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East and Central Asia

Armenia, Azerbaijan, People’s Republic of China, Kazakhstan, Kyrgyz Republic, Mongolia, Tajikistan, Turkmenistan, Uzbekistan

Subregional Perspective

The People’s Republic of China (PRC) has made remarkable progress in reducing poverty, establishing an example among emerging economies in East and Central Asia, including the South Caucasus. By 2004, the number of people living on $1 per day or less had been slashed to about 10.4% of the population from 33% in 1990, while by 2005 the number of rural poor under the official poverty line had fallen to 23.7 million from 250 million in 1978.

To the west, and blessed with oil, natural gas, cotton, gold, and hydroelectric potential, the Central Asian and the Caucasian republics are also growing strongly and stepping away from their post-Soviet decline.

The PRC’s economic rise is well documented. In 2005, economic growth surged to 9.9%, led by strong investment, accelerating consumption, and robust exports. Foreign trade exceeded $1.4 trillion to make it the third highest volume in the world. The government recently adjusted its growth figure for 2004 from the 9.5% originally reported to 10.1%. Its economy is now the world’s fourth largest.

Major economic developments in 2005 included the reform of the foreign exchange regime. Beginning in July 2005, the PRC adopted a package of reforms installing a managed floating exchange rate system based on market supply and demand and with reference to a basket of foreign currencies.

Inflation in 2005 was under control at 1.8%, below the government’s 4% target, while urban unemployment was kept to 8.39 million.

High oil prices are an area of concern, however, and pose some risks to the 2006 economic outlook. In 1993, the PRC was an oil exporter, but as its economy surged, so have its energy needs. It now imports 40% of its oil, and its energy efficiency still needs improvement.

Stronger economies and greater regional cooperation mean a better future for children like these in Bukhara, Uzbekistan

In Mongolia, GDP expanded by 6.2% in 2005, down from 10.7% in 2004. Strong growth in 2005 was underpinned by higher livestock production, investments in the mining and mineral sectors, and surging commodity prices. But all these have been insufficient to bring down the high levels of poverty—more than one third of the population—that emerged in the transition from centrally planned to market-based economies.

In Central Asia, growth has been strong in recent years, fueled by gas and oil deposits in Azerbaijan, Kazakhstan, and Turkmenistan; gold in the Kyrgyz Republic; cotton in Uzbekistan; and construction in Armenia.

However, Central Asia remains poor, and a gap is opening up between those countries with oil and gas, and those without. Per capita incomes in the oil producers in 2005 were already more than double those in the Kyrgyz Republic, Tajikistan, and Uzbekistan. In Kazakhstan’s case, per capita GDP was $3,600 in 2005, compared with Uzbekistan’s $515. Agriculture accounted for about 50% of the Kyrgyz economy in 2005, but for just 6.3% of Kazakhstan’s.

The value of exports increased by 87% in Azerbaijan in 2005 and by 40% in Kazakhstan, with proven oil reserves of 0.6% and 0.8% of the world total, respectively. Turkmenistan has less oil, measured at about 0.3% of world reserves in 2003, but also accounts for about 2.1% of global natural gas production.

If the Central Asian and the Caucasian republics are to sustain strong growth, they will have to direct more attention to the nascent private sector, the development of which has lagged behind both the PRC and Mongolia. In these countries, except in Armenia, which has undergone largescale privatization, the private sector is still being overshadowed by large state enterprises; afflicted by weak support for services; and hamstrung by poor policy, legal, and regulatory frameworks.

Regional Cooperation

Economic cooperation in the East and Central Asian regions is advancing strongly, fueled by the PRC’s economic success. The PRC is actively working with its neighbors to foster regional cooperation. To the south, through Yunnan province, the country has been a member of the GMS Program from its inception in 1992. In 2005, the GMS Program began integrating the PRC’s Guangxi Zhuang Autonomous Region into its activities. To the west, the PRC—through the Xinjiang Uygur Autonomous Region—is also finding new opportunities as a member of the Central Asia Regional Economic Cooperation Program, as the Central Asian republics look to reestablish age-old commercial ties with their booming neighbor.

Bread for sale in Khojand, Tajikistan; ADB projects provide micro credit and assistance to small- and medium-sized enterprises

Remote and landlocked, yet a land bridge connecting Asia with Europe and Russia with South Asia, Central Asia and the Caucasus are finding regional cooperation a necessity. Under the program, founded in 1997 with ADB support, the countries are rediscovering regional trade and finding bigger markets.

Spanning nearly 4,000 km across Central Asia, from Baku, Azerbaijan on the west coast of the Caspian Sea, through Ulaanbaatar in Mongolia, the program includes Azerbaijan, Kazakhstan, Kyrgyz Republic, Mongolia, Tajikistan, Uzbekistan, and the Xinjiang Uygur Autonomous Region of the PRC. Afghanistan was admitted in November 2005, while Russia has been invited to join.

As of end-2005, ADB had approved 13 loans totaling $357.1 million for nine program-related projects and had attracted cofinancing amounting to $52.8 million for three projects. ADB had also approved 37 technical assistance grants totaling $23.8 million.

The program is an alliance of development partners that includes ADB, World Bank, International Monetary Fund, Islamic Development Bank, United Nations Development Programme, and European Bank for Reconstruction and Development. So far it has focused on transport, energy, and trade.

Boosting Transport and Trade

ADB provided assistance in the transport sector for improving important sections of the old Silk Road and other regional transport corridors through a series of road projects in Kazakhstan, Kyrgyz Republic, and Tajikistan.

A loan was approved in November 2004 for the Southern Transport Corridor Road Rehabilitation project to improve the road linking Osh in the south of the Kyrgyz Republic through Irkeshtam on the PRC border with the major Xinjiang market town of Kashgar and beyond.

In November 2005, ADB approved another loan, the Dushanbe–Kyrgyz Border Road Rehabilitation II project, to improve a section of the road running north from Dushanbe in Tajikistan to the border with the Kyrgyz Republic. Further projects are under consideration to complete the improvement of the north–south corridor through the Kyrgyz Republic and Tajikistan, to extend it west toward Kashgar and Urumqi in the PRC, and to extend it east into Uzbekistan.

Under the Central Asia Regional Economic Cooperation Trade Facilitation Program, the PRC has strengthened bilateral customs cooperation with other participating countries. PRC customs entered into bilateral cooperation agreements and protocols with Azerbaijan, Kyrgyz Republic, and Uzbekistan, and initiated harmonization of customs manifest with Kazakhstan and a joint customs control initiative with Mongolia. Significant progress has been made in preparing accession to the Customs Convention on International Transport of Goods under Cover of Transports Internationaux Routiers Carnets to promote transit trade and transform Central Asia and the western part of the PRC into a modern Silk Road. PRC customs is also a major host and financial sponsor of regional training and knowledge forums. Five events have been organized in the PRC since the beginning of the Trade Facilitation Program.

ADB is also helping the regional transport sector with assistance to the Shanghai Cooperation Organization in drafting a regional road transport agreement including PRC, Kazakhstan, Kyrgyz Republic, Russian Federation, Tajikistan, and Uzbekistan.

A large amount of infrastructural lending to the Central Asian republics is channeled through the Central Asia Regional Economic Cooperation Program and, as in other regions, ADB has aimed to get the private sector more deeply involved. Central Asia needs about $2–3 billion per year in new infrastructure from 2005 to 2010 to sustain growth and reduce poverty, up from about $1 billion per year.

For now, however, most is state-funded and insufficient. Red tape, excessive bureaucracy, insufficient property rights, and corruption are just some factors discouraging private sector growth. There is potential, however, particularly for private sector participation in railways, water supply, and aviation.

Powering Central Asia

A giant transformer in Nurek, Tajikistan; the Central Asia Regional Economic Cooperation Program is taking measures to support regional electricity trade

In the energy sector, projects under the Central Asia Regional Economic Cooperation Program included improving regional gas transmission networks, rehabilitating the power supply in Tajikistan, rehabilitating the Central Asia–Central Europe gas pipeline, and working on power interconnection.

The program established the Members Electricity Regulators Forum in 2005 to support regional electricity trade through better regulation of power industry reforms and the promotion of efficient energy use.

The program is gaining recognition, particularly with its expansion to Afghanistan, and plans to include Russia. It operates in partnership with other regional organizations such as the Shanghai Cooperation Organization and the Eurasia Economic Community (which was recently merged with the Central Asia Cooperation Organization), and is the only forum that brings together all the countries of the region, key multilateral institutions, and regional trade organizations within a single institutional framework.

ADB is strengthening its partnership with the PRC and members of the program to enhance cooperation in trade and transport in the region. An expressway project linking Urumqi, the capital of Xinjiang Uygur Autonomous Region, to the border of the Kyrgyz Republic, and an urban infrastructure and environment improvement project have been included in the 2007 and 2008 lending program.

In March 2005, the PRC contributed $20 million to set up a technical assistance fund to promote regional cooperation and poverty reduction among the countries of developing Asia.

The Regional Cooperation and Poverty Reduction Fund, the first such one set up by an ADB developing member, will encourage greater sharing of knowledge and experience on regional cooperation and poverty reduction across developing Asia. All ADB developing members will be eligible for grants.

In addition, the Inner Mongolia Autonomous Region of the PRC has been exploring ways to cooperate in crossborder trade, transport, and environmental protection with Mongolia. Mongolia is also a member of the program, and a part of several other regional cooperation efforts.

Loan Helps Clean the Air in the PRC

Coal is the primary fuel in the PRC. It fires heavy industry and envelops cities in a smoky, unhealthy haze, particularly in the winter months. Improving air quality means finding more efficient ways to use coal to meet energy needs. Cleaner air through reduced methane emissions is the goal of several projects Coal mines are already extracting methane from mines around the country, which improves coal mining safety. Inefficient methane removal, however, causes the gas to be released into the atmosphere, with the PRC coal mines releasing about 6 billion cubic meters of highly potent methane each year. Methane has 21 times the greenhouse impact of carbon dioxide on the earth’s atmosphere. Another way is to make better use of cleaner-burning methane gas, present in many coal mines, for heating and power, and to convert methane into less harmful carbon dioxide. In doing so, the process can generate tradable emission reduction credits by using the Clean Development Mechanism, a major provision of the Kyoto Protocol on climate change. To that end, ADB is lending $70 million for the Liaoning Environmental Improvement project to extract, store, and distribute methane gas from coal mines. A component of the project centered around Fuxin is financed with backing from a $15.8 million loan. The Liaoning project will capture up to 46 million cubic meters of methane for residential and industrial use, delivering it through new and upgraded pipelines and substations to the cities of Benxi and Fushun. Before 2002, none of the major cities in Liaoning province in the PRC met national air quality standards. By 2003, 7 of 14 did, helped by a concerted government effort to close small and highly polluting coal-fired heating boilers. The project will also supply large and efficient heating boilers equipped with modern pollution control devices, and allow the closure of more than 412 small, polluting coal-fired boilers. Meanwhile, ADB’s Clean Development Mechanism Facility and Clearworld Energy, a clean-energy development company based in Beijing, have structured agreements for the Fuxin Mining Group to sell greenhouse gas emission reduction credits to two buyers under the mechanism. The mechanism allows industrialized countries to invest in developing country projects and to acquire credits that they can then use to meet reduction targets under the Kyoto Protocol. ADB set up its facility in September 2003 to provide technical and administrative assistance to eligible projects in parallel with project identification and loan processing. A larger undertaking to capture methane is the Coal Mine Methane Development project in Shanxi province. This project will use the latest technologies to boost methane production produced by coal mines to about 265 million cubic meters to fuel a 120-megawatt power plant, and will transport methane to consumers under a $117.4 million ADB loan. It is expected to save about 430,000 tons of coal per year.

ADB Assistance

To enhance relevance, ADB is adapting its programs in the PRC to improve infrastructure development, environmental protection, agriculture and natural resource management, energy conservation, social sector development, private sector development, and regional cooperation.

In Central Asia and the Caucasus, ADB’s lending portfolio has emphasized regional cooperation. Loan and grant support has also helped in several other areas in individual countries, including programs to help combat land degradation under the Central Asian Countries Initiative for Land Management.

Assistance in East and Central Asia totaled about $1.84 billion in 2005.

People’s Republic of China

Improving Connectivity

ADB approved loans to the PRC totaling about $1.5 billion in 2005, with total assistance of about $1.6 billion. It also approved $18.3 million in technical assistance, and secured $2.5 billion in cofinancing. About 81% of ADB lending in 2005 went to transportation, particularly roads and railways; about 17% for projects for urban infrastructure and urban environmental improvement; and the rest for agriculture and natural resources.

One way that ADB is helping address income disparities between the east and west, and between urban and rural areas, is through “connecting” infrastructure, particularly roads and railways that lead to larger markets. About 30 loans since 1991, totaling nearly $6.2 billion, have financed approximately 4,500 km of expressways, which encourage interregional trade, and 7,700 km of local road networks to foster economic efficiencies.

By strengthening its partnership with the PRC and members of the Central Asia Regional Economic Cooperation Program, ADB aims to promote cooperation in the region’s trade and transport

The “go west” policy involves a massive redistribution of resources from coastal areas to 12 western provinces. The policy is designed to create conditions supportive of economic activities, transport, infrastructure, utilities, education, health, environmental protection, and private sector promotion.

A $600 million loan to finance construction of a 244-km expressway from Ya’an to Lugu in Sichuan province was among the features of transport assistance approved in 2005. Part of a $2 billion project, the expressway will complete a 900-km route connecting the Sichuan capital, Chengdu, with Kunming in Yunnan province; upgrade 678 km of local roads in poor areas; and rehabilitate four public transport centers.

Located in the poor mountainous periphery of the province, the PRC’s seventh smallest, the project will improve the network and increase access to jobs, markets, and social services. It also supports the Western Region Development Strategy of the government, which aims to reduce development disparities between the interior and coastal regions.

Similarly, a $208 million loan for Hunan’s rural and mountainous Xiangxi Tujia and Miao Autonomous Prefecture will help build an expressway to provide access to the poor region.

Related objectives are behind PRC plans for construction of eight passenger railway lines by 2020. In 2005, ADB approved a $400 million loan to develop the railway connecting the provinces of Henan and Shaanxi, with plans for 459 km of track and nine new stations from Zhengzhou in Henan to Xi’an in Shaanxi. The line will help link PRC cities and ports with Central Asia and Europe by connecting the Beijing–Guangzhou, Shanghai–Xuzhou, and Beijing–Wuhan main lines in the east with the Xi’an–Baoji–Lanzhou, Xi’an–Baoji–Chengdu, Xi’an–Ankang, and Xi’an–Yan’an main lines in the west.

Agreement Tackles the Dust Bowl in Central Asia

The Central Asian republics suffer severe land degradation caused by years of unsustainable agricultural practices including overgrazing and deforestation, and natural disasters. Degraded lands hamper economic progress, are a health risk, and undermine the region’s social structure. Yet efforts to address problems have generally had limited success. They have been poorly coordinated, and have suffered from weak policy, legislation, and regulation. Desertification can be tackled only through an integrated and cooperative effort involving all development partners In answer, ADB and the Global Mechanism of the United Nations Convention to Combat Desertification have spearheaded formulation of the Strategic Partnership Agreement for UNCCD Implementation in the Central Asian countries. The agreement aims to coordinate a more integrated response among the development agencies to the subregion’s land degradation problems. Members include the Global Mechanism, ADB, Canadian International Development Agency, the Convention to Combat Desertification Project of the German Agency for Technical Cooperation, Swiss Agency for Development Cooperation, International Fund for Agricultural Development, International Center for Agricultural Research in Dry Areas, and United Nations Development Programme. The World Bank has applied for membership. The Central Asian Countries Initiative for Land Management has emerged as the main vehicle for reaching their goals. With ADB serving as the lead Global Environment Facility agency, the initiative will support the implementation of a 10-year program of country-driven activities and resource mobilization covering 2006–2015, with an additional 5 years for implementation (to 2020). In 2005, it was in the design phase, with a multi-country partnership framework currently being prepared for submission to the Global Environment Facility in March 2006. The initiative will help describe the necessary policy, legislative, and institutional conditions needed for sustainable land management and will present an approach to mainstreaming sustainable land management into national development planning and budgetary processes. It will also identify the leading problems and constraints to sustainable land management, and identify priority areas and investment and technical assistance requirements.

Improving the Environment

ADB assistance is helping the PRC rail network expand to the far reaches of the interior, helping address income disparities

The PRC’s rapid growth and urbanization have taken a toll on the environment. Urban infrastructure construction has not kept pace and large-scale investments will be required to improve air quality in major cities and towns, treat wastewater discharged into rivers and lakes, and provide safe drinking water supplies. Land degradation is also a serious concern for the PRC and one that is linked to agriculture. Sandstorms are an annual event, with desertification encroaching in the west and north, while other areas suffer as farmers convert wetlands and other natural areas into agricultural uses.

ADB provided three loans in 2005 to improve the urban environment of cities in Jilin and Henan provinces and Fuzhou municipality. ADB’s partnership with the PRC in urban infrastructure and environmental improvement is expected to strengthen in the next few years.

A flower seller in Kunming, Yunnan province; the province is gaining new economic opportunities through the GMS Program

To fight air pollution, ADB has undertaken several projects to provide clean energy, one of which is building a hydroelectric power plant in Gansu province, where coalfired thermal plants have been the main source of energy. Approved in 2003 and expected to be completed in 2007, the $35 million project is constructing the 98-megawatt Xiaogushan Hydropower plant to serve Zhangye city. It will also upgrade the power supply to three poor rural townships—Xishui, Huazhai, and Anyang. Zhangye suffers frequent power interruptions and shortages, a situation that has worsened as demand has risen and new generating plants have been slow to come online.

Two other projects, in Liaoning and Shanxi, are helping extract and use the methane gas produced in coal mining as a clean fuel.

An important $1 million technical assistance grant helped develop a strategy for pollution control in the Songhua River Basin, and is in line with the PRC government’s goal to develop a suitable river basin approach for managing water quality. The strategy gives attention to the critical areas of water quality and pollution control management, as well as addressing a number of related policy, technical, institutional, regulatory, and financial issues. The government has committed $1.9 billion to clean up the Songhua River’s domestic and industrial wastewater, providing a basis for further, faster, and sustainable growth of the northeast economy.

Wetlands Plan Marks a Watershed

Two views of the vast Sanjiang Plain, where an ADB project is improving management Massive flooding in the PRC in 1998—which left thousands dead, millions homeless, and the economy poorer—marked a critical change in views about flood control. It helped officials recognize the havoc caused by the destruction of natural systems that for millennia had sustained the country’s river basins. “There was an awakening after the 1998 floods: People asked ‘Why, when we’ve been spending all this money, are these floods still happening and causing more and more severe damage?’ The emerging view is that floods must be managed under an integrated approach and in better harmony with nature,” says KyeongAe Choe, ADB principal natural resources management specialist. That “new” thinking is behind the $55 million Sanjiang Plain Wetlands Protection project, which is designed to manage watersheds in an integrated way to protect humans and biological diversity on the vast Sanjiang Plain in Heilongjang province in the northeastern PRC. This is in line with the long-term focus of ADB assistance for the Songhua River. The plain covers an area the size of the Republic of Korea and supports about 37 ecosystems, 1,000 plant species, and 528 vertebrate species. Yet 5 decades of agricultural expansion have imperiled it, and just one fifth remains in the original forest and wetland cover. Residents have drained wetlands to expand farms and have channeled floodwaters. Immense networks of drainage canals, pumping stations, and flood control dikes have altered the cycle of entire watersheds and destroyed millions of hectares of natural marshes and wet meadows. To put the plain on a sustainable path, the project adopts an integrated watershed and wetland management approach, combining conservation with the economic welfare of rural people. It began in mid-2005 and is funded jointly by the Global Environment Facility, PRC government, and ADB. It will increase forest cover in upper watershed areas and improve water resource planning and management. It also targets restoration of 3,433 hectares of wetlands and the repopulation of wetland natural reserves with globally threatened wildlife species. Six key nature reserves will directly benefit from habitat and wildlife protection.

Private Sector Development

The PRC’s private sector has been growing strongly, and more rapid development is expected as the government continues its efforts to tackle constraints such as unclear private property rights, market entry barriers, high taxation for domestic private enterprises, and inadequate access to financial services. The government has asked ADB for strong support. In response, ADB’s private sector operations in the PRC have focused on environmental improvement and on the infrastructure, energy, and financial sectors.

In October 2005, ADB made an equity investment of $75 million, less than a 1% stake, in the Bank of China Limited, its largest equity transaction to date from its private sector operations. This is an important effort to support the PRC as it reforms its financial sector to prepare for greater competition under the World Trade Organization and fits ADB’s view that an efficient financial sector is a critical component of the region’s economic development. The Bank of China is one of the country’s largest commercial banks and among the first state-owned banks slated for privatization.

Education provides the basis for a sound economy

More than 80% of small- and medium-sized enterprises still have trouble accessing financial services. Under one loan in 2005, ADB agreed to lend the Business Development Bank Limited $17.5 million and 2.5 million euros.

The Business Development Bank now extends mainly dollar-denominated loans to medium-sized enterprises requiring dollar financing in Shanghai and nearby coastal provinces. It is also permitted to conduct limited renminbi business with foreign enterprises in specified major cities. Under the loan, it will expand lending to small- and medium-sized enterprises, increase its capital base, and obtain a broader renminbi business license to provide local currency loans to local enterprises.

The year 2005 also saw the launch of the first yuan-denominated bond (the Panda Bond) for CNY1 billion ($124.9 million), part of a bigger plan to boost local currency capital markets throughout East Asia and improve the availability of funds for the private sector in the PRC.

Mongolia

A $10 million loan for the Financial Regulation and Governance Program, approved in 2005, will develop a sound and broad-based financial sector. The program aims to reduce borrowing costs and expand credit, strengthen governance in banks, and enhance the role of nonbank financial institutions in mobilizing savings for investment capital by helping establish a single regulator for the sector. The program will establish a financial intelligence unit in the Bank of Mongolia to help reduce the risks from money laundering.

In 2005, ADB approved $1.65 million in technical assistance to Mongolia to prepare the Urban Development and Housing project to support capacity building for financial sector reforms, and for a prefeasibility study of the Western Regional Road Corridor. A $1 million Japan Fund for Poverty Reduction grant for Maternal Mortality Reduction will help Mongolia meet this important MDG.

Grant Fortifies Diets for Children

Fortifying basic, staple foods will allow children like this one in the Kyrgyz Republic to grow up healthy A lack of basic vitamins and micronutrients in the diet is damaging the cognitive health of children in Central Asia, where deficiencies are unusually high. Only two parts of the world are now suffering from a rise in the levels of stunted children caused by malnutrition: Central Asia and Sub- Saharan Africa. Iron-deficient women are more likely to die in childbirth and to give birth to children with impaired or delayed motor and cognitive skills. In Tajikistan alone, more than 30% of children suffer from a severe lack of iodine in their diets, which can impair brain development. There are pockets of Central Asia where the incidence of iodine deficiency is greater than 90%. Yet salt can be iodized for as little as $0.05 per person per year, and wheat flour can be fortified with iron for as little as $0.09, according to the World Bank. A two-phase project under the Japan Fund for Poverty Reduction—Improving Nutrition of Poor Mothers and Children in Asian Countries in Transition, begun in 2001 and provided with over $7 million in 2004—is one of two approved by ADB to remedy the situation. A second phase of the project, running from 2005 to 2007, is promoting fortification as a simple solution to the malnutrition problem, and is helping iodize salt and fortify wheat flour with iron, folic acid, and other minerals in Azerbaijan, Kazakhstan, Kyrgyz Republic, Mongolia, Tajikistan, and Uzbekistan. After almost 3 years of implementation, both production and consumption of iodized salt had substantially increased in all participating countries. As of April 2004, production of iodized salt in Kazakhstan, Kyrgyz Republic, and Tajikistan had surpassed the project goal of 66% of domestically consumed salt. Tajikistan produced more than twice the project goal.

Central Asian and Caucasian Republics

ADB approved about $152 million in loans to the Central Asian and Caucasian republics in 2005, almost the same as in 2004. A third of the loan assistance went to Uzbekistan at 36%, followed by Azerbaijan with 34%, Tajikistan with 19%, and the Kyrgyz Republic with 10%. ADB also approved $12.49 million in technical assistance.

Supporting Transition

Students at a computer class in Merv, Turkmenistan; information and communication technology will equip them to land better jobs

A considerable number of projects are helping support transition to more market-friendly rural economies, where economic growth has been slower, with much wider support for farmers’ rights and with less state interference.

In Tajikistan, for example, ADB is assisting farm reform and is implementing the Farm Debt Resolution Strategy. This $15 million project will help the Tajikistan government resolve cotton farm debt through an analysis of a large number of indebted farms.

The technical assistance grant will also help coordinate the activities of other agencies involved in the country’s rural sector, including the World Bank, United Nations Development Programme, and European Union.

ADB is helping Azerbaijan improve the last two sections of its East-West Highway through a new loan package of $52 million approved in late 2005. It is improving a two-lane paved road on the Yevlakh–Ganja and Qazakh–Georgian border, as well as local roads.

Improving Education

In the Kyrgyz Republic, ADB approved a $15.5 million grant to help it deliver better basic education services to children in poor areas.

In Uzbekistan, ADB lent $30 million to integrate information and communications technology—including computers and internet access—into basic education. The project will directly benefit some 540,000 students in grades five to nine as well as 89,000 teachers in predominantly poor, rural, and remote areas.

Uzbekistan invests substantially in its education system and, indeed, all the Central Asian republics boast high literacy rates. However, the systems are expensive and based on Soviet values and the labor requirements of a centrally planned economy, and are thus ill suited to transitional economies.

Safe Drinking Water, Improved Health

Another project approved in 2005 will benefit around 250,000 rural residents in Uzbekistan, who will gain access to safe drinking water and sanitation through rehabilitation of dilapidated infrastructure in two provinces, backed by a $25 million ADB loan. The project will help improve living conditions and public health in about 170 villages in Kashkadarya and Navoi provinces through rehabilitating and upgrading piped water supply systems, building public and school latrines, and improving wastewater drainage. Some 12 subprojects will be carried out covering clusters of up to 20 villages comprising an integrated water supply system and improved sanitation facilities.

Wide-ranging support also included a grant from the Japan Fund for Poverty Reduction to help the region deal with the serious problem of poor nutrition that is behind the high incidence of cognitive dysfunction, birth defects, and maternal and child mortality.

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