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p. 24 of 53 BACK | NEXT Classification of Developing Member Countries in Bank Operations Bank Operations in Pacific Island Developing Member Countries Lending and Relending Policies (Ordinary Capital Resources) Lending and Relending Policies (Asian Development Fund) Sector Lending Program Lending Assistance to Private Enterprises Financial Intermediation Loans/Credit Lines Financing of Interest and Other Charges During Construction Financing of Indirect Foreign Exchange Cost of Projects Lending Foreign Exchange for Local Expenditures on Projects Retroactive Financing Supplementary Financing of Cost Overruns of Bank-Financed Projects Use of Surplus Loan Funds Foreign Exchange Risk in Bank Operations Sector Development Programs Technical Assistance Guarantee and Security Arrangment for Bank Loans Environmental Considerations in Bank Operations Gender and Development in Bank Operations Project Performance Management System The Bank's Cooperation with NGOs Emergency Rehabilitation Assistance Loan for Small DMCs Rehabilitation Assistance After Disasters Cooperation Arrangements with International Organizations and Bilateral Sources Coordination with Aid Agencies Regional Cooperation Cofinancing Japan Special Fund Guarantee Operations Bank's Operational Missions Communication with Members of the Board of Directors Processing of Loan Proposals Project Financial Management Systems, Financial Analysis and Financial Performance Indicators Economic Analysis of Projects Procurement of Goods and Works Use of Consulting Services Formulation and Implementation of Loan Convenants Effectiveness of the Loan Agreement Loan Disbursement and Loan Closing Project Accounting, Financial Reporting, and Auditing Post Evaluation Country Planning and Programming Incorporation of Social Dimensions in Bank Operations Poverty Reduction ADB Accountability Mechanism Involuntary Resettlement Internal Audit Confidentiality and Disclosure of Information Indigenous Peoples Governance Anticorruption Enhancing the Asian Development Bank's Role in Combating Money Laundering and the Financing of Terrorism

Operations Manual

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OM Section 25: Issued on 12 December 1995
Rehabilitation Assistance After Disasters

Bank Policies (BP)

1. The Bank's policy is to assist in the rehabilitation efforts of its developing member countries (DMCs)¹ after they are struck by disasters. These may be natural and sudden in their impact (e.g., floods, earthquakes, windstorms, tidal waves, volcanic eruptions, wildfires, landslides, and avalanches), slow in materializing (e.g., crop failures, environmental degradation, and droughts), or caused by human action (e.g., civil strife). The Bank's assistance seeks to enable DMCs to continue their development expenditures that otherwise would have to be reallocated for disaster rehabilitation. The Bank's rehabilitation loan finances immediate needs for specific repairs that are aimed at rapid restoration of infrastructure and production facilities subsequent to the disaster. The Bank does not finance relief operations such as providing emergency food, temporary shelter, medical supplies, etc.

Nature of Projects

2. Rehabilitation projects require

(i) rapid response by the Bank to the DMC's needs and request for assistance,

(ii) strong commitment of the DMC government to rehabilitation, and

(iii) emphasis on ensuring continuity of productive and social life by repairing damaged infrastructure and facilities.

3. Bank assistance under this facility is not meant for major capacity enhancement or for new development activities, although due regard will be paid to disaster prevention and easily achievable improvements.

4. Rehabilitation projects are characterized by:

(i) an implementation schedule adapted to the emergency needs;

(ii) emphasis on supplementing local institutional and other capabilities required to execute rehabilitation projects;

(iii) efficient coordination of rehabilitation efforts at local, national, and international levels;

(iv) flexible adaptation of the Bank's own project processing requirements and procedures to the specific emergency; and

(v) close supervision by the Bank during project implementation.

Scope

5. Rehabilitation projects are essentially meant to reestablish disrupted services in the following sectors/subsectors:

(i) water, sewerage, and power infrastructure and equipment;

(ii) transportation infrastructure (roads, bridges, railways, ports, airports, and related maintenance equipment);

(iii) communications infrastructure and equipment;

(iv) health facilities and equipment;

(v) education infrastructure and equipment;

(vi) irrigation and drainage infrastructure and equipment; and

(vii) basic production and storage facilities in agriculture and manufacturing.

Selection Criteria

6. The following criteria apply for identifying rehabilitation projects:

(i) the activities should be related to refurbishing damaged infrastructure and equipment and its restoration in order to meet at least the level of demand prior to the disaster, with due regard to technological improvement, changed requirements, and disaster prevention;

(ii) the repair work should normally be of a simple nature and allow for flexible response during project implementation;

(iii) the execution of the rehabilitation project should not involve complex new design and technical work or require use of extensive technical assistance; and

(iv) priority should normally be given to alleviating damage sustained by Bank-financed projects.

Policy Dialogue

7. Processing of rehabilitation assistance after disasters does not involve policy dialogue.

Institutional Support

8. A strong institutional framework and government support are required to cope with the crisis situation and to implement the recovery program. In case of weaknesses in this regard, the Bank may supplement local institutional capacity for implementation with consultants and/or rely on remedial action taken by other agencies.

9. The rehabilitation project should normally be completed within three years after the disaster occurred.

Consultation and Coordination

10. The Bank will seek to consult systematically with affected communities and coordinate its support with that of other agencies. Such consultation and coordination with all parties involved in the disaster (affected communities, national and local government, bilateral and multilateral agencies, and nongovernment organizations) are necessary to design appropriate projects for rehabilitation and to avoid duplication of efforts, adoption of contradictory policies to guide disaster responses, neglect of areas that may be important to consider in the recovery strategy, and waste of resources. Bank assistance will seek to reinforce the government's capacity to coordinate its efforts at the local, national, and international levels.

Project Analysis

11. The requirement of an appropriate financial and economic internal rate of return will be flexibly employed.² The emphasis will be on least-cost solutions that address rehabilitation and medium-term requirements of disaster mitigation and prevention. Although rigorous rate-of-return analyses may not be feasible, estimates in an order of magnitude should be provided and justified in as much detail as possible. However, for large and expensive individual infrastructure components of a rehabilitation project, financial and economic analysis will be undertaken as necessary, particularly if there are indications that prior to the disaster they had been built to over-specifications.

Cost Recovery

12. The Bank does not insist on improvement in cost recovery practices under rehabilitation loans, as the main purpose is the rapid restoration of damaged structures and infrastructure, and productive activities.

Implementation

13. Implementation-related policies and procedures of the Bank will be liberally interpreted to ensure speedy and effective rehabilitation. These relate mainly to advance procurement, advance consultant recruitment, retroactive financing, and local cost financing in excess of standard percentage limits.

Reallocation of Funds

14. The Bank may agree to reallocate surplus funds³ in other loans to the DMC for disaster rehabilitation. In special cases where the rehabilitation needs are particularly urgent, the Bank may consider reallocating outstanding loan proceeds for rehabilitation purposes, in response to changed government priorities on account of the disaster, if:

(i) the scope of ongoing projects could be reduced without adversely affecting the benefits of other project components already implemented,

(ii) the ongoing projects and the rehabilitation assistance are in the same sector, and

(iii) the government accords lower priority to the ongoing projects in view of the disaster.

Sources and Terms

15. The terms of disaster rehabilitation lending are not materially different from the terms for other Bank lending. Countries having access to Asian Development Fund (ADF) lending would receive disaster rehabilitation loans at standard ADF terms. For countries eligible only for ordinary capital resources (OCR) lending, loans will carry a grace period of 7 years, a maturity of 30 years, and the relevant pool-based variable lending rate and standard commitment charge. For countries eligible for OCR/ADF blend, every effort will be made to provide rehabilitation loans from ADF resources only, or else primarily from ADF. For the ADF portion, standard ADF terms for blend countries will apply, and for the OCR portion, if any, the terms mentioned earlier will apply.

Disaster Mitigation

16. Risk analysis and management of natural hazards should form an integral part of the appraisal process for all projects that may potentially be affected by disasters. Such analysis will help in evolving effective strategies to mitigate, or eliminate, the impact of hazards in general and the vulnerability of specific project elements or target groups in particular, and in selecting appropriate disaster responses well before disasters take place.

Operational Procedures (OP)

Approval Authority

1. When the use of loan savings or a reallocation for a rehabilitation activity can be shown to be within the overall scope and objectives of an ongoing project as previously approved by the Board, the President may approve the utilization, with the Board being appropriately informed thereafter. When the loan savings or the reallocation is proposed to be used for a rehabilitation activity that is entirely outside the scope of the ongoing project as previously approved by the Board, a fresh Board approval will be required. In view of the urgent nature of the exercise, Board approval in such a case should be sought on a no-objection basis.

Imprest Account and Statement of Expenditures¹

2. To expedite rehabilitation after disasters, disbursements of rehabilitation loans will be made as expeditiously as possible to ensure uninterrupted progress of repairs. The use of imprest accounts to disburse rehabilitation loans on the basis of statements of expenditures will be especially suitable. In addition, standard commitment and reimbursement procedures may be used if warranted. An understanding on standard commitment and reimbursement procedures, on using imprest accounts, as well as on the Bank's right to reverse imprest account entries in cases of misprocurement, will be reached with the borrower during appraisal and included in the loan agreement.

Mobilizing Missions

3. Upon receipt of a request for rehabilitation assistance from a DMC, the Bank will ordinarily send a small mission to assess disaster-related damage in one or more specific sectors, and to advise the authorities on how best to approach the rehabilitation efforts and how this approach could be integrated with the DMC's long-term development needs. The mission will usually leave for the field promptly after the request of the authorities has been received.

Project Processing

4. Simplified procedures will apply in processing projects of rehabilitation assistance after disasters.

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