Countries and Regions

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p. 3 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 2004-2006: Nepal

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III. Portfolio Management Issues

A. Portfolio Performance

19. Cumulative public sector lending to Nepal totals 99 loans, amounting to $2.0 billion. There were 18 active loans, as of 31 May 2003, amounting to $679.9 million. Cumulative contract awards and disbursements for these are $233.4 million and $220.9 million respectively (34% and 32% of the net loan amount). In 2002, contract awards and disbursements amounted to $13.2 million and $28.2 million, respectively (41% and 100% of their projected levels). Approved in 2002 were two loans (in the social infrastructure sector), amounting to $60.0 million, and nine technical assistance (TA) activities, totaling $3.9 million. The disbursement ratio declined to 8.41 in 2002, due to slow development activities, which is much lower than the ADB-wide average for the Asian Development Fund (ADF) of 19.69. Provision of counterpart funds was not a problem, since ADB-supported projects are categorized as priority 1, under the medium-term expenditure framework, and therefore qualify for automatic budget releases. Submission of audited project accounts is generally satisfactory.

20. The 2002 Country Portfolio Review Mission, conducted jointly with the Government, the World Bank, and the Japan Bank for International Cooperation, discussed six key areas of concern: (i) quality at entry and quality of supervision, (ii) procurement management, (iii) financial management, (iv) project administration and staffing, (v) project monitoring and evaluation, and (vi) operation and maintenance. A midterm review of the joint action plan to improve portfolio performance, held in May 2002, showed a reasonable level of compliance. Of the 16 time-bound actions agreed on, 12 were due for compliance at the time of the review. Of these, seven have been complied with or mostly complied with, three are partly complied with, and two have not been complied with and have been rescheduled. Bimonthly project managers’ meetings ⁶ (cochaired by the Ministry of Finance and ADB) have been held since July 2001, to address implementation issues related to ADB-assisted projects. These meetings have improved some aspects of project implementation, especially those affected by less frequent movement of key staff. While overall implementation performance is satisfactory, the following generic issues have adversely affected ADB’s portfolio: poor quality of civil works, slow decision making by the Government, slow progress in implementing policy reforms, and delayed compliance with loan effectiveness conditions. Five projects, or 27% of ADB’s projects, are classified as at risk.

B. Performance Monitoring and Evaluation

21. Project monitoring and evaluation need to be strengthened to ensure the sustainability of poverty reduction investments and improve the quality of civil works, and this remains a key element of ADB’s policy dialogue. The National Planning Commission has recently established a separate section for periodic poverty monitoring and encouraged line ministries to improve monitoring and evaluation, particularly for priority 1 projects. While these initiatives to establish uniformity in project monitoring and reporting are positive, a broad and sustained commitment by NPC and executing agencies is needed. Of the 40 projects evaluated by the Operations Evaluation Department, 22 (or 55%) were generally successful, 10 (or 25%) were partly successful, and 8 (or 20%) were unsuccessful. In 2002, three evaluations were undertaken, one the East Rapti Irrigation Project,⁷ Technical Education and Vocational Training Development Project,⁸ and Industrial Sector Program.⁹ These activities were all rated as successful, largely due to the active participation of user groups and/or needs-based policy reforms.

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