Introduction As a landlocked country, Uzbekistan’s roads carried 1.24 billion tons, or 90.6% of all freight, in 2020 (rail 5.2%, pipelines 4.2%). From 2001 to June 2023, about 70% of the $47.27 billion in investments through the Central Asia Regional Economic Cooperation (CAREC) went to the transport sector, with 24% allocated to Uzbekistan. Governments (21%), the Asian Development Bank (ADB, 35%), and other development partners (44%) funded these investments. Since 2017, Uzbekistan has accelerated infrastructure development through private sector participation, including public-private partnerships (PPPs) for road projects. PPPs offer a way to leverage private sector efficiency, expertise, and financing for road construction and operation, which supports development goals like job creation and industrial innovation. However, PPPs for high-cost road projects have public financial management (PFM) implications, as long-term payment commitments pose contingent risks. Due diligence and risk assessment are critical to ensure PPPs provide better value than conventional procurement. Analysis PPP progress The PPP Development Department (PPPDD), established in 2018 under the Ministry of Economy and Finance (MOEF), monitors PPP progress in Uzbekistan. As of 5 August 2024, the government had signed 973 PPPs, totaling about $2.152 billion. These include 463 water management projects, 220 heating system projects, 91 education projects, 52 healthcare projects, and only 2 in transportation. Most PPP projects are small, averaging about $2.2 million each. The benefits of PPPs are more tangible for large projects, such as roads. Currently, no road PPPs have been signed, but two are in the pipeline: the Tashkent-Andijan Road (TAR), estimated at $5.35 billion, and the Tashkent-Samarkand Road (TSR), estimated at $1.4 billion. Road construction and rehabilitation typically require higher investment than other infrastructure sectors. The World Bank estimates Uzbekistan’s Road Development Plan faces a $1.5 billion annual funding gap. Mobilizing private sector and external financiers is crucial to bridge this gap. PPP projects generally progress through six phases: project identification, appraisal, structuring, tendering, delivery, and operation. Both the TAR and TSR are at the structuring stage. For TAR, the World Bank funded a pre-investment study in 2015 at a cost of $2.85 million, building on a pre-feasibility study completed in 2020. An investment teaser was prepared in December 2023, and the government invited expressions of interest by March 2024, with prequalification expected later in the year. The TSR feasibility study, funded by the European Bank for Reconstruction and Development (EBRD), began in 2019 but remains incomplete. Besides TAR and TSR, other potential PPP road projects include the Kungrad-Daut-Ata A380 Highway (KDH) operations and maintenance, a nationwide electronic tolling system, real-time traffic monitoring, weigh-in-motion systems, the Takhtakaracha tunnel construction, and the development of a new road crash and vehicle operations and maintenance database. In December 2023, EBRD approved a €10 million loan to establish the Uzbekistan PPP Project Development Facility (UPDF), which will finance the preparation of priority PPP projects, including in the road sector. Uzbekistan’s PPP framework Uzbekistan’s PPP framework is built on the 2019 PPP Law (amended in 2021), Resolution 259 (2020), and a draft toll road law developed with World Bank support. The draft law aims to provide a foundation for tolling roads, complementing the existing PPP Law, and was expected to be submitted to Parliament by June 2024. The International Monetary Fund (IMF) recommended improving fiscal risk assessments, including for state-owned enterprises and PPPs, to better manage external borrowing and integrate investment planning into the medium-term budget. Uzbekistan’s public debt rose from 28% of GDP in 2019 to 36.8% in July 2023, reaching $31.5 billion. The Debt Law caps public debt at 60% of GDP, with policies tightening if debt reaches 50%. Attracting private sector financing for high-cost road projects is essential to avoid increasing the public debt burden. Tolling system for roads The government plans to introduce toll roads to ease budget constraints and improve road services. A draft toll law, prepared with World Bank assistance, aims to establish tolling mechanisms. Preliminary estimates suggest toll fees for the TAR route could be $5-7 for cars and $15 for trucks and buses. Tolling alone may not cover construction and operations and maintenance costs, requiring availability payments or co-funding from development partners. The ADB has supported road infrastructure in Uzbekistan with $1.3 billion from 2007 to 2022. The Ministry of Transport requested ADB’s assistance in introducing a tolling system, with the KDH project selected to pilot this system. The KDH could become the first ADB-supported PPP road project in Uzbekistan, with potential involvement in other PPP efforts, such as transforming State Unitary Entities (SUE) for road operations and maintenance and improving urban bus services in Karakalpakstan. Implications Developing PPP operations for road projects may accelerate Uzbekistan’s progress toward achieving several Sustainable Development Goals (SDGs), particularly in decent work and economic growth, industry, innovation, infrastructure, and partnerships. To support these efforts, stakeholders can take the following actions: Conversion of KDH into a PPP project: The proposed pilot test for the KDH tolling system, involving private sector participation, could demonstrate how to transition existing highways into PPP projects. In addition to tolling, the private sector could finance supporting infrastructure, such as gas stations, restaurants, and market stalls at rest stops. This would help reduce the government's fiscal burden, improve operations and maintenance, and enhance project sustainability. Financing and capacity building: The government and ADB are considering applying for external financing, such as the Asia Pacific Project Preparation Facility (AP3F), to fund a detailed feasibility study for the tolling pilot test. This funding could also be used for capacity building, including PPP certification training, workshops, and learning from other countries' successes and failures in PPP road projects. Fiscal risk studies: Given the high cost and long-term nature of PPP road projects, further studies on potential public financial management risks are necessary. These studies should assess possible fiscal liabilities under PPP contracts, particularly for the KDH project, and incorporate lessons learned from other countries. Resources Asian Development Bank. Uzbekistan: Road Subsector Development Strategy and Action Plan.Development Asia. 2023. A Way to Sustain Uzbekistan’s Road Infrastructure Transformation. Ask the Experts Agustina Musa Senior Financial Management Specialist, Public Financial Management Division, Procurement, Portfolio, and Financial Management Department, ADB Agustina has been with ADB since June 2002 and is currently a Senior Financial Management Specialist in the Public Financial Management Division. She holds a master’s degree in banking and finance and a PhD in development studies, both from the UK. Agustina also holds the APMG International Certified Public-Private Partnerships (PPP) Professional Credential and has supported PPP operations, particularly in Cambodia, Lao PDR, and the Philippines. Follow Agustina Musa on Yongkeun Oh Senior Transport Specialist, Transport Sector Office, Sectors Group, Asian Development Bank Yongkeun has been with ADB since April 2017 and is currently a Senior Transport Specialist in the Transport Sector Office. He holds a master’s degree in business administration from the Korea Advanced Institute for Science and Technology (KAIST). Previously, he served as chief representative to the Philippines for the Economic Development Cooperation Fund (EDCF), the concessional development financing arm of the Republic of Korea, and worked as a senior credit officer at the Export-Import Bank of Korea. Follow Yongkeun Oh on Asian Development Bank (ADB) The Asian Development Bank is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region. Its main instruments for helping its developing member countries are policy dialogue, loans, equity investments, guarantees, grants, and technical assistance. Follow Asian Development Bank (ADB) on Leave your question or comment in the section below: View the discussion thread.