Annual Report 2007

The Central and West Asia Department consolidated and expanded operations. Sixteen sovereign loan, eight nonsovereign loan, and twelve grant projects totaling $3.0 billion were approved for nine countries (Afghanistan, Armenia, Azerbaijan, Georgia, Kazakhstan, Kyrgyz Republic, Pakistan, Tajikistan, and Uzbekistan). The total was twice the annual average of $1.5 billion in 2002–2006.

About 66% of sovereign approvals (70% including nonsovereign approvals) involved ordinary capital resources (OCR), and the other 34% (30% including nonsovereign approvals) were Asian Development Fund (ADF) loans and grants. ADF grants totaled $247.4 million (Table 13). Lending operations started in Armenia in the transport and water supply sectors. The transport, finance, and energy sectors have the biggest share of the program.

Pakistan continued to be the main client, with six sovereign loan projects and one non-sovereign loan project valued in total at $2.0 billion. Lending to Pakistan targeted greater inclusiveness and access to financial services, policy reforms for capital market development, and improved government efficiency. Lending was also directed at providing $400 million in long-term investment financing to clear bottlenecks in transport and to support energy, irrigation, and earthquake rehabilitation projects.

Two multitranche financing facilities (MFFs) for $1.4 billion were approved: one for the Azerbaijan road network development and another for the Pakistan trade corridor highway program (Table 12). The second tranche of a Pakistan power transmission MFF was also approved. These projects represented ADB’s continuing effort to adopt a programmatic approach to doing business.

Nonsovereign operations reached record levels in 2007, in line with the transition of the subregion to a market economy and efforts to develop the private sector. ADB’s nonsovereign approvals in the region totaled $642.8 million (Statistical Annex 10).

Georgia joined ADB, and an interim operational strategy was prepared for the country. For the Kyrgyz Republic, ADB and four other development partners -the Department for International Development of the United Kingdom, Swiss Cooperation, United Nations agencies, and the World Bank Group drew up a joint country support strategy. Country partnership strategies were prepared for Afghanistan and Pakistan.

PORTFOLIO MANAGEMENT

ADB spent much time and resources managing its 129 ongoing loan projects in the region. A hugely important "spring cleaning" exercise in Pakistan resulted in the closing and cancellation of loans for slow-moving and problem projects. ADB stepped up work on contract awards and disbursements and kept a watchful eye on projects at risk. By year-end, it had exceeded the year’s targets for contract awards ($1.4 billion, or 113%) and disbursements ($1.2 billion, or 120%), and "projects at risk," at 5%, were at an all-time low. ADB redoubled its efforts to close overdue technical assistance projects in close coordination with project consultants and the Controllers Department. Teams communicated constantly with consultants and firms, setting deadlines to conclude pending financial transactions.

Innovations were introduced to improve portfolio management. These included early warning systems (i.e., implementation issues anticipated, given past performance and the changing environment); a new policy of not extending loans or technical assistance automatically, especially to those with no chance of meeting targets on time and within budget; a division work-load audit to clarify accountabilities and responsibilities, maintain transparency, and plan the delegation of projects to resident missions; and a joint venture of headquarters and resident missions that builds on the synergy between sector expertise and local knowledge for effective loan supervision.