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Raising Development Impact through Evaluation

Uzbekistan: Railway Rehabilitation Project and Railway Modernization Project [Loans 1631/1773]

Evaluation Document | 31 December 2010

Project performance evaluation of the Railway Rehabilitation Project and Railway Modernization Project in Uzbekistan.

Background

A top priority for Uzbekistan in the 1990s was to rehabilitate and reform its railways. In the former Soviet Union, rail was the primary means of transporting freight throughout Central Asia. With the breakup of the Soviet Union in the early 1990s, the centralized railway system had to be reorganized along the lines of the new countries, and the economic decline led to falling revenues of railways. The institutional changes and falling revenues each contributed to poor maintenance and deterioration of railways in Uzbekistan and other Central Asian countries.

In 1998, ADB approved a loan for the Railway Rehabilitation Project (the first project). Two years after, the Railway Modernization Project (the second project) was approved. These two projects were part of the Government's master plan for developing transport and communication.

The first project aimed to rehabilitate 320 kilometers of track along the railway line from just north of Tashkent, the capital, to Samarkand, Uzbekistan's second largest city. The project also aimed to improve the maintenance capabilities of the state railway enterprise, Uzbekistan Temir Yullari (UTY), by upgrading its maintenance equipment, and to restructure and reform UTY and railway operations. The second project aimed to continue rehabilitating the track from Samarkand to just beyond Bukhara, Uzbekistan's fifth largest city, to continue upgrading UTY's maintenance capabilities, to continue the reforms of UTY, and to upgrade UTY's information technology system.

This report presents the findings of the performance evaluation for the two railway projects. The first project cost $116.8 million and the second project, $131.2 million. ADB's loan for each project was $70 million; ADB disbursed $62.6 million for the first loan, and the full $70 million for the second loan.

Summary of Assessment

Overall, each project is rated successful. The first project is highly relevant, effective, efficient, and likely sustainable. The second project is relevant, effective, efficient, and likely sustainable.

The physical investments in each project (track rehabilitation, maintenance equipment, computer systems, and telecommunications equipment) are highly relevant. The reforms of UTY (downsizing, restructuring, and privatizing) in the first project are relevant; those in the second are partly relevant. Considering the predominance of the physical investments over the reforms, the first project is rated highly relevant overall, and the second, relevant.

The study rates each project as effective at achieving outcomes. The physical investments are effective based on the evaluation's analysis of track quality and observation of train speeds. The reforms are less effective, for less than half of the performance indicators met their targets. Given the predominance of the physical investments over the reforms, the overall rating is effective.

The evaluation rated efficiency in resource use considering the economic internal rate of return (EIRR) and efficiency of processes. The evaluation rates the investments in the first project efficient, based on an estimated EIRR of 38.7%, and the second project efficient, based on an EIRR of 17%. Despite the high EIRRs, the efficiency of each project was limited by the delays and the high cost of rail procured under ADB financing.

The evaluation rates the outcomes of the physical investments and reforms under each project likely sustainable, based on good ongoing maintenance, high financial returns to the rehabilitation, UTY's strong financial position as operating agency, and the continuing commitment and adherence to reforms.

Lessons

Before preparing projects for Central Asia or the Caucasus, ADB should determine if restricting procurement to ADB-member countries will significantly raise the cost of goods and services over unrestricted procurement. For the two railway projects, the least-cost source of rails was nonmember countries, and limiting procurement to ADB member countries raised the cost of rails by more than 150%.

Loan agreements should include a covenant that can avoid delays from the contract registration process in the Ministry of Foreign Economic Relations, Investment, and Trade. The ministry is required to register contracts within 10 days of an application, but it tends to register contracts with qualifications on pricing, implicitly encouraging renegotiation of bid prices.

Loan agreements in Uzbekistan could include a covenant that ADB-financed projects are exempt from Clause 62 of General Regulations in the Cabinet of Ministers Resolution No. 456, concerning the requirements for examination of tender results, and that no price verification should be exercised for contracts funded partly or in whole by ADB and awarded on the basis of competitive bidding, including international competitive bidding.

Future projects should have an implementation consultant or a construction supervision consultant throughout project implementation. Although UTY capably implemented the projects without support from consultants, a project implementation consultant can supervise implementation on behalf of ADB, and ensure that ADB gets sufficient information on progress.

When ADB starts a new program in a country, government officials and others must learn about ADB's policies, procedures, and requirements, including those regarding safeguards, anti-corruption, and procurement. ADB should initially stick to simple projects that are among the government's highest priorities, and build a strong project implementation unit that can lay the foundation for future projects.

Follow Up Actions

The evaluation finds that there is no need for follow-up actions related to the projects. UTY and the Government are expected to ensure good maintenance and operation of the projects.

Contents 

  • Contents
  • Basic Data
  • Executive Summary
  • Introduction
  • Design and Implementation
  • Performance Assessment
  • Other Assessments
  • Issues, Lessons, and Follow-up Actions
  • Appendixes