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88. The plan has six major activities

1. Enhancing Quality of Governance in DMCs

1. Beginning in 2001, as part of the country strategy and program (CSP) process, more rigorous and structured studies will be undertaken to analyze governance issues in individual DMCs and the risks they pose³⁸. In addition, public expenditure reviews for all DMCs will be undertaken in collaboration with the World Bank, International Monetary Fund (IMF), and other development agencies
2. This analysis will pay particular attention to the extent of transparency in budget preparation; level and trend of nonproductive government expenditures and spending on social sector programs; opportunities for and degree of participation in development processes (at national, sector, local, and project levels); prevalence of the rule of law; success in fighting corruption; existence of legal and bureaucratic factors promoting official secrecy and inhibiting public access to information; and the need to ensure that complex, large, and unusual patterns of financial transactions are monitored and reported.
3. Based on this analysis, the CSPs will formulate strategies and programs to address the key governance issues, including noneconomic factors that have demonstrable and direct economic effects that have been identified. The CSPs will also specify relevant performance indicators (future CSPs will assess the effectiveness of these programs and identify successes and failures)⁴⁰. Governance assessments and progress in improving the quality of governance will inform both the level and sectoral composition of ADB assistance to a DMC.
4. Targeted capacity building will be a major part of ADB's efforts in improving governance in DMCs. In this regard, ADB will focus on areas of weakness in governance identified in the CSP process⁴¹. Such activities will include strengthening the capacity of the public sector to monitor and evaluate government performance, and of civil society (particularly NGOs and other groups that represent vulnerable segments of the population), to maintain the debate about improvements in governance.
5. Enhancing participation in development decision-making is another area of importance for ADB. Therefore, ADB will promote participation in DMCs by ensuring that, in the design of projects and programs, attention is given to expanding opportunities for involvement by local representative assemblies and civil society, including women's groups, and creating a favorable environment for citizens to have meaningful input into development decisions.
6. By 2001, ADB will develop indicators for the four elements of good governance, i.e., accountability, participation, predictability and transparency, for all DMCs. These indicators will be used to identify the strengths and weaknesses in governance in individual DMCs, determine priority areas for ADB governance activities in the DMC concerned, and track the broad impact of governance interventions. The indicators will be implemented on the basis of rigorous studies undertaken as part of the CSP process and revised annually in the context of the CSP updates.

2. Elevating Good Governance to the Top Level of the Development Agenda in the Region:

1. Focusing on the principles of accountability, participation, predictability, and transparency, ADB will develop a regional program of governance initiatives. This program will begin in 2001 and will directly promote good governance principles in the DMCs' antipoverty programs⁴². The aim is to identify and implement effective methodologies that could be applied in all or most DMCs, demonstrate the positive impact of good governance, and create momentum for an expanded set of governance activities. (Possible initiatives under consideration are listed in Appendix 3.)
2. By 2001, ADB will promote a regional partnership network on governance, comprising representatives from governments, civil society, the private sector, and development agencies, to build a consensus on relevant benchmarks, best practices and codes of conduct, and indicators of good governance, and review progress in achieving better governance in the region. The network will also be a venue for successful "champions of change" to promote the value of good governance. ADB will provide a web site to support this partnership network.
3. ADB will work with the ADB Institute to develop a program of workshops and training courses to enhance understanding of DMC politicians, officials, and leaders of civil society about the value and principles of good governance. The workshops and courses will be demand driven, reflecting the impact of the dialogue and other ADB initiatives .
4. ADB will actively lead a continuing public debate on the importance of governance issues by commissioning studies and publishing their results and through other public affairs' initiatives.

3. Fighting Corruption by Setting an Example of Zero-Tolerance, and by Promoting the Spread of Good Financial and Other Internal Control Systems:⁴³

1. Through project procurement related audits, ADB will assist DMCs to strengthen the control systems of executing agencies and identify fraud and corruption. Whenever, pursuant to ADB guidelines, fraud or corruption is identified, appropriate steps will be taken, including sanctions against the contractor and cancellation of the loan.
2. Beginning in 2000, ADB will develop a program to train ADB staff to detect fraud and corruption in ADB-financed projects.
3. By 2001, ADB will introduce measures to strengthen borrowers' capacities to carry out audits with appropriate independence. Attention will also be paid to professional accountancy bodies and the way they manage their own ethical standards. This focus will also produce benefits in corporate governance.
4. ADB will expand its assistance to supreme audit institutions (SAIs) in the DMCs for developing programs and training to strengthen their capability to detect corruption and fraud. ADB continues to support the Asian Organization of Supreme Audit Institutions (ASOSAI) and South Pacific Association of Supreme Audit Institutions (SPASAI)⁴⁴ to strengthen SAIs in the region. Attention will also be paid to benchmarking the performance of supreme audit institutions.
5. (e) ADB will prepare, in consultation with other MDBs, master standard bidding documents to introduce standard terms and conditions for bidding and award of contracts, as well as generally accepted international best practices, into ADB procurement procedures and practices.

4. Coordinating Governance Work of MDBs and Other Development Agencies:

1. The MDB Working Group on Governance, Anticorruption, and Capacity Building has set up four subgroups to actively promote unified approaches and cooperation in key areas⁴⁵. The working group will complete the first phase of work to develop understandings on major issues by 2001.
2. ADB will set up cooperative arrangements with the IMF, World Bank, United Nations Development Programme (UNDP), and major bilateral aid agencies to carry out governance assessments and public expenditure reviews in the DMCs.

5. Strengthening ADB's Governance Capacity

1. ADB will provide governance specialist positions to all operational departments and ensure that a minimum critical mass is built up for the effective implementation of the governance policy. In addition, resources will be provided to engage specialized experts to respond to the demand for governance reforms, as reflected in CSPs, through TAs or as staff consultants.
2. ADB will develop governance and institutional databases on each DMC⁴⁶. The latter will include information about the strengths and weaknesses of key executing agencies in the priority sectors assisted by ADB. ADB will also enhance its project performance reports so that information is collected about the contribution that projects are making to improved governance.
3. ADB will elaborate the links between good governance and poverty reduction, private sector development, and political and institutional frameworks, and ensure that the links are recognized in project designs and in promotional material prepared by ADB.
4. Managers and mission leaders will be appropriately trained and provided with toolkits for effectively addressing governance issues in project design. The training will encompass case studies illustrating key lessons learned about governance and the case studies will be updated regularly as more information becomes available.

6. Monitoring Implementation of the Action Plan

1. In the first quarter of 2001, based on the approved action plan, ADB will present to its Board a work program on governance. The program will include measurable and monitorable actions and targets for 2001.
2. Beginning 2002, ADB will provide an annual report to its Board on implementation of the action plan. The report will include information on actual achievements against the actions and targets in the annual work program, lessons learned, and a work program for the next year.

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