Mongolia: Southeast Gobi Urban and Border Town Development Project

Sovereign Project | 42184-022


The objective of the Project is to maximize benefits from development of mining and border trade activities in the region.

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Project Name Southeast Gobi Urban and Border Town Development Project
Project Number 42184-022
Country Mongolia
Project Status Approved
Project Type / Modality of Assistance Grant
Source of Funding / Amount
Grant 0204-MON: Southeast Gobi Urban and Border Town Development Project
Asian Development Fund US$ 15.00 million
Strategic Agendas Inclusive economic growth
Regional integration
Drivers of Change Governance and capacity development
Private sector development
Sector / Subsector Energy - Energy utility services
Transport - Urban roads and traffic management
Water and other urban infrastructure and services - Urban policy, institutional and capacity development - Urban sewerage - Urban solid waste management - Urban water supply
Gender Equity and Mainstreaming Effective gender mainstreaming
Description The objective of the Project is to maximize benefits from development of mining and border trade activities in the region.
Project Rationale and Linkage to Country/Regional Strategy

The aimags (provinces) of Omnogovi and Dornogovi (Southeast Gobi) are poised to experience a rapid increase in economic activity as a result of rapid growth in mining and cross-border trade. The influx associated with these economic activities is projected to more than double urban populations in the project towns by 2020. For some soum (district) centers in Southeast Gobi, population is expected to increase by an order of magnitude by 2020.

The provision of urban infrastructure and services is currently poor and is not keeping pace with population growth. Many services are either inadequate or absent. There are low levels of access to water supply and sanitation, and smaller urban areas do not have piped networks. Insufficient and unreliable urban services add to business and household costs, damage the urban environment and diminish quality of life, and decrease the attractiveness of towns to further potential investment. Investment and capacity development are required to enable government to expand the coverage and improve the quality and reliability of urban services. Local governments are ill-equipped to meet the joint challenges posed by increased demand for scarce water resources.

Maximizing the benefits to existing and future residents of Southeast Gobi from mining investments, trade growth, and associated economic development opportunities depends on effective urban planning, management, and service delivery policies and structures being in place. Strengthening the provision of basic urban services will require institutions and policies that provide incentives for performance while also ensuring affordability. Services are currently provided by utilities that are largely owned by local government, and are delivered at a loss due to unwillingness of local government councils to raise tariffs to cost-recovery levels. This is costly in terms of the resources spent on untargeted subsidies and foregone opportunities to attract private sector expertise and financing.

Impact The impact of the Project will be enhanced economic development and livability in aimag centers, mining and border towns in Southeast Gobi.
Project Outcome
Description of Outcome The outcome of the Project will be improved urban governance, and expanded access to sustainable infrastructure and services in urban places in Southeast Gobi.
Progress Toward Outcome Project progressed very well in 2014 and exceeded 2014 contract awards and disbursement targets. As of date, 32.6 km water supply and 23 km sewerage pipeline are constructed in the project towns against planned 36 km and 30.1 km, respectively. Project completed substantial part of civil works during 2014 construction season and put into operation the water supply, sewerage and heating supply systems in Sainshand, Zamyn-Uud and Gurvantes towns. Infrastructure built in project towns serves existing and planned residential zones and public and social institutions. In 2015, the project will commission the Tsogttsetsii supply systems and complete infrastructure development works in Khanbogd soum.
Implementation Progress
Description of Project Outputs

A.1 Basic urban infrastructure services reforms and transaction advice systems established

A.2 Institutional development and capacity building systems established to strengthen urban planning and policy making.

A.3 Strengthened regional cooperation to improve efficiency of border trade and explore use of shared assets.

B.1 Water sources developed with water transmission, distribution and storage networks in place, allowing increased connections to piped water supply and reducing system leakage.

B.2 Increased wastewater collection coverage and enhanced capacity for wastewater treatment and effluent reuse.

B.3 Improved efficiency and coverage of district heating services.

B.4 Improved stormwater drainage.

B.5 Surfaced central road networks improved.

B.6 Development of controlled solid waste landfills and enhanced capacity for solid waste collection.

Status of Implementation Progress (Outputs, Activities, and Issues)

A.1 Ongoing. Package A4 consultants provide advisory services to local governments in identifying a suitable PPP transaction mode approach for public utility services organization (PUSO). Due to unavailability of funds to finance a service fee, replacement of replace operating management contract approach with a lease contract for the existing PUSOs has been proposed. The lease contract includes setting tariffs that will recover operational and maintenance costs including depreciation, service quality targets and required investment. A selection of a PPP approach is being finalized by the EA.

A.2 Completed. General plans for four project sites are finalized. Aligned with the urban planning work, the consultant team developed the integrated strategic institutional plan for the Project aimags and soums. Consultants assessed the institutional capacity and financial and budgeting systems, and identified mechanisms for citizens' participation in master plan implementation. The plan includes recommended structure and staffing of local agencies involved in the implementation of urban master plans and the proposal for upgrading the status of project soums, as applicable. Development of these recommendations, as a part of master planning work, is a new initiative for Mongolia.

A.3 Completed. Assessment of the current situation along the border between the People's Republic of China and Mongolia was undertaken under the Project. Consultants developed the proposal on establishment of a joint institution at Zamyn-Uud, Gashuun Sukhait and Shivee Khuren border points to improve cooperation between the Mongolian and Chinese agencies operational at the border points.

B.1 Completed in Dalanzadgad, Sainshand, Zamyn-Uud and Gurvantes soums. Ongoing in Tsogttsetsii and Khanbogd.

B.2 Completed in Dalanzadgad, Sainshand, Zamyn-Uud and Gurvantes soums. Ongoing in Tsogttsetsii and Khanbogd.

B.3 Completed in Sainshand and Zamyn-Uud.

B.4 Storm water drainage will be constructed in Gurvantes soum. Not yet started, pending commencement of 2015 construction season.

B.5 Not yet started, pending commencement of 2015 construction season.

B.6 Completed. Trucks and machinery for public utility services organizations in the project towns were supplied in March 2014.

Geographical Location Omnogovi and Dornogovi aimags of Mongolia
Safeguard Categories
Environment B
Involuntary Resettlement B
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects

The project is classified as environmental category B. Initial environmental examinations (IEEs) were carried out for all of the part B activities in accordance with ADB's Safeguard Policy Statement. In accordance with ADB's information and disclosure and consultation requirements, these subprojects and the potential environmental impacts were presented and discussed at stakeholder meetings and focus group discussions. Key environmental impacts during construction are largely temporary in nature, and include dust, gaseous emissions, noise, and some public inconvenience. Operational impacts might include gaseous emissions, contamination of water supply, improper treatment and disposal of sludge, or escape of leachate. The extent of these impacts will be mitigated with measures identified in the IEEs including careful project management and contractor compliance during construction with an environmental management plan integral to the contract documents. Key mitigation measures during operation are securing an adequate operational budget, implementing reforms to service institutions under the project, and developing (under the project) operation and maintenance (O&M) manuals for (i) water supply and wastewater management; (ii) solid waste management; and (iii) district heating that incorporate the conditions stipulated in the environmental permit, if necessary, and the proposed mitigation measures specified in the environmental management plan (EMP).

The recipient's institutional capacity to manage environmental risks is limited, with a single trained full-time environmental staff member working at the aimag level and a single untrained environmental inspector covering all environmental matters in each soum. Aimag and soum environmental management and monitoring capacity will be strengthened with capacity development and training under part A, and the PIUs will be staffed and assisted with technical specialists and qualified consultants including environmental management specialists. The project will greatly improve community health and living conditions, reduce environmental pollution, and decrease per capita demand for energy resources by improving the efficiency of urban services. Priority infrastructure investments in solid-waste management will reduce groundwater pollution, and improved urban roads will reduce dust and noise. EMPs, including the Grievance Redress Mechanism (GRM), will be refined during the detailed design stage using a consultation process with affected persons and closely consulting project stakeholders. An environmental safeguard specialist will ensure revised IEEs and EMPs during detailed engineering design.

The environmental monitoring report for 2012 was submitted to ADB in February 2013. The EA has recruited a local consulting company to undertake the environmental impact assessment of the project. The Mongolian version of the report was submitted to the Ministry in Q1 2013. The report will be submitted to ADB in Q4 2013 which is under translation into English.

Involuntary Resettlement It is anticipated that land acquisition and resettlement will not be significant and can be avoided for most activities. Some houses, gers, and fences will need to be relocated to nearby plots only in the proposed roads improvement priority infrastructure investment in Hanbogd. In accordance with ADB's Safeguard Policy Statement, a land acquisition and resettlement plan (LARP) has been prepared. To provide a framework for unanticipated land acquisition and resettlement as a result of changes in project sites prior to implementation, a land acquisition and resettlement framework (LARF) has also been prepared. The LARF sets out (i) the resettlement policy and Mongolian legal framework for land acquisition and resettlement, (ii) compensation standards and entitlements, (iii) implementation arrangements, (iv) consultation and participation, (v) eligibility provision, (vi) a grievance redress mechanism, (vii) monitoring and evaluation, and (viii) provision of the resettlement budget. The PIUs will be responsible for overall resettlement management and coordination, internal monitoring, and quarterly reporting to ADB. The PIUs will also take primary responsibility for resettlement consultation, notices, implementation, and timely delivery of entitlements. Because of limited experience with involuntary resettlement, training and capacity building will be conducted under part A. The PMU will review the remaining activities under part B before the award of the civil works contracts to ensure there are no involuntary resettlement effects that would require compensation and other assistance. If impacts are identified and cannot be avoided in other project activities, a LARP will be prepared in accordance with the provisions of the LARF and submitted to ADB. The Project's national resettlement consultant conducted a series of training sessions for the PMU and design contractors on ADB resettlement guidelines, and cooperated with design consultants to reduce the scope of involuntary resettlement. A land acquisition and resettlement plan for project sites will be finalized by Q4 2013.
Indigenous Peoples No indigenous peoples are living in the project area.
Stakeholder Communication, Participation, and Consultation
During Project Design The Project was developed with extensive consultation with stakeholders, including central and local governemnts, population of project aimags and soums, private sector and NGOs.
During Project Implementation Consultation meetings are organized on a regular basis with central and local government, communities and mining companies in urban planning of project towns and in designing infrastructure.
Business Opportunities
Consulting Services

Consultants will be selected and engaged using ADB's quality- and cost-based selection procedures, consultant qualification selection, and/or individual consultant selection procedures The Project will require a total of about 80 person-months of international and 350 person-months of national consulting services to support: (i) the PMU and PIUs in project implementation and management; (ii) development of structure plans for all project towns; (iii) an improved institutional and incentive framework for urban service delivery; (iv) improved local government capacity for urban planning, land management system planning, operations and maintenance; (v) enhanced cost recovery from services through metering and tariff reform; and (vi) improved local government revenues and financial management through the establishment of predictable recurrent financing and performance-based contracting and private sector participation. The ADB grant will finance 80 person-months of international and 350 person-months of national consultants.

The international consultants will have expertise in: (i) project management and procurement - including performance-based contracting; (ii) urban and regional planning; (iii) financial management; (iv) institutional and organizational development; and (v) capacity building and training. The national consultants will have expertise in: (i) water and wastewater engineering; (ii) resettlement; (iii) environmental management; (iv) legal aspects; (v) database development; (vi) financial management; and (vii) construction supervision and engineering design.

Procurement Procurement financed from the ADB grant will be carried out in accordance with ADB's Procurement Guidelines (February 2007, as amended from time to time). International competitive bidding (ICB) will be applied to supply contracts estimated to cost $500,000 or more. Supply contracts with a value less than $500,000 will follow national competitive bidding (NCB), and those less than $100,000 will follow shopping procedures as reflected by particular circumstances of the contract packages. ICB will be used for civil works contracts valued at $1 million or more. Civil works contracts valued less than $1 million will be procured using NCB procedures. The selection and engagement of contractors will be subject to ADB approval. Before commencement of NCB procurement, ADB and the Borrower will review the Borrower's procurement procedures to ensure consistency with ADB requirements. Any necessary modifications or clarifications to the Borrower's procedures will be documented in the procurement plan. Any internationally tendered equipment packages will include the necessary technical support for ensuring proper installation, testing, commissioning, and training of operational staff as part of the related contracts. In accordance with ADB requirements, foreign contractors may participate in bidding for NCB contracts.
Responsible ADB Officer Tuul Badarch
Responsible ADB Department East Asia Department
Responsible ADB Division Mongolia Resident Mission
Executing Agencies
Min of Roads, Transportation, Const. & Urb DevtJ. Bat-ErdeneMinistry of Road, Transporation, Construction and Urban Development
Ministry of Construction and Urban DevelopmentUlaanbaatar 211238
Barilgachdyn Talbai 3 Mongolia
Concept Clearance 13 Nov 2009
Fact Finding 09 Nov 2009 to 26 Nov 2009
MRM 29 Jan 2010
Approval 19 Apr 2010
Last Review Mission -
PDS Creation Date 13 Apr 2010
Last PDS Update 27 Mar 2015

Grant 0204-MON

Approval Signing Date Effectivity Date Closing
Original Revised Actual
19 Apr 2010 07 Jun 2010 30 Jul 2010 31 May 2015 31 May 2016 -
Financing Plan Grant Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 21.90 Cumulative Contract Awards
ADB 15.00 19 Apr 2010 14.61 0.00 97%
Counterpart 6.90 Cumulative Disbursements
Cofinancing 0.00 19 Apr 2010 13.47 0.00 90%
Status of Covenants
Category Sector Safeguards Social Financial Economic Others
Rating Satisfactory - - - - Satisfactory

Safeguard Documents

See also: Safeguards
Title Document Type Document Date
Southeast Gobi Urban and Border Town Development: Omnogovi Initial Environmental Examination Feb 2010
Southeast Gobi Urban and Border Town Development: Dornogovi Initial Environmental Examination Feb 2010

Evaluation Documents

See also: Independent Evaluation

No documents found.

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