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Countries and Regions Country Partnership Strategies Document
III. Portfolio Management IssuesA. Portfolio Performance29. As of 31 December 2000, 70 ongoing loans totaling $7.1 billion comprised 66 project loans for $4.9 million and 4 program loans for $2.2 billion. About $3.68 billion in the loan portfolio remains undisbursed. The disbursement ratio was 18.5 percent in 2000 against the ADB average of 20.5 percent, and represents a sharp decline from the 1999 disbursement ratio of 24.8 percent. The drop is due primarily to the fact that program loans achieved only 34 percent of their disbursement targets in 2000 although project loans achieved 124 percent. Contract awards also decreased 36 percent in 2000 from the 1999 level, despite projects attaining 155 percent of total awards targeted in 2000. 30. Of the ongoing project loans, 20 are partly satisfactory and 3 unsatisfactory in terms of implementation progress, while 12 were partly satisfactory in achieving development objectives. In terms of combined ratings for implementation progress and development objectives, 24 loans are partly satisfactory and 3 unsatisfactory, together constituting 38.6 percent of the portfolio by number and 56 percent by amount. Of the 44 loans delayed by more than 20 percent, 20 were delayed by 40 percent or more. Late start-ups continue to affect implementation. After good progress in 1999, submission of audited project accounts and financial statements deteriorated in 2000. Of 52 loans needing audited accounts by end 2000, 24 complied, 19 complied late, and 9 did not comply. B. Counterpart Funding31. The Government has been requesting assistance to resolve the counterpart budgets problem which had been aggravated by the financial crisis. In 1998, ADB agreed to provide financing up to 80 percent on a contract-by-contract basis for FY1999 on the understanding that adjustments would be made to maintain ADB’s originally envisaged financing percentages. ADB also carried out comprehensive “spring-cleaning” exercises in 1998, 1999, and 2000 to streamline the portfolio. More recently, ADB agreed to change the financing ratio for projects approved in 2000 to 80:20 (ADB:Government) for the first three years of implementation. During the 2001 CPM and Country Portfolio Review Mission (CPRM), the Government requested ADB to consider increasing its financing share for projects approved during 2001 and for all projects under the ongoing portfolio. The counterpart financing problem is likely to be further exacerbated by decentralization, with many local governments finding it difficult to shoulder their share of counterpart funds. An exercise to review all loan projects affected was initiated in June 2001 to thoroughly investigate and resolve this problem. C. Monitoring and Evaluation32. Postevaluation results as of 31 December 2000 indicate that of 19 projects evaluated during the period 1996-2000, 4 (21.1 percent) were highly successful, 11 (57.9 percent) successful, 2 (10.5 percent) partly successful and 2 (10.5 percent) unsuccessful. The 2000 evaluations indicate the need for (i) sound design, (ii) effective community participation for ownership and proper operation and maintenance, (iii) a capable project monitoring office, and (iv) appropriate strategies that will help attain all objectives. ADB should also help build borrowers’ capacity to respond effectively to disasters, especially in disaster-prone areas. 33. Postevaluation results and performance of the ongoing portfolio indicate a need to step up efforts to improve project implementation. The Indonesia Resident Mission has recently been strengthened with this as an objective. The problem affects all funders. The common issue of aid effectiveness has been raised at all important funder meetings with the Government, such as at the interim Consultative Group Meeting for Indonesia (CGI) in April 2001. In order to increase the impact of dialogue with the Government, ADB has begun a process of joint country portfolio reviews with the World Bank and Japan Bank for International Cooperation (JBIC). Improvement of implementation is now a major issue of policy dialogue with the Government, with improvements specified in the COS as necessary for upper-range annual lending and for continued Asian Development Fund (ADF) availability (para. 34). With decentralization, the dialogue will increasingly tackle local government implementation performance. The lessons from portfolio reviews are being used to design the country program. With this in mind, a CPRM was fielded parallel to the 2001 CPM. Project selection and program scheduling have been influenced by past implementation experience, with more processing time and capacity-building inputs provided in problematic sectors.
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