Public sector management / Economic affairs management

Asia continues to face large infrastructure investment gaps. Although alternative financing schemes have been emerging to help ease the fiscal burden, reforms in other areas such as in governance, legal and regulatory framework to enhance investment climates would have to be undertaken. In some cases, the lack of well prepared financially and economically viable projects have hindered the DMCs to implement these programs and projects to support their quest for growth.

DMCs' capacities for the conduct of adequate due diligence, particularly for economic and financial due diligence, greatly vary. Only selected DMCs have established processes and capacities for conduct of economic due diligence in line with ADB s requirements as outlined in ADB Charter and policies. Even in case of majority of these DMCs, methodologies and viability criteria need to be revisited and updated. This weak capacity often leads to allocation of unviable projects especially for private sector financing and PPPs and have caused major delay in their implementation. Weak capacity in project economic analysis also causes misallocation of scarce fiscal resources to project with suboptimal development impacts. This also affects the selection of infrastructure projects to be financed by ADB and other development partners. On the other hand, weak capacity in assessing the impact of structural reforms required in creating enabling

environment for increased public and private sector investment in infrastructure and even in other sectors hampers policy dialogue and the preparation of progressive policy reforms. Weak preparation can result in poor design and slow the pace of reforms

Given these, there is pressing need for the development partners to assist the DMCs in building their capacities and processes for conduct of adequate levels of due diligence in key areas including economic due diligence. In case of DMCs with limited capacity and with no-defined processes for conduct of economic due diligence, the focus will need to be in developing their own processes and guidelines and train the DMC officials in conduct of economic due diligence. In case of DMCs with existing capacity and processes for economic due diligence, the focus needs to be on assistance for reviewing and updating the current methodologies and processes, and familiarizing the staff in applying the updated methodologies and processes.

Capacity of DMC officials on conduct of economic analysis or assessment improved

Guidance materials for improved economic analysis published and disseminated.

Capacity of DMC Officials on conduct of Economic Analysis of Policy Reforms improved.