South East Gobi Municipal Infrastructure Project

cancelled

The EBRD is considering providing a sovereign loan to Mongolia of US$ 18.3 million for on-lending to the Omnogobi Aimag provincial government (US$ 10.7 million) and Dornogobi Aimag provincial government (US$ 7.6 million). The proposed project was originally composed by the Asian Development Bank (ADB) as a municipal infrastructure improvement programme called “the Southeast Gobi Urban and Border Town Development Project” covering the municipalities of Dalanzadgad, Tsogttsetsii, and Khanbogd, Gurvan-Tes in Omnogobi Aimag and Saynshand and Zamyn-Uud in Dornogobi Aimag. The programme covers water supply, wastewater and storm water management, roads, solid waste and district heating. Due to funding constraints, the ADB is only able to partially finance the programme, and the EBRD has been asked by the Government of Mongolia to consider co-finance. The ADB will provide a US$ 15.0 million grant for the programme, and the EBRD’s co-financing under a parallel financing agreement would complement financing for water and wastewater components in Dalanzadgad and Saynshand. When approved by the EBRD’s Board of Directors, the proposed project will have the following transition impact: i) Establishing a solid legal framework for the urban infrastructure services. ii) Implementing a tariff reform with a sound tariff methodology in relation to cost recovery, sensitivity to affordability criteria of the tariff structures, and due attention to social categories of users. iii) Commercialisation by developing Public Service Contracts to establish clear rights and obligations between the Aimag governments and utility service providers (the Public Utility Services Organisations - PUSOs) iv) Improving operational and financial management of the PUSOs. v) Demonstration on urban infrastructure service reform The ADB is planning to address the overall sector reform issues. The EBRD will work with the Aimag governments and the ADB how to address these transition impact objectives. Omnogobi Aimag provincial government for the benefit of the PUSOs in Dalanzadgad, and Dornogobi Aimag provincial government for the benefit of the PUSO in Saynshand The EBRD is considering providing a sovereign loan to Mongolia of up to US$ 18.3 million. The ADB will provide a US$ 2.29 million grant from the total package of US$ 15.0 million grant parallel to the EBRD’s finance. US$ 22.79 million The proposed project has been categorised B in accordance with the 2008 EBRD Environmental and Social (E&S) Policy, as the potential impacts are expected to be site specific and readily identifiable and addressed through mitigation measures. The environmental and social due diligence for the project, which is ongoing with EBRD TC funds, includes an independent third party environmental and social audit to assess the Client’s management capacity and systems to manage environment, health, safety and labour issues in its operations and an analysis of the potential (future) E&S impacts and benefits. It will also assess the Client’s ability to carry out the Project in compliance with the Bank’s Performance Requirements. An Environmental and Social Action Plan (ESAP) will be prepared for the project, and a Stakeholder Engagement Plan will be developed that will include a grievance mechanism. Information on environmental and social performance and a summary of the agreed Action Plan will be released to stakeholders. This PSD will be updated when the results of due diligence are known. Pre-signing 1. Institutional, financial and creditworthiness analysis to analyse the adequacy of the proposed on-lending structure to the Aimag governments, conduct financial analysis on the PUSOs and carry out creditworthiness assessment of the Aimag governments. (€74,186, funded by the EBRD Shareholders’ Special Fund). 2. Technical and Environmental due diligence to review and confirm the technical parameters and the priority of the investment components to be financed by the EBRD, and carry out Environmental and Social due diligence on components to be financed by the Bank. (€73,992, funded by the EBRD Shareholders’ Special Fund.) Post-signing 3. Urban Infrastructure Services Reform Advice to establish a solid legal framework for independent regulator, tariff methodology, mandate of the PUSOs and service targets, and develop a tariff methodology and a model for Public Service Contract to be used throughout Mongolia. (USD 800,000 (€600,000 equivalent) to be funded by an international donor) 4. Corporate Development and Stakeholder Participation Programme to assist the PUSOs to prepare and implement new detailed operational plan, maintenance programmes for infrastructure, the business plan; and carry out a Stakeholder Consultation and Public Awareness Programme. (US$ 600,000 (€400,000 equivalent) to be funded by an international donor) 5. Procurement and implementation support to assist with technical design, preparation of tender documents, tendering and evaluation support, contract award and administration and construction supervision. (US$ 600,000 (€400,000 equivalent) to be funded by an international donor) The ADB will provide post-signing support covering: (i) infrastructure services reforms (ii) institutional development and capacity building to strengthen urban planning and policy making (iii) strengthening of regional cooperation and (iv) project management and project performance monitoring. The ADB will also provide technical project implementation support for the ADB financed components equivalent to the Bank’s TC3 above.