2015 Annual Portfolio Performance Report

Transcription

1 April Annual Portfolio Performance Report This is a redacted version of the document that excludes information that is subject to exceptions to disclosure set forth in ADB's Public Communications Policy 2011.

2 ABBREVIATIONS ADB Asian Development Bank ADF Asian Development Fund APPR annual portfolio performance report BER bid evaluation report PRC People s Republic of China CWRD Central and West Asia Department DEfR Development Effectiveness Review DVA direct value added EARD East Asia Department IRR internal rate of return MFF multitranche financing facility OCR ordinary capital resources ORM Office of Risk Management OSFMD Operations Services and Financial Management Department PARD Pacific Department PASS Procurement Accreditation Skills Scheme PPTA project preparatory technical assistance PSOD Private Sector Operations Department RBL results-based lending SARD South Asia Department SERD Southeast Asia Department TA technical assistance TFP Trade Finance Program NOTES (i) (ii) In this report, $ refers to US dollars. Totals may not sum precisely because of rounding.

3 Vice-President D. Stokes, Vice-President (Administration and Corporate Management) Director General Head Team leader R. Subramaniam, Operations Services and Financial Management Department (OSFMD) M. Parkash, Advisor and Head, Operations Management Unit, OSFMD C. Hu, Principal Portfolio Management Specialist, OSFMD D. Zhang, Senior Portfolio Management Specialist, OSFMD Team members M. Abrera, Senior Financial Control Officer, Controller s Department (CTL) M. Barcenas, Portfolio Management Officer, OSFMD R. Caluag, Senior Investment Officer, Private Sector Operations Department (PSOD) H. Carlsson, Advisor and Head, Portfolio, Results and Quality Control Unit, South Asia Department P. Comia, Associate Portfolio Management Officer, OSFMD O. Dyloco-Canto, Senior Portfolio Management Officer, OSFMD I. Flores, Senior Portfolio Management Assistant, OSFMD C. Horiuchi, Risk Management Specialist, Office of Risk Management (ORM) H.W. Hwang, Financial Control Specialist, CTL M. Lahoz, Senior Finance Officer, PSOD M. Monreal, Associate Portfolio Management Analyst, OSFMD S. Muramoto, Unit Head, Project Administration, Pacific Department R. Narasimham, Principal Project Management Specialist, OSFMD D. Ordonez, Risk Management Officer, ORM J. Pascual, Portfolio Management Officer (Systems Support), OSFMD J. Petersen, Senior Portfolio Management Specialist, Southeast Asia Department C.L. Roberts, Director, PSOD G. Rublee, Principal Risk Management Specialist, ORM M. Tan, Portfolio Management Officer, OSFMD A.M. Tirona, Risk Management Analyst, ORM M. Villareal, Principal Portfolio Management Specialist, East Asia Department N. Zhang, Advisor and Head, Portfolio, Results, Safeguards and Gender Unit, Central and West Asia Department In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

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5 CONTENTS EXECUTIVE SUMMARY Page I. INTRODUCTION 1 II SOVEREIGN PORTFOLIO 1 A. Portfolio Composition and Trends 1 B. Portfolio Key Findings 2 C. Conclusions and Agreed Actions 23 III NONSOVEREIGN PORTFOLIO 28 A. Portfolio Composition and Trends 28 B. Portfolio Key Findings 33 C. Conclusions and Agreed Actions 33 i APPENDIXES Sovereign Portfolio: Key Indicators Status of the 2014 Annual Portfolio Performance Report Recommended Actions Sovereign Operations Glossary Nonsovereign Operations Glossary 43

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7 EXECUTIVE SUMMARY The annual portfolio performance report is a Management report that details the state of the sovereign and nonsovereign portfolios of the Asian Development Bank (ADB). It presents a snapshot of ADB s operational performance in 2015, analyzes portfolio composition and trends, and identifies key issues. It concludes with agreed actions to improve portfolio performance Sovereign Portfolio The active sovereign portfolio of loans, grants, technical assistance (TA), and equity increased by $7.1 billion or 10.4% over 2014 and totaled $74.9 billion at the end of The loan and grant portfolio of 685 active projects increased by 10.9% to $73.2 billion. ADB s ordinary capital resources (OCR) financed 70.5% of the loan and equity portfolio value ($52.9 billion). The Asian Development Fund (ADF) financed 24.9% and other special funds and cofinancing financed 4.6%. The average project size increased by 7.8% to $106.9 million from $99.1 million in The core sectors of Strategy 2020 accounted for 82.4% of the portfolio value, a slight decrease from 82.7% in In 2015, contract awards for project loans and grants totaled $8.1 billion, 0.4% less than in Disbursements for projects totalled $7.0 billion in 2015, a decrease of 3.6% from $7.3 billion in OCR-funded projects performed better than ADF-funded projects. The cumulative portfolio disbursement (S-curve) for 2015 improved only over 2013 actual S-curve and is worse than 2012, 2014, and average. Disbursements in projects for all age groups except age 0, were lower in 2015 compared to By the end of the sixth year of implementation after approval, ADB project disbursement was 67.2%, compared with 83.3% of , lower by 16.1 percentage points. This indicates actual project implementation period is longer than previous years and signifies slowdown during project implementation. The uncontracted percentage was 43.8%, which is lower than 44.1% in 2014, and the 5-year average of 44.3%. Good progress was made to implement 10-Point Procurement Reform Action Plan. The average time taken by ADB for processing approval of bid evaluation reports of $10 million and above contracts in 2015 was reduced to 49 days compared with 58 days The average age of projects from approval increased from 3.1 years to 3.3 years in When measured by value, 58% of the portfolio was in ages 0 3 years of implementation, compared with 63% in The percentage by number was 58, down from 59 in Some 17.6% of the total project portfolio ($11.9 billion) and 18.7% in number (175) are 6 years old and above. The entry of effective loans and grants within the same year of approval into the portfolio was 21.5% in 2015 compared with 23.7% in In 2015, $759.7 million of loans and grants were terminated and cancelled. Except for 2012, this is the lowest in the last 5 years. The 2015 net resource transfer for project loans was $3.0 billion, 11.7% lower than in 2014 ($3.4 billion). The 2015 TA portfolio decreased $66 million (4.0%) by value and 105 (9.8%) by number. By number, 19.9% were project preparatory TA (PPTA) and 80.1% were non-ppta. The average age of a TA project from approval was 2.3 years, and 58.4% of the active TA projects had been extended for an average of 1.8 years. In addition, at the end of December 2015, 85 TA projects were age 5 and above, with an undisbursed balance of $118.6 million.

8 ii The performance of the sovereign portfolio in 2015 declined in terms of contract awards, disbursements, and project performance ratings. Contract awards and disbursements were lower in absolute amounts and in ratios than in The decline in contract awards and disbursement performance is attributed to the weak performance of the energy, water and other urban infrastructure and services, and agriculture, natural resources, and rural development sectors. Contract awards in the year 1 and 3 age groups declined by 24.3% ($1.1 billion), indicating continued problems in project readiness and start-up delays. Disbursements in the year 1 and 3 age groups fell by 40.2% ($1.2 billion), reflecting continued problems in project implementation. Compared with 2014, the number of 6-year-old and above projects increased by 17.4%, highlighting the need to monitor the performance of these projects closely. Based on the 2015 performance, the following actions have been agreed amongst the concerned departments to improve the portfolio s performance: (i) Provide appropriate resources, incentives, and staff skill mix for project design and implementation to regional and operations support departments. (ii) Apply procurement readiness and design readiness criteria strictly before approval to all projects. Encourage use of project design advance (PDA) and provide more PPTA resources to ensure higher project readiness. (iii) Resolve contracting and disbursement issues, provide capacity building support to executing agencies and implementing agencies, and strengthen contract management. (iv) Review age six and above portfolio to reduce implementation problems. (v) Limit the number of TA projects, close old TA projects, limit extensions and supplementary approvals. (vi) Make efforts to reduce the procurement time for contracts above $20 million. Nonsovereign Portfolio The total committed nonsovereign portfolio increased by 3.5% to $7.9 billion at the end of 2015 ($7.6 billion at the end of 2014), mainly because of a 9.8% increase in the loan portfolio and a 2.5% increase in the equity portfolio. [This information contains sensitive financial information subject to disclosure restrictions per paragraph 97, exception (viii) of ADB s Public Communications Policy (2011).]

9 I. INTRODUCTION 1. The annual portfolio performance report (APPR) is a Management report that details the state of the sovereign and nonsovereign portfolios of the Asian Development Bank (ADB). It presents a snapshot of ADB s operating performance in 2015, analyzes portfolio composition and trends, and identifies key issues. It concludes with agreed actions to improve portfolio performance. 2. The APPR is an integral building block within the ADB performance management information system and complements ADB s annual Development Effectiveness Review (DEfR) 1 by providing a more focused and in-depth analysis of the sovereign and nonsovereign portfolio. By providing an analytical framework for country portfolio assessments, the APPR is a key input in annual country portfolio reviews, regional department portfolio management, and long-term country partnership strategies. 3. The APPR provides information on the status of the sovereign and nonsovereign portfolios at the start and end of 2015 (Figures 1 and 47). It shows the composition of and illustrates trends in the two portfolios by approvals, commitments, disbursements, sector, country, and modality. The report assesses the quality and performance of each portfolio and identifies key findings. A. Portfolio Composition and Trends II SOVEREIGN PORTFOLIO 4. Overall portfolio. The active sovereign portfolio of loans, grants, technical assistance (TA), and equity increased by $7.1 billion or 10.4% over 2014 and totaled $74.9 billion at the end of 2015 (Figures 1 and 2). The loan and grant portfolio comprised 685 active projects and increased by 10.9% to $73.2 billion. Ordinary capital resources (OCR) financed 70.5% of the portfolio value ($52.9 billion). The Asian Development Fund (ADF) financed 24.9% ($18.7 billion) and other special funds and cofinancing financed 4.6% ($3.4 billion). The average project size increased by 7.8% to $106.9 million ($99.1 million in 2014). 5. Regional distribution. Composition by regional department has remained stable. The South Asia Department (SARD) accounted for 31.0% ($23.3 billion) of the portfolio at the end of 2015, followed by the Central and West Asia Department (CWRD) with 26.0% ($19.5 billion), the Southeast Asia Department (SERD) with 23.3% ($17.5 billion), the East Asia Department (EARD) with 16.5% ($12.4 billion), and the Pacific Department (PARD) with 2.7% ($2.0 billion) (Figure 3). All regional departments contributed to the overall portfolio growth in CWRD s portfolio grew by $2.6 billion (15.2%), SERD s by $1.7 billion (11.1%), SARD s by $1.7 billion (8.0%), EARD s by $1.0 billion (8.8%), and PARD s by $0.09 billion (4.7%). Distribution has been largely unchanged since SARD had the biggest share (5-year average of 32.5%) and PARD had the smallest share (5-year average of 2.7%). 6. The CWRD portfolio comprised 138 active projects and 115 TA projects. Five countries accounted for 83.9% Pakistan ($6.4 billion), Uzbekistan ($3.4 billion), Afghanistan ($3.0 billion), Kazakhstan ($2.1 billion), and Azerbaijan ($1.5 billion). EARD had 109 active projects and 153 TA projects, with the People s Republic of China (PRC) accounting for 92.8% ($ ADB Development Effectiveness Review 2014 Report. Manila.

10 2 billion), Mongolia for 7.0% ($0.9 billion), and regional projects for 0.1% ($0.02 billion). PARD had 62 active projects and 68 TA projects. Papua New Guinea was the largest component of its portfolio ($1.0 billion, 50.1%) followed by Timor-Leste ($0.3 billion, 13.8%), Samoa ($0.1 billion, 5.7%), regional projects ($0.1 billion, 5.6%), and Fiji ($0.1 billion, 5.3%). SARD had 212 active projects 2 and 166 TA projects. India accounted for 51.6% ($12.0 billion), followed by Bangladesh (26.3%, $6.1 billion), Sri Lanka (11.8%, $2.8 billion), Nepal (8.3%, $1.9 billion), and Bhutan (1.4%, $0.3 billion). SERD had 163 active projects, one equity investment, and 215 TA projects. Viet Nam continued to be its largest borrower ($9.0 billion) and accounted for 51.4% of its portfolio. It was followed by Indonesia ($3.1 billion, 17.7%), the Philippines ($2.7 billion, 15.4%), Cambodia ($1.2 billion, 6.7%), and the Lao People s Democratic Republic ($0.7 billion, 4.0%). 7. Country concentration. Country concentration decreased slightly in 2015, with the portfolio share held by the five largest countries falling from 61.7% in 2014 to 60.1% in 2015 (Figure 4). The share held by the three largest borrowers reduced to 43.3% from 46.1% in 2014, and the combined value of their portfolios grew by $1.2 billion. The countries with the largest increases in value were Indonesia ($1.4 billion), Bangladesh ($1.0 billion), Pakistan ($1.0 billion), the PRC ($0.8 billion), and Kazakhstan ($0.6 billion). The biggest declines were regional ($0.1 billion) and in Viet Nam ($0.1 billion) (Figure 5). 8. Sector concentration. The core sectors of Strategy accounted for 82.4% of the portfolio value, a slight drop from 82.7% in 2014 (Figure 6). This included 35.9% in transport, 24.2% in energy, 12.5% in water and other urban infrastructure and services, 5.1% in education, and 4.9% in finance (Figure 6). 9. Modality. As of 31 December 2015, 176 multitranche financing facility (MFF) projects worth $24.0 billion and 509 non-mff projects valued at $49.2 billion are active. MFF projects accounted for 32.8% of total loans and grants by value and 25.7% by number. Non-MFF projects accounted for 67.2% by value and 74.3% by number (Figure 7). During 2015, 25 MFF tranches 4 totaling $3.6 billion were approved, and approvals for 96 non-mff projects amounted to $10.5 billion. Policy-based loans and grants increased by $2.6 billion to $5.5 billion in 2015, accounting for 7.5% of total loans and grants (4.3% in 2014). Results-based lending (RBL) increased by 160.6% from $0.7 billion in 2014 to $1.8 billion in B. Portfolio Key Findings 10. The 2015 sovereign portfolio performance declined from 2014 in the following ways: (i) Contract awards decreased by 0.4% to $8.1 billion. (ii) The contract award ratio decreased by 1.0 percentage point to 22.9%. (iii) Disbursements for projects decreased by 3.6% to $7.0 billion. 5 (iv) The project disbursement ratio declined by 1.0 percentage point to 17.2%. (v) The proportion of projects reporting implementation risks (i.e., potential and actual problem projects) increased to 24.2% from 19.8% in Excludes nonsovereign public sector committed portfolio of $250 million. As of the end of December 2015, the total SARD nonsovereign cumulative disbursement was $156.1 million, and the undisbursed balance was $93.9 million. Its nonsovereign disbursement during 2015 totaled $85.9 million. 3 ADB Strategy 2020: The Long-Term Strategic Framework of the Asian Development Bank, Manila. 4 Excludes four cofinanced additional financing for MFF tranches. 5 Including sovereign policy-based lending disbursements totaled $11.0 billion in 2015, compared with $9.1 billion in Policy-based loans and grants are not included in the disbursement analysis in this report.

11 3 Figure 1: Sovereign Portfolio at a Glance (as of 31 December 2015) Active portfolio as of 1 January 2015 ADB s active portfolio had a value of $67.8 billion, comprising (i) $59.9 billion in loans (no. = 623), (ii) $6.1 billion in grants (no. = 306), (iii) $1.7 billion in TA (no. = 1,033), and (iv) $0.2 billion in equity (no. = 1). A total of 666 active projects were funded by loans and grants. Approvals Approvals in 2015 totaled $14.4 billion, comprising (i) $13.3 billion in loans, (ii) $0.9 billion in grants, and (iii) $0.2 billion in TA. Closures Closures totaled $6.5 billion, comprising $6.2 billion in loans and grants and $0.3 billion in TA. Cancellations Cancellations totaled $0.8 billion, of which 93% was loan and grant cancellations. Entry ratio The net entry ratio was 49.3%, higher than 34.2% in 2014, mainly due to a ($2.4 billion) increase in approvals. Active portfolio as of 31 December 2015 The active portfolio grew by 10.4% to $74.9 billion in 2015, comprising (i) $66.7 billion in loans (no. = 657), (ii) $6.6 billion in grants (no. = 313), (iii) $1.5 billion in TA (no. = 923), and (iv) $0.2 billion in equity (no. = 1). A total of 685 active projects were funded by loans and grants. ( ) = negative, ADB = Asian Development Bank, no. = number, TA = technical assistance.

12 4 $ billion Figure 2: ADB Overall Portfolio ADB = Asian Development Bank. Figure 4: Five Largest Portfolios by Country 40% India Share of Active Portfolio Value on Cut-off Date 100% 80% 60% 40% 0% 60% Others Bangladesh Pakistan Viet Nam % 12% 8% People's Republic of China Figure 6: Portfolio by Sector 16% 18% 11% 12% 42% 36% 5% % 16% 84% 82% 5% 21% 24% 4% 5% EDU ENE FIN TRA WUS Others EDU = education, ENE = energy, FIN = finance, TRA = transport, WUS = water and other urban infrastructure and services. Non-Ops $0.3 billion 0.4% SERD $17.5 billion 23% Figure 3: Portfolio by Region SARD $23.3 billion 31% 3% CWRD = Central and West Asia Department, EARD = East Asia Department, Non-Ops = nonoperations, PARD = Pacific Department, SARD = South Asia Department, SERD = Southeast Asia Department. Figure 5: Portfolios with Largest Changes Change in Portfolio Value ($million) 1,600 1,400 1,200 1, ,368 Indonesia 1, Bangladesh Pakistan People's Republic of China ( ) = negative. Portfolio Value ($ billion) Figure 7: Multitranche Financing Facility and Non-Multitranche Financing Facility MFF = multitranche financing facility. 619 Kazakhstan MFF NON-MFF CWRD $19.5 billion 26% EARD $12.4 billion 16% PARD $2.0 billion (117) (74) Regional 0 Viet Nam Value 2015 Value 2014 Number 2015 Number Number of Projects

13 5 $ billion Figure 8: Contract Awards, Projects $ billion Figure 9: Disbursements, Projects The sovereign portfolio performance indicators for each country are in Appendix 1 and the major findings of the sovereign loan and grant portfolio performance in 2015 are discussed below. 1. Contract Award and Disbursement Performance Overview 12. In 2015, both contract awards and disbursements slowed down. Contract awards for project loans and grants (hereafter, projects) totaled $8.1 billion, 6 0.4% ($0.03 billion) less than $8.2 billion in 2014 (Figure 8). Disbursements for projects totaled $7.0 billion in 2015, 7 a decrease of 3.6% ($0.3 billion) from $7.3 billion in 2014 (Figure 9). 13. Consistent with the absolute results, the contract awards ratio and disbursement ratio declined by about one percentage point. The contract awards ratio declined to 22.9% from 23.9% in 2014 (Figure 10) and the disbursement ratio 8 declined from 18.2% in 2014 to 17.2% in 2015 (Figure 11). 14. For the three major borrowers the PRC, India, and Viet Nam, which together account for 46.1% of the active project portfolio the contract award ratio declined from 26.2% in 2014 to 25.4% in 2015 and the disbursement ratio declined to 15.8% in 2015 from 18.7% in The PRC contract award ratio increased from 21.2% to 21.3%, India s declined from 34.7% to 34.3%, and Viet Nam s dropped from 23.1% to 20.0%. India s disbursement ratio improved from 16.3% to 16.5%, the PRC s declined from 21.0% to 18.0%, and Viet Nam s dropped from 19.2% to 12.1% (Figures 10 and 11). 15. Among the top 10 project portfolios, the Philippines (37.5%), India (34.3%), and Sri Lanka (28.6%) had the highest contract award ratio while Uzbekistan (11.4%) and Nepal (13.7%) had the lowest. The decline in Uzbekistan of $430.8 million was mainly due to projects in the energy sector and an MFF tranche of a transport sector project. By amount, Pakistan 6 Including $160.8 million from RBL, a 60.6% increase from $100.1 million in Including $239.6 million from RBL, a 149.0% increase from $96.2 million in Starting in 2014, the definition of disbursement ratio has been revised in line with ADB s results framework to total disbursement during the year (including disbursements from newly approved operations during the year) over the undisbursed balance at the beginning of the year (based on approvals as of the previous year). This definition is used throughout the report.

14 6 increased by $293.6 million and Bangladesh rose by $137.5 million. The Philippines had the highest disbursement ratio (39.9%), followed by Uzbekistan (26.6%), while Afghanistan (7.8%), Pakistan (10.6%), Nepal (10.9%), and Viet Nam (12.1%) had the lowest. Viet Nam had the largest decline of $415.9 million. Afghanistan s disbursement ratio was low as a result of low disbursements in the energy and transport sectors. 16. MFF projects performed better than non-mff projects in both contract award and disbursement ratios. The MFF contract award ratio was 26.8% (30.5% in 2014), higher than 21.0% for non-mff and ADB s overall average of 22.9%. Uzbekistan had the largest decline of 59.6 percentage points (10.7% in 2015 against 70.3% in 2014). The finance sector had the largest drop of 31.3 percentage points (from 56.2% in 2014 to 24.9% in 2015) caused by two loans in Kazakhstan with no contract award and two loans in India that were not yet effective. The disbursement ratio for MFF projects was 17.8% (17.7% in 2014), higher than 16.8% for non-mff projects, and ADB s overall average (17.2%). 17. The contract award ratio for the transport sector, which accounts for 39.4% of the active project portfolio, increased to 31.4% in 2015 from 29.3% in 2014, while the disbursement ratio declined from 19.7% to 17.0%. The energy sector, which accounts for 24.9% of the active project portfolio, had a lower contract award ratio and disbursement ratio than in Its contract award ratio of 15.1% is the lowest since 2005 and the disbursement ratio of 11.4% is the lowest since Pakistan, Uzbekistan, Nepal, and Viet Nam had lower contract award ratios than the sector average. The water and other urban infrastructure and services sector contract award ratio declined to 20.2% and had its lowest disbursement ratio of 13.4% since Compared with the water and other urban infrastructure and services sector s disbursement ratio, India, the PRC, Pakistan, and Viet Nam were below its average. 18. OCR-funded projects performed better than ADF-funded projects on these two ratios. The contract award ratio for OCR-funded projects was 22.9%, compared with 22.4% for ADFfunded projects. The OCR-funded disbursement ratio was 17.2%, against 17.1% for ADFfunded projects. OCR-funded projects had a lower performance than in 2014, while ADF-funded projects had a higher performance. 35% 30% 25% 15% 10% 5% 0% Figure 10: Contract Award Ratio, Projects 31% 26% 22% 27% 25% 22% 26.2% 25.4% 22% 24% 21% % 3 largest (IND, PRC, VIE) Others ADB ADB = Asian Development Bank, PRC = People s Republic of China, IND = India, VIE = Viet Nam. Figure 11: Disbursement Ratio, Projects 35% 30% 25% 15% 10% 5% 0% 23% 17% 18% 18.7% 18.3% 18.2% 18% 18% 17.2% 18% 18% 18% 18% 15.8% largest (IND, PRC, VIE) Others ADB ADB = Asian Development Bank, PRC = People s Republic of China, IND = India, VIE = Viet Nam.

15 7 19. The cumulative portfolio contract award S-curve 9 for 2015 performed slightly better than 2014 in age 0 projects (0.8 percentage point) but was lower from age 1 to 6, implying issues in contracting and contract management (Figure 12). By the seventh year of implementation after approval, ADB contract awards were at 86.0%, lower than the average of 96.8%. 20. A comparison of the actual 2015 S-curve with the average S-curve in a sample of 70 projects approved in 2015 shows a 32% difference by age 2 and 18% by age 5, reflecting the need for more realistic implementation schedules in the reports and recommendations of the President. Figure 12: Contract Award S-curve 1 10% 1 100% 80% 60% 5% 0% 5% 4% 3% 1% 2% % 18% 100% 80% 60% 40% 40% 0% Age from approval average 2015 S-curve (actual) 2014 S-curve (actual) 2013 S-curve (actual) 2012 S-curve (actual) Sample of approved projects 21. A comparison of the actual S-curves 10 with the average S-curve in a sample of 70 projects approved in 2015 shows that the cumulative portfolio disbursement S-curve for 2015 improved only over the 2013 actual S-curve and is worse than the 2012, 2014, and averages (Figure 13). Except for age 0, which was 2.2% higher, disbursements in projects for all age groups were lower in 2015 than in By the end of the sixth year of implementation after approval, ADB project disbursement was 67.2%, compared with 83.3% during , 16.1 percentage points lower. This indicates that the actual project implementation period is longer than in previous years and signifies a slowdown during project implementation. 0% 9 The project contract award S-curve shows the project contract award profile over its life and is a useful graphical presentation of project performance. 10 The project disbursement S-curve shows the project disbursement profile over its life and is a useful graphical presentation of project performance.

16 8 Figure 13: Disbursement S-curve 1 10% 1 100% 80% 60% 5% 0% 1% 1% 3% 1% 2% 0 1 5% 34% 100% 80% 60% 40% 13% 40% 0% Age from approval average 2015 S-curve (actual) 2014 S-curve (actual) 2013 S-curve (actual) 2012 S-curve (actual) Sample of 2015 approved projects 0% 2. Analysis of Uncontracted Balance and Contract Award 22. The uncontracted balance as a percentage of the total value to be awarded (hereafter, uncontracted percentage) was 43.8%, which is lower than 44.1% in 2014, and the 5-year average of 44.3% (Figure 14). The uncontracted balance as of 31 December increased by $1.5 billion (5.9%) to $27.6 billion 11 ($26.1 billion in 2014). SARD had the highest contract award ratio of 28.7% (Figure 15). 23. The PRC, India, and Viet Nam accounted for 42.6% ($11.8 billion) of the total uncontracted balance in 2015 compared with 44.3% in Pakistan (55.4%), the Philippines (54.7%), Nepal (53.4%), Uzbekistan (50.5%), and the PRC (46.3%) had a higher uncontracted percentage than the ADB average of 43.8% (Figure 16). Countries with the largest increases in uncontracted balance were Uzbekistan ($525.2 million) and Pakistan ($506.8 million). Some 83.8% of Pakistan s uncontracted amount is from the energy and transport sectors, 52.6% of the Philippines is from education and multisector, 64.1% of Nepal s is from energy and education, and 52.8% of Uzbekistan s is from the energy sector. 24. Among the largest sectors, agriculture, education, water and other urban infrastructure and services, finance, and energy all had higher uncontracted percentages than the ADB average (Figure 17). The uncontracted balance for the energy sector increased to a record $7.7 billion, up from $6.2 billion in 2014, $6.0 billion in 2013, $5.3 billion in 2012, $4.8 billion in 2011, and $4.13 billion in Including $1.5 billion from RBL.

17 9 100% 80% 60% 40% 0% Figure 14: Contract Award Ratio and Uncontracted Percentage, Projects, % 43% 26% 25% 46% 44% 44% 24% 23% Contract Award Ratio Uncontracted % Figure 15: Contract Award Ratio and Uncontracted Percentage by Department, Projects, % 80% 60% 40% 0% 46% 47% 39% 39% 47% 44% 18% 22% 23% 29% 21% 23% CWRD EARD PARD SARD SERD ADB Contract Award Ratio Uncontracted % ADB = Asian Development, CWRD = Central and West Asia Department, EARD = East Asia Department, PARD = Pacific Department, SARD = South Asia Department, SERD = Southeast Asia Department. $ billion Figure 16: Uncontracted Balance and Percentage by Country, Projects, % 46% 34% 34% Uncontracted Balance 2015 Uncontracted Balance 2014 Uncontracted % 2015 Uncontracted % BAN = Bangladesh, PRC = People s Republic of China, IND = India, PAK = Pakistan, VIE = Viet Nam. $ billion % Figure 17: Uncontracted Balance and Percentage by Sector, Projects, ANR = agriculture, natural resources and rural development; EDU = education; ENE = energy; FIN = finance; TRA = transport; WUS = water and other urban infrastructure and services. 41% 40% 55% 53% PRC IND VIE PAK BAN 37% 32% 51% 54% 54% 49% 50% 51% 52% 44% 48% 44% TRA ENE WUS ANR EDU FIN 2014 Uncontracted Balance 2015 Uncontracted Balance 2014 Uncontracted % 2015 Uncontracted % 51% 43% 60% 50% 40% 30% 10% 0% 60% 50% 40% 30% 10% 0%

18 The contract awards aging analysis shows that in 2015 most contract awards came from the age 1 projects (25.6% or $2.1 billion). This is, however, $860 million lower than in The contract awards in age 1 and 3 declined by $1.1 billion. The contract awards in age 0 projects increased by 41.5% ($116.9 million) and age 2 projects increased by 23.0% ($367 million) compared with 2014 (Figure 18), indicating that projects aged 1 and 3 need closer attention (Figure 19). 3,500 3,000 Figure 18: Annual Contract Awards by Age, Projects, ,947 $ million 2,500 2,000 1,500 1, ,087 1,959 1,592 1,483 1,266 1, => % Figure 19: Uncontracted Percentage by Age, Projects, % 96% 80% 72% 74% 60% 40% 59% 56% 26% 44% 17% 13% 10% 7% 7% 44% 44% 0% =>6 ADB ADB = Asian Development Bank.

19 11 3. Analysis of Contracting Time for Contracts 26. In 2015, the average end-to-end contracting period from receipt of bidding documents to the signing of contracts for $10 million and above contracts was 406 days, 12.2% longer than in 2014 (Figure 20). ADB took 144 days on average and the executing agencies took 262 days. The one-stage-one-envelope procurement method took less time than the one-stage-twoenvelope method. The two-stage plant or turnkey or design and build required the most time (Figure 21). Average Processing Time in Days Figure 20: 2015 Average Processing Time for Procurement Contracts $10 million X X Average Processing Time ADB Number of Contracts Total Ave Processing Time ADB = Asian Development Bank Number of Contracts Average Processing Time Executing Agency Average Processing Time in Days Figure 21: 2015 Average Processing Time for Procurement Contracts $10 million ADB Executing Agency Number of Contracts 1S1E = one stage, one envelope; 1S2E = one stage, two envelopes; 2S = two stage; ADB = Asian Development Bank; EA = executing agency. Note: Average processing time refers to the average number of days from the date of the first receipt of draft bidding document by ADB to the contract signing. It covers all contracts signed in S1E 1S2E 1S1E 1S2E 1S1E 1S2E 2S Goods Plant or Turnkey or Design and Build Works Number of Contracts

20 In 2015, ADB implemented the Procurement Reform 10-Point Action Plan (Box 1). 12 Good progress was made, and the average time taken by ADB for approving the bid evaluation reports of $10 million and above contracts in 2015 was reduced by 9 days to 49 days compared with Procurement times were shortened for approvals requiring action by regional departments (contracts of $10 million $20 million) and joint approvals by regional departments and the Operations Services and Financial Management Department (OSFMD) ($20 million $40 million), but were 6 days longer for those by the Procurement Committee ($40 million) (Table 1). While these results are encouraging, further efforts should be made to streamline joint approvals and Procurement Committee decisions. Table 1: 2015 Procurement Time ( $10 million) Year No. of Receipt of BER to Submissions ADB approval a days days days Item No. of Submissions Receipt of BER to ADB approval $10 $20 million (RD) $20 $40 million (RD+OSFMD) $40 million and above (PC) Average time 49 ADB = Asian Development Bank, BER = bid evaluation report, no. = number, OSFMD = Operations Services and Financial Management Department, PC = Procurement Committee, RD = regional department. a Refers to the average number of days from the date of the first receipt of BER to ADB s approval of BER. It includes the time spent on any clarification and revision needed to finalize evaluation of BER. 12 ADB Midterm Review of Strategy 2020 Action Plan. Manila.

21 13 Box 1: Update of Procurement Reform 10-Point Action Plan Implementation In 2015, ADB adopted the Procurement Reform 10-Point Action Plan and related reforms in line with the midterm review action plan to address a wide range of procurement-related challenges. The reforms were to improve ADB s procurement performance by reducing procurement time, increasing administrative efficiency, and improving project delivery while maintaining sound fiduciary oversight. The reforms implemented a new risk-based approach to procurement governance under the existing ADB guidelines. Risk is now considered and directs procurement actions at each step in the project cycle from country partnership strategy to project concept, project preparation, and contract implementation. Good progress has been made on the 10-point actions: Action 1: New procurement risk assessment. Six country assessments completed (Cambodia, Fiji, Indonesia, Pakistan, Timor-Leste, and Viet Nam). Seven more are in process and likely to be completed in Action 2: New international competitive bidding thresholds. Twenty-nine developing member countries have adopted the revised international competitive bidding thresholds. Action 3: New prior review limits and post review sampling. Assessed procurement risks and introduced new prior review limits for contracts. The new prior review limits are effective for all new projects and may be applied to ongoing projects. Since 1 September 2014, 42 projects reviewed adopted the new prior review ceilings. In March 2015, the Board approved the Amendment to ADB s Procurement Guidelines for mainstreaming e-procurement and post review sampling. Four projects in three countries (Cambodia, India, and Indonesia) have adopted post review (sampling). Action 4: New procurement committee and regional department decision authorities. The revised decision making authorities are in effect and have delivered significant efficiency gains. In 2015, 184 approvals made for contracts over $10 million showed an improvement in transaction time. Action 5: Project procurement classification. Thirty-three projects have been classified A (complex) or those requiring support from OSFMD in project processing. Action 6: Launch of full procurement review system. Launched on 1 January 2015 for transactions valued at $10 million and above. Two hundred fifty-three transactions are using this information and communication technology-based review system. Action 7: Agree master bidding document during project preparation. Thirty projects have adopted master bidding documents. In December 2015, four standard bidding documents for various procurement types (works, works small contracts, goods, and plants) were issued to facilitate the preparation and encourage the adoption of master bidding documents. Action 8: New streamlined procurement committee process. Six senior staff have been outposted to resident missions (Bangladesh Resident Mission, India Resident Mission, PRC Resident Mission, Pakistan Resident Mission, Uzbekistan Resident Mission and Viet Nam Resident Mission) and four OSFMD procurement staff have been deployed to work exclusively with the Central and West Asia Department, Pacific Department, South Asia Department and Southeast Asia Department front offices. The turnaround time from the receipt of a borrower s recommendation to its approval for contracts $10 million and above has shortened to 49 days in 2015 (58 days in 2014). Action 9: New procurement approval form. All submissions have used the procurement approval form. An electronic template for the procurement approval form has also been developed for regional departments to input the data directly into the procurement review system. Action 10: End-to-end consulting services process review. A consulting service unit has been established. The quality- and cost-based selection now encourages 90:10 criteria (90% for technical and 10% for cost), and loan consulting services review up to $5 million has been delegated to regional departments. Source: Asian Development Bank Operations Services and Financial Management Department.

22 14 4. Analysis of Undisbursed Balances and Disbursement 28. The total undisbursed balance of active project loans and grants 13 as of 31 December 2015 was $43.3 billion, 14 a 5.4% increase over $41.1 billion at the end of ADB s undisbursed balance as a percentage of total active projects (hereafter, undisbursed percentage) improved to 64.0% from 64.7% in In 2015, CWRD (66.2%) and SARD (65.6%) had undisbursed percentages that were higher than the ADB average but lower than in 2014 (67.4% for CWRD and 67.0% for SARD) (Figure 22). Of the top 10 countries with the largest project portfolio, Nepal (74.1%), Pakistan (75.3%), and Afghanistan (72.2%) had the largest undisbursed percentage, while India ($7.6 billion), the PRC ($6.7 billion), and Viet Nam ($5.2 billion) continued to have the largest undisbursed balance (Figure 23) as a result of their portfolio size. Pakistan had the largest increase ($921.1 million) in undisbursed balance, from $3.6 billion in 2014 to $4.5 billion in 2015, largely because age 1 projects had 97.3% undisbursed and age 2 projects had 90.9% undisbursed. Figure 22: Disbursement Ratio and Undisbursed Percentage by Department, Projects, % 80% 60% 40% 0% 66% 61% 58% 66% 62% 64% 17% 17% 19% 16% 17% 17% CWRD EARD PARD SARD SERD ADB Disbursement Ratio Undisbursed % ADB = Asian Development Bank, CWRD = Central and West Asia Department, EARD = East Asia Department, PARD = Pacific Department, SARD = South Asia Department, SERD = Southeast Asia Department. $ billion Figure 23: Undisbursed Balance and Percentage by Country, Projects, 2014 and BAN = Bangladesh, PRC = People s Republic of China, IND = India, PAK = Pakistan, VIE = Viet Nam 100% % 75% 80% % 60% 71% 67% % 67% 60% 58% % % % IND PRC VIE PAK BAN 2014 Undisbursed Balance 2015 Undisbursed Balance 2014 Undisbursed % 2015 Undisbursed % 13 Undisbursed balance is the amount available for disbursement at the end of the year for active project loans and grants. 14 Including $1.4 billion from RBL.

23 By sector, transport and energy continued to have the largest undisbursed balance in At $28.1 billion, it accounted for 64.8% of the overall undisbursed balance. Energy showed the largest increase in undisbursed percentage among the sectors, rising from 67.1% in 2014 to 70.8% in 2015, increasing by $1.6 billion to $11.9 billion. Water and other urban infrastructure and services had the second largest increase of $711.4 million, its highest undisbursed balance ($6.3 billion) since Its undisbursed percentage of 70.6% was also higher than the ADB average (Figure 24), mainly because 93.4% of age 2 projects and 80.5% of age 3 projects remained undisbursed. The highest undisbursed percentage was in public sector management projects, increasing from 64.6% in 2014 to 74.6% in This was mainly due to an MFF tranche 2 project in Viet Nam approved in 2014 but not yet effective. The transport sector had its lowest undisbursed percentage (60.5%) since $ billion Figure 24: Undisbursed Balance and Percentage by Sector, Projects, 2014 and % 64% % 59% % 71% ANR = agriculture, natural resources and rural development; EDU = education; ENE = energy; FIN = finance; TRA = transport, WUS = water and other urban infrastructure and services. 30. The disbursement aging analysis of 2015 shows that the age 2 projects have the largest disbursement of $1,424.3 million (20.2% share), closely followed by $1,336.2 million (19.0%) of age 4 projects. Age 1 projects had the largest decrease in disbursement against 2014 at 52% ($731.6 million) (Figure 25), reflecting possible implementation problems. Disbursements in the age 3 projects also declined by 29% ($427.3 million) compared with A closer look into age 3 projects by sector indicates that 2015 disbursement in the transport sector was lower by $303.4 million (36.9%) compared with 2014, water and other urban infrastructure and services by $121.0 million (61.5%), and education by $47.7 million (54.6%). These projects will require close monitoring to ensure any implementation issues are resolved early on. Disbursements in age 2 projects increased by 70.9%, while age 4 projects were the highest at $1.3 billion since Analysis of the undisbursed percentage by age reflects a lower percentage in ages where annual disbursement was high (Figure 26). 46% 36% % 60% 5.61 ANR EDU ENE FIN TRA WUS 72% 71% 100% 2014 Undisbursed Balance 2015 Undisbursed Balance 2014 Undisbursed % 2015 Undisbursed % 80% 60% 40% 0%

24 16 Figure 25: Annual Disbursement by Age from Approvals, Projects ,000 $ million 1,500 1,000 1, ,424 1,472 1,044 1,336 1, ,355 1, % 90% 80% 70% 60% 50% 40% 30% 10% 0% => Figure 26: Undisbursed Percentage by Age from Approvals, Projects % 97% 87% 91% ADB = Asian Development Bank. 5. Portfolio Structure 87% 78% 61% 74% 49% 48% 40% 33% 22% 21% =>6 ADB 65% 64% 31. ADB s overall portfolio grew $7.1 billion, or 10.4%, in 2015 to $74.9 billion. The average product age from approval increased from 3.1 to 3.3 years (Figure 27), reflecting stable lending. Some 17.6% of the total project portfolio ($11.9 billion) and 18.7% in number (175) was 6 years old and above (Figures 28 and 29). Compared with 2014, the number of six-year-old and above projects increased by 17.4%, highlighting the need to monitor the performance of these projects. Years Figure 27: Project Portfolio by Age, Age from Approval

25 17 $ billion Figure 28: Project Portfolio by Value, Age from Approval, % 80% 60% 40% 15%14% 16% 13%14% 10%7% 4% 7% 0% Cumulative Percentage Number Figure 29: Project Portfolio by Number, Age from Approval, % 80% 60% 40% 14%14%15%15% 12%12%8%4% 7% 0% Cumulative Percentage Net Amount ($ billion) Percent by Age from Approval Cumulative % Number Percent by Age from Approval Cumulative % 32. The entry of effective loans and grants within the same year of approval into the portfolio was 21.5% in 2015 compared with 23.7% in 2014 (Figure 30). This can be correlated to lower approvals during the first to third quarter (Q1 Q3) of % compared with 52.2% in 2014 (Figure 31). The decline in approvals during Q1 Q3 may have impacted the achievement of potentially higher contract awards and disbursements. $ billion Figure 30: Effectiveness within the Same Year of Approval % % % 23.7% 21.5% 18.4% 15% % 30% 10% 5% 0.0 0% Approval Year Total Value in $ billion Effective year = 0 Effective year = 0 (%) Percentage Approved Value (Effective Year=0) $ million Figure 31: Approval of Projects by Amount 7,000 6,000 5,000 4,000 3,000 2,000 1, % 12% 13% 2% 27% 26% Q1 Q2 Q3 Q4 Q = quarter. 70% 60% 57% 50% 48% 40% 30% 10% 0% 2014 Amount 2015 Amount 2014 % 2015 % 6. Termination and Cancellation 33. In 2015, $759.7 million of loans and grants were terminated and cancelled (Figure 32). This was the second lowest amount since Partial termination was made on a road transport loan in Pakistan prior to loan signing, and substituted with a grant funded by the Department for International Development of the United Kingdom. Eighty-two loans and 42 grants amounting to $720.7 million were partially cancelled. The largest cancellations were in

26 18 India ($311.1 million) and accounted for 43.2% of the 2015 total, followed by Pakistan ($175.4 million, 24.3%). Cancellations in India were mainly due to three MFF tranches in the energy sector ($210.2 million) where projects were expected to go beyond the MFF availability period of 10 years, while cancellation in Pakistan was mainly due to a revised financing plan of an MFF tranche ($82.4 million) in the transport sector. $ million 3,000 2,500 2,000 1,500 1, Figure 32: Total Termination and Cancellation, , Cancellation (Effective) Cancellation (Not Effective) Termination (Not Signed) Note: 2015 termination (not signed) was a partial cancellation from loan 3197-PAK (National Trade Corridor Highway Investment Program -Tranche 3); substituted with Grant 435 (National Trade Corridor Highway Investment Program - Tranche 3: Partial Substitution of ADB OCR Loan by the Department for International Development of the United Kingdom) 7. Net Resource Transfer 34. ADB s net resource transfer is an area that is directly affected by disbursement performance and loan service payments received. The 2015 net resource transfer for project loans was $3.0 billion, which was 11.7% lower than in 2014 ($3.4 billion) (Figure 33). This was due to a 4.9% decrease in disbursements and a 2.2% increase in payments from the 2014 levels. India had the highest net resource transfer of $743.5 million, followed by $449.4 for Uzbekistan and $423.8 million for the PRC (Figure 34). Similar to 2014, Indonesia had the largest negative net resource transfer of $461.6 million because of a loan service payment of $561.1 million and lower disbursements during the year. $ billion Figure 33: Net Resource Transfer, Project Loans Disbursement Loan Service Payment Net Resource Transfer

27 19 $ million Figure 34: Countries with Highest and Lowest Net Resource Transfers, Project Loans IND UZB PRC VIE PHI INO LAO MAL MYA TAJ (35) (23) (18) (14) -600 (462) ( ) = negative, PRC = People s Republic of China, IND = India, INO = Indonesia, LAO = Lao People s Democratic Republic, MAL = Malaysia, MYA = Myanmar, PHI = Philippines, TAJ = Tajikistan, UZB = Uzbekistan, VIE = Viet Nam. 8. Project Performance Ratings 35. Project performance ratings are a key indicator of portfolio performance. As of the end of 2015, more than of CWRD, EARD, PARD, and SERD projects had implementation risks (Figure 35). The agriculture, energy, health, industry and trade, multisector, public sector management, transport, and water and other urban infrastructure and services sectors had more than of projects with implementation risks (Figure 36). A decline in the overall project performance ratings from 2014 reflected the lower achievement of contract awards and disbursement in % 80% Figure 35: Portfolio Ratings by Department % 8% 9% 3% 5% 5% 100% 4% 5% 3% 9% 13% 15% 12% 7% 15% 16% 15% 18% 15% 21% 17% 28% 80% 13% 60% 60% 40% 87% 77% 64% 83% 79% 80% 40% 78% 74% 73% 83% 68% 76% 0% CWRDEARD PARD SARD SERD ADB 0% CWRD EARD PARD SARD SERD ADB ADB = Asian Development Bank, CWRD = Central and West Asia Department, EARD = East Asia Department, PARD = Pacific Department, SARD = South Asia Department, SERD = Southeast Asia Department.

28 20 Figure 36: 2015 Portfolio Ratings by Sector 100% 80% 5% 5% 8% 19% 11% 0% 18% 10% 15% 0% 0% 22% 14% 16% 16% 6% 9% 7% 15% 19% 17% 60% 100% 57% 40% 76% 84% 72% 82% 75% 78% 68% 79% 73% 76% 29% 0% ANR EDU ENE FIN HLT IND ICT MUL PSM TRA WUS ADB On Track Potential Problem Actual Problem ADB = Asian Development Bank; ANR = agriculture, natural resources and rural development; EDU = education; ENE = energy; FIN = finance; HLT = health; IND = industry and trade; ICT = information and communication technology; MUL = multisector; PSM = public sector management; TRA = transport; WUS = water and other urban infrastructure and services. 9. Technical Assistance Portfolio 36. In 2015, the TA portfolio decreased 4.0% by value and 9.8% by number (Figure 37) 15. Of the total TA projects, 19.9% were PPTA and 80.1% were non-ppta projects. Of the $1.6 billion TA portfolio, SERD continued to hold the largest portfolio by value ($558.6 million) and number (215) in 2015 (Figure 38). 37. The average age of a TA project from approval was 2.3 years in 2015, and 58.4% of the active TA portfolio had been extended. The average extension was 1.8 years compared with 1.7 years in 2013 and The age distribution of the active TA portfolio showed 22.7% (by amount) in age 5 years and above (Figure 39). Non-PPTA accounted for 87.3% ($838.2 million) of undisbursed amounts and 86.5% ($466.0 million) of uncommitted TA amounts (Figure 40). 15 Includes PSOD TA projects.

29 21 $ million 1,800 1,600 1,400 1,200 1, Figure 37: Technical Assistance Portfolio Growth, ,321 1,379 1,626 1,665 1,599 Net TA Amount ($ million) TA = technical assistance. 1,069 1, No. of Active TA projects Number 600 Figure 38: Technical Assistance Portfolio Growth by Department, $ million Number 0 CWRD EARD PARD PSOD SARD SERD KMSD Others 2014 Net TA Amount ($million) 2015 Net TA Amount ($million) 2014 No. of Active TA projects 2015 No. of Active TA projects CWRD = Central and West Asia Department, EARD = East Asia Department, KMSD = knowledge management services departments, No. = number, PARD = Pacific Department, PSOD = Private Sector Operations Department, SARD = South Asia Department, SERD = Southeast Asia Department, TA = technical assistance Figure 39: Technical Assistance Portfolio by Age year 1 to 2 years 3 to 4 years =>5 years No. of TA Projects Net Amount TA = technical assistance. Source Asian Development Bank data

30 22 $ million Figure 40: Active Technical Assistance Portfolio Undisbursed and Uncommitted Value - Project Preparatory and Non-Project Preparatory, ,500 1, Undisbursed Uncommitted Non-PPTA PPTA Non-PPTA = non-project preparatory technical assistance, PPTA = project preparatory technical assistance. 38. As of the end of December 2015, 85 TA projects are age 5 and above, with an undisbursed balance of $118.6 million (Figure 41). Of the 85 TA projects, all have extended their completion date by an average of 4.1 years. Twenty-five are overdue closure and 44 TA projects have supplementary approvals to increase the original TA amount. Three TA projects have implementation schedules of more than 10 years. These 85 TA projects have a total of $60.0 million (16.6%) still uncommitted. The highest uncommitted percentages were in age 5 (21.3%) and age 7 (20.3%) (Figure 43). Knowledge management services departments had an uncommitted balance of $20.3 million and SERD had $18.3 million (Figure 44). The analysis suggests that additional attention and efforts should be given to managing the older TA projects, including speeding up TA implementation, closing TA projects, and limiting extensions and multiple supplementary approvals. These actions will also help reduce the administrative burden. Figure 41: Undisbursed Balance on Technical Assistance with Age 5 years, Figure 42: Undisbursed Balance on Technical Assistance with Age 5 years by Department, $ million $ million TASF = Technical Assistance Special Fund Age from Approval date TASF Other Funds 6.7 TASF Other Funds CWRD = Central and West Asia Department, EARD = East Asia Department, KMSD = knowledge management services departments, PARD = Pacific Department, PSOD = Private Sector Operations Department, SARD = South Asia Department, SERD = Southeast Asia Department, TASF = Technical Assistance Special Fund.

31 23 $ million Figure 43: Uncommitted Balance and Percentage on Technical Assistance with Age > 5 years by Age, % % % % Age from Approval date Uncomitted Uncommitted % 25% 15% 10% 6% 5% 3.3 0% $ million Figure 44: Uncommitted Balance and Percentage on Technical Assistance with Age > 5 years by Department, % % % 16%14% % % % 25% 17% 15% 10% 5% 0% Uncomitted Uncommitted % CWRD = Central and West Asia Department, EARD = East Asia Department, KMSD = knowledge management services departments, PARD = Pacific Department, PSOD = Private Sector Operations Department, SARD = South Asia Department, SERD = Southeast Asia Department. C. Conclusions and Agreed Actions 1. Portfolio Performance 39. The performance of the sovereign portfolio in 2015 declined in terms of contract awards, disbursements, and project performance ratings. Contract awards and disbursements were lower in absolute amounts and in ratios than in The decline in contract awards and disbursement performance is attributed to weak performance of the energy, water and other urban infrastructure and services, and agriculture, natural resources, and rural development sectors. The contract award ratio of 15.1% for the energy sector is the lowest since 2005 and the disbursement ratio of 11.4% is the lowest since The water and other urban infrastructure and services sector disbursement ratio of 13.4% is the lowest since The energy sector has a record 49.5% ($7.7 billion) uncontracted and 70.8% ($11.9 billion) undisbursed; water and other urban infrastructure and services has 49.9% of its portfolio or $4.1 billion uncontracted and 70.6% or $6.3 billion undisbursed. In addition, there was a deterioration in the performance of the portfolios in DMCs which are large borrowers such as Pakistan and Uzbekistan. The uncontracted balance of Uzbekistan increased by $525.2 million to $1,560.0 million and that of Pakistan increased by $506.8 million to $2,932.8 million. Contract awards in the year 1 and 3 age groups declined by 24.3% ($1.1 billion), showing continued problems in project readiness and start-up delays. Disbursements in the year 1 and 3 age groups fell 40.2% ($1.2 billion), reflecting continued problems in project implementation. The number of 6-year-old and above projects increased by 17.4% on 2014, highlighting the need to monitor the performance of these projects closely.

32 Though the disbursement ratio declined by 1 percentage point, the 2015 disbursement ratio is the lowest since The 2015 disbursement ratio does not take into account 2015 approvals; otherwise, it would have been 3 percentage points lower. A review of annual approvals, contract awards, and disbursements during indicates that the level of contract awards and disbursements lags approvals by $1 billion $5 billion per year (Figure 45). The OCR ADF merger is likely to see higher approvals in the next few years, which will put more pressure on contract award and disbursement ratios. $ billion Figure 45: Annual ADB Approvals, Contract Awards, and Disbursements, Annual Approvals Annual Contract Awards Annual Disbursements ADB = Asian Development Bank, ADF = Asian Development Fund, OCR = ordinary capital resources. Note: Covers sovereign OCR and ADF projects only (excludes policy-based). 42. The use of a harmonized disbursement ratio definition shows that ADB s achievement has been lower than that of the World Bank since 2011 and an even wider gap exists when compared with the African Development Bank (Table 2). This highlights the need for ADB to continue its emphasis on improving its disbursement performance. Table 2: Disbursement Ratio ADB, African Development Bank, and World Bank, Year ADB World Bank AfDB % 28% % 19% % 21.5% 18% % 20.0% 22% % 19.8% 24% % 20.0% 19% % 21.2% ADB = Asian Development Bank, AfDB = African Development Bank. Sources: World Bank World Bank Group and World Bank Corporate Scorecard October Washington, DC: World Bank Group; African Development Bank Group Annual Development Effectiveness Review 2015 Driving Development Through Innovation. Tunisia: African Development Bank Group; Asian Development Bank data.

33 All this highlights the need for continued action on project readiness, including design readiness, and on contract management, including working closely with the client on reviewing complex contractual issues such as poor quality of contractors, lack of adequate supervision, and problems with counterpart funding. On the ADB side, the skills mix, resources, and incentives provided for implementation need to be examined. Project selection criteria also need to be studied and project design must include realistic implementation schedules. 44. Though the TA portfolio fell by 4% in 2015, the overall number of TA projects is high (965 TA projects). The average age has increased to 2.3 years, and the 85 active TA projects are age 5 and above with a total undisbursed balance of $118.6 million. These have all been extended by an average of 4.1 years. This highlights the need to limit the number of new TA projects, close old TA projects, and closely monitor TA implementation. 2. Looking Forward 45. Based on the positive portfolio structure conditions, particularly the portfolio age and the 5-year average performance of contract awards and disbursements, performance is expected to improve in Contract awards are expected to increase to $9.4 billion and disbursements to $9.7 billion in 2016 (Figure 46). Regional departments should continue their efforts to achieve higher levels of performance in Figure 46: Project Loan and Grant Contracts and Disbursements Funds Available versus Actual, $ billion Active Loan and Grant Portfolio 31 Dec Funds Available for Contracting Funds Available for Disbursement (beginning of year) Contract Awards Disbursement

34 26 Box 2: 2016 Portfolio Actions Proposed by ADB s Regional Departments The following are the committed actions of the regional departments for 2016: Central and West Asia Department (i) Pay greater attention to project design improvements before project approvals. (ii) Proactive collaboration within the department and with other support offices and/or departments to sustain capacity assistance to executing and/or implementing agencies on better understanding of ADB procedures and requirements. (iii) Improve headquarters project review missions to align with planned country portfolio review/tripartite portfolio review missions led by resident missions to facilitate greater sector-focus review during country-level discussions. (iv) Strengthen joint venture arrangement with greater attention to sector-focused portfolio management. (v) Ensure each EA deploys an international procurement specialist for the project management/implementation unit to improve quality and speed of bid evaluations. Also continue making efforts in simplifying and expediting the process of government s approvals of procurement documents. East Asia Department (i) Monitor service standards on disbursements and ensure strong coordination between PRC resident mission and sector division. (ii) Enforce the project readiness criteria and undertake pre-implementation arrangements, particularly on procurement and safeguards, especially approval of first bidding documents and revised resettlement plans, in parallel with loan signing and effectiveness. (iii) Delegate procurement review of headquarters-administered projects to PRC resident mission procurement unit to support the low capacity of executing and/or implementing agencies at the county level. (iv) Increase project delegation to PRC and Mongolia resident missions. (v) Monitor procurement milestones and strengthen contract management. (vi) Ensure timely recruitment of consultants, and implementation of land acquisition and resettlement. (vii) Engage national procurement officers as mission members during project preparation, and enhance the procurement capacity of executing and/or implementing agencies. Pacific Department (i) Continue to implement the Pacific Project Implementation Action Plan. (ii) Encourage the use of project design advance for Category A projects. Enhance project readiness at the project concept stage and a Project Readiness Checklist before seeking project approval. (iii) Implement a regional CDTA to (i) provide capacity building programs for executing agency staff, (ii) deploy on-the-job problem solving teams to rapidly assist executing agencies, (iii) support portfolio management activities and business opportunity seminars, and (iv) introduce a new business process with one consultant for one project approach. (iv) Establish a monitoring framework to track and report on progress in improving project performance. South Asia Department (i) Delegate 65% of project administration to resident missions. Implement the delegation plan for the India and Bangladesh resident missions. (ii) Reduce active TA portfolio to 150 TA projects, and undisbursed TA amount by. (iii) Establish TA (project preparation) facility. (iv) Reduce overall procurement lead time by 50%. (v) Deliver larger projects with better procurement packaging. (vi) Increase Procurement Accreditation Skills Scheme (PASS) accreditation to 50% of project administration unit staff in all units with project (infrastructure) investments. (vii) 100% procurement readiness and project readiness compliance form fine-tuned with more stringent procurement and other readiness requirements. Southeast Asia Department (i) Accelerate outposting of staff. (ii) Continue dialogue with developing member countries to strengthen official development assistance management and increase readiness to shift to country systems. (iii) Transfer 40 projects from headquarters to resident missions as part of the midterm review of Strategy 2020 action plan. (iv) Provide additional resources in resident missions targeted for additional project delegation to increase project administration, procurement, disbursement, safeguards, and financial management capacity. (v) Strengthen resident mission and headquarters divisions teamwork as One ADB by linking processing and administration teams and facilitating greater dialogue and exchange of lessons and experiences through sector focal point network groups. (vi) Make greater effort to comply with readiness filters, and strengthen advance actions. ADB = Asian Development Bank, PRC = People s Republic of China, TA = technical assistance. Source: ADB Operations Services and Financial Management Department.

35 27 3. Agreed Actions 46. The progress made in implementing the 2014 APPR recommendations is updated in Appendix 2. The majority of the 2014 recommendations related to the midterm review action plan to improve project readiness, procurement, and implementation. Good progress has been made to implement the Procurement Reform 10-Point Action Plan. However, the number of projects that were procurement- and design-ready has decreased in 2015, and efforts are needed to increase this performance has been discussed with regional departments and each regional department has proposed its own set of actions to enhance portfolio performance (Box 2). In addition, the following actions are recommended and agreed to improve portfolio performance further: (i) Provide appropriate resources, incentives, and staff skill mix for project design and implementation to regional and operations support departments. (ii) Apply procurement readiness and design readiness criteria strictly before approval to all projects. Encourage use of project design advance (PDA) and provide more PPTA resources to ensure higher project readiness. (iii) Resolve contracting and disbursement issues, provide capacity building support to executing agencies and implementing agencies, and strengthen contract management. (iv) Review age six and above portfolio to reduce implementation problems. (v) Limit the number of TA projects, close old TA projects, limit extensions and supplementary approvals. (vi) Make efforts to reduce the procurement time for contracts above $20 million.

36 28 A. Portfolio Composition and Trends III NONSOVEREIGN PORTFOLIO 48. Overall portfolio. The total committed nonsovereign portfolio increased by 3.5% to $7.9 billion at the end of 2015 ($7.6 billion at the end of 2014) (Figure 47). 16 Nonsovereign committed loans totaled $6.0 billion ($5.5 billion in 2014), committed guarantees totaled $0.8 billion ($1.1 billion in 2014), and committed equities (at carrying value) totaled $1.1 billion ($1.0 billion in 2014). Direct value-added (DVA) commercial cofinancing totaled $4.6 billion, a 5.1% decrease from $4.8 billion in 2014, driven by a decline in parallel loans and TFP cofinancing. 49. The total outstanding portfolio increased by 12.1% to $6.0 billion at the end of 2015 ($5.3 billion at the end of 2014), with loans constituting the largest share at $4.5 billion ($3.6 billion at the end of 2014). 17 The top two sectors energy and finance accounted for 85.2% of the outstanding portfolio (84.3% in 2014). The concentration in the top three countries (The PRC, India, and Thailand) increased to 55.0% of the outstanding portfolio (The PRC, India and Pakistan accounted for 51.7% in 2014). 1. Approvals, Commitments, and Disbursements 50. In 2015, nonsovereign approvals and disbursements rose, but commitments declined. Approvals increased by 36.9% to $2.6 billion, 19.3% above the 2015 planning figures for nonsovereign operations of $2.2 billion. Commitments decreased by 6.9% to $1.7 billion ($1.9 billion in 2014). Loan and equity disbursements increased by 27.6% to a record high of $1.6 billion (Figure 48). 51. Loan approvals totaled $2.2 billion in 2015, a 25.5% increase over Loan commitments fell by 2.1% to $1.5 billion. Loan disbursements increased by 32.7% to $1.4 billion. Guarantee approvals increased significantly to $341.2 million ($20.0 million in 2014). 18 Guarantee commitments increased by 476.4% to $59.4 million ($10.3 million in 2014). Equity approvals declined by 27.6% to $134.0 million, of which $45.0 million was for investment funds and $89.0 million for direct equities. Equity commitments fell by 47.4% to $160.0 million and equity disbursements declined by 12.2% to $123.0 million. 52. In 2015, total approvals in group A countries decreased to $315.0 million ($342.0 million in 2014). Approvals increased in group B to $1.1 billion ($1.0 billion in 2014) and in group C to $1.1 billion ($478.0 million in 2014). 19 The PRC and India accounted for $1.2 billion or 44.2% of total approvals ($1.1 billion or 56.1% in 2014). 16 The committed loan and equity portfolio consists of outstanding balances plus undisbursed balances. The committed guarantee portfolio consists of outstanding balances plus non-executed commitments. Commitments are project investments approved by ADB s Board of Directors for which the investment agreements are signed by the investee company and ADB. 17 The total outstanding portfolio is the disbursed loans and equity investments (on the balance sheet) plus executed guarantees (off the balance sheet). 18 Guarantee approvals exclude approvals in supply chain finance and trade finance. 19 Countries that received nonsovereign project assistance from ADB: Group A are Afghanistan, Bhutan, Cambodia, the Kyrgyz Republic, the Lao People s Democratic Republic, the Maldives, Myanmar, Nepal, Samoa, and Tajikistan. Group B countries are Armenia, Bangladesh, Georgia, India, Mongolia, Pakistan, Papua New Guinea, Sri Lanka, Uzbekistan, and Viet Nam. Group C countries are Azerbaijan, the PRC, Indonesia, Kazakhstan, Malaysia, the Philippines, and Thailand.

37 29 Figure 47: Nonsovereign Portfolio at a Glance (As of 31 December 2015) Total Nonsovereign Portfolio Total year-end committed portfolio increased by 3.5% to $7.9 billion Total loans committed increased to $6.0 billion, guarantees committed fell to $807.5 million, and equity committed marginally increased to $1.1 billion Approvals increased by 36.9% to $2.6 billion Commitments decreased by 6.9% to $1.7 billion Disbursements increased by 27.6% to $1.6 billion Droppages and cancellations increased to $836.2 million from $597.8 million in 2014 Loan Portfolio Total committed loans increased by 9.8% to $6.0 billion Outstanding loans increased by 23.6% to $4.5 billion Undisbursed balances decreased by 16.6% to $1.6 billion Approvals increased by 25.5% to $2.2 billion Commitments decreased by 2.1% to $1.5 billion Disbursements increased by 32.7% to $1.4 billion Droppages and cancellations increased by 624.9% to $815.7 million Prepayments decreased by 63.3% to $114.6 million Guarantee Portfolio Total committed guarantees fell by 26.8% to $807.5 million Outstanding guarantees fell by 21.1% to $785.7 million Signed non-executed guarantees decreased by 79.7% to $21.8 million (excluding Trade Finance Program and revolving Partial Credit Guarantees) Approvals (excluding supply chain finance) increased significantly to $341.2 million Commitments increased by 476.4% to $59.4 million Droppages and cancellations decreased by 95.8% to $14.3 million Equity Portfolio Total committed equities increased by 2.5% to $1.1 billion Outstanding equities (at carrying value) decreased marginally to $717.5 million Undisbursed equities increased to $345.5 million Approvals decreased by 27.6% to $134.0 million, of which $89.0 million was for direct equities Commitments decreased by 47.4% to $160.0 million Disbursements decreased by 12.2% to $123.0 million Droppages and cancellations were $6.2 million