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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

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

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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ADB’s Funding Sources E. ADB Support for Project Preparation D. Project Readiness E. Objectives D. Sectors D. Cofinancing D. Instruments Chapter 3: Expected Benefits A. Regions and Countries C. Background and Rationale B. Developing Member Country Perspectives B. Guidance on the Multitranche Financing Facility modality B. Long-term Support to Clients B. Monitoring and Reporting Arrangements Chapter 6: Implications for Operations A. 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 . Due Diligence and Viability Analysis C. Improved Organizational Effectiveness C. About the Multitranche Financing Facility C. Reduced Commitment Charges Chapter 4: The Working of the Modality A. Oversight. Flexibility Aspects Chapter 5: Quality Assessment and Review 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. Study Period E. Evaluation Methodology Chapter 2: The Portfolio A. Approvals B. Peer Review D. Justification of the Multitranche Financing Facility modality B. Decision-making filters C.

and Recommendations A.Chapter 7: Key Findings. Lessons C. 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. Lessons. 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 .

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

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

on the basis of its attractiveness to clients as well as its potential impact on development effectiveness when implemented well. . Within such a forward looking framework.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. the review stresses recommendations for strong action to direct the instrument towards enhancing the development impact of the operations.

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

the loan covenants were substantially complied with. The evaluation notes that. 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. the Board had approved 66 MFF investment programs. Simultaneously. the multiphase or multi-country series of projects. do not announce a financing envelope up front. another country visited by the study team. For one lending modality. which raised ADB’s ordinary capital resources for lending. which. the Board would have to convene to approve such a replication project. additional financing. tranche approvals had grown from 17% of total loan/grant approvals in 2006 to 27% in 2009 and 37% in 2011. prerequisites of alignment of MFF tranches with road maps. reflecting the priorities outlined in Strategy 2020. Annual approvals at the facility level had risen from $3. and institutional capacity needed for ensuring both quality implementation and sustainability). if implementation of the first project was satisfactory. ADB’s Innovation and Efficiency Initiative in 2005. at the time of conducting this study in 2012. a follow-on project is supported through additional financing only. had a results framework that stated as impact: demonstrable improvements in the development impact of ADB operations in reducing poverty in DMCs. the World Bank’s Board approves the first project under regular procedures and succeeding replication projects on a no-objection basis. very few MFF programs had been completed. however. and streamlined approval of subsequent tranches) as well as gains in development effectiveness (relating to programmatic approach. with a combined financing envelope of about $32 billion. flexibility. In such cases. The World Bank has two similar investment lending modalities. By the end of 2011. ADB increased lending volumes rapidly.2 billion in 2011. of which the MFF was a part. by considering efficiency gains or cost reductions (relating to transaction costs. and the additional loan was economically justified. The transport and energy sectors account for 62% of the total number and 69% of the total MFF amounts approved until December 2011. The MFF has been used predominantly in the infrastructure sectors. and without Board approval. many governments like the MFF for financial and flexibility reasons. relying in part on the MFF modality to do so. 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. In conclusion. For the second lending modality. These checks were built in to safeguard the development effectiveness of the lending programs. The continued increase in MFF and tranche approvals after 2009 was facilitated by the General Capital Increase V. Evaluation Framework This evaluation takes into account both the costs and benefits associated with the MFF modality.8 billion in 2006 to $6.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. These factors made it . unless there are significant modifications. This appears to be the case in Pakistan also. The regional departments had also not yet conducted any self-evaluations for the completed MFF programs.

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

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

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

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

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

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

Recommendation 5 deals with issues related to access to data and documentation. which could be integrated with the country programming strategy formulation process. this evaluation recommends that Management continue to address the weaknesses in the MFF approval and implementation processes that have been experienced thus far. provided a number of prerequisites are adhered to. recommendation 2 suggests a way to ascertain that the provisions of the Project Administration Instructions of December 2011 are complied with. and on the basis of the study’s findings and lessons. however. strong actions are recommended to improve the development effectiveness of upcoming MFF programs and tranches. and the design of physical investment programs that conform to MFF prerequisites. 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. as well as results-based financing and other modalities currently under consideration). The adequacy of such due diligence and preparation must be reconfirmed through monitoring arrangements in subsequent recommendations. Similarly. In recognition of the MFF’s potential advantages and the fact that the instrument is appreciated for its flexibility by clients. Recommendation 1 is consistent with the key MFF requirements articulated in the internal Staff Instructions of July 2011. . To ensure development effectiveness. it is essential to augment the existing peer review mechanism with (i) use of suitable MFF readiness filters for specific ADB regions or DMCs. Owing to concerns that arise because the MFF modality has been amenable to diversified uses and interpretations beyond what was originally envisaged. Recommendation 4 is in recognition of the crowding-out effects. Towards this goal. there needs to be a realistic discussion on institutional capacities and the suitability and stability of a policy framework.Executive Summary xvii Recommendations The MFF modality has attractive features that have the potential to help improve operational efficiency as well as development effectiveness. 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. To facilitate adherence to other provisions of the Operations Manual. and the need for ADB to maintain its ability to respond to crisis situations. The five recommendations presented below build on the lessons learnt and are intended to strengthen the MFF modality. 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. 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). which is based on stand-alone modes rather than a long-term multitranche facility. and suggests a way forward to ensure that such requirements are met. such as the MFF prerequisites. Recommendation 3 seeks a correction of the midterm review and monitoring system. 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. In responding to the Board request.

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

incorrect assumptions are presented as conclusive: i. The important role of the MFF in making ADB more relevant through innovation of new products is well recognized. However. inferring that ADB is approvals driven (Executive Summary). Independent Evaluation Department. 4. While the Report refers to some of the benefits of the MFF. 81. It is not clear whether documentation was requested from ADB staff and available but not provided or withheld. 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. The MFF provides greater flexibility in design and a longer term platform for cofinancing partnerships. As recognized by the SES. or data was available but not reviewed by IED. We believe that the Report’s negative and unbalanced tone fails to fairly reflect these aspects. the Director General. These features enable a more customized approach to address the needs of different DMC clients and have led to increased demand for MFFs. 2. 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. As discussed below. General Comments 1. including those in fragile and conflict-affected situations as appropriate. Paras 20. 71. . The MFF is an innovative and demand driven financing modality developed by ADB to better address DMC client needs. 75. we agree with the need for further evaluation of effectiveness at an appropriate time after a critical number of MFF projects are complete. MFFs were developed to provide DMC clients with a greater choice of lending modalities to better address their needs and ii. received the following response from the Managing Director General on behalf of the Management: I.Management Response On 15 January 2013. Since no MFFs were closed during the Report period and only a few of tranche completion reports have been prepared (Paras 12 and 170). 25. the MFF is a relatively new instrument and still evolving.g. Foreword. this unique lending modality enables longer term engagement (policy and capacity development) with DMC clients. 3. The Report incorrectly implies that MFFs were designed to expand ADB lending. Executive Summary. data was requested but not available. 178). This is not correct. 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). The Report implies that MFF documentation may have been withheld by repeatedly stating adequate data is incomplete or not readily available or accessible (e.

The Report does not compare the performance of MFFs with other lending modalities. 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. As a matter of fact. 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. The Report implies that the new streamlined business processes result in less disclosure of key information. adoption of MFF readiness filters for specific ADB regions or DMCs (Para. The Report assumes that the rapidly growing acceptance of the MFF warrants additional requirements. which will enable more concrete findings and recommendations to improve MFF performance. 201). for example. MFFs not only help DMCs avoid unduly high commitment charges. The Report concludes that there has been not much savings in commitment charges (Para 175). and not because of ADB’s desire to expand lending. For example. institutional capacity. e. in contrast to stand alone projects. This is incorrect. The Report states that adequate information required for a “reasonable evaluation” of the MFF modality is not readily available or accessible for ii. This is not correct. . iii. We disagree. which follows specific business processes and stakeholder consultations. (Foreward). The Report does not compare MFF implementation over time to clarify improvements after 2008 mainstreaming and adoption of 2011 Staff Instructions. but enable ADB to provide long term commitment. was expected to generate such savings. 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. bunching and loan cancellation. which led to the fifth General Capital Increase (GCI). OM D14 and Staff Instructions provide clear guidance on MFF information requirements.xx Real-Time Evaluation Study of Multitranche Financing Facility are anchored in the Country Partnership Strategy (CPS). ADB lending has grown because of client needs and their appreciation of ADB products that respond to their needs. iii. These recommendations do not adequately acknowledge recent improvements in MFF governance under Staff Instructions. iv. when the design of the MFF. due diligence. v. We disagree with this conclusion. raising due diligence concerns.g. For example. Many of the issues discussed in the report are relevant to processing of all lending modalities. The scale of DMC needs was recognized by ADB’s shareholders. 5. 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. 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.

We believe that such findings should have been anchored on more facts. 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). and states that findings are “sufficiently robust” (Foreword). while other sections of the report (Para 43) confirm that MFFs provide clients with “the comfort of longer term support” than other modalities. This statement is incorrect. The Report questions the expected savings in staff time for processing under the MFF (Executive Summary. 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. . Report findings also ignore relevant information. II. The Report questions whether MFFs allow clients to plan more systemically and mobilize co-financing for investment plans or individual projects. The main drivers of growth in lending volumes in 2009 and 2010 were programs loans and counter cyclical support. xxi ii. The GCI V enabled ADB to meet this demand. If adequate information is not available the findings cannot be sufficiently robust and provide adequate grounds for evaluation. including views from unnamed sources. There is a disconnect between Report conclusions and analysis/data. the Report states that the envisaged opportunities for policy dialogue have not been realized. The example given in Box 5 is on the energy and transport sectors in Pakistan. The two points are inconsistent. Many specific recommendations disregard recent MFF governance improvements under the new Staff Instructions. and greater opportunities for co-financing (Para 56 notes that in 48 of 68 MFFs. Instead the Report relies on anecdotal evidence. i. iii. v. raising questions about the credibility of the findings. . Comments on Specific Recommendations 7. Specific recommendations under the Report are very general and based on good practices for the processing of loan financing modalities. and program policy support that was provided earlier has been discontinued in sectors where MFFs have penetrated the most (Para 79). The Report indicates that ADB’s rapid increase in lending volumes after 2009 was based in part on the MFF modality (Executive Summary). 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). co-financing is mentioned). 6. iv. 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).

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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.

an innovative facility favored by DMCs because of its greater flexibility. namely: (i) the evidence is unclear in regard to expected efficiency on staff processing time. The following is the Chair’s summary of the Committee discussion: 1. Some DEC members suggested that Management may consider appending the comparative matrix in the report and recommendation to the President. The report found that the MFF’s flexibility is its most attractive feature. DEC discussed whether there was a comprehensive assessment done before the decision to mainstream MFF. 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. (ii) MFFs have been used flexibly over long utilization periods. (iii) MFF prerequisites. Mainstreaming MFF. noting that the advantages and disadvantages of mainstreaming were presented to the Board and the Board had favored the move to mainstream the modality.381-12) on 17 January 2013. and (iii) the role of the panel of experts which serves as independent confirmation that eligibility requirements are met. technical. 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. DEC welcomed the real-time evaluation study of the multitranche financing facility (MFF) which found the facility increasingly favored by developing member countries (DMCs). Advantages of MFF and perceived gaps. in order to compare different modalities and justify . enabling clients to adjust their project pipeline without need for additional approval from top decision makers. The report also highlighted MFF’s potential to crowd out other lending and diminish crisis response operations.Chair’s Summary: Development Effectiveness Committee The Development Effectiveness Committee considered the Independent Evaluation Department report. Special Evaluation Study: Real-Time Evaluation Study of the Multitranche Financing Facility (IN. (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. although some members voiced concerns about due diligence on prerequisites. DEC discussed (i) the MFF’s approval process noting that the concept paper is signed off by a Vice President. 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. and tranche level changes have often been classified as minor at least prior to the clarification issued in late 2011. 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 flagged some key observations. 3. and economic due diligence was less rigorous.

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

among other instruments and modalities. increased flexibility. and helping ADB to work better with other development partners. Medium-Term Strategy. 4. making ADB more compatible with existing and evolving market practices. 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. and to meet the large financing gaps that persisted in many DMCs and that posed challenges to them for achieving the Millennium Development Goals. 5 and (ii) free up ADB staff time spent on processing for Board approval. the Board therefore approved the proposal to pilot test the MFF.6 and recommended an evaluation of the performance and effectiveness of the modality to be conducted after 3–4 years. and savings on commitment charges. a modality introduced in the Asian Development Bank (ADB) in 2005. 2001. 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). Background and Rationale 2. Mainstreaming the Multitranche Financing Facility. It enabled ADB to complement modes of assistance of other development partners and accelerate the approval process. the evaluation focuses on the requirements that were applicable to the modality and the implementation of these requirements and procedures. 2000. United Nations Millennium Declaration. This report provides a real-time evaluation of the multitranche financing facility (MFF).4 The MFF aimed to strengthen ADB’s capacity to mobilize development finance 3. A. the Board approved in July 2008 the mainstreaming of the MFF. ADB.CHAPTER 1 Evaluation Focus 1. In August 2005. 3 ADB in 2005 launched the innovative and efficiency initiative (IEI). Manila. 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. 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. streamlined processes. Following a 3-year pilot period. 2008. Manila. 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. 2005. Manila. the introduction of the MFF. 2001. and a broader range of financial instruments and modalities. which proposed. In line with this strategy. by enhancing the flexibility and client orientation of its financial products. Therefore. Sufficient time has not elapsed to fully evaluate its development outcomes in client countries. as preconditions that need to met to enable the achievement of development effectiveness. ADB. United Nations. ADB. a more appropriate skill base. Innovative and Efficiency Initiative: Pilot Financing Instruments and Modalities. 6 . Moving the Poverty Reduction Agenda Forward in Asia and the Pacific: The Long-Term Strategic Framework of the Asian Development Bank (2001–2015). Manila. New York.

. (iv) assuring clients that ADB is a committed partner for their long-term financing plans in specific sectors. 7 However. The MFF is neither a balance-sheet commitment nor an off-balance-sheet item for the ADB and its client. 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. Such a standby letter of credit is formalized through a framework financing agreement (FFA) between ADB and the client. reduces the need for separate Board approvals except for the facility as a whole and for the first tranche. (ii) allowing ADB and clients to engage in constructive policy dialogue.” The FFA also spells out a long-term planning perspective for the particular sector the MFF is supporting. policy framework. over a time frame of up to 10 years or even more. capacity development. the MFF modality embodies certain major benefits over existing lending modalities. 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 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). 7 Refer to para 9. and financing plan accompanied by suitable undertakings or commitments. ADB can thus support longer term investment programs that are structured and staggered into multiple loans under the umbrella of the MFF commitment.2 Real-Time Evaluation Study of the Multitranche Financing Facility B. and (vii) registering contingent liability only to the extent loans are signed in response to PFRs received from clients. for each such loan. Appendix 4 of the IEI Document (footnote 4). it is especially suited to sector investment programs. As originally conceptualized. Since 2005. and improving governance. With the MFF facility. road map. Although the MFF modality was anticipated to be applicable to large and stand-alone projects with discrete and sequential components. This includes the strategic context. About the Multitranche Financing Facility MFF modality is unique among the lending modalities offered by development partners 5. 8. investment program. 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. reduces staff time for processing. (v) facilitating the preparation of a series of investments with planning for safeguards and other concerns. (vi) reducing commitment fees for the clients. With the FFA. in its own financial projections. a separate loan agreement is signed. and (ii) similar projects but with different executing agencies. the MFF modality has been applied to increasingly varied situations. such as (i) a series of similar projects with cost over-run financing included in some tranches. 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. 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. that avoids repetitive processing tasks. and thereby encouraging cofinancing. ADB’s Treasury Department models projected PFRs beyond the work program and budget framework (WPBF) period. these are collectively referred to as the MFF prerequisites. However. and allows staff to spend more time on implementation administration and management. 6. These include (i) financing a series of projects or phases. Only approved loans under the MFF umbrella enter the balance sheets. 7. (iii) increasing operational flexibility in response to client needs.

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

The number of MFFs approved during the two sub-periods was 20 and 46. The extent to which such premises have held true thus far is examined in chapter 3. 19. as well as the implications for ADB’s policy dialogue and the ability to respond to emergency situations. E. Examining the working of the MFF modality: After the mainstreaming of the 17. a nearly 3-year span up to the mainstreaming in mid-2008. 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). clients perceive the benefits of the MFF modality. insufficient clarity of criteria and decision-making filters for use of the modality. and specific questions pertaining to them are provided in Appendix 2. The main chapters of this study will discuss the MFF portfolio. Study Period 13. Issues related to funding sources. and seasonal bunching of MFF and tranche approvals are also examined in chapter 2. how they are deriving benefit from it. The components of the evaluation methodology are described in this chapter. How DMC governments and 18. additionality of the MFF modality. In response. 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. was designed to support clients’ long-term sector plans through a long-term commitment. certain changes in documentation and other requirements have been instituted from time to time. Evaluation Methodology 14.4 Real-Time Evaluation Study of the Multitranche Financing Facility D. and implications for operations. the working of the modality. The study period begins with the proposal to introduce the MFF (mid-2005) until December 2011. and a 3.5-year period after mainstreaming. a quality assessment and review. This comprises two sub-periods. DMC and ADB concerns about the MFF modality. lessons and recommendations related to these components and chapters are pulled together in chapter 7. including reduced ADB and client staff time in preparation and processing of investment interventions). the expected benefits. While all such . Components of the Real-Time Evaluation 15. the Board has continued to express concerns regarding the increasing size of the MFF portfolio. and increasing ADB’s organizational effectiveness (through reduced transaction costs. Examining the MFF portfolio. minimizing the impact of borrowing from ADB or committing to borrow from ADB. 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. as well as reporting and oversight arrangements. The key findings. respectively. 1. MFF modality. 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. Examining the premise on which MFF was piloted and mainstreamed: The MFF 16. and their decision-making processes for MFF and tranche approvals are discussed in chapter 6. headroom. The evaluation considers the merits and demerits of a programmatic approach and promise of long-term assistance to DMC clients. and development effectiveness.

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). Given that this is an evaluation of the MFF modality. and there is no readily available. and (iii) Loan 2296 of MFF08 (PRC: Gansu Heihe Rural Hydropower Development Investment Program). countries. India Infrastructure Project Financing Facility. the Independent Evaluation Department (IED) study team has tried to fill some information gaps through interactions with ADB staff and meetings with incountry stakeholders. although certain sector-specific aspects do need to be considered in the analysis (for instance. 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. and interactions with incountry stakeholders provided the information for the evaluation. the analysis has given more attention to the transport and energy sector MFFs. Triangulation of information at various levels gives the evaluation confidence about its key findings. 2012. Evaluation Limitations Sector focus. Manila. as not all necessary information sources (see Appendix 2) were available to the study team. For many transport and energy sector MFFs.1).8 No approach for evaluating an MFF program was firmed up at the MFF design stage. A mix of MFFs in these sectors (which cut across subsectors. and account for 69% of the total MFF approved amounts as of December 2011. only a few tranche level self-evaluations are available. it is expected that for sector investment programs. 23. those related to the network nature of roads or power distribution systems). 2. Efficiency and effectiveness of MFF in achieving facility level outcomes and outputs cannot be fully evaluated at this state. Although all 66 MFFs approved between 2005 and 2011 are 22. (ii) Loan 2248 of MFF01 (IND: Rural Road Sector II Investment Program). Although the inferences are drawn for the MFF modality. the RTE relies on case studies. which are 62% of the total number of MFFs approved by end-2011. Timing. No independent evaluation or validation of a tranche project completion report has been conducted to date. November. as well as an online survey of selected ADB personnel (see Appendix 2 for details). the study focuses on project readiness and implementability (such as institutional arrangements. Nonetheless. tentatively. when adequate experience will have been gathered to develop plausible counterfactuals for various circumstances in which the MFF modality has been used. interviews with ADB staff. The information so gathered forms the basis for addressing the evaluation issues listed in Appendix 2 (Table A2. the most common type of MFF investment programs. 21. 23). some gaps do remain for nearly all MFFs and tranches. The desk study included a review of relevant ADB documents and databases. the supporting backup evidence comes from approved MFFs. and extent of progress as documented) is studied. tested and widely accepted approach to evaluating an entire MFF program. Evaluation Approach 5 20. Although no guidelines for evaluating MFFs have been firmed up (as of December 2012). a more thorough assessment of results on the ground is deferred to a later stage.Evaluation Focus factors influence ADB’s potential for impact and thereby the development effectiveness of the MFF modality. A mix of desk studies. the . early indications of effectiveness. At the end of 2012.9 Therefore. 3. A first completion report for an MFF was posted on ADB’s website in December 2012: ADB. covered in the report. As no MFFs had been reported completed at the time of data collection. sectorspecific issues are not the focus. technical aspects and funds flow).

all required data and information. financing requirements. MFF portfolio-level analysis also shows gaps. 26.related folders on e-STAR. Therefore. IED and other departments (other than the owner department) normally do not have access to relevant MFF. However. which included 1 year of data from May 2011 to May 2012 for all regional departments. and (ii) data once entered are verified for correctness and accuracy. was not available for preparation of this report. However. and inaccuracies of data in certain official ADB databases. IED conducted a survey of staff engaged in preparing. IED needed access to such documents for a few selected MFFs. It also appears that all MFF and tranche-related documents are not necessarily uploaded onto e-STAR in a timely fashion. For instance. processing. To the extent that project viability analysis and due diligence review work entail email communications among ADB staff. and/or clients. including recorded rationales for tranche scope and other course changes. 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. 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. Upon special request to the concerned staff. 27. Other modalities usually allow greater access to data and progress statements. Appendix 2 provides a list of required documents. The time-sheet management system (TMS). how an MFF has progressed since approval.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 is granted access for a limited time period. IED also requires the email records. many scope change documents approved in 2012 were not yet uploaded in e-STAR by the time this study checked. which are specific to MFFs should also be assessed in a similar manner. . All such documents and data are required by IED for an evaluation of a particular MFF investment program. For the purposes of the RTE of the MFF modality. as originally envisaged in the IEI document (footnote 4). or implementation arrangements adds to the need to fully understand the sequence of changes that take place. However. Data access. 25. 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. no document consolidates the information or provides reference or links to other relevant documents. consultants. 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. are difficult to find for any MFF. inconsistencies. A large number of documents are required to fully understand 24. MFF-level completion reports should generally follow sector assessment guidelines. where ADB would have better record-keeping owing to greater ADB involvement in project preparation. Although most documents can be available on ADB’s electronic document storage system e-STAR. Access to such data would have allowed IED to compare the efficiency of the modality better. The fact that approved tranche projects can change in terms of scope. The design and implementation characteristics. Instead. 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. the email records are not easily retrievable.

7 0.CHAPTER 2 The Portfolio A.0 2006 2007 2. of which 66 were SSTs. As of 31 December 2011. to 27% in 2009 and 37% in 2011.5 billion in 2005 and $3.2 billion in 2011. Figure 1: MFF and Tranche Approval Trends 7 6.2 40% 35% 30% 3. Grant. More than one quarter of ADB’s active portfolio is in MFF tranches.6 25% 20% 15% ($ billion) 1.5 4. while approved tranche amounts increased from about $180 million in 2005 to nearly $4. 1). 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. and (ii) 126 tranches had been approved. Simultaneously. Until December 2011.8 billion in 2006 to more than $6. a total of (i) 66 MFFs had been approved with a combined approved amount of nearly $32 billion. Following acceptance of the proposal to begin piloting the MFF. MFF tranche approvals had risen from 17% of total approvals for ADB sovereign lending in 2006.2 10% 5% 0% 0 2005 2008 2009 2010 2011 Approved MFF Resource Envelope during the year ($ billion) Approved MFF Tranche Amount during the year ($ billion) % MFF Tranche Amount approvals to Total Loan approvals MFF = multitranche financing facility.5 1. Since then. the approved MFF envelopes increased from $1.5 billion in 2011 (see Fig.0 0% 1. For details.4 4.1 3.2 6 5 4 3 2 1 5.8 4. Source: Asian Development Bank database for Loan.0 23% 20% 17% 27% 4. 13 MFFs had fully allocated . Approvals 28. refer to Appendix 3.7 34% 37% 6. 29. By 2011. two MFFs were approved in December 2005. and Equity Approvals. Technical Assistance.

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. one in energy and the other in the transport sector) have five or more approved tranches.10 2 had five or more approved tranches. 11. financial intermediation loans. (iii) Bangladesh and India in South Asia. 38. 43. Sources: Asian Development Bank database. 56. 17. however.) and prepare necessary documentation under some time pressure. . 14 Table 2: Bunching of MFF and Tranche Approvals in December MFFs 66 19 31. 25.306 First Tranches 66 21 8. In the East. 47-54. Table 2 shows that. MFFs have been approved in two countries each. Considerable acceleration is observed in the fourth quarter. and ADB. and guarantees) approved from 2005 to 2011 in the 14 countries where MFF investment programs have been approved. 11 Two MFFs (MFFs 1 and 11. 39. several more countries have been added. 33. By the end of 2011. 30% (84 of 277) of stand-alone loans were approved in the month of December. 41. A key difference. 8. etc. 2012. sector loans. both in India. and (iv) Viet Nam in Southeast Asia. South and South-East Asia regions. while the 26 MFFs approved in Central-West Asia are spread across seven countries (the maximum being 8 MFFs in Pakistan). appraisal.317 Second and Subsequent Tranches 60 29 8. Figure 2 shows the regional and country mix in terms of number of approved 32. mostly in Central-West Asia. The standalone loans include all sovereign loans (project loans. program loans. 20.846 4. 24. 12 29 MFFs (MFFs 12.938 10.906 All Tranches 126 50 16. Manila. Multitranche Financing Facility Annual Report 2011. only four MFFs and seven PFRs were approved. 12 30. 58-66) have only one approved tranche. Regions and Countries Central West and South Asia regions account for more than 75% of 66 MFFs approved 31. the most recent addition being Mongolia. 10 13 MFFs (MFFs 1.13 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. 19. In the first three quarters of 2012. nearly 50% of all SSTs were approved during that month.042 3. TA loans. B.11 while 29 MFFs had only one approved tranche. Papua New Guinea (PNG) is the only country where ADB approved an MFF intervention. 13 In comparison. 28. 31. while only in Bangladesh have no further MFF’s been approved. 29. In the Pacific. although less than one third of the MFFs and first-tranches were approved during the month of December. 57) have fully allocated MFF resource envelopes into tranches/loans. is that 25 of the 26 approved MFFs in South Asia are in one country (India). ADB introduced MFFs in six DMCs that were spread across four ADB regions: (i) Azerbaijan and Pakistan in Central-West Asia. 44. 15. 16. 13. (ii) Peoples Republic of China (PRC) in East Asia.8 Real-Time Evaluation of Multitranche Financing Facility MFF resource envelopes into tranches. 22.889 8. 37. it may also mean tight deadlines for ADB staff and the consultants to conduct research (fact-finding. MFFs and the combined resource envelopes. During the piloting stage (mid-2005 to 11 July 2008). the MFF modality had been extended to 14 DMCs. Since July 2008.989 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. 14 This trend appears to have continued in 2012.

Sectors 34.0 0 EARD 4 MFFs PARD 3 MFFs MFF env. Azerbaijan. and Equity Approvals. Source: Asian Development Bank database for Loan.The Portfolio 33. 3). GEO = Georgia.6 5. 9 Figure 2: MFF Approvals by Regional Department 25 24 20 ($ billion) 16 12 8 4 0 CWRD 26 MFFs UZB PAK 20 IND 15.0 VIE INO SERD 7 MFFS 10 5 MON PRC 1. MFF interventions were approved only for physical infrastructure.0 KAZ GEO AZE ARM AFG BAN SARD 26 MFFs 15 9. and account for more than 60% by number and nearly 70% of the total resource envelope of all MFFs approved until December 2011. natural resource management. but since mainstreaming. SARD = South Asia Department. beginning in December 2005. CWRD = Central and West Asia Department. one MFF each has been During the pilot phase MFF approvals focused on infrastructure. respectively). Furthermore: (i) the average resource envelope approved per MFF is above $700 million in Pakistan. C. (iii) in the remaining three Central-West Asian countries where MFFs have been approved. ARM = Armenia. The two sectors in which MFFs were first approved are (i) transport. 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). it has penetrated other sectors . BAN = Bangladesh. Technical Assistance. MFF = multitranche financing facility. PNG = Papua New Guinea. AZE = Azerbaijan. MON = Mongolia. Since mainstreaming however. of MFFs approved AFG = Afghanistan. VIE = Viet Nam. These two sectors remain the mainstay of the MFF modality (Fig. and (ii) energy. and multisector projects were approved later in the pilot phase. PAK = Pakistan. each has an average resource envelope in the $400 million–500 million range. UZB = Uzbekistan. and above $500 million each in Afghanistan. amount approved ($ billion) No.3 PNG 1. and (iv) in large countries such as PRC and India. Although the same number of MFF interventions are approved in Central-West and South Asia regions. the average resource envelope per MFF is less than $400 million (although the maximum MFF sizes are $1 billion and $800 million. PRC = People’s Republic of China. KAZ = Kazakhstan. before December 2007. EARD = East Asia Department. SERD = Southeast Asia Department. MFFs for urban and water-wastewater-sewerage infrastructure. Grant. Initially in the pilot phase. from March 2006. IND = India. (ii) Viet Nam is the only country outside the Central West Asia region where the average resource envelope approved per MFF exceeds $700 million. and Kazakhstan. PARD = Pacific Department.

8 billion $16. at least one operations department is also preparing and processing an MFF in the education sector.7% of all MFF approvals). Grant. ADB’s Funding Sources 35.1 billion $13.5 1 5 0 Multisector Public Sector MFF Resource Envelope ($billion) Number of MFFs MFF = multitranche financing facility.3 10 4 1.5% grants. Figure 3: MFF approvals by Sector 14 12 10 8 6 4 2 0 30 26 17 8.6 1 Finance 0. Kazakhstan. . Figure 4 shows the combined MFF financing envelope for these three country groups. and 6.5 Transport Energy Urban/Water 25 20 15 12 7 2. Grant. The 14 DMCs where the MFF modality has been used. and Equity D. India. and Viet Nam—the four DMCs where ADB provides assistance only from ordinary capital resources (OCR). total MFF approvals through December 2011 comprised $27.3 billion from OCR sources (85. including but not limited to Asian Development Fund (ADF) grants. Figure 4: MFF Financing Envelope Approved for Countries that Receive Concessional. Source: Asian Development Bank database for Loan.9% ADF loans. The study is aware that in 2012. and Equity Approvals. 7.9 0. Source: Asian Development Bank database for Loan.7 4. and (iii) nine DMCs that receive a mix of OCR and ADF loans from ADB. Overall.10 Real-Time Evaluation of Multitranche Financing Facility approved also for public sector management and financial sector interventions. Technical Assistance. OCR and Mixed financing $2. (ii) PRC.4 Natural Resources ($ billion) 13. OCR = ordinary capital resources. Technical Assistance.1 billion ADF only OCR ADF & OCR ADF = Asian Development Fund. comprise (i) Afghanistan—a DMC where ADB extends all assistance from grant sources. MFF = multitranche financing facility.

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

5) 18 19 ADB. Long-term Support to Clients 38. ADB’s new long-term strategy. only one or two tranches have thus far been approved.CHAPTER 3 Expected Benefits 37. energy. Nine of the 66 MFFs have a utilization period of 10 years or more. environment. The MFF modality was proposed with the objective of providing to clients the comfort of long-term support by ADB. These assumptions were considered as holding true at mainstreaming.6 years (i. Each MFF is expected to have multiple tranches (usually 3 or more). ADB. Manila. the MFF investment programs have a longer time span than stand-alone investment projects.7 years and the average utilization period across all 66 MFFs is 7. 20 . Compared with a series of similar stand-alone projects. 2008. The need for ADB to provide long-term support for physical and social infrastructure (including urban infrastructure) was explicitly recognized in the late 1990s. Manila. For the 66 MFF investment programs approved until December 2011. which possibly allows the clients to plan more systematically and mobilize cofinancing for the investment plans or individual projects. the MFF modality was intended to reduce staff resources required for processing. and education. 40. Defined as the number of days (or months or years) elapsed between tranche approval date and loan closing date. ADB will employ its financial and institutional resources in five core areas” that include infrastructure. 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).e. In keeping with the long-term strategies that have been in effect since the MFF modality was first piloted in 2005. A. which came into effect in 2008. and to that extent contribute towards achieving the objectives of ADB’s long-term strategies. Operations Manual: Bank Policies and Operational Procedures. and country operations business plans (COBPs) continue to update the list of projects that ADB is anticipated to support in a 3-year period. 19 The shortest utilization period is about 3. and urban physical infrastructure across various DMCs. the median utilization period is about 7. 2008. energy. albeit for a shorter period (usually 5 years). Where actual loan closing dates are not available. efficiency and impact. By design. then projected closing date (as at time of approval.8 years. 18 also emphasized that to “maximize results. and resulted in the formulation of ADB’s first long-term strategic framework (footnote 1). most of the approved MFF investment programs are to enhance transport. Strategy 2020: The Long-Term Strategic Framework of the Asian Development Bank (2008– 2020). as well as the clients’ commitment fee payment obligations. or as revised thereafter during the implementation period) is used. The country partnership strategies (CPSs) are set up to do the same. This sets the maximum MFF utilization period at 10 years. although in many instances. Most of the approved MFF investment programs are to enhance transport. and urban physical infrastructure across various DMCs 39. Yet 3 MFFs approved after August 2008 have utilization periods in excess of 10 years. A frequency distribution of tranche implementation periods 20 (see Fig. finance sector development.

IED has no documents that show that the MFF utilization period has been extended.1). 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.Expected Benefits reveals that (i) first and second tranches span 60% or less of the MFF utilization period for about 45% of the tranches. Source: Asian Development Bank database for Loan. (ii) about 75% of first tranches and 90% of second tranches span up to 80% of the MFF utilization period. 41.. (iii) as per available data. and Equity Approvals. . some tranche implementation periods are 100% or more. 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. stand-alone loans are considered only in sectors and countries in which MFF interventions have been approved. time taken from loan effectivity to achieve 10%. which comprise mostly actual tranche approval dates for all tranches.21 while in other cases.>=100% 100% Implementation period as % of MFF utilization period Tranche 1 Tranche 2 MFF = multitranche financing facility.e. 20% and 30% of approved loan amounts) also reveal no clear trend (see Appendix 4. Rather than entire MFF investment programs. Grant. Available data on tranche implementation periods. In some cases this is because the first tranche extends the entire MFF utilization period. Available data on disbursement rates (i. Technical Assistance. and for transport and energy sectors in particular. such analysis does not capture the underlying assumptions for each data point (Appendix 4). Table A4.g.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%.. For comparative purposes. Table A4. A sample of 431 stand-alone projects approved from 2000 through 2011 is thus compared with 126 MFF tranches approved up to 2011. MFF57 (IND: Madhya Pradesh Energy Efficiency Improvement Investment Program). tranche implementation periods have been extended beyond the originally stated end of the MFF utilization period. 42. However. 23 The average energy sector tranche implementation period is within 15% of the average implementation 21 22 23 e.2).

17 91 92 182 4.30 93 12. EN = Energy.LA signing to effectivity . but energy tranches are about 10% smaller.14 Real-Time Evaluation Study of Multitranche Financing Facility period for stand-alone energy loans.7 Stand-alone Projects All EN TC Sectors 39 6. Improved Organizational Effectiveness Increased n organizational effectiveness of ADB was an intended outcome of the entire IEI program.Approval to LA signing . and Equity Approvals. Table 3: Comparison of Loan Amounts and Timelines for MFF vs. n. which piloted several financing instruments and modalities. for other sectors the difference is less than 10%. including the MFF 44.a. Technical Assistance. LA = loan agreement. address policy gaps.56 431 47. However. Stand-alone Projects MFF EN 17 39 22 5. an MFF processing time is typically 90 staff-weeks. with associated benefits such as more opportunities to understand sector issues. including the MFF. SSTs = second and subsequent tranches.74 108 ADB = Asian Development Bank. TC = transport and communications. owing to substantive staff time savings while processing tranches.7 No. Nos.76 All Sectors 66 126 56 16. 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. while transport tranches are about 15% larger. 125 110 232 5. 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. Grant.8 35% 157 86 92 85 169 4. 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.0 53% 155 n. However.5 47% 140 147 81 95 176 4.PFR submission and approval for SSTs . Nos. = not applicable. Source: Asian Development Bank database for Loan. of tranches/projects .Approval to closing (implementation period) Nos.a. Increased organizational effectiveness of ADB was cited as an intended outcome of the entire IEI program.a. B. 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. Whether or not a time-sheet system had been tried or piloted in . coupled with (ii) increased staff availability for implementation monitoring and administration. PFR = periodic financing request. wherein 45.6 65% 136 n.Approval to effectivity . and the equivalent time for a standalone project is 75 weeks. of MFFs No. Overall. $ billion % $ million days days days days years 135 105 107 84 179 4. MFF = multitranche financing facility.54 TC 23 43 20 6. 43. 101 141 235 5. The Board Paper provides quantitative estimates of staff time savings. and make mid-course corrections. at 354 staff-weeks. Processing a tranche was typically expected to take 40% of staff time vis-à-vis a standalone project (see Appendix 5 for further details).of which SSTs Approved total loan amount Approved loan amounts of total Sector interventions Average tranche/loan size Elapsed time between . the average approved amounts of MFF tranches are about 25% larger than for stand-alone loans.

and that certain departments had still to make efforts to assess the quality and consistency of data entered by the staff. as obtained from the e-Operations (eOps) database. IED could not obtain the TMS data.24 46. Similarly. 15 24 25 26 During the early 2000s. and less than 200 days for tranche processing (see Appendix 5 for further analysis of survey data). the eOps database for tranche preparation and processing is not complete and shows wide variations in the estimated elapsed times (Box 1). but there is no central database that compiles such information. just over 200 days for MFF processing. ADB databases include data on time elapsed during 47. A brief analysis shows the paucity of data on milestone dates in these databases. and approval of the PFR of the proposed tranche were compiled from these databases. however. Supplementary Appendix B provides the survey forms). The findings from the IED survey also show wide variations. and more than 1-year of timesheet data had been compiled by the third quarter of 2012. 48. and detailed data are in Supplementary Appendix A. 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. the findings of which had been used for staff allocation and budgeting purposes.Expected Benefits ADB—albeit on a limited basis—during the MFF pilot period is not specified in the Board Paper. Such information may be documented in a related back-to-office report of a review mission for a preceding tranche. In May 2011. which also incorporates some data previously compiled in the project performance report and project information documents.25 Elapsed time estimates. as well as a wide variation in the estimated elapsed time for MFF preparation and processing (Box 1). 26 Further data analysis is given in Appendix 5. as it was felt that the TMS was still in an initial phase. approval of the RRP of the proposed MFF. preparation and processing. tranche loans. to gauge the extent of staff resource utilization and savings associated with the preparation and processing of at least some MFFs and tranches. However. . IED was unable to access the TMS data pertaining to specific MFFs. a TMS established the parameters for processing and administering stand-alone projects and technical assistance. Nonetheless. but with averages that are lower: less than 400 days on MFF preparation. Available data on milestone dates toward finalization of the project preparatory technical assistance (PPTA) work. and stand-alone loans. The eOps database also does not specify when action on the second tranche (or a subsequent tranche) was first initiated. 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. ADB instituted a pilot TMS.

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

Staff continuity issues are a matter of human resources policy. Source: Independent Evaluation Department.0 Ratio of LOE for MFF to Standalone Projects LOE = level of effort. 30 . Staff continuity. as the survey data relied on the memory of team leaders rather than any written record or database of LOE.50 1. project is less than that for an MFF but more than that for a tranche. MFF = multitranche financing facility. which occur more frequently than desired as per MFF policy. there is no conclusive evidence of staff time savings over the entire MFF cycle 32% 11% 0% 11% >2.25 to 1. (ii) address policy issues and procedural gaps. and (iii) change implementation plans while work is in progress.75 to 2. and stand-alone projects. Such staff movements can be (i) within the same sector but across regional or operations departments. so that ADB staff can (i) gather and share knowledge with the client on sector issues and trends. 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. or (ii) within the same regional department at the headquarters or in a resident mission. However. Management driven. tranches. the survey data therefore tend to show that the LOE for a stand-alone 52. and implementation of MFFs and their tranches.50 to 1. this inference is based on a small number of observations—and then too. which appears to be consistent with the original premise that the MFF modality improves organizational effectiveness. provided a sufficient number of tranches are included in the MFF.25 1. which is 54. processing. 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. perhaps with higher responsibilities. more time would be required to conceptualize an MFF investment program. or (iii) form a regional department to a knowledge or support department. where distinct types of interconnected projects would comprise each tranche. it does not conform to the “staff continuity” requirements as spelled out in the MFF Board Paper. for example through access to TMS data. As yet. and potentially change the normal practice of staff movements.75 1. it appears that changes introduced through the internal staff instructions issued in July 2011 led to an increase in tranche processing time. The Board Paper (footnote 6) recognized that greater staff continuity is required in the preparation. This is perhaps one of the reasons that have contributed to the difficulty in reducing the LOE for tranche processing. Table 4 shows that as of mid-2012. Besides. this observation cannot be considered conclusive.30 Although staff movement within the same regional department does not lead to a loss of expertise to the department as such.Expected Benefits 17 Overall. half of the team leaders had sectors).0 53. or (iv) any other movement. The MFF modality was also thought to help regional departments plan better their people and skill requirements.

2 million (initially) ADB: reduced MFF financing envelope to $157. then ADB’s support will increase to $78 million For overall MFF investment program: ADB: $188. The cofinancing database is expected to capture donor commitments and actual contributions. Cofinancing Adequate information is not available to analyze level of cofinance achieved through MFFs As originally envisaged. and it was recognized that. or on special leave without pay No movement (within same division and same department). Tranche 3 Leverage of 100%. Source: Independent Evaluation Department. However. 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. Tranche 2 Cofinancing Particulars A guarantee facility of $200 million to mobilize commercial debt for wind and other renewable energy projects ADB: $38 million. the MFF modality provides to clients the comfort of 55. of which: for the 25 MFFs approved during 2010–2011 for the 41 MFFs approved during 2005–2009 MFF = multitranche financing facility. 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. 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. Number of Staff 14 6 7 6 33 18 15 C. All tranches MFF24 (KAZ). If EIB cofinancing does not come through. the MFF modality is potentially more conducive to cofinancing than other modalities and instruments. Such factors do contribute to the MFF’s rising use. and financial intermediation loans) have on the client’s balance sheet and cofinancing capabilities (footnote 4). sector loans. EIB: $40 million. there is no particular notice or announcement to indicate that the introduction of the MFF has changed the deployment pattern of staff. to provide sufficient information to project processing and administration teams as well as concerned development partners.31 Table 5 shows information on cofinancing arrangements for selected MFFs. to be firmed up MFF22 (IND).18 Real-Time Evaluation Study of Multitranche Financing Facility not changed divisions or departments after processing an MFF and getting it approved.5 million Remarks Commercial cofinancing amount not known (as of October 2012) MFF05 (PAK). Table 5: Cofinancing in Selected Multitranche Financing Facility Investment Programs MFF Number and Tranche Reference MFF05 (PAK). . 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. 31 For overall MFF investment program: Cofinancing possibility known at MFF approval stage.

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

ADB charged its project loan borrowers an annual commitment fee of 0. Since the MFF modality was piloted. 57. 35 Although the guarantee option in this particular MFF appears to have been dropped. 34 35 These include (i) discrete. MFF31). and (iv) the entire loan amount thereafter. Source: Independent Evaluation Department. and (iii) financial intermediary credit lines.34 Guarantees that cover political or credit risks are often intended to mobilize cofinancing. the commitment charge rates have been reduced (Box 2). c In some instances. This commitment charge rate has remained unchanged since. (iii) 85% of the loan amount during the third 12-month period. Proposed Multitranche Financing Facility and Administration of Cofinancing. only one explicitly offers the option of a guarantee cover in the initial documentation. 36 Refers to MFF05 (Renewable Energy Sector Development Investment Program). MFF = multitranche financing facility. but they diminish somewhat the benefits associated with the MFF rationale. 36 D. Islamic Republic of Pakistan: Energy Efficiency Investment Program. sequential components or large stand-alone projects.15% of the undisbursed balance.1% waiver (on the undisbursed balance of sovereign project loans negotiated after 1 January 2007). the Board eliminated the waiver and approved a reduction of annual commitment charges for sovereign project loans to 0. approved in December 2006. it may be important to hold close consultations with other development partners during the MFF processing stage itself. a The commitment fee was applied to the following amounts (less amounts withdrawn from time to time). Box 2: Reduction of Commitment Charge Rates When the MFF modality began to be piloted in the latter half of 2005. The MFF modality was conceived as a debt-financing facility to offer guarantees along with other instruments. ADB. Manila (approved 17 September 2009.35% per annum on the undisbursed balance of sovereign project loans negotiated after 1 January 2007. In April 2007. the Board agreed on a further reduction of commitment charge through a 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. (ii) slices (or tranches) of sector investment programs over a longer time frame of 7–10 years. Such reductions of commitment charges are not related to the introduction of the MFF modality in 2005. 2009. Report and Recommendation of the President to the Board of Directors. In December 2007. 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. if the MFF investment program requires a substantial amount of cofinancing. the borrowers were not able to calculate commitment charges properly and had to rely on ADB’s accounting records. However. such as (i) the normal rate at which project construction can proceed on a best-efforts basis. Reduced Commitment Charges 58.c In October 2005. 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. the Board approved a simpler flat structure with a commitment fee rate of 0. a Although the progressive structure allowed borrowers to pay lower commitment fees overall. which were normally at variance with procedures and processes followed by borrowers. and (ii) ADB’s contracting and procurement requirements. In any event.20 Real-Time Evaluation Study of Multitranche Financing Facility amount of cofinancing) is also not clear. of the 66 MFFs approved until end-2011. .75% on a progressive percentage of the undisbursed loan balance.b it was considered complex by many borrowers. Loan commitment charges cover ADB’s cost of carrying liquidity for loans prior to disbursement.

In all these cases. Appendix 7 illustrates commitment fee savings in a few cases where the 60.25 0. as the last tranche loan was approved much later than originally planned. Either of these conditions holds only for few MFFs. counterfactual assumed for an MFF with “n” tranches (one stand-alone loan that equals the size of the MFF) is meaningful. and during the same time period (2005 –2011).2 0. a Loan agreements have been signed for the entire MFF financing envelope for the 3 selected MFFs. b The second tranche comprises more than 95% of the MFF resource envelope.45% 0. However. wherein even a small delay in the signing/effectivity of successive tranches can lead to some commitment fee savings.Expected Benefits 21 Nonetheless. 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 is mixed. 37 most large MFFs can be viewed as a cluster of projects. Source: Independent Evaluation Department. PRCc MFF38. The commitment fee savings are evident but can be considered negligible (Table 6).25% 0. 61. it is likely that commitment fee savings from MFFs would come 59. However. but the MFF utilization period actually got extended by 12 months. c The MFF has a small financing envelope of $100 million. and less than 0. or (ii) the MFF financing envelope is comparable to a stand-alone project. at this time. the available evidence (on changes in disbursal rates with each subsequent tranche) is mixed.5% of the approved MFF financing envelope. 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 ($210 million). Indiad MFF = multitranche financing facility. the fee savings are small. commitment fee savings from such large MFFs would relate more to timing of tranche approvals and tranche disbursal rates vis-à-vis the counterfactual string of stand-alone (corresponding to tranches) loans. The commitment fee savings reflects the time difference between the loan signings of the first and second tranches. Viet Namb MFF20. which would otherwise be financed through one stand-alone loan. and (b) three tranches were approved and made effective in quick succession during the 2. in addition to loan envelope size) are available. commitment fee savings are likely to reflect improvements in disbursal rates in SSTs—should SSTs be actually disbursed more quickly. The estimates in Table 6 are for MFFs for which sufficient data (particularly on loan amounts and loan signing dates for each tranche. 37 In the same countries and sectors where ADB has approved MFF interventions. Therefore. at this point. and where commitment fee savings come from phasing of the approval/effectivity of a stand-alone loan through tranches. with each tranche being like one project. PRC = People’s Republic of China. Most large MFFs cannot be viewed as one project comprising several subprojects. only when (i) a large MFF is used to finance one large project.year time span.14% Small commitment fee savings are evident for some MFFs MFF Number/ Country MFF13. Table 6: Commitment Fee Savings Estimates for Selected MFFs Number of Tranches Approved p 2 3 3 Total MFF Resource Envelope ($ million) 931 100 200 Commitment Fee Savings ($ million) 4.28 Commitment Fee savings (% of MFF resource envelope)a 0. the detailed computations and assumptions are given in Appendix 7. . In most cases.

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.

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

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

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

IND: Madhya Pradesh Power Sector Investment Program (MFF11). Madhya Pradesh. as spelled out in the respective RRPs. financial management. or where institutional commitment to a good policy framework is weak. Both these are important considerations for ADB. 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. at least in Madhya Pradesh. IND: Madhya Pradesh Energy Efficiency Improvement Investment Program (MFF57). Board of Directors. the capacity development component is designed to improve the commercial orientation of the concerned entities. Perhaps a key area of least in some states. 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.000 is helping to deepen staff capacity along lines that were already part of the roadmap for the PRC railway system. For state-level agencies in Assam. 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. 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. (ii) Himachal Pradesh to update the regulatory framework and upgrade skills to implement a multiyear tariff regime. IND: National Power Grid Development Investment Program (MFF19). as well as safety. and NPI Components of Selected MFFs IND: Uttaranchal Power Sector Investment Program (MFF03). is in line with the specific requirements of the clients. 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. Proposed MFF: Second Road Network Development Investment Program: Azerbaijan. other available MFF documents such as periodic financing request reports (PFRRs) and back-to-office reports (BTORs) provide little update. . distribution franchising. the Government of Electricity Act (2003) and other policies implementing agencies have displayed a policy framework. IND: Himachal Pradesh Clean Energy Development Investment Program (MFF23). and renewable energy development. Policy Dialogue. IND: Himachal Pradesh Clean Energy Transmission Investment Program (MFF62) In all these 7 MFFs. India set the policy framework through the Indian and regulations. An accompanying advisory TA grant of $600. Box 4a: Overview of Selected Examples of Good Policy Framework. and Uttarakhand. human resource management. Himachal Pradesh. and (iii) Uttarakhand to improve project readiness. Nevertheless. 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. The MFF investment program fits the strategic context. the slow progress in reducing transmission and distribution losses and the continued financial deficit point to the need for further technical assistance support. or the policy framework is weak. Manila (approved by the Board on 4 October). including in some cases (such as the unbundled transmission and distribution entities in Madhya Pradesh) to enable commencement of commercially independent operations. IND: Assam Power Sector Enhancement Investment Program (MFF38).

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

electrification of rural areas. Source: Independent Evaluation Department.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). these areas are not covered in the NPIs under the MFF. PAK = Pakistan. etc. and organization for development of policies. where the official road development plan lists mainly the planned physical investments. NPI = nonphysical investment. IND = India. That a large number of international consultants were to be appointed to train the utility staff on planning and project management. capacity development at the federal level had not progressed. and program management. this is mostly in the first tranche—although the PFR for tranche 2 indicates a continuation of the advisory component. AFG = Afghanistan. the state-level policy dialogue relates to enforcement of traffic laws. better planning. improved sector governance. This statement does not qualify as a viable energy policy framework. MFF = multitranche financing facility. ADB = Asian Development Bank. . and institutions need to be developed and strengthened. Only 0. However. 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. TA = technical assistance. for instance. This situation indicates a lot of scope for long-term engagement of ADB. PAK: Renewable Energy Sector Development Investment Program (MFF05) Although a policy framework and government commitment exist. The Government of Pakistan also requested ADB to provide TA to support the executing agency for work on policy formulation. guidelines. emissions control. improved modal integration. From the perspective of policy dialogue and capacity development at least. Available information on NPIs also suggests that actual progress in capacity development remains short of initial plans. and capacity development in one of the provinces was expected to be cancelled. subsequent progress (or lack thereof) indicates the need for a better understanding of the priorities of the concerned federal and provincial stakeholders. it appears that enabling regulations. it is difficult to justify the MFF modality. and investment in new capacity. As per the RRP.3% of the total MFF financing envelope is allocated for NPIs. In this case. as of March 2012. and logistics. as well as the need for capacity development. However. introduction of management information systems. although the existing policy framework and capacity development related MFF design aspects do appear to justify the MFF modality. which focuses on enabling the concerned state government department to sustain the investment by strengthening staff capacities. 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. creates an impression that skill levels are low.

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. MFF = multitranche financing facility. Regarding program loans in sectors where MFF investment programs have penetrated most (energy and transport).) appear to show an increasing trend. 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 2003.65 million per year during 2006–2011. public health. a marginal reduction in the annual average approvals for support to India’s and Pakistan’s road transport sectors. By the time the MFF modality began to be piloted. the causality between a fall in the energy sector program loan volumes and the rise in penetration of MFFs is difficult to decipher. as a percentage of all loan and grant assistance for physical investments.77 million per year during 1990–2005 to $0.57 million per year during 1990–2005 to $0. Available MFF documents (whether periodic financing requests. ADB approved program loans for about $1. and social protection. It appears therefore that the originally envisaged opportunities for policy dialogue have not been realized. public sector management. industry and trade. 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. and (iv) excluding support for ports and rail sectors. Manila. capacity development. which was last approved in 2002. 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. periodic financing request reports. Asian Development Bank Annual Report 2011. program loans were being extended more for agriculture and natural resources management. 2012. while policy support that was provided earlier has been discontinued in sectors where MFFs have penetrated the most. it is reasonable to expect that the sum of NPI allocations for MFFs and TA resources for capacity development should increase.The Working of the Modality 78.70 million per year during 2006–2011. even though overall TA resources (for project preparatory work plus advisory. NPI = nonphysical investment. total TA resources show a declining trend. finance. (ii) a reduction in the average annual approvals for support to India’s power sector by 10% after 2005—from $0. Refer to ADB. However. education. trends can be discerned only in India and Pakistan (Box 5 and Appendix 10). a Over a longer time horizon from 2000 to 2011. Given the recent emphasis on improving project readiness.3 billion to support India’s and Pakistan’s energy and transport sectors. It is noted that (i) ADB supported power sector reform and restructuring through program loans from the mid-1990s to the early2000s. this increase reflects inclusion of support for sector-wide planning as well as coal utilization strategy. 79. 2–5 May (45th Annual Meeting). there have been no program loan approvals for these sectors in the two countries. Since the MFF modality began to be piloted. . a Total TA grants disbursements declined from $189 million in 2008 to $148 million in 2011 (with a peak of $202 million in 2009). 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. The use of preparatory TA resources also appears to be declining although the decline is not so pronounced. TA = technical assistance. Source: Independent Evaluation Department. etc. (iii) a more than 10% increase in the approval for support to Pakistan’s energy sector from $0.

is in doubt. client-side ownership and buy-in are difficult to sustain. as outlined in the FFA. as in MFF47. the extent to which the investment program and financing plan can be considered sacrosanct. the extent to which DMC governments and clients can prepare sector strategies and road maps of the requisite quality is uncertain. however. In many RRPs. 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.32 Real-Time Evaluation Study of Multitranche Financing Facility 3. Even if ADB provides support to define strategies and road maps. road map. financing plan. Other Prerequisites Investment program and financing plans. or the undertakings considered firm. AZE: Road Network Development Program. Undertakings. overseeing them. as subsequent tranches are often not defined in the MFF. institutional performance. 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. for instance (i) combining project management and other capacity development activities. To the extent that the financing plan includes counterpart funds from the client or other DMC sources. is presented differently. undertakings can be assessed in terms of the quality of strategic context. policy framework. Under such circumstances. 52 and (iii) including construction supervision in capacity development. KAZ: Central Asian Regional Economic Cooperation Corridor-2 (Mangystau Oblast Sections).51 (ii) combining project management with project preparation and construction supervision. etc. 4. 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. Refer to para 68 of Board Paper (footnote 6). it indicates commitment from the client side. the financing plan makes a distinction between the investment component and capacity development support. However. considered a commitment to the agreed-upon road map. as in MFF58. The 81. Given the proliferation of MFFs across many countries and sectors. and other indicators of government commitment. a financing plan for the entire MFF does not carry much significance. capacity constraints exist in most sectors and in the institutions 83.54 Therefore. as in MFF14. rather than in project cost. policy framework. A case in point is the combination of different types of NPIs. In that sense. it would be 84. is the very basis on which the MFF modality enables ADB to support a client. An agreed-upon investment program 80. Suitable databases that provide information on policy. Prerequisites as Decision-making Filters Consistency in presenting financing plans needs to improve In most DMCs. The investment program includes physical and nonphysical components. Consistency in presenting the financing plans needs to improve. and governance aspects could possibly provide useful inputs for screening the use of the MFF modality. useful to reconsider the importance to be given to such an underlying assumption in justifying the choice of the MFF modality. Undertakings are normally stated in the FFA and can be 82. . Yet the implicit assumption while approving any MFF investment program is that institutional capacities are strong and contribute to a stable policy environment.53 As a result. capacity development objectives. or investment plan (for single large projects) as presented in the FFA and RRP.

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

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

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

Each has different rules and regulations for procurement and evaluation process. VIE = Viet Nam. with capacity building support provided through a parallel TA. and there was only a onemonth time lag between loan effectiveness and date of first contract award for the third tranche. . MFF = multitranche financing facility. IND = India. ADB = Asian Development Bank. EIB = European Investment Bank. The situation has improved since then. TA = technical assistance. 39% 24% 41% 42% 21% 14% 12% 8% Tranches Approved up to 31 December 2010 Source: Independent Evaluation Department. CFL = compact fluorescent light. 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 . the first contract was awarded nearly two months prior to loan effectiveness date for the second tranche. 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. PAK = Pakistan. EIB and KfW).36 Real-Time Evaluation Study of Multitranche Financing Facility effectiveness of the first tranche loan. KfW = Kreditanstalt für Wiederaufbau Bank. Source: Independent Evaluation Department. 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.

5. those that can be approved by ADB Management. 2008.approved project financing. 61 It is acknowledged that the need for flexibility can also arise due to the occurrence of emergency situations. IEI document (footnote 4).The Working of the Modality 37 In general. Of the next 46 MFFs approved until the end of 2011. given the long utilization periods. Manila. Some improvement is noted since mainstreaming in mid-2008. Besides. and (ii) DMC governments and clients review agreed-upon scopes even for approved tranches. 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. Until December 2011. the MFF modality provides financial and operational flexibility to clients and ADB. within the ADB. 34–43 and Appendix 4. and projects are expected to get implemented with smaller delays. 5. the MFF utilization periods can get exhausted without accomplishing the full intended scope of the MFF. 13 (28%) did not provide this information. 2008. however. Operations Manual: Bank Policies and Operational Procedures (Section D14). Change of Loan and/or Grant Funded Projects. 62 ADB. Change in Project Scope or Implementation Arrangements. For this reason. therefore. 59 It allows (i) sound balance sheet management on the client side. part. it is unlikely that all projects for all tranches will be identified and known upfront in all MFFs. the RRPs of 7 (35%) did not provide the number of tranches or indicated only a range. As envisioned in the IEI document. Manila. to be coupled with long-term and programmatic investments. the flexibility offered by the MFF modality reflected in 95. that with increased attention to project readiness and without commensurate efforts to build institutional capacities. Manila. and (iii) different debt finance structures to be applied in each tranche. even if the precise number is not known. a lack of clarity in the relevant project administration instruction until 2011. Besides. about 30% of all approved MFFs do not even indicate upfront the number of tranches. It is likely. 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. Of the first 20 MFFs approved during the pilot period. overall. 64 clearly stated that 59 60 The flexibility offered by MFF has reflected in part. Project Administration Instructions. E.04. Change in Scope of Loan and/or Grant Funded Projects. the time span between approvals of successive tranches will increase. Flexibility Aspects 94.02. The PAI of January 2011. which was retracted within less than a year. 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. 63 Refer to: (i) ADB. (ii) financial approvals as and when projects are ready and PFRs are submitted. 64 ADB.02 as revised in December 2011. Emergency situations may arise from natural disasters. 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. 2011. 61 The required clarity came about through PAI 5.62 96. the need to have high-quality road maps upfront that inspire a high level of confidence may also have diminished. Manila . or other unforeseen events that cause turmoil. unless DMC governments and clients adopt measures to accelerate the achievement of project readiness by appropriate institutional capacity development measures. approval and effectivity. introduced the idea that a major change is a change in the project outcome and target values of outcome indicators. Therefore. 2011.60 In practice. . the relevant PAI’s did not explicitly mention the MFF modality. and (ii) ADB. more MFFs indicate at least a range for the number of tranches in the RRP. Project Administration Instructions No. Project Administration Instructions No. conflict situations. regarding the types of scope changes Refer to paras. project readiness is expected to reduce the time lag between loan 93.

Table 9 describes some tranche project changes. including changes in executing and/or implementing agencies.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. Appendix 12 shows that most changes that have been made in tranche projects across agriculture. 1. consulting services. 2011. The Board has delegated to the President. It appears from Table 9 that at least until December 2011. including project performance monitoring and evaluation. due to such factors as the study’s data collection during mid year. 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. the flexibility offered by the MFF modality had been related to the fact that if a change is considered a minor change. 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.” Supplementary Appendix C includes a description of tranche project changes to the extent IED could obtain such information. Change of Loan and/or Grant Funded Project. Project Administration Instructions (PAI) No. and/or (v) reporting arrangements. which means changes in the mix of currency and sources of finance. (iii) a change in the sectors covered by the investment program. unless they fundamentally affect the scope and project outcome—in which case they constitute a “major” change. the late approval of many scope changes over 2012. As for stand-alone projects. Only 6 of 46 tranche project changes affected in 2011 or before were classified as major. 66 67 .65 Any one or a combination of these changes results in a “minor” tranche project change. Data available with IED show that about 85% of the tranche project changes approved in or before December 2011 had been classified as minor. implementation period. (ii) financing plan. and disbursement arrangements. Manila. concerned Director General (who may in turn delegate in writing the approval authority to an authorized director). effected in various MFF tranche projects. (iii) project outputs or performance targets. 67 About 85% of the tranche project changes approved in or before December 2011 had been classified as minor 65 ADB. and late uploading of scope change memoranda in e-STAR. for practical purposes. Therefore. (iv) implementation arrangements. Project Changes What constitutes a minor change has been clarified in December 2011 Tranche project changes.02. procurement. the authority to approve “major” changes. which refers to changes among the existing categories of project cost and finance tables. 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. it can be approved by the concerned head of department. any change at the tranche level does not require approval from the Board. changes have also been 97. “Minor” changes to individual projects under an MFF are approved by the 98. 5. (ii) a change in the policy framework that negatively affects the viability or sustainability of the investment program or investment plan. and (iv) a substantial and material change in the type of investments contemplated under the investment program or investment plan. urban. energy transport. and other sectors to date have been categorized as “minor.

Scope changes in MFFs. along with other projects. and cannot be implemented by a state government agency. major MFF level changes that affect the outcomes of an MFF as originally approved by the Board. 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. require Board consideration and Board approval (para. Cost overruns after detailed design in tranche 1 and tranche 2 went beyond their financial. and consulting services in design and construction management. PAK = Pakistan. IND = India.a and rehabilitation or one hydropower plant was included. the Qila Saifullah-Zhob road section was to be widened and improved in tranche 1. a After it was realized that the hydrological data collection is in the purview of the central government. (ii) an undetermined postponement of the Batumi-bypass and withdrawal of government support for border facilities effectively cancelled tranche 2. 99. . As per the MFF policy. In reality the design of the hydrological monitoring and information system was dropped. Source: Independent Evaluation Department. 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. and are approved by the President. 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. Other types of changes constitute “minor” changes. hardware and software for transmission planning and operations. and (iii) the deleted Kobuleti-bypass section from tranche 1 was included in an unscheduled tranche 3. Therefore (i) a section of the Kobuleti bypass from tranche 1 was deleted. This section was shifted to tranche 2. Originally. MFF = multitranche financing facility.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. Originally. designing of a hydrological monitoring and information system. tranche 1 included a 29km bypass around Kobuleti to be implemented in three contracts. 95). 2. and 3 of MFF34 (GEO: Road Corridor Investment Program) Minor More than 100% cost overrun in capital cost of tranche 1 Kobuleti bypass.

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

2012. MFF = multitranche financing facility. so that its scope had to be reduced by the 39 kmlong Ganja-Bypass. ADB = Asian Development Bank. 2011. 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.The Working of the Modality existing MFF to raise its financing envelope. AZE = Azerbaijan. The appraisal cost estimates were made without finalizing the highway alignment. taxes and duties 104.72 103. By way of an example. 65 of ADB. Cost Sharing and Eligibility of Expenditures for ADB Financing. RRP = report and recommendation of the President. Cost sharing. 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). 74 This provides additional and convenient flexibility when preparing the MFF investment and financing plans.4 million to replace the Ganja-Qazakh road. the tranche 1 scope was reduced by 40 km. a Loans 2205-AZE and 2206-AZE. Refer to para. are also included as eligible expenditures for ADB financing in MFFs as well as other stand-alone modalities (other than policy-based lending. and limited or nonrecourse financing to subsovereign or nonsovereign public sector entities). This was transferred to MFF14 under Tranche 2.075 ($3 million) from Special Funds resources. Although the inclusion of additional financing provided by ADB within the MFF modality is consistent with. 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. Manila. The four-laning of the Ganja-Qazakh road was listed in the RRP. as possible under tranche 2 under the MFF. East-West Highway Improvement Project. Manila. The East-West Highway Improvement Project. and has been welcomed by clients. 73 Allocations or expenditures to cover taxes and duties are included for computing ADB’s share in the project cost. Bank Policies and Operational Procedures. and leverages the programmatic orientation of the MFF. 71 and for individual tranches within the MFF. Source: Independent Evaluation Department. OM Section H3/BP and H3/OP. ADB is financing taxes and duties for a transport MFF in Afghanistan. ADB. Additional Financing. Operations Manual. also experienced high cost overruns. Box 8 provides illustrative examples. SDR2. 66 of OM Section H5. 72 73 74 . approved 8 December 2005 in the amount of $49 million OCR. Owing to the cost overruns. OM Section H5/BP and H5/OP. In addition to other project-related expenditures.a a stand-alone project previously supported by ADB. among others. The highway sections deleted from tranche 1 were processed under a new tranche 3. ADB’s share in project cost may exceed the country cost-sharing ceiling for a particular project. 41 Although the inclusion of additional financing mechanism is feasible under MFF. A grant 71 Refer to para. 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. Operations Manual. it has led to some situations where sufficient attention may not have been given to project design. with an allocation of around $56.

75 75 ADB. 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). Proposed Multitranche Financing Facility. . Islamic Republic of Afghanistan: Transport Network Development Program. Report and Recommendation of the President to the Board of Directors. 2011.

Such changes have been effected particularly to (i) improve the clarity on the structuring of MFF and MFF prerequisites. a sector or regional assessment will be prepared and submitted to the Board together with other MFF documents for Board consideration. ADB requires the client to undertake a strategic environmental assessment to identify mitigation measures to be built into MFF design. specify documentation requirements at the MFF and/or tranche levels. The provisions that call for additional documentation also in many cases help 107. Many gaps that have been closed since then have also helped to address some Board concerns such as quality assurance and Board supervision. 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. (ii) specify documentation requirements at the MFF and/or tranche levels. Among the more salient additional documentation requirements are ones that reflect rising concerns about safeguard compliance. 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). safeguard categorization. and project readiness. Where significant sector or regional environmental impacts from the investments under an MFF are anticipated. A. 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. Guidance on the MFF Modality 106. and introduce measures for quality assurance OM (2010) OM (2010) Compliance . Coupled with this are quality assurance measures that include peer reviews. Table 10 provides a brief overview of the major changes since the MFF modality was introduced. Additional documentation also facilitates third-party review and quality assurance. risk 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. and (iii) introduce measures for quality assurance of the MFF investment programs and tranche level investments. as applicable. clarify and provide guidance on the structuring of the MFF and MFF prerequisites.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. gaps related to the design and functioning of MFF investment programs.

evaluating. fiduciary oversight. Gender mainstreaming project categorization is to be done for each PFR. Each tranche is to undergo a separate risk categorization and to be processed accordingly. investment program or investment plan. procurement. governance. and financing plan). as necessary. and social dimensions. strategic context. and mechanisms for monitoring. 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. and revisions incorporated into the PFR submitted to Management. sustainability. frameworks addressing environmental. corresponding undertakings. commercial. and measuring results For individual tranches. Safeguard categorization is to be made at the level of individual tranches.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. indigenous peoples. economic and social dimensions (as applicable). regulatory. safeguards. involuntary resettlement. Regional and Sustainable Development Department to the chief compliance officer for concurrence or further discussion (as required). For each MFF. 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. 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. any required policy refinements. 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 . and other matters. 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. due diligence is to cover: technical. and management of social risks. legal. reporting requirements. capacity. anticorruption aspects. The SPRSS is to be updated for SSTs. implementation. policy framework. planning and phasing of interventions. safeguard issues. action plans on given themes. financial. The operations department is to be responsible for proposing the categorization of all tranches and submitting the checklist and categorization results. Upon receiving a signed PFR from the Government requesting a new tranche approval. Project readiness is to be reviewed and discussed in the PFRR. due diligence is to cover: MFF prerequisites (road map. through the Environment and Safeguards Division.

The PFR is to confirm that the general understandings under the FFA remain valid. 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. intensive and professional as for stand-alone projects. SPD= Strategy and Policy Department. legal.Quality Assessment and Review SI / OM Area of concern Details and implementing agencies is built upon. The IEI team is required to review and comment on MFF proposals before they are submitted to Management and the Board. (iii) procurement for packages (including consultancies) planned in the first year of implementation is sufficiently advanced before tranche approval (wherever possible. due diligence. financial. 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. procurement up to the contract award should be sought for SSTs). At the time of mainstreaming. SI = staff instruction. 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. . social. 109. Source: Independent Evaluation Department. However. regulatory. and had requested ADB Management to supervise adherence to. and quality of. 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. anticorruption. DMF = design and monitoring framework. and other matters. safeguards. MFF = multitranche financing facility. 45 SI (2006) Quality assurance SI (2011) Quality assurance SI (2006) Peer review and advice SI (2011) Peer review and quality assurance B. (ii) safeguard actions are taken. economic. some Board members had noted that the modality poses some risks to proper implementation and accountability. PFR = periodic financing request. procurement. as well as any representations and warranties included in the FFA. implementation. director. capacity. PFRR = periodic financing request report. FFA = framework financing agreement. OM = Operations Manual. 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. fiduciary oversight. SRM = staff review meeting. SST = second and subsequent tranche. 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. governance. For the MFF: A checklist signed by the project team leader. Due Diligence and Viability Analysis It is generally desirable that due diligence of MFF tranche projects should be as 108. It should describe the client’s compliance with the undertakings. commercial. MRM = management review meeting. 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. 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.

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

which include (i) advising on the sound application of appraisal methods for lending services. RRPs do not define all tranches up front. In many cases. and (ii) reject projects with an EIRR below 10%. several road sector feasibility studies use the HDM IV model to establish the benefits from new. including substantiating overly optimistic assumptions. It appears that ADB staff is readily accepting the results. it appears that economic viability analysis and due diligence may not be accorded the importance they are due. and to accept projects and subprojects with an EIRR of more than 12%. or with an EIRR in the 10%–12% range if relevant additional but unquantifiable benefits can be identified. This is a very late stage in the tranche processing cycle.nsf/webview!OpenView& Start=1&.” the authorized director is required to obtain inputs from other departments on a draft memorandum that provides relevant details on the changes. Even where SST 116. and the tranche project information remains within the division and department until the PFRR is to be circulated to other departments for comments. The entire SST preparation process is managed by the team leader and other team members. whether 117. and available tranche project change memoranda indicate that it does not receive these memorandums for comments. reconstructed and rehabilitated highways or roads. 81 gets the opportunity to review the economic analysis only when a draft PFRR is circulated across departments to seek comments. 79 The standard ADB practice is to use the economic internal rate of return (EIRR) criterion. is circulated to Central Operations Services Office (COSO). projects are defined in the RRP. and distilling good practices of economic analysis of projects and programs. 82 ERD is not explicitly mentioned in this list. Strategy and Policy Department (SPD).02 (refer to footnote on this PAI). 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. or where unvalued costs are expected to be significant. 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. the draft memorandum defining and detailing the scope change.asiandevbank. Economic Viability and Due Diligence 47 115. A review of the MFF and PFRR documents and discussions with stakeholders of 118. As per PAI 5. see http://lnadbg1.org/edr0015p. The HDM IV model works like a black-box where the user provides relevant project data. Controller’s Department (CTL). “major” or “minor. particularly when the EIRR is above the threshold. The Economics and Research Department (ERD). To the extent that tranche project changes are to be introduced. when it becomes difficult to address discrepancies or problems with the economic analysis. . and the model automatically calculates the EIRR. Against this background. and (ii) undertaking methodology research. Economic viability of all tranche projects is required to be established as per the ADB guidelines for economic analysis. Further.Quality Assessment and Review 2. to (i) reject projects with EIRR between 10% and 12% if no additional unvalued benefits can be demonstrated. which has the expertise and competence to comment on economic evaluation issues. they are considered indicative and are subject to change. For instance. Office of the General Counsel (OGC). This ERD competence is in line with its various mandates. and other relevant departments. These departments are required to provide comments within five working days of receipt of the draft memorandum.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.

. and (iii) a traffic increase from 3775 vehicles per day (base year 2006) to 7. 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. While the revised traffic estimates are based on new traffic counts.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. However. in this recalculation. the revised EIRR was shown as 12.6 million per kilometer to $6. 2009. As part of the nonphysical investment component. Manila. It is noteworthy that passenger time savings account for a large share of the total benefits.” 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. while the EIRR is only a little above the threshold. This is due largely to the fact that ADB’s own safeguards requirements are more stringent than those followed by its DMCs. the EIRR for tranche 1 scope. Source: Independent Evaluation Department. Safeguards Compliance and Due Diligence For safeguards due diligence. MFF = multitranche financing facility. RRP = report and recommendation of the President. the estimated increase in other benefits is questionable. it suffered cost overruns.8%. MFF34 GEO: Road Corridor Investment Program Tranche 1 originally included the bypass around Kobuleti.4 million per kilometer.3%.9%. After additional financing through tranche 3. EIRR = economic internal rate of return. After more than doubling the cost from $2. 84 ADB. rather than pushing for a deepening of the analysis. the $70 million spent in tranche 1 is considered a “sunk cost. ADB either provides the necessary expertise or 120. ADB has supported capacity development related to safeguards in client organizations or program management units in about 50% of the approved MFF investment programs. 119. 3.254 vehicles per day (base year 2008) in one of the highway sections. or when concerned about the overall viability of the project. the new Masali-Astara expressway. In some cases. This reflected increase benefits in terms of (i) about 100% increase in time savings benefits. the recalculated EIRR for the Kobuleti bypass is estimated at 12. In some cases. GEO = Georgia. was 12.48 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. and a part of the bypass was then to be funded through tranche 3. After detailed design and realignment. sources it externally by engaging consultants. Policy Paper. 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. Safeguard Policy Statement. (ii) 12 fold increase in avoided accidents-related benefits.

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

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

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

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

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

the MFF modality is favored as the government considers the FFA as a 143. or a different MFF. 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. 142. On the contrary. from the Government of India’s perspective. India: Madhya Pradesh Efficiency Improvement Investment Program (MFF57). the second tranche was quickly processed and approved by December of that year. 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. In Papua New Guinea. certain cost savings can be achieved. The Government of India also recognizes and understands the flexibility 144. DMC Experience with the MFF Modality The flexibility associated with MFFs has made the modality attractive 141. that is considered an additional element of flexibility of the MFF in many cases. 98 With such a long-term commitment as a basis. For instance. some borrowing entities for urban sector MFFs in India took decisions to strengthen their capacities to manage urban projects. In India. it was expected that ADB would be able to approve the second tranche only in the first quarter of 2012. 99 Overall. 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. full commitment from ADB. Towards increasing acceptance of the MFF modality. and that specific tranche loans can be signed as and when project readiness is achieved. or a stand-alone project. and can make minor adjustments to accommodate ADB’s changing liquidity position. However.101 Constraining features of the MFF modality. In countries such as Armenia. where the MFF modality has been used in the transport sector. This type of accommodation is possible. the study is informed by the concerned regional department. while ADB’s fiscal year coincides with the calendar year. as per the requirements of the MFF policy. To the extent MFF tranches have financed cost over-runs of MFF projects included in previous tranches of the same MFF. 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. and (ii) the client need not seek specific approval for a project that is newly introduced under the MFF umbrella. In such a case. . associated with the MFF. and all tranche projects can be implemented without having to draw down the entire tranche loan amount. when it became evident that resources would become available within 2011. of approving the second tranche in December of a certain year or the first 3 months of the following year was very little. They added to their skill base to be able to improve other urban services. and Georgia. Azerbaijan. Previously. that relevant agencies appreciate the programmatic design and predictable financing associated with the modality. there are indications that the MFF in India has led to greater appreciation of ADB funded investment programs than in most other countries. MFF57 was approved although a stand-alone project loan could have been structured instead. but without having to pay commitment fees (no matter how small) on the entire MFF envelope. because the fiscal year in India runs from 1 April to 31 March. 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.100 At the time of MFF57 approval in July 2011.54 Real-Time Evaluation Study of Multitranche Financing Facility 2. The difference. executed efficiently. Where all projects in a tranche are 145. the urban local bodies had mostly sanitation engineers and workmen.

the MFF modality helps to the extent that. international consultants are required to pay taxes as per Indian tax laws (that are not applicable if they are engaged by ADB). and India. retain authority for project approval or loan signing. 105 the executing agency engaged international consultants (who had worked on previous tranches) for tranche 3. This is viewed as a tedious and unnecessary process by the PowerGrid Corporation of India. Special clearances are required to engage international consultants. Where project approval processes are cumbersome or encourage government and client officials to go by precedence. which thus forces grossed up fees. Azerbaijan. Government Decision-making Processes for MFF and Tranche Approvals 55 148. the benefits of an MFF framework are not as significant. Executing Agencies in the PRC also observed no significant reduction in processing time or effort for a tranche 2 project. where the President signs the loan agreement for each tranche under a previously approved MFF and FFA. This is noted in Armenia. effectively. the MFF modality is perceived as being useful. after once obtaining approval for an MFF from an apex body (such as the National Development and Reform Commission or the State Council). 150. Following the internal Staff Instructions of 2011. Where some high-level body or top-level country executive retains or intends to 149. 3. and a new tranche loan needs to be processed to finance another project. 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. India: National Power Grid Development Investment Program (MFF19). the tranche loan agreement. . the executing agency does not need to obtain similar In many countries. When engaged by the executing agency or any local body. even if it had been included in the approved pipeline for foreign capital investment. but preferred to switch back to using TA funds for tranche 4. A case in point is Kazakhstan. their inherent investment decision-making and approval processes are amenable to MFFs 102 103 104 105 This principle applies to stand-alone projects. preparation of SST projects through previous tranche loans (barring exceptional circumstances). India: Himachal Pradesh Clean Energy Development Investment Program. that of obtaining clearance from the National Development and Reform Commission. the effort required was about the same as for any other modality. In the particular case of MFF23 in Himachal Pradesh in India. The difficulties relate mostly to the high consulting fees charged by international consultants.103 The executing agency for MFF20 also noted that to affect any amendment in 146. In many countries.102 The amount saved is required to be cancelled from that particular tranche. 104 Good performance and project familiarity obtained through PPTA preceding the MFF are not decisive consultant selection criteria. the executing agencies are required to hire project preparation consultants under tranche loans. The level of effort required for loan negotiations. their inherent investment decisionmaking and approval processes are amenable to MFFs. relending arrangements. and as being just the same as for other modalities. Investment approval and decision-making processes normally incorporate a system of checks and balances. which mandates the 147. where internal government policies make it difficult to engage international consultants.Implications for Operations the same tranche. In the PRC. where loan or grant savings need to be cancelled before the savings return to ADB’s financing envelope. This has proved problematic in India. and effectiveness requirements was nearly the same as for any type of loan. Georgia. it saved only one last step.

from the $8 billion–$11 billion per year range during 2006–2008.5 billion range during the next 3 years. procurement. 107 MFF52: Ho Chi Minh City Urban MRT Line 2 Investment Program.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. mainly through the CPS which is 153. and efforts by other development partners. The first tranche provides system development and implementation support. A CPS normally defines a program of assistance that identifies areas of investment projects. and construction contracts. 151. 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. In Viet Nam. 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. ADB’s operations (including OCR and Special Funds resources for loans. Any MFF 154. This was made possible by the fifth general capital increase (GCI V). to the $13. and consulting services. As a result. the DMC’s development strategy. and construction supervision. and narrows the focus further within these areas. 109 GCI V made it possible to increase investment lending through MFF and other investment lending modes. General Capital Increase V 152. but it does reduce the maneuverability of including interventions to manage unforeseen stress. the opportunity to reduce commitment fee payment obligations (no matter how small) in the coming years will make the MFF modality generally more attractive. The first tranche supports site preparation. and trade finance) have increased significantly. 108 ADB. the government concedes it still prefers stand-alone projects.56 Real-Time Evaluation Study of Multitranche Financing Facility approvals for each tranche—although as noted above. technical assistance grants. The second tranche supports the construction of the underground and elevated line. 109 Following adoption of Resolution number 336 by the ADB Board of Governors in April 2009. At present. This may not be critical for those countries and sectors where the combined MFF tranche financing envelope is lower than the CPS financing envelope. 2. ADB Perspectives 1. The full CPS cycle is shorter than the MFF utilization period. plus engineering. each tranche of an MFF investment program and all other investment projects need to be approved by the Prime Minister’s office. civil works. depot equipment. guarantees. aligned with Strategy 2020. Annual Report 2011. ADB’s comparative strengths. Country Programming Any MFF program necessarily straddles more than one CPS cycle ADB delivers its strategic agenda to a DMC. although it recognizes that with OCR loans.5 billion–$15. 2012. which define a pipeline of interventions that fit the agenda spelled out in the CPS. . The second tranche supports the remainder of civil works and consulting services. depot. 2–5 May (Forty-fifth annual meeting of ADB Board of Governors). grants. 2009–2011. A CPS is normally implemented through rolling 3-year COBPs. Manila. Table 12 shows that all countries and sectors with MFF interventions 106 MFF12: Viet Nam: Mong Duong 1 Thermal Power Investment Program. programs. B. A CPS identifies operational areas from the menu of options provided in Strategy 2020 within the framework of the DMC government’s development plan. and technical assistance to the particular DMC over a 5-year period. Since MFF was first piloted. there is little savings in terms of time and effort. equity investments.

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

467 72% Transport 1. b a 3.201 12% Uzbekistan Transport 486 658 74% Water 258 313 82% Viet Nam Energy 1. In some sectors and countries where the MFF modality has penetrated rapidly and accounts for a major share (say. MFF portions that are not converted to tranches. it may be useful to consider other options for strengthening policy dialogue for such sectors and countries.396 3. more than 75%) of all approved assistance since MFF began to be piloted (see Table 13).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). Please note that the actual MFF tranche approvals fell short of the projected levels.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. basis of actual and projected data provided by other ADB departments. Source: Independent Evaluation Department.485 3. In addition to approvals for physical investments. 157.075 91% Mongolia Transport 44 146 30% Pakistan Energy 1.315 1.074 51% Transport 390 2. During 2005–2011. and that all actual approvals during the 2009–2011 period are MFF tranche approvals. c Refers to all sovereign lending operations. including MFF tranche approvals. it may also be useful to understand the implications for policy dialogue and capacity development. To the extent necessary.004 28% Georgia Transport 347 377 92% Urban 118 118 100% India Energy 2. also includes approvals for nonphysical components.711 14% Water 138 311 44% ADB = Asian Development Bank. MFF = multitranche financing facility.279 43% Water 897 1. as follows: (i) . Source: Independent Evaluation Department. Refers only to tranche approvals.051 2.142 66% Water 90 113 80% Armenia Transport 277 324 85% Azerbaijan Transport 455 496 92% Water 375 375 100% Bangladesh Transport 281 1. PRC = People’s Republic of China. c MFF tranches account for 100% of the pipelined approvals projected in the CPS/COBP documents. are not included. 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. Capital Headroom ADB’s Treasury Department (TD) models MFFs in the OCR balance sheet on the 158. then the projected/planned tranche approval amount is taken from the most recent CPS/COBP.

4 4 2 2006 2007 2008 2009 2010 2011 6. which for 2013–2015 is about 40% of sovereign lending. Most of this accumulation is from OCR resources—as 85% of the combined approved MFF envelope is from OCR resources.3 15 Undisbursed Balance ($ billion) MFF = multitranche financing facility. in view of portions of existing MFFs that are not converted to tranche loans. especially those in which the remaining portion of the MFF financing envelope is significantly greater than the remaining MFF utilization period. Source: Independent Evaluation Department.Implications for Operations actual tranche approvals from the Controller’s Department. (iii) beyond the WPBF period. accumulating each year (see Figure 8). the share of tranche approvals to sovereign lending approvals is assumed to be 35% per year. (ii) projected tranche approvals in the 3-year WPBF from SPD. Figure 8: MFF Portion Not Converted into Tranche (as of 31 December 2011) 16 14 12 ($ billion) 10 8 6 4.3 12.7 10. 59 A portion of the MFF financing envelope that is not converted into tranches is 159. 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. Figure 9 shows that some MFFs contribute more to this accumulation.9 13. as well as additional MFFs that are projected to be approved over the coming years. .

ADB’s capital adequacy has been declining over the past few years. flooding. and/or is projected to continue falling over the next few years.113 This could diminish ADB’s ability to mount crisis-response operations. However. MFF investment programs lock up future finances. etc. Disasters may be caused by (i) natural events such as earthquakes. direct cost implication on an OCR-financed MFF from the portion that has not been converted into a tranche loan. guarantees. valued at $162. In addition. MFF investment programs lock up future finances. oil spills. it is anticipated (as of end-November 2012) that within a few years. there is no commitment charge or any 160. and contribute to the depletion of capital headroom Where the MFF is from OCR resources. volcanic eruptions. 112 Inspite of subscriptions to General Capital Increase V. the DMC has little reason to cancel or state that it will not avail of any leftover portion of an approved MFF envelope. and contribute to the depletion of capital headroom. $8. cyclones.7 billion was paid as of 31 December 2011. tidal waves. the subscribed capital had increased to over 10. crowd out other financial products from OCR lending. crowd out other financial products from OCR lending.5 million shares. chemical mishaps. response includes needs for emergency assistance quickly following a disaster. equity. At the conclusion of the subscription to the fifth general capital increase in 31 December 2011. Therefore. Effectively then. hurricanes. This need not be a cause for concern during times when ADB’s capital adequacy is high and rising.2 billion by December 2011. widespread community violence.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. 114 so as to address rehabilitation of priority physical and social infrastructure.5 billion. and increase in paid-in capital to $8. such as regional/national civil wars. . or nuclear reactor leaks. Crisis161.2 billion was for paid-in of which $4. 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%. and loan loss reserve. or epidemics: (ii) technological or industrial accidents such as explosions. droughts. annual OCR lending approvals could be restricted to less than the levels approved in 2009–2011. revitalize basic services (such as education and healthcare). 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. Source: Independent Evaluation Department. or (iii) conflicts of any type. and catalyze economic activity. in addition to projections for loan repayments.

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. In 2009. The MFF and its PFRs can be rejected. 117 The MFF modality binds clients to the delivery of specific warranties and representations that cover safeguards. capacity. postponed. the ADF component of MFF09 was enhanced from $10 million to $280 million. 2009. Manila. 2011. legal.116 162. the financing envelope was reduced for only one approved MFF investment program. in view of headroom considerations. Real-time evaluation of Asian Development Bank’s response to the Global Economic Crisis of 2008–2009. Such actions (reductions or cancellations) require commitment by the Board and the Management. and technical aspects. social. Manila. This reduction was part of an effort to free resources to launch emergency relief measures. IED reviewed ADB’s crisis-lending response. governance. IED. In 2011. 115 However. and not attributed to poor performance of the MFF. or terminated if conditions described in the FFA and legal agreements are not met. Such reductions or cancellations may also give ADB greater leverage over some reforms and enhance the credibility of the MFF modality.8 million. as well as the establishment of some suitable triggers. Enhancing ADB’s Response to the Global Economic Crisis—Establishing the Countercyclical Support Facility. ADB responded through the establishment of a new budget support instrument. 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). the incidence of approved MFF programs in the country assistance portfolio can make it relatively difficult to accommodate newly arising financial assistance requirements. 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. social. financial. However. 117 Existing documentation— including the proposal document for the MFF modality. 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. 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. MFF enablers and undertakings that constitute the FFA are in fact a binding commitment on the DMC governments and clients. and economic. 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. governance. to extend short-term loans (of 5-year maturity including a 3-year grace period) to DMCs. 118 However. More specifically. the policy paper that mainstreamed the MFF. 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. 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. which included the entire MFF allocation at the time). capacity. .Implications for Operations limit. the countercyclical support facility. 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. Until November 2012. Table 14: Documented Provisions to Terminate. only one tranche had been approved in 2006 for $227. sector policies. legal and technical aspects. sector policies. financial. and recommended more flexible repayment terms going forward. and economic. in view of the urgency for investing in infrastructure to support the rural poor.

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

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

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

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

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

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

The required facility-wide and tranche-level DMFs are intended to generate the right information for oversight. Board Oversight over Long MFF timelines Time lines of MFFs are significantly longer and the MFF financing envelope is 185.8 years. However. and the MFF financing envelope is normally significantly larger. on a regular basis. COBP. the MFF time lines are longer than for stand-alone projects. For the 66 MFFs approved until December 2011.6 years. However. However. Each MFF is usually expected to have three or more tranches. and PFRR preparation—in dovetailing MFF-related data into the CPS and COBP preparation process. the Economics and Research Department also reviews the economic analysis. A coherent set of performance indicators may not be used to track performance across tranches and at the facility level. Tranches are comparable to stand-alone projects in terms of implementation time lines (time lapsed between approval and closing) as well as approved amounts. the linkages between MFF and tranche-level DMFs continue to be weak (although there has been some improvement since 2009). and compliance with undertakings. The fact that nearly 50% of all second and subsequent tranches approved thus far. Lending Planning and Financial Projections 188. for some sectors and some countries. MFF RRP. Even though some tranches overlap. Dovetailing of tranche approvals for approved MFFs within the country annual 187. which is part of the team processing an MFF tranche. tranche performance. Portions of MFF financing envelopes that are not converted to tranche loans have increased each year. resource envelope has been difficult. across all MFF investment programs. the median utilization period is 7. MFF investment programs span two or three CPS periods. MFF performance reports to the Board can be improved to provide adequate 186. 8. This situation highlights the difficulties—under existing or generally accepted practices and processes for CPS. In addition to inputs from an economist. a re-examination of economic viability would most likely lead to significant delays in tranche approval and is therefore not done. information for Board oversight. only one or two tranches have been approved thus far. significantly larger than for other lending modalities. Economic due diligence of tranche projects must be rigorous. At this stage. The scorecard system used to rate MFFs can also be refined in the coming years with the introduction of more sophisticated approaches for evaluating. when the PFR report is nearing finalization. by themselves. the memorandum is not required to be circulated to the Economics and Research Department for comments. although in many instances. Where a minor or major change is effected in tranche projects. The utilization period of nine approved MFFs is 10 years or more. the CPS and COBP do not provide a good basis for advance information to the Board on MFF-related matters. Therefore.68 Real-Time Evaluation Study of Multitranche Financing Facility 184. have been approved in the December bunching season means the Management does not have sufficient time for review and oversight. the projected MFF tranche approvals in a given year can exceed the CPS financing envelope for that sector. In many cases. the Economics and Research Department obtains a PFR report for commenting at a late stage. 7. Self-evaluations and independent evaluations of completed MFFs will necessarily have to take place very long after their approval. and to form a basis for tracking and reporting performance at the MFF and tranche levels. with an average of about 7. MFFs have contributed to difficulties in lending planning and financial projections. MFF delays. and MFF approvals have an impact on headroom .

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

delays occur in achieving the desired project readiness criteria. where institutional capacities are weak. The achievement of such filters depends on to a large extent on institutional capacities. Lesson 3: Where actual tranche approvals in a given year exceed the country : financing envelope for that sector. it is difficult to prepare credible : 197. and safeguards due diligence is 198. energy sector MFF in Afghanistan). Attention to project readiness need not prevent delays in tranche approvals 193. It is also difficult to institute policy frameworks that encourage a judicious mix of commercial. financial. the . Lesson 4: Where capacity constraints exist. strategies and road maps—or if prepared. such as extension of the tranche closing date. The scorecard system can also provide a better basis for gauging and comparing performance across MFFs when the performance rating system is improved. governance. social. which implies delays in obtaining tranche approvals. the experience can vary on a case-to-case basis. and undertakings cannot be considered firm. financial. As a result. Such information will be needed at MFF closure. Institutional capacity development is supported through NPIs. data and documents that shaped the MFF implementation need to be readily accessible. For instance. B. social. (iii) Where the client is required to engage international consultants for preparation of projects for SSTs. important. Under such circumstances. MFF utilization periods can possibly be exhausted without accomplishing the intended scope. Therefore. technical. Although country-specific project readiness filters account for the specific circumstances of different countries. but development experience indicates that weak institutions are strengthened over a period of several years or decades. Equally important is the rigor of due diligence on legal. Lessons 194. the MFF prerequisites of the desired quality are not likely to be easily achieved (e. as well as when a specific MFF investment program is to be independently evaluated. with the possible exception of certain types of investments (such as a long highway that can be financed through a series of tranches).g. when an MFF completion report is to be prepared. and equity objectives along with improving operational efficiency and minimizing the environmental footprint. regulatory.. the investment plans. Lesson 2: Improved monitoring can serve to give early warnings on the : 195. While the devolvement of tranche approval processes encourages flexibility in many ways. For instance. and extension of MFF utilization periods. then to ascertain client ownership and absorptive capacity. Lesson 1: Where the development effectiveness of a specific MFF investment : program is to be assessed. Such documents have been difficult to obtain for this evaluation. fiduciary oversight and other aspects. these filters are similar across all countries. 196.70 Real-Time Evaluation Study of Multitranche Financing Facility any amendment in a tranche loan agreement. In short. the country strategies and rolling business plans are not sufficient basis for advance MFF-related information to the Board. Lesson 5: The rigor of economic. performance of large and long-term MFFs. is nearly the same as for any other stand-alone project modality. financing plans. 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. gender. 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.

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

It is also essential to establish systems to ascertain that all official online databases are regularly updated. Given the concerns that result from continuously rising portions of MFF financing envelopes that are not converted to tranches. 203. Recommendation 5: Ask for regular submission of necessary documentation 205. and take necessary steps that will help ensure prudent lending planning and financial projections. the MFF modality currently does not require a facility-wide midterm review. or postponement of tranche approval. Recommendation 4: Regularly monitor MFF portions not converted to tranches 204. in relation to the country programming financing envelope. It is useful to weigh the pros and cons of conducting annual reviews versus midterm reviews during the MFF utilization period. ADB needs to keep adequate records and provide easy access to all relevant documentation. and to facilitate learning and accountability. and that data entered once are audited and verified to ascertain correctness. . This can be achieved by having an online searchable repository on the intranet. (ii) a cap on the MFF financing envelope not converted to tranches. The design and due diligence of other stand-alone modes will also benefit from such measures. Should it be necessary to avoid reputational risk. 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. and (iii) activities to overcome deficiencies found in midterm reviews in relation to remedial actions required. The use of all these databases (including eOperations and TMS) can also be encouraged to help obtain feedback for improving them further. The results of the formal reviews ought to be reported to the Board in a timely manner. Although it can span two or more CPS cycles. 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. in relation to levels achieved so far. Given that ADB DMCs increasingly demand knowledge products and services. from clients and make all relevant documentation and data on implementation of MFF immediately accessible within ADB. Management can also initiate suitable awareness creation activities. or coinciding the timing of such reviews with the CPS preparation process. it is useful to devise criteria for their cancellation or discontinuation.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 Recommendations 73 Appendixes .Key Findings. Lessons.

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

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. preparation of subsequent projects. Under this facility. The first tranche can include (but is not limited to) the financing of advisors for the implementation of the first project. only the converted loans are.436 2011 13 6. and (iv) guarantees. and safeguard frameworks adjusted to consider specific issues.” Sources: Asian Development Bank database and ADB.= not available.889 % MFF Tranche Amount Approvals to Total Loan Approvals -17.6 33. (ii) tranches of sector investment programs over a long time frame.3 19. This was approved along with MFF02 “National Highway Development Sector Investment Program. About the MFF 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. As originally conceived in the IEI document.938 Approved MFF Tranche Amount ($ million) 3. risks addressed. in turn.28a 971 1670 2160 3571 4051 4462 16. undertakings. An MFF is a financing modality made available by ADB to its clients to support their medium. Manila.193 2010 12 4. a Refers to Asian Development Fund (ADF) Loan 2210-PAK from Special Fund Resources.237 Total 66 31. and capacity development. The MFF modality was originally meant only for investment projects—although a few policy-based loans have also been included in recent years. 6.1: Multitranche Financing Facility Approvals Approved MFF Financing Envelope Number of Amount Year MFF Approvals ($ million) 2005 2 1.g.810 2007 7 4.5 26. the Board approves a maximum amount for each proposed MFF. Policies can be refined. Following Board approval. MFF interventions are broadly classified as follows: (i) discrete. . approved on 13 December 2005. 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).024 2008 12 5. sequential components of large stand-alone projects.718 2009 12 6. Earlier tranches can be designed to facilitate the implementation of subsequent tranches. Multitranche Financing Facility Annual Report 2011. The overall facility amount is not a legally binding commitment on ADB or its clients.4 Tranches of sector investment programs. 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. (iii) financial intermediary credit lines.6 32. MFF = multitranche financing facility.7 37. eligibility criteria and decision making filters.5 22. 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.to long-term investment programs or investment plans. 2012.Overview of the Multitranche Financing Facility Modality 75 Table A1. B.. 7. ADB Management expects that the MFF potentially provides ADB and its clients with multiple entry points for policy dialogue within a specified utilization period. urban infrastructure projects). for institutional strengthening. and (ii) a number of discrete but same type of projects that are repeated at different locations with different executing/implementing agencies (e.520 2006 8 3. Some MFF tranches have also been used to finance cost overruns from other ADB interventions.7 -. and reporting arrangements.

PFR = periodic financing request.g. To what extent this belief is justified is at best unclear even today. FFA = framework financing agreement. MFF = multitranche financing facility. 5 Refer to footnote 2 (paras. Figures A1. DG = director general.1 and A1. RRP = report and recommendation to the president. project feasibility study). ADB and its clients can expect significant time and related resource savings vis-à-vis stand-alone projects. PFR.e. ADB believes that in the processing of an MFF and its multiple tranche loans. 9. This would come with other associated benefits. SRC = staff review committee.76 Appendix 1 8. which can be made available during the implementation phase.2 present respectively process flow diagrams for (i) the MFF and the first periodic financing request (PFR). (ii) more opportunities to address policy and procedural gaps.1 and A1. and (iii) more opportunities to modify implementation plans while work is in progress. 2008.5 freeing staff time. MRM = management review meeting. and (ii) second and subsequent PFRs. a fact-finding mission may be combined with completion of PPTA work (i.2.. and related legal Agreements •Sign FFA – DG/CD •Sign FFA & PFR Client •Finalize RRP CD = country director.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. some of the steps are now normally carried simultaneously (e. Mainstreaming the Multitranche Financing Facility. . such as (i) more opportunities for interaction with clients on sector issues and trends. Manila. Figure A1. 52 and 53).. VP = vice president. Source: ADB. It is important to note that the new business processes introduced in 2010 entail the same steps as outlined in Figures A1.

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. OED = Operations Evaluation Department.Overview of the Multitranche Financing Facility Modality 77 Figure A1. CTL. CTL. safeguard policy compliance memo •VP may convene MRM if deemed appropriate OGC drafts legal agreements. governance. Circulation of PFR Report to COSO. PFR. RSES. policy issues. and circulates to COSO. . Manila. progress on previous tranches. OED. status of compliance. etc. VP = Vice President. RSES = Environment and Safeguards Division. COSO = Central Operations Services Office. OGC. capacity. CTL = Controller’s Department. OED. 2008. and RSES for comments within 5 working days •Management reviews PFR Report. OGC = Office of the General Counsel. 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. Mainstreaming the Multitranche Financing Facility. PFR = periodic financing request. Source: ADB.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.

Staff Instructions for the Multitranche Financing Facility. start-up delays.78 Appendix 1 10. given that the first MFF approvals occurred in December 2005. director. as of now. strategic context. 1 2 3 4 5 B. 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. etc. then other modalities should be used. Besides. policy framework. Manila.) that is sufficient to understand the scope and financing of subsequent tranches. Although there should be a completion report for each MFF tranche. 6 7 6 7 8 9 This is not unusual. type of investment. etc. Table A1. ADB. contractors’ unresponsiveness. Factors Affecting MFF Performance 11. The tranche must have a physical investment component (Note: if nonphysical investment alone is required. 14–24). 2011. Table A1. An investment program proposed for MFF should first be checked for eligibility on this basis.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. undertakings. financing plan. and decision-making criteria and filters. and that infrastructure projects normally take 3–5 years or more to complete. capacity development. Refer to footnote 9 (paras. etc. as for investment projects funded supported by ADB through other modalities. the RRP should contain indicative information (geography. past implementation records. 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. subsector. 6 Facility completion reports are also expected to be prepared as and when ongoing MFF’s begin to close. and merits of the proposed MFF The first tranche should not exclusively finance detailed design. investment program. 2010. few tranches have closed and few tranche completion reports are available. due diligence services. Manila. ADB. the MFF tranche projects are also affected by factors such as insufficient institutional capacities. such as TA loan or a project design advance (PDA) A. 1.2 lists the key requirements for MFF design at present. . 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. Much of the information regarding progress of approved MFFs and their tranches is available through the project performance information system and e-Operations. Operational Manual Section D14 issued on 18 May 2010. 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.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. Otherwise.

the nature of investment and financing plans. although some members expressed concern about the increasing size of the MFF portfolio. IA = implementing agency. policy framework. RRP = report and recommendation of the President. 14 Description The first tranche projects should be representative of the entire MFF from a safeguards perspective. MFF = multitranche financing facility. compliance with Operations Manual Sections F1 and D14). 10 2. financing plan. to secure safeguards compliance (i. from: (i) ADB. TA = technical assistance. 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. This may be explained in the FFA. Staff Instructions for the Multitranche Financing Facility. and results b) DMF for each Tranche should focus on project level outcomes. The MFF modality also calls for (i) continuity of ADB staff and significant reallocation of ADB resources from processing to implementation. (ii) appropriate management information systems and good management and application of such information. Manila. 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. the Board was generally supportive of the MFF modality. If not. Manila. may also be at later stages DMF = design and monitoring framework. legal. (iv) ADB. inputs. safeguards. PFR reports submitted for President’s approval should specify which expenditures are to be financed from ADB sources. should be included in the facility administration manual (FAM). FFA = framework financing agreement. 2010. (Note: similarly. and (iii) risks to implementation and accountability. safeguards framework. Simultaneously. At the end of the pilot phase. economic.. the Board expressed concerns that related mostly to (i) the strategic context of the MFF. 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. MFF size should be justified within the context of: a) client’s financing needs and readiness of the investments b) technical. and other matters. broad investment program. 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. Operations Manual. (iii) ADB. 2011.e. . loan amounts. and on the basis of experience gathered during the pilot phase. warranties and representations. 2006. Section D14. etc. Manila. (ii) ADB. EA = executing agency. and the application of ADB policies and procedures. (ii) clarity and consistency on the criteria for the MFF and its application—which refers to the quality of road maps and policy frameworks. Source: Compiled by the Independent Evaluation Department. Staff Instructions for Multitranche Financing Facility. outcomes.Overview of the Multitranche Financing Facility Modality 79 8 9 10 11 12 13 C. 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. Manila. 2008. Issues 13. The 10 Refer to footnote 2. 12. PPTA = project preparatory technical assistance. Operations Manual Section D14. and (iii) well equipped advisory and support teams for procurement.

and that substantial and material changes in the type of investments contemplated under the investment program/plan should require Board approval. 15 and (ii) improving project outcomes through all stages of the project cycle. this alone may not be sufficient. 23 tranches have potential problems [para. 14]. Good Project Implementation Practice. ADB. To this end. 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. identifying areas that ADB should further emphasize to ensure successful achievement of its mandate. 14. and security concerns. Development Effectiveness Review 2010 Report.80 Appendix 1 Board also wanted precise decision-making criteria. a tight alignment of the sector roadmap with the government strategy and the CPS would be required. the MFF design does not appear to work as intended. streamlining of business processes. Manila (December). finalized in July 2011 after discussions with the operations departments. 14 This finding has spurred management and the regional departments to adopt a number of initiatives. although the delivery of core sector development outcomes had been on the decline. Manila. 17 However. Improving Project Outcomes. ADB. and mainstreaming the use of sector roadmaps/results frameworks through the project cycle. and doability (addressing capacity challenges. as well as the government’s ownership and commitment. Manila (August). For details of action plans by various regional departments. and (ii) advisory services financed through previous tranches should also help address constraints in subsequent tranches. Manila. This would allow a closer look to identify the problems and causal factors that influence MFF performance. . start-up delays. 16 February (15 MFFs have potential problems and one is at risk [para. Multitranche Financing Facility Annual Report 2011. The Board also requested for better benchmarking of sector issues that the MFF and other ADB financial instruments target. and other risks). However. 2011. and its own oversight. contractors’ unresponsiveness. addressed these Board concerns. MFF and Development Effectiveness 16.13 C. Manila. reform delays. 2012. 16 17. In Board meetings held during 2010–2011. including the need to (i) strengthen the rationale for selecting the MFF modality. Note: This is an internal document. Staff Instructions for the Multitranche Financing Facility. 11 New Staff Instructions for the MFF. Note: This is an internal document. as well as provide a sound basis for a conceptual framework to assess risks and performance and increase accountability. 15]). and tranche projects are still affected by factors such as insufficient institutional capacities. 2011 (footnote 19). 2010. enhancing staff skills and organizational structuring matters. refer to Appendixes 1 through 6 of ADB. for release of new staff Instructions for the MFF modality. Salient among these are (i) stronger emphasis on project readiness. ADB. (ii) introduce quality assurance systems. 11 12 13 14 15 16 17 Covering memo dated 1 July 2011. and (iii) improve reporting. in certain sectors and country contexts. implementation challenges. Report of the Project Implementation Working Group. and improved project monitoring and performance reporting. ADB. the Board raised further issues. and its design. ADB. Serious assessments of fundamental elements would further be needed to ensure that the MFF will help ADB enhance sector development outputs and outcomes. better reporting arrangements. The operational performance of MFF tranches could be improved by adequate implementation of the action plans articulated by various regional departments. 2011. A 2010 development effectiveness review (DEfR) showed that ADB had remained by-and-large on track toward achieving its 2009–2012 output targets. 12 15. 2011.

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 completion of agreedupon conditions Two loans up front (one a Policy-based program policy-based program loan. and private entities DMCs.Table A1. adjustment costs. the loan: in tranches against other a project loan) completion of agreedupon conditions. and project costs DMCs Sector Loan Cost of subprojects In tranches. and private entities Guarantee Amounts guaranteed and DMCs. public sector proven as owed subsovereigns. 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 Overview of the Multitranche Financing Facility Modality B.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. against project cost In amounts requested. and private entities Guarantee Amounts guaranteed and DMCs. public sector nonsovereigns. Loans Project Loan (sovereign) In amounts requested. public sector nonsovereigns. and budget requirements Cost of reforms. 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 . adjustment costs or budget requirements. public sector proven as owed subsovereigns. public sector nonsovereigns Private sector. against agreed-upon conditions Nonsovereign Loan (without a sovereign guarantee) Policy-based Program Loan To finance a reform program One loan up front DMCs.

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

APPENDIX 2: EVALUATION ISSUES AND INFORMATION REQUIREMENTS Table A2. 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. policy framework. investment program. etc. sector roadmap.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. 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. indicating a weak sector strategy or roadmap? Does the flexibility accorded by the MFF allow for relaxation of standards for project design. 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. 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. the client.? 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 . and the dynamic among ADB. financing plan. due diligence.

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

MFF = multitranche financing facility. Source: Independent Evaluation Department. EIA = environmental impact assessment. FFA = framework financing agreement. PFRR = periodic financing request report. 5 above ADB = Asian Development Bank. RRP = report and recommendation of the President. SRC = staff review committee. 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.6 7. FAM = facility administration manual. a Assuming IED does not have access to documents uploaded on e-STAR.Evaluation Issues and Information Requirements 87 Normally available Normally not available Difficult to obtain Generally not obtainable 7. PAM = project administration manual. MRM = management review meeting. PFR = periodic financing request.7 8. EA = executing agency. . SST = second and subsequent tranches.

APPENDIX 3: MULTITRANCHE FINANCING FACILITY APPROVED BY SECTOR Table A3.1: 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 .

MFF = multitranche financing facility. GEO = Georgia. MON = Mongolia. PNG = Papua New Guinea. IND = India. Technical Assistance. Table A3.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 - . PRC = People’s Republic of China. KAZ = Kazakhstan. VIE = Viet Nam. AZE = Azerbaijan. and Equity Approvals.2: MFFs Approved by Sector (2005–2011) MFF Total OCR No.Multitranche Financing Facility Approved by Sector MFF No. BAN = Bangladesh. 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. Grant. PAK = Pakistan. Source: Asian Development Bank database on Loan. ARM = Armenia. UZB = Uzbekistan.

ADF = Asian Development Fund.000 1.938 27. OCR = ordinary capital resources. AFG = Afghanistan. PSM = public sector management.060 Grant Source 400 ADF 787 ADF. MFF = multitranche financing facility. Technical Assistance. a Refer to Table A3.1 for the approved MFF Investment Programs.188 Multisector 1. AITF = Afghanistan Infrastructure Trust Fund. PNG = Papua New Guinea. AITF .= not available. VIE = Viet Nam.167 1. GEO = Georgia.476 325 6. ARM = Armenia. VIE = Viet Nam.483 375 15.90 Appendix 3 MFF Total OCR ADF No. Grant. Source: Asian Development Bank database on Loan. AZE = Azerbaijan.246 W & WSS and Others 821 138 791 1. Source: Asian Development Bank database on Loan. IND = India.559 Finance 150 150 Transport 650 1. CWRD = Central and West Asia Department.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. DMC = developing member country.3: MFF Tranche Approved Amount per Sector for Years 2005–2011 – ($ Million) Country/ Region PRC India VIE PNG CWRD Others Total Total 800 6. ANR = agriculture and natural resources. PNG = Papua New Guinea.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 1.750 . .709 252 6. and Equity Approvals. and Equity Approvals.= not available.074 2.000 1. Table A3. PRC = People’s Republic of China. MFF = multitranche financing facility. MON = Mongolia.368 5. PRC = People’s Republic of China.561 1. UZB = Uzbekistan.000 55 GEO 500 250 250 64 IND 200 200 0 Total 31. W & WSS = water and water supply and sanitation. KAZ = Kazakhstan. 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 2.051 57 1. BAN = Bangladesh.210 390 195 3.359 200 1. PAK = Pakistan.787 ANR 217 498 50 765 PSM 130 130 Energy 150 2. Technical Assistance.

and Equity Approvals. PNG = Papua New Guinea.162 12. Table A3. Grant. Technical Assistance.596 4.226 332 780 2.213 W& WSS 1. Table A3.0 1.216 10. MFF = multitranche financing facility. CWRD = Central and West Asia Department. Source: Asian Development Bank database on Loan.516.803 Energy 605 732 1. CWRD = Central and West Asia Department.669 Multisector 1.758 1.0 2.0 175.5: 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 - .792 390 7.152 2.851 Transport 4.996 19. PRC = People’s Republic of China. ANR = agriculture and natural resources.Multitranche Financing Facility Approved by Sector 91 Table A3. PNG = Papua New Guinea. ANR = agriculture and natural resources. W & WSS = water and water supply and sanitation.626 5.555 5. PRC = People’s Republic of China.5 3.050 135 13 886 1. PSM = public sector management.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 .= not available.128 PSM 0 200 690 0.973. W & WSS = water and water supply and sanitation.955 2. Source: Asian Development Bank database on Loan.266 46 819 0 368 629 3.017 0. VIE = Viet Nam.0 0. CWRD = Central and West Asia Department. Grant.662 Urban 285 0 125 0 67 400 877.166 372 45 0 151 928 2.6: Non-MFF Approved Amount per Sector during 2005–2011 ($ Million) 2 Country/ Region PRC India VIE PNG CWRD Others Total Total 9.1 120.768 3. VIE = Viet Nam. MFF = multitranche financing facility. Technical Assistance.861 48. PSM = public sector management.5 Finance 0 1.049. PNG = Papua New Guinea. W & WSS = water and water supply and sanitation. VIE = Viet Nam.0 760 2. Source: Asian Development Bank database on Loan.698 7. Technical Assistance. and Equity Approvals.6 Others 0 150 561 45 315 1.223 ANR = agriculture and natural resources. PRC = People’s Republic of China. MFF = multitranche financing facility.834. Grant.= not available.9 6. and Equity Approvals. .261 ANR 1. PSM = public sector management.

PNG = Papua New Guinea. VIE = Viet Nam. PSM = public sector management. W & WSS = water and water supply and sanitation. CWRD = Central and West Asia Department.6 Others 0 150 43 23 63 48 49 ANR = agriculture and natural resources.92 Appendix 3 Table A3.8: 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. Table A3. and Equity Approvals. Grant. W & WSS = water and water supply and sanitation. Technical Assistance. CWRD = Central and West Asia Department.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. Source: Asian Development Bank database on Loan. VIE = Viet Nam. PNG = Papua New Guinea. MFF = multitranche financing facility. . PRC = People’s Republic of China. Source: Asian Development Bank database on Loan. Grant. and Equity Approvals. MFF = multitranche financing facility. PSM = public sector management. PRC = People’s Republic of China. Technical Assistance.

652 2.878 1.621 2.016 1.799 3.026 2.APPENDIX 4: TRANCHE IMPLEMENTATION PERIODS Table A4.280 1.836 4.285 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) 1.329 2.242 1.645 2.347 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 .915 1.098 1.570 1.588 2.486 1.775 2.652 4.026 1.904 3.823 1.116 1.443 1.828 1.373 1.221 2.200 1.132 1.220 2.539 1.934 1.006 1.166 1.049 1.206 1.671 2.287 3.976 2.208 3.836 2.036 2.939 3.208 648 1.090 3.614 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.269 2.

016 1.830 2.132 2.945 1.981 1.658 3.544 2.300 1.920 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) 1.988 1.610 2.061 1.477 1.578 1.210 1.036 1.94 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.665 2.487 2.373 1.441 757 913 2.426 3.519 2.827 2.113 2.374 2.795 1.651 2.660 3.202 3.078 2.291 1.092 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 .559 1.666 1.670 921 5.751 3.316 1.387 1.838 3.142 1.387 1.495 1.915 1.409 3.895 1.664 1.111 848 3.306 2.

728 353 1.643 1.091 2.208 2.390 2.461 2.682 1.177 1.008 1.557 2.728 1.111 1.836 2.017 3.355 2.470 3.373 1.883 1.043 3.390 1.307 2.645 2.754 2.868 1.384 1.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) 1.151 1.258 1.860 656 2.851 1.554 1.109 2.547 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 .172 2.355 2.201 1.187 2.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.473 3.093 2.652 3.187 3.152 1.052 3.153 3.508 1.041 1.836 1.389 2.085 2.596 2.093 2.263 2.

631 2.566 3. BAN = Bangladesh.324 1. WSS = water supply and sanitation.998 2.478 2.850 2.382 2. Technical Assistance. GEO = Georgia.436 1. KAZ = Kazakhstan. AZE = Azerbaijan.566 2. VIE = Viet Nam. UR = urban . ARM = Armenia.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.990 1.324 1. UZB = Uzbekistan.447 1. Impl = implementation. INO = Indonesia. PAK = Pakistan. PRC = People’s Republic of China. a Refer to Table A3.037 941 2. TC = transport and communications. Source: Asian Development Bank database on Loan. IND = India.940 844 2.676 1.910 1. and Equity Approvals.447 2.958 2.290 1.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. EN = Energy.879 1. MFF = multitranche financing facility. .324 1. ANR = agriculture and natural resources.302 1.990 1.201 2.272 2.440 1.416 3.447 2.272 2.96 Appendix 4 Tranche Implementation Period as % of MFF Utilization Period 59 100 108 100 50 69 70 53 MFF No.302 2.416 2.046 3. MON = Mongolia. PNG = Papua New Guinea. Grant.524 1.324 1.017 3.990 1.1 for the approved MFF Investment Programs.

the utilization period has been (or is being) extended. and at approval across tranches in the same MFF.Tranche Implementation Periods 1. or efficient household lighting in one tranche and power plant efficiency improvement in the next tranche).g. . 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).. 03. 97 1 2 For analytical purposes. The large variation in time-lag between actual approval of a grant or loan. given that scope changes have been affected for a large number of tranches. and the actual date of effectivity of the same grant or loan. water distribution pipelines. 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. 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. power transmission in one tranche and power distribution in another. 1 The extent to which attention has been paid to project readiness at approval across countries and sectors. 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 each tranche has dissimilar projects. these projects were reasonably well prepared by the time MFF63 was approved. given that in a significant number of MFFs nearing completion (MFF numbers 01. For instance: The extent of similarity of projects across tranches in the same MFF. 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. it is considered that if each tranche has projects in the same subsector (e. national highways). To what extent the projected end of the MFF utilization period can be considered reliable. Besides. power distribution. it has similar projects. 2 To what extent the projected tranche closing dates can be considered reliable. If the projects in different tranches of the same MFF cover different subsectors (for instance. 20).

609 109 1.5% 50.2% 28.6% 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.5% 35.2% --26.3% -39.6% 18.345 423 673 631 --812 910 -140 152 1.9% -29.0% 11.9% 138.9% 59.4% 26.8% Time Elapsed between 30% Disbursement and Effectivity (% of Tranche Duration) 38.644 -452 653 1.2% 13.8% 11.3% 16.566 998 121 959 773 1.1% 102.7% 26.1% 49.6% 17.464 956 1.5% .7% -12.4% 42.299 515 1.9% 9.4% 24.7% --39.086 124 940 390 573 703 921 197 Time Elapsed between 20% Disbursement and Effectivity (% of Tranche Duration) 31.2% 24.1% 21.1% 63.3% 48.9% -63.5% 8.8% 42.2% 30.9% 3.146 --609 793 1.9% 73.6% 42.3% 6.2: Time elapsed from Effectivity to 10%.0% 30.7% 50.5% 19.5% -52.654 317 318 847 233 289 460 1.3% 6.9% 14.1% --39.5% 11.0% 42.1% -45.0% 3.6% 42.3% 47.2% 39.9% 102.6% 35.1% 43.4% 45.98 Appendix 4 Table A4.1% 10.5% Time Elapsed between 20% Disbursement and Effectivity (days) 587 50 -439 -126 -1. 20% and 30% disbursements for selected MFFs and Tranches Loan No.212 313 1.2% 38.177 333 548 516 -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 -1.0% 53.7% 2.5% 20.380 112 579 277 1.1% 40.1% 12.6% 8.4% 60.4% 68.2% 40.3% -18.6% -76.4% 9.8% 28.4% -10.1% 19.4% 41.9% 34.8% 59.4% 29.1% 41.640 1.8% -4.4% 50.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 1.6% 103.6% 20.7% 10.1% 4.1% 26.003 25 118 720 118 686 138 232 532 547 45 Time Elapsed between 10% Disbursement and Effectivity (% of Tranche Duration) 21.

1% 5.4% 0. a As per information available from COSO.6% 48.9% -- 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) 30.6% 29.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) 25.0% -17. GEO = Georgia.5% 8.2% 16.2% -33.6% 42.8% 37.0% 63.5% 33.6% 7.7% 26.3% -25.7% -29.5% 36.4% 51.8% 27.6% 0.6% 63.0% 31.8% 32.2% -33.9% 13. UZB = Uzbekistan.3% 14.5% 46. time value dates for MFF loans not listed above.4% -15.3% 33.6% 9.3% 13.5% 27.5% 10.2% 39.3% 11.0% -15.4% 17.8% 45. PNG = Papua New Guinea.8% 9.1% 18.5% 35. 20% and 30% disbursement.2% 35.5% 12.1% 36.8% 15.6% 49.1% 26.7% -- Tranche Implementation Periods ARM = Armenia. PRC = People's Republic of China.6% ---26.2% 49. MFF = Multitranche Financing Facility.1 for the approved MFF Investment Programs. KAZ = Kazakhstan.8% 19.3% 39. AZE= Azerbaijan. VIE = Viet Nam.9% 22. 99 . are not available for when those loans first reached 10%. BAN = Bangladesh.Loan No.8% 3.8% 2.6% 24.6% 31.2% 31. IND = India.0% 11.6% 13.2% --0.9% -20. Source: Based on data provided by Central Operations Services Office.7% -23. INO = Indonesia. b Refer to Table A3.7% Time Elapsed between 30% Disbursement and Effectivity (% of Tranche Duration) 40.5% 42.1% 24. PAK = Pakistan.9% 30.7% 26.2% 31.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.3% 48.3% 14.2% --28.6% 12.9% 53.

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

The annual budget coefficient to implement a normal infrastructure project is 13 staff weeks. 101 . PFR = periodic financing request. and processing a normal infrastructure project (75 staff weeks). which will not be provided to prepare PFRs. Manila. d These numbers represent the aggregate budget coefficient for processing and implementing a PPTA (10 and 8 staff weeks. respectively). Source: ADB. the budget coefficients for PPTA processing and implementation have not been added to the numbers in this column.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. Processing and Implementation of Multitranche Financing Facilities MFF = multitranche financing facility. Each PFR is the functional equivalent of one normal infrastructure project. PPTA = project preparatory technical assistance. and to monitor and administer them. one MFF has about four PFRs. e On average.Table A5. b The numbers in this column are estimates of the actual number of staff weeks needed to process an MFF and its PFRs. the use of PPTAs to prepare subsequent PFRs is discouraged. Under MFFs. Policy Paper: Mainstreaming the Multitranche Financing Facility. c The budget coefficient for PPTAs is added here to reflect savings generated out of PPTAs. a The budget coefficient for staff time to process a normal infrastructure project is 75 staff weeks. 2008. Since the use of PPTAs to prepare subsequent PFRs is discouraged.

With a view to obtaining some information on the level of effort (LOE) in preparing and processing MFFs and tranches. 6. PFR = periodic financing request. where the MFF fact-finding and negotiations were concluded on 19 August 2011. for MFF47 for the transport sector in Kazakhstan. SRM = staff review meeting. the fact-finding mission is reported to have been finished in July 2006 and the MRM/SRM was in March 2007. and does not include any information on staff time actually spent or allocated for specific activities and sub-activities. 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. Online Survey Database 8. IED conducted an online survey on team leaders that had prepared and processed MFFs and tranches. However. MFF = multitranche financing facility. while FFA negotiations were concluded in June 2011. In yet another instance. Another example is MFF66 for the energy sector in Viet Nam. A cursory glance at the compiled data shows a large number of gaps (see Supplementary Appendix A). D.2). such as timeline for performing various tasks and achieving specific . A quick analysis also reveals the wide variations in the data. 5. a second MRM/SRM convened on the same day. and even the incidence of negative elapsed time between two milestones or other seemingly inexplicable sequences of events. The evaluation team also took this opportunity to compile other useful information through the survey. 7. negotiations completed a day earlier on 11 April 2011. The eOps database also includes corresponding activities for preparation and processing of stand-alone project loans. 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. while the RRP is reported to have been circulated to the Board on 7 September 2010. eOps only provides data on elapsed time. eOperations Database 4. RRP = report and recommendation of the President. For instance.102 Appendix 5 C. Table A5. The eOperations (eOps) database covers all sub-activities that go into preparing and processing of MFFs as well as individual 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. MFF fact-finding is reported to have been completed on 12 April 2011. while MRM/SRM was held a month later on 20 September 2011. MFF58. the elapsed time required between certain milestones. PPTA = project preparatory technical assistance. FFA = framework financing agreement. MRM = management review meeting. Source: Independent Evaluation Department.

11. A5.5. 13. For reasons mentioned above (para. The large variations in the data compiled from eOps and the online survey are evident from Tables A5. (ii) a change in team leader for each subsequent tranche of an MFF is the norm. it was hoped that it would improve the judgment of the concerned team leaders. However. the evaluation team could not be too precise in asking the questions either.Resources for Preparation. etc. whether or not there was a PPTA is left open.6 also reveals the large variations in elapsed time for preparation and processing of stand-alone projects. To a somewhat lesser degree.1 The online survey questionnaires are in Supplementary Appendix B. and skill sets available on a team. the same is also generally true also for elapsed time estimates for preparation and processing of tranches. and certain institutional development aspects (such as whether or not institutional capacity was assessed up front. While this by itself does not in any way ascertain that precise information/data will be provided. Regarding LOE for preparation of MFF plus Tranche1. where the respondents were expected to fill out the survey forms from memory.4. it could have been the start of a PPTA factfinding mission. Similarly. 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). 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. and A5.e.) would not be available through these surveys. regarding the elapsed time for preparation of MFF plus Tranche1 (i. 10. Compared with the data from eOps. the starting point of the elapsed time is not specified. and Implementation of Multitranche Financing Facilities milestones.8). a PMO set up. capacity development support identified up front. team composition. the survey shows a shorter elapsed time for preparation and processing of MFFs plus Tranche 1 in nearly all cases. Owing to that reason alone. 11).. up to the finalized PPTA report). Findings of Elapsed Time and Level of Effort 12. the approval of the PPTA concept note. and relied on an approach of asking respondents to provide qualitative comments in addition to quantitative data.3. in spite of the rather small sample size. 14. . 9. rather than the exception. 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.). regarding elapsed time for processing of MFF plus Tranche 1. Table A5. level of effort. sector strategy and policy. 1 The survey also included questions on ownership. Processing. For instance. 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. while others may not have. or some other. 103 E. Likewise. The evaluation team recognized up front that precise information on any aspect (elapsed time. the level of effort data also reveal vast ranges of one order of magnitude or more (see Tables A5.7 and A5. It appears that some may have included the person-days of consultants in arriving at these estimates. etc.

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) . UR = urban. 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. Source: Independent Evaluation Department. MFF = multitranche financing facility.4: Elapsed Time for Processing of MFF along with Tranche 1 Elapsed Time.104 Appendix 5 Table A5. a From eOps. TC = transport and communications. b From eOps.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. 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. IND = India. PPTA = project preparatory technical assistance. c From online survey. and (ii) 17 MFFs for elapsed time between fact-finding and submission of final report. EN = energy. The online survey of team leaders that prepared and processed MFFs yielded 23 responses with elapsed time-related data. Table A5.

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. TC = transport and communications. from end of Fact-Finding to RRP Approval (days)a 71 290 1117 114 374 Elapsed Time. and Implementation of Multitranche Financing Facilities Elapsed Time. VIE = Viet Nam. IND = India. EN = energy. Processing. EN = energy. (ii) 81 for elapsed time between concept paper approval and PFRR approval. UR = urban. Note: Data drawn from the following number of tranches from eOps: (i) 54 for elapsed time between end of fact-finding and PFRR approval.Resources for Preparation. The online survey of team leaders that processed tranche loans yielded 31 responses with data on elapsed time-related queries. . (ii) 59 MFFs for elapsed time between concept approval and RRP approval. a From eOps. Source: Independent Evaluation Department. a From eOps. and (iii) 39 for elapsed time between PFR receipt and PFRR approval. 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. RRP = report and recommendation of the President. PAK = Pakistan. Note: Data drawn from the following number of MFFs from eOps (i) 61 MFFs for elapsed time between fact-finding and RRP approval. UR = urban. PFR = periodic financing request. Source: Independent Evaluation Department. PFRR = periodic financing request report. The online survey of team leaders that prepared and processed MFFs yielded 25 responses with elapsed time-related data. TC = transport and communications. b From online survey. IND = India. Table A5. b From online survey.

p-d = person-day. MS = mainstreaming. .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. PRC = People’s Republic of China. PPTA = project preparatory technical assistance. Note: Data drawn from 26 transport and energy sector stand-alone loans in selected countries where MFFs have also been approved. 26 responses received contained relevant data. PAK = Pakistan. Table A5. MFF = multitranche financing facility.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. Note: Data drawn from survey of MFF team leaders. that included 7 MFFs in the pilot stage. VIE = Viet Nam. TC = transport and communications. RRP = report and recommendation of the President. and 19 thereafter. Source: Independent Evaluation Department. Source: Compiled by the Independent Evaluation Department from survey responses. Post-MS = post mainstreaming.106 Appendix 5 Table A5.

Source: Compiled by the Independent Evaluation Department from survey responses. IND = India.Resources for Preparation. . EN = energy. p-d = person-day. UR = urban. and Implementation of Multitranche Financing Facilities Table A5. MFF= multitranche financing facility. Processing.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. TC = transport and communications. Note: Sample size in parentheses.

other sources of financing include sub–borrowers." In the RRP." In the RRP (main text). Other sources of financing include local market and foreign borrowing. "if the Government requests. In the DMF. "Other Funding Agencies" and "Private Sector" were identified. In the RRP. cofinancing is being sought for SSTs." In the RRP (main text).. i. cofinancing under Carbon Market Initiative is a possibility.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. but there was no further clarification on who they might be." In the RRP (main text). In the DMF." In the DMF. other sources of financing identified include "Other Financiers". The latter include bilateral and multilateral contributions and funds that will be raised from international capital markets. other sources of financing for the Investment Program include "other financial institutions.. In the RRP. In the 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 . cofinancing was referred to as a possibility. cofinancing for SSTs was "actively being sought. "private institutions" were identified as another financing source. In the DMF: "Other external financiers" for the Investment Program was identified as another financing source.APPENDIX 6: COFINANCING Table A6: References to Cofinancing in RRPs and FFAs of Approved MFFs MFF No. in the DMF. "other agencies" were identified as one of the financing sources. domestic banks were identified as one of the financing sources. i. In the DMF. In the RRP (main text). "Other International Financial Institutions or Bilateral Financial Institutions" was identified as another financing source for the Investment Program. in the DMF. but there was no further clarification on what these agencies might be. cofinancing was referred to as a possibility—"may be mobilized in the future" "Others" was identified as one of the financing sources. other sources of financing include the private sector and other financial institutions In the DMF and FFA. "Others. cofinancing was referred to as a possibility. "India may request. cofinancing for energy efficiency and alternative energy projects was deemed possible under the Kyoto Protocol.e.e. In the RRP.

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

ADB. Report and Recommendation of the President. In some cases. 2. In joint cofinancing. The guarantee facility is not mentioned in the RRP. Proposed Multitranche Financing Facility.2 The need for cofinancing is not a consequence of the ADB-supported MFF. Orissa Integrated Irrigated Agriculture and Water Management Investment Program (India). 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. Proposed Multitranche Financing Facility. respectively). 6 and (iv) at the appraisal stage. 28 August (approved 18 September 2008. but included during implementation phase as Tranche 2. 3 4 5 6 7 In parallel cofinancing in this case. Power Transmission Enhancement Investment Program (Pakistan). Report and Recommendation of the President. Manila. 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. Power Distribution Enhancement Investment Program (Pakistan). It is noted that in some cases. Manila. another development partner can cofinance another portion of the sector roadmap in parallel. 1 2 Cofinanciers follow their own procedures to finance different goods or activities that are integral to the sector roadmap. Report and Recommendation of the President. ADB. it is most likely to be influenced by the policy framework. Manila. ADB. Proposed Multitranche Financing Facility.110 Appendix 6 1. Proposed Multitranche Financing Facility. Manila. . which includes pricing policies. 13 August (approved 3 September 2008. Therefore. 2006. that may be so because of longterm ADB support. Greater Mekong Subregion Ben Luc-Long Thanh Expressway Project (Viet Nam). 23 November (approved 17 December 2010. Such cofinancing administered by ADB may be parallel or joint. and other aspects—which is unlikely to have been duly influenced by the MFF investment program. 21 November (approved 12 December 2006. Report and Recommendation of the President. institutional structures. 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. 10 November. 3. 2010. As a MFF investment program is often a part of a sector roadmap or strategy. 1 Whether or not an ADB-supported MFF investment program has in fact contributed to such cofinancing is difficult to ascertain. Report and Recommendation of the President. but that should some cofinancier come forward. 2010. MFF53). Report and Recommendation of the President. 2008. 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. Proposed Multitranche Financing Facility. the cofinanciers follow their own procedures to finance different goods or activities that are integral to the MFF investment program. parallel cofinancing from a potential cofinancier was expected in the second tranche. 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. and ADB. Manila. 23 November (approved 14 December 2010. Ho Chi Minh City Urban Mass Rapid Transit Line 2 Investment Program (Viet Nam). ADB and other cofinanciers cofinance expenditures related to a common list of goods and activities in agreed-upon portions. for instance in the power transmission and distribution system investment programs in Pakistan (MFF07 and MFF21. a development partner or another financier may choose to complement ADB’s financing (after Board approval of the MFF) through cofinancing administered by ADB. 4 (ii) at the MFF approval stage for an expressway in Viet Nam. Manila. MFF52). 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). MFF21). To the extent that commercial cofinanciers (commercial banks) participate. the prospect of parallel cofinancing is simply highlighted in the MFF documents. Proposed Multitranche Financing Facility. 2006. MFF07).7 In this case. ADB. ADB. MFF22). the project sponsors and their commercial lenders are encouraged to pursue debt financing from export credit agencies and other bilateral or multilateral sources. it was known that ADB would cancel the relevant portion of the ADB loan if cofinancing from OFID were to become available.

guarantees. grants. Technical Assistance. wherein even a small delay in the signing/effectivity of successive tranches can lead to some commitment fee savings. 2. Water Supply and Sanitation. 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. Mongolia. Grant. It is difficult to establish such a long-term partnership if clients’ financial liabilities increase. Papua New Guinea. PRC = People’s Republic of China. But given that commitment fees begin accruing only on loan signing/effectivity in both cases. especially in infrastructure and utilities. Other than those listed. The Board paper 1 noted that many ADB clients require long-term and large investments. A programmatic approach can possibly mitigate these problems but requires a partnership framework to be in place. 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. or (ii) the MFF financing envelope is comparable to a stand-alone project. 4.APPENDIX 7: COMMITMENT FEE SAVINGS A. Kazakhstan. However. Transport.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. simply because they have entered into long-term partnership arrangements. this leads to sizeable commitment fees for the client and tighter lending headroom for ADB. and for countries and sectors where ADB has approved MFFs. equity.1 that the average MFF financing envelope in all countries has exceeded the average stand-alone project approval amounts substantially. Bangladesh. It is noted from Table A7. Either of these conditions holds only for a few MFFs. and that individual tranche loan/grant approval amounts are comparable to stand-alone project amounts. . By agreeing (through the framework financing agreement) to provide financing only when needed. Azerbaijan. Includes the following sectors: Agriculture and Natural Resources. commitment fee savings are likely to reflect improvements in disbursal rates. Public Sector Management. this is just a matter of conjecture. However. Definition of Counterfactual Scenario 1. includes the following countries where ADB has approved MFFs: Afghanistan. and Uzbekistan. such an MFF facility cannot lead to commitment fee savings. the MFF modality helps ADB to address this problem. Finance. 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). In most cases. Indonesia. such ADB financing products generate a balance sheet commitment for clients. and technical assistance) are indeed relevant. Source: Asian Development Bank database on Loan. at this time. Multisector. and where commitment fee savings come from phasing of the approval/effectivity of a stand-alone loan through tranches. Georgia. and Equity Approvals. Armenia. 3. Energy. and Urban. Table A7. And ADB’s traditional financing instruments (loans. Note: All data are for the period 2005–2011. and if the approved amount is large.

while in the alternative mode. it becomes possible to arrive at a reasonable estimate of commitment fee savings even if data on actual disbursements. except that the design phase gets extended.. the MFF comprises two tranches. which are smaller than the average size of stand-alone projects in those countries. 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. Scenario 2 is similar to Scenario 1. and (ii) MFF20 and MFF38. when a flat commitment fee rate began to be applied. the MFF comprises four tranches to finance four similar projects. i.3 entail some simplifying assumptions. 2 and (ii) all required data are available. are not available. 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).3 shows the commitment fee savings for selected MFFs where (i) more than one tranche loan has been approved under the MFF investment program. 6. Table A7.112 Appendix 7 B. 2 As ADF grants do not come with any commitment fees. In Scenario 3.2. Table A7. disbursal amounts vs elapsed time profile will not vary with the loan signing date). With such assumptions. Commitment Fee Savings Estimates 5. the commitment fee savings are negligible.2 shows that in all scenarios. the loan disbursal pattern will remain the same (i. all commitment fee savings estimates are for tranche loans.e. For sake of simplicity. In Scenario 1. Commitment fee savings estimates presented in Table A7.e. . particularly the tranche loan approval amounts and tranche loan signing dates for all tranches that have been approved thus far. Although this threshold for project readiness may vary vastly across executing agencies in different sectors and countries. and actual or scheduled disbursement dates. one for detailed project design and the other for project construction. the commitment fee savings are estimated for MFFs under which all tranche loans were negotiated after January 2007. the underlying assumptions effectively are that (i) during the time the MFF is being implemented. in the alternative stand-alone mode.. any particular executing agency continues to function essentially in the same way. the most important being that (i) the alternative scenario remains a large stand-alone loan. the four are financed through one loan. Commitment fee savings are estimated for three hypothetical scenarios in Table A7. 7. these are financed through a single loan. which supports one large project. Computations are shown for three MFFs that include (i) MFF13. This effectively means that any executing agency would prefer to sign a loan agreement only when a certain level of project readiness is achieved.

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

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

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

and Equity Approvals.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 0.45 MFF No. SST = second and subsequent tranches. T2 = second tranche.14 IND = India. .a Energy 13 13 20 20 20 38 38 38 VIE VIE PRC PRC PRC IND IND IND 0.25 0. MFF = multitranche financing facility.18 0.1 for the approved MFF investment programs. Grant. a Refer to Table A3.25 0. VIE = Viet Nam.116 Appendix 7 Table A7.3: Commitment Fee Savings Estimates for Selected Energy MFFs MFF Tranche Country Loan/ Grant No. Source: Asian Development Bank database on Loans. 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. T1 = first tranche. T3 = third tranche. PRC = People’s Republic of China. RRP = report and recommendation of the President. Technical Assistance.

Tranche 1: 18 Dec ‘06. and relies mostly on imported coal for power generation. Consistency with ADB strategic priorities The energy sector has been a priority area of ADB since it started operations in the PRC in 1986. Tranche 2: 28 Jan ‘08) 1. The sixth cascade hydropower plant in the scheme. The Gansu Provincial Government (GaPG) thus wanted to accelerate hydropower development. and water sector strategies in the PRC.2 million. . From 2000 to 2005. the two selected MFF hydropower projects are an integral part of Gansu Province’s least-cost generation expansion plan.000 MW and was rising rapidly. one more hydropower project had been commissioned. was supported by ADB under the Gansu Clean Energy Development Project (Loan 2032-PRC). in particular deterioration in air quality. Gansu had a population of about 26. 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. Development context In 2005. PRC: Gansu Heihe Rural Hydropower Development Program (MFF08) Approval dates (MFF: 13 Dec ‘06. 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). The roadmap GaPG developed the Heihe River Cascade Hydropower Development Scheme in Zhangye City. 2. environmental. Given its vast renewable energy resource base. and promoting integrated water resource management have been part of ADB’s energy. Along with the entire scheme of cascading hydropower projects. Gansu Province. and in addition to XHP. On the other hand. ensuring sustainable use of natural resources.5 MW. only 23% of Gansu’s hydropower potential of about 17. At approval (and since then) developing clean energy resources. From 2003 to 2005. Gansu was identified by the PRC Government as one of the key provinces to promote renewable energy development in the 11 th FYP period. The Zhangye City Government (ZCG) also included these projects in its investment program for the 11th FYP period. the 102 MW Xiaogushan Hydropower Project (XHP).000 MW had been exploited. had adverse environmental consequences. Coal-fired power capacity in 2005 exceeded 6. which is a large infrastructure project with seven discrete run-of-the-river medium-sized hydropower projects with a combined capacity of 645. By the end of 2005. Gansu has limited fossil fuel resources. This.APPENDIX 8: STRATEGIC CONTEXT OF MULTITRANCHE FINANCING FACILITIES A. 4. with 79% classified as rural. two of the seven hydropower projects were under construction. however. GaPG set priorities and made plans to promote hydropower development to meet growing electricity demand in an environmentally sustainable manner. Gansu experienced demand growth of more than 13% per year. which was met with an increase in quick gestation coal-fired power plants. Gansu’s GDP growth was about 10% per annum in real terms. 3. Introduction of new initiatives to increase support to DMCs for low-carbon technologies and energy efficiency projects in Strategy 2020.

6. building retrofits. Development context Continued and increasing power and energy supply side shortages. Energy efficiency investments represent the least-cost and quickest low-carbon solution to bridge the energy gap. Mainstreaming of energy efficiency is a critical component of the government’s climate change program. and pricing regimes are right (RRP. and (ii) scale up deployment of proven technologies through public investments and fostering private investments. Consistency with ADB strategic priorities New energy efficiency interventions increase support for low-carbon technologies. page iii. respectively. A general recognition at appraisal that energy efficiency investments can be most effective when the policy. B. The government recognizes that an integrated institutional and resource allocation structure is required to implement this policy framework.118 Appendix 8 In terms of project readiness. and (ii) compact fluorescent lamp diffusion. 8. the Erlongshan and Dagushan hydropower projects (nos. 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. 7. PAK: Energy Efficiency Investment Program (MFF31) Approval dates (MFF: 17 Sep ‘09. under the scheme) were next in line to be constructed and were to be supported through the (then) proposed MFF. Philippines). The government has a policy framework that focuses on maximizing energy savings by rational and efficiency use in all energy-consuming sectors. the government agreed to a set of commitments aimed to (i) establish a dynamic business environment for sustained transformation of the energy efficiency market. Consistency with government plans and priorities Energy security is the primary goal under Pakistan’s energy strategy.16 million tons of oil equivalent) was 18% of primary energy use in 2008. regulatory. ADB’s country partnership strategy for Pakistan has energy efficiency as a core intervention area. in line with Strategy 2020. industrial energy efficiency financing. . A large number of initiatives were identified that included (i) thermal power plant rehabilitation. . . first sentence). The roadmap included measures to increase energy efficiency on both the supply and demand sides. 4 and 5. plus transmission and distribution upgrades on the supply side. As per the roadmap. Tranche 1: 22 Sep ’09) 5. Energy security and affordability are priorities under the government's energy sector strategy and policies. the energy efficiency initiative in Pakistan was to begin in August 2009 and to progress rapidly. At appraisal. High energy intensity compared with countries at a similar stage of development (India. and gas and electric appliance replacements. Pakistan’s energy savings potential (estimated at appraisal at about 11.

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

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

immigration patterns. the RRP acknowledges that the capacity of water resources organizations and stakeholders in the CRB is low.Strategic Context of Multitranche Financing Facilities alone as is stated in the RRP. but it is still being debated and negotiated between ADB and the government. Although the RRP claimed that a sector roadmap was in place. UZB: Water Supply and Sanitation Services Investment Program (MFF36) 15.. 121 D. nor optimization of allocation and consequences for social and economic factors. 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. As per the RRP. 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). The intended objective of this stand-alone grant was to help the government strengthen sector planning and management by developing (i) a sector strategy. 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. the sector roadmap should have been approved and ready at the time of MFF processing. and (iii) an investment program. which should help define the roadmap. net and gross withdrawal amounts. 13. 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. usage or allocation of water by sectors over time. 16.5 million). it had not been finalized and accepted by the government. There appear to be no quantitative links between the sector assessment and the MFF interventions. . but as of October 2012. basin mapping for modeling purpose with nodes. such an optimization analysis was planned to be attempted in 2012. The grant served as a “PPTA” for the whole MFF. population growth. There are also no economic data. Moreover. However. A formal water sector optimization analysis is needed. there appears to be no detailed analysis required to define sufficiently the MFF projects as outlined in the financing plan and implementation schedule. etc. There is also no institutional study and capacity assessment for implementation of the investment plan. In other words. no water resources study. There is no detailed quantitative basin planning. the government wanted to provide water supply and sanitation (WSS) services as a means of raising public health and hygiene standards. trends in industry and different sectors. After MFF approval in September 2009. exposure of the hydrologic problems quantitatively explained with rainfall/runoff. there was no detailed sector roadmap as described in the relevant Operations Manual Section (D14). hydrology. and to achieve poverty reduction. and capacity development plans are included in the MFF. (ii) a road map. so that optimization modeling can take place under different climatic probability scenarios. Therefore. transfers. a properly detailed sector roadmap was prepared. more than 3 years after MFF approval. 14. 1 Ideally.

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

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

(v) reporting. Establishment of revolving fund. 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. planning policy refinements. The (i) component will assist the maintenance of the newly constructed 220 kV NEPS. billing. as specified in the RRP. 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. procedures. The contract will include an option for a 2-year extension in case the required capacity is not obtained in the initial contract period. Scope of Nonphysical Investments (NPIs) 8. introduction or upgrading of the billing system. and investment program development. a metering program. and implementing efficiencies in the collection system. 9. The consulting services also include identification and procurement of the required tools and spare parts for the maintenance of the 220 kV NEPS. and transparency. (v) Distribution planning system. and collection of tariffs. An MIS will be (ii) established in the PMO to improve efficiency. (ii) legal services (contracts and bidding processes). Project management. The intention is to work on broad institutional matters while addressing day-to-day operational and project execution. controls. audits. Nonphysical outputs of the Investment Program include (i) better system operation and maintenance. A program management office (PMO) was established to undertake (i) technical work (design and supervision). analysis. records. This project will assist the utility (i) primarily with capacity development for its MIS. Consultants will be recruited to support the PMO. 11.124 Appendix 9 2. 10. accuracy. 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. . evaluations. including emergency restoration systems. Preparation of future tranches. Consultants will be recruited to develop sufficient managerial and organizational capacity of the electric utility through provision of necessary training. and (vi) technical assistance to train staff on project management. funding. Project management and due diligence—consulting services. The PMO has due diligence experts to prepare the next generation of priority investments. In addition to the software provision and a demonstrative pilot system planning of one of the districts. Tranche 1 North East Power System (NEPs) 220 kV system operation and maintenance. and advisory services to its management and technical staff. A revolving pool of funds will be created for capturing (iv) MFF onlending repayment for use in the energy sector. (iii) safeguard management and gender mainstreaming. and (ii) enhanced planning and project management. and cash management). The PMO will have a special team to prepare due (iii) diligence work in support of projects evaluated for subsequent tranches. The PMO will also have a communication function. (iv) finance and administration (to tighten up on systems. Tranche 2 Electric utility’s institutional capacity development. including the introduction of a management information system (MIS) and better metering. and results measurement. The project will support (ii) the PMO in conducting a feasibility study on hydropower and irrigation schemes in the Lower Kokcha River. (iii) Electric utility’s management.

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

and business regulation. Clean Development Mechanism (CDM) consultant is to be engaged by the executing agency for registration of projects for Certified Emission Reduction (CER). safeguards. rule-based governance. social protection. and incentives to facilitate private sector investment. and effective use of concessional assistance. monitoring. The government will finance the balance. and environmental sustainability). Capacity development. operational. and project implementation matters. and implementation agency levels. monitoring. (iii) Capacity development in Punjab will be cancelled due to the executing agency’s inaction. accounting and auditing. targeting efficient project evaluation. 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. equity of public resource use. better planning. provincial. anticorruption. transparency. financial management systems and practices. commercial. Table A9 shows the scores for (i) policy and institutional rating. federal level.126 Appendix 9 19.000. policy. accountability. labor. and (iv) establishment of systems and procedures. management. finance. D. financial management. ADB conducts country performance assessments for all DMCs with access to the ADF. Related/parallel technical assistance. This will support establishment of new evaluation. 24. staff coaching and training. and corruption). . legal.000 on a grant basis. governance. 20. (ii) SHYDO building construction is completed. no commitment has been made to date. capacity development consultant engagement is almost complete. planning. The TA fits over and above the capacity development component accompanying the MFF. The program will also work on institutional strengthening. knowledge management (regarding sector development issues and project best practice worldwide). and reporting at the investment and implementing agency level. (iii) expert support and training of staff in relation to best practice project preparation work —in essence covering due diligence on technical. quality of public administration. and financial reporting. and monitoring at the top level with project preparation. and (ii) governance of public sector enterprises. assistance (TA) package to support AEDB to cater for work on policy formulation. this compilation may not be suitable for the purpose of understanding institutional capacity strength from the viewpoint of suitability for administering the MFF. Capacity development. It will also define and execute a program to help improve strategy and policy formulation and planning. sustainable growth. monitoring and reporting. backed by training and computer software and hardware to set up modern management and financial information systems. evaluation. procurement. procurement of durable goods is ongoing (contracts awarded). fiduciary oversight. fiduciary oversight. (i) No progress has been made to date in capacity development at the 22. and program oversight or management. Institutional Capacity Assessment 23. The government requested ADB to provide a technical 21. The total cost is estimated at $980. (iii) degree to which its policies and institutions promote equity and inclusion (covering gender equality. (ii) coherence of its structural policies on trade. The capacity component combines “big picture” strategies. building human resources. 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. Capacity development will cover (i) planning and formulation of policy. Given that the basic purpose of compiling this information is to understand the DMC’s policy and institutional framework for promoting poverty reduction. including regulatory and legal framework. The executing agency for the TA will be AEDB. ADB will finance $800. (ii) development of adequate management and financial systems. financial. revenue mobilization efficiency. and reporting systems at the federal. and (iv) quality of governance and public sector management (covering property rights.

(v) rule of law.2 4.8 3.4 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.0 3.3 3. Annual Report on the 2011 Country Performance Assessment Exercise.4 Governance of Public Sector Enterprises 2.7 4. and policies for social inclusion and equity.5 3. Therefore.8 4.4 4. (iii) government effectiveness.8 Policy and Institutional Ratinga 2.5 4.8 4. 2012. (iv) regulatory quality.1 4.3 127 Country Afghanistan Armenia Bangladesh Georgia Mongolia Pakistan Papua New Guinea Uzbekistan Viet Nam a Averaged over scores for economic management.9 4.9 4.6 3.5 4.5 4. Manila.7 4.0 4.9 3.3 Structural Policies 2. the World Bank Institute compiles Worldwide Governance Indicators that cover all 14 countries where ADB has supported MFF investment programs.5 4.0 3.9 3.8 4.9 3. and (vi) control of corruption. .0 4.2 4.4 3. Table A9: Institutional Capacity Ratings of Selected ADF Eligible Countries Economic Management 3. Source: ADB. These are composite indicators that rely on data from more than 100 databases on the following broad themes: (i) voice and accountability.8 4.Policy Dialogue and Capacity Development (Selected Case Studies) 25.5 4.3 4.3 5.0 4.6 3.6 3. (ii) political stability and absence of violence.5 4. structural policies.1 4. For instance.7 3.2 3. it would be useful to consider developing suitable indicators from a range of available databases.2 Policies for Social Inclusion and Equity 2.6 3.

6% 3.8% 1.6% 0.4% 0.8% 2.1% 5.2% 0.5% 0.6% 11.0% Country PRC India Viet Nam Papua New Guinea Pakistan Other MFF countries Afghanistan Armenia Azerbaijan Georgia Kazakhstan Uzbekistan Bangladesh Indonesia Mongolia 1.1% 1.2% 2004 0.5% 0.5% 0. and Equity Approvals Database.3% 0.1% 0.5% 4.APPENDIX 10: TRENDS OF TECHNICAL ASSISTANCE AND PROGRAM LENDING SUPPORT Table A10.5% 2006 0.6% 0.3% 4.4% 0.8% 0.2% 0.8% 1.3% 0.7% 0.3% 0.8% 3. Source: Loan.4% 0.4% MFF = multitranche financing facility.5% 7. and Equity Approvals Database.7% 3.6% 1.9% 2.9% 0.9% 0.7% 0.0% 0.4% 1.0% 28.1% 3.0% 1.0% 0.8% 7.4% 2.4% 0.6% 0.2% 0.5% 0.3% 3.4% 0.8% 0.7% 5.2% 1.6% 2009 1.6% 0.2% 0.7% 0.5% 0.4% 0.3% Country PRC India Viet Nam Papua New Guinea Pakistan Other MFF countries Afghanistan Armenia Azerbaijan Georgia Kazakhstan Uzbekistan Bangladesh Indonesia Mongolia 5.2% 5.8% 0. Grants.0% 0.2% 0.8% 1.6% 1.1% 1.1% 6.0% 2011 0.3% 0.2% 1. .5% 0.8% 0.0% 1.8% 0.4% 0.0% 0.1: Ratio of All TA Support to Loan and Grant Approvals 2000 1.4% 0.8% 2004 1.5% 4.5% 2.5% 2007 1.5% 9.0% 0.4% 0. PRC = People’s Republic of China.3% 0.0% 0.1% 6.2% 1.6% 0.1% 5.2% 0.4% 1.5% 0.0% 3.1% 0.0% 2.1% 0.4% 1.8% 0.5% 0.8% 2.8% 1.4% 0.6% 1.8% 1.1% 2007 0.6% 3.7% 8.2% 10.1% 0.7% 0.2% 3.0% 0.4% 2001 1.3% 1.2% 1.3% 1.5% 3.0% 1.0% 1.1% 0.5% 2.1% 0.5% 2.9% 15.3% 1.4% 1.6% 0.1% 0.1% 3.4% 2011 1.4% 0.3% 0.2% 1.8% 1.2% 5.4% 2.0% 4.0% 1.0% 0.3% 7.6% 4.3% 0.2% 2010 0.8% 3.7% 0.5% 0.4% 1.2% 0.1% 1.7% 0.9% 8.0% 28.9% 1.7% 1.3% 6.9% 7.2% 1.3% 0.2% 2.6% 2.1% 1.7% 2.3% 2008 1.7% 2.5% 3.5% 5.6% 0.1% 1.2% 0.6% 1.9% 0.6% 1.1% 5.3% 0.2% 2.5% 0.5% 1.7% 7.5% 1.7% 1.4% 0.1% 0.1% 1.8% 2005 1.2% 0.7% 0.1% 0.1% 0.7% 0.3% 2009 0. PRC = People’s Republic of China.8% 4.5% 0.5% 0.3% 2003 0.0% 0.9% 3.8% 1.4% 2005 0.3% 0.7% 0.3% 0.4% 1.0% 1.8% 0.3% 0.0% 1.4% 0.3% 0.3% 1.3% 2010 1.7% 13.0% 0.8% 44.0% 2.2% 1.4% 2.7% 0. Table A10. Source: Loan.7% 0.6% 0.6% 6.4% 1.2% 0.8% 0.6% 1.5% 26.5% 3.0% 2008 0.5% 0.5% 0.0% 1.5% 3.2% 0.5% 0.0% 0.5% 0.7% 3.7% 1.2% MFF = multitranche financing facility.6% 3.2% 0.0% 1. TA = technical assistance.7% 2003 0.9% 2.9% 2.2% 2.1% 2.7% 2. Technical Assistance.0% 2006 0.7% 0.0% 1.6% 1.8% 0.0% 0.5% 0.3% 0.4% 10.9% 1.6% 0.7% 8.7% 0.7% 1.2: Ratio of PPTA Support to Loan and Grant Approvals 2000 0.3% 0.6% 2.4% 0.3% 0.0% 1.7% 5.0% 0.2% 0.6% Total 2.3% 3.7% 1.8% 1.3% 0. PPTA = project preparatory technical assistance.6% 0.5% Total 1.2% 0.1% 5.4% 1.2% 0.5% 1.1% 1.1% 3.9% 1.0% 1.7% 2002 1.0% 0. Technical Assistance. Grants.5% 0.0% 8.6% 1.6% 3.9% 5.0% 2001 0.3% 0.0% 0.1% 2002 0.0% 0.1% 0.

4% 0.0% 1.0% 1.0% 1.5% Total 0.7% 1.5% 1.0% 0.0% 0.3% 0.4% 0.1% 0.9% 4.0% 0.3% 0. Ltd.9% 0.1% 2006 0.8% 2004 1.5% 2.9% 0.6% 1. PRC = People’s Republic of China. 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 .9% 0.7% 1.3% Country PRC India Viet Nam Papua New Guinea Pakistan Other MFF countries o Afghanistan Armenia Azerbaijan Georgia Kazakhstan Uzbekistan Bangladesh Indonesia Mongolia 4.4% 5.1% 0.1% 0.3% 2.1% 2011 1.0% 0.2% 2008 0.6% 10.1% 0.8% 3.3% 0.3% 2.9% 2.4% 0.7% 2. 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.3% 0.3% 2007 0.3% 4.4% 0.6% 6.9% 9.2% 1.3% 0.7% 2.4% 2005 0. 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% 2001 0.4% 1.6% 3.5% 5.3: Ratio of ADTA Support to Loan and Grant Approvals 2000 1.2% 1.1% 0.7% 7.4% 0.3% 18.0% 4.1% 0.6% 1.7% 1.4: 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.9% 0.0% 1.5% 0.5% 0.7% 0.6% 3.2% 0.1% 4.7% 0.6% 0.5% 2. Grants.6% 0.2% 1.3% 1.1% 2010 1.8% 0.6% 1.9% 2.8% 1.6% 0.5% 0.1% 5.8% 1.5% 0.9% 3.3% 2009 0.9% 0.5% 2002 1.3% 0.6% 0.4% 4.1% 5.3% 4.1% 0. MFF = multitranche financing facility.1% 0.9% 1.Table A10.9% 0.3% 2.0% 0.0% 1.3% 1. Source: Loan.0% 8.2% 1.1% 1.7% 1. and Equity Approvals Database.8% 2.9% 0.3% 1. Technical Assistance.9% 0.5% 11.3% 2003 0.5% 1.1% 2.5% 1.0% 2.2% 0.8% ADTA = advisory technical assistance.0% 8.7% 0.3% 3.0% 0.5% 0.6% 0.8% 1.8% 1.9% 2.2% 0.7% 0.9% 0.2% 0.3% 2.0% 0.5% 1.0% 3.3% 0.2% 0. Trends of Technical Assistance and Program Lending Support Table A10.2% 6.4% 0.

214 600 400 600 100 1.588 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 1.000 600 1.700 900 24 20. 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 1.050 560 325 800 500 760 500 340 670 210 240 350 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 .000 600 600 50 450 400 150 150 500 1.130 Appendix 10 TA No.000 400 700 500 1.

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

the sub-borrowers prepare the subprojects. the sub-borrowers prepare the subprojects. Tranche 1 Loan Tranche 1 Loan Implementation support component under each tranche Tranche 1 Loan The MFF provides FIL. 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 Loan Tranche 1 Loan Not identified in the RRP The MFF provides FIL Tranche 1 Loan Tranche 1 Loan The MFF provides subloans. .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. 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.APPENDIX 11: FINANCING SOURCES FOR PREPARATION OF SECOND AND SUBSEQUENT TRANCHES MFF No. which will be implemented under each tranche Tranche 1 Grant Tranche 1 Loan Tranche 1 Loan Tranche 1 Loan The MFF provides FIL. Tranche 1 Loan Tranche 1 Loan Not identified in the RRP and PFRRs ADTA The TA is not attached to the program. The TA is not attached to the program.

Each contract package is time-sliced in line with the indicative tranching plan. piggy-backed to the MFF) PPTA for the MFF Tranche 1 Loan (or.1 for the approved MFF investment programs. FIL = financial intermediary loan. The MFF provides FIL CDTA attached to the MFF Tranche 1 Grant Tranche 1 Loan CDTA (for safeguards compliance. SST = second and subsequent tranche. MFF = multitranche financing facility. RRP = report and recommendation of the President. . Sources: Asian Development Bank database on Loan. PFRR = periodic financing request report.Financing Sources for Preparation of Second and Subsequent Tranches MFF No. PPTA = project preparatory technical assistance. and Equity Approvals. Technical Assistance. Grant. EA = executing agency. 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 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. CDTA = capacity development technical assistance. under the Project Implementation component of the MFF) 61 62 63 64 65 66 UZB IND AFG IND MON VIE ADTA = advisory technical assistance. a Refer to Table A3.

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. 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 .

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. 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.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 .

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.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. 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 .

GEF = Global Environment Facility. East Asia Department. and Equity Approvals (LTA) of COSO. and Equity Approvals. South Asia Department. SEEN = Energy division. AZE = Azerbaijan. and Agriculture division. AFG = Afghanistan. BAN = Bangladesh. CWPF = Public Management. and Trade division. Grant.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. Financial Sector. CWEN = Energy and Natural Resources division. South Asia Department. INRM = India resident mission. and Trade division. VIE = Viet Nam. GEO = Georgia. OCR = ordinary capital resources.1 for the approved MFF investment programs.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. Central and West Asia Department. ** = MFF 44 is Not Allocated. Note: Unless otherwise stated. South Asia Department. and Trade. MFF = multitranche financing facility. Southeast Asia Department. 139 . ARM = Armenia. SETC = Transport and Communications division. SEPF = Public Management. Southeast Asia Department. CWTC = Transport and Communications division. N = no. Y = yes. CWUW = Urban Development and Water division. SAPF = Public Management. TA. UZB = Uzbekistan. a Refer to Table A3. Financial Sector. South Asia Department. KAZ = Kazakhstan. PNRM = Papua New Guinea resident mission. Central and West Asia Department. AFRM = Afghanistan resident mission. 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. Technical Assistance. PRC = People’s Republic of China. Source: Asian Development Bank database on Loan. Central and West Asia Department. Natural Resources. SAEN = Energy division. SEER = Environment. Grant. ADF = Asian Development Fund. Natural Resources. SEUW = Urban Development and Water division. Southeast Asia Department. SAER = Environment. MON = Mongolia. South Asia Department. and Agriculture division. EATC = Transport and Communications division. *** = in MFF 51 is Transport. PRCM = People’s Republic of China resident mission. SATC = Transport and Communications division. SAUW = Urban Development and Water division. Financial Sector. all information in the table are from LFIS. IRM = Indonesia resident mission. Energy and Natural Resources divisions. Southeast. PNG = Papua New Guinea. PAK = Pakistan. UK = United Kingdom. MFF 0063 was sourced from Loan. LFIS = loan financial information system. IND = India. Central and West Asia Department . Southeast Asia Department.

then “potential problem” >=3 ENV. then “on track” o SCA/SCO >=0. cost overruns. . and IP covenants are not complied with.75 but <0.7 but <0. and indigenous peoples (IP) safeguards.” This can be derived from LFIS If: o SCA/SCO >= 0.” This can be derived from PAM Let actual contract award curve (from effectiveness to closing) be denoted by “SCA. then “on track” 2 ENV. SCA = actual contract award curve. then “on track” o n/N >= 0.9. implementation arrangements. then “at risk” ENV = environment. LFIS = loan financial information system. SDO = original/projected disbursement curve.75. RES. etc. this reflects a count of number of financial and related covenants that are not complied with. computerized accounting and MIS. then “potential problem” o n/N < 0. then “at risk” Let original/projected disbursement curve (from effectiveness to closing) be denoted by “SDO.9.” This can be derived from LFIS If: o SDA/SDO >= 0. This covers documentation requirements for environmental (ENV). Such financial covenants normally deal with accounts receivables. and IP covenants are not complied with.APPENDIX 13: TRANCHE PERFORMANCE RATINGS Criteria Technical Rating Are problems (such as key project conditions. IP = indigenous peoples.9. as per ADB’s safeguard policy. Basically.9.9. RES = resettlement.75. Source: Independent Evaluation Department.75 but <0. RES.7. then “potential problem” o >=3 financial covenants are not complied with. resettlement (RES). then “potential problem” o SDA/SDO <0. SDA = actual disbursement curve. then “potential problem” o SCA/SCO <0. RES. then “at risk” Disbursements Financial Management. and IP covenants are not complied with. SCO = original/projected contract award curve. then “on track” o 2 financial covenants are not complied with. then “on track” o SDA/SDO >=0. online billing and collection systems. etc.) 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. then “at risk” If: o 0 or 1 financial covenants are not complied with. then “at risk” Let original/projected contract award curve (from effectiveness to closing) be denoted by “SCO. If: o o o 0 or 1 ENV.9. PAM = project administration manual.” This can be derived from PAM Let actual disbursement curve (from effectiveness to closing) be denoted by “SDA. consistency of internal controls with international standards. Safeguards.

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

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