Publications

	Table of Contents
p. 21 of 32 BACK | NEXT I. Introduction II. Assessment of Past Performance III. Rationale and Role IV. Operational Strategy V. Operational Improvements A. Single Project Exposure Limit B. Providing for Smaller Interventions C. Conflicts of Interest D. Screening of Projects E. Streamlining of Business Processes F. Strengthened Risk Management G. Strengthened Management of Nonperforming Investments H. Private Sector Operations at Resident Missions I. Enhancing Technical Assistance for Private Sector Operations J. Active Outreach Marketing K. Establishment of a Financial Reporting System VI. Resource Requirements VII. Conclusions and Recommendations

Private Sector Operations: Strategic Directions and Review : V. Operational Improvements

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D. Screening of Projects

85. As part of the strategy to sharpen focus on development impact, PSG will develop a scorecard that can be used to screen all prospective private sector projects against a set of development objectives, consistent with the PSD Strategy.⁵⁸ The scorecard will enable ADB to strengthen the development focus of PSO because it will have identified at the outset the development impacts of private sector projects it is considering for assistance.

86. In addition, the scorecard will be used for checking ADB’s role or “value added” in private sector projects, as differentiated from the impacts of the projects themselves. Traditionally, the question often asked to test the need for ADB assistance is whether a project would go forward without ADB’s participation. However, the more meaningful question is what value ADB adds to the project. It is difficult to tell if sufficient private sector financing would have been available had ADB not supported a given project. However, the special value-added contributions that ADB makes to the project can be easily identified. Indeed, ADB’s participation in a project should be justified in terms of the contribution of such participation to ensure or enhance (i) the project’s development impacts (e.g., improved economic returns and environmental and social impacts); and (ii) its ability to deliver such impacts (e.g., improved financial returns and sustainability). Examples of the value-added contributions ADB can make are listed below, but no one project should be expected to embody every one of them.

1. catalytic value in terms of the amount and terms of private debt financing and/or the types of private sector lenders mobilized;
2. improvements brought about in loan tenor and financial structure of the project making the project financially sustainable;
3. impact of those improvements on the project’s long-term viability and on service quality and/or cost to the consumer over the long-term;
4. improvements to concession contracts (e.g., termination payment mechanisms, tariff adjustment formulas, government performance undertaking) so that the project becomes bankable;
5. improvements in environmental and social risk mitigation, including public consultation;
6. improvements in the degree of consumer satisfaction with the services the project provides;
7. the value of ADB loan covenants to enforce long-term compliance with public objectives, including those included in concession contracts to enhance developmental benefits;
8. contributions to improving corporate governance in the project company; and
9. introduction of unique beneficial feature (e.g., socially responsible investment, clean technology, etc.) to the project.

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