Eligibility of State-Owned Road Enterprises for Participation in ADB-Financed Projects

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Eligibility of State-Owned Road Enterprises for Participation in ADB-Financed Projects Technical Assistance Consultant’s Report Project Number: 41685-01 (Technical Assistance No. 7053) June 2008 Uzbekistan: Eligibility of State-owned Road Enterprises for Participation in ADB-financed Projects Prepared by Nicolas Audier, Etienne Laumonier, Umid Ubaydullaev and Mirodil Mirakhmedov This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents. Final Report – June 24, 2008 Confidential FINAL REPORT June 24, 2008 Consulting Services for Asian Development Bank Project TA-7053 UZB – Eligibility of State-Owned Road Enterprises for Participation in ADB-Financed Projects Nicolas Audier Etienne Laumonier Team leader SOE advisor Legal advisor Umid Ubaydullaev Mirodil Mirakhmedov National Consultant National Consultant Hereinafter, the “Consultants” Page 1 of 167 Final Report – June 24, 2008 Confidential TABLE OF CONTENTS PRELIMINARY STATEMENTS .......................................................................................... 7 Acknowledgements .................................................................................................................... 8 Glossary of Abreviations............................................................................................................ 9 Introduction .............................................................................................................................. 10 1. Terms of Reference.................................................................................................... 10 2. Project Background and Rationale............................................................................. 11 2.1 Project background........................................................................................... 11 2.2 Rationale........................................................................................................... 12 Scope of the Consultants’ Assignment..................................................................................... 13 Methodology ............................................................................................................................ 14 1. Kick-off Meetings...................................................................................................... 14 2. Preparatory work........................................................................................................ 14 3. Implementation of the project.................................................................................... 15 SECTION 1: GATHERING AND REVIEWING ALL EXISTING UZBEKISTAN LAWS AND OTHER RELEVANT DOCUMENTATION, PARTICULARLY THOSE RELATED TO SOES, AND CONSULTING WITH ALL STAKEHOLDERS TO ACQUIRE A FULL UNDERSTANDING OF THE STATUS OF THE LEGAL FRAMEWORK FOR UZAVTOYOL ENTERPRISES........................................................................................................ 17 1. General review of the Uzbek legal framework applicable to SOEs........................... 18 1.1 Applicable Laws and Statutes........................................................................... 18 1.1.1 Definition and typology .......................................................................... 18 1.1.2 State unitary enterprises and LLCs or JSCs having state shares in their authorized capital .................................................................................... 22 1.1.3 Rights and obligation of SOEs................................................................ 26 1.1.4 Establishment, reorganization and dissolution........................................ 27 1.1.5 Exercise of State ownership.................................................................... 27 1.1.6 Organisation of management .................................................................. 29 1.2 Provisions regarding financial management and auditing................................ 35 1.3 Provisions regarding dissolution and bankruptcy............................................. 35 1.4 Uzavtoyol.......................................................................................................... 37 1.4.1 Establishment .......................................................................................... 37 1.4.2 Capital and assets .................................................................................... 38 1.4.3 Legal status.............................................................................................. 40 1.4.4 Objectives and responsibilities................................................................ 40 2 Final Report – June 24, 2008 Confidential 1.4.5 Rights and obligations............................................................................. 43 1.4.6 Management bodies ................................................................................ 45 1.4.7 Relationship with the State...................................................................... 49 1.4.8 Relations with its “subsidiaries” or member entities .............................. 50 1.5 Uzavtoyol enterprises (G7)............................................................................... 52 1.5.1 Preliminary note...................................................................................... 52 1.5.2 Establishment .......................................................................................... 52 1.5.3 Assets ...................................................................................................... 53 1.5.4 Legal status.............................................................................................. 53 1.5.5 Objectives and responsibilities................................................................ 53 1.5.6 Rights and obligations............................................................................. 54 1.5.7 Management bodies ................................................................................ 54 1.5.8 Establishment of “subsidiaries” .............................................................. 55 2. Privatization and denationalization of to SOEs ......................................................... 55 2.1 Basic Concepts................................................................................................. 55 2.2 Relevant Stakeholders...................................................................................... 57 2.3 Privatization and denationalization programs .................................................. 58 2.4 SOE denationalization...................................................................................... 59 2.5 Privatization and denationalization process of Uzavtoyol enterprises ............. 60 SECTION 2: REVIEWING AND BECOMING FAMILIARIZED WITH ADB’S POLICIES, GUIDELINES, PROCEDURES, AND DOCUMENTS, PARTICULARLY THOSE RELATED TO THE ELIGIBILITY FOR PARTICIPATION IN ADB-FINANCED PROJECTS........................................ 61 1. Detailed review of ADB’s policies and guidelines.................................................... 62 1.1 Review of ADB’s guidelines dated February 2007 (the “Guidelines”) ........... 62 1.1.1 Scope of application and governing principles ....................................... 62 1.1.2 Fraud and corruption............................................................................... 62 1.1.3 International competitive bidding (ICB)................................................. 63 1.1.4 Other forms of procurement.................................................................... 65 1.2 SOEs’ eligibility for participation in ADB-financed projects.......................... 65 1.3 Conflict of interest............................................................................................ 67 1.4 Fraud and corruption ........................................................................................ 69 2. Detailed review of other aid agencies’ policies and guidelines related to eligibility and ICB ...................................................................................................................... 69 2.1 IDA and IBRD.................................................................................................. 69 2.2 EBRD................................................................................................................ 70 3 Final Report – June 24, 2008 Confidential 3. Overview on applicable Uzbek Laws and statutes on tendering ............................... 71 3.1 Applicable regulations...................................................................................... 71 3.1.1 Development, expertise and approval of the tender documentation;...... 71 3.1.2 Persons eligible for participation in tenders;........................................... 72 3.1.3 Composition and requirement for the Tender Committee ...................... 72 3.1.4 Evaluation of bids and decision-making process .................................... 73 3.1.5 Control of tender process ........................................................................ 73 3.1.6 Liability of participants, organizers and members of the Tender Committee for violations of the bidding rules. ....................................... 73 3.2 Interaction with ADB’s guidelines................................................................... 74 3.2.1 Establishment of an ad hoc Project Management Unit........................... 74 3.2.2 Function of the PMU............................................................................... 74 3.2.3 Reporting and control.............................................................................
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