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p. 4 of 7 BACK | NEXT Executive Summary I. Current Development Trends and Issues II. The Government’s Development Strategy III. ADB’s Development Experience IV. ADB’s Strategy V. ADB’s Assistance Program VI. Risks and Results-Based Monitoring and Evaluation

Country Strategy and Program Update 2006-2010: Bangladesh

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III. ADB’s Development Experience

A. Impact of Past Assistance

43. Bangladesh became a member of ADB in 1973, and subsequently emerged as one of the largest borrowers of ADB's concessionary Asian Development Fund (ADF) resources. As of end 2004, ADB had approved 158 public sector loans for $7.4 billion and 297 technical assistance (TA) activities for $158 million. The 32 ongoing public sector loans (for 25 projects) are valued at about $2 billion. In addition, ADB supported 7 private sector projects, valued at $242 million, including the Meghnaghat Power Project, which is the first build-own-operate power project, and a $20 million loan to GrameenPhone, which, together with a follow-on loan in 2004, has substantially expanded access to mobile telecommunications in rural areas.

44. Through the late 1980s, ADB was primarily a lender for growth-promoting investment projects. In the 1990s, project lending in the growth-promoting sectors became more closely linked to institutional and policy reform through program loans in agriculture, industry, railways, finance, and energy project loans. During the 1990s the focus on social infrastructure reflected the increasing emphasis on human development, gender equality, and poverty reduction. In line with the 1999 country operational strategy,⁹ ADB expanded into new interventions in urban and rural infrastructure, and education to encompass decentralization and good governance.

45. As of end 2004, public sector lending was dominated by four sectors: energy (34%), transport and communications (25%), social infrastructure (20%), and agriculture and natural resources (19%). Lending in the other sectors, including finance, governance, and multisector operations remains relatively small, although these sectors have been given more prominence in recent years. A total of 54 loans (for 51 projects) were postevaluated. Of these, about 39% were classified as generally successful, compared with an ADB average of 56%. Over half (52%) were partly successful, and 9% were unsuccessful compared with ADB averages of 32% and 11%, respectively.

46. The 2003 independent country assistance program evaluation (CAPE)¹⁰ concluded that ADB assistance has been generally relevant and contributed to development progress in several areas with the partial exception of capital markets and railways. It concluded that the early strong support to the energy and transport sectors has proved especially beneficial over time, combining programs of incremental reform with capacity building and investment support. It recommended that (i) more emphasis be accorded to good governance and SME development, (ii) mechanisms be developed to provide recurrent budget support for the education and health sectors, (iii) project-specific targets and road maps be made consistent with government poverty reduction targets, and (iv) ADB should support champions of local reform. The CAPE recommended that ADB focus interventions on fewer sectors to have greater impact on poverty reduction and development effectiveness. This could be achieved by focusing more attention on "champions"; and reducing support in sectors where performance has been poor, the potential for catalyzing development impact is limited, or ADB has no comparative advantage. In selecting sectors, the CAPE recommends that Government commitment to reforms to improve sector efficiency should be a key criterion, and the CAPE cautioned that these conditions may not prevail in the case of railways and capital markets.

47. Most recently, performance in some sectors has not fully met expectations. Interventions aimed at improving the management of forest resources and encouraging biodiversity preservation in the Sundarbans have suffered from complex project design, weak sector governance (including poor financial management), and insufficient commitment to agreed policy and institutional reform. Greater government commitment, strong beneficiary participation, and more direct links to NGOs will be required to secure progress in these areas.

B. Portfolio Performance and Status

48. ADB's loan portfolio in Bangladesh is diverse, covering several major sectors including agriculture, water resources, education, urban primary health, energy, transport, and finance. As a result of intensified portfolio management during recent years, major portfolio indicators have improved¹¹ and are now generally at par or better than ADB averages¹². For instance, before mid-2005, all 2004 loans have become effective. As a result of combined efforts by ADB and the Government to improve project implementation, portfolio indicators are expected to further improve during 2005. This will result in a significant increase in overall disbursement, thereby contributing to a much-needed increase in the net transfer of resources, which became negative during 2004 (Appendix 1, Table A1.7).

49. A wide range of portfolio management initiatives have been pursued by both ADB and the Government over the last few years to enhance portfolio performance. Following a results-based approach, these include (i) improving project quality at entry by introducing a project readiness filter for all projects being formulated, and adopting project designs with realistic and well-sequenced policy conditions; (ii) restructuring and redesigning ongoing projects with partial cancellation¹³; (iii) adopting new streamlined Government project approval procedures and formats¹⁴; (iv) implementing more efficient and transparent public procurement regulations (2003); (v) intensifying project and procurement reviews by ADB's Bangladesh Resident Mission and reviews by independent auditors along with commencement of performance auditing of projects as part of anticorruption efforts; (vi) adopting a new monitoring system for efficient and transparent recruitment of consultants along with simplified recruitment procedures; (vii) strengthening executing agencies' implementation capacity with upfront commitment of critical resources and continuous monitoring and follow-up on results; (viii) strengthening ADB's implementation capacity with further delegation of project administration to the resident mission, and increasing staff resources for project implementation; (ix) strengthening financial management, reporting, and auditing; (x) preparing a national involuntary resettlement policy with ADB assistance; (xi) increasing allocations for operation and maintenance (O&M) to sustain project benefits; and (xii) conducting regular portfolio reviews and continuous follow-up meetings with the Government. Project- and sector-specific action plans have contributed to improved project implementation, most notably in the power and roads sectors during 2004 and 2005.

50. The NPRS highlights the urgent priority of improving the implementation of the annual development program. ADB will continue to work closely with the Government and the DPs, particularly the joint strategy partners, to address common project implementation constraints. Prioritized portfolio management activities include continued and intensified joint country portfolio reviews, introduction of results-based project and sector reviews, special in-depth reviews of poorly performing projects or sectors, strengthening of project management, enhanced financial management with increased resource allocation, and independent performance and procurement auditing. The Government has agreed to use a results-based framework to assess implementation and measure project, sector, and country results; continued support will be provided for capacity building to ensure that the framework is used as an effective management tool.

C. Conclusions and Lessons for the Country Strategy and Program

51. ADB's assistance in key sectors has contributed to steady achievements, particularly in energy, transport, rural development, education, and urban health. Success has been greatest and sustained the longest when ADB has maintained long-term involvement in the sector; combined programs of incremental reform with capacity building and investment support; and built effective partnerships with other DPs, the private sector, and civil society. The poverty impacts of ADB-assisted operations will, however, be amplified by concentrating resources on a few priority sectors, and operating in those sectors in which the Government is firmly committed to necessary policy and institutional reform.

52. Addressing critical bottlenecks to sustain high rates of economic growth, improving the quality of basic social services, and building a well-governed public sector are Bangladesh's most important priorities. Scaling-up good-practice initiatives in key sectors that combine policy reform, capacity building, and new investment can catalyze the delivery of tangible poverty-reduction results. Doing this in a manner that builds a durable, results-oriented partnership between the Government, private sector, and civil society is critical to achieving poverty reduction goals and objectives. Development effectiveness can be improved if ADB focuses its assistance on key areas vital to NPRS success, harmonizes its interventions with those of other DPs, and maintains a clear focus in all operations on contributing to the delivery of well-defined development results. A long-term commitment to capacity building, encouragement of good governance practices, and an appropriate policy environment are critical, together with ownership and commitment to reforms by political leaders, Government, and civil society.

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