of energy use in rural areas by developing nascent market in small hydropower	More rural communities with energy supply from small hydropower in ADB project areas Baseline 2005 Number of communities: Number of Kw of power produced by small hydropower Baseline: 2005 TBD under PPTA 4709	Planned Rural renewable energy (2006)   Other partners UNDP
Halve by 2015 the proportion of people without access to safe drinking water Baseline 2004: % population with access to safe water supply coverage in rural areas: 65%	Rural water supply and sanitation (WSS) coverage. Low coverage of safe water supply and adequate sanitation in certain rural pockets, compromising communities’ health   Rural WSS institutions. Weak regulatory framework and limited institutional capacity of the regional water supply agencies affecting operational efficiency, planning, and financial management of operations   Rural WSS financing. With low cost recovery, inadequate spending on O&M, water supply infrastructure is deteriorating.	Increased access to safe and sustainable water supply for the rural poor         Improved institutional capacity of rural vodakanals for planning, management, and involving communities in design and implementation       Level and structure of tariffs adjusted to cover O&M costs	Increased percentage of rural population with access to safe drinking water in ADB-assisted areas Baseline: 2005 Percentage of population with access to safe drinking water: TBD under the third rural water supply PPTA	Ongoing Western Uzbekistan Rural Water Supply   Kashkadarya and Navoi Rural Water Supply and Sanitation Sector Project   Planned Third rural water supply (2007)   Other partners World Bank	Local governments provide support, including adequate counterpart funding.   Communities are willing to pay for improved and sustainable water services.

Summary of Strategic Priority 2

Thematic Results Framework for Strategic Priority 2: Enable Private Sector Development

Long-term Country Development Outcomes (I)	Sector Issues and Opportunities     (II)	CSP Outcomes that ADB Expects to Influence   (III)	Milestones and Indicators   (IV)	ADB and Partner Interventions (V)	Assumptions and Risks   (VI)
Competitiveness of private enterprises enhanced by an improved business environment   Private investment, domestic and foreign, catalyzed   Independent business surveys  1) Cross-country “doing business” (World Bank) (Sub-indicators: Starting a business, dealing with licenses, hiring and firing, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts, closing a business)   Local business survey conducted by local agency (Ijtimiy Fikr [Public Opinion])	Business regulatory regime. Heavy regulatory burden on business with fragmented approach to regulatory reforms, poor regulatory governance       Competition environment. Barriers to entry exist. Competition policy focused on price controls. State involvement in enterprise sector through industrial associations deters competition from non-members and weakens enterprise governance.           Enterprise restructuring including liquidation and privatization. Number of large enterprises classified “strategic”, including insolvent firms, not restructured and liquidated. Unclear property rights contribute to problem. Slow progress on privatization of large enterprises.	Improved regulatory governance and institutional capacity for private sector development through effective regulatory management system built with institutional capacity for ongoing RIAs    Government capacity to implement competition policy enhanced with competition agency evolving from price controller to a behavior-based regulator of competition. Industrial associations become facilitators of competition by serving as training and information resource centers for private small and medium enterprises.   Process for restructuring and privatizing enterprises made more transparent	Regulatory policy framework in place Number of regulatory regimes streamlined with RIA and complementary methodologies   New competition policy adopted by the State Committee on Demonopolization and Competition Development.   Role of industrial associations reoriented to serve ad training and information resource centers for private small and medium enterprises	Nonlending Governance and institutional support for PSD TA cluster (2006–2009)	Consistent Government commitment to regulatory reforms
		Enabling environment for rural PSD	Indicators for improved enabling environment for rural PSD from strategic priority 1 above	Intervention for enabling rural PSD from strategic priority 1 above

Long-term Country Development Outcomes (I)	Sector Issues and Opportunities     (II)	CSP Outcomes that ADB Expects to Influence   (III)	Milestones and Indicators   (IV)	ADB and Partner Interventions (V)	Assumptions and Risks   (VI)
	Weaknesses in investment climate have deterred private investors.	Private investment catalyzed through ADB’s PSOD Increased availability of financial products that have less collateral requirements (e.g., leasing) Increased access of SMEs to microfinance	Pickup in number of private sector operations   Baseline: 2005 Number of PSOD trans-actions	PSOD loans, equity, TA   Other partners World Bank; Microfinance Private and Financial sector TA   EBRD SME credit lines   IFC Leasing Credit lines SME policy environment surveys Central Regional Housing Market Survey	Improved investor perceptions of business climate

ADB = Asian Development Bank, CSP = country strategy and program, EBRD = European Bank for Reconstruction and Development, IFC= International Finance Corporation PSD = private sector development, PSOD = Private Sector Operations Department, RIA = regulatory impact assessment, SMEs = small and medium-sized enterprises, TA = technical assistance.

Summary of Strategic Priority 3

Thematic Road Map for Strategic Priority 3: Promote Regional Cooperation in Transport and Customs Transit

Long-term Country Development Outcomes (I)	Sector Issues and Opportunities       (II)	CSP Outcomes that ADB Expects to Influence   (III)	Milestones and Indicators     (IV)	ADB and Partner Interventions     (V)	Assumptions and Risks     (VI)
Expanded spatial reach and scope of merchandise trade   Customs partnership with trade   Baseline 2004: External trade turnover with CIS countries in value: Exports: $1.528 million Imports: $1.474 million	Physical barriers. With Uzbekistan’s double-landlocked location, reducing high transport costs for cross-border goods traffic is a challenge. Inter-modal freight flows across borders are problematic.   Non-physical barriers. These include complex and nontransparent transport regulations and border crossing procedures. Difficulties with transit through neighboring countries.   Customs clearance costly and time consuming	Reduction in physical barriers to transport and cross-border transit through support for regional transport infrastructure   Enhanced institutional and organizational capacity for handling cross-border goods traffic and reduced uncertainty of transit time         Internationally acceptable practices in customs administration. Improved customs revenue collection. Reduced corruption in customs administration   Using subregional mechanisms to develop a regional network of transport and trade-related infrastructure agencies that share information and coordinate investment plans	Share of regional road transport corridor constructed under ADB-assisted projects   Time of rail transport to transit from border entry to border exit under the ADB project             Reduction inaveragecustoms clearance time, Baseline: 2005 Average customs clearance time: TBD under TA for customs modernization	Lending Regional infrastructure (roads) (2007)   Regional infrastructure (railways) (2008)   Nonlending Transport sector strategy (2006) Customs modernization (2008)   Coordination mechanisms: Under CAREC:   Transport Sector Coordinating Committee   Customs Cooperation Committee   Other partners EBRD   JBIC	Reduced motivation for national authorities to construct road and railway detours to avoid transit through neighboring countries

Summary of Strategic Priority 4

Thematic Results Framework for Strategic Priority 4: Build Human Capital of the Poor

Long-term Country Development Outcomes (I)	Sector Issues and Opportunities     (II)	CSP Outcomes that ADB Expects to Influence     (III)	Milestones and Indicators     (IV)	ADB and Partner Interventions   (V)	Assump-tions and Risks   (VI)
Healthy young children ready to learn   Baseline 2005: Percentage of children enrolled in preschool: 21%	Pre-school enrolment, It is low. Rationalization of ECD service coverage needed Poor households unable to afford fees for ECD services.   ECD service quality concerns due to insufficient funding for early childhood learning materials and teacher training	Strengthened policy framework for providing ECD services   Programs established to expand provision and increase quality of early childhood education and health programs, with focus on poor and disabled children.   Community involvement in ECD service provision promoted. Increased number of rural communities are developing alternative cost-effective ECD delivery services	Percentage of children enrolled in early childhood education in ADB-assisted areas Baseline: 2005 Percentage of enrollment in ECD: To be determined	Ongoing Woman and Child Health (2004)   Planned Early childhood development (2008)   Other partners UNICEF	Improved inter-agency coordi-nation on community involve-ment

Long-term Country Development Outcomes (I)	Sector Issues and Opportunities     (II)	CSP Outcomes that ADB Expects to Influence     (III)	Milestones and Indicators     (IV)	ADB and Partner Interventions   (V)	Assump-tions and Risks   (VI)
Rural-urban differences in quality of basic education reduced       Educational quality indicator: TBD	Rural-urban disparities in material and human resource endowments of schools   Quality of basic education a concern. Learning outcome measures not well-developed     Sector efficiency low because of rigid central norms that regulate budget allocations and personnel deployment   NPSED program (2004–2009) envisages major investments in basic education	Improved physical and human resources in rural schools to bridge rural-urban gap.   Improved sector efficiency   Reliability and quality of education information base increased   Building private-public partnerships and facilitating private initiative in the education sector	Increased percentage of rural schools with adequate material infrastructure in ADB-assisted areas Baseline: 2005   Increased percentage of trained teachers in rural schools in ADB-assisted projects Baseline: 2005	Ongoing Education Sector Development Program (2002)   Second Textbook Development (2004)   ICT in Basic Education (2005)   Planned Rural Basic Education (2007)   Other partners USAID   World Bank (planned)	Govern-ment commit-ment to implemen-ting basic education reform is sustained

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