Countries and Regions

	Table of Contents
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 2005-2007: People's Republic of China

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III. Portfolio Management Issues

A. Portfolio Performance

23. PRC’s portfolio rating in 2003 was better than ADB-wide averages for implementation progress, achieving development objectives, and disbursements. In 2003, projects classified as “at risk” constituted 10.3% of the 39 ongoing loans. This is lower than the 14.5% ADB-wide figure. The disbursement ratio was 25.8%, higher than the 20.2% ADB-wide average. The PRC disbursement ratio has generally shown an upward trend during the last 5 years. However, the contract award ratio in 2003 fell to only 14.9%, below the ADB-wide average of 17.3%. This is the first time that contract award ratio in the PRC was lower than the ADB-wide average in the last 5 years. The shortfall of contract awards was mainly because of three energy projects.²⁹ The PRC’s performance in timely submission of audited project accounts and financial statements deteriorated in 2003. Only 27% of projects fully complied in 2003 compared with 61% in 2002. One of the reasons was the outbreak of severe acute respiratory syndrome (SARS) in early 2003. The performance in this area is expected to improve in the future. Key portfolio indicators are in Appendix 1 (Table A1.6–A1.9). Several measures in the Joint 2002 PRC-ADB Action Plan to improve portfolio performance were implemented in 2002 and 2003. The Financial Management Review carried out by PRCM identified a number of areas where improvements could be made in the financial management practices in executing agencies. Four ADB-sponsored Financial Management Workshops³⁰ were conducted, which covered the issues identified in the financial management review.

24. The 2004 country portfolio review mission (CPRM) focused on generic portfolio performance issues and sector-specific issues. Particular attention was paid to progress in implementing the action plans under previous CPRMs and recommendations under various portfolio studies that PRCM had undertaken. The 2004 CPRM also covered ADB initiatives and measures for improving portfolio performance and implementation issues, evaluation issues, ADB’s Project Performance Management System, ADB’s Anticorruption Policy, Results-Based Management, and government actions for improving portfolio performance. An updated timebound Joint Government-ADB Action Plan to improve portfolio performance was prepared based on RBM concepts. The CPRM results have been reflected in the preparation of the CSPU.

B. Performance Monitoring and Evaluation

25. In 2003, one PPAR was completed for the Dalian Water Supply Project, which was rated highly successful. Improvements needed in project performance include (i) better screening projects to be consistency with the government priorities and ADB policy objectives; (ii) greater attention and strong commitment of the government and executing agencies; (iii) preparing projects in extensive consultation with stakeholders, including the public; (iv) planned implementation through effective supervision, monitoring, and cost control; and (v) timely provision of counterpart funds. In early 2004, ADB helped to introduce the RBM concept to the Key Project Inspectorate of the NDRC.

26. In April 2004, MOF completed a study entitled Performance Evaluation of Loan Projects of International Financial Institutions (IFIs) including ADB. The study concluded that assistance from IFIs has played a positive role in the PRC's economic development, and that IFIs contributed to inducing foreign and private investment, providing infrastructure, reducing poverty, formulating the country development strategy, and transferring and disseminating knowledge. Lessons identified in that study included (i) long processing time and implementation period had exposed projects to changes in markets, interest rates, exchange rates, and domestic policies; (ii) lack of coordination undermined the realization of project objectives; (iii) procurement procedures should have been more flexible and disbursement procedures simplified; (iv) laws, regulations, and loan agreements had been violated; (v) financial management needed strengthening in some executing agencies; and (vi) postevaluation capacity needed strengthening. The Government has requested ADB assistance to help evaluate and propose measures to improve the effectiveness of programs related to environmental policy and investment for water pollution control in the Huai River and Tai Lake, grasslands improvement and the poverty reduction impacts of key forestry conservation programs. ³¹ The July 2004 reform of the investment approval system placed increased emphasis on strengthening the key project inspection ³² and post-evaluation systems and encouraging the public and the media to monitor governmental investments.