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The timing of project midterm reviews should provide allowance for adjustments to be made to improve performance and/or ensure optimum utilization of the loan/grant proceeds.

The project midterm review (MTR) was conducted in October 2014, 4 years after loan effectiveness. The delay resulted in less flexibility in the processing of subsequent subprojects. Consequently, uncommitted loan proceeds of about $8 million had to be cancelled because of time constraints, preventing the project from accomplishing more out of already-approved funds. To avoid the recurrence of this experience, ADB should make sure that the timing of MTRs allows adjustments to be made to improve performance and ensure optimum use of project funds.

Strong government commitment and timely provision of counterpart funding are crucial to project success.

The project was completed without cost overrun and according to schedule. Besides sound design, efficient preparatory work, and adequate implementation capacities in relevant agencies, this was attributable to strong commitment from and timely provision by local governments of their counterpart funds. For future similar projects, ADB and partner governments should make sure that local counterpart funds are not only available but are released on time to ensure smooth implementation and success of all the subprojects.

Sound preparation of core subprojects is central to the success of the sector loan modality.

By addressing a representative mix of key sector challenges, core subprojects under a sector loan modality also provide models for the development and implementation of subsequent subprojects. The efficacy of this approach in ensuring overall success was shown in this project by how well the preparation and processing of subsequent subprojects had built up from the sound preparation of the preceding core subprojects. Of note was the comprehensive and integrated design of core subprojects which, when replicated in subsequent subprojects, enabled them to achieve more in all levels of the project results framework. Effective use of advance procurement and efficient bidding, contracting, and disbursement procedures are also areas where this project was able to demonstrate replicable good practices. Future assistance for similar projects should encourage partner governments to look at these practices and replicate them where applicable.


Liaoning province, in the southern part of northeast People’s Republic of China (PRC), functions as a major hub between the country’s northeastern economic region and fastest-growing economic region of Pan-Bohai that includes the cities of Beijing and Tianjin. Since the 1980s, the province’s economic growth has lagged those of other provinces because of resource depletion and a painful transition from reliance on state-dominated heavy industries to a more diversified industrialization track.


Problems have heaped up as rapid urbanization has accompanied the province’s race to industrialization. Amidst an unabated urban population growth, many cities and towns have had to contend with the increasing inadequacy and poor quality of urban infrastructure and associated services, more pollution and congestion, and greater poverty and unemployment. The province’s urban population reached 67.4% of its total 43.8 million people in 2016 as against 59% of the total 42.98 million in 2007.


To prevent the situation from getting worse, Liaoning’s Eleventh Five-Year Plan (11th FYP) called for the promotion of sustainable economic development, particularly in the province’s small cities and towns, through the construction and upgrading of road infrastructure and water supply, and environmental improvement. The plan accorded with PRC’s policy to develop small cities and towns’ potential in increasing national productivity and narrowing the urban income gap by transforming them into dynamic economic hubs that provide farmers from nearby rural areas with better employment opportunities and a higher standard of living.


Responding to the call, the Asian Development Bank (ADB) financed the Liaoning Small Cities and Towns Development Demonstration Sector Project through a loan of $100 million and a grant of $0.25 million from the ADB-administered Water Financing Partnership Facility. The project was processed as a sector loan to enable the government to flexibly respond to the small towns and cities’ rapidly changing needs. It supported 7 subprojects, 3 of which consisted of core subprojects that served as models for subsequent subprojects during loan implementation.

All the core subprojects were along major transport corridors, had employment generation potential, and had achieved a certain level of development, at appraisal. Subsequent subprojects were chosen based on their economic growth potential and capacity to provide jobs for rural migrants. Institutional development was also undertaken to ensure effective implementation of each subproject and sustainable operation and maintenance of the facilities.

With outputs consisting mainly of improved roads, water supply networks, wastewater treatment, river management, and district heating, all the subprojects were completed in 6 years, without cost overrun and, in several cases, exceeding targets. Successful completion of these subprojects has improved the quality of life in 7 small cities and towns, directly benefiting over 1 million people, 8.2% of them poor. During implementation, the project also created 3,862 jobs, including 374 for women and 1,235 for the poor.

The Liaoning Provincial Government, through the Provincial Project Coordination Group and the Liaoning Provincial Project Management Office (LPPMO), served as executing agency. The LPPMO, together with the project management office in each subproject, managed day-to-day project implementation.

Project Information
Project Name: 
Liaoning Small Cities and Towns Development Demonstration Sector Project
Report Date: 
June, 2018
Main Sector: 
Project Number: 
Sector Loan
Loan Number: 
Source of Funding: 
OCR, Water Financing Partnership Facility
Date Approved: 
18 September 2009
Report Rating: 

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