ADB to Extend $300 Million to Uzbekistan for Water, Sanitation Overhaul | Asian Development Bank

ADB to Extend $300 Million to Uzbekistan for Water, Sanitation Overhaul

News Release | 29 September 2009

MANILA, PHILIPPINES - The Asian Development Bank (ADB) is extending up to $300 million in financial assistance to Uzbekistan to overhaul its ageing water and sanitation systems to improve the health and hygiene of about three million people.

The multitranche financing facility of the Water Supply and Sanitation Services Investment Program is targeted at provincial cities and secondary towns in eight provinces. The nine-year program, costing around $375 million, supports the government's push to deliver safe water and expand the sanitation coverage to all urban dwellers and up to 85% of the rural population within the next decade. Under the first tranche, ADB will provide a $60 million loan to be sourced from its concessional Asian Development Fund.

Up to 70% of Uzbekistan's water supply systems need to be replaced due to poor maintenance. Many rural areas have no access to potable water, while more than half of the population in 69 major urban areas has no sewerage system. Poorly-treated wastewater is a major source of groundwater pollution.

In addition, service agencies, known as vodokanals, suffer from weak management and insufficient funds as tariffs fail to cover the costs of services.

The program will invest in infrastructure upgrades as well as improvement in the policy, planning and management capacities of the service agencies. Tariff structures will be overhauled and performance-based service contracts will be introduced for small vodokanals. The program will also launch public-private partnership contracts for bulk water supply as part of the government's push to encourage more private investment in the sector, and introduce benchmarking to help raise performance standards.

"By 2018, potable water will be available more than 20 hours a day, up from the current two to eight hours a day. Water supply will be available in over 95% of the targeted secondary towns, while sewerage coverage will be at 70% in the provincial capitals," said Ye Yong, Senior Urban Economist in ADB's Central and West Asia Department. "This program will also improve planning, and service management, cost recovery and financial controls of the vodokanals."

He added that the shorter time needed to collect and store water will benefit women and girls, giving them the chance to pursue livelihood and educational opportunities.

The first tranche will finance improvement to water source and distribution systems in Damkhoja and 11 district centers in Bukhara and Navoi provinces, as well as upgrading wastewater treatment and sewerage systems in Termez city.

The multitranche facility has significant advantages over other ADB financing modes. It allows both parties to modify the amount and timing of ADB funds under each tranche; links financing to project readiness; creates the basis for a medium-term relationship between the government and development partners; and ensures greater focus is put on project execution by front-loading key analysis work at the outset.

ADB's first tranche loan, which covers 80% of the total investment cost of $75 million has a repayment term of 32 years, including a grace period of eight years with an interest charge of 1% per year, rising to 1.5% for the balance of the term. The government will provide $15 million and a further $60 million for subsequent program projects. The executing agency for the program, which is due for completion in December 2018, is the state-owned Uzbekistan Agency which oversees water and sanitation services.