Completion Report

Project Number: 37697-013 Loan Number: 2301 August 2016

Mongolia: Urban Development Sector Project

This document is being disclosed to the public in accordance with ADB's Public Communications Policy 2011.

CURRENCY EQUIVALENTS

Currency Unit – togrog (MNT)

At Appraisal At Project Completion 15 November 2006 27 October 2015 MNT1.00 = $0.000859 $0.000502 $1.00 = MNT1,164 MNT1,993.25

ABBREVIATIONS

ADB – Asian Development Bank CBO – community-based organization DED – Deutscher Entwicklungsdienst (German Development Service) EIRR – economic internal rate of return EMP – environmental management plan FIRR – financial internal rate of return GAP – gender action plan GIZ – Deutsche Gesellschaft für Internationale Zusammenarbeit (German Agency for International Cooperation) GTZ – Gesellschaft für Technische Zusammenarbeit (German Technical Cooperation Agency) ICB – international competitive bidding IEE – initial environmental examination JFPR – Japan Fund for Poverty Reduction LARF – Land Acquisition and Resettlement Framework LARP – Land acquisition and resettlement plan LARPIC – Land Acquisition and Resettlement Plan Implementation – Committee LRCUDD – Land Relations, Construction and Urban Development Department MCUD – Ministry of Construction and Urban Development MDF – Microfinance Development Fund MOF – Ministry of Finance NBFI – nonbanking financial institution NCB – national competitive bidding O&M – operation and maintenance OLA – onlending agreement PCR Project Completion Report PFI – participating financial institution PIU – project implementation unit PMU – project management unit PPMS – project performance monitoring system PSC – project steering committee PUSO – public urban services organization CRD – City Road Department RCR – Resettlement Completion Report RF – resettlement framework RP – resettlement plan SDR – special drawing rights SLA – subsidiary loan agreement

TA – technical assistance VOC – vehicle operating cost WACC – weighted average cost of capital

WEIGHTS AND MEASURES

Lpcd – liters per capita per day Lpd – liters per day m2 – square meter m3 – cubic meter

GLOSSARY

Aimag – province/provincial Ger – traditional tent Hashaa – residential plot Khoroo – sub-district Soum – administrative subunit of aimag

NOTES

(i) The fiscal year (FY) of the Government and its agencies ends on 31 December. (ii) In this report, "$" refers to US dollars.

Vice-President S. Groff, Operations 2 Director General A. Konishi, East Asia Department (EARD) Country Director Y. Fernandez Lommen, Mongolia Resident Mission, EARD

Team leader T. Badarch, Senior Project Officer (Infrastructure), EARD Team members T. Begzsuren, Associate Social Development Officer (Gender), EARD E. Enkhbold, Investment Officer, EARD A. Pettersson, Senior Portfolio Management Specialist, EARD O. Purev, Senior Environment Officer, EARD B. Tsetsgee, Project Analyst, EARD M. T. Villareal, Principal Portfolio Management Specialist, EARD

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS Page

BASIC DATA i MAP v I. PROJECT DESCRIPTION 1 II. EVALUATION OF DESIGN AND IMPLEMENTATION 1 A. Relevance of Design and Formulation 1 B. Project Outputs 2 C. Project Costs 3 D. Disbursements 3 E. Project Schedule 3 F. Implementation Arrangements 4 G. Conditions and Covenants 5 H. Related Technical Assistance 5 I. Consultant Recruitment and Procurement 5 J. Performance of Consultants, Contractors, and Suppliers 7 K. Performance of the Borrower and the Executing Agency 7 L. Performance of the Asian Development Bank 8 III. EVALUATION OF PERFORMANCE 8 A. Relevance 8 B. Effectiveness in Achieving Outcome 8 C. Efficiency in Achieving Outcomes and Outputs 9 D. Preliminary Assessment of Sustainability 9 E. Impact 10 IV. OVERALL ASSESSMENT AND RECOMMENDATIONS 13 A. Overall Assessment 13 B. Lessons 13 C. Recommendations 14

APPENDIXES 1. Design and Monitoring Framework 16 2. Project Outputs 21 3. Project Cost and Financing Plan 25 4. Disbursements 26 5. Actual Implementation Schedule 27 6. Status of Compliance with Loan Covenants 30 7. Procurement Packages for ADB Financing 43 8. Economic Reevaluation 45 9. Financial Reevaluation 48 10. Gender Action Plan 51 11. Environmental Analysis 63 12. Land Acquisition and Resettlement 69

BASIC DATA

A. Loan Identification

1. Country Mongolia 2. Loan Number 2301 3. Project Title Urban Development Sector Project 4. Borrower Mongolia 5. Executing Agency Ministry of Construction and Urban Development 6. Amount of Loan SDR 23,417,750.00 7. Project Completion Report Number PCR: 1589

B. Loan Data 1. Appraisal – Date Started 16 August 2006 – Date Completed 6 October 2006

2. Loan Negotiations – Date Started 20 November 2006 – Date Completed 21 November 2006

3. Date of Board Approval 19 December 2006

4. Date of Loan Agreement 27 August 2007

5. Date of Loan Effectiveness – In Loan Agreement 25 November 2007 – Actual 26 February 2008 – Number of Extensions

6. Closing Date – In Loan Agreement 30 June 2013 – Actual 18 December 2015 – Number of Extensions 2

7. Terms of Loan – Interest Rate 1% per annum during grace period and 1.5% thereafter – Maturity (number of years) 32 – Grace Period (number of years) 8

8. Terms of Relending (if any) Subloan agreements (SLAs) with aimag governments and Ulaanbaatar Municipal Government and onlending agreements with pubic urban service organizations (PUSOs) under Component A: – Interest Rate 2% – Maturity (number of years) 25 – Grace Period (number of years) 6 years

SLAs with participating financial institutions (PFIs) under Component C: – Interest Rate 5% – Maturity (number of years) 10 years – Grace Period (number of years) 3.5

Onlending agreements (OLAs) with the subborrowers under Component C: – Interest Rate 8–10% ii

– Maturity (number of years) 2–10 years – Grace Period (number of years) 1 year

9. Disbursements a. Dates

Initial Disbursement Final Disbursement Time Interval 23 July 2008 27 October 2015 87.20 months

Effective Date Original Closing Date Time Interval 26 February 2008 30 June 2013 64.13 months

b. Amounts (SDR million) Original Revised Amount Net Amount Amount Undisbursed Category Allocation Allocation Cancelleda Available Disbursed Balance 1. Civil Works 11.66 13.45 0.13 13.45 13.32 0.00 1A Basic Urban 3.43 9.12 0.13 9.12 8.99 0.00 Services 1B Urban Road 8.23 4.33 0.00 4.33 4.33 0.00 Improvement 2. Equipment 2.21 5.82 0.06 5.82 5.77 0.00 2A Basic Urban 1.83 5.39 0.06 5.39 5.33 0.00 Services 2B Urban Road 0.38 0.44 0.00 0.44 0.43 0.00 Improvement 3. Small Loan 2.12 2.11 0.02 2.11 2.09 0.00

4. Institutional 1.01 1.83 0.07 1.83 1.76 0.00 Development 5. Interest Charge 0.20 0.20 0.00 0.20 0.20 0.00

6. Unallocated 0.00 0.00 0.00 0.00 0.00 1.82

Total 23.42 0.28 23.42 23.13 0.00 19.02 Total $ Equivalent 28.20 35.43 0.40 35.43 35.03 0.00

a An undisbursed balance of SDR 0.28 million, equivalent to $0.4 million, was cancelled at loan closing. Note: Totals may not sum up precisely because of rounding.

10. Local Costs (Financed) - Amount ($) 26.1 million - Percent of Total Cost 63.2%

C. Project Data

1. Project Cost ($ million)

Cost Appraisal Estimate Actual Foreign Exchange Cost 13.3 15.2 Local Currency Cost 24.3 26.1 Total 37.6 41.3

iii 2. Financing Plan ($ million)

Cost Appraisal Estimate Actual Implementation Costs Borrower Financed 7.3 6.1 ADB Financed 27.9 34.7 Other External Financing 2.1 0.2 Subtotal 37.3 41.0 IDC Costs Borrower Financed - - ADB Financed 0.3 0.3 Other External Financing - - Subtotal 0.3 0.3 Total 37.6 41.3

ADB = Asian Development Bank, IDC = interest during construction.

3. Cost Breakdown by Project Component ($ million)

Component Appraisal Actual Estimate A. Base Cost Component A: Improvement of Basic Urban Services 10.4 26.4 Component B: Urban Road Improvement 16.9 8.6 Component C: Small Loans for Water Connections and On-Plot Facilities 3.8 3.0 Subtotal (A) 2.9 3.0 Contingencies 1. Physical 2.4 - 2. Price 1.0 - Subtotal (B) 3.3 - C. Financing Charges During Implementation 0.3 0.3 Total 37.6 41.3

4. Project Schedule

Item Appraisal Estimate Actual Component A: Basic Urban Services Date of Contract with Consultants Dec 2007 May 2009a Completion of Engineering Designs Dec 2008 Mar 2013b Civil Works Contract Date of Award Oct 2007 Jun 2010 Completion of Work Mar 2012 Jun 2015 Equipment and Supplies Dates First Procurement Jun 2008 Oct 2010 Last Procurement Jun 2010 May 2014 Completion of Equipment Installation Dec 2010 Jun 2015 Start of Operations - Completion of Tests and Commissioning Jun 2012 Jun 2015 Beginning of Start-Up Jun 2012 Jun 2015 Component B: Urban Road Improvement Date of Contract with Consultants - May 2009 Completion of Engineering Designs Mar 2008 Nov 2011 Civil Works Contract Date of Award Jun 2008 Jun 2010 Completion of Work Sep 2011 Sep 2013 Equipment and Supplies iv

Dates Procurement - Jul 2010 Completion of Equipment Installation Dec 2010 May 2011 Start of Operations - Completion of Tests and Commissioning - Sep 2013 Component C: Small Loans for water connection and on-plot facilities Community Awareness and Education Mar 2008 Dec 2014 Launch of Small Loans Oct 2008 Mar 2015 Component D: Institutional development and training Identify Training Needs - Oct 2009 Institutional Capacity Building Dec 2008 Dec 2010 Training of Communities Mar 2008 Mar 2011 Off-Site Training Mar 2011 Jun 2012 a Refers to the first contract award to a firm to design a water supply and sewerage system in Erdenet. b Refers to the completion of the last contract design and tender documentation for water meters.

5. Project Performance Report Ratings

Ratings Development Implementation Implementation Period Objectives Progress 26 Feb 2008 to 31 Dec 2008 Satisfactory Satisfactory 1 Jan 2009 to 31 Dec 2009 Satisfactory Satisfactory 1 Jan 2010 to 31 Dec 2010 Satisfactory Satisfactory 1 Jan 2011 to 31 Dec 2011 Satisfactory Satisfactory 1 Jan 2012 to 31 Dec 2012 Satisfactory Satisfactory 1 Jan 2013 to 31 Dec 2013 Satisfactory Satisfactory 1 Jan 2014 to 31 Dec 2014 Satisfactory Satisfactory 1 Jan 2015 to 30 Jun 2015 Satisfactory Satisfactory

A. Data on Asian Development Bank Missions

No. of No. of Person- Specialization of Name of Mission Date Persons Days Members Loan Fact-finding 5–23 Jun 2006 7 105 a, b, c, d, e, f, g Loan Pre-appraisal 16 Aug–1 Sep 2006 5 45 a, c, f, g, h Loan Pre-appraisal Follow-up 3–6 Oct 2006 3 9 a, c, i Loan Inception 2–12 October 2007 4 36 a, c, j, k Loan Review 1 and Handover 13–20 Nov 2008 4 24 a, c, j, k Loan Review 2 8–19 Jun 2009 2 20 c ,m Midterm Review 25 May–4 Jun 2010 2 16 c, j Loan Review 3 25 Oct–1 Nov 2010 2 10 c, m Loan Review 4 29 Nov–2 Dec 2011 3 18 j, l, m Loan Review 5 20–26 Jun 2012 2 2 k, n Loan Review 6 6–11 Dec 2012 2 8 k, n Loan Review 7 9–13 Sep 2013 3 15 k, n, l Loan Review 8 26–27 Mar 2014 1 2 n Loan Review 9 21–25 Oct 2014 5 15 k, j, n, o, p Loan Review 10 17–19 Jun 2015 4 12 j, k, n, o Project Completion Review 2–4 Mar 2016 2 6 k, q a = urban development specialist, b = counsel, c = economist, d = poverty reduction specialist, e = urban infrastructure specialist (staff consultant), f = project specialist (urban development), g = project specialist (road), h = principal financial economist, I = director, Urban and Social Sectors Division, j = senior portfolio specialist, k = project analyst, l = environmental specialist (staff consultant), m = administrative assistant, n = senior project officer (Infrastructure), o = associate social development officer (gender), p = senior social development specialist (gender); q = investment officer.

I. PROJECT DESCRIPTION

1. Nomadic and rural Mongolia has experienced rapid urbanization since 1950, which accelerated during the transition from central planning to a market-based economy in the early 1990s. A series of harsh winters (dzuds) resulted in large numbers of livestock deaths1 in rural Mongolia that damaged herders’ livelihoods. Affected households migrated in large numbers to the capital, Ulaanbaatar, and to provincial (aimag) centers for employment and better access to social services and infrastructure. This migration increased urban populations from 60% of the total national population in 2006 to 72% in 2015.

2. Urban Mongolia has two distinct type residential areas: apartment areas and traditional tent (ger) areas. Apartment areas are formally laid out to include permanent housing and utilities such as heat and hot water. Ger areas are informal, unserved, or underserved settlements characterized by long strips of large plots of land (khashaas). Poor sanitation—with almost exclusively open pit latrines, irregular waste collection, and limited access to water—which is supplied at often distant kiosks—have created highly unsanitary living conditions. Indoor and outdoor air pollution is high and particularly severe during winter2 because of coal-fired stoves that damage environmental and human health.

3. At project appraisal, Ulaanbaatar’s road network totaled about 380 kilometers (km). Ger areas had unpaved gravel roads with little or no public transportation. As a result, residents had limited access to markets and social services such as health and education. Upgrading urban roads was a top priority for residents during the project’s social appraisal process.

4. Housing loans were rarely accessible to low-income households, which lack repayment capacity and collateral. Commercial banks also have high loan servicing requirements. The project aimed to fill the gap by providing small loans for on-plot improvements.

5. A sector loan for $28.2 million from the Asian Development Fund was approved on 19 December 20063 and took effect on 26 February 2008. The expected outcomes were upgraded basic urban services, urban roads, and on-plot facilities. ADB classified the loan as a general intervention in water supply, sanitation, road, and microfinance to support inclusive social development and environmental sustainability. The project design and monitoring framework was updated in 2014 to reflect subprojects’ expected outputs, which were added during project implementation. The revised design and monitoring framework with the project achievements at completion is in Appendix 1.

II. EVALUATION OF DESIGN AND IMPLEMENTATION

A. Relevance of Design and Formulation

6. The project design and formulation were highly relevant to the government’s and ADB’s sector strategies at appraisal, implementation, and completion. The project aligned with the ADB’s 2006–2008 Country Strategy and Program for Mongolia, which supported implementation of a major pillars of the government’s strategy: inclusive social development. The project remained consistent with ADB’s Strategy 2020, Midterm Review of Strategy 2020,

1 A series of dzuds in 1999–2002 killed 8.4 million livestock, while one dzud in 2010 killed 7.8 million livestock. 2 The Mongolian winter is long and cold with temperatures often below -40°C. 3 ADB. 2006. Report and Recommendation of the President to the Board of Directors: Proposed Loan to Mongolia for the Urban Development Sector Project. Manila.

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and Urban and Water Operational plans. The project was consistent with the government’s 2003 Strategy for Economic Growth Support and Poverty Reduction, which called for reducing disparities in living conditions in urban and rural settlements. It was in line with the Government’s Action Plan for 2004–2006 and program to provide 40,000 households with opportunities to live in housing with improved basic services. During implementation, the project objectives remained highly relevant to country conditions and to the strategies of ADB and the government, including national programs of the Government Action Plan for 2012–2016 in improving basic urban services and housing in aimag and soum4 centers and in ger areas. The project was in line with government efforts to enforce the Law on Utilization of Urban Water Supply and Sewerage Systems, which was ratified in 2011.

7. The project was designed and implemented using a sector approach, as the government met the requirements for sector lending. Feasibility studies were developed for two core subprojects: (i) improvement of Khailaast road in Ulaanbaatar; and (ii) water supply, sanitation, and solid waste management in Erdenet. Minor changes to the project were approved during implementation to add eligible subprojects to improve basic urban services in other provincial capitals and soums and ger area roads in Ulaanbaatar. The additional subprojects enhanced the project’s relevance.

8. The project was formulated based on the findings of project preparatory technical assistance.5 Design incorporated lessons learned from previous ADB urban services projects in provincial towns, 6 including the need to (i) focus on developing public urban service organizations (PUSOs) into more independent, financially sustainable institutions; (ii) diversify the types of public utilities; and (iii) adopt simple, affordable technologies in construction and facility improvements. Stakeholders were consulted during project planning, design, and implementation.

B. Project Outputs

9. The project had four components: (i) A: improvement of basic urban services – rehabilitation and/or construction of basic urban infrastructure in the project town, including water supply, sanitation, and solid waste collection; (ii) B: improvement of urban roads – upgrading existing unpaved road in ger areas of Ulaanbaatar and connection to the trunk roads to the city center; (iii) C: small loans for water connections and on-plot facility improvements; and (iv) D: institutional development and training. The core project aimags were Bayankhongor, Bulgan, Govi-Altai, Orkhon, and Uvurkhangai, which belong to Mongolia’s eastern and central regions. The distance between Ulaanbaatar and project towns is 330 km to 1,005 km. The location of outputs as completed are shown in the project maps.7 The average population of the project aimags is 82,400 people, and the major sectors of the economy are agriculture and mining. The outputs are described in Appendix 2.

4 An administrative sub-unit of an aimag. 5 ADB. 2005. Technical Assistance to Mongolia for Preparing the Urban Development and Housing Project. Manila. 6 ADB. 1997. Report and Recommendation of the President to the Board of Directors: Proposed Loan and Technical Assistance Grant to Mongolia for the Provincial Towns Basic Urban Services Project. Manila; ADB. 2002. Report and Recommendation of the President to the Board of Directors: Proposed Loan to Mongolia for Integrated Development of Basic Urban Services in Provincial Towns Project. Manila. 7 See pages vi and vii.

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C. Project Costs

10. At appraisal, the project cost was estimated at $37.6 million, of which ADB was to finance $28.2 million (75% of the total project cost) from its Special Funds resources. State and provincial governments were to contribute $7.3 million equivalent in counterpart funds and participating financial institutions (PFIs) would contribute $0.7 million for Component C. In addition, German Development Service (DED) and German Technical Cooperation Agency (GTZ) were to provide parallel co-financing grants of $1.2 million and $0.2 million, respectively, for advisory services. In 2009, ADB’s loan increased in size from $28.2 million to $35.2 million, reflecting the transfer of $7.03 million in loan savings from the then-completed Loan 1907-MON: Integrated Development of Basic Urban Services in Provincial Towns project.

11. Total project cost at completion was $41.3 million, $35.4 million (84.8%) of which was financed by ADB. The government financed $6.1 million equivalent (12.9%) from the state budget ($5.7 million) and the Ulaanbaatar Road Fund ($0.4 million). As agreed among the Ministry of Construction and Urban Development (MCUD), DED, and GTZ, financial contributions from DED and GTZ were reduced; DED financed $0.2 million towards the cost of a household survey in 2010 to assess demand and affordability of small loans. GTZ made no contribution as, by May 2008, its funds to finance community infrastructure consultancy services had largely been utilized. PFIs provided in-kind contributions, rather than cash, to Component C.

12. Supplementary loan proceeds transferred from Loan 1907 and savings freed from the cancellation of the Sharkhad road subproject ($5.6 million from ADB loan) were mainly used to finance additional subprojects to improve urban infrastructure development in aimag and soum centers (para. 37). This resulted in Component A costing 2.5 times the estimate at appraisal.8 The project cost and financing plan at appraisal and at completion are in Appendix 3.

D. Disbursements

13. Of the loan proceeds equivalent to $35.4 million, $35.0 million was disbursed and $0.4 million was canceled at closing. Loan proceeds were disbursed according to ADB’s Loan Disbursement Handbook (2015, as amended from time to time). The imprest fund and direct payment procedures were used. The first disbursement ($0.3 million) was made on 23 July 2008 and the final disbursement ($0.19 million) on 27 October 2015. The increase in the ceiling of the imprest account from $0.3 million to $3.5 million during peak construction made it possible for (i) the PMU to make at-sight payments to local contractors and suppliers, and (ii) ADB’s Controllers Department to make faster disbursements because of economies of scale. By completion, 98% of the loan proceeds had been utilized. Quarterly disbursements over the implementation period are shown in Appendix 4.

E. Project Schedule

14. The loan was declared effective 14 months after approval, mainly because a change in government in 2007 delayed ratification of the loan agreement in parliament. Project implementation picked up in 2010 with most of the new subprojects identified and detailed designs either completed or underway. Project implementation slowed in 2011–2012 because of delays in contract awards for civil works and supply of trucks and machinery for PUSOs. Re- tendering of several international competitive bidding (ICB) contract packages 3–4 times

8 From $10.4 million at appraisal to $26.4 million at completion.

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substantially affected project progress (see para. 24). Other factors contributing to delays were a short construction season,9 inclement weather, rising costs for construction materials and labor in 2010–2012, and frequent changes in management at the executing agency, MCUD.10 Following government requests, ADB extended the loan closing dates twice by a total of 2 years from 30 June 2013 to 1 July 2015 to allow for physical completion of subprojects. The project implementation schedule is in Appendix 5.

F. Implementation Arrangements

15. The implementation arrangements were highly satisfactory and adequate to deliver project outputs and achieve outcomes. The MCUD had overall responsibility for project coordination, implementation, and liaison with ADB and stakeholders. The implementing agencies for Components A and C were aimag governments, and for Component B the implementing agency was the Ulaanbaatar Municipal Government. A project steering committee was chaired by the State Secretary of MCUD and composed of representatives of MCUD; the Ministry of Finance; the Ministry of Roads and Transportation; the Ulaanbaatar Municipal Government; and the project management unit (PMU) established at MCUD for the project’s day-to-day management. The project steering committee met regularly; reviewed project progress; provided guidance on implementation and policy issues, as required; and ensured coordination between the project and other ongoing and planned infrastructure development activities in Mongolia. The PMU in Ulaanbaatar coordinated work of the four Project Implementation Units (PIUs) established at PUSOs in Altai, Arvaikheer, Bayankhongor, and Erdenet to ensure their involvement in the subprojects’ design, construction supervision, testing, and commissioning.

16. The PMU’s procurement capacity was generally satisfactory and was further enhanced through training from and consultation with ADB staff.

17. MCUD’s financial management practices were seen at appraisal as fully adequate to implement the Project. Staff at implementing agencies needed training in project management and relevant ADB procedures during project implementation. The PMU established a solid financial management system, including internal financial and accounting controls, which satisfied ADB’s requirements. PMU recorded all transactions and balances, prepared regular and reliable financial statements and financial monitoring reports, and arranged for annual audits in a format and manner acceptable to ADB and submitted on time. MCUD had its own strong system of checks and balances before endorsing withdrawal applications and sending them to MOF for approval. MCUD’s internal project audit was conducted annually over the project life. Counterpart funds were budgeted and provided on time, except for 2015 where budget cuts took place throughout the government.

18. Implementation arrangements remained largely unchanged at appraisal, implementation, and completion. Implementing agencies needed to maintain separate accounts but were not required to submit audited project financial statements. The PMU released adequate funds to finance the subprojects according to schedule.

9 Mongolia is one of the coldest countries in the world: construction season in Mongolia runs from mid-April to mid- October. During the rest of the year, below-freezing temperatures make it impossible to excavate or move earth. Once this season is missed, construction is delayed by a full year. 10 MCUD positions at the level of director and above changed three times from 2012 to 2015 as part of widespread government restructuring.

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G. Conditions and Covenants

19. Major covenants were generally relevant and practical. Loan covenants—including those relating to implementation, resettlement, environmental management, financial management, counterpart financing, disbursements, and anticorruption measures—were substantially complied with. The covenant requiring an increase in water and wastewater tariffs was partially achieved. In 2014–2015, the Water Regulatory Committee reviewed tariffs of participating PUSOs and introduced fixed water and sewerage tariffs for households and for public and business entities, in addition to increasing tariffs by an average of 25%. The tariffs are still too low for PUSOs to recover their costs. Implementation of the gender action plan (GAP) was satisfactory; however, the indicators were not regularly monitored and reported during the early part of project implementation. The associated covenant was partially complied with. The status of loan covenants compliance is in Appendix 6.

H. Related Technical Assistance

20. A technical assistance11 grant of $600,000—$350,000 equivalent of which came from ADB’s Technical Assistance Special Fund and $250,000 equivalent from the Poverty Reduction Cooperation Fund—was approved on 18 August 2005. The objective of the technical assistance grant was to prepare a sector project that would improve living conditions and quality of life for the urban population, with a particular focus on the urban poor. The technical assistance project made use of the available sector study results and coordinated closely with activities assisted by other external funding agencies. The main focus areas of the technical assistance project were (i) ger area development, and (ii) institutional development. For the ger development component, the technical assistance project assessed socioeconomic conditions in urban centers and level of urban services delivery, particularly in ger areas; reviewed alternative technologies; and prepared a feasibility study for core subprojects, including preliminary engineering designs, cost estimates, assessments of financial and economic viability and environmental and social soundness, and proposed criteria and guidelines for selection of subprojects. For the institutional development component, the TA developed education and training programs for government agencies and for local communities to increase awareness on public health, environmental management, and alternative technologies for urban infrastructure and services. The component also developed capacity development plans for PUSOs. The technical assistance project was highly relevant, efficient, and timely, and resulted in an ensuing loan.

I. Consultant Recruitment and Procurement

21. International and national consultants were recruited in accordance with ADB's Guidelines on the Use of Consultants using quality and cost-based selection, consultant qualification selection, and single-source selection.

22. At appraisal, the project was seen to need 195 person-months of international and 82 person-months of national consulting services to support the PMU and PIUs in project implementation and management; detailed design of subprojects; and institutional development, education, and training. The ADB loan was to finance 31 person-months of international consultants and 82 person-months of national consultants. At completion, the ADB loan financed 27.9 person-months of international consultant inputs and 248.25 person-months of national consultant inputs. More national consultant time (individuals and firms)—which was spent on project management, safeguards, institutional development, and detailed design—was

11 ADB. 2005. Technical Assistance to Mongolia for Preparing the Urban Development and Housing Project. Manila.

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needed to develop and implement additional subprojects. Five contracts for detailed design and supervision of civil works with a total value of $0.49 million were awarded to national consulting firms. An international consulting firm was engaged under Component B to perform a feasibility study of a fly-over bridge at a cost of $0.18 million. The study was successfully completed and handed over to the municipal government of Ulaanbaatar. The total cost of consulting services financed under the loan was $1.25 million. The German Development Cooperation through DED and GTZ was to finance 164 person-months of long- and short-term international experts in community engineering and community development and training. DED financed 16 person- months of input from an international microfinance consultant in 2009–2010, as agreed between the German Development Cooperation and the MCUD.12

Procurement

23. Procurement of civil works and goods took place according to ADB’s Procurement Guidelines. Bid evaluation committees were established in accordance with the Public Procurement Law of Mongolia (2015, as amended from time to time). International and national competitive bidding (ICB and NCB) and shopping methods were used to procure 26 civil works and 15 supply contracts. Force accounts were applied to two contracts for installation of water meters by PUSOs. The list of procurement of packages is in Appendix 7.

24. Procurement of civil works and goods through NCB and shopping was generally smooth and timely. ICB packages went through several rebidding processes, significantly delaying project implementation. Where rebids were needed, local companies had not responded to technical and/or commercial requirements. Some bids were incomplete, lacking construction licenses, acceptable bid securities, and evidence of bidders’ technical experience and financial capacity. Small contract values and remote or scattered project locations made the contracts unattractive to foreign companies; few foreign companies bid to participate.

25. A major subproject for road construction in Ulaanbaatar’s Sharkhad ger area estimated at $6.6 million did not materialize and was removed from the project scope following four unsuccessful bids that took a total of 819 calendar days. In each bidding round, as many as three bids were received and then rejected for non-responsiveness. ADB, the MCUD, and the PMU made significant efforts to award this contract given the road’s importance to communities. In April 2013, prior to the fourth bidding, the MCUD and ADB organized a roadshow for 40 potential bidders where they presented the contract scope, bidding procedures, and requirements, and discussed obstacles to companies’ bids. National road companies raised concerns such as difficulties in meeting minimum financial qualifications—particularly documentation on average annual construction turnover and cash flow—and an inability to prepare bid documents in English. The NCB threshold for civil works was at that time $1.0 million; repackaging the contract into multiple lots was considered inefficient. In September 2013, the MCUD and ADB agreed to cancel the package and reallocate ADB’s share of the $5.7 million contract price to Component A13 to implement 19 new subprojects to improve basic urban services in aimag and soum centers.

12 The 2010 household survey concluded that households could not afford individual water connections. The executing agency proposed canceling Component C. The contract with DED’s microfinance consultant was therefore closed in February 2011. 13 ADB approved reallocation of funds between cost categories on 14 January 2014.

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J. Performance of Consultants, Contractors, and Suppliers

Consultant, Contractors and Suppliers

26. National and international individual consultants’ performance was satisfactory. National consulting firms carried out detailed design in a timely manner. Contractors reported some discrepancies between the design and on-site soil category during civil works and prepared contact variations. Supervision of civil works by the design and PMU consultants was generally satisfactory. Institutional development consultants’ outputs were good quality. Consultants’ assistance was sufficient for the MCUD to implement the project in accordance with the ADB and government policies and procedures.

27. The project contractors performed satisfactorily, and the quality of the completed works was generally good. Issues that threatened quality and timely completion of civil works contacts were effectively resolved by involving MCUD. A long-standing dispute on price between two parties involved in the subproject to improve water supply and sewerage systems in Altai resulted in the supplier withdrawing from the bid. The contract scope was adjusted and essential water disinfection equipment and valves and fittings were procured through shopping.14

28. The performance of companies supplying equipment and fittings for water supply, sewerage systems, and PUSO machinery was generally satisfactory. Suppliers provided adequate and timely training and instructions to PUSOs on the operation and maintenance (O&M) of equipment.

Participating Financing Institutions

29. PFIs managed the small loan funds well in accordance with the approved procedures and business plans. PFIs’ weighted average interest rates ranged from 8.8% to 10%. As of 31 December 2015, none of the PFIs had nonperforming loans in their small loan portfolios. Field missions performed spot checks on beneficiary households. The subloans were found to have been used for the intended purposes. In general, PFIs’ performance was satisfactory.

K. Performance of the Borrower and the Executing Agency

30. The implementation arrangement was well established. The project achieved most of its intended outcomes. The government provided counterpart funds and all necessary support in a timely manner. PSC meetings were held as often as required to provide timely guidance on implementation issues. Quarterly and annual progress reports, safeguards reports, and financial statements were submitted to ADB on time and as required under the loan agreement. No irregularities were found in the annual audit process. The Ulaanbaatar Municipal Government, aimag governments, and PUSOs demonstrated a strong commitment to the project, provided full support to ADB‘s regular review missions, and frequently joined the missions. The construction schedule, quality, and costs were closely monitored and controlled by the MCUD, PMU, and PIUs. All contract variations were dealt with according to government procedures and submitted to ADB for prior approval. Internal controls were in place to promote the effective use of funds. Component C benefitted from the fact that Micro-Finance Development Fund (MDF) of Mongolia, the PIU, had experience in and established arrangements for selecting and managing financial institutions for microcredit financing. The MCUD and implementing agencies addressed resettlement issues in compliance with ADB’s Involuntary Resettlement Policy (1995) and

14 The combined value of the two shopping contracts was $164,170.

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procedures. In 2014–2015, the MCUD efficiently identified and implemented 19 new subprojects, which were (i) in line with the project objective; and (ii) ready to be procured with the detailed designs duly cleared by concerned national authorities, including state expertise. The borrower, the MCUD, and implementing agencies performed their responsibilities effectively and efficiently. Their performance is rated satisfactory.

L. Performance of the Asian Development Bank

31. ADB’s performance is rated satisfactory. It provided timely response to the government in formulating and implementing subprojects and was flexible in addressing issues that emerged during project implementation. Lessons from previous ADB-assisted urban sector development projects were incorporated during project design and implementation. The project was processed and initially administered by the then Social Sector Division of the East Asia Department. Project administration was delegated to the Mongolia Resident Mission from 1 January 2009. This was appropriate given several components and multiple project sites. Four project officers administered the project. ADB conducted 16 missions, including inception and midterm reviews in October 2007 and May 2010, respectively. Missions included visits to the project sites to monitor civil works, to meet with beneficiaries and local governments, and to participate in identifying new subprojects. Members of the team responsible for environmental and social safeguards regularly participated in review missions to monitor the implementation of plans to manage safeguards issues. Regular interactions with the MCUD and local government on project issues helped to address implementation difficulties. ADB actively disseminated the project accomplishments and its benefits to communities through media outreach, including local and international media tours (jointly by ADB’s Mongolia Resident Mission and Department of External Relations). ADB organized a series of training sessions involving the MCUD and PMU staff on ADB policies and procedures including on procurement, loan disbursement, anticorruption, gender mainstreaming in urban development sector, and ADB lending modalities.

III. EVALUATION OF PERFORMANCE

A. Relevance

32. The project is rated highly relevant, at appraisal and completion, to the government’s development strategies and to ADB’s country partnership strategy and operational and thematic priorities. It was consistent with government action plans covering 2006–2016 and national programs on aimag, soum, and ger area development. A sector approach for project design allowed for flexibility in the face of rapidly changing investment priorities and urgent local needs.

B. Effectiveness in Achieving Outcome

33. Overall, the project is rated effective. The project enabled comprehensive improvements to living conditions for a total of 293,000 ger area residents in the project towns and soums. Urban roads built in Ulaanbaatar ger areas increased access to markets and social welfare services to more than 85,000 residents in remote areas and enabled construction of new schools, kindergartens, health centers, and other social institutions and new businesses along the the project roads. Urban roads reduced dust and air pollution, which helped public health. The project also gave more than 1,700 members of low- and middle-income households access affordable to small loans for individual utility connections and on-plot improvements. The project assisted in reorganizing Bayankhongor PUSO into a stock holding company in 2013, and the decision to introduce PUSO reforms in other four participating aimags is pending. The project

9

was categorized as “B” for environment15 and involuntary resettlement and “C” for indigenous people. Mitigation measures to reduce anticipated environmental impacts were carried out as planned. Monitoring of implementation took place regularly, and recommendations were given. No safeguards issues were encountered that affected project effectiveness.

C. Efficiency in Achieving Outcomes and Outputs

34. The project is rated efficient. At appraisal, the economic internal rate of return (EIRR) for the Erdenet water supply subproject was 29.4% and 18% for the Khailaast road subproject. At completion, the EIRR was recalculated at 20.7% for the Erdenet subproject and at 24.7% for the Khailaast subproject using the same methodology. The EIRRs at appraisal and the recalculated EIRRs at completion exceed both the opportunity cost of capital of 12%, indicating the project’s economic viability. A sensitivity analysis concluded that the economic benefits of Erdenet water supply and Khailaast road subprojects outweighed the associated economic costs. The project would have a substantially higher EIRR than at appraisal if the measured benefits included direct health benefits, access to low-interest loans with longer tenors, and opportunities for individual connections to water pipelines. Appendix 8 presents the recalculated EIRRs and their supporting assumptions. The financial internal rate of return (FIRR) for the Erdenet subproject was estimated at 8.1%. This indicates that the project is justified from financial and economic perspectives. The recalculated FIRR for Erdenet subproject is 8.4%, higher than the weighted average cost of capital (WACC) of 3.3% in 2016 constant price terms. Appendix 9 presents the FIRR and the results of the discounted cash flow analysis.

D. Preliminary Assessment of Sustainability

35. Overall project is considered likely sustainable. The project was well conceived and is technically sound. The project facilities meet the required engineering standards and specifications, and are of sufficient quality to meet the design service life and ensure that the project’s benefits are achieved in the long term. The institutional strengthening and capacity- building component provided sufficient training and advisory services to aimag governments, the CRD, and PUSOs to build capacity to manage O&M of the project facilities. Government funds will be needed to maintain the upgraded infrastructure and sustain benefits over time, avoiding more expensive repair and rehabilitation later on. Given that the price elasticity of water demand by rural households, particularly those in ger areas, is high and the political commitment to increase water tariffs is lacking, two options are under consideration: (i) further enhancements to PUSOs’ operational efficiency; and (ii) cash subsidies to compensate for the difference between regulated water tariffs and O&M costs.

36. Legal and institutional arrangements are in place to ensure sustainability of the small loan facility. A revolving fund mechanism has been established with the initial lending capital of $3.0 million provided under the project.16 The repayment of the subloans, together with interest, is being used to replenish the fund and make further subloans. To ensure this, the loan agreement between the government and ADB and the subsidiary loan agreement between MOF and PFIs includes provisions that relending of all repayments from the original loans must target

15 In compliance with environment loan covenant (Schedule 5 para 35, Loan Agreement), no category B-sensitive subprojects were financed under the project. 16 The Ministry of Finance (MOF) entered into a subsidiary loan agreement with the State Bank of Mongolia and Capital Bank of Mongolia for amounts equivalent to $1.0 million and 2.0 million, respectively, in local currency from the loan proceeds. PFIs have used this amount to establish small loan facilities to onlend to subborrowers in eligible ger areas.

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similar populations. The PFIs are making in-kind contributions to cover costs associated with administering the small loan facilities such as costs in staff time, loan application processing, field monitoring, public outreach, and travel costs. The maturity of loans to the PFIs is equivalent to the maximum term of subloans to subborrowers: a maximum of 10 years. An eligible sub- borrower is allowed to borrow twice during the 10-year period provided that he or she has fully repaid the previous subloan.

37. The PFIs will carry all credit risk and will be fully responsible for subloan recovery and for repayments to the government. The PFIs will choose the most creditworthy of the qualified borrowers to ensure collection of each subloan and subborrowers’ compliance with their loan obligations. MDF has been designated by MOF to oversee and monitor the implementation of the small loans beyond the project completion to ensure the PFIs’ use of the small loan funds for the original purpose.

38. The government, with MDF assistance, will supervise the PFIs regularly to determine their continuing eligibility to participate under the credit line. The PFIs will be responsible for ensuring that subborrowers satisfy eligibility requirements. PFIs will be required to ensure that the subloans are used strictly to buy water connections, on-plot facilities, or home improvements.

39. Household connections piloted under Component C have been replicated and scaled up in project towns where supporting infrastructure is available. Since the Erdenet subproject was completed in 2014, the local government invested MNT5.5 billion from its own resources to expand the utility service systems, including MNT0.995 billion to increase the number of ger area households connected to the water supply and sewerage systems that the project built.

E. Impact

Social, Poverty, and Institutional Impact

40. The project supported the government in improving public utility services in provincial towns. Connection of 91 water kiosks to the centralized water system enabled access to safe drinking water for 41,611 ger area households or 140,635 people, 51% of whom are women, in the core aimag centers. An estimated 66% of these ger area residents now have access to safe water 200–300 meters from their home. Some 58% of ger residents now spend 10–15 minutes to fetch water from kiosks compared to a 2010 baseline of 39% of ger residents.

41. Hot water and heating systems constructed in the selected aimag and soums are expected to decrease coal consumption and reduce indoor and outdoor air pollution. This, in turn, will likely reduce the incidence of respiratory diseases, particularly among children and elders.

42. Water discharge has been increased to meet future demand in project towns. 17 Expansion and rehabilitation of piping systems in the project towns and metering of kiosks and apartment dwellers and public and private institutions in selected towns have led to the improved billing and collection, increased PUSOs’ revenues, and fewer system losses caused by leaks and losses from service connections.

17 In Bayankhongor city, the project has increased water well discharge by 21.1 liters per second. This would be sufficient to meet the projected 2025 daily water consumption of 5,270 cubic meters per day (m3/d). Consumption before the project was 2,300 m3/d and in 2015 it was 2,721 m3/d.

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43. The roads serve more than 85,600 people in the newly settled ger areas, improving their access to social services and opportunities for new jobs and business. The roads also contributed to more efficient, effective public and private transport movement, shorter travel times, reduced travel costs, and better amenities in ger areas.

44. Component C of the project has filled a gap in housing loan demand by providing low- income households in ger areas access to small loans for on-plot facility improvements and water connections. The small loan scheme was financially inclusive in that 15% of the total borrowers were poor. The small loan scheme is expected to have long-term impact on households’ living conditions in ger areas.

45. Project investments in urban services infrastructure will increase the value of residents’ durable assets such as land, houses, and apartments, opening up new economic opportunities for project beneficiaries.

Gender

46. The project is categorized “effective gender mainstreaming.” Most of the gender action plan (GAP) activities and targets were relevant to the project outcome and outputs. Two activities and one target were not particularly linked to the project’s output on institutional development and training. A number of important features with direct gender benefits were included in the design and monitoring framework (DMF) but not in the GAP (e.g., water supply through water kiosks to women and children, gender-friendly roads18 which provide safe access to ger areas, and permanent employment opportunities for women beyond the life of the project). These have been added to the modified GAP to ensure consistency.

47. Providing potable water and other basic infrastructure directly benefits women and children, and reduces women’s time poverty and labor inputs. Time was saved and health improved estimated 55,112 women and school girls in five project sites by connecting 90 water kiosks to the centralized water supply system. Six local schools—one dormitory and eight kindergartens—were directly connected to the water supply and sewerage systems, benefiting 7,805 school students (47% girls) and 1,365 children (53.5% girls).

48. Of the 481 households who received small loans, 46.15% (222) were women, well exceeding the GAP target of 30%. An estimated 57 female-headed households (11.85%) and 59 poor and low-income households (12.27%) benefitted from the small loans. A model street in Arvaikheer, implemented with support from a community-based organization, allowed four households (two of them female-headed) to build new houses with their small loans, creating assets under women’s names. With access to credit, women are more empowered at the household level to make decisions on housing and other on-plot improvements. The project can contribute to women’s economic empowerment, and to better health, hygiene, and safety, resulting in strategic gender benefits. The project created 86 permanent new jobs, 67% of them occupied by women. Overall, 81% of GAP activities were completed, and 80% of gender-related targets in the GAP were achieved. Details on GAP achievements are in Appendix 10.

18 For instance, installation of lighting for safe mobility purposes.

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Environmental Impact

49. The project was categorized as Category “B” for environment. Initial environmental examinations (IEEs) were carried out to identify and assess potential environmental impacts and risks during implementation and operation. General environmental impact assessments (GEIAs) were conducted for subprojects. GEIAs concluded that a detailed environmental impact assessment (EIA) is required for road subprojects but not for water supply and sanitation subprojects. For 12 non-core subprojects in project soums, environmental management plans (EMPs) were prepared and mitigation measures were proposed to reduce expected negative impacts on air, soil, water, and vegetation. Measures to reduce dust included regular watering at the construction site, covering of construction materials, avoiding disturbing land as much as possible, and rehabilitating any degraded areas after construction. Construction waste was to be properly managed, and health and safety regulations to be followed, among other things. Contractors were given guidance and recommendations on EMP implementation. The objective of the EMPs was to avoid, prevent, or mitigate negative environmental and occupational health and safety impacts. This objective was achieved through regular EMP monitoring during civil works execution and community consultations. The project carried out 11 environmental monitoring visits during construction and made recommendations to improve EMP implementation. The main recommendations were to post caution signs at work sites, to follow labor safety and health regulations, and to rehabilitate and vegetate degraded land. The project produced significant environmental and social benefits, including less wastewater discharge and surface water pollution; fewer air emissions from heat distribution facilities; and better water supply, environmental quality, and public health. Before wastewater treatment plants in Altai and Bayankhongor were rehabilitated, a daily average inflow of 1,500 cubic meters (m3) of wastewater was discharged directly to nearby rivers with very little pre-treatment, polluting the river basin and affecting the environment. The sewage is now treated 80–90% treated (versus 35% at appraisal) using a combination of simple mechanical and biological treatment technologies. The project’s main environmental benefit includes provision of safe and reliable drinking water to over 210,000 urban residents in eight project aimags and eight soums. The project made a significant contribution to the Mongolia’s achievement of the Millennium Development Goal 7 and Target 10.19 An analysis of the project’s environmental performance is in Appendix 11.

50. Land acquisition and resettlement (LAR) was carried out in accordance with ADB Involuntary Resettlement Policy for subprojects under components A and B. Compensation to affected people was satisfactory. None of affected persons lost more than 10% of their income- generating assets. A total of 9 land acquisition and resettlement plans were implemented. About 218 individuals, enterprises, and government organizations were affected; 20,900 square meters (m2) of land was acquired and transferred to public ownership; and 355 houses, fences, sheds, and other assets were partially or entirely relocated. In total, MNT465.6 million was provided to affected persons in compensation. Land acquisition and resettlement working groups were established. This effort from implementing agencies significantly contributed to the project becoming the first ADB ger area development project in Mongolia to have successfully implemented land acquisition and resettlement in accordance with ADB’s Involuntary Resettlement and Safeguard Policies. The detailed LAR description is in Appendix 12.

19 The proportion of people without access to safe drinking water in Mongolia was 40% in 2015 compared to 60.8% baseline in 2006.

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IV. OVERALL ASSESSMENT AND RECOMMENDATIONS

A. Overall Assessment

51. The project is considered successful based on its relevance, effectiveness, efficiency and sustainability. The project was generally well conceived and implemented. It successfully implemented subprojects, achieved its outcomes, and disbursed 98% of the loan proceeds through close cooperation and coordination between the government, ADB, the MCUD, and the implementing agencies. The project’s direct benefits to communities, impact on environment, and the institutional strength of PUSOs are substantial. The sector lending modality was appropriate as it allowed for faster processing of subprojects and flexibility to address rapidly changing investment priorities. The project (i) supported the government in achieving the Millennium Development Goals related to water supply, sanitation, and environmental sustainability; (ii) significantly increased the length of utility pipelines and coverage of utility systems; (iii) improved access to health, education, and other social services for Ulaanbaatar ger area residents by expanding urban road network; and (iv) enabled access to affordable small loans for low- and middle-income households to improve their living conditions.

B. Lessons

52. Lessons learned from the preparation and implementation of the project include:

(i) Engaging PUSOs as project implementation units enables PUSO participation in civil work contract administration, including contract management and works supervision, training of operators and testing and commissioning. 20 This, in turn, enhances the PUSO’s O&M capacities, accountability, and sense of ownership. (ii) The project covenant to restructure water supply and wastewater tariffs to achieve full cost recovery was too ambitious. It was unrealistic to expect a single covenant to create tariff reform without broader policy work. (iii) The underlying assumptions and targets for a number of borrower-households were overly ambitious. The project was designed anticipating that most households would borrow to finance connections to water and sewerage mains to be constructed under the project. This left the decision regarding connections to households’ discretion, based on their incomes and ability to borrow. Few low-income households borrowed to build water or sewerage connections. Most borrowed to repair or build new houses. (iv) The initial capital in the revolving fund did not meet demand. The cost estimates on which the loan funds were estimated became outdated over the project. (v) For urban development projects in Mongolia with multiple components and dispersed sites, using a sector loan modality is considered most suitable. (vi) The project team’s initiative to conduct training to improve financial literacy for potential borrowers has proven effective in increasing access to small loans, especially for women. Future projects with microcredit line should include such training. (vii) The project experienced start-up delays because the government was slow to ratify the project and issue a legal opinion on the loan agreement.

20 This lesson was taken into consideration in the processing of the L3388-MON, with institutional arrangements designed accordingly.

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C. Recommendations

1. Project Related

Future Monitoring and Follow-Up Actions

53. Operation and maintenance (O&M) is critical to the project’s long-term success. The government needs to allocate sufficient O&M budget so that facilities can be properly maintained. ADB should monitor O&M expenses regularly through the government budget. Options for sustainable financing of O&M such as public–private partnerships (PPP) and performance-based management contracts should be considered in the design of future projects.

54. Small loans. For future projects with small loans components, keeping the revolving fund sustainable in the long term may require (i) an initial injection sufficient to meet demand; (ii) limits on the size and tenor of subloans to keep the fund’s continuity; and (iii) more funding from local governments and PFIs.

55. Subloans for water and sewerage connections need longer lead times for preparatory work, such as (i) surveying interested and eligible households; (ii) preparing design drawings and cost estimates; (iii) selecting contractors; and (iv) preparing mains to enable household connections. The longer lead time for onlending for water and sewerage connections, and the seasonal nature of pipeline construction works in Mongolia, need to be taken into account when developing future projects with a microcredit component.

56. Operation of the revolving fund needs to be assessed during the performance evaluation review to see if the PFIs are using them for their original purpose, if repayments are made, and if new subloans are being made under the conditions agreed between the government and PFIs.

57. Timing of the project performance evaluation report. A project performance evaluation report is recommended for 2018. By that time, project facilities will have been operating for 3–4 years and the revolving fund for small loans will be regularized.

58. Additional assistance. Built on experience from this and earlier projects, ADB and the government of Mongolia should continue prioritizing municipal service investments to improve living conditions in aimag, soum, and ger areas across Mongolia.21 Future urban projects could consider a holistic approach that develops complete social and urban services infrastructure in a few select locations. Policy-based lending or technical assistance projects to support water and wastewater tariff reforms and comprehensive capacity-building for non-project PUSOs are recommended.

59. Project scope. Projects that aim to improve basic urban services should propose building cold water, hot water, and heating supply distribution systems at the same sites to maximize impacts and save money. Water supply and heating supply pipes can be laid in the

21 A new investment is under discussion among ADB, the Ministry of Finance (MOF), and the Ministry of Construction and Urban Development. A project preparatory technical assistance project (PPTA) is in country operation business plan (COBP) standby in 2016.

15 same channel, and the excavation of trenches can be more shallow, since the hot water and heating pipes would prevent the cold water pipes from freezing in winter. This approach was used in Arvaikheer at later stages of the project and should be considered for future urban infrastructure projects in Mongolia.

2. General

60. Sector modality. Sector loans are recommended for urban development projects of 5 years or longer and with multiple components and sites located remotely from each other. This allows flexibility and promptness to meet the rapidly changing investment priorities and urgent sector needs.

61. Project processing in Mongolia requires strong ownership and championing by the MCUD and other stakeholders such as aimag governments to have the project ratified by parliament promptly after the ADB’s approval of financing.

16 Appendix 1

DESIGN AND MONITORING FRAMEWORK

Design Assumptions Summary Performance Targets/Indicators Project Achievements and Risks Impact By 2015 Assumption Improve living conditions and Public satisfaction with the living Living conditions for more than 300,000 • Project facilities are quality of life for the urban conditions increased (to be quantified residents in ger (traditional tent) areas of adequately operated population in the project towns when baseline established) project cities have improved. and maintained

Risk Incidence of water- and vector-borne The incidence of hepatitis A in four • Tariffs reforms are b diseases reduced by 10% from 2005 project provinces fell by 98.4% from 30.6 not implemented levels (incidence of digestive disorders in 2005 to 0.5 per 10,000 in 2015. were 743 and hepatitis A 2,185 per Incidence of digestive diseases in these 10,000)a four provinces increased by 19.4% from 3.6 per 10,000 to 4.3 per 10,000. Outcome By 2011 Assumptions Upgraded basic urban About 36,374 ger area households in six 41,611 ger area households in five • Overall water supply services, urban roads, and on- provincial towns served by new or provincial towns are served by new and system in Erdenet is plot facilities improved water kiosks within 200 meters rehabilitated water kiosks located within properly operated from their plots 200-300 meters of each household. and maintained These kiosks are directly connected to • The sewerage the central water supply system and not treatment plant in fed by trucked water, eliminating the Erdenet is properly chances of contamination during operated and transport. maintained • An action plan for 19 public institutions in four project Water supply and sanitation services solid waste areas—including schools, kindergartens, improved for 21 organizations connected collection and hospitals, and markets—benefit from to water supply and sewerage pipelines, disposal is prepared improved water supply and sanitation including schools, kindergartens, • Trunk roads in the hospitals, markets, and shops in five core city center of project cities. Ulaanbaatar are

c properly maintained About 81,000 households in Erdenet In total, 41,611 households in five core • Main water supply benefit from improved solid waste project towns—plus ger area households networks are collection and disposal. in aimag centers—have benefitted from completed and improved solid waste collection and available for disposal. individual connections

Appendix 1 17

Design Assumptions Summary Performance Targets/Indicators Project Achievements and Risks Public transportation to the city center Public transport services have improved: improved in Khailaast, Baruun Salaa, the project built 12.3 km new asphalt Orbit Takhilt, Botanic-Sharkhad ger areas concrete roads in Khailaast (1.1 km), in Ulaanbaatar (quantitative target will be Baruun Salaa (4.1km), and Orbit-Tahilt established at baseline survey). (7.1 km) ger areas.

Access to the public services improved in Over 85,635 residents in target ger areas Khailaast, Baruun Salaa, Orbit Takhilt, now have improved access to social Botanic-Sharkhad ger areas in services and opportunities for new jobs Ulaanbaatar (quantitative target will be and businesses. The new roads are established at baseline survey). expected to help reduce dust and air pollution.

An estimated 1,800 ger area households 481 ger area households in Erdenet, in four project areas construct individual Bayankhongor, Arvaikheer, and Altai water connections and improve on-plot were connected to piped water and facilities using small loans. improved on-plot facilities using small loans.

Four PUSOs improve their operational Operational efficiencies of five PUSOs efficiency (Performance targets/indicators have been improved with upgraded and for the remaining subprojects will be modern technologies, expanded pipeline identified when they are appraised during networks, improved capacity, provision of project implementation) new machinery, and more connections to public and private institutions. Outputs Assumptions 1.1 Water supply facilities 13 boreholes constructed or improved in A total of 11 new and 5 rehabilitated bore • MCUD and aimag Erdenet, Altai, Arvaikheer, Bayankhongor wells were equipped and put into governments remain operation in four target towns. committed to implement the Eight reservoirs constructed in Erdenet, Eight new reservoirs with a storage project 3 Altai, Arvaikheer, and Bayankhongor. capacity of 100–1,000m were • Ger area constructed in four target towns. communities and local banks and Five sets of chlorination equipment and Four sets of chlorination equipment and nonbanking financial water purification equipment provided in two water softening facilities were institutions are four project cities. installed. willing to participate in the project

18 Appendix 1

Design Assumptions Summary Performance Targets/Indicators Project Achievements and Risks 113.6 km of water pipeline constructed at 120.4 km of water supply transmission • Households are able four project sites. and distribution pipelines were and willing to save in constructed in aimag and soum centers order to establish under five core and five non-core creditworthiness subprojects. and/or develop collateral for small 89 water kiosks rehabilitated or 91 kiosks were connected to centralized loans constructed at four project sites. water supply systems, including 58 new • PFIs wish to engage and 33 rehabilitated kiosks. in the Project on the terms and criteria 1.2 Sewerage facilities 10.8 km of trunk sewer constructed or 3.9 km trunk sewers were constructed at proposed for the repaired at four project sites. project sites. Project • Land acquisition and Five solid waste collection trucks and 26 pieces of solid and liquid waste resettlement is one backhoe loader provided. collection and transportation trucks, and implemented in a crane trucks, loaders and excavators timely manner were supplied to PUSOs of core and non- core subproject aimags, including Risks 1.3 Solid waste management Khuvsgul, Arkhangai, and Tuv. • Formulation of the facilities remaining About 18.8 km of roads upgraded in 12.3 km of paved roads upgraded in subprojects are Khailaast, ger Baruun Salaa, Orbit Khailaast, Baruun Salaa, Orbit Takhilt ger delayed Takhilt, Botanic-Sharkhad ger areas in areas in Ulaanbaatar. • Unforeseen difficult Ulaanbaatar construction conditions related to 2.1 Roads improvement An estimated 1,800 ger area households 481 ger area households in Erdenet, severe weather in four project sites utilize small loans to Bayankhongor, Arvaikheer, and Altai conditions build individual water connections, utilized small loans for household water improve their homes, and install on-plot connections, improvement of their facilities houses, and installation of on-plot 3.1 Small loans facilities.

4.1 Implementing agency staff About 60 training sessions on financial In total, 490 person-days of training on trained management and operation and the PUSO institutional reforms were maintenance of the project facilities provided through five sessions to five provided for staff of the implementing participating PUSOs, in addition to 70 agencies person-days training to staff of non- participating PUSOs and aimags.

Appendix 1 19

Design Assumptions Summary Performance Targets/Indicators Project Achievements and Risks 4.2 People trained in health About 120 sessions of public awareness Five public health training sessions on and environment training on public health, environmental water, sanitation, and waste disposal management, and alternative were conducted. technologies for urban infrastructure and services An awareness session on sexually transmitted infections (STIs) and (Performance targets/indicators for the HIV/AIDS prevention was conducted for remaining subprojects will be identified 45 construction workers (six females) at when they are appraised during project Khailaast road and 63 workers (two implementation) females) and Baruun-Salaa road construction sites, respectively. Training handouts and handbook on health awareness and proper hygiene behaviour were developed and distributed to public. Community awareness sessions on managing wastewater and solid waste disposal were also conducted. At Appraisal Actual Activities and Milestones Inputs Inputs From the Report and Recommendation of the ADB: ADB: President (RRP) • Provide $35.2 million (civil works; equipment; • Provided $35.0 million (civil works; equipment; implementation, supervision, and training; financial implementation, supervision, and training; financial charges during construction) charges during construction) • Undertake review missions • Undertook 16 review missions • Provide training on ADB procedures • Provided training on ADB procedures

Government: Government: • Provide $7.3 million counterpart funds (civil works; • Provided $6.1 million counterpart funds (civil works; land acquisition and resettlement; environmental land acquisition and resettlement; environmental protection; contingencies) protection; contingencies) • Undertake onlending arrangements and loan • Undertook onlending arrangements and loan management management • Establish and maintain project offices at all levels • Established and maintained project offices at all • Provide operation and maintenance budget and levels staffing • Provided operation and maintenance budget and staffing

20 Appendix 1

Design Assumptions Summary Performance Targets/Indicators Project Achievements and Risks Cofinancing: • Banks and nonbanking financial institutions: Cofinancing: $0.7 million • Banks and nonbanking financial institutions: • DED: $1.2 million $0.0 million • GTZ: $0.2 million • DED: $0.2 million • GTZ: $0.0 million

ADB = Asian Development Bank, CBO = community-based organization, DED = Deutscher Entwicklungsdienst (German development service), GTZ = Deutsche Gesellschaft für Technische Zusammenarbeit (German Agency for Technical Cooperation), km = kilometer, MCUD = Ministry of Construction and Urban Development, PCR = project completion report, PFI = participating financial institution, PIU = project implementation unit, PMU = project management unit, PPAR = project performance audit report, PSC = project steering committee, PUSO = public urban services organization, UMG = Ulaanbaatar Municipal Government a The national level data were presented for project towns at baseline. Furthermore, the appraisal data for national incidence of hepatitis A was inaccurate. It was 21.1 per 10,000 in 2005. b Aimag level data were presented for project towns because town-level data were not available. c Appraisal data were inaccurate. The total number of households in Erdenet was 19,962 in 2003, 24,273 in 2010, and 26,000 in 2014. Source: National Statistical Office. 2010. Population and Housing Census 2010, Statistical Yearbook 2014, and http://srv.nso.mn/Monsis_Service/Monsis_Service.svc/StatService8/xml/2.

Appendix 2 21

PROJECT OUTPUTS

Component A: Improvement of Basic Urban Services

1. Component A at appraisal included subcomponents to improve water supply, sanitation, and solid waste management in Erdenet. At project completion, 37 civil works and supply contracts were implemented in eight aimag centers and eight soum centers under this component. New subprojects were identified and added to the project based on the selection criteria agreed between the government and ADB at appraisal. All subprojects were in line with the project objectives of supporting environmental sustainability and increasing access to improved urban services, and supported the government in implementing strategies and programs in urban sector, including Soum Development Program. Within the framework of the MCUD’s aid coordination efforts, the project built facilities for outdoor water supply, sanitation, and heating in five soum1 centers, while the UNDP-financed MON13/302: Rural Water and Sanitation Project installed indoor piping and plumbing facilities at public institutions and provided training to potential operators.

2. Water supply subcomponent. At appraisal, the expected outputs were construction or renovation of four boreholes, two reservoirs, 33.5 km of water mains, and 30 water kiosks to improve operation of centralized water supply systems and to expand distribution network in ger areas. Actual outputs were 15 water source boreholes, eight reservoirs with a storage capacity of 100–1,000 cubic meters (m3) each, four sets of chlorination equipment, two water softening facilities, 120.42 km of water supply transmission and distribution pipelines, and connection of 91 kiosks—58 new and 33 rehabilitated—to the centralized water system.

3. The Sanitation subcomponent foresaw at appraisal construction of a 3.9-km trunk sewer under the Erdenet subproject. Actual outputs at completion were (i) construction of 28.36 km trunk sewer; (ii) rehabilitation of two wastewater treatment plants in Altai and Bayankhongor; and (iii) construction of small-scale wastewater treatment facilities with 50m3/day capacity each in seven soum centers. In line with the new Master Plan for Arvaikheer city up to 2030, which was formulated after the project appraisal, the initial intention to rehabilitate the existing wastewater treatment plant (WWTP) no longer met population, housing, and business growth projections. As a follow-up request from the Uvurkhangai Aimag Government, the government requested an ADB loan2 to finance construction of four WWTPs in aimag centers, including Arvaikheer.

4. Solid waste subcomponent. At appraisal, the project was expected to supply 10 solid waste collection tipper trucks, one backhoe loader, and four street sweepers. The actual outputs consisted of 26 items: solid and liquid waste collection and transportation trucks, crane trucks, loaders, and excavators for use in building and maintaining utility pipelines. Equipment was supplied in accordance with technical requirements and handed over to the project public urban service organizations (PUSOs) in 2014.

1 Gurvansaikhan soum in Dundgovi aimag, Teshig soum in Bulgan aimag, Buren and Buregkhangai soums in Tuv aimag, and Sant soum in Uvurkhangai aimag. 2 ADB. 2016. Report and Recommendation of the President to the Board of Directors: Proposed Loan and Technical Assistance Grant for Additional Financing to Mongolia for Southeast Gobi Urban and Border Town Development Project. Manila.

22 Appendix 2

5. Heating and hot water supply. The subcomponent was added to the project in 2014 to support the government’s aim to improve housing in aimag and soum centers. The outputs at completion were construction of (i) 8.85 km of heating supply and 7.28 km of hot water supply pipelines, (ii) four new heating boiler houses, and (iii) the supply and installation of seven heating boiler plants.

Component B: Urban Roads Improvement.

6. The component at appraisal included construction of 1.1 km road in Khailaast ger area in Ulaanbaatar. Based on eligibility criteria agreed during the project appraisal, two more road sections were added to the project: the 7.1-km Orbit–Takhilt road and the 4.1-km Baruunsalaa road. The roads are built with sidewalks, drainage channels, road and traffic signs and markers, street lighting, bus stations with shelters, dams, and culverts.

7. The project provided a complete set of laboratory equipment—comprising 90 different tools and pieces of equipment—to the Ulaanbaatar Roads Department for quality control during construction of the project roads and thereafter. The project provided associated training and instructions on operation and maintenance of the equipment as part of the supply contract.

Component C: Small loans for water connections and on-plot improvements

8. At appraisal, $0.98 million out of $3.0 million was to be lent to 1,800 ger area households in Erdenet and the remaining funds to be utilized in other project aimags, which were to be identified during the course of the project. At completion, $1.2 million was lent to 216 households in Erdenet and $1.8 million to 265 households in Bayankhongor, Arvaikheer, and Altai based on demand for small loans determined through a 2013 survey. Willingness, affordability, population size, and household income were also considered in the allocation. Small loans up to MNT15.0 million were on-lent3 at 8–10% interest per annum for up to 10 years to eligible households to (i) finance household water supply and sewerage connections; (ii) build on-plot decentralized sanitation facilities (in-door toilets and bathrooms) and new energy- efficient houses; and (iii) improve heat conservation by installing residential boilers, vacuum- insulated windows and replacing roofs, walls, and floors.

9. The onlending interest rate was half of the local prevailing weighted nominal lending interest rate in local currency, which was about 20% per year at the time. The onlending rates were not to exceed 10% per year, as specified in the project documents. Given the project’s pro-poor objective and poor subborrowers’ constrained ability to afford loans, participating financial institutions (PFIs) took a more flexible approach to collateral than commercial practice typically does.

10. Fewer than anticipated households borrowed, as the basic assumptions that drove estimates at appraisal had changed substantially by the time the lending began in February 2015. At appraisal, the cost of a water connection was estimated at $600 (MNT720,000) per household, based on assumptions such as a 20-meter distance from distribution system to household, the associated cost of piping of $300, a lateral line shared by about 30 households, and some of the works using voluntary labor. In 2015, however, the average distance from the distribution pipeline to a ger household was 60 meters. Uneven distribution of income across households was another reason fewer households per street were willing and able to borrow for a water connection, hence higher costs for lateral lines. As a result, the estimated cost per

3 Through two participating financial institutions (PFIs).

Appendix 2 23

household connection increased to MNT5.7 million. Inflation and cost escalation in construction materials and wages for household connection and on-plot improvement over 8 years also contributed to an increase in the maximum loan size from MNT5.0 million at appraisal to MNT15.0 million in 2014.

11. At appraisal, PFIs were assumed to make cash contributions of $0.7 million (17.4%) from their own resources; ADB was to finance the remaining 82.6%. When PFIs were being selected in 2014, the economy was slowing down markedly and banks were less interested in contributing their own resources. At the request of PFIs and MOF, PFIs’ 17.4% share was changed from cash to an in-kind contribution. The in-kind contributions covered PFIs’ costs associated with the onlending and administering of small loans for the entire repayment period of 10 years, such as costs in staff time, processing of loan applications, monitoring and field auditing, local travels to project sites, and public outreach on subloans.4

12. The late start of small loans affected achievement of outputs. In June 2010, the government proposed to drop Component C and to reallocate funds equivalent to SDR2.1 million to Component A. However, ADB recommended that the government should postpone the reallocation until most of the project funds had been committed and continue to explore options to support household investments in on-plot improvements. Actual implementation of Component C did not start until early 2015, which also reduced the number of borrowers. However, the number of borrowers is expected to increase over the term of subsidiary loan agreements with PFIs, which are 10 years long. There is continued strong demand for small loans in the project towns and the institutional arrangements for the revolving fund are in place.

13. The more intermediate output measure of the small loan component is the repayment rate, which was 100% as of 31 December 2015 in all four project towns.

Component D: Institutional Development and Training

14. This component comprised activities to (i) improve project management capacity of agencies involved in the project implementation; (ii) support PUSO institutional reform; and (iii) educate aimag governments, communities, and contractors. PMU and ADB organized a series of short-term training sessions to strengthen aimag governments’ and PUSOs’ project administration capacity according to ADB procurement guidelines, as well as project administration, reporting, and gender policies and procedures. To support five participating PUSOs 5 to become autonomous and financially sustainable operating entities, the project conducted training sessions on corporate governance and accounting, strategic planning, employee stock ownership program, and long-term contracting. Training curriculum was developed to support institutional reform endeavor of the Law on Utilization of Urban Water Supply and Sewage Systems, which defines ownership and roles and responsibilities of aimag governments and PUSOs in operating systems. The project provided 560 person-days of training on PUSO institutional reforms.

15. The institutional reform subcomponent provided training to the staff of the Ulaanbaatar Municipal Government’s City Roads Department (CRD) on a road maintenance master plan and a road safety strategy, including a safety audit program and traffic management and control strategy.

4 An associated change in the financing plan—increasing ADB’s share of financing of Component C from 82.6% to 100%—was approved in 2015. 5 The participating PUSOs were Erdenet, Bayankhongor, Arvaikheer, Altai, and Bulgan.

24 Appendix 2

16. Under the education and training subcomponent, the project management unit (PMU) conducted public health awareness activities for aimag governments and communities in the project towns. The PMU also gave a series of training sessions to civil works contractors to raise their awareness on HIV/AIDS risks, environmental management, and compliance with environmental management plans (EMPs).

Appendix 3 25 PROJECT COST AND FINANCING PLAN Appraisal Actual ADB Government Germany Total ADB Government Germany Total Components State Local UB PFI DED GTZ State Local UB PFI DED GTZ Govt. Govt. Road Govt. Govt. Road A. Basic Urban Service 1. Civil Works 5.09 1.37 0.00 0.00 0.00 0.00 0.00 6.46 13.55 1.71 0.00 0.00 0.00 0.00 0.00 15.26 2. Equipment 2.71 0.00 0.00 0.00 0.00 0.00 0.00 2.71 8.14 0.00 0.00 0.00 0.00 0.00 0.00 8.14 3. Resettlement and 0.00 0.00 0.01 0.00 0.00 0.00 0.00 0.01 0.00 0.17 0.00 0.00 0.00 0.00 0.00 0.17 Land Acquisition 4. Environmental (EMP 0.05 0.01 0.00 0.00 0.00 0.00 0.00 0.06 0.00 0.04 0.00 0.00 0.00 0.00 0.00 0.04 Monitoring) 5. Taxes and Duties 0.00 1.20 0.00 0.00 0.00 0.00 0.00 1.20 0.00 2.82 0.00 0.00 0.00 0.00 0.00 2.82 Subtotal 7.84 2.59 0.01 0.00 0.00 0.00 0.00 10.44 21.69 4.73 0.00 0.00 0.00 0.00 0.00 26.42

B. Urban Roads 6. Civil Works 12.21 0.00 0.00 1.83 0.00 0.00 0.00 14.04 6.64 0.00 0.00 0.36 0.00 0.00 0.00 7.00 7. Equipment 0.57 0.00 0.00 0.00 0.00 0.00 0.00 0.57 0.67 0.00 0.00 0.00 0.00 0.00 0.00 0.67 8. Resettlement and 0.00 0.38 0.34 0.00 0.00 0.00 0.00 0.72 0.00 0.18 0.00 0.01 0.00 0.00 0.00 0.19 Land Acquisition 9. Environmental (EMP 0.11 0.00 0.00 0.03 0.00 0.00 0.00 0.14 0.00 0.00 0.00 0.03 0.00 0.00 0.00 0.03 Monitoring) 10. Taxes and Duties 0.00 1.39 0.00 0.00 0.00 0.00 0.00 1.39 0.00 0.73 0.00 0.00 0.00 0.00 0.00 0.73 Subtotal 12.89 1.77 0.34 1.86 0.00 0.00 0.00 16.86 7.31 0.91 0.00 0.39 0.00 0.00 0.00 8.61

C. Small Loans 11. Small Loans for On- 3.14 0.00 0.00 0.00 0.66 0.00 0.00 3.80 3.00 0.00 0.00 0.00 0.00 0.00 0.00 3.00 Plot Facilities

D. Institutional

Development Institutional Development 1.50 0.00 0.00 0.00 0.00 1.15 0.23 2.88 2.73 0.10 0.00 0.00 0.00 0.16 0.00 2.98

E. Contingencies 12. Physical 1.87 0.36 0.00 0.16 0.00 0.00 2.40 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 13. Price 0.67 0.16 0.00 0.08 0.00 0.05 0.01 0.95 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Subtotal 2.54 0.52 0.00 0.24 0.00 0.05 0.01 3.35 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

F. Financing Charges

during Implementation 1. Interest during 0.29 0.00 0.00 0.00 0.00 0.00 0.00 0.29 0.30 0.00 0.00 0.00 0.00 0.00 0.00 0.30 Construction TOTAL PROJECT COST 28.20 4.88 0.34 2.10 0.66 1.20 0.24 37.62 35.03 5.74 0.00 0.39 0.00 0.16 0.00 41.31 Note: Totals may not sum precisely due to rounding off. Source: Asian Development Bank ADB = Asian Development Bank, Govt. = Government, DED = Deutscher Entwicklungsdienst (German Development Service), EMP = environmental management plan, GTZ = Gesellschaft für Technische Zusammenarbeit (German Technical Cooperation Agency), PFI = participating financial institution, UB = Ulaanbaatar.

26 Appendix 4

DISBURSEMENTS

Cumulative Percentage Year Quarter Quarterly Disbursement Disbursement Disbursed ($ million) ($ million) (%) 2008 III 0.30 0.3 1% IV 0.00 0.3 1% 2009 I 0.00 0.30 1% II 0.00 0.30 1% III 0.30 0.60 2% IV 0.00 0.60 2% 2010 I 0.00 0.61 2% II 0.25 0.85 2% III 0.31 1.16 3% IV 2.06 3.22 9% 2011 I 1.65 4.87 14% II 0.66 5.53 16% III 1.31 6.83 20% IV 3.32 10.15 29% 2012 I 1.08 11.23 32% II 0.20 11.43 33% III 2.02 13.45 38% IV 2.61 16.06 46% 2013 I 0.19 16.25 46% II 0.75 17.00 49% III 2.70 19.70 56% IV 1.70 21.40 61% 2014 I 0.40 21.81 62% II 1.56 23.37 67% III 0.81 24.17 69% IV 4.03 28.21 81% 2015 I 0.56 28.77 82% II 2.00 30.77 88% III 3.73 34.50 98% IV 0.52 35.02 100% Total 35.02 Note: Totals may not sum up precisely due to rounding off. Source: Asian Development Bank.

Appendix 5 27

ACTUAL IMPLEMENTATION SCHEDULE Item 2007 2008 2009 2010 2011 2012 20132014 2015 Activity 123412341234123412341234123412341234 Project Preparation Establish PMU & PIU

Recruit Individual Consultants

Subsidiary Loan Agreements

Component A: Basic Urban Services - Erdenet Subproject Recruit Design Consultants

Design, Tender, Contract Aw ard

Land Acquisition and Resettlement Works

Environmental Impact Assessment

Supply of Equipment and Civil Works

Testing and Commissioning

Component A: Basic Urban Services - Altai Subproject Recruit Design Consultants

Design, Tender, Contract Aw ard

Land Acquisition and Resettlement Works

Environmental Impact Assessment

Supply of Equipment and Civil Works

Testing and Commissioning

Component A: Basic Urban Services - Uvurkhangai Subproject Recruit Design Consultants

Design, Tender, Contract Aw ard

Land Acquisition and Resettlement Works

Environmental Impact Assessment

Civil Works

Testing and Commissioning

Component A: Basic Urban Services - Bayankhongor Subproject Recruit Design Consultants

Design, Tender, Contract Aw ard

Land Acquisition and Resettlement Works

Environmental Impact Assessment Civil Works

Testing and Commissioning

28 Appendix 5

Component A: Basic Urban Services - Bulgan Subproject Recruit Design Consultants

Design, Tender, Contract Aw ard

Land Acquisition and Resettlement Works

Civil Works

Testing and Commissioning

Component A: Basic Urban Services - Sukhbaatar Subproject Design, Tender, Contract Aw ard

Civil Works

Testing and Commissioning

Component A: Basic Urban Services - Supply of PUSO Equipment Design

Tender and Contract Aw ard

Equipment Supply

Component A: Basic Urban Services - Additional Subprojects Tender and Contract Aw ard

Civil Works

Testing and Commissioning Component A: Basic Urban Services - Water Meters Design, Tender and Contract Aw ard

Supply and Delivery of Water Meters

Installation of Water Meters

Component B: Improvements of Urban Roads - Khailaast Road, 1.1 km Recruit Design Consultants

Design, Tender, Contract Aw ard

Land Acquisition and Resettlement Works

Environmental Impact Assessment

Civil Works

Testing and Commissioning

Component B: Improvements of Urban Roads - Baruun Salaa Road, 4.1 km Recruit Design Consultants

Design, Tender, Contract Aw ard

Land Acquisition and Resettlement Works

Environmental Impact Assessment

Civil Works

Testing and Commissioning

Appendix 5 29

Component B: Improvements of Urban Roads - Orbit-Takhilt Road, 7.1 km Recruit Design Consultants

Design, Tender, Contract Aw ard

Land Acquisition and Resettlement Works

Environmental Impact Assessment

Civil Works Tender Invitation, Assessment, Contract Aw ard Civil Works

Testing and Commissioning

Component B: Improvements of Urban Roads - Sonsgolon Fly-Over Feasibility Study Recruit Design Consultant

Feasibility Study

Road Equipment Supply Road Equipment Selection

Tender and Contract Aw ard

Equipment Supply

Component D: Institutional Development and Training Identify Training Needs

Institutional Capacity Building

Training of Communities

Off-site Training

Component C: Small Loans for Water Connections and On-plot Facilities Recruit Micro Finance Consultant

Survey and Reports

Provision of Small Loans

Project Monitoring Activities PMO and Consultant Reports

ADB Administration Activities and Review Missions Planned at Appraisal

Actual Implementation

30 Appendix 6

STATUS OF COMPLIANCE WITH LOAN COVENANTS

Covenants Reference Status of Compliance Implementation arrangements 1 MCUD shall be the Project Executing Agency for the LA, Project. MCUD shall provide overall Project guidance Schedule 5, and co-ordination, and shall delegate all para. 1 responsibilities in Project administration to the PMU. Complied with. MCUD’s principal responsibilities include (a) providing The Ministry of Construction and policy coordination and guidance in the Urban Development (MCUD) implementation of the Project through PSC, and (b) carried out its responsibilities monitoring implementation of the Project and effectively and efficiently. coordinating and submitting timely and accurate reports to ADB and the Cofinanciers through the PMU. 2 MCUD shall establish a Project Management Unit LA, Complied with. (“PMU”) within MCUD to manage the Project and co- Schedule 5, The project management unit ordinate the work of the PIUs for each Sub-project. para. 2, 3 (PMU) was established in 2008. 3 The MCUD shall appoint a Project Director, who shall LA, (a) coordinate the implementation of Project activities Schedule 5, and support the Steering Committee; (b) ensure para. 3 Complied with. adequate coordination between PMU and PIUs; (c) The Director of MCUD’s Housing ensure adequate coordination between the Project and Public Utility Policy and the related Japan Fund for Poverty Reduction Coordination Department was Project; (d) monitor and report on the progress of appointed Project Director in Project implementation; and (e) coordinate 2008. communication with ADB and the Borrower. 4 Within two weeks of the Effective Date, MCUD shall LA, Complied with. ensure that PSC is established under the Project. The Schedule 5, The project steering committee PSC shall meet initially within 2 weeks of the Effective para. 4 (PSC), chaired by the MCUD Date, and each quarter thereafter or more frequently, State Secretary, was established if considered necessary. in February 2008 and held regular meetings throughout the project implementation period. 5 The Implementing Agency (IA) for each respective LA, Component of the Project shall be as follows: Schedule 5, (a) Component A and C – relevant Aimag para. 5 Complied with. Governments, in respect of Subprojects formulated Implementing agencies were and implemented in the project area, where such established. Aimag Government has jurisdiction; and (b) Component B – UMG. 6 The Borrower shall ensure that each Implementing LA, Agency shall be responsible for activities in respect of Schedule 5, its Subprojects or Subloans, as applicable, including para. 6 Complied with. staff recruitment, consultant selection and Implementing agencies appointment as necessary, Subproject identification performed their respective duties and submission as applicable, civil works and other satisfactorily. procurement if applicable, Subproject implementation, fund management, and Subproject project reporting. 7 The Orhon Aimag Government shall ensure that its LA, Complied with. PIU shall be staffed by at least (a) a director and Schedule 5, Project implementation units construction manager; (b) a finance and accounting para. 8 (PIUs) were staffed, as per the specialist; (c) a construction supervisor and inspector, loan agreement. Construction (d) a community development specialist, and (e) a supervision engineers were secretary and translator. assigned to perform the tasks related to community

Appendix 6 31

Covenants Reference Status of Compliance development. 8 The UMG shall ensure that its PIU for Component B LA, Complied with. shall be staffed by at least (a) a director and roads Schedule 5, The Ulaanbaatar Municipal engineer, (b) a construction engineer, (c) a para. 9 Government’s PIU was staffed procurement specialist; (d) an accountant, and (e) a as per the loan agreement. secretary and translator. 9 Each other Aimag Government shall ensure that its LA, Complied with. PIU shall be established within each PUSO. The PIU Schedule 5, PIUs were established within shall include the PUSO director, chief engineer, and para. 10 each public service utility chief account of the PUSO. organization (PUSO). 10 Each PIU for Component A and C shall conduct (a) LA, Complied with. public awareness and education campaigns, (b) Schedule 5, PIUs— Guided and supported provide technical and practical training, (c) establish para. 11 by the PMU and its consultants and support the development and operation of —carried out public awareness community groups, (d) promote community and education campaign and participation, (e) encourage financial planning, and (f) training for communities. conduct participatory monitoring and evaluation. 11 Each IA shall establish a working group to facilitate LA, Complied with. communication among sub-project participants. Schedule 5, Working groups were para. 12 established in 2008–2010 in aimags and Ulaanbaatar Municipal Government. Selection criteria 12 The Borrower, through the PMU, shall ensure that the LA, screening, selection, and appraisal of subprojects are Schedule 5, based on the selection criteria and procedures agreed para. 13 Complied with. upon with ADB, that all proposed subprojects meet to Subprojects were selected ADB’s satisfaction, the agreed sector specific based on criteria and procedures selection criteria and implementing arrangements, agreed with ADB. and shall cause the PMU to obtain the prior approval of ADB for any subproject and ensure that subprojects are controlled and monitored to ADB’s satisfaction. 13 Component A Subprojects shall meet the following LA, selection criteria that relate to existing inadequate Schedule 5, infrastructure and living conditions and the ability to para. 14 improve such conditions: (a) there is a prospect for rapid population growth or significant population lives in Ger Area in the proposed subproject town; (b) The subproject’s components are included in city or sector maser plans for the relevant aimag; (c) the subproject is not categorized as Category Complied with. A, or Category B environmentally sensitive Component A subprojects met under ADB”s Environment Policy (2002); the selection criteria. (d) The subproject minimizes resettlement, whether temporary or permanent; (e) plots in Ger Areas have been privatized or the legal right for residents to acquire legal title to such plots exists; (f) raw water sources are or will be available from an aquifer with a reliable and adequate yield and acceptable quality of supply, except to the extent it requires disinfection; (g) the relevant PUSO delivers a certificate of

32 Appendix 6

Covenants Reference Status of Compliance incorporation, or equivalent establishment document (including an explanation of its ownership); (h) the relevant Aimag Government provides a demonstrated ability and willingness to implement tariff reforms that ensure cost recovery and affordability for poor households; and (i) the relevant Aimag Government provides a demonstrated ability and willingness to finance and provide adequate funds for operation and maintenance of the project facilities; 14 Component A subprojects shall cover the aspects that LA, Complied with. relate to technical feasibility, financial and economic Schedule 5, Due diligence was carried out for viability, ad social and environmental soundness para. 15 all new subprojects under Component A. 15 Component B Subprojects shall meet the following LA, selection criteria that relate to existing inadequate Schedule 5, infrastructure and living conditions and the ability to para. 16 improve such conditions:

(a) The subproject’s components are included in city or sector maser plans for the relevant aimag; (b) the subproject is not categorized as Category Complied with. A, or Category B environmentally sensitive Component B subprojects met under ADB”s Environment Policy (2002); the selection criteria. (c) The subproject minimizes resettlement, whether temporary or permanent; (d) the proposed subproject connects a Ger Area in the outskirt of the city with the city center or is located in the city center; (e) the proposed road section has sufficient road users to justify the economic viability of the proposed subproject and is expected to have a significant traffic volume upon completion, sufficient for its economic viability (f) UMG is committed to finance to provide adequate funds for operation and maintenance of the Project roads; 16 Component B subprojects shall cover the aspects that LA, Due diligence was carried out for relate to technical feasibility, financial and economic Schedule 5, all new subprojects under viability, ad social and environmental soundness para. 17 Component B. 17 The Borrower shall ensure that the PMU will select LA, Complied with. and appraise subprojects in accordance with the Schedule 5, evaluation criteria. The PMU will prepare a subproject para. 18 All subprojects were selected by appraisal report for consideration by PSC. Those PMU in accordance with subprojects approved by PSC will be forwarded to evaluation criteria, and eligible ADB for approval. Subprojects that are rejected by subprojects were approved by either the PMU, PSC, or ADB shall be referred to the the PSC and ADB. relevant Aimag Governments indicating the reasons for rejection, the areas where the proposal was deficient, and whether the proposal should be revised for resubmission.

Appendix 6 33

Covenants Reference Status of Compliance 18 No later than one month prior to tendering bids for LA, Complied with. Component C, the Borrower and ADB shall agree to Schedule 5, Component C eligibility criteria final initial eligibility criteria and ongoing eligibility para. 19 were discussed and agreed criteria for PFIs for Component C and to final criteria between the government and for Eligible Subborrowers. ADB before interested PFIs were invited to bid. 19 The PFIs shall meet the eligibility requirements of the LA, Borrowers and ADB. In particular, the initial eligibility Schedule 5, criteria for PFIs shall include para. 20

(a) For commercial banks:

(i) registration under the Borrower's Banking Law for at least three years, and a current operating license; (ii) compliance with the Bank of Mongolia's prudential norms for at least the preceding six months; and Complied with. (iii) a history of satisfactory financial performance confirmed by the Bank of Participating commercial banks Mongolia and a satisfactory outlook for met the eligibility requirements of future financial performance. the Borrower and ADB.

(b) For Non-Bank Financial Institutions: Non-bank financial institutions did not participate in Component (i) registration under the Borrower's Non- C. Bank Financial Institution's Law, or relevant authority for at least three years, and a current operating license with the Financial Regulatory Commission; (ii) compliance with the Financial Regulatory Commission’s prudential norms for at least the preceding six months; and (iii) a history of satisfactory financial performance confirmed by the NBFI and a satisfactory outlook for future financial performance. 20 The Borrower shall ensure that PFI's shall consider all LA, Complied with. Eligible Subborrowers for Subloans. Eligible Schedule 5, Subborrowers shall fulfil the following eligibility para. 21 All subborrowers met the criteria: eligibility requirements. (a) they are residents of Ger Areas in the Project Area for individual water connections and on-plot facilities improvements and residents in Ger Areas and apartments in the Project Areas for water meter installation; (c) they have adequate collateral or security, and (d) they have the ability to afford a loan using 10 percent to 15 percent of household income for monthly payment. Improvement of Basic Urban Services 21 The Borrower shall ensure that it provides ADB with LA, Complied with. notice and opportunity to comment upon any Schedule 5, MCUD submitted the relevant proposed policies, legislation, or reports, plans, or para. 22 project documents to ADB, as policies, relating to institutional and sector applicable.

34 Appendix 6

Covenants Reference Status of Compliance restructuring prior to their finalization, including to the maximum extent permissible, all such documents of development partners. 22 Within three months of loan effectiveness, the LA, Complied with. Borrower, through MCUD, shall cause each Aimag Schedule 5, Throughout the project Government, in consultation with ADB to commence a para. 23 implementation, aimag review and provide recommendations on the revision governments supported by of its local regulations for: project consultants and MCUD worked on improvements to local (a) management of the water supply and regulations on tariff restructuring, sanitation systems; water loss reduction, and other (b) effective collection of water supply and aspects pertinent to effective sanitation tariffs; and management of water supply (c) effective promotion and implementation of and sewerage systems. These water loss reduction, metering, and water revisions were discussed with conservation measures; monitoring water ADB as and when applicable. consumption, leakage, and wastewater discharges; and controlling water connections. 23 Prior to entering into a PUSO on-lending agreement, LA, Complied with. the Borrower shall cause each Aimag Government to Schedule 5, Financial and operational improve each PUSO’s overall effectiveness by para. 24 performance of PUSOs was developing a priority reform and efficiency policy, reviewed and a set of including unaccounted-for water reduction and sound recommendations on the PUSO financial management. During Project operation efficiency Implementation, the Borrower, through MCUD, shall improvements was developed. review each management contract under the Project Bayankhongor PUSO was between an Aimag Government and a PUSO to restructured into the stock implement such priority reform and efficiency policy holding company. An onlending and make recommendations for the improvement of agreement was established the PUSO’s performance. between Orkhon Aimag and Erdenet PUSO in 2009. 24 Cost Recovery and Tariff Reform LA, The Borrower, through MCUD, shall cause each Schedule 5, Partially complied with. Aimag Government to ensure that (a) water supply para. 25 and wastewater tariffs for all users are restructured to In 2014–2015, the government cover all costs associated with water supply and increased water and wastewater sewerage services; (b) each PUSO undertakes tariffs by an average of 25%, in annual reviews of tariffs and fees; (c) no entity addition to introducing surcharge receiving water supply services is exempted from fees for water supply and payment of the tariff, or excused for delays in wastewater disposal services. payments without penalty, and (d) a review is Revised tariffs still remain low to conducted of the impact of increased water and meet full cost recovery. sanitation tariffs on the poor taking into account the ability of consumers, particularly vulnerable people, to pay for such increases. 25 Counterpart Funding LA, Complied with. The Borrower, through MOF and MCUD, shall cause Schedule 5, the Implementing Agencies to ensure that (a) all local para. 26 The government provided and foreign currency counterpart financing necessary counterpart funding totaling $6.1 for the Project shall be provided in time to enable million to finance the completion of Project activities; (b) additional government’s share of civil counterpart financing shall be provided for any works costs, land access and shortfall of funds or cost overruns, and (c) counterpart resettlement compensation, financing for compensation and entitlements under taxes and duties, and other

Appendix 6 35

Covenants Reference Status of Compliance the Resettlement Plan are fully provided directly to project-related expenses. affected people prior to their displacement from housing and land. 26 Construction Quality LA, Complied with. The Borrower, through MCUD, shall monitor and Schedule 5, Quality control on construction ensure quality control of construction work and para. 27 work and materials was materials under the Project, and ensure that performed through regular contractors and builders shall be approved by the supervision by staff from the Borrower for technical competence before any Project PMU, PIU, MCUD, and aimag work is conducted. governments. Civil works contracts were awarded to companies that hold the special licenses required under Mongolian law. 27 Road Safety LA, Complied with. Within three months of loan effectiveness, UMG shall Schedule 5, Road safety guidelines and an commence preparation of the UMG road safety para. 28 action plan were developed in guidelines and actions plan. UMG shall implement 2009 and incorporated into the such guidelines and action plans during project design of roads sections built in implementation. UMG shall also ensure that vehicle Ulaanbaatar. Vehicle axle weight axel weight limits are established and enforced to limits were established and prevent overloaded vehicles from entering the project enforced through technical roads. Before opening the Project roads, UMG shall specifications of the roads. ensure that road safety measures identified in the action plan be applied to the improved sections. 28 Information Conveyed to Aimag Borrowers and LA, Complied with. PUSOs Schedule 5, ADB policies, procedures, and The Borrower, through MCUD shall ensure that all para. 29 guidelines relevant to project ADB’s policies, procedures, and guidelines regarding implementation were conveyed social, resettlement, environmental protection, and to aimag governments and the anticorruption, and all of the requirements in the Loan Ulaanbaatar Municipal Agreement and Project Agreements, as applicable, Government (UMG) in a timely will be clearly conveyed to and understood by the and effective manner for their Aimag Governments, UMG, and PUSOs, and that information and compliance, as they will comply with these policies, procedures, and applicable. guidelines, and any applicable law, in implementation of the Project. 29 Material Changes to PUSOs Assets LA, Complied with. The Borrower shall, and shall cause UMG, the Schedule 5, No material changes to PUSO relevant Aimag Government, and PUSO to consult para. 30 assets were made, except with ADB within a reasonable time prior to the Bayankhongor PUSO, which approval of any contemplated material change in was reorganized into a stock- assets or ownership a PUSO. The Borrower shall, and holding company. This shall cause MCUD, UMG, and the concerned PUSO, reorganization was made based to ensure that such change be carried out in a publicly on recommendations from transparent and participatory manner. project consultants and discussed with ADB. Land Acquisition and Resettlement 30 The Borrower shall ensure and shall cause each Complied with. relevant IA and PUSO to ensure that (i) all land and LA Land access and resettlement right of way required by the project are made Schedule 5, plans (LARPs) were formulated available in a timely manner; (ii) the Subproject shall para. 31 and implemented in accordance not require Significant Involuntary Resettlement and with ADB’s involuntary any involuntary resettlement will be avoided or resettlement and land acquisition minimized. If land acquisition and/or involuntary and safeguards policies.

36 Appendix 6

Covenants Reference Status of Compliance resettle are required for the subproject, the Borrower shall or shall cause the relevant Implementing Compensation to affected Agency, PUSO or UMG to prepare a resettlement persons was provided and plan for such subproject in accordance with (a) impact mitigation measures applicable laws and regulations; (b) ADB’s Policy on implemented in accordance with Involuntary Resettlement (1995) and (c) the LARP. Over MNT465 million was Resettlement Framework. Such resettlement plan paid in counterpart funds to shall be prepared based on the final detailed design affected households and for such subproject and resettlement plan shall be organizations during the project. disclosed to affected people in accordance with ADB applicable information disclosure requirements for For non-core subprojects where resettlement. no LAR was required, due diligence reports were prepared by the PMU and cleared by ADB. 31 The Borrower, through MCUD shall (a) conduct LA, Complied with. monthly monitoring of the implementation of each Schedule 5, Resettlement plan and (b) conduct (with an para. 32 The PMU engaged an external independent external agency acceptable to ADB) resettlement monitoring monitoring and evaluation of the resettlement and consultant. report for ADB and the Borrower, half-yearly and concurrently. The Borrower shall provide to the independent external agency (at no cost) all documents required to monitor the process of resettlement including Resettlement plan, detailed measurement survey, census documents and all other associated documents as may be requested by the independent external agency. 32 In cases of discrepancies between the Borrower’s LA, Complied with. laws, regulations and procedures and ADB’s Schedule 5, ADB policies were followed in requirements, ADB’s requirements shall apply. No civil para. 34 the LAR activities. works shall commence in a specified geographic area prior to the Project Executing Agency (i) having satisfactory completed in that area, and in accordance with the approved Resettlement Plan, the payment of compensation and relocation, (ii) if appropriate, ensuring that all rehabilitation assistance has been established for Project affected persons is in place and that the specified geographic area is free of all encumbrances. Environment 33 The Borrower shall, and shall cause each Complied with. Implementing Agency, PUSO and UMG to contract, LA, Environmental impact operate, maintain, and monitor the Project Facilities in Schedule 5, assessments (EIAs) for strict conformity with (i) all applicable laws and para. 35 subprojects under Components regulations, including national and local regulations A and B were carried out with and standards for environmental protection, health, government financing. labor, and occupational safety; (ii) ADB’s Environment Environmental mitigation and Policy (2002); and (iii) the environmental mitigation monitoring measures complied and monitoring measures detailed in the approved with ADB and government IEEs and EMP for the Project and each Sub-project. policies, agreed procedures, and No category A or B sensitive Sub-project (classified in the initial environmental accordance with the requirements of ADB's examination (IEE) and Environment Policy (2002)), shall be financed under environmental management plan the Project. (EMP).

Appendix 6 37

Covenants Reference Status of Compliance

34 The Borrower shall ensure that an IEE be conducted LA, Complied with. for all subprojects in accordance with the environment Schedule 5, IEEs were prepared and assessment and review procedure in the Summary para. 36 approved for each subproject. IEE and included in the subproject proposal. If the approval of the Ministry of Nature and Environment of the Borrower is required for any Subproject, such approval shall be obtained prior to the award of any contracts for the Subproject. 35 The Borrower shall ensure that (a) the Implementing LA, Complied with. Agency, PUSOs and UMG engage full-time Schedule 5, Environment and external personnel, and sufficient staff and other resources to para. 37 environment specialists under monitor the implementation of each EMP, under the PMU supported and guidance of the Ministry of Nature and Environment; monitored EMP implementation. (b) the Aimag Governments or PUSOs provide monitoring reports to the PMU who will coordinate the The PMU coordinated preparation of a semi-annual environmental report on preparation of semiannual and implementation of EMP in a format acceptable to annual progress reports and ADB, and the annual reports will be submitted to ADB, submitted to ADB on time. by 31 March each year, until loan closure. 36 The Borrower shall ensure that all ADB-financed LA, Complied with. contracts under the Project include provisions Schedule 5, Provisions on EMP mitigation requiring the mitigation and monitoring measures para. 38 and monitoring measures were identified in the IEE and the EMP for the respective included in bidding and contract Sub-project, and that a budget is allocated for all documents for all civil works, mitigation and monitoring measures. and associated costs were allocated in the contracts. Labor, Health and Gender Development 37 The Borrower, through MCUD, and each LA, Complied with. Implementing Agency and PUSO shall ensure that all Schedule 5, civil works contractors engaged under the Project will para. 39 Relevant provisions were (a) provide timely payment of wages to all workers reflected in civil works contracts including male and female workers (with such for all subprojects. PMU, PIU, requirements being included in civil works contract and aimag PUSOs monitored and monitored by construction supervision performance and compliance. consultants); (b) provide women’s employment, where appropriate, and pay equal wages to the women employees for equivalent work; (c) not employ child labor in project activities, in compliance with the relevant laws and regulations of the Borrower; and (d) monitor the effects of the Project on women through collection and compilation of gender-disaggregated data, where relevant, including in the relevant Resettlement Plan, social development action plan, and PPMS and report upon such effects through internal and external monitoring reports. 38 The Borrower, through MCUD and each Implementing LA, Complied with. Agency and PUSO shall (a) cause the contractors to Schedule 5, Training and information disseminate information on the risks of socially and para. 40 dissemination activities were sexually transmitted diseases, including HIV/AIDS, to conducted in 2010–2012 for their employees during project implementation; and contractors and the general (b) in coordination with other appropriate agencies public in project towns. identified by the MCUD, ensure that public awareness and education programs on health and hygiene behavior and managing wastewater and solid waste

38 Appendix 6

Covenants Reference Status of Compliance disposal will be conducted in Project areas. 39 The Borrower shall ensure (through each LA, Partially complied with. Implementing Agency and PUSO) that a Gender Schedule 5, Action Plan (GAP) is implemented and monitored. para. 41 Gender action plan indicators The Borrower, through MCUD shall (a) monitor the were not regularly monitored or Gender Action Plan indicators, through the PPMS, on reported as part of the project a bi-annual basis to determine the efficiency and performance management effectiveness of the Project and its impacts on system (PPMS) reports during women; and (b) provide to ADB annual Gender Action the early phase of project Plan monitoring reports as part of PPMS reports, in implementation. However, with form and substance acceptable to ADB, from the demonstrable efforts from the commencement of Project implementation until MCUD and PUSOs in 2014– Project completion. 2015 and with support from ADB, 81% of the eight GAP activities were implemented and completed and 80% of the five gender-related targets were achieved. Small Loans for Water Connections and On-plot Facilities Improvement 40 Use of Repaid Funds under Sub-loans LA, Complied with. The Borrower shall ensure that Sub-loan repayments Schedule 5, under Component C (after making the Loan para. 42 Repayments from the first batch repayments) are used for making further Sub-loans to of subloans are being relent to Eligible Sub-borrowers. new subborrowers.

This obligation has been covenanted in subsidiary loan agreements between the Borrower and PFIs. Planning, Monitoring and Review 41 Governance and Anti-Corruption LA, Complied with. The Borrower shall comply with and shall cause each Schedule 5, Aimag Government, UMG, each PUSO, and each PFI para. 43 to carry out the Project in accordance with ADB’s Anti- corruption Policy (1998, as amended to date). 42 Project Performance Monitoring and Evaluation LA Complied with. System Schedule 5, During Project implementation, MCUD, through the para. 44 PMU, shall develop a Project Performance and Monitoring System (“PPMS”) including baseline performance monitoring and systematic Project performance monitoring, including benefits monitoring and evaluation, acceptable to ADB. 43 Annual Reviews LA, Complied with. The Borrower, and ADB, in conjunction with DED and Schedule 5, GTZ, shall carry out annual reviews of the Project para. 45 The project conducted 16 review during Project implementation. missions. Mid-term Review LA, Complied with. The Borrower and ADB shall jointly carry out a mid- Schedule 5, term review of the Project during the third year of para. 46 A midterm review was carried Project implementation or at any other time as may be out from 25 May to 4 June 2010. agreed upon by the Borrower and ADB. 44 Co-financing PA, Except as otherwise agreed by ADB, within 3 months Schedule 5, of the Effective Date, the Borrower shall ensure the para. 47

Appendix 6 39

Covenants Reference Status of Compliance execution and delivery of each of the DED Grant Complied with. Agreement and the GTZ Grant Agreement on behalf A tri-partite agreement among of the Borrower, and shall further ensure that it has DED, the MCUD, and ADB was been duly authorized or ratified by all necessary signed on 17 April 2008. governmental action; duly executed and delivered on behalf of the Borrower, and shall have become legally binding upon the Borrower in accordance with their terms.

Financial Covenants 45 Each IA shall maintain, or cause to be maintained, PA, Section Complied with. adequate records and accounts to identify the goods, 2.06 works and consulting services and other items of expenditure financed from the proceeds of the Loan, to disclose the use thereof in the Project, to record the progress of the Project (including the cost thereof) and to reflect, in accordance with consistently maintained and sound accounting principles, its operations and financial condition. 46 Each IA shall (i) maintain separate accounts for the Project Complied with. Project and for its overall operations; (ii) have such Agreement The PMU, on behalf of the accounts and related financial statements (balance (PA), MCUD, maintained project sheet, statement of income and expenses, and Section accounts in accordance with related statements) audited annually, in accordance 2.09(a) ADB’s Loan Disbursement with appropriate auditing standards consistently Handbook and had them audited applied, by independent auditors whose qualifications, in a timely manner. No experience and terms of reference are acceptable to irregularities were found in the ADB; and (iii) furnish to ADB, promptly after their annual audits. preparation but in any event not later than 6 months after the close of the fiscal year to which they relate, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors' opinion on the use of the Loan proceeds and compliance with the financial covenants of the Loan Agreement as well as on the use of the procedures for impress account/statement of expenditures), all in the English language. Each IA shall furnish to ADB such further information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request. 47 Each IA shall enable ADB, upon ADB's request, to PA, Complied with. discuss IA’s financial statements and its financial Schedule II, affairs from time to time with the auditors, appointed para. 2.09 by IA pursuant to Section 2.09(a) here above, and (b) shall authorize and require any representative of such auditors to participate in any such discussions requested by ADB, provided that any such discussion shall be conducted only in the presence of an authorized officer of IAs, unless IAs shall otherwise agree. Particular Covenants 48 In the carrying out of the Project and operation of the LA, Article Complied with. Project facilities, the Borrower shall perform, or cause IV, Section The government, MCUD, and to be performed, all obligations set forth in Schedule 5 4.01 implementing agencies fulfilled

40 Appendix 6

Covenants Reference Status of Compliance to this Loan Agreement. all obligations that fell to them in in the Loan Agreement. The Borrower shall enable ADB’s representatives to LA, Article Complied with. 49 inspect the Project, the Goods and Works financed IV, Section ADB conducted regular missions out of the proceeds of the Loan and any relevant 4.02 to the project sites. records and documents. 50 The Borrower shall take all action which shall be LA, Article Complied with. necessary on its part to enable each Implementing IV, Section Agency to perform its obligations under the Project 4.03 Agreement, including the establishment and maintenance of tariffs as required pursuant to paragraph 25 of Schedule 5 to this Loan Agreement, and shall not take or permit any action which would interfere with the performance of such obligations. 51 (a) The Borrower shall exercise its rights under LA, Article Complied with. the Subsidiary Loan Agreement in such a manner as IV, Section to protect the interests of the Borrower and ADB and 4.04 Subsidiary Loan Agreements to accomplish the purposes of the Loan. were established in full (b) No rights or obligations under any Subsidiary compliance with this covenant. Loan Agreement shall be assigned, amended, or waived without the prior concurrence of ADB. 52 Each IA shall carry out the Project with due diligence PA, Section Complied with. and efficiency, and in conformity with sound 2.01, para administrative, financial, engineering, and (a) environmental and road transport and safety practices. 53 In the carrying out of the Project and operation of the PA, Section Complied with. Project facilities, each IA shall perform all obligations 2.01, para set forth in the Loan Agreement to the extent that they (b) are applicable to IAs. 54 Each IA shall make available, promptly as needed, PA, Section Complied with. the funds, facilities, services, equipment, land and 2.02 Implementing agencies provided other resources which are required, in addition to the $388,404 equivalent to finance proceeds of the Loan, for the carrying out and the some of the civil works costs, operations and maintenance of the Project. compensation to affected people, and implementation of the EMPs. 55 In the carrying out of the Project, each IA shall employ PA, Section Complied with. competent and qualified consultants and contractors, 2.03, para acceptable to ADB, to an extent and upon terms and (a) conditions satisfactory to ADB. 56 Except as ADB may otherwise agree, all Goods, PA, Section Complied with. Works and consulting services to be financed out of 2.03, para Project procurement was carried the proceeds of the Loan shall be procured in (b) out in accordance with the accordance with the provisions of Schedule 4 to the Schedule 4 of the Loan Loan Agreement. ADB may refuse to finance a Agreement. contract where Goods, Works or consulting services have not been procured under procedures substantially in accordance with those agreed between the Borrower and ADB or where the terms and conditions of the contract are not satisfactory to ADB. 57 Each IAs shall carry out the Project in accordance PA, Section Complied with. with plans, design standards, specifications, work 2.04. Implementing agencies carried schedules and construction methods acceptable to out the project in accordance

Appendix 6 41

Covenants Reference Status of Compliance ADB. The Aimag Government shall furnish, or cause with approved plans, design to be furnished, to ADB, promptly after their standards, specifications, and preparation, such plans, design standards, work schedules. specifications and work schedules, and any material modifications subsequently made therein, in such detail as ADB shall reasonably request. 58 (a) The Aimag Government shall take out and PA, Section Complied with. maintain with responsible insurers, or make other 2.05. All project facilities were properly arrangements satisfactory to ADB for, insurance of insured. the Project facilities to such extent and against such risks and in such amounts as shall be consistent with sound practice; (b) Without limiting the generality of the foregoing, the Aimag Government undertakes to insure, or cause to be insured, the Goods to be imported for the Project and to be financed out of the proceeds of the Loan against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable to replace or repair such Goods. 59 (a) ADB and the Aimag Government PA, Section Complied with. shall cooperate fully to ensure that the purposes of 2.07 the Loan will be accomplished. (b) The Aimag Government shall promptly inform ADB of any condition which interferes with, or threatens to interfere with, the progress of the Project, the performance of its obligations under this Project Agreement or the Subsidiary Loan Agreement, or the accomplishment of the purposes of the Loan. (c) ADB and the Aimag Government shall from time to time, at the request of either party, exchange views through their representatives with regard to any matters relating to the Project, the Aimag Government and the Loan. 60 The Aimag Government shall enable ADB's PA, Section Complied with. representatives to inspect the Project, the Goods and 2.10 ADB conducted regular missions Works financed out of the proceeds of the Loan, all to the project sites. other plants, sites, properties and equipment of Aimag Government, and any relevant records and documents.

61 (a) The Aimag shall, promptly as required, take all PA, Section Complied with. action within its powers to maintain its corporate 2.11 No threats to the corporate existence, to carry on its operations, and to acquire, existence of aimag governments maintain, and renew its rights, properties, powers, were observed or occurred privileges and franchise which are necessary in the during project implementation. carrying out of the Project in the conduct of its business (b) The Aimag Government shall at all times conduct its business in accordance with sound administrative, financial, environmental and urban development practices, and under the supervision of competent and experienced management and personnel;

42 Appendix 6

Covenants Reference Status of Compliance (c) The Aimag Government shall at all times operate and maintain its plants, equipment and other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound administrative, financial, engineering, environmental, urban development, and maintenance and operational practices. 62 Except as ADB may otherwise agree, the Aimag PA, Section Complied with. Government shall not sell, lease or otherwise dispose 2.12 No such events were observed of any of its assets which shall be required for the or occurred during project efficient carrying on of its operations or the disposal of implementation. which may prejudice its ability to perform satisfactorily any of its obligations under this Project Agreement. 63 Except as ADB may otherwise agree, the Aimag PA, Section Complied with. Government shall apply the proceeds of the Loan to 2.13 Loan proceeds were used to the financing of expenditures on the Project in finance goods, works, and accordance with the provisions of the Loan consulting services exclusively Agreement and this Project Agreement, and shall for the project. ensure that all Goods, Works and Consulting Services financed out of such proceeds are used exclusively in the carrying out of the Project. 64 Except as ADB may otherwise agree, the Aimag PA, Section Complied with. Government shall duly perform all its obligations 2.14 Aimag governments’ under the Subsidiary Loan Agreement, and shall not performance in meeting the take, or concur in, any action which would have the obligations of the subsidiary loan effect of assigning, amending, abrogating or waiving agreements was fully any rights or obligations of the parties under the satisfactory. Subsidiary Loan Agreement. 65 The Aimag shall promptly notify ADB of any proposal PA, Section Complied with. to amend, suspend, or repeal any provision of 2.15 constituent documents and shall afford ADB an adequate opportunity to comment on such proposal prior to taking any action thereon.

Appendix 7 43

PROCUREMENT PACKAGES FOR ADB FINANCING No PCSS Procurement Contract ADB Contract Contract No. method amount financing Signing Completion Contract Description (million $) share date Date (million $) Component A: To Improve Basic Urban Services Erdenet Subproject 1 0025 Civil works to improve water supply and sewerage systems in ger areas ICB 3.91 3.08 15-Oct-10 29-May-14 Supply and delivery of pipes and fittings to improve water supply and 2 0026 ICB 1.19 1.19 27-Oct-10 07-Jun-11 sewerage systems in ger areas 3 0036 Supply, delivery, and installation of pumping equipment NCB 0.32 0.32 30-May-11 26-May-14 Govi-Altai Aimag Subproject 4 0029 Civil works to install of 1.56 km water transmission pipelines in Altai Shopping 0.09 0.07 27-Sep-10 03-Nov-10 Supply and delivery of pipes and fittings for water transmission pipelines of 5 0030 Shopping 0.05 0.05 29-Sep-10 25-Oct-10 1.56 km and connection to the bore wells in Altai 6 0031 Electrical works for power supply system in Altai Shopping 0.04 0.03 29-Sep-10 03-Nov-10 7 0040 Civil works to improve water supply and sewerage systems in Altai ICB 1.74 1.37 04-Aug-11 25-Dec-13 8 0062 Installation of water meters in Altai Force 0.01 0.01 13-Jun-13 30-Sep-14 9 0069 Supply and delivery of pumps and ultra violet (UV) equipment for Altai ShoppingAccount 0.10 0.10 11-Nov-13 28-Jan-14 10 0070 Supply and delivery of valves and fittings to Altai Shopping 0.08 0.08 12-Nov-13 23-Dec-13 Supply and delivery of chlorination disinfection equipment, mechanical 11 0071 Shopping 0.09 0.09 12-Nov-13 24-Jan-14 sewage screen, and water purification equipment to Altai Civil works to rehabilitate outdoor water supply and sewerage systems in 12 0083 NCB 0.80 0.63 08-Oct-14 25-Jun-15 Yusunbulag soum Sukhbaatar Aimag Subproject 13 0037 Civil works and supply and installation of pipes and fittings in Baruun-Urt ICB 1.24 0.98 25-Jul-11 30-Nov-11 Bayankhongor Aimag Subproject 14 0047 Civil works to improve water supply and sewerage systems in Bayankhongor ICB 2.51 1.98 09-Mar-12 30-Jul-13 15 0057 Supply and delivery of water meters for Altai and Bayankhongor Shopping 0.04 0.04 29-Mar-13 22-May-13 16 0061 Installation of water meters in Bayankhongor Force 0.01 0.01 16-Jun-13 31-Aug-14 Civil works to install outdoor heating and water supply pipelines for heating Account 17 0075 NCB 0.73 0.57 26-Jun-14 01-Oct-14 distribution center No. 11 in Bayankhongor Civil works to install outdoor sewerage pipes of petroleum depot in 18 0091 NCB 0.23 0.18 17-Nov-14 27-Apr-15 Bayankhongor soum Uvurkhangai Aimag Subproject 19 0056 Civil works to improve water supply and sewerage systems in Arvaikheer ICB 3.43 2.71 08-Nov-12 14-Nov-14 Civil works to install heating, water supply, and sewerage pipelines in 20 0076 NCB 0.73 0.57 26-Jun-14 30-Sep-14 Kharkhorin soum 21 0077 Civil works to install heating, water supply and sewerage pipelines for 1,000 NCB 0.86 0.68 04-Jul-14 17-Oct-14 households apartment building in Arvaikheer Civil works to install heating, water supply and hot water pipelines in the new 22 0078 NCB 0.99 0.78 04-Jul-14 17-Oct-14 city center in Arvaikheer

44 Appendix 7

Supply of equipment and supplies for the wastewater treatment plant in Sant 23 0085 Shopping 0.08 0.08 10-Sep-14 30-Jun-15 soum Supply of equipment and supplies for the wastewater treatment plant in 24 0088 Shopping 0.08 0.08 10-Sep-14 30-Jun-15 Bayangol soum 25 0095 Civil Works for the installation of sewerage pipelines in Sant soum NCB 0.12 0.09 25-Dec-14 30-Jun-15 Bulgan Aimag Subproject 26 0060 Construction of 1.3 km water transmission pipeline in Bulgan NCB 0.19 0.15 06-May-13 Sep-13 Civil works to expand heating and hot and cold water supply networks in 27 0074 NCB 1.02 0.81 13-Jun-14 07-Nov-14 Bulgan Supply of equipment and supplies for the wastewater treatment plant in 28 0082 Shopping 0.07 0.07 10-Sep-14 30-Jun-15 Teshig soum Supply of equipment and supplies for the wastewater treatment plant in 29 0086 Shopping 0.08 0.08 10-Sep-14 29-Jun-15 Buregkhangai soum 30 0096 Civil works to rehabilitate central heating house in Teshig soum NCB 0.34 0.27 01-Dec-14 22-Jun-15 Tuv Aimag Subproject Civil works to construct boiler house of 1,000 households apartment building 31 0080 NCB 0.80 0.63 19-Sep-14 09-Jun-15 in Zuunmod Supply of equipment and supplies for the wastewater treatment plant in Buren 32 0081 Shopping 0.08 0.08 10-Sep-14 30-Jun-15 soum Supply of equipment and supplies for the wastewater treatment plant in 33 0087 Shopping 0.08 0.08 10-Sep-14 30-Jun-15 Zuundelger soum 34 0097 Civil works to rehabilitate the central heating house in Buren soum NCB 0.35 0.27 25-Dec-14 08-Jun-15 Dundgovi Aimag Subproject Installation of water supply and sewerage pipeline and construction of a road 35 0084 NCB 0.90 0.71 15-Oct-14 12-Jun-15 in Gurvansaikhan soum Supply of equipment and supplies for the wastewater treatment plant in 36 0089 Shopping 0.08 0.08 10-Sep-14 12-Jun-15 Gurvansaikhan soum Supply of Solid and Liquid Waste Equipment in Multiple Provincial Towns 37 0066 Supply and delivery of trucks and machinery ICB 0.80 0.80 18-Nov-13 15-Apr-14 38 0068 Supply and delivery of trucks and machinery ICB 1.09 1.09 19-Nov-13 30-Apr-14 Component B: Ulaanbaatar Urban Road Improvement 39 0019 Construction of 1.1 km asphalt concrete road in Khailaast ICB 0.72 0.57 30-Jun-10 28-Nov-11 40 0020 Supply, delivery and the installation of road laboratory equipment ICB 0.67 0.67 20-Jul-10 25-May-11 41 0023 Construction of 4.1 km asphalt concrete road in Baruunsalaa ICB 2.20 1.91 22-Sep-10 30-May-14 442 0024 Civil works for 7.1 km asphalt concrete road in Orbit Takhilt, Ulaanbaatar ICB 3.77 2.97 22-Sep-10 12-Sep-13

ICB = international competitive bidding, km = kilometer, NCB = national competitive bidding, UV = ultraviolet.

Appendix 8 45

ECONOMIC REEVALUATION

A. Introduction

1. The economic internal rate of return (EIRR) for the Erdenet water supply subproject was reevaluated on the basis of non-incremental and incremental project effects over 25 years of operation. The economic reevaluation was carried out on the basis of the revised scope and actual costs incurred during the project implementation. The economic reevaluation for Erdenet subproject used the same methodology as at appraisal.

B. Water Supply Project

2. The project benefited more than 52,000 ger area residents in Erdenet city. The project’s primary benefits included (i) cheaper water costs for ger area residents, (ii) more water kiosks in ger areas, (iii) better water supply treatment and distribution services, (iv) time savings from improved water accessibility, (v) better drinking water, (vi) human health benefits such as fewer waterborne diseases, (vii) individual connections for ger area residents, and (viii) possible connection extensions in the future.

3. The quantified project benefits include incremental water supply, nonincremental water supply, and time and water savings. The assumptions used to quantify the project benefits are as follows:

(i) Incremental benefits: All marginal benefits generated from outputs delivered by the project; (ii) Nonincremental benefits: All water supply benefits associated with normal operations of the PUSO; (iii) Water savings: If the PUSO reduces leakages out of pipelines, this will significantly increase the subproject’s economic and financial benefits; (iv) Time savings: Water supply services improvement will increase opportunity costs for ger area residents in terms of timing.

4. Base costs plus physical contingencies for Erdenet water supply subproject were estimated and apportioned on the basis of tradable, nontradable, and skilled and unskilled labor costs. Similarly, operation and maintenance cost for the subproject was estimated on the basis of skilled and unskilled labor valued in economic prices. For instance, the shadow wage rate factor was assumed at 0.8 for unskilled labor and 1.0 for skilled labor.

Table A6.1: Economic Internal Rate of Return of PUSO Appraisal At Completion EIRR 29.4% 20.7% EIRR = economic internal rate of return. Source: Asian Development Bank estimates.

5. The recalculated EIRR for Erdenet water supply project is 20.7% which is higher than economic opportunity cost of capital (EOCC) of 12%. The EIRR was calculated as 29.4% at appraisal. A sensitivity analysis indicates that a simultaneous increase in costs and reduction in benefits will not have a substantial impact on the subproject’s EIRR. Table A6.1 presents the EIRR for the Erdenet subproject and Table A6.2 presents the results of the sensitivity analysis.

46 Appendix 8

Table A6.2: Sensitivity Analysis for Erdenet Water Supply Subproject Erdenet Water Supply Base Case 20.7% 10% Decrease in Benefits (2) 18.4% Combination of 1 and 2 16.4% Source: Asian Development Bank estimates

C. Road Project

6. The investment cost for the Khailaast road subproject was converted to US dollars based on average annual exchange rates of the Mongolian togrog to the US dollar. The cost used to calculate the EIRR for this subproject excludes value-added tax. The subproject’s economic operation and maintenance (O&M) is assumed at 2% of economic investment cost and periodic maintenance cost after 10 years is assumed at 10% of economic investment cost. Its residual value is assumed at 30% after 20 operational years.

7. Vehicle operating costs (VOC) savings for Khailaast road subproject were calculated for normal traffic and for generated traffic (applying the rule of half)1. The estimated VOC savings compared road roughness of 18 meters per kilometer (m/km) against 4 m/km, with savings of $0.15 to $0.75 per vehicle-kilometer and reduced distances (1.6 km less) for normal traffic. Time savings were calculated on the basis of an average reduction of travel time of almost six minutes, occupancy of 1.5 people in compact car, two people in a medium-sized car (sport utility vehicle, or SUV) and 15 in a medium bus, at a value of $1.15 per car passengers (40% work-related trips) and $0.5 per bus passenger. The rule of half was applied to generated traffic. The cost and benefit streams are discounted at an economic opportunity cost of capital (EOCC) of 12%.

8. The recalculated EIRR for the subproject is 24.7% at completion, which is higher than EIRR of 18% at appraisal. Table A6.3 presents the results of the economic discounted cash flow analysis.

Table A6.3: EIRR for Khailaast Road Subproject (in US Dollars) Time Time Economic VOC savings VOC savings savings Net Investment O&M normal savings normal generated Benefit Cost traffic generated traffic traffic

2010 457,700 - - - - - (457,700)

2011 279,528 - - - - - (279,528)

2012 341 14,751 157,149 26,835 41,304 71,183 82,926

2013 - 14,751 171,292 36,160 45,611 97,499 118,908

2014 - 14,751 186,709 44,083 49,716 118,676 148,008

2015 - 14,751 203,512 58,213 54,190 156,354 199,815

2016 - 14,751 221,828 70,317 59,067 188,663 244,229 2017 - 239,575 76,876 63,793 206,238

1 Economic theory suggests that when consumers change their travel in response to a financial incentive, the net consumer surplus averages half of their price change (called the “rule of half”). This takes into account total changes in financial costs, travel time, convenience and mobility as perceived by consumers.

Appendix 8 47

Time Time Economic VOC savings VOC savings savings Net Investment O&M normal savings normal generated Benefit Cost traffic generated traffic traffic 14,751 268,363

2018 - 14,751 258,741 84,045 68,896 225,441 294,734

2019 - 14,751 279,440 91,878 74,408 246,425 323,551

2020 - 14,751 301,795 100,438 80,361 269,352 355,038

2021 - 14,751 325,939 109,791 86,789 294,403 389,442

2022 73,757 14,751 325,939 117,603 86,789 314,392 343,486

2023 - 14,751 348,795 123,456 92,609 329,612 438,316

2024 - 14,751 373,449 129,597 98,868 345,563 460,408

2025 - 14,751 400,058 136,039 105,603 362,277 483,565

2026 - 14,751 428,791 142,797 112,854 379,788 507,834

2027 - 14,751 459,833 147,127 120,664 388,899 521,275

2028 - 14,751 459,833 155,392 120,664 407,282 547,923

2029 - 14,751 459,833 164,369 120,664 427,174 576,792

2030 - 14,751 459,833 174,128 120,664 448,724 608,101

2031 - 14,751 459,833 184,746 120,664 472,094 642,089

2032 221,271 14,751 459,833 196,307 120,664 497,462 457,747 ENPV 1,059,346 EIRR 24.7% EIRR = economic internal rate of return, ENPV = economic net present value, O & M = operation and maintenance, VOC = vehicle operating cost. Source: Asian Development Bank estimates.

9. The resulting EIRR is tested for sensitivity to adverse scenarios: (i) a decrease in benefits of 10%; and (ii) an increase in economic O&M of 10%. The results indicate that the EIRR for the subproject remains robust and substantially higher than the EOCC of 12% for all of the above scenarios. With these results, Khailaast road subproject is deemed economically sustainable.

Table A6.4: Sensitivity Analysis for Khailaast Road Subproject Khailaast Road Base Case 24.7% 10% Decrease in Benefits 23.0% 10% Increase in O&M 24.6% O&M= operation and maintenance. Source: Asian Development Bank estimates.

48 Appendix 9

FINANCIAL REEVALUATION

A. Introduction

1. The financial reevaluation of the Urban Development Sector Project was undertaken in real terms using constant 2016 prices over 25 years of operation, including a 4-year implementation period from 2010 to 2014. In accordance with the Report and Recommendation of the President to the Board of Directors for Urban Development Sector Project, the financial analysis of the public urban services organization (PUSO), “Erdenet Us” Joint Stock Company, operating in Erdenet was carried out. The discounted cash flow analysis, financial internal rates of return (FIRRs), and sensitivity analysis were based on updated information from the field survey carried out in Erdenet and actual project data, among other sources.

B. Major Assumptions

2. The financial reevaluation assessed the financial performance of Erdenet PUSO as the water supply operator under the project. In the financial projection, it is assumed that water consumption will increase by 5% in 2018 and 2023, and water tariffs will remain steady over the reevaluation period. The weighted average cost of capital (WACC) was calculated for the subproject, using the actual mix and costs of various financing resources. Discounted cash flow analysis has been prepared based on the actual data using real cost and revenue streams. To measure project financial viability, FIRR will be compared to the WACC.

C. Tariffs

3. Different water tariffs are levied on households and institutions. After ratification of the law on Utilization of Water and Sewerage in Cities and Provincial Towns on 6 October 2011, the tariff regulation board for water and sanitation services was established in major cities and provincial towns in Mongolia. The law allows the boards to carry out several authorities on various tariff- related regulations, including: (i) setting tariff structure of sales to consumers; (ii) implementing tariff indexation; (iii) establishing a pricing and tariff system that enables supply of water at the lowest possible cost and allows an adequate rate of return; and (iv) reviewing investment plan of licensees in expanding water supply networks. The Water Services Regulatory Commission, established in 2012, is responsible for confirming water service tariffs and granting water services licenses to PUSOs.

4. Current water tariffs charged by Erdenet PUSO range from MNT0.67 per liter to MNT3 per liter. The decrease of water supply delivery cost to users progressed well in Erdenet. For instance, the cost of water per liter delivered to ger area residents was reduced from MNT9.0 at appraisal to MNT4.2 per liter at completion. About two thirds of the cost of water supply (MNT 8,108 per ton) is still subsidized. Erdenet PUSO has not received any cash subsidies over the past 5 years. The government is expected to provide a subsidy of MNT 200 million to this PUSO in 2016. Capital costs associated with equipping water kiosks with smart technology were financed from Erdenet city’s budget. Table A7.1 summarizes the tariffs at appraisal and at completion.

Appendix 9 49

Table A7.1: Tariffs at Appraisal and Completion for Erdenet PUSO (MNT) Items Unit At Appraisal At Completion

Water Supply Residential Apartments with water meter m3 505 670 without water meter m3 3,480 3,480 Institutions with water meter m3 966 1,080 without water meter m3 1,080 1,080 Ger Area Residents L 2 2 L = liter, MNT = Mongolian togrog, m3 = cubic meter, PUSO = public urban service organization. Source: “Erdenet Us” JSC.

5. The covenants relating to water and wastewater tariff reform for cost recovery were partly complied with. Water tariffs were raised nationwide in 2015. However, most PUSOs in rural areas generate negative cash flows partly because of lower water tariffs and operational inefficiencies. Under the law on Utilization of Water and Sewerage in Cities and Provincial Towns, PUSOs are allowed to review tariffs annually. Annual consultation sessions to review water tariffs involve Water Services Regulatory Commission, a PUSO, and the local government.

D. Weighted Average Cost of Capital

6. The WACC was calculated in real terms for each subproject. Funding sources are the ADB loan and counterpart funds from the government. The real WACC was calculated using the actual financing mix. The interest rate of the ADB loan was 3.25% per annum (ADB rate of 1.5% plus 1.75%). The opportunity cost of the government’s counterpart funding was assumed to be 15%.3 The domestic annual inflation rate is 2% and international inflation is 1%. The real WACC for Erdenet PUSO is estimated as 3.33%. Detailed calculations are summarized in Table A7.2.

Table A7.2: Weighted Average Cost of Capital Amount Nominal Nominal Corporation Inflation Real (in million Weighting Rate Weighted Tax Rate Term MNT) Rate after Tax ADB fund 7,446.71 89.9% 3.25% 25.00% 1.80% 1.00% 2.25% 2.02% Government 832.31 10.1% 15.00% 0.00% 8.00% 2.00% 13.00% 1.31% fund Total 8,279.02 100% 3.33%

Real WACC 3.33% ADB = Asian Development Bank, WACC = weighted average cost of capital. Source: Asian Development Bank estimates.

E. Financial Reevaluation

7. A discounted cash flow analysis was prepared for the Erdenet subproject. The FIRR for the subproject was recalculated as 8.4% at project completion. The FIRR estimate is substantially higher than the WACC of 3.33%. Despite delays in project implementation, the recalculated FIRR for the subproject at completion exceeds the FIRR estimate of 8.1% at appraisal largely because of cheaper costs to deliver water. Table A7.3 presents the comparison between the FIRR calculated at appraisal and recalculated at completion and Table A7.4 presents the FIRR and discounted cash flow analysis results.

3 This is based on prevailing yields of the country’s sovereign securities issued in international capital markets.

50 Appendix 9

Table A7.3: Financial Internal Rate of Return and Net Present Value (‘000 MNT) Appraisal Completion FIRR 8.1% 8.4% FNPV at 2006 and 2016 constant prices 2,003,908.0 4,875,796.9 FIRR = financial internal rate of return, FNPV = financial net present value, MNT = Mongolian togrog. Source: Asian Development Bank.

Table A7.4: Financial Internal Rate of Return (‘000 MNT) Year Erdenet Subproject Investment O&M Project Net Cash

Cost Revenue Flow 2010 489,434.3 (489,434.3) 2011 3,309,920.1 3,047,842.7 1,888,339.5 (4,469,423.4) 2012 439,466.3 2,316,360.5 1,947,972.9 (807,853.8) 2013 731,720.0 1,570,304.9 2,150,437.0 (151,587.9) 2014 2,476,169.1 1,570,304.9 2,207,368.6 (1,839,105.4) 2015 1,570,304.9 2,532,785.1 962,480.2 2016 1,570,304.9 2,510,590.5 940,285.6 2017 1,570,304.9 2,506,402.6 936,097.7 2018 1,648,820.1 2,657,727.1 1,008,907.0 2019 1,648,820.1 2,605,678.7 956,858.5 2020 1,648,820.1 2,624,157.0 975,336.8 2021 1,648,820.1 2,599,542.7 950,722.6 2022 1,648,820.1 2,595,342.3 946,522.1 2023 1,731,261.2 2,771,085.4 1,039,824.3 2024 1,731,261.2 2,736,647.5 1,005,386.4 2025 1,731,261.2 2,691,112.3 959,851.2 2026 1,731,261.2 2,741,439.1 1,010,178.0 2027 1,731,261.2 2,704,652.7 973,391.6 2028 1,731,261.2 2,719,200.5 987,939.4 2029 1,731,261.2 2,715,583.7 984,322.5 2030 1,731,261.2 2,749,482.0 1,018,220.8 2031 1,731,261.2 2,709,496.7 978,235.5 2032 1,731,261.2 2,722,542.1 991,280.9 2033 1,731,261.2 2,697,324.3 966,063.2 2034 1,731,261.2 2,702,263.4 971,002.2 FNPV 4,875,796.9 FIRR 8.4% FIRR = financial internal rate of return, FNPV = financial net present value, MNT = Mongolian togrog, O&M = operation and maintenance. Source: Asian Development Bank estimates.

F. Sensitivity Analysis

8. A sensitivity analysis was conducted to test whether changing costs and revenues would affect the subproject’s financial viability. The results indicate that the Erdenet subproject would remain financially viable under various conditions. Generally, the results showed that the FIRR for the subproject will remain above the WACC for the following scenarios: a 10% increase in capital cost, a 10% increase in operations and maintenance (O&M) cost, and a 10% decrease in project revenues. The results of the sensitivity analysis are in Table A7.4.

Table A7.4: Sensitivity Analysis

Capital Base O&M cost Revenue cost case +10% -10% +10%

Erdenet 8.4% 7.4% 5.5% 4.3% Source: Asian Development Bank estimates

Appendix 10 51

GENDER ACTION PLAN

A. A Summary Gender Assessment

1. Most activities in the Gender Action Plan (GAP) were relevant to the outcome and outputs of the project, which was categorized “effective gender mainstreaming.” However, two activities and one target were not particularly linked to Output 3 on Institutional Development and Training. A number of important features with direct gender benefits were included in the design and monitoring framework (DMF) and in the concept, but are not in the GAP (e.g., water supply through water kiosks to women and children, gender-friendly roads1 which provide safe access to ger areas, and permanent employment opportunities for women beyond the life of the project). The GAP has been modified to ensure consistency by merging three activities of Output 3 into one.

2. The project’s direct, practical gender benefits also include gender-friendly road access to ger area households, which has, in turn, enabled an adjacent new kindergarten and school to be built. The new roads have also improved accessibility to public transport. In the ger areas of Ulaanbaatar (i.e., Orbit-Takhilt, Khailaast, and Baruunsalaa) three access roads (12.3 km) have been built by the project, with dedicated bus stations, street lighting, and safe walking paths. In total, 85,635 people have benefitted from new roads in those sites. This has resulted in improved access to health clinics for women, children, the elderly and people with disabilities in all three sites. After the project road completion in Orbit-Takhilt in 2013, a new school and kindergarten were built close to the ger households in 2013. Two female teachers, Enkhtsetseg and Ariunaa, said “the number of students grew rapidly from 600 to 1,050 (60% girls), between 2013 and 2014. Previously, the children had to go to downtown area (sic) to attend school. Now, there is a school right in the middle of their ger area.”

3. Women and girls received practical benefits from the project and its GAP-designed features through gender responsive water supply and sanitation provision to ger district households, schools, kindergartens, community baths, and so on. Gender-responsive service delivery has been significantly achieved through the provision of 58 new water kiosks and 33 rehabilitated and renovated water kiosks. These are providing immediate, adequate, potable, safe, and more accessible water to women in 41,611 ger area households in five core project sites of Altai, Arvaikheer, Bayankhongor, Bulgan, and Erdenet, which comprised 140,635 people (51% women). Benefits to girls and women include improvements to their businesses, health, knowledge, and education. They no longer need to rely on intermittent water trucks to provide water, or to walk long distances to fetch water, resulting in less time spent travelling. The provision of potable water and other basic infrastructure had a direct positive impact on women and children through reduced women’s time poverty, and labor inputs, including caring for sick family members. An estimated 66% of 140,635 ger area residents at five projects sites have now access to safe drinking water supply within 200–300 meters (m), while the remaining 34% have access within 300–500 m, a 17% increase from the 2010 baseline. Women—and, in particular, children, who are most susceptible to infectious diseases—have benefitted greatly from the improved water supply and sanitation. The incidence of hepatitis A in four project aimags decreased from 30.6 per 10,000 persons in 2005 to 0.5 in 2015. As a result, the project contributed towards achievement of two targets of Millennium Development Goals’ (MDGs) on water supply (60%) and sanitation (40%).

4. Economic empowerment and employment for women has also been secured through permanent employment opportunities and short-term construction works. The project has created 86 new permanent jobs, of which women account for 67%; with 58 women employed as water

1 For instance, installation of lighting for safe mobility purposes.

52 Appendix 10 vendors and 28 men employed at water reservoirs, pumping stations and sewerage treatment plants in 5 project sites. The project provided 347 temporary construction job opportunities, of which 53 (15.2%) were for women, reflecting high occupational gender segregation in the construction sector nationwide.

Women collecting water at kiosk #18 ger district bagh Ikh zaluu, Erdenet

5. To raise awareness among staff at the MCUD, the Mongolia Resident Mission’s (MNRM) Associate Social Development Officer (Gender) conducted two training sessions for the staff of Ministry of Construction and Urban Development, and its agency Construction Development Center on the topic of gender analysis and mainstreaming in urban development. The training sessions had 82 attendees, 39 of whom were women.

B. Gender Action Plan Achievements

6. In total, 58 water kiosks were built and 33 water kiosks were refurbished in five project sites, making 91 water kiosks connected to centralized water supply. Adequate, potable, and more accessible safe water is now available to women, children, and the elderly of 41,611 households in five core project sites. Previously, ger district female residents had to wait, sometimes many hours, for water trucks to arrive. “There is an increased access to safe water supply for 1,430 ger households compared to 1,000 households still with limited access of water supply due to truck delivery (sic),” noted Ms. Idertsetseg, Public Urban Service Organization (PUSO) chief engineer in the Bayankhongor aimag. The improved quality of water supply was also echoed by a beneficiary woman2 in Uvurkhangai aimag as follows:

“My family used to fetch water from an old water kiosk for two years and disinfection substances in the water left an aftertaste. But with an establishment of the new water kiosk, we have now easy access to safe drinking water.”

7. Local PUSOs at five project sites employ 628 workers, of which 192 (30.5%) are women (including 28 women who are heads of households). While a few women were employed as the engineers of road, bridge, and electricity during road construction in Ulaanbaatar, women mostly worked as engineers, cooks, and assistants during civil works in rural areas. In total, 67 jobs were temporarily created for local workforce for subprojects in Erdenet, Arvaikheer, and Bayankhongor, of which 17% was for women. The average wage for men in road construction was $394, while for women it was $391. The average wage for men involved in water supply was $635, while it was

2 Ms. Enkhjargal, first bagh resident, Arvaikheer

Appendix 10 53

$540 for female employees. Compared to the national statistics on the gender wage gap, which stands at 15—18%, there was no explicit wage gap in most of the project’s civil works.

Compared to 30% target of small loan funds for women, 222 women (46.15%) received small loans under their names to improve on-plot facilities.

8. Before implementation of Component C on small loans, women-only focus group discussions (FGDs) and individual interviews with female-headed households (FHHs) were held with 40 women to collect their views on affordability and demand of small loans, while assessing gender dynamics with respect to access to finance and intra-household bargaining power.3 The FGD results showed that due to unemployment, lack of collateral, low income, and absence of regular income, FHHs were not likely to afford the small loans. To disseminate information on small loans among the public, an open-door day event was held in four target cities in Arvaikheer and Bayankhongor aimags, with 122 people (87 women) attended the events.

9. Bidding procedures and documents (e.g., Business Plans, Subsidiary Loan Agreements etc.) required that at least 30% of participating financial institutions (PFIs) have sole or co- borrowers that are women. Gender-related guidance and training was provided to the project management unit (PMU), project implementation units (PIUs) and PFIs, resulting in smooth collection of data and reporting disaggregated data by gender, age, and income source, creating an opportunity for gender analysis. Consequently, all reports included sex-disaggregated data, which allowed assessing practical gender benefits on the ground. A total of 1,700 persons benefitted from small loans to improve their on-plot facilities (e.g., housing conditions improvement, individual connections to water supply and waste water services, and energy savings and thermal efficiency measures) in Erdenet, Bayankhongor, Arvaikheer, and Altai cities.

10. Out of a total of 481 borrowers representing 1,700 persons, 46.15% (222) were women, well exceeding the target. Subloan agreements with PFIs were signed by both borrowers and co- borrowers to ensure shared responsibility between both spouses. Interviews with PFIs and beneficiaries revealed that the target of 30% was reflected in all types of documents (e.g. Business plans of PFIs, public brochures) and was publicly informed that “at least 30% of small loans shall be dedicated to women,” which resulted in high percentage of small loans disbursed under women’s names. With the targeted approach and soft loan terms4 offered to vulnerable households to encourage more women and disadvantaged households (i.e., female-headed and low-income households) to apply, the project provided small loans to 57 female-headed households (11.85%), and 59 poor and low-income households (12.27%) as shown in the table below.

Female and Low-Income Borrowers under Component C of the Project Total number (%) % of total of Borrowers disbursement TOTAL 481 (100.00%) 100.00% Women 222 (46.15%) 45.38% Female-headed households 57 (11.85%) 11.56% Poor and low-income households 59 (12.27%) 11.54%

3 Aide Memoire of gender review mission to Bayankhongor and Arvaikheer, 19-23 January 2015. 4 State Bank: 10% of loan funds to be disbursed to female-headed households (FHHs), and with a grace period of 2 years; Capital Bank: Interest rate of 8% per annum for FHHs, tailored approach of a model street for FHHs, and women in the low and middle- income brackets.

54 Appendix 10

11. Most borrowers were 26–55 years old (i.e., 33.5% aged 26–35, 28.1% aged 36–45, and 24.5% aged 46–55). Youths aged 18–25 years old accounted for 5.2% and the elderly (aged 56- 65) accounted for 8.7%. This was, to some extent, related to high unemployment among youths nationwide and less access to loans among the elderly, whose pensions are not recognized by PFIs as regular income.

12. As part of a pioneer initiative from community based-organization (CBO) Mungun Khurimtlal to establish a model street in Arvaikheer,5 four households (including two female-headed ones) built new houses with small loans. Interviews with nine beneficiary households (four of which were female-headed and two low-income) revealed beneficiaries were living in a a safer, more comfortable, and healthier environment. A qualitative assessment as part of the completion review revealed that co-borrowers of FHHs tended to be siblings or children who had regular incomes. Beneficiary households said that: “Because of the project requirement that women should be encouraged to apply for loans, more women received small loans under their names. As a result, we could have the certificates of our new houses under our names.”

Box 1: With the new house and more space, I have now my own room so that I can concentrate more on my drawings–my main income source

My name is DavaamaaMs. Davaamaa, and I am project a single beneficiary mother of and thr CBOee sons. member, I am andrawing artist. aAs painting I did not have any property to be used as collateral, a member of my CBO “Mungun Khurimtlal” helped me by lending her certificate of land plot. Thanks to small loan, I have now my own space for drawing, which is the main source of my income. I used to live in a ger sharing the land plot with my mother. But now I have my own immovable property. With this new house, I am no longer afraid of flood or storms (sic).

Box 2: The new house provides me a chance to invest in my bakery

My name is Sumiya, 45, and a single mother of two sons. I run a small bakery inside my house. Thanks to small loan, I can use my existing house for my family business purposes by extending my bakery (sic).

5 Comprised of 17 groups including 190 members, and operational since 2006.

Appendix 10 55

Ms. Sumiya, project beneficiary and CBO member, in front of her new house

13. Overall intended gender benefits are assessed as successfully delivered, given that 81% of the eight GAP activities were implemented and completed, and 80% of the five gender-related targets achieved. Details on the GAP achievements are available in the matrix below.

C. Lessons learned

14. Gender targets and indicators, especially qualitative ones, should be as specific and measurable as possible. At project completion, some missing sex-disaggregated data was collected but this did not happen consistently throughout project implementation. Regular sex- disaggregated data collection on all project interventions, gender analysis, monitoring of GAP indicators, and reporting on practical project benefits for women and other vulnerable segments of population should happen consistently throughout project implementation.

15. Throughout project implementation, major provisions of the loan covenants were complied with, except for annual monitoring reports on GAP implementation as part of project performance monitoring system (PPMS) reporting. Annual reporting on GAP implementation was insufficient because of an absence of an intermittent dedicated gender specialist at the PMU early in project implementation, and a lack of understanding among staff at the MCUD and the project management unit on gender-related reporting requirements.

16. Tailored outreach to women and dedicated targets to ensure women’s access to credit are good practices for future urban development sector projects with microfinance components. It is also crucial to provide training on financial literacy for potential borrowers, especially for women and rural populations, in future projects that have a microcredit component.

56 Appendix 10

Gender Action Plan Matrix

GAP Activities and Indicators Achievements at Project Completion Component A: Improvement of Basic Urban Services 1. Water supply to ger households Achieved. The project installed 58 new water kiosks and refurbished 33 water kiosks at five project sites, through the provision of new or making 91 water kiosks in total that are connected to centralized water supply. This has provided immediate, improved water kiosks 200 m or adequate, potable, safe, and more accessible water to 41,611 ger area households or 140,635 people (51% less from ger residences women). As the 2010 baseline data shows below, out of 89 water kiosks, only two were connected to centralized water supply, while in 2014, out of 115 water kiosks, 91 were connected to centralized water supply. Number of water kiosks connected to centralized water supply 2010 2014 Project sites Connected Connected No. of New Kiosks Total No. of to Water Total No. to Water Kiosks Supply of Kiosks Supply Erdenet 24 0 50 50 26 Altai 13 0 20 7 7 Arvaikheer 32 0 45 18 18 Bayankhongor 20 2 44 14 5 Bulgan 0 0 2 2 2 Total 89 2 115 91 58

Prior to the project (2010), 49% of 125,341 ger area residents had access to water 200–300 meters (m) from

home, and the remaining 51% within 300–500 m. On project completion (2014), 66% of 140,635 ger area

residents had access to water within 200–300 m and 34% within 300–500 m (details available below). All water kiosks were established within 200–250 m, except Bulgan aimag (250–300 m). This complies with a

joint decree #192/а-255 by Ministers for Road, Transportation and Urban Development and for Nature, Environment and Tourism (dated 2 July 2012) on adoption of an approach for water supply and services (3.2.a) which stipulates “Water supply point should be located within 300 m radius to which no longer than 30 minutes shall be spent (travelling).”

2010 2015 Total No. of Distance to Total No. of Distance to Project Sites Ger Area % Water Kiosks Ger Area % Water Kiosks Residents (m) Residents (m) Erdenet 48,800 40 200–300 64,605 65 200–300 60 300–500 35 300–500 Bayankhongor 26,530 65 200–300 24,059 75 200–300 35 300–500 25 300–500 Arvaikheer 25,230 75 200–250 25,972 93 200–250

Appendix 10 57

GAP Activities and Indicators Achievements at Project Completion 25 250–300 7 250–300 Altai 12,781 35 200–250 13,369 49 200–250 65 250–300 51 250–300 Bulgan 12,000 30 200–250 12,660 50 200–250 70 250–350 50 250–350 49 200–300 66 200–300 125,341 51 300–500 m and 140,635 34 within 300–500 Total over

2. Kindergartens and schools with Achieved. Seven local schools, one dormitory, and nine kindergartens were directly connected to water continuous water and sanitation supply and sewerage at six project sites, resulting in increased practical gender benefits for 8,655 students services through direct and pupils (47.62% girls), and 1,680 children (53.33% girls) overall. connections of whom at least half Kindergartens and Schools Connected with Number of the pupils are girls. Water and Sanitation Services at Project Sites Students and Children Male (%) Female (%) Erdenet Secondary School No. 3 “Naran tsogtsolbor” 2,000 54 46

Kindergarten No. 6 335 45 55 1 Kindergarten No. 22 300 47 53 Kindergarten No. 23 240 48 52 Secondary School No. 17 1,200 52 48 Secondary School No. 15 850 49 51 Altai Vocational Training and Production Center 1,000 49 51 2 Kindergarten No. 2 140 45 55 Kindergarten No. 4 140 47 53 Arvaikheer Technological College 2,000 48 52 3 Vocational Training and Production Center 1,000 51 49 Kindergarten 140 48 52

Bayankhongor 4 Kindergarten No. 6 150 48 52 Teshig Soum, Bulgan 5 Kindergarten 135 43 57 Buren Soum, Tuv Secondary School 525 51 49 6 School Dormitory 80 65 35 Kindergarten 100 49 51 Total 10,335 49.46% 50.53%

58 Appendix 10

GAP Activities and Indicators Achievements at Project Completion

3. Improved access to family health Achieved. In total 85,635 people have benefitted from new roads at three project sites (33,652 people in clinics in sub-urban areas of Khailaast, 24,839 in Baruun Salaa, and 27,144 in Orbit Takhilt). This has improved access to family health Ulaanbaatar city clinics for women, children, the elderly and people with disabilities in all three sites.

4. Qualified females will have equal Achieved. Water vendors of 58 newly established water kiosks are all women, making the total number of access to employment employed women 90 out of 91 water vendors. opportunities during improvement Water Kiosks of urban infrastructure Project Sites New Refurbished 1 Erdenet 26 24 2 Altay 7 3 Arvaikheer 18 4 Bayankhongor 5 9 5 Bulgan 2 Total 58 33

A provision ensuring equal access to employment for women was reflected in the civil works employment

contracts. The project provided 347 temporary construction job opportunities, of which 53 (15.2%) went to

women. Contractors’ data shows no explicit gender wage gap in comparable categories of jobs. While there

were a few women employed as engineers during road construction in Ulaanbaatar, most women worked as

engineers, cooks, and assistants during civil works in rural areas. In total, 67 jobs were temporarily created for

local workers in three project towns (Erdenet, Arvaikheer, and Bayankhongor), of which 17% was for women.

Project Total No. of Monthly Salary (USD) Contractors Workers Male Female Male Female 1 Khailaast 1.1 km 25 19 6 387.5 383.3 2 Orbit-Takhilt 7.3 km 38 30 8 400.0 400.0 3 Baruunsalaa 4.1 km 63 61 2 350.0 350.0 Local Labour 5 5 - 350.0 - 4 Erdenet 47 39 8 625.0 625.0 Local Labour 30 26 4 333.3 333.3 5 Govi-Altai 29 24 5 342.0 342.0 6 Arvaikheer 35 29 6 625.0 625.0 Local labour 15 10 5 333.3 333.3 7 Bayankhongor 48 42 6 468.0 468.0 Local Labour 22 19 3 350.0 350.0 Total 347 294 53

Appendix 10 59

Component B: Urban Road Improvement 5. Traffic and pedestrian roads built Achieved. The project built three access roads (a total of 12.3 km long) in suburban Ulaanbaatar with a total (12.3 km) to ger residence areas of 45 bus stations in Orbit Takhilt (29), Baruun Salaa (13), and Khailaast (3) ger areas, as well as street 1 with lighting to access final lighting and safe walking paths on both sides of the project roads. This has resulted in gender-friendly and destination for bus service, and safe road access to ger area households, enabling adjacent access to a new school built along the road. shorten overall travel time Component C: Small Loans for Water Connections and On-Plot Facility Improvements 6. Small loans to ger HHs of whom Achieved. A target to provide at least 30% of small loans to women as sole or co-borrowers was required at least 30% will include women throughout bidding procedures for participating financial institutions (PFIs). Gender-related guidance and as sole or co-applicants and their training was provided to the PMU, PIU, and PFIs, resulting in smooth collection of data disaggregated by names are reflected in relevant gender, age, and income source. All reports included sex-disaggregated data, which allowed assessing legal documents. Sex- practical gender benefits on the ground. The project benefitted a total of 1,700 persons to improve their on-plot disaggregated data to be facilities. As a result of the targeted approach and low interest rates offered to vulnerable households, 46.15% collected. (222) were women out of a total of 481 borrowers, while 11.85% (57) were female-headed households and 12.27% (59) were poor and low-income households. Loan agreements were signed by both borrowers and co- borrowers to ensure shared responsibility among both spouses. Interviews with PFIs and beneficiaries revealed that the target of 30% was reflected in all types of documents (e.g. PFIs' business plans, public brochures) and was publicized, which resulted in high percentage of small loans disbursed under women’s names. Component D: Institutional Development and Training Achieved. A total of 628 workers are currently employed by local public urban service organizations (PUSOs) 7. Women will be equally considered in five project sites, of whom 192 (30.5%) were women (see table below). Although there is no female head of with men for all type of a local PUSOs, there is one female chief engineer and all five chief accountants are women. Women had an management and project equal opportunity to apply for temporary jobs created under the project. The project has created 86 permanent implementation work. new jobs, of which women occupy 67%; 58 women are employed as water vendors and 28 men are employed at water reservoirs, pumping stations, and sewerage treatment plants at five project sites (details available below). Women New Jobs Created Under the Project Total Who Head Project Sites Workers Male (%) Female (%) Households Total Male (%) Female (%) 1 Erdenet 324 207 (65%) 115 (35%) 13 34 8 (24%) 26 (76%) 2 Altai 47 32 (68) 15 (32%) 1 11 4 (36%) 7 (64%) 3 Arvaikheer 44 30 (53%) 14 (47%) 3 25 7 (28%) 18 (72%) 4 Bayankhongor 57 38 (67%) 19 (33%) 3 14 9 (64%) 5 (36%) 5 Bulgan 156 127 (77%) 29 (18.5%) 8 2 - 2 (100%)

434 192 Total 628 28 86 28 (31%) 58 (69%) (69.5%) (30.5%)

1 For instance, installation of lighting for safe mobility purposes.

60 Appendix 10

8. Training will be open to men and Partly Achieved. 28 officials (16 of which were women) from PUSOs and local governments were trained on women equally and training an employee stock ownership plan; 25 officials (12 women) were trained on public–private partnerships and materials will be sensitive to 21 people (15 women) on corporate governance. 70 officials (over 50% female) from 19 aimags attended gender issues. training on PUSO institutional reforms in 2013. An awareness session on prevention of sexually transmitted infections (STIs) and HIV/AIDS was conducted for 45 construction workers (six women) in Khailaast and 63 workers (two women) in Baruun-Salaa. A training handbook on health awareness and hygiene was developed, and public awareness sessions on managing wastewater and solid waste disposal were held in Erdenet (September 2011), Bayankhongor (June 2012), Arvaikheer (May 2013), and Altai (June 2013).

9. Community group trained should Partly Achieved. According to a survey on affordability and willingness to pay (covering 203 households) comprise at least 40% women. conducted on May 2010, only 20% of the community could afford monthly payments for bank loans, given an average investment of around $2,000–2,500 per household to build a water or sewerage connection. For this reason, the project discussed cancelling this loan component but later decided to proceed. Meantime, under a project called Community-Driven Development for Urban Poor in Ger Areas project (9106-MON) funded by Japan Fund for Poverty Reduction—which was supposed to be implemented in parallel with the project, 64 community groups (7–16 households per group) were formulated in Bayankhongor aimag during 2009–2011. Based on collective decisions on priority investments, these community groups built a number of social facilities themselves (e.g., two water kiosks, a sports complex, a playground, model ger streets, and public bus stops). To sustain the community-driven development approach, a local nongovernment organization (NGO) "Community Development Center" was established in 2011, comprising 30 community groups (of which 90% were led by women). The project supported the existing CBO “Mungun Khurimtlal” and gave four loans for member households to establish a “model street” in Uvurkhangai aimag. Public open-door day events were organized with over 900 attendees (of whom more than half were women) in four target project towns to disseminate information on small loans (January 2015), and 20,000 brochures were distributed. In Arvaikheer, around 15 members (all female) from the “Mungun Khurimtlal” CBO attended the event. There was also a training conducted in collaboration with the Mongolia’s Cooperatives’ Training and Information Center on March 2015 in four project towns, which 951 people attended (no sex-disaggregated data was available).

Appendix 10 61

10. Awareness building and Partly Achieved. A handbook on health awareness and hygiene was developed, and a series of awareness consultation program should be sessions on “Managing wastewater and solid waste disposal” was held in Erdenet (September 2011) with nine directed at least 40% toward attendees (six women/66%), Bayankhongor (June 2012) with 13 attendees (10 women/77%), Arvaikheer (May women, with gender 2013) with 10 attendees (5 women/50%) and in Altai (June 2013) with 13 attendees (10 women/77%). A total disaggregated groups as required of 241 persons attended 24 public consultation meetings, of which 92 (38.1%) were women. to ensure women participate fully. No. of Potentially No. of Potentially No. of Affected Affected Persons (No. of Consultation No. of Attendees Subprojects Facilities Women) Meetings (Women as No./%) Altai 11 17 (10) 2 22 (6 W/ 27.3%) Bayankhongor 14 59 (34) 2 23 (7 W/ 30.4%) Erdenet 73 212 (106) 4 59 (20 W/ 33.9%)

Arvaikheer 7 17 (10) 2 14 (5 W/ 35.7%) Bulgan 9 32 (17) 2 16 (8 W/ 50%) Orbit Takhilt 12 39 (21) 2 21 (11 W/ 52.4%) Khailaast 7 35 (18) 4 24 (10 W /41.6%) Baruun Salaa 12 45 (27) 2 15 (7 W/ 46.7%) Botanic- 72 271 (142) 4 47 (18 W/38.3%) Sharkhad Total 157 688 (385) 24 241 (92 W/ 38.1%)

11. Ensure equal participation Achieved. An estimated 150 civil servants—including staff from the governor’s administrative office in project among men and women in aimags, social workers, family group practitioners, PUSO officials, and water vendors—were trained on sanitation, health, and hygiene “Community engagement and public awareness raising on hygiene” in three focus project towns: Erdenet, training. Bayankhongor, and Altai. Around 60–70% of attendees at the eight local training sessions were women. 12. Provide entrepreneurial advice and training for women for potential Not demanded and not implemented as this feature was beyond project scope. community improvement profit-making enterprises (i.e., humus sales, recycling) on a demand-driven basis. Achieved with Variation. Instead of a community development specialist, the project recruited a short-term 13. Engage community development public health awareness and training specialist. The PMU had a full-time monitoring & evaluation specialist specialist to monitor and evaluate project who was in charge of GAP implementation and collecting sex-disaggregated data to assess project impacts. impacts on women. At five project sites, 58% of ger residents spend 10–15 minutes, 30% spend 15–20 minutes, and 12% spend 20–30 minutes collecting water in 2015. This compares with the 2010 baseline where 39% spent 10–15 minutes, 35% spent 15–20 minutes, and 26% spent 20–30 minutes. An estimated 55,112 women and girls at five project sites spend less time to get water, resulting in reduced time poverty and more opportunities to allocate time for family members’ wellbeing and education, and for themselves (details given below).

62 Appendix 10

Time Spent Collecting Water each Day at the Five Project Sites Item 2010 2015 Total Number of Ger Area 125,341 100% 140,635 100% Residents in Five Project Sites 10–15 minutes 41,562 39% 72,420 58% 15–20 minutes 38,829 35% 37,015 30% 20–30 minutes and over 28,459 26% 13,810 12%

Appendix 11 63

ENVIRONMENTAL ANALYSIS

A. Introduction

1. According to Asian Development Bank (ADB) procedures for environmental and social review of projects, the Urban Development Sector Project was categorized as environmental category “B”. The main physical components of the Project were the (i) improvement of basic urban services; (ii) improvement of urban roads; (iii) the provision of small loans for water connections and on-plot facility improvements; and (iv) institutional development and training.

2. The potential environmental consequences of each subproject were screened to assess the likely impacts that should be monitored and which form the basis for the environmental management plan. This assessment was conducted throughout (i) project preparation and design phase; (ii) project construction phase; and (iii) operation and maintenance of completed works.

3. The environmental examination addressed the characteristics of the general location of the subproject area, the surrounding environmental conditions, and the likely impact of the proposed works at the specific locations. Possible conflicts over water resources, raw water quality, and the licensing and control of such resources were investigated. Similarly, the licensing, control, and environmental impacts of wastewater discharge and landfill disposal of domestic solid waste were assessed. Road traffic flows and their impact on bordering neighborhoods were reviewed with requirement for impact mitigation measures. The initial environmental examinations (IEEs) assessed the potential issues likely to result from construction and their impact on public safety and the environment. These were creation of dust and noise; conflicts in traffic movements; restrictions to access; and the presence of numerous construction workers, including health and safety requirements.

4. A detailed environmental impact assessment (EIA) was carried out for road subprojects in Ulaanbaatar as was recommended in the General EIA made by the Ministry of Environment. The General EIA was carried out for additional subprojects on water supply and sewage systems and heat distribution centers in project aimags. The General EIA concluded that no detailed EIA was required. Some recommendations were made as to mitigate negative impacts, including noise and dust control, solid waste management, prevention from soil degradation, and labor safety.

5. The need and scope for environmental monitoring was reviewed in detail and the findings and assessment were incorporated into the environmental management plan (EMP). The estimated costs of the mitigation measures for the subprojects were also provided.

B. Type, Size, and Operation of Subproject Works

6. The project’s underground works mainly comprised excavation of pipe trenches and laying of water and sewer pipes. Connection chambers on water mains and manholes on sewers were equipped with suitable covers. Above-ground works were limited to the construction of reservoirs, pumping stations, and water sales kiosks. The largest reservoir was 1,000 cubic meters (m3) and made from reinforced concrete. The reservoirs were insulated and covered with earth to prevent freezing during winter. Water sales kiosks are small, typically 3 meters by 3 meters, because water kiosks were connected to the piped system and no longer needed storage tanks. Pumping stations were largely confined to borehole locations each with a small well-head structure to house electrical and control equipment. Construction work at

64 Appendix 11

wastewater treatment plants was confined to improving existing structures and re-equipping mechanical and biological stages of the treatment process. The pipe trenches were necessarily deep (up to 4 meters) to ensure water pipes are laid at or below the limit of seasonal freezing. Pipes laid varied in diameter from 250 millimeters (mm) to 100 mm, and the material was medium density polyethylene (MDPE). Extreme care was taken during trenching to ensure workers’ and public safety.

7. The completed main roads were operated and maintained by the Ulaanbaatar Municipal Government. Water supply, sewerage, and wastewater treatment were the responsibility of the towns’ public urban service organizations (PUSOs), initially operating under the management of the aimag government. The PUSOs are intended to become autonomous in the medium term. Individual water connections and the on-plot disposal of excreta and grey water remained the responsibility of the residents. However, the Project enabled access to small loans to residents for improving and operating these facilities.

8. Municipalities were responsible for solid waste collection and management, although the service may be contracted to the private sector in future. 26 solid and liquid waste collection and transportation trucks, crane trucks, loaders, and excavators were provided to PUSOs to improve collection of solid waste. Road sweepers maintained paved roads in a clean condition.

C. Problems Identified in the IEE Prior to Construction

9. The land around the Project areas is generally un designated and unallocated. The nearest areas protected for cultural or environmental reasons are more than 50 kilometers (km) from the project towns. The former forest areas in Erdenet have been decimated for fuel for nearby ger areas. Soil erosion and deep rutting is evident from multiple vehicle tracks over soft or muddy ground and, particularly in the more southern town of Bayankhongor. Frequent dust and sand storms result in atmospheric pollution and respiratory problems. Prevailing winds are north and north-west in project areas.

10. Towns typically were made up of formal urban centers with institutional buildings, residential apartment blocks, roads, and service infrastructure but also included extensive and sprawling ger areas with rudimentary infrastructure. Up to 90% of towns’ populations are, or the medium term will be, living in ger areas. The urban environment is degrading as a result of a number of factors, including low density of dwellings leaving much open space which is not maintained, lack of sufficient infrastructural amenities and facilities, unconfined animal husbandry, unemployment, and generally poor socioeconomic conditions. Solid waste is often evident despite reasonable collection services but the public is ambivalent about the service. Illegal waste dumping occurs, mostly of residual fuel ashes and construction waste (cement).

11. Ger areas are often located on less convenient or steeper ground on the perimeter of more formal settlements. This leads to a variety of problems, including access and drainage. The on-plot accommodation comprises either a ger structure or, increasingly, single story timber buildings of modest construction. Electricity is available to each plot but no other connected services. Residents were required to buy and haul water from kiosks, which received their supply by truck. This arrangement was expensive and time-consuming. Water was prone to contamination, and hauling water was complicated by severe winter conditions. Sanitation is by simple on-plot latrine and wastewater disposal is by soak pit. Solid waste collection is sporadic and poorly managed.

Appendix 11 65

12. Pedestrian and vehicular access to water kiosks and to individual plots is often difficult because the roads are unfinished, steep, slippery in winter, and eroded by weather and human activity. The project facilitated improvements, subsequent phases of which may be undertaken by local governments and/or by the residents themselves. The government is taking some initiative to replicate project activities, such as providing small loans for improvements to residential plots and water supply connections.

D. Environmental Impacts and Mitigation Measures Undertaken

13. Subprojects’ potential environmental consequences were screened to assess likely impacts that should be monitored and form the basis of the environmental management plan. Environmental impacts were assessed for the phases of project preparation and design construction, and operation and maintenance. The IEEs assessed the likely issues arising from construction problems and their impact on public safety and the environment. Potential impacts included the creation of dust and noise, conflicts in traffic movements, restrictions to access, and the presence of construction workers.

Pre-Construction Phase

14. The project preparation stage included public involvement and specific consideration of potential environmental impacts. Alternative design approaches were offered and discussed. Impact mitigation plans were developed for the core subprojects’ design, construction, and operation phases. These plans include: (i) public participation in determining scope of project through workshops, surveys, and meetings; (ii) requirements for training and practical assistance to stakeholders in environmental issues; (iii) monitoring impacts and mitigation measures during the construction and operation phases; and (iv) evaluating environmental and economic benefits and social impacts. These plans included several types of public involvement, e.g. site visits, workshops, investigation of specific issues, interviews, and public hearings. For 12 non-core subprojects in project soums, environmental management plans were prepared and mitigation measures proposed to reduce expected negative impacts on air, soil, water, and vegetation. Mitigation measures included regular watering of the construction site, covering of construction materials, avoiding disturbing land as much as possible, rehabilitating disturbed land after construction, properly managing construction waste, and following health and safety regulations.

15. The proposed mitigation measures during construction were included in the tender and contract documents where appropriate. Necessary permissions were obtained before construction. Costs related to mitigation measures for the construction phase were included in the contracts for construction works. Information related to construction was shared with the public and neighboring residents in advance.

Construction Phase

16. The following measures were undertaken during construction to reduce negative impacts to environment and occupational health and safety: (i) reasonable construction arrangements, (ii) installation of on-site sound barriers to reduce noise, (iii) timely clean-up, (iv) transportation of waste in covered vehicles or in closed containers, (v) provision of personal protective equipment, (vi) provision of temporary roads, (vii) diversion of traffic at peak hours, and (viii) regular watering during construction to control dust.

17. Contractors appointed staff in charge of implementing the EMPs.

66 Appendix 11

18. Information boards at the construction site were posted to alert local communities of safety hazards during the civil work.

19. Eight training sessions were conducted on public health, environment, and occupational health and safety to public and contractors. A total of 150 participants (of which around 100 were women) participated. Public awareness materials including fliers and brochures were distributed during workshops.

Operation Phase

20. A project management unit (PMU) was established in Ulaanbaatar and project implementation units (PIUs) were established in Erdenet, Altai, Arvaikheer, and Bayankhongor cities. In other towns, construction supervision engineers were appointed to supervise the construction works and to ensure environmental, occupational health and safety, and land acquisition and resettlement issues were addressed. They also managed the day-to-day implementation of the project tasks, maintained working relationships between the project parties, and provided regular updates to the PMU and local governments.

21. For institutional reforms, a number of activities were undertaken with the PUSOs, including: (i) support for the PUSOs becoming financially sustainable, (ii) proposed tariff reforms and operational improvements, and (iii) sound operation and maintenance plans for future service provision.

22. A revised law on urban water supply and sewerage use created an independent regulatory council at the national level to coordinate the operation and maintenance of urban water supply and sewerage systems. Under this law, the council has the right to establish tariffs and fees for water supply and sewerage services, issue special licenses, and provide professional advice. The project supported the development of the proposed changes in the revised law and revision of basic prices for water supply and sewerage services. The proposals were included in the revised law and revisions to basic prices applied in aimags and cities, supporting PUSOs’ financial viability.

23. The law also states that “the construction of urban water supply intake, water transmission facilities and distribution, wastewater collection, networks and waste water treatment plant should be the property of state and provincial property relations office” and clearly defined the responsibilities for the operation and maintenance of water supply and sewerage facilities. This removed the burden of operation and maintenance from the PUSOs.

24. PUSO reform recommendations were developed and published during project implementation. The recommendations included proposals to revise the urban water supply and sewerage use law to establish an Independent Regulatory Council at the national level and ownership, and to clarify PUSOs’ role in operation and maintenance of facilities. The executing agency distributed the published recommendations to all aimag residents’ representatives meetings and to governors. The executing agency also provided information and conducted training to PUSO officials and aimag governor’s office staff. As a result, the proposals were included in the revised law.

25. A significant progress has been made in Bayankhongor aimag in terms of ownership of urban water supply intake and water transmission facilities. The residents’ representative meeting Resolution (No. 17/3 of April 11, 2012) on “Measures to be taken on the local

Appendix 11 67 ownership” set out to transfer ownership of the urban water supply intake, water transmission facilities and distribution, wastewater collection, networks and waste water treatment plant from the Chandmani Bayankhongor PUSO to the provincial property relations office. A long-term contract has now been signed with the Chandmani Bayankhongor PUSO to operate the water supply and sewerage system. Under resolution number 18/3 of 11 October 2012, a decision was made to change the Chandmani Bayankhongor PUSO into a joint stock company. Currently, the local property office owns 51% of the total shares in the company, with 20% being owned by employees and the remaining 29% by local residents.

26. The PMU has twice organized two days of special training for the Bayankhongor aimag Residents’ Representative meeting, aimag governor’s office, provincial property relations office, and to the Chandmani Bayankhongor Joint Stock Company administration and Board, and has provided recommendations and guidelines on the corporatization process.

E. Institutional Arrangements and Environmental Monitoring

27. The Project was implemented by the Ministry of Construction and Urban Development (MCUD), which was the executing Agency. A project steering committee, chaired by the Minister of Construction and Urban Development, provided policy coordination and guidance. A project management unit (PMU) was established under the MCUD to manage and coordinate the subprojects. The PMU, contractors, and PIUs appointed committed, qualified environmental specialists to oversee environmental management and ensure implementation of the environmental monitoring plan (EMP).

28. The EMP covered all phases of the project from preparation and construction to commissioning and operation, and aimed to ensure control of environmental impacts through monitoring and mitigation implementation. A full EMP was incorporated into the construction and operation management plans as appropriate.

29. During project preparation and implementation, institutions with different environmental management responsibilities, such as the Ministry of Environment, Green Development and Tourism (MEGDT), the Local Authority for Specialized Inspection (LASI), Aimag Environmental Agencies, PMU, implementing agencies, Design institutes, Environmental Management consultants (EMCs), contractors, and construction supervision companies have been involved in implementing EMPs. ADB approved two IEEs/EMPs. Monitoring of EMP implementation took place at least twice during construction for each subproject and recommendations provided.

30. Regular monitoring of EMP implementation was carried out by the PMU. Environmental consultants monitored air and soil pollution. For road subprojects, sampling points for air and soil pollution were identified and consultants sampled regularly. Air quality parameters were assessed as “unpolluted”. Soil samples did not exceed permitted levels.

31. During monitoring, environmental specialists made on-site recommendations to improve EMP implementation. Specialists also addressed some issues identified during monitoring.

32. An environmental safeguard specialist joined ADB review missions to monitor EMP implementation and to recommend improvements and follow-up actions.

68 Appendix 11

F. Reporting

33. PMU coordinated the preparation of semi-annual and annual environmental progress reports and submitted these to ADB on time. Ten environmental monitoring reports (four annual, six semi-annual) were uploaded in ADB website.

34. A grievance redress mechanism was created in 2011 and operated through the operation phase. The project received nine complaints, mainly requests to speed up construction and provide additional information on civil works. One complaint was received from herding families from Bulgan aimag on the risk of depletion of surface water. The project visited the site more than 20 times in 2011–2012, involving sector specialists. It met with 12 herding families and local authorities to explain the project plans to improve the water supply. The Minister for Construction of Urban Development also joined one of the visits. The complaint was addressed positively. Construction of an additional deep well to ensure sustainable supply of water source in Arvaikheer city was discussed in 2013. As a result, the project built a 49-meter- deep well with groundwater monitoring equipment to be operated in case of a water shortage. Some comments were related to construction noise and dust. The PMU addressed all complaints upon receipt and resolved then satisfactory. There were no outstanding complaints.

G. Conclusion and Recommendations

35. Implementation of mitigation measures in the EMP was satisfactory during the pre- construction and construction.

36. The project carried out a number of public awareness and education activities: public consultation during the EIA process; and training on health, occupational health and safety, hygiene, and management of wastewater and solid waste. Fliers and brochures were distributed to participants. Residents were informed in advance of planned construction activities.

37. The project achieved its objective as identified in the design and monitoring framework. Living conditions for more than 300,000 residents were improved in project target areas which also led to decrease of waterborne diseases. A total of 21 organizations—including schools, kindergartens, hospitals, market and shops—were connected to water supply and sewage pipelines in project aimags.

38. Road construction has improved the living environment. There has been a reduction in dust and air pollution, benefitting public health, reducing travelling times, improving road networks, and reducing traffic.

39. The provision of laboratory equipment assisted in quality assurance and quality control of roads that the project built in Ulaanbaatar. It also improved local implementing agencies’ capacity to control quality of the overall Ulaanbaatar road network.

40. PUSOs should continue operating the water supply and sewerage network and conduct necessary tests and samples for water quality control and engage the Aimag Professional Inspection Departments in regular monitoring during the operation.

Appendix 12 69

LAND ACQUISITION AND RESETTLEMENT

A. Background

1. The project’s feasibility study identifying the potential need for land acquisition and resettlement (LAR) in the Khailaast ger area of Chingeltei District, Ulaanbaatar, and Orkhon aimag. A Land Acquisition and Resettlement Framework (LARF) was included in the feasibility study in October 2006 and updated in July 2009.

2. The project started with two core subprojects: (i) improvement of the Khailaast road section in Ulaanbaatar; and (ii) improvements to water supply, sanitation, and solid waste management in Erdenet city, Orkhon aimag. More subprojects were implemented in other locations at the request of local aimag governments and the Ministry of Construction and Urban Development (MCUD). The subprojects were implemented in the locations indicated in Table 1 below.

Table 1: Project Locations No. Location Comments Ulaanbaatar 1 Khailaast, Chingeltei District 2 Baruun Salaa, Songinokhairkhan District 3 Orbit-Takhilt, Songinokhairkhan District 4 Botanic-Sharkhad, Bayanzurkh District LARP was prepared and implemented, but the project was not implemented Aimags 5 Erdenet, Orkhon Aimag Two LARPs were prepared 6 Baruun-Urt, Sukhbaatar Aimag 7 Altai, Govi-Altai Aimag 8 Bayankhongor, Bayankhongor Aimag 9 Arvaikheer, Kharkhorin, Sant and Bayangol soums, Uvurkhangai Aimag 10 Bulgan, Buregkhangai and Teshig soums, Bulgan Aimag 11 Zuunmod and Buren soums, Tuv Aimag 12 Gurvansaikhan soum, Dundgovi Aimag LARP = land acquisition and resettlement plan

3. Land acquisition and resettlement (LAR) was required for 10 subprojects. A Land Acquisition and Resettlement Plan (LARP) was prepared and uploaded to the ADB website (see Table 2).

4. Component A involved subprojects in Sukhbaatar, Tuv and Dundgovi aimags and additional subprojects in Bulgan, Bayankhongor, Uvurkhangai aimags. Subprojects included rehabilitation of water pipes; installation of water, heating, and sewerage pipes; installation of a wastewater treatment plant; and construction of a heating and boiler plant. The PMU and the officials of the respective aimags conducted LAR due diligences. No LAR were expected in these projects, thus no LARPs were necessary for these projects. The DDRs were uploaded at the ADB website.

70 Appendix 12

Table 2: LARPs Prepared and Uploaded in the ADB Website1

No. Name Status Date Remarks 1 LARP for the Bayankhongor Basic Urban Services Final Nov Improvement Subproject 2010 2 Updated LARP for the Erdenet Basic Urban Final Nov Services Improvement Subproject 2010 Supplementary LARP for the Erdenet Basic Urban Supple Nov Services Improvement Subproject mentary 2010 3 LARP for the Erdenet Basic Urban Services Final Oct Improvement Subproject 2009 4 LARP for the Altay Basic Urban Services Final Oct Improvement Subproject 2010 5 LARP for the Arvayheer Basic Urban Services Final Oct Improvement Subproject 2010 6 LARP for the Baruun Salaa Road Improvement Final Oct Subproject in Ulaanbaatar 2009 7 LARP for the Khailaast Road Improvement Final Oct Updated version of Subproject in Ulaanbaatar 2009 the document below Short Resettlement Plan for the Construction of Final Oct Developed during the Road in the Hailaast Ger Area, Chingeltei District 2006 feasibility study 8 LARP for the Orbit-Takhilt Road Improvement Final Oct Subproject in Ulaanbaatar 2009 9 LARP for the Botanic-Sharkhad Road Final Nov Improvement Subproject 2011 10 LARP for Bulgan Subproject Final Mar 2012 11 Due diligence reports (DDRs) for Bayankhongor, DDR June Uvurkhangai and Bulgan subprojects 2014 LARP = land acquisition and resettlement plan

5. Table 2 provides information on the LARPs that were prepared and approved by the government and ADB. These LARPs were approved as early as October 2006 during the feasibility study stage; the last one was approved in May 2012 for the Bulgan subproject. The LARP for Botanic-Sharkhad Road Improvement Subproject in Ulaanbaatar was prepared, approved, and implemented. Road construction did not take place because of issues related to contractor selection.

6. The LAR activities were carried out in accordance with the relevant legislation of Mongolia and ADB’s Involuntary Resettlement Policy. No affected persons lost more than 10% of their income generating assets and the number of people displaced from their homes did not exceed 200 for any subproject. The project fell under Category B of ADB’s resettlement policy. Ten LARPs were developed for the nine subprojects that involved LAR. A total of 215 individuals, businesses, and government organizations were affected; 22,456 square meters (m2) of land was acquired and transferred to public ownership; and 346 houses, fences, sheds and other assets were partially or entirely affected. In total, MNT450,538,332 was paid in compensation.

1 The website does not provide information on due diligence for subprojects that did not require land acquisition and resettlement (LAR): subprojects in Sukhbaatar, Dundgovi, and Tuv aimags.

Appendix 12 71

B. Land Acquisition and Resettlement Impacts

7. LAR activities were ongoing since the start of project preparation, beginning with the LARF in October 2006 (see para. 1). LAR implementation began in August 2008 with the establishment of Land Acquisition and Resettlement Plan Implementation Committees (LARPIC) and working groups under the offices of the aimags where subprojects were implemented. The LAR activities were completed in October 2013.

8. Resettlement specialists, in cooperation with the detailed technical design contractors, reduced LAR impacts by visiting the field, consulting affected persons, and optimizing technical design.2

9. Upon completion of the LAR process, the impact was slightly smaller than at appraisal. Across all nine subprojects (10 LARPs) that involved LAR, there were total of 215 affected entities (households, commercial entities, and state/public organizations) and 804 affected persons. A total of 22,456 m2 of land in 201 parcels was acquired—0.6% less than planned. Of the total affected land, 7,844 m2 or 35% was unlicensed. There were 346 affected structures (residential and commercial buildings, fences, latrines, sheds, etc.). The acquisition of structures included 266 m2 residential and 244 m2 commercial buildings, which is in line with the LARPs. The livelihoods of 17 households were affected; all were properly compensated in accordance with the LARPs. LARPs foresaw relocation of 18 households; in reality, 17 households were relocated, and all of them compensated properly. No affected households were worse off after LAR implementation. The project’s detailed LAR impacts and the difference between the LARP and actual implementation are provided in Table 3 (Attachment 1).

C. Resettlement Policy and Compensation Rates

10. The main objective of LAR is to ensure that all affected persons receive appropriate, timely assistance to maintain well-being equivalent to—or better than—what it would have been without the subproject. Affected persons must be fully informed, closely consulted, compensated for their losses, assisted to gain possession or ownership of replacement land and to reestablish their enterprises, and participate in any decision-making pertinent to resettlement. Special measures are provided for affected persons who do not hold titles to land.

11. The LARF was developed in accordance with the ADB safeguard policies and key Mongolian legislation related to LAR, including Law of Mongolia on Land (2002), Law on Allocation of Land to Mongolia Citizens for Ownership (2003), and the Civil Code of Mongolia (2002). The LARF set affected persons’ entitlements; procedures to formulate the LARPs; and provisions for information provision, consultation, compensation, and assistance.

12. LAR activities were carried out based on willing-buyer, willing-seller negotiations under the Civil Code of Mongolia. Mongolian legislation does not allow use of eminent domain. If agreements had not been reached, subprojects would not have been implemented. In two cases—one in Erdenet and one in Botanic-Sharkhad—that an agreement could not be reached. In Erdenet, it was possible to change the technical design to avoid acquiring land from an unwilling seller, as well as from one additional neighbor. In the case of Botanic-Sharkhad UB,

2 For example, in the Baruun-Salaa subproject, 59 affected households were reduced to 11. For the Orbit-takhilt subproject, 52 affected households were reduced to 12. In the Khailaast subproject, 36 subprojects were reduced to 7. For the Uvurkhangai subproject, 11 affected households were reduced to 7, and for the Bayankhongor subproject 45 affected households were reduced to 16.

72 Appendix 12 the affected person was demanding too high compensation for the affected land and agreement was not made. There were no further efforts made to conclude an agreement with this affected person, as the subproject’s construction works were cancelled and not implemented. There were no incidents in the subprojects that did not allow the construction works to stop its works due to LAR and disagreement of the affected persons.

13. The main policy that differed from the Mongolian legislations is that affected persons – unlicensed occupants of land were eligible for compensation and rehabilitation entitlements. Unlicensed occupants of land in areas designated by GOM for past, present or future land allocation were treated as legally affected persons and were given ownership licenses for the remainder of partially affected land or, in the case of full loss of a plot of land, provided with replacement land and a license of ownership.

14. Affected land was compensated at replacement cost based on market rates or the applicable government tariff, whichever was higher. If a plot of land was fully lost, affected persons were provided replacement land. If 50 per cent or more of a plot was affected, the project considered the plot 100 per cent affected and eligible for replacement, if the affected person so desires. Affected structures were compensated at replacement cost based on prevailing market rates for comparable types of structures without depreciation. Remaining materials could be salvaged by the affected persons, if they desired.

15. Compensation rates for the land and structures were calculated by the resettlement specialists and certified land valuation experts. The market value of land was lower than the government compensation tariffs in eight of the 10 LARPs. In the remaining two locations— Bayankhongor and Botanic-Sharkhad—market rates for land were higher than the government tariff. Compensation for structures was calculated based on market costs (including labor and transport) to replace comparable structures. In the Borrower’s Project Completion Report (PCR) and Resettlement Completion Reports (RCR), there was no mention about variation between planned and actual compensation. See Table 4 (Attachment 2) for details of compensation rates, including frequently occurring compensation items.

D. Rehabilitation and Income Restoration

16. The LARs were carried out based on negotiated contractual agreements with each of the affected persons on the basis of Civil Code of Mongolia. The LARPs have adequately addressed and compensated for the lost residential and commercial buildings. Affected livelihoods/incomes were identified based on the claims of the affected persons and compensated properly.

17. For relocation, the costs for the moving, obtaining the new replacement plots were facilitated by the subproject Governor’s offices. One vulnerable AH in Erdenet, LARP 2009, was able to purchase an apartment with the compensation. All the relocated AHs in the aimags have obtained comparable land parcels in nearby areas. 8 AHs in UB City, all of whom did not have land permit and whose land could not be legalized due to their lands being located higher unstable slopes or within the floodway. For 4 of these AHs, land parcels in the nearby areas were allocated and provided with land titles. For two of them, comparable land parcels were allocated in the other part of the city and provided land titles. As for the remaining two AHs, 1 of them moved to a parcel owned by a relative and 1 was offered titled land in a different place, but never claimed it. Finding a land parcel for non-titled AHs is a huge issue in UB city; therefore, PMU, PIU and the District Administration recommended that UB City Gov’t should develop a special strategy to handle the relocation of non-titled AHs.

Appendix 12 73

All transaction costs such as notarization of contracts, cadastral mapping, service fees and property rights registration were provided. Vulnerable APs were defined as households with (i) monthly per capita income below the poverty line or (ii) elderly, female or disabled heads. In addition to receiving compensation within the framework established for all AHs, vulnerable APs received other forms of compensation such as assistance with the preparation of contracts; assistance with the administrative process of land transfer; and preferential treatment for temporary employment during construction.

18. Details of the compensation and rehabilitation for the affected livelihood/incomes, relocation and transaction costs are provided in Table 4 (Attachment 2).

E. Resettlement Cost and LAR budget

19. According to the LARPs, the total cost of LAR was MNT524,309,295.3 Actual LAR costs were MNT465,681,404, 20% less than planned. This is might be due to the fact that the costs such as administration, contingencies and external monitoring were not considered in the LAR implementation budget costs that were reported in the RCRs. Table 5 summarizes the LAR costs in the LARP and actual compensation costs as per the Borrower’s PCR. The actual LAR disbursements might be closer to the amount in column 2 under Cost/MNT in Table 5, which excludes the costs for administration, contingencies and external monitoring. The LARP budget for Baruun-Salaa, Orbit-Takhilt and Khailaast subprojects in UB are from 42% to 51% higher compared to the LAR budget numbers of the Borrower’s PCR and RCR. This is due to the fact the budgeted costs for external monitoring were high compared to the total budget. Table 5 below summarizes planned versus actual LAR costs.

Table 5: LARP and actual compensation costs

Cost/MNT Difference No. Sub-project LARP LARP w/o* RCR BPCR Amount % 1 2 3 4 1-3 1 Bayankhongor 64,045,208 55,983,574 52,934,715 64,045,208 11,110,493 (17) 2 Erdenet 2009 63,611,594 48,532,826 55,521,552 55,521,552 8,090,042 (13) 3 Erdenet 2010 48,420,577 42,325,679 48,420,577 48,420,577 - - 4 Altai 26,499,642 23,164,023 23,164,023 26,499,642 3,335,619 (13) 5 Arvaikheer 6,486,897 5,670,364 5,789,937 6,486,897 696,960 (11) 6 Baruun-Salaa UB 20,765,824 11,669,538 11,943,978 11,943,978 8,821,846 (42) 7 Khailaast UB 16,340,414 8,390,482 8,011,251 8,011,251 8,329,163 (51) 8 Orbit-Takhilt UB 19,721,537 10,756,700 10,965,740 10,965,740 8,755,797 (44) 9 Botanic-Sharkhad UB 238,614,479 204,754,789 213,983,435 213,983,435 24,631,044 (10) 10 Bulgan 19,803,124 17,310,423 19,803,124 19,803,124 - -

Total 524,309,295 428,558,397 450,538,332 465,681,404 73,770,963 (20)

BPCR = Borrower's Project Completion Report, LARP = Land Acquisition and Resettlement Plan, RCR = Resettlement Completion Report. Note: The numbers show the LAR costs-budget for compensation measures and exclude administration, supervision, contingency, and external monitoring costs.

33 Includes administration, supervision, contingency, and external monitoring costs.

74 Appendix 12

F. Institutional Arrangement

20. For the basic urban services component, working groups established for each subproject town. These groups were responsible for supporting preparation of proper LARPs and implementing the LARPs in compliance with the ADB safeguard requirements (with the support of resettlement specialists form the PMU and local PIUs). The working groups should consist of officials from Land Relations, Construction and Urban Development Department (LRCUDD), aimag and soum Governors, the Land Registration Agency, and the city manager. Governors of subproject aimags issued orders to establish working groups.

21. For the urban road improvement component, LARP Implementing Committees (LARPIC), responsible for the implementation of the LARPs at each subproject District and Khoroo of Ulaanbaatar, were formed. LARPICs were responsible to support the preparation of proper LARPs and the implementation of the LARPs in compliance with the ADB safeguard requirements with the support of the resettlement specialists of the PMU and local UB PIU staff. The LARPICs should consist of UB City officials such as District Governor, Governor of Khoroo4, Resettlement specialist of PIU, representatives of Department of Road, Property Relations Agency, Land Administration Department, APs and NGOs, if available.

22. Informative and training workshops on land acquisition and resettlement in ADB Projects was organized for government officers from the the relevant aimag and district Governors’ offices. The participants included LARPIC and working group members, affected persons, and other stakeholders. Participants were trained on the legal framework of the project, including applicable Mongolian Laws, ADB involuntary resettlement policies and safeguard requirements, the LARF, and the steps of the process of LARP preparation and implementation.

23. LARPICs and working groups were effective, and institutional arrangements supported timely and proper implementation of the LARPs.

G. Participation and Information Disclosure

24. The affected persons were involved and consulted in LAR activities since the start of each subprojects. Individual consultations took place with affected persons along the subprojects’ rights of way (ROWs) during field verification. Affected persons were consulted individually during the census and socioeconomic survey. They were consulted and involved in the discussions to avoid and minimize the LAR impacts, entitlements, and resettlement options. Individual consultations took place throughout preparation and implementation of the LAR activities.

25. Public consultation and involvement was organized during the disclosure of the draft LARPs to affected persons. Affected persons were provided with Mongolian translations of the key sections of the LARP. For each subproject the legal framework, compensation entitlement, and grievance and monitoring procedures were reviewed and discussed.

26. After the public and individual consultations with the affected persons on the draft LARPs and their concerns, the LARPs were revised and finalized. Once the LARPs were finalized, individual consultations to prepare and conclude contractual agreements continued until agreements were concluded. After the LARPs were endorsed by the governors of the

4 Khoroo is an administrative unit under the districts in Ulaanbaatar city.

Appendix 12 75

subproject locations and approved by ADB, they were once again publicly disclosed by the PMU/PIU.

27. Mongolian land authorities’ practice of serving “demand letters”, which had threatening features, to affected persons was abandoned in favor of LAR notifications delivered to affected persons.

28. The LARPs for each subproject included grievance redress mechanisms, through which an aggrieved affected person could lodge a grievance that had to be settled within 4–5 weeks. If the grievance was not settled, affected persons had possibility to go to the court. Since the entire LAR activities were carried out openly and consultatively by involving the affected persons, no major grievances arose during LARP implementation. Grievances were handled by the PMU in cooperation with the local PIUs and with support from the working groups and LARPICs.

H. Resettlement Monitoring and Evaluation

29. Internal monitoring of compliance with the LARP and the LARF during implementation was carried out by the subproject PIUs together with the PMU. The subproject PIUs monitored LARP implementation and submitted reports to the PMU. The PMU provided resettlement monitoring reports in the annual project reports. For each subproject, PMU prepared a Resettlement Completion Report (RCR) and submitted it to ADB. The format for monthly LAR monitoring reports were prepared and included in all LARPs. RCRs or any other project documents did not include monthly LAR monitoring reports.

30. An independent local monitoring specialist was engaged by the PMU in 2009. The specialist carried out socioeconomic baseline surveys and initial inspection reports for Khailaast, Baruun-Salaa, Orbit-Takhilt, and Erdenet subprojects in 2010. In 2011, socioeconomic baseline surveys and initial inspection reports for Govi-Altai, Bayankhongor, Uvurkhangai and subprojects were provided. Also, in 2011, the baseline socioeconomic survey was done for the Botanic-Sharkhad subproject. A second-level inspection report for Khailaast, Baruun-Salaa, Orbit-Takhilt and Erdenet were carried out in 2011. Finalized external monitoring and evaluation reports were not provided for any of the subprojects, however. The Borrower’s PCR, annual reports, and other relevant project documents do not provide information on the results of the external monitoring and evaluation. ADB website does not have any external LAR monitoring and evaluation documents.

I. Conclusions and Lessons

31. Generally, the LARPs were implemented successfully in compliance with ADB Involuntary Resettlement Policy and safeguard requirements, and Mongolian legislation. LAR impacts were reduced significantly, based on the key ADB principle to avoid and minimize LAR through detailed technical design. Extensive consultations with the affected persons and strong support by the local governments through the working groups and LARPICs enabled the successful implementation and completion of the LARPs. As per the RCRs, RCRs and interview with the PMU resettlement specialist, all the AHs were appropriately and timely compensated, and no APs livelihoods were worsened by the subprojects. This can be confirmed by the fact that LARPs were only finalized once the negotiations with the APs were conducted and agreements reached. Also, it was confirmed that no written grievances were received by the APs related to any issue, including compensation, as any concerns raised by the APs were

76 Appendix 12 handled appropriately during the LARP preparation and negotiation. Both the APs and the District officials honored and implemented these agreements diligently.

32. The provision of replacement land, for AHs who have no land title and whose land cannot be legalized, needs to be discussed with ADB and UB City officials and a special strategy developed for these types of AHs.

33. There is little or no external monitoring information on the results of the LARP implementation. This is key information to measure the success of the LAR activities. Project LAR documentations should be maintained systematically and well written.

Appendix 12, Attachment1 77

Table 3: The Comparison of Project Impacts between the LARP and Actual

Bayankhongor Erdenet 2009 Erdenet 2010 Altai Arvaikheer Bulgan No. Item LARP Actual +/- LARP Actual +/- LARP Actual +/- LARP Actual +/- LARP Actual +/- LARP Actual +/- 1 No. of AEs* 16 16 - 51 49 (2) 24 24 - 11 11 - 7 7 - 9 9 - AHs** 14 14 51 49 (2) 24 24 4 4 4 4 8 8 ACs*** 2 2 3 3 2 2 1 1 AOs**** 4 4 1 1 2 No. of APs 59 59 - 212 212 - 85 85 - 17 17 - 17 17 - 32 32 - AH members 59 59 212 212 85 85 17 17 17 17 32 32 CE employees AO employees Relocation - No. of APs 27 27 3 Affected land, m2 1,303 1,303 - 4,552 4,534 18) 906 906 - 4,961 4,961 - 438 438 - 344 344 - No. of land parcels 7 7 - 47 45 (2) 23 23 - 11 11 - 7 7 - 9 9 - with permit, m2 961 961 1,761 802 4,873 275 275 322 322 without permit, m2 342 342 2,791 104 88 163 163 22 22 residential, m2 809 809 4,514 4,496 (18) 833 833 180 180 297 297 333 333 commercial, m2 494 494 38 38 73 73 471 471 121 121 11 11 organizational, m2 4,309 4,309 20 20 4 Affected structures, pc 22 22 - 76 76 - 39 39 - 18 20 2 9 9 - 17 17 - Residential buildings, m2 27 27 60 60 40 40 Commercial buildings, m2 81 81 10 10 5 Affected livelihoods 1 1 - 8 8 - 4 4 - - - - AH 1 1 8 8 4 4 CE AO 6 Relocation 7 6 -1 2 2 - - - - - AHs 7 6 -1 2 2 CEs AOs AE = affected entity, affected households, businesses, state organizations and NGOs, AH = affected household, AC = affected commercial entity, AOs = affected organizations (state organizations and NGOs), CE = affected commercial entity.

78 Appendix 12, Attachment 1

Table 3: The Comparison of Project Impacts between the LARP and Actual (cont.)

Baruun Salaa, UB Khailaast, UB Orbit Takhilt, UB Botanic Sharkhad UB Total No. Item LARP Actual +/- LARP Actual +/- LARP Actual +/- LARP Actual +/- LARP Actual +/- +/- in % 1 No. of AEs* 11 11 - 7 7 - 12 12 - 72 69 (3) 220 215 (5) (2.3) AHs** 11 11 7 7 12 12 67 64 (3) 202 197 (5) (2.5) ACs*** 1 1 9 9 AOs**** 4 4 9 9 2 No. of APs 45 45 - 35 35 - 39 39 - 271 263 (8) 812 804 (8) (1.0) AH members 45 45 35 35 39 39 271 263 812 804 (8) (1.0) CE employees - AO employees - Relocation - No. of APs 32 32 59 59 3 Affected land, m2 1,422 1,422 - 422 422 - 2,064 2,064 - 6,183 6,063 (120) 22,594 22,456 (138) (0.6) No. of land parcels 11 11 - 7 7 - 12 12 - 72 69 206 201 (5) (2.4) with permit, m2 604 216 632 4,283 14,406 without permit, m2 818 206 1,432 1,900 7,844 residential, m2 1,420 1,420 350 350 2,064 2,064 3,315 3,195 (120) 14,114 13,976 (138) (1.0) commercial, m2 2 2 71.5 71.5 31 31 1,313 1,313 organizational, m2 2,837 2,837 7,167 7,167 4 Affected structures, pc 14 14 - 9 9 - 14 14 - 129 126 (3) 347 346 (1) (0.3) Residential buildings, m2 140 139.7 266 266 Commercial buildings, m2 17.5 17.5 71.5 71.5 63.4 63.4 244 244 5 Affected livelihoods 1 1 - 1 1 - - 2 2 - 17 17 - AH 1 1 1 1 2 2 17 17 CE - AO - 6 Relocation - 1 1 - - 8 8 - 18 17 (1) (5.6) AHs 1 1 8 8 18 17 (1) CEs - AOs - AE = affected entity, affected households, businesses, state organizations and NGOs, AH = affected household, AC = affected commercial entity, AOs = affected organizations (state organizations and NGOs), CE = affected commercial entity. Note: Figures may not add up due to rounded decimals.

Appendix 12, Attachment 2 79

Table 4: Compensation Rates

Unit/ Baruun Orbit-Takhilt Botanic- No. Compensation item Bayankhongor Erdenet 09 Erdenet 10 Altai Arvaikheer Khailaast UB Bulgan MNT Salaa UB UB Sharkhad UB 1 Land m2 6,000 8,000 8,000 4,000 4,000 13,200 13,200 13,200 18,500-21,600 3,600 2 Residential building m2 176,900 258,640 55,072-253,474 137,000 241,289-375,161 274,054 3 Commercial building m2 255,265 59,614 70,300 35,150-40,300 345,548 4 Wooden fence remove & rebuild m 12,670 5,000-9,500 8,950 14,907 10,435 5,000 5,000 5,000 9,000 8,950 replacement m 16,670 5 Fence (iron, block etc) m 23,731 5,759 18,371-34,200 13,000 6 Garage m2 119,425 52,947-137,000 174,146 7 Latrine pc 221,296 85,648 221,296 221,296 221,296 80,800 80,800 200,000 221,296 8 Wooden shed pc 52,947 44,710-59,614 42,566-80,973 35,150 125,931-188,268 9 Concrete shed m2 103,680 84,631 Livelihood/Business 10 loss day 20,000 14,000-53,333 27,000-30,000 30,000 50,000-150,000 120,000 11 Relocation cost pc 200,000 250,000 50,000 250,000 Relocation of a ger 12 within the plot pc 45,000 45,000 45,000 45,000 Relocation of a 13 container pc 120,000 150,000 Transaction costs 10,000- 5,000- Notary pc 20,000-60,000 5,000-25,000 5,000-25,000 10,000-20,000 20,000 5,000-10,000 5,000-10,000 5,000-10,000 5,000-50,000 10,000 14 Cadastral map pc 50,000 16,593 50,000 50,000 50,000 50,000 50,000 50,000 35,000 35,000 Service fee pc 5,000 2,500 2,500 5,000 5,000 2,500 2,500 2,500 2,500 3,500 Property rights registration pc 12,000 12,000 12,000 12,000 12,000 10,000 10,000 10,000 8,000 11,500