Using select priority projects in two or three intermediary cities as demonstration projects, the proposed policy and advisory technical assistance (TA) will help develop a well-documented and structured menu or range of private sector participation and financing options/modalities. The recommendations will suggest methods to utilize the country's large pool of capital held by local pension funds, the National Oil Fund and other investors more efficiently for urban infrastructure development. The related policy, legal and regulatory gaps arising from the assessments of these projects, but with wider sectorial implications, will also be identified. The TA will include two parts: suggested policy improvements to make urban infrastructure investments less risky and therefore more attractive to private sector participation, and initial assessments of alternative approaches and financing modalities for the select priority projects.
|Project Name||Alternative Urban Infrastructure Financing Modalities|
|Project Type / Modality of Assistance||Technical Assistance
|Source of Funding / Amount||
|Strategic Agendas||Inclusive economic growth
|Drivers of Change||Governance and capacity development
Private sector development
|Sector / Subsector||
Finance - Infrastructure finance and investment funds - Money and capital markets
Water and other urban infrastructure and services - Urban solid waste management - Urban water supply
|Gender Equity and Mainstreaming|
|Description||Using select priority projects in two or three intermediary cities as demonstration projects, the proposed policy and advisory technical assistance (TA) will help develop a well-documented and structured menu or range of private sector participation and financing options/modalities. The recommendations will suggest methods to utilize the country's large pool of capital held by local pension funds, the National Oil Fund and other investors more efficiently for urban infrastructure development. The related policy, legal and regulatory gaps arising from the assessments of these projects, but with wider sectorial implications, will also be identified. The TA will include two parts: suggested policy improvements to make urban infrastructure investments less risky and therefore more attractive to private sector participation, and initial assessments of alternative approaches and financing modalities for the select priority projects. The objective is to change government's perception and understanding of how it can (i) strengthen investor confidence while tangibly minimizing risks in some of the main investment phases and components of the priority development projects; and (ii) create the conditions needed to effectively mobilize private sector participation through debt, equity and other means, for financially and economically sustainable urban and other public infrastructure development.|
|Project Rationale and Linkage to Country/Regional Strategy||
Despite being a middle-income country, urban infrastructure investment requirements in Kazakhstan remain large and are estimated at over US$25 billion. The federal government devolved service delivery to local government units without adequate funding, apart from operational subsidies and urgent interventions to fund breakdowns. Currently there are insufficient institutional, regulatory and governance arrangements to ensure the financial and environmental sustainability of urban utilities. Local governments, except for those in Astana and Almaty, are not allowed to borrow and are dependent on federal government transfers for capital investments. Alternative sources of capital are available from local pension funds, the National Oil Fund and the Sovereign Wealth Fund (Samruk Kazyna), and potentially from local and foreign debt and equity markets. However, Kazakhstan has not yet found a strategy to effectively mobilize this capital for urban infrastructure development. The lack of a comprehensive strategy for the sector and weak policy and regulatory frameworks for urban infrastructure investment result in major unmitigated risks. Investment instruments and markets that enable capital from the private sector to be channeled efficiently into urban infrastructure with a more optimal risk structure are not yet available.
The result is rapidly deteriorating urban infrastructure and weakening services, particularly for the poor and for women. For example most of the water collection, treatment and distribution infrastructure inherited from the Soviet period is in physical disrepair. This has resulted in poor technical performance and quality of drinking water key factors that impact public health. At least 10% of households do not have running water and about 20% of the population has no access to a proper sewage system. Nonrevenue water supply arising from system losses ranges from 25% to 60%, but actual losses may be greater as it is not accurately measurable due to the lack of metering. A preliminary assessment suggests that all major cities have inefficient solid waste management systems which are unable to cope with rapid urbanization. Supply of heat to multi-apartment buildings (district heating) during the cold season is a basic human need, yet the distribution and piping network is outdated and inefficient and the technology is obsolete. Much of the heat produced is lost due to leakages, lack of proper thermal insulation, and inadequate energy efficiency infrastructure in the housing stock. Greenhouse gas (GHGs) emissions from the heating sector are estimated at 42-46 million tons of carbon dioxide per year, or almost 20% total emissions. Women in urban areas particularly note problems with heating distribution and water supply, and increasing tariffs combined with poor service.
|Impact||Improved enabling environment for private sector participation in selected priority urban infrastructure projects in intermediary cities in Kazakhstan|
|Description of Outcome||A range of alternative financing modalities developed to enhance the government's ability to reduce the risks for priority urban infrastructure projects|
|Progress Toward Outcome||
Outcome achieved ahead of time; TA extension request under process to enable preparation of a possible follow on project (linked to TA recommendations on outputs 1, 2, 3, 4 and 5)
Final report, including pilot studies, shared with Government; TA closing extended from original 31 May 2015 to 30 September 2015 to enable ADB-GOK discussion on implementing the TA recommendations, as summarized under the proposed Urban Utilities Transition Support Program (UUTSP) to help operationalize key actions envisaged under the State Program of Infrastructure Development Nurly Zhol' 2015-2019. Mission scheduled for end-September 2015.
Pilot studies /assessments of Zhetisu Vodokanal (Taldykorgan water), Taldykorgan Teploservis (Heating) and Karaganda Su (water) will be shared with the Government in the first week of April, 2015.
Review Mission fielded in November 2014; Government comments on draft TA report received and discussed; comments on Aide Memoire received with regard to continuation of ADB technical assistance support; specifically, regarding (i) the priority projects of the state program of infrastructure development ("Nurly Jol") for the years 2015-2019; (ii) the infrastructure financing fund (feasibility of establishing a fund to finance the infrastructure is currently under consideration by interested government agencies and organizations); and (iii)
developing standard documentation (concession proposals, competitive documentation, and concession agreement) in the sectors of heat and water supply.
Additionally, the Committee for Construction, Housing and Communal Services and Land Management Department is currently considering the possibility of cooperation with the ADB to elaborate the mechanism of financing the modernization of ZhKH networks under the state program "Nurly Jol (The project of the state program of infrastructure development "Nurly Jol" for the years 2015-2019 is awaiting PM approval (as of March 2015).
Draft final TA report reviewed by ADB; to be shared with the EA (now under the new Ministry of National Economy); draft report of pilot project 1 (Karaganda Su Water/sanitation) being reviewed by ADB; Draft reports of pilot projects 2, 3, 4 being prepared
Financial assessment of 21 Water, and 13 District Heating Utility companies completed
Cities and priority pilot projects being shortlisted to initiate analyses on alternative ownership and financing modalities
Karaganda and Taldykorgan confirmed by the Government as the pilot cities (Letter of confirmation dated: 24/01/2014). The utilities selected are: Karaganda Su (water/sanitation), Karaganda Teplotranzit (Heat), Zhetisu Vodokanal (Water / Sanitation) and Taldykorgan Teploservice (Heat).
Mission to Karaganda fielded to begin to work closely with the heating and water utility companies and start the preparation of the Prefeasibility Studies (PFS). The PFS' will summarize the observations regarding each city and utility entity, articulate its strengths and weaknesses and scope for improvement, and detail the new financing, governance, institutional arrangements, and de-risking mechanisms identified to improve their service delivery.
Mission to Taldykorgan scheduled in April 2014.
|Description of Project Outputs||
1. Updated diagnostic assessments as inputs to CPS, and advice on improving policy, regulatory and institutional frameworks for private sector participation in urban infrastructure
2. Dialogue mechanism established with various stakeholders
3. Priority projects identified, and government readiness established to test alternative development and financing modalities for these projects through a long-term action plan
4. Alternative ownership, management, and financing structures proposed as options for each priority project identified
5. Methods for effectively mobilizing commercial and official cofinancing established
|Status of Implementation Progress (Outputs, Activities, and Issues)||
All outputs completed; TA extension request under process to enable preparation of a possible follow on project (linked to TA recommendations on outputs 1, 2, 3, 4 and 5)
1, 2, 3, 4, 5 completed ( 5 - methods suggested/recommended; establishment being discussed with Government).
1, 2 and 3 - completed (refer draft TA report).
4 - draft completed (refer draft pilot study reports for (i) LLP Karaganda Su (karaganda water co); (ii) Karaganda TeploTranzit LLP (karaganda district heating co); (iii) Zhetisu Vodokanal GKP (taldykorgan water co); and (iv) Taldykorgan Teploservis GKP (taldykorgan district heating co)).
5 - completed (refer draft TA report)
Draft final TA report - recommending policy, institutional legal and regulatory changes to increase private sector participation in urban infrastructure - reviewed by ADB; being translated for sharing with the EA (now under the new Ministry of National Economy);
Draft report of pilot project 1 (Karaganda Su Water/sanitation), providing recommendations for alternative ownership, management, and financing structures, and effectively mobilizing commercial and official cofinancing being reviewed by ADB
Draft reports of pilot projects 2 (Karaganda Teplotranzit (Heat); 3 (Zhetisu Vodokanal (Water / Sanitation); 4 (Taldykorgan Teploservice (Heat) in the process of being prepared
-Draft report to be ready by end- April due to delay in hiring of legal specialist
- Inter-ministerial Working Group established; stakeholder mechanism being established
- Priority projects selected are: Karaganda Su (water/sanitation), Karaganda Teplotranzit (Heat), Zhetisu Vodokanal (Water / Sanitation) and Taldykorgan Teploservice (Heat).
- TA team to start preparation of PFS' to achieve outputs 4 and 5.
- Pilot studies for 3 utilities will be sent to the government for review on 2 April 2015.
|Summary of Environmental and Social Aspects|
|Stakeholder Communication, Participation, and Consultation|
|During Project Design||
All key ministries and public and private sector stakeholders consulted during design (Government reorganization has led to ministerial portfolios being rationalized and ministry names changed)
Ministry of Economy and Budget Planning (MEBP), Kazakhstan Public-Private Partnership Center (PPP Center) and the Ministry of Finance (MOF) through regular in person meetings, email and telephone communication (with ADB team).
|During Project Implementation||
- All key stakeholders in Government and outside of government were consulted during implementation
- Continuous consultation with key implementing agencies and the EA
- Ministry of Finance (MOF), Kazakhstan Public-Private Partnership Center (PPP Center) and the Ministry of Regional Development through regular in person meetings, email and telephone communication (with ADB team and consultant team).
-ZhKH (RK Center for utilities modernization & reform), Water Association (KazSu); ZhKH Palata (association of ZhKH operators and vendors)
- Inter-ministerial/Agency Working Group constituted based on mutually agreed TOR
|Consulting Services||The TA requires a team of five international (25 person-months) and six national specialists (18 person-months). International consultants comprise (i) Team leader, 5 person-months; (ii) Municipal Infrastructure Development Specialist, 4 person-months; (iii) Senior Urban Planning Specialist/Urban Economist, 6 person-months; (iv) PPP and Institutional Development Specialist, 5 person-months; and (v) Senior Finance and Capital Markets Specialist, 5 person-months. National consultants comprise (i) National Infrastructure Development Specialist, 4 person-months; (ii) National PPP Specialist, 4 person-months; (iii) National Urban Economy and Finance Specialist, 4 person-months; (iv) National Capital Markets Development Specialist, 3 person-months; and (v) National Institutional and Social Specialist, 3 person-months|
|Responsible ADB Officer||Sood, Priyanka|
|Responsible ADB Department||Central and West Asia Department|
|Responsible ADB Division||Public Management, Financial Sector and Trade Division, CWRD|
Department for Budget Investments and PPP Development under the Ministry of National Economy
010000, Astana, Kazakhstan, 8, Orynbor Street, Kazakhstan
|Concept Clearance||11 Feb 2013|
|Approval||09 May 2013|
|Last Review Mission||-|
|Last PDS Update||30 Mar 2016|
|Approval||Signing Date||Effectivity Date||Closing|
|09 May 2013||12 Jun 2013||12 Jun 2013||31 May 2015||31 Mar 2016||-|
|Financing Plan/TA Utilization||Cumulative Disbursements|
|0.00||1,000,000.00||0.00||0.00||0.00||0.00||1,000,000.00||09 May 2013||439,011.14|
Project Data Sheets (PDS) contain summary information on the project or program. Because the PDS is a work in progress, some information may not be included in its initial version but will be added as it becomes available. Information about proposed projects is tentative and indicative.
The Public Communications Policy (PCP) recognizes that transparency and accountability are essential to development effectiveness. It establishes the disclosure requirements for documents and information ADB produces or requires to be produced.
The Accountability Mechanism provides a forum where people adversely affected by ADB-assisted projects can voice and seek solutions to their problems and report alleged noncompliance of ADB's operational policies and procedures.
In preparing any country program or strategy, financing any project, or by making any designation of, or reference to, a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.
|Title||Document Type||Document Date|
|Alternative Urban Infrastructure Financing Modalities: Technical Assistance Completion Report||TA Completion Reports||Aug 2016|
|TA 8366-KAZ Alternative Urban Infrastructure Financing Modalities: Final Report||Consultants' Reports||Sep 2014|
|Alternative Urban Infrastructure Financing Modalities||Technical Assistance Reports||May 2013|
Safeguard Documents See also: Safeguards
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.
None currently available.
Evaluation Documents See also: Independent Evaluation
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