ADB COUNTRY DIRECTOR ON FUTURE PROJECTS

C O N F I D E N T I A L SECTION 01 OF 02 TASHKENT 000828 SIPDIS SIPDIS DEPT FOR SCA/CEN; MANILA FOR AMBASSADOR SPELTZ E.O. 12958: DECL: 04/24/2016 TAGS: AF ECON EFIN PGOV PREL UZ EINV SUBJECT: ADB COUNTRY DIRECTOR ON FUTURE PROJECTS Classified By: CLASSIFIED BY AMB. JON R. PURNELL FOR REASONS 1.4 (B, D) . ¶1. (C) Summary: The Asian Development Bank (ADB)released its strategy for Uzbekistan that cites difficulties with the GOU as a reason for the failure of certain projects. ADB will focus its program funds on technical assistance and education. ADB Country Director told DCM that ADB will become the largest donor in Uzbekistan as a result of the World Bank's decision to limit its activity in Uzbekistan. Systemic conflicts between the GOU and ADB/World Bank on procurement regulations have complicated cooperation. Uzbekistan has shown interest in developing transportation infrastructure in northern Afghanistan, but has failed to submit contract bids. End summary. ¶2. (C) ADB recently released its Uzbekistan country strategy for 2006-2010. The strategy is based primarily on the Country Assistance Program Evaluation (CAPE) report concluded in December 2005. In its evaluation, the ADB found that programs in primary education and agriculture were the most successful, while vocational and credit line projects were the least. ¶3. (C) In January, ADB held a meeting to discuss the CAPE with local embassies and development NGOs. The overall conclusion expressed at the meeting was that the GOU exerts a large amount of influence over a project's level of success. Not surprisingly, the ADB presenters reported that the GOU selects programs for overwhelmingly political reasons. Personalities are also key. For example, the Minister of Transportation disliked a particular railway project and thus sabotaged it by consistently delaying decisions. Representatives of ADB stated that while a regional focus is important, the GOU is less likely to sanction trans-border projects. ADB cited the failure of a trans-border energy project due to poor Uzbek-Tajik relations. ADB representatives argued development organizations should work through their regional offices to coordinate trans-border projects, making such processes less transparent to the GOU by giving the appearance of a regional focus. ¶4. (C) In speaking with the DCM on April 10, ADB's Country Director, Sean O'Sullivan, echoed much of what was said in January. He added that the ADB has a good relationship with the GOU and that it should become even better with the recent World Bank decision to stop all new lending. The ADB will thus become the largest multinational donor in town. He said that ADB's work with the GOU is simplified by the fact that ADB has a strictly economic mandate, not a particularly political one such as that of the EBRD. ADB plans to invest 300 million USD over the next three years: 100 million USD in loans and 200 million USD in technical assistance. ¶5. (C) The DCM asked O'Sullivan if ADB has had problems with employees' accreditation or automobiles. O'Sullivan replied negatively. He mentioned, though, that a GOU employee responsible for procurements under an ADB project had recently been jailed. O'Sullivan explained that the World Bank and ADB have certain prescribed regulations to assure transparency and guard against corruption in procurement activities. Sometimes their procurement regulations appear to come into conflict with GOU rules in the same sphere. This GOU employee apparently got caught in between trying to follow ADB procurement rules, which it seems his bosses felt contradicted GOU rules. O'Sullivan said this is a systemic issue that he and the World Bank Country Director have been trying, at the policy-level, to work on with several GOU ministries. With the World Bank's recent decision to limit its activities to technical assistance, there will be only ADB's projects and procurement requests in the pipeline. O'Sullivan believes it may become even more difficult to persuade the GOU to modify its rules in accordance with the ADB's and World Bank's procurement rules, with only him as the advocate. ¶6. (C) Asked about ADB efforts to encourage Uzbek-Afghan economic and development initiatives, the ADB Country Director told DCM about efforts to implement and facilitate Uzbek assistance and investment in developing infrastructure, particularly the road system of northern Afghanistan. He explained that ADB has the lead in constructing/rehabilitating the Mazar-i-Sharif to Sheberghan to Herat links of the ring road. O'Sullivan himself had traveled to northern Afghanistan to learn about the project to assist him in enlisting Uzbek support. The Uzbekistan road authority had been interested and active in assisting TASHKENT 00000828 002 OF 002 early feasibility studies for parts of this road, including bridges. However, in the end it could not get its act together to submit a competitive bid. The project was bid out to others. O'Sullivan made a point of noting that he had bowed out of further involvement in the project for conflict of interest reasons, when it looked like the GOU road authority might bid. DCM noted that from time to time we hear second-hand of Uzbek interest in assisting feasibility studies for extending the rail network in Afghanistan from the 12 km railhead at Haireton, which links up with Termez in Uzbekistan across the "Friendship Bridge." O'Sullivan said he knew nothing about GOU interest or activity in this area. ¶7. (C) Comment: The recent WB decision to stop new lending to Uzbekistan will in effect make the ADB the only game in town. The ADB already enjoyed a good relationship with the government, mainly due to the Bank's willingness to focus on GOU priorities while avoiding political discussions. This relationship will likely improve. PURNELL