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The proposed project will assist in the further development of water resources in Kazakhstan by financing part of the 600,000 ha irrigation subsector investment planned by the government using a sector loan modality. The investment is also part of the proposed updated agribusiness policy. The proposed project outputs will be (i) irrigation infrastructure upgraded; (ii) Water management systems and capacity in project areas increased; and (iii) KVK's management capacity strengthened. Additional structural and non-structural interventions to improve water productivity, and designing irrigation systems to meet the service requirements of differing types of irrigation in different regions, will be analyzed during project preparation. ADB's value addition is through a more comprehensive approach, including application of technically appropriate technology, to achieving improved water productivity.

These outputs will result in the following outcome: farm productivity increased through well managed irrigation systems. The project will be aligned with the following impact: Agriculture production contribution to GDP increased, as outlined in Strategy Kazakhstan 2050.

The proposed project will contribute to the Government of Kazakhstan's development of irrigated agriculture by financing the rehabilitation of ageing irrigation systems that service 253,000 hectares of gravity fed and pumped irrigation lands in five of the country's 14 provinces (oblasts Aktobe, East Kazakhstan, Karaganda, Kyzylorda and Zhambyl). Rehabilitating the country's irrigation and drainage infrastructure is of paramount importance to ensure increased water accessibility, agricultural production, and economic growth. The project will rehabilitate and expand efficient water delivery infrastructure. Capacity building interventions will strengthen water management and water operations and maintenance (O&M) at the institutional level, and improve farm water productivity. The primary beneficiary will be irrigation farmers.

Further development of the irrigation subsector is a key focus of the government's efforts to diversify Kazakhstan's economy, increase rural employment opportunities, promote food security, and reduce poverty. An ambitious target to rehabilitate 600,000 ha of irrigation systems by 2020 has been set to meet the economic development agenda. While in 2015, the agriculture sector's share of gross domestic product was only 4.9% of GDP, the sector accounted for 17.1% of total employment. Moreover, half the country's population is located in rural areas with living standards depending heavily on income generated from agricultural production. Women make up 29% of the workforce in the agriculture sector and 64% of rural women are self-employed, mostly in activities directly related to agriculture.

During the Soviet period, Kazakhstan witnessed construction of extensive, centrally planned irrigation systems that were managed and operated by oblast administration. In 1992, the area irrigated with full control irrigation was estimated to be 2.24 million hectares. In 2010, it was estimated only 1.2 million hectares were still being irrigated, reflecting a gradual degradation of irrigation systems. Missions of the Asian Development Bank (ADB) fielded to Kazakhstan in September and November 2016 found that irrigation systems that have not been operational since farm collectives broke down after independence in 1991. Local agencies responsible for the management of irrigation systems have limited capacity to work effectively, and eventually a number of irrigation systems have deteriorated over time. To improve efficiency of irrigation systems at national level, asset ownership and operational responsibility for urban water, and bulk water storage, irrigation and drainage systems are currently being transferred from various national and local agencies to Republican State Enterprise KazVodKhoz (KVK), a government owned utility.

The major challenges to improve the irrigated agriculture sector in Kazakhstan are (i) inadequate availability of water resources mainly due to, underinvestment in water storage and control infrastructure at all levels, abstraction by upstream countries reducing inflows in transboundary rivers, which provide almost half of the national water supply, and water losses during conveyance and distribution; (ii) obsolete agricultural practices and on-farm water management technologies; (iii) low water delivery tariffs that prevent adequate cost recovery for O&M; (iv) limited capacity and inadequate legislative, regulatory, and institutional frameworks; and (v) shortage of skilled sector specialists. In an international comparator, water productivity indicators for irrigated wheat are 70% below top performing countries , and climate change stressors will sharpen the need for water productivity to improve. A problem tree details the core problem, causes, and effects.