Report and Recommendation of the President · 2020-01-08 · Report and Recommendation of the President to the Board of Directors Project Number: 52256-001 October 2019 Proposed Results-Based

Report and Recommendation of the President to the Board of Directors

Project Number: 52256-001 October 2019

Proposed Results-Based Loan, Grant, and Technical Assistance Grant Kyrgyz Republic: Naryn Rural Water Supply and Sanitation Development Program Distribution of this document is restricted until it has been approved by the Board of Directors. Following such approval, ADB will disclose the document to the public in accordance with ADB’s Access to Information Policy.

CURRENCY EQUIVALENTS

(as of 20 September 2019)

Currency unit – som (Som) Som1.00 = $0.014019

$1.00 = Som71.33

ABBREVIATIONS ADB – Asian Development Bank ARIS – Agentstvo Razvitya i Investirovanya Soobshestv (Community

Development and Investment Agency) BFM – beneficiary feedback mechanism CBISSP – Community-Based Infrastructure Services Sector Project CDWUU – community drinking water users’ union DDWSSD – Department of Drinking Water Supply and Sewerage

Development DLI – disbursement-linked indicator IVA – independent verification agent M&E – monitoring and evaluation MOF – Ministry of Finance O&M – operation and maintenance PAP – program action plan RBL – results-based lending SDWSSSS – Strategy for Development of Water Supply and Sewerage

Systems in Settlements SEFF – small expenditure financing facility TA – technical assistance UNICEF – United Nations Children’s Fund WSS – water supply and sanitation WSU – water supplies and utilities services entity

NOTE

In this report, “$” refers to United States dollars.

Vice-President Shixin Chen, Operations 1 Director General Werner E. Liepach, Central and West Asia Department (CWRD) Director Yong Ye, Urban Development and Water Division CWRD Team leader Jude Kohlhase, Senior Urban Development Specialist, CWRD Team members Ainagul Amanova, Senior Project Officer, Kyrgyz Resident Mission,

CWRD Ana Paula Araujo, Environment Specialist, CWRD Minhong Fan, Procurement Specialist, Procurement, Portfolio and

Financial Management Department Xijie Lu, Young Professional, CWRD Leah Luna, Senior Operations Assistant, CWRD Cholpon Mambetova, Integrity Specialist, Office of Anticorruption and

Integrity Maritess Marcelino, Project Officer, CWRD Christina Pak, Principal Counsel, Office of the General Counsel Diep Pham, Senior Financial Management Specialist, CWRD

Sona Poghosyan, Social Development Specialist (Safeguards), CWRD Nathan Rive, Climate Change Specialist, CWRD Mary Alice Rosero, Social Development Specialist (Gender and

Development), CWRD Laxmi Sharma, Urban Development Specialist, CWRD Lu Shen, Unit Head, Portfolio Management, CWRD

Peer reviewer Alexandra Conroy, Urban Development Specialist, Pacific Department In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

Page RESULTS BASED PROGRAM AT A GLANCE

MAP

I. THE PROPOSAL 1

II. THE PROGRAM 1

A. Strategic Context 1

B. Program Rationale 2

C. Program Scope 5

D. Program Results 6

E. Expenditure Framework and Financing Plan 8

F. Capacity Development and Program Action Plan 9

G. Technical Assistance 9

H. Implementation Arrangements 9

III. SUMMARY OF ASSESSMENTS 10

A. Program Technical Assessments 10

B. Program Systems Assessments 11

C. Integrated Risk Assessment and Mitigating Measures 12

IV. ASSURANCES 13

V. RECOMMENDATION 13

APPENDIXES

1. Design and Monitoring Framework 14

2. List of Linked Documents 17

3. Disbursement-Linked Indicators, Verification Protocols, and Disbursement Schedule 18

Project Classification Information Status: Complete

RESULTS BASED PROGRAM AT A GLANCE

Source: Asian Development BankThis document must only be generated in eOps. 15102019154234387900 Generated Date: 05-Nov-2019 15:29:56 PM

1. Basic Data Project Number: 52256-001Project Name Naryn Rural Water Supply and Sanitation

Development ProgramDepartment/Division CWRD/CWUW

Country Kyrgyz Republic Executing Agency Department of Drinking Water Supply and Sewerage Development under the State Agency for Water Resources under the Government of the Kyrgyz Republic

Borrower Kyrgyz Republic

Country Economic Indicators

https://www.adb.org/Documents/LinkedDocs/?id=52256-001-CEI

Portfolio at a Glance https://www.adb.org/Documents/LinkedDocs/?id=52256-001-PortAtaGlance

2. Sector Subsector(s) ADB Financing ($ million)Agriculture, natural resources and rural development

Rural sanitation 4.28

Rural water supply services 23.12

Total 27.40

3. Operational Priorities Climate Change InformationAddressing remaining poverty and reducing inequalities

Accelerating progress in gender equality

Tackling climate change, building climate and disaster resilience, and enhancing environmental sustainabilityPromoting rural development and food security

Strengthening governance and institutional capacity

Climate Change impact on the Project

Medium

ADB Financing

Adaptation ($ million) 1.23

Sustainable Development Goals Gender Equity and MainstreamingSDG 1.4SDG 5.5SDG 6.1, 6.2SDG 10.1SDG 12.2SDG 13.a

Effective gender mainstreaming (EGM)

Poverty TargetingGeographic Targeting

4. Risk Categorization: Complex.

5. Safeguard Categorization Environment: B Involuntary Resettlement: B Indigenous Peoples: C.

6. Financing

Modality and Sources Amount ($ million)

ADB 27.40 Sovereign Results Based Lending: Asian Development Fund 13.70 Sovereign Results Based Lending (Concessional Loan): Ordinary capital resources

13.70

Cofinancing 0.00 None 0.00

Counterpart 5.50 Government 5.50

Total 32.90Note: An attached technical assistance will be financed on a grant basis by the Technical Assistance Special Fund (TASF-6) in the amount of

$225,000.

Currency of ADB Financing: US Dollar



https://www.adb.org/Documents/LinkedDocs/?id=52256-001-PortAtaGlance

https://www.adb.org/Documents/LinkedDocs/?id=52256-001-PortAtaGlance

Toktogul Reservoir

Andizhan Reservoir Lake Chatyr-Kul

Lake Song-Kul

Lake Issyk-Kul

Sary-Tash

Irkeshtam

Gulcha

Kok-Yangak

Kok-Art

Kara-Suu

Kochkor-Ata

Tash-Komur

Ivanovka

Jyrgalang

Engilchek

Bedel

SulyuktaFrunze

Chauvay

Karamyk

Kara-Kul

Arslanbob

Kara-Jygach

Daroot-Korgon

Naiman

Aravan

Kazarman

Uzgen

Kara-Kulja

Bazar-Korgon

Terek-Say

Kerben

Kanysh-Kiya

Shamaldy-Say

Toktogul

Maimak

Bakay-Ata

Pokrovka

Kara-Balta

Kayindy

Shopokov

Belovodskoe

Kant KeminTokmok

Balykchy

Cholpon-Ata

Tyup

Barskoon

IsfanaHaidarkan

Kyzyl-Kiya

Suusamyr

Torugart

Kara-Keche

Ak-Kiya

At-Bashy

Baetov

Kochkor

Chaek ISSYK-KUL

TALAS

CHUI

JALAL-ABAD

OSH

BATKEN

NARYN

Osh

Jalal-Abad

Talas Karakol

Batken

BISHKEK

Naryn

National Capital

Provincial Capital

City/Town/Settlement

Main Road

Other Road

River

District Boundary

Provincial Boundary

International Boundary

Boundaries are not necessarily authoritative.

NARYN RURAL WATER SUPPLY

AND SANITATION DEVELOPMENT PROGRAM

KYRGYZ REPUBLIC

Kilometers

N

77 'Eo

77 'Eo

72 'Eo

72 'Eo

'No

'No

2 'No

2 'No

19

199

4B

19

KG

Z A

BV

This map was produced by the cartography unit of the Asian Development Bank. The boundaries, colors, denominations, and any other information shown on this map do not imply, on the part of the Asian Development Bank, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries, colors, denominations, or information.

I. THE PROPOSAL 1. I submit for your approval the following report and recommendation on a proposed results-based loan and a proposed results-based grant, both to the Kyrgyz Republic for the Naryn Rural Water Supply and Sanitation Development Program. The report also describes proposed technical assistance (TA) for Supporting the Naryn Rural Water Supply and Sanitation Development Program, and if the Board approves the proposed loan and grant, I, acting under the authority delegated to me by the Board, approve the TA. 2. The proposed Asian Development Bank (ADB) assistance will contribute to a portion of the national Strategy for Development of Water Supply and Sewerage Systems in Settlements (SDWSSSS) program, 2016–2026 to achieve inclusive and reliable access to safe water supply and sanitation (WSS) services. 1 ADB financing will target infrastructure expansion in rural communities of Naryn province, while building capacities of WSS service operators and institutions across the country to enhance service delivery and performance of the subsector.

II. THE PROGRAM A. Strategic Context 3. The Kyrgyz Republic is one of the poorest countries in Central and West Asia and its estimated gross domestic product per capita is $1,280.2 An estimated 22.4% of the country’s 6.2 million people live below the national poverty line.3 The concentration of poverty in the country is higher in rural areas and greatest in mountainous areas, where more than half of the population is poor. The Kyrgyz Republic is also highly vulnerable to climate change impacts, including frequent drought and early snowfall, increasing the risk of water scarcity, frequent landslides, and floods, particularly for poor populations. 4. Access to safe drinking WSS in rural areas remains a significant challenge. Poor water quality and sanitation costs the country over $100 million annually, including productivity losses.4

Most of the rural WSS infrastructure was built in 1960s and has exceeded its design life, with little maintenance resulting in low-quality services. In 2014, only one-quarter of rural households had piped household connections,5 and about 73% of rural households had intermittent water supply. There are 200 water supply intakes without sanitary protection setback zones and they lack treatment facilities, exposing people to preventable diseases. Rural sanitation coverage is only 10% and characterized primarily by unimproved sanitation facilities. The key issues confronting rural WSS in the Kyrgyz Republic are (i) insufficient resources because of inadequate tariffs, (ii) weak capacity of WSS service operators, and (iii) limited operation and maintenance (O&M) and capital investment.

1 Government of the Kyrgyz Republic. 2016. Strategy for Development of Water Supply and Sewerage Systems in

Settlements of the Kyrgyz Republic until 2026. Bishkek. 2 International Monetary Fund. 2019. World Economic Outlook Database. Washington, DC (accessed 23 September

2019). 3 Government of the Kyrgyz Republic, National Statistical Committee of the Kyrgyz Republic. Living Standard

(accessed 30 August 2019). 4 World Bank. 2016. Sustainable Rural Water Supply and Sanitation Development Project. Washington, DC; and World

Bank. 2017. Sustainable Rural Water Supply and Sanitation Development Project – Additional Financing. Washington, DC.

5 United Nations Children’s Fund (UNICEF). 2015. Kyrgyzstan Multiple Indicator Cluster Survey 2014. Final Report. Revised 2016. Bishkek.

http://www.stat.kg/en/statistics/uroven-zhizni-naseleniya/

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5. The government’s water supply and sanitation program. In March 2016, the government approved its national SDWSSSS program, covering all seven provinces in the Kyrgyz Republic. The goal of the national program is to increase water supply coverage from 40% to 90% and sanitation coverage from 10% to 70% by 2026. The nationwide program is also anchored in the National Development Strategy of the Kyrgyz Republic for 2018–2040 which prioritizes access to clean drinking water and sanitary facilities.6 The national SDWSSSS program provides a clear framework to guide sector development by outlining key areas and activities in developing urban and rural water supply and sewerage systems. It also contains measures to conduct analysis and monitoring. The resolution includes an implementation plan for ongoing and planned projects totaling $420 million with financing sourced from the state budget (6.4%) and primarily from external sources (93.6%). The national program expenditure framework consists of an annual budget of $63 million during 2018–2020, which comprises development partner funding (90%) through loans and grants. Government counterpart funding is 10% ($6 million per year). 6. Strong commitment to delivering results in the rural water supply and sanitation subsector. The government has demonstrated a high level of commitment from 2016 and has been proactive in attracting development partners, who have committed $393 million to support the national SDWSSSS program during 2016–2026. The national program is benefiting from assistance from bilateral partners, the European Bank for Reconstruction and Development, the European Union, the Islamic Development Bank, and the World Bank. In November 2018, ADB approved the Issyk-Kul Wastewater Management Project to upgrade and expand the existing wastewater systems in Balykchy and Karakol cities. 7. Improvements in institutional arrangements in the subsector. The Department of Drinking Water Supply and Sewerage Development (DDWSSD) under the State Agency for Water Resources, established in 2012, is in charge of the WSS policy, sector reforms, and execution of the SDWSSSS. The DDWSSD has been actively seeking improvements to institutional arrangements and has demonstrated a willingness for change in the subsector. The Community Development and Investment Agency (ARIS), a government agency was established in 2003, with a mandate to support local governments to deliver new and rehabilitated assets; 7 implementation of investment plans; and provision of technical, administrative, and financial assistance. Local governments are the asset owners and community drinking water users’ unions (CDWUUs) are the service providers. However, only one-quarter of the 633 CDWUUs are operational, while the rest are unable to continue operations because of the lack of revenue and technical specialists. The government is moving toward a professionally oriented model, and formalizing these as water supplies and utilities services entities (WSUs) in accordance with the Law of Local Self-Government (2018). This new model will support WSUs to improve sustainability and have access to public funding (e.g., transfers). B. Program Rationale 8. The SDWSSSS aims to improve access to safe rural WSS and is aligned with Sustainable Development Goals 1, 5, 6, 10, 12, and 13. The results-based lending (RBL) program is embedded in the SDWSSSS program and will enhance development effectiveness. The government requested support from multiple development partners to implement the SDWSSSS

6 Government of the Kyrgyz Republic. 2018. National Development Strategy of the Kyrgyz Republic for 2018–2040.

Bishkek. 7 ARIS was established in October 2003 and is governed by a statutory supervisory board composed of seven national

government representatives, seven local government representatives, and seven nongovernment organization representatives. Currently, ARIS employs 311 staff.

3

program and allocated each of the seven provinces to different development partners to expedite efficiency and enhance coordination. The government requested ADB’s assistance in Naryn. 9. Naryn is a mountainous province and one of the poorest in the Kyrgyz Republic, with a poverty rate of 29% in 2017. Naryn’s resident population was estimated at 287,000 in 2018 across Naryn township and 165 villages (footnote 3). In 2009, the urban population share was 15.3%.8 The ADB-supported Bishkek–Torugart road traverses through Naryn and connects Bishkek to the People’s Republic of China (PRC), providing regional connectivity with Central Asian neighbors and opportunities for rural development.9 Most villages in Naryn have unprotected water sources. Incidences of waterborne diseases are high in Naryn. The program will cover 64,000 people in Naryn and will support the design, construction, and rehabilitation of WSS facilities; and institutional capacity to provide sustainable and safe WSS services across 31 program villages. In addition, the program will ensure that detailed designs are completed for 12 program villages and ready them for implementation when additional financing becomes available. 10. Alignment with ADB strategic priorities. The program is aligned with ADB’s Strategy 2030, supporting four of the seven operational priorities: (i) addressing remaining poverty and reducing inequalities, (ii) promoting rural development and food security, (iii) strengthening governance and institutional capacity, and (iv) building climate and disaster resilience.10 The program is included in ADB’s country operations business plan for the Kyrgyz Republic, 2019–2021 and is aligned with ADB’s country partnership strategy for the Kyrgyz Republic, 2018–2022, which calls for equality between regions, and improved WSS services.11 The program is also aligned with ADB’s Water Policy and Water Operational Plan.12 11. Lessons learned. ADB’s assistance from 2000 to 2013 included two subsector projects totaling $66 million.13 In 2000, ADB approved the Community-Based Infrastructure Services Sector Project (CBISSP), which suffered from major cost overruns and poor execution of works. To rectify deficiencies, in 2009 ADB approved supplementary financing. However, only about 10% of planned subprojects were completed and, because of procurement irregularities and noncompliance with ADB procedures, the project was canceled in 2013.14 From 2013 to 2018,

8 Government of the Kyrgyz Republic, National Statistical Committee of the Kyrgyz Republic. Population and Housing

Census of the Kyrgyz Republic of 2009. Bishkek. 9 ADB. 2016. Report and Recommendation of the President to the Board of Directors: Proposed Loan and Grant to the

Kyrgyz Republic for the Central Asia Regional Economic Cooperation Corridors 1 and 3 Connector Road Project. Manila.

10 ADB. 2018. Strategy 2030: Achieving a Prosperous, Inclusive, Resilient, and Sustainable Asia and the Pacific. Manila.

11 ADB. 2018. Country Operations Business Plan: Kyrgyz Republic, 2019–2021. Manila; and ADB. 2018. Country Partnership Strategy: Kyrgyz Republic, 2018–2022—Supporting Sustainable Growth, Inclusion, and Regional Cooperation. Manila.

12 ADB. 2001. Water Policy. Manila; and ADB. 2011. Water Operational Plan, 2011–2020. Manila. 13 ADB. 2000. Report and Recommendation of the President to the Board of Directors: Proposed Loan and Technical

Assistance Grant to the Kyrgyz Republic for the Community-Based Infrastructure Services Sector Project. Manila; ADB. 2010. Completion Report: Community-Based Infrastructure Services Sector Project. Manila; ADB. 2008. Report and Recommendation of the President to the Board of Directors: Proposed Supplementary Asian Development Fund Grant to the Kyrgyz Republic for the Community-Based Infrastructure Services Sector Project (Supplementary). Manila; and ADB. 2018. Report and Recommendation of the President to the Board of Directors: Proposed Loan and Grant to the Kyrgyz Republic for the Issyk-Kul Wastewater Management Project. Manila.

14 ADB. 2014. Completion Report: Community-Based Infrastructure Services Sector Project (Supplementary). Manila; Independent Evaluation Department. 2014. Validation Report: Community-Based Infrastructure Services Sector Project (Supplementary). Manila: ADB; and ADB (Office of Anticorruption and Integrity). 2012. Project Procurement-Related Review Report Grant 0122-KGZ (SF): Community-Based Infrastructure Services Sector Project (Supplementary). Manila.

4

ADB provided capacity development TA to the DDWSSD for developing the SDWSSSS, reviewing technical standards, benchmarking, and improving the institutional framework.15 12. The main lessons learned from ADB’s overall involvement during 2000–2013 are as follows: (i) frequent turnover of responsible authorities reflects a lack of government ownership and commitment to deliver results, (ii) past institutional frameworks should be examined closely to evaluate effectiveness and identify weaknesses, (iii) due diligence should be conducted on government entities, and (iv) adequate ADB resources should be made available to bolster implementation. The RBL program incorporates these lessons as follows:

(i) Strong government ownership. The government has demonstrated ownership of the subsector through the establishment of the national program and commitment to deliver results. Several development partners have active operations supporting the national program, which are progressing well. Through the World Bank’s intervention, the government has included results-based financing for the sanitation component and introduced verification protocols. The RBL is established within the broader national program and will support the SDWSSSS program until it ends in 2026.

(ii) Strengthened institutional arrangements. The executing agency for the CBISSP was originally the Department of Rural Water Supply under the Ministry of Agriculture, Water Resources, and Processing Industry. Subsequently, the executing agency arrangements changed four times during the implementation period. These changes stifled project performance and led to poor development effectiveness. Similarly, the implementing agency originally was a joint-project management unit within the National Agency for Local Self-Governance that later proved to be ineffective. Overall, the subsector lacked an effective and stable governance framework and did not have a central agency for policy leadership. ADB’s TA supported the government in establishing strong and competent sector institutions. The RBL program’s executing agency will be the DDWSSD, and the program implementing agency will be ARIS. The DDWSSD and ARIS have been key stakeholders in the rural WSS subsector; ARIS has clear accountability for delivering the externally financed projects. The DDWSSD was not part of CBISSP, whereas ARIS’s involvement was through 2011–2012. The noncompliance situation emerged before the transition to ARIS, and ARIS was not able to rectify related issues, including quality technical supervision of works that had been implemented, within the short 10-month period during which it was the executing agency. Currently, ARIS is responsible for the implementation of 10 externally financed projects including those funded by the World Bank. Essential resources have been provided to strengthen the capacity of ARIS. The program design has benefitted from development coordination through the Development Partners Coordination Council, and directly with development agencies. The RBL program uses harmonized results framework with the World Bank to encourage complementary activities to improve sector governance and accountability. The program design allows for scaling up, if and when additional financing or cofinancing becomes available. In particular, the Aga Khan Foundation has expressed interest in supporting the RBL program.

(iii) Completed due diligence during program processing. The DDWSSD has been the lead policy and planning institution for the subsector since 2016, and is responsible for the implementation of the Drinking Water Law (1999). The DDWSSD has dedicated staff and provides program governance and coordination

15 ADB. 2013. Technical Assistance to the Kyrgyz Republic for Water Supply and Sanitation Strategy. Manila.

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among the stakeholders. The absence of a strong central agency was one of the main reasons for the slow pace of governance, institution, policy, and regulatory reforms. ADB assessments have concluded that the DDWSSD and ARIS have developed the essential capacity in project management, safeguards, procurement, and financial management that can be used to support the program. Progress reviews will provide indication of the potential (i) to scale up implementation efforts across other villages in Naryn and (ii) to broaden the application of program systems, such as the program procurement manual and the monitoring and evaluation (M&E) framework, to other provinces.

(iv) Strengthened capacity and program systems. The RBL program will be complemented by an attached TA and a small expenditure financing facility (SEFF) activity to support institutional strengthening of the program systems and key institutions.16 The additional resources will support the recruitment of a credible independent verification agent (IVA) and provide program start-up and implementation services to mitigate the program’s operating environment risks, promote delivery of critical results through the effective use of disbursement-linked indicators (DLIs), enhance the sustainability of RBL program benefits, and assess opportunities for scaling up the program.

13. Results-based lending modality. The RBL instrument responds to the government’s request to shift the focus from investment transactions toward the RBL modality to incentivize the achievement of results, support financing a slice of its SDWSSSS expenditure program, and further strengthen the institutional capacity of the DDWSSD and ARIS to promote sustainability of the program. ARIS has experience with the implementation of results-based financing mechanisms, specifically in the rural sanitation subsector (footnote 4). Due diligence assessments provide reasonable assurance that the government’s program systems can deliver verifiable results. Institutional strengthening actions proposed in procurement, M&E, and fiduciary practices will mitigate related risks and support program implementation efficiency. The RBL is effective in managing large number of small procurement packages. It also provides a good platform for capacity development and technical and policy discussions, particularly in areas to (i) achieve program results and DLI targets, (ii) enhance program systems on the basis of the outcome of technical, fiduciary, and program safeguard-system assessments, (iii) strengthen accountability of basic service provision to rural residents, and (iv) leverage cofinancing. The government confirmed its strong commitment to this instrument. 14. ADB value addition. ADB value addition includes (i) the introduction of a results-based approach for investment planning and strengthening of institutions; (ii) a focus on building the capacity and management practices of asset owners and WSUs; (iii) actions to strengthen the program M&E (para. 31), procurement, and financial management systems; and (iv) the incorporation of climate change risk management into subsector operations. C. Program Scope 15. The government and ADB have agreed on an RBL program size of $32.9 million, of which the proposed ADB financing is $27.4 million (Table 1).

16 ADB. 2019. Report and Recommendation of the President to the Board of Directors: Proposed Small Expenditure

Financing Facility to the Kyrgyz Republic for the Multisector Activities Support Facility. Manila.

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Table 1: Program Scope Item Broader Government Program Results-Based Lending Programa Outcome Health and quality of life improved by

achieving 90% coverage for water supply services and 70% coverage for sanitation systems

Inclusive and reliable access to safe water supply and improved sanitationb for rural communities in Naryn province

Key outputs (i) Water supply and sewerage systems constructed and upgraded;

(ii) policy and regulatory frameworks strengthened; and

(iii) accountability and sustainability strengthened, with social protection for vulnerable groups.

(i) Water and sanitation infrastructure expanded and sanitation solutions piloted, and

(ii) institutional capacities strengthened for enhanced sustainability in the rural water supply and sanitation subsector.

Activity types (i) Infrastructure investments, rehabilitation, construction;

(ii) sector coordination at the national and local government levels;

(iii) vocational and technical training; and

(iv) policy and regulatory reforms.

(i) Potable water supply infrastructure and distribution networks,

(ii) improved gender-sensitive water and sanitation facilities in health and education facilities,

(iii) piloting of non-networked household sanitation solutions,

(iv) institutional strengthening in procurement and financial management, and

(v) support to water supplies and utilities services entities.

Program expenditure

$420.6 million (estimate) $32.9 million

Main financiers and the respective financing amounts

Government: $27.3 million ADB: $56.7 million World Bank: $60 million EBRD, EU, EIB, SECO: $252.2 million Islamic Development Bank: $20.0 million UN: $4.3 million

Government: $5.5 million ADB: $27.4 million, comprising:

(i) $13.7 million concessional OCR loan, and (ii) $13.7 million ADF grant

Geographic coverage

Nationwide (urban and rural) across seven provinces: Batken, Chui, Issyk-Kul, Jalalabad, Naryn, Talas

Naryn province (rural)

Implementation period

2016–2026c January 2020–December 2026

ADB = Asian Development Bank, ADF = Asian Development Fund, EBRD = European Bank for Reconstruction and Development, EIB = European Investment Bank, EU = European Union, OCR = ordinary capital resources, SECO = State Secretariat for Economic Affairs of the Government of Switzerland, UN = United Nations. a The results-based lending program is supporting the Strategy for Development of Water Supply and Sewerage

Systems in Settlements, 2016–2026 (footnote c). b An improved sanitation facility at the household level is designed to hygienically separate excreta from human

contact. Improved sanitation facilities treat and dispose of excreta either on-site or transported and then treated off-site at facilities designed for faecal sludge.

c Government of the Kyrgyz Republic. 2016. Strategy for Development of Water Supply and Sewerage Systems in Settlements of the Kyrgyz Republic until 2026. Bishkek.

Sources: ADB; and Department of Drinking Water Supply and Sewerage Development estimates.

D. Program Results 16. Impacts and outcome. The RBL program’s impacts will be (i) health and quality of life of residents improved and (ii) adverse environmental impacts reduced by 2026 (footnote 1). The outcome will be inclusive and reliable access to safe WSS for rural communities in Naryn improved.17

17 The design and monitoring framework is in Appendix 1.

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17. Two outputs will contribute to the outcome: (i) Output 1: Water supply and sanitation infrastructure expanded and

sanitation solutions piloted. The program will include the following infrastructure components: (a) safe water sources, water storage, and treatment and disinfection systems; (b) distribution networks for the target population of 64,000; (c) gender-sensitive safe water and sanitation facilities in selected kindergartens, schools, and health facilities; and (d) piloting of non-networked household sanitation solutions.

(ii) Output 2: Institutional capacities strengthened for enhanced sustainability in the rural water supply services and sanitation subsector. Output 2 focuses on institutional measures to strengthen WSS systems and improve service delivery. It will (a) establish and strengthen WSUs and secure at least 20% female participation across all WSUs by 2025, and 40% female participation in WSU-related trainings and public consultations; (b) deliver financial management training to further enhance internal control processes and procedures for ARIS and WSUs; (c) adopt and apply a procurement manual and a multiyear procurement action plan; and (d) develop and implement an M&E framework to improve knowledge of asset inventory and data management.

18. Disbursement-linked and other result indicators. The program will track progress using eight DLIs (Table 2) and two indicators not linked to disbursement.18 DLI 1 measures the population using water supply that meets national quality standards. DLI 2 monitors access to gender-sensitive safe water and sanitation facilities in selected schools, kindergartens, and health facilities. The program will track progress against output 1 using the completion of detailed design (DLI 3) and water supply infrastructure from source, storage, and disinfection to piped networks (DLI 4); and the piloting of household sanitation (DLI 5). Under output 2, DLI 6 includes the development of a procurement manual, which is instrumental for institutional strengthening and improving procurement practices; DLI 7 will track improved financial management capacity; and DLI 8 will track the establishment and performance of WSUs. The two indicators that are not linked to disbursement address climate change risk assessments and a grievance redress mechanism, which is referred to in the Kyrgyz Republic as a beneficiary feedback mechanism (BFM).

Table 2: Disbursement-Linked Indicators

Indicator

Disbursement Allocated ($ million)

Share of Total ADB

Financing (%)

Outcome

1. By 2026, at least 64,000 people in the villages of Naryn use potable water 8.22 30.0 2. By 2026, at least an additional 13 village schools and/or kindergartens and 8 health

facilities served by improved gender-sensitive water and sanitation facilities 2.74 10.0

Outputs

3. By 2025, detailed design of infrastructure completed for 43 villages 0.55 2.0

4. By 2024, infrastructure components for water supply and distribution networks completed for at least 64,000 people

9.04 33.0

5. By 2023, non-networked household sanitation solutions piloted in at least 2 villages with minimum combined total of 660 households

1.37 5.0

6. From 2020, procurement manual developed and implemented for the RBL program 1.37 5.0

7. By 2026, 100% of internal audit staff and finance staff of ARIS trained and certified in internal audit and financial management by a nationally recognized institute

1.37 5.0

18 Program Results Assessment; and Program Results Framework (accessible from the list of linked documents in

Appendix 2).

8

Indicator

Disbursement Allocated ($ million)

Share of Total ADB

Financing (%) 8. By 2026, WSUs fully operational and financially sustainable, with at least 20%

female participation in WSUs, and 40% female participation in WSU-related trainings and public consultations

2.74 10.0

Total 27.40 100.0

ADB = Asian Development Bank, ARIS = Agentstvo Razvitya i Investirovanya Soobshestv (Community Development and Investment Agency), RBL = results-based lending, WSU = water supplies and utilities services entity. Sources: ADB; ARIS; Department of Drinking Water Supply and Sewerage Development; and Ministry of Finance.

19. Verification and disbursement. Table 2 shows the allocation of ADB disbursements among DLIs (Appendix 3, Table A3.3). An IVA, engaged through a separate SEFF grant, will conduct the verification of DLIs and ADB will verify prior result achievement of DLI 6. E. Expenditure Framework and Financing Plan 20. Program expenditures. The RBL program expenditures are estimated to be $32.9 million from 2020 to 2026 (Table 3).

Table 3: Summary of Program Expenditure Framework, 2020–2026 (in 2019 prices)

Item Amount ($ million)

Share of Total (%)

1. Constructiona 26.39 80.2

2. Equipment and goods 0.46 1.4

3. Consulting services 1.53 4.7

4. Program management and institutional strengthening 1.69 5.1

5. Contingencies 2.09 6.4

6. Interest during construction 0.73 2.2

Total 32.90 100.0

Note: Numbers may not sum precisely because of rounding. a Includes $0.5 million for operation and maintenance in water supplies and utilities services entities during

implementation.

Sources: Asian Development Bank estimates; and Community Development and Investment Agency estimates.

21. Program financing. The government has requested (i) a concessional loan of $13.7 million from ADB’s ordinary capital resources, and (ii) a grant not exceeding $13.7 million from ADB’s Special Funds resources (Asian Development Fund) to help finance the program. The loan will have a 32-year term, including a grace period of 8 years; an interest rate of 1.0% per year during the grace period and 1.5% per year thereafter; and such other terms and conditions set forth in the draft loan agreement. The government will provide counterpart financing of $5.5 million, including taxes and duties. Climate change adaptation is estimated to cost $1.23 million, of which ADB will finance 100%.19 22. The financing plan is summarized in Table 4.

Table 4: Program Financing Plan Source Amount ($ million) Share of Total (%)

Government of the Kyrgyz Republic 5.5 16.6

Asian Development Bank

Ordinary capital resources (concessional loan) 13.7 41.7

19 Climate Change Risk Assessment (accessible from the list of linked documents in Appendix 2).

9

Source Amount ($ million) Share of Total (%)

ADF Special Funds resources (grant) 13.7 41.7

Total 32.9 100.0

ADF = Asian Development Fund. Source: Asian Development Bank estimates. 23. Disbursement arrangements. The Ministry of Finance (MOF) will submit to ADB withdrawal applications, and report DLI achievements according to the verification protocol. ADB disbursement will be made following verification of DLI achievements. Before submission of the first withdrawal application, the MOF will submit to ADB the evidence of the authority of the person(s) who are authorized to sign the withdrawal applications, together with the authenticated signatures of each authorized person. From program effectiveness, the government will require $6.8 million (25%) of the total ADB financing amount to support program budgeting, procurement, and contract management. In this regard, advance financing will provide the liquidity needed to expedite the program’s financing needs for investment activities through the initial 3 years.20 Financing of prior results achieved not more than 12 months before loan and grant signing will be allowed to support start-up actions. The endorsement of the procurement manual is identified for financing for prior result and $820,000 is allocated for achieving this milestone. The concessional ordinary capital resources loan and Asian Development Fund grant proceeds will be disbursed to an account set up in a commercial bank by the MOF, from which ARIS will draw funds for the RBL program. Funding for disbursement related to each DLI will be equally contributed by the loan and grant. F. Capacity Development and Program Action Plan 24. Program and system assessments identified capacity gaps. Paras. 27–37 report highlights from the assessments.21 The program action plan (PAP) includes actions to be undertaken during program implementation in the areas of results, M&E, fiduciary, procurement, corruption, safeguards, and gender.22 G. Technical Assistance 25. The attached TA is estimated to cost $225,000, which will be financed on grant basis by ADB’s Technical Assistance Special Fund (TASF 6). The TA will be implemented from November 2019 to December 2021.23 The attached TA will fund consultants to (i) assist with M&E of DLIs, and PAP actions; and (ii) provide technical and procurement support. The government will support the TA in the form of counterpart staff and other in-kind contributions. The program will also be supported by a SEFF activity estimated to cost $2,500,000, which will be financed separately on a grant basis. The SEFF will fund the IVA, and consultants to support capacity development. H. Implementation Arrangements 26. The RBL program will be implemented from January 2020 to December 2026. The DDWSSD will be the executing agency and will be responsible for the overall monitoring of the

20 ADB. 2013. Piloting Results-Based Lending for Programs. Manila. The amount of advance financing was calculated

based on the projected financing investment needs, the expected timing of DLI verification over successive years, and the disbursement amounts during the RBL program period to improve cash flow.

21 ADB. 2018. Technical Assistance to the Kyrgyz Republic for Preparing the Naryn Rural Water Supply and Sanitation Development Program. Manila.

22 Program Action Plan (accessible from the list of linked documents in Appendix 2). 23 Attached Technical Assistance Report (accessible from the list of linked documents in Appendix 2).

10

program results. ARIS will be the implementing agency to coordinate program implementation and address emerging issues. A program coordination committee, composed of representatives from the DDWSSD, ARIS, the MOF, the Ministry of Economy, the Ministry of Health, the State Agency for Local Self-Governance, and the Naryn plenipotentiary governor, will coordinate the implementation of DLIs and the PAP, endorse the procurement manual, and address operational issues. The program completion date is on 31 December 2027.

III. SUMMARY OF ASSESSMENTS A. Program Technical Assessments 27. Program design. The program design is sound and the DLIs are critical indicators for achieving overall program results. The program design considers local conditions (such as weather), the need for gender-specific school and health facilities, community-based sanitation solutions, and the need to have efficient and accountable rural WSS services. The program is designed to improve WSS reliability and sustainability. The program design places emphasis on ensuring access to all, which is in line with the SDWSSSS, and is consistent with one of the national development strategy objectives. International expertise will be engaged to support ARIS’s design review, construction supervision, and contract management. A technical auditor will conduct regular audits to ensure that the as-built systems comply with specifications and that high-quality standards are maintained. Training will be provided to WSU staff to further enable sustainable service delivery, with a particular focus on building capacity to identify critical water quality risks. 28. The program will contribute to poverty reduction by improving health outcomes and reducing the time spent on water collection. It will directly benefit about 36,500 poor beneficiaries by providing better access to WSS services. It will especially alleviate women’s poverty by reducing the time spent collecting and storing water, and making it safe for household consumption. Based on analyses of similar rural water schemes, the benefits are (i) reduced incidence of water-related diseases and (ii) decreased time spent collecting water and treating it in-house.24 29. The WSS service operators currently charge low tariffs that do not cover O&M costs. Poverty surveys indicate that households are willing to pay much higher tariffs for clean water, which would be sufficient to cover O&M costs but not full replacement costs.25 The national program underscores the government’s policy objective to create economically sustainable and affordable WSS services by establishing a market format with a reliable subsidy system for vulnerable groups. As the RBL program rehabilitates and commissions new schemes, local governments will establish WSUs to provide services and ensure proper O&M. The attached TA and SEFF activity will promote sustainable approaches and accountable arrangements and, through a public awareness campaign, service levels will encourage higher collection efficiency rates by the WSUs. Institutions and systems will be further strengthened, especially at the local level, to provide sufficient budget allocation for routine O&M, if needed. The attached TA and SEFF will be provided to implement efficient operations, including developing appropriate strategies for billing and collection of tariffs.

24 Program Soundness Assessment; and Program Monitoring and Evaluation System Assessment (accessible from

the list of linked documents in Appendix 2). 25 ADB. 2019. Poverty, Social, and Gender Assessment. Consultant’s report. Manila (TA 9633-KGZ).

11

30. The program is categorized effective gender mainstreaming. Given existing gender inequalities and women’s role in water collection, housework, and childcare, the program will alleviate women’s workload, free up time for productive activities and leisure, and meet water and hygiene needs for businesses headed by women. Gender is mainstreamed through DLI 2 and DLI 8 to promote (i) gender-sensitive infrastructure design (Appendix 3, Table A3.1), (ii) women’s representation in management structures, and (iii) women’s participation in service-related consultations. The PAP requires BFM and WSU trainings to promote gender awareness and action. B. Program Systems Assessments 31. Monitoring and evaluation system. ARIS has a comprehensive M&E system for externally funded projects, including baseline surveys and infrastructure monitoring. ARIS has nine M&E specialists and a network of BFM specialists to report progress. ARIS has proven monitoring capacity for reporting on project and program indicators.26 ARIS is also developing a rural WSS information system to support its M&E system. 32. Fiduciary systems. The financial management assessment of ARIS concluded that the overall pre-mitigation financial management risk is substantial, based on specific financial management weaknesses identified in planning and budgeting, staffing, accounting and internal control, and external audit. The implementation of a proposed financial management action plan will reduce such risk. 33. The overall program procurement risk is assessed moderate. The Public Procurement Law (2015) was found to be generally comprehensive and included open competitive bidding. The program will rely on the RBL program procurement system. 27 ARIS will develop a procurement manual to ensure that procurement procedures and processes under the program mitigate procurement risks and meet ADB principles.28 34. The Guidelines to Prevent or Mitigate Fraud, Corruption, and Other Prohibited Activities in Results-Based Lending for Programs were explained to and discussed with the government, the DDWSSD and ARIS. The government’s anticorruption laws are comprehensive, and the institutional framework is assessed adequate. 35. The sustainability of the program is linked to the adequate operations of newly built systems, particularly the maintenance of equipment and disinfection systems, which will be installed at all production sites. Village governments will set up WSUs, which will be responsible for (i) water production and distribution, (ii) application of effective mechanisms for O&M of WSS infrastructure, (iii) billing and collection against the provision of services, and (iv) adherence to the highest standards of accountability through comprehensive and timely financial reporting and auditing. There is substantial risk to sustainable operations during the operational phase. To address this risk, an indicative tariff increase from Som77 per household per month in 2018 to Som237 per household per month in 2022, when the new WSS facilities are completed and put to use, will ensure that WSUs are able to recover operating costs. The indicative incremental tariff increase is about 208%. To ensure an adequate tariff level to cover O&M, operational and financial performance measures are included in the DLI 8 verification protocol for new WSUs to

26 Program Monitoring and Evaluation System Assessment (accessible from the list of linked documents in Appendix

2). 27 Program Procurement System Assessment (accessible from the list of supplementary documents in Appendix 2). 28 Given that lower-value procurement packages are expected to be procured, the high-value procurement thresholds

are proposed to be lowered.

12

achieve. The RBL program will help sustain progress in financial management, accountability, and procurement to monitor financial sustainability of WSUs in the program areas. 36. Safeguard systems. The RBL program is classified category B for environment. ARIS will screen all program activities. Construction works will be small, and the impacts on the environment will be site-specific. ADB conducted program safeguards system assessment and prepared environmental assessment review framework, and land acquisition and resettlement framework to guide the safeguards process for each of the program activities.29 The program is classified category B for involuntary resettlement and category C for indigenous peoples. ARIS has a mechanism for environmental and social safeguards monitoring, which will be strengthened to comply with ADB’s Safeguard Policy Statement (2009) principles. C. Integrated Risk Assessment and Mitigating Measures 37. Major risks and mitigating measures are summarized in Table 5. The overall benefits and impacts are expected to outweigh the risks and costs.

Table 5: Summary of Integrated Risk Assessment and Mitigating Measures Risks Ratings Key Mitigating Measures

Results

Unfamiliarity with RBL and/or political pressure to expand interventions could jeopardize DLI achievement.

Substantial Strengthen monitoring and evaluation systems and capacities to enable frequent DLI monitoring by key decision makers.

Ineffective management of water and sanitation facilities with low tariffs and poor collection rates leads to poor systems.

Substantial Support the replacement of community drinking water users’ unions by WSUs, with ownership by local authorities. Technical assistance and small expenditure financing facility targeted training of WSUs to achieve financial sustainability.

Fiduciary

Rules for cash management, payment procedures, and contract management (internal audit review) are not being fully implemented.

Substantial The finance unit procedures for cash management, external payment and contracting, and quality assurance procedures will be strengthened. Compliance with procedures will be audited.

Internal audit function lacks formal professional qualifications and has limited methodological and functional capacity, which resulted in inadequate reporting to the ARIS supervisory board.

Substantial Arrange for internal auditors capacity development and formal professional qualification training. The internal audit unit will report to the ARIS supervisory board on its activities on a regular basis.

The Chamber of Accounts’ external audit work is not based on international audit standards and it does not provide an audit opinion on any financial statements.

Substantial The annual audit of the financial statements for the RBL program will be carried out by independent auditors acceptable to ADB, based on terms of reference agreed with ADB, and using International Standards on Auditing.

BFM not fully operational and is significantly under-resourced.

High Recruit a BFM specialist to operationalize BFM system and include anticorruption and grievance redress as specific conditions of contracts.

Corruption

Level of corruption in the country is relatively high.

High ARIS will adopt the program procurement manual. Engage anticorruption staff and program beneficiaries in procurement and monitoring. Conduct regular anticorruption training for stakeholders.

Overall RBL program risk Substantial

ADB = Asian Development Bank, ARIS = Agentstvo Razvitya i Investirovanya Soobshestv (Community Development and Investment Agency), BFM = beneficiary feedback mechanism, DLI = disbursement-linked indicator, RBL = results-based lending, WSU = water supplies and utilities services entity.

29 Program Safeguard Systems Assessment (accessible from the list of linked documents in Appendix 2).

13

Note: Risk factors are assessed against two dimensions: (i) the likelihood that the risk will occur and (ii) the impact of the risk on the outcome. Rating scale: low = low likelihood and low impact, moderate = substantial to high likelihood but low to moderate impact, substantial = low to moderate likelihood but substantial to high impact, high = high likelihood and high impact. Source: ADB.

IV. ASSURANCES

38. The government and the DDWSSD have agreed with ADB on certain covenants for the RBL program, which are set forth in the loan agreement, grant agreement, and program agreement.

V. RECOMMENDATION 39. I am satisfied that the proposed results-based loan and the proposed results-based grant would comply with the Articles of Agreement of the Asian Development Bank (ADB) and recommend that the Board approve

(i) the loan of $13,700,000 to the Kyrgyz Republic for the Naryn Rural Water Supply and Sanitation Development Program, from ADB’s ordinary capital resources, in concessional terms, with an interest charge at the rate of 1.0% per year during the grace period and 1.5% per year thereafter; for a term of 32 years, including a grace period of 8 years; and such other terms and conditions as are substantially in accordance with those set forth in the draft loan agreement presented to the Board; and

(ii) the grant not exceeding $13,700,000 to the Kyrgyz Republic from ADB’s Special Funds resources (Asian Development Fund) for the Naryn Rural Water Supply and Sanitation Development Program; on terms and conditions that are substantially in accordance with those set forth in the draft grant agreement presented to the Board.

Takehiko Nakao President

17 October 2019

14 Appendix 1

DESIGN AND MONITORING FRAMEWORK

Impacts the RBL Program is Aligned with

(i) Health and quality of life of residents improved and (ii) adverse environmental impacts reduced by 2026 (Strategy for Development of Water Supply and Sewerage Systems in Settlements of the Kyrgyz Republic until 2026)a

Results Chain

Performance Indicators with Targets and Baselines

Data

Sources and

Reporting

Mechanisms

Risks

Outcome Inclusive and reliable access to safe water supply and sanitation for rural communities in Naryn improved

a. By 2026, at least 64,000 people in the villages of Naryn use potable waterb (2019 baseline: 0) DLI 1 (RFI 5.1 and RFI 1.3)

a–b. ARIS M&E systems

Vulnerability to external shocks may divert government priorities, including resources allocated for the program.

b. By 2026, at least 13 village schools and/or kindergartens and 8 village health posts served by improved gender-sensitive water and sanitation facilitiesc (2019 baseline: 0) DLI 2 (RFI 5.1.1, RFI 1.3.1, and RFI 2.4.1)

Outputs 1. Water supply and sanitation infrastructure expanded and sanitation solutions piloted

1a. By 2025, detailed design of infrastructure completed for 43 villages (2019 baseline: 3) DLI 3

1a–d. ARIS M&E systems

Extreme weather conditions in Naryn may delay construction. Undue delays in government approval processes may hold up the institutional actions necessary.

1b. Climate change risk assessments applied to all sites for potable water sources in the program by 2026 and become mandatory for the rural water supply services and rural sanitation subsector from 2024 (2019 baseline: 0) (RFI 3.2.5)

1c. By 2024, infrastructure components for water supply and distribution networks in place for at least 64,000 peopled (2019 baseline: 0) DLI 4 (RFI 5.1.1 and RFI 1.3.1)

1d. By 2023, non-networked household sanitation solutions piloted in at least 2 villages with minimum combined total of 660 households (2019 baseline: 0) DLI 5 (RFI 5.1 and RFI 1.3)

2. Institutional capacities strengthened for enhanced sustainability in the rural water supply services and sanitation subsector

2a. Procurement manual developed and implemented for the RBL program from 2020 (2019 baseline: not applicable) DLI 6 (RFI 6.1.4)

2a–d. ARIS M&E systems, procurement records, audit training records, BFM records, and local government records

2b. By 2026, 100% of internal audit staff and finance staff of ARIS trained and certified in internal audit and financial management by a nationally recognized institute (2019 baseline: 0) DLI 7 (RFI 6.1 and RFI 6.1.1)

2c. By 2026, WSUs fully operational and financially sustainable, with at least 20% female participation in WSUs, and 40% female participation in WSU-related trainings and public consultationse (2019 baseline: not applicable) DLI 8 (RFI 6.1 and RFI 2.1.1) 2d. By 2025, the BFM fully functioning in the beneficiary villagesf (2019 baseline: not applicable) (RFI 6.2.4)

Appendix 1 15

Key Program Actions 1. Program technical aspects

1.1 Implement the program M&E framework and establish quarterly reviews of DLIs by key decision makers, with

corrective actions as required, and share minutes of DLI quarterly reviews with ADB (Q1 2020–Q4 2026). 1.2 Recruit at least one other M&E staff to support the RBL program’s M&E specialist, and provide training for

M&E staff as required (Q2 2020).

1.3 Recruit one BFM specialist dedicated to the RBL program. Have the BFM unit report to the ARIS supervisory board, as well as to ARIS management (Q1 2020).

2. Fiduciary 2.1 Ensure that the vacant internal audit unit position is filled with a qualified and experienced staff member (Q1

2020). 2.2 Revise the job description or terms of reference for the finance manager position to include a requirement of a

formal accounting certification (Q1 2020). 2.3 Strengthen the procedures for cash management, external payment, and contracting; and review and improve

the applied quality assurance and supervision procedures (Q1 2020–Q4 2021).

2.4 The internal audit unit will report to the supervisory board on its activities on a regular basis (Q1 2020). 2.5 Arrange training for the internal auditors on a priority basis (at the Ministry of Finance Training Center, if

available) (Q2 2020, Q2 2022, Q2 2024, and Q2 2026).

2.6 Carry out audits of the annual financial statements for the RBL program by independent auditors acceptable to ADB, based on terms of reference agreed with ADB, and using International Standards on Auditing (Q1 2020–Q4 2026).

2.7 Adopt a comprehensive procurement manual acceptable to ARIS based on commonly accepted good practice principles embodied in the ADB Procurement Policy (2017, as amended from time to time) for the Naryn RBL program (Q4 2019).

2.8 Build capacity of ARIS to enhance procurement function and service (Q1 2020–Q4 2026). 2.9 Develop agreed-upon operating procedures and archiving procedures for procurement records, and finalize

master documents such as bidding documents, requests for proposals, and bid evaluation report templates to

be used for the RBL program (Q4 2019–Q4 2026). 3. Safeguards 3.1 Engage professional and certified detailed measurement survey and valuation specialists to prepare impact

and valuation of affected assets for preparation of the land acquisition and resettlement plan (Q1 2020). 3.2 Engage a safeguards advisor for the implementing agency who will be dedicated to covering both

environmental and social safeguard issues in the RBL program (Q1 2020). 3.3 Develop capacity at (i) ARIS, (ii) municipal governments in Naryn, and (iii) the Department of Drinking Water

Supply and Sewerage Development through trainings on environmental management and environmental management plan implementation as per ADB’s Safeguard Policy Statement (2009) (Q1 2020).

4. Gender

4.1 Ensure that BFM and WSU trainings incorporate gender concerns and solutions to promote female participation in WSUs and WSU-related events (Q2 2020–Q4 2026).

4.2 Engage a gender specialist to work with the implementing agency (Q2 2020). 4.3 Systematically disaggregate data by sex (Q1 2020–Q4 2026).

Financing Plan

Total financing program from 2020 to 2026: $32.9 million Government of the Kyrgyz Republic: $5.5 million Asian Development Bank: $13.7 (loan) and $13.7 million (grant)

Assumptions for Partner Financing

Not applicable

ADB = Asian Development Bank, ARIS = Agentstvo Razvitya i Investirovanya Soobshestv (Community Development and Investment Agency), BFM = beneficiary feedback mechanism, DLI = disbursement-linked indicator, M&E = monitoring and evaluation, Q = quarter, RBL = results-based lending, RFI = results framework indicator, WSU = water supplies and utilities services entity. a Government of the Kyrgyz Republic. 2016. Strategy for Development of Water Supply and Sewerage Systems in

Settlements of the Kyrgyz Republic until 2026. Bishkek. b Potable water supply means water from a safe, disinfected source that meets the minimum criteria for quality and

continuity of water supply specified in the verification protocol for DLI 1 and DLI 4. c Improved gender-sensitive water and sanitation facilities for schools and health facilities must meet the following

criteria: (i) the facilities are in line with national standards and regulations of the Kyrgyz Republic and best international practices; (ii) toilet facilities are separate for males and for females; (iii) appropriate provisions must be made in a convenient place to prevent freezing and encourage use of handwashing facilities even in winter and even

16 Appendix 1

with outside latrines; (iv) sanitation facilities are connected to a compartmentalized septic tank, which will dispose of human waste hygienically; and (v) each gender-sensitive water and sanitation facility in a school will have at least one hygiene cabin for schoolgirls and female teachers (for menstrual hygiene, cleaning, and privacy purposes) in line with national standards (Appendix 3, Table A3.2). Target areas are to be identified by Q1 2020, and will be monitored and measured quarterly.

d The infrastructure components comprise the following, sufficient to serve the needs of at least the population of 64,000: (i) safe water sources (borehole and/or protected spring); (ii) functioning disinfection systems in line with national health norms; (iii) water storage facilities, all of which meet criteria provided in verification protocols; and (iv) water distribution networks at a sufficient depth to avoid freezing, with piped networks extending from the water supply source to the street level, at a minimum. Target areas are to be identified by Q4 2019, and will be monitored and measured quarterly.

e The functioning of each WSU (fully operational) is gauged from BFMs. Criteria that each WSU must fill are provided in the verification protocols. Each WSU should be legally established under the Local Self-Government Law and fully resourced (including a general manager and/or accountant, engineer, and technician), and its operational performance measured and monitored. The M&E framework for DLI 8 sets out the data to be collected and monitored, including (i) financial accounts and records (operating costs and revenue generated); (ii) institutional arrangements, including its legal mandate; and (iii) staffing levels. Target areas are to be identified by Q4 2019, and will be monitored and measured quarterly.

f The functioning of the BFM system will be assessed according to the criteria agreed by ARIS and ADB in 2019, including disaggregation by sex, and the way in which reports and/or complaints are handled for monitoring beneficiary feedback and engagement, covering all aspects of the program implementation period. The BFM will be incorporated under the program’s M&E system. Currently, a BFM has only been established in 43 villages dedicated to pasture and livestock management improvement (World Bank) and rural improvement (International Fund for Agricultural Development) projects.

Contribution to the ADB Results Framework:

RFI 5.1 People benefiting from increased rural investment. RFI 3.1 Poor and vulnerable people with improved standards of living. RFI 5.1.1 Rural infrastructure assets established or improved. RFI 1.3.1 Infrastructure assets established or improved. RFI 2.4.1 Time-saving or gender-responsive infrastructure assets and/or services established or improved. RFI 3.2.5 New and existing infrastructure assets made climate and disaster resilient. RFI 6.1.4 Transparency and accountability measures in procurement and financial management supported in implementation. RFI 6.1.1 Government officials with increased capacity to design, implement, monitor, and evaluate relevant measures. RFI 6.1. Entities with improved management functions and financial stability. RFI 2.1.1. Women enrolled in technical and vocational education and training and other job training. RFI 6.2.4. Citizen engagement mechanisms adopted. Note: Expected results values and methodological details for the RFIs are in Contribution to the ADB Results Framework (accessible from the list of linked documents in Appendix 2). Sources: ADB; and ARIS.

Appendix 2 17

LIST OF LINKED DOCUMENTS http://www.adb.org/Documents/RRPs/?id=52256-001-3

1. Loan Agreement

2. Grant Agreement

3. Program Agreement

4. Country Economic Indicators

5. Summary Sector Assessment: Agriculture, Natural Resources, and Rural Development (Rural Water Supply Services and Rural Sanitation)

6. Program Soundness Assessment

7. Program Results Assessment

8. Program Results Framework

9. Program Expenditure and Financing Assessment

10. Program Monitoring and Evaluation System Assessment

11. Program Fiduciary Systems Assessment

12. Integrated Risk Assessment and Mitigating Measures

13. Contribution to the ADB Results Framework

14. Development Coordination

15. Summary Poverty Reduction and Social Strategy

16. Program Implementation Document

17. Program Safeguard Systems Assessment

18. Program Action Plan

19. Attached Technical Assistance Report

Supplementary Documents

20. Program Procurement System Assessment

21. Climate Change Risk Assessment

22. Detailed Program Safeguard System Assessment

23. Program Monitoring and Evaluation Framework

http://www.adb.org/Documents/RRPs/?id=52256-001-3

18 Appendix 3

DISBURSEMENT-LINKED INDICATORS, VERIFICATION PROTOCOLS, AND DISBURSEMENT SCHEDULE

Table A3.1: Disbursement-Linked Indicators

Disbursement-linked indicators

Baseline value and

year

Prior results

Target values

2020 2021 2022 2023 2024 2025 2026

Outcome: Inclusive and reliable access to safe water supply and improved sanitation in Naryn DLI 1. By 2026, at least 64,000 people in the villages of Naryn use potable water

0 population use water from disinfected sources, 2019

Potable water supply and distribution network for 4,500 population commissioned

Potable water supply and distribution network for 19,000 population (cumulative) commissioned



DLI 2. By 2026, at least an additional 13 village schools and/or kindergartens and 8 health facilities served by improved gender-sensitive water and sanitation facilities

0 additional schools and/or kindergartens and health facilities, 2019

(i) GSWS facilities in 3 schools and/or kindergartens commissioned (ii) GSWS facilities in 3 health facilities commissioned

(i) GSWS facilities in 7 schools and/or kindergartens (cumulative) commissioned (ii) GSWS facilities in 5 health facilities (cumulative) commissioned

(i) GSWS facilities in 13 schools and/or kindergartens (cumulative) commissioned (ii) GSWS facilities in 8 health facilities (cumulative) commissioned

Output 1: Water supply and sanitation infrastructure expanded and sanitation solutions piloted DLI 3. By 2025, detailed design of infrastructure completed for 43 villages

0 completed Predesign activities and detailed design completed in 13 villages

Predesign activities and detailed design completed in 23 villages





DLI 4. By 2024, infrastructure components for water supply and distribution networks completed for at least 64,000 population

Infrastructure inadequate or non-existent

Preparation of bidding documents to conduct tender for construction works to cover at least 4,500 population

(i)Safe water source, disinfection, and storage system completed to cover needs of 4,500 population (ii) Water distribution networks expanded to serve 4,500 population

(i) Safe water source, disinfection, and storage system completed to cover needs of 19,000 population (ii) Water distribution networks expanded to serve 19,000 population



Appendix 3 19


Baseline value and

year

Prior results

Target values

2020 2021 2022 2023 2024 2025 2026

DLI 5. By 2023, non-networked, household sanitation solutions piloted in at least 2 villages with minimum combined total of 660 households

Sanitation solutions not piloted

Feasibility study completed for pilot approach

List of target villages and households identified. Detailed designs developed

Solutions implemented for at least 250 households

Solutions implemented for at least 660 households (cumulative)

Output 2: Institutional capacities strengthened for enhanced sustainability in the rural water supply services and sanitation subsector DLI 6. Procurement manual developed and implemented for the RBL program from 2020

Gaps identified in ARIS’s procurement and contract management systems

Procurement manual and MYP developed

2020 MYP targets implemented according to procurement manual







DLI 7. By 2026, 100% of internal audit staff and finance staff of ARIS trained and certified in internal audit and financial management, respectively, by a nationally recognized institute

Gaps identified in ARIS’s financial management system. The audit and financial management units have 3 and 13 staff, respectively, without accreditation

ARIS ensures that at least four internal audit staff and finance staff are trained and certified respectively in audit and financial management




DLI 8. By 2026, WSUs fully operational and financially sustainable, with at least 20% female participation within WSUs, and at least 40% female participation in WSU-related trainings and public consultations

No functioning structures for operations, maintenance, and management support

Scoping study conducted for jurisdiction, roles and responsibilities of raion and aiyl okmotu levels

(i) Public consultations and trainings completed, with at least 40% female participation, to cover 4,500 population (ii) Tariff set by aiyl okmotu for 4,500 population (iii) Tariff approved by aiyl kenesh for

(i) WSUs established to serve population receiving water supply in 2021 (ii) Public consultations and trainings completed, with at least 40% female participation, to cover 19,000 population



(i) 64,000 population served by WSUs, with (ii) at least 20% female participation in the overall WSUs

(i) 64,000 population served by WSUs, with (ii) at least 20% female participation in the overall WSUs

20 Appendix 3


Baseline value and

year

Prior results

Target values

2020 2021 2022 2023 2024 2025 2026

4,500 population

(iii) Tariff set by aiyl okmotu for 19,000 population. (iv) Tariff approved by aiyl kenesh for 19,000 population

(iii) Tariff set by aiyl okmotu for 45,000 population (iv) Tariff approved by aiyl kenesh for 45,000 population

(iii) Tariff set by aiyl okmotu for 64,000 population (iv) Tariff approved by aiyl kenesh for 64,000 population

40. ADB = Asian Development Bank, ARIS = Agentstvo Razvitya i Investirovanya Soobshestv (Community Development and Investment Agency), BFM = beneficiary feedback mechanism, DLI = disbursement-linked indicator, MYP = Multi-Year Procurement Action Plan, WSU = water supplies and utilities services entity established and operating in accordance with laws of the Kyrgyz Republic. Sources: ADB; and ARIS.

Appendix 3 21

Table A3.2: Verification Protocols Disbursement-Linked Indicator Definition and Description of Achievement

Information Source and Frequency

Verification Agency, Procedure and Time Frame

Outcome: Inclusive and reliable access to safe water supply and improved sanitation enhanced for rural communities in Naryn

DLI 1: By 2026, at least 64,000 people in the villages of Naryn use potable water

2019 Baseline: Target population have no access to potable water supply and networks from disinfected sources Targets: Potable water supply and distribution network commissioned for: • 2021: 4,500 population • 2022: 19,000 population

(cumulative) • 2023: 45,000 population

(cumulative) • 2024: 64,000 population

(cumulative)

Definitions

“Commissioned” means the complete water supply system from source to piped network, as defined for DLI 4, has been tested to ensure it is complete and functioning, and handed over from the contractor(s) to relevant government bodies.

“Use of potable water” means that the community is using water from a safe, disinfected source that meets the minimum criteria specified under DLI 4 (i) and (ii). The use is monitored by a variety of methods, such as field checks and BFM reports.

Depending on the program budget, and on community and local government contributions, the access to the piped network may be facilitated through household connections or street level networks.

Conditions for disbursement are met if the targets in the first column are achieved.

Partial disbursement. The DLI is scalable and partial disbursement is allowed, according to the population served by the commissioned potable water supply and networks. If the population target is not fully achieved, then disbursement can be proportional to the increase made from the previous year’s targeted achievement. The following formula will be applied:

Partial DLI disbursement = planned DLI disbursement for the period (actual achievement of the current period–targeted achievement of the previous period)/ (targeted achievement of the current period–targeted achievement of the previous period).

Disbursements are allowed for early or late achievement of the DLI. This means that the planned disbursement amount for a given year can be released when the set target is fully achieved, even if the achievement is late, as long as the achievement is during the program’s duration. Early disbursement is also allowed when achievement is earlier than scheduled.

ARIS database on the program.

Required frequency for reporting will be annual, and ARIS and ADB may agree each year on interim reporting arrangements as appropriate.

Monitoring may be as frequent as ARIS wishes.

Each year, ARIS conducts monitoring and prepares an attestation that the DLI is met and attaches the relevant report.

The IVA will verify the results each year through field visits to target villages as well as records available from ARIS, aiyl okmotu, and local authorities at national, raion, and community level, as required. Spot checks and interviews will be implemented on field trips as appropriate.

The IVA will refer to the verification protocols and other relevant guidelines prepared for the program. The IVA report is then attached to the ARIS attestation report.

Within one month of receiving the validated report, ADB will confirm that the target has been met.

DLI 2: By 2026, at least an additional 13 village schools and/or kindergartens and 8 health facilities served by improved gender-sensitive water and sanitation facilities

2019 Baseline: Zero additional schools and health facilities are served

Definitions. “Commissioned” means the improved GSWS facilities, as defined below, have been tested to ensure they are complete and functioning, and handed over from the contractor(s) to the aiyl okmotu (village administration).


Each year ARIS conducts monitoring and prepares an attestation that the DLI is met and attaches the relevant report.

22 Appendix 3

Disbursement-Linked Indicator Definition and Description of Achievement



by improved GSWS facilities

Targets:

2021: (i) GSWS facilities in 3 village schools and/or kindergartens commissioned (ii) GSWS facilities in 3 village health facilities commissioned

2022: (i) GSWS facilities in 7 village schools and/or kindergartens (cumulative) commissioned (ii) GSWS facilities in 5 village health facilities (cumulative) commissioned

2023: (i) GSWS facilities in 13 village schools and/or kindergartens (cumulative) commissioned (ii) GSWS facilities in 8 village health facilities (cumulative) commissioned

Improved GSWS facilities for schools and/or kindergartens are required to meet the following criteria: (a) The facilities are in line with national standards and regulations of the Kyrgyz Republic and best international practices; (b) toilet facilities are separate for males and for females; (c) where handwashing facilities do not exist in outside latrines, appropriate auxiliary building and/or room is constructed with a water supply connection to such structure; (d) toilets meet national standards; (e) school sanitation facilities are connected to a compartmentalized septic tank, which will dispose of human waste hygienically through pre-treatment and treatment of sewage, discharging excess water to an infiltration system leading to an absorption field; (f) each GSWS facility will have at least 1 hygiene cabin for schoolgirls and female teachers in line with national standards;a and (g) the GSWS facilities may be achieved through rehabilitation of existing facilities and do not have to be constructed provided they meet the above criteria.

Improved gender-sensitive water and sanitation (GSWS) facilities for health facilities are required to meet the following criteria: (a) the facilities are in line with national standards and regulations of the Kyrgyz Republic and best international practices; (b) toilet facilities are separate for males and for females; (c) piped water network is built on the health facility grounds, with running water available from faucets in handwashing facilities, which are situated close to toilets, at a convenient place to wash hands, even in winter; (d) toilets meet national standards; (e) sanitation facilities are connected to a compartmentalized septic tank, which will dispose of human waste hygienically through pre-treatment and treatment of sewage inside, discharging excess water to an infiltration system leading to an absorption field; (f) the GSWS facilities may be achieved through rehabilitation of existing facilities and do not have to be newly constructed as long as they meet the above criteria; (g) at least one primary health care facility (FAP) will be included among the 6 target facilities.


Partial disbursement. The DLI is scalable and partial disbursement is allowed, according to the number of GSWS facilities commissioned. For each year’s allocation, (i) and (ii) are weighted equally and thus comprise 50% of that year’s allocation. Each of the yearly targets under (i) and (ii) are scalable, meaning that if the target is not fully achieved, then disbursement can be proportional to the increase made from the previous year’s targeted achievement. The following formula will be applied:

Partial DLI disbursement = planned DLI disbursement for the period (actual achievement of the current period–targeted achievement of the



The IVA will verify the results each year through field visits to target villages and facilities as well as records available from ARIS, aiyl okmotu, and local health and education authorities, as required. Spot checks and interviews will be implemented on field trips as appropriate.



Appendix 3 23




previous period)/ (targeted achievement of the current period–targeted achievement of the previous period).


Output 1. Water and sanitation infrastructure expanded and sanitation solutions piloted

DLI 3: By 2025, detailed design of infrastructure completed for 43 villages

2019 Baseline: Detailed design activities incomplete or not conducted in target villages

2020: Predesign activities and detailed design completed in 13 villages






Definitions.

Predesign activities are those that are required prior to the development of the detailed and working design and may include various assessments necessary for making decisions on the development of design and subsequent implementation of the projects. Detailed and working design comprises calculations, drawings, and bills of quantities elaborated in detail to enable the contractor to start construction activities on the site. Detailed design is developed based the results of predesign activities. The target is considered achieved only when the detailed design is produced.


Partial disbursement. The DLI is scalable and partial disbursement is allowed, but only according to the number of villages where specified activities are completed. If detailed design is not completed, partial disbursement cannot be made for predesign activities or incomplete detailed design. If the target number of villages is not fully achieved, then disbursement can be proportional to the increase made from the previous year’s targeted achievement. The following formula will be applied:







The IVA will verify the results each year through field visits to target villages as well as records available from ARIS, aiyl okmotu, and local authorities at national, raion and community level, as required. Spot checks and interviews will be implemented on field trips as appropriate.



DLI 4: By 2024, infrastructure components for water supply and distribution networks completed for at least 64,000 population

24 Appendix 3




2019 Baseline: Infrastructure inadequate or non-existent; water supply does not meet national safety standards

2020: Preparation of bidding documents to conduct tender for construction works to cover at least 4,500 population

(i) (a)Safe water source, (b) water disinfection system, and (c) water storage system completed, and

(ii) Water distribution networks expanded to cover the needs of following population for each year:

2021: 4,500 population




Definitions. “Infrastructure components” for water supply and distribution networks means the complete infrastructure for potable water supply and distribution networks as follows:

Stage (i): Safe water source, disinfection, and storage system, which meet criteria (a) to (c). Stage (i) is considered accomplished only when (a), (b) and (c) are completed.

Stage (ii): Water distribution networks.

Stage (i): For each site,

(a) safe water source can be either

• two boreholes (according to national standards, so that if one borehole does not work, the water supply system continues to function), or if one borehole is drilled, in accordance with the national standards, the borehole will be equipped with additional standby pumping equipment to ensure continuous water supply.

• a protected spring (protected from contamination from surface water). Boreholes should be drilled to a depth sufficient to draw water from a clean and safe aquifer protected from surface contamination. Surface water sources that do not meet the normative requirements set forth for the Kyrgyz Republic are not allowed. (b) A water disinfection system must be functioning, in line with national standards for a residual chlorine rate, which is aligned with the World Health Organization recommendations.

(c) Water storage: the storage facility must be able to provide sufficient water supply for the population, calculated according to the current national standards

Stage (ii):

The water distribution networks means piped network. These must be laid at a depth below the surface sufficient to avoid freezing in winter. Stage (ii) is considered completed when the piped networks extend from the water supply source to the street level at a minimum.


Partial disbursement. The DLI is scalable and partial disbursement is allowed in proportion to population covered and according to components (i) and (ii), as follows: For each year’s allocation, (i) and (ii) are weighted equally and thus comprise 50% of that year’s allocation. Each of the yearly population targets under (i) and (ii) are also scalable. Under (i), however, partial disbursement cannot be made according to components (a), (b) and








Appendix 3 25




(c) (that is, partial disbursement can be made for stage (i) in proportion to the population covered, but only if all three components (a), (b) and (c) are all completed.

If the target is not fully achieved, then disbursement can be proportional to the increase made from the previous year’s targeted achievement. The following formula will be applied:



DLI 5: By 2023, non-networked, household sanitation solutions piloted in at least 2 villages with minimum combined total of 660 households

2019 Baseline: Sanitation solutions not yet piloted

2020: Feasibility study completed for pilot approach

2021: List of target villages and households identified

Detailed designs developed

2022: Sanitation solutions implemented for at least 250 households

2023: Sanitation solutions implemented for at least 660 households (cumulative)

Definitions. Non networked sanitation solutions mean an individual or group system with one or several houses (depending on the site) connected to a compartmentalized septic tank, which will dispose of human waste hygienically. The septic tank(s) will be connected to the toilets of the house(s).

Implementation of the pilot approach means that the construction of the compartmentalized septic tanks is completed for the target number of households, with connections between the septic tank and the households.


Partial disbursement. The DLI is scalable and partial disbursement is allowed, but only for 2022 and 2023, according to the number of households covered by the approach. If the stated household targets are not fully achieved for 2022 or 2023, then disbursement can be proportional to the increase made from the previous year’s targeted achievement. The following formula will be applied:


Partial disbursement is not allowed for 2020 and 2021 targets. Disbursements are allowed for early or late achievement of the DLI. This




Each year, the focal unit(s) in ARIS prepares an attestation that the DLI is met and attaches the relevant report.




26 Appendix 3




means that the planned disbursement amount for a given year can be released when the set target is fully achieved, even if the achievement is late, as long as the achievement is during the program’s duration. Early disbursement is also allowed when achievement is earlier than scheduled.

Output 2. Institutional capacities strengthened for enhanced sustainability in the rural water supply services and sanitation subsector

DLI 6: Procurement manual is developed and implemented for the RBL program from 2020

2019 Baseline: ARIS’s procurement and contract management systems assessed, and gaps identified

Prior results: A Procurement Manual and an MYP on procurement training, rules and procedures appropriate for ARIS, developed and completed in line with international best practices, including FIDIC

2020-2026:

For each year, MYP targets of the respective year implemented according to the Procurement Manual

Definition. The Procurement Manual, developed in 2019 and approved by the program coordination committee (comprised of DDWSSD (chair), ARIS, MOF, MOE, MOH, State Agency for Local Self-Governance, Naryn plenipotentiary governor), will set out the procurement processes for the program in line with international best practices, including FIDIC, and agreed to by ADB. The Multi-Year Procurement Action Plan (MYP) means an action plan (including training) also developed in 2019 with technical support provided by ADB from separate technical assistance funds. The MYP is considered completed when ADB and ARIS both sign off on it.


Partial disbursement. The DLI is scalable and partial disbursement is allowed according to the number of MYP action points achieved each year. The total number of MYP action points for a given year (e.g., 8 action points) will represent the 100% disbursement target for that year. If 4 of those action points are achieved for that year, then 50% of the disbursement allocation is made. If the target is not fully achieved, then disbursement can be proportional to the increase made from the previous year’s targeted achievement. The following formula will be applied:


Disbursements are not allowed for procurement actions that do not follow the rules and procedures in the Procurement Manual. Other than this, disbursements are allowed for early or late achievement of the MYP targets, such as for training. This means that the planned disbursement amount for a given year can be released when the set target is fully achieved, even if the achievement is late, as long as the achievement is during the program’s duration. Early disbursement is also allowed when achievement is earlier than scheduled.

ARIS records for the program.

Required frequency for reporting will be semi-annually, and ARIS and ADB may agree each year on interim reporting arrangements as appropriate.



The IVA will verify the results each year through relevant records available from ARIS’s procurement department and interviews as required.



DLI 7: By 2026, 100% of internal audit staff and finance staff of ARIS trained and certified in internal audit and financial management, respectively, by a nationally recognized institute

Appendix 3 27




2019 Baseline: ARIS’s financial management system assessed and areas for improvement identified, including training needs

2020, 2022, 2024, 2026: For each of these years, ARIS ensures that at least four internal audit staff and finance staff are trained respectively in audit and financial management

Definitions. ARIS staff trained for a given year means that (a) a training needs assessment is carried out before the training in the year specified; (b) the training plan is developed for that year; (c) a training program is prepared; (d) the list of participation is verified by the training provider for that year; and (e) training is conducted by a nationally recognized institute.

Conditions for disbursement are met if the targets in the first column are achieved, with the criteria specified in (a), (b), (c), (d) and (e) above.

Partial disbursement. The DLI is not scalable and partial disbursement is not allowed for the specified year.

Disbursements are not allowed for early or late achievement of the DLI. This means that the planned disbursement amount for a given year can only be released when the set target is fully achieved within that year.


Required frequency for reporting will be once every two years (biennial), and ARIS and ADB may agree each year on interim reporting arrangements as appropriate.



The IVA will verify the results through training records available from ARIS and interviews as appropriate of trained staff.



DLI 8: By 2026, WSUs fully operational and financially sustainable, with at least 20% female participation within WSUs, and at least 40% female participation in WSU-related trainings and public consultations

2019 Baseline: No functioning structures for operations, maintenance, and management support

2020: Scoping study conducted for jurisdiction, roles and responsibilities at raion and aiyl okmotu levels

2021: (i) Public consultations and trainings completed, with at least 40% female participation, to cover at least 4,500 population. (ii) Tariff developed by aiyl okmotu for 4,500 population. (iii)Tariff approved by aiyl kenesh for 4,500 population

2022: (i) WSUs established to serve population receiving water

Definition. A water supplies and utilities services entity (WSU) is established by the aiyl okmotu within the aiyl okmotu (village administration) itself. The aiyl okmotu will own the water system assets while the WSU is responsible for delivering water, maintaining the assets and collecting tariffs, being responsible to and reporting to the aiyl okmotu. To this end, an operational WSU should be legally established under the Local Self-Government Law, fully resourced (including a General Manager or Accountant, Engineer, and 1 Technician), and operational performance measured and monitored (i.e., total operating revenue over total operating expense is not less than 0.5 in 2022, 0.6 in 2023, 0.7 in 2024, 0.8 in 2025, 0.9 in 2026, and 1.0 in 2027).b The M&E framework for DLI 8 sets out the data to be collected and monitored include (i) financial account and records (operating costs and revenue generate); (ii) institutional arrangements including its legal creation; and (iii) staffing levels. The water enterprise may cover more than one village or system, depending on the scoping study to be conducted in the first year. While the specific terms of reference for WSUs are defined by each aiyl okmotu, these generally include the following: (a) quality assurance of water supply, (b) maintenance of networks and equipment necessary for water supply and sanitation, (c) construction and installation works, (d) provision of paid services, and (e) “commercial activities” (i.e., tariff collection). Before each WSU is set up, public consultations and training of relevant staff must be conducted in the village(s) concerned. For 2021 (i), 2022 (i), 2023 (i), and 2024 (i), the combined records of the public consultations and




Use audited financial statements (audited by independent auditor such as, Chamber of Account or private audit firm) to measure operating ratio.


The IVA will verify the results each year through field visits to target villages as well as records available from ARIS (such as BFM), aiyl okmotu, and local authorities at national, raion and community level, as required. Spot checks and interviews will be implemented on field trips as appropriate.



28 Appendix 3




supply in 2021, (ii) Public consultations and trainings completed, with at least 40% female participation, to cover 19,000 population. (iii) Tariff developed by aiyl okmotu for 19,000 population, (iv) Tariff approved by aiyl kenesh for 19,000 population

2023: (i) WSUs established to serve population receiving water supply in 2022. (ii) Public consultations and trainings completed, with at least 40% female participation, to cover 45,000 population, (iii) Tariff developed by aiyl okmotu for 45,000 population, (iv) Tariff approved by aiyl kenesh for 45,000 population

2024: (i) WSUs established to serve population receiving water supply in 2023, (ii) Public consultations and trainings completed, with at least 40% female participation, to cover 64,000 population, (iii)Tariff developed by aiyl okmotu for 64,000 population, (iv) Tariff approved by aiyl kenesh for 64,000 population

2025: (i) 64,000 population served by

trainings should show not less than 40% female participation in the combined total participants for each year, to be eligible for disbursement (not necessarily for each village). The WSU should be established no later than a year after the water supply networks are constructed, completed, and handed over/commissioned (DLI 1).

Tariff means the price assigned to water supplied by the aiyl okmotu (owner of the facility) through a piped network to users. The water tariffs are developed by aiyl okmotu and approved by the aiyl kenesh (local council).

“Population served by WSUs” means that this population is living in villages that have functioning WSUs as part of the aiyl okmotu. The functioning of the WSUs is gauged from the BFM system that ARIS will implement as part of the RBL program (see non-disbursement linked indicator on BFM).

20% female participation in the WSU means that by 2025 and 2026, the proportion of women members in the total WSUs established by the RBL program is not less than 20%.


Partial disbursement. The DLI is scalable and partial disbursement is allowed for 2021, 2022, 2023, 2024, according to (i) target population to be serviced by WSUs (i.e., whether the established WSUs for that year are sufficient for the target population number); (ii) population covered by approved tariffs. For year 2021, equal weight is assigned to targets (i), (ii) and (iii) in that year’s disbursement allocation. For years 2022, 2023, and 2024, equal weight is assigned to targets (i), (ii), (iii), and (iv) in each year’s disbursement allocation. For years 2025 and 2026, equal weight is assigned to targets (i) and (ii), and partial disbursement is also allowed according to (i) population served by established WSUs; and (ii) the percentage of females in the overall WSUs.

Female participation: The 40% female participation in consultations and trainings is not scalable, meaning that consultations and training activities must have a combined total 40% female participation for that year or they will not be counted for that year.

The 20% female participation in WSUs is scalable and partial disbursements may be made in 2025 and 2026, according to the proportion of women in the overall total of WSUs (not necessarily for each WSU).

If the target is not fully achieved, then disbursement can be proportional to the increase made from the previous year’s targeted achievement. The following formula will be applied:

Appendix 3 29




WSUs, with (ii) at least 20% female participation in the overall WSUs

2026: (i) 64,000 population served by WSUs, with (ii) at least 20% female participation in the overall WSUs



ADB = Asian Development Bank, ARIS = Agentstvo Razvitya i Investirovanya Soobshestv (Community Development and Investment Agency), BFM: beneficiary feedback mechanism, DLI = disbursement-linked indicator, FAP = feldsher midwifery posts, FIDIC = international federation of consulting engineers, IVA = independent verification agent, MOE = Ministry of Economy, MOF = Ministry of Finance, MOH = Ministry of Health, MYP = Multi-Year Procurement Action Plan, WSU = water supplies and utilities services entity. a For menstrual hygiene, cleaning, and privacy purposes. b Operational performance of total revenue over total expense is an indicative and can be revisited during the implementation. Any changes will require ADB’s approval. Sources: ADB; and ARIS.

30 Appendix 3

Table A3.3: Combined Loan and Grant Disbursement Schedulea

Disbursement-linked Indicator

Total ADB Financing Allocation

Share of ADB

Financing (%)

Financing for Prior Results 2020 2021 2022 2023 2024 2025 2026 Total

Outcome

DLI 1. By 2026, at least 64,000 people in the villages of Naryn use potable water

8.22 30% 2.88 1.78 1.78 1.78 8.22

DLI 2. By 2026, at least an additional 13 village schools and/or kindergartens and 8 health facilities are served by improved gender-sensitive water and sanitation facilities

2.74 10% 1.10 0.54 1.10 2.74

Outputs

DLI 3. By 2025, detailed design of infrastructure is completed for 43 villages

0.55 2% 0.08 0.08 0.08 0.08 0.15 0.08 0.55

DLI 4. By 2024, infrastructure components for water supply and distribution networks completed for at least 64,000 population

9.04 33% 1.81 1.81 1.81 1.81 1.80 9.04

DLI 5. By 2023, non-networked, household sanitation solutions piloted in at least 2 villages with minimum combined total of 660 households

1.37 5% 0.34 0.34 0.34 0.35 1.37

DLI 6. Procurement manual developed and implemented for the RBL program from 2020

1.37 5% 0.82 0.08 0.08 0.08 0.08 0.08 0.08 0.07 1.37

DLI 7. By 2026, 100% of internal audit staff and finance staff of ARIS trained and certified in internal audit and financial management, respectively, by a nationally recognized institute

1.37 5% 0.34 0.34 0.34 0.35 1.37

DLI 8. By 2026, WSUs fully operational and financially sustainable, with at least 20% female participation in WSUs, and 40% female participation in WSU-related trainings and public consultations

2.74 10% 0.39 0.39 0.39 0.39 0.39 0.39 0.39 2.74

Total 27.40 100% 0.82 3.05 6.68 5.36 5.59 4.54 0.55 0.81 27.40

ADB = Asian Development Bank, ARIS = Agentstvo Razvitya i Investirovanya Soobshestv (Community Development and Investment Agency), DLI = disbursement-linked indicator, RBL = results-based lending, WSU = water supplies and utilities services entity. Note: Numbers may not sum precisely because of rounding. a Funding for disbursements for each DLI will be equally contributed by loan and grant. Source: ADB; and ARIS.