Report and Recommendation of the President to the Board of Directors Project Number: 45432 August 2012 Proposed Grant and Administration of Loan Republic of Tajikistan: Central Asia Regional Economic Cooperation Corridor 6 (Ayni–Uzbekistan Border Road) Improvement Project This document is being disclosed to the public prior to Board consideration in accordance with ADB’s Public Communications Policy (2011). Subject to any revisions required following Board consideration, this document is deemed final. CURRENCY EQUIVALENTS (as of 6 August 2012) Currency unit – somoni (TJS) TJS1.00 = $0.2099 $1.00 = TJS4.765 ABBREVIATIONS ADB – Asian Development Bank ADF – Asian Development Fund CAREC – Central Asia Regional Economic Cooperation EIRR – economic internal rate of return IEE – initial environmental examination km – kilometer MOT – Ministry of Transport OFID – OPEC Fund for International Development PIU – project implementation unit NOTE In this report, “$” refers to US dollars. Vice-President X. Zhao, Operations 1 Director General K. Gerhaeusser, Central and West Asia Department (CWRD) Director H. Wang, Transport and Communications Division, CWRD Team leader Z. Wu, Transport Specialist, CWRD Team members N. Djenchuraev, Environment Specialist, CWRD D. Hill, Senior Transport Specialist, CWRD J. Ngai, Counsel, Office of the General Counsel F. Nuriddinov, Project Officer, CWRD S. Roth, Social and Gender Development Specialist, CWRD I. Setyawati, Resettlement Specialist, CWRD J. Stickings, Senior Social and Gender Development Specialist, CWRD Peer reviewer H. Iwasaki, Principal Infrastructure Specialist, Southeast Asia 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 PROJECT AT A GLANCE MAP I. THE PROPOSAL 1 II. THE PROJECT 1 A. Rationale 1 B. Impact and Outcome 3 C. Outputs 3 D. Investment and Financing Plans 4 E. Implementation Arrangements 5 III. DUE DILIGENCE 6 A. Technical 6 B. Economic and Financial 6 C. Governance 7 D. Poverty and Social 7 E. Safeguards 8 F. Risks and Mitigating Measures 8 IV. ASSURANCES AND CONDITIONS 9 V. RECOMMENDATION 9 APPENDIXES 1. Design and Monitoring Framework 10 2. List of Linked Documents 12 PROJECT AT A GLANCE 1. Project Name: Central Asia Regional Economic Cooperation Corridor 6 (Ayni– 2. Project Number: 45432-002 Uzbekistan Border Road) Improvement Project 3. Country: Tajikistan 4. Central and West Asia Department/Transport and Department/Division: Communications Division 5. Sector Classification: Sectors Primary Subsectors Transport, and information and √ Road transport communication technology 6. Thematic Classification: Themes Primary Subthemes Economic growth Widening access to markets and economic opportunities Regional cooperation √ Crossborder infrastructure Capacity development Institutional development Social Development Other vulnerable groups 6a. Climate Change Impact 6b. Gender Mainstreaming Gender equity theme (GEN) No Climate Change Indicator available Effective gender mainstreaming (EGM) √ Some gender elements (SGE) No gender elements (NGE) 7. Targeting Classification: 8. Location Impact: Targeted Intervention National Medium Geographic Income General Millennium Regional High dimensions poverty at Intervention development Rural Medium of inclusive household goals Urban Low growth level √ 9. Project Risk Categorization: Low risk 10. Safeguards Categorization: Environment B Involuntary resettlement B Indigenous peoples C 11. ADB Financing: Sovereign/Nonsovereign Modality Source Amount ($ million) Sovereign Project grant Asian Development Fund 100.0 Total 100.0 12. Cofinancing: Financier Category Amount ($ million) Administration Type OPEC Fund for International Official-Loan 14.0 Partial Administration Development 13. Counterpart Financing: Source Amount ($ million) Government 22.0 Total 22.0 14. Aid Effectiveness: Parallel project implementation unit No Program-based approach No o 69 o 00'E 73 00'E TAJIKISTAN UZBEKISTAN CENTRAL ASIA REGIONAL ECONOMIC COOPERATION CORRIDOR 6 (AYNI–UZBEKISTAN BORDER ROAD) Shaydon IMPROVEMENT PROJECT Taboshar Buston Kayrokkum Reservoir Khujand N Kayrokkum Konibodom Zafarobod Chkalovsk Gafurov o Nov Isfara o 40 00'N 40 00'N Gonchi Proletar 0 50 100 Istaravshan Vorukh Kilometers Shakhriston KYRGYZ REPUBLIC SUGD Panjakent Shakhristan Pass REGION Ayni Mehron Kizil-Art Jirgatol Pass PEOPLE'S REPUBLIC Anzob Pass Garm OF CHINA Tojikobod REGIONS UNDER DIRECT Darband Lake Karakul UZBEKISTAN REPUBLICAN Varzob JURISDICTION Tavildara Shahrinav DUSHANBE Rogun Tursunzoda Akbaytal Pass Fayzobod Hissor Vakhdat Kalaikhumb Khovaling Somoniyon Norak GORNO-BADAKHSHAN Baljuvon Vanch AUTONOMOUS REGION Yovon Nulvand Murgob Kulma Pass KHATLON REGION Lake Sarez Obikiik Dangara Muminobod Kuybishev Sovet Kulob Rushon Kurgonteppa Sarband Vose Shuroobod Ismoili Somoni Moskva Vakhsh Isoev Farkhor Jilikul Khorug o Kubodiyon 37 00'N Dusti 37 o 00'N Panj Shakhrituz Roshtkala Panji Poyon A F G H A N I S T A N Ishkoshim National Capital Project Road River Regional Center CAREC Corridor 3 District Boundary This map was produced by the cartography unit of the Asian Development Bank. The boundaries, colors, denominations, and any other information shown on this Autonomous Regional Center CAREC Corridor 6 Regional Boundary map do not imply, on the part of the Asian Development Bank, any judgment on the District Center/Town National Road Autonomous Regional Boundary 12-2030 legal status of any territory, or any endorsement or acceptance of such boundaries, colors, denominations, or information. Railway Other Road International Boundary Boundaries are not necessarily authoritative. o o A 73 00'E V 69 00'E I. THE PROPOSAL 1. I submit for your approval the following report and recommendation on (i) a proposed grant, and (ii) proposed administration of a loan to be provided by the OPEC Fund for International Development (OFID), both to the Republic of Tajikistan for the Central Asia Regional Economic Cooperation (CAREC) Corridor 6 (Ayni–Uzbekistan Border Road) Improvement Project.1 2. The project is located in the isolated and remote Zarafshan Valley in northern Tajikistan. To support regional cooperation and inclusive growth in the region, the project will finance the rehabilitation and reconstruction of a road of approximately 113 kilometers (km) between Ayni– Panjakent and the border with Uzbekistan, the improvement of road safety, the upgrading of Sarazm border post infrastructure, and community development, including improving feeder roads and public facilities and training local communities.2 II. THE PROJECT A. Rationale 3. Tajikistan’s geographic isolation and mountainous territory (comprising over 90% of the country) results in high transport and logistics costs, which makes it uncompetitive in international and regional markets. The country’s remoteness from seaports, and limited transport infrastructure and facilities constrain development. Large parts of the country are sparsely populated. Connectivity is a key development issue: the railway network is fragmented because of construction difficulties resulting from the mountainous topography, while roads (which are the dominant transport mode) are deteriorating rapidly due to inadequate maintenance, ineffective traffic loading control, and harsh terrain and climate. 4. The Zarafshan Valley is an isolated and remote region, which is prone to extreme natural events.3 The project road provides the only access to rest of the country and beyond. Overland travel to this high elevation valley is often restricted, particularly during winter, due to poor road conditions, avalanches, and mudflows. Consequently, the more than 300,000 inhabitants living in the region have limited access to markets, educational and medical services, while the region's capacity to develop diverse industries—including agriculture, mining and tourism4—is severely constrained. 5. The project road—part of the historic Silk Road—runs east–west following the Zarafshan River through the valley, crossing the Ayni and Panjakent districts before ending at the border with Uzbekistan in the west. The connecting road in Uzbekistan (national road A377) links with Samarkand (about 40 km from the border) via the CAREC Corridor 6 in Uzbekistan. Through the north–south transport artery—the CAREC Corridor 6 in Tajikistan—the project road goes (i) northeast to Khudjand (the provincial center), and onward to Uzbekistan; and (ii) south to Dushanbe, onward to Afghanistan and east–west bound to the Kyrgyz Republic and Uzbekistan 1 The design and monitoring framework is in Appendix 1. 2 The Asian Development Bank (ADB) provided project preparatory technical assistance. ADB. 2012. Technical Assistance to the Republic of Tajikistan for the Roads Improvement Project. Manila. 3 The valley is located in northern Tajikistan, comprising the districts of Ayni, Kuhistoni Mastchoh, and Panjakent and belonging to the Sughd province. The valley has one of the highest migration rates in Central Asia and is one of the poorest regions, with per capita gross domestic product about 60% of the national average in 2010. 4 Aside from abundant agricultural products, Zarafshan Valley is one of the country's main tourist attractions, featuring an ancient history with the country’s only United Nations Educational, Scientific and Cultural