Many public resource reforms, especially those relating to taxes or concessions as in the SPBL, have political and economic implications and are often difficult to undertake without strong ownership. The SPBL implementation success is attributable to (i) a good understanding of the vested interests, (ii) the institutional capacity of government agencies, (iii) effective partnership and coordination between ADB and the government, and (iv) a strong sense of appreciation for the overall benefits of the program.
This special policy-based loan (SPBL) was developed in close consultation with the government and development partners, including the International Monetary Bank and the World Bank, and was designed through a holistic approach. The experience demonstrated that a comprehensive and holistic consultation process can ensure effective diagnosis of the issues, leading to a strong, relevant policy matrix that prioritizes reform measures and sets realistic timelines in collaboration with the development partners.
While the key urban sector and executing agency for this project, the Ministry of Urban Development (MUOD), adopted a structure for GESI mainstreaming with separate budget head, this initiative faced challenges after the country’s administrative restructuring. There were no division offices and GESI units in the districts, and the sociologist’s position that used to support GESI activities was removed from the departments. Nevertheless, using the resource materials developed under this project as guide, the GESI-trained staff in the divisions can push for establishing and institutionalizing GESI in the new structure of the provinces and at the local level. This would require revising MOUD’s GESI operational guidelines 2013 to define the roles and responsibilities in all tiers of government.
Neither the ADB project team nor project coordination office could fully comprehend the financial management requirements and financial covenant issues raised during this project’s review missions. As such, they were unable to follow up on audit opinions and recurrent issues, leading to the recurrence of the same issues and delays in submitting the audited project financial statements This improved only with the inclusion of a financial management staff toward the project’s end.
Part of the project’s design innovation is the construction of modern SLS. The Nepalgunj SLS construction was successful due to continuous community engagement, cooperation among political leaders, and early implementation of a community development program targeted at communities living near the SLS. However, the SLSs in Janakpur and Siddharthanagar had to be dropped, as nearby communities did not agree to their construction. Due to haphazard operation of existing SLSs and dumping sites, there is a growing “not in my backyard” syndrome in these communities towards SWM facilities. Discord among local political leaders, inadequate coordination at inter-local level, and political misunderstanding disrupted stakeholder engagement and contributed to the two sites’ cancellation.
The initial design of this project was delayed and required modifications during implementation mainly due to the unavailability of information on existing underground utilities such as by plan profile and as-built drawings. Final designs were likewise not always comprehensive, necessitating variations for most contracts, resulting in both startup delays and contract modifications. In future, ADB should ensure that the scope of work of design consultants for urban development projects include an assessment of all existing utilities, including those underground. Also, that the consultants make every effort to meet their deliverables, comply with the agreed schedules and contract obligations, and respond to requests from client governments and ADB.
This program’s results framework and targets were closely aligned with PLN’s key performance indicators (KPIs), which were based on PLN’s RUPTL, 2015–2024 and Indonesia’s National Medium-Term Development Plan (RPJMN), 2015–2019. PLN has established KPIs in its corporate plan and has regularly reflected these in its annual reports. The close alignment between the PLN’s KPIs and the program’s results framework and targets encouraged the PLN to achieve the DLI targets. Power utility companies in other countries would benefit from similar arrangements that are beneficial for the attainment of both the program and corporate performance targets.
completion, six of the seven safeguard PAPs were achieved. The implementation of the safeguard PAPs has improved the capacity of PLN, especially at the unit level, to manage environmental and social impacts. By excluding 190 circuit-kilometer (ckm) of medium-voltage lines in the indigenous peoples’ area and 428.19 ckm of medium-voltage lines and 284.98 ckm low-voltage lines in the key biodiversity areas, the PAPs minimized the risks to ADB safeguards compliance. But the exclusion also eliminated indigenous peoples’ access to program benefits. In the upcoming review of ADB’s Safeguard Policy Statement, the provisions for this modality could consider how significant risks associated with government-funded programs could be better addressed.
The RBL modality tested in Indonesia through this program came out successful and easier to implement with lower transaction costs. It was flexible enough and allowed the PLN to select investments based on its changing requirements even during program implementation. Therefore, it is well suited to large power systems where demand and the technology available can change within a short time. By focusing on aggregate outputs and result areas as opposed to monitoring each contract, the program was able to support PLN in an effective programmatic manner.
Monitoring the progress against targets of PLN’s broader Sumatra program, which the RBL supported, was not considered part of the RBL administration responsibility. Therefore, the threats posed by the lack of financing for the broader program and the subsequent removal of some of its major components were not sufficiently tracked down and addressed under the RBL. It is important for future RBL programs to include in their monitoring all associated interventions that could have an impact on their implementation to enable necessary actions to be taken promptly to address deficiencies and/or avoid negative unintended consequences.
Some of the DLI targets and baselines set during program preparation were found to be conservative or inconsistent. Adjustments were made during implementation to make them more realistic. The target on energy sales was significantly affected by external factors beyond PLN’s control, including lower economic growth than anticipated under the PLN’s Power Supply Business Plan (RUPTL), energy subsidy removal, and the changing costumer consumption behavior. The experience has highlighted the importance of (i) setting DLIs that are within program control and not vulnerable to external factors, (ii) setting ambitious but achievable targets based on historic trends and EA/IA capacity, and (iii) having enough flexibility to adjust to changes in the external environment.
Through the Indonesia Resident Mission, ADB ensured that lessons learned from program implementation were used in the design of PLN subsequent RBL programs. Building on the program’s success in improving warehouse and waste management in Sumatra, ADB and the PLN transitioned this PAP into a DLI in the RBL programs for Sulawesi and Nusa Tenggara and Kalimantan, Maluku, and Papua. Adjusting DLI targets and verification protocols as needed is also a lesson learned that found useful application in subsequent programs.
By using disbursement-linked indicators (DLIs), non-DLI targets, and program action plans (PAPs) under the results-based lending (RBL) modality, the program successfully instituted mechanisms that strengthened the capacity and encouraged performance improvements from Indonesia’s State Electricity Company, PLN (Perusahaan Listrik Negara), in both technical and administrative areas. Improvements spanned: (i) the procurement monitoring system, where inconsistencies in reporting were identified and addressed through regular procurement monitoring; (ii) the planning and implementation capacity of PLN, which (a) made the preparation of subsequent RBL programs easier, (b) enhanced coordination among PLN divisions, and (c) enhanced PLN’s ability to continue to access debt capital markets and the bank debt market (PLN has supportive relationships with banks and investors so has access to multiple channels of commercial financing); (iii) PLN’s processes for the recording, collection, calculation, and reporting of data used to measure and track the DLIs and non-DLIs, particularly the management reporting information system and its primary sources of data; and (iv) warehouse and waste management. Because of the stronger evaluation culture developed by the RBL, the program also helped PLN recognize the need to update its internal regulations on the disposal of Non-Operating Fixed Assets (ATTB), particularly transformers, to speed up safe disposal.
Historically, resettlement implemented for the Yuqiao Reservoir occurred in three phases: 1960–1967, 1973, and 1979–1982. It was complex. Delays in the implementation of the resettlement subcomponent of this project could have been mitigated if lessons from the past have been taken into account. This included having closer consultation and ensuring that resettlement impact is better communicated with local officials, village committees and affected peoples, proposing reasonable resettlement or fishpond removal scope and compensation policies. The villagers would then be able to better understand the objectives and importance of projects, and would be more receptive to the resultant land acquisition and resettlement activities.
The Yuqiao Reservoir subcomponent involved environment improvements to 68 villages. For such community-based subcomponents, community participation and self-management are effective gateways into sustainable implementation and operation. For similar projects, a community participation and self-management booklet should be prepared by villagers under the guidance of the social specialist at the project preparatory or implementation stage.
The eventual full participation of Tianjin Capital Environmental Protection Company (TCEPC) in component A was a good demonstration of private sector participation, particularly in bringing about the required expertise in running a wastewater treatment plant. Aside from the Beicang wastewater treatment plant, TCEPC is also responsible for the operations of three other large-scale wastewater treatment plants in Tianjin. Prospects of private sector participation in component B should have been explored with other private groups or entities, particularly in enhancing ecological works around the Yuqiao Reservoir, which is currently financed by municipal funds. This could be a showcase to invite interest from private enterprises, particularly in the growing concern for the environment.
During appraisal, one of the benefits identified from the project was to provide employment opportunities to women through the All-China Women’s Federation. At the project’s completion, it was mentioned that women were employed as laborers during construction, and some were given permanent jobs in the IAs. Moreover, there were training opportunities given for skills enhancement. Given the focus on the growing role of women in development, gender equality is inevitably mentioned in ADB projects. Emphasis on gender depends on the context and locale conditions.
Sewerage construction needs to be fully addressed in the early stage of the project, particularly as it affects the implementation of wastewater treatment operations. Further to this, when the two are implemented by different funding institutions, the need for inter-donor coordination is essential to ensure that project operations and targeted completion are not compromised.
Various trainings were given to the executing and implementing agencies in water supply and wastewater treatment operations. Aside from training, emphasis on developing the institutions, such as review of the overall organization structures and terms of reference of management and staff, would be helpful in further strengthening the EA and IAs. The creation of the Tianjin Water Affairs Bureau can be regarded as a first step in overseeing the continued development of water-related IAs to focus efforts in building capacity in operational areas needed for the city’s development. Furthermore, it is also acknowledged that the commercialization of operations, through TCEPC involvement, is also another step in institutional strengthening.
The SDP was based on the premise that regulatory and institutional reforms will improve the performance of sector entities. Although the regulatory and institutional reforms were implemented as intended, the sector entities except for MPTransco showed no significant improvement in performance. Although there are several reasons for this such as the underlying political economy issues constraining the measures that can be taken to reduce the ATC losses, the lack of financial autonomy, financial incentives, and managerial accountability could have contributed to underachievement of this important development outcome. The management of a utility is not responsible for financial performance and MPG has regularly stepped in to finance the cash deficit. The regulatory interventions were limited to annual tariff settings based on progressively improving performance norms. The reform program should have gone beyond the institutional reforms and encouraged MPG and the regulator to set performance targets and ensure compliance with those targets through an incentive and/or penalty mechanism. It is encouraging to note that the MP State Government and MPSERC have set targets for loss reduction , revenue realization etc in last 3–4 years and the reporting requirements to periodically monitor the performance of DISCOMs with respect to these targets have been initiated.
The Madhya Pradesh power sector has been suffering from structural problems such as persistently high level of ATC losses, increasing cost of generation and power purchase, and limited scope of tariff increase as industrial tariffs have already reached the cost of captive power generation. Improving the operational efficiency of utilities and tariff adjustments aimed at reducing the cross-subsidies to residential and agricultural consumers can help, but the underlying problem in the power sector remains the high ATC losses. The reduction of ATC losses requires technical measures (reducing the overloading of distribution feeders and measures such as HVDS and bundled conductors to prevent electricity pilferage), institutional measures (improved metering, billing and bill collection) as well as governance-related actions (discouraging electricity theft by taking legal action against the pilferers). However, the underlying political economy such as affordability and competitiveness of Madhya Pradesh’s agriculture sector in the event of full cost recovery of supply of electricity to agriculture needs to be addressed.
Financial viability and cost recovery in the sector are important considerations for private sector investments in power generation in the absence of opportunities to sell electricity outside the state. Before India’s Electricity Act of 2003 was enacted, it was difficult to attract private sector investments to power generation in Madhya Pradesh, for investors were concerned about MPSEB’s ability to set aside adequate cash flows to meet power purchase obligations (escrow cover). After the provisions of the Electricity Act related to the setting up of a competitive power market and open access to a transmission network were implemented, private investors have shown increased willingness to invest in power generation in Madhya Pradesh as demonstrated by the recent success in initiating several private sector investments with likely capacity additions of more than 1,500 MW from private sector projects in next 2–3 years.
While technical assistance in the form of logistical support, advisory assistance (through consultant inputs), study tours, and training help to improve project capabilities, they do not necessarily address long-term sustainability of institutions. Efforts towards promoting sustainability, such as for the SBEC, should include developing appropriate and effective financial systems, installing an effective management information system, institutionalizing good governance and management structure, and strengthening risk assessment, loan appraisal, and monitoring skills.
The project had no clear strategy on how the Small Business Enterprise Centre (SBEC) should be supported beyond the life of the project. The SBEC was left with a huge loan guarantee portfolio at the end of the project and no long-term means to sustain its operations.
In the context of Samoa—where the financial market is relatively underdeveloped, the collateral framework is weak, and institutions have limited capacity—a more simple and focused project design would have been more appropriate. Some of the subcomponents such as the venture capital fund, credit bureau and chattels registry were totally new activities which made the design more complex and difficult to implement. Also, clearly a modest project like this would not be the best vehicle for addressing a fundamental political issue like land ownership. Greater focus should have been placed on creating an enabling environment for the financing and growth of micro and small enterprises. This would have involved developing the policy and legal environment for the sector, which to some extent was achieved by the project, and building institutions to service the sector.