(EnergyAsia, September 16 2011, Friday) — The Asian Development Bank (ADB) said it is providing a multitranche financing facility of up to US$500 million to help Uzbekistan reconstruct around 230 kilometers of poor quality roads that will improve road connectivity and safety, as well as boost trade along a key regional transport corridor linking Asia to Europe.
The ADB board recently approved the multitranche financing facility as part of the Second Corridor 2 Road Investment Programme under the Central Asia Regional Economic Cooperation (CAREC) forum. The first tranche of US$130 million will be used to rehabilitate a 74-km section of A373 highway running through the Fergana Valley, where a third of all Uzbeks live and a large proportion of the country’s agricultural goods are produced. Assistance will also be given for road safety and asset management improvements.
Shakeel Khan, Principal Portfolio Management Specialist at the ADB’s Central and West Asia Department, said:
“The road reconstruction work with up-to-date safety features will result in safer and faster travel, and greater access to social services and lower transport costs. It will also open up new trade, business and investment opportunities for people both domestically and in neighbouring countries.”
CAREC Corridor 2, which connects the Caucasus and Mediterranean to East Asia, is among a number being built under the cooperation programme. This initiative aims to help Central Asian countries take economic advantage of the region’s strategic location at the crossroads of Asia and Europe.
Rehabilitating roads in Uzbekistan will allow the country to take a central role in CAREC’s development plans, said the ADB.
“There is an unprecedented opportunity for Uzbekistan to emerge as a centre for trade and commerce in Central Asia and to achieve rapid and sustainable economic growth,” said Hong Wang, ADB’s Director at the Central and West Asia Department.
Road passenger and freight traffic are booming in Uzbekistan, with vehicle fleets projected to double every five years. The Uzbek government spends 1% of annual gross domestic product on roads but is gradually increasing the amount. ADB said its assistance will help the government raise the capacity of oversight agencies to manage and maintain roads and implement a national road safety strategy and action plan.
The financing facility will release loans for three separate projects under the investment program. ADB said US$320 million will come from its ordinary capital resources and up to US$180 million from its concessional Asian Development Fund.
The first tranche loan will have a 24-year term, with a 4-year grace period and annual interest determined in accordance with ADB’s LIBOR-based lending facility.
The Uzbek government will extend counterpart funds of $100 million for a total program cost of $600 million. The Ministry of Finance-controlled Republican Road Fund will be the executing agency for the program which is due for completion in March 2017.