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