Uzb Tacr

Technical Assistance Consultant’s Report
Project Number: P39669

December 2007
Uzbekistan: Preparing the Regional Infrastructure

(Roads) Project
Prepared by Islohotkonsaltservis Ltd. in association with Road Institute

Tashkent, Uzbekistan
For The Republican Road Fund under the Ministry of Finance
This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and
ADB and the Government cannot be held liable for its contents. (For project preparatory technical
assistance: All the views expressed herein may not be incorporated into the proposed project’s design.
ASIAN DEVELOPMENT BANK
GOVERNMENT OF THE REPUBLIC OF UZBEKISTAN
THE REPUBLICAN ROAD FUND

UNDER THE MINISTRY OF FINANCE
F PREPARING THE REGIONAL

INFRASTRUCTURE (ROADS) PROJECT
I ADB PPTA No. 4889-UZB
N VOLUME 1
A
L
R
E
P
O Submitted by:
R
T
ISLOHOTKONSALTSERVIS LTD.
Tashkent / Uzbekistan
in association with
ROAD RESEARCH INSTITUTE
October 2007
TA 4889-UZB: PREPARING THE REGIONAL INFRASTRUCTURE (ROADS) PROJECT FINAL REPORT
LIST OF ABBREVIATIONS AND ACRONYMS USED
ADB Asian Development Bank

AIFU Association of International Freight Forwarders of Uzbekistan
AADT Average Annual Daily Traffic
AOI Area of Influence
CACOM Common Market in Central Asia
CAREC Central Asia Regional Economic Cooperation
CARs Central Asian Republics
CIS Commonwealth of Independent States
CSATTF Central and South Asia Transport and Trade Forum
CSP Country Strategy and Programme
EA Executing Agency
EBRD European Bank for Reconstruction and Development
EC European Commission
ECO Economic Cooperation Organization
ECOTA ECO Trade Agreement
ESCAP Economic and Social Commission for Asia and the Pacific
EU European Union
EurAsEC Eurasian Economic Community
GDP Gross Domestic Product
GOU Government of Uzbekistan
JSC Joint Stock Company
IKS Islohotkonsaltservis
IMF International Monetary Fund
JBIC Japan Bank for International Cooperation
KfW Kreditanstalt für Wiederaufbau
km kilometers
mm millimeters
MOF Ministry of Finance
MOFER Ministry of Foreign Economic Relations, Investments and Trade
MOI Ministry of Interior
m Metre
m3 Cubic metres
m3/hr Cubic metres per hour
mm Millimetres
MPa Megapascal
MV motor vehicle
PCEs Passenger Car Equivalents
PIA Project Impact Area
pkm passenger kilometres
PPTA Project Preparation Technical Assistance
SCO Shanghai Cooperation Organisation
SJSC State Joint Stock Company
SOE State Owned Enterprise
sq. square
SSC State Stock Company
IKS/RRI i TASHKENT, OCTOBER 2007

SWOT Strengths–Weaknesses–Opportunities – Threats

TA Technical Assistance
TACIS Technical Assistance for CIS Countries
t.km tonne kilometers
TIR Transports Internationaux Routiers
TOR Terms of Reference
TRACECA Transport Corridor Europe-Caucasus-Asia
UARRT Uzbek Agency for Road and River Transport
UNECE United National Economic Commission for Europe
US$ United States dollars
USSR Union of Soviet Socialist Republics
FSU Former Soviet Union
UTACA Uzbek Association for Transport and Transport Communications
UTY Uzbekistan Temir Yullari (Uzbek Railways)
UZB Uzbekistan
hp Horsepower
ICB International competitive bidding
JICA Japan International Cooperation Agency
kg Kilogram
SJSC State joint stock company
tonnes/hr Tonnes per hour
VAT Value added tax
Rate of Exchange – 1 August. 2007
US$1 = Soum1270
IKS/RRI ii TASHKENT, OCTOBER 2007

TABLE OF CONTENTS
SECTION 1: INTRODUCTION
1.1 General 1
1.2 Background 1
1.3 Rationale of the Project 4
1.4 The Project 5
1.4.1 Impact and Outcomes 5
1.4.2 Output of the TA 5
1.5 Work Undertaken Since the Submission of the Draft Final Report 5
1.5.1 Other Administrative Matters 6
SECTION 2: BRIEF OVERVIEW OF THE ECONOMY OF UZBEKISTAN AND THE

PROJECT ROAD HINTERLAND, TRAFFIC COUNTSAND FINAL TRAFFIC
FORECASTS
2.1 Introduction 7
2.2 General Background 7
2.3 Assumptions as to Progress on Main Indicators 7
2.4 Income Elasticities of Domestic Transport Demand 9
2.5 Factors Influencing International Trade along the Project road 9
2.6 2007 Traffic Counts and Count Data 10
2.6.1 International Traffic 10
2.6.2 Domestic and Total Traffic 10
2.7 Final Traffic Forecast for Sections Selected For Reconstruction 11
2.7.1 Domestic Traffic 11
2.7.2 International Truck Traffic 12
2.7.3 Traffic Forecast over the Forecast Horizon 13
2.8 Diverted Traffic 13
SECTION 3: DEVELOPMENT PROPOSAL AND PROPOSED ASSOCIATED

ACTIVITIES TO ASSIST IN RESTRUCTURING OF THE ROAD SUBSECTOR
3.1 Road Development Component 16
3.2 Road Sustainability Component 18
SECTION 4: PRELIMINARY DESIGN AND COSTS OF ROAD REHABILITATION AND

ASSOCIATED TECHNICAL ASSISTANCE
4.1 Preliminary Design and Costs of Road Reconstruction 19
4.1.1 Basic Preliminary Project Design 19
4.1.1 Basic Preliminary Project Design 19
4.1.1.1 All Projects’ Designs Shall Meet The Environmental Requirements 19
4.1.1.2 Alignment 19
4.1.1.3 Road Bed 19
4.1.1.4 Road Pavement 20
4.1.1.5 Bridges and Pipes 20
4.1.1.6 Intersections and Junctions 21
4.1.1.7 Bus Stops 21
4.1.1.8 Traffic Management 21
4.1.1.9 Engineering Utilities 21
4.1.2 Cost of Road Reconstruction 21
IKS/RRI iii TASHKENT, OCTOBER 2007

SECTION 5: EQUIPMENT PACKAGE AND ROAD EQUIPMENT POOL COMPANY

5.1 Introduction 24
5.2 Parties Involved in Road Construction and Maintenance 24
5.2.1 Road Fund 25
5.2.2 Uzavtoyul 25
5.2.3 Private Sector Contractors 27
5.2.4 Road Equipment Package 28
5.3 Proposed Road Equipment Pool Company 30
5.3.1 General 30
5.3.2 Organizational Structure of REPC 31
5.3.3 REPC Management 33
5.3.4 Expected Demand for REPC Services 34
5.3.5 Financial Plan and Financial Projections of REPC 35
5.3.6 Time-Bound Action Plan for Road Equipment Pool Company 42
SECTION 6: ECONOMIC ANALYSIS

6.1 Economic Analysis of Road Works and Equipment Package 43
6.2 Sensitivity Tests 47
6.2.1 Road Appraisal 47
6.2.2 Sensitivity Analysis of Equipment Package 49
6.3 Switching Values 50
6.3.1 Road Works 50
6.3.2 Equipment Component 50
SECTION 7: FINANCIAL MANAGEMENT ISSUES AND FINANCING PLAN

7.1 Administration of Financial Management Assessment Questionnaire – Road
Fund 51
7.2 Financing Plan and Financial Analysis 61
7.2.1 Financing Plan 61
SECTION 8: PRELIMINARY PROJECT IMPLEMENTATION ARRANGEMENTS

8.1 The Executing Agency 65
8.2 Project Implementation Unit (PIU) 65
8.3 Main Responsibilities of PIU 65
8.4 Consulting Services 66
8.5 Advance Contracting and Retroactive Financing 67
8.6 Implementation period 67
SECTION 9: PROCUREMENT PLAN

9.1 Procurement for Road Construction Component 68
9.2 Procurement of Road Equipment Component 69
SECTION 10: PROJECT DESIGN AND MONITORING FRAMEWORK 70
IKS/RRI iv TASHKENT, OCTOBER 2007

LIST OF APPENDICES
APPENDIX 1: OUTLINE TERMS OF REFERENCE FOR CONSULTANTS
APPENDIX 2: ASSESSMENT OF EQUIPMENT FINANCING OPTIONS
APPENDIX 3: FINANCIAL MANAGEMENT ASSESSMENT QUESTIONNAIRE
APPENDIX 4: BUDGET FORMULATION AND APPROVAL PROCEDURES
APPENDIX 5: RATES OF CONTRIBUTIONS TO THE REPUBLICAN ROAD FUND
APPENDIX 6: CHART OF ACCOUNTS (NATIONAL ACCOUNTING STANDARDS NO.21)
APPENDIX 7: PROJECT IMPLEMENTATION ARRANGEMENTS
APPENDIX 8: PROCUREMENT PLAN AND TENTATIVE CONTRACT PACKAGES
APPENDIX 9: PROJECT IMPLEMENTATION SCHEDULE
FIGURES
FIGURE 1.1 - Public roads
FIGURE 1.2 - Asian highways
FIGURE 2.1 – Alternative route to A380 through Kazakhistan
FIGURE 3.1 – Project sections
FIGURE 5.1 – Uzavtoyul organization
FIGURE 5.2 – The organizational arrangements of REPC
FIGURE 5.3 – Management structure of REPC
FIGURE 5.4 – Management Structure of One of the Branches of REPC
FIGURE 5.5 - Road Equipment Pool Company Financing Arrangement:
IKS/RRI v TASHKENT, OCTOBER 2007

SECTION 1: INTRODUCTION
1.1 General
1. Under a Contract signed between IKS Ltd. (the Consultant) and the Asian
Development Bank (the Bank), IKS Ltd. undertook the Technical Assistance (TA) assessing
the feasibility of rehabilitation and upgrading of Road A380 Guzar-Bukhara-Nukus-Beyneu.
The road links the area southeast of Karshi in Kashkadarya Oblast with Beyneu on the
border of Kazakhstan. The route forms part of the Asian Highway being promoted by the
Economic and Social Commission for Asia and the Pacific of the United Nations. (ESCAP).
Should the feasibility of the proposed rehabilitation and upgrading works be confirmed, it is
anticipated that a Loan Proposal for the foreign component of Project inputs would be
presented to the Board of the ADB in December, 2007.
2. This Final Report commences with a discussion of the Impacts and Rationale of the
Project which are revised versions of the Impact and Rationale presented in the Inception
Report of the TA submitted 18 May, 2007 and modified at ADB request in the Interim Report
submitted on 18 June 2007. The output of the TA is also presented as are activities
undertaken since 18 June 2007 including the submission of several sections of the Draft
Final Report submitted to an ADB Mission which visited Uzbekistan between 24 July and 6
August 2007.1
3. In Section 2, final traffic forecasts are shown for the sections of the road selected for
upgrading following receipt of the latest information on border passages received from the
Dautata Customs post in late June -2007. Section 3 presents the development proposal
indicating proposed physical investment and Technical Assistance interventions in support of
the restructuring of the road subsector.
4. Section 4 presents a preliminary design and costs of the development proposal and
associated TA activities. Section 5 presents the proposals for equipment acquisition and
management, and establishment of Road Equipment Pool Company (REPC).
5. The economic analysis is presented in Section 6. The preparation of safeguard

analysis is discussed in Volumes II and III. The results of the administration of the relevant
sections of the ADB’s Financial Management Assessment Questionnaire are presented in
Section 7 along with the Financing Plan and Financial analysis of Project implementation
activities and loan repayment. Implementation and procurement plans are discussed in
Sections 8 and 9. The Report concludes with a discussion of the variables to be included in a
benefit monitoring framework.
6. A series of appendices supports the Report.
1.2 Background
7. Uzbekistan’s major public roads, totaling 42,530 kilometres (km), are divided into
international (3,626 km), national (16,909 km), and regional (local) roads (21,995 km).
(Figures 1.1 and 1.2). In addition, there are about 140,000 km of urban, rural and
departmental roads. Road transport carried about 85% of Uzbekistan’s freight in tonne-km
and 93% of its passengers in 2005. Traffic volume grew about 4% per year over the period
2000–2005.Freight and passenger transport are expected to increase by 4.4% and 5.1% per
2
annum, respectively.
1
The Mission comprised Olly Norojono, Transport Economist (Mission Leader) and Hee Young Hong,
Financial Specialist. Sean M. O’Sullivan, Director CWID, lead meetings with high level officials of the
Government on 25-27 July 2007. Rafael Nadyrshin, Portfolio Management Officer, participated in the
wrap-up meeting.
2
ADB. 2007. TA 6579-UZB: Transport Sector Strategy. Consultant Report (Final Report).
IKS/RRI 1 TASHKENT, OCTOBER 2007

Figure1.1

Figure 1.2

8. In general, despite a few missing links, the road network has good coverage and
sufficient capacity to accommodate the moderately growing traffic demand. Most major
corridors are dual carriageway and the current volume capacity ratios are relatively low. Part
of the network is in poor condition and requires rehabilitation. The road quality is
deteriorating because of a maintenance backlog. Poor signposting and road markings on
some roads have been observed, thus raising road-safety concerns.
1.3 Project Rationale
9. The Government’s primary objective in the transport sector is to improve the

efficiency of international road corridors. The reconstruction of A-380 Guzar-Bukhara-Nukus-
Uzbekistan /Kazakhstan Border (1,204 km) is a government priority project in which work on
some sections is ongoing.3 The pavement condition of the A-380 has deteriorated due to
deferred maintenance and an increase in traffic.
10. The A-380 serves as an increasingly important international corridor between

Afghanistan/Tajikistan/Turkmenistan and Kazakhstan/Russia. The reconstruction of A380 will
reduce vehicle operating costs and travel time of the domestic, regional, and transit traffic,
thereby contributing to the growth of domestic and international trade in the area, and
promoting regional cooperation with neighboring countries.
11. The Government also plans to improve other international road corridors and
strategic roads, including M-49, which has been reflected in the Government Program for
2007-2010. The planned road rehabilitation and reconstruction needs adequate maintenance
to ensure its sustainability. Uzavtoyul is responsible for maintaining 42,530 km of common
roads. The routine and periodic maintenance works are delegated to 20 state-owned road
construction enterprises across the country. The lack of modern road construction and
maintenance equipment mainly from the difficulties associated with securing hard currency
has resulted in inefficient implementation of routine and periodic maintenance of road works.
It also limits their capacities to bid for larger projects.
12. A systematic approach to prioritizing road maintenance interventions and

development planning would help the Government better assesses the real need for road
maintenance and development. Although ad hoc surveys are undertaken, there is no network
condition database for rural and local roads. This is urgently required. Only with
comprehensive data can the extent of the maintenance backlog be quantified and a
prioritized remedial maintenance program be developed. The enhancement of those
practices as necessary and arrange appropriate training to ensure that sector staffs are
proficient in their implementation.
13. The role of the Road Fund4 has been expanded since 2006. Revisiting the operations
of the Road Fund and examining the effectiveness of the current operating, financing, and
quality control procedures would be timely. Drafting of a new road law is in progress which
will introduce road tolling system providing a legal basis for improving sustainability of road
management and operations. After the new road law is enacted, a government regulation
needs to be issued for the implementation of the tolling system.
14. The number of accidents is reported at about 10,000 per year resulting in about 2,000
fatalities. At about 15.4 fatalities per 10,000 vehicles, this rate is very high by developed
3
This project is included in the Program for Road Development (2007–2010). This priority is also
confirmed by the transport sector strategy prepared under ADB. 2005 Technical Assistance to the
Republic of Uzbekistan for Transport Sector Strategy (2006–2020) (Financed by the Japan Special
Fund). Manila. (TA 4659-UZB, approved on 3 October 2005).
4
The Republican Road Fund, established under the Ministry of Finance (MOF) in 2003, is the
government agency responsible for road investment planning, project implementation, and financial
management of road construction and maintenance, and policy making.

countries’ standard but low for developing countries. There has been a coordinated effort for
improving road safety. The restoration of the pavement on the A 380 is expected to reduce
accident frequency.
1.4 The Project
1.4.1 Impact and Outcomes
15. The Project will help provide an adequate, efficient, safe, and sustainable road
network in Uzbekistan that provides for domestic and regional connectivity which will
contribute to sustainable economic development and increased domestic and international
trade.
1.4.2 Output of the TA
16. The output will be (i) newly rehabilitated and reconstructed of 131 km road sections of
A380 between Guzar – Bukhara – Nukus – Uzbekistan/Kazakhstan border; (ii) a set of road
equipment to be managed by an equipment pool under Uzavtoyul, and (iii) a comprehensive
road sector planning and management system introduced at the Road Fund office.
1.5 Work Undertaken Since the Submission of the Draft Final Report
17. The Interim Report was submitted on 18/24 June (English/Russian) Draft Final
Report was submitted on 14/21(English/Russian) to the Executing Agency (EA), the
Republican Road Fund under the Ministry of Finance and to the Asian Development Bank
(ADB). An Interim Report tripartite meeting was held on 3 July 2007.
18. Some variations have been made to the contract since Inception report was
submitted. Subsequent to negotiations and contract signing on 29 March 2007, the
Government of Uzbekistan indicated a desire to include a package of road construction
equipment for use in construction works to be included in the proposed Project Loan as
identified in the course of the TA. Given this development, the Consultant proposed the
following modifications to the scope of work which were accepted by the ADB:
(i) Engagement of the services of an experienced Road Construction Plant and

Equipment Pool Specialist to examine options for the disposition and
management of road construction equipment to be procured with loan funds.
Mr. Terry Boyce, a qualified Civil Engineer was proposed as Plant and
Equipment Engineer. Mr. Boyce arrived in Uzbekistan on 18 June 2007. The
work carried out during his assignment is included as Section 5 of this Report.
(ii) Mr. Roger McIntyre, the scheduled Social Development Specialist was no
longer available to the TA because of a scheduling conflict. Mrs. Anna
Ohhanessian-Charpin was accepted as the replacement Social Development
Specialist and commenced her input on 20 June 2007.
19. The International and Domestic Environmental Specialists have carried out two
missions to the field during the periods 13-16 June 2007 and 14-18 July 2007 for purposes of
collecting data necessary for the preparation of the Initial Environmental Examination which
is under preparation.
20. At time of writing, the International and Domestic Social Development Experts are
carrying out the social impact and poverty analysis having made field examinations during
15-21 July 2007, following a reconnaissance mission during 27-29 June 2007.
21. The Team Leader has finalized traffic forecasts for the sections selected for
rehabilitation and upgrading in consultation with the Road Fund. He has carried out a

preliminary economic appraisal of the rehabilitation of the sections between km 490 - 581 in
Khorezm Oblast and km 876 – 916 in Karakalpakstan Republic.
22. Three seminars have been given to Road Fund and Uzavtoyul staff as follows:
(i) Seminar on ADB procurement procedures and guidelines – 6 July 2007

(ii) Seminar on equipment disposition and management options – 13 July 2007
(iii) Seminar on Medium-Long Term Investment Plan for the Road Subsector – 16
July 2007.
1.5.1 Other Administrative Matters
23. The Road Fund has assisted the Consultant in the arrangement of meetings with
various organizations and assisted in writing letters to the Ministry of Foreign Economic
Relations, Trade and Investment and State Customs Committee of the Republic of
Uzbekistan in collecting data on international trade and getting permission to conduct cross
border survey. The ADB has facilitated the application for visas for International Team
Members. The Consultant hereby registers its appreciation for this assistance so graciously
given.

SECTION 2: A BRIEF OVERVIEW OF THE ECONOMY OF UZBEKISTAN AND THE

PROJECT ROAD HINTERLAND, TRAFFIC COUNTS AND FINAL TRAFFIC FORECASTS
2.1 Introduction
24. This brief overview of the economy of Uzbekistan is being presented for the purposes
of preparing final traffic forecasts. It is anticipated that a Loan for Upgrading of the Project
Road would be negotiated in late 2007, early 2008. It is assumed that all rehabilitation and
upgrading works would take place starting in late 2008 and 2010 with all rehabilitated and
upgraded sections being opened for traffic in 2011. Benefits are assumed to flow for 20 years
after improvement entailing that forecasts of main indicators are carried out to 2030.
2.2 General Background
25. Although rich in resources, Uzbekistan’s distances from markets arising from its
doubly landlocked status presented serious challenges to the fledgling nation following the
breakup of the Former Soviet Union. Post 1991, GDP initially declined with the GOU
following a cautious policy stance that resulted in Uzbekistan experiencing less economic
shock than other CIS countries. It was also the first CIS country to exceed its 1991 GDP
following independence.
26. In 1997, growth rates again started to decrease with low prices for major export
commodities. At that point, the GOU implemented foreign trade restrictions, primarily on
imports, and foreign exchange controls. Uzbekistan remains a relatively undeveloped country
with a per capita income of US$ 292 in 2005. Commodity (cotton, gold) and energy exports,
and agriculture continue to dominate the economy. Increasing remittances from Uzbeks
working outside the Nation have also contributed to recent growth.
27. Recent high prices of cotton, gold and for energy products have entailed relatively
high GDP growth rates in excess of 6 % pa between 2004 and 20065. Recognizing the
exposure of the economy to global commodity price volatility, the GOU set up a Uzbekistan
Reconstruction and Development Fund in 2006 in order to help dampen the impact of
external price swings on the economy. Half of the intended UD$ 1.0 billion commitment to
the fund has been made.6
28. Reform has continued since the late 1990’s. Recent accomplishments include: (i)
Commencement of the development of a Treasury Function; (ii) Tax reform aimed at
reducing the burden on enterprises, small and medium businesses, and individuals; and, (iii)
The pending launch of a financial sector reform program. Despite these advances, trade
practices remain closely controlled, partly to buttress enterprises set up early after the
collapse of the FSU as part of an import substitution policy.
2.3 Assumptions as to Progress on Main Indicators
29. In the short term, the Bank is forecasting growth in GDP of 7.4 % in 2007 and 7.1 %
in 2008.7 In the medium to longer term, the Bank analysed possible growth paths for Central
Asian economies in 2006, through to 2015.8 Three scenarios were postulated: (i) Continuing
moderate policy reform; (ii) A stronger commitment to policy reform, opening of markets to all
comers, and enhanced regional cooperation; and, (iii) A decline in reformist tendencies, and
limited regional cooperation. The forecast growth rates associated with each growth path are
shown in Table 2.1.
5
Asian Development Outlook, 2007. GDP calculated on a five year moving average basis.
6
Ibid.
7
Ibid.
8
ADB Working Paper Central Asia: Mapping Future Prospects to 2015, April, 2006 (no longer
available on Bank Website).

Table 2.1 Growth Rates Under Different Policy Assumptions
2015 Poverty
+∆ GDP
Policy Assumption GDP/Capita Incidence
% pa
(US$) (%)
(i) Moderate policy reform and regional
5.2 733 17.8
cooperation
(ii) Enhanced policy reform and regional
6.3 822 12.3
cooperation
(ii) Declining commitment to policy reform and
4.0 645 21.8
regional cooperation
Source: ADB Working Paper Central Asia: Mapping Future Prospects to 2015, April, 2006 as
presented in ADB TA 4659, Transport Sector Strategy Study.
30. For purposes of the traffic forecast, the Consultant’s have assumed that a mixture of
policy options (i) and (ii) will prevail, with a central forecast rate for GDP growth of 5.8 % post
2010 through to 2020, declining to 4.5 % by 2030.
31. One relatively bright spot for Uzbekistan has been its success in lowering the rate of
population growth thus allowing it to address health, education and social welfare issues in a
more effective fashion than relatively poor countries with rapidly expanding populations.
Table 2.2 shows the recent population growth rates characterizing Uzbekistan and its
neighbors.
Table 2.2 Population Growth Rates of Selected CIS Economies in

Transition
Country Population Growth Rate (% pa 2001-2005)

Armenia -0.5
Azerbaijan 0.9
Kazakhstan -0.4
Kyrgyzstan 1.4
Russian Federation -0.6
Tajikistan 0.9
Turkmenistan 1.5
Uzbekistan 1.5
Source: The State of World Population 2003
32. The data for Armenia, Kazakhstan and Russia is typical of countries with minimal
controls on population movements and a tendency to emigrate in search of better economic
opportunities. Amongst the countries with more settled populations, Turkmenistan,
Kyrgyzstan and Uzbekistan are those characterized with relatively high growth rates.
However, Uzbekistan’s growth rate of 1.5 % per annum represents a significant decline from
the growth rates prevailing between 1985 and 1990 which were of the order of 2.3 % per
annum.9 Further, the last few years have seen an increase in the numbers of Uzbeks working
abroad while maintaining their families at home, as has happened in Europe with the
accession of former Warsaw Pact nations to EU membership. Over the forecast horizon, it is
assumed that the population growth rate will decline from 1.5 % per annum to 1.0 % pa.
33. GDP, population and GDP per capita forecasts at intervals over the forecast period
are presented in Table 2.3.
9
“UNDP Human Development Report Uzbekistan”, Tashkent, 1999.

Table 2.3 Assumed Population and GDP Per Capita 2007-2030 by Five Year Intervals
GDP per Capita

Year GDP (US$ billion) Population (million)
(US$)
2005 7.8 26.8 292
2010 11.0 27.6 399
2015 14.9 29.2 510
2020 19.2 30.8 622
2025 23.9 32.4 738
2030 29.1 34.1 853
Note: GDP in constant 2004 prices.
Sources: ADO 2007 and Consultant’s estimate.
2.4 Income Elasticities of Domestic Transport Demand
34. Income elasticities of demand characterizing several indicators of the transport sector
are shown in Table 2.4.
Table 2.4 Income Elasticities of Demand Characterizing the Transport Sector
Income Elasticity of Demand

Transport Demand Indicator
2006/2003 2006/2005
Total freight transport – tonnes 0.93 1.16
Total freight transport – tkm 1.73 1.26
Road freight transport – tonnes 0.95 0.99
Road freight transport-tkm 1.41 2.85
Total passenger transport – pax 1.07 1.45
Total passenger transport – pkm 1.30 1.74
Road passenger transport – pax 1.11 1.58
Road passenger transport – pkm 1.24 2.01
Source: ADO 2007 and Statistical Review of Uzbekistan, 2007.
35. It can be seen from Table 2.4 that the income elasticities of demand were above the
medium term trend in 2006. Only the tonnage carried by road freight grew at less than the
rate of GDP, although the 2006 income elasticity of demand for road tonnage is slightly
higher than the medium term elasticity. Uzbekistan’s fleet of vehicles of four wheels or more
per 1000 persons is slightly above the world mid-point but there is considerable likelihood of
a continuing increase of the vehicle fleet in excess of income growth. Nevertheless, in the
medium term the income elasticity of road passenger demand (pax) can be expected to
decline towards a rate influenced by the rates of growth of per capita GDP and population.
Assumptions as to income elasticities governing the forecasts of domestic traffic for the
Project Road are presented in Section 2.8 below.
2.5 Factors Influencing International Trade along the Project Road
36. The A380 is classified as a Northwestern Route by Uzavtoyul, leading to Russia,

Ukraine and Europe via Kazakhstan. Short to medium growth rates for the trading partners
serviced by the Project Road are shown in Table 2.5.

Table 2.5 Short – Medium Term Growth of Economies Accessed by the Project Road/
Northwestern Route
Country/Region 2006 2007 2008

EU 3.0 2.9 2.7
Russia 7.0 5.5 5.5
Ukraine 7.1 5.5 5.5
Sources: 1. ADO 2007.
2. Ukraine Economic Update, World Bank, April, 2007.
3. Wall Street Journal, 8 May, 2007.
2.6 2007 Traffic Counts and Count Data
2.6.1 International Traffic
37. Table 2.6 shows the tonnage and implied number of loaded and empty trucks passing
through the Dautata Customs Post near the Kazakhstan Border between 2003 and 2006. A
forecast for 2007 is also shown.
Table 2.6 Truck, Tonnage and Trade Value Flow through Dautata Customs Post
Item 2003 2004 2005 2006 2007*

Trucks per year 3157 2866 2228 2634 3512
Volume of goods/year (tonnes) 31,571 28,658 18,797 17,783 23,710
Value of Goods (US$ million) 41,350 50,985 35,886 22,154 29,539
Trucks per Day 11.0 11.9 6.1 7.2 9.6
Note: * - 2007 figures are forecast.
Source: Uzbekistan Customs.
38. It can be seen that tonnage through the border post fell between 2003 and 2006, but
appears to have recovered according to 2007 forecasts. The number of trucks currently
passing the post is of the order of 10 per day. The value of goods handled by the Dautata
Customs Post is about 0.27 % of the value of total trade turnover between Uzbekistan on the
one hand and Kazakhstan, Russia, and the Ukraine on the other hand. Despite the relatively
small proportion of traffic handled by the Dautata Post and the A-380, a high quality
international route obviously has significant potential traffic on offer.
2.6.2 Domestic and Total Traffic
39. Classified traffic counts were carried out over 24 hours on sections of the Project
Road away from the influence of towns and cities between 22/23May and 05/06June 2007.
International truck trips are identified separately.
Table 2.7 2007 Traffic Flows on Project Road Sections
Domestic International
Section Buses Cars Other Total
Trucks Trucks
Khorezm (km 481) 1066 5 445 341 67 1924
Karakalpakstan (km
164 10 58 130 2 364
886)
Source: Consultant’s Traffic Count
40. It can be seen that the flows on the line haul portion of the Project Road are
considerably lower the flows presented in the Inception Report. Discussions with those
familiar with previous counts indicate that they were often carried out in and close to towns
and cities on the A-380 indicating that they are possibly inflated by urban traffic flows.

2.7 Final Traffic Forecast for Sections Selected for Rehabilitation
2.7.1 Domestic Traffic
41. The formulae for utilizing the income elasticities of road transport demand to derive
growth rates are shown below:
Growth Rates for Demand for Passenger Transport Services
∆PT = (((∆GDPca * Ep)/100+1) * (∆POP/100+1)-1) * 100
Where:
∆PT is the growth in demand for passenger transport services;
∆GDPca is growth in per capita GDP;
EP is the income elasticity of demand for passenger transport services; and
∆POP is the growth in population.
Growth Rates for Demand for Freight Transport Services
∆FT = ∆GDP * EF
Where:
∆FT is the growth in demand for freight transport services;
∆GDP is the growth in GDP; and
EF is the income elasticity of demand for freight transport services.10
42. As can be seen, passenger traffic growth is influenced by the growth in population
and per capita GDP, as modified by evident passenger transport income elasticities of
demand. The demand for freight transport is tied closely to the growth in GDP as influenced
by the income elasticity of demand for freight transport services.
43. As regards domestic demand for freight transport, the analysis of elasticities was
presented in Table 3.4 of Section 3.5.
44. It can be seen from the Table 3.4 that the income elasticity of road transport demand
(tones) was 0.95 between 2003 and 2006 rising to 0.99 in 2006, while the elasticity in terms
of tkm was 1.41 in 2003 and 2.85 in 2006. It is argued that the dominance of urban traffic in
road measures can mask differences between urban growth and interurban growth.
45. Freight income elasticities of demand are often understood to lie between 1.2 and
1.5. In a situation where there are still some limitations on access to foreign exchange for
imports, there is a case for assuming that as liberalization and reform continue, there is still
some unsatisfied domestic demand for freight vehicles. In addition, the fact that the road
freight elasticity (tkms) leads that the total freight elasticity indicates an increasing role for
road in interurban transport the Consultant has assumed that freight elasticities will be 1.5 for
domestic traffic declining to 1.0 over the forecast horizon.
46. As regards passenger transport, it is evident from Table2.4 that the most recent
income elasticities of demand characterizing road passenger transport are somewhat higher
than those characterizing passenger transport in general. There is still a strong possibility of
rapid growth in the acquisition of passenger transport vehicles as incomes increase and
10
These formulae have been utilized on previous TAs for the CAREC Subregion. See for example the Draft Final Report of
ADB TA 4875, Preparing the Western Regional Road Development Project, submitted 22 January, 2007.

liberalization continues in the economy. Similar income elasticities of demand are assumed
to characterize road passenger demand growth over the forecast horizon as is shown in
Table 2.8.
Table 2.8 Forecast Growth Rates of Main Domestic Traffic Indicators
Case/Item/ Main Indicator Average Average

Period Growth Rates Passenger Freight
Passenger Freight
Growth Growth
Without Road GDP Population GDPca Elasticity Elasticity
Rate Rate
Improvement (%pa) (% pa) (% pa)
(% pa) (% pa)
2006-10 7.1 1.02 6.4 1.5 8.5 1.5 10.7
2011-15 6.2 1.01 5.1 1.4 6.2 1.4 8.8
2016-20 5.2 1.01 4.0 1.3 4.2 1.3 6.9
2021-25 4.5 1.00 3.5 1.2 3.2 1.2 5.3
2026-30 4.0 1.00 3.0 1.0 2.0 1.0 4.0
Source: Consultant’s estimate.
2.7.2 International Truck Traffic
47. Factors likely to influence international traffic flows on the A-380 are shown
in Table 2.9.
Table 2.9 Trade Turnover of Uzbekistan with Kazakhstan, Ukraine and Russia
Percentage of
2006 Percentage
Uzbekistan
Trading Partner Turnover Increase over
Foreign Trade
(US$ million) 2005
Turnover
Kazakhstan 722.6 6.7 37.3
Russia 2825.9 26.2 39.1
Ukraine 614.8 5.7 86.0
Total Uzbekistan 10785.7 38.6 13.5
Source: Statistical Review of Uzbekistan.
48. It can be seen from Table 2.9 that the three countries to the North and Northwest of
Uzbekistan accounted for 38.6 % of total trade turnover in 2006. Furthermore, growth in two
way trade between each country and Uzbekistan exceeded over 3 times the growth recorded
nationally. The high prices currently prevailing for Uzbekistan exports make it difficult to
speculate about volume trends. For the basis of a working assumption, the Consultant has
assumed the growth rates in international truck volume shown in Table 2.10 below.
Table 2.10 Assumed Growth Rates in International Truck Traffic along the Project
Road
Time Period Assume Growth Rate (% pa)

2006-2010 10.0
2011-2015 7.6
2016-2020 6.0
2020-2025 4.0
2025-2030 4.0
Note: Derived from an assumption that volume of goods will Increase at
these rates. Substitution of larger vehicles not taken into account at this point.

2.7.3 Traffic Forecast over the Forecast Horizon
49. Table 2.11 shows traffic forecasts for the road sections selected for rehabilitation.
Average Annual Daily Traffic (AADT) is shown by vehicle type.
Table 2.11 Annual Average Daily Traffic by Vehicle Type – Normal Domestic Traffic
Domestic International
Section/Year Buses Cars Other Total PCEs
Trucks Trucks
2007
Khorezm 1066 5 445 341 67 1924 4420
Karakalpakstan 169 5 58 130 2 364 583
2010
Khorezm 1363 7 592 454 86 2502 5726
Karakalpakstan 218 7 77 173 3 477 761
2015
Khorezm 1839 10 854 654 116 3474 7906
Karakalpakstan 311 10 119 266 4 710 1120
2020
Khorezm 2260 14 1143 876 142 4435 10014
Karakalpakstan 404 14 160 360 5 943 1478
2025
Khorezm 2645 19 1391 1066 166 5286 11904
Karakalpakstan 491 19 203 454 5 1172 1827
2030
Khorezm 2920 23 1692 1296 184 6115 13634
Karakalpakstan 565 23 247 553 6 1393 2152
2.8 Diverted Traffic
50. Two Sources of diverted traffic have been calculated. Firstly, rail traffic through the
Nukus-Oasis Line has been estimated at some 1,718,800 mt per year. Discussions with the
Marketing Office of UTY has indicated that small consignments make up about 35 % of
tonnage on this line. It has been assumed that up to 10 % of tonnage on the line could divert
to the improved A 380 resulting in an additional 121 heavy trucks per day by 2015.
51. A second source of diverted traffic for the improved road is the alternative route
through Chimkent (Figure 2.1) which is also grouped with the A 380 in the so called Northern
and Northwestern Routes. Discussions with a leading Uzbekistan trucking firm indicate that
using the alternative Northern route is more costly because fees are levied at six Kazakh
oblasts en route to Russia and the Ukraine as compared to two Kazakh oblast boundaries
which are passed utilizing the A 380. Additional diverted Northern Route could be expected
to total 57 heavy trucks by 2015.
52. Generated traffic has been assumed to total about 20 % of the flow of forecast normal
domestic traffic once all sections of the A 380 have been rehabilitated by 2011. Table 2.12
shows the final traffic forecasts for the two sections selected for rehabilitation.

Figure 2.1

Table 2.12 Final Traffic Forecasts of Normal Traffic, Generated Traffic and Diverted
Traffic – Average Annual Daily Traffic
Domestic International Bus,

Section/Year Car Other Total PCE
Trucks Trucks Microbus
2007
Khorezm 1066 5 445 341 67 1924 4804
Karakalpakstan 169 5 58 130 2 364 994
2010
Khorezm 1363 7 592 454 86 2502 6241
Karakalpakstan 218 7 77 173 3 477 1318
2015
Khorezm 2207 190 1025 785 139 4347 8678
Karakalpakstan 374 190 143 319 4 1030 1971
2020
Khorezm 2712 266 1372 1051 170 5571 11076
Karakalpakstan 485 266 193 431 6 1381 2671
2025
Khorezm 3174 344 1669 1279 199 6665 13265
Karakalpakstan 589 344 243 545 7 1729 3375
2030
Khorezm 3504 418 2030 1556 220 7729 15276
Karakalpakstan 678 418 296 664 7 2063 4041
53. Neither section will require widening in the later stages of the forecast horizon.

SECTION 3: ROAD DEVELOPMENT COMPONENT AND ROAD SUSTAINABILITY

COMPONENT
3.1 Road Development Component
54. ADB will finance reconstruction of A-380 highway. The A-380 highway is the main
route between the north-west and south-east of Uzbekistan. It serves as an increasingly
important international corridor between Afghanistan (via Termez)/Tajikistan/Turkmenistan
and Kazakhstan/Russia. The A-380 highway is designated as CAREC 6 Corridor, Asian
Highway 63, TRACECA Corridor 28, and European Highways E-40/60. The adjoining 84 km
Kazakhstan section Uzbekistan Border-Beyneu is included in the 2009–2010 Kazakhstan
Road Sector Development Program for reconstruction. Reconstruction of the Beyneu-Aktau
(Caspian Sea) and Beyneu-Russian border sections is also in the program for completion by
2011. The A-380 highway is part of CAREC 6 that is considered high priority for completion
by 2012.11
55. The pavement condition of the A-380 highway Guzar–Bukhara–Nukus–Dautata

(Uzbekistan /Kazakhstan Border) has deteriorated due to deferred maintenance and an
increase in traffic. With the existing traffic of about 5,500 passenger car equivalent (PCE) per
day in Khorezm section, the A-380 highway traffic is expected to reach 13,000 PCE/day in
2020. Reconstruction of this international road is technically justified. Out of 1,204 km of A-
380 highway, 260 km will be reconstructed and 700 km will be repaired during 2007–2010;
while the remaining road sections need adequate routine maintenance. ADB’s investment in
reconstruction of A-380 highway will help the Government accelerate the completion of the
overall program and introduce international best practice.
56. Civil works under this component will comprise reconstruction of 131 km of the A380
highway in Karakalpakstan Autonomous Republic and Khorezm Province to meet two-lane
international design standard with four-lane road bed within the existing right-of-way. The
Project will not involve land acquisition and resettlement nor create significant environmental
impacts. The sections of highway are as follows (Figure 3.1):
(i) Section 1: Km 876–916 (40 km) in Karakalpakstan Autonomous Region.

(ii) Section 2: Km 490–581 (91 km) in Khozarasp District of Khorezm Province
and Tortkul District of Karakalpakstan.
57. Advisory support for procurement of contractors and recruitment of consultants will be
provided. An international procurement consultant will work in the project implementation unit
(PIU) to strengthen its procurement capability. Advisory support for project management and
construction supervision will also be provided to assist PIU in managing, implementing, and
supervising the overall project. The scope, objectives, TORs and other details of above
captioned TAs are described in Appendix 1.
11
ADB. 2007. TA 6347-REG. 2007: CAREC Transport Sector Strategy Study. Consultant Draft Final Report.

Figure 3.1

3.2 Road Sustainability Component.
58. This component will primarily assist the Government strengthen road sustainability in
Uzbekistan through improvement of road sector institutions, the introduction of competition
leading to further commercialization of enterprises and eventually privatization, road sector
planning, and budgeting system; and provision of road equipment to ensure timely and
effective road maintenance program. This component will involve the following activities:
(i) Advisory Support for Road Sector Planning and Management System.
The advisory support will review the current road sector planning and
financing system, study the impact of possible application of road user
charges and tolling systems, study separating road agency and business
entities including possible outsourcing and competitive bidding of road
maintenance, introduce computerized road sector planning and management,
develop a data base system, train staff, and prepare a long-term program for
country-wide application. At the end of the Project, a Planning Unit will have
been fully established at the Road Fund.
(ii) Provision of Road Equipment. The Project will finance the procurement of a
set of road equipment to be managed by a Road Equipment Pool Company
(REPC). The company will be set up as an independent commercially-
operated state-owned enterprise. REPC will provide services for utilizing the
equipment to be procured under ADB financing on a full cost recovery basis.
Advisory assistance support will be provided to establish the REPC as a
viable and sustainable enterprise. This will include developing a business
plan; an equipment service provision system; introducing proper
administrative, accounting and financial procedures; identifying workshops,
stores, and equipment operations manuals; establishing equipment hire
charge system; and providing on the job training for operators and workshop
personnel.

SECTION 4: PRELIMINARY DESIGN AND COST OF ROAD RECONSTRUCTION AND

ASSOCIATED TECHNICAL ASSISTANCE
4.1 Preliminary Design and Cost of Road Reconstruction
4.1.1 Basic Preliminary Project Design
59. The total length of the road section is 131 km. Road sections are located in Khorezm
region and the Republic of Karakalpakstan. Road category before reconstruction is III, after
reconstruction – II. Meanwhile, the road bed will be designed for category I. Estimated year
of prospective traffic forecast is 2025.
Estimated traffic forecast:
Km 876-916 13625 PCE/day

Km 490-581 3375 PCE/day
4.1.1.1 All Projects’ Designs Shall Meet The Environmental Requirements.
60. It is necessary to stipulate environmental safeguards in line with requirements set

forth in section on environment.
4.1.1.2 Alignment
61. The road alignment remains without changes, except for individual sections, where
due to increase of curve radiuses in plan view road baseline will be shifted. Final drawings of
project sections shall be submitted with the final report.
4.1.1.3 Road Bed
62. Existing roadbed of road sections is constructed in compliance with category III
technical standards. The width of roadbed varies from 11.5 to 13.0m. The subsoil used for
roadbed is represented by barkhan sands (km 876-916), (km 574-581) and sand loam with
limestone and argillaceous deposit (876-916 km). The fill slope ratio is 1:2 and 1:1.5.
63. The depth of fill varies from 1.5 to 4.5 m the depth of cut is up to 4m. Individual
roadbed sections will be rectified to ensure road visibility in profile.
It is proposed to accept the following main parameters:

Roadbed width - 25.1 m;
Fill slope ratio - 1:3;
Cut slope ratio:
Inner - 1:3;
Outer - 1:4;
Road bed projection at least - 0.8m;
Maximum longitudinal grade not more than - 4%;
Traffic lane width -3.75m;
Margin strip width -0.75m.
64. A 2.6m wide central reserve is provided to separate opposite directions. It is

envisaged to establish Group I reinforced concrete road guard on a central reserve. The
accepted project designs on road parameters in plan view and in profile (radius at bend,
vertical curves, slopes, etc.) shall meet the requirements and ensure visibility in plan view
and longitudinal profile, as well as safe flow of traffic with the estimated speed of 120km/h.

65. The road bed is recommended to be constructed from borrow pits. It would be
necessary to determine a subsoil building features in borrow pits during detailed designing at
the stage of detailed geological engineering survey.
4.1.1.4 Road Pavement
66. The present road cross section consists of a 5 to 18 cm thick wearing course
(constructed by mixing the constituent materials in place) laid over a mixed sand and
crushed rock base course 12 to 21 cm in thickness. This cross section does not meet
present project requirements.
67. It is recommended that the existing wearing course should be removed by milling its
full thickness over the entire length and breadth of the existing road. The resultant materials
should be stored in stockpiles to be located as required along the road length and then be
reused in the base course of the rehabilitated pavement. The existing road base should be
loosened to a depth of 0.3m
68. The resilient modulus of the rehabilitated pavement structure should be a minimum of
215 megapascal (MPa).
69. The recommended rehabilitated pavement structure should be:
Sub-base course: 20 cm of mixed sand and crushed rock
Base course: 6 cm of materials milled from the existing

wearing course mixed with up to 50% of
additional sand and crushed rock, all stabilised
with 8% cement
Binder course: 7 cm of hot mixed coarse porous asphalt
Wearing course: 5 cm of fine dense asphalt
70. The rehabilitated pavement structure should extend across the entire width of the
new carriageway, including all speed change lanes and shoulders.
4.1.1.5 Bridges and Pipes
71. There are no pipe culverts on section km 490-555, and no need to arrange them.
There are 10 pipes on section km 555-581 and 32 on section km 876-916. The pipes will be
replaced in accordance with the standard. A table below shows the location of bridges along
the road, which should be expanded to the four-lane carriageway:
Bridge Bridge
Location of bridge, km Bridge material length, dimensions,
meter meter
Republic of Karakalpakstan
572 + 200 reinforced concrete 109,5 9,7+2x1,15
574 + 500 reinforced concrete 23 8,3+2x1,0
878 + 300 reinforced concrete 12,3 12,1+2x1,0

4.1.1.6 Intersections and Junctions
72. Existing intersections, road ramps and junctions will be arranged as category III-IV
roads.
4.1.1.7 Bus Stops
73. No bus stops are required on section km 490-555. The arrangement of 2 bus stops
with enclosed bus stops is envisaged on section km 555-581 and 5 - on section km 876-916.
4.1.1.8 Traffic Management
74. Traffic management elements are envisaged in the form of road signs, road marking,
barriers and sign posts. Barrier type road guards in the form of curved bar shall be installed
on dangerous road sections with a depth of fill more than 3m. Signposts are recommended
to be arranged on road shoulders within curves in plan and on approaches to them, on road
straights with the depth of fill more than 2m, as well as near pipe culverts.
4.1.1.9 Engineering Utilities
75. The rearrangement of gas pipeline, watercourses, communications and power

transmission lines will be required on the sections km 555-581 and km 876-916.
4.1.2. Cost of Road Reconstruction
76. The reconstruction cost of sections selected for treatment under the project is
determined through the cost analysis of reconstruction performed or ongoing on adjacent
sections. The consolidated cost estimates include only major construction and assembly
works. Expenses on construction of buildings and facilities serving road transport vehicles,
drivers and passengers are not in cost estimates. The cost of each type of work will be
refined at the detailed designing stage. The summary calculations for the subsection of km
876-916 and 490-581 are shown in Tables 4.1 and 4.2.

Table 4.1 Consolidated cost estimate of major road construction works proposed under the project by sections
km 555-581 km 876-896 km 896-916

Name of works and costs
Volume of Cost, $ Volume of Cost, $ Volume of Cost, $
works (000) works (000) works (000)
Road bed
Road bed arrangement, km 26 780000 20 700000 20 700000
Road pavement
Road surfacing, km 26 11310000 20 8800000 20 8900000
Engineering structures
Bridges, running metre 1940 2855600 2130 686400 - -
Pipe curverts, running metre 85 153600 176 229800 108 261600
Road furniture and facilities

Road signs, road guards and marking, km 26 119600 20 87000 20 93000
Bus stops, units 2 28000 3 21000 2 14000
Engineering unilities
Rearrangement of gas pipeline, watercourse, communications and
- 1000000 - 1200000 800000
power transmission lines
Total: 16246800 11724200 10768600

Table 4.2 Consolidated cost estimate of major road construction works proposed under the project by sections
km 490-510 km 510-530 km 530-555

Name of works and costs
Volume of Cost, $ Volume of Cost, $ Volume of Cost, $
works (000) works (000) works (000)
Road bed
Road bed arrangement, km 20 840000 20 880000 25 1000000
Road pavement
Road surfacing, km 20 8500000 20 8600000 25 10875000
Engineering structures
Bridges, running metre - - - - - -
Pipe curverts, running metre - - - - - -
Road furniture and facilities

Road signs, road guards and marking, km 20 192000 20 192000 25 240000
Bus stops, units 4 28000 - - - -
Engineering unilities
Rearrangement of gas pipeline, watercourse, communications
- - - - - -
and power transmission lines
Total: 9560000 9672000 12115000

SECTION 5: EQUIPMENT PACKAGE AND ROAD EQUIPMENT POOL COMPANY
5.1 Introduction
77. The ADB requested the Consultant to consider three options for the provision and
management of the Government of Uzbekistan requested road equipment:
(i) provision of the equipment directly to UZAVTOYUL, the State Joint Stock
Company responsible for coordinating the operation and maintenance of
primary roads;
(ii) leasing of the equipment to UZAVTOYUL; and,
(iii) establishment of an equipment pool to hire equipment to private contractors.
78. The findings of the Team’s Plant and Equipment Specialist were presented in the
Draft Final Report submitted on 20 August 2007. He concluded that:
79. “Based on an examination of the three options, the desire to encourage the
commercialization of Uzavtoyul enterprises and the need to maintain probity and fair dealing
in the awarding of the road works contracts under the Project, the most suitable course of
action would be to make the equipment available to Uzavtoyul enterprises on some form of
repayment basis and through a third party arrangement, either a contracted leasing entity or
through an equipment hire pool.
80. A preliminary version of the analysis of equipment management options including the
fourth option (establishing credit line facility) that was added later formed the basis of the
discussions between the Bank Mission of 24 July – 6 August 2007 and the Government of
Uzbekistan as to the final details of the equipment portion of the road sustainability
component. Chief amongst the agreements reached between the Mission and the
Government of Uzbekistan was a decision to establish a Road Equipment Pool Company
(REPC).12
81. Section 5.2 briefly describes the parties involved in Road construction. The same
section also describes the list of equipment proposed for delivery under the Project. Section
5.3 describes the steps to be taken to establish the REPC with preliminary financial analysis
of the REPC.
5.2 Parties Involved in Road Construction and Maintenance
82. Public roads are considered state property and responsibilities for road construction
and maintenance in Uzbekistan are defined by the Law for Highways, which was passed on
3 July 1992 and is now being updated. At present, road policy development, planning,
construction, and maintenance are coordinated by the following four bodies:
i) the Uzbekistan Transport and Transport Communication Association (UTACA)
is a policy formulation body which coordinates the activities of the transport
sector’s main stakeholders;
ii) the Road Board is a policy formulation body which focuses on the road sector
and is chaired by the deputy prime minister;
iii) the Republican Road Fund, established under the Ministry of Finance (MOF)
in 2003, is the government agency responsible for road investment planning,
project implementation, and financial management of road construction and
maintenance; and,
12
This is in line with the Transport Sector Strategy which recommended the establishment of an
Equipment Management and Utilization Organization providing construction equipment to road
companies as a means of enhancing their operational capacity and hence ability to compete on a
broader market front.
IKS/RRI 24 TASHKENT, OCROBER 2007

iv) Uzavtoyul is a state joint stock company responsible for the operation and
maintenance of major public roads.
83. Prior to 2003, Uzavtoyul was responsible for almost all road-sector activities covering
road infrastructure and road transport services, and ranging from planning, construction,
maintenance, financing, and supervision. The Road Fund now plays most of these roles,
particularly investment planning and the execution of projects.
5.2.1 Road Fund
84. The Road Fund is the government agency responsible for road investment planning,
project implementation, and financial management of road construction and maintenance. It
tenders and supervises new road construction and rehabilitation (capital repairs) road
maintenance contracts. Currently, more than 400 projects are being implemented under the
Fund’s supervision. In an international contractual sense, the Fund is the Employer’s
Representative where the Employer is the Government of Uzbekistan.
85. For the number of projects they handle, the Road Fund’s capacity in planning and
execution, including contract procurement and management, is considered to be
inadequate.13 They have minimal experience engaging private sector contractors but a good
level of experience letting contracts to Uzavtoyul enterprises.
5.2.2 Uzavtoyul
86. Uzavtoyul is a state joint stock company responsible for the operation and, periodic
and routine maintenance of major public roads.
87. Provincially based subsidiary enterprises are responsible for local, as distinct from
national, roads. Within each province there are district road maintenance and repair
enterprises which only work on local roads. There are also seven ‘specialized international
and national road repair and maintenance enterprises’. These geographically based
enterprises are responsible for the repair and maintenance of national and international
roads. (International roads can generally be described as those roads which connect other
countries though Uzbekistan.) Their operations cross provincial boundaries. It is these
enterprises which bid for Road Fund capital works contracts. There are a number of
specialist companies and enterprises specializing in activities such as quarrying and the
manufacture of concrete bridge components.
88. The Uzavtoyul organizational structure is shown in Figure 5.1.
13
ADB 39669–UZB, Republic of Uzbekistan: Preparing the Regional Infrastructure (Roads) Project, Technical
Assistance Report, December 2006

Figure 5.1 Uzavtoyul Organization14

SJSC “Uzavtoyul”
Regional Road Specialized International and Road Repair and Construction

Maintenance National Roads Repair and Enterprises Procurement
Enterprises Maintenance Enterprises Department
(SINRRME) “Nazarnekavtoyul” “Uzdorcomplekt”
Karakalpakavtoyul Yul Loyikha Markazi (Road Design
Andijonavtoyul “Avtomagistral” (Tashkent) Centre)
Bukharaavtoyul North-western (Nukus) JSC “Samararkand Obodonchiligi”
Jizzakavtoyul Bukhara-Navoi (Bukhara) CSJC “Olamalik Obodonchiligi”
Kashkadaryaavtoyul Southern (Kashkadarya Province) LLC “Zomoin Kukalamzorlashtirish" Training Centres
Navoiavtoyul Samarkand (Samarkand) LLC "Kashkadaryo Yul Ta'minot"
Namanganavtoyul Central (Syrdarya Province) LLC "Surkhandaryo Yul Ta'minot". Bukhara
Samarkandavtoyul Eastern (Kokand) LLC "Angren Obodonchiligi". Namagan
Surkhandaryaavtoyul "Uztyumendorstroy" Trust
Syrdaryaavtoyul
Tashkentavtoyul
Ferghanaavtoyul
Khorezmavtoyul
Industrial Enterprises Specialized Drilling and Blasting
Enterprises
District Road Maintenance Kuyluk experimental bridge
reinforced concrete structures Taskent (Tashkent Province)
and Repair Enterprises
(161 units) production plant Angren (Tashkent Province)
"Chinozyulindustry" Karatau (Republic of Karakalpakstan)
"Yangiyeryulindustry"
"Bekabadyulindustry"
"Bukharayulgranite" SJSC – state joint stock company
Specialized Bridge Repair "Uzyulmashservice"
and Maintenance JSC – joint stock company
Almazar experimental mechanical CJSC – closed joint stock company
Enterprises repair ancillary production enterprise
(12 units) LLC – limited liability company
14
Extracted from Resolution of the President of the Republic of Uzbekistan, “On measures for improvement of organizational structure of the State Joint-
Stock Company Uzavtoyul”, No.PP-511 of 14 November 2006
89. All companies and enterprises are required to operate on a profitable basis or at least
within an annual budget. Individual Uzavtoyul companies hire resources such as equipment
from each other and purchase materials such as aggregate and asphalt from specialist
Uzavtoyul enterprises. They rarely, if ever, enter into partnerships or joint ventures with
private sector companies.
90. The degree of commercialization varies between individual Uzavtoyul enterprises with
the most commercialized ones probably being those involved in specialized activities such as
quarrying, asphalt production, concrete bridge member construction etc. The Uzavtoyul
enterprises provide an excellent foundation for the development of the road construction and
maintenance private sector through the continued commercialization leading to privatization
of Uzavtoyul enterprises.
91. Road Fund staff highlight several advantages of working with Uzavtoyul enterprises
compared with working with private contractors:
i) Uzavtoyul has the equipment,
ii) Uzavtoyul has the skilled personnel,
iii) Uzavtoyul enterprises are state enterprises and are therefore accountable,
iv) the focus of Uzavtoyul is on quality not profits,
v) there is cooperation and mutual assistance between individual Uzavtoyul
enterprises with staff and equipment being transferred between enterprises
when necessary,
vi) Uzavtoyul enterprises are used to deploying around the country, and
vii) competition does exist between Uzavtoyul enterprises.
5.2.3 Private Sector Contractors
92. There are very few established private sector companies capable of undertaking
capital road works projects. Those that do exist do not have all the specialist equipment
required for capital maintenance works, have difficulty accessing essential materials, require
close supervision and are insufficient in number to provide competition in the bidding
process. There are companies which undertake lower level road maintenance work,
principally in urban areas.
93. In the last two years, the Road Fund has let two contracts for road reconstruction
works to private contractors. Both were unsuccessful because the contractors did not have
the necessary equipment, the quality of work was not up to standard and the contractors did
not complete the work specified in the contracts.
94. Road Fund staff report that the main problems they face engaging private contractors
are:
i) the contractors lack equipment,
ii) the contractors do not have enough operators,
iii) difficulties in contacting the contractors because they do not have permanent
offices,
iv) the contractors have significant difficulties obtaining materials especially
‘strategic’ materials such as bitumen, and
v) the work is seasonal and contractors have difficulty activating their workforce
when required.
95. The Director of the Road Fund believes that private sector contractors should have a
greater role in road works but believes that the environment is not yet suitable for a
concerted development of the private sector. There is no strategy for the development of
private contractors. However, there is a significant consideration which must be taken into
account in the development of the private sector.

96. It is important to note that the national budget for road works and the volume of road
works is unlikely to be able to sustain both privatized Uzavtoyul enterprises and new private
sector contractors especially in the end of the market involving road construction and capital
roads maintenance. This must be a consideration when developing strategies for developing
the private sector and privatizing Uzavtoyul enterprises.
5.2.4 Road Equipment Package
97. The provisional list of equipment requested by the Government of Uzbekistan is

shown in Tables 5.4 and includes road maintenance and bridge maintenance equipment.
Table 5.4 List of Equipment Requested by Uzavtoyul

Four complexes of equipment for road construction works on asphalt paved roads
Total
№ Plant and equipment Unit Quantity cost,
‘000 USD
Asphalt mixing plant, mobile, Producing capacity 100
1. set 4 6885
tonnes/h
Rock-crushing and screening plant, mobile, producing
2. set 4 1994
capacity 100m3/h
3. Asphalt paver, working width 7.5 m unit 4 1460
Vibrating combination tandem roller, with the weight 9.2
4. unit 4 482
tonnes
5. Combination tandem roller, with the weight 8.6 tonnes unit 4 474
6. Front-end loader, with 4-5m3 bucket unit 8 2875
7. Cold milling asphalt cutter, with width of 2.0m unit 4 3002
8. Dump truck with the capacity 15 tonnes unit 120 9088
9. Bulldozer, capacity 100-150 hp unit 8 1418
12. Motor grader, with the weight up to 13 tonnes unit 16 1620
13. Motor grader, with the weight up to 20 tonnes unit 12 1458
14. Excavator, with 1.5-2m3 bucket unit 8 810
15. Cold milling asphalt cutter, with width of 0.5m unit 4 1134
16. Asphalt recycling plant unit 4 4860
17. Truck crane, capacity 10 tonnes unit 4 608
Chassis-mounted bitumen tanker (transporter), capacity
18. unit 4 324
20-25 tonnes
Drilling-and-blasting equipment, depth 30-50m, diameter
19. set 4 729
215-250 mm
20. Fuelling vehicle, capacity 8000l unit 4 486
21. Mobile repair shop unit 4 486
Total: 232 41811
Source: UZAVTOYUL

Table 5.5 One complex for bridge construction works

Total cost,
№ Plant and equipment Unit Quantity
‘000 USD
1. Tractor-trailer rig, capacity 60 tonnes unit 1 192
4. Dump truck, capacity 15 tonnes unit 2 182
Diesel hammer, with the weight of striking part
5. unit 1 41
2500kg
Drop-hammer pile driver, mobile, capacity 10
6. unit 1 51
tonnes, useful height 20m
7. Boring machine, depth up to 50m, diameter 1.7m unit 1 3029
Total: 10 4305
Source: UZAVTOYUL.
Table 5.6 One complex for road construction works on concrete paved roads
Total cost,
‘000 USD
5. unit 1 41
2500kg
6. unit 1 51
Total: 10 4305
Source: UZAVTOYUL.
Table 5.7 One complex for bridge construction works
№ Plant and equipment Total cost,

Unit Quantity
‘000 USD
5. unit 1 41
2500kg
6. unit 1 51
Immersion and plate vibrators, diameter 36-130
8. unit 10 41
mm
Total: 20 1569
GRAND TOTAL ON 7 PACKAGES 55108
Source: UZAVTOYUL.

5.3 PROPOSED ROAD EQUIPMENT POOL COMPANY
5.3.1 General
98. The proposed loan for UZB: Central Asia Regional Economic Cooperation (CAREC)
Regional Road Project (sections of A-380 Guzar-Bukhara-Nukus-Beyneu road) will consist of
two component to be financed jointly by the Government of Uzbekistan (GoU) and ADB loan:
i) The purchase of road maintenance equipment;

ii) The rehabilitation of sections of the A380
99. The equipment to be procured under the ADB financing will be operated on cost
recovery basis. The GoU, will provide a counter sovereign guarantee against the
establishment of a company, tentatively called Road Equipment Pool Company (REPC).
100. Road equipment is needed to maintain, repair, and reconstruct the roads. Road
equipment is expensive to purchase and maintain. A contractor needs to have a high level of
certainty of works before purchasing equipment. An alternative to purchase is for the
contractor to engage subcontractors or to have access to an equipment pool from which to
hire. However, a commercial plant hire company or sub-contractor will similarly need to have
continuity of work to justify the purchase and maintenance of plant and operators. The
establishment of an equipment pool company was based on much detailed benefit cost
analyses and assessment of various equipment financing options (Appendix 2).
101. The Government has had difficulties securing a stable stream of long term hard
currency in the market and the timely investments in road sector equipment has been
subsequently delayed as a result. There has been understanding in the Government that the
essential road maintenance equipment investment be prioritized to spur overall facilitation of
backlog of road maintenance programs. Thorough assessment of various equipment
financing options were explored:
− providing the equipment direct to Uzavtoyul through direct credit to Uzavtoyul;
− establishing an equipment pool as a quasi public company to hire equipment;
− independent equipment pool through a leasing company; and
− establishing a directed credit line facility
102. Based on analysis and comparison of advantages and disadvantages of the four
options, the desire to encourage the commercialization of Uzavtoyul enterprises and the
need to maintain probity and fair dealing in the awarding of the road works contracts under
the Project, the most suitable course of action would be to make the equipment available to
Uzavtoyul enterprises on some form of repayment basis and through a third party
arrangement, that is the third option in the form of establishing Road Equipment Pool
Company (REPC).
103. This is further in line with the Transport Sector Strategy financed under ADB TA
4659-UZB with the recommendation of revisiting the proposal for establishment of an
Equipment Management and Utilization Organization providing arms length leasing of
construction equipment to road companies as a means of enhancing their operational
capacity and hence ability to compete on a broader market front. The Government will take
all the necessary legal measures and actions to set up a new entity for this purpose.
Establishing a corporate/business plan and the requisite administrative and financial
procedures for operating the equipment unit and preparation of working operational/business
manuals are prerequisite to financial and operational sustainability, which will be heavily
assisted as part of the proposed Project.
104. The provision of road equipment will pave the way for strengthening private sector
and Uzavtoyul’s subsidiary enterprises. The subsidiary enterprises provide an excellent
foundation for the development of the road construction and maintenance private sector
through the continued commercialization leading to privatization of state owned road

companies. Strengthening its subsidiary enterprises’ businesses and hence profits will be, in
the long run, generally beneficial for the country as they could eventually be sold to strategic
investors and private financiers/equity for profit. It expects to further promote competition
amongst state owned road companies to secure necessary construction and maintenance
equipment to be better equipped with future opportunities in the international as well as
national projects. These state owned road companies will be strengthened through active
participation in international bidding and could be gradually spun off from Uzavtoyul and
converted to private sector contractors.
105. Financing support for setting up REPC and purchase of road equipment for hire will
achieve several objectives: (i) meeting the government strategy to develop modern road
infrastructure; (ii) encourage private sectors and, hence, competition; and (iii) improve
efficiency of road maintenance and sustainability.
5.3.2 Organizational structure of REPC
106. Road Equipment Pool Company (REPC) set up will include the establishment of
independent enterprise in the form of State Joint-Stock Enterprise with seven affiliated
branches in the regions of Uzbekistan The government’s share in REPC will come from
Uzavtoyul’s branches and enterprises in the form workshops, buildings or some other assets
that is expected to be transferred from balance of these enterprises and REPC will be
completely independent and separate state owned company. REPC will be a non-road
construction enterprise and will not bid for tenders on road construction and repair.
107. The headquarters of the REPC is expected to be set up on the basis of Specialized
road repair and construction enterprise «Avtomagistral» (Bardankul village, Tashkent
regionin), with the transfer of required property to the assets of REPC from balance of
“Avtomagistral” and it has to be noted that Avtomagistral will not have any influence or
control on REPC as it will not have any shares in REPC and these two enterprises shall be
independent and separate legal entities.
108. Affiliated branches will be set up on the basis of repair and maintenance enterprises
being part of Uzavtoyul. The location of each branch will be selected based on the most
optimum alternative for planned road construction and periodic repair works on the
international and local common use roads across Uzbekistan up to 2013 that is consistent
with the GoU’s road improvement program up to 2010 and further expected 3-years period.
The organizational arrangements are illustrated in Figure 5.2 below:

MECHANIZATION DEPOT
Figure 5.2 Head office on the basis of
SRRCO «Avtomagistral»
(Bardankul village, Tashkent
region)
Engineering, financial and administrative management
Mechanization depot affiliate Mechanization depot affiliate Mechanization depot affiliate Mechanization depot affiliate
on the basis of North-Western on the basis of North-Western on the basis of Bukhara- on the basis of Southern
SINRRME (Kungrad city, SINRRME (Miskin village, Navoi SINRRME (Tsvetuschiy SINRRME (Guzar city,
Republic of Karakalpakstan) Republic of Karakalpakstan) village, Bukhara region) Kashkadarya region)
1 road construction complex 1 road construction complex 1 road construction complex 1 road construction complex
(asphalt) (asphalt) (asphalt) (asphalt)
Provision of transport and construction-assembly services

Mechanization depot affiliate
on the basis of Samarkand Mechanization depot affiliate
SINRRME (Konegil village, on the basis of SRRCO
Samarkand region) Winning bidders of the tenders «Avtomagistral» (Yangiabad
village, Tashkent region)
on roads A-380, M-39,
1 bridge construction complex
M-37, A-373, etc. 1 road construction complex
(cement concrete)
Mechanization depot affiliate
on the basis of Tashkent
SINRRME (Tashkent city)
1 bridge construction complex

109. This REPC will be established under the resolution of the Government. Therefore it
would be advisable to consider in this resolution a clause that REPC shall be established in
the form of State Joint Stock Company that will not be a structural enterprise of Uzavtoyul
and will not have any property obligations before Uzavtoyul.
5.3.3 REPC Management

110. REPC will be responsible for managing road maintenance equipment fleets, including
related services to the winning contractors of tenders on road construction, reconstruction
and repair works in the Republic of Uzbekistan.
111. Preliminary REPC management structure is shown in the Figure 5.3 below:
Figure 5.3: Management Structure of REPC
Management
1-unit
Financial/Accounting Deputy Head of Manger Procurement Cost control

2-unts Head of branch 1 unit 1 unit
1 unit
Operations Transport Workshop

70 units 60 units 20 units
Source: ADB PPTA consultants
112. It has to be noted that the REPC’s headquarters shall also include one of the
branches that is responsible for technological line with concrete laying.
.
113. The REPC manager has the responsibility for the efficient operation of the entity in
accordance with business plans and budgets. The manager also deals with policy matters
such as setting hire rates and the purchase of and disposal of assets as well as developing,
monitoring and controlling annual budgets. Deputy manger will be responsible for the
operation of the branch located in the headquarters.
114. The duties of the administrative staff include health and welfare of personnel,
employee training, legal and insurance advice, employment conditions, wage negotiations
and maintaining staff personnel records.
115. The accounting staff are responsible for the payment of invoices, receipts from hire
sales, cash and credit control, the preparation of monthly and annual financial and
management reports and the preparation of annual budgets.
116. Taking into account the all affiliated branches will be set up as separate legal entities,
a separate purchasing function for the purchase and management of spares parts and other
consumables such as oils and greases may not be required.
117. The cost control staff collects and interprets data from other parts of the operation
and prepares targets, in the form of budgets, against which costs and revenues can be
monitored. In particular, the staff collects data for the establishment of rates for services
provided. In branches, this function could be undertaken by the accounting staff.
118. The operating department manages the delivery and collection of the plant to the
customer, monitors its use and manages any operators provided with the plant and
equipment. Additionally, the department coordinates the servicing of the plant and
IKS/RRI 33 TA SHKENT, OCTOBER 2007

equipment to maximize the charge out hours without compromising the plant servicing
schedule.
119. A heavy transport capability is required to deliver, re-locate and collect plant. It may
be possible to contract or hire heavy transport when required but the transporters must be
available when and where required to avoid unnecessary plant downtime. In branches, the
transport function could be included in the plant hire department.
120. The workshop services and repairs the plant. It would be usual to have a base
workshop and a field or mobile workshop. A field workshop would be established where
there is a concentration of plant on a work site. A mobile workshop is required if the hired
plant is dispersed on numerous sites. A field workshop will usually have some form of
mobile workshop capability to carry small repairs (such as broken hydraulic hoses) where the
plant is working. The base workshop function could be contracted out as long as a reliable
and responsive workshop contractor could be engaged.
121. To establish the hire pool operation, staff would need to be recruited and trained.
This includes administrative, accounting, plant operations and workshop staff.
122. The contractors will use REPC services that would require the availability of operators
and other suitably skilled operating personnel. This would increase the cost of and time taken
to establish the entity if started from scratch. Administrative and operational procedures
would need to be developed, documented and implemented, which will be later developed by
the consultants.
123. Below Figure 5.4 illustrates the typical structure of one of the 7 branches of REPC.
The other branches will also have the same organizational structure.
Figure 5.4: Management Structure of One of the Branches of REPC
Manger
1-unit
Deputy Manger Finance/Accounting department

Mechanical engineer 4-units
1-unit
Operations/Transport/Workshop
150-unit
Source ADB consultants
124. The manger of the branch shall be responsible for the organization of works and
general commercial activity of it’s branch. He or she would also directly subordinate and
report to the manager of the REPC. The manger shall also report to the Procurement,
Finance and Cost control Units of the headquarters in related fields of operation of REPC.
Besides the departments of branches shall also keep operational contact with their
appropriate departments in the headquarters.
5.3.4 Expected Demand for REPC Services
125. The is embarking on an extensive programme of construction and repair of common

use road network, in pursuance of which between 2008 and 2010 only it is envisaged to
reconstruct some 522 km, as well as to undertake medium and capital repair of some 2189

km of roads, construction of bridges and other structures, though there is not sufficient road
construction plant and equipment to undertake these works.
126. It is assumed that before 2011 the equipment will be deployed on the project sections
of А 380 road and 2012 и 2013 it will be deployed mainly to improve the condition of M 39
road, as well as other international and local common use roads.
127. Taking into account quasi public companies are not supplied with sufficient required
equipment and transport facilities, existing equipment is highly worn-out and lack of private
sector on this market, it can be assumed that newly established REPC will probably be the
main entity in the best position to provide suchservices.
128. Additional competitive advantage of REPC will be the location of its affiliated
branches in the regions of the Republic, which would ensure the lowest costs on
transportation and servicing of equipment.
5.3.5 Financial Plan and Financial Projections of REPC
A. General
129. The financial projections for the Road Equipment Pool Company (REPC) have been
prepared to assess operational and financial sustainability as a corporate entity. The
Government of Uzbekistan is committed to the establishment of REPC. REPC will be
incorporated as a State Joint Stock Company (SJSC), independent from SJSC Uzavtoyul.
REPC will own and manage the road equipment assets financed under the Project and be
accountable for the associated liabilities. The estimated asset value consisting of debt
financed $55.1 million15 road equipment and capital contribution by the Government of
$16.56 million in the form of facilities, plant and property, which will provide an opening
balance for the company. The Government will take all the necessary legal measures and
actions to set up a new entity for this purpose. The projected income statement, balance
sheet and cashflow statement are in Tables 5.8-5.12.
B. Major Assumptions
130. Major assumptions for REPC’s projected financial statements include the following:
131. The domestic inflation rates are assumed at 8.2% in FY2008, 7.5% in FY2009, 7.3%
in FY2010, and 7.0% from FY2011 onward, in line with the ADB’s domestic cost escalation
factors 2007-2011. The international inflation rate is assumed at 0.8% per annum during the
period of analysis.
132. The exchange rate used is Uzbekistan Soum1,280 to $1.00 for FY2007 adjusted
during the forecast period based on the differential between the assumed domestic and
international inflation rates.
133. The estimated time for procurement of road equipment is 24 months. It is assumed
that REPC will be fully operational in FY2009. Operating revenues are generated from
equipment hire fees. Equipment hire fees are estimated on a full cost recovery basis (i.e.
depreciation, operation and maintenance (O&M), and debt service allowing return on assets
of 15%. Approximately 250km per annum is assumed to be covered with the equipment.
90% productivity factor is used. The average equipment hire fee is estimated at about
$80,000 per kilometers (km), equivalent to Soum102 million/km and are adjusted to reflect
local inflation. They are geared to meet minimum 80:20 debt to equity ratio, 1.2 debt service
coverage ratio, and 80% operating ratio.
15
$55.1 million will be onlent to REPC from MOF. Advisory support on the establishment of $0.21 million
is not assumed to be onlent to REPC.

134. Operating expenses consist of (i) O&M (salaries and general administration
expenses), (ii) depreciation/major repairs of existing and newly acquired assets.
Administration costs are estimated at 6% of REPC’s annual revenue. The average labor cost
is projected at 3% of gross fixed assets increasing in line with the local inflation. Depreciation
of assets is calculated on straight line basis at 10% depreciating the assets over its
economical life of 10 years. Repairs and maintenance cost is assumed to be 1% of gross
fixed assets initially and are projected to increase over time to 4%.
135. REPC is expected to get the same benefits as other road companies (private as well
as public), which are exempt from payments of corporate taxation, custom duty of 20% on
the import of equipment and machinery.
136. Capital expenditure on the road maintenance equipment is based on estimates from
the feasibility studies financed by ADB.16 163 unit is assumed to be procured in FY2008 and
136 unit in FY2009 with a total of 299 unit of equipment.
137. Inventories represent 1 month of repairs and maintenance cost and are assumed to
contain all necessary spares and tools for the maintenance of the equipment.
138. Minimum debt to equity ratio of 80:20 is assumed. The Government is committed to
transfer assets that are relevant to REPC operations in the form of equity contribution
assumed at $16.56 million representing about 23% of REPC’s total assets.
139. Financial charges are assumed to be paid as accrued during each year. The financial
charges are calculated on the average balance of outstanding loan liability during the year.
ADB OCR loan of $55.3 million will be on lent to REPC at an additional premium of 0.2%.
The same repayment period is assumed to apply: 4 year grace period and 20 year debt
amortization schedule. LIBOR is estimated at 5.6% (6 months LIBOR at 5.0% as of 22
October 2007) including 0.6% fixed spread. 0.35% commitment charge on undisbursed loan
amount. Foreign exchange fluctuation will be borne by REPC.
140. Accounts receivable and payable represents one month and three months value of
revenue, respectively.
141. Based on preliminary calculations it can be assumed that such REPC shall be
sustainable and shall have sufficient cash flow proceeds for on time return of loan proceeds.
Net profit shall be not less than 4% annually and debt service coverage ratio shall be not less
than 1.7. The share of its own capital in the balance shall be ensured at the level not less
than 20%.
142. The fund flow for regional project is illustrated in below Figure 5.4
16
ADB TA4889-UZB Preparing the Regional Infrastructure (Roads) Project

Table 5.8 - Financing Plan of REPC:
Hard
Local currency Structure
currency Total
(mln. USD equivalent) (%)
(mln.USD)
Equity
REPC 14.847 1.709 16.556 100.00%
Total equity: 14.847 1.709 16.556 100.00% 23.04%
Loans
ADB LOAN 0.000 55.310 55.310 100.00%
Total loans: 0.000 55.310 55.310 100.00% 76.96%
Total financing: 14.847 57.019 71.866 100.00%

Table 5.9 - Financial Analysis of Proposed REPC:

GENERAL PROFIT AND LOSS ACCOUNT PROJECTION
1 year 2 year 3 year 4 year 5 year 6 year 7 year 8 year 9 year 10 year
Total Sales 19.350 20.664 21.924 23.184 24.444 25.704 26.964 28.224 29.484 30.744
VAT - - - - - - - - - -
Cost of product sold 11.936 12.242 12.537 12.833 13.129 13.424 13.720 14.016 14.311 14.607
Gross Profit 7.414 8.422 9.387 10.351 11.315 12.280 13.244 14.208 15.173 16.137
Period costs 2.156 2.292 2.423 2.553 2.684 2.814 2.944 3.075 3.205 3.335
Operating profit 5.258 6.130 6.964 7.798 8.632 9.466 10.300 11.134 11.968 12.802
Interests 3.319 3.319 3.32 3.279 3.121 2.963 2.805 2.647 2.489 2.331
Road payment 0.194 0.207 0.219 0.232 0.244 0.257 0.270 0.282 0.295 0.307
Payment to Pension Fund 0.135 0.145 0.153 0.162 0.171 0.180 0.189 0.198 0.206 0.215
Profit before tax 1.610 2.460 3.273 4.125 5.095 6.066 7.036 8.007 8.978 9.948
Profit after tax 1.610 2.460 3.273 4.125 5.095 6.066 7.036 8.007 8.978 9.948
Profitability rates (%)
Gross Profit / Total Sales 38% 41% 43% 45% 46% 48% 49% 50% 51% 52%
Net Profit / Total Sales 8% 12% 15% 18% 21% 24% 26% 28% 30% 32%

Table 5.10 – Total Cash Flow Statement:

0 year 1 year 2 year 3 year 4 year 5 year 6 year 7 year 8 year 9 year 10 year
Total Sales - 19.35 20.66 21.92 23.18 24.44 25.70 26.96 28.22 29.48 30.74
VAT - - - - - - - - - - -
+ Depresiation & Amortisation - 6.47 6.47 6.47 6.47 6.47 6.47 6.47 6.47 6.47 6.47
Change in Working Capital - 1.74 0.09 0.09 0.09 0.09 0.09 0.09 0.11 0.09 0.09
Cash from Sales - 24.07 27.04 28.30 29.56 30.82 32.08 33.34 34.58 35.86 37.12
Costs of Product Sold - 11.94 12.24 12.54 12.83 13.13 13.42 13.72 14.02 14.31 14.61
Gross Cash Income - 12.14 14.80 15.76 16.73 17.69 18.66 19.62 20.57 21.55 22.51
Period costs - 2.16 2.29 2.42 2.55 2.68 2.81 2.94 3.07 3.21 3.34
Operating Cash Income (A) - 9.98 12.50 13.34 14.17 15.01 15.84 16.68 17.49 18.34 19.18
Equity 16.56 - - - - - - - - - -
Investment (70.01) - - - - - - - - - -
Interest, Management & Committment fees ( 1.51 3.32 3.32 3.32 3.28 3.12 2.96 2.81 2.65 2.49 2.33
Taxes (C) - 0.33 0.35 0.37 0.39 0.42 0.44 0.46 0.48 0.50 0.52
Period expenses - - - - - - - - - - -
Other Financial Costs - - - - - - - - - - -
Contingency (0.15)
Net Cash Income (52.09) 6.33 8.83 9.65 10.50 11.47 12.44 13.41 14.37 15.35 16.32
Debt Amortisation (D) - - - - 2.63 2.63 2.63 2.63 2.63 2.63 2.63
Cash after Debt Amortisation (52.09) 6.33 8.83 9.65 7.87 8.84 9.81 10.78 11.73 12.72 13.69
Financial Requirement 55.31 - - - - - - - - - -
Cash Flow 3.219 6.333 8.834 9.649 7.867 8.837 9.808 10.779 11.732 12.720 13.690
Cumulative Cash Flow 3.22 9.55 18.39 28.03 35.90 44.74 54.55 65.33 77.06 89.78 103.47
Debt Service Ratio

[(A-C-F)/(B+D)] 2.91 3.66 3.91 2.33 2.54 2.75 2.98 3.22 3.48 3.76

Table 5.11 – Balance Sheet Projection

0 year 1 year 2 year 3 year 4 year 5 year 6 year 7 year 8 year 9 year 10 year
Cash 3.22 9.55 18.39 28.03 35.90 44.74 54.55 65.33 77.06 89.78 103.47
Accounts Receivable - 1.61 1.72 1.83 1.93 2.04 2.14 2.25 2.35 2.46 2.56
VAT & custom duties
- 0.15 0.15 0.15 0.15 0.15 0.15 0.15 0.15 0.15 0.15
(import)
Spare parts Stock - 0.26 0.26 0.27 0.27 0.27 0.27 0.27 0.28 0.28 0.28
Current Assets 1.86 10.03 18.79 28.36 36.15 44.91 54.64 65.34 76.99 89.63 103.24
Fixed Assets 70.01 63.73 57.45 51.17 44.89 38.61 32.33 26.05 19.77 13.49 7.21
Net Fixed Assets 70.01 63.73 57.45 51.17 44.89 38.61 32.33 26.05 19.77 13.49 7.21
Total Assets 71.87 73.76 76.24 79.53 81.04 83.52 86.97 91.39 96.76 103.12 110.45
Accounts Payable - 0.29 0.31 0.32 0.34 0.36 0.38 0.39 0.39 0.41 0.43
Current Liabilities - 0.29 0.31 0.32 0.34 0.36 0.38 0.39 0.39 0.41 0.43
Long Term Loans 55.31 55.31 55.31 55.31 52.68 50.04 47.41 44.77 42.14 39.51 36.87
Share Capital 16.56 16.56 16.56 16.56 16.56 16.56 16.56 16.56 16.56 16.56 16.56
Retained Earnings - 1.61 4.07 7.34 11.47 16.56 22.63 29.66 37.67 46.65 56.60
Equity 16.56 18.17 20.63 23.90 28.02 33.12 39.18 46.22 54.23 63.21 73.15
Total Liabilities 71.87 73.76 76.24 79.53 81.04 83.52 86.97 91.39 96.76 103.12 110.45
Equity / Total Liabilities 23% 25% 27% 30% 35% 40% 45% 51% 56% 61% 66%

Figure 5.5 - Road Equipment Pool Company Financing Arrangement:
Ministry of Finance
Loan Repayment ($) ADB
Loan agreement
($) ($)
EQUIPMENT
Pay SUPPLIERS
Subloan Maintenance
Agreement equipment
- Consultant Team
REPC - Procurement
ASSET OWNER - Management
Equipment - Technical assistance
Road Fund
Guarantee - Business development
- Maintenance
Fee, Charge Equipment

Fund flow (Soum)
Document flow
Physical asset flow
State Owned Road Enterprises and Private Companies

5.3.6 TIME-Bound Action Plan for Road Equipment Pool Company
Road equipment pool company (REPC) will be incorporated as a state joint stock company
(SJSC) to manage and maintain road equipment procured under the ADB financing. The
below table specifies necessary actions to be fulfilled prior to full fledged operations of
REPC.
Target
Milestone Responsible Party
Date
Hiring of Management Advisory Team 01 Dec Road Fund
financed under ADB loan 2007
Issuance of Resolution by Cabinet of 21 Dec Ministry of Finance (MOF),
Ministers for the establishment of REPC 2007 Cabinet of Ministers (COM)
Charter documents
Preparation and development 31 Dec REPC
2007
Approval 31 Dec MOF, COM
2007
Registration 31 Dec Project Director/REPC
2007
Appointment of REPC Director 31 Dec MOF, COM
2007
Signing sub loan agreement with MOF 01 Feb MOF
2007 REPC
Formation of Capital Charter 28 Feb REPC
2008
Issuance of shares COM
28 Feb
State Appointment of Board of Directors MOF
2008
REPC
Hire of REPC Personnel 28 Feb REPC Director
2008
Development of internal business Management Advisory Team
procedures and relevant operations Project Director/REPC
manuals for:
Corporate plan
Company structure
01 July
Staffing plan/HR Policy
2008
Accounting and reporting
Financial Management
Setting up of hire fees/charges
Budgeting system
On the Job Training
Approval and transfer of fixed assets COM
01 Sep
including land, plants and property and MOF
2008
capital to REPC REPC
Preparation of relevant infrastructure and 01 Sep REPC, PIU
facilities for REPC to be fully operational. 2008
Acceptance and commissioning of 01 Dec REPC, PIU
equipment and full operation of REPC 2008

SECTION 6: ECONOMIC ANALYSIS
6.1 Economic Analysis of Road Works and Equipment Package
147. The Consultant’s economic analysis is carried out in two parts utilizing the costs
presented in Table 4.1. Costs are expressed net of VAT, Customs Duties and excise tax. As
regards the civil works and associated advisory services, an economic appraisal utilizing
RED HDM-4 VOC has been prepared. The equipment package has been analyzed
separately.
148. Costs are summarized in Table 6.1.
Table 6.1 Project Capital and Maintenance Costs for Roadworks
Works Cost
Capital Works $77.1 million (base cost and physical contingencies)
Routine Maintenance $1,390 per kilometer
Periodic 10 % of capital cost in years 6 and 12; and 25 % of capital cost in
Maintenance year 18
149. In the RED analysis, the following benefit types have been identified:
(i) Vehicle Operating Cost (VOC) savings to existing users.

(ii) Domestic generated traffic benefits which are assumed to equal 50 % of the
benefit accruing to domestic users of the A 380. Domestic generated traffic is
assumed to equal 20 % of the volume of of existing traffic by 2015.
(iii) Benefits to traffic diverting from the more expensive Northern Route. The
benefits to diverting road traffic been conservatively valued as a proportion
the savings in passage costs through Kazakhstan accruing to traffic diverting
from the Northern Route to the A380..
(iv) Benefits to small rail consignments which are diverted by shippers from the
UTY to reap the benefits of the quicker service offered by the road mode.
These benefits are Arise from the assumption that 17.5 % of rail traffic, being
half the amount of UTY traffic on the Nukus - Oasis line that is accounted for
by small consignments, A benefit is also calculated for avoided rail tonne-km.
(v) Road Accident Savings. These benefits have been calculated by assuming a
10 % reduction in accident losses once the A 380 is improved. The ADB and
other International Financial Institutions have found that annual losses in
property damage and forgone production in member countries can easily
approach 3 % of GDP.17 The annual km of vehicles traveling along the 151 km
of the A 380 to be improved were calculated as a % of total national vehicle-
km for the purposes of allocating traffic losses attributable to the 151 km. A 10
% reduction in losses was then assumed to accrue to the improvement of the
A 380, representing the minimum estimate.
150. The VOC-IRI equations calculated by RED-HDM-4 VOC were utilized in the
calculation of benefits. The current International Roughness Index (IRI) of the km under
consideration for rehabilitation is estimated to be 12 for the Khorezm Province Section (km
490-581) and 14 for the Karakalpakstaan Province Section (km 876-916). Following
rehabilitation, roughness is assumed to rise from 3.0 back to 3.97 before the next scheduled
periodic maintenance intervention in year 6 lowers it back to 3 as measured on the IRI.
17
See for instance the Final Report of ADB TA 6195 “Greater Mekong Subregion Transport Sector
Strategy Study”, December 2005 which shows data on Member Country losses arising from road
traffic accidents.

151. The input data to RED-HDM-4 VOC includes vehicle prices which have been
calculated on the basis of Uzbekistan vehicle prices obtained from local dealers as of 23
July 2007 net of duties and tax. . A world price for petroleum and lubricants has been
calculated based on a price per barrel of US$ 70. Uzbekistan crew wages, mechanics charge
and utilization rates have been adapted from previous studies carried out by the Consultant.
152. Table 6.2 presents the preliminary EIRR calculation for the reconstruction of km 490-
581 while Table 6.3 presents the calculation for km 876-916. The reconstruction of both
sections is viable under the Consultant’s assumptions.

Table 6.2 Economic Analysis - km 490-581

Capital Benefits Diverted
Costs Routine Periodic Generated Diverted Net
Cost Plus Total Existing From Other Accident Total
Year Advisory Mainte- Mainte- Traffic Rail Cash
Physical Cost Traffic NW Road Savings Benefits
Services nance nance Benefits Traffic Flow
Contingency Benefits Routes
2007 0,0
2008 448,0 448,0 -448,0
2009 14103,5 569,8 14673,3 -14673,3
2010 20422,3 535,7 20958,0 -20958,0
2011 17827,4 524,3 18351,8 -18351,8
2012 55,4 55,4 10613,7 1061,4 756,1 4865,0 665,2 17961,4 17906,0
2013 55,4 55,4 11129,6 1113,0 811,6 5383,2 703,7 19141,0 19085,6
2014 55,4 55,4 11651,3 1165,1 870,8 5956,5 744,6 20388,2 20332,8
2015 55,4 55,4 12145,4 1214,5 931,9 6590,8 787,7 21670,4 21615,0
2016 55,4 55,4 12387,9 1238,8 976,0 7167,5 833,4 22603,6 22548,2
2017 5235,3 5235,3 13470,0 1347,0 1080,4 7794,7 881,8 24573,9 19338,6
2018 55,4 55,4 14516,1 1451,6 1187,6 8476,7 932,9 26564,9 26509,5
2019 55,4 55,4 14941,8 1494,2 1252,9 9218,4 987,0 27894,4 27839,0
2020 55,4 55,4 15372,3 1537,2 1321,4 10025,0 1044,3 29300,2 29244,8
2021 55,4 55,4 15595,4 1559,5 1369,0 10715,8 1091,3 30330,9 30275,5
2022 18847,1 18847,1 16382,8 1638,3 1462,5 11454,1 1140,4 32078,0 13230,9
2023 55,4 55,4 17593,0 1759,3 1594,2 12243,3 1191,7 34381,4 34326,0
2024 55,4 55,4 18042,8 1804,3 1667,0 13086,8 1245,3 35846,3 35790,9
2025 55,4 55,4 18373,8 1837,4 1732,2 13988,5 1301,3 37233,3 37177,9
2026 55,4 55,4 18512,5 1851,3 1777,4 14727,1 1359,9 38228,2 38172,8
2027 55,4 55,4 18595,8 1859,6 1819,0 15504,7 1421,1 39200,2 39144,7
2028 13088,3 13088,3 19339,4 1933,9 1919,7 16323,3 1485,0 41001,4 27913,1
2029 55,4 55,4 20556,8 2055,7 2067,1 17185,2 1551,9 43416,7 43361,3
2030 55,4 55,4 20875,5 2087,5 2135,3 18092,6 1621,7 44812,6 44757,2
2031 -6905,2 55,4 -6849,7 21199,1 2119,9 2205,8 18816,3 1694,7 46035,7 52885,5
Notes: 1) 20 % salvage value of road works. Net Present Value @ 12 % (000) 80608,4
2) Generated traffic benefits build up from 2011 to 2013.
EIRR (%) 30,0

Table 6.3 Economic Analysis - km 876-916

Costs Benefits
Capital Generated
Cost Traffic Diverted
Routine Periodic Existing Diverted
Year Plus Advisory Total Benefits From Accident Total
Mainte- Mainte- Traffic Rail Traffic
Physical Services Cost (20 % of Other Savings Benefits
nance nance Benefits (0.5 value)
Contingency Existing@ NW Routes
0.5 value)
2007
2008 7790,3 196,9 7987,3
2009 13561,4 250,5 13811,9
2010 3390,3 235,5 3625,8
2011 230,5 230,5 828,4 82,8 420,2 1954,1 21,9 3307,4
2012 24,4 24,4 997,0 99,7 452,2 2162,2 23,4 3734,6
2013 24,4 24,4 1056,6 105,7 486,6 2392,5 24,8 4066,2
2014 24,4 24,4 1117,7 111,8 522,6 2647,3 26,2 4425,6
2015 24,4 24,4 1179,8 118,0 549,7 2929,3 27,8 4804,5
2016 24,4 24,4 1237,8 123,8 660,5 3185,6 29,4 5237,0
2017 2474,2 2474,2 1499,2 149,9 720,4 3464,3 31,1 5864,9
2018 24,4 24,4 1609,7 161,0 762,8 3767,4 32,9 6333,8
2019 24,4 24,4 1674,9 167,5 807,4 4097,1 34,8 6781,7
2020 24,4 24,4 1742,5 174,3 840,3 4455,6 36,8 7249,5
2021 24,4 24,4 1808,4 180,8 972,1 4762,6 38,9 7762,9
2022 8907,1 8907,1 2102,8 210,3 1047,4 5090,7 41,2 8492,4
2023 24,4 24,4 2236,6 223,7 1097,8 5441,5 43,6 9043,1
2024 24,4 24,4 2311,3 231,1 1145,7 5816,4 46,1 9550,6
2025 24,4 24,4 2378,2 237,8 1180,9 6217,1 48,2 10062,2
2026 24,4 24,4 2445,2 244,5 1315,7 6545,4 50,4 10601,2
2027 24,4 24,4 2729,3 272,9 1380,6 6891,0 52,6 11326,4
2028 6185,5 6185,5 2834,8 283,5 1466,9 7254,8 55,0 11895,0
2029 24,4 24,4 2982,5 298,2 1519,2 7637,9 57,5 12495,2
2030 24,4 24,4 3056,2 305,6 1573,3 8041,2 60,1 13036,4
2031 -4948,42 24,4 -4924,1 3131,8 313,2 1629,5 8362,8 62,8 13500,0
Notes: 1) 20 % salvage value of road works. Net Present Value @ 12 % (000) $9 286,8
2) Equipment economic life likely over by 2025.
3) Generated traffic benefits build up from 2011 to 2013. EIRR (%) 16,21

153. The appraisal of the equipment package has been carried out utilizing the assumption
that the equipment will be deployed on periodic maintenance of the international road
network. It is assumed that up to 2011, roughness will be reduced from an average of 12 on
the A 380 project sections to 3.0. In 2012 and 2013, it is assumed that the equipment will be
deployed in reducing the M39 road from a roughness of 12 to a roughness of 3.0. Thereafter,
the average roughness of International Road sections programmed for periodic maintenance
is assumed to fall from 8 to 3 as a result of the equipment deployment.
154. Operating costs of equipment have been adopted from a UZAVTOYUL analysis of
hourly operating costs. An enhanced allowance for depreciation has been made in light of
the relatively higher capital cost characterizing the equipment being delivered under the
Project as compared to the bulk of the current national equipment fleet. A provision for
annual insurance premiums at 2 % of the replacement value of the equipment has been
included in the annual costs. The equipment cost is reckoned to account for 37.5 % of total
reconstruction costs. The equipment is assumed to be working on 3.4 % of the International
Road Network per annum. Data from the Transport Sector Strategy has been utilized to
estimate total vkm traveled over the International Road network in a year. In the absence of
detailed data, the percentage vehicle composition on the A 380 has been applied to
International Road Traffic Flows. The savings in the ten years the equipment will be utilized
are calculated by RED VOC relationships, given the roughness reductions identified
previously.
155. Table 6.4 presents the economic appraisal of the equipment package.
Table 6.4 Equipment Package Appraisal (US$ million)
Table 6.4 Equipment Package Appraisal (US$ million)
Operating
Total
Year Capital Depreciation, and Benefits NCF
Costs
Insurance
2008 22.8 22.8 -22.8
2009 37.9 5.4 43.3 -43.3
2010 10.7 10.7 1.3 -9.4
2011 10.7 10.7 1.2 -9.5
2012 10.7 10.7 35.5 24.8
2013 10.7 10.7 35.5 24.8
2014 10.7 10.7 44.3 33.6
2015 10.7 10.7 46.4 35.7
2016 10.7 10.7 53.5 42.7
2017 10.7 10.7 58.9 48.2
2018 10.7 10.7 61.2 50.5
2019 10.7 10.7 63.3 52.6
NPV @ 12 % $47.48
IRR (%) 21.7
6.2 Sensitivity Tests
6.2.1 Road Appraisal
156. Table 6.5 presents the sensitivity analysis of the road works proposed for km 876-916
under various assumptions .

Table 6.5 Summary of Sensitivity Tests km 876-916
Variation Variation NPV @ 12 %

EIRR (%)
(%) (%) (US$ 000)
Capital Cost 0 Normal Traffic 0 9286,8 16,21
Generated Traffic 0
Diverted Traffic 0
Capital Cost +20 Normal Traffic 0 5316,1 14,12
Generated Traffic 0
Diverted Traffic 0
Capital Cost 0 Normal Traffic -20 7696,3 15,54
Generated Traffic 0
Diverted Traffic 0
Generated Traffic -100
Diverted Traffic 0
Capital Cost 0 Normal Traffic 0 -14486,7 1,84
Generated Traffic 0
Diverted Traffic -100
Generated Traffic 0
Capital Cost +20 Normal Traffic 0 -4298,0 10,08
Generated Traffic 0
157. The analysis shows that it is only under extreme conditions such as an increase in
Capital Costs of 20 % and a decrease in diverted traffic of 20 %; or, the non-diversion of
diverted traffic that the reconstruction of the Section between 876 and 916 km is rendered
non-viable. Neither, condition is likely to eventuate given the conservative nature of the
Consultant’s assumptions.
158. Table 6.6 presents the summary of the sensitivity tests carried out in relation to the
economic analysis of the section between km 490 and 551.

Table 6.6 Summary of Sensitivity Tests km 490-581
Variation Variation NPV @ 12 % EIRR

(%) (%) (US$ 000) (%)
Generated Traffic 0
Diverted Traffic 0
Generated Traffic 0
Diverted Traffic 0
Generated Traffic 0
Diverted Traffic 0
Diverted Traffic 0
Generated Traffic 0
Generated Traffic 0
Generated Traffic 0
Generated Traffic 0
159. It can be seen from Table 6.6 that the reconstruction of the Section between km 490
and 581 remains viable under all sensitivity tests.
6.2.2 Sensitivity Analysis of Equipment Package
160. The sensitivity analysis for the economic criteria of the equipment component is
shown in Table 6.7 for various combinations of capital cost and total cost variations of ± 20 %
on the one hand and similar variations of benefits on the other hand. The NPV and EIRR are
greater than required values of 0.0 and 12 % respectively in all cases except those
combining capital or total cost increases of 20 % and benefit decreases of 20 %.

Table 6.7: Summary of Sensitivity Analyses of Equipment Package
Domestic Total
NPV (US$ 000) ±20 % Benefits Benefits No
+20 % -20 % +20 -20 Variation
+20 % 70.4 -2.1 70.4 10.1 40.2
Capital Costs 0% 80.0 19.8 80.0 19.8 47.5
-20 % 89.7 50.3 89.7 29.4 107.8
+20 % 57.0 -3.3 57.0 -3.3 26.8
Total Costs 0% 77.6 17.4 77.6 17.4 47.5
-20 % 98.2 60.8 98.2 38.0 68.1
Domestic Total
IRR (%) Benefits Benefits No
+20 -20 +20 -20 Variation
+20 24.37 11.55 24.37 14.16 19.72
Capital Costs 0 27.37 16.63 27.37 16.63 21.74
-20 31.11 27.37 31.11 19.67 37.21
+20 21.74 11.32 21.74 11.32 17.02
Total Costs 0 26.57 15.97 26.57 15.97 21.74
-20 32.68 30.63 32.68 21.74 27.67
Source: Consultant's estimates.
6.3 Switching Values
6.3.1 Road Works
161. As regards capital costs, an increase of 220 % would be required to render the
Khorezm section from km 490 – 581 non-viable. An increase in total cost of 180 % would be
required for non-viability. A similar result is obtained when benefits decrease by 64 %. Even
if there were no diverted traffic from the Northwest road route and the rail line, the
reconstruction of the section remains viable.
162. For the Karakalpakstan section between km 876 and 916, a 28 % reduction of
benefits would render the project uneconomic, as would an increase in the capital cost of 47
%. If less than 39 % of the assumed diverted traffic diverts to the road, then the
reconstruction of the section is non-viable.
6.3.2 Equipment Component
163. The switching value analysis indicates that it would require an increase in the capital
cost of the equipment of 107 % to render the acquisition of the equipment non-viable. A 33 %
reduction in benefits would have the same impact.

SECTION 7: FINANCIAL MANAGEMENT ISSUES AND FINANING PLAN
7.1 Administration of Financial Management Assessment Questionnaire – Road

Fund
164. It is concluded that the Road Fund currently meets ADB’s minimum financial
management requirements for EAs. The Road Fund has satisfactory financial management
capability to (i) record required financial transactions and balances, (ii) provide regular and
reliable financial statements and monitoring reports, (iii) safeguard the financial assets. A
summary of FMA findings is in table 8.1.
Table 7.1: Summary of the FMA

Particulars Conclusions
Road Fund is a separate entity that is accountable to the Ministry of Finance
(MOF) of the Republic of Uzbekistan. Road Fund is well experienced in
A. Executing
managing and implementing large scale projects. However, it has not
Agency
previously implemented any project with participation of international financial
institutions/multinational development banks.
Entities’ funds flow arrangements are reliable, predictable and secure. Road
B. Funds
Fund has enough capability to work under the proposed funds flow
Flow
arrangements acceptable to ADB. For the Regional Road Project funds flow
Arrangements
arrangements are identified in consultation with Road Fund representatives.
Road Fund is well staffed with experienced financial specialists. Since the
proposed Project Implementation Unit (PIU) scheme requires additional hire for
C. Staffing the Project, it is recommended that trainings and workshops on ADB financial
management procedures be provided. It is expected that on-the-job trainings
provided by the PIU staff of other ongoing projects will also be beneficial.
The Road Fund’s accounting policy is based on the Uzbekistan National
Accounting Standards, which are progressively being modernized in
D. Accounting
accordance with International Accounting Standards. For the Regional Road
Policies and
PIU, separate accounting policy and financial management manual will be
Procedures
established in accordance with requirements of ADB and the MOF of
Uzbekistan.
E. Internal There is no internal audit unit within the structure of the Road Fund.
Audit
The Road Fund is audited annually by Chamber of Accounts. In case of other
projects in the country, PIU is audited by independent external auditors on an
F. External
annual basis. If stipulated in the loan agreement, audit of the project accounts
Audit
will be done in accordance with the International Standards on Auditing (ISA),
which complies with the requirements of ADB.
The Road Fund reports comply with the reporting requirements of the MOF, the
G. Reporting
Ministry of Economy (MOE), the State Tax Committee, and other government
and
bodies. Acceptable reporting requirements for the proposed PIU shall be
Monitoring
stipulated in the Loan Agreement between ADB and Government of Uzbekistan
The Road Fund operates accounting system “1S Accounting” budget module.
Reports are prepared with help of the program and using spreadsheets. 1S
H. Information
Accounting is not costly and not complicated system, which can well suit the
Systems
requirements of the Project, although some reports cannot be automatically
generated. Many ADB financed projects in the country are using this system.
Source: PPTA consultants

A. Introduction
165. The purpose of the present financial management assessment (FMA) is to study the
financial management capacity of the Republican Road Fund under the Ministry of Finance
of the Republic of Uzbekistan (Road Fund), the Executing Agency for the implementation of
the proposed ADB-financed Regional Road Project.
166. Within the frame of the FMA, followings were undertaken: review of the EAs’ structure
and management framework with regards to financial management, assessment of the Road
Funds resources, including its personnel, the sources of income, its information technology
equipment and software, etc. Consequently, analyses of the EA accounting, reporting,
auditing, internal control systems, information systems, and capacity of the personnel were
carried out. Additional follow-up interviews, discussions with authorities, international
financial institution’s representatives, reviews of relevant national legislation and supporting
documents were conducted.
167. The FMA is based on ADB’s Financial Management and Analysis of Projects (2005).
The instrument used for assessment was ADB’s standard financial management assessment
questionnaire (FMAQ), carried out in June 2007 and is in Appendix 3.
B. Project Description
168. The Project will (i) reconstruct 131 kilometers (km) road sections of A-380: Guzar–
Bukhara–Nukus–Dautata (Uzbekistan/ Kazakhstan border); (ii) establish Road Equipment
Management Unit (REPC) with a set of equipment purchased under the Project; and (iii)
introduce at the Road Fund a comprehensive road sector planning and management system
and conduct studies on road sector financing and road sector institutions.
169. The Project will have three components: (i) road construction component; (ii) road
equipment component; and (iii) advisory support component for introducing a comprehensive
road sector planning and management system, establishing of a road construction
equipment unit, and procurement of civil works, consultants, and equipments.
C. Country Issues
170. The existing practices of financial management and reporting including budget
preparation, allocation, accounting, reporting and auditing in Uzbekistan and the Road Fund
for the proposed loan, have been summarized in the context of ADB’s loan requirements.
Law on Budgetary System18 regulates the budgeting process in Uzbekistan. This law
provides the legal basis for preparation, review, approval and execution of the state budget.
In the state budget, organizations are entitled to budgetary allocation through provincial
administrations, “state-trust-in funds” and “republican funds”. MOF prepares the draft budget
after compiling all the draft budgets and submits it to “Cabinet of Ministers” (COM) for
approval by September 15th. COM after reviewing it finally submits the budget to Oliy
Majlis19. In case of Projects financed jointly with International Financial Institutions (IFI), PIU
is responsible for providing forecasted project budget for the subsequent year to the MOE for
approval in May of the current year. Structural chart on budget formulation and approval is
presented in Appendix 4.
171. National accounting and financial reporting system rationalization in Uzbekistan

started with, “State Program on Transition into International Accounting Standards (IASs)” in
1994. The legal basis of accounting and financial reporting was established by “Law of the
Republic of Uzbekistan No. 279-1 on Accounting” dated 30 August 1996. Subsequently,
18
Law of the Republic of Uzbekistan No. 158-II on Budgetary System dated 14 December 2000 and amended on
23 May 2005
19
Parliament of the Republic of Uzbekistan

National Accounting Standards (NAS) were formulated, which define the general accounting
principles, roles and responsibilities of organizations, accounting practices and procedures,
and financial reporting requirements in Uzbekistan.
172. In Uzbekistan in the early 90s, internal control revision departments of the
government agencies were dismantled, partly because of ineffective operations of these
departments, and partly because of the budgetary restrictions. The institution responsible for
internal financial control is the Control and Revision Department (CRD) of MOF. It is the
organization that is closest in concept to Supreme Audit Institution. Control and monitoring
on the compliance with budget discipline at republican and provincial levels is the main
administrative task of the CRD.
D. Risk Analysis
173. During the implementation phase, the proposed project implementation unit might
face some risks that can generally be divided in two main categories for the purpose of this
review: (i) country level; and (ii) organization / project level. Unavailability or delay in
disbursement of counterpart funds and weak public procurement legislation can be attributed
as major country specific risks for the project.
174. Experience of other externally financed projects in the country reveals that availability
of counterpart funds is subject to seasonal or local fluctuations in revenue generation and
control of cash flows. Therefore, a risk of counterpart fund releases exists, which can often
be late or sometimes not disbursed at all. Therefore written guaranties at MOF and Road
Fund level are required to ensure the timely disbursement of funds.
175. Public procurement procedures and practices, legislative and institutional framework,
and its control are found to be vulnerable in Uzbekistan. Even after one and a half decades
some features of Soviet system of public procurement, which are characterized by absence
of competitiveness, transparency and reliability, remain in the republic.
176. In the country, for ADB-financed projects, in general, foreign consultant is invited for
the establishment of procedures and preparation of procurement documentation. On the
basis of framework created by foreign expert project implementation units manage further
procurement transactions. Furthermore, ADB makes procurement guidelines and manuals
available, and regularly conducts training courses and seminars on procurement to the PIU
staff, and the Government officials involved in the project implementation. Seminars on
Project Implementation and Administration and Use of Consulting Services include trainings
on appropriate procurement procedures. As a result, executing and implementing agencies
personnel are found to be informed about ADB procurement requirements and guidelines.
Risk
Risk Risk-Mitigation Measures
Assessment*
Inherent Risk
Written guaranties at MOF and Road Fund
level are required to ensure the timely
disbursement of counterpart funds
1. Country-specific Risks M
Proposed institutional and procurement
arrangements need to be stipulated in the Loan
agreement
Lack of the experience of the Road Fund in
2. Entity-specific Risks M implementing ADB financed projects will be
compensated by creating necessary PIU
3. Project-specific Risks N
Overall Inherent Risk M
Control Risk

Risk
Risk Risk-Mitigation Measures
Assessment*
Organizational capacity augmentation with the
1. Implementing Entity M induction of new staff at the PIU is proposed to
support the existing organizational structure
Timely availability of counterpart funds will be
2. Funds Flow M ensured by implementing the proposed funds
flow arrangements
Dedicated accounting and financial
management staff at PIU level is required. The
minimum qualification required for such
personnel are bachelors and masters in
commerce and accounting with at least three
years of work experience preferably on an
externally agency funded project in Uzbekistan.
3. Staffing M Project supervision consultant will assist the
Road Fund to determine training needs of the
new staff. It will assist them to design and
implement the training program especially for
ADB financial reporting requirements and their
integration into overall national financial
reporting requirements as per NAS and other
statutes.
Accounting Policy should be drafted taking into
4. Accounting Policies and
H account the national accounting standards and
Procedures
the requirements of ADB.
Internal commission can be activated for PIU or
an internal auditor should be appointed
5. Internal Audit N especially for PIU by the Road Fund,
conditioned to the agreement by ADB and
Road Fund.
Audit of the project accounts should be done in
accordance with the International Standards on
6. External Audit H Auditing, by the Auditor acceptable to ABD.
Three of major four international auditing
companies have local offices in Uzbekistan.
Project implementation unit will be required to

7. Reporting and
H report in accordance with ADB requirements
Monitoring
with inherent adequate control mechanisms
Program 1S-Accouting should be installed at
8. Information Systems S
PIU for the project needs
Overall Control Risk S
* H – High, S – Substantial, M – Moderate, N – Negligible or Low.
Source: PPTA consultants
E. Executing Agency and Implementing Entities
177. The Republican Road Fund under MOF is a Government fund, operated under
Regulations20 issued by the President of Uzbekistan. In carrying out its activities, the Fund is
20
Appendix 2 to the Resolution of the Resolution of the President of the RU No PP-499 of 25 November 2006 on
Regulation on Republican Road Fund under the Ministry of Finance of the Republic of Uzbekistan

accountable to the MOF. Funds’ main purpose, functions, its rights and obligations, and
organizational arrangements were approved by the same resolution.
178. The Road Fund was instituted in 2003 by the Decree of the President of Uzbekistan.
The purpose of the fund is to accumulate and effectively utilize funds for financing the
projects for developing roads networks and their operations and maintenance. Main functions
of the Fund consist of followings:
• Formulating the annual and quarterly balance of income and expenditures of

the Fund. The Road Fund develops and presents to the MOF drafts of the
annual income and expenditures statements forecasts. Together with State
Taxation Committee and State Customs Committee takes measures to ensure
the full and timely receipt of contributions and fees of the Fund.
• Together with MOE, MOF and SJSC “Uzavtoyul” approves the list of projects
to be included in the state budget.
• Verifies the design documentation of road construction and maintenance

projects and is involved as a customer of the construction. As a part of this
process, organizes competitive biddings and enters into agreement with
contractors.
• Based on budget, finances the projects and carries out financial and technical
control.
179. In the Regulations, there are no restrictions on cooperation of the Road Fund with
foreign partners.
180. Supreme management body of the entity is the Fund Management Board, members
of which are appointed by the Resolution of the COM. Executive function of the Road Fund
prepares the statements on income and expenditures of the Fund, which after approval by
the Management Board is presented to the MOF. Fund is headed by executive director
appointed by the COM.
181. For the implementation of Regional Road Project establishment of new PIU at central
level is proposed. At this stage organizational structure of the PIU is not finalized, but it is
planned to be created on the basis of previous ADB financed project implementation
experience in Uzbekistan.
F. Funds Flow Arrangements
182. The Road Funds income is generated from: (i) obligatory contributions made by
companies and fees paid at the registration of vehicles in local currency; and (ii) fees for
entering the territory of Uzbekistan by vehicles from abroad in foreign currency. Rates of the
collections and fees are set by the Presidents Resolution annually in December for upcoming
year. Comparative data on types of the fees and collections for the last 4 years is provided in
Appendix 5.
183. Contributions and fees to the fund are paid by entities on a monthly based on the
estimates presented to the local Taxation administrations. Taxation administration on 1st of
every month sends report to Road Fund on accrued and received income and accounts
receivable and advances received.
184. During the last years income of the Road Fund has been increasing steadily, more
specifically by 22% and 32% in years 2005 and 2006, respectively. Information on the
income for the last 3 years is provided in table 8.2.

Table 7.2 Income of the Road Fund in million UZS
Particulars Year 2004 Year 2005 Year 2006
Income 168,970.1 206,603.2 272,498.9
Annual Increase 22% 32%

Source: The Road Fund
185. Funds expenditures are allocated through following entities:
a. The Road Fund for design, construction and repairs of the roads of international
importance
b. Single Customer Service of regional administrations for design, construction

and repairs of the roads of local importance
c. SJSC “Uzavtoyul” for O&M and current repairs of the roads and for purchasing
of the necessary equipment
186. At Road Fund all budgets are made based on allocated budget and forecasted
income; and the information received from the Road Fund suggests that actual results of
received income usually exceed the forecasts.
187. Taking into account the lessons learned from externally financed projects being
implemented in Uzbekistan and consultations with Road Fund representatives appropriate
funds flow arrangements for the Road Reconstruction Component of Regional Road Project
have been identified and given in table 8.3. Funds flow arrangements for the Equipment
Component are comprehensively reviewed in the section devoted to Road Equipment Pool
Company (REPC).
Table 7.3.: Fund Flow of Road Reconstruction Component
Ministry of Finance ADB
Direct payment
Counterpart
funds - Contractors
Road Fund - National/Foreign Consultant
PIU
Flow of funds
Lending
Loan Repayment
188. For large scale contracts, payments are released either directly by ADB or it can be
made through the account of the Road Fund. Whereas counterpart financing schedule is
annually approved by the resolution of the COM. Based on this, Road Fund transfers
counterpart funds to the accounts of contractors, suppliers and local consultants.
189. In case of Regional Road Project, the Road Fund will establish sub-account for the
PIU, so all counterpart funds may be transferred through these accounts.

190. During the implementation of previous projects, PIUs came across delays in
counterpart funding in settlement of payment requests of the contractors and suppliers
tendered at the local level. This is related to: (i) inappropriate practices of PIU in sending the
request for funds to the MOF; (ii) unavailability of cash contributed at local levels, which
came as a result of failure in assessment of the financial condition of local beneficiaries
during the project preparation. However, in case of Regional Road Project, it is not expected
to face such delays in counterpart funding, since counterpart funds are distributed centrally
by the Road Fund.
191. The Road Fund is not experienced in managing foreign exchange risks. MOF needs
to be consulted regarding this issue prior to the loan agreement.
G. Staffing
192. For the Regional Road Project, establishment of PIU is still in early stages. However,
EA should start identifying the appropriate personnel for the project.
193. As for staffing the project with adequate financial personnel, it is proposed to assign
one accountant who will be also doing the functions of the financial specialist, who can meet
the project needs even after commencing in full scale operations.
194. Since the Road Fund has no experience in managing the projects financed by ADB or
foreign institutions, its personnel is not aware of financial management and reporting
standards of ADB. Therefore, in selecting the project financial personnel through tendering,
special attention should be paid to the experience of the staff with international financial
institutions. Project accounting and finance staff is expected to be trained in ADB
procedures.
195. Usually, it is practiced to contract the PIU personnel for the duration of one year,
which is prolonged for the subsequent year if the satisfactory performance of the staff is
confirmed.
196. Preliminary organizational of the proposed project implementation unit is as follows:
HEAD OF PIU OF
REPUBLICAN ROAD
FUND
CONSULTING DEPUTY HEAD OF PIU

SERVICES OF ADB
International Financial expert Road engineer Mechanical engineer

Procurement Expert
Local Procurement Expert Local Procurement Expert
TRANSLATOR/ SECRETARY/
INTERPRETER ADMINSTRATOR
DRIVER

H. Accounting Policies and Procedures
197. Accounting System, Policies and Procedures. The Road Fund and proposed PIU
use accrual method of accounting in their regular and project operations. The accounting
system of the Fund, as well as of all state and private legal entities in Uzbekistan, is based
on the NAS, which has being developed based on IAS and the national accounting
guidelines of the MOF. As it is practiced in other ADB financed projects, PIU shall develop
project accounting manual in accordance with ADB and MOF requirements. The manual
shall be updated annually to include project accounting policy changes issued by the MOF.
The PIU shall follow the procedures stipulated in ADB’s Financial Management and Analysis
for Projects (2005). Chart of accounts based on NAS 2121 will be applied by the PIU, which
is given in Appendix 6.
198. All reports and supporting documents on all transactions will be stored and retained
by the project accountant until documents are inspected by state controlling agencies (Tax
Inspection, MOF, Chamber of Accounts), after which documents are kept in archive.
199. Clear segregation of duties shall be implemented at PIU, and job descriptions should
provide for that. The project manager is authorized to execute the project transactions. The
project financial expert/accountant handles recording of the transactions. Depending on
circumstances project accountant or office manager should bear the responsibility for the
custody of assets per transaction. Payments are approved and made by project manager
and accountant. In order to increase the transparency, practicing double checking system
(i.e. requiring the documents to be signed by two persons) for bank reconciliations is found to
be the best alternative, since the number of PIU accounting personnel is limited in the case
of non-revenue earning projects.
200. Budgeting System. The Road Funds and PIUs’ budgeting systems will be separate,
also budget of the latter will be included in consolidated budget of the Road Fund. Budgeting
procedures for public institutions is described above in part C. The project budgets will be
prepared annually by the financial specialist in consultation with PIU head. PIU develops
detailed budget that set annual physical and financial targets. The budget is to be presented
to ADB, the Road Fund, MOE, which after approval, is submitted to MOF for final approval.
201. During the budget execution, actual expenditures are compared with planned
expenditures on a monthly and quarterly basis, and report on analysis of variations is
prepared. Significant variations need to be approved prior to the ascertainment of the fact.
Project financial specialist (accountant) will be responsible for budgeting, monitoring and
controlling the execution of the budget.
202. Payments. All project payments are made with payrolls through bank transfer. In
accordance with national accounting procedures, payroll is stamped (PAID) and assigned an
accounting code. Payrolls prepared by the accountant are checked by the project manager.
203. Cash and Bank. PIU head and the project accountant shall be duly authorized
signatories to all project-bank transactions. Cash is deposited to the project accounts leaving
minimal amounts necessary for the office operations. For the proposed project, it is
recommended to install accounting software “1S Accounting”, which allows to maintain the
cashbook in the electronic system. Bank reconciliation is undertaken at the end of each
month or at any time as, if necessary.
204. Safeguard over Assets. The Road Fund and PIU shall assure that sufficient controls
are undertaken over project assets, and safeguards are undertaken to protect assets from
fraud, waste and abuse. Annual physical inventory of all stocks and materials must be
21
Decree of the MOF on Approval of the National Accounting Standard of the RU (NAS 21)

carried out as per the requirements of NAS. Fixed assets inventory is required every two
years. Stock-taking is also practiced when chief accountant or office manager is replaced.
I. Internal Audit
205. As it is mentioned above, there is no internal audit unit in any government ministry or
entity in Uzbekistan. Road Fund also does not have a department for conducting internal
audit of either Funds or project operations in the future.
206. Control Revision Department22 (CRD) of the MOF is the equivalent form of Supreme
Audit Institution, which carries out internal audit of State entities once in a two-year period.
CRD is mainly concerned with inspecting the compliance of the entities with budget rules and
regulations. However, CRD does not conduct value-for-money analysis and department is
not involved in identifying the gaps in internal control systems and strengthening them, which
are the essential features of modern internal audit.
J. External Audit
207. State agencies are not required to undergo external auditing, but the Road Fund is
annually audited by the Chamber of Accounts of Uzbekistan. The PIU to be created under
Road Fund will be subject to annual external audit. In other ADB financed projects, external
auditors are selected based on competitive bidding process in accordance with ADB
requirements23. For the Regional Road Project, external auditor shall be required to apply
international standards on auditing. EA expects Terms of Reference (TOR) for auditing
services to be prepared by the financial specialist of the PIU to be created at beginning of
project implementation.
208. The project is subject to central Government audit by MOF only at project completion,
unless any major accountability issue is raised that would warrant it sooner.
209. PIU shall (i) maintain separate accounts for the Project, and (ii) have such accounts
and related financial statements audited annually by independent auditors acceptable to ADB
and in accordance with the provisions of the Loan Agreement to be signed and as specified
in the ADB guidelines.
210. The SOE records will also be audited as part of the annual audit. PIU will submit to
ADB certified copies of such audited accounts and financial statements, and the related
reports of auditors, within 6 months of the close of every financial year.
K. Financial Reporting and Monitoring
211. Road Fund financial reporting follows the NAS procedures and requirements. The
project financial statements should be prepared using a computerized accounting system
and in spreadsheets and submitted to MOF, MOE and ADB on monthly, quarterly and annual
basis. The quarterly project progress reports to be prepared following ADB formats highlight
the physical accomplishments and financial progress. Spreadsheet analysis and reports are
prepared to adapt to special and supplementary reporting requirements.
212. Types of the reports required by the ADB will be provided to the PIU together with
ADB instructions and policies. List of the reports required by ADB, their frequency, due
submitting dates are summarized in table 8.4 below.
22
Discussed in more detail in Uzbekistan: Country Diagnostic Studies Review
23
There are more than 500 registered auditing firms in the county, including such multinationals as PWC, E&Y,
Deloitte & Touche

Table 7.4. Summary of Required Financial Reports to be prepared and submitted by

PIU
Report Frequency Basis Duration Due date

Project Every 6 months after
expenditures Semiannual Annual Term of project commencement of
forecast loan project
Operation plan Annual Annual 12 months January 10
QP-01 Annual Quarterly 12 months January 10
Project Monthly, Monthly, Monthly,
expenditures Quarterly, Quarterly, or Quarterly, or Monthly
report Annually Annually Annually
Audited annual
September 1 of the
financial Annual Annual Annual
subsequent year
statements
Source: summary of ADB guidelines and instructions
L. Information Systems
213. The Road Fund operates accounting program 1S Accounting, however the system
does not have all features of the contemporary management information system. For the PIU
under Road Fund, it is proposed to make use of the same program, which has enough
capacity to meet the requirements of the project. The system enables the PIU to (i) respond
to operational and project-related queries pertaining to specific accounts, and (ii) prepare
financial reports on the transactions that occurred in the reporting period. The accounting
system is capable of generating financial reports for both external and internal use. For
some types of reports, PIUs will make use of spreadsheets. The Road Fund gave assurance
on confidentiality of the financial information.
M. Conclusions
214. Overall, the FMA rated the Road Fund as an EA, and its financial management,
reporting and monitoring systems satisfactory. Road Fund shall ensure the project unit to be
adequately staffed with efficient and experienced personnel. Newly created PIU should pay
special attention to train the project staff in procedural and reporting requirements of ADB.
Road Fund welcomes further training to enhance the staff professional capacity.
215. Accounting and financial reporting practices of the Road Fund are found to be
reliable. Accounting policy of the PIU is to be established following both national and ADB
regulations, which are not contradictory. Since in the case of non-revenue earning projects
number of accounting and financial personnel is limited, reliability of the accounting
documentation will be ensured by the current system of authentication that requires double
signatures (i.e. signing by two persons) for the most of the accounting documents. As it is
practiced with other PIUs operating in the country, Regional Road Project financial reporting
will be computerized, and it will not necessitate any changes in Road Fund financial reporting
system.
216. There is no department within the structure of Road Fund responsible for internal
audit. The Fund is audited by the Chamber of Accounts annually. For the projects being
implemented in Uzbekistan jointly with IFI, external annual audit is carried out in line with
external donor institutions’ requirements.
N. Financial and Other Covenants

(i) Road Fund and MOF should ensure timely availability of counterpart funding
as per project financing plan

(ii) Foreign consultant should be invited for the establishment of procedures and
preparation of procurement documentation
(iii) Annual audit of the project accounts should be done in accordance with the
International Standards on Auditing, by the Auditor acceptable to ABD
(iv) Road Fund should ensure that a satisfactory financial management system
including financial management and reporting and auditing is maintained
throughout the duration of ADB funding.
7.2 Financing Plan and Financial Analysis
7.2.1 Financing Plan
217. The financing plan is shown overleaf. The proposed ADB financing of $82.5 million
represents 47.4% of the total project cost and will finance the direct and indirect foreign
exchange cost, interest and other charges during construction. The Government will provide
the remaining local currency costs of $91.5 million.
218. ADB will provide a loan of $82.5 million from ADB’s ordinary capital resources to help
finance the civil works for the Project, road equipment, and consulting services. The loan will
have a 24-year term, including a grace period of 4 years, an interest rate determined in
accordance with ADB’s London interbank offered rate (LIBOR)-based lending facility, and a
commitment charge of 0.35% of the Loan per annum. The Government has provided ADB
with (i) the reasons for its decision to borrow under ADB’s LIBOR-based lending facility on
the basis of these terms and conditions, and (ii) an undertaking that these choices were its
own independent decision and not made in reliance on any communication or advice from
ADB.
219. The Government will relend the proceeds of the ADB loan for the equipment to the
REPC in local currency with additional 0.2% spread on the terms and conditions as the ADB
loan to the Government. The Government will assume the foreign exchange risk.

Table 7.5 - Cost Estimates and Financing Plan
Cost Estimates ($ million) Financing Plan ($ million)

Asian Development Bank Government
Foreign Local Foreign Local Sub- Foreign Local Sub-
Item Total
Exchange Currency Exchange Currency total Exchange Currency total
A. Investment Costs
1. Civil Works 10.5 59.6 70.1 10.5 0.0 10.5 0.0 59.6 59.6
2. Road Construction Equipment 55.1 0.0 55.1 55.1 0.0 55.1 0.0 0.0 0.0
3. Consulting Services
A. Procurement Specialist 0.2 0.0 0.2 0.2 0.0 0.2
B. Project Management and Supervision 1.4 1.0 2.5 1.4 1.0 2.5 0.0 0.0 0.0
C. Establishment of Equipment Pool 0.3 0.0 0.3 0.3 0.0 0.3 0.0 0.0 0.0
D. Road Planning and Management System 1.4 0.3 1.7 1.4 0.3 1.7 0.0 0.0 0.0
Sub-total (A) 68.9 61.0 129.9 68.9 1.4 70.3 0.0 59.6 59.6
B. Incremental Project Cost 0.0 0.5 0.5 0.0 0.5 0.5 0.0 0.0 0.0
C. Taxes and Duties 0.0 11.9 11.9 0.0 0.0 0.0 0.0 11.9 11.9
D. 1. Physical 3.8 6.0 9.8 3.8 0.0 3.8 0.0 6.0 6.0
2. Price 2.8 14.1 16.9 2.8 0.0 2.8 0.0 14.1 14.1
Sub-total (D) 6.6 20.0 26.6 6.6 0.0 6.6 0.0 20.0 20.0
Total before Financing Charge 75.5 93.4 169.0 75.5 1.9 77.5 0.0 91.5 91.5
E. 1. Interest during implementation 4.5 0.0 4.5 4.5 0.0 4.5 0.0 0.0 0.0
2. Commitment charges 0.6 0.0 0.6 0.6 0.0 0.6 0.0 0.0 0.0
3. Front end fees 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Sub-total (E) 5.1 0.0 5.1 5.1 0.0 5.1 0.0 0.0 0.0
Total Project Costs 80.6 93.4 174.0 80.6 1.9 82.5 0.0 91.5 91.5
Cost Composition 46.3% 53.7% 100.0% 47.4% 52.6%

220. Table 7.6 shows the incremental costs of project works and project financing to the
Road Fund. These costs include incremental routine maintenance costs which are higher
than the amounts projected by the Road Fund on a per km basis. Capital costs, periodic
maintenance costs, interest during implementation, commitment fees, repayment of principal
and interest due over the payback period.

Table 7.6 Incremental Financial Analysis of Road Fund Project and Financing Expenditure
Advisory
Total Interest
Services Interest
Capital Periodic Routine Incremental on
Plus During Commitment Repayment Total
Year Expenditure Equipment Mainte- Mainte- Project Remaining Loan
Incremental Construction Fee of Principle Expenditure
Road nance nance Expenditure Balance
Project
Cost
2008 7790.3 22844.5 759.3 31394.2 1434.9 281.8 33110.9
2009 27664.9 37937.9 2224.7 67827.4 2708.3 118.9 70654.7
2010 23812.6 1313.1 25125.7 298.7 100.9 25525.4
2011 17827.4 928.2 18755.7 212.1 88.2 19055.9
2012 79.8 79.8 4287.6 4741.3 9108.7 81465.3
2013 79.8 79.8 4287.6 4491.7 8859.2 77177.6
2014 79.8 79.8 4287.6 4242.2 8609.6 72890.0
2015 79.8 79.8 4287.6 3992.7 8360.1 68602.3
2016 7709.5 7709.5 4287.6 3743.1 15740.3 64314.7
2017 79.8 79.8 4287.6 3493.6 7861.0 60027.0
2018 79.8 79.8 4287.6 3244.0 7611.5 55739.4
2019 79.8 79.8 4287.6 2994.5 7361.9 51451.7
2020 79.8 79.8 4287.6 2745.0 7112.4 47164.1
2021 79.8 79.8 4287.6 2495.4 6862.8 42876.4
2022 27754.3 27754.3 4287.6 2245.9 34287.8 38588.8
2023 79.8 79.8 4287.6 1996.3 6363.8 34301.2
2024 79.8 79.8 4287.6 1746.8 6114.2 30013.5
2025 79.8 79.8 4287.6 1497.2 5864.7 25725.9
2026 79.8 79.8 4287.6 1247.7 5615.1 21438.2
2027 79.8 79.8 4287.6 998.2 5365.6 17150.6
2028 19273.8 79.8 19353.6 4287.6 748.6 24389.9 12862.9
2029 79.8 79.8 4287.6 499.1 4866.5 8575.3
2030 79.8 79.8 4287.6 249.5 4617.0 4287.6
2031 79.8 79.8 4287.6 0.0 4367.4 0.0

SECTION 8: PRELIMINARY PROJECT IMPLEMENTATION ARRANGEMENTS
8.1 The Executing Agency
221. The Republican Road Fund (the Road Fund) will be the executing agency (EA) for the
Project. Project Implementation Unit (PIU) under the Road Fund will be headed by a Head of
PIU, acceptable to ADB, who is a qualified civil engineer with experience in the road sector.
The Road Fund will ensure that during the entire period of project implementation, the PIU is
adequately staffed with qualified engineering, financial, administrative, and secretarial staff,
and equipped with the necessary office space, equipment, and facilities.
8.2 Project Implementation Unit (PIU)
222. The Road Fund will appoint Head of PIU responsible for implementation of the (i)
Road Construction Component, (ii) Road Equipment Component and Advisory Support for
Establishment of REPC, and (iii) Advisory Support for Road Sector Planning and
Management System. On item one the Head of PIU would coordinate the work through
contact officer who is the head of department for technical inspection of road construction in
Road fund. On item two the contact officer would be the head of mechanical department of
Uzavtoyul and on item three the work would be coordinated through the contact officer who
is the head of department for developing yearly and mid term road construction programs
and conducting biddings for civil works of the Road Fund.
223. PIU shall be established in the central office of the Republican Road Fund
under the Ministry of finance as structural unit to implement the project. PIU shall not
be a separate legal entity with its bank account and will rather serve as a separate
department of Republican Road Fund to ensure Project completion successfully.
224. The proposed project implementation arrangements are in Appendix 7
8.3 Main responsibilities of PIU
225. The main responsibilities of the PIU on implementing the Project are;
• Planning the Project;

• Coordination of the Project – team up all the participants of the Project,
(Government, Executing Agency, Implementing agency, Bank, Consultants,
Suppliers and Construction companies) into one distinctly functioning unit;
• Staffing and planning of the Project – Hiring and training the appropriate staff;
• Project implementation – Management of all aspects of Project activities and
implementation;
• Control on the management of the Project – application of control system on
cost, schedules, technical quality of the work and reporting procedure as well
as submitting the reports to the Bank on the activities in accordance with
requirements of Loan and Project agreements and Bank’s rules;
• Management of procurement – ensure that all the requirements on inspection
and testing indicated in various contracts are met;
• Communication with the Project – setting up the procedure of interaction and
cooperation with other organizations and parties involved in the Project as well
as with the Government departments of the Borrower;
• Regulating the conflict – resolution of disputes between the participants of the
Project in accordance with the agreements and contracts;
• Management of changes – control on changes and functioning of the progress
of the Project;

• Financial management o the Project – allocation of funds, cost control,

support of effective system of accounting, preparation of financial reports for
the Bank in accordance with Loan and Project agreement;
• Compliance with the covenants of Loan and Project agreement;
• Transferring and acceptance of the project – preparation of procedures and
recourses for transferring it after its completion.
8.4 Consulting Services
226. International consultants in association with national consultants will be selected and
engaged using ADB’s quality and cost-based selection procedures in accordance with
Guidelines on the Use of Consultants by the Asian Development Bank and its Borrowers
(2007 as amended from time to time).
227. An international consulting firm in association with national consultants will provide
support for bidding, design review, and supervising construction of 6 civil works packages.
An international consulting firm in association with national consultants will provide advisory
for establishing the Road equipment pool company (REPC). Another international consulting
firm in association with national consultants would also be recruited to carry out advisory
services for road sector planning and management system.
228. Detailed engineering design is being undertaken by locally recruited consultants and
financed from the Road Fund resources. The Road Fund will also engage a procurement
specialist with external funded projects experience to help implement advance action for
procurement of contractors and consultants.
229. The international procurement consultant whose services will be financed by ADB
(Bank) shall work in PIU to strengthen its procurement capability. It is anticipated that an
international expert will be required to assist in project procurement and offer on the job
training including seminars on selected procurement topics to PIU staff. Usually it is practiced
to contract the international consultant for the duration of one year, which is prolonged for the
subsequent year if the satisfactory performance of the consultant is confirmed. The
international procurement expert shall be hired by Road Fund prior to loan becomes effective
who would consequently help Road Fund PIU to hire other consultants and procurement of
goods and services.
230. The proposed tentative contract packages are as follows.
Table 8.1: Proposed Consulting Service Package
Estimated
Contract Procurement Number of
Consulting Service Package
Value Mode a Contract
($ Thousand)
CSP-1 Project Management and Supervision 2,453.0 Firm 1
Establishment of REPC 297.9 Firm 1
CSP-3 Road Sector Planning and Management 1,692.2 Firm 1
INV-1 Procurement Specialist 240.0 Individual b 1
a
Consulting services will be conducted by international firms in association with national consultants that
will be selected using international competitive bidding
b
Retroactive financing.
CSP=consulting service package.
INV=individual consultant.

8.5 Advance Contracting and Retroactive Financing
231. It is highly recommended to have advance contracting for procuring goods and
services which could be done through retroactive financing of up to 20% of the loan amount
provided that expenditures are in accordance with ADB agreed procedures and it should take
place during the 12 months before the signing of the loan agreement. Retroactive financing is
sought for eligible expenditures including civil works, goods, and consulting services. Such
financing will be subject to safeguard compliance. Furthermore, the Road Fund should be
informed that approval of advanced contracting and retroactive financing does not commit
ADB to finance the proposed project. Such retroactive financing shall be applied in this
project for hiring procurement expert and preparatory civil works on two packages of civil
works contracts.
8.6 Implementation Period
232. The Project will be implemented over 4 years inclusive of procurement and
construction activities and is expected to be completed by 31 December 2011. The
implementation schedule is in Appendix 9.

SECTION 9: PROCUREMENT PLAN
9.1 Procurement for Road Construction Component.
233. The Project will comprise the road reconstruction of the following 2 sections of the
A380 to meet 2 lane international design standard with 4-lane road bed within the existing
right-of –way:
(iii) Section 1: Km 876-916 (40 km) in Kungrad District of Karakalpakstan

Autonomous Republic.
(iv) Section 2: Km 490-581 (91 km) in Khazarasp District of Khorezm Province

and Tortkul District of Karakalpakstan.
234. Procurement of civil works, and related services financed from the ADB loan will be
done in accordance with ADB’s Guidelines for Procurement. To ensure competitive bidding,
international competitive bidding (ICB) contract packages will be adopted. Civil works
contracts will be procured through ICB among pre-qualified bidders. Civil works contracts
with an estimated value less than $2 million will be procured using national competitive
bidding through ADB’s standard prequalification procedure. Supply contracts will use limited
international bidding for contracts with an estimated value of $100,000–1,000,000, and
shopping arrangements for contracts of less than $100,000. Goods in excess of $1 million
will be procured through ICB. The procurement plan is in Appendix 8.
235. The Project involves 6 ICB contract packages for road civil works. Furthermore, to
enable bidders to prepare proposals quickly, the bidding period has been reduced to 45
days.
236. In order to ensure on time implementation of Governments’ road program for the
period of 2007-2010, it is recommended to split packages one and two into preparatory
works and reconstruction works. Given some limited time, the procurement of preparatory
civil works on package one and two shall be carried out using national competitive bidding
and actual reconstruction work shall be carried out on these two packages using international
competitive bidding. The proposed tentative contract packages are as follows.
Table 9.1: Proposed Civil Works
Estimated
Length Contract
Package Procurement Mode Financing
(km) Value a
($ Million)
CWP-1A: Km 876–896 20 2.0 NCB Retroactive
CWP-1B: Km 876–896 20 12.1 ICB Project
CWP-3: Km 490–510 20 12.2 ICB Project
4: Km 510–530 20 12.2 ICB Project
5: Km 530–555 25 16.7 ICB Project
6: Km 555–581 26 22.4 ICB Project
Total: 90.7
ICB = international competitive bidding, Km = kilometer, NCB=national competitive bidding, CWP =

civil works package.
a
Including physical and price contingencies, but not including interest during construction.

9.2 Procurement of Road Equipment Component.
237. The Project will finance the procurement of a set of road equipment to be managed
by a Road Equipment Pool Company (REPC). The company will be set up as an
independent commercially-operated state-owned enterprise. REPC will provide services for
utilizing the equipment to be procured under ADB financing on a full cost recovery basis.
Advisory assistance support will be provided to establish the REPC as a viable and
sustainable enterprise. This will include developing a business plan; an equipment service
provision system; introducing proper administrative, accounting and financial procedures;
identifying workshops, stores, and equipment operations manuals; establishing equipment
hire charge system; and providing on the job training for operators and workshop personnel.
238. Procurement of Road Equipment and related services financed from the ADB loan
will be done in accordance with ADB’s Guidelines for Procurement. To ensure competitive
bidding, international competitive bidding (ICB) contract packages will be adopted.
239. The equipment list provided by Uzavtoyul includes 4 complexes of road construction
equipment for works with asphalt laying, one complex of road construction equipment for
works with concrete laying and two complexes of bridge construction equipment. Accordingly
the packaging of contracts of equipment to be procured under the project was therefore done
by Uzavtoyul based on these complexes.
240. The proposed tentative contract packages are as follows.
Table 9.2: Proposed Packages for Road Equipment
Estimated Contract
Package Quantity Procurment mode
Value ($ Million)
CP-1: 58 10,4 ICB
CP-2: 10 4,3 ICB
CP-3: 37 7,4 ICB
CP-4: 58 10,4 ICB
CP-5: 58 10,4 ICB
CP-6: 58 10,4 ICB
CP-7: 20 1,6 ICB
TOTALS 55,1

SECTION 10: PROJECT DESIGN AND MONITORING FRAMEWORK
DESIGN AND MONITORING FRAMEWORK
Data
Design Performance Assumptions
Sources/Reporting
Summary Targets/Indicators and Risks
Mechanisms
Impact By 2018: Assumption
Increased Increased gross domestic National socioeconomic Government sustains policies

trade growth product from $9 billion (est. statistics from the Central conducive to economic growth
2007) to $17.5 billion Statistics Office and committed to enhanced
policy reform and regional
Increased external trade with integration.
Russia, Kazakhstan, and
Ukraine from $4.2 billion
(2006) to $10.5 billion
Outcome By 2013: Assumptions
Improved Increased total traffic volume National, provincial, and Increased availability and quality
traffic of A380 in Karapakalstan district socioeconomic of transport services following
operation on from 360 vehicles per day statistics from the Central improvement of the project road.
the (vpd) in 2007 to 800 vpd and Statistics Office
reconstructed in Khorezm from 1,900 vpd to Improved cross-border facilities
regional road 3,600 vpd and procedures at the border
(A-380) point between Uzbekistan and
Increased number of cross- ADB’s project completion Kazakhstan. Mobile scan is in
border trucks on A380 report and project place by the State Custom.
(Daudata Custom Post) from performance evaluation
10 trucks/day (2007) to 17 report The Road Fund continues
trucks/day reconstructing the remaining
sections of A380 as scheduled.
Accident rate reduced by Periodic traffic counts and
10% on A-380 Risk
surveys
Inadequate financial resources
Freight Forwarder for road maintenance.
Association Statistics
Improved Road financing plan prepared ADB’s project Assumption
road sector by the newly developed performance evaluation
management system. report Government commitment to
and efficiency further reform the road sector
and adopt good governance and
cost recovery principles.
REPC’s financial Financial statement
performance improved. ADB’s project
performance evaluation
report
Recommendations under Government Resolution.
road sector institutional ADB’s project
strategy implemented. performance evaluation
report
Outputs By 2011: Assumption
Newly 131 km road reconstructed on Consultants’ progress Timely provision of counterpart

reconstructed time, within budget, and reports resources and support for the
road sections meeting technical ADB review missions Project.
of A380 specifications
between Pavement international Risk
Guzar and roughness index of less than Road Fund is not familiar with
Dautata 3 m/km. foreign-funded projects.
border
REPC Guidance for development of Risk
established the equipment unit prepared.

Data
Design Performance Assumptions
Sources/Reporting
Summary Targets/Indicators and Risks
Mechanisms
and Business plan prepared. Government’s willingness to
operational About 300 units of road move toward commercialization
equipment purchased. and privatization of REPC.
20 staff trained.
Comprehensi A road sector institutional Assumption
ve road strategy prepared.
sector Computerized road sector Government is committed to
planning and planning and management further reform the road sector.
management system installed.
system Data base system and Road Fund’s committed to
introduced at manual developed improving its planning capacity.
the Road The system tested.
Fund office 30 Road Fund staff trained.
Long-term system
improvement program
developed.
Activities with Key Milestones Inputs
Road Construction Component ADB loan $85.8 million

Award civil works contracts by October 2008 (first package under the (OCR)
Project) Government counterpart budget
Completion of civil works by December 2011 of $91.5 million.
Road Equipment Component

REPC set up by September 2007
Procurement by December 2009
Advisory Support for Road Sector Planning and Management

System
Recruitment of Procurement Specialist by September 2007
Recruit consultants for project management and construction
supervision by September 2008
Recruit consultants for establishment of REPC by March 2008
Recruitment of consultants by March 2009
Consulting services completed by December 2011
ADB = Asian Development Bank, km = kilometer, OCR = ordinary capital resources, REPC = road equipment
pool company.

APPENDIX 1
OUTLINE TERMS OF REFERENCE FOR CONSULTANTS
A. PROCUREMENT SPECIALIST
1. Introduction
1. A procurement specialist will be required to assist the Road Fund, the Project’s
executing agency (EA), in procurement of civil works for reconstruction of 131 km of A-380
Guzar–Bukhara–Nukus–Dautata, procurement of road reconstruction and maintenance
equipment, and recruitment of consulting services for the Project (Table A9.1)
Table A9.1: Proposed Contract Packages
Package Number of package Procurement mode

Civil works package 2 NCB
6 ICB
Equipment 7 ICB
Consulting services 3 QCBS
ICB=international competitive bidding, NCB=national competitive bidding,
QCBS=quality- and cost-based selection
P P
2. Scope of services
2. The procurement specialist will be responsible for overall coordination of procurement

activities carried out under the project, as well as for procurement on Project level and
shared activities, and ensuring that procurement is carried out in compliance with the
procedures agreed with the Asian Development Bank (ADB).
3. The tasks of the procurement specialist will include but not be limited to:
(i) Undertake procurement activity as per the draft Procurement Plan which
provides the estimated costs and the basis for the procurement methods for
each procurement item under the project.
(ii) Prepare technical specifications for procurement of good and services
together with EA.
(iii) Prepare bidding documents.
(iv) Prepare tender notices, and invitations for bids.
(v) Receive, open, and assist in evaluation of bids, and finalize contracts.
(vi) Administer contracts to ensure compliance with the contract conditions,
payment terms, variations, dispute resolution, and monitoring etc.
(vii) Maintain all the records relating to procurement.
(viii) Maintain a separate record relating to complaints and their redressal.
(ix) Periodically update the Procurement Plan in agreement with the EA to reflect
the actual project implementation needs and improvements in institutional
capacity.
(x) Prepare procurement implementation reports in accordance with the reporting
requirement acceptable to ADB.
(xi) Assist EA in their procurement activities and help them in developing reports
in agreed format.
(xii) Obtain all necessary clearances within the GOU and ADB.
(xiii) Keep all procurement records in proper order, acceptable to the EA and the
ADB,
(xiv) Assist the ADB staff during procurement post-review missions;
(xv) Contribute to the preparation of project documents, studies and materials for
ADB and the EA.

(xvi) Provide partial back-up, be familiar and participate in the activities of the PIU
Financial Management Officer in all areas, including preparation of financial
and status reports, maintaining financial management system, preparation of
document for payment, books and records keeping, etc.
(xvii) Training on procurement for the EA staff.
4. If so required by the Employer, the procurement specialist will provide any of the
following as additional services: (i) prepare reports, additional contract documentation, and/or
review and comment on the contractor’s proposals, as may be required for the successful
completion of the Project; and (ii) provide any other specialist services as may be required
from time to time.
5. The Employer will authorize all additional services, other than minor extras that do not
materially affect the scope of the procurement work, at the rates mutually agreed upon when
the services require the use of specialists not listed in the contract.
3. Input
6. The services will be carried out by an individual international consultant, to be

selected by the Road Fund in accordance with ADB’s Guidelines on the Use of Consultants.
A total of 12 person-months of international consultant inputs are estimated for the
procurement activities. He or she should be a procurement specialist preferably having
experience with ADB guidelines on procurement of civil works, goods, and services. The
services will be implemented over a 12- month period.
4. Deliverables
7. The consultant will submit the following reports:
Table A9.2: Required Reports
Recipient
Type of Reports
Road Fund ADB
Inception Report (month 1) 6 2
Progress report (monthly) 6 2
Draft Procurement Report 6 2
Final Procurement Report 6 2

B. ESTABLISHMENT OF ROAD EQUIPMENT MANAGEMENT UNIT
1. Introduction
8. A team of consultants is required to help the Road Equipment Unit (REMU) start
operating the unit. The assistance will be provided to ensure the viability and sustainability of
REMU in developing efficient equipment management mechanism, introducing proper
administrative, accounting and financial procedures, identifying workshop, stores and
equipment operations manuals, establishing equipment costing system, and providing on the
job training for operators and workshop personnel.
2. Scope of Services
9. The scope of services will include:
(i) Financial assistance to rent equipment, acquire operating facilities and

business systems and, to hire and train staff.
(ii) Business development assistance to develop management and business
development systems.
(iii) Management development assistance to develop the hiring and cost control
systems (including the calculation of rentals), the maintenance systems and
equipment replacement strategies and processes.
(iv) Training assistance to train all staff in their duties and to train staff to be able
to train contractors in the operation and maintenance of the equipment.
(i) Procure a suitable system together with any necessary computers and
associated software and hardware;
(ii) for selected staff of the trial enterprise, procure and manage training in an
overseas organization using the proposed system and undertaking road
construction or maintenance operations similar to those being undertaken by
the trial enterprise;
(iii) install the system in the trail enterprise and train all staff of the enterprise who
will use the system;
(iv) prepare a user manual in English and Russian;
(v) after one budgetary cycle, review the operation of the system and assist the
trial enterprise implement any necessary improvements to the system
including any necessary revisions to the user manual;
3. Input
10. The services will be carried out by a firm of international consultants in association
with national consultants to be engaged in accordance with ADB's Guidelines on the Use of
Consultants. The services will require a total of about 10 person-months of international
consultants and 12 person-months of national consultants. The Services will be implemented
over a 6 month period. The international consultants will have expertise in the fields of
management and finance corporate law, and marketing. The national consultants will have
expertise in the fields of financial analysis, legal, contract, and mechanical engineering..
4. Deliverables
11. The Consultant will submit the following reports:

Recipient
Type of Reports
Road Fund ADB
Draft Final Report 6 2
Final Report 6 2

C. PROJECT MANAGEMENT AND CONSTRUCTION SUPERVISION
1. Introduction
12. The Project will involve the improvement of the road sections noted below.
Table A9.4: Proposed Civil Works
Estimated
Length Contract Procurement
Package Financing
(km) Value a
P Mode
($ Million)
ICB = international competitive bidding, Km = kilometer, NCB=national competitive bidding,

CWP = civil works package.
a
P Including physical and price contingencies, but not including interest during construction.
P
13. Civil works will be carried out based on the Federation Internationale des Ingenieurs
Conseils (FIDIC) contract. A Consultant Team will be engaged for the Project to perform as
the Engineer. The Consultant will administer the construction contracts and ensure that the
contractual clauses for both quality and specifications of work are complied with and the
works are constructed in accordance with the provisions of the construction contracts, The
Engineer’s representative in accordance with the provisions of the construction contracts will
be a full-time professional resident engineer in the Project area under each package.
14. The Supervision Consultant while supervising construction works will make all
necessary arrangements for quality control and implementation of the works. The Consultant
in consultation with the Road Fund will make all engineering decisions required for the
successful and timely completion of the construction contracts, and have all the powers
defined as those of the Engineer.
15. The Engineer will carry out a critical review of the detailed design prior to the
commencement of works to identify defects or omissions that comprise on consistency of the
design and completeness of works. This review will be carried out immediately after the
services commence and will be complete within 5 weeks. On completion of the review, the
Supervision Consultant will prepare a report, setting out all findings and recommendations for
correcting any defects or omissions identified. Notwithstanding these, the Supervision
Consultant will immediately inform the employer of any defect or omissions that may have a
substantial impact on the Project at the time the defect or omission is uncovered. The
Consultant will submit four copies of the review report to the employer.
2. Scope of services
16. The tasks of the Consultant will include but not be limited to:
(i) ensure that the construction methods as proposed by the contractor for
carrying our the works are satisfactory, inspection of contractor’s construction

equipment; and safety of the works, property, personnel, and general public;
the schedule of mitigation measures for adverse environmental impacts;
(ii) ensure that road safety design requirements are implemented in accordance
with the contract;
(iii) establish efficient procedures for verifying contractor performance and
reporting progress and problems, in a timely manner, including quality control
reports, quantity survey records, requests for variation or change orders;
contractor’s claims and invoices;
(iv) undertake project performance monitoring and evaluation in accordance with
the Project Framework and ADB’s Project Performance Management System
(PPMS) Handbook including the baseline data survey and the following
annual survey and reporting up to project completion;
(v) ensure that the contractor does not involve child labor for the execution of the
civil works contracts in accordance with the provisions of the contract
agreement;
(vi) prepare and issue the following reports, the format and content of which are to
be acceptable to the employer: an inception report, a brief monthly progress
report, a detailed quarterly report, a detailed project completion report;
(vii) check that “as built” drawing are prepared for all works as construction
processes;
(viii) carry out the following duties related to environmental mitigation with particular
reference to the technical requirements of sound environmental standards on
the basis of ADB’s Environmental Guidelines for Selected Infrastructure
development Projects (Highways and Roads) during construction: (i) ensure
that all the environmental mitigation measures required to be implemented are
incorporated into the contract documents; (ii) supervise and monitor the
implementation of environmental mitigation measures required; (iii) in the
event of occurrence of any unexpected environmental impacts, coordinate
with the Project Implementation Unit (PIU) of the Republican Road Fund, to
provide necessary mitigation measures for submission to the Republican
Road Fund and ADB;
(ix) Land acquisition and resettlement: (a) assist the Republican Road Fund to
prepare and update the resettlement plan for each subproject which involves
land acquisition and resettlement, based on the resettlement Framework
agreed by the Republican Road Fund and ADB; and (b) assist the Republican
Road Fund to implement all activities outlined in the Resettlement Plan;
(x) HIV/AIDS and Human Trafficking. Monitor that the contractors comply and
carry our required actions as provided in the respective contract documents,
such as awareness and education of laborers and workers;
(xi) Project completion report – draft report at 90 percent physical completion;
(xii) Project completion report – final report two months after project physical
completion or alternative date as agreed with the Republican Road Fund; and
(xiii) Other detailed requirements are provided separately.
17. The Supervision Consultant will process interim and final payments to the contractors.
18. If so required by the employer, the Supervision Consultant will provide any of the
following as additional services: (i) prepare reports, including technical appraisals, additional
contract documentation, and/or review and comment on the contractor’s proposals, as may
be required for the successful completion of the Project; and (ii) provide any other specialist
services as may be required from time to time.
19. The employer will authorize all additional services, other than minor extras that do not
materially affect the scope of the supervision work, at the rates established in the
construction supervision contract, or at the rates mutually agreed upon when the services
require the use of specialists not listed in the contract.

3. Input
consultants and 226 person-months of national consultants. The Services will be
implemented over a 39 month period. The international consultants will provide the following
experts (i) chief resident engineer; (ii) contract specialist; (iii) material engineer, and (iv)
highway engineer. The national consultants will have expertise in the fields of (i) assistant
chief resident, (ii) highway engineer, (iii) bridge engineer, (iv) road design engineer, (v)
structural engineer, (vi) materials engineer, (vii) drainage engineer, (viii) environmental
specialist, and (ix) quantity surveyors.
4. Deliverables
Recipient
Type of Reports
Road Fund ADB
Draft Procurement Report 6 2
Final Procurement Report 6 2

D. ROAD SECTOR PLANNING AND MANAGEMENT
1. Introduction
22. The Road Fund has identified the organization’s limitations as regards road and
highway planning in general and prioritization of maintenance works in the face of budgetary
constraints in particular. Since becoming operational in March 2006, the Road Fund has
been primarily concerned with the procurement of roads works contracts. The programming
of works is carried out based on ad hoc surveys, and does not reflect adequately road traffic
and road condition throughout the network. Now that Road Fund staff has been introduced to
the HDM-4 based approach to asset management widely utilized in the developing world, the
time is considered appropriate to install modern transport planning and highway engineering
approaches in the Road Fund. .
23. A team of consultants is required to help strengthen the Road Fund’s capacity in road
sector planning and management, and prepare the Road Fund to adopt a modern asset
management approach to one of Uzbekistan’s most valuable capital assets. The Road Fund
will establish a road works planning unit after completion of this support component.
24. The objective of the technical assistance is to enable the Road Fund to raise the
general standards of condition and capacity of the network through utilization of: (i)
systematic road traffic censuses, and transport planning and highway techniques; (ii)
scientifically-based monitoring of road surface condition (roughness) and roadbed conditions
(structural number) on a regular basis so that the status of the entire network is known with a
reasonable degree of certainty on a continuous basis; (iii) prioritization of road periodic
maintenance and construction works utilizing HDM-4, in light of current and projected
available financial resources to be carried out every 3 years on a rolling basis, and (iv)
appropriately designed and maintained databases to support the above activities.
2. Scope of Services
25. The consultants will carry out the following tasks:
(i) Review the current road sector planning and financing system.
(ii) Study the impact of possible application of road user charges, tolling system,
and asset management systems including, in the longer term, Public Private
Partnerships.
(iii) Assess institutional framework of the road sector and prepare an institutional
development strategy focusing on (i) need for a road agency, and (ii) ways of
introducing private sector competition in the provision and maintenance of
roads.
(iv) Introduce computerized road sector planning and management based on
HDM-IV1 TP PT
(v) Introduce appropriate transport planning tools including transport models to

adequately address emerging road capacity constraint issues
(vi) Develop data base systems to support (iii) and (iv) above.
(vii) Develop manual for systems application.
(viii) Purchase and set up the systems.
(ix) Undertake a pilot data collection exercise, including appraisal utilizing HDM-IV
and the transport model for the Tashkent – Samarkand – Termez Road (M39).
(x) Staff training and study tours to transport planning and highway engineering
centers of excellence.
(xi) Prepare long-term program for country-wide application of road condition and
road link flow databases.
1
TP PT Highway Development and Management Model- IV.

(xii) Formalization of transport planning and highway engineering and planning

through the establishment off a Road Works Planning Unit.
3. Input
consultants and 63 person-months of national consultants. The Services will be implemented
over a 12 month period. The international consultants will have expertise in the fields of (i)
transport planning, (ii) transport economics, (iii) road maintenance specialist, (iv) road
financing, (v) road institution specialist, (vi) HDM-IV Specialist, and (vii) data base system
and management. The national consultants will have expertise in the fields of (i) transport
planning, (ii) transport economics, (iii) highway engineering, (iv) bridge engineering, and (iv)
data base system and management.
4. Deliverables
Recipient
Type of Reports
Road Fund ADB
Draft Final Report 6 2
Final Report 6 2
28. The following will be the consultant’s outputs.
(i) A transport planning and HDM-4 capacity installed in the Road Fund;
(ii) Trained Road Fund staff capable of running HDM-4 and a transport planning
model;
(iii) A development plan including both condition and capacity oriented elements
for the M39.
(iv) Installed data bases supporting (iii) above and a plan to expand the database
to include the entire common use network;
(v) A road sector institutional strategy; and
(vi) Proposals for adequately funding the identified needs of the road sector in
general and the M39 Development Plan in particular.

APPENDIX 2
ASSESSMENT OF EQUIPMENT FINANCING OPTIONS
A. Background
1. The proposed Project will finance about US$ 55,1 mln road maintenance equipment
for the Government of Uzbekistan (GOU). The Government considers its road construction
and maintenance equipment and plant fleet outmoded and, in many cases, past its economic
life. The Uzavtoyul plant and equipment fleet includes a mixture of new items and very old
items, the latter mostly of Soviet origin. Some modernization of equipment has occurred with
the assistance of the Japan International Cooperation Agency in 1997 and 2004.The purpose
of this section is to explore various financing options for providing the plant and equipment
and identify the optimal financing structure feasible in the context of Uzbekistan.
2. There are four key players involved in public road construction and maintenance.
Public roads are considered state property and responsibilities for road construction and
maintenance in Uzbekistan are defined by the Law for Highways 1992, which is now being
updated. At present, road policy development, planning, construction and maintenance are
coordinated by the four bodies, the Uzbekistan Transport and Transport Communication
Association, the Road Board, the Republican Road Fund under MOF and Uzavtoyul. For the
proposed Project, Road Fund and Uzavtoyul are expected to hold major roles and functions
in the smooth implementation of the Component 2 of the Project. The Road Fund as an EA
will essentially be a administrator for funding and Uzavtoyul a coordinator for project
implementation.
3. Uzavtoyul was further scrutinized as it holds a rather complicated corporate structure

and historical background and as its perceived dual roles and functions as a government
body and a company. Uzavtoyul is a designated agency of state administration of common
use roads and maintains a small number of staff, ceiling of 29 people, to administer,
coordinate, and implement contracting of road periodic and routine programs on behalf of the
GOU. However, it was confirmed that Uzavtoyul administers state programs through budget
arrangement with the Road Fund and the profits by subsidiary enterprises are not being
shared by Uzavtoyul. Uzavtoyul’s subsidiary enterprises can be broadly categorized into four;
regional road maintenance enterprises, specialized international and national roads repair
and maintenance enterprises, road repair and construction companies, and others (refer to
figure 5.1: Organizational structure of Uzavtoyul). Provincially based subsidiary enterprises
(regional road maintenance enterprises) are responsible for local, as distinct from national,
roads. Within each province there are district road maintenance and repair enterprises which
only work on local roads. There are also seven ‘specialized international and national road
repair and maintenance enterprises’. These geographically based enterprises are
responsible for the repair and maintenance of national and international roads1. Their
operations cross provincial boundaries. It is these enterprises which bid for Road Fund
capital works contracts. There are a number a number of specialist companies and
enterprises specializing in activities such as quarrying and the manufacture of concrete
bridge components.
4. Two development approaches for commercialization/privatization, i.e. top down and

bottom up, were scrutinized to determine whether strengthening government entities or
building up private sector could be rationalized. The findings indicate that there are very few
established private sector companies capable of undertaking road works projects. Those that
do exist do not have all the specialist equipment required for capital maintenance works,
have difficulty accessing essential materials, require close supervision and are insufficient in
number to provide competition in the bidding process. There are companies which undertake
lower level road maintenance work, principally in urban areas. It shows that the bottom up
approach for the proposed Project could not achieve the desired results of quality, cost
1
International roads can generally be described as those roads which connect other countries though Uzbekistan.
efficiency and timeliness, however, the Component 2 of the proposed Project is expected to
level the playing field by availing the equipment pool to be open to securing equipment needs
that private sector companies.
5. The more feasible approach is considered to be top down approach where the
subsidiary enterprises provide an excellent foundation for the development of the road
construction and maintenance private sector through the continued commercialization
leading to privatization of state owned road companies. Strengthening its subsidiary
enterprises’ businesses and hence profits will be, in the long run, generally beneficial for the
country as they could eventually be sold to strategic investors and private financiers/equity
for profit. It expects to further promote competition amongst state owned road companies to
secure necessary construction and maintenance equipment to be better equipped with future
opportunities in the international as well as national projects. These state owned road
companies will be strengthened through active participation in international bidding and could
be gradually spun off from Uzavtoyul and converted to private sector contractors. However,
with the current setting of these enterprises owning, operating and managing significant
length of international and regional road sections, any type of spin-off and/or partial
privatization is less likely to be attainable in the immediate future unless the government
buys back the strategic road sections under the enterprises’ control.
6. The below outlines and summarizes the findings of various options for the ownership
and financing mechanisms for effective and efficient utilization of equipment.
B. Assessment of Equipment Financing Options
7. The Mission explored four equipment financing options, which include (i) direct credit
sale to Uzavtoyul, (ii) establishment of an equipment pool, (iii) independent equipment pool
through a leasing company/ies, and (iv) creation of a credit line facility in the Road Fund. The
options are summarized below.
Table1: Equipment Financing and Ownership Options
Option 1 Option 2 Option 3 Option 4

Independent
Direct credit sale to Equipment Pool Equipment Pool Directed Credit
Uzavtoyul under Uzavtoyul through a Line Facility
leasing company
Description Routine and periodic road Equipment purchased Equipment Road fund
equipment purchased with with ADB loan to GOU purchased with establish a
ADB loan to GOU to be to be onlent to and ADB loan to GOU credit line
onlent and supplied to state supplied to Equipment to be onlent and facility through
owned road companies. Pool. supplied to an national bank of
State owned road existing, i.e. Uzbekistan
companies makes payments Uzmashservice, a Kurilish available for all
for equipment. state owned repair and Lizing/new facility including
workshop company Uzavtoyul,
Uzavtoyul is deemed a state could be revamped Kurilish lizing is a private sector
agency for roads. It has and used as one of the private leasing contractors and
confirmed that it ahs no operational divisions company and the leasing
capacity to own and manage under this structure mission was companies
the equipment. unable to identify
a suitable
13 state owned road government entity
companies undertake for this purpose
maintenance works.
Especially 7 state owned
road companies are viewed
independent in undertaking
construction as well as
maintenance works. Profits
are retained within
companies

Method Direct purchase Equipment hire charge Leasing Purchase

system and/or leasing
Owners of state owned road companies Equipment pool Government Credit users
equipment owned leasing
company
Identification Uzavtoyul, initially as a Equipment pool Government On a needs
of equipment coordinator to make alist of coordinated and owned leasing basis by the
to be equipment lists, and/or state reviewed by Uzavtoyul company users of credit
purchased owned road companies if only in the initial stage
identified until Equipment pool
becomes a legitimate
entity and operational
Purchaser of Uzavtoyul at an initial state Equipment Pool government Credit users
equipment for coordination but state owned leasing
(ADB owned road companies are company
guidelines) preferred to undertake its
own procurement
Equipment Inhouse or outsourcing Inhouse or outsourcing Government Suppliers/
Maintenance owned leasing Outsourcing
company or
outsourcing
Workshop In house or outsourcing In house or May be Needed
support outsourcing needed/outsourcin
g
Contributes No Encourage commercial Yes Yes
to activities
development
of the private
sector
Simplicity Simple Relatively simple More complex Least simple
than option 2
Time Short Marginally longer than Longer than Marginally
involved option 1 to meet option 2 longer than
GOU’s legal option 1
requirements for the
establishment of Road
Equipment Pool
Company (REPC)
Advantages Fast, simple; Full utilization of Private sector Fair opportunity
Minimum technical equipment; involvement; to all players
assistance; Supported by country True maintenance including
GOU’s request strategy; cost; private sector;
encourage arms length Arms length Tailors to
transaction; transaction individual
Extensive geographical guaranteed company’s
coverage; needs;
Will be able to Arms length
standardize and transaction
rationalize choice of guaranteed
equipment fee;
Promote cost recovery;
Generate its own
replacement funding;
Lending and borrowing
equipment amongst
road companies exist
but could be a lengthy
exercise. This
equipment pool could
provide a one shop
service for road
companies’ equipment
needs at an affordable
rate on a priority basis
Easy performance
tracking/monitoring of
equipment

Disadvantag Only few big subsidiary Marginal private sector Leasing law, Poor results in
es companies could benefit; involvement; regulation and the past using
Credit assessment of each More costly option as acts need be credit line
recipient necessary; additional technical reviewed prior to facility;
If onlent to subsidiary assistance is investment; The credit line
enterprises, there could be necessary to set up a Significant facility involves
several IAs; business development, technical another layer, a
Difficulties tracking management assistance bank;
performance monitoring; development, necessary to Difficulties in
Equipment may not be fully administrative and involving a leasing performance
utilized; financial system business; and safeguard
No private sector Not optimal and monitoring
involvement could be
considered as
crowding out
private leasing
businesses;
Only financing
leasing is
available;
Costly option
Source: ADB staff
C. Conclusion
8. From the assessment, it was determined that the establishment of equipment pool is
a preferred financing modality under the Component 2 by both GOU and ADB. This is further
in line with the Transport Sector Strategy financed under ADB TA4659 in December 2006
with the recommendation of revisiting the proposal for establishment of an Equipment
Management and Utilization Organization providing arms length leasing of construction
equipment to road companies as means of enhancing their operational capacity and hence
ability to compete on a broader market front. However, this option could entail adverse cost
and time implications. GOU and Uzavtoyul must facilitate necessary legal and regulatory
requirement to establish Road Equipment Pool Company (REPC) and ADB must assist
REPC all the necessary steps to start and normalize operations including establishing the
requisite administrative and financial procedures for operating the equipment unit and
prepare working manuals as necessary ensuring that the sector staff are fully trained in the
operation of those systems and procedures.

APPENDIX 3
FINANCIAL MANAGEMENT ASSESSMENT QUESTIONNAIRE

Topic Response Remarks
1. Implementing Agency
1.1 What is the entity’s legal status / In accordance with the decree of the
registration? President UP-3292 dated 18.08.2003
and Resolution of the President PP-
499 of 25.10.2006 the Republican
Road Fund under the Ministry of
Finance is the government agency
accumulating financial resources for
financing of designing, construction,
reconstruction, repair and
maintenance of common use roads.
1.2 Has the entity implemented an
externally-financed project in the No
past (if so, please provide details)?
1.3 What are the statutory reporting In accordance with the Resolution of
requirements for the entity? the President PP-499 dated
25.10.2006 the Republican Road
Fund shall submit the report to the
Republican Road Fund management
Board, with the accounting and other
reporting submitted to the Ministry of
Finance and other authorized
agencies.
1.4 Is the governing body for the Currently under development
project independent?
1.5 Is the organizational structure Currently under development
appropriate for the needs of the
project?
2. Funds Flow Arrangements
2.1 Describe (proposed) project funds Funds flow options are under
flow arrangements, including a consideration
chart and explanation of the flow of
funds from ADB, government and
other financiers.
2.2 Are the (proposed) arrangements Funds flow options are under
to transfer the proceeds of the loan consideration
(from the government / Finance
Ministry) to the entity satisfactory?
2.3 What have been the major
problems in the past in receipt of N/A
funds by the entity?
2.4 In which bank will the Imprest Cash processing centre of the main
Account be opened? department of the Central Bank of the
Republic of Uzbekistan for Tashkent
City
2.5 Does the (proposed) project Specialists with adequate
implementing unit (PIU) have qualification and experience in this
experience in the management of area will be hired to PMU and PIU
disbursements from ADB?


2.7 Does the entity have/need a The Borrower (Ministry of Finance)
capacity to manage foreign has an experience in foreign
exchange risks? exchange risks management
2.8 How are the counterpart funds Currently under development
accessed?
2.9 How are payments made from the The Government contribution is made
counterpart funds? in accordance with target lsit, to be
annually agreed with the Ministry of
Finance and the Ministry of Economy
in compliance with the Resolution of
the President of the Republic of
Uzbekistan.
2.10 If part of the project is implemented
by communities or NGOs, does the
PIU have the necessary reporting
N/A
and monitoring features built into its
systems to track the use of project
proceeds by such agencies?
2.11 Are the beneficiaries required to
contribute to project costs? If
beneficiaries have an option to
contribute in kind (in the form of Not required
labor), are proper guidelines
formulated to record and value the
labor contribution?
3. Staffing
3.1 What is the (proposed) After the organizational structure is
organizational structure of the approved
accounting department? Attach an
organization chart.
3.2 Identify the (proposed) accounts After the organizational structure is
staff, including job title, approved
responsibilities, educational
background and professional
experience. Attach job descriptions
and CVs of key accounting staff.
3.3 Is the project finance and After the organizational structure is
accounting function staffed approved
adequately?
3.4 Is the finance and accounts staff Finance and accounts staff with
adequately qualified and adequate qualification and
experienced? experience will be hired on a
competition basis
3.5 Is the project accounts and finance This provision will be given special
staff trained in ADB procedures? consideration when hiring finance
and accounts staff
3.6 What is the duration of the contract The duration of the contract is 1 year
with the finance and accounts
staff?
3.7 Indicate key positions not The contracts shall be made after the
contracted yet, and the estimated organisational structure is approved
date of appointment.


3.10 Does the project have written After the organizational structure is
position descriptions that clearly approved
define duties, responsibilities, lines
of supervision, and limits of
authority for all of the officers,
managers, and staff?
3.11 At what frequency are personnel
N/A
transferred?
3.12 What is training policy for the Annual training in the various carrier
finance and accounting staff? development courses and
participation on ADB seminars
4. Accounting Policies and Procedures
4.1 Does the entity have an accounting Yes.
system that allows for the proper
recording of project financial The accounting system will be
transactions, including the developed for the project in
allocation of expenditures in compliance with the existing
accordance with the respective guidelines and regulations of the
components, disbursement Ministry of Finance and ADB
categories, and sources of funds?
Will the project use the entity
accounting system?
4.2 Are controls in place concerning In place
the preparation and approval of
transactions, ensuring that all
transactions are correctly made
and adequately explained?
4.3 Is the chart of accounts adequate National Accounting Standards 21
to properly account for and report are applied with the amendments,
on project activities and which take into account ADB
disbursement categories? requirements, ensure accounting
transparency.
4.4 Are cost allocations to the various
funding sources made accurately
Yes
and in accordance with established
agreements?
4.5 Are the General Ledger and General ledger and subsidiary
subsidiary ledgers reconciled and ledgers are periodically reconciled.
in balance?
4.6 Are all accounting and supporting In accordance with the Law of the
documents retained on a Republic of Uzbekistan On
permanent basis in a defined Accounting.
system that allows authorized
users easy access?


Segregation of Duties
4.7 Are the following functional After the organizational structure is
responsibilities performed by approved. The following segregation
different units or persons: (i) of duties is proposed:
authorization to execute a (i) project manager
transaction; (ii) recording of the (ii) accountant
transaction; and (iii) custody of (iii) accountant, office-manager
assets involved in the transaction? To be additional clarified following the
approval of organizational structure
4.8 Are the functions of ordering, After the organizational structure is
receiving, accounting for, and approved. It is proposed that:
paying for goods and services depending on the operations
appropriately segregated? functions to be segregated between
project manager, accountant,
procurement specialist and office-
manager
4.9 Are bank reconciliations prepared After the organizational structure is
by someone other than those who approved. It is proposed that:
make or approve payments? payments to be approved by the
accountant. For bank reconciliation
cross-check system should be
applied, i.e. accountant and office-
manager, accountant and
procurement specialist, etc.
Budgeting system
4.10 Do budgets include physical and After project and budget are
financial targets? approved.
4.11 Are budgets prepared for all After project and budget are
significant activities in sufficient approved
detail to provide a meaningful tool
with which to monitor subsequent
performance?
4.12 Are actual expenditures compared Yes, undertaken on a monthly and
to the budget with reasonable quarterly basis with explanations
frequency, and explanations thereto.
required for significant variations
from the budget?
4.13 Are approvals for variations from In advance
the budget required in advance or
after the fact?
4.14 Who is responsible for preparation Project manager, planner, chief
and approval of budgets? accountant (to be clarified after the
project is approved).
4.15 Are procedures in place to plan Prior to commencement of project
project activities, collect information implementation it is necessary to
from the units in charge of the develop procedures for project
different components, and prepare activities planning and information
the budgets? collection based on requirements of
Executive agency (RF) and ADB


4.16 Are the project plans and budgets
of project activities realistic, based
on valid assumptions, and N/A
developed by knowledgeable
individuals?
Payments
4.17 Do invoice-processing procedures The proposal is:
provide for: (i) Copies of purchase
orders and receiving reports to be (i) Accountant
obtained directly from issuing (ii) Procurement specialist
departments? (ii) Comparison of (iii) office-manager
invoice quantities, prices and (iv) Procurement specialist and
terms, with those indicated on the accountant
purchase order and with records of Additional adjustments will be made
goods actually received? (iii) after the approval of the projects,
Comparison of invoice quantities budget and project implementation
with those indicated on the plan
receiving reports? (iv) Checking the
accuracy of calculations?
4.18 Are all invoices stamped PAID, It is proposed to conduct payment
dated, reviewed and approved, and procedures and account code
clearly marked for account code assignment in accordance with the
assignment? national standards (payment order).
4.19 Do controls exist for the Verified by the top management.
preparation of the payroll and are
changes to the payroll properly
authorized?
Policies and procedures
4.20 What is the basis of accounting The accrual method is used in
(e.g., cash, accrual)? accordance with national legislation.
4.21 What accounting standards are National Accounting Standards
followed?
4.22 Does the project have an adequate After the project is approved. Job
policies and procedures manual to descriptions. Organisational structure
guide activities and ensure staff of PMU/PIU,
accountability?
4.23 Is the accounting policy and Prior to the commencement of project
procedure manual updated for the implementation it is necessary to
project activities? develop accounting policy, which can
be updated in accordance with newly
introduced amendments to national
legislation and ADB requirements
4.24 Do procedures exist to ensure that It is proposed to reflect it in the
only authorized persons can alter regulation of PMU/PIU
or establish a new accounting
principle, policy or procedure to be
used by the entity?
4.25 Are there written policies and Regulation on the Republican Road
procedures covering all routine Fund under the Ministry of Finance of
financial management and related the Republic of Uzbekistan (as
administrative activities? executing agency)


4.26 Do policies and procedures clearly To be clarified after the project is
define conflict of interest and approved
related party transactions (real and
apparent) and provide safeguards
to protect the organization from
them?
4.27 Are manuals distributed to To be clarified after the project is
appropriate personnel? approved
Cash and Bank
4.28 Indicate names and positions of The Project makes provisions for:
authorized signatories in the bank Project manager and Accountant
accounts.
4.29 Does the organization maintain an Timely cashbook record keeping and
adequate, up-to-date cashbook, observation of cash discipline in
recording receipts and payments? compliance with the guidelines on
cash transactions conduct.
4.30 Do controls exist for the collection,
timely deposit and recording of Yes
receipts at each collection location?
4.31 Are bank and cash reconciled on a
Yes
monthly basis?
4.32 Are all unusual items on the bank
reconciliation reviewed and N/A
approved by a responsible official?
4.33 Are all receipts deposited on a The receipts and charges to the
timely basis? Republican Road Fund shall be
deposited within the prescribed
period in accordance with the
regulation on procedure for
generation and expenditure of funds
of the Republican Road Fund
Safeguard over Assets
4.34 Is there a system of adequate
safeguards to protect assets from Yes
fraud, waste and abuse?
4.35 Are subsidiary records of fixed
assets and stocks kept up to date Yes
and reconciled with control
accounts?
4.36 Are there periodic physical Yes, annually (or in case of
inventories of fixed assets and replacement of official)
stocks?
4.37 Are assets sufficiently covered by
No
insurance policies?
Other Offices and Implementing Entities
4.38 Are there any other regional offices Yes, regional territorial road
or executing entities participating in maintenance entities of SJSC
implementation? «Uzavtoyul»


4.39 Has the project established It shall be developed prior to the
controls and procedures for flow of commencement of project
funds, financial information, implementation
accountability, and audits in
relation to the other offices or
entities?
4.40 Does information among the
different offices/implementing
Yes
agencies flow in an accurate and
timely fashion?
4.41 Are periodic reconciliations Yes, on a quarterly basis or as may
performed among the different be required
offices/implementing agencies?
Other
4.42 Has the project advised
employees, beneficiaries and other
recipients to whom to report if they Yes
suspect fraud, waste or misuse of
project resources or property?
5. Internal Audit
5.1 Is there a internal audit department
No
in the entity?
5.2 What are the qualifications and
experience of audit department N/A
staff?
5.3 To whom does the internal auditor
N/A
report?
5.4 Will the internal audit department
include the project in its work N/A
program?
5.5 Are actions taken on the internal
N/A
audit findings?
6. External Audit
6.1 Is the entity financial statement The audit of the Republican Road
audited regularly by an Fund is conducted by the Accounting
independent auditor? Who is the Chamber of the Republic of
auditor? Uzbekistan in compliance with the
national legislation
6.2 Are there any delays in audit of the Periods for issue of audit report
entity? When are the audit reports should be defined in accordance with
issued? the ADB procedures
6.3 Is the audit of the entity conducted The audit of the Republican Road
according to the International Fund is conducted by the Accounting
Standards on Auditing? Chamber of the Republic of
Uzbekistan in compliance with the
national legislation
6.4 Were there any major
accountability issues brought out in
N/A
the audit report of the past three
years?


6.5 Will the entity auditor audit the The auditor to audit project financial
project accounts or will another statements will be selected on a
auditor be appointed to audit the tender basis
project financial statements?
6.6 Are there any recommendations
made by the auditors in prior audit
No
reports or management letters that
have not yet been implemented?
6.7 Is the project subject to any kind of Yes, Accounting Chamber of the
audit from an independent Republic of Uzbekistan
governmental entity (e.g., the
supreme audit institution) in
addition to the external audit?
6.8 Has the project prepared Under preparation by the Technical
acceptable terms of reference for Assistance Consultants.
an annual project audit?
7. Reporting and Monitoring
7.1 Are financial statements prepared In accordance with the national
for the entity? In accordance with standards of the Republic of
which accounting standards? Uzbekistan
7.2 Are financial statements prepared During project implementation for
for the implementing unit? superior management bodies and
ADB
7.3 What is the frequency of Depending on the form of reporting
preparation of financial timely monthly, quarterly, semi-
statements? Are the reports annual and annual report are
prepared in a timely fashion so as prepared or those requested by the
to useful to management for top management.
decision making?
7.4 Does the reporting system need to
be adapted to report on the project N/A
components?
7.5 Does the reporting system have the
capacity to link the financial
information with the project's
physical progress? If separate
systems are used to gather and N/A.
compile physical data, what
controls are in place to reduce the
risk that the physical data may not
synchronize with the financial data?
7.6 Does the project have established
financial management reporting
responsibilities that specify what
N/A
reports are to be prepared, what
they are to contain, and how they
are to be used?
7.7 Are financial management reports Yes, for planning and decisions
used by management? making purposes
7.8 Do the financial reports compare Yes.
actual expenditures with budgeted
and programmed allocations?


7.9 Are financial reports prepared The computerized accounting system
directly by the automated «1С – Accounting» will be introduced
accounting system or are they
prepared by spreadsheets or some
other means?
8. Information Systems
8.1 Is the financial management
Yes
system computerized?
8.2 Can the system produce the
Yes
necessary project financial reports?
8.3 Is the staff adequately trained to Yes, it is stipulated to carry out
maintain the system? training programme courses for
financial and accounting personnel
8.4 Does the management
organization and processing
system safeguard the Yes
confidentiality, integrity and
availability of the data?
RSCG

APPENDIX 4
BUDGET FORMULATION AND APPROVAL PROCEDURES
Ministry of Finance
BUDGET INQUIRY
Provincial administrations,
Recipients of republican
Entities responsible for state
budget funds
trust-in-funds
City and district City and district

administrations administrations
Entities receiving funds

from city and district
budgets
REQUEST FOR FUNDS

Entities receiving funds until June 1
Provincial Finance
from local budgets Departments
until July 1
Entities receiving funds
Ministry of Finance
from republican budget
until June 25
DRAFT BUDGETS
District and City Provincial Finance
Financial Units Departments
Provincial administrations, until July 1

Entities responsible for Ministry of Finance
state trust-in-funds
DRAFT STATE BUDGET
Until Until
September 15 October 15
MINISTRY OF THE CABINET OF

OLIY MAJLIS
FINANCE MINISTERS
Notes: The Cabinet of Ministers sets the sending dates of the Budget Inquiry
Ministry of Finance establishes the procedures and forms for Request for Funds

APPENDIX 5
RATES OF CONTRIBUTIONS TO THE REPUBLICAN ROAD FUND UNDER

THE MINISTRY OF FINANCE
Table 1. Compulsory contributions

Rate (%)
No Types of contributions and fees Basis
2007 2006 2005
Entities providing intermediary services

1 Turnover less VAT 1,0% 1,0% 1,5%
under commission basis contracts
2 Warehousing, supplying entities Turnover less VAT 0,0% 1,0% 1,0%
Republican specialized wholesale

3 Gross profit 1,0% 1,5% 1,5%
organizations and their regional branches
4 Drug stores Gross profit 0,0% 1,0% 1,0%
5 Trade companies Turnover 0,0% 1,0% 1,0%

Commercial banks, credit unions,
5 microfinance institutions, insurance Profit 1,5% 1,5% 1,5%
companies, auctions, show business
6 Leasing companies Profit 1,5% 1,5% 1,5%
Turnover less
Heating, water and gas supplying
7 VAT, cost of 1,5% 1,5% 1,5%
organizations
energy/water/gas
Construction companies and design
8 Turnover less VAT 1,5% 1,5% 1,5%
institutes
9 Auto and transportation companies Turnover less VAT 2,5% 2,5% 2,5%
Turnover less
10 Others 1,5% 1,5% 1,5%
VAT, Excise
Table 2. Other fees

Rate (%)
No Types of contributions and fees Basis
2007 2006 2005
1 Fees paid by the owners of vehicles upon registration
Buses up to 40 seats and trucks with load

1.1 Cost of the vehicle 20% 20% 20%
capacity of up to 10t
1,2 All other vehicles Cost of the vehicle 6% 6% 6%
Income from sales of the property of SJSC

2 Property sold 50% 50% 50%
"Uzavtoyul"

Rates of Collections of the Repiblican Road Fund under the Ministry of Finance
for the Entrance and Transit of Vehicles to the Territory of Uzbekistan
Rate (in USD)

No Types of contributions and fees
2007 2006 2005
Fee for entering the territory of Uzbekistan by vehicle from

1 foreign countries, per vehicle (excl. countries mentioned under 400 400 400
2 - 5)
Fee for entering the territory of Uzbekistan by the truck or bus
2
of Tadjikistan
per truck or bus 130 130 130
per one day after 8 days per truck or bus 50 50 50
for transit of buses or trucks through the terriroty of
90 90 90
Uzbekistan to third countries (except CIS)
3 300 300 300
of Kazakstan, except transit
4 300 300 300
of Kyrgiz Republic
5
of Turkmenistan
Trucks with load capacity of:
up to 10 t 50 50 50
from 10 to 20 t 100 100 100
more than 20 t 150 150 150
Buses with passenger capacity of:
less than 12 seats 25 25 25
from 13 to 30 seats 50 50 50
more than 30 seats 100 100 100
transit cars 30 30 30
transit motorbikes 15 15 15
* Note: When carrying the humanitarian cargo, coeficient of 0,5 is applied to the rates

APPENDIX 6
CHART OF ACCOUNTS (NATIONAL ACCOUNTING STANDARDS NO.21)
No of
Name of account Type
acc
PART I LONG-TERM ASSETS
Section 1 FIXED ASSETS, INTANGIBLE & OTHER LONG-TERM ASSETS
0100 FIXED ASSETS A
1100 Land
0111 Land Improvements
0112 Long-term Leasehold Improvements
0120 Buildings and Facilities
0130 Machinery and Equipment
0140 Furniture and Office fixtures
0150 Computer equipment and techniques
0160 Vehicles
0170 Draft animals and Livestock
0180 Perennial Plants
0190 Other Fixed Assets
0199 Preserved Fixed Assets
0200 DEPRECIATION OF FIXED ASSETS CA
0211 Depreciation of Land Improvements
0210 Depreciation of Long-term Leasehold Improvements
0220 Depreciation of Buildings and Facilities
0230 Depreciation of Machinery and Equipment
0240 Depreciation of Furniture and Office fixtures
0250 Depreciation of Computer equipment and techniques
0260 Depreciation of Vehicles
0270 Depreciation of Draft Animals
0280 Depreciation of Perennial Plants
0290 Depreciation of Other Fixed Assets
0299 Depreciation of Fixed Assets Received on Long-term Rent
0300 FIXED ASSETS RECEIVED ON LONG-TERM RENT A
0310 Fixed Assets, Received on Long-term Rent
0400 INTANGIBLE ASSETS A
0410 Patents, Licenses and Know-how
0420 Trademarks, Trade signs & Industrial samples
0430 Software
0440 Rights to use land and natural resources
0450 Organization Costs
0460 Franchise fees
0470 Copyrights
0480 Goodwill
0490 Other Intangible Assets
0500 AMORTIZATION OF INTANGIBLE ASSETS CA
0510 Accumulated Amortization - Patents, Licenses and Know-how
0520 Accumulated Amortization - Trademarks, Trade signs & Industrial
samples
0530 Accumulated Amortization - Software
0540 Accumulated Amortization - Rights to use land and natural resources
0550 Accumulated Amortization - Organization Costs

0560 Accumulated Amortization - Franchise fees
No of
acc
0570 Accumulated Amortization - Copyrights
0590 Accumulated Amortization - Other Intangible Assets
0600 LONG-TERM INVESTMENTS A
0610 Securities
0620 Investments in Subsidiaries
0630 Investments in Subordinates
0640 Investments in enterprises with foreign capital
0690 Other Long-term Investments
0700 EQUIPMENT TO BE INSTALLED A
0710 Equipment to be installed - Local
0720 Equipment to be installed - Imported
0800 CAPITAL INVESTMENTS A
0810 Work in progress
0820 Acquisition of fixed assets
0830 Acquisition of intangible assets
0840 Formation of main herd
0850 Capital Investments in Land Improvements
0860 Capital Investments in Fixed Assets received on long-term rent
0890 Other Capital investments
0900 LONG-TERM RECEIVABLES AND DEFERRED CHARGES A
0910 Notes Receivable
0920 Long-term Rent Payments Receivable
0930 Personnel Long-term Receivables
0940 Other Long-term Receivables
0950 Deferred income tax on temporary differences
0960 Long-term Deferred Expenses on Discounts
0990 Other Long-term Deferred Expenses
PART II CURRENT ASSETS
Section 2 INVENTORY
1000 RAW MATERIALS INVENTORY A
1010 Materials
1020 Purchased Semi-finished Goods and Components
1030 Fuel
1040 Spare Parts
1050 Construction Materials
1060 Packaging Materials
1070 Materials for Outside Processing
1080 Inventory and household fixings
1090 Other Materials
1100 ANIMALS FOR BREEDING A
1100 Animals for Growing
1120 Animals for Fattening
1200
1300
1400
1500 PROVISION AND PURCHASE OF MATERIALS
1510 Provision and Purchase of Materials
IKS/RRI 2 TASHKENT, SEPTEMBER 2007

No of Name of account Type

acc
1600 DEVIATION IN COST OF MATERIALS A
1610 Deviation in Cost of Materials
1700
1800
1900
2000 MAIN PRODUCTION WORK IN PROCESS
2010 Main Production Work in Process
2100 TRANSFER OF IN PROCESS INVENTORY A
2110 Transfer of in process inventory
2200
2300 AUXILIARY PRODUCTION IN PROCESS A
2310 Auxiliary Production in Process
2400
2500 GENERAL PRODUCTION EXPENSES
2510 General Production Expenses
2600 DAMAGE IN PRODUCTION
2610 Damage in Production
2700 ATTENDANT ENTERPRISES A
2710 Attendant Enterprises
2800 FINISHED GOODS INVENTORY A
2810 Finished Goods in Warehouse
2820 Finished Goods in Exhibition
2830 Finished Goods submitted to commission
2900 GOODS A
2910 Goods in Warehouse
2920 Goods in Retail Trade
2930 Goods in Exhibition
2940 Items for Rent
2950 Full and Empty packaging
2960 Goods submitted to commission
2970 Goods in Transit
2980 Trading Estimate
2990 Other Goods
Section 3 PREPAID EXPENSES AND
DEFERRED EXPENSES - CURRENT PORTION
3000
3100 PREPAID EXPENSES A
3110 Prepaid Rent
3120 Prepaid Services
3190 Other Prepayments
3200 DEFERRED EXPENSES A
3210 Deferred income tax on temporary differences
3220 Deferred Expenses on Discounts
3290 Other Deferred Expenses
3300
3400
3500
3600
3700
3800
No of
acc

3900
Section 4 RECEIVABLES - CURRENT PORTION
4000 ACCOUNTS RECEIVABLE A
4010 Accounts Receivable form Customers
4020 Notes Receivable
4100 ACCOUNTS RECEIVABLE FROM SUBDIVISIONS, SUBSIDIARIES AND A
SUBORDINATES
4110 Accounts Receivable from Subdivisions
4120 Accounts Receivable from Subsidiaries and Subordinates
4200 ADVANCES GIVEN TO PERSONNEL A
4210 Advances given for payroll
4220 Advances given for business-trips
4230 Advances for General Expenses
4290 Other Advances given to personnel
4300 ADVANCES GIVEN TO SUPPLIERS AND CONTRACTORS A
4310 Advances given to suppliers and contractors for inventory
4320 Advances given to suppliers and contractors for long-term assets
4330 Other Advances Given
4400 ADVANCE PAYMENTS TO BUDGET A
4410 Advance payments on taxes and fees to budget
ADVANCE PAYMENTS TO STATE FUNDS FOR SPECIAL PURPOSE A
4500 AND ON INSURANCE
4510 Advance payments on insurance
4520 Advance payments to state funds for special purpose
4600 RECEIVABLES FROM FOUNDERS A
4610 Receivables from Founders
4700 RECEIVABLES FROM PERSONNEL ON OTHER TRANSACTIONS A
4710 Receivables for goods on credit
4720 Receivables on loans
4730 Receivables to cover material loss
4790 Receivables on other transactions
4800 OTHER RECEIVABLES A
4810 Long-term Rent Payments Receivable
4820 Short-term Rent Payments Receivables
4830 Interest Receivable
4840 Dividends Receivable
4850 Royalty Receivable
4860 Claims Receivable
4890 Other Receivables
4900 ALLOWANCE FOR DOUBTFUL DEBTS CA
4910 Allowance for Doubtful Debts
Section 5
CASH, SHORT-TERM INVESTMENTS AND OTHER NON-CASH CURRENT ASSETS
5000 CASH A
5010 Cash in national currency
5020 Cash in foreign currency
5100 CASH ON SETTLEMENT ACCOUNT A
5110 Settlement account
5200 CASH IN FOREIGN CURRENCY ACCOUNTS A
5210 Foreign Currency Accounts Domestic
5220 Foreign Currency Accounts Abroad
No of
acc
5300

5400
5500 SPECIAL BANK ACCOUNTS A
5510 Letters of Credit
5520 Cash in Checking Account
5530 Other Special Accounts
5600 CASH EQUIVALENTS A

5610 Cash Equivalents
5700 CASH (TRANSFERS) IN TRANSIT A
5710 Cash (Transfers) in Transit
5800 SHORT-TERM INVESTMENTS A
5810 Securities
5830 Short-term loans receivable
5890 Other Current Investments
SHORTAGE AND LOSS FROM DETERIORATION OF VALUABLES AND
5900 OTHER CURRENT ASSETS A
5910 Shortage and Loss from deterioration of valuables
5920 Other Current Assets
PART III LIABILITIES
Section 6 SHORT-TERM LIABILITIES
6000 ACCOUNTS PAYABLE TO SUPPLIERS AND CONTRACTORS L
6010 Accounts Payable to Suppliers and Contractors
6020 Notes Payable
ACCOUNTS PAYABLE
6100 L
TO SUBDIVISIONS AND SUBORDINATES
6110 Accounts Payable to Subdivisions
6120 Accounts Payable to Subsidiaries and Subordinates
6200 DEFERRED LIABILITIES L
6210 Unearned Discounts CL
6220 Unearned Premiums
6230 Other Unearned Income
6240 Deferred Liabilities on Taxes and Obligatory payments
6250 Liabilities on Income Tax on Temporary Differences
6290 Other Deferred Liabilities
6300 ADVANCES RECEIVED L
6310 Advances Received from Customers
6320 Advances Received from Subscribers to Stock
6390 Other Received Advances
6400 DEBT ON BUDGET PAYMENTS L
6410 Debt on Budget Payments (on types of taxes)
INSURANCE DEBT AND DEBT ON PAYMENTS TO STATE FUNDS
6500 L
FOR SPECIAL PURPOSE
6510 Insurance Debt
6520 Debt on payments to state funds for special purpose
6600 DEBT TO FOUNDERS L
6610 Dividends Payable
6620 Debt due to leaving founders
6700 SETTLEMENTS WITH PERSONNEL L
6710 Settlements with Personnel
6720 Escrow Salary

acc
6800 SHORT-TERM CREDITS AND LOANS L
6810 Short-term Bank Credits

6820 Short-term Loans
6830 Bonds Payable - non-bank
6840 Notes Payable - non-bank
6900 OTHER PAYABLES L
6910 Short-term Rent Payable
6920 Accrued Interest
6930 Debt on Royalty
6940 Debt on Guaranties
6950 Long-term Liabilities - current portion
6960 Payable on Claims
6970 Debt due to employees
6990 Other Liabilities
Section 7 LONG-TERM LIABILITIES
7000 ACCOUNTS PAYABLE TO SUPPLIERS AND CONTRACTORS L
7010 Accounts Payable to Suppliers and Contractors
7020 Notes Payable
LONG-TERM LIABILITIES TO SUBDIVISIONS, SUBSIDIARIES AND
7100 L
SUBORDINATES
7110 Long-term Liabilities to Subdivisions
7120 Long-term Liabilities to Subsidiaries and Subordinates
7200 DEFERRED LONG-TERM LIABILITIES L
7210 Deferred Discounts
7220 Deferred Premiums
7230 Other Deferred Incomes
7240 Deferred Liabilities on Taxes and Obligatory payments
7250 Deferred Income Tax Liability on temporary differences
7290 Other Deferred Long-term Liabilities

7300 ADVANCES RECEIVED FROM CUSTOMERS - LONG-TERM PORTION L
7310 Advances Received from Customers - long-term portion
7400
7500
7600
7700
7800 LONG-TERM CREDITS AND LOANS L
7810 Long-term bank credits
7820 Long-term Loans
7830 Bonds Payable
7840 Notes Payable
7900 OTHER LONG-TERM LIABILITIES L
7910 Long-term Rent Payable
7920 Other Long-Term Liabilities
PART IV
OWNER'S EQUITY
Section 8. CAPITAL, RETAINED EARNINGS AND RESERVES
8000
No of
acc
8100
8200
8300 CHARTERED CAPITAL L
8310 Common Stock
8320 Preferred Stock

8430 Donated Capital
8400 ADDITIONAL CAPITAL
8410 Revenues from Issuance
8420 Foreign Exchange difference in forming chartered capital
8500 RESERVE CAPITAL L
8510 Assets Revaluation Adjustment
8520 Reserve Capital fixed by Legislation
8530 Property Received on Gratis
8600 TREASURY STOCK CL
8610 Treasury Stock - Common
8620 Treasury Stock - Preferred
8700 RETAINED EARNINGS (NON-COVERED LOSS) L
8710 Retained Earnings (Non-covered Loss) for Reporting Period
8720 Retained Earnings for Prior Periods (Non-covered Loss)
8800 FUNDS RECEIVED FOR SPECIAL PURPOSES L
8810 Grants
8820 Subsidies
8830 Membership fees
8840 Tax Remissions for special purpose
8890 Other funds received for special purposes
8900 RESERVE OF FUTURE EXPENSES AND PAYMENTS L
8910 Reserve of Future Expenses and Payments
PART V FORMATION AND UTILIZATION OF FINANCIAL RESULTS

Section 9. REVENUES AND EXPENSES
9000 REVENUES FROM MAIN BUSINESS T
9010 Revenues from Sale of Finished Goods
9020 Revenues from Sale of Goods
9030 Revenues from Sales of Works and Services
9040 Sales Return CL
9050 Discounts for Customers CL
9100 COST OF GOODS (WORKS, SERVICES) SOLD T
9110 Cost of Finished Goods Sold
9120 Cost of Goods Sold
9130 Cost of Works and Services Sold
9140 Acquisition/Purchase of Inventory in periodical accounting
9150 Inventory Adjustments in periodical accounting
9200 DISPOSAL OF FIXED AND OTHER ASSETS
9210 Disposal of fixed assets
9220 Disposal of other assets

acc
9300 OTHER INCOME FROM MAIN BUSINESS T
9310 Gain from disposal of fixed assets
9320 Gain from disposal of other assets
9330 Paid fines, penalties and forfeits
9340 Income of previous years
9350 Income from short-term rent
9360 Income from writing off payables and depositor debt
9370 Income of attendant enterprises

9380 Financial Donations
9390 Other operating income
9400 PERIOD EXPENSES T
9410 Selling Expenses
9420 Administrative Expenses
9430 Other Operational Expenses
9440 Reporting Period Expenses excluded from taxable base in future
9500 INCOME FROM FINANCIAL ACTIVITY T
9510 Income from Royalty
9520 Income from Dividends
9530 Interest Income
9540 Income from differences in currency exchange (positive)
9550 Income from long-term rent
9560 Income from revaluation of securities
9570 Other Income from Financial Activity
9600 EXPENSES ON FINANCIAL ACTIVITY T
9610 Interest expenses
9620 Foreign Currency Exchange difference losses (negative)
9630 Expenses on Issue and Distribution of Securities
9690 Other Expenses on Financial Activity
9700 EXTRAORDINARY GAIN (LOSS) T
9710 Extraordinary Gain
9720 Extraordinary Loss
9800 UTILIZATION OF PROFIT FOR TAXATION AND FEES T
9810 Income Tax
9820 Fees and other mandatory deductions
9900 INCOME SUMMARY T
9910 Income Summary
PART VI OFF-BALANCE ACCOUNTS
001 Fixed Assets on short-term rent (leased) OB
002 Inventory deposited in custody OB
003 Materials received for processing OB
004 Goods taken on commission OB
005 Equipment received for mounting OB
006 Forms under seal OB
007 Written-off bad debts OB
008 Security for debt and payment - received OB
009 Security for debt and payment - issued OB
010 Fixed Assets under long-term rent agreement OB
011 Property received under subsidy agreement OB
No of
acc
012 Expenses excluded from taxable base of the following periods OB
013 Temporary tax remissions (by types) OB
014 Inventory and household fixings in operation OB
Notes:
A - Assets Account
CA - Contra Assets Account
L - Liability & Owners Equity Account
CL - Contra Liability & Owners Equity Account
T - Temporary Account
OB - Off-Balance Sheet Account

APPENDIX 7
PROJECT IMPLEMENTATION ARRANGEMENTS
Project Implementation Unit – Road Fund

Head of PIU
Project Management Procurement

and Supervision Specialist
(CSP-1) (INV)
Contact Officer Contact officer Contact officer of

of Road Fund of Road Fund Uzavtoyul
Road Road Sector Consultant Establishment of

Construction Planning and (CSP-2) Equipment Unit
Component Management
System
Civil Works Contractor Consultant Goods Suppliers

(CWPs 1-6) (CSP-3) (GPs 1-7)

APPENDIX 8
PROCUREMENT PLAN AND TENTATIVE CONTRACT PACKAGES
Project Information
Country Republic of Uzbekistan
Name of Borrower Ministry of Finance
Project Name Regional Road Project
Loan Reference TBD
Date of Effectiveness TBD
Project Cost Amount ($ million) $170.6 million
Of which ADB Loan Amount ($ million) $85.2 million
Executing Agency The Road Fund
Approval Date of Original Procurement TBD
Plan
Approval of Most Recent Procurement TBD
Plan
Publication for Local Advertisement TBD
Period Covered by this Plan1 TBD
Procurement Thresholds, Goods & Related Services, Works and Supply & Install
Methods Threshold
International Competitive Bidding (works) > $2,000,000
International Competitive Bidding (goods) > $1,000,000
National Competitive Bidding (works) </= $2,000,000
National Competitive Bidding (goods) </= $1,000,000
Shopping (works) </= $100,000
Shopping (goods) </= $100,000
Exceptional Methods
Limited International Bidding (works) $100,000~$1,000,000
Limited International Bidding (goods) $100,000~$1,000,000
Procurement Thresholds, Consultants Services

Methods Threshold
> $1,000,000 by Full Technical Proposal
</= 1,000,000 by Simplified Technical
Quality Cost Based Selection (QCBS)
Proposal
</= $600,000 by Bio-data Technical Proposal
Consultants Qualifications Selection (CQS) </= $200,000 (ex. External auditors)
Least Cost Selection (LCS) </= $100,000 (ex. External auditors)
Individual consultant (International
Procurement Specialist). Justification: A
Single-Source Selection Procurement Specialist is required to help the
Road Fund undertake advance actions for
procurement of contractors and consultants
1
The plan will be updated annually, on rolling 18-month basis, on the anniversary of the date of loan
effectiveness.

Table 1: List of Contract Packages in Excess of $100,000

Goods, Works, and Consulting Services
Estimated Expected Prior

Contract Procurement
Ref Costs Date of Review Comments
Description Methods
($ million) Advertisement Y/N
Financed by ADB
1. Civil Works 86.4 ICB/NCB October 2007 Y
and GOU
2. Goods 57.9 ICB October 2007 Y Financed by ADB
Consulting
3. 4.6 QCBS October 2007 Y Financed by ADB
Services
ADB = Asian Development Bank, GOU = Government of Uzbekistan, ICB = international competitive bidding,
N = no, NCB = national competitive bidding, QCBS = quality- and cost-based selection, Y = yes.
Source: the Road Fund.
Table 2: Proposed Detailed Contract Packaging

Estimated Mode of Contract
Contract Duration Contract Responsible
Ref Unit Costs Procure- Comple-
Description (months) Starting Agency
($ million) ment tion
Length
A. Civil Works
(km)
CWP-1A:
1. 20 2.0 NCB 9 Jan 2008 Sept 2008 Road Fund
Km 876-896
CWP-1B: March
2. 20 11.2 ICB 18 Oct 2008 Road Fund
Km 876-896 2009
CWP-2A:
3. 20 2.0 NCB 9 Jan 2008 Sept 2008 Road Fund
Km 896-916
CWP-2B: March
4 20 11.2 ICB 18 Oct 2008 Road Fund
Km 896-916 2009
CWP-3:
5 20 13.2 ICB 18 Jan 2009 June 2010 Road Fund
Km 490-510
CWP-4:
6.. 20 13.2 ICB 18 Jan 2009 June 2010 Road Fund
Km 510-530
CWP-5:
7. 25 16.5 ICB 21 April 2010 Dec 2011 Road Fund
Km 530-555
CWP-6:
8. 26 17.1 ICB 21 April 2010 Dec 2011 Road Fund
Km 555-581
Total Civil
131 86.4
Works
B. Goods Set
March
1. GP-1 58 11.0 ICB 9 July 2008 REMU
2009
March
2. GP-2 10 4.5 ICB 9 July 2008 REMU
2009
March
3. GP-3 37 7.8 ICB 9 July 2008 REMU
2009
March
4. GP-4 58 11.0 ICB 9 July 2008 REMU
2009
5. GP-5 58 11.0 ICB 6 July 2009 Dec 2009 REMU
Total Goods 299 57.9

Person
Consulting
C. -month
Services
(total)
INV:
1. Procurement 12 0.24 SSS 12 Oct 2007 Sep 2008 Road Fund
Specialist
CSP-1:
Project
management
2. 296 2.4 QCBS 39 Oct 2008 Dec 2011 Road Fund
and
construction
services
CSP-2:
3. Establishmen 22 0.3 QCBS 6 April 2008 Sep 2009 Road Fund
t of REMU
CSP-3: Road
Sector March
4. 136 1.7 QCBS 12 April 2009 Road Fund
Planning and 2010
Management
Total
Consulting 466 4.64
Services
Total
Contract 148.64
Packages
CSP = consulting service package, CWP = civil works package, GOU = Government of Uzbekistan, GP = goods
package, INV = individual consultant, ICB = international competitive bidding, NCB = national competitive bidding, km
= kilometer, QCBS = quality- and cost-based selection.
Source: The Road Fund.

APPENDIX 9
P R O J E C T IM P L E M E N T A T IO N S C H E D U L E
A c t iv it y 2007 2008 2009 2010 2011

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
P r e p a r a to r y W o r k s
S e t- u p o f P IU
W e b s ite d e v e lo p m e n t a n d u p lo a d in g
R e c r u itm e n t o f P ro c u re m e n t S p e c ia lis t
P re p a r a to r y W o r k s fo r P ro c u r e m e n t
R e c r u itm e n t o f D e ta ile d E n g in e e r in g D e s ig n C o n s u lta n t
E n g in e e r in g d e s ig n
C iv il W o r k s
R e c r u itm e n t o f P ro je c t M a n a g e m e n t a n d S u p e r v is io n C o n s u lta n t
P ro je c t M a n a g e m e n t a n d S u p e r v is io n W o r k s
P ro c u r e m e n t C W P - 1 A a n d C W P - 2 A
C iv il w o rk s C W P -1 A a n d C W P - 2 A
P ro c u r e m e n t C W P - 1 B a n d C W P - 2 B
C iv il w o rk s C W P -1 B a n d C W P - 2 B
P ro c u r e m e n t C W P - 3 a n d C W P - 4
C iv il w o rk s C W P -3 a n d C W P - 4
P ro c u r e m e n t C W P - 5 a n d C W P - 6
C iv il w o rk s C W P -5 a n d C W P - 6
R o a d E q u ip m e n t
P ro c u r e m e n t o f E q u ip m e n t G P -1 , G P - 2 , G P -3 , a n d G P -4
D e liv e ry o f E q u ip m e n t G P -1 , G P - 2 , G P - 3 , a n d G P -4
P ro c u r e m e n t o f E q u ip m e n t G P -5 , G P - 6 , G P -7
D e liv e ry o f E q u ip m e n t G P -5 , G P - 6 , G P - 7
A d v is o r y S u p p o r t
R e c r u itm e n t o f C o n s u lta n t fo r A d v is o ry fo r E s ta b lis h m e n t o f R E M U

E s ta b lis h m e n t o f R E M U
R e c r u itm e n t o f c o n s u lta n ts
A d v is o r y s e r v ic e s fo r R o a d S e c to r P la n n in g a n d M a n a g e m e n t S ys te m


PREPARING THE REGIONAL INFRASTRUCTURE

(ROADS) PROJECT
F ADB PPTA No. 4889-UZB
I VOLUME 2
N Initial Environmental Examination
A
L
R
E
P Submitted by:
O
R
T ISLOHOTKONSALTSERVIS LTD.
in association with
October 2007
Initial Environmental Examination (IEE)
ADB TA 4889-UZB
Regional Infrastructure (Roads) Project
October, 2007
Table of Contents
1. INTRODUCTION...............................................................................................................1
1.1 PURPOSE OF THE IEE..................................................................................................1
1.2 IEE BOUNDARIES ........................................................................................................5
1.3 LEGAL AND ADMINISTRATIVE FRAMEWORK FOR ENVIRONMENTAL PROTECTION ..............6
1.4 METHODOLOGY APPLIED .............................................................................................7
1.5 ACKNOWLEDGEMENT ...................................................................................................7
2. DESCRIPTION OF THE PROJECT.................................................................................8
2.1 TYPE OF PROJECT .......................................................................................................8
2.2 CATEGORY OF PROJECT ..............................................................................................8
2.3 NEED FOR PROJECT ....................................................................................................8
2.4 LOCATION ...................................................................................................................8
2.5 SIZE OF OPERATION AND PROPOSED SCHEDULE OF IMPLEMENTATION ...........................9
3. DESCRIPTION OF THE ENVIRONMENT......................................................................10
3.1 PHYSICAL RESOURCES ..................................................................................................10
3.1.1 Climate................................................................................................................10
3.1.2 Air Quality and Noise ..........................................................................................10
3.1.3 Topography, Geology and Soils .........................................................................13
3.1.4 Surface Water and Groundwater Resources .....................................................13
3.2 ECOLOGICAL RESOURCES: FOREST, WILDLIFE AND FISHES .........................................14
3.3 ECONOMIC DEVELOPMENT .........................................................................................15
3.3.1 Industries and Employment ................................................................................15
3.3.2 Infrastructure and facilities (water supply, sewerage, drainage/control) ............15
3.3.3 Transportation (road, rail pipeline and air) .........................................................15
3.3.4 Land Use Planning .............................................................................................15
3.3.5 Power Sources and Transmission......................................................................16
3.3.6 Agricultural and Mineral Development. ..............................................................16
3.4 SOCIAL AND CULTURAL RESOURCES ..........................................................................16
3.4.1 Population and Community ................................................................................16
3.4.2 Public Health.......................................................................................................16
3.4.3 Education Facilities.............................................................................................17
3.4.4 Socioeconomic Conditions .................................................................................17
3.4.5 Physical and Cultural Heritage ...........................................................................17
3.4.5.1 Current Use of Lands and Resources by Indigenous People ............................21
3.4.5.2 Historical, Archaeological, Paleontological or Architectural Features ................21
3.4.6 Human Settlement in the RoW ...........................................................................22
3.5 INSTITUTIONS ............................................................................................................18
4. SCREENING OF POTENTIAL IMPACTS AND MITIGATIVE MEASURES ..................18
4.1 PRE CONSTRUCTION ENVIRONMENTAL EFFECTS AND MITIGATIVE MEASURES ..............18
4.2 CONSTRUCTION-PERIOD ENVIRONMENTAL EFFECTS AND MITIGATIVE MEASURES ........20
4.3 ENVIRONMENTAL EFFECTS ASSOCIATED WITH PROJECT OPERATIONS .........................22
4.4 IMPACT AND MITIGATION RELATED TO PROCUREMENT ................................................24
4.5 SOCIAL ASSESSMENT ................................................................................................25
4.5.1 Social Impact ......................................................................................................25
4.5.2 Poverty Impact....................................................................................................25
4.5.3. Resettlement.......................................................................................................25
4.6 THE ENVIRONMENTAL IMPACT MITIGATION AND MONITORING PROGRAM (EMP) ...........25
4.6.1 The Environmental Mitigation Table (EMiP)....................................................26
4.6.2 The Environmental Monitoring Table (EMoP) ....................................................26
4.6.3 Delivering Mitigation and Monitoring ..................................................................26
4.7 MITIGATION AND MONITORING COSTS ............................................................................26
5 INSTITUTIONAL REQUIREMENTS AND ENVIRONMENTAL MONITORING PROGRAM 27
5.1 INSTITUTIONAL CAPACITY, NEEDS AND PROPOSED STRENGTHENING ...........................27
5.2 ENVIRONMENTAL MONITORING...................................................................................28
6. PUBLIC CONSULTATION AND INFORMATION DISCLOSURE ................................28
7. FINDINGS AND CONCLUSIONS ..................................................................................30

8. RECOMMENDATIONS ..................................................................................................30
Annexes
Annex A: Opinion of State Environmental Expertise Committee
Annex B: Table A-1-Environmental Management Plan

Table A-2-Environmental Monitoring Plan
Annex C: Outline Terms of Reference for Consultants
IKS/RRI ii TASHKENT, OCTOBER

2007
Acronyms, Abbreviations and Definitions
Applicable Unit
Item Definition
of Measure
AADT Vehicles/day Average Annual Daily Traffic Volume
Carbon dioxide released into the are from
CO2 mg/m3
burning fossil fuel
CSE -- Construction Supervision Engineer
dBA decibals Decibals in the A-weighted or audible noise band
Environmental Mitigation Table or Plan (part of
EMiP --
EMP)
Environmental Monitoring Table or Plan ( part of
EMoP --
EMP)
EMP -- The project’s environmental management plan
General term for any hazardous and toxic
HAZMAT --
materials
hr -- Abbreviation for hour
L or l -- Abbreviation for the liquid measure liter
Medecins Sans Frontieres (Doctors Without
MSF --
Borders)
Nitrogen dioxide a pollutant stemming from fossil
NO2 mg/m3
fuel use
Oblast -- Soviet era term for province
Passenger Car Equivalent; a unit used to make
PCE -- all road vehicles equal to passenger cars, e.g. a
truck might be 3 PCEs.
PIU -- Project Implementation Unit of UZAVTOYUL
RoU -- Republic of Uzbekistan
The width of land along a road which is owned by
the government and reserved for road and
RoW m
related infrastructure construction; varying
between 30 and 50m
t or tonne -- Metric ton or 1000 kgs.
Uzbekistan State Ecological Expertise
SEE
Department
SO2 mg/m3 Sulfur dioxide gas produced by fossil fuel burning
Uzbekistan Road Fund ( main manager or Road
URF --
planning in the country)
UTY -- Uzbekistan Railway Authority
UZAVTOYUL -- Uzbekistan’s National Road operator
UZGIDROMET -- Uzbekistan’s National Meteorological Service
Total hydrocarbon in the air stemming from
TH ug/m3
evaporation of fuel during its handling.
Measurement of particles in the air, usually
TPM ug/m3 referred to as PM10, i.e, particles less than or
equal to 10 microns in size.
IKS/RRI iii TASHKENT, OCTOBER

2007
1. Introduction
1. This IEE has been prepared as a direct requirement of the ADB’s environmental
specifications for infrastructure project planning. It has classified this project as a Category B
undertaking. Under the Uzbekistan EA regulation this project requires only confirmation that
project activities will be confined to the RoW and that no significant realignments or
interference with any natural habitat will take place. Therefore, in this case the ADB’s
category is more stringent than Uzbekistan’s legislation. The project ToR called for the
examination of the need for a full EIA. This was completed as part of the interim report
(submitted to the ADB in June 2007), in which the field evidence and consultation with
officials revealed that most of the project impacts were benign and/or easily mitigated,
confirming that a full EIA will not be needed.
2. This IEE has been approved by the Opinion of State Environmental Expertise
Committee (“GOSKOMPRIRODA”). The Opinion of the GOSKOMPRIRODA is attached in
Annex A
1.1 Purpose of the IEE

3. The IEE is a RoU document. It is prepared by the TA consultant, on behalf of the
Executing Agency, in this case the Uzbekistan Road Fund (URF) within the Ministry of
Finance and UZAVTOYUL (Road Agency)1. The IEE identifies any likely significant direct
and indirect environmental effects associated with the proposed project during key period of
work, the extent, duration and severity of the impacts, the assessment of all significant
impacts, and the preparation of a set of costed mitigative and monitoring actions in the form
of an Environmental Mitigation and Monitoring Action Plan or EMiP/EMoP (Annex B: Table 1
and 2). The IEE also provides an examination of the institutional and technical capacity of
URF and Uzavtoyul and other bodies at the provincial level likely involved in the
implementation of the EMiP and EMoP’s, implementation. It concludes with
recommendations for follow up environmental work, such as an EIA and any other more
specialized environmental analyses.
Identification of the Project and Project Proponent

4. The potential project, involving a project loan to upgrade two sections of National
Highway A-380 in Kharezm province and the Autonomous Region of Karakalpakstan totalling
131 km and the provision of key road construction and paving equipments to replace the old
and poorly functioning existing inventory. This equipment will include 2 mobile asphalt plants,
rock crushing plants, asphalt milling machines, bulldozers, large road roller and a number of
large trucks. A PPTA was funded by the ADB to prepare a complete feasibility study, leading
to negotiations and approval of the project loan from the ADB. The proponent (executing
agency) for this project is the URF and UZAVTOYUL, with the main point of contact being
the URF.
The Nature, Size, Location and Importance of the Project

5. The objectives of the Project are to (i) promote economic development and regional
cooperation by improving the national A-380 highway and (ii) facilitating the acquisition of
modern construction equipment used to rehabilitate the key highways and roads in
Uzbekistan, focusing initially on A-380 and M-39.
6. To achieve these objectives two key outputs will be:

• a project feasibility study covering a review of technical, financial and economic
viability; including the examination of both environmental and social
1
UZAVTOYUL’s specific involvement is not confirmed at this point, but it is likely that they will become
the executing agency

implications, plus institutional capacity to effectively undertake the management

of the road rehabilitation work and implementation of all requirements defined in
the feasibility study; and,
• a framework and process with which the purchase and effective use of this high
tech equipment, including state-of-the-art mobile asphalt plants can be achieved
.
The project involves the upgrading of Highway A-380 along the following sections:
• Section 1: Kharezm Province and Karakalpakstan: Km 490- 581; 91 km; and,
• Section 2: Karakalpakstan: Km 876-916; 40 km.
7. A total of 131 km will be rehabilitation, requiring widening and resurfacing, using more
or less 484,000 m3 of asphalt and twice the amount of sub-base materials. The main
working width will be 8-10m centered over the existing carriageway (Figure 1). There are no
diversions or bypasses included in this work. These two sections will be important links in
the rehabilitation of all of A-380 expected to be completed by 2012 or 2013.

Figure 1 Cross Section showing Approximate Dimensions of the work area

8. The Road building equipment to be purchased will likely account for >40% or $75
million of the loan, and will include two mobile asphalt plants and two crushing plants, each
capable of producing 100/t/hr and 100m3/hr of materials respectively. In addition there will
be blasting equipment, drilling rigs, pile driving rigs and 300hp bulldozers (Table 1). The ADB
has ruled that the procurement component is not to be included as part of the environmental
assessment. Nevertheless a general mitigation statement is provided in Section 4.4 of the
IEE.
9. Based in the social survey, more than 65% of the people in this area have incomes
less than 3,600 Soum/person/month. Of these more than half have incomes of less than
2,600 Soum/person/month. Using World Bank criteria, these figures suggest low to very low
incomes and associated living conditions; or in international terms, poverty and extreme
poverty conditions. These conditions are particularly dire in Karakalpakstan due to the
collapse of all industry associated with the Aral Sea, and the growing salinization of the land
due to airborne dispersal of the Aral sea salt as it continues to shrink (at least in the Uzbek
basin) and the dramatic rise is respiratory disease .
10. Upgrading of the project road sections will on their own have little socioeconomic
effect and will generate few direct benefits, other than during construction when some people
from local communities will be employed. As more and more sections are upgraded and the
highway has a uniform level of service along its entire length, benefits in terms of reduced
travel time, more reliable transport service, greater passenger comfort and generation of jobs
stemming from greater traffic-induced commerce may be realized. These changes will, over
the long term, gradually lead to an improved standard of living for those local families who
will take advantage of new income generating opportunities. It will be better access to
services such as health, schooling and markets that will be felt immediately once a section or
road is improved.
11. Given the extremely harsh desert climate and almost total absence of communities in
the sections to be rehabilitated the influx of people and business is not likely for many years.
12. The ToR for this project made no mention the important role the border crossing
facilities have in supporting the benefits of the road as a stimulant for greater international
traffic. At present crossings at both ends of the road are old, inefficient and already lead to
considerable backups, during busy periods, and as such are infrequently used. As traffic
grows these conditions will only worsen, negating the value of better roads. That having
been said, to date there is no plan to include the border crossings in the feasibility study.
Table 1. Road and Bridge Equipment to Purchase as Part of This Loan: July 2, 2007
1. Asphalt mixing plant, mobile, Producing capacity 100 tonnes/h set 4
Rock-crushing and screening plant, mobile, producing capacity
2. set 4
100m3/h
3. Asphalt paver, working width 7.5 m unit 4
4. Vibrating combination tandem roller, with the weight 9.2 tonnes unit 4
5. Combination tandem roller, with the weight 8.6 tonnes unit 4
6. Front-end loader, with 4-5m3 bucket unit 8
7. Cold milling asphalt cutter, with width of 2.0m unit 4
8. Dump truck with the capacity 15 tonnes unit 120
9. Bulldozer, capacity 100-150 hp unit 8
12. Motor grader, with the weight up to 13 tonnes unit 16
13. Motor grader, with the weight up to 20 tonnes unit 12
14. Excavator, with 1.5-2m3 bucket unit 8
16. Asphalt recycling plant unit 4
17. Truck crane, capacity 10 tonnes unit 4
Chassis-mounted bitumen tanker (transporter), capacity 20-25
18. unit 4
tonnes

Drilling-and-blasting equipment, depth 30-50m, diameter 215-250

19. set 4
mm
20. Fuelling vehicle, capacity 8000l unit 4
21. Mobile repair shop unit 4
Total: 232
One complex for road construction works on concrete paved roads

1. Tractor-trailer rig, capacity 60 tonnes unit 1
4. Dump truck, capacity 15 tonnes unit 2
5. Diesel hammer, with the weight of striking part 2500kg unit 1
6. Drop-hammer pile driver, mobile, capacity 10 tonnes, useful height 20m unit 1
7. Boring machine, depth up to 50m, diameter 1.7m unit 1
Total: 10
One complex for bridge construction works

1. Concrete mixing plant, mobile, Producing capacity 100m3/h set 1
2. Rock-crushing and screening plant, mobile, producing capacity 100m3/h set 2
3. Concrete paver, working width 7.5 m unit 1
4. Front-end loader, with 4-5m3 bucket unit 2
6. Dump truck with the capacity 15 tonnes unit 30
Total: 37
One complex for bridge construction works

1. Tractor-trailer rig, capacity 60 tonnes unit 1
4. Dump truck, capacity 15 tonnes unit 2
5. Diesel hammer, with the weight of striking part 2500kg unit 1
6. Drop-hammer pile driver, mobile, capacity 10 tonnes, useful height 20m unit 1
7. Boring machine, depth up to 50m, diameter 1.7m unit 1
8. Immersion and plate vibrators, diameter 36-130 mm unit 10
Total: 20
1.2 IEE Boundaries

13. Based on existing regulation the national road RoW width is 50m (25 m on either side
of the road centerline. While this is not officially surveyed or marked, it is generally complied
with (Photo 1) even through towns.

Photo 1. Km 900 in Karakalpakstan Section of the Project Road:

Note Transmission line, marking left boundary of RoW.
14. Note in Photo 1 that the electrical power line is outside edge of the RoW and between
it and the road shoulder is the underground gas pipeline, usually located about 30m from the
shoulder. The pipeline is very clearly marked every 10-20 m by special dry reed markers
visible from the road and also from the air. There is no danger of the pipeline being
interfered with by the road work. All work will be done within the existing subgrade width, or
about 20-22m (Figure 1), with construction and movement of materials taking place from the
highway, thus not requiring any access roads. The boundary of the impact zone for
endangered species and for any ecologically important areas was extended to a 2 km band
centered over A-380.
1.3 Legal and Administrative Framework for Environmental Protection

15. Since Independence, many laws and regulations on environmental issues have been
developed in Uzbekistan. The Law on Environmental Protection (1992) established a legal,
economic and organizational framework for environment protection, ensuring sustainable
development and defining principles, including the conduct of environmental studies2. The
State Committee for Nature Protection (Goscompriroda) is a primary environmental
regulatory agency, and reports directly to the Parliament. Goscompriroda is responsible for
supervising, coordinating and implementing environmental protection and controlling the
usage and renewal of natural resources at the central, oblast and rayon (district) levels. The
mandate of Goscompriroda is based on the Regulation on the State Environmental
Committee of the Republic of Uzbekistan (1996).
16. The organizational structure of Goscompriroda consists of a central body in
Tashkent, and provincial and district branches and agencies for scientific and technical
support. In Tashkent, Goscompriroda consists of various authorities and departments. The
authorities have responsibilities in the fields of protection of air, water and land resources.
The departments have technical responsibilities related to environmental standards,
environmental law, international relations, use of environmental funds, etc. Three remaining
units deal with economics, publicity, EIA and ecological (environmental) review (State
Ecological Expertise).
17. Goscompriroda, through its State Ecological Expertise Department (SEE) reviews,
inter alia, environmental impact reports, promotes the use of low waste technologies,
2
At present Uzbekistan uses a more reactive, as opposed to preventative, approach to management
of environmental impacts of development projects.

prepares and implements ecological regulations and standards, coordinates environmental

programs and elaborates the structure for environmental monitoring and governance of
nature reserves. It approves regulations proposed by the environmental committees at
various levels and issues permits for pollutant emissions and may prohibit projects and
construction works that do not comply with environmental legislation.
18. In addition to the 1992 Law in Environmental Protection, Goscompriroda uses the
following additional legal instruments to manage environmental issue related to road
development:
• Law on Ecological Expertise. Approved in May 2000г.// New Laws of the
Republic of Uzbekistan. –Edition 23, page.189. Amendments were published in
the Newspaper «Narodnoye Slovo» dated on 7.06.2000.
• Law on Especially Protected Environmental Areas.
• Law on Wildlife Protection and Management. Approved in December 26 1997//
New Laws of the Republic of Uzbekistan. 18th Edition, p.220.
• Law on Protection and Management of Flora. Approved in December 26 1997//
New Laws of the Republic of Uzbekistan. 18th Edition, p.207.
• Law on Introduction of Amendments into the Law on Nature Protection and On
Especially Protected Environmental Areas. Approved in May 5-6 1994// New
Laws of the Republic of Uzbekistan. 10th Edition, p.242.
• Law on Atmospheric Air Pollution. 1999. Including ambient air quality standards,
emission standards and Guidelines for Application (#469-1999).
• Law on Water Pollution. 1999
19. Uzbekistan’s Law on Ecological Expertise (Assessment) addresses Environmental
Assessment and defines for which types of projects an EIA must be undertaken. A complete
examination of Uzbekistan’s EA process was published in 2004 by Khusnutdunova (2004)3,
in which she concluded that the EA process in Uzbekistan requires strengthening before
sustainable development can be fully achieved. Some of these gaps were to be filled via
training workshops and in particular a World Bank project completed in 2005. Unfortunately
that training was not given to the UZOVTOYUL or URF staff and a large gap remains.
1.4. Methodology Applied

20. Prior to the selection of the two sections as the preferred project, at least two other
sections in Karakalpakstan Autonomous Region as well as in Bukhara Province were
considered. The preferred option was selected by the GoU on the basis of need and
confirmation that no serious environmental or social issues would need to be addressed.
21. Screening of potential impacts was completed using a ‘windshield’ surveys involving
a drive along the road by car; with all environmental features within the 50m-wide road RoW
recorded on survey forms and with photos taken more or less every 2-3 km. Significant
environmental features were flagged as well as any locations where construction methods to
be applied could lead to potentially significant negative impacts. The photographic record
was used to support findings and conclusions. The direct impact zone for this IEE is the 50m
wide national highway RoW and a broader ecological impact boundary of 2 km (1 km on
either side of edge-of-pavement).
22. The IEE was prepared using inputs of many institutions, most prominent being
Goscompriroda in Tashkent and provincial officials of the URF in both Kharezm and
Karakalpakstan, as well as the provincial environment departments in both provinces.
1.5 Acknowledgement
23. The IEE was completed by the ADB consultant on behalf of URF and UZAVTOYUL.
Their inputs and those of its regional offices in Urgench and Nukus, the local office in
Kungrad, were greatly appreciated. As well, consultations with Kharezm and Karakalpakstan
3
Khusnutdinova, Galina. 2004. Environmental Impact Assessment in Uzbekistan. IAIA Journal. 22 (2):
167-172

environmental departments and government entities in order to assess if there are any
environmentally sensitive features within the 2 km –wide ecological impact zone was
completed. Information and cooperation of GOSCOMPRIRODA is acknowledged.
Knowledge of local conditions gained through informal discussion with local officials and
residents along the road RoW is also gratefully acknowledged.
2. Description of the Project
Type of Project
24. This project involves undertaking a feasibility study and preparing a road upgrading
investment package for future project-loan financing. The Project focuses on the upgrading
of the existing 131 km of National Highway A-380 and procurement of two sets of high tech
equipment including two mobile asphalt plants.
Category of Project
25. The ADB has classified this project as a category B. This category requires the
completion of an Initial Environmental Examination (IEE). The IEE authors, on behalf of the
GoU, assessed the need for a complete EIA and concluded in the interim report that, given
only minor environmental impacts, an IEE was indeed the only assessment necessary. This
conclusion was accepted by the ADB.
2.3 Need for Project

26. Uzbekistan is rich in natural resources but landlocked and hampered by restrictive
export regulations imposed by its neighbors. It borders Kazakhstan to the north, Kyrgyzstan
to the east, Tajikistan and Afghanistan to the south and Turkmenistan to the West.
Uzbekistan is one of the major producers of cotton, gold uranium and natural gas in Central
Asia. It also has significant deposits of copper, oil, silver and limestone (for cement). For
these resources to be profitably exploited, they are moved to processing facilities in very
large (with some exceptions) quantities, usually by rail, and from there by truck transport.
Road, particularly the national highway system is in bad repair and as a result the movement
of commodities suffers significantly, not just in terms of delivery time but the quality of the
goods transported over punishingly rough roads.
27. As a Soviet Republic, Uzbekistan was designed as a narrow and unbalanced
economy, i.e. a component in a larger industrial base, and therefore is now struggling with
economic reforms hoping that they will signal a more stabile and less risky investment
climate. A cornerstone of this strategy is having a modern road network able to carry large
volumes of freight across the country and internationally. The A-380 is the main road link,
running N-S through Uzbekistan, linking to other central Asia countries and indeed Europe.
2.4 Location
28. The project is located in the desert of NW Uzbekistan near the border with
Turkmenistan and paralleling the Amudarya River (Map 1). In Section 1 the river is 5-10 km
to the south of the road section, often with desert followed by fields and small farms between
it and the road, since settlement (what little there is o fit) is all clustered along the river
shore. For Section 2 the river is >100 km to the north and east of the road. The corridor does
not pass through settled areas (Photo 2), other than nomad camps located about 7 km
distance from the road, and a few road-toll houses (Photo 3). The project road section has
no farming other than the nomadic sheep and cattle herding which has taken a great toll on
the Kyzylkum Desert, decreasing the sparse grass cover and increasing the problems with
sand dunes and erosion.

Photo 2 Km 497 Looking NW on the A 380 Corridor
One nomadic camp (actually a temporary encampment, consisting of mostly goat and sheep
herders ( 3-5)), were pointed out by the local consultants, 7 km from the road. These were
not assessed further in the IEE, given the distance and nomadic lifestyle.
2.5 Size of Operation and Proposed Schedule of Implementation

29. In relative terms the project will involve a small number of people working in a very
confined area, nearly 100% restricted to the road right-of-way. The work will likely be
awarded to six contractors, who will start work at more or less the same time. A total
workforce of 100-150 people will be involved in each rehabilitation contract for 20km of
roadway. All major construction materials will be brought a nearby storage location by rail
and to the construction site by large truck.
Photo 3. Military Checkpoint along A380 in Kharezm Province

30. The total area disturbed will be between 78-80 ha of land, not including the existing
carriageway and shoulders. The movement of more than 6.6 million m3 of earthworks for
subgrade, shoulder and carriageway repair will be done primarily by 18-26 ton-capacity
trucks, transporting materials to the road worksites and/or the mobile asphalt plants.

31. The work period for the whole rehabilitation, including preparatory time and
procurement of materials and equipment is set at approximately 4 years beginning in late
2007, with the contractor being mobilized in late 2008, with actual work progressing for three
years. As indicated in the feasibility study, not all work can be completed simultaneously, but
much of the intensive earthworks activity will take place during years two and three of the
construction period. Key environmental tasks needing to be integrated into the main project
actions will be:
• the preparation of environmental clauses for inclusion in the bid
documentation ( during Detailed Design Stage),
• the planning and delivery of an EA training workshop in Nukus and Kungrad,
(within the 1st month of the start of construction);
• the preparation of a construction period mitigation and monitoring schedule by
the contractor, based on the IEE’s EMiP and EMoP (prior to groundbreaking
by contractor).
• The preparation of end of construction environmental compliance
checklist/report; ( within 4 months of end of construction period) and,
• The preparation of a operating period environmental monitoring schedule in
consultation with the road operator (Within first three months of operating
period).
32. Work will take place around the clock in order to take advantage of the remote
location of nearly all of the project contract road sections. The section from Kungrad to Km
916 will need restrictions to reduce noise and visual intrusion impacts at night, near Kungrad.
3. Description of the Environment
3.1. Physical Resources

3.1.1. Climate
33. The project area has a southern temperate continental desert climate, with extremely
hot summer temperatures exceeding 45o C and virtually no rain. December through
February is the winter period with temperatures dropping below -15o C, but more often
around the freezing point or above 0o C. Temperatures begin to climb in March,
accompanied by occasional rain, with not more than100-200 mm falling, sometimes
accompanies by flash-flooding. In dry desert conditions the daily temperature fluctuations
can be as much as 30o C.
34. These fluctuations have affected the stability of the roadway and engineering
countermeasures will be designed to reduce the problems now being encountered during
these extreme shifts. Frequent dust storms occur during the summer when winds exceeding
100km/hr generate large disturbances, significantly raising the levels of Total Particulate
Matter (TPM) in the project area.
3.1.2 Air Quality and Noise
35. In Uzbekistan air quality data are collected at 17 observations centers, operated by
by the Service of Air, Surface Water, and Soil Pollution Monitoring of the Committee on
Hydrometeorology of the RoU (UZGIDROMET). Results of the monitoring on 17
Observation Stations, located throughout the country are published in a confidential annual
report “Review of Air Pollution Condition and Pollutant Emissions in the Cities and Territories
of Uzbekistan”.
36. According to the multiyear data, intensity of dust-storms, with wind speeds of 80-90
kph, increase as one drives NE from Urgench to Kungrad. The average wind speed
remains about


37. 20.5 km/hr. Wind is very significant for air quality since for many months of the year
the project area has elevated TPM levels due to the constant wind-related dust in the air.
Table 2. Ambient Air Quality as measured along A 380; 2006 (unknown averaging period)
NO2 (mg/m3) TSP (mg/m3) CO2 (mg/m3)
Air Quality Control Point Continuous
Single Continuous
Location and Km Measurement Single Continuous Single
(1 hr) Measurement
(24 hr)
0.018-
Section 1: km 490-581(91km) 0.010 Up to 0.3 0.10 ≤3 Not available
0.299
0.018-
Section 2: km 876-916(40km) 0.010 Up to 0.3 0.10 ≤3 Not available
0.299
RoU Standards 0.20 0.085 0.5 0.15
Sources: Air Quality Yearbook, 2006 ; Note: Air Pollution Index is within normal range.
38. Monitoring data (Table 2) show that background levels of NO2 and TPM at Urgench
and Nukus are within permissible standards. During the March-May windy season, TSP
level will exceed permissible concentrations due to sand storms which can be enormous,
sometimes covering more than 45,000 km2 during a single event. Given that there is no
industry anywhere along the alignment except the Prov. Transport Department’s rock
crushing and batch plant facilities, and the soda mine and factory at Km 916, air remains
relatively clean. During storms fine salt due past irrigation-induced soils salinization and Aral
Sea recession, is dispersed into the airmass, causing serious environmental damage to all
living organisms, as well as wide ranging human health effects.
39. At other times the air quality near the road is well within the RoU standards since no
industrial or commercial emission source exist anywhere and traffic is at low levels.
Table 3. Summary of Traffic Volume Projects By Vehicles Type and as PCEs for 2007-2030
(Source: TA consultant).
Average Annual Daily traffic by Vehile Type
Sum
Fore
Inter- Inter- of
Section 1: Km 490-583 Domestic Domestic - PCEs
naional naional Col:
casted
1-11
Fore- Sum:
Four- Lint’l Domestic Int’l Domestic
Car Bus Bus Truck Truck casted Col Existing
Year Wheel Truck Truck Arctic. Artic.
medium Mini Heavy Light Medium Light 1-11 Traffic
Drive Heavy Heavy Truck Truck
Trucks AADT
Column
1 2 3 4 5 6 7 8 9 10 11
NO
2007 341 0 103 342 78 334 5 304 0 350 67 1924 4420
2012 534 0 161 536 112 481 8 438 0 505 97 2873 6537
2017 735 0 222 738 146 626 12 570 0 656 126 3830 8656
2022 947 0 286 950 176 754 16 686 0 790 151 4757 10668
2030 1296 0 392 1300 214 915 23 833 0 959 184 6115 13516
Section 2: KM 876-916
2007 130 0 41 17 18 131 5 20 0 0 2 364 610
2012 209 0 66 27 27 197 8 33 0 0 3 571 952
2017 302 0 95 39 37 266 12 50 0 0 4 806 1337
2022 404 0 127 53 45 327 16 70 0 0 5 1048 1726
2030 553 0 174 72 56 406 23 102 0 0 6 1393 2281
PCE
1.00 1.00 1.00 2.50 1.50 2.25 3.00 3.00 3.50 3.50 2.00
Factor
PCE=Passanger car equivalent
40. Over a nearly 25 year projection period traffic (Table 3) is expected to increase less
that 4X to only 1,393 AADT by 2030. These volumes are not enough for serious air pollution
problems, particularly when viewed in relation to emission control technology improvements
as well as the introduction of cleaner fuels. In terms of diverted traffic from other means to
this road for 2030 was estimated to be only 1,816 PCEs yielding an AADT of 15,376 PCEs,
or less than 10% rise over no-project conditions.

41. During the field investigation no sensitive noise sites were identified. The Daoud Ata
Cemetery, within 50m or the A380 carriageway at km 888, is a marginally sensitive site and
had existing traffic noise averaging 60-65 dBA. This is not expected to change appreciably
over time. Noise levels at two stations were estimated using the RoU basic noise model as
well as a noise attenuation nomograph taken from the ADB’s 1998 EA Guidelines. Further
Uzbekistan noise data from the Environment Department were also examined. At 20 meters
from the edge-of-pavement, noise levels during the day are at 66dBA and at night are
perceived to be 53 dBA (Tale 4). There are levels at or below annoyance levels.
42. For section 2 the noise levels are lower, due to a much lower traffic volume. Again
measured values are well within RoU standards for rural areas.
Table 4. Estimated noise levels :A380 at 20m distances from source (consultant estimate ’07).
Noise Level db(A).
Sections Traffic Distance
Day Night
sensitive to Volumes from
Section Description Time Time
Noise AADT roadside
(0700- (1701-
(km from-to) 2007 (m)
1700) 0659)
Section 1: km
1924 Desert: sparsely populated 20 65-68 50-55
490-581
Section 2: km km 876 to km 887 – irrigated lands
364 20 59-62 45-49
876-916 km 887 – desert, Plateau Ustyurt
Less
RoU Standard 65-70
than 65
Weighting includes adding 10dBA for night-time annoyance factor due to low ambient noise levels
ROU Standard: residential -rural: day 65-75dBA night <65dBA: range refers to standard for sensitive
landuses such as schools and playgrounds, versus fields and unused land.
3.1.3 Topography, Geology and Soils

43. The topography of the land through which the two road sections pass includes mostly
desert and slightly undulating terrain as found at the boundary of the Amudarya River valley.
Karakalpakstan, where all but 20km of the project road is located has two large water bodies
the Aral Sea and Sarykamysh Lake which it shares with Kazakhstan and Turkmenistan
respectively. Nearly all towns and villages in the vicinity of the road are located in the
irrigated river plain and the delta of the Amudarya, a minimum of 5-10km away from the road
RoW, leaving the project roadsides almost totally uninhabited.
44. The geology of the area consists of a mixture of sandstone and limestone, overlain
with sand. The Amudarya plain has fertile soils deposited over the millennia by the river on
its journey to the Aral Sea. The low levels of precipitation require that the area be irrigated, a
practice ongoing for more than 2000 years, but only recently during the Soviet period,
practiced to extremes with massive diversions of fresh water, leading to the demise of much
of the Aral Sea. Neither of the project road sections passes across or close to the river
valley proper.
3..4 Surface Water and Groundwater Resources
45. Aside from the occasional rainfall and flash flooding, there is no surface water over
which the road passes. The shallow groundwater aquifer is >25m below the surface, is saline
and polluted. Due to the intensive pesticide and fertilizer use, especially in Khorezm province
and Karakalpakstan, groundwater at a depth of 100-150m is also contaminated.
Groundwater for human consumption is scarce in the two project oblasts, an estimated
22,000 and 33,000 m3/day are available (2003 data) in Khorezm and Karakalpakstan
respectively. Seven thousand and 5,000 m3/day have been allocated for industrial use in
Karakalpakstan and Khorezm respectively, thereby seriously restricting the water use for
concrete production4 . While neither surface nor groundwater quality will be affected, the
4
Concrete making required very clean water, with no salt contamination and a low TDS level.

local extraction of groundwater during the construction period could have serious local
impacts. Hauling water from the Amudarya, at least for Section 1 is an option to be
considered 5 .
3.2 Ecological Resources: Forest, Wildlife and Fishes

46. The ecological zones through which the road passes is the Qizylkum desert and
Ustiyurt Plateau an elevated desert region, much of it significantly modified by past irrigated
agriculture and livestock over-grazing. The ecology of the project area is dominated by the
desert, with different regions having variable levels of vegetation. Section 1 has no known
environmental issues or environmentally sensitive features within at least a 3 km distance
centered over the road.
47. The Amudarya River Basin Forest Reserve is located at km 686, more than 100km
away from project road Section 1 and 100 km from Section 2; with the forest beginning
about 1.5 km SE of A-380 RoW ( Map 1). While its administrative boundary (the buffer zone)
is within 20 meters of the roadside. The forest extends in a long strip near the river for more
than 10 km.
Shoulder to shoulder
width is 10-11m
Photo 4. Road Section No. 1 , Km 490-581, passing through the Kyzylkum desert area, looking
North. Note salt bush and Saksaul Plants. Electricity and gas pipeline located on left side of
road with Amudariya River located 1-4km to the SW out of view of much of this section
48. For section 2 there are no known sensitive species habitats, despite the fact that
historically the area was, prior to 1980 the migratory range of the saiga antelope, an
endangered species and the goitered gazelle a vulnerable species. Since that time over
hunting and the shrinking of the Aral Sea has decimated the Saiga population such that now
only 10% of the original numbers remain. There is no danger that the project road work will in
any way interfere with these species. A less sever, but similar condition affects the goitered
gazelle.
49. There are other vulnerable birds and herptiles species in the general area, but have
not been sighted within 5 km of the road sections by environment officials of Gozcompriroda
Nukus or Kungrad (Personal communication Gozcompriroda Nukus and Kungrad July ’07)
for over a decade .
5
The Amudarya is the nearest surface waterbody to either project road section; i.e., from 4-10 km
distance for Section 1 and > 100km for Section 2.

3.3. Economic Development

3.3.1. Industries and Employment
50. After the collapse of the Soviet Union, Uzbekistan suffered from significant negative
impact that was caused by loss of significant transfers from the Soviet Union budget and
distortion of highly integrated economic ties with enterprises in the former Soviet republics. In
contrast to other CIS republics, Uzbekistan followed a cautious approach to economic
reforms and as a result it experienced less economic shock than its neighbours.
51. Uzbekistan was the first CIS country to exceed its 1991 level of GDP. Growth rates
started to decrease in 1997 when prices for main export commodities fell, at which point the
ROU imposed strict foreign exchange controls and foreign trade restrictions. As a result
Uzbekistan’s GDP growth rate was modest at around 4% according to official estimates for
the last 6 years and lower than in most CIS countries.
52. Uzbekistan possesses rich natural resources and a skilled labour force, yet it remains
an underdeveloped country with per capita income of US$ 450 (2006). Agriculture
contributes 29% to GDP (2003), while industry accounts for around 15%. Industry is
agriculture oriented; however Government supported the launch of an automobile industry in
1996 with South Korean automaker Daewoo. Uzbekistan still remains a major producer of
raw commodities.
53. Exports and imports increased in 2003, largely due to the import of capital goods.
Exports are highly dependent on primary commodities such as cotton fiber (20%), energy
products (10%), and metals (6.4%). Principal imports are machinery and equipment (44%),
chemical products (13%), services (10%) and food products (9%).
54. Due to a tight credit policy followed by the Central Bank, the reported annual average
inflation rate remains around 10 %. Real GDP growth has been of the order of 4-4.5 % over
the last five years, but is predicted to decrease through 2010. However, if reforms
recommended by development partners are adopted in the next few years, real GDP growth
could approach 7.0 % per annum by 2015.
3.3.2 Infrastructure and facilities (water supply, sewerage, drainage/control)
55. Outside the major centers, few towns have piped potable water or indoor toilet
facilities. Water comes from wells and sewage is disposed of in pit privies and septic tanks.
Larger towns dump sewage into water courses. Generally, in towns along the road have
electricity, but little else. This is particularly true in Karakalpakstan where basic household
services do not exist and people live in very primitive conditions. The loss of the Aral Sea
fishery and related industries had hit Karakalpakstan very hard.
56. There are no communities close to the road and as such no services will be affected.
3.3.3. Transportation (road, rail pipeline and air)
57. The are three main surface modes of transport in Uzbekistan; road pipeline and rail.
River transport also exists on the Amudariya. The network length of each major surface
transport system is : Main Roads (UZAVTOYUL) 43,500 km and Rail-UTY 3,993 km
58. The rail system carries nearly 84% of all freight. Rail transport services dominate the
freight and passenger transport markets in term of tons of freight and passengers carried.
Road however is the dominant mode used by people, accounting for 93 % of passenger
movements. The long-haul of transport of goods is dominated by pipeline (for oil and gas)
and rail.
3.3.4 Land Use Planning
59. Territory along both Section 1 and 2 of the project consists mainly of dry desert with
some nomadic goat, sheep and camel herding taking place. Land is used almost totally for
light grazing or us unused. Some roadside areas along Section 1 are mined for sand and
aggregate materials.

3.3.5. Power Sources and Transmission

60. Power for the project Oblasts is provided by the national power grid, which uses both
fossil fuelled and hydroelectric power generation. Power is supplied via low and medium-
voltage transmissions lines paralleling A 380. Despite this the rural areas experience
frequent power outages, particularly in Karakalpakstan.
3.5.6. Agricultural and Mineral Development.
61. The only agriculture along the road RoW is the occasional heard of goats or sheep
being driven across the sparsely vegetated semi-desert. In fact this grazing is leading to
considerable environmental damage.
62. The only known mineral development along the RoW is the Comodroy Soda Mine
and Factory at km 916 of A 380. Further north along A 380 future mining activity is planned.
3.4 Social and Cultural Resources

3.4.1 Population and Community
63. Karakalpakstam, where nearly all the road improvements will take place, is a sparsely
populated area (7.5 people/km2) and within the road RoW almost totally devoid of any
settlement. With a population of only 1.6 million and an out-migration rate of 4000-6000
people per year, the areas has a, net population growth of only 1.25% per year; this in an
area covering more than 30% of the country (MSF, 2003). This out-migration to Khazakhstan
has increased since 2003, due to the draught conditions and lack of appreciable government
assistance. In rural areas of the project, the average family size is 4-6 people. Along the
roadway sections there are no people to speak of.
64. According to the ADB Study: Women in the RoU, “the traditional Uzbek family is
characterized as complex , withof more than one generation living together and based on a
patrilocal residence and patriarchal authority structures on the basis of seniority and gender.”
The poorest families in the project areas are found >5km distance from A 380, are large and
live in terrible conditions, are isolated and marginalized unemployed residents.
3.4.2. Public Health
65. Public health in Karakalpakstan is rapidly deteriorating with the health agencies
spending less than USD.6.50/per person/year. As a result communicable pulmonary and
cardiovascular diseases are on the rise. The notified incidence rate of pulmonary
tuberculosis in Karakalpakstan in 2002 was 89 cases per 100,000 populations per year, with
one of the highest rates of infection in Central Asia as well as in the region (e.g., Khorezm
has 23 per 100,000 and the national average is 18 per 100,000 people). Rates of drug
resistant forms of tuberculosis are also some of the highest recorded globally to date; 13% of
new patients have multi-drug resistant tuberculosis.
66. Cancer services, emergency health services, maternal and child health services,
public health and disease prevention activities, to name but a few, are all in need of upgrade
and support. Pilot projects to tackle the alarmingly high rates of infant deaths, acute
respiratory infections, and diarrhoeal disease are ongoing, but will need substantial financial
support to be expanded throughout Karakalpakstan. Karakalpakstan is also threatened by
complex chronic health problems linked directly to the Aral Sea environmental disaster, for
which neither the causes nor measures to prevent them are clear. Potential health threats
include salinisation of drinking water, dust storms and the presence of agricultural chemical
pollutants in the environment and food chain. Health-care facilities suffer from years of
under-investment and in many rural hospitals lack even basic amenities such as washing
facilities and clean toilets.
67. Due to the recent program to aggregate of health services, clinics now exist only in
main villages. Each such clinic has one or two doctors plus a staff of between 11-15,
making the patient-doctor ratio more than 1 per 15,000 inhabitants. Equipment is scarce,
and services at a bare minimum. In addition to more doctors and nurse practitioners, clean

facilities, medicines and equipment are badly needed. Electricity to these clinics is
unreliable with power shortages occurring frequently, including in winter, making operation of
basic equipment and heating of the building very difficult.
3.4.3 Education Facilities
68. While rural educational facilities are rudimentary, literacy is well above 98% and
equal access to education by gender is guaranteed by the constitution. In 1996, the literacy
rate for women and men was almost 100%. However, “some gaps remain between men and
women at secondary and university levels of education”, and for the poor. “However,
disinvestments in higher education have continued since independence and enrolments in
pre-school, secondary education, and higher education all declined in the early years of the
transition.”6
69. According to World Bank’s (2001) Family Budget Survey, while cumulative enrolment
at all education levels is higher for women than for men, the reduction in preschool program
services have negatively affected poorer women, forcing them to remain at home longer, to
care for children. In general, post independence literacy levels are falling.
3.4.4. Socioeconomic Conditions
70. GDP per capita for the two oblasts is starkly different with Karakalpakstan
considerably below Khorezm. Both are considerably below the country average.
Karakalpakstan is the poorest and most remote region of the country. Khorezm is somewhat
more wealthy because it has a growing tourism industry (Khiva) and the fact that the
Amudarya River valley is wide and fertile for much of the oblast and more than 90% of the
population lives in the valley. The project is expected to create a few jobs , but generally
there will be few short term benefits for the two areas and possibly more in the long term as
traffic increases and there is a need for more roadside facilities which local entrepreneurs
may take advantage of (project ISA).
3.4.5 Physical and Cultural Heritage
3.4.5.1 Current Use of Lands and Resources by Indigenous People
71. Since there are no “indigenous people’ living in and around the project area, no
special land uses have been identified. The native Karakalpak residents speak their own
language and are traditionally herders and fishers, but are not considered indigenous
peoples, separate from the Uzbek population at large. However, given their plight vis-à-vis
the Aral Sea and pollution, they are in desperate need of special assistance.
3.4.5.2 Historical, Archaeological, Paleontological or Architectural Features
72. Two features along Section 2 of the project roads that were identified are the Topraq
Qala Fort (Photo 5) and the Daoud Ata Cemetary. Topraq Qala, an adobe walled fortification
is located at km 887 north of Kungrad and is a 2nd century A.D. structure from the Kushan
period. Re-discovered in 1946 by Tolstov the site is spread over a 120 X 100 m are and was
partially excavated in 1959-1960. Toprak Qala’s has no connection to A 380 and outer mud
wall boundary is location about 150 m from A 380.
73. On the Ustyurt Plateau there are a series of other archaeological sites namely Kirqgiz
Qalaa and Tesik Qalaa dating from the same period. These areas are known only from
historical records, i.e., they have not been rediscovered.
74. The second feature is the Daud Ata Cemetary, located at km 889 on the East side of
A 380. Built around the tomb of Daoud Ata who was considered a holy man throughout
central asia by both Muslims and Christians, the cemetery is hundreds of years old and
should contain archaeological remains. It is actively used by the four small villages located
to the East of it ,as well as by the people of Kungrad. Its entrance is located on the east side
of the road and consists of a large gate extending to a wall surrounding the cemetery.
6
Source: World Bank, Uzbekistan Living Standards Assessment, May 2003.

3.4.6. Human Settlement in the RoW

75. Based on the social survey, there is no human settlement within the 50m wide RoW
along the entire project corridor. The four villages around Daud Ata are all away from the
road and to the East of the cemetery. A number of villages were also identified in the Social
Assessment Report, but they are a minimum of 5 km from the road sections; in fact not
visible from the road.
Photo 5. A 380 Km 888 Looking South to Topraq Qala’s Adobe walls
3.5. Institutions
76. The transport sector is governed by the Cabinet of Ministers. For road transport the
authority is UZAVTOYUL (Road Agency) as well as the URF, providing all planning,
implementation and operational functions for road development in the country. Within the
URF there is a research institute where environmental expertise is supposed to be located.
The environmental expertise, as with many other agencies in Uzbekistan has great strength
in the hard sciences such as geology, hydrology and meteorology, but almost no capacity in
environmental management or the implementation of environmental mitigation and
monitoring measures, such as defined in this IEE.
77. At the oblast-level, the URF Offices have no environmental capacity. Based on
consultation with the Goscompriroda units who are mandated to undertake the day-to day
compliance inspection compliance monitoring of the roadways, their technical capacity is in
the chemical and physical sciences, with almost no knowledge of ecosystems-based
environmental management or impact mitigation. Therefore, impact mitigation and
monitoring is generally not undertaken.
4. Screening of Potential Impacts and Mitigative Measures

78. Potential Impacts were grouped into the periods of the project cycle when they are
most likely to occur, i.e. the pre-construction, construction and operating period, and are
discussed in the following subsections.
4.1 Pre Construction Environmental Effects and Mitigative Measures

79. During this period most of the impacts can be avoided through careful planning and
environmentally friendly design considerations. The four impacts identified were:
Design Decision to Realign Roadway

80. The decision to restrict the road upgrading to within the existing RoW and
carriageway, will keep construction impacts to a minimum. New groundcover will not be

disturbed and as such no unacceptable impacts are expected. Fortunately the utility
transmission lines and the pipelines parallel the road and form a natural construction
boundary, which can easily be A work boundary of 25m from the centerline of Sections 1 and
2, should be defined using fencing to ensure that construction equipment does not stray too
far from the work sites.
Planning Decision to Bring Construction Materials to Worksite By Any Means.

81. Environmentally friendly planning is reflected in a decision by the URF to bring all
construction materials to the construction area in bulk by railcar and from inter-modal
terminals near with work by large (up to 26 ton) truck to where they are needed. Given that
all the work involves upgrading of existing road with construction equipment using the
existing highway for access, no new access roads are needed.
Poor Quarry/Borrow Area Planning

82. Operation of quarry/borrow sites may cause soil erosion, slope instability, siltation of
surface water, damage to haul roads, landscape disfigurement, and loss of vegetation. There
are 3 existing quarries that will supply Rock, Fractured crushed stone, gravel and stone-sand
mixtures, need for subgrade and surface treatment. Uzavtoyul and the URF confirm that
these quarries are all fully legal and licensed sites in operation for more than 10 years each.
83. The three quarries are old and have been in operation for years and will continue to
operate for decades after his project ends. Rail spur lines have been built to these sites.
They are essentially large limestone and sandstone rock outcrops, or mountains designated
as mining sites. The extent of rehabilitation will be to ensure that the areas where materials
are loaded onto rail cars are kept dust free and clean of debris. This is considered an
environmentally friendly design feature as well as a construction period mitigative measure.
84. Finally, rock, crushed rock, gravel and sand will be hauled from the quarry to a local
inter-modal transfer station by rail car hopper, and taken by large truck using the national
highway A 380 to the site (EMiP item2(ii).
85. As part of environmentally friendly planning, UZAVTOYUL has decided that there will
be no stockpiling near waterways as this is environmentally unsuitable and economically
unviable. Stockpiling will be at roadside, within the RoW, given that it is almost exclusively
sand and there are existing bypass lanes, to be used for such purposes.
86. Borrow pit dewatering will not be an issue since only between 25 -50 mm of rain fall
per year and quite a number of years with 0 mm. When rain falls it disappears instantly!
87. Finally here will be no borrow pits beyond the three quarry sites.
Lack of Environmental Clauses or Covenant in Contracts

88. The IEE is an environmental statement coming from The URF and UZAVTOYUL.
While it is prepared by the consultant it is a commitment by the RoU, through the proponent
and its contractors and consultants, to implement the mitigative and monitoring actions listed
in the IEE. For the measures proposed in the IEE’s mitigation (EMiP) and monitoring
(EMoP) plans to be taken seriously they must become legally binding through inclusion as
environmental clauses in the loan agreement between the ROU and the ADB as well as the
specifications in the contract-bid documents. For the construction period, this is often
achieved by either integrating the EMP (EMiP and EMoP) into the contract specifications as
a clause, or using the EMP to prepare a construction-period environmental action plan
defining specific steps to be taken by the contractors and the government during the
construction period.
89. This project will have a Project Implementation Unit (PIU) assisted by a construction
supervision engineer (CSE), likely an international consultant, with responsibility for
environmental mitigation and monitoring oversight. It will be the CSE’s responsibility to
establish specific pay-items for the environmental mitigation and monitoring activities, with

payments made only after verification that each work component has been completed as
prescribed.
Lack of Construction Compliance Inspection Services and Environmental Training

90. With environmental mitigation, the saying that a plan is only as good as its
enforcement program is very true. While the EMP and the environmental covenants can be
very clear and specific, if there is no one knowledgeable to undertake compliance monitoring,
inspection and regular reporting, little of the EMP will be implemented or completed.
91. Neither UZAVTOYUL or the URF have skills in environmental compliance
inspection/monitoring and reporting. This is particularly true for the Oblast-level units who
will be responsible for the inspection reporting duties7. In addition to the translation and
distribution of the IEE, including its EMP, the PIU will organize and coordinate two workshop,
each approximately 2 days long, for managers and Oblast-level inspectors. The topics will
include the management of environmental assessments, mitigation inspection, enforcement
and reports. Workshops will be held in Nukus and Kungrad Karakalpakstan (See Annex B).
4.2 Construction-Period Environmental Effects and Mitigative Measures

92. Construction period impacts associated with road rehabilitation in such an extensively
disturbed, arid and remote area are few and involve, noise, dust , failure to apply good
housekeeping practices during construction and wind and rain-related erosion of exposed
surfaces. Therefore , the likely eight impacts and the proposed mitigative actions will be:
Improper Management of Earthworks Storage and Transport Operations

93. Large volumes of quarry rock, aggregate and sand will be transported and stored
near the roadworks. These operations and storage areas will be constantly exposed to the
elements and will create primarily dust during the frequent windy conditions (sediment laden
drainage water is not an issue since there is no water for this to drain to—thus simply
percolating back into the surrounding soils during the rare rains. Dust control will be very
difficult given the scarcity of water. Dust at worksites will be controlled by watering, using
shallow acquifer saline water but along the haul roads, properly loaded trucks with canopies
preventing spillage onto the highway and blowing dust will be mandatory, becoming the
primary mitigative measure. Any spills on the haul roads will be cleaned up by the contractor
within a 24-hour period.
Inappropriate Management Of Desert ‘Topsoil’

94. In deserts there is no topsoil as is commonly found in non-desert conditions. There is
however a microphytic (or cryptobiotic) crust a few cm deep, comprised of blue-green algae
fibers, mosses and bacteria, held together with fibers and gelatinous materials produced by
the algae and bacteria, etc., forming a kind of nutrient rich (relatively speaking) surface layer
able to trap water and serving as a medium for desert plant growth. This layer is fragile, and
can easily be disturbed by construction works or other actions such as heavy equipment
traffic and human t trampling, leading to wind erosion, the formation of sand dunes etc. If the
disruption is short-lived and focused in a limited area the microphytic crust can reestablish
within a few months.
95. It can be very carefully harvested and reseeded on the freshly disturbed desert to
help with the reformation of the crust. Very little is know about the success of such labour-
intensive work. This is a very tricky given that the layer is so thin and that too much sand
can destroy the living elements of the crust. One case examples were found during an
internet search (http://www.cababstractsplus.org/google/abstract.asp?AcNo=20053082714).
7
Since the previous environmental study completed by the consultant in 2004, there remains in the
ROU no tradition of distributing environmental assessment and indeed environmental mitigation plans
to inspectors and/or contractors. Inspectors enforce on the basis of existing rules and regulations and
contractor follow the same rules. In other word the EAs are really not used. The IEE completed in
2004 remains unused.

96. The problem in the study area is that due to the disruption by utility maintenance
activities, as well as the regular goat and sheep grazing this layer has not been allowed to
reestablish, therefore leading to ever increasing sand dune problems and severe desert
conditions, along both road sections. For this reason all construction activity will be strictly
confined to a narrow as possible corridor within the RoW.
Inadequate handling, Storage and Use of Reclaimed Asphalt
97. To avoid any pollution problems with the asphalt removed from the existing road
surfaces, it will be stored along the section where it will be reused, in the reserve, or bypass
lanes that now exist as sand tracks within the alignment. All reclaimed asphalt will be
crushed, then mixed with 35-50% crushed stone and some bitumen , reheated to 100-120o
C in the mobile asphalt plants and reapplied to the road as a new surface. Reusing the
reclaimed asphalt and leaving as small a footprint as possible is the objective of
UZAVTOYUL and URF.
Failure to Adhere To Good Housekeeping Practices during Construction

98. Failure by contractors to adhere to good housekeeping practices as defined in the
contract Terms and Conditions and Conditions of Special Application and a lack of
enforcement by the PIU, will lead to longer term contamination at construction camp sites all
along the RoW , leaving behind a generally sloppy corridor of impact, with dissatisfied,
sceptical and disappointed local people. The PIUs inspectors will be expected to
‘undertake regular environmental compliance monitoring, using the EMP as their guide8. A
monitoring checklist will be prepared as part of each monitoring cycle and a monitoring report
will be submitted to UZAVTOYUL AND URF at the end of the construction period.
Modification Of Surface Drainage Without Repair Or Rehabilitation

99. Constrained by a meagre budget, tight schedule and an environmentally unaware
client, contractors could decide to skip proper surface draining repair and management
during construction, leading to potentially catastrophic problems during the rare but
devastating flash-flood events in some sections. There is at least one such stretch along
each of the two project sections. Therefore, as part of the detailed design work, these
stretches must be identified by the local road agency staff and these conditions
accommodated in the final design. Construction inspection will include the specific
examination of existing culverts and water channels in those areas subject to flash flooding
to reconfirm that no drainage restrictions will result due to the construction work.
Uncontrolled Deep Aquifer Water Extraction for Construction Purposes

100. Given the scarcity of water, in particular water suitable for use in concrete making
and a plan for contractors to extract large volumes from the deep aquifer along the road or
from existing wells, a water extraction permitting and monitoring program must be prepared
in close consultation with local water management authorities. In general to produce 1000m3
of concrete 176,000 L of water are needed. The extraction volumes per well will be
established based on the geo-hydrological conditions as determined by experts, such that
recharge and extraction will be balanced. Each well to be used will have a maximum
sustainable extraction volume established and a meter will be affixed to each well with a
seal. Meters will be read daily, with records sent to local authorities. Contractors exceeding
allowable limits will have the water supply shut off and an investigation completed and fines
paid. As an option, water could be hauled form the Amudarya R. by tanker truck, but due to
the high sediment load, may need to be cleaned before use in concrete manufacturing. This
8
Small quantity sewage and septic waste management from small work camps in desert conditions
can be managed through simple aerobic settling ponds, where the liquid simply evaporates leaving the
dry solids behind. These must be covered with a 30-40cm-thick layer of sand, although research has
shown that generally aerosol dispersion of bacteria from fecal material is of concern only within a
70m radius of the site and less so in harsh dry desert conditions.

method may introduce other impacts, such as additional truck traffic on secondary and
tertiary poor roads, dust and localized air pollution.
Wind and Rain Erosion Due To Poor or No Erosion Prevention Actions

101. Assuming that the work is undertaken as planned, the exposure of denuded ground
to the frequent wind and rare rain events should be relatively small. Clearing will involve
about, 130 ha of land in partially disturbed roadside lands, which nevertheless will need to be
stabilized and revegetated as soon as construction is completed. Stablization using reed
mats and the planting of Saksaul seedlings according to advice from the Uzbekistan Forestry
Institute9 in Tashkent will be undertaken. It may be possible to use waste sewage water to
help with watering of revegetation sites. To prevent wind and water erosion, revegetation of
the disturbed areas will be undertaken as the work proceeds and as soon as work on any
given stretch is completed.
Inadequate Construction Operation Noise Management

102. Noise will be an overall minor construction period impact, since work will take place in
rural isolated terrain with no population centers along the road sections. The four small
villages located around the Daud Ata Cemetery are mostly to the east of the cemetery and
as such will be exposed on imperceptible increases in noise of period 3 -5 dBA spikes.
103. Since all the work is in uninhabited or very sparsely populated terrain10, more than
100m from any habitation, no mitigative action or monitoring will be needed.
Construction Period Air Pollution

104. Construction period air pollution will be dust and emissions from operating machinery.
Mobile aggregate crushing facilities and asphalt plants will emit CO2, dust and some odor. It
is assumed that the new mobile plants purchased as part of this loan will have dust
suppression technology installed and as such will help to control the dust plumes that usually
come from crushing operations. Emissions should be kept to a minimum given that state-of-
the-art machinery will be used.
105. Despite the fact that work is in an area devoid of settlements, controls on idling and
equipment maintenance will be imposed through construction inspection and regular
reporting, ensuring that equipment is maintained to specifications and that dust is carefully
and continuously managed. Dust control will be particularly stringent for mobile crushing
plants which can produce large plumes of find dust which can become airborne for many
kilometres downwind of their location.
Failure of Contractor and/Or UZAVTOYUL’s PIU To Prepare Final Construction Period

Mitigation Report
106. In order that mitigation measure are carried over into the operating period, a
construction period environmental mitigation completion report will need to be prepared and
submitted to UZAVTOYUL for their use during the operational period. Some measures such
as revegetation will need to be continued and strengthened during the operational period if
the mitigation plan is to be useful.
4.3 Environmental Effects Associated with Project Operations

107. With an expected small increase in traffic volume, associated impacts will likely be
minor. Local air and noise conditions will be affected minimally. Depending on the shipping
routes the transport of larger volumes of hazardous and toxic materials may marginally
increase the risk of hazardous material spills. Four operating period impacts are discussed
in detail as follows.
9
Uzbek Forestry Research Institute in Tashkent , Prof. Z. Novitzky, gtz_novi@globalnet.uz
10
For example for the entire 91 km of Section 1 there are only a couple of roadside police
checkpoints, no other permanent habitation .

Failure To Delivery The Construction Mitigation /Monitoring Completion Report To The

Operating Unit Of UZAVTOYUL
108. The contractor is required to prepare a Mitigation/Monitoring Completion Report,
which must be submitted to UZAVTOYUL’s unit which will operate the road, in order that they
can follow up with mitigative measures such as revegetation, initiated by the contractors and
undertake measures, such as air and noise sampling, as defined in the EMP. Should this not
take place, the entire EMP and monitoring program is in jeopardy. UZAVTOYUL and its PIU
is committed to making certain that the contractor carries out this task.
109. Measures to continue into the operating period will be the maintenance of
revegetation areas and confirmation of the record of the decommissioning of any work areas,
workcamp sites including waste dumps, etc and the sealing/securing of wells newly dug for
use during the construction period.
Noise and Vibration Disturbance Due To Increases In Traffic

110. Noise levels 23 years into the future will be well within the standard during the
daytime (Table 5). They may considerably exceed night noise standards if one assumes
uniform traffic volumes over a 24 hour cycle; particularly with the perceived noise correction
of 10dBA (an internationally accepted factor) is added to the estimates. Neither night-time
traffic nor noise was actually measured during the project surveys, therefore the actual
figures are not known. However, based on driving habits, the traffic at night along A 380
drops by ≥ 75%, therefore noise levels would drop to levels well within the RoU standard for
rural residential landuses; even within 10m of the edge-of-pavement. Assuming that road
conditions improve markedly and that border crossings operate 24-hours a day, future traffic
volumes at night may only drop by 25-30%, enough to keep noise levels within RoU
standards at 50m from the road. Since there is virtually no habitation along these two road
sections, noise is a non-issue and should not be a problem so long as residential
development does not take place at or near roadside. In-migration is highly unlikely given
the extremely harsh desert conditions, and almost total lack of water.
Table 5. Estimated Existing and Future Noise Levels at varying distances

from Source (no Night-time weighting added).
Estimated Leq 80 (dBA)

AADT PCE ROU
Location Year 10 m 50m 100m
Estimate Estimate Std.
Section 1 2007 1924 4,804 65-68 60-65 55-66 D: 65-70
2030 6,115 15,276 70-80 64-74 59-69 N: <65
Section 2 2007 364 994 59-62 45-58 48-51 D: 65-70

2030 1,393 4,041 66-69 60-64 55-58 N: <65
PCE= Passenger Car Equivalent; Note: Night time weighting for perceived noise ranges from 6-10dBA
Vibration is not an issue with this project.

Degradation Of Local Air Quality With Increase In Road Traffic
111. Existing air quality in the vicinity of A 380 is relatively unpolluted despite the existing
traffic. The tripling of the relatively small traffic volume from 4804 to 15,276 and 994 to 4041
PCEs for Section 1 and 2 respectively, coupled with the dramatic changes in emission
control equipment, fuel and indeed transportation modes, will mean marginally significant
changes in NO2, TSP, TH and CO2 levels. It is roughly predicted that without significantly
improved emission technology11 and fuels the increased traffic will mean that at roadside
day-time concentrations of NO2, SO2, TPM and TH will rise by as much as 25% above
existing standards. This will occur even with the no-project scenario.
11
A scenario of no technical improvements or fuel upgrades over 30 years is virtually impossible, thus
technology will play a major role in reducing emissions from internal combustion engines.

112. The upgraded road is likely to attract between 384 and 1,760 PCEs per day, or 8.7 to
13% of the total traffic. This diversion will be mostly from the railway, much of it freight
hauling and a more environmentally friendly mode of transport, and also some from other
roads. This means that the upgraded road will contribute marginally if at all to carbon saving.
In general terms only 8-13 % of the changes in local air quality could be attributable to the
road improvements of the 131 km length, making up 11% of A 380’s total length.
113. The upgrading of the two project sections will, on their own, contribute minimally to air
quality improvement since these short sections are located between long stretches of poor
quality road, almost totally negating the travel time and fuel savings generated by the
improved sections. Only when the entire A380 is upgrade will a real time/fuel saving, coupled
with CO2 and carbon emission savings be apparent.
114. A further fact confounding efforts at CO2 reduction and carbon savings is the driving
habits of Uzbeks, who disregard all speed limit which is nominally set at 120 kph. Instead,
drivers travel at between 140-150 kph as much as possible, also requiring rapid deceleration
and accelerations thereby dramatically increasing the emissions per km travelled (by as
much as 15%) per trip. Without speed limit enforcement this pattern will continue, and may
only get worse as the road is improved. It is hoped that the average saving in travel time
coupled with better emission technology and other improvements mentioned, will result in net
CO2 and hydrocarbon emissions remaining at or below 2007 levels.
Spill Of Hazardous And Toxic Material (HAZMAT)

115. Over the past 10 years the record on spills along A 380 has been very poorly
recorded. The sparse data would indicate that most hazardous and toxic materials are
shipped by rail, and therefore only minor road-based spills of less than 4000 L or 25 tons are
due to truck accidents. There were no records of collisions involving the spilling of HAZMAT
materials anywhere along A 380. The present risk of a spill of HAZMAT is extremely low, on
the order of 1 accident for every 5-6 years. Assuming more less the same future traffic make
up as shown in the traffic projections, the risk of a spill by 2029 should stay the same since
improvements in shipment methods, enforcement of mandatory safety procedures, and
further shift of the transport of such materials from road to rail, will balance the increased
volume shipped by road.
116. At present neither UZOVTOYUL nor the URF keep reliable accident records or have
a written accidental spill protocol. This in contrast to the national rail operator UTY, which
not only has a spill database but a spill management protocol and procedure.
117. The consultant recommends that once the traffic volume of trucks doubles and the
movement of hazardous and toxic materials increase significantly a specific spill contingency
plan be prepared and that provincial offices be trained to respond to spills. UTY will be
approached for assistance in development of a plan and with training.
4.4 Impact and Mitigation Related to Procurement

118. Under the Project, the following road building equipment may will be purchased: (i)
mobile rock-crushing and screening plants, (ii) mobile asphalt mixing plants, (iii) heavy
equipment/ vehicles such as bulldozers, asphalt paver, loader, graders, excavator, recycling
equipment, asphalt cutters, rollers, crane, dump truck, drilling equipment, bitumen distributor,
etc. (iv) blasting equipment, (v) mobile repair shop, and (vi) fuelling vehicle. The equipment
listed above will also be used for construction and maintenance of other road projects. To
minimize impacts resulting from their operation, the EA will ensure that the following
mitigation measures be implemented:
• Operation of asphalt mixing, rock-crushing and screening plants shall not be

allowed in close proximity to populated settlements. These facilities shall be
located at least 1 km from the nearest residential area.

• All equipment and vehicles shall be fitted with appropriate pollution (including
noise and dust) control device, regularly maintained and operated consistent
with the national pollution control guidelines.
• An oil interceptor will be provided for the mobile repair shop and that oily
wastewater shall be properly collected and disposed of consistent with
applicable regulations.
• A contingency plan shall be developed for cleanup of spills and leaks of fuel,
bitumen and other hazardous materials. a-d to be added in EMiP and EMoP
• Equipment that will generate noise level exceeding applicable standards shall
only be operated between 0600 and 2000 hours within 500 m of residences.
• Vehicles transporting potentially dust-producing material are not overloaded, are
provided with adequate side and tail-boards and are covered. Dust suppression
along haul roads shall be undertaken by water spraying.
4.4 Social Assessment

119. Impacts on the local communities, households and individuals within the road corridor
and the administrative areas around it, as discussed in the Social Impact Assessment
completed as part of this feasibility study, will be barely measurable. The following three
sections provide summary statements on the conclusions found in the social assessment.
4.4.1 Social Impact
120. None of the activities proposed will negatively affect local communities or local
economies, since they are located far from the road and the work is of a small-scale. In fact
the project will provide some benefit, bringing mostly temporary economic opportunities in
terms of employment and provision of good and services.
121. There should be no impact on community dynamics or cohesion as a result of the
project since none of the work camps will be anywhere near settlements and secondly the
camps will be small and made up mostly of local people.
4.4.2 Poverty Impact
122. The upgraded 131 km of road will have only a minor positive impact on poverty since
some of the poor in Khorezm and Karakalpakstan will find work during the construction
period and few will benefit from the increased need for food for construction workers. There
will be no negative effects.
4.4.3. Resettlement
123. No land acquisition or resettlement is needed anywhere along the two sections since
all activity will take place in the wide RoW, generally between the utility corridors in each side
and paralleling the road. No landless people were identified anywhere in the RoW
4.5 The Environmental Impact Mitigation and Monitoring Program (EMP)

124. The EMP’s mitigation and monitoring actions that will be taken by UZOVTOYUL
and/or the URF or its representatives, to prevent and mitigate unwanted negative effects,
,are defined in detail in the Mitigation(EMiP) and Monitoring(EMoP) Tables. The EMP in total
identifies the mitigation and compliance monitoring requirements, including specifying how,
when where and by whom, the the mitigation and monitoring is to be carried out, (Annex B,
Table 1-2) during the three key phases of the project; the preconstruction or planning and
design period, the construction period and the operating period). Both tables are self
explanatory and have been prepared such that they can be used as environmental clauses in
the contract documentation to be completed.

4.5.1. The Environmental Mitigation Table (EMiP)

125. Key actions listed in the EMiP (Annex B, Table 1) for the preconstruction period
include the need for planning decisions to bring in high volume construction materials and
equipment by rail, specify mitigation requirements for contractors in the bid documentation
and provide training to permit the PIU, Contractors and the UZAVTOYUL to understand and
manage the environmental effects of the work.
126. During construction, mitigative measures focus in assuring that contractors undertake
all their work in an environmentally responsible manner, properly disposing of wastes,
controlling the use of fuels and lubricants, revegetating any sites cleared during construction
and being aware that construction dust must be managed as it can travel long distance.
127. Operating period mitigative actions focus on ensuring that key mitigative measures
are carried over into the operating period and that a spill contingency protocol and plan be
considered after 2020 when traffic volumes begin to rise above AADT 10,000 PCEs.
4.5.2 The Environmental Monitoring Table (EMoP)
128. The EMoP (Annex B, Table 2) lays out the monitoring and reporting requirements
that UZAVTOYUL has committed to, using the same three key project phases as shown in
the EMP. The EMoP defines five pre-construction period monitoring events, eight
construction period actions and five operating period monitoring requirements. Most
important with monitoring will be the consistent and regular actions dealing with compliance
of UZAVTOYUL’s design team with the preconstruction engineering actions to limit
environmental impacts, followed by careful compliance monitoring of the contractors.
Monitoring stresses stress timely recording and reporting.
4.5.3 Delivering Mitigation and Monitoring
129. The presentation of the EMiP and EMoP in this IEE is only the first step in the
delivery of a credible mitigation and monitoring program. The EMiP and EMoP must be
carefully reviewed revised during the design stage, to reflect any new engineering
specifications and the edited to become a mitigation and monitoring timetable for use by
contractors and the road operators. Key ingredient will be clear and timely reporting of the
mitigative measures and associated compliance monitoring.
130. Secondly the contractor(s) must a) receive the revised EMiP and EMoP as part of
their bid documentation and confirm that they fully understand how to carry out the measures
and b) must conduct or retain specialist to conduct the mitigation and monitoring as
prescribed in the EMiP and EMoP.
131. Finally, the delivery of the final report on the construction period mitigation and
monitoring to the road operator will be essential if mitigation and monitoring measures are to
be seamlessly carried forward into the operating period and a record of actions take available
for all to inspect. Historically, this is a major failing and UZAVTOYUL will make every effort
to avoid this problem.
4.6 Mitigation and Monitoring Costs

132. The largest construction period cost will be the purchase of the saksaul seedlings
which at USD 20.00-23.00 per hundred seedlings, plus a planting and maintenance charge
would require a budget of USD 20,000 including labour charges for the planting of 50,000
seedlings, an additional USD 10,000/yr (for 4 years) for other items is estimated, making the
total construction period cost around USD 60,000. Operating period costs would include an
audit to ensure that Topraq Qala and the Daoud Ata cemetery in Kungrad have not been
damaged and that a maintenance program for the newly planted trees is undertaken and
maintained for at least 3 years into the operating period of the road. This maintenance of the
plantings scheduled 3X/year for a 1 week cycle, over a three-year period using two people
and one watering vehicle is estimated to be USD 10,000.

133. The completion of monitoring of the water extraction process and volumes extracted
during the production of concrete will be essential. This work would normally be costed as
part of the regular construction inspection duty, but due to its importance an additional
budget of USD3,000 will be included to ensure proper inspection and reporting.
134. Proper construction site and work camp ‘good housekeeping’ are considered part of
the contractors’ operating costs and will not have a separate environmental budget item.
Compliance monitoring of contractors’ worksites and work camps will be undertaken and a
special budget item of USD3,000 established for quarterly inspection and reporting during
the 3-year construction period.
135. Prior to work begins along A 380, anywhere between km 886-889, in the vicinity of
the Topraq Qala site, a site survey by trained professionals will be undertaken to insure that
no archaeological remains, such as ancient roadbeds or bridges, are present along the sides
of the road or immediately under the existing subgrade. A further budget item of USD1,500
will be allocated for this action.
136. Finally the planned 2-day training workshop will be budgeted as defined in Annex C
of the IEE. The total cost including use of an international expert will be USD36,690.
Replacing the international expert with a national consultant would reduce the cost to about
USD15,000. Involving the international person only in the preparation of the workshop
materials would bring the price down to USD 23,000.
137. Therefore, assuming full-cost training the total estimated mitigation and monitoring
costs would likely be about USD 112,000 for the six years the mitigation and monitoring will
be undertaken.
5 Institutional Requirements and Environmental Monitoring Program
5.1. Institutional Capacity, Needs and Proposed Strengthening

138. Uzbekistan established its EA law in 2000. It is implemented on a limited basis, is
poorly understood and virtually unheard of outside Tashkent and a few of the other major
centers. In other words environmental capacity needs considerable strengthening12. In
2003 the World Bank funded a broad ranging study to examine and provide a plan for
strengthening the country’s environmental agency, delivering some training, helping to
identify and fill in regulatory gaps, and clearing up confusing overlaps in jurisdiction. The
benefits of this work were not clearly felt by the road transport sector.
139. The URF’s Environmental staff has expertise in the biophysical sciences, such a
hydrology, soils engineering and meteorology but lacks the integrative skills of ecology and
environmental management, or for that matter experience the capacity needed to undertake
all forms of environmental assessment.
140. The 2000 legislation states that all new projects require an environmental study,
beginning with a screening, its detail depending on which of four categories a project was
placed in. To date, most projects have not received full EIAs and RoU continues to lack
technical skills in this area. This means that the URF and UZOVTOYUL will need
considerable upgrading if they hope to be able to implement the EMP for this study and the
ones to come in the future. The URF/UZOVTOYUL and its PIU must be able to plan,
undertake and deliver:
• Environmental Screening Studies
• Initial Environmental Examinations (IEEs); and,
• Environmental Assessments (EAs) including Environmental Mitigation (EMiP)
and Monitoring Plans (EMoPs).
12
Strength in specific fields such as air pollution, noise pollution, hydrology, forestry, etc. is excellent.
It is the integrative skills required to undertake manage and follow-up environmental assessments that
is only now being developed.

141. The URF recognizes its and the PIU’s weakness in this area and will, as a first step,
organize two 2-days workshops (one in Nukus and one in Kungrad) on environmental
management and assessment as it is applied by the ADB and in Uzbekistan for its provincial
management and technical staff. Secondly, The URF will develop and deliver a capacity
building plan for improving the environmental assessment mitigation and compliance
monitoring function of its PIU and the URF’s Road Transport Research Institute.
142. The workshop organizers, namely the URF or its PIU and CSE will require that
successful contractors also participate in the workshop, with emphasis on EMiP and EMoP
interpretation, implementation and reporting.
143. Terms of Reference for a short training program have been prepared and are
attached to this IEE as Annex C.
5.2. Environmental Monitoring

144. During the project design period, monitoring (Annex B, Table 2) will focus on
confirming UZAVTOYUL’s commitment to arranging and participating in training programs on
environmental assessment, mitigation and monitoring methods and reporting. Secondly the
contract documentation will be examined to assure that appropriate environmental
safeguards have been added, such as the requirement to implement and adhere to the
EMoP.
145. Construction period monitoring will deal mostly with compliance monitoring of the
following construction-related actions:
• consultation with local community people prior to initiation of work that affects
their livelihoods, e.g. access restriction and traffic congestion , noise;
• execution and management of revegetation program;
• handling and delivery of construction materials;
• dust management at construction sites; and
• general good housekeeping activities by the contractor at all construction sites.
146. Monitoring during the operational period will concentrate on assuring that the
mitigative measures implemented during the construction period such as the track runoff
system is fully implemented and maintained
147. The monitoring timetable included as part of Annex B, Table 2 will conform to the
following limits:
• During the design period, monitoring will take place once, just before the bids
are released and will be completed by UZAVTOYUL staff.
• During the construction period monitoring will be every 3-4 months, based on a
timetable prepared by the UZAVTOYUL, using the IEE as a baseline document,
and for the 3-years construction period. This will be in addition to the daily
construction inspection;
• Operational period monitoring will be once or twice a year, depending on the
requirements, for a three year period.
6. Public Consultation and Information Disclosure

148. Two consultation sessions were undertaken. The first was in June and held in
Bukhara and Urgenh and was attended by the the national and international environmental
specialist who travelled the length of the project area, describing the proposed work to local
officials and seeking all comments and inputs. Attendance (Table 6) included mostly
government and municipal officials. but participation was mostly by local officials and small
business owners. The attendees were asked if there were any problems and no

environmental issues were raised and in fact 100% of the attendees were in favour of the
project.
149. No specific documentation was handed out, although the map showing A-380 and an
approximate cross-section of the upgraded road was used to indicate the location and scale
of the work. Since the impacts are almost all benign, the project generated little interest and
it was difficult to obtain opinions from the general public. Officials also had little criticism or
felt it was not necessary to give any advice. During the first session UZAVTOYUL (the
consultant) was shown the road sections affected by sand dune encroachment and asked for
assistance. An approach was proposed and ADB approved it but the RoU considered other
sections to be more important.
150. The second round of consultation was held in Nukus and Kungrad, Karakalpakstan in
July and addressed specific environmental concerns, such as the existence and sensitivity of
the endangered species in the vicinity of the project area, existing concerns with noise and
air pollution. Local officials and municipal managers had no concerns with construction
period impacts, but were interested to learn about the traffic management program during the
construction, as the work would be done on the existing A380. UZAVTOYUL is consulting
with its regional offices in this matter and will require that the contractor(s) prepare a traffic
management program.
151. All people and groups consulted during the two sessions are listed in Table 6:
Table 6. Listing of Participants in Consultation Sessions, June and July 2007
Consultation Period No. 1
№ Name Agency/Title Date of Meeting
Goskompriroda of the republic of Uzbekistan
1 Koroleva, Nina 13.06.07.
Major ecological expert
2 Komilov, Kalandar Major Engineer of Bukhara Highway 15.06.07.
3 Kayumov, Farhod Major Engineer of “Bukhara Avtoyul” 15.06.07.
4 Abdullaev, Mehrulla Head of Bukhara highway section 15.06.07.
Mahmudov, First deputy of Goskompriroda chairman
5 15.06.07.
Kahramon Bukhara region
Head of land inspection
6 Kuziev, Kamol 15.06.07.
Bukhara region
7 Abdullaev, Sadulla Head of Gazlin DRSU section 16.06.07.
8 Safarov, Tursun Major engineer of Gazlin DRSU 16.06.07.
9 Polvonov, Norbek Head of “Tuprokala” DRSU section 16.06.07.
Doshniyazov,
10 Head of Khorezm DRSU 16.06.07.
Aminboy
Head of Turtkul DRSU of the republic of
11 Turabek Razzakov 16.06.07.
Karakalpakistan
12 Rustam Alimov Major engineer of DRSU 16.06.07.
Consultation Period 2
Head of North-Western Hghway department of
13. Ruslan Erniyazov 14.07.07
the Republic of Karakalpakstan
Deputy Head of North-Western Hghway
14. Shukhrat Dauletyarov 14.07.07
department of the Republic of Karakalpakstan
15. Kamal Kalandarov Deputy Head of “Karakalpakavtoyul” 14.07.07
Head of Goskompriroda of the Republic of
16. Pulat Raimov 14.07.07
Karakalpakstan
17. Makhset Yuldashev Head of Kungrad district road department 14.07.07
Head of Kungrad district department of
18. Urinboy Allanov 14.07.07
Goskompriroda
Chief Engineer of Turtkul District Road
19. Rustam Raymov 15.07.07
Department of the Republic of Karakalpakstan
Aminboy
20. Head of Khorezm DRSU 15.07.07
Doshniyazov
Chief Engineer of Khorezm Highway
21. Oibek Sobirov 15.07.07
department
22. Jumanazar Rakhimov Chief Engineer of Khorezm Design Institute 16.07.07
Acting Head of Goskompriroda of Khorezm
23. Bakhtiyar Kalandarov 16.07.07
Province

152. During the consultations, all project details known at the time, except costs, were
disclosed, including the preparation of an EMP and the need to implement and monitor it and
the strong commitments of UZAVTOYUL to follow the environmental guideline defined in the
IEE. During both sets of meetings, participants were pleased to note the emphasis on
environmental controls but felt that for this project there was little to be worried about.
7. Findings and Conclusions

153. The improvement to the two road sections will not have significant negative
environmental effects on the local environment, provided that UZAVTOYUL and its
contractors adhere to good construction practices as defined in contractor bid documentation
and that they use the EMP and monitoring guide prepared in this IEE. The 16 key impacts
and mitigative measures are summarized in this IEE and related monitoring measures
defined in the EMoP.
154. The amount of residual environmental damage due to the project will be directly
related to how well the UZAVTOYUL meets its environmental responsibility, and how it uses
the EMP and enforces the contractors’ compliance with the EMP and the monitoring
program. If properly used, there should be no significant residual environmental effects.
155. If one excludes the environmental inspection (which is normally a part of construction
inspection by UZAVTOYUL), the mitigation and monitoring costs will be low. By making a
number of key environmentally important planning decisions, such as no work outside the
RoW and use of the EMP in the bid documentation major impacts will be eliminated from
further consideration.
156. While the IEE identified a number endangered species, mostly found at great
distance from Section No.2 on the Ustyurt Plateau, experts indicted that few if any of these
species are found anywhere near the road RoW, most occurring to the North and East of km
916.
157. The only potentially important Impacts during the operating period, but only after
2020 will traffic levels rise above 10,000, causing noise levels of some concern. At 10m from
the roadside noise levels could exceed 68 dBA more than 10% of the time during any 18
hour day. At 100m from the road way this sound will drop to an average of 3-4 dBA and at
250m will cut the noise level in half to around 60 dBA. During the night traffic will drop by at
least 60% eliminating noise issues all together. However there are no settlements within 5km
of the road RoW (aside from the Daoud Ata Cemetery site) and at present there is no plan to
permit strip development along the road, thereby making this effect only marginally relevant.
The cemetery is located on a hill between the four small villages and the road, creating an
effective noise barrier.
158. Given the lack of technical capacity to undertake and manage environmental
mitigation and monitoring tasks, environmental capacity building workshops are planned for
Nukus and Kungrad, and will include the contractors assigned to do the work.
159. Total estimated costs for environmental, mitigation and monitoring conducted over six
years will be USD 112,000 , with no contingency added.
160. Finally, this IEE reinforces the conclusion of the Screening report presented in the
Interim Project Report that the IEE is sufficient to deal with all environmental matters and no
EIA or further study is need.
8. Recommendations
161. UZAVTOYUL will recommend to the RoU that institutional capacity building within
UZAVTOYUL in the environmental field is essential and that it needs to be done before
construction begins, via a set of workshops.
162. The consultant recommended that UZAVTOYUL carefully review the IEE and its
EMiP and EMoP,and incorporate these two matrices as a executable pay items in its contract

with contractors, and that it assign the EMiP and EMoP compliance monitoring to a specific
individual or unit.
163. Since UZAVTOYUL at present has no internal environmental expertise, it will hire a
specialist to implement the EMP. Alternatively it will open a dialogue with Goscompriroda
and seek their help and cooperation as needed. Without such specialized assistance the
EMP and the monitoring program will likely never be implemented effectively, and the
monitoring, reporting and feedback mechanism will not be initiated.
164. The consultant recommends that a short in-service training program in environmental
management and assessment as related to road infrastructure program planning,
construction and operations by designed and delivered to UZAVTOYUL and its contractors
over a 2-day period, in Nukus and Kungrad. A summary ToR, including a cost estimate, has
been prepared and is attached to this IEE.

Annexes A, B and C
Annex A: Opinion of State Environmental Expertise

Committee
Annex B: The Environmental Management Plan:
Environmental Mitigation (EMiP) and Monitoring (EMoP)
Annex C: Training Workshop Preparation and

Delivery Terms of Reference

ANNEX A
TRANSLATION
State Committee for Nature Protection
31 July 2007
Ref. No. 18/267
In response to Ref. No. IKS-07/47 of 18.07.2007
Opinion
of State Environmental Expertise Committee
Project: Environmental Impact Assessment of rehabilitation of A-380 Guzar – Nukus –

Kungrad – Beyneu, on section km 490-581 and km 876-916
Customer: Republican Road Fund under the Ministry of Finance
Developer: Islohotkonsultservis Ltd.
To: Mr. Djulibekov,

Director, Republican Road Fund under the Ministry of Finance
Mr. Kalandarov B.R.

Acting Head of Khorezm Regional Committee for Nature Protection
Mr.Reymov P.R.
Chairman, State Committee for Nature Protection of the Republic of Karakalpakstan
Mr. Mirakhmedov M.M.

Director, Islohotkonsultservis Ltd.
The materials of initial environmental impact assessment of rehabilitation of international

road A-380 Guzar – Nukus – Kungrad – Beyneu on sections km 490-581 (in Khorezm
region) and km 876-916 (in the Republic of Karakalpakstan) were submitted for state
environmental expertise. Based on project data the repair works are planned on the roads
sections with no adjacent buildings and localities.
The rehabilitation of this road is necessitated by bringing it to conformity with international

standards and requirements to transcontinental expressway, as well as by distress of
pavement and subgrade, which is more significant on the first section. The road is meant for
international transport (to Kazakhstan and Russia). Travel speed after rehabilitation shall
increase from 60 km/h to150 km/h, while the traffic volume – from 3.5 thousand to 30
thousand vehicles per day, of which 30% will be trucks and 70% cars.
In 2003 the construction of the road Kungrad-Beyneu was commenced, which extends the
project road and also is a part of international road corridor linking Uzbekistan with Russia
and European countries. At present the construction of subgrade base and upper layers of
sand and gravel material with the length of 240 km is completed. The completion of woks on
road paving with asphalt concrete is expected in 2007-2008.
Road sections envisaged for rehabilitation start in Pitnyak district of Khorezm region and
extend to the border of Kungrad district of the Republic of Karakalpakstan. The total distance
of the sections is 131 km. The first section crosses Kyzylkum desert, while the second
section goes across the uphill and top of Plateau Ustyurt.
In the course of reconstruction and construction it is planned to use 87 items of equipment

(excavator, asphalt paver, rollers, truck cranes, bulldozers, motor graders, dump trucks,
mobile asphalt-mixing plant, etc.)

Vehicle emissions before road reconstruction generate the highest air pollutant concentration
exceeding maximum allowable threshold for nitrogen dioxide, benzopyrene and aldehydes
due to nonuniformity of traffic passage along damaged sections.
During reconstruction the operating equipment will temporarily discharge in the air
contaminants, mainly dust, soot, aldehydes, carbon oxide, nitrogen oxide, and sulfur oxide.
Estimation of maximum contaminant concentration generated by special equipment
emissions made in the course of expertise has demonstrated that there would be no
exceeding of maximum allowable threshold beyond the buffer zone, where the highest would
amount 0.3 maximum concentration limits. Estimation of maximum contaminant
concentration for the period following reconstruction of the road shows that despite traffic
augmentation no exceeding of maximum allowable threshold would be observed since the
expected evenness of traffic flow movement with the constant and increased speed will result
in reduction of concentrations generated by emissions.
The project stipulates the reuse of removed layer by milling and mixing up with sand and
crushed rock to be used for subgrading. Tree vegetation felling and extraction is not planned
due to its absence. The problem on the first project road section is blowing sands, which are
expected to be prevented by adjacent soil stabilization with reed and sand intercepting
shields made of reed-fiber mat.
The project considers the collision of vehicles with subsequent inflammation as most likely
emergency situation. It was demonstrated that road reconstruction will lead to reduction of
adverse emergency situations consequences risks and accident probability resulting from
upgrading of road technical parameters and elimination of forced abrupt speed change
zones. The divider bar shall prevent potential accident situations in case of riding on the
opposite carriageway.
The project has developed environmental safeguards stipulating revegetation of lands

disturbed during construction, implantation along the road of shrub and other vegetation
absorbing contaminants discharged to air by road transport. It envisages adjacent land
planning with the stabilization thereof with clay mud.
Environmental expertise of the project has shown that the documents submitted are in line
with the requirements of legal documents. Reconstruction of the road to bring its parameters
into the line with international standards is designed in the regimen of moderation not
involving irreversible adverse environmental impacts, and it has no contraindications from the
environmental point of view as it will result in abatement of environment pollution and
reduction of accident probability.
The State Environmental Expertise Committee of State Committee of Nature

Protection of the Republic of Uzbekistan agrees upon Draft Environmental Impact
Statement of the rehabilitation of international road A-380 Guzar- Nukus – Kungrad –
Beyneu on the sections km 490-581 and km 876-916.
Khorezm Regional Committee for Nature Protection and State Committee for Nature
Protection of the Republic of Karakalpakstan shall take over the control of Environmental
Compliance during rehabilitation of the international road A-380 Guzar- Nukus – Kungrad –
Beyneu on the sections km 490-581 (in Khorezm region) and km 876-916 (in the Republic of
Karakalpakstan).
R.Khabirov,
Acting 1st Deputy Chairman
Koroleva N.V.
Tel. 139-16-88




ANNEX B
THE ENVIRONMENTAL PLAN: MITIGATION (EMiP) AND MONITORING (EMoP)
Table A-1: Environmental Mitigation Plan (EMiP).
Environmental Responsibility
Mitigative Measures Location2 Time Frame
Impact/Issue Implementation Supervision
1. PRE-CONSTRUCTION PERIOD
i) Failure to restrict road Fortunately the utility transmission lines and the pipelines
UZAVTOYUL,
rehabilitation design to parallel the road and form a natural construction boundary, During project
NA its PIU and UZAVTOYUL
the existing RoW which can easily be a work boundary of 25m from the design period
consultants
centerline of the proposed road sections.
ii) Plan to bring Design construction in such a way that avoids the
construction materials construction if any new access roads and plan to bring bulk UZAVTOYUL,
During project
by any means, without materials to the site by rail and then truck, in an NA its PIU and UZAVTOYUL
design period
consideration of environmentally friendly manner. consultants
environmental factors
iii) Inadequate guidance Extraction of sand and gravel from the Amudarya R. shall
on construction material be prohibited except (i) where there is no technically and
Planned during the
extraction sites, leadingeconomically feasible alternative, and (ii) provided specific UZAVTOYUL,
At all construction design stage for
to negative effects mitigation measures are implemented to minimize impacts its PIU and UZAVTOYUL
sites compliance by
on the natural ecosystem. consultants
contractors
Materials shall be sourced from licensed quarry/borrow
areas operations.
iv) Failure to include Prepare environmental contract clauses for contractors’
environmental clauses contract Terms and conditions and Conditions of Special
in contract and Application section of standard documentation—using the
covenants in loan EMP and monitoring plan as guides.
agreements, defining Prepare an environmental loan covenant the binds Before UZAVTOYUL,
mitigative actions UZAVTOYUL/Road Fund to implement the EMP and NA construction its PIU and UZAVTOYUL
monitor according to the Monitoring Plan and to show proof begins consultants
that the work has been completed
In defining the “bill of quantities” provide specific
environmental items against which interim payments can
be tagged—and withheld for non-compliance
v) No plan for provision UZAVTOYUL and its PIU will provide the successful
of IEE, related contractor with the translated IEE , its EMiP and EMoP,
documents and training with instructions on how the mitigative measures and
in EA and EMP monitoring are to be undertaken, as defined in a work plan Once the contract
implementation, prepared by UZAVTOYUL. award is made to UZAVTOYUL’s
monitoring and reporting Secondly, the PIU will provide Oblast-level inspectors with Workshops to be held the winning PIU
to UZAVTOYUL/ROAD copies of the IEE and all supporting reports for use in their in Nukus and contractor(s) UZAVTOYUL
FUND, The PIU and inspection process Kungrad Trainers as
successful Contractors, The oblast-level inspectors, who will be required to Prior to contractor assigned by
in Nukus and Kungrad. undertake inspection during construction, have no training mobilization UZAVTOYUL
in this area. UZAVTOYUL will organize workshops in
Nukus and Kungrad for technical inspectors, dealing with
environmental compliance monitoring and reporting, etc.
2. CONSTRUCTION PERIOD
i) Improper management Large volumes of quarry rock, aggregate and sand will be
of earthworks transport transported and stored near the roadworks. These
and Storage operations and storage areas will be constantly exposed to
procedures, including the elements and will create primarily dust during the
cleaning; leading to frequent windy conditions. sediment laden drainage water Contractor
dust and air pollution is not an issue since there is no water for this to drain to— Supv.
Within the area
thus simply percolating back into the surrounding soils Construction Engineer, PIU
where existing ballast Contractor
during the very rare rains. Dust control will be very difficult period and oblast-
is located
given the scarcity of water. Dust at worksites will be level
controlled by watering, using shallow acquifer saline water . inspectors
Along the haul roads, properly loaded trucks with canopies
preventing spillage onto the highway and blowing dust will
be mandatory. Any spills on the haul roads will be cleaned
up by the contractor within a 24-hour period.
Ii) Improper or failure to Any roads used by the contractors for the transport of Contractor
repair haul roads materlals and equipment will be inspected during the Supv.
damaged by heavy load operations to ensure that deteriorations are patched to Construction Engineer, PIU
Any/all haul roads Contractor
haulage prevent accidents and at the end of the construction, fully Period and oblast-
rehabilitated to pre-construction conditions. level
inspectors
iii) Failure to adhere to Contractors will adhere to standard good housekeeping
construction related practices as defined in the contract Terms & Conditions
good housekeeping and Conditions of Particular Application. Special
practices, including solidconsiderations will be given to management of construction UZAVTOYUL
Any construction site
and sanitary waste waste and water, equipment lubricants and fuel. This will ‘s
or activity which is Throughout the
management be done in accordance with ROU and UZAVTOYUL Contractor Construction
the responsibility of construction period
regulations and standards; which the contractor will be Supv.
the contractor
expected to know. Also, the contractor shall orient all Engineer-PIU
construction workers in basic sanitation and health care
issues, general health and safety matters, and on the
specific hazards of their work
iv) Modification of There is at least one such stretch along each of the two
Contractor
surface drainage without project sections where flash flooding could take place. As
Contractor and Supv.
repair and rehabilitation part of the detailed design work, these stretches will be
At any water Throughout the Construction- Engineer, PIU
after construction is identified by the local road agency staff and these
crossing/canal sites construction period period and oblast-
finished conditions accommodated in the final design. Construction
inspectors level Govt.
inspection will include the specific examination of existing
inspectors
culverts and water channels in those areas subject to flash

Environmental Responsibility
Mitigative Measures Location2 Time Frame
Impact/Issue Implementation Supervision
flooding to reconfirm that no drainage restrictions will result
due to the construction work
vi) Uncontrolled Deep The extraction volumes per well will be established based
Water Aquifer extraction on the geo-hydrological conditions as determined by
Contractor
at construction sites for experts, such that recharge and extraction will be balanced.
All construction Contractor and Supv.
concrete production Each well to be used will have a maximum sustainable
period extraction Throughout the Construction- Engineer, PIU
extraction volume established and a meter will be affixed to
wells sites as yet to construction period period and oblast-
each well with a seal. Meters will be read daily, with records
be determined inspectors level Govt.
sent to local authorities. Contractors exceeding allowable
inspectors
limits will have the water supply shut off and an
investigation completed and fines paid.
vii) Wind and rain Clearing will involve about, 130 ha of land in partially
erosion due to poor disturbed roadside lands, which nevertheless will need to
groundcover be stabilized and revegetated as soon as construction is
replacement at completed. Stabilization using reed mats and the planting Contractor
worksites of Saksaul seedlings according to advice from the Supv.
Uzbekistan Forestry Institute in Tashkent ( see source in Engineer, PIU
Contractor
IEE text) will be undertaken. It may be possible to use and oblast-
waste sewage water to help with watering of the level Govt.
revegetated sites. To prevent wind and water erosion, inspectors
revegetation of the disturbed areas will be undertaken as
the work proceeds and as soon as work on any given
stretch is completed.
viii) Excessive The new mobile crushing and asphalt plants purchased as
construction-period air part of this loan will have dust suppression technology
pollution installed and as such will help to control the dust plumes
that usually come from such operations. Emissions will be
kept to a minimum given that state-of-the-art machinery will
be used. Location of such plants will be according to RoU
At all work sites Construction
standards and fully permitted.
where construction Throughout the Supv.
Controls on vehicle idling time when not in use and Contractor
equipment is construction period Engineer and
equipment maintenance will be imposed through
operating PIU
construction inspection and regular reporting, ensuring that
equipment is maintained to specifications and that dust is
carefully and continuously managed. Dust control will be
particularly stringent for mobile crushing plants which can
produce large plumes of find dust which can become
airborne for many kilometres downwind of its location.
ix) Failure of the Contractor working Contract package No. 1 ( km876-896)
Site survey
contractor to be aware will be required to insure that a archaeological site survey Contractor,
Between km 886-889 completed prior to
of possible has been completed to confirm that there is no possibility working with UZAVTOYUL
of A-380 near the any ground
archaeological remains that remains exist along the roadside or under the existing UZAVTOYUL and its PIU
Topraq Qala ruin breaking in this
in area near Topraq subgrade and could be disturbed by the construction work. and its PIU
area
Qala
x) Inadequate traffic A traffic management plan shall be prepared by the Contractor,
management leading to contractor prior to site works. Such plan shall be prepared At all construction During the working with UZAVTOYUL
congestion and in consultation with local authorities. sites and at all times construction period UZAVTOYUL and its PIU
unnecessary delays. and its PIU
xi) Failure of contractors The contractor will prepare a mitigation measures
At end of
to submit final implementation report summarizing the entire construction UZAVTOYUL
NA construction period Contractor
Monitoring Compliance period and submit it to the PIU Engineer and UZAVTOYUL and its PIU
(last 5 months)
Report
3. OPERATIONAL STAGE
i) Contractors do not The contractor is required to prepare a
prepare Mitigation Mitigation/Monitoring Completion Report, which must be
Completion report and submitted to UZAVTOYUL’s unit which will operate the
PIU fails to provide a road, in order that they can follow up with mitigative Contractor with
Operating stage measures such as revegetation, initiated by the contractors. Mitigation report help from
mitigation timetable for Should this not take place, the entire EMP and monitoring completed before UZAVTOYUL’s
UZAVTOYUL’s program is in jeopardy. UZAVTOYUL and its PIU is contractor received PIU and later
UZAVTOYUL
operating unit committed to making certain that the contractor carries out NA final payment and with operating
and PIU
this task and will provide guidance implementation unit of
Measures to continue into the operating period will be the schedule when UZAVTOYUL
maintenance of revegetation areas and confirmation of the operations begin responsible for
record of the decommissioning of any work areas, that section
workcamp sites including waste dumps, etc and the
sealing/securing of wells newly dug for use during the
construction period.
ii) Failure to address At present neither UZOVTOYUL nor the Road Fund keep
possibility of a haz. Or reliable accident records or has a written accidental spill
toxic materials spill, via protocol. This in contrast to the national rail operator UTY Need for plan will
a protocol and plan which not only has a spill database but a spill management be around 2020
protocol and procedure. when traffic
NA UZAVTOYUL UZAVTOYUL
The consultant recommends that once the traffic volume of volumes exceed
trucks doubles and the movement of hazardous and toxic AADTs of 10,000
materials increase significantly a specific spill contingency PCEs
plan be prepared and that provincial offices be trained
responding to spills.
4. ENVIRONMENTAL MONITORING
Failure to undertake In order for the mitigation program to be effective, Pre-
monitoring compliance monitoring will be necessary and UZAVTOYUL Construction:
is committed to making sure that it and prompt reporting PIU and
Throughout project
takes place. contractor
NA as defined in Table UZAVTOYUL
Construction:
Annex B-Table 2
Contractor
Operating
Period:PIU

Table A-2: The Environmental Monitoring Plan (EMoP)

Executing Reporting
ITEM Monitoring Details Timing
Unit Responsibility
PRE-CONSTRUCTION (DESIGN) PERIOD: all written confirmation and reports submitted to UZAVTOYUL’s PIU for the record, and
available to ADB for compliance check.
I) Checking design for Prior to the completion if the design work the PIU and their
integration of environmental consultant will complete an audit to ensure that Prior to the end of UZAVTOYUL
considerations; i.e. working environmentally sound design and construction measures have the detailed and the CSC or UZAVTOYUL
within RoW, materials haul been integrated in the detailed design and bid documentation design work PIU
restrictions
ii) Mitigation and Monitoring Sign-off by UZAVTOYUL that mitigation and monitoring
Before UZAVTOYUL
Implementation Timetable timetable has been prepared and will become a part of UZAVTOYUL
groundbreaking and its PIU
contractual activities
iii) Environmental UZAVTOYUL, with the help of the Supv. Consultant, is to Prior to bids and
specifications for provide draft environmental clauses and specifications based signing of Loan UZAVTOYUL,
contractors bid documents, on the EMP, for inclusion in bid documents and the Loan Agreement PIU and any UZAVTOYUL
Env clauses for contracts Agreement; or Use the EMP as the reference document between ADB & Supv. consultants
and Loan Covenant UZAVTOYUL
iv) Mitigation Reporting Prepare and submit to UZAVTOYUL and ADB (as required)
Near end of Pre-
pre-construction mitigation summary confirming that all items
construction UZAVTOYUL UZAVTOYUL
in part one of the EMP (Pre-Construction Mitigation items),
period
have been completed.
v) Confirmation of Training Prepare a completion report on the training provided including Just prior to PIU and
program copies of materials used duration, attendance and student Contractor Construction UZAVTOYUL
evaluation results mobilization Supv. Consultant
CONSTRUCTION PERIOD -prepare and use a monitoring checklist
i) Earthworks transport and Undertake, as part of the construction inspection, regular
Every day,
storage monitoring confirmation that earthworks are handled in an Contractor and
throughout the
environmentally acceptable manner and dust control is UZAVTOYUL or UZAVTOYUL
construction
undertaken at all time, including the use of tarpaulins by trucks PIU inspectors
period
hauling fine materials.
ii) Construction-related good Undertake regular good housekeeping tasks as defined in the Every day
Contractor and
housekeeping tasks monitoring EMP and provide monthly monitoring checklist to throughout
UZAVTOYUL UZAVTOYUL
such as waste water and solids UZAVTOYUL’s PIU. construction
inspectors
Use the EMiP as the basis for the checklist. period
iii) Monitoring of surface The PIU or its CSC will inspect and verify that adequate Twice during the
drainage works at potential consideration and drainage works and protection have been construction
flash flood sites provided for locations where the road crosses flash flooding period, once to
locations. These findings will be recorded in the monitoring confirm that sites Contractor and
report to the PIU and ADB have been UZAVTOYUL UZAVTOYUL
identified and inspectors
secondly to verify
that work was
done
iv) Monitor Contractor water Special monitoring checklist will be prepared for each well Record of
extraction used by the contractors for extraction of construction-water. extraction will be
The installation of meters and a recording system will be continuous by the
Contractor and
verified and a record of approval for extraction of a maximum contractor and
UZAVTOYUL
volume will be recorded and record of extraction volumes/day monitoring will be UZAVTOYUL
and PIU
will be checked. This documentation will be submitted to the monthly, during
inspectors
PIU, the CSC and the Ministry of Water Resources the time when
water is being
extracted
v) Monitoring of revegetation Inspectors will examine the revegetation program by providing Inspection is to
program an accounting of the number of trees/shrubs planted, the take place every 4
location and survival rate at each inspection cycle. Reports months along all Contractor and
UZAVTOYUL
are to go to PIU, UZAVTOYUL and be available for road sections PIU inspectors
inspection by Gozcompriroda, and ADB. recently worked
on.
vi) Monitoring construction As part of the regular construction inspection the habits of
period air pollution contractors to leave vehicles idling unused for more than 2 Inspection as part
minutes will be reported, as well failure to maintain vehicles of the weekly Contractor and
UZAVTOYUL
leading to serious pollution as with diesel equipment. This construction PIU inspectors
reporting table must be kept separate for submission to the inspection
PIU, Gozcompriroda and ADB.
vii) Monitoring of completion The PIU will undertake to confirm in writing that a site survey Prior to any work
PIU and
of Arch, site survey at Km was complete. That report will contain the results of the starting in this UZAVTOYUL
Contractor
886-889 survey and a permission to proceed. section
viii) Contractor’s final Contractor must list, in tabular form, all mitigative actions
At the end of
Monitoring report submission completed, their timing and location, then indicate their status Contractor UZAVTOYUL
construction
as % completed and the need for any future action(s).
OPERATIONAL PERIOD – Update and continue to use checklist
i) Receipt of contractor’s At the time of commissioning the contractor must confirm in
monitoring report writing that mitigative actions as defined in the EMP, At the
Before upgraded Contractor and
time of commissioning the contractor must confirm and any UZAVTOYUL
road opens UZAVTOYUL
other legally binding environment document ,have been
completed as recorded.
ii) Inspection of Construction Based in mitigation completion report prepared by the
Within 3 months
Period Mitigation contractor, an inspection of how well the measures were
of the start of the UZAVTOYUL UZAVTOYUL
implemented will be prepared. This summary will be in the
operating period.
form of a checklist

Executing Reporting
ITEM Monitoring Details Timing
Unit Responsibility
iii) Extraction well Shortly after the start of the operating period UZAVTOYUL Survey within 1
decommissioning will complete a verification survey to ensure that the wells month of start of
UZAVTOYUL or
used during construction have been secured such that Operating period. UZAVTOYUL
consultant
groundwater will not be contaminated and/or withdrawn
illegally.
iv) Inspection of revegetation UZAVTOYUL or a contractor will complete an inspection of Annually for three
work completed during the roadside revegetation sites, using the data collected during the operating years
UZAVTOYUL or
construction period construction period, and enumerate the survival rate and define UZAVTOYUL
consultant
a further planting program to replant those materials that have
not survived
v) HAZMAT spill contingency During year five of the operating period, UZAVTOYUL will Inspection and
plan prepare a hazmat spill contingency plan, using UTY as a reporting during
UZAVTOYUL or
model and using data on spills collected during the 1st five the 5th operating UZAVTOYUL
consultant
your of operations. The plan’s distribution to the regional year of the
offices of UZAVTOYUL will be undertaken. upgraded A 380
1. At the end of the construction period and before the final payment is approved, it is critical that an inspection of high use
areas, such as waste facilities, machinery service areas, waste disposal sites, quarries, fabrication yards, be made to
confirm that proper decommissioning has taken place

ANNEX C
OUTLINE TERMS OF REFERENCE FOR CONSULTANTS
1. Consulting services in the field of capacity building in environmental management

and assessment, impact evaluation and mitigation, institution development, and
environmental management capacity building will be required to provide 0.6 person-months
of International consultant and 1.73 months of national consultant services over a 2 month
period. The assignment will include:
• Rapid documentation of Uzbekistan’s environmental laws, regulations and

standards as related to environmental assessment and infrastructure
development, and its relation to acceptable international standards, such as
the ADB , World Bank or EU;
• Examination of UZAVTOYUL’s environmental capacity and updating of
institutional needs assessment completed as part of the IEE, and preparation
if an institutional development plan for environmental management within
UZAVTOYUL and its related organizations; and,
• Based on the outputs of a. and b., develop and deliver a training program on
general environmental management as related to infrastructure development,
environmental assessment and interpretation, implementation and conduct of
environmental mitigation and monitoring. This training program must be
suitable for three audiences, namely UZAVTOYUL senior managers,
UZAVTOYUL’s project managers and Chief Engineers and UZAVTOYUL’s
Oblast-level inspectors.
The details for each component of the work are presented below:
A. Review of Environmental Legislation and Regulations

2. Briefly review and summarize the overall existing environmental legislation
framework,
environmental policies and plans. The consultant will review the Uzbek environmental laws,
regulations, and standards currently enforced and in force under Goscompriroda
administration. The consultant will identify provisions, requirements, and procedures in those
laws, regulations, and standards that fall short of ADB’s regulations (as defined in the 2003
Guidelines) and recommend corrective actions.
3. Using the results of this brief review, the consultant will prepare at least one module
of the training program on the environmental legislation and regulations affecting road
development and operations in Uzbekistan and the impact of donor lending.
B. Preparation of The Basis for Environmental Capacity Building of UZAVTOYUL,

its Oblast Technicians and Its Contractors
4. Analyze the existing institutional structure within UZAVTOYUL (1-1.5 days interviews
with officials within UZAVTOYUL and Goscompriroda with respect to environmental
management). Identify key institutions and processes required under the proposed and
appropriately scaled environmental policy framework and legislation. Identify gaps in the
institutional current structure and constraints, and possible policy implementation and
enforcement problem areas. Discuss in detail proposed institutional capacity constraints, and
requirements for administrative and organizational arrangements to implement the proposed
policy and legislation enforcement with a particular focus on structures, organizational
arrangements, procedures, and regulations relating to the implementation of the EIA system
for new Rail sector projects. The consultant will:
• review the capacity of UZAVTOYUL and a sample of contractors’ technical

capacity in EIA, their capacity to understand mitigation, monitoring, and the
implementations of the monitoring program and mitigating measures of the
project IEE.

• prepare an organizational plan that includes job descriptions, and delegation

of duties and responsibilities for the team to evaluate, review, and monitor the
implementation of IEE and EIA reports of future infrastructure projects; and
will also,
• identify bond/guarantee arrangements ensuring that an appropriate length of
services is required of the trainees with the new government, as appropriate.
5. The consultant will review ongoing and planned external (bilateral and multilateral)
development assistance programs/projects in the road transport sector and the
environmental management and EA training needs this may generate.
6. The consultant will also document the external assistance in environmental capacity
building and training provided to Uzbekistan since 2000, indicating, in a matrix table, when,
by whom, what type and for whom training was provided.
C. Development and Delivery of Training

7. Based on findings resulting from the completion of the work defined in paragraphs 2-
6, the consultant will develop and deliver a 2-day training program that will be tailored to the
needs, gaps and requirements identified; however addressing as a minimum, the following
key topics:
For Delivery to UZAVTOYUL Senior Management:

Overview of need for environmental considerations in road transport development
and operations; environmental responsibility, cost savings, etc”
For Delivery to UZAVTOYUL Oblast Inspectors :

Understanding EIA in Road Planning, Construction and Operations
Identifying impacts
Mitigative and monitoring options
Preparing and implementing EMPs
Documentation and Reporting
Compliance Monitoring
8. The consultant will also prepare and deliver a ½ to 1 day training program to
UZAVTOYUL project managers, chief engineers and contractors: This short lecture and
discussion period style delivery will address as a minimum:
EA management and implementation of the EMP

Compliance Monitoring, Reporting and Documentation
9. As part of the training workshop/program delivery, the consultant will use the ADB TA
4076 or TA 4889 environmental study and EMP as a case example, working with the
inspectors to prepare an mitigation plan and compliance monitoring and reporting program.
10. All training materials should be prepared using MS Powerpoint and appropriate
workbooks, and should be handed over the UZAVTOYUL and Goscompriroda (or any other
designated agency), for use in ongoing future training activities, once the workshops have
been delivered and the overall report has been submitted.
D. Reporting
11. The consultant will submit 10 copies of a completion report in Uzbek, Russian and
English (bound together as one document), which will include the findings based on the tasks
defined in paragraphs 2-6 above, and all training materials to the ADB and UZAVTOYUL, in
both hard copy and electronic format.

F. Consultant Requirements:
12. To undertake this work the Team Leader must be trained in environmental
management and have a minimum of 20 years background in hands-on environmental
management and assessment in a number of countries as well as in the planning and
delivery of in-service environmental training in the infrastructure area. The Team leader
must have an excellent command of English.
13. The consultant will be required to partner with a national expert who will have at least
10 years experience in environmental assessment and management in Uzbekistan and have
a high level of familiarity with both Uzbek and IFI environmental requirements, and have has
some experience in providing in-service training in the environmental field. The team
member must have a good command of English and excellent language skills in Russian and
Uzbek.
Task Estimated Cost:

Person Days Comments Totals
(as defined in ToR) USD$/month
A. Review Joint Effort
International 2
National 10
B. Plan Prep. Joint Effort
International 2
National 7
C. Training Ntn’l would lead delivery
International 12
National 21
Lead by Int’l but with
D. Documentation
extensive Ntl’l. input
International 1
National 14
Total No. Days
International 15 (0.50 mnth) 19,000 /mnth Includes mark up 8,000
National 52 (1.73 mnth) 8,000/month Includes mark up 13,840
Subtotal 21,840
Consultant Expenses
Per Diems 17days USD 100/day 1,700
Int’l Airfares 1 4,000
Local Travel 1,000
Misc Expenses 400
Subtotal 7,100
>20 people at two locations,
Trainees Costs
two to three audiences
USD 75/day x2days x20
Per diems, etc. 6,000
x2 Locations
Logistics Materials 1,750
Subtotal 7,750
Translation Costs Provided by ROU 00
Secretarial Costs Provided by RoU 00
TOTAL ESTIMATED COST 36,690
14. This assignment does not require that the team leader be an international specialist.
On the contrary two national experts would be preferable, so long and the levels and types of
experience closely match this defined in these ToR (paragraph 12) . Should both the team
leader and assistant be Uzbek nationals, per diems and international airfare costs would be
reduced by as much as 50%.
This assignment is to be completed over a 3 month period as designed by the consultant in

close consultation with UZAVTOYUL and others as needed.


PREPARING THE REGIONAL INFRASTRUCTURE

(ROADS) PROJECT
F ADB PPTA No. 4889-UZB
I VOLUME 3
N INITIAL SOCIAL ANALYSIS
A
L
R
E
P
O Submitted by:
R
T ISLOHOTKONSALTSERVIS LTD.
in association with
October 2007
ADB PPTA No. 4889-UZB: PREPARING REGIONAL INFRASTRUCTURE (ROADS)
PROJECT
INITIAL SOCIAL ANALYSIS
October 2007
TABLE OF CONTENTS
SECTION 1: DEVELOPMENT IMPACT OF THE PROJECT IN THE AUTONOMOUS REPUBLIC

OF KARAKALPAKSTAN AND THE PROVINCE OF KHOREZM
1 Background 4
1.1 State Development and Poverty Issues in Uzbekistan and Causes of Poverty 4
1.2 State Programs Planned for Poverty Reduction: Millennium Development Goals
and Main Strategy 5
1.3 Migration Issues Related to Poverty 5
1.4 State Development in Rural Areas 6
1.5 From Collectivization to Privatization: Agrarian and Land Reforms 6
1.6 Actual Farm Types 7
1.7 Livestock and Animal Production 8
SECTION 2: PROJECT LOCATIONS

2.1 Khorezm and Karakalpakstan 10
2.2 Khorezm and Karakalpakstan: a Common Problem 10
2.3 The Aral Sea Catastrophe and its Implications 11
SECTION 3: PROJECT LOCATION: SECTION 1 OF A 380 : KM 459 – 581 FOR A TOTAL OF

111 KM, INCLUDING 18 KM IN KARAKUL-TORTQOL DISTRICT OF KARAKALPAKSTAN AND
93 KM IN KHOZARASP DISTRICT OF KHOREZM PROVINCE
3.1 Khorezm Province 13
3.2 Description of Settlements and Location of Section 1 – A 380 Km 459-581 13
3.3 General Socioeconomic Characteristics of Khozarasp District in Khorezm
Province 14
SECTION 4: THE MAIN BENEFICIARIES OF THE PROJECT (SECTION 1) AND THEIR

SOCIOECONOMIC CHARACTERISTICS
4.1 The Village of Saramoy 15
4.2 Pastoralistm in Kizil Qum 17
4.3 The Tea/restaurants: chayxonos 17
4.4 Truck Drivers 18
SECTION 5: PROJECT LOCATION: SECTION 2, HIGHWAY A 380 : KM 876 – 916, WITHIN

KARAKALPAKSTAN AUTONOMOUS REPUBLIC, KUNGRAD DISTRICT
5.1 Description of Settlements and Locations of Section 2 19
5.2 The Delta-Plain of Amu Darya:The first 10 Km 19
5.3 Toprak Qalaa 20
5.4 The Daoud Ata Cemetery 20
5.5 The Ustyurt Plateau 31
SECTION 6: MAIN BENEFICIARIES OF THE PROJECT (SECTION 2) AND THEIR

6.1 Kungrad District and Town 22
6.2 Village settlements: Sample: Adabiad village 23
6.3 The workers’ settlements: The Soda Plant 24
6.4 Pastoral-nomads 25
6.5 Animal Production and the Sovkhoz of Khojali 25
SECTION 7: VULNERABILITIES OF RURAL LIVELIHOODS IN THE PROJECT AREAS

7.1 Vulnerable groups and different stages of vulnerabilities 27
7.2 Village Sharecroppers 27
7.3 Village Inhabitants in Desert Area 28
7.4 Pastoral-nomads or herders 28

7.5 Workers of the Soda Plant 28
SECTION 8: GENDER AND RURAL LIVELIHOODS 30
SECTION 9: POVERTY RANKING IN THE PROJECT LOCATIONS 31
SECTION 10: DEVELOPMENT AND POVERTY IMPACTS IN PROJECT LOCATIONS:

KARAKALPAKSTAN AND KHOREZM
10.1 Economic Impacts and Benefits 33
10.2 Impacts no Cultural Heritage and Tourism 33
10.3 Service Impacts 33
10.4 Gender Impacts 33
10.5 Poverty Impacts 34
SECTION 11: RECOMMENDATIONS AND SAFEGUARDS WITH A PARTICIPATORY

APPROACH
11.1 Direct Involvement 37
11.2 Indirect Involvement 37
11.3 Workshops and Participatory Planning 37
SECTION 12: MONITORING INDICATORS

12.1 Economic Impact indicators 39
12.2 Poverty Reduction Indicators 39
12.3 Social Impact Indicators 39
SECTION 13: IMPACT OF ROAD SECTOR DEVELOPMENT 40
IKS/RRI ii TASHKENT, OCTOBER 2007

A. Background
1. The Project: The proposed Uzbekistan Regional Road Project focuses on the
reconstruction of A-380: Guzar-Bukhara-Nukus-Dautata (Uzbekistan/Kazakhstan Border) of
1,204 km. This is a government priority project. The A-380 is the main route between the
north-west and south/east of Uzbekistan and is the link between the historic tourist cities of
Bukhara and Khiva and Autonomous Republic of Karakalpakstan. It serves as an
increasingly important international corridor between Afghanistan (via Termez)/
Tajikistan/Turkmenistan and Kazakhstan/Russia.
2. The present study concerns 2 sections of the road: Km 459 – 581 and Km 876 – 916.
The first is mainly in Khorezm Province Khozarasp district with 29 Km in the district of Tortqol
that belongs to Karakalpakstan Autonomous Republic. The second stretches on a total of 40
Km, all within Kungrad district of Karakalpakstan Autonomous Republic.
3. By rehabilitating road A380 and improving connectivity and transport conditions, the
project aims to have a positive impact on poverty reduction encouraging human development
and economic growth.
B. Development Context
4. The objective of the study is to identify and analyze development issues associated
with the project focused on regional road rehabilitation.
5. A “transport project is expected to contribute to poverty reduction through its indirect

impacts on economic growth or its direct impacts as for social welfare of the poor” (page V)1.
Enhance human capital formation and improve access to economic and social opportunities
including schools and health clinics are the main contributions even if transport is “an
intermediate service, it is a means to an end. Transport alone cannot reduce poverty but it
services a pervasive and crucial complementary role” (page VI).
6. The present study is at first hand a social and poverty assessment analysis in the two
above-mentioned regions with special reference to vulnerable and poor groups, socially
excluded persons or groups, situation of women and the elderly. It examines the current
socioeconomic situation in both regions, the opportunities available and accessible to the
youth and to vulnerable groups. The analysis points out the survival strategies and the
safety-nets available and accessible to the local and how these can and will be improved
through the project and the improvement of communication means.
7. The rehabilitation of the road is seen by all the stakeholders, - local authorities, rural
and urban population- as a very positive action that will foster new opportunities for business
and improve their everyday life. Access to basic needs and social services as well as
employment opportunities are restrained by the lack of adequate and reliable transport in
rural areas. It can penalize cash crop farming and non farm employment opportunities. The
reverse is also true.
C. Methodology
8. The study was carried out in summer June-July 2007. Its main objective at first hand
was to assess the poverty and social situation in the two regions concerned. For this it used
3 major sources of information: (a) secondary data which mainly referred to the country in
general, (b) interviews and meetings with local authorities and different sectors’
representatives (agriculture, market and production, youth and social affairs, women’s
business associations etc.). NGO’s, university programs, (c) and at last the local population
being the main beneficiaries.
1
- Collin Gannon, Zhi Liu, « Poverty and Transport », TWU, 30 sept. 1997.

9. The field meetings were carried out in a representative sample of persons in villages.
They were participative and the beneficiary population. Direct observation, visits and
meetings participatory discussions and semi-conducted interviews were held in village
mahallas, in other public places and private homes. Quantitative data was gathered and
analyzed when it was available and accessible.
10. People were asked to discuss the effects of the road, on production and income,
access to health services and education, markets, transport and employment, investment
opportunities for micro, medium and macro enterprises and the status and opportunities
women have as well as socially vulnerable groups.
11. The report is composed of two chapters. The first chapter examines general issues
related to poverty and vulnerability issues in Uzbekistan and the situation women and
livelihoods in rural areas. A special section tries to clarify the agrarian and land reform and its
consequences in rural areas.
12. The second chapter provides an overview of findings on the development impact of
the project in the Autonomous Republic of Karakalpakstan (district of Kungrad, Km 876 – 916
of A 380) and the Province of Khorezm (district of Khozarasp Km 459 – 581 of A380.).
Field work and difficulties:

13. The differences observed between the 2 sections of the road were also reflected in
the organization of the field work. In Kungrad, many engineers of the Road Fund
accompanied us on the field and were eager to give all the information needed. However,
information had also to be taken from the local population and we needed to talk to peasants,
pastoralists, workers in the Soda Plant etc. No appointment was taken and introductions
were difficult to make. To this was added a general “ambiance” of certain “suspicion” and
hesitation to answer to questions. Much diplomacy was needed. And although the meetings
were conclusive it was however difficult to gather quantitative information, figures and
statistics on planned procurement or on the rural/urban population.
14. The situation was different in Khorezm, thanks to the director of the Road Fund of the
Province who had organized all the field visits. Here, it was possible to talk to the governor of
the district, to the village chairpersons and to some of the pastoral-nomads. The information
obtained and the resulted analysis is of a different quality. Although, here too we could have
few figures and most of the field-work was based on semi-conducted interviews and direct
observation.
15. The Autonomous Republic of Karakalpakstan and the Province of Khorezm are
concerned by the two sections of the project.
16. These two regions share in common important aspects of social life and poverty
issues and at the same time represent differences on several points.
17. The range of socio-economic differences can be understood as different stages of

change independence brought. In general, changes from the FSU period are slower in
Kungrad and at the bottom and local level they are not yet apparent. From this point of view
Khorezm Province seems already in apparent transformation. For example, animal
production has still its sovkhoz transformed into a “shirkat” in Kungrad whereas in
Khozarasp, herds are privately owned.
18. In Kungrad, 4 villages owned by “shirkats” occupy the first ten kilometres of the road.
They have irrigated agriculture and produce the three strategic crops. The shirkat system
shows little differences in these villages and the inhabitants are sharecroppers in a
vulnerable situation than land-owners. With the disaster of the Aral Sea which is at some
kilometers from the road, the section in Kungrad is in general much more vulnerable.

19. However, with its underground oil and gas in the Ustyurt Plateau, the Soda Plant at
40 Km from Kungrad, new opportunities will soon arise in the area. The road has its major
importance in the future development of the region as all communication depend from it and
at the same time all relations with the bordering countries.
20. These two regions share in common a specific environment. In both cases A 380
crosses desert and arid zones. This brings to consider the situation of pastoralism and more
specifically of pastoral-nomadism which is today considered to be a new activity in-spite of its
being the oldest one in the whole region of Central Asia. In the Soviet period, pastoral-
nomads were gradually sedentarised through their relation with the sovkhozes and in a way
this lifestyle was not recognized and even forgotten. With independence, pastorlism hass
comeback not only as a safety-net or shock absorber but also as a major income activity. It is
important to take into consideration this “new” pastoralism which is growing fast as for the
time being rangeland and water are free of access, and limitations are very few if none.

SECTION I - DEVELOPMENT IMPACT OF THE PROJECT IN THE AUTONOMOUS

REPUBLIC OF KARAKALPAKSTAN AND THE PROVINCE OF KHOREZM
1. Background:
1.1 State Development and Poverty Issues in Uzbekistan and Causes of Poverty
21. Before the collapse of the USSR, the Republic of Uzbekistan was considered as one
of the poorest regions of the former Soviet Union and, for some years after independence,
the situation worsened. By 1996, the economic growth and measures taken by the
government led to positive trends and the country started to recover. These measures
targeted industry, agriculture and services while simultaneously insuring the passage from
collectivism to privatization.
22. These measures had positive impact on : life expectancy that increased, on infant
and child mortality which started to reduce, a generalized basic education and elimination of
and illiteracy. The measures pointed also at the reduction of gender gap in education.
Privatization measures started by the ownership of households and by 1996, 95 % of the
households were owners of their dwelling. In rural areas the majority of households had
access to plots.
23. Nevertheless, observation showed in 2002-2003 that even if the number of the poor
population was declining slowly, growth had not generated sufficient employment
opportunities.
24. According to the 2002 and 2003 household budget surveys, the poverty level in the
country is 27.5 percent, and concerns 6.8 million people living in absolute income
deprivation2. The Interim Poverty Reduction Strategy (PRS) for Uzbekistan (2005-2010)
identifies four pillars for reducing poverty incidence: (i) high growth rates by maintaining
macroeconomic stability and accelerating structural reforms, human development and social
protection, reduced interregional inequalities in living standard, and improved environment
protection. It takes into account the differences in the social and economic development of
the regions of the country3.
25. Regional variations in poverty remain high and rural populations have a higher rate of
poverty: 70% of the country’s poor live in rural areas and poverty rate is 30.5 percent versus
22.5 percent in urban areas
26. The highest concentration of poor households is found in the southern and northern
regions, together with the Republic of Karakalpakstan that has relatively low standards of
living.
27. Features related to the population and the general socio-economic situation still affect
poverty and sometimes emphasize it. Poverty studies have identified causes of poverty
which include: (i) demographic growth, even if in recent years demographic trends become
more favorable with the birth rate decreasing, (ii) health issues with the growth of
tuberculosis, chronic pathologies and HIV/AIDS. The specialized medical services on a fee
basis on the other make health care more and more inaccessible to poor families. They are
most vulnerable to these diseases because of the high cost of care.
28. Causes of poverty are present also in the field of education, differences exist in
the quality of education by regions, and by urban and rural areas as well as access to
higher education, given the high level of payment the poor sections of the population
2
WB, Living Standards Assessment, Rep. N°25923-UZ, May 2003.
3
The Interim Poverty Reduction Strategy (PRS) for Uzbekistan (2005-2010)

have less access. Another cause of poverty more specifically in rural areas is related
to the quality and productivity of land, even if 95% of families own their houses and
plots. The productivity of such plots is sometimes insufficient to allow profitable
agricultural activity, partially because of the low quality of these plots and lack of
water.
Gender aspects are also underlined as features increasing poverty, because differences
exist even if women are represented in all economic sectors. For example, women form a
majority in sectors of health and education where the wages are relatively low, or they
represent only 14% of private enterprises4.
29. Environment directly affects living standards and, primarily, socially vulnerable groups
through:
- decreased yields of crops and reduced cultivated areas as a result of land
salinity and degradation;
- decreased productivity in cattle breeding and fishing because of the reduction in
biodiversity caused by imbalances in the ecosystems;
- increased morbidity rates in the republic, particularly among women of fertile
age;
- Little financial resources for environment protection and rehabilitation
measures, for health protection of the population living in ecologically
unfavorable regions.
1.2 State Programs Planned for Poverty Reduction: Millennium Development Goals and
Main Strategy
30. Uzbekistan has taken up obligations to achieve the Millennium Development Goals
and has defined the objectives and tasks of the strategy. The basic objectives of this strategy
are:
- Improvement of the living standards of the population and reduction of poverty
by half by 2015.
- Guarantee of equal access to basic education.
- Achievement of gender equality and provision of women with their rights and
opportunities through all sections of the Strategy.
- Improvement of the living standards of mothers and children.
- Prevention of the spread of tuberculosis and HIV/AIDS.
Basic directions and key tasks have been defined in order to achieve the defined objectives.
They underline the need to reduce regional distinctions in the living standards, through the
elimination of differences in employment opportunities, access to social services and
infrastructure.
1.3 Migration Issues Related to Poverty
31. Migration is also present in Uzbekistan and is directly related to poverty. The main
recipient countries are Kazakhstan and Russia. Russia counts 40-45 illegal Uzbek
immigrants where as Kazakhstan counts 25 to 30% (Dr. Maksakova).
32. Labour migration had reached its peak by the end of the eighties and the beginning of
the nineties, and had started to decrease again as a result of economic growth. Nowadays,
its flow is almost twice that of 1996.
33. Young persons, usually between 20 and 30 years old, skilled, with an important level
of vocational or higher education leave the country. This loss of human resources and brain
drain represents for the country the loss of an important force of adaptation and innovation
4
- The Business Women’s Association of Uzbekistan makes active steps to increase employment of women,
particularly in small- and medium-size businesses.

and a potential capacity of development.
34. Migration has also its gender importance, although female migration is more present
in urban areas that in rural ones.
35. The relation of migration to poverty and un-employment is not yet fully underlined in
Uzbekistan and hence no specific strategies or measures are put forth5.
On a more local level, migration is looked at as an opportunity. Those who migrate and have
obtained jobs in other countries are considered as having been successful. Departures are
still considered as opportunities of success and of well-being instead of loss or failure. In
soviet period, to obtain a passport and a visa to leave the country was such a hassle that
departures are still achievements.
MIGRATION OF POPULATION BY GENDER

Table 1:
Total (persons) In %
Women Men Women Men
Immigrants
2000 82,245 63,635 56.4 43.6
2001 84,612 67,230 55.7 44.3
2002 83,234 69,561 54.5 45.5
2003 74,255 65,440 53.2 46.8
2004 80,083 67,315 54.3 45.7
Emigrants
2000 118,977 93,495 56.0 44.0
2001 125,109 104,494 54.5 45.5
2002 127,068 109,059 53.8 46.2
2003 122,433 110,274 52.6 47.4
2004 129,061 114,429 53.0 47.0
Migratory flows
2000 -36,732 -29,860 55.2 44.8
2001 -40,497 -37,264 52.1 47.9
2002 -43,834 -39,498 52.6 47.4
2003 -48,178 -44,834 51.8 48.2
2004 -48,978 -47,114 51.0 49.0
1.4 State Development in Rural Areas
36. The two sections of the Rehabilitation Project of A 380 are situated in rural
areas as well as in the desert and arid zones. Land and agrarian reforms since
Independence had significant influence on the livelihoods and poverty issues in these
regions and represent assets as well as survival strategies.
1.5 From Collectivization to Privatization: Agrarian and Land Reforms
37. Since Independence, Uzbekistan has been through important reforms toward
a more liberal economy and privatization. From collectivism, agrarian reforms and
land laws tend to insure private ownership of land and enhance private production.
38. Collectivization was well accomplished in Uzbekistan from the very beginning
of soviet rule, with cotton playing a pivotal role in the political economy of the region.
Uzbek cotton accounted for the 2/3rds of all cotton production in the Soviet Union
5
- This is also the reason – a cause and effect relation – why reports on poverty or country strategies seldom
include the issue of migration related to poverty.

and the acreage devoted to cotton expanded continuously. And already in 1980, the
water resources of Amu Darya and Syr Darya were fully utilized. And soil exhaustion
by unfit crops and high uses of chemical fertilizers and pesticides to affect on the
yield that started to decline considerably.
39. The development of cotton was at the expenses of grain and more specifically wheat,
which had become an un-significant by-products losing land and importance. The yield had
dropped from 57% of the sawn area in 1940 to 35% in 1979 and finally to 20% in 1986.
40. Following the break-up of the soviet-union, the economic recession and crisis in
public finance prompted a dual process of demonetarization and re-agrarianization. Rising
unemployment, a greater reliance on domestic economy for basic goods brought agriculture
and farming to act as “shock-absorbers”.
41. Today, agriculture provides the main source of revenue for state budget. It accounts
for 60% of the GDP and 6% of the foreign exchange receipt and about 40% of employment.
42. On the other hand, the situation and the choices presented to the government were
also dual and opposing each other; on one hand, prioritize reforms and measures that would
improve market economy with increased privatization, and on the other hand, take measures
that would help keep control over the production of cotton. The break-up of the collective
farm system as well as the pressures for privatization would destabilize this system of
extraction.
43. The country ranks as the world’s 4th largest cotton producer and thus the state has a
major stake in keeping in place a system of governance that ensures the continued
extraction of surplus from agriculture. Prices for cotton and wheat became subject to a
mandatory system of production quotas and state order.
44. The production of wheat followed the same system and wheat became a
“strategic crop”. This because of shortages of wheat and flour the country went
through just after independence as trading links were disrupted with other republics.
As a result and in order to insure a certain level of autarchy, wheat became also a
strategic crop. The acreage of land devoted to wheat production was expanded.
With a production of an estimated 3.7 tones of wheat in 1998 – 6 time the yield of
1991 – the country had achieved the goal and had reduced drastically its grain
imports and ensures a certain level of self-sufficiency.
1.6 Actual Farm Types
45. State control on one hand, privatization on the other brought different land
reforms with 3 types of farms. They have different sizes, different production
arrangements and different holding systems.
46. The result of these opposing pressures and contradictory measures is a

“multilayered” farming enterprise with varying degrees of rights to ownership and use.
- Shirkats or extended units are: (i) collective enterprises, (ii) joint-stock

companies both open and closed or (iii) cooperatives. They vary in size, usually
between 700 and 2000 ha, with the average size being about 1500 ha. In
accordance with year-end results shirkat employees receive dividends from the
profit.
- Individual lease plots that are private farms with leasehold of tenure of 10 to 50
years. These farms use family members and other full-time workers on open-
ended work contracts. These contracts have to have the approval of the
shirkats and the district hakim (governor) and should contain a business plan.

The plots are in minimum of 10 hectares for cotton and wheat and one hectare
for horticulture and orchard. When the farm is for animal production, the
minimum herd size is 30 animals.
- Household plots are the most “liberalized” system, making their own production
and input decisions for the most part. They are family small plots and can only
use family members and relatives for labour. And, currently, the maximum
holding is 0.35 hectares to one hectare, depending on climatic conditions and
the need for irrigation.
47. These small household plots have a life-long tenure and the right to be inherited.
48. And in spite of these privatization measures: Land cannot be privatized, sold,
mortgaged, given away as a gift or exchanged. Only leasing land for specified terms is
allowed.
49. In the regions of our concern, these three crops are cultivated in the areas near
Kurgrad (Karakalpakstan sector) and more specifically in the 4 villages with irrigated
agriculture, that are on the first 10 Km of road A 380 from Kungrad to Ashkalak.
50. These 3 crops are their main products and the main income activities of these 4
villages divided into several shirkats.
51. On the field, all these different land and farm forms exist, although from the
inhabitant’s incomes and livelihoods’ analysis, these represent little changes from the
sovkhozes’ era. Working conditions are the same in the shirkats as they were in the
sovkhozes. The individual 0.35 ha plots represent the safety net needed. It means however
extra-work for women and children to ensure family consumption.
Table 2: Yield differentials in 2001

Farm types Dekhkan farms Private farms
Karakalpakstan 178% 83%
Khorezm 119% 77%
1.7 Livestock and Animal Production
52. “Livestock production” is an important issue in the two sections of the project although
documentation and figures are rare. All the information upon which rests our analysis is
driven from the field and what was possible to gather from the local population.
53. Reports and studies relative to rural livelihoods or agrarian reforms refer mainly to
agriculture and more particularly irrigated agriculture. When general figures are given
regarding the “rural” or the “agricultural” sector, there is no differentiation between crops and
livestock production.
54. Both sectors are in arid and desert areas where livestock and pastoralism was and
still is the important income activity.
Animal Sovkhozes
55. Livestock had also its sovkhozes during the soviet period. Established within the
desert where pastoral-nomads were the main animal breeders, these sovkhozes regulated
most of the animal production of the country.
56. Before the soviet era, pastoral-nomads were important in the Qizil Kum desert. There
were and big herds belonging to beys (honorific title) that were kept by pastoralists on a
shareholding system
57. Today, very little knowledge exists locally on the management of these herds, on the

modes of life of those pastoral-nomads and on the ways rangeland and water were exploited
among different tribes. The sovkhozes had gradually leveled all these. The pastoral-nomads
were linked to the sovkhozes because the animals had become the property of these
collective farms. All the migratory movements of the tribes and of the flocks started to evolve
around the sovkhozes and gradually these nomadic pastoralists became sedentarised in
villages with schools and other services.
After Independence
58. The 3 types of farm that were described above also apply for livestock: there are
major cooperative livestock enterprises and at the bottom level, some heads of cattle and
sheep privately owned that ensure the survival of the household.
59. The different stages of reforms and transformations of collective farms into more
private enterprises apply also to animal husbandry. There are shirkats for livestock. And in
spite of these transformations, for the local workers and peasants, most of these shirkats
continue in the same system as the former sovkhozes and even carry the same
denomination (livestock sovkhoze). The only change is the shift from state ownership to
cooperative system with extended ownerships
60. During the “sovkhozes” period, animals were owned by the collective farms and all
the production cycle was divided into several specialties and managed from above, by
“masters” who knew how to have good and healthy animals. The feed was already prepared
and brought from elsewhere. The pastoralists did not have to worry for the nutritional
aspects, for veterinary care, nor for the different stages of production and marketing. The
peasants or the herders had their own obligations and were only part of the cycle that was
completely managed from above and divided into sections with little communication passing
from one section to the other.
61. This has some repercussions on today’s situation. The pastoralists, who were the
members of the sovkhozes, are now responsible of the whole cycle of the profession, from
animal breeding to marketing. And, of course their knowledge of animal breeding is not
complete. They count on their innate knowledge inherited from their forefathers. They use
whatever is left from the old system – especially veterinary care and vaccination - and
whatever is available as natural resource. This is directly affecting the quality and quantity of
the production and of the produce, of markets that can be developed and be more active.
62. The production of meat and milk has shifted almost entirely to the household sector.
This is in part related to an acute shortage of feed crops that has worsened with the
conversion of land planted with barley and fodder to wheat (the aggregate feed available in
1997 was about one-third of 1991).
63. In arid areas, it is the livestock sector that has also become the “shock-absorber” for
rural households.
64. As such, the activity is growing and more and more persons go into this
sector. Pastoralists keep the herds with a sharing system; they are able to build a
herd of their own in a quit short period of time.
65. 3 points have to be underlined:

- Animal breeding has become a shock-absorber” within the whole sector
related t agriculture. At the level of individual households it represents an
important safety-net within the survival strategies of rural areas.
- Desert animal breeding – pastoralism- is an activity that is prospering and
many persons tend to become “new pastoralists”. This because the sharing
system gives the possibility to build up ones own herd and have an income
safety and second, because the natural resources needed, mainly graze land
and water, are available and accessible with very little taxation.

- Knowledge of the whole cycle of animal breeding is not yet accomplished and
needs real attention and in order to overcome these gaps and lacunae, the
quantity is replacing quality.

SECTION II: PROJECT LOCATIONS
2.1 Khorezm and Karakalpakstan
66. The Province (oblast, hakimiyat) of Khorezm and the Autonomous Republic of
Karakalpakstan are the two regions concerned by the sections of road A380. The project
focuses on 2 sections within these regions:
- 1 – Section 1 – Highway A 380: Km 459 - 581 for a total of 122 Km, including 29 Km
of Tortqol district (rayon) of Karakalpakstan Autonomous Republic and 93 Km in
Khozarasp district (rayon, touman) of Khorezm Province.
- 2 – Section 2: Highway A 380 : Km 876 - 916 for a total of 40 Km, all within
Karakalpakstan Autonomous Republic and within Kungrad district.
67. In spite of today’s different administrative entities – an Autonomous Republic and a

Province- the history of Khorezm and Karakalpakstan is common to both and represents a
rich past.
Some Historical References

Many of ancient Khorezm falls within modern Karakalpakstan that has today its own
administration based in the city of Nukus.
In the past the Amu Darya river has changed its course many times leaving archaeological
remains that witness a rich and ancient history. The earliest settlements are from the
Paleolithic and the Neolithic periods. From around the 6th to the 4th centuries BC the region
was known as Khorezm. When Alexander the Great marched his armies into Central Asia he
made no effort to conquer the Khorezm, despite the fact that it included the fabled land of
the Amazons.
Following Alexander’s death nomadic tribes began to move from the east into the region of
Samarkand and then westward. A new and powerful empire grew out of these tribes, the
Kushan, who ruled over lands from Central Asia to India. This was also the time of prosperity
when trade flourished between China and Rome and from the Baltic Sea to India.
A new era of invasions from the Northern steppes followed the decline of the Kushan empire
between the 4th and the 6th centuries, that of the Huns and then the Turks. In the 7th century,
they were followed by the Arab Conquest, when the Muslim armies brought in a new and
powerful faith to the region.
In the 13th century, Khorezm and the whole region was ravaged and destroyed by the
Mongols under Gengis Khan. However, under the Golden Horde, the West Bank of the river
recovered soon after and became important nodes of international trade.
This prosperity lasted until the 14th century when Tamer Lane invaded the country.
It was not until the beginning of the 20th century that the canals were rebuilt under Soviet
Rule and land became settled again.
2.2 Khorezm and Karakalpakstan: a Common Problem
68. On the West Bank of the Amy Darya is the modern administrative region that still
bears the ancient name of Khorezm. The main city is Urgench and few kilometers south lies
the medieval capital of Khiva. Khorezm is a province with a population numbering 1,200,000.
69. Both regions, the Autonomous Republic of Karakalpakstan and Khorezm are affected
by the catastrophe of the Aral Sea although at different stages.
70. Karakalpakstan lies at the end of the Amu Darya river and borders the southern
edge of the Aral Sea: an area once dominated by the extensive delta of the river that
flows west and crosses immense desert areas.

71. The population of Karakalpakstan, numbering 1,5 to 2 Million, is composed mainly of

Karakalpaks and represent today a mix with Uzbeks and Kazakhs together with smaller
number of Russians, Turkmen and Tatars.
72. Today, more than 80% of land in the Autonomous Republic is desert but supports
extensive agricultural communities along the canals while cattle and sheep are herded in the
Qizil Kum desert.
73. Cotton and rice are the two dominant agricultural products. Fruit, vegetables,
potatoes and forage plants are also cultivated in the region.
74. The Autonomous republic has significant mineral resources, natural gas, crude oil,
granite. It has the largest oil deposit in the country of which about 20% are discovered in the
Ustyurt Plateau. 2 power plants completely satisfy the demands for electricity and supply the
neighbouring Khorezm.
75. 50 to 70% of the whole population of the republic is estimated to be poor and
20 % to be severely poor facing important food shortage. 40% of the population does
not have access to drinking water.
2.3 The Aral Sea Catastrophe and its Implications
76. The Autonomous Republic’s main problem, which is the basic cause of
general poverty, is the Aral Sea catastrophe with its consequent waterborne
diseases. The problems caused are not confined to the republic and spread to the
neighbouring Khorezm Province with salinisatioon of soil and water.
77. Before 1950, the sea was the major source of livelihood for those living on its
shores and fishing became a very productive industry in a collective farm system with
150 tones fishing capacity. This industry decreased between 1958 and 1980 and by
1983 it completely stopped in Munyak Fisheries.
78. Years of regional irrigated agriculture intensification has shrunk what was once
– before 1950 - the fourth largest inland body of water in the world with a surface
area of about 68 000 km. Since the 1960s, the surface area has decreased
dramatically. More than 80% of the water body and more than 60% of the water
surface have been lost.
79. Agricultural production has declined because of lack of water and

contamination of land with salt. By 1994, 94% of land around the Sea was
considered salinated. According to FAO, during the severe drought of 2000-2001
agriculture production was only 6% less in the whole country while it fell to 54% in
Karakalpakstan and a little less in Khorezm, of which rice and potato crops virtually
failed, fodder and oilseed crops decreased by half and cotton and vegetable output
by 30-40%.
80. Between 1999 and 2001 the flow of the Amu Darya diminished with less than
half of the average amount of water. The sea’s decline has been accompanied by
similar devastation of the downstream area of the Amu Darya river, affecting the lives
of 4 Million of people living downstream mainly in Khorezm Province.
81. Salt dust and salt storms threaten people and agriculture in the entire Aral
basin. Most parts of the dry sea floor form huge salt flats and are the source of
presumably millions of tons of (partly ,alkaline) salt and dust which are blown out
each year, transported to distant areas and re-deposited on irrigated fields and
settlements.
82. The Aral Sea problem is common – although in different degrees- to the three
neighbor republics of Kazakhstan, Turkmenistan and Uzbekistan. Despite this fact,
independence could not bring any solution to some of the major problems. The
deterioration continues in terms of livelihoods, health, human development and
environmental natural resources and fears of future drought events on food security
and human health persist.
83. Fuelled by poor living standards, poor nutrition and hygiene, contaminated natural
resources health problems are acute, mortality rates are high and life expectancy is lower
than in the rest of the republic. Many health indicators, including rates of maternal mortality,
respiratory and diarrhoeal diseases are high and tuberculosis has grown to epidemic
proportions with an important percentage of the multi-drug resistant type.
For the year 2002, 89 cases of tuberculosis per 100.000 persons per year recorded in
Karakalpakstan. In Khorezm the figures are 23/100.000 and the national average is
18/100.000.
84. Employment opportunities are scarce and salaries are lower in Khorezm and still
lower in Karakalpakstan than elsewhere in the country. Unemployment is also high and
reaches 70% of the total population and exceeds twice the country average. Some families
are becoming more reliant on their own initiative to just feed themselves (as observed by
MSF mission). People are attempting to start small enterprises or simply add an animal or
two in their family holdings. They face though many barriers some of which are high taxes
and control on availability of agriculture and other input.

SECTION III: PROJECT LOCATION :

SECTION 1 OF A 380 : KM 459 – 581 FOR A TOTAL OF 111 KM, INCLUDING 18 KM
IN KARAKUL-TORTQOL DISTRICT OF KARAKALPAKSTAN AND 93 KM IN
KHOZARASP DISTRICT OF KHOREZM PROVINCE
3.1 Khorezm Province
85. History is common to Karakalpakstan and Khorezm and history in these regions is
rich with archaeological sites. They represent an important economic potential based on
tourism and infrastructural development. Already, some itineraries, other than the important
and known sites and cities like Khiva, Bukhara, are proposed to tourists all through A 380
and mainly in the two regions coverede by the project. Tourism development is greatly
dependent of the road and in its turn, the road rehabilitation will enhance and give more
potential to the development of this sector. On the long run, this will contribute locally to
reduce poverty in general mitigate migration of the skilled youth.
86. Khiva is within the Province of Khorezm and the actual international tourist itineraries
include a crossing of A 380 from Bukhara to Khiva, passing from the project focus area.
The Khanat of Khiva

The Khanat of Khiva was established in 1511 by nomadic Uzbeks and it survived until 1920,
when the last Khan abdicated and the Khanat was proclaimed the Khorezm People’s Soviet
Republic.
The old city has been extensively restored by 1967 and had become an “open air museum”.
After independence, the original inhabitants of the city, who had to abandon their houses to
the “museum”, returned and re-established within the old walls of the town. Today, they live
mainly of tourism and help it to prosper through all the service and the tourist infrastructure
they provide. With their presence, this open-air museum has become alive and
contemporary.
87. Khorezm is a frontier-region with Turkmenistan and A 380 is sometimes only at a

kilometer from the borderline. This new frontier between Uzbekistan and Turkmenistan, as all
the other frontiers of Central Asian republics, is a legacy of the Soviet rule and until
independence, people living in the region had never experiences frontiers. From one day to
the next villagers in Khorezm found themselves cut off from their land and crops by barbed
wire.
88. Villagers within the project area had their kin in other villages some kilometers away
that are now on the other side of the border. With the actual difficulties to cross borders even
if they have the authorization to do so once a month, solidarity ties are becoming weaker
creating additional vulnerabilities.
3.2 Description of Settlements and Location of Section 1 – A 380 Km 459-581
89. The section starts at Km 581 which is some ten kilometers before the village of Miskin
and stretches for 29 Km. in Tortqol district of Karakalpakstan Autonomous Republic until it
reaches the police border entering Khorezm Province and the district of Khozarasp.
On these 29 Km. there are no settlements or any presence except for the railway line
and the gas pipeline at 1 Km. from the road.
From the village of Miskin and onward, the section enters the Kizil Qum desert, an arid
environment with little human settlement.
90. The traffic flow shows 3000 cars and trucks daily on this section. This number
includes 300 buses and 700 to 800 trucks that are the main beneficiaries of the rehabilitation
project.

91. Apart from them, the main stakeholders are:

- The district of Khozarasp.
- The village of Saramoy and its total territory that includes 2 other small
settlements.
- The “pastoral-nomads” or transhumant population living on the sides of the
road.
- The different “chayxona” (tea/restaurants) on the road that are private
enterprises.
3.3 General Socioeconomic Characteristics of Khozarasp District in Khorezm

Province
92. The district dates back to 1926 and covers a total area of 198,000 sq Km. It counts
55750 households, 68 schools with 44065 pupils, 23 kinder gardens and 6 colleges with
4800 students. It has 4 hospitals and 17 rural medical centers that cover all the health issues
of the district.
93. Khozarasp is a central market place for wholesale trading and distributes goods and
products to all other parts of the country. Even in FSU period it was an important market
place. The rehabilitation of the road will have a very positive impact on the development of
this market place. <
94. More than 100 trucks deliver goods and agricultural products to or from Khozarasp,
and nearly 90% of the transportation used is by A 380 road. 8 % uses the railway.
95. This market importance of Khozarasp is helpful for the emergence and growth of the
private sector. And again, a major part of the private enterprises deal with transportation and
are related to the road. There are already several companies who own trucks. And, the
chayxonas on both sides of the road are becoming important business enterprises.
Agricultural products:
96. Rice is the main product of Khozarasp. It was almost introduced here in these regions
by Koreans after Second World War 2. In the town of Toprak Qala (south of the A 380 at Km
459) half of the 10,000 ha of irrigated land are rice fields.
Wheat and cotton are the other important crops.
Animal products:
97. “Patoralism is growing into private enterprise” as has underlined the Hakim, with
herds sometimes up to 1000 heads. They stay mainly in the northern part of the road in
summer and come to the southern part in February and stay until November. The graze land
has been divided by the rayon hakim among the different pastoral enterprises. And, water is
taken from the water pipeline of Zarafshan.
In FSU period there was a tax on each head of animal that has been abolished with
independence in order to encourage the increase of animal breeding.
In Khozarasp district, there are two animal markets, one in Pitnak, and the other in
Khozarasp town. Apart from the markets, animals are also sold directly on the road and this
in important quantities.

SECTION IV: THE MAIN BENEFICIARIES OF THE PROJECT (SECTION 1) AND THEIR
4.1 The village of Saramoy
98. The territory of the village starts from the first chayxona of the section at Km 570, until
the territory of Toprak Qala’a, stretching on 68 Km on the road.
99. Population: 3350 persons, 1658 women and a total of 733 families. The village is
inhabited by several “ethnic” groups. Turkmen represent 73% of the whole population. Then
come Uzbeks, Kazakhs and Kirghiz. There are also few families of Backers, Tatars,
Maldives, Ukrainians, Russians and Koreans.
100. Before 1950, Saramoy was first inhabited by Turkmen and by Uzbeks. The other
groups came later when the Gas Pipeline and the Water pumps were built and presented
employment opportunities.
101. Education: There are 2 schools and one kinder-garden.College is in Toprak Qala’a at
20 km and 8 students from Saramoy (5 girls and 3 boys) attend it. 3 or 4 of them will go to
university at Urgench later.
102. Health facilities: The village has a primary health centre that opens only at working
hours and is closed on week-ends. The hospital and the maternal care centre are in Toprak
Qala’a.
103. The main bazaars are also in Toprak Qala and in Khozarasp.
Main income activities:

- Water Reservoir pumps. Is the main employer for 33 years. This pumping
station depends from the Zarafchan Water Reservoir of the Metallurgy and
Gold Mine complex. Almost each family of the village has a member or two
employed in the company.
- Gas reservoir pumps. Established also in the 50ies, some of the inhabitants
are employed by the gas reservoir next to Tuyanmoyoun.
- Private sector. Since independence the private sector has also flourished in
the village that counts around 20 mini markets and food stores and 5
tea/restaurants (chayxona) on the road that have become important halting
areas for drivers, passengers and even tourists.
- Animal husbandry. Saramoy was a sovkhoz in FSU period for animal
production. After independence the animals were sold to the local population
with credit facilities. In spite of this, not all of the families could purchase the
animals. So, now, some have herds and others are herd keepers (chopan)
with a system of sharing that enables the latter to build up a herd for
themselves. Animals are sold alive, transported by truck to all big cities of the
country and important bazaars.
- Fishing from the nearby Amu Darya is another activity that seems to be quite
important as fish is sold to the chayxonos or directly on the road. However,
only one person is officially recognized as a professional fisherman.
104. There are 200 persons, both men and women, registered as un-employed. They are
both skilled and unskilled. They work on their own plots and with their own herds.
Gender aspects of employment:

105. Among the total number of 1658 women in the village 133 have a regular
employment.
These are in:

- Schools.
- Water pumps company. There are settlements in the Water-Pump company
that belong to the Metallurgy and Gold Plant of Nuwey and Zarafchan. There
is also a rest house and a Laboratory where women from Saramoy work
mainly as housekeepers.
- The Road Fund has employed 5 women.
- 2 women go to the bazaar to sell the surplus product of their plots and
animals.
-
106. There are no business women in the village and no other opportunity for employment.
With the road, women think they may have some new business opportunities. Work has to
be preferably at home. They can produce Turkmen carpets, as they already make them for
themselves. They can also work on textiles, garments and other crafts.
“’Ilm var, hunar var” (there is the knowledge and there is the know-how).
Turkmen population and the problems of new international borders:

107. Nearly 73% of the population of Saramoy is Turkmen. And if village life has no
problem with other ethnic groups, the Turkmen of this village and of the whole area are
suffering from the new international borders.
108. Before independence there were many marriages and kinship ties were tight.
Families visited members of the descent groups and communication was permanent. Now
that the border has become difficult these relations are decreasing and families have
difficulties to meet again. They can cross the border individually only once a month for 3 days
after paying the amount of 10.000 sum.
Migration in Saramoy
109. Economic migration is also present in the village that counts 75 young persons in
Russia and in Kazakhstan. Although they leave for short periods of time -2 to 3 years- hired
as workers mainly in construction projects, this youth once back home has no opportunity to
start a new business. It tries to migrate again.
There is no female migration.
Animal husbandry in Saramoy

110. Before all the area of Saramoy was for animal husbandry. There is no, irrigated
agriculture here, no cotton production as there is no water.
Saramoy was a sovkhoz for animal production and its name comes from “butter” in Kazakh,
because, even before soviet period, the area was well-known for its animal husbandry.
111. Today, dekhkan farming is mainly for animal husbandry. The households grow
vegetables and some fruit trees on their individual plots for their own consumption. Within the
same compound they keep some sheep and goats - not exceeding 10 - 15 heads - and 3 or
4 cows and rarely horses for their own use. Sometimes the surpluses of dairy production or
vegetables are sold in the bazaars.
112. And, although animal husbandry represents here the safety-net and is the shock-
absorber, it is not fully recognized by the village representatives and not really valued. They
dream of irrigated agriculture of cotton that still represents the “value” of development and
well-being.

4.2 Pastoralistm in Kizil Qum6

7
113. Pastoralism is not a new activity in the area, it is rather the main traditional one. The
Turkmen as well as some Kazakhs have always been pastoral-nomads here. The desert is
where they lived, kept their herds, used the rangelands and available water from wells. The
pastoralists were nomads and roamed in the desert from summer to winter graze-lands and
water. Summer areas are more on the Turkmen side of the river and closer to A 380, while in
winter, the pastoral nomads went northward, far into the desert of Qizil Kum.
114. Before the soviet period there were big herd owners with a system of sharing. The
FSU established sovkhozes for animal production in the area and confiscated the animals.
The herd keepers and pastoralists continued their work receiving salaries. They kept the
herds and produced the planned quantities without bothering for fodder, quality of feed,
veterinary care and marketing the products.
115. With the establishment of the sovokhozes, these pastoral-nomads gradually stopped
roaming and sedentarised in villages around. Saramoy is a village of this type.
116. After independence, as noted earlier, some did purchase important numbers of
animals through the credit facilities and rebuilt herds. Others could not.
117. Now, the important herds count at least from 30 to 40 cows and 200 to 300 sheep
and goats. Those who could not afford to buy the animals started to take care to the herds of
the others. The “new” pastoralists today who are in the desert, keep the herds of different
owners and have different agreements with each one. These can be salary (around 600 sum
per head per month), or in kind, sharing of the number of newborns in half.
118. In these last 15 years the number of pastoralists has grown up and is still increasing.
The demand for animals is important and markets are prosperous. Animals are bought
directly from the herders or their owners and put in the trucks. All these transactions take
place on the sides of the road within the project area.
119. The share holding system is a way to make up a herd in some years: from a herd of
400 heads one of the chobans we visited could keep 100 heads for himself each year. This
is a way to make up for a new herd very quickly and represents an income generating
activity. And the people of Saramoy know it and many of them have left their salaried-jobs –
of low wages and unskilled employment – to become pastoralist and go back to the desert.
120. They camp near the water pipeline and use water as the old wells are empty. They
buy fodder for 2 months in winter and for the rest of the year use natural graze lands in the
desert without any payment or any management system, because grass is available and
there is no real problem related to overgrazing yet.
121. The old sovkhoze has become a centre for veterinary care and vaccination.
4.3 The Tea/restaurants: chayxonos
122. There are several resting areas on the road called chayxonos or tea/restaurants. This
private sector is flourishing and the demand is important. In two years time they have
doubled their activities. In FSU period there was nothing on the road, not even gas stations.
Now, and for the last 5-6 years, 5 chayxonos are opened on this section of A 380 with
different capacities, some for trucks others for buses and some others for tourists. They
6
- We are presenting the pastoralists as a separate group of stakeholders even if most of them are related to
Saramoy. They are now the new inhabitants of the desert crossed by A 380 and they are directly concerned with
the rehabilitation works of the road.

serve food and beverages and most of them are specialized in fish8. All have officially
obtained land on lease from the district governor of Khozarasp and pay a monthly rent.
4.4 Truck Drivers
123. For the truck drivers interviewed the bad condition of the road is the main difficulty
they have. The section from Km 450 to Km 500 is the worst. It is in a very bad state and
requires much more time.
124. The second issue truck drivers pointed out, is the absence of “services” on the road.
There are no garages and very few gas pumps (there is only one on the section Km 581-
459). They are happy to have the actual chayxonos and would like to have more resting
areas.
8
- Each chayxono buys 50 to 100 kg. of fish every day from the fishermen of the Amu Darya.

SECTION V : PROJECT LOCATION

SECTION 2, HIGHWAY A 380 : KM 876 – 916, WITHIN KARAKALPAKSTAN
AUTONOMOUS REPUBLIC, KUNGRAD DISTRICT
5.1 Description of Settlements and Locations of Section 2
125. Close to the sea, the district is directly affected by the problems caused by the Aral
catastrophe. The salinization of water and soil, the spread of the desert over the plain are the
main features.
126. Within the district, the Section 2 Km 876 – 916 crosses two main and very opposing
natural environments: the delta-plain of Amu Darya and the arid desert of Ustyurt Plateau.
The former has villages with intensive irrigated agriculture, and the latter, which is the desert,
has a number of scattered small service-towns inhabited by employees and workers and a
number of pastoral-nomads roaming with their herds.
Gas compressing station in Kungrad
127. This section of the road starts at the end of Kungrad town, marked by the presence of
the huge Gas Compressing Station that is related by pipelines to Gazli (Bukhara Province
and parallel to A 380) and continues up to the Ustyurt plateau until the border town of
Karakalpakstan on a distance of 300 Km.
128. Parallel to A 380 at a few kilometers are: (i) 4 gas pipeline, (ii). the water pipeline and,
(iii) the railway.
5.2 The Delta-Plain of Amu Darya:The first 10 Km
129. After Kungrad town, the first ten kilometers are still in the delta-plain of the Amu
Darya. Here land is fertile and irrigated agriculture produces the main “strategic crops” of
cotton, rice and wheat.
130. Cotton and rice fields are very close to the road. However, rehabilitation work will not
include any widening of the road and hence there is no resettlement and land compensation
issue in this section.

Rice fields close to the road
5.3 Toprak Qalaa
131. The archaeological site is also located at 7 Km from the beginning of the section in
Kungrad. It is an archaeological of the 2nd century A.D. of Kushan period. Discovered in
1946 by Tolstov and spread over 120 X 100 m, it was partially excavated in 1959-1960.
132. On the plateau there are a series of other archaeological sites dating from the same
period, like in Kirqgiz Qalaa, Tesik Qalaa, but they are not close to the road as Toprak Qalaa
which is situated at 100 to 200 m distance from it.
133. The rehabilitation of the road will not have any negative impact on the site. Indirect
positive impacts may enhance: (i) more attention from scholars both national and
international for new excavations, (ii) tourist excursions and bring new development
opportunities.
5.4 The Daoud Ata Cemetery
134. These villages are almost around a cemetery, which is an important historical and
contemporary site, located at 8 Km distance from the beginning of the section in Kungrad.
Built around the tomb of Daoud Ata, the holy man’s grave is venerated by the local but also
by people coming from other countries like Kazakhstan and Turkmenistan and both by
Muslims and Christians. The cemetery is old and should contain archaeological remains. It
is still used by the 4 villages around as well as by people from Kungrad. Its entrance is
located at 8 Km from the road and is surrounded by a wall that is also distant from the road.
135. There is no problems with the rehabilitation of the road and even if any widening work
is done. On the contrary, the rehabilitation of the road will improve the access to the
cemetery and help valorize its architectural importance.

Daoud Ata Cemetery
5.5 The Ustyurt Plateau
The Plateau and the delta-plain
136. The Ustyurt plateau begins at a distance of 10, Km and starts almost abruptly with an
elevation of 50-70 m from the plain and stretches to the Kazakhestan border. The plateau is
arid and its desert aspect is in contrast with the irrigated plain. There are few settlements and
within the section of 40 Km there is the important Soda factory (Soda Plant) at a distance of
20 Km from the beginning of the plateau.
137. This Soda Plant is the main stakeholder with its different factories, quarries, refineries
and a population of workers numbering 1500 persons.
138. The next settlements like Ashkalaq, Kirqgiz, Bostan and Abadan, Barsa-Kelmes are
of small size and situated far beyond the limit of 40 kilometers. They are all habitation areas
for the workers of the different stations: gas and water pumping stations or those of the
railway.

SECTION VI: MAIN BENEFICIARIES OF THE PROJECT (SECTION 2) AND THEIR

6.1 Kungrad District and Town
139. Kungrad district covers 37% of Karakalpakstan and represents 11% of the whole
territory of Uzbekistan. As mentioned earlier in a note, it was almost impossible to have any
information from the hakimiyat as the study was thought to concern only resettlement.
However, important concern and interest for the rehabilitation of the road was underlined and
it was related to the economic activities that it would induce and bring some prosperity to the
town…
Agriculture and animal production:

140. The system of shirkats that is operational follows the production quotas, the
procurement amounts as planned each year by the hakimiyat.
141. And if the “strategic crops” are still the main irrigated agricultural production there is
however, an important tendency to transfer from cotton and rice into vegetables and fruits.
This is due to the important market demand coming from Kazakhstan and also because the
latter are more adapted to the changing natural conditions and scarcity of water.
142. The district is an important centre for animal production as well and it possesses –
through shirkats- pastures of good quality. In the delta area, animal production concerns
mainly cows and cattle, whereas on the plateau sheep and goat are breaded together with
horses and camels.
143. Kungrad town is an important market place where all the products – apart from the
“strategic crops”- are sold. Two days a week the market place becomes an animal market
where livestock and products are sold.
144. Kungrad is, after Nukus, the second town of the Republic. It is an important market
center for all the district and all the inhabitants – the villages and the settlements in the
Plateau – rely on its markets for their everyday needs.
145. The main hospital and health centers are also in the town as well as secondary
colleges.
Women’s committee:
146. In Nukus and Kungrad the Women’s Committee is quite active with its 34 members
and 5000 participants. Since 2004, they have also started to support men for employment,
small business creation and acquisition of small credits funds. 10% of their participants are
now men.
147. The committee has implemented some projects with great success as state micro-
finance project, the Aral Sea drought project to support unemployed women” of UNDP, ADB
project on micro-crediting and leasing which was very new for them and helped provide
equipments for small businesses, together with The Japan Fund for Poverty Reduction.
These projects have been completed with success and the beneficiaries are now self-
financing.
148. The businesses run by women are not very different from other parts of the country.
They are mainly developing in 4 main directions:
- Handicrafts that women can produce while at home as well as sawing and
knitting and garment production.
- Small trades.
- Animal husbandry and preparation of dairy products and centers for milk
processing, sold after in the local bazaars.

- Services.
Table 3:
Kungrad
Karakalpakstan in town/district (no
Business women
general information on
villages)
Number of business women who have a bank
4765 519
account:
Number of women who received small credits: 275 13
Number of women who received small credits
397 72
for animal production:
149. The committee is very active also in providing educational activities as training
sessions as how to prepare a business plan, market studies or technical training on dairy
products.
150. The committee members think that the rehabilitation of the road will create new
opportunities for women as well in small trades, tourism and infrastructure developments.
6.2 Village settlements: Sample: Adabiad village
151. Is also known as the shirkat farm of Akhoun Babayev for which all the villagers, men,
women and sometimes children work full time. Adabiad counts 140 households, with an
average household size of 5 to 6 persons.
152. This is an old village that was transformed into a sovkhoz and named Konibishov
during soviet period. Later it was converted to a kolkhoz and since 2000 it is a shirkat
regrouping 10 farms who are mainly from the village with a director coming from Kungrad
town. The other 4 villages inhabitants work on these 10 farms.
153. On the local level and from the villagers’ or workers’ point of view, at least for this part
of Kungrad district, the differences among sovkhoz, kolkhoz, shirkat or private farm are not
clear and not felt. The amount of work, benefits and wages have not changed a great deal for
the local villagers who do not have their share of land in these farm holdings.
154. The shirkat farm is totally irrigated and produces the three crops: cotton, wheat and
rice. And, as all the other inhabitants of the village work on these lands, the sharecropping
system varies with the crops: (i) wheat is sold according to the state quotas and the surplus
shared among the workers, (ii) cotton picking is paid after harvest.
155. The change that brings a security net and leaves a tight margin for individual income
together with some sort of “liberalized” way to use land is in dekhan farming, which are the
family plots.
156. Each family possesses 0.35 ha of land (16 sotok) for housing and cultivation. They
mainly cultivate vegetables and fruits for their own consumptions. The surplus is sold in the
local bazaars.
157. Together with dekhan land, each family owns individually 2-3 cows, 5 to 6 sheep.
Animal and dairy products are mainly used for their own consumption and the surplus sold in
the bazaar.
158. Adabiat village possesses a primary school and a primary health centre, which was
that of the sovkhoz.
159. The 3 other villages in the same vicinity have the same structure and the inhabitants

work on very similar shirkat farms.

- Turk Aul has 55 households. The secondary school is in this village because it
is in the middle and not far away from all. The other villages have all their
primary schools.
- Sayat Aul has 45 households. .
- Bostan Aul counts 35 households.
Saramoy and Adabaid
160. From our rapid observation we can say that there is an important difference between
Adabiad village in Kungrad and Saramoy in terms of livelihoods and well-being. The first
continues the sovkhozes system of irrigated agriculture under the shirkats and the villagers
have no time and no possibility for any informal activity to diversify their income. Whereas
those in Saramoy, through the proximity of the desert, with their innate knowledge, though
incomplete, of animal husbandry have the possibility to improve their living through this
activity.
6.3 The workers’ settlements: The Soda Plant
161. On the plateau the main stakeholder is the Sodium production plant. It is an important
infrastructure with building works that have started in 1995 and the factory is operational only
since august 2006. A filial of the Chemical and Technical Institute of Tashkent is also part of
the Plant which hosts 185 students.
162. The Plant produces soda ash and calcium and runs on the fourth of its capacity only
for the time being9. It will expand and develop further when the factory will work on its full
capacity until 2009-2010 with the new refinery of Ashkalaq and the quarry of Barsa-Kelmes.
Workers and inhabitants of the Plant

163. The Plant employs 1500 persons of which at least 1000 live within the plant. They
are from Karakalpakstan but also from Khorezm, other areas in Uzbekistan and even some
are China.
164. Housing construction were complete din 1998 and now the Plant has 8 apartment
buildings with 18 apartments each and 11 guesthouses of which one is for the students of
the abovementioned Institute. These buildings are the Plant’s property rented to the
inhabitants. 255 families live here together with single workers.
165. By 2010, the Plant plans to employ 2000-2500 workers and built 2 or 3 other
apartment buildings10. The workers are young and most of them are single. Their average
age is 25 to 30 and very little are above 35 years old. The majority is skilled. There are
engineers, technological and mechanical, skilled and chain workers too.
“Salaries and wages are not enough because the Plant is not running on full capacity”
(Makhalla chairman)
Women
166. About 30% of the women present in the settlement work for the Soda Plant. Many of
them are in employments related to the school and the health-centre. There is no “Business
Women” or any other association of the sort.
There is:
- One kinder-garden for 90 children,
9
- The overall capacity of the plant allows to produce 100,000 tonnes of soda ash annually. In 2006, the
enterprise produced 12,800 tonnes.
10
One of these buildings is going to offer the possibility to purchase the apartments with a credit system from the
housing bank and own them within 10 years.

- One primary school 350 pupils.

College is in Kungrad. And, after the visit of the President a new upgrading program has
started which involves:
- Building of a second kinder-garden.
- A children’s sport centre.
- Upgrading the school that has already started.
- They are also planning to build a specialized health-centre –sanatorium- using
the mud and the salt.
With the opening of the new refinery in Akshalaq, which will bring the number of workers up
to 2500, the Institute’s capacity is planned to increase with the construction of a new college.
167. Now, in the residence area they have:

- a cultural centre.
- A primary health centre, which is more for minor and daily care. They have an
ambulance and the hospital of Kungrad is the nearest.
Main problems and needs:

Water:
168. Water from the pipeline coming from the Tuyamuyun reservoir is used both for the
Plant’s needs and for the inhabitants of the settlement.
Infrastructure and services:

169. They need to develop some infrastructural compounds: bazaar, supermarket,
restaurant and some resting or leisure places. For the very basic needs they have to go to
Kungrad.
Agriculture:
170. As water is scarce, there is no agricultural activity or production even for local or
family consumption. It will be good to create agricultural plots for families using little water.
Transportation:
171. Transportation is the main problem for the inhabitants. The inhabitants and workers of
this plant are completely dependant of the road for their everyday life since they have to go
to Kungrad for their basic needs.
172. The road is not in a good condition and has become time consuming. There are
transportation facilities of “inter-city” buses 3 times a day between Kungrad and Ashkalaq.
There is also international transportation with busses coming from Bukhara and going to
Russia. In addition, the Plant has its own buses that takes the workers to Nukus for the
week-end and brings them back on Monday.
173. The Soda Plant is an important stakeholder and almost the only one on the section of
the road on the plateau. It is a new and developing factory with many branches and many
possibilities. All this may become an important infrastructural establishment with its workers’
town developed into a city in the desert.
6.4 Pastoral-nomads
174. Pastoralism is also an important activity on the arid plateau. The pastoralists are still
tied up to the sovkhoz specialized in animal production. This sovkhoz works with 66 herders
(chobans) who herd in the Ustyurt plateau. Each of them has 500 to 600 heads and they are
paid in kind even if the amounts are counted in sum.
6.5 Animal Production and the Sovkhoz of Khojali
175. This sovkhoz is in fact a shirkat that own the old structure and is composed of 2
villages and a total number of 1952 members of whom 995 are women. The shirkat has also

556 workers and 66 chopans or herders (pastoralists). The total area of the shirkat is
178,237 ha divided into graze land where fodder seeds are cultivated, agricultural and
irrigated land and 55 family plots of 0.35 ha each.
176. The sovkhoze raises mainly qaraqol sheep (38,500 heads for 2006) goats, horses
and some camels. All these animals are sold in the animal bazaar of Kungrad every
Wednesday and Sunday morning.
177. The 66 chopans of the sovkhoz are pastoral-nomads who dwell on the Ustyurt
Plateau. In the beginning of spring – March/April- they go up North-West to the border near
Karakalpakstan settlement, and come back to the sovkhoze graze land area in Septembre-
Octobre. Each chopan is responsible of a herd of 500-1000 heads that belong to the shirkat.
178. The chopans are paid in kind and the system of sharing is quite complicated where
the official agreements are in sum, related to the actual price of the animal in the bazaar and
then transferred to a number of the new-born animals that the chopan takes for him.
179. The pastoralist roams on the whole area of the plateau. In summer they are in the
northern parts and come to the south in winter. For all their movements, the road is used
both for men and animals. This means that their presence on the road and in the area is
seasonal and mostly related to summer pastures.

SECTION VII : VULNERABILITIES OF RURAL LIVELIHOODS IN THE PROJECT

AREAS
180. Farm restructuring in Uzbekistan has undoubtedly created new hardships, and on the
other hand, agriculture has gradually become, from late soviet period onwards, a “shock-
absorber”. This is more specifically with the private household plot, the dekhkan farm or
small private farms.
181. The smallest plot, related to household is free of production and procurement quotas
and has become, for the time being, the most “liberal” tenure system. The selling or
bartering the surplus or the products of the plot represents the “informal” income of most
peasant households. It represents mainly the safety-net that ensures part of the family’s
subsidence. If informal income during late soviet period existed, it was an additional income.
Now, the informal agricultural sector has become in most cases, the new strategy for
survival.
182. This agricultural activity is not the only income activity of a rural household. By
adopting a mixed portfolio of activities, rural households have tended to respond to the
chronic shocks produced mainly by collective enterprises in permanent deficit, paying
workers intermittently and in kind.
183. Our field work both in Karakalpakstan and in Khorezm shows this necessity of mixed
incomes in households. These income sources both in kind and cash are:
- Working in shirkat farms.
- Informal agricultural activities.
- Income based on salary in “stations” or factories.
- Pensions for the aged who have become part of the household’s income and not
only that of the aged persons.
- Benefits or entitlements, like maternity etc…
- Migration of one of the members of the family, often the young educated one.
184. The composition of the members of the household – aged, women, young skilled –
help diversify income sources. This means that families with few members, women headed
families, or aged and pensioners are the most vulnerable ones.
7.1 Vulnerable groups and different stages of vulnerabilities
185. The 3 types of settlements – agricultural villages, pastoral-nomads and workers’

settlements – are the main inhabitants on the two sections of A 380. They are the main
stakeholders and beneficiaries of the rehabilitation project of the road. These 3 types
represent different vulnerable groups.
7.2 Village sharecroppers
186. The village inhabitants are vulnerable because they are sharecroppers and do not
own the land they cultivate, apart from the family plots. They are completely dependent of the
“shirkats” and the state/hakimiyat for their livelihoods and have no other opportunity. As
sharecroppers, their incomes are dependent of the state planned quotas and their ability to
produce surplus. This means that their work input is high and for that reason, not only they
do not have spare time to do other small businesses, but women and also children have to
work on the farms in order to respond to the quotas.
187. The family plots they own are their only safety-net, their only food security and very
often they do not have time to sell the products of these plots in markets.

7.3 Village Inhabitants in Desert Area
188. The families livelihoods are completely dependent of the wages and salaries
of the employed or pensioned persons. In the arid zone, the family plots are not very
productive. Animal husbandry is the only income generating activity as it has always
been. This activity is important but still not very well organized, which makes all
market transactions and the whole production cycle more difficult.
7.4 Pastoral-nomads or herders
189. To be a pastoralist – as in Khorezm Province – is somehow a new employment

opportunity as livestock is an important asset and represents “cash money”. Graze lands are
free and not yet totally endangered by overgrazing or other uses. The desert is open for all
and the system of sharing animals gives the possibility to build an individual herd even if it
takes a long time.
190. Nevertheless, this population is also a vulnerable group. First, because it is totally
dependant of the “shirkats” that own the animals and the managed graze lands. The sharing
system does not help rebuilt a herd in a short time.
191. And if graze lands are now available in the plateau area and, being state land they
are free of charge for the time being, the different levels of “ownership” of the plateau will
soon cover the available pastures.
192. The second issue that threatens the pastoralist is the land tenure of the Plateau. As
underlined earlier, the underground resources of the Plateau are important: oil, gas, granite
etc, as well as the natural reserves. These represent different levels of land tenure or
ownership and there will soon be no place for these pastoralists who live from and on the
Plateau.
193. In general pastoralism is not recognized as an income generating activity, although

the number of pastoralists is increasing these last ten years and livestock represents an
important income. This situation makes them invisible and in some cases marginal and
isolated.
7.5 Workers of the Soda Plant
194. The workers are employees and have their salaries. Their vulnerabilities are much
less than the other inhabitants of the project sector.
195. However, as they do not posses any land nor any animal as a safety-net to insure the
basic needs in food, they rely totally on the road for it. The rehabilitation of the road and the
good conditions are important factors for their everyday lives.
196. The village inhabitants and pastoralists have the family plots and some cows and
sheep to insure their basic needs in food. And, if they are not owners of the lands they
cultivate or the herds they keep, these family-plots are their safety net.
197. The only market place in the area is Kungrad town, which is disserved by A380.
All these inhabitants of the region are completely dependent of the road for their
everyday needs and life. The markets, the hospital, the colleges and all the important
services are in Kungrad.

Table 4 : Inhabitant’s characteristics:
Dekhan
Presence land Availability
Settlements Number Approximate
of and of primary
in both of number of Status
primary animals health
locations households inhabitants
school owner- center
ship
Adabiad
140 840 1 Sharecroppers yes yes
village
Turk Aul
village
Sayat Aul
village
Bostan
village
Pastoralists
556 1 Sharecroppers yes yes
in section 1
Soda Plant
1500 2 Employees No yes
employees
Saramoy
Animal
village and
3350 1 husbandry, Yes Yes
pastoralists
employees
in section

SECTION VIII: GENDER AND RURAL LIVELIHOODS
“The blanket definition of women as unpaid family workers seems to be accepted

unquestioningly by most respondents in rural Uzbekistan” (Kandiyot)i.
198. When women have paid jobs or salary incomes, these are concentrated in social
sector jobs as in health and education or unskilled agricultural work. Very few women occupy
administrative and technical positions in collective enterprises. The shirkats’ management for
example, is mainly a male profession.
199. Women’s presence in informal sectors of income generating activities is much higher.
The levels of participation by older women in communal life, and their tendency to manage or
jointly manage the household budgets, are also found to be higher. It is mainly women in
their 40’s and 50’s who are able to allocate their time to extra-household activities. Some of
the most crucial labour relations in rural households are enacted between different
generations of women. And, younger married women with under-age children carry the
heaviest burdens, whereas older women with cohabiting daughters-in-law may enjoy greater
relative leisure.
200. Despite significant similarities with patterns in the wider Muslim world and parts of
South and East Asia, there are some distinctive features of rural women’s employment in
Uzbekistan These have to do, on the one hand, with women’s high literacy rates, due to an
effective system of universal education, and on the other hand, with a developed rural social
infrastructure, which provided women with a significant source of salaried jobs and
opportunities for non-farm employment.
201. Widowed women with older children could be found as heads of their own
households. However, divorced women and young widows are expected to return to their
parental home.
202. A woman, who has lost her earnings as a professional, falls on the mercies of her
husband’s parents for access to cultivable plots. And forced cohabitation with in-laws is the
lot of many young married couples who are unable to get a house plot or the finances to set
up house separately.
203. If we put these observations into a context of economic recession and the necessity
for survival strategies then these patriarchal values become the basis of some of solidarity
ties.
204. Safety-nets are built upon solidarity ties that in their turn rely first on family ties and
cultural values where the household plots become the recipient.
205. And, where law and reforms cannot bring income stability then customary laws play
an important role. Women have become more and more dependent of these solidarity ties
and what they imply.

SECTION IX : POVERTY RANKING IN THE PROJECT LOCATIONS
Table 5 : Incidence of poverty in the two regions of the project11.

Khorezm Province Republic of Karakalpakstan
Incidence of poverty 30.1% 36.4%
Incidence of extreme poverty 8.3% 7.7%
Share of population 5.4% 6.2%
Share of poor 5.9% 8.2%
Share of extreme poor 4.6% 4.9%
206. The percentages related to poverty incidence are high in Karakalpakstan and
Khorezm. In general the main asset that defined wealth by villagers was “time”. The fact of
not having enough time to look for other opportunities and improve livelihoods seems to be
the most important aspect that keeps them in poverty and gives little opportunity for
economic mobility. Time is missing for the sharecroppers, for the employees in the Soda
Plant to look for other incomes. On the other hand this shows that there is little
unemployment and work is too heavy.
207. Poverty is not structural. It is not defined as missing assets, rather, it is understood as
assets that are precarious, dependent of aspects that are far beyond the control of local
situations and are highly vulnerable. Land is precarious since it is unproductive. Land is
precarious as it is tied to quotas and production controls. Livestock is precarious as it is not
well managed and organized. Opposing this, the sovkhoz/shirkat system gives a certain
insurance that the local inhabitants are looking for. For example, in Saramoy, irrigated
agriculture is envied, where as in Adabiad village irrigated agriculture is a heavy burden that
does not leave enough time for other income activities.
208. In the PRA data and through the field visits, the population of both locations, which is
the main beneficiary, may be divided into 3 to 4 socioeconomic groups. The “lower poor” are
those whose assets are the most precarious: livestock, rangeland and water together with
dependencies from shirkats. This group is represented by the pastoralists of
Kungrad/Karakalpakstan. There are also those who have marginal land plots producing no
surplus.
209. In this group we also find families with large number of dependents, or families relying
only on the pensions of the elderly members. The “medium poor”. The “upper poor” are
distinguished from the lower poor by the quality of their land plot and the number of animals
(a cow or two and some sheep) owned individually. This distinction is further based on the
presence of a family member who can look after the plot and the animals.
210. Like the poorest, they have limited opportunities for economic mobility and time for
secondary activities. In this group we have the sharecroppers and the villagers of Saramoy.
The 'medium group': Families of the medium group are distinguished from the upper poor by
the greater economic security provided by one or two members being employed in factories,
in the Soda Plant or other basis. The quality of the land plot is then secondary and very often
fruit trees are planted for the family consumption. These families have a greater tendency to
invest in education and microenterprises, especially for women. Together with the upper poor
they typically comprise 60-80 per cent of the village population.
211. A fourth group as the 'well-off' is also to be differentiated although it represents not
even 5% of the whole population of both locations. This group is represented by families who
have invested in a private enterprise and have created business opportunities for the other
members and especially for the young persons of the family. They are those who have
opened the different chayxonos and restaurants on the sides of the road. Women are also
11
- WB, Living Standards Assessment, Rep. N°25923-UZ, May 2003.
represented in this group as family members working in the family enterprise or as the
business women who owns the enterprise.
212. This fourth group is found only in Khorezm Province (section 2). In Karakalpakstan
private initiatives are rare if non-existent. This difference is also perceptible in other
situations, where the shirkat system is very close to the sovkhoz system leaving little
possibilities for more liberal activities.
213. This fourth category is directly related to the road and the rehabilitation of the road will
increase the number of these private enterprises.

SECTION X: DEVELOPMENT AND POVERTY IMPACTS IN PROJECT LOCATIONS:

KARAKALPAKSTAN AND KHOREZM
214. The project locations are in rural and desert areas. A 380 crosses these areas and
often is the only means of communication between villages and major towns. The railway is
present, but if the road is used up to 80% by the local inhabitants, the railway does not
exceed 8%.
215. The actual bad conditions of the road are time-consuming for all the stakeholders,
and reduce access to main social services and basic needs. Good road conditions will
improve access to health care centres, social services, education, veterinary and agriculture
support services, markets. Good road will also foster new business and development
opportunities for the local inhabitants and generate benefits to a wider circle of beneficiaries.
216. As “time” was a indicator of wealth for the local population, good travelling conditions
will leave more time for all since they have to drive from 10 to 40 Km for markets, for
hospitals and other necessities.
10.1 Economic Impacts and Benefits
217. The Project will generate non-quantifiable economic benefits. Better roads will likely
attract additional economic activity and traffic and bring new customers and new business
opportunities. All the stakeholders and beneficiaries have expressed these issues.
218. The direct benefit of the project includes employment opportunities in civil works.
Construction will create temporary jobs, and routine maintenance will employ unskilled and
semiskilled workers. Women will be encouraged to work and be treated equitably.
219. The indirect benefits will have positive impacts on markets and development of
commerce and new employment opportunities, thus increasing the macro-economic impact
of the project. Access to labour markets, new employment and investment opportunities both
in public and private sectors are likely to be improved and generate new development
benefits and widen the circle of beneficiaries.
220. New services and individual initiatives will be created related to the road. This has
already started with the different tea/restaurants around the village of Saramoy. The need for
resting areas, leisure places, car repair services, handicrafts, have been underlined and
individual initiatives for this kind of SMEs are almost ready. Collective initiatives and
possibilities – Women’s Business Association or Mahalla chairmen fostering SME’s through
facilitation of credit – will be developed.
10.2 Impacts no Cultural Heritage and Tourism
221. The rehabilitation of the road will enhance tourism. Visitors will have opportunities to
see the historical sites and also less famous archaeological sites. This will contribute to their
conservation of the cultural heritage.
10.3 Service Impacts
222. The Project will provide better and improved conditions for all the users of the road.
Public transport conditions will be improved as well as access to social services and basic
needs. In a desert and isolated environment, good communication conditions and better
access to health centres, basic needs, markets and towns have their positive impact on the
quality of life and help alleviate poverty issues. The vulnerable groups like the pastoralists
and village sharecroppers will have better access to buy and sell their goods in town-markets
and will be less isolated. As the lack and shortages of “time” were underlined by the village
sharecroppers, preventing them to look for other opportunities, improved connectivity will

positively impact on their availabilities.
223. Public transport: an increase in buses, mini-buses and private transport systems
between villages and district towns will be in favour of the local population and bring new job
opportunities.
224. Access to social and health services: In most project locations, hospitals and
important health centres with permanent staff and medical services, secondary schools and
colleges, and other institutions are located in towns, outside the villages, in a distance of 10
to 40 Km. Improved transportation make these services more accessible.
Access to markets: Markets are also located in towns and are quite away from the villages
and the desert areas. Improved access to markets is an important issue to alleviate
livelihoods.
10.4 Gender Impacts
225. Gender impacts are important although they may seem to be indirect. Better
information and improved connectivity are basic for women’s empowerment in rural areas.
This, on an individual ground, through business opportunities and improved contacts and
communication and also, for NGOs like the Women Business Associations that are currently
based in towns and have little contact – due to transport difficulties - with rural areas.
226. Rural women are enthusiastic and ready to participate or create new business
opportunities and SMEs related to the development opportunities created by the road.
Further benefit will be a psychological well-being. Less isolation, more contacts and
empowerment, more activities and opportunities, as most of young women are educated will
contribute to improve women’s well-being and role in the society.
10.5 Poverty Impacts
227. All the economic and social developments will help reduce poverty. If agriculture and
pastoralism are nowadays strategies for survival, with the improvement of market conditions
and new business opportunities they will develop into productive activates.
228. The relations of migration to poverty have been underlined. In the project areas,
migration concerns young men, skilled or unskilled. New opportunities and initiatives will help
decrease the flow of emigration.
229. The main non-farm employment opportunities are public or semi-public with the Gas
and Water stations, the Soda Plant and the Zarafshan Gold Mines (this latter is quite far from
the project location but employs many inhabitants of the villages within the project area).
These industries and stations will develop further with good communication conditions and
present new opportunities for young persons, both male and female.
230. The diversification of employment or income opportunities enhanced by the

rehabilitation of the road and the improvement of connectivity conditions are an important
factor to reduce poverty. Diversification of income sources within families reduces
vulnerabilities especially in rural areas when farming is not the only income.
Table 6 : Expected Impact of the Project
Indicators by Expected Negative

Expected Positive Project Impact
sector Project Impacts
A. Social factors
Villages and Villages will be less isolated and
human communication with cities faster.
settlements

Indirect impact: better and faster access to

1 Health problems city hospitals, especially in maternity care and
emergency cases.
Indirect impact through better access to
2 Education
colleges and universities.
Direct impact: development of more
B. Labour and
3 employment opportunities in different sectors
employment
both public and private.
Direct impact: access improved and faster to
the market centres.
Bazars and market - Better accessibility to the local population.
3a
development - Better accessibility and improved conditions
for transportation of goods and products.
- Better accessibility for buyers and sellers.
- Employment opportunities with the road
rehabilitation and maintenance.
3b Public sector - Other employment opportunities in the
public sector: gas and water stations etc.
Improved.
Development of different kinds of business
opportunities.
- Directly related to the road: different services
like car repair, maintenance etc.
3c Private sector
- Leisure services like restaurants, chayxonas
and other resting areas.
- Development of new small markets: food,
basic needs, crafts, other goods etc.
Tourism development in different aspects:
- Visits and tours.
3d Tourism - Small hotels etc.
- Handicrafts.
- Guides and information centres.
- Conservation of archaeological sites.
3e Heritage sites - Better conditions for research and
excavations.
Better access to cities, health centres,
education, markets.
- Opportunities for new enterprises for
women.
4 Gender - More opportunities to be involved in SMEs
and micro-financed business projects.
-Improved contacts of village women with
NGOs and other associations.
- Less isolation.
- Better access to markets. - Pressure on the
- Better or easier access to pastoral-nomads desert and on its
in the desert. natural resources
5 Pastoralists - Development of mobile animal markets on that has a direct
the road. negative influence
- Better access to health-care and veterinary on their survival.
care.
- Better access to markets.
- New SME opportunities.
6 Agriculturalists
- Better transport conditions for agricultural
products.
7 NGOs and CBOs - Improved contact conditions that can help

them be more present in rural and isolated

areas.
- Improved transport
- New economic opportunities for the local conditions may
8 Migration issues people, which will help reduce economic facilitate emigration.
migration. - May induce gender
migration.

SECTION XI: RECOMMENDATIONS AND SAFEGUARDS WITH A PARTICIPATORY

APPROACH
231. In order to encourage participatory approach it is recommended to involve local

authorities and beneficiary communities in the different phases of the project’s
implementation.
11.1 Direct Involvement
232. During the Construction Phase it is necessary to ensure direct involvement of local
persons in the construction activities.
- Access to skilled and unskilled temporary labour for the local communities.
- Short-term specialized employment activities in construction and maintenance
that would procure some specific skills to some of the local youth. These can
be presented as training sessions.
- Work with local private small enterprises for procurement of goods and
material and other services like transportation of material etc.
- Involve local inhabitants in part time jobs like cleaning roads, plantation etc.
11.2 Indirect Involvement
233. As an important part of the life of the villages is and will be turned around the road, it
is important to organize awareness meetings related to all aspects of living on both sides of a
highway. The indirect involvement of the local population, local authorities and the different
NGOs present has to be on different themes and through meetings and workshops.
Awareness meetings: example of themes that have to be discussed and treated during these
meetings.
- On safety and security issues related to the highway and the dangers related
to rapid traffic for the nearby village inhabitants, for the pastoralists and their
herds while crossing the highway. The awareness meetings shall include also
the owners of tea/restaurants and the leisure areas on the sides of the road
as well as truck and bus drivers.
- Gender issues related to road traffic and public transportation.
- Road traffic, driving issues and public transports.
- Village social life and environmental issues: water and natural resources
related to the nearby highway.
- Trade and importance of exchange on the sides of the road.
11.3 Workshops and participatory planning
234. A second type of involvement of the local population and the different authorities is
through the organization of several workshops during the different phases of the project.
- These workshops have to deal with the planning of the development issues
related to the road and more specifically on the new business activities that
the rehabilitation of the road will enhance. These workshops and meetings
should be subsequently translated into planning process by the local
authorities and the beneficiary communities themselves of the development
issues and activities related to the road. These workshops should be further
extended to involve NGO’s, University professionals (Urgench and Nukus
universities) and through community consultations.
These workshops should also involve themes related to the negative consequences of
development activities on the natural resources and the necessities to use them in a
sustainable way.
235. The absence of comprehensive gender analysis in the infrastructure sector of

Uzbekistan in general, and the lack of actual and adequate information about traveling
conditions for women complicate the process of developing the gender-related activities. To

maximize project impact on women and men in the transport sector, a gender assessment in
the transport/highway sector of Uzbekistan project was formulated. The activities will include:
(i) identification of gender issues in the road sector, (ii) assessment of highway condition
from gender’s perspective, (iii) identification of shortages of improved road from gender
perspective, and (iv) formulation of actions to address gender concerns for the Project.
Funding of $20,000 was secured from the ADB’s Gender and Development Cooperation
Fund (GDCF) for undertaking the assessment.

SECTION 12: MONITORING INDICATORS
12.1 Economic Impact indicators:

- Sustainable development and private business opportunities.
- More SMEs in villages.
- Less migration of young and educated or skilled persons.
- Markets available and accessible.
- Number of women in business increased.
- Less dependency on pensions and social aid.
- More time to do secondary and informal jobs.
- Cultural heritage sites visited and well conserved.
- For pastoral-nomads less isolation and better access to markets to sell
livestock and animal products.
12.2 Poverty Reduction Indicators:

- The fourth group defined in Poverty ranking, become the majority.
- The « lower poor » group become less important as there is an increase in
economic mobility and less time-consuming activities.
- The « upper poor » become less important as precarious conditions and
assets have less importance on livelihoods, due to other income opportunities.
- The « medium group » less dependent of employment and taking private
initiatives.
12.3 Social Impact Indicators

- Health problems less crucial.
- Increased contacts and communication between villages and workers’
settlements.
- Number of young girls and boys attending college and higher education
increased.
- Increased contacts with town and less isolation.

SECTION 13: IMPACT OF ROAD SECTOR DEVELOPMENT
236. These indicators show the importance of the positive impacts regarding the negative
ones. In order to have a further indication of the importance of these impacts a comparison of
findings with other Studies of the Impact of Road Rehabilitation on Poverty R is proposed in
the table bellow. The comparison is taken from and ADB similar project in a recent ADB
study.
Table 7:
Documented Impacts PRA Findings
“Assessing the Impact of Transport and
Energy Infrastructure on Poverty Reduction
(co-published by ADB, DFIF, JBIC and WB).
Poverty Impact Study carried out for ADB’s

East-West Corridor development Project:
Rehabilitation of
Major Highway linking Lao PDR to Viet Nam.
(Chamberlain, 1999)
Short term Positive Impacts
- Access to markets for agricultural goods. - Confirmed in both project locations.
- Access to villages by government health - Better access to health centres.

officials and service providers.
- Availability for temporary unskilled jobs for - Confirmed with UZAVTOYUL and the
villagers in construction. ROAD FUND in both areas.
- Confirmed in both project locations.
- Confirmed. Access to regional and local

markets too.
- Confirmed for both project areas.
- Confirmed for both project areas and for

pastoralist in the desert.
- Not confirmed because there are no

forests. The reverse impact is more likely to
occur which is over-utilization of natural
resources, especially water, which is already
rare.
- Confirmed for both, with the University in

Urgench for Khozarasp District and that of
Nukus for Kungrad District.
- Confirmed for both districts as they are rich

with national heritage sites.
- Confirmed for both areas and for all

stakeholders.
- As there is no resettlement or nad loss,

there is no loss of field space nor of crops.

Long term Positive Impacts
- Access to long distance transport services. - Not confirmed.
- Access to long distance markets. - Not confirmed. The risks are on both sides
because other diseases due to
environmental problems are present in both
areas and more acutely in Kungrad District.
- Easier access to health care facilities and - Not confirmed. The Road Fund is locally
medical treatment. very present.
- Increased access to agricultural extension - Not confirmed although in a desert

services including veterinary care for environment this is not an issue.
livestock.
- Reduced environmental pressure due to - Not confirmed.

reduced reliance on non-sustainable
extraction of wildlife and forest products.
- Increased access to education. - As the local population has an important

literacy level, this is not an issue.
- Increased opportunities for the - The positive impacts are much more
development of tourism. important for the vulnerable groups than
such risks.
- Diversification of income sources. - May be confirmed, but not much relevant

for the situation, as women want to be active
and insure their own income. Literacy level is
high also with rural women.
- Improved social control on trafficking. - Not relevant for desert environment.

Short term negative impacts
- Loss of field space and limitation of crop

types.
- Social disruption during construction

resulting from interaction with workers from
outside.
- Increased risks of contracting socially

transmitted diseases.
- Potential safety hazards to villagers

unfamiliar with heavy equipment.
- Unesthetic appearance of road under

construction.
- Potential for outside exploitation of villagers

from entrepreneurs.

Long term Negative Impacts

- Economic exploitation.
- Vulnerable groups’ exploitation.
- Gender – additional burden on women.
- Increased noise and pollution.

TABLE 8: EFFECT BY SOCIOECONOMIC GROUP AND GENDER WITHOUT THE ROAD

REHABILITATION PROJECT
Poor Medium group

Effects if the
road is not
Male Male
rehabilitated
Female Female
Livelihoods Livelihoods Livelihoods Few
based on based on dependent of opportunities for
subsistence subsistence employment women to have
farming of family farming of the opportunities employment.
plots, often of family plots and and employed Few
poor quality soil. caring of the members of the opportunities for
Precarious few animals. family. women in rural
Opportunities and situations and Migration of the areas to have
economic mobility high skilled and the their own
dependencies of youth. business.
shirkats. Difficult access Difficult access
to adequate to adequate
health and child health and child
care maternal care maternal
centres. centres
Difficult and time-consuming access to markets for buying and selling
Need for development programs to Need for business development
improve sustainable livelihoods for programs to improve investment
Empowerment
the poor, the sharecroppers, the and private initiatives.
pastoralists, the village inhabitants.
Away from towns and market centres, security problems become more
Security issues
important. Increased economic migration of the youth.
and migration of
Health problems are crucial, partly because centres are of difficult
the youth
access.

A. Table 9 : Effect by Socioeconomic Group and Gender with the Road

Rehabilitation Project
Poor Medium Group
Effects of the
Male Male
rehabilitated road
Female Female
Improved year- Improved Opportunities Opportunities to
round access to to develop develop private
opportunities to health and child private part- part-time or full
travel to and find care services. time time enterprises
part-time and businesses. and activities.
informal work Traveling to Opportunities for
outside the Improved year- employment other family
village for the round places are less members and
Opportunities and sharecroppers opportunities to time- for family
economic mobility who have more travel to find consuming. initiatives.
time. work.
Possibilities for
trade on the road
or nearby
markets for
agriculturalists
and pastoralists.
Better and Better and Possibilities to Possibilities for
improved access improved have small private small
to markets for access to local markets enterprises.
buying and markets for and trade as
selling. buying and transportation
Empowerment selling informal is improved. More
and surplus communication
products. and contacts
with NGOs of
other villages
Less isolation. and towns
Less isolation, improved mobility Less isolation and more security.
Security and will enhance local opportunities Less migration for the skilled
migration and reduce migration. youth as local opportunities will
be improved.

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Technical Assistance Consultant’s Report

Project Number: P39669

Uzbekistan: Preparing the Regional Infrastructure

Prepared by Islohotkonsaltservis Ltd. in association with Road Institute

For The Republican Road Fund under the Ministry of Finance

GOVERNMENT OF THE REPUBLIC OF UZBEKISTAN

THE REPUBLICAN ROAD FUND

F PREPARING THE REGIONAL

LIST OF ABBREVIATIONS AND ACRONYMS USED

ADB Asian Development Bank

IKS/RRI i TASHKENT, OCTOBER 2007

SWOT Strengths–Weaknesses–Opportunities – Threats

Rate of Exchange – 1 August. 2007

IKS/RRI ii TASHKENT, OCTOBER 2007

SECTION 2: BRIEF OVERVIEW OF THE ECONOMY OF UZBEKISTAN AND THE

SECTION 3: DEVELOPMENT PROPOSAL AND PROPOSED ASSOCIATED

SECTION 4: PRELIMINARY DESIGN AND COSTS OF ROAD REHABILITATION AND

IKS/RRI iii TASHKENT, OCTOBER 2007

SECTION 5: EQUIPMENT PACKAGE AND ROAD EQUIPMENT POOL COMPANY

SECTION 6: ECONOMIC ANALYSIS

SECTION 7: FINANCIAL MANAGEMENT ISSUES AND FINANCING PLAN

SECTION 8: PRELIMINARY PROJECT IMPLEMENTATION ARRANGEMENTS

SECTION 9: PROCUREMENT PLAN

SECTION 10: PROJECT DESIGN AND MONITORING FRAMEWORK 70

IKS/RRI iv TASHKENT, OCTOBER 2007

IKS/RRI v TASHKENT, OCTOBER 2007

5. The economic analysis is presented in Section 6. The preparation of safeguard

6. A series of appendices supports the Report.

IKS/RRI 1 TASHKENT, OCTOBER 2007

IKS/RRI 2 TASHKENT, OCTOBER 2007

IKS/RRI 3 TASHKENT, OCTOBER 2007

1.3 Project Rationale

9. The Government’s primary objective in the transport sector is to improve the

10. The A-380 serves as an increasingly important international corridor between

12. A systematic approach to prioritizing road maintenance interventions and

IKS/RRI 4 TASHKENT, OCTOBER 2007

1.4 The Project

1.4.1 Impact and Outcomes

1.4.2 Output of the TA

(i) Engagement of the services of an experienced Road Construction Plant and

IKS/RRI 5 TASHKENT, OCTOBER 2007

(i) Seminar on ADB procurement procedures and guidelines – 6 July 2007

1.5.1 Other Administrative Matters

IKS/RRI 6 TASHKENT, OCTOBER 2007

SECTION 2: A BRIEF OVERVIEW OF THE ECONOMY OF UZBEKISTAN AND THE

2.2 General Background

2.3 Assumptions as to Progress on Main Indicators

IKS/RRI 7 TASHKENT, OCTOBER 2007

Table 2.1 Growth Rates Under Different Policy Assumptions

Table 2.2 Population Growth Rates of Selected CIS Economies in

Country Population Growth Rate (% pa 2001-2005)

IKS/RRI 8 TASHKENT, OCTOBER 2007

GDP per Capita

2.4 Income Elasticities of Domestic Transport Demand

Table 2.4 Income Elasticities of Demand Characterizing the Transport Sector

Income Elasticity of Demand

2.5 Factors Influencing International Trade along the Project Road

36. The A380 is classified as a Northwestern Route by Uzavtoyul, leading to Russia,

IKS/RRI 9 TASHKENT, OCTOBER 2007

Country/Region 2006 2007 2008

2.6 2007 Traffic Counts and Count Data

2.6.1 International Traffic

Item 2003 2004 2005 2006 2007*