Evaluation

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Annual Report on Loan and Technical Assistance Portfolio Performance for the Year Ending 31 December 2005
Completed: 2006

The Annual Report presents the most complete and accessible summary data and analyses available in the Asian Development Bank (ADB) of its public sector lending, private sector investment, and technical assistance (TA) grant operations for the year 2005, along with trend analyses that for the most part cover the decade 1996–2005.

  Summary of Findings

Public Sector Lending:

• During 2005, 65 public sector loans were approved for 58 projects—the $5,261 million in loan approvals ranked 7^th for the decade, and the $4,541 million of disbursements ranked 4^th.
• The major themes by volume of new lending in 2005 were: sustainable economic growth (78.5%), governance (29.5%), inclusive social development (19.5%), capacity development (14.0%), and gender and development (11.1%).
• The major sectors by volume of new lending in 2005 were: transportation and communications (32.7%); multisector (16.4%); law, economic management and public policy (14.8%); energy (12.1%); and water supply, sanitation and waste management (11.7%).
• During 2005, 39 loans for $2,566 billion were closed, of which $444 million (17.3%) was cancelled, as compared to an average of 17.7% cancellations for the decade.
• During the decade, 86% of the loans closed required an average of 2.1 extensions to the loan closing date, and the average total extension per loan closed was 2.13 years.
• At year-end 2005, the public sector portfolio comprised 512 active loans for $33.9 billion, including 455 project loans for $28.8 billion and 57 program loans for $5.1 billion.
• During 2005, there were 473 active projects and programs in various stages of implementation, of which 82.7% had review missions.
• At year-end 2005, 31.4% of the active loans were being administered by ADB’s resident missions, up from 27.9% a year earlier.
• The 446 project completion reports prepared to date for projects approved during the decade 1990–1999 rated 73% successful, 23% partly successful, and 4% unsuccessful.

Technical Assistance Grants:

• During 2005, ADB approved 299 TAs worth $198.8 million, comprising 68 project preparatory TAs, 152 advisory and operational TAs, and 79 regional TAs.
• The portfolio of active TAs grew from 663 TAs worth $485 million in 1998, to 1,016 TAs worth $687 million in 2004, and comprised 977 TAs worth $727 million in 2005.
• During 2005, only 25% of the active TAs had a review mission.
• During the decade 1996-2005, ADB’s TA Special Fund provided 44% of TA funding, the Japan Special Fund provided 35%, and other funds provided 21%; however, there was a shift in 2005 when the TA Special Fund provided 45% of TA funding, the Japan Special Fund provided 14%, and other funds provided 41%.

Private Sector Investments:

• During 2005, ADB approved 17 investments worth $821 million, comprising 65% loans, 26% equity, and 8% guarantees.
• At year-end 2005, the active portfolio comprised $1,692 million of investments in 89 projects in 16 countries, plus 20 regional projects, comprising 43% loans, 35% equity, and 21% guarantees.
• Since 1983, ADB approved 246 investments worth $5,720 million, but the full cancellation of 24 investments and partial cancellation of 2 resulted in a 13.7% reduction in investments to $4,934 million; and more than 38% of the investments were approved during 2003–2005.
• At year-end 2005, 73% of the investments by number and 87% by volume had risk ratings of satisfactory or better, and the share of companies in default was 4.6%.

  Key Issues

Public Sector Lending:

• New loan approvals have stagnated at about $5.3 billion/year since 1996 in nominal terms, except for the inflated lending in 1997 due to the Asian financial crisis; new lending instruments may change this but are still in the pilot phase.
• For the past decade, delays to loan closing have averaged more than 2 years, suggesting a chronic problem with the preparation of project implementation schedules.
• There is a continuing problem with delays to second and subsequent program loan tranche releases.
• Cancellations reached 17% of the net loan portfolio during 2005, compared to an average of 12.8%/year for the decade.
• Loan disbursements showed a steady decline from 1999 to 2004, with a mild recovery in 2005.
• During 2005, about 83% of active loans had a review mission, up from 80% during 2004, but increased attention to project administration is warranted.

Technical Assistance Grants:

• During 2005, for the second year in a row, only 25% of active TAs had a review mission, suggesting that TA administration has been week.
• The plan to reduce the number of active TAs in the portfolio was starting to take effect at the end of 2005 and should be completed by the end of 2007.
• The 18% decrease in the average project preparatory TA budget funding from 1996 to 2005, in real terms, is cause for concern given the increasing complexity of projects.
• ADB needs to ensure the proper administration of about 30 TA trust funds supported by other aid agencies, as they have become a major source of TA support.

Private Sector Investments:

• Compared to the International Finance Corporation and the European Bank for Reconstruction and Development, the Private Sector Operations Department is understaffed at the current level of operations.
• Risk management is a growing concern as private sector operations are projected to continue to expand in the short term, and staffing of the Risk management Unit must keep pace.

  Recommendations

The primary recommendation is for management to see that the Action Plan to Improve Loan and Technical Assistance Portfolio Performance prepared in 2005 is regularly reviewed and fully implemented over the next few years.