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The Asian Development Bank (ADB) will help boost economic growth and reduce poverty in the Kyrgyz Republic through a loan approved for US$32.8mn to rehabilitate a key transport corridor that links the country with China and Uzbekistan.

The project will improve the 124km Osh-Gulcha-Sopu Korgon section of the Osh-Sary Tash-Irkeshtam road and procure maintenance equipment for the entire road.

The road comprises part of the transport corridor linking the Kyrgyz Republic, China, and Uzbekistan. It connects to the Bishkek-Osh road, a vital national transport corridor, and to the road to Tajikistan and on to Afghanistan, both of which are also being rehabilitated with ADB support.

“The landlocked Kyrgyz Republic is one of the poorest countries of the former Soviet Union, and its future development is dependent on enhancing its access to regional markets and expanding trade,” says Jeffrey Miller, an ADB senior project economist.

“The project will help increase regional trade and reduce poverty by reducing transport costs, and will also improve access to markets and services for people living along the road.”

The government has agreed to will use border-crossing fees on the project road to finance maintenance and also to develop a new strategy for road maintenance.

An US$800,000 TA grant accompanies the loan to improve road maintenance and help the Ministry of Transport and Communications (MOTC) establish and make operational a transport corridor management department for the Oash-Sary Tash-Irkeshtam road.

Another US$500,000 TA grant will fund activities to prevent the spread of HIV/Aids, sexually transmitted diseases, and human trafficking. Both TAs are financed by the Japan Special Fund, from the government of Japan.
ADB is the major provider of assistance to the country’s road sector, with about US$145mn worth of loans approved for road rehabilitation and US$4.3mn in technical assistance grants, in addition to the loan and TAs just approved.

The loan, which covers 75.6% of the project’s total cost of US$43.4mn, comes from ADB’s concessional Asian Development Fund. It carries a 32-year term, including a grace period of eight years. Interest will be charged at 1% per year during the grace period and 1.5% per year after.

The Opec Fund will provide cofinancing worth US$4mn, to be considered this December, and the government will contribute US$6.6mn toward the project.

MOTC is the executing agency for the project, which is due for completion in September 2008.