Publications

	Table of Contents
p. 6 of 13 BACK | NEXT I. Introduction II. ADB's Governance Policy III. Implementation of ADB's Governance Policy A. ADB's Governance Activities B. Assessing the Impact on the Four Elements of Good Governance C. Addressing Governance Issues-ADB's Instruments D. Developing ADB's Capacity to Address Governance Issues IV. Lessons Learned V. Medium-Term Governance Agenda and Action Plan 2000-2004 VI. Conclusions and Recommendations

Promoting Good Governance: ADB's Medium-Term Agenda and Action Plan (2000) : III. Implementation of ADB's Governance Policy

---

C. Addressing Governance Issues-ADB's Instruments

67. ADB has addressed governance issues within its lending modalities and grant-funded TA. With the increased pace of assistance for governance reforms in recent years, the mismatch between the instruments and the assistance requirements for good governance and capacity building became obvious. Capacity building usually entails long-term attention, while ADB's instruments, particularly policy-based loans and conventional TA, tend to be for the short to medium term. However, ADB's new modalities now allow longer commitment periods (e.g., the TA cluster approach and slow-disbursing program loans). Also ADB has pilot tested an approach to phasing of reforms to suit overlapping or sequential lending programs³⁰. These changes in modalities will go a long way to resolving the mismatch.

68. In 1997, ADB launched an important TA instrument-the TA cluster. Recognizing that a single TA intervention is often not sufficient to address a set of related issues or problems, the cluster approach is especially suitable for governance initiatives, which often need to handle unpredictability and provide for flexibility. In some cases, a series of interventions over time is called for. In others, a range of interventions may be required, involving a number of agencies. Power Sector Restructuring in Gujarat is an example of TA cluster. The objective of this TA cluster was to increase the reliability, efficiency, and commercial orientation of the Gujarat power sector through gradual, comprehensive, and systematic restructuring along functional lines. Five related TAs³¹ were designed to help the state government design and implement key reform measures such as unbundling of generation, transmission, and distribution; commercialization of generation and distribution; separation of sector regulation from ownership of assets; and private sector participation in generation and distribution. These initiatives were closely interrelated and paved the way for possible lending and investment operations by ADB and other agencies to the power sector in Gujarat.

Regional TA, although generally short term and limited in size, is another flexible instrument to bring DMCs together and compare experiences in addressing governance issues. For example, such TAs have (i) provided a forum for municipal governments to develop capacity for benchmarking and continuous improvement, and learn from each other in the process³²; (ii) supported activities to assess the merits of different approaches to fighting corruption in DMCs; (iii) enabled information on subjects like public expenditure management and public administration to be produced and disseminated³³; and (iv) helped raise awareness of regulatory and governance issues among policymakers, investors, and civil society³⁴.

___________________

Back B. Assessing the Impact on the Four Elements of Good Governance	Next D. Developing ADB's Capacity to Address Governance Issues