ADB PORTFOLIO REVIEW: Sluggish Performance

Director General of the Asian Development Bank Kenichi Yokoyama push for Nepal to enhance portfolio performance.

May 9, 2023, 8:13 a.m. Published in Magazine Issue: VOL. 16, No. 18, May.05, 2023 (Baisakh 22. 2080) Publisher and Editor: Keshab Prasad Poudel Online Register Number: DOI 584/074-75

Kenichi Yokoyama, the director general of the Asian Development Bank (ADB) for South Asia, is familiar with Nepal. Kenichi served as Nepal's country director from 2013 to 2017 and helped the country boost its portfolio from 15% to over 25%.

As he attended the portfolio review conference last month, the performance of the Nepal portfolio was once more decreasing. Kenichi has a plethora of understanding about Nepal as a Ph.D. student and country director.

He worked in Nepal as an academic while earning his Ph.D. in community management irrigation system in eastern Nepal before moving to Nepal in 2013 as a country director for Asian Development Bank.

In addition, Yokoyama served as the Principal Water Resources Specialist for the South Asia Department of the ADB, where he was in charge of planning water resource projects for nations like Bangladesh, India, and Nepal.

During his tenure as a country director in Nepal, the groundwork was laid for the completion of some of the major initiatives, including the Melamchi Drinking Water Project, the Gautam Buddha International Airport, transmission lines, motorways, including the Koshi Bridge, and rural roads.

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The COVID-19 pandemic, ongoing political meddling in the Government, and political upheaval have all harmed Nepal's portfolio.

The current Nepal County Director Arnaud Cauchois, who is also familiar with Nepal from his work in the water resources sector developing the Bagamati River Master Plan, including the recently inaugurated Dhap Dam, visited the project sites as the pace of the construction of roads and other infrastructure projects slowed.

With Ministers and other top officials, he went to the Butwal-Narayanghat Road sites and the Mugling-Pokhara Road sites last month to quicken the speed of construction. Along with NEA's MD Kul Man Ghising, he also went to the Tanahu Hydropower Project and the Marsyangdi Corridor Transmission Project.

Two important areas of the ADB's portfolio in Nepal are energy and transportation. The portfolio will get better in the following days as the speed of Tanahu Hydropower, other transmission lines along the Marsyangdi Corridor, and distribution upgrade projects in the Kathmandu Valley pick up. Following the visit of County Director Arnaud Cauchois and ministers to two road-building sites, there have been some improvements seen.

Nepal has to improve its capital expenditure, especially the portfolio performance in key sectors in the Asian Development Bank's portfolio, as the country transitions from an LDC to a middle-income economy by 2026.

ADB Director General Yokoyama urged Nepal to improve Portfolio Performance Key to Development Results and Higher Concessional Resource Allocations in his speech to the gathering.

Improved portfolio performance, according to him, is essential for the timely delivery of development results and achieving higher and more consistent allocations of concessional resources. He was addressing during the first day of a two-day country portfolio review meeting that the Nepali government and ADB organized to evaluate the development projects it supports.

"To improve project delivery, the Ministry of Finance (MOF) is aggressively addressing difficulties. According to Yokoyama, for Nepal to be eligible for greater concessional resource allocations under the ADB's performance-based allocation methodology, it must disburse at least $350 million to $450 million annually. "By pursuing higher implementation disciplines, the government and ADB can pursue higher disbursement."

Finance Minister Dr. Prakash Sharan Mahat personally attended the review meeting due to Nepal's urgent need to increase capital expenditure and secure fresh loans and grants for growth.

Dr. Mahat, the Minister of Finance of Nepal, presided over a discussion on sector and project performance that was attended by government secretaries, senior officials, project directors, and employees of the ADB's Nepal Resident Mission.

"We value the support ADB has provided for Nepal's growth throughout the years. According to Dr. Mahat, the government is committed to overcoming obstacles in project implementation and disbursements and enhancing the impact of capital investments for development on the ground for Nepali citizens.

In order to evaluate the advancement of development projects financed by the ADB, the government of Nepal and the ADB arranged a two-day country portfolio review meeting. He made this remark during the opening session of the meeting.

ADB's active portfolio in Nepal, which supported a variety of important sectors including energy, transport, agriculture, water, urban infrastructure and services, rural development and natural resources, health, and education, stood at over $3.2 billion as of December 31, 2022.

According to ADB Country Director for Nepal Arnaud Cauchois, "In 2022, the overall portfolio performance in Nepal was lower than expected, affected primarily due to insufficient project staff and high turnover, challenges in contract management, delays in environmental and land clearances, and disruption of the construction supply chain. "Following the review, MOF and ADB will agree on specific actions to overcome the challenges, and we are hopeful that project implementation and disbursement will pick up pace," he continued.

ADB has given Nepal around $7.6 billion in financial and technical assistance since it began operating there in 1969.

While continuing its efforts to end extreme poverty, ADB is dedicated to establishing a prosperous, inclusive, resilient, and sustainable Asia and the Pacific. It was founded in 1966 and is owned by 68 members, 49 of them are locals.

"Following the review, MOF and ADB will agree on specific actions to address the issues, and we are optimistic that project implementation and disbursement will accelerate," he continued. ADB has given Nepal around $7.6 billion in financial and technical assistance since it began operating there in 1969.

Although the performance number is lower than anticipated, the main reasons for this are a lack of project staff and high staff turnover, difficulties with contract management, delays in environmental and land clearances, and disruptions in the supply chain for building materials, according to ADB Country Director for Nepal Arnaud Cauchois. He continued, "Following the review, MOF and ADB will agree on specific actions to overcome the challenges and we are hopeful that project implementation and disbursement will pick up pace."

For Director General of ADB Yokoyama and Country Director Arnaud Cauchois, the recent portfolio meeting give hope to accelerate the Nepal portfolio performance.

Understanding the importance of the Asian Development Bank, As the largest multi-lateral development partner of Nepal, Nepalese officials also expressed their commitment to improve the portfolio improving the concerns raised in the review period.

Award for Best Performer

At a special ceremony held in conjunction with the meeting, Finance (Revenue) Secretary Ram Prasad Ghimire presented awards to ADB-supported projects for their accomplishments in effective project management, gender equality and social inclusion, and environmental and social protection monitoring. Among the projects that have received funding are the Urban Water Supply and Sanitation (Sector) Project, the Bagmati River Basin Improvement Project-Additional Financing, the SASEC Highway Improvement Project, the Rural Enterprise Financing Project, and the Power Transmission and Distribution Efficiency Enhancement Project. Top authorities were permitted to address the problems preventing Nepal from strengthening its portfolio management following the country portfolio review conference.

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