RURAL ENTERPRISE DEVELOPMENT PROJECT (Loan 1504–UZB)
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ASIAN DEVELOPMENT BANK PCR: UZB 30375 PROJECT COMPLETION REPORT ON THE RURAL ENTERPRISE DEVELOPMENT PROJECT (Loan 1504–UZB) IN UZBEKISTAN October 2003 CURRENCY EQUIVALENTS Currency Unit – sum At Appraisal At Project Completion (30 September 1996) (21 February 2003) SUM1.00 = $0.025 $0.0010 $1.00 = SUM40 SUM963 ABBREVIATIONS ADB – Asian Development Bank CAR – capital adequacy ratio CBU – Central Bank of Uzbekistan DEM – Deutsche mark DSCR – debt service coverage ratio EBRD – European Bank for Reconstruction and Development FIRR – financial internal rate of return FSU – Former Soviet Union GAAP – generally accepted accounting principles IAS – International Accounting Standards IFC – International Finance Corporation IOS – Interim operating strategy JSC – Joint Stock Company JV – Joint Venture KfW – Kreditanstalt für Wiederaufbau LDR – loan-to-deposit ratio LIBOR – London interbank offered rate MDC – management development center NBU – National Bank for Foreign Economic Activity of the Republic of Uzbekistan OCR – ordinary capital resources PCR – project completion review PTE – Private Limited Company ROA – return on assets RRP – report and recommendation of the President SMEs – small and medium-sized enterprises SOE – state-owned enterprise TA – technical assistance TCR – technical assistance completion report US – United States NOTE In this report, "$" refers to US dollars. CONTENTS Page Basic Data ii I. BACKGROUND 1 A. History 1 B. Scope of Operations of NBU 1 C. NBU’s Relation with ADB and Other Lenders 1 D. Relevance of Design and Formulation 2 E. Related Technical Assistance 3 II. IMPLEMENTATION 3 A. Lending Policies 3 B. Characteristics of Subloans 4 C. Implementation and internal Operations of Subprojects 5 D. Operational Performance of NBU 7 E. NBU’s Financial Performance 9 F. Financial Statements and Ratios 9 G. Covenants 10 H. Performance of the Asian Development Bank 10 III. EVALUATION 11 A. Loan Appraisal 11 B. Implementation 12 IV. ASSESSMENT AND RECOMMENDATIONS 13 A. Relevance 13 B. Efficacy in Achievement of Purpose 13 C. Efficiency 13 D. Preliminary Assessment of Sustainability 13 E. Other Impacts 14 F. Overall Assessment 14 G. Lessons Learned 14 H. Recommendations 15 APPENDIXES 1. NBU’s Other Credit Lines 16 2. NBU Credit Policy 18 3. Characteristics of Subloans 21 4. Operational and Financial Performance of Subprojects 26 5. NBU’s Management Structure 30 6. NBU’s Loan Portfolio 31 7. NBU’s Portfolio Classification System and Loan Loss Provision 33 8. NBU’s Financial Statements and Ratios 34 9. NBU’s Compliance with Covenants 38 10. Overall Assessment of the Project 48 BASIC DATA A. Loan Identification 1. Country Uzbekistan 2. Loan Number PAG: UZB 30375, Loan 1504-UZB 3. Loan Title Rural Enterprises Development Project 4. Borrower Republic of Uzbekistan 5. Name of development finance institutions National Bank for Foreign Economic Activity of the Republic of Uzbekistan 6. Amount of Loan USD50,000,000 7. Project Completion Report Number PCR: UZB 775 B. Loan Data 1. Appraisal – Date Started 10 Sep 1996 – Date Completed 30 Sep 1996 2. Loan Negotiations – Date Started 18 Nov 1996 – Date Completed 20 Nov 1996 3. Date of Board Approval 17 Dec 1996 4. Date of Loan Agreement 7 May 1997 5. Date of Loan Effectiveness – In Loan Agreement 13 Jun 1997 – Revised – Number of Extensions none 6. Terminal Date for Commitments – In Loan Agreement 13 Jun 2000 – Actual 13 Jun 2000 – Number of Extensions none 7. Closing Date – In Loan Agreement 13 Jun 2002 – Revised – Number of Extensions 8. Terms to the Borrower – Interest Rate Variable interest rate for lending in USD from ordinary capital resources (current 6.34%) – Maturity (number of years) 15 – Grace Period 3 (number of years) – Free Limit $3 million – Repayment Terms 24 half-yearly payments 9. Terms of Relending (if any) Same as loan iii 10. Interest Rate for Subloans – Original ADB interest rate + NBU margin – Revised 11. Disbursements a. Dates Initial Disbursement Final Disbursement Time Interval April 2, 1998 March 13, 2002 48 months Effective Date Original Closing Date Time Interval June 13, 1997 June 13, 2002 60 months b. Amount $45,629,510 Category Original Last Amount Net Amount Undisbursed or Allocation Revised Canceled Amount Disbursed Balance Subloan Allocation Available “New-York – Samarkand 288,557 - - - 288,557 - Industrial Enterprise” JV Namangan Conserva JSC 1,182,000 - - - 1,182,000 - “El Erk Nur” Firm 524,680 - - - 524,680 - “Lalmikor” PTE 114,230 - - - 114,230 - “Ishtikhan Conserva” JV 2,514,699 - - - 2,514,699 - “Ziyo-Nur” PTE 843,637 - 3 - 843,634 - “Meva” JV 2,720,000 - - - 2,720,000 - “Nilufar - D” PTE 1,212,689 - - - 1,212,689 - “Ice-Djaykhun” JV 334,250 - - - 334,250 - “Deroz” PTE 443,000 - - - 443,000 - “Termez non” JSC 464,560 - - - 464,560 - “Golden Fleece” JSC 2,306,204 - - - 2,306,204 - “ABK” PTE 3,536,330 - 533,250 - 3,003,080 - “Hoshim” Firm 298,271 - - - 298,271 - “Navoi don Invest” 3,334,014 - - - 3,334,014 - “Pasta – Kamola” JV 1,245,000 - - - 1,245,000 - “Parranda – Khasib” JSC 301,545 - - - 301,545 - “Non – Pasta” JSC 1,495,000 - - - 1,495,000 - “Shukurdavlat” PTE 292,700 - - - 292,700 - “Muzimpeks-Tijorat” 5,000,000 - 2 - 4,999,998 - “Mukaddam” PTE 215,000 - - - 215,000 - “Polimex” JV 700,000 - - - 700,000 - “Green World” JV 4,000,000 - - - 4,000,000 - “Karakalpaktomat” 2,750,000 - - - 2,750,000 - “Jeinov” JSC 285,817 - - - 285,817 - “Afrasiab Meva” JSC 3,400,000 - - - 3,400,000 - “Ziyobakhsh-Uni-Trading” JV 4,990,000 - - - 4,990,000 - “Laziz” JSC 1,370,582 - - - 1,370,582 - “Garzai Uz-Af” JV 2,349,000 - 2,349,000 - - - “Oltin Meva” JSC 1,488,235 - 1,488,235 - - - Total 50,000,000 - 4,370,490 - 45,629,510 - ***ADB = Asian Development Bank, JSC = Joint Stock Company, JV = Joint Venture, NBU = National Bank of Uzbekistan, PTE = Private Limited Company, USD = US dollars. *** Source: National Bank of Uzbekistan iv C. Implementation Data 1. Number of Subloans 28 2. Sectoral Distribution of Rural small and medium-sized enterprises Subloans Sector Projected Actual Food production 27 27 Light Industry 1 1 Total 28 28 Source: National Bank of Uzbekistan 3. Size of Subloans $45,629,510 Range Number of Subloans Aggregate Amount (sum) Up to 1,000,000 13 5,106,244 From 1,000,001 to 2,000,000 5 6,505,271 From 2,000,001 to 3,000,000 4 10,290,903 Over 3,000,001 6 23,727,092 Total 28 45,629,510 Source: National Bank of Uzbekistan 4. Other Breakdown of Refer to Appendix 3: Characteristics of Subloans (distribution criteria Subprojects agreed upon in loan documents) (USD). Criteria Projected Actual 5. Subloans Above Free Limit $23,727,092 Subloan Aggregate Number Amount (sum) PSE-ABK 016 3,003,080 Navoi Don Invest 019 3,334,014 Muzimpeks-Tijorat 024 4,999,998 Ziyobakhsh-Uni-Trading 029 4,990,000 Green World 030 4,000,000 SC Afrasiab-Meva 033 3,400,000 Total 6 23,727,092 Source: National Bank of Uzbekistan 6. Project Performance Report Ratings Ratings Implementation Period Development Implementation Objectives Progress (i) From 29 Nov 1998 to 30 Dec 1998 S / S (ii) From 30 Dec 1998 to 27 Feb 1999 PS / PS (iii) From 27 Feb 1999 to 30 Mar 1999 PS / S (iv) From 30 Mar 1999 to 29 Apr 1999 PS / S v (v) From 29 Apr 1999 to 30 Dec 2000 PS / S (vi) From 30 Dec 2000 to 30 Nov 2002 S / S PS = partly satisfactory, S = satisfactory. Source: Asian Development Bank Project Performance Reports D. Data on Asian Development Bank Missions Name of Mission Date No. of No. of Person- Specialization of Persons Days Members Reconnaissance 22 Jun to 9 5 85 economist, senior Jul 1996 economist, assistant general counsel, young professional, staff consultant Appraisal 10 to 30 Sep 8 136 economist, manager, 1996 senior economist, young professional, counsel, three consultants. Inception 15 to 18 Jul 1 4 senior project 1997 engineer Review 4 to15 May 1 12 financial analyst 1998 Review 24 to 30 Oct 1 7 financial analyst 1998 Review 8 to 17 Feb 2 20 financial analyst, 2000 investment officer Review 12 to 13 Jul 1 2 financial analyst 2000 Review 11 to 20 Feb 2 20 senior portfolio 2002 management specialist, financial economist Project Completion 11 to 22 Feb 2 24 senior portfolio Review 20031 management specialist, assistant project analyst E. Related Loans Loan No. Date of Agreement Amount SME Development Project 1799-UZB March 9, 2001 $50,000,0002 SME = small- and medium -sized enterprise. 1 This project completion report was prepared by the Project Completion Review (PCR) Mission, which comprised R. Narasimham, senior portfolio management specialist/mission leader; and Teresa Yabut, assistant project analyst/mission member. 2 Credit allocation to National Bank of Uzbekistan under this loan was $20 million. I. BACKGROUND A. History 1. In December 1996, the Asian Development Bank (ADB) approved from its ordinary capital resources (OCR) a $50-million loan to Uzbekistan for relending to the National Bank for Foreign Economic Activity of the Republic of Uzbekistan (NBU) for onlending to viable private- sector and small- and medium-sized enterprises (SMEs) engaged in agroindustry. 2. NBU was formed in September 1991 as a wholly state-owned commercial bank to operate as the Government’s agent on international financial markets. Both according to its charter and its banking license obtained from the Central Bank of Uzbekistan (CBU), NBU is a universal commercial bank with a license to undertake foreign exchange transactions. NBU has four financial affiliates, all of which have complementary relationships with the bank. These comprise partial ownership in two joint-venture banks in Uzbekistan ie. ABN-AMRO (Uzbekistan)1 and UzDaewoo Bank,2 an investment in a domestic leasing company, and a subsidiary bank in Russia.3 NBU’s charter mandates that the bank must be at least 60% state- owned.