AzerWeb HomeAzeri

Advanced search

 Program Resume - Azerbaijan-Pilot Reconstruction Project (WB)

 Duration: 22.04.1997 - present
 Location: Fizuli
 Sectors: Poverty

Project Name Azerbaijan-Pilot Reconstruction Project (+)
Region Europe and Central Asia
Sector Multisector
Project ID AZPA35770
Borrower Government of Azerbaijan
Implementing Agency Azerbaijan Rehabilitation and Reconstruction Agency (ARRA) 
69 Fizuli Street, Baku, Azerbaijan
Contact person: Ali A. Mamedov 
Executive Director, ARRA, 
Tel.: (99412) 95-78-97 (receptionist) 
Fax: (99412) 95-78-97 
Date initial PID prepared April 23, 1997
Date this PID prepared April 23, 1997
Projected Appraisal Date February, 1998
Projected Board Date May, 1998

Country and Sector Background 

1. Azerbaijan, with an area of 86,600 square kilometers, has a population of 7.5 million and a per capita GDP of about US$ 490. It is a country of mountain ranges and river valleys with the greater Caucasus mountains in the north, the Lesser Caucasus mountains stretching across the south-west and the Talysh mountains in a subtropical zone in the south. The eastern coast of Azerbaijan is boarded by the Caspian Sea. The Kura and Arak rivers are located in the central part of the republic and have been equipped with large reservoirs for irrigation. The Nakhechivan Autonomous Republic (5,500 square kilometers and 295,000 inhabitants), an integral part of the republic, is geographically separated from the Azerbaijan main territory by Armenia. Azerbaijan is well-endowed with various natural resources, including fertile land, substantial oil reserves, especially in the Caspian Sea, a diversified industrial structure and a well educated labor force. It is one of the oldest oil producing regions in the world. Since its independence, however, Azerbaijan has been going through a very difficult period. In addition to the usual transition problems, the country had to deal with an undeclared but costly war.

2. Since 1988, when the conflict over the Nagorno-Karabakh region started, major parts of Azerbaijan, including Nagorno-Karabakh and "surrounding" areas, have been devastated by civil strife and, as a result of the conflict, 20% of the Azebaijan's territory has been occupied. It is estimated that thousands of people have been killed, about 650,000 internally displaced people (IDPs) and 200,000 refugees from Armenia have become scattered around Azerbaijan. Many of these IDPs and refugees have temporarily been accommodated in 65 towns and villages. A special State Committee for Refugees has been set up to coordinate the efforts of various national and international agencies providing humanitarian assistance to the IDPs. The impact of the conflict on Azerbaijan has been devastating, with the cessation of most economic activities in the occupied territories, the cut-off of the Nakhichevan portion of the country and the influx of refugees and IDPs.

3. Under the auspices of the Organization on Security and Cooperation in Europe (OSCE), a cease fire was achieved in May 1994 and has been generally respected. Since then, while several "peace talks" have been held, no agreement has been reached on a comprehensive settlement of the conflict. As a result, only a small portion of Azerbaijan's territory, in the Fizuli rayon, along the front line in Agdam and Terter raions and along the border with Armenia in Nakhchivan, liberated in late 1993, is currently available for reconstruction and reintegration of IDPs. The Government has selected these areas for the implementation of a Pilot Reconstruction Program to prepare for the major reconstruction program that will be implemented when a comprehensive peace is achieved.

4. In April 1996, the President of Azerbaijan requested the Bank to assist in preparing a reconstruction program. Government has initiated a number of steps to prepare for a reconstruction program, including: 

(a) a decree creating a State Commission for Reconstruction chaired by a Deputy Prime Minister with full authority reporting to the President, was signed in July 1996; the decree also includes the establishment of an International Advisory Group with representation of bilateral and multilateral institutions as well as NGOs; 

(b) the Government has endorsed the principle of partnership among donors, NGOs and the Government in the implementation of the program; meetings are regularly convened with NGOs on reconstruction and relief activities;

(c) the Azerbaijan Rehabilitation and Reconstruction Agency (ARRA) has been set up under the State Commission for Reconstruction to coordinate and implement the reconstruction program.

5. Following the July mission a PHRD grant of US$1.3 million was approved to carry out damage assessments/feasibility studies, strengthen ARRA's institutional capacity and implement selected pilot projects. UNDP provided US$500,000 to set up ARRA and to initiate some reconstruction activities. The European Union recently decided to provide about ECU6 million to finance the reconstruction of infrastructure and housing in the Fizuli raion.

6. A social assessment was carried out in the second half of 1996 to determine the views of the Internally Displaced People (IDPs) from Fizuli. The sample used for the survey was 500 households, of which 400 from Fizuli (both IDPs who have already returned to Fizuli and those who are still living outside Fizuli) and 100 from areas other than Fizuli. The objective was to start a process of public participation by which the stakeholders can be involved in the preparation and implementation of the reconstruction project. The social assessment was successfully completed.

7. In January 1997, the Government convened a donors conference in Baku in an effort to mobilize donors assistance for reconstruction. Support to the program was confirmed by the Bank, UNDP and the EU. The Government has, through its own resources and through the mobilization of the international donor community, begun to plan the process of reconstruction of the liberated area. Road, rail and power supply which were out of service in many cases have been partly restored, at least on a temporary basis. The predominantly agricultural based activities could be revived if  essential irrigation infrastructure could be rehabilitated combined with the provision of institutional support services such as credit for agricultural inputs, land registration and farmer information and advisory services. Rebuilding of houses and social facilities  will take much longer, but the rapid provision of building materials and key equipment and supplies will assist these efforts.

Prospects for Reconstruction 

8. The eventual reconstruction of the areas currently under occupation will be a major task. Although no comprehensive survey has been undertaken, preliminary indications are that the level of destruction may be high. This is true not only due to the fighting and consequent damage to infrastructure, but to the time which has elapsed since the initiation of the conflict and the forced migration of IDPs. The experience of conflicts in other parts of the world has highlighted the fact that conflict-induced destruction often occurs as much through deterioration of infrastructure because of lack of maintenance as through direct impact of high explosives. The possibility that infrastructure may have been looted or cannibalized for other purposes by occupying forces reinforces the likelihood that reconstruction will be a major task. The assumed wide-scale laying of land-mines in these areas will also complicate the task of reconstruction and will require appreciable investments in de-mining.

9. Azerbaijan is doing what it can to rebuild and restore its economy and deal with the problem of IDPs given its limited financial and institutional capacity. A rapid infusion of donor assistance is crucial to sustain and carry forward the efforts which are underway especially the transition from assistance for relief to reconstruction activities where they are possible. This transition will be especially necessary to assist the IDPs where they are and prepare their return as security conditions permit.

Objectives of the Pilot Reconstruction program

10. The Government's long term objective is to assist the return of all IDPs as the security situation changes and all the territories currently occupied are freed up in some way. In the medium term, the pilot reconstruction program will assist in the reconstruction of the conflict-affected regions of Fizuli, Agdam, Terter, Geranboy and Gazakh raions, as well as the Sadarak, Sharur, Babek, Shahbuz, Julfa, Ordubad raions in Nakhchevan which are under civilian administration. According to official statistics, 45,000 people are presently living in the Fizuli raion (30,000 before the conflict) in 22 settlements and about 112,700 people in the other 10 raions (138,600 before the conflict) in 91 settlements.

11. Within this context, the Government has set priority, in part based on the results of social assessment, on the basic repair of housing to allow the return of IDPs from refugee camps, the reconstruction of damaged physical and social infrastructure, and the revival of the local agriculture-based activity. The Government medium term reconstruction program would include therefore :

(a) clearance of land mines;

(b) basic repairs to the physical infrastructure (power supply, drinking water supply, roads, telephone, irrigation);

(c) basic repairs to housing and social infrastructure;

(d) provision of credit for agricultural inputs and assistance in the privatization of agricultural land; and (e) income generating activities. It is expected that, once the program is completed, about 9,000 people in Fizuli and 22,000 in the other raions, will be able to return to permanent residence from the refugee camps.

Bank response and strategy 

12. Following the July 1996 mission, the Bank/UNDP and the Government agreed on the steps needed to undertake the reconstruction starting with a pilot project in liberated areas and expanding the program when the additional areas are liberated. The proposed project would provide an essential input into the Government reconstruction program, by assisting in high priority reconstruction activities necessary to restore the basic conditions for the revival of economic activities in the conflict-affected areas. At the same time, it would provide capacity building in project preparation, management and implementation.

13. A number of programs are under implementation by UNHCR, together with International Rescue Committee (IRC), ICRC, DHA and WFP. UNHCR is assisting in the reconstruction of shelters. ICRC is active in solving immediate drinking water supply, providing food and seeds and is conducting a mine awareness program in the villages near the front line. The UNDP is providing the institutional support to ARRA and some financing for the reconstruction of housing and social infrastructure in Fizuli. The European Union has approved a reconstruction program under TACIS to reconstruct the drinking water supply, the electricity supply for the 22 settlements in the Fizuli raion, the irrigation system and repair of the railway. The humanitarian arm of the EU, ECHO, will undertake the rehabilitation of 600 individual houses (with GTZ) and twelve rural schools in the Fizuli raion.

Project Description

14. The proposed pilot reconstruction project would include the following components:

a) Repair of electric power supply in Fizuli, Agadam, Terter, Geranboy, Gazakh and Nakhchivan: reconstruction of 35-kV, 10-kV and LV power lines and 35/10-kV and 10/0.4-kV substations;

(b) Repair/reconstruction of drinking water supply in Fizuli, Agdam, Terter, Gazakh, Geranboy, Gazakh and Nakhchivan: drilling and restoration of borewells, pipelines, water reservoirs and pumping stations;

(c) Rehabilitation of irrigation structures and networks: borewells, hydrostructures, irrigation canals reconstruction and repair;

(d) Housing and social infrastructure: basic repair of public and private housing; repair of healthcare and school facilities;

(e) Agriculture and Income generation activities: agricultural institutional services, agricultural inputs, afforestation, etc.;

(f) Clearance of landmines: including the establishment of a national landmine clearing capability;

(g) Institutional support to ARRA: program preparation and management.

Project Financing 

16. The total financing requirements for a first phase program (1 to 3 years) amount to US$23.1 million, of which UNDP is financing 3.1 million and the EU (TACIS and ECHO) has committed US$6.5 million. The Bank could consider a first phase of US$10.5 million and the Government would contribute US$3.0 million. Other potential donors that expressed interest include the Islamic Development Bank and the US (for the humanitarian aspects). Ideally, the Bank contribution should be able to be increased or decreased depending upon firm donors interest, NGOs participation, the pace of implementation and the outcome of the peace process.

17. Funds are available from the EU, UNDP and NGOs for most of the reconstruction activities in Fizuli although there are some gaps as, for example, in mine clearing and afforestation. Little funding has been identified for other areas such as, Agdam, Terter, Garenboy, Gazakh and Nakhchevan, for which detailed damage assessments are being prepared. It is expected that once about 50% of this first phase program has been committed, a second phase of the reconstruction program would be defined in partnership with the Government and other donors and NGOs. 

Project Implementation 

18. The responsibility for assessing the damage and carrying out the proposed reconstruction program lies with the newly created Azerbaijan Rehabilitation and Reconstruction Agency (ARRA) and other government agencies and public enterprises, such as Azerafteroy (roads); Azenerji (power supply); Azeri Water Supply company, etc. For Fizuli, damage assessment and feasibility studies for most of sectors have been completed. For Agdam, Terter, Garenboy, Gazakh and Nakhichevan, except for the power facilities, no comprehensive assessments of the damages in the various sectors have been undertaken so far. To address this issue, local consultants are currently being hired under the PHRD grant to carry out detailed damage assessment, feasibility studies and prepare bidding documents.


19. The reconstruction of damaged infrastructure, the return of displaced families in their homes, and the reconstruction of damaged industrial and agricultural assets are priorities in the Government agenda. In addition to the humanitarian aspects, the return of IDPs to a normal economic is in itself a justification of the project.

Lessons Learned from Past Operations in the Country/Sector

20. The World Bank has financed many war reconstruction programs over the years which have been used in the design of the approach in Azerbaijan, in particular:

(a) establishing a strong implementation capacity which can take decisions quickly and with the authority of a country's senior leaders; this is reflected in the setting-up of ARRA;

(b) ensuring that there is coordination and cooperation among the donors, including local and foreign NGOs, to avoid duplication and waste of resources, for which the donors coordination mechanism was created;

(c) identifying in an environment of inadequate overall resources what the priorities of the affected people are, which the social assessment has done; and

(d) in the period before an overall peace settlement is put in place, piloting reconstruction efforts as soon as the security situation allows, which is what UNDP, EU and the World Bank have done through their financing over the last nine months and which the proposed Pilot Project is designed to continue.

21. The World Bank's experience with assisting governments with demining is very recent and the Bank does not have the technical expertise in-house to prepare and monitor demining programs. The Bank's experience to date with demining in Bosnia and Croatia has depended on specialized consultants, who have also been used to prepare the Azerbaijan demining component thus far and used a variety of implementation and procurement arrangements which will also be tested in Azerbaijan.

Poverty Category

22. Although the project does not contain a poverty alleviation components it is aimed at improving the livelihood of IDPs and host communities in the project areas.

Environmental Aspects

23. The project would follow accepted Bank procedures, and would normally be assigned the environmental rating B. Any subcomponent which present an opportunity for environmental enhancement will be designed accordingly, and all subcomponents will be monitored during supervision to ensure that there is no degradation to the environment.

Program Objective Categories

24. The program objective categories would include poverty alleviation and environmentally sustainable development.

Contact Point:         

Salem Ouahes, Task Manager
The World Bank
1818 H Street N.W.
Washington, D.C.  20433
Telephone No.:  (202) 473-2430
Fax No.:  (202) 477-3285

Note:  This is information on an evolving project.  Certain components may not necessarily be included in the final project. Processed by the Public Information Center week ending September 5, 1997.


Environmental Impact 

1. The Project does not have any major environmental issues associated with its implementation. Rather, its implementation would have positive impacts on the environment through the clearance of landmines, provision of drinking water and electricity and afforestation. It offers the opportunity of removing hazards from landmines and improving the quality of life for the populations living in the war-torn areas. 

2. The environmental issues associated specifically with the Project are largely confined to the reconstruction works and the resulting increased contractors activity in the project areas. Best practice will be used for the construction works to minimize adverse impact on the environment. Further, the project will include the development of a modest environmental monitoring capacity.

For Organizations
Login In:


Forget Password
New User

Mobil: (055) 669 68 89
WhatsApp: (055) 669 68 89

Log In:


Forget Password
New User