for official use only report no: pad2885€¦ · gis geographic information systems giz german...

FOR OFFICIAL USE ONLY Report No: PAD2885

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

PROJECT APPRAISAL DOCUMENT

ON A

PROPOSED LOAN

IN THE AMOUNT OF US$100 MILLION

TO THE

REPUBLIC OF UZBEKISTAN

FOR A

MEDIUM-SIZE CITIES INTEGRATED URBAN DEVELOPMENT PROJECT

November 21, 2018

Social, Urban, Rural And Resilience Global Practice Europe And Central Asia Region

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

(Exchange Rate Effective November 6, 2018)

Currency Unit = UZS (Uzbekistan Som)

UZS 8249.97 = US$1

FISCAL YEAR

January 1 - December 31

Regional Vice President: Cyril E. Muller

Country Director: Lilia Burunciuc

Senior Global Practice Director: Ede Jorge Ijjasz-Vasquez

Practice Manager: David N. Sislen

Task Team Leader(s): Rosanna Nitti

ABBREVIATIONS AND ACRONYMS

ADB Asian Development Bank

ADM Accountability and Decision-Making

AIIB Asian Infrastructure Investment Bank

ASA Advisory Services and Analytics

CBA Cost-benefit analysis

CER Center for Economic Research

CH Cultural Heritage

CSO Civil Society Organization

CoM Cabinet of Ministers

CPF Country Partnership Framework

CRIs Corporate Result Indicators

EA Environmental Assessment

EBRD European Bank for Reconstruction and Development

ECA Europe and Central Asia

EE Energy Efficiency

EHS Environmental, Health, and Safety

EIA Environmental Impact Assessment

EMP Environmental Management Plan

ERR Economic Rate of Return

ESA Environmental and Social Assessment

ESIA Environmental and Social Impact Assessment

ESMAP Energy Sector Management Assistance Program

ESMF Environmental and Social Management Framework

ESMP Environmental and Social Management Plan

EU European Union

FM Financial Management

FY Fiscal Year

GDP Gross Domestic Product

GEF Global Environment Facility

GFDRR Global Facility for Disaster Reduction and Recovery

GIS Geographic Information Systems

GIZ German Development Agency (Gesellschaft für Internationale Zusammenarbeit)

GoU Government of Uzbekistan

GNI Gross National Income

GRM Grievance Redress Mechanism

GRS Grievance Redress Service

IBRD International Bank for Reconstruction and Development

ICD Integrated City Diagnostic

ICT Information and Communication Technology

IDA International Development Association

IDB Islamic Development Bank

IFI International Financial Institution

IFR Interim (un-audited) Financial Reports

IPF Investment Project Financing

M&E Monitoring & Evaluation

MoC Ministry of Culture

MoE Ministry of Economy

MoF Ministry of Finance

MSCIUDP Medium-Size Cities Integrated Urban Development Project

NMSCP National Medium-Size Cities Program

NPV Net Present Value

OP Operational Policy

PAD Project Appraisal Document

PAP Project-affected People

PDO Project Development Objective

PIU Project Implementation Unit

POM Project Operations Manual

RAP Resettlement Action Plans

RPF Resettlement Planning Framework

RSPIU Regional Staff of the Project Implementing Unit

SC Steering Committee

SCD Systematic Country Diagnostics

SCTD State Committee for Tourism Development

SIC State Investment Committee

SoP Series of Projects

SORT Systematic Operations Risk-rating Tool

SS Safeguards Specialist

SURR Social, Urban, Rural and Resilience

TA Technical Assistance

TRACE Tool for Rapid Assessment of City Energy

UNDP United Nations Development Program

UZS Uzbekistan Som

WB World Bank

The World Bank Uzbekistan Medium-Size Cities Integrated Urban Development Project (P162929)

TABLE OF CONTENTS

DATASHEET ........................................................................................................................... 1

I. STRATEGIC CONTEXT ...................................................................................................... 6

A. Country Context................................................................................................................................ 6

B. Sectoral and Institutional Context .................................................................................................... 6

C. Relevance to Higher Level Objectives ............................................................................................... 8

II. PROGRAM AND PROJECT DESCRIPTION .......................................................................... 9

A. Program ......................................................................................................................................... 9

B. Series of Project Objective and Phases ....................................................................................... 10

C. Project ......................................................................................................................................... 11

D. Project Components ................................................................................................................... 11

E. Project Beneficiaries ................................................................................................................... 12

F. Role of Partners .......................................................................................................................... 12

G. Lessons Learned and Reflected in the project Design .................................................................... 13

III. IMPLEMENTATION ARRANGEMENTS ............................................................................ 13

A. Institutional and Implementation Arrangements .......................................................................... 13

B. Results Monitoring and Evaluation Arrangements......................................................................... 15

C. Sustainability ................................................................................................................................... 15

IV. PROJECT APPRAISAL SUMMARY ................................................................................... 16

A. Economic and Analysis ................................................................................................................ 16

B. Technical ..................................................................................................................................... 17

C. Financial Management................................................................................................................ 21

D. Procurement ............................................................................................................................... 22

E. Social Safeguards ........................................................................................................................ 22

F. Environmental Safeguards .......................................................................................................... 24

G. Other Safeguard Policies (if applicable) ...................................................................................... 25

H. World Bank Grievance Redress ................................................................................................... 25

V. KEY RISKS ..................................................................................................................... 25

VI. RESULTS FRAMEWORK AND MONITORING ................................................................... 27

ANNEX 1: DETAILED PROJECT DESCRIPTION ......................................................................... 32

ANNEX 2: IMPLEMENTATION ARRANGEMENTS .................................................................... 36

ANNEX 3: IMPLEMENTATION SUPPORT PLAN ...................................................................... 43

ANNEX 4: Medium-size Cities in Uzbekistan and Integrated City Diagnostics ........................ 46


MAP .................................................................................................................................... 50


Page 1 of 50

DATASHEET

BASIC INFORMATION BASIC_INFO_TABLE

Country(ies) Project Name

Uzbekistan Medium-Size Cities Integrated Urban Development Project

Project ID Financing Instrument Environmental Assessment Category

P162929 Investment Project Financing

B-Partial Assessment

Financing & Implementation Modalities

[ ] Multiphase Programmatic Approach (MPA) [ ] Contingent Emergency Response Component (CERC)

[✓] Series of Projects (SOP) [ ] Fragile State(s)

[ ] Disbursement-linked Indicators (DLIs) [ ] Small State(s)

[ ] Financial Intermediaries (FI) [ ] Fragile within a non-fragile Country

[ ] Project-Based Guarantee [ ] Conflict

[ ] Deferred Drawdown [ ] Responding to Natural or Man-made Disaster

[ ] Alternate Procurement Arrangements (APA)

Expected Approval Date Expected Closing Date

18-Dec-2018 30-Jun-2025

Bank/IFC Collaboration

No

Proposed Development Objective(s)

The Project Development Objectives are to support the Borrower to: (a) improve selected urban infrastructure, public spaces and assets, and access to services in Participating Cities; and (b) strengthen the institutional capacity of the Borrower’s relevant agencies to deliver and manage local infrastructure.

The World Bank Medium-Size Cities Integrated Urban Development Project (P162929)

Page 2 of 50

Components

Component Name Cost (US$, millions)

Component 1: Improvement of Urban Services and Enhancement of Public Urban Spaces

83.00

Component 2: Institutional Strengthening and Capacity Building 14.50

Component 3: Implementation Support 2.50

Organizations

Borrower: Republic of Uzbekistan

Implementing Agency: State Investment Committee

PROJECT FINANCING DATA (US$, Millions)

SUMMARY-NewFin1

Total Project Cost 120.00

Total Financing 120.00

of which IBRD/IDA 100.00

Financing Gap 0.00

DETAILS-NewFinEnh1

World Bank Group Financing

International Bank for Reconstruction and Development (IBRD) 100.00

Non-World Bank Group Financing

Counterpart Funding 20.00

Borrower 20.00

Expected Disbursements (in US$, Millions)

WB Fiscal Year 2019 2020 2021 2022 2023 2024 2025

Annual 0.80 5.54 10.00 15.00 22.00 23.00 23.66


Page 3 of 50

Cumulative 0.80 6.34 16.34 31.34 53.34 76.34 100.00

INSTITUTIONAL DATA

Practice Area (Lead) Contributing Practice Areas

Social, Urban, Rural and Resilience Global Practice

Climate Change and Disaster Screening

This operation has been screened for short and long-term climate change and disaster risks

Gender Tag

Does the project plan to undertake any of the following?

a. Analysis to identify Project-relevant gaps between males and females, especially in light ofcountry gaps identified through SCD and CPF

No

b. Specific action(s) to address the gender gaps identified in (a) and/or to improve women ormen's empowerment

No

c. Include Indicators in results framework to monitor outcomes from actions identified in (b) No

SYSTEMATIC OPERATIONS RISK-RATING TOOL (SORT)

Risk Category Rating

1. Political and Governance Substantial

2. Macroeconomic Moderate

3. Sector Strategies and Policies Moderate

4. Technical Design of Project or Program Moderate

5. Institutional Capacity for Implementation and Sustainability Substantial

6. Fiduciary High

7. Environment and Social High

8. Stakeholders Low

9. Other


Page 4 of 50

10. Overall Substantial

COMPLIANCE

Policy Does the project depart from the CPF in content or in other significant respects?

[ ] Yes [✓] No

Does the project require any waivers of Bank policies?

[ ] Yes [✓] No

Safeguard Policies Triggered by the Project Yes No

Environmental Assessment OP/BP 4.01 ✔

Performance Standards for Private Sector Activities OP/BP 4.03 ✔

Natural Habitats OP/BP 4.04 ✔

Forests OP/BP 4.36 ✔

Pest Management OP 4.09 ✔

Physical Cultural Resources OP/BP 4.11 ✔

Indigenous Peoples OP/BP 4.10 ✔

Involuntary Resettlement OP/BP 4.12 ✔

Safety of Dams OP/BP 4.37 ✔

Projects on International Waterways OP/BP 7.50 ✔

Projects in Disputed Areas OP/BP 7.60 ✔

Legal Covenants

Sections and Description Key safeguard covenants as set out and described in Schedule 2, Section I.B, of the Legal Agreement require that the SIC shall ensure that: (a) for each activity under the Project for which the ESMF provides that an ESIA and/or an ESMP shall be prepared, such ESIA and/or ESMP, as appropriate: (i) is prepared in accordance with the ESMF; (ii) consulted upon and disclosed locally; (iii) furnished to the Bank for approval; and (iv) thereafter adopted prior to the implementation of such activity; all in a manner acceptable to the Bank; (b) for each activity under the Project for which the RPF provides that a RAP shall be prepared, such RAP: (i) is prepared in accordance with the RPF; (ii) consulted upon and disclosed locally; (iii) furnished to the Bank for approval; and (iv) thereafter adopted prior to the implementation of such activity; all in a manner acceptable to the


Page 5 of 50

Bank; and (c) pursuant to subparagraphs (a) and (b) above, the Project activities are carried out in accordance with the ESIAs, ESMPs and RAPs, as appropriate.

Conditions

Type Description

Effectiveness The Project Operational Manual has been adopted by the SIC, in a form and substance,

acceptable to the Bank.


Page 6 of 50

I. STRATEGIC CONTEXT

A. Country Context

1. The Republic of Uzbekistan, a lower middle-income country in Central Asia, demonstrated

persistent growth over the last decade. Uzbekistan, with a population of 32.3 million, is the largest

country in Central Asia. Over the past decade, Uzbekistan has maintained a high and stable economic

growth rate1 and has gradually diversified its economy. Coinciding with economic growth, poverty rates

have declined from 27.5 percent in 2001 to 12.5 percent in 20162, accompanied by equity gains, with B403

incomes growing faster than T60 over the period 2008–2013. Meanwhile, per capita GNI rose from

US$2,020 in 2001 to US$5,840 in 2014.4

2. Uzbekistan’s long-term development goal is to become an upper-middle income country with a

well-diversified and liberalized economy which enables job creation. The Government’s approach

toward achieving this goal is to continue the transition to a more market-oriented economy, strengthening

the country’s regional role as a hub in Central Asia. It aims to mitigate the potential negative consequences

of external shocks, ensure equitable distribution of growth between regions, and maintain infrastructure and

social services at an adequate level. The “Strategy of action on five priority areas of development of the

Republic of Uzbekistan for 2017-2021” issued in February 2017 was based on this approach. The Strategy

aims to develop Uzbekistan through the modernization and diversification of the leading sectors of the

economy to ensure the optimal and effective use of their economic potential5 and focuses on supporting

regional development in Uzbekistan, giving priority to lagging cities and districts, with the aim of putting

in place reliable infrastructure in both urban and rural areas, and fostering balanced socio-economic growth.

Some of the key economic sectors highlighted in the strategy include industry, services, and specially

tourism, a sector identified as a key driver for the economy of Uzbekistan.

B. Sectoral and Institutional Context

3. Cities and urbanization have played a key role in Uzbekistan’s recent economic achievements. The

urbanization process has been inclusive with a rising share of urban growth and job creation in the country’s

cities. With a young and growing Uzbek population and increasing rural-to-urban migration6, a larger share

of jobs created every year in Uzbekistan are in urban areas and/or directly around cities (e.g. civil and public

works, manufacturing, construction and services). The urbanization level in Uzbekistan is 51 percent (in

2017).7

4. Though the majority of the population lives in larger cities, medium- and small-size cities are

growing the fastest. 8 While slightly more than 40 percent of the urban population lives in cities with more

than 100,000 inhabitants, the fastest growth rates of population have been observed in medium-size cities

(54 percent growth) from 1990 to 2017.9 This development reinforces the potential role of medium-size

cities as important secondary economic hubs in the Uzbek system of cities.

1 Per official estimates, annual GDP growth averaged 7.2 percent between 2000 and 2016. 2 The World Bank notes that the methodology for measuring poverty needs to be brought to international standards. Official

poverty estimate does not consider nonfood items and the use value of assets. 3 B40 -Bottom 40 percent of income distribution. T60 – Top 60 percent of income distribution. 4 These figures are presented in purchasing-power-parity terms. In current U.S. dollars (Atlas method), GNI per capita rose from

US$560 in 2001 to US$2,111 in 2016. 5 Section 3 of “Strategy of action on five priority areas of development of the Republic of Uzbekistan for 2017-2021” 6 A decline of 1 million agriculture jobs is estimated by 2020 – CER Development Focus Issue #16. 7 State Committee of Statistics. 8 In 2008, as a result of territorial-administrative changes, over 1000 residential centers were classified as centers and the size of

the urban population grew. From: World Bank ASA - Cities in ECA: A story of Growth/Decline. 9 State Committee of Statistics.


Page 7 of 50

5. These rapidly growing secondary urban centers have the highest untapped potential for

generating local jobs outside the larger urban agglomerations, but gaps in urban infrastructure and

basic services hinder that potential. Most medium-size cities are strategically located along thriving

logistic corridors and/or at the periphery of larger urban centers, with the potential of creating a large

number of entry-level service jobs for the surrounding rural regions. However, the rapid unmanaged growth

of these cities results in inefficiencies and an increasing unmet demand for infrastructure and

services/utilities which hampers the quality of life and overall investment attractiveness.

6. Several common and interrelated challenges affect medium-size cities in Uzbekistan, resulting in

low economic vibrancy and/or unsustainable growth patterns. To better understand the challenges and

opportunities for medium-size cities in Uzbekistan, the World Bank, in consultation with local governments

and stakeholders, conducted an Integrated City Diagnostic of selected pilot cities: Chartak, Kagan and

Yangiyul. The diagnostic identified challenges to the quality of the urban environment in these cities, that

are common across all medium-size cities in Uzbekistan. These challenges include: (1) top-down and

uncoordinated urban planning system; (2) absence of a shared strategic vision and plan for the city; (3)

urban sprawl; (4) heavy reliance of local governments on central budget transfers and planning; (5) lack of

incentives to increase local revenue mobilization; and (6) aging and inefficient infrastructure.

7. While medium-size cities in Uzbekistan face many common challenges, each city is endowed with

unique assets and opportunities that need to be unlocked/leveraged. This will enable each city to

mobilize its full potential and allow it to develop a strong economic backbone for long-term sustainable

local development. While some of the cities have an important logistics/trade function that could be

strengthened and transformed into a regional hub, others have cultural heritage or natural assets that could

be leveraged to attract tourists, injecting their expenditure into the local economy.

8. Improving the efficiency of urban growth and expansion is essential to address the current

challenges. Experience from around the world demonstrates that increasing integration and multi-agency

coordination is critical to achieve higher efficiencies in the delivery of urban services and infrastructure,

and to systematically address critical bottlenecks to create more livable, green, and energy efficient cities.

This increases their attractiveness for private sector job creation, urban resilience and competitiveness,

while also tackling spatial inequalities and inefficiency of local public expenditures. This approach aligns

well with the objective of the Government of Uzbekistan (GoU) of “creating the conditions for rapid job

creation,” while also ensuring balanced socio-economic development of the country’s regions.

9. Physical improvements in the quality of the urban environment alone are not sufficient to

guarantee long-term sustainability of incremental development gains if not accompanied by

increased capacity of local governments. Traditionally, local governments in Uzbekistan10 operate within

a top-down cascading system (whereas the decisions of the higher levels of government are obligatory for

lower ones). The chief executive of each region (regional khokhim) is appointed by the president and sits

atop the regional government structure, constituting the highest authority in their regions. However, local

governments still have relatively little independence from the central government at the moment. The GoU

is embarking on a reform process that recognizes the need for gradual decentralization, combining greater

accountability of local governments with increased financial and economic self-sufficiency11. Regional

10 Local governments in Uzbekistan consist of regional (oblast), district (rayon) and city level” khokhimiyats” (administrations).

Khokhimiyats are headed by “khokhims” who are appointed by the President and are responsible for managing all issues on their

respective territories. They have considerable powers in managing local affairs (e.g. local taxes, local development programs,

attraction of private sector financing etc.). Local departments of key line ministries and agencies are subordinated to khokhims.

Regional, district and city khokhims exercise their powers on the principle of undivided authority and are personally responsible

for the decisions and activities of government bodies subordinate to them. 11 For more details on the decentralization reform, please see “Action strategy on five priority development directions of the

Republic of Uzbekistan in 2017-2021” approved by the Decree of the President of 7th of February 2017


Page 8 of 50

khokhims are at the center of the reform process at the regional level and critical stakeholders. The

Integrated City Diagnostic carried out in the three pilot cities highlighted that for local governments to be

active stakeholders in the reform process, their capacity and level of responsibility will have to be built in

critical areas such as capital investment planning, local revenues generation and collection, increased voice

and responsibility in urban planning and local development as well as modernization of instruments for

engagement with the private sector.

10. Uzbekistan is also affected by climate and disaster risks requiring mitigation and adaptation

measures. Average temperatures are expected to increase by 2-3°C in the next 50 years in Uzbekistan.

River flooding is one of the main risks affecting Uzbekistan and one of the pilot cities of the project,

Yangiyul, is located in a high-risk area for flooding. Water scarcity and droughts are classified as high risk

in some parts of Uzbekistan, which affects particularly the pilot city of Kagan. Earthquake hazard is

classified as high for the country and more than half of the population lives in areas of seismic risk,

including the pilot cities of Yangiyul and Kagan. Observed and anticipated climate change impacts, such

as more intense precipitation and rising rivers level, are expected to lead to increasing risk of natural

disasters, including more frequent and intense flooding in low-lying areas of river deltas and cities located

in these areas and other extreme weather events. The GoU is taking these risks into consideration, making

sure that any new investment within this context of vulnerability is properly assessed and designed to

contribute to climate change mitigation and adaption, resulting in overall improved urban resilience.

11. The Government of Uzbekistan, acknowledging the need for a comprehensive approach to

medium-size cities in the country, has requested the World Bank to be the leading partner agency to

support the development of a National Medium-Size Cities Program (NMSCP)12 in line with the GoU’s

Strategy for Development (2017-2021). Moreover, the GoU will strengthen the role of local authorities

with technical, financial and managerial tools to increase the level of decentralization to local governments.

This includes the possibility of local administrations to retain a larger share of locally generated revenues,

enabling a more effective implementation of the NMSCP13 and improve urban management service delivery

and overall quality of life in medium-size cities.

12. This programmatic approach is designed to support GoU reforms in sub-national

governance. Together with the proposed Obod Qishloq Project14, the program will support GoU reforms

introducing an integrated, decentralized approach to local development planning in place of the current

sectoral planning approach. To achieve this aim, the local governance reform process will likely require

progressive changes to: (i) national policies; (ii) processes for coordination and planning at the sub-national

level, and (iii) capacity building at all levels. The Support to the Uzbekistan Prosperous Villages Project

will complement the operation by piloting approaches to (a) engaging citizens and local self-governing

bodies in local development planning and decision-making such that locally-identified needs are prioritized

and incorporated into district-level development plans, and (b) financing investments to close gaps in access

to basic infrastructure and services and connect rural communities to opportunities created through

investments in urban areas.

C. Relevance to Higher Level Objectives

13. The Medium-Size Cities Integrated Urban Development Project responds to the request by the GoU

to support the demonstration of innovative approaches to integrated urban and territorial development in

12 This is also in line with the recently launched national urban program titled “Obod Makhallas”, aiming to upgrade neighborhoods

in all cities of Uzbekistan (Presidential Decree No.UP-5467 dated June 27, 2018) 13 Presidential Decree from 7th June 2017, on possibilities of local administrations keep locally generated revenues, Cabinet of

Ministers Decree from 29th June 2017, on collection of reserves of collecting local taxes. 14 Support to Uzbekistan Prosperous Villages (Obod Qishloq) Project, P168233, proposed to be financed by the Bank, is currently

under preparation.


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Uzbekistan. It supports the GoU objective to improve livability and support local development in medium-

size cities and to demonstrate a viable model for replication across the country.

14. The project is included in the World Bank Group’s Country Partnership Framework for Uzbekistan FY16-FY20 (Report No. 105771), agreed between the GoU and the World Bank and approved by the World Bank's Board of Directors, and related Program Learning Review (PLR), presented to the Board in June 2018. In line with the adjustments made to the CPF through the PLR, the project will be aligned to Focus Area 1: Sustainable transformation towards a market economy, and supports improved efficiency of infrastructure service delivery, including creating favorable conditions for private sector development.

15. Twin goals: by supporting an integrated approach to urban development in Uzbekistan, the project supports the World Bank’s twin goals of reducing poverty and increasing shared prosperity. The project will contribute to bringing more reliable, efficient, cost-effective and environmentally friendly services to households in some of the least serviced medium-size cities in the country, enhancing their quality of life. This would also have indirect impact on improving attractiveness for businesses, thereby contributing to create more jobs, improve the local economy and increase income generation. The project will promote and address issues related to physical accessibility which means support to universal design approach for the project financed infrastructure investments to facilitate equal access to public spaces, buildings and facilities for people with limited mobility, including the disabled and the elderly15.

16. While focusing on addressing the basic services and infrastructure gap for medium-size cities in Uzbekistan, through public and concessional financing, the project will also contribute to building capacities of local governments to plan, operate and maintain infrastructure, deliver municipal services, and generate necessary local revenues, with the long-term objective of equipping the cities with the necessary enabling environment to mobilize and crowd-in private sector commercial capital and to access to the markets.

II. PROGRAM AND PROJECT DESCRIPTION

A. Program

17. The NMSCP will be designed to support GoU’s overarching development goal of achieving

an “integrated and balanced social-economic development of regions, districts and cities”16 of

Uzbekistan. Its framework is conceptualized as a long-term national program that specifically targets

medium-size cities and supports innovative approaches tailored to the country context to promote integrated

urban and territorial development.

18. The overarching objective of the NMSCP is to improve quality of life, functionality and

attractiveness of medium-size cities in Uzbekistan by addressing major infrastructure barriers and

bottlenecks to long-term development. In doing so, it will also contribute to building capacities of relevant

government agencies to carry out strategic and integrated territorial planning, improve efficiency of capital

investment planning, operate and maintain infrastructure, deliver municipal services and generate the

necessary revenues for long-term sustainable local development. In the long-term, the Program is expected

to ultimately contribute to the generation of quality jobs and the development of the local economy, and to

increased self-sufficiency of local governments.

19. Relevant spatial coordination with other Bank-financed projects. To the extent possible, the

NMSCP will coordinate closely with the proposed Bank financed “Obod Qishloq Project”, which is at the

15 The World Bank (2018, Disability Inclusion and Accountability Framework 16 Presidential Decree dated February 7, 2017, on Action strategy on five priority development directions of the Republic of

Uzbekistan in 2017-2021


Page 10 of 50

early stages of preparation, to ensure integration of spatial coverage and to facilitate urban-rural linkages

between the two operations. Both projects will strive to harmonize capacity building and technical

assistance aimed to build capacities of subnational Government administrations for integrated local

development planning.

B. Series of Project Objective and Phases

20. The Program Framework. The proposed NMSCP will be implemented through an investment

program designed as a Series of Projects (SoP) to assist medium-size cities through a series of

transformational investment projects. It is expected that the first project would play the most critical role in

the time-series of SoP as the first demonstration/pilot project and providing the necessary technical

assistance to achieve its overarching objective. Subsequent roll-out of the program would be supported

through a series of projects with a modular phasing, targeting different groups of cities using a common

project design and integrated approach. The overlap will also allow essential activities in each project to

continue in parallel reinforcing and complementing each other.

21. The financing plan of the NMSCP’s roll-out will include different sources of funding from GoU,

various donors, including the World Bank, and the potential leverage of private sector capital. The design

of each subsequent project will consider the capacity of the implementing institution and the priorities of

the Government, technical challenges and the nature of the involved financing sources.

The NMSC Program Framework

22. The first project in the SoP, described in detail in this PAD, will be implemented over five years

and supported by the World Bank to launch the NMSCP and the SoP, playing a demonstration and catalytic

role. It will target three selected cities to pilot an innovative approach identifying and prioritizing tailored

investment programs through a systematic process for a strategic urban-development vision specific to each

city. As the first project in the series, it will also support the GoU to strengthen/develop institutions and

agencies responsible for urban and territorial development both at national and local levels, and finance the

concept designs to lay the foundation to select priority strategic investment programs for all the remaining

cities in the NMSCP, in line with the common framework/template and approach developed for the SoP.


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Above and beyond the city-level impacts, this operation would help establish a framework for more

sustainable local development and the use of government own resources to achieve scalability and

sustainability of interventions.

C. Project

23. The Project Development Objectives are to support the Borrower to: (1) improve selected urban

infrastructure, public spaces and assets, and access to services in Participating Cities; and (2) strengthen the

institutional capacity of the Borrower’s relevant agencies to deliver and manage local infrastructure.

24. PDO Level Indicators are designed to capture improved urban living conditions in the project

areas of targeted medium-size cities and include the following:

(i) Number of people (cumulative), of which female (50 percent of total), provided with access to

improved urban services;

(ii) Square meters of new or rehabilitated urban public spaces, of which now accessible to persons with

disabilities (percentage);

(iii) Number of municipalities with asset management system in place and with trained municipal

officials to use them.

D. Project Components

25. The proposed project will consist of the following components:

26. Component 1: Improvement of Urban Services17 and Enhancement of Public Urban Spaces

(US$ 83 million). This component will finance a targeted bundle of integrated and multi-sectoral

investments to contribute to the enhancement of selected public urban spaces in project cities and improve

livability. These will include, without being limited to, upgrading of public spaces, street networks and

associated infrastructure; upgrading of vehicular, pedestrian and multi-modal accesses; carrying out works

to restore selected heritage buildings; improvements to selected basic infrastructure and services that are

part of larger networks on a case-by-case basis when deemed necessary to complement the long-term

functionality and increase effectiveness of area-specific urban improvements. It will also finance all

necessary feasibility studies, detailed design studies and construction supervision associated with these

investments.

27. Component 2: Institutional Strengthening and Capacity Building (US$ 14.5 million). This

component will include two subcomponents:

Subcomponent 2.A: Institutional strengthening and capacity building of participating cities. This

subcomponent will consist of activities targeting project cities and local government agencies, tailored

to their specific needs, including without being limited to: (i) asset management systems and

management of integrated urban mobility; (ii) sustainable tourism development; and (iii) cooperation

with the private sector.

Subcomponent 2.B: Support to the National Medium-Size Cities Program (NMSCP). This

subcomponent will support the design of the NMSCP and the phased development of design studies

17 Services include any urban services delivered under a Social, Urban, Rural and Resilience (SURR) project or intervention—

water supply, sanitation, sewerage, sidewalks, roads, etc. (The World Bank 2016, Corporate Results Indicators Bank Guidance).


Page 12 of 50

deemed necessary for the preparation of the roll-out phase of the NMSCP to all participating cities in

the national program and relevant agencies, including the methodology and approach required to

enable the prioritization and preparation of integrated investment packages for the Participating Cities.

It will also support relevant government agencies (central, regional and local) responsible for the

program implementation and those involved in urban development.

28. Component 3: Implementation Support (US$ 2.5 million) This component will support project

implementation, including implementation of the project monitoring and evaluation system,

communication strategy, application of safeguard instruments as well as training and financing of

incremental operating costs of the Project Implementing Unit.

E. Project Beneficiaries

29. Project beneficiaries: The primary beneficiaries of this project include the population of the pilot

cities who will directly benefit from improved urban infrastructure, services and overall living conditions

in the participating cities, starting from the pilot cities of Chartak, Kagan and Yangiyul and their adjacent

periphery (both male and female inhabitants), estimated to be 165,000. Indirect beneficiaries will be the

aggregated number of visitors to the cities (for work, visit to markets, administrative, tourism and other

purposes), estimated to be 200,000. Since it is likely that the project might add a fourth medium-size city,

the direct beneficiaries could increase by an order of 50,000 to 100,000, depending on the size of the

additional participating city.

F. Role of Partners

30. The NMSCP aims to develop a framework for urban development of medium-size cities, allowing

other development partners and donors to systematically contribute to the implementation of the Program

in line with its development objectives.

31. Key Partners: Other key project partners include the Ministry of Construction, Ministry of

Economy, Ministry of Culture (MoC), Ministry of Housing and Communal Services (MHCS), State

Committee for Tourism Development (SCTD), and the Ministry of Finance (MoF). Ministry of

Construction is the key project partner for strategy and planning of selected cities and regions; Ministry of

Economy as coordinator of Obod Qisloq Project, in addition to being engaged in some territorial and

sectoral development policies. MHCS is the key agency for the activities under the project that are related

to water and wastewater, housing, heating as well as solid waste. SCTD is the line agency responsible for

tourism development and as such will play a key role in the development of tourism infrastructure

development in selected cities. SCTD will also be one of the main beneficiaries of activities, in particular,

those aiming to increase the capacity of the central government for tourism development. MoC will be

responsible for supporting the PIU in reviewing activity concepts and approving designs that involve

rehabilitation of cultural heritage sites. MoF will be supporting the municipalities and would also be one of

the beneficiaries in capacity building in asset management and municipal finance.

32. Other donors: A number of other donors are becoming increasingly active in the urban sector in

Uzbekistan and the project will provide a unique opportunity for collaboration and leveraging of resources

in support of sustainable urban development. Some donors who are active in the infrastructure sector in

Uzbekistan and already expressed interest to coordinate and contribute to the urban agenda are the Asian

Development Bank (ADB), the Asian Infrastructure Investment Bank (AIIB) and the Islamic Development

Bank (IDB). The European Bank for Reconstruction and Development (EBRD) also actively works with

business entities in Uzbekistan, which might provide opportunities for collaboration under Component 2.

The Global Environment Facility (GEF) is also active in Uzbekistan and in the process of exploring the

possibility to support the MSCIUDP and its overarching NMSCP through the mobilization of funds under


Page 13 of 50

the Sustainable Cities Impact Program to support the piloting of green investments for the participating

cities.

G. Lessons Learned and Reflected in the project Design

33. This project is the first World Bank financed project in the urban sector in Uzbekistan, and several

lessons learned from previous World Bank financed projects in Uzbekistan, the Europe and Central Asia

region and worldwide are reflected in the project design as follows:

Lesson 1. Understanding the complexity of the local environment sufficiently and making adequate

allowances for the complexity in project design and implementation. This lesson has been partly

addressed through the project design (framework SoP approach) with the Central Government as well

as the local governments as part of the project preparation. This will be continued through the first

SoP implementation and will ensure continuous monitoring, review and adjustments over the life of

the project.

Lesson 2. Adopting integrated multisector approach, that would avoid/reduce inefficiencies in the

system due to fragmentation of investments and enable transformational impact and long-term

sustainability though coordination across sectors and agencies in the urban sphere, eventually creating

a more attractive environment to attract private capital. This has been demonstrated in several Bank-

financed projects including the Strategic Cities Urban Development project in Sri Lanka.

Lesson 3. While medium-size cities face many common challenges, each city is endowed with

unique assets and opportunities that need to be unlocked/leveraged. The solutions would have to

be tailored to adapt to the local needs of each of the cities. This will enable the intervention to mobilize

the city’s full potential and allow it to reach its economic growth and potential. Then, investments

would focus on identifying and removing bottlenecks to development, unlocking each city’s growth

potential. This is based on experience in projects such as the Georgia Regional Development Projects.

Lesson 4. Strategic planning and catalytic investments require the development of institutional

capacity. Effective and sustainable sectoral interventions require: (i) institutional/organizational

setup and instruments for better coordination and execution of interventions at the local level; (ii)

integrated planning, both sectoral and geographical; and (iii) an efficient urban management system.

In addition, local authorities should strengthen their capacity to plan and manage local services and

infrastructure, as well as capacity to mobilize private investments.

Lesson 5. Importance of evidence-based urban development practices. Effective urban development

interventions all over the world have showed that a strong data driven M&E and policy making

system in place is of key relevance for effective urban development and management. The CPF

highlights one of the main constraints for achieving evidence-based practices in Uzbekistan due to

limited data availability at the local level. Data availability issues preclude a full understanding of

recent economic developments and evidence-based policy formulation, making it difficult to confirm

administrative data, determine where the gaps lie in terms of basic needs, and understand poverty

levels and dynamics. The NMSCDP Program takes this into consideration by (1) applying an

Integrated Urban Diagnostic as a first step in the urban interventions (2) carrying out capacity

building and technical assistance under its pilot projects to feed evidence-based practices into the

subsequent phases of the SoP.

III. IMPLEMENTATION ARRANGEMENTS

A. Institutional and Implementation Arrangements

34. While still centralized, the implementation arrangements for the project are conceptualized, both at


Page 14 of 50

central and regional levels, as a first step towards creating a long-term mechanism to scale-up

implementation of the NMSCP and continue to support municipalities to become gradually more self-

sufficient in planning and delivering municipal services and infrastructures.

35. Implementing Agency: The State Investment Committee (SIC)18 has been designated as the main

project implementation agency and is responsible for overall project implementation, coordination among

all relevant sectors, making key decisions related to the project including use of funds, signing of contracts,

and supervision of the Project Implementation Unit (PIU). The SIC has direct representatives and reporting

staff in all regions that have been mobilized and empowered through internal decrees to be responsible for

project oversight and implementation at the local level as direct representatives of the implementation

agency.

36. Project Implementation Unit: The PIU was formally established at the national level as a

separately registered entity, but under and controlled by the SIC with functions to coordinate and implement

the project, with the perspective to subsequently expand its responsibility to scale-up coverage at the

national level to include other participating cities under the upcoming NMSCP. The PIU is led by a Project

Director and includes staff capacity in procurement, environmental and social safeguards, and basic

financial management. The mobilization of an experienced Financial Management Officer is on-going and

should be finalized before effectiveness of the loan agreement. Engineering and sector expertise will be

mobilized over time both through consultancies and relevant agencies and/or organizations, as needed. The

PIU facilitates control and approval of feasibility studies under the project and coordination amongst all the

relevant sectors. The PIU will deploy its representatives in the regions of the selected project cities, under

the general oversight of the regional representative of SIC. Likewise, it will also organize capacity building,

trainings and monitoring and evaluation of all PIU staff, both in the central and regional locations. A Project

Operational Manual (POM), to be prepared by the SIC and satisfactory to the Bank, will be approved before

(and as a formal condition of) loan agreement effectiveness, and will provide details about implementation

and reporting processes.

37. Representatives of the PIU in the project regions: Since the project would be implemented at

the local level, it is expected that the PIU will deploy key staff in the regions, within 4 months of loan

agreement effectiveness. PIU regional representatives would strengthen the local presence and improve

implementation coordination and performance. The regional representatives of the PIU will work closely

with the respective city/district19 local authorities (khokimiyats) as most appropriate, reporting to the PIU

and under general oversight and facilitation by the regional representative of SIC. The regional staff of the

PIU (RSPIU) will be responsible to facilitate selected daily operational functions of project management at

local level, including, but not limited, local-level coordination among agencies and monitoring of progress

of works. RSPIU will include at minimum one Local Engineer/Coordinator and one Local Safeguards

Officer (for both social and environment safeguards) at the start of the project implementation. Sector

expertise might be mobilized over time both through consultancies and relevant agencies and/or

organizations, as needed and in line with the POM. Relevant heads of city/district/region khokhimiyats will

facilitate interregional coordination and project activities, with the support of a regional inter-agency

consultative Working Group to ensure both horizontal and vertical coordination for cross-sector activities.

Over time, as the experience in project implementation is built at local level, it would be expected that the

regional outfit of the PIU might increasingly carry more fiduciary and safeguard responsibilities. Therefore,

the centralized implementation arrangements will be reassessed at mid-term to determine if there are

18 The SIC was established with the Decree of the President of the Republic of Uzbekistan dated March 31, 2017 No. UP-4996 as

a legal successor of the former Ministry of Foreign Economic Activities, Investments and Trade. It's a body of the GoU and its

chair is the Deputy Prime Minister. 19 Some of the medium-size cites in Uzbekistan do not have a dedicated hokim (mayor) and are managed by the respective

Districts, as it is the case of the project city of Chartak.


Page 15 of 50

sufficient capacities by then to enable the transfer of selected administrative functions to the regional level.

38. Steering Committee: Considering the multi-sectoral nature of the project, a high-level Inter-

Ministerial Steering Committee (SC) was established to facilitate the SIC in decision-making and

coordinate project implementation. The SC includes deputy ministers or other high-level representatives of

key line ministries and government agencies, including, without being limited to: the Ministry of

Construction, MoF, MoE, SCTD, MHCS, MoC and heads of pilot regions (khokims). It is chaired by the

First Deputy Chair of the State Investment Committee. At the technical level, a formally appointed inter-

ministerial Sectoral Research and Technical Council (SRTC or OHTC in Russian20), will facilitate cross-

sectoral activities of the SIC and its PIU, and interagency technical coordination.

B. Results Monitoring and Evaluation Arrangements

39. The project will make clear provision for the design and implementation of an integrated

Monitoring and Evaluation (M&E) system as part of the Component 2 and through Component 3, which

will cover the costs aimed at designing and managing M&E systems for the project implementation period.

This system will build upon the existing M&E systems already in place in Uzbekistan. In particular, the

SIC will be responsible to monitor (without being limited to): (a) the progress of work on the ground with

timely identification of bottlenecks during implementation; (b) the performance of the project towards the

achievement of the project development indicators; (c) regular and specific monitoring of the implementing

agencies, identifying the most appropriate indicators, triggers and targets to project performance,

compliance and success. The RSPIUs will work in close collaboration with the PIU and keep track of the

data at the local level and will submit bi-annual reports to the PIU. A baseline report for each municipality

will be available at the start of project implementation. A Monitoring and Evaluation Framework will be

an integral part of the POM.

40. The PIU, under the SIC, will be responsible for day-to-day project oversight and results monitoring

and day-to-day M&E responsibilities. The PIU will be also responsible for keeping track of locally collected

data and preparing and submitting bi-annual reports to the Bank to monitor project progress based on

performance indicators defined in Section VII, providing the detailed results framework and baseline

indicators for the project.

C. Sustainability

41. Recognizing the long-term sustainability risk, the project has been designed in close consultation

with national agencies and municipalities. The first-year fast-track investments were identified following a

bottom-up approach and in close consultation with municipalities and project partner agencies. They mostly

address neglected critical last-mile connections and infrastructure gaps/bottlenecks, bringing forward

urgent no-regret capital investments that were already listed in the pipeline for state investments plans, but

fragmented in terms of sequencing and pushed to outer years due to lack of resources. In doing so, the

project will address urgent needs for improved infrastructures while also increasing their efficiency (both

in terms of performance and energy efficiency), hence increasing overall long-term sustainability.

42. Moreover, considering the multi-sectoral nature of these investments, the SIC is coordinating

directly with relevant line ministries and agencies (e.g. water, transport and energy) to ensure that what is

delivered under the project is fully consistent with other ongoing and/or upcoming larger sectoral programs

and/or project financed both the GoU and other IFIs, follows relevant national sector guidelines and design

criteria, and approaches consistent with ongoing sector reform programs21. Relevant line agencies, under

20 According to Presidential Decree, no PP-3857 dated July 16, 2018, on effectiveness of preparation and implementation of

projects with international financial institutions and foreign governmental financial organizations. 21 For example, in the case of Kagan, any investments in the enhancement of sewerage networks potentially supported by the

project will be fully coordinated with the ongoing WB financed Samarkand and Bukhara Sewerage project, while similarly, in the


Page 16 of 50

the leadership of the Regions and coordination by RSPIUs, will also be involved in various stages of

implementation, from tendering to commissioning, and be responsible for O&M after handover. For those

assets that will remain under the responsibility of the municipalities, the project will assist them to enhance

future sustainability outlook through capacity building support.

43. In fact, Component 2 of the project also aims to contribute directly towards ensuring sustainability

of project investments and, more widely, of urban development in the country. During project

implementation, local municipalities will be supported by consultants (municipal engineers and planners)

who will, inter alia, strengthen the capacity of local authorities to consistently deliver and maintain urban

infrastructure and services. Infrastructure maintenance capacity will also be improved under the project by

Component 2 and cooperation with the private sector will be facilitated. Furthermore, the project will build

resilience towards climate change by investing in climate change mitigation and adaptation measures.

44. The detailed urban design studies will introduce innovative urban design processes that include

participatory approaches and citizens’ engagement (e.g., place-making) for the identification and

prioritization of investments. This will contribute to increase local ownership of project activities, in turn

increasing also the collection rate of local taxes and, ultimately, long-term sustainability.

IV. PROJECT APPRAISAL SUMMARY

A. Economic and Analysis

45. The project will improve urban infrastructure, public spaces and access to services. Selected

secondary urban centers which are home to an estimated number of 165,000 residents currently have large

gaps in connective and basic urban infrastructure, suffer from a lack of quality public spaces and well-

defined and functioning city centers. These challenges are further exacerbated by the rapid growing

population and the lack of an integrated strategic vision for the city and increasing risks of extreme weather

events. Through its components, the project is expected to increase residents’ living standards by providing

improved access to urban infrastructure, public spaces and services. The project is also expected to improve

efficiency in spending both by (i) supporting an integrated approach, and by (ii) directly supporting

investments aimed at reducing inefficiencies in service provision (e.g. Energy efficiency). The economic

benefits linked to the above are multiple. Improved urban infrastructure, such as public spaces, streetscapes,

and municipal roads, can lead to a reduction of vehicle operating costs, improved urban livability, increased

safety of movement for residents. The planned investments will also contribute to mitigation of climate

change, as they will lead to reduced CO2 emissions due to improved energy efficiency. The investments in

streetlighting also come with high social benefits of improving illumination as well as reduced criminality

and safety on the roads in the evening and at night time. These investments are also expected to make

selected cities, and their centers, better places to live, and more attractive places to invest. Investments in

selective cultural heritage assets – which are also envisaged under the project – will also contribute to the

preservation of global public goods.

46. For project appraisal, economic analyses for four22 of the project’s first-year investments

have been conducted. The selected first year investments cover two of the three selected cities (Chartak

and Kagan) - for which both preliminary costs and benefits can be easily accounted and attributed to23. For

these investments, traditional cost-benefit analysis (CBA) was conducted as further outlined below. The

case of Yangiyul, with the ADB-financed projects for Tashkent Region (both water supply and sanitation). 22 These include: (1) Municipal building energy efficiency retrofit in Chartak, (2) Streetlighting improvement in Chartak, (3)

Streetlighting improvement in Kagan, (4) Rehabilitation of full sewerage network in the project area of Kagan. 23 For these four first-year investments we had sufficient information either from preliminary studies (e.g. TRACE and City

Energy Savings Action Plans), from pre-feasibility studies (e.g. Chartak streetlighting pre-feasibility studies) or official

information regarding the costs and potential benefits – based on in-country experience.


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overall economic return of the four first-year investments was estimated to be 7.5 percent and the NPV to

be 0.79 USD million. Below is a summary table of the overall NPV and ERR by investment (see column 1

and 2), lumped by type of investment. As observed all investments except for one have a positive NPV and

an ERR above 5 percent24. However, in conjunction with well-known and documented high social benefits

of streetlighting improvements (reduced criminality and accidents on the road), the results are considered

acceptable for this investment. A sensitivity analysis was conducted for all four investments assuming a 10

and 20 percent increase in project costs. Column 3 and 4 present sensitivity analysis results for a 20 percent

increase in project costs. As observed two investments continue to have positive NPVs and an ERR beyond

the 5 percent threshold.

Table 1. Economic Evaluation Results for a sample of indicative fast-track investments

Sensitivity Analysis

20% Increase in

Investment Costs

Investment name NPV

USD

million

ERR

%

NPV

USD

million

ERR

%

Chartak Energy Efficiency investments in street-lighting 0.14 13 0.10 10.0

Chartak Energy Efficiency investments in buildings 0.66 20 0.54 16.0

Kagan Energy Efficiency investments: street-lighting -0.29 -6.0 -0.39 -8.0

Kagan Rehabilitation of full sewerage network in project

area

0.25 6.2 -0.10 4.6

All four first-year investments 0.79 7.5 0.16 5.5

47. An economic analysis will be conducted for the remaining first-year investment (e.g. Yangiyul

rehabilitation of water network, Chartak rehabilitation of critical bridges, dedicated bus-lane between

Kagan and Bukhara, etc.) once more detailed information on their costs and benefits is made available upon

the completion of preliminary studies and feasibility studies.

48. Finally, economic analysis will be used as a screening tool in the selection of investments for the

remainder of the project. Details for the development of the economic analysis of investments will be

included as part of the Project Operational Manual. An investment must yield a minimum ERR of 5 percent.

For relatively small investments, where benefits are difficult to monetize, a cost effectiveness analysis will

be carried out in place of a CBA.

B. Technical

49. Project readiness. The three pilot cities of Kagan, Yangiyul and Chartak were pre-selected to

launch the project and demonstrate the application of the integrated approach to urban development in

Uzbekistan. A selected number of fast-track investments - to be implemented during the first year of project

implementation -were preliminarily identified at pre-appraisal for all the three pilot cities. These fast-track

investments were assessed and prioritized taking into consideration their relevance to the project

development objectives, based on the findings and recommendations of the Integrated City Diagnostics

conducted25 in the pilot cities, followed by a technical assessment and preliminary confirmation that they

fall under safeguard Category B. Their relevance was validated technically and based on sound principles

24 As per new Guidelines a 5 percent Discount Rate is recommended for project evaluation - Technical Note on Discounting

Costs and Benefits in Economic Analysis of World Bank Projects 25 The Integrated City Diagnostic (ICD) is a tool applied as part of project preparation with involvement of the city governments

and local stakeholders to help cities to identify challenges and Plan for future sustainable development. Please see Annex 4 for

further information.


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of urban design (to ensure no-harm and consistency with existing and upcoming investment plans) and

underwent extensive consultative processes for endorsement by both local government and central technical

government agencies. Investments for the remainder of the project will be identified and appraised in the

same manner, in parallel during the first year of project implementation.

50. The identified fast-track investments for Year 1 make up to about 35 percent of total project

investments and they are expected to be launched within the first year of project implementation after

project effectiveness. A realistic Procurement Plan has been prepared detailing how these fast-track

investments will be managed and staggered during the first 18 months of project implementation. These

investments include a combination of Works under Component 1 and Goods under Component 2. In

particular, the list of selected fast-track Works include: (1) Design and construction of pedestrian and cyclist

friendly greenway or loop from the city center along the river to the water reservoir in Chartak; (2) Retrofit

and energy efficiency measures of an existing municipal building in Chartak; (3) Improvement of street-

lighting in the selected project-areas in the cities of Kagan and Chartak; (4) Rehabilitation of critical bridges

in Kagan; (5) Enhancement of water supply system and potential sanitation network in Chartak; (6)

Restoration and Adaptive reuse of Emir Palace and selected Cultural Heritage Buildings in the urban core

of Kagan; (7) Rehabilitation of full sewerage network in the project area of Kagan; (8) Piloting of a

dedicated bus lane between Kagan and Bukhara; and (9) Rehabilitation of the water network of the core

area of Yangiyul. Selected fast-track Goods include a combination of maintenance and solid-waste

collection equipment for target municipalities tailored to their specific needs.

51. Most of the investments for Year 2-5 require additional studies, detailed designs and planning to

be fully identified. Such studies are either ongoing or will be launched in the coming months and will follow

the same appraisal procedure as the fast-track investments for year one. More details on activities by

component and respective subcomponents are provided in the following sections and Annex 1.

52. Integrated City Diagnostics and other background analysis that informed project design: The

main background analysis that informed first and foremost the selection of the first set of three

demonstration cities26 and subsequently the project design is the consultative Integrated City Diagnostic

(ICD) (see Annex 4 for more details) carried out during the project preparation phase and partly supported

by a grant by the Global Facility for Disaster Reduction and Recovery (GFDRR), to ensure that elements

of urban resilience were taken into consideration for long-term sustainability. The main findings and

recommendations of the ICD were widely presented and discussed (through a combination of workshops,

technical roundtables and individual presentations) with the SIC and other key project stakeholders in line-

ministries and agencies that have a direct impact and relation with urban development in Uzbekistan. The

ICD went also through multiple rounds of consultations with the pilot city administrations during a series

of regional workshops conducted during the preparation and identification phases of the project. The ICD

process resulted in the development of an area-based approach to urban upgrading tailored to the Uzbekistan

country context and to be applied by the project within each participating city. It also contributed to identify

and validate both a number of fast-track investments to be implemented during Year 1 and specific areas

of investment for Years 2–5 that will require further detailed urban design and other relevant studies.

53. In addition to the ICD, the project investments were informed by city-specific assessments of their

energy use, using the Tool for Rapid Assessment of City Energy (TRACE) to identify cost-effective and

26 The three pilot cities of Kagan, Yangiyul and Chartak were confirmed to be a valid representative sample of the universe of

medium-size cities in Uzbekistan. They have a population between 50,000 and 100,000 (not considering the surrounding non-

urban expansion areas) and geographically well distributed in the country. They are all secondary economic centers gravitating

around larger urban centers, while also being located along the Central Asia Regional Economic Cooperation (CAREC) logistic

corridors (i.e. along the Silk Route). However, they are not able to fully exploit their location advantage mostly due to a

combination of infrastructure bottlenecks and/or poor performance, lack of a long-term strategic development vision and overall

limited livability and attractiveness.


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feasible measures to improve energy efficiency of investments in urban infrastructure and services. The

TRACE reports and related city energy efficiency plans were underpinned by intense consultative processes

and supported by a grant by the Energy Sector Management Assistance Program (ESMAP).

54. Multiple consultations with key project partners, donors, and private sector stakeholders were

carried out to finalize the project design. In addition, existing studies and ongoing work carried out by the

ADB, the IDB, the UNDP, the GIZ, and the EU were carefully reviewed and contributed to inform the

project design and selected project investments.

55. Mitigation and adaptation measures to address the country’s vulnerability to climate change

and respond to the increasing risks of extreme weather events in Uzbekistan are considered in the

project design and are based on the results of the project screening for short and long-term climate

change and disaster risks. The project areas are vulnerable to increasing temperatures, floods, droughts

as well as earthquakes. The project design aims at addressing the country’s vulnerabilities to climate change

throughout the different components. Climate and disaster risks have been considered in the design of both

Component 1, which focuses on the Improvement of Urban Services and Enhancement of Public Urban

Spaces, as well as Component 2, which focuses on Institutional Strengthening and Capacity Building. For

investments in physical infrastructure under Component 1, climate variability is considered in the design

of the investments to adapt to climate change in the long-term, and, particularly, to address the increasing

risks of extreme weather events, such as more frequent and intense flooding in low-lying areas of river

deltas and near cities (particularly through investments in storm-water drainage and stabilizing

embankments), to improve infrastructure resistance to extreme droughts, as well as to ensure seismic

resistance standards of urban infrastructure. As part of Component 2, the awareness and capacity to

understand urban resilience and energy efficiency practices of both national government and municipal

officials will be strengthened. Besides engaging in climate change adaptation activities, the project also

includes long-term climate change mitigation measures. The mitigation measures are comprising

investments in energy efficiency regarding streetlighting as well as administrative buildings in the pilot

cities. Furthermore, both the fast track investments of Year 1 as well as the Year 2-5 project investments

will focus on improving mobility in the project cities for pedestrians and cyclists by adapting innovative

and eco-friendly mobility solutions.


56. Project investments under Component 1 would include a combination of area-based multi-sector

urban upgrading investments, together with the targeted improvement of complementary basic

infrastructure networks to reduce city-level bottlenecks for local development, and address vulnerability to

climate change, as described above. This component will be implemented starting with the three selected

pilot cities of Kagan, Yangiyul, and Chartak, with different scope of interventions by city based on their

specific needs, as validated by the ICD. Since the project follows a framework approach, depending on the

final estimates of priority investments identified by the ongoing and upcoming studies, a fourth or more

city could be added following the same approach used for the pilot cities.

57. As part of project preparation, each selected municipality underwent a thorough ICD and a

consultative process with local governments, local agencies, and local, regional and national stakeholders

and relevant government line agencies to ensure that all selected investments are (a) fully aligned with the

PDO; (b) consistent with the ICDs; and (c) prioritized and selected to support the development vision of

each of the selected urban centers, ensuring complementarity and avoiding fragmentation. This process

resulted in the identification of priority areas for project support within each city, with selected fast-track

investments to be implemented during Year 1 spanning both subcomponents (further details in Annex 1),

and specific urban core zones to be further studied to define the actual scope of project support during Years

2–5. While the selected fast-track investments are already undergoing feasibility studies financed by a


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Recipient-Executed ECAPDEV27 project preparation grant, the studies for the urban design concepts have

also been launched in parallel with the support of the KGGTF28, to timely identify and prioritize investments

for Years 2-5 and have them ready for detailed designing by project effectiveness. Detailed designs for

Year-1 investments identified in Kagan, Yangiyul and Chartak are expected to come in line for finalizations

starting in summer 2019.

Component 2: Institutional Strengthening and Capacity Building

58. The ICD revealed that most municipalities are lacking, among others, the (a) knowledge/equipment

for budgeting and capital investment planning; (b) knowledge and skills for integrated spatial/territorial

planning, green urban development and resilience, smart urban management solutions and sustainable

transit-oriented development; (c) knowledge/equipment for establishing GIS and computer-based systems

for asset management, (d) knowledge of energy efficiency practices and standards, and (e) mechanisms for

civic engagement and gender inclusion in municipal urban development. Moreover, an assessment of the

private sector potential in relation to tourism development for Kagan and Chartak was carried out as part

of the project preparation, which confirmed the strong potential demand by the private sector to invest in

these cities if services and livability were improved. This study significantly informed the design of

Component 2.

Subcomponent 2.A: Institutional strengthening and capacity building of Participating Cities.

59. Building on the findings of the ICD, this subcomponent will focus on institutional strengthening

and capacity building of project municipalities. Areas for support under this subcomponent include, without

being limited to: (i) asset management systems and planning & management of integrated urban mobility,

including information and communications technology (ICT); (ii) sustainable tourism development; and

(iii) cooperation with the private sector. Further details on the areas for support can be found in Annex 1.

60. The activities under Subcomponent 2.A are aimed at improving service delivery and enhancing the

operation of assets rehabilitated under the project as well as at reducing inefficiencies in service delivery at

the city level by coordination across sectors and agencies. Subcomponent 2.A will not only focus on

technical assistance but will also finance investments in goods and works for improved municipal

management (for example, asset management systems, GIS, selected maintenance equipment and

facilities). Through this subcomponent, the project will coordinate with other banks and IFIs’ supported

projects and initiatives to explore the potential for collaboration, particularly with regard to e-governance

principles in asset management, cadaster and energy efficiency in urban development (potentially

leveraging GEF funds through the Sustainable Cities Impact Program), and Urban Resilience (through the

support of a GFDRR grant for Urban Resilience).

Subcomponent 2.B: Support to the National Medium-Size Cities Program (NMSCP)

61. This subcomponent will finance preliminary studies and technical assistance to design the NMSCP

and refine the methodology and approach required to enable the prioritization and preparation of integrated

investment packages for the roll-out of the SoP to all medium-size cities in the country. The first step in

this direction will be a study for the system of Medium-Size Cities and Roadmap for Urban and regional

development in Uzbekistan, which will be launched in early 2019. This study will benefit also from the

cross-fertilization with other similar projects currently being prepared in the Kyrgyz Republic and on

regional activities in Central Asia (CA) to ensure coordination at CA regional level, sharing of experience

27 The Europe and Central Asia region Capacity Development Trust Fund (ECAPDEV) managed by the World Bank. 28 Korean Green Growth Trust Fund


Page 21 of 50

and consistency of approaches across bordering countries. This subcomponent will also support the

preparatory studies for selected additional participating cites, in the eventuality such need arises to absorb

project savings after all priority investments have been identified for the three pilot cities.

62. In addition, this subcomponent will also finance institutional strengthening and capacity building

activities at the national level. Areas for support under this subcomponent include, without being limited

to: (i) public financial management; (ii) sustainable tourism development; and (iii) integrated

spatial/territorial planning, focusing on green growth approaches and including consideration to civic

engagement and gender inclusion. Further details on the areas for support can be found in Annex 1.

C. Financial Management

63. A Financial Management (FM) assessment was carried out to determine the FM implementation

risk and to help establish adequate FM arrangements for the proposed project. The SIC has fiduciary

responsibilities for the project, relying on the day-to-day support of the PIU. The selected municipalities

and project partners agencies will have no FM responsibility, but will provide the PIU evidence of review

and acceptance of the goods, works, and consultants’ deliverables, as required, to ensure validity of payment

requests by contractors, suppliers, and consultants. The assessment showed that the PIU will have to

develop satisfactory FM capacity for the project implementation (devising POM with related FM content

by Effectiveness, installing the fully functional accounting software and hiring the Financial Management

Specialist by the end of December 2018). As of result of the assessment, the project financial management

systems at the PIU is rated Moderately Unsatisfactory and the FM risk level High at appraisal stage, mostly

due to lack of prior experience managing World Bank funds and the attached ‘High’ Country Level Risk.

The FM arrangements of the PIU will be considered generally acceptable for project implementation

provided the key risk mitigation measures mentioned above and further detailed in Annex 2 are addressed

prior to project effectiveness date.

64. The POM will define in detail the flow of relevant documents and approval process, internal control

procedures to be followed for managing project resources as well as the disbursement and reporting

procedures and formats specific to the project. The project will follow the traditional transaction-based

disbursement mechanism, including direct payments and replenishments of the designated account and

reimbursements. The minimum application size and designated account ceiling are specified in the loan

disbursement letter. Quarterly Interim un-audited (IFRs) will be produced for monitoring purposes. The

adoption of the POM is a condition for project effectiveness.

65. Disbursements Loan proceeds will be advanced to the Designated Account (DA), denominated in

USD dollars and maintained in a financial institution acceptable to the Bank, and transit account in Uzbek

Sums as may be necessary, and both accounts will be used only for the inflow of the Loan funds and

payment of eligible expenditures. Reporting on eligible expenditures will be based on summary statements,

statements of expenditures, and records submitted. Other allowed disbursement methods will include

reimbursements, direct payments, and special commitments.

66. The Loan will be complemented by GoU’s own contribution estimated to be equivalent to about

$20 million in the form of tax exemptions and funds necessary to cover the costs in case there would be

any need for land acquisition and compensation.

67. The annual audited project financial statements will be submitted to the Bank within six months

after the end of each fiscal year. The audit reports will be made publicly available within two months from

receipt as required by the Bank’s Policy on Access to Information. The details of the FM and disbursement

arrangements under the proposed project are provided in Annex 2.


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D. Procurement

68. Applicable Procurement Framework: The activities under the project will be subject to the

“Procurement Regulations”. All procurement of contracts will be conducted through the procedures as

specified in the World Bank’s Procurement Regulations for IPF Recipients - Procurement in Investment

Project Financing Goods, Works, Non-Consulting and Consulting Services, dated July 2016, revised

November 2017 and August 2018. Moreover, the Guidelines on Preventing and Combating Fraud and

Corruption in projects financed by IBRD loans and IDA credits and Grants, dated October 15, 2006 and

revised January 2011 and as of July 1, 2016, shall apply to this project. The procurement and contract

management processes will be tracked through the Systematic Tracking of Exchange in Procurement

(STEP) system.

69. Procurement Risks Assessment: Procurement capacity assessment was performed by the Bank

using the Procurement Risk Assessment and Management System (P-RAMS). The key risks concerning

procurement for implementation of the project include systemic weaknesses in the areas of: (i) procurement

capacity at the national level; (ii) accountability of procurement decision-making in the SIC; (iii) the

technical expertise in preparing the specifications for equipment; (iv) potential risk of delays in the

implementation of the project due to the complexity of procurement processes and decision-making that

involves a large number of government officials. Preliminary Risk mitigation measures are: (i) technical

specifications preparation capacity building at the SIC; (ii) training for new and current staff on Bank

Procurement Regulations; (iii) update of POM with a detailed chapter on procurement, including

description of decision-making processes and accountability for procurement decisions; iv) putting in place

an efficient contract management mechanism. As a quick reference, Annex 2 provides a summary table of

key risks and mitigation measures.

70. Summary of Project Procurement Strategy for Development (PPSD) and Procurement Plan

(PP): The PPSD has been developed, based on which the Procurement Plan for the first 18 months of

project implementation has been prepared. The PPSD includes a detailed Procurement Risk Analysis and

actions to mitigate the risks. If followed properly, and the risks are mitigated, a lower risk rating might be

upgraded during project implementation. Market analysis for large value packages, like: (a) Procurement

of Special Machinery and Equipment for cities; (b) Extension of Sewerage Systems of cities; (c) Supply

and Installation of Advanced Outdoor Lighting Equipment for cities confirmed that this market is a very

competitive market with a large number of manufacturers, suppliers and contractors. The project also

includes several civil works contracts. The nature of the civil work contracts is not complex, and a good

level of competition is expected among the international and national companies depending on the

packaging approach. The Procurement Plan will be updated at least annually or as required to reflect the

actual project implementation needs and improvements in institutional capacity.

71. Use of National Procurement Procedures: All contracts for goods, works and consultancy

services following national market approach shall use the procedures set out in the Public Procurement Law

(PPL) dated April 2018. The provisions of the PPL are consistent with the World Bank Procurement

Regulations Section V – Para 5.4 National Procurement Procedures subject to a few conditions specified in

the PPSD. To promote transparency, efficiency and value for money under the new country public

procurement system, the draft PPL provides for a gradual introduction of e-procurement system. The new

e-procurement system will be assessed by the Bank’s procurement team. If found acceptable, the project

may use it for procurement of simple goods and small works.

E. Social Safeguards

72. Social assessments carried out as part of the project preparation included consultations with local

authorities, communities, project affected persons and other stakeholders. In addition, focus group

discussions and structured interviews have been held in each of the project cities. This has enabled


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assessments of the social safeguard issues arising from the proposed project’s interventions. Overall, the

project is expected to have significant positive social impacts including: (a) improved civic amenities; (b)

strengthened local governance; and (c) enhanced livelihood opportunities. Key social issues relate to:

ensuring inclusion and local level participation; land requirements having impacts on temporary and / or

permanent resettlement; and capacity support as well as capacity building. Towards ensuring inclusion and

participation an ESMF has been prepared that enables identifying/screening social issues and the related

stakeholders thereof, thus providing for effective ways to reach out to the poor and vulnerable. The ESMF

also outlines aspects related to citizen engagement (CE) and gender. In respect of each investment, a

comprehensive citizen engagement plan (CEP) as well as Gender Action Plan (GAP) will be prepared as

relevant. Lastly, a stand-alone resettlement policy framework (RPF) has been prepared.

73. Involuntary Resettlement. The proposed project will finance civil works that could necessitate

some temporary and/or permanent land acquisition or induce changes in land use or land access in the areas

of certain activities. For example, public roads may need to be redesigned or parking areas may need to be

expanded to serve a greater number of visitors and other changes in the use and physical characteristics of

public spaces. This may have collateral effects on neighboring areas, and income-generating activities

(many of which may be informal) in public spaces could be affected. This has necessitated triggering of the

Operational Policy on Involuntary Resettlement (OP 4.12). However, the nature and extent of interventions

and the impacts thereof are currently not known and will become clearer as and when investment activities

are chosen, and implementation begins. Given this, an RPF has been prepared to be applied as and when

required, and a Resettlement Action Plan (RAP) will be prepared to address physical and/or economic

displacement. The RPF was prepared in consultation with a variety of stakeholders and public consultations

were carried out in the three pilot cities between October 1 and 3, 2018. A summary was translated into

local languages and disclosed in the country on September 18, 2018 and on the World Bank website on

October 5, 2018. Approval of the RAP(s) and full payment of resettlement and rehabilitation benefits will

precede any civil construction works.

74. Citizen engagement. The project incorporates robust measures for citizen engagement and public

involvement towards urban planning development, in general, and the project interventions. The project

preparation has involved consultations with different stakeholders including beneficiary communities,

government and public institutions such as Ministry of Construction, State Committee for Tourism

Development, cultural heritage restoration entity as well as central, regional, and municipal levels of

government. The project will continue to be engaged in holding consultations with the citizens as well as

key stakeholders throughout the implementation on a regular basis. Key elements of the engagement will

include: 1) Consultations and Disclosures; 2) Beneficiary Assessment/ satisfaction surveys; and 3)

Grievance Redress Mechanism (GRM).

75. Gender Dimension. Given the investments in urban development planning and design, it is

expected that the project will equally benefit male and female citizens of participating cities. The project

promotes the participation of women in consultation processes and access to the benefits of the project.

Women are expected to benefit from project activities that enhance livability of cities, promote safety, and

support economic opportunities through improvement of entrepreneurship, trade and tourism-led economic

development.

76. The ESMF and RPF include the project’s gender inclusion strategy. The objective of the gender

strategy in the ESMF is to ensure access of women to the benefits of the project. Whereas, the objective of

the gender strategy in the RPF is to ensure equity in the resettlement process, enabling women and their

families to sustainably re-establish their housing and livelihoods. Some of the gender consideration to be

addressed in the project include:

• ensuring women’s participation in community consultations in investments planning and

implementation;


Page 24 of 50

• gender sensitive provision of civic infrastructure including sanitation, transport, working environment,

etc;

• special attention to women headed households in the relocation and post resettlement process, with

targeted livelihood assistance;

• provision of special targeted livelihood assistance for vulnerable women who may be adversely affected

and lose their livelihoods as a result of resettlement; and

• equal provision of employment training opportunities for men and women.

77. During implementation, as and when an investment is chosen, a gender assessment will be

undertaken as a part of the social screening and a gender action plan will be prepared as appropriate. This

plan will lay out ways and mechanism for addressing the above listed aspects. The PIU will reflect impacts

by disaggregating relevant indicators by gender as part of the project’s quarterly reports and the Results

Framework.

F. Environmental Safeguards

78. Project potential environmental and social impacts and triggered by the Bank’s OPs. The proposed

project activities (civil works in street upgrading, recreational services like parks and other public spaces

improvements, intra city transport, social, drainage, water supply, solid waste management, schools,

hospitals upgrading) might generate a series of various environmental and social impacts. These impacts

would be associated with increased pollution with waste, noise, dust, and air pollution, health hazards and

labor safety issues, etc., due to civil works. All of them are expected to be typical for small scale

construction/rehabilitation works, temporary by nature and site specific, and can be easily mitigated by

applying best construction practices and relevant mitigation measures. The project triggers only one WB

Environmental Operational Policy 4.01 as the project will generate some adverse environmental and social

impacts (see above). The OP 4.04 on Natural Habitats as well as OP 7.36 on Forests, are not triggered as

the project the project is focused on existing infrastructure in urban areas no natural habitats and/or forests

will be impacted. As per WB disclosure policy, the draft ESMF has been disclosed in the country and

related public consultations were carried out in the participating pilot cities prior to appraisal.

79. Given the historic nature of some of the participating municipalities, it is expected that the project

might also support investments included in the lists of regional or national Physical Cultural Resources and

therefore the OP 4.11 is also triggered.

80. Project Category and EA instruments to be applied by the project. In accordance with the Bank’s

safeguard policies and procedures, the project is classified as Category B, which implies that none of the

activities financed by the project will cause significant environmental impacts that may fall under the

Category A projects, for which a full EIA would be required. In fact, no Category A investments will be

eligible for support under the project, hence only an Environmental Assessment (EA) with Environmental

and Social Management Plan (ESMP) will be required. Since the final investments to be financed by the

project have not been identified before appraisal, the appropriate EA instrument at onset is an ESMF that

would specify all rules and procedures for the investments. However, since most of the investments that

fall under the Category B might also cause some adverse environmental impacts, a simple and/or a partial

Environmental and Social Impacts Assessment (ESIA) and/or preparing an ESMP would be developed as

necessary, in line with Bank requirements.

81. Purpose of the ESMF. The ESMF will guide the Environmental and Social Impact Assessment

process, relevant to the proposed project activities. Overall its main goal is to avoid, minimize or mitigate,

potential negative environmental and related social impacts caused by the project implementation. The

ESMF provides the following: (a) the national and WB safeguards rules and procedures; (b) environmental

and social impacts associated with the proposed investments and generic mitigation measures; (c)


Page 25 of 50

guidelines on conducting sub projects environmental screening, as well as ESIA, including defining

mitigation measures and monitoring activities for different types of activities; (d) roles and responsibilities

in EA process and in supervision and reporting; (e) ESMP and ESMP Checklist to be applied within the

EA process; and (f) capacity building activities to ensure an efficient ESMF implementation. Under

Component 2 the proposed institutional strengthening and capacity building activities will include special

training on identifying and addressing environmental safeguards issues. Public consultations were carried

out in the three pilot cities between October 1 and 3, 2018 and the ESMF was publicly disclosed on the

World Bank website on October 8, 2018.

G. Other Safeguard Policies (if applicable)

82. OP 7.50 is triggered because it has been determined during project preparation that some of the

proposed activities might use water from ‘international waterways’ that would discharge wastewater in two

main river basins in Central Asia - the Amu Darya and the Syr Darya or their tributaries. However, the

activities to be financed would be limited to rehabilitation, modifications and minor additions or alterations

to existing schemes in ways which would not increase the amount of water abstracted or lead to appreciable

impact on the water sources or local hydrological regime. As these investments are of rehabilitation nature

and have positive impacts, the project has received Regional Vice-Presidency approval for the "Exception

to the notification of riparian states" on October 5, 2018.

H. World Bank Grievance Redress

83. Communities and individuals who believe that they are adversely affected by a WB supported

project may submit complaints to existing project-level grievance redress mechanisms or the WB’s

Grievance Redress Service (GRS). The GRS ensures that complaints received are promptly reviewed in

order to address project-related concerns. Project affected communities and individuals may submit their

complaint to the WB’s independent Inspection Panel which determines whether harm occurred, or could

occur, as a result of WB non-compliance with its policies and procedures. Complaints may be submitted at

any time after concerns have been brought directly to the World Bank's attention, and Bank Management

has been given an opportunity to respond. For information on how to submit complaints to the World Bank’s

corporate GRS, please visit http://www.worldbank.org/en/projects-operations/products-and-

services/grievance-redress-service. For information on how to submit complaints to the World Bank

Inspection Panel, please visit www.inspectionpanel.org.

V. KEY RISKS

84. The overall project risk has been identified as Substantial, mostly because the project is

Uzbekistan’s first multi-sector integrated urban development investment project financed by the World

Bank or any other IFI. Potential coordination challenges both horizontal and vertical are foreseen due to

the multi-sectoral nature of the project. Close coordination amongst multiple Government agencies is

required for the preparation and implementation of the project. To mitigate this risk, the project will be

implemented by the SIC, multi-sectoral by its nature, whose mandate includes coordination amongst all

sectoral agencies in planning of development projects. The project will also be supported by an interagency

“Sectoral Research and Technical Council” to provide technical advice across different sectoral government

agencies.

85. Institutional capacity for implementation and sustainability is also rated Substantial, mostly

due to the limited institutional capacity and experience of the SIC as implementation agency for

http://www.worldbank.org/en/projects-operations/products-and-services/grievance-redress-service

http://www.worldbank.org/en/projects-operations/products-and-services/grievance-redress-service

http://www.inspectionpanel.org/


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investment projects. While project management and technical capacities exist within the GoU to manage

World Bank financed projects, the SIC is a relatively new agency and has not been exposed to the World

Bank’s fiduciary, project management, and safeguards procedures and requirements, which could hamper

the progress of the project in the early stages of implementation. Hence, both the fiduciary and safeguard

risks also remain “High” at appraisal stage. To address these risks, the key measures taken by the project

are: (i) establishment of a PIU within the SIC, staffed with an inter-disciplinary team composed by the

Project Director, safeguard, fiduciary and technical personnel, which will increase the capacity of SIC to

provide senior technical leadership and oversight during project implementation; (ii) establishment of a

Steering Committee to facilitate inter-ministerial coordination and high-level decision-making, (iii) project

support for the strengthening of the SIC institutional capacity to implement and manage the project by

providing extensive training and hands-on support on areas such as procurement, safeguards, monitoring

and evaluation, and financial management; and (iv) the Bank will play an active role through close project

supervision to ensure that any coordination issues are identified and solved on time.

86. Potential disconnect between the project preparation and implementation framework

approach used by the project and the typical project preparation and implementation cycle of

investments projects in Uzbekistan. Traditionally, preparation of investment projects in Uzbekistan

requires full preparation of all feasibility studies as part of the preparation phase. Under this project the

Bank provides flexibility in the use of a framework approach to expedite the project’s preparation and

implementation. The risk of disconnect between the GoU’s and Bank approaches to accelerated project

preparation and implementation are mitigated by the recent resolution of the President of Uzbekistan29

allowing for the use of the framework approach. However, the risk of delays remains, since the framework

approach is relatively new to Uzbekistan and many agencies involved in the project are not yet familiar

with how to best synchronize GoU and WB’s requirements.

87. The risk of labor influx during construction works has been found low. Nevertheless, the

construction contracts will incorporate special clauses requiring application of workers’ code of conduct,

including labor influx guidelines.

88. The following table summarizes the rating of identified risks by category:

Risk Categories Rating

(H, S, M or L)30

Political and governance S

Macroeconomic M

Sector strategies and policies M

Technical design of project or program M

Institutional capacity for implementation and sustainability S

Fiduciary H

Environment and social H

Stakeholders L

Overall S

.

29 Resolution of the President of Uzbekistan no. PP-3857 dated July 16, 2018 30 The four available ratings are high (H), substantial (S), moderate (M) and low (L).


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VI. RESULTS FRAMEWORK AND MONITORING

Results Framework

COUNTRY: Uzbekistan Medium-Size Cities Integrated Urban Development Project

Project Development Objectives(s)

The Project Development Objectives are to support the Borrower to: (a) improve selected urban infrastructure, public spaces and assets, and access to services in Participating Cities; and (b) strengthen the institutional capacity of the Borrower’s relevant agencies to deliver and manage local infrastructure.

Project Development Objective Indicators

RESULT_FRAME_T BL_ PD O

Indicator Name DLI Baseline End Target

Improve selected urban infrastructure, public spaces and assets, and access to services

Number of people (cumulative), of which female (50% of total), provided with access to improved urban services (Number)

0.00 100,000.00

Square kilometers of new or rehabilitated urban public spaces, of which now accessible to persons with disabilities (percentage) (Square kilometer(km2))

0.00 12.00

Strengthen institutional capacity of relevant government agencies

Number of municipalities with asset management system in place and with trained municipal officials to use them (Number)

0.00 3.00

PDO Table SPACE


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Intermediate Results Indicators by Components

RESULT_FRAME_T BL_ IO

Indicator Name DLI Baseline End Target


Urban Roads rehabilitated (Kilometers) 0.00 10.00

Streets with improved street lighting in selected municipalities (Kilometers)

0.00 26.00

New or rehabilitated pedestrian walkways in selected municipalities (Kilometers)

0.00 10.00

Number of Public buildings rehabilitated and/or adaptively used (including Cultural Heritage buildings) (Number) 0.00 4.00

Length of water transmission and distribution pipes replaced (Kilometers) or laid (Kilometers) 0.00 140.00

Component 2. Institutional Strengthening and Capacity Building

Number of municipalities with trained staff to use asset management system (Number) 0.00 3.00

Number of people (cumulative), of which female (percentage), provided with trainings in selected municipalities (Number)

0.00 100.00

National program of medium-size cities designed (Yes/No) No Yes

Component 3: Implementation Support

Grievances registered related to delivery of project benefits that are actually addressed (Percentage)

0.00 100.00

Project website maintained with up-to-date information on project activities (Yes/No) No Yes

Beneficiary satisfaction survey carried out (Number) 0.00 3.00

IO Table SPACE

UL Table SPACE


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Monitoring & Evaluation Plan: PDO Indicators

Indicator Name Definition/Description Frequency Datasource Methodology for Data Collection

Responsibility for Data Collection

Number of people (cumulative), of which female (50% of total), provided with access to improved urban services

Number of people (cumulative), of which female (50% of total), provided with access to improved urban services in reference to baseline

Mid-term and closure

Beneficiary survey

Beneficiary survey

SIC through PIU

Square kilometers of new or rehabilitated urban public spaces, of which now accessible to persons with disabilities (percentage)

Cumulative number (in square kilometers) of new or rehabilitated urban public spaces (understood as public parks, green spaces, plazas, pedestrian walkways - including sidewalks and pedestrian roads) in selected municipalities, of which now accessible to persons with disabilities (percentage). Note: in line with the 2018 WB Disability Inclusion and Accountability Framework, improvement of physical accessibility would include facilitation of equal access to public spaces, buildings and facilities for people with limited mobility, including the disabled and the elderly.

Biannual

Construction supervision


SIC through PIU


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Number of municipalities with asset management system in place and with trained municipal officials to use them

Number of municipalities with asset management system and GIS in place with trained municipal officials to use them


Local government

Local government

SIC through PIU

ME PDO Table SPACE

Monitoring & Evaluation Plan: Intermediate Results Indicators

Indicator Name Definition/Description Frequency Datasource Methodology for Data Collection

Responsibility for Data Collection

Urban Roads rehabilitated Kilometers of urban roads rehabilitated in selected municipalities

Biannual

Construction Supervision


SIC through PIU

Streets with improved street lighting in selected municipalities

Kilometers of street lighting improved in selected municipalities

Biannual



SIC through PIU

New or rehabilitated pedestrian walkways in selected municipalities

Kilometers of new or rehabilitated pedestrian walkways (understood as sidewalks, promenades, pedestrian stairs and pedestrian roads) in selected municipalities

Biannual



SIC through PIU

Number of Public buildings rehabilitated and/or adaptively used (including Cultural Heritage buildings)

Number of public buildings rehabilitated and/or adaptively used (including Cultural Heritage buildings) in selected municipalities

Biannual



SIC through PIU

Length of water transmission and distribution pipes replaced (Kilometers) or laid

Kilometers of water transmission and distribution pipes replaced

Biannual



SIC through PIU


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or laid in selected municipalities

Number of municipalities with trained staff to use asset management system

Number of municipalities with trained staff to use asset management system

Biannual

Local government

Local government

SIC through PIU

Number of people (cumulative), of which female (percentage), provided with trainings in selected municipalities

Cumulative number of people, of which female (percentage), provided with trainings in selected municipalities

Biannual

Local government

Local government

SIC through PIU

National program of medium-size cities designed

National program of medium-size cities designed


Progress report

Progress report

SIC through PIU

Grievances registered related to delivery of project benefits that are actually addressed

Percentage of grievances registered that are actually addressed

Biannual

Progress report

Progress report

SIC through PIU

Project website maintained with up-to-date information on project activities

Project website maintained with up-to-date information on project activities

Biannual

Progress report

Progress report

SIC through PIU

Beneficiary satisfaction survey carried out Number of Beneficiary satisfaction surveys carried out

Start, Mid-term and Closure

Progress report

Progress report

SIC through PIU

ME IO Table SPACE


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ANNEX 1: DETAILED PROJECT DESCRIPTION

COUNTRY : Uzbekistan

Uzbekistan Medium-Size Cities Integrated Urban and Territorial Development Project

1. The Project Development Objectives are to support the Borrower to: (a) improve selected urban

infrastructure, public spaces and assets, and access to services in Participating Cities; and (b)

strengthen the institutional capacity of the Borrower’s relevant agencies to deliver and manage local

infrastructure.

2. .Component 1: Improvement of Urban Services and Enhancement of Public Urban Spaces ($83

million). This component will finance selected infrastructure investments in participating cities to address the

needs for targeted area-based urban development and complementary infrastructure, services and connectivity

for participating cities. Under this first project in the SoPs, three pilot cities have been identified as early starters

and for each of these cities a set of “fast-track” investments are undergoing advanced preparation for

implementation during the Year-1 of the project, while all other investments for Year 2-5 are being identified

and prepared in parallel. During the first year of implementation, as the estimated costs and needs are refined

through the various studies, additional cities might be added for financing under the project through the same

process used for the first pilot cities

3. Investments in participating municipalities would include, without being limited to: (i) enhancement

of public spaces31 and upgrading of street networks and associated infrastructure (urbanscaping); (ii)

construction works for the adaptive reuse of selected cultural heritage buildings (taking into consideration

energy efficiency standards), (iii) improvements in urban mobility32 and other urban infrastructure upgrading,

and (iv) improvements to selected basic infrastructure and services that are part of larger networks when

deemed necessary to address bottlenecks hindering urban functionality and/or complement the long-term

functionality and increase effectiveness of area-specific urban upgrading efforts33. For example: (a) upgrading

of vehicular, pedestrian and multi-modal accesses, including upgrading of bridges to reduce severance in all

cities; (b) enhancement of local power transformers; (c) rehabilitating and improvements/modernization of

trunk infrastructure, including water supply and sewage networks; (d) support to solid waste management

systems; (e) upgrading of storm water drainage systems; and (v) preparation of necessary feasibility studies,

detailed designs (including urban design studies), and construction supervision of above listed investments.

4. To the extent possible, the project will strive to make urban environments, infrastructure, and housing

inclusive and accessible to persons with disabilities in alignment with WB Disability Inclusion and

Accountability Framework34. The project will promote, and address issues related to physical accessibility,

which means support to universal design approach for the project financed infrastructure investments to

31 This will also include planting of trees in public spaces and streets as well as recreational areas, as part of the integrated urban

upgrading of the project municipalities. 32 Improvements in urban mobility will focus on making the project cities more pedestrian and cyclist friendly and on introducing

transit-oriented development approaches. 33 Underground infrastructure will be included as part of street network improvement when needed. 34 The World Bank Disability Inclusion and Accountability Framework (January 1, 2018) is aligned with the Convention on the

Rights of Persons with Disabilities (CRPD), in which accessibility is defined as enabling persons with disabilities to live

independently and participate fully in all aspects of life is a cross-cutting issue (Articles 3, 9, 19, 20, and 21). More details can be

found at http://documents.worldbank.org/curated/en/437451528442789278/Disability-inclusion-and-accountability-framework

http://documents.worldbank.org/curated/en/437451528442789278/Disability-inclusion-and-accountability-framework


Page 33 of 50

facilitate equal access to public spaces, buildings and facilities for people with limited mobility, including the

disabled and the elderly.

5. In the long term, these urban-enhancement investments will contribute to improve the livability of

participating cities, which in turn would be expected to foster local development and increase vibrancy and

attractiveness (including for private sector investments), as demonstrated by the emerging experience and

growing body of evidence from similar urban interventions around the world. Moreover, these activities will

help to improve climate resilience of infrastructure and urban spaces constructed or upgraded under the project,

particularly in terms of addressing increasing risks of extreme weather events and more frequent and intense

flooding in low-lying areas of river deltas and near cities (through upgrading of storm water drainage systems

and stabilization of embankments) and improve infrastructure resistance to extreme droughts. The project will

also contribute towards reducing CO2 emissions due to improved energy efficiency of municipal buildings and

streetlighting as well as planting of trees in urban squares and roads as well as recreational areas. Moreover,

the project activities will focus on the development of integrated, eco-friendly mobility concepts in the project

municipalities (which might include trails, bike paths, bike rentals, etc.)

6. Year 1 investments in each of the selected municipalities have already been identified35. and will be

validated based on the results of the ongoing the feasibility studies. The tailored bundle of priority investments

(Year 2-5) will be identified and prioritized on the basis of detailed urban design studies, taking into

consideration consultative processes with participating cites and key project partners, which will ensure that

investments are (i) fully aligned with the PDO; (ii) consistent with, prioritized and selected to support the

development vision of each participating city, and (iii) complementary, rather than fragmentated. The tailored

investments bundles for Years 2-5 proposed as a result of the detailed urban design studies will need to be

deemed satisfactory by the World Bank for project financing.

7. Component 2: Institutional Strengthening and Capacity Building ($14.5 million). This component

will support capacity building activities that would strengthen the role of the local, regional and central

governments and will also provide support to the design and roll-out of the NMSCP. The results of the ICD

(further details in Annex 4) as well as the TRACE studies significantly informed the design of Component 2.36

Component 2 is divided into two sub-components.

Subcomponent 2.A: Institutional strengthening and capacity building of participating cities will consist

of activities targeting project cities and local government agencies, tailored to their specific needs, aimed

at improving service delivery and enhancing the operation of assets rehabilitated under the project as well

as at reducing inefficiencies at the city level by coordination across sectors and agencies. Areas for support

under this subcomponent include, without being limited to:

(i) Asset management systems, including information and communications technology (ICT). Many

municipalities are lacking a systematic approach towards asset management and need the right software

equipment for asset management (e.g. GIS-based systems) and/or training of municipal officials in the

use of those systems. The project is aiming at strengthening sustainability regarding asset management

in the project municipalities and improving capacities of municipalities for using GIS systems, in

35 Year 1 investments have been identified in Chartak, Kagan and Yangiyul to be fully aligned with the PDO and with the integrated

urban upgrading approaches followed by the project. These include (a) rehabilitation of municipal and cultural heritage buildings in

Chartak and Kagan; (b) Greenway/“Eco-Trail” Loop in Chartak for pedestrians and cyclists35; (c) piloting of dedicated bus-lane

between Kagan and Bukhara; (d) rehabilitation of critical bridges in Chartak; and (e) enhancement and rehabilitation of targeted water

and sanitation infrastructure systems in all the three cities. Feasibility studies of these investments are currently ongoing. 36 The TRACE studies which were conducted as part of project preparation, helped to prioritize actions for energy efficiency measures

which are also fully embedded in the different capacity building activities under Component 2 of the project.


Page 34 of 50

coordination and cooperation with relevant central government agencies and other ongoing Bank and

IFIs’ supported initiatives.

(ii) Sustainable tourism development Currently cultural heritage is underutilized in Uzbekistan for

sustainable tourism. The project aims at improving institutional capacities towards leveraging

underutilized cultural heritages for adaptive re-use (taking into consideration disaster risk management

and energy efficiency standards) to enhance tourist attractions and at building capacities regarding

sustainable tourism development at the municipal level.

(iii) Cooperation with the private sector. Many municipalities in Uzbekistan are facing great pressure to

attract private investments. However, they are lacking a long-term vision for attracting private

investments, which often leads to piecemeal activities which interfere with the long-term development

perspectives of the city. Project municipalities need support in attracting investments and in

coordinating these investments in a sustainable way. The project will explore and support the piloting

of innovative initiatives for cooperation with the private sector in the project cities. The project also

aims at supporting project municipalities to make these private sector engagements more sustainable

in the long-run.

8. Subcomponent 2.A will not only focus on technical assistance, but also finance investments in goods,

such as equipment for improved municipal management (for example, asset management systems, GIS), and

potentially works (e.g. upgrading of maintenance equipment facilities).

Subcomponent 2.B: Support to the National Medium-Size Cities Program. This subcomponent will

finance necessary preliminary studies and technical assistance required to enable the prioritization and

preparation of integrated investment packages for the roll-out of the SoPs to the participating cities of

the NMSCP, which will include similar investments and activities to those of the participating cities of

the MSCIUDP37. This subcomponent will also finance institutional strengthening and capacity building

activities at the national level.

9. Areas for support under this subcomponent include, without being limited to:

(i) Design of the NMSCP. The first and most critical study to be launched under this subcomponent will

be a study of the system of Medium-Size Cities and related roadmap for urban and regional

development in Uzbekistan. This will be launched early in the project implementation.

(ii) Public financial management. Medium-size cities in Uzbekistan are experiencing a lack of self-

sufficiency regarding local budgets, with a high dependence on regional and national subsidies. The

government of Uzbekistan recently started a decentralization agenda regarding public financial

management. The project will provide support and expertise to the Ministry of Finance in framing and

operationalizing this agenda.

(iii) Sustainable tourism development. Currently cultural heritage and other relevant urban assets

(particularly if located in or around smaller cities) are underutilized in support of sustainable tourism

in the country. Strategic planning and management of the country’s numerous natural and heritage

tourism assets and a strong institutional framework are the most pressing requirements to be addressed

to support the long-term sustainability and resilience of the tourism sector in Uzbekistan, including a

sustainable tourism plan with resilient cultural heritage at its core focus. The project aims at supporting

37 Further information on the SoP approach can be found in Section B of the PAD.


Page 35 of 50

the government in developing a sustainable tourism development plan and applying international best

practices in the mobilization of its cultural heritage, natural and other assets located in and around

medium-size cities in support of this agenda.

(iv) Integrated spatial/territorial planning, including green growth approaches and consideration of civic

engagement and gender inclusion. Currently, the urban planning process in Uzbekistan is driven by

the central government with very limited involvement of the local governments. Most often, the

implementation of sectoral plans appears to be fragmented, with a disconnection between the city’s

master plans and sector plans developed in silos. Urban planning approaches used by the government

are often reactive and outdated. Urban sprawl is only one consequence of these approaches. The project

aims at supporting the GOU and the newly established Ministry of Construction in these efforts to

modernize urban planning practices and moving towards green growth approaches of urban planning

and transit-oriented development approaches. The project will mobilize international expertise to

provide guidance to the government.

10. Component 3: Implementation Support ($2.5 million). This component will support project implementation,

including (a) core project staff and consultants to assist the project implementing agency (SIC) and the PIU in the

implementation of project activities; (b) the maintenance of the project M&E system; (c) the project-related operating

costs of the SIC and PIU including in-country travel expenditures; (d) the project operating costs, including

contributions toward the cost of backstopping assistance and other eligible expenditures as agreed with the World

Bank; (e) strategic communication (including design and creation of websites and other content for public

communication and social media) and citizens’ engagement activities and (f) relevant training of staff and other

persons associated with project implementation, particularly in safeguards, procurement and contract management.


Page 36 of 50

ANNEX 2: IMPLEMENTATION ARRANGEMENTS


Uzbekistan Medium-Size Cities Integrated Urban and Territorial Development Project (i) Project Institutional and implementation arrangements

1. Primary responsibility for project implementation resides with the State Investment Committee

(SIC). A Project Implementing Unit (PIU) has been established under SIC to assist and facilitate the overall

project preparation and day-to-day implementation and oversight, including a coordination role across all

sectoral agencies at all government levels. SIC will rely on its representatives at regional levels to also play an

important role in coordination, monitoring and policy support role at the local level. The PIU is expected to

deploy its representatives to be based in the regions of the selected project cities, under the general oversight of

the regional representative of SIC. Likewise, it will also organize capacity building and trainings of all PIU staff

and relevant SIC staff, both in the central and regional locations.

2. The specific roles and responsibilities of the key parties will be described in detail in the Project

Operational Manual (POM) and are outlined below:

State Investment Committee (SIC)

3. SIC is the governmental agency responsible for making key decisions for the project including

providing policy, institutional, legal, financial and technical decisions in implementing the proposed activities

under the project. In addition, SIC will (without being limited to):

(1) when deemed necessary, bring all relevant issues to the attention of higher-level management that

need to be resolved at a high level in relation to the project implementation;

(2) ensure that all investments under the project are well coordinated with the Government programs

and projects.

(3) obtain the legal, institutional and financial backing and resources from line agencies and other

central and local government agencies including, if necessary, to effectively “ringfence” project

investments from potentially ad-hoc and unplanned interventions prompted by other national

programs in the absence of coordination with the project.

(4) mobilize the institutional and technical support from relevant sectoral agencies when necessary as

needed for the successful implementation of the project.

(5) report to all parties and the Bank on the progress of project components and utilization of project

funds, including monthly, quarterly, half-yearly, annual, mid-term, end of project, and other period

reports as may be necessary for effective project management.

Project Implementation Unit (PIU)

4. As the overall implementing agency established under SIC, the PIU will support SIC to facilitate

project implementation and to ensure that the project is delivered in accordance with its objectives and design,

with acceptable quality, on time and within budget. The PIU is also responsible for overseeing the work of the

other agencies involved in the project and for ensuring that Bank guidelines, including, inter alia, supporting

SIC in procurement, financial management, social and environmental safeguards, are met. In addition, the PIU

will assist SIC to:


Page 37 of 50

(1) coordinate and monitor compliance with the project implementation quality to achieve maximum

cost-effectiveness of the project, including liaising with other government agencies and leveraging

community and private sector support for Program objectives;

(2) manage all procurement under the project and potentially upcoming Program;

(3) develop, and maintain the project schedule;

(4) manage and account for all project funds; and

(5) identify, analyze and assess the risks of the project and develop and implement measures aimed at

reducing risk throughout the project lifecycle.

Representatives of the PIU in the project regions

5. The locally based regional staff of the PIU (RSPIU) will be responsible for facilitating the successful

implementation of the project components in their respective jurisdictions, ensuring local working-level

coordination and problem solving of all stakeholders involved., and quality and timeliness of deliverables,

eventually contributing to building long-term sustainability. The RSPIUs will be locally deployed also in view

of future regional overseeing of clusters of medium-size cities and/or villages under the NMSCP (for example,

Namangam RSPIUs will oversee the pilot city of Chartak and potential additional participating medium-size

cities in its territory at scale-up stage, like Chust and Uyci), promoting integrated urban development across the

city boundaries and looking at development at a regional level. Relevant city/district/region khokhimiyats will

be expected to facilitate interregional coordination and project activities implemented by the PIU and its RSPIU.

Local government will be also actively participating in designing and supporting the implementation of activities

under Component 1 and 2. of the project, in close consultation with the RSPIUs.

6. RSPIU will include at a minimum one Local Engineer/Coordinator and one Local Safeguards Officer

(for both social and environment safeguards) for each project region at the start of the project implementation,

expected to be mobilized within four months from effectiveness. Sector expertise might be also mobilized over

time both through consultancies and relevant agencies and/or organizations, as needed. TORs for core staff will

be included in the POM.

City/District-level Khokhimiyats as Main Beneficiaries

7. The Hokhim will actively participate in project implementation and facilitate coordination and the work

of the RSPIU. Inter alia, they will remove obstacles that face project implementation on the local level, monitor

all aspects of the project that involve public safety and public health, and facilitate civic engagement and

communication with the citizens and project affected people, and ensure both horizontal and vertical

coordination for cross-sector activities with the support of a regional inter-agency consultative Working Group.

Multi-stakeholders Coordination.

8. Given the cross-sector nature of the integrated project and the many stakeholders involved, the

following mechanisms will be put in place to ensure coordination and mitigate the risk of fragmentation of

investments:

- Higher-level coordination would be maintained through an inter-ministerial Steering Committee (SC)

comprising the Deputy Ministers of all relevant agencies and Hokhims of the selected pilot cities, would

meet as needed to provide guidance and solve high-level problems, and be chaired by the First Deputy

Chairman of SIC.

- At technical and implementation level, a formally appointed inter-ministerial Sectoral Research and

Technical Council (SRTC or OHTC in Russian38) will facilitate cross-sectoral activities of the PIU and

38 According to Presidential Decree, no PP-3857 dated July 16, 2018, on effectiveness of preparation and implementation of projects


Page 38 of 50

interagency technical coordination. The SRTC includes technical representation from all project key

partners including, among others, the Ministry of Construction, MHCS, MoC, SCTD, MoE, MoF. It

will also provide technical guidance and approve TORs and Report on behalf of the GoU, among other

technical functions. It will meet as necessary to resolve coordination issues and plan project activities

within the Government and the project to avoid duplication and ensure efficient delivery.

- Local level coordination would be assured through the support of an inter-agency consultative Working

Group comprising the respective mayors and provincial governors, senior representatives of relevant

agencies including SIC and representatives of local stakeholders. The consultative regional working

group would meet as necessary to review progress and solve problems and would be chaired by the

Regional Hokhim.

FLOWCHART OF IMPLEMENTING ARRANGEMENTS

with international financial institutions and foreign governmental financial organizations.

Regional Staff of PIU Regional Staff of PIU Regional Staff of PIU

Support by Project City/District Hokimiyat

Sectoral Research and Technical Council (SRTC)

Steering Committee State Investment Committee (SIC)

Implementation Agency

NATIONAL MEDIUM-SIZE CITIES PROGRAM



Consultative Regional Working Groups

Etc.

Project Implementation Unit (PIU)


Page 39 of 50

(ii) Financial Management

Risk Assessment and Mitigation

9. The Financial Management (FM) assessment of the SIC was carried out and concluded that the FM

arrangements were not acceptable at the time of the assessment but are expected to meet the minimum World

Bank requirements once the actions agreed below are duly addressed. The current fiduciary risk is assessed as

High given that the SIC has no experience with the World Bank and taking into account that the PIU capacity

is yet to be built. Once the actions are addressed, the project risk will be reviewed and may be downgraded to

Substantial. Agreed actions for capacity building of SIC and the PIU include:

• Develop and implement the Project Operations Manual, that would include FM chapter describing

project’s internal controls, budgeting, external auditing, financial reporting and accounting policies and

procedures and funds flows.

• Acquire and install a fully functional automated accounting information system (1C) for keeping project

records and generation of project financial statements.

10. Staffing: The PIU is currently staffed with the PIU Director and the Procurement Specialist. The SIC

will need to hire an adequately qualified FM Specialist at the earliest and, at a later stage, once the project

activities start full-fledged implementation, also an accountant to manage the FM arrangements requirements.

The FM staff will receive training on World Bank policies and procedures and have additional implementation

support training opportunities after project effectiveness.

11. Budgeting: The PIU will prepare an annual budget based on procurement plans, operating expense

estimates and will submit the budget to SIC and the Ministry of Finance for approval. The PIU’s Manager and

the FM specialist will be responsible for the project budget preparation and planning and execution procedures.

These will include monthly planning and preparation of annual budgets. The budget will form the basis for

allocating the funds as per project activities and project periods. Based on the agreed budget, the PIU will be

entitled to use funds from the PIU designated account.

12. Accounting: The PIU will be in charge of keeping accounting records for this project in the accounting

system which would be acquired and installed by project effectiveness. The project accounting records will be

maintained in accordance with the Cash Basis International Public Sector Accounting Standards. At the same

time, the PIU will apply accrual basis accounting to reporting with respect to state agencies. This system would

allow fully automated accounting and reporting, including automatic generation of Statements of Expenditure,

IFRs, and other reports required by national legislation. The system will have in-built controls to ensure data

security, integrity, and reliability.

13. The accounting records will be maintained in the currency of payment, as well as in the USD

equivalent, applying the actual exchange rate used at the currency conversion. The accounting records will need

to include the necessary detail, including all individual payments under each contract, balances and transactions

from the Designated/transit account, etc. IFRs will be prepared on a quarterly basis and will include information

on the sources and uses of funds, detailed use of fund by each activity, as well as movements and balances in

the Designated and Transit account.

14. Internal controls: The PIU will establish an internal control system capable of providing reliable and

adequate controls over financial management and disbursement processes and procedures. These include

controls for safeguarding of assets, segregation of duties, authorization of transactions, review and approval of

invoices, and contract management, among others. The internal control system, reporting and auditing

requirements will be stated in detail in the POM. The POM will be prepared by the PIU prior to project


Page 40 of 50

effectiveness. There is no internal audit function at either SIC or PIU. However, the PIU could be subject to the

inspections by the state authorities as required by laws and regulations.

15. Financial reporting: The PIU will prepare IFRs every calendar quarter, starting with the quarter in

which the first disbursements occur. The format of IFRs will be agreed and will include (a) Project Sources and

Uses of Funds, (b) Uses of Funds by Project Activities, (c) Project Balance Sheet, (d) Designated Account

Statement, and (e) a Statement of Expenditure Withdrawal Schedule. IFRs will be automatically generated by

the project accounting software. These financial reports will be submitted to the Bank within 45 days after the

end of each calendar quarter.

16. External audit: The PIU under the SIC will be responsible for arranging the annual audit of Project

Financial Statements. The Project Financial Statements audit will be conducted (a) by independent private

auditors acceptable to the Bank, on terms of reference acceptable to the Bank, and (b) according to the

International Standards on Auditing issued by the International Auditing and Assurance Standards Board of the

International Federation of Accountants. The project audit will include (a) audit of financial statements; and (b)

review of the internal controls of the PIU. No entity audit is required. Table 3 summarizes the audit requirements

for this project.

Table 3: Audit Requirements for this project

Audit Report Due date

Project Financial Statements

The Project Financial Statements include Project

Balance Sheet, Sources and Uses of Funds, Uses of

Funds by project activities, Statement of Expenditures

Withdrawal Schedule, Designated Account Statement,

Notes to the financial statements, and Reconciliation

Statement

Within 6 months of the end of each fiscal year

and also at the closing of the project

17. The audited project financial statements will be disclosed to the public in a manner acceptable to the

Bank. Following the Bank’s formal receipt of these statements from the Borrower, the Bank will make them

available to the public in accordance with the World Bank Policy on Access to Information. Audit of annual

Project Financial Statements will be financed from credit proceeds.

Disbursement

18. Flow of funds will follow the standard World Bank procedures, with Loan proceeds being disbursed

to a segregated Designated Account (DA) held by the implementing agency at a commercial bank acceptable to

the World Bank, for onwards transfers to the suppliers for eligible project expenditures. In addition, the

following disbursement methods would also be available under the project: direct payments, reimbursements,

and special commitments. Details on the ceiling of the DA as well as all other disbursement related requirements

will be provided in the Disbursement and Financial Information Letter (DFIL). Withdrawal applications for the

replenishment of the DA will be sent to the World Bank at least quarterly and the amounts spent from the DA

will be documented using the Statements of Expenditure (SOEs) in the format provided in the DFIL.


Page 41 of 50

Procurement Risk Management Plan

19. The PPSD addresses how procurement activities will support the development objectives of the project

and deliver the best Value for Money (VfM) under a risk-based approach. Based on the procurement risk analysis

conducted as part of the PPSD, the following risk management plan was also prepared to inform a procurement

approach that considers the ability of the borrower to manage such identified risks:

Identified risk Risk description Description of proposed mitigation

through procurement process

Risk

owner

Procurement

process stage

Technical

specifications

are inadequate

Limited expertise of the Borrower

to develop technical

specifications

Qualified consultants will be hired to

support the Borrower in preparation

of technical specifications

Conducting Market survey before

preparation Technical Specifications

Borrower Preparation

of

procurement

documents

Implementation

risks

Less qualification of new WB

Procurement Regulations as well

Less local supplier’s performance

during bid preparation,

submitting bank guarantees and

quality assurance process.

Providing intensive trainings,

seminars and pre-bidding

conferences on the Procurement

Process for the Staff of SIC, PIU

/RSPIU and bidders


of

procurement

documents

Contract

management

risks

At contract management stage

much more attention to timely

implementation of contract

duties, though suppliers provide

the Performance Security on

proper time and proper form.

Implement timely implementation

contract progress monitoring,

carefully check the duration of the

Performance Guarantee and

applicable form.

Borrower Contract

management

World Bank

Designated Account

(US$)

US$ Payments

Operating Account

UZS

UZS Payments


Page 42 of 50

Procurement

and

implementation

delays

There is a risk of procurement &

implementation delay which is

manageable through

implementing appropriate

mitigation measures

- Implement timely project progress

monitoring and evaluation tools

- Clear roles and responsibilities of

parties concerned and project

stakeholders


of

procurement

documents,

bid

evaluation

and contract

management

Disruption in

upstream supply

chain

Transportation of goods and

services from their source to final

destination has limited options

because Uzbekistan is a

landlocked country with limited

regional connectivity

Undertake market engagement with

potential bidders/suppliers to

understand how supply chain

operates in the market or in the

region.

Borrower Contract

management

Limited

management

capacity of the

project

Implementation

Agency/Unit

The level of qualification and

experience of the project

implementing team has a direct

effect on project success

- Composition of qualified project

implementation team

- Hiring project management

consultant (independent firm)

Borrower Project

implementati

on

Staff turnover High level of staff turnover

affects capacity of project

implementing team

Introducing financial and social

incentives to keep trained and

qualified staff throughout the project

period

Borrower Project

implementati

on

Evaluated

prices

of bids

exceeding

the estimate

There is a risk for bids to come in

at levels higher than the

feasibility estimates, partly due to

the inflation rate and devaluation

of local currency, which leads to

increase in cost of locally

manufactured materials.

Overall project budget shall have

4.3% contingency budget line, which

can be allocated in the case of

shortage of funds

Borrower Project

preparation

Cost over run Given the nature of the project

involving series of construction

contracts, which are rarely

completed on time, there is risk of

project extension with consequent

operational costs

Overall project budget shall have

4.3% contingency budget line, which

can be allocated in the case of

shortage of funds

Borrower Project

preparation


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ANNEX 3: IMPLEMENTATION SUPPORT PLAN


Medium-Size Cities Integrated Urban Development Project

Strategy and Approach for Implementation Support

1. The Implementation Support Plan describes how the World Bank will assist the client in achieving the

PDO of the project. In particular, the Implementation Support Plan places emphasis on accomplishing the

following objectives: (a) provide necessary technical advice to the client and bring international experiences and

good practices to ensure that the project meets the World Bank’s technical standards; (b) ensure that the

implementing agency’s measures meet the standards approved by the World Bank with regard to construction

supervision; (c) ensure that the required fiduciary, social, and environmental safeguards are put in place and

implemented according to the Loan Agreement and other project documents; and (d) ensure that the annual

training plans and programs exclusively benefit the main project beneficiaries, that is, the selected municipalities.

2. The project will be implemented over a period of six years commencing June 2019, the planned date of

effectiveness of the IBRD loan. The mid-term review will be conducted no later than June 2022.

Implementation Support Plan

3. Technical implementation support. During the implementation phase, the task team will continue to

engage experienced urban specialists, urban mobility experts, architects and engineers to ensure the technical

quality of outputs. Specifically, an urban specialist/architect, water supply and sanitation engineer and civil/energy

efficiency engineer will be engaged to review designs before tender. An international tourism specialist will also

provide close supervision to activities developed under Subcomponent 1A in relation to tourism development.

Recognizing that skills are currently limited within SIC and hokhimiats structures to deliver the integrated activities

required for successful urban upgrading, Component 1 will require extra supervision in addition to the expertise

hired to strengthen the municipal team. The task team has already leveraged GFDRR Urban Resilience funds to

support this subcomponent and to ensure the long term resilience and sustainability of investments, including

meaningful partnerships with the private sector. Technical implementation missions will be implemented three

times a year during the first 18 months of project implementation, followed by biannual supervision missions. The

project team will carry out site visits where works are ongoing or where service has recently commenced.

4. Procurement supervision and ex post review. Routine procurement reviews and supervision will be

provided by the procurement analyst based in the country office. In addition, two supervision missions are expected

to take place per year, during which ex post reviews will be conducted for the contracts that are not subject to World

Bank prior review on a sample basis (20 percent with regard to the number of contracts). One ex post review report

will be prepared per fiscal year, including findings of physical inspections for not less than 10 percent of the

contracts awarded during the review period.

5. FM implementation support. During project implementation, the project team will supervise the project’s

FM arrangements in the following ways: (a) review the project’s quarterly IFRs as well as the project’s annual

financial statements, the auditor’s management letters, and remedial actions recommended in the auditor’s

management letters and (b) during the World Bank team’s on-site missions, review the following key areas: project

accounting and internal control systems; budgeting and financial planning arrangements; disbursement

arrangements and financial flows, including counterpart funds, as applicable; and any incidences of corrupt


Page 44 of 50

practices involving project resources. As required, a World Bank-accredited FM specialist will participate in the

implementation support and supervision process.

6. Environmental and social safeguards implementation support. A World Bank environmental specialist

will review the implementation of the project’s ESMPs and provide guidance to the implementing agency’s

environmental specialist to ensure compliance with the World Bank’s environmental safety guidelines. Similarly,

a World Bank social specialist will review the implementation of the project’s RAPs (if any) and provide guidance

to the PIU to ensure compliance with the World Bank’s social safeguards guidelines.

7. Social mobilization. The social specialist will also review citizen engagement under the project, including

the commitment to gender representation, and provide support regarding the implementation of the grievance

mechanism in place. Assistance will also be provided toward adopting demand-side management to improve

commercial practices of utility operators.

Table 4: Implementation Support

Time Focus Skills Needed Resource Estimate Partner Role

First twelve

months • Designs developed for

participating

municipalities under

detailed urban design

studies.

• Procurement of fast-

track investments and

initiation of works

• Launching of

Subcomponent 2A and

2B activities

• Design of the National

Medium-size Cities

Program

Entire team with

particular focus on

urban and mobility

planning, and

tourism development

US$250,000

annually

Coordinate with key

project partners, and key

donors active in project

area (ADB, World Bank,

Islamic Development

Bank, etc.)

12–60 months • - Closely supervise

development of

construction works

and safeguards

compliance

• - Supervise activities

under Subcomponents

2A and 2B

Entire team with

particular focus on

urban and mobility

planning, site

management,

capacity building,

and citizen

engagement

US$200,000

annually

Coordinate with key

project partners, and key

donors active in project

area (ADB, World Bank,

Islamic Development

Bank, etc.)

Table 5: Skills Mix Required

Skills Needed Number of Staff Weeks Number of Trips Comments

Task team leaders 30 12 Non-field-based staff

Urban specialist (Architect/Urban

Planner) 20 10

Non-field-based staff

Urban Mobility expert 8 6 International expert

Water Supply and Sanitation engineer 20 10 Field-based staff

Energy Efficiency expert 10 10 Field-based staff

Institutional Expert/Urban Economist 20 10 Field-based staff

Spatial regional Planner 6 3 International expert


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Skills Needed Number of Staff Weeks Number of Trips Comments

Municipal Management experts 8 6 International expert

Private sector development specialist 6 3 International expert

Municipal engineer 6 6 Field-based staff

Environmental specialist 4 6 Field-based staff

Social specialist 8 8 Regionally-based staff

M&E specialist 2 2

At mid-term review and

project end

FM specialist 4 4 Field-based staff

Procurement specialist 8 8 Field-based staff


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ANNEX 4: Medium-size Cities in Uzbekistan and Integrated City Diagnostics

The World Bank received a request by the Government of Uzbekistan (GoU) to demonstrate innovative approaches

of integrated urban and territorial development in Uzbekistan, by focusing on three selected Medium-Size pilot

cities: Chartak, Kagan and Yangiyul. These cities have similar typologies as other MSCs globally.

Medium size cities (MSCs), as defined by GoU, are cities that have a population of approximately between 50,000

to 100,000. Globally, MSCs are key drivers of the increasing rapid urbanization trends that are taking place around

the world. It is estimated that about 75 percent of the world’s urban population already lives in second-tier cities

which function as boosters of regional and national economies. These cities serve as the economic and service

backbone to larger cities.

This is also the case in Uzbekistan where slightly more than 40 percent of the urban population lives in cities and

towns with less than 100,000 inhabitants, of which about 1.5 million people live in 21 medium-size cities that have

experienced the highest population growth rates in the last decades. In fact, population in these cities grew by an

extraordinary 54 percent from 1990 to 2017.39, reinforcing their potential role as important secondary economic

hubs in the Uzbek system of cities. The majority of these cities are strategically located along logistic corridors

and/or at the periphery of larger urban centers, creating a large number of entry-level service jobs for the

surrounding rural regions.

Figure 1: Meium-size Cities in Uzbekistan

Medium-size Cities under MSCIUDP and a need for unique opportunities and tailored solutions

39 State Committee of Statistics.


Page 47 of 50

The three pilot cities identified by the Government are Chartak, Kagan and Yangiyul. While the characteristics of

these cities represent most MSCs in Uzbekistan, the selection of these pilot cities represent different regions,

economic characteristics and functions. For instance, Chartak is one of the several MSCs in Fergana Valley –

however, this city borders Kyrgyz Republic and is a popular destination for sanatoriums and would need strategic

investments to attract domestic as well as regional tourists. In a similar way, Kagan has potential not to be so

dependent economically on tourists to Bukhara but leverage its own assets to generate more revenue. Yangiyul is

in Tashkent Region but lacks economic vibrancy with most residents commuting to Tashkent for their livelihood,

thereby necessitating a need for diversification of economy to generate more jobs and improve basic living

conditions.

While these cities face many common challenges, one of the main conclusions is that each city is endowed with

unique assets and opportunities that need to be leveraged. This will enable it to fully mobilize the local resources

and allow each city to unlock its economic potential. Therefore, the solutions would have to be tailored to the local

needs and context of individual cities, so that action and priority investments would focus on identifying and

removing bottlenecks to development, unlocking growth potential. For example, in the case of Kagan, while the

function of the city as a logistic center should be supported, the untapped potential of the tourism economy should

be given priority by mobilizing the existing cultural heritage assets. This will attract potential tourists, support

tourism-oriented industries (which are labor intensive) and benefit the local population.

Integrated City Diagnostic

For this diagnostic, the Integrated City Diagnostic tool was applied to better understand the three pilot cities. This

tool uses a bottom-up approach with the city governments and local stakeholders to help cities to identify challenges

and plan for future sustainable development. Based on the findings of the Integrated City Diagnostics, the project

concept and roadmap were designed.

Methodology of Integrated City Diagnostic

By adopting a cross-sectoral and multi-dimensional dialogue and collaboration amongst all stakeholders, the

Integrated City Diagnostics helps developing a common vision for a city to unlock the city challenges and harness

opportunities. This includes a holistic understanding of the current level of city development, validation of

challenges faced by all sectors and stakeholders and identification of priority actions and investments to increase

the livability of cities and help them to realize their goals.

However, the main caveat of this diagnostic was the limited data which was available for the assessment. The

quantitative and qualitative data collected was used to analyze the current situation and to identify key gaps.

Stages of the Integrated City Diagnostics

This tool has four main stages (as can be seen in Figure 2): Pre-diagnostic Data Collection, Consultations, Interviews

& Field Visits, Prioritization and Debriefing & Discussion. The process ends with a debriefing with the city

leadership and national government.


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Figure 2. Stages of the Integrated City Diagnostics

Findings of the Integrated City Diagnostic

Based on the findings from the Integrated City Diagnostics combined with the findings of the Tool for Rapid

Assessment of City Energy (TRACE)40, the project concept and components were designed jointly with all

stakeholders to achieve their vision for short and long-term city development. The study identified common

medium-size cities’ challenges clustered into the following topics: governance, economy and finance, spatial

integration, urban environment, inclusion and access dimensions. Figure 3 below gives a more detailed overview

of the findings.

40 Another diagnostic as part of the MSCIUDP project preparation was conducted with the use of the Tool for Rapid Assessment of City

Energy (TRACE), funded by the ESMAP grant, to help cities to identify under-performing sectors, evaluate improvement and cost-saving

potential, and prioritize sectors and actions for energy efficiency (EE) intervention. It covers six municipal sectors: passenger transport,

municipal buildings, water and wastewater, public lighting, solid waste, and power and heat.


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Figure 3. Common Challenges in Medium-size Cities in Uzbekistan

Given the unique opportunities and tailored solutions identified by the Integrated City Diagnostic, the project

framework of the MSCIUDP builds on three major components:

- Strategic/Catalytic investments that are crucial to city development based on city function;

- Supporting critical municipal infrastructure and services that includes providing public services to all

residents; and - Institutional Strengthening, including support to capacity building and providing technical assistance to

relevant agencies for implementation and operation of the project in the long run.


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