Regions and Countries

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p. 3 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: Mongolia

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III. Portfolio Management Issues

A. Portfolio Performance

23. At the end of 2000, Mongolia had 15 ongoing loans under implementation (Appendix 3, page 1). The portfolio performance in Mongolia is generally satisfactory. By major portfolio performance indicators such as disbursement achievement, contract award achievement, and submission of audited financial statement, Mongolia's performance is better than the ADB average (Appendix 3, page 2). The share of under-performing projects (i.e., the sum of partly satisfactory projects and unsatisfactory projects) in Mongolia's portfolio was 20 percent, compared with the ADB average of 26.1 percent. One loan⁵ in the portfolio was rated as unsatisfactory due to the long delay in loan signing as the Government and Parliament required more time to review the loan that was developed and negotiated by the previous administration. In general, start-up delay due to reviews after loan approval is a major concern that may affect the overall portfolio performance. To improve performance, priority needs to be given to reducing such start-up delays by helping the Government rationalize its planning and review procedure for public investment projects. Furthermore, the ADB and the Government need to work together to enhance the project preparedness filters to improve project quality at entry.

B. Counterpart Funding

24. As a large portion of lending was done through program loans, providing counterpart funding for ADB financed projects is not yet a general concern despite the Government's fiscal constraints. Nonetheless, some projects, particularly the projects in the road sector, experience difficulty in obtaining timely counterpart fund releases. This usually reflects the need for further reforms in the overall financing mechanism of the sector and, therefore, should be addressed through continued policy dialogue with the Government. Since the portion of project lending to Mongolia is increasing with a corresponding decline in program lending, counterpart funding may become an increasing concern. This concern is to be addressed through technical assistance for improving the public investment management of the Government.

C. Monitoring and Evaluation

25. Strengthening project monitoring to improve portfolio performance is a major agenda in policy dialogue with the Government. In cooperation with UNDP, ADB will provide TA to help the Government rationalize the institutional structure for day-to-day monitoring of the ongoing projects and to strengthen the feedback mechanism for timely actions to improve portfolio performance.

26. In 2000, post-evaluation was undertaken for the Industrial Sector Program.⁶ The Program was the first attempt to restructure the industrial sector in Mongolia. Although the Government managed to accomplish 28 out of the 31 policy actions, the program is rated partly successful on the ground that the objective of bringing about efficiency and international competitiveness in the industrial sector has not yet been achieved. Lessons learned from the Program highlight the complexity of policy reforms in a transitional economy-a complexity that was often underestimated. These lessons need to be taken into consideration when designing a new program or sector development program.

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