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Real-Time Evaluation Study of the Multitranche Financing Facility

Real-Time Evaluation Study of the Multitranche Financing Facility

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This evaluation examines the costs and benefits associated with the multitranche financing facility modality, by considering efficiency gains or cost reductions as well as gains in development effectiveness. The evaluation reviews whether lessons or initial outcomes before it was mainstreamed led to any changes in policy for the facility or operating requirements to improve its effectiveness. The study also provides insights into the future design of multitranche financing facility interventions.
This evaluation examines the costs and benefits associated with the multitranche financing facility modality, by considering efficiency gains or cost reductions as well as gains in development effectiveness. The evaluation reviews whether lessons or initial outcomes before it was mainstreamed led to any changes in policy for the facility or operating requirements to improve its effectiveness. The study also provides insights into the future design of multitranche financing facility interventions.

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Sections

  • A. Background and Rationale
  • BB. About the Multitranche Financing Facility
  • C. Objectives
  • DD. Study Period
  • E. Evaluation Methodology
  • A. Approvals
  • B. Regions and Countries
  • C. Sectors
  • D. ADB’s Funding Sources
  • EE. Instruments
  • A. Long-term Support to Clients
  • B. Improved Organizational Effectiveness
  • C. Cofinancing
  • DD. Reduced Commitment Charges
  • A. Justification of the Multitranche Financing Facility modality
  • BB. Decision-making Filters
  • CC. ADB Support for Project Preparation
  • DD. Project Readiness
  • E. Flexibility Aspects
  • B. Due Diligence and Viability Analysis
  • CC. Peer Review
  • DD. Oversight, Monitoring, and Reporting Arrangements
  • B. ADB Perspectives
  • A. Key Findings
  • B. Lessons
  • C. Recommendations
  • AAPPENDIX 2: EVALUATION ISSUES AND INFORMATION REQUIREMENTS
  • AAPPENDIX 3: MULTITRANCHE FINANCING FACILITY APPROVED BY SECTOR
  • AAPPENDIX 8: STRATEGIC CONTEXT OF MULTITRANCHE FINANCING FACILITIES
  • AAPPENDIX 9: POLICY DIALOGUE AND CAPACITY DEVELOPMENT (SELECTED CASE STUDIES)
  • AAPPENDIX 10: TRENDS OF TECHNICAL ASSISTANCE AND PROGRAM LENDING SUPPORT

Special Evaluation Study

Real-time Evaluation Study of the Multitranche Financing Facility

Evaluation

Independent

Special Evaluation Study
December 2012

Real-Time Evaluation Study of the Multitranche Financing Facility

Reference Number: SES: REG 2012-22 Independent Evaluation: SS-120

Director General Director Team leader Team members V. “$” refers to US dollars. IED N. the Independent Evaluation Department does not intend to make any judgment as to the legal or other status of any territory or area. Senior Evaluation Assistant. Foerster. Principal Evaluation Specialist. Evaluation Officer. Thomas. Fortu. IED T. reviewing. Guevara. there were no conflicts of interest of the persons preparing. Thukral. Hettige. . To the knowledge of the management of the Independent Evaluation Department. IED K. Ueda. or by making any designation of or reference to a particular territory or geographic area in this document. In preparing any evaluation report. or approving this report. Independent Evaluation Division 2. IED J. IED The guidelines formally adopted by the Independent Evaluation Department on avoiding conflict of interest in its independent evaluations were observed in the preparation of this report. Independent Evaluation Department (IED) H. Evaluation Specialist.NOTE In this report. IED M. Principal Evaluation Specialist.

Abbreviations ADB ADF ADTA AEDB BTOR COBP COP COSO CPS DMC DMF EA EIRR ELR eOps ERD FFA GaPG GCI IA IED IEI LOE MFF NEPS NPI OCR OM PAI PFR PFRR PMO POE PPTA PRC RRP RTE SPD SST TA TD TMS WPBF – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – Asian Development Bank Asian Development Fund advisory technical assistance Alternative Energy Development Board back-to-office report country operations business plan community of practice Central Operations Services Office country partnership strategy developing member countries design and monitoring framework executing agency economic internal rate of return equity to loan ratio e-operations Economics Research Department framework financing agreement Gansu Provincial Government general capital increase implementing agency Independent Evaluation Department innovative and efficiency initiative level of effort multitranche financing facility North East Power System nonphysical investment ordinary capital resources operations manual project administration instruction periodic financing request periodic financing request report project management office panel of experts project preparatory technical assistance People’s Republic of China report and recommendation of the President real-time evaluation Strategy and Policy Department second and subsequent tranches technical assistance Treasury Department time-sheet management system work program and budget framework .

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Regions and Countries C. Developing Member Country Perspectives B. Oversight. About the Multitranche Financing Facility C. Project Readiness E. Background and Rationale B. Justification of the Multitranche Financing Facility modality B. Instruments Chapter 3: Expected Benefits A. Monitoring and Reporting Arrangements Chapter 6: Implications for Operations A.Contents Acknowledgements Foreword Executive Summary Management Response IED’s Clarification on the Management’s Response Chair’s Summay: Development Effectiveness Committee Chapter 1: Evaluation Focus A. ADB’s Funding Sources E. Cofinancing D. Approvals B. Decision-making filters C. Flexibility Aspects Chapter 5: Quality Assessment and Review A. Peer Review D. ADB Perspectives v vii ix xix xxiii xxv 1 1 2 3 4 4 7 7 8 9 10 11 12 12 14 18 20 22 22 23 33 35 37 43 43 45 49 50 53 53 56 . ADB Support for Project Preparation D. Objectives D. Reduced Commitment Charges Chapter 4: The Working of the Modality A. Improved Organizational Effectiveness C. Due Diligence and Viability Analysis C. Long-term Support to Clients B. Study Period E. Guidance on the Multitranche Financing Facility modality B. Sectors D. Evaluation Methodology Chapter 2: The Portfolio A.

Key Findings B. Processing and Implementation of Multitranche Financing Facilities 6 Cofinancing 7 Commitment Fee Savings 8 Strategic Context of Multitranche Financing Facilities 9 Policy Dialogue and Capacity Development (Selected Case Studies) 10 Trends of Technical Assistance and Program Lending Support 11 Financing Sources for Preparation of Second and Subsequent Tranches 12 Major and Minor Changes Approved in Multitranche Financing Facility Tranches 13 Tranche Performance Ratings 64 64 70 71 74 83 88 93 100 108 111 117 122 128 134 136 140 SUPPLEMENTARY APPENDIXES (available on request) A Multitranche Financing Facility and Tranche Data B Part 1: Survey Form for Multitranche Financing Facility Processes Part 2: Survey Form for Tranche Processing C Major and Minor Changes in Multitranche Financing Facility Projects D Multitranche Financing Facility Key Requirements and Processing (2005–2011) E Review of the Economic Evaluation of Multitranche Financing Facilities in the Transport Sector . Lessons. Recommendations APPENDIXES 1 Overview of the Multitranche Financing Facility Modality 2 Evaluation Issues and Information Requirements 3 Multitranche Financing Facility Approved by Sector 4 Tranche Implementation Periods 5 Resources for Preparation.Chapter 7: Key Findings. Lessons C. and Recommendations A.

The team also wishes to thank ADB Board and Management who found time to be interviewed.N. The team also thanks Walter A. Raina (India) and Vu Hoang Hoa (Viet Nam). The team wishes to thank officials of various developing member country governments. Division 2. Principal Evaluation Specialist. Kolkma (Director. Ellen Nunez and Aiken Rose Tafgar were the headquarters consultants. IED and Jean Foerster. The guidelines formally adopted by IED on avoiding conflict of interest in its independent evaluations were observed in the preparation of this report. Intermittent inputs were also obtained from Tomoo Ueda. Technical and administrative support was provided by Lawrence Nelson Guevara and Myrna Fortu respectively. Division 1. Eunica Aure. The team also acknowledges the contributions from internal peer reviewers from IED: Henrike Feig and Toshiyuki Yokota. D. Other in-country consultants engaged for the study included: Anna Gogokhia (Armenia). They all reviewed and commented on the approach paper and an earlier version of the draft report. reviewing. Karine Taslakyan (Georgia). Transport Specialist) worked closely with the team leader to provide insightful inputs through all stages of the evaluation. This evaluation was conducted under the overall guidance of Vinod Thomas. Director. executing agencies. Gunter Hecker (Consultant. IED. Evaluation Specialist. or approving this report had no conflict of interest. IED. To the knowledge of the management of IED. and implementing agencies who made time for interviews. The team gratefully acknowledges the feedback from external peer reviewers: Nils Fostvedt (formerly with the Independent Evaluation Group. This evaluation was prepared by a team led by Kapil Thukral. The team also wishes to thank ADB staff in Manila and in resident missions who made time to be interviewed and respond to a survey. M. IED) for their contribution in giving the finishing touches to the report. IED. IED) and Valerie Reppelin-Hill (Advisor. Director General.Acknowledgments This real-time evaluation is a product of the Independent Evaluation Department (IED) of the Asian Development Bank (ADB). as well as making available relevant documents. Principal Evaluation Specialist. IED and Hemamala Hettige. the persons preparing. World Bank) and Stephen Curry (formerly with ADB). Hong Miao (PRC). .

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This process evaluation. Yet. social and fiduciary perspectives. Management has assured that the process of such devolution. However. the rapidly growing acceptance of the MFF modality warrants more guidance and due diligence on practices regarding its preparation. this evaluation finds that some guidance and directives that were aimed at streamlining the business processes. as requested by the Board. . interviews with staff and the triangulation of different types of information. The modality also has considerable in-built flexibility in its use. Both features have contributed to the attractiveness of the instrument to countries and to ADB. so as to improve the modality’s efficiency and effectiveness without diluting ADB’s prudence in financial planning and exposure to reputational risk. as well as for tougher decision making with respect to exercising the option of discontinuing an ongoing but poorly performing MFF investment program. to consider just the cost side of an operation. In evaluations such as this. Yet. processing and implementation. but not the benefits to development outcomes—or vice versa. This has a bearing on the modality’s contribution to development effectiveness. In essence. The most significant change that needs attention is the impact of the devolution of decision-making from Board to Management on the needed adherence to a programmatic approach. The evaluation examines outstanding issues that need to be addressed. financial. it is vital to look at instruments within a framework that accounts for both the cost savings delivered by the approach and the development benefits it brings about. Hardly any MFF has been completed as yet. as is the case sometimes. economic.Foreword Against the backdrop of the need for more innovative and efficient financing instruments to meet the large and growing financing gaps in many countries. It would be a mistake. environmental. the study has come up with sufficiently robust findings and lessons. Despite data and timing limitations. the Asian Development Bank (ADB) piloted the multi-tranche financing facility (MFF) from mid2005. is an opportunity to examine how things are going and what needs to be done. say the cost of having due diligence or sound safeguards. and conform to technical. they reflect the need for much better upfront screening and project selection. this evaluation tried to comment on both the costs and benefits. have been interpreted so liberally that their application potentially compromises the development goals and outcomes in varying degrees. and the putting in place of checks and balances – to ensure development effectiveness – are evolving. and mainstreamed it in mid-2008. Management has incrementally introduced procedures to direct the implementation of the MFFs in the spirit with which ADB normally extends support. MFF documentation is incomplete. for the enforcement of rigorous checks and balances during implementation. The instrument is special in providing the comfort of long term programmatic support to a country without the commitment fee cost associated with subsequent segments in a financing envelope. through field visits.

Within such a forward looking framework. the review stresses recommendations for strong action to direct the instrument towards enhancing the development impact of the operations. .viii Real-Time Evaluation Study of Multitranche Financing Facility The study supports the continuation of the modality as one instrument in ADB’s tool kit. on the basis of its attractiveness to clients as well as its potential impact on development effectiveness when implemented well.

and requested ADB Management to closely supervise due diligence. Following a 3-year pilot period. some Board members noted some lapses in due diligence and risks to implementation and accountability. The . It has been used extensively in Central-West and South Asia. and Georgia. This real-time evaluation is in keeping with this request. and without the need for the processing of each such tranche for ADB Board approval after the facility itself would be approved. in 3–4 years time.Executive Summary Introduced at the Asian Development Bank (ADB) in mid-2005. while the 26 MFFs approved in CentralWest Asia are spread across seven countries. with a need to pay commitment fees only on the approved loan tranches or guarantees. At the time. the utilization period could extend up to 10 years or longer. the MFF’s flexibility is viewed as its most attractive feature. which has the biggest MFF portfolio and which was visited by the study team. The MFF modality aimed to strengthen ADB’s capacity to mobilize development finance by enhancing the flexibility and client orientation of its financial products. enabling clients to adjust and modify their project pipeline. the MFF in the context of its development effectiveness. In India. A key difference. other countries that IED teams visited over the year. After approval of an MFF. Azerbaijan. making ADB more in tune with existing and evolving market practices. relying on government agencies to submit tranche proposals only if and as soon as new tranche projects would be ready. the MFF modality is favored because of the government’s appreciation of the framework financing agreement (FFA) of the MFF as a long-term ADB commitment. MFF use has been significantly less in DMCs of East and Southeast Asia as well as in the Pacific. The advantage would also be that only tranches approved would burden the clients’ balance sheet and its cofinancing abilities. There is also appreciation of the fact that the signing of specific tranches can be timed for the moment when project readiness is achieved. the MFF modality was mainstreamed in mid2008 by ADB’s Board of Directors. is that 25 of 26 approved MFFs in South Asia are in one country (India). and helping ADB to work better with other development partners. This presented the advantage to clients that they would be assured of a stable financing source. In Armenia. the modality of the multitranche financing facility (MFF) was intended to facilitate the programming of a set of individual loan tranches in a sector and country in an efficient and sequential way. not the entire MFF financing envelope from the day of its approval. The Board also asked the Independent Evaluation Department (IED) to evaluate. Favored Modality ADB’s generation of a large pipeline of MFF investment programs year after year is indicative that the MFF is becoming a favored modality in many developing member countries (DMCs). however. without a liability to pay commitment fees on the entire MFF envelope. The incentive structure of the MFF. also provided ADB with a way to expand its lending without the need for commensurate increase in staff resources for processing. not the entire amount of the MFF approved. which together account for more than 75% of the number and amounts of the MFFs approved until the end of 2011.

ADB’s Innovation and Efficiency Initiative in 2005. which raised ADB’s ordinary capital resources for lending. The MFF has been used predominantly in the infrastructure sectors. the Board had approved 66 MFF investment programs. relying in part on the MFF modality to do so. the loan covenants were substantially complied with. In such cases. at the time of conducting this study in 2012. additional financing. however. very few MFF programs had been completed. another country visited by the study team. These checks were built in to safeguard the development effectiveness of the lending programs. Annual approvals at the facility level had risen from $3.2 billion in 2011. ADB increased lending volumes rapidly. do not announce a financing envelope up front. of which the MFF was a part. prerequisites of alignment of MFF tranches with road maps. By the end of 2011. and streamlined approval of subsequent tranches) as well as gains in development effectiveness (relating to programmatic approach. The regional departments had also not yet conducted any self-evaluations for the completed MFF programs.8 billion in 2006 to $6. had a results framework that stated as impact: demonstrable improvements in the development impact of ADB operations in reducing poverty in DMCs. flexibility. which. the multiphase or multi-country series of projects. tranche approvals had grown from 17% of total loan/grant approvals in 2006 to 27% in 2009 and 37% in 2011. The number of countries in which the MFF modality had been introduced had increased from 6 in the pilot period to 14 by the end of 2011. many governments like the MFF for financial and flexibility reasons. by considering efficiency gains or cost reductions (relating to transaction costs. Simultaneously. The continued increase in MFF and tranche approvals after 2009 was facilitated by the General Capital Increase V.x Real-Time Evaluation Study of Multitranche Financing Facility attraction is viewed as higher where the clients do not need to seek specific approval from top decision makers in the country for a new project under the same MFF umbrella. For one lending modality. This appears to be the case in Pakistan also. the Board would have to convene to approve such a replication project. a follow-on project is supported through additional financing only. if implementation of the first project was satisfactory. Unique Modality The MFF is unique among the lending modalities offered by development partners in that it provides the comfort of long-term programmatic support to a DMC client but without entailing an additional cost burden on the client. unless there are significant modifications. and institutional capacity needed for ensuring both quality implementation and sustainability). Evaluation Framework This evaluation takes into account both the costs and benefits associated with the MFF modality. The transport and energy sectors account for 62% of the total number and 69% of the total MFF amounts approved until December 2011. These factors made it . and without Board approval. reflecting the priorities outlined in Strategy 2020. For the second lending modality. with a combined financing envelope of about $32 billion. The World Bank has two similar investment lending modalities. and the additional loan was economically justified. In conclusion. The evaluation notes that. the World Bank’s Board approves the first project under regular procedures and succeeding replication projects on a no-objection basis.

staff efforts. Many of the procedural changes for the preparation. the discussion on many aspects of the MFF cycle involves steps that are similar to those of stand-alone modes. in the concept papers and reports and recommendations of the President (RRPs). Management issued Staff Instructions to introduce significant changes related to (i) reinforcement of the August 2008 provisions of the Operations Manual section on MFFs. Triangulation of information at various levels gives the evaluation confidence about its key findings. and it has gradually closed some of them. The lack of documentation and data or their availability to independent evaluation itself.Executive Summary very difficult to test any particular MFF’s development effectiveness in detail. xi Study Findings The MFF is a relatively new instrument. The MFF essentially follows the same procedures as ADB’s other sovereign lending instruments. so as to clarify the . was obtained through interactions with ADB staff as well as in-country stakeholders for selected MFF programs in Armenia. Instead. as seen in this evaluation and sometimes elsewhere. and Viet Nam. The evaluation is also influenced by the fact that a large number of documents are required to fully understand how a particular MFF investment program has progressed since approval. to explore the opportunities available for improving the efficiency and effectiveness of the modality midstream. is a finding that needs to be addressed. except for devolvement of decision making related to second and subsequent tranches from the Board to Management. (ii) the peer review process. IED did not have access to all required documents and data as needed and requested for this evaluation. flexibility. saving of commitment charges. As a result. which was strengthened with the creation of a Panel of Experts (POE) to advise at the MFF preparation and processing stages. Relevant information for case studies. During its early implementation. A more thorough evaluation of the development effectiveness of the MFF modality can be done at a later stage. Management realized that the initial guidance on the design and functioning of MFF programs had gaps. specifically regarding justification of the choice of the modality. The inability to trace the documentation trail of the MFF process tends to compromise transparency and the accountability associated with its use. the evaluation focuses on improving these aspects to contribute to the learning about greater development effectiveness of the MFF modality as well as other modalities. However. and implications for financial planning. People’s Republic of China. India. particularly where tranche project changes are affected. when adequate experience has been gathered to develop plausible counterfactuals for various circumstances in which the MFF modality has been used. This has adverse implications for fiduciary control on the resources provided in the MFF. and stating that they needed strict compliance. Nevertheless. In 2011. processing. Georgia. and implementation made subsequent to the mainstreaming of the MFF also apply to other lending modes. Azerbaijan. the evaluation does provide some early indication of the MFF modality’s likely contribution to development effectiveness on the basis of proxies for development effectiveness (such as the quality of due diligence). however. and the quality of the MFF prerequisites. In August 2008. (iii) clarification on what constitutes major and minor changes in scope at the MFF and tranche levels. Management issued its first Operations Manual section on MFFs (Section D14). this real-time evaluation focuses on reviewing processing timelines.

which increased to 72% from mainstreaming in 2008 to the end of 2011. Low numbers of tranche scope change approvals post-2011 for which description and classification related information was available to IED. Unclear is the trend in the quality of and adherence to the important MFF prerequisites. the small number of tranche approvals since December 2010 also makes the observation of any improvement in MFF tranche project readiness inconclusive. Likewise. modality was intended to enhance ADB’s organizational effectiveness by saving staff resources for processing of repetitive tasks at the tranche level. Before and after mainstreaming. For instance. Recently. there is no indication of greater staff continuity for preparation. 65% of the MFFs approved during the pilot period gave a firm number or a range for the number of tranches. Since mid-2011. This evaluation identifies issues that need to be addressed to improve operational efficiency and development effectiveness associated with the modality.xii Real-Time Evaluation Study of Multitranche Financing Facility approval authorities for various types of changes. available data on elapsed time and level of effort for processing do not provide clear evidence of savings in either. makes it difficult to conclude whether improvements have been made after the December 2011 guidance. in the required approval documentation. processing. which provides information on forthcoming tranche approvals. However. Some improvements have been observed in response to the guidance given over the years. the Board appreciated the elaboration of such a good road map and sector strategy for an MFF on roads in Azerbaijan. although the MFF modality can help regional departments to plan better their people and skill requirements. . and provision of forward information to the Board in the form of a consolidated summary of periodic financing requests (PFRs) received for various approved MFFs. but there is a need to improve these further. and reporting arrangements. (iv) improvement of oversight. The . on the classification of scope changes. Organizational Effectiveness The evidence is not clear on expected savings in staff time for processing. although a more sophisticated rating mechanism is expected to evolve to provide more detailed and evidence-based insights on performance-related matters. a number of MFFs approved each year continue to be backed by weak road maps. after mainstreaming. Besides. However. The linkages between design and monitoring frameworks (DMFs) at the MFF level and at the tranche level have improved. Weaknesses in the quality of institutional capacities and policy frameworks also persist. RRPs and FFAs have also become more consistent in terms of reflecting or considering cofinancing. specifically through a scorecard system to rate the performance of each MFF. the Board has also begun to receive a consolidated statement that lists the PFRs received from DMCs. from 15% in the pilot period to 28% after mainstreaming. leaving more time for ADB staff for policy dialogue during implementation. and implementation of MFFs. monitoring. each year some high-quality road maps and sector strategies have been a basis for approval of some MFFs. Likewise. Reporting to the Board has also improved through the scorecard system. and it was the basis for their approval of the second MFF in spite of problems encountered in implementing the first.

because at MFF approval. the MFF documents only mention that cofinancing will be pursued upon the specific request of the concerned government. Although extending the policy to the MFF modality is consistent with. the flexibility thus accorded to the MFF program can compromise the programmatic approach originally approved. The lack of clarity on what constitutes a major or minor change at the tranche level has resulted in a situation where most changes in tranches have been categorized as minor changes. about 30% of all approved MFFs do not indicate a firm number of tranches or a range up front. the RRPs and FFAs of more than 70% of the approved MFFs mention or consider cofinancing in some way. the flexibility enabled by MFFs is one of the key reasons for their increased acceptance and support in many DMCs. It is often not clarified whether cofinancing will be incremental to the MFF financing envelope or a substitute. This allowed the concerned department head to approve changes (of scope or financing or implementation arrangements) in an approved tranche until the end of 2011 if the change was classified as minor. Flexibility MFFs are used highly flexibly over long utilization periods that average about 8 years. On the other hand. Lack of clarity regarding the nature of scope changes that require Board approval has led to another questionable aspect of MFF flexibility. In some instances it would seem to be clarified. simply shifting a certain project from one tranche to another was classified as a major change. in a few cases. The MFF modality is potentially more conducive to cofinancing than other lending modalities and instruments. Although there is some improvement in up-front documentation in this respect (72% of MFFs have had tranching information up front since mainstreaming compared with 65% during the pilot period). Changes were classified as minor in about 85% of the cases known to IED until December 2011. it is unlikely that all projects for all tranches would even be identified. In many cases. For this reason. and leverages the programmatic . Such built-in flexibility is necessary for MFFs. Minor changes included cost overrun financing of some projects from a certain tranche through a subsequent tranche of the same MFF. and cost overrun financing for a project previously not supported by an MFF.Executive Summary Cofinancing xiii Cofinancing has been mentioned or considered in the approval documents of most MFF investment programs. in 30% of the MFFs. or that the client will explore cofinancing with other development partners. but this study finds it difficult to gauge whether they are effective. as it offers clients greater certainty and up-front agreement for long-term funding without the accompanying commitment charge payment obligations. as in an agriculture and water management MFF in India. on the basis of the limited new information available to IED. Such differences in interpretation were seen for transport sector MFFs across regional departments and also across countries within the same regional department. However. The additional financing that is allowed within the MFF modality may have discouraged attention to proper tranche design or careful cost estimation. The lack of an adequate information system and non-availability of data on cofinancing do not allow an analysis of the levels of cofinancing achieved through the MFF modality in comparison with other modes. Along with greater certainty for long-term funding. the documents are not consistent in their reference to cofinancing. The clarifications introduced in December 2011 would seem to have reduced the scope for unwarrantedly excessive flexibility. MFF flexibility is enhanced by the rules that govern additional financing.

ADB staff are expected to comment on technical matters during this stage. or policy frameworks are not of the requisite quality in more than 20% of the MFFs for which sufficient information was available to the study team—but this percentage can exceed 75% in some country groups (for instance. and ADB reviews safeguards requirements during the early stages of tranche project preparation. whether or not they are in an environmentally or socially sensitive category. including bottlenecks. cost recovery. such feedback is often via email. MFFs in some Central-West Asian countries). as this study learned. the policy framework did not focus on the main challenges of the particular sector. For instance. However. and competition. technical due diligence seems not to have been conducted rigorously. In other cases. IED could access such records only for some MFFs. and noted that (i) feedback on technical design or cost-effective technical alternatives seems to be an exception. Project-level Due Diligence Safeguards due diligence is conducted for all projects. In some cases. and records are not kept systematically. The original guidance given implied the need for good institutional capacities and policy frameworks.xiv Real-Time Evaluation Study of Multitranche Financing Facility orientation of the MFF. Weak institutional capacities that are very likely the underlying reason for such occurrences need to be addressed up front. such as efficiency. Given that ADB promotes diligent safeguard implementation and the capacity of many executing agencies is lacking in this regard. sustainability. Sector strategies. However. road maps. it has led to some cases where sufficient attention may not have been given to project design. . concept papers for . the appraisal cost estimate of a major road project was made without finalizing the highway alignment. and others) of MFFs does not establish a link between the findings of such institutional capacity due diligence work and the design of nonphysical investment components. Nonphysical Investment components need to be designed on the basis of upfront institutional capacity assessments. In some cases that were investigated. As ADB often interfaces closely with consultants and executing agencies when PFRs are being prepared. Most MFFs have allocated and incurred nonphysical expenditures (such as for capacity development) only in the first tranche. FFAs. risks. which meant that the stated road map could not be used to filter investment opportunities. and (ii) most technical contributions from ADB relate to ADB’s advice on procurement guidelines or certain aspects of environmental impact management. the available documentation (RRPs. even though the MFF modality allows for this. At the initial design stage. ADB also supports safeguards capacity development in a large number of approved MFF programs. for a transport sector MFF in Azerbaijan. Insufficient sector expertise within the staff team and the relevant sector community of practice implies the need for ADB to engage consultants to comment on technical design and engineering aspects. the road map did not have a detailed assessment of physical and nonphysical investments. a few MFFs recognized the need to evaluate institutional capacities and use that as a basis to allocate and incur nonphysical expenditures for capacity development. Up-front Due Diligence Up-front assessments of MFF prerequisites ought to be comprehensive and rigorous. and mitigation measures. and only a few MFFs have done so in second and subsequent tranches.

Lending Planning and Financial Projections Empirical experience regarding MFF discontinuation is different from what the modality in principle allows. The lapses in technical and economic due diligence were corroborated by some departments during the stage of interdepartmental circulation of a draft for comments. and (ii) ADB retains the right to decline execution of any legal agreement for a tranche. the MFF modality allows for the approval of a subsequent tranche before closure or completion of a previous tranche. the Economics and Research Department (ERD) also reviews the economic analysis. and that either side can exercise its right to cancel the MFF or any uncommitted portion thereof. being cognizant of reputational risk. Portions of MFF financing envelopes that . their major thrust being that (i) the FFA does not constitute a legal obligation on the part of either the DMC or ADB. wherein the second MFF was approved before the closure of the first MFF in that sector.. However. Specific FFAs also reinforce this view. which is part of the team processing an MFF tranche. across all MFF investment programs. the memorandum is not required to be circulated to ERD for comments. In addition to inputs from an economist.g. this study is encouraged by positive feedback from several departments that such lesson learning is now taking place. the experience gained from the first MFF may not contribute to the design of the second MFF. ERD obtains a PFR report for commenting at a late stage.Executive Summary Economic due diligence of tranche projects must be rigorous. it appears that. such as if the client does not meet the conditions described in the FFA and/or legal agreements. and notes that ADB’s capital headroom has been falling over the past few . Moreover. However. impact ADB’s ability to manage contingencies. ADB Management has preferred not to discontinue any MFF program thus far (except to divert a small part of the financing envelope to an emergency loan in Pakistan). in some countries. where three electricity distribution companies in Madhya Pradesh are executing agencies in two MFFs).4 billion at the end of 2006 to $15 billion by the end of 2011. ADB is permitted to discontinue the MFF in midstream . However. Where a minor or major change is effected in tranche projects. and reduce headroom. have been approved in the December bunching season means that Management does not have sufficient time for review and oversight. Self-Evaluation xv Subsequent MFFs and tranches may not benefit from the lessons of previous MFFs and tranches. ADB’s Treasury Department models MFFs in the ordinary capital resources balance sheet on the basis of historical and projected data provided by other ADB departments. under certain conditions. were not converted into tranches rose from $4. crowd out other lending. ADB has multiple MFFs with the same clients (e. when the PFR report is nearing finalization. The rising number of MFFs adversely impacts ADB’s ability to manage contingencies and headroom considerations. and will provide financing only if the borrower and client are in compliance with the MFF prerequisites. In such instances. in India. By design. in spite of situations where some binding commitments in the FFA are not met. This means that the findings and lessons from an earlier tranche do not have to be taken into account in the design of tranches approved before its closure. At this stage. a reexamination of economic viability would most likely lead to significant delays in tranche approval and is therefore not done. and the MFF approach is evolving as a consequence. MFF investment programs thus lock up future finances. The fact that nearly 50% of all second and subsequent tranches approved thus far.

data and documents that shaped the MFF implementation need to be accessible. as well as when a specific MFF investment program is to be independently evaluated. The scorecard system can also provide a better basis for gauging and comparing performance across MFFs when the performance rating system is improved. the facility-wide and tranchelevel DMFs can form a basis for tracking and reporting performance at the MFF and tranche levels by further improving the linkages between MFF and tranche-level DMFs. Lesson 6: Where lending constraints are increasing. the investment plans.xvi Real-Time Evaluation Study of Multitranche Financing Facility years and is projected to fall to the minimum acceptable and prudent level over the next few years. fiduciary oversight and other aspects. where institutional capacities are weak. if prepared. it would be useful for ADB to consider ways to be able to exercise the option. Such information will be needed at MFF closure. Such documents have been difficult to obtain for this evaluation. social. and undertakings cannot be considered firm. it is difficult to prepare credible : strategies and road maps—or. financing plans. and equity objectives along with improving operational efficiency and minimizing the environmental footprint. governance. financial. Under such circumstances. and safeguards due diligence is important. Lesson 3: Where actual tranche approvals in a given year exceed the country : financing envelope for that sector. the energy sector MFF in Afghanistan).g. technical. For instance. In short. Lessons towards Rationalizing the Use of the Multitranche Financing Facility Modality Lesson 4: Where capacity constraints exist. social. of terminating or cancelling ongoing MFFs in midstream. Lesson 2: Improved monitoring can serve to give early warnings on the : performance of large and long-term MFFs. and the evidence for improved development effectiveness remains tentative. when an MFF completion report is to be prepared. if necessary. the MFF prerequisites of the desired quality are not likely to be easily achieved (e.. to ascertain client ownership and buy-in. gender. financial. regulatory. the achievements through the MFF program may deviate significantly from what was stipulated in the Board-approved documentation upfront. the country strategies and rolling business plans are not a sufficient basis for advance MFF-related information to the Board. It is also difficult to institute policy frameworks that encourage a judicious mix of commercial. This will diminish ADB’s ability to mount crisis-response operations. While the devolvement of tranche approval processes encourages flexibility in many ways. with the possible exception of certain types of investments (such as a long highway that can be financed through a series of tranches). Lesson 5: The rigor of economic. Equally important is the rigor of due diligence on legal. . Lessons on Documentation and Monitoring Lesson 1: Where the development effectiveness of a specific MFF investment : program is to be assessed.

and the need for ADB to maintain its ability to respond to crisis situations. To facilitate adherence to other provisions of the Operations Manual. The five recommendations presented below build on the lessons learnt and are intended to strengthen the MFF modality. strong actions are recommended to improve the development effectiveness of upcoming MFF programs and tranches. which is based on stand-alone modes rather than a long-term multitranche facility. Recommendation 1 is consistent with the key MFF requirements articulated in the internal Staff Instructions of July 2011. Similarly. this evaluation recommends that Management continue to address the weaknesses in the MFF approval and implementation processes that have been experienced thus far. and the design of physical investment programs that conform to MFF prerequisites. Recommendation 1: Apply the standards for the needed quality of MFF prerequisites for MFF investment programs in countries and sectors as designed at the time of mainstreaming. as well as results-based financing and other modalities currently under consideration). Owing to concerns that arise because the MFF modality has been amenable to diversified uses and interpretations beyond what was originally envisaged. To ensure development effectiveness. Towards this goal. there needs to be a realistic discussion on institutional capacities and the suitability and stability of a policy framework. it is essential to augment the existing peer review mechanism with (i) use of suitable MFF readiness filters for specific ADB regions or DMCs. ADB must ensure that future MFF programs are consistent with the provisions of the relevant Operations Manual section (D14) and that the comparative advantages of the MFF modality vis-à-vis other lending modalities are highlighted at the concept stage. and suggests a way forward to ensure that such requirements are met. provided a number of prerequisites are adhered to. Recommendation 4 is in recognition of the crowding-out effects. Recommendation 5 deals with issues related to access to data and documentation. such as the MFF prerequisites. recommendation 2 suggests a way to ascertain that the provisions of the Project Administration Instructions of December 2011 are complied with.Executive Summary xvii Recommendations The MFF modality has attractive features that have the potential to help improve operational efficiency as well as development effectiveness. In responding to the Board request. . it is crucial that the delegation of authority by the Board to Management to approve and adjust subsequent tranches of MFFs be supplemented and underpinned by meaningful and monitorable due diligence exercised by Management. which could be integrated with the country programming strategy formulation process. and (ii) training of staff on the conduct of due diligence for institutional capacity (which can help improve the design of nonphysical investments and the content of policy dialogue) as well as for enhancing understanding of various MFF prerequisites (as per the relevant Operations Manual sections). Recommendation 3 seeks a correction of the midterm review and monitoring system. In recognition of the MFF’s potential advantages and the fact that the instrument is appreciated for its flexibility by clients. and on the basis of the study’s findings and lessons. however. The adequacy of such due diligence and preparation must be reconfirmed through monitoring arrangements in subsequent recommendations. this evaluation takes a broad view that the MFF modality needs to continue as one of the financing instruments in ADB’s toolkit (which includes additional financing and other existing modalities.

It is important to institute a system of one or more facility-wide formal reviews during the term of the MFF to facilitate Management decision making. Recommendation 3: Conduct facility-wide mid-term reviews of ongoing MFF programs and formal reviews at any time deemed appropriate. A suitable arrangement can also be worked out to ensure uniform interpretation of guidelines across regional departments. Office of the General Counsel. once entered. Management can also initiate suitable awareness-creation activities. or postponement of tranche approval. Recommendation 4: Regularly monitor MFF portions not converted to tranches. and to facilitate learning and accountability. (ii) a cap on the MFF financing envelope not converted to tranches. in relation to the country programming financing envelope. Controller. the MFF modality. Although it can span two or more country partnership strategy cycles. it is important to institute systems and procedures that allow for sufficient flexibility for DMC governments and clients. in relation to remedial actions required. it would be useful to devise criteria for their cancellation or discontinuation. Given the concerns that result from continuously rising portions of MFF financing envelopes that are not converted to tranches. Each regional department can have a focal person who guides other ADB staff (in consultation with the Strategy and Policy Department. without compromising on other intended benefits of the modality. Options for such criteria can comprise suitable triggers that relate to (i) the required rate of tranche approvals and amounts in the remaining MFF utilization period. The results of the formal reviews ought to be reported to the Board in a timely manner. and Central Operations Services Office) to consistently and uniformly interpret guidelines that define minor and major tranche project change categorization. in relation to levels achieved so far. The use of all these databases (including eOperations and the time-sheet management system) can also be encouraged to help obtain feedback for improving them further. Besides. or (iii) activities to overcome deficiencies found in midterm reviews. as well as ensure proper scrutiny of the MFF prerequisites. are audited and verified to ascertain correctness.xviii Real-Time Evaluation Study of Multitranche Financing Facility Recommendation 2: Manage the use of flexibility during the MFF implementation period without compromising. the MFF modality currently does not require a facility-wide midterm review. and take necessary steps that will help ensure prudent lending planning and financial projections. The design and due diligence of other stand-alone modes will also benefit from such measures. . It is also essential to establish systems to ascertain that all official online databases are regularly updated. In view of the extent to which flexibility mechanisms have led to project changes in approved tranches in the past. Given that ADB DMCs increasingly demand knowledge products and services. ADB needs to maintain adequate record keeping and provide easy access to all relevant documentation. and the fact that the additional financing mechanism has led to unwarranted flexibility in project design. It is useful to weigh the pros and cons of conducting annual reviews versus midterm reviews during the MFF utilization period. This can be achieved by having an online searchable repository on the intranet. economic and safeguards due diligence of tranche projects also need to be considered. or coinciding the timing of such reviews with the country partnership strategy preparation process. Should it be necessary to avoid reputational risk. procedural and other changes required to improve technical. Recommendation 5: Ask for regular submission of necessary documentation from clients and make all relevant documentation and data on implementation of an MFF immediately accessible within ADB. or with the strengthening of the benefits of. and that data.

2. Independent Evaluation Department. The Report incorrectly implies that MFFs were designed to expand ADB lending. the Director General. The Report implies that MFF documentation may have been withheld by repeatedly stating adequate data is incomplete or not readily available or accessible (e. we agree with the need for further evaluation of effectiveness at an appropriate time after a critical number of MFF projects are complete. We welcome the Special Evaluation Study on Real-Time Evaluation of the Multitranche Financing Facility (MFF) as a way to take stock of progress in implementing the MFF in developing member countries (DMCs). General Comments 1. Executive Summary. 25. . or data was available but not reviewed by IED. The important role of the MFF in making ADB more relevant through innovation of new products is well recognized. The MFF is an innovative and demand driven financing modality developed by ADB to better address DMC client needs. Foreword. the Report contains sweeping generalizations which are not evidence based and fails to adequately take into account the evolution of this instrument and recent governance improvements under Staff Instructions which became effective in July 2011. 71. this unique lending modality enables longer term engagement (policy and capacity development) with DMC clients. However. 178). We believe that the Report’s negative and unbalanced tone fails to fairly reflect these aspects. While the Report refers to some of the benefits of the MFF.g. This is not correct. the MFF is a relatively new instrument and still evolving. inferring that ADB is approvals driven (Executive Summary). These features enable a more customized approach to address the needs of different DMC clients and have led to increased demand for MFFs. Since no MFFs were closed during the Report period and only a few of tranche completion reports have been prepared (Paras 12 and 170). It is not clear whether documentation was requested from ADB staff and available but not provided or withheld. received the following response from the Managing Director General on behalf of the Management: I. including those in fragile and conflict-affected situations as appropriate. 4. 75.Management Response On 15 January 2013. data was requested but not available. 3. The MFF provides greater flexibility in design and a longer term platform for cofinancing partnerships. incorrect assumptions are presented as conclusive: i. As recognized by the SES. MFFs were developed to provide DMC clients with a greater choice of lending modalities to better address their needs and ii. Paras 20. 81. As discussed below. Another key benefit of the MFF is that it provides predictable financing for clients without liability to pay commitment fees on the entire MFF envelope.

For example. bunching and loan cancellation. for example. which follows specific business processes and stakeholder consultations. The Report covers the period through December 2011 and the new Staff Instructions became effective in July 2011 to strengthen the quality of MFFs and address this concern. iii. As a matter of fact. e. This is not correct. This is incorrect.xx Real-Time Evaluation Study of Multitranche Financing Facility are anchored in the Country Partnership Strategy (CPS). the Report claims that the liberal interpretation of guidance and directives aimed at streamlining the business processes potentially compromises MFF development goals and outcomes in various degrees. iv. . the Report (Para 64) states that the requirement to include a comparative matrix on the choice of the MFF modality in the concept paper is not met in most cases. due diligence. raising due diligence concerns. in contrast to stand alone projects. v. Periodic Financing Report (PFR) approvals in a given year are equal to approvals that can be done through stand alone projects based on overall annual approval ceilings arising from equity to loan ratio constraints. The Report assumes that the rapidly growing acceptance of the MFF warrants additional requirements. The scale of DMC needs was recognized by ADB’s shareholders. Many of the issues discussed in the report are relevant to processing of all lending modalities. These recommendations do not adequately acknowledge recent improvements in MFF governance under Staff Instructions. which will enable more concrete findings and recommendations to improve MFF performance. The Report concludes that there has been not much savings in commitment charges (Para 175). iii. We disagree with this conclusion. 201). OM D14 and Staff Instructions provide clear guidance on MFF information requirements. The Report implies that the new streamlined business processes result in less disclosure of key information. The Report does not compare the performance of MFFs with other lending modalities. but enable ADB to provide long term commitment. adoption of MFF readiness filters for specific ADB regions or DMCs (Para.g. For example. We disagree. MFFs not only help DMCs avoid unduly high commitment charges. ADB lending has grown because of client needs and their appreciation of ADB products that respond to their needs. institutional capacity. and not because of ADB’s desire to expand lending. was expected to generate such savings. The Report does not compare MFF implementation over time to clarify improvements after 2008 mainstreaming and adoption of 2011 Staff Instructions. The Report states that adequate information required for a “reasonable evaluation” of the MFF modality is not readily available or accessible for ii. which led to the fifth General Capital Increase (GCI). when the design of the MFF. (Foreward). 5. We believe that there are flaws in the evaluation methodology: i. Adoption of the Staff Instruction clarifying this requirement and including new quality control procedures (MFF Panel of Experts) has addressed this concern.

raising questions about the credibility of the findings. iv. while other sections of the report (Para 43) confirm that MFFs provide clients with “the comfort of longer term support” than other modalities. We believe that such findings should have been anchored on more facts. Specific recommendations under the Report are very general and based on good practices for the processing of loan financing modalities. The GCI V enabled ADB to meet this demand. and greater opportunities for co-financing (Para 56 notes that in 48 of 68 MFFs. There is a disconnect between Report conclusions and analysis/data. The Report states (Para 181) that additional financing that is allowed in the MFF modality “may” be leading to less attention to proper project design.Management Response most MFFs (Para 20). Instead the Report relies on anecdotal evidence. 6. The Report questions the expected savings in staff time for processing under the MFF (Executive Summary. the Report states that the envisaged opportunities for policy dialogue have not been realized. Comments on Specific Recommendations 7. II. The Report indicates that ADB’s rapid increase in lending volumes after 2009 was based in part on the MFF modality (Executive Summary). . The two points are inconsistent. xxi ii. . The Report refers to two MFF projects to conclude that insufficient attention “may” not have been given to cost estimates in project design based on cost overruns and the use of MFF tranches to address such overruns (Para 103 and box 8). Para 172) and ignores and contradicts the results of a survey of MFF team leaders under which 29 out of 36 (81%) responded that tranche processing took less time than a standalone project (Para 51). iii. i. and states that findings are “sufficiently robust” (Foreword). If adequate information is not available the findings cannot be sufficiently robust and provide adequate grounds for evaluation. The main drivers of growth in lending volumes in 2009 and 2010 were programs loans and counter cyclical support. Report findings also ignore relevant information. co-financing is mentioned). v. and program policy support that was provided earlier has been discontinued in sectors where MFFs have penetrated the most (Para 79). ADB has not been able to provide program lending in Pakistan in the absence of an IMF program – this important factor underlying the shift in approach is not mentioned. The Report questions whether MFFs allow clients to plan more systemically and mobilize co-financing for investment plans or individual projects. This statement is incorrect. The example given in Box 5 is on the energy and transport sectors in Pakistan. Many specific recommendations disregard recent MFF governance improvements under the new Staff Instructions. including views from unnamed sources.

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8. Recommendation (i): Apply the standards for the needed quality of MFF requisites for MFF investment programs in countries and sectors as designed at the time of mainstreaming. While we agree with the rigorous application of MFF prerequisites, we disagree with the recommendation to adopt and implement MFF readiness filters at the country/sector level. OM D14 and 2011 Staff instructions clarify the preconditions for using the MFF. As per usual practice, the modality selection should be done and justified on a case by case basis in line with sector/subsector assessments and institutional capacity assessments. We agree with the need to continually improve quality control procedures, including documentation, for all ADB products, including the MFF. We disagree with the recommendation for specific MFF related training and instead propose that project related training be strengthened and supplemented to strengthen skills in selecting and designing investments, including MFFs, consistent with institutional capacity. 9. Recommendation (ii): Manage the use of flexibility during the MFF implementation period without compromising, or with the strengthening of the benefits of the MFF modality. We agree with the general recommendation. However, we disagree with the recommendation to nominate department focal persons for the MFF to strengthen the peer review process and MFF quality. Adding another layer to the review process seems redundant. 10. Recommendation (iii): Conduct facility-wide mid-term reviews of ongoing MFF programs and formal reviews at any time deemed appropriate. We disagree with the recommendation to mandate a “facility-wide midterm review.” While this recommendation has appeal in principle, it is redundant with respect to MFFs. During MFF tranche preparation, teams review the progress of the facility, which is reported to Management. 11. Recommendation (iv): Regularly monitor MFF portions not converted to tranches, and take necessary steps that will help ensure prudential lending, planning and financial projections. This is already being done. MFF reviews form part of the CPS preparation process. The Annual Work Program and Budget Framework provides a process for planning and financial projections. Future MFF portions not converted to tranches are regularly reported to the Board through MFF annual reports. However, we welcome the Report’s recommendation to devise criteria to cancel remaining MFF tranches. 12. Recommendation (v): Ask for regular submission of necessary documentation from clients and make all relevant documentation and data on implementation of an MFF immediately accessible within ADB. This recommendation is not unique to MFFs. While the Report mentions cases of incomplete information, it is not clear whether this is an issue of incomplete processing documents, missing documents, failure to request all relevant documents, or failure to provide such documents upon request, and it is thus difficult to clarify the problem. The Report notes that “it appears that all MFF and tranche related documents are not necessarily uploaded into e-Star in a timely manner” (para. 24). Project related documentation and project related data management might, in general, need improvement. Management will conduct a review on the quality of project documentation (quality of entry review) and project related data management/eStar generally.

IED’s Clarification on the Management’s Response
1. Doing a real time evaluation (RTE) is in keeping with the Board’s requirement that this evaluation be conducted about four years after mainstreaming. Since none of the multitranche financing facility (MFF) investment programs had closed and no completion reports were available (para 12), the RTE is not intended to be a final judgment, but a review of the experience in design and implementation, to obtain feedback for mid-course corrections. Comparisons of MFF with other long standing modalities (eg. program loan, sector loan) on the other hand, would only be warranted in a few years when some MFFs have been completed.

On progress being made, the RTE covers mid-2005 to end-2011 (para 13), 2. although some information for 2012 was also gathered. Incremental changes, including in 2011, in requirements for documentation, reporting and quality assurance, were made by Management (para 106, Table 10). But the information available to IED for 2012 is inadequate to show any significant improvement following the guidelines of 2011. For instance: (i) IED notes lapses in the follow up to the requirements of the OM of August 2008, on the inclusion of a comparative matrix in MFF concept papers (para 63, 64). Staff Instructions of July 2011 tried to reinforce this requirement; but IED normally does not have access to concept papers (Table A2.3) to allow further comment. (ii) Until Project Administration Instructions were revised in December 2011, there was lack of clarity on the classification of tranche level scope changes as minor or major (para 96). Of the 37 tranche level scope changes from January to September 2012, IED had access to only four, which does not allow an assessment of progress (para 98). On the robustness of the findings, the report gives evidence from 3. documentation on 20 MFFs triangulated with information in ADB databases, and discussions with ADB staff, client personnel, and consultants (paras 23–27, Chapters 4 and 5). Information on some aspects of organizational efficiency was also gathered from a survey of MFF and tranche team leaders. For example, IED was able to verify issues related to classification of significant changes in tranche scope as minor, upfront institutional capacity assessment, and physical completion such as for highway construction or additional financing requirements for highway construction upon proper alignment after approval — that reflect upon upfront technical due diligence (paras. 98, 75, 102–103). On MFF and lending volumes, IED notes that rapid increase in lending volumes 4. after 2009 was in part driven by MFF modality (Executive Summary). During 2009-2011, program loans and counter-cyclical facility approvals were $7.1 billion while MFF investment program and MFF tranche approvals $17 billion and $12 billion respectively.

1.

Management confirmed that the MFF is a preferred modality not only due to flexibility but also in terms of continuity for policy reform and capacity development. The report also highlighted MFF’s potential to crowd out other lending and diminish crisis response operations. (ii) MFFs have been used flexibly over long utilization periods. and (iii) the role of the panel of experts which serves as independent confirmation that eligibility requirements are met.381-12) on 17 January 2013. (ii) the insufficient evidence on improvement in the concept paper regarding inclusion of a justification on the use of the MFF vis-à-vis other modalities after the guidance issued in mid-2011. DEC welcomed the real-time evaluation study of the multitranche financing facility (MFF) which found the facility increasingly favored by developing member countries (DMCs). The following is the Chair’s summary of the Committee discussion: 1. DEC discussed (i) the MFF’s approval process noting that the concept paper is signed off by a Vice President. The report found that the MFF’s flexibility is its most attractive feature. noting that the advantages and disadvantages of mainstreaming were presented to the Board and the Board had favored the move to mainstream the modality.Chair’s Summary: Development Effectiveness Committee The Development Effectiveness Committee considered the Independent Evaluation Department report. and (iv) subsequent tranches may not benefit from lessons of the first tranche because the modality allows the approval of subsequent tranches before closure or completion of the previous tranche. DEC discussed whether there was a comprehensive assessment done before the decision to mainstream MFF. enabling clients to adjust their project pipeline without need for additional approval from top decision makers. in order to compare different modalities and justify . an innovative facility favored by DMCs because of its greater flexibility. The case of Afghanistan was cited where the MFF allows ADB to engage the country on a long term basis while allowing room to adjust when assumptions and expectations change. and economic due diligence was less rigorous. namely: (i) the evidence is unclear in regard to expected efficiency on staff processing time. 3. although some members voiced concerns about due diligence on prerequisites. Mainstreaming MFF. Some DEC members inquired about fragile and conflict afflicted countries where governments and priorities could change often. DEC members agreed that the MFF is 2. and tranche level changes have often been classified as minor at least prior to the clarification issued in late 2011. technical. (iii) MFF prerequisites. Advantages of MFF and perceived gaps. Some DEC members suggested that Management may consider appending the comparative matrix in the report and recommendation to the President. The report flagged some key observations. Special Evaluation Study: Real-Time Evaluation Study of the Multitranche Financing Facility (IN.

some DEC members were concerned that the facility locks in resources leaving little room for other projects. this factor should be considered in partnership strategies and business plans of countries which use the MFF extensively. verifying data to assess the level of effort involved in preparing and processing MFF loans as opposed to standalone loans. DEC members agreed that a review of the MFF in 2014 or 2015 should be conducted. Since the MFF occupies a substantial portion of the resource 5. Further discussion on the report. DEC appreciated that the report would be shared among staff working actively on MFF. Country concentration and proposed review.xxvi Real-Time Evaluation Study of Multitranche Financing Facility the use of the MFF. There was discussion on the difficulty in acquiring and 6. DEC Chair proposed to have further discussion after 60 days when Management has included its action plan in the Management Action Record System (MARS). particularly in South and Central West Asia and noted that a country’s capacity to meet the requirements of the MFF is a factor for the uptake on the facility. DEC should receive the Management’s response 5 working days before a DEC meeting. so it could not be concluded whether cofinancing is incremental or substitutes a portion of the MFF. DEC also discussed the differentiation between major or minor changes. The lack of a comprehensive database on cofinancing was also raised. Time Period for Circulation of Documents to DEC 8. and (iii) the importance of the subject. IED indicated that it will include clarifications on the concerns raised in the Management Response. envelope. which is a broader problem not exclusive to MFF projects. To enable DEC members to prepare appropriately. Since ADB does not expect any significant increase in its resource envelope in the near future. DEC also reviewed IED’s observations on some prerequisites such as the quality of road maps and sector assessments. Other concerns. DEC also noted that since MFF constitute almost a third of ADB’s resource envelope. circulation of Management’s response to the report and the DEC meeting. Headroom. not all countries utilize MFF. which made the evidence related to staff efficiencies in relation to MFF inconclusive. DEC discussed the use of MFF 4. Due to (i) insufficient time between the 7. I. the DEC Chair indicated that IED and Management should provide sufficient lead time for DEC to review evaluation reports and the Management’s response. The following time frames were agreed to by IED and Management: Circulation of IED documents to the Board (and DEC) would continue to be 21 calendar days. It was noted that although a large part of future approvals are already earmarked. DEC agreed that the SES warrants further discussion. and given that one DEC member indicated there were only four members present at the meeting and she would not intervene as there had not been sufficient time to reflect and conduct due diligence between the circulation of Management's response and the DEC meeting. the quality of projects will have a considerable impact on the effectiveness of ADB’s operations. as in the case of India. In the next uploading of the report which contains this DEC Chair’s Summary. . (ii) diverging views of the success of the program between IED and Management.

ADB. by enhancing the flexibility and client orientation of its financial products.4 The MFF aimed to strengthen ADB’s capacity to mobilize development finance 3.6 and recommended an evaluation of the performance and effectiveness of the modality to be conducted after 3–4 years. 5 and (ii) free up ADB staff time spent on processing for Board approval. 4. 3 ADB in 2005 launched the innovative and efficiency initiative (IEI). 2000. 2008. Manila. United Nations. and helping ADB to work better with other development partners. Manila. Mainstreaming the Multitranche Financing Facility. among other instruments and modalities. and savings on commitment charges. Sufficient time has not elapsed to fully evaluate its development outcomes in client countries. Following a 3-year pilot period. United Nations Millennium Declaration. 1 The MFF was designed to facilitate greater certainty and upfront agreement with a client and free up ADB staff time spent on processing for Board approval 2 3 4 5 ADB. the Board therefore approved the proposal to pilot test the MFF. A. and a broader range of financial instruments and modalities. a more appropriate skill base. Manila. and to meet the large financing gaps that persisted in many DMCs and that posed challenges to them for achieving the Millennium Development Goals. In line with this strategy. New York. making ADB more compatible with existing and evolving market practices. the Board approved in July 2008 the mainstreaming of the MFF. Manila. ADB’s corporate-wide long-term strategic framework 2001–2015 1 and its associated first medium-term strategy 2001–20052 called on ADB to respond better to the needs of its developing member countries (DMCs) by improving organizational effectiveness through greater flexibility in its structure. Background and Rationale 2. 2001. increased flexibility. 2001. Moving the Poverty Reduction Agenda Forward in Asia and the Pacific: The Long-Term Strategic Framework of the Asian Development Bank (2001–2015). ADB. 6 . Medium-Term Strategy. ADB. 2005.CHAPTER 1 Evaluation Focus 1. Innovative and Efficiency Initiative: Pilot Financing Instruments and Modalities. An issue that becomes relevant to countries as they graduate from receiving only Asian Development Fund (ADF) support to a mix of support from ADF and ordinary capital resources (OCR). as preconditions that need to met to enable the achievement of development effectiveness. The MFF modality was also anchored on the expectation that sovereign guaranteed lending would remain the predominant type of development finance for many DMCs in the foreseeable future. a modality introduced in the Asian Development Bank (ADB) in 2005. It enabled ADB to complement modes of assistance of other development partners and accelerate the approval process. which proposed. This report provides a real-time evaluation of the multitranche financing facility (MFF). the introduction of the MFF. The MFF was designed to (i) facilitate “greater certainty and upfront agreement with a client through financing that fits within the client’s longer term plan” particularly since there was a felt need for longer term commitment. streamlined processes. Therefore. In August 2005. the evaluation focuses on the requirements that were applicable to the modality and the implementation of these requirements and procedures.

7 However. 7 Refer to para 9. the MFF modality embodies certain major benefits over existing lending modalities. Since 2005. ADB’s Treasury Department models projected PFRs beyond the work program and budget framework (WPBF) period. As originally conceptualized. About the Multitranche Financing Facility MFF modality is unique among the lending modalities offered by development partners 5. such as (i) a series of similar projects with cost over-run financing included in some tranches. the MFF modality has been applied to increasingly varied situations. . and thereby encouraging cofinancing. ADB conveys its intention to provide a maximum amount of financing (the MFF financing envelope) to a client over a specified time period under a set of detailed pre-negotiated “warranties and representations. it is especially suited to sector investment programs. ADB can thus support longer term investment programs that are structured and staggered into multiple loans under the umbrella of the MFF commitment. these are collectively referred to as the MFF prerequisites. over a time frame of up to 10 years or even more. for each such loan. However. a separate loan agreement is signed. The MFF modality is unique among the lending modalities offered by development partners in the sense that it strengthens comfort for long-term programmatic support to a DMC client but does not entail an additional commitment fee burden on the client. Appendix 4 of the IEI Document (footnote 4). 8. that avoids repetitive processing tasks. Although the MFF modality was anticipated to be applicable to large and stand-alone projects with discrete and sequential components. The MFF thus has characteristics that are similar to a standby letter of credit in the commercial banking sector—an important difference being that the MFF umbrella financing envelope entails no cost. With the FFA. (iv) assuring clients that ADB is a committed partner for their long-term financing plans in specific sectors. (vi) reducing commitment fees for the clients. (v) facilitating the preparation of a series of investments with planning for safeguards and other concerns. and improving governance. and (vii) registering contingent liability only to the extent loans are signed in response to PFRs received from clients.” The FFA also spells out a long-term planning perspective for the particular sector the MFF is supporting. reduces the need for separate Board approvals except for the facility as a whole and for the first tranche. in its own financial projections. An MFF thus has features similar to a cluster loan or sector loan—as all except the first tranche project need to be identified only broadly up front.2 Real-Time Evaluation Study of the Multitranche Financing Facility B. (iii) increasing operational flexibility in response to client needs. policy framework. reduces staff time for processing. road map. and financing plan accompanied by suitable undertakings or commitments. With the MFF facility. Only approved loans under the MFF umbrella enter the balance sheets. the MFF modality has undergone significant changes that Management effected through the issue and revision of internal staff instructions and Operations Manual (OM) sections (Table 1). and (ii) similar projects but with different executing agencies. 6. 7. Such a standby letter of credit is formalized through a framework financing agreement (FFA) between ADB and the client. capacity development. This includes the strategic context. (ii) allowing ADB and clients to engage in constructive policy dialogue. The MFF is neither a balance-sheet commitment nor an off-balance-sheet item for the ADB and its client. investment program. and allows staff to spend more time on implementation administration and management. These include (i) financing a series of projects or phases. and/or (iii) projects that cut across subsectors. The individual loans are approved and signed in response to specific requests (referred to as periodic financing requests [PFRs]) received from the client.

the Board requested it to be evaluated in 3–4 years time to identify any unforeseen developments. As of December 2011. the Board expressed that the MFF modality enables ADB to invest programmatically. Appendix 1 provides a brief history and overview of the MFF modality. as well as a comparison of the MFF with other modalities as understood at the time of mainstreaming in July 2008. the Board also stressed the need to introduce quality assurance systems and improve reporting. Besides. . many of the procedural changes introduced subsequent to mainstreaming of the MFF also apply to stand-alone modes. second and subsequent tranches (SSTs) have one less layer of supervision compared with stand-alone modes. OP = operational procedure. Multitranche Financing Facility Operations Manual Bank Policies (Section D14/BP) and Operational Procedures (Section D14/OP). 66 MFFs had been approved with a combined approved amount of nearly $32 billion (further details are in chapter 2). the RTE will revisit the raison d’être for introducing the MFF modality as well as examine (i) the extent to which the Board’s concerns are justified. 10. Multitranche Financing Facility Staff Instructions for the Multitranche Financing Facility b a Date 12 October 2006 6 August 2008 18 May 2010 15 July 2011 This is an internal ADB document. In fact. This study is therefore a real-time evaluation (RTE) with the objective of identifying issues that need to be addressed. and implementation involves steps that are the same or similar to stand-alone modes. With increasing use. MFF = multitranche financing facility. and (ii) efforts that ADB may need to make to steer the use of the MFF modality in a manner that would improve its development effectiveness. 11. reduces overreliance on stand-alone project approaches that often involve repetitive and cumbersome business processes. BP = business process. although the ADB Board endorsed the mainstreaming of the MFF modality in mid-2008. the discussion on many aspects of MFF preparation. and provides predictability and continuity to clients.Evaluation Focus 3 Table 1: Multitranche Financing Facility-related Staff Instructions and Operations Manual Sections Title Staff Instructions on the Use of the Multitranche Financing Facility a Operations Manual Bank Policies (Section D14/BP) and Operational Procedures (Section D14/OP). from the Board to Management. financial intermediary loan. opens the way for more structured cofinancing. The most significant change is the devolvement of decision-making on matters related to second and subsequent tranches. the development effectiveness aspects of the MFF modality are becoming more important. In so doing. In Board meetings held during 2010–2011. Use of the MFF has increased significantly over the years. Effectively. No MFF had closed by mid-2012. Objectives 12. 9. sector loan. The Board’s concerns are further elaborated in Appendix 1. Use of the s MFF has increased significantly over the years C. so as to improve the modality’s effectiveness and efficiency without compromising ADB’s prudence in financial planning. processing. Consequently. b This is an internal ADB document. cuts the financial and nonfinancial costs of doing business. and some of the findings and inferences are not specific to the MFF modality as such. Source: Independent Evaluation Department. The MFF modality essentially follows the same procedures as ADB’s other sovereign lending modes (project loan. In deciding on the mainstreaming of MFFs.

The number of MFFs approved during the two sub-periods was 20 and 46. and implications for operations. The extent to which MFF and tranche approvals have increased since the modality was first piloted in 2005 is analyzed in terms of country and sector coverage. the Board has continued to express concerns regarding the increasing size of the MFF portfolio. and specific questions pertaining to them are provided in Appendix 2. headroom. This comprises two sub-periods. Evaluation Methodology 14.4 Real-Time Evaluation Study of the Multitranche Financing Facility D. Study Period 13. and seasonal bunching of MFF and tranche approvals are also examined in chapter 2. The evaluation methodology gives due recognition to the MFF modality’s increasing use and examines the underlying causes (such as benefits of long-term commitment and increased flexibility). Examining the working of the MFF modality: After the mainstreaming of the 17. lessons and recommendations related to these components and chapters are pulled together in chapter 7. DMC and ADB concerns about the MFF modality. While all such . as well as reporting and oversight arrangements.5-year period after mainstreaming. a nearly 3-year span up to the mainstreaming in mid-2008. E. as well as the implications for ADB’s policy dialogue and the ability to respond to emergency situations. the expected benefits. Components of the Real-Time Evaluation 15. additionality of the MFF modality. including reduced ADB and client staff time in preparation and processing of investment interventions). insufficient clarity of criteria and decision-making filters for use of the modality. and increasing ADB’s organizational effectiveness (through reduced transaction costs. The medium-term implications for ADB’s operations of the increasing use of the MFF modality are also discussed in the context of country programming. The evaluation considers the merits and demerits of a programmatic approach and promise of long-term assistance to DMC clients. The extent to which such changes address the Board’s concerns and enhance development effectiveness of the MFF portfolio is examined in chapters 4 and 5. 1. was designed to support clients’ long-term sector plans through a long-term commitment. and their decision-making processes for MFF and tranche approvals are discussed in chapter 6. The extent to which such premises have held true thus far is examined in chapter 3. MFF modality. Issues related to funding sources. clients perceive the benefits of the MFF modality. The main chapters of this study will discuss the MFF portfolio. a quality assessment and review. and development effectiveness. respectively. The components of the evaluation methodology are described in this chapter. 19. Examining the MFF portfolio. minimizing the impact of borrowing from ADB or committing to borrow from ADB. How DMC governments and 18. how they are deriving benefit from it. the working of the modality. In response. and a 3. Examining the premise on which MFF was piloted and mainstreamed: The MFF 16. certain changes in documentation and other requirements have been instituted from time to time. The study period begins with the proposal to introduce the MFF (mid-2005) until December 2011. The key findings.

interviews with ADB staff. 21. only a few tranche level self-evaluations are available. technical aspects and funds flow).9 Therefore. the study focuses on project readiness and implementability (such as institutional arrangements. Nonetheless. All MFF and tranche-level information that is required for a reasonable evaluation of the MFF modality is not readily available from these sources for most MFFs (para. (ii) Loan 2248 of MFF01 (IND: Rural Road Sector II Investment Program). as not all necessary information sources (see Appendix 2) were available to the study team. Although all 66 MFFs approved between 2005 and 2011 are 22. the supporting backup evidence comes from approved MFFs. some gaps do remain for nearly all MFFs and tranches.1). Given that this is an evaluation of the MFF modality. As no MFFs had been reported completed at the time of data collection. sectorspecific issues are not the focus. and there is no readily available. Manila. 2012. Timing. the RTE relies on case studies. For many transport and energy sector MFFs. a more thorough assessment of results on the ground is deferred to a later stage. Evaluation Limitations Sector focus. it is expected that for sector investment programs. and account for 69% of the total MFF approved amounts as of December 2011. the analysis has given more attention to the transport and energy sector MFFs.Evaluation Focus factors influence ADB’s potential for impact and thereby the development effectiveness of the MFF modality. India Infrastructure Project Financing Facility. the most common type of MFF investment programs. Evaluation Approach 5 20. Although the inferences are drawn for the MFF modality. countries. Triangulation of information at various levels gives the evaluation confidence about its key findings. No independent evaluation or validation of a tranche project completion report has been conducted to date. A mix of desk studies. and (iii) Loan 2296 of MFF08 (PRC: Gansu Heihe Rural Hydropower Development Investment Program). the . The information so gathered forms the basis for addressing the evaluation issues listed in Appendix 2 (Table A2. A first completion report for an MFF was posted on ADB’s website in December 2012: ADB. At the end of 2012. and extent of progress as documented) is studied. the Independent Evaluation Department (IED) study team has tried to fill some information gaps through interactions with ADB staff and meetings with incountry stakeholders. 23. covered in the report. Although no guidelines for evaluating MFFs have been firmed up (as of December 2012). as well as an online survey of selected ADB personnel (see Appendix 2 for details). 23). those related to the network nature of roads or power distribution systems). Efficiency and effectiveness of MFF in achieving facility level outcomes and outputs cannot be fully evaluated at this state. The desk study included a review of relevant ADB documents and databases. which are 62% of the total number of MFFs approved by end-2011. tested and widely accepted approach to evaluating an entire MFF program. when adequate experience will have been gathered to develop plausible counterfactuals for various circumstances in which the MFF modality has been used. 3. November. tentatively.8 No approach for evaluating an MFF program was firmed up at the MFF design stage. and interactions with incountry stakeholders provided the information for the evaluation. 8 9 Only three tranche completion reports were available as of September 2012: (i) Loan 2231 of MFF02 (PAK: National Highway Development Sector Investment Program). A mix of MFFs in these sectors (which cut across subsectors. early indications of effectiveness. 2. although certain sector-specific aspects do need to be considered in the analysis (for instance.

A large number of documents are required to fully understand 24. IED also requires the email records. how an MFF has progressed since approval. no document consolidates the information or provides reference or links to other relevant documents. It also appears that all MFF and tranche-related documents are not necessarily uploaded onto e-STAR in a timely fashion. For the purposes of the RTE of the MFF modality. 27. MFF-level completion reports should generally follow sector assessment guidelines. many scope change documents approved in 2012 were not yet uploaded in e-STAR by the time this study checked. IED and other departments (other than the owner department) normally do not have access to relevant MFF. The time-sheet management system (TMS). IED is granted access for a limited time period. Other modalities usually allow greater access to data and progress statements. anecdotal evidence and discussions with staff and clients on various MFF investment programs was also relied on in order to understand the working of the MFF modality. Instead. However. 25. including recorded rationales for tranche scope and other course changes. . Documents that would be prepared by the client or its consultants (such as project feasibility studies for second and subsequent tranche projects) were also required but proved difficult to access. To the extent that project viability analysis and due diligence review work entail email communications among ADB staff. and (ii) data once entered are verified for correctness and accuracy. MFF portfolio-level analysis also shows gaps. financing requirements. which included 1 year of data from May 2011 to May 2012 for all regional departments. which are specific to MFFs should also be assessed in a similar manner. Sufficient information on the content and sequencing of all tranches is not provided in the report and recommendation of the President (RRP) or the FFA. Appendix 2 provides a list of required documents. 26. the email records are not easily retrievable. and administering MFFs and their tranches to gauge whether or not staff resource use efficiency did actually improve with the use of the MFF modality. Although most documents can be available on ADB’s electronic document storage system e-STAR. and/or clients. are difficult to find for any MFF. For instance. all required data and information. and the necessary information can be gauged only from documents that are prepared after MFF approval. which indicates the need for instituting systems to ascertain that (i) all requisite data are entered. However. The design and implementation characteristics. consultants. and inaccuracies of data in certain official ADB databases. inconsistencies. Data access. Therefore. was not available for preparation of this report.related folders on e-STAR. Upon special request to the concerned staff. All such documents and data are required by IED for an evaluation of a particular MFF investment program. However. The fact that approved tranche projects can change in terms of scope. or implementation arrangements adds to the need to fully understand the sequence of changes that take place. processing. as originally envisaged in the IEI document (footnote 4). IED needed access to such documents for a few selected MFFs. where ADB would have better record-keeping owing to greater ADB involvement in project preparation.6 Real-Time Evaluation Study of the Multitranche Financing Facility and proxy indicators as well as triangulation of information from multiple sources in support of its evaluation findings. IED conducted a survey of staff engaged in preparing. Access to such data would have allowed IED to compare the efficiency of the modality better.

Until December 2011.4 4. Technical Assistance. the number of MFF approvals has increased from eight in 2006 (the first complete calendar year that ADB processed MFF interventions) to 13 in 2011. refer to Appendix 3. Source: Asian Development Bank database for Loan. Grant.1 3. to 27% in 2009 and 37% in 2011. More than one quarter of ADB’s active portfolio is in MFF tranches. Simultaneously.2 billion in 2011.8 billion in 2006 to more than $6.2 10% 5% 0% 0 2005 2008 2009 2010 2011 Approved MFF Resource Envelope during the year ($ billion) Approved MFF Tranche Amount during the year ($ billion) % MFF Tranche Amount approvals to Total Loan approvals MFF = multitranche financing facility.7 0. 29. and Equity Approvals.5 billion in 2011 (see Fig. 13 MFFs had fully allocated .5 1. Approvals 28. while approved tranche amounts increased from about $180 million in 2005 to nearly $4.5 4. Following acceptance of the proposal to begin piloting the MFF.5 billion in 2005 and $3. Figure 1: MFF and Tranche Approval Trends 7 6. the approved MFF envelopes increased from $1.6 25% 20% 15% ($ billion) 1. For details. MFF tranche approvals had risen from 17% of total approvals for ADB sovereign lending in 2006.8 4. As of 31 December 2011.0 0% 1. a total of (i) 66 MFFs had been approved with a combined approved amount of nearly $32 billion. Since then. of which 66 were SSTs. and (ii) 126 tranches had been approved.2 6 5 4 3 2 1 5.2 40% 35% 30% 3. two MFFs were approved in December 2005.7 34% 37% 6.CHAPTER 2 The Portfolio A. 1).0 2006 2007 2. By 2011.0 23% 20% 17% 27% 4.

MFFs have been approved in two countries each. In the first three quarters of 2012. the most recent addition being Mongolia.317 Second and Subsequent Tranches 60 29 8. 11 Two MFFs (MFFs 1 and 11. and guarantees) approved from 2005 to 2011 in the 14 countries where MFF investment programs have been approved.10 2 had five or more approved tranches.042 3. however.) and prepare necessary documentation under some time pressure. By the end of 2011.13 The apparent concentration of MFF and tranche approvals during the last month of the calendar year most likely means increased work load for the approving authorities—both the Board and Management—during November and December. Papua New Guinea (PNG) is the only country where ADB approved an MFF intervention. The Central-West and South Asia regions account for more than 75% of the number and amounts of the 66 MFFs approved until December 2011. 22. only four MFFs and seven PFRs were approved. 12 29 MFFs (MFFs 12. while only in Bangladesh have no further MFF’s been approved.8 Real-Time Evaluation of Multitranche Financing Facility MFF resource envelopes into tranches. 15. 14 This trend appears to have continued in 2012. 10 13 MFFs (MFFs 1. financial intermediation loans. 41.906 All Tranches 126 50 16. ADB introduced MFFs in six DMCs that were spread across four ADB regions: (i) Azerbaijan and Pakistan in Central-West Asia. 30% (84 of 277) of stand-alone loans were approved in the month of December. A key difference. 29. 39. while the 26 MFFs approved in Central-West Asia are spread across seven countries (the maximum being 8 MFFs in Pakistan). 17. the MFF modality had been extended to 14 DMCs. and (iv) Viet Nam in Southeast Asia. (ii) Peoples Republic of China (PRC) in East Asia. is that 25 of the 26 approved MFFs in South Asia are in one country (India). Manila. program loans. TA loans. nearly 50% of all SSTs were approved during that month. appraisal. B. 12 30. 25. 33. 37. 16. . Sources: Asian Development Bank database. 20. 11. etc. In the Pacific. Considerable acceleration is observed in the fourth quarter. In the East. sector loans. 43. 2012. South and South-East Asia regions. 13 In comparison. Table 2 shows that.306 First Tranches 66 21 8. 57) have fully allocated MFF resource envelopes into tranches/loans.846 4. During the piloting stage (mid-2005 to 11 July 2008). 19. mostly in Central-West Asia. Regions and Countries Central West and South Asia regions account for more than 75% of 66 MFFs approved 31. and ADB. 47-54. 58-66) have only one approved tranche. (iii) Bangladesh and India in South Asia. MFFs and the combined resource envelopes.889 8. 8. 24. Since July 2008. although less than one third of the MFFs and first-tranches were approved during the month of December. one in energy and the other in the transport sector) have five or more approved tranches. 44. The standalone loans include all sovereign loans (project loans. several more countries have been added.989 Until 2011 66 MFFs s had been approved with a combined amount of $32 billion Total number Number approved in December Total approvals ($ million) December approvals ($ million) MFF = multitranche financing facility. Figure 2 shows the regional and country mix in terms of number of approved 32. 13. it may also mean tight deadlines for ADB staff and the consultants to conduct research (fact-finding.938 10. 14 Table 2: Bunching of MFF and Tranche Approvals in December MFFs 66 19 31.11 while 29 MFFs had only one approved tranche. Multitranche Financing Facility Annual Report 2011. 56. 28. both in India. 31. 38.

GEO = Georgia. 9 Figure 2: MFF Approvals by Regional Department 25 24 20 ($ billion) 16 12 8 4 0 CWRD 26 MFFs UZB PAK 20 IND 15. MFFs for urban and water-wastewater-sewerage infrastructure. These two sectors remain the mainstay of the MFF modality (Fig. each has an average resource envelope in the $400 million–500 million range. UZB = Uzbekistan.3 PNG 1. Sectors 34. and multisector projects were approved later in the pilot phase. and (iv) in large countries such as PRC and India. CWRD = Central and West Asia Department. Since mainstreaming however. beginning in December 2005. (ii) Viet Nam is the only country outside the Central West Asia region where the average resource envelope approved per MFF exceeds $700 million. (iii) in the remaining three Central-West Asian countries where MFFs have been approved. Grant. BAN = Bangladesh. Source: Asian Development Bank database for Loan.0 0 EARD 4 MFFs PARD 3 MFFs MFF env. EARD = East Asia Department. MON = Mongolia. natural resource management. MFF = multitranche financing facility. MFF interventions were approved only for physical infrastructure. the total amount approved for MFF interventions in Central West Asia (at a little more than $15 billion) is more than 50% greater than that for South Asia (where it less than $10 billion). and above $500 million each in Afghanistan. 3).The Portfolio 33. PAK = Pakistan. and (ii) energy. VIE = Viet Nam. C. respectively). Although the same number of MFF interventions are approved in Central-West and South Asia regions. from March 2006. but since mainstreaming. KAZ = Kazakhstan. the average resource envelope per MFF is less than $400 million (although the maximum MFF sizes are $1 billion and $800 million.0 VIE INO SERD 7 MFFS 10 5 MON PRC 1. The two sectors in which MFFs were first approved are (i) transport. and Kazakhstan. SERD = Southeast Asia Department. SARD = South Asia Department. Azerbaijan. PNG = Papua New Guinea. Initially in the pilot phase. PRC = People’s Republic of China.0 KAZ GEO AZE ARM AFG BAN SARD 26 MFFs 15 9. and Equity Approvals. it has penetrated other sectors . amount approved ($ billion) No. AZE = Azerbaijan. PARD = Pacific Department. Technical Assistance. of MFFs approved AFG = Afghanistan. and account for more than 60% by number and nearly 70% of the total resource envelope of all MFFs approved until December 2011. one MFF each has been During the pilot phase MFF approvals focused on infrastructure. before December 2007. IND = India.6 5. Furthermore: (i) the average resource envelope approved per MFF is above $700 million in Pakistan. ARM = Armenia.

Figure 4: MFF Financing Envelope Approved for Countries that Receive Concessional. Technical Assistance.9 0. The 14 DMCs where the MFF modality has been used. Source: Asian Development Bank database for Loan. and (iii) nine DMCs that receive a mix of OCR and ADF loans from ADB. The study is aware that in 2012. OCR and Mixed financing $2. Technical Assistance.10 Real-Time Evaluation of Multitranche Financing Facility approved also for public sector management and financial sector interventions.9% ADF loans. and Viet Nam—the four DMCs where ADB provides assistance only from ordinary capital resources (OCR). Source: Asian Development Bank database for Loan.7 4. comprise (i) Afghanistan—a DMC where ADB extends all assistance from grant sources.3 10 4 1. Grant.8 billion $16. OCR = ordinary capital resources.1 billion ADF only OCR ADF & OCR ADF = Asian Development Fund. total MFF approvals through December 2011 comprised $27. (ii) PRC. Grant. at least one operations department is also preparing and processing an MFF in the education sector. including but not limited to Asian Development Fund (ADF) grants. . 7.5 1 5 0 Multisector Public Sector MFF Resource Envelope ($billion) Number of MFFs MFF = multitranche financing facility.5% grants. India. Figure 4 shows the combined MFF financing envelope for these three country groups. ADB’s Funding Sources 35.3 billion from OCR sources (85. MFF = multitranche financing facility. and 6. Kazakhstan.4 Natural Resources ($ billion) 13.7% of all MFF approvals).1 billion $13.5 Transport Energy Urban/Water 25 20 15 12 7 2. and Equity Approvals. Overall.6 1 Finance 0. and Equity D. Figure 3: MFF approvals by Sector 14 12 10 8 6 4 2 0 30 26 17 8.

(ii) Second India Infrastructure Project Financing Facility (MFF37). . at the request of the government of Pakistan. However. 16 although the guarantee facility has been set up in at least one other MFF. and (iii) Guangdong Energy Efficiency and Environment Improvement Investment Program (MFF20). ADB is providing $200 million equivalent in guarantees to help mobilize commercial debt to finance wind and other renewable energy projects. This is the Renewable Energy Sector Development Investment Program in Pakistan (MFF05).17 15 16 17 These include (i) India Infrastructure Project Financing Facility (MFF17). Instruments 36. and guarantee instruments. The RRP for the Energy Efficiency Investment Program in Pakistan (MFF31) explicitly mentions the option of converting a part of the MFF resource envelope to a guarantee instrument for some tranches. A few MFFs have extended loans to financial intermediaries to support certain types of projects. most MFF interventions comprise straight loans and grants to the concerned DMC. 15 and only one MFF investment program explicitly mentions the guarantee option.The Portfolio 11 E. lines of credit run by financial intermediaries. The MFF modality was conceptualized as a debt financing facility that would use loans or grants.

e. which possibly allows the clients to plan more systematically and mobilize cofinancing for the investment plans or individual projects. Operations Manual: Bank Policies and Operational Procedures. The need for ADB to provide long-term support for physical and social infrastructure (including urban infrastructure) was explicitly recognized in the late 1990s. These assumptions were considered as holding true at mainstreaming. Yet 3 MFFs approved after August 2008 have utilization periods in excess of 10 years. environment. and to that extent contribute towards achieving the objectives of ADB’s long-term strategies. 2008.6 years (i. only one or two tranches have thus far been approved. Each MFF is expected to have multiple tranches (usually 3 or more). the median utilization period is about 7. Defined as the number of days (or months or years) elapsed between tranche approval date and loan closing date. 40. A. Nine of the 66 MFFs have a utilization period of 10 years or more. This sets the maximum MFF utilization period at 10 years. although in many instances. For the 66 MFF investment programs approved until December 2011. energy. as well as the clients’ commitment fee payment obligations. Strategy 2020: The Long-Term Strategic Framework of the Asian Development Bank (2008– 2020). Where actual loan closing dates are not available. Manila. the MFF modality was intended to reduce staff resources required for processing. or as revised thereafter during the implementation period) is used. Compared with a series of similar stand-alone projects. finance sector development. the MFF investment programs have a longer time span than stand-alone investment projects. ADB’s new long-term strategy. and resulted in the formulation of ADB’s first long-term strategic framework (footnote 1). In keeping with the long-term strategies that have been in effect since the MFF modality was first piloted in 2005.CHAPTER 3 Expected Benefits 37. and urban physical infrastructure across various DMCs 39. By design. The country partnership strategies (CPSs) are set up to do the same. which came into effect in 2008. and urban physical infrastructure across various DMCs. efficiency and impact.7 years and the average utilization period across all 66 MFFs is 7. then projected closing date (as at time of approval. The MFF modality was proposed with the objective of providing to clients the comfort of long-term support by ADB. and education. A frequency distribution of tranche implementation periods 20 (see Fig. the intended duration of the MFFs plus extensions granted for those that have exceeded this period or are nearing the end and anticipated to slip). ADB will employ its financial and institutional resources in five core areas” that include infrastructure. 18 also emphasized that to “maximize results. energy. and country operations business plans (COBPs) continue to update the list of projects that ADB is anticipated to support in a 3-year period. Most of the approved MFF investment programs are to enhance transport. Manila. 5) 18 19 ADB. albeit for a shorter period (usually 5 years). ADB. Long-term Support to Clients 38. 19 The shortest utilization period is about 3.8 years. 20 . 2008. most of the approved MFF investment programs are to enhance transport.

Table A4. and for transport and energy sectors in particular. Rather than entire MFF investment programs. tranche implementation periods have been extended beyond the originally stated end of the MFF utilization period. Table A4. For comparative purposes. However. Available data on tranche implementation periods. Technical Assistance. some tranche implementation periods are 100% or more. (iii) as per available data. Available data on disbursement rates (i.g.1). . 41. Grant. and projected tranche closing dates for most tranches (the exceptions being the few first tranches that have actually closed thus far) reveal no clear trend in the shortening or lengthening of second tranche compared with the first tranche—although it is somewhat more likely that second tranches have shorter implementation periods than first tranches (see Appendix 4. MFF57 (IND: Madhya Pradesh Energy Efficiency Improvement Investment Program).22 Figure 5: Frequency Distribution of Tranche 1 and Tranche 2 Implementation Periods as Percent of MFF Utilization Period 13 35% 30% % Number of tranches 30% 25% 20% 15% 10% 5% 27% 24% 17% 12% 11% 8% 5% 0% 2% 3% 0% 30%40% 40%50% 50%60% 60%70% 70%80% 80%90% 17% 14% 12% 8% 5% 5% 0% 3% 0% 0%-20% 20%30% 90%.. IED has no documents that show that the MFF utilization period has been extended. stand-alone loans are considered only in sectors and countries in which MFF interventions have been approved. 42. A sample of 431 stand-alone projects approved from 2000 through 2011 is thus compared with 126 MFF tranches approved up to 2011.>=100% 100% Implementation period as % of MFF utilization period Tranche 1 Tranche 2 MFF = multitranche financing facility. which comprise mostly actual tranche approval dates for all tranches. Source: Asian Development Bank database for Loan. and Equity Approvals.21 while in other cases. 20% and 30% of approved loan amounts) also reveal no clear trend (see Appendix 4. 23 The average energy sector tranche implementation period is within 15% of the average implementation 21 22 23 e.Expected Benefits reveals that (i) first and second tranches span 60% or less of the MFF utilization period for about 45% of the tranches.2). it is more appropriate to compare MFF tranches with stand-alone loans. Table 3 shows a comparison of approval amounts and various measures of elapsed time between MFF tranches and stand-alone loans for all sectors. In some cases this is because the first tranche extends the entire MFF utilization period. (ii) about 75% of first tranches and 90% of second tranches span up to 80% of the MFF utilization period.e.. such analysis does not capture the underlying assumptions for each data point (Appendix 4). time taken from loan effectivity to achieve 10%.

Processing a tranche was typically expected to take 40% of staff time vis-à-vis a standalone project (see Appendix 5 for further details).56 431 47. Overall.of which SSTs Approved total loan amount Approved loan amounts of total Sector interventions Average tranche/loan size Elapsed time between .6 65% 136 n. and the equivalent time for a standalone project is 75 weeks. including the MFF.54 TC 23 43 20 6. $ billion % $ million days days days days years 135 105 107 84 179 4. for other sectors the difference is less than 10%. the average approved amounts of MFF tranches are about 25% larger than for stand-alone loans. Stand-alone Projects MFF EN 17 39 22 5.7 Stand-alone Projects All EN TC Sectors 39 6. MFF = multitranche financing facility. coupled with (ii) increased staff availability for implementation monitoring and administration. and Equity Approvals. EN = Energy. Improved organizational effectiveness was considered as being a consequence of (i) reduced staff time for processing a number of tranches under an MFF vis-à-vis the same number of stand-alone investment projects.a. but energy tranches are about 10% smaller. and make mid-course corrections. n.Approval to closing (implementation period) Nos.30 93 12. However.14 Real-Time Evaluation Study of Multitranche Financing Facility period for stand-alone energy loans. Table 3: Comparison of Loan Amounts and Timelines for MFF vs. Grant. an MFF processing time is typically 90 staff-weeks. PFR = periodic financing request.74 108 ADB = Asian Development Bank.76 All Sectors 66 126 56 16. LA = loan agreement. at 354 staff-weeks. address policy gaps.0 53% 155 n.7 No. Figure 5 and Table 3 therefore indicate that the MFF modality does provide to clients the comfort of support that is significantly longer than with other modalities that comprise stand-alone loans. 101 141 235 5. the overall level of effort for a MFF program with four tranches (180 staff-weeks) would be significantly less than for four corresponding standalone projects.LA signing to effectivity .8 35% 157 86 92 85 169 4.Approval to effectivity .PFR submission and approval for SSTs . B. Increased organizational effectiveness of ADB was cited as an intended outcome of the entire IEI program. of tranches/projects . Source: Asian Development Bank database for Loan.17 91 92 182 4. Technical Assistance.a. 125 110 232 5. However. whether or not these estimates are based on time-sheet data and the source of data on person-weeks expended for processing and administering MFFs and tranches is unclear. with associated benefits such as more opportunities to understand sector issues. Nos. Improved Organizational Effectiveness Increased n organizational effectiveness of ADB was an intended outcome of the entire IEI program.a. while transport tranches are about 15% larger. of MFFs No. wherein 45. TC = transport and communications. The Board Paper provides quantitative estimates of staff time savings.Approval to LA signing . SSTs = second and subsequent tranches.5 47% 140 147 81 95 176 4. Nos. which piloted several financing instruments and modalities. = not applicable. owing to substantive staff time savings while processing tranches. including the MFF 44. Whether or not a time-sheet system had been tried or piloted in . 43.

as well as a wide variation in the estimated elapsed time for MFF preparation and processing (Box 1). and approval of the PFR of the proposed tranche were compiled from these databases. the TMS tried in the early 2000s could not have provided a the basis for estimating staff inputs for processing and administering MFFs and tranches as given in the Board Paper. the eOps database for tranche preparation and processing is not complete and shows wide variations in the estimated elapsed times (Box 1). A brief analysis shows the paucity of data on milestone dates in these databases. and detailed data are in Supplementary Appendix A.Expected Benefits ADB—albeit on a limited basis—during the MFF pilot period is not specified in the Board Paper. and stand-alone loans. . which also incorporates some data previously compiled in the project performance report and project information documents. and less than 200 days for tranche processing (see Appendix 5 for further analysis of survey data). Available data on milestone dates toward finalization of the project preparatory technical assistance (PPTA) work. IED could not obtain the TMS data. ADB databases include data on time elapsed during 47. approval of the RRP of the proposed MFF. Such information may be documented in a related back-to-office report of a review mission for a preceding tranche. preparation and processing. as obtained from the e-Operations (eOps) database. Nonetheless. 26 Further data analysis is given in Appendix 5. Supplementary Appendix B provides the survey forms). however. IED’s inability to obtain the TMS data effectively meant that IED had to rely on other ADB databases and an email-based survey of selected staff (team leaders for MFF and tranche processing. In May 2011. and that certain departments had still to make efforts to assess the quality and consistency of data entered by the staff. IED was unable to access the TMS data pertaining to specific MFFs. 15 24 25 26 During the early 2000s. The eOps database also does not specify when action on the second tranche (or a subsequent tranche) was first initiated. The findings from the IED survey also show wide variations. just over 200 days for MFF processing. the findings of which had been used for staff allocation and budgeting purposes. tranche loans. and more than 1-year of timesheet data had been compiled by the third quarter of 2012. a TMS established the parameters for processing and administering stand-alone projects and technical assistance. 48.24 46. to gauge the extent of staff resource utilization and savings associated with the preparation and processing of at least some MFFs and tranches. but with averages that are lower: less than 400 days on MFF preparation. ADB instituted a pilot TMS.25 Elapsed time estimates. However. Similarly. as it was felt that the TMS was still in an initial phase. but there is no central database that compiles such information.

19 agreed that the LOE for preparing and processing an MFF is higher than that for a stand-alone project. the LOE for tranche processing time is less than that for stand-alone projects. i) from about 40 days to more than 1. after MFF prerequisites had been codified in the ADB OM in 2008). PFRR = periodic financing request report. b. the wide variations in MFF and tranche preparation and processing times raise concerns about the timeliness and quality of data entered in eOps.300 days for work on a PPTA (average of 600 days) ii) from about 100 to about 1. Survey findings regarding LOE show wide variations of one order of magnitude or more. Data availability for MFF processing is somewhat better. MFF = multitranche financing facility. PPTA = project preparatory technical assistance. concept approval and RRP approval available for about 60 of the 66 MFFs. Bank Policies and Operations Procedures. after the most recent internal staff instructions were issued that sought increased documentation and other requirements prior to SST approval) required more LOE than a stand-alone project. RRP = report and recommendation of the President.800 days from loan fact-finding to periodic financing request report (PFRR) approval ii) from 15 days to nearly 900 days to process a PFR and obtaining approval of the PFRR (average of about 120 days). Regarding MFF preparation and processing: a. Manila. and (iii) 16 of the 19 MFFs were approved after mainstreaming (i. Regarding tranche preparation and processing: a.28 The tranche survey data tend to show that. 29 Notwithstanding the fact that all survey data are based on the memory of the concerned team leaders. data on level of effort (LOE). Although it is difficult to determine the linkage between flexibility and increased time required for preparation and processing of an MFF and its tranches. However. b..800 days to process an MFF (average of 270 days). The data show wide variations: i) from 300 days to more than 1. Processing and Implementation of MFFs and Their Tranches 1. it is also acknowledged that. 28 Refer to Table 10. as well as the credibility of a system to audit and verify data once entered. while PFR receipt dates are available for about 30% (39 of 126). Loan fact-finding dates are available for less than 45% of the tranches (54 of 126). 6) compared with 20% more time assumed in the Board Paper. The elapsed time also varies widely. Level of effort estimates. 2. Other than TMS. c.29 27 ADB. with milestone dates for MFF fact-finding.. across a relatively small number of MFFs and tranches. 2008. Source: Independent Evaluation Department.e. it is interesting to note the perceptions of the MFF team leaders: (i) of the 26 responses received from a total of 66 enquiries.27 51. PFR = periodic financing request.e. Operations Manual.16 Real-Time Evaluation Study of Multitranche Financing Facility Box 1: Elapsed Time Estimates for Preparation. OM Section D14/BP and D14/OP. owing to some sector-related issues (such as in water resources or agricultrure . in many cases. 49. no official ADB database contains 50. and (ii) 15 of the 19 MFFs required up to 50% more time for preparing and processing an MFF (along with Tranche 1) than a stand-alone project (Fig. and (ii) 4 of the 7 tranches approved after June 2011 (i. Dates for PPTA fact-finding and receipt of draft final report are available for less than one-third of the MFFs (21 of 66). Of the 36 SSTs for which survey responses were received from the 60 enquiries made (i) 29 noted that tranche processing calls for a lower LOE than a stand-alone project.

or (iv) any other movement. Table 4 shows that as of mid-2012. 30 .25 1. The MFF modality was also thought to help regional departments plan better their people and skill requirements. more time would be required to conceptualize an MFF investment program.0 53. perhaps with higher responsibilities. and (iii) change implementation plans while work is in progress. where distinct types of interconnected projects would comprise each tranche. project is less than that for an MFF but more than that for a tranche. for example through access to TMS data. which occur more frequently than desired as per MFF policy. or (iii) form a regional department to a knowledge or support department.30 Although staff movement within the same regional department does not lead to a loss of expertise to the department as such.75 to 2. The Board Paper (footnote 6) recognized that greater staff continuity is required in the preparation. it does not conform to the “staff continuity” requirements as spelled out in the MFF Board Paper. as the survey data relied on the memory of team leaders rather than any written record or database of LOE.50 to 1. the survey data therefore tend to show that the LOE for a stand-alone 52. It would be possible to have more conclusive evidence of the findings when more data on LOE for preparation and processing become available for more MFFs. there is no conclusive evidence of staff time savings over the entire MFF cycle 32% 11% 0% 11% >2. MFF = multitranche financing facility. As yet. Source: Independent Evaluation Department. Figure 6: Frequency Distribution of Ratio of Level of Effort for MFFs e f to Level of Effort for Stand-alone Projects 47% 50% % of MFF's 40% 30% 20% 10% 0% Up to 1. (ii) address policy issues and procedural gaps.75 1. or (ii) within the same regional department at the headquarters or in a resident mission. half of the team leaders had sectors). so that ADB staff can (i) gather and share knowledge with the client on sector issues and trends. Such staff movements can be (i) within the same sector but across regional or operations departments. and implementation of MFFs and their tranches. which appears to be consistent with the original premise that the MFF modality improves organizational effectiveness.25 to 1. Staff continuity. this inference is based on a small number of observations—and then too. However. tranches. it appears that changes introduced through the internal staff instructions issued in July 2011 led to an increase in tranche processing time. processing. Management driven. this observation cannot be considered conclusive. This is perhaps one of the reasons that have contributed to the difficulty in reducing the LOE for tranche processing. and stand-alone projects.Expected Benefits 17 Overall. which is 54. Staff continuity issues are a matter of human resources policy. Besides. provided a sufficient number of tranches are included in the MFF.50 1.0 Ratio of LOE for MFF to Standalone Projects LOE = level of effort. and potentially change the normal practice of staff movements.

The cofinancing database is expected to capture donor commitments and actual contributions.2 million (initially) ADB: reduced MFF financing envelope to $157. Number of Staff 14 6 7 6 33 18 15 C. sector loans. EIB: $40 million. ADB reduced MFF commitment upon confirmation of cofinancing of about $30 million from the OPEC Fund for International Development Leverage of more that 80% ADB intends to strengthen the centralized information system that would include the cofinancing database. there is no particular notice or announcement to indicate that the introduction of the MFF has changed the deployment pattern of staff. The lack of a comprehensive financial and performance information system and the non-availability of data on parallel and joint cofinancing do not allow a comprehensive analysis of the levels of cofinancing achieved through the MFF modality in comparison with other modes of ADB financing. 31 For overall MFF investment program: Cofinancing possibility known at MFF approval stage. Table 4: Movements of MFF Team Leaders since obtaining MFF approval Type of Movement Change of department Within same department but to a different division Within same department but to a resident mission Not associated with ADB anymore. building a long-term relationship with ADB and securing long-term funding but without the negative impact that several other modes of ADB financing (such as project loans. Such factors do contribute to the MFF’s rising use.31 Table 5 shows information on cofinancing arrangements for selected MFFs. and it was recognized that. Tranche 2 Cofinancing Particulars A guarantee facility of $200 million to mobilize commercial debt for wind and other renewable energy projects ADB: $38 million. of which: for the 25 MFFs approved during 2010–2011 for the 41 MFFs approved during 2005–2009 MFF = multitranche financing facility.5 million Remarks Commercial cofinancing amount not known (as of October 2012) MFF05 (PAK).18 Real-Time Evaluation Study of Multitranche Financing Facility not changed divisions or departments after processing an MFF and getting it approved. If EIB cofinancing does not come through. Cofinancing Adequate information is not available to analyze level of cofinance achieved through MFFs As originally envisaged. Table 5: Cofinancing in Selected Multitranche Financing Facility Investment Programs MFF Number and Tranche Reference MFF05 (PAK). Source: Independent Evaluation Department. All tranches MFF24 (KAZ). and financial intermediation loans) have on the client’s balance sheet and cofinancing capabilities (footnote 4). to be firmed up MFF22 (IND). then ADB’s support will increase to $78 million For overall MFF investment program: ADB: $188. . Tranche 3 Leverage of 100%. the MFF modality provides to clients the comfort of 55. the MFF modality is potentially more conducive to cofinancing than other modalities and instruments. to provide sufficient information to project processing and administration teams as well as concerned development partners. or on special leave without pay No movement (within same division and same department). However.

All tranches MFF53 (VIE).4 million For Tranche 2: ADB: 500 million. EIB: $195 million For Tranche 1: ADB: $40 million. KfW: $313 million. but not in both. IsDB: $170 million. KfW = Kreditanstalt für Wiederaufbau Bank. To the extent that funding from these sources is secured as part of the MFF investment program. or considered in some manner. no cofinancing expected in Tranche 1. PAK = Pakistan. or that the borrower or the executing agency will explore the soliciting of cofinancing from other development partners and/or private entities. or both did not. Japan: $68 million For overall MFF investment program: ADB: $540 million. either both the RRP and the FFA referred to cofinancing. IsDB = Islamic Development Bank. A significant improvement is observed in the level of consistency after mainstreaming: (i) for 7 of 20 MFFs in the pilot period (35%). or both did not. Updated cofinancing arrangements for projects expected to be financed through the MFF: ADB: $812 million. or the State Bank of India to fund their transmission and distribution capacity expansion programs. even though it was to use up nearly 50% of the approved ADB financing envelope. IND = India. and 220% for tranche 2 ADB = Asian Development Bank. All tranches Cofinancing Particulars Original cofinancing arrangements for projects expected to be financed through the MFF: ADB: $700 million. Japan: $150 million. IsDB: $414 million. Appendix 6 shows that in the RRPs and/or FFAs for 48 of the 66 MFFs. the documentation also indicates that specific attention to mobilizing cofinancing has not been given in many MFFs approved thus far. Available documentation does indicate some attention to cofinancing in some MFFs (see Appendix 6). and whether or not it will be incremental to the MFF financing envelope or lead to a reduction of the MFF financing envelope (by an amount equivalent to the 32 33 It is recognized that certain executing agencies normally raise investment capital from specific sources. the cofinancing option is not explicitly mentioned in the RRP and/or the FFA documents even if it is referred to in the design and monitoring framework (DMF). Whether or not this pertains to joint or parallel cofinancing is not clarified. Leverage of about 100% overall. either both the RRP and the FFA referred to cofinancing. As per RRP. 56. EIB: $195 million For overall MFF investment program: ADB: $636 million. referred to. Source: Independent Evaluation Department. MFF = multitranche financing facility. Japan: $634 million Remarks expected upfront at MFF approval stage is reduced to less than 30% (as per updated information as of June 2012). Japan: $634 million For tranche 2: ADB: $286 million. KfW: $276. cofinancing is mentioned or considered either in the MFF or the FFA. OPEC = Organization of Petroleum Exporting Countries.Expected Benefits MFF Number and Tranche Reference All tranches 19 MFF52 (VIE). the MFF documents simply mention that cofinancing will be pursued upon the specific request of the concerned government.33 In many cases. For instance. KAZ = Kazakhstan. certain power sector utilities in India routinely borrow from the Power Finance Corporation. the Rural Electrification Corporation. . and (ii) for 26 of the 46 MFFs after mainstreaming to end of 2011 (56%). 32 In 15 MFFs. EIB = European Investment Bank. VIE = Viet Nam. RRP = report and recommendation of the President. it is considered that the long-term support offered through the MFF has not affected this cofinancing.6 million. cofinancing is mentioned. KfW: $36. Leverage of more than 90% Parallel cofinancing for other similar urban mass rapid transit lines also expected. In three MFFs. However.

which were normally at variance with procedures and processes followed by borrowers. it may be important to hold close consultations with other development partners during the MFF processing stage itself. a Although the progressive structure allowed borrowers to pay lower commitment fees overall. only one explicitly offers the option of a guarantee cover in the initial documentation. 34 35 These include (i) discrete. if the MFF investment program requires a substantial amount of cofinancing. of the 66 MFFs approved until end-2011. (ii) slices (or tranches) of sector investment programs over a longer time frame of 7–10 years.c In October 2005. 36 D. Box 2: Reduction of Commitment Charge Rates When the MFF modality began to be piloted in the latter half of 2005. sequential components or large stand-alone projects. the Board approved a simpler flat structure with a commitment fee rate of 0.1% waiver (on the undisbursed balance of sovereign project loans negotiated after 1 January 2007). the Board agreed on a further reduction of commitment charge through a 0. a The commitment fee was applied to the following amounts (less amounts withdrawn from time to time). and (iii) financial intermediary credit lines. Manila (approved 17 September 2009. the commitment charge rates have been reduced (Box 2).34 Guarantees that cover political or credit risks are often intended to mobilize cofinancing. c In some instances. However. Islamic Republic of Pakistan: Energy Efficiency Investment Program.15% of the undisbursed balance. Since the MFF modality was piloted. approved in December 2006. In April 2007. 57. but they diminish somewhat the benefits associated with the MFF rationale. ADB. MFF = multitranche financing facility. 2009. 35 Although the guarantee option in this particular MFF appears to have been dropped.35% per annum on the undisbursed balance of sovereign project loans negotiated after 1 January 2007. Proposed Multitranche Financing Facility and Administration of Cofinancing. such as (i) the normal rate at which project construction can proceed on a best-efforts basis. and (iv) the entire loan amount thereafter. the borrowers were not able to calculate commitment charges properly and had to rely on ADB’s accounting records. b It was argued that it was unfair to charge the borrowers a commitment fee on the balances that could not be disbursed quickly for a variety of reasons. during successive periods commencing 60 days after loan signing: (i) 15% of the loan amount during the first 12-month period (ii) 45% of the loan amount during the second 12-month period. (iii) 85% of the loan amount during the third 12-month period. MFF31). In any event.b it was considered complex by many borrowers. Reduced Commitment Charges 58. This commitment charge rate has remained unchanged since. The MFF modality was conceived as a debt-financing facility to offer guarantees along with other instruments.75% on a progressive percentage of the undisbursed loan balance. the Board eliminated the waiver and approved a reduction of annual commitment charges for sovereign project loans to 0. ADB considered it appropriate to allocate a part of the approved MFF amount earmarked for loans to a guarantee for supporting physical investments in another MFF in the same country and sector. and (ii) ADB’s contracting and procurement requirements. 36 Refers to MFF05 (Renewable Energy Sector Development Investment Program). In December 2007. Report and Recommendation of the President to the Board of Directors. ADB charged its project loan borrowers an annual commitment fee of 0. Loan commitment charges cover ADB’s cost of carrying liquidity for loans prior to disbursement.20 Real-Time Evaluation Study of Multitranche Financing Facility amount of cofinancing) is also not clear. Source: Independent Evaluation Department. . Such reductions of commitment charges are not related to the introduction of the MFF modality in 2005.

at this point. Either of these conditions holds only for few MFFs. Therefore. Given that the average MFF financing envelope is $480 million compared with an average stand-alone project of about $100 million (Appendix 7). the available evidence (on changes in disbursal rates with each subsequent tranche) is mixed.Expected Benefits 21 Nonetheless. and during the same time period (2005 –2011).5% of the approved MFF financing envelope.2 0. . commitment fee savings from such large MFFs would relate more to timing of tranche approvals and tranche disbursal rates vis-à-vis the counterfactual string of stand-alone (corresponding to tranches) loans. b The second tranche comprises more than 95% of the MFF resource envelope. The commitment fee savings are evident but can be considered negligible (Table 6). which would otherwise be financed through one stand-alone loan. and less than 0. Appendix 7 illustrates commitment fee savings in a few cases where the 60. Viet Namb MFF20. counterfactual assumed for an MFF with “n” tranches (one stand-alone loan that equals the size of the MFF) is meaningful. wherein even a small delay in the signing/effectivity of successive tranches can lead to some commitment fee savings. with each tranche being like one project.14% Small commitment fee savings are evident for some MFFs MFF Number/ Country MFF13. and where commitment fee savings come from phasing of the approval/effectivity of a stand-alone loan through tranches. and (b) three tranches were approved and made effective in quick succession during the 2. the detailed computations and assumptions are given in Appendix 7.25 0. Indiad MFF = multitranche financing facility. In most cases. a Loan agreements have been signed for the entire MFF financing envelope for the 3 selected MFFs. 61. in addition to loan envelope size) are available. In all these cases. or (ii) the MFF financing envelope is comparable to a stand-alone project.year time span. the fee savings are small. Source: Independent Evaluation Department. The estimates in Table 6 are for MFFs for which sufficient data (particularly on loan amounts and loan signing dates for each tranche. Most large MFFs cannot be viewed as one project comprising several subprojects. as the last tranche loan was approved much later than originally planned. but the MFF utilization period actually got extended by 12 months. However.45% 0. PRCc MFF38. only when (i) a large MFF is used to finance one large project. The commitment fee savings reflects the time difference between the loan signings of the first and second tranches. However. 37 In the same countries and sectors where ADB has approved MFF interventions.25% 0. commitment fee savings are likely to reflect improvements in disbursal rates in SSTs—should SSTs be actually disbursed more quickly. d The low commitment fee savings reflects the facts that (a) the MFF financing envelope of $200 million is smaller than the average stand-alone loan size approved in India during the study period ($210 million). c The MFF has a small financing envelope of $100 million. the available evidence is mixed. 37 most large MFFs can be viewed as a cluster of projects.28 Commitment Fee savings (% of MFF resource envelope)a 0. PRC = People’s Republic of China. at this time. it is likely that commitment fee savings from MFFs would come 59. Table 6: Commitment Fee Savings Estimates for Selected MFFs Number of Tranches Approved p 2 3 3 Total MFF Resource Envelope ($ million) 931 100 200 Commitment Fee Savings ($ million) 4.

CHAPTER 4

The Working of the Modality
Board approvals of most MFF investment program proposals have been 62. accompanied by concerns about certain aspects of the MFF modality—in addition to comments and feedback on the normal development effectiveness-related aspects of economic and financial viability, environmental and social safeguards, institutions, and governance. The Board’s concerns on the need to ascertain or enhance the development effectiveness of MFF proposals have also been evident—albeit indirectly— through numerous observations regarding the rapidly increasing MFF portfolio and approved amounts, coupled with (i) inadequate clarity of criteria and decision-making filters for using the MFF modality; and (ii) insufficiency of monitoring and reporting arrangements in place, and the need for better oversight. ADB Management has attempted to address such concerns through a series of revisions promulgated through updates of internal staff instructions and relevant operations manuals.

A.

Justification of the Multitranche Financing Facility modality

Concept and approval documents do not usually compare MFF modality with other options

63. The IEI document (footnote 4) required the client and ADB to agree upon a range of issues while firming up an FFA; such issues need not necessarily be helpful in justifying the choice of the MFF modality. 38 The internal Staff Instructions (2006) clarified that the MFF should be justified in the FFA. However, during the pilot period, it became clear that the justification should precede work on the FFA. Therefore, the Board paper (footnote 6) specified that the choice of the MFF modality should be justified in the MFF concept paper, and that a comparative matrix should be presented in the concept paper. This matrix should assess the merits or demerits of the MFF compared with other instruments and modalities. This requirement was repeated in the relevant OM section introduced in 2008 and revised in 2010, and was referred to in the relevant internal Staff Instructions (2011). For the MFF modality in particular, where ADB’s engagement with concerned executing and implementing agencies is likely to be long term, the justification for the MFF modality can also consider their risk profiling. 39 64. A review of the concept papers available to IED revealed that a comparative matrix was included in about 5% of the MFF concept papers since mainstreaming. The available FFAs and RRPs also do not compare the MFF modality with other options. Instead, they report that all MFF prerequisites are sufficiently covered. This implies that in most cases, ADB considers the presence of all MFF prerequisites as sufficient justification for the choice of the MFF modality. The stated requirement in the relevant OM section is not met in most cases.

38

These issues include tentative financing, utilization period, project and subproject eligibility criteria, fiduciary oversight arrangements, procurement plans, cost recovery and sustainability commitments, cofinancing arrangements, safeguards frameworks, disbursements, and implementation plans. 39 The risk profiling assessment regarding procurement and financial management can take into account the executing and implementing agencies’ previous experience with ADB or other international financial institutions. If the MFF modality is preferred, such an assessment can also provide inputs for design of capacity development support.

The Working of the Modality

23

B.

Decision-making Filters

65. The MFF prerequisites (para. 6) are not unique to MFFs. In reality, few standalone projects can be, or should be, processed and implemented without taking such criteria into consideration, i.e., being strategically aligned with broader development objectives, being an integral part of a sector roadmap, being supported by a suitable policy framework and suitable institutions, having realistic investment and financing plans, having a high level of commitment. A difference is that for stand-alone projects, progress improvement in the quality of such prerequisites becomes evident to the Board for each successive loan. 66. The IEI document had provided general guidance on the MFF modality. Much had been left unclear regarding the strategic context and basis for greater certainty and up-front agreement. The scope for policy dialogue had been left open. There was no word on client capacity or skills base, or on the monitoring and evaluation of outcomes. The Board Paper required that due diligence for the overall MFF should be an integral part of MFF processing.40 1. Strategic Context and Road Map

67. The MFF modality allows ADB to offer financial resources to clients with which ADB has an agreed-upon investment program or has agreed on a set of interrelated investments. Only with the issue of internal Staff Instructions (2006), did Management clarify that the MFF investment program should be consistent with an agreed-upon sector strategy and sector road map (wherein ADB supports, through loans and guarantees, the physical and nonphysical investments in programs, projects, project components, subprojects, and lines of credit). 41 Further guidance on the required strategic context and road map came in the 68. Board Paper. An MFF’s strategic context could come from the relevant CPS, and a roadmap was required to define (i) strategic directions for a sector, service, or industry; (ii) the importance it has for growth, poverty reduction, and inclusiveness (or the extent to which it is a binding constraint); and (iii) a list of success factors for better performance. Besides, as for any stand-alone project appraisal, a road map was also required to include a detailed assessment of bottlenecks to physical and nonphysical investments, as well as risks and mitigation measures. 69. Good strategic contexts need not be sufficient for ensuring good road maps, and inadequate road maps may not lead to bad MFFs,42 although the likelihood does increase as (i) strategic context and directions remain unclear; (ii) risks may not be assessed properly, with consequently inappropriate mitigation measures; and (iii) warranties and representations may be weak and unstructured. Available documents show that the quality of strategic context and road maps 70. has varied considerably across MFFs even after MFF mainstreaming. Boxes 3a and 3b present some examples that illustrate the quality variations of strategic contexts and road maps in MFFs (further details are provided in Appendix 8).

Available documents show that the quality of strategic context and road maps has varied considerably across MFFs even after MFF mainstreaming

40

41 42

To establish baseline conditions regarding the MFF prerequisites: policy framework, sector roadmap, investment and financing plans, and warranties and representations. Refer to paras. 13–14 of Board Paper (footnote 6). ADB. 2006. Staff Instructions on the Use of the Multitranche Financing Facility (MFF). Manila. Para. 45 (i), Board Paper (footnote 6).

24

Real-Time Evaluation Study of Multitranche Financing Facility

Box 3a: Broad Assessment of Strategic Context and Road Map of selected MFFs (Selected Examples of Good Strategic Context and/or Road Map)
PRC: Gansu Heihe Rural Hydropower Development Investment Program (MFF08) The MFF has a clearly established (i) development context (displacing polluting power generation options by clean hydropower, exploiting untapped hydropower potential, and reducing fossil fuel imports); (ii) consistency with national, provincial, and local government policies that signify the importance of investing in hydropower and other least-cost generation expansion options; and (iii) consistency with ADB strategic priorities (improving energy access, reducing tariffs for rural poor). The road map is also clear in that a large scheme of seven cascading hydropower projects has been identified, and the MFF is to finance two of these seven projects. With previous ADB support for one of the seven cascading projects to the executing agency, ADB recognized that the EA had a good and experienced team that: (i) was familiar with ADB procedures for procurement of consultants, contractors, and equipment; (ii) was familiar with ADB social and environmental safeguards; and (iii) was technically sound, given that they had increased the capacity of the previously supported Xiaogushan project during the construction phase, a and had succeeded in registering the project for sale of certified emission reductions. PAK: Energy Efficiency Investment Program (MFF31) The strategic context is clearly evident from (i) the need for reducing persistent energy shortages (the development context), (ii) the fact that energy security and affordability are high on the list of government priorities (consistent with government plans and priorities), and (iii) the fact that energy efficiency improvements necessarily deploy low-carbon technologies (consistent with ADB strategic priorities). Although there is a detailed road map for implementation of energy-efficiency measures across a range of sectors, and responsibilities are assigned to various institutions for achieving a large number of milestones, the road map does not appear to focus attention on resource allocation and institutional strengthening aspects. The stated time lines for beginning a range of demand-side measures appear to have been rather ambitious. The delay in implementing the first tranche (of compact fluorescent light distribution to households) is noted; and the need to switch the second tranche from an industrial energy-efficiency pilot (a demand-side energy-efficiency measure) to a more manageable thermal power plant loss reduction project (a supply-side energy efficiency measure) reinforces the observation that the road map was not backed by a sufficiently strong institutional framework. The fact that the program management office had to be relocated from the Planning Commission to the Ministry of Water and Power clearly shows the difficulties in implementing an energy-efficiency road map that goes beyond the traditional power supply side. GEO: Road Corridor Investment Program (MFF34) The ADB operational strategy at the time was centered on nurturing sustainable economic growth with governance, regional cooperation, and environmental protection as support themes; the core strategy areas of intervention included municipal infrastructure services, road transportation, and energy infrastructure. ADB also focused on main highways connecting Georgia to its neighbors, policy reform, and capacity. This was in sync with the government’s strategy to develop infrastructure and institutions to reinforce market integration, productivity, and competitiveness and to harness the country’s unique potential as a transit country between the Caspian and the Black seas. To achieve this, the government had endorsed the Joint Needs Assessment prepared by the United Nations together with the major aid agencies in Georgia that defined a road investment plan as well as a priority reform agenda: to focus on capacity development for better road asset management and maintenance, to provide sufficient financial and technical resources, and to set up a legal framework for the private sector to build and operate main roads.

a However. Source: Independent Evaluation Department. and renovation of main roads). a ADB.The Working of the Modality 25 The related road map itemizes the intended activities to alleviate certain bottlenecks to reach the strategic objectives including set targets and milestones for improving the surface conditions of the road network. and municipal heating) but not urban transport. was changed soon after tranche 1 approval. 71. integration of different public transport services. Nonetheless. While the two bypasses fit the objective of improving the subregional corridor. the road maps. MFF = multitranche financing facility. do not serve the intended purpose. redesigning main problematic crossroads. and (iv) upgrading of the urban Mestia area road network. Georgia: Interim Operational Strategy 2008–2009. 2010. good-quality strategic contexts have been analyzed and high-quality road maps have been prepared by the concerned DMC governments or relevant institutions. upgrading existing road to improve safety. . however. MFF = multitranche financing facility. A new paradigm for sustainable urban transport". "Changing Course. PRC = People’s Republic of China. the identified components under tranche 1 include (i) extension of the underground metro in Tbilisi. January. reducing road accidents. GEO = Georgia. and monitoring the intended reform process. extension of refurbishing the metro network in Tbilisi. 2008. It may so happen that in some DMCs. waste treatment. The cost allocation in the RRP for tranche 1 has been kept highly flexible by giving only the consolidated figure for the physical intervention. This scope. sewerage networks. (iii) parking organization. (ii) public transport (structuring and developing public transport. a The Xiaogushan hydropower project capacity was increased from 98 megawatts (MW) as per design to 102 MW (actual) by shortening the diversion tunnel by 300 meters and reducing the tunnel lining roughness factor. The investment components of the MFF relate to the new construction of bypasses around the coastal cities of Kobuleti and Batumi and improved infrastructure at the border crossing at Sarpi to Turkey. Box 3b: Broad Assessment of Strategic Context and Road Map of Selected MFFs (Selected Example of Weak Strategic Context and/or Road Map) GEO: Sustainable Urban Transport Investment Program (MFF43) ADB’s operational strategy 2008–2009 in Georgia included support to municipal infrastructure (covering municipal services including piped water. (ii) redevelopment of the river embankment in Gorgasali/Tbilisi for providing access to pedestrians. the “urban transport infrastructure. perhaps with assistance from ADB (during MFF implementation) or other development partners. support for urban transport in Georgia in 2010 was in line with policy papers on sustainable transport. In many cases. (iii) renewal of man avenues in Kuatisi by introducing a 26-km bicycle network. To the extent that this is indeed the case. b To a certain extent. Manila. promote pedestrian and other soft modes uses). MFF43 is consistent with the road map the government had identified as midterm interventions for (i) the urban road network (creation of missing links. b ADB. Source: Independent Evaluation Department. Manila. and (iv) non-motorized transport (develop urban projects. In line with this road map. such as (i) removal of the bicycle lanes component in Kutaisi to allow for better coordination with ongoing water supply work. as provided in available MFF documents. the strategies and road maps allow any type of project to be included in the MFF investment program. and ADB. Additional components are also being requested for inclusion by the government. Sustainable Transport Operational Plan. GEO = Georgia. but that such information is not included in the readily available MFF documents. Manila. PAK = Pakistan.” This allows for scope modifications but does not suggest a committed road map. 2009. for reasons of changes in the priorities of the government. they also help divert heavy traffic from the new-to-develop tourist centers. and (ii) whether or not the river embankment development is to include a tunnel. renovation of the rolling stock). Box 3a and Appendix 8 show some MFFs where the stated requirement for good-quality strategy and road map is met.

social equity. 11 and para. financial. 44 As originally proposed. better governance. The Board Paper states that if no such policy framework is available or if it is considered unsatisfactory. 43 44 45 46 A policy framework needs to spell out (i) the strategic vision for a sector (the road map). NPIs include capacity development support to DMC governments and clients that relates to (i) project preparation. the policy dialogue pertains to the fine-tuning of regulations. Refer to para. Refer to para. 46 The first tranche of the MFF should therefore include NPIs that help the DMC governments. and indicates that within the MFF. (ii) the principles of change (such as cost recovery. and reporting. and institutional matters). legal. agencies reflects the inadequacies of due diligence on institutional capacities. sustainability. the MFF modality is projected to provide multiple 73. Such information should form the basis for reform actions over the short. sustainability. and institutional matters. commercial. economic. 62 of Board Paper (footnote 6). regulatory. and long terms. system expansion and investment planning. and implementing agencies in implementing strategies and road maps. commercial. This is evident from Table 7. which can be the nonphysical investment (NPI) component of the MFF scope. transparency etc. governance risks corrected. institutional.). A policy framework focuses on the main challenges and operating conditions in the relevant sector to ensure efficiency. operational. safeguards. However. 74. and policy implementation enablers such as improved financial management. guidelines. Boxes 4a and 4b provide examples of policy frameworks and NPIs on the basis of information given in readily available MFF documentation (further details are in Appendix 9). (ii) program and/or project management. Such policy dialogue then effectively focuses largely on capacity development.26 Real-Time Evaluation Study of Multitranche Financing Facility 2. medium. and (iv) monitoring and evaluation. 9 of Board Paper (footnote 6). executing agencies. regulatory. efficient resource utilization. competition. cost recovery. and governancerelated matters. improved technical expertise and other aspects. which provides an overview of due diligence work carried out during the project preparation stage. enterprise-wide resource planning. . Policy Dialogue and Capacity Development 72. some other financing modality should be used.43 It should cover more than technical and operational matters and address financial. The policy dialogue should remain within the confines of a policy framework. opportunities for policy dialogue through the term of the MFF investment program. Refer to para. economic. and the link between due diligence findings and the scope and budgets for the NPI component. including procurement and financial management capacity development where necessary. results management. (iii) policy analysis. and (iii) the targeted changes and levels (regarding technical. available MFF documentation does not normally provide adequate information on the rigor of due diligence performed. 39 of Board Paper (footnote 6). and initial due diligence gaps can be corrected through regular reviews. Initial gaps in institutional capacity due diligence can be corrected through regular reviews As per the Board Paper.”45 This effectively limits the scope of an intensified policy dialogue. and facilitate their monitoring. legal. policy formulation. wherein “policies can be refined. standards. and safeguard frameworks adjusted to take into account specific issues. the selection of poor executing and implementing 75. and competition.

there are instances when only the first tranche of an MFF in a particular country and sector included a capacity development component. and is normally expected to close much before the end of the MFF utilization period. gender. However. groundwater management as well as institutional strengthening and modernization. where. and (ii) for MFF71. financial. governance. the first tranche of MFF71. Pakistan). economic. included capacity development assistance pertaining to issues related to road maintenance and road safety. poverty. project-level due diligence only (on technical. where the capacity development component in tranche 1 included an on-farm water management system. economic. 49 This may be due to the flexibility of the MFF. 47 that. project-level due diligence only (on technical. In such MFFs. 68 and 85 of the Board Paper (footnote 6). financial. PAK = Pakistan. A 76. and local) and the project level to identify gaps. Report and Recommendation of the President to the . MFF = multitranche financing facility. financial.The Working of the Modality Table 7: Institutional Capacity Assessment Considered or Planned during Project Preparation Stage MFF Specifics PAK: MFF16 PAK: MFF21 Scope of Upfront Institutional Capacity Assessmenta and Other Comments Further development of executing agency’s capacity related to project management. and social safeguards aspects plus legal aspects related to private sector participation) Project level due diligence confined to environmental and resettlement-related aspects No due diligence of institutional capacities. when a 47 48 Refer to paras.. Report and Recommendation of the President to the Board of Directors. 48 Yet. and then a second MFF approved several years later included a similar capacity development component in its first tranche. ADB. IND = India. and social safeguards aspects) No due diligence of institutional capacities. a As stated in the MFF concept papers. project-level due diligence only (on technical. India). 2007. in addition to various support offered to the various executing and implementing agencies. approved in 2007. an NPI component is financed largely through the first tranche. provincial. MFF07 and MFF21). economic.g. governance. plus tranches 2 and 3 provide further support for capacity development. and implementation Evaluate capacity at all levels of government (federal. Manila. and indigenous people-related aspects) 27 VIE: MFF52 VIE: MFF53 ARM: MFF56 IND: MFF60 VIE: MFF66 In most MFFs. a NPI component is financed largely through the first tranche Where institutional commitment is weak there is a risk that inadequate attention will be paid to capacity development ARM = Armenia. included these two same capacity development components (among others). further support to enhance computerization of some of the implementing agencies was extended through tranche 6. project-level due diligence only (on technical. However. poverty. approved in 2012. 45 (iii). the first tranche also incorporates funding from ordinary capital resources to support the physical component of the investment program. where it adequately covers the nonphysical component in tranche 1 alone. financial. and (ii) MFF11 (Madhya Pradesh Power Sector Investment Program. there are few MFFs where capacity development is included in the SSTs. 2012. poverty. recommendation made in the Board Paper. A case in point is the two transport sector MFFs in Azerbaijain. In most MFFs. Source: Independent Evaluation Department. 39. VIE = Viet Nam. with the same executing agency. Refer to (i) for MFF14. which will form a basis for proposals to mitigate the gaps No due diligence of institutional capacities. economic. Possible exceptions are MFFs wherein the first tranche incorporates funding partly from the Asian Development Fund and continues until the end of the MFF utilization period (e. Two subsequent tranches approved under this MFF in 2008 and 2012 did not include any capacity development. 50 This implies that. 49 Two such examples are: (i) MFF09 (Punjab Irrigated Agriculture Investment Program. and social safeguards aspects) No due diligence of institutional capacities. Proposed MFF: Road Network Development Program. where necessary. 50 The first tranche of a transport sector MFF in Azerbaijan (MFF14). ADB. governance. poverty. where the second MFF (MFF71) includes some capacity development components that are same as in the first MFF (MFF14). capacity development can also be incorporated into SSTs is seldom followed. governance. monitoring.

the Government of Electricity Act (2003) and other policies implementing agencies have displayed a policy framework. as spelled out in the respective RRPs. and renewable energy development. Manila (approved by the Board on 4 October). Parallel TA operations were also provided to improve the capacity of the power entities of (i) Assam to enhance capacity in the areas of corporate management. or where institutional commitment to a good policy framework is weak. is in line with the specific requirements of the clients. . An accompanying advisory TA grant of $600. IND: Madhya Pradesh Energy Efficiency Improvement Investment Program (MFF57). at least in Madhya Pradesh.000 is helping to deepen staff capacity along lines that were already part of the roadmap for the PRC railway system. Policy Dialogue. and NPI Components of Selected MFFs IND: Uttaranchal Power Sector Investment Program (MFF03). human resource management. other available MFF documents such as periodic financing request reports (PFRRs) and back-to-office reports (BTORs) provide little update. or the policy framework is weak. the slow progress in reducing transmission and distribution losses and the continued financial deficit point to the need for further technical assistance support. Although the respective RRPs provide good information on the type of capacity development support required and intended as part of NPIs for the various MFFs. Perhaps a key area of least in some states. (ii) Himachal Pradesh to update the regulatory framework and upgrade skills to implement a multiyear tariff regime. Board of Directors. as well as safety. For state-level agencies in Assam. Both these are important considerations for ADB. Proposed MFF: Second Road Network Development Investment Program: Azerbaijan. including in some cases (such as the unbundled transmission and distribution entities in Madhya Pradesh) to enable commencement of commercially independent operations. there is a risk that ADB will pay inadequate attention to a constructive and useful policy dialogue and capacity development during some years of the MFF utilization period. India set the policy framework through the Indian and regulations. PRC: Railway Energy Efficiency and Safety Enhancement Investment Program (MFF40) The MFF is structured to facilitate shopping for equipment to improve the energy efficiency of PRC railways. financial management. and the concerned executing and high level of commitment on many aspects of this poor commitment relates to tariff rationalization at The capacity development support. IND: Himachal Pradesh Clean Energy Development Investment Program (MFF23). IND: Madhya Pradesh Power Sector Investment Program (MFF11). IND: National Power Grid Development Investment Program (MFF19). IND: Assam Power Sector Enhancement Investment Program (MFF38). and (iii) Uttarakhand to improve project readiness. the capacity development component is designed to improve the commercial orientation of the concerned entities. The MFF will be implemented mostly in the relatively poor southwestern regions of the PRC.28 Real-Time Evaluation Study of Multitranche Financing Facility second MFF is not approved. distribution franchising. Madhya Pradesh. Himachal Pradesh. Box 4a: Overview of Selected Examples of Good Policy Framework. Nevertheless. IND: Himachal Pradesh Clean Energy Transmission Investment Program (MFF62) In all these 7 MFFs. The MFF investment program fits the strategic context. and Uttarakhand.

IND: Roads Sector II Investment Program (MFF01) The MFF supported the government’s program for poverty reduction through enhancing the propoor National Rural Roads Program. In coordination with funding agencies (ADB. IND = India. which aimed to connect all villages with populations of about 500 with good all-weather roads by 2007.The Working of the Modality 29 IND: Railway Sector Investment Program (MFF60) The MFF investment program is embedded in the Railway Vision 2020. PRC = People’s Republic of China. ADB = Asian Development Bank. Japan). IND: North Eastern State Roads Investment Program (MFF58) This is aligned to the Special Accelerated Road Development Program for India’s northeastern region. the entire allocated amount has not been utilized for this purpose. 77. TA = technical assistance. A separate advisory TA supports the preparation for and registration with the Clean Development Mechanism Executive Board. A capacity development component of the NPI included implementation assistance to concerned state agencies for properly addressing policy issues such as procurement. . Source: Independent Evaluation Department. to be supported by enhancing railway capacity on over-saturated critical routes. and (ii) implement road asset management and road safety systems. That emphasis on policy dialogue and advisory support has declined since the early 2000s is evident from the decline in the availability of overall TA resources as well as advisory TA resources as a percentage of total loan and grant approvals. The MFF eventually covered five states. which emphasizes environmental sustainability. The NPI component is to be implemented through two advisory TA operations to (i) strengthen state-level organizations in road management by introducing of modern road management practices and establishing road maintenance funds. World Bank. road safety and sustainability. safeguards. MFF = multitranche financing facility. for sale of certified emission reductions. the government developed a comprehensive policy matrix to facilitate program implementation. ADB is supporting the introduction and implementation of a new accounting system for efficient management practices. In supporting the institutional strengthening action plan. and supports the construction of high-quality roads in the northeast. NPI = nonphysical investment. Although the total allocations were small.

Only 0. as of March 2012. for instance. From the perspective of policy dialogue and capacity development at least. PAK: Renewable Energy Sector Development Investment Program (MFF05) Although a policy framework and government commitment exist. As per the RRP. and investment in new capacity. . In this case. However. creates an impression that skill levels are low. That a large number of international consultants were to be appointed to train the utility staff on planning and project management. AFG: Energy Sector Development Investment Program (MFF26) The energy policy framework is more of a statement of intent of a four-pronged approach that covers greater supply-side and end-use efficiencies. which focuses on enabling the concerned state government department to sustain the investment by strengthening staff capacities. and organization for development of policies. TA = technical assistance. The Government of Pakistan also requested ADB to provide TA to support the executing agency for work on policy formulation. capacity development at the federal level had not progressed. PAK = Pakistan. better planning. and institutions need to be developed and strengthened. However. although the existing policy framework and capacity development related MFF design aspects do appear to justify the MFF modality. and capacity development in one of the provinces was expected to be cancelled. these areas are not covered in the NPIs under the MFF. AFG = Afghanistan. etc. it appears that enabling regulations. emissions control. subsequent progress (or lack thereof) indicates the need for a better understanding of the priorities of the concerned federal and provincial stakeholders. ADB = Asian Development Bank. improved metering and billing. there is no indication that consultants to enable the utility staff to improve their distribution system planning skills have been engaged. and logistics. the state-level policy dialogue relates to enforcement of traffic laws. this is mostly in the first tranche—although the PFR for tranche 2 indicates a continuation of the advisory component. This statement does not qualify as a viable energy policy framework. it is difficult to justify the MFF modality. IND = India. introduction of management information systems. Available information on NPIs also suggests that actual progress in capacity development remains short of initial plans.3% of the total MFF financing envelope is allocated for NPIs. MFF = multitranche financing facility. Source: Independent Evaluation Department. improved sector governance. and program management. This situation indicates a lot of scope for long-term engagement of ADB. guidelines. improved modal integration. NPI = nonphysical investment. electrification of rural areas. where the official road development plan lists mainly the planned physical investments.30 Real-Time Evaluation Study of Multitranche Financing Facility Box 4b: Overview of Selected Examples of Weak Policy Framework and/or Policy Dialogue IND: Uttaranchal State Road Investment Program (MFF10) This MFF focuses on state roads in one state (Uttaranchal). as well as the need for capacity development.

the causality between a fall in the energy sector program loan volumes and the rise in penetration of MFFs is difficult to decipher. a Over a longer time horizon from 2000 to 2011. 2012. The use of preparatory TA resources also appears to be declining although the decline is not so pronounced. MFF = multitranche financing facility. as a percentage of all loan and grant assistance for physical investments. this increase reflects inclusion of support for sector-wide planning as well as coal utilization strategy. Asian Development Bank Annual Report 2011. even though overall TA resources (for project preparatory work plus advisory. finance. It appears therefore that the originally envisaged opportunities for policy dialogue have not been realized. However. education.70 million per year during 2006–2011. NPI = nonphysical investment. Regarding program loans in sectors where MFF investment programs have penetrated most (energy and transport). 31 Box 5: Program Lending and Advisory Technical Assistance Support (the examples of energy and transport sectors in India and Pakistan) During the 1990s and up to 2003. Since the MFF modality began to be piloted. it is reasonable to expect that the sum of NPI allocations for MFFs and TA resources for capacity development should increase. TA = technical assistance. industry and trade. It is noted that (i) ADB supported power sector reform and restructuring through program loans from the mid-1990s to the early2000s. 2–5 May (45th Annual Meeting). trends can be discerned only in India and Pakistan (Box 5 and Appendix 10). etc. available data show that total TA grants from the TA Special Fund and other Special Funds resources appear to be declining since the MFF modality was mainstreamed. Given the recent emphasis on improving project readiness. back-to-office reports or other documents) also do not show policy dialogue and capacity development support (beyond program management and perhaps monitoring and loan and grant evaluation) in the respective NPI components. there have been no program loan approvals for these sectors in the two countries. a marginal reduction in the annual average approvals for support to India’s and Pakistan’s road transport sectors. (ii) a reduction in the average annual approvals for support to India’s power sector by 10% after 2005—from $0. a Total TA grants disbursements declined from $189 million in 2008 to $148 million in 2011 (with a peak of $202 million in 2009).The Working of the Modality 78.77 million per year during 1990–2005 to $0. . capacity development. program loans were being extended more for agriculture and natural resources management.65 million per year during 2006–2011. and social protection. and (iv) excluding support for ports and rail sectors. Manila. periodic financing request reports. total TA resources show a declining trend.) appear to show an increasing trend.3 billion to support India’s and Pakistan’s energy and transport sectors. public sector management. Refer to ADB. (iii) a more than 10% increase in the approval for support to Pakistan’s energy sector from $0. The following observations on advisory TA in the energy and transport sectors in India and Pakistan are noteworthy: (i) no further approvals for support to India’s oil and gas industry after 1997.57 million per year during 1990–2005 to $0. while policy support that was provided earlier has been discontinued in sectors where MFFs have penetrated the most. Source: Independent Evaluation Department. By the time the MFF modality began to be piloted. ADB approved program loans for about $1. and (ii) ADB support through program loans in transport and other infrastructure sectors was relatively less both prior to and after the introduction of the MFF modality. 79. Available MFF documents (whether periodic financing requests. public health. which was last approved in 2002.

To the extent that the financing plan includes counterpart funds from the client or other DMC sources. Yet the implicit assumption while approving any MFF investment program is that institutional capacities are strong and contribute to a stable policy environment. a financing plan for the entire MFF does not carry much significance. In that sense. Other Prerequisites Investment program and financing plans. KAZ: Central Asian Regional Economic Cooperation Corridor-2 (Mangystau Oblast Sections). road map.51 (ii) combining project management with project preparation and construction supervision. 52 and (iii) including construction supervision in capacity development. is presented differently. as outlined in the FFA. Appendix 9 provides a broad overview of the available databases and information that can be used as a basis for 51 52 53 54 UZB: Second Central Asian Regional Economic Cooperation Corridor-2 Road Investment Program. A financing plan for the entire MFF and the first tranche is derived from the investment program (or investment plan) and presented in the RRP. Prerequisites as Decision-making Filters Consistency in presenting financing plans needs to improve In most DMCs. The 81. and other indicators of government commitment. for instance (i) combining project management and other capacity development activities. and governance aspects could possibly provide useful inputs for screening the use of the MFF modality. undertakings can be assessed in terms of the quality of strategic context. it indicates commitment from the client side. as in MFF14. policy framework. or investment plan (for single large projects) as presented in the FFA and RRP. Even if ADB provides support to define strategies and road maps. is the very basis on which the MFF modality enables ADB to support a client. as in MFF47. Suitable databases that provide information on policy. overseeing them. capacity constraints exist in most sectors and in the institutions 83.32 Real-Time Evaluation Study of Multitranche Financing Facility 3.53 As a result. Undertakings are normally stated in the FFA and can be 82.54 Therefore. the extent to which DMC governments and clients can prepare sector strategies and road maps of the requisite quality is uncertain. Under such circumstances. In many RRPs. or the undertakings considered firm. . useful to reconsider the importance to be given to such an underlying assumption in justifying the choice of the MFF modality. The investment program includes physical and nonphysical components. rather than in project cost. 4. etc. the financing plan makes a distinction between the investment component and capacity development support. Refer to para 68 of Board Paper (footnote 6). AZE: Road Network Development Program. An agreed-upon investment program 80. Undertakings. A case in point is the combination of different types of NPIs. Given the proliferation of MFFs across many countries and sectors. client-side ownership and buy-in are difficult to sustain. Consistency in presenting the financing plans needs to improve. is in doubt. institutional performance. as subsequent tranches are often not defined in the MFF. however. policy framework. as in MFF58. it would be 84. capacity development objectives. financing plan. it is difficult to identify the volume of advisory assistance supported by ADB—albeit through a loan—without havings access to the terms of reference for various consultant contract awards. the extent to which the investment program and financing plan can be considered sacrosanct. However. considered a commitment to the agreed-upon road map.

fiduciary. governance. this guidance was introduced to enhance project ownership by the client and to steer the use of scarce TA funds towards strengthening institutions. for which funding is increasingly an issue. safeguards. and other issues. which go beyond the legal provisions in the respective DMCs and are not known to new executing agencies or officials who have not been exposed to these guidelines before. as per available RRPs. be it project preparatory or advisory (MFF12. 55 86. While in the case of PPTA. there are many instances wherein TA or some other concessional assistance from ADB has supported the preparation of SST projects. Illustrative examples are in Table 8. and MFF64). Manila. MFF22. Thus far. Nonetheless. the interface between the consultant and ADB is routed through the client. safeguards. Multitranche Financing Facility. ADB finds it difficult to deal with and interface on a day-to-day basis with consultants engaged by clients. projects/subprojects. for resettlement and compensation-related matters. several MFFs approved after October 2006 financed SST project preparation from sources other than the first tranche loan (or grant). MFF58. while MFFs that relied on a financial intermediary to finance the ultimate subprojects effectively deployed the internal resources of the sub-borrowers. In some cases. For instance (i) the prefeasibility report for the tranche2 hydropower project in Gansu Province in the PRC (MFF08) was prepared under advisory TA. However. In a few MFFs. ADB employs a consultant and the consultant 88. and that financing for preparation of SSTs should be incorporated in earlier tranches. ADB Support for Project Preparation ADB has supported its clients in preparing the first tranche investment 85. This guidance also reflected the fact that the MFF includes a NPI component which can support (among other) design work. Although some executing agencies may not need to be supported on financial or even technical aspects of feasibility studies. unless “exceptional circumstances” prevail. ADB does not consider project preparation to be complete. 56 Presumably. governance. as well as a review consultant to conduct due diligence on the reports of the monitoring consultant. while in some cases. which helps reduce the use of project preparatory TAs. . 2011. However. and (ii) SSTs of five MFFs in India were supported through some TA.The Working of the Modality deciding on the choice of the MFF modality. The actual design of such decision-making or screening criteria is beyond the scope of this evaluation. Such support often relates to the use of and compliance with ADB guidelines. ADB documentation requirements can call for the engagement of a consultant to monitor implementation. and other issues 55 56 For instance. gender. MFF62. 33 C. the preparation of SST projects was financed from the implementing agency’s internal resources. tranche loans have been used to support SST 87. ADB. gender. The internal Staff Instructions (2011) then reaffirmed that PPTA funds should not be used for preparation of investment projects for SSTs. A PPTA is supposed to support only first tranche projects. ADB experience is varied. fiduciary. and the cost of preparing SST projects is required to be financed from loans (or grants) of previous tranches. Without proper and necessary documentation that covers all these aspects. safeguards action plan execution and advanced procurement. many require support on economic. ADB positions itself to be the intermediary for communications between the consultant and the counterparties. normally through a PPTA. Staff Instructions. reports to ADB on any emerging concerns. Many executing agencies require support on economic. project preparation in about 40 of the 66 MFFs (see Appendix 11).

with inputs from the consultant. and the consultant experienced considerable friction with the client. which focuses on setting up hydropower projects in hilly terrain in India. although the client was supposed to prepare the project and PFR for tranche 2. In the case of the Ho Chi Minh City Mass Rapid Transit Line 2 Investment Program in Viet Nam (MFF52). The second tranche project was mentioned in the RRP. ADB = Asian Development Bank. but seldom interfaces directly with the consultant. MFF = multitranche financing facility. the ADB team found it more expedient to have this done under its own supervision. In the Georgia case. The consultant. however.34 Real-Time Evaluation Study of Multitranche Financing Facility Table 8: Client-Consultant-ADB Interfaces during Second and Subsequent Tranche Project Preparation Interface between ADB. EA = executing agency.and Consultant The consultant deals directly with the client. and leaves the initiative to the ADB team. high investment cost. and ADB) were dissatisfied with the tranche 3 arrangement. the first tranche. wherein the client had engaged the consultant. Such difficulties can become amplified for MFFs with projects classified as social and/or environmental Category A. This is one of the reasons that in MFF23. In the Road Corridor Investment Program (MFF34) in Georgia. Client . has been cancelled. which included a bypass around a second city. 89. The client engages a consultant and pays for the consulting services. Source: Independent Evaluation Department. RRP = report and recommendation of the President. the consultant. the second tranche. but its cancellation was classified as a minor change in scope. SST = second and subsequent tranche. suffered cost overruns after realignment to minimize environmental impact. PPTA = project preparatory technical assistance. The acceptance of four-laning upfront in Armenia and the cost overrun scenario in Georgia eventually mean a reduction of the originally intended physical scope of the MFF. and the resulting poor economic viability. PFR = periodic financing request. ADB is not directly involved in the study process in the manner that it would be if the consultant were appointed by ADB through a PPTA. and ADB supports the client Illustrative Experience In the case of the North-South Road Corridor Investment Program (MFF35) in Armenia. and thus not needing to be reported to the Board. Should ADB not be able to interface sufficiently closely with the project preparation consultants for SST projects. it can encounter some difficulties in dealing with environmental and social safeguards-related issues. In this particular case the RRP only mentions “upgrading” of the corridor for the subsequent tranches. The client has no objection to this arrangement. recommended a phased construction on account of low traffic volume. The client lets ADB take the lead in interfacing with the consultants. ADB preferred to engage the consultant for tranche 4 after all parties (the client. The ADB team therefore tended to generally support the client’s wishes. which included a bypass around one city. the government preferred the whole road corridor to be four lanes. .

2010. it would appear that the time lags between subsequent steps necessary to begin and complete project construction should have declined since 2010. 2011. far. Good Project Implementation Practice. as well as retroactive financing. take into account the specific circumstances of the country. In this case. the inadequate commitment of distribution utility and government personnel to incur costs upfront on distributing CFLs and insufficient awareness levels on the benefits of CFLs have contributed to execution delays. and 7 more months were required for first contract award following 57 58 As quoted in ADB. This is also true for stand-alone projects (Figure 7b). (ii) availability of all environmental and social safeguards-related documentation.The Working of the Modality 35 D. Given the emphasis on improved project readiness at approval since 2010. Report of the Project Implementation Working Group . without delay. Manila. Development Effectiveness Review 2010 Report. Available data (Figure 7a) shows that. which 91. 57 and (ii) this prompted Management to begin adopting good project implementation practices. including in some cases a contract ready for award subject to PFR approval. Among the key initiatives was one to ascertain total project readiness at approval so as to reduce execution start-up delays and completion delays. in addition to procurement related issues. Box 6 provides a few examples of delays experienced with MFF tranches thus 92. Essentially however. . it is noteworthy that (i) ADB recognized the low success rate of its completed operations and the need to manage the growing portfolio effectively. Although not specific to the MFF modality. IND: Uttaranchal Power Sector Investment Program (MFF03) There was a 9 month time lag between dates of Board approval of MFF03 and first tranche loan approval. 58 This is also likely to improve the performance of stand-alone projects and MFFs alike. and different project approving decision-making practices in the country. With these filters in place and by allowing advanced procurement action 12–18 months prior to project approval. this observation may not be considered conclusive. for activities that are by-and-large under the control of DMC governments and clients. Manila. ADB. the project readiness filters at MFF approval by the Board are similar across all departments and include (i) availability of detailed design (or preliminary design in the case of a designbuild contract). The time lag between subsequent steps for each MFF approved after 2010 tends to have declined Box 6: Illustrative Examples of Delays in Approval to Effectivity PAK: Energy Efficiency Investment Program (MFF31) The 11 month time lag between the first tranche loan approval of MFF31 in Pakistan and loan effectivity follows from the difficulties encountered in setting up a PMO and achieving other loan effectiveness conditions. with a small number of data points after 31 December 2010. However. the time lag for MFF tranches approved before and after 31 December 2010 tends to have declined. The regional departments set up country-specific project readiness filters. and (iv) secured counterpart funding to cover MFF projects over a reasonable time period. such as time taken to reach loan effectiveness after loan approval. Note: This is an internal ADB document. Project Readiness 90. ADB Management expects project implementation to start immediately upon approval. (iii) availability of procurement documents.

The situation has improved since then. Figure 7a: Frequency Distribution of Time Lag between Tranche Approval and Effectivity Percentage of Number of Tranches Approved 50% 40% 30% 20% 10% 0% ≤ 100 101-200 201-300 >300 Number of Days Tranches Approved from 1 January 2011 or later . TA = technical assistance. CFL = compact fluorescent light. EIB = European Investment Bank. ADB = Asian Development Bank. EIB and KfW). Each has different rules and regulations for procurement and evaluation process. . MFF = multitranche financing facility. KfW = Kreditanstalt für Wiederaufbau Bank. Source: Independent Evaluation Department. the first contract was awarded nearly two months prior to loan effectiveness date for the second tranche. 39% 24% 41% 42% 21% 14% 12% 8% Tranches Approved up to 31 December 2010 Source: Independent Evaluation Department. VIE = Viet Nam. IND = India. VIE: Greater Mekong Subregion Ben Luc-Long Thanh Expressway Project (MFF 53) The 12 month time lag between approval and effectivity can be attributed largely to the fact that there three cofinanciers (ADB. with capacity building support provided through a parallel TA. Figure 7b: Frequency Distribution of Time Lag between Approval and Effectivity (Stand-alone Projects) 50% 40% 30% 30% 20% 10% 0% 13% 31% 24% 14% 11% Percentage of Number of Tranches Approved 41% 34% <101 <201 <301 Since 1 January 2011 >300 Number of Days Until 31 Dec 2010 Source: Independent Evaluation Department. PAK = Pakistan. and there was only a onemonth time lag between loan effectiveness and date of first contract award for the third tranche.36 Real-Time Evaluation Study of Multitranche Financing Facility effectiveness of the first tranche loan.

02. Manila. Project Administration Instructions No. Besides. it is unlikely that all projects for all tranches will be identified and known upfront in all MFFs. E. the time span between approvals of successive tranches will increase. the flexibility offered by the MFF modality reflected in 95. the relevant PAI’s did not explicitly mention the MFF modality. The PAI of January 2011. more MFFs indicate at least a range for the number of tranches in the RRP. IEI document (footnote 4). Project Administration Instructions No. part. unless DMC governments and clients adopt measures to accelerate the achievement of project readiness by appropriate institutional capacity development measures. Manila. 2008.approved project financing. a lack of clarity in the relevant project administration instruction until 2011. Change in Scope of Loan and/or Grant Funded Projects.The Working of the Modality 37 In general. (ii) financial approvals as and when projects are ready and PFRs are submitted. Manila . however. therefore. It is likely. the RRPs of 7 (35%) did not provide the number of tranches or indicated only a range. Change of Loan and/or Grant Funded Projects. 62 ADB. For this reason. Besides. about 30% of all approved MFFs do not even indicate upfront the number of tranches. 63 Refer to: (i) ADB. given the long utilization periods. Such lack of clarity is among the reasons that (i) project feasibility studies or costing of preliminary designs upfront is such that it later results in a reconfiguration of tranche projects to accommodate substantive cost over-runs. that with increased attention to project readiness and without commensurate efforts to build institutional capacities. Of the first 20 MFFs approved during the pilot period. and (iii) different debt finance structures to be applied in each tranche. 2011. within the ADB. Project Administration Instructions. As envisioned in the IEI document. introduced the idea that a major change is a change in the project outcome and target values of outcome indicators. 34–43 and Appendix 4. which was retracted within less than a year. 64 clearly stated that 59 60 The flexibility offered by MFF has reflected in part. the need to have high-quality road maps upfront that inspire a high level of confidence may also have diminished. 63 This lack of clarity continued in spite of the fact that the relevant OM section issued in mid-2008 at the time of MFF mainstreaming. the MFF utilization periods can get exhausted without accomplishing the full intended scope of the MFF. Of the next 46 MFFs approved until the end of 2011.04. 61 The required clarity came about through PAI 5. Operations Manual: Bank Policies and Operational Procedures (Section D14). conflict situations. 2011. 2008.02 as revised in December 2011. project readiness is expected to reduce the time lag between loan 93. Emergency situations may arise from natural disasters. The PAI of June 2008 defined a project change as being major in terms of the extent of change in the fundamental nature of the project and/or its cost implications.62 96. those that can be approved by ADB Management. Change in Project Scope or Implementation Arrangements. 61 It is acknowledged that the need for flexibility can also arise due to the occurrence of emergency situations. Flexibility Aspects 94. and (ii) ADB. or other unforeseen events that cause turmoil. overall. approval and effectivity. the MFF modality provides financial and operational flexibility to clients and ADB. Therefore. and projects are expected to get implemented with smaller delays. even if the precise number is not known. Until December 2011. 64 ADB. 59 It allows (i) sound balance sheet management on the client side. 13 (28%) did not provide this information. . and (ii) DMC governments and clients review agreed-upon scopes even for approved tranches. 5. to be coupled with long-term and programmatic investments. Some improvement is noted since mainstreaming in mid-2008. 5. a lack of clarity in the relevant project administration instruction (PAI) until 2011 regarding the types of scope changes that require approval from the Board vs. regarding the types of scope changes Refer to paras.60 In practice. Manila.

As for stand-alone projects. Change of Loan and/or Grant Funded Project. Only 6 of 46 tranche project changes affected in 2011 or before were classified as major. concerned Director General (who may in turn delegate in writing the approval authority to an authorized director). for practical purposes. urban. including project performance monitoring and evaluation. Therefore. Table 9 describes some tranche project changes. (iv) implementation arrangements. implementation period.38 Real-Time Evaluation Study of Multitranche Financing Facility changes that require Board consideration would include (i) a substantial and material change in the strategic direction of the road map. the flexibility offered by the MFF modality had been related to the fact that if a change is considered a minor change. 1. unless they fundamentally affect the scope and project outcome—in which case they constitute a “major” change. the authority to approve “major” changes. It appears from Table 9 that at least until December 2011. Since December 2011 it has become clear that change to a tranche is considered “minor” if it is limited to change in (i) project cost estimates. limited response by regional departments to data requests. Tranche project scope change description and classification information was available only for four of the 37 tranche scope changes approved upto 3rd quarter 2012. which refers to changes among the existing categories of project cost and finance tables. and late uploading of scope change memoranda in e-STAR. which means changes in the mix of currency and sources of finance. Appendix 12 shows that most changes that have been made in tranche projects across agriculture. and other sectors to date have been categorized as “minor. “Minor” changes to individual projects under an MFF are approved by the 98.” Supplementary Appendix C includes a description of tranche project changes to the extent IED could obtain such information. 66 Whether or not the PAI of December 2011 has made any significant difference in this trend of categorization is not evident from the small number of scope changes for which IED has data. (ii) a change in the policy framework that negatively affects the viability or sustainability of the investment program or investment plan. 5. any change at the tranche level does not require approval from the Board. and disbursement arrangements. Manila. Project Administration Instructions (PAI) No. Data available with IED show that about 85% of the tranche project changes approved in or before December 2011 had been classified as minor. including changes in executing and/or implementing agencies. effected in various MFF tranche projects. and (iv) a substantial and material change in the type of investments contemplated under the investment program or investment plan.65 Any one or a combination of these changes results in a “minor” tranche project change. 66 67 . Project Changes What constitutes a minor change has been clarified in December 2011 Tranche project changes. The Board has delegated to the President. 67 About 85% of the tranche project changes approved in or before December 2011 had been classified as minor 65 ADB. energy transport. consulting services. the late approval of many scope changes over 2012. due to such factors as the study’s data collection during mid year. (iii) project outputs or performance targets. 2011.02. (ii) financing plan. procurement. it can be approved by the concerned head of department. and/or (v) reporting arrangements. (iii) a change in the sectors covered by the investment program. changes have also been 97.

(ii) an undetermined postponement of the Batumi-bypass and withdrawal of government support for border facilities effectively cancelled tranche 2. IND = India. . As per the MFF policy. 99. Categorization of Project Change Minor Comments Is the hydrological information system not expected to contribute significantly to either hydropower system operations or planning and design of future hydropower expansion 39 Tranches 1. Therefore (i) a section of the Kobuleti bypass from tranche 1 was deleted. Source: Independent Evaluation Department. hardware and software for transmission planning and operations. the Qila Saifullah-Zhob road section was to be widened and improved in tranche 1. after detailed design and realignment to minimize environmental impact Tranches 1 and 2 of MFF02 (PAK: National Highway Development Sector Investment Program) Major Reduced civil works in tranche 1 by 26% of approved amount for tranche 1 GEO = Georgia. Originally. Other types of changes constitute “minor” changes. and tranche 2 was to consist of a 14-km bypass around Batumi towards Sarpi at the border with Turkey and improvement of border infrastructure. tranche 1 included a 29km bypass around Kobuleti to be implemented in three contracts. MFF = multitranche financing facility. a After it was realized that the hydrological data collection is in the purview of the central government. 95). major MFF level changes that affect the outcomes of an MFF as originally approved by the Board. PAK = Pakistan. and consulting services in design and construction management. along with other projects. 2.The Working of the Modality Table 9: Tranche Project Changes MFF and Tranche particulars Tranche 1 of MFF03 (IND: Uttaranchal Power Sector Investment Program) Description of Tranche Project Change Originally included the setting up of four new small hydropower plants. and 3 of MFF34 (GEO: Road Corridor Investment Program) Minor More than 100% cost overrun in capital cost of tranche 1 Kobuleti bypass. Scope changes in MFFs. This section was shifted to tranche 2. require Board consideration and Board approval (para. and (iii) the deleted Kobuleti-bypass section from tranche 1 was included in an unscheduled tranche 3. In reality the design of the hydrological monitoring and information system was dropped. and cannot be implemented by a state government agency.a and rehabilitation or one hydropower plant was included. Originally. Cost overruns after detailed design in tranche 1 and tranche 2 went beyond their financial. designing of a hydrological monitoring and information system. and are approved by the President.

given the delays in implementing some tranches of MFF03 in India. hold good through the entire MFF utilization period. The title of this tranche 1 component. particularly the sector road maps. While Mestia was not listed in the main text of the RRP.e. the MFF utilization period was required to be extended beyond its original closing date of January 2013. Operations Manual Changes that Support Flexibility 102. Source: Independent Evaluation Department. referred it as an urban sector or urban transport sector intervention. This will ensure year-round access to Mestia. in assessments that lead up to the road map). any portion of the facility amount can be applied to provide financing of purely price or financing arrangement changes in prior ADB interventions. which means that more time is needed to exhaust the last tranche. and 3 to June 2014 (i. There has been no systematic attempt by ADB to establish whether or not the original MFF prerequisites. 69 The time lag between preparation of the PFR by the executing agency (along with details of candidate subprojects and sub-borrowers) and ADB approval is about 6 months. Box 7 provides an example of an urban sector MFF wherein a part of the investment was diverted to another sector (the transport sector). 2. 78 of footnote 6.a This should have been considered a “major” change in scope of the MFF. 2. . 70 Refer to para.” Box 7: Example of a Change of Sector Covered by an MFF Investment Program The RRP for MFF43 (GEO: Sustainable Urban Transport Investment Program). a The scope covers improvement of a 20 km section of a 188-km road that links Sugidi to Mestia. 69 Such examples suggest that tranche closing dates are being extended beyond the original MFF utilization period. and sometimes without first obtaining approval for extending the MFF utilization period. and extend the last date for PFR submission (for tranche 4) to July 2012. 101. which is a winter resort. Given that DMC governments normally make 5-year plans. but this change was categorized as “minor. a financial intermediation arrangement for facilitating energy-efficiency investments in the PRC. MFF = multitranche financing facility. and (iii) is accompanied by appraisal procedures that are consistent with both the MFF policy and the additional financing policy. while most MFFs extend for 6 years or more. (ii) is for projects that are consistent with the strategic context and road map. which constitutes a “minor” change. and the executing agency has to identify other suitable subprojects.” does not reflect the intended or actual scope of work under the component—which is the improvement of a highway connecting to Mestia. provided that such a requirement (i) has been considered in the MFF preparation stage (i.. Additional financing. beyond the original MFF closing date. Until now. ADB agreed to extend the disbursement closing date by 12 months from December 2012 to December 2013.e. the city appeared as a candidate for upgrading urban roads under tranche 1. As per the MFF policy paper. MFF flexibility is enhanced by the rules that govern additional financing. changes at the MFF level have largely been in terms of extending the MFF utilization period. “Upgrading of Mestia Urban Road Network. as submitted to the Board.. 70 Additional financing may also be processed for an 68 The ADB consultation mission in April 2012 agreed to extend the loan closing dates for tranches 1. GEO = Georgia. and some governments remain in power for an even shorter period. 68 In MFF20. For instance. Some sub-borrowers prefer not to wait that long. it is important to review the government’s sector road map and policy framework at an appropriate time during the MFF utilization period.40 Changes at the MFF level have largely been in terms of extending the MFF utilization period Real-Time Evaluation Study of Multitranche Financing Facility 100.

The appraisal cost estimates were made without finalizing the highway alignment. provided ADB’s share in the aggregate cost of the portfolio of projects in the concerned DMC does not exceed the country cost-sharing ceiling over the CPS period. Cost sharing. OM Section H5/BP and H5/OP. The East-West Highway Improvement Project. 65 of ADB. 2012. so that its scope had to be reduced by the 39 kmlong Ganja-Bypass. Owing to the cost overruns. The four-laning of the Ganja-Qazakh road was listed in the RRP. This was transferred to MFF14 under Tranche 2.075 ($3 million) from Special Funds resources. Operations Manual. 72 73 74 . In addition to other project-related expenditures.The Working of the Modality existing MFF to raise its financing envelope.72 103.4 million to replace the Ganja-Qazakh road. Refer to para. 66 of OM Section H5. The tranche 1 project (the 60-km Masalli to Astara expressway) had substantial cost overruns (from $211 million at appraisal to $373 million at bidding). Additional Financing. Manila. among others. 2011. SDR2. ADB’s share in project cost may exceed the country cost-sharing ceiling for a particular project. taxes and duties 104. the tranche 1 scope was reduced by 40 km. Bank Policies and Operational Procedures. The highway sections deleted from tranche 1 were processed under a new tranche 3. 73 Allocations or expenditures to cover taxes and duties are included for computing ADB’s share in the project cost. a Loans 2205-AZE and 2206-AZE. Cost Sharing and Eligibility of Expenditures for ADB Financing. as possible under tranche 2 under the MFF. East-West Highway Improvement Project. ADB is financing taxes and duties for a transport MFF in Afghanistan. RRP = report and recommendation of the President. also experienced high cost overruns. and leverages the programmatic orientation of the MFF. approved 8 December 2005 in the amount of $49 million OCR. ADB = Asian Development Bank. A grant 71 Refer to para. AZE = Azerbaijan. Manila. 74 This provides additional and convenient flexibility when preparing the MFF investment and financing plans. ADB. 71 and for individual tranches within the MFF. Operations Manual. Box 8 provides illustrative examples. Although the inclusion of additional financing provided by ADB within the MFF modality is consistent with. and limited or nonrecourse financing to subsovereign or nonsovereign public sector entities). are also included as eligible expenditures for ADB financing in MFFs as well as other stand-alone modalities (other than policy-based lending. 41 Although the inclusion of additional financing mechanism is feasible under MFF. it has led to some situations where sufficient attention may not have been given to project design. Source: Independent Evaluation Department. OM Section H3/BP and H3/OP. Box 8: Examples of Cost Overrun Financing through MFF Tranches AZE: Road Network Development Project (MFF14) The RRP presented the construction of a new 60-km expressway from Masalli to Astara at the Iranian border as the main component of tranche 1. it has led to some situations where sufficient attention may not have been given to project design AFG: Road Network Development Investment Program (MFF25) Tranche 1 and Tranche 2 of this MFF address financing gaps in previously ADB supported road projects that would otherwise be stalled or curtailed due to increase in project costs. By way of an example.a a stand-alone project previously supported by ADB. with an allocation of around $56. MFF = multitranche financing facility. and has been welcomed by clients.

Report and Recommendation of the President to the Board of Directors. Islamic Republic of Afghanistan: Transport Network Development Program. .75 75 ADB. Proposed Multitranche Financing Facility. 2011. Manila.42 Real-Time Evaluation Study of Multitranche Financing Facility of $33 million from the Afghanistan Infrastructure Trust Fund covers the business receipts tax (essentially a 2% value-added tax).

as applicable. Such changes have been effected particularly to (i) improve the clarity on the structuring of MFF and MFF prerequisites. Guidance on the MFF Modality 106. and introduce measures for quality assurance OM (2010) OM (2010) Compliance . ADB requires the client to undertake a strategic environmental assessment to identify mitigation measures to be built into MFF design. Many gaps that have been closed since then have also helped to address some Board concerns such as quality assurance and Board supervision. gaps related to the design and functioning of MFF investment programs. Compliance with social dimension and gender and development policies: Social dimensions are to be addressed in the DMF of the MFF and the DMFs of its tranches. The gaps have been closed through issuance of internal staff instructions as well as policies and operational procedures contained in the OM (see Supplementary Appendix D for further details). clarify and provide guidance on the structuring of the MFF and MFF prerequisites. Among the more salient additional documentation requirements are ones that reflect rising concerns about safeguard compliance. (ii) specify documentation requirements at the MFF and/or tranche levels. A. Coupled with this are quality assurance measures that include peer reviews. The provisions that call for additional documentation also in many cases help 107. specify documentation requirements at the MFF and/or tranche levels. and (iii) introduce measures for quality assurance of the MFF investment programs and tranche level investments. and project readiness.CHAPTER 5 Quality Assessment and Review The general guidance provided by the IEI document (footnote 4) had left many 105. but consumes more staff time. Additional documentation also facilitates third-party review and quality assurance. safeguard categorization. Table 10: Guidance on the MFF Modality since It Was Introduced in Mid-2005 SI / OM SI (2006) Area of concern Safeguards Details Where the potential exists for significant cumulative and induced environmental impacts from the entire MFF. The summary poverty reduction and social strategy The general guidance provided by the IEI document had left many gaps related to the design and functioning of MFF investment programs Many gaps have been closed since then which clarify the structuring of MFF prerequisites. risk categorization. Table 10 provides a brief overview of the major changes since the MFF modality was introduced. Where significant sector or regional environmental impacts from the investments under an MFF are anticipated. a sector or regional assessment will be prepared and submitted to the Board together with other MFF documents for Board consideration.

regional departments should complete the “tranche at a glance” template and submit it to SPD for consolidation and further communication to the Board no later than the last day of the month of receipt. economic and social dimensions (as applicable). safeguard issues. corresponding undertakings. and social dimensions. planning and phasing of interventions. evaluating. commercial. due diligence is to cover: MFF prerequisites (road map. Gender mainstreaming project categorization is to be done for each PFR. and financing plan). Risk categorization of the first tranche is to be simultaneously undertaken as part of the concept paper The PFRR submitted to Management is to clearly assign a suitable risk category to the specific tranche. Each tranche is to undergo a separate risk categorization and to be processed accordingly. and management of social risks. investment program or investment plan. procurement. Safeguard categorization is to be made at the level of individual tranches. For each MFF. regulatory. any required policy refinements. SPD is to prepare an ADB-wide consolidated monthly PFRR and submit it to the Board within the first 6 working days of each month. It should set out the broad magnitude of the scope and criteria for carrying out further poverty and social analysis and developing more specific plans or measures in future.44 Real-Time Evaluation Study of Multitranche Financing Facility SI / OM Area of concern Details (SPRSS) is to be prepared before approval of the MFF. Project teams are to check that (i) capacity of executing OM (2008) Safeguard categorization OM (2010) Risk categorization at tranche level OM (2008) Scope of due diligence at MFF level OM (2008) Scope of due diligence at tranche level SI (2011) Board reporting SI (2011) Board reporting SI (2011) Project readiness . The SPRSS is to be updated for SSTs. governance. through the Environment and Safeguards Division. The operations department is to be responsible for proposing the categorization of all tranches and submitting the checklist and categorization results. Project readiness is to be reviewed and discussed in the PFRR. implementation. and other matters. fiduciary oversight. Upon receiving a signed PFR from the Government requesting a new tranche approval. financial. as necessary. and revisions incorporated into the PFR submitted to Management. action plans on given themes. involuntary resettlement. strategic context. capacity. sustainability. policy framework. due diligence is to cover: technical. reporting requirements. and measuring results For individual tranches. safeguards. Regional and Sustainable Development Department to the chief compliance officer for concurrence or further discussion (as required). frameworks addressing environmental. anticorruption aspects. indigenous peoples. legal. and mechanisms for monitoring.

fiduciary oversight. OM = Operations Manual. 109. 76 Expectation from the MFF modality is a quicker processing of a sequence of projects—this may not allow for sufficient time to build on lessons from previous projects 76 Due diligence of tranche projects is performed on the following aspects: technical. The PFR is to confirm that the general understandings under the FFA remain valid. financial. anticorruption. economic. An MFF Panel of Experts is to review the following: the adequacy of the MFF as the choice of modality and compliance with MFF policies. and other matters. For SSTs: A checklist confirming compliance with procedural and content requirements is to be attached to the PFRR submitted to the President requesting tranche approval. some Board members had noted that the modality poses some risks to proper implementation and accountability. MRM = management review meeting. procurement. capacity. For the MFF: A checklist signed by the project team leader. .Quality Assessment and Review SI / OM Area of concern Details and implementing agencies is built upon. At the time of mainstreaming. due diligence. and director general is to be submitted to the President with the department’s request to circulate an RRP for an MFF to the Board. governance. intensive and professional as for stand-alone projects. PFR = periodic financing request. MFF = multitranche financing facility. PFRR = periodic financing request report. FFA = framework financing agreement. (ii) safeguard actions are taken. It should describe the client’s compliance with the undertakings. However. procurement up to the contract award should be sought for SSTs). SI = staff instruction. implementation. Due Diligence and Viability Analysis It is generally desirable that due diligence of MFF tranche projects should be as 108. DMF = design and monitoring framework. commercial. and had requested ADB Management to supervise adherence to. Source: Independent Evaluation Department. One expert would be assigned to review each new MFF proposal and provide comments to project team and management in the regional department in writing prior to concept paper clearance and MRM/SRM stages ADB = Asian Development Bank. social. The IEI team will also provide advice on demand at all stages of the MFF processing cycle during the pilot period. IEI = innovation and efficiency initiative. and quality of. SRM = staff review meeting. safeguards. as well as any representations and warranties included in the FFA. director. SST = second and subsequent tranche. SPD= Strategy and Policy Department. regulatory. 45 SI (2006) Quality assurance SI (2011) Quality assurance SI (2006) Peer review and advice SI (2011) Peer review and quality assurance B. (iii) procurement for packages (including consultancies) planned in the first year of implementation is sufficiently advanced before tranche approval (wherever possible. and (iv) regional departments should consider taking early standalone approvals from Management for advance actions in order to achieve the levels of project readiness required. The IEI team is required to review and comment on MFF proposals before they are submitted to Management and the Board. legal. the declared expectation from the MFF modality is quicker processing of a sequence of projects— which may not allow for sufficient time to build on lessons from previous projects.

processing. The ADB team provides inputs on all aspects of project preparation. whether on the MFF/tranche team or 113. 111. When preparing an MFF tranche. sector COPs comprise mostly staff from the sector specialist stream from operations departments and other relevant specialists from knowledge departments. the ADB team is expected to have discussed the various aspects of tranche projects with the consultants and clients and to be fully informed about the feasibility studies related to tranche projects. are seen relatively infrequently. The sector specialists are normally required to work on strategy and planning. The supplementary appendixes are not circulated but can be provided by the team. it is evident that discussions on technical designs or on technical alternatives that may be more cost effective. noting that limited planning and detailed design work prior to starting construction resulted in increased costs and delays. The extent to which supplementary appendixes are suitably updated or verified for correctness and accuracy is uncertain. The staff were asked to provide a good understanding and assessment of what proper design works on the ground means and what duration it will take. On the basis of a review of a few BTORs that are available to IED. An example comes from advice given to staff on a transport sector MFF.46 Real-Time Evaluation Study of Multitranche Financing Facility 1. The sector community of practice (COP) is the most qualified to perform technical due diligence—although it is not mandated to receive all PFRRs. 78 These are issues of internal control. or implementation. However. Technical Viability and Due Diligence Staff inputs and discussions on technical designs or on technical alternatives that may be more cost effective are seen on an exceptional basis 110. ADB staff review the reports prepared by the project preparation consultants. which determines the extent to which the technical and engineering aspects need to be discussed. on the COP. In general. the new streamlined business processes allow documents to contain minimal and sometimes selective information. the client is normally assisted by a consultant. 112. do not emphasize project design and engineering aspects. and not specific to MFFs per se. are not systematically stored. In addition. upon request. By the time ADB receives a signed PFR with all its required attachments and appendixes for approval. this study is of the view that ADB (along with its consulting engineers) must be in a position to identify major gaps in project design and ascertain project soundness and cost effectiveness. and staff supervision. and concerns for timely submissions of the required documents were also expressed. ADB job descriptions of sector specialists.77 This process is similar to that for a standalone project. take on by providing too much input or advice on technical and engineering matters during project preparation. ADB Management has a genuine concern regarding the liability that ADB may 114. and are often irretrievable makes it difficult to obtain a complete picture. . However. However. 77 78 In one case (MFF34 in Georgia). Details are presented in the supplementary appendixes. project management. the fact that discussions with consultants and clients are often via email. normally during project preparation missions or review missions. technical due diligence normally comes about when the team has prepared and circulated a draft PFRR for inter-departmental comments and feedback. the ADB team had commented on the alignment of a road bypass. knowledge sharing. the BTORs showed that ADB teams provided significant inputs on issues related to ADB’s procurement rules and safeguards. After PFR submission. including technical and engineering.

and to accept projects and subprojects with an EIRR of more than 12%.02 (refer to footnote on this PAI).Quality Assessment and Review 2. The entire SST preparation process is managed by the team leader and other team members. 79 The standard ADB practice is to use the economic internal rate of return (EIRR) criterion. some MFFs reveals that the rigor with which a tranche project is assessed to establish its economic viability may not be commensurate with the size of the projects. projects are defined in the RRP. or with an EIRR in the 10%–12% range if relevant additional but unquantifiable benefits can be identified. and other relevant departments. whether 117.83 Table 11 provides a few examples that suggest that it would be useful for ADB staff to rerun the computer models and do sensitivity analyses as part of the economic due diligence exercise.80 In many cases. 81 gets the opportunity to review the economic analysis only when a draft PFRR is circulated across departments to seek comments.asiandevbank. It appears that ADB staff is readily accepting the results. The Economics and Research Department (ERD). Even where SST 116. Office of the General Counsel (OGC). “major” or “minor. and available tranche project change memoranda indicate that it does not receive these memorandums for comments. Strategy and Policy Department (SPD). to (i) reject projects with EIRR between 10% and 12% if no additional unvalued benefits can be demonstrated. . and (ii) undertaking methodology research. and the model automatically calculates the EIRR.nsf/webview!OpenView& Start=1&. which has the expertise and competence to comment on economic evaluation issues. 82 ERD is not explicitly mentioned in this list. and distilling good practices of economic analysis of projects and programs. To the extent that tranche project changes are to be introduced. Economic Viability and Due Diligence 47 115. In many cases.org/edr0015p. This is a very late stage in the tranche processing cycle. The HDM IV model works like a black-box where the user provides relevant project data. RRPs do not define all tranches up front. or where unvalued costs are expected to be significant. see http://lnadbg1. This ERD competence is in line with its various mandates. Controller’s Department (CTL). A review of the MFF and PFRR documents and discussions with stakeholders of 118.” the authorized director is required to obtain inputs from other departments on a draft memorandum that provides relevant details on the changes. several road sector feasibility studies use the HDM IV model to establish the benefits from new. including substantiating overly optimistic assumptions. Further. RRPs do not define all tranches upfront The rigor with which tranche projects are assessed to establish their economic viability may not be commensurate with the size of the projects 79 80 81 82 83 Economic Analysis of Projects. the draft memorandum defining and detailing the scope change. and the tranche project information remains within the division and department until the PFRR is to be circulated to other departments for comments. These departments are required to provide comments within five working days of receipt of the draft memorandum. is circulated to Central Operations Services Office (COSO). particularly when the EIRR is above the threshold. Against this background. it appears that economic viability analysis and due diligence may not be accorded the importance they are due. reconstructed and rehabilitated highways or roads. Economic viability of all tranche projects is required to be established as per the ADB guidelines for economic analysis. For instance. when it becomes difficult to address discrepancies or problems with the economic analysis. which include (i) advising on the sound application of appraisal methods for lending services. and (ii) reject projects with an EIRR below 10%. As per PAI 5. they are considered indicative and are subject to change.

While the revised traffic estimates are based on new traffic counts. the new Masali-Astara expressway. and (iii) a traffic increase from 3775 vehicles per day (base year 2006) to 7. and a part of the bypass was then to be funded through tranche 3. or when concerned about the overall viability of the project. Policy Paper. However. (ii) 12 fold increase in avoided accidents-related benefits. ADB either provides the necessary expertise or 120. 3. Manila.” ADB has supported capacity development related to safeguards in client organizations or program management units in about 50% of the approved MFF investment programs AZE = Azerbaijan. the $70 million spent in tranche 1 is considered a “sunk cost. Safeguards Compliance and Due Diligence For safeguards due diligence. ADB has supported capacity development related to safeguards in client organizations or program management units in about 50% of the approved MFF investment programs. the estimated increase in other benefits is questionable. This is due largely to the fact that ADB’s own safeguards requirements are more stringent than those followed by its DMCs. EIRR = economic internal rate of return. rather than pushing for a deepening of the analysis. It is noteworthy that passenger time savings account for a large share of the total benefits.254 vehicles per day (base year 2008) in one of the highway sections. sources it externally by engaging consultants. MFF = multitranche financing facility. RRP = report and recommendation of the President. while the EIRR is only a little above the threshold.4 million per kilometer.3%. 119. In some cases. 2009. After detailed design and realignment. MFF34 GEO: Road Corridor Investment Program Tranche 1 originally included the bypass around Kobuleti.48 Real-Time Evaluation Study of Multitranche Financing Facility Table 11: Economic Viability Assessment of Selected MFF Tranche Projects MFF Reference MFF14 Comments on Economic Viability Assessment AZE: Road Network Development Program In the RRP. This reflected increase benefits in terms of (i) about 100% increase in time savings benefits. .6 million per kilometer to $6. the tranche project consultants felt that ADB mission members were more concerned about how the submissions could be accelerated to meet a certain deadline for tranche approval. the consultants also felt they did not get the necessary support from the mission members when having conflicting views with the concerned executing agency regarding technical and design issues. GEO = Georgia. the EIRR for tranche 1 scope. in this recalculation. After additional financing through tranche 3. the recalculated EIRR for the Kobuleti bypass is estimated at 12. the revised EIRR was shown as 12. was 12.9%. Source: Independent Evaluation Department. it suffered cost overruns. In some cases.84 and the concern that nongovernmental organizations that are active in championing the cause of project-affected peoples may detect and publicize any lapses in ADBsupported projects.8%. 84 ADB. Safeguard Policy Statement. After more than doubling the cost from $2. As part of the nonphysical investment component.

and (ii) environmental management plan. and to provide written inputs to the MFF team prior to concept paper clearance and the Management review or staff review stages—although the expert may choose to provide inputs and guidance to the MFF team at any other stage as well.Quality Assessment and Review 121. land acquisition and resettlement framework. Safeguards due diligence is also done thoroughly for all projects. approximately 20 MFFs had been approved from the time the POE was established. indigenous peoples impact assessment. This practice was discontinued when the MFF modality was mainstreamed in mid-2008. the 125. ADB provided inputs and comments on the quality of the initial environmental examination. a peer review process was established. Safeguards related documents are prepared for all projects. are available on ADB’s external website.88 This limited sample 126. the Environment and Safeguards Division of RSDD also reviews the safeguards documents (such as resettlement plans. Peer Review 124. 8. its role is planned to be reviewed by end-2012. these documents 123. (ii) regarding need for credible 85 The peer review process introduced through the establishment of a POE augments the usual business processes for quality assurance 86 87 88 Such documentation includes the (i) environmental impact assessment or initial environmental examination. indicates that POE inputs have included a mix of comments (i) relating to the justification of the choice of the MFF modality.87 This augmented the usual business processes for quality assurance. for which a full-fledged environmental impact assessment is not required. When a PFRR is circulated across departments. peer review process was reintroduced through the establishment of a panel of experts (POE). They interface with the clients and/or consultants to ascertain (i) compliance with relevant safeguards at the project design stage. The POE was set up with the purpose of reviewing all MFF proposals on matters related to (i) choice of the MFF modality. and as per internal Staff Instructions (2011). One expert was to be assigned to each MFF from the concept stage. Given the information disclosure requirements wherein safeguards documents are required to be posted on the internet for 120 days to invite feedback. The POE was set up in mid-2011. and (ii) compliance with MFF policies.86 An assessment of the quality of the safeguards documents and how effectively the safeguards are actually followed during tranche project implementation is beyond the scope of this evaluation. ADB provided inputs and comments on the quality of the initial environment examination. and (ii) incorporation of relevant safeguards-related aspects in the PFR documents that are submitted to ADB. It is noteworthy that for industrial energy-efficiency subprojects supported through MFF20 in the PRC. Given further experience gained over the subsequent 3 years to mid-2011. whether or not they are considered to be in an environmentally and/or socially sensitive category. if necessary.85 The safeguards specialists also contribute to firming up PFRRs. when the IEI team was mandated to review concept papers and other MFF proposal documents. Refer to para. For instance. land acquisition and resettlement plan. Staff Instructions (2011) (footnote 70). . Following the internal Staff Instructions (2006). 49 C. Until November 2012. Safeguards specialists on the MFF/tranche preparation team are from within the operations departments. and other documentation. for industrial energy efficiency subprojects supported through MFF20 in PRC. Division of RSDD reviews the compliance of tranche projects with ADB’s safeguard policy. indigenous peoples plans and environmental impact assessments) prior to PFRR circulation. the Environment and Safeguards 122. depending on the environmental categorization of a project. IED has access to POE feedback on five MFF proposals. for which a fullfledged environmental impact assessment was not required.

(iv) status of compliance with undertakings. policy framework. The concerned team leaders were given an opportunity to formulate a DMF by 31 March 2011 and get it endorsed from their client by November 2011. several PFRRs did not contain a separate DMF for the particular tranche. and perhaps of the third type. to indicate which outputs constitute physical investments and which constitute nonphysical investment. . or/and that question the veracity of MFF prerequisites. However. and to identify the total amount of TA along with its funding source. and outcomes. 2010. further improvement is desirable. the Board 128. Design and monitoring frameworks. it was noticed that 129. Likewise. and to provide estimates for consultant and staff time requirements. 92 Such reporting was supposed to provide (i) statistical information on the MFF. the quality of MFF and tranche level DMFs is assessed as being variable by the Central Operations Services Office (COSO) Portfolio Management Unit. recognized that the DMFs needed to be improved significantly. and (v) any changes in circumstance or material facts relating to the investment program/plan. although the conceptual framework for MFFs was sound. safeguards framework.50 Real-Time Evaluation Study of Multitranche Financing Facility prerequisites. which was to help track the direction of the roadmap. financing plan. Similarly. and Reporting Arrangements Board concern on due diligence. D. The DMF-based tracking and reporting mechanism required MFF and tranche teams to do adequate data and information gathering. other inputs. and 2011. No matter how rare such occurrences are. 93 Refer to the COSO Portfolio Management Unit’s DMF quality assessment reports which analyze DMFs of MFFs. to indicate that due diligence will be carried on tranche1 projects. 90 and (iv) on non-MFF related issues that would normally be expected to be made when the concept paper or RRP is circulated across departments to invite feedback and comments. investment program. directors noted that. 91 For instance. it appears that there have been some lapses in the quality of due diligence of MFF tranche projects (see Box 6 and Table 11). (ii) risks and issues. At the time of mainstreaming. 89 (iii) on compliance with procedural issues or nomenclature. it appears that the POE is making a useful contribution. Monitoring. DMFs are intended to generate the right information for decision making and oversight. 92 Each MFF was required to have a facility-wide DMF. Nonetheless. whether or not advance and retroactive financing will be considered. and to form a basis for tracking and reporting performance at the MFF and tranche levels. as well as possible barriers and issues. to discuss indicative procurement methods. 91 To the extent that comments are of the first and second type. there were risks to implementation and accountability—and they specifically requested ADB Management to supervise adherence to and quality of due diligence. Oversight. an observation that inclusion of “further refinement of sector road map” as an output indicates that the available sector roadmap is not credible—in which case the choice of MFF as a modality can be questioned. suggesting a way to relate institutional capacity strengthening requirements with the budget for nonphysical investments. including progress made on each tranche output. which enabled regional departments to report on the performance of each MFF in each country on an annual basis. outputs. tranches and other projects approved in 2009. and actions being taken to mitigate the risks and resolve the issues. Although linkages between the MFF and tranche-level MFFs improved overall from 2009 to 2011. (iii) DMF updates. several 127. they have added to the Board’s concerns for increased oversight and supervision and have contributed to the need for ADB to institute safeguards against lapses in the due diligence process.93 89 The design and monitoring frameworks need to be improved significantly For instance. At mainstreaming in mid-2008. noting that the financing plan does not bring out the availability of finances for subsequent tranches. and each tranche was to have its own DMF and be monitored in the same way as a stand-alone project. At the time of switching to the eOps platform in early 2011. 90 For instance.

among others. SPD’s annual submission on MFFs. The listing specifies whether the change is “major” or “minor. to check how they are performing. To what extent such reports provide insights for a comparison of MFF performance across countries or country groupings or sectors is not clear. The internal Staff Instructions (2011) required the inclusion of a scorecard 132. the MFF is to be rated on three distinct parameters: (i) MFF delays. which 131. and comment and provide feedback on the PFRR before the President’s approval. . if felt necessary. noncompliance with none or only one covenant means the tranche is rated to be on track. the MFF is the only modality that provides the Board with information on projects supported through it. more sophisticated rating mechanisms are expected to evolve in the coming years so as to provide better insights to the Board on MFF performance-related matters. risks. (ii) tranche performance. forward information to the Board. such as (i) compliance with undertakings. Without compromising on transparency. and (iv) issues.Quality Assessment and Review 51 Reporting and Board oversight. Such reports are compiled by Strategy and Policy Department (SPD). and (iii) compliance with undertakings. and noncompliance with three or more covenants means it is at risk. (ii) changes in circumstance or material facts relating to investment program or investment plan. cofinancing. potentially problematic. tranche projects and financings. The scorecard system was prepared through consultations between relevant ADB departments and the Board. This means that with the exception of program lending where each tranche is to be approved by the Board. include a list of changes approved on all types of ADB financings (including MFF tranches) during the previous quarter. (iii) DMF updates. A beginning has been made on tranche performance ratings through the use of a transparent mechanism (see Appendix 13). also includes similar data on tranche project changes—but they are in the linked documents for each tranche. 96 The PFR Report is to be submitted for President’s approval at least 10 working days after the PFR monthly report has been received by the Board. and other statistics. In response to a Board concern that the reporting system did not provide any 133. and mitigations. and have thus far covered 2008–2011.. amounts mobilized. and not easily noticeable. noncompliance with two covenants means it is potentially problematic. For Board circulation. 96 More sophisticated rating mechanisms are expected to p evolve to provide better insights to the Board on MFF performance 94 Such as listing of MFF and tranche approvals. and to contain consolidated data for all PFRs received from governments in the previous month. aggregation of number of MFF and tranche approvals by source of funds. or on track. committed and disbursed. 94 the Board also obtains information on other important aspects. country etc. extent of staff inputs. 95 Board members can seek additional information on any PFR and its attachments and appendixes. the template for which was prepared in consultation with relevant ADB departments and the Board.” but does not describe the change. the internal Staff Instructions (2011) mandate that the Board should receive each month a consolidated PFR monthly report that SPD prepares on the basis of one-page summaries received from operations departments for any new PFRs submitted by governments. on rating tranche performance with respect to compliance with all safeguards as per policy. COSO also compiles quarterly portfolio updates. For instance. The purpose is to identify and bring to the attention of the Board MFFs and tranches that can be considered to be at risk. time lags between selected milestones. are presented to the Board once every year. system to rate the performance of each MFF. 95 Such a monthly PFRR was to be furnished to the Board by the 6th working day of each month. In addition to performance reports for MFF 130. As per this system.

which clearly enables the reviewer to gauge (among others) the following: (i) how the MFF modality is justified. and providing forward-looking information. The long MFF utilization period. implies that MFF 136. It is expected that. and (vi) the extent to which ADB was actually engaged in policy dialogue during the MFF period. templates for preparation of MFF completion reports had not been prepared. there is scope for improving the reporting to the Board and facilitating Board oversight from the perspectives of monitoring of performance. provided the MFF period is not extended. (iii) the extent to which the sector road map or other prerequisites actually changed during the course of the MFF period. financial. once prepared. and their categorization. This is much longer than the normal project cycle in ADB and spans more than two CPS cycles. rating of MFFs and tranches. Once guidelines are prepared. they will provide the basis for selfevaluation of the entire MFF envelope Review and evaluation of MFFs. Independent evaluations would be typically more than 10 years after approval. All necessary documentation would be required for such work. from the pre-approval stage through to the end of the utilization period. guidelines and 135. averaging 7. While the Board has endorsed the current reporting arrangement. completion reports will be made 8–9 years after approval.8 years. As of the third quarter of 2012. and technical viability of the tranche projects is justified. (iv) what (if any) tranche project changes were made. (v) how economic. . the guidelines will provide a basis on which selfevaluations can be conducted over the entire MFF cycle.52 Real-Time Evaluation Study of Multitranche Financing Facility 134. (ii) the quality of the MFF prerequisites as articulated up front.

CHAPTER 6 Implications for Operations 137. Certain sector-specific or other constraints have influenced the pace of investment in some countries. and areas of skill sets needing improvement. it contributes to improving ownership and sector performance. engaged on a medium-to long-term basis. and beyond the MFF utilization period. A. Along with efforts to address structural issues and create required skill sets. To avail of ADB support. and (ii) poor operational efficiency in various technical and business processes. environmental. and other relevant disciplines necessary for project/program management and sustainable development. and setting operational efficiency improvement targets along various parameters. and environmental and social safeguards. institutional capacities. DMC Perspectives 1. such measures help to improve the pace at which projects in the sector can be developed. financial. economic. . To the extent that policy dialogue during the course of an MFF contributes to improving and streamlining policies within an acceptable policy framework. are specific to a country and sector contexts. The pace at which the sector can develop depends on a mix of factors including (i) ownership and financial commitment by all levels of the government. However. Developing a necessary skills base includes: (i) supporting the independent power regulator in managing billing-and tariff-related disputes. Regional departments do not consider a signed FFA as a financial commitment. and (iii) supporting all power sector entities for better progress monitoring and status reporting. social. 97 The MFF modality is used in countries and sectors where ADB is expected to be engaged on a medium-to long termbasis 97 Structural issues that need to be addressed. which results in weak commercial viability of sector entities. (ii) structural impediments that affect the mobilization of domestic resources. Decision-making processes—or priorities of decision-making bodies—in some countries are also more amenable to an MFF than in others. Pace of Sector Development The MFF modality is used in countries and sectors where ADB is expected to be 139. the concerned institutions should also be familiar with ADB procedures for procurement and contracting. (ii) supporting the generation. and (iii) a critical mass of required skill sets across all relevant technical. The NPI components of MFFs address issues related to development of requisite 140. transmission and distribution entities for system expansion and investment planning. Interest in the MFF modality has varied significantly across countries and sectors. structural impediments that need to be addressed include (i) high technical and nontechnical energy losses in the transmission and distribution systems. in India’s power sector. For instance. 138. the Treasury Department models MFF-related tranches beyond the WPBF period in its financial projections. and the extent to which the MFFs have been adopted thus far.

it was expected that ADB would be able to approve the second tranche only in the first quarter of 2012. from the Government of India’s perspective. In India. However. . or a different MFF. In Papua New Guinea. there are indications that the MFF in India has led to greater appreciation of ADB funded investment programs than in most other countries. the following factors have contributed to making the MFF modality more attractive: (i) the flexibility associated with MFFs enables clients to adjust and modify the project pipeline. They added to their skill base to be able to improve other urban services. and Georgia. where the MFF modality has been used in the transport sector.54 Real-Time Evaluation Study of Multitranche Financing Facility 2. To the extent MFF tranches have financed cost over-runs of MFF projects included in previous tranches of the same MFF. executed efficiently.100 At the time of MFF57 approval in July 2011. Where all projects in a tranche are 145. India: Madhya Pradesh Efficiency Improvement Investment Program (MFF57). the MFF modality is favored as the government considers the FFA as a 143. DMC Experience with the MFF Modality The flexibility associated with MFFs has made the modality attractive 141. because the fiscal year in India runs from 1 April to 31 March. associated with the MFF. no other project can be included in 98 99 100 101 The MFF modality provides a mechanism to reduce commitment charges without exerting any pressure to hasten project readiness. The Government of India also recognizes and understands the flexibility 144. or a stand-alone project. full commitment from ADB. that relevant agencies appreciate the programmatic design and predictable financing associated with the modality. that is considered an additional element of flexibility of the MFF in many cases. In countries such as Armenia. On the contrary. 99 Overall. In such a case. Azerbaijan. the urban local bodies had mostly sanitation engineers and workmen. For instance. and that specific tranche loans can be signed as and when project readiness is achieved. of approving the second tranche in December of a certain year or the first 3 months of the following year was very little. as per the requirements of the MFF policy. certain cost savings can be achieved. and all tranche projects can be implemented without having to draw down the entire tranche loan amount.101 Constraining features of the MFF modality. the study is informed by the concerned regional department. when it became evident that resources would become available within 2011. some borrowing entities for urban sector MFFs in India took decisions to strengthen their capacities to manage urban projects. MFF57 was approved although a stand-alone project loan could have been structured instead. and (ii) the client need not seek specific approval for a project that is newly introduced under the MFF umbrella. 142. 98 With such a long-term commitment as a basis. the approach of most clients in India is to wait until project readiness is achieved (as agreed upon between ADB and the Government of India) and to time tranche approval and loan signing with readiness. Previously. The Government of Papua New Guinea also recognizes that the MFF modality is fully in line with its effort to pursue a multi-year planned expenditure agenda. the second tranche was quickly processed and approved by December of that year. This type of accommodation is possible. and can make minor adjustments to accommodate ADB’s changing liquidity position. but without having to pay commitment fees (no matter how small) on the entire MFF envelope. Towards increasing acceptance of the MFF modality. while ADB’s fiscal year coincides with the calendar year. The difference. It appears that operational flexibility is a key attractive feature in countries and sectors with a need to improve institutional capacities and quality of other MFF prerequisites.

which thus forces grossed up fees. The level of effort required for loan negotiations.103 The executing agency for MFF20 also noted that to affect any amendment in 146. Government Decision-making Processes for MFF and Tranche Approvals 55 148. 105 the executing agency engaged international consultants (who had worked on previous tranches) for tranche 3. India: National Power Grid Development Investment Program (MFF19). This has proved problematic in India. and India. international consultants are required to pay taxes as per Indian tax laws (that are not applicable if they are engaged by ADB). In many countries. where internal government policies make it difficult to engage international consultants. This is noted in Armenia. 150.102 The amount saved is required to be cancelled from that particular tranche. the benefits of an MFF framework are not as significant. . Following the internal Staff Instructions of 2011. Georgia. When engaged by the executing agency or any local body. In the particular case of MFF23 in Himachal Pradesh in India. 104 Good performance and project familiarity obtained through PPTA preceding the MFF are not decisive consultant selection criteria. that of obtaining clearance from the National Development and Reform Commission. the effort required was about the same as for any other modality. relending arrangements. after once obtaining approval for an MFF from an apex body (such as the National Development and Reform Commission or the State Council). which mandates the 147. it saved only one last step. the executing agency does not need to obtain similar In many countries. where the President signs the loan agreement for each tranche under a previously approved MFF and FFA.Implications for Operations the same tranche. and a new tranche loan needs to be processed to finance another project. their inherent investment decisionmaking and approval processes are amenable to MFFs. their inherent investment decision-making and approval processes are amenable to MFFs 102 103 104 105 This principle applies to stand-alone projects. Where some high-level body or top-level country executive retains or intends to 149. the MFF modality helps to the extent that. preparation of SST projects through previous tranche loans (barring exceptional circumstances). Azerbaijan. and as being just the same as for other modalities. Special clearances are required to engage international consultants. In the PRC. where loan or grant savings need to be cancelled before the savings return to ADB’s financing envelope. India: Himachal Pradesh Clean Energy Development Investment Program. retain authority for project approval or loan signing. In Pakistan the clear benefit is a saving in elapsed time and LOE of government and executing agency staff because an umbrella approval can cover subsequent tranche projects as well. effectively. 3. Investment approval and decision-making processes normally incorporate a system of checks and balances. The difficulties relate mostly to the high consulting fees charged by international consultants. A case in point is Kazakhstan. This is viewed as a tedious and unnecessary process by the PowerGrid Corporation of India. even if it had been included in the approved pipeline for foreign capital investment. and effectiveness requirements was nearly the same as for any type of loan. the MFF modality is perceived as being useful. Executing Agencies in the PRC also observed no significant reduction in processing time or effort for a tranche 2 project. Where project approval processes are cumbersome or encourage government and client officials to go by precedence. the executing agencies are required to hire project preparation consultants under tranche loans. but preferred to switch back to using TA funds for tranche 4. the tranche loan agreement.

investment program therefore necessarily straddles more than one CPS cycle and impacts on the flexibility to incorporate new findings or to adjust to unexpected developments. ADB Perspectives 1. A CPS is normally implemented through rolling 3-year COBPs. and efforts by other development partners.5 billion–$15. aligned with Strategy 2020. programs. A CPS identifies operational areas from the menu of options provided in Strategy 2020 within the framework of the DMC government’s development plan. procurement. As a result. the DMC’s development strategy. ADB’s operations (including OCR and Special Funds resources for loans. The second tranche supports the remainder of civil works and consulting services. This was made possible by the fifth general capital increase (GCI V). ADB’s comparative strengths. Manila. and trade finance) have increased significantly. Any MFF 154. . which define a pipeline of interventions that fit the agenda spelled out in the CPS.5 billion range during the next 3 years. Table 12 shows that all countries and sectors with MFF interventions 106 MFF12: Viet Nam: Mong Duong 1 Thermal Power Investment Program. Country Programming Any MFF program necessarily straddles more than one CPS cycle ADB delivers its strategic agenda to a DMC. there is little savings in terms of time and effort. 107 MFF52: Ho Chi Minh City Urban MRT Line 2 Investment Program.56 Real-Time Evaluation Study of Multitranche Financing Facility approvals for each tranche—although as noted above. depot. each tranche of an MFF investment program and all other investment projects need to be approved by the Prime Minister’s office. 2012. depot equipment. 151. and construction supervision. B. technical assistance grants. This may not be critical for those countries and sectors where the combined MFF tranche financing envelope is lower than the CPS financing envelope. guarantees. plus engineering. A CPS normally defines a program of assistance that identifies areas of investment projects. 2–5 May (Forty-fifth annual meeting of ADB Board of Governors). grants. General Capital Increase V 152. only those MFFs that represent large-scale projects that have been tranched into phases (such as in MFF12 106 and MFF52 107) can benefit from the MFF modality in terms of obtaining investment approval. Annual Report 2011. 109 Following adoption of Resolution number 336 by the ADB Board of Governors in April 2009. but it does reduce the maneuverability of including interventions to manage unforeseen stress. the government concedes it still prefers stand-alone projects.108 This reflects the increase in OCR lending approvals from the $6 billion–8 billion per year range during 2006–2008 to $9 billion–11 billion during 2009– 2011. from the $8 billion–$11 billion per year range during 2006–2008. The full CPS cycle is shorter than the MFF utilization period. 2. and construction contracts. The first tranche provides system development and implementation support. In Viet Nam. civil works. At present. mainly through the CPS which is 153. 108 ADB. and narrows the focus further within these areas. The second tranche supports the construction of the underground and elevated line. the opportunity to reduce commitment fee payment obligations (no matter how small) in the coming years will make the MFF modality generally more attractive. 2009–2011. 109 GCI V made it possible to increase investment lending through MFF and other investment lending modes. although it recognizes that with OCR loans. Since MFF was first piloted. and consulting services. to the $13. and technical assistance to the particular DMC over a 5-year period. equity investments. The first tranche supports site preparation.

CPS = country partnership strategy. in Pakistan. Pakistan: Country Partnership Strategy (2009–2013). MFF = multitranche financing facility. is observed in this respect: in the documents required for MFF approval. investment program may not be known up front. 2010. respectively. the CPS team needs to coordinate with all MFF teams for all MFFs under preparation. Table 12: CPS and Pipelined COBP Approvals vs MFF Tranche Approvals Average Annual Assistance in Line with CPS Envelope ($ million)a 85 102 70 107 148 133 744 624 365 167 212 57 Country Afghanistan Armenia Azerbaijan India Reference Years 2008–2012 2009–2013 2011–2013 2010–2014 Pakistan 2009–2011 Sector Transport Energy Transport Energy Transport Urban/WSS Transport Energy WSS Transport Energy Average Actual / Planned Tranche Approvals (% of Average Annual Assistance as per CPS/COBP)b 151% 98% 123% 54% 109% 130% 41% 59% 92% 46%c 117% COBP = country operations business plan. the RRP of one MFF states the number of components rather than number of tranches. annual lending approvals from the COBP are considered as updates to CPS annual lending approvals. Some improvement however. the fact that the tranche approval amount for transport sector MFFs is 46% of the CPS envelope is largely due to (i) delays in the approval of certain tranches. a $200 million tranche of a $450 million MFF (Punjab Urban Transport) was projected to be approved. The need for and the challenges in dovetailing MFF-related information with 156. 110 111 The MFF envelope information in an RRP is normally limited to the MFF financing envelope. to arrive at average annual assistance for the particular sector and country. 8 RRPs do not give any indication. which increased to 72% of the 46 MFFs approved after mainstreaming to the end of 2011. the internal Staff Instructions (2011) require that an indicative tranching plan be given in the facility administration manual. a To the extent available. and 2011 were $150 million. WSS = water supply and sanitation. $125 million. See ADB. 2009. 110 Only 46 of the 66 MFFs (70%) approved until December 2011 state in the RRP the number of tranches planned or envisaged. 111 Therefore. the tranche 1 approval amount. CPS and COBP updates are not a good source of advance information for the Board on MFFs. the last PFR submission date. In 2009. projected tranche approval amounts for 2009. . Manila. and (ii) COBP assumptions that the first few tranches of two yet-to-be-approved MFF investment programs will be approved. when firming up a CPS or preparing COBP updates. processing. For instance. the country programming effort is also evident from other situations. and 11 others provide a minimum or maximum or a range for the number of tranches. For another $900 million MFF (Lahore Urban Transport). 65% of the 20 MFFs approved during the pilot period gave a firm number of a range for the number of tranches. and that large borrowers such as India and Pakistan have a better chance of maintaining it. many MFFs are approved with only limited envelope information in the RRP. Therefore. and $150 million.Implications for Operations have not maintained CPS flexibility. and the MFF utilization period. To help correct this situation. The likely timing of future tranches is also not indicated in the RRPs. and implementation. The number and timing of tranche approvals expected in a particular MFF 155.

b a 3. In addition to approvals for physical investments. c Refers to all sovereign lending operations. Refers only to tranche approvals.201 12% Uzbekistan Transport 486 658 74% Water 258 313 82% Viet Nam Energy 1. more than 75%) of all approved assistance since MFF began to be piloted (see Table 13). it may be useful to consider other options for strengthening policy dialogue for such sectors and countries. then the projected/planned tranche approval amount is taken from the most recent CPS/COBP. as follows: (i) .269 71% Indonesia Water 4 200 2% Kazakhstan Transport 980 1. PNG = Papua New Guinea.315 100% Transport 524 525 100% Water 40 54 73% PNG Energy 57 57 100% Transport 196 530 37% PRC Energy 151 774 20% Transport 650 5.711 14% Water 138 311 44% ADB = Asian Development Bank. and that all actual approvals during the 2009–2011 period are MFF tranche approvals. basis of actual and projected data provided by other ADB departments.396 3. Table 13: Penetration of MFF Tranche Approvals in Selected Sectors and Countriesa MFF Tranche Total ADB % Share of MFF Approvals Support Tranche Country Sector ($ million)b ($ million)c Support u Afghanistan Energy 333 431 77% Transport 757 1. c MFF tranches account for 100% of the pipelined approvals projected in the CPS/COBP documents.485 3. During 2005–2011.004 28% Georgia Transport 347 377 92% Urban 118 118 100% India Energy 2. MFF portions that are not converted to tranches.074 51% Transport 390 2. it may also be useful to understand the implications for policy dialogue and capacity development. PRC = People’s Republic of China. Source: Independent Evaluation Department. To the extent necessary. also includes approvals for nonphysical components. MFF = multitranche financing facility.051 2. Capital Headroom ADB’s Treasury Department (TD) models MFFs in the OCR balance sheet on the 158.315 1. Please note that the actual MFF tranche approvals fell short of the projected levels.142 66% Water 90 113 80% Armenia Transport 277 324 85% Azerbaijan Transport 455 496 92% Water 375 375 100% Bangladesh Transport 281 1.58 Real-Time Evaluation Study of Multitranche Financing Facility b If actual data on tranche approval for a particular year (from within the relevant reference years) are not available from ADB’s online database (Loan and Grants Financial Information System). In some sectors and countries where the MFF modality has penetrated rapidly and accounts for a major share (say. are not included.467 72% Transport 1. 157. including MFF tranche approvals.279 43% Water 897 1. Source: Independent Evaluation Department.075 91% Mongolia Transport 44 146 30% Pakistan Energy 1.

Most of this accumulation is from OCR resources—as 85% of the combined approved MFF envelope is from OCR resources. the share of tranche approvals to sovereign lending approvals is assumed to be 35% per year. 59 A portion of the MFF financing envelope that is not converted into tranches is 159. which for 2013–2015 is about 40% of sovereign lending. in view of portions of existing MFFs that are not converted to tranche loans. Figure 8: MFF Portion Not Converted into Tranche (as of 31 December 2011) 16 14 12 ($ billion) 10 8 6 4. Figure 9 shows that some MFFs contribute more to this accumulation.4 4 2 2006 2007 2008 2009 2010 2011 6. (iii) beyond the WPBF period.3 15 Undisbursed Balance ($ billion) MFF = multitranche financing facility.7 10. as well as additional MFFs that are projected to be approved over the coming years.Implications for Operations actual tranche approvals from the Controller’s Department.3 12.9 13. Source: Independent Evaluation Department. especially those in which the remaining portion of the MFF financing envelope is significantly greater than the remaining MFF utilization period. The disbursement rate for MFF tranches is projected on the basis of a blend between historical tranche disbursement rates and disbursement of the fastest sector) irrespective of the evolving sector composition of the MFF. . accumulating each year (see Figure 8). (ii) projected tranche approvals in the 3-year WPBF from SPD.

volcanic eruptions. equity. in addition to projections for loan repayments. widespread community violence. guarantees. or (iii) conflicts of any type. there is no commitment charge or any 160. or epidemics: (ii) technological or industrial accidents such as explosions. crowd out other financial products from OCR lending. Source: Independent Evaluation Department. the DMC has little reason to cancel or state that it will not avail of any leftover portion of an approved MFF envelope.60 Real-Time Evaluation Study of Multitranche Financing Facility Figure 9: MFF Portion Not Converted to Tranche vs Elapsed Time : n % MFF portion not converted into tranche (as of 31 Dec 2011) 95% 85% 75% 65% 55% 45% 35% 25% 15% 5% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Elapsed Time as % of MFF Utilization period (as of 31 December 2011) MFF = multitranche financing facility. response includes needs for emergency assistance quickly following a disaster.7 billion was paid as of 31 December 2011. chemical mishaps. This need not be a cause for concern during times when ADB’s capital adequacy is high and rising. and/or is projected to continue falling over the next few years.113 This could diminish ADB’s ability to mount crisis-response operations. 112 Inspite of subscriptions to General Capital Increase V. MFF investment programs lock up future finances. crowd out other financial products from OCR lending. $8.5 billion. . direct cost implication on an OCR-financed MFF from the portion that has not been converted into a tranche loan. hurricanes. Effectively then. However. annual OCR lending approvals could be restricted to less than the levels approved in 2009–2011. Disasters may be caused by (i) natural events such as earthquakes. or nuclear reactor leaks. droughts. In April 2009 the Board of Governors adopted a resolution that provided for a fifth general capital increase in ADB’s capital stock and subscriptions by about 200%. such as regional/national civil wars. Therefore. ADB’s capital adequacy has been declining over the past few years. At the conclusion of the subscription to the fifth general capital increase in 31 December 2011. revitalize basic services (such as education and healthcare). it is anticipated (as of end-November 2012) that within a few years. the subscribed capital had increased to over 10. flooding. etc. MFF investment programs lock up future finances. and contribute to the depletion of capital headroom. and contribute to the depletion of capital headroom Where the MFF is from OCR resources. and increase in paid-in capital to $8. 114 so as to address rehabilitation of priority physical and social infrastructure. and loan loss reserve. In addition. and catalyze economic activity.5 million shares.2 billion by December 2011. where projected/actual approved tranche amounts equal or exceed the CPS envelope 112 113 114 As per projections for new loan approvals plus approval of tranches from existing and new MFF programs. Crisis161. cyclones. valued at $162. oil spills. tidal waves.2 billion was for paid-in of which $4.

Table 14: Documented Provisions to Terminate. in view of the urgency for investing in infrastructure to support the rural poor. IED reviewed ADB’s crisis-lending response. as well as the establishment of some suitable triggers. The overall reduction in the financing envelope effectively represented a cancellation of a part of the MFF envelope that had not been converted into a tranche (since the MFF was approved in 2006. financial. governance. In 2011. in view of headroom considerations. and technical aspects. social. MFF enablers and undertakings that constitute the FFA are in fact a binding commitment on the DMC governments and clients. capacity. it is worthwhile considering a way for ADB to effectively retain the option of terminating an approved MFF or not approving another tranche without being exposed to reputational risk. and recommended more flexible repayment terms going forward. 115 However. In 2009. No additional PFR will be approved for financing unless all key warranties and representations made by the client under the FFA and the previous approved periodic commitments have been met in full. MFFs can impose a binding constraint in a particular country context if emergency assistance is required to be extended quickly in response to a disaster that occurs just weeks before the final date for submission and approval of the last PFR under a specific MFF investment program. 117 The MFF modality binds clients to the delivery of specific warranties and representations that cover safeguards. 2011. and not attributed to poor performance of the MFF. 117 Existing documentation— including the proposal document for the MFF modality. the incidence of approved MFF programs in the country assistance portfolio can make it relatively difficult to accommodate newly arising financial assistance requirements. Real-time evaluation of Asian Development Bank’s response to the Global Economic Crisis of 2008–2009. capacity. and economic. or terminated if conditions described in the FFA and legal agreements are not met. financial. . social. 118 The MFF financing envelope for MFF09 (Punjab Irrigated Agriculture Invesment Program) was reduced from $900 million to $700 million in December 2011 as part of an ADB effort to respond to relief measures following floods in 2011. Suspend or Cancel an MFF Investment Program Source IEI (2005)a Description of Relevant Provisions The use of MFF binds clients to the delivery of specific warranties and representations covering safeguards. and economic. This reduction was part of an effort to free resources to launch emergency relief measures. Such reductions or cancellations may also give ADB greater leverage over some reforms and enhance the credibility of the MFF modality.8 million. Such actions (reductions or cancellations) require commitment by the Board and the Management. Manila. as well as available signed FFAs—allows for a discontinuation of the MFF mid-stream in the event the commitments are not kept (Table 14). which included the entire MFF allocation at the time). postponed. sector policies. sector policies. 61 MFFs could diminish ADB’s ability to mount crisis-response operations ADB needs to use the option to terminate MFF when it is inadequately or improperly used MFF Policy Paperb 115 116 ADB. ADB responded through the establishment of a new budget support instrument. Until November 2012. only one tranche had been approved in 2006 for $227. to extend short-term loans (of 5-year maturity including a 3-year grace period) to DMCs.116 162. the financing envelope was reduced for only one approved MFF investment program. Manila. the ADF component of MFF09 was enhanced from $10 million to $280 million. More specifically. 2009. 118 However.Implications for Operations limit. IED. The MFF and its PFRs can be rejected. governance. legal and technical aspects. ADB did not consider the trade-off between the countercyclical support facility (including longer lending terms) and the possibility of discontinuation of MFF levels to free up ADB’s risk-bearing capacity. the countercyclical support facility. the policy paper that mainstreamed the MFF. However. Enhancing ADB’s Response to the Global Economic Crisis—Establishing the Countercyclical Support Facility. legal.

The approved MFF envelope also does not affect ADF liquidity. The FFA does not constitute a legal obligation on the part of ADB to commit any financing. do not account for the unfunded balance of the MFF envelope. MFF = multitanche financing facility. In deciding whether to approve the SSTs. or suspension or cancellation of the related tranche. which includes all PFRs approved during that period. 4. In addition. investment program. . the combined approved MFF envelope is from ADF sources. 25 and 44 of Appendix 4 of IEI document (footnote 4) b Refer to paras. and provided the borrower and the clients are in compliance with the understandings in the FFA. Asian Development Fund The ADF portion of the undisbursed MFF balance is significantly less. which are also based on the commitment authority of the related ADF replenishment. DMF = design and monitoring framework. IEI = innovation and efficiency initiative. FFA = framework financing agreement. among other things. and policy considerations. Management will consider. The DMC government and ADB can exercise their respective rights to cancel the MFF or any uncommitted portion thereof. a Refer to paras. and 92 of Board Paper (footnote 6) c Refer to FFAs for MFF11 (IND: Madhya Pradesh Power Sector Investment Program). the borrowing DMCs have no incentive to formally seek cancellation of any ADF allocations for the MFF modality. or rejection of the PFRs. The remaining portion of the MFF financing envelope that is not converted into a tranche is no consideration. As a result. ADF’s binding constraint is its financial resources. Source: Independent Evaluation Department. The FFA does not constitute a legal obligation on the part of the DMC government to request any financing. PFR = periodic financing request. As there is no commitment charge for ADF financing. compliance with the MFF undertakings. 119 119 The prudential minimum liquidity for ADF was lowered in June 2012 from 100% to 81% of the next year’s projected cash flows. Total resource allocations must not exceed the commitment authority of the related ADF replenishment. and if found satisfactory. 16. prepare the related legal agreements. DMC = developing member country. TD’s financial projections for ADF.62 Real-Time Evaluation Study of Multitranche Financing Facility Source Description of Relevant Provisions Noncompliance on matters such as non-existence of facility wide and tranche level DMFs or not monitoring the DMFs may trigger decisions by Management leading to termination or suspension of the MFF. MFF65 (MON: Western Regional Road Corridor Investment Program). as 15% of 163. 164. ADB will review the PFRs. which can be made available during a replenishment period (the commitment authority). are limited by the commitment authority and its country allocations. the processing of a PFR is subject to the availability of resources allocated to a concerned ADF eligible country. an approved MFF financing envelope is neither a binding commitment. ADB will provide loans and/or guarantees to finance projects under the MFF as and when the projects are ready for financing. 74. as well as the status of the road map. FFAsc ADB = Asian Development Bank. and the total ADF loans and grants committed during a 4-year replenishment period. MFF 31 (PAK: Energy Efficiency Investment Program). ADB may decline to authorize the negotiation and execution of any legal agreement for a tranche. and the relevant projects are in line those same understandings. nor does it pose a financing headroom issue. For operational planning.

a definitive assessment of the modality’s contribution to meeting ADB’s development effectiveness agenda is not possible. efficiently delivered. strategies or road maps are not of the requisite quality. the MFF modality would help to increase development effectiveness. . Therefore. as more upfront planning would begin. itself a response to the Millennium Development Declaration and the 2005 Paris Declaration agenda. including financing of cost over-runs of previously approved stand-alone project infrastructure. 166. in the context of which ADB had renewed its commitment to improve development effectiveness. dynamic. All these certainly indicate the possibility for an improvement of the development effectiveness of the MFF modality in the coming years. it is useful to recognize the vast and diverse experiences accumulated through the 66 ongoing MFFs so far to gauge early indications.Implications for Operations 63 5. The IEI document mentions that IEI was a core reform initiative under ADB’s reform agenda. over a period of time. and (iii) the rigor for conducting economic and/or technical due diligence of projects or components prior to tranche approval is not sufficiently thorough. Development Effectiveness Although less explicit either when proposed or when mainstreamed. Available evidence shows that there are some MFFs in which (i) sector 167. or an appropriate policy framework does not exist. 120 it was 165. all MFF investment programs approved thus far are still ongoing. believed that. leading to better investment programs that comprise more relevant. However. Weak institutional capacities are very likely one of the underlying reasons for such occurrences. (ii) important changes have been affected in projects or components of approved tranches. The reform agenda was to enhance ADB’s organizational effectiveness and to make ADB a more effective. and results-driven catalyst for poverty reduction and prosperity in the region. MFF modality would help to increase development effectiveness A definitive assessment of the modality’s contribution to meeting ADB’s development effectiveness agenda is not possible 120 IEI document (footnote 4) and Board Paper (footnote 6). At this time. and more sustainable projects with improved outcomes.

In some cases. and other sectors. This evaluation study. Such information can be obtained only from documents that are prepared after MFF approval.CHAPTER 7 Key Findings. is in keeping with this Board requirement. the programmatic approach enabled by the MFF was appreciated. no MFF-level self evaluations in MFF completion reports were available. MFF interventions were approved in 14 countries to support investments in transport. Favored Modality 169. From the time the MFF modality was introduced in mid-2005. and up to December 2011. the MFF seemed to engender greater appreciation of ADB loan based investments. Substantial . and the financing conditions. and the rigor of due diligence cannot be assessed. so the sequence of events related to tranche project changes cannot be readily traced. No document consolidates or provides links to various tranche-level documents. the Board had approved 66 MFF investment programs with a combined financing envelope of about $32 billion. which is to be completed after 4 full years of mainstreamed MFF operation. like in India. and other types of infrastructure. All MFF related information is not readily available for any single MFF. A large 171. The inability to trace the documentation trail of MFF process compromises transparency. No MFF completion reports were available to provide inputs to this evaluation. During this period. Lessons and Recommendations This chapter presents key findings in 10 areas. A. In Papua New Guinea. IED does not normally have access to the eSTAR repository of regional departments. the Board expressed the need for an evaluation of the MFF modality by IED (then the Operations Evaluation Department) in 3–4 years. lessons and five key recommendations to fine-tune MFF operations. but can obtain access to documents only for a specific MFF for a limited period upon special request. Tranche approvals also spiraled upwards to account for more than 37% of total investment project approvals in 2011. Clients consulted reported their preference for the perceived flexibility afforded by the MFF. at the time of compiling information for this evaluation report. and less than a handful of tranche completion reports. agriculture. Key Findings 1. which in turn makes it difficult to fix accountability. Access to Required Data 170. energy. 2. The use of the MFF modality has increased rapidly. This has adverse implications for fiduciary control on the resources provided for the MFF. However. number of documents are required to fully understand how an MFF has progressed since approval. At the time of mainstreaming in mid-2008. as well as finance. following which it discusses six 168.

Although as of mid-2012. and implementation of MFFs. It is also recognized that the MFF modality can help regional departments plan better their people and skill requirements. and inaccuracies are observed in certain official ADB databases (e. Commitment fee savings associated with the MFF are not as significant as 175. processing. which is Management driven (not modality driven). while the MFF umbrella which is larger. It is recognized that the MFF modality is potentially more conducive to cofinancing than other modalities. Second. tranches are comparable to stand-alone projects.. The evidence is not clear on expected savings in staff time for processing. and make mid-course corrections. Staff continuity issues are a matter of human resources policy. and administering MFFs and their tranches. and most large MFFs can be viewed as a cluster of projects.g. address policy gaps. In 48 of the 66 MFF documents (RRPs and/or FFAs). Therefore. The lack of a comprehensive financial and performance information system and non-availability of data on cofinancing do not allow an analysis of the levels of cofinancing achieved through the MFF modality. Commitment fee charges on OCR loans were reduced within the MFF pilot period. Whether or not the cofinancing so received will be incremental to the MFF financing envelope or substitute it may or may not be clarified. the Board recognized that greater staff continuity in the preparation. attracts no front-end fees or commitment fees of any sort. indicating the need for instituting systems to ascertain that necessary data are entered. 173. The analysis shows that few MFF interventions can be considered to have resulted in commitment fee savings. they simply mention that cofinancing will be pursued. which attenuated one of the perceived benefits of the MFF modality. originally envisaged. Expected Benefits 65 172. and Recommendations data gaps. it is not appropriate to claim commitment fee savings from use of the MFF modality in most cases. It was considered a consequence of (i) reduced staff time for processing an MFF and its tranches vis-à-vis a series of stand-alone investment projects. coupled with (ii) increased staff availability for implementation monitoring and administration. Improved organizational effectiveness was the intended outcome of the IEI program. At the time of mainstreaming. However. Lessons. . which piloted the MFF modality. there is no particular indication that the introduction of MFFs has changed the deployment pattern of staff. half of the team leaders had not changed their divisions or departments after processing an MFF and getting it approved. and the entered data are audited. processing. 3. eOps). cofinancing is mentioned or considered in some manner.Key Findings. IED did not have access to the TMS and instead conducted a survey of staff engaged in preparing. programs. with associated benefits such as more opportunities to understand sector issues. inconsistencies. Available data on elapsed time and LOE for processing do not provide conclusive evidence of savings in either. processing. the RRPs and FFAs are sometimes not consistent. In many cases. There is no indication of greater staff continuity for preparation. Cofinancing has been mentioned or considered in most MFF investment 174. and implementation of MFFs and their tranches would help to increase organizational effectiveness.

available documentation does not normally provide adequate information on the rigor of due diligence performed. (ii) the MFF’s strategic context comes from the relevant CPS. among other things. For this reason. appropriate attention is given to the nonphysical investment component of the MFF investment program. However. the strategies and road maps are so general and high level that it is possible to justify any type of project for inclusion in the MFF investment program. OM updates and internal staff instructions clearly states that (i) the MFF should be consistent with an agreed-upon strategy and sector road map. years. because at MFF approval. the flexibility accorded by MFFs is one of the key reasons for their increased acceptance in many DMCs. The choice of the MFF modality is seldom properly justified in the concept papers and RRPs. it appears that this requirement has been followed in only 5% of them. The quality of strategic context and road map. this also means insufficient attention to a constructive and useful policy dialogue during a part of the MFF utilization period. Adequate due diligence on institutional capacity is required to ascertain that 178. Along with greater certainty for long-term funding. 5. Although there is some improvement in the upfront documentation in this respect. such due diligence is necessary. and a recommendation that. a list of success factors for better performance. Flexibility MFFs are used highly flexibly over long utilization periods that average about 8 179. documentation. From the concept papers available to IED. and (ii) a mere discussion of all MFF prerequisites is considered sufficient and appropriate justification for choosing the MFF modality. about 30% of all approved MFFs do not indicate a firm number of tranches or a range up front. Given that in many countries. a nonphysical investment component is financed largely through the first tranche. It appears that. nor on the link between the due diligence findings and the scope and budgets of the nonphysical component. in many cases. In most MFFs. as evident from available MFF 177. a detailed assessment of bottlenecks and constraints to achieving the roadmap. capacity development can be incorporated into SSTs is seldom followed. as well as risks and mitigation measures. the FFAs and RRPs in particular do not provide enough insight into the quality of the roadmap and strategic context of the MFF. Guidance provided on the required strategic context and road map through the Board Paper. One of the lessons from the piloting stage is that inadequate due diligence on institutional capacity has led to poor executing agency selection and insufficient mitigation measures. Such built-in flexibility is necessary for MFFs.66 Real-Time Evaluation Study of Multitranche Financing Facility 4. and (iii) a road map should include. the concept paper is required to include a matrix to justify the MFF modality vis-à-vis other instruments. Whether or not such a road map has been made remains unclear. MFF Prerequisites 176. where necessary. there is significant scope to improve institutional capacities across a range of sectors. Where the policy framework is weak. For many MFFs. the flexibility thus accorded to the MFF program can compromise the programmatic approach. . it is unlikely that all projects for all tranches would even be identified. In many cases (i) the RRPs also do not include a proper justification of the choice of the MFF modality. and its subsequent revision in 2010. is highly variable. As per the Board paper and the relevant OM section introduced at the time of MFF mainstreaming in 2008.

This allowed the concerned department head to approve changes (of scope or financing or implementation arrangements) in an approved tranche if the change was classified as minor until the end of 2011. in a few cases. social. implementation. 182. Although extending the policy to the MFF modality is consistent with. The clarifications introduced in December 2011 would seem to have reduced the scope for excessive flexibility. legal. As ADB often interfaces closely with consultants and executing agencies during stages when periodic financing requests (PFRs) are being prepared.e. although the conceptual framework for the MFF was sound. Such differences in interpretation were seen for transport sector MFFs across regional departments and also across countries within the same regional department. less attention to proper tranche design or proper project design. it has led to some cases where sufficient attention may not have been given to project design. . Additional financing that is allowed within the MFF modality may be leading to 181. anticorruption. Changes were classified as minor in about 85% of the cases until December 2011 known to this study. financial. In some cases investigated. Quality Assessment and Review 67 Due diligence for each tranche is required on technical. Lack of clarity regarding the nature of scope changes that require Board approval has led to another questionable aspect of MFF flexibility. and other matters of concern to ADB. conducted rigorously. ADB staff are expected to comment on technical matters during this stage itself. Insufficient sector expertise within the staff team and the relevant sector community of practice implies the need for ADB to engage consultants to comment on technical design and engineering aspects—which is seldom done. on the basis of limited information available to this study. However. and (ii) most technical contributions from ADB relate to ADB’s advice on procurement guidelines or certain aspects of environmental impact management. On the other hand. and records are not kept systematically. safeguard. Lessons. the MFF. governance. ADB is responsible for determining whether or not investment projects are ready for financing. Due diligence of tranche projects is performed on technical. and noted that (i) feedback on technical design or cost-effective technical alternatives seems to be an exception. and other aspects. and Recommendations 180. The lack of clarity on what constitutes a major or minor change at the tranche level has resulted in most changes in tranches having been categorized as minor changes. fiduciary oversight.. but this study finds it difficult to gauge whether they are effective. regulatory. some Board members noted that. there were risks to implementation and accountability. such feedback is often via email. i. IED could access such records for some MFFs. procurement. or cost over-run financings for a project previously not supported by an MFF. as this study learned. At the time of mainstreaming. The Board had also specifically requested ADB management to supervise adherence to and quality of due diligence. safeguards. commercial. MFF flexibility is enhanced by the rules that govern additional financing. economic.Key Findings. technical due diligence seems not to have been 183. whether or not they have been suitably prepared and can be implemented in compliance with relevant ADB policies and agreed-upon criteria. economic. and leverages the programmatic orientation of. simply shifting a certain project from one tranche to another had been classified as a major change. 6. capacity. Minor changes included cost over-run financing of some projects from a certain tranche through a subsequent tranche of the same MFF.

although in many instances. the MFF time lines are longer than for stand-alone projects. information for Board oversight. on a regular basis. Each MFF is usually expected to have three or more tranches. For the 66 MFFs approved until December 2011. resource envelope has been difficult. Where a minor or major change is effected in tranche projects.6 years. the CPS and COBP do not provide a good basis for advance information to the Board on MFF-related matters. MFF investment programs span two or three CPS periods. The fact that nearly 50% of all second and subsequent tranches approved thus far. and to form a basis for tracking and reporting performance at the MFF and tranche levels. the linkages between MFF and tranche-level DMFs continue to be weak (although there has been some improvement since 2009). Dovetailing of tranche approvals for approved MFFs within the country annual 187. Even though some tranches overlap. Economic due diligence of tranche projects must be rigorous. by themselves. which is part of the team processing an MFF tranche. 7. Board Oversight over Long MFF timelines Time lines of MFFs are significantly longer and the MFF financing envelope is 185. tranche performance. A coherent set of performance indicators may not be used to track performance across tranches and at the facility level. However. Self-evaluations and independent evaluations of completed MFFs will necessarily have to take place very long after their approval. only one or two tranches have been approved thus far. across all MFF investment programs. a re-examination of economic viability would most likely lead to significant delays in tranche approval and is therefore not done. COBP. have been approved in the December bunching season means the Management does not have sufficient time for review and oversight. Lending Planning and Financial Projections 188. Portions of MFF financing envelopes that are not converted to tranche loans have increased each year. At this stage. MFF delays. MFF performance reports to the Board can be improved to provide adequate 186. and the MFF financing envelope is normally significantly larger.8 years. In many cases. the Economics and Research Department also reviews the economic analysis. when the PFR report is nearing finalization. Therefore.68 Real-Time Evaluation Study of Multitranche Financing Facility 184. and PFRR preparation—in dovetailing MFF-related data into the CPS and COBP preparation process. However. the projected MFF tranche approvals in a given year can exceed the CPS financing envelope for that sector. This situation highlights the difficulties—under existing or generally accepted practices and processes for CPS. and MFF approvals have an impact on headroom . However. and compliance with undertakings. the memorandum is not required to be circulated to the Economics and Research Department for comments. for some sectors and some countries. the Economics and Research Department obtains a PFR report for commenting at a late stage. MFF RRP. The utilization period of nine approved MFFs is 10 years or more. Tranches are comparable to stand-alone projects in terms of implementation time lines (time lapsed between approval and closing) as well as approved amounts. In addition to inputs from an economist. The scorecard system used to rate MFFs can also be refined in the coming years with the introduction of more sophisticated approaches for evaluating. the median utilization period is 7. MFFs have contributed to difficulties in lending planning and financial projections. 8. with an average of about 7. The required facility-wide and tranche-level DMFs are intended to generate the right information for oversight. significantly larger than for other lending modalities.

Although less explicit in the IEI document or the Board Paper. and Recommendations considerations. road map and policy-related aspects would begin leading to better investment programs—comprising more relevant. conditions. precisely because ADB prefers to treat MFFs and FFAs as binding commitments. Lessons. Specific FFA’s have different clauses. The IEI document that proposed the MFF modality states that ADB need not approve another PFR for financing unless all key warranties and representations made by the client under the FFA and previous approved periodic commitments have been met in full. and in that respect. DMC Experience with the MFF Modality A DMC’s investment decision-making processes influence the acceptance for 191. and impact ADB’s ability to manage contingencies in the coming years. More upfront planning and attention to strategy. MFF documents allow ADB to discontinue the MFF midstream under certain 189. the LOE required to effect . 9. and (iii) many changes are effected in tranche projects from time to time. (ii) the economic and technical due diligence rigor is not sufficient. as per MFF policy. Where project approval processes are cumbersome or encourage government and client officials to go by precedence. and more sustainable projects with improved outcomes. Besides. sometimes amounting to changes in goal posts. the MFF modality requires that any savings in a tranche loan be cancelled and then processed as a separate tranche. This is viewed as a tedious requirement by some efficiently performing clients. Where some high-level body or top-level country executive retains or intends to retain authority for project approval or loan signing. Three aspects 192. Development Effectiveness 69 190.Key Findings. and either side can exercise its right to cancel the MFF or any uncommitted portion thereof. 10. with the major thrust being that (i) the FFA does not constitute a legal obligation on the part of either the DMC or ADB. the MFF modality. This will diminish ADB’s ability to mount crisis-response operations in particular. Increased development effectiveness was expected to result from the use of the MFF modality. There is no evidence that such issues were examined at the time of mainstreaming. or terminated if conditions described in the FFA and legal agreements are not met. over a period of time. a general reduction in ADB support to improve institutional capacities after the first tranche also precludes a high development effectiveness outcome of at least some MFFs. Some constraining features of the MFF modality are also noted. however. have been identified: (i) Regarding DMC approval of certain types of changes. ADB’s capital headroom has been falling over the past few years and is projected to fall over the next few years. and will provide financing only if the borrower and client are in compliance with the MFF prerequisites. the benefits of the MFF modality are not as significant. (ii) From the perspective of some DMC governments and clients. The Board Paper is more explicit in stating that an MFF and its PFRs can be rejected. The MFF investment programs are thus considered to lock up future finances. the MFF modality would help to increase development effectiveness (footnote 121). At this time. more efficiently delivered. postponed. crowd out other lending products. (ii) ADB retains the right to decline execution of any legal agreement for a tranche. experience shows that there are some MFFs wherein (i) upfront planning work is not of the requisite quality. Investment decision-making and approval processes normally incorporate a system of checks and balances. similar to other modalities. the MFF modality is perceived as being useful. it was expected that.

Lesson 1: Where the development effectiveness of a specific MFF investment : program is to be assessed. Such information will be needed at MFF closure. strategies and road maps—or if prepared. Under such circumstances. In short. and undertakings cannot be considered firm. MFF utilization periods can possibly be exhausted without accomplishing the intended scope. such as extension of the tranche closing date. Therefore. as well as when a specific MFF investment program is to be independently evaluated. where institutional capacities are weak. Lesson 5: The rigor of economic. data and documents that shaped the MFF implementation need to be readily accessible. important. with the possible exception of certain types of investments (such as a long highway that can be financed through a series of tranches). B. and safeguards due diligence is 198. fiduciary oversight and other aspects. As a result. regulatory. Equally important is the rigor of due diligence on legal. The achievement of such filters depends on to a large extent on institutional capacities.70 Real-Time Evaluation Study of Multitranche Financing Facility any amendment in a tranche loan agreement. the clients may find it difficult to gross up charge rates to compensate the consultant for tax payment liabilities that do not arise when the same consultant is engaged by ADB. energy sector MFF in Afghanistan). which implies delays in obtaining tranche approvals. social. these filters are similar across all countries. Institutional capacity development is supported through NPIs. Although country-specific project readiness filters account for the specific circumstances of different countries. Attention to project readiness need not prevent delays in tranche approvals 193. financing plans. it is difficult to prepare credible : 197. and extension of MFF utilization periods. the experience can vary on a case-to-case basis. the MFF prerequisites of the desired quality are not likely to be easily achieved (e. For instance. and equity objectives along with improving operational efficiency and minimizing the environmental footprint.g.. gender. delays occur in achieving the desired project readiness criteria. It is also difficult to institute policy frameworks that encourage a judicious mix of commercial. 196. Lesson 3: Where actual tranche approvals in a given year exceed the country : financing envelope for that sector. Such documents have been difficult to obtain for this evaluation. financial. the facility-wide and tranchelevel DMFs can form a basis for tracking and reporting performance at the MFF and tranche levels by further improving the linkages between MFF and tranche-level DMFs. the . Lesson 2: Improved monitoring can serve to give early warnings on the : 195. but development experience indicates that weak institutions are strengthened over a period of several years or decades. (iii) Where the client is required to engage international consultants for preparation of projects for SSTs. Lesson 4: Where capacity constraints exist. when an MFF completion report is to be prepared. performance of large and long-term MFFs. The scorecard system can also provide a better basis for gauging and comparing performance across MFFs when the performance rating system is improved. For instance. then to ascertain client ownership and absorptive capacity. social. the country strategies and rolling business plans are not sufficient basis for advance MFF-related information to the Board. technical. While the devolvement of tranche approval processes encourages flexibility in many ways. is nearly the same as for any other stand-alone project modality. governance. financial. Lessons 194. the investment plans.

implementation period without compromising. this evaluation takes a broad view that the MFF modality needs to continue as one of the financing instruments in ADB’s tool kit (that includes additional financing and other existing modalities. In view of the extent to which flexibility mechanisms have led to project changes in approved tranches in the past. To ensure proper scrutiny of the MFF prerequisites. Recommendations 200. Lessons. C. while the evidence for 199. Another recommendation deals with the issues related to access to data and documentation. The MFF modality has attractive features that have the potential to help improve efficiency as well as development effectiveness provided a number of prerequisites are adhered to. such as the MFF pre-requisites. it would be useful for ADB to consider ways to be able to exercise the option. improved development effectiveness remains tentative. Towards this goal. or with the strengthening of.Key Findings. and the fact that the additional financing mechanism has led to unwarranted flexibility in project design. Recommendation 2: Manage the use of flexibility during the MFF 202. of terminating or cancelling ongoing MFFs midstream. Office of the General Counsel. In recognition that these attractive features are appreciated by clients and have contributed to the growth in MFF programs. and the design of physical investment programs that conform to MFF prerequisites. Recommendation 1: Apply the standards for the needed quality of MFF prerequisites for MFF investment programs in countries and sectors as designed at the time of mainstreaming. procedural and other changes . which could be carried out as part of the CPS process. are presented below to strengthen the approval and implementation process for the MFF modality. To facilitate adherence to other provisions of the Operations Manual. without compromising other intended benefits of the modality. ADB must ensure that future MFF programs are consistent with the provisions of the relevant Operations Manual sections (D14) and that the comparative advantages of the MFF modality vis-à-vis other lending modalities are highlighted at the concept stage. the benefits of the MFF modality. 201. it is essential to augment the existing peer review mechanism with: (i) use of suitable MFF readiness filters for specific ADB regions or DMCs. The adequacy of such due diligence must be reconfirmed through monitoring arrangements in subsequent recommendations. there needs to be a realistic discussion on institutional capacities and the suitability and stability of a policy framework. as well as results based financing and other modalities currently under consideration). on the basis of the study’s key findings. each regional department can have a focal person that guides other ADB staff (in consultation with SPD. and (ii) training of staff on the conduct of due diligence for institutional capacity (which can help improve the design of nonphysical investments and the content of policy dialogue) as well as for enhancing understanding of various MFF prerequisites (as per the relevant Operations Manual sections). 71 Lesson 6: When lending constraints are increasing. Four recommendations. Controller and COSO) to consistently and uniformly interpret guidelines that define minor and major tranche project change categorization. and Recommendations achievements through the MFF program may deviate significantly from what was stipulated in the Board-approved documentation upfront. Besides. A suitable arrangement can also be worked out to ensure uniform interpretation of guidelines across regional departments. if necessary. it is important to institute systems and procedures that allow for sufficient flexibility to DMC governments and clients.

and that data entered once are audited and verified to ascertain correctness.72 Real-Time Evaluation Study of Multitranche Financing Facility required to improve technical and economic due diligence of tranche projects also needs to be considered. and (iii) activities to overcome deficiencies found in midterm reviews in relation to remedial actions required. Recommendation 5: Ask for regular submission of necessary documentation 205. . It is useful to weigh the pros and cons of conducting annual reviews versus midterm reviews during the MFF utilization period. It is important to institute a system of one or more facility-wide formal reviews during the term of the MFF to facilitate Management decision making. the MFF modality currently does not require a facility-wide midterm review. Options for such criteria can comprise suitable triggers that relate to (i) the required rate of tranche approvals and amounts in the remaining MFF utilization period. It is also essential to establish systems to ascertain that all official online databases are regularly updated. Although it can span two or more CPS cycles. Recommendation 4: Regularly monitor MFF portions not converted to tranches 204. in relation to the country programming financing envelope. and to facilitate learning and accountability. Management can also initiate suitable awareness creation activities. The use of all these databases (including eOperations and TMS) can also be encouraged to help obtain feedback for improving them further. ADB needs to keep adequate records and provide easy access to all relevant documentation. The design and due diligence of other stand-alone modes will also benefit from such measures. it is useful to devise criteria for their cancellation or discontinuation. Should it be necessary to avoid reputational risk. Given that ADB DMCs increasingly demand knowledge products and services. 203. or postponement of tranche approval. (ii) a cap on the MFF financing envelope not converted to tranches. or coinciding the timing of such reviews with the CPS preparation process. The results of the formal reviews ought to be reported to the Board in a timely manner. in relation to levels achieved so far. Recommendation 3: Conduct facility-wide mid-term reviews of ongoing MFF programs and formal reviews at any time deemed appropriate. Given the concerns that result from continuously rising portions of MFF financing envelopes that are not converted to tranches. This can be achieved by having an online searchable repository on the intranet. and take necessary steps that will help ensure prudent lending planning and financial projections. from clients and make all relevant documentation and data on implementation of MFF immediately accessible within ADB.

Lessons. and Recommendations 73 Appendixes .Key Findings.

Given the balance sheet implications of ADB funding. many transactions that ADB financed on a stand-alone project basis were part of a broader and often long-term investment program. Mainstreaming the Multitranche Financing Facility. its products more innovative. Historical Perspective 1. the Board also opined that the MFF should be evaluated in 3–4 years. and tranche approvals have exceeded one-third of ADB’s total annual approvals since 2010 (Table A1. 3 The MFF modality has become increasingly prevalent since 2005. Following a 3-year period of pilot testing the MFF modality. opens the way for more structured cofinancing. The Innovation and Efficiency Initiative (IEI) document thus observed that the challenge and opportunity for ADB was to make its interventions more programmatic. . The MFF Annual Report published in 2012 observed that MFFs performed reasonably well during 2005–2011. DMC government clients normally preferred loans that financed smaller time slices of investments even though that supposedly increased the DMC government’s and executing agency’s time and resources required for processing. 2012.” and in the process frees up ADB staff time spent on processing for implementation. 2. The rationale for introducing the MFF modality was ostensibly in response to a felt need for ADB to commit on a long-term basis. ADB. 1 2 3 ADB. Along with approving the mainstreaming of the MFF modality. although ADB did not finance a slice longer than 3– 5 years. 2008.1). Manila. Innovative and Efficiency Initiative: Pilot Financing Instruments and Modalities. 3. but still retain flexibility and not burden the borrowers with high commitment charges. The multitranche financing facility (MFF) was introduced in 2005 1 and streamlined in July 2008 following approval from the Board of Directors. the Board considered that the MFF modality enables ADB to invest programmatically. and its practices and procedures more efficient. ADB.APPENDIX 1: OVERVIEW OF THE MULTITRANCE FINANCING FACILITY MODALITY A. cuts the financial and nonfinancial costs of doing business. This also supposedly increased ADB’s cost of doing business. 2005. Manila. Manila. Until 2005. 4. MFF Annual Report 2011. and provides predictability and continuity to clients. although performance varied significantly across countries and sectors. reduces overreliance on stand-alone project approaches that often involve repetitive and cumbersome business processes. and the commitment fee structure that discouraged large-scale investment programs. 2 The MFF modality was conceived to facilitate “greater certainty and upfront agreement with a client through financing that fits within the client’s longer term plan. Based on the experience gained in the pilot phase. the Board of Directors approved its mainstreaming in July 2008. particularly as due diligence and documentation were required to be repeated each time as if the project or sector operations were new.

193 2010 12 4.718 2009 12 6. Policies can be refined. Manila.889 % MFF Tranche Amount Approvals to Total Loan Approvals -17.1: Multitranche Financing Facility Approvals Approved MFF Financing Envelope Number of Amount Year MFF Approvals ($ million) 2005 2 1.5 22. a Refers to Asian Development Fund (ADF) Loan 2210-PAK from Special Fund Resources. 2012.5 26.810 2007 7 4.4 Tranches of sector investment programs. urban infrastructure projects).237 Total 66 31. (iii) financial intermediary credit lines. ADB Management expects that the MFF potentially provides ADB and its clients with multiple entry points for policy dialogue within a specified utilization period.024 2008 12 5. 4 The financial intermediation option was included so as not to foreclose the possibility of financing a large number of small to mid-size investments through the MFF modality. approved on 13 December 2005. (ii) tranches of sector investment programs over a long time frame. The MFF modality was originally meant only for investment projects—although a few policy-based loans have also been included in recent years. Some MFF tranches have also been used to finance cost overruns from other ADB interventions.7 -. . and safeguard frameworks adjusted to consider specific issues. 6. Following Board approval. for institutional strengthening. are of two types: (i) networks of highways or transmission lines where the same type of projects with the same executive agency or implementing agency are repeated at multiple locations. Multitranche Financing Facility Annual Report 2011. and (ii) a number of discrete but same type of projects that are repeated at different locations with different executing/implementing agencies (e.3 19.= not available. About the MFF 5. The overall facility amount is not a legally binding commitment on ADB or its clients. risks addressed. in turn. MFF = multitranche financing facility.6 32. B.. and reporting arrangements. The first tranche can include (but is not limited to) the financing of advisors for the implementation of the first project. 7.7 37.436 2011 13 6. sequential components of large stand-alone projects. which is to be made available to the DMC only for an investment program that meets the preconditions approved for the use of the MFF: specific entry points. the Board approves a maximum amount for each proposed MFF.Overview of the Multitranche Financing Facility Modality 75 Table A1.to long-term investment programs or investment plans. An MFF is a financing modality made available by ADB to its clients to support their medium. Under this facility. undertakings. The guarantee mechanism was included so as to encourage cofinancing from commercial banks (given that one of the intended benefits of the MFF is to enable executing agencies to seek cofinancing once they are assured of long-term commitment from ADB). MFF interventions are broadly classified as follows: (i) discrete. only the converted loans are.28a 971 1670 2160 3571 4051 4462 16.” Sources: Asian Development Bank database and ADB.938 Approved MFF Tranche Amount ($ million) 3. preparation of subsequent projects. and (iv) guarantees.6 33. This was approved along with MFF02 “National Highway Development Sector Investment Program. Management converts this facility amount into a series of loans as and when the investments are deemed to be ready and the client requests financing.g.520 2006 8 3. As originally conceived in the IEI document. Earlier tranches can be designed to facilitate the implementation of subsequent tranches. and capacity development. eligibility criteria and decision making filters.

5 freeing staff time. MRM = management review meeting.2 present respectively process flow diagrams for (i) the MFF and the first periodic financing request (PFR). . ADB believes that in the processing of an MFF and its multiple tranche loans.g. (ii) more opportunities to address policy and procedural gaps. and (iii) more opportunities to modify implementation plans while work is in progress. RRP = report and recommendation to the president. which can be made available during the implementation phase. DG = director general. SRC = staff review committee. 52 and 53). 9. FFA = framework financing agreement. PFR = periodic financing request. 5 Refer to footnote 2 (paras. Manila. ADB and its clients can expect significant time and related resource savings vis-à-vis stand-alone projects.. a fact-finding mission may be combined with completion of PPTA work (i.1 and A1. PFR. some of the steps are now normally carried simultaneously (e.1 and A1.1: Flow Chart for Processing MFF and First PFR Concept Processing and Clearance Board Approval Post Approval Activities Concept clearance by VP Fact Finding • Draft RRP • Draft FFA • Draft PFR Submit to the Board •RRP •Signed FFA* •Signed PFR Memo to the President through VP requesting approval of the tranche and legal agreements Legal agreements to be signed by client and ADB within 12 months of Board approval of MFF Interdepartmental circulation MRM Appraisal •Update draft RRP •Update draft FFA •Update draft PFR Interdepartmental circulation SRC VP authorizes negotiation of legal agreements and execution of FFA •Negotiate FFA. project feasibility study). and related legal Agreements •Sign FFA – DG/CD •Sign FFA & PFR Client •Finalize RRP CD = country director. This would come with other associated benefits. VP = vice president. 2008. Mainstreaming the Multitranche Financing Facility.. Source: ADB.e. To what extent this belief is justified is at best unclear even today.76 Appendix 1 8.2. and (ii) second and subsequent PFRs. MFF = multitranche financing facility. Figure A1. It is important to note that the new business processes introduced in 2010 entail the same steps as outlined in Figures A1. Figures A1. such as (i) more opportunities for interaction with clients on sector issues and trends.

. policy issues. etc. OGC. capacity. minute changes to PFR or client signs new PFR Memo to President through VP requesting approval of the tranche and legal agreements Legal agreements signed by client and ADB ADB = Asian Development Bank. CTL. progress on previous tranches. RSES. status of compliance. and regional department VP authorizes negotiations of legal agreements ADB to Client: Notice of decision and invitation to negotiate legal agreements on PFR •Negotiation of legal agreements •If appropriate. COSO = Central Operations Services Office.2: Flow Chart for Processing Second and Subsequent PFRs Monitors and Reviews Client/Executing Agency (EA) •implements project and program •prepares future projects •shares due diligence and preparatory work with ADB mission/teams ADB Project Team Client/EA submits PFR Project team drafts PFR Report •description of proposed tranche.Overview of the Multitranche Financing Facility Modality 77 Figure A1. PFR. and RSES for comments within 5 working days •Management reviews PFR Report. OED = Operations Evaluation Department. safeguard policy compliance memo •VP may convene MRM if deemed appropriate OGC drafts legal agreements. CTL. and circulates to COSO. 2008. RSES = Environment and Safeguards Division. governance. OGC = Office of the General Counsel. Source: ADB. Circulation of PFR Report to COSO. OED. OED. Mainstreaming the Multitranche Financing Facility. CTL = Controller’s Department. PFR = periodic financing request. VP = Vice President. Manila.

Manila. . the MFF tranche projects are also affected by factors such as insufficient institutional capacities. 1. etc. start-up delays. and merits of the proposed MFF The first tranche should not exclusively finance detailed design. Besides. due diligence services.2: Key Requirements for Multitranche Financing Facility Design Description Documentation Justify choice of modality in Concept Paper All the following constituents are present and well defined: a) Sector strategy and associated road map b) Clear strategic context justifying ADB’s intervention c) A policy framework (if unsatisfactory or not available. An investment program proposed for MFF should first be checked for eligibility on this basis. policy framework. 6 Facility completion reports are also expected to be prepared as and when ongoing MFF’s begin to close. etc. Refer to footnote 9 (paras. policy and institutional mandate of EA/IA) Consistency of MFF support with priorities outlined in the country partnership strategy (CPS) at the time of approvals of MFF and each Tranche Checklist signed by project team leader. Much of the information regarding progress of approved MFFs and their tranches is available through the project performance information system and e-Operations. contractors’ unresponsiveness. Factors Affecting MFF Performance 11. capacity development. Table A1. 14–24). strategic context. 2011. the RRP should contain indicative information (geography. as for investment projects funded supported by ADB through other modalities. 1 2 3 4 5 B. as of now. The tranche must have a physical investment component (Note: if nonphysical investment alone is required. such as TA loan or a project design advance (PDA) A.8 The essential characteristics of such constituents are also well understood 9 and clearly show the need for the executing agency(ies) and implementing agency(ies) to have good in-house skill sets and capacity levels. and decision-making criteria and filters.2 lists the key requirements for MFF design at present. and that infrastructure projects normally take 3–5 years or more to complete. past implementation records. financing plan. type of investment. undertakings. The MFF modality should help staff to strategically design interventions to maximize their impacts 7 when the following constituents are in place: sector road map. director. etc. Staff Instructions for the Multitranche Financing Facility. Otherwise. and director general to accompany departmental request for circulating MFF’s RRP to the Board MFF Structuring (towards maximizing impact) Design of Tranche 1 and its physical investment projects should be representative of the entire MFF to the extent possible. few tranches have closed and few tranche completion reports are available. given that the first MFF approvals occurred in December 2005. 2010.78 Appendix 1 10. investment program. 6 7 6 7 8 9 This is not unusual.) that is sufficient to understand the scope and financing of subsequent tranches. ADB. Although there should be a completion report for each MFF tranche. then must include other modalities for policy dialogue and development) d) Detailed investment program/plan strongly owned by the client e) Financing plan for the MFF f) Facility level undertakings that capture the basic principles and criteria under which the financing will be made available Good staff judgment to back the decisions regarding: a) Whether or not the EA or IA is suitable to implement an MFF b) The level of implementation complexity that can arise from a project involving multiple EAs and IAs can be managed (Note: consider EA/IA capacity. then other modalities should be used. Operational Manual Section D14 issued on 18 May 2010. Table A1. subsector. Manila. ADB.

(ii) appropriate management information systems and good management and application of such information. and (iii) well equipped advisory and support teams for procurement. IA = implementing agency. Source: Compiled by the Independent Evaluation Department. etc. 12. Simultaneously. safeguards framework. the RRP should include: a) indicative/expected categorization for each tranche (which will be confirmed during implementation) b) Explain measures that will be put in place during tranche processing. (ii) ADB. to secure safeguards compliance (i. 2011.e. Operations Manual. MFF = multitranche financing facility. loan amounts. The 10 Refer to footnote 2. Manila. FFA = framework financing agreement. PPTA = project preparatory technical assistance. (Note: similarly. Manila. may also be at later stages DMF = design and monitoring framework. (iii) ADB. The MFF modality also calls for (i) continuity of ADB staff and significant reallocation of ADB resources from processing to implementation. Section D14. inputs. and be consistent with the approved list of eligible items Quality Assurance and Review (Processing stage) One expert from a Panel of Experts to review: a) adequacy of the MFF as the choice of modality b) compliance with MFF policies Note: certainly at the concept paper clearance stage. 2006. PFR reports submitted for President’s approval should specify which expenditures are to be financed from ADB sources. 14 Description The first tranche projects should be representative of the entire MFF from a safeguards perspective. 2010. should be included in the facility administration manual (FAM). legal. financing plan.. This may be explained in the FFA. each tranche should contribute to maximizing development effectiveness and optimizing resource use) PPTA should be used only for preparation of the MFF and Tranche1 (Note 1: unless exceptional circumstances prevail) (Note 2: financing of preparation of subsequent tranches should be incorporated in earlier tranches) Design and Monitoring Frameworks (DMFs) a) DMF for entire MFF should track the direction of the road map. the Board expressed concerns that related mostly to (i) the strategic context of the MFF. At the end of the pilot phase. If not.Overview of the Multitranche Financing Facility Modality 79 8 9 10 11 12 13 C. Operations Manual Section D14. the nature of investment and financing plans. (ii) clarity and consistency on the criteria for the MFF and its application—which refers to the quality of road maps and policy frameworks. outcomes. (iv) ADB. economic. warranties and representations. and administrative efficiency factors c) EA/IA absorptive capacity d) ADB’s strategic intervention in the sector (Note: this contributes to maximizing development effectiveness) Information on tranche projects. Manila. and results b) DMF for each Tranche should focus on project level outcomes. RRP = report and recommendation of the President. the Board was generally supportive of the MFF modality. EA = executing agency. 10 2. from: (i) ADB. compliance with Operations Manual Sections F1 and D14). Issues 13. and the application of ADB policies and procedures. policy framework. . Manila. broad investment program. and (iii) risks to implementation and accountability. 2008. and on the basis of experience gathered during the pilot phase. outputs and inputs c) Need for consistency and clear linkages between the two List of eligible items for expenditure is determined in the MFF’s RRP as approved by the Board. Staff Instructions for the Multitranche Financing Facility. although some members expressed concern about the increasing size of the MFF portfolio. TA = technical assistance. safeguards. MFF size should be justified within the context of: a) client’s financing needs and readiness of the investments b) technical. and other matters. Staff Instructions for Multitranche Financing Facility.

ADB. 14. ADB. 11 12 13 14 15 16 17 Covering memo dated 1 July 2011. and its own oversight. (ii) introduce quality assurance systems. ADB. Manila. a tight alignment of the sector roadmap with the government strategy and the CPS would be required. Salient among these are (i) stronger emphasis on project readiness. refer to Appendixes 1 through 6 of ADB. start-up delays. A 2010 development effectiveness review (DEfR) showed that ADB had remained by-and-large on track toward achieving its 2009–2012 output targets. and improved project monitoring and performance reporting. for release of new staff Instructions for the MFF modality. Note: This is an internal document. and its design. Note: This is an internal document. finalized in July 2011 after discussions with the operations departments. and security concerns. this alone may not be sufficient. 2011 (footnote 19). Manila. the MFF design does not appear to work as intended. Report of the Project Implementation Working Group. and doability (addressing capacity challenges. as well as provide a sound basis for a conceptual framework to assess risks and performance and increase accountability. In Board meetings held during 2010–2011. contractors’ unresponsiveness. The operational performance of MFF tranches could be improved by adequate implementation of the action plans articulated by various regional departments. ADB. although the delivery of core sector development outcomes had been on the decline. 2012. in certain sectors and country contexts.13 C. as well as the government’s ownership and commitment. 23 tranches have potential problems [para. implementation challenges. 16 17. and tranche projects are still affected by factors such as insufficient institutional capacities. and (iii) improve reporting. The Board also requested for better benchmarking of sector issues that the MFF and other ADB financial instruments target. Good Project Implementation Practice. However. reform delays. Serious assessments of fundamental elements would further be needed to ensure that the MFF will help ADB enhance sector development outputs and outcomes. streamlining of business processes. 14]. ADB. identifying areas that ADB should further emphasize to ensure successful achievement of its mandate. and (ii) advisory services financed through previous tranches should also help address constraints in subsequent tranches. 2011. and other risks). This would allow a closer look to identify the problems and causal factors that influence MFF performance. MFF and Development Effectiveness 16. 2010. Improving Project Outcomes. Staff Instructions for the Multitranche Financing Facility. Manila (August). and that substantial and material changes in the type of investments contemplated under the investment program/plan should require Board approval. Manila. 14 This finding has spurred management and the regional departments to adopt a number of initiatives. addressed these Board concerns. One expectation was that the MFF modality would face fewer hurdles in project implementation than conventional modalities for investment projects because (i) investments proposed for MFF are first checked for eligibility with respect to certain criteria and decision-making filters. 11 New Staff Instructions for the MFF. For details of action plans by various regional departments. 2011. Development Effectiveness Review 2010 Report.80 Appendix 1 Board also wanted precise decision-making criteria. including the need to (i) strengthen the rationale for selecting the MFF modality. the Board raised further issues. better reporting arrangements. 12 15. 15 and (ii) improving project outcomes through all stages of the project cycle. 15]). Multitranche Financing Facility Annual Report 2011. Manila (December). 17 However. 2011. enhancing staff skills and organizational structuring matters. and mainstreaming the use of sector roadmaps/results frameworks through the project cycle. To this end. 16 February (15 MFFs have potential problems and one is at risk [para. .

Table A1. public sector nonsovereigns (IEI product) DMCs Sector Development Program To finance a reform Loan program and specific project linked to sector and program (normally small in size) Project costs and corporate operating or capital expenses Cost of reforms. and private entities Guarantee Amounts guaranteed and DMCs. and project costs DMCs Sector Loan Cost of subprojects In tranches. Project loans: in amounts requested against project cost One loan Up front In amounts requested against cost of subprojects One loan up front In amounts requested to fund the credit lines In amounts requested against mandate cost In amounts requested against project cost DMCs Financial Intermediary Loan Financial intermediaries Technical Assistance Loan To finance numerous and comparatively small subprojects within a sector To finance directed investments of financial intermediaries To finance a technical assistance mandate Credit lines extended by the financial intermediary Mandate costs One loan up front To supplement Project costs financing of an ongoing project where original financing is insufficient Guaranteed amounts One loan up front Supplementary Loan DMCs. against agreed-upon conditions Nonsovereign Loan (without a sovereign guarantee) Policy-based Program Loan To finance a reform program One loan up front DMCs. public sector nonsovereigns. and budget requirements Cost of reforms. public sector proven as owed subsovereigns. the loan: in tranches against other a project loan) completion of agreedupon conditions. Loans Project Loan (sovereign) In amounts requested. Guarantees Partial Credit Guarantee (with To guarantee partial or without sovereign repayment of amounts guarantee to cover ADB risk) owed to lenders of ADB's client Political Risk Guarantee (with To guarantee or without sovereign repayment of amounts guarantee to cover ADB risk) owed to lenders of ADB's client where Guaranteed amounts 81 .3: Comparison of Multitranche Financing Facility and Other Modalities Purpose To finance a project Project or corporate finance requirements One loan up front Project costs One loan up front What it pays for Form in which it is provided Disbursement Client Product A. adjustment costs or budget requirements. against completion of agreedupon conditions Two loans up front (one a Policy-based program policy-based program loan. and private entities DMCs. and private entities Overview of the Multitranche Financing Facility Modality B. against project cost In amounts requested. public sector proven as owed subsovereigns. and private entities Guarantee Amounts guaranteed and DMCs. public sector nonsovereigns Private sector. adjustment costs. public sector nonsovereigns.

(c) slices of large contract packages. or guarantees are committed separately over a period of time for the estimated cost of projects as they become ready for financing. Mainstreaming the Multitranche Financing Facility. Maximum amount approved under facility.82 Product What it pays for Form in which it is provided Disbursement Client Appendix 1 Purpose repayment fails due to political risk (e. MFF = multitranche financing facility. availability. public sector subsovereigns. Each separate financing disbursed as a regular loan/grant. IEI = innovation and efficiency initiative.g. ADF = Asian Development Fund. expropriation) Amount for each financing committed out of available MFF amount against a financing request. DMC = developing member country. Source: ADB. or administered cofinancing over time (a) multiple projects under an investment program in a sector or in various sectors. the latter depending on eligibility. breach of contract. and allocation conditions. . guarantee. grants. FX conversion risk. (b) large stand-alone projects with substantial and related individual components. As part of the above. FX repatriation risk. ADB = Asian Development Bank. FX = foreign exchange. OCR and ADF financing possible. 2008. C. To finance through Investment costs loan. grant.. OCR = ordinary capital resources. A series of loans. need. MFF Mainstreamed MFF DMCs. financing will also cover nonphysical investments. Manila.

indicating a weak sector strategy or roadmap? Does the flexibility accorded by the MFF allow for relaxation of standards for project design. sector roadmap. etc.1: Evaluation Issues and Questions Broad Evaluation Issue MFF Portfolio Related Evaluation Questions What is the growth of the MFF portfolio? How has MFF coverage increased to cover more countries and sectors? Is there any significant “bunching” of MFFs for approval by the Board towards the end of a calendar year? Likewise. the client. policy framework.APPENDIX 2: EVALUATION ISSUES AND INFORMATION REQUIREMENTS Table A2. and the dynamic among ADB.? Are there different standards for deciding on the classification of project scope changes across regional departments or divisions? Does the flexibility provided under MFF include cost overruns in subsequent The premise on which the MFF was piloted and mainstreamed The working of the MFF modality . due diligence. and the consultant? Are policy reforms sufficiently well monitored during the MFF utilization period? Or is the focus essentially on preparation and processing of physical investment of subsequent tranches to reach the MFF financing envelope within the MFF utilization period? Does the flexibility and responsiveness to a client’s needs lead to frequent and adhoc changes in tranche scope. investment program. is there any significant bunching of tranches for approval from Management towards the end of a calendar year? Has there been a major shift in the sectoral distribution of ADB’s portfolio since the MFF modality was introduced or was streamlined? Does the large MFF envelope crowd out other sector interventions? Does MFF crowd out interventions in sectors that may be more closely linked to poverty reduction? Is the MFF utilization period significantly different from that for stand-alone project loans/grants? Is the planned tranche term (approval to closure) similar to that for stand-alone projects? Does the MFF modality result in progressively quicker disbursements in successive tranches? Does the MFF modality lead to overall savings in ADB-staff time for processing (vis-àvis a string of stand-alone projects) Does the MFF enable staff to spend more time for implementation administration and policy dialogue? Has introduction of the MFF modality resulted in increased continuity for staff working on the MFF? Does the MFF modality result in commitment fee savings? Has the MFF modality encouraged or facilitated cofinancing? Are the MFF prerequisites (strategic context and roadmap. does the MFF effectively reduce to a mere “standby line of credit” type facility? Does ADB revisit the policy agenda during the course of the MFF? Does increased use of the MFF modality have any implications for use of TA resources. financing plan. and undertakings) solid and stable enough to forego the need for further approvals from the Board on any aspect of the MFF during the MFF utilization period? Are the clients advanced or capable enough to take on the responsibility of preparing subsequent tranches? Is the MFF tranche content as per the roadmap—or does it reflect ad hoc and changing priorities? Are all advisory nonphysical investments (NPIs) listed in the MFF report and recommendation of the President (RRP) pursued? Or are they sometimes sacrificed to enable cost overrun management on the physical investment side? To what extent does NPI include construction supervision and project management support? If the client is sophisticated and capable so that no policy and institutional capacity development inputs are required.

84

Appendix 2
Broad Evaluation Issue Related Evaluation Questions tranches, or does incorporating cost overruns of external projects into the fold of the MFF lead to reduced cost consciousness in the due diligence process on the engineering and economic sides? Is there any difference in intensity in economic and technical/engineering due diligence between the first tranche (which is normally approved with the MFF) and subsequent tranches? Does ADB have enough in-house expertise in technical/engineering fields to be at least at par with consultant experts, at least for the more common fields of engineering? Are there sufficient and credible control points in the due diligence process in ADB? Is it possible or likely that the due diligence for second and subsequent tranches (SSTs) is less rigorous than for the first tranche? Are the recently instituted measures for quality assurance helping to improve the quality of approved MFFs? Is there any implication for ADB’s development effectiveness from the fact that there is no mandate to revisit the basic assumptions under which the MFF has been approved? How do DMC governments and counterparts view the flexibility that is offered by the MFF modality? What is the fit of the MFF modality with the institutional setup in the DMC? How are DMC development investment decision-making processes aligned to derive benefits offered by the MFF modality? In other words, is DMC government and counterpart staff time saved because of the MFF modality? And is it perceived that way? Is the “nonfinancial commitment” character of MFF absolutely neutral to ADB’s lending headroom and liquidity requirements by the Treasury Department? Does MFF reduce the importance of the country programming exercise?

DMC- and ADB-related issues

ADB = Asian Development Bank, DMC = developing member country, MFF = multitranche financing facility, PFR = periodic financing request, RRP = report and recommendation of the President, SST = second and subsequent tranche. Source: Independent Evaluation Department.

Table A2.2: Information Sources for Evaluation of the MFF Modality
Type of Information Source Documents that present the genesis and evolution of the MFF modality Particulars of Information Source ADB-wide corporate strategy documents MFF proposal, policy paper, relevant staff instructions, and Operations Manual sections Concerns expressed by the Board at mainstreaming, and at approval of various MFF interventions ADB initiatives to improve core sector development outcomes ADB Annual Reports, IED Annual Reviews Relevant country partnership strategies and operational business plans for countries where MFF investment programs have been approved To the extent available, MFF-related documents such as reports and recommendations of the President (RRPs), framework financing agreements (FFAs), periodic financing requests (PFRs), PFR reports (PFRRs), facility administration manuals (FAMs), project administration manuals (PAMs), back-tooffice reports (BTORs), etc. e-Operations (e-Ops) Loan documents Loan and Grant Financial Information Service (LGFIS) Listing of Loan, Technical Assistance, Grant, and Equity Approvals (LTAA) Project Performance Management System (PPMS) Quarterly Portfolio Updates (QPU) Project Information Documents (PID) Project Performance Reports Interactions with ADB Management and/or staff engaged in: Processing and/or implementation of MFFs

Other documents

ADB databases

Interactions within ADB

Evaluation Issues and Information Requirements
Type of Information Source Particulars of Information Source Monitoring and reporting of MFF performance to the Board Due diligence of MFF tranches Legal and other compliance-related aspects Treasury management Interactions with the following categories of stakeholders for transport or energy sector MFFs in Armenia, Azerbaijan, People’s Republic of China, Georgia, India, Vietnam: Relevant national, provincial, and local government ministries Executing agencies and implementing agencies Consultants ADB personnel engaged in preparation and processing of: MFFs approved until December 2011 Tranches approved until December 2011

85

Interactions with incountry stakeholders

Online survey

ADB = Asian Development Bank, BTOR = back-to-office reports, e-Ops = e-Operations, FAM = facility administration manual, FFA = framework financing agreement, IED = Independent Evaluation Department, LGFIS = Loan and Grant Financial Information Service, LTAA = Listing of Loan, Technical Assistance, Grant, and Equity Approvals, MFF = multitranche financing facility, PAM = project administration manual, PID = project information document, PFR = periodic financing request, PFRR = periodic financing request report, PPMS = project performance management system, QPU = quarterly portfolio update, RRP = report and recommendation of the President. Source: Independent Evaluation Department.

Table A2.3: Documents for a Full Review of MFF and Tranches a
Normally not available Difficult to obtain Generally not obtainable

Normally available 1. 1.1 1.2 1.3 1.4 2. 2.1 Concept Paper Stage Interdepartmental Comments-Matrix on Draft Concept Paper Concept Paper Minutes of MRM BTOR of Appraisal Mission RRP-Preparation Stage Interdepartmental Comments-Matrix on Draft RRP,FFA,PFR

Remarks to become aware of the MFF issues contains justification for MFF contains guidance by Management

x x x x

x

2.2

Minutes of MRM Interdepartmental Comments on Updated Draft RRP,FFA,PFR

x

2.3

x

2.4 2.5 3. 3.1 3.2

Minutes of SRC Minutes of FFA Negotiations Board Presentation Stage MFF-RRP Linked Documents

x x

to become aware of the issues contains guidance by Management on how to deal with critical interdepartmental comments review how Management guidance has been followed contains guidance by Management on how to deal with critical issues interdepartmental comments obtain information on concerns of client

x x

documents needed as source of basic info on

86

Appendix 2

3.3

FFA

Normally available x

Normally not available

Difficult to obtain

Generally not obtainable

3.4 3.5 3.6 4. 4.1 4.2 4.3 5. 5.1

PFR1 Minutes of Board Discussions Minutes of Loan Negotiations on PFR1 Stage after Board Approval Loan Agreement FAM PAM Implementation Stage of Tranche 1 BTORs of Review Missions Interdepartmental Comments-Matrix on Tender Documents; Safeguard documents, EIA, etc. ADB-Comments on Tender Documents

x x x

Remarks MFF/tranche; not all important details are contained in RRP (due to page limit) to be aware of the Board's concerns obtain information on concerns of client

x x x

source of basic information not all necessary and important details are contained in RRP

x

to obtain information on implementation issues to obtain information on implementation issues, compliance with ADB rules, and ADB input into the implementation process obtain information on changes in project and judgment on arguments whether change is major or minor

5.2

x

5.3

x

5.4 6.

Memos on major and minor changes in scope including Comments-table Preparation Stage for PFR-SST Documentation of advice provided by ADB to EA during their preparation of PFR-SST regarding engineering, economic, financial, and safeguard aspects Official Comments of ADB to EA on Draft PFR-SST Approval Stage of PFRR-SST Interdepartmental Comments-Matrix on Draft-PFRR

x

6.1 6.2 7. 7.1

x x

to judge ADB’s overall contribution to project design and development

x

7.2 7.3 7.4

Minutes of MRM on PFRR PFRR & linked Documents Updated FAM

x x x

7.5

PAM of Approved Tranche/Project

x

to become aware of the issues contains guidance by Management on how to deal with critical issues interdepartmental comments documents needed as source of basic information on MFF/tranche; not all important details are contained in RRP (due to

MRM = management review meeting. Source: Independent Evaluation Department. . FAM = facility administration manual. PFR = periodic financing request.Evaluation Issues and Information Requirements 87 Normally available Normally not available Difficult to obtain Generally not obtainable 7. Minutes of Loan Negotiations Loan Agreement on Approved Tranche Implementation Stage of subsequent Tranche(s) x Remarks page limit) obtain information on concerns of client source of basic information See No. SST = second and subsequent tranches. SRC = staff review committee. 5 above ADB = Asian Development Bank. RRP = report and recommendation of the President. PAM = project administration manual.7 8. FFA = framework financing agreement. EA = executing agency. PFRR = periodic financing request report. a Assuming IED does not have access to documents uploaded on e-STAR. MFF = multitranche financing facility.6 7. EIA = environmental impact assessment.

1: Approved MFF Investment Programs MFF No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 Country IND PAK IND BAN PAK IND PAK PRC PAK IND IND IND VIE AZE IND PAK IND IND IND PRC PAK IND IND KAZ AFG AFG INO PAK PNG IND PAK AZE AFG GEO ARM UZB IND IND PNG PRC VIE UZB GEO IND IND IND KAZ KAZ IND IND PNG VIE Title Rural Roads Sector II Investment Program National Highway Development Sector Investment Program Uttaranchal Power Sector Investment Program Railway Sector Investment Program Renewable Energy Sector Development Investment Program North Karnataka Urban Sector Investment Program Power Transmission Enhancement Investment Program Gansu Heihe Rural Hydropower Development Investment Program Punjab Irrigated Agriculture Investment Program Uttaranchal State-Road Investment Program Madhya Pradesh Power Sector Investment Program Jammu and Kashmir Urban Sector Development Investment Program Mong Duong 1 Thermal Power Project Road Network Development Program Rajastan Urban Sector Development Investment Program National Trade Corridor Highway Investment Program India Infrastructure Project Financing Facility Uttarakhand Urban Sector Development Investment Program National Power Grid Development Investment Program Guangdong Energy Efficiency and Environment Improvement Investment Program Power Distribution Enhancement Investment Program Orissa Integrated Irrigated Agriculture and Water Management Investment Program Himachal Pradesh Clean Energy Development Investment Program CAREC Transport Corridor I (Zhambyl Oblast Section) [Western Europe-Western People's Republic of China International Transit Corridor] Investment Program Road Network Development Investment Program Energy Sector Development Investment Program Integrated Citarum Water Resources Management Investment Program Sindh Cities Improvement Investment Program Highlands Region Road Improvement Investment Program North Eastern Region Capital Cities Development Investment Program Energy Efficiency Investment Program Water Supply and Sanitation Investment Program Water Resources Development Investment Program Road Corridor Investment Program North-South Road Corridor Investment Program Water Supply and Sanitation Services Investment Program Second India Infrastructure Project Financing Facility Assam Power Sector Enhancement Investment Program Civil Aviation Development Investment Program Railway Energy Efficiency and Safety Enhancement Investment Program SOE Reform and Corporate Governance Facilitation Program Central Asia Regional Economic Cooperation Corridor 2 Road Investment Program Sustainable Urban Transport Investment Program National Capital Region Urban Infrastructure Financing Facility Agribusiness Infrastructure Development Investment Program Infrastructure Development Investment Program for Tourism Central Asia Regional Economic Cooperation Corridor 2 (Mangystau Oblast Sections) Investment Program Small and Medium Enterprise Investment Program Sustainable Coastal Protection and Management Investment Program Assam Integrated Flood and Riverbank Erosion Risk Management Investment Program Town Electrification Investment Program Ho Chi Minh City Urban Mass Rapid Transit Line 2 Investment Program .APPENDIX 3: MULTITRANCHE FINANCING FACILITY APPROVED BY SECTOR Table A3.

VIE = Viet Nam. 53 54 55 56 57 58 59 60 61 62 63 64 65 66 Country VIE VIE GEO ARM IND IND UZB IND UZB IND AFG IND MON VIE Title Greater Mekong Subregion Ben Luc-Long Thanh Expressway Project Water Sector Investment Program Urban Services Improvement Investment Program Sustainable Urban Development Investment Program Madhya Pradesh Energy Efficiency Improvement Investment Program North Eastern State Roads Investment Program Second Central Asia Regional Economic Cooperation Corridor 2 Road Investment Program Railway Sector Investment Program Housing for Integrated Rural Development Investment Program Himachal Pradesh Clean Energy Transmission Investment Program Transport Network Development Investment Program (SF) Assam Urban Infrastructure Investment Program Western Regional Road Corridor Investment Program Power Transmission Investment Program 89 AFG = Afghanistan. MFF = multitranche financing facility. IND = India. Table A3.2: MFFs Approved by Sector (2005–2011) MFF Total OCR No. PNG = Papua New Guinea. BAN = Bangladesh. Grant. UZB = Uzbekistan.a DMC ($ mn) ($ mn) Agriculture and Natural Resources 9 PAK 900 890 22 IND 188 188 27 INO 500 470 33 AFG 303 45 IND 170 170 49 IND 250 250 50 IND 120 120 Energy 3 IND 300 300 5 PAK 510 500 7 PAK 800 790 8 PRC 50 50 11 IND 620 620 13 VIE 931 931 19 IND 600 600 20 PRC 100 100 21 PAK 810 800 23 IND 800 800 26 AFG 570 31 PAK 780 760 38 IND 200 200 51 PNG 120 60 57 IND 400 400 62 IND 350 350 66 VIE 730 730 Finance 48 KAZ 500 500 Multisector 17 IND 500 500 37 IND 700 700 44 IND 150 150 61 UZB 500 500 Public Sector Management 41 VIE 630 600 Transport and Communications 1 IND 750 750 ADF ($ mn) 10 30 303 10 10 10 570 20 60 ADF ADF/UK Grant ($ mn) Grant Source Guarantee ($ mn) Date Approved 13-Dec-06 18-Sep-08 04-Dec-08 23-Sep-09 16-Sep-10 29-Sep-10 19-Oct-10 30-Mar-06 01-Dec-06 12-Dec-06 13-Dec-06 29-Mar-07 21-Sep-07 28-Mar-08 04-Jun-08 03-Sep-08 23-Oct-08 28-Nov-08 17-Sep-09 18-Nov-09 25-Nov-10 07-Jul-11 30-Sep-11 16-Dec-11 29-Sep-10 14-Dec-07 17-Nov-09 10-Aug-10 31-Aug-11 14-Dec-09 20-Dec-05 30 - . ARM = Armenia. PAK = Pakistan. GEO = Georgia. AZE = Azerbaijan. MON = Mongolia. and Equity Approvals. KAZ = Kazakhstan. Source: Asian Development Bank database on Loan. PRC = People’s Republic of China.Multitranche Financing Facility Approved by Sector MFF No. Technical Assistance.

GEO = Georgia. PRC = People’s Republic of China. UZB = Uzbekistan. Grant.804 Grant ($ mn) Guarantee ($ mn) Date Approved 13-Dec-05 10-Oct-06 18-Dec-06 28-Sep-07 10-Dec-07 12-Nov-08 28-Nov-08 16-Dec-08 29-Sep-09 29-Sep-09 24-Nov-09 08-Dec-09 20-Apr-10 19-Jul-10 28-Sep-10 17-Dec-10 17-Dec-10 19-Apr-11 21-Jul-11 23-Aug-11 31-Aug-11 20-Sep-11 09-Dec-11 06-Dec-06 31-May-07 31-Oct-07 24-Jan-08 03-Dec-08 01-Jun-09 23-Sep-09 29-Sep-09 28-Sep-10 22-Feb-11 30-Mar-11 30-Sep-11 2.000 1. ADF = Asian Development Fund. Source: Asian Development Bank database on Loan.709 252 6. and Equity Approvals.359 200 1. ARM = Armenia. Table A3.188 Multisector 1. W & WSS = water and water supply and sanitation. VIE = Viet Nam. VIE = Viet Nam. CWRD = Central and West Asia Department.559 Finance 150 150 Transport 650 1.060 Grant Source 400 ADF 787 ADF.246 W & WSS and Others 821 138 791 1. Source: Asian Development Bank database on Loan. PNG = Papua New Guinea. MFF = multitranche financing facility. PSM = public sector management.000 55 GEO 500 250 250 64 IND 200 200 0 Total 31. KAZ = Kazakhstan. PRC = People’s Republic of China.a DMC ($ mn) ($ mn) ($ mn) 2 PAK 770 770 4 BAN 430 400 30 10 IND 550 550 14 AZE 500 490 10 16 PAK 900 890 10 24 KAZ 700 700 25 AFG 400 29 PNG 400 400 34 GEO 500 381 119 35 ARM 500 440 60 39 PNG 480 140 340 40 PRC 1. OCR = ordinary capital resources. BAN = Bangladesh. Grant.368 5. a Refer to Table A3. and Equity Approvals. AFG = Afghanistan.074 2.476 325 6.000 1.3: MFF Tranche Approved Amount per Sector for Years 2005–2011 – ($ Million) Country/ Region PRC India VIE PNG CWRD Others Total Total 800 6. PAK = Pakistan. ANR = agriculture and natural resources.561 1.= not available.787 ANR 217 498 50 765 PSM 130 130 Energy 150 2. . Technical Assistance.938 27. Technical Assistance.483 375 15. AITF = Afghanistan Infrastructure Trust Fund.000 42 UZB 600 240 360 43 GEO 300 135 165 47 KAZ 800 800 53 VIE 636 636 52 VIE 540 540 56 ARM 400 220 180 58 IND 200 200 59 UZB 500 320 180 60 IND 500 500 63 AFG 787 65 MON 170 100 70 Water and Other Municipal Infrastructure Services 6 IND 270 270 12 IND 300 300 15 IND 273 273 18 IND 350 350 28 PAK 300 150 150 30 IND 200 200 32 AZE 600 600 36 UZB 300 300 46 IND 250 250 54 VIE 1.1 for the approved MFF Investment Programs. MON = Mongolia.167 1.051 57 1. IND = India. MFF = multitranche financing facility. AITF . DMC = developing member country.= not available. AZE = Azerbaijan. PNG = Papua New Guinea.90 Appendix 3 MFF Total OCR ADF No.750 .210 390 195 3.

803 Energy 605 732 1.= not available. VIE = Viet Nam. MFF = multitranche financing facility. PSM = public sector management. Grant.4: Number of MFF Loans Approved per Sector for Years 2005–2011 – Country/ Region PRC India VIE PNG CWRD Others Total Total 8 54 8 7 50 6 133 ANR 5 3 2 10 PSM 2 2 Energy 5 21 3 2 12 43 Multisector 7 1 8 Finance 1 1 Transport 3 9 2 5 25 4 48 W& WSS 12 1 8 21 Urban Others 0 .213 W& WSS 1.0 0.955 2.834.973.0 1.792 390 7. PRC = People’s Republic of China.162 12.223 ANR = agriculture and natural resources.166 372 45 0 151 928 2. ANR = agriculture and natural resources. MFF = multitranche financing facility. Table A3. Technical Assistance.851 Transport 4.669 Multisector 1.698 7.0 175.0 760 2. Source: Asian Development Bank database on Loan. Source: Asian Development Bank database on Loan. W & WSS = water and water supply and sanitation.662 Urban 285 0 125 0 67 400 877. Technical Assistance. and Equity Approvals.226 332 780 2. VIE = Viet Nam.596 4.0 2.9 6. CWRD = Central and West Asia Department. Source: Asian Development Bank database on Loan. and Equity Approvals.1 120. Grant. PSM = public sector management. .555 5.5: MFF Sectoral Approval Average Loan Size during 2005–2011 ($ Million) Country/ Region PRC India VIE PNG CWRD Others Total Total 100 114 214 36 130 63 119 ANR 43 166 25 77 PSM 65 65 Energy 30 122 350 29 114 121 Multisector 194 200 195 Finance 150 150 Transport 217 134 195 39 139 81 130 W& WSS 68 138 99 83 Urban Others - .266 46 819 0 368 629 3. PNG = Papua New Guinea.= not available. PNG = Papua New Guinea.516. PSM = public sector management.996 19. MFF = multitranche financing facility.049.050 135 13 886 1. CWRD = Central and West Asia Department.6: Non-MFF Approved Amount per Sector during 2005–2011 ($ Million) 2 Country/ Region PRC India VIE PNG CWRD Others Total Total 9.017 0. PRC = People’s Republic of China.Multitranche Financing Facility Approved by Sector 91 Table A3.861 48. W & WSS = water and water supply and sanitation. Grant. and Equity Approvals.758 1. PNG = Papua New Guinea.626 5.6 Others 0 150 561 45 315 1.152 2.261 ANR 1. Table A3. ANR = agriculture and natural resources. Technical Assistance.216 10. PRC = People’s Republic of China.128 PSM 0 200 690 0. VIE = Viet Nam.768 3. W & WSS = water and water supply and sanitation.5 3. CWRD = Central and West Asia Department.5 Finance 0 1.

Source: Asian Development Bank database on Loan. and Equity Approvals. VIE = Viet Nam. Table A3. Technical Assistance. W & WSS = water and water supply and sanitation. W & WSS = water and water supply and sanitation. PRC = People’s Republic of China. Source: Asian Development Bank database on Loan. Technical Assistance. PNG = Papua New Guinea. . PSM = public sector management. PSM = public sector management. MFF = multitranche financing facility. MFF = multitranche financing facility. PNG = Papua New Guinea.7: Number of Non-MFF Loans Approved per Sector during 2005–2011 – Country/ Region PRC India VIE PNG CWRD Others Total Total 66 22 57 11 85 226 467 ANR 16 1 13 0 12 21 63 PSM 0 3 5 0 19 35 62 Energy 5 3 4 0 8 25 45 Multisector 11 2 6 0 12 29 60 Finance 0 2 2 1 6 21 32 Transport 20 7 11 8 15 37 98 W& WSS 11 3 1 0 5 25 45 Urban 3 0 2 0 3 9 17 Others 0 1 13 2 5 24 45 ANR = agriculture and natural resources. CWRD = Central and West Asia Department. VIE = Viet Nam.92 Appendix 3 Table A3.6 Others 0 150 43 23 63 48 49 ANR = agriculture and natural resources. and Equity Approvals. CWRD = Central and West Asia Department. Grant.8: Non-MFF Sectoral Approval Average Loan Size during 2005–2011 ($ Million) – Country Region PRC India VIE PNG CWRD Others Total Total 145 210 102 36 94 88 103 ANR 79 0 63 0 30 30 50 PSM 0 67 138 0 142 206 174 Energy 121 244 254 0 95 102 126 Multisector 138 60 29 0 164 105 114 Finance 0 525 68 13 148 84 120 Transport 238 279 202 42 52 58 125 W& WSS 106 124 45 0 30 37 59 Urban 95 0 63 0 22 45 51. Grant. PRC = People’s Republic of China.

090 3.823 1.775 2.221 2.285 1.a 1 1 1 1 1 1 2 2 2 3 3 3 3 4 4 4 5 5 5 6 6 6 7 7 7 7 8 8 8 9 9 9 9 10 10 10 11 11 11 11 11 11 12 12 13 13 13 14 14 14 MFF# Tranche MFF01 MFF01 T1 MFF01 T2 MFF01 T3 MFF01 T4 MFF01 T5 MFF02 MFF02 T1 MFF02 T2 MFF03 MFF03 T1 MFF03 T2 MFF03 T3 MFF04 MFF04 T1 MFF04 T2 MFF05 MFF05 T1 MFF05 T2 MFF06 MFF06 T1 MFF06 T2 MFF07 MFF07 T1 MFF07 T2 MFF07 T3 MFF08 MFF08 T1 MFF08 T2 MFF09 MFF09 T1 MFF09 T2 MFF09 T3 MFF10 MFF10 T1 MFF10 T2 MFF11 MFF11 T1 MFF11 T2 MFF11 T3 MFF11 T4 MFF11 T5 MFF12 MFF12 T1 MFF13 MFF13 T1 MFF13 T2 MFF14 MFF14 T1 MFF14 T2 Country IND IND IND IND IND IND PAK PAK PAK IND IND IND IND BAN BAN BAN PAK PAK PAK IND IND IND PAK PAK PAK PAK PRC PRC PRC PAK PAK PAK PAK IND IND IND IND IND IND IND IND IND IND IND VIE VIE VIE AZE AZE AZE Sector TC TC TC TC TC TC TC TC TC EN EN EN EN TC TC TC EN EN EN UR UR UR EN EN EN EN EN EN EN ANR ANR ANR ANR TC TC TC EN EN EN EN EN EN UR UR EN EN EN TC TC TC Approval Date 31-Jul-06 31-Jul-06 17-Mar-08 26-Sep-08 07-Aug-09 06-Jul-10 13-Dec-05 13-Dec-05 26-Aug-09 02-Jan-07 02-Jan-07 23-Dec-08 08-Jan-09 13-Feb-07 13-Feb-07 22-Dec-11 13-Dec-06 13-Dec-06 13-Dec-10 26-Jan-07 26-Jan-07 14-Jun-10 13-Dec-06 13-Dec-06 17-Dec-07 22-Dec-11 18-Dec-06 18-Dec-06 28-Jan-08 18-Dec-06 18-Dec-06 22-Dec-11 22-Dec-11 02-Jan-07 02-Jan-07 22-Oct-08 04-Apr-07 04-Apr-07 21-Aug-07 21-Aug-07 13-Apr-09 21-Dec-10 04-Jun-07 04-Jun-07 02-Oct-07 02-Oct-07 21-Dec-09 04-Oct-07 04-Oct-07 22-Aug-08 Duration (days) 1.287 3.373 1.645 2.329 2.206 1.570 1.588 2.934 1.976 2.269 2.116 1.652 4.026 1.220 2.836 2.671 2.915 1.939 3.036 2.006 1.166 1.280 1.APPENDIX 4: TRANCHE IMPLEMENTATION PERIODS Table A4.200 1.208 648 1.904 3.208 3.878 1.800 2.1: Tranche Implementation Period as Percentage of MFF Utilization Period Tranche Implementation Period as % of MFF Utilization Period 72 69 85 77 68 55 46 90 58 57 124 71 50 47 52 64 55 60 45 47 70 81 16 47 48 40 64 63 72 54 46 63 95 83 86 51 MFF No.486 1.652 2.828 1.049 1.016 1.098 1.132 1.621 2.242 1.836 4.347 MFF/Loan Closing Date 31-Dec-10 09-Oct-09 07-Apr-11 30-Jun-12 31-Dec-12 30-Jun-13 30-Jun-15 31-Mar-11 31-Dec-13 31-Jan-13 30-Jun-12 30-Jun-12 30-Jun-12 30-Jun-13 31-Dec-14 30-Jun-16 31-Dec-17 30-Jun-12 29-Feb-16 30-Jun-16 31-Dec-11 30-Jun-16 31-Dec-16 30-Jun-12 31-Dec-13 30-Jun-16 31-Dec-13 01-Apr-10 31-Dec-12 30-Sep-17 30-Sep-15 30-Sep-13 31-Dec-16 31-Dec-17 31-Mar-12 31-Mar-13 31-Dec-14 31-Mar-12 30-Jun-12 31-Mar-13 30-Jun-13 30-Jun-14 31-Dec-15 31-Oct-12 30-Oct-13 30-Jun-13 31-Dec-14 31-Dec-14 31-Dec-13 30-Apr-12 .443 1.799 3.026 2.614 1.539 1.

670 921 5.291 1.316 1.036 1.078 2.920 1.660 3.830 2.981 1.544 2.477 1.373 1.827 2.665 2.306 2.838 3.016 1.113 2.945 1.519 2.94 Appendix 4 Tranche Implementation Period as % of MFF Utilization Period 42 79 76 64 67 53 63 62 52 75 76 47 78 67 51 39 49 56 68 58 72 77 88 48 59 39 66 65 53 29 37 26 50 47 105 70 MFF No.495 1.610 2.387 1.559 1.409 3.061 1.751 3.202 3.092 1.646 MFF/Loan Closing Date 31-Dec-14 31-Dec-14 30-Jun-13 30-Jun-14 30-Jun-15 30-Aug-17 30-Jun-14 30-Nov-11 15-Jan-10 26-Aug-11 25-Jan-16 31-Dec-12 31-Dec-15 31-Mar-15 30-Jun-13 30-Jun-14 31-Mar-15 31-Dec-12 31-Dec-11 31-Dec-12 31-Dec-13 30-Jun-18 30-Jun-12 30-Sep-15 30-Sep-17 30-Sep-13 30-Sep-16 31-Mar-14 30-Jun-14 30-Jun-16 30-Jun-15 31-Dec-13 30-Jun-15 31-Dec-13 31-Dec-14 31-Dec-17 30-Jun-12 31-Dec-16 30-Jun-17 30-Jun-14 30-Jun-14 30-Jun-14 31-Dec-23 30-Jun-14 30-Jun-14 31-Dec-18 31-Dec-13 30-Jun-18 30-Jun-13 31-Dec-15 30-Apr-16 30-Jun-16 16-Sep-19 .210 1.651 2.111 848 3.300 1.a 14 15 15 15 15 16 16 17 17 17 18 18 18 19 19 19 19 20 20 20 20 21 21 21 22 22 23 23 23 23 24 24 24 24 24 25 25 25 26 26 26 26 27 27 27 28 28 29 29 30 30 30 31 MFF# Tranche MFF14 T3 MFF15 MFF15 T1 MFF15 T2 MFF15 T3 MFF16 MFF16 T1 MFF17 MFF17 T1 MFF17 T2 MFF18 MFF18 T1 MFF18 T2 MFF19 MFF19 T1 MFF19 T2 MFF19 T3 MFF20 MFF20 T1 MFF20 T2 MFF20 T3 MFF21 MFF21 T1 MFF21 T2 MFF22 MFF22 T1 MFF23 MFF23 T1 MFF23 T2 MFF23 T3 MFF24 MFF24 T1 MFF24 T2 MFF24 T3 MFF24 T4 MFF25 MFF25 T1 MFF25 T2 MFF26 MFF26 T1 MFF26 T2 MFF26 T3 MFF27 MFF27 T1 MFF27 T2 MFF28 MFF28 T1 MFF29 MFF29 T1 MFF30 MFF30 T1 MFF30 T2 MFF31 Country AZE IND IND IND IND PAK PAK IND IND IND IND IND IND IND IND IND IND PRC PRC PRC PRC PAK PAK PAK IND IND IND IND IND IND KAZ KAZ KAZ KAZ KAZ AFG AFG AFG AFG AFG AFG AFG INO INO INO PAK PAK PNG PNG IND IND IND PAK Sector TC UR UR UR UR TC TC OTHERS OTHERS OTHERS UR UR UR EN EN EN EN EN EN EN EN EN EN EN ANR ANR EN EN EN EN TC TC TC TC TC TC TC TC EN EN EN EN WSS WSS WSS UR UR TC TC UR UR UR EN Approval Date 14-Dec-11 08-Nov-07 08-Nov-07 19-Jan-09 13-Dec-10 17-Dec-07 17-Dec-07 20-Dec-07 20-Dec-07 24-Feb-09 01-Feb-08 01-Feb-08 03-Nov-11 28-Mar-08 28-Mar-08 03-Mar-09 07-Dec-11 09-Jun-08 09-Jun-08 16-Dec-09 05-Sep-11 12-Sep-08 12-Sep-08 14-Dec-10 26-Sep-08 26-Sep-08 27-Oct-08 27-Oct-08 08-Dec-09 22-Oct-10 30-Dec-08 30-Dec-08 07-Oct-09 15-Nov-10 21-Feb-11 02-Dec-08 02-Dec-08 21-Dec-10 02-Dec-08 02-Dec-08 03-Dec-09 22-Dec-11 22-Dec-08 22-Dec-08 04-Aug-10 19-Dec-08 19-Dec-08 22-Dec-08 22-Dec-08 01-Jul-09 01-Jul-09 16-Dec-11 22-Sep-09 Duration (days) 1.915 1.988 1.895 1.487 2.795 1.658 3.132 2.441 757 913 2.426 3.578 1.664 1.666 1.374 2.387 1.142 1.

728 1.389 2.a 31 32 32 32 33 33 33 34 34 34 34 35 35 35 36 36 36 36 37 37 37 37 38 38 38 38 39 39 40 40 40 40 41 41 42 42 42 43 43 44 44 45 45 45 46 46 46 47 47 48 48 49 49 MFF# Tranche MFF31 T1 MFF32 MFF32 T1 MFF32 T2 MFF33 MFF33 T1 MFF33 T2 MFF34 MFF34 T1 MFF34 T2 MFF34 T3 MFF35 MFF35 T1 MFF35 T2 MFF36 MFF36 T1 MFF36 T2 MFF36 T3 MFF37 MFF37 T1 MFF37 T2 MFF37 T3 MFF38 MFF38 T1 MFF38 T2 MFF38 T3 MFF39 MFF39 T1 MFF40 MFF40 T1 MFF40 T2 MFF40 T3 MFF41 MFF41 T1 MFF42 MFF42 T1 MFF42 T2 MFF43 MFF43 T1 MFF44 MFF44 T1 MFF45 MFF45 T1 MFF45 T2 MFF46 MFF46 T1 MFF46 T2 MFF47 MFF47 T1 MFF48 MFF48 T1 MFF49 MFF49 T1 Country PAK AZE AZE AZE AFG AFG AFG GEO GEO GEO GEO ARM ARM ARM UZB UZB UZB UZB IND IND IND IND IND IND IND IND PNG PNG PRC PRC PRC PRC VIE VIE UZB UZB UZB GEO GEO IND IND IND IND IND IND IND IND KAZ KAZ KAZ KAZ IND IND Sector EN WSS WSS WSS ANR ANR ANR TC TC TC TC TC TC TC WSS WSS WSS WSS OTHERS OTHERS OTHERS OTHERS EN EN EN EN TC TC TC TC TC TC PSM PSM TC TC TC TC TC UR UR ANR ANR ANR OTHERS OTHERS OTHERS TC TC FIN FIN ANR ANR Approval Date 22-Sep-09 14-Oct-09 14-Oct-09 22-Dec-11 06-Oct-09 06-Oct-09 06-Oct-09 06-Oct-09 06-Oct-09 07-Dec-10 22-Dec-11 06-Oct-09 06-Oct-09 21-Dec-10 08-Oct-09 08-Oct-09 21-Apr-10 07-Dec-11 27-Nov-09 27-Nov-09 14-Dec-10 01-Dec-11 27-Nov-09 27-Nov-09 05-Oct-10 04-Nov-11 01-Dec-09 01-Dec-09 15-Dec-09 15-Dec-09 14-Dec-10 20-Jul-11 14-Jan-10 14-Jan-10 21-Apr-10 21-Apr-10 31-Mar-11 21-Jul-10 21-Jul-10 18-Aug-10 18-Aug-10 24-Sep-10 24-Sep-10 19-Dec-11 04-Oct-10 04-Oct-10 15-Dec-11 20-Dec-10 20-Dec-10 04-Nov-10 04-Nov-10 06-Oct-10 06-Oct-10 Duration (days) 1.307 2.643 1.883 1.153 3.652 3.Tranche Implementation Periods Tranche Implementation Period as % of MFF Utilization Period 29 43 64 57 57 65 13 56 57 55 66 66 58 35 128 60 76 56 56 35 87 87 79 58 57 54 76 64 100 52 69 62 78 56 46 95 MFF No.151 1.645 2.201 1.085 2.596 2.390 2.754 2.373 1.355 2.263 2.851 1.682 1.868 1.390 1.017 3.052 3.836 1.860 656 2.008 1.836 2.187 3.208 2.187 2.093 2.554 1.258 1.041 1.473 3.172 2.508 1.355 2.043 3.384 1.461 2.091 2.177 1.470 3.152 1.557 2.109 2.728 353 1.547 MFF/Loan Closing Date 31-Jul-12 31-May-18 30-Jun-13 30-Jun-17 29-Sep-19 30-Jun-15 30-Jun-15 31-Dec-16 30-Jun-14 25-Nov-11 31-Dec-15 31-Dec-17 30-Jun-14 30-Jun-15 30-Jun-18 30-Jun-15 31-Jan-16 31-Dec-16 31-Dec-14 14-Sep-11 30-Jun-17 14-Dec-14 30-Jun-15 28-Feb-14 30-Nov-13 31-Dec-14 31-Dec-19 30-Jun-13 30-Jun-17 30-Jun-16 30-Jun-17 30-Jun-17 31-Dec-15 30-Jun-13 30-Apr-16 30-Sep-13 30-Jun-14 31-Dec-18 31-Dec-16 30-Jun-17 31-Dec-14 30-Jun-18 30-Jun-18 31-Dec-15 30-Jun-20 30-Jun-17 31-Dec-17 30-Jun-17 31-Jan-16 31-Dec-15 21-Sep-13 31-Dec-19 31-Dec-14 .111 1.093 2.

VIE = Viet Nam.a 50 50 51 51 52 52 53 53 54 54 55 55 55 56 56 57 57 57 57 58 58 58 58 59 59 60 60 61 61 62 62 63 63 64 64 65 65 66 66 MFF# Tranche MFF50 MFF50 T1 MFF51 MFF51 T1 MFF52 MFF52 T1 MFF53 MFF53 T1 MFF54 MFF54 T1 MFF55 MFF55 T1 MFF55 T2 MFF56 MFF56 T1 MFF57 MFF57 MFF57 T1 MFF57 T1 MFF58 MFF58 MFF58 T1 MFF58 T1 MFF59 MFF59 T1 MFF60 MFF60 T1 MFF61 MFF61 T1 MFF62 MFF62 T1 MFF63 MFF63 T1 MFF64 MFF64 T1 MFF65 MFF65 T1 MFF66 MFF66 T1 Country IND IND PNG PNG VIE VIE VIE VIE VIE VIE GEO GEO GEO ARM ARM IND IND IND IND IND IND IND IND UZB UZB IND IND UZB UZB IND IND AFG AFG IND IND MON MON VIE VIE Sector OTHERS OTHERS EN EN TC TC TC TC WSS WSS UR UR UR TC TC EN EN EN EN TC UR TC UR TC TC TC TC OTHERS OTHERS EN EN TC TC UR UR TC TC EN EN Approval Date 25-Oct-10 25-Oct-10 06-Dec-10 06-Dec-10 22-Dec-10 22-Dec-10 22-Dec-10 22-Dec-10 07-Jun-11 07-Jun-11 12-Apr-11 12-Apr-11 23-Nov-11 09-May-11 09-May-11 15-Jul-11 15-Jul-11 15-Jul-11 15-Jul-11 21-Jul-11 21-Jul-11 21-Jul-11 22-Aug-11 02-Sep-11 02-Sep-11 18-Oct-11 18-Oct-11 09-Sep-11 09-Sep-11 18-Oct-11 18-Oct-11 12-Oct-11 12-Oct-11 18-Nov-11 18-Nov-11 22-Dec-11 22-Dec-11 29-Dec-11 29-Dec-11 Duration (days) 2.416 2. IND = India. a Refer to Table A3. . PAK = Pakistan.990 1. GEO = Georgia.324 1.324 1. INO = Indonesia.440 1.990 1. ANR = agriculture and natural resources.302 1.416 3.037 941 2.447 1. BAN = Bangladesh.463 MFF/Loan Closing Date 30-Jun-17 30-Sep-14 30-Jun-14 30-Jun-14 31-Dec-16 30-Jun-17 31-Dec-17 31-Dec-17 30-Jun-21 30-Jun-16 31-Mar-19 30-Sep-16 30-Jun-17 31-Dec-20 30-Jun-16 28-Feb-15 28-Feb-15 28-Feb-15 28-Feb-15 31-Dec-16 31-Dec-16 31-Dec-16 31-Dec-16 31-Mar-17 31-Mar-14 31-Dec-18 30-Jun-18 31-Dec-16 31-Dec-13 30-Jun-18 30-Jun-18 31-Dec-17 31-Dec-17 30-Jun-18 30-Jun-18 30-Jun-21 30-Jun-17 31-Dec-20 31-Dec-15 100 100 100 98 46 93 44 100 100 100 58 44 AFG = Afghanistan.272 2. UZB = Uzbekistan. EN = Energy.850 2.290 1. Impl = implementation.324 1.1 for the approved MFF Investment Programs.436 1.447 2. AZE = Azerbaijan.566 3. PRC = People’s Republic of China. MON = Mongolia. and Equity Approvals.96 Appendix 4 Tranche Implementation Period as % of MFF Utilization Period 59 100 108 100 50 69 70 53 MFF No.879 1. WSS = water supply and sanitation.998 2.676 1.382 2. Technical Assistance.201 2.302 2. TC = transport and communications.324 1. Grant.017 3.272 2.566 2. KAZ = Kazakhstan.990 1. UR = urban . PNG = Papua New Guinea.478 2.447 2.958 2.631 2. Source: Asian Development Bank database on Loan.046 3.910 1. MFF = multitranche financing facility. ARM = Armenia.524 1.940 844 2.

2 To what extent the projected tranche closing dates can be considered reliable. Comparison of tranche implementation periods on the basis of available data on approval and closing dates does not capture the underlying differences across tranches and MFF’s. 97 1 2 For analytical purposes. 1 The extent to which attention has been paid to project readiness at approval across countries and sectors. If the projects in different tranches of the same MFF cover different subsectors (for instance. The unusually long time lag in Kazakhstan is because of internal government procedures that require the country’s President to sign loan agreements (which can take a long time). it is considered that if each tranche has projects in the same subsector (e. given that in a significant number of MFFs nearing completion (MFF numbers 01. these projects were reasonably well prepared by the time MFF63 was approved. urban roads. The unusually short time lag for the first tranche of MFF63 in Afghanistan reflects the fact that this MFF picked up the road projects that were to have been included in the previous transport sector MFF in Afghanistan (MFF63). the utilization period has been (or is being) extended.. 03. Besides.Tranche Implementation Periods 1. or efficient household lighting in one tranche and power plant efficiency improvement in the next tranche). 20).g. . and the actual date of effectivity of the same grant or loan. and at approval across tranches in the same MFF. given that scope changes have been affected for a large number of tranches. For instance: The extent of similarity of projects across tranches in the same MFF. national highways). the extent to which actual tranche closing dates will be delayed from the projected ones (as is observed for many standalone projects) is also not considered. The range is very wide and varies between 19 days (for Tranche 1 of MFF63 in Afghanistan) to 515 days (for Tranche 1 of MFF47 in Kazakhstan). 04. water distribution pipelines. it is considered that each tranche has dissimilar projects. The large variation in time-lag between actual approval of a grant or loan. it has similar projects. power distribution. power transmission in one tranche and power distribution in another. To what extent the projected end of the MFF utilization period can be considered reliable.

6% 42.8% 59.9% -63.9% -29.1% 41.3% 16.1% 21.2% 40.1% -45.98 Appendix 4 Table A4.3% 48.1% 102.566 998 121 959 773 1.4% 45.4% 26.5% 8.299 515 1.b 2 1 5 7 7 8 9 9 10 3 6 4 4 11 11 12 11 11 13 14 14 15 7 16 17 8 18 1 19 20 14 21 22 1 Country PAK IND PAK PAK PAK PRC PAK PAK IND IND IND BAN BAN IND IND IND IND IND VIE AZE AZE IND PAK PAK IND PRC IND IND IND PRC AZE PAK IND IND Time Elapsed between 10% Disbursement and Effectivity (days) 410 34 1.4% 50.644 -452 653 1.380 112 579 277 1.5% 19.177 333 548 516 -765 736 591 -35 152 912 124 770 250 329 626 795 113 Time Elapsed between 30% Disbursement and Effectivity (days) 721 153 -509 -146 --515 -1.3% 6.654 317 318 847 233 289 460 1.0% 3.345 423 673 631 --812 910 -140 152 1.0% 42.5% 20.3% 6.2: Time elapsed from Effectivity to 10%.9% 14.9% 9.7% 10.7% 50.9% 73.0% 30.1% 40.a 2231 2248 2287 2289 2290 2296 2299 2300 2308 2309 2312 2316 2317 2323 2324 2331 2346 2347 2353 2354 2355 2366 2396 2400 2404 2408 2410 2414 2415 2426 2433 2438 2444 2445 Tranche No T1 T1 T1 T1 T1 T1 T1 T1 T1 T1 T1 T1 T1 T1 T2 T1 T3 T4 T1 T1 T1 T1 T2 T1 T1 T2 T1 T2 T1 T1 T2 T1 T1 T3 MFF No.8% Time Elapsed between 30% Disbursement and Effectivity (% of Tranche Duration) 38.6% 103.6% 40.4% 41.5% 11.1% 49.2% --26.086 124 940 390 573 703 921 197 Time Elapsed between 20% Disbursement and Effectivity (% of Tranche Duration) 31.8% 11.9% 59.9% 138.1% 19.2% 13.2% 38.4% 9.9% 102.1% 10.6% 42.9% 34.5% -52.146 --609 793 1.640 1.1% 4.5% 50.609 109 1.0% 53.2% 28.0% 11.3% -39.7% -12.1% 63.4% 29.212 313 1.4% 60.6% 20.5% 35.8% 28.4% 42.7% 2.1% 12.9% 3.4% -10.3% 47.6% 8.6% 18.464 956 1.5% .1% 43.4% 24.6% 35.3% -18. 20% and 30% disbursements for selected MFFs and Tranches Loan No.8% -4.7% --39.8% 42.1% --39.4% 68.6% 17.2% 30.6% -76.2% 24.2% 39.7% 26.003 25 118 720 118 686 138 232 532 547 45 Time Elapsed between 10% Disbursement and Effectivity (% of Tranche Duration) 21.1% 26.5% Time Elapsed between 20% Disbursement and Effectivity (days) 587 50 -439 -126 -1.

3% 11.6% 24.0% -15.9% -20.6% 0. KAZ = Kazakhstan. GEO = Georgia.5% 46.1% 26.6% 63.7% Time Elapsed between 30% Disbursement and Effectivity (% of Tranche Duration) 40. PAK = Pakistan. time value dates for MFF loans not listed above.4% -15.4% 17.8% 15. are not available for when those loans first reached 10%.9% 22.3% 33.2% 49.8% 2.6% 29.7% -29.5% 27.7% -- Tranche Implementation Periods ARM = Armenia. Source: Based on data provided by Central Operations Services Office. PRC = People's Republic of China.0% -17.2% 39.8% 37.9% -- Time Elapsed between 20% Disbursement and Effectivity (days) 496 844 936 861 -426 781 301 618 583 755 152 814 -528 667 204 299 -174 339 402 -189 345 257 2 -118 159 -- Time Elapsed between 30% Disbursement and Effectivity (days) 658 962 ---480 957 333 710 722 -214 --598 667 204 407 -174 339 575 -318 --2 -118 192 -- Time Elapsed between 20% Disbursement and Effectivity (% of Tranche Duration) 30.1 for the approved MFF Investment Programs.2% 31.8% 32.2% --0.3% 13.2% 16. MFF = Multitranche Financing Facility.5% 36. 99 .4% 51.6% ---26.5% 10.2% --28.8% 27.6% 9.8% 45.b 10 23 28 27 3 24 15 17 19 11 30 1 2 34 24 32 37 23 13 20 41 42 6 1 43 23 48 24 34 37 15 Country IND IND PAK INO IND KAZ IND IND IND IND IND IND PAK GEO KAZ AZE IND IND VIE PRC VIE UZB IND IND GEO IND KAZ KAZ GEO IND IND Time Elapsed between 10% Disbursement and Effectivity (days) 415 493 784 706 807 143 549 269 533 274 495 97 634 381 240 483 204 88 207 145 339 196 213 151 324 54 2 188 118 131 62 Time Elapsed between 10% Disbursement and Effectivity (% of Tranche Duration) 25.3% 39.8% 3.6% 31.6% 49.5% 33. PNG = Papua New Guinea.3% 48.6% 12. BAN = Bangladesh.5% 35.2% 31.1% 36.3% 14.8% 9.8% 19.2% 35.5% 8.2% -33. 20% and 30% disbursement.9% 13. a As per information available from COSO.2% -33.1% 18.6% 42.6% 48. IND = India.5% 42.4% 0.7% 26. b Refer to Table A3.7% 26.1% 24.1% 5. UZB = Uzbekistan.3% 14. AZE= Azerbaijan.5% 12.9% 53.9% 30.0% 31.Loan No. INO = Indonesia.0% 11.7% -23. VIE = Viet Nam.6% 13.6% 7.3% -25.0% 63.a 2458 2461 2499 2501 2502 2503 2506 2509 2510 2520 2528 2535 2540 2560 2562 2571 2586 2596 2610 2611 2613 2635 2638 2651 2655 2687 2689 2697 2716 2717 2725 Tranche No T2 T1 T1 T1 T3 T1 T2 T2 T2 T5 T1 T4 T2 T1 T2 T1 T1 T2 T2 T2 T1 T1 T2 T5 T1 T3 T1 T3 T2 T2 T3 MFF No.

In contrast. B. At the time of mainstreaming of the multitranche financing facility (MFF) modality in mid-2008. and make mid-course corrections. PROCESSING.. This represents considerable time and related resource savings for clients and Asian Development Bank (ADB). Since 1 June 2011. MFF = multitranche financing facility. (ii) TA supervision and implementation. an MFF on average is equivalent to four stand-alone projects. AND IMPLEMENTATION OF MULTITRANCHE FINANCING FACILITIES A. 53. Four stand-alone projects require 300 person-weeks (75x4). fact finding. However. Box A5: Resources for Processing and Implementation 52.g. ADB staffs are also required to go to the field more often. It is important to note that ADB began to roll out the timesheet management system (TMS) a few years later. the MFF processing cycle with four tranches requires 150 personweeks—the standard 75 person-weeks for the first tranche.1 provide the underlying assumptions and quantitative estimates of staff time requirements for preparing and processing MFFs and the consequent increased staff availability for administration of implementation. The basis for these estimates is not clear. First. and implementation administration actually fill timesheets yet (e. a comparison of multitranche financing facilities (MFFs) with stand-alone projects requires different assumptions. As such. in April 2011. Manila. which implies higher travel costs. 3. 15 person-weeks for due diligence of the MFF as a whole. (iii) loan/grant processing. processing. 2008. (ii) more entry points to address policy and procedure gaps. etc. Mainstreaming the Multitranche Financing Facility. For purposes of this evaluation. However.APPENDIX 5: RESOURCES FOR PREPARATION. The extra time spent on implementation is a strong and positive feature of MFFs. in view of the general perception that they were not reliable or complete for the purpose at hand. (iii) opportunities to change implementation plans while work is in progress and (iv) more exposure by staff to sector and executing agency issues for longer periods. This is based on the projected number of conversions of tranches over the utilization period of an approved MFF. address policy gaps. Other benefits of the MFF include (i) more opportunities for knowledge gathering and knowledge sharing on sector issues and trends. an MFF reaches its break-even point vis-à-vis a stand-alone project at the time of the second periodic financing request. as well as relevant tranche loan projects and MFFs that were prepared and/or processed during the 12-month period. and 20 person-weeks for each subsequent tranche. The TMS does not record staff time spent on sub-activities such as concept paper finalization. IED tried to access 12 months of data (from 1 June 2011 to 31 May 2012) for selected stand-alone projects. 13 person-weeks are budgeted annually for project administration. Multitranche Financing Facilities Board Paper 1. In addition to spending time managing MFFs. the Board noted that the MFF modality would help improve organizational effectiveness owing to (i) reduced staff time requirements for processing an MFF and its tranches vis-à-vis a series of stand-alone investment projects. ADB = Asian Development Bank. Source: ADB. and (iv) loan/grant supervision and implementation. framework financing agreement (FFA) preparation. compared with about 20 personweeks for MFF implementation. not all departments that have a role in preparation. For stand-alone projects. . all five regional departments have been filling out the TMS. Implementation of MFFs entails strong program management and additional time in the field. For instance. with associated benefits such as more opportunities to understand sector issues. such data were not available. the Central Operations Services Office [COSO]). Box A5 and Table A5. coupled with (ii) increased staff availability for implementation monitoring and administration. Timesheet Management System 2. Relevant activities by international staff and national staff that are recorded in the TMS are (i) TA processing.

the budget coefficients for PPTA processing and implementation have not been added to the numbers in this column. 101 .Table A5. e On average. which will not be provided to prepare PFRs. Source: ADB. PFR = periodic financing request. Processing and Implementation of Multitranche Financing Facilities MFF = multitranche financing facility. Under MFFs. c The budget coefficient for PPTAs is added here to reflect savings generated out of PPTAs. and processing a normal infrastructure project (75 staff weeks). one MFF has about four PFRs. 2008. The annual budget coefficient to implement a normal infrastructure project is 13 staff weeks. Since the use of PPTAs to prepare subsequent PFRs is discouraged. the use of PPTAs to prepare subsequent PFRs is discouraged. respectively). and to monitor and administer them. Policy Paper: Mainstreaming the Multitranche Financing Facility. a The budget coefficient for staff time to process a normal infrastructure project is 75 staff weeks. b The numbers in this column are estimates of the actual number of staff weeks needed to process an MFF and its PFRs. Manila. Each PFR is the functional equivalent of one normal infrastructure project.1: Multitranche Financing Facility Resource Implications Budget Coefficient for a Staff Weeks (a) Processing 90 30 30 30 180 174 63 63 63 (15) c c c Total Estimates on Required b Staff Weeks (b) Staff Weeks Saved (Additional) (a-b) Processing Project Project (+PPTA) Project (+PPTA) Project (+PPTA) e MFF & PFR 1 e PFR 2 e PFR 3 e PFR 4 Total 75 d 93 d 93 d 93 d 354 Administration and Monitoring 13 13 13 13 52 Total 80 20 20 20 20 Project (7) (7) (7) (7) (28) Project Project Project Administration and Monitoring e MFF & PFR 1 e PFR 2 e PFR 3 e PFR 4 Total Resources for Preparation. PPTA = project preparatory technical assistance. d These numbers represent the aggregate budget coefficient for processing and implementing a PPTA (10 and 8 staff weeks.

where the MFF fact-finding and negotiations were concluded on 19 August 2011.2). the fact-finding mission is reported to have been finished in July 2006 and the MRM/SRM was in March 2007. With a view to obtaining some information on the level of effort (LOE) in preparing and processing MFFs and tranches.2: Major Milestones for which eOps is Structured to Have Data MFF Preparation (PPTA stage) PPTA fact finding Concept paper approval PPTA approval Shortlisting of consultants Beginning of study Receipt of draft final report Submission of final report MFF Processing Reconnaissance mission Concept paper approval Fact finding MRM/SRM FFA negotiations Circulation and approval of RRP Tranche Processing and Preparation r Concept paper approval Fact finding MRM/SRM Appraisal PFR receipt from EA Safeguard document receipt from consultant or borrower Negotiations Approval of PFR Report EA = executing agency. 6. PFR = periodic financing request. However. Source: Independent Evaluation Department. Online Survey Database 8. The eOps database is structured to include completion dates for a large number of milestones during MFF and tranche preparation and processing (see Table A5. MFF = multitranche financing facility. while MRM/SRM was held a month later on 20 September 2011. 5.102 Appendix 5 C. such as timeline for performing various tasks and achieving specific . IED conducted an online survey on team leaders that had prepared and processed MFFs and tranches. 7. For instance. and even the incidence of negative elapsed time between two milestones or other seemingly inexplicable sequences of events. SRM = staff review meeting. MRM = management review meeting. a second MRM/SRM convened on the same day. FFA = framework financing agreement. MFF fact-finding is reported to have been completed on 12 April 2011. In yet another instance. while FFA negotiations were concluded in June 2011. while the RRP is reported to have been circulated to the Board on 7 September 2010. eOps only provides data on elapsed time. A quick analysis also reveals the wide variations in the data. The eOperations (eOps) database covers all sub-activities that go into preparing and processing of MFFs as well as individual tranches. Another example is MFF66 for the energy sector in Viet Nam. Such observations indicate strongly the need for an improved system to ascertain timely data entry/updating and a credible system to audit and verify data. RRP = report and recommendation of the President. the elapsed time required between certain milestones. The evaluation team also took this opportunity to compile other useful information through the survey. A cursory glance at the compiled data shows a large number of gaps (see Supplementary Appendix A). The eOps database also includes corresponding activities for preparation and processing of stand-alone project loans. Table A5. for MFF47 for the transport sector in Kazakhstan. and does not include any information on staff time actually spent or allocated for specific activities and sub-activities. PPTA = project preparatory technical assistance. eOperations Database 4. D. negotiations completed a day earlier on 11 April 2011. MFF58.

the same is also generally true also for elapsed time estimates for preparation and processing of tranches. Owing to that reason alone. The large variations in the data compiled from eOps and the online survey are evident from Tables A5. Compared with the data from eOps. where the respondents were expected to fill out the survey forms from memory. The process of identifying the names and current titles of team leaders revealed that (i) many team leaders who had prepared and processed MFFs were not engaged in processing subsequent tranches of the same MFF. team composition. 11. and A5. 10. 9. For reasons mentioned above (para. It appears that some may have included the person-days of consultants in arriving at these estimates. while others may not have. the survey shows a shorter elapsed time for preparation and processing of MFFs plus Tranche 1 in nearly all cases. Likewise. 11). there are sufficient prompts to enable the team leader to provide reasonable responses—for instance by specifying the team composition (by skill type) and person-months required from each skill type. the very large range of LOE estimates from a small sample size possibly indicates that different respondents made very different assumptions in their efforts to quantify the LOE. it could have been the start of a PPTA factfinding mission. sector strategy and policy.7 and A5. the level of effort data also reveal vast ranges of one order of magnitude or more (see Tables A5. However. For instance. 13. Findings of Elapsed Time and Level of Effort 12. and (iii) there were very few team leaders who had prepared and processed two or more MFFs—and thus had firsthand experience in managing the evolving requirements (that evolved with as new staff instructions and operating procedures were issued).3.8). and relied on an approach of asking respondents to provide qualitative comments in addition to quantitative data. regarding the elapsed time for preparation of MFF plus Tranche1 (i.4. rather than the exception.1 The online survey questionnaires are in Supplementary Appendix B. in spite of the rather small sample size. or some other.) would not be available through these surveys. etc. the approval of the PPTA concept note. a PMO set up. and Implementation of Multitranche Financing Facilities milestones. 1 The survey also included questions on ownership. up to the finalized PPTA report).. etc. (ii) a change in team leader for each subsequent tranche of an MFF is the norm. 14. 103 E. Similarly.). and skill sets available on a team. Processing. Regarding LOE for preparation of MFF plus Tranche1.e. level of effort. and certain institutional development aspects (such as whether or not institutional capacity was assessed up front. whether or not there was a PPTA is left open. capacity development support identified up front.6 also reveals the large variations in elapsed time for preparation and processing of stand-alone projects.5.Resources for Preparation. A5. While this by itself does not in any way ascertain that precise information/data will be provided. the evaluation team could not be too precise in asking the questions either. the starting point of the elapsed time is not specified. it was hoped that it would improve the judgment of the concerned team leaders. regarding elapsed time for processing of MFF plus Tranche 1. Table A5. To a somewhat lesser degree. . The evaluation team recognized up front that precise information on any aspect (elapsed time.

104 Appendix 5 Table A5. UR = urban.3: Elapsed Time for Preparation of MFF along with Tranche 1 Elapsed Time between Fact-Finding and Receipt of Draft Final Report (days)a 1389 304 623 1389 465 577 629 336 522 522 304 433 1389 454 757 771 545 651 Elapsed Time between Fact-Finding and Submission of Final Report (days)b 1641 335 801 1641 654 721 764 482 659 654 335 521 1641 626 1033 907 572 740 Elapsed Time between MFF preparation up to Final Draft PPTA Report (days)c 1080 30 367 720 210 454 720 450 585 540 210 370 1080 30 260 630 180 405 All MFFs All MFFs All MFFs IND MFFS IND MFFs IND MFFs ANR MFFs ANR only ANR only EN only EN only EN only TC only TC only TC only UR only UR only UR only Max (days) Min (days) Avg (days) Max (days) Min (days) Avg (days) Max (days) Min (days) Avg (days) Max (days) Min (days) Avg (days) Max (days) Min (days) Avg (days) Max (days) Min (days) Avg (days) ANR = agriculture and natural resources. EN = energy. a From eOps. c From online survey.4: Elapsed Time for Processing of MFF along with Tranche 1 Elapsed Time. Table A5. PPTA = project preparatory technical assistance. The online survey of team leaders that prepared and processed MFFs yielded 23 responses with elapsed time-related data. IND = India. Note: Data drawn from the following number of MFFs from eOps (i) 21 MFFs for elapsed time between fact-finding and receipt of draft final report. TC = transport and communications. and (ii) 17 MFFs for elapsed time between fact-finding and submission of final report. from end of Fact-Finding to RRP Approval (days)a 1828 61 271 1828 97 353 356 104 2174 476 61 235 1828 Elapsed Time. Source: Independent Evaluation Department. b From eOps. from Concept Approval to RRP Approval (days)a 2317 84 479 2066 190 605 1779 84 615 722 89 362 2317 Elapsed Time from Fact-Finding to RRP Approval (days)b 720 60 206 360 120 182 150 135 143 240 120 180 720 All MFFs All MFFs All MFFs IND only IND only IND only ANR only ANR only ANR only EN only EN only EN only TC only Max (days) Min (days) Avg (days) Max (days) Min (days) Avg (days) Max (days) Min (days) Avg (days) Max (days) Min (days) Avg (days) Max (days) . MFF = multitranche financing facility.

from end of Fact-Finding to RRP Approval (days)a 71 290 1117 114 374 Elapsed Time. (ii) 59 MFFs for elapsed time between concept approval and RRP approval. PAK = Pakistan. Table A5.Resources for Preparation. from Concept Approval to RRP Approval (days)a 92 452 1329 133 808 Elapsed Time from Fact-Finding to RRP Approval (days)b 60 210 120 120 120 105 TC only TC only UR only UR only UR only Min (days) Avg (days) Max (days) Min (days) Avg (days) ANR = agriculture and natural resources. Source: Independent Evaluation Department.5: Elapsed Time for Preparation and Processing of Tranches End of FactFinding to PFR Approval (days)a 1860 39 304 1860 136 396 449 119 255 456 175 277 364 117 213 537 58 242 1860 39 352 319 113 226 Concept Paper Approval to PFR Approval (days)a 2443 62 687 2098 196 730 2296 148 1021 1544 257 569 1787 97 623 2296 109 769 2443 62 659 1962 133 912 PFR Receipt to PFRR Approval (days)a 884 15 119 234 29 94 884 51 346 NA NA NA 234 234 234 884 29 247 223 15 67 181 28 106 Survey of Tranche Processing Fact-Finding to Approval (months)b 510 45 194 360 90 200 420 150 290 240 240 240 210 180 195 510 120 281 270 45 140 360 210 280 All Tranches All Tranches All Tranches IND only IND only IND only PAK only PAK only PAK only VIE only VIE only VIE only ANR only ANR only ANR only EN only EN only EN only TC only TC only TC only UR only UR only UR only Max (days) Min (days) Avg (days) Max (days) Min (days) Avg (days) Max (days) Min (days) Avg (days) Max (days) Min (days) Avg (days) Max (days) Min (days) Avg (days) Max (days) Min (days) Avg (days) Max (days) Min (days) Avg (days) Max (days) Min (days) Avg (days) ANR = agriculture and natural resources. Processing. The online survey of team leaders that prepared and processed MFFs yielded 25 responses with elapsed time-related data. and (iii) 39 for elapsed time between PFR receipt and PFRR approval. IND = India. UR = urban. PFR = periodic financing request. a From eOps. b From online survey. EN = energy. Note: Data drawn from the following number of tranches from eOps: (i) 54 for elapsed time between end of fact-finding and PFRR approval. The online survey of team leaders that processed tranche loans yielded 31 responses with data on elapsed time-related queries. a From eOps. RRP = report and recommendation of the President. and Implementation of Multitranche Financing Facilities Elapsed Time. Note: Data drawn from the following number of MFFs from eOps (i) 61 MFFs for elapsed time between fact-finding and RRP approval. IND = India. TC = transport and communications. PFRR = periodic financing request report. . UR = urban. (ii) 81 for elapsed time between concept paper approval and PFRR approval. VIE = Viet Nam. EN = energy. TC = transport and communications. Source: Independent Evaluation Department. b From online survey.

106 Appendix 5 Table A5. Note: Data drawn from survey of MFF team leaders. that included 7 MFFs in the pilot stage. VIE = Viet Nam. PRC = People’s Republic of China. MS = mainstreaming. RRP = report and recommendation of the President. MFF = multitranche financing facility. Table A5. Note: Data drawn from 26 transport and energy sector stand-alone loans in selected countries where MFFs have also been approved. p-d = person-day.6: Elapsed Time for Preparation and Processing of Stand-alone Projects End of FactFinding to Approval 685 86 243 488 90 197 190 181 186 619 96 315 685 132 262 685 86 218 619 89 255 Concept paper Approval to RRP Approval 1056 154 437 554 154 322 594 594 594 830 198 443 1056 207 447 1056 176 412 830 154 448 All All All IND only IND only IND only PAK only PAK only PAK only PRC only PRC only PRC only VIE only VIE only VIE only EN only EN only EN only TC only TC only TC only Max (days) Min (days) Avg (days) Max (days) Min (days) Avg (days) Max (days) Min (days) Avg (days) Max (days) Min (days) Avg (days) Max (days) Min (days) Avg (days) Max (days) Min (days) Avg (days) Max (days) Min (days) Avg (days) EN = Energy. IND = India. and 19 thereafter. Source: Compiled by the Independent Evaluation Department from survey responses. 26 responses received contained relevant data. Post-MS = post mainstreaming. TC = transport and communications. . PAK = Pakistan. Source: Independent Evaluation Department. PPTA = project preparatory technical assistance.7: Level of Effort for Preparation and Processing of MFFs MFF Preparation (up to draft final PPTA Report) 2220 180 650 2220 210 1055 990 180 500 840 240 540 990 180 507 MFF Processing (FF to approval) 1500 120 440 1500 180 623 750 180 390 660 120 306 750 120 372 All MFFs All MFFs All MFFs Pilot MFFs Pilot MFFs Pilot MFFs MS to July'11 MS to July'11 MS to July'11 Post-July'11 Post-July'11 Post-July'11 Post MS Post MS Post MS max p-d min p-d avg p-d max p-d min p-d avg p-d max p-d min p-d avg p-d max p-d min p-d avg p-d max p-d min p-d avg p-d FF = fact-finding.

8: Level of Effort for Processing of MFF Tranches Tranche Processing (Fact-Finding to Approval) 720 27 218 390 45 158 390 60 225 720 45 248 600 27 221 390 150 225 240 210 720 45 239 390 45 196 600 27 215 107 All Tranches (36) All Tranches All Tranches IND only (16) IND only IND only ANR only (2) ANR only ANR only EN only (11) EN only EN only TC only (12) TC only TC only UR only (5) UR only UR only Before Oct 2006 (1) Oct 2006 to June 2008 (1) July 2008 to May 2010 (11) July 2008 to May 2010 July 2008 to May 2010 June 2010 to June 2011 (9) June 2010 to June 2011 June 2010 to June 2011 After June 2011 (12) After June 2011 After June 2011 max p-d min p-d avg p-d max p-d min p-d avg p-d max p-d min p-d avg p-d max p-d min p-d avg p-d max p-d min p-d avg p-d max p-d min p-d avg p-d p-d p-d max p-d min p-d avg p-d max p-d min p-d avg p-d max p-d min p-d avg p-d ANR = agriculture and natural resources. Note: Sample size in parentheses. TC = transport and communications.Resources for Preparation. UR = urban. EN = energy. MFF= multitranche financing facility. Source: Compiled by the Independent Evaluation Department from survey responses. . and Implementation of Multitranche Financing Facilities Table A5. Processing. p-d = person-day. IND = India.

cofinancing was referred to as a possibility. In the main text. cofinancing is being sought for SSTs. "Others. cofinancing was referred to as a possibility. i. cofinancing under Carbon Market Initiative is a possibility. "Other Funding Agencies" and "Private Sector" were identified.e.APPENDIX 6: COFINANCING Table A6: References to Cofinancing in RRPs and FFAs of Approved MFFs MFF No. but there was no further clarification on what these agencies might be. In the DMF. In the RRP (main text). In the DMF: "Other external financiers" for the Investment Program was identified as another financing source. but there was no further clarification on who they might be.a 1 2 Country IND PAK RRP (Main Text) Yes Yes RRP (DMF) No No FFA No No Remarks In the RRP (main text) and FFA. other sources of financing include the private sector and other financial institutions In the DMF and FFA. other sources of financing include sub–borrowers." In the RRP. In the DMF." In the DMF. In the RRP. other sources of financing for the Investment Program include "other financial institutions. other sources of financing identified include "Other Financiers". i. In the RRP. "private institutions" were identified as another financing source. In the DMF." In the RRP (main text). 3 4 5 6 7 8 9 10 11 IND BAN PAK IND PAK PRC PAK IND IND Yes No No Yes Yes No Yes Yes Yes Yes No Yes No Yes Yes No No Yes * No Yes No Yes No * No Yes 12 13 14 15 16 IND VIE AZE IND PAK Yes No Yes No Yes No No Yes No No No No Yes No * 17 IND Yes No Yes 18 19 20 21 22 23 IND IND PRC PAK IND IND No No No Yes Yes Yes No Yes Yes Yes No Yes No No No Yes No No 24 25 26 27 28 29 30 KAZ AFG AFG INO PAK PNG IND Yes Yes Yes Yes No Yes No Yes Yes Yes Yes No Yes No Yes Yes Yes * No Yes No . "Other International Financial Institutions or Bilateral Financial Institutions" was identified as another financing source for the Investment Program." In the RRP (main text). domestic banks were identified as one of the financing sources. cofinancing was referred to as a possibility—"may be mobilized in the future" "Others" was identified as one of the financing sources..e. "other agencies" were identified as one of the financing sources. "if the Government requests. cofinancing for SSTs was "actively being sought. in the DMF. Other sources of financing include local market and foreign borrowing. In the RRP." In the RRP (main text). "India may request. The latter include bilateral and multilateral contributions and funds that will be raised from international capital markets. in the DMF. cofinancing for energy efficiency and alternative energy projects was deemed possible under the Kyoto Protocol..

cofinancing was forwarded as a possibility that ADB will pursue. DMF = design and monitoring framework. Commercial External). there was no cofinancing available. JFPR funds a TA attached to the MFF. ARM = Armenia. UZB = Uzbekistan. CAREC = Central Asia Regional Economic Cooperation. 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 PRC VIE UZB GEO IND IND IND KAZ KAZ IND IND PNG VIE VIE VIE GEO ARM IND IND UZB IND UZB IND AFG IND MON VIE No Yes No No No No No Yes Yes Yes No Yes Yes Yes Yes Yes Yes No No No Yes Yes No Yes No No No No Yes No No Yes No No Yes Yes No No No Yes Yes No No No No Yes No No Yes No Yes Yes No No No Yes No No Yes No No No Yes Yes No No Yes * Yes Yes Yes No * No No Yes No Yes Yes No Yes In the RRP. AFG = Afghanistan. * = no copy of FFA accessible to IED. The latter include bilateral and multilateral contributions and funds that will be raised from international capital markets. PNG = Papua New Guinea. Grant. 38 39 IND PNG Yes Yes No Yes Yes No Sources of financing are local market and foreign borrowings. and Equity Approvals. JFPR = Japan Fund for Poverty Reduction. SSTs = second and subsequent tranches. cofinancing was referred to as a possibility. cofinancing was referred to as a possibility that ADB will pursue. strategic investors. RRP = report and recommendation of the President. in the DMF. In the RRP.a 31 32 33 34 35 36 37 Country PAK AZE AFG GEO ARM UZB IND RRP (DMF) Yes No Yes Yes Yes No No FFA Yes No * Yes Yes No Yes Remarks Cofinancing includes one or more sources (AFD and Others. Cofinancing was referred to as a possibility in the RRP. AFD = Agence Française de Développement. In the RRP. GEO = Georgia. BAN = Bangladesh.Cofinancing RRP (Main Text) Yes No Yes Yes Yes No Yes 109 MFF No. Technical Assistance. private sector. SOE = state-owned enterprise.1 for the approved MFF investment programs. a Refer to Table A3. In the RRP. MFF = multitranche financing facility. Other sources of financing identified include general corporations. PAK = Pakistan. Commercial Domestic. FFA = framework financing agreement. In the FFA. Other sources of financing include sub-borrowers. KAZ = Kazakhstan. IND = India. In the FFA. cofinancing was referred to as a possibility that will be explored for the SSTs. cofinancing was identified for the Investment Program. In the RRP (main text). In the FFA. MON = Mongolia. . "Other financiers" was identified as financing source In the DMF. VIE = Viet Nam. private sector participation was identified as a financing source. PRC = People’s Republic of China. AZE = Azerbaijan. Source: Asian Development Bank database on Loan. home buyers. other sources of financing identified include the private sector. but it indicated the possibility for SSTs.

6 and (iv) at the appraisal stage. The guarantee facility is not mentioned in the RRP. In some cases. ADB and other cofinanciers cofinance expenditures related to a common list of goods and activities in agreed-upon portions. institutional structures. which includes pricing policies. 10 November. Manila. ADB. the prospect of parallel cofinancing is simply highlighted in the MFF documents. Ho Chi Minh City Urban Mass Rapid Transit Line 2 Investment Program (Viet Nam). MFF22). and ADB. 23 November (approved 14 December 2010. another development partner can cofinance another portion of the sector roadmap in parallel. To the extent that commercial cofinanciers (commercial banks) participate. 2010. MFF52). Greater Mekong Subregion Ben Luc-Long Thanh Expressway Project (Viet Nam). 2010. MFF53). a development partner or another financier may choose to complement ADB’s financing (after Board approval of the MFF) through cofinancing administered by ADB. but that should some cofinancier come forward. 5 (iii) a $200 million guarantee facility set up to mobilize commercial debt for wind and renewable energy projects in Pakistan. following agreed-upon procurement guidelines. 2006. 2008. 1 Whether or not an ADB-supported MFF investment program has in fact contributed to such cofinancing is difficult to ascertain. and other aspects—which is unlikely to have been duly influenced by the MFF investment program. Proposed Multitranche Financing Facility.7 In this case. Power Distribution Enhancement Investment Program (Pakistan). It is noted that in some cases.2 The need for cofinancing is not a consequence of the ADB-supported MFF. ADB. Report and Recommendation of the President. In joint cofinancing. MFF21). ADB. Proposed Multitranche Financing Facility. Manila. Such cofinancing administered by ADB may be parallel or joint. 2008. Proposed Multitranche Financing Facility. Report and Recommendation of the President. Proposed Multitranche Financing Facility. 3 Some examples include (i) $313 million from German development cooperation through KfW and $195 million from the European Investment Bank for a mass rapid transit line in Ho Chi Minh City in Viet Nam. As a MFF investment program is often a part of a sector roadmap or strategy. ADB. that may be so because of longterm ADB support. but included during implementation phase as Tranche 2. Report and Recommendation of the President. Renewable Energy Development Sector Investment Program (Pakistan). To the extent that the private sector participates in implementing a sector roadmap during or after the MFF utilization period. their participation in cofinancing is more likely to be influenced by sector pricing policies (which in turn may or may not be impacted by the MFF investment program). for instance in the power transmission and distribution system investment programs in Pakistan (MFF07 and MFF21. the cofinanciers follow their own procedures to finance different goods or activities that are integral to the MFF investment program. ADB. 1 2 Cofinanciers follow their own procedures to finance different goods or activities that are integral to the sector roadmap. . 3 4 5 6 7 In parallel cofinancing in this case. Proposed Multitranche Financing Facility. 2006. Manila. Report and Recommendation of the President. it is most likely to be influenced by the policy framework. Manila. 23 November (approved 17 December 2010. Report and Recommendation of the President. 21 November (approved 12 December 2006. 3. 28 August (approved 18 September 2008. respectively). Proposed Multitranche Financing Facility. Therefore. it was known that ADB would cancel the relevant portion of the ADB loan if cofinancing from OFID were to become available. a case-by-case analysis of the progress made in implementing the MFF program is required to gain insights into the catalytic affect of the MFF on parallel cofinancing. Manila. MFF07). 4 (ii) at the MFF approval stage for an expressway in Viet Nam. Report and Recommendation of the President. Power Transmission Enhancement Investment Program (Pakistan). Orissa Integrated Irrigated Agriculture and Water Management Investment Program (India). 13 August (approved 3 September 2008. the OPEC Fund for International Development (OFID) had expressed interest in providing $30 million cofinancing for an agriculture and water management investment program in India. the project sponsors and their commercial lenders are encouraged to pursue debt financing from export credit agencies and other bilateral or multilateral sources.110 Appendix 6 1. Manila. 2. parallel cofinancing from a potential cofinancier was expected in the second tranche.

Papua New Guinea. or (ii) the MFF financing envelope is comparable to a stand-alone project. However. Energy. guarantees. such an MFF facility cannot lead to commitment fee savings. Source: Asian Development Bank database on Loan. Indonesia. Kazakhstan. PRC = People’s Republic of China. equity. Note: All data are for the period 2005–2011. and that individual tranche loan/grant approval amounts are comparable to stand-alone project amounts. this is just a matter of conjecture. grants. Georgia. It is noted from Table A7. But given that commitment fees begin accruing only on loan signing/effectivity in both cases. at this time. Either of these conditions holds only for a few MFFs. Finance. Mongolia. Public Sector Management. and where commitment fee savings come from phasing of the approval/effectivity of a stand-alone loan through tranches. It is difficult to establish such a long-term partnership if clients’ financial liabilities increase. .1: Average MFF Financing Envelope vs Average Stand-alone Loan/Grant Size Average Approved MFF Envelope Country ($ million) PRC 383 India 368 Viet Nam 747 Pakistan 721 Others 473 All 483 Number of MFFs Approved 3 25 6 8 24 66 Average Average Approved Approved Number of Stand-alone Loan Tranche Amount MFF Tranches Amount ($ million) Approved ($ million) 100 8 145 114 54 210 214 8 102 119 14 178 110 42 81 119 126 103 Number of Stand-alone Loans Approved 66 22 57 28 288 467 MFF = multitranche financing facility. This effectively assumes that the MFF is used to finance multiple investment projects that would otherwise be financed through a string of stand-alone projects—and that the tranche mechanism can somehow help reduce commitment fees. and Equity Approvals. Includes the following sectors: Agriculture and Natural Resources. includes the following countries where ADB has approved MFFs: Afghanistan. Table A7. such ADB financing products generate a balance sheet commitment for clients. The Board paper 1 noted that many ADB clients require long-term and large investments. 2. Bangladesh. And ADB’s traditional financing instruments (loans. and for countries and sectors where ADB has approved MFFs. the MFF modality helps ADB to address this problem. Definition of Counterfactual Scenario 1. Multisector. However. simply because they have entered into long-term partnership arrangements.1 that the average MFF financing envelope in all countries has exceeded the average stand-alone project approval amounts substantially. and Uzbekistan. A programmatic approach can possibly mitigate these problems but requires a partnership framework to be in place. commitment fee savings are likely to reflect improvements in disbursal rates. and technical assistance) are indeed relevant. In most cases. wherein even a small delay in the signing/effectivity of successive tranches can lead to some commitment fee savings. Azerbaijan. and Urban. this leads to sizeable commitment fees for the client and tighter lending headroom for ADB. especially in infrastructure and utilities. Technical Assistance. By agreeing (through the framework financing agreement) to provide financing only when needed. Grant. Commitment fee savings come only when (i) a large MFF is used to finance one large project that would otherwise be financed through one stand-alone loan. 3. Water Supply and Sanitation. 1 An issue that becomes relevant to countries as they graduate from receiving only Asian Development Fund (ADF) support to a mix of support from ADF and ordinary capital resources (OCR). 4.APPENDIX 7: COMMITMENT FEE SAVINGS A. Other than those listed. Armenia. and if the approved amount is large. Transport.

e.2 shows that in all scenarios. in the alternative stand-alone mode. the commitment fee savings are estimated for MFFs under which all tranche loans were negotiated after January 2007. particularly the tranche loan approval amounts and tranche loan signing dates for all tranches that have been approved thus far. Table A7. which supports one large project. . In Scenario 3.3 entail some simplifying assumptions. except that the design phase gets extended.3 shows the commitment fee savings for selected MFFs where (i) more than one tranche loan has been approved under the MFF investment program.. it becomes possible to arrive at a reasonable estimate of commitment fee savings even if data on actual disbursements. Although this threshold for project readiness may vary vastly across executing agencies in different sectors and countries. these are financed through a single loan. i. and (ii) MFF20 and MFF38. Scenario 2 is similar to Scenario 1. when a flat commitment fee rate began to be applied. Computations are shown for three MFFs that include (i) MFF13. any particular executing agency continues to function essentially in the same way. the loan disbursal pattern will remain the same (i. the underlying assumptions effectively are that (i) during the time the MFF is being implemented.. 2 and (ii) all required data are available. and actual or scheduled disbursement dates. 6. all commitment fee savings estimates are for tranche loans. which are smaller than the average size of stand-alone projects in those countries. 2 As ADF grants do not come with any commitment fees. Table A7. and (ii) the executing agency apparently has a sufficient skills base to be able to simultaneously manage the implementation of a large number of projects or subprojects. the MFF comprises two tranches.2. In Scenario 1. the four are financed through one loan. the most important being that (i) the alternative scenario remains a large stand-alone loan. and (ii) no matter when an executing agency signs a loan agreement to borrow for implementing a particular project or subproject (identified to be implemented through the MFF).112 Appendix 7 B. This effectively means that any executing agency would prefer to sign a loan agreement only when a certain level of project readiness is achieved. the commitment fee savings are negligible. the MFF comprises four tranches to finance four similar projects. Commitment Fee Savings Estimates 5.e. Commitment fee savings are estimated for three hypothetical scenarios in Table A7. are not available. while in the alternative mode. Commitment fee savings estimates presented in Table A7. With such assumptions. 7. disbursal amounts vs elapsed time profile will not vary with the loan signing date). For sake of simplicity. one for detailed project design and the other for project construction.

2a: Commitment Fee Comparison vs.Table A7. Stand-alone Project Commitment Fee Savings 113 .

Stand-alone Project Appendix 7 .114 Table A7.2b: Commitment Fee Comparison vs.

Table A7.2c: Commitment Fee Comparison vs. Stand-alone Project Commitment Fee Savings 115 .

18 0. PRC = People’s Republic of China.1 for the approved MFF investment programs. Source: Asian Development Bank database on Loans. . RRP = report and recommendation of the President.14 IND = India.116 Appendix 7 Table A7. MFF = multitranche financing facility. T1 = first tranche. Technical Assistance. and Equity Approvals. T2 = second tranche. a Refer to Table A3.a Energy 13 13 20 20 20 38 38 38 VIE VIE PRC PRC PRC IND IND IND 0.28 2353 2610 2426 2611 2773 2592 2677 2800 931 931 100 100 100 200 200 200 28 903 35 22 43 60 90 50 09-Oct-07 09-Nov-10 29-Sep-08 30-Mar-10 14-Nov-11 15-Feb-10 17-Jan-11 27-Feb-12 T1 T2 T1 T2 T3 T1 T2 T3 0.3: Commitment Fee Savings Estimates for Selected Energy MFFs MFF Tranche Country Loan/ Grant No. VIE = Viet Nam. T3 = third tranche.25 0. Grant. SST = second and subsequent tranches.45 MFF No.25 0. Total MFF Envelope ($ million) Planned as per MFFRRP Actual Loan/ Grant Signing Date Elapsed Time between Loan Signing Dates of T1 and SSTs (days) Commitment Fee Savings for MFF ($m) Commitment Fee Savings from MFF (% MFF envelope) 1127 547 1141 336 742 4.

Coal-fired power capacity in 2005 exceeded 6. From 2003 to 2005. the 102 MW Xiaogushan Hydropower Project (XHP). The sixth cascade hydropower plant in the scheme. GaPG also wanted to increase access to power and reduce power tariffs to rural households (which had been previously connected to a stand-alone power supply system). which is a large infrastructure project with seven discrete run-of-the-river medium-sized hydropower projects with a combined capacity of 645. The Gansu Provincial Government (GaPG) thus wanted to accelerate hydropower development. environmental. Consistency with ADB strategic priorities The energy sector has been a priority area of ADB since it started operations in the PRC in 1986. and relies mostly on imported coal for power generation. 4. 3. was supported by ADB under the Gansu Clean Energy Development Project (Loan 2032-PRC). Development context In 2005. Consistency with government plans and priorities The PRC’s 11th Five Year Plan (FYP) 2006–2010 highlighted the significance of diversifying energy supply by providing increasing renewable energy including hydropower. and in addition to XHP. with 79% classified as rural. By the end of 2005.000 MW had been exploited. ensuring sustainable use of natural resources. and promoting integrated water resource management have been part of ADB’s energy. Tranche 2: 28 Jan ‘08) 1. one more hydropower project had been commissioned. the two selected MFF hydropower projects are an integral part of Gansu Province’s least-cost generation expansion plan.5 MW. Gansu Province. The Zhangye City Government (ZCG) also included these projects in its investment program for the 11th FYP period. PRC: Gansu Heihe Rural Hydropower Development Program (MFF08) Approval dates (MFF: 13 Dec ‘06. GaPG set priorities and made plans to promote hydropower development to meet growing electricity demand in an environmentally sustainable manner. which was met with an increase in quick gestation coal-fired power plants.APPENDIX 8: STRATEGIC CONTEXT OF MULTITRANCHE FINANCING FACILITIES A. From 2000 to 2005. two of the seven hydropower projects were under construction. and water sector strategies in the PRC. Introduction of new initiatives to increase support to DMCs for low-carbon technologies and energy efficiency projects in Strategy 2020. Gansu had a population of about 26. Gansu’s GDP growth was about 10% per annum in real terms. only 23% of Gansu’s hydropower potential of about 17.000 MW and was rising rapidly. Gansu has limited fossil fuel resources. . On the other hand. This.2 million. in particular deterioration in air quality. Gansu was identified by the PRC Government as one of the key provinces to promote renewable energy development in the 11 th FYP period. At approval (and since then) developing clean energy resources. had adverse environmental consequences. The roadmap GaPG developed the Heihe River Cascade Hydropower Development Scheme in Zhangye City. Tranche 1: 18 Dec ‘06. Along with the entire scheme of cascading hydropower projects. 2. Given its vast renewable energy resource base. Gansu experienced demand growth of more than 13% per year. however.

16 million tons of oil equivalent) was 18% of primary energy use in 2008. The roadmap The government had adopted a clear and sound strategic multisector roadmap for energy efficiency based on extensive consultations and inputs from all stakeholders. Philippines). PAK: Energy Efficiency Investment Program (MFF31) Approval dates (MFF: 17 Sep ‘09.118 Appendix 8 In terms of project readiness. the Erlongshan and Dagushan hydropower projects (nos. . first sentence). respectively. The government recognizes that an integrated institutional and resource allocation structure is required to implement this policy framework. . 8. B. The roadmap included measures to increase energy efficiency on both the supply and demand sides. A general recognition at appraisal that energy efficiency investments can be most effective when the policy. Mainstreaming of energy efficiency is a critical component of the government’s climate change program. Energy efficiency investments represent the least-cost and quickest low-carbon solution to bridge the energy gap. building retrofits. and pricing regimes are right (RRP. industrial energy efficiency financing. plus transmission and distribution upgrades on the supply side. under the scheme) were next in line to be constructed and were to be supported through the (then) proposed MFF. Energy security and affordability are priorities under the government's energy sector strategy and policies. As per the roadmap. The government has a policy framework that focuses on maximizing energy savings by rational and efficiency use in all energy-consuming sectors. and (ii) compact fluorescent lamp diffusion. A large number of initiatives were identified that included (i) thermal power plant rehabilitation. 7. Tranche 1: 22 Sep ’09) 5. ADB’s country partnership strategy for Pakistan has energy efficiency as a core intervention area. page iii. . At appraisal. Consistency with government plans and priorities Energy security is the primary goal under Pakistan’s energy strategy. Consistency with ADB strategic priorities New energy efficiency interventions increase support for low-carbon technologies. and gas and electric appliance replacements. Pakistan’s energy savings potential (estimated at appraisal at about 11. in line with Strategy 2020. regulatory. Development context Continued and increasing power and energy supply side shortages. 6. the energy efficiency initiative in Pakistan was to begin in August 2009 and to progress rapidly. 4 and 5. the government agreed to a set of commitments aimed to (i) establish a dynamic business environment for sustained transformation of the energy efficiency market. and (ii) scale up deployment of proven technologies through public investments and fostering private investments. High energy intensity compared with countries at a similar stage of development (India.

Excess demand 3. irrigation. Roadmap 2. water pollution. A roadmap for integrated water resource development and management was prepared and endorsed following lengthy multistakeholder reviews. erosion. 11. water supply and sanitation. Curug run of river power project 5. water resources development and management. and the roadmap with the investment plan plus outputs and activities in the DMF.Strategic Context of Multitranche Financing Facilities 119 C. However. participatory irrigation Investment Plan Components + Outputs/ Activities in DMF Institutions and planning for IWRM 1. Water council 1 2 Degradation of Hydraulic Infrastructure. Unbalanced supply/ demand 2. 10. Groundwater depletion 2. the activities are found broadly in line with the problems identified. The problem tree identifies problems and their causes. tariffs. Bandung water source 2. legislation. Bulk water for Bekasi. The sector assessment presented in the RRP covers groundwater. Optimization/ allocation 2. Karawang 8. Problem Tree. Water conveyance Low reliability of water supply: 1. disaster management. The discussion is essentially qualitative. Sand 2. 3 Water use conflict: 1. of which the MFF is approved to finance $500 million. Participation/education Water rights. Roadmap. information. Licensing . and program management. it is not apparent how the activities in the DMF and financing plan were actually derived from the sector assessment or based on the problem tree. and Investment Plan Sector Assessment Issues Groundwater Management (Falling Water Table). infrastructure construction. groundwater wells. Water Supply and Sanitation Separate planning for river basin and infrastructure planning. sedimentation. Mini/micro hydro study 6. Table A8: Reconciliation of Sector Assessment. Irrigation upper Cipunegara 3.5 billion worth of investments over 15 years. Coordination 2. INO: Integrated Citarum Water Resources Management Investment Program (MFF27) 9. Urban water supply and sanitation Water sharing: 1. Irrigation Cisankuy 4. Low tariffs Degradation of hydraulic structures: 1. Table A8 attempts to link the sector assessment. Demand management 9. allocation. Cirata dam raising 7. Water resources development and management 1. High stream flow Roadmap Organizational restructuring & capacity development. environmental protection. nor how the roadmap provides insight into the selection of the activities and their timing. Mandates Water shortages: 1. Surface Water Management (Demand) Problem Tree Issues Weak basin wide management capacity: 1. water sharing. Limited alternatives Water pricing: 1. efficient / effective use of water (not IED definition of the terms). Water sources 2. problem tree. The roadmap is intended to guide $3. and decision-making support. and drainage. O&M. The roadmap development process identifies groups of activities that include integrated water resources management (IWRM). Free irrigation 2. Citarum basin plan 3. planning. community empowerment. The summary roadmap captures issues of concern typical of many hydro basins and provides qualitative roadmap objectives to guide the design of MFF components. Overall. policy. Apex body 3. data. regulations.

Sediment 2. Peak flows 2. data sharing. Management of water disasters Community empowerment: 1. community self-help 7 Irrigation and Drainage Lack of decision support tools: 1. PCR = project completion report. Management 2. the problems faced in the Citarum River Basin (CRB) are complex. Salinity 2. Reforestation 5. community part in integrated water resources management. Solid waste 3. Tides 4. Protected area management 5 Flooding 6 Planning and construction. disaster preparedness plan. Tide / sediment High sediment loads: 1. IME = independent monitoring and evaluation. information decision support: 1. Erosion and Sedimentation Enhancing capacity for environment protection of rivers. IWRM = integrated water resources management.120 Appendix 8 Investment Plan Components + Outputs/ Activities in DMF 3. Slope failure Flooding: 1. Land uses Low water quality: 1. Source: Independent Evaluation Department. Pollution Sedimentation in river mouths: 1. decision support system and modeling Disaster management: 1. Household effluent 2. information. drought management plan Education. Water quality improvement 2. Tariffs/allocation Sector Assessment Issues Problem Tree Issues Undesirable Flow Regime: 1. Wastewater Saguling Dam 3. Fertilizers / chemicals 3. lakes. Fisheries 4. water resources information technology. wetlands. Information Water quality and hydrology monitoring. O&M = operations and maintenance. Community participation 2. On-line flow forecasting 8 Program management: 1. Coastal zone management 4. While it is desirable that the roadmap gain wide support in the community and government. Logging 2. Farming 3. Urban development Pollution of the watershed: 1. capacity development. IME 3. Limited drainage 3. PCR DMF = design and monitoring framework. Land use Roadmap 4 Water Pollution. awareness. 12. Citarum flood management 2. forests. and it is unlikely that suitable selection of interventions can be developed and prioritized through such a consultative process . Logging 2. Industry Mudflow and landslides: 1. The interventions were prioritized in consultations with water resources organizations and stakeholders. research. Environment protection: 1. Information/education/ awareness for capacity development of community Data.

However. The grant served as a “PPTA” for the whole MFF. etc. 13.Strategic Context of Multitranche Financing Facilities alone as is stated in the RRP. usage or allocation of water by sectors over time. 1 Ideally. more than 3 years after MFF approval.5 million). In other words. Although the RRP claimed that a sector roadmap was in place. 16. nor (ii) provide sufficient clarity on the selection of town to be included in the ADB MFF (vis-à-vis support from other funding agencies active in the WSS sector). such an optimization analysis was planned to be attempted in 2012. The available government strategy and roadmap at the time of processing the MFF did not (i) provide a sound technical assessment of WSS facilities and services in the country.. trends in industry and different sectors. A formal water sector optimization analysis is needed. and capacity development plans are included in the MFF. The intended objective of this stand-alone grant was to help the government strengthen sector planning and management by developing (i) a sector strategy. basin mapping for modeling purpose with nodes. population growth. there appears to be no detailed analysis required to define sufficiently the MFF projects as outlined in the financing plan and implementation schedule. exposure of the hydrologic problems quantitatively explained with rainfall/runoff. 1 This was prepared under ADB assistance under a different stand-alone grant-UZB-0131 Surkhandarya Water Supply and Sanitation Project (approved on 3 November 2008 with $1. no water resources study. there was no detailed sector roadmap as described in the relevant Operations Manual Section (D14). (ii) a road map. As per the RRP. 121 D. so that optimization modeling can take place under different climatic probability scenarios. but as of October 2012. UZB: Water Supply and Sanitation Services Investment Program (MFF36) 15. and to achieve poverty reduction. net and gross withdrawal amounts. relying on agencies with low capacity to prioritize interventions to resolve complex and expensive basin-wide problems for the sake of participation seems risky in terms of outcomes. the RRP acknowledges that the capacity of water resources organizations and stakeholders in the CRB is low. but it is still being debated and negotiated between ADB and the government. There is no detailed quantitative basin planning. and (iii) an investment program. immigration patterns. There is also no institutional study and capacity assessment for implementation of the investment plan. nor optimization of allocation and consequences for social and economic factors. a properly detailed sector roadmap was prepared. it had not been finalized and accepted by the government. . 14. hydrology. transfers. the sector roadmap should have been approved and ready at the time of MFF processing. Therefore. Moreover. which should help define the roadmap. There appear to be no quantitative links between the sector assessment and the MFF interventions. There are also no economic data. After MFF approval in September 2009. the government wanted to provide water supply and sanitation (WSS) services as a means of raising public health and hygiene standards.

and distribution entities. and Uttarakhand. corporatization. transmission. 9 March (approved 30 March 2006. Madhya Pradesh. . Uttaranchal Electricity Department (UED). and the implementing agencies to undertake power system expansion activities in a cost-effective manner. MFF03). (vii) having an independent regulator that (among other roles) formulates a tariff mechanism with the objective of promoting competition and efficiency in the pricing of bulk power and transmission services. Manila. (iii) acquisition of computer hardware and software 1 2 There are seven energy sector MFF investment programs in India: one each to support power sector entities in two states (Assam and Uttarakhand). 2006. The central level policies also mirror the state-level policies and encompass (i) increasing commercial orientation of all central sector power corporations. Power Grid Corporation of India Limited (PowerGrid) is also fully committed to this policy framework. maintenance. (iii) encouraging private participation in generation to augment generation and compete against central sector power generation corporations. operation. and rehabilitation design and operations. Himachal Pradesh. privatization of power stations in the unbundled state-level generation entities. (iii) encouraging distribution companies to improve their performance through reduction in technical and nontechnical losses. All states have committed to this policy framework and are at various stages of enacting and implementing the unbundling. The policy framework for the power sector at the state and central levels is defined by the Indian Electricity Act (2003) and various other regulations at the state and central levels. the key aspects of the policy framework are (i) unbundling of the vertically integrated state electricity boards into distinct generation. 2 The MFF supports capacity development and strengthening of the institutional framework within the Government of Uttaranchal (GOU). relevant information on the Uttarakhand Power Sector Investment Program is presented below. and (vi) corporatizing and improving financial management and governance of all state-level power sector entities. (iv) encouraging private participation in transmission to augment transmission system and compete against the central transmission utility. As an example.APPENDIX 9: POLICY DIALOGUE AND CAPACITY DEVELOPMENT (SELECTED CASE STUDIES) A. and regulating central generating station tariffs. It focuses initially on implementation through the project management office (PMO) and includes (i) training of UED and implementing agency staff to transfer and implement international best practices in transmission. (v) encouraging power plants to sell power to more than one state by entering into power purchase agreements with the grid-operating entity. (ii) creating a grid-operating entity by unbundling the grid operations function from the central transmission utility. (ii) consulting services for design and construction management. Uttaranchal (Uttarakhand) Power Sector Investment Program (India). ADB. and two each to support power sector entities in two states (Himachal Pradesh and Madhya Pradesh). Energy MFF Interventions in India1 1. generation. and privatization program. which now focuses only on transmission capacity expansion. (iv) having independent regulators that are responsible for setting tariffs in a manner that encourages distribution companies to enhance their operational efficiencies. Capacity Development Support 3. Proposed Multitranche Financing Facility. (v) improving the targeting of subsidies to specific customer categories (such as farmers and low income households). At the state level. (ii) encouraging competition in generation through investment in central sector power generating corporations. 2. Report and Recommendation of the President. Policy Framework 1. one to support a central transmission utility (PowerGrid). and facilitating private investment in power generation. and maintenance. (vi) encouraging merchant power plants by guaranteeing off-take for a part of the generation. These include the four states where ADB has MFF interventions: Assam. 2.

3 ADB. such as the Northeast Power System (NEPS). and the promotion of public– private partnerships. and coal. substations. and cheaper to gain a (i) megawatt of power from increasing efficiency than from building a new generation plant. Because Afghanistan is building its energy infrastructure from the ground up. and efforts must be focused on a few large projects. and (v) corporate development. and upgrade. capacity must be improved. decentralized power will prove more beneficial in the long run. small hydropower plants. New supplies must be rationalized. It can prioritize energy efficiency and renewable energy. It is easier. and other activities to be defined in consultation between GOU.Policy Dialogue and Capacity Development (Selected Case Studies) for the PMO and the project implementation units. preparing an enabling legal. 4. (iii) (iv) Investments in new capacity. Progress in creating new supplies has been insufficient. and for renovation. and ADB. and regulatory base for business. 3 This advisory TA for capacity development. including compliance with safeguards and external monitoring. faster. Implementation support includes (i) consulting services required for the design and construction of transmission lines. The government wants to increase production from various sources. originally proposed as a TA attached to the loan. 7. Rural energy. the country also needs to consider longer term issues. it can learn from the lessons in other countries. including the preparation of environmental and social assessments for subprojects introduced after the approval of the MFF. . operating independently and mobilizing private sector investment. gas. To accomplish this. The Afghan energy strategy contains an implicit prioritization of energy subsector activities. addressing end-use efficiency now reduces overall costs. Related advisory TA provides project management support and develops capacity in the PMO and the implementing agencies during the first year of implementation. (ii) preparation of subproject appraisal reports for the candidate (noncore) subprojects. In addition. 2005. initial design of an independent power trading company. including advisory services for restructuring. In addition to addressing immediate and short-term needs. and (iv) acquisition and installation of project-related information technology. UED. Electricity is prioritized over other sectors. coordination among the entities and aid agencies must be strengthened. including hydro. losses can be significantly reduced. A multisector regulator would be a good start. Manila. 5. By locating power generation closer to users. Energy MFF Intervention in Afghanistan 1. policy. (ii) Improvement in sector governance and coordination. Policy Context 6. The strategy is based on a four-pronged approach: Greater efficiency from existing operations. (iv) field supervision. The aim is to pursue outsourcing. to improve capacity to comply with all relevant ADB policies and procedures. Moreover. This affects most of the population. was processed separately to accelerate project readiness. 123 B. Technical Assistance to India for the Uttaranchal Power Sector Capacity Building Project. Most rural areas lack electricity. While the national grid is important in transporting power from cheaper markets. (iii) implementation of management plans for environmental and social safeguards. monitoring. The success of the energy sector will depend on energy utilities. and the commercialization of state-owned enterprises (SOEs).

11. The project will support (ii) the PMO in conducting a feasibility study on hydropower and irrigation schemes in the Lower Kokcha River. funding. (v) reporting. planning policy refinements. The contract will include an option for a 2-year extension in case the required capacity is not obtained in the initial contract period. accuracy. The intention is to work on broad institutional matters while addressing day-to-day operational and project execution.124 Appendix 9 2. (iii) safeguard management and gender mainstreaming. and transparency. The (i) component will assist the maintenance of the newly constructed 220 kV NEPS. The consulting services also include identification and procurement of the required tools and spare parts for the maintenance of the 220 kV NEPS. and (vi) technical assistance to train staff on project management. and collection of tariffs. A program management office (PMO) was established to undertake (i) technical work (design and supervision). An MIS will be (ii) established in the PMO to improve efficiency. Preparation of future tranches. a metering program. Consultants will be recruited to support the PMO. and investment program development. analysis. The PMO will have a special team to prepare due (iii) diligence work in support of projects evaluated for subsequent tranches. and advisory services to its management and technical staff. The PMO will also have a communication function. (iv) finance and administration (to tighten up on systems. . Nonphysical outputs of the Investment Program include (i) better system operation and maintenance. controls. Scope of Nonphysical Investments (NPIs) 8. training of appropriate staff at the electric utility will be undertaken to ensure that the system will be effectively adopted and used in a sustainable manner. records. including emergency restoration systems. Project management and due diligence—consulting services. Tranche 2 Electric utility’s institutional capacity development. Tranche 1 North East Power System (NEPs) 220 kV system operation and maintenance. introduction or upgrading of the billing system. as specified in the RRP. (v) Distribution planning system. Project management. evaluations. (iii) Electric utility’s management. This project will assist the utility (i) primarily with capacity development for its MIS. This component is to build the electric utility’s capacity in distribution planning system in order to enable it to effectively engage in the planning of the distribution system. and cash management). and (ii) enhanced planning and project management. Consultants will be recruited to develop sufficient managerial and organizational capacity of the electric utility through provision of necessary training. In addition to the software provision and a demonstrative pilot system planning of one of the districts. A revolving pool of funds will be created for capturing (iv) MFF onlending repayment for use in the energy sector. procedures. including the introduction of a management information system (MIS) and better metering. 10. The PMO has due diligence experts to prepare the next generation of priority investments. Establishment of revolving fund. 9. and implementing efficiencies in the collection system. and results measurement. Technical assistance will be provided for developing the specific mechanism of the revolving fund that will be generated by the recovery of the subloans provided under the MFF to be used to subsidize tariffs for the poor and vulnerable. audits. billing. (ii) legal services (contracts and bidding processes).

The diagnostic work outlined key problems. capacity. At the federal level. namely technical. there is a need for better strategic thinking. The RE development road map places special emphasis on capacity development. C. management. Tranche 2 improves and expands the Kabul distribution system and strengthens the capacity of the power sector. and safeguards. The RE policy fits with a broader clean energy and environmental policy in Pakistan. fiduciary oversight. There is also a need for better systems. governance. The latter combines physical with nonphysical investments. procurement. and reporting. financial management. Status of Tranches 1 and 2 NPIs by Start of Tranche 3 125 Under Tranche 1. The first loan will finance the services of 18. One feature of this due diligence package is to ensure that all ADB operational policies and procedures are adhered to in full and at all times. This work includes detailed due diligence on all standard project finance areas associated with ADB-financed transactions. and teams for systematic evaluation. procedures. The objective is to close the time gap between the approval dates for subproject finance and the start-up of their implementation. regular monitoring. 17. Energy MFF Intervention in Pakistan 1. Baluchistan and Sindh provinces are in the process of fine-tuning their policies targeting wind and solar energy. These are to be sequenced and complementary. and opportunities. governance. Policy Context 14. The latter is an apex body charged with promoting RE nationwide. 13. a number of which were supported by institutions including ADB. reforms. and documentation for the clearance of project concepts in the internal government system. Tranche 2 is in an early stage of implementation focusing on supervision consultant recruitment for project implementation and procurement of contractors for civil works. 2. and capacity development. institutional change. private sector engagement. The policy framework will be backed by a comprehensive action plan. including incentives and transparent rules and procedures for more private sector investment. challenges. It covered each of the provinces and subsectors. 15. This covers actions at various levels.Policy Dialogue and Capacity Development (Selected Case Studies) 3. North West Frontier Province (NWFP) and Punjab are developing new power generation policies that offer incentives for RE. an RE Policy Framework had already been developed by the Alternative Energy Development Board (AEDB). legal. Scope of Nonphysical Investments (NPIs) Feasibility studies and due diligence for new sites. commercial. 16. The role of institutions and their functions also needs more clarity and simplification. At the provincial level. The genesis of the policy framework and action plans for RE development is a road map for the sector. The latter includes physical investments. and policy formulation. . PMO consultants have been mobilized. experts to work on preparing eight new hydropower proposals in NWFP and Punjab. in particular with regard to small to medium-size hydropower plants. operational. The roadmap covers the period 2006–2012. This RE development road map was prepared on the basis of various assessments undertaken over recent years. This work paved the way for developing a strategic vision for the sector and an investment program. 12. The work will also include preparing advance actions on consulting services. The Government of Pakistan was committed to developing the renewable energy (RE) sector. planning. regulatory. At the federal level.

The total cost is estimated at $980. (i) No progress has been made to date in capacity development at the 22. accounting and auditing. labor.000. this compilation may not be suitable for the purpose of understanding institutional capacity strength from the viewpoint of suitability for administering the MFF. (iii) degree to which its policies and institutions promote equity and inclusion (covering gender equality. transparency. D. ADB will finance $800. finance. assistance (TA) package to support AEDB to cater for work on policy formulation. and corruption). This will support establishment of new evaluation. safeguards. and (ii) governance of public sector enterprises. operational. knowledge management (regarding sector development issues and project best practice worldwide). evaluation. management. provincial. 20. The executing agency for the TA will be AEDB. monitoring. and environmental sustainability). fiduciary oversight. social protection. (iii) Capacity development in Punjab will be cancelled due to the executing agency’s inaction. and financial reporting. building human resources. capacity development consultant engagement is almost complete. Given that the basic purpose of compiling this information is to understand the DMC’s policy and institutional framework for promoting poverty reduction. financial management. procurement. and program oversight or management. These performance assessments are based on a large number of measures that include (i) quality of its macroeconomic management including fiscal policy and debt policy. sustainable growth. equity of public resource use. and business regulation. fiduciary oversight. commercial. 24.000 on a grant basis. targeting efficient project evaluation. The TA fits over and above the capacity development component accompanying the MFF. Capacity development. and reporting systems at the federal. staff coaching and training. revenue mobilization efficiency. The TA will be implemented over a period of 18 months as two major tasks: The first will cover capacity development of AEDB and the second will cover RE policy formulation. and project implementation matters. and incentives to facilitate private sector investment. Capacity development will cover (i) planning and formulation of policy. Clean Development Mechanism (CDM) consultant is to be engaged by the executing agency for registration of projects for Certified Emission Reduction (CER). and (iv) establishment of systems and procedures. financial management systems and practices. and (iv) quality of governance and public sector management (covering property rights. financial. The government will finance the balance. (iii) expert support and training of staff in relation to best practice project preparation work —in essence covering due diligence on technical. Table A9 shows the scores for (i) policy and institutional rating. anticorruption. (ii) development of adequate management and financial systems. legal. . quality of public administration. monitoring. The program will also work on institutional strengthening. (ii) SHYDO building construction is completed. backed by training and computer software and hardware to set up modern management and financial information systems. governance.126 Appendix 9 19. ADB conducts country performance assessments for all DMCs with access to the ADF. Capacity development. and effective use of concessional assistance. Institutional Capacity Assessment 23. rule-based governance. better planning. The government requested ADB to provide a technical 21. procurement of durable goods is ongoing (contracts awarded). and monitoring at the top level with project preparation. including regulatory and legal framework. Related/parallel technical assistance. federal level. (ii) coherence of its structural policies on trade. and reporting at the investment and implementing agency level. and implementation agency levels. policy. accountability. It will also define and execute a program to help improve strategy and policy formulation and planning. no commitment has been made to date. monitoring and reporting. The capacity component combines “big picture” strategies. planning.

2 4.9 3.4 4. These are composite indicators that rely on data from more than 100 databases on the following broad themes: (i) voice and accountability.0 3.5 4.4 3.9 3.2 4.0 3.5 4.6 3.8 3. (iv) regulatory quality.0 4.1 4.6 3.7 3. Therefore.2 Policies for Social Inclusion and Equity 2.2 3.8 4.9 4. and policies for social inclusion and equity.9 4.0 4. (v) rule of law. it would be useful to consider developing suitable indicators from a range of available databases.3 Structural Policies 2.0 4.5 4.5 3.5 4.6 3. Manila. Source: ADB. Annual Report on the 2011 Country Performance Assessment Exercise.5 4.8 4. and (vi) control of corruption.8 4. structural policies. (iii) government effectiveness. .3 4.1 4.3 5.5 4.6 3.4 Governance of Public Sector Enterprises 2.3 127 Country Afghanistan Armenia Bangladesh Georgia Mongolia Pakistan Papua New Guinea Uzbekistan Viet Nam a Averaged over scores for economic management.3 3.8 4. the World Bank Institute compiles Worldwide Governance Indicators that cover all 14 countries where ADB has supported MFF investment programs. For instance.7 4.4 2. The design of an indicator or a suite of indicators that can be used to decide on whether or not to use the MFF modality in a particular country and sector context is beyond the scope of this evaluation. (ii) political stability and absence of violence.8 Policy and Institutional Ratinga 2.Policy Dialogue and Capacity Development (Selected Case Studies) 25.7 4.9 3. Table A9: Institutional Capacity Ratings of Selected ADF Eligible Countries Economic Management 3. 2012.

0% 1.5% 1.5% 0.0% 2.1% 2007 0.4% 0.5% 26.8% 2005 1.4% 0.2% 0.4% 0.6% 2.5% 9.2% MFF = multitranche financing facility.5% 2007 1.1% 0. Technical Assistance.5% 3.9% 2.0% 1.8% 1.6% 11.7% 0.5% 2.1% 3.2% 10.3% 0.1% 0.7% 2.5% 1.3% 2010 1.0% 0.0% 0.1% 0.4% 1.1% 0.2% 0.6% 1.0% 4.3% 2008 1.6% 0.7% 1.7% 0.4% 1.6% 3.4% 1.6% 6.2% 1.8% 2004 1.0% 28.2% 5.9% 1.4% 0.3% 7.3% 0.8% 0.4% 0.9% 1.7% 0.3% Country PRC India Viet Nam Papua New Guinea Pakistan Other MFF countries Afghanistan Armenia Azerbaijan Georgia Kazakhstan Uzbekistan Bangladesh Indonesia Mongolia 5.7% 2002 1.4% 0.8% 7.3% 3.8% 0.7% 13.0% 1. Source: Loan.1% 0.6% 1.4% 0.0% 0.7% 8.2% 1.6% 3.2% 0. Technical Assistance.0% 0.9% 15.2% 2. Grants.0% 1.0% 2008 0.5% 3.6% Total 2.8% 0.0% 0. PPTA = project preparatory technical assistance.5% 3.9% 3.6% 0.4% 2.8% 44.7% 5.5% 0.1% 3.0% 1.2% 0.3% 4.4% 0.7% 1.7% 0.3% 1.3% 1.9% 7.6% 1.4% 2005 0.5% 0.3% 0.0% 0.4% 2.7% 8.6% 1.1% 1.3% 3.6% 0.5% 2006 0.8% 1.5% 3.6% 0.3% 6. and Equity Approvals Database.2: Ratio of PPTA Support to Loan and Grant Approvals 2000 0.9% 2.0% 2011 0.2% 0.7% 3.2% 2.0% 1.8% 0.9% 5.8% 2.8% 1.APPENDIX 10: TRENDS OF TECHNICAL ASSISTANCE AND PROGRAM LENDING SUPPORT Table A10.7% 1.1% 5.8% 0.0% 2001 0.9% 2.1% 0.0% 1.5% 0.5% 4.5% 2.3% 0.7% 1.1% 1.0% 2.6% 0.2% 2010 0.3% 1.7% 0.5% 0.6% 1.1% 1.0% 0.8% 0.7% 0.5% 0.4% 1.6% 0.6% 3.4% 0.1% 0.7% 2003 0.2% 1.3% 0.6% 1.3% 0.4% 1.2% 2004 0.4% 2011 1.9% 8.1% 2.4% MFF = multitranche financing facility.0% 0.8% 0.4% 1.0% 0.6% 0.2% 0.2% 0.2% 0.0% 1.0% Country PRC India Viet Nam Papua New Guinea Pakistan Other MFF countries Afghanistan Armenia Azerbaijan Georgia Kazakhstan Uzbekistan Bangladesh Indonesia Mongolia 1.0% 0.1% 5.7% 0.4% 1.8% 4.2% 2. Table A10.7% 0.7% 0.6% 2.3% 0.3% 0.6% 0.5% 0.0% 0.3% 0.7% 0.7% 2.6% 1.0% 2006 0.4% 2. .8% 2.0% 28. Source: Loan. Grants.2% 0.5% 0.3% 2003 0.1% 0.5% 0.5% 0.3% 0.5% 2.1% 0.3% 0.0% 0.7% 7.6% 2009 1.9% 0.8% 1.9% 0.7% 0.6% 4.0% 1.1% 3.2% 0.5% 0.7% 0.7% 2.1% 5.3% 0.2% 0.6% 0.2% 5.4% 0.9% 1.4% 2001 1.0% 1.1% 1.7% 1.2% 1.3% 0.5% 0.7% 5.1% 0.1% 1.0% 1.1% 6.5% 5.3% 0.0% 1. PRC = People’s Republic of China.8% 1.5% 0.1% 1.5% 1.5% 7.2% 3.1% 2002 0.0% 3.4% 10.3% 0.8% 1.3% 0. PRC = People’s Republic of China.8% 1.0% 0.2% 0.0% 0.4% 0.7% 3.0% 0.0% 8.3% 0.8% 0.2% 1.8% 1.8% 3. TA = technical assistance.5% 4.1% 5.2% 1.0% 0.5% 0.8% 3.1% 6.4% 0.1: Ratio of All TA Support to Loan and Grant Approvals 2000 1.2% 0.4% 0.1% 1.6% 0. and Equity Approvals Database.7% 0.6% 1.5% Total 1.2% 0.9% 0.3% 1.6% 3.5% 0.8% 0.1% 0.5% 0.4% 1.5% 0.4% 0.5% 0.2% 1.2% 0.3% 0.3% 2009 0.

9% 0.6% 0. Preparation of a Power System Master Plan for the State of Gujarat Development of a Framework for Electricity Tariffs in Gujarat Review of Electricity Legislation and Regulations in Gujarat Approval Date 08-Nov-90 14-Nov-91 02-Jan-92 02-Jan-92 02-Jan-92 07-Dec-93 09-Dec-96 03-Apr-97 30-Aug-90 30-Aug-90 25-May-92 29-Sep-92 20-Dec-95 26-Sep-96 17-Dec-96 17-Dec-96 17-Dec-96 Approved Amount ($’000) 100 180 890 200 400 600 600 600 740 490 100 600 300 600 600 300 235 TA No.6% 10.0% 0.1% 5.3% 3.4% 0.7% 0.7% 0.2% 0.5% Total 0. 1416 1598 1597 1645 1646 2008 2702 2775 1365 1366 1701 1756 2490 2648 2738 2739 2740 Country IND IND IND IND IND IND IND IND IND IND IND IND IND IND IND IND IND Sector Energy Energy Energy Energy Energy Energy Energy Energy Energy Energy Energy Energy Energy Energy Energy Energy Energy 129 . Grants.2% 2008 0.6% 3.1% 0.8% 2.3% 0.4% 0.9% 1.3% 0.7% 1.0% 1.5% 0.3% 2.1% 2011 1.8% 1.0% 2001 0.1% 5.Table A10.4% 4.5% 2.5% 2.3% 4.4% 5.7% 0.7% 1.4% 1.0% 1.6% 0.9% 2.0% 0.0% 2.0% 0.2% 1.2% 6.3% 0.5% 0.1% 2.5% 1.9% 0.3% 0.8% 1.6% 1.3% 1.9% 2.7% 0.5% 1.9% 0.0% 0.3% 18.8% 0.1% 2006 0.3% 2003 0.9% 0. MFF = multitranche financing facility.9% 3.7% 1.2% 0.6% 6.4: Approvals of Advisory Technical Assistance in Energy and Transport Sectors in India and Pakistan (1990–2011) TA Name Undertaking a Review of the Hydrocarbon Sector Operations Evaluation of Petroleum Exploration and Development Risk Contracts Safety and Environmental Management of ONGC's Activities Examination of Public Sector Oil Refining. Trends of Technical Assistance and Program Lending Support Table A10.9% 0.8% 3.1% 0.5% 5.3% 2009 0.7% 1. and Equity Approvals Database.2% 1. PRC = People’s Republic of China.3: Ratio of ADTA Support to Loan and Grant Approvals 2000 1.6% 3.1% 0.1% 0.0% 0.6% 1.5% 11.1% 2010 1.0% 1.9% 0.0% 8.8% 2004 1.2% 1.9% 9.5% 1.3% 2007 0. Source: Loan. Distribution and Marketing Activities Promotion of Private Sector Investment in Downstream Activities Regulatory Framework for the Gas Industry Preparation of Natural Gas Development Master Plan Hydrocarbon Exploration and Production Database and Archive System Tamil Nadu Electricity Board Operational Improvement Environment Monitoring and Pollution Control Training Workshop on Environmental Issues Related to Electric Power Generation Study of Bulk Power and Transmission Tariffs and Transmission Regulations Development of a Framework for Electricity Tariffs in Andhra Pradesh Institutional Strengthening of Indian Renewable Energy Development Agency.0% 0.3% 1.5% 2002 1.3% 4.5% 0.5% 1.9% 0.3% 2.1% 4.1% 1.9% 4.6% 0.2% 1.2% 0.4% 2005 0.9% 2.3% 0.3% 1.8% ADTA = advisory technical assistance.6% 0.0% 0.2% 0.9% 0.5% 0.1% 0.0% 3.4% 0.1% 0.1% 0.7% 2.9% 0.7% 7.8% 1.7% 2.3% 2.0% 4.3% Country PRC India Viet Nam Papua New Guinea Pakistan Other MFF countries o Afghanistan Armenia Azerbaijan Georgia Kazakhstan Uzbekistan Bangladesh Indonesia Mongolia 4.6% 1.8% 1.3% 0.2% 0.1% 0.0% 1.4% 0.3% 2. Ltd.4% 0. Technical Assistance.4% 0.5% 0.3% 0.6% 0.0% 8.0% 1.

000 600 600 50 450 400 150 150 500 1.000 600 1. Construction and Operation Road Construction Industry Study on Development and Implementation of MOST's Strategies for Deregulation and Policy Changes Road Safety Environmental Management of Road Projects Technical Standards of Highway Concrete Structures 29-Mar-90 29-Mar-90 27-Oct-92 12-Mar-97 29-Sep-97 05-Dec-91 05-Dec-91 05-Dec-91 19-Dec-96 19-Dec-02 30-Oct-90 30-Oct-90 30-Oct-90 27-Oct-92 29-Nov-93 29-Nov-93 29-Nov-93 Country IND IND IND IND IND IND IND IND IND IND IND IND IND IND IND IND IND IND IND IND IND IND Sector Energy Energy Energy Energy Energy Energy Energy Energy Energy Energy Energy Energy Energy Energy Energy Energy Energy Energy Energy Energy Energy Energy Approval Date 17-Dec-96 17-Dec-96 07-Jan-98 24-Nov-99 28-Dec-99 13-Dec-00 13-Dec-00 13-Dec-00 14-Jun-02 14-Jun-02 05-Nov-02 24-Jan-03 10-Dec-03 10-Dec-03 17-Dec-04 11-Aug-05 16-Nov-07 04-Apr-08 13-Nov-08 26-Nov-08 02-Aug-11 Approved Amount ($’000) 580 375 1.050 560 325 800 500 760 500 340 670 210 240 350 1283 1284 1770 2768 2880 1620 1621 1622 2721 4053 1402 1403 1404 1771 2001 2002 2003 IND IND IND IND IND IND IND IND IND IND IND IND IND IND IND IND IND Transport Transport Transport Transport Transport Transport Transport Transport Transport Transport Transport Transport Transport Transport Transport Transport Transport .130 Appendix 10 TA No.588 1.214 600 400 600 100 1.000 400 700 500 1. 2741 2742 2980 3305 3380 3573 3574 3575 3882 3883 3972 4083 4241 4242 4496 4630 4992 7073 7172 7181 7073 TA Name Financial Management Support to Kheda & Rajkot Distribution Centers of the Gujarat Electricity Board Solicitation of Private Sector Implementation of the Chhara Combined Cycle Power Madhya Pradesh Power Sector Development Support to the Power Finance Corporation Private Sector Participation in Electricity Transmission Reorganization Plan for Gujarat Electricity Board Consumer Awareness and Participation in Power Sector Reforms Support to Gujarat Electricity Regulatory Commission Development of a Transfer Scheme for Madhya Pradesh Power Sector Reform Legal Support for Madhya Pradesh Power Sector Reform Strengthening Consumer and Stakeholder Communication for Madhya Pradesh Power Sector Reform Building the Capacity of Assam Electricity Regulatory Commission Reorganization of Assam State Electricity Board Institutional Development for Rural Electrification Capacity Building for Clean Development Mechanism Uttaranchal Power Sector Capacity Building Energy Efficiency Enhancement in the Power Generation Sector Developing the Power System Master Plan for Bihar Facilitating the Operations of the Energy Conservation Fund "Energy Smart" in Madhya Pradesh Capacity Building for Himachal Pradesh Power Sector Agencies Developing the Power System Master Plan for Bihar (Supplementary) All Operational and Financial Assistance for Bombay Ports Development of Ship Repair Facilities Planning and Management Advisory Services for Paradip Port Trust Ports Policy and Financing Opportunities Enhancement of India Ports Policy Implementation Enhancement of Operational Efficiency on Indian Railways Rationalization of Nonbulk General Cargo Traffic Improvement of Traffic Costing and Financial Management Reporting of Indian Railways Railway Sector Improvement Management Consulting Services to Indian Railways Pavement Management for National Highways Private Sector Participation in Expressway Financing.000 1.700 900 24 20.

TA No. 22-Dec-99 25-May-00 20-Sep-01 05-Dec-02 18-Dec-03 29-Apr-05 23-Nov-05 12-Sep-06 31-May-07 18-Sep-08

Country

Sector

Approval Date

Approved Amount ($’000) 600 150 700 1,500 700 600 900 1,000 1,000 1,000 17,743

3361

IND

Transport

3445 3724 4013 4271

IND IND IND IND

Transport Transport Transport Transport

4013 4697 4836 4934 7130

IND IND IND IND IND IND

Transport Transport Transport Transport Transport Transport

1512 1616 1618 1619 2594 2809 3711 1447 1448 1625 1655 2162 2163 3409 3502

PAK PAK PAK PAK PAK PAK PAK PAK PAK PAK PAK PAK PAK PAK PAK

Energy Energy Energy Energy Energy Energy Energy Energy Energy Energy Energy Energy Energy Energy Energy

TA Name Capacity Building for Contract Supervision and Management in the National Highways Authority of India Establishing a Public-Private Joint Venture for the West Bengal North-South Economic Corridor Development Enhancing the Corporate Finance Capability of National Highways Authority of India Institutional Strengthening and Capacity Building for Madhya Pradesh State Road Sector Development of High Density Corridors under the Public-Private Partnership Institutional Strengthening and Capacity Building for Madhya Pradesh State Road Sector (Supplementary) Development of Road Agencies in the North Eastern States Urban Transport Strategy Institutional Strengthening of Madhya Pradesh Public Works Department Institutional Strengthening of the Bihar Road Sector All Program for Safe Repair and Operation of the Gas Processing Plants Belonging to the Sui Southern Gas Company Hydrocarbon Sector Strategy Study Financial Restructuring and Management Strengthening of SSGC Environmental, Safety and Efficiency Improvement of SSGC's Operations Natural Gas Import Study Private Hydropower Policy Study Restructuring the Gas Sector Power and Institutional Study Development of a Management Information System for WAPDA Power Generation Coordination Improvement and Tariff Training KESC Organizational and Financial Restructuring Study KESC Restructuring and Privatization Study Demand-Side Management Study Capacity Building of the National Electric Power Regulatory Authority Support for Privatization of Karachi Electric Supply Corporation 15-Apr-91 20-Nov-91 03-Dec-91 03-Dec-91 26-Jun-96 11-Jun-97 29-Aug-01 20-Dec-90 20-Dec-90 02-Jan-92 13-Jan-92 22-Sep-94 22-Sep-94 06-Mar-00 22-Sep-00 20-Jun-03 17-Dec-04 14-Jul-05 23-Oct-06 17-Nov-06 01-Dec-06 25-Oct-07

100 600 860 680 600 100 1,000 788 415 585 75 300 90 1,000 1,000 600 150 150 150 950 800 2,000 12,993

Trends of Technical Assistance and Program Lending Support

4130 4500 4610 4852 4870

PAK PAK PAK PAK PAK

Energy Energy Energy Energy Energy

4881 4982

PAK PAK PAK

Energy Energy Energy

Institutional Capacity Building of the National Transmission and Despatch Company Limited Capacity Building of the Alternative Energy Development Board Operational Support to the Office of the Energy Advisor Formulation of Strategy for Development and Utilization of Coal Reserves at Thar and Badin Establishment and Commencement of Operations for the Central Power Purchasing Authority Renewable Energy Policy Formulation and Capacity Development of the Alternative Energy Development Board Integrated Energy Model All

131

132
Appendix 10

TA No. 1738 1938 1461 1870 2176 3675 3676 4221 4469 7008 TA Name Oil Terminal National Ports Master Plan and Management Study Ports Subsector Tariff Review Farm-to-Market Roads Private Sector Participation in Highway Financing, Construction and Operation Environmental Assessment Institutional Reform and Road Maintenance Financing Study Cross Border Development Road and Road Sector Assessment Study Development of the National Trade Corridor Highway Business Plan All

Country PAK PAK PAK PAK PAK PAK PAK PAK PAK PAK PAK

Sector Transport Transport Transport Transport Transport Transport Transport Transport Transport Transport Transport

Approval Date 24-Jul-92 24-Aug-93 07-Jan-91 21-Apr-93 29-Sep-94 03-Jul-01 03-Jul-01 20-Nov-03 09-Dec-04 10-Dec-07

Approved Amount ($’000) 900 100 105 475 50 150 500 150 500 2,930

IND = India, ONGC = Oil and Natural Gas Corporation, PAK = Pakistan, SSGC = Sui Southern Gas Company, TA = technical assistance. Source: Loan, Technical Assistance, Grants, and Equity Approvals Database.

TABLE A10.5: Program Loan Approvals in Energy and Transport Sectors in India and Pakistan
Loan Name Hydrocarbon Sector Program Gujarat Power Sector Development Madhya Pradesh Power Sector Development Program State Power Sector Reform Assam Power Sector Development Program Madhya Pradesh State Roads Sector Development Program Energy Sector Restructuring Program Energy Sector Restructuring Program Capacity Enhancement in the Energy Sector Road Sector Development Program Approval Date 17-Dec-91 13-Dec-00 06-Dec-01 12-Dec-02 10-Dec-03 05-Dec-02 14-Dec-00 14-Dec-00 14-Dec-00 19-Dec-01 Approved Amount ($ million) 250 150 150 150 150 30 300 50 5 50 Original Closing Date 30-Jun-95 31-Dec-02 28-Nov-03 30-Jun-08 30-Jun-05 30-Jun-05 30-Jun-04 30-Jun-04 30-Jun-04 30-Jun-07 Actual Closing Date 18-Sep-97 10-Dec-03 28-Nov-03 05-Sep-08 28-Jun-05 29-Mar-06 19-Jan-04 19-Dec-00 20-Jun-04 30-Jun-07

Loan # 1148 1804 1868 1968 2036 1958 1807 1808 1809 1891

Country IND IND IND IND IND IND PAK PAK PAK PAK

Sector Energy Energy Energy Energy Energy Transport Energy Energy Energy Transport

IND = India, PAK = Pakistan. Source: Loan, Technical Assistance, Grants, and Equity Approvals Database.

Trends of Technical Assistance and Program Lending Support

133

Tranche 1 Loan Tranche 1 Loan Not identified in the RRP The MFF provides FIL Tranche 1 Loan Tranche 1 Loan The MFF provides subloans. Tranche 1 Loan Tranche 1 Loan Not identified in the RRP and PFRRs ADTA The TA is not attached to the program. Tranche 1 Loan Tranche 1 Loan Implementation support component under each tranche Tranche 1 Loan The MFF provides FIL. . which will be implemented under each tranche Tranche 1 Grant Tranche 1 Loan Tranche 1 Loan Tranche 1 Loan The MFF provides FIL. the sub-borrowers prepare the subprojects. The TA is not attached to the program.APPENDIX 11: FINANCING SOURCES FOR PREPARATION OF SECOND AND SUBSEQUENT TRANCHES MFF No. the sub-borrowers prepare the subprojects. Tranche 1 Loan EA's resources EPP sub-borrowers propose subprojects that will be reviewed by GFTC and EPP-PMO (this is a FIL) Tranche 2: TA Loan 2178 Subsequent tranches: Investment program support component of the MFF Tranche 1 Loan PPTA (TA Cluster) Tranche 1 Loan Tranche 1 Loan SSTs were used to finance existing ADB road projects only. Tranche 1 Grant Tranche 1 Loan Tranche 1 Loan Tranche 1 Loan Tranche 1 Loan Tranche 1 Loan Under Program Management Facility component of the MFF.a 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 Country IND PAK IND BAN PAK IND PAK PRC PAK IND IND IND VIE AZE IND PAK IND IND IND PRC PAK IND IND KAZ AFG AFG INO PAK PNG IND PAK AZE AFG GEO ARM UZB IND IND PNG PRC VIE UZB GEO IND Preparation of Second and Subsequent Tranches Capacity development component of each tranche of the MFF EA's resources Tranche 1 Loan Tranche 1 Loan Tranche 1 Loan Tranche 1 Loan Tranche 1 Loan Prefeasibility report for Tranche 2 was prepared under an ADTA.

a 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 135 Country IND IND KAZ KAZ IND IND PNG VIE VIE VIE GEO ARM IND IND UZB IND Preparation of Second and Subsequent Tranches Tranche 1 Loan Tranche 1 Loan Tranche 1 Loan The MFF provides FIL Tranche 1 Loan Tranche 1 Loan Tranche 1 Loan PPTA for the MFF (The only physical output is in Tranche 2 only) PPTA for the MFF and TA loan and grants not attached to the MFF Various PPTAs not attached to the MFF Tranche 1 Loan Tranche 1 Loan There was no information on how the subprojects under the two tranches were prepared. Grant. . RRP = report and recommendation of the President. PPTA = project preparatory technical assistance.1 for the approved MFF investment programs. PPTA for the MFF and sector-wide CDTA Tranche 1 Loan PPTA for the MFF The MFF will finance slices of long-term contract packages. a Refer to Table A3. SST = second and subsequent tranche. Sources: Asian Development Bank database on Loan. MFF = multitranche financing facility. Technical Assistance. The MFF provides FIL CDTA attached to the MFF Tranche 1 Grant Tranche 1 Loan CDTA (for safeguards compliance. and Equity Approvals. FIL = financial intermediary loan.Financing Sources for Preparation of Second and Subsequent Tranches MFF No. PFRR = periodic financing request report. EA = executing agency. piggy-backed to the MFF) PPTA for the MFF Tranche 1 Loan (or. Each contract package is time-sliced in line with the indicative tranching plan. under the Project Implementation component of the MFF) 61 62 63 64 65 66 UZB IND AFG IND MON VIE ADTA = advisory technical assistance. CDTA = capacity development technical assistance.

37066 37066 37066 37066 37066 37559 37559 37559 37139 37139 37139 32234 32234 22-Jul-11 Y Y Y 04-Oct-11 07-Jun-11 22-Apr-09 Y Y 04-Aug-11 04-Aug-11 2006 2006 2010 2007 2010 2006 2006 2007 2011 2006 2008 2006 2006 2011 2007 2008 2007 2007 2007 2007 2009 2010 5 5 5 6 6 7 7 7 7 8 8 9 9 9 10 10 11 11 11 11 11 11 OCR ADF OCR OCR OCR OCR ADF OCR OCR OCR OCR OCR ADF ADF OCR OCR OCR OCR OCR OCR OCR OCR PAK PAK PAK IND IND PAK PAK PAK PAK PRC PRC PAK PAK PAK IND IND IND IND IND IND IND IND Loan Number 2248 2414 2445 2535 2651 2210 2231 2540 2309 2498 2502 2316 2317 2845 2286 2287 2726 (Guarantee) 2312 2638 2289 2290 2396 2846 2296 2408 2299 2300 2841 2308 2458 2323 2324 2346 2347 2520 2732 34339 34339 34339 38254 38254 37192 37192 37192 37193 39652 39652 37231 37231 37231 38255 38255 32298 32298 32298 32298 32298 32298 CWEN CWEN CWEN SAUW SAUW CWEN CWEN CWEN CWEN PRCM PRCM PRM PRM PRM INRM INRM INRM INRM INRM INRM INRM INRM 1 1 2 1 2 1 1 2 3 1 2 1 1 2 1 2 1 2 3 4 5 6 Y Y 22-Jun-10 31-Oct-07 .APPENDIX 12: MAJOR AND MINOR CHANGES APPROVED IN MULTITRANCHE FINANCING FACILITY TRANCHES Table A12: Major and Minor Changes Approved in MFF Tranches Tranches (LFIS) 1 2 3 4 5 Y Y 6-Oct-11 Any Major Change (Y/N) Y Y Any Minor Change (Y/N) Approval Date of Minor Change Approval Date of Major Change 29-Oct-08 29-Oct-08 21-Apr-09 Year 2006 2008 2008 2009 2010 2006 2006 2009 2007 2008 2009 2007 2007 1 2 1 2 3 1 1 Y Y 26-Jul-11 MFF No.a 1 1 1 1 1 2 2 2 3 3 3 4 4 Country IND IND IND IND IND PAK PAK PAK IND IND IND BAN BAN Division SATC SATC SATC SATC SATC CWTC CWTC CWTC SAEN SAEN SAEN SATC SATC Fund OCR OCR OCR OCR OCR ADF OCR OCR OCR OCR OCR OCR ADF Project No.

Any Major Change (Y/N) Any Minor Change (Y/N) Y Y Y Y Y Y 18-Apr-08 07-Jan-11 10-Nov-08 01-Jun-10 05-Dec-11 15-Jun-11 Approval Date of Minor Change 22-Jun-10 Approval Date of Major Change Y Y 30-May-08 Y 13-Jul-10 Y 25-Mar-11 Project No.a 12 13 13 14 14 14 14 15 15 15 16 16 17 17 18 18 19 19 19 20 20 20 21 21 21 22 23 23 23 24 24 24 24 25 25 26 26 26 27 27 27 28 Country IND VIE VIE AZE AZE AZE AZE IND IND IND PAK PAK IND IND IND IND IND IND IND PRC PRC PRC PAK PAK PAK IND IND IND IND KAZ KAZ KAZ KAZ AFG AFG AFG AFG AFG INO INO INO PAK Loan Number 2331 2353 2610 2354 2355 2433 2831 2366 2506 2725 2400 2401 2404 2509 2410 2797 2415 2510 2823 2426 2611 2773 2438 2439 2727 2444 2461 2596 2687 2503 2562 2697 2735 135 244 134 184 280 2500 2501 216 2499 Fund OCR OCR OCR OCR ADF OCR OCR OCR OCR OCR OCR ADF OCR OCR OCR OCR OCR OCR OCR OCR OCR OCR OCR ADF OCR OCR OCR OCR OCR OCR OCR OCR OCR ADF grant ADF grant ADF grant ADF grant ADF grant OCR ADF GEF Grant ADF Tranches (LFIS) 1 1 2 1 1 2 3 1 2 3 1 1 1 2 1 2 1 2 3 1 2 3 1 1 2 1 1 2 3 1 2 3 4 1 2 1 2 3 1 1 2 1 137 . 41116 39595 39595 39176 39176 39176 39176 40031 40031 40031 40075 40075 40655 40655 38272 38272 39630 39630 39630 39653 39653 39653 38456 38456 38456 38411 41627 41627 41627 41121 41121 41121 41121 42095 42095 42094 42094 Y 15-Feb-12 Y Y Y Y 37049 37049 3704908 37220 Y Y Y 03-Feb-11 14-Dec-11 11-May-11 02-Dec-11 09-May-11 09-May-11 05-Aug-10 Division INRM * * CWTC CWTC CWTC CWTC INRM INRM SAUW CWTC CWTC SAPF SAPF INRM INRM INRM INRM SAEN PRCM PRCM EAEN PRM PRM CWEN SAER INRM INRM INRM CWTC CWTC CWTC CWTC AFRM CWTC AFRM AFRM AFRM IRM IRM SEER CWUW Major and Minor Changes Approved in Multitranche Financing Facility Tranches Year 2007 2007 2009 2007 2007 2008 2011 2007 2009 2010 2007 2007 2007 2009 2008 2008 2008 2009 2011 2008 2009 2011 2008 2008 2010 2008 2008 2009 2010 2008 2009 2010 2011 2008 2010 2008 2009 2011 2008 2008 2010 2008 MFF No.

138 Tranches (LFIS) 1 1 1 Y Y Y Y 18-Apr-10 16-May-11 19-Aug-10 11-Apr-11 Division PNRM PNRM SAUW SAUW CWEN CWEN CWUW CWUW Any Major Change (Y/N) Any Minor Change (Y/N) Approval Date of Minor Change Approval Date of Major Change Appendix 12 Y Y 26-Aug-10 11-Oct-11 Y Y Y 30-Mar-10 30-Mar-10 30-Mar-10 Year 2008 2008 2009 2011 2009 2009 2009 2011 2009 2009 2009 2010 2011 2009 2010 2009 2010 2011 2009 2010 2011 2009 2010 2011 2009 2009 2009 2009 2010 2011 2010 2010 2010 2011 2010 2010 2010 2011 2010 2011 2010 CWTC CWTC CWTC CWTC CWTC CWUW CWUW CWUW SAPF SAPF SAPF SAEN SAEN SAEN PNRM PNRM PNRM EATC EATC EATC SEPF SEPF CWTC CWTC CWUW ** SAER SAER INRM INRM CWTC Y Y 1 1 1 2 1 1 1 2 3 1 2 1 2 3 1 2 3 1 2 3 1 1 1 1 2 3 1 1 1 2 1 1 1 2 1 2 1 07-Mar-12 27-Jul-11 MFF No.a 29 29 30 30 31 31 32 32 33 33 34 34 34 35 35 36 36 36 37 37 37 38 38 38 39 39 39 40 40 40 41 41 42 42 43 44 45 45 46 46 47 Country PNG PNG IND IND PAK PAK AZE AZE AFG AFG GEO GEO GEO ARM ARM UZB UZB UZB IND IND IND IND IND IND PNG PNG PNG PRC PRC PRC VIE VIE UZB UZB GEO IND IND IND IND IND KAZ Loan Number 2496 2497 2528 2834 2552 2553 2571 2842 167 170 2560 2716 2843 2561 2729 2564 2633 2825 2586 2717 2822 2592 2677 2800 2588 2589 2590 2605 2724 2765 2613 2614 2635 2746 2655 2660 2669 2837 2676 2833 2728 Fund ADF ADF OCR OCR OCR ADF OCR OCR ADF grant UK Grant ADF OCR OCR ADF OCR ADF ADF ADF OCR OCR OCR OCR OCR OCR OCR ADF ADF OCR OCR OCR OCR ADF ADF OCR ADF OCR OCR OCR OCR OCR OCR Project No. 40173 40173 35290 35290 42051 42051 42408 42408 42091 42091 41122 41122 41122 42145 42145 42489 42489 42489 41036 41036 41036 41614 41614 41615 43141 43141 43141 43332 43332 43332 39538 39538 42107 42108 42414 41598 37091 37092 40648 40649 43439 .

AFG = Afghanistan. PNG = Papua New Guinea. Grant. Energy and Natural Resources divisions. PRCM = People’s Republic of China resident mission. CWEN = Energy and Natural Resources division. BAN = Bangladesh. SEEN = Energy division. SETC = Transport and Communications division. IRM = Indonesia resident mission. 139 . Source: Asian Development Bank database on Loan. Natural Resources.1 for the approved MFF investment programs. ** = MFF 44 is Not Allocated. Financial Sector. KAZ = Kazakhstan. South Asia Department. Grant. Central and West Asia Department. MON = Mongolia. Southeast. and Agriculture division. SEPF = Public Management. Central and West Asia Department. IND = India. CWUW = Urban Development and Water division. PAK = Pakistan. Central and West Asia Department . CWTC = Transport and Communications division. GEO = Georgia. TA. OCR = ordinary capital resources. AZE = Azerbaijan. and Trade division. Southeast Asia Department. LFIS = loan financial information system. CWPF = Public Management. UK = United Kingdom. and Agriculture division. all information in the table are from LFIS. PRC = People’s Republic of China. and Equity Approvals (LTA) of COSO. MFF 0063 was sourced from Loan. *** = in MFF 51 is Transport. and Trade division. SAPF = Public Management. Natural Resources. PNRM = Papua New Guinea resident mission. South Asia Department. GEF = Global Environment Facility. SEUW = Urban Development and Water division. SATC = Transport and Communications division. and Trade. South Asia Department. Financial Sector.Any Major Change (Y/N) Any Minor Change (Y/N) Approval Date of Minor Change Approval Date of Major Change Y 02-Feb-11 Project No. MFF = multitranche financing facility. East Asia Department. SAER = Environment. SAUW = Urban Development and Water division. Note: Unless otherwise stated. Southeast Asia Department. EATC = Transport and Communications division. SAEN = Energy division. Central and West Asia Department. N = no. Southeast Asia Department.a 48 49 50 51 51 52 53 54 55 55 56 57 57 58 59 60 61 62 63 64 65 66 Country KAZ IND IND PNG PNG VIE VIE VIE GEO GEO ARM IND IND IND UZB IND UZB IND AFG IND MON VIE Loan Number 2689 2679 2684 2713 2714 2731 2730 2754 2749 2807 2752 2764 2830 2770 2772 2793 2775 2794 261 2806 2847 2848 Fund OCR OCR OCR OCR ADF OCR OCR OCR ADF ADF ADF OCR OCR OCR OCR OCR OCR OCR ADF OCR ADF OCR Tranches (LFIS) 1 1 1 1 1 1 1 1 1 2 1 1 2 1 1 1 1 1 Major and Minor Changes Approved in Multitranche Financing Facility Tranches * = in MFF 13 is Energy and Water divisions. AFRM = Afghanistan resident mission. South Asia Department. Financial Sector. Southeast Asia Department. UZB = Uzbekistan. ARM = Armenia. 44060 40156 38412 41504 41504 39500 41414 42415 43405 43405 42417 43467 43467 37143 44483 36330 44318 43464 Y 02-Mar-12 Y 1 1 1 08-Dec-11 42265 41193 42039 Division CWPF SAER SAER *** *** SETC SETC SEUW CWUW CWUW CWUW SAEN SAEN SATC CWTC SATC CWPF SAEN CWTC SAUW EATC SEEN Year 2010 2010 2010 2010 2010 2010 2010 2011 2011 2011 2011 2011 2011 2011 2011 2011 2011 2011 2011 2011 2011 2011 MFF No. SEER = Environment. and Equity Approvals. INRM = India resident mission. Y = yes. a Refer to Table A3. Technical Assistance. VIE = Viet Nam. ADF = Asian Development Fund. South Asia Department.

then “potential problem” >=3 ENV. then “on track” o 2 financial covenants are not complied with. RES = resettlement. If: o o o 0 or 1 ENV.9.9. then “potential problem” o SDA/SDO <0. cost overruns. SCO = original/projected contract award curve. then “at risk” Let original/projected contract award curve (from effectiveness to closing) be denoted by “SCO. SCA = actual contract award curve. then “at risk” ENV = environment.” This can be derived from PAM Let actual disbursement curve (from effectiveness to closing) be denoted by “SDA.75. then “on track” o SDA/SDO >=0. RES. then “potential problem” o SCA/SCO <0. then “at risk” Let original/projected disbursement curve (from effectiveness to closing) be denoted by “SDO. and IP covenants are not complied with.75. SDO = original/projected disbursement curve. Safeguards.9. then “at risk” If: o 0 or 1 financial covenants are not complied with. SDA = actual disbursement curve. then “potential problem” o >=3 financial covenants are not complied with.” This can be derived from LFIS If: o SDA/SDO >= 0. etc.APPENDIX 13: TRANCHE PERFORMANCE RATINGS Criteria Technical Rating Are problems (such as key project conditions. then “on track” o SCA/SCO >=0. and indigenous peoples (IP) safeguards. etc. and IP covenants are not complied with.9. LFIS = loan financial information system. . resettlement (RES). then “potential problem” o n/N < 0. RES. This covers documentation requirements for environmental (ENV). implementation arrangements. online billing and collection systems.75 but <0.) identified by supervision consultants and/or ADB review missions being addressed? Contract Awards Rating system Let total number of problems be “N” Let total number of problems being addressed be “n” If: o n/N >= 0. consistency of internal controls with international standards.7. Basically.9.9. IP = indigenous peoples. and IP covenants are not complied with. RES.7 but <0.” This can be derived from PAM Let actual contract award curve (from effectiveness to closing) be denoted by “SCA. Such financial covenants normally deal with accounts receivables.” This can be derived from LFIS If: o SCA/SCO >= 0. PAM = project administration manual. computerized accounting and MIS. then “on track” 2 ENV.75 but <0. then “at risk” Disbursements Financial Management. Source: Independent Evaluation Department. this reflects a count of number of financial and related covenants that are not complied with. as per ADB’s safeguard policy. then “on track” o n/N >= 0.

and special concerns of the Asian Development Bank relating to organizational and operational effectiveness. The study also provides insights into the future design of multitranche financing facility interventions. operations. and technical assistance. and regional integration. with 903 million struggling on less than $1. About the Independent Evaluation at Asian Development Bank The Independent Evaluation Department evaluates the policies. it remains home to two-thirds of the world’s poor: 1. guarantees. loans. Based in Manila. The evaluation reviews whether lessons or initial outcomes before it was mainstreamed led to any changes in policy for the facility or operating requirements to improve its effectiveness. It contributes to development effectiveness by providing feedback on performance and through evaluation lessons. strategies. including 48 from the region. Contact Information Independent Evaluation at the Asian Development Bank 6 ADB Avenue.adb.25 a day. environmentally sustainable growth. equity investments. grants. Mandaluyong City Philippines 1550 www. About the Asian Development Bank ADB’s vision is an Asia and Pacific region free of poverty. ADB is owned by 67 members. by considering efficiency gains or cost reductions as well as gains in development effectiveness. Its mission is to help its developing member countries reduce poverty and improve the quality of life of their people. Despite the region’s many successes. Its main instruments for helping its developing member countries are policy dialogue.org Telephone: (63-2) 632 4100 Fax: (63-2) 636 2161 Printed on recycled paper .8 billion people who live on less than $2 a day. ADB is committed to reducing poverty through inclusive economic growth.Real-time Evaluation Study of the Multitranche Financing Facility This evaluation examines the costs and benefits associated with the multitranche financing facility modality.org/evaluation Email: evaluation@adb.

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