Report and Recommendation of the President to the Board of Directors
Project Number: 52256-001 October 2019
Proposed Results-Based Loan, Grant, and Technical Assistance Grant Kyrgyz Republic: Naryn Rural Water Supply and Sanitation Development Program
Distribution of this document is restricted until it has been approved by the Board of Directors. Following such approval, ADB will disclose the document to the public in accordance with ADB’s Access to Information Policy.
CURRENCY EQUIVALENTS (as of 20 September 2019)
Currency unit – som (Som) Som1.00 = $0.014019 $1.00 = Som71.33
ABBREVIATIONS
ADB – Asian Development Bank ARIS – Agentstvo Razvitya i Investirovanya Soobshestv (Community Development and Investment Agency) BFM – beneficiary feedback mechanism CBISSP – Community-Based Infrastructure Services Sector Project CDWUU – community drinking water users’ union DDWSSD – Department of Drinking Water Supply and Sewerage Development DLI – disbursement-linked indicator IVA – independent verification agent M&E – monitoring and evaluation MOF – Ministry of Finance O&M – operation and maintenance PAP – program action plan RBL – results-based lending SDWSSSS – Strategy for Development of Water Supply and Sewerage Systems in Settlements SEFF – small expenditure financing facility TA – technical assistance UNICEF – United Nations Children’s Fund WSS – water supply and sanitation WSU – water supplies and utilities services entity
NOTE
In this report, “$” refers to United States dollars.
Vice-President Shixin Chen, Operations 1 Director General Werner E. Liepach, Central and West Asia Department (CWRD) Director Yong Ye, Urban Development and Water Division CWRD
Team leader Jude Kohlhase, Senior Urban Development Specialist, CWRD Team members Ainagul Amanova, Senior Project Officer, Kyrgyz Resident Mission, CWRD Ana Paula Araujo, Environment Specialist, CWRD Minhong Fan, Procurement Specialist, Procurement, Portfolio and Financial Management Department Xijie Lu, Young Professional, CWRD Leah Luna, Senior Operations Assistant, CWRD Cholpon Mambetova, Integrity Specialist, Office of Anticorruption and Integrity Maritess Marcelino, Project Officer, CWRD Christina Pak, Principal Counsel, Office of the General Counsel Diep Pham, Senior Financial Management Specialist, CWRD Sona Poghosyan, Social Development Specialist (Safeguards), CWRD Nathan Rive, Climate Change Specialist, CWRD Mary Alice Rosero, Social Development Specialist (Gender and Development), CWRD Laxmi Sharma, Urban Development Specialist, CWRD Lu Shen, Unit Head, Portfolio Management, CWRD Peer reviewer Alexandra Conroy, Urban Development Specialist, Pacific Department
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 RESULTS BASED PROGRAM AT A GLANCE MAP I. THE PROPOSAL 1 II. THE PROGRAM 1 A. Strategic Context 1 B. Program Rationale 2 C. Program Scope 5 D. Program Results 6 E. Expenditure Framework and Financing Plan 8 F. Capacity Development and Program Action Plan 9 G. Technical Assistance 9 H. Implementation Arrangements 9 III. SUMMARY OF ASSESSMENTS 10 A. Program Technical Assessments 10 B. Program Systems Assessments 11 C. Integrated Risk Assessment and Mitigating Measures 12 IV. ASSURANCES 13 V. RECOMMENDATION 13
APPENDIXES 1. Design and Monitoring Framework 14 2. List of Linked Documents 17 3. Disbursement-Linked Indicators, Verification Protocols, and Disbursement Schedule 18
Project Classification Information Status: Complete
RESULTS BASED PROGRAM AT A GLANCE 1. Basic Data Project Number: 52256-001 Project Name Naryn Rural Water Supply and Sanitation Department/Division CWRD/CWUW Development Program Country Kyrgyz Republic Executing Agency Department of Drinking Water Borrower Kyrgyz Republic Supply and Sewerage Development under the State Agency for Water Resources under the Government of the Kyrgyz Republic Country Economic https://www.adb.org/Documents/LinkedDo Indicators cs/?id=52256-001-CEI Portfolio at a Glance https://www.adb.org/Documents/LinkedDo cs/?id=52256-001-PortAtaGlance 2. Sector Subsector(s) ADB Financing ($ million) Agriculture, natural Rural sanitation 4.28 resources and rural Rural water supply services 23.12 development Total 27.40
3. Operational Priorities Climate Change Information Addressing remaining poverty and reducing inequalities Climate Change impact on the Medium Accelerating progress in gender equality Project Tackling climate change, building climate and disaster resilience, and enhancing environmental sustainability ADB Financing Promoting rural development and food security Adaptation ($ million) 1.23 Strengthening governance and institutional capacity Sustainable Development Goals Gender Equity and Mainstreaming SDG 1.4 Effective gender mainstreaming (EGM) SDG 5.5 SDG 6.1, 6.2 Poverty Targeting SDG 10.1 Geographic Targeting SDG 12.2 SDG 13.a
4. Risk Categorization: Complex . 5. Safeguard Categorization Environment: B Involuntary Resettlement: B Indigenous Peoples: C . 6. Financing Modality and Sources Amount ($ million) ADB 27.40 Sovereign Results Based Lending: Asian Development Fund 13.70 Sovereign Results Based Lending (Concessional Loan): Ordinary capital 13.70 resources Cofinancing 0.00 None 0.00 Counterpart 5.50 Government 5.50 Total 32.90 Note: An attached technical assistance will be financed on a grant basis by the Technical Assistance Special Fund (TASF-6) in the amount of $225,000. Currency of ADB Financing: US Dollar
Source: Asian Development Bank This document must only be generated in eOps. 15102019154234387900 Generated Date: 05-Nov-2019 15:29:56 PM o o 72 'E 77 'E
KYRGYZ REPUBLIC NARYN RURAL WATER SUPPLY AND SANITATION DEVELOPMENT PROGRAM
Shopokov Ivanovka Kara-Balta Kant Kemin BISHKEK Tokmok Tyup Pokrovka Kayindy Belovodskoe Jyrgalang Cholpon-Ata Maimak Talas CHUI Karakol Balykchy Lake Issyk-Kul Bakay-Ata TALAS o Kochkor 2 'N Barskoon Suusamyr Engilchek o Chaek 2 'N ISSYK-KUL Ak-Kiya Toktogul Kanysh- Kiya Toktogul Reservoir Lake Song-Kul Kara-Jygach JALAL-ABAD Kara-Keche Kerben Kara-Kul NARYN Bedel Tash- Kazarman Naryn Terek-Say Komur Arslanbob Baetov Shamaldy-Say At-Bashy Kochkor-Ata Kok-Yangak
Bazar-Korgon Jalal-Abad Andizhan Reservoir Uzgen Lake Chatyr-Kul Kara-Suu Kara-Kulja Torugart N Aravan Osh Gulcha o 'N Kok-Art Kyzyl-Kiya Naiman OSH o Frunze 'N Sulyukta Chauvay Kilometers Batken Haidarkan Isfana Sary-Tash BATKEN National Capital Karamyk Irkeshtam Provincial Capital Daroot-Korgon City/Town/Settlement Main Road Other Road River District Boundary 191994B 19KGZ ABV This map was produced by the cartography unit of the Asian Development Bank. Provincial Boundary The boundaries, colors, denominations, and any other information shown on this International Boundary map do not imply, on the part of the Asian Development Bank, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries, Boundaries are not necessarily authoritative. colors, denominations, or information.
o o 72 'E 77 'E
I. THE PROPOSAL
1. I submit for your approval the following report and recommendation on a proposed results- based loan and a proposed results-based grant, both to the Kyrgyz Republic for the Naryn Rural Water Supply and Sanitation Development Program. The report also describes proposed technical assistance (TA) for Supporting the Naryn Rural Water Supply and Sanitation Development Program, and if the Board approves the proposed loan and grant, I, acting under the authority delegated to me by the Board, approve the TA.
2. The proposed Asian Development Bank (ADB) assistance will contribute to a portion of the national Strategy for Development of Water Supply and Sewerage Systems in Settlements (SDWSSSS) program, 2016–2026 to achieve inclusive and reliable access to safe water supply and sanitation (WSS) services. 1 ADB financing will target infrastructure expansion in rural communities of Naryn province, while building capacities of WSS service operators and institutions across the country to enhance service delivery and performance of the subsector.
II. THE PROGRAM
A. Strategic Context
3. The Kyrgyz Republic is one of the poorest countries in Central and West Asia and its estimated gross domestic product per capita is $1,280.2 An estimated 22.4% of the country’s 6.2 million people live below the national poverty line.3 The concentration of poverty in the country is higher in rural areas and greatest in mountainous areas, where more than half of the population is poor. The Kyrgyz Republic is also highly vulnerable to climate change impacts, including frequent drought and early snowfall, increasing the risk of water scarcity, frequent landslides, and floods, particularly for poor populations.
4. Access to safe drinking WSS in rural areas remains a significant challenge. Poor water quality and sanitation costs the country over $100 million annually, including productivity losses.4 Most of the rural WSS infrastructure was built in 1960s and has exceeded its design life, with little maintenance resulting in low-quality services. In 2014, only one-quarter of rural households had piped household connections,5 and about 73% of rural households had intermittent water supply. There are 200 water supply intakes without sanitary protection setback zones and they lack treatment facilities, exposing people to preventable diseases. Rural sanitation coverage is only 10% and characterized primarily by unimproved sanitation facilities. The key issues confronting rural WSS in the Kyrgyz Republic are (i) insufficient resources because of inadequate tariffs, (ii) weak capacity of WSS service operators, and (iii) limited operation and maintenance (O&M) and capital investment.
1 Government of the Kyrgyz Republic. 2016. Strategy for Development of Water Supply and Sewerage Systems in Settlements of the Kyrgyz Republic until 2026. Bishkek. 2 International Monetary Fund. 2019. World Economic Outlook Database. Washington, DC (accessed 23 September 2019). 3 Government of the Kyrgyz Republic, National Statistical Committee of the Kyrgyz Republic. Living Standard (accessed 30 August 2019). 4 World Bank. 2016. Sustainable Rural Water Supply and Sanitation Development Project. Washington, DC; and World Bank. 2017. Sustainable Rural Water Supply and Sanitation Development Project – Additional Financing. Washington, DC. 5 United Nations Children’s Fund (UNICEF). 2015. Kyrgyzstan Multiple Indicator Cluster Survey 2014. Final Report. Revised 2016. Bishkek.
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5. The government’s water supply and sanitation program. In March 2016, the government approved its national SDWSSSS program, covering all seven provinces in the Kyrgyz Republic. The goal of the national program is to increase water supply coverage from 40% to 90% and sanitation coverage from 10% to 70% by 2026. The nationwide program is also anchored in the National Development Strategy of the Kyrgyz Republic for 2018–2040 which prioritizes access to clean drinking water and sanitary facilities.6 The national SDWSSSS program provides a clear framework to guide sector development by outlining key areas and activities in developing urban and rural water supply and sewerage systems. It also contains measures to conduct analysis and monitoring. The resolution includes an implementation plan for ongoing and planned projects totaling $420 million with financing sourced from the state budget (6.4%) and primarily from external sources (93.6%). The national program expenditure framework consists of an annual budget of $63 million during 2018–2020, which comprises development partner funding (90%) through loans and grants. Government counterpart funding is 10% ($6 million per year).
6. Strong commitment to delivering results in the rural water supply and sanitation subsector. The government has demonstrated a high level of commitment from 2016 and has been proactive in attracting development partners, who have committed $393 million to support the national SDWSSSS program during 2016–2026. The national program is benefiting from assistance from bilateral partners, the European Bank for Reconstruction and Development, the European Union, the Islamic Development Bank, and the World Bank. In November 2018, ADB approved the Issyk-Kul Wastewater Management Project to upgrade and expand the existing wastewater systems in Balykchy and Karakol cities.
7. Improvements in institutional arrangements in the subsector. The Department of Drinking Water Supply and Sewerage Development (DDWSSD) under the State Agency for Water Resources, established in 2012, is in charge of the WSS policy, sector reforms, and execution of the SDWSSSS. The DDWSSD has been actively seeking improvements to institutional arrangements and has demonstrated a willingness for change in the subsector. The Community Development and Investment Agency (ARIS), a government agency was established in 2003, with a mandate to support local governments to deliver new and rehabilitated assets; 7 implementation of investment plans; and provision of technical, administrative, and financial assistance. Local governments are the asset owners and community drinking water users’ unions (CDWUUs) are the service providers. However, only one-quarter of the 633 CDWUUs are operational, while the rest are unable to continue operations because of the lack of revenue and technical specialists. The government is moving toward a professionally oriented model, and formalizing these as water supplies and utilities services entities (WSUs) in accordance with the Law of Local Self-Government (2018). This new model will support WSUs to improve sustainability and have access to public funding (e.g., transfers).
B. Program Rationale
8. The SDWSSSS aims to improve access to safe rural WSS and is aligned with Sustainable Development Goals 1, 5, 6, 10, 12, and 13. The results-based lending (RBL) program is embedded in the SDWSSSS program and will enhance development effectiveness. The government requested support from multiple development partners to implement the SDWSSSS
6 Government of the Kyrgyz Republic. 2018. National Development Strategy of the Kyrgyz Republic for 2018–2040. Bishkek. 7 ARIS was established in October 2003 and is governed by a statutory supervisory board composed of seven national government representatives, seven local government representatives, and seven nongovernment organization representatives. Currently, ARIS employs 311 staff.
3 program and allocated each of the seven provinces to different development partners to expedite efficiency and enhance coordination. The government requested ADB’s assistance in Naryn.
9. Naryn is a mountainous province and one of the poorest in the Kyrgyz Republic, with a poverty rate of 29% in 2017. Naryn’s resident population was estimated at 287,000 in 2018 across Naryn township and 165 villages (footnote 3). In 2009, the urban population share was 15.3%.8 The ADB-supported Bishkek–Torugart road traverses through Naryn and connects Bishkek to the People’s Republic of China (PRC), providing regional connectivity with Central Asian neighbors and opportunities for rural development.9 Most villages in Naryn have unprotected water sources. Incidences of waterborne diseases are high in Naryn. The program will cover 64,000 people in Naryn and will support the design, construction, and rehabilitation of WSS facilities; and institutional capacity to provide sustainable and safe WSS services across 31 program villages. In addition, the program will ensure that detailed designs are completed for 12 program villages and ready them for implementation when additional financing becomes available.
10. Alignment with ADB strategic priorities. The program is aligned with ADB’s Strategy 2030, supporting four of the seven operational priorities: (i) addressing remaining poverty and reducing inequalities, (ii) promoting rural development and food security, (iii) strengthening governance and institutional capacity, and (iv) building climate and disaster resilience.10 The program is included in ADB’s country operations business plan for the Kyrgyz Republic, 2019– 2021 and is aligned with ADB’s country partnership strategy for the Kyrgyz Republic, 2018–2022, which calls for equality between regions, and improved WSS services.11 The program is also aligned with ADB’s Water Policy and Water Operational Plan.12
11. Lessons learned. ADB’s assistance from 2000 to 2013 included two subsector projects totaling $66 million. 13 In 2000, ADB approved the Community-Based Infrastructure Services Sector Project (CBISSP), which suffered from major cost overruns and poor execution of works. To rectify deficiencies, in 2009 ADB approved supplementary financing. However, only about 10% of planned subprojects were completed and, because of procurement irregularities and noncompliance with ADB procedures, the project was canceled in 2013.14 From 2013 to 2018,
8 Government of the Kyrgyz Republic, National Statistical Committee of the Kyrgyz Republic. Population and Housing Census of the Kyrgyz Republic of 2009. Bishkek. 9 ADB. 2016. Report and Recommendation of the President to the Board of Directors: Proposed Loan and Grant to the Kyrgyz Republic for the Central Asia Regional Economic Cooperation Corridors 1 and 3 Connector Road Project. Manila. 10 ADB. 2018. Strategy 2030: Achieving a Prosperous, Inclusive, Resilient, and Sustainable Asia and the Pacific. Manila. 11 ADB. 2018. Country Operations Business Plan: Kyrgyz Republic, 2019–2021. Manila; and ADB. 2018. Country Partnership Strategy: Kyrgyz Republic, 2018–2022—Supporting Sustainable Growth, Inclusion, and Regional Cooperation. Manila. 12 ADB. 2001. Water Policy. Manila; and ADB. 2011. Water Operational Plan, 2011–2020. Manila. 13 ADB. 2000. Report and Recommendation of the President to the Board of Directors: Proposed Loan and Technical Assistance Grant to the Kyrgyz Republic for the Community-Based Infrastructure Services Sector Project. Manila; ADB. 2010. Completion Report: Community-Based Infrastructure Services Sector Project. Manila; ADB. 2008. Report and Recommendation of the President to the Board of Directors: Proposed Supplementary Asian Development Fund Grant to the Kyrgyz Republic for the Community-Based Infrastructure Services Sector Project (Supplementary). Manila; and ADB. 2018. Report and Recommendation of the President to the Board of Directors: Proposed Loan and Grant to the Kyrgyz Republic for the Issyk-Kul Wastewater Management Project. Manila. 14 ADB. 2014. Completion Report: Community-Based Infrastructure Services Sector Project (Supplementary). Manila; Independent Evaluation Department. 2014. Validation Report: Community-Based Infrastructure Services Sector Project (Supplementary). Manila: ADB; and ADB (Office of Anticorruption and Integrity). 2012. Project Procurement- Related Review Report Grant 0122-KGZ (SF): Community-Based Infrastructure Services Sector Project (Supplementary). Manila.
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ADB provided capacity development TA to the DDWSSD for developing the SDWSSSS, reviewing technical standards, benchmarking, and improving the institutional framework.15
12. The main lessons learned from ADB’s overall involvement during 2000–2013 are as follows: (i) frequent turnover of responsible authorities reflects a lack of government ownership and commitment to deliver results, (ii) past institutional frameworks should be examined closely to evaluate effectiveness and identify weaknesses, (iii) due diligence should be conducted on government entities, and (iv) adequate ADB resources should be made available to bolster implementation. The RBL program incorporates these lessons as follows: (i) Strong government ownership. The government has demonstrated ownership of the subsector through the establishment of the national program and commitment to deliver results. Several development partners have active operations supporting the national program, which are progressing well. Through the World Bank’s intervention, the government has included results-based financing for the sanitation component and introduced verification protocols. The RBL is established within the broader national program and will support the SDWSSSS program until it ends in 2026. (ii) Strengthened institutional arrangements. The executing agency for the CBISSP was originally the Department of Rural Water Supply under the Ministry of Agriculture, Water Resources, and Processing Industry. Subsequently, the executing agency arrangements changed four times during the implementation period. These changes stifled project performance and led to poor development effectiveness. Similarly, the implementing agency originally was a joint-project management unit within the National Agency for Local Self-Governance that later proved to be ineffective. Overall, the subsector lacked an effective and stable governance framework and did not have a central agency for policy leadership. ADB’s TA supported the government in establishing strong and competent sector institutions. The RBL program’s executing agency will be the DDWSSD, and the program implementing agency will be ARIS. The DDWSSD and ARIS have been key stakeholders in the rural WSS subsector; ARIS has clear accountability for delivering the externally financed projects. The DDWSSD was not part of CBISSP, whereas ARIS’s involvement was through 2011–2012. The noncompliance situation emerged before the transition to ARIS, and ARIS was not able to rectify related issues, including quality technical supervision of works that had been implemented, within the short 10-month period during which it was the executing agency. Currently, ARIS is responsible for the implementation of 10 externally financed projects including those funded by the World Bank. Essential resources have been provided to strengthen the capacity of ARIS. The program design has benefitted from development coordination through the Development Partners Coordination Council, and directly with development agencies. The RBL program uses harmonized results framework with the World Bank to encourage complementary activities to improve sector governance and accountability. The program design allows for scaling up, if and when additional financing or cofinancing becomes available. In particular, the Aga Khan Foundation has expressed interest in supporting the RBL program. (iii) Completed due diligence during program processing. The DDWSSD has been the lead policy and planning institution for the subsector since 2016, and is responsible for the implementation of the Drinking Water Law (1999). The DDWSSD has dedicated staff and provides program governance and coordination
15 ADB. 2013. Technical Assistance to the Kyrgyz Republic for Water Supply and Sanitation Strategy. Manila.
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among the stakeholders. The absence of a strong central agency was one of the main reasons for the slow pace of governance, institution, policy, and regulatory reforms. ADB assessments have concluded that the DDWSSD and ARIS have developed the essential capacity in project management, safeguards, procurement, and financial management that can be used to support the program. Progress reviews will provide indication of the potential (i) to scale up implementation efforts across other villages in Naryn and (ii) to broaden the application of program systems, such as the program procurement manual and the monitoring and evaluation (M&E) framework, to other provinces. (iv) Strengthened capacity and program systems. The RBL program will be complemented by an attached TA and a small expenditure financing facility (SEFF) activity to support institutional strengthening of the program systems and key institutions.16 The additional resources will support the recruitment of a credible independent verification agent (IVA) and provide program start-up and implementation services to mitigate the program’s operating environment risks, promote delivery of critical results through the effective use of disbursement-linked indicators (DLIs), enhance the sustainability of RBL program benefits, and assess opportunities for scaling up the program.
13. Results-based lending modality. The RBL instrument responds to the government’s request to shift the focus from investment transactions toward the RBL modality to incentivize the achievement of results, support financing a slice of its SDWSSSS expenditure program, and further strengthen the institutional capacity of the DDWSSD and ARIS to promote sustainability of the program. ARIS has experience with the implementation of results-based financing mechanisms, specifically in the rural sanitation subsector (footnote 4). Due diligence assessments provide reasonable assurance that the government’s program systems can deliver verifiable results. Institutional strengthening actions proposed in procurement, M&E, and fiduciary practices will mitigate related risks and support program implementation efficiency. The RBL is effective in managing large number of small procurement packages. It also provides a good platform for capacity development and technical and policy discussions, particularly in areas to (i) achieve program results and DLI targets, (ii) enhance program systems on the basis of the outcome of technical, fiduciary, and program safeguard-system assessments, (iii) strengthen accountability of basic service provision to rural residents, and (iv) leverage cofinancing. The government confirmed its strong commitment to this instrument.
14. ADB value addition. ADB value addition includes (i) the introduction of a results-based approach for investment planning and strengthening of institutions; (ii) a focus on building the capacity and management practices of asset owners and WSUs; (iii) actions to strengthen the program M&E (para. 31), procurement, and financial management systems; and (iv) the incorporation of climate change risk management into subsector operations.
C. Program Scope
15. The government and ADB have agreed on an RBL program size of $32.9 million, of which the proposed ADB financing is $27.4 million (Table 1).
16 ADB. 2019. Report and Recommendation of the President to the Board of Directors: Proposed Small Expenditure Financing Facility to the Kyrgyz Republic for the Multisector Activities Support Facility. Manila.
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Table 1: Program Scope Item Broader Government Program Results-Based Lending Programa Outcome Health and quality of life improved by Inclusive and reliable access to safe water achieving 90% coverage for water supply and improved sanitationb for rural supply services and 70% coverage for communities in Naryn province sanitation systems Key outputs (i) Water supply and sewerage (i) Water and sanitation infrastructure expanded systems constructed and upgraded; and sanitation solutions piloted, and (ii) policy and regulatory frameworks (ii) institutional capacities strengthened for strengthened; and enhanced sustainability in the rural water (iii) accountability and sustainability supply and sanitation subsector. strengthened, with social protection for vulnerable groups. Activity types (i) Infrastructure investments, (i) Potable water supply infrastructure and rehabilitation, construction; distribution networks, (ii) sector coordination at the national (ii) improved gender-sensitive water and and local government levels; sanitation facilities in health and education (iii) vocational and technical training; facilities, and (iii) piloting of non-networked household (iv) policy and regulatory reforms. sanitation solutions, (iv) institutional strengthening in procurement and financial management, and (v) support to water supplies and utilities services entities. Program $420.6 million (estimate) $32.9 million expenditure Main financiers Government: $27.3 million Government: $5.5 million and the respective ADB: $56.7 million ADB: $27.4 million, comprising: financing amounts World Bank: $60 million (i) $13.7 million concessional OCR loan, and EBRD, EU, EIB, SECO: $252.2 million (ii) $13.7 million ADF grant Islamic Development Bank: $20.0 million UN: $4.3 million Geographic Nationwide (urban and rural) across Naryn province (rural) coverage seven provinces: Batken, Chui, Issyk- Kul, Jalalabad, Naryn, Talas Implementation 2016–2026c January 2020–December 2026 period ADB = Asian Development Bank, ADF = Asian Development Fund, EBRD = European Bank for Reconstruction and Development, EIB = European Investment Bank, EU = European Union, OCR = ordinary capital resources, SECO = State Secretariat for Economic Affairs of the Government of Switzerland, UN = United Nations. a The results-based lending program is supporting the Strategy for Development of Water Supply and Sewerage Systems in Settlements, 2016–2026 (footnote c). b An improved sanitation facility at the household level is designed to hygienically separate excreta from human contact. Improved sanitation facilities treat and dispose of excreta either on-site or transported and then treated off- site at facilities designed for faecal sludge. c Government of the Kyrgyz Republic. 2016. Strategy for Development of Water Supply and Sewerage Systems in Settlements of the Kyrgyz Republic until 2026. Bishkek. Sources: ADB; and Department of Drinking Water Supply and Sewerage Development estimates.
D. Program Results
16. Impacts and outcome. The RBL program’s impacts will be (i) health and quality of life of residents improved and (ii) adverse environmental impacts reduced by 2026 (footnote 1). The outcome will be inclusive and reliable access to safe WSS for rural communities in Naryn improved.17
17 The design and monitoring framework is in Appendix 1.
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17. Two outputs will contribute to the outcome: (i) Output 1: Water supply and sanitation infrastructure expanded and sanitation solutions piloted. The program will include the following infrastructure components: (a) safe water sources, water storage, and treatment and disinfection systems; (b) distribution networks for the target population of 64,000; (c) gender- sensitive safe water and sanitation facilities in selected kindergartens, schools, and health facilities; and (d) piloting of non-networked household sanitation solutions. (ii) Output 2: Institutional capacities strengthened for enhanced sustainability in the rural water supply services and sanitation subsector. Output 2 focuses on institutional measures to strengthen WSS systems and improve service delivery. It will (a) establish and strengthen WSUs and secure at least 20% female participation across all WSUs by 2025, and 40% female participation in WSU- related trainings and public consultations; (b) deliver financial management training to further enhance internal control processes and procedures for ARIS and WSUs; (c) adopt and apply a procurement manual and a multiyear procurement action plan; and (d) develop and implement an M&E framework to improve knowledge of asset inventory and data management.
18. Disbursement-linked and other result indicators. The program will track progress using eight DLIs (Table 2) and two indicators not linked to disbursement.18 DLI 1 measures the population using water supply that meets national quality standards. DLI 2 monitors access to gender-sensitive safe water and sanitation facilities in selected schools, kindergartens, and health facilities. The program will track progress against output 1 using the completion of detailed design (DLI 3) and water supply infrastructure from source, storage, and disinfection to piped networks (DLI 4); and the piloting of household sanitation (DLI 5). Under output 2, DLI 6 includes the development of a procurement manual, which is instrumental for institutional strengthening and improving procurement practices; DLI 7 will track improved financial management capacity; and DLI 8 will track the establishment and performance of WSUs. The two indicators that are not linked to disbursement address climate change risk assessments and a grievance redress mechanism, which is referred to in the Kyrgyz Republic as a beneficiary feedback mechanism (BFM).
Table 2: Disbursement-Linked Indicators Disbursement Share of Allocated Total ADB Indicator ($ million) Financing (%) Outcome 1. By 2026, at least 64,000 people in the villages of Naryn use potable water 8.22 30.0 2. By 2026, at least an additional 13 village schools and/or kindergartens and 8 health 2.74 10.0 facilities served by improved gender-sensitive water and sanitation facilities Outputs 3. By 2025, detailed design of infrastructure completed for 43 villages 0.55 2.0 4. By 2024, infrastructure components for water supply and distribution networks 9.04 33.0 completed for at least 64,000 people 5. By 2023, non-networked household sanitation solutions piloted in at least 2 villages 1.37 5.0 with minimum combined total of 660 households 6. From 2020, procurement manual developed and implemented for the RBL program 1.37 5.0 7. By 2026, 100% of internal audit staff and finance staff of ARIS trained and certified 1.37 5.0 in internal audit and financial management by a nationally recognized institute
18 Program Results Assessment; and Program Results Framework (accessible from the list of linked documents in Appendix 2).
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Disbursement Share of Allocated Total ADB Indicator ($ million) Financing (%) 8. By 2026, WSUs fully operational and financially sustainable, with at least 20% 2.74 10.0 female participation in WSUs, and 40% female participation in WSU-related trainings and public consultations Total 27.40 100.0 ADB = Asian Development Bank, ARIS = Agentstvo Razvitya i Investirovanya Soobshestv (Community Development and Investment Agency), RBL = results-based lending, WSU = water supplies and utilities services entity. Sources: ADB; ARIS; Department of Drinking Water Supply and Sewerage Development; and Ministry of Finance.
19. Verification and disbursement. Table 2 shows the allocation of ADB disbursements among DLIs (Appendix 3, Table A3.3). An IVA, engaged through a separate SEFF grant, will conduct the verification of DLIs and ADB will verify prior result achievement of DLI 6.
E. Expenditure Framework and Financing Plan
20. Program expenditures. The RBL program expenditures are estimated to be $32.9 million from 2020 to 2026 (Table 3).
Table 3: Summary of Program Expenditure Framework, 2020–2026 (in 2019 prices) Item Amount Share of Total ($ million) (%) 1. Constructiona 26.39 80.2 2. Equipment and goods 0.46 1.4 3. Consulting services 1.53 4.7 4. Program management and institutional strengthening 1.69 5.1 5. Contingencies 2.09 6.4 6. Interest during construction 0.73 2.2 Total 32.90 100.0 Note: Numbers may not sum precisely because of rounding. a Includes $0.5 million for operation and maintenance in water supplies and utilities services entities during implementation. Sources: Asian Development Bank estimates; and Community Development and Investment Agency estimates.
21. Program financing. The government has requested (i) a concessional loan of $13.7 million from ADB’s ordinary capital resources, and (ii) a grant not exceeding $13.7 million from ADB’s Special Funds resources (Asian Development Fund) to help finance the program. The loan will have a 32-year term, including a grace period of 8 years; an interest rate of 1.0% per year during the grace period and 1.5% per year thereafter; and such other terms and conditions set forth in the draft loan agreement. The government will provide counterpart financing of $5.5 million, including taxes and duties. Climate change adaptation is estimated to cost $1.23 million, of which ADB will finance 100%.19
22. The financing plan is summarized in Table 4.
Table 4: Program Financing Plan Source Amount ($ million) Share of Total (%)
Government of the Kyrgyz Republic 5.5 16.6 Asian Development Bank Ordinary capital resources (concessional loan) 13.7 41.7
19 Climate Change Risk Assessment (accessible from the list of linked documents in Appendix 2).
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Source Amount ($ million) Share of Total (%) ADF Special Funds resources (grant) 13.7 41.7 Total 32.9 100.0 ADF = Asian Development Fund. Source: Asian Development Bank estimates.
23. Disbursement arrangements. The Ministry of Finance (MOF) will submit to ADB withdrawal applications, and report DLI achievements according to the verification protocol. ADB disbursement will be made following verification of DLI achievements. Before submission of the first withdrawal application, the MOF will submit to ADB the evidence of the authority of the person(s) who are authorized to sign the withdrawal applications, together with the authenticated signatures of each authorized person. From program effectiveness, the government will require $6.8 million (25%) of the total ADB financing amount to support program budgeting, procurement, and contract management. In this regard, advance financing will provide the liquidity needed to expedite the program’s financing needs for investment activities through the initial 3 years.20 Financing of prior results achieved not more than 12 months before loan and grant signing will be allowed to support start-up actions. The endorsement of the procurement manual is identified for financing for prior result and $820,000 is allocated for achieving this milestone. The concessional ordinary capital resources loan and Asian Development Fund grant proceeds will be disbursed to an account set up in a commercial bank by the MOF, from which ARIS will draw funds for the RBL program. Funding for disbursement related to each DLI will be equally contributed by the loan and grant.
F. Capacity Development and Program Action Plan
24. Program and system assessments identified capacity gaps. Paras. 27–37 report highlights from the assessments.21 The program action plan (PAP) includes actions to be undertaken during program implementation in the areas of results, M&E, fiduciary, procurement, corruption, safeguards, and gender.22
G. Technical Assistance
25. The attached TA is estimated to cost $225,000, which will be financed on grant basis by ADB’s Technical Assistance Special Fund (TASF 6). The TA will be implemented from November 2019 to December 2021.23 The attached TA will fund consultants to (i) assist with M&E of DLIs, and PAP actions; and (ii) provide technical and procurement support. The government will support the TA in the form of counterpart staff and other in-kind contributions. The program will also be supported by a SEFF activity estimated to cost $2,500,000, which will be financed separately on a grant basis. The SEFF will fund the IVA, and consultants to support capacity development.
H. Implementation Arrangements
26. The RBL program will be implemented from January 2020 to December 2026. The DDWSSD will be the executing agency and will be responsible for the overall monitoring of the
20 ADB. 2013. Piloting Results-Based Lending for Programs. Manila. The amount of advance financing was calculated based on the projected financing investment needs, the expected timing of DLI verification over successive years, and the disbursement amounts during the RBL program period to improve cash flow. 21 ADB. 2018. Technical Assistance to the Kyrgyz Republic for Preparing the Naryn Rural Water Supply and Sanitation Development Program. Manila. 22 Program Action Plan (accessible from the list of linked documents in Appendix 2). 23 Attached Technical Assistance Report (accessible from the list of linked documents in Appendix 2).
10 program results. ARIS will be the implementing agency to coordinate program implementation and address emerging issues. A program coordination committee, composed of representatives from the DDWSSD, ARIS, the MOF, the Ministry of Economy, the Ministry of Health, the State Agency for Local Self-Governance, and the Naryn plenipotentiary governor, will coordinate the implementation of DLIs and the PAP, endorse the procurement manual, and address operational issues. The program completion date is on 31 December 2027.
III. SUMMARY OF ASSESSMENTS
A. Program Technical Assessments
27. Program design. The program design is sound and the DLIs are critical indicators for achieving overall program results. The program design considers local conditions (such as weather), the need for gender-specific school and health facilities, community-based sanitation solutions, and the need to have efficient and accountable rural WSS services. The program is designed to improve WSS reliability and sustainability. The program design places emphasis on ensuring access to all, which is in line with the SDWSSSS, and is consistent with one of the national development strategy objectives. International expertise will be engaged to support ARIS’s design review, construction supervision, and contract management. A technical auditor will conduct regular audits to ensure that the as-built systems comply with specifications and that high-quality standards are maintained. Training will be provided to WSU staff to further enable sustainable service delivery, with a particular focus on building capacity to identify critical water quality risks.
28. The program will contribute to poverty reduction by improving health outcomes and reducing the time spent on water collection. It will directly benefit about 36,500 poor beneficiaries by providing better access to WSS services. It will especially alleviate women’s poverty by reducing the time spent collecting and storing water, and making it safe for household consumption. Based on analyses of similar rural water schemes, the benefits are (i) reduced incidence of water-related diseases and (ii) decreased time spent collecting water and treating it in-house.24
29. The WSS service operators currently charge low tariffs that do not cover O&M costs. Poverty surveys indicate that households are willing to pay much higher tariffs for clean water, which would be sufficient to cover O&M costs but not full replacement costs.25 The national program underscores the government’s policy objective to create economically sustainable and affordable WSS services by establishing a market format with a reliable subsidy system for vulnerable groups. As the RBL program rehabilitates and commissions new schemes, local governments will establish WSUs to provide services and ensure proper O&M. The attached TA and SEFF activity will promote sustainable approaches and accountable arrangements and, through a public awareness campaign, service levels will encourage higher collection efficiency rates by the WSUs. Institutions and systems will be further strengthened, especially at the local level, to provide sufficient budget allocation for routine O&M, if needed. The attached TA and SEFF will be provided to implement efficient operations, including developing appropriate strategies for billing and collection of tariffs.
24 Program Soundness Assessment; and Program Monitoring and Evaluation System Assessment (accessible from the list of linked documents in Appendix 2). 25 ADB. 2019. Poverty, Social, and Gender Assessment. Consultant’s report. Manila (TA 9633-KGZ).
11
30. The program is categorized effective gender mainstreaming. Given existing gender inequalities and women’s role in water collection, housework, and childcare, the program will alleviate women’s workload, free up time for productive activities and leisure, and meet water and hygiene needs for businesses headed by women. Gender is mainstreamed through DLI 2 and DLI 8 to promote (i) gender-sensitive infrastructure design (Appendix 3, Table A3.1), (ii) women’s representation in management structures, and (iii) women’s participation in service-related consultations. The PAP requires BFM and WSU trainings to promote gender awareness and action.
B. Program Systems Assessments
31. Monitoring and evaluation system. ARIS has a comprehensive M&E system for externally funded projects, including baseline surveys and infrastructure monitoring. ARIS has nine M&E specialists and a network of BFM specialists to report progress. ARIS has proven monitoring capacity for reporting on project and program indicators.26 ARIS is also developing a rural WSS information system to support its M&E system.
32. Fiduciary systems. The financial management assessment of ARIS concluded that the overall pre-mitigation financial management risk is substantial, based on specific financial management weaknesses identified in planning and budgeting, staffing, accounting and internal control, and external audit. The implementation of a proposed financial management action plan will reduce such risk.
33. The overall program procurement risk is assessed moderate. The Public Procurement Law (2015) was found to be generally comprehensive and included open competitive bidding. The program will rely on the RBL program procurement system. 27 ARIS will develop a procurement manual to ensure that procurement procedures and processes under the program mitigate procurement risks and meet ADB principles.28
34. The Guidelines to Prevent or Mitigate Fraud, Corruption, and Other Prohibited Activities in Results-Based Lending for Programs were explained to and discussed with the government, the DDWSSD and ARIS. The government’s anticorruption laws are comprehensive, and the institutional framework is assessed adequate.
35. The sustainability of the program is linked to the adequate operations of newly built systems, particularly the maintenance of equipment and disinfection systems, which will be installed at all production sites. Village governments will set up WSUs, which will be responsible for (i) water production and distribution, (ii) application of effective mechanisms for O&M of WSS infrastructure, (iii) billing and collection against the provision of services, and (iv) adherence to the highest standards of accountability through comprehensive and timely financial reporting and auditing. There is substantial risk to sustainable operations during the operational phase. To address this risk, an indicative tariff increase from Som77 per household per month in 2018 to Som237 per household per month in 2022, when the new WSS facilities are completed and put to use, will ensure that WSUs are able to recover operating costs. The indicative incremental tariff increase is about 208%. To ensure an adequate tariff level to cover O&M, operational and financial performance measures are included in the DLI 8 verification protocol for new WSUs to
26 Program Monitoring and Evaluation System Assessment (accessible from the list of linked documents in Appendix 2). 27 Program Procurement System Assessment (accessible from the list of supplementary documents in Appendix 2). 28 Given that lower-value procurement packages are expected to be procured, the high-value procurement thresholds are proposed to be lowered.
12 achieve. The RBL program will help sustain progress in financial management, accountability, and procurement to monitor financial sustainability of WSUs in the program areas.
36. Safeguard systems. The RBL program is classified category B for environment. ARIS will screen all program activities. Construction works will be small, and the impacts on the environment will be site-specific. ADB conducted program safeguards system assessment and prepared environmental assessment review framework, and land acquisition and resettlement framework to guide the safeguards process for each of the program activities.29 The program is classified category B for involuntary resettlement and category C for indigenous peoples. ARIS has a mechanism for environmental and social safeguards monitoring, which will be strengthened to comply with ADB’s Safeguard Policy Statement (2009) principles.
C. Integrated Risk Assessment and Mitigating Measures
37. Major risks and mitigating measures are summarized in Table 5. The overall benefits and impacts are expected to outweigh the risks and costs.
Table 5: Summary of Integrated Risk Assessment and Mitigating Measures Risks Ratings Key Mitigating Measures Results Unfamiliarity with RBL and/or political Substantial Strengthen monitoring and evaluation systems and pressure to expand interventions could capacities to enable frequent DLI monitoring by key jeopardize DLI achievement. decision makers. Ineffective management of water and Substantial Support the replacement of community drinking water sanitation facilities with low tariffs and users’ unions by WSUs, with ownership by local poor collection rates leads to poor authorities. Technical assistance and small expenditure systems. financing facility targeted training of WSUs to achieve financial sustainability. Fiduciary Rules for cash management, payment Substantial The finance unit procedures for cash management, procedures, and contract management external payment and contracting, and quality assurance (internal audit review) are not being fully procedures will be strengthened. Compliance with implemented. procedures will be audited. Internal audit function lacks formal Substantial Arrange for internal auditors capacity development and professional qualifications and has limited formal professional qualification training. The internal methodological and functional capacity, audit unit will report to the ARIS supervisory board on its which resulted in inadequate reporting to activities on a regular basis. the ARIS supervisory board. The Chamber of Accounts’ external audit Substantial The annual audit of the financial statements for the RBL work is not based on international audit program will be carried out by independent auditors standards and it does not provide an acceptable to ADB, based on terms of reference agreed audit opinion on any financial statements. with ADB, and using International Standards on Auditing. BFM not fully operational and is High Recruit a BFM specialist to operationalize BFM system significantly under-resourced. and include anticorruption and grievance redress as specific conditions of contracts. Corruption Level of corruption in the country is High ARIS will adopt the program procurement manual. relatively high. Engage anticorruption staff and program beneficiaries in procurement and monitoring. Conduct regular anticorruption training for stakeholders. Overall RBL program risk Substantial ADB = Asian Development Bank, ARIS = Agentstvo Razvitya i Investirovanya Soobshestv (Community Development and Investment Agency), BFM = beneficiary feedback mechanism, DLI = disbursement-linked indicator, RBL = results-based lending, WSU = water supplies and utilities services entity.
29 Program Safeguard Systems Assessment (accessible from the list of linked documents in Appendix 2).
13
Note: Risk factors are assessed against two dimensions: (i) the likelihood that the risk will occur and (ii) the impact of the risk on the outcome. Rating scale: low = low likelihood and low impact, moderate = substantial to high likelihood but low to moderate impact, substantial = low to moderate likelihood but substantial to high impact, high = high likelihood and high impact. Source: ADB.
IV. ASSURANCES
38. The government and the DDWSSD have agreed with ADB on certain covenants for the RBL program, which are set forth in the loan agreement, grant agreement, and program agreement.
V. RECOMMENDATION
39. I am satisfied that the proposed results-based loan and the proposed results-based grant would comply with the Articles of Agreement of the Asian Development Bank (ADB) and recommend that the Board approve (i) the loan of $13,700,000 to the Kyrgyz Republic for the Naryn Rural Water Supply and Sanitation Development Program, from ADB’s ordinary capital resources, in concessional terms, with an interest charge at the rate of 1.0% per year during the grace period and 1.5% per year thereafter; for a term of 32 years, including a grace period of 8 years; and such other terms and conditions as are substantially in accordance with those set forth in the draft loan agreement presented to the Board; and (ii) the grant not exceeding $13,700,000 to the Kyrgyz Republic from ADB’s Special Funds resources (Asian Development Fund) for the Naryn Rural Water Supply and Sanitation Development Program; on terms and conditions that are substantially in accordance with those set forth in the draft grant agreement presented to the Board.
Takehiko Nakao President 17 October 2019
14 Appendix 1
DESIGN AND MONITORING FRAMEWORK
Impacts the RBL Program is Aligned with (i) Health and quality of life of residents improved and (ii) adverse environmental impacts reduced by 2026 (Strategy for Development of Water Supply and Sewerage Systems in Settlements of the Kyrgyz Republic until 2026)a
Data Sources and Reporting Results Chain Performance Indicators with Targets and Baselines Mechanisms Risks Outcome Inclusive and a. By 2026, at least 64,000 people in the villages of a–b. ARIS Vulnerability to reliable access Naryn use potable waterb (2019 baseline: 0) DLI 1 (RFI M&E systems external shocks to safe water 5.1 and RFI 1.3) may divert supply and government sanitation for b. By 2026, at least 13 village schools and/or priorities, including rural kindergartens and 8 village health posts served by resources communities in improved gender-sensitive water and sanitation allocated for the Naryn improved facilitiesc (2019 baseline: 0) DLI 2 (RFI 5.1.1, RFI 1.3.1, program. and RFI 2.4.1) Outputs 1. Water supply 1a. By 2025, detailed design of infrastructure completed 1a–d. ARIS Extreme weather and sanitation for 43 villages (2019 baseline: 3) DLI 3 M&E systems conditions in infrastructure Naryn may delay expanded and 1b. Climate change risk assessments applied to all sites construction. sanitation for potable water sources in the program by 2026 and solutions piloted become mandatory for the rural water supply services Undue delays in and rural sanitation subsector from 2024 (2019 baseline: government 0) (RFI 3.2.5) approval processes may 1c. By 2024, infrastructure components for water supply hold up the and distribution networks in place for at least 64,000 institutional d people (2019 baseline: 0) DLI 4 (RFI 5.1.1 and RFI actions necessary. 1.3.1)
1d. By 2023, non-networked household sanitation solutions piloted in at least 2 villages with minimum combined total of 660 households (2019 baseline: 0) DLI 5 (RFI 5.1 and RFI 1.3) 2. Institutional 2a. Procurement manual developed and implemented 2a–d. ARIS capacities for the RBL program from 2020 (2019 baseline: not M&E strengthened applicable) DLI 6 (RFI 6.1.4) systems, for enhanced procurement sustainability in 2b. By 2026, 100% of internal audit staff and finance records, audit the rural water staff of ARIS trained and certified in internal audit and training supply services financial management by a nationally recognized records, BFM and sanitation institute (2019 baseline: 0) DLI 7 (RFI 6.1 and RFI 6.1.1) records, and subsector local 2c. By 2026, WSUs fully operational and financially government sustainable, with at least 20% female participation in records WSUs, and 40% female participation in WSU-related trainings and public consultationse (2019 baseline: not applicable) DLI 8 (RFI 6.1 and RFI 2.1.1)
2d. By 2025, the BFM fully functioning in the beneficiary villagesf (2019 baseline: not applicable) (RFI 6.2.4)
Appendix 1 15
Key Program Actions 1. Program technical aspects 1.1 Implement the program M&E framework and establish quarterly reviews of DLIs by key decision makers, with corrective actions as required, and share minutes of DLI quarterly reviews with ADB (Q1 2020–Q4 2026). 1.2 Recruit at least one other M&E staff to support the RBL program’s M&E specialist, and provide training for M&E staff as required (Q2 2020). 1.3 Recruit one BFM specialist dedicated to the RBL program. Have the BFM unit report to the ARIS supervisory board, as well as to ARIS management (Q1 2020). 2. Fiduciary 2.1 Ensure that the vacant internal audit unit position is filled with a qualified and experienced staff member (Q1 2020). 2.2 Revise the job description or terms of reference for the finance manager position to include a requirement of a formal accounting certification (Q1 2020). 2.3 Strengthen the procedures for cash management, external payment, and contracting; and review and improve the applied quality assurance and supervision procedures (Q1 2020–Q4 2021). 2.4 The internal audit unit will report to the supervisory board on its activities on a regular basis (Q1 2020). 2.5 Arrange training for the internal auditors on a priority basis (at the Ministry of Finance Training Center, if available) (Q2 2020, Q2 2022, Q2 2024, and Q2 2026). 2.6 Carry out audits of the annual financial statements for the RBL program by independent auditors acceptable to ADB, based on terms of reference agreed with ADB, and using International Standards on Auditing (Q1 2020–Q4 2026). 2.7 Adopt a comprehensive procurement manual acceptable to ARIS based on commonly accepted good practice principles embodied in the ADB Procurement Policy (2017, as amended from time to time) for the Naryn RBL program (Q4 2019). 2.8 Build capacity of ARIS to enhance procurement function and service (Q1 2020–Q4 2026). 2.9 Develop agreed-upon operating procedures and archiving procedures for procurement records, and finalize master documents such as bidding documents, requests for proposals, and bid evaluation report templates to be used for the RBL program (Q4 2019–Q4 2026). 3. Safeguards 3.1 Engage professional and certified detailed measurement survey and valuation specialists to prepare impact and valuation of affected assets for preparation of the land acquisition and resettlement plan (Q1 2020). 3.2 Engage a safeguards advisor for the implementing agency who will be dedicated to covering both environmental and social safeguard issues in the RBL program (Q1 2020). 3.3 Develop capacity at (i) ARIS, (ii) municipal governments in Naryn, and (iii) the Department of Drinking Water Supply and Sewerage Development through trainings on environmental management and environmental management plan implementation as per ADB’s Safeguard Policy Statement (2009) (Q1 2020). 4. Gender 4.1 Ensure that BFM and WSU trainings incorporate gender concerns and solutions to promote female participation in WSUs and WSU-related events (Q2 2020–Q4 2026). 4.2 Engage a gender specialist to work with the implementing agency (Q2 2020). 4.3 Systematically disaggregate data by sex (Q1 2020–Q4 2026). Financing Plan Total financing program from 2020 to 2026: $32.9 million Government of the Kyrgyz Republic: $5.5 million Asian Development Bank: $13.7 (loan) and $13.7 million (grant) Assumptions for Partner Financing Not applicable ADB = Asian Development Bank, ARIS = Agentstvo Razvitya i Investirovanya Soobshestv (Community Development and Investment Agency), BFM = beneficiary feedback mechanism, DLI = disbursement-linked indicator, M&E = monitoring and evaluation, Q = quarter, RBL = results-based lending, RFI = results framework indicator, WSU = water supplies and utilities services entity. a Government of the Kyrgyz Republic. 2016. Strategy for Development of Water Supply and Sewerage Systems in Settlements of the Kyrgyz Republic until 2026. Bishkek. b Potable water supply means water from a safe, disinfected source that meets the minimum criteria for quality and continuity of water supply specified in the verification protocol for DLI 1 and DLI 4. c Improved gender-sensitive water and sanitation facilities for schools and health facilities must meet the following criteria: (i) the facilities are in line with national standards and regulations of the Kyrgyz Republic and best international practices; (ii) toilet facilities are separate for males and for females; (iii) appropriate provisions must be made in a convenient place to prevent freezing and encourage use of handwashing facilities even in winter and even
16 Appendix 1
with outside latrines; (iv) sanitation facilities are connected to a compartmentalized septic tank, which will dispose of human waste hygienically; and (v) each gender-sensitive water and sanitation facility in a school will have at least one hygiene cabin for schoolgirls and female teachers (for menstrual hygiene, cleaning, and privacy purposes) in line with national standards (Appendix 3, Table A3.2). Target areas are to be identified by Q1 2020, and will be monitored and measured quarterly. d The infrastructure components comprise the following, sufficient to serve the needs of at least the population of 64,000: (i) safe water sources (borehole and/or protected spring); (ii) functioning disinfection systems in line with national health norms; (iii) water storage facilities, all of which meet criteria provided in verification protocols; and (iv) water distribution networks at a sufficient depth to avoid freezing, with piped networks extending from the water supply source to the street level, at a minimum. Target areas are to be identified by Q4 2019, and will be monitored and measured quarterly. e The functioning of each WSU (fully operational) is gauged from BFMs. Criteria that each WSU must fill are provided in the verification protocols. Each WSU should be legally established under the Local Self-Government Law and fully resourced (including a general manager and/or accountant, engineer, and technician), and its operational performance measured and monitored. The M&E framework for DLI 8 sets out the data to be collected and monitored, including (i) financial accounts and records (operating costs and revenue generated); (ii) institutional arrangements, including its legal mandate; and (iii) staffing levels. Target areas are to be identified by Q4 2019, and will be monitored and measured quarterly. f The functioning of the BFM system will be assessed according to the criteria agreed by ARIS and ADB in 2019, including disaggregation by sex, and the way in which reports and/or complaints are handled for monitoring beneficiary feedback and engagement, covering all aspects of the program implementation period. The BFM will be incorporated under the program’s M&E system. Currently, a BFM has only been established in 43 villages dedicated to pasture and livestock management improvement (World Bank) and rural improvement (International Fund for Agricultural Development) projects. Contribution to the ADB Results Framework: RFI 5.1 People benefiting from increased rural investment. RFI 3.1 Poor and vulnerable people with improved standards of living. RFI 5.1.1 Rural infrastructure assets established or improved. RFI 1.3.1 Infrastructure assets established or improved. RFI 2.4.1 Time-saving or gender-responsive infrastructure assets and/or services established or improved. RFI 3.2.5 New and existing infrastructure assets made climate and disaster resilient. RFI 6.1.4 Transparency and accountability measures in procurement and financial management supported in implementation. RFI 6.1.1 Government officials with increased capacity to design, implement, monitor, and evaluate relevant measures. RFI 6.1. Entities with improved management functions and financial stability. RFI 2.1.1. Women enrolled in technical and vocational education and training and other job training. RFI 6.2.4. Citizen engagement mechanisms adopted. Note: Expected results values and methodological details for the RFIs are in Contribution to the ADB Results Framework (accessible from the list of linked documents in Appendix 2). Sources: ADB; and ARIS.
Appendix 2 17
LIST OF LINKED DOCUMENTS http://www.adb.org/Documents/RRPs/?id=52256-001-3
1. Loan Agreement 2. Grant Agreement 3. Program Agreement 4. Country Economic Indicators 5. Summary Sector Assessment: Agriculture, Natural Resources, and Rural Development (Rural Water Supply Services and Rural Sanitation) 6. Program Soundness Assessment 7. Program Results Assessment 8. Program Results Framework 9. Program Expenditure and Financing Assessment 10. Program Monitoring and Evaluation System Assessment 11. Program Fiduciary Systems Assessment 12. Integrated Risk Assessment and Mitigating Measures 13. Contribution to the ADB Results Framework 14. Development Coordination 15. Summary Poverty Reduction and Social Strategy 16. Program Implementation Document 17. Program Safeguard Systems Assessment 18. Program Action Plan 19. Attached Technical Assistance Report Supplementary Documents 20. Program Procurement System Assessment 21. Climate Change Risk Assessment 22. Detailed Program Safeguard System Assessment 23. Program Monitoring and Evaluation Framework
18 Appendix 3
DISBURSEMENT-LINKED INDICATORS, VERIFICATION PROTOCOLS, AND DISBURSEMENT SCHEDULE
Table A3.1: Disbursement-Linked Indicators Baseline Target values Disbursement- value and Prior linked indicators year results 2020 2021 2022 2023 2024 2025 2026 Outcome: Inclusive and reliable access to safe water supply and improved sanitation in Naryn DLI 1. By 2026, at 0 population Potable water Potable water Potable water Potable water least 64,000 people use water supply and supply and supply and supply and in the villages of from distribution distribution distribution distribution Naryn use potable disinfected network for network for network for network for water sources, 4,500 19,000 45,000 64,000 2019 population population population population commissioned (cumulative) (cumulative) (cumulative) commissioned commissioned commissioned DLI 2. By 2026, at 0 additional (i) GSWS (i) GSWS (i) GSWS least an additional 13 schools facilities in 3 facilities in 7 facilities in 13 village schools and/or schools and/or schools and/or schools and/or and/or kindergartens kindergartens kindergartens kindergartens kindergartens and 8 health facilities and health commissioned (cumulative) (cumulative) served by improved facilities, (ii) GSWS commissioned commissioned gender-sensitive 2019 facilities in 3 (ii) GSWS (ii) GSWS water and sanitation health facilities facilities in 5 facilities in 8 facilities commissioned health facilities health facilities (cumulative) (cumulative) commissioned commissioned Output 1: Water supply and sanitation infrastructure expanded and sanitation solutions piloted DLI 3. By 2025, 0 completed Predesign Predesign Predesign Predesign Predesign Predesign detailed design of activities and activities and activities and activities and activities and activities and infrastructure detailed design detailed design detailed design detailed design detailed design detailed design completed for 43 completed in 13 completed in 23 completed in 28 completed in 33 completed in 38 completed in 43 villages villages villages villages villages villages villages DLI 4. By 2024, Infrastructure Preparation of (i)Safe water (i) Safe water (i) Safe water (i) Safe water infrastructure inadequate bidding source, source, source, source, components for or non- documents to disinfection, disinfection, disinfection, disinfection, water supply and existent conduct tender and storage and storage and storage and storage distribution networks for construction system system system system completed for at least works to cover completed to completed to completed to completed to 64,000 population at least 4,500 cover needs of cover needs of cover needs of cover needs of population 4,500 19,000 45,000 64,000 population population population population (ii) Water (ii) Water (ii) Water (ii) Water distribution distribution distribution distribution networks networks networks networks expanded to expanded to expanded to expanded to serve 4,500 serve 19,000 serve 45,000 serve 64,000 population population population population
Appendix 3 19
Baseline Target values Disbursement- value and Prior linked indicators year results 2020 2021 2022 2023 2024 2025 2026 DLI 5. By 2023, non- Sanitation Feasibility study List of target Solutions Solutions networked, solutions not completed for villages and implemented implemented household sanitation piloted pilot approach households for at least 250 for at least 660 solutions piloted in at identified. households households least 2 villages with Detailed (cumulative) minimum combined designs total of 660 developed households Output 2: Institutional capacities strengthened for enhanced sustainability in the rural water supply services and sanitation subsector DLI 6. Procurement Gaps Procuremen 2020 MYP 2021 MYP 2022 MYP 2023 MYP 2024 MYP 2025 MYP 2026 MYP manual developed identified in t manual targets targets targets targets targets targets targets and implemented for ARIS’s and MYP implemented implemented implemented implemented implemented implemented implemented the RBL program procurement developed according to according to according to according to according to according to according to from 2020 and contract procurement procurement procurement procurement procurement procurement procurement management manual manual manual manual manual manual manual systems DLI 7. By 2026, Gaps ARIS ensures ARIS ensures ARIS ensures ARIS ensures 100% of internal identified in that at least that at least that at least that at least four audit staff and ARIS’s four internal four internal four internal internal audit finance staff of ARIS financial audit staff and audit staff and audit staff and staff and finance trained and certified management finance staff are finance staff are finance staff are staff are trained in internal audit and system. The trained and trained and trained and and certified financial audit and certified certified certified respectively in management, financial respectively in respectively in respectively in audit and respectively, by a management audit and audit and audit and financial nationally recognized units have 3 financial financial financial management institute and 13 staff, management management management respectively, without accreditation DLI 8. By 2026, No Scoping study (i) Public (i) WSUs (i) WSUs (i) WSUs (i) 64,000 (i) 64,000 WSUs fully functioning conducted for consultations established to established to established to population population operational and structures for jurisdiction, and trainings serve serve serve served by served by financially operations, roles and completed, with population population population WSUs, with (ii) WSUs, with (ii) sustainable, with at maintenance, responsibilities at least 40% receiving water receiving water receiving water at least 20% at least 20% least 20% female and of raion and aiyl female supply in 2021 supply in 2022 supply in 2023 female female participation within management okmotu levels participation, to (ii) Public (ii) Public (ii) Public participation in participation in WSUs, and at least support cover 4,500 consultations consultations consultations the overall the overall 40% female population and trainings and trainings and trainings WSUs WSUs participation in WSU- (ii) Tariff set by completed, with completed, with completed, with related trainings and aiyl okmotu for at least 40% at least 40% at least 40% public consultations 4,500 female female female population participation, to participation, to participation, to (iii) Tariff cover 19,000 cover 45,000 cover 64,000 approved by population population population aiyl kenesh for
20 Appendix 3
Baseline Target values Disbursement- value and Prior linked indicators year results 2020 2021 2022 2023 2024 2025 2026 4,500 (iii) Tariff set by (iii) Tariff set by (iii) Tariff set by population aiyl okmotu for aiyl okmotu for aiyl okmotu for 19,000 45,000 64,000 population. (iv) population population Tariff approved (iv) Tariff (iv) Tariff by aiyl kenesh approved by approved by for 19,000 aiyl kenesh for aiyl kenesh for population 45,000 64,000 population population 40. ADB = Asian Development Bank, ARIS = Agentstvo Razvitya i Investirovanya Soobshestv (Community Development and Investment Agency), BFM = beneficiary feedback mechanism, DLI = disbursement-linked indicator, MYP = Multi-Year Procurement Action Plan, WSU = water supplies and utilities services entity established and operating in accordance with laws of the Kyrgyz Republic. Sources: ADB; and ARIS.
Appendix 3 21
Table A3.2: Verification Protocols Disbursement-Linked Information Source Verification Agency, Procedure and Indicator Definition and Description of Achievement and Frequency Time Frame Outcome: Inclusive and reliable access to safe water supply and improved sanitation enhanced for rural communities in Naryn DLI 1: By 2026, at least 64,000 people in the villages of Naryn use potable water 2019 Baseline: Target Definitions ARIS database on Each year, ARIS conducts monitoring population have no access the program. and prepares an attestation that the DLI “Commissioned” means the complete water supply system from source to to potable water supply piped network, as defined for DLI 4, has been tested to ensure it is is met and attaches the relevant report. and networks from complete and functioning, and handed over from the contractor(s) to The IVA will verify the results each year disinfected sources Required frequency relevant government bodies. for reporting will be through field visits to target villages as well as records available from ARIS, aiyl “Use of potable water” means that the community is using water from a annual, and ARIS Targets: okmotu, and local authorities at national, Potable water supply and safe, disinfected source that meets the minimum criteria specified under DLI and ADB may agree 4 (i) and (ii). The use is monitored by a variety of methods, such as field each year on interim raion, and community level, as required. distribution network Spot checks and interviews will be commissioned for: checks and BFM reports. reporting arrangements as implemented on field trips as • 2021: 4,500 population Depending on the program budget, and on community and local appropriate. • 2022: 19,000 population government contributions, the access to the piped network may be appropriate. (cumulative) facilitated through household connections or street level networks. Monitoring may be The IVA will refer to the verification protocols and other relevant guidelines • 2023: 45,000 population Conditions for disbursement are met if the targets in the first column are as frequent as ARIS (cumulative) wishes. prepared for the program. The IVA report achieved. is then attached to the ARIS attestation • 2024: 64,000 population report. (cumulative) Partial disbursement. The DLI is scalable and partial disbursement is allowed, according to the population served by the commissioned potable Within one month of receiving the water supply and networks. If the population target is not fully achieved, validated report, ADB will confirm that then disbursement can be proportional to the increase made from the the target has been met. previous year’s targeted achievement. The following formula will be applied: Partial DLI disbursement = planned DLI disbursement for the period (actual achievement of the current period–targeted achievement of the previous period)/ (targeted achievement of the current period–targeted achievement of the previous period). Disbursements are allowed for early or late achievement of the DLI. This means that the planned disbursement amount for a given year can be released when the set target is fully achieved, even if the achievement is late, as long as the achievement is during the program’s duration. Early disbursement is also allowed when achievement is earlier than scheduled.
DLI 2: By 2026, at least an additional 13 village schools and/or kindergartens and 8 health facilities served by improved gender-sensitive water and sanitation facilities 2019 Baseline: Zero Definitions. “Commissioned” means the improved GSWS facilities, as ARIS database on Each year ARIS conducts monitoring additional schools and defined below, have been tested to ensure they are complete and the program. and prepares an attestation that the DLI health facilities are served functioning, and handed over from the contractor(s) to the aiyl okmotu is met and attaches the relevant report. (village administration).
22 Appendix 3
Disbursement-Linked Information Source Verification Agency, Procedure and Indicator Definition and Description of Achievement and Frequency Time Frame by improved GSWS Improved GSWS facilities for schools and/or kindergartens are required to Required frequency The IVA will verify the results each year facilities meet the following criteria: (a) The facilities are in line with national for reporting will be through field visits to target villages and Targets: standards and regulations of the Kyrgyz Republic and best international annual, and ARIS facilities as well as records available practices; (b) toilet facilities are separate for males and for females; (c) and ADB may agree from ARIS, aiyl okmotu, and local health 2021: (i) GSWS facilities where handwashing facilities do not exist in outside latrines, appropriate each year on interim and education authorities, as required. in 3 village schools and/or auxiliary building and/or room is constructed with a water supply connection reporting Spot checks and interviews will be kindergartens to such structure; (d) toilets meet national standards; (e) school sanitation arrangements as implemented on field trips as commissioned (ii) GSWS facilities are connected to a compartmentalized septic tank, which will appropriate. appropriate. facilities in 3 village health dispose of human waste hygienically through pre-treatment and treatment facilities commissioned Monitoring may be The IVA will refer to the verification of sewage, discharging excess water to an infiltration system leading to an as frequent as ARIS protocols and other relevant guidelines 2022: (i) GSWS facilities absorption field; (f) each GSWS facility will have at least 1 hygiene cabin for a wishes. prepared for the program. The IVA report in 7 village schools and/or schoolgirls and female teachers in line with national standards; and (g) the is then attached to the ARIS attestation kindergartens (cumulative) GSWS facilities may be achieved through rehabilitation of existing facilities report. commissioned (ii) GSWS and do not have to be constructed provided they meet the above criteria. Within one month of receiving the facilities in 5 village health Improved gender-sensitive water and sanitation (GSWS) facilities for health facilities (cumulative) validated report, ADB will confirm that facilities are required to meet the following criteria: (a) the facilities are in the target has been met. commissioned line with national standards and regulations of the Kyrgyz Republic and best 2023: (i) GSWS facilities international practices; (b) toilet facilities are separate for males and for in 13 village schools females; (c) piped water network is built on the health facility grounds, with and/or kindergartens running water available from faucets in handwashing facilities, which are (cumulative) situated close to toilets, at a convenient place to wash hands, even in commissioned (ii) GSWS winter; (d) toilets meet national standards; (e) sanitation facilities are facilities in 8 village health connected to a compartmentalized septic tank, which will dispose of human facilities (cumulative) waste hygienically through pre-treatment and treatment of sewage inside, commissioned discharging excess water to an infiltration system leading to an absorption field; (f) the GSWS facilities may be achieved through rehabilitation of existing facilities and do not have to be newly constructed as long as they meet the above criteria; (g) at least one primary health care facility (FAP) will be included among the 6 target facilities. Conditions for disbursement are met if the targets in the first column are achieved. Partial disbursement. The DLI is scalable and partial disbursement is allowed, according to the number of GSWS facilities commissioned. For each year’s allocation, (i) and (ii) are weighted equally and thus comprise 50% of that year’s allocation. Each of the yearly targets under (i) and (ii) are scalable, meaning that if the target is not fully achieved, then disbursement can be proportional to the increase made from the previous year’s targeted achievement. The following formula will be applied: Partial DLI disbursement = planned DLI disbursement for the period (actual achievement of the current period–targeted achievement of the
Appendix 3 23
Disbursement-Linked Information Source Verification Agency, Procedure and Indicator Definition and Description of Achievement and Frequency Time Frame previous period)/ (targeted achievement of the current period–targeted achievement of the previous period). Disbursements are allowed for early or late achievement of the DLI. This means that the planned disbursement amount for a given year can be released when the set target is fully achieved, even if the achievement is late, as long as the achievement is during the program’s duration. Early disbursement is also allowed when achievement is earlier than scheduled. Output 1. Water and sanitation infrastructure expanded and sanitation solutions piloted DLI 3: By 2025, detailed design of infrastructure completed for 43 villages 2019 Baseline: Detailed Definitions. ARIS database on Each year ARIS conducts monitoring design activities Predesign activities are those that are required prior to the development of the program. and prepares an attestation that the DLI incomplete or not the detailed and working design and may include various assessments Required frequency is met and attaches the relevant report. conducted in target necessary for making decisions on the development of design and for reporting will be The IVA will verify the results each year villages subsequent implementation of the projects. Detailed and working design annual, and ARIS through field visits to target villages as 2020: Predesign activities comprises calculations, drawings, and bills of quantities elaborated in detail and ADB may agree well as records available from ARIS, aiyl and detailed design to enable the contractor to start construction activities on the site. Detailed each year on interim okmotu, and local authorities at national, completed in 13 villages design is developed based the results of predesign activities. The target is reporting raion and community level, as required. 2021: Predesign activities considered achieved only when the detailed design is produced. arrangements as Spot checks and interviews will be and detailed design Conditions for disbursement are met if the targets in the first column are appropriate. implemented on field trips as completed in 23 villages achieved. Monitoring may be appropriate. 2022: Predesign activities Partial disbursement. The DLI is scalable and partial disbursement is as frequent as ARIS The IVA will refer to the verification and detailed design allowed, but only according to the number of villages where specified wishes. protocols and other relevant guidelines completed in 28 villages activities are completed. If detailed design is not completed, partial prepared for the program. The IVA report disbursement cannot be made for predesign activities or incomplete is then attached to the ARIS attestation 2023: Predesign activities report. and detailed design detailed design. If the target number of villages is not fully achieved, then completed in 33 villages disbursement can be proportional to the increase made from the previous Within one month of receiving the year’s targeted achievement. The following formula will be applied: validated report, ADB will confirm that 2024: Predesign activities the target has been met. and detailed design Partial DLI disbursement = planned DLI disbursement for the period completed in 38 villages (actual achievement of the current period–targeted achievement of the previous period)/ (targeted achievement of the current period–targeted 2025: Predesign activities achievement of the previous period). and detailed design completed in 43 villages Disbursements are allowed for early or late achievement of the DLI. This means that the planned disbursement amount for a given year can be released when the set target is fully achieved, even if the achievement is late, as long as the achievement is during the program’s duration. Early disbursement is also allowed when achievement is earlier than scheduled. DLI 4: By 2024, infrastructure components for water supply and distribution networks completed for at least 64,000 population
24 Appendix 3
Disbursement-Linked Information Source Verification Agency, Procedure and Indicator Definition and Description of Achievement and Frequency Time Frame 2019 Baseline: Definitions. “Infrastructure components” for water supply and distribution ARIS database on Each year ARIS conducts monitoring Infrastructure inadequate networks means the complete infrastructure for potable water supply and the program. and prepares an attestation that the DLI or non-existent; water distribution networks as follows: Required frequency is met and attaches the relevant report. supply does not meet Stage (i): Safe water source, disinfection, and storage system, which meet for reporting will be The IVA will verify the results each year national safety standards criteria (a) to (c). Stage (i) is considered accomplished only when (a), (b) annual, and ARIS through field visits to target villages as 2020: Preparation of and (c) are completed. and ADB may agree well as records available from ARIS, aiyl bidding documents to Stage (ii): Water distribution networks. each year on interim okmotu, and local authorities at national, conduct tender for reporting raion and community level, as required. construction works to Stage (i): For each site, arrangements as Spot checks and interviews will be cover at least 4,500 (a) safe water source can be either appropriate. implemented on field trips as population appropriate. • two boreholes (according to national standards, so that if one borehole Monitoring may be does not work, the water supply system continues to function), or if one as frequent as ARIS The IVA will refer to the verification (i) (a)Safe water source, borehole is drilled, in accordance with the national standards, the borehole wishes. protocols and other relevant guidelines (b) water disinfection will be equipped with additional standby pumping equipment to ensure prepared for the program. The IVA report system, and (c) water continuous water supply. is then attached to the ARIS attestation storage system • a protected spring (protected from contamination from surface water). report. completed, and Boreholes should be drilled to a depth sufficient to draw water from a clean Within one month of receiving the and safe aquifer protected from surface contamination. Surface water (ii) Water distribution validated report, ADB will confirm that sources that do not meet the normative requirements set forth for the Kyrgyz networks expanded to the target has been met. Republic are not allowed. cover the needs of (b) A water disinfection system must be functioning, in line with national following population for standards for a residual chlorine rate, which is aligned with the World Health each year: Organization recommendations. 2021: 4,500 population (c) Water storage: the storage facility must be able to provide sufficient 2022: 19,000 population water supply for the population, calculated according to the current national 2023: 45,000 population standards 2024: 64,000 population Stage (ii): The water distribution networks means piped network. These must be laid at a depth below the surface sufficient to avoid freezing in winter. Stage (ii) is considered completed when the piped networks extend from the water supply source to the street level at a minimum. Conditions for disbursement are met if the targets in the first column are achieved. Partial disbursement. The DLI is scalable and partial disbursement is allowed in proportion to population covered and according to components (i) and (ii), as follows: For each year’s allocation, (i) and (ii) are weighted equally and thus comprise 50% of that year’s allocation. Each of the yearly population targets under (i) and (ii) are also scalable. Under (i), however, partial disbursement cannot be made according to components (a), (b) and
Appendix 3 25
Disbursement-Linked Information Source Verification Agency, Procedure and Indicator Definition and Description of Achievement and Frequency Time Frame (c) (that is, partial disbursement can be made for stage (i) in proportion to the population covered, but only if all three components (a), (b) and (c) are all completed. If the target is not fully achieved, then disbursement can be proportional to the increase made from the previous year’s targeted achievement. The following formula will be applied: Partial DLI disbursement = planned DLI disbursement for the period (actual achievement of the current period–targeted achievement of the previous period)/ (targeted achievement of the current period–targeted achievement of the previous period). Disbursements are allowed for early or late achievement of the DLI. This means that the planned disbursement amount for a given year can be released when the set target is fully achieved, even if the achievement is late, as long as the achievement is during the program’s duration. Early disbursement is also allowed when achievement is earlier than scheduled. DLI 5: By 2023, non-networked, household sanitation solutions piloted in at least 2 villages with minimum combined total of 660 households 2019 Baseline: Sanitation Definitions. Non networked sanitation solutions mean an individual or ARIS database on Each year, the focal unit(s) in ARIS solutions not yet piloted group system with one or several houses (depending on the site) connected the program. prepares an attestation that the DLI is 2020: Feasibility study to a compartmentalized septic tank, which will dispose of human waste Required frequency met and attaches the relevant report. completed for pilot hygienically. The septic tank(s) will be connected to the toilets of the for reporting will be The IVA will verify the results each year approach house(s). annual, and ARIS through field visits to target villages as Implementation of the pilot approach means that the construction of the 2021: List of target and ADB may agree well as records available from ARIS, aiyl compartmentalized septic tanks is completed for the target number of villages and households each year on interim okmotu, and local authorities at national, households, with connections between the septic tank and the households. identified reporting raion and community level, as required. Conditions for disbursement are met if the targets in the first column are arrangements as Spot checks and interviews will be Detailed designs achieved. appropriate. implemented on field trips as developed appropriate. Partial disbursement. The DLI is scalable and partial disbursement is Monitoring may be 2022: Sanitation solutions allowed, but only for 2022 and 2023, according to the number of households as frequent as ARIS The IVA will refer to the verification implemented for at least covered by the approach. If the stated household targets are not fully wishes. protocols and other relevant guidelines 250 households achieved for 2022 or 2023, then disbursement can be proportional to the prepared for the program. The IVA report 2023: Sanitation solutions increase made from the previous year’s targeted achievement. The is then attached to the ARIS attestation implemented for at least following formula will be applied: report. 660 households Partial DLI disbursement = planned DLI disbursement for the period Within one month of receiving the (cumulative) (actual achievement of the current period–targeted achievement of the validated report, ADB will confirm that previous period)/ (targeted achievement of the current period–targeted the target has been met. achievement of the previous period). Partial disbursement is not allowed for 2020 and 2021 targets. Disbursements are allowed for early or late achievement of the DLI. This
26 Appendix 3
Disbursement-Linked Information Source Verification Agency, Procedure and Indicator Definition and Description of Achievement and Frequency Time Frame means that the planned disbursement amount for a given year can be released when the set target is fully achieved, even if the achievement is late, as long as the achievement is during the program’s duration. Early disbursement is also allowed when achievement is earlier than scheduled. Output 2. Institutional capacities strengthened for enhanced sustainability in the rural water supply services and sanitation subsector DLI 6: Procurement manual is developed and implemented for the RBL program from 2020 2019 Baseline: ARIS’s Definition. The Procurement Manual, developed in 2019 and approved by ARIS records for the Each year, the focal unit(s) in ARIS procurement and contract the program coordination committee (comprised of DDWSSD (chair), ARIS, program. prepares an attestation that the DLI is management systems MOF, MOE, MOH, State Agency for Local Self-Governance, Naryn Required frequency met and attaches the relevant report. assessed, and gaps plenipotentiary governor), will set out the procurement processes for the for reporting will be The IVA will verify the results each year identified program in line with international best practices, including FIDIC, and semi-annually, and through relevant records available from agreed to by ADB. The Multi-Year Procurement Action Plan (MYP) means Prior results: A ARIS and ADB may ARIS’s procurement department and Procurement Manual and an action plan (including training) also developed in 2019 with technical agree each year on interviews as required. an MYP on procurement support provided by ADB from separate technical assistance funds. The interim reporting MYP is considered completed when ADB and ARIS both sign off on it. The IVA will refer to the verification training, rules and arrangements as protocols and other relevant guidelines procedures appropriate for Conditions for disbursement are met if the targets in the first column are appropriate. prepared for the program. The IVA report ARIS, developed and achieved. Monitoring may be is then attached to the ARIS attestation completed in line with Partial disbursement. The DLI is scalable and partial disbursement is as frequent as ARIS report. international best allowed according to the number of MYP action points achieved each year. wishes. practices, including FIDIC Within one month of receiving the The total number of MYP action points for a given year (e.g., 8 action validated report, ADB will confirm that 2020-2026: points) will represent the 100% disbursement target for that year. If 4 of the target has been met. For each year, MYP those action points are achieved for that year, then 50% of the targets of the respective disbursement allocation is made. If the target is not fully achieved, then year implemented disbursement can be proportional to the increase made from the previous according to the year’s targeted achievement. The following formula will be applied: Procurement Manual Partial DLI disbursement = planned DLI disbursement for the period (actual achievement of the current period–targeted achievement of the previous period)/ (targeted achievement of the current period–targeted achievement of the previous period). Disbursements are not allowed for procurement actions that do not follow the rules and procedures in the Procurement Manual. Other than this, disbursements are allowed for early or late achievement of the MYP targets, such as for training. This means that the planned disbursement amount for a given year can be released when the set target is fully achieved, even if the achievement is late, as long as the achievement is during the program’s duration. Early disbursement is also allowed when achievement is earlier than scheduled. DLI 7: By 2026, 100% of internal audit staff and finance staff of ARIS trained and certified in internal audit and financial management, respectively, by a nationally recognized institute
Appendix 3 27
Disbursement-Linked Information Source Verification Agency, Procedure and Indicator Definition and Description of Achievement and Frequency Time Frame 2019 Baseline: ARIS’s Definitions. ARIS staff trained for a given year means that (a) a training ARIS database on Each year, the focal unit(s) in ARIS financial management needs assessment is carried out before the training in the year specified; (b) the program. prepares an attestation that the DLI is system assessed and the training plan is developed for that year; (c) a training program is Required frequency met and attaches the relevant report. areas for improvement prepared; (d) the list of participation is verified by the training provider for for reporting will be The IVA will verify the results through identified, including that year; and (e) training is conducted by a nationally recognized institute. once every two training records available from ARIS and training needs Conditions for disbursement are met if the targets in the first column are years (biennial), and interviews as appropriate of trained staff.
2020, 2022, 2024, 2026: achieved, with the criteria specified in (a), (b), (c), (d) and (e) above. ARIS and ADB may The IVA will refer to the verification For each of these years, Partial disbursement. The DLI is not scalable and partial disbursement is agree each year on protocols and other relevant guidelines ARIS ensures that at least not allowed for the specified year. interim reporting prepared for the program. The IVA report four internal audit staff and arrangements as is then attached to the ARIS attestation finance staff are trained Disbursements are not allowed for early or late achievement of the DLI. This appropriate. means that the planned disbursement amount for a given year can only be report. respectively in audit and Monitoring may be financial management released when the set target is fully achieved within that year. Within one month of receiving the as frequent as ARIS validated report, ADB will confirm that wishes. the target has been met. DLI 8: By 2026, WSUs fully operational and financially sustainable, with at least 20% female participation within WSUs, and at least 40% female participation in WSU-related trainings and public consultations 2019 Baseline: No Definition. A water supplies and utilities services entity (WSU) is ARIS database on Each year, the focal unit(s) in ARIS functioning structures for established by the aiyl okmotu within the aiyl okmotu (village administration) the program. prepares an attestation that the DLI is operations, maintenance, itself. The aiyl okmotu will own the water system assets while the WSU is Required frequency met and attaches the relevant report. and management support responsible for delivering water, maintaining the assets and collecting for reporting will be The IVA will verify the results each year 2020: Scoping study tariffs, being responsible to and reporting to the aiyl okmotu. To this end, an annual, and ARIS through field visits to target villages as conducted for jurisdiction, operational WSU should be legally established under the Local Self- and ADB may agree well as records available from ARIS roles and responsibilities Government Law, fully resourced (including a General Manager or each year on interim (such as BFM), aiyl okmotu, and local at raion and aiyl okmotu Accountant, Engineer, and 1 Technician), and operational performance reporting authorities at national, raion and levels measured and monitored (i.e., total operating revenue over total operating arrangements as community level, as required. Spot expense is not less than 0.5 in 2022, 0.6 in 2023, 0.7 in 2024, 0.8 in 2025, appropriate. checks and interviews will be 2021: (i) Public 0.9 in 2026, and 1.0 in 2027).b The M&E framework for DLI 8 sets out the consultations and trainings Monitoring may be implemented on field trips as data to be collected and monitored include (i) financial account and records appropriate. completed, with at least (operating costs and revenue generate); (ii) institutional arrangements as frequent as ARIS 40% female participation, including its legal creation; and (iii) staffing levels. The water enterprise may wishes. The IVA will refer to the verification to cover at least 4,500 cover more than one village or system, depending on the scoping study to Use audited protocols and other relevant guidelines population. (ii) Tariff be conducted in the first year. While the specific terms of reference for financial statements prepared for the program. The IVA report developed by aiyl okmotu WSUs are defined by each aiyl okmotu, these generally include the (audited by is then attached to the ARIS attestation for 4,500 population. following: (a) quality assurance of water supply, (b) maintenance of independent auditor report. (iii)Tariff approved by aiyl networks and equipment necessary for water supply and sanitation, (c) such as, Chamber of Within one month of receiving the kenesh for 4,500 construction and installation works, (d) provision of paid services, and (e) Account or private validated report, ADB will confirm that population “commercial activities” (i.e., tariff collection). audit firm) to the target has been met. 2022: (i) WSUs Before each WSU is set up, public consultations and training of relevant measure operating established to serve staff must be conducted in the village(s) concerned. For 2021 (i), 2022 (i), ratio. population receiving water 2023 (i), and 2024 (i), the combined records of the public consultations and
28 Appendix 3
Disbursement-Linked Information Source Verification Agency, Procedure and Indicator Definition and Description of Achievement and Frequency Time Frame supply in 2021, (ii) Public trainings should show not less than 40% female participation in the consultations and trainings combined total participants for each year, to be eligible for disbursement completed, with at least (not necessarily for each village). The WSU should be established no later 40% female participation, than a year after the water supply networks are constructed, completed, and to cover 19,000 handed over/commissioned (DLI 1). population. (iii) Tariff Tariff means the price assigned to water supplied by the aiyl okmotu (owner developed by aiyl okmotu of the facility) through a piped network to users. The water tariffs are for 19,000 population, (iv) developed by aiyl okmotu and approved by the aiyl kenesh (local council). Tariff approved by aiyl kenesh for 19,000 “Population served by WSUs” means that this population is living in villages population that have functioning WSUs as part of the aiyl okmotu. The functioning of the WSUs is gauged from the BFM system that ARIS will implement as part 2023: (i) WSUs of the RBL program (see non-disbursement linked indicator on BFM). established to serve population receiving water 20% female participation in the WSU means that by 2025 and 2026, the supply in 2022. (ii) Public proportion of women members in the total WSUs established by the RBL consultations and trainings program is not less than 20%. completed, with at least Conditions for disbursement are met if the targets in the first column are 40% female participation, achieved. to cover 45,000 Partial disbursement. The DLI is scalable and partial disbursement is population, (iii) Tariff allowed for 2021, 2022, 2023, 2024, according to (i) target population to be developed by aiyl okmotu serviced by WSUs (i.e., whether the established WSUs for that year are for 45,000 population, (iv) sufficient for the target population number); (ii) population covered by Tariff approved by aiyl approved tariffs. For year 2021, equal weight is assigned to targets (i), (ii) kenesh for 45,000 population and (iii) in that year’s disbursement allocation. For years 2022, 2023, and 2024, equal weight is assigned to targets (i), (ii), (iii), and (iv) in each year’s 2024: (i) WSUs disbursement allocation. For years 2025 and 2026, equal weight is assigned established to serve to targets (i) and (ii), and partial disbursement is also allowed according to population receiving water (i) population served by established WSUs; and (ii) the percentage of supply in 2023, (ii) Public females in the overall WSUs. consultations and trainings Female participation: The 40% female participation in consultations and completed, with at least trainings is not scalable, meaning that consultations and training activities 40% female participation, must have a combined total 40% female participation for that year or they to cover 64,000 will not be counted for that year. population, (iii)Tariff developed by aiyl okmotu The 20% female participation in WSUs is scalable and partial for 64,000 population, (iv) disbursements may be made in 2025 and 2026, according to the proportion Tariff approved by aiyl of women in the overall total of WSUs (not necessarily for each WSU). kenesh for 64,000 If the target is not fully achieved, then disbursement can be proportional to population the increase made from the previous year’s targeted achievement. The 2025: (i) 64,000 following formula will be applied: population served by
Appendix 3 29
Disbursement-Linked Information Source Verification Agency, Procedure and Indicator Definition and Description of Achievement and Frequency Time Frame WSUs, with (ii) at least Partial DLI disbursement = planned DLI disbursement for the period 20% female participation (actual achievement of the current period–targeted achievement of the in the overall WSUs previous period)/ (targeted achievement of the current period–targeted 2026: (i) 64,000 achievement of the previous period). population served by Disbursements are allowed for early or late achievement of the DLI. This WSUs, with (ii) at least means that the planned disbursement amount for a given year can be 20% female participation released when the set target is fully achieved, even if the achievement is in the overall WSUs late, as long as the achievement is during the program’s duration. Early disbursement is also allowed when achievement is earlier than scheduled. ADB = Asian Development Bank, ARIS = Agentstvo Razvitya i Investirovanya Soobshestv (Community Development and Investment Agency), BFM: beneficiary feedback mechanism, DLI = disbursement-linked indicator, FAP = feldsher midwifery posts, FIDIC = international federation of consulting engineers, IVA = independent verification agent, MOE = Ministry of Economy, MOF = Ministry of Finance, MOH = Ministry of Health, MYP = Multi-Year Procurement Action Plan, WSU = water supplies and utilities services entity. a For menstrual hygiene, cleaning, and privacy purposes. b Operational performance of total revenue over total expense is an indicative and can be revisited during the implementation. Any changes will require ADB’s approval. Sources: ADB; and ARIS.
30 Appendix 3
Table A3.3: Combined Loan and Grant Disbursement Schedulea Share of Total ADB ADB Financing Financing Financing for Prior Disbursement-linked Indicator Allocation (%) Results 2020 2021 2022 2023 2024 2025 2026 Total Outcome DLI 1. By 2026, at least 64,000 people in the 8.22 30% 2.88 1.78 1.78 1.78 8.22 villages of Naryn use potable water DLI 2. By 2026, at least an additional 13 2.74 10% 1.10 0.54 1.10 2.74 village schools and/or kindergartens and 8 health facilities are served by improved gender-sensitive water and sanitation facilities Outputs DLI 3. By 2025, detailed design of 0.55 2% 0.08 0.08 0.08 0.08 0.15 0.08 0.55 infrastructure is completed for 43 villages DLI 4. By 2024, infrastructure components for 9.04 33% 1.81 1.81 1.81 1.81 1.80 9.04 water supply and distribution networks completed for at least 64,000 population DLI 5. By 2023, non-networked, household 1.37 5% 0.34 0.34 0.34 0.35 1.37 sanitation solutions piloted in at least 2 villages with minimum combined total of 660 households DLI 6. Procurement manual developed and 1.37 5% 0.82 0.08 0.08 0.08 0.08 0.08 0.08 0.07 1.37 implemented for the RBL program from 2020 DLI 7. By 2026, 100% of internal audit staff 1.37 5% 0.34 0.34 0.34 0.35 1.37 and finance staff of ARIS trained and certified in internal audit and financial management, respectively, by a nationally recognized institute DLI 8. By 2026, WSUs fully operational and 2.74 10% 0.39 0.39 0.39 0.39 0.39 0.39 0.39 2.74 financially sustainable, with at least 20% female participation in WSUs, and 40% female participation in WSU-related trainings and public consultations Total 27.40 100% 0.82 3.05 6.68 5.36 5.59 4.54 0.55 0.81 27.40 ADB = Asian Development Bank, ARIS = Agentstvo Razvitya i Investirovanya Soobshestv (Community Development and Investment Agency), DLI = disbursement-linked indicator, RBL = results-based lending, WSU = water supplies and utilities services entity. Note: Numbers may not sum precisely because of rounding. a Funding for disbursements for each DLI will be equally contributed by loan and grant. Source: ADB; and ARIS.