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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

To the knowledge of the management of the Independent Evaluation Department.NOTE In this report. . Independent Evaluation Department (IED) H. Thukral. IED M. or approving this report. reviewing. or by making any designation of or reference to a particular territory or geographic area in this document. Hettige. IED J. Thomas. 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. there were no conflicts of interest of the persons preparing. In preparing any evaluation report. Foerster. IED T. Senior Evaluation Assistant. “$” refers to US dollars. IED K. Guevara. Independent Evaluation Division 2. Evaluation Specialist. IED N. Director General Director Team leader Team members V. Principal Evaluation Specialist. Fortu. 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. Evaluation Officer.

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

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 .Chapter 7: Key Findings. Lessons C. Lessons. Recommendations APPENDIXES 1 Overview of the Multitranche Financing Facility Modality 2 Evaluation Issues and Information Requirements 3 Multitranche Financing Facility Approved by Sector 4 Tranche Implementation Periods 5 Resources for Preparation. Key Findings B. and Recommendations A.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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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.

The case of Afghanistan was cited where the MFF allows ADB to engage the country on a long term basis while allowing room to adjust when assumptions and expectations change. and (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. Mainstreaming MFF. DEC discussed whether there was a comprehensive assessment done before the decision to mainstream MFF. DEC discussed (i) the MFF’s approval process noting that the concept paper is signed off by a Vice President. The following is the Chair’s summary of the Committee discussion: 1. Advantages of MFF and perceived gaps. in order to compare different modalities and justify . technical. an innovative facility favored by DMCs because of its greater flexibility. 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. (ii) MFFs have been used flexibly over long utilization periods. and economic due diligence was less rigorous. Some DEC members suggested that Management may consider appending the comparative matrix in the report and recommendation to the President. 3. noting that the advantages and disadvantages of mainstreaming were presented to the Board and the Board had favored the move to mainstream the modality.Chair’s Summary: Development Effectiveness Committee The Development Effectiveness Committee considered the Independent Evaluation Department report. The report flagged some key observations. namely: (i) the evidence is unclear in regard to expected efficiency on staff processing time. Some DEC members inquired about fragile and conflict afflicted countries where governments and priorities could change often.381-12) on 17 January 2013. (ii) the insufficient evidence on improvement in the concept paper regarding inclusion of a justification on the use of the MFF vis-à-vis other modalities after the guidance issued in mid-2011. DEC members agreed that the MFF is 2. and tranche level changes have often been classified as minor at least prior to the clarification issued in late 2011. DEC welcomed the real-time evaluation study of the multitranche financing facility (MFF) which found the facility increasingly favored by developing member countries (DMCs). Special Evaluation Study: Real-Time Evaluation Study of the Multitranche Financing Facility (IN. and (iii) the role of the panel of experts which serves as independent confirmation that eligibility requirements are met. The report also highlighted MFF’s potential to crowd out other lending and diminish crisis response operations. The report found that the MFF’s flexibility is its most attractive feature. enabling clients to adjust their project pipeline without need for additional approval from top decision makers. although some members voiced concerns about due diligence on prerequisites. (iii) MFF prerequisites.

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

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

(iv) assuring clients that ADB is a committed partner for their long-term financing plans in specific sectors. it is especially suited to sector investment programs. ADB’s Treasury Department models projected PFRs beyond the work program and budget framework (WPBF) period. (vi) reducing commitment fees for the clients. 7. for each such loan. 7 However. 7 Refer to para 9. and allows staff to spend more time on implementation administration and management. policy framework. the MFF modality has undergone significant changes that Management effected through the issue and revision of internal staff instructions and Operations Manual (OM) sections (Table 1). and/or (iii) projects that cut across subsectors. 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. 6. 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. over a time frame of up to 10 years or even more. (iii) increasing operational flexibility in response to client needs. that avoids repetitive processing tasks. such as (i) a series of similar projects with cost over-run financing included in some tranches. and thereby encouraging cofinancing. and (vii) registering contingent liability only to the extent loans are signed in response to PFRs received from clients. (v) facilitating the preparation of a series of investments with planning for safeguards and other concerns. investment program. With the FFA. Although the MFF modality was anticipated to be applicable to large and stand-alone projects with discrete and sequential components. The individual loans are approved and signed in response to specific requests (referred to as periodic financing requests [PFRs]) received from the client. Appendix 4 of the IEI Document (footnote 4). However. Only approved loans under the MFF umbrella enter the balance sheets. Since 2005. . 8. the MFF modality has been applied to increasingly varied situations. the MFF modality embodies certain major benefits over existing lending modalities.” The FFA also spells out a long-term planning perspective for the particular sector the MFF is supporting. As originally conceptualized. these are collectively referred to as the MFF prerequisites. and (ii) similar projects but with different executing agencies. capacity development. 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. 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. a separate loan agreement is signed. With the MFF facility. road map. and financing plan accompanied by suitable undertakings or commitments. and improving governance. ADB can thus support longer term investment programs that are structured and staggered into multiple loans under the umbrella of the MFF commitment. 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. About the Multitranche Financing Facility MFF modality is unique among the lending modalities offered by development partners 5. in its own financial projections.2 Real-Time Evaluation Study of the Multitranche Financing Facility B. The MFF is neither a balance-sheet commitment nor an off-balance-sheet item for the ADB and its client. This includes the strategic context. (ii) allowing ADB and clients to engage in constructive policy dialogue. reduces staff time for processing. These include (i) financing a series of projects or phases.

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

Examining the premise on which MFF was piloted and mainstreamed: The MFF 16. and a 3. While all such . 1. respectively. The study period begins with the proposal to introduce the MFF (mid-2005) until December 2011. 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. Issues related to funding sources. 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. How DMC governments and 18. The extent to which such premises have held true thus far is examined in chapter 3. headroom. a nearly 3-year span up to the mainstreaming in mid-2008. and specific questions pertaining to them are provided in Appendix 2. The medium-term implications for ADB’s operations of the increasing use of the MFF modality are also discussed in the context of country programming. the Board has continued to express concerns regarding the increasing size of the MFF portfolio. DMC and ADB concerns about the MFF modality. and implications for operations. the working of the modality. as well as reporting and oversight arrangements. including reduced ADB and client staff time in preparation and processing of investment interventions). additionality of the MFF modality. The evaluation considers the merits and demerits of a programmatic approach and promise of long-term assistance to DMC clients. The key findings. The components of the evaluation methodology are described in this chapter. The number of MFFs approved during the two sub-periods was 20 and 46. 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). The main chapters of this study will discuss the MFF portfolio. clients perceive the benefits of the MFF modality. 19. certain changes in documentation and other requirements have been instituted from time to time. Examining the working of the MFF modality: After the mainstreaming of the 17. insufficient clarity of criteria and decision-making filters for use of the modality. Components of the Real-Time Evaluation 15. the expected benefits. and increasing ADB’s organizational effectiveness (through reduced transaction costs. Evaluation Methodology 14. In response. MFF modality.5-year period after mainstreaming. was designed to support clients’ long-term sector plans through a long-term commitment. and their decision-making processes for MFF and tranche approvals are discussed in chapter 6. Examining the MFF portfolio.4 Real-Time Evaluation Study of the Multitranche Financing Facility D. E. how they are deriving benefit from it. Study Period 13. a quality assessment and review. and seasonal bunching of MFF and tranche approvals are also examined in chapter 2. minimizing the impact of borrowing from ADB or committing to borrow from ADB. as well as the implications for ADB’s policy dialogue and the ability to respond to emergency situations. This comprises two sub-periods. lessons and recommendations related to these components and chapters are pulled together in chapter 7. and development effectiveness.

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

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

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. Grant. MFF tranche approvals had risen from 17% of total approvals for ADB sovereign lending in 2006.CHAPTER 2 The Portfolio A. Until December 2011. two MFFs were approved in December 2005. More than one quarter of ADB’s active portfolio is in MFF tranches. By 2011.7 34% 37% 6. a total of (i) 66 MFFs had been approved with a combined approved amount of nearly $32 billion. and (ii) 126 tranches had been approved. Since then. and Equity Approvals.2 40% 35% 30% 3. For details. 13 MFFs had fully allocated . refer to Appendix 3.8 billion in 2006 to more than $6. 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. 1). Simultaneously.4 4. the approved MFF envelopes increased from $1.7 0. while approved tranche amounts increased from about $180 million in 2005 to nearly $4. Figure 1: MFF and Tranche Approval Trends 7 6.5 billion in 2005 and $3.0 0% 1. of which 66 were SSTs. Technical Assistance. 29.2 billion in 2011.2 6 5 4 3 2 1 5.5 1.6 25% 20% 15% ($ billion) 1. Following acceptance of the proposal to begin piloting the MFF.5 4. As of 31 December 2011.0 2006 2007 2. Approvals 28.8 4.1 3.5 billion in 2011 (see Fig.0 23% 20% 17% 27% 4. Source: Asian Development Bank database for Loan. to 27% in 2009 and 37% in 2011.

(iii) Bangladesh and India in South Asia. By the end of 2011. mostly in Central-West Asia. 41. 47-54. sector loans. 10 13 MFFs (MFFs 1. In the East. During the piloting stage (mid-2005 to 11 July 2008). only four MFFs and seven PFRs were approved. 31. the most recent addition being Mongolia.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. although less than one third of the MFFs and first-tranches were approved during the month of December. Table 2 shows that. 8. Manila. appraisal. 43. .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. (ii) Peoples Republic of China (PRC) in East Asia. 28.889 8.11 while 29 MFFs had only one approved tranche.317 Second and Subsequent Tranches 60 29 8. 11 Two MFFs (MFFs 1 and 11. 39. 16. Regions and Countries Central West and South Asia regions account for more than 75% of 66 MFFs approved 31. Sources: Asian Development Bank database. In the Pacific. 30% (84 of 277) of stand-alone loans were approved in the month of December. 13. TA loans. while only in Bangladesh have no further MFF’s been approved. is that 25 of the 26 approved MFFs in South Asia are in one country (India). 25. 14 This trend appears to have continued in 2012.) and prepare necessary documentation under some time pressure.906 All Tranches 126 50 16. 19. Papua New Guinea (PNG) is the only country where ADB approved an MFF intervention. 13 In comparison. both in India. while the 26 MFFs approved in Central-West Asia are spread across seven countries (the maximum being 8 MFFs in Pakistan). South and South-East Asia regions. Considerable acceleration is observed in the fourth quarter. and (iv) Viet Nam in Southeast Asia. 58-66) have only one approved tranche. 56. A key difference. 33. 38. 17. 12 29 MFFs (MFFs 12. financial intermediation loans. the MFF modality had been extended to 14 DMCs. 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. Multitranche Financing Facility Annual Report 2011. 14 Table 2: Bunching of MFF and Tranche Approvals in December MFFs 66 19 31. it may also mean tight deadlines for ADB staff and the consultants to conduct research (fact-finding.10 2 had five or more approved tranches.938 10. 22. 11. 15. 44. Figure 2 shows the regional and country mix in terms of number of approved 32. one in energy and the other in the transport sector) have five or more approved tranches. program loans.306 First Tranches 66 21 8. nearly 50% of all SSTs were approved during that month. and guarantees) approved from 2005 to 2011 in the 14 countries where MFF investment programs have been approved.042 3. 12 30. 2012.8 Real-Time Evaluation of Multitranche Financing Facility MFF resource envelopes into tranches. etc. Since July 2008.846 4. 20. The standalone loans include all sovereign loans (project loans. 37. B. several more countries have been added. MFFs have been approved in two countries each. and ADB. 57) have fully allocated MFF resource envelopes into tranches/loans. MFFs and the combined resource envelopes. 29. 24. In the first three quarters of 2012. ADB introduced MFFs in six DMCs that were spread across four ADB regions: (i) Azerbaijan and Pakistan in Central-West Asia. however.

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

7 4.7% of all MFF approvals). MFF = multitranche financing facility. Overall.3 billion from OCR sources (85.4 Natural Resources ($ billion) 13. Source: Asian Development Bank database for Loan.1 billion $13.9 0. India.9% ADF loans. at least one operations department is also preparing and processing an MFF in the education sector. Figure 4: MFF Financing Envelope Approved for Countries that Receive Concessional. (ii) PRC. The study is aware that in 2012. Source: Asian Development Bank database for Loan.10 Real-Time Evaluation of Multitranche Financing Facility approved also for public sector management and financial sector interventions. comprise (i) Afghanistan—a DMC where ADB extends all assistance from grant sources. Kazakhstan. and Equity D. and (iii) nine DMCs that receive a mix of OCR and ADF loans from ADB.5 1 5 0 Multisector Public Sector MFF Resource Envelope ($billion) Number of MFFs MFF = multitranche financing facility. Technical Assistance.5% grants. Figure 4 shows the combined MFF financing envelope for these three country groups. and Viet Nam—the four DMCs where ADB provides assistance only from ordinary capital resources (OCR).5 Transport Energy Urban/Water 25 20 15 12 7 2. Grant.3 10 4 1. . ADB’s Funding Sources 35. and 6. The 14 DMCs where the MFF modality has been used. including but not limited to Asian Development Fund (ADF) grants. Grant.6 1 Finance 0. Figure 3: MFF approvals by Sector 14 12 10 8 6 4 2 0 30 26 17 8. OCR = ordinary capital resources. OCR and Mixed financing $2. total MFF approvals through December 2011 comprised $27. 7. and Equity Approvals.8 billion $16.1 billion ADF only OCR ADF & OCR ADF = Asian Development Fund. Technical Assistance.

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

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

(ii) about 75% of first tranches and 90% of second tranches span up to 80% of the MFF utilization period. and Equity Approvals. Available data on tranche implementation periods. Source: Asian Development Bank database for Loan.1). tranche implementation periods have been extended beyond the originally stated end of the MFF utilization period. 23 The average energy sector tranche implementation period is within 15% of the average implementation 21 22 23 e.. Technical Assistance. stand-alone loans are considered only in sectors and countries in which MFF interventions have been approved. 20% and 30% of approved loan amounts) also reveal no clear trend (see Appendix 4. it is more appropriate to compare MFF tranches with stand-alone loans. Table A4. 42. Rather than entire MFF investment programs. IED has no documents that show that the MFF utilization period has been extended.e. .g. Grant. (iii) as per available data. 41.22 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%.21 while in other cases.2). MFF57 (IND: Madhya Pradesh Energy Efficiency Improvement Investment Program). A sample of 431 stand-alone projects approved from 2000 through 2011 is thus compared with 126 MFF tranches approved up to 2011. some tranche implementation periods are 100% or more. Table A4. However. In some cases this is because the first tranche extends the entire MFF utilization period.Expected Benefits reveals that (i) first and second tranches span 60% or less of the MFF utilization period for about 45% of the tranches. time taken from loan effectivity to achieve 10%. such analysis does not capture the underlying assumptions for each data point (Appendix 4). Available data on disbursement rates (i. which comprise mostly actual tranche approval dates for all tranches. Table 3 shows a comparison of approval amounts and various measures of elapsed time between MFF tranches and stand-alone loans for all sectors. and for transport and energy sectors in particular.>=100% 100% Implementation period as % of MFF utilization period Tranche 1 Tranche 2 MFF = multitranche financing facility. For comparative purposes. 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..

Nos.a.30 93 12. wherein 45. 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. However.8 35% 157 86 92 85 169 4. Technical Assistance.a.5 47% 140 147 81 95 176 4. Stand-alone Projects MFF EN 17 39 22 5.LA signing to effectivity .a. 125 110 232 5. EN = Energy. owing to substantive staff time savings while processing tranches. coupled with (ii) increased staff availability for implementation monitoring and administration. $ billion % $ million days days days days years 135 105 107 84 179 4. n. an MFF processing time is typically 90 staff-weeks. Source: Asian Development Bank database for Loan. 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. including the MFF 44.54 TC 23 43 20 6. while transport tranches are about 15% larger. with associated benefits such as more opportunities to understand sector issues. 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 MFFs No.17 91 92 182 4. LA = loan agreement. for other sectors the difference is less than 10%.Approval to closing (implementation period) Nos.Approval to effectivity . Increased organizational effectiveness of ADB was cited as an intended outcome of the entire IEI program. B. Table 3: Comparison of Loan Amounts and Timelines for MFF vs. Nos.of which SSTs Approved total loan amount Approved loan amounts of total Sector interventions Average tranche/loan size Elapsed time between . 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. and the equivalent time for a standalone project is 75 weeks. Improved Organizational Effectiveness Increased n organizational effectiveness of ADB was an intended outcome of the entire IEI program. SSTs = second and subsequent tranches. the average approved amounts of MFF tranches are about 25% larger than for stand-alone loans. MFF = multitranche financing facility. = not applicable.6 65% 136 n. address policy gaps. However. including the MFF.76 All Sectors 66 126 56 16. 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. at 354 staff-weeks. Whether or not a time-sheet system had been tried or piloted in . and Equity Approvals. of tranches/projects .PFR submission and approval for SSTs . and make mid-course corrections.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. but energy tranches are about 10% smaller. 43. which piloted several financing instruments and modalities. The Board Paper provides quantitative estimates of staff time savings. Grant.74 108 ADB = Asian Development Bank.7 No. TC = transport and communications.Approval to LA signing .56 431 47. 101 141 235 5. PFR = periodic financing request. Overall.0 53% 155 n.

and that certain departments had still to make efforts to assess the quality and consistency of data entered by the staff. Supplementary Appendix B provides the survey forms). which also incorporates some data previously compiled in the project performance report and project information documents. 26 Further data analysis is given in Appendix 5. the findings of which had been used for staff allocation and budgeting purposes. to gauge the extent of staff resource utilization and savings associated with the preparation and processing of at least some MFFs and tranches. and approval of the PFR of the proposed tranche were compiled from these databases. as well as a wide variation in the estimated elapsed time for MFF preparation and processing (Box 1). . tranche loans. 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. Nonetheless. The eOps database also does not specify when action on the second tranche (or a subsequent tranche) was first initiated. however. 48. as it was felt that the TMS was still in an initial phase. IED could not obtain the TMS data. and detailed data are in Supplementary Appendix A.24 46.25 Elapsed time estimates.Expected Benefits ADB—albeit on a limited basis—during the MFF pilot period is not specified in the Board Paper. In May 2011. The findings from the IED survey also show wide variations. ADB databases include data on time elapsed during 47. However. but there is no central database that compiles such information. and stand-alone loans. but with averages that are lower: less than 400 days on MFF preparation. as obtained from the e-Operations (eOps) database. and more than 1-year of timesheet data had been compiled by the third quarter of 2012. ADB instituted a pilot TMS. approval of the RRP of the proposed MFF. and less than 200 days for tranche processing (see Appendix 5 for further analysis of survey data). preparation and processing. Such information may be documented in a related back-to-office report of a review mission for a preceding tranche. 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. 15 24 25 26 During the early 2000s. the eOps database for tranche preparation and processing is not complete and shows wide variations in the estimated elapsed times (Box 1). Similarly. IED was unable to access the TMS data pertaining to specific MFFs. just over 200 days for MFF processing. Available data on milestone dates toward finalization of the project preparatory technical assistance (PPTA) work. A brief analysis shows the paucity of data on milestone dates in these databases. a TMS established the parameters for processing and administering stand-alone projects and technical assistance.

However. b. Other than TMS. it is also acknowledged that. it is interesting to note the perceptions of the MFF team leaders: (i) of the 26 responses received from a total of 66 enquiries. and (ii) 4 of the 7 tranches approved after June 2011 (i. 29 Notwithstanding the fact that all survey data are based on the memory of the concerned team leaders. across a relatively small number of MFFs and tranches. Survey findings regarding LOE show wide variations of one order of magnitude or more. concept approval and RRP approval available for about 60 of the 66 MFFs. while PFR receipt dates are available for about 30% (39 of 126).e. 2008. as well as the credibility of a system to audit and verify data once entered. Source: Independent Evaluation Department. i) from about 40 days to more than 1. 28 Refer to Table 10. with milestone dates for MFF fact-finding. PFR = periodic financing request. no official ADB database contains 50.800 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).16 Real-Time Evaluation Study of Multitranche Financing Facility Box 1: Elapsed Time Estimates for Preparation. Manila. 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). RRP = report and recommendation of the President.27 51. MFF = multitranche financing facility. Loan fact-finding dates are available for less than 45% of the tranches (54 of 126). 6) compared with 20% more time assumed in the Board Paper.e. 49. c. 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. Data availability for MFF processing is somewhat better.800 days to process an MFF (average of 270 days). Operations Manual. Bank Policies and Operations Procedures. 2. the wide variations in MFF and tranche preparation and processing times raise concerns about the timeliness and quality of data entered in eOps. Regarding tranche preparation and processing: a. Processing and Implementation of MFFs and Their Tranches 1. Dates for PPTA fact-finding and receipt of draft final report are available for less than one-third of the MFFs (21 of 66).300 days for work on a PPTA (average of 600 days) ii) from about 100 to about 1. 19 agreed that the LOE for preparing and processing an MFF is higher than that for a stand-alone project. and (iii) 16 of the 19 MFFs were approved after mainstreaming (i. data on level of effort (LOE).29 27 ADB. 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. Level of effort estimates. The elapsed time also varies widely. OM Section D14/BP and D14/OP.28 The tranche survey data tend to show that. Regarding MFF preparation and processing: a. owing to some sector-related issues (such as in water resources or agricultrure .. PPTA = project preparatory technical assistance. Although it is difficult to determine the linkage between flexibility and increased time required for preparation and processing of an MFF and its tranches.. the LOE for tranche processing time is less than that for stand-alone projects. b. PFRR = periodic financing request report. 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. in many cases.

for example through access to TMS data. The MFF modality was also thought to help regional departments plan better their people and skill requirements. Besides. or (iv) any other movement. half of the team leaders had sectors). or (ii) within the same regional department at the headquarters or in a resident mission. and implementation of MFFs and their tranches. 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. which is 54. this observation cannot be considered conclusive.75 1. it does not conform to the “staff continuity” requirements as spelled out in the MFF Board Paper.50 1. Management driven. 30 .25 1. this inference is based on a small number of observations—and then too. it appears that changes introduced through the internal staff instructions issued in July 2011 led to an increase in tranche processing time. or (iii) form a regional department to a knowledge or support department.25 to 1. and potentially change the normal practice of staff movements. so that ADB staff can (i) gather and share knowledge with the client on sector issues and trends. Table 4 shows that as of mid-2012. Staff continuity issues are a matter of human resources policy. more time would be required to conceptualize an MFF investment program. project is less than that for an MFF but more than that for a tranche. Source: Independent Evaluation Department. perhaps with higher responsibilities. Such staff movements can be (i) within the same sector but across regional or operations departments. tranches. As yet. which occur more frequently than desired as per MFF policy.0 53. where distinct types of interconnected projects would comprise each tranche. as the survey data relied on the memory of team leaders rather than any written record or database of LOE. Staff continuity.Expected Benefits 17 Overall. and (iii) change implementation plans while work is in progress. However. 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.30 Although staff movement within the same regional department does not lead to a loss of expertise to the department as such.0 Ratio of LOE for MFF to Standalone Projects LOE = level of effort. This is perhaps one of the reasons that have contributed to the difficulty in reducing the LOE for tranche processing. processing. MFF = multitranche financing facility. the survey data therefore tend to show that the LOE for a stand-alone 52. (ii) address policy issues and procedural gaps. and stand-alone projects. which appears to be consistent with the original premise that the MFF modality improves organizational effectiveness. The Board Paper (footnote 6) recognized that greater staff continuity is required in the preparation.50 to 1. there is no conclusive evidence of staff time savings over the entire MFF cycle 32% 11% 0% 11% >2.75 to 2. provided a sufficient number of tranches are included in the MFF.

the MFF modality is potentially more conducive to cofinancing than other modalities and instruments. Source: Independent Evaluation Department. and financial intermediation loans) have on the client’s balance sheet and cofinancing capabilities (footnote 4). the MFF modality provides to clients the comfort of 55. to provide sufficient information to project processing and administration teams as well as concerned development partners. 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. of which: for the 25 MFFs approved during 2010–2011 for the 41 MFFs approved during 2005–2009 MFF = multitranche financing facility. sector loans. Such factors do contribute to the MFF’s rising use. All tranches MFF24 (KAZ).31 Table 5 shows information on cofinancing arrangements for selected MFFs. Table 5: Cofinancing in Selected Multitranche Financing Facility Investment Programs MFF Number and Tranche Reference MFF05 (PAK). The cofinancing database is expected to capture donor commitments and actual contributions. and it was recognized that. If EIB cofinancing does not come through. there is no particular notice or announcement to indicate that the introduction of the MFF has changed the deployment pattern of staff. EIB: $40 million. then ADB’s support will increase to $78 million For overall MFF investment program: ADB: $188.18 Real-Time Evaluation Study of Multitranche Financing Facility not changed divisions or departments after processing an MFF and getting it approved. Number of Staff 14 6 7 6 33 18 15 C. or on special leave without pay No movement (within same division and same department). Tranche 2 Cofinancing Particulars A guarantee facility of $200 million to mobilize commercial debt for wind and other renewable energy projects ADB: $38 million.2 million (initially) ADB: reduced MFF financing envelope to $157. 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. to be firmed up MFF22 (IND). 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. Cofinancing Adequate information is not available to analyze level of cofinance achieved through MFFs As originally envisaged. However.5 million Remarks Commercial cofinancing amount not known (as of October 2012) MFF05 (PAK). 31 For overall MFF investment program: Cofinancing possibility known at MFF approval stage. . Tranche 3 Leverage of 100%. 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.

RRP = report and recommendation of the President. no cofinancing expected in Tranche 1. Japan: $68 million For overall MFF investment program: ADB: $540 million.Expected Benefits MFF Number and Tranche Reference All tranches 19 MFF52 (VIE). the Rural Electrification Corporation. IsDB = Islamic Development Bank. Leverage of about 100% overall. Available documentation does indicate some attention to cofinancing in some MFFs (see Appendix 6). EIB: $195 million For Tranche 1: ADB: $40 million. KfW = Kreditanstalt für Wiederaufbau Bank. the MFF documents simply mention that cofinancing will be pursued upon the specific request of the concerned government. either both the RRP and the FFA referred to cofinancing. but not in both. IND = India. In three MFFs. 56.4 million For Tranche 2: ADB: 500 million. 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).6 million. KAZ = Kazakhstan. cofinancing is mentioned or considered either in the MFF or the FFA. either both the RRP and the FFA referred to cofinancing. the documentation also indicates that specific attention to mobilizing cofinancing has not been given in many MFFs approved thus far. or the State Bank of India to fund their transmission and distribution capacity expansion programs. cofinancing is mentioned. KfW: $276. IsDB: $170 million. As per RRP. All tranches Cofinancing Particulars Original cofinancing arrangements for projects expected to be financed through the MFF: ADB: $700 million.33 In many cases. IsDB: $414 million. it is considered that the long-term support offered through the MFF has not affected this cofinancing. A significant improvement is observed in the level of consistency after mainstreaming: (i) for 7 of 20 MFFs in the pilot period (35%). or both did not. . or both did not. OPEC = Organization of Petroleum Exporting Countries. 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. MFF = multitranche financing facility. Appendix 6 shows that in the RRPs and/or FFAs for 48 of the 66 MFFs. and 220% for tranche 2 ADB = Asian Development Bank. Whether or not this pertains to joint or parallel cofinancing is not clarified. Leverage of more than 90% Parallel cofinancing for other similar urban mass rapid transit lines also expected. Updated cofinancing arrangements for projects expected to be financed through the MFF: ADB: $812 million. referred to. Japan: $150 million. 32 In 15 MFFs. or considered in some manner. EIB: $195 million For overall MFF investment program: ADB: $636 million. PAK = Pakistan. KfW: $36. or that the borrower or the executing agency will explore the soliciting of cofinancing from other development partners and/or private entities. To the extent that funding from these sources is secured as part of the MFF investment program. However. KfW: $313 million. even though it was to use up nearly 50% of the approved ADB financing envelope. and (ii) for 26 of the 46 MFFs after mainstreaming to end of 2011 (56%). certain power sector utilities in India routinely borrow from the Power Finance Corporation. For instance. Source: Independent Evaluation Department. EIB = European Investment Bank. Japan: $634 million Remarks expected upfront at MFF approval stage is reduced to less than 30% (as per updated information as of June 2012). All tranches MFF53 (VIE). Japan: $634 million For tranche 2: ADB: $286 million. VIE = Viet Nam.

the Board agreed on a further reduction of commitment charge through a 0. In April 2007. and (ii) ADB’s contracting and procurement requirements. a The commitment fee was applied to the following amounts (less amounts withdrawn from time to time). Islamic Republic of Pakistan: Energy Efficiency Investment Program.34 Guarantees that cover political or credit risks are often intended to mobilize cofinancing. 36 D. 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 borrowers were not able to calculate commitment charges properly and had to rely on ADB’s accounting records. Since the MFF modality was piloted. 35 Although the guarantee option in this particular MFF appears to have been dropped. it may be important to hold close consultations with other development partners during the MFF processing stage itself.b it was considered complex by many borrowers. if the MFF investment program requires a substantial amount of cofinancing. approved in December 2006. and (iii) financial intermediary credit lines. This commitment charge rate has remained unchanged since. such as (i) the normal rate at which project construction can proceed on a best-efforts basis. Manila (approved 17 September 2009.1% waiver (on the undisbursed balance of sovereign project loans negotiated after 1 January 2007). c In some instances. 57. ADB. (ii) slices (or tranches) of sector investment programs over a longer time frame of 7–10 years. only one explicitly offers the option of a guarantee cover in the initial documentation. Source: Independent Evaluation Department. a Although the progressive structure allowed borrowers to pay lower commitment fees overall. Loan commitment charges cover ADB’s cost of carrying liquidity for loans prior to disbursement. the Board approved a simpler flat structure with a commitment fee rate of 0. 2009. and (iv) the entire loan amount thereafter.15% of the undisbursed balance. 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. Proposed Multitranche Financing Facility and Administration of Cofinancing. MFF = multitranche financing facility. of the 66 MFFs approved until end-2011.35% per annum on the undisbursed balance of sovereign project loans negotiated after 1 January 2007. In December 2007. .c In October 2005. 34 35 These include (i) discrete. Box 2: Reduction of Commitment Charge Rates When the MFF modality began to be piloted in the latter half of 2005. 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. The MFF modality was conceived as a debt-financing facility to offer guarantees along with other instruments. ADB charged its project loan borrowers an annual commitment fee of 0. Report and Recommendation of the President to the Board of Directors. 36 Refers to MFF05 (Renewable Energy Sector Development Investment Program).75% on a progressive percentage of the undisbursed loan balance. In any event. MFF31). the Board eliminated the waiver and approved a reduction of annual commitment charges for sovereign project loans to 0. but they diminish somewhat the benefits associated with the MFF rationale. Reduced Commitment Charges 58. (iii) 85% of the loan amount during the third 12-month period. Such reductions of commitment charges are not related to the introduction of the MFF modality in 2005. sequential components or large stand-alone projects. the commitment charge rates have been reduced (Box 2). However.20 Real-Time Evaluation Study of Multitranche Financing Facility amount of cofinancing) is also not clear. which were normally at variance with procedures and processes followed by borrowers.

The commitment fee savings reflects the time difference between the loan signings of the first and second tranches.Expected Benefits 21 Nonetheless. . at this time. Given that the average MFF financing envelope is $480 million compared with an average stand-alone project of about $100 million (Appendix 7). 37 In the same countries and sectors where ADB has approved MFF interventions. and during the same time period (2005 –2011). Viet Namb MFF20. Either of these conditions holds only for few MFFs. at this point.5% of the approved MFF financing envelope. The commitment fee savings are evident but can be considered negligible (Table 6).2 0. in addition to loan envelope size) are available. c The MFF has a small financing envelope of $100 million. 37 most large MFFs can be viewed as a cluster of projects. wherein even a small delay in the signing/effectivity of successive tranches can lead to some commitment fee savings. Indiad MFF = multitranche financing facility. a Loan agreements have been signed for the entire MFF financing envelope for the 3 selected MFFs. counterfactual assumed for an MFF with “n” tranches (one stand-alone loan that equals the size of the MFF) is meaningful. 61. or (ii) the MFF financing envelope is comparable to a stand-alone project. and less than 0. the available evidence (on changes in disbursal rates with each subsequent tranche) is mixed. the detailed computations and assumptions are given in Appendix 7. commitment fee savings are likely to reflect improvements in disbursal rates in SSTs—should SSTs be actually disbursed more quickly. the available evidence is mixed.25 0. The estimates in Table 6 are for MFFs for which sufficient data (particularly on loan amounts and loan signing dates for each tranche.14% Small commitment fee savings are evident for some MFFs MFF Number/ Country MFF13. which would otherwise be financed through one stand-alone loan.28 Commitment Fee savings (% of MFF resource envelope)a 0. Appendix 7 illustrates commitment fee savings in a few cases where the 60.25% 0. with each tranche being like one project. and (b) three tranches were approved and made effective in quick succession during the 2. Most large MFFs cannot be viewed as one project comprising several subprojects. PRCc MFF38. In most cases. However. Source: Independent Evaluation Department. Therefore.45% 0. 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 ($210 million). commitment fee savings from such large MFFs would relate more to timing of tranche approvals and tranche disbursal rates vis-à-vis the counterfactual string of stand-alone (corresponding to tranches) loans. In all these cases. b The second tranche comprises more than 95% of the MFF resource envelope. only when (i) a large MFF is used to finance one large project. PRC = People’s Republic of China. Table 6: Commitment Fee Savings Estimates for Selected MFFs Number of Tranches Approved p 2 3 3 Total MFF Resource Envelope ($ million) 931 100 200 Commitment Fee Savings ($ million) 4. the fee savings are small. but the MFF utilization period actually got extended by 12 months.year time span. it is likely that commitment fee savings from MFFs would come 59. However. as the last tranche loan was approved much later than originally planned. and where commitment fee savings come from phasing of the approval/effectivity of a stand-alone loan through tranches.

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.

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

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

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

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

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

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

77 million per year during 1990–2005 to $0.57 million per year during 1990–2005 to $0. (iii) a more than 10% increase in the approval for support to Pakistan’s energy sector from $0. while policy support that was provided earlier has been discontinued in sectors where MFFs have penetrated the most. 79. etc. a Over a longer time horizon from 2000 to 2011. capacity development. education. TA = technical assistance. 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. However. Source: Independent Evaluation Department. Manila. it is reasonable to expect that the sum of NPI allocations for MFFs and TA resources for capacity development should increase.70 million per year during 2006–2011. 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. Regarding program loans in sectors where MFF investment programs have penetrated most (energy and transport).3 billion to support India’s and Pakistan’s energy and transport sectors. a Total TA grants disbursements declined from $189 million in 2008 to $148 million in 2011 (with a peak of $202 million in 2009). even though overall TA resources (for project preparatory work plus advisory. as a percentage of all loan and grant assistance for physical investments. 2–5 May (45th Annual Meeting). public health. and social protection. the causality between a fall in the energy sector program loan volumes and the rise in penetration of MFFs is difficult to decipher. The use of preparatory TA resources also appears to be declining although the decline is not so pronounced. It is noted that (i) ADB supported power sector reform and restructuring through program loans from the mid-1990s to the early2000s.The Working of the Modality 78. Given the recent emphasis on improving project readiness. trends can be discerned only in India and Pakistan (Box 5 and Appendix 10). 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. Refer to ADB. NPI = nonphysical investment. 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. and (iv) excluding support for ports and rail sectors. ADB approved program loans for about $1. It appears therefore that the originally envisaged opportunities for policy dialogue have not been realized. By the time the MFF modality began to be piloted.65 million per year during 2006–2011. finance. public sector management. 2012. periodic financing request reports. there have been no program loan approvals for these sectors in the two countries. (ii) a reduction in the average annual approvals for support to India’s power sector by 10% after 2005—from $0. this increase reflects inclusion of support for sector-wide planning as well as coal utilization strategy. industry and trade. . MFF = multitranche financing facility.) appear to show an increasing trend. 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. total TA resources show a declining trend. Asian Development Bank Annual Report 2011. a marginal reduction in the annual average approvals for support to India’s and Pakistan’s road transport sectors. Available MFF documents (whether periodic financing requests. Since the MFF modality began to be piloted. program loans were being extended more for agriculture and natural resources management. which was last approved in 2002.

Prerequisites as Decision-making Filters Consistency in presenting financing plans needs to improve In most DMCs. etc. 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. The investment program includes physical and nonphysical components. policy framework. and governance aspects could possibly provide useful inputs for screening the use of the MFF modality. AZE: Road Network Development Program. road map. capacity constraints exist in most sectors and in the institutions 83. is the very basis on which the MFF modality enables ADB to support a client. Consistency in presenting the financing plans needs to improve. for instance (i) combining project management and other capacity development activities. as in MFF47. useful to reconsider the importance to be given to such an underlying assumption in justifying the choice of the MFF modality. 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. client-side ownership and buy-in are difficult to sustain. Given the proliferation of MFFs across many countries and sectors. or the undertakings considered firm. the extent to which the investment program and financing plan can be considered sacrosanct. The 81. however. capacity development objectives. Undertakings.53 As a result. as outlined in the FFA. To the extent that the financing plan includes counterpart funds from the client or other DMC sources. 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.54 Therefore. is presented differently.32 Real-Time Evaluation Study of Multitranche Financing Facility 3. In many RRPs. the financing plan makes a distinction between the investment component and capacity development support. . rather than in project cost. it indicates commitment from the client side. Undertakings are normally stated in the FFA and can be 82. KAZ: Central Asian Regional Economic Cooperation Corridor-2 (Mangystau Oblast Sections).51 (ii) combining project management with project preparation and construction supervision. it would be 84. as in MFF14. undertakings can be assessed in terms of the quality of strategic context. 52 and (iii) including construction supervision in capacity development. financing plan. An agreed-upon investment program 80. Under such circumstances. Yet the implicit assumption while approving any MFF investment program is that institutional capacities are strong and contribute to a stable policy environment. is in doubt. or investment plan (for single large projects) as presented in the FFA and RRP. A case in point is the combination of different types of NPIs. Other Prerequisites Investment program and financing plans. and other indicators of government commitment. overseeing them. However. a financing plan for the entire MFF does not carry much significance. as in MFF58. Suitable databases that provide information on policy. institutional performance. Even if ADB provides support to define strategies and road maps. as subsequent tranches are often not defined in the MFF. Refer to para 68 of Board Paper (footnote 6). policy framework. the extent to which DMC governments and clients can prepare sector strategies and road maps of the requisite quality is uncertain. considered a commitment to the agreed-upon road map. In that sense. 4.

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

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

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

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

project readiness is expected to reduce the time lag between loan 93. 13 (28%) did not provide this information. the time span between approvals of successive tranches will increase. overall. regarding the types of scope changes Refer to paras. unless DMC governments and clients adopt measures to accelerate the achievement of project readiness by appropriate institutional capacity development measures. 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. and (iii) different debt finance structures to be applied in each tranche. Operations Manual: Bank Policies and Operational Procedures (Section D14). Emergency situations may arise from natural disasters. the MFF utilization periods can get exhausted without accomplishing the full intended scope of the MFF. and (ii) DMC governments and clients review agreed-upon scopes even for approved tranches. conflict situations. the RRPs of 7 (35%) did not provide the number of tranches or indicated only a range. to be coupled with long-term and programmatic investments. therefore. 63 Refer to: (i) ADB. 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. . Manila. 61 It is acknowledged that the need for flexibility can also arise due to the occurrence of emergency situations.02. 5. It is likely. Change in Scope of Loan and/or Grant Funded Projects.02 as revised in December 2011. Until December 2011. Some improvement is noted since mainstreaming in mid-2008.approved project financing. Change of Loan and/or Grant Funded Projects. 2008. 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. that with increased attention to project readiness and without commensurate efforts to build institutional capacities. Of the next 46 MFFs approved until the end of 2011. Project Administration Instructions. Change in Project Scope or Implementation Arrangements. E. 64 ADB. given the long utilization periods. The PAI of January 2011. it is unlikely that all projects for all tranches will be identified and known upfront in all MFFs. (ii) financial approvals as and when projects are ready and PFRs are submitted. 2008. Manila . For this reason.62 96. As envisioned in the IEI document. even if the precise number is not known. 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. 62 ADB.60 In practice. and (ii) ADB. IEI document (footnote 4). the flexibility offered by the MFF modality reflected in 95. 64 clearly stated that 59 60 The flexibility offered by MFF has reflected in part. Besides. the relevant PAI’s did not explicitly mention the MFF modality. part. more MFFs indicate at least a range for the number of tranches in the RRP. which was retracted within less than a year. those that can be approved by ADB Management. approval and effectivity. within the ADB. 34–43 and Appendix 4. the MFF modality provides financial and operational flexibility to clients and ADB. 59 It allows (i) sound balance sheet management on the client side.The Working of the Modality 37 In general. and projects are expected to get implemented with smaller delays. Manila.04. however. introduced the idea that a major change is a change in the project outcome and target values of outcome indicators. 61 The required clarity came about through PAI 5. or other unforeseen events that cause turmoil. Project Administration Instructions No. Therefore. 2011. 5. a lack of clarity in the relevant project administration instruction until 2011. about 30% of all approved MFFs do not even indicate upfront the number of tranches. the need to have high-quality road maps upfront that inspire a high level of confidence may also have diminished. Flexibility Aspects 94. 2011. Project Administration Instructions No. Of the first 20 MFFs approved during the pilot period. Besides. Manila.

Data available with IED show that about 85% of the tranche project changes approved in or before December 2011 had been classified as minor. limited response by regional departments to data requests. (ii) financing plan. It appears from Table 9 that at least until December 2011. energy transport. procurement. 67 About 85% of the tranche project changes approved in or before December 2011 had been classified as minor 65 ADB. unless they fundamentally affect the scope and project outcome—in which case they constitute a “major” change. effected in various MFF tranche projects. 2011. it can be approved by the concerned head of department.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. and/or (v) reporting arrangements. including changes in executing and/or implementing agencies. The Board has delegated to the President. (ii) a change in the policy framework that negatively affects the viability or sustainability of the investment program or investment plan. Therefore. 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. Appendix 12 shows that most changes that have been made in tranche projects across agriculture. Table 9 describes some tranche project changes. urban. and late uploading of scope change memoranda in e-STAR. Project Changes What constitutes a minor change has been clarified in December 2011 Tranche project changes. and (iv) a substantial and material change in the type of investments contemplated under the investment program or investment plan. any change at the tranche level does not require approval from the Board. “Minor” changes to individual projects under an MFF are approved by the 98. the late approval of many scope changes over 2012. which means changes in the mix of currency and sources of finance. Project Administration Instructions (PAI) No. for practical purposes. 66 67 . and disbursement arrangements. including project performance monitoring and evaluation. Only 6 of 46 tranche project changes affected in 2011 or before were classified as major.” Supplementary Appendix C includes a description of tranche project changes to the extent IED could obtain such information. consulting services. 1. Change of Loan and/or Grant Funded Project. implementation period.65 Any one or a combination of these changes results in a “minor” tranche project change. the authority to approve “major” changes. which refers to changes among the existing categories of project cost and finance tables. due to such factors as the study’s data collection during mid year. Tranche project scope change description and classification information was available only for four of the 37 tranche scope changes approved upto 3rd quarter 2012. (iii) a change in the sectors covered by the investment program. (iii) project outputs or performance targets. the flexibility offered by the MFF modality had been related to the fact that if a change is considered a minor change. Manila. As for stand-alone projects. changes have also been 97. 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. and other sectors to date have been categorized as “minor.02. 5. (iv) implementation arrangements. concerned Director General (who may in turn delegate in writing the approval authority to an authorized director).

Scope changes in MFFs. hardware and software for transmission planning and operations. In reality the design of the hydrological monitoring and information system was dropped. 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. 95).a and rehabilitation or one hydropower plant was included. 2. Other types of changes constitute “minor” changes. . As per the MFF policy. designing of a hydrological monitoring and information system. a After it was realized that the hydrological data collection is in the purview of the central government. Source: Independent Evaluation Department. Originally. MFF = multitranche financing facility. 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. (ii) an undetermined postponement of the Batumi-bypass and withdrawal of government support for border facilities effectively cancelled tranche 2.The Working of the Modality Table 9: Tranche Project Changes MFF and Tranche particulars Tranche 1 of MFF03 (IND: Uttaranchal Power Sector Investment Program) Description of Tranche Project Change Originally included the setting up of four new small hydropower plants. 99. IND = India. This section was shifted to tranche 2. PAK = Pakistan. Therefore (i) a section of the Kobuleti bypass from tranche 1 was deleted. along with other projects. tranche 1 included a 29km bypass around Kobuleti to be implemented in three contracts. 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. the Qila Saifullah-Zhob road section was to be widened and improved in tranche 1. and consulting services in design and construction management. and are approved by the President. and (iii) the deleted Kobuleti-bypass section from tranche 1 was included in an unscheduled tranche 3. 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. Cost overruns after detailed design in tranche 1 and tranche 2 went beyond their financial. and 3 of MFF34 (GEO: Road Corridor Investment Program) Minor More than 100% cost overrun in capital cost of tranche 1 Kobuleti bypass. Originally. require Board consideration and Board approval (para.

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

OM Section H5/BP and H5/OP. Cost sharing. with an allocation of around $56. taxes and duties 104. 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. Refer to para. Box 8 provides illustrative examples. The East-West Highway Improvement Project. OM Section H3/BP and H3/OP. ADB’s share in project cost may exceed the country cost-sharing ceiling for a particular project. This was transferred to MFF14 under Tranche 2. 2012. and limited or nonrecourse financing to subsovereign or nonsovereign public sector entities). 72 73 74 .72 103. The highway sections deleted from tranche 1 were processed under a new tranche 3. 41 Although the inclusion of additional financing mechanism is feasible under MFF. and has been welcomed by clients. 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. Manila. Cost Sharing and Eligibility of Expenditures for ADB Financing. 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. The four-laning of the Ganja-Qazakh road was listed in the RRP. and leverages the programmatic orientation of the MFF. In addition to other project-related expenditures. Bank Policies and Operational Procedures. Manila. are also included as eligible expenditures for ADB financing in MFFs as well as other stand-alone modalities (other than policy-based lending. 73 Allocations or expenditures to cover taxes and duties are included for computing ADB’s share in the project cost. Additional Financing. A grant 71 Refer to para. Operations Manual. a Loans 2205-AZE and 2206-AZE. East-West Highway Improvement Project. 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). ADB = Asian Development Bank. as possible under tranche 2 under the MFF. so that its scope had to be reduced by the 39 kmlong Ganja-Bypass. MFF = multitranche financing facility. it has led to some situations where sufficient attention may not have been given to project design.a a stand-alone project previously supported by ADB. Operations Manual. The appraisal cost estimates were made without finalizing the highway alignment. 71 and for individual tranches within the MFF. Owing to the cost overruns.075 ($3 million) from Special Funds resources. 2011.4 million to replace the Ganja-Qazakh road. Source: Independent Evaluation Department. 66 of OM Section H5. 74 This provides additional and convenient flexibility when preparing the MFF investment and financing plans.The Working of the Modality existing MFF to raise its financing envelope. Although the inclusion of additional financing provided by ADB within the MFF modality is consistent with. By way of an example. the tranche 1 scope was reduced by 40 km. 65 of ADB. among others. AZE = Azerbaijan. RRP = report and recommendation of the President. approved 8 December 2005 in the amount of $49 million OCR. ADB is financing taxes and duties for a transport MFF in Afghanistan. ADB. also experienced high cost overruns. SDR2.

.75 75 ADB. 2011.42 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). Report and Recommendation of the President to the Board of Directors. Proposed Multitranche Financing Facility. Manila. Islamic Republic of Afghanistan: Transport Network Development Program.

and (iii) introduce measures for quality assurance of the MFF investment programs and tranche level investments. a sector or regional assessment will be prepared and submitted to the Board together with other MFF documents for Board consideration. 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). risk categorization.CHAPTER 5 Quality Assessment and Review The general guidance provided by the IEI document (footnote 4) had left many 105. as applicable. 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. A. Where significant sector or regional environmental impacts from the investments under an MFF are anticipated. gaps related to the design and functioning of MFF investment programs. ADB requires the client to undertake a strategic environmental assessment to identify mitigation measures to be built into MFF design. Among the more salient additional documentation requirements are ones that reflect rising concerns about safeguard compliance. 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. safeguard categorization. Additional documentation also facilitates third-party review and quality assurance. Many gaps that have been closed since then have also helped to address some Board concerns such as quality assurance and Board supervision. specify documentation requirements at the MFF and/or tranche levels. Such changes have been effected particularly to (i) improve the clarity on the structuring of MFF and MFF prerequisites. Coupled with this are quality assurance measures that include peer reviews. Guidance on the MFF Modality 106. and introduce measures for quality assurance OM (2010) OM (2010) Compliance . 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. clarify and provide guidance on the structuring of the MFF and MFF prerequisites. The provisions that call for additional documentation also in many cases help 107. Table 10 provides a brief overview of the major changes since the MFF modality was introduced. (ii) specify documentation requirements at the MFF and/or tranche levels. but consumes more staff time. and project readiness.

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

procurement. social. MRM = management review meeting.Quality Assessment and Review SI / OM Area of concern Details and implementing agencies is built upon. OM = Operations Manual. FFA = framework financing agreement. 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. intensive and professional as for stand-alone projects. as well as any representations and warranties included in the FFA. SI = staff instruction. Source: Independent Evaluation Department. director. 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. It should describe the client’s compliance with the undertakings. anticorruption. some Board members had noted that the modality poses some risks to proper implementation and accountability. SPD= Strategy and Policy Department. However. DMF = design and monitoring framework. regulatory. For the MFF: A checklist signed by the project team leader. At the time of mainstreaming. 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. financial. 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. SST = second and subsequent tranche. 45 SI (2006) Quality assurance SI (2011) Quality assurance SI (2006) Peer review and advice SI (2011) Peer review and quality assurance B. and (iv) regional departments should consider taking early standalone approvals from Management for advance actions in order to achieve the levels of project readiness required. The IEI team will also provide advice on demand at all stages of the MFF processing cycle during the pilot period. due diligence. economic. IEI = innovation and efficiency initiative. SRM = staff review meeting. The PFR is to confirm that the general understandings under the FFA remain valid. implementation. 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. 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. legal. safeguards. Due Diligence and Viability Analysis It is generally desirable that due diligence of MFF tranche projects should be as 108. MFF = multitranche financing facility. fiduciary oversight. procurement up to the contract award should be sought for SSTs). governance. PFRR = periodic financing request report. 109. commercial. . capacity. 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. (ii) safeguard actions are taken. and had requested ADB Management to supervise adherence to. PFR = periodic financing request. and other matters. and quality of.

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

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

3%. This is due largely to the fact that ADB’s own safeguards requirements are more stringent than those followed by its DMCs. MFF34 GEO: Road Corridor Investment Program Tranche 1 originally included the bypass around Kobuleti. After detailed design and realignment.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. However. ADB has supported capacity development related to safeguards in client organizations or program management units in about 50% of the approved MFF investment programs. the $70 million spent in tranche 1 is considered a “sunk cost. In some cases. Source: Independent Evaluation Department. sources it externally by engaging consultants. or when concerned about the overall viability of the project. 3. the estimated increase in other benefits is questionable. As part of the nonphysical investment component. Safeguard Policy Statement. 2009. In some cases. the EIRR for tranche 1 scope. ADB either provides the necessary expertise or 120. EIRR = economic internal rate of return. while the EIRR is only a little above the threshold. This reflected increase benefits in terms of (i) about 100% increase in time savings benefits. it suffered cost overruns. (ii) 12 fold increase in avoided accidents-related benefits. and (iii) a traffic increase from 3775 vehicles per day (base year 2006) to 7. RRP = report and recommendation of the President. 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.8%. . Manila.254 vehicles per day (base year 2008) in one of the highway sections. the recalculated EIRR for the Kobuleti bypass is estimated at 12. in this recalculation. GEO = Georgia.6 million per kilometer to $6. Policy Paper. the new Masali-Astara expressway. 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. rather than pushing for a deepening of the analysis. It is noteworthy that passenger time savings account for a large share of the total benefits. 84 ADB.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. After additional financing through tranche 3. While the revised traffic estimates are based on new traffic counts. was 12.” 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. 119.9%. MFF = multitranche financing facility. the revised EIRR was shown as 12. After more than doubling the cost from $2.4 million per kilometer. and a part of the bypass was then to be funded through tranche 3. Safeguards Compliance and Due Diligence For safeguards due diligence.

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

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

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

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

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

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

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

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

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

then the projected/planned tranche approval amount is taken from the most recent CPS/COBP.269 71% Indonesia Water 4 200 2% Kazakhstan Transport 980 1. including MFF tranche approvals. PNG = Papua New Guinea. Please note that the actual MFF tranche approvals fell short of the projected levels.711 14% Water 138 311 44% ADB = Asian Development Bank. b a 3. 157.315 1.485 3. are not included. it may also be useful to understand the implications for policy dialogue and capacity development. c MFF tranches account for 100% of the pipelined approvals projected in the CPS/COBP documents.051 2. Source: Independent Evaluation Department.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).074 51% Transport 390 2. In addition to approvals for physical investments. MFF = multitranche financing facility. and that all actual approvals during the 2009–2011 period are MFF tranche approvals. In some sectors and countries where the MFF modality has penetrated rapidly and accounts for a major share (say. also includes approvals for nonphysical components. PRC = People’s Republic of China.075 91% Mongolia Transport 44 146 30% Pakistan Energy 1.142 66% Water 90 113 80% Armenia Transport 277 324 85% Azerbaijan Transport 455 496 92% Water 375 375 100% Bangladesh Transport 281 1. To the extent necessary.004 28% Georgia Transport 347 377 92% Urban 118 118 100% India Energy 2. as follows: (i) . Refers only to tranche approvals.201 12% Uzbekistan Transport 486 658 74% Water 258 313 82% Viet Nam Energy 1.315 100% Transport 524 525 100% Water 40 54 73% PNG Energy 57 57 100% Transport 196 530 37% PRC Energy 151 774 20% Transport 650 5.279 43% Water 897 1. it may be useful to consider other options for strengthening policy dialogue for such sectors and countries.467 72% Transport 1. MFF portions that are not converted to tranches. 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. During 2005–2011. Capital Headroom ADB’s Treasury Department (TD) models MFFs in the OCR balance sheet on the 158.396 3. Source: Independent Evaluation Department. c Refers to all sovereign lending operations. basis of actual and projected data provided by other ADB departments. more than 75%) of all approved assistance since MFF began to be piloted (see Table 13).

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

114 so as to address rehabilitation of priority physical and social infrastructure. MFF investment programs lock up future finances. 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%. At the conclusion of the subscription to the fifth general capital increase in 31 December 2011. annual OCR lending approvals could be restricted to less than the levels approved in 2009–2011. equity. flooding.2 billion was for paid-in of which $4. $8. volcanic eruptions. in addition to projections for loan repayments. crowd out other financial products from OCR lending. However. 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. response includes needs for emergency assistance quickly following a disaster. . cyclones. MFF investment programs lock up future finances. oil spills. tidal waves. This need not be a cause for concern during times when ADB’s capital adequacy is high and rising. and increase in paid-in capital to $8. and catalyze economic activity.113 This could diminish ADB’s ability to mount crisis-response operations. ADB’s capital adequacy has been declining over the past few years. the subscribed capital had increased to over 10. valued at $162. the DMC has little reason to cancel or state that it will not avail of any leftover portion of an approved MFF envelope. or epidemics: (ii) technological or industrial accidents such as explosions.5 million shares. and contribute to the depletion of capital headroom Where the MFF is from OCR resources. Therefore. revitalize basic services (such as education and healthcare). Crisis161. or nuclear reactor leaks. Source: Independent Evaluation Department.7 billion was paid as of 31 December 2011. Disasters may be caused by (i) natural events such as earthquakes. etc. guarantees. chemical mishaps. or (iii) conflicts of any type. direct cost implication on an OCR-financed MFF from the portion that has not been converted into a tranche loan. droughts. 112 Inspite of subscriptions to General Capital Increase V. it is anticipated (as of end-November 2012) that within a few years.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.2 billion by December 2011.5 billion. there is no commitment charge or any 160. In addition. and loan loss reserve. and/or is projected to continue falling over the next few years. such as regional/national civil wars. and contribute to the depletion of capital headroom. crowd out other financial products from OCR lending. hurricanes. widespread community violence. Effectively then.

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

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

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

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

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

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

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

This situation highlights the difficulties—under existing or generally accepted practices and processes for CPS. a re-examination of economic viability would most likely lead to significant delays in tranche approval and is therefore not done. by themselves. although in many instances. the MFF time lines are longer than for stand-alone projects. The fact that nearly 50% of all second and subsequent tranches approved thus far. Dovetailing of tranche approvals for approved MFFs within the country annual 187. the Economics and Research Department obtains a PFR report for commenting at a late stage. For the 66 MFFs approved until December 2011. the median utilization period is 7. and to form a basis for tracking and reporting performance at the MFF and tranche levels. resource envelope has been difficult. Each MFF is usually expected to have three or more tranches. the memorandum is not required to be circulated to the Economics and Research Department for comments. when the PFR report is nearing finalization. and compliance with undertakings. and MFF approvals have an impact on headroom . MFF investment programs span two or three CPS periods. COBP. The scorecard system used to rate MFFs can also be refined in the coming years with the introduction of more sophisticated approaches for evaluating. Even though some tranches overlap. However. 8. However. tranche performance. which is part of the team processing an MFF tranche. and PFRR preparation—in dovetailing MFF-related data into the CPS and COBP preparation process. Board Oversight over Long MFF timelines Time lines of MFFs are significantly longer and the MFF financing envelope is 185.6 years. Economic due diligence of tranche projects must be rigorous. across all MFF investment programs. for some sectors and some countries. significantly larger than for other lending modalities. MFFs have contributed to difficulties in lending planning and financial projections. with an average of about 7. However. 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 utilization period of nine approved MFFs is 10 years or more. the projected MFF tranche approvals in a given year can exceed the CPS financing envelope for that sector. At this stage. Self-evaluations and independent evaluations of completed MFFs will necessarily have to take place very long after their approval. MFF RRP. In many cases.68 Real-Time Evaluation Study of Multitranche Financing Facility 184. on a regular basis. 7. Therefore. the Economics and Research Department also reviews the economic analysis. the linkages between MFF and tranche-level DMFs continue to be weak (although there has been some improvement since 2009). Where a minor or major change is effected in tranche projects. The required facility-wide and tranche-level DMFs are intended to generate the right information for oversight. only one or two tranches have been approved thus far. Portions of MFF financing envelopes that are not converted to tranche loans have increased each year. MFF delays. the CPS and COBP do not provide a good basis for advance information to the Board on MFF-related matters. A coherent set of performance indicators may not be used to track performance across tranches and at the facility level.8 years. Lending Planning and Financial Projections 188. information for Board oversight. In addition to inputs from an economist. and the MFF financing envelope is normally significantly larger. MFF performance reports to the Board can be improved to provide adequate 186. have been approved in the December bunching season means the Management does not have sufficient time for review and oversight.

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

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

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

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

Lessons. and Recommendations 73 Appendixes .Key Findings.

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

7. preparation of subsequent projects.6 32. 2012.28a 971 1670 2160 3571 4051 4462 16. eligibility criteria and decision making filters.” Sources: Asian Development Bank database and ADB.3 19. 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. Manila.1: Multitranche Financing Facility Approvals Approved MFF Financing Envelope Number of Amount Year MFF Approvals ($ million) 2005 2 1. The overall facility amount is not a legally binding commitment on ADB or its clients. The MFF modality was originally meant only for investment projects—although a few policy-based loans have also been included in recent years.889 % MFF Tranche Amount Approvals to Total Loan Approvals -17. About the MFF 5. An MFF is a financing modality made available by ADB to its clients to support their medium.193 2010 12 4. approved on 13 December 2005. Earlier tranches can be designed to facilitate the implementation of subsequent tranches. Policies can be refined.938 Approved MFF Tranche Amount ($ million) 3.to long-term investment programs or investment plans. Some MFF tranches have also been used to finance cost overruns from other ADB interventions. only the converted loans are.g.718 2009 12 6.436 2011 13 6. sequential components of large stand-alone projects. This was approved along with MFF02 “National Highway Development Sector Investment Program.7 -. (ii) tranches of sector investment programs over a long time frame.5 22. ADB Management expects that the MFF potentially provides ADB and its clients with multiple entry points for policy dialogue within a specified utilization period. risks addressed. MFF = multitranche financing facility. Following Board approval. in turn. 6. 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. and (ii) a number of discrete but same type of projects that are repeated at different locations with different executing/implementing agencies (e. 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. and reporting arrangements. for institutional strengthening..= not available.7 37. 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.4 Tranches of sector investment programs. the Board approves a maximum amount for each proposed MFF.024 2008 12 5. urban infrastructure projects). Multitranche Financing Facility Annual Report 2011.520 2006 8 3. 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).237 Total 66 31.810 2007 7 4.5 26. and capacity development.6 33. and (iv) guarantees. MFF interventions are broadly classified as follows: (i) discrete. a Refers to Asian Development Fund (ADF) Loan 2210-PAK from Special Fund Resources. (iii) financial intermediary credit lines. As originally conceived in the IEI document. The first tranche can include (but is not limited to) the financing of advisors for the implementation of the first project. Under this facility. B.Overview of the Multitranche Financing Facility Modality 75 Table A1. . and safeguard frameworks adjusted to consider specific issues. undertakings.

1 and A1.2 present respectively process flow diagrams for (i) the MFF and the first periodic financing request (PFR). MFF = multitranche financing facility.2.76 Appendix 1 8. Source: ADB. To what extent this belief is justified is at best unclear even today. 5 Refer to footnote 2 (paras.1 and A1. FFA = framework financing agreement. DG = director general. such as (i) more opportunities for interaction with clients on sector issues and trends. and (iii) more opportunities to modify implementation plans while work is in progress. Figures A1.1: Flow Chart for Processing MFF and First PFR Concept Processing and Clearance Board Approval Post Approval Activities Concept clearance by VP Fact Finding • Draft RRP • Draft FFA • Draft PFR Submit to the Board •RRP •Signed FFA* •Signed PFR Memo to the President through VP requesting approval of the tranche and legal agreements Legal agreements to be signed by client and ADB within 12 months of Board approval of MFF Interdepartmental circulation MRM Appraisal •Update draft RRP •Update draft FFA •Update draft PFR Interdepartmental circulation SRC VP authorizes negotiation of legal agreements and execution of FFA •Negotiate FFA. some of the steps are now normally carried simultaneously (e. a fact-finding mission may be combined with completion of PPTA work (i. 9. Figure A1. PFR.. which can be made available during the implementation phase. It is important to note that the new business processes introduced in 2010 entail the same steps as outlined in Figures A1. ADB believes that in the processing of an MFF and its multiple tranche loans. PFR = periodic financing request. and related legal Agreements •Sign FFA – DG/CD •Sign FFA & PFR Client •Finalize RRP CD = country director. and (ii) second and subsequent PFRs. 2008. RRP = report and recommendation to the president. Manila..e. SRC = staff review committee. (ii) more opportunities to address policy and procedural gaps.g. Mainstreaming the Multitranche Financing Facility. VP = vice president. 52 and 53).5 freeing staff time. MRM = management review meeting. ADB and its clients can expect significant time and related resource savings vis-à-vis stand-alone projects. . This would come with other associated benefits. project feasibility study).

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

etc. Table A1. start-up delays. financing plan.2 lists the key requirements for MFF design at present. and decision-making criteria and filters. 1 2 3 4 5 B. given that the first MFF approvals occurred in December 2005. contractors’ unresponsiveness. Table A1. 6 Facility completion reports are also expected to be prepared as and when ongoing MFF’s begin to close. 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. due diligence services. Manila. The tranche must have a physical investment component (Note: if nonphysical investment alone is required. Otherwise. etc. type of investment. Factors Affecting MFF Performance 11. 14–24). An investment program proposed for MFF should first be checked for eligibility on this basis. Staff Instructions for the Multitranche Financing Facility. as of now. policy framework. Operational Manual Section D14 issued on 18 May 2010. past implementation records. Much of the information regarding progress of approved MFFs and their tranches is available through the project performance information system and e-Operations. Manila. the MFF tranche projects are also affected by factors such as insufficient institutional capacities.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. 2011.8 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. Although there should be a completion report for each MFF tranche. subsector. strategic context. and that infrastructure projects normally take 3–5 years or more to complete. investment program. 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. and merits of the proposed MFF The first tranche should not exclusively finance detailed design.) that is sufficient to understand the scope and financing of subsequent tranches. then other modalities should be used. Besides.78 Appendix 1 10. 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. 1. 6 7 6 7 8 9 This is not unusual. the RRP should contain indicative information (geography. 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. director. few tranches have closed and few tranche completion reports are available. ADB. capacity development. such as TA loan or a project design advance (PDA) A. ADB. 2010. Refer to footnote 9 (paras. . as for investment projects funded supported by ADB through other modalities. etc. undertakings.

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

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

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

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

APPENDIX 2: EVALUATION ISSUES AND INFORMATION REQUIREMENTS Table A2. sector roadmap. does the MFF effectively reduce to a mere “standby line of credit” type facility? Does ADB revisit the policy agenda during the course of the MFF? Does increased use of the MFF modality have any implications for use of TA resources.? 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 . 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. due diligence. investment program. etc. 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. 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. financing plan. the client. and the dynamic among ADB. policy framework.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.

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

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

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 .

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

051 57 1. Grant. AFG = Afghanistan. OCR = ordinary capital resources. PRC = People’s Republic of China.90 Appendix 3 MFF Total OCR ADF No.060 Grant Source 400 ADF 787 ADF. a Refer to Table A3. ARM = Armenia. W & WSS = water and water supply and sanitation.483 375 15. BAN = Bangladesh.= not available.359 200 1. PSM = public sector management.167 1.368 5.000 1.000 55 GEO 500 250 250 64 IND 200 200 0 Total 31. MON = Mongolia. MFF = multitranche financing facility. UZB = Uzbekistan. PNG = Papua New Guinea.787 ANR 217 498 50 765 PSM 130 130 Energy 150 2.= not available.1 for the approved MFF Investment Programs.246 W & WSS and Others 821 138 791 1. AZE = Azerbaijan. Technical Assistance. VIE = Viet Nam.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. and Equity Approvals.709 252 6. GEO = Georgia.3: MFF Tranche Approved Amount per Sector for Years 2005–2011 – ($ Million) Country/ Region PRC India VIE PNG CWRD Others Total Total 800 6. IND = India.750 .561 1. AITF = Afghanistan Infrastructure Trust Fund.000 42 UZB 600 240 360 43 GEO 300 135 165 47 KAZ 800 800 53 VIE 636 636 52 VIE 540 540 56 ARM 400 220 180 58 IND 200 200 59 UZB 500 320 180 60 IND 500 500 63 AFG 787 65 MON 170 100 70 Water and Other Municipal Infrastructure Services 6 IND 270 270 12 IND 300 300 15 IND 273 273 18 IND 350 350 28 PAK 300 150 150 30 IND 200 200 32 AZE 600 600 36 UZB 300 300 46 IND 250 250 54 VIE 1. CWRD = Central and West Asia Department.074 2. PAK = Pakistan. AITF . Grant.000 1.938 27. Table A3. DMC = developing member country. ADF = Asian Development Fund. ANR = agriculture and natural resources.559 Finance 150 150 Transport 650 1. PRC = People’s Republic of China. Source: Asian Development Bank database on Loan. . Source: Asian Development Bank database on Loan.476 325 6. and Equity Approvals. MFF = multitranche financing facility. KAZ = Kazakhstan.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 2.210 390 195 3. Technical Assistance. VIE = Viet Nam. PNG = Papua New Guinea.188 Multisector 1.

MFF = multitranche financing facility. CWRD = Central and West Asia Department.050 135 13 886 1.768 3. PSM = public sector management.128 PSM 0 200 690 0.996 19. W & WSS = water and water supply and sanitation.555 5. CWRD = Central and West Asia Department.6 Others 0 150 561 45 315 1.0 760 2.758 1. and Equity Approvals.1 120.216 10.152 2. ANR = agriculture and natural resources.792 390 7. Source: Asian Development Bank database on Loan. W & WSS = water and water supply and sanitation. Source: Asian Development Bank database on Loan. Source: Asian Development Bank database on Loan.261 ANR 1.955 2.516. PSM = public sector management. PNG = Papua New Guinea. ANR = agriculture and natural resources.0 1.5: 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 - .851 Transport 4.662 Urban 285 0 125 0 67 400 877. Grant. MFF = multitranche financing facility. PSM = public sector management.6: Non-MFF Approved Amount per Sector during 2005–2011 ($ Million) 2 Country/ Region PRC India VIE PNG CWRD Others Total Total 9.= not available. PRC = People’s Republic of China.698 7.166 372 45 0 151 928 2.626 5. VIE = Viet Nam.861 48.049.= not available. PNG = Papua New Guinea. Grant.226 332 780 2. W & WSS = water and water supply and sanitation. Technical Assistance. MFF = multitranche financing facility. . and Equity Approvals. Grant. Table A3.669 Multisector 1. VIE = Viet Nam.834.162 12. VIE = Viet Nam.0 175.5 Finance 0 1. Technical Assistance. PRC = People’s Republic of China. Technical Assistance.0 0.973.Multitranche Financing Facility Approved by Sector 91 Table A3.266 46 819 0 368 629 3.0 2. Table A3. and Equity Approvals.9 6.4: 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 . PNG = Papua New Guinea. CWRD = Central and West Asia Department.213 W& WSS 1.017 0.803 Energy 605 732 1.596 4.223 ANR = agriculture and natural resources.5 3. PRC = People’s Republic of China.

Grant.6 Others 0 150 43 23 63 48 49 ANR = agriculture and natural resources. . PRC = People’s Republic of China.7: Number of Non-MFF Loans Approved per Sector during 2005–2011 – Country/ Region PRC India VIE PNG CWRD Others Total Total 66 22 57 11 85 226 467 ANR 16 1 13 0 12 21 63 PSM 0 3 5 0 19 35 62 Energy 5 3 4 0 8 25 45 Multisector 11 2 6 0 12 29 60 Finance 0 2 2 1 6 21 32 Transport 20 7 11 8 15 37 98 W& WSS 11 3 1 0 5 25 45 Urban 3 0 2 0 3 9 17 Others 0 1 13 2 5 24 45 ANR = agriculture and natural resources. CWRD = Central and West Asia Department. CWRD = Central and West Asia Department. W & WSS = water and water supply and sanitation. PNG = Papua New Guinea. Technical Assistance. Table A3. W & WSS = water and water supply and sanitation. and Equity Approvals. Source: Asian Development Bank database on Loan. PNG = Papua New Guinea. MFF = multitranche financing facility. Grant.92 Appendix 3 Table A3. PSM = public sector management. Source: Asian Development Bank database on Loan.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. VIE = Viet Nam. MFF = multitranche financing facility. PSM = public sector management. Technical Assistance. and Equity Approvals. VIE = Viet Nam. PRC = People’s Republic of China.

878 1.443 1.904 3.836 4.098 1.671 2.132 1.934 1.1: 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.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) 1.269 2.486 1.775 2.645 2.200 1.285 1.588 2.026 2.976 2.116 1.329 2.287 3.939 3.016 1.006 1.799 3.373 1.347 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 .242 1.090 3.652 2.036 2.915 1.049 1.206 1.828 1.614 1.621 2.800 2.APPENDIX 4: TRANCHE IMPLEMENTATION PERIODS Table A4.026 1.220 2.208 3.539 1.166 1.836 2.823 1.280 1.208 648 1.652 4.221 2.570 1.

291 1.981 1.795 1.300 1.660 3.664 1.519 2.578 1.477 1.036 1.316 1.078 2.210 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 .092 1.113 2.409 3.895 1.441 757 913 2.387 1.487 2.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) 1.827 2.670 921 5.666 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.306 2.142 1.495 1.061 1.202 3.945 1.544 2.426 3.751 3.838 3.651 2.920 1.111 848 3.658 3.988 1.016 1.610 2.830 2.559 1.665 2.373 1.387 1.915 1.132 2.374 2.

728 1.390 1.557 2.052 3.645 2.643 1.187 2.384 1.728 353 1.682 1.470 3.172 2.754 2.085 2.a 31 32 32 32 33 33 33 34 34 34 34 35 35 35 36 36 36 36 37 37 37 37 38 38 38 38 39 39 40 40 40 40 41 41 42 42 42 43 43 44 44 45 45 45 46 46 46 47 47 48 48 49 49 MFF# Tranche MFF31 T1 MFF32 MFF32 T1 MFF32 T2 MFF33 MFF33 T1 MFF33 T2 MFF34 MFF34 T1 MFF34 T2 MFF34 T3 MFF35 MFF35 T1 MFF35 T2 MFF36 MFF36 T1 MFF36 T2 MFF36 T3 MFF37 MFF37 T1 MFF37 T2 MFF37 T3 MFF38 MFF38 T1 MFF38 T2 MFF38 T3 MFF39 MFF39 T1 MFF40 MFF40 T1 MFF40 T2 MFF40 T3 MFF41 MFF41 T1 MFF42 MFF42 T1 MFF42 T2 MFF43 MFF43 T1 MFF44 MFF44 T1 MFF45 MFF45 T1 MFF45 T2 MFF46 MFF46 T1 MFF46 T2 MFF47 MFF47 T1 MFF48 MFF48 T1 MFF49 MFF49 T1 Country PAK AZE AZE AZE AFG AFG AFG GEO GEO GEO GEO ARM ARM ARM UZB UZB UZB UZB IND IND IND IND IND IND IND IND PNG PNG PRC PRC PRC PRC VIE VIE UZB UZB UZB GEO GEO IND IND IND IND IND IND IND IND KAZ KAZ KAZ KAZ IND IND Sector EN WSS WSS WSS ANR ANR ANR TC TC TC TC TC TC TC WSS WSS WSS WSS OTHERS OTHERS OTHERS OTHERS EN EN EN EN TC TC TC TC TC TC PSM PSM TC TC TC TC TC UR UR ANR ANR ANR OTHERS OTHERS OTHERS TC TC FIN FIN ANR ANR Approval Date 22-Sep-09 14-Oct-09 14-Oct-09 22-Dec-11 06-Oct-09 06-Oct-09 06-Oct-09 06-Oct-09 06-Oct-09 07-Dec-10 22-Dec-11 06-Oct-09 06-Oct-09 21-Dec-10 08-Oct-09 08-Oct-09 21-Apr-10 07-Dec-11 27-Nov-09 27-Nov-09 14-Dec-10 01-Dec-11 27-Nov-09 27-Nov-09 05-Oct-10 04-Nov-11 01-Dec-09 01-Dec-09 15-Dec-09 15-Dec-09 14-Dec-10 20-Jul-11 14-Jan-10 14-Jan-10 21-Apr-10 21-Apr-10 31-Mar-11 21-Jul-10 21-Jul-10 18-Aug-10 18-Aug-10 24-Sep-10 24-Sep-10 19-Dec-11 04-Oct-10 04-Oct-10 15-Dec-11 20-Dec-10 20-Dec-10 04-Nov-10 04-Nov-10 06-Oct-10 06-Oct-10 Duration (days) 1.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.091 2.208 2.390 2.187 3.008 1.554 1.307 2.389 2.263 2.111 1.152 1.860 656 2.093 2.093 2.473 3.151 1.508 1.201 1.851 1.373 1.017 3.461 2.177 1.596 2.109 2.836 1.868 1.355 2.043 3.652 3.041 1.153 3.836 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 .355 2.883 1.258 1.

447 2.990 1.272 2.201 2. Impl = implementation. KAZ = Kazakhstan.436 1.324 1. Grant. UR = urban . MON = Mongolia. PAK = Pakistan. PRC = People’s Republic of China.416 2.1 for the approved MFF Investment Programs. VIE = Viet Nam. IND = India. Source: Asian Development Bank database on Loan. TC = transport and communications.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) 2.046 3.324 1.440 1.447 2.416 3.478 2. PNG = Papua New Guinea. BAN = Bangladesh.324 1. .566 2.382 2.990 1.037 941 2.998 2.96 Appendix 4 Tranche Implementation Period as % of MFF Utilization Period 59 100 108 100 50 69 70 53 MFF No.879 1.447 1.631 2.958 2. a Refer to Table A3. WSS = water supply and sanitation. EN = Energy. GEO = Georgia. MFF = multitranche financing facility.302 1. Technical Assistance.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.910 1. ARM = Armenia.850 2.524 1.302 2. UZB = Uzbekistan.272 2.290 1. AZE = Azerbaijan.017 3.676 1. ANR = agriculture and natural resources. INO = Indonesia. and Equity Approvals.990 1.566 3.940 844 2.324 1.

urban roads. and at approval across tranches in the same MFF. water distribution pipelines. or efficient household lighting in one tranche and power plant efficiency improvement in the next tranche). 20). power transmission in one tranche and power distribution in another. 97 1 2 For analytical purposes. 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. 04. it has similar projects.. 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). Besides. 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).g. To what extent the projected end of the MFF utilization period can be considered reliable. it is considered that each tranche has dissimilar projects. 03. . and the actual date of effectivity of the same grant or loan. 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). 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 utilization period has been (or is being) extended. these projects were reasonably well prepared by the time MFF63 was approved. national highways). 1 The extent to which attention has been paid to project readiness at approval across countries and sectors. 2 To what extent the projected tranche closing dates can be considered reliable. The large variation in time-lag between actual approval of a grant or loan. it is considered that if each tranche has projects in the same subsector (e.Tranche Implementation Periods 1. If the projects in different tranches of the same MFF cover different subsectors (for instance. given that scope changes have been affected for a large number of tranches. power distribution. given that in a significant number of MFFs nearing completion (MFF numbers 01.

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 1.2% 24.3% 47.5% -52.644 -452 653 1.9% 102.9% 59.1% 41.4% 9.566 998 121 959 773 1.8% Time Elapsed between 30% Disbursement and Effectivity (% of Tranche Duration) 38.003 25 118 720 118 686 138 232 532 547 45 Time Elapsed between 10% Disbursement and Effectivity (% of Tranche Duration) 21.086 124 940 390 573 703 921 197 Time Elapsed between 20% Disbursement and Effectivity (% of Tranche Duration) 31.4% 68.464 956 1.2% 13.2% 39.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.4% 45.6% 42.7% 26.4% 50.5% 35.9% 34.6% 35.2% 38.3% -39.1% 10.212 313 1.6% 8.5% Time Elapsed between 20% Disbursement and Effectivity (days) 587 50 -439 -126 -1.640 1.1% 43.1% 4.5% 8.6% 103.9% 9.2: Time elapsed from Effectivity to 10%.4% 60.8% 59.1% 49.7% 2.5% .1% --39.3% 48.9% 138.3% 16.380 112 579 277 1.609 109 1.299 515 1.3% -18.5% 11.654 317 318 847 233 289 460 1.0% 53.7% --39.6% 17.0% 11.5% 19.146 --609 793 1.8% 28.2% --26.9% 73.9% 14.8% 42.98 Appendix 4 Table A4.0% 30.9% -29.3% 6.1% 63.2% 40.1% -45.177 333 548 516 -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 -1.6% 20.0% 3. 20% and 30% disbursements for selected MFFs and Tranches Loan No.4% -10.4% 26.1% 26.8% 11.1% 19.345 423 673 631 --812 910 -140 152 1.5% 50.2% 30.6% 18.4% 24.7% 50.6% 40.5% 20.4% 42.7% -12.6% -76.1% 102.9% -63.2% 28.8% -4.1% 12.6% 42.1% 21.9% 3.4% 29.1% 40.4% 41.7% 10.3% 6.0% 42.

3% 48.6% 7.6% 48.2% -33.9% -- 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) 30.8% 2.5% 12.2% 35.8% 3.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.7% -23.5% 10.5% 42.6% 42. INO = Indonesia.3% 11. AZE= Azerbaijan.3% 14. PAK = Pakistan.1 for the approved MFF Investment Programs. UZB = Uzbekistan. PNG = Papua New Guinea.8% 27. MFF = Multitranche Financing Facility.7% Time Elapsed between 30% Disbursement and Effectivity (% of Tranche Duration) 40.3% 33.0% 11.6% 31.5% 27.2% 16. GEO = Georgia.9% 30.1% 5. are not available for when those loans first reached 10%.7% -- Tranche Implementation Periods ARM = Armenia. VIE = Viet Nam. PRC = People's Republic of China.8% 15.5% 8.Loan No. 20% and 30% disbursement.1% 26.8% 9. 99 . KAZ = Kazakhstan.8% 32.6% ---26.8% 45.2% 31.1% 24.4% 0.2% --0.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) 25.6% 29. Source: Based on data provided by Central Operations Services Office.2% 49.3% 13.5% 33.8% 19.2% 31.1% 36.0% 31. IND = India.9% -20.4% 51.4% 17.0% -15.3% -25. BAN = Bangladesh.9% 53.6% 13.3% 14.4% -15.7% 26.5% 35.6% 63.2% -33.6% 12.2% 39.3% 39. time value dates for MFF loans not listed above.7% -29.6% 9.7% 26.2% --28.5% 46.9% 22. a As per information available from COSO.6% 0.1% 18.6% 49.9% 13.0% 63.0% -17. b Refer to Table A3.8% 37.6% 24.5% 36.

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

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

However. D. In yet another instance. while the RRP is reported to have been circulated to the Board on 7 September 2010. eOps only provides data on elapsed time.102 Appendix 5 C. RRP = report and recommendation of the President. and does not include any information on staff time actually spent or allocated for specific activities and sub-activities. For instance. Table A5. negotiations completed a day earlier on 11 April 2011. With a view to obtaining some information on the level of effort (LOE) in preparing and processing MFFs and tranches. Source: Independent Evaluation Department. the elapsed time required between certain milestones. MRM = management review meeting.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 = multitranche financing facility. MFF fact-finding is reported to have been completed on 12 April 2011. SRM = staff review meeting. The eOperations (eOps) database covers all sub-activities that go into preparing and processing of MFFs as well as individual tranches. where the MFF fact-finding and negotiations were concluded on 19 August 2011. 7. FFA = framework financing agreement. A quick analysis also reveals the wide variations in the data. 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 8.2). A cursory glance at the compiled data shows a large number of gaps (see Supplementary Appendix A). the fact-finding mission is reported to have been finished in July 2006 and the MRM/SRM was in March 2007. such as timeline for performing various tasks and achieving specific . and even the incidence of negative elapsed time between two milestones or other seemingly inexplicable sequences of events. 6. Another example is MFF66 for the energy sector in Viet Nam. 5. while FFA negotiations were concluded in June 2011. The eOps database also includes corresponding activities for preparation and processing of stand-alone project loans. PFR = periodic financing request. while MRM/SRM was held a month later on 20 September 2011. eOperations Database 4. a second MRM/SRM convened on the same day. 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. PPTA = project preparatory technical assistance. for MFF47 for the transport sector in Kazakhstan. MFF58. IED conducted an online survey on team leaders that had prepared and processed MFFs and tranches. The evaluation team also took this opportunity to compile other useful information through the survey.

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

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

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

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

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

but there was no further clarification on what these agencies might be. other sources of financing identified include "Other Financiers"." In the DMF. i.. cofinancing under Carbon Market Initiative is a possibility. In the DMF. "if the Government requests. in the DMF. other sources of financing for the Investment Program include "other financial institutions." In the RRP (main text). "India may request." In the RRP. cofinancing is being sought for SSTs. 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 . domestic banks were identified as one of the financing sources." In the RRP (main text). cofinancing was referred to as a possibility. "Others.a 1 2 Country IND PAK RRP (Main Text) Yes Yes RRP (DMF) No No FFA No No Remarks In the RRP (main text) and FFA. "Other Funding Agencies" and "Private Sector" were identified. Other sources of financing include local market and foreign borrowing.e.APPENDIX 6: COFINANCING Table A6: References to Cofinancing in RRPs and FFAs of Approved MFFs MFF No. In the RRP. cofinancing was referred to as a possibility.. In the DMF: "Other external financiers" for the Investment Program was identified as another financing source. "other agencies" were identified as one of the financing sources. In the main text. other sources of financing include sub–borrowers. In the RRP. cofinancing was referred to as a possibility—"may be mobilized in the future" "Others" was identified as one of the financing sources. "Other International Financial Institutions or Bilateral Financial Institutions" was identified as another financing source for the Investment Program. The latter include bilateral and multilateral contributions and funds that will be raised from international capital markets. In the RRP. other sources of financing include the private sector and other financial institutions In the DMF and FFA. "private institutions" were identified as another financing source. In the DMF. in the DMF. cofinancing for SSTs was "actively being sought. In the DMF. In the RRP (main text). i." In the RRP (main text). but there was no further clarification on who they might be. cofinancing for energy efficiency and alternative energy projects was deemed possible under the Kyoto Protocol.e.

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

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

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

Computations are shown for three MFFs that include (i) MFF13. For sake of simplicity.e.3 entail some simplifying assumptions. 2 As ADF grants do not come with any commitment fees. and actual or scheduled disbursement dates. 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).e. the four are financed through one loan. Table A7. Commitment Fee Savings Estimates 5. Commitment fee savings estimates presented in Table A7. the underlying assumptions effectively are that (i) during the time the MFF is being implemented.. 2 and (ii) all required data are available. Although this threshold for project readiness may vary vastly across executing agencies in different sectors and countries. and (ii) MFF20 and MFF38. particularly the tranche loan approval amounts and tranche loan signing dates for all tranches that have been approved thus far. the loan disbursal pattern will remain the same (i. 6.3 shows the commitment fee savings for selected MFFs where (i) more than one tranche loan has been approved under the MFF investment program. are not available. all commitment fee savings estimates are for tranche loans.112 Appendix 7 B. 7. i. 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. these are financed through a single loan. any particular executing agency continues to function essentially in the same way. In Scenario 3. it becomes possible to arrive at a reasonable estimate of commitment fee savings even if data on actual disbursements. the MFF comprises four tranches to finance four similar projects. Scenario 2 is similar to Scenario 1. disbursal amounts vs elapsed time profile will not vary with the loan signing date). while in the alternative mode. in the alternative stand-alone mode. .2 shows that in all scenarios..2. the commitment fee savings are estimated for MFFs under which all tranche loans were negotiated after January 2007. the most important being that (i) the alternative scenario remains a large stand-alone loan. In Scenario 1. one for detailed project design and the other for project construction. With such assumptions. Commitment fee savings are estimated for three hypothetical scenarios in Table A7. except that the design phase gets extended. the commitment fee savings are negligible. which are smaller than the average size of stand-alone projects in those countries. This effectively means that any executing agency would prefer to sign a loan agreement only when a certain level of project readiness is achieved. when a flat commitment fee rate began to be applied. Table A7. which supports one large project. the MFF comprises two tranches.

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

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

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

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 0.14 IND = India. . PRC = People’s Republic of China. T2 = second tranche. Technical Assistance. a Refer to Table A3. Source: Asian Development Bank database on Loans. T3 = third tranche. MFF = multitranche financing facility. RRP = report and recommendation of the President.18 0. Total MFF Envelope ($ million) Planned as per MFFRRP Actual Loan/ Grant Signing Date Elapsed Time between Loan Signing Dates of T1 and SSTs (days) Commitment Fee Savings for MFF ($m) Commitment Fee Savings from MFF (% MFF envelope) 1127 547 1141 336 742 4. T1 = first tranche. and Equity Approvals. SST = second and subsequent tranches.1 for the approved MFF investment programs. Grant.45 MFF No.116 Appendix 7 Table A7.25 0.a Energy 13 13 20 20 20 38 38 38 VIE VIE PRC PRC PRC IND IND IND 0. VIE = Viet Nam.25 0.3: Commitment Fee Savings Estimates for Selected Energy MFFs MFF Tranche Country Loan/ Grant No.

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

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

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

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

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

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

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

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

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

It will also define and execute a program to help improve strategy and policy formulation and planning. Capacity development will cover (i) planning and formulation of policy. The government requested ADB to provide a technical 21. 24. and reporting systems at the federal.000 on a grant basis. and (ii) governance of public sector enterprises. accountability. revenue mobilization efficiency. and incentives to facilitate private sector investment. procurement. monitoring. and implementation agency levels. building human resources. equity of public resource use. and financial reporting. quality of public administration. safeguards. and environmental sustainability). commercial. this compilation may not be suitable for the purpose of understanding institutional capacity strength from the viewpoint of suitability for administering the MFF. The TA fits over and above the capacity development component accompanying the MFF. (ii) coherence of its structural policies on trade. D. federal level. Capacity development. and program oversight or management. The capacity component combines “big picture” strategies. accounting and auditing. and corruption). fiduciary oversight. Given that the basic purpose of compiling this information is to understand the DMC’s policy and institutional framework for promoting poverty reduction. procurement of durable goods is ongoing (contracts awarded). monitoring and reporting. (iii) degree to which its policies and institutions promote equity and inclusion (covering gender equality. fiduciary oversight. The executing agency for the TA will be AEDB. and reporting at the investment and implementing agency level. 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. Related/parallel technical assistance. (ii) SHYDO building construction is completed. and business regulation. financial management systems and practices. rule-based governance. finance. provincial. and (iv) quality of governance and public sector management (covering property rights. anticorruption. monitoring. evaluation. The government will finance the balance. policy. sustainable growth. backed by training and computer software and hardware to set up modern management and financial information systems. (i) No progress has been made to date in capacity development at the 22. Clean Development Mechanism (CDM) consultant is to be engaged by the executing agency for registration of projects for Certified Emission Reduction (CER). Table A9 shows the scores for (i) policy and institutional rating. knowledge management (regarding sector development issues and project best practice worldwide). . targeting efficient project evaluation. management. (iii) expert support and training of staff in relation to best practice project preparation work —in essence covering due diligence on technical. ADB conducts country performance assessments for all DMCs with access to the ADF. The program will also work on institutional strengthening. and project implementation matters. operational. (iii) Capacity development in Punjab will be cancelled due to the executing agency’s inaction. 20. ADB will finance $800. The total cost is estimated at $980. Institutional Capacity Assessment 23. This will support establishment of new evaluation. governance. labor. including regulatory and legal framework. and effective use of concessional assistance. transparency. and monitoring at the top level with project preparation. financial. legal. no commitment has been made to date. better planning. staff coaching and training. and (iv) establishment of systems and procedures. capacity development consultant engagement is almost complete.000.126 Appendix 9 19. financial management. planning. Capacity development. assistance (TA) package to support AEDB to cater for work on policy formulation. social protection. (ii) development of adequate management and financial systems. 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.

3 4. Manila. (ii) political stability and absence of violence. 2012.8 4.8 4.6 3.3 5. For instance.2 4.5 4. the World Bank Institute compiles Worldwide Governance Indicators that cover all 14 countries where ADB has supported MFF investment programs.6 3.3 3.5 4.2 Policies for Social Inclusion and Equity 2.9 4.8 Policy and Institutional Ratinga 2.9 3.4 2.7 4.4 4. . (iv) regulatory quality.0 4. (v) rule of law. These are composite indicators that rely on data from more than 100 databases on the following broad themes: (i) voice and accountability.7 3. structural policies.2 4.5 4.0 3.5 4.7 4.2 3.1 4.1 4.5 4. (iii) government effectiveness.9 4.8 4.0 4.4 3.0 3. Source: ADB. 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. Annual Report on the 2011 Country Performance Assessment Exercise.3 Structural Policies 2. it would be useful to consider developing suitable indicators from a range of available databases.5 4.6 3. Table A9: Institutional Capacity Ratings of Selected ADF Eligible Countries Economic Management 3.5 3. and (vi) control of corruption.8 3. and policies for social inclusion and equity.6 3. Therefore.9 3.4 Governance of Public Sector Enterprises 2.9 3.3 127 Country Afghanistan Armenia Bangladesh Georgia Mongolia Pakistan Papua New Guinea Uzbekistan Viet Nam a Averaged over scores for economic management.0 4.Policy Dialogue and Capacity Development (Selected Case Studies) 25.8 4.

4% 0.8% 0.1% 0.7% 0.8% 2004 1.0% 1.3% 2009 0.1% 1.7% 0.6% 0.3% 0.4% 10.5% Total 1.3% 6.6% 3.9% 5.4% 0.5% 0. Technical Assistance.9% 1.6% 3.3% 2003 0.0% 28. Source: Loan.8% 44.3% 0.7% 13.4% 1.4% 0.6% 3.5% 2006 0.9% 8.2% 3.9% 3.8% 2005 1.1% 0.6% 2.3% 1.4% 0.2% 10.2% 0.8% 0.1% 5.0% 1.0% 0.2% 5.4% 1.7% 0.1% 2.6% 0.0% 1.0% 1.8% 0.9% 1.1% 0.1: Ratio of All TA Support to Loan and Grant Approvals 2000 1.8% 1. .5% 0.2% 0.5% 3.7% 0.7% 1.6% 3.6% 1.4% 0.5% 2007 1.6% 1.3% 3.1% 1.0% 0.5% 2.5% 3.6% 0.7% 1.2% 5.4% 1.3% 0.0% 0.3% 3.2% 0.4% MFF = multitranche financing facility.0% 1.7% 5. PPTA = project preparatory technical assistance.9% 0. and Equity Approvals Database.0% 0.7% 2.1% 1.8% 1.4% 0.2% 0.0% 8.7% 0.3% 0.8% 0.1% 0.2% 2004 0.9% 2.2% 0.3% 0.0% 2.2% 2.8% 3.9% 0.7% 0.5% 1.8% 1.6% 11.8% 1.6% 0.4% 1.5% 0.2% MFF = multitranche financing facility.3% 0.8% 0.5% 0.4% 0.5% 0.5% 26.2% 2010 0.1% 0.2% 1.7% 2002 1.8% 4.1% 0.1% 6.5% 1.1% 2007 0.1% 2002 0.2: Ratio of PPTA Support to Loan and Grant Approvals 2000 0.1% 5.0% 0.0% 0.4% 0.3% 2008 1.5% 9.APPENDIX 10: TRENDS OF TECHNICAL ASSISTANCE AND PROGRAM LENDING SUPPORT Table A10.0% 2.1% 1. PRC = People’s Republic of China.1% 1.7% 3.6% 0.0% 0.0% 1.3% 0.2% 0.2% 1.0% 0.3% 0.1% 1.6% 1.8% 1. Table A10.0% 1.4% 2.8% 2.2% 0.3% 4.4% 0.6% Total 2.4% 1.9% 2.6% 0.3% 0.5% 0.4% 0.8% 2.1% 0.3% 0.7% 5. Source: Loan.1% 1.0% 1.7% 0. and Equity Approvals Database.1% 5.2% 0.0% 2001 0.1% 3.7% 2.4% 2005 0.5% 3.6% 0. Grants.5% 0.2% 0.8% 1.7% 0.8% 3.8% 0.2% 0.1% 3.6% 1.6% 2009 1.6% 2.6% 4. PRC = People’s Republic of China.2% 0.0% 0.0% 2008 0.6% 6.2% 1.5% 2.8% 1.7% 8.2% 1.2% 1.7% 2003 0.3% 0.7% 0.4% 2.8% 1.5% 3.0% 0.2% 0.5% 5.4% 0.0% 0.0% 3.5% 0.3% 0.0% 1.5% 2.4% 0.0% 4.6% 1.0% 0.0% 0.2% 1.8% 0.4% 2011 1.3% 2010 1.5% 0.3% 7. Grants.2% 0.7% 3.2% 1.7% 0.5% 0. Technical Assistance.7% 1. TA = technical assistance.5% 7.0% 1.5% 0.6% 1.2% 2.2% 0.7% 0.6% 0.0% Country PRC India Viet Nam Papua New Guinea Pakistan Other MFF countries Afghanistan Armenia Azerbaijan Georgia Kazakhstan Uzbekistan Bangladesh Indonesia Mongolia 1.5% 1.3% Country PRC India Viet Nam Papua New Guinea Pakistan Other MFF countries Afghanistan Armenia Azerbaijan Georgia Kazakhstan Uzbekistan Bangladesh Indonesia Mongolia 5.4% 2001 1.7% 1.0% 0.3% 1.1% 0.1% 0.0% 28.4% 0.1% 5.7% 2.3% 1.8% 0.9% 1.3% 1.0% 0.0% 1.9% 15.3% 0.4% 1.6% 0.4% 1.2% 2.4% 1.4% 0.6% 1.0% 1.1% 6.9% 7.4% 2.8% 7.7% 0.6% 0.5% 4.0% 2006 0.5% 0.5% 0.1% 0.5% 0.5% 0.3% 0.1% 3.3% 0.9% 2.5% 4.2% 0.8% 0.0% 2011 0.3% 0.7% 0.0% 0.1% 0.6% 1.5% 0.3% 0.9% 0.7% 1.7% 8.5% 0.5% 0.7% 7.3% 0.

9% 0.0% 4.2% 0.2% 0.0% 1.5% 0.3% 0.9% 2.9% 0.0% 1.1% 0.5% 0.7% 0.1% 2006 0.4% 0.3% 2007 0. 1416 1598 1597 1645 1646 2008 2702 2775 1365 1366 1701 1756 2490 2648 2738 2739 2740 Country IND IND IND IND IND IND IND IND IND IND IND IND IND IND IND IND IND Sector Energy Energy Energy Energy Energy Energy Energy Energy Energy Energy Energy Energy Energy Energy Energy Energy Energy 129 .1% 2011 1.4% 5. Technical Assistance.0% 0.6% 0.7% 0.2% 1.7% 1.2% 0.1% 0.7% 0.5% Total 0.5% 0.1% 0.9% 2.0% 0.4% 0.6% 6.9% 0.5% 1.3% 0.3% 0. Ltd.3% 0.2% 1.1% 0.3% 0.1% 0.3% 2.4% 1.4% 0.2% 2008 0.9% 0.9% 2.6% 10.4% 0.6% 0.9% 0.8% 1.6% 3.5% 1.0% 0.8% ADTA = advisory technical assistance.9% 9.3% Country PRC India Viet Nam Papua New Guinea Pakistan Other MFF countries o Afghanistan Armenia Azerbaijan Georgia Kazakhstan Uzbekistan Bangladesh Indonesia Mongolia 4. 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.3% 2.0% 0. Grants.1% 1.1% 5.8% 1.0% 1.0% 3.7% 0.4% 0.8% 3.3% 1.5% 1.3% 3.Table A10.0% 1.7% 7.1% 0.2% 0.9% 0.6% 0. MFF = multitranche financing facility.5% 2002 1.2% 0.9% 0.2% 1.6% 1.7% 2.5% 5.0% 2001 0.1% 5.9% 0.9% 3.8% 1.0% 8.8% 2004 1.8% 2.9% 1.0% 0.3% 2.6% 1.3% 2.3% 2009 0.1% 0.1% 2.6% 0.3% 1.5% 11.7% 2.6% 3.3: Ratio of ADTA Support to Loan and Grant Approvals 2000 1.8% 0.7% 1.0% 0.8% 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.5% 2.0% 8.3% 4.4% 0.3% 18.9% 0. and Equity Approvals Database.6% 1.3% 0.5% 0. Trends of Technical Assistance and Program Lending Support Table A10.9% 4.4% 4.3% 1.7% 1.7% 1.6% 0.5% 1.2% 6.2% 1.4% 2005 0.0% 1.3% 4.5% 0.1% 4.3% 0. Source: Loan.5% 2.0% 2.0% 0. PRC = People’s Republic of China.1% 0.3% 2003 0. Preparation of a Power System Master Plan for the State of Gujarat Development of a Framework for Electricity Tariffs in Gujarat Review of Electricity Legislation and Regulations in Gujarat Approval Date 08-Nov-90 14-Nov-91 02-Jan-92 02-Jan-92 02-Jan-92 07-Dec-93 09-Dec-96 03-Apr-97 30-Aug-90 30-Aug-90 25-May-92 29-Sep-92 20-Dec-95 26-Sep-96 17-Dec-96 17-Dec-96 17-Dec-96 Approved Amount ($’000) 100 180 890 200 400 600 600 600 740 490 100 600 300 600 600 300 235 TA No.1% 2010 1.

214 600 400 600 100 1. 2741 2742 2980 3305 3380 3573 3574 3575 3882 3883 3972 4083 4241 4242 4496 4630 4992 7073 7172 7181 7073 TA Name Financial Management Support to Kheda & Rajkot Distribution Centers of the Gujarat Electricity Board Solicitation of Private Sector Implementation of the Chhara Combined Cycle Power Madhya Pradesh Power Sector Development Support to the Power Finance Corporation Private Sector Participation in Electricity Transmission Reorganization Plan for Gujarat Electricity Board Consumer Awareness and Participation in Power Sector Reforms Support to Gujarat Electricity Regulatory Commission Development of a Transfer Scheme for Madhya Pradesh Power Sector Reform Legal Support for Madhya Pradesh Power Sector Reform Strengthening Consumer and Stakeholder Communication for Madhya Pradesh Power Sector Reform Building the Capacity of Assam Electricity Regulatory Commission Reorganization of Assam State Electricity Board Institutional Development for Rural Electrification Capacity Building for Clean Development Mechanism Uttaranchal Power Sector Capacity Building Energy Efficiency Enhancement in the Power Generation Sector Developing the Power System Master Plan for Bihar Facilitating the Operations of the Energy Conservation Fund "Energy Smart" in Madhya Pradesh Capacity Building for Himachal Pradesh Power Sector Agencies Developing the Power System Master Plan for Bihar (Supplementary) All Operational and Financial Assistance for Bombay Ports Development of Ship Repair Facilities Planning and Management Advisory Services for Paradip Port Trust Ports Policy and Financing Opportunities Enhancement of India Ports Policy Implementation Enhancement of Operational Efficiency on Indian Railways Rationalization of Nonbulk General Cargo Traffic Improvement of Traffic Costing and Financial Management Reporting of Indian Railways Railway Sector Improvement Management Consulting Services to Indian Railways Pavement Management for National Highways Private Sector Participation in Expressway Financing.000 1.000 600 1.700 900 24 20.588 1.130 Appendix 10 TA No. 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 1.000 600 600 50 450 400 150 150 500 1.000 400 700 500 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 .

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

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 Implementation support component under each tranche Tranche 1 Loan The MFF provides FIL.APPENDIX 11: FINANCING SOURCES FOR PREPARATION OF SECOND AND SUBSEQUENT TRANCHES MFF No. the sub-borrowers prepare the subprojects. . Tranche 1 Loan EA's resources EPP sub-borrowers propose subprojects that will be reviewed by GFTC and EPP-PMO (this is a FIL) Tranche 2: TA Loan 2178 Subsequent tranches: Investment program support component of the MFF Tranche 1 Loan PPTA (TA Cluster) Tranche 1 Loan Tranche 1 Loan SSTs were used to finance existing ADB road projects only. Tranche 1 Loan Tranche 1 Loan Not identified in the RRP and PFRRs ADTA The TA is not attached to the program.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. The TA is not attached to the program. Tranche 1 Loan Tranche 1 Loan Not identified in the RRP The MFF provides FIL Tranche 1 Loan Tranche 1 Loan The MFF provides subloans. Tranche 1 Grant Tranche 1 Loan Tranche 1 Loan Tranche 1 Loan Tranche 1 Loan Tranche 1 Loan Under Program Management Facility component of the MFF. the sub-borrowers prepare the subprojects.

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

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 .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.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.

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 .

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

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

then “on track” o n/N >= 0. Safeguards.APPENDIX 13: TRANCHE PERFORMANCE RATINGS Criteria Technical Rating Are problems (such as key project conditions. consistency of internal controls with international standards.75 but <0. then “potential problem” o SCA/SCO <0. SCA = actual contract award curve. then “on track” o SDA/SDO >=0.75. RES = resettlement.” This can be derived from PAM Let actual disbursement curve (from effectiveness to closing) be denoted by “SDA. computerized accounting and MIS.” This can be derived from PAM Let actual contract award curve (from effectiveness to closing) be denoted by “SCA. If: o o o 0 or 1 ENV. etc. LFIS = loan financial information system. then “potential problem” >=3 ENV.75.7 but <0. then “at risk” Let original/projected disbursement curve (from effectiveness to closing) be denoted by “SDO.9. then “at risk” If: o 0 or 1 financial covenants are not complied with. and IP covenants are not complied with.” This can be derived from LFIS If: o SDA/SDO >= 0. implementation arrangements. Such financial covenants normally deal with accounts receivables.) 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. resettlement (RES).9.” This can be derived from LFIS If: o SCA/SCO >= 0. as per ADB’s safeguard policy. this reflects a count of number of financial and related covenants that are not complied with. then “potential problem” o >=3 financial covenants are not complied with. RES. and IP covenants are not complied with. etc. SDA = actual disbursement curve. then “on track” o SCA/SCO >=0. then “on track” 2 ENV. then “at risk” Disbursements Financial Management. PAM = project administration manual.9. Source: Independent Evaluation Department. then “on track” o 2 financial covenants are not complied with.9. then “potential problem” o SDA/SDO <0. SCO = original/projected contract award curve. This covers documentation requirements for environmental (ENV). then “potential problem” o n/N < 0. SDO = original/projected disbursement curve. .9. and indigenous peoples (IP) safeguards.75 but <0. RES.7. RES. cost overruns. and IP covenants are not complied with. IP = indigenous peoples. online billing and collection systems. then “at risk” Let original/projected contract award curve (from effectiveness to closing) be denoted by “SCO. then “at risk” ENV = environment. Basically.9.

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

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