Regions and Countries

	Table of Contents
p. 7 of 9 BACK | NEXT Executive Summary I. Introduction II. Current Development Trends and Issues III. Pacific DMC Development Strategies IV. ADB's Development Experience V. ADB's Strategy VI. Delivering the Pacific Strategy VII. Risks and Performance Monitoring and Evaluation Appendixes

Responding to the Priorities of the Poor: A Pacific Strategy for the Asian Development Bank 2005-2009

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VI. Delivering the Pacific Strategy

116. The identification of a defined set of KRAs gives strategic focus to ADB’s operations in the Pacific, but detailed objectives and targets for programs and projects will continue to be determined at the country level, in programming discussions with PDMC governments and stakeholders. The KRAs provide a starting point for discussion, but selectivity in country programs will be sought, with only a limited set of KRAs to be addressed in any one PDMC. On occasion it may be appropriate to respond to a priority request from a PDMC government that does not address a listed KRA, though the request would be expected to address one of the three listed strategic objectives.

117. This approach is intended to allow ADB to reflect the varying circumstances among the PDMCs. In better performing PDMCs, the focus will be on supporting policy and institutional enhancements and infrastructure investments that accelerate current economic growth rates and raise the quality of services. In other PDMCs, the key challenge will be to turn around recent anemic growth and a decline in the quality of institutions. In Solomon Islands for example, a long-term focus on rebuilding basic institutions will be necessary, and in Timor-Leste strengthening new institutions is a key goal. Relatively weak performance among several PDMCs will warrant more careful analytic attention, in accordance with the approach outlined to Asian Development Fund (ADF) IX donors and using tools such as the World Bank’s “low income countries under stress” (LICUS) framework. Innovative approaches to delivering ADB assistance will need to be developed in these cases, and will need to be combined with greater policy dialogue and regular contact with governments, CSOs, and private sector groups.

A. Overall Assistance Level

118. Eleven of the 14 PDMCs are eligible to access the ADF.²⁵ The recent ADF IX replenishment agreement provides a positive financing context and valuable policy guidance to this strategy. As a result of the ADF IX agreement, (i) the allocation of loan funds under ADF IX will be more closely linked to DMC performance and good governance, (ii) TA funds have been replenished, (iii) grants will be available for post-conflict and heavily indebted countries and to address HIV/AIDS, and (iv) there will be renewed focus on engagement with weakly performing DMCs.

119. Under a revised performance-based allocation process, ADF IX will feature a stronger link between country performance assessment (CPA), including governance, and ADF allocations. The allocation formula also provides a significant weighting for small states, so those ADF-eligible PDMCs with good governance, sound country performance, and capacity to manage higher debt levels should have improved access to ADF to meet their borrowing requirements. Conversely, PDMCs with low CPA rankings will receive reduced ADF allocations. In any event, with the debt levels of some PDMCs relatively high (and in a small number of cases close to unsustainable), the capacity of PDMCs to borrow from ADB will be carefully monitored as an element of the CPA. Enhanced dialogue between ADB and PDMC governments on these issues, and on the rationale for CPA ratings by ADB, will be essential.

120. The likely outcome for ADF lending in the Pacific during the early part of the strategy period is for currently modest lending levels to remain as they are, or to gradually fall further, in the range of $40–60 million annually. Ordinary capital resources lending of about $20–40 million per annum is expected to be confined to PNG and Fiji Islands, where strong demand for improved infrastructure remains. In addition, ADB will monitor opportunities for private sector operations that would have a catalytic effect on private sector-led economic growth and leverage its support for improvements to public sector policies and institutions, in a PDMC or the region as a whole.

121. The main PDMC users of ADF grants are expected to be Solomon Islands and Timor- Leste, both poor post-conflict countries (and the former, highly indebted). The levels of ADF grant available to each, beginning in 2005, will be dictated by the revised performance-based allocation policy, the ADF IX allocation framework, and implementation guidelines. In both cases, ADF IX grants are expected to be focused on financing essential infrastructure and services that have a high poverty reduction impact. ADB will also explore opportunities to utilize ADF grants allocated to combat HIV/AIDS and other communicable diseases, especially in PNG and at a regional level.

122. TA will continue to be ADB’s most important mode of assistance in the Pacific. Agreement in ADF IX to allocate 3% of ADF to replenish TA funds will be important in securing the TA program for the Pacific. ADB will seek to augment the Technical Assistance Special Fund and the Japan Special Fund with resources from channel financing funds. Grant cofinancing from bilateral donors (e.g., Australia) will also be pursued. On an indicative basis, an annual TA program of about $15 million is envisaged, with about $5 million of this for regional TA projects.

B. ADB’s Assistance for the Strategic Objectives

123. Under the Pacific Strategy 2005–2009, the nature of ADB’s engagement in the Pacific will be qualitatively different. While grant financing from other development partners is expected to remain relatively abundant for PDMCs, ADB’s most important contribution and primary mode of assistance will be its knowledge products and services, provided mainly through grantfinanced TA, economic, thematic, and sector analytic work, and policy advice. Discussing key development issues widely, on the basis of quality information, will be a key activity for ADB staff. ADB will seek to engage key officials and policy makers, including legislators and parliamentarians, CSOs, and private sector groups, in order to promote awareness, understanding, and implementation of policies that enhance economic growth and poverty reduction. Prime opportunities for dialogue will be in conjunction with formulation of country strategies and sector road maps as well as with the implementation of TA and investment projects. ADB will also identify opportunities at key points to conduct or support joint development partner–government retreats or workshops, which would provide an environment for building mutual trust and for an open exchange of views. In part, an objective of these events would be to identify and support champions for poverty reduction and sound economic management from among the key actors in government.

124. This engagement will be based on a sound analysis of the development issues and options facing PDMCs. ADB is committed to addressing the knowledge gap evident in many PDMCs. ADB is a leading provider of analytic work on key economic, thematic, and sector issues for the region, published through the Pacific Studies Series. ADB will continue to place high priority on this work, defining priority topics in terms of their contribution to Pacific Strategy and country strategy objectives. ADB will also continue to support the collection and analysis of economic and poverty-related data, embedding this work in PDMC and regional institutions as far as possible in order to promote sustainability. Weakness of demand from policy makers for data and analysis as well as weak capacity to interpret data are current constraints that ADB will seek to address.

125. Maximizing the dissemination of this analytic work to a range of audiences, and the effectiveness of communication to varying audiences, is a key challenge in the Pacific environment. ADB will therefore develop and maintain a simple communications strategy and action plan as a key vehicle for effective delivery of the Pacific Strategy. Different communications formats for key messages, such as policy briefs, will be considered.

126. Consistent with the identification of participation and ownership as a strategy KRA, ADB will, in the formulation and implementation of ADB-financed projects, make a sustained effort to build community capacities and knowledge, through participatory approaches. ADB is developing practical user guidelines on promoting participation, and will apply these in the Pacific context, building on recent successful experience (see Box 4).

127. Strengthening the capacity of PDMC governments, CSOs, and private sector groups is a new thematic objective for ADB under its revised Poverty Reduction Strategy, and a KRA for the Pacific Strategy, with a focus on achieving development results in the three strategic objectives. ADB is currently preparing an action plan to strengthen capacity development outcomes throughout its operations. Once this action plan is in place, further work will be required to tailor the new approaches to the Pacific context. ADB will adapt the new approaches to local conditions as appropriate, and will engage in a discussion with PDMCs and other development partners with a view to identifying best practices for effective capacity development. Better institutional analysis during project design, strengthening terms of reference, and careful consultant selection based on ability to develop local capacity are among the practical steps that can be taken. Regional approaches will usually be appropriate for the delivery of more specialized capacity, exemplified by the establishment in 2003 and ongoing development (with ADB support) of a Pacific Aviation Safety Office.

128. Each of these commitments implies additional time and resources being spent on engagement and project preparation, with a view to better and more sustainable development results. Given finite resources, more focused programs concentrated in fewer sector and thematic areas will be necessary to meet these commitments, as will fewer individual projects.

129. PARD already has some flexibility in applying procedures and documentary requirements for CSP development and economic, thematic, and sector work. Given the small scale of many operations and the requirement for PARD to support a large number of PDMC clients with limited staff resources, PARD will continue to look for options to pilot new modalities and streamline procedures, consistent with ADB’s corporate focus on managing for development results.

130. Under its new Disaster and Emergency Assistance policy, ADB will implement strategies for rehabilitation and reconstruction after disasters that lay the foundations for medium- and long-term development. Disaster prevention, mitigation, and preparedness may also be addressed.

131. ADB’s Pacific regional cooperation program of TA and loans will play a vital part in delivering this strategy in two ways. First, and as outlined in the Regional Cooperation Strategy and Program (RCSP) 2004–2006, it will build and strengthen knowledge and regional institutional capacity in key focus areas: currently public expenditure and management; PSD; transport and communications; and environment and natural resources. As noted above, improving analysis of the costs and benefits of regional cooperation will be a key theme. Second, the RCSP will support the achievement of the Pacific Strategy KRAs, by financing ADB analytic work, policy dialogue, and effective communication, either in a leadership role for ADB or in partnership with other development practitioners. The RCSP Update in 2005 will be an important opportunity to reshape the RCSP to ensure alignment with the Pacific Strategy and, importantly, with the emerging Pacific Plan of the Pacific Islands Forum.

132. In support of the KRAs in building demand for good governance and in promoting dialogue and cooperation among CSOs, private sector groups, and governments, ADB will undertake specific activities to strengthen the role and capacity of CSOs and private sector groups.

133. ADB has increasingly engaged with CSOs in recent years, in line with ADB policy and commitments made in Pacific Strategy for the New Millennium 2000–2004 (see footnote 2). A recent study on CSO/ADB cooperation in the Pacific (unpublished) shows that a strategic framework outlining key areas and guiding the interaction between ADB, CSOs, and governments is required. ADB accepts this recommendation. Consistent with ADB’s Framework for ADB-NGO Cooperation, the focus of ADB support for CSOs in support of the new strategy will have three prongs:

1. Promote an enabling environment, including regulatory and policy frameworks, for CSOs
2. Facilitate closer cooperation between CSOs and governments. ADB will promote improved understanding and appreciation for each other's roles and objectives. Lack of political literacy among CSOs, a key constraint to effective civic engagement, will be addressed. ADB will also facilitate CSO and government dialogue and consultations on issues of strategy and policy development
3. Follow a systematic approach to CSO consultations and cooperation in ADB country operations. This consultation may, on a case-by-case basis, lead to practical cooperation in areas such as (a) project design and community needs assessments (b) project implementation, (e.g., in basic service delivery) and (c) community impact assessments, project monitoring, and evaluation.

134. In order to support and monitor these commitments, ADB will designate a staff member in each of its Pacific field offices as a CSO liaison officer.

135. A similar approach will be appropriate for ADB’s engagement with private sector groups, such as chambers of commerce. ADB will listen carefully to private businesses, with a view to better understanding business needs and incentive systems, and not with a view to directing private sector efforts. ADB will support enhanced dialogue between governments and private sector groups. ADB is also committed to working with chambers of commerce and similar groups to build their understanding of their roles and responsibilities as private sector representatives, and to raise their capacity to fulfill those roles. ADB’s new Pacific Liaison and Coordination Office in Sydney will have lead responsibility for liaison with private sector groups.

C. External Funding Coordination and Partnership Arrangements

136. External assistance plays a significant role in the PDMCs, and ADB has a responsibility to work with other Pacific development partners toward better development outcomes. ADB will help maximize outcomes from development expenditures in the Pacific in three ways:

1. By continuing to support the development of national and sector development strategies by PDMCs, but with a strengthened focus on PDMC capacity to manage for development results and to integrate development partner resources and programs into PDMC plans
2. By selecting objectives, KRAs, programs, and projects that are complementary to other development partner inputs and by taking steps to harmonize with other partner programs where possible
3. By promoting dialogue among development partners on key development policy issues, involving PDMCs to the extent possible, in order to reach agreement on key directions and on priorities for policy dialogue and analytic work.

137. Scope for official cofinancing on loan projects is likely to be relatively limited, but options will be explored to promote suitable arrangements for private sector participation in infrastructure development in the larger Pacific economies.

138. Bilateral funding of TA grants has been a significant source of funding for some of PARD’s most innovative work in recent years, in fields such as poverty reduction and governance. Channel financing has also facilitated work in difficult environments which might not otherwise have been possible. ADB appreciates these opportunities provided by development partners. ADB will pursue these opportunities selectively, in support of Pacific Strategy objectives, to provide innovative and effective TA to the PDMCs.

D. Internal Resource Requirements

139. The new structure created by the establishment of new offices in Port Moresby, PNG; in Suva, Fiji Islands; and in Sydney, Australia significantly enhances ADB’s capacity to deliver the Pacific Strategy. The field offices provide greater capacity for outreach, policy dialogue, and problem solving in project administration. The new structure will increase the accessibility and responsiveness of ADB to clients and other Pacific development partners, with about one third of PARD professional staff (and one half of all PARD staff) located in field offices.

140. This shift will create capacity for a greater focus in headquarters on policy and strategy, knowledge management, sector and thematic expertise, coordination, and quality assurance. A general principle will be to devolve programming and project administration to the staff in the field offices, with sector and thematic specialists based mainly in headquarters. However, given the limits presented by relatively small staff numbers, PARD will continue to operate in a matrix organization to some degree, drawing on specialist staff from any location as necessary.

141. The overall work program of the department and individual work plans of PARD staff will be reviewed and adjusted to ensure that activities and resources are fully aligned with the strategic objectives and KRAs. To allow more intensive staff involvement with PDMC counterparts, there will be an effort, through greater selectively in country programs, to reduce the number of countries and/or issues of involvement for each staff member. PARD’s staffing and skills mix will also need to be brought into line with the KRAs. An internal human resource plan will be developed to guide this transformation. In general, most staff will need to upgrade skills and knowledge in the areas of participatory approaches, effective capacity development, political economy, and reform process facilitation.

142. Effective knowledge management will be a key to how effectively ADB delivers the Pacific Strategy. PARD has established a Knowledge Management Unit, which will build on work to strengthen ADB’s knowledge management system and make ADB knowledge products more accessible for the Pacific. This work will be closely integrated with the proposed communications strategy for ADB Pacific operations.

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