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Project Rationale and Linkage to Country/Regional Strategy |
Roads are a key element of Kazakhstan's transport system. They play an important role in providing access to rural areas, and facilitating transit traffic and in-country transport movement. However, much of the road network is in poor condition--about 60% of the national roads require major rehabilitation and proper maintenance. Moreover, the feeder road network serving the rural population is not fully developed; and is characterized by poor conditions and a low service level, especially during wintertime. This results in high transport costs.
The road sector has long-standing bottlenecks: (i) the network is incomplete, and in some sections in bad condition; (ii) truck overloading is frequent, cutting into the economic life of road assets; (iii) revenues from transit are low, affecting cost recovery and reinvestment capabilities; (iv) inefficient cross-border procedures increase the burden on trade and traders, and raise the cost of doing business; (v) weak road sector planning affects sound investment sequencing; and (vi) project development and project management shortcomings create inefficiencies, high costs, and bad governance. These gaps translate into higher-than-average transport costs. They also hamper regional cooperation and integration opportunities, and ultimately the country's competitiveness.
The Government of Kazakhstan's Western Europe-Western PRC Corridor (the Corridor) Development Program intends to remove these constraints to improve the road sections in the Kazakhstan territory of CAREC Transport Corridor I, which total 2,715 km running from Khorgos through Almaty and Shymkent to the Russian Federation's western border. The Corridor Development Program will improve the existing road and construct bypasses and new alignments to make the Corridor suitable for international traffic.
The Government sought assistance from the international financial institutions to finance sections along the Corridor. ADB, with the Japan International Cooperation Agency (JICA) and the Islamic Development Bank (IDB) finance 470 km in Zhambyl Oblast. The European Bank for Reconstruction and Development, and the World Bank finance 102 km and 1,062 km, respectively.
Teaming up with IDB and JICA, ADB committed to improve 470 km in Zhambyl Oblast through the multitranche financing facility (MFF). On 13 January 2009, the Government and ADB entered into a framework financing agreement (FFA) for the MFF, with an aggregate principal amount not exceeding the equivalent of $700 million. ADB approved the MFF on 12 November 2008. ADB approved the first tranche for $340 million on 30 December 2008, which was reduced to $225 million, the second tranche of $187 million on 7 October 2009, and the third tranche of $173 million in 15 November 2010.
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