The new government failed to carry forward the privatization program articulated in the report and recommendation of the President. This underlines the need for such reforms to be based on broad stakeholder consultations, and the importance of a high degree of political consensus on the goals and process of the reform.
This is demonstrated by the broadening of the tax base by implementing the goods and services tax. Collected revenue doubled during 2012–2016 with the help of sustained and targeted support from ADB starting in 2010.
It is essential that implementing units are properly established at inception with competent staff who are knowledgeable in project implementation.
Two components in this project’s original design were dropped during implementation as they were found redundant with already ongoing initiatives. Specifically, the creation of a judgement database was no longer necessary as the same database, which would provide commercial banks and investors access to debt judgements in court and enable them to have a fair assessment of the financial health of MSMEs, was already developed by the Department of Judicial Administration. The planned establishment of 7 solar-powered citizen service centers likewise duplicated an ongoing intervention by the Ministry of Environment and Energy under ADB’s Sustainable Energy Development Project. These redundancies, which led to changes in scope and corresponding increases in project administration work and project cost, should have been avoided had a better review been made of ongoing ADB projects and government activities during the design stage. Similarly, a better scan of the development environment would have surfaced the fluid political situation in Maldives and the need for pacing the reforms involving legislation.
This project involved the creation of a project management unit (PMU) in each of the initial three implementing agencies (IAs) to which another one was added just 3 months before project closing in December 2016. Inter-agency coordination under this arrangement turned out to be complex as responsibilities laid with several agencies and there were lapses in communication. It did not help that while the Ministry of Finance and Treasury was the executing agency (EA), the Ministry of Economic Development’s (MED) central PMU had a stronger influence on project implementation. Lack of full-time, experienced staff and consultants in the PMUs exacerbated the inefficiencies in project implementation. Implementation arrangements in future projects, particularly those involving multiple agencies, should clearly stipulate not only the roles and functions of each agency but also their interrelationships and coordination mechanisms. Dedicated staff with significant experience in implementing Asian Development Bank- (ADB) assisted projects should be made to assume key positions in project EAs/IAs. Changes in implementation arrangements need to be minimized, with both staff and the organization protected from undue disruptions due to changes in the country’s political leadership and administration.
At appraisal, the project envisaged 4 consultancies, 5 procurement packages, and 1 capacity building and training package. But this was revised 12 times, with the project ending up with 32 consultancy and procurement packages. Significant delays in contract signing and several variations made by the project management units further pushed back the start of consulting services to end-2013 and information technology-related procurement to 2015. Consequently, against initial projections that 60% of the contract awards would be completed by 2014, only 12% were completed under the grant component. As by end-2016, only 85% of the contract awards had been completed, project closing was extended twice for a total of 18 months. Besides delaying project completion, the large number of contracts also made contract administration more complex and burdensome. A smaller number of contracts, each with a realistic scope and costing, could have improved project performance, and this should be explored in future projects.
This project had multidimensional interventions that were essential to addressing the sector bottlenecks in a comprehensive manner. Its success was critically determined by the government’s strong commitment to the micro-, small-, and medium-sized enterprises (MSME) sector. Nevertheless, the loan size should have been set in accordance with the government’s actual absorptive capacity. This would have prevented the cancellation of more than 71% of the $5.57 million project loan, despite the 4-time revision in its allocation.