The combination of programmatic policy-based assistance and TA support provided under this initiative proved to be effective and should be continued. The lack of qualified and experienced local consultants had been a recurring issue, and the Ministry of Health (MOH), the executing agency, continued to face a shortage of sanctioned staff. By giving consultant support to key departments of MOH, the TA contributed to knowledge transfer and capacity building for these departments, and to stronger coordination across the MOH and other ministries.
Effective implementation of system reforms, given their long-term horizon, requires phased support from development partners. The multiple tranche arrangement employed by this program ensured satisfactory progression as a precondition for continued ADB assistance and strengthened the government’s accountability for the reforms.
The policy actions pursued under this program were developed in an open, participatory manner. They were fully aligned with the country’s Health Sector Reform Strategy and Health Sector Development Plan. The participatory development and full alignment of the reform program with the country sector strategy and development plan ensured strong and broad ownership and commitment from the government, and with the assistance of development partners, strengthened policy dialogue and coordination.
Social safeguard designs initially underestimated the resettlement impacts, omitted right-of-way compensation requirements, and proposed unsuitable mitigation measures such as voluntary land donations. As a result, the project was non-compliant with social safeguards requirements for 26 months. Safeguards implementation came into better shape, following the reconduct of detailed measurement survey of losses and execution of a resettlement corrective action plan in 2018. Although some issues remained pending as of project physical completion in 2019, these were eventually resolved with the resumption of discussions between ADB and the EA in 2020. The experience highlights the importance of an accurate assessment of potential impacts and EA/IA safeguards capacity and EA/IA training and capacity building to ensure proper safeguards design and implementation. Context-sensitive issues such as the suitability of voluntary land donations, should be carefully weighed and agreed with the EAs/IAs at the early stage of project implementation.
The ADB grant-financed module 1 was completed more than two years ahead of the KEXIM loan-financed modules 2 and 3. However, because of the interdependence of the three transmission modules, module 1 cannot be operationalized without the completion of modules 1 and 2. The risk of procurement and implementation delays in the co-financed components should have been considered in the project design. When project components can be made technically independent, this option should be used to avoid delayed benefits.
Cost overruns initially led to the removal of one transmission line, but a shorter line was added once it was confirmed it could be completed using the project’s available financing envelope. These overruns were caused mainly by higher than envisaged materials costs. For example, between 2009 and 2011 copper prices increased by about 54%, aluminum by about 44%, and steel by about 30%. The overruns could have been mitigated by a thorough assessment of the relevant international market conditions and the incorporation of results into the project cost estimates.
The project had two turnkey contracts procured through international competitive bidding: (i) an ADB-financed $12.6 million contract, open to contractors from all ADB member countries, and (ii) the KEXIM-financed $34.82 million contract, open only to contractors from Korea. The ADB-financed contract, once awarded, was implemented smoothly. However, the KEXIM-financed contract encountered difficulties to the contractor’s limited experience in the Lao PDR, which caused delays in conducting surveys, fine-tuning technical designs, obtaining various approvals, and preparing the contractor environmental management plan.
Extended five times, the completion of this project was 5.5-year behind schedule. Delays occurred because of low project readiness and weak procurement capacity of the executing agency. As a result, against the procurement plan to award all transmission works contracts in quarter 4 of 2012, the ADB-financed contract for module 1 was awarded in quarter 2 of 2014 while the contracts for modules 2 and 3 financed by the government of Korea through the Korean Export and Import (KEXIM) Bank was awarded in quarter 2 of 2016. Contract awards could have been accelerated if the project was design or procurement ready at approval. In future, ADB and the government should identify and mobilize adequate resources to prepare detailed engineering designs and corresponding safeguards documents to launch procurement as early as possible.
A “bottom-up” approach to urban land use could help avoid a potential overload of infrastructure and service networks due to overcrowding, pollution, increased poverty, and environmental degradation. Building on the success of the village area improvement initiative, in particular (but also community participation initiatives in earlier ADB-supported urban projects), support for community planning could complement and support higher level urban and regional plans. This would facilitate the involvement of underserved communities in determining their priorities. Such community planning may be acknowledged within the development planning and management system.
The village area improvement experience highlights the importance of proactive communities during the design, implementation, and maintenance of projects. The use of similar principles may be replicated or expanded for a larger set of beneficiaries. An important lesson from the village area improvement program is its use of a demand-driven approach to development instead of the top-down, supply-driven activities of the past. The main advantages of the village area improvement approach are community inputs and an applied gender-balance concept. These include (i) the participation of many parties, (ii) consultations, (iii) action at the grassroots level, and (iv) the solidarity of the village committee members.
A multisector approach in the urban sector is readily implementable in the Lao PDR, because, for the most part, subsectors are within the mandate of the ministry responsible for urban development and its provincial branches. The approach can be enhanced further with the inclusion of urban transport in urban projects. This would not be difficult, given the mandate of MPWT/DPWT. But a multisector approach may be truly tested only when more stakeholders are added to urban projects or programs, bringing in expertise from outside MPWT/DPWT. Moving forward, stronger links may have to be established between (i) infrastructure and services provision and job creation and economic development; and (ii) investments in wastewater treatment and other initiatives responsive to urban issues (e.g., vehicle emissions) that involve outside agencies. Limited experience in dealing with “outside agencies” suggests that an expanded multisector approach will be difficult to implement without clarifying roles and responsibilities across agencies, horizontally and vertically.
Careful attention must be paid to the following aspects of urban institutional reform: (i) its acceptance by all key stakeholders through a participatory process; (ii) a thorough understanding of local politics; (iii) realistic phasing, sequencing, and timing of its institutional and policy reform; and (iv) an appropriate balance between allocated resources and expectations of the stakeholders involved. A more open-ended policy dialogue may yet prove more helpful than the application of loan covenants. If substantial policy change is involved, it would also be prudent to consider this as either (i) separate and parallel policy work in support of the investment components; or (ii) a two-phase process, with policy development preceding the investments.
For the ADB-funded section of the road, the Lao PDR government could keep track of expenditures and verify if timelines and guidelines are followed. This was not the case with the PRC and Thailand financed sections. For example, the PRC used its own design standards for the road without conducting any dialogue with the Lao PDR government.
A mechanism needs to be devised for the costs to be shared in proportion to the benefits received by the stakeholders.
The IEM economic analysis indicates that the net present value of the project for the Lao PDR could be made positive if higher grant elements were used in the financing by the PRC and Thailand.
Although it seems self-evident, this fundamental lesson is often overlooked and needs to be reiterated. Community involvement in planning and responsibility for O&M is a practical and cost-effective way of managing such small-scale systems. The government-enabled community ownership and capacity building approach employed by the project will be useful in other efforts to scale up agricultural development, for example in improving rural health, water supply and sanitation, and education. The project demonstrated that community mobilization combined with sustained agricultural extension services can deliver both higher rice yields and expanded irrigation areas through communities’ substantial and long-term commitment.
Sustainable O&M that guarantees water provision is an incentive for farmers to remain members of WUAs. Farmers tend to withdraw from WUAs if their fields do not receive adequate water flows. Without water delivery to their fields, there was no incentive for farmers to work on land conversion and therefore some refused to invest their resources in converting undeveloped land to paddy fields, which would have increased the irrigated area under the project. Farmers’ willingness to pay for irrigation services is affected if they cannot get adequate water flows to their fields, and if irrigation facilities damaged by extreme weather events are not expeditiously repaired by the government. The government’s response capacity for post-completion maintenance needs to improve by allocating adequate funds systematically.
Frequent damage to irrigation facilities caused by flooding and landslides is a big threat to the sustainability of infrastructure improvements. Considering the poor watershed management in the areas surrounding subprojects and incompatible land uses (e.g., hilly land corn farming above the irrigated rice fields), the construction of irrigation infrastructure needs to improve. Preventive and protective measures need to be taken to guard against recurring intense rainfalls and extreme weather events. Such measures could take account of environmental risks and ecological accidents and apply watershed management approaches. This would build long-term climate resilience, supporting the government’s Agriculture Development Strategy to 2025 and Vision 2030.
The NRSLLDP aimed to provide farmers with animals to be integrated into their semi-subsistence livelihoods. These additional animals were stores of wealth that were sold occasionally to smooth consumption (e.g., school fees) or support other investments (e.g., motorbikes). With a commercialized approach, the focus is on maximizing a stream of income over a sustained period. This will require substantial changes in the production, marketing, selling, and reinvesting cycle. Compared with the NRSLLDP, this will require much more intense and regular training.
Unfortunately, the NRSLLDP was rather short-sighted and did not seek to develop groups to access or provide benefits to farmers throughout the production chain (from inputs, to husbandry, to selling). The project also dropped the access-to-market component. As such, it will be left to the follow-on project to fill some of these gaps by engaging with stakeholders such as government extension workers, research centers, veterinarians, market centers, and the private sector.
A key decision for IFAD, ADB, and the government will be to agree on a partner—for example, the Bank of Laos—to implement the rural finance component of the NSLCP transparently and professionally.
The NRSLLDP, through the VIF, supported CDD-related infrastructure (such as village meeting halls) at the provincial, district, and local levels. Livestock development and commercialization endeavors, on the other hand, will require new infrastructure to address impediments such as access to water, animal shelters, medicinal supplies, cold-chain, access roads, and market infrastructure.
The close and effective collaboration of ADB, the World Bank, and other IFIs from an early stage provided the necessary confidence for the private sector to undertake a pioneering, complex, and large-scale project in a limited-capacity country. Although the total IFI loans and guarantees were modest in scale, the independent evaluation team established that they had been a necessary requirement for the international dollar financiers to extend loans to NTPC. The involvement of the IFIs clearly provided the initial comfort and confidence needed to extend financing with the assurance that the government will honor its obligations under the project. In addition, the government’s consistent honoring of its obligations to date under NT2 HP has made a major impact in stimulating subsequent private sector investment in the power sector and power trade in the Greater Mekong Subregion.
The selection of a well-qualified developer as the primary equity holder in the NTPC consortium appears to have played a major role in the efficient construction and operation of the dam and power facilities with very modest cost and time overruns. Additionally, the government’s commitment as seen in its equity in NTPC (through Lao Holding State Enterprise) and the guarantees backstopped by the IFIs also provided an incentive for it to honor its obligations in such policy and regulatory aspects as permitting, clearances, and others. On the other hand, entrusting a power company with implementation of a complicated social and environmental development program may not have been the best option. Biodiversity conservation, as well as resettlement and livelihood restoration, are not engineering issues, and it is clear that NTPC was not a very appropriate institution to manage implementation of these programs by itself, especially given the country’s limited institutional capacity. This should have been more carefully considered during appraisal and in making institutional arrangements.
The exceptionally long preparation and implementation periods (2003–2019) were essential to provide sufficient time for analysis, appraisal, and supervision of a complex project and ensure an eventually successful outcome in a high-risk context. This extended period enabled oversight and validation of the power plant’s operation and export potential several years past commissioning and provided adequate oversight during implementation of the environmental and social programs, which required several adjustments to deliver the final outcomes. While the resulting benefits appear to be commensurate with the attendant costs, the NT2 HP experience is indicative of the firmness and longevity of institutional and resource commitments that may be required to successfully undertake similar projects in the future.