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2. Implementation of the ADF VII Framework

49. Donors agreed that an ADF Donors’ Report is an understanding between the Donors and ADB which sets out conclusions, recommendations and proposals for time-bound actions by the ADB on the basis of which Donors pledge new contributions to ADF. In that context, during the ADF VIII negotiations, ADB submitted to Donors a review of the implementation of the ADF VII framework (in the ADF VII Donors’ Report, January 1997).

50. Donors concluded that ADB has followed the operational priorities established by the Donors for ADF VII, with emphasis on targeted investments in the social sectors and in poverty reduction combined with efforts to stimulate broad-based economic growth. Significant progress has been made in directing ADF lending to social and environmental areas. The project mix targets have been met, with the proportion of projects targeting economic growth only falling to 37 percent. The social and environment target has largely been attained through increased emphasis on human development which accounted for a third of ADF lending (mostly for education, but also for health and sanitation). However, although the overarching goal of poverty reduction is now reflected in many COSs, few projects have been designed specifically to address this objective (although 20 percent of projects have poverty reduction as a secondary objective). Little lending has been directly targeted at women or the environment.

51. Donors concluded that on a country basis, lending approved for Group B countries met the project mix targets, although economic growth remained the primary objective of most lending to Group A countries. Group A includes many small countries where growth remains the primary objective because of their relatively better social indicators yet relatively slow growth. This emphasis on growth seems appropriate given their low capacity and limited resource base, although the benefits of growth need to be distributed more equitably. Donors recognized that most of the COSs that have guided operations during the ADF VII period were prepared before the ADF VII strategic objective mix was adopted and show economic growth as the key to poverty reduction. The CAPs have reflected this. However, several COSs have now been or are being revised and reflect the change in ADB’s approach to development with a greater focus on poverty reduction. At the project level, there has been a noticeable improvement in the quality of the design of projects approved during ADF VII. Their scope and components have generally been consistent with claimed project purposes and strategic objectives. Implementation of the classification system for these objectives still has weaknesses. Donors recognized that almost all projects and advisory technical assistance now have logical frameworks and monitoring and evaluation mechanisms. They concluded that there is still need for significant improvement. Many projects have poorly defined performance indicators or indicators that focus on project outputs rather than assessment of project purpose and objectives. Donors also noted that measures for capacity building are included in most projects; but, they expressed concern that capacity building still tends to be related to the needs of loan projects rather than of institutions. There are also doubts as to the sustainability of capacity building efforts.

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