UZBEKISTAN: ASIAN DEVELOPMENT BANK'S STOCK RISES WITH

C O N F I D E N T I A L SECTION 01 OF 02 TASHKENT 000705 SIPDIS AMEMBASSY HELSINKI PASS TO AMCONSUL ST PETERSBURG AMEMBASSY MOSCOW PASS TO AMCONSUL VLADIVOSTOK AMEMBASSY MOSCOW PASS TO AMCONSUL YEKATERINBURG AMEMBASSY BELGRADE PASS TO AMEMBASSY PODGORICA AMEMBASSY ATHENS PASS TO AMCONSUL THESSALONIKI E.O. 12958: DECL: 2019/05/11 TAGS: PGOV ECON UZ SUBJECT: UZBEKISTAN: ASIAN DEVELOPMENT BANK'S STOCK RISES WITH POSITIVE ASSESSMENT AND LOAN INCREASE CLASSIFIED BY: Timothy P. Buckley, Second Secretary, Department of State, Political and Economic Section; REASON: 1.4(B),(D) ¶1. (C) Summary: On May 3 Deputy Director of the Asian Development Bank (ADB) Tashkent office, Kiyoshy Tamaguchi, told poloff that ADB recently completed a favorable assessment of Uzbekistan for its 2009-2010 cycle, which cleared the way for a substantial increase in loans from USD 170 million to USD 300 million. Projects will focus on water issues and electricity provision. Poloff also spoke with a railroad engineer who is working on a project financed by the Japan International Cooperation Agency (JICA),and he reported major planned upgrades on the Karshi - Termez lines that will improve Uzbek rail efficiency over a 10-year timeframe. End summary. The Way to Make Friends with Uzbekistan -------------- -------------- ¶2. (C) Poloff spoke with Tamaguchi on May 3, who described ADB's recent assessment of Uzbekistan, which included the macroeconomic picture, credit performance, forecasts, and other variables. The document was positive, although Tamaguchi conceded that it "was perhaps too lenient and favorable" but, on the whole, also "reasonable." When asked about repayment abilities, Tamaguchi noted that this is a strong suit for the host country and that "Uzbekistan is never in default." He noted that Uzbek authorities were very pleased by the positive assessment for the 2009-2010 period, and it clears the way for a substantial increase in ADB loans to Uzbekistan from USD 170 million to approximately USD 300 million. Tamaguchi said Uzbek officials are citing the ADB assessment to other international entities and urging them to follow suit, which apparently has irked the World Bank, which had not assessed Uzbekistan in as favorable a light. ¶3. (C) According to Tamaguchi, the bulk of the loans will be used for water-related projects and electrical transmission infrastructure, the latter of which will boost Uzbekistan's capacity to supply energy to Afghanistan. He was pleased that Uzbekistan is starting to leverage its strategic central location in the region to build infrastructure linkages that could benefit itself and neighbors alike. "Could you imagine countries in other parts of the world not taking advantage of their locations for so long," he asked rhetorically. Rail Infrastructure Improvement -------------- ¶4. (C) A Japanese national doing railroad consulting work for Uzbekistan Railways as part of a JICA-sponsored project attended the same May 3 event, and the engineer told poloff that major improvements are planned on the line between Karshi and Termez. He referenced already completed project work by ADB, which upgraded tracks to Karshi, and added that existing track leading north to Russia is also in decent shape. Thus, with further improvements to Termez, he noted that this corridor would eventually be able to efficiently handle a much greater amount of rail traffic. He said signal and survey work is underway now, and that consulting teams are exploring electrification of the right-of-way as a means of adding faster, cleaner trains on this corridor. The engineer is splitting time between offices in Tashkent and on-site in Karshi, and he expects the project will be put out to bid in the near future. Comment: TASHKENT 00000705 002 OF 002 -------------- ¶5. (C) Uzbekistan's interest in rail and electricity infrastructure projects is a welcome indication that the government is starting to buy into the concept of a north-south axis, which would support our broader strategic interests in the region and eventually enhance economic integration with South Asia. Uzbekistan is very suspicious of Russia - which was especially evident in President Karimov's critical remarks about "third parties" at the recent Central Asian water summit -- and this is a good time to promote links in alternative directions, including with Afghanistan. NORLAND