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

Sovereign Project | 44318-025

Summary

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.

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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 Environmentally sustainable growth
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 Of the $200 million Tranche 2 loan approved on 1 October 2013 (which became effective on 24 October 2013), $198.56 million has been disbursed for rural housing mortgages (subloans). Under Tranche 2, ADB financing helped finance subloans for the construction of 9,348 new houses for eligible rural families, and provided capacity development and PIU support for Component 1 of HIRD.
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)

Under Output 1, site due diligence conducted in accordance with the ADB Safeguard Policy Statement (SPS) 2009 ensured that HIRD sites complied with the ADB SPS and related Uzbek laws and regulations. Use of extensive public advertising, social scoring, and information technology solutions to assess mortgage applications has improved targeting. Qishloq Qurilish Bank (QQB) delivered training on HIRD and credit appraisal and portfolio risk management processes to its branch managers, loan officers, and other staff. Efforts to improve creditworthiness for women applicants included promoting the use of guarantors and help to mobilize down payments.

Under Output 2 local governments developed and delivered community plans and land use arrangements, installed infrastructure and social services, and tendered housing contracts. Budget allocations are now made annually to relevant state entities and local governments to ensure site and services development for HIRD, and to fulfill Component 2 and Component 3 work plans. Hokimiyat capacity building and rural skills development are being delivered nationwide under specialized professional education programs. During Tranches 1 and 2, almost 25,000 local government officials were trained in HIRD processes and integrated rural development planning and investment promotion strategies. Training curricula was developed for results-based regional investment planning, with additional TA support. The Program also developed two intern programs.

Under Output 3 the government is implementing targeted measures to improve access to a broad range of financial services and to reduce bureaucratic bottlenecks for MSEs. In 2012, the government reduced license and permit requirements, simplified and reduced tax payments, and reduced inspections to lower MSE transaction costs. Programs to increase access to finance for rural MSEs, including an existing ADB financial inclusion project with an emphasis on rural and women-owned businesses is underway. To reduce small business barriers, a pilot program for online business registration has been launched.

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

The Housing for Integrated Rural Development Investment Program continues to work with a number of stakeholders to help achieve the objectives of the program. This includes working with district hokimiyats, mahallas, branch offices of the women's committee, and local youth groups around beneficiary selection, site selection and other local issues.

To ensure efficient implementation of HIRD, a total of 8 review missions were undertaken between December 2013 and March 2015. A combined mid-term review mission for Tranche 2 and inception mission for Tranche 3 is planned for September 2015. Extensive discussions are held with the government agencies and stakeholders and missions teams undertake field visits to meet beneficiaries, contractors, mohalla representatives, and regional government officers to assess first hand some of the positive impacts of the program.

All of the FFA undertakings have currently been complied with to date.

A local audit firm Grant Thornton has been engaged on 9 January 2015 (contract cost is $314,560) to conduct Technical and Financial Performance Audit for houses constructed in 2012 and 2013. The firm has submitted its inception report and the survey design and questionnaires have been finalized. Surveys are underway and the expected closing date for the assignment is June 2015.

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 Matthew Hodge-Kopa
Responsible ADB Department Central and West Asia Department
Responsible ADB Division Public Management, Financial Sector and Trade Division, CWRD
Executing Agencies
Ministry of EconomyROULAMOV@MINECONOMY.UZUzbekistan 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 30 Mar 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 0.55 0.00 38%
Counterpart 1,564.65 Cumulative Disbursements
Cofinancing 0.00 01 Oct 2013 0.26 0.00 18%

Safeguard Documents

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Evaluation Documents

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