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Funding for the Poor
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Just how effective is the Asian Development Fund - ADF? How much difference has it made to efforts of the Asian Development Bank (ADB) to reduce poverty in the Asia and Pacific region? And what can be done to improve the ADF’s effectiveness in the future? ADB sought to answer these questions and more in a new report finalized by the Operations Evaluation Department in March 2003.
Some basic ADF facts:
ADF as a Proportion of Total ADB Lending
One of the most striking findings of the report is the dramatic improvement in quality in ADF-financed projects. Out of the 489 ADF-financed projects from 1975 to 2001, 53% were rated as generally successful, 38% partly successful, and 9% unsuccessful. However, it is the improvement in project quality over the past 10 years that is most striking (see figure 2). In 1975, 60% of projects were rated as successful. By the second half of the 1980s and early 1990s, this slipped to less than 40% of projects. The downward trend was halted and reversed as project quality steadily improved throughout the 1990s. Successful projects now dominate the ADF portfolio, surpassing 70% after 1998.
ADB targeted 10 specific areas to maximize the efficiency and impact of ADF resources. The sample period for the report was ADF VI–VII, 1992–2000, a time of high activity within ADB. During this period, 336 ADF-financed loans were approved totaling $12 billion for 318 projects, and 17 polices were adopted. ADB also introduced a medium-term strategy and restructured some key departments in 1995. The assessment of progress on all 10-targeted areas follows.
Implementing a More Strategic Planning Process. ADB’s progress in this area was highly satisfactory. Strategic planning has become an integral part of ADB’s institutional culture with the medium-term and long-term strategic frameworks. Country-based programming has been improving each year, and project selection and design have been following ADB’s strategic directions.
Resources should be used to support pro-poor sustainable economic growth, poverty reduction, and increased assistance to the social sectors
Stimulating Economic Growth. Project investments directed
toward stimulating balanced economic growth reflected solid economic internal
rates of return. Efforts to address project-related issues that affect the poor,
such as resettlement, have improved during the report period and are continuing
to improve with experience.
Assisting in Family Planning and Human Development Activities. While family
planning activities have not been sustained at the level anticipated during
the discussions on ADF VI–VII, investments in human development—in
the social sectors—have continued to expand. Indeed, one of the concerns
is that they have expanded in too many directions, straining capacity within
ADB and blunting the impact of this support.
Reducing Poverty. Effectively reaching the poorest people is a big challenge for development assistance for every institution. Poverty reduction investments have been steadily improving with experience, a greater institutional understanding of the issues, and more defined targets and goals.
Improving the Quality of Projects. The quality and performance of ADF projects have improved (see figure 2). However, more effort is needed in the area of project monitoring and management.
ADF Allocation. The resource allocation has been relatively efficient for ADF VI–VII and in line with the formal performance-based measures adopted for ADF VIII.
ADF-Supported Projects/Programs Rated “Successful” By Year of Completion
Improving Environmental Protection and Natural Resource Management. This activity has been partly satisfactory as efforts to improve environmental management have proceeded unevenly within ADB. Formal processes for environmental classification of projects and inclusion of mitigation measures have been mainstreamed, but the number of projects directly addressing environmental issues has not met expectations.
Strengthening Policy Adjustments that Contribute to Growth. ADB’s lending for policy reforms—program lending—had mixed success during the report period. Reform programs sometimes have been over-ambitious and governments have lacked the capacity, or the will, to implement difficult reforms. There have been some notable successes, and lessons have been learned.
Adopting a Policy on Country Graduation. The country graduation policy has addressed some immediate concerns and some developing member countries (DMCs) have formally graduated from the ADF. However, changes in access criteria have had little effect on DMC borrowing patterns and an assessment of the coherence of the graduation policy’s objectives and the performance-based allocation policy would be desirable.
Addressing Gender Concerns. There has been slow progress in implementing the Gender and Development (GAD) Policy. Project selection and design have not effectively supported this development objective to date. However, because the policy was approved in 1998, there is insufficient empirical basis for fully assessing its effectiveness. A full evaluation of its impact is scheduled for 2004.
Drawing together lessons of development based on 9 years of experience with ADF VI–VII is a challenging task. Many factors, some internal and some exogenous, have contributed to shaping the outcomes of this report. Nevertheless, lessons for the future may be usefully drawn in three broad areas that correspond to ADB’s long-term objectives: sustainable economic growth, inclusive social development, and governance for effective policies and institutions.
Sustainable Economic Growth. ADF should be used more strategically for bigger impacts since resources are limited, and the needs in the Asia and Pacific region are overwhelming. Projects and programs provide opportunities to push for reforms that can result in structural changes in the conditions that foster poverty. These opportunities should be seized more consistently.
More effort is also needed to include gender issues in institutional development. There were no policy-based programs with women in development/GAD as a primary objective during the ADF VI–VII period. Core GAD projects addressing structural and institutional reforms are needed in addition to gender mainstreaming to support sustainable development.
Inclusive Social Development. ADB needs to be more strategic about poverty reduction. The country investment strategy should be tied to the country poverty reduction strategy. More strategic interventions with more leverage are needed to shift resources toward the poor. Strategic thinking in regard to designing poverty reduction projects has started relatively recently with the adoption of the poverty reduction mandate in 1999.
More poverty projects should reach the very poor. These investments should reach the urban extreme poor as well as the traditionally targeted rural poor, because although the urban poor may be a little better off than the rural poor in terms of cash income, the conditions of their lives can be worse.
Governance for Effective Policies and Institutions. Many of the important institutions underlying public sector accountability in DMCs—an independent judiciary and the rule of law, and national audit institutions—still remain relatively underdeveloped. There are numerous obstacles to further developing media independence, fiscal transparency, an open and democratic electoral process, nongovernment organizations, and avenues for broader public participation in policy development. ADB needs to leverage the ADF more efficiently in partnership with its DMCs to address these issues.
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