Countries and Regions

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p. 7 of 21 BACK | NEXT I. Country Performance Assessment A. Economic Performance Assessment B. Policy and Development Issues C. Poverty Assessment D. Assessment of Socio-Environmental Performance E. Governance: Sound Development Management F. Implementation Assessment II. Country Operational Strategy III. Sector Strategies IV. Subregional Economic 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 - People's Republic of China : I. Country Performance Assessment

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F. Implementation Assessment

1. The Portfolio

42. Findings of the 1998 Country Assistance Program Evaluation (CAPE)⁹ for PRC continue to be integrated into portfolio management. The CAPE assessed the relevance of ADB’s strategy in terms of the needs of the PRC, the effectiveness of ADB operations, and the constraints that narrow the choice of operational options. ADB operations were concentrated in the financial and industrial sectors during 1986-1990. During the 1990s, the focus shifted to the transport, energy, and environment sectors. The CAPE concluded that ADB’s performance in the transport and energy sectors, which account for 63 percent of ADB’s PRC portfolio, was good. Performance in the agriculture, financial and industrial sectors, which together account for 25 percent of ADB’s PRC portfolio, was mixed. The CAPE concluded that ADB’s technical assistance program had been effective in the environment, and infrastructure sectors and in providing policy support for fiscal reform but had not led to strategic impacts in the financial, enterprise and agriculture sectors. ADB’s performance in promoting the private sector and mobilizing cofinancing was rated as good. An important finding was that the CAPs in the past embodied the borrowing program of the PRC, as projects were normally selected by the borrowers.

43. The major recommendations in the CAPE have been were discussed with the Government in the preparation of the present CAP. This is reflected in a streamlined and better targeted TA program. Consistent with the CAPE’s recommendations, TA 3375-PRC: Project Performance Management Capacity Building was provided to strengthen the capacity of the Project Inspectorate in SDPC and a follow-up TA is now included in the program. Linkages and implementation arrangements with the GEF (Global Environment Facility) are being developed to expand ADB’s environmental activities to address green side environmental issues. In May 2000, ADB was requested by the Government to assist it in preparing a GEF Partnership Program focussing on the protection of deteriorated eco-environmental areas in the western region. High level policy dialogue involving Management led to an agreement that ADB could play a more strategic role in the areas of financial and enterprise reform. This dialogue resulted in agreement that ADB would be the first multilateral institution to make a loan to support social security reform in PRC.

44. Early postevaluation results have been mixed. Of the six project performance audit reports (PPAR) carried out for PRC, four have concluded successful performance with demonstrated economic viability, sustainability, increased employment opportunities, and general compliance with environmental regulations. PPARs for a pulp mill project and a railway project rated the projects as unsuccessful. Lessons from these problem projects have been incorporated in the design of subsequent projects in the respective sectors.

45. Projects in ADB’s PRC portfolio are generally implemented on schedule and within budget. In terms of contract awards and disbursements, PRC has performed well compared to other DMCs. As of 31 December 1999, cumulative net lending to the PRC amounted to $9.4 billion with contract awards and disbursements reaching $5.5 billion and $4.9 billion, respectively. PRC’s 19.3 percent disbursement ratio exceeded the ADB-wide average of 17.6 percent. ADB’s lending focuses on physical infrastructure with more than 65 percent of the portfolio concentrated in the transport/communications and energy subsectors. Detailed portfolio performance indicators are given in Appendix 2. ADB had provided 328 technical assistance totaling $166.6 million as of 31 December 1999. Project preparatory Project preparatory TAs accounted for 27.74 percent of the total number of TAs. T

46. As of May 2000, all ongoing projects (i.e. 30 projects) had submitted audited financial statements. However, some of the submissions were late. The full compliance rate audited financial statements for PRC was 63 percent as against ADB average of 61 percent.

47. The wide-ranging reform of the Ggovernment structure to remove bureaucratic interference in economic activities and streamline government functions should improve transparency and expedite project processing and implementation. The recent changes in institutional arrangements and approval authority should have a substantial positive impact on ongoing and future ADB operations. However, in the near term, the changing bureaucratic environment may exacerbate institutional problems and delay approval formalities during the transition period.

2. Issues in Project Implementation

48. PRC has demonstrated a strong project implementation capability. The good project quality and implementation experience reflect the strong sense of project ownership that prevails among all agencies involved in the design, implementation, and management of projects as well as the rigorous screening and approval process for development projects, particularly those proposed for external assistance.

49. Despite the overall satisfactory portfolio performance, implementation difficulties have affected some ADB-financed projects. Seven portfolio issues need to be addressed: (i) Implementation Capacity: ADB’s target is to shift about two-thirds of its geographically specific lending to interior pinland provinces. Generally, the institutions in the interior pinland provinces are weaker and less experienced in dealing with donors than the executing agencies on the Coastal Region. Careful monitoring and support from ADB is needed to facilitate the implementation of projects in the inland provinces; (ii) Counterpart Funds: In the past some executing agencies, experienced difficulties raising the necessary counterpart funds. Because of the Government’s large domestic stimulus package, the availability of counterpart funds has generally not been a problem improved for infrastructure projects. However, some pProjects in other sectors, particularly those involving financially independent entities, still continue to have experienced counterpart fund problems. Therefore, this issue will need to be carefully monitored as the domestic stimulation package winds down and ADB projects are increasingly located in the poorer interior Western provinces; (iii) Procurement. While procurement is generally undertaken efficiently in PRC, there have been some instances in the power and transport sectors of delays in implementation caused by procurement problems. In some cases, ADB has refused to finance contracts that were not awarded in a manner consistent with ADB procurement Guidelines. Efforts need to be made to avoid repetition;¹⁰ (iv) Resettlement: Resettlement is generally done well in PRC and adequate remedial actions are being taken during the implementation. However, ADB may needs to be involved from the earliest stage when large-scale resettlement is required; (v) Reporting: Some executing agencies are late in submitting required progress reports or fail to submit the reports. This makes it difficult to monitor project implementation issues from the Headquarters; and (vi) Delays in Loan Signing and Effectiveness: Loans approved have experienced average delays of about 9nine months before being declared effective, implying implementation delays and the loss of part of the grace period.

50. The establishment of the PRC Resident Mission (PRCM) in Beijing in June 2000 will foster closer interactions with stakeholders, including Ggovernment officials, NGOs, private sector and other donors, and enhance ADB’s local knowledge. This presence in Beijing will increase ADB’s development impact. Because of its local presence, local knowledge and proximity to executing agencies, the PRCM will enable ADB to collaborate more closely with the Government in project planning and design and contribute to improving ADB’s portfolio management and project administration. The PRCM is expected to provide follow-up in such areas as TA approvals, loan effectiveness, appointment of consultants, procurement, disbursement, and the timely release of counterpart funds.

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