Catalog

	Table of Contents
p. 22 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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E. Streamlining of Business Processes

87. Flexibility and responsiveness, while ensuring credit quality, are vital for successful PSO. Currently, the approval process for private sector projects is based largely on the procedures prescribed for public sector loans. The process involves well-defined steps based on the established planning cycles for ADB public sector operations. These defined steps, however, do not always have parallels in PSO. In PSO, for example, there is no real distinction between fact finding, appraisal, and negotiation. PSO project processing missions are all part of one complex “due diligence and structuring process” prior to Board consideration. To address credit risk, to better support the various facets of the due diligence process, and to be more responsive to the tight timetable of private sector clients, the approval process for private sector projects should be modified and streamlined. The redesign of business processes that is now under way to support ADB’s new organizational structure offers an important opportunity to also formulate an approval process and other business processes that are specifically keyed to the particular requirements of PSO in terms of both control over credit quality and responsiveness to clients.

88. The approval process for private sector projects in the context of ADB involves two aspects: the “development” aspect and the “credit” aspect. The development aspect reviews the consistency of a proposed project with relevant ADB strategies and policies, and the justification for ADB’s assistance to the project. The credit aspect reviews the bankability of the project, the risks associated with it, and the measures proposed to mitigate these risks. As at present, there would normally be just one formal interdepartmental discussion of a project after concept clearance—the equivalent of a Management Review Meeting, where major issues related to the project are examined and resolved by the ADB Management. After receiving Management approval and guidance, PSG would complete project processing with bilateral consultations with relevant departments and offices to ensure project quality.

89. One source of processing delay currently is the possibility of a project’s eligibility for ADB assistance being questioned repeatedly throughout the approval process. To avoid this, today’s concept clearance procedure would be used to endorse and confirm up front, key “development” concerns, particularly (i) the consistency of the project concept with ADB’s relevant country and sector strategies, and (ii) the rationale for ADB’s participation. This initial screening would also flag environmental and social issues, if any.

90. Quick approval of small equity investments, particularly for rights issues that are subject to short deadlines, is facilitated through the approval authority delegated to the President for supplementary equity investments not exceeding $2 million each in existing investee companies that are performing and are expected to perform satisfactorily, subject to prompt reporting to the Board.⁵⁹ This practice will continue. PSG’s new streamlined Report and Recommendation of the President (RRP) under ADB’s Guidelines on Operational Procedures,⁶⁰ has already facilitated the Board approval process for PSO. The approval process would be further streamlined through more efficient use of the summary procedure, which is allowed under existing policy.⁶¹ In line with the recent paper on further streamlining of the Board approval process for public sector loans,⁶² the requirements for use of the summary procedure in PSO would be reviewed in the course of PSO strategy implementation.

Back D. Screening of Projects	Next F. Strengthened Risk Management