ADB TPRM 2018 Performance Worries

The government needs to come out strongly to recover the projects from their current state of poor performance

Aug. 19, 2018, 12:02 p.m. Published in Magazine Issue: VOL 12 No.03, August 17, 2018 (Bhadra 01, 2075) Online Register Number: DOI 584/074-75

Almost a year has passed since the breakthrough of Melamchi Tunnel, but the water distribution is still uncertain because of the delay by the contractor in finishing work such as on the construction of its diversion.

As Nepal has been talking about the need to bring 2 million tourists next year, the runway expansion and infrastructure improvement work in Tribhuwan International Airport has almost been delayed for three years. Despite cancelling the contract agreement with the first party and awarding the second contract for new contractors, the work is yet take off on the airport expansion due to the delay in signing the contract.

Except for the story of Gautam Buddha International Airport, which has seen some progress recently, Transmission Lines, hydropower and road projects are all making a slow progress.

From project to project and from agreement to agreement, project managers and government officials discussed the performance of the ADBG’s ongoing projects. With regards to its total $2.3 billion worth of 20 ongoing TAs, $27.8 million worth 33 projects, 27 loans, and 17 grants, ADB’s progress has not been as expected.

In some cases, project managers and officials of concerned ministries have shown an apathy. The officials from Ministry of Tourism and Ministry Drinking Water and Energy have no answer for the delay.

With the delay in project implementation, a huge escalation of costs is sure to happen. In Melamchi, Italian Contractor, which also successfully bid Tanahu Hydropower project, is intentionally delaying the finishing work.

However, Melamchi project officials are unable to enforce the contract agreement and force the contractor to speed up its work. Tribhuwan International Airport’s case is much unique as it showed how inefficiency of Nepal’s management system plays out in implementing the contract.

“I would like to specially highlight the slow progress of a few flagship projects – Tribhuvan International Airport, Gautam Buddha Airport (although with some recent improvements), Melamchi Water Supply and its associated Kathmandu Valley Water Supply Projects. Close monitoring of progress and decisive actions are needed for the civil aviation and water supply projects to improve and accelerate implementation, and to ensure targets and results can be achieved for these flagship projects,” said Diwesh Sharan, Deputy Director General, SARD, addressing second Tripartite Portfolio Review Meeting (TPRM) for 2018.

“TPRM is an important event to improve the performance of ADB supported projects and overall project portfolio. We accord very high attention and priority to ADB’s Nepal portfolio that is growing. As of end June 2018, the active portfolio stands at $2.3 billion with 33 investment projects,” said Sharan.

After years of effort, Nepal has made drastic progress in year 2017 in terms of disbursement, contract agreement and progress. However, the situation in 2018 has turned suddenly bleak.

“Following good performance in 2017, at the country portfolio review meeting in February 2018, I had noted the optimistic targets by government agencies for this year — around $447 million for contract award and about $338 million for disbursement. As mentioned by the Country Director and the Finance Secretary himself, the achievement as of end June 2018 has been slow with 23% contract award of the annual target and 32% disbursement of the annual target.”

Clearly, challenges remain and there is a need to focus on further improvements in procurement documents and evaluation scrutiny, stringent contract management to contain implementation and fiduciary risks, sound safeguard management, including environmental management, and deputation of competent project staff.

“The Financial Year 2018/2019 budget has released funds to the provincial and local governments. This has affected few ADB supported projects in terms of implementation arrangements and fund flow mechanism. These issues will be described in the sector and project presentation today. I urge the Ministry of Finance and concerned ministries to agree on time bound actions to ensure effective project implementation,” said Sharan.

Continued improvement of Nepal’s portfolio performance is critical to increasing ADB assistance in future in line with its performance-based allocation policy.

Finance Secretary Dr. Rajan Khanal, who was co-chairing the opening session of TPRM, urged the project managers to examine the implementation constraints at the ground level and evaluate the project progress to avoid the time and cost overrun and agree on a time bound action plan to achieve the project target 2018.

“As we all are aware that project implementation challenges remain with the state restructuring process. Similarly, other systematic issues like human resources management, technical and project supervision capacity and weak contract management are all still prevailing as the barrier of smooth implementation of the project,” said Khanal.

“I hope we will be jointly able to sort out and address these issues and overcome them with solution in this meeting. Moreover, I would like to draw your attention to focus on the projects with high risks that require special consideration and critical actions,” said Secretary Khanal.

However, there is poor performance in contract award and disbursement. Although contract Award target set for 2018 was $447 million and the target for quarter two was $149 M. But the achievement was Just $104 M.

Similarly, disbursement target for 2018 is $338 million and Q2 target was $146 million but the achievement was just $108 million. Presenting the Nepal Portfolio Performance, Narendra Chand, Officer-in-Charge, Portfolio Management Unit, Nepal Resident Mission, described the progress of the projects and state of the projects.

Under Air Transport Capacity Enhancement, CAAN board is late in the contractor mobilization for the expansion of runway. Although contractors are already mobilized on two components, the pace is yet to take off.

Under Tourism Infrastructure project, Gautam Buddha Airport has made certain improvement in the implementation progress but it still needs to accelerate the pace.

There is also much delay in Melmachi Water Supply as Kathmandu invert lining has already pushed the project’s further delay.

Under the Road Transport SASEC Road Improvement, there is delay in clearance on tree cutting and deputation of project team in Narayanghat-Butwal road of two months.

They also discussed Emergency Earthquake Assistance in education sector, compensation distribution in rural and strategic roads; and targeted physical progress, capital Market ‒ Institutionalization of Public Debt Management Office. Similarly, there is also discussion on delaying on contract award in Tanahu hydropower project.

Joint Secretary of the Ministry of Finance Shreekrishna Nepal also requested the concerned project managers and ministry to accelerate the pace of the construction activities. “If there is any problem, the ministry will be ready to help as much as it can,” said Nepal.

At a time when the government is emphasizing implementation of the infrastructure projects on priority, the present trend has showed that it needs to completely change the current mentality and working model to achieve the target.

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