Regions and Countries

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p. 6 of 20 BACK | NEXT I. Country Performance Assessment A. Economic Performance Assessment B. Poverty Assessment C. Assessment of Socio-Environmental Performance D. Governance: Sound Development Management E. Implementation Assessment II. Country Operational Strategy III. Sector Strategies IV. Regional Cooperation V. Donor Activities and Aid Coordination VI. Cofinancing and Catalyzing External Resources VII. ADB’s Operational Program VIII. Economic and Sector Work Program IX. Local Cost Financing

Country Assistance Plans - Federated States of Micronesia : I. Country Performance Assessment

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E. Implementation Assessment

1. The Portfolio

17. As of 31 December 1999, cumulative ADB lending to FSM consisted of three loan projects for a total of $35.1 million. In addition, ADB has provided thirty-one TAs totalling $17.55 million (see Appendix 2, pages 1 and 2 for implementation, disbursement performance, post-evaluation results, and status of implementation). Loans have been approved for a public sector reform program (PSRP), water supply and sanitation, and fisheries development⁸.

18. The PSRP loan resulting in successful fiscal adjustments of the national and state governments was closed in December 1999⁹. ADB's other two ongoing loan projects have experienced delays in implementation and a mixed performance to date. Restructuring of the problematic Micronesian Longlining Fishing Company (MLFC), which is a private venture established under Loan No. 1257-FSM: Fishery Development Project, is a key issue. The Kosrae state component under Loan No. 1459-FSM: Water Supply and Sanitation Project is to be cancelled with funds reallocated to components of other states.

19. TA grants have included six project preparatory TAs of which only 2 have so far led to the approval of a loan. TAs to date have covered economic policy and planning, natural resource development, and support to the finance and industry sectors. As of 31 December 2000, there are a total of four ongoing TA projects covering economic policy advice, privatization and corporate governance, and strengthening the statistical system.

2. Issues in Project Implementation

20. In June 1999, the final second tranche drawdown for the PSRP¹⁰ was disbursed as Chuuk and Pohnpei state governments have met the required conditions by passing the foreign investment law and other legislation. ADB's other two ongoing loan projects¹¹ have had a mixed performance. The lessons learned are: (i) ADB's project needs to be based on the individual state needs and (ii) ongoing economic reforms to create a more private sector-friendly environment should precede or at least coincide with, ADB's investment in revenue generating sectors.

21. The political system, which allows each of the states a high degree of autonomy with each having its own Constitution, poses a task for project and program design. The separations of legislature and executive at national and state levels make consensus building more challenging. It is, therefore, imperative that attention be given to the political realities in the entry stage of project/program design to avoid delays and difficulties during implementation. Conditionalities in project design should be realistic and acceptable within the broad framework of the Constitution of each state and allow for adequate flexibility for implementation to proceed even if all states are not in compliance.

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