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p. 5 of 6 BACK | NEXT Foreword I. Introduction II. Economic Analysis in 2003: An Overview III. Project Rationale and Analysis of Alternatives: Further Assessment IV. Further Improving EREA's Service Delivery V. Conclusions and Recommendations

Economic Analysis Retrospective: 2003 Update

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IV. Further Improving EREA’s Service Delivery

The principle of doing the right thing and doing it the right way applies to EREA as much as it does to the rest of ADB. Last year EREA, through a survey, asked its clients if it was doing its job the right way. This year, EREA sought client perceptions not only on the issue of EREA fulfilling its role in the right way, but also on the matter of EREA doing the right thing.

In February 2004, EREA facilitated focus group discussions among regional departments to listen to their views on how EREA could further improve its operations support in economic analysis. Five sector directors and eighteen mission leaders or project economists participated in these sessions.

In general, the discussions validated the results of last year’s survey. Consistent with the results of the survey, the early and informal interactions of EREA staff with operations were appreciated. The participants also believed that EREA’s inputs might no longer be useful in the later stages of project processing, and thus the timing of the assistance is crucial.

EREA’s Role as Perceived by Clients

The question of when EREA should get involved is invariably linked to the participants’ concept of economic analysis. The results of the survey last year provided a clue on the mindset of operations colleagues, when they indicated that EREA should get involved early. While the participants in the discussions sometimes started with the bureaucratic, if not mechanical, notion of economic analysis as the activities necessary to fulfill the contents of the Guidelines for the Economic Analysis of Projects, the discussions always resulted in the recognition that the need for economic analysis pervades the project processing cycle. The activities associated with economic analysis ranged from the conceptual issues at the PPTA stage to the technical details at the appraisal and evaluation stages.

EREA’s perceived triad of roles emerged in these discussions. First, the Division is an “auditor”— checking the soundness of the economic analysis and influencing quality-at-entry through its comments at appropriate stages. A variant of this audit role is the “certifying” or “clearing” function that assures the acceptability of analysis. In these cases, EREA is seen as an authority in judging the soundness of economic analysis.

Second, EREA is ADB’s “think-tank,” focusing on cutting-edge approaches and tools in economic evaluation. It should study development assistance issues together with other divisions of ERD. EREA is therefore more than an authority in economic analysis; it provides the substance and impetus for innovation as well.

Third, and reflecting the above two views, EREA staff are extension agents. Having an overall view of documents from operations, EREA staff is in the best position to distill insights from operations and disseminate the lessons. Their responsibilities include building the capacity of the client departments for economic analysis.

EREA’s Work Program

The insights from the discussions helped to prepare EREA’s 2004-2006 work program. After identifying the challenges which the Division is mandated to address and taking note of the strengths and constraints of the Division, EREA staff redefined themselves primarily as extension economists who:

• Work with country and project teams by reviewing operations papers primarily at design stage, and by providing advice for strengthening the economic basis of ensuing operations;
• Conduct adaptable research by distilling insights from operations and bringing in fresh ideas from the development literature, and disseminate research output through good practice papers;
• Support staff learning by developing and delivering learning programs to raise the awareness of economics among colleagues in operations and encouraging consistent application of economic principles and methods.

The suggestion for EREA to get involved early supports the focus on the initial stages of the project cycle. The explicit inclusion of development issues in research and the increased focus on learning programs were other propositions mentioned in the focus group discussions. EREA’s evolving work program reflects its continuing effort to be client-responsive. A key insight learned from the focus group discussions is that EREA has to be relevant and must add value. Therefore, EREA has adopted relevance and value-added as two criteria to guide work priorities and to ensure the effectiveness of partnerships with regional departments. For example, project completion report (PCR) and project performance appraisal report (PPAR) drafts will be excluded from formal reviews. Instead, EREA will develop a user reference guide on economic reevaluation for use by regional departments and Operations Evaluation Department (OED) when preparing the PCR/PPAR. In addition, EREA will provide advice for PCR/PPAR teams to address any analytical and methodological issues prior to PCR/PPAR missions.

Although a retrospective and updates of it are published annually, acts of retrospection and introspection need to be performed continuously by EREA. As needs change, the role of EREA necessarily adjusts. Ultimately, EREA hopes that its services result in more than cosmetic enhancements to project proposals and genuinely add value to the quality of project design.

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