DEVELOPING INFRASTRUCTURE IN CENTRAL ASIA Impacts and Financing Mechanisms Edited by Naoyuki Yoshino, Bihong Huang, Dina Azhgaliyeva, and Qaisar Abbas ASIAN DEVELOPMENT BANK INSTITUTE Developing Infrastructure in Central Asia: Impacts and Financing Mechanisms Edited by Naoyuki Yoshino, Bihong Huang, Dina Azhgaliyeva, and Qaisar Abbas ASIAN DEVELOPMENT BANK INSTITUTE © 2021 Asian Development Bank Institute All rights reserved. ISBN 978-4-89974-231-9 (Print) ISBN 978-4-89974-232-6 (PDF) The views in this publication do not necessarily reflect the views and policies of the Asian Development Bank Institute (ADBI), its Advisory Council, ADB’s Board or Governors, or the governments of ADB members. ADBI does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. 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Asian Development Bank Institute Kasumigaseki Building 8F 3-2-5, Kasumigaseki, Chiyoda-ku Tokyo 100-6008, Japan www.adbi.org Contents Tables and Figures iv Abbreviations ix Contributors x Introduction 1 Naoyuki Yoshino, Bihong Huang, Dina Azhgaliyeva, and Qaisar Abbas 1. Infrastructure in Central Asia and the Caucasus 5 Ghulam Samad and Qaisar Abbas 2. Measuring the Impact of Road Infrastructure on Household Well-Being: Evidence from Azerbaijan 29 Nurmukhammad Yusupov 3. Managing the Risks of Public Infrastructure Financing: Toward Sustainability 57 Quanhou Zhao, Licheng Zhang, Beilin Feng, Wei Liu, Xiaoyan Long, Jiaxi Sun, Xu Chen, and Qiongqi Xiao 4. Public–Private Partnerships in Georgia and Impact Assessment of Infrastructure 90 Nestan Devidze 5. Measuring Impacts and Financing Infrastructure in Kazakhstan 131 Bibigul Aidarkhanova 6. Measuring the Impact and Financing of Infrastructure in the Kyrgyz Republic 168 Kamalbek Karymshakov and Burulcha Sulaimanova 7. Infrastructure Development and Public–Private Partnerships: Measuring Impacts of Urban Transport Infrastructure in Pakistan 198 Muhammad Ayub Mehar 8. Are Public–Private Partnerships a Solution to the Lagging Infrastructure of Tajikistan? 231 Ziyodullo Parpiev iii Tables and Figures Tables 1.1 Road Infrastructure in Selected Central Asian and the Caucasus Countries, 2018 12 1.2 Railways for Goods and Passenger Transport in Central Asia and Caucasus, 2007–2017 14 1.3 Air Transport Infrastructure, Transport, and Service Quality in Selected Central Asian and Caucasus Countries 16 1.4 Water Infrastructure Indicators in Selected Central Asian and Caucasus Countries, 2018–2019 18 1.5 Electricity Production, Source, and Access in Central Asia, 2015 21 1.6 Electricity Infrastructure, Rate, and Quality in Selected Central Asian and Caucasus Countries, 2019 22 1.7 Central Asia Regional Economic Cooperation Corridors 23 2.1 Foreign Direct Investment in Azerbaijan, 2014–2016 38 2.2 Descriptive Statistics 46 2.3 Characteristics of Treatment vs. Control Districts 47 2.4 Perceived Market Value of Housing – OLS Estimations 48 2.5 Subjective Household Wealth Relative to Others in the Society – OLS Estimations 51 2.6 Subjective Household Wealth Relative to Others in the Society – Ordered Logit Estimations 53 3.1 Issuing of Local Government Bonds vs. Issuing of Corporate Bonds 78 4.1 Descriptive Statistics for the Dependent and Control Variables in Our Modified DiD Model 101 4.2 Hausman Test Results 103 4.3 Results of the DiD Estimations 104 4.4 List of Active PPP Projects in Georgia 111 4.5 Summary of Indicators for Georgia against the Benchmarked Practices in the Preparation Phase of PPPs 116 4.6 Summary of Indicators for Georgia against the Benchmarked Practices in the Procurement Phase of PPPs 118 4.7 Summary of Indicators for Georgia against the Benchmarked Practices in the Contract Management Phase of PPPs 120 4.8 Summary of Indicators for Georgia against the Benchmarked Practices in the Management of Unsolicited Proposals 121 5.1 Financial Account Balance in Kazakhstan, 2015–2017 138 iv Tables and Figures v 5.2 Treated and Control Group in the Subregional Model Using the DiD Method 148 5.3 Summary Statistics of Dependent and Independent Variables by Subregion 149 5.4 Treated and Control Group in the Regional Model Using the DiD Method 150 5.5 Summary Statistics of Dependent and Independent Variables by Region 151 5.6 Evaluation of Impact on Treated Subregions in Subregional Model Using the DiD Method 156 5.7 Evaluation of Impact on Treated Region in Regional Model Using the DiD Method 159 6.1 Macroeconomic Indicators for the Kyrgyz Republic, 2001–2016 170 6.2 Road Construction Projects in the Kyrgyz Republic 175 6.3 Description of Treatment, Control Groups, and Variables 176 6.4 Summary of Statistics for Control and Treated Regions (regional-level data) 178 6.5 Summary of Statistics for Control and Treated Regions (district-level data) 179 6.6 DiD Estimators for Regional Level Analysis 180 6.7 DiD Estimators for District-Level Analysis 182 6.8 Financing Public Investment Program in the Kyrgyz Republic, 2015–2017 183 A6.1 Difference-in-Differences Estimation Results for Regional Level Analysis 196 A6.2 Difference-in-Differences Estimation Results for Kara-Suu, Alai, and Chon-Alai Treated Districts 196 A6.3 Difference-in-Differences Estimation Results for Alai and Chon-Alai Treated Districts 197 A6.4 Difference-in-Differences Estimation Results for Alai Treated District 197 7.1 Pakistan’s Global Ranking in Infrastructure 202 7.2 Structural Changes in 1993: Patterns of Development Financing 205 7.3 Approval Process of a Project 206 7.4 The Largest Public–Private Partnership Programs in Pakistan 208 7.5 List of Urban Transit Systems in Pakistan (since 2013) 209 7.6 Descriptive Statistics (Region and Year Wise) – Household Survey 211 7.7 Descriptive Statistics (Overall) – Household Survey 212 7.8 Average Household Real Incomes for 2005–2012 and 2014 216 7.9 Average Household Real Incomes for 2005–2012 and 2014–2016 216 vi Tables and Figures 7.10a Impact of Infrastructure on Household Income (All Regions) – Dependent Variable: Real Household Income at Constant Prices of 2005 220 7.10b Impact of Infrastructure on Household Income (Urban Regions) – Dependent Variable: Real Household Income at Constant Prices of 2005 221 A7 Government Capability to Prepare, Procure, and Manage PPP Projects 228 8.1 Tajikistan’s Recent Performance in Global Rankings 237 8.2 Comparative Analysis of the Pamir Energy and Dushanbe-Chanak Road Projects 248 8.3 Characteristics of the Four Regions of Tajikistan Used in This Study 252 8.4 Descriptive Statistics of Regional Data for Tajikistan 252 8.5 Results of Difference-in-Differences Regressions 255 Figures 1.1 Gross Domestic Product Per Capita Growth in Panama, 1960–2014 6 1.2 Gross Domestic Product Per Capita Growth in Egypt, 1916–2015 7 1.3 Country Population Shares in Central Asia and the Caucasus, 2018 9 1.4 Gross Domestic Product Growth Rate at Constant Prices in Central Asia and the Caucasus, 2014–2020 10 1.5 Infrastructure Global Competitiveness Index in Selected Central Asian and Caucasus Countries, 2007–2018 11 1.6 Railway Length in Central Asia and the Caucasus, 1995–2017 13 1.7 Number of Passengers Traveling by Air Transport in Central Asia and the Caucasus, 1996–2018 15 1.8 Quality of Port Infrastructure in Selected Central Asian and Caucasus Countries 17 1.9 Ranking of Quality of Port Infrastructure in Selected Central Asian and Caucasus Countries, 2018 and 2019 17 1.10 Freshwater Withdrawal for Agriculture, Industry, and Domestic in Selected Central Asian and Caucasus Countries 19 1.11 Fixed Telephone and Broadband Subscriptions (per 100 People) in Central Asia and the Caucasus, 2019 20 1.12 Number of Mobile Phone Users (per 100 People) in Central and the Caucasus Asia, 1995–2017 20 1.13 Rail Corridors, Central Asia and the Caucasus 24 1.14 Total Infrastructure Investments by Region, 1990–2019 25 1.15 Infrastructure Investments as a Share of GDP, 2011 26 Tables and Figures vii 1.16 Regulatory Environment in Selected Central Asian and Caucasus Countries, 2018 26 2.1 Azerbaijan’s Recent Economic Growth, 2012–2018 36 2.2 End Use of Azerbaijan’s GDP (2017 Estimates) 38 2.3 Investment Spending from State Budget in Azerbaijan, 2008–2016 40 3.1 Four Models of Financing for Public Infrastructure, 1998–2014 59 3.2 Tax Revenue and Revenue from Extra-Budgetary Charges in the PRC, 1987–1996 66 3.3 State-Owned Land Sale Revenue and Urban Public Infrastructure Investment, 2000–2017 69 3.4 2017 Financing Structure of a Sample Financing Platform Company 70 3.5 Evolution of Maturities of Bonds Issued by Local Governments 72 3.6 Process for Preparation and Review of Government’s Public Investment Budget Items 74 3.7 Amount of Bonds Issued by Local Governments, 2009–2018 76 3.8 Monthly Changes in the Number of Projects in the Management Library