KAZAKHSTAN: WORLD BANK ENVIRONMENTAL PROJECTS

Environmental Technologies: Water Resources Equipment/Services

by Olga Fedotova

04/09/2002

INTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE, 2002. ALL RIGHTS RESERVED OUTSIDE OF THE UNITED STATES.

Summary: The World Bank held its Fifth Country Portfolio Performance Review for
Kazakhstan in Astana on July 25, 2001. A detailed review of each of the problem
projects in the portfolio was carried out at the meeting. The following is a summary of those projects which may offer opportunities for interested U.S. suppliers.

1. Atyrau Pilot Water Supply Project

The Republic of Kazakhstan received a loan worth $16.5 million from the World
Bank toward the cost of Atyrau Pilot Water supply Project in June 1999. The
objective of the project is to strengthen the capacity of Vodocanal (the water
and wastewater enterprise) in the City of Atyrau to provide reliable and safe
drinking water and dispose of sewage in an environmentally responsible, and
financially, operationally, and institutionally efficient and sustainable
manner. This project is a pilot program, to be used as the basis for a larger,
full-scale project including: a) training in management and implementation of
internationally financed projects; b) establishment of a sound financial base
for Vodocanal; c) formulation of a rationalized investment program; and d)
strengthening the operational and management capacity of Vodocanal. The
project involves purchase of consulting services.

Current status of project implementation:

Over $5.5 million, or 34.1%, of the loan amount has been disbursed. The main
civil works contract has already progressed to 60% completion of the works,
three months ahead of the schedule. A study tour to Poland and Germany was
very successful, and the Atyrau authority is now ready to move forward to
private participation in the water and sewerage services.

Next steps and recommendations:

A financial improvement plan for Vodocanal, based on the outcome of a tariff
study, will be developed in the framework of the project. The institutional
strengthening program for Vodokanal and the city will be worked out.

2. Pilot Water Supply Project

The World Bank earmarked a loan worth $7 million in December 1996 to implement
a Pilot Water Supply Project. The implementation agency is the Water Resources
Committee of Ministry of Natural Resources and Environmental Protection. The
project aims at gaining experience in developing operational methodologies and
capabilities in all aspects of project processing, cost recovery, international
procurement and contracting, and at speeding up implementation of the
full-scale project through early completion of detailed engineering design and
preparation of bidding documents.

Current status of the project implementation:

Complete. Disbursements make up over $6.5 million, or 92.5%, of the loan
amount. After significant delays, the main civil works contract is about to be
awarded. The institution-building process has been successful in having
central and regional government officials gain experience in developing
operational methodologies and capabilities in all aspects of project
processing, international procurement and contracting, and in project
implementation.

As for the full-scale project, the Kuwait Fund has offered $30 million
financing for the civil works portion project. The World Bank encouraged the
Government of Kazakhstan to accept Kuwait Fund financing, given that the
interest charges on their loans were significantly lower than those offered by
the Bank. The Kuwait fund Project is underway.

3. Irrigation and Drainage Improvement Project

In June 1996, the Republic of Kazakhstan received an $80 million loan to
implement an irrigation and drainage improvement project. The Implementation
Agency is the Ministry of Agriculture.

The project goals are the following:

- to promote sustainable agricultural production on about 25 irrigated
sub-projects in ten oblasts (mostly on recently privatized state farms) through
irrigation and drainage rehabilitation, improved water management, and better
operation and maintenance;

- to introduce improved agricultural practices both on sub-project farms, as
well as other privatized farms through farmers' training, demonstration plots,
and farmers' information services;

- to strengthen irrigation and environmental agencies.

Current status of the project implementation:

Over $36.5 (45.9%) of the loan amount has been disbursed.

The project sponsors rehabilitation of sixteen irrigation and drainage
sub-projects, of which two have been completed. Work on eight is well
underway, contracts for two have been awarded, and bids for two have been
invited. Preparation, design and bidding for the remaining sup-project should
be completed soon enough to ensure completion of all of them by the end of
2002. So far, progress in sub-project preparation, design, contract awards,
management and implementation are proceeding as scheduled.

The agricultural component is being revitalized, including three
sub-components, participatory training, on-farm demonstrations, and farmer
information services. Farm crop demonstrations have been carried out
successfully in ten sub-projects.

For increased production in agricultural the shortage of farm machinery remains
a serious issue, especially for small private farmers, as their borrowing
capacity is very low. Efforts are underway to work out a system that these
small farmers would be able to receive credit through the Agricultural
Post-privatization Assistance Project.

In addition, counterpart funding for the project remains problematic despite
the fact that governmental revenues are increasing.

Next steps and recommendations:

- The Ministry of Agriculture and the Bank are to resolve the issue regarding
provision of farm machinery to small farmers by developing a system in the
framework of the existing Agricultural Post-privatization Assistance Project to
enable poor farmers to receive credit for purchase of needed agricultural
machinery.

- The Government of Kazakhstan is to provide adequate counterpart funds for
completion of the project.

4. The Syr Darya River Control Project

A $64.5 million loan to the Republic of Kazakhstan dated June 2001 to carry out
the project of the Syr Darya River Control Project. The main goals of the
project are:

- to secure the existence of the Northern Aral Sea (NAS) and improving
ecological /environmental conditions in the delta and around the NAS leading to
improved human and animal health and conservation of biodiversity;

- to increase and sustain agriculture (including livestock) and fish
production in the Syr Darya basin in Kazakhstan. The Implementation Agency is
the Ministry of Natural Resources and Environmental Protection.

Current status of the project implementation:

Disbursements have not yet been made. Efforts are underway to meet conditions
to expedite project start-up.

Next steps and recommendations:

- Project Management Unit to complete pre-qualification of two major civil
works contracts for construction of Northern Aral Sea and Aklak dikes and
construction of Aitek complex. The Aitek complex is the system of hydraulic
constructions (dikes, dams and etc.) to regulate water supply from the Syr
Darya River.

- Complete feasibility study and design for rehabilitation of Chardara Dam,
including appointment of independent panel of experts.

- Recruit consultants for construction, design & supervision, monitoring &
evaluation, and implementation of the environmental management plan.

Commercial Service Almaty will continue to monitor the status of Word
Bank-funded projects to identify export opportunities for U.S. environmental
companies.

Contact information

U.S. Embassy Commercial Service
531 Seyfullin Street, 3rd floor
Almaty 480091, Kazakhstan
Tel: 7 (3272) 58-79-20, 58-79-18
Fax: 7 (3272) 58-79-22
E-mail: almaty.office.box@mail.doc.gov
Olga.Fedotova@mail.doc.gov
Web site: www.csalmaty.kz
www.ecolinks.org
Contact: Mr. James Fluker, Senior Commercial Officer
Ms. Olga Fedotova, EcoLinks Technical Representative

This report is provided courtesy of the Business Information Service for the Newly Independent States (BISNIS)