Learning Curves

OED
September 2007

ImprovingADBsStrategicFocus andOperationsinIndia

Indiahasmadefasteconomicprogressinthelastdecadebutstillbattleshighlevelsof poverty. Traditionally,ADBslendingandtechnicalassistancetothecountryhavefocusedon infrastructure.WasADBsoperationalfocusappropriateforsupportingsustainable economicgrowthandpovertyreduction?HowhasADBsassistanceperformed?Howmight ADBsstrategicfocusandoperationsbeimproved?ThefindingsofanevaluationofADBs countryassistanceprograminIndiahaveimplicationsforresourceallocation,designand focusofoperations,programmanagement,andbusinessprocesses.

Background Theperiodfromthemid1980ssawtheIndian economysgradualandsometimeshaltingtransition fromnearlyaquarterofacenturyofextensivestate regulationandownership,toamoremarketoriented economicsystem.Italsosawaccelerationofgross domesticproductgrowthratesaftereconomicreforms wereinitiatedin1991,andsizablereductioninpoverty levelsfrom45%to28%.StrategiesoftheAsian DevelopmentBank(ADB)in1986,1990,1996,and2003 helpedreformswhileprioritizingassistanceto infrastructureinsupportofequitablegrowth. In2007theOperationsEvaluationDepartment conductedthefirstCountryAssistanceProgram EvaluationforIndia. 1 Thestudywasinformedby sectorassistanceprogramevaluationsforthetransport andenergysectors,andaSpecialEvaluationStudyon ADBSupporttoPublicResourceManagementin India.Itprecedespreparationofthenewcountry partnershipstrategyfor20082012. Thestudyexaminedoperationsapprovedfrom1986, thefirstyearofADBsoperationsinthecountry,to2006. ItfollowedtheGuidelinesforthePreparationof CountryAssistanceProgramEvaluationReportsand isbasedonstrategic/institutionalandsector performanceassessmentsconsideringADBsstrategic positioning,contributiontodevelopmentresults,and performance,andtherelevance,effectiveness,efficiency, sustainability,andimpactofADBssectoroperations.
Operations Evaluation Department Asian Development Bank

Assessmentswerebasedonperceptionsurveys, interviews,reviewsofsectorandprojectperformance evaluationsandspecialevaluationstudies,andrapid sectorassessments. SummaryofFindings ADBsstrategiesandprogramswerewellaligned withADBscorporateobjectivesandtheGovernments developmentstrategies,butalsoreflectedthelatters shortcomings,particularlyduringtheprereformarea, wheninfrastructureinvestmentswerefinanceddespite deficientpolicyandinstitutionalframeworks.ADBs lackofsectorstrategiesforthefirsttenyearsof operationsinIndianegativelyaffectedthesequencing andcontinuityofADBsassistanceinanumberof sectors.Theshiftfromcentraltostateleveloperations after1996hashelpedimprovethegeographicand institutionalfocusofADBscountryprogram,which, togetherwithcomparativelyhighsectorselectivity, facilitatedefficientandeffectiveuseofADBsresources. AlthoughADBsassistancecomparedtoIndias overallinvestmentrequirementshasbeensmall,ADB madesignificantcontributionstothedevelopment process,mostimportantlythroughitssupportfor projectdesignandimplementation,advisoryservices, andpolicydialogueatthestatelevel.However,ADB failedtoaddmuchvalueintheprovisionofknowledge productsandservicesandriskmitigation.ADB assistancehelpedbuildmuchneededinfrastructure

6 ADB Avenue, Mandaluyong City, 1550 Metro Manila, Philippines Tel +63 2 632 4444; Fax +63 2 636 2444; evaluation@adb.org; www.adb.org/evaluation/

andcontributedtoimprovingpolicyandinstitutional frameworks,whichsupportedeconomicgrowth.The recentexpansionofADBsoperationstomore backwardstateswithhighpovertyincidenceandto ruralareasislikelytocontributetomoreequitable growthandpovertyreduction,andurbandevelopment projectshavehelpedimprovethedeliveryofbasic services,therebyreducingnonincomepoverty. ADBsfocusonprojectapprovals,inadequatestaff resources,limiteddelegationofauthorityforproject implementationtoADBsIndiaResidentMission, applicationofsafeguardsandprocurementpolicies, andunaddressedcapacityproblemsofexecuting agenciescontributedtosignificantproject implementationdelays.Proactiveportfolio managementmeasuresjointlyinstitutedbyADBand theGovernment,aswellastheuseofnewmodalities underADBsInnovationandEfficiencyInitiative, haveledtorecentimprovements. Energyandpublicresourcemanagementsector operationsweredeemedsuccessful.Operationsinthe transport,urban,andfinancialsectorswerejudged partlysuccessfulonthehighside.Theeffectivenessof financialsectoroperationswasreducedbycancellations offinancialintermediationloans,whichaccountedfora largeshareofsectorassistance,duetolackofeffective demandresultingfromunaddressedsectorlevel structuralproblemsandthereadyavailabilityof domesticfunds.Theefficiencyoftransportprojectsis likelygoingtobeaffectedbylowerthanforecasttraffic volumesandimplementationproblemsthatmaylead tocostoverruns.Lackofadequatefundsforoperation andmaintenanceactivitiesandweaknessesin institutionalcapacitymightreducethesustainabilityof projectsintheroadsandurbansectors. TheoverallratingforADBsassistanceprogramin Indiawassuccessful,albeitonthelowside,thisbased onstrategic/institutionalandsectorperformanceratings. Recommendations ImprovethestrategicfocusofADBsoperationsin Indiabycarefullyanalyzingandselectingsectorsfor inclusioninADBsassistanceprogram; concentratingresourcesinamanageablenumberof focusstates;anchoringanexpansioninlending volumesandadditionofnewsectorsandstatesto commensurateincreasesinstaffandtechnical assistanceresources;andconsideringsupportfor environmentalissues.
Learning Curves available @ www.adb.org/evaluation/

ImprovethequalityofADBssectorlendingby discontinuingfinancialintermediationlendingfor whichthereisnoeffectivedemandorvalueaddition; addressingprojectsustainabilityissuesthrough stakeholderconsultationsonproject/programdesign optionsandrelatedtarifforfiscalrequirementsand throughcapacitydevelopmentsupport;preparing realisticprojectimplementationschedulesand arrangements;andstrengtheningstaffincentivesfor projectimplementation. Increasethelevelofprivatesectoroperationsby developingajointoperationsstrategycoveringboth thepublicandprivatesectorsidesofADB; equippingtheIndiaResidentMissionwithmore capacityandaccountabilityforprivatesectorand othernonsovereigntransactions;expanding headroomforprivatesectorlendingtoIndia; shiftingfundingfromADBspublicto private/nonsovereignwindowswhenfeasible;and catalyzingfundingfromcommercialsources throughtheuseofriskmitigationinstruments. Improvetherelevanceandeffectivenessof nonlendingservicesbyfocusingeconomicand sectorworkontopicsrelevanttoADBslending operations;strengtheningstaffincentivesfor economicandsectorwork;providingstaffresources withinfrastructureregulatory,policy,institutional, publicprivatepartnership,andfinancingexpertise; andencouragingtherecruitmentofexceptionally wellqualifiedinternationalandnationalconsultants. Improveresponsivenesstoclientconcernsby consideringdecentralizationofadditionalfunctions anddelegationofmoreauthoritytotheIndia ResidentMission,andharmonizingtheapproachto commonsafeguardsissuesinIndiaandgradually movingtowardcountrysystemswhereequivalence withADBprinciplesexists. Feedback WhentheseLearningCurveswerepreparedADB ManagementsResponseandtheChairsSummaryof theDevelopmentEffectivenessCommittee Discussionswerenotavailablefordisclosuretothe public.ThestudywascompletedinSeptember2007. 1 ADB.2007.CountryAssistanceProgramEvaluationforIndia.
Manila.Available: http://www.adb.org/Documents/CAPES/IND/CAPEIND 2007.pdf

Team Leader: Henrike Feig; Tel +63 2 632 4104; hfeig@adb.org