Modernization of the Kyzylorda bus park - Environmental and Social Due Diligence

Kyzylorda city is the administrative center of the Kyzylorda oblast. According to the Kazakhstan Central Statistical Office, as of February 2015, there were 753,200 people in the Kyzylorda oblast, of which 260,817 live in the city of Kyzylorda, on an area of 240 km². The city’s economy is mainly based on oil and natural gas production in the region and the service sector within the city. Rice growing and processing is another important industry, with two rice factories operating in the city. Kyzylorda is a leading educational center with over 150,000 students in the region studying at the state university and in many other schools in the city. Kyzylorda is characterized by mixed types of land use: residential buildings, trade enterprises, light industry enterprises, and service organizations located throughout the city. 

As with many medium-sized cities in Kazakhstan, the urban transport sector in Kyzylorda suffered from underinvestment coupled with a lack of adequate regulation. Transport services in the City were provided by only one mode of transport - used buses operated by private drivers. The quality level of urban transport services was constantly deteriorating, which was primarily due to a weak regulatory framework when the license issuance was not supported by compliance with quality standards. In addition, the lack of contractual controls and incentives for drivers to provide better services has further exacerbated problems such as non-compliance with the schedule, chaotic and oversupply of buses on major profitable routes during rush hours, and lack of proper maintenance.

Public transport in Kyzylorda faced a lack of funding and a lack of a proper legal framework. The Akimat of Kyzylorda oblast applied to the EBRD in 2013 for assistance in reforming the city's public urban transport sector. The EBRD, after examining all aspects of the issue, provided the transport company "Bus fleet of Kyzylorda" LLP, owned by the oblast Akimat, a loan in the amount of up to USD 18.8 million to upgrade the city fleet with new LNG buses; construction of a fully equipped Depot equipped for maintenance and refueling of LNG buses; creation of a reliable institutional environment and regulatory framework for the sector development by consolidating private operators into formal legal entities; introduction of a transparent tendering regime for the provision of bus services for the private sector through monetary policy; and, the development of an integrated ticketing system (“TS”).

Lending terms: The loan term is 10 years, including a grace period of 3 years, the interest rate is 4.5% per annum. (*annual effective rate - 5.12%).

Modernization of rolling stock was of fundamental importance for the development of public transport in Kyzylorda in general. Therefore, all shuttle vans and old buses were removed from service and replaced with new buses. Taking into account passenger requests, land use, and other measures to improve public transport, a completely new vehicle fleet has been created, consisting of 92 standard LNG-fueled buses with a large capacity purchased through the EBRD project and tightening requirements for private carriers of small buses with new medium-sized buses by 50 passengers. The city Akimat built a new depot with a capacity of about 300 buses to service the updated bus fleet, as well as an NGV filling station (automobile gas-filling compressor station) for operating the updated composition of the city's buses. 

The Public Transport Development Strategy developed by the Project defines the key role of the Department of Passenger Transport of Kyzylorda as a structure that has the competence and all necessary powers and authority to plan, manage and regulate the Kyzylorda public transport system. In the Strategy, UPTK has a demanding role for collecting fare revenue and hiring operators to provide services according to the required level of service. The level of service is stipulated in the Public Service Agreement (PSA) for each route, where the PSAPS itself is the central element of the current commercial concession agreement, to which operators will be required to join under the contract. In November 2016 the Akimat of Kyzylorda city on the basis of a tender for the maintenance of five socially significant routes, concluded the relevant Service Agreements (SA) between the “City department of housing and  communal services,  passenger transport and highways” state institution and “Kyzylorda Bus Fleet” LLP. Also, a new special route was launched for a certain range of arrival and departure times of flights from the "Korkyt - Ata" airport to the railway station of the city.

The main directions of modeling cash flows of financial activities developed during the implementation of the Project formed the sources for repayment of loan obligations to the EBRD:

• Passenger traffic flow: Clarification of the passenger flow and establishment of the final profile of the expected demand for transportation services for all routes based on a large number of available forecasts;
• Costing methodology: An estimate of the costs of Kyzylorda Bus Fleet (KBF) based on the current methodology and its comparison with the calculation of the actual costs of KBF in connection with ensuring the operation of all buses on all routes and measures leading to a decrease in the need for subsidies;
• Rates: Revision with local authorities to agree on a revised costing approach, combined with lower costing, fewer subsidies.

Converting a loan from US dollars to tenge: to reduce large losses from exchange rate differences and improve the financial situation of the Company in the medium and long term.

• Tax evasion by operators has also been reduced through the implementation of an integrated ticketing and revenue collection system, which makes it possible to control passenger traffic flow, including by type of passengers to facilitate subsidy payments.

The corresponding restructuring of the transport network has allowed to use service models that are suitable for current and changing transport needs and requirements, based on the principles of frequent, affordable, and integrated services. The Project consultants have developed a transportation demand model in accordance with international industry standards. The guidelines for network optimization were taken from the “Guidelines for the provision of high-quality transport services in small and medium-sized cities in Europe” and based on the adaptation of existing data, the recommended network configuration was presented for subsequent implementation to the public transport authorities of Kyzylorda. Passengers are able to reach their destination using only public transport, with reasonable walking distances to and from bus stops.

• Public transport is generally recognized as the most efficient and economical mode of travel. By setting measurable goals and a clear vision, infrastructure renewal and an implemented public transport strategy in Kyzylorda provide a basis for consistent investment in public transport. Achieving an additional share for public transport may seem like an ambitious goal, given the issues identified in Kyzylorda's current public transport system, coupled with the continued growth in vehicle ownership and use. Nevertheless, the Project proves that such a goal is achievable, but it will require direct regulation, integration, organization and management of public transport. The oblast Akimat and other government agencies have ensured the establishment of an efficient and high-quality public transport management system that will embody a regulatory framework capable of sustainably promoting the regulation and implementation of all proposed measures to improve the public transport situation in Kyzylorda.

Currently, there are three departments responsible for the control of public transport in Kyzylorda: 

• Regional Department of Public Transport and Roads of the Kyzylorda Oblast – Responsible for general transport throughout the region.
• City department of housing and communal services, passenger transport and highways– Responsible for community facilities and transport in the city.
• “Kyzylorda Bus Fleet” LLP (KBF) - KBF owns LNG buses and depots, which are planned to be leased to private operators on a competitive basis.