Environmental Monitoring Report # Annual Safeguard Monitoring Report March 2019 UZB: Horticulture Value Chain Development Project Prepared by Sayfullo Gaibullaev and Diana Rakhimova (UZIAFSA) for the Agency for implementation of projects in the field of agroindustry and food security (UZAIFSA) and the Asian Development Bank. ANNUAL SAFEGUARD MONITORING REPORT Project Number: 3471-UZB (SF) Reporting period: January – December 2018 Republic of Uzbekistan: Horticulture Value Chain Development Project (FТnanced by tСe ADB’s ordТnary capТtal resources) Prepared by: Sayfullo Gaibullaev, Rakhimova Diana, (UZAIFSA) Tashkent, Uzbekistan For: ADB Agency for implementation of projects in the field of agroindustry and food security (UZAIFSA) Endorsed by: Bakhtiyor Kamalov (Deputy Director General of UZAIFSA) This environmental monitoring report is a document of the borrower. The views expressed herein do not necessarily represent those of ADB's Board of Directors, Management, or staff, and may be preliminary in nature. 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. ABBREVIATIONS ADB – Asian Development Bank CAR – Capital adequacy ratio CBU – Central Bank of Uzbekistan ESMS – Environmental and social management system MAWR – Ministry of Agriculture and Water Resources MOF – Ministry of Finance PFI – Participating financial institution PIU – Project implementation unit PMO – Project management office RRA – Rural Restructuring Agency SEE – State Environmental Expertise EIS – Environmental Impact Statement NBU _ National Bank of Uzbekistan SLA _ Subsidiary Loan Agreement UZAIFSA _ Agency for implementation of projects in the field of agroindustry and food security Table of Contents Part I Introduction ................................................................................................................... 4 1.1. Short description of the program................................................................................. 4 1.2. Summary of activities and project progress during the previous 12 months ........... 4 Part II Environmental issues ...................................................................................................... 9 2.1. Environmental issues in the previous 12 months. ...................................................... 9 2.2. Explanations of instances in which environmental standards or guidelines were exceeded or environmental incidents happened ................................................................ 10 2.3. Recommendations are required to show how any exceedances will be prevented in the future ............................................................................................................................ 11 Part III: Compliance with ADB’s Social Protection Requirements and ADB’s Prohibited Investment Activities List ......................................................................................................... 12 3.1. A brief description of the taken measures ................................................................ 13 Part IV: ESMS operations (for PFIs which are financing B-category subprojects) ............... 13 4.1. A brief description of the effectiveness of the ESMS within 12 months. ................ 13 4.2. Specific data on the following activities is recommended ....................................... 14 5.1. Conclusions. ............................................................................................................... 15 5.2. Action plan for the next reporting period .................................................................. 15 Annexes ..................................................................................................................................... 17 Annex 2: Site photographs ....................................................................................................... 24 Annex 3: Terms of reference (ToR) Annex 4: ESMS reports Part I Introduction 1.1. Short description of the program The project supports the government strategy in horticulture value chain development through increasing outreach of participating financial institutions (PFI) to horticulture farmers and entrepreneurs in all in twelve regions nationwide and the Republic of Karakalpakistan. It improved access to market-based bank finance for farmers, agro-processing enterprises, owners and operators of cold storage facilities, trading and logistics service suppliers involved in the horticulture value chain. The project helped increase farm productivity, processing and storage capacity, and reduced post-harvest losses through upgrading and setting up intensive orchards, modern and efficient greenhouses, processing, storage and refrigeration facilities. In this turn, it promoted long- term economic and environmental sustainability, and enhanced profitability for farmers and agribusiness enterprises. 1.2. Summary of activities and project progress during the previous 12 months. According to the Loan Agreement and project agreements, eight participating financial institutions (PFIs) as well as National Bank of Uzbekistan, Asaka Bank, Uzpromstroybank, Ipak Yuli Bank, Ipoteka Bank, Hamkorbank, Turon Bank and Davr Bank were selected to participate in the project. Out of the total loan proceed of USD 154 million, USD 151 million was allocated for the credit line and USD 3 million was earmarked for project management and implementation support. In fact, as of January 1, 2019 USD 152.2 million (or 98.8% of the loan amount) has been released from Loan 3471-UZB, including USD 151.4 million to PFIs for sub-loan financing, and USD 0.761 million to RRA for project management and implementation. Allocations and withdrawals of credit line were done by PFIs as shown in the table below: Table 1: Summary of activities and project progress during 12 months Allocated Withdrawn % from (in PFIs (in million allocated № million USD) ammount USD) 1 NBU 50.6 50.6 100.0 2 Asaka bank 46.7 46.7 100.0 3 Uzpromstroybank 15.0 15.0 100.0 4 Ipoteka bank 11.0 11.0 100.0 5 Ipak Yuli bank 10.0 10.0 100.0 6 Turonbank 10.0 10.0 100.0 7 Hamkorbank 5.0 5.0 100.0 8 Davr bank 3.0 3.0 100.0 Total 151.4 151.4 100.0 162 subprojects were financed during the entire project period, while in the reporting period - there were 38 subprojects financed. All subprojects underwent preliminary environmental screening by the PFIs strictly following the Environmental and social management system (ESMS) procedures of which 157 are classified as "B" and the remaining 5 subprojects are classified as "C" according to the legislation of the Republic of Uzbekistan in the field of environmental protection and ADB's requirement. Table 2: Financed sub-loans in this reporting period ESMS Number of sub-loans by environmental № PFIs approval categories date B C Total 1 JSICB «Ipak ВulТ» 24.05.2017 1 - 1 2 PJSCB «DAVR BANK» 15.05.2017 1 - 1 3 JSCB «Turonbank» 25.05.2017 - - 4 JSCB «Hamkorbank» 29.05.2017 6 2 8 5 JSCB «Asaka bank» 30.05.2017 - - - 6 JSCMB «Ipoteka bank» 25.05.2017 1 - 1 7 National Bank of Uzbekistan for Foreign 26.05.2017 18 - 18 Economic Activities 8 JSCB «Uzpromstroybank» 30.05.2017 9 - 9 Total 36 2 38 As of December 2018, a preliminary estimate indicates that the project has helped to establish 3,369 hectares (ha) of intensive orchards and 137 ha of water- and energy-saving greenhouses; increased refrigerated storage capacity by 68,200 tons (on the basis of one-off single load capacity), post-harvest processing capacity by 122,091 tons, and packaging material manufacture of 14 million square meters; and procured 179 units of agricultural machinery. Summary table of activities of Created capacity from disbursed subproject during the reporting period is given in the Table 3. Table 3. Created capacity from disbursed subproject № Type of investment Unit of measure Capacity 1 Modern refrigeration storage Ton 68,200 2 Intense garden Hectare 3,369 3 Processing of horticulture complexes Ton 122,091 4 Modern greenhouse complexes Hectare 137 5 Manufacture of packing Sq.meter 14 million 6 Agriculture machinery and other Pcs. 179 According to paragraph (l) of Section 6.01 of the Subsidiary loan agreement, (SLA) PFIs are provided annual reports on the effectiveness of implementation of environmental and social measures. Tables 4 and 5 indicat summaries of extended subloans using ADB funds within the Horticulture Value Chain Development Project (HVCDP). Table 4: Quantity of the total portfolio of innovations for the modernization of gardening by subcomponents : Number of Subprojects Purchase of Modern Processing of Modern № PFIs Intense Manufacture of agricultural refrigeration horticulture greenhouse Total garden packaging machinery storage products complexes and transport 1 NBU 20 2 10 15 2 49 2 Asaka bank 13 3 5 16 37 3 UzPSB 9 2 8 1 20 4 Ipoteka bank 9 1 3 6 1 20 5 Ipak Yuli bank 3 1 1 4 9 6 Turon bank 2 2 2 1 7 7 Hamkorbank 7 5 1 3 17 8 Davr bank 1 2 1 3 Total 63 12 25 56 2 4 162 Table 5 Breakdown of Subprojects by Region (as of December 2018) Processing of Refrigerated Intensive Horticultural Greenhouse Storage Orchard Products Complex Others Total Value Value Value Value Value Value Region No ($ m) No ($ m) No ($ m) No ($ m) No ($ m) No ($ m) Karakalpakstan 3 0,705 2 1,119 5 1,823 Andijan 4 0,998 1 0,691 4 1,831 3 3,657 12 7,177 Bukhara 4 1,137