African Development Bank Group. The Programme and Budget

Transcription

1 African Development Bank Group The Programme and Budget

2 African Development Bank Group 1 The Programme and Budget

3 2 This version of the document was approved by the Bank s Boards of Directors on 11 th December 2008.

4 3 Table of Contents Executive Summary 7 1 Introduction 11 2 Guiding Principles for the Indicative Work Programme 13 3 The Indicative Operational Programme Areas of Operational Focus The Operational Work Programme 17 4 The Indicative Non-Operational Programme Improving Corporate Services Strengthening the Bank s Financial Framework and Management Enhancing Institutional Governance 22 5 Reinforcing Capacity to Implement the Work Programmes Enhanced Budget Flexibility Skills Adjustment Accelerated Recruitment 25 6 Performance and Monitoring Framework Monitoring Framework Implementation of the 2008 Programme Implementation of the 2008 Budget Productivity, Savings and Efficiency Gains 28 7 Estimates of the Budgets Staffing Implications of the Work Programmes Administrative Expenses Budget and the Major Cost Drivers Budgetary Implications of the Indicative Work Programmes (IWPs) Strategic Alignment Supporting Complexes Alignment to the Operational Work Programme Decentralization 37 8 The Capital Budget Projected Capital Investments Return to Abidjan (Bank s Headquarters) 42 9 Resource Estimates Internally Generated Resources Bilateral and Multilateral Resources Conclusion and Recommendations 49

5 4 List of Annexes Annex 1 (a) Indicative Lending Projections, Annex 1 (b) Distribution by Financing Instrument of Indicative Lending Projections Annex 1 (c) Sectoral Distribution of Indicative Lending Projections Annex 2 UA Budgeting 55 Annex 3 List of Institutional KPIs and Yearly Targets Annex 4 Comparators with other MDBs 63 Annex 4 (a) Staff Numbers 63 Annex 4 (b) Administrative Costs 63 Annex 5 List of Existing Indicators Monitoring Efficiency Gains 65 Annex 6 (a) Institutional Performance 67 Annex 6 (b) Operations Complexes Performance 69 Annex 6 (c) ECON and Supporting Complexes Performance 70 Annex 7 Quarterly Budget Execution Annex 8 Staffing Overview 75 Annex Projected Budget Allocation by Department 79 Annex Budget Proposals by Major Expense Components 83 Annex 11 (a) Capital Expenditures Proposed Budget 85 Annex 11 (b) Estimated Field Offices Capital Expenditure Budget by Project Nature 95 Annex 12 Operational Net Income Estimates 97 Annex 12 (a) Assumption for Bank Group s Net Income Estimates 97 Annex 12 (b) Projected Bank Group Lending 97 Annex 12 (c) Bank Group Cost-Sharing Formula 97 Annex 12 (d) Allocation of Bank Group Administrative Expenses for Annex 12 (e) Projected Net Operational and Net Income Annex Projected Funds from Bilateral and Multilateral Sources 101

6 5 Acronyms and Abbreviations ADB ADF EADI BITS BWIs BUs CFAA CIPSC COBS COO CPAR CRMU CSP CSVP CWP ECON ERCU ESAP ESW FNVP FO GEF GPOA HIPC HQ HR HTM ICA ICF ICT IFAD INOP IOP ISSC IWP JAI JEPA KPIs MASSP MDB MDG MDRI MEFMI MIC MTS NEPAD NPO NTF OAGL OPEV African Development Bank African Development Fund African Development Institute Broadband Integrated Telecommunication Services Bretton Woods Institutions Business Units Country Financial Accountability Assessment Capital Investment Programme Steering Committee Department of Corporate Strategy and Budget Chief Operating Officer Country Procurement Assessment Report Compliance Review & Mediation Unit Country Strategy Paper Corporate Services Vice-Presidency Country Work Programme Chief Economist and Knowledge Management Complex External Relations and Communications Unit Environmental and Social Assessment Procedures Economic and Sector Work Financial Management Vice-Presidency Field Office Global Environmental Facility Gender Plan of Action Highly Indebted Poor Countries Headquarters Human Resources Held to Maturity Infrastructure Consortium for Africa Investment Climate Facility Information, Communication and Technology International Fund for Agricultural Development Indicative Non-Operation Programme Indicative Operation Programme Information Systems Steering Committee Indicative Work Programme Joint Africa Institute Joint Economic Performance Assessment Key Performance Indicators Mutually Agreed Staff Separation Program Multilateral Development Bank Millennium Development Goal Multilateral Debt Relief Initiative Macro Economic & Financial Management Institute Middle Income Country Medium Term Strategy New Partnership for Africa s Development Non Profit Organization Nigeria Trust Fund Office of the Auditor General Operations Evaluation Department

7 6 OpsCom ORQR PBA PBD PCR PER PMG PPP RASP RBCSP RMC RMF ROs RWSSI SLA SMEs TRA UA WARR WPA YPP YPs Operations Committee Department of Quality Assurance and Results Performance Based Assessment Program and Budget Document Project Completion Report Public Expenditure Review Performance Monitoring Group Public-Private Partnership Regional Assistance Strategy Paper Results-based Country Strategy Paper Regional Member Country Results Measurement Framework Regional Operations Rural Water Supply and Sanitation Initiative Service Level Agreement Small and Medium Enterprises Temporary Relocation Agency (Tunis) Unit of Account Weighted Average Risk Rating Work Program Agreement Young Professional Programme Young Professionals

8 7 Executive Summary 1. Consistent with the key findings of the Report of the High Level Panel, and the Medium Term Strategy (MTS), this document presents a three-year rolling Work Programme and Budget aimed at ensuring that the Bank will continue to grow and deliver results on the ground for its RMCs. The key principles guiding the preparation of the Programme and Budget Document (PBD) and allocation of the resources are: (i) greater selectivity in operations; (ii) renewed focus on performance, results, and governance; (iii) effective decentralization and strengthened partnerships; (iv) staff empowerment and motivation; (v) improved knowledge generation and sharing; (vi) strengthened risk management and maintaining a solid financial framework; and (vii) streamlined business processes. 2. Bank Financing Operations experienced a 53% growth from UA 2.29 billion in 2005 to UA 3.50 billion in The projected lending target for 2011 is UA 5.34 billion, which is a 53% increase over the 2008 objective. Meanwhile, authorised staff strength increased by 25% between 2005 and 2008 and is projected to grow by a further 17% during the period The proposed additional organizational capacity of 313 staff (excluding the YPs) between will mainly be in the areas of: (i) quality assurance and results measurement; (ii) risk management; and (iii) delivery of operations in infrastructure, private sector, and fragile states. Staff levels outside these areas will remain constant and existing vacancies will only be filled if found to be consistent with MTS priorities. Non-performing staff will be separated whilst the requirements for 2010 and 2011 will be firmed up in the light of the findings of the Skills Audit, evaluation of the Decentralization Programme, necessary adjustments following the 2009 recruitment drive, and emerging efficiency gains. 4. Out of the 119 new positions requested for 2009, 23% will reinforce the Bank s capacity in risk assessment and management and maintaining a solid financial base, 8% will be allocated to delivery and results functions, while the remaining 69% will be spread over various key operational areas, such as climate change, sustainable development, gender, fragile states, governance, infrastructure, private sector operations and regional integration. 5. Management is acutely aware of the need to increase productivity, identify and promote areas of efficiency gains, and generate savings. During the period, Management expects to see evidence of such gains from: (i) implementation of the new staff performance evaluation and HR strategy; (ii) leveraging on bilateral and multilateral resources; (iii) value for money on IT infrastructure and telecommunications investments; (iv) structural reforms for maximum efficiency and performance effectiveness; (v) closer monitoring of Operations costs and the execution of capital projects; and, (vi) cost avoidance from effective management, prudent procurement, and cost containment of general expenses. 6. In line with the priorities set in the MTS, planned operations will : focus more selectively on infrastructure, private sector development, governance, and higher education, technology and vocational training; increase horizontal emphasis on regional integration, fragile states and clientresponsive engagement, in particular in middle-income countries (MICs); mainstream gender, climate change and knowledge management more effectively. The overall financing objective is projected at UA billion, of which UA 4.09 billion in 2009, UA 3.71 billion in 2010, and UA 5.34 billion in This represents an average annual increase of 17% between 2008 and The proposed Administrative Expenses Budget for 2009 is UA million, which is UA 32.4 million (14.72%) higher than the 2008 Budget. The indicative budget for 2010 and 2011 is UA million and UA million respectively (2008 prices). The average

9 8 annual budget is projected at UA 279 million. This represents an increase of around 8.7% between 2009 and 2011 compared to the 11.7% increase of the approved 2008 budget over External Relations and Communications Unit (ERCU). An additional UA 0.28 million has been added to the proposed ERCU budget. This will increase appropriation for ERCU from 80% to 88% of estimated requirements. 8. The 14.72% increase in the 2009 Administrative Budget is composed of: (i) a 5.70% price adjustment, (ii) a 0.88% provision for salary adjustment and (iii) an 8.14% volume increase. 9. The projected Administrative Budget growth in 2009 is mainly driven by: (i) additional positions required to deliver in key priority areas (para. 4 above), (ii) the Decentralization Programme and (iii) implementation of the HR reforms. 10. Costs related to decentralization have to be met immediately. However, whereas there are some early gains (mostly related to quality; intensified collaboration with governments and development partners; better monitoring and supervision), significant savings will only occur gradually as the transfer of work and increased authority to the field reduces workload in HQ. Meanwhile, in the light of recent discussions with the Boards, the opening of new Field Offices (FOs) will be dependent on the outcome of the independent evaluation of the Decentralization Programme. Thus, except for the South Africa Office, which will become operational in 2009, the requested Staff, Administrative and Capital Budgets included in document ADB/BD/WP/2008/165/Rev.1 ADF/BD/WP/2008/Rev.1 have been adjusted to reflect this position. 11. The Board recently approved a new Communications Strategy for the Bank and underscored the need to ensure that it is adequately funded. Management proposes to shift a part of the budget which had been earmarked for the Field Office to be opened in 2009 to increase the proposed budget for the 12. Strengthened HR activities include the YPP (20 per year); accelerated recruitment to address the high vacancy level; a revamped induction programme; and implementation of the new staff performance system. 13. Under the Capital Budget, new investments are required to upgrade the IT systems in HQ and the FOs. The 2009 IT capital budget aims at enhancing security and the risk management framework; providing increased support for decentralization efforts, organizational effectiveness and knowledge management. Included in the total IT budget of UA million for 2009 is UA 3.30 million to revamp and upgrade SAP systems for increased flexibility and accessibility in the HQ and the FOs. 14. As part of the budget reforms launched in 2007, Management will take further action to move to UA Budgeting in order to increase the Bank s ability to respond quickly to changes in needs and circumstances, and to strengthen accountability for results. 15. The Bank Group s projected operational income is UA million in 2009, UA million in 2010 and UA million in 2011 and is adequate to sustain the proposed budgets. Operational income includes estimated fair value losses or gains on the Bank s investment portfolio, but does not include possible (i) fair value gains or losses on borrowings and derivatives and (ii) possible translation gains or losses. 16. In general, despite the severity of the current global financial crisis, the Bank is expected to remain financially solid and achieve the above projected results.

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12 11 1. Introduction Following the discussions held with the Committee of the Whole on 4 November 2008, Management presents, for consideration, the Programme and Budget Document (PBD). This PBD provides the Board of Directors with both the Indicative Operational and Non- Operational Work Programmes (collectively the Bank s Indicative Work Programme, IWP), and the resource requirements. The IWP and budget proposals have been combined into one consolidated strategic document in order to deepen the alignment of staffing and budgetary resource allocation with the core activities of the institution. In line with its commitment to the Boards, Management initiated the programming and budgeting process for in early March This was followed by discussions with the Board, for direction and guidance, in July, September and November This document is articulated around 10 chapters. After this introductory section (i), the analysis covers: (ii) Guiding Principles for the Indicative Work Programme; (iii) the Indicative Operational Programme; (iv) the Indicative Non-Operational Programme; (v) Reinforcing Capacity to Implement the Work Programmes; (vi) Performance and Monitoring Framework; (vii) Estimates of the Administrative Budgets; (viii) the Capital Budget; (ix) Resource Estimates; and (x) Conclusion and Recommendations.

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14 13 2. Guiding Principles for the Indicative Work Programme The IWP has been developed as an instrument for the effective implementation of the Medium Term Strategy (MTS). The strategic framework, as outlined in the MTS, seeks to ensure that the Bank can respond effectively and quickly to changing needs and circumstances. Moreover it is predicated on the assumption that the Bank will be judged by its results and the contribution it makes to development and the reduction of poverty, in particular by promoting equitable growth and economic integration on the continent. In so doing, the Bank will become the preferred partner in Africa, providing quality investment and advice. During the preparation of the 2008 Budget, Management introduced the concept of Country Work Programmes. For , particular attention has been taken to ensure that, in addition to the business as usual elements, the Indicative Non-Operational Programme (INOP) is fully aligned with the Bank s strategic priorities, as outlined in the MTS. In order to ensure the visibility and accountability of the INOP, Management will introduce Work Programme Agreements (WPAs) for the Non-Operational Units. 1 The Programmes are anchored on the Bank s core principles aimed at improving its institutional and operational effectiveness. These principles are discussed in some detail below. (i) Greater Selectivity in Operations The Bank will focus more selectively on infrastructure, governance, private sector development and higher education, technology and vocational training. It will increase its horizontal emphasis on regional integration, support to fragile states, and clientresponsiveness, in particular in MICs. Finally, the Bank will mainstream gender, climate change, and knowledge management more fully and effectively in its operations. (ii) Focus on Performance, Results and Governance The Bank has embarked on an ambitious medium-term agenda to strengthen the focus on results in its strategies, operations and reporting systems. Management is committed to improve quality at entry, instil a results-oriented supervision culture, enhance learning and accountability through ex-post evaluation, integrate results reporting into information systems, and advance decentralization and harmonization for better development results on the ground. The newly created Department of Quality Assurance and Results (ORQR) will coordinate the Bank s results agenda. Within the context of the MTS and ADF commitments, the Results Measurement Framework (RMF) will be used to monitor implementation of this agenda, including: (i) a review of countries progress towards key development outcomes; (ii) an assessment of the Bank s contribution to these outcomes through its operations; and (iii) an analysis of the Bank s performance in effectively delivering support, as measured through Key Performance Indicators (KPIs). Besides the traditional internal auditing and risk assessment role, the Office of the Auditor General (OAGL) will strengthen its activities relating to investigations, complaints handling and integrity awareness. The aim will be to minimize the risks associated with decentralization and the expanded Bank involvement in private sector and infrastructure activities. Finally, the Compliance Review and Mediation Unit (CRMU) and the Operations Evaluation Department (OPEV) Work Programmes are expected to grow over the coming years. (iii) Effective Decentralization and Strengthened Partnerships To enhance delivery of its products and services, 1 CSVP, FNVP and Units reporting directly to the President (UPRST) or to the Board of Directors. Reference Document of the reform (ADB/BD/WP/2006/18) presented to the Board and circulated to the Staff on 12 April 2006.

15 the Field Offices (FOs) will be strengthened and given effective delegation of authority across a broad range of operational matters. This will include getting as many FOs as possible to Phase 2 of the disbursement Decentralization Programme and to strengthen procurement and financial management capacities. The increased presence of the Bank in the field will also facilitate more effective partnerships with a broader range of stakeholders, including other development agencies and the private sector. (iv) Staff Empowerment and Motivation Implementation of the HR Strategy approved in 2007 will include a drive to attract, retain and motivate talented staff. Included in the planned activities is the extension of the new performance management system to FOs, enhanced staff training, and proper mapping of staff skills profiles in line with institutional priorities. Management also intends to build necessary capacity and allocate resources over the period to ensure better succession planning and to maintain a vacancy level below 5% at all times. (v) Scaling up Knowledge Generation and Sharing The Bank will improve its statistical capacity and produce flagship reports on selected topics in line with its sector focus. A new strategy for external relations and communication will be developed to make Banksupported operations more visible, intelligible and well understood by all the stakeholders. In addition, the Bank will continue to improve both internal knowledge-sharing tools and delivery platforms such as its Intranet, Documenting and Records Management System (DARMS) and its website. A number of areas for enhancement have been identified to support the Bank s mission and delivery capacity; including completing the BITS (Broadband Integrated Telecommunication Services) project by yearend This will result in a major upgrade in the Bank s network and telecoms equipment 14 infrastructure, thereby reducing the existing IT gap between the HQ and FOs. (vi) Risk Management and Financial Framework Management considers it crucial to strengthen the Bank s risk analysis and management capacity and responsiveness. This will involve enhancement of a number of Units across the institution: (i) financial risk management, (ii) procurement and fiduciary specialists at TRA and in the FOs, (iii) risk mitigation in private sector operations, (iv) the Office of the Auditor General, (v) business continuity preparedness, including in the FOs, (vi) e-security within the Bank s IT infrastructure, and (vii) heightened security for all Bank staff, premises and properties. Furthermore, Management will review the Bank s capital adequacy framework in order to safeguard the Bank s financial integrity; develop capabilities to properly service new private sector products (e.g. syndication), and maintain its AAA rating status. (vii) Streamlined Business Processes Internal processes will continue to be improved upon, including peer review and quality assurance. The Procurement and Financial Management Department was recently restructured to achieve improved standards and performance. The SAP system and data-warehouse platform will be upgraded to ensure their alignment with revised business processes and to enhance individual data retrieval and query capabilities. A major functional upgrade in the Bank s ERP (Enterprise Resource Planning) system involving integrated strategic planning, programming and budgeting and Early Warning Monitoring features is planned for The Bank will deliver corporate services in a more cost-effective manner, through outsourcing of support activities, where possible, as well as developing longer-term partnerships with suppliers and service providers. Reforms planned include a review of Corporate Services, introducing greater automation and increased fiduciary controls.

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18 17 3. The Indicative Operational Programme 3.1 Areas of Operational Focus Infrastructure The Bank will direct a significant proportion of its new commitments to infrastructure investments, especially for transport, power, water and sanitation, and ICT. It will actively seek demonstrable public benefit by improving growth, productivity, employment, and access to market opportunities and essential services, particularly to accelerate progress towards the MDGs. The Bank will exercise leadership in a number of pan-african initiatives (NEPAD, ICA, etc.). Governance The Bank will strengthen governance in key areas linked directly to its core operational priorities. It will focus on deepening transparency and accountability in the management of public resources, at sector, country and regional levels in particular in fragile states and natural resources management. The choice and mix of instruments will be tailored to country circumstances, combining budgetary support, institution-strengthening projects, nonlending operations, and analytical and advisory work. Private Sector Development As spelt out in the Bank s updated Private Sector Strategy 2, the Bank will seek to ensure that private sector operations reinforce public sector activities in the context of agreed Country Strategies and avoid ad hoc approaches. It will look for opportunities to leverage ADF resources with non-sovereign lending to promote private sector development in lower-income countries. It will strengthen the articulation of the development case and expected results for specific transactions, and will develop a model to ensure appropriate assessment of development impacts. Higher Education, Technology and Vocational Training The Bank will develop partnerships with the private sector to upgrade and rehabilitate existing facilities, including national and regional centres of excellence. The objective is to provide quality tertiary training and thereby lay the foundations for scientific and technological innovations. The Bank will selectively design and implement projects in order to contribute to sustained economic and social growth in the RMCs. Furthermore, the Bank will support technical and vocational education and training operations to help address high unemployment in many RMCs. Whilst pursuing the above sectoral focus, the Bank will also support regional integration, fragile states and client-responsive engagement, particularly in the MICs. In the first area, the Bank will focus on deepening cross-border economic, commercial, and policy linkages, including those between ADF and ADB countries. In fragile states, the Bank will support selected states with supplementary funding for priority investments, arrears clearance and targeted capacity-building assistance. The new MICs Strategy will include the following elements: (i) to build more effective linkages between sovereign and non-sovereign operations, and (ii) to develop new competitive lending products more systematically packaged with high-value knowledge and advisory services. The Bank s track record of strong credit ratings is expected to be sustained, allowing continued access to international capital markets to mobilize resources on favourable terms. Lending to MICs will be boosted by the Bank s recent measures to increase the ADB sustainable lending limits for RMCs. 3.2 The Operational Work Programme The Bank financing objective is premised on: (i) the balance of the ADF-XI replenishment commitments, which amount to UA 3.4 billion for the period , and (ii) the projected ADF commitments estimated at UA 2.4 billion for 2011 based on an assumed 50% increase of ADF-XII compared to ADF-XI. 2 (ADB/BD/WP/2007/149).

19 i. Financing Objective and Work Programme The aggregate financing objective as shown in Table 1 below, is projected at UA billion, of which UA 4.09 billion in 2009, UA 3.71 billion in 2010, and UA 5.34 billion in This represents an average annual increase of 17% between 2008 and For , about 44% of the financing objective will be met through the concessional ADF window. The ADB public sector lending will account for about 32% of the overall financing and the ADB private sector financing for the remaining 24%. The Nigeria Trust Fund will contribute UA 50 million in 2009 and 30 million for 2010 and 2011 respectively (see Annex 1a). The global financial crisis could have an impact on the Bank s lending. Slower global economic growth, more difficult credit conditions, and changes in the international aid architecture could affect both aggregate targets as well as the composition of concessional vs. nonconcessional financing. The Bank will monitor its financing objectives and reassess targets on a quarterly basis to constantly reflect changes in the macro-economic environment. ii. Table 1: Financing Objectives (UA billion) ADB Group ADF ADB Distribution by Financing Instrument The main financing instrument of the Work Programme will continue to be loans, the bulk of which will be extended through the ADB public and private sector windows. The ADF will provide the majority of its financing through loans, which will represent about 75% of the overall ADF financing between 2009 and Investment operations will continue to dominate the Work Programme, accounting for about 74% of the resources, followed by policy based operations at 13%. Lines of credit, equity participation and loan guarantees, in support of the private sector, 18 will represent 12%. The balance of 1% will be financed using institutional support loans/grants and grant for studies under both the ADB MIC Trust Fund and the ADF (see Annex 1b). iii. Distribution by Sector Consistent with the Bank s sector focus as laid out in the MTS, 87% of the financing priorities will remain in the four operational focal areas of infrastructure, governance, private sector, and higher education, technology and vocational training. More than half of all financing in (53%) will be allocated to infrastructure. 13% of the financing over the period will be for governance, with an increasing share over time, reaching 18% in In light of the food crisis and increased investment needs in the area of agricultural infrastructure, 8% of the financing will be for agriculture (see Annex 1c). iv. Non-Financing Activities Non-financing activities complement the Bank s financing operations in the RMCs. These will include programming activities, economic and sector work (ESW), portfolio management, and policy development, as detailed below. For 2009, the number of CSPs and related papers is expected to increase by more than 20% to 34, and those of Country Portfolio Reviews by around 15% to 21. The number of ESWs will remain at a similar level, with 60 ESWs planned for 2009 compared to 62 in Programming & Pipeline Development Activities: The following tasks will be undertaken: the preparation of new full and interim CSPs, RASP and CSP update documents, Mid-Term Reviews and CSP Completion Reports. The activities linked to the definition of new country strategies will include the preparation of Joint Assistance Strategies (JASs), working closely with the World Bank, the International Monetary Fund and other development partners. Economic and Sector Work (ESW): The Bank will intensify ESW to strengthen the Bank s knowledge base. ESW will be conducted in collaboration with the Office of the Chief Economist, which has developed a mediumterm plan for knowledge development and dissemination. The new three-year planning

20 cycle will ensure that ESW will be planned and undertaken more systematically in future. Portfolio Management: The Bank will continue implementing measures to strengthen portfolio management, and to emphasize results on the ground. Increased and more diversified staffing in the FOs and the introduction of KPIs has enhanced the capacity for portfolio management. Project supervision will be intensified, to ensure that the annual target of 1.5 supervision missions 19 per project is met. A portfolio clean-up is ongoing with the cancellation of projects that meet the relevant criteria. Policy Development: The following policies and strategies under preparation will be finalized for adoption in 2009: Integrated Urban Development Strategy; Operations Strategy on Regional Integration; Policy on Streamlining Conditions; Land Tenure Policy; and Natural Resources Management Policy.

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22 21 4. The Indicative Non-Operational Programme For the first time, the PBD contains an Indicative Non-Operational Programme (INOP). The Programme prioritizes activities that directly support the development assistance programmes outlined in the MTS and annual IOPs. In addition, the Non-Operations Units 3 have the responsibility to provide institutional services to the Bank as a whole. Key contributions of these Complexes are discussed below. 4.1 Improving Corporate Services CSVP intends to streamline its processes for greater efficiency. The ongoing studies on outsourcing and the organization and processes of CSVP are expected to lead to changes, commencing in 2009, to enhance efficiency and cost-effectiveness; and to improve the processes and implementation capability in the Complex. New and innovative information systems will be introduced in support of the changes. Human Resources Management: Ongoing implementation of the HR Strategy approved in 2007 will be deepened during the period. Included in the planned activities are: the extension of the performance management system to FOs; enhanced staff training; and better planning for staff skills profiles, allocation and succession planning. The Bank s recruitment capacity will be increased in order to drastically reduce the vacancy backlog. The Performance Management System will, for the first time, be extended to local staff in the FOs. They will henceforth receive salary increases and bonuses on the basis of their performance and not, as is currently the case, in response to UNDP salary movements in the respective countries. This will be yet another important milestone in the mainstreaming of staff in FOs and creating one Bank. Training on the use and application of the new Performance Management System started in October 2008, with planned completion by the end of Programmed Enhanced Staff Training in 2009 will be based on clearly identified needs and premised on skills mix gaps. Key training activities will include project management, gender and climate change, a leadership development programme, as well as managing for results. Better planning for staff skills profiles will receive close attention in New job descriptions are being prepared in line with the revised roles and responsibilities in the light of changes in organizational structure and functions; and emerging new priorities will also witness the implementation of the dual career progression, which allows growth and development based on performance and results rather than vacancies. In the same vein, internal promotions which started in 2007 will be reinforced and used as a tool for reward and recognition. These developments are considered important incentives for higher productivity, better results and staff retention. Furthermore, planning for succession will be reviewed so as to recruit replacements in good time. Finally, the staff induction and orientation programmes are being revamped to enable employees to quickly settle into the Bank. A Committee has been established to work out the details of the Induction and Orientation programmes for the various categories of staff at HQ/TRA and the FOs. This work including the design and development of materials, guidelines and a dedicated web page is expected to be completed by the end of Information Technology: Both the internet and intranet sites will undergo improvements as part of efforts to strengthen the Bank s communications, improve its image, and strengthen the knowledge agenda. New investments in infrastructure and the extension of existing facilities are planned to cater for the South Africa Office and to accommodate additional staff respectively. The BITS (Broadband Integrated Telecommunication Services) project will continue with the upgrading 3 CSVP, FNVP and Units reporting directly to the President s Office (UPRST) or to the Board of Directors. Reference Document of the reform (ADB/BD/WP/2006/18) presented to the Board and circulated to the Staff on 12 April 2006.

23 of telecoms infrastructure in FOs; this will help reduce the IT gap between HQ and FOs. Disaster Recovery and Business Continuity: The revised strategy, which is still under discussion with the Board, outlines a new holistic approach which will build necessary response capacity across the Bank, including in the FOs. 4.2 Strengthening the Bank s Financial Framework and Management Decentralization of Disbursement Activities: Attention will be given to building capacity in the FOs. This will involve training of staff in the FOs and more frequent missions by FFCO during the transition period to ensure readiness for greater delegation of authority envisaged under Phase 2. Loan Administration Support for New Private Sector Products: This involves developing the capacity to properly service the new products being proposed by OPSM (e.g. Syndication). In addition, Finance will continue to provide accounting policy support to OPSM in the review of new transactions. 22 Refinancing the Bank s Lending Operations in Infrastructure and in the Private Sector: The focus will be on raising resources in international capital markets at the most competitive cost. There is also continuous effort to develop new products: the synthetic local currency loan product was recently developed to respond to private sector clients requirements, especially in the infrastructure sector where project sizes tend to be very large. Operational Focus on Governance and Knowledge Management: The local currency initiative of the Bank fosters the transfer of knowledge and experience to selected local banks. Also, local currency issuance by the Bank will reinforce the efforts of RMC authorities to widely disseminate international best practices with respect to: listing, settlement, rating, clearing, and transparency and risk management products. It should also be noted that the resulting benefits to the market are consistent with the Bank s role as lead agency under NEPAD for the dissemination and application of international standards and best practices for the financial sector. In its role as NEPAD s lead agency for financial reforms in Africa, the Bank is providing financial and technical assistance towards developing such markets. Building Resource Management Capacity: Internal training and direct support activities will be increased to assist Managers to optimize their resources, better leveraging on the flexibility introduced by budget reforms and achieving higher performance levels. Reinforcing Risk Management Capacity: In the light of the growth in non-sovereign lending, Management plans to build FFMA s capacity and strengthen its credit assessment framework to enable it to provide adequate back-up to OPSM. This will allow OPSM to: (i) maintain the quality of projects entering the Bank s portfolio, (ii) ensure a moderate weighted average portfolio risk profile (WARR), and (iii) maintain the financial integrity of the Bank. Furthermore, given the growing complexity of treasury operations, new risk management products, the establishment of special purpose vehicles and funds managed by Bank on behalf of third parties (e.g. Investment Climate Facility- ICF, Congo Basin, Fragile States Facility, etc.), it is critical for the Bank to strengthen its treasury risk control and reporting framework. Finally, the expected expansion of the Bank s balance sheet and the introduction of new financial instruments to meet borrower needs require the implementation of adequate financial policies and safeguards to ensure the Bank s financial soundness. 4.3 Enhancing Institutional Governance The UPRST Units are mainly involved in the Bank s Institutional Governance management. In response to the expanded activities in the Operations Complexes, and the growth of the Bank in general, they will experience an increase in their workload over the period. Strengthening Institutional Coherence and Coordination: To improve coherence and coordination, and to better monitor and manage performance, the Bank s structure has been finetuned, including the creation of the position of Vice President/Chief Operating Officer (VP/COO). More

24 adjustments will be made, in consultation with the Boards, as necessary. The VP/COO will directly supervise the newly restructured Department of Corporate Strategy and Budget (COBS) and the new Performance Monitoring Group (PMG). COBS is tasked with ensuring effective strategic planning, greater decentralization and alignment of programming and budgeting, promoting a higher level of accountability in resource use, improved implementation of administrative and capital budgets, and enhanced, timely analytical reporting. The Bank s Ethics Officer will also report to the VP/COO. Leveraging Compliance Review and Mediation: The effectiveness of the Bank Group s operations will be enhanced by establishing Review Panels to investigate situations of possible non-compliance with the Bank Group s policies and procedures and/or by giving a voice to people directly affected by projects financed by the Bank. The Compliance Review and Mediation Unit (CRMU) is still in the process of development, and activities are expected to grow over the coming years in tandem with the Bank s operations, especially with the increase in infrastructure and private sector investments. As requested by the Boards, CRMU will also undertake a review of the IRM during regional integration, and the decentralization process. General Counsel and Legal Services: GECL provides legal support to all levels of decision making the Board of Governors, the Board of Directors, Senior Management and other levels of Management. In the recent past, there has been a growing demand for legal services arising from the Bank s expanding engagement in the identified operational focus areas, in particular infrastructure and private sector operations. Office of the Auditor General: Of late, the Internal Audit Division s annual work programme has been allocating about 38% of its workload to audits of projects and the FOs. This will increase as the Bank s operations and FOs expand. The Integrity and Anti-Corruption Division s activities relating to investigations, complaints handling, integrity awareness campaigns within the Bank and in RMCs, have been growing during its two years of existence. Increased familiarity and use of the anti-corruption hotline has led to more complaints. This, coupled with the Bank s decentralization, especially in the areas of procurement and disbursement, and expanded Bank financing of private sector and infrastructure projects, has contributed to a rise in the caseload. Operations Evaluation: OPEV undertakes unbiased, independent evaluations of the Bank s operations, policies and procedures. It aims to ensure learning and accountability across all Bank operations and, ultimately, to promote development effectiveness. The work programme for takes into account recent shifts in the Bank s operational focus, giving increased attention to key sectors such as infrastructure, governance, fragile states, private sector operations, as well as gender, External Relations and Communications: The Bank will develop and implement a new Strategy for External Relations and Communications to promote the image of the Bank and boost its contribution to the reduction of poverty on the continent. The Strategy will also showcase Bank-financed projects and ensure they are disseminated to a wider range of stakeholders. Finally, the Bank will continue to enhance both its internal knowledge-sharing tools and delivery platforms such as its Intranet and website.

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26 25 5. Reinforcing Capacity to Implement The Work Programmes 5.1 Enhanced Budget Flexibility Successful delivery of the Work Programmes requires additional reforms and policy adjustments; effective implementation of agreed reforms, including procedural flexibilities; and further empowerment of Cost Centre Managers for resource management. To this end, Management is finalizing an Action Plan to implement one key element in Phase II of the Budget Reforms approved in June 2007, i.e. full transition to UA Budgeting, which is now scheduled to be fully operational by July 2010 (see Annex 2). 5.2 Skills Adjustment Management is carrying out a Skills Audit which seeks, among other things, to assess the skills of the staff of the Bank and their alignment with the MTS framework. Management is also preparing a Mutually Agreed Staff Separation Programme (MASSP) to cater for separations that may result from the Skills Audit, the CSVP reform, rationalizing staff complement at the HQ location, and poor performance. In line with practices of other institutions, and for ease of planning, Management proposes that the funding of MASSP be specifically earmarked in each year s budget. However, for 2009, it is planned to fund it out of expected limited uncommitted 2008 appropriations. Based on the initial analysis from the skills assessment exercise, it is expected that the Bank may release 1-2 % of staff through MASSP, translating to 15 PL staff and 10 GS staff in Over the three years, the budget distribution is estimated as follows: (i) UA 4.6 million in 2009; UA 5.4 million in 2010; and UA 6.1 million in Accelerated Recruitment As discussed in some detail in section 7.1, Management is proposing a net increase of 119 headcount positions in the Bank in Taking into account 53 candidates already selected and 33 expected to assume duty, there will be 206 vacancies in the pipeline by end In addition, 37 staff members are due to retire in 2008/2009, leaving a total of 243 vacancies. When added to the 119 new positions and 20 Young Professionals (YPs) to be recruited in 2009, a total of 382 positions will need to be filled between now and end September HQ positions total 291, of which 210 are PL. Included in the 382 vacancies are 43 positions for FOs, which are scheduled to be filled by the end of There are also another 20 for the Algeria and Angola Offices, which are yet to be opened. Most of the HQ vacancies for the GS are for generic positions and will be recruited in batches. Some of the PL positions will be filled by candidates identified from the list of those recommended during various interviews conducted since January Whilst the Bank has, on average, filled approximately 150 positions per year, CHRM has secured external assistance (five consultants) for this recruitment campaign. Moreover, in addition to total decentralization of the evaluation process to the Complexes, e-recruitment is expected to go-live early in December This will significantly increase the speed and efficiency of the recruitment process. Management will report on progress of the recruitment effort in the Quarterly Budget and Performance Reports.

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28 27 6. Performance and Monitoring Framework Monitoring Framework Delivery of the Work Programmes will be assessed on a quarterly and annual basis, using an agreed set of Institutional and Complex level KPIs. Management will build on progress made by the Performance Monitoring Group (PMG) to enhance the quality of quarterly reports; these will help to update the Board on the progress of the proposed Work Programmes. The PMG has developed an Intranet page where the performance of the institution as a whole and of the Complexes in particular, can be regularly updated in a transparent manner. Management intends to: i) put in place an effective Early Warning Monitoring System, with real-time information and actionoriented recommendations; and ii) ensure that the monitoring and reporting framework is improved on a regular basis including internal benchmarking at a regional level. Annex 3 provides the list of institutional KPIs and yearly targets for the period. The KPIs monitor Bank performance in terms of the effectiveness of internal processes and the delivery of financial and knowledge products. The KPIs also serve as an input to the lower tier of the Bank s overall RMF, which moves beyond institutional effectiveness to assess the Bank s contribution to development outcomes through its operations. It also seeks to assess the progress of RMCs toward key development outcomes and MDGs. This multi-tier RMF including a subset of KPIs also underpins Bank reporting on ADF-XI commitments. To improve the monitoring framework, new KPIs have been introduced, including some that address specific tasks and functions of the supporting Complexes. Using the 2008 Budget as the baseline, Management is keen to establish trend analysis to enable benchmark comparison over time. Management is also gathering information to establish reliable external benchmarking with other MDBs. Annex 4 contains some preliminary findings which provide a mixture of indications, both in positive and negative directions. Further analysis is underway to enable Management to make informed judgements on the best course of action to be taken. In order to identify and monitor efficiency gains from streamlined business processes, and thus mainstream them in the budgeting process, Management is already using some indicators at Institutional and Complex level (Annex 5). Management, in the transition to UA Budgeting, will also develop productivity indicators. Table 2 below shows an example of a 2008 baseline which will inform some monitoring aspects under evaluation. Indicator Table 2: Example of 2008 Baseline x 1 Million UA Lending 6.2 Implementation of the 2008 Programme x 1 Million UA Disbursed 2008 Baseline (UA 000) Total Administrative costs Operational costs Staff costs Consultancy costs Total Bank Group financing approvals as at end November 2008 reached UA 2, million, of which UA 1, million was from the ADB window and UA 1, million from the ADF window. This represents an overall implementation rate of 65% of the 2008 target. However, implementation by year-end is projected to fully achieve the lending target. The bunching phenomenon, common to all MDBs, has been particularly marked this year. The main reason for this was the combination of the first year of ADF replenishment with the new review procedures to ensure the highest quality at entry, in addition to the rollout of key policies related to regional operations, fragile states, procurement and financial management

29 streamlining. Management is recalibrating the Work Plan to ensure a more balanced delivery spread and thus minimize, to the extent possible, severe bunching in future years. Seventy Knowledge Management Products (CSPs, CPRs, ESWs and related papers) have been delivered, representing an implementation rate of 65%. Work for all planned products has already started and delivery by end of the year is expected to attain 100% of the target for CSPs and CPRs, while ESWs will reach 70%. Finally, delivery on the policy and strategy documents, including new formats for key documents, is on track. 28 Figure 1: Productivity Indicators Disbursements, both in amounts and ratios, are in line with yearly targets. Portfolio management performance shows mixed results, from the very positive achievement in terms of problematic projects (at 5%, which is much better than the target of 10%) to the less encouraging performance on timely PCRs coverage (currently at 32% instead of the yearly target of 89%). Performance on the PCR is expected to gather pace during the last quarter of 2008 and the first quarter of Going forward, the FOs are expected to make a significant impact once they are adequately staffed. 6.3 Implementation of the 2008 Budget The utilization rate at end November stands at 72% (UA million) Management forecasts an implementation rate at year end in line with the KPI target set at 95%. 6.4 Productivity, Savings and Efficiency Gains There is growing evidence that the Bank is utilizing resources in a more optimal manner. An analysis of the average budgeted costs for two of the core operational processes lending and disbursement confirms that, since 2006, these have been implemented more cost-effectively. For every UA million lent, administrative expenses will decline from UA 73,130 over to UA 65,050 during The same analysis for every UA million disbursed shows a decline from UA 124,450 in to UA 113,570 in , as shown in Figure 1 below. During the period, Management expects efficiency gains from: (i) implementation of the new performance evaluations and HR strategy; (ii) leveraging on bilateral and multilateral resources; (iii) value for money on IT infrastructure and telecommunications investments. Savings will be obtained through: structural reforms for maximum efficiency and performance effectiveness; closer monitoring of Operations costs and the execution of capital projects; and cost avoidance from effective management, prudent procurement and cost containment of general expenses. Human Resource Management The new Human Resources Strategy is expected to smooth out staff benefits, reward performance and contain growth in staff costs. These relate to: - Staff Benefits: limiting to four the children benefiting from the education grant per employee s total career will result in long term savings; - Pay for Performance: introduction of a non-

30 pensionable pay at risk element through performance bonuses to provide reward and recognition without the budget implications of ripple effects on other benefits; - Abidjan Staff Rationalization: Management will review the staff complement in Abidjan HQ and take appropriate actions; - Staff Separation: Management is developing separation strategies for non-performing staff. In addition, it is expected that 1%, 4% and 5% of PL staff will retire in 2009, 2010 and 2011 respectively. There will be no automatic replacement of retirees. Bilateral and Multilateral Resources In 2007, about UA 8.3 million was disbursed for operational and non-operational activities, and 2008 disbursements are projected to reach the same target. For the 2009 Budget, Management aims at funding about 53% (UA 9.44 million) of total Operations consultancy requests through bilateral and multilateral sources. The trend will continue in IT and Telecommunications Increased usage of video-conference facilities for meetings, interviews, etc. will translate into about UA 850,000 (or 10% travel budget) savings per annum. The BITS will also generate about UA 190,000 direct savings per annum through reduced operating costs of the telecoms system. To further ensure value for money on IT and telecommunications investments, Management will shortly conduct an audit. 29 Translation Services The reduction in average Board document size to 20 pages will result in a reduction in translation and paper costs. These will soon be quantified in UA terms. Outsourcing Management is reviewing the current outsourcing model to make it more costeffective. An overall proposal that will provide data on expected upfront investments, short/ medium and long-term savings on outsourced activities (in areas of facilities management and administrative services, travel services, IT infrastructure, IT application development and support, payments & benefits, public relations, translation and interpretation, recruitment, medical centre services, training planning and protocol services) will be discussed with the Board. Once approved, the resulting Net Present Value (NPV) analysis of the new model will be included in the PBD. Decentralization Through enhanced decentralization; more than 400 projectrelated activities (excluding supervision) will be handled in FOs in With the increase in sector, procurement and fiduciary specialists in the FOs, there will also be an increasing load of supervisions and PCR work undertaken by the Offices. Project Management Workshops currently organized in the RMCs by EADI will increasingly be planned and conducted by Field Office staff. However, more work still needs to be done to properly quantify the expected budgetary savings. Effective Management of General Expenses Decentralized ticketing and negotiated tariffs with airlines and hotels will result in annual savings of about UA 440,000, which will help contain the travel budget, despite the global increases in air travel costs. The new Documents Reproduction Centre will result in savings of UA 200,000 per annum. Management aims at reducing building and equipment maintenance costs and limiting improvements at the TRA. The environmental footprint initiative will lead to a reduction in the consumption of water, electricity and paper by 5%, 12% and 10% respectively. Capital Expenditure A comprehensive cleanup of the capital projects portfolio is ongoing and an estimated UA million is expected to be released for future capital projects. Specific KPIs have been developed to track capital portfolio performance. In general, Management will establish a framework to assist in monitoring, tracking, quantifying and redeploying savings and efficiency gains to agreed priority areas in future PBDs. It is expected that projected budgets for 2010 and 2011 could thereby be reduced.

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32 31 7. Estimates of the Budgets 7.1 Staffing Implications of the Work Programmes To deliver on their work programmes, the Operational and Non-Operational Complexes have identified substantial needs for an increase in human resources over the budgeting period, resulting in an additional 313 staff positions (119 in 2009, 114 in 2010 and 80 in 2011). For 2009 staffing, Management has prioritized positions in the following areas: (i) results, quality and performance monitoring; (ii) risk management (financial risk management, Table 3: Distribution between HQ and FOs of Additional 2009 Staff Positions fiduciary services, security, anti-corruption and ICU); and (iii) for new priorities or previously understaffed areas (fragile states, environment, climate change and gender). Management also plans to reinforce capacity in governance; regional integration; private sector; and knowledge management. Staff levels outside these areas will remain constant and existing vacancies will only be filled if found to be consistent with MTS priorities. Table 3 and Figure 2 below show the distribution of the requested additional 2009 positions: PL GS GRAND TOTAL HQ FO TOTAL HQ FO TOTAL 2009 Positions Figure 2: 2009 PL Staff Requirement: Areas of Expertise The additional staffing requirements planned for 2010 and 2011 will be further reassessed in the light of the outcome of the Skills Audit, the Bank s absorption capacity, the independent evaluation of the impact of the decentralization programme; emerging efficiency gains; and, possible changes in strategic directions in the light of major continental and global developments. The projected increases and distribution are presented in Annex 8. Management is satisfied that the requested additional staff headcount aligns with the work programmes objectives. As indicated in Table 4 below, the financing objective increased by 53% during the period , and a similar evolution (53%) is planned for The analysis also demonstrates that, for the next three years, the focus will be on implementation, with the disbursement volume expected to be 51% higher than 2008, while for the previous three years disbursed volume grew at a low rate of 2%. Past expansions in lending levels and disbursement volume contributed to a 25% growth in positions during For , the projected increase in staff positions is 17%. The pattern that emerges is one of delayed response in staff strength, in the light of growth in lending operations and related portfolio management demands.

33 32 Table 4: Expected Growth in Staff Positions (Requested) % increase 2008/2005 % increase 2011/2008 Budgeted Positions (No.) 1,445 1,811 25% 2,124 17% Lending (UA million) 2,294 3,500 53% 5,340 53% Disbursement (UA million) 1,843 1,886 2% 2,846 51% Results from the recent Skills Mix Assessment indicate that staffing levels in the Bank are generally less favourable than in a number of other MDBs. For the Public Sector, the Bank has half the level of PL staff when compared to the Africa & MENA regions of the World Bank. The situation is more acute for the Private Sector, where the Bank has one-tenth of the IFC staff covering the same two regions (see Table 5 below). This finding, coupled with the Bank s portfolio of projects which, on average, is older and smaller than that of the WB, adds further pressure on the Bank s ability to deliver competitively. Table 5: Comparison of Staff Numbers in the ADB and WB, 2008 WB Group ADB (at post end Oct. 2008) Africa Region 1,500 MENA 390 IFC Africa Region 300 IFC MENA 230 Total staff 2,420 1,471 PL staff 1, (48 Private Sector) Administrative Expenses Budget and Major Cost Drivers The IWP proposals for will require an Administrative Budget of UA million in 2009, UA million in 2010, and UA million in The 2009 Administrative Budget is UA million (14.72%) higher than the 2008 adjusted budget whilst the indicative budgets for 2010 and 2011 show increases 4 of UA million (11.16% increase) and UA million (7.39% increase) over the previous year (see Table 6 below). The 14.72% increase in the 2009 Administrative Budget is composed of: (i) a 5.70% price adjustment, (ii) a 0.88% provision for salary adjustment and (iii) an 8.14% volume increase factor (compared to 6.36%, 1.38% and 3.91% respectively in 2008 Budget proposal). The price adjustment factor is broken down as follows: % inflation impact on the budget representing a combination of: (i) exchange rate deflator between UA/franc CFA and Tunisian Dinar and (ii) inflation indexes for goods and services in Tunis, Abidjan, and the Field Offices; % (UA 2.32 million) resulting from increases in Travel Agencies fees and air fares. 4 These increases are calculated on the basis of 2008 prices.

34 Administrative Budget 33 Table 6: Proposed Administrative Expenses Budget (UA million) Special Appropriations (Boards, OPEV, SRP) Complexes Reference Budget Increase/(Decrease) Compared to Previous Year 2008 vs 2009 In Value In Percentage 5.1% 16.6% 14.7% 2009 vs 2010 In Value In Percentage 6.9% 11.9% 11.2% 2010 vs 2011 In Value In Percentage 4.8% 7.8% 7.4% Major Cost Drivers The gross budget increase for 2009 is accounted for by direct operating expenses (8.95%), and administrative support (5.77%). Figure 3 below provides a further breakdown of the main cost drivers. Figure 3: Principal Cost Drivers of the 2009 Budget 5 5 Apart for Young Professionals Programme, Field Offices and Additional Headcounts, these Cost Drivers are crosscutting and are distributed across several cost centres.

35 There are 5 major cost drivers to the 2009 proposed budget : (i) additional headcount, (ii) recruitment and resettlement, (iii) TRA workload, (iv) cyclical home leave to Côte d Ivoire, and (v) travel cost impact. Additional headcount: The staff cost for the requested 119 new positions in 2009 is estimated at UA 6.87 million; Recruitment and resettlement: In order to fill the existing vacant positions and new positions requested, the estimated cost for recruitment and resettlement processes is estimated at UA 3.41 million; TRA workload: The cost associated with additional activities undertaken by TRA-based staff (missions, consultants, etc.) is projected at 3.95 million; Cyclical home leave to Côte d Ivoire: Since the Bank relocated its activities to Tunis in 2003, Ivorian GS and PL, and non-ivorian GS recruited in Abidjan are exceptionally entitled to home leave benefits every other year, starting in The estimated cost in 2009 for this exceptional benefit is UA 2.85 million; Travel cost impact: The new policy instituted by airlines, in which travel agencies fees are transferred to clients, in addition to the increase cost of air travel, will generate an additional cost of UA 2.32 million for the Bank. 7.3 Budgetary Implications of the Indicative Work Programmes (IWPs) Strategic Alignment Management recognizes the need for 2009 to set up a robust platform to ensure it provides for an adequate response to the demands of growing Bank activities in line with the MTS. Key areas for enhancement are: Risk Management (budget increase UA 3.94 million) The breakdown of this amount is: (i) UA 1.03 million for FFMA, (ii) UA 1.20 million for Procurement and Fiduciary Services, (iii) UA 0.70 million for Auditing and Anti-corruption activities, (iv) 34 UA 0.82 million to the Security Unit, and (v) UA 0.19 million for the BCP. Quality, Results and Performance Monitoring (budget increase UA 2.73 million) This increase is allocated thus: (i) UA 1.77 million to ORQR, (ii) UA 0.73 million to COO (including COBS); and UA 0.23 million to ADOA. Decentralization: The budget amount allocated to this area is provided and discussed under section 7.5 below. Given the substantial impact of the abovementioned areas on the recruitment programme of the Bank, Management also considers strengthening the Bank recruitment and training capacity a prerequisite, hence the proposed budget increase for CHRM in the region of UA 1.8 million. This will cover the costs of three new positions as Recruitment Officers and a sizeable resource envelope for consultancy. Since 2006, the imbalance in allocations between non-operational complexes (61%) and Operations complexes (39%) has been gradually reversed. While the share of the proposed budget for Operational activities was 45% and 49% (57% if ECON and Operational units in non-operational Complexes are included) respectively in 2007 and 2008 budgets, the proposed Operations Complexes budget for 2009 represents 57% of the Administrative Expenses Budget. The 2009 Operations budget amounts to UA million; this represents an increase by UA million in comparison to Increases for the following two years will be respectively for UA million in 2010 and UA million in 2011 (Annex 9). The requested budget for the four Operational priority sectors outlined in the MTS will increase in 2009 and further consolidate in 2010 and Management, however, considers 2009 a critical transition year, during which the outcome of the Skills Mix Survey will be available, the vacancy rate will be significantly lowered, and the empowerment of FOs will be completed. This will allow Management to position the Bank for effective implementation of the MTS. The analysis below gives a further breakdown of the proposed 2009 budget allocations 6 UA million is composed of the budget for Operational Complexes, including ECON and units and divisions of non- Operational Complexes whose work programmes are fully operational namely: (i) OPEV, (ii) CRMU; (iii) GECL, (iv) FFMA2, (v) FFCO3 and (vi) FTRY4.

36 and the increase in percentage over the 2008 allocations. Results, Procurement & Fiduciary Services 35 (UA 5.64 million, %) Vocational Training, which represents a growth of 21.93% (UA 0.50 million) compared to It should be noted that, though budgets for some components are kept stable, there are still increases recorded due to price adjustment factor, workload and shared expenses. The total budget proposed for the newly created Department of Quality Assurance and Results (ORQR) is UA 2.46 million, which represents an increase of 251%, (i.e. UA 1.76 million) over 2008 reflecting its evolution from a Division in ORPC to a fully fledged Department. An amount of UA 3.18 million will be allocated to the restructured Procurement and Fiduciary Services Department, which represents an increase of UA 1.20 million (61%) over the 2008 Budget. Governance/Building Capable States (UA 7.86 million, 30.56%) With their critical role in strengthening transparency and accountability; improving the business environment in the RMCs; and designing Bank support to fragile states, the budget for governance, economic reforms and capacity building activities for 2009 is estimated at UA 7.86 million, representing an increase of 30.56% (UA 1.84 million) over the 2008 Budget. Private Sector (UA million, 22.51%) The private sector has been identified as a key player for scaling up sustainable economic growth in RMCs. It does this by providing them with expertise (packaging and syndication), funds for specific actions and investors risk mitigation. The proposed budget of UA million represents an increase of 22.51% between 2008 and It will be recalled that private sector growth from 2007 to 2008 was of the magnitude of 45%. Higher Education, Technology & Vocational Training (UA 2.78 million, 21.93%) The overall budget allocated to Human Development activities in 2009 amounts to UA 9.05 million (9.5% increase over 2008), of which about one-third (UA 2.78 million) is proposed for Higher Education, Science, Technology and Agriculture, Gender, Environment and Climate Change (UA million, 19.69%) The 2009 agriculture budget records a UA 1.42 million increase due mainly to the sector s new responsibilities for promoting sustainable natural resources management. The budget for environment, gender and climate change will grow by UA 0.72 million (101%) to enable the Bank to give more visibility to these vital crosscutting issues in the operations it finances. Knowledge Management (UA million, 13.91%) Compared to 2008, the 2009 budget for this area has been increased by UA 1.36 million (13.91%) to enable the Bank: (i) to enhance results measurement in Bank and RMC policies, strategies, and development programs through the use of timely and reliable data; and (ii) to produce relevant knowledge to improve the quality and effectiveness of its operations; iii) to undertake development impact assessment for private sector projects (ADOA); and iv) to support capacity building to ensure improved project and program implementation in RMCs. The 2009 budget allocation for this area is UA million, of which UA 0.23 million is for ADOA. Infrastructure and Regional Integration (UA million, 3.43%) Infrastructure and Regional Integration have an important role in boosting economic sectors; such as power, transport, ICT4D, water and sanitation. The capacity of OIVP departments is being reinforced by the allocation of ten additional headcount positions (in addition to the four for Private Sector). Resources for 2009 for this area amount to UA million. Compared to 2008 budget, the growth is not significant because of the nature of ONRI s studies which are generally long-term and subsequent Consultants needs.

37 36 Figure 4: Breakdown of 2009 Operations Budget and Increases by Area of Focus (UA millions) 7.4 Supporting Complexes Alignment to the Operational Work Programme 7 The budget proposed for the Non-Operational Programme in 2009 shows an increase of UA million (18%) compared to An increase of UA 5.04 million (7%) is envisaged in 2010 while the indicative budget for 2011 shows a growth of UA 5.02 million (6%) compared to the previous year. This growth is a consequence of ramp-up investments which will occur during 2009 and 2010 in order to build Bank capacity to deliver the ambitious IOP for future years and to strengthen the decentralization process. Institutional Governance and Corporate Management (UA 5.29 million, 23.50%) The increased allocation in this area represents 23.50% (UA 5.29 million) over the 2008 Budget. This is driven mainly by : (i) the ambitious improvement for the Bank s visibility in the field through more effective corporate communication (UA 0.63 million); (ii) staff costs and overhead expenditure for the implementation of the new VP/ COO Office, Budget and Strategy Department 9, and the creation of the position of Ethics Officer (UA 0.73 million); (iii) increased participation of the Legal Department in project preparation and definition, and to the increased number of FOs (UA 1.26 million); (iv) expansion of integrity and anti-corruption activities of the Office of the Auditor General (UA 0.70 million); (v) increased workload for support services to the Board (UA 0.64 million); and (vi) the expansion of security strategy to FOs (UA 0.82 million). Finance Complex (UA 2.59 million, 17.37%) The budget proposal for the Finance Complex in 2009 totals UA million, representing an increase of UA 2.59 million (17%) compared to The indicative budgets for 2010 and 2011 are UA million and UA million respectively. During the period, the 7 It is worth noting that this section does not exclude units and divisions of non-operational complexes whose work programmes are fully operational namely: (i) OPEV, (ii) CRMU; (iii) GECL.1, (iv) FFMA.2, (v) FFCO.3, and (vi) FTRY.4. 8 This non-operational Programme is designated as Complexes Budget in Annex 9. 9 Reference July 2008 restructuring document ADB/BD/WP/2008/104. FPBG was restructured and transferred from FNVP to VP/COO whilst the Security Unit was moved from CGSP to UPRST.

38 Details of the items to be financed in 2010 and 2011 will be refined in the light of the outcome of the planned independent evaluation of the decentralization programme and of subsequent discussions with the Board. In the meantime, Management has added two new KPIs to moaverage annual budget is UA million, which represents an average annual increase rate of 8.27%. The increased budget is in response to issues discussed in Chapter 4 (INOP). Corporate Services 37 the new compensation policy and performance evaluation system. The Budget distribution by major expense categories is summarized in Annex 10. (UA 3.94 million, 14.35%) The projected budget for this complex in 2009 is UA million, representing an increase of UA 3.94 million (14%) compared to There is no significant increase expected in 2010 and The 2009 budgetary increase will support the Human Resources Department (CHRM) headcount for enhanced recruitment capacity and HR services provision, including personnel development and training (at both the TRA and FOs) and the implementation of 7.5 Decentralization Management is strongly committed to an effective decentralization programme. To this end, an amount of UA million (15.37% of the total 2009 administrative budget) will be allocated to the FOs. This amount represents a budget increase of UA 6.97 million (21.84%) over The allocation is expected to increase to UA million in 2010 and to UA million in Detailed data and budgets for FOs are provided in Table 7 below. Table 7: Summary of Decentralization Data and Budget Approved Budget Proposed Budget Proposed Budget Proposed Budget Number of Field Offices Regional Offices Country Offices National Programme Offices Staffing Regular International Professional Staff Local Professional Staff Local Support Staff Administrative Expenses* Batch 1& Batch Batch Capital Budget* (*) Amounts in UA millions Besides the need to strengthen the existing FOs by implementing the customized Staffing Matrix, it is planned to extend the current FO network by opening one new Field Office in 2009 in South Africa (originally approved in and recently confirmed by the Board). 10 Proposal for Bank Presence in Regional Member Countries documents ADB/BD/WP/99/34/Rev.1 and ADB/BD/ WP/2008/167/Add.1/Rev.1

39 nitor: (i) the shift of Bank resources (measuring the percentage of budget allocated to FOs in comparison to the total budget) and (ii) portfolio Management (measuring the percentage of projects managed by field-based Task Managers). As shown in Annex 5, both indicators show progressively increasing targets. It should be noted that the budget envelope for the FOs cannot be directly related to Work Programme activities indicated in the IOP for the same period. There is a learning curve for the new staff in the FOs, supported by substantial backup from HQ, before complete transfer of designated responsibilities. This implies that budget allocations to related Units at HQ will, in the near future, remain relatively high. A growing number of hitherto centrally managed functions will be transferred to the FOs. 38 These functions, which will include procurement, fiduciary services and disbursement, aim to enhance the Bank s performance. This empowerment generates additional costs related to: (i) the progressive relocation of HQ international professional staff to FOs and the recruitment of a full complement of local staff; (ii) supplementary workload resources; (iii) additional office space and housing for international staff; and (iv) comprehensive training and personnel development programmes for both international and local staff. The total budget increase amounts to UA 6.97 million in 2009, UA 9.56 million in 2010, and UA 6.74 million in Management proposes that the Field Offices administrative budget be considered as part of the Operations budget, thus removing, for the first time, the ring-fencing.

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42 41 8. The Capital Budget 8.1 Projected Capital Investments The proposed Capital Expenditure Budget for the period is expected to amount to UA million UA million in 2009, UA million in 2010 and UA million in 2011 (see Table 8 below and details in Annex 11). An extensive clean-up of the Capital Budget is underway in order to identify resources (estimated at UA 12.8 million) which can be released to finance some of the investments. Within the envelope of the proposed capital investment projects, UA million (43%) relates to the IT upgrades and UA million (32%) is for the FOs upgrade. The balance, UA million (25%), will be spent at the TRA. The proposed Capital Budget has been subject to arbitration through the Information Systems Steering Committee (ISSC) and Capital Investment Program Steering Committee (CIPSC). Table 8: Proposed Capital Investment Programme (UA thousands) Investment Type 2008 Approved Budget Section 16 - Office Equipment Section 17 - Office Furniture Section 19 - IT & Communications equipment Section 20 - Buildings & Civil Works Section 23 - Other Projects 2008 Revised Budget Proposed Budgets Proposed FOs TRA IT (b) (c) (d) (e) (f) (g) (h) (i) , ,465 1, ,200 3,836 3,836 10, , , ,788 10,690 5,240 21,718 12,298 9,420 2,270 2,270 1, ,883 1, Total 8,541 8,541 18,533 17,923 10,863 47,319 15,131 11,660 20,528 Percentages 32% 25% 43% IT Capital Budget: Out of the UA million earmarked for IT upgrades, the following major allocations apply: 35% will support decentralization efforts through BITS extension and provision of additional equipment to FOs. 24% is intended for the enhancement of IT security and risk management through the acquisition of software for capital adequacy framework, risk assessment, NumeriX and Summit systems for FFMA; surveillance and verification software for the OAGL; and Bank-wide client desktop automatic backup, network cabling and monitoring systems. 23% has been earmarked for organizational effectiveness, including the deployment of new IT equipment, finalization of e-recruitment and

43 NPO (to include the FO staff payroll) modules. 18% is associated with knowledge management, which includes enhancement to the Data Development Platform for ESTA and the corporate data warehouse software systems. Also included in the proposed IT capital budget for effective communication and secured connectivity; are requirements for corporate conference services, server consolidation, PABX & VSAT, and Internet/Intranet enhancement. Finally, the SAP systems will be revamped and upgraded for increased flexibility and accessibility in the HQ and the FOs Return to Abidjan (Bank s Headquarters) Following the political crisis in Côte d Ivoire (Bank s Headquarters), the Bank provisionally transferred its operations to the Temporary Relocation Agency (TRA) site in Tunis in February Subject to a final determination to be made by the Board of Governors, Management is making necessary arrangements for a return to the Bank s headquarters in Abidjan during the period. Detailed proposals both for the administrative and capital costs for this specific programme will be submitted to the Boards for approval at the appropriate time. The budgets for the exercise will be ring-fenced.

44 43

45 44

46 45 9. Resource Estimates 9.1 Internally Generated Resources Assumptions The Bank Group s net income estimates for are based on assumptions summarized in Annex 12(a). The projections in Annex 12(b) assumed lending levels for the Bank Group based on the Medium Term Strategy. ADB approvals for 2009 are projected to reach around UA billion, while ADF and NTF are estimated to be UA 1.90 billion and UA 50 million respectively Sharing of Administrative Expenses by Institution total operational income of the Bank Group will vary between UA million and UA million over the next three years (see Annex 12(e)). After providing for administrative expenditures, the estimated net income for the Bank Group is UA million in 2009 and is expected to reach UA million in The projected net income for the ADB of UA million in 2009, UA million in 2010 and UA million in 2011 compares to the indicative planning range of UA 80 million to UA 120 million. This places the Bank in a good position to continue to strengthen its risk-bearing capacity as well as maintain its net income transfers to the ADF and for other developmental initiatives. The Bank Group s total administrative expenditures are shared among the three institutions forming the Bank Group 11. The Bank Group s budgeted administrative expenses amount to UA million, UA million, UA million, and UA million for 2008, 2009, 2010 and 2011 respectively. In 2009, UA million shall be classified as operational expenses, UA million as non-operational expenses and UA 6.22 million as direct expenses. Based on projections of each institution s operational activities and relative size, the costsharing formula for joint expenditures is contained in Annex 12(c). The allocation of the 2009 Bank Group Administrative Expenses by institution is provided in Annex 12(d) Operational and Net Income Estimates for Based on the assumptions in Annex 12(a), The lower projected ADB net income over the period compared to the exceptional level of UA 323 million in 2007 is due to the following factors: The provision write-back of UA 84 million and a high gain on fair-valued borrowings and related derivatives, and gain on derivatives on non fair-valued borrowings of UA million and UA million respectively recorded in Provisions for loan principal and charges are projected at UA 8.72 million for 2008, reflecting both sovereign and non-sovereign portfolio risk profile, and are expected to increase to UA million thereafter. The share of administrative expenses will increase from UA million in 2007 to UA million in 2008, UA million in 2009, UA million in 2010 and UA million in The projected Net Operational & Net Income for are summarized in Annex 12(e). 11 This is in accordance with an agreed predetermined cost-sharing formula provided in an information note (ADB/BD/ IF/99/330) distributed to the Boards in November Management noted that loans cancelled as a result of MDRI will require continued management, thereby leaving the volume of administered loans unaffected by MDRI.

47 9.2 Bilateral and Multilateral Resources The Bank mobilizes and manages additional nonstatutory resources in support of its programmes and operations from various bilateral and multilateral partners. Management continues to improve the utilization of Trust Fund resources. Annual programming over the period for all the Trust Funds will be ensured through a systematic call for proposals/annual programme/bulk approval by the Bank/donors. In addition, the ongoing TCF reform programme, which will untie all available resources, will be completed by September As a transitional measure, the use of tied resources (such as China/Nigeria) is being 46 accelerated, and waivers to untied resources are being sought from donors. The indicative levels of utilization of bilateral/ multi-donor thematic Trust Funds are UA 50 million in 2009, UA 75 million in 2010, and UA 110 million in From bilateral trust funds, UA 7.76 million was committed in 2007, whereas UA million has already been committed in the first half of 2008, showing a rapid increase and more efficiency in the funds utilization. In that regard, Management aims at seeking usage of bilateral/multilateral resources for 10% of the ESWs programmed for 2009, raising this target to 25% for the next two years Annex 13 provides the projections of the levels of resource mobilization and new commitments for

48 47

49 48

50 Conclusion and Recommendations Management invites the Boards of Directors to consider the proposals for the Work Programmes and associated resource requirements. The rolling work programmes and budgets are aimed at building the Bank s capacity for more effective implementation of operations in the RMCs and strengthened risk management and results monitoring. They will be approved by the Boards of Directors on an annual basis. Management s proposals for 2009 for Boards approval consist of: The Bank Group s projected operational income of UA million, UA million and UA million for each of the three years, respectively, is adequate to sustain the proposed budgets. The Bank s ability to deliver the IWP is reinforced by several factors such as: (i) recent structural fine-tuning; (ii) the ongoing improvement of internal processes and decentralization; (iii) greater productivity and generation of efficiency gains; and, (iv) the increased budget management capacity at the Complex level. an Administrative Expenses Budget of UA million; a Capital Expenditure Budget of UA million; a Contingency Budget of UA 2.53 million; one hundred and nineteen (119) additional staff positions. The Boards of Directors are also invited to take note of the indicative administrative budgets of UA million and UA million for 2010 and 2011 respectively. To better leverage the introduction of the multi-year budgeting framework, Management will begin a phased implementation of the UA Budgeting system in Within the framework of full flexibility to be launched in 2010, greater authority will be delegated to Complexes and Cost Centre Managers, including Field Offices. Managers will be held accountable for use of resources and delivery on their Work Programmes. A strengthened performance monitoring system and additional safeguards built into the various stages of the business process will be introduced as part of necessary checks and balances.

51 50

52 51

53 52

54 53 Annex 1: Indicative Lending Projections Annex 1(a): Indicative Lending Projections Annex 1(b): Distribution by Financing Instruments (source) for Indicative Lending Projections Annex 1(c): Sectoral Distribution of the Indicative Lending Projections

55 54

56 55 Annex 2: UA Budgeting The 2009 Budget proposal has been prepared in the context of the implementation of the second phase of the Budget Reform Agenda approved by the Boards in June The first phase of reforms was implemented in January The second phase involves introduction of the multiyear budgeting process (starting with ) and the transition to full budget fungibility through a unit-driven UA Budgeting system. What is UA Budgeting? UA Budgeting will be used to describe the Bank Group s new budgeting system that will : determine required budget by first deciding the Work Programme to be funded and thereafter translate the workload into the total resources needed to execute the Work Programme. Expenditures will not be planned by lineitem but at the aggregate level; decentralize resources (financial and personnel) management to Business Units (BUs). Managers will be given authority and be held accountable for resources management. They will have full flexibility to decide the most costeffective 12 mix of expenditures; reduce the emphasis on head count controls, authorized or vacant positions; allocate budgets to BUs in total envelope, without line-item breakdown or control. BUs can move budgets across line-items as and when needed without justification to COBS; and permit full fungibility within allocated BU budgets. Requirements for Successful Implementation The implementation of UA Budgeting system would require: full transparency and accountability of BUs in delivering agreed Work Programmes. This requires significant adaptation by all Managers to a culture of delegation combined with accountability; building adequate staff capacity in BUs for prudent and cost-effective management of resources; strengthening the capacity of COBS and CHRM to exercise strategic oversight and assessment of BUs performances and staff management; operating robust systems that generate comprehensive and timely management information to effectively support decisionmaking by BUs and senior management; implementing Cost Accounting and Time Recording Systems; to be managed by COBS, while BUs should be responsible for timeliness and accuracy of data; maintaining appropriate institutional safeguards; and update relevant Policy Document to clarify the role of COBS vis-à-vis the Complexes. Challenges and Safeguards Expenses tracking : It is difficult to track spending on individual line-items or total spending to specific activities, without a proper cost accounting system. Management will therefore implement a cost accounting system. Reliability of the costs: BUs will be concerned with cost-effectiveness because resources are planned, allocated and monitored in terms of money rather than headcount. Risk of overspending : This is a paramount concern that arises from a view that once central headcount control is removed; it may induce BU managers to hire too many staff, leading to overspending. This risk will be managed by: (a) requiring BU managers to manage spending within their centrally allocated envelope; (b) using staff fixed-cost ratio monitoring mechanism; and (c) implementing soft 12 cost-effective is used to mean the economy and efficiency with which expenditures are incurred to deliver work programmes and outputs of the desired standard and quality.

57 or hard system controls whereby once BU total spending reaches a certain level (say 80%) of total budget, a system flag is generated that would require formal discussion between the BU and COBS on future costs control. Implementation Analysis of prerequisites for successful implementation, challenges and safeguards enumerated above demonstrated that the Bank is not ready to introduce UA Budgeting 56 in Management therefore proposes a phased implementation approach, where a framework of policies, procedures and systems will be carried out during 2009, with the aim of full implementation starting Preparatory work will start immediately; including the development of the operational specifications and implementation modalities for a cost accounting system; and formulating the policies for decentralized staff and budget management. Below is Management s suggested sequence and implementation timeline:

58 57

59 58

60 59 Annex 3: List of Institutional KPIs and Yearly Targets Indicators Unit Baseline 2008 Targets I- Development Financing Operations Total Bank Group Financing (1) UA mn ADB Public Lending UA mn ADB Private Lending UA mn ADF Financing UA mn II- Knowledge Management Products New RBCSPs (2) No CSPs Related Documents (3) No CPRs No ESWs and Related Papers No III- Disbursements Bank Group Disbursement Amount UA million ADB Amount UA million ADF Amount UA million Bank Group Disbursement Ratio (Investment only) % 24% 30% 31% 31% ADB Public Disbursement Ratio % 20% 20% 20% 25% ADB Private Disbursement Ratio % 40% 50% 50% 50% ADF Disbursement Ratio % 16% 20% 22% 22% IV- Portfolio Management Projects at Risk % 45% 40% 35% 30% Operations Supervised Twice a Year % 30% 40% 50% 55% Projects Managed by Field Offices % 0% 5% 15% 20% Impaired Loan Ratio (Non-Sovereign only) % 3.79% 5% 5% 5% V- Process Efficiency Lapse of time between approval and first disbursement Months Lapse of Time for Procurement (4) Months Timely PCR Coverage % 22% 40% 45% 50% VI - Cross-cutting Areas Gender Mainstreaming in Operations (5) % - 15% 20% 35% Climate Proofed Projects (6) % - 5% 7% 10% VII - Human Resources (PL) Field Based (7) % 23% 30% 32% 35% Gender Balance % 23% 26% 28% 30% Staff Age Diversity (8) % 30% 35% 39% 43% Staff Attrition Rate (9) % 13% 11% 9% 7%

61 60 Indicators Unit Baseline 2008 Targets VIII - Budget and Expenses Administrative Budget Implementation % 89% 95% 95% 95% Field Offices Expenses % 14% 17% 19% 22% Operations (10) Expenses % 56% 60% 62% 65% Fixed Staff Costs (11) % 70% 70% 70% 70% Capital Budget Implementation % 30% 33% 33% 33% (1) Excluding HIPC and ADB special assistance SRF & other grants. (2) New RBCSPs include: RBCSPs, Joint Assessment Strategy Papers and Interim Review Strategy Papers. (3) CSPs related documents include: Mid-Term Review CSPs, updated CSPs and Completion Reports. (4) This KPI will not be measured in the near future. ORPF department will refine the definition and collect the relevant data. (5) % of new projects and new RBCSPs which identify at least 1 gender equality outcome indicator in the logframe. (6) Percentage of projects classified as climate sensitive which become climate proofed (their climate resilience is increased by reducing their climate vulnerability). (7) Considered as % of Operational PL staff (PL staff in the 3 Operations Complexes + ECON PL staff + PL staff in 100% Operational Units outside Operations Complexes (ADB/BD/ IF/99/330)). (8) % of PL staff under 45 years of age (excluding Board Officers) (9) % of PL leaving the Bank within the first 3 years of Contract in comparison to total PL leaving the Bank in the same period. (10) Operations defined as ORVP, OIVP, OSVP, ECON, and 100% Operational Units outside Operations Complexes (OPEV, GECL.1, FFMA.2, FTRY.4 and FFCO.3) (11) Fixed Staff Cost comprises salaries and benefits expenses.

62 61

63 62

64 63 Annex 4: Comparators with Other MDBs (2007 data) MDB No. of Staff Annex 4(a): Staff Numbers No. in Field Offices No. of Field Offices Field Office % Female % AsDB 2, % 29% PL EBRD 1, % 37% IADB 1, % 41.6% PL AfDB 1, % 23% PL MDB Administrative Expenses (UA mn) Annex 4(b): Administrative Costs No. of New Projects Loans value (UA mn) Disbursement (UA mn) Administrative cost (UA '000) per UA 1 mn. Loan Administrative cost ('000 UA) per UA 1 mn. Disbursed AsDB ,352* 4, EBRD ,818 3, IADB ,596 4, AfDB ,765 1, WB-Africa ,645 2, WB- MENA Note: Exchange rate: USD and Euro to UA as at Dec *Excluding bilateral and multilateral Trust Fund loans

65 64

66 65 Annex 5: List of Existing Indicators Monitoring Efficiency Gains INDICATORS Bank Group Disbursement Ratio (Investment only) ADB Public Disbursement Ratio ADB Private Disbursement Ratio ADF Disbursement Ratio Portfolio Management Projects Managed by Field Offices Process Efficiency Lapse of Time between Approval and First Disbursement Lapse of Time for Procurement Human Resources Field Based PL Staff Operations Complexes PL Staff HR Costs Per Capita Lapse of Time between Advertisement and Staff at Post Budget and Expenses Budget Implementation Rate Operations Complexes Expenses to Total Expenses Field Offices Expenses Staff Costs Expenses to Total Expenses IT Costs Per Capita Facility Management Costs Per Capita

67 66

68 67 Annex 6: Bank Group Performance Annex 6(a): Institutional Performance Indicator Unit Achievement Sep Target Achievement Sep Achievement Nov Implementation Rate Nov I- Development Financing Operations Total Bank Group Financing* UA mn % ADB Public Lending UA mn % ADB Private Lending UA mn % ADF Financing UA mn % Number of Operations % ADB Public Operations No % ADB Private Operations No % ADF Operations No % II- Knowledge Management Products % Number of CSPs and related Papers No % Number of CPRs No % Number of ESWs and Flagship Reports No % III- Disbursements Bank Group Disbursement Amount UA mn % ADB Public Amount UA mn % ADB Private Amount UA mn % ADF Amount UA mn % NTF Amount UA mn Bank Group Disbursement Ratio (Investment only) % 11% 25% 13% 16% ADB Public Disbursement Ratio % 15% 20% 14% 20% ADB Private Disbursement Ratio % 11% 50% 28% 29% ADF Disbursement Ratio % 10% 20% 11% 14% IV- Portfolio Management Problematic Projects % 17% 10% 5% 5% Operations Supervised Twice a Year % 29% 33% 27% 26% Timely PCR Coverage % 28% 89% 24% 32% Impaired Loan Ratio % 2.7% 5% 3.79% 3.79% Weighted Average Risk Rating (WARR - Non-Sovereign only) score V- Process Efficiency Lapse of time between approval and first disbursement Months

69 68 Indicator Unit Achievement Sep Target Achievement Sep Achievement Nov VI- Human Resources Gender Balance Index (PL staff) % 22% 25% 23% 24% Field Based PL Staff % 9% 18% 15% 15% Operations Complexes PL Staff % 45% 60% 55% 54% VII- Budget and Expenses Budget Implementation Rate % 56% 95% 59% 72% Operations Complexes Expenses to Total Expenses % 43% 60% 46% 48% Staff Costs Expenses to Total Expenses % 71% 70% 68% 67% *Total financing includes some operations managed outside OSVP and OIVP Implementation Rate Nov. 2008

70 Key Performance Indicators Indicator Unit 69 Annex 6(b): Operations Complexes Performance 2008 Target Achieved Sep. 08 Achieved Nov. 08 Implem. Rate Regional and Country Programmes (ORVP) Number of CSPs and No % related Papers Number of Country Portfolio Review (CPR) and Improvement Plan Number of ESW and Flagship Reports Lapse of time between approval and first disbursement Budget Execution (UA million) Budget Type Directly Managed No % Centrally Managed No % Month Sector Operations (OSVP) ADB Public Lending UA mn % Directly Total ADF Financing UA mn % Managed Average Size of ADF Projects Lapse of time between approval and first disbursement UA mn Month Problematic Projects % 10% 6% 7% Number of Project supervisions Number of Project Completion Reports No % No % Number of ESW No % Infrastructure, Private Sector and Regional Integration (OIVP) ADB Public Lending UA mn % Private Sector Lending UA mn % ADF Financing UA mn % Lapse of time between approval and first disbursement (for Private Months Sector Projects) Lapse of time between approval and first disbursement (for Public Sector Projects) Months Problematic Projects % 5% 2% 1% Number of Project supervisions Number of Project Completion Reports No % No % Number of ESW No % Budget Actual Execution Rate % % Total % Centrally Managed % % Total % Directly Managed Centrally Managed % % Total %

71 70 Annex 6(c): ECON and Supporting Complexes Performance Key Performance Indicators Indicator Unit 2008 Target Knowledge Management and Research (ECON) Studies and Working papers Achieved Sep. 08 Achieved Nov. 08 Implem. Rate Budget Type No % Directly Managed Flagship publications No % Other publications No % Seminars and conferences No % Training workshops Number of implemented No. No % 100% Centrally Managed Statistical Technical assistance ( countries) Number of dissemination workshops in RMC Mainstreaming results Measurement and knowledge in Bank Operations (CSP and ESW supported) Financial Management (FNVP) Process loan applications received without any defect within 10 working days Process and send loan bills 6 to 8 weeks before their due dates No % Budget Execution (UA million) Budget Assigned Execution Rate % % No % Total % % 80% 53% 53% Directly Managed % 85% % Settlement failure rate % 2% 0.42% 0.42% Cost of funds base on US$ 6 Month Libor Timely preparation of monthly financial highlights Budget - timely periodic reports to the Boards and Management (percentage of reports delivered within closing date) % Base- 21bps -25bps -25bps Centrally Managed % 95% 96% 96% % % % 90% 91% 91% Total %

72 71 Key Performance Indicators Indicator Unit 2008 Target Corporate Services (CSVP) Gender Balance Index (PL staff) Vacancy Rate (PL staff at post only) Vacancy Rate (PL at post excluding elected personnel and staff attached to the Board) Vacancy Rate (PL staff at post and offers made and positions committed)* Achieved Sep. 08 Achieved Nov. 08 % 25% 23% 24% % 5% 17% 15% % 5% 18% 16% % 5% 10% 14% Field Based PL Staff % 18% 15% 15% Operations Complexes PL Staff % 60% 55% 54% HR Costs Per Capita UA IT Costs Per Capita UA Facility Management Costs Per Capita UA Implem. Rate Budget Type Directly Managed Centrally Managed Budget Execution (UA million) Budget Assigned Execution Rate % % Total % * Currently 13 offers have been made, 40 candidates have been selected and 33 selected candidates are going to assume positions.

73 72

74 73 Annex 7: Quarterly Budget Execution (UA)

75 74

76 75 Annex 8: Staffing Overview

77 76

78 77

79 78

80 79 Annex 9: Projected Budget Allocation by Department (UA millions) 2008 Adjusted Budget 2009 Proposed Budget Staff Costs Workload Overhead Total Staff Costs Workload Overhead Total Increase over 2008 Increase % Boards of Governors % Boards of Directors (0.20) -1% Operation Evaluation % Staff Retirement Plan % Subtotal Special Appropriations Regional & Country Programs % % Regional Departments % Field Offices % Policy and compliance (0.33) -6% Procurement and Fiduciary Services % Sector Operations % Infrastructure, Water, PS & Regional Integration % Subtotal Operations % Knowledge Management & Research Subtotal Operations and Office of Chief Economist % % Financial Management % Corporate Services % Institutional Governance & Corporate Management % Presidency % Chief Operating Officer % Legal & Advisory Services Compliance Review and Mediation Office of the Auditor General Institutional Support and General Secretariat Subtotal Complexes Budget Young Professionals Program % % % % % % Separation Package Total Reference Budget %

81 Proposed Budget 2010 Proposed Budget Staff Costs Workload Overhead Total Increase over 2008 Increase % Staff Costs Workload Total Overhead Increase over 2009 Increase Boards of Governors % % Boards of Directors (0.20) -1% % Operation Evaluation Staff Retirement Plan Subtotal Special Appropriations Regional & Country Programs Regional Departments % % % % % % % % % % Field Offices % % Policy and compliance Procurement and Fiduciary Services (0.33) -6% % % % Sector Operations % % Infrastructure, PS & Regional Integration % % Subtotal Operations % % Knowledge Management & Research Subtotal Operations and Office of Chief Economist Financial Management % % % % % % Corporate Services % % Institutional Governance & Corporate Management % % Presidency % % Chief Operating Officer Legal & Advisory Services Compliance Review and Mediation Office of the Auditor General Institutional Support and General Secretariat Subtotal Complexes Budget Young Professionals Program % % % % % % % % % % % % % % Separation Package Total Reference Budget % %

82 Proposed Budget 2011 Proposed Budget Staff Costs Workload Total Overhead Increase over 2009 Increase % Staff Costs Total Workload Overhead Increase over 2010 Increase % over 2010 Boards of Governors Boards of Directors Operation Evaluation Staff Retirement Plan Subtotal Special Appropriations Regional & Country Programs Regional Departments % (0.11) -3% % % % % % % % % % % % % Field Offices % % Policy and compliance Procurement and Fiduciary Services % % % % Sector Operations % % Infrastructure, PS & Regional Integration Subtotal Operations Knowledge Management & Research Subtotal Operations and Office of Chief Economist Financial Management % % % % % % % % % % Corporate Services % % Institutional Governance & Corporate Management % % Presidency % % Chief Operating Officer Legal & Advisory Services Compliance Review and Mediation Office of the Auditor General Institutional Support and General Secretariat Subtotal Complexes Budget Young Professionals Program Separation Package Total Reference Budget % % % % % % % % % % % % % % % % %

83 82

84 83 Annex 10: Budget Proposals by Major Expense Components (UA millions) Major Components 2008 Adjusted Budget 2009 Budget Increase Over 2008 Increase % Contribution to the Increase 2010 Budget Increase Over 2009 Increase % Contribution to the Increase 2011 Budget Increase Over 2010 Increase % Contribution to the Increase (a) (b ) (c=b-a) (d=c/a) (e=c/ a) (f ) (g=f-b) (h =g/b) (i = g/ b) (j) (k =j-f) (l =k/f) (m=k/ f) Direct Operating Expenses % 10.41% % 8.31% % 6.25% Staff Related Cost of Which % 7.09% % 7.55% % 5.95% Salaries % % % Benefits % % % Workload % 3.31% % 0.76% % 0.31% Consultants (0.89) -5.46% % % Short Term Staff (0.43) % % % Business Travel % % % Other Direct Expenses % % % Support Cost % 3.99% % 2.51% % 1.02% Human Resource Management % % % Facility Management % % % IT & Treasury Information System Mgt % % % Other Overhead (Publishing, Reproduction, etc) % % % Other Institutional General Expenses % 0.33% % 0.34% % 0.11% Meeting Bank Business (0.36) -7.63% % % Audit, Legal & Advisory Service Fees % % % Indirect Borrowing Expenses & Hedging Premium % 0.92 (0.08) -8.26% % RMC Training & Other Institutional Expenses % % % TOTAL REFERENCE BUDGET % 14.72% % 11.16% % 7.39%

85 84

86 85 Annex 11 Annex 11(a): Capital Expenditures Proposed Budget (UA thousands) Orders 2008 Approved Budget Overall Budget Assigned Available for Use HQ TRA Proposed 3-Year Rolling Budget Total budget Proposed Field Offices Total TRA Field Offices Total TRA Field Offices Total ( ) SECTION OFFICE EQUIPMENT 350 5,416 4, , CGSP0-TRA Office Equipment - 3,442 3, Office Equipment CGSP0-TRHQP Office Equipment CGSP1 FO Office Equipment New FOs CGSP1 FO Office Equip. Batch CGSP1-TRA Office Equip. New Staff CGSP1-FO Office Equip. Batch 1& CGSP1-TRA Spec. Equip. AUDT xx1 CGSP1-FO Generators Batch 1& xx2 CGSP.1-FO Generators Batch N0029 Office equipment for New FO and NPO N0055 CGSP1-TRA Office Equipment N0063 CGSP1-FO Office Equipment SECTION OFFICE FURNITURE 1,465 6,397 3,473 2, , CGSP0-TRA Office Furniture Office Furniture - 2, , CGSP0-TRHQP Office Furniture 500 1,380 1, CGSP1 Office Furniture - New Initiatives CGSP1- New Field Offices Furniture CGSP1 FO Office Furniture Batch CGSP1 FO Office Furniture Cost Matrix B CGSP1 FO Office Furniture Cost Matrix B CGSP1 FO Office Equipt Cost Matrix B1&B N0027 Furniture for new field offices

87 86 Annex 11(a): Capital Expenditures Proposed Budget (UA thousands) Orders Budget Approuvé 2008 Budget Total Exécution Disponible Proposed 3-Year Rolling Budget Total Budget HQ TRA FO Total TRA FO Total TRA FO Total Proposed ( ) 1N0056 CGSP1-TRA Office Furniture ,200 1N0062 CGSP1-FO Office Furniture SECTION IT & COMMUNICATIONS EQUI- PMENT 3,836 51,211 47,519 3,692-10,678-10,678 5,859-5,859 3,991-3,991 20, CIMM0-TRA Computer Equip. Hard & Software 1,043 7,479 7, CIMM0-TRA Computer Network Cabling 125 2,413 2, CIMM0-TRA Telecoms(VSAT & PABX) 236 2,452 2, CIMM0-TRA Videoconferencing CIMM Software Acquisition & Related Training CIMM Knowledge Management & Data Warehouse Hardware Acquisition and Enhancement - 3,700 3, Network Upgrades and Enhancement - 1,264 1, Software and Applications Packages Disaster and Security Recovery Plan - 1,581 1, Specialized Software Telecoms Enhancement-Equipment - 2,145 2, Project AFRICA - 9,089 9, Documents & Records Management System- DARMS - 2,480 2, Corporate Information Data Warehouse Business Process Innovation-SEGL A Video Conferencing System FTRY Asset/Liability Mgt Systems(Summit/ Numerix) - 2,248 1, Software & Application Packages Internet/Intranet Implementation FTRY5 Specialized Software and Hardware

88 87 Annex 11(a): Capital Expenditures Proposed Budget (UA thousands) Orders Budget Approuvé 2008 Budget Total Exécution Disponible Proposed 3-Year Rolling Budget Total Budget HQ TRA FO Total TRA FO Total TRA FO Total Proposed ( ) CIMM0-TRA Disaster and Security Recovery Plan CIMM0-TRA Documents & RecordsManagement- System FTRY TRA ALM System(Summit/Numerix) CIMM0-Internet/Intranet Implementation CIMM0-Network Enhancement Mission CIMM0-Software & Application P CIMM0-Telecommunications Enhancement TRA CIMM0-Telecommunications Enhancement TRA AFRICA0-Project Africa-Mission AFRICA0-Project Africa-Training CIMM0-DARMS Training Missions CIMM0-Database-Datamart FTRY5 ALM Systems-Numerix/Summ FTRY5-Consultancy-Ass/Liab. Management CIMM1-TRA Digital Mapping System CIMM0-Videoconference Systems CIMM0-I*NET Training Missions FTRY0-New Module for Repo A/LM CIMM0-Corporate Info.Datawarehouse CIMM0-Software and Application CIMM0-Reinforcement FTRY Training CIMM0-Specialized Software-mis CIMM0-SWIFT Alliance Servers FTRY5-Missions-Asset/Liab. Management CIMM.3 Organizational Change

89 88 Annex 11(a): Capital Expenditures Proposed Budget (UA thousands) Orders Budget Approuvé 2008 Budget Total Exécution Disponible Proposed 3-Year Rolling Budget Total Budget HQ TRA FO Total TRA FO Total TRA FO Total Proposed ( ) CIMM0-Software and Application CIMM0-Reinforcement FTRY CIMM0-Project ISCC- SAP Competence Centre CIMM2- IT & Comm Equip- New In CIMM0-Upgrade of Computer Security CIMM1 Specialised Software CIMM0-FO-DEC Computer Equip. H CIMM0-FO-DEC Computer Network CIMM0-FO-DEC Telecomms(VSAT & - 1,364 1, CIMM0-FO-DEC Disaster&Security CIMM2-FO-DEC Videoconference Software SAP Management Self service software 43 1,284 1, NIN Other Specialised Software NIN PDRE ICP Project NIN CIMM3 EPES Project CIMM0-AUDT Software Acquisition CIMM0-Specialized Software-Consulting CIMM0-Specialized Software-Training xxx Impact of Decentralization CIMM0-TRA Software Acquisition ESTA CIMM0-TRA Software Acquisition ECON CIMM0-TRA Soft Acquisit CHRM1 e-recruitment (1) CIMM0-TRA Soft Acquisit SRP-CHRM CIMM0-TRA Soft Acqui Suplier Relat Sh

90 89 Annex 11(a): Capital Expenditures Proposed Budget (UA thousands) Orders Budget Approuvé 2008 Budget Total Exécution Disponible Proposed 3-Year Rolling Budget Total Budget HQ TRA FO Total TRA FO Total TRA FO Total Proposed ( ) 1N0000 CIMM0- IT Backup Center - BCP CIMM0- Customized Staffing Matrix N0009 P8 FILENET Platform DARMS Migration N0010 New Summit Modules N0011 Projet INTELSAT& Hughes Network Services N0012 SERVER CONSOLIDATION PROJECT N0013 ADB CLIENT DESKTOP AUTOMATIC BACKUP N0014 Servers N0015 ADB CORPORATE CONFERENCE SERVICES N0016 BDD MIGRATION TO VISTA / OFFICE N0017 DEPLOYMENT OF IT EQUIPMENT ,684-1,684 2,026-2,026 2,293-2,293 6,002 1N0021 Security Enhancement N0022 CAD system N0024 Telecom (PABX & VSAT) Enhancement N0025 Special Depts Hardware & Software acquisition N0033 KNOWLEDGE Mangt &Datawarehouse N0034 CIMM0 - Loan Disburmnt & Portfolio Mngmt N0035 INTERNET/INTRANET N0036 CIMM0 - Enhancmnt of E-Recruitment & NPO N0037 HARWARE Equipments N0038 OTHER SPECIALIZED SOFTWARE N0040 GENERAL BANK SOFTWARE N0042 BROADBAND INTEGRATED TELECOMMUNICA- TIONS N0043 OAGL-TRA-Surveillance & Verif Software N0044 OAGL-TRA-Surveillance & Verif Software

91 90 Annex 11(a): Capital Expenditures Proposed Budget (UA thousands) Orders Budget Approuvé 2008 Budget Total Exécution Disponible Proposed 3-Year Rolling Budget Total Budget HQ TRA FO Total TRA FO Total TRA FO Total Proposed ( ) 1N0045 MUST module for new Numerix interface N0046 INTEX / ADCO N0047 Update of SAS Platform N0048 Hardware to host ALM ORACLE BI Env N0049 Project Risk & Rating Assessment N0050 Monitoring of Credit Limits N0051 Country Risk Assessment System N0052 SAP FONCTIONNAL UPGRADE ,300-3,300 1,220-1, ,520 1N0053 EXTENTION DES BUREAUX N0058 SURVEILLANCE &VERIFICATION SOFTWARE-OAGL N0061 FO-DEC Computer Equip. Hard.&Soft N0066 NETWORK CABLING AND MONITORING ,302 1N0067 ENHANCEMENT TO THE DDP SYSTEM for ESTA SECTION BUILDINGS & CIVIL WORKS ,705 6,487 10,217-2,970 2,818 5,788 4,450 6,240 10,690 2,000 3,240 5,240 21, CGSP0-TRA Build.Security Fire&Access Con CGSP1-TRA Generators and UPS - 1, CGSP1-TRA Electrical Cabling CGSP1-TRA Supplementary Works (EPI/Eds) CGSP1-TRA Electrical Works EPI Tower A CGSP1-TRA Signal related Civil Works CGSP1-TRA Agencement Bibliotheque Renovation of the Meeting Rooms Waterproofing: 18th Floor and Mezzanine - 3, , Rehab of the Plumbing Infrastructure Kitchen Equipment

92 91 Annex 11(a): Capital Expenditures Proposed Budget (UA thousands) Orders Budget Approuvé 2008 Budget Total Exécution Disponible Proposed 3-Year Rolling Budget Total Budget HQ TRA FO Total TRA FO Total TRA FO Total Proposed ( ) Fire Security Devices Rehabilitation of the Air Conditioning System - 1, Reorganization & Renovation of Headquarters Generators Electricity CGSP0-Access Control (Phase 2) Lifts Headquarters - 2, , CGSP-HQ Transfer of Auditorium CGSP-Pilot Rehabilitation/Renovation CGSP-Library CGSP-Wall Headquarters CGSP4-Scanner for H/Q Building Entrances CGSP1-Renovation of 160 KVA UPS for H/Q CGSP1-Energy Savings Projects CGSP0-TRA Cafeteria CGSP0-TRA Improvment of Heating and Air Cond Dris CGSP0-- Fitting out and Equipping CGSP0-Foor Covering-HQ CGSP0-Improvements to the Grou CGSP1-TRA Outfitting New Space CGSP1-FO Outfitting Batch , CGSP1-TRA Fitting-out Trading Room CGSP0-Rehabf the Security System (2nd Phase) CGSP1-FO Generators Batch 3AUDT CGSP1-FO Acquisition of land. Il doit

93 92 Annex 11(a): Capital Expenditures Proposed Budget (UA thousands) Orders Budget Approuvé 2008 Budget Total Exécution Disponible Proposed 3-Year Rolling Budget Total Budget HQ TRA FO Total TRA FO Total TRA FO Total Proposed ( ) 1N0005 CGSP1-FO Outfitting CostMatrix B N0018 Construction of NGFO office ,500 1, ,500 1N0019 ATR - Expansion of office space ,500-2,500 4,000-4,000 1,500-1,500 8,000 1N0023 Construction of offices - FO ,000 6,000-3,000 3,000 9,000 1N0026 Outfitting New Field offices and NPO N0054 CGSP1-TRA Heating and AC systems N0059 CGSP1-TRA Office Building Outfitting N0060 CGSP1-TRA Electrical Works and Cabling N0064 CGSP1-FO Office outfitting ,048 SECTION OTHER PROJECTS 2,195 15,992 10,726 5, , CGSP Vehicles Simultaneous Interpretation Equipment Security Equipment TRA Miscellaneous Works Villa TRA Villa Equipment TRA Villa Furniture JAI Equipment Equipment of the Regional Offices Computer Backup Room Riviera III Security of the Villas & Residence Purchase of the 6th Floor of ''Immeuble Atlantic" - 2,137 1,074 1, Pre-investment Studies Prepare RQST Quotation - 1,639 1, Deputy Contractor_Maîtred'Oeuvre Délégué CIMM0-Security Cameras for the Satellite Renewal of Villas Air Conditioners

94 93 Annex 11(a): Capital Expenditures Proposed Budget (UA thousands) Orders Budget Approuvé 2008 Budget Total Exécution Disponible Proposed 3-Year Rolling Budget Total Budget HQ TRA FO Total TRA FO Total TRA FO Total Proposed ( ) Lifts Cité BAD Replacement of 6 Vehicles Villa-Fitting out and Equiping of Villas CGSP1-Villa 6-Apatam Renovation CGSP1-Satellite Air Conditioning CGSP3-Vehicles for New Field Offices CGSP1-Partitioning Works New Field Office 500 1, CGSP1-TRA Security equipment villa CGSP1-Villas-Fitting out and Equipping CGSP0-Electric Rehab. Villas BT GARO-Equipment EGCO-Equipment CGSP0-Marking of the External CGSP0-Conversion of 3rd Basement CGSP0-Replacement of Simultane CGSP3-Vehicles for New FOs CGSP1-TRA Medical center equipment CGSP1-Partitioning Works 20 1, CGSP1-Vehicles Batch CGSP1-FO Generators (residence) Batch CGSP TRA - Tender Management S OAGL TRA - Surveillance & Verification FFCO TRA - COSO Risk Project Software ORPC TRA - RBM System Software CGSP1-FO Security equipment Batch 1& CGSP1-FO Security equipment Batch

95 94 Annex 11(a): Capital Expenditures Proposed Budget (UA thousands) Orders Budget Approuvé 2008 Budget Total Exécution Disponible Proposed 3-Year Rolling Budget Total Budget HQ TRA FO Total TRA FO Total TRA FO Total Proposed ( ) CGSP1-FO Security equipment Batch CGSP1- TRA Photocopy & reproduction machines CGSP0-FO Outfitting CostMatrix B1& CGSP0-FO Outfitting CostMatrix B N0028 Vehicles for New FO and NPO N0030 SECU0-Security Warden/Cores System N0031 SECU0-FO Security equipment Batch N0032 SECU0-FO Security equipment Batch N0057 CGSP1-TRA Building Fire Security N0065 CGSP1-FO Vehicles ,012 GRAND TOTAL 8,541 95,718 72,816 22, ,298 4,185 18,533 11,079 6,844 17,923 6,761 4,102 10,863 47,319

96 95 Annex 11(b): Estimate Field Offices Capital Expenditures Budget by Project Nature and Components (UA thousand) Investment Type 2008 Budget * 2009 Budget 2010 Budget 2011 Budget Total Budget Increase/Decrease Amount % (a) (b) (c ) (d) e=b+c+d (f)=(e)-(a) (g)=(f)/ a) Section Office Equipment % Section Office Furniture % Section IT & Communications Equipment Section Buildings & Civil Works (679) -29% 320 2,818 6,240 3,240 12,298 11, % Section Other Projects 1, % Total 2,349 4,185 6,844 4,102 15,131 12, % * Excludes Customized Matrix

97 96

98 97 Annex 12: Operational Net Income Estimates Annex 12(a): Assumption for Bank Group s Net Income Estimates The rate of return on ADB and ADF investments for each year is the weighted average return on the held to maturity investment portfolio and the liquid investment portfolio. The projected investment income for the Bank Group reflects future prospects based on current volatile market conditions. For 2008, valuation losses in the trading portfolio were estimated on the basis of the assumption that the downward trend of October would continue until the end of Regarding the HTM portfolio, an impairment estimate of approximately UA 23 million was taken into account to reflect the credit deterioration of some securities. This estimated impairment is subject to continuous review to reflect ongoing changes in market conditions. The financial projections for ADF incorporate the estimated foregone income effect of the MDRI debt cancellation initiative, but assume continued special purpose reporting. The share of grants in ADF operations is assumed to remain at 30% through the period. Future loan disbursements will be based on the historical disbursement profiles for category C countries for the Bank, and the historical disbursement profiles for category A countries for the ADF and NTF. All borrowers in default status as at 30 September 2008 are assumed to remain in that status throughout the period Provisioning for loan losses for ADB and NTF shall be calculated according to the revised IAS 39 implemented as at January 1, ADF presents special purpose financial statements and is not subject to provisioning. Annex 12(b): Projected Bank Group Lending (UA millions) ADB Public Sector 940 1,347 1,031 1,780 Private Sector ,140 1,110 Total 1,640 2,187 2,171 2,890 ADF 1,900 1,900 1,546 2,450 NTF Annex 12(c): Bank Group Cost-sharing Formula ADB 28.17% 26.91% 26.97% 26.92% ADF 70.33% 71.58% 71.54% 71.59% NTF 1.50% 1.51% 1.49% 1.49%

99 98 Annex 12(d): Allocation of Bank Group Administrative Expenses for 2009 (UA millions) BUDGET PART Total ADB ADF NTF(*) Total Bank Group Administrative Expenses Budget Less Direct Administrative Expenses 6.22 Subtotal Shared Depreciation Total Shareable Expenses Plus Direct Expenses: Direct Administrative Expenses Non Shareable Depreciation (ADB only) Total Administrative Expenses (*) In the event that the share of actual Bank Group Administrative expenditure attributable to NTF exceeds 20% of NTF gross income, the excess over such percentage is borne by ADB

100 99 Annex 12(e): Projected Net Operational & Net Income (UA millions) ADB ADF NTF Total ADB ADF NTF Total ADB ADF NTF Total ADB ADF NTF Total ADB ADF NTF Total Loan Income Investment Income * Other Income Total Income Financial Charges Provision for Loan Losses Total Operational Expenses Operational Income Share of Administrative Expenses Depreciation Total Admin. Expenditures Discount on accd encashments IAS39 FVO Gain / (Loss) IAS39 Non-FVO Gain / (Loss) Translation Gain / (Loss) and sundry expenses Impairment on equity investments and other receivables Net Income ** *** * Investment income include unrealized valuation losses and the provisions for impairment on certain securities in the HTM portfolio estimated at UA 65 million and UA 23 million respectively. ** Net Income for 2008 was revised upward from UA million (see document ADB/BD/WP/2008/165) to UA million due to 1) Reduction in borrowing expenses (+22.5 million); 2) Decrease in Investments, Loans and Other Income (-UA 11.3 million); 3) Provision write-backs as a results of RCI payments (+UA 27 million); 4) Additional provisions for possible new impairments (-UA 15 million); and 5) Other miscellaneous (+UA 3.7 million). *** Projected Net Income for 2009 increased from UA million (ref: document ADB/BD/WP/2008/165) to UA million due to the reduction in Shared Administrative Expenses from UA million (ref: document ADB/BD/WP/2008/165) to UA million.

101 100

102 101 Annex 13: Projected Funds from Bilateral and Multilateral Sources (UA million) Projected New Resource Mobilization and Commitment Amount Technical Cooperation and Special Funds: Bilateral to be newly mobilized Bilateral to be committed Multilateral to be newly mobilized Multilateral to be committed Donor-funded Technical Assistants/Secondment to be newly mobilized and committed Cofinancing to be newly mobilized Total resources to be newly mobilized

103 102

104 103

105 104 THE PROGRAMME AND BUDGET

106 AfDB - Design, External Relations and Communication Unit/YAL African Development Bank Group Angle de l avenue du Ghana et des rues Pierre de Coubertin et Hedi Nouira BP Tunis Belvedere (Tunisia) Tel.: Fax: afdb@afdb.org Internet: