Kazakhstan: Reconstruction of A-27 Highway Atyrau-Dossor Section Project

proposed

The Project will include reconstruction and upgrading (from 2- to 4-lanes) of an 86 km road section of A-27 Highway between the city of Atyrau and town of Dossor in the Atyrau region of Kazakhstan. The Project aims to increase the capacity and operating efficiency of the road section, improve the road safety, and promote the development of local economy. The Project scope includes the expansion and construction of dual-carriageways with Category I-b, including 136 culverts, 30 cattle underpasses, four bridges, three railway overpasses, 18 agricultural machinery overpasses, one interchange, and two rest areas. The Project will also support associated supervision, implementation support, and institutional capacity-building activities. The Project is the joint multilateral development banks' efforts in improving the road network connectivity in the west of Kazakhstan. The road links with the Asian Development Bank financed Aktobe-Makat road project in the east and the Atyrau - Astrakhan road project financed by European Bank for Reconstruction and Development in the west. The Project road is a vital segment of the international transit corridor, facilitating the overland transit of goods from Uzbekistan and Turkmenistan to western Kazakhstan. It also enhances connectivity between the Atyrau Region and Aktau, a Caspian Sea port city and a key transit hub along the Middle Corridor, thereby positioning the Atyrau Region as a critical feeder zone for the Trans-Caspian International Transport Route. The Project aims to enhance the road's capacity, allowing for increased traffic flow and improved safety, which will, in turn, promote export-import operations and regional economic growth. The Project aims to improve road conditions and capacity to accommodate growing traffic demand, with enhancements of road safety, service levels, and climate-resilient standards. In addition, it will introduce the Design-Build-Maintain (DBM) contract model and a tolling system to strengthen the road's long-term technical and financial sustainability. It will be the first toll road in the Atyrau Oblast. This Project is among the pioneers in using an integrated DBM contract model based on the Yellow Book contract format of the International Federation of Consulting Engineers (FIDIC). This integrated approach leverages private sector expertise to develop the design and long-term maintenance program upfront, ensuring alignment with the specific project features and supporting a lifecycle approach to road infrastructure planning. It also aims to reduce the risk of cost overruns and implementation delays commonly associated with conventional contract models. AIIB is proposed to provide Sovereign Backed financing of approximately 88 percent of the total Project cost, through two loan tranches in 2025 and 2026 respectively. Government of Kazakhstan (GoK) will finance the remaining share up to 12 percent as counterpart funding. According to the government sovereign guarantee arrangement to the Project, the first loan tranche is around 37 percent of total AIIB financing. It is expected to be committed in 2025 and focuses on procuring DBM contractors and the supervision consultants, hiring the project management consultant, advancing the road design, and updating the relevant ES instruments. The second loan tranche accounting for remaining 63 percent is expected to be committed in 2026 and focuses on construction, implementation, and institutional capacity building activities. As the Bank's first standalone operation in road sector in Kazakhstan, the Project plans to assist GoK in accessing grant funding from China International Development Cooperation Agency (CIDCA) on a best effort basis, to complement AIIB's loan financing to enhance the institutional capacity, strengthen the project quality and promote the adaptation of international good practice in road sector investment and operations in Kazakhstan.