Kazakhstan : Central Asia Regional Economic Cooperation Corridors 1 and 6 Connector Road (Aktobe–Kandyagash) Reconstruction Project

Transport / Road transport (non-urban)

The proposed project will (i) reconstruct the 89-kilometer highway connecting Aktobe and Kandyagash, and (ii) strengthen the institutional capacity of KazAvtoZhol.

The project is aligned with the following impact: more jobs created, and Kazakhstan integrated into the regional and global economic system. The project will have the following outcome: efficient, reliable, and safe movement of people and goods in West Kazakhstan increased.

Output 1: AktobeKandyagash highway reconstructed to category I standard. The project will upgrade the 89-km two-lane category II and III road to a four-lane category I road that will connect Aktobe to Kandyagash. The project will widen the road to the category I standard with climate-resilient features, construct roadside service areas with sanitary facilities especially for women, reconstruct all bridges, build two new bypasses of villages, and improve road safety.

Output 2: Institutional capacity of KazAvtoZhol strengthened. This output will strengthen KazAvtoZhol's institutional capacity by providing equipment; staffing; and training on financial management, procurement, project management, gender, and social safeguards management. The training sessions will include a minimum of 30% participation by women.

Kazakhstan has a total road length of about 97,000 km, of which about 63% is nominally classified as paved. About 24,000 km of the road network are classified as republican (national) roads, of which 92% is paved; these are managed centrally by the Committee of Roads under the Ministry of Industry and Infrastructure Development (MIID). Akimats (regional administrations) manage the rest, which consist of oblast (provincial) roads (33,000 km) and district (40,000 km) roads. Republican roads are further classified as international, national, and regional highways. Much of the road network was constructed during the Soviet era with obsolete technical standards and has deteriorated because of inadequate maintenance and harsh weather conditions. As of January 2014, about 32% of republican roads, 18% of oblast roads, and 10% of district roads were estimated to be in good condition, partly because of institutional inefficiency and underinvestment. In 2014, MIID set targets of 38% of republican roads to be in good condition by 2016 and 48% by 2020.

Many republican roads form part of transcontinental transport and trade corridors that span the vast territory of Kazakhstan to and from dynamic growth centers in neighboring countries and beyond. Improving these corridors to access markets in neighboring countries and in Europe, the Middle East, and South Asia is critical for Kazakhstan's economic diversification and growth. Owing to the country's size and low population density, maintaining an integrated national transport infrastructure is costly. Travel distances within the country are long; for example, the CenterWest (Nur-Sultan - Aktau) corridor is about 2,730 km, while the CenterSouth (Nur-Sultan - Almaty) corridor is about 1,215 km. Besides increasing vulnerability to climate change, Kazakhstan's harsh continental climate makes transport infrastructure highly susceptible to extreme weather events and associated disasters (e.g., heavy snowfall, high winds, floods, and extreme temperatures). This requires special planning and design considerations in infrastructure provision, resulting in a substantial increase in construction and maintenance costs.

Poor road condition is also a contributing factor in road crashes. The cost of road crashes in Kazakhstan is estimated at $2 billion - $4 billion per year (about 4% of GDP in 2013). The traffic-related fatality rate for Kazakhstan is about 21.9 per 100,000 population, which is double the rate in Uzbekistan and more than four times higher than the average for Western Europe. Despite a rapidly growing fleet (4.2 million vehicles in 2013 and increasing at an annual average rate of more than 5%), the number of reported fatalities in Kazakhstan fell from a peak of 4,365 in 2007 to 2,086 in 2017. However, the number of injuries rose by 17% and the number of crashes rose by 7% over the same period. The government is committed to improving road safety and endorsed the CAREC regional road safety strategy for 2017 - 2030 at the 15th CAREC ministerial conference in Islamabad in October 2016.

Kazakhstan has strategic policies and plans that influence transport sector development. These strategy documents define the objectives to be achieved in the road subsector and in other sectors. Foremost is the state program of infrastructure development 'Nurly Zhol (bright path) for 20152019 announced by the Kazakh President in November 2014. To be implemented from 2016 to 2020, Nurly Zhol prioritizes domestic transport links of strategic importance and regional impact, and aims to connect the national capital, Nur-Sultan, with other urban agglomerations and/or second-tier cities in the country through integrated rail, air, and road networks. Nurly Zhol expected priority physical infrastructure and improved connectivity to foster business-driven regional economic integration through enhanced mobility, allowing the establishment of distributed production and delivery systems. Nurly Zhol is expected to generate a significant number of new jobs and incomes through investments and is currently being updated to extend to 2025. At the operational level, the most relevant strategy is KazAvtoZhol's 20132022 strategy, most recently updated in February 2018 with targets to (i) improve 5,100 km of republican roads; (ii) conduct routine, midterm, and capital repair on 10,100 km of republican roads; (iii) ensure 88% of the republican road network in good or fair condition; (iv) toll about 15,917 km republican roads (72% of republican road network); and (v) build 260 roadside facilities. The ambitious tolling target is linked to a proposal for KazAvtoZhol to greatly increase its self-financing through toll revenues.

The project is part of the 460 km AktobeKandyagashMakat road project, which connects the oil- and mineral-rich provinces of Aktobe and Atyrau, serving a population of 1.7 million. The Asian Development Bank (ADB) approved to finance the 299 km Kandyagash Makat section in 2016. In 2018, the government requested ADB to finance an additional section of 89 km connecting Aktobe and Kandyagash, while the government will be financing the remaining 72 km under the state budget with a target completion date by 2020. The AktobeMakat link is a connector road that links CAREC corridors 1b and 6a, two major trade routes, to the Russian Federation and the European Union, Kazakhstan's major trade partners. It will integrate these two international corridors to greatly reduce transport cost and increase travel speed along the corridors and contribute to Kazakh trade facilitation.

The AktobeMakat road is a two-lane, category II and III republican road built in 1970s. Because of deterioration, the road pavement, bridges, and culverts (which were designed for a lower axle load) are barely able to cope with the rapidly increasing and heavy traffic loads from the oil wells and refineries in the region. Traffic between Aktobe and Atyrau is increasingly being diverted to the northern AktobeOralAtyrau route, as the travel time is nearly the same despite an additional 500 km detour. Poor road connectivity has also become a key social issue as it has contributed to the growing ruralurban income and wealth disparity in West Kazakhstan.

ADB assistance in the Kazakh transport sector has been largely successful. ADB started its transport operations in Kazakhstan in 2000. It approved the first multitranche financing facility for the CAREC Transport Corridor 1 (Zhambyl Oblast Section) Investment Program in 2008 with an aggregate amount not exceeding $700 million and completed it in 2015 with a rating of successful. ADB approved a second road subsector multitranche financing facility in 2010 for the CAREC Corridor 2 (Mangystau Oblast Sections) Investment Program with an amount not exceeding $800 million. Tranche 1 with a loan amount of $283.0 million was completed in 2015 and rated successful. Tranche 2 with a loan amount of $371.3 million was approved in 2012 and will be completed by the end 2019. ADB also approved project loans of (i) $95.0 million to finance the CAREC Corridor 1 (Taraz Bypass) Project in 2011, completed in 2015 with a successful rating, and (ii) $240.0 million in 2016 to reconstruct the 299 km AktobeMakat road in 2016 and the project is ongoing.

ADB, in collaboration with other development partners, has jointly supported institutional restructuring and capacity development in the Kazakh transport sector. Support has focused on (i) separating policy making and planning from implementation of road works; (ii) developing a road asset management system; (iii) introducing results-based planning and monitoring, and modern transport information technologies; (iv) institutionalizing road safety audits; (v) enforcing control of traffic overloading; and (vi) expanding toll road operations. These interventions have been largely effective because of close and effective coordination and collaboration among the development partners and good government ownership. Such coordination will remain critical as the government continues its efforts related to road system modernization, efficient use of road assets, and further reduction in transport and logistic costs.

The project is aligned with ADB's Strategy 2030 (operational cluster 3 on infrastructure and economic connectivity) and supports four of its seven operational priorities: (i) addressing remaining poverty and reducing inequalities; (ii) accelerating progress in gender equality; (iii) tackling climate change, building climate and disaster resilience, and enhancing environmental sustainability; and (iv) fostering regional cooperation and integration. Improving the project road is the government's top priority to improve connectivity in West Kazakhstan. The project is fully in line with ADB's country partnership strategy for Kazakhstan, 20172021, especially the strategy's objective to facilitate smooth trade across borders and establish regional and global value chains through exchanges of best practice and private sector development. The project also supports the CAREC Transport and Trade Facilitation Strategy 2020.

More jobs created and Kazakhstan integrated into the regional and global economic system (Kazakhstan 2050 Strategy)

Efficient, reliable and safe movement of people and goods in the West Kazakhstan increased

Aktobe-Kandyagash highway reconstructed to category I standard

Institutional capacity of KazAvtoZhol strengthened

Two civil works contracts awarded.