CERR presented a study on the assessment of investment infrastructure projects: the experience of Uzbekistan

Tashkent, Uzbekistan (UzDaily.com) -- In the context of the global economic crisis, attracting private sector capital to finance infrastructure is critical for the Uzbek economy. The press release examines an example of evaluating the effectiveness of an infrastructure investment project for the construction of the Tashguzar-Boysun-Kumkurgan railway line, implemented in 2003-2007. This was reported by the public relations service of the Center for Economic Research and Reforms.

The purpose of the project analysis is to determine the result (value) of an investment infrastructure project.

The methodology for the financial and economic assessment of infrastructure investment projects was developed by CERR jointly with ADB and is carried out for the assessment of projects (ex-post analysis) put into operation after at least 4-5 years. Such an econometric analysis is being carried out in Uzbekistan for the first time.

Today, on 30 September, an international conference on the topic: "Attracting Private Investment in Sustainable Infrastructure in Asia: Lessons for Central Asia" was held in an online format on the Zoom platform, in which the leadership of the Center for Economic Research and Reforms (CERR) took part.

The event is organized by the Asian Development Bank Institute (ADB) in cooperation with the Central Asia Regional Economic Cooperation Institute (CAREC).

Over 60 participants from 11 Asian countries took part in the conference: heads and authorized representatives of transport ministries and departments, railways, seaports, transport, logistics and IT companies, think tanks, as well as leading international organizations and associations in the field of infrastructure.

At the opening of the event, welcoming remarks were made by Mr. Naoyuki Yoshino, Chief Adviser, Financial Research Center, Japan Financial Services Agency, Mr. Tetsushi Sonobe, Head of ADB Institute, Mr. Yasmin S. Siddiqi, Director of Environment, Natural Resources and Rural Affairs Economy (CWER), Central and West Asia Department of ADB, Mr. Sayed Shakil Shah, Director of the CAREC Institute.

During today’s event, the role of governments and new models for attracting private investment in sustainable infrastructure was discussed.

During the plenary session, forecasts were announced, according to which, according to the Asian Development Bank, developing countries in Asia will need US$26 trillion in infrastructure investment over the next decade to sustain growth, eradicate poverty and tackle climate change. In particular, this includes investments in the energy, transport, telecommunications, water supply and sanitation sectors.

Given the limited public funding in most countries, introducing innovative measures to attract private sector capital will be critical to addressing the infrastructure financing gap in the region.

Attracting institutional investors such as insurance companies and pension funds, which are characterized by long-term investment projects lasting 10-20 years, will be especially important for large-scale infrastructure development. Likewise, it will be important to take into account the propensity of banks to invest in short and medium-term projects that match the structure of their assets and liabilities.

From the Uzbek side at the event, Deputy Director of the Center for Economic Research and Reforms Umid Abidkhadzhaev made a presentation on the Center’s research on the topic: “Financing infrastructure based on evidence: the experience of Uzbekistan”.

The conference participants were presented with an evidence-based approach to the development of infrastructure in Uzbekistan, for example, the project for the construction of the Tashguzar-Boysun-Kumkurgan railway line, implemented in 2003-2007.

The Tashguzar-Baysun-Kumkurgan railway line with a length of 223 km, put into operation in August 2007, is of strategic importance for the development of the southern regions of Uzbekistan. The road, worth US$447 million, bypasses Turkmenistan and reduced the previous distance of passenger and freight traffic by 170 km, and the travel time by 7 hours. The project was financed from the budget, funds of Uzbekiston Temir Yullari JSC and a loan from the Japanese government.

The aim of the CERR study was to quantify the impact of the Tashguzar-Baysun-Kumkurgan railway line, which was commissioned 13 years ago, on the profitability of enterprises and organizations.

“Evaluating the return on investment projects financed by taxpayers or external debt is relevant for most developing countries. At the same time, unlike other investment projects, assessing the non-financial, economic and social consequences of infrastructure projects requires a more complex approach and is not limited to a review of only the financial indicators of the project.

The Center for Economic Research and Reforms, in cooperation with international organizations, in particular, researchers from the Institute of the Asian Development Bank, represented by the senior adviser of the Japanese Financial Agency, Dr. Naoyuki Yoshino, developed a strategy for empirical assessment of infrastructure projects, the results of which were presented today for the review of the international expert community, said Umid Abidkhadzhaev.

“This methodology was previously applied to the Kyushu high-speed train in Japan. In addition, Victor Pontinez used this analysis to evaluate the performance of the Lipa-Ibaan-Batangas highway in the Philippines. Today we have used this methodology on the example of Uzbekistan”, - noted the deputy director of CERR.

According to him, the econometric analysis revealed the presence of positive effects in the regions where the line was built and the presence of indirect effects (spillover effect) in the neighboring regions.

The positive effects include an increase in the profits of enterprises and organizations in the Kashkadarya and Surkhandarya regions by 246 billion soums and 319 billion soums over 4 and 5 years, respectively.

At the same time, indirect effects for the 5th year showed an increase in the profit of enterprises in Bukhara and Samarkand regions by 156 billion soums.

The advantage of this analysis is that it allows to determine the economic effect of each factor separately. In particular, other factors could also contribute to economic growth in parallel with the implementation of the project. This econometric approach makes it possible to single out the relative share of these factors, as well as to determine the magnitude and scale of the impact on the infrastructure project.

Experts noted that over the past three years, large-scale economic reforms have been carried out in Uzbekistan, including favorable conditions have been created to attract foreign investment in infrastructure projects, the assessment of which can be carried out at least in 4-5 years. Namely, such an econometric analysis will allow assessing the impact of investment projects on infrastructure and development of the region as a whole.

Further, a discussion took place, during which international experts highly appreciated the CERR study, the results of which will be included in the corresponding ADB collection “Attracting Private Investment in Sustainable Infrastructure in Asia: Lessons for Central Asia”.