Independent Evaluation

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Country Assistance Program Evaluation for Bhutan
May 2005

Strategic planning, as set out in formal country operational strategies (COSs) and country assistance programs (CSPs), did not play a major role in guiding the Asian Development Bank's (ADB) operations in Bhutan.

The 1991 COS was the only formal strategy prepared during the 18 year period from 1982 to 2000. During this period, ADB operations were guided more by pragmatic country programming missions and generally clearly articulated government priorities. Since 2000, ADB has placed more emphasis on developing formal country strategies for Bhutan. A CSP was approved in 2000.

The country assistance program evaluation (CAPE) adopts the standard evaluation framework used by ADB's Operations Evaluation Department to assess the performance of CAPs, as well as individual projects, programs, and TA grants after completion.

  Findings and Lessons

A synthesis of findings indicates that during the period under evaluation, ADB operations shared a common set of priority areas that encompass institutional capacity building, private sector development, physical and social infrastructure development, environmental protection, and human resource development.

Although the program was relatively balanced, it did not support the oft-cited strategic objective of supporting private sector development through nontraditional activities designed to diversify the economic base of the country and diversify its exports.

The lessons that came out from the evaluation were:

• inadequate explanations in some COSs and CSPs for the reasons for substantive program changes;
• lack of ownership of ADB assistance by some government agencies;
• insufficient sensitivity of some project designs to cultural and religious beliefs;
• lack of flexibility in some project designs;
• inadequate integration of projects with one another when there was potential for complementarities;
• inadequate coordination of some projects with development partners; and
• project implementation delays resulting from inadequate local budget allocations, shortage of skilled local staff, frequent changes of project staff, weak procurement and contracting capabilities, insufficient delegation of authority, weak monitoring and coordination, and delays in consultant recruitment.

  Key recommendations

• Increasing ADB's Assistance to Bhutan. Because of Bhutan's good economic performance and rising per capita GDP, there is likely to be a reduction of grants and loans from other development partners in the near future.
  
  
• Sectoral Focus and Selectivity. The CAPE's assessment of performance has been positive in most sectors and, based on evaluation findings, there are no compelling reasons to withdraw from sectors.
  
  
• Grant Financing, Cofinancing, and Funding Agency Coordination. The Government will continue to focus its requests for donor support on grant financing to avoid the debt-servicing commitments associated with loans. ADB should increase its efforts to mobilize cofinancing and developing partnerships with other donors, particularly in areas directly related to the Millennium Development Goals.
  
  
• Portfolio Monitoring and Establishment of a Resident Mission. Frequent missions to monitor and review projects are essential to efficient portfolio monitoring. Establishing a resident mission would allow ADB to play a more active role in the local donor community and respond more rapidly to requests from the Government and executing agencies.
  
  
• CSP Targets and Indicators. A set of measurable output and outcome target indicators for each sector should be established in the next CSP.
  
  
• Financial Sector Competitiveness. ADB will need to expand its interventions in the regulatory framework of the financial sector if sector is to achieve optimal results from future projects based on lines of credit or other forms of loan finance.
  
  
• Private Sector Development. The formulation of the next CSP should consider whether part of the strategy should be to increase ADB direct support for the private sector.