Regions and Countries

	Table of Contents
p. 4 of 4 BACK | NEXT I. Development Situation II. Implementation of the Country Strategy and Program III. Portfolio Management Issues IV. Country Performance and Lending Level

Country Strategy and Program Update 2002-2004: Bangladesh

---

IV. Country Performance and Lending Levels

A. Lending Level Proposed

23. ADB has initiated a performance-based allocation system to allocate the Asian Development Funds (ADF) resources to its eligible developing member countries. The system assesses country performance by using both a set of common criteria yielding an initial allocation (the base case) and country-specific criteria. The resulting base case allocation of ADF for Bangladesh is $263 million, which can be adjusted up to 20 percent above or below the base case for the high case and low case scenarios, respectively, depending on country-specific performance. The indicative lending pipeline for Bangladesh during 2002-2004, together with performance triggers for each lending scenario, is given in Appendix 4. The base case scenario requires the Government to adopt measures to improve macroeconomic management, achieve reasonable progress in structural and sector-specific reforms, and maintain satisfactory portfolio performance. The high case scenario requires strong macroeconomic performance, significant progress in structural and sector specific reforms and in meeting PAPR targets, and substantial improvement in portfolio performance. The key underlying assumptions for the low case scenario are slippage in macroeconomic and portfolio performance, and slowdown in structural and sector-specific reforms. The firm lending program for Bangladesh during 2002-2004 comprises 17 projects valued at $1,205 million. An average annual lending volume is $402 million, comprising an ordinary capital resource component of $102 million and ADF component of $300 million. The higher annual average of ADF than the base case allocation of $263 million reflects some over programming to allow for possible slippage.

B. Loan Program

24. Overall, 47 percent of the 17 projects in the 2002-2004 lending program consist of poverty intervention projects, inclusive of core poverty intervention. The projects were included in the pipeline based on their expected contribution to economic growth, impact on poverty reduction, and resolution of sector issues. The proposed projects – particularly for agriculture and natural resources, social infrastructure, and rural electricity – will address poverty, including the hard-core poor. To promote pro-poor growth, ADB will support the development of key infrastructure such as rural power, gas, transportation, and urban services, along with policy reforms to establish an enabling environment for private sector development. The extreme poor (including vulnerable groups) will benefit from the core poverty interventions of the Primary Education Sector-III and Participatory Livestock Development-II Projects. In addressing natural disaster, the Jamuna-Meghna River Erosion Mitigation and Secondary Towns Integrated Flood Protection-II Projects will assist in preventing target groups from sliding into extreme poverty that often occurs after natural disasters like floods and riverbank erosion. The SME Development and Financing Project is expected to have a sustainable poverty reduction impact by fostering labor-intensive growth and thus helping generate employment opportunities. The Project will also address the adverse implications of the termination of the MFA by the end of 2004, including its disruptive impact on the labor-intensive garments sector that provides employment to 1.5 million, mostly women. ADB’s study of poverty in Bangladesh revealed the immense contribution of rural roads and associate infrastructure to poverty reduction.⁶ Accordingly, the 2002-2004 lending program contains the Rural Development, and Road Network Improvement and Maintenance-I Projects, which will help ease poverty in rural areas by improving rural infrastructure. Development of a social safety net is the underlying objective of the proposed Public Pension and Insurance Governance and Administration Project.

25. While selecting these projects, consideration was given to ADB’s own economic and sector work, past sector experience, and the institutional capability of the executing agencies to ensure high chances of project success. The loan program is consistent with the strategic thrust of the COS, PAPR, and LTSF. The processing of projects proposed for a particular sector would depend on successful institutional reforms and satisfactory performance of ongoing projects.

C. Technical Assistance and Economic and Sector Work Program

26. A total of 32 TA projects for $20.25 million (including $1.3 million for three TAs proposed for financing from external sources) were prepared for 2002-2004 (Appendix 4); 18 of them are project preparatory TAs. The TA program is expected to support the processing of projects in the loan pipeline; facilitate the implementation of projects and programs; help build up institutional capacity at the national level; address cross-cutting issues such as good governance, environmental management, as well as gender and development; and promote sector policy and institutional reforms in the sectors/subsectors of high priority for ADB intervention.

27. The economic and sector work program forms the basis for ADB’s support of policy reforms, capacity building, and institutional strengthening (Appendix 5). The thematic work will focus on governance, human development, and private sector development. A series of studies on poverty reduction in the selected subsectors, which are strategically important in achieving poverty reduction, will contribute to successful implementation of the PAPR. Sector studies will provide guidelines for ADB’s future interventions in agriculture and rural development, water resources management, urban development, finance, transport, foreign exchange management and export strategy, external debt management, social sector investment, and development of SMEs in Bangladesh.

D. Summary of Changes

28. Project selection briefs for loans and TAs are given in Appendix 6. The new pipeline of loans reflects some changes compared with the 2001-2003 country assistance plan for the overlapping years 2002-2003. For example, the Jamuna-Meghna River Erosion Mitigation Project was advanced from 2003 to 2002 due to the urgent need to protect river embankments from imminent erosion threatening poor people living in the areas. The Gas Sector Development Project was deferred from 2000 to 2002 due to the inadequate progress of sector policy reforms. To help promote social and economic development in rural areas through the provision of electricity and to improve the quality of life, a new Rural Electrification Project is included in the 2003 lending program. In response to the Government’s request for addressing the adverse implications of the impending termination of the MFA at the end of 2004, a new SME Development and Financing Project is included in the 2003 lending program and, accordingly, the Public Pension and Insurance Governance and Administration Project was postponed till 2004.

Back III. Portfolio Management Issues	Country Strategy and Program Update 2002-2004: Bangladesh