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Azerbaijan: Railway Sector Development Program

Sovereign (Public) Project | 48386-004 Status: Active

The Program will provide project financing for the rehabilitation of the track and structure of the Sumgayit -Yalama rail line--a key link in the North -South Railway Corridor within the Central Asia Regional Economic Cooperation network. It will improve rail network serviceability (the project loan); and support the railway sector development reforms in management autonomy and governance, financial restructuring, reporting and control, operational efficiency, and corporate restructuring (the policy-based loan).

Project Details

Project Officer
Sluijter, Jurgen Central and West Asia Department Request for information
Country
  • Azerbaijan
Modality
  • Loan
  • Technical Assistance
Sector
  • Transport
 
Project Name Railway Sector Development Program
Project Number 48386-004
Country Azerbaijan
Project Status Active
Project Type / Modality of Assistance Loan
Technical Assistance
Source of Funding / Amount
Loan 3614-AZE: Railway Sector Development Program
Ordinary capital resources US$ 250.00 million
Loan: Railway Sector Development Program
Agence Francaise de Developpement US$ 75.00 million
TA 9439-AZE: Capacity Development and Reform Support for Railway Sector Development
Technical Assistance Special Fund US$ 1.00 million
Loan 3615-AZE: Railway Sector Development Program
Ordinary capital resources US$ 150.00 million
Loan 8375-AZE: Railway Sector Development Program
Agence Francaise de Developpement US$ 100.00 million
Strategic Agendas Environmentally sustainable growth
Inclusive economic growth
Regional integration
Drivers of Change Gender Equity and Mainstreaming
Governance and capacity development
Partnerships
Sector / Subsector

Transport / Rail transport (non-urban)

Gender Equity and Mainstreaming Some gender elements
Description The Program will provide project financing for the rehabilitation of the track and structure of the Sumgayit -Yalama rail line--a key link in the North -South Railway Corridor within the Central Asia Regional Economic Cooperation network. It will improve rail network serviceability (the project loan); and support the railway sector development reforms in management autonomy and governance, financial restructuring, reporting and control, operational efficiency, and corporate restructuring (the policy-based loan).
Project Rationale and Linkage to Country/Regional Strategy

A sustained policy implementation effort to engineer a transition towards a less oil-dependent economy is an urgent priority, and railway development can be a crucial enabler of this alternative development path. With railway infrastructure installations in almost all strategic locations of Azerbaijan (border cross points, ports, oil production and agricultural regions), railways competitiveness can be essential to the country''s production, trade, and distribution of bulk materials such as agricultural products. But reform challenges in the sector are urgent.

The development problem urgently requires a comprehensive policy and fiscal response from the government that (i) promotes institutional, corporate, financial management and control, and labor and debt-restructuring reforms; and (ii) makes crucial financing available to upgrade ADY''s service capacity and/or competitiveness. The emerging railway development challenges require properly sequenced institutional and corporate reform actions to tackle the consequences of years of financial and institutional mismanagement at ADY. These reforms are crucial so that a financially sustainable outlook for investment financing can help tackle the physical constraints to the freight and passenger businesses at ADY. The sector development program modality of the ADB enables multiyear assistance to such a sector-focused reform and investment financing agenda.

The program, included in ADB''s country operations business plan for Azerbaijan, 2018 -2020, will be ADB''s first intervention in Azerbaijan''s railways. Dialogue on the program's' design and the assistance began in late 2015. The program''s multiyear, programmatic policy loan component supports the government's reform agenda for the railway sector and the currently-integrated main operator. Its project loan component synergizes infrastructure improvement of Azerbaijan''s East -West and North -South railway corridors to maximize the country''s transit potential. In addition, since ADY''s capacity is significantly stretched by the wide range of immediate challenges, ADB will allocate technical assistance to facilitate policy dialogue and support implementing further change. This will enhance the coordination with development partners, key ADY stakeholders and other policy makers regarding the challenging reform processes.

Impact Railway development for Azerbaijan economically sustained
Project Outcome
Description of Outcome Rail service delivery and financial viability of railway operations in Azerbaijan improved
Progress Toward Outcome

2019: All planned contracts awarded in 2019.

2020: Travel restrictions due to COVID-19 limited the full mobilization of the contractor and CSC; adjustments in the work schedule agreed with contractors and consultants. Geopolitical instability (Sep-Nov), shift of government focus to reclaimed territories and the resulting institutional changes also slowed down project implementation activities.

Q1 2021: Final total contract cost have been defined after completion of detailed design (being part of the contract). Construction preparations are on track. Detailed implementation schedule is being updated in cooperation with ADY. Delay caused by the pandemic seems to be minor, pending updated work program.

Implementation Progress
Description of Project Outputs

Governance, and management and financial autonomy of ADY enhanced

Financial restructuring of ADY's debt liabilities effectively conducted

Financial and management control, efficiency and reporting at ADY enhanced

Operational efficiency enhanced and corporate restructuring effectively conducted

Infrastructure of the Sumgayit -Yalama rail line improved

Status of Implementation Progress (Outputs, Activities, and Issues)

Outputs 1 and 3: Completed and follow-on actions ongoing.

Outputs 2 and 4: Awaiting ADY update for end 2020 data.

ADY researched vertically integrated railway sectors in various countries to understand the vital elements for the legal framework. ADY departments drafted a new Law on railways and submitted it for government approval. Per government approval procedures, the draft law passed a lengthy consultation and concurrence process with over 20 government ministries and agencies. Meanwhile, the Ministry of Economy began formulating a new strategy to develop the freight logistics industry, further delaying Parliament's approval of the Law.

ADY submitted all required information to the rating agency, Moody's, in October 2018 and obtained the credit rating on 11 March 2019. This was a crucial milestone to enable ADY's return to accessing credit markets and rate its financial transparency and governance, and sets a key benchmark for management performance assessment. The rating agency has made recommendations to improve the rating over a period of 3 5 years, including solutions like those included in the scope of the program, e.g., contractual subsidy arrangements with the government to cover losses in mandated passenger services (PSO) and infrastructure maintenance (SPA), and partially converting state debt into equity. ADY is already implementing all the recommendations.

AEFS FY 2018 prepared and completed in 2019. Qualified opinion was given.

Output 5:

Final total contract cost have been defined after completion of detailed design (being part of the contract). Construction preparations are on track. Detailed implementation schedule is being updated in cooperation with ADY. Delay caused by the pandemic seems to be minor, pending updated work program.

Support from TA 9439-AZE provided for the review of preliminary documents on the Alat-Osmanli-Astara line. Final government decision on priority rail lines for rehabilitation is awaited; includes these possibilities: (i) Horadiz-Agbend/Zangilan line, (ii) Alat-Osmanli-Horadiz-Agbend, or sections of these lines.

Geographical Location Baku, Yalama
Safeguard Categories
Environment B
Involuntary Resettlement B
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects The project loan is classified category B for environmental safeguards. Meaningful public consultations were conducted and an initial environmental examination was prepared in accordance with ADB's Safeguard Policy Statement (2009) and disclosed on ADB's website on 7 November 2017. Project impacts during construction are expected to be site-specific, temporary, and related to the direct replacement of track, such as noise in residential areas, dust and exhaust emissions from equipment, impacts of bridge rehabilitation on the crossing rivers, and waste management. During operations, potential noise and vibration impacts are expected from the increased train speed and frequency after track improvement. The project will improve railway safety by fencing along the whole alignment. An environmental management plan provides mitigation and monitoring measures, as well as a capacity building plan for the PMO and ADY. Contractors will be responsible for implementing the mitigation measures. The loan has allocated funds for institutional strengthening, including safeguard compliance and railway safety improvement. The PMO will ensure the project complies with the environmental loan covenants, including semiannual environmental monitoring reporting. No environmental impact is expected for the policy-based loan.
Involuntary Resettlement The project loan is classified category B for involuntary resettlement. Meaningful public consultations were conducted and a draft land acquisition and resettlement plan (LARP) was prepared in accordance with ADB's Safeguard Policy Statement (2009) and disclosed on ADB's website on 5 October 2017. The LARP completion report is finalized and disclosed on ADB's website on 29 September 2019. ADY has overall responsibility for LARP finalization and implementation. It has adequate institutional capacity and is committed to managing social safeguard compliance. The construction supervision consultant will monitor LARP implementation. The PMO will ensure the project complies with social safeguards loan covenants, including semiannual social safeguard monitoring reporting. No land acquisition and resettlement impact is expected for the policy-based loan.
Indigenous Peoples The project loan is classified category C for indigenous peoples.
Stakeholder Communication, Participation, and Consultation
During Project Design Stakeholders including ADY, government agencies, development partners and local residents were consulted throughout project preparation to minimize adverse impacts and ensure social acceptance. The views and concerns of all stakeholders will be taken into consideration during project implementation.
During Project Implementation The recent spread of COVID-19 cases, in the country and region, has led to a minimization of physical contact. Therefore, public consultations cannot be conducted. Instead, since 2020, the information dissemination has been done through individual meetings and through local informants, such as municipalities and train station officials. Therefore, it was considered more appropriate to prepare booklets as a source of information to provide information about the project, including GRM details, to local people. An appropriate booklet has been prepared and will soon be distributed to local people along the entire route.
Business Opportunities
Consulting Services Consulting services to be financed under the ADB loan will be recruited in accordance with ADB's Guidelines on the use of Consultants (2013, as amended from time to time) and ADB''s prior review.
Procurement All procurement financed under the ADB loan including ADB-administered loan will follow international competitive bidding procedures pursuant to ADB's Procurement Guidelines (2015, as amended from time to time) and ADB''s prior review.
Responsible ADB Officer Sluijter, Jurgen
Responsible ADB Department Central and West Asia Department
Responsible ADB Division Transport and Communications Division, CWRD
Executing Agencies
Ministry of Finance
[email protected]
83, Same Vurgun Street AZ1022 Baku, Azerbaijan
Timetable
Concept Clearance 04 Jul 2016
Fact Finding 28 Aug 2017 to 08 Sep 2017
MRM 09 Oct 2017
Approval 06 Dec 2017
Last Review Mission -
Last PDS Update 29 Apr 2021

Loan 3614-AZE

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
06 Dec 2017 19 Dec 2017 16 Jan 2018 30 Jun 2022 - 30 Sep 2019
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 400.00 Cumulative Contract Awards
ADB 250.00 06 Dec 2017 250.00 0.00 100%
Counterpart 75.00 Cumulative Disbursements
Cofinancing 75.00 06 Dec 2017 250.00 0.00 100%

Loan 3615-AZE

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
06 Dec 2017 19 Dec 2017 16 Jan 2018 30 Jun 2022 - -
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 150.00 Cumulative Contract Awards
ADB 150.00 06 Dec 2017 126.06 0.00 84%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 0.00 06 Dec 2017 45.90 0.00 31%

Loan 8375-AZE

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
14 Jun 2018 11 Mar 2019 11 Mar 2019 27 Dec 2023 - -
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 100.00 Cumulative Contract Awards
ADB 0.00 14 Jun 2018 0.00 99.98 92%
Counterpart 0.00 Cumulative Disbursements
Cofinancing 100.00 14 Jun 2018 0.00 33.68 31%

TA 9439-AZE

Milestones
Approval Signing Date Effectivity Date Closing
Original Revised Actual
06 Dec 2017 28 Dec 2017 28 Dec 2017 31 Dec 2020 - -
Financing Plan/TA Utilization Cumulative Disbursements
ADB Cofinancing Counterpart Total Date Amount
Gov Beneficiaries Project Sponsor Others
1,000,000.00 0.00 0.00 0.00 0.00 0.00 1,000,000.00 06 Dec 2017 963,315.83

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 Access to Information Policy (AIP) 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
Railway Sector Development Program: Procurement Plan Procurement Plans Jul 2021
Railway Sector Development Program: Updated Project Administration Manual Project/Program Administration Manual Jul 2021
Railway Sector Development Program: Updated Project Administration Manual Project/Program Administration Manual Dec 2020
Railway Sector Development Program: Audited Project Financial Statements (January-December 2019) Audited Project Financial Statements Dec 2020
Railway Sector Development Program (Second Tranche): Progress Report on Tranche Release Progress Reports on Tranche Releases Aug 2019
Railway Sector Development Program: Audited Project Financial Statements (January-December 2018) Audited Project Financial Statements Aug 2019
Railway Sector Development Program: Updated Project Administration Manual Project/Program Administration Manual Jul 2019
Railway Sector Development Program: Project Administration Manual Project/Program Administration Manual Sep 2018
Dəmir Yolu Sektorunun İnkişafı Proqramı : Layihə Data Sənədi Translated PDS Mar 2018
Loan Agreement for Loan 3614-AZE: Railway Sector Development Program Agreements Dec 2017
Project Agreement for Loan 3615-AZE: Railway Sector Development Project Project/Program Agreements Dec 2017
Loan Agreement for Loan 3615-AZE: Railway Sector Development Project Loan Agreement (Ordinary Resources) Dec 2017
Railway Sector Development Program: Report and Recommendation of the President Reports and Recommendations of the President Nov 2017
Railway Sector Development Program: Initial Poverty and Social Analysis Initial Poverty and Social Analysis Aug 2016
Railway Sector Development Program: Project Preparatory Technical Assistance Report Project Preparatory Technical Assistance Reports Aug 2016

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.

Evaluation Documents See also: Independent Evaluation

None currently available.

Related Publications

None currently available.


The Access to Information Policy (AIP) establishes the disclosure requirements for documents and information ADB produces or requires to be produced in its operations to facilitate stakeholder participation in ADB's decision-making. For more information, refer to the Safeguard Policy Statement, Operations Manual F1, and Operations Manual L3.

Requests for information may also be directed to the InfoUnit.

Tenders

Tender Title Type Status Posting Date Deadline
Railway Sector Development Program: Marketing Specialist (National) Individual - Consulting Closed 01 Jun 2019 07 Jun 2019
Individual Consultant for Project Implementation Support Individual - Consulting Closed 02 Mar 2019 18 Mar 2019
Risk Management Specialist Individual - Consulting Closed 23 Feb 2019 01 Mar 2019
National Risk Management Specialist Individual - Consulting Closed 16 Jan 2019 22 Jan 2019
Loan No. 3615-AZE: Railway Sector Development Program [RSDP – Lots 1 & 2] Invitation for Bids Closed 24 Dec 2018 15 Mar 2019
Asset Management Specialist Individual - Consulting Closed 22 Dec 2018 03 Jan 2019
Capacity Development and Reform Support for Railway Sector Development - Railway Engineering Specialist (International) Individual - Consulting Closed 23 Jun 2018 02 Jul 2018
Capacity Development and Reform Support for Railway Sector Development - Corporate Risk Management and Credit Evaluation/Rating Specialist (International) Individual - Consulting Closed 31 May 2018 04 Jun 2018
Capacity Development and Reform Support for Railway Sector Development - Asset Management Specialist (International) Individual - Consulting Closed 26 May 2018 01 Jun 2018
Capacity Development and Reform Support for Railway Sector Development - Railway Business Specialist (International) Individual - Consulting Closed 26 May 2018 01 Jun 2018
Capacity Development and Reform Support for Railway Sector Development - Coordination Specialist (National) Individual - Consulting Closed 21 Apr 2018 27 Apr 2018
Capacity Development and Reform Support for Railway Sector Development - Legal Consultant (National) Individual - Consulting Closed 21 Apr 2018 27 Apr 2018
Consulting Services for engineering and construction supervision Firm - Consulting Closed 15 Feb 2018 16 Mar 2018

Contracts Awarded

Contract Title Approval Number Contract Date Contractor Contractor Address Executing Agency Contract Description Total Contract Amount (US$) Contract Amount Financed by ADB (US$)
DESIGN,SUPPLY AND INSTALLATION WORKS FOR RAIL TRACK REHABILITATION (INCLUDING STRUCTURES) OF YALAMA-SUMGAIT LINE LOT 1 Loan 3615 10 Dec 2019 KOLIN INSHAT TURIZM SANAYI VE TICARET A.S & HORASAN SOKAK NO.14 GOP 06700 ANKARA, TURKEY TURKEY Azerbaijan Railways Closed Joint Stock Company CONSTRUCTION 158,204,527.01 57,669,448.48
DESIGN,SUPPLY AND INSTALLATION WORKS FOR RAIL TRACK REHABILITATION (INCLUDING STRUCTURES) OF YALAMA-SUMGAIT LINE LOT 2 Loan 3615 10 Dec 2019 KOLIN INSHAAT TURIZM SANAYI VE TICARET A.S& HORASAN SOKAK NO.14 GOP 06700 ANKARA, TURKEY TURKEY Azerbaijan Railways Closed Joint Stock Company CONSTRUCTION 158,622,892.21 57,669,448.81
ENGINEERING AND CONSTRUCTION SUPERVISION FOR REHABILITTATION OF RAILWAY TRACK ALONG YALAMA-SUMGAIT LINE Loan 3615 11 Oct 2019 JV KOCKS CONSULT GMBH AND SSF INGENIEURE AG STEGENMANNSTR. 32-38, 56068 KOBLENZ GERMANY GERMANY Azerbaijan Railways Closed Joint Stock Company CONSULTANCY 9,704,308.34 9,704,306.88
PROJECT IMPLEMENTATION SUPPORT Loan 3615 02 Aug 2019 MALCOLM GERARD OWENS 5/10-12 BEN BOYD ROAD,NEUTRAL BAY NSW 2089, AUSTRALIA AUSTRALIA Azerbaijan Railways Closed Joint Stock Company CONSULTANCY 704,000.00 704,000.00

Procurement Plan