Evaluation

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A Review of the Asian Development Fund I–V Operations
Completed: 2001

Increased accountability and the need to take stock of the use of the Asian Development Fund (ADF) resources prompted the Asian Development Bank (ADB) to evaluate the impact of its ADF portfolio.

Completed in 2001, this study covers the first five ADF commitment periods (1973–1991), plus the period under the Special Funds (1969–1972) that preceded the ADF.

This study seeks to answer questions relating to

• the reasons for establishing the ADF
• the objectives, policies, and strategies governing the use of the ADF
• the allocation of ADF resources
• the performance of projects funded under the ADF
• their development impacts
• the lessons and insights that can be drawn, and the implications for ADB's current strategic direction and operations

  Summary of Findings

• Very poor countries that would be eligible for full ADF financing received the bulk of ADF lending, accounting for about 85% of the total net loans amounting to $11.2 billion during ADF I-V, while countries at intermediate levels of development eligible for limited ADF financing received the balance of 15%.
• The average cumulative allocation per capita was higher in the Pacific developing member countries (DMCs) in response to the mandate by the ADF contributors to give special attention to poorer and smaller DMCs.
• Agriculture, particularly irrigation and rural development, consistently received the biggest ADF loan allocation. Energy projects received 16%, while the transport and communications sector accounted for 11% of the total.
• Project loans served as the main vehicle of transferring concessional resources to DMCs. However, their share steadily declined from about 95% in ADF I to 56% in ADF V. Program loans increasingly became an important lending vehicle, particularly at the start of 1987 when their purpose changed from financing inputs to supporting policy reform.

  Main Impacts by Region

• Of the total 488 projects in 26 DMCs in the ADF I-V portfolio, 59% were post-evaluated and there has been a discernible improvement in project performance. Statistically significant differences in project performance were noted under different project classification.
• Given the high success rates of physical infrastructure projects the most significant impact was in promoting economic growth, particularly in the Lao People's Democratic Republic, Myanmar, Nepal, Pakistan, and to some extent in Bangladesh and Sri Lanka, thus indirectly helping reduce poverty in these DMCs.
• Projects designed to directly impact on the poor in terms of employment and income generation and enhanced well-being generally had limited results.
• Projects in the education, irrigation and rural development, and forestry subsectors and multisector projects showed above-average performance. Those in other subsectors generally fell below expectations.

  Lessons identified

• Thorough project preparation should be carried out, considering not only technical and financial aspects but the local culture as well.
• Real beneficiary participation is needed to develop a sense of ownership of the project.
• The capability of ADB staff to deal with stakeholders at the grassroots level should be enhanced.
• An executing agency's capability to match the requirements of the project and to remedy the gap, if any, should be thoroughly assessed.
• A long-term commitment to a sector/subsector in providing assistance is necessary.
• There is a need for an effective system of monitoring project performance even after completion.
• Vigilance is needed to ensure transparency and accountability in project management.
• The importance of a policy environment supportive of the project should be addressed.

  Recommendations

• ADF should ensure a critical mass of assistance and meaningful impact on a defined target. The portion of the ADF portfolio allocated for direct poverty intervention projects should concentrate on well-selected target beneficiaries so as to reach the maximum number of the poor.
• Continuing assistance should be provided until the beneficiary organizations or communities become thoroughly empowered and self-governing.
• Indicators or milestones of successful empowerment need to be defined, which ultimately should be the main measure of success of poverty focused projects.