Strategy 2030 and

Governance and Capacity Building

Asia’s public sector institutions are pursuing efficiency and accountability on many avenues, from financial management to service orientation and more. With about 127 cofinanced projects pursuing good governance in some form, ADB’s financing partnerships continue to help strengthen the capacity of public institutions to undertake policy reforms and promote private sector development.

ADB’s Strategy 2030 sets its course for strengthening governance and institutional capacity by pursuing the following:

  • Governance and institutional capacity for service delivery
  • Public sector management and financial stability

Governance performance in Asia and the Pacific

Countries with sound policies and regulations, effective public service, and control on corruption have been shown to develop more quickly than others. According to ADB’s Country Performance Assessment, governance and institutional performance in Asia and the Pacific has gradually improved over the last decade even as significant challenges remain. Performance varies both among sub-regions and countries, but most tend to perform better in budgetary and financial management and revenue mobilization. Many countries still contend with issues in public administration capacity, transparency, accountability and corruption in the public sector, and issues with enforcing property and contract rights.

Despite Asia and the Pacific showing signs of better governance and institutional capacities, problems persist in many Developing Member Countries (DMCs), and the region continues to lag most others in the world. Using the Worldwide Governance Indicators—a dataset of perception-based relative governance performance—developing Asia and the Pacific is shown to continue to lag other regions in governance performance, including peer regions such as Latin America.

ADB’s vision under Strategy 2030 requires effective governance and improved institutional capacity in its DMCs.

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After decades of neglect, Kiribati’s South Tarawa road network gets much-needed repair through a partnership between ADB, the World Bank, Government of Australia, and the Government of Kiribati. To make sure the outcomes of the project are sustained, local governments and enterprises were trained in routine maintenance to keep the road in top shape.

Governance interventions cut across a wide array of sectors and themes, among them education, energy, finance, health, transport, urban, water, climate change and disaster risk management, gender, social development, rural development and food security, regional cooperation, and public-private partnership.

Some 127 of the 148 cofinanced projects in 2019 indicated pursuing governance in some form as part of their objectives, aligning with Strategy 2030’s governance agenda.

The key financing partners that contributed the most to these projects included the Asian Infrastructure Investment Bank, European Bank of Reconstruction and Development, Japan International Cooperation Agency, KfW, and the New Development Bank. The sectors with most governance-related projects were transport, public sector management, energy, water and urban infrastructure services, and health. The top DMCs with most governance-related projects in 2019 were the Philippines, Indonesia, Sri Lanka, India, and Uzbekistan.

Governance and Institutional Capacity for Service Delivery

ADB nurtures specialized governance trust funds that support government-led reforms aimed at improving transparency, accountability, predictability, and participation. One such fund is the Governance Cooperation Fund, which was established in 2001 with a grant from the Government of Canada. Since then, Denmark, Ireland, and Norway have made contributions to support the fund.

Strategy 2030 also puts importance on governance-related knowledge-based partnerships to maximize development impact for clients. Examples of these partnerships are the ADB-OECD Anti-Corruption Initiative for Asia and the Pacific, launched in 1999; Open Government Partnership, launched in 2011; the Development Partners Network on Decentralization and Local Governance, launched in 2006; and the OECD Development Assistance Committee Network on Governance (GovNet), launched in 1995.

In terms of projects, the Connecting the Railways of the Greater Mekong Subregion (Phase 2), a regional technical assistance (TA), is cofinanced with the People’s Republic of China Poverty Reduction and Regional Cooperation Fund for $500,000. The TA supports the Greater Mekong Railway Association (GMRA) by improving the organizational structure of the GMRA, preparing an operational readiness plan, and updating the GMS railway strategy for the development of missing cross-border railway links and associated domestic connections. The TA runs from 2019-2021.

Modernizing Power Trade Coordination in Central Asia

Central Asia stands to benefit from increased energy trading made possible by a modernized power trade coordinating agency. The Asian Clean Energy Fund under Clean Energy Financing Partnership Facility and the High-Level Technology Fund are supporting this project.

The European Bank of Reconstruction and Development is cofinancing the Georgia: North–South Corridor (Kvesheti–Kobi) Road Project for $60 million. The project, which runs from 2019 to 2026, aims to improve connectivity and safety along the North-South Corridor by constructing about 23 kilometers (km) of climate-resilient two-lane highway between Kvesheti and Kobi (the project road) and about 5 km of all-weather access roads. The project will also help increase road safety awareness and improve the capacity of the Roads Department on project and contract management. The project expands efforts of ADB and other development partners to upgrade the country’s national highway network along vital economic corridors.

The Uzbekistan project, Power Generation Efficiency Improvement Project, is cofinanced with the Uzbekistan Fund for Reconstruction and Development for $177 million, the European Bank of Reconstruction and Development for $240 million, and Japan Fund for Poverty Reduction for $2 million. The project, which runs from 2019 to 2023, is constructing two units of 450 MW energy-efficient gas turbines at the Talimarjan Thermal Power Plant in the Kashkadarya region. It aims to contribute to energy saving, greenhouse gas emission reduction, and reliable power supply in Uzbekistan. The project builds on the experience gained through the Talimarjan Power Project, which helped improved corporate governance in the energy sector.

The Republic of Korea e-Asia and Knowledge Partnership Fund and the People’s Republic of China Poverty Reduction and Regional Cooperation Fund are cofinancing a Technical Assistance in Mongolia for $500,000 each. The Methane Gas Supply Chain Development Master Plan will support the study on the development of the country’s first nationwide methane gas supply infrastructure development strategy. The TA will help the country’s policy to (i) mitigate air pollution in Mongolia, and (ii) ensure the reliable, cleaner, and secured primary energy supply by developing a methane gas supply infrastructure development strategy paper to switch primary energy resource from coal to cleaner methane gas. The study will run from 2019-2022.

Public Sector Management and Financial Stability

The public sector management aspect of this operational priority focuses on improving public expenditure and fiscal management, reforms of state-owned enterprises, and social protection.

Partnerships can help address fiscal, governance, technical, and policy deficits that reduce the quality and efficiency of public services.

In Pakistan, the Energy Sector Reforms and Financial Sustainability Program (Subprogram 1) is cofinanced with the Export-Import Bank of Korea for $80 million. The project aims to address fiscal, governance, technical, and policy deficits in Pakistan’s energy sector. These deficits have adversely impacted the sector’s quality and efficiency of services, and the sustainability of energy infrastructure and finances, thereby challenging Pakistan’s fiscal balance and macroeconomic stability. The project runs from 2019-2020.

In the Philippines, the Strengthening the Transition of Vulnerable Communities Affected by the Malolos-Clark Railway Project, cofinanced by the Japan Fund for Poverty Reduction for $2 million, was approved. The TA will involve consultations with project affected persons for the preparation of the Resettlement Action Plan and the Livelihood Restoration and Improvement Program for the Malolos-Clark Railway Project. The TA runs from 2019-2021.

Cofinanced by KfW for $553.7 million, the Fiscal and Public Expenditure Management Program (Subprogram 3) in Indonesia supports critical fiscal and public expenditure management reforms to improve the quality of government spending on health, education, social protection, and infrastructure. The subprogram runs from 2019 to 2020. In Tonga, the Building Macroeconomic Resilience Program, Subprogram 3 was cofinanced with the Government of Australia for $2.8 million, the European Union for $2.2 million, and the World Bank for $5.5 million. The program, consisting of three subprograms, aimed to strengthen Tonga’s long-term growth prospects and capacity to respond to external shocks. It supported government efforts to improve the country’s fiscal position by adopting prudent policies and better public financial management, and improving the business climate by continuing policy, regulatory, and public enterprise reforms. The project ran from June to October 2019.

Projects that support reforms in financial management and public service delivery, such as the Improved Fiscal and Infrastructure Management Program in Tonga, can help improve a country’s macroeconomic stability.

Similarly, in Tuvalu, the Improved Fiscal and Infrastructure Management Program was cofinanced with the Government of Australia for $1 million, the European Union for $1.5 million, the World Bank for $7.5 million, and the Government of New Zealand for $600,000. The TA, which ran from October to December 2019, helped implement and sustain the government’s medium-term public sector management reform agenda by supporting efforts to improve public financial management practices and public service delivery. The Government of Tuvalu recognizes that improved macroeconomic sustainability and public service delivery is critical, given the development challenges that it faces.

Moving Forward

Good governance and strong institutional capacity are the basis for country development. ADB’s partnerships will continue to help DMCs improve governance and create an enabling environment for sustainable growth by strengthening the quality and capacity of public institutions to undertake policy reforms and promote private sector development. They will also continue to support reforms in public expenditure; revenue collection, including tax system and enforcement; corruption eradication and anti-money-laundering activities, and more.