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LESSONS:

Outer Islands Electrification (Sector) Project

sector: Energy | country: Maldives

Island selection and subproject appraisal were inefficient, delaying the commencement of contract processing by over 2 years and suggesting a recommendation for altering the approach that is shown in the next section.

Forming separate, miniature utility cooperatives on individual islands with an average population of only 1,511 people, each with a separate loan agreement and inspector, proved very difficult to implement. This suggests that one island is too small a unit to justify this approach. The availability of technical expertise on each island varies significantly, and the requisite financial-management and tariff-setting expertise is scarce. The government?s decision in 2009 to form regional utility companies (RUCs) was good for the project, as their taking over ownership and operation enables economies of scale and operational efficiencies, including more effective utilization of technical and managerial skills across islands. Had RUCs existed at the beginning of the project and acted as IAs for clusters of projects within their territory, numerous implementation and coordination problems could have been avoided.

In formulating similar loan projects, ADB should ensure to the extent possible that achieving outputs is within the grasp of the implementing agency (IA). Depending on the Ministry of Planning and National Development (MPND), an agency without a stake in the subprojects, to spearhead the benefit and poverty monitoring and evaluation (BPME) proved problematic, as its withdrawal from that commitment left the IA unable to complete that part of the project.

Passing the Cooperative Societies Act, the necessary enabling legislation before subproject loan agreements were possible, was known at project approval to be the responsibility of Parliament and therefore something the government could guarantee. Yet project formulation as set out in the report and recommendation of the President (RRP) implicitly assumed that this legislation would be passed in a timely manner and offered no robust contingency plan should the legal entities to operate subprojects fail to materialize.

For future projects located on numerous outer islands, formalized feedback channels from local island development committees (IDCs) to the IA should be established as part of project design.

A notable feature of this project was the difference in the performance of the batch 1 and batch 2 contractors, though both contracts were undertaken by the same consortium. The main difference was in project management requirements. Particularly for projects involving outer islands, which by their nature introduce communication and logistical challenges, ADB should ensure that bid documents specify minimum requirements relating to project and contract management, requiring bidders to fully describe planned contract and project management plans in their bids and stating that ADB will not approve contracts unless satisfied that these plans are adequate to ensure successful and timely completion.

ADB must supervise an IA more effectively if it has not established a prior record of successfully managing ADB-funded projects. ADB review missions throughout the project noted early warning signs that the project faced difficulties. More proactive and decisive action by ADB might have effected more efficient implementation. For example, when it became apparent that legislation would be delayed, ADB could have engaged the government to discuss an acceptable alternative, rather than simply leave it to a review mission to urge the government to take unspecified corrective action.

There are underlying systemic challenges associated with project implementation on the outer islands of the Maldives that must be considered in project design, as these conditions are different from those of other South Asian developing member countries. First, direct project oversight is more difficult because of transport issues unique to the archipelago. (Many outer islands are remote, with transport by lengthy, infrequent, and irregularly scheduled boat trips. The only alternative of hiring fast private boats is very expensive.) Second, a subproject on a particular outer island is naturally much smaller than infrastructure projects in larger countries. Third, the cost of hiring international consultants for long periods makes consultant costs disproportionately high when compared with direct project costs such as civil works, and the availability of local consultants may be limited in a small population.

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