US$ 800 million ADB loan to improve Kazakhstan's roads and boost regional trade

By Richard High28 September 2010

Kazakhstan's roads are set to receive a US$ 800 million boost following the Asian Development Bank's decision to extend a loan facility designed to boost transit trade along a key Central Asia transport corridor.

The multi-tranche facility for the Central Asia Regional Economic Cooperation Corridor 2 Investment Program will finance reconstruction of about 790 km of roads in Mangystau Oblast (province), Kazakhstan's main oil- and mineral-producing region on the eastern shore of the Caspian Sea.

The total cost of the investment program is estimated at US$ 1.2 billion and the government will provide US$ 412 million equivalent as a counterpart contribution.

The eight countries and six multilateral institutions, including ADB, which make up the Central Asia Regional Economic Cooperation Program (CAREC), have an action plan to develop six corridors connecting the region to other parts of Asia and Europe. Kazakhstan, with its ideal strategic location and abundant resources, is an integral part of the strategy.

Trade between Asia and Europe reached US$ 700 billion in 2009 and is expected to grow to US$ 1 trillion by 2015, with around 20% passing through Kazakhstan, generating an estimated US$ 1.1 billion in revenues for the country.

Mangystau's capital, Aktau, is a hub for transporting oil and oil products to European and Asian countries, and the growing movement of goods through the port has seen a corresponding rise in road freight traffic.

However, the province's roads are in poor shape, with over half of them still gravel or earth surfaces, while most paved sections have deteriorated due to lack of maintenance. As a result, average driving speeds are low, costs are rising, and transit trade is running well below expectations.

The first project of the investment program will reconstruct about 200 km of the road linking Manasha to Beki, and improve bridges, culverts and other infrastructure. Subsequent projects will focus on rehabilitating other key roads along CAREC Corridor 2, which links Kazakhstan to Azerbaijan and Europe through the Caspian Sea in the west; to the Russian Federation in the north; and to Uzbekistan and Turkmenistan in the southeast and south.

Funds will also be used to strengthen the capacity of agencies involved in preparing, implementing and managing program activities.

The loan from ADB's ordinary capital resources is expected to be released in three tranches, pending government request, with the amount of US$ 283 million earmarked for the first tranche project. Annual interest rate charges will be based on ADB's LIBOR-based lending facility.

The government will provide counterpart funds of US$ 50 million equivalent.

The Ministry of Transport and Communications is the executing agency for the program, which is expected to be completed by June 2017.

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