Uzbekistan: Housing for Integrated Rural Development Improvement Program - Tranche 2

Sovereign Project | 44318-025 Status: Approved

Summary

ADB is helping Uzbekistan improve living standards and livelihoods in rural areas. The investment program will principally provide financing to participating commercial banks for lending to more than 40,000 targeted rural homebuyers. It will also strengthen the capacity of local governments for integrated rural development and support the establishment of micro, small, and medium-sized businesses.

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Project Name Housing for Integrated Rural Development Improvement Program - Tranche 2
Project Number 44318-025
Country Uzbekistan
Project Status Approved
Project Type / Modality of Assistance Loan
Source of Funding / Amount
Loan 3039-UZB: Housing for Integrated Rural Development Improvement Program - Tranche 2
Ordinary capital resources US$ 200.00 million
Strategic Agendas Inclusive economic growth
Drivers of Change Governance and capacity development
Private sector development
Sector / Subsector

Agriculture, natural resources and rural development - Agricultural policy, institutional and capacity development

Finance - Housing finance

Gender Equity and Mainstreaming Effective gender mainstreaming
Description

The Housing for Integrated Rural Development (HIRD) Program is a high priority component of Uzbekistan's Welfare Improvement Strategy (WIS) 2012 2015 for achieving inclusive growth and greater diversification of the economy. HIRD focuses on rural housing as an engine for economic transformation and accelerating rural development. Planned communities, modern house designs, new construction technology and materials, and more environmentally sustainable construction solutions are advancing the construction sector and providing opportunities for Uzbek entrepreneurs and industries. As part of HIRD up to 10,000 homes are being built per year, creating opportunities for up to 1,000 small rural contractors and 100,000 rural construction jobs annually. Improved access to nearby schools and clinics is a key part of this program. More reliable electricity, gas, and water supply, combined with community designs that include space for retail shops and commercial services, are opening up opportunities for home-based businesses. HIRD is an important driver for the 500,000 rural micro and small enterprises and home-based jobs targeted each year.

On 31 August 2011, the Asian Development Bank (ADB) approved a $500 million multitranche financing facility (MFF) for the Housing for Integrated Rural Development (HIRD) Investment Program principally to provide financing to participating commercial banks (PCBs) for onlending to more than 40,000 targeted rural homebuyers.

Under HIRD, subloans financed by the MFF help support construction of new modern houses built in planned rural community sites, with serviced land plots with electricity, gas, water supply and sanitation, and roads provided by local governments. Local governments also provide access to and improvements in nearby schools and medical clinics, and are making space available for new retail shops and commercial services.

Project Rationale and Linkage to Country/Regional Strategy

Uzbekistan's strong macroeconomic fundamentals have helped maintain high rates of economic growth over the last decade and resiliency during the global financial crisis. Gross domestic product growth has averaged 8% since 2004, per capita income has doubled in real terms, and absolute poverty has almost been cut in half, from 27% of households in 2000 to about 15% in 2012. While declining, rural poverty in Uzbekistan remains higher (20.1%) than urban poverty (13.4%). Higher rural population growth and increases in the working age population (from 54% in 2001 to 61% in 2010), along with shifts in the economy from agriculture to industry, means that rural jobs are harder to find. Urban migration and informal and seasonal employment are all rising. Key inputs needed to attract rural investment for job creation, and to retain entrepreneurs and skilled professionals in rural areas, include improvements in: (i) education and health services; (ii) telecommunications and reliable infrastructure; (iii) promotion of regional investment; (iv) access to finance; and (v) housing and living conditions.

As part of HIRD, the MFF roadmap and policy framework links ADB investment support to the government's reform program. The overall program will improve the quality of life for rural households by: (i) increasing access to modern rural housing with related infrastructure, (ii) strengthening local government capacity for integrated rural planning and results-based delivery of rural services, and (iii) accelerating rural MSME development to diversify and increase rural jobs and attract regional investment in industry. The MFF supports the program implementation unit (PIU) and capacity development, as well as rural housing finance under the first component. Housing plots, related infrastructure arrangements, and associated commercial and social services are provided by the government. The second and third components, with accompanying reforms, are financed by the government with support from the PIU for monitoring and evaluation.

Impact Improved rural housing for targeted beneficiaries.
Project Outcome
Description of Outcome Downstreaming of the rural housing scheme for moderate and lower income beneficiaries, with a focus on women.
Progress Toward Outcome As of the 30 June 2015, $198.823 million (99.41%) of the $200 million tranche 2 loan has been disbursed: $198.56 million for mortgages and $263,235 for PIU expenses, audits, and reports.
Implementation Progress
Description of Project Outputs

Housing loans provided by PCBs to targeted credit worthy subborrowers in rural areas

Improved capacity of local governments to prepare and implement integrated rural development plans and investment promotion strategies

Improved enabling environment for entrepreneurs and MSEs to establish or expand new businesses in rural areas

Status of Implementation Progress (Outputs, Activities, and Issues) Disbursements of $198.82 million have been made: (i) $198.56 million to finance 9,348 subloans by QQB and a second PCB National Bank of Uzbekistan (NBU) for construction and purchase of new houses, and (ii) $263,235 for capacity development and PIU support for component 1. Improvements were made to the designs of HIRD houses to reduce costs and increase environmental sustainability. For example, two-cycle boilers and solar water heaters were provided as options. Under component 2, more than 2,200 local government officials received training in integrated rural development planning and investment promotion strategies in 2013 and 2014. Under component 3, the government implemented 24 additional reforms. Using its own funds and funds from international financial institutions, including ADB, the government provided credit lines to banks to increase lending to MSEs, particularly rural businesses and businesses owned by women. A pilot program for online business registration was also launched in 2014
Geographical Location National
Safeguard Categories
Environment FI
Involuntary Resettlement FI-C
Indigenous Peoples FI
Summary of Environmental and Social Aspects
Environmental Aspects Environmental impacts are anticipated to be insignificant. Each PCB will adopt an environmental and social management system (ESMS) with screening criteria and monitoring procedures to ensure that the subprojects have minimal or no adverse environmental or social risks.
Involuntary Resettlement Only land sites with no involuntary resettlement impacts will be considered. The ESMS will also monitor this.
Indigenous Peoples Only land sites with no indigenous peoples' impacts will be selected. The ESMS will also monitor this.
Stakeholder Communication, Participation, and Consultation
During Project Design

The Housing for Integrated Rural Development Investment Program cuts across a number of development themes. Donor coordination focuses on three key themes: rural development, financial sector development, and local government capacity building. Close ADB donor coordination is maintained in these three themes and in cross-cutting areas, specifically governance, environment, and gender.

With the World Bank, collaboration is supported in the financial sector, micro and small enterprises, local government, and cross-cutting governance issues including public procurement. Cooperation with the UNDP is achieving synergy on local government capacity building efforts and environmentally sustainable approaches for rural housing and community development. The Islamic Development Bank is evaluating cofinancing as part of its country programming process. Possibilities linked to plans to diversify small to medium enterprise programs have also been explored with Kreditanstalt fur Wiederaufbau (KfW).

During Project Implementation Many of the findings of the TFPAs for 2012 and 2013, which were completed during project 2, are encouraging. The home buyer selection process is satisfactory and credit assessment is adequate. In 2013, of the 34,618 applications received, 9,380 were determined to be eligible a 10.2% increase from 2012. The reasons for rejecting certain subloan applications included a lack of down payment, poor creditworthiness, no credit repayment source, and no credit history. In setting house prices, the costs of implemented works reflected the prices in the contracts. However, improvements can be made in estimating costs, introducing more precise methods for defining and classifying equipment, and ensuring QQI's administrative expenses are shown more clearly. The construction quality of HIRD houses is satisfactory and is improving each year. Housing construction complies with designs. However, the designs in some regions could better reflect local conditions, including (i) actions to prevent water penetration into plinth walls, (ii) stipulating the materials for all doors to improve their quality, (iii) providing standards for propane gas tanks where the gas supply is irregular, and (iv) improving the documentation to ensure authorized people sign off on construction. HIRD provides good value for money. Home owners are also satisfied with their new houses because: (i) the land for the house is provided for free to the buyer on a long lease arrangement; (ii) housing construction benefits from tax and customs privileges, and mortgage payments receive tax benefits; (iii) HIRD subloan terms and conditions are more favorable than standard mortgages; (iv) most construction materials are centrally procured, which allows bulk buying discounts to be obtained; and (v) the house design provides modern facilities and comforts such as hot and cold running water, modern plumbing and indoor bathrooms, and a spacious indoor kitchen. The TFPAs recommended some improvements in procurement, which have been discussed with the MOE, the State Committee for Architecture and Construction, QQI, the Tender Consulting Center, and others for action. ADB has incorporated some of these recommendations into the procurement process for project 3 and will closely monitor the implementation of the TFPA-recommended actions.
Business Opportunities
Consulting Services

Six basic principles apply on the use of consultants: (i) consulting services should be of high quality, (ii) engagements should be economical and efficient, (iii) all qualified consultants should have the opportunity to compete for assignments, (iv) ADB develops and uses consultants from its developing member countries, (v) the selection process should be transparent and should not involve a conflict of interest, and (vi) good governance and ethical behavior are especially important.

For the Program capacity development component, an estimated 473 person-months (14 international and 459 national) of consulting services, including PIU staff, are required to (i) support and enhance results-based program management, implementation, monitoring and reporting, (ii) strengthen capacity of local governments for rural development planning and investment promotion, and (iii) undertake a number of studies and other activities to improve the impact of the Program. All consultants will be recruited according to ADB's Guidelines on the Use of Consultants (2013, as amended from time to time).

Procurement The construction period of HIRD houses ranges from 6 to 12 months. Requests for bids will be advertised each year up to six months prior to planned construction. For Tranches 1 and 2, advance initiation of the procurement process has been approved to enable broad public advertisement of the request for bids to be initiated in accordance with ADB procurement requirements.
Responsible ADB Officer Asadullah Sumbal
Responsible ADB Department Central and West Asia Department
Responsible ADB Division Uzbekistan Resident Mission
Executing Agencies
Ministry of Economy
ROULAMOV@MINECONOMY.UZ
Uzbekistan Avenue, 45A Tashkent, 100060
Republic of Uzbekistan
Timetable
Concept Clearance -
Fact Finding -
MRM 18 Jul 2013
Approval 01 Oct 2013
Last Review Mission -
Last PDS Update 21 Sep 2015

Loan 3039-UZB

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
01 Oct 2013 11 Oct 2013 24 Oct 2013 31 Mar 2016 - -
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 1,764.65 Cumulative Contract Awards
ADB 200.00 01 Oct 2013 0.57 0.00 40%
Counterpart 1,564.65 Cumulative Disbursements
Cofinancing 0.00 01 Oct 2013 0.63 0.00 44%
Title Document Type Document Date
Housing for Integrated Rural Development Investment Program - Qishloq Qurilish Bank: Audited Project Financial Statements for Projects 1 (20 April 2012-31 December 2014) and 2 (24 October 2013-31 December 2014) Audited Project Financial Statements Jul 2015
Housing for Integrated Rural Development Investment Program - National Bank for Foreign Economic Activity: Audited Project Financial Statements for Project 2 (24 October 2013-31 December 2014) Audited Project Financial Statements Jul 2015
Amendment to the Loan Agreement for Loan 3039-UZB: Housing for Integrated Rural Development Investment Program - Project 2 Loan Agreement (Ordinary Resources) Dec 2014
Amendment to the Project Agreement for Loan 3039-UZB: Housing for Integrated Rural Development Investment Program - Project 2 Project/Program Agreement Dec 2014
Amendments to the Project Agreement for Loan 3039-UZB: Housing for Integrated Rural Development Investment Program - Project 2 Project/Program Agreement Dec 2014
Loan Agreement for Housing for Integrated Rural Development Investment Program - Project 2 Loan Agreement (Ordinary Resources) Oct 2013
Project Agreement for Housing for Integrated Rural Development Investment Program - Project 2 Project/Program Agreement Oct 2013
Project Agreement for Housing for Integrated Rural Development Investment Program - Project 2 Project/Program Agreement Oct 2013
Housing for Integrated Rural Development Investment Program - Tranche 2 Procurement Plans Oct 2013

Safeguard Documents

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Safeguard documents provided at the time of project/facility approval may also be found in the list of linked documents provided with the Report and Recommendation of the President.

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Evaluation Documents

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