Regions and Countries

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p. 4 of 4 BACK | NEXT I. Current Development Trends and Issues II. Implementation of the Country Strategy and Program III. Portfolio Management Issues IV. Country Performance and Assistance Levels

Country Strategy and Program Update 2007–2009

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IV. Country Performance and Assistance Levels

A. Proposed Lending Level

23. Country-specific allocations have been based on the results of the country performance assessment (CPA) exercise in 2005 after applying the performance-based allocation formula. The ADF allocation for Mongolia for 2007–2008 has been set at $48.3 million. The ADF assistance program for 2009 is tentative, with actual ADF assistance levels subject to the results of the CPA exercise in 2007 and the outcome of discussions on the next ADF replenishment. The pipeline for the indicative lending program 2007–2009 is provided in Table A1.10 and concept papers for the 2007 program are in Appendix 2. The cost-sharing limits remain unchanged and remain at 80% of project costs.

B. Nonlending Program

24. The TA program supports the lending program. Priority is given to technical assistance associated with projects within a strategic and focused approach. Project preparatory TA is expected to address such issues as institutional organization, efficiency of public service delivery, and better coordination and monitoring. Efforts will be made to supplement the nonlending program with cofinancing resources. The proposed pipeline for the indicative nonlending program for 2007–2009 is provided in Table A1.11 and concept papers for the 2007 program are in Appendix 3.

C. Summary of Changes to Lending and Nonlending Programs

25. Figure 1 summarizes the proposed changes to the lending and nonlending programs. While the overall program directions of the CSP have been maintained, project designs have been reoriented to pay attention to five major considerations: the Government’s strategic approach, the MfDR agenda, governance, MTS II priorities, and harmonization with other sources of funds. Support for the Government’s agriculture strategy has been intensified to provide the basis for the Agriculture and Rural Development Project in 2007 (Figure 1, page 8). In line with the Government’s strategic focus, ADB lending to the education and health sectors has the potential to move toward a sector approach. The Health Sector Reform Project in 2008 and the Education Sector Reform Project in 2009 anticipate sector support for investment programs linked to master plans.

26. In support of the MTS II priority of catalyzing investments, the proposed Agriculture and Rural Development Project has been reoriented to focus on the role of private investment and rural infrastructure. It includes a market-oriented brand development and promotion strategy for Mongolian agriculture. The project has also been designed to maximize cofinancing opportunities with both public and private investors and contains a large element of direct private sector financing.⁶ The project preparatory TA (PPTA) for Rural Enterprise Development in 2009 will be implemented jointly by ADB’s East Asia and Private Sector Operations departments and will identify private sector investments to follow up on lending support in the 2007 Agriculture and Rural Development Project complemented by public goods and services.

27. The PPTAs for sustainable urban transport and environment management in 2009 are oriented to the MTS II priority of managing the environment. The environment management PPTA will address land degradation and pasture management and the strong potential for obtaining Global Environment Facility cofinancing (with assistance from ADB’s Regional Sustainable Development Department) will be considered. The PPTA for urban development in 2008 (for a proposed 2009 loan) will be directed at environmental issues. ADB has continued to provide regional technical assistance funded by Dutch Government to the energy sector under the Promotion for Renewable Energy, Energy Efficiency and Greenhouse Gas Abatement Project.⁷ Mongolia will also participate in the RETA on Mitigation of Transboundary Air Pollution from Coal-Fired Power Plants in North East Asia in 2006.

28. Regional cooperation and integration receives renewed attention in the CSPU. The Western Regional Road Development Project in 2007 has been recast to seek cost-sharing commitments from the PRC and the Russian Federation. The Regional Transport Project in 2008 assumes that the transport sector strategy being developed by the Government will increase the potential for regional cooperation, integration, and harmonization. New planned activities including the proposed second phase of the RETA for Prevention and Control of Sand and Dust Storms in Northeast Asia, prevention of transboundary pollution, activities under the Central Asia Regional Economic Cooperation program, and a proposed RETA to develop new regional cooperation opportunities in East Asia all are expected to contribute.

29. Furthermore, although not reflected in the pipelines, ADB has responded to the Government’s interest in expanding funding sources for infrastructure development. The Energy Division of the East Asia Department (EARD) will continue to work with the Government to identify enclave projects with export revenue potential. If there is a need for external financing, EARD may work with ADB’s Office of Cofinancing Operations (OCO) to structure products to improve the likelihood of external financing. If an enclave project could export energy to the PRC and thus balance external debt against export earnings, it would support the CSP priority of diversifying the economy and reducing Mongolia’s vulnerability while maintaining the primacy of debt sustainability.

30. Finally, in order to catalyze investments that are particularly beneficial to the poor, ADB will maximize efforts to mobilize Japan Fund for Poverty Reduction (JFPR) resources to complement the program. JFPR projects in Mongolia have been particularly effective in increasing the access of the poorest sections of society to benefits from ADB-funded projects and other development initiatives. The appropriate application of JFPR funds will help address the public perception that economic growth is not benefiting the poorest sections of society. Specifically, JFPR resources will be sought in 2007 to complement the ongoing Ulaanbaatar Heat Efficiency Project,⁸ the Agriculture and Rural Development Project in 2008, and to complement the Urban Development Project in 2009. Ethnic minority issues will receive particular attention in the Agriculture and Rural Development Project.

31. The 2006 program has been adjusted to take account of recent developments. The Government’s planned administrative consolidation program is pending a final decision by the Government and as a result the proposed Public Administration Consolidation Program Loan was dropped from the pipeline for 2006. The Third Education Development Program planned for 2005 was postponed to 2006 awaiting tangible progress on the development of the Government’s education sector master plan and discussions with the World Bank over joint project administration in the education sector. ADB has been providing technical assistance to the Mongolian Customs Agency to assess its institutional needs and identify actions to modernize systems and harmonize procedures with neighboring countries. The Minister of Finance requested financial assistance from ADB to undertake the reforms and investments identified in the assessment and the Government– External Partners Technical Meetings on 28 February and 1 March 2006 identified customs reform as a priority to improve the climate for private sector investment; so a loan project was included in the 2006 program for this purpose.

32. The CSP proposed technical assistance for aid coordination and results-based management in 2006. However, the CPRM in 2005 suggested that it would be more efficient to undertake much of the preliminary work toward results-based management of projects under the portfolio management action plan. Furthermore, recent experience indicates that a consolidated approach to results-based management would be more efficient. Therefore, three technical assistance projects proposed in the CSP have been consolidated into a single nonlending product for Institutional Strengthening for Managing for Development Results in 2007. This will include improved systems for monitoring and evaluation, capacity building for impact assessment, and civil-society participation in MfDR.

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