those in Groups B1 and B2.
Table 1: Project Success by Country Classification
Source: OED.
The averages by classification mask important country differences. Within all groups, there are outliers in both directions. The country variation holds true for source of funding. For some OCR borrowers, projects are more likely to be successful than in ADF-eligible countries, but ADB’s portfolios perform better in some countries that have access to ADF than in some OCR borrowers. In Group B2, the People’s Republic of China stood out as one of ADB’s best-performing portfolios, achieving an 82% success rate in the 1990s. In contrast, Papua New Guinea had a 22% success rate in the 1990s, the weakest portfolio performance in ADB. In Group B1, the success rates of the portfolios in Bangladesh (84%) and Viet Nam (91%) significantly exceeded both group and ADB averages for projects approved in the 1990s. In contrast, only 57% of projects approved for Pakistan in the 1990s were rated as successful. In Group A, the portfolio success rates of Bhutan, Cambodia, Kyrgyz Republic, Lao People’s Democratic Republic, Maldives, Mongolia, and Solomon Islands exceeded Group A and ADB averages in the 1990s. On the other hand, the success rates for Kiribati, Nepal, Samoa, and Vanuatu were below average for countries in Group A.
There is a school of thought that country ownership, which is a key factor for project success, increases with a country’s share of the financing of a project. This hypothesis was tested by comparing project success rates with the percentage of project costs financed by the executing agency after controlling for sector differences. No significant statistical relationship was found, nor was there any clear pattern to suggest that project success improved with the share of government financing. Since the likelihood of project success is not compromised as the share of ADB funding increases, it is reasonable for ADB to address the greater fiscal constraints faced by lower income countries by increasing the allowable financing limit.
Box 3: Republic of Korea Financial Sector Program and Institutional Strengthening of the Financial Sector Projecta
Highly Successful
By 1996, the Republic of Korea had become the world’s 11th largest economy. Many industrial conglomerates had grown rapidly on borrowed capital and were highly leveraged. Interlocking relationships between the corporate and finance sectors, and the accommodative role of government, meant that many financial institutions did not operate within prudent, market-driven norms. In mid-1997, the currencies, stock markets, and other asset prices in Southeast and East Asian economies, including the Republic of Korea, depreciated rapidly, causing panic among investors and financial institutions. Several smaller conglomerates in the country declared bankruptcy but were not bailed out by the Government, which had been the practice in the past. Confidence in the Republic of Korea’s finance sector eroded. Demands were made for the repayment of foreign exchange loans, and a foreign exchange crisis was imminent. The Government approached the international community for emergency assistance. As part of the package, the Asian Development Bank provided a $4 billion program loan aimed at restructuring the entire finance sector. This was the bank’s largest loan ever, and it was processed in record time.
Evaluation found that the program had a very high level of government ownership of the intended reforms. It had addressed fundamental structural weaknesses in the finance sector. The coverage of the reforms and their sequencing had been appropriate. The reforms facilitated the elimination of nonviable institutions, opened the sector to competition, and improved the regulatory framework and market oversight. Finance sector indicators improved rapidly in 1998, and the finance sector is now healthier and less vulnerable to external shocks.
a Available: www.adb.org/documents/ppers/kor/31651-kor-pper.pdf
Box 4: People’s Republic of China Anhui Environmental Improvement Project for Municipal Wastewater Treatment and Industrial Pollution Abatement a
Successful
Rapid economic growth in Anhui province in the 1990s resulted in increases in nutrients and pollutants entering Chao Lake with concomitant algal blooms, fish kill, and pollution of the water supply of Hefei and Chaohu cities. The project was the first major initiative of a massive cleanup campaign. It aimed to improve the water quality in Chao Lake and reduce wastewater, air, and solid waste pollution in Hefei and Chaohu. It had six subprojects: two treatment facilities for Hefei and Chaohu, and industrial pollution abatement for four top industrial polluters in Anhui.
The project was implemented as envisaged, although there were some cost savings and a delay in implementation. Implementation of project components varied, ranging from excellent to less than satisfactory. The two wastewater treatment plants improved the environment by treating about 310,000 cubic meters of polluted water per day. The wastewater treatment ratios of these two plants are among the highest in the country. The four industrial pollution abatement subprojects improved the quality of products; reduced air, water, and solid waste pollution discharges; and reduced resource inputs by improving production efficiency.
The project was relevant and effectively and efficiently helped to address pollution in Chao Lake, targeted as a top priority for environmental cleanup by both Anhui and the State Council. The recalculated economic internal rate of return was 16.4% and the recalculated financial internal rate of return was 8.4% (higher than the cost of capital). With some exceptions, the subprojects were generally well maintained, but the poor financial performance of some enterprises may adversely affect the sustainability of some. Despite their satisfactory financial internal rates of return, the project is assessed as less likely to be sustainable (without the Government’s coverage of debt). The project has achieved significant impacts on institutional strengthening of environmental management and on the operation and maintenance of wastewater treatment facilities.
The two associated advisory TA operations achieved significant results. Training courses were conducted for operators of municipal and industrial wastewater treatment facilities throughout Anhui in environmental monitoring, operation, maintenance, and management of such facilities. A permanent training center was established using the training manuals and equipment provided under the TA. A long-term integrated environmental management plan was formulated to improve water and air quality and solid waste management in the Chao Lake basin. The outputs of the TA were highly relevant, timely, and instrumental for the formulation of the Chaohu Environmental Improvement Plan, approved by the State Council, and included in Anhui’s 10th Five-Year Plan. More than 80% of the investment projects recommended to improve environmental quality in the Chao Lake basin have either been, or are being, constructed.
a Available: www.adb.org/documents/ppers/prc/28241-prc-pper.pdf
Box 5: Indonesia Health and Nutrition and Social Protection Sector Development Programsa
Successful
A sector development program is a combination of investment (a project) and policy-based (a program) components designed to meet sector needs in a comprehensive and integrated way. In 2006, OED evaluated the sector development programs for health and nutrition and for social protection in Indonesia. These were OED’s first evaluations of that lending modality. Both programs were designed and implemented in response to the 1997 financial and economic crisis that undermined social well-being in Indonesia by increasing unemployment, reducing family incomes, and raising prices of necessities. As a result, there was a substantial
