ASIAN DEVELOPMENT BANK Operations Evaluation Department

COUNTRY ASSISTANCE PROGRAM EVALUATION

FOR THE

LAO PEOPLES DEMOCRATIC REPUBLIC

In this electronic file, the report is followed by Managements response and the Board of Directors Development Effectiveness Committee (DEC) Chairs summary of a discussion of the report by DEC.

Evaluation Study

Reference Number: CAP: LAO 2006-05 Country Assistance Program Evaluation April 2006

Lao Peoples Democratic Republic

Operations Evaluation Department

CURRENCY EQUIVALENTS Currency Unit Kip (KN) 1986 KN1.00 $1.00 = = $0.1000000 KN10.00 1991 $0.0014232 KN702.63 1996 $0.0010769 KN928.59 2001 $0.0001124 KN8,892.50 2006 (as of 31 March) $0.0000960 KN10,411.29

ABBREVIATIONS ADB ADF ADTA AFD ANR APB APL BEGP BOL BSRP CAPE CBTA CMISP COMPAS CPI CPRM CRIP CSP CSPU DIDMSP DMC DOR DP DPE EA EdL EIA EQIP-I EQIP-II ESP ETSW EWCP FDI FSPL-I FSPL-II GDP GMS GWh Asian Development Bank Asian Development Fund advisory technical assistance Agence Franaise de Dveloppement agriculture and natural resources (sector) Agriculture Promotion Bank Agriculture Program Loan Basic Education (Girls) Project Bank of Lao PDR Banking Sector Reform Program Country Assistance Program Evaluation Cross-Border Transport Agreement Community-Managed Irrigation Sector Project Common Performance Assessment Committee on Planning and Investment Country Portfolio Review Mission Champassak Road Improvement Project Country Strategy and Program Country Strategy and Program Update Decentralized Irrigation Development and Management Sector Project developing member country Department of Roads development partner Division of Poverty Eradication executing agency Electricit du Laos environmental impact assessment (First) Education Quality Improvement Project Second Education Quality Improvement Project Environment and Social Program economic, thematic, and sector work East-West Corridor Project foreign direct investment (First) Financial Sector Program Loan Second Financial Sector Program Loan gross domestic product Greater Mekong Subregion gigawatt-hour

ha HIPC HRD IES IMF ITPP km Lao PDR LHSE LRM LTSF M&E MAF MCTPC MDG MfDR MOE MPH MTEF MTS MTSF NAO NARPDP NECP NEM NGO NGPES NLHP NNLPPTP NNRBDSP NORAD NPL NPTWSSP NR NSC NSHDP NT2 NTR NUOL O&M OED PBA PCR PEMSP PERP PHC PHCP PHCEP PIP

hectare highly-indebted poor country human resources development impact evaluation study International Monetary Fund Industrial Tree Plantation Project kilometer Lao Peoples Democratic Republic Lao Holding State Enterprise Lao PDR Resident Mission Long-Term Strategic Framework monitoring and evaluation Ministry of Agriculture and Forestry Ministry of Communication, Transport, Post, and Construction Millennium Development Goal Managing for Development Results Ministry of Education Ministry of Public Health medium-term expenditure framework Medium-Term Strategy Medium-Term Strategic Framework National Audit Office Northern Area Rural Power Distribution Project Northern Economic Corridor Project New Economic Mechanism nongovernment organization National Growth and Poverty Eradication Strategy Nam Leuk Hydropower Project Nam Ngum-Luang Prabang Power Transmission Project Nam Ngum River Basin Development Sector Project Norwegian Agency for Development Cooperation nonperforming loan Northern Provincial Towns Water Supply and Sanitation Project national road National Statistics Center Nam Song Hydropower Development Project Nam Theun 2 normal trade relations National University of Laos operation and maintenance Operations Evaluation Department performance-based allocation project/program completion report Public Expenditure Management Strengthening Program Postsecondary Education Rehabilitation Project primary health care Primary Health Care Project Primary Health Care Expansion Project public investment program

PIU PMO PPAR PPER PPR PPTA PRC PRGF PRPA PRS PRSP PSD PSERP PTDP RARP RCSP RCSPU RETA RRDP RUVWSP SAC SAF SAPE SAPL SARS SCB SCSPP SDP SES SIDA SMEs SOE SPTWSP STDSP STEA STUDP SWAP SWIM TA TCR THHP TPAR TTC UDAA UNDP US VIUDP VUISP WASA WSSSP

project implementation unit Procurement Monitoring Office project/program performance audit report project performance evaluation report project/program performance rating project preparatory technical assistance Peoples Republic of China Poverty Reduction and Growth Facility Poverty Reduction Partnership Agreement Poverty Reduction Strategy Poverty Reduction Strategy Papers private sector development Postsecondary Education Rehabilitation Project Power Transmission and Distribution Project Rural Access Roads Project Regional Cooperation Strategy and Program Regional Cooperation Strategy and Program Update regional technical assistance Roads for Rural Development Project Rehabilitation and Upgrading of Vientiane Water Supply Project Structural Adjustment Credit Structural Adjustment Facility Sector Assistance Program Evaluation Second Agriculture Program Loan severe acute respiratory syndrome state-owned commercial bank Shifting Cultivation Stabilization Pilot Project Smallholder Development Project special evaluation study Swedish International Development Cooperation Agency small and medium-sized enterprises state-owned enterprise Southern Provincial Towns Water Supply Project Small Towns Development Sector Project Science, Technology, and Environment Agency Secondary Towns Urban Development Project sector-wide approach sector-wide management technical assistance technical assistance completion report Theun Hinboun Hydropower Project technical assistance performance audit report teacher training college Urban Development Administration Authority United Nations Development Programme United States Vientiane Integrated Urban Development Project Vientiane Urban Infrastructure and Services Project Water Supply Authority Water Supply and Sanitation Sector Project

WTO XHP XKRIP

World Trade Organization Xeset Hydropower Project Xieng Khouang Road Improvement Project

NOTES (i) (ii) The fiscal year (FY) of the Government ends on 30 September. In this report, $ refers to US dollars.

Director General Director Team Leader Team Members

B. Murray, Operations Evaluation Department (OED) R.K. Leonard, Operations Evaluation Division 1, OED S. Hutaserani, Principal Evaluation Specialist, Operations Evaluation Division 1, OED O. Nuestro, Evaluation Officer, Operations Evaluation Division 1, OED O. Badiola, Sr. Operations Evaluation Assistant, Operations Evaluation Division 1, OED Operations Evaluation Department, CE-12

CONTENTS Page EXECUTIVE SUMMARY MAPS I. INTRODUCTION A. Objectives and Goal of the Country Assistance Program Evaluation B. Scope of the Country Assistance Program Evaluation C. Evaluation Methodology of the Country Assistance Program Evaluation DEVELOPMENT CONTEXT AND THE GOVERNMENTS STRATEGIC PRIORITIES ASSESSMENT OF QUALITY AT ENTRY OF COUNTRY STRATEGIES: RELEVANCE AND POSITIONING A. Relevance of Country Strategies to the Governments National Development Strategies/Plans B. Relevance of Country Strategies to the Countrys Socioeconomic Issues C. Relevance of Country Strategies to the Asian Development Banks Corporate Strategies D. Harmonization of Country Strategies with Other Key Development Partners E. Positioning of Country Strategies ASSESSMENT OF QUALITY AT ENTRY OF COUNTRY PROGRAMS: POSITIONING A. Sufficient Background Research on Sector/Thematic Strategies B. Governments Absorptive Capacity and Ownership C. The Asian Development Banks Comparative Advantage and Partnerships with Other Development Partners D. Focus/Selectivity and Synergies E. Long-Term Continuity F. Constraints/Risks and Adjustment/Monitoring Mechanism to Achieve Measurable Targets G. All Criteria Combined iii ix 1 1 1 1 5 11 11 13 15 16 17 20 21 21 22 24 25 25 26

II. III.

IV.

The guidelines, formally adopted by the Operations Evaluation Department (OED) on avoiding conflicts of interest in its independent evaluations, were observed in the preparation of this report. R. Anderson, E. Breckner, C. Brown, P. Ghate, M. Godfrey, and S. Lohani were the international consultants, employed for a total period of 8 person-months to prepare a draft input of preliminary sector assessments. The Team Leader (the author of this report) developed the evaluation framework, guided the consultants, and prepared this report based on the consultants' draft input and other sources of materials. The consultants were not involved in processing any projects or programs in the Lao People's Democratic Republic. To the knowledge of the management of OED, there were no conflicts of interest of the persons preparing, reviewing, or approving this report.

ii

V.

RESULTS ACHIEVEMENT: BOTTOM-UP ASSESSMENT OF EFFECTIVENESS A. Program Contributions to Achieving Intermediate Outcomes by Sector B. Program Contributions to Achieving Intermediate Outcomes by Theme C. Program Contributions to Achieving the Country Strategy Objective of Poverty Reduction RESULTS ACHIEVEMENT: TOP-DOWN ASSESSMENT OF LONG-TERM DEVELOPMENT IMPACTS AND THE MILLENNIUM DEVELOPMENT GOALS A. Program Contributions to The Countrys Achievement of Long-Term Impacts B. Exogenous Factors C. Countrys Challenges and Prospects: Future within Reach? PROGRAM IMPLEMENTATION: ASSESSMENT OF EFFICIENCY A. Project Performance Rating B. Financial Performance C. Factors Affecting Implementation Performance PROGRAM ATTRIBUTION: ASSESSMENT OF OTHER ASPECTS A. Government Performance B. The Asian Development Banks Performance C. Harmonization and Partnerships D. Nongovernment Organizations Role OVERALL PERFORMANCE ASSESSMENT AND RATING A. Sector-Level Performance (Bottom-Up) B. Strategic- and Country-Level Performance (Top-Down) C. Overall Rating of All Levels of Performance KEY FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS A. Key Factors Contributing to Delivery of Results B. Lessons from Past and Ongoing Operations C. Recommendations

27 28 45 54 54 55 55 55 56 56 57 58 58 58 59 61 62 63 63 65 67 67 67 68 68

VI.

VII.

VIII.

IX.

X.

APPENDIXES 1. 2. 3. 4. 5. 6. 7. 8. Field Visit/Survey Sites and Socioeconomic Data Quality at Entry of the Country Strategies and Programs: The Asian Development Banks Corporate Strategies Asian Development Banks Lending and Nonlending Assistance Programs Detailed Bottom-Up Assessment of Sector Performance Portfolio Performance of Lending Program Questionnaire for Client/Stakeholder Surveys Harmonization of Development Partners Strategies and Programs Governments Fiscal Sustainability Prospects by Sector 71 84 103 118 166 169 173 176

Attachments:

Management Response DEC Chair Summary

EXECUTIVE SUMMARY The objectives of this Country Assistance Program Evaluation (CAPE) are to (i) assess the performance of the Asian Development Banks (ADB) Country Operational Strategies and Country Assistance Programs for the Lao Peoples Democratic Republic (Lao PDR) during 19862004; and (ii) derive lessons and recommendations for future ADB operations. The goal of the CAPE is to identify lessons and recommendations that will be used in the preparation of the next Country Strategy and Program (CSP) for the Lao PDR. The scope of the CAPE covers the period from 1986 to 2004. This time period was selected because (i) 1986 was the year the Government started to transform the economy from a centrally planned to a market-based system through the New Economic Mechanism; (ii) prior to 1986, ADB lending accounted for only 5% of total lending to the country; and (iii) the period of 19 years is not too long to assess the performance of ADB interventions, although the CAPE focuses on evaluating the performance of more recent operations to draw up-to-date lessons and recommendations. The CAPE used a results-based evaluation framework, which provides an integrated evaluation of various performance aspects of the CSPs at different levels (strategic, program/sector/thematic, and country levels). At the strategic level, the quality at entry of ADBs Country Strategies for the Lao PDR is assessed in terms of relevance and the strength of positioning of their strategic choices against various criteria. The four criteria for assessing relevance are (i) the Governments national strategies/plans, (ii) the countrys socioeconomic issues, (iii) ADBs corporate strategies, and (iv) country strategies of other development partners (DPs). The six criteria for assessing positioning are (i) sufficient background research on the country and sectors, (ii) the Governments absorptive capacity and ownership, (iii) ADBs comparative advantage and partnership with other DPs, (iv) focus/selectivity and synergies, (v) long-term continuity, and (vi) constraints/risks and adjustment/monitoring mechanism to achieve measurable targets. Overall, the assessment of relevance and positioning is to determine whether the Country Strategies have made not only relevant, but also coherent choices in positioning ADB as a key DP in certain priority areas, given existing constraints. At the program level, the quality at entry of ADBs Country Programs is assessed in terms of the strength of positioning against the same six criteria used to assess the Country Strategies. This is to determine how well the former have translated the latter into a coherent program to address the countrys priorities based on ADBs comparative advantage. At the sector/thematic level (under the program level), the performance of lending and nonlending products and services is assessed by sector using the following five criteria: (i) relevance of the design of the lending program to ADBs sector policies and strategies; (ii) effectiveness of the lending and nonlending programs in achieving sector outcomes and the objectives of the Country Strategiesto determine how well the Country Programs have put the Country Strategies into practice to achieve development results; (iii) efficiency of the lending and nonlending programs by sector in terms of portfolio performance and other implementation issues; (iv) prospects for sustainability by sector; and (v) contributions to impacts by sector. At the country level, the overall development impacts/results (e.g., sustainable economic growth, poverty reduction, and other Millennium Development Goals) achieved at the country level were assessed and linked to the achievement of outcomes and impacts at the sector level through institutional impacts on the countrys managing for development results (MfDR) capacity. The overall performance of the Country Strategies and Country Programs, summarized below, is based on two groups of assessment: (i) sector-level performance (bottom-up), and (ii) strategic- and country-level performance (top-down). The rating system follows the CAPE Guidelines of the Operations Evaluation Department.

iv Sector-Level Performance (Bottom-Up Assessment) Sector performance is summarized and rated for all sectors combined under five criteria (relevance, effectiveness, efficiency, sustainability, and contributions to impacts) below: Relevance. The focus of many projects in most sectors under the Country Programs is found to be relevant to the priority areas defined in the Country Strategies. However, project/program design was overly complex and diffused in the agriculture and natural resources (ANR), financial, and water supply sectors. This resulted in noncompliance with many policy reforms, delayed implementation, cost overruns, and low achievement of outputs and outcomes. Project design in other sectors was generally satisfactory. It was highly satisfactory in the transport sector, reflecting continuity and synergies among projects. Overall, the performance of ADBs Country Programs for the Lao PDR is considered relevant. Effectiveness. The effectiveness of ADBs operations varied by sector. The ANR, financial, and water supply sectors, constituting about a quarter of total lending during the CAPE period, were less effective in achieving outcomes. Other sectors were generally effective. The two major sectors (energy and transport) that accounted for more than half (55%) of total lending were rated as highly effective. A series of transport projects delivered the outputs of about 2,000 kilometers of national and provincial roads. Outcomes during 19942004 included contributing a total of 7% of the countrys road network; reducing travel time between Vientiane and Luangprabang from 23 days to 8 hours; and handling traffic, which increased by 22% per year. Despite concerns regarding the issues related to the mitigation of adverse environment and social impacts, the outputs of energy projects included four hydropower plants producing 355 megawatts and some power transmission lines. Outcomes during 19912004 included increasing energy generation capacity by 2,067 gigawatt-hours per year, creating 70% of the countrys total electricity generation capacity, increasing foreign exchange earnings from energy exports by $520 million, and providing electricity connections to 70,646 households. Overall, the performance of ADBs Country Programs for the Lao PDR is considered effective. Efficiency. Overall portfolio performance of ongoing loans is rated as satisfactory. The average disbursement ratio of all active loans was about the same as the ADB-wide average (21%) over the past decade. There were lapses in implementation and resource utilization: (i) delayed implementation due to the non-availability of counterpart funds, (ii) cost overruns and delayed disbursements due to poor design, and (iii) problems related to compliance with environmental and social safeguards. The lack of counterpart funds delayed project implementation in many sectors and contributed to substandard work, as underpaid contractors tried to save money by cutting corners. Poor project design resulted in underachievement of outputs and outcomes in water supply and ANR projects. Delayed releases of program loan tranches reflected overly ambitious conditionalities. Although the economic internal rates of return of many projects in the two major sectors (energy and transport) were high, the total portfolio is considered to be borderline efficient because of problems experienced. Sustainability. The Governments allocation of recurrent expenditure to priority sectors (education and health, and ANR) has been low (11% and 2%, respectively, during 19992003). The high share of the others/unexplained item raises concerns over the lack of fiscal transparency. More efforts are needed to increase public revenues, restructure public expenditure to better reflect the Governments priority sectors, and increase transparency in budget allocation/utilization. With the recent establishment of the government-owned Lao Holding State Enterprise, foreign exchange earnings from future electricity exports should be accounted for more transparently as public revenues and used in priority areas. Overall sustainability prospects are regarded as likely, but at the lower end of the range, depending on government commitment to channel more export earnings into priority sectors.

v Contributions to Impacts. With the exception of the ANR, financial, and water supply sectors, ADB operations in other sectors have made satisfactory contributions to the countrys achievement of impacts. Most notable contributions were in the transport and energy sectors. The outputs and outcomes achieved from a series of transport projects contributed to an opening up of previously unreachable areas, facilitated Greater Mekong Subregion cross-border trade and tourism, and contributed to increased provincial gross domestic product per capita. Similarly, the outputs and outcomes of the energy projects contributed to tripling the countrys electricity generation capacity and increasing energy exports from 8% of total exports to 27%. These outcomes indirectly contributed to the countrys achievement of the annual economic growth of 6% over the past decade, and progress in poverty reduction from 48% in 1990 to 33% in 2003. Overall, ADBs contributions to impacts are regarded as significant (satisfactory). Overall Rating of the Sector-Level Performance. Overall, the sector performance based on the five criteria is rated as successful (Table 7 in the main text). Strategic- and Country-Level Performance (Top-Down Assessment) Strategic- and country-level performance is summarized and rated below, consisting of (i) the quality at entry of overall CSPs in terms of relevance and positioning, (ii) ADBs performance, and (iii) contributions to the country-level MfDR capacity and long-term impacts. Quality at Entry of Overall Country Strategies and Programs. In terms of relevance, the strategic choices of the combined three periods of ADBs Country Strategies for the Lao PDR (1991, 1996, and 2001) are rated as generally relevant to the Governments national development strategies/plans; the countrys socioeconomic issues; ADBs corporate objectives; and country strategies of other key DPs, which focused on transforming the economy from a centrally planned to a market-based system from the late 1980s and on poverty reduction from the late 1990s onward. In terms of positioning, the overall Country Strategies are rated as partly satisfactory because of the lack of coherence. This was particularly the case for the 2001 CSP, which did not focus on ADBs comparative advantage in physical infrastructure (energy and transport) in supporting private sector-led growth. It diverted attention to many sectors, without addressing limited government absorptive capacity. This implies that the overall Country Strategies had made relevant, but not coherent, choices in positioning ADB as a major DP in particular sectors/areas. For the overall Country Programs, in terms of positioning, they are also rated as partly satisfactory due to the lack of coherence. Although lending to the two sectors in which ADB had comparative advantage comprised more than half, the remainder of the programs was spread thinly in many sectors. Thus, the quality at entry of the overall CSPs is rated as partly satisfactory. ADBs Performance. ADBs role in the development of the Lao PDR was regarded by other DPs as favorable. The Government appreciated ADBs client-oriented approach in response to the countrys development needs. ADBs lending volume appears to have exceeded the Governments absorptive capacity, as reflected in inadequate provision of counterpart funding and recurrent cost financing, and in institutional weaknesses. ADB financed many small projects in too many sectors, thus reducing the degree of program coherence. Policy lending in the ANR and financial sectors failed to achieve many of the expected reforms due to overly ambitious program design. Although ADBs performance was weak in some sectors, it performed well in the key sectors in which it had a comparative advantage (transport and energy), particularly in terms of focus and continuity of projects and staffing, and close supervision during implementation. Self-reinforcing outcomes and critical masses were generated. Overall, ADBs performance is rated as satisfactory.

vi Contributions to the Countrys MfDR Capacity and Long-Term Results/Impacts. ADBs contributions to building the countrys MfDR capacity were through standalone advisory technical assistance (TA) to improve (i) statistical capacity; (ii) poverty assessment, and monitoring and evaluation (M&E) capacity; and (iii) fiduciary arrangements or governance. These TAs, which were not attached to projects, generally did not perform well due to low government commitment and less ADB supervision. In the TAs for improving the statistical and poverty M&E capacity, the focus was more on strengthening statistical capacity and less on M&E capacity, with insufficient followup, as the data collected later disappeared. In the area of fiduciary arrangements, a number of TAs were provided to improve the countrys procurement and audit procedures, accounting regulations, and public expenditure management. However, due to inadequate government ownership, the Procurement Office supported by ADB ceased functioning for a while, although it was subsequently restored with assistance from the World Bank; and the sustainability of the National Audit Office is threatened due to insufficient budget. In public expenditure management, expected outputs were achieved, including preparation of the Medium-Term Expenditure Framework linking annual budgets to investment priorities. However, not all the priorities were supported by the budget, as these priorities were set separately in the Governments National Growth and Poverty Eradiation Strategy (NGPES) as distinct from the Fifth Plan (20012005). The NGPES is now being integrated with the new Sixth Plan (20062010), to be supported by a single budget. Joint efforts with the World Bank are designed to improve the countrys public expenditure management capacity in a coherent manner under the Nam Theun 2 Project. Overall, ADBs contributions to the countrys MfDR capacity are regarded as modest (partly satisfactory). The Lao PDR achieved a reasonably high economic growth rate (6% per annum) over the past decade and made progress in reducing incidence of poverty from 48% in 1990 to 33% in 2003. These impacts resulted from the joint efforts of the Government and DPs, including ADB. ADBs contributions to the country-level impacts were notable through the critical masses developed in the energy and transport sectors, since good infrastructure is necessary to support economic growth. Sustainable economic growth, in turn, is a necessary condition for sustainable poverty reduction. Despite all these positive impacts, the Lao PDR is still faced with formidable development challenges, including (i) weak public financial management and governanceboth on the expenditure side (imbalance between capital and recurrent budget, and nontransparent budget allocation) and on the revenue side (insufficient revenue mobilization from taxes and other sources); (ii) weaknesses in the enabling environment for private sector development and foreign direct investment; and (iii) debt overhang. Thus, the country-level impacts from the top down are rated as modest (partly satisfactory). Overall Rating of the Strategic- and Country-Level Performance. While the quality at entry of the CSP and contributions to the countrys MfDR capacity and impacts were partly satisfactory, ADBs performance was satisfactory. The resulting overall CSP performance at the strategic and country levels is rated as borderline successful (Table 9 in the main text). Overall Rating of All Levels of Performance Given the bottom-up and top-down performance assessment above, the overall CSP performance at all levels combined is rated as successful (Table 10 in the main text). Lessons from past and ongoing ADB operations are identified below: Continuity Was Key to Achieving Critical Masses and Development Effectiveness. The success of the Country Programs in generating critical masses and achieving development effectiveness reflected a systematic and continued series of interventions, allowing succeeding projects to build on past achievements (e.g., in the energy and transport sectors).

vii Without Overall Sector Focus and Coherent Strategy by Sector, Investments Became Diffused and Failed to Achieve Development Effectiveness. Without overall sector prioritization and a clear strategy for each sector, any investment could be justified as a priority. This led to scattered investments, particularly in the ANR sector. Limited Government Absorptive Capacity and Ownership Resulted in a Shortage of Counterpart Funding and Recurrent Cost Financing. ADB lent too much for the Government to effectively absorb. This was reflected in inadequate counterpart funding and recurrent cost financing. The former caused delays in project implementation, higher bid prices, and substandard work across sectors. The latter threatened project sustainability in some sectors (e.g., education and health). The Lao PDR is a highly aid dependent country with official development assistance accounting for 85% of total government expenditure. The total volume of aid appears to have exceeded the countrys absorptive capacity. The high aid dependency ratio raises questions about whether the Government or funding agencies are setting development priorities. Weak Government Commitment Deterred Achievement of Development Effectiveness. Weak government commitment was also reflected in delayed compliance with policy reforms and limited follow-through on the issuance of implementation decrees. Both had negative effects on delivering the expected development results. Complicated Project/Program Design Deterred Achievement of Development Effectiveness. Inadequate project preparation in the ANR and water supply sectors led to implementation delays, cost overruns, and cancellation of components. In all program loans, proposed policy conditionalities were too complex and ambitious to implement. Limited Strategic Partnerships among DPs Resulted in Piecemeal Outcomes. Weak aid coordination during the CAPE period resulted in a lack of strategic partnerships (e.g., cofinancing strategies, and program-based or sector-coordinated approaches) and in piecemeal outcomes. However, progress on aid coordination and harmonization has recently improved. ADBs Mekong Regional Department, inclusive of the Lao PDR Resident Mission, should consider the recommendations below in formulating the next CSP in 2006.
Recommendations Need to Address the Problems of Limited Government Absorptive Capacity and Ownership/Commitment. Given the countrys high aid intensity ratio and low absorptive capacity, the development agenda has been driven largely by funding agencies. This was reflected in the Governments inability to provide counterpart funds and its inertia in following through on major reform measures. These were endemic problems occurring across sectors. Although ADB has recently approved a more flexible policy framework for cost sharing, which allows the government of each developing member country to finance a lower proportion of counterpart funds based on a specific countrys cost-sharing ceiling, government ownership/commitment (e.g., in terms of macroeconomic performance and fiduciary arrangements) is still a key factor determining the ceiling. MKRD should consider (i) determining the Lao PDRs cost-sharing ceiling based on the aggregate portfolio of the next CSP period during the preparation of the 2006 CSP; and (ii) discussing the issue of high aid intensity ratio with other DPs and pursuing collective policy dialogue with the Government. This objective would be to determine whether the total amount of aid should be reduced to be more in line with the absorptive capacity and how to improve the Governments capacity in raising more domestic revenues so as to reduce the countrys dependence on aid in the long run. Increasing aid flows in the current circumstances will not necessarily result in the achievement of better development results. Responsibility MKRD, the Government (Ministry of Finance and Committee on Planning and Investment), and the aid community

viii
Recommendations Need for Sector Selectivity. Given the lower indicative planning figure of $22.7 million for 2006 ($30 million in 2005) compared with the average of $55 million over the CAPE period for the Lao PDR, and concerns over the Governments limited absorptive capacity, the next CSP should focus on a smaller number of sectors. The sectors should be prioritized based on the following considerations: (i) government priorities for ADB assistance, (ii) involvement of other DPs, (iii) relative funding position in the sectors among DPs, and (iv) ADBs comparative advantage in terms of sector performance based on the CAPEs findings. Indicative directions for ADB interventions are shown in Table 12 of the main text. Need for Stronger Harmonization and Partnerships with Other DPs. In line with the expectations stated in the Paris Declaration, ADB should develop more strategic partnerships with other DPs (e.g., joint CSPs and sector strategies, cofinancing strategy, and program-based or sector-coordinated approaches) to provide a more coherent assistance program. This will help reduce the Governments transaction costs, enhance its role in leading the countrys development agenda, and increase the possibility for other DPs to finance future recurrent costs after project implementation. Need to Improve the Results Achieved by Program Lending. Given the disappointing results of program lending, ways must be found to improve performance if use of this modality is to be continued. This may involve (i) developing a more realistic package of reforms that are consistent with the Governments institutional capacity and political economy; (ii) having a more realistic time frame to implement the policy changes that reflect the institutional constraints in the country and to follow through on the issuance of implementation decrees to ensure achievement of outcomes/impacts; (iii) improving the analysis on which the policy reforms are based; and (iv) making future program lending more manageable/flexible, based on cash-on-delivery (e.g., cluster program modality), with digestible reform programs that are government owned. Need to Strengthen Sector Strategies with Focus on Governance, Anticorruption, and the Enabling Environment for PSD. The lack of good sector strategies resulted in diffused investments and failure to achieve sector outcomes. The role of ADTAs and economic, thematic, and sector work should be strengthened to develop sector strategies to guide future ADB operations. These should look not only at factors specific to the sectors, but also on factors outside the sectors that are important preconditions for increased sector efficiency (e.g., governance, anticorruption, banking, enterprise reforms, the business climate, and the countrys competitive position after gaining full accession to the World Trade Organization). The implementation of social safeguard policies also needs to be strengthened. Need to Improve the Management of the TA Program. Many ADTAs did not perform well, with limited government commitment. This was particularly true for TAs that were not attached to any project. ADB should improve the management of TAs by (i) increasing government participation in TA design and implementation to increase client ownership; (ii) improving the link between the lending and nonlending programs; (iii) programming TA strategically, rather than in an ad-hoc fashion; and (iv) focusing on achievement of TA outcomes, rather than outputs. Need to Balance the Coverage of the next CSP with Available ADB Resources. Given the need to strengthen aid coordination, policy dialogue, and project implementation at the field level, LRMs role should be strengthened with increased delegation of authority and redeployment of staff. This should be considered in relation to the regional role of the Thailand Resident Mission. Responsibility MKRD

MKRD and OCO

MKRD

MKRD

MKRD

MKRD and BPMSD

ADB = Asian Development Bank; ADTA = advisory technical assistance; BPMSD = Budget, Personnel, and Management Systems Department; CAPE = Country Assistance Program Evaluation; CSP = Country Strategy and Program; DP = development partner; Lao PDR = Lao Peoples Democratic Republic; LRM = Lao PDR Resident Mission; MKRD = Mekong Regional Department; OCO = Office of Cofinancing Operations; PSD = private sector development; TA = technical assistance.

I. A.

INTRODUCTION

Objectives and Goal of the Country Assistance Program Evaluation

1. The objectives of the Country Assistance Program Evaluation (CAPE) are to (i) assess the performance of the Asian Development Banks (ADB) Country Operational Strategies and Country Assistance Programs 1 for the Lao Peoples Democratic Republic (Lao PDR) during 19862004; and (ii) derive lessons and recommendations for future ADB operations. The goal of the CAPE is to identify useful lessons and recommendations that will be used in the preparation of the next Country Strategy and Program (CSP) for the Lao PDR. B. Scope of the Country Assistance Program Evaluation

2. The Lao PDR became an ADB member in 1966. ADBs first loan to the country was approved in 1970. By the end of 2004, ADB had provided financing for 62 public-sector loans totaling $1.11 billion, all from the Asian Development Fund (ADF) resources. The scope of the CAPE covers the period from 1986 to 2004 (19 years), during which ADB approved 50 loans for $1.05 billion, 54 project preparatory technical assistance (PPTA) grants for $24.8 million, and 131 advisory technical assistance (ADTA) grants for $69.3 million. Of the 50 loans, 6 were program loans (2 in agriculture and natural resources [ANR], 3 in finance, and 1 in environment) totaling $135 million (13% of ADBs total lending for the Lao PDR). This time period was selected for the CAPE because (i) 1986 was the year the Government started to radically transform the economy from a centrally planned to a market-based system through the New Economic Mechanism (NEM); (ii) prior to 1986, ADB had provided only 12 loans to the Lao PDR (5% of ADBs total lending to the country); and (iii) the period of 19 years is not too long to assess the performance of ADB interventions, although the CAPE focuses on evaluating the performance of more recent operations to draw up-to-date lessons and recommendations. During the period, annual ADB lending to the Lao PDR averaged $55 million.2 C. Evaluation Methodology of the Country Assistance Program Evaluation

3. This section describes the evaluation methodology (consisting of evaluation framework, approach, and methods) applied to the CAPE.3 1. Results-Based Evaluation Framework

4. A results-based evaluation framework (Figure 1) was used to guide the CAPE. This framework reflects the CAPE Guidelines of the ADBs Operations Evaluation Department (OED) and incorporates the thrust of the Common Performance Assessment (COMPAS)4 of multilateral
1

2 3

In 2001, ADB combined the Country Operational Strategy (COS) and Country Assistance Program (CAP) into the Country Strategy and Program (CSP). To avoid using the old terms, this CAPE will refer to the COS as Country Strategy and to the CAP as Country Program. The annual average indicative planning figure for ADF VIVIII (19922004) was about $58 million. Evaluation methodology is defined as a systematic and coherent set of procedures used to carry out the entire process of analysis, while evaluation framework is defined as the essential structure of the analysis. Evaluation approach is defined as an analytical tool applied to the analysis within the proposed framework. Evaluation method is defined as a procedure for using the analytical tool to accomplish the analysis within the proposed framework. COMPAS is one of the joint efforts of multilateral development banks to harmonize their approaches for assessing and monitoring the institutional performance of recipient countries in managing for development results (MfDR), in accordance with one of the main thrusts (i.e., harmonization) of the 2005 Paris Declaration on Aid Effectiveness. The COMPAS indicators for MfDR include statistical capacity, poverty assessment and monitoring and evaluation (M&E) capacity, and public expenditure management capacity.

2 development banks. The framework provides an integrated evaluation of various performance aspects of the CSPs at different levels (i.e., strategic, program/sector/thematic, and country levels). At the strategic level, the quality at entry of ADBs Country Strategies for the Lao PDR is assessed in terms of relevance and the strength of positioning of their strategic choices against various criteria. The four criteria for assessing relevance/responsiveness are (i) the Governments national strategies/plans, (ii) the countrys socioeconomic issues, (iii) ADBs corporate strategies, and (iv) country strategies of other development partners (DPs).5 The six criteria for assessing positioning/coherence are (i) sufficient background research on the country and sectors, (ii) the Governments absorptive capacity and ownership, (iii) ADBs comparative advantage and partnership with other DPs, (iv) focus/selectivity and synergies, (v) long-term continuity, and (vi) constraints/risks and adjustment/monitoring mechanism to achieve measurable targets. Overall, the assessment of relevance and positioning is to determine whether the Country Strategies have made not only relevant, but also coherent choices in positioning ADB as a key DP in certain priority areas, given existing constraints. 5. At the program level, the quality at entry of ADBs Country Programs is assessed in terms of the strength of positioning against the same six criteria used to assess the Country Strategies. This is to determine how well the former have translated the latter into a coherent program to address the countrys priorities based on ADBs comparative advantage. At the sector/thematic level (under the program level), the performance of lending and nonlending products and services is assessed by sector using the following five criteria: (i) relevance of the design of the lending program to ADBs sector policies and strategies (as well as to some sector strategies prepared under ADTAs and economic, thematic, and sector work [ETSW]); (ii) effectiveness of the lending and nonlending programs in achieving sector outcomes and the objectives of the Country Strategiesto determine how well the Country Programs have put the Country Strategies into practice (i.e., whether things have been done right/well) to achieve development results; (iii) efficiency of the lending and nonlending programs by sector in terms of portfolio performance and other implementation issues; (iv) prospects for sustainability by sector; and (v) contributions to impacts by sector. 6. At the country level, the overall development impacts/results (e.g., sustainable economic growth, poverty reduction, and other Millennium Development Goals [MDGs]) achieved at the country level were assessed and linked to the achievement of outcomes and impacts at the sector level through institutional development impacts on the countrys managing for development results (MfDR) capacity. 7. This evaluation framework is results-based in that, under the effectiveness aspect, it evaluates the development effectiveness6 of the Country Programs in achieving the Country Strategy objectives, measured by intermediate sector outcomes/results (bottom-up assessment). This is linked to the countrys achievement of long-term development impacts/results (top-down assessment). Thus, it is a forward-looking evaluation framework, focusing on the end results achieved.

DPs refer to international funding agencies, the private sector, and civil society, including nongovernment organizations (NGOs). Development effectiveness is defined here as the extent to which Country Programs operations have achieved intermediate sector outcomes, thereby contributing to achieving the Country Strategy objectives.

Figure 1: Results-Based Evaluation Framework

Countrys Development Results/ Impacts (Achievement of MDGs)
Impacts/ Results

Top-Down Assessment

Country Level

Countrys MfDR Capacity o Statistical Capacity o Poverty Assessment and M&E Capacity o Fiduciary Arrangements/Governance (Procurement, Audit, Accounting Regulations, and Public Financial Management)

CAPEs Lessons and Recommendations Results of Governments Interventions Results of ADBs Interventions (ADBs Outputs and Outcomes by Sectors/ Thematic Areas) Results of Other Key Funding Agencies Interventions Results of NGO Interventions
Institutional Development of MfDR Capacity

Results of Exogenous Factors

Program/ Sector/ Thematic (CP) Level

Effectiveness and Sustainability

ADBs Sector Policies and Sector Strategies from ETSW

ADBs CSPs (CSs & CPs) Inputs and Activities o Loans o ADTAs, PPTAs, RETAs, Policy Dialogue, Aid Coordination/ Harmonization o Portfolio and Implementation Performance

Bottom-Up Assessment

Efficiency

Relevance and Positioning

Strategic (CS) Level

Countrys Socioeconomic Issues/ Challenges

Governments National Development Strategies/ Plans (NGPES)

ADBs Corporate Strategies (PRS, MTS, LTSF, and MfDR)

Country Strategies of Other Key Funding Agencies

CSPs Self Evaluation o PBA System o M&E System o Learning and Incentive System, etc.

Sufficient Background Research on the Country and Sectors ADBs Comparative Advantage and Partnerships with Other DPs

Governments Absorptive Capacity and Ownership

Focus/Selectivity and Synergies

Long-Term Continuity

Constraints/Risks and Adjustment/Monitoring Mechanism to Achieve Measurable Targets

ADB = Asian Development Bank; ADTA = advisory technical assistance; CAPE = Country Assistance Program Evaluation; CP = Country Program; CS = Country Strategy; CSP = Country Strategy and Program; DP = development partner; ETSW = economic, thematic, and sector work; LTSF = Long-Term Strategic Framework; M&E = monitoring and evaluation; MDG = Millennium Development Goal; MfDR = Managing for Development Results; MTS = Medium-Term Strategy; NGO = nongovernment organization; NGPES = National Growth and Poverty Eradication Strategy; PBA = Performance-Based Allocation; PPTA = project preparatory technical assistance; PRS = Poverty Reduction Strategy; RETA = regional technical assistance.

4 2. Evaluation Approach and Limitations

8. Various sets of evaluation criteria are used as the evaluation tool within this framework to assess both the quality at entry of the Country Strategies and Country Programs (para. 4) and the implementation performance of the Country Programs at the sector/thematic and country levels (paras. 5 and 6). Although the implementation performance of the Country Programs at the sector level is evaluated by five criteria, the key criterion is effectiveness which will determine the contributions of the Country Programs in achieving sector outcomes and the Country Strategy objectives (bottom-up assessment). The achievement of such intermediate outcomes is linked to the countrys achievement of long-term impacts (top-down assessment) in terms of contributions by ADB, rather than attribution. The country-level impacts cannot be attributed solely to ADBs efforts. Rather, such impacts are a result of combined efforts of the Government, funding agencies, the private sector, and civil society. Methodological difficulties regarding attribution constitute a limitation of all CAPE studies, including this one. 9. The CAPE used a results matrix to trace the results chain (rather than to disaggregate the results) of ADBs contributions (in terms of inputs, outputs, and outcomes at the sector level) to the overall achievement of development results at the country level. The input column computed ADB inputs by sector in terms of cumulative disbursement values over the past years as a proportion of total cumulative disbursement values by all funding agencies and nongovernment organizations (NGOs) combined over the same period. This proportion roughly indicates the importance of ADBs role in each sector relative to the achievement of sector outcomes, linked to the country-level impacts. If ADB was a major funding agency in any sector, the achievement of sector outcomes and impacts can be considered as being influenced by ADB interventions; if not, ADBs influence is considered more limited. This approach of recognizing the efforts of all DPs in contributing collectively (rather than separately) to achieving development results reflects the importance of country-led development. 3. Evaluation Method

10. The evaluation method draws together evidence from a literature review, perceptions of key informants and beneficiaries, and data analysis. (i) Literature Review. The CAPE used secondary data/information from existing documents of the Government, ADB, and other key DPs (e.g., country economic reviews; loan documents; TA reports; national development strategies and plans; CSP reports of ADB and other DPs; evaluation reports of ADB, the Government, and other DPs; etc.). Perceptions of Key Informants. Primary data/informationboth qualitative and quantitativewas collected through (a) participatory consultation workshops;7 (b) structured surveys of clients/stakeholders/beneficiaries to obtain their perceptions on ADB operations and performance; and (c) participatory key informant interviews and focus group discussions with stakeholder groups, including interviews of beneficiaries during field visits of selected projects (Table

(ii)

Two participatory consultation workshops were held at the Lao Plaza Hotel, with the assistance of the Lao PDR Resident Mission (LRM), in May and November 2005. In the first workshop, key features of the CAPE position paper (e.g., the CAPE objectives, goals, methodology, activities, and schedule; and a summary of ADB assistance) were presented, followed by discussion and feedback. In the second workshop, the preliminary CAPE findings, lessons, and recommendations were presented, followed by discussion and feedback. Both workshops were chaired by the LRM Country Director and attended by about 40 people from various stakeholder groups, including government officials from concerned agencies as well as representatives from funding agencies and civil society.

5 A1.1, Appendix 1). This CAPE used a mix of qualitative feedback and quantitative analysis of indicators before and after ADB assistance to assess ADBs contributions to outcomes and impacts.8 (iii) Data Analysis. The data/information collected from the two steps above was analyzed to assess the performance of the CSP.

II.

DEVELOPMENT CONTEXT AND THE GOVERNMENTS STRATEGIC PRIORITIES

11. This chapter assesses the broad trends in economic, social, and political development, including progress in achieving poverty reduction and other MDGs. The assessment is divided into different periods to provide background information on the context within which ADBs strategies and programs were developed. 12. Prior to Major Economic Reforms (19751985). The Lao Peoples Revolutionary Party took control of the country in 1975. By 1985, after a decade of pursuing development along the socialist line of a command economy, the economy faced an economic crisis. Manufacturing growth had decreased by half, exports had declined to 30% of imports, external debt had doubled, and the debt-service ratio9 had risen to 22% during the First 5-Year Plan (19811985) period. The strategic objective of the Plan was to achieve food self-sufficiency and collectivization of agriculture. Economic activities tended to center around subsistence and barter trade systems, posing difficulties in mobilizing domestic resources to finance the countrys fiscal deficit. Many state-owned enterprises (SOEs) were not financially viable and required subsidies through the budget. The situation was aggravated by the cessation of aid from the former Soviet Union, which affected the countrys investment programs. 13. Transition from a Centrally-Planned to a Market-Based System (19861990). In 1986, the Government took a bold step toward reforms by endorsing the NEM. It aimed at decentralizing economic decision making and creating a market-oriented economy, in which the private sector would be the main engine of economic growth. The NEMs key policy reforms included liberalizing the foreign direct investment (FDI) law enacted in 1988 and developing a privatization plan (1991). These measures were to be implemented during the Second Plan (19861990) without sacrificing continued food self-sufficiency, the strategic objective of the Plan. However, the food self-sufficiency objective and the overall agriculture sector were adversely affected by severe droughts during 1987 and 1988. The NEM reforms gathered momentum in 1989, supported by the World Banks Structural Adjustment Credit (SAC) I and II and the International Monetary Funds (IMF) Structural Adjustment Facility. This assistance supported medium-term macroeconomic stabilization and structural adjustments and was complemented by ADB assistance for policy adjustments in the agriculture and financial sectors in 1989 and 1990. At the end of the period, the Lao PDR was a poor country, with per capita

According to the OEDs CAPE Guidelines, counterfactuals are not observable, and different stakeholders may have diverging views on what would have happened in the absence of the assistance. Since counterfactuals are not observed, proxy indicators, indirect measures, and a mix of qualitative and quantitative indicators will have to be used as evidenced of ADBs contributions to outcomes. The counterfactual technique also has its own limitations: (i) it is difficult to do within a limited time and budget; and (ii) accessible pure controlled areas, which have not been influenced by assistance of other DPs, are difficult to find. Thus, although counterfactuals can be identified, there is no guarantee that they will correctly represent what would have happened had there not been ADB assistance. Given the limitations of the counterfactual technique and the suggestion in the CAPE Guidelines, this CAPE used a mix of qualitative and quantitative indicators before and after ADB assistance. Defined as the ratio of external debt payments to exports.

6 gross domestic product (GDP) of $180 and almost half (48%) of the countrys population living in poverty.10 14. Improved Macroeconomic Performance (19911995). Aligned with the NEM, the strategic objective of the Third Plan (19911995) was to facilitate the countrys transition to a market economy by promoting infrastructure development and undertaking policy and institutional reforms to encourage private sector development (PSD). By the early 1990s, there were significant achievements: (i) more than 100 SOEs had been privatized; (ii) tax collection had improved; (iii) the FDI law had been revised (1994) to allow ventures that were 100% foreign-owned; (iv) FDI had increased; (v) commodity price controls and transport restrictions had been lifted; (vi) economic growth resumed (averaging 7% during 19931995); (vii) exports were 18% of GDP; (viii) inflation had fallen to around 6% in 1993 after peaking at 60% in 1989; and (ix) the nominal exchange rate had stabilized. On the political front, a new constitution was adopted (1991) after the first national elections in 1989. The same ruling party has held power up to the present. The World Banks evaluation of SAC-I and II found that, while these external assistance programs brought about sweeping macroeconomic policy reforms in the early 1990s, progress in translating such policies into administrative actions was slow (e.g., while many laws to create an enabling legal and regulatory framework for PSD had been enacted, the preparation of the needed regulations and directives to make them operational lagged behind); and the overall macroeconomic position remained fragile. This was due to weak governance and corruption, factors that reflected institutional constraints, vested interests, and lack of a tradition of transparency. These are common problems for transitional economies. Fiscal deficits remained high (averaging 9.7% of GDP). While poverty had declined from the preceding period, the country remained poor, with per capita GDP of $377 and poverty incidence of 46% at the end of the period. 15. Financial Destabilization (19962000). The Lao PDR joined the Association of Southeast Asian Nations in 1997. The move was consistent with the countrys Fourth Plan (19962000), the strategic objective of which was to facilitate the transition to a market economy and poverty reduction, mainly by improving infrastructure, human resources development (HRD), regional cooperation, and environmental preservation. An exogenous shockthe 1997 Asian financial crisishad an adverse impact on the Lao PDR due to its close economic relationship with Thailand. The currency collapsed, economic growth fell to 4% in 1998 compared with 7% in the previous 3 years, and inflation shot up to 134% in 1999. Economic growth later picked up to average 6% over the period. Although inflation subsequently fell to 27% in 2000, it remained in double digits, about 11% in the following period (20012004) (Table A1.2, Appendix 1). High fiscal deficits continued (averaging 9.6% of GDP). The poverty incidence remained high (39% in 1998) and GDP per capita remained low ($335) at the end of the period. 16. Recovery and Consolidation (20012005). The economy recovered during the Fifth Plan (20012005). The strategic objective of the Plan was to ensure social and political stability with sustainable growth and poverty reduction, especially through food self-sufficiency, environmental preservation, HRD, and mobilizing savings to encourage PSD. In September 2001, the Government signed the Poverty Reduction Partnership Agreement (PRPA) 11 with
10

The poverty incidence was defined as the proportion of people living below the national poverty line of less than $1.5 per day. 11 The PRPA objectives are to (i) halve poverty incidence and stop poppy cultivation by 2005, (ii) eradicate poverty and stop shifting cultivation by 2010, and (iii) graduate from being a least developed country by 2020. Poverty is to be reduced through (i) sustainable economic growth, (ii) accelerated human and institutional development, (iii) improved governance, (iv) environmental sustainability, and (v) encouraging greater peoples participation in the development process.

7 ADB. Four sectors were identified as priority sectors for poverty reduction (agriculture and rural development, education, health, and road transport). In 2001, IMF provided a $40 million Poverty Reduction and Growth Facility, which required greater effort in revenue collection and bank restructuring. The FDI law was further amended in 2004 mainly to improve tax incentives to encourage investors to reinvest their profits. 12 The United States (US) granted bilateral normal trade relations (NTR)13 status to the Lao PDR in 2004, which is expected to help expand its manufacturing exports to the US. The Lao PDR began its accession to the World Trade Organization (WTO) in October 2004, although full accession is likely to be effective only in a few years time. The first half of 2004, saw a recovery in tourist arrivals, which were 30% higher than the year-earlier period, when there was the regional outbreak of severe acute respiratory syndrome (SARS). 17. With the countrys heavy dependence on external assistance and the financing of most of the public investment program by foreign borrowings and grants, concerns were raised over the Governments absorptive capacity and ability to repay debt.14 The Lao PDR was classified by the IMF and World Bank as a highly-indebted poor country (HIPC), eligible for debt relief. Using data from 41 HIPCs combined during 19891997, one study found that the total debt relief of $33 billion resulted in new borrowing of $41 billion.15 This confirmed the mortgaging-thefuture hypothesis that the HIPC governments replaced forgiven debt with new debt, resulting in higher debt burden. For the Lao PDR, although the Government adopted an austere debt policy under which no commercial loans are contracted and all new loans should be concessional and have a grant element up to 40%50%, the debt burden remains high. 16 IMFs Article IV consultation (2004) noted the countrys improvements in macroeconomic performance since the turn of the century, with an economic growth rate averaging 6% per annum, lower inflation, and fiscal restraint. Despite such improvements, its revenue base remained weak (averaging 12% of GDP) due to weak tax collection and administration. Continued reforms are needed, especially revenue mobilization; banking and SOE reforms; and promoting good governance, the rule of law, and other elements needed to foster an enabling environment for PSD. These issues were also emphasized in ADBs country performance assessment for the Lao PDR for performancebased allocation (PBA) under ADF. ADBs PBA assessment indicates that the country has high portfolio performance, with generally satisfactory macroeconomic, structural, and social performance, although many issues remain to be tackled. Governance performance (in terms of public sector management, transparency, accountability, and corruption) was found to be poor, thus reducing the countrys overall performance rating.17 18. Other issues/challenges faced by the country, which are also emphasized in the PBA assessment, include the following: (i) high fiscal deficits (averaging 7% of GDP, albeit having gone down from 8% to 5% recentlyTable A1.2 and Figure A1.1, Appendix 1), most of which
12

The law on domestic investments was also amended to equalize tax incentives for FDI and domestic investors, and to streamline the investment process. But the tax exemption may erode the Governments revenue base. 13 NTR requires further trade liberalization (e.g., reduction in quota restrictions and rationalization of import tariffs) by the Lao PDR as a step toward accession to the World Trade Organization (WTO). Under NTR, the Lao PDR receives most-favored-nation treatment for exports to the US. 14 The stock of external debt of the Lao PDR was high, at $3 billion in 2003 (or $1.2 billion in net present value terms). However, about half was owed to the Russian Federation. In June 2003, the Russian Federation agreed to write off 70% of the debt owed to it and allow the Government to service the remaining debt of about $380 million over a period of 33 years at a preferential interest rate. 15 W. Easterly. 2002. The Elusive Quest for Growth. Massachusetts Institute of Technology Press. Cambridge. 16 According to ADBs PBA assessment for 2005, although the Lao PDRs debt burden remains high, due to its mostly concessional nature, the debt-service burden (averaging 9.4% of exports) will be manageable provided economic reforms are on track, especially fiscal reform. 17 Based on the results of the PBA assessment, the ADF allocation to the Lao PDR was reduced from the average of $55 million per year during the CAPE period to $30 million in 2005 and $22.7 million in 2006.

8 have been financed by foreign borrowings and grants; (ii) a high proportion of capital expenditure, accounting for more than 60% of total expenditure; (iii) low domestic resources mobilization, with gross domestic investments and savings averaging 21% and 16% of GDP, respectively; (iv) difficulties in attracting FDI and expanding exports (with exports declining to an average of 16% of GDP during 20012004 compared with 20% in the preceding period, and export growth increasing only slightly to 2.5% per year during 20012004 compared with 1.7% in the preceding period) due to inadequate labor skills, high transport and logistics costs because of the countrys rugged terrain, weaknesses in the transport systems, small and fragmented domestic market associated with dispersed population; (v) difficulties in developing small and medium-sized enterprises (SMEs) due to limited access to credit and entrepreneurial skills, nonconducive investment laws and climate, and high transaction costs of doing business; (vi) low demand for school graduates and limited demand to improve the quality of education due to the underdeveloped job market; (vii) lack of competitiveness 18 in the manufacturing industry (garments, in particular, which account for 23% of the total exports); although the country was granted NTR status by the US, competition in the world garment industry intensified with the expiry of preferential export quotas under the Multi-Fiber Agreement; and (viii) weak agriculture sector (providing livelihood for more than three-quarters of the countrys population and about half of GDP)19 due to high dependency on traditional cultivation;20 insufficient access to essential inputs, rural infrastructure, and markets; and lack of agriculture diversification, commercialization, and a conducive investment climate. Given these constraints, the countrys poverty level remains high, albeit declining. 19. Countrys Current MDG Status. The 6% economic growth rate achieved over the past decade (19952004) contributed to satisfactory progress on the MDG indicator on poverty reduction. The poverty incidence fell from 48% in 1990 to 46% in 1993, 39% in 1998, and 33% in 2003 (Table A1.3, Appendix 1). The current GDP per capita ($401 in 2004) is not much higher than a decade ago ($386 in 1995). The Lao PDR is still one of the poorest countries in the world, with level of GDP per capita, poverty incidence, and other MDG and social indicators comparable to those of Cambodia, but poorer than those of Viet Nam (Table 1). Although its population size (5.8 million) is about half that of Cambodia and much lower than that of Viet Nam, its current population growth rate remains the highest (2.8%21 compared with 1.8% for Cambodia and 1.6% for Viet Nam).

18

Although the labor cost is low, labor productivity (measured by value added per worker) is also low. While the Lao PDR labor cost is 44% that of Indonesia, productivity is 33%. Excluding labor cost, other costs of doing business (transport, telecommunications, electricity, and rental costs) in the Lao PDR are higher than in other East Asian countries (World Bank. 2004. Lao PDR Country Economic Memorandum: Realizing the Development Potential of Lao PDR. Report No. 30188-LA. Washington, D.C.). 19 The agriculture growth rate averaged 4.3% per year over the past decade. Industry and services grew more rapidly (Table A1.2 and Figure A1.2, Appendix 1). 20 Most upland farmers still engage in traditional subsistence cultivation (swidden agriculture with slash and burn). 21 The average number of births per woman is 4.8.

9
Table 1: Comparison of Economic and Social Indicators in Some Greater Mekong Subregion Countries Lao PDR Early to Late Latest Year 1990s 7.0 (1995) 6.9 377.0 (1995) 401.0 4.6 (1995) 5.8 (2004) (2004) (2004) (2003) (2002)
a

Item GDP Growth (%, constant) GDP per Capita ($, current) Population (million)

Cambodia Early to Late 1990s Latest Year 6.9 (1995) 5.2 (2003) 322.0 (1995) 296.0 (2003) 10.5 (1990) 13.1 (2004) 2.7 (1990) 91.0 (1992) 1.8 (2004) 64.0 (2002)

Viet Nam Early to Late 1990s Latest Year 9.5 (1995) 7.5 (2004) 287.2 (1995) 500.0 (2004) 66.2 (1990) 82.1 (2004) 2.3 (1990) 44.0 (1990) 1.6 (2004) 30.0 (2002)

Population Growth (% change) 2.6 (1995) 2.8 Infant Mortality Rate (below 1 104.0 (1995) 87.0 year/1,000 live births) Adult Literacy Rate (%) 60.2 (1995) 66.4 Gross Enrollment Ratio (%, 104.8 (1991) 83.0 primary) Human Development Index 0.487 (1995) 0.545 Human Poverty Index 38.2 Poverty Incidence (%) 38.6 (1998) 32.7 Road (km/'000 Population) 1.0 (1999) 5.6 Electrification Ratio (%) 16.0 (1999) 20.0

(2002) (2002) (2003) (2003) (2003) (2004) (2004)

62.0 (1990) 73.6 (2004) 120.9 (1990) 123.4 (2001) 0.512 (1990) 0.571 (2003) 41.3 (2003) 39.0 (1993) 33.8 (2003)

88.0 (1990) 90.3 (2002) 103.0 (1992) 106.8 (2002) 0.470 (1990) 0.691 (2004) 21.2 (2003) 50.7 (1990) 0.2 (1999) 35.0 (1999)

ADB = Asian Development Bank, GDP = gross domestic product, km = kilometer, Lao PDR = Lao People's Democratic Republic, UNDP = United Nations Development Programme. a This figure is net enrollement ratio, while the figures in the other columns are gross enrollment ratios. Sources: ADB. 2005. Country Strategy and Program Update (20062008): Lao PDR . Manila; ADB. 2005. Key Indicators 2005: Markets in Asia: Promoting Full, Productive, and Decent Employment . Manila; UNDP. 2003. Human Development Report . New York.

20. About one quarter of the Lao PDR population live in mountainous regions. There is high ethnic diversity (more than 47 official minority groups).22 Inequality, as measured by the Gini coefficient, is high (37%), with the northern region provinces23 being the poorest. Insufficient effort has been made to mitigate the adverse impacts of war (e.g., contaminated land and unexploded ordinance). Progress related to the social/non-income MDG indicators remains poor. Table A1.4 (Appendix 1) shows that slow to moderate progress was made in improving some of these MDG indicators. By the early 2000s, adult literacy rate was 66%; primary school net enrollment rate was 83%; infant mortality rate was 87 per 1,000 live births; child mortality rate was 106 per 1,000 live births; maternal mortality was 530 per 100,000 live births; and the proportions of the population with access to safe water and improved sanitation were 52% and 51%, respectively. To further facilitate poverty reduction and more rapid improvement in other MDG indicators, the Government endorsed the National Growth and Poverty Eradication Strategy (NGPES) in 2003, which identifies 47 priority districts24 and the same 4 priority sectors as identified in the joint PRPA with ADB. Under the World Bank assistance, a Poverty Reduction Fund was established in 2003 as part of the Poverty Reduction Strategy Papers, with subproject activities in 10 target districts. 21. Future Prospects for Achieving MDGs. The poverty incidence targets under the NGPES (based on the assumption of 7% GDP growth and 2.5% population growth) are 22% by
22

The unofficial figure is about 230 groups. Although ethnic diversity enriches cultural dimensions of the country, too much diversity can deter economic development due to barriers in languages and livelihood patterns. It can also result in ethnic tensions. In 2004, the Government launched a series of military attacks on Hmong rebels in the northern region of the country, and offered amnesty and land to those who ceased resistance. 23 Including Bokeo, Huaphanh, Luangnamtha, Luangprabang, Oudomxay, Phongsaly, Xayabury, Xaysomboun, and Xiengkhouang (see Map 1, page ix). 24 There are 142 districts in the countrys 17 provinces (including the Vientiane Municipality). Of the 142 districts, 47 are classified as the poorest, 70 as poor, and 25 as non poor.

10 2006, rather than 24% by 2015, as specified under the MDG targets (Table A1.4, Appendix 1). In reality, however, not all NGPES priorities were supported by the budget, and the actual average GDP growth achieved so far is about 6% (rather than 7%). The more likely case is projected by the World Bank in the base case-plus scenario with the Nam Theun 2 (NT2) Hydroelectric Project, 25 under which GDP will grow around 56% per year (Table A1.5, Appendix 1). This is expected to reduce the poverty incidence to 23% by 2015 (Table A1.6, Appendix 1), thus achieving the income MDG target 1, as planned. 22. Estimates of MDG trends by the United Nations Development Programme (UNDP) also indicate that the Lao PDR is likely to realize the income MDG target 1 by 2015 (indicator 1: halve, between 1990 and 2015, the poverty incidence to 24%; and indicator 2: halve the poverty gap ratio to 6%) (Figures A1.3 and A1.4, Appendix 1). However, some non-income MDG indicators on poverty under target 2 seem unlikely to be achieved based on the current trends (indicator 4: halve, between 1990 and 2015, the prevalence of underweight children under 5 years of age to 20%; and indicator 5: halve the proportion of population living below the minimum level of dietary energy consumption to 16%) (Figures A1.5 and A1.6, Appendix 1). Other non-income MDG indicators on education and health (Figures A1.7A1.13, Appendix 1) seem likely to be achieved, but with more difficulty than the income indicators. For example, the MDG target 3 (indicator 7: ensure that by 2015 the proportion of pupils starting grade 1 who reach grade 5 will reach 95%) will be difficult to achieve under the current trend (Figure A1.5, Appendix 1). These results imply that more effort should be directed toward improving the capacity of public service delivery, particularly at the provincial and district levels. This is expected to increase household income and, in turn, the demand for improved education and health, rather than focusing on the supply side alone (i.e., improving public revenue and expenditure management). Improved non-income MDGs are likely to contribute to further poverty reduction as projected by the World Bank study cited above. The study simulated the impacts of key socioeconomic variables on poverty reduction using nationwide household survey data. 26 It was found that improved agriculture and employment (irrigation, productive assets, and off-farm employment) had the strongest poverty reduction impact (e.g., switching household heads from being subsistence farmers to off-farm self-employed reduced poverty by 9%). Providing all villages with necessary infrastructure (e.g., electricity and piped water supply) reduced poverty by 7% and 5%, respectively. Increasing the education of household heads by 1 year reduced poverty by 3%. On improving the environment through increased access to clean water, Figure A1.14 (Appendix 1) shows that the target is likely to be achieved (indicator 30: double by 2015 the proportion of population with sustainable access to an improved water source).

25

In the absence of the NT2 Project (base case scenario), the estimated annual economic growth rate is 45%, compared with 68% under the high case scenario (with the NT2 Project, together with 13 smaller hydro projects under the Electricit du Laos (EdL) power expansion plan, improved village forestry management, and the exploitation of an additional gold-copper mine). The base case and base case-plus scenarios differ only in the assumption about the NT2 Project, while other components (mining and forestry) of the resources sector are the same. In these two scenarios, the growth rate assumptions for agriculture (excluding forestry), industry (excluding natural resources), and services are also the same, at 3%, 8%, and 6%, respectively, based on recent subsector growth rates adjusted for factors expected to affect these sectors in the future (e.g., rice and garments are assumed to increase more slowly because of expected crop diversification and increased competition from the Peoples Republic of Chinas (PRC) accession to WTO, respectively). For the high case scenario, the corresponding sector growth rate assumptions are 4%, 10%, and 7%, respectively. 26 The Lao Expenditure and Consumption Survey II and the Multiple Indicator Cluster Survey (2000).

11 III. ASSESSMENT OF QUALITY AT ENTRY OF COUNTRY STRATEGIES: RELEVANCE AND POSITIONING

23. This chapter traces the evolution of ADBs three Country Strategies for the Lao PDR and assesses their quality at entry in terms of relevance and positioning (Figure 2). Relevance/ responsiveness is a broad criterion, determining whether the Country Strategies made a relevant choice of objectives in response to, or in harmonization with, the following four criteria (assessed in sections AD below): (i) the Governments national development strategies/plans, (ii) the countrys socioeconomic issues, (iii) ADBs corporate strategies, and (iv) country strategies of other key DPs. Positioning/coherence is a specific criterion, determining the degree of coherence of the Country Strategies in narrowing down the strategic choices to the most important ones, based on the following six criteria (assessed in section E below): (i) sufficient background research on the country and sectors, (ii) Governments absorptive capacity and ownership, (iii) ADBs comparative advantage and partnerships with other DPs, (iv) focus/selectivity and synergies, (v) long-term continuity, and (vi) constraints/risks and adjustment/monitoring mechanism to achieve measurable targets. Overall, the assessment of relevance and positioning is to determine whether the Country Strategies have made a relevant and coherent choice in positioning ADB as a key DP in certain priority areas, given existing constraints.
Figure 2: Criteria for Evaluating the Quality at Entry of Country Strategies
ADBs Country Strategies x 1991 x 1996 x 2001 Criteria for Relevance:

Governments National Plans/Strategies

Countrys Socioeconomic Issues

ADBs Corporate Strategies

Country Strategies of Other Key DPs

Criteria for Positioning: Sufficient Background Research on the Country and Sectors Governments Absorptive Capacity and Ownership ADBs Comparative Advantage and Partnerships with Other DPs Focus/ Selectivity and Synergies Long-Term Continuity Constraints/ Risks and Adjustment/ Monitoring Mechanism to Achieve Measurable Targets

ADB = Asian Development Bank, DP = development partner.

A.

Relevance of Country Strategies to the Governments National Development Strategies/Plans

24. Prior to the First Formal 1991 Country Strategy. ADB started providing lending assistance to the Lao PDR in 1970, prior to the establishment of the Peoples Democratic Republic in 1975. Since there was no formal country strategy at that time, the Country Program followed the Governments development agenda. The evolution of the first Country Strategy in

12 1991 was in parallel with the Governments intention to move the economy toward a market system (Table A2.1, Appendix 2). This was followed by the 1996 Country Strategy, the 2001 full CSP, and the annual CSP Updates (CSPUs) from 2002 to 2005. The CAPE found these Country Strategies to be generally responsive to the corresponding national development strategies/plans. The formers strategic objectives and priority areas were closely aligned with those of the latter, with synchronized timing. This was not surprising, as ADB provided some ADTAs to directly and indirectly help the Government in preparing the national plans, especially the Third Plan. 25. 1991 Country Strategy. As shown in Figure A2.1 (Appendix 2), the objective of the 1991 Country Strategy was to transform the economy into a market system through the following priority areas: (i) policy and institutional reforms to encourage PSD, (ii) direct investments in essential physical infrastructure, and (iii) selective investments in basic social services due to limited government absorptive capacity. 27 The importance of the ANR and financial sectors in the countrys transformation was subsumed under the first priority area. Poverty reduction, PSD, and gender and environmental concerns were identified as crosscutting themes. Since the objective and priority areas of the 1991 Country Strategy were almost the same as those of the Governments Third Plan (19911995), the CAPE rated the former as highly responsive to the latter. 26. 1996 Country Strategy: Failure to Address Environmental Concerns. The objective of the 1996 Country Strategy was to facilitate a transition to a market system through the following priority areas: (i) enhancing sustainable growth and broadening its impacts through physical infrastructure development, (ii) policy and institutional reforms to facilitate PSD, (iii) HRD and capacity development, and (iv) regional cooperation (Figure A2.2, Appendix 2). 28 Gender concerns were identified as the main cross-cutting theme, whereas PSD and regional cooperation were part of the priority areas. The 1996 Country Strategy made the right choice in addressing regional cooperation, since the Greater Mekong Subregion (GMS) Program was initiated in 1992. However, it did not address environmental concerns--either in its priority areas or as a cross-cutting theme. This concern was one of the priority areas of the Governments Fourth Plan (19962000). Given that (i) the countrys extensive areas of primary tropical forest and biodiversity were under threat from commercial logging, shifting cultivation, upland erosion and consequent watershed deterioration, and flooding by hydroelectric reservoirs; and (ii) the countrys comparative advantage was in resource-based products (in particular hydropower, timber, and minerals), the failure to address environmental issues as cutting across sectors resulted in environmental problems, such as those associated with the Nam Leuk Hydropower Project (approved in 1996). The countrys overall environmental outlook has not been favorable as indicated by a recent low Environmental Performance Index score of 52.9 (out of 100) for the Lao PDR, ranking 102nd out of 133 countries.29 Environmental issues are important in the Lao PDR. Due to this strategic gap, the 1996 Country Strategy is rated as partly responsive to the Fourth Plan. 27. 2001 CSP. The 2001 CSP focused on poverty reduction, while emphasizing community participation, through three ADB-wide pillars: (i) pro-poor, sustainable economic growth; (ii)
27

Seven sectors were recommended in the 1991 Country Strategy: ANR, industry/finance, energy, transport, education, health, and water supply. 28 Eight sectors were recommended in the 1996 Country Strategy: ANR, finance, energy, transport, education, health, water supply, and urban development. 29 This index was calculated for 2006 by the Yale Center for Environmental Law and Policy and the Center for International Earth Science Information Network at Columbia University. The index was tracked in six established areas of environment: environmental health, air quality, water resources, biodiversity and habitat, productive natural resources, and sustainable energy.

13 inclusive social development; and (iii) good governance through policy and institutional development (Figure A2.3, Appendix 2). The 2001 CSP identified four priority areas for ADB interventions: 30 (i) rural development and market linkages; (ii) HRD; (iii) sustainable environmental management; and (iv) PSD and regional cooperation, with geographic focus on poor regions/provinces, particularly in the North (see footnote 23). Governance and environmental concerns became part of the strategic pillars and priority areas. These four priority areas also reflected the Governments four priority sectors (agriculture and rural development, education, health, and road transport) identified in the NGPES. Since the Governments Fifth Plan (20012005) also focused on poverty reduction, with the NGPES as its long-term poverty reduction strategy, the 2001 CSP is rated as highly responsive to the Governments strategy/plan.31 28. Although the GMS Program was initiated in 1992, ADB prepared its first Regional Cooperation Strategy and Program (RCSP) only in March 2004 to support a 3-year rolling GMS Program (20052007). The RCSP Update (RCSPU) was prepared in 2005. Most of the 2001 CSP priority areas were echoed in the 2004 RCSP, with substantial consistency. During the 13th GMS Ministerial Conference held in December 2004, three priority areas were emphasized in the GMS action plan: (i) enhancement of connectivity, (ii) promotion of competitiveness, and (iii) development of a greater sense of community. These priorities were the pillars of the 2005 RCSPU to guide GMS operations and achieve the GMS vision. 29. Overall. Based on the above findings, the objectives and priority areas of the combined three periods of the Country Strategies are generally found to be relevant/responsive to those of the Governments national development strategies/plans. They are not considered highly relevant because of the strategic gap in not addressing environmental concerns, at least as a cross-cutting theme, in the 1996 Country Strategy. B. Relevance of Country Strategies to the Countrys Socioeconomic Issues

30. 1991 Country Strategy. The degree of relevance of a country strategy depends on the depth of its reach into the core of prevailing socioeconomic problems. During the first few years after the 1986 introduction of the NEM, the country experienced difficulties because inefficiencies inherited from the centrally planned regime could not be resolved quickly. The 1991 Country Strategy aimed at helping the country to move to a market system. The CAPE considers it as highly responsive to the socioeconomic problems facing the country at that time, since the two priority areas covered (viz., policy reforms and physical infrastructure) were needed to move the country forward (Figure A2.1, Appendix 2). 31. 1996 Country Strategy: Failure to Address Governance Issue. Although the country, with the assistance from key DPs, was able to achieve sweeping policy reforms during the first half of the 1990s, progress in translating the new policies into administrative actions was slow (para. 14). Based on the World Banks evaluation of its SAC I and SAC II, the countrys overall macroeconomic position remained fragile due to weak governance and corruption (Figure A2.2, Appendix 2). The 1996 Country Strategy continued the market-orientation mandate, with four specific priority areas (economic growth, policy reforms to promote PSD, HRD and capacity development, and regional cooperation), but without addressing the weak governance system
30 31

The sectors recommended in the 2001 CSP were the same as those in the 1996 Country Strategy. The Governments strategy is being implemented through an action plan to the year 2010 (approved in 1996 by the National Assembly). The action plan is being carried out in two stages: (i) improved economic base to ensure sustained growth (20012010), and (ii) high economic growth with improved equity and access to social services and markets (20112020). The Government is now halfway through the first stage.

14 and corruption. Weak governance and corruption are common problems among transition economies. After decades of economic control along the socialist line, the Lao PDR was left with weak public institutions in terms of enforcing contracts, protecting property rights, and delivering public services. Combined with severe public sector budget constraints and low salary scales, the public institution system was constrained by vested interests and lack of a tradition of transparency. 32. The World Banks 2003 Country Policy and Institutional Assessment gave particularly low ratings to the Lao PDR for policies on financial stability, environmental sustainability, and public sector management (including public financial management, transparency, and accountability). The World Bank has constructed a worldwide database of indicators measuring six dimensions of governance over 19962004: 32 (i) voice and accountability, (ii) political stability, (iii) regulatory quality, (iv) rule of law, (v) government effectiveness, and (vi) control of corruption. Figures A2.4A2.9 (Appendix 2) compare these governance indicators for the Lao PDR and other GMS countries (Cambodia, Thailand, and Viet Nam). The score for each indicator lies between -2.5 and +2.5, with a mean of zero and with a higher score corresponding to a better outcome.33 The scores are generally lower for the Lao PDR than for the other three countries, suggesting that improving governance and reducing corruption in the Lao PDR is an important strategic objective for development management. 33. In Figure A2.4 (Appendix 2), the voice and accountability indicator (measuring political, civil, and human rights) for the Lao PDR was better than that for Viet Nam at the beginning of the period (1996), but declined to the bottom in 2002 before converging with that for Viet Nam in 2004, at around -1.5. In Figure A2.5 (Appendix 2), the political stability indicator (measuring the likelihood of violent threats to or changes in government) for the Lao PDR shows the biggest relative deterioration. From the top position in 1996, it slipped to the bottom by 2004, at around -0.8 compared with -0.6 for Cambodia. However, the fall in political stability perceptions is rather exaggerated, given the stable situation prevailing at the beginning of the period. Figure A2.6 (Appendix 2) shows that the regulatory quality indicator (measuring the incidence of market unfriendly policies) for the Lao PDR lagged behind the other countries and was stable over the period, at around -1.3. Figure A2.7 (Appendix 2), shows that in terms of the rule of law (measuring the quality of contract enforcement, the police and the courts, and the likelihood of crime and violence), the Lao PDR improved from the lowest in 1996 and converged with Cambodia in 2002 before declining to the lowest position again afterward, at around -1.3 in 2004. In Figure A2.8 (Appendix 2), the government effectiveness indicator (measuring the competence of the bureaucracy and the quality of public service delivery) for the Lao PDR deteriorated from a level comparable with Viet Nam and much better than Cambodia in 1996 to the lowest position in 2004, at around -1.0. Figure A2.9 (Appendix 2) shows that the control of corruption indicator (measuring the exercise of public power for private gainboth petty and grand corruption and state capture) for the Lao PDR was at par with Cambodia in 1996 and improved at the end of the 1990s before sliding to the lowest position in 2004, at around -1.2. Overall, despite the uncertainty associated with the data, the weakness in governance appears to be a more serious problem in the Lao PDR than in neighboring countries. Governance and corruption merited more attention from the Government and DPs and should have been addressed in the 1996 Country Strategy, at least as a cross-cutting theme. Due to this strategic

32

D. Kaufmann, A. Kraay, and M. Mastruzzi. 2005. Governance Matters IV: Governance Indicators for 19962004. World Bank Policy Research Working Paper Series No. 3630. Washington, D.C. 33 Measuring governance in a quantitative manner is a difficult challenge. Since the margins of error in the estimates are not trivial, this cross-country comparison should be treated with caution. The indicators show the relative position of each country and, hence, relative changes rather than absolute changes.

15 gap, the 1996 Country Strategy is rated as partly responsive to the countrys socioeconomic issues during that period. 34. 2001 CSP. In the latter half of the 1990s, the country experienced financial destabilization and currency collapse following the 1997 Asian financial crisis. Economic growth, particularly in the agriculture sector, slowed and poverty incidence remained as high as 39%. ADB subsequently shifted the strategic objective from facilitating a market system to poverty reduction in the 2001 CSP through three pillars (pro-poor, sustainable economic growth; inclusive social development; and good governance), with four priority areas (Figure A2.3, Appendix 2). The 2001 CSP is regarded as responsive to the countrys socioeconomic problems at that time because its four priority areas (rural development and market linkages, HRD, sustainable environmental management, and promoting PSD and regional cooperation) attempted to foster pro-poor growth, which was adversely affected by the financial crisis. The 2004 RCSP was also responsive, as it focused on infrastructure connectivity to promote PSD and competitiveness and, hence, sustainable economic growth. 35. Overall. Based on the above findings, the objectives and priority areas of the combined three periods of the Country Strategies are rated as relevant/responsive to the countrys socioeconomic issues. They are not considered highly responsive because of the strategic gap in not addressing governance and corruption in the 1996 Country Strategy. C. Relevance of Country Strategies to the Asian Development Banks Corporate Strategies

36. 1991 Country Strategy. ADBs corporate strategies for the early 1990s, as identified in the 1989 Panel Report, included (i) balance between ADB focus on economic growth and social infrastructure development, (ii) improvement in the living standards of the poorest groups, (iii) environmental protection, and (iv) reorientation of the public sector (see details in Appendix 2). The two priority areas of the 1991 Country Strategy for the Lao PDR (policy and institutional reforms to promote PSD, and investments to build up physical and social infrastructure) reflected some of ADBs corporate objectives (Figure A2.1, Appendix 2). It is thus considered responsive to ADBs objectives during that period. 37. 1996 Country Strategy. In the mid-1990s, ADB prepared a Medium-Term Strategic Framework (MTSF, 19951998), with five strategic thrusts to guide the preparation of country strategies: (i) economic growth, (ii) HRD, (iii) poverty reduction, (iv) women in development, and (v) environmental protection (Figure A2.2, Appendix 2). The MTSF also identified four priority areas to guide the operations of Country Programs: (i) policy support; (ii) capacity building for development management; (iii) creating and strengthening productive capacity, infrastructure, and services; and (iv) regional cooperation. The 1996 Lao PDR Country Strategys four priority areas (economic growth, policy reforms to promote PSD, HRD and capacity development, and regional integration) were largely consistent with the MTSF. It is, therefore, considered responsive to ADBs corporate strategies during that period. 38. 2001 CSP. The 2001 CSP focused on poverty reduction through three pillars (sustainable economic growth, inclusive social development, and good governance), consistent with ADBs 1999 Poverty Reduction Strategy (PRS) and 2000 Long-Term Strategic Framework (LTSF) for 20012015 (Figure A2.3, Appendix 2). Because the 2001 CSPs three pillars were identical to those in the PRS and the LTSF, the 2001 CSP is regarded as highly responsive to ADBs PRS and LTSF. It was also highly relevant to ADBs 2000 PSD Strategy, since (i) the PSD Strategy, along with the PRS, formed the major building block for the LTSF; and (ii) one of

16 its four priority areas captured the essence of the PSD Strategy (i.e., promoting PSD and regional cooperation). The 2001 CSP was highly responsive to ADBs 2000 Medium-Term Agenda and Action Plan for Promoting Good Governance, because governance improvement was one of the objectives of the CSP. 39. Overall. Based on the above findings, the objectives and priority areas of the combined three periods of the Country Strategies is considered relevant/responsive to ADBs overall corporate objectives. 40. Following the 2002 Monterrey International Conference on Financing for Development, ADB endorsed MfDR. ADBs corporate commitment was to be accompanied by the following actions: (i) strengthening developing member countries (DMC) MfDR capacity, (ii) improving the relevance and effectiveness of aid, and (iii) fostering a global partnership with other funding agencies (including joint efforts and harmonization of country strategies and programs). ADBs CSPs for various DMCs are in the process of incorporating these actions. For the Lao PDR, although the 2001 CSPs strategic objective, pillars, and priority areas remained valid and were used in the annual CSPUs from 2002 to 2005, the CSPUs were adjusted to adopt some of the MfDR mandates. D. Harmonization of Country Strategies with Other Key Development Partners

41. From the late 1980s to mid-1990s, the strategic objectives of the IMFs and the World Banks country strategies focused on transforming the economy into a market system (e.g., through the Structural Adjustment Facility, SAC I, and SAC II) (Figures A2.1 and A2.2, Appendix 2). From the late 1990s onward, their strategic objectives, like ADBs, shifted to poverty reduction, e.g., through IMFs Poverty Reduction and Growth Facility (Figure A2.3, Appendix 2). As such, the strategic choice of the combined three periods of ADBs Country Strategies for the Lao PDR is rated as harmonized with those of other key DPs in addressing the countrys development needs. However, aid coordination and partnership among DPs was weak, although it has recently improved. The MfDR mandate adopted in recent CSPUs included assistance in the joint preparation of the Governments NGPES with other DPs. The process included strengthening MfDR capacity and preparing a northern region development strategy to help integrate the poor northern region with the dynamic neighboring GMS economies. 42. Overall. Given the findings in sections AD above, the quality at entry of the combined three periods of ADBs Country Strategies for the Lao PDR in terms of relevance is found to be relevant/responsive to the four criteria (Table 2). This implies that the Country Strategies generally made a relevant choice of objectives and priority areas at the time of the formulation, although there were some notable omissions (e.g., failure to address the environment, governance, and corruption in some Country Strategies). The weakest of the three Country Strategies in terms of relevance was the 1996 one.

17
Table 2: Evaluation Rating of the Quality at Entry of Country Strategies in Terms of Relevance Criteria (from Figures A2.1A2.3, Appendix 2) Weighted Government's SocioADB's Country Plans and economic Corporate Strategies of Average of All Strategies Issues Strategies Other Key DPs Criteriaa 3 (HR) 3 (HR) 2 (R) 2 (R) 2.5 (R) 1 (PR) 1 (PR) 2 (R) 2 (R) 1.5 (PR) 3 (HR) 2 (R) 3 (HR) 2 (R) 2.5 (R) 2.2 (R)

Country Strategy 1991 Country Strategy 1996 Country Strategy 2001 Country Strategy Overall Country Strategy

ADB = Asian Development Bank, DP = development partner, HR = highly relevant, IR = irrelevant, OED = Operations Evaluation Department, PR = partly relevant, R = relevant. a An equal weight is applied to each of the four criteria for relevance. The rating follows OED's standard rating for projects/programs as follows: (i) HR > 2.5, (ii) 2.5 >= R >= 1.6, (iii) 1.6 > PR >= 0.6, and (iv) 0.6 > IR.

E.

Positioning of Country Strategies

43. As shown in Figure 2, in addition to relevance, the quality at entry of the Country Strategies is also assessed in terms of the strength of positioning, or the degree of coherence, against the six criteria in subsections 16 below. 1. Sufficient Background Research on the Country and Sectors

44. The CAPE rates the quality at entry of the 1991, 1996, and 2001 Country Strategies as partly satisfactory, satisfactory, and highly satisfactory, respectively, against this criterion (Table A2.2, Appendix 2). The formulation of the 1991 Country Strategy was based mainly on a country economic review, which was the usual practice during that time. Sector analysis was broad and not supported much by ETSW. Neither did it draw on the findings and lessons of some completed projects from existing evaluation reports. The 1996 Country Strategy was formulated based on additional analysis (e.g., HRD, poverty profile, and women in development). It also used evaluation findings and lessons. The 2001 CSP was formulated based on more ETSW (e.g., sector/thematic strategies and participatory poverty assessment), drew on existing evaluation findings, and used information on activities of major DPs by sector. 2. Governments Absorptive Capacity and Ownership

45. One way to increase government ownership is to recognize that governments, particularly of small transitional economies, generally have a limited absorptive capacityboth institutionally and financially. That the 1991 Country Strategy explicitly addressed this problem during its formulation (by recommending that ADB assistance in basic social services be selective due to limited absorptive capacity) merits a satisfactory rating against this criterion (Table A2.2, Appendix 2). Other aspects of government ownership (fully participating in the Country Strategy formulation and leading the countrys development agenda) could not be expected at that time. The quality at entry of the 1996 Country Strategy and 2001 CSP are rated as unsatisfactory against this criterion because the problem of limited government absorptive capacity was mentioned in the former only in relation to delayed project implementation, rather than as part of a strategic thrust. Other aspects of government ownership were not recognized. However, recent CSPUs gave more emphasis to government ownership and participation. 46. Does Limited Government Absorptive Capacity Matter? The failure of the funding agency community to recognize the problem of weak Governments absorptive capacity contributed to high aid inflows (85% of total government expenditure). It could be argued that

18 aid flows of this level reduce the effectiveness of aid and undercut government ownership. This was reflected in the Governments inability to provide counterpart funds for capital expenditure and sufficient recurrent cost financing to sustain completed projects in some sectors, as discussed in Chapter V (section A). A review of recent empirical literature on the development effectiveness of aid in an OED report34 found that aid is generally effective, but a large aid inflow relative to the absorptive capacity of a recipient country leads to diminishing returns. This finding is supported by a recent study of the Center for Global Development,35 which found that the aid intensity ratio (as measured by overseas development assistance over the aid recipients total government expenditure) of the Lao PDR is the highest (85%) among Asian countries and the eighth highest in the world. This raises several concerns about (i) accountabilitythe Government would tend to rely more on external finance, rather than trying to enhance domestic revenues; (ii) corruptionmuch past aid has disappeared into private accounts or is used in ways not helpful to the poor; even where corruption may be less obvious, aid budgets are thought to have often fuelled internal systems of patronage and sustained regimes that might not have survived otherwise; (iii) sustainabilitymore capital expenditure would require more recurrent expenditure to sustain the investments; and (iv) outcomes/impactsthere is a limit to which aid will result in increased outcomes. While these are general findings that are not based on a detailed analysis of the Lao PDR, they do suggest that the Government and funding agencies should seriously consider whether the total volume of aid has exceeded the Governments absorptive capacity, thereby adversely affecting the achievement of development results given the amount of money that is being spent. Funding agencies are concerned about corruption, including illegal logging and smuggling, waste, slow and opaque bureaucratic decision making, and fiscal and revenue collection issues. Because of its high dependence on foreign aid, some critics have charged that the high levels of aid reduce the Governments incentive to undertake serious reform. 3. The Asian Development Banks Comparative Advantage and Partnerships with Other Development Partners

47. To ensure efficient use of resources (by focusing on the sectors in which ADB has a comparative advantage), coordination with other DPs is needed to (i) avoid duplicative efforts in the same sectors; (ii) reinforce each others efforts in the same sectors through systematic cofinancing; and/or (iii) reinforce each others efforts in the same sectors through more systematic, program-based/sector-coordinated approaches, 36 ranging from a common policy framework to sector-wide management (SWIM) and sector-wide approach (SWAP). Systematic partnerships started only recently. Prior to the 1991 Country Strategy, ADBs comparative advantage in the Lao PDR was in physical infrastructure, as indicated by a high proportion of lending assistance (almost 70%) provided to energy and transport combined during 19861990, and the generally successful project performance. At the ADB-wide level, OEDs Annual Evaluation Review (2005) found that success rates of project performance are the highest in these two sectorsone indicator of ADBs comparative advantage. That the 1991 Country Strategy emphasized physical infrastructure reflected its recognition of the strength of ADB in this area, although partnerships with other DPs were not given due consideration at the time. The quality at entry of the 1991 Country Strategy against this criterion is thus rated as
34

M.G. Quibria. 2004. Development Effectiveness: What Does Recent Research Tell Us? ADB OED Working Paper No. 1. Manila. 35 T. Moss and A. Subramanian. 2005. After the Big Push? Fiscal and Institutional Implications of Large Aid Increases. Center for Global Development. Working Paper No. 71. Washington, D.C. 36 A program-based approach can be in the form of broad sector coordination such as a common policy framework, or more systematic approaches such as sector-wide management (SWIM) and sector-wide approach (SWAP). SWIM differs from SWAP in that the former is a policy-driven, sector-wide management to increase coordination among DPs without pooling financial resources. It is viewed as a necessary step toward SWAP.

19 satisfactory (Table A2.2, Appendix 2). The quality at entry of the 1996 Country Strategy is also rated as satisfactory, since it still emphasized physical infrastructure to stimulate economic growth, while attempting to deepen growth impacts through social infrastructure (mainly HRD). Activities of other DPs were listed to avoid duplicative efforts. 48. How Can Poverty be Effectively Reduced? In line with the change in the strategic direction of major DPs and the Government to focus on poverty reduction, the 2001 CSPs strategic objective changed from facilitating a market economy through sustainable growth to poverty reduction. This resulted in a diversion from ADBs comparative advantage in physical infrastructure to many other areas/sectors that were expected to have direct poverty reduction impacts. While a focus on direct poverty reduction is indisputable, there were concerns about how effective this Strategy would be in reducing poverty when the limited amount of resources was spread thinly over many sectors. The development experience of the East Asian miracle economies reveal that the most important mechanism for reducing poverty was rapid economic growth. 37 While direct poverty reduction programs may result in faster poverty reduction in specific locations, the impact might be difficult to sustain if it is not accompanied by rapid economic growth at the national level. In terms of partnerships, the 2001 CSP recognized the need to develop partnerships and collaboration with other DPs. Although formal partnerships were not developed during the formulation of the 2001 CSP, some were developed afterwards (e.g., PRPA and NGPES). However, given the large diversion from ADBs comparative advantage, the quality at entry of the 2001 CSP is rated as partly satisfactory (Table A2.2, Appendix 2). 4. Focus/Selectivity and Synergies

49. More focused/selective strategies are likely to create critical masses of benefits/ beneficiaries in the selected sectors or geographic areas. Selectivity can be sector focus or area focus. Sector focus is given more weight, since ADB and the Government are organized by sector. If the focus is on some related sectors where the impacts can help reinforce one another, synergies are likely to develop. The quality at entry of the 1991 and 1996 Country Strategies is rated as satisfactory against this criterion, as both focused on physical infrastructure (energy and transport) to support private sector-led growth, although the latter also gave additional attention to HRD. Synergies were not directly addressed (Table A2.2, Appendix 2). The 2001 CSP had a geographic focus, targeting some poorest provinces in the North and Savannakhet Province along the East-West Corridor to deepen the poverty reduction impacts and develop synergies. However, it is rated as partly satisfactory due to lack of sector focus and the spreading of resources thinly across many (eight) sectors. 5. Long-Term Continuity

50. While there was no formal Country Strategy for the Lao PDR prior to 1991, almost 70% of the ADBs Country Program during 19861990 focused on physical infrastructure in support of the NEM. The quality at entry of the 1991 and 1996 Country Strategies is rated as satisfactory, because continuity was recognized in their attempt to support the transformation of the economy to a market system through physical infrastructure development, although the latter Strategy also paid additional attention to social infrastructure (Table A2.2, Appendix 2). While the poverty reduction focus of the 2001 CSP is undisputed, it did not have to drastically shift away from the physical infrastructure-led growth focus, since experience elsewhere had

37

M. G. Quibria. 2002. Growth and Poverty: Lessons from the East Asian Miracle Revisited. ADB Institute Research Paper No. 33. Tokyo.

20 shown that rapid economic growth was a necessary condition for sustainable poverty reduction (see footnote 37). Thus, its quality at entry is rated as partly satisfactory against this criterion. 6. Constraints/Risks and Adjustment/Monitoring Mechanism to Achieve Measurable Targets

51. A good country strategy should identify some measurable targets for its objectives, constraints/risks to achieving the objectives, and an adjustment/monitoring mechanism to accommodate the uncertainties and monitor the progress toward achieving the objectives. Since the 1991 and 1996 Country Strategies were prepared without any measurable targets, risk assessment, or adjustment/monitoring mechanism, their quality at entry is rated as unsatisfactory (Table A2.2, Appendix 2). The quality at entry of the 2001 CSP is rated as partly satisfactory because it identified the overarching poverty reduction target and some potential risks, together with some mitigation actions, but without identifying other intermediate outcome targets or monitoring mechanism. Neither did it address ADBs resource constraints. 7. All Criteria Combined

52. Based on the results of the three periods, the quality at entry of the overall Country Strategies combined in terms of positioning is rated as partly satisfactory against the six criteria due mainly to the lack of coherence (Table 3). Combined with the earlier findings that the overall Country Strategies were responsive to the four criteria under the relevance aspect, the overall Country Strategies are regarded as making a generally relevant choice of objectives (not contradictory to the countrys needs or to ADBs and other DPs mandates), but not a coherent choice in positioning ADB as a major DP in certain sectors.
Table 3: Evaluation Rating of the Quality at Entry of Country Strategies in Terms of Positioning/Coherence Criteria (from Table A2.2, Appendix 2) Sufficient Background Research on the Country and Sectors 1 (PS) 2 (S) 3 (HS) Government's Absorptive Capacity and Ownership 2 0 0 (S) (US) (US) ADB's Comparative Advantage and Focus/Selectivity Partnerships with and Synergies Other DPs 2 2 1 (S) (S) (PS) 2 2 1 (S) (S) (PS) Constraints/Risks Weighted and Adjustment/ Long-Term Average of All Monitoring Continuity Mechanism to Criteriaa Achieve Targets 2 (S) 0 (US) 1.5 (PS) 2 (S) 0 (US) 1.3 (PS) 1 (PS) 1 (PS) 1.2 (PS) 1.3 (PS)

Country Strategy 1991 CS 1996 CS 2001 CS Overall CS

ADB = Asian Development Bank, CS = Country Strategy, DP = development partner, HS = highly satisfactory, OED = Operations Evaluation Department, PS = partly satisfactory, S = satisfactory, US = unsatisfactory. a An equal weight is applied to each of the six criteria for positioning/coherence. The rating follows OED's standard rating for projects/ programs as follows: (i) HS > 2.5, (ii) 2.5 >= S >= 1.6, (iii) 1.6 > PS >= 0.6, and (iv) 0.6 > US.

IV.

ASSESSMENT OF QUALITY AT ENTRY OF COUNTRY PROGRAMS: POSITIONING

53. A good Country Strategy should lay down the right (relevant and coherent) choice of objectives and priority areas, which should be translated into a coherent Country Program with strong positioning in certain areas. This means that a good Country Program should be relevant/responsive to the Country Strategys objectives and priority areas. However, if the Country Strategy itself does not have a coherent choice, a good Country Program that follows such a Country Strategy cannot be regarded as good either. To avoid these conflicting results in the Country Programs for the Lao PDR, this chapter uses the same set of six criteria (Figure 3)

21 used in assessing the Country Strategies to assess the strength in positioning of the Country Programs (in sections AF below), rather than using the Country Strategies objectives as the criteria.
Figure 3: Criteria for Evaluating the Quality at Entry of Country Programs
ADBs Country Programs x 19911995 x 19962000 x 20012004

Sufficient Background Research on Sectors and Themes

Governments Absorptive Capacity and Ownership

ADBs Comparative Advantage and Partnerships with Other DPs

Focus/ Selectivity and Synergies

Long-Term Continuity

Constraints/ Risks and Adjustment/ Monitoring Mechanism to Achieve Measurable Targets

ADB = Asian Development Bank, DP = development partner.

A.

Sufficient Background Research on Sector/Thematic Strategies

54. The CAPE rates the quality at entry of the 19911995 Country Program as partly satisfactory against this criterion, since its formulation was based mainly on the 1991 Country Strategy and some updated country economic reviews (Table A2.3, Appendix 2). ETSW was not sufficiently utilized to provide sector/thematic analysis to update the strategic directions of the sectors proposed in the 1991 Country Strategy. The quality at entry of the 19962000 and 20012004 Country Programs is rated as satisfactory, since both made use of some ETSW and ADTAs. This was intended to update some sector/thematic strategies to be in line with Governments strategies in such sectors and to guide subsequent ADB operations. B. Governments Absorptive Capacity and Ownership

55. The 1991 Country Strategy suggested interventions in seven sectors (footnote 27), but selective interventions in social infrastructure due to limited government absorptive capacity. This was not followed by the 19911995 Country Program, since both the lending and nonlending proportions for social infrastructure (education, health, water supply, and urban development) turned out to be high (26% and 27%, respectively) (Figures 4 and 5: third bar) compared with negligible amounts in the preceding period (19861990) when there was no formal Country Strategy (Figures 4 and 5: second bar). Moreover, the annual average lending during 19911995 was quite high ($70 million) for a small country with limited absorptive capacity (para. 46). It was more than double that in the previous period ($29 million). The quality at entry of the 19911995 Country Program is thus rated as partly satisfactory against this criterion (Table A2.3, Appendix 2). Both the 1996 Country Strategy and the 2001 CSP suggested interventions in eight sectors (footnotes 28 and 30), with more investments in social infrastructure to deepen the growth impacts and directly reduce poverty. The lending and nonlending proportions in social infrastructure during 19962000 (Figures 4 and 5: fourth bar) were almost the same as those in the preceding period, but higher in 20012004 (Figures 4 and 5: fifth bar). The annual average lending of both periods remained high ($67 million and $56

22 million) relative to the countrys absorptive capacity. The quality at entry of the 19962000 and 20012004 Country Programs is thus rated as partly satisfactory (Table A2.3, Appendix 2).
Figure 4: Composition of Approved Loans by Sector in Five Periods 100% 90% 80% 70%
Education Multisector (Environment, Urban and Water Supply) Health
80%

Figure 5: Composition of Approved Advisory Technical Assitance by sector in Five Periods

Others (Capacity Building)

100%

Governance

60% 50%
Transport

60%

Multisector (Environment, Urban and Water Supply) Health

Education
40%

40% 30%
Energy

Transport

20% 10% 0% 1970 1985

(Prior to CAPE period) Finance/ Industry

20%

Energy

0%

Finance/Industry

1986 1990

1991 1995

1996 2000

2001 2004

Agriculture and Natural Resources

1970 1985
(Prior to CAPE period)

1986 1990

1991 1995

1996 2000

2001 2004

Agriculture and Natural Resources

C.

The Asian Development Banks Comparative Advantage and Partnerships with Other Development Partners

56. During the entire CAPE period (19862004), the overall Country Programs consisted of 50 public sector loans ($1.05 billion), 54 PPTAs ($24.8 million), and 131 ADTAs ($69.3 million) (Tables A3.1A3.3, Appendix 3).38 Prior to the CAPE period (19701985), about half of ADBs lending and three quarters of nonlending (ADTAs) assistance went to ANR in support of the Governments food self-sufficiency policy (Figures 4 and 5: first bar). Physical infrastructure (energy and transport) absorbed a large, but smaller, lending proportion (40%) during this period. In the early transition period (19861990), in line with the Governments 1986 NEM to transform the economy to a market system, the proportion of ADB lending to the energy and transport sectors combined increased to about 70% to facilitate efficient economic growth, while its corresponding nonlending proportion increased to 40% (Figures 4 and 5: second bar) (see details in Tables A3.6 and A3.7, Appendix 3). At the same time, both lending and nonlending proportions to the ANR sector were reduced drastically to 14% and 20%, respectively. ADBs continued major role in the two physical infrastructure sectors, combined with the generally successful performance of the completed projects in these sectors thus far, implied that its comparative advantage was mainly in the energy and transport sectors, even before the introduction of its first formal 1991 Country Strategy for the Lao PDR. In this period (1986 1990), ADB started to provide support to the financial sector (17% and 29% of total lending and nonlending assistance, respectively). The first financial policy-based loan and the high nonlending proportion indicated that ADB started to play a major policy advisory role in this

38

Other nonlending assistance was in the form of regional technical assistance (Table A3.4, Appendix 3). The lending pipeline (20052008) is shown in Table A3.5 (Appendix 3).

23 sector to help develop a legal and regulatory framework conducive to PSD in support of the NEM. 57. With the introduction of the first Country Strategy in 1991, which aimed to assist in market transition, the 19911995 Country Program responded by continuing ADBs comparative advantage in physical infrastructure (62% of lending and 24% of non-lending proportions) (Figures 4 and 5: third bar). Coordination with other DPs was in the form of cofinancing on a project-by-project basis (5 of 16 projects covering almost all sectors) (Table A3.8, Appendix 3). Thus, the quality at entry of the 19911995 Country Program against this criterion is rated as satisfactory (Table A2.3, Appendix 2). The 1996 Country Strategy continued to stress the major role of physical infrastructure for sustaining economic growth. The 19962000 Country Program responded by continuing ADBs comparative advantage, with more than half (55%) of its lending and 26% of nonlending proportions provided to these two sectors (Figures 4 and 5: fourth bar). ADBs policy advisory role in the financial sector regained prominence, as indicated by the high proportion of nonlending assistance in this sector (26%) and the second financial policy-based lending (8%). Complementary to ADBs advisory role in the financial sector, the 19962000 Country Program started to increase ADBs role in governance (through 8% of its nonlending assistance) to improve the legal and regulatory framework conducive for PSD, although governance was not addressed in the 1996 Country Strategy. Coordination with other DPs during this period was again in the form cofinancing on a project-by-project basis (9 of 13 projects in almost all sectors). The quality at entry of the 19962000 Country Program against this criterion is rated as satisfactory (Table A2.3, Appendix 2). 58. With the 2001 CSPs emphasis on poverty reduction, the 20012004 Country Program responded by shifting away from ADBs comparative advantage in physical infrastructure to social infrastructure, which was expected to have more direct poverty reduction impacts. The lending proportion in the energy and transport sectors was reduced to 34% (compared with more than half in the preceding period), without any nonlending assistance (Figures 4 and 5: fifth bar). The lending proportion in social infrastructure (education, health, water supply, and urban development combined) increased to 36% (compared with a quarter in the preceding period). ADBs advisory role in governance increased to 17% of total nonlending during this period, and in the financial sector continued with about the same nonlending proportion as in the previous period (27%), but a higher lending proportion (13%) due to the third financial policybased loan. ADBs main comparative advantage in physical infrastructure is also confirmed by another set of data (Table 4). During 20002003, ADBs proportion of lending and nonlending disbursements over the total disbursements of all DPs was the highest in physical infrastructure (38%24% in energy and 14% in transport). This was followed by 19% in finance, implying that ADB also had a comparative advantage among funding agencies in the financial sectormainly through its policy advisory role. The corresponding proportion of ADBs assistance in all sectors combined was 13%. Although this proportion might not be high in itself, it is considered high if it is compared with those of other DPs in Table A3.9 (Appendix 3), which shows that the proportion of ADB assistance in all sectors combined was second only to that of Japan (13% versus 26%).

24
Table 4: Disbursements of Development Partners by Sector (20002003) Disbursements (20002003) Disbursements of ADB Disbursements of All and Proportions of Development Total Disbursements Partners by Sector % $ million % $ million 280.5 18.0 24.3 8.7 86.8 5.6 16.1 18.5 202.4 13.0 48.5 24.0 365.0 23.4 52.6 14.4 143.2 9.2 16.4 11.4 99.8 6.4 10.3 10.3 190.8 12.2 35.4 18.5 193.1 12.4 5.3 2.7 1,561.5 100.0 208.9 13.4

Sector Agriculture and Natural Resources a Finance, Industry, and Trade Energy Transport and Communications Education Health Other Social Infrastructure and Activities b Others Total
a b

Including domestic trade, economic management, and industry. Including development administration, disaster preparedness, and humanitarian aid relief. Source: Ministry of Foreign Affairs. Lao PDR. 2004. Foreign Aid Report 19992003 . Vientiane; and Staff estimates.

59. During this period (20012004), cofinancing was considered on a project-by-project basis (6 of 13 projects in almost all sectors), rather than on a sector-wide level (Table A3.8, Appendix 3). Although possibilities of building a systematic collaboration among DPs through adopting a program-based approach were discussed and explored (e.g., in education and health), institutional readiness has not yet reached a stage where this has been undertaken. Combined with a relatively large diversion away from ADBs comparative advantage, the quality at entry of the 20012004 Country Program is rated as partly satisfactory (Table A2.3, Appendix 2). D. Focus/Selectivity and Synergies

60. A focused/selective program is expected to create a critical mass of benefits/ beneficiaries and, hence, deepen the resulting impacts. Ironically, prior to the first Country Strategy in 1991, ADBs Country Programs were more focused/selective than after. For example, about 50% of total lending went to ANR under the 19701985 Country Program, and 70% to physical infrastructure under the 19861990 Country Program, with no lending and negligible nonlending support for social infrastructure (Figures 4 and 5, first and second bars). With the adoption of the 1991 Country Strategy, the 19911995 Country Programs lending proportion for physical infrastructure declined to 62%, and its nonlending counterpart to 24% (Figures 4 and 5, third bars). Lending for social infrastructure (education, health, water supply, and urban development combined) started in this period, accounting for 26% of the total, with the same nonlending proportion. However, the 19911995 Country Program is still considered focused/selective due to its high physical infrastructure lending proportion (62%). As such, its quality at entry is rated as satisfactory against this criterion (Table A2.3, Appendix 2). The 19962000 Country Program is also rated as satisfactory since it continued to focus on physical infrastructure (55% of its lending), but with an increased policy advisory role in the financial sector (Figures 4 and 5, fourth bars) (Table A2.3, Appendix 2). Although the 2001 2004 Country Programs lending had a geographic focus aimed at poverty targeting, it lacked sector focus. Lending was spread thinly in various sectors under social infrastructure (36%) and physical infrastructure (34%), with 16% for ANR and 13% for finance. This finding is confirmed

25 by another OED study,39 which found that the lack of focus was a common problem in ADB operations in transitional economies, and that the Lao PDR had the least focused loan portfolio.40 The ongoing 23 loans as of end-2004 were spread over nine sectors/subsectors, resulting in 2.6 loans per sector. Thus, the quality at entry of the 20012004 Country Program is rated as partly satisfactory (Table A2.3, Appendix 2). 61. When all the periods of the Country Programs are combined (19862004), the lending composition is found to be not very coherent due mainly to the lack of focus in the latest period. Although more than half (55%) of the lending over the entire period went to physical infrastructuretransport (32%) and energy (23%) (Figure 6; and Tables A3.10, Appendix 3), about a quarter went to scattered sectors under social infrastructure (10% to urban development and environment, 5% to water supply, 7% to education, and 2% to health). The remainder went to ANR (13%) and finance (8%). The nonlending PPTA and ADTA programs were more scattered, with energy and transport accounting for 33% of the PPTAs and 25% of the ADTAs, and the rest spread in all sectors (Figures 7 and 8). ANR had the highest share of PPTA despite having a low lending share, because (i) it had the largest number of PPTAs; and (ii) its average amount per PPTA ($553,000) was second only to that of the energy sector ($632,000), but higher than that of other sectors, including transport ($376,000) (Table A3.2, Appendix 3). ANR and finance had the highest share of ADTAs of about 22% (Figure 8). The high ADTA share of the financial sector reflected ADBs prominent policy advisory role. E. Long-Term Continuity

62. The quality at entry of the 19911995 and 19962000 Country Programs is rated as satisfactory against this criterion due to unchanged sector focus (on energy and transport) from the previous period (19861990), albeit with a decline in the lending proportion in these two sectors, from 70% to 62% and 55%, respectively (Figures 4 and 5, second to fourth bars; Table A2.3, Appendix 2). The quality at entry of the 20012004 Country Program is rated as partly satisfactory, because it did not continue the same sector focus, with a substantial decline in the lending proportion in the two sectors to 34% (Table A2.3, Appendix 2). F. Constraints/Risks and Adjustment/Monitoring Mechanism to Achieve Measurable Targets

63. Since the 19911995 and 19962000 Country Programs were prepared without any measurable targets, risk assessment, or adjustment/monitoring mechanism, their quality at entry is rated as unsatisfactory against this criterion (Table A2.3, Appendix 2). The quality at entry of the 20012004 Country Program is rated as unsatisfactory, because it was not results based. Except for poverty reduction and other MDG targets, intermediate outcome targets were not identified; and neither was a monitoring mechanism (Table A2.3, Appendix 2). It should be noted, however, that ADBs guidelines for preparing CSPs did not require the inclusion of such factors. Thus, this is a corporate matter than a country issue.

39

ADB. 2005. Annual Report on Loan and Technical Assistance Portfolio Performance for the Year Ending 31 December 2004. Manila. 40 Among Cambodia, Lao PDR, Mongolia, Tajikistan, Uzbekistan, and Viet Nam.

26

Figures 68: Composition of Approved Loans and Technical Assistance by Sector.

Figure 6: Composition of Approved Loans by Sector (19862004)
Environment, Urban Development, and Water Supply 15% Education and Health 9% Agriculture and Natural Resources 13% Finance/ Industry 8%

Energy 23% Transport 32%

Source: Based on Table A3.1, Appendix 3.

Figure 7 : Composition of Approved Project Preparatory Technical Assistance by Sector (19862004)

Environment, Urban Development, and Water Supply 19% Agriculture and Natural Resources 28%

Figure 8: Composition of Approved Advisory Technical Assistance by Sector (19862004)

Others 13% Environment, Urban Development, and Water Supply 8% Agriculture and Natural Resources 22%

Education and Health 14%

Finance/Industry 6%

Education and Health 11% Finance/Industry 21%

Transport 15%

Energy 18%

Transport 14%

Energy 11%

Source: Based on Table A3.2, Appendix 3.

Source: Based on Table A3.3, Appendix 3.

G.

All Criteria Combined

64. Based on the findings of the three periods combined, the quality at entry of the overall Country Programs in terms of positioning is considered partly satisfactory, due mainly to the lack of coherence, particularly in the 2001 CSP (Table 5).

27
Table 5: Evaluation Rating of the Quality at Entry of Country Programs in Terms of Positioning/Coherence Criteria (from Table A2.3, Appendix 2) Sufficient Government's ADB's Comparative Background Absorptive Advantage and Focus/Selectivity Long-Term Continuity Research on Capacity and Partnerships with and Synergies Sectors/Themes Ownership Other DPs 1 2 2 (PS) (S) (S) 1 (PS) 1 (PS) 1 (PS) 2 2 1 (S) (S) (PS) 2 2 1 (S) (S) (PS) Constraints/Risks and Adjustment/ Weighted Average of All Monitoring Mechanism to Criteriaa Achieve Targets 2 (S) 0 (US) 1.3 (PS) 2 (S) 0 (US) 1.5 (PS) 1 (PS) 0 (US) 1.0 (PS) 1.3 (PS)

Country Program 19911995 CP 19962000 CP 20012004 CP Overall CP

ADB = Asian Development Bank, CP = Country Program, DP = development partner, HS = highly satisfactory, OED = Operations Evaluation Department, PS = partly satisfactory, S = satisfactory, US = unsatisfactory. a An equal weight is applied to each of the six criteria for positioning/coherence. The rating follows OED's standard rating for projects/ programs as follows: (i) HS > 2.5, (ii) 2.5 >= S >= 1.6, (iii) 1.6 > PS >= 0.6, and (iv) 0.6 > US.

65. The findings from the preceding chapter about the quality at entry of the overall Country Strategies indicate that the Country Strategies have generally made a relevant choice of objectives and priority areas (Table 2), but not a coherent choice in positioning ADB as a major DP in certain sectors (Table 3). Combined with the findings in Table 5, the quality at entry of the overall Country Strategies and Country Programs combined is found to be partly satisfactory (Table 6). This implies that ADB did not have strong positioning in the sectors where it had a strong comparative advantage.
Table 6: Overall Evaluation Rating of the Quality at Entry of Country Strategies and Country Programs Combined Country Strategies Criteria for Relevance Criteria for Positioning (from Table 2) (from Table 3) (i) (ii) (iii) (iv) (i) (ii) (iii) (iv) (v) (vi) 3 3 2 2 1 2 2 2 2 0 1 1 2 2 2 0 2 2 2 0 3 2 3 2 3 0 1 1 1 1 Country Programs Criteria for Positioning (from Table 5) (ii) (iii) (iv) (v) (vi) 1 2 2 2 0 1 2 2 2 0 1 1 1 1 0 Weighted Average of All Criteriaa 1.7 1.4 1.4 1.5

CS and CP 19911995 19962000 20012004 Overall

(i) 1 2 2

(S) (PS) (PS) (PS)

CP = Country Program, CS = Country Strategy, HS = highly satisfactory, OED = Operations Evaluation Department, PS = partly satisfactory, S = satisfactory, US = unsatisfactory. a An equal weight is applied to each of the 16 criteria for relevance and positioning/coherence. The rating follows OED's standard rating for projects/programs as follows: (i) HS > 2.5, (ii) 2.5 >= S >= 1.6, (iii) 1.6 > PS >= 0.6, and (iv) 0.6 > US.

V.

RESULTS ACHIEVEMENT: BOTTOM-UP ASSESSMENT OF EFFECTIVENESS

66. This chapter assesses the effectiveness of the Country Programs in achieving the following: (i) intermediate results/outcomes by sector, linked to long-term results/impacts 41 (section A), as well as by theme (section B); and (ii) the Country Strategies overriding objective of poverty reduction (section C). Detailed sector performance under the remaining criteria (relevance, efficiency, and sustainability) is assessed in Appendix 4. Result matrixes are given in Tables A4.1aA4.1h (Appendix 4) to trace the results chain of ADBs inputs and outputs, linked to ADBs contributions to outcomes and impacts by sector. At the end of each sector in section A, the overall sector performance rating is drawn based on the findings of all evaluation criteria combinedboth from section A and Appendix 4.
41

These long-term impacts will also be assessed from the top down in the next chapter to link to the assessment from the bottom up in this chapter.

28

67. Both lending and nonlending components of the Country Programs are assessed. The former includes completed and ongoing loans. The latter includes relevant ADTAs and GMSrelated RETAs, policy dialogue, and aid coordination. PPTAs are not evaluated because they led to loans, and the loans are evaluated. The CAPE does not rerate individual projects or ADTAs separately,42 but groups them by sector and assesses their combined contributions to achieving sector outcomes, based on (i) existing findings of relevant evaluation reportsproject completion reports (PCRs), project performance audit/evaluation reports (PPARs/PPERs), 43 project performance ratings (PPRs), technical assistance completion reports (TCRs), technical assistance performance audit reports (TPARs), impact evaluation studies (IESs), special evaluation studies (SESs), and the Sector Assistance Program Evaluation (SAPE) for the ANR sector;44 and (ii) updated data/information collected by the CAPE Mission (see Figures A4.1 A4.6, Appendix 4). Detailed descriptions of individual projects are in Table A4.2 (Appendix 4). A. Program Contributions to Achieving Intermediate Outcomes by Sector

68. The ratings under different criteria for each sector are summarized in Table 7.45 The ratings under the effectiveness and impacts criteria are drawn from the assessment of each sector in this section (subsections 18 below), whereas the ratings under the remaining three criteria (relevance, efficiency, and sustainability) are drawn from Appendix 4. As shown in Table 7, performance in one sector (transport) was found to be highly successful. Performance was found to be successful in four sectors (energy, education, health, and urban development) and as partly successful in three sectors (ANR, finance, and water supply).
Table 7: Summary Rating of Performance Assessment at the Sector Level Loan Amount a (%) Sector Relevance Effectiveness ANR 13.0 1 2 Finance 8.0 2 2 Energy 23.0 2 6 Transport 32.0 3 6 Education 7.0 2 4 Health 2.0 2 4 Urban Development 10.0 2 4 Water Supply 5.0 1 2 WA Sector Performance Scoreb Sector Performance a Efficiency Sustainability Impacts Scores Ratings 1 2 2 8 PS 1 2 2 9 PS 2 4 4 18 S 2 4 6 21 HS 2 2 4 14 S 2 2 4 14 S 2 4 4 16 S 1 2 2 8 PS 14.7 S

ANR = agriculture and natural resources, HS= highly successful, PS = partly successful, S = successful, U = unsuccessful, WA = weighted average. a The ratings under the effectiveness and impacts criteria are based on the assessment in Chapter V, section A (subsections 18); whereas the ratings under the remaining three criteria are based on the assessment in Appendix 4. b Sector weighted average scores are calculated by aggregating across sectors with the weight of 2 for the energy and transport sectors (which accounted for more than 50% of the Country Programs' total lending during the Country Assistance Program Evaluation period) and the weight of 1 for the remaining sectors, divided by the summation of the total sector weights of 10.

42

However, the rating of individual projects and ADTAs by existing evaluation reports are cited as reference, with additional data/information collected during the CAPE Mission whenever available. 43 The name PPAR was replaced by PPER starting 2005. 44 ADB. 2005. Lao PDR: Sector Assistance Program Evaluation for the Agriculture and Natural Resources Sector. Manila. 45 Table 8 shows the standard/reference scoring and rating system suggested by the CAPE Guidelines which were applied to Table 7.

29
Table 8: Standard/Reference Scoring and Rating System Suggested by the CAPE Guidelines as Applied to Table 7 Four Rating Categoriesa Highly Sucessful (HS) Successful (S) Partly Successful (PS) Unsuccessful (U)
a

Reference Scores for Each of the Five Criteria Relevance Effectiveness Efficiency Sustainability Impacts 3 6 3 6 6 2 4 2 4 4 1 2 1 2 2 0 0 0 0 0

Sector Performance Scores Ratings 24 HS >= 20 16 20 > S >= 14 8 14 > PS >= 8 0 8 > US

CAPE = Country Assistance Program Evaluation. The four rating categories under the five evaluation criteria are called differently. For example, (i) under the relevance criterion, the four categories are called highly relevant, relevant, partly relevant, and irrelevant; (ii) under the effectiveness criteria, they are called highly effective, effective, less effective, and ineffective; and (iii) for all the five criteria combined, they are called highly successful, successful, partly successful, and unsuccessful.

1.

Agriculture and Natural Resources Sector

69. ADBs Inputs. ADBs lending to the ANR sector during the CAPE period (19862004) started out with two program loansthe Agriculture Program Loan (APL) in 1989 and the Second Agriculture Program Loan (SAPL) in 1992. Since then, lending has been characterized by projects in diverse subsectorsforestry, irrigation, resources management/conservation, and agriculture commercialization. Both program loans were completed and assessed as partly successful by the SAPE. ADBs inputs in terms of disbursements to the ANR sector as a proportion of total disbursements to this sector by all DPs combined during 2000200346 was 9% (Table A4.1a, Appendix 4). This is modest, given that ADB assistance to all sectors combined during 20002003 was 13% (Table 4), making it the second largest DP after Japan (Table A3.9, Appendix 3). 70. ADBs Outputs. The APL aimed to support and develop the Governments policy and institutional reforms to liberalize the ANR sector. The SAPL aimed to enhance/consolidate the performance achieved under the APL, including privatizing ANR SOEs. There were 28 policy measures under the APL47 and a further 39 under the SAPL,48 not all of which were closely related to the ANR sector per se, and many of which were complex and took time to comply with. These policy measures were undertaken in parallel with the reforms being supported by other major funding agencies.49 The SAPE rated these two program loans as less effective, because many of the policy reform measures represented a case of outputs being delivered rather than outcomes being achieved. Among the policy reforms that had been undertaken included (i) reduction of state interventions by promoting divestments of agricultural SOEs, (ii) deregulation of the marketing of agricultural produce, (iii) removal of input/output subsidies, (iv) provision of land rights to farmers, (v) restructuring of the Ministry of Agriculture and Forestry (MAF), and (vi) deregulation of domestic and foreign trade (Table A4.1a, Appendix 4). 71. During the implementation period of both program loans (19891995), a series of ADTAs 50 were provided to help develop subsector policies and action plans as well as institutional capacity of the MAF conducive to policy reforms required under the program loans. Some of these TAs were rated by the TPARs as successful because they helped set the stage
46

Data on disbursements broken down into funding agencies and sectors are available only for 4 years (20002003). Although not covering the entire CAPE period, they can be used as indicative figures for the sample CAPE period. 47 The APL had six unmet policy conditionalities that had to be undertaken during the SAPL period. 48 The SAPL had one unmet conditionality that still could not be complied with. This entailed the elimination of subsidized interest rates from the APB. At the time of the PPAR, the rates were still subsidized. 49 Notably, the IMFs SAF and World Banks SAC. 50 Including TA Nos. 11342011 (Table A3.3, Appendix 3), for agricultural research; forestry action plan; improvement of agricultural statistics; national agricultural manpower, extension services, and crop development; livestock sector policy development; agriculture sector Third Five-Year Plan; and institutional strengthening of MAF.

30 for improvements in governance of the sector and prioritized sector investments. Some were partly successful or unsuccessful, mainly because their outputs were unsustainable. The SAPE noted that the technical contents of the TAs were generally appropriate and relevant to the Governments sector priorities, and that TA outputs were normally delivered on time and of adequate quality, with recommendations for appropriate actions. However, there were a number of limitations: (i) TA terms of reference were not always well defined or integrated with the programs; (ii) TA durations were too short; (iii) intermittent inputs of different TA consultants could not easily be coordinated to have meaningful engagement with the counterparts; (iv) there was weak government ownership of the TAs; and (v) TAs composition was diffused and incongruent, without strategic focus. 72. Four of the seven projects have progressed far enough to assess their outputs. The Industrial Tree Plantation Project (ITPP, 1993) aimed to reestablish tree cover on unstocked/ degraded forest land, and establish a policy and institutional framework for the development of industrial plantations. It was completed and rated by the PCR and SAPE as unsuccessful because the actual areas of plantation were less than the target, poorly maintained, and often destroyed by fire or termites. Further, a significant portion of the credit funds provided by the Agriculture Promotion Bank (APB) for tree planting was diverted to opportunistic borrowers, who used them for other purposes and did not repay the loans.51 The project met only 67% of its output target (Table A4.1a, Appendix 4). The Community-Managed Irrigation Sector Project (CMISP, 1996) aimed to improve food security in the central mountainous region, reduce shifting cultivation, and promote tree planting. The project has just been completed, and the PCR has not yet been prepared. The project generally met its output targets (Table A4.1a, Appendix 4). The ongoing Shifting Cultivation Stabilization Pilot Project (SCSPP, 1999) aims to improve income for upland farmers in an isolated district in the north and to conserve natural resources through environmentally sustainable farming systems as alternatives to shifting cultivation. The project has met its physical output targets (Table A4.1a, Appendix 4). The ongoing Decentralized Irrigation Development and Management Sector Project (DIDMSP, 2000) aims to establish sustainable irrigated agriculture in the advanced Mekong River valley through the rehabilitation of irrigation infrastructure and a transfer process, while strengthening water user associations. It has almost met its physical construction output target (Table A4.1a, Appendix 4). However, the quality of the rehabilitation has been poor, resulting in significant operation and maintenance (O&M) challenges. This has resulted in some farmer water user groups rejecting the transfer of schemes to them for O&M.52 73. Effectiveness (ADBs Contributions to Intermediate Sector Outcomes). The SAPE noted that both programs contributed to achieving some outcomes within and outside the ANR sector due to their broad reform agenda. They also helped set the stage for a continued reform process. Some of the APL and SAPL outcomes were (i) increased FDI from negligible to $88 million during the period prior to the start of the APL and by the end of the SAPL (19891995), and (ii) increased rice production from 1.35 to 2.5 million tons after completion (19962004) (Table A4.1a, Appendix 4). Since both program loans were implemented concurrently with
51

Based on the SAPE findings (para. 103), there were allegations of (i) collusion and corrupt practices between APB credit officers and ITPP clients to obtain credit approval and disbursements, (ii) the existence of ghost borrowers, and (iii) misuse of credit funds. ADBs Office of the Auditor General, Integrity Division (OAGI) confirmed the allegations. However, OAGI did not intend to conduct further investigation because the Government, through APB and the Bank of Laos, conducted their own investigation in 20002001, which resulted into the termination of some APB staff. Comments from one NGO stated that the approval of the new forestry project in 2006 (Loan No. 2209LAO[SF]: Forest Plantations Development Project) indicates that ADB did not seem to learn the lesson despite the failure of the ITPP (World Rainforest Movement Bulletin No. 103, February 2006). 52 ADB. 2003. Special Evaluation Study on Participatory Approaches to Forest and Water Resources Operations in Selected Developing Member Countries. Manila.

31 major policy and institutional reforms by other funding agencies, the outcomes achieved cannot be disaggregated or attributed to ADB assistance alone. The SAPE rated both the APL and the SAPL as less effective, since their objectives were only partly achieved. Although some outcomes have been achieved, major impediments to doing business and to commercial agriculture continue to persist. As for the two completed projects (ITPP and CMISP), the PCR and SAPE rated the ITPP as less effectivewhile some areas were planted and the technical viability of tree plantations was demonstrated, the plantings were of poor quality and uneconomical, and there was no market for the timber. The ITPP also led to negative outcomes, as it generated a large proportion of nonperforming loans (NPLs) to APB (87% in 2004) (Table A4.1a, Appendix 4). The CMISP achieved large outcomes (Table A4.1a, Appendix 4), but within the limited project areas. Of the ongoing projects, only the SCSPP is far enough advanced. The SAPE rated it effective mainly due to the benefits of the projects feeder roads, which were most appreciated by project beneficiaries (see measurable outcomes in Table A4.1a, Appendix 4). 74. Overall, the SAPE rated the performance of the ANR sector as less effective due to partial achievement of the objectives of the two program loans, the failure of the ITPP and its negative effects on the financial health of APB, and the problems of poor quality of rehabilitation being encountered under the ongoing DIDMSP. Although the other two projects (CMISP and SCSPP) were effective in achieving outcomes, the outcomes were negligible on a national scale. As such, the CAPE rates the ANR sector performance as less effective. 75. ADBs Contributions to Long-Term Impacts. The positive outcomes achieved from two projects (CMISP and SCSPP) had no country-wide impact. The country-wide impact resulting from the negative outcomes of the ITPP has been jeopardizing the financial soundness of APB, and making the task of turning it into a viable institution for the development of rural finance more difficult than it was prior to the project (Table A4.1a, Appendix 4). The SAPE found that both the APL and SAPL contributed to some country-level impacts, particularly to the beginning of a period of long-term sustained growth in the ANR sector. Some measurable impacts during 19952004 included (i) sustained agricultural growth rate of 4.3%, (ii) increased rice yields from 2.5 tons per ha to 3.2 tons per ha, and (iii) achieved food self-sufficiency in rice (Table A4.1a, Appendix 4). These impacts were the result of combined efforts of the Government and concerned DPs, including ADB. However, the SAPE rated the impacts of both the APL and SAPL as modest, since the investment climate remains poor and presents a formidable challenge to doing business. Overall, the impacts on the ANR sector are considered modest (partly satisfactory). 76. Based on the findings above (combined with those in Appendix 4), the overall performance of the ANR sector is rated as partly successful (Table 7). 2. Financial Sector and Private Sector Development

77. ADBs Inputs. ADB started providing assistance to the financial sector in 1988 with some ADTAs, followed by the First Financial Sector Program Loan (FSPL-I, 1990), the Second Financial Sector Program Loan (FSPL-II, 1996), and the Banking Sector Reform Program (BSRP, 2000). These three program loans were supported by a series of ADTAs.53 The first two loans have been completed, and the BSRP is ongoing. ADB has been a key DP in the sector,
53

In addition to the ADTAs for the three program loans, an ADTA cluster for Rural Finance Development was also provided in 2000 for $2.02 million to (i) strengthen the capacity of Bank of Lao PDR (BOL) to support sustainable rural financial development, (ii) assist APB to build its capacity and expand outreach on a sustainable basis, and (iii) introduce credit unions on a pilot basis. The TA culminated in the Rural Finance Sector Development Program to be approved in 2006.

32 with the sector disbursements of 19% of total sector disbursements by all DPs combined during 20002003 (Table A4.1b, Appendix 4; and Table 4). ADB played a leading policy advisory role in this sector. 78. ADBs Outputs. The FSPL-I aimed to develop an efficient financial system responsive to the needs of a nascent private sector in transition. Both the PCR and PPAR rated it as partly successful, since many reforms were not undertaken due to noncompliance with many conditionalities. Those that were complied with normally had long delays. Of the 38 policy actions, 17 were delayed by 47 years, 6 were reinforced by the follow-up FSPL-II, and 5 were completed only after additional TA support. The FSPL-I had three main components: central banking reforms and money market mechanisms, institutional reforms, and PSD. Major outputs delivered included (i) providing the Bank of Lao PDR (BOL) with the tools to control money supply, (ii) improving the payment system, (iii) recapitalizing the state-owned commercial banks (SCBs), (iv) loosening control over interest rates, (v) extending banking services to the northern region, (vi) providing a legal framework for domestic enterprises, (vii) establishing a land registration office, and (viii) continuing progress on privatization (Table A4.1b, Appendix 4). The FSPL-I also introduced a number of legal and policy changes, major among them being approval of the Bankruptcy Law and the signing of interbank market regulations. Eight ADTAs54 accompanied the FSPL-I (four before approval of the FSPL-I and four afterward). The first four TAs aimed to restructure the financial sector and the monetary and banking systems, while the last four provided for long-term credit facility support, a debt disposal unit, and commercial bank training. Six of these TAs were assessed by a TPAR, which rated the ones on commercial bank training as successful, and the rest mainly unsuccessful. The unfavorable TA performance was due to (i) partly relevant training programs not adapted to local conditions, (ii) insufficient institutional and political economy analysis of the conditions in the country, and (iii) inappropriate sequencing of the TAs vis--vis the programs. Thus, the TAs were not able to help improve the performance of the FSPL-I. 79. The FSPL-II (1996) aimed to develop an environment favorable to a market-driven financial sector for nurturing PSD. Its key objectives were to (i) mobilize more domestic savings, particularly long-term savings, and allocate them efficiently to promote PSD; and (ii) strengthen macroeconomic management through the development of a sound and market-responsive banking system. Six of the 23 conditions were to continue the unfinished agenda of the FSPL-I. The PCR and PPER55 rated the FSPL-II as partly successful due to the following: (i) there were weaknesses in program design and implementation; (ii) lack of a clearly defined originating ministry for most of the laws, implementation decrees, and regulations drafted caused excessive delays in their approval (sometimes up to 5 years from the first draft to approval); and (iii) although the majority of the policy conditions were met on paper, many failed to achieve intended outputs and outcomes, hence limiting their contribution to meeting the objective of mobilizing savings to facilitate PSD. The PPER further determined that, of the 23 second tranche conditions, only 13 were fully complied with. Two further conditions were substantially complied with, seven partly complied with, and one not complied with. Major outputs of the FSPL-II included (i) consolidation of the seven SCBs into three, 56 (ii) adoption of a chart of accounts by all banks and completion of international audits of the SCBs, (iii) establishment of a separate Supervision and Examination Department in BOL, 57 (iv) building of market support infrastructure for the banking system, and (v) establishment of a social security fund/pension
54 55

TA Nos. 1032, 1115, 1263, 1296, 1433, 1434, 1805, and 1805 (supplementary) (Table A3.3, Appendix 3). The PPER for the FSPL-II rated it as partly successful bordering on unsuccessful. 56 After consolidation, two SCBs are the Banque pour le Commerce Exterieur Lao and the Lao Development Bank. APB remains a separate SCB. 57 Renamed the Banking and Financial Institutions Supervision Department in 2001.

33 scheme for employees of public and private enterprises (Table A4.1b, Appendix 4). The two attached ADTAs (TAs 2642 and 2643) were found by the PCR and PPER to be partly successful. Some key outputs of TA 2642 were not adequately achieved: (i) an action plan for restructuring the SCBs was not prepared, as this was not supported by ADBs policy dialogue; (ii) while various options for increasing the autonomy of SCBs were presented, suitable banks interested in a joint venture or management contract arrangement were not identified; and (iii) neither a leasing market nor a secured transactions regime was developed. For TA 2643, the macroeconomic policy environment was not conducive to the development of an interbank market. Progress in SCB restructuring was also slow. 80. The third program loan (BSRP, 2000), together with its TA loan, is ongoing. It aims to foster efficient financial intermediation and ensure a sound banking system to support growth and rural outreach. The attached ADTA (TA 4002) aims to implement key governance reforms (e.g., restructuring the two SCBs, instituting antimoney laundering procedures, and combating the financing of terrorism). As in the two preceding program loans, BSRP implementation encountered serious delays such that ADB had to impose certain actions for the Government to fulfill prior to ADBs proceeding with further BSRP implementation and approval of the new Rural Finance Sector Development Program. While ongoing, the BSRP has delivered many outputs: (i) adoption of comprehensive SCB restructuring plans and governance agreements, (ii) recovery of KN70 billion of NPLs in the two SCBs (mentioned in footnote 56), (iii) implementation of an information and communications technology project at the two SCBs, (iv) adoption of new credit and portfolio management policies by the two SCBs, and (v) implementation of a restructuring plan by APB (Table A4.1b, Appendix 4). 81. Effectiveness (ADBs Contributions to Intermediate Sector Outcomes). Based on the PPAR, the FSPL-I achieved only limited outcomes, mostly in terms of improved financial intermediation (e.g., reduced real lending interest rate, and increased credit to private enterprises) (Table A4.1b, Appendix 4). However, outcomes in terms of enactment of appropriate policies to create the right environment to foster PSD and overcome constraints (such as the segmented nature of the banking sector and banks lack of awareness about opportunities afforded by an interbank market for improving asset-liability management) were not achieved. The FSPL-II also had limited outcomes, mostly negative ones (e.g., decreased return on assets of the two SCBs, and increased NPLs of the two SCBs) (Table A4.1b, Appendix 4), because SCB recapitalization was done without improving banking governance. The two SCBs have been afflicted with a high level of policy lending by government agencies and SOEs due to the lack of progress on SOE restructuring and public expenditure management reforms. They were largely managed by BOL which did not operate independently of MOF. These reflected a lack of willingness/ownership on the part of the Government to make real and meaningful changes. Moreover, the FSPL-II did not continue the enterprise sector reform started under the FSPL-I. As such, the development of SMEs, which forms the basis for PSD and growth, has been stumbled. The lack of SMEs is caused by a number of barriers, including limited access to finance, exchange rate fluctuations, and poor and costly transport logistics. This will continue to limit the ability of the countrys industry sector to adopt new technology and expand employment, thus affecting the Lao PDRs competitiveness position to become a low-cost, labor-intensive production center in the near future. 82. Given the delayed compliance and noncompliance with many conditionalities as well as limited outcomes from the FSPL-I and FSPL-II, particularly in preventing deterioration of the health of the banking system and in failing to develop an enabling environment for SMEs, ADBs Country Program performance in this sector is considered less effective. Development efforts

34 would have been more effective had there been a viable financial sector unburdened by a high degree of NPLs and able to take on a catalytic role in PSD. 83. ADBs Contributions to Long-Term Impacts. The FSPL-I and FSPL-II had limited impacts at the country level, although the impacts were not due entirely to ADBs contributions alone. The health of the countrys financial sector did not seem to improve, as shown by the following impact indicators: (i) slightly increased deposit/GDP ratio; (ii) decreased share of credit to the private sector in the net domestic credit to the economy; and (iii) slightly increased M2/GDP ratio, indicating that the depth of the financial sector remained shallow58 (Table A4.1b, Appendix 4). ADBs contribution to the countrys achievement of long-term impacts in this sector is, therefore, considered modest (partly satisfactory). 84. Based on the findings above (combined with those in Appendix 4), the overall performance of the financial sector is rated as partly successful (Table 7). 3. Energy Sector

85. ADBs Inputs. ADB started supporting the energy sector in 1971, before the CAPE period. Of the nine projects during the CAPE period, eight have been completed. ADB has been the largest DP in this sector, with the sector disbursements of 24% of total sector disbursements by all DPs combined during 20002003 (Table A4.1c, Appendix 4; and Table 4). 86. ADBs Outputs. Since two of the nine projects were supplementary projects, they are assessed here with their main projects. This resulted in seven projects, four of which were power generation and three were in power transmission and distribution. For power generation, except for the Xeset Hydropower Project (XHP, 1987), which is located in the south, the other three are located in the central region. The objectives of the XHP, the Nam Song Hydropower Development Project (NSHDP, 1992), and the Nam Leuk Hydropower Project (NLHP, 1996) were to (i) generate power to meet local demand and improve economic activities in and around the project areas, and (ii) increase the countrys foreign exchange earnings through exports of surplus electricity to Thailand. The XHP was designed as a run-of-river plant on the Xeset River, a tributary of the Mekong. The NSHDP diverted the major part of the flow in the Nam Song into the Nam Ngum reservoir to increase the power generation capacity of the Nam Ngum power plant. The NLHP is a transbasin project, consisting of a dam, two generation plants, and diversion structures to divert water from the Nam Leuk River to the existing Nam Ngum reservoir. The remaining projectthe Theun Hinboun Hydropower Project (THHP, 1994)was the largest of all. It aimed primarily at exporting electricity to Thailand. Major outputs of the four projects combined were the construction and operation of 355 megawatts of power plants (Table A4.1c, Appendix 4). A series of ADTAs were attached to these projects, including TAs 2054, 2569, 2583, 3225, and 3374 (Table A3.3, Appendix 3), which were found to be useful in improving institutional capacity of the Electricit du Laos (EdL) in power system planning, strategy formulation, corporate and financial development, and analysis of financing options. 87. All three power transmission and distribution projects were located in the north, the countrys poorest region. These included the Nam Ngum-Luang Prabang Power Transmission Project (NNLPPTP, 1988); the Power Transmission and Distribution Project (PTDP, 1997); and the Northern Area Rural Power Distribution Project (NARPDP, 2003). All the three projects aimed to expand electricity transmission and distribution to meet the demand in order to promote economic growth and local economic conditions in Luangprabang, five rural areas, and
58

The rate was comparable with the financial development of the Central Asian republics. The corresponding rates in Viet Nam and Thailand were more than 30% and more than 90%, respectively.

35 rural low-income communities, respectively. The NNLPPTP had four ADTAsTAs 1081, 1082, 1301, and 1301-supplementary (Table A3.3, Appendix 3)which were successful in helping develop the institutional capacity of EdL to operate the transmission and distribution systems. The NARPDP is ongoing and is also helping to restructure the power sector and to strengthen EdLs project management capacity and operational efficiency. Its engineering design and procurement are on track. All the three projects have delivered expected outputs in terms of installation of transmission lines (Table A4.1c, Appendix 4). 88. Effectiveness (ADBs Contributions to Intermediate Sector Outcomes). For the power generation projects, the PCRs and PPARs did not rate the XHP, but rated the other three projects as successful due to the achievement of substantial outcomes, although slightly below targets in the NSHDP and THHP, but above target in the NLHP. The CAPE agrees with the PCR and PPAR findings for the three projects and considers the XHP to be successful due to the combined outcomes achieved during 19912004: (i) provision of energy generation capacity of 2,067 gigawatt-hour (GWh) per year, (ii) contribution to 70% of the countrys energy generation capacity, and (iii) generation of foreign exchange earnings from energy exports to Thailand of $520 million (Table A4.1c, Appendix 4). The key factors underlying the good performance in energy generation were (i) creation of a critical mass in terms of large foreign exchange earnings from electricity exports, and (ii) involvement of the private sector in joint ventures to utilize their expertise and increase the source of investment financing.59 However, the THHP and NLHP brought about negative social and environmental impacts. Progress in mitigating these adverse impacts is behind schedule. Despite the negative impacts, these projects are considered successful due to their substantial outcomes, since it should be possible to mitigate the negative impacts. Closer monitoring of the implementation of the mitigation measures by ADB will be required. 89. Hydropower projects are generally controversial for some international NGOs and affected people,60 due to (i) inadequate consultation with affected people, (ii) potential negative social and environmental impacts,61 and (iii) unmitigated costs of the displacement and other social costs that often fall disproportionately on the poor, women and indigenous people. Although the PPAR rated the NLHP successful on economic, financial, and technical grounds and concluded that the relatively small scale resettlement was done well, the PPAR also identified some environmental and social problems and measures to address them. The resulting recommendations have not yet been fully implemented, and further monitoring is required. Problems related to the implementation of ADBs environmental and social safeguard policies, inadequate consultation, adverse environmental impacts, inadequate compensation of some affected persons, and a lack of fiscal transparency were also found in the THHP.62 The NT2 Project (approved in 2005) is another example of a hydropower project that some stakeholders had major concerns about. During its processing, ADB had interactions with many
59

Under the THHP, the Theun-Hinboun Power Company Limited, was formed to plan, finance, construct, own, and operate the project. EdL, the state-owned power utility, contributed 60% of the share capital, and two foreign investors contributed 20% each. ADB acted as the lead coordination agency for the Governments negotiations with foreign investors and provided legal and financial advice. 60 See (i) World Commission on Dams. 2000. Dams and Development: A New Framework for Development. Earthscan Publications Ltd. London and Sterling, VA; and (ii) A. Nuera. 2005. The Asian Development Bank and Dams. NGO Forum on ADB Guidebook Series. Manila. 61 Including hydrology and water supply problems; water quality issues and impacts on drinking water; erosion; increased access to forest and protected areas resulting in logging and poaching; damage to fish habitats and breeding; and adverse impacts on the livelihoods for fisher folk and cultivators due to lack of alternative employment. 62 S. Jusi. 2005. The Asian Development Bank--a Promoter of Good Governance? Case Study Theun Hinboun Hydropower Project in Lao PDR. Department of Regional Studies and Environmental Policy. University of Tampere. Tampere, Finland.

36 NGOs. Advocacy NGOs challenged ADB staff and member governments through an internationally coordinated campaign. Much of the discussion related to identifying and developing ways to mitigate potential adverse environmental and social impacts. The resulting transaction costs for ADB and the Government were high.63 Because implementation of the NT2 Project is at a very early stage, it remains to be seen whether (i) the project will be successful, (ii) the potentially adverse social and environmental impacts will be effectively mitigated, and (iii) the interaction with civil society was an effective means of improving the quality of the project. NGOs have the potential to help ADB deliver better development results by improving the project design, investigating alternatives, designing mitigation measures, and improving the monitoring of the implementation of the mitigation measures. The challenge is for ADB to find ways for constructive engagement with stakeholders that leads to better development results on the ground. 90. As for the power transmission and distribution projects, the combined outcomes of the NNLPPTP. PTDP, and NARPDP were (i) provision of electricity connections to 70,646 households (about 500,000 people), and (ii) contribution to 36% of the countrys electricity connections. The key factors underlying the good performance in power distribution were (i) good quality and workmanship of the installation, (ii) reliability of the power supply as appreciated by the consumers interviewed for the PTDP, (iii) increased sales of power supply in the NNLPPTP, and (iv) creation of a critical mass of beneficiaries of electricity access. 91. In sum, with the substantial sector outcomes achieved so far--in both power generation and distribution--ADB operations in the energy sector are considered highly effective. 92. ADBs Contributions to Long-Term Impacts. The country achieved large long-term impacts in the energy sector during 19912004: (i) tripling electricity generation capacity from 1,027 GWh per year to 3,094 GWh per year; (ii) increasing access to electricity to 20% of households and 2% of rural households; and (iii) increasing export diversification as the share of electricity sales in total exports rose from 8% to 27% (Table A4.1c, Appendix 4). These contributed to the countrys progress in economic growth and poverty reduction. Although these impacts were not entirely attributed to ADB assistance alone, ADB has been the biggest DP in this sector. Thus, ADBs contributions to the countrys achievement of impacts in the energy sector is considered significant (satisfactory). 93. Based on the findings above (combined with those in Appendix 4), the overall performance of the energy sector is rated as successful (Table 7). 4. Transport Sector

94. ADBs Inputs. Of the 12 transport projects, 11 were road projects and one was an airport project. ADB and the World Bank have been the two primary DPs in the transport sector. ADBs sector disbursements was 14% of total sector disbursements by all DPs combined during 20002003 (Table A4.1d, Appendix 4; and Table 4). ADB concentrated on physical upgrading of the road and bridge network. The World Bank is moving away from road projects to become the lead DP for road maintenance activities.

63

ADB spent $1.7 million to review the studies undertaken by the proponents to ensure the project was aligned with ADB policies, about 60% of which was to review safeguard conditions. In addition, many ADB staff years were spent for project processing and compliance reviews, including missions to some member countries to meet with NGOs and other interested parties. There were numerous meetings and briefings with ADB Management and the Board and site visits by ADB Management and the Board.

37 95. ADBs Outputs. The CAPE has classified the ADB road projects into four groups as follows: (i) Group 1 focused on the north, (ii) Group 2 on the south, (iii) Group 3 on GMS cooperation, and (iv) Group 4 on rural access. The Group 1 projects (the Third, Fourth, Fifth, and Xieng Khouang Road Improvement Projects, approved in 1987, 1989, 1991, and 1997, respectively) aimed at connecting the formerly isolated northern region to enable it join the countrys economic mainstream. The projects concentrated on the northern 13N corridor. All the projects have been completed, the first three of which were rated by the PCRs as successful and upgraded by the PPARs to highly successful due to substantial outputs and outcomes achieved. The Xieng Khouang Project was physically completed recently. Six ADTAs were attached to the Group-1 projects (TA Nos. 923, 924, 1494, 1494-Supplementary, 1495, and 2862--Table A3.3, Appendix 3) to develop institutional capacity in the Ministry of Communication, Transport, Post, and Constructions (MCTPC) Department of Roads (DOR) in various aspects. The CAPE found these TAs to be successful, especially in building DORs capacity by providing necessary training (e.g., in project implementation, road maintenance and equipment, bridge management, and management information systems). DOR is now able to implement projects successfully, achieving substantial outputs and outcomes. The projects main outputs included upgrading/construction of many kilometers (kms) of NR 13N, NR 1, and NR 7, together with access/feeder roads in Xiengkhouang Province (Table A4.1d, Appendix 4). 96. The Group 2 projects (the Second, Sixth, and Champassak Road Improvement Projects, approved in 1986, 1993, and 1995, respectively) aimed to increase economic growth in the southern provinces of Champasack, Attapeu, Sekong, and Saravane. The projects improved both national and provincial roads located to the east, south and west of Pakse, the countrys major southern city and the provincial capital of Champasack Province. All the Group2 projects have been completed and were rated by the PCRs as successful. The Champassak project was upgraded by the PPAR to highly successful due to substantial outputs and outcomes achieved. Five ADTAs were attached to the Group-2 projects (TA Nos. 796, 797, 797Supplementary, 2388, and 2389Table A3.3, Appendix 3) to develop institutional capacity of DOR in various areas. The CAPE finds these TAs to be successful, particularly in strengthening DORs capacity through training in project implementation, road maintenance, rural feeder road maintenance, and management information system. This enabled the DOR to implement the projects successfully with substantial outputs and outcomes. The projects main outputs included upgrading/construction of many kms of NR 13S, NR 16W, and provincial roads; and access/feeder roads in Champasack province (Table A4.1d, Appendix 4). Both NR 13S and NR 16W road sections improved under this Project were identified as corridors under the GMS Cross Border Trade Agreement (CBTA). Also identified under the CBTA were the two border crossing of the Project, at Chong Mek (to Thailand) and Veun Kham (to Cambodia). 97. The Group 3 projects (the East-West Corridor Project [EWCP], 1999; and Northern Economic Corridor Project [NECP], 2002) aim to strengthen the east-west road linkage between Viet Nam and Thailand via the corridor passing through Savannakhet, and the north-south road linkage between the Peoples Republic of China and Thailand passing through Luangnamtha. Both projects are ongoing, with the first near completion. One ADTA was attached to the Group3 projects (TA 3348Table A3.3, Appendix 3). The CAPE views the TA as successful since it facilitated smooth project implementation by improving east-west corridor coordination. The CAPE also views the first project as successful, given the outputs delivered in terms of construction of many kms of NR3 and NR9, and access/feeder roads (Table A4.1d, Appendix 4). 98. The Group 4 projects (the Rural Access Roads and Roads for Rural Development Projects, approved in 2000 and 2004, respectively) aim to improve low-volume, rural access roads primarily in isolated rural communities as a core poverty intervention. Both projects are

38 ongoing. There was one attached ADTA (TA 3557--Table A3.3, Appendix 3), which helped strengthen DORs capacity in social and environmental management through with the formation of the Environmental and Social Division within MCTPC. The projects are expected to deliver outputs as planned (Table A4.1d, Appendix 4). 99. In sum, the total outputs achieved by all the road projects combined include upgrading/construction of 2,333 km of the countrys road network (1,153 km of national roads, 275 km of provincial roads, and 905 km of access/feeder roads) (Table A4.1d, Appendix 4). 100. The only project in the aviation subsector (1993) aimed to (i) play a catalytic role in the economic development of Vientiane and its hinterland as well as the country as a whole, and (ii) address the priority safety issues at the countrys major airports and improve 10 of the 15 minor airports. The ADTA (TA 1986--Table A3.3, Appendix 3) attached to the project helped strengthen the capacity of the National Airports Authority and Lao Civil Aviation (in business plan preparation, accounting systems, computerization, human resource training, and successful project implementation), albeit with long delays. The PCR rated the project as successful, because it achieved large outputs and outcomes, although below the appraisal targets (Table A4.1d, Appendix 4). However, the project brought the country into compliance with International Civil Aviation Organization requirements, and there has been a substantial increase in the number of tourists. Thus, the CAPE endorses the PCR rating. 101. Effectiveness (ADBs Contributions to Intermediate Sector Outcomes). The outputs achieved by the road projects led to substantial outcomes, including coverage of 7% of the countrys total road network (16% of national roads, 3% of provincial roads, and 6% of access/feeder roads) during 19942004. Other quantifiable outcomes of Groups 1 and 2 projects included increased traffic counts, lower travel time, and lower bus passenger fares (due to reduced vehicle operating costs) (Table A4.1d, Appendix 4). It is too early to assess the outcomes of the Group 3 and Group 4 projects. But they are likely to handle growing amounts of traffic, improve market linkages, and reduce travel time. The airport projects outcomes were increased international flights, passengers, and freight (Table A4.1d, Appendix 4). 102. The following were key factors underlying the good performance in the road subsector: (i) Continuity: ADB and MCTPC were able to ensure unusual continuity of key officers over a long period of time. This not only fostered a close working relationship, but also permitted both sides to learn more about the operational and procedural aspects of the other. Well-designed projects: Each built upon the preceding ones to enhance its effects, starting off with the emphasis on the backbone (NR 13) of the countrys road network, then regionally targeted to connect to major provinces in the North, Northwest, and South. This has had significant effects on opening up isolated areas and enhancing economic opportunities overall. Some of the projects also complemented those of other funding agencies, such as the World Bank and the former Soviet Union. The GMS projects are expected to stimulate cross-border trade, tourism, and economic growth. Critical mass: A critical mass of 2,333 km of the countrys road network has been built/upgraded by ADB.

(ii)

(iii)

39 103. Given the substantial sector outcomes achieved, ADBs assistance to the transport sector is considered highly effective. 104. ADBs Contributions to Long-Term Impacts. Some of the quantifiable impacts of the Group 2 projects in Champasack province in the south included (i) increased provincial GDP per capita, (ii) increased agricultural income and consumption, (iii) increased number of SMEs, (iv) quadruple the number of hotel rooms, and (v) more than double the number of tourists (Table A4.1d, Appendix 4). 64 Coupled with the impacts of the projects in other groups, these contributed to the countrys progress in economic growth and poverty reduction. Although these impacts are not entirely attributed to ADB assistance, nor to the transport sector alone, ADB has been a major DP in the transport sector. ADBs contributions to the countrys achievement of these impacts are considered substantial (highly satisfactory). 105. Based on the findings above (combined with those in Appendix 4), the overall performance of the transport sector is rated as highly successful (Table 7). 5. Education Sector

106. ADBs Inputs. ADB lending to the education sector began with the Education Quality Improvement Project (EQIP-I) in 1991, followed by the Postsecondary Education Rehabilitation Project (PSERP, 1995), the Basic Education (Girls) Project (BEGP, 1998), and the Second Education Quality Improvement Project (EQIP-II, 2001). The first two projects have been completed and the other two are ongoing. ADB has been one of the major DPs in this sector, with the sector disbursements of 11% of total sector disbursements by all DPs combined during 20002003 (Table A4.1e, Appendix 4; and Table 4). 107. ADBs Outputs. The EQIP-I aimed to improve the quality of basic education through improving teacher education nationwide. There were two attached ADTAs. 65 The former succeeded in improving institutional capacity of the Ministry of Education (MOE), and the latter in improving teacher education. The EQIP-I was rated by the PCR as successful due to the achievement of various outputs as planned (e.g., developing preservice teacher training curriculum, upgrading eight teacher training colleges [TTCs], and providing teacher training) (Table A4.1e, Appendix 4). The PSERP aimed to improve the postsecondary education system to meet the skills requirement of the NEM. The attached ADTA 66 was successful in helping facilitate the issuance of the Prime Minister Decree to establish the National University of Laos (NUOL). The Project itself was rated by the PCR as highly successful due to substantial outputs and outcomes achieved. Major outputs were the establishment of the NUOL by amalgamating 10 postsecondary institutions and upgrading facilities; and provision of training to administrative and faculty staff (Table A4.1e, Appendix 4). 108. In 1998, the focus of assistance in the education sector shifted back to basic education through the BEGP, which aimed to improve access to and quality of primary education in 52 remote districts of 11 provinces, particularly for girls and ethnic minorities. Although it is ongoing, the CAPE Mission finds that the project has delivered many outputs (e.g., development of multigrade schools and construction of classrooms, and recruitment and training of teachers from ethnic minority groups) (Table A4.1e, Appendix 4).The attached ADTA (TA 3014) was successful, as it helped produce a 5-year Education Sector Development Plan, which was used
64 65

See details in the PPER of the Champassak Road Improvement Project (2005). Including (i) Institutional Strengthening of Ministry of Education, and (ii) Curriculum Development for Teacher Education (Table A3.3, Appendix 3). 66 Post Secondary Education Management Development (Table A3.3, Appendix 3).

40 as the basis for subsequent development of the countrys Long-Term Education Sector Strategic Vision (20012020). The ongoing EQIP-II (2001) aims to consolidate the activities initiated under the EQIP-I by improving access to and quality of basic education and strengthening institutional capacity of MOE. The quality aspect (i.e., teacher training) is nationwide, while the other aspects focus on 12 project districts in 6 provinces. Although it is too early to assess the project, the CAPE observes that that many outputs have been achieved (e.g., provision of teacher training, and construction of multigrade schools and classrooms) (Table A4.1e, Appendix 4). The EQIP-II has an attached ADTA (TA 3971), which provided management training, especially in decentralized education management. However, concerned MOE officials informed the CAPE Mission that the decentralized management practices recommended by the TA have not yet been implemented/institutionalized due to lack of funds. 109. Effectiveness (ADBs Contributions to Intermediate Sector Outcomes). Although the EQIP-I achieved many outputs, it did not have adequate links to school curricula, textbooks, or in-service training for school teachers and principals. These activities were transferred to the World Banks Education Development Project in 1997. In addition, it focused heavily on civil works of TTCs, rather than training delivery. Thus, its outcomes were limited to increased enrollment at TTCs and improved teacher education (Table A4.1e, Appendix 4). Links to the quality of school education are expected under the ongoing EQIP-II, the outcomes of which are too early to assess. The outcomes of the PSERP included increased university enrollment and rationalization. The ongoing BEGP has already generated favorable outcomes (e.g., increased access to and quality of primary education in terms of reduced dropout and repetition rates) (Table A4.1e, Appendix 4). The CAPE found that the outcomes of the project, however, have not been fully realized due to a scarcity of textbooks. Of the 43 sample schools surveyed, 16% had no Lao language textbooks at all, five had textbooks for all grade 1 students, and eight had one grade 1 textbook for every two students. 110. Overall, with the positive sector outcomes achieved so far, ADBs Country Program assistance to this sector is considered effective and evolving. 111. ADBs Contributions to Long-Term Impacts. The country achieved the following longterm impacts in terms of (i) increased adult literacy rate, and net enrollment rate and gross enrollment rate for basic education; (ii) decreased dropout and repetition rates, and proportion of untrained teachers (Table A4.1e, Appendix 4). These impacts are the result of the collective efforts of all DPs, with ADB being one of the major ones. ADBs contributions to these impacts are considered significant (satisfactory), but at the lower end of the range because much more remains to be done to realize the non-income MDG education targets by 2015. 112. Based on the findings above (combined with those in Appendix 4), the overall performance of the education sector is rated as successful (Table 7). 6. Health Sector

113. ADBs Inputs. ADB has taken the leading role in primary health care (PHC), with two projects provided--one completed (Primary Health Care Project [PHCP], 1995) and the other ongoing (Primary Health Care Expansion Project [PHCEP], 2000). ADB has been a key DP in this sector, with the sector disbursements of 10% of total sector disbursements by all DPs combined during 20002003 (Table A4.1f, Appendix 4; and Table 4). 114. ADBs Outputs. The completed PHCP aimed to carry out a pilot test of a PHC approach provided by trained health workers in a network of village level health centers in two provinces

41 and one district. Both the PCR and PPAR rated the project as successful because the testing of the PHC approach was successfully completed, and outputs envisaged at appraisal were achieved (e.g., construction of health centers and district hospitals, provision of equipment and training to health staff, strengthening of the drug revolving fund scheme, and development of a PHC policy and nationwide implementation of an integrated PHC system) (Table A4.1f, Appendix 4). The TA on Strengthening the Ministry of Public Health (MPH) was attached to the loan. It met the objective of improving MPHs management capacity for PHC delivery. The ongoing PHCEP (2000) aims to strengthen and expand PHC in eight northern mountainous provinces. The attached ADTA (Capacity Building for PHCTable A3.3, Appendix 3) aimed to further develop MOHs capacity for PHC development. The TA was successful, as it helped strengthen the PHC capacity of the Rural Development Division and established PHC coordination units in the project provinces to increase accessibility of health services for the poor and ethnic minorities. Although with initial delays, major outputs were achieved (e.g., improved facilities and networks of provincial/district hospitals and health centers, increased access to PHC at the village level, improved quality and management of health services, and better capacity to provide strong leadership for health planning and budgeting) (Table A4.1f, Appendix 4). 115. Effectiveness (ADBs Contributions to Intermediate Sector Outcomes). The outcomes of the PHCP in the two project provinces and one district included (i) increased access to PHC; and (ii) contributed to reducing the infant mortality rate and child mortality rate, and to increasing the coverage of fully immunized children (Table A4.1f, Appendix 4). For the ongoing PHCEP, the CAPE field visits to Xiengkhoung Province found that access to, and utilization of, PHC services have improved due to the expansion of the PHC network (including village drug kits managed by village health volunteers) to the village level. After introduction of the PHC services, there was a substantial reduction in the outbreak of common diseases such as malaria and diarrhea. Although the incidence of malaria is decreasing, it has remained the leading cause of morbidity and mortality across the Lao population of all ages. Nearly 90% of villages claimed malaria as a major problem. In sum, with the positive sector outcomes achieved so far, the Country Program assistance for this sector is considered effective. 116. ADBs Contributions to Long-Term Impacts. Based on available data from the Health Facility Survey and Household Survey (2003), the country has achieved the following impacts: (i) decreased infant mortality rate and maternal mortality rate, and (ii) increased contraceptive prevalence rate and child immunization rate (Table A4.1f, Appendix 4). These impacts are a result of collective efforts of all DPs, with ADB being a major one in PHC. ADBs contributions to these impacts are considered significant (satisfactory), but at the lower end of the range, because much more remains to be done to realize the non-income MDG health targets by 2015. 117. Based on the findings above (combined with those in Appendix 4), the overall performance of the health sector is rated as successful (Table 7). 7. Urban Development Sector

118. ADBs Inputs. ADB lending for urban development began with the Vientiane Integrated Urban Development Project in 1995, followed by the Secondary Towns Urban Development Project (STUDP, 1997), the Vientiane Urban Infrastructure and Services Project (VUISP, 2001), and the Small Towns Development Sector Project (STDSP, 2003). The first two projects have been completed, and the remaining two are ongoing. ADB has been a major DP in this sector. The disbursements for the urban development sector and water supply sector combined were

42 19% of total disbursements in these two sectors by all DPs combined during 20002003 (Table A4.1g, Appendix 4; and Table 4). 119. ADBs Outputs. The four projects have aimed at improving urban livelihood through upgraded basic infrastructure, improved sanitation, and consideration of the environment. While the first and third projects focused on Vientiane, the second focused on secondary towns and the fourth on small towns. The first project for Vientiane (Vientiane Integrated Urban Development Project, 1995) was assessed by the PCR as successful. Most of the outputs were largely, though not fully, achieved. The CAPE endorses the PCR rating, since the outputs achieved were substantial, despite the nonconducive institutional environment at that time and the cancellation of the whole sanitation component due to a lack of demand. The outputs included construction of drainage channels, networks, a solid waste management system, roads, and footpaths; and establishment of the Urban Development Administration Authority (UDAA) for Vientiane (Table A4.1g, Appendix 4). The other ongoing project for Vientiane (VUISP) includes citywide infrastructure improvements and village area improvements. Its physical work was observed by the CAPE Mission to be well under way. However, due to a shortage of counterpart funds, contractors have not been paid fully for the work done. This has led to delay in contract completion and lower than expected quality of construction. 120. The other two projects (STUDP and STDSP) are located in the provinces. The STUDP (1997) focused on the countrys four major secondary towns (Thakhek, Pakse, Savannakhet, and Luangprabang). It was completed, and a PCR is under preparation. The CAPE Mission found that most components were completed as planned. In Thakhek, for example, the facilities provided are of good construction standard and in good condition. The main exception is again the sanitation component, which failed to find acceptance among the target beneficiaries, despite the efforts of the community awareness and education component of the project. Some key informants pointed out to the CAPE Mission that there was not enough consultation with the local authorities and beneficiaries during project design and that some facilities were not fully appropriate. However, the project provided many outputs (e.g., reconstruction of some roads, footpaths, and flood embankments; protection of riverbanks; setting up solid waste sites; and establishment of the UDAAs in the four towns) (Table A4.1g, Appendix 4). The last project (STDSP, 2003), focusing on small towns, is just out of the start-up period. It consists of an urban infrastructure component, a village upgrading and livelihood component, and capacity building. Physical work has yet to start, but contracting bids have been opened for two towns and are currently being evaluated. The UDAAs have been set up in 10 project towns. 121. Three ADTAs (TA Nos. 2377, 2972, and 3331Table A3.3, Appendix 3) were attached to the projects in this sector to help establish the UDAAs and develop their capacity. The first TA was rated by a TCR as partly successful. Because the institutional environment was not conducive to the new system of urban administration, there was a lack of initial commitment by the Government. The other two TAs were successful in establishing the UDAAs in Vientiane, the 4 secondary towns, and the 10 small towns. Prior to this, urban areas were administered as part of the province, with no special budget or administrative structure. Now they have their own administrations, with the mandate to raise funds for O&M of urban infrastructure. 122. Effectiveness (ADBs Contributions to Intermediate Sector Outcomes). The major outcome achieved was the UDAAs ability to raise their own funds for O&M of urban infrastructure. Although the amounts generated are still less than what is needed (60% of the O&M requirement for the Vientiane UDAA), this is a significant achievement, given that the UDAAs were developed from a zero base. Another outcome is the institutionalization of the UDAAs through the passage of the Law on Local Administration, formulated under TA 3331.

43 Other measurable outcomes of the completed projects combined collected by the CAPE Mission include (i) access to improved urban environment increased to 33% of total urban population, (ii) reduced damage and destruction due to flooding, and (iii) increased number of businesses in the downtown urban areas (Table A4.1g, Appendix 4). Overall, ADB operations in the urban development sector are considered effective in achieving sector outcomes. 123. ADBs Contributions to Long-Term Impacts. The urban development sector is developing, with the proportion of the urban population having access to improved sanitation, increasing from 24% to 51% (19902002) (Table A4.1g, Appendix 4). This is one of the MDG indicators that should be increased further. This impact is a result of the collective efforts of all DPs, with ADB being one of major ones in the sector. Due to the large impact achieved, ADBs contributions to this impact are considered significant (satisfactory). 124. Based on the findings above (combined with those in Appendix 4), the overall performance of the urban development sector is rated as successful (Table 7). 8. Water Supply and Sanitation Sector

125. ADBs Inputs. ADB lending to the water supply sector began with the Southern Provincial Towns Water Supply Project in 1991, followed by the Rehabilitation and Upgrading of Vientiane Water Supply Project (1992); the Northern Provincial Towns Water Supply and Sanitation Project (NPTWSSP, 1993); and the Water Supply and Sanitation Sector Project (WSSSP, 1999). The first three projects have been completed, and the fourth is ongoing. ADB has been a major DP in this sector. The disbursements for the water supply sector and urban development sector combined were 19% of total disbursements in these two sectors by all DPs combined during 20002003 (Table A4.1h, Appendix 4; and Table 4). 126. ADBs Outputs. The Southern Provincial Towns Water Supply Project aimed to construct/upgrade water supply systems in four towns. It was assessed by the PCR as successful, but the PPAR rated it only as partly successful. The PCR focused on the outputs delivered in terms of construction of two new water treatment plants, and rehabilitation of the distribution networks and water mains (Table A4.1h, Appendix 4). However, the PPAR found that many of the intended outputs were not achieved: (i) at Sekong, the project facilities had not been used since 1995; problems were being remedied/reconstructed under the WSSSP; (ii) at Pakse, the project facilities were operating at 70% capacity, since only half of the town had been connected to the system; no remedial financing was available for additional connections; (iii) at Attapeu, the system only functioned during the wet season, but even then it did not supply potable water due to its high silt content; the Norwegian Agency for Development Cooperation provided a completely new system there; and (iv) in Saravane, the project facilities were operating as intended but only served 5,600 users. The CAPE endorses the PPAR partly successful rating of this project. 127. The Rehabilitation and Upgrading of Vientiane Water Supply Project aimed to rehabilitate and expand the reticulation system for Vientiane, and to construct transmission pipelines and three reservoirs. The PCR rated it as successful, mainly because of the large number of project beneficiaries. There is no PPAR for the project, but the CAPE Mission found that it had not achieved its intended output targets, although it delivered some outputs (Table A4.1h, Appendix 4). The CAPE regards the project as partly successful because (i) project facilities reached only about 60% of the planned service areas due to an underestimation of the amount of work to be undertaken, inadequate research design of the transmission component, and consequent underestimation of the cost of civil works; (ii) the reservoir component was

44 significantly reduced from three reservoirs to one; and (iii) the drainage component was dropped. To complete the originally intended project scope, financing was included under the ongoing WSSSP for an expansion of the reticulation system. This was, however, replaced and completed by Agence Franaise de Dveloppement (AFD) under parallel financing. 128. The NPTWSSP was designed to provide safe and dependable water to seven towns through the provision of water supply systems. The PCR rated the project as successful because of the outputs (construction/ rehabilitation of water supply systems) achieved (Table A4.1h, Appendix 4). The PPAR rated it as partly successful, because (i) the seven water supply systems were poorly designed and constructed; (ii) they entailed high O&M cost such that at least two of them may have to be abandoned due to the inability of the provincial water supply companies to maintain them; the other five continue to function, but at a high cost to the operating utility; (iii) although water sales were 86% of those estimated at appraisal, this figure masked a large degree of variationwater production in some towns exceeded the appraisal target by as much as 170%, while in others it was as little as 29%; and (iv) in none of the systems was the water bacteriologically safe to drink. The CAPE endorses the PPAR rating. Remedial works are badly needed for the five schemes to operate efficiently, but none has been provided to date. 129. The ongoing WSSSP is progressing well, with more than 80% of outputs completed, and is likely to exceed the appraisal targets (Table A4.1h, Appendix 4). It established the Water Supply Authority as the regulatory body for all water supply companies. One concern is the selection of subproject towns and the appropriateness of design. At one system (at Nam Bok in Khammuane Province) visited by the CAPE Mission, a well-constructed but expensive plant was supplying water to a rather small number of beneficiaries. Questions could be raised about the ability of the water utility to pay back the capital cost and continue to operate and maintain the scheme, while charging a fee affordable by most users. 130. Four ADTAs (TA Nos. 1606, 1787, 1987, and 4377Table A3.3, Appendix 3) were attached to the projects in this sector to develop the capacity of the Executing Agency (EA) Nam Papa Lao (Lao Water Supply Company). The first TA was assessed by a TCR and TPAR as partly successful, because the EA was initially very weak and the capacity development process took time. The remaining TAs were considered successful, since they were able to help strengthen institutional capacity of the Lao Water Supply Company and provincial water supply companies in terms of human resources, planning, water management, and financing capabilities. 131. Effectiveness (ADBs Contributions to Intermediate Sector Outcomes). One of the outcomes achieved from the combined lending and nonlending support was the success in turning provincial water supply companies into operating agencies independent from Nam Papa Lao, with their own income-generation capabilities. However, the outputs of the three completed projects suffered significant shortcomings, and the measurable outcomes achieved were much below appraisal targets (Table A4.1h, Appendix 4). Thus, ADB operations in the water supply sector are rated as less effective. 132. ADBs Contributions to Long-Term Impacts. The country doubled access to clean water supply, from 28% of the population to 52% (19902002) (Table A4.1h, Appendix 4). This is one of the MDG indicators for which more progress is needed to achieve the target. However, due to the deficient outputs and outcomes achieved, ADBs contributions to long-term impacts in the water supply sector are rated as modest (partly satisfactory).

45 133. Based on the findings above (combined with those in Appendix 4), the overall performance of the water supply sector is rated as partly successful (Table 7). B. Program Contributions to Achieving Intermediate Outcomes by Theme

134. This section assesses the effectiveness of the ADBs lending and nonlending operations in achieving intermediate development results/outcomes by theme. These themes in themselves constitute the three ADB pillars.67 1. Regional Cooperation

135. The GMS Program was initiated in 1992 between ADB and the governments of the six countries 68 through which the Mekong River passes. The Program aimed at achieving cooperation and accord among the six countries in planning and promoting subregional economic development, which is important in promoting economic growth. As the only member of the GMS that borders all of the other member countries, the role of the Lao PDR in GMS activities is both active and crucial. The Lao PDR participates in 9 of the 11 GMS Flagship Programs.69 During 19862004, ADB provided assistance under the GMS Program to the Lao PDR through both the lending (loans) and nonlending (RETAs) modalities. Of the 50 loans, 6 were under the GMS Program70 (1 in industry, 2 in energy, and 3 in transport), totaling $233 million (22% of the total loan amount). During this period, ADB also provided 74 GMS RETAs, accounting for about $60 million (Table A3.4, Appendix 3). The CAPE assesses the impacts of the RETAs and projects under the GMS Program in separate subsections below. 136. Outcomes of GMS RETAs. The impacts of key GMS RETAs71 were assessed in an OED IES on ADBs Program of Subregional Economic Cooperation in the GMS (1999). The 21 RETAs were selected from seven sectors: transport, telecommunications, energy, tourism, environment, HRD, and trade and investments. The findings indicated that the GMS Program during 19921999 provided member countries with the opportunity to develop a shared vision of future development of the region. It was most effective when it focused on activity-based initiatives to secure reforms and agreements on measures to reduce barriers inhibiting cooperation, which were a major distinguishing and widely appreciated feature of the GMS approach.72 ADB has funded important GMS infrastructure projects. Sustained high levels of participation in ministerial meetings signified strong ownership of the GMS process. Given the need for widespread consultations in reaching agreements and securing political approval from multiple governments for GMS activities, its overall progress was considered satisfactory.
67

For example, (i) the theme on regional (GMS) cooperation belongs to ADBs pillar 1 (pro-poor, sustainable economic growth); (ii) the themes on gender development, and environmental and ethnic minority concerns belong to ADBs pillar 2 (inclusive social development); and (iii) the themes on institutional capacity development and governance belong to ADBs pillar 3 (good governance). The sectors assessed in the preceding chapter can also be reclassified under these three ADB pillars as follows: (i) the ANR, energy, transport, and financial sectors belong to pillar 1; and (ii) the education, health, urban development, and water supply sectors belong to pillar 2. There is no specific lending assistance belonging to pillar 3 as pillar 3 generally cuts across sectors. To avoid repetition, the CAPE will not regroup these themes under the three ADB pillars and reassess them again. 68 Cambodia, Lao PDR, Myanmar, Thailand, Viet Nam, and Yunnan Province of PRC. 69 (i) North-South Economic Corridor, (ii) East-West Economic Corridor, (iii) Telecommunications Backbone and Information and Communications Technology, (iv) Regional Power Interconnection and Trading Agreements, (v) Facilitating Cross-Border Trade and Investment, (vi) Enhancing Private Sector Participation and Competitiveness, (vii) Developing Human Resources and Skill Competencies, (viii) Strategic Environmental Framework, and (ix) GMS Tourism Development. 70 See note d, Table A3.1 (Appendix 3). 71 Including 20 RETAs involving the Lao PDR (see note a, Table A3.4, Appendix 3). 72 This activity-based approach contrasts with the rule-based approach of other regional organizations, such as the Association of Southeast Asian Nations Free Trade Area, and WTO.

46

137. Despite the progress, the IES raised the following concerns: (i) lack of a strategic framework to guide the Program within limited financial and staff resources; (ii) lack of crosssectoral synergies; (iii) weak linkages between the GMS Program and national programs; (iv) poor national ownership at the project level in sectors other than infrastructure (although strong national ownership of the GMS process was felt at the ministerial level), largely because of inadequate stakeholder participation in project identification and design due to differences in capacity and resources across member countries; 73 (v) lack of effective institutional mechanisms for monitoring GMS projects and sharing information in a timely manner to facilitate regulatory and institutional reforms; and (vi) lack of clear distinction between what would be done most effectively at the regional level and at the national level. 138. Some of these concerns have subsequently been tackled in more recent RETAs, as two74 of them helped prepare a GMS strategic framework75 for 20012010. The framework was endorsed by the GMS Ministers during the 10th GMS Ministerial Conference in Yangon, Myanmar, in November 2001. It stressed a more multisectoral and holistic approach to increasing synergies across sectors, with five strategic thrusts: (i) strengthening infrastructure linkages through a multisectoral approach, (ii) facilitating cross-border trade and investments, (iii) enhancing private sector participation and its competitiveness, (iv) HRD, and (v) promoting sustainable use of shared natural resources with environmental protection. This framework was instrumental for the preparation of a 3-year rolling RCSP in 2004 and updated in 2005 to guide ADBs GMS operations. The RCSP strategic thrusts are in line with those of the CSPs for GMS member countries. A GMS Transport Sector Strategy was prepared in March 2005 as a guideline for transport investments in the GMS member countries over 20062015. In sum, the nonlending assistance under the GMS Program can be considered as effective, given the satisfactory progress so far, together with the efforts made in response to the IES key recommendations (e.g., concerning the formulation of the GMS strategic framework, RCSP, and RCSPU). However, more efforts are needed to address the remaining recommendations. 139. Outcomes of GMS Projects. Table A4.3 (Appendix 4) shows that six projects are under the GMS Program (two in energy, three in transport, and one in tourism ). The CAPE notes that the two hydropower projects (THHP and NLHP) have generated the combined outcomes in terms of electricity generation of 1,801 GWh per year, and export earnings of electricity to Thailand of $439 million (19982004) (Table A4.4, Appendix 4). The earnings will increase when the NT2 Project comes on board in about 5 years. Although the other two hydropower projects (XHP and NSHDP) were officially not part of the GMS Program, they also contributed to strengthening GMS ties with Thailand through electricity exports of $81 million (19912004). In the transport sector, the EWCP, although ongoing, has already stimulated trade with Viet Nam and Thailand and improved accessibility within the center of the country. Similarly, the improvement of transport linkages with the PRC, with the commencement of the North-South Corridor under the NECP has already spurred many new agriculture and commercial ventures in Luangnamtha Province, long before the road link itself is due to be completed. Even as a simple transit corridor between two countries, the Lao PDR stands to gain from services provided to traffic traveling along the road links and from enhanced accessibility. The Mekong Tourism Development Project just started and is expected to generate tourism-related income in the near future. In sum, the completed projects under the GMS Program have produced
73

For example, in the environment sector, weakness in Cambodias technical expertise reduced the effectiveness of subregional training, and insufficient financial resources limited the usefulness of interventions, especially in the installation of databases. 74 RETAs 5886 and 5961 for Promoting Subregional Cooperation among Cambodia, Peoples Republic of China, Lao PDR, Myanmar, Thailand, and Viet Nam (Phase IV, Year 1 and Year 2). 75 ADB. 2001. Building on Success: A Strategic Framework for the Next 10 Years of the GMS Program. Manila.

47 satisfactory outcomes, while the ongoing ones have strong potential to produce positive outcomes. This is especially so along the North-South Corridor, which runs through some of the poorest and more isolated parts of the Lao PDR. The recent signing by all member countries of the GMS Cross-Border Transport Agreement to improve the regulatory framework will help facilitate the achievement of expected outcomes. Thus, ADBs GMS operations are considered significant (satisfactory). 2. Gender Development and Ethnic Minority Concerns

140. ADBs Country Gender Strategy for the Lao PDR76 provides an overview of past gender initiatives and finds that the recommendations contained in the 1996 Country Briefing Paper on Women, which outlined a comprehensive gender strategy, were being followed. ADB made efforts to mainstream gender in some ongoing loans, such as BEGP, EQIP-II, and PHCEP. EQIP-II includes a specific gender and ethnic minority strategy. Gender strategies are also incorporated in the DIDMSP, the Nam Ngum River Basin Development Sector Project, the Northern Community-Managed Irrigation Sector Project, the VUISP, and the STDSP. Gender concerns are being addressed in the EWCP and the NECP. Several ADTAs and poverty reduction grants associated with these projects are aimed at gender development.77 However, most of these initiatives are recent, and it is too early to assess their outputs or outcomes. 141. The only completed gender-related ADTA to date was on Capacity Building of the Lao Womens Union. It is considered only partly successful due to misunderstanding by the EA of the intent and content of the TA and a general lack of ownership. Thus, the main output (National Gender Action Plan) was not achieved. The poverty reduction grant associated with the CMISP seems to have had a degree of success in providing income-earning opportunities for women of ethnic minority groups and helping them participate in decision-making activities. In ongoing loans that address gender, the CAPE Mission found some positive gender outcomes, although not entirely attributable to ADB assistance alone. These outcomes from the ongoing BEGP are summarized in the results matrix for the education sector (Table A4.1e, Appendix 4). In the health sector, the ongoing PHCEP includes prioritized actions to address gender issues. The CAPE field visits to Xiengkhouang Province found that many female PHC workers are being trained and that access to PHC, which has benefited mostly women, increased from 41% of villages in the eight project provinces to 81% (20022004). 142. The two health projects and two ongoing education projects directly targeted ethnic minorities in northern provinces. The outcome of the completed PHCP was increased PHC access for 0.5 million mountainous people in project provinces (20002004) (Table A4.1f, Appendix 4). Under the ongoing PHCEP, many ethnic minorities are being trained as village health volunteers to expand PCH access in remote mountainous areas. The BEGP increased enrollment of girls, most of whom are ethnic minorities in project provinces. 143. Overall, ADBs operations in gender development and ethnic minority concerns are considered significant (satisfactory).

76 77

ADB. 2004. Lao PDR: Gender, Poverty, and the Millennium Development Goals. Manila. These include the ADTA on Study of Gender Inequality in Women's Access to Land, Forests, and Water; and the Japan Fund for Poverty Reduction grants associated with the Community-Managed Irrigation Sector Project and with the Nam Ngum River Basin Development Sector Project.

48 3. Environmental and Social Concerns

144. The Country Programs started to address environmental and social issues in the early 1990s through some ANR projects78 to change upland cropping patterns, improve land use, increase rural incomes of ethnic minorities in hill areas, and support integrated water resources management. Two projects in the energy sector (THHP and NLHP) generated negative environmental and social impacts more severe than originally expected in the environmental impact assessment (EIA) studies. Such adverse impacts of projects involving dams have been highlighted by some vocal international NGOs. These impacts included the loss of cultivated land, displacement of people, disruption of transport links, riverbank erosion, and fishery loss. Long-term mitigation actions are now being undertaken in THHP by the Theun Hinboun Power Company. Since NLHP is located within the Phou Khoa Khouay National Biodiversity Conservation Area (PKK Park), environmental remedial actions will be supported by the Environmental Protection Fund under the ongoing ADB-financed Environmental and Social Program (ESP). 79 The degree to which actions based on the PPAR recommendations 80 are undertaken needs to be carefully monitored (see para. 89). 145. Direct assistance in environmental concerns was provided through some ADTAs 81 to strengthen the EIA capacity at MCTPC; EdL; and the Science, Technology, and Environment Agency (STEA). Environmental coordination is a responsibility of the STEA, a rather weak and ancillary agency with no real enforcement power. These TAs were able to deliver the expected outputs (e.g., staff training, preparation of frameworks/plans for environmental management, and regulations). However, outcomes in terms of institutionalizing the EIA capacity in these agencies were not achieved. Concerns about environmental sustainability and social diversity seem to be driven by DPs, including NGOs. ADBs most direct and ambitious environmental and social initiative was the ESP, approved in 2001. This complex, multisectoral program loan aimed to (i) support the Governments policy reform agenda for improved environmental management and social safeguards, with wide-ranging policy measures; (ii) implement transport and energy sector planning within an area-based framework; and (iii) establish an Environment Fund as a sustainable financing mechanism for environmental and social protection activities. However, the ESP suffered from a 2-year delay in the release of its second tranche due to the complexities of many required conditionalities, and the time needed to formulate the comprehensive social safeguards and mitigation measures for the NT2 Project. 82 The third tranche is expected to be released in June 2006. Outcomes of the ESP are yet to be achieved.

78

Including the Industrial Tree Plantation Project (1993); the Community-Managed Irrigation Sector Project (1996); the Shifting Cultivation Stabilization Project (1999) (Table A3.1, Appendix 3); and the following ADTAs: (i) Nam Ngum Watershed Management (1996), (ii) Institutional Strengthening of the Water Resources Committee (1998), and (iii) Implementation of the Water Sector Action Plan (Table A3.3, Appendix 3). 79 EdL is considering allocating a percentage of revenue from all hydropower projects to this Fund. 80 Including (i) preparing an action plan to resolve the environmental issues; (ii) preparing a fisheries and water quality monitoring study, together with an action plan; (iii) preparing a water quality report and communicate to the villagers; and (iv) evaluating water supply conditions of the affected villagers. 81 Including (i) Strengthening Environmental and EIA Capacity (1995); (ii) Capacity Building for Environmental and Social Management in Energy and Transport (2001); (iii) Strengthening Social and Environmental Management Capacity in the Department of Roads (2000); and (iv) Poverty Reduction Through Land Tenure Consolidation, Participatory Natural Resources Management, and Local Communities Skills Building (2004) (Table A3.3, Appendix 3). 82 Including $90.5 million, consisting of $31.5 million for watershed management, $16.0 million for downstream mitigation up to the end of the concession period, and the remaining for resettlement. These have included extensive studies and the formulation of mitigation measures for environmental and social impacts (e.g., biodiversity offset and conservation; social mitigation, compensation and livelihood restoration; study of cumulative and regional impacts, including impact on downstream riparian areas of the Mekong river; and the implementation of these measures during project construction and operation).

49 146. Given the underachievement of outcomes and negative environmental and social impacts generated by some hydropower projects, the performance of ADB operations in the area of environment and social concerns is rated as modest (partly satisfactory). 4. Institutional Capacity Development

147. After a long period of administration under the centrally planned regime, the Lao PDR was left with an inefficient public institution and civil service system. Considerable powers have been retained by provincial authorities, with the civil service functioning as the administrative arm of the ruling party. The situation was aggravated by limited human resources and minimal financial resources for recurrent expenditure, including salaries for civil servants. Both the 1991 and 1996 Country Strategies recognized the need to develop institutional capacity 83 of the countrys public agencies early in the transition period. This was reflected in the Country Programs lending and nonlending assistance. In the lending case, since capacity development cuts across sectors, it was provided as a component of many loans and through attached ADTAs. In the nonlending case, it was provided as standalone ADTAs when it was not sector specific, such as in the areas of macroeconomic planning and management, aid monitoring, statistics, and poverty M&E capacity.84 These included 11 ADTAs for $3.9 million (6% of the total ADTA amount over 19862004) (Table A3.3, Appendix 3). These aspects of capacitybuilding assistance are assessed in two subsections below. 148. Sector-Specific Lending Assistance. OEDs recent SES on Capacity Development Assistance to the Lao PDR85 assessed the performance of ADBs capacity building assistance through both loans and associated ADTAs. According to the SES, many of the ADTAs associated with project/program loans were rated by TCRs/TPARs as successful. The reason was mainly because the capacity had been developed, although without a consistent pattern or comprehensive coverage. However, in the financial sector, most of the associated ADTAs were found by the TPAR and SES to be partly successful or unsuccessful. The main reason was that it was too early in the transition from a centrally planned economy to attempt such a degree of capacity development reforms when the Governments commitment and financial resources were not clear. One notable exception pointed out by the SES was the achievement of capacity development in the urban development sector, in which its institutions had to be developed from a zero base. There was no existing institution focused exclusively on urban development at the time ADB began its operations in that sector. The outcome achieved in this case was functioning UDAAs in Vientiane and the major secondary towns, which is also confirmed by the CAPE findings (para. 119). Except for this case, the SES pointed out several pitfalls in the capacity development assistance that deterred/prevented achievement of expected outcomes. Some of them included (i) capacity substitution focus, rather than development, wherein consultants were hired to help implement a project, develop sector plans/policies and training programs, and provide training without adequate interactions to create ownership and skills transfer to the intended EAs; and (ii) lack of continuity, with one-off assistance.

83

A useful operational definition of capacity development is the process by which individuals, organizations, institutions, and societies develop abilities (individually and collectively) to perform functions, solve problems, and set and achieve objectives (UNDP, 1997). In addition to these two aspects (improvement of individual skills, and improvement of overall organizational capacityin both internal management and services delivery), the definition of capacity development should also be broad enough to cover two more aspects, including improvement of interrelationships between entities, and provision of an enabling environment through policy and legal reforms for addressing cross-sectoral issues. 84 Standalone ADTAs for capacity development to improve governance and gender are assessed under the subsections on governance and gender, respectively. 85 ADB. 2004. Special Evaluation Study on Capacity Development Assistance to the Lao PDR. Manila.

50 149. The CAPE findings confirm those of the SES, indicating that the capacity development assistance provided through many loans and associated ADTAs across sectors was generally able to make some contributions to enhance the capacity of government and quasi-government agencies, but overall capacity remains low. The successful completion of the projects in the irrigation, energy, transport, education, health, and urban development sectors points to an improved capacity of the EAs at least to implement projects. The independent operations of EdL, the Vientiane UDAA, several provincial water supply authorities, and the irrigation water user associations (which were improved under the CMISP) point to an improved capacity to operate and maintain project-supplied infrastructure. The CAPE also observed that capacity development was most successful with adequate and continued support from ADB as well as with government ownership.86 150. Standalone ADTAs. the capacity building assistance was more successful in achieving outputs (e.g., plans formulated, reports done, and individual staff trained) than outcomes (e.g., skills transfer and institutionalization, and improved management systems to deliver services more effectively, conducive to results-based performance). An exception was the two TAs87 to improve the capacity of the Department of International Cooperation of the Ministry of Foreign Affairs to produce/monitor foreign aid data. Both TAs were successful, mainly because the key outputs were delivered (e.g., establishment of the Aid Coordination System by the first TA, and preparation of a foreign aid report and provision of training by the second TA). The CAPE Mission found that outcomes (e.g., strong ownership and skills transfer) were achieved in the second TA. These resulted in the EAs commitment to produce foreign aid reports on an annual basis, which provided useful data for budgeting and planning preparation. 151. In other cases, however, government ownership/commitment was relatively weak as was ADBs TA management and supervision. Three ADTAs88 were provided to the National Statistics Center (NSC) for strengthening the countrys statistics and poverty M&E capacity, which are important aspects of MfDR. The CAPE found that while both TAs delivered the outputs (e.g., individual staff trained, surveys conducted, and reports prepared), outcomes in terms of overall institutional strengthening were not achieved due to the focus on training at the individual level without emphasizing overall organizational improvement and creating NSCs demand for or commitment to improvement. For example, the data collected under the second TA disappeared, reportedly through a computer crash. Moreover, both TAs focused more on statistics capacity (e.g., collecting and reporting poverty data), and less on M&E capacity (e.g., tracking the progress of poverty reduction and preparing adjustment mechanisms when something goes wrong). The CAPE observes that the expertise of NSC staff lies mostly in data collection and statistical analysis. To strengthen their capacity in poverty assessment and M&E, more rigorous and relevant training should be done and institutionalized. 152. The third TA, which was approved in December 2004 to further strengthen NSCs capacity, just started implementation in August 2005. However, the CAPE finds that there is another agencythe Division of Poverty Eradication (DPE), also under the Committee for Planning and Investmentwhose function (poverty reduction planning and implementation) is also relevant to poverty M&E. DPE should have been included in the TA design stage for close collaboration with NSC to strengthen the countrys poverty M&E capacity. Based on these findings, the institutional capacity performance in this area is considered modest. Most TAs
86

Capacity building assistance was successful in the urban development sector because it included a series of ADTAs amounting to $1,800,000 over a period of 5 years (19951999) associated with a series of projects. 87 Including (i) Establishing an Aid Coordination and Monitoring System, and (ii) Strengthening the Capacity of Aid Coordination and Monitoring (Table A3.3, Appendix 3). 88 Including (i) Participatory Assessment of Poverty in the Lao PDR, (ii) Participatory Poverty M&E, and (iii) Institutional Strengthening for Poverty M&E (Table A3.3, Appendix 3).

51 were implemented through specially created project implementation units, rather than normal government structures. Although this was more practical in a situation of fragile government structures, it did not help institutional capacity development.89 In effect, it gave more weight to the immediate objectives of facilitating, monitoring, and supervising resource flows than to the intermediate objective of developing capacity. 153. Overall, based on the findings assessed above, ADB operations in institutional capacity development, including poverty M&E capacity as part of the countrys MfDR capacity, are rated as modest (partly satisfactory). Although the TAs were successful in achieving outputs, in most cases outcomes were not achieved. 5. Governance and Corruption

154. The Government recognized the problem of corruption for the first time at the Fourth Party Congress held in 1986, when the central planning system was blamed for the deficiencies in the state management. New opportunities for corruption emerged as economic reforms started to take hold in the 1980s.90 The Government has taken steps to address corruption since 1993, including (i) issuing a decree91 designating roles of the Party Control Committees to fight corruption at all levels (central, provincial, local, and ministerial) in 1993; (ii) forming a Central Task Force on Corruption in 1993; (iii) establishing/strengthening the State Audit Organization in 1998, and the State Inspection Authority as the new anti-corruption body in 2001; (iv) issuing the Anticorruption Decree92 in 1999 to reduce petty and grand corruption; and (v) preparing a policy framework addressing governance issues and discussing it in a governance roundtable meeting, 93 organized by the Government and UNDP in 2003. The framework focused on four reform areas: public service improvement, peoples participation, rule of law, and sound financial management. A follow-up roundtable meeting 94 was held in 2004 to report on the progress of implementation and identify factors contributing to corruption. These included (i) incomplete legal framework; (ii) inconsistent understanding among government staff of policies and their responsibilities; (iii) unclear decentralization systems;95 (iv) limited capacity in public administration; and (v) inadequate organizational systems, characterized by low salary scale which tended to induce corruption. In 2005, the laws on anticorruption measures were adopted by the National Assembly. Despite these efforts, corruption remains a major problem, which, if not addressed, will seriously retard the development of the Lao PDR. The Governments draft new Sixth Plan (20062010) pointed out that about half of the tax revenue was lost due to corruption in the public service. Thus, the countrys priority areas for reducing corruption would be to improve accountability, transparency, and integrity. 155. At the corporate level, ADBs Medium Term Agenda and Action Plan for Promoting Good Governance (2000) identified four pillars of good governance--accountability, participation,

89 90

ADB, 2004. Special Evaluation Study on Project Implementation Units. Manila. C. Wescott in J. Rabin, ed. 2005. Encyclopedia of Public Administration and Public Policy. Marcel Dekker, Inc. New York. 91 The decree stipulated that all citizens have the right to sue and provide information to battle corruption. 92 Corruption was defined as the endemic abuse by some groups and individuals, who intentionally misuse their authority, positions, and power to steal public assets; accept illegal fees or bribes; and disobey rules, regulations, and laws in order to benefit themselves, their families, relatives, cronies, and partners. 93 Lao PDR. 2003. Public Sector Reform, Peoples Participation, Rule of Law, and Sound Financial Management. Background Paper on Governance, Priority Areas for Governance Reform: Roundtable Process. Vientiane. 94 Lao PDR. 2004. Implementation of Priority Areas of Governance Reforms, Progress Report, Governance Round Table Meeting. Vientiane. 95 Decentralization measures were introduced in 20002001. Since financial management was devolved to provinces and districts, provincial authorities failed to remit taxes and duties collected locally to the national treasury.

52 predictability, and transparency.96 Progress with these four pillars was considered in ADBs AntiCorruption Policy (1998) as an effort to combat corruption. The policy had three objectives: supporting competitive markets and efficient and transparent public administration, supporting promising anticorruption efforts on a case-by-case basis, and ensuring that ADB projects and staff adhere to the highest financial and ethical standards. The update of ADBs Anti-Corruption Policy (2004) refined the definition of corruption to include corrupt practice, fraudulent practice, collusive practice, and coercive practice. 156. At the CSP level, although governance and corruption issues were not explicitly addressed in the 1996 Country Strategy for the Lao PDR, they had been addressed in the Country Program since the mid-1990s through an ETSW to prepare a governance policy paper97 and a series of 10 nonlending ADTAs. These TAs accounted for $5 million (7% of all ADTAs during the 19862004) (Table A3.3, Appendix 3). Most of them focused on the accountability pillar, mainly by improving fiduciary arrangements (in procurement, audit, accounting regulations, and public expenditure management). These are consistent with the countrys governance priority areas, and also emphasized by the COMPAS as important areas in improving MfDR at the country level. Governance issues were also indirectly addressed through lending assistance in some sectors, especially the financial sector.98 157. For the nonlending assistance, which directly addressed governance issues, two TAs99 were provided in the area of procurement. The first TA was assessed by a TCR as successful mainly in terms of meeting its outputs, such as establishment of the Procurement Monitoring Office (PMO) within MOF; provision of training on procurement matters; and preparation of national procurement rules and regulations, model bidding documents for local competitive bidding, standard bid evaluation reports, and contract documents for supply of goods and services. The second TA also achieved its outputs, as it provided start-up assistance to the PMO in various procurement activities. But it was rated by a TCR as partly successful due to the lack of government ownership. Expected outcomes in terms of increased transparency of procurement activities could not be sustained. The CAPE agrees with the TCR assessment finding that the PMO virtually disappeared for a while before the World Bank stepped in to provide additional assistance. The lack of government ownership resulted partly from lack of continuity in the ADB assistance, as there was a gap of almost 3 years between the two TAs,
96

Specific action areas for (i) accountability includes public expenditure management, public enterprise management, public sector management, and civil service reform; (ii) participation includes decentralization, the public-private sector interface, and cooperation with NGOs; (iii) predictability includes rule of law and legal frameworks for PSD; and (iv) transparency includes disclosure of information. 97 ADB. 1995. Governance: Sound Development Management. Manila. 98 Under the lending assistance, governance issues were mainly addressed in the three financial sector program loans. Weak financial sector governance has been a major cause inhibiting the enforcement and implementation of prudential regulations. These loans required changes in policies and legal and regulatory frameworks to upgrade SCBs operations to best banking practice standards, thus encouraging expansion of private banking operations and private enterprises. This kind of assistance is consistent with one of the four ADBs governance pillars--the predictability pillar. However, the two completed financial sector program loans failed to solve this governance issue. For example, although the existing six SCBs were consolidated into two, in reality, they are still under the BOL control and acting largely like a BOL extension. BOL itself is not independent from the Government as most of their monetary policies and activities still need MOFs approval. Such a lack of SCBs autonomy had incurred heavy financial burden and high NPLs to them through large policy lending (both directed and connected lending) provided to government agencies and SOEs. This, in turn, deterred them from being privatized. However, the ongoing BSRP loan started to take this and other governance issues (e.g., putting in place anti-money laundering and combating the financing of terrorism policies and procedures within the banks) seriously. Signing the Governance Agreements for the two SCBs and the APB was imposed by ADB as one of the actions required of the Government before ADBs further implementation in the sector. 99 Including (i) Preparation of National Procurement Regulations for the Public Sector, and (ii) Institutional Strengthening of the Procurement Monitoring Office-Phase II (Table A3.3, Appendix 3).

53 and partly from weak commitment by the Government. The PMO is an example of an institution that can be kept going only by external resources. The involvement of two funding agencies in this case does not mean that there was duplication in effort. Rather, the problem was the lack of coherent/systematic assistance by the funding agencies involved. 158. In the area of audit, two TAs100 were provided. While there was no TCR for the second TA, a TCR for the first rated it as highly successful, since most of the expected outputs were achieved (e.g., establishing the National Audit Office [NAO], providing training to staff, and preparing the NAO strategic plan). The CAPE finds that the second TA also achieved most of its expected outputs (e.g., improving the regulatory and institutional framework for state audits, and conducting audits of some SOEs and externally assisted projects). The picture on outcomes is less encouraging, as NAO is critically constrained by the small size of its budget that threatens its sustainability and viability. Only 10 auditors are available for project audits. One auditor is contemplating a move to the private sector, which would increase her salary101 tenfold. 159. In the area of accounting regulations, two TAs102 were provided, one of which is ongoing. The completed one was assessed as highly successful by a TCR, because most of the expected outputs were delivered (e.g., establishing a workable and sustainable accounting framework and systems for recording and reporting government recurrent budget transactions, developing an accounting software in the Lao language, and improving staff capacity). Outcomes in terms of the full treasury system remain to be achieved, with the Government securing full information and control over its revenuescentral as well as provincial. 160. In the area of public expenditure management, three TAs103 were provided. The first one was assessed by a TCR as partly successful because the Committee on Planning and Investment (CPI), formerly the State Planning Commission, was never convinced of the need for a Public Investment Program nor appreciated the usefulness of the linkages to the annual budget. The TCR criticized the top-down approach of ADB in failing to discuss the planning tools with CPI senior officials and to convince them of their usefulness. Thus, CPI saw no benefit of any follow-up to this TA. Yet, there was a follow-up, but it was not assessed by any TCR. However, the CAPE finds that the follow-up TA learned the lessons of the first one. Strong commitment from CPI was obtained, and the Public Investment Program was developed. Another follow-up TA was prepared and assessed by a TCR as successful, mainly because a training manual was produced, and relevant CPI staff were trained in planning exercises. Considering the three TAs altogether, the CAPE finds that the main outputs were generally achieved, especially the preparation of the medium-term expenditure framework linking annual budget to investment priorities to ensure a disciplined and transparent budget process. The expected outcome of this process would be sufficient budget to implement priority programs. In reality, however, the CAPE finds that these priorities were set in the Governments NGPES (launched in 2003) separately from the Fifth Medium-Term Plan (20012005), and that not all priorities were supported by the budget. 161. One way to deal with this problem is to integrate the two plans into a single one to be supported by one budget, which has recently been done in the Sixth Plan (20062010). Another way is to further improve the countrys public financial management capacity in a coherent
100

Including (i) Establishing the National Audit Office, and (ii) Institutional Strengthening of the National Audit Office (Table A3.3, Appendix 3). 101 On average, an auditor earns about $50 or less per month. 102 Including (i) Enhancing Government Accounting Regulations and Procedures, and (ii) Enhancing Government Accounting Regulations and Procedures-Phase II (Table A3.3, Appendix 3). 103 Including (i) Strengthening Economic and Financial Management, (ii) Public Investment Program, and (iii) Institutional Strengthening of Public Investment Management (Table A3.3, Appendix 3).

54 manner. Joint efforts has just started with the World Bank under the NT2 Project to prepare the Public Expenditure Management Strengthening Program as a framework to effectively improve governance and reduce corruption by pooling external resources, in a phased manner. It will take time before the outcomes of improved public financial management capacity, which is an important part of accountability and transparency as well as MfDR capacity, could be achieved. 162. However, given the weak governance/fiduciary management outcomes achieved so far (especially in the areas related to the countrys MfDR capacity--procurement, audit, and public expenditure management) and the limited efforts to directly engage in anti-corruption assistance, the overall performance of ADB operations in improving governance and MfDR capacity is rated as modest (partly satisfactory). C. Program Contributions to Achieving the Country Strategy Objective of Poverty Reduction

163. Although the priority areas of the three periods of the Country Strategies were phrased differently, they overlapped and reflected the three ADB strategic pillars under the PRS. These pillars are (i) pro-poor, sustainable economic growth (through PSD, GMS integration, and rural development and market linkages); (ii) inclusive social development (through HRD and environmental management); and, to a lesser extent, (iii) good governance (through institutional and policy reforms). Thus, these ADB pillars can be regarded as the priority areas (secondorder objectives) of the combined three periods of the Country Strategies, while poverty reduction is regarded as their overriding (first-order) objective. Logic models are used to group the loans and ADTAs by sector under the three second-order objectives and the overriding poverty reduction objective of the overall Country Strategies (Figures A4.7 and A4.8, Appendix 4). Since the Country Strategies overriding objective of poverty reduction is the same as ADBs overarching objective, in effect, this section assesses the overall performance of the Country Programs in achieving ADBs overarching objective of poverty reduction. 164. It was found that the outcomes in the two major sectors (energy and transport) were achieved with large critical masses (e.g., generating $520 million of energy exports and improving more than 2,000 km of the countrys total road network over the past decade). These were considered as one of the contributing factors to the countrys achievement of the annual economic growth of 6% over the past decade, and the progress in poverty reduction from 48% in 1990 to 33% in 2003 (Tables A4.1cd, Appendix 4). VI. RESULTS ACHIEVEMENT: TOP-DOWN ASSESSMENT OF LONG-TERM DEVELOPMENT IMPACTS AND THE MILLENNIUM DEVELOPMENT GOALS

165. This chapter assesses the countrys achievement of long-term development results/ impacts104 from the top down, linked to ADBs contributions to the achievement of intermediate results/outcomes assessed from the bottom up in the preceding chapter. The impacts of exogenous factors are also examined. The countrys challenges are assessed to determine whether its prospects for achieving the MDGs are within reach or not.

104

These impacts are an additional evaluation criterion (separately from the effectiveness criterion), because they are longer-term results at the country level, influenced mostly by the combined efforts of all DPs. The effectiveness criterion focuses on intermediate sector/thematic outcomes generally achieved prior to impacts.

55 A. Program Contributions to The Countrys Achievement of Long-Term Impacts

166. At the country-wide level, the Lao PDR achieved a reasonably high economic growth rate, averaging 6% over the past decade. Growth accelerated after the Asian financial crisis from 4.0% in 1998 to 6.9% in 2004. Although the countrys poverty incidence remains high, progress was made in poverty reduction, from 48% in 1990 to 39% in 1998 and 33% in 2003. The economic growth and poverty reduction impacts resulted from joint efforts of the Government and all DPs. However, ADB can be considered as playing an important role given that it was the second largest DP after Japan. ADBs contributions were particularly evident in the sectors where critical masses were established (e.g., energy and transport). The outputs and outcomes achieved from a series of the continued transport projects contributed to an opening up of previously unreachable areas by financing the improvement of 7% of the countrys road network, facilitated GMS cross-border trade and tourism, and increased provincial GDP per capita (Table A4.1d, Appendix 4). Similarly, the outputs and outcomes of the energy projects contributed to tripling the countrys electricity generation capacity and increasing energy exports (Table A4.1c, Appendix 4). Improving physical infrastructure on a large scale such as in these two important sectors was a necessary, though not a sufficient, condition to accelerate economic growth. However, despite the positive impacts achieved, the Lao PDR is still faced with formidable challenges in terms of weak governance and public financial management--both on the expenditure side (imbalance between capital and recurrent budget, and nontransparent budget allocation) and the revenue side (insufficient revenue mobilization from taxes and other sources); non conducive investment laws and climate; and debt overhang. Thus, ADBs contribution to the countrys performance from the top down is regarded as modest (partly satisfactory). B. Exogenous Factors

167. Over the past decade, the Lao PDRs macroeconomic performance was adversely affected by exogenous shocks. The ANR sector was affected by severe droughts in 1987 and 1988. The country was hard hit by the 1997 Asian financial crisis and its aftermath due to its economic interdependence with Thailand. The crisis triggered a sharp fall in Lao exports to Thailand and a sharp fall in FDI from Thailand. Coupled with the countrys weak macroeconomic position--on both the fiscal and monetary fronts--the Lao currency collapsed, resulting in tripledigit inflation in 1999 (134%), before reducing to 8% in 2000 and increasing to double digits of about 12% per annum during 20022004. The growth of broad money supply (M2) almost doubled after the crisis in 1998 (to 113%) before averaging 23% during 20022004. The economy was also adversely affected by the regional outbreak of the SARS in 2003. However, there was a recovery in tourist arrivals in the first half of 2004, which were 30% higher than the year-earlier period, when the industry was struck by the impact of the SARS outbreak. C. Countrys Challenges and Prospects: Future within Reach?

168. While the ADBs Country Strategies and Country Programs were generally successful in developing critical masses and delivering some outcomes, which contributed to improving the countrys economic growth and poverty reduction, much more remains to be done. The new Sixth Plan (20062010) emphasizes improvements in public financial management, the FDI environment, the services sector, and corruption control as the key stimulants to economic growth and poverty reduction. The countrys greatest challenge ahead is how to raise sufficient revenues and spend them efficiently in priority areas. Improving public financial management and governance are urgently needed--both on the expenditure side (more balance between capital and recurrent budgets, and more pro-poor budget allocation) and the revenue side (improving tax collection system and introducing a value-added tax). The World Banks

56 projections show an average GDP growth of 56% in 20062015 (versus the Sixth Plans target of 7.07.5% and the ADBs projections of 6% in 20062007) 105 under the base case-plus scenario. This scenario is the most likely one, with resource flows from the NT2 Project. The flows can contribute significantly to public revenues, as they are projected to grow from the current level by 50% in 20062010 to nearly double by 20112015.106 The poverty reduction target of 24% by 2015 seems to be within reach, but the attainment of the non-income MDGs lags behind. 169. The extent of the contributions of these resource flows to public revenues will depend largely on governance and on monetary and fiscal discipline. While the resource flows are likely to contribute significantly to public revenues, their direct contributions to economic growth are projected to be relatively small, peaking at 1.8% in 20062010 for the base case-plus scenario before gradually declining afterwards. This indicates the need to increase revenues from other sources. In the long run, economic growth will need to rely on the strength of the three core sectors (agriculture, industry, and services). While the agriculture sector accounts for about 50% of GDP, it lacks efficiency, commercialization, and diversification (rice accounts for about 40% of agriculture value added).107 The same holds in the industry and services sectors (food and beverages account for about 80% of manufacturing value added, and wholesale and retail trade for about 40% of total services). This situation increases the vulnerability of the economy to exogenous forces. Substantial reforms are needed to make these sectors operate more efficiently and effectively, particularly in view of the fact that the country is in the process of accession to WTO. Most urgently needed reforms relate to the banking and enterprise areas to improve the overall investment/reinvestment climates, as well as the rule of law and regulations conducive to PSD (both FDI and SMEs), and employment generation. 170. While the income poverty-reduction target seems to be within reach (24% by 2015), more efforts are needed to enhance the impacts of economic growth on the non-income MDGs. This will require improving governance and institutional capacity (at the national, provincial, and district levels) to deliver public services more efficientlynot only to raise household incomes, but also to create the demand-side impacts on the non-income MDGs (improved education and health). ADBs future CSP should address these challenges to help make the attainment of the income and non-income MDGs within reach. VII. PROGRAM IMPLEMENTATION: ASSESSMENT OF EFFICIENCY

171. This chapter assesses the performance of the Country Programs in terms of efficiency in resource utilization by assessing various aspects of portfolio performance of ongoing loans and other implementation issues. A. Project Performance Rating

172. As of 31 December 2005, ADBs loan portfolio for the Lao PDR consisted of 22 ongoing public sector loans, 21 of which are from ADF and one from the ordinary capital resources. The net loan amount was $455 million. There were also 10 PPTAs and 21 ADTAs ongoing in the TA portfolio for the Lao PDR, totaling $19.5 million. Considering TA resource utilization, Table A3.2, footnote a (Appendix 3) shows that one PPTA (Nam Ngum 500 kilovolt Power Transmission) did
ADB. 2006. Asian Development Outlook: 2006. Manila. In addition to the NT2 Project, the expected revenue increase will come from the Sepon gold-copper mine, rising from a negligible level to around KN300 billion after 2011. 107 The rain-fed rice crop accounts for about 75% of the total crop due to limited irrigation. Other major crops are maize, coffee, sugarcane, tobacco, and peanut.
106 105

57 not lead to a loan, mainly because of the lower power demand in Thailand during the late 1990s following the Asian financial crisis. Private power developers were facing difficulties in negotiating power purchase agreements and in raising funds. Since only 1 of 54 PPTAs did not result in a loan (2.3% in value terms), the PPTA resources can be said to have been utilized efficiently. 173. As of 31 December 2005, the PPRs of ongoing loans in the portfolio was found to be satisfactoryboth in terms of implementation progress and the likelihood of meeting development objectives. 108 Under the first criterion, 91% (or 20 loans) were rated as satisfactory and 9% (2 loans)109 as highly satisfactory (Table A5.1, Appendix 5). Under the second criterion, one loan (4%) 110 was rated as highly satisfactory and the remaining 21 loans (96%) as satisfactory. The proportion of loans considered at risk was 0%. As of 31 December 2005, the portfolio performance based on the PPRs of ongoing loans in the Lao PDR was slightly better than both the regional average and the ADB-wide average. B. Financial Performance

174. Contract Awards. Table A5.2 (Appendix 5) shows that in the past 5 years (20012005), the actual amounts of contract awards of all active loans for the Lao PDR fell short of targets, except for 2002 and 2005. In 2005, the actual amount of contract awards of all active loans was 126% of projection ($87 million versus $69 million), while that for project loans was 140% of projection ($76 million versus $54 million). This was due to improvements in the delays in obtaining award approvals from EAs and other start-up difficulties. However, the actual contract award ratio of all active loans for the Lao PDR has been much better than the ADB-wide average (Table A5.3 and Figure A5.1, Appendix 5), except for 2003. The ratio improved in 2004 and 2005 (20% and 40%, respectively), compared with the ADB-wide average of 15% and 22% for those years. 175. Disbursements. In 2005, the actual disbursement amounts of all active loans and project loans were higher than the projections ($68 million versus $61 million, and $79 million versus $76 million) (Table A5.2, Appendix 5). The opposite was true for program loans ($11 million versus $15 million) due to delayed disbursements in the two ongoing programs.111 In 2005, disbursement ratios of all active loans, project loans, and program loans improved from their corresponding ratios in 2004 because (i) the second tranche of the Environment and Social Program, which was delayed by more than 2 years, was released in 2005; and (ii) the implementation and disbursements of several projects improved significantly in 2005. 112 This resulted in higher disbursement ratios than the corresponding ADB-wide average ratios in 2005 (Table A5.4, Appendix 5). If the ratios were averaged over the past 11 years, the average disbursement ratio of the Lao portfolio appeared to be about the same as the ADB-wide average (21%) (Figures A5.2 and A5.3, Appendix 5). 176. Audit Compliance. The timeliness of submission of audited project accounts and agency financial statements improved in 2005. Of the 17 loans requiring submission of audited accounts, 15 fully complied and 2 complied late, but still within 6 months.
108

Relevant Central Operations Service Office database of ADB. Including the Primary Health Care Expansion Project, and the Vientiane Urban Infrastructure and Services Project. 110 The Water Supply and Sanitation Sector Project. 111 Including the Banking Sector Reform Program, and the Environment and Social Program (Table A3.1, Appendix 3). In the latter, the disbursements of the second tranche was delayed by more than 2 years. 112 Including the Basic Education (Girls) Project, the Vientiane Urban Infrastructure and Services Project, the Nam Ngum River Basin Development Project, the Smallholder Development Project, and the GMS: Northern Economic Corridor Project (Table A3.1, Appendix 3).
109

58

C.

Factors Affecting Implementation Performance

177. The 2004 Country Portfolio Review Mission (CPRM) identified key factors affecting implementation performance, including delayed payment or nonpayment of counterpart funds,113 delayed recruitment of consultants, declining contract award and disbursement, delayed compliance or non-compliance with loan covenants, and delays in TA implementation (about 6 months in submitting final TA reports). These issues were confirmed by the 2005 CPRM, which was jointly conducted by ADB, the Swedish International Development Cooperation Agency (SIDA), and the World Bank. The CAPE Mission identified the problem with counterpart funding as a serious matter. It leads to delayed payments to contractors, which means that work either does not get done or is done to substandard levels. In other cases, delays are caused by underqualified contractors selected due to their low bids, but unable to undertake the works required. These result in rebidding at a financial cost. The problems of rebidding and delayed counterpart funding release were faced by many projects across sectors.114 Another problem identified by the CAPE Mission is cost overruns due to poor design, hence, underachievement of outputs (e.g., in past water supply projects). 115 Pragmatically, these problems were often addressed by providing additional funding from other ADB projects and other funding agencies. This is not, however, desirable or a sustainable approach. The environmental and social impacts of some energy projects 116 were more serious than initially assessed at the design stage, and mitigation measures had to be adopted afterward. 178. In sum, the portfolio performance based on the PPRs of ongoing loans was slightly better than the regional and ADB-wide averages. The economic internal rates of return of many completed projects were generally found by the PCRs and PPARs to be high, averaging 17% in the energy and transport sectors (Table A5.5, Appendix 5). On the negative side, problems of a shortage of counterpart funds, cost overruns, and delayed implementation were evident in many completed and ongoing projects affected the achievement of outputs and outcomes and incurred additional cost. Taking into account these problems, combined with the problems related to compliance with environmental and social safeguards, the overall implementation and resource utilization performance of the Country Programs is regarded as borderline efficient. VIII. PROGRAM ATTRIBUTION: ASSESSMENT OF OTHER ASPECTS

179. This chapter assesses government performance, ADBs performance, partnerships and harmonization among DPs, and the role of NGOs. A. Government Performance

180. The Government generally performed well in the implementation of project loans, relative to program loans. Continuity of government project staff was observed in the two key sectors (energy and transport), reflecting strong commitment. However, four areas need to be improved: (i) lack of counterpart funds, (ii) inadequate recurrent budget, (iii) delayed project
113 114

For FY2003/04 the release of counterpart funds reached only 52% of the requirement. Including the Vientiane Urban Infrastructure and Services Project, the Decentralized Irrigation Development and Management Project, the Secondary Towns Urban Development Project, the Basic Education (Girls) Project, and the ongoing transport projects (Table A3.1, Appendix 3). 115 The Southern Provincial Towns Water Supply Project constructed only two of the planned four operating water systems. The Rehabilitation and Upgrading of Vientiane Water Supply Project achieved only about 60% of its planned targets. Most of the water supply systems improved under the Northern Provincial Towns Water Supply and Sanitation Project were found to be defective in one way or another. 116 Including the Theun-Hinboun Hydropower Project, and the Nam Leuk Hydropower Project (Table A3.1, Appendix 3).

59 startup, and (iv) lack of follow through on major institutional and policy reforms. Weaknesses in these four areas have adversely affected project implementation and reduced the achievement of development results. The first two issues relate to the Governments weak financial position. Delayed counterpart funding affected contractor payments in many sectors. Arrangements had been made for contractors to withhold the payment of taxes in lieu of receiving counterpart payments. This is not a good practice, as it creates an environment that could allow corruption to flourish. In any case, this still did not compensate fully for the lack of counterpart funds. For example, under the VUISP, the Governments contributions to civil works should be 28%. Even if the contractor was allowed to retain tax payments, (about 10% of the contract), funds owing under the contract remained unpaid. The shortfall was more than the normal profit margin on a civil works contract. This resulted in implementation delays, unpaid staff, poorly maintained equipment, and corners being cut during construction. It also led to increased bid prices. In the case of inadequate recurrent cost funding, there was little budget to pay staff and to operate/maintain project facilities in the education and health sectors. Schools were short of teachers and textbooks, health clinics were short of health workers and medicines, and public buildings were in a dilapidated state. Adequate recurrent funding is needed to get the full development results associated with the type of capital investment that ADB funded. 181. Delayed project startup is another endemic problem. In many cases, consultant recruitment was not started until 6 months after loan effectiveness. The main reasons were lack of understanding on the part of EAs of the sequencing of both ADB and government approval procedures, and lack of communication between EAs and the Ministry of Finance (MOF). A series of seminars and workshops are being arranged to address this problem. The final problem was the lack of follow-through on policy and legislative reforms. For example, the Law on Local Administration was passed in 2003, but the implementing decrees are not expected to be issued until 2007. This will delay granting legal status to UDAAs, thus inhibiting them from mobilizing revenues. Moreover, instead of covering Vientiane and all four secondary towns, the decrees will cover only pilot implementation in Vientiane and Luangprabang. Similar delays were found in the issuance of regulations in decrees needed to implement the Law on Water and Water Resources, the Forestry Law, the Environment Protection Law, and the Charter establishing the Water Supply Authority. Until the enabling regulations are issued, the passage of laws will have little impact. 182. However, given some positive sector outcomes and impacts achieved despite limited government capacity and resources, government performance is regarded as satisfactory, but at the lower end of the range. More efforts are needed to reduce these deficiencies. B. The Asian Development Banks Performance

183. At the strategic and program levels, based on the CAPEs surveys (Appendix 6), clients/ stakeholders have favorable perceptions of ADBs role in the development of the Lao PDR. ADB is regarded as a major and long-term DP. The Government appreciated ADBs client-oriented approach in response to the countrys development strategies and needs. This started out with ADTAs to assist in the preparation of the countrys Third Plan (19911995) and other capacity development, and with program/policy lending in the ANR and financial sectors. ADBs lead role in the energy and transport sectors was much appreciated, as it responded to the countrys priorities. On the negative side, the program loans in the ANR and financial sectors failed to achieve many of the expected policy reforms and outcomes due to overly ambitious program design. 117 ADBs lending sometimes exceeded the Governments absorptive capacity as
117

However, policy dialogue was undertaken and some of the policy changes subsequently helped facilitate the countrys transition to a market-based system. In the ANR sector, examples included the freeing up of the market

60 reflected in inadequate counterpart funding and recurrent cost financing. ADB also tended to provide many small projects in too many sectors, thus reducing the degrees of program coherence, synergy, and economies of scale in portfolio management. 184. The Lao PDR Resident Mission (LRM), established in 2001, is viewed by the Government and other DPs as active in relations with the Government and local aid coordination, and in facilitating project implementation. Currently, three projects118 are delegated to LRM and it will soon be administering two more.119 Greater delegation to LRM should help overcome some implementation issues, such as delayed startup, which several projects face at the moment. LRM is also responsible for preparing the CSP and conducting the CPRM. The first joint CPRM was undertaken in November 2005 with SIDA and the World Bank. LRM is also active in providing support and backup to visiting missionsprocessing, review, and evaluation. 185. At the project level, ADB performance was weak in project preparation and design in some sectors, leading to delayed implementation, cost overruns, and underachievement of outcomes. Project preparation in the water supply sector was done with a bare minimum of PPTA funding. The cost overrun due to poor design led to the abandonment of some systems. Remedial actions have been undertaken in some completed projects, but not yet for the NPTWSSP. In the energy sector, design deficiencies led to a 31% cost overrun in the XHP. Quality at entry problems also led to unexpected negative environmental and social problems in the THHP. In the ANR sector, projects were diffused in different subsectors with no continuity. Some projects were not suited to a time-bound project format. The SCSPP and the Nam Ngum River Basin Development Sector Project aimed at changes in land use and cropping patterns for which there are no existing models, and may take decades to achieve. 186. ADBs performance in the key sectors (transport and energy), which accounted for more than half of total lending during the CAPE period, was noteworthy in terms of focus and continuity of projects and staffing. Substantial critical masses and synergies were generated. In urban development, ADB assistance, including policy dialogue, helped raise awareness of the need for a separate, legal, self-financing, urban administration system, and guided the Government through its establishment. Overall, ADBs performance at the project and program/strategic levels is considered satisfactory, although it varied from sector to sector. Box 1 provides Governments views on how ADB can improve its performance.

for inputs and outputs, removal of export and exchange rate controls, adoption of new and more liberal land laws, removal of state subsidies, privatizing SOEs, and restructuring and strengthening of MAF (see details in the SAPE for the ANR Sector). In the financial sector, examples included central banking and monetary reforms, consolidation of SCBs, and restructuring and strengthening of BOL. 118 Including the Basic Education (Girls) Project, the GMS: East-West Road Corridor Project, and the Smallholder Development Project (Table A3.1, Appendix 3). 119 Including the Decentralized Irrigation Development and Management Sector Project, and the Northern Area Rural Power Distribution Project (Table A3.1, Appendix 3).

61

Box 1: Governments Views on How ADB Can Improve Performance x Improving Project Monitoring by Increasing the Role of LRM. Delayed implementation and insufficient coordination between international consultants and counterpart staff were perceived to be important issues associated with inadequate ADB monitoring and supervision (including insufficient visits to project sites). The Government suggested that more projects should be delegated to LRMs for administration alongside increasing the number of senior technical staff. Focusing on Smaller Number of Sectors. It was perceived that ADBs sector assistance was not well coordinated to achieve MDGs. The Government suggested that ADB should concentrate on the sectors that it had a longstanding record of good performance, such as in physical infrastructure which also had large GMS benefits, and should take the lead in aid coordination to help the Government prepare a program-based or sector-coordinated approach (e.g., SWIM/SWAP) for the education and health sectors. Improving Assistance Modality to Make It More Integrated and Coherent. The Government suggested that ADB should start using a sector-coordinated approach in such sectors as education and health to increase aid coordination, synergies, and impacts. Since the country has just started to adopt this approach, a strong funding agency should act as a leader, particularly at the beginning of the process. Pursuing Harmonization and Collective Policy Dialogue. Given ADBs longstanding and wellestablished profile as a major development partner in the Lao PDR, there is more scope for ADB to expand its relevance by taking the lead role in donor coordination through (i) harmonizing the preparation of the Country Strategy and Program with other DPs, such as in terms of sector division, synergies, or timing of preparation; and (ii) pursuing collective policy dialogue in a range of important policy issues, including governance. Improving Effectiveness and Participation of Capacity Development Assistance. The Government felt that ADBs capacity development assistance did not perform well due to (i) insufficient monitoring from both sides, and (ii) most of this assistance was provided by standalone technical assistance (TAs) with not much demand from the Government. The Government tended to pay more attention to the implementation of projects and TAs associated with the projects. There should be an improvement in the design of capacity building assistance to be more participatory and in ADB monitoring of this kind of assistance. Sustainability. The Government suggested that ADB should develop a clear strategy when financing projects to ensure that project benefits will be sustained.

C.

Harmonization and Partnerships

187. The main thrusts of the Paris Declaration on Aid Effectiveness include ownership, harmonization, alignment, results, and mutual accountability. Given the Lao PDRs heavy dependence on external assistance, with most of the fiscal deficits financed by foreign grants and borrowing, strong aid coordination and harmonization are needed to enhance aid effectiveness. Aid coordination in the Lao PDR has been carried out through Roundtable Meetings and the working group system, both of which seem to be an effective way of coordination in a relatively small country such as the Lao PDR. The former are held every 2 years, while the latter are semiannual. Most major DPs (ADB, AFD, Japan International Cooperation Agency, Norwegian Agency for Development Cooperation, UNDP, and the World Bank) participate in the meetings, along with government representatives. It is important to include government officials in such discussions, something that does not always happen in

62 other countries. There are eight working groups.120 LRM chairs the infrastructure working group and cochairs (with AFD and SIDA) the ANR and the environment working group. 188. In terms of aligning country strategies by key DPs, although their strategic objectives may be consistent with the Governments overall development objective of poverty reduction (Appendix 7), collective actions and harmonization among them have been weak, something that was confirmed through the CAPEs client/stakeholder surveys (Appendix 6). This was due to the lack of agreed upon development agenda in the past as well as well-coordinated and systematic approaches of aid management, such as SWIM/SWAP and joint country strategies. This resulted in piecemeal efforts. Only recently did the key DPs try to harmonize their strategies and assistance programs. Assistance provided to support the preparation of the Governments NGPES resulted in an agreed upon development agenda. The NGPES served as the countrys full Poverty Reduction Strategy Papers following discussions at the Roundtable Meeting in September 2003. A recent decision of the Government to chair and co-chair the Roundtable and working group meetings with DPs reflects government commitment to increased ownership of the countrys development agenda. A recent example of best coordination and harmonization practice was the November 2005 joint CPRM, carried out by ADB, SIDA, and the World Bank. Sector-coordinated approaches are under preparation in the education and health sectors, with ADB taking the lead role in the latter. Overall, aid coordination and harmonization among DPs in the past is considered modest (partly satisfactory), although with recent positive signs of improvement. D. Nongovernment Organizations Role

189. The role of NGOs in development activities in the Lao PDR has been more modest than in neighboring countries such as Cambodia. Most NGOs operating in the country are international NGOs, with few local active ones. The Internet Directory of NGOs in the Lao PDR121 lists 38 organizations that are working on a total of 125 projects. These include a wide range of large and well-known NGOs such as CARE, Medecins sans Frontieres, and the Red Cross as well as a number of smaller ones aimed only at the Lao PDR. NGOs in the Lao PDR are most active in the fields of health, education, transport, and ANR. Those working directly on ADB-funded projects include the Handicap International and the Action Nord/Sud, which are involved in water user organizations under the DIDMSP; and the Danish Red Cross, working on the GMS: NECP. Several NGOs are also actively working in parallel with ADB-funded projects (EQIP-II and PHCEP) in the education and health sectors. 190. LRM intends to broaden and deepen the interactions with NGOs in the future. This will include measures to inform NGOs of upcoming ADB activities in which they can participate adding a section on the LRM website directed to NGOs and possibly recruiting a national liaison officer. NGOs can play a significant role in future ADB operations, substituting for a lack of government capacity and recurrent cost financing, especially in isolated areas. However, some informants contacted by the CAPE Mission felt that some NGO staff lacked technical expertise and that NGOs had their own agendas that are not always the same as those of ADB or the Government. Nonetheless, given the Governments limited technical capacity and funding constraints, the human and financial resources and direct links with local people that NGOs can provide should be mobilized to support the achievement of development results.

120

Including infrastructure, education, health, governance, PSD, ANR and the environment, mini-Dublin (focusing on drug control), and unexploded ordnance working groups. 121 Prepared with World Bank assistance.

63 IX. OVERALL PERFORMANCE ASSESSMENT AND RATING

191. This chapter summarizes the overall performance of the Country Strategies and Country Programs assessed in Chapters IIIVIII and provides ratings for the (i) sector-level performance (bottom-up assessment), (ii) strategic- and country-level performance (top-down assessment), and (iii) overall performance, in sections AC, respectively. Figure 9 is a reference pie chart derived from the CAPE Guidelines to show the standard percentage breakdown of performance assessment under different criteria for each level.
Figure 9: Standard Percentage Breakdown of Performance Assessment under Different Criteria and Levels (Based on the CAPE Guidelines)

Strategic- and Country-Level Performance (Top-Down)

ADB's Performance 16.7% Institutional MfDR Capacity and Countrywide Impacts 16.7% CSP Relevance and Positioning 16.7%

Sector Impacts 12.5%

Relevance 6.2%

Sustainability 12.5%

Effectiveness 12.5% Efficiency 6.2%

Sector-Level Performance (Bottom-Up)

CAPE = Country Assistance Program Evaluation, CSP = Country Strategy and Program, MfDR = Managing for Development Results.

A.

Sector-Level Performance (Bottom-Up)

192. The sector performance assessed in chapters V and VII is summarized and rated below under the five criteria (relevance, effectiveness, efficiency, sustainability, and contributions to impacts). The summary sector rating is given in Table 7 (p. 28). The standard scoring and rating system from the CAPE Guidelines is tabulated in Table 8 (p. 29) to show how the system was applied to Table 7. 193. Relevance. The focus of many projects in most sectors under the Country Programs is found to be relevant to the priority areas defined in the Country Strategies. However, project/program design was overly complex, diffused, and sometimes inappropriate, in the ANR, financial, and water supply sectors. This resulted in noncompliance with many policy reforms, delayed implementation, cost overruns, cancellation of components, and low achievement of outputs and outcomes. Project design in other sectors was generally satisfactory. It was highly

64 satisfactory in the transport sector, reflecting continuity and synergy among projects. Overall, the performance of ADBs Country Programs for the Lao PDR is considered relevant. 194. Effectiveness. The effectiveness of ADBs operations varied by sector. The ANR, financial, and water supply sectors, constituting about a quarter of total lending during the CAPE period, were less effective in achieving outcomes. Other sectors were generally effective. The two major sectors (energy and transport) that accounted for more than half (55%) of total lending were rated as highly effective. A series of transport projects delivered the outputs of more than 2,000 km of national and provincial roads. Outcomes during 19942004 included contributing a total of 7% of the countrys road network; reducing travel time between Vientiane and Luangprabang from 23 days to 8 hours; and handling traffic, which increased by 22% per year. Despite concerns regarding the issues related to the mitigation of adverse environment and social impacts, the outputs of energy projects included four hydropower plants producing 355 megawatts and some power transmission lines. Outcomes during 19912004 included increasing energy generation capacity by 2,067 GWh per year, creating 70% of the countrys total electricity generation capacity, increasing foreign exchange earnings from energy exports by $520 million, and providing electricity connections to 70,646 households. Overall, the performance of ADBs Country Programs for the Lao PDR is considered effective. 195. Efficiency. Overall portfolio performance of ongoing loans is rated as satisfactory. The average disbursement ratio of all active loans was about the same as the ADB-wide average (21%) over the past decade. There were lapses in implementation and resource utilization: (i) delayed implementation due to the non-availability of counterpart funds, (ii) cost overruns and delayed disbursements due to poor design, and (iii) problems related to compliance with environmental and social safeguards. The lack of counterpart funds delayed project implementation in many sectors and contributed to substandard work as underpaid contractors tried to save money by cutting corners. Poor project design resulted in underachievement of outputs and outcomes in water supply and ANR projects. Delayed release of program loan tranches reflected overly ambitious conditionalities. Although the economic internal rates of return of many projects in the two major sectors (energy and transport) were high, the total portfolio is considered to be borderline efficient because of problems experienced. 196. Sustainability. The Governments allocation of recurrent expenditure to priority sectors (education and health, and ANR) has been low (11% and 2%, respectively, during 19992003) (Appendix 7). The high share of the others/unexplained item raises concerns over the lack of fiscal transparency. More efforts are needed to increase public revenues, restructure public expenditure to better reflect the Governments priority sectors, and increase transparency in budget allocation/utilization. With the recent establishment of the government-owned Lao Holding State Enterprise, foreign exchange earnings from future electricity exports should be accounted for more transparently as public revenues and used in priority areas. Overall sustainability prospects are regarded as likely, but at the lower end of the range, depending on government commitment to channel more export earnings into priority sectors. 197. Contributions to Impacts. With the exception of the ANR, financial, and water supply sectors, ADB operations in other sectors have made satisfactory contributions to the countrys achievement of impacts. Most notable contributions were in the transport and energy sectors, which accounted for more than half of ADBs total lending. Since some outcomes, particularly in the transport and energy sectors, were achieved country-wide with large critical masses, they were considered as one of the contributing factors to the countrys achievement of the annual economic growth of 6% over the past decade and progress in poverty reduction. Overall, ADBs contributions to impacts are regarded as significant (satisfactory).

65

198. Overall Rating of the Sector-Level Performance. Overall, the sector performance based on the five criteria is rated as successful (Table 7). B. Strategic- and Country-Level Performance (Top-Down)

199. The strategic- and country-level performance assessed in Chapters III, IV, VI, and VIII is summarized and rated below based on three dimensions: (i) the quality at entry of overall Country Strategies and Programs in terms of relevance and positioning, (ii) ADBs performance, and (iii) contributions to the country-level MfDR capacity and long-term impacts. 200. Quality at Entry of Overall Country Strategies and Programs. In terms of relevance, the strategic choices of the combined three periods of ADBs Country Strategies for the Lao PDR (1991, 1996, and 2001) are rated as generally relevant to the Governments national development strategies/plans, the countrys socioeconomic issues, ADBs corporate objectives, and country strategies of other key DPs, which all focused on transforming the economy from a centrally planned to a market-based system from the late 1980s and on poverty reduction from the late 1990s onward. In terms of positioning, the overall Country Strategies are rated as partly satisfactory because of the lack of coherence. This was particularly the case for the 2001 CSP which did not focus on ADBs comparative advantage in physical infrastructure (energy and transport) in supporting private sector-led growth. It diverted attention to many sectors, without addressing limited government absorptive capacity. This implies that the overall Country Strategies had made relevant, but not coherent choices in positioning ADB as a major DP in particular sectors/areas. For the overall Country Programs, in terms of positioning, they are also rated as partly satisfactory due to the lack of coherence. Although lending to the two sectors in which ADB had comparative advantage comprised more than half, the remaining was spread thinly in many sectors. The overall results imply that ADB did not have a strong Country Program positioning in the sectors in which it had a strong comparative advantage. Thus, the quality at entry of the overall Country Strategies and Programs is rated as partly satisfactory. 201. ADBs Performance. ADBs role in the development of the Lao PDR was regarded by other DPs as favorable. The Government appreciated ADBs client-oriented approach in response to the countrys development needs. But ADBs lending volume appears to have exceeded the Governments absorptive capacity, as reflected in inadequate provision of counterpart funding and recurrent cost financing, and in institutional weaknesses. ADB financed many small projects in too many sectors, thus reducing the degree of program coherence. Policy lending in the ANR and financial sectors failed to achieve many of the expected reforms due to overly ambitious program design. However, although ADBs performance was weak in some sectors, it performed very well in the key sectors in which it had a comparative advantage (energy and transport), particularly in terms of focus and continuity of projects and staffing and close supervision during implementation. Self-reinforcing outcomes and critical masses were generated. Overall, ADBs performance is rated as satisfactory. 202. Contributions to the Countrys MfDR Capacity and Long-Term Results/Impacts. ADBs contributions to building the countrys MfDR capacity were through standalone ADTAs to improve (i) statistical capacity, (ii) poverty assessment and M&E capacity, and (iii) fiduciary arrangements or governance. These TAs, which were not attached to projects, generally did not perform well due to limited government commitment and ADB supervision. In the TAs for improving the statistical and poverty M&E capacity, the focus was more on strengthening statistical capacity and less on M&E capacity, with insufficient followup, as the data collected later disappeared. In the area of fiduciary arrangements, a number of TAs were provided to improve the countrys procurement, audit, accounting regulations, and public expenditure

66 management. However, due to the lack of government ownership and support, the Procurement Office supported by ADB disappeared for a while, although it was subsequently restored with assistance from the World Bank. The sustainability of the NAO is threatened due to insufficient budget. In public expenditure management, expected outputs were achieved, including the preparation of the medium-term expenditure framework linking annual budgets to investment priorities. However, not all the priorities were supported by the budget, as these priorities were set in the Governments NGPES, separately from the current Fifth Plan. The NGPES is now being integrated with the new Sixth Plan to be supported by a single budget. Joint efforts with the World Bank are designed to improve the countrys public expenditure management capacity in a coherent manner under the NT2 Project. Overall, ADBs contribution to the countrys MfDR capacity is regarded as modest (partly satisfactory). 203. The Lao PDR achieved a reasonably high economic growth rate (6% per annum over the past decade) and made progress in reducing poverty incidence from 48% in 1990 to 33% in 2003. These impacts resulted from the joint efforts of DPs, including ADB. ADBs contributions to the country-level impacts were notable through the critical masses created under the energy and transport sectors, since good infrastructure is necessary to support economic growth. Sustainable economic growth, in turn, is a necessary prerequisite for sustainable poverty reduction. Despite all these positive impacts, the Lao PDR is still faced with formidable development challenges, including (i) weak governance and corruption containment efforts and poor public financial managementboth on the expenditure side (imbalance between capital and recurrent budget, and nontransparent budget allocation) and on the revenue side (insufficient revenue mobilization from taxes and other sources); (ii) weaknesses in the enabling environment for PSD and FDI; and (iii) debt overhang. Thus, the country-level impacts from top down are rated as modest (partly satisfactory). 204. Overall Rating of the Strategic- and Country-Level Performance. While the quality at entry of the Country Strategies and Programs, together with the contributions to the countrys MfDR capacity and impacts, was rated as partly satisfactory, ADBs performance was satisfactory. The resulting overall performance at the strategic and country levels is rated as borderline successful (Table 9).
Table 9: Summary Rating of Other Aspects of Performance Assessment at the Strategic and Country Levels Strategic- and CountryLevel Performance - CSP Relevance and Positioning (from Table 6 and para. 200) - ADB's Performance (from para. 201) - Contributions to the Country's MfDR Capacity and Long-Term Impacts/Results (from paras. 202203) Performance Score at the Strategic and Country Levels Scores of Other Aspects of Performance a 4 6 4 14.0

Rating PS S PS S

ADB = Asian Development Bank, CSP = Country Strategy and Program, MfDR = Managing for Development Results, HS = highly successful, PS = partly successful, S = successful, U = unsuccessful, WA = weighted average. a Since Tables 6 and 9 are based on different scoring and rating systems, the PS score from Table 6 (which is = 1.5) is converted to the PS score for Table 9 (which is = 4).

67 C. Overall Rating of All Levels of Performance

205. Given the bottom-up and top-down assessment above, the overall performance of the Country Strategies and Programs at all levels combined is rated as successful (Table 10).
Table 10: Overall Rating of Performance Assessment at the Sector and Other Levels Combined All Levels of Performance - Sector-Level Performance (from Table 7) - Other-Level Performance (from Table 9) Overall Performance Score Scores 14.7 14.0 28.7 Ratinga S S S

CAPE = Country Assistance Program Evaluation, HS = highly successful, PS = partly successful, S = successful, US = unsuccessful. a Based on the CAPE Guidelines, the rating score ranges for overall performance are as follows: (i) HS >= 40, (ii) 40 > S >= 28, (iii) 28 > PS >= 16, and (iv) 16 > US.

X.

KEY FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS

206. This chapter draws conclusions from the entire evaluation by identifying key findings in terms of factors contributing to the results achieved by ADB operations, and lessons for the future. Most of the lessons are drawn from factors adversely affecting ADB operations. Subsequently, recommendations are identified for consideration in the formulation of the next CSP for the Lao PDR. A. Key Factors Contributing to Delivery of Results

207. Timely Response to the Needs of the Country. ADB operations were seen by the Government and other DPs as responsive to the countrys development needs, starting with the strategic emphasis under the first two Country Strategies in support of the transformation of the economy to a market system. A combination of the Country Programs lending and nonlending products and services was tailored to support basic infrastructure, institutional development, and policy reforms. Program lending in the ANR and financial sectors was an appropriate response to the need for major economic restructuring, although neither were well designed or implemented. The emphasis on infrastructure projects was a response to the countrys pressing needs at the beginning of the CAPE period. 208. Continuity and Synergies in Key Sectors. An important factor contributing to the overall success of ADB operations was continuity in key sectors (energy and transport). Critical masses of beneficiaries/benefits were created (e.g., 2,333 km of roads and 70% of the countrys total energy generation capacity). Good infrastructure is necessary to support the countrys economic growth. In the transport sector, the focus was first on improving a series of key road links in the South and then in the North, allowing successive investments to build on earlier ones. There were also cross-sectoral synergies as the benefits from road investments in the northern and northwestern regions were complemented by the extension of the electricity grid in the same regions. Continuity of project staffon both the ADB and government sideswas also a positive factor. 209. Appreciation of the Need for Institutional and Policy Reforms and Policy Dialogue. The Country Programs supported the countrys need for institutional and policy reforms, in the context of both the transition to a market economy and the low level of skills and capacity prevailing in many government agencies. Almost every project/program was designed with this

68 need in mind. While the outcomes of many of such reform initiatives were less successful than expected, the design of the Country Programs recognized the need to create an institutional and policy environment conducive to undertaking development activities. Policy dialogue was carried out to facilitate the reform process, although the anticipated results were not always achieved (e.g., in the ANR and financial sectors). Policy dialogue was particularly successful in the urban development sector, where ADB helped to establish self-financing UDAAs. B. Lessons from Past and Ongoing Operations

210. While sector-specific lessons are identified under the assessment of each sector (in Appendix 4), broader lessons derived from the overall CAPE findings are drawn below: 211. Continuity Was Key to Achieving Critical Masses and Development Effectiveness. The success of the Country Programs in generating critical masses and achieving development effectiveness reflected a systematic and continued series of interventions, allowing succeeding projects to build on past achievements (e.g., in the energy and transport sectors). 212. Without Overall Sector Focus and Coherent Strategy by Sector, Investments Became Diffused and Failed to Achieve Development Effectiveness. Without overall sector prioritization and a clear strategy for each sector, any investment could be justified as a priority. This led to scattered investments, particularly in the ANR sector. 213. Limited Government Absorptive Capacity and Ownership Resulted in a Shortage of Counterpart Funding and Recurrent Cost Financing. ADB lent too much for the Government to effectively absorb. This was reflected in inadequate counterpart funding and recurrent cost financing. The former caused delays in project implementation, higher bid prices, and substandard work across sectors. The latter threatened project sustainability in some sectors (e.g., education and health). The decision to reduce the indicative lending level to $30 million in 2005 and $22.7 million in 2006 from the average of $55 million during the CAPE period is consistent with this finding. 214. Weak Government Commitment Deterred Achievement of Development Effectiveness. Weak government commitment was also reflected in delayed compliance with policy reforms and limited follow-through on the issuance of implementation decrees. Both had negative effects on delivering the expected development results. 215. Complicated Project/Program Design Deterred Achievement of Development Effectiveness. Inadequate project preparation in the ANR and water supply sectors led to implementation delays, cost overruns, and cancellation of components. In all program loans, proposed policy conditionalities were too complex and ambitious to implement. 216. Limited Strategic Partnerships among DPs Resulted in Piecemeal Outcomes. Weak aid coordination during the CAPE period resulted in a lack of strategic partnerships (e.g., cofinancing strategies, and program-based or sector-coordinated approaches) and in piecemeal outcomes. However, progress on aid coordination and harmonization has recently improved. C. Recommendations

217. ADBs Mekong Regional Department (MKRD), inclusive of LRM, should improve the way it does business by taking into account the recommendations in Table 11 in formulating the next CSP in 2006.

69
Table 11: Recommendations Recommendations Need to Address the Problems of Limited Government Absorptive Capacity and Ownership/Commitment. Given the countrys high aid intensity ratio and low absorptive capacity, the development agenda has been driven largely by funding agencies. This was reflected in the Governments inability to provide counterpart funds and its inertia in following through on major reform measures. These were endemic problems occurring across sectors. Although ADB has recently approved a more flexible policy framework for cost sharing, which allows the government of each DMC to finance a lower proportion of counterpart funds based on a specific countrys cost-sharing ceiling, government ownership/ commitment (e.g., in terms of macroeconomic performance and fiduciary arrangements) is still a key factor determining the ceiling. MKRD should consider (i) determining the Lao PDRs cost-sharing ceiling based on the aggregate portfolio of the next CSP period during the preparation of the 2006 CSP; and (ii) discussing the issue of high aid intensity ratio with other DPs and pursuing collective policy dialogue with the Government. This objective would be to determine whether the total amount of aid should be reduced to be more in line with the absorptive capacity and how to improve the Governments capacity in raising more domestic revenues so as to reduce the countrys dependence on aid in the long run. Increasing aid flows in the current circumstances will not necessarily result in the achievement of better development results. Need for Sector Selectivity. Given the lower indicative planning figure of $22.7 million for 2006 ($30 million in 2005) compared with the average of $55 million over the CAPE period for the Lao PDR, and concerns over the Governments limited absorptive capacity, the next CSP should focus on a smaller number of sectors. The sectors should be prioritized based on the following considerations: (i) government priorities for ADB assistance, (ii) involvement of other DPs, (iii) relative funding position in the sectors among DPs, and (iv) ADBs comparative advantage in terms of sector performance based on the CAPEs findings. Indicative directions for ADB interventions are shown in Table 12. Need for Stronger Harmonization and Partnerships with Other DPs. In line with the expectations stated in the Paris Declaration, ADB should develop more strategic partnerships with other DPs (e.g., joint CSPs and sector strategies, cofinancing strategy, and program-based or sector-coordinated approaches) to provide a more coherent assistance program. This will help reduce the Governments transaction costs, enhance its role in leading the countrys development agenda, and increase the possibility for other DPs to finance future recurrent costs after project implementation. Need to Improve the Results Achieved by Program Lending. Given the disappointing results of program lending, ways must be found to improve performance if use of this modality is to be continued. This may involve (i) developing a more realistic package of reforms that are consistent with the Governments institutional capacity and political economy; (ii) having a more realistic time frame to implement the policy changes that reflect the institutional constraints in the country and to follow through on the issuance of implementation decrees to ensure achievement of outcomes/impacts; (iii) improving the analysis on which the policy reforms are based; and (iv) making future program lending more manageable/flexible, based on cash-on-delivery (e.g., cluster program modality), with digestible reform programs that are government owned. Need to Strengthen Sector Strategies with Focus on Governance, Anticorruption, and the Enabling Environment for PSD. The lack of good sector strategies resulted in diffused investments and failure to achieve sector outcomes. The role of ADTAs and economic, thematic, and sector work should be strengthened to develop sector strategies to guide future ADB operations. These should look not only at factors specific to the sectors, but also on factors outside the sectors that are important preconditions for increased sector efficiency (e.g., governance, anticorruption, banking, enterprise reforms, the business climate, and the countrys competitive position after gaining full accession to the WTO). The implementation of social Responsibility MKRD, the Government (Ministry of Finance and Committee on Planning and Investment), and the aid community

MKRD

MKRD and OCO

MKRD

MKRD

70

Recommendations safeguard policies also needs to be strengthened. Need to Improve the Management of the TA Program. Many ADTAs did not perform well, with limited government commitment. This was particularly true for TAs that were not attached to any project. ADB should improve the management of TAs by (i) increasing government participation in TA design and implementation to increase client ownership; (ii) improving the link between the lending and nonlending programs; (iii) programming TA strategically, rather than in an ad-hoc fashion; and (iv) focusing on achievement of TA outcomes, rather than outputs. Need to Balance the Coverage of the next CSP with Available ADB Resources. Given the need to strengthen aid coordination, policy dialogue, and project implementation at the field level, LRMs role should be strengthened with increased delegation of authority and redeployment of staff. This should be considered in relation to the regional role of the Thailand Resident Mission.

Responsibility

MKRD

MKRD and BPMSD

ADB = Asian Development Bank; ADTA = advisory technical assistance; BPMSD = Budget, Personnel, and Management Systems Department; CAPE = Country Assistance Program Evaluation; CSP = Country Strategy and Program; DP = development partner; Lao PDR = Lao Peoples Democratic Republic; LRM = Lao PDR Resident Mission; MKRD = Mekong Regional Department; OCO = Office of Cofinancing Operations; TA = technical assistance.

Table 12: Indicative Directions for Possible Sector Interventions by the Asian Development Bank ADB's Comparative Funding Advantage Position based on of ADB in the CAPE's Findings Sector Relative on Sector to Other DPsa Performance M PS H (advisory role) PS H S H HS M S M S b M S b M PS

Government Priorities Role of for ADB Other Sector/Theme Assistance DPs ANR Y H Finance/Industry N L Energy N M Transport Y H Education Y M Health Y L N L Urban Development Water Supply N L Public Expenditure Management (MfDR Capacity) Y L

Indicative Directions C (suspended until a good sector strategy is proposed) C (mainly advisory role) C (consistent with the GMS Program) C (consistent with the GMS Program) C (conditional on using sector-coordinated approach) C (conditional on using sector-coordinated approach) W W (after completing remedial works)

PS

C (mainly advisory role)

ADB = Asian Development Bank, ANR = agriculture and natural resources, C = continue, CAPE = Country Assistance Program Evaluation, DP = development partner, GMS = Greater Mekong Subregion, H = high, HS = highly successful, L = low, M = medium, MfDR = Managing for Development Results, N = no, PS = partly successful, S = successful, W = withdraw, Y = yes. a The information in this column comes from Table 4 (amount of ADB lending and nonlending disbursements by sector as a proportion of total disbursements by all DPs combined in that sector during 20002003). b In Table 4, the amount of ADB assistance for urban development and other social infrastructure (which includes water supply and others) combined is high. But if this amount is divided into urban development and water supply, it would be considered medium.

FIELD VISIT/SURVEY SITES AND SOCIOECONOMIC DATA Table A1.1: Field Visit/Survey Sites for Primary Data Collection
Project Xanakham district, Vientiane province Xanakham district, Vientiane province 1. Project Director 2. Supervising Consultant 3. Some villagers with access to the project roads 1. Two head teachers of two schools 2. Some parents of students attending the project schools More than 20 lecturers in the National University of Laos Location Visited Persons Interviewed 1. Chief, Electricit du Laos Service Center, Xanakham 2. Some villagers with access to the project electricity

Sector

Energy

Power Transmission and Distribution Project

Transport

Rural Access Roads Project

Education

1. Basic Education (Girls) Project Vientiane City, Vientiane province Xiengkhouang province

Xiengkhouang province

2. Postsecondary Education Rehabilitation Project

Health

1. Primary Health Care Project

2. Primary Health Care Expansion Project

1. 2. 3. 4. 5.

One health assistant Two chiefs of two district hospitals One provincial hospital chief One provincial health office staff Some villagers with access to the project health facilities

Urban Development

1. Vientiane Urban Infrastructure and Services Project Thakhek town, Khammuane province

Vientiane City, Vientiane province

1. Project Director 2. Supervisory Consulting Engineer 3. Some families with access to the project facilities 1. Members of Thakhek Urban Development Administration Authority 2. Some families with access to the project facilities 1. Staff of the Borikhamxay Water Supply Company 2. Some families with access to the project water supply system

2. Secondary Towns Urban Development Project

Water Supply and Sanitation

1. Northern Provincial Towns Water Supply and Sanitation Sector Project

Pakxane town, Borikhamxay province

2. Water Supply and Sanitation Sector Project

1. Thakhek town, Khammuane province 2. Nam Bok town, Khammuane province

Appendix 1

1. Chief Engineer of the Khammuane Water Supply Company 2. Staff of Nam Bok Water Supply Plant 3. Some families with access to the project water supply system, half of whom have recently connected to the system and half of whom have not.

71

Source: Field surveys.

Table A1.2: Country's Economic Indicators (19932004)

72

Item

1993

1994

1995

1996

1997

Fiscal Year 1998 1999 2000 2001 2002 2003 2004

Appendix 1

297 5.8 2.7 10.0 7.7 57.5 17.7 24.7 24.5 11.5 29.0 12.4 26.2 10.0 24.7 14.8 22.7 13.8 20.5 12.2 21.0 14.1 57.1 18.0 24.9 55.2 19.1 25.7 52.9 20.9 26.2 52.8 21.0 26.2 53.3 22.5 24.2 53.7 22.6 23.7 52.5 22.9 24.6 51.2 23.7 25.1 50.4 24.7 25.0 21.2 15.6 48.6 25.9 25.5 21.2 18.7

336 8.1 8.3 10.7 5.5

383 7.0 3.1 13.1 10.2

399 6.9 2.8 17.3 8.5

364 6.9 7.0 8.1 7.5

262 4.0 3.1 9.2 5.5

286 7.3 8.2 8.0 6.7

332 5.8 4.9 8.5 4.9

333 5.8 3.8 10.1 5.7

339 5.9 4.0 10.1 5.7

374 5.8 2.2 11.5 7.2

401 6.9 3.5 12.5 7.5 47.1 27.3 25.6 22.0 10.5
5,031,980

6.3 125,847 13.2 64.6 11.7 17.7 (6.0) (10.9) 240.0 18.1 431.9 32.5 (191.9) 31.4 24.9 30.6 58.2 96.1 24.8 59.2 62 3.3 1,107.8 1,543.5 717.7 4.6 93 5.7 1,419.1 1,763.5 804.7 4.6 170 5.9 116.8 1,725.7 1,873.7 921.0 4.7 4.4 76.7 88.3 24.2 88.4 17.1 64.1 124.6 29.7 128.0 2.4 3.1 62.6 49.0 66.0 20.0 35.8 64 4.0 951.0 1,327.7 716.3 4.5 (1.4) (6.0) 90.5 89.7 20.8 86.3 112 7.3 132.9 2,200.7 1,746.6 1,260.0 4.8 7.7 (14.7) 70.2 115.4 66.5 45.3 113 9.6 210.7 4,240.2 1,285.6 3,298.3 4.9 (14.4) 300.4 19.5 564.1 36.5 (263.7) (11.4) 307.6 17.4 588.8 33.4 (281.2) (16.6) 317.2 16.9 689.6 36.8 (372.4) (16.2) 312.7 17.9 647.9 37.1 (335.2) (10.1) 336.8 26.2 552.8 43.0 (216.0) (8.9) 301.5 20.7 554.3 38.1 (252.8) (10.5) 0.3 65.5 54.9 90.5 51.6 106 6.3 195.5 10,328.6 1,454.3 7,102.0 5.1 11.9 23.0 (11.1) 11.4 20.4 (9.0) 12.6 21.7 (9.1) 10.4 18.7 (8.4) 8.9 20.0 (11.1) 9.0 16.6 (7.6) 12.4 18.4 (6.0) (7.3) 330.3 19.1 535.3 30.9 (205.0) 9.6 (3.4) 91.6 72.9 112.2 33.9 140 5.7 83.2 13,669.5 1,733.0 7,887.6 5.2

6.7 165,988 15.0 31.9

19.4 193,266 13.6 16.4

13.0 244,928 14.2 26.7

19.3 406,001 18.4 65.8

87.4 865,934 20.4 113.3

134.0 1,544,120 14.9 78.3

8.4 2,252,100 16.5 45.9

7.8 2,704,150 17.1 20.1 12.6 20.2 (7.6) (5.3) 319.5 18.1 510.3 28.9 (190.8) (3.3) (4.7) 98.7 78.6 106.4 23.9 131 7.8 82.7 15,794.0 1,763.8 8,954.6 5.3

10.7 3,435,510 18.7 27.0 13.4 21.7 (8.3) (2.1) 300.6 16.4 446.9 24.4 (146.3) (5.9) (12.4) 100.3 70.8 103.6 4.5 192 8.9 88.8 18,390.0 1,828.7 10,056.3 5.4

15.5 4,094,740 18.2 19.2 11.0 18.8 (7.8) (2.6) 322.3 15.1 455.6 21.4 (133.3) 7.2 1.9 90.9 63.9 91.0 19.5 209 6.8 104.0 22,536.0 2,132.3 10,569.0 5.7

20.4 22.9 11.9 16.7 (4.8) (8.6) 363.3 15.6 712.7 30.6 (349.4) 12.7 56.4 97.0 67.0 97.0 16.9 228 9.4 93.9 24,621.0 2,325.8 10,586.0 5.8

A. Income and Growth 1. GDP, per capita ($, current prices) 2. GDP Growth (%, constant prices) - Agriculture - Industry - Services 3. Sectoral Shares (% of GDP) - Agriculture - Industry - Services B. Savings and Investment (market prices) 1. Gross Domestic Investments (% of GDP) 2. Gross National Savings (% of GDP) C. Money and Inflation 1. Consumer Price Index (annual % change) 2. Money Supply (M2) (Kip million) 3. M2/GDP (%, in Kip) 4. Money Supply (M2) (Kip, annual % change) D. Government Finance (% of GDP) 1. Revenue 2. Expenditure and Onlending 3. Overall Fiscal Balance (excluding grants) E. Balance of Trade/Payments a 1. Current Account Balance (% of GDP) 2. Merchandise Exports ($ million) 3. Merchandise Exports (% of GDP) 4. Merchandise Imports ($ million) 5. Merchandise Imports (% of GDP) 6. Trade Balance ($ million) 7. Merchandise Exports ($) Growth (annual % change) 8. Merchandise Imports ($) Growth (annual % change) 9. Textile Exports ($ million) b 10. Wood Products Exports ($ million) 11. Electricity Exports ($ million) 12. Foreign Direct Investments ($ million) F. External Payments Indicators 1. Gross Official Reserves ($ million) 2. External Debt Service (% of exports of goods and services) 3. Total External Debt (% of GDP) G. Memorandum Items 1. GDP (Kip billion, current prices) 2. GDP ($ million, current prices) 3. Exchange Rate (Kip/$, average) 4. Population (million)

= not available, ADB = Asian Development Bank, GDP = gross domestic product, Lao PDR = Lao People's Democratic Republic, M2 = broad money supply. Excluding offical transfers. b Refers to logs, timber and other wood products. Sources: ADB. 2005. Key Indicators 2005 . Manila; ADB. 2005. Country Strategy and Program Update (20062008): Lao PDR . Manila; ADB. 2006. Asian Development Outlook 2006 . Manila; and Staff estimates.

Appendix 1

73

Figure A1.1: Key Macroeconomic Indicators

35.0 30.0 25.0 20.0 15.0

10.0 5.0 0.0 -5.0 -10.0 -15.0 1996 1997 1998 1999 2000 2001 2002 2003 2004

Year
Gross Domestic Investments (% of GDP) Revenue (% of GDP) Merchandise Exports ($) Growth (annual % change)
GDP = gross domestic product. Source: Table A1.2.

Gross National Savings (% of GDP) Overall Fiscal Balance, excluding grants (% of GDP)

Figure A1.2: Sectoral and GDP Growth Rates

20.0 18.0 16.0 14.0 12.0 % 10.0 8.0 6.0 4.0 2.0 0.0 1996 1997 1998 1999 2000 Year 2001 2002 2003 2004

GDP Growth (%,constant prices) Agriculture Industry Services

GDP = gross domestic product. Source: Table A1.2.

74

Appendix 1

Table A1.3: Country's Social and Poverty Indicators

Period Latest Year MidLate 90s Late 80sEarly 90s Item A. Population Indicators 1. Population (in million) 4.1 (1990) 4.6 (1995) 5.8 (2004) 2. Annual Population Growth Rate (% change) 2.5 (1990) 2.6 (1995) 2.8 (2003) B. Social Indicators 1. Total Fertility Rate (births per woman) 6.0 (1990) 5.3 (1995) 4.8 (2002/03) 2. Maternal Mortality Rate (per 100,000 live births) 750.0 (1990) 656.0 (1998) 530.0 (2000) 3. Infant Mortality Rate (below 1 year per 1,000 134.0 (1990) 104.0 (1995) 87.0 (2002) live births) 4. Life Expectancy at Birth (years) 45.0 (198588) 49.7 (1995) 54.3 (2005) Male 48.5 (1995) 53.0 (2002) Female 46.0 (198588) 51.0 (1995) 56.0 (2002) 5. Adult Literacy Rate (%) 44.0 (198588) 60.2 (1995) 75.0 (2002) Male 73.5 (1995) 77.0 (20022004) Female 47.9 (1995) 56.0 (20022004) a b 83.0 (2001/02) 6. Primary Enrollment Ratio (%) 104.8 (1991) a Female 105.0 (2002/03) 93.3 (1991) 7. Lower Secondary School Gross Enrollment 31.8 (1991) 50.0 (2002/03) Rate (%) Female 25.7 (1991) 8. Child Malnutrition (% of children under 5 years) 40.0 (1990) 40.0 (2000) 9. Population below Poverty Line (%) 46.0 (1992/93) 38.6 (1997/98) 32.7 (2002/03) 10. Population with Access to Safe Water (%) 28.0 (1990/91) 52.0 (2002/03) c 24.0 (1990/91) 51.0 (2002/03) 11. Population with Access to Sanitation (%) 12. Public Education Expenditure (% of GDP) 1.9 (1991) 3.2 (19992001) 13. Human Development Index (HDI) 0.450 (1990) 0.487 (1995) 0.545 (2003) HDI Ranking 133rd out of 177 14. Gender Related Development Index 0.540 (2003) Ranking 102nd out of 140 C. Poverty Indicators 1. Poverty Incidence (% of population) 46.0 (1992/93) 38.6 (1997/98) 32.7 (2002/03) 2. Percent Poor to Total Population a. Vientiane Municipality 33.6 (1992/93) 26.2 (2002/03) b. Northern Region 51.6 (1992/93) 35.5 (2002/03) c. Central Region 45.0 (1992/93) 35.5 (2002/03) d. Southern Region 45.7 (1992/93) 30.8 (2002/03) 3. Poverty Gap Index 11.3 (1992/93) 10.3 (1997/98) 4. Poverty Severity Index 4.2 (1992/93) 4.0 (1997/98) d 28.6 (1992/93) 37.0 (1997/98) 5. Inequality 6. Human Poverty Index 38.2 (2003) Rank 72nd out of 103 = not available/no data, ADB = Asian Development Bank, GDP = gross domestic product, UNDP = United Nations Development Programme. a Gross enrollment ratio is defined as the number of students enrolled in a level of education, whether or not they belong to the age group for that level, expressed as a percentage of the population in the age group 610 years for primary school, 1113 years for lower secondary school, and 1416 years for upper secondary school. b Net Enrollment ratio differs from gross enrollment ratio in that its numerator includes only students enrolled in a level of education who belong to the age group of that level. c Percentage of population with reasonable access to sanitary means of excreta and waste disposal, including outdoor latrines and composting. d Refers to Gini Index. The Gini index refers to inequality per capita real consumption, which takes into account differences in the cost of living and changes in the monthly consumer prices. Sources: ADB. 2005. Country Strategy and Program Update (20062008): Lao PDR . Manila; UNDP. 2005. Human Development Report. New York.

Table A1.4: Countrys Millennium Development Goals1

Goals

Targets

Indicators

Lao PDRs Baselines and Most Recent Status 1. 48% in 1990 39% in 1998 33% in 2003 12% in 1990 10% in 1997 9.3% in 1992 7.8% in 1997 2. 1. 24% in 2015

Lao PDRs Targets

Goal 1 Eradicate extreme poverty and hunger 2. Poverty gap ratio (incidence times depth of poverty) Share of poorest quintile in national consumption 3. 2.

Target 1 Halve, between 19902015, the proportion of people living in poverty

1.

Proportion of people living below the national poverty line

6% in 2015

3.

3.

Target under consideration by Lao Government 4. 20% in 2015

4.

Prevalence of underweight in children under 5 years of age Proportion of population having below the minimum level of dietary energy consumption Net enrolment in primary school 5.

4.

40% in 1990 40% in 2000 31% in 1990 29% in 1998

Target 2 Halve, between 19902015, the proportion of people who suffer from hunger 5.

5. 16% in 2015

Goal 2 Achieve universal primary education 7.

6.

6.

58% in 1991 83% in 2002 7. 32% in 1991 76% in 2002 8. 60% in 1995 66% in 2002 9. 1991 Primary: 77% Lower Secondary: 66% Upper Secondary: 56% Tertiary: 49%

6.

98% in 2015

Target 3 Ensure that, by 2015, children everywhere, boys and girls alike, will be able to complete a full course of primary schooling 8.

Proportion of pupils starting Grade 1 who reach Grade 5 Literacy rate in the age group of 1524 year olds Ratio of girls to boys in primary, secondary, and tertiary education

7.

95% in 2015

8. 99% in 2015

Goal 3 Promote gender equality and empower women

Target 4 Eliminate gender disparity in primary and secondary education, preferably by 2005, and in all levels of education no later than 2015

9.

9. Primary: 100% in 2015

Appendix 1

Agreed at the Millennium Summit of 189 countries, September 2000, endorsed by the Asian Development Bank (ADB) in April 2002 and now a priority in ADBs Medium-Term Strategy and Long-Term Strategic Framework.

75

76

Goals 2002 Primary: 84% Lower Secondary: 74% Upper Secondary: 68% Tertiary: 58% 10. Ratio of literate females to males, 15 24 years old 11. Share of women in wage employment in the nonagricultural sector 11. 38% in 1995 10. 81% in 1995 90% in 2001 10. 100% in 2015

Targets

Indicators

Lao PDRs Baselines and Most Recent Status Lao PDRs Targets

Appendix 1

11. Target under consideration by Lao Government 12. Target under consideration by Lao Government 13. 55 deaths/1,000 live births in 2015

12. Proportion of seats held by women in the national parliament

12. 6.3% in 1990 23.0% in 2003

Goal 4 Reduce child mortality 14. Infant mortality rate (deaths/1,000 live births)

Target 5 Reduce by two thirds, between 19902015, the under-5 mortality rate

13. Under-5 mortality rate (deaths/1,000 live births)

13. 170 in 1990 106 in 1999 14. 134 in 1990 104 in 1995 87 in 2002 15. 62% in 1996 42% in 2000 16. 750 in 1990 656 in 1998 530 in 2000 16a. 13% in 1990 23% in 1995 32% in 2000 17. 14% in 1994 17% in 1999

14. 45 deaths/1,000 live births in 2015

15. Proportion of 1-year-old children immunized against measles 16. Maternal mortality ratio (deaths/100,000 births)

15. 90% in 2015

Goal 5 Improve maternal health

Target 6 Reduce by three quarters, between 19902015, the maternal mortality ratio

16. 185/1,000 live births in 2015

16a. Contraceptive prevalence rate

16a. 55% in 2015

17. Proportion of births attended by skilled health personnel 18a. HIV prevalence among 1524 years old commercial service women

17.

80% in 2015

Goal 6 Combat HIV/AIDS, malaria, and other

Target 7 Have halted by 2015, and begun to reverse the spread of

18a. 0.4% in 2001

18a. < 1% in 2015

Goals 19a. Proportion of 1524 years old women who have ever used condom during sexual intercourse 19b. Proportion of 1524 years old commercial service women reporting consistent use of condom with nonregular sexual partners in the past 12 months 20a. Proportion of 1524 years old women who know how to prevent RTIs/STDs 20b. Proportion of 1524 year old commercial service women who correctly identify ways of preventing sexual transmission of HIV and who reject major misconceptions about HIV transmission or prevention 21. Death rate associated with malaria (per 100,000) 21a. Morbidity rate due to malaria (suspected cases per year per 1,000) 22. Proportion of population in malaria risk areas using effective malaria prevention and treatment measures 22a. Proportion of population in malaria risk areas protected by impregnated bed nets 23. Prevalence rate associated with tuberculosis (per 100,000) 24.1 Proportion of tuberculosis cases detected under directly observed treatment, short-course 20a. 32% in 2000 19b. 45% in 2000 19a. 0.9% in 1994 0.7% in 2000 19a. 20% in 2015

Targets

Indicators

Lao PDRs Baselines and Most Recent Status Lao PDRs Targets

diseases

HIV/AIDS

19b. 70% in 2015

20a. 70% in 2015

20b. 20% in 2000

20b. 70% in 2015

Target 8 Have halted by 2015 and begun to reverse the incidence of malaria and other major diseases

21. 9.0 in 1990 3.5 in 2002 21a. 44 in 1990 48 in 2002 22. 23.9% in 2000

21. 0.2 deaths/ 100,000 in 2015 21a. 15 in 2015

22. 100% in 2015

22a. 25% in 1999 60% in 2002

22a. 100% in 2015

23. 144 in 1990

23. 50/100,000

Appendix 1

24.1 24% in 1996 47% in 2002

24.1 70% in 2015

77

78

Goals

Targets

Indicators

Lao PDRs Baselines and Most Recent Status Lao PDRs Targets 24.2 72% in 1996 83% in 2002 25. 47% in 1992 24.2 85% in 2015

Appendix 1

24.2 Proportion of tuberculosis cases under directly observed treatment 25. Proportion of land forest cover

Goal 7 Ensure environmental sustainability 26. Area protected to maintain biological diversity as proportion of total surface area 27.1 Carbon dioxide emissions from fossil fuels (metric tons/capita) 27.1 0.1 in 1990 0.1 in 1998 26. 12% in 1993 14% in 2000

Target 9 Integrate the principles of sustainable development into country policies and programs and reverse the loss of environmental resources

25. Target under consideration by Lao Government 26. Target under consideration by Lao Government 27.1 Target under consideration by Lao Government 27.1a Target under consideration by Lao Government

27.1a Carbon dioxide emissions from all emission sources (metric tons/capita)

27.1a 4.1 in 1990

27.2. Consumption of ozone-depleting chlorofluorocarbons (metric tons of ozone depleting potential) 28. Proportion of population using solid fuels

27.2. 50 in 1999 42 in 2002

27.2 0 in 2005

28.

97% in 1995 96% in 2000

28. Target under consideration by Lao Government

Target 10 Halve, by 2015, the proportion of people without sustainable access to safe drinking water

29.

Proportion of population with sustainable access to an improved water source

29.

28% in 1990 52% in 2002

29. 80% in 2015

30a. Proportion of urban population with access to improved sanitation

30a.

24% in 1990 51% in 2002

30a. 70% in 2015

Goals

Targets

Indicators

Lao PDRs Baselines and Most Recent Status Lao PDRs Targets

Target 11 By 2020, have achieved a significant improvement in the lives of at least 100 million slum dwellers

31. Proportion of urban households with access to secure tenure

31.

91% in 1995

31.

Target under consideration by Lao Government

ADB = Asian Development Bank, AIDS = acquired immunodeficiency syndrome, GDP = gross domestic product, HIV = human immunodeficiency virus, Lao PDR = Lao Peoples Democratic Republic, RTI = reproductive tract infection, STD = sexually transmitted disease. Source: United Nations Development Programme. 2004. Millennium Development Goals Progress Report for Lao PDR. Vientiane.

Appendix 1

79

80

Appendix 1

Table A1.5: Projections of Growth by Sector Scenario Base Case Growth by Sector Agriculture Industry Services Natural Resources Total Agriculture Industry Services Natural Resources Total Agriculture Industry Services Natural Resources Total 19992002 2.8 1.3 2.0 0.1 6.2 2.8 1.3 2.0 0.1 6.2 2.8 1.3 2.0 0.1 6.2 2005 1.3 1.6 1.5 0.1 4.5 1.3 1.6 1.5 0.1 4.5 1.8 2.1 1.8 0.4 6.1 20062010 1.2 1.8 1.6 0.6 5.2 1.2 1.8 1.6 1.8 6.4 1.6 2.3 1.8 2.3 8.0 20112015 1.1 2.1 1.7 0.0 4.9 1.1 2.0 1.6 (0.1) 4.6 1.4 2.5 1.7 1.5 7.1

Base Case-Plus

High Case

Lao PDR = Lao People's Democratic Republic. Source: World Bank. 2004. Lao PDR Country Economic Memorandum: Realizing the Development Potential of Lao PDR. Report No. 30188-LA. Washington D.C.

Table A1.6: Projections of Poverty Indicators Scenario (2) Base CasePlus 2010 2015 2005 26.2 23.9 22.8 6.3 5.7 5.5 2.2 2.1 2.0 1,590 1,642 1,769 36.3 40.6 42.6

Indicator Poverty Headcount Poverty Gap Poverty Severity Number of Poor ('000) Inequality (Gini Coefficient) Memorandum Items: Real Per Capita GDP Growth

Actual 1997 2002 39.1 29.2 10.3 7.1 3.9 2.6 1,943 1,645 34.9 35.6

(1) Base Case 2005 2010 2015 26.2 24.1 22.8 6.3 5.8 5.5 2.2 2.1 2.0 1,590 1,650 1,772 36.3 38.7 41.1

(3) High Case 2005 2010 2015 24.6 18.5 14.4 5.7 4.1 3.1 2.0 1.5 1.1 1,490 1,265 1,115 36.3 40.8 44.7

NPEP 2006 2010 22.1 16.2 5.0 3.6 1.8 1.3 1,372 1,108 37.7 40.3

4.3

3.2

4.6

5.2

4.9

4.6

6.4

4.6

6.0

7.9

7.1

4.6

4.9

GDP = gross domestic product, NPEP = National Poverty Eradication Program. Source: World Bank. 2004. Lao PDR Country Economic Memorandun: Realizing the Development Potential of Lao PDR. Report No. 30188-LA. Washington D.C.

Appendix 1

81

Figures A1.3A1.14: Projections of Millennium Development Goal Indicators Goal 1 Eradicate Extreme Poverty and Hunger
Target 1: Halve between 1990 and 2015, the proportion of people living in poverty
Figure A1.3: National MDG Indicator 001a. Poverty Headcount Ratio (% of population living below the national poverty line) Figure A1.4: MDG Indicator 002. Poverty Gap Ratio (incidence x depth of poverty [%])

Target 2: Halve, between 1990 and 2015 the proportion of people who suffer from hunger Figure A1.5: Indicator 004. Prevalence of Underweight Children Under-Five Years of Age (% of children under five)
Figure A1.6: MDG Indicator 005. Proportion of Population Living Below the Minimum Level of Dietary Energy Consumption (% of population)

Goal 2 Achieve Universal Primary Education

Target 3: Ensure that by 2015, children everywhere, boys and girls alike, will be able to complete a full course of primary schooling
Figure A1.7: MDG Indicator 007. Proportion of Pupils Starting Grade 1 Who Reach Grade 5 (% of children enrolled in Grade 1)

82

Appendix 1

Goal 3 Promote Gender Equality & Empowerment of Women

Target 4: Eliminate gender disparity in primary and secondary education, preferably by 2015, and to all levels of education no later than 2015
Figure A1.8: MDG Indicator 009. Ratio of Girls to Boys in Primary, Secondary, and Tertiary Education (number of girls per 100 boys enrolled)

Goal 4 Reduce Child Mortality

Target 5: Reduce by two-thirds the under-five mortality rate
Figure A1.9: MDG Indicator 013. Under-Five Years Old Child Mortality Rate (deaths per 1,000 live births) Figure A1.10: MDG Indicator 014. Infant Mortality Rate (deaths per 1,000 live births)

Goal 5 Improve Maternal Health

Target 6: Reduce by three quarters the maternal mortality ratio
Figure A1.11: MDG Indicator 016. Maternal Mortality Ratio (deaths per 100,000 live births) Figure A1.12: National MDG Indicator 016a. Contraceptive Prevalence Rate (% females aged 1549) years)

Appendix 1

83

Goal 6 Combat HIV/AIDS, Malaria and other diseases

Target 7: Have halted by 2015, and begun to reverse, the spread of HIV/AIDS (No graph) Target 8: Have halted by 2015 and begun to reverse, the incidence of malaria and other major diseases
Figure A1.13: MDG Indicator 021. Death Rate Associated with Malaria (per 100,000 population)

Goal 7 Ensuring Environmental Sustainability

Target 9: Integrate the principles of sustainable development into country policies and programs, and reverse the loss of environmental resources
Figure A1.14: MDG Indicator 30. Proportion of Population with Sustainable Access to an Improved Water Source, Urban and Rural (% of population)

AIDS = acquired immunodeficiency syndrome, HIV = human immunodeficiency virus, Lao PDR = Lao Peoples Democratic Republic, MDG = Millennium Development Goal. Source: United Nations Development Programme. 2004. Millennium Development Goals Progress Report for Lao PDR. Vientiane.

84

Appendix 2

QUALITY AT ENTRY OF THE COUNTRY STRATEGIES AND PROGRAMS: THE ASIAN DEVELOPMENT BANKS CORPORATE STRATEGIES 1. This part of Appendix 2 discusses various Asian Development Bank (ADB) corporate strategies developed since the early 1990s to guide ADB operations. These strategies are classified under two periods in sections A and Bprior to and after the adoption of poverty reduction as the ADB overarching objectiveas follows: (i) a series of 3-year rolling MediumTerm Strategic Framework (MTSF) papers, from 1992 until 1995, covering 19951998; and (ii) the Poverty Reduction Strategy (PRS), 1999; the Long-Term Strategic Framework (LTSF), 20012015; and the Medium-Term Strategy (MTS), 20012005. The thrusts of these ADB strategies are listed below as a reference used in the main text in assessing whether the objective and priority areas identified under the Country Strategies for the Lao Peoples Democratic Republic (Lao PDR) in each of the three periods are responsive/relevant to ADB strategies at that time. Section C discusses ADBs adoption of the Millennium Development Goals (MDGs) and Managing for Development Results (MfDR) as a corporate commitment. A. A Series of Medium-Term Strategic Framework Papers

2. ADB strategic priorities for the 1990s were outlined in the 1989 panel report, The Asian Development Bank in the 1990s.1 The report emphasized the need to (i) balance ADB focus on economic growth with social infrastructure development, (ii) improve the living standards of the poorest groups, (iii) protect the environment, and (iv) reorient the public sector. Based on these emphases, a series of 3-year rolling MTSF papers2 were prepared from 1992 until 1995 (covering 19951998). The MTSF specified five strategic thrusts to guide the preparation of the Country Strategies and Programs for developing member countries (DMCs), including support of (i) economic growth, (ii) human development, (iii) poverty reduction, (iv) women in development, and (v) environmental protection.3 It also redefined ADB operating role from being project financier to project financier and catalyst of policy change and capacity development due to the lesson learned that it was virtually impossible to have good projects in a poor policy environment. Four priority areas were identified for ADB operations: (i) policy support; (ii) capacity building for development management; (iii) creating and strengthening productive capacity, infrastructure, and services; and (iv) regional cooperation. 3. To ensure implementation of the MTSF five strategic thrusts through the Country Strategies and Programs for DMCs, a system of project classification was adopted during that time to classify projects by their primary and secondary objectives in accordance with the five strategic thrusts. B. Poverty Reduction Strategy, Long-Term Strategic Framework, and Medium-Term Strategy

4. Poverty reduction became the overarching goal of ADB in 1999 when the PRS4 was approved. The PRS identified three strategic pillars to guide the preparation of the Country Strategies and Programs for DMCs: (i) pro-poor, sustainable economic growth; (ii) good governance; and (iii) social development. It also specified three sector priorities: (i) agriculture and rural development, (ii) social sectors, and (iii) infrastructure and finance. In addition, it
1 2 3

ADB. 1989. The Asian Development Bank in the 1990s: Panel Report. Manila. ADB. 1992. The Banks Medium-Term Strategic Framework (19921995). Manila. These five strategic thrusts were abbreviated as EG, HD, PR, WID, and EP, respectively, for the purpose of project classification. ADB. 1999. Fighting Poverty in Asia and the Pacific: The Poverty Reduction Strategy. Manila.

Appendix 2

85

emphasized the need to develop a Poverty Reduction Partnership Agreement with each DMC, together with medium-term target indicators to monitor progress toward long-term development goals. Shortly after the PRS was approved, the Private Sector Development (PSD) Strategy5 was approved in March 2000 to promote private sector-led growth and its contributions to poverty reduction. These two strategies formed the major building block for the LTSF (2001 2015)6 approved in March 2001. 5. The LTSF identifies three core strategic areas for ADB operations: (i) sustainable, broadbased economic growth, including investments both in physical and social infrastructure, with environmentally sound development; (ii) inclusive social development, including investments in social support programs to improve equity and empowerment for women and disadvantaged groups; and (iii) governance for effective policies and institutions, including support for public sector reform, and legal and judicial reforms. These three core areas are complemented by three crosscutting strategic themes aimed at promoting (i) PSD, (ii) regional cooperation and integration, and (iii) environmental sustainability. 6. The LTSF also identifies the following four strategic operating principles for implementing ADB strategic thrusts to ensure a strong country focus, and selectivity of assistance programs: (i) ensuring country leadership and ownership of the development agenda and priorities; (ii) taking a long-term approach to development assistance, particularly in the prioritized sectors and areas to ensure greater selectivity; (iii) enhancing strategic alliances and partnership to ensure greater selectivity and complementarity; and (iv) measuring development impacts of assistance programs by developing indicators for short- and medium-term targets toward achievement of long-term development goals. To translate these strategic operating principles into concrete forms of assistance programs, the LTSF emphasizes innovations in modalities, which involves doing different things and doing things differently, including (i) a cluster approach, which involves sequencing lending and nonlending assistance to a particular sector to achieve a defined set of long-term goals, thus supporting a long-term development approach and greater selectivity; (ii) a sectorwide approach to ensure larger development impacts and increased government ownership in that sector; and (iii) new partnership modalities (e.g., with nongovernment organizations, civil society groups, and local governments) to support partnership development. 7. The LTSF is to be implemented through a set of three MTSs,7 the first one of which, approved in September 2001, covers 20012005. It echoes the strategic thrusts and operating principles of LTSF for the country strategy and programs to implement. Following the adoption of the PRS, the system of project classification has been changed from classifying projects by their primary and secondary objectives in accordance with the old MTSF five strategic thrusts, to classifying by (i) poverty focus under three categories: core poverty intervention, poverty intervention, and other development intervention;8 and (ii) thematic focus under seven categories: economic growth, environmental protection, good governance, gender and development, human development, PSD, and regional cooperation.9

5 6

7 8 9

ADB. 2000. PSD Strategy: Promoting the Private Sector to Support Growth and Reduce Poverty. Manila. ADB. 2001. Moving the Poverty Reduction Agenda Forward in Asia and the Pacific: The Long-Term Strategic Framework of the Asian Development Bank (20012015). Manila. ADB. 2001. Medium-Term Strategy (20012005). Manila. Abbreviated as CPI, PI, and ODI, respectively. Abbreviated as EG, ENV, GG, GD, HD, PSD, and RC, respectively.

86 C.

Appendix 2

Millennium Development Goals and Managing for Development Results

8. The MDGs are a series of goals, targets, and indicators agreed to at the Millennium Summit of 189 United Nations (UN) member countries, in September 2000, for tackling poverty worldwide by 2015. The MDGs evolved from the International Development Goals for poverty reduction, which were formerly agreed to by UN member countries. ADB adopted the International Development Goals through its PRS, LTSF, and MTS, which formed the basis for ADB endorsement of the MDGs. Alongside, ADB also endorsed the MfDR in 2002, following the 2002 Monterrey International Conference on Financing for Development, as a corporate commitment to help DMCs achieve their MDGs by 2015. Such commitment has been accompanied by the following actions: (i) strengthening DMCs MfDR capacity, (ii) improving the relevance and effectiveness of aid, and (iii) fostering a global partnership with other funding agencies (including joint efforts and harmonization of Country Strategies and Programs). 9. The MDGs consist of eight goals: (i) eradicating extreme poverty and hunger; (ii) achieving universal primary education; (iii) promoting gender equality and empowering women; (iv) reducing child mortality; (v) improving maternal health; (vi) combating human immunodeficiency virus/acquired immunodeficiency syndrome, malaria, and other diseases; (vii) ensuring environmental sustainability; and (viii) developing a global partnership for development. The last goal is generally for more-developed countries to adopt as a means to achieving the first seven goals. Each of these goals has corresponding targets, totaling 18, and a number of indicators for each target. The MDGs as applied to the Lao PDR are shown in Table A1.4 (Appendix 1), in which the baseline value and expected medium- and long-term values for each indicator is specified. These expected future MDG values are also shown in Figures A1.3A1.14 (Appendix 1).

Table A2.1: Relevance of the Asian Development Banks (ADB) Country Strategies and Programs for the Lao PDR to the Countrys Key Socioeconomic Issues, Government Plans, ADBs Corporate Strategies, and Other Key Funding Agencies Country Strategies
Transition to a MarketBased System (1986 1990) Improved Macroeconomic Performance (19911995) ADBs First Country Strategy for the Lao PDR (1991) Strategic Objective x to transform the economy to a market-based system Strategic Objective x to facilitate smooth transition to a marketbased system ADBs Second Country Strategy for the Lao PDR (1996) Financial Destabilization (19962000) No ADB Country Strategy for the Lao PDR during this Period Recovery and Consolidation (2001 2005) ADBs Third Country Strategy for the Lao PDR (2001) Strategic Objective x poverty reduction with greater community participation and geographic focus in poor regions Pillars x pro-poor, sustainable growth x inclusive social development x good governance Priority Areas x policy analysis and institutional reforms to provide a conducive environment for PSD x direct investments, particularly in essential physical infrastructure x selective investments in basic social services due to limited Governments absorptive capacity Priority Areas x enhancing economic growth and broadening its impacts x policy reforms to encourage PSD x HRD and institutional capacity development x regional cooperation Strategic Gaps (in relation to the Government Plan in this Period) x failed to address environmental issues Priority Areas x rural development and market linkages x HRD x sustainable environmental management x PSD and regional cooperation

Prior to Major Economic Reforms (1975-1985)

1. ADBs Country Strategies for the Lao PDR

No ADB Country Strategy for the Lao PDR during this Period

Appendix 2

Partnerships x ADB signed PRPA with the Government in September 2001, with 4 priority sectors (ANR, education, health, and road transport)

87

88

Prior to Major Economic Reforms (1975-1985) Improved Macroeconomic Performance (19911995) x but ADBs Country Programs started addressing direct environmental issues since the later part of the preceding period in 1995 through an ADTA (No. 2329), and continued with some more ADTAs in this period (see Table A3.3, Appendix 3) Strategic Gaps (in relation to the Countrys Issues in the Preceding and this Periods) x failed to address governance issues but ADBs Country Programs started addressing direct governance issues since the later part of the preceding period in 1995 through an ADTA (No. 2334), and continued with some more ADTAs in this period (see Table A3.3, Appendix 3) 19861990 (without ADBs Country Strategysee second bar in Figure 4 of the main text) x in accordance with the 19911995 (under ADBs 1991 Country Strategy see third bar in Figure 4 of the main text) x with ADBs 1991 Country 19962000 (under ADBs 1996 Country Strategy see fourth bar in Figure 4 of the main text) x with ADBs 1996 Country 20012005 (under ADBs 2001 Country Strategysee fifth bar in Figure 4 of the main text) x with ADBs 2001 Financial Destabilization (19962000)

Transition to a MarketBased System (1986 1990)

Recovery and Consolidation (2001 2005) x ADB was involved in the joint preparation of NGPES (which is the Governments longterm plan for poverty reduction)

Appendix 2

2. ADBs Country Programs for the Lao PDR

19701985 (Prior to the CAPE Period see first bar in Figure 4 of the main text)

x about half of ADB

Prior to Major Economic Reforms (1975-1985) Improved Macroeconomic Performance (19911995) Strategy (focusing on transition to a marketbased economy through physical and basic social services), 62% of ADB lending assistance went to physical infrastructure (35% to transport and 27% to energy) x this was followed by social infrastructure (15% to urban development and water supply, 10% to education and 1% to health) x lending assistance to ANR decreased slightly to 12% x environmental and governance issues started to be directly addressed in the later part of this period in 1995 through non-lending assistance (ADTA 2329 and 2334, respectively), and continued with more ADTAs in the next periods (see Table A3.3, Appendix 3) Government Third Plan (19911995) Government Fourth Plan (19962000) Strategy (focusing on facilitating smooth transition to a marketbased system through economic growth, PSD, HRD, and regional cooperation), the composition of ADB lending assistance resembled that of the previous period (i.e., dominated by transport and energy by more than half) Financial Destabilization (19962000) Governments adoption of the 1986 NEM to transform the economy to a market-based system, about 70% of ADB lending assistance went to physical infrastructure (48% to transport and 20% to energy) and 17% to finance x lending assistance to ANR decreased substantially to 14%

Transition to a MarketBased System (1986 1990)

Recovery and Consolidation (2001 2005) Country Strategy (which shifted the focus to poverty reduction through rural development and market linkages, HRD, environmental management, PSD, and regional cooperation), ADBs Country Programs have become less coherent as the composition of ADBs lending assistance in physical infrastructure was reduced to less than half (21% transport and 13% energy) x social infrastructure received more support (27% to urban development and water supply, and 10% to education) x lending assistance to ANR increased slightly to 16%

lending assistance went to the ANR sector in accordance with the Governments first plan (which focused on food self-sufficiency)

3. Government Plans/ Strategies Strategic Objective x transformation to a

Government First Plan (19811985)

Government Second Plan (19861990), with the Introduction of the 1986 NEM

Government Fifth Plan (20012005)

Appendix 2

Strategic Objective x food self-

Strategic Objective x transformation to a

Strategic Objective x smooth transition to a

Strategic Objective x social and political

89

90

Prior to Major Economic Reforms (1975-1985) Improved Macroeconomic Performance (19911995) market-based system market-based system Financial Destabilization (19962000) market-based system, without sacrificing food self-sufficiency stability, with sustainable economic growth and poverty reduction Priority Areas x food self-sufficiency x environmental preservation (e.g., resolving the issue of slash-and-burn) x HRD x saving mobilization to encourage PSD Progresses/Issues

Transition to a MarketBased System (1986 1990)

Recovery and Consolidation (2001 2005)

Appendix 2

sufficiency and collectivization of agriculture

Priority Areas x privatization of SOEs

Priority Areas x policy and institutional reforms for PSD x infrastructure development and basic social services

Priority Areas x infrastructure development x HRD x environmental preservation x regional cooperation

4. Countrys Key SocioEconomic Progresses and Issues Progresses/Issues Progresses/Issues x issues from the first period continued as the economy started to move towards a market system through the introduction of the 1986 NEM x the NEM reforms gathered momentum since 1989, with the IMFs SAF and the World Banks SAC-I and II to support macro stabilization and structural adjustments x these were complemented by ADB assistance for policy adjustments in the ANR and finance sectors in 1989 and x more than 100 SOEs were privatized, tax collection improved, FDI law revised in 1994, FDI improved, and controls/ restrictions lifted x GDP growth averaged 7% x inflation declined to 6% x macro position remained fragile, with high fiscal deficits averaging 9.7% of GDP x while external assistance programs brought about sweeping macro reforms, the progress in translating such policies into actions was slowed due to weak governance (in terms of institutional

Progresses/Issues by 1985 (after a Decade of Pursuing Development under the Socialist Line)

Progresses/Issues

x economy declined (manufacturing growth dropped by 50%, exports declined to 30% of imports, external debt doubled, and debt service ratio rose to 22%) x economic activities centered around subsistence and barter trade systems x many SOEs drained fiscal budget through

x weak governance continued x economy was hardest hit by exogenous shock (the 1997 Asian financial crisis) x currency collapsed x GDP growth decreased to 4% in 1998, but averaged 6% during the period x export growth averaged 1.7% x Inflation shot to 134% in 1999, but fell to 27% in 2000 x fiscal deficits remained high (9.6% of GDP) x by 2000, poverty incidence remained high (39%) and GDP per

x IMF provided a $40 million PRGF in 2001, requiring greater efforts in revenue collection and bank restructuring x economy recovered, with GDP growth averaging 6% x export growth increased slightly to 2.5% x FDI law was further amended in 2004 x the US granted a NTR status to the country in 2004, which will expand manufacturing exports to the US x inflation remained in double digits (averaging 11%)

Prior to Major Economic Reforms (1975-1985) Improved Macroeconomic Performance (19911995) constraints posed by vested interests and lack of tradition of transparency) x by 1995, poverty incidence remained high (46%) and GDP per capita low ($377) capita low ($335) Financial Destabilization (19962000) 1990 x by 1990, inflation was 60% x by 1990, about half (48%) of the countrys population was living in poverty, and GDP per capita was less than $200

Transition to a MarketBased System (1986 1990)

Recovery and Consolidation (2001 2005)

subsidies

Appendix 2

x high proportion of capital expenditure (60% of total) x revenue base remained weak (averaging 12% of GDP) due to weak governance x high fiscal deficits (averaging 7% of GDP), financed mostly by foreign borrowings and grants x high stock of external debt (92% of GDP), half of which was owed to the Russian Federation which agreed to write off 70% x debt service burden (9.3% of exports) would be manageable if the reforms are on track x weak ANR sector due to lack of diversification, commercialization, and conducive investment climate x difficulties to attract FDIs and develop SMEs due to lack of conducive investment laws and climate x GDP per capita remained low ($402 in 2004)

91

92

Prior to Major Economic Reforms (1975-1985) Improved Macroeconomic Performance (19911995) Financial Destabilization (19962000)

Transition to a MarketBased System (1986 1990)

Recovery and Consolidation (2001 2005) x poverty incidence remained high (33% in 2003), though declined x other non-income MDG indicators remained poor (see Table A1.4, Appendix 1)

Appendix 2

5. ADBs Corporate Strategies

ADBs Corporate Objectives during the Early 1990s

ADBs MTSF (19951998)

ADBs PRS (1999), LTSF (20012015), and a Series of MTSs Strategic Objective x poverty reduction Pillars/Priority Areas x pro-poor, sustainable economic growth x inclusive social development x good governance

x balance between economic growth and social infrastructure development x improvement in living standards of the poorest x environmental protection x public sector reorientation x x x x x IMFs and World Banks Country Strategies for the Lao PDR (Early 1990s)

economic growth HRD poverty reduction women in development environmental protection

6. Other Key Funding Agencies Country Strategies for the Lao PDR

IMFs and World Banks Country Strategies for the Lao PDR (Mid-1990s)

IMFs and World Banks Country Strategies for the Lao PDR (Early and Mid-2000s) x to facilitate smooth transformation into a market-based system mainly through continued structural and macro reforms and banking reforms Strategic Objective x poverty reduction

x to transform the economy into a market-based system mainly through structural adjustments and macro reforms

Priority Areas x sustaining growth (through regional cooperation, PSD, rural development and natural resources management)

Prior to Major Economic Reforms (1975-1985) Improved Macroeconomic Performance (19911995) Financial Destabilization (19962000) x improving social outcomes (through public financial management, service delivery capacity, and targeted poverty reduction)

Transition to a MarketBased System (1986 1990)

Recovery and Consolidation (2001 2005)

Partnerships x joint preparation of NGPES (which is the Governments longterm plan for poverty reduction and has served as the countrys full PRSP since 2003)

ADB = Asian Development Bank, ADTA = advisory technical assistance, ANR = agriculture and natural resources sector, CAPE = Country Assistance Program Evaluation, FDI = foreign direct investment, GDP = gross domestic product, HRD = human resources development, IMF = International Monetary Fund, Lao PDR = Lao Peoples Democratic Republic, LTSF = Long-Term Strategic Framework, MDG = Millennium Development Goal, MTS = Medium-Term Strategy, MTSF = Medium-Term Strategic Framework, NEM = New Economic Mechanism, NGPES = National Growth and Poverty Eradication Strategy, NTR = normal trade relations, PRGF = Poverty Reduction and Growth Facility, PRPA = Poverty Reduction Partnership Agreement, PRS = Poverty Reduction Strategy, PRSP = Poverty Reduction Strategy Papers, PSD = private sector development, SAC = Structural Adjustment Credit, SAF = Structural Adjustment Facility, SMEs = small and medium-sized enterprises, SOE = state-owned enterprise, US = United States. Sources: Lao PDR. 1990, 1995, 2000. National Development Plans, Various Issues. Vientiane; ADB. 1990, 1995. Country Operational Strategy. Manila; ADB. 2001. Country Strategy and Program. Manila.

Appendix 2

93

94

Appendix 2

Figure A2.1: Assessment of Relevance of Asian Development Banks 1991 Country Strategy for the Lao PDR
ADBs 1991 Country Strategy for the Lao PDR - Transition to a Market Economy x policy and institutional reforms for PSD x investments in physical infrastructure x selective investments in basic social services due to limited government absorptive capacity

Government 3 Plan (1991 1995) - Transition to a Market Economy x policy and institutional reforms for PSD x physical and social infrastructure development (HR)

rd

Countrys Issues (19911995) x macro position remained fragile, but improved due to assistance in policy reforms from ADB, IMF, and WB x slow progress in translating policy reforms into action due to weak governance (HR)

ADBs Corporate Objectives (Early 1990s) x balance between growth and social infrastructure x improvement in living standard of the poorest x environmental protection x public sector reorientation (R)

Country Strategies of Key Funding Agencies for the Lao PDR (Early 1990s) x transformation to a market system mainly through structural adjustments and macro reforms (R)

ADB = Asian Development Bank, HR = highly relevant, IMF = International Monetary Fund, Lao PDR = Lao Peoples Democratic Republic, PSD = private sector development, R = relevant, WB = World Bank.

Figure A2.2: Assessment of Relevance of Asian Development Banks 1996 Country Strategy for the Lao PDR
ADBs 1996 Country Strategy for the Lao PDR - Further Transition to a Market Economy x sustainable growth and its impacts through infrastructure development x policy reforms for PSD x HRD and institutional capacity development x regional cooperation th - Strategic Gaps (in relation to the 4 Plan and Countrys Issues) x failed to address environmental and governance issues

Government 4 Plan (19962000) - Smooth Transition to a Market System x infrastructure development x HRD x environmental preservation x regional cooperation (PR)

th

Countrys Issues (19962000) x weak governance continued x economy was hardest hit by the 1997 Asian financial crisis x economic growth averaged 6% x fiscal deficit was 9.6% of GDP x export growth was 1.7% x high poverty incidence (39% in 1998) (PR)

ADBs Corporate Objectives (MTSF, 19951998) x economic growth x HRD x poverty reduction x women in development x environmental protection (R)

Country Strategies of Key Funding Agencies for the Lao PDR (Mid-1990s) x smooth transformation to a market system mainly through continued structural/macro and banking reforms (R)

ADB = Asian Development Bank, GDP = gross domestic product, HRD = human resources development, Lao PDR = Lao Peoples Democratic Republic, MTSF = Medium-Term Strategy Framework, PR = partly relevant, PSD = private sector development, R = relevant.

Appendix 2

95

Figure A2.3: Assessment of Relevance of Asian Development Banks 2001 Country Strategy for the Lao PDR
ADBs 2001 Country Strategy for the Lao PDR - Poverty Reduction through Three Pillars (Pro-Poor Growth, Inclusive Social Development, and Good Governance) x rural development and market linkages x HRD x sustainable environmental management x PSD and regional cooperation - Partnerships x joint preparation of PRPA and NGPES

Government 5 Plan (20012005) - Stability with Sustainable Growth and Poverty Reduction x food self-sufficiency x environmental preservation x HRD x savings mobilization for PSD (HR)

th

Country Issues (20012005) x economy recovered, with GDP growth of 6% and export growth 2.5% x revenue remained low (12% of GDP) due to weak governance x fiscal deficit remained high (7% of GDP) x debt-service burden (9.3% of exports) manageable if reforms on track x weak agriculture sector due to lack of commercialization and conducive investment climate x difficulties to attract foreign direct investments and develop SMEs due to lack of conducive investment laws and climate x poverty incidence remained high (33% in 2003) (R)

ADBs Corporate Objectives - Poverty Reduction x pro-poor, sustainable economic growth x inclusive social development x good governance (HR)

Country Strategies of Key Funding Agencies for the Lao PDR (Early and Mid2000s) - Poverty Reduction x sustaining growth (through regional cooperation, PSD, rural development, and natural resources management) x improving social outcomes (through public financial management, service delivery capacity, and targeted poverty reduction) - Partnerships x joint preparation of NGPES (R)

ADB = Asian Development Bank, GDP = gross domestic product, HR = highly relevant, HRD = human resources development, Lao PDR = Lao Peoples Democratic Republic, NGPES = National Growth and Poverty Eradication Strategy, PRPA = Poverty Reduction Partnership Agreement, PSD = private sector development, R = relevant, SMEs = small and medium-sized enterprises.

96

Appendix 2

Figures A2.4A2.9: Cross-Country Comparison of Governance/Corruption Indicators

Figure A2.4: Voice and Accountability Lao PDR, Cambodia, Thailand, and Viet Nam (19962004)
0.50 Score in relation to mean of zero 1.50 0.00 Score in relation to mean of zero 1.00 0.50 0.00 (0.50) (1.00) (1.50) 1996 Lao PDR Cambodia Thailand Viet Nam

Figure A2.5: Political Stability Lao PDR, Cambodia, Thailand, and Viet Nam (19962004)

(0.50)

Lao PDR Cambodia

(1.00)

Thailand Viet Nam

(1.50)

(2.00) 1996

1998

2000

2002

2004

1998

2000

2002

2004

Figure A2.6: Regulatory Quality Lao PDR, Cambodia, Thailand, and Viet Nam (19962004)
1.00 Score in relation to mean of zero Score in relation to mean of zero 0.50 0.00 (0.50) (1.00) (1.50) 1996 Lao PDR Cambodia Thailand Viet Nam 1.00 0.50 0.00 (0.50) (1.00)

Figure A2.7: Rule of Laws Lao PDR, Cambodia, Thailand, and Viet Nam (19962004)

Lao PDR Cambodia Thailand Viet Nam

1998

2000

2002

2004

(1.50) 1996

1998

2000

2002

2004

Figure A2.8: Government Effectiveness Lao PDR, Cambodia, Thailand, and Viet Nam (19962004)
Score in relation to mean of zero
0.60 Score in relation to mean of zero 0.40 0.20 0.00

Figure A2.9: Control of Corruption Lao PDR, Cambodia, Thailand, and Viet Nam (19962004)
0.00 (0.20) (0.40) (0.60) (0.80) (1.00) (1.20) (1.40) 1996
Lao PDR Cambodia Thailand Viet Nam

(0.20) (0.40) (0.60) (0.80) (1.00) (1.20) (1.40) 1996 1998 2000 2002 2004 Lao PDR Cambodia Thailand Viet Nam

1998

2000

2002

2004

Source: Recalculated from D. Kaufmann, A. Kraay, and M. Mastruzzi. 2005. Governance Matters IV: Governance Indicators for 19962004. World Bank Policy Research Working Paper Series No. 3630. Washington, D.C.

Appendix 2

97

Table A2.2: Assessment of Positioning/Coherence of Asian Development Banks Country Strategies for the Lao Peoples Democratic Republic Criteria for Positioning Sufficient Background Research on Country and Sectors 1991 Country Strategy x Preparation of the 1991 Strategy was based mainly on a country economic review. x Sector analysis was broad, without much support from ETSW. x No attempt was made to use findings or lessons from existing evaluation reports. (PS) x The strategic thrust of the 1991 Strategy recognized the limitation on the Governments absorptive capacity. x Other aspects of government ownership were not addressed. 1996 Country Strategy x Preparation of the 1996 Strategy was based on a country economic review and some additional ETSW. x It used evaluation findings and lessons. 2001 Country Strategy x Preparation of the 2001 CSP was based on a country economic review and various ETSW (sector strategies and participatory poverty assessment). x It used evaluation findings and lessons. x It used information on activities of key DPs. (HS) x The 2001 CSP did not recognize the problem of limited government absorptive capacity. x Government ownership in leading the development agenda was not addressed. x However, more recent CSPUs gave emphasis to government ownership and participation. (US) x The 2001 CSP focused on poverty reduction. x This resulted in a diversion from ADBs comparative advantage in physical infrastructure to many other priority areas for direct poverty reduction impacts. x While focusing on poverty reduction is indisputable, there are concerns on how effective this Strategy would be when the limited resources were spread thinly across many sectors. x East Asian experience revealed that the most important mechanism for reducing poverty was rapid growth. x In terms of partnerships, the 2001 CSP recognized the need to develop partnerships and collaboration with other DPs, civil society, the private sector, and local government. x While formal partnership agreements were not developed during formulation of the 2001

Governments Absorptive Capacity and Ownership

(S) x The 1996 Strategy did not recognize the problem of limited government absorptive capacity. x Other aspects of government ownership were not addressed.

ADBs Comparative Advantage and Partnership with Other DPs

(S) x Prior to the 1991 Strategy, ADBs comparative advantage was in physical infrastructure. x The 1991 Strategy emphasized physical infrastructure, as it recognized the strength of ADB in this area. x Partnerships with other DPs was not given due consideration.

(US) x The 1996 Strategy continued to emphasize physical infrastructure, but with additional attention to the social sectors. x While partnerships with other DPs were not given due consideration, the activities of other DPs were listed to avoid duplicating efforts.

98

Appendix 2

Criteria for Positioning

1991 Country Strategy

1996 Country Strategy

2001 Country Strategy CSP, some were made afterwards (e.g., PRPA and NGPES). (PS) The 2001 CSP was not coherent, as it did not have a sector focus, with resources spread over many sectors. It had a geographic focus on some poorest northern provinces to deepen the poverty reduction impacts and develop synergies. (PS) While the poverty reduction focus of the 2001 CSP is indisputable, it did not have to shift away from the physical infrastructure-led growth focus, since experience elsewhere showed that rapid economic growth was a necessary condition for poverty reduction. (PS) The 2001 CSP identified constraints/risks to achieving the poverty reduction target. Mitigation of potential risks was broadly identified. Except for the poverty reduction target, other intermediate outcome targets were not identified, nor was a monitoring mechanism. (PS)

Focus/ Selectivity and Synergies

(S) x The 1991 Strategy focused on physical infrastructure in the transport and energy sectors to support private sector-led growth, although synergies were not directly addressed.

(S) x The 1996 Strategy focused on the transport and energy sectors, but with additional attention on HRD, although synergies were not directly addressed.

Long-Term Continuity

Constraints/ Risks and Adjustment Mechanism to Achieve Measurable Targets

(S) x Prior to the 1991 Strategy, almost 70% of ADBs Country Program focused on physical infrastructure to stimulate economic growth. x Continuity was recognized since the 1991 Strategy aimed to transform the economy to a market system mainly through physical infrastructure development. (S) x The 1991 Strategy was prepared without any measurable targets, risk assessment, or adjustment/ monitoring mechanism. This was consistent with ADB practice at the time.

(S) x The 1996 Strategy continued the market economy mandate for long-term continued growth prospects, based mainly on physical infrastructure development, although with additional attention to social infrastructure.

(S) x The 1996 Strategy was also prepared without any measurable targets, risk assessment, or adjustment/ monitoring mechanism, consistent with ADB practice at the time.

x x x

(US)

(US)

ADB = Asian Development Bank; CSP = Country Strategy and Program; CSPU = Country Strategy and Program Update; DP = development partner; ETSW = economic, thematic, and sector work; HRD = human resources development; HS = highly satisfactory; NGPES = National Growth and Poverty Eradication Strategy; PRPA = Poverty Reduction Partnership Agreement; PS = partly satisfactory; S = satisfactory; US = unsatisfactory.

Appendix 2

99

Table A2.3: Assessment of Positioning/Coherence of Asian Development Banks Country Programs for the Lao Peoples Democratic Republic Criteria for Positioning Sufficient Background Research on Sector/ Thematic Strategies 19911995 Country Program x Preparation of the 19911995 Program was based mainly on the 1991 Strategy and some updated country economic reviews. x ETSW was not sufficiently utilized to provide sector/ thematic analysis and strategies to guide the strategic directions of the sectors proposed in the 1991 Strategy. 19962000 Country Program x Preparation of the 19962000 Program was based on the 1996 Strategy and some updated country economic reviews. x The Program was based on some ETSW and ADTAs to update some sector/thematic strategies and to guide subsequent ADB operations in those sectors. x For example, in 1998, an ADTA1 was provided to support the preparation of the Governments 5-Year Education Sector Development Plan, which formed the basis for the countrys Long-Term Education Sector Strategic Vision (20012020). x Two ADTAs2 were provided in 1998 and 2000 to help the Government prepare a comprehensive sector strategy for banking sector reform. (S) x The 1996 Strategy suggested 8 sectors for interventions: ANR, finance, energy, transport, education, health, water supply, and urban development. x The 1996 Strategy did not address the limited government absorptive capacity and suggested more investments in social infrastructure. x The 19962000 Programs lending and nonlending proportions remained almost the same as those in the preceding period, with relatively high social infrastructure components (26% and 20%, respectively). x The annual average lending of this period was high ($67 million) for a small country 20012004 Country Program x Preparation of the 2001 2004 Program was based on the 2001 CSP and some updated country economic reviews. x The Program was based on a number of ETSW and ADTAs to update some sector/thematic strategies (e.g., Financial Sector Strategy and Roadmap, Private Sector Assessment, Assessment of Economic Potentials and Competitive Advantages of Ethnic Minority, Implications of Nam Theun 2 Project on Macro Management, Country Paper on Women, and Rural and Microfinance Strategy).

Governments Absorptive Capacity and Ownership

(PS) x The 1991 Strategy suggested 7 sectors for interventions: ANR, industry/finance, energy, transport, education, health, and water supply. x The 1991 Strategy suggested only selective interventions in social infrastructure due to limited government absorptive capacity. x The 19911995 Program did not really follow the 1991 Strategy since the proportions of both lending and nonlending (ADTAs) assistance for social infrastructure (education, health, water supply, and urban development combined) were high (26% and 27%, respectively), but almost negligible in the preceding period (1986

(S) x The 2001 CSP also suggested the same 8 sectors for interventions as the previous period, but with more emphasis on social infrastructure due to the poverty reduction focus. x The problem of limited government absorptive capacity was not addressed in the 2001 CSP, as the annual average lending under the 20002004 Program remained high ($56 million).

1
2

TA 3014: Education Sector Development Plan, for $530,000, approved in 1998. TA 3146: Commercial Banking Capacity and Efficiency Enhancement, for $550,000, approved in 1998; and TA 3466: Strengthening Corporate Governance and Management of State-Owned Commercial Banks, for $900,000, approved in 2000.

100

Appendix 2

Criteria for Positioning

19911995 Country Program 1990). x The annual average lending during this period was $70 million, which was quite high for a small country with limited absorptive capacity. x This amount of funding was more than double that in the preceding period ($29 million). (PS) x Prior to the 1991 Strategy, 70% of lending under the 19861990 Program went to physical infrastructure (energy and transport), with the nonlending proportion at 40%. x This implied that ADBs comparative advantage was in these two sectors. x Under the 19861990 Program, ADB started to provide support to the financial sector (17% and 29% of total lending and nonlending assistance, respectively), implying ADB had a major role in policy advise in the financial sector to help develop a legal and regulatory framework conducive to PSD. x In the first Strategy in 1991, physical infrastructure was stressed for market transition. x The 19911995 Program responded by continuing ADBs major role in physical infrastructure, with 62% of lending (and 24% of nonlending) assistance. x Under the 19911995 Program, coordination with other DPs was in the form of cofinancing on a project-byproject basis (5 of 16 projects in almost all sectors).

19962000 Country Program with limited absorptive capacity.

20012004 Country Program

ADBs Comparative Advantage and Partnership with Other DPs

(PS) x The 1996 Strategy also stressed the major role of physical infrastructure in stimulating economic growth. x The 19962000 Program responded by continuing ADBs comparative advantage in energy and transport, with 56% of its lending (and 26% of nonlending) assistance. x ADBs policy advisory role in the financial sector regained importance, with a high nonlending proportion (26%). x Complementary to ADBs advisory role in the financial sector, the 19962000 Program started to increase ADBs role in governance (8% of its nonlending assistance) to improve the legal and regulatory framework conducive for PSD, although governance was not stressed in the 1996 Strategy. x Coordination with other DPs during this period was again in the form of cofinancing on a project-by-project basis (9 of 13 projects in almost all sectors).

(PS) x With the 2001 CSPs emphasis on poverty reduction, the 20012004 Program responded by shifting away from ADBs comparative advantage in physical infrastructure to social infrastructure. x The lending proportion in physical infrastructure (energy and transport) fell to 34%, without any nonlending assistance. x The lending proportion in social infrastructure (education, health, water supply, and urban development) increased to 36% (from 26% in the previous period). x ADBs policy advisory role in governance increased to 17%, and in the financial sector continued with about the same nonlending proportion as in the previous period (27%), but a higher lending proportion (13%) due to the third financial policy-based loan. x ADBs importance as a major donor in various sectors is shown in Table 4. During 20002003, the proportions of ADBs sector disbursements to total disbursements of all DPs in the same sectors were the highest in energy and transport combined (24% and 14%, respectively). This was followed by 19% in the financial sector. This implies that ADB had a comparative advantage in physical infrastructure and in the financial sector (mainly through its policy advisory role). The

Appendix 2

101

Criteria for Positioning

19911995 Country Program

19962000 Country Program

20012004 Country Program corresponding proportion of ADBs disbursements in all sectors combined was 13%. Although this proportion might not be high in itself, it is considered high if it is compared with those of other DPs in Table A3.9 (Appendix 3). The table shows that the proportion of ADB disbursements in all sectors combined was second only to that of Japan (13% versus 26%). Cofinancing was on a project-by-project basis (6 of 13 projects in almost all sectors), rather than on a sector-wide level. Although possibilities of building a systematic collaboration with other DPs through adopting a program-based approach were discussed and explored in such sectors as education and health, preparation for the institutional readiness is yet to be undertaken. (PS) Although the 20012004 Programs lending had a geographic focus aimed at poverty targeting, it was not in accordance with ADBs comparative advantage due to the lack of sector focus. The lending was spread thinly in various sectors under social infrastructure (36%) and physical infrastructure (34%), with 16% to ANR and 13% to finance. This finding is confirmed by 3 another OED study, which found that the Lao PDR was among the six 4 countries with the least focused loan portfolios (i.e., the ongoing 23 loans as of end-2004 were spread over 9 sectors/subsectors, resulting in 2.6 loans per

Focus/ Selectivity and Synergies

(S) x Prior to having the first Strategy in 1991, ADBs Programs were more focused/selective than after strategies were developed. x For example, about 50% of total lending went to ANR under the 19701985 Program, and 70% to physical infrastructure under the 1986 1990 Program, with no lending and negligible nonlending support to social infrastructure. x With the 1991 Strategy, the 19911995 Programs lending proportion in physical infrastructure declined to 62%, while its nonlending counterpart declined to 26%. x Lending to social infrastructure (education, health, water supply, and urban development) started in this period at 26%, with the same

(S) x The 19962000 Program had about the same lending pattern as in the previous period, although with a different nonlending pattern due to the increased policy advisory role in the financial sector. x It continued to focus on physical infrastructure (56% of its lending).

ADB. 2005. Annual Report on Loan and Technical Assistance Portfolio Performance for the Year Ending 31 December 2004. Manila. Including Cambodia, Lao PDR, Mongolia, Tajikistan, Uzbekistan, and Viet Nam.

102

Appendix 2

Criteria for Positioning

19911995 Country Program nonlending proportion. x However, the 19911995 Program was focused/ selective due to its high physical infrastructure lending (62%). (S) x Continuity was reflected in the 19911995 Program in terms of unchanged sector focus in energy and transport from the previous period (19861990), although with a decline in the lending proportion in these two sectors (from 70% to 62%). (S) x Consistent with ADB practice at the time, the 19911995 Program was prepared without any measurable targets, risk assessment, or adjustment/monitoring mechanism.

19962000 Country Program

20012004 Country Program sector/subsector).

Long-Term Continuity

(S) x The 19962000 Program continued the same sector focus as in the previous period. x Although the lending proportion in the two sectors declined, it was still more than half (56%).

Constraints/ Risks and Adjustment/ Monitoring Mechanism to Achieve Measurable Targets

(S) x Similarly, the 19962000 Program was prepared without any measurable targets, risk assessment, or adjustment/monitoring mechanism.

(US)

(US)

(PS) x The 20012004 Program did not continue the same sector focus as in the previous period, with a substantial decline in the lending proportion in the two leading infrastructure sectors to 34%. (PS) x In the 19962000 Program, except for the poverty reduction and other MDG targets, other intermediate outcome targets were not identified; and neither was a monitoring mechanism. x The Program was not results-based. (US)

ADB = Asian Development Bank; ADTA = advisory technical assistance; ANR = agriculture and natural resources; CSP = Country Strategy and Program; DP = development partner; ETSW = economic, thematic, and sector work; MDG = Millennium Development Goal; OED = Operations Evaluation Department; PS = partly satisfactory; PSD = private sector development; S = satisfactory; US = unsatisfactory.

Appendix 3 ASIAN DEVELOPMENT BANK'S LENDING AND NONLENDING ASSISTANCE PROGRAMS

103

Table A3.1: List of Approved Loans by Sector (19862004)

19912000 20012004 Prim./Sec. Pov./Thematic Objectives Classification Approved Amount % $'000 Approval Date Completion Rating Date PCR PPAR

Loan No. Title Agriculture and Natural Resources - Agriculture EG 1. 965(SF)a,b Agriculture Program a Second Agriculture Program EG 2. 1180(SF) ENV/EG 3. 1295(SF)a Industrial Tree Plantation c Shifting Cultivation Stabilization PR/ENV 4. 1688(SF) Smallholder Development 5. 1949(SF) Subsector Total - Water Resources Management and Irrigation PR 6. 1488(SF)a Community-Managed Irrigation Sector 7. 1788(SF) Decentralized Irrigation Development EG/PR and Management Sector 8. 1933(SF) Nam Ngum River Basin Development Sector 9. 2086(SF) Northern Community -Managed Irrigation Sector Subsector Total Sector Total Finance, Industry, and Private Sector Development - Finance EG 10. 1061(SF)a Financial Sector Program a Second Financial Sector Program EG 11. 1458(SF) 12. 1931(SF) Banking Sector Reform (TA Loan) 13. 1946(SF) Banking Sector Reform Program Subsector Total - Industry 14. 1970(SF)d GMS: Mekong Tourism Development (Lao PDR) Subsector Total Sector Total Energy EG 15. 846(SF)a,b Xeset Hydropower EG 16. 928(SF)a Nam Ngum-Luang Prabang Power Transmission EG 17. 1063(SF)a,b Xeset Hydropower (Supplementary) EG 18. 1214(SF)a Nam Song Hydropower Development EG 19. 1308(SF)a Nam Ngum-Luang Prabang Power Transmission (Supplementary) EG 20. 1329(SF)a,d Theun-Hinboun Hydropower EG 21. 1456(SF)a,d Nam Leuk Hydropower EG 22. 1558(SF)a Power Transmission and Distribution 23. 2005(SF) Northern Area Rural Power Distribution Sector Total Transport - Civil Aviation EG 24. 1266(SF)a Airports Improvement Subsector Total - Roads EG 25. 0788(SF)a Second Road Improvement EG 26. 0866(SF)a Third Road Improvement EG 27. 1009(SF)a Fourth Road Improvement a Fifth Road Improvement EG 28. 1108(SF) EG 29. 1234(SF)a Sixth Road Improvement a,d Champassak Road Improvement EG/PR 30. 1369(SF) 31. 1533(SF) Xieng Khouang Road Improvement EG EG/PR 32. 1727(SF)c,d GMS: East-West Corridor (Lao PDR) PR 33. 1795(SF)c Rural Access Roads 34. 1989(SF)d GMS: Northern Economic Corridor

ODI/EG

20,000 30,000 11,200 5,600 12,000 78,800 14,700 15,500

03-Aug-89 08-Oct-92 22-Dec-93 11-May-99 28-Nov-02 7 21-Nov-96 28-Nov-00 11-Nov-02 05-Jul-04 5 13

12-Sep-93 NA 09-Aug-95 PS 31-Aug-03 U

NA PS

30-Jun-04

PI/EG CPI/EG

15,000 10,000 55,200 134,000

ODI/EG/PSD ODI/EG/GG/ PSD

25,000 25,000 4,000 15,000 69,000 7

06-Dec-90 12-Sep-96 14-Nov-02 28-Nov-02

09-Sep-92 NA 30-Apr-01 PS

PS PS

PI/EG/RC

10,900 10,900 79,900 15,500 11,000 3,000 31,500 4,000 60,000 52,000 30,000 30,000 237,000 1 8

12-Dec-02

27-Oct-87 06-Dec-88 11-Dec-90 21-Dec-92 30-Aug-94 08-Nov-94 10-Sep-96 30-Sep-97 18-Sep-03 23

30-Jun-91 NA 31-Jul-98 PS 30-Jun-91 NA 30-Nov-96 GS 31-Jul-98 PS 30-Apr-98 GS 31-Dec-99 S 31-Jul-03 S

NA S NA S S S

PI/EG

15,000 15,000 12,000 19,000 39,000 34,000 26,000 48,000 46,000 32,000 25,000 30,000

18-Nov-93 1 16-Sep-86 24-Nov-87 21-Dec-89 29-Oct-91 01-Jun-93 31-Aug-95 09-Sep-97 20-Dec-99 07-Dec-00 20-Dec-02

30-Apr-01

01-Apr-96 30-Sep-94 30-Jun-96 30-Jun-97 31-May-02 28-Feb-00 31-Dec-05

GS GS GS GS S S

HS HS HS HS

PI/EG

104

Appendix 3
Approved Amount $'000 % 17,700 328,700 31 343,700 32

Table A3.1Continued
19912000 20012004 Prim./Sec. Pov./Thematic Loan No. Title Objectives Classification 35. 2085(SF) Roads for Rural Development Project CPI/EG Subsector Total Sector Total Social Sector - Education HD/EG 36. 1103(SF)a Education Quality Improvement HD 37. 1374(SF)a Postsecondary Education Rehabilitation WID/HD 38. 1621(SF)c Basic Education (Girls)
c

Approval Completion Rating Date Date PCR PPAR 28-Jun-04

13,300 20,000 20,000

26-Sep-91 19-Sep-95 25-Jun-98 28-Sep-01 7 19-Jan-95 24-Aug-00 2 9

31-Dec-98 GS 31-Jul-02 HS

PI/HD/GD 20,000 39. 1844(SF) Second Education Quality Improvement Subsector Total 73,300 - Health PR/HD 5,000 40. 1348(SF)a Primary Health Care 41. 1749(SF) Primary Health Care Expansion PR/GD 20,000 Subsector Total 25,000 Sector Total 98,300 Multisector (Urban Development, Environment, and Water Supply and Sanitation) - Urban Development ENV/HD 20,000 42. 1362(SF)a Vientiane Integrated Urban Development ENV/HD 27,000 43. 1525(SF)a Secondary Towns Urban Development 44. 1834(SF) Vientiane Urban Infrastructure and ODI/HD/GG 25,000 Services 45. 1994(SF) Small Towns Development Sector PI/HD 16,000 Subsector Total 88,000 - Environment 46. 1867(SF) Environment and Social Program ODI/EP 20,000 Subsector Total 20,000 - Water Supply and Sanitation PR/HD/EG 9,600 47. 1122(SF)a Southern Provincial Towns Water Supply PR/HD/EG 9,500 48. 1190(SF)a Rehabilitation and Upgrading of Vientiane Water Supply HD/ENV 13,000 49. 1267(SF)a Northern Provincial Towns Water Supply and Sanitation 50. 1710(SF) Water Supply and Sanitation Sector HD/HD 20,000 Subsector Total 52,100 Sector Total 160,100 Total 1,053,000

31-Oct-00

17-Aug-95 26-Jun-97 23-Aug-01 28-Jan-03 8 06-Dec-01 2 19-Nov-91 17-Nov-92 18-Nov-93 16-Nov-99 5 15 100

31-Dec-00 31-Dec-03

S S

30-Jun-97 GS 31-Mar-97 GS 19-Nov-93 GS

PS

PS

ADB = Asian Development Bank, CPI = core poverty intervention, EG = economic growth, ENV = environment, EP = environmental protection, GD = gender development, GG = good governance, GMS = Greater Mekong Subregion, GS = generally successful, HD = human development, HS = highly successful, Lao PDR = Lao People's Democratic Republic, LRM = Lao PDR Resident Mission, NA = not applicable/available, No. = number, ODI = other development intervention, PCR = project completion report, PI = poverty intervention, Pov. = poverty, PPAR = project performance audit report, PR = poverty reduction, Prim. = primary, PS = partly successful, PSD = private sector development, RC = regional cooperation, S = successful, Sec. = secondary, SF = special fund, TA = technical assistance, U = unsuccessful, WID = women in development.
a b

Physically completed and closed. Loans included in the ADB. 1994. Country Synthesis of Post Evaluation Findings . Manila. c Delegated to LRM for administration. d Under the GMS Program. Source: Regrouped from relevant ADB databases.

Appendix 3
Table A3.2: List of Approved Project Preparatory Technical Assistance by Sector(19862004) PPTA No. Title Agriculture and Natural Resources - Agriculture 1 1418 Third Forestry Development 2 1679 Preparatory Study for a Pilot Micro-Credit and Training Project 3 1765 National Integrated Extension and Research Program 4 2779 Shifting Cultivation Stabilization 5 3603 Smallholder Development Project 6 3794 Tree Plantation for Livelihood Improvement 7 4287 Participatory Livestock Development 8 4419 Preparing the Forest Plantations Sector Subsector Total - Water Resources Management and Irrigation 9 2447 Small-Scale Community-Managed Irrigation Sector 10 3189 Irrigation Management Transfer 11 3718 Northern Community-Managed Irrigation Sector 12 3544 Nam Ngum River Basin Development Subsector Total Sector Total Finance, Industry, and Private Sector Development - Finance 13 1856 Financial Sector Review 14 2640 Financial Management Training 15 3737 Financial Sector Development Program 16 4135 Rural Finance Development Subsector Total - Private Sector Development 17 4526 Private Sector Development Program Subsector Total Sector Total Energy 18 1080 Xieng Khouang and Sayaburi Power Transmission Study 19 1532 Feasibility Study of Nam Song-Nam Leuk Hydropower Development 20 2479 Power Transmission and Distribution Nam Ngum 500 kV Power Transmission 21 2926a 22 3087 Northern Area Rural Power Distribution 23 4213 Greater Mekong Subregion: Nam Theun 2 Hydropower Development 24 4323 Greater Mekong Subregion: Nam Theun 2 Hydropower Development Phase II Sector Total Transport - Civil Aviation 25 1747 Civil Aviation Master Plan 26 1899 Pavement Evaluation Study at Vientiane Airport and Preparation of Base Plans for Domestic Airports 27 3968 Northern Airports Improvement Subsector Total - Roads 28 0873 Southern Roads Improvement 29 1639 Preparation of the Sixth Road Improvement 30 1896 Seventh Road Improvement 31 2242 Xieng Khouang Road Improvement 32 2889 Rural Access Roads Improvement 33 3756 Roads for Rural Development 34 3817 Northern Economic Corridor Subsector Total Sector Total Approved Amount % $ Approval Date

105

320,000 100,000 410,000 600,000 750,000 700,000 900,000 270,000 4,050,000 530,000 650,000 700,000 850,000 2,730,000 6,780,000

15-Nov-90 26-Mar-92 08-Oct-92 15-Apr-97 20-Dec-00 12-Dec-01 18-Dec-03 20-Dec-04 16 20-Nov-95 27-Apr-99 11-Sep-01 14-Nov-00 11 27

100,000 250,000 400,000 150,000 900,000 700,000 700,000 1,600,000 85000.00 1,300,000 250,000 580,000 510,000 700,000 1,000,000 4,425,000

23-Mar-93 10-Sep-96 10-Oct-01 02-Jul-03 4 23-Dec-04 3 6 03-Jan-89 08-Jul-91 18-Dec-95 28-Nov-97 14-Oct-98 09-Nov-03 29-Mar-04 18

100,000 100,000 500,000 700,000 330,000 100,000 500,000 530,000 600,000 400,000 600,000 3,060,000 3,760,000

18-Aug-92 02-Jun-93 04-Nov-02 3 13-May-87 02-Jan-92 01-Jun-93 14-Dec-94 07-Oct-97 30-Oct-01 19-Dec-01 12 15

106

Appendix 3

Table A3.2Continued
Approved Amount PPTA No. Title $ % Social Sector - Education 35 1289 Preparation of an Education Project 300,000 36 1957 Postsecondary Education Rationalization 250,000 37 2326 Employment Promotion and Training 469,000 380,000 38 2557 Women's Education 39 3294 Second Education Quality Improvement 600,000 40 4499 Basic Education Development 600,000 2,599,000 10 Subsector Total - Health 41 1947 Essential Drugs 250,000 42 3058 Primary Health Care Expansion 700,000 950,000 4 Subsector Total 3,549,000 14 Sector Total Multisector (Urban Development, Environment, and Water Supply and Sanitation) - Urban Development 43 1143 Southern Area Development Multiproject 95,000 44 1548 Pre-Feasibility Study on Viability of the Nam Mang 3 50,000 Multipurpose 45 1911 Vientiane Integrated Urban Development 600,000 46 2396 Secondary Towns Integrated Urban Development 600,000 47 3333 Vientiane Urban Infrastructure and Services 600,000 48 3492 Small Towns Development 700,000 Subsector Total 2,645,000 11 - Environment 49 3535 Energy and Transport Socio-Environmental Management 150,000 Subsector Total 150,000 1 - Water Supply and Sanitation 50 1596 Vientiane Water Supply Rehabilitation and Upgrading 100,000 51 1607 Northern Provincial Towns Water Supply Development 420,000 52 2711 Small Towns Water Supply and Sanitation 500,000 53 3903 Northern and Central Regions Water Supply and Sanitation 700,000 54 4377 Northern and Central Region Water Supply and Urban Development 200,000 1,920,000 8 Subsector Total Sector Total 4,715,000 19 Total 24,829,000 100
a

Approval Date

11-Apr-90 27-Sep-93 09-May-95 23-Apr-96 10-Nov-99 17-Dec-04

09-Sep-93 20-Aug-98

04-Apr-89 07-Aug-91 21-Jul-93 12-Sep-95 10-Dec-99 29-Aug-00

10-Nov-01

13-Nov-91 19-Nov-91 13-Dec-96 20-Aug-02 18-Aug-04

ADB = Asian Development Bank, GMS = Greater Mekong Subregion, kV = kilovolt, No. = number, PPTA = project preparatory technical assistance, TA = technical assistance, TCR = technical assistance completion report. This TA did not lead to a loan. The TCR for TA 2926 rated it as partly successful. Source: Regrouped from relevant ADB databases.

Appendix 3
Table A3.3: List of Approved Advisory Technical Assistance by Sector (19862004 Approved Amount $ % Approval Date

107

ADTA No. Title Agriculture and Natural Resources - Agriculture 1 1134 Agricultural Research 2 1156 Tropical Forestry Action Plan 1156 Tropical Forestry Action Plan (Supplementary) 3 1188 Improvement of Agricultural Statistics 4 1190 Study of National Agriculture Manpower and National Extension Service 5 1191 Study of National Crop Development and Seed/Planting Material Multiplication 6 1192 Pesticides and Environmental Control 7 1262 Second Forestry Development (Institutional Support) 8 1277 Livestock Sector Policy Development and Industry Restructuring 9 1279 Agriculture Sector Third Five-Year Plan Programming 10 1745b Institutional Development and Strengthening of the Ministry of Agriculture and Forestry 11 2011 Study to Evaluate the Impact of Agriculture Program Lending 12 2028 Institutional Support to Department of Forestry 13 2029 Institutional Support to Agricultural Promotion Bank 14 2333b Institutional Development and Strengthening of the Ministry of Agriculture and Forestry (Phase II) 15 2883 Agriculture Strategy Study 16 3403 Towards Implementation of the Agriculture Strategy 17 4005 Agribusiness Support and Training 18 4392 Marketing Support for Organic Produce of Ethnic Minorities 19 4406 Capacity Building for Smallholder Livestock Systems 20 4434 Poverty Reduction Through Land Tenure Consolidation, Participatory Natural Resources Management and Local Communities Skills Building Subsector Total - Water Resources Management and Irrigation 21 1189 Review of the Irrigation Subsector 22 1764 Strengthening and Restructuring Irrigation Development 1764 Strengthening and Restructuring Irrigation Development (Supplementary) 23 2734 Nam Ngum Watershed Management 24 3006 Institutional Strengthening of the Water Resources Coordination Committeee 25 3205 Implementation of the Water Sector Action Plan 26 4339 Study of Gender Inequality in Women's Access to Land, Forests, and Water Subsector Total Sector Total Finance, Industry, and Private Sector Development - Finance 27 1032 Restructuring of the Financial Sector 28 1115 Restructuring of Monetary and Banking Systems 29 1263 Review of the Financial Sector 30 1296d Restructuring of the Monetary and Banking Systems - Phase II 31 1433d Long-Term Credit Facility Support 32 1434d Debt Disposal Unit 33 1805d Commercial Bank Training 1805d Commercial Bank Training (Supplementary) 34 1843 Mechanism for Tendering Government Paper 35 1844 Pension Fund and Leasing Legislation 36 2160d Human Resource Development in Banks 37 2201 Development of Commercial Bank Linkages to Micro and Small Enterprises 38 2316 Review of Banking Sector Policies and Portfolios 39 2642 Restructuring and Consolidation of the State-Owned Commercial Banks 40 2643 Development of an Interbank Market 41 3146 Commercial Banking Capacity and Efficiency Enhancement 42 3154 Development and Application of the Secured Transactions Law and Bankruptcy Law 43 3413 Rural Finance Development (TA Cluster)

Rating TCR TPAR

1,115,000 75,000 25,000 170,000 178,000 153,000 80,000 900,000 100,000 380,000 1,290,000 578,000 1,550,000 450,000 597,000 600,000 100,000 250,000 600,000 550,000 850,000

03-Mar-89 12-May-89 31-Jan-90 03-Aug-89 03-Aug-89 03-Aug-89 03-Aug-89 28-Dec-89 14-Mar-90 19-Mar-90 18-Aug-92 10-Dec-93 22-Dec-93 22-Dec-93 22-May-95 30-Sep-97 11-Feb-00 28-Nov-02 17-Sep-04 11-Oct-04 17-Nov-04

NEa Sa Sa NEa NEa NEa

Sa NE PSc S GS PS

GS

GS

10,591,000 132,000 893,000 1,665,000 1,200,000 260,000 300,000 250,000 4,700,000 15,291,000

15 03-Aug-89 13-Dec-93 13-Dec-93 23-Dec-96 15-Apr-98 09-Jun-99 20-May-04 7 22 NE

GS GS GS

12,000 790,000 414,000 585,000 298,000 555,000 580,000 20,000 85,000 100,000 350,000 500,000 74,000 954,000 130,000 550,000 150,000 2,020,000

19-Sep-88 24-Jan-89 26-Dec-89 27-Apr-90 06-Dec-90 06-Dec-90 15-Dec-92 09-Jun-94 25-Jan-93 25-Jan-93 21-Sep-94 07-Nov-94 30-Mar-95 12-Sep-96 12-Sep-96 24-Dec-98 31-Dec-98 09-Mar-00

PS U U U GS GS

GS GS

PS

108

Appendix 3
Approved Amount $ % 900,000 900,000 9,967,000 299,000 100,000 409,000 570,000 300,000 150,000 700,000 2,528,000 597,000 100,000 100,000 100,000 500,000 150,000 670,000 2,217,000 14,712,000 1,760,000 1,000,000 192,000 198,000 960,000 1,034,000 100,000 340,000 600,000 600,000 140,000 800,000 7,724,000 285,000 1,200,000 250,000 225,000 1,000,000 600,000 400,000 570,000 950,000 475,000 300,000 350,000 350,000 700,000 280,000 720,000 690,000 150,000 3 21 27-Oct-87 14-Dec-90 03-Jan-89 03-Jan-89 30-Mar-90 14-Oct-92 04-Jan-94 15-May-96 07-Jun-96 23-Dec-96 16-Jul-99 23-Dec-99 11 16-Sep-86 16-Sep-86 08-Mar-91 24-Nov-87 24-Nov-87 13-Mar-91 02-Mar-92 13-Mar-91 01-Jun-93 31-Mar-93 20-Dec-94 31-Aug-95 31-Aug-95 09-Sep-97 14-Mar-00 17-Sep-98 20-Dec-99 02-Feb-00 GS 4 13-Oct-89 02-Apr-90 07-Sep-90 24-Aug-92 23-Jul-97 16-Dec-03 18-Dec-03 14 07-Nov-86 26-Apr-89 12-Dec-89 13-Aug-90 15-Dec-92 09-May-03 15-Dec-04 GS GS Approval Date 07-Jul-00 28-Nov-02 Rating TCR TPAR PS

Table A3.3Continued
No. Title 3466 Strengthening Corporate Governance and Management of StateOwned Commercial Banks 45 4002 Strengthening Corporate Governance and Management of StateOwned Commercial Banks II Subsector Total - Industry 46 0815 Management Reorganization and Strengthening of the Lao Wood Industries Corporation 47 1151 Evaluation and Promotion of Investment Proposals in the Industrial and Mining Sectors 48 1241 Mineral Exploration and Development Plan 49 1353 Industrial Sector Study and Strengthening of the Ministry of Industry and Handicrafts 50 1804e Strengthening the Industrial Waste Management Capability of the Ministry of Industry and Handicraft 51 4108 Integrating the Poor in Regional Trade through Standard-Setting for Private Sector Development 52 4481 Integrating the Poor in Regional Trade through Industrial Standard Development- Phase II Subsector Total - Private Sector Development 53 1211 Improving the Management Efficiency of State-Owned Enterprises 54 1287 Study on Privatization in Lao PDR 55 1370 Establishing of a Privatization Coordination Unit in Lao PDR 56 1749 Domestic Financing Mechanisms for Privatization 57 2831 Foreign Investment Capacity Enhancement 58 4264 Investment Climate and Productivity Study 59 4279 Advisory Assistance on Small and Medium-Sized Enterprise and Private Sector Development Subsector Total Sector Total Energy 60 0909 Xeset Hydropower 0909 Xeset Hydropower (Supplementary) 61 1081 Ngum Hydropower Station Operational Improvement Study 62 1082 Institutional Improvement to EdL Luang Prabang 63 1301 Nam Ngum-Luang Prabang Power Transmission (Part C) 1301 Nam Ngum-Luang Prabang Power Transmission (Part C) (Supplementary) 64 2054 Theun-Hinboun Power 65 2569 Corporate and Financial Development of EdL 66 2583 Power System Planning in the Ministry of Industry and Handicraft 67 2728 Study for Establishing the National Grid Company 68 3225 Analyzing and Negotiating Financing Options for the Nam Leuk Hydropower Project Cost Overruns 69 3374 Power Sector Strategy Study Sector Total Transport 70 0796 Road Maintenance Study 71 0797 Implementation of Second Road Improvement 0797 Implementation of Second Road Improvement (Supplementary) 72 0923 Road Maintenance Training 73 0924 Implementation of Third Road Improvement 74 1494 Road Maintenance and Equipment Training 1494 Road Maintenance and Equipment Training (Supplementary) 75 1495 Prestressed Concrete Bridge Training 76 1897f Privatization and Management of Road Sector Institutions 77 1986 Institutional Strengthening of the National Airports Authority and Lao Civil Aviation 78 2248 Upgrading of the School of Communication and Transport 79 2388 Feeder Roads Maintenance Training 80 2389 Management Information System in MCTPC 81 2862 Management Information System (Phase II) 2862 Management Information System (Phase II) (Supplementary) 82 3070 Road Infrastructure for Rural Development 83 3348 East-West Corridor Coordination 84 3396 Assessing a Concession Agreement for the Lao PDR Component of the Chiang Rai to Kunming Highway ADTA 44

GS

GS GS GS GS PS

GS

HS

Appendix 3 Table A3.3Continued

No. Title 3557 Strengthening Social and Environmental Management Capacity in the Department of Roads Sector Total Social Sector - Education 86 1130 Education Sector Study 87 1569 Institutional Strengthening of Ministry of Education 88 1570 Curriculum Development for Teacher Education 89 1776g Encouraging Private Sector Education 90 1954 Strengthening Labor Market Monitoring and Analysis 91 2097g Private Sector Education Development 92 2361 Postsecondary Education Management Development 93 2925 Capacity Building in Job Training 94 3014 Education Sector Development Plan 95 3871 Strengthening Decentralized Education Management Subsector Total - Health 96 2291 Strengthening the Ministry of Public Health 97 3478 Capacity Building for Primary Health Care 98 4009 Social Protection in the Lao PDR: Issues and Options Subsector Total Sector Total Multisector (Urban Development, Environment, and Water Supply and Sanitation) - Urban Development 99 0759 Southern Area Development Master Plan Study 100 2377 Establishing Municipal Administration Systems 101 2972 Support for Urban Development Administration Authorities 102 3331 Capacity Building for Urban Development Administration Authorities Subsector Total - Environment 103 2329 Strengthening Environmental Planning and EIA Capacity 104 3133 Strengthening Social and Environmental Management 105 3746 Capacity Building for Environment and Social Management in Energy and Transport Subsector Total - Water Supply and Sanitation 106 1606h Institutional Strengthening of the Water Supply Sector 107 1787h Institutional Support to Nam Papa Lao 108 1987h Strengthening Planning Capabilities in Nam Papa Lao 109 4377 Northern and Central Region Water Supply and Urban Development Subsector Total Sector Total Others (Capacity Building in Various Areas) - Governance 110 2047 Strengthening Economic and Financial Management 111 2334 Preparation of National Procurement Regulations for the Public Sector 112 2857 Institutional Strengthening of the Procurement Monitoring OfficePhase II 113 2987 Establishing the National Audit Office 114 3266 Public Investment Program 115 3309 Enhancing Government Accounting Regulations and Procedures 116 3626 Capacity Building in Project Financial Management 117 3627 Institutional Strengthening of Public Investment Management 118 3771 Institutional Strengthening of the National Audit Office 119 4180 Enhancing Government Accounting Regulations and Procedures Phase II Subsector Total - Macroeconomic Management, Development Planning and Monitoring 120 1288 Assistance in Preparation of Third 5-Year Plan 121 1358 Formulating the Third 5-Year Plan - Phase II 122 1398 Debt Recording and Management System 123 1667i Human Resource Planning 124 2018 Establishing an Institutional Framework for a Policy Research Institute 125 2630 Establishing an Aid Coordination and Monitoring System 126 3285 Strengthening the Capacity of Aid Coordination and Monitoring 127 3407 Participatory Assessment of Poverty in the Lao PDR ADTA 85 Approved Amount $ % 200,000 9,695,000 14 Approval Date 07-Dec-00

109

Rating TCR TPAR

380,000 500,000 2,000,000 74,000 400,000 400,000 250,000 600,000 530,000 500,000 5,634,000 800,000 800,000 150,000 1,750,000 7,384,000

14-Feb-89 26-Sep-91 26-Sep-91 30-Oct-92 20-Sep-93 14-Jun-94 13-Jul-95 28-Nov-97 07-May-98 24-May-02 8 19-Jan-95 10-Aug-00 04-Dec-02 3 11

GS GS GS GS GS S HS GS

GS HS

750,000 700,000 500,000 600,000 2,550,000 0 950,000 600,000 1,550,000 630,000 210,000 257,000 200,000 1,297,000 5,397,000

13-Mar-86 17-Aug-95 31-Dec-97 10-Dec-99 4 10-May-95 22-Dec-98 22-Oct-01 2 19-Nov-91 17-Nov-92 18-Nov-93 18-Aug-04 2 8

PS GS S

PS GS GS

PS GS GS

1,197,000 410,000 400,000 400,000 150,000 700,000 400,000 400,000 700,000 150,000 4,907,000 99,500 435,000 96,000 185,000 98,500 447,000 680,000 150,000 7

23-Dec-93 22-May-95 29-Aug-97 09-Feb-98 28-Sep-99 25-Nov-99 25-Jan-01 02-Feb-01 14-Nov-01 23-Sep-03

PS GS PS HS HS S

09-Apr-90 20-Aug-90 26-Oct-90 04-Feb-92 15-Dec-93 23-Aug-96 28-Oct-99 02-Mar-00

PS

GS

S S

110

Appendix 3
Approved Amount $ % 600,000 700,000 400,000 6 3,891,000 300,000 300,000 9,098,000 69,301,000 Approval Date 21-Dec-00 04-Nov-02 22-Dec-04 Rating TCR TPAR S

Table A3.3Continued
ADTA 128 129 130 No. Title 3616 Participatory Poverty Monitoring and Evaluation 3969 Northern Region Strategic Action Plan 4521 Institutional Strengthening for Poverty Monitoring and Evaluation Subsector Total - Gender 131 3641 Capacity Building of the Lao Women's Union Subsector Total Sector Total Total

19-Mar-01 0 13 100

PS

ADB = Asian Development Bank; ADTA = advisory and operational technical assistance; GS = generally successful; EdL = Electricit du Laos; EIA = environment impact assessment; HS = highly successful; Lao PDR = Lao People's Democratic Republic; MCTPC = Ministry of Communication, Transport, Post, and Construction; NE = not explicit; No. = number; PCR = Project Completion Report; PS = partly successful; S = successful; SF = Special Fund; TA = technical assistance; TCR = Technical Assistance Completion Report; TPAR = Technical Assistance Performance Audit Report; U = unsuccessful.
a b c

As provided in the PCR of Loan 965-LAO(SF) Included in TPAR (TE-20: Institutional Development and Strengthening of the Ministry of Agriculture and Forestry, approved in December 1997). As provided in the PCR of Loan 1180-LAO(SF) d Included in TPAR (TE-30: Selected Financial Sector TAs to Lao PDR, approved in December 1999). e Included in TPAR (TE-16: Strengthening Industrial Waste Management Capability of the Ministry of Industry and Handicraft , approved in December 1996). f Included in TPAR (TE-42: Road Sector Management in Lao PDR, Papua New Guinea, and Philippines, approved in December 2002).
g h i

Included in TPAR (TE-28: Private Sector Education in the Lao PDR, approved in December 1999). Included in TPAR (TE-45: Selected ADTAs for Institutional Development and Capacity Building in the Water Supply and Sanitations, approved in March 2003). Included in TPAR (TE-08: Human Resources Planning, approved in October 1994). Source: Regrouped from relevant ADB databases.

Appendix 3

111

Table A3.4: List of Regional Technical Assistance under the Greater Mekong Subregional Program
Amount ($'000) 100.0 270.0 5,260.0 200.0 94.5 977.6 78.0 30.0 130.0 3,000.0 600.0 600.0 1,665.0 180.0 480.0 3,000.0 2,500.0 345.0 600.0 770.0 600.0 50.0 600.0 550.0 150.0 1,000.0 1,600.0 800.0 125.0 50.0 1,650.0 950.0 610.0 800.0 600.0 600.0 150.0 900.0 750.0 600.0 800.0 150.0 700.0 650.0 500.0 600.0 550.0 500.0 150.0 800.0 1,600.0 1,000.0 1,000.0 500.0 800.0 Approval Date 27-May-91 09-Mar-92 10-Jun-93 10-Dec-93 06-Jun-94 09-Feb-95 20-Sep-95 02-Oct-95 23-Oct-95 09-Nov-95 08-Apr-96 18-Apr-96 09-May-96 29-May-96 26-Jun-96 23-Jul-96 22-Aug-96 19-Dec-96 27-Feb-97 28-May-97 09-Jun-97 18-Jun-97 24-Jun-97 26-Aug-97 17-Sep-97 31-Dec-97 20-Mar-98 30-Jun-98 29-Sep-98 14-Oct-98 22-Dec-98 16-Jul-99 16-Dec-99 22-Dec-99 28-Dec-99 29-Dec-99 17-May-00 10-Jul-00 17-Nov-00 07-Dec-00 14-Dec-00 21-Dec-00 02-Nov-01 17-Dec-01 21-Dec-01 21-Dec-01 25-Feb-02 17-May-02 31-May-02 25-Oct-02 11-Dec-02 19-Dec-02 19-Dec-02 19-Dec-02 09-Apr-03

RETA No. 1. 5447 2. 5487a 3. 5535a 4. 5557 5. 5582 6. 5622a 7. 5643a 8. 5645a 9. 5647a 10. 5649a 11. 5680 12. 5681 13. 5684a 14. 5686a 15. 5689 16. 5693a 17. 5697a 18. 5713 19. 5728 20. 5738a 21. 5739 22. 5741a 23. 5743a 24. 5749a 25. 5751 26. 5771a 27. 5783a 28. 5794 29. 5807a 30. 5810 31. 5822a 32. 5850a 33. 5881 34. 5886 35. 5893 36. 5899 37. 5915 38. 5920 39. 5951 40. 5958 41. 5961 42. 5970 43. 6004 44. 6011 45. 6017 46. 6020 47. 6021 48. 6032 49. 6034 50. 6056 51. 6069 52. 6083 53. 6084 54. 6091 55. 6098

Title Thai-Lao Conference on Private Sector Cooperation and Development Studies on Subregional Cooperatioon Among the Countries in Indochina, Myanmar, PRC, and Thailand Promoting Subregional Cooperation among Cambodia, PRC, Lao PDR, Myanmar, Thailand, and Viet Nam Regional Conference for Biodiversity Conservation Workshop on Vegetable Workshop Research and Development in Cambodia, Lao PDR, and Viet Nam Subregional Environmental Monitoring and Information System Subregional Electric Power Forum GMS Meeting of Telecommunications Officials GMS Regional Program to Train Trainers in Tourism in the GMS GMS Infrastructure Improvement Establishment of a Vegetable Research Network for Cambodia, Lao PDR, and Viet Nam Cooperation in Employment Promotion and Training in the GMS Subregional Environmental Training and Institutional Strengthening in the GMS Mitigation of Nonphysical Barriers to Cross-Border Movement of Goods and People Capacity Building in Project Accounting for Cambodia, Lao PDR, and Viet Nam Promoting Subregional Cooperation Among Cambodia, PRC, Lao PDR, Myanmar, Thailand, and Viet Nam Se Kong-Se San and Nam Theun River Basins Hydropower Development Study TA to Cambodia and Lao PDR to Prepare for Membership in ASEAN Chiang Rai-Kunming Road Improvement via LAO PDR East Loop Telecommunications Project in the GMS Media for the Disadvantaged Third Meeting of the Subregional Telecommunications Forum Mekong/Lancang River Tourism Planning Study Cross-Border Movement of Goods and People in the GMS Cooperation in the Prevention and Control of HIV/AIDS in the GMS Poverty Reduction and Environmental Management in Remote GMS Watersheds Strategic Environmental Framework for the GMS Study of Health and Education Needs of Ethnic Minorities in the GMS Tourism Skills Development in the GMS Regional Training Course in Financial Management for Water Supply and Sanitation Utilities in DMCs Protection and Management of Critical Wetlands in the Lower Mekong Basin Facilitating the Cross-Border Movement of Goods and People in the GMS Preventing HIV/AIDS among mobile populations in the GMS GMS Promoting Subregional Cooperation among Cambodia, PRC, and Lao PDR Mekong/Lancang River Tourism Infrastructure Development Subregional Environmental Monitoring and Information Systems Phase II Establishment of Backbone Telecommunications Network Project Phase I Regional Indicative Master Plan on Power Interconnection in the GMS SME Growth and Development in the Mekong Region Roll-back Malaria Initiative in the GMS Promoting Subregional Cooperation in the GMS Phase IV Drug Eradication in the GMS GMS Telecommunications Sector Policy Formulation and Capacity Building Strengthening the Collaborative Vegetable Research Network in Cambodia, Lao PDR, and Viet Nam (Phase II) Capacity Building for National Institutions Involved in the GMS Program Facilitating Cross-Border Trade and Investment for SME Development in the GMS A Framework for ADB-NGO Cooperation Support to the Greater Mekong Subregion Summit of Leaders and Related Activities Study on Subregional Issues in the Agriculture Sector in the GMS GMS Phnom Penh Plan for Development Management National Performance Assessment and Subregional Strategic Environment Framework in the GMS ICT and HIV/AIDS Preventive Education in the Cross-Border Areas of the GMS Promoting Subregional Cooperation among Cambodia, PRC, and Lao PDR Capacity Building for Resettlement Risk Management Implementing the Agreement for Facilitation of the Cross-Border Transport of Goods and People in the GMSPhase I

112

Appendix 3

Table A3.4Continued
RETA No. 56. 6100 57. 6110 58. 6088 59. 6111 60. 6113 61. 6115 62. 6118 63. 6121 64. 6108 65. 6134 66. 6140 67. 6147 68. 6149 69. 6152 70. 6167 71. 6056 72. 6077 73. 6171 74. 6192 Title Study for a Regional Power Trade Operating Agreement in the GMS Promoting Partnerships to Accelerate Agriculture Development and Poverty Reduction in the GMS Strengthening and Collection of Purchasing Power Parity Data in Selected DMCs (Supplementary) 2003/04 Seminars on Capacity Building for Project Implementation and Administration Making Markets Work Better for the Poor Poverty Reduction in Upland Communities in the Mekong Region through Improved Community and Industrial Forestry Promoting NGO Support for Poverty Reduction in the GMS Rural, Urban, and Subregional Linkages in the Mekong Region: A Holistic Approach to Development and Poverty Reduction Emergency Regional Support to Address the Outbreak of Severe Acute Respiratory Syndrome (SARS) (Supplementary) GMS: Southern Coastal Corridor Infrastructure Development in East Asia GMS Power Interconnection Project Phase I Support for the Mekong River Commission Flood Management and Mitigation Program Development of Domestic Consultant Services in DMCs Study on Cooperation Opportunities between ADB and Mekong River Commission GMS Phnom Penh Plan for Development Management (Supplementary) Road Safety in the ASEAN (Supplementary) Reviewing the Poverty Impact of Regional Economic Integration in the GMS Transboundary Animal Disease Control in the GMS Total Amount ($'000) 850.0 300.0 400.0 600.0 2200.0 800.0 150.0 400.0 3000.0 150.0 500.0 800.0 1000.0 1800.0 45.0 350.0 304.0 750.0 1000.0 59,344.1 Approval Date 21-Apr-03 09-Jun-03 09-Jun-03 13-Jun-03 02-Jul-03 04-Aug-03 22-Aug-03 02-Sep-03 29-Sep-03 05-Nov-03 19-Nov-03 12-Dec-03 16-Dec-03 16-Dec-03 13-Feb-04 22-Mar-04 22-Mar-04 06-May-04 11-Oct-04

ADB = Asian Development Bank, AIDS = acquired immunodeficiency syndrome, ASEAN = Association of South East Asian Nations, DMC = developing member country, GMS = Greater Mekong Subregion, HIV = human immunodeficiency virus, ICT = information and communication technology, Lao PDR = Lao Peoples Democratic Republic, NGO = nongovernment organization, No. = number, PRC = Peoples Republic of China, RETA = regional technical assistance, SMEs = small and medium-sized enterprises, TA = technical assistance. a Included in the ADB. 1999. Impact Evaluation Study of Asian Development Bank's Program of Subregional Economic Cooperation in the Greater Mekong Subregion. Source: Regrouped from relevant ADB databases.

Table A3.5: List of Expected Loans in the Pipeline by Sector (20052008) Expected Total Project Cost Targeting Thematic Classification Priority Division ($'000) TI TI TI GI TI TI ECO/ ENV ECO ECO/ISD/ ENV RC/ECO ECO ECO MKAE MKAE MKAE MKAE MKAE MKAE 15,350 12,500 12,500 25,000 12,500 12,500 90,350 10,400 10,000 12,500 32,900 1,250,000 60,000 1,310,000 GI TI GI ECO/RC ECO ECO/RC MKID MKID MKID 25,000 35,000 12,500 72,500
h

Appendix 3

113

ADB OCR ADF ($'000) 0 0 0 0 0 0 0 0 0 0 0 20,000 0 20,000 0 0 0 0.0

i

Title Agriculture and Natural Resources 1 Forest Plantation Sector (2006) a 2 3 4 5 6 Participatory Livestock Development (2006) Shifting Cultivation Stabilization II (2007) GMS: Flood Management and Mitigation e (2008)

% of Gov.'t Cofinancing Total ADB Amt. ($'000) ($'000)

b

10,000 10,000 10,000 20,000 10,000 10,000 70,000 10,000 10,000 10,000 30,000 0 15,000 15,000 20,000 28,000 10,000 58,000

6 4 4 8

2,120 2,500 2,500 5,000

3,230 TBD TBD TBD TBD TBD 3,230 TBD TBD TBD TBD
j

c d

Agriculture Trade Diversification (2008) Nam Ou River Basin Development (2008) Sector total Finance, Industry, and Private Sector Development 7 Rural Finance Sector Development (2006) 8 9 Private Sector Development Program (2007)

4 2,500 4 2,500 27 17,120 4 4 4 11 8 6 13 8 11 4 400 0 2,500 2,900 0 5,000 5,000 5,000 7,000 2,500

TI GI TI

GMS: Pro-poor Tourism e (2007) Sector total Energy 10 GMS: Nam Theun 2 Hydroelectric e,g(2005) 11 GMS: Power Interconnection (Phase I)e (2007) Sector total Transport and Communications 12 GMS: Information and Communication Technology (Phase I)e (2007) 13 Northern GMS Transport Networke (2007) 14 GMS: Luang Prabang Airport Improvement e (2008) Sector total Social Sector - Education 15 Basic Education Sector Development (2006) 16 Education Sector-Wide Development Program (2008) - Health 17 GMS: Communicable Disease Control in Border Areasd (2005) 18 Health Sector Development Program (2007) Sector total

PSD/ MKGF GOV/GAD PSD/ECO MKGF RC/ISD MKSS

GI GI

ECO/ PSD ECO

MKID MKID

1,230,000 40,000 1,270,000 TBD TBD TBD TBD

22 14,500

TI TI TI TI

ISD/PSD ISD ISD/RC/ GAD PSD/ISD

MKSS MKSS MKSS MKSS

16,000 12,500 6,000 14,000 48,500 25,000 22,500 47,500 10,000 10,000 1,611,750

0 0 0 0 0 0 0 0.0 0 0 20,000

12,800 10,000 6,000 12,000 40,800 10,000 10,000 20,000 10,000 10,000 243,800

k f

5 4 2 5 15 4 4 8 4

3,200 2,500 0 2,000 7,700 5,000 2,500 7,500 0

TBD TBD TBD TBD TBD 10,000 10,000 20,000 TBD 0 1,293,230

Multisector (Urban Development, Environment, and Water Supply and Sanitation) TI ISD/ENV/ MKSS 19 Northern and Central Regions Water Supply and GAD Urban Development (Phase I) (2006) 20 Northern and Central Regions Water Supply and TI ISD/ENV/ MKSS Sanitation Sector (Phase II) (2008) GAD Sector total Others (Law, Economic Management, and Public Policy) 21 Public Resource Management Program (2008) GI GOV MKGF Sector total Total

4 0 100.0 54,720

ADB = Asian Development Bank; ADF = Asian Development Fund; Amt. = Amount; ECO = sustainable economic growth; ENV = environment sustainability; GAD = gender and development; GI = general intervention; GMS = Greater Mekong Subregion; Gov.'t = Government; GOV = governance; ISD = inclusive social development; MKAE = Mekong Department Agriculture, Environment and Natural Resources Division; MKGF = Mekong Department Governance, Finance, and Trade Division; MKID = Mekong Department Infrastructure Division; MKSS = Mekong Department Social Sectors Division; OCR = ordinary capital resources; PSD = private sector development; PSOD = Private Sector Operations Deparment; RC = regional cooperation; SF = Special Fund; TBD = to be determined; TI = targeted interventions. a Loan 2209-LAO(SF) was approved last 16 January 2006 with a total amount of $7 million. b Including ADF grants of $3.0 million. c Including proposed ADF grants of $0.6 million. d Including proposed ADF grants of $4.0 million. e Under the GMS Program. f ADF grants financing may be considered. g An OCR Loan 2162-LAO was approved last 4 April 2005 with a total amount of $20 million. h A combination of loan facilities amounting to about $900 million and shareholders' equity of about $350 million excluding equity allocation of $200 million. i Excluding a $50 million direct loan to the project developer through private sector operations and a $50 million political risk guarantee. PSOD's assistance amounts are counted in the cofinancing column. j The government will participate in the project through equity injection into the project company. Aside from ADB's OCR (loan up to $20 million), the government's equity injection will be financed by loans and grants from the International Development Association (grant up to $20 million), European Investment Bank (loan up to Euro 40 million or equivalent $52 million) and Agence Francaise de Developpment (grant funds of Euro 5 million or equivalent $6.5 million) which are reflected in the cofinancing column. k Proposed for full ADF grants financing. Source: ADB. 2005. Country Strategy and Program Update (20062008): Lao PDR. Manila.

114

Table A3.6: Composition of Approved Loans by Sector in Four Periods 19861990 % $'000 % 13.8 17.3 20.4 48.4 0.0 0.0 0.0 0 100.0 144,500 100.0 16 100.0 350,100 100.0 13 100.0 332,800 100.0 13 100.0 225,600 100.0 4 25.0 52,100 14.9 2 15.4 47,000 14.1 3 1 6.3 5,000 1.4 1 7.7 20,000 6.0 0 0.0 23.1 2 12.5 33,300 9.5 1 7.7 20,000 6.0 1 7.7 4 25.0 123,000 35.1 3 23.1 103,000 30.9 2 15.4 3 18.8 95,500 27.3 2 15.4 82,000 24.6 1 7.7 30,000 47,700 20,000 0 61,000 0 0.0 0 0.0 1 7.7 25,000 7.5 3 23.1 29,900 13.3 13.3 21.1 8.9 0.0 27.0 2 12.5 41,200 11.8 3 23.1 35,800 10.8 3 23.1 37,000 16.4 No. % No. % No. % 12.5 12.5 37.5 37.5 0.0 0.0 0.0 0 0 70,000 29,500 25,000 20,000 19911995 % $'000 19962000 % $'000 20012004 % $'000

Sector

No.

ANR

Appendix 3

Finance/Industry

Energy

Transport

Education

Health

Multisector (Environment, Urban Development, and Water Supply)

Total

ADB = Asian Development Bank, ANR = agriculture and natural resources, No. = number. Source: Recalculated from relevant ADB databases.

Table A3.7: Composition of Approved Advisory Technical Assistance by Sector in Four Periods 19861990 % $'000 % 19.8 28.9 24.6 16.2 2.3 0.0 4.5 5 13.2 1 2.6 6 15.8 3,624 800 1,797 7 18.4 4,245 1 2.6 1,134 5.0 18.8 16.0 3.5 7.9 8 21.1 2,109 9.3 7 5 5 2 1 3 6 15.8 7,023 31.0 5 No. % No. 27.8 36.1 11.1 11.1 2.8 0.0 2.8 750 0 380 2,710 4,110 4,829 3,308 13.9 19.4 13.9 13.9 5.6 2.8 8.3 19911995 % $'000 19962000 % $'000 2,460 5,204 2,480 2,740 1,130 800 2,050 % 12.1 25.5 12.2 13.4 5.5 3.9 10.1 No. 5 5 0 0 1 1 2 20012004 % $'000 23.8 23.8 0.0 0.0 4.8 4.8 9.5 2,500 2,570 0 0 500 150 800 % 26.1 26.9 0.0 0.0 5.2 1.6 8.4

Sector

No.

ANR

10

Finance/Industry

13

Energy

Transport

Education

Health

Multisector (Environment, Urban Development, and Water Supply) 0.0 8.3 100.0 631 3.8 0 0.0 2 2 38

Governance

5.3 5.3 100.0

1,607 284 22,623

7.1 1.3 100.0

4 4 36

11.1 11.1 100.0

1,650 1,877 20,391

8.1 9.2 100.0

4 3 21

19.0 14.3 100.0

1,650 1,400 9,570

17.2 14.6 100.0

Others (Capacity Building)

Total

36

16,718 100.0

Asian Development Bank, ANR = agriculture and natural resources, No. = number. Source: Recalculated from relevant ADB databases.

Appendix 3 Table A3.8: List of Approved Loans Having Cofinancing Amounts, 19862004 ($ million) Loan No. Title ADB Loan Cofinancing Government Total Project Cost

115

Approval Year

Agriculture and Natural Resources - Agriculture 1688 Shifting Cultivation Stabilization Pilot - Water Resources Management and Irrigation 1488 Community-Managed Irrigation Sector 1788 Decentralized Irrigation Development and Management Sector 1933 Nam Ngum River Basin Development Sector Energy 0846 1063 1329

5.60 14.70 15.50 15.00

1.30 4.00 2.70 3.80

UNDCP OPEC AFD AFD

1.90 5.40 6.00 4.20

8.80 24.10 24.20 23.00

1999 1996 2000 2002

b c

Xeset Hydropower Xeset Hydropower (Supplementary) Theun-Hinboun Hydropower

15.50 3.00 60.00

18.80 8.07 166.00

1456 1558 2005

Nam Leuk Hydropower Development Power Transmission and Distribution Northern Area Rural Power Distribution

52.00 30.00 30.00

38.50 9.85 10.00

SIDA, UNDP SIDA, UNDP, Norway Commercial borrowings, ECA, NDF, NORAD OECF France, NDF NDF

5.60 44.00
d

39.90 11.07 270.00

1987 1990 1994

22.10 18.46 11.51

112.60 58.31 51.51

1996 1997 2003

Transport - Civil Aviation 1266 Airports Improvement

15.00

23.90

France, Japan, NDF, NORAD, OPEC, Thailand UNDP UNDP Japan, OPEC OPEC PRC, Thailand NDF, OPEC

5.90

44.80

1993

- Roads 0788 Second Road Improvement 0866 Third Road Improvement 1533 Xieng Khuoang Road Improvement 1795 Rural Access Roads 1989 GMS: Northern Economic Corridor 2085 Roads for Rural Development Social Sector - Education 1103 Education Quality Improvement 1621 Basic Education (Girls) 1844 Second Education Quality Improvement Multisector - Urban Development 1362 Vientiane Integrated Urban Development 1525 Secondary Towns Urban Development 1834 Vientiane Urban Infrastructure and Services - Water Supply and Sanitation 1190 Rehabilitation and Upgrading Vientiane Water Supply

12.00 19.00 46.00 25.00 30.00 17.70

1.20 1.13 4.20 5.00 60.00 13.30

3.01 3.62 14.30 7.50 7.30 8.20

16.21 23.75 64.50 37.50 97.30 39.20

1986 1987 1997 2000 2002 2004

13.30 20.00 20.00

2.00 4.30 9.60

Norway AusAID SIDA

3.10 8.70 8.00

e f

18.40 33.00 37.60

1991 1998 2001

20.00 27.00 25.00 9.50

2.71 4.00 4.40 19.30

Japan KfW, UNDP/NORAD AFD Japan

5.00 7.50 7.60 2.39

27.71 38.50 37.00 31.19

1995 1997 2001 1992

ADB = Asian Development Bank, AFD = Agence Franaise de Dveloppement, AusAID = Australian Agency for International Development, ECA = Export Credit Agency, GMS = Greater Mekong Subregion, KfW = Kreditan-stalt fur Weideraufbau, NDF = Nordic Development Fund, No. = number, NORAD = Norwegian Agency for Development Cooperation, OECF = Overseas Economic Cooperation Fund, OPEC = Organization of Petroleum Exporting Countries, PRC = People's Republic of China, SIDA = Swedish International Development Cooperation Agency, UNDCP = United Nations Drug Control Programme, UNDP = United Nations Development Programme.
a b c

$1.8 million from the Government, $0.1 million from the Beneficiaries $2.4 million from the Government, $3 million from the Communities Private Partner Equity $2 million from the Government, $4 million from the Beneficiaries $7.7 million from the Government, $1 million from the Beneficiaries $7.2 million from the Government, $0.3 million from the Beneficiaries $7.2 million from the Government, $0.4 million from the Communities

d e f

Government and Communities contribution

g h

Source: Regrouped from relevant ADB databases.

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Table A3.9: Disbursements by Development Partners (20002003) Disbursements by All Development Partners $ million %

Development Partners Multilateral Agencies ADB European Union IDA/WB IFAD IMF JBIC Mekong River Commission NDF OPEC UN Agencies Subtotal Major Bilateral Donors Australia Belgium Canada China Denmark Finland France Germany India Japan Korea Republic Luxembourg New Zealand Norway Sweden Switzerland Thailand USA Viet Nam Subtotal NGOs (Core Resources Only) Total

2000

2001

2002

2003

55.14 8.75 15.90 1.97 19.27 12.79 3.87 9.91 28.66 156.26

43.60 15.87 32.58 2.44 11.00 2.35 1.55 3.22 6.27 37.07 155.95

57.82 14.28 34.13 4.77 10.00 4.72 2.37 16.16 2.79 34.29 181.33

52.29 3.95 43.62 3.39 11.40 23.92 3.40 10.21 4.33 27.09 183.60

208.85 42.85 126.23 12.57 32.40 50.26 20.11 33.46 23.30 127.11 677.14

13.38 2.74 8.08 0.81 2.07 3.22 1.29 2.14 1.49 8.14 43.37

11.36 1.51 38.88 0.86 1.18 6.66 23.42 90.82 0.30 1.68 0.54 5.59 13.63 5.88 0.63 202.94 359.20

14.06 4.60 0.09 1.18 4.07 2.66 11.89 17.99 1.00 110.58 0.30 2.74 3.93 6.78 26.61 1.04 3.54 1.74 8.75 223.55 13.89 393.39

11.79 0.97 19.72 3.25 0.28 11.80 11.69 1.01 100.21 0.30 3.21 3.91 4.26 11.58 0.88 0.77 6.85 5.47 197.95 13.09 392.37

17.23 1.37 29.23 3.99 0.29 12.57 10.33 3.33 103.42 1.01 4.02 0.67 0.06 10.16 0.88 0.77 8.26 10.62 218.21 14.69 416.50

54.44 8.45 0.09 89.01 12.17 4.41 42.92 63.43 5.34 405.03 1.91 11.65 9.05 16.69 61.98 2.80 10.96 17.48 24.84 842.65 41.67 1,561.46

3.49 0.54 0.01 5.70 0.78 0.28 2.75 4.06 0.34 25.94 0.12 0.75 0.58 1.07 3.97 0.18 0.70 1.12 1.59 53.97 2.67 100.00

= not applicable, ADB = Asian Development Bank, IDA/WB = International Development Association/World Bank, IFAD = International Fund for Agricultural Development, IMF = International Monetary Fund, JBIC = Japan Bank for International Cooperation, Lao PDR = Lao People's Democratic Republic, NGO = nongovernmental organization, NDF = Nordic Development Fund, OPEC = Organization of Petroleum Exporting Countries, UN = United Nations, USA = United States of America. Sources: Ministry of Foreign Affairs, Lao PDR. 2004. Foreign Aid Report 19992003 . Vientiane; and Staff estimates.

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Table A3.10: Composition of Loans and Technical Assistance by Sector for the Entire Period (19862004) Sector ANR Finance/Industry Energy Transport Education Health Urban Development and Environment Water Supply and Sanitation Others Total No. 9 5 9 12 4 2 5 4 % 18.0 10.0 18.0 24.0 8.0 4.0 10.0 8.0 Loans $'000 134,000 79,900 237,000 343,700 73,300 25,000 108,000 52,100 % 12.7 7.6 22.5 32.6 7.0 2.4 10.3 4.9 No. 12 5 7 10 6 2 7 5 % PPTAs $'000 6,780 1,600 4,425 3,760 2,599 950 2,795 1,920 % 27.3 6.4 17.8 15.1 10.5 3.8 11.3 7.7 100.0 No. 26 33 10 16 10 3 7 4 22 % ADTAs $'000 % 22.1 21.2 11.1 14.0 8.1 2.5 5.9 1.9 13.1 100.0

22.2 9.3 13.0 18.5 11.1 3.7 13.0 9.3

19.8 15,291 25.2 14,712 7.6 12.2 7.6 2.3 5.3 3.1 16.8 7,724 9,695 5,634 1,750 4,100 1,297 9,098

50 100.0 1,053,000 100.0

54 100.0 24,829

131 100.0 69,301

ADB = Asian Development Bank, ADTA = advisory technical assistance, ANR = agriculture and natural resources, No. = number, PPTA = project preparatory technica assistance. Source: Recalculated from relevant ADB databases.

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Appendix 4

DETAILED BOTTOM-UP ASSESSMENT OF SECTOR PERFORMANCE 1. This appendix section assesses sector performance of the Asian Development Banks (ADB) Country Program assistance to the Lao Peoples Democratic Republic (Lao PDR) during 19862004, based on the following criteria: (i) relevance, (ii) efficiency, (iii) sustainability, and (iv) institutional development effects.1 The performance assessment of each sector under the effectiveness and impacts criteria, which are the results-oriented criteria, is presented in Chapter V (section A) of the main text. Overall performance of each sector under all of these criteria combined is summarized and rated in Table 7 of the main text.2 Sector-level lessons and recommendations are drawn at the end of each sector. 1. Agriculture and Natural Resources Sector

2. Sector Issues. ADB assistance for the Agriculture and Natural Resources (ANR) sector in the Lao PDR encompasses diverse subsectors, covering agribusiness, commercialization of smallholder agriculture, irrigation, livestock, river basins, watersheds, upland agriculture, and tree plantation. Agriculture production accounts for about half of the countrys gross domestic product (GDP) and 80% of employment. About 620,000 households depend on agriculture for their livelihoods. More than 80% of farmers still practice subsistence farming, mostly based on rainfed rice production, with low crop diversification (rice accounting for about 40% of agriculture GDP). The country is predominantly mountainous, with hills and steep terrain covering two thirds of total land areas. Thus, much of the country is characterized by remote settlements, while areas of cultivable land are scarce and tend to be densely populated.3 This has led to unsustainable agricultural practices, such as shifting cultivation in upland areas. The area planted to rice represents more than 80% of the nations crop land. The Lao PDR is selfsufficient in rice overall, but localized rice deficits and household food insecurity continue to occur in many parts of the country, particularly in the northern region. Crop cultivation is characterized by limited use of pesticides and fertilizers. Crop losses have been high (about 30%) due to low harvest and post-harvest technologies. Market access, distribution networks, and commercialization have been largely constrained by lack of all-weather roads. 3. Relevance. During the Country Assistance Program Evaluation (CAPE) period (1986 2004), ADBs Country Program assistance to the ANR sector consisted of 9 loans for $134 million, 12 project preparatory technical assistance (PPTAs) for $6.8 million, and 26 advisory technical assistance (ADTAs) for $15.3 million. These amounts corresponded to 13%, 27%, and 22% of the total amounts of loans, PPTAs, and ADTAs, respectively (Table A3.1A3.3, Appendix 3). ADB assistance to this sector had several dimensions. The two policy (program)
1

The CAPE Guidelines suggested that overall sector performance be rated based on the combined five criteria: relevance, effectiveness, efficiency, sustainability, and contributions to impacts. The remaining criterion (institutional development effects) is not included in the rating system in the CAPE Guidelines because it is subsumed under the effectiveness/impacts criteria due to (i) their overlapping natures, and (ii) the fact that institutional development effects are not an end result in itself, but a means to achieving the end results in terms of outcomes/impacts. Thus, this CAPE will follow the CAPE Guidelines by not explicitly expressing institutional development effects as a separate criterion in Table 7. However, institutional development effects will only be assessed separately in this appendix to show how they were part of the effectiveness/impacts criteria. 2 The scoring and rating system used in Table 7 of the main text follows the system suggested by Country Assistance Program Evaluation (CAPE) Guidelines (tabulated in Table 8 of the main text, as reference). The CAPE Guidelines suggested that overall sector performance be rated based on the combined five criteria: relevance, effectiveness, efficiency, sustainability, and contributions to impacts. The remaining criterion (institutional development effects) is not included in the rating system in the CAPE Guidelines because it is subsumed under the effectiveness and impacts criteria due to (i) their overlapping natures, and (ii) the fact that institutional development effects are not an end result in itself, but a means to achieving the end results in terms of outcomes/impacts. 3 Mostly confined to the floodplains of the Mekong River and its tributaries in the central and southern regions.

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119

loans were relevant to support the countrys New Economic Mechanism (NEM), which was adopted in 1986 to transform the economy into a market system. In terms of program design, however, the design depth suggested both inadequate preparation and ambitious expectations of reform in the Lao context. According to the recent Sector Assistance Program Evaluation (SAPE) of the ANR sector, the numerous technical assistance (TA) grants linked with the program loans were not well integrated into the long-term program involvement. Individual investment projects and TAs on their own were relevant to the Governments development priorities and issues in the sector. Collectively, clear links were not established to overcome the impediments confronting commercialization of agriculture. The dichotomy between subsistence and commercial agriculture has not been clearly addressed by ADB assistance. Individual operations had their own merits and relevance to specific sector issues, but their combined objectives and scope lacked focus, and their targets were dispersed. Sequencing of operations and timing of assistance have not been consistent, and several projects and TAs were not coordinated. Since the completion of the Second Agriculture Program Loan, there were no further significant policy-based loans to address the remaining constraints to private investments in the sector. Overall, ADB assistance to the ANR sector is considered partly relevant to the needs of the sector. 4. Efficiency. According to the SAPE, the policy-based lending, which has been ADBs major intervention in the ANR sector during the CAPE period, was less efficient. It underestimated the efforts required to effect policy changes under the countrys political economy context. Requirements for institutional preparedness for changes, management of changes, and the time needed to generate outcomes were underestimated. Project lending was also found to be less efficient. For example, investments in irrigation entailed heavy costs, low returns, negligible crop diversification, and continuing market constraints; while investments in tree plantations generated economic losses, with negative impacts on poverty. Efficiency of TA operations was generally affected by inadequate counterpart arrangements, absorptive capacity, and lack of institutional analysis. The use of TA resources resulted in some capacity development, but in other cases TA resources intended for capacity development were used for capacity substitution. Overall, ADB assistance to the ANR sector is regarded as less efficient. 5. Sustainability. As mentioned by the SAPE, reform measures from the policy-based lending have been largely sustained on paper, with no overt reversals in the formal policy direction. Policy implementation was affected by an environment characterized by regulatory uncertainty, unpredictability, lack of transparency, and other governance issues. Central and local government jurisdictions and decentralization have influenced the reform process and its implementation. TA operations often produced recommendations that could not be implemented because of deficient analysis of their implications on requirements for resources, institutional mandates, and organizational and development management. The sustainability of project investments was generally less likely due to (i) shortfalls in operation and maintenance (O&M); (ii) inadequate resources (human, institutional, and others) to sustain outcomes; and (iii) overriding impediments that impose market constraints on farmers and agribusinesses. Overall, sustainability prospects of ADB assistance to the ANR sector is considered less likely. 6. Institutional Development, Policy Dialogue, and Other Effects. Institutional development and policy dialogue were mostly addressed through the policy-based lending and associated TAs. The SAPE noted that both program loans were not supported with detailed stakeholder or institutional analysis. They were diffused, comprising a large number of interventions, from macro to micro aspects. Tranching and reforms were not synchronized, and there was little assessment of expected outcomes and impacts. Despite its shortcomings, both the First and Second Agricultural Program Loan catalyzed a long-term policy development and

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planning process within the Ministry of Agriculture and Forestry (MAF) in particular, and the Government in general. Legislative and policy changes broadened, deepened, and improved the enabling environment for the ANR sector. However, while the policy initiatives were largely fulfilled on paper, effective implementation proved difficult due to the continuing lack of administrative and technical capacity within central ministries and at provincial and district levels. Reform measures falling under the MAFs own purview were more actively pursued than those of a more general nature. Overall, institutional development and other effects of ADB assistance to the ANR sector are regarded as modest (partly satisfactory). 7. Lessons and Recommendations. (i) The lack of focus and well-designed sector strategy resulted in diffused assistance and less than satisfactory results. (ii) During the formulation process of the Country Strategy and Program, the Government and ADB should jointly reassess ADBs future involvement in this sector. (iii) If the joint assessment concludes that ADB has a role to play, then a suitable strategy, which takes into account ADBs in-house human resources capacity, should be prepared. (iv) ADB should improve its project administration capabilities and commit resources to match the current ANR portfolio. (v) ADB and the Government should review/monitor the performance of ongoing projects such that midcourse actions can be taken to improve the probability of achieving development results. (vi) ADB should strengthen ex-ante project economic analysis of ANR projects to recognize realist assumptions and risks. 2. Financial Sector and Private Sector Development

8. Sector Issues. The Financial sector in the Lao PDR consists mainly of banksthe Bank of Laos (BOL), two state-owned commercial banks (SCBs) (the Banque pour le Commerce Exterieur Lao and the Lao Development Bank), the Agriculture Promotion Bank (which is another SCB specializing in agriculture), some private banks, and one insurance company. Although monetization of the economy has increased over the years as indicated by the broad money supply/GDP ratio of 20% in 2004, the credit/GDP ratio remained relatively low at 25%. There has been no improvement in institutional diversity since the early days of the NEM. The two SCBs account for 75% of total gross asset in the banking sector, but are technically insolvent with a high proportion of non-performing loans amounting to 64% in 2004. 9. Relevance. During the CAPE period (19862004), ADBs Country Program assistance to the financial sector consisted of 3 program loans and 1 TA loan, totaling $69 million; 4 PPTAs for $0.9 million; and 20 ADTAs for $10 million (Tables A3.1A3.3, Appendix 3). These amounts corresponded to 7%, 4%, and 14% of the total amounts of loans, PPTAs, and ADTAs, respectively. ADBs Country Program assistance to this sector is considered highly relevant to the Country Strategy objectives and the countrys needs since it aimed at supporting the implementation of the NEM to develop a market-based economy through enhanced private sector role. The Financial Sector Program Loan (FSPL-I) was also harmonized with/ complementary to the International Monetary Funds (IMF) Structural Adjustment Facility and the World Banks Structural Adjustment Credit (SAC) III, both of which aimed to facilitate structural adjustments and macroeconomic stabilization. The Second Financial Program Loan (FSPL-II) was implemented alongside the IMFs Enhanced Structural Adjustment Credits and the World Banks SAC-III.4 However, the design of both loans was problematic because (i) the loans were too complex and often beyond the comprehension and skills of the Lao PDR; (ii) they contained measures which might have been considered superfluous; and (iii) the timeframe
4

However, both the IMF and World Bank programs were discontinued in 1998 due to the Governments inability to comply with policy conditions.

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121

given for the accomplishment of many conditionalities was far too optimistic since the tangible objectives of the two program loans were, for the most part, long-term expectations. Due to these design drawbacks, overall performance of ADB assistance to this sector is considered relevant, despite its being highly relevant to the Country Strategy objectives and the countrys needs. 10. Efficiency. The delays in the implementation of many reform measures under the FSPLI and FSPL-II mean that many important reform outcomes were not delivered as expected, while the program costs were not reduced. Moreover, confusion due to changes in policy reforms during the FSPL-I (e.g., seven SCBs were recapitalized) and FSPL-II (e.g., seven SCBs were consolidated into three) reduced efficiency in resources use. Overall, ADB assistance to this sector is regarded as less efficient. 11. Sustainability. Sustainability of the completed program loans is not yet firmly in place due to delays in implementation of many of the planned reforms and a lack of commitment on the part of the Government, especially at higher levels. Thus, sustainability of overall programs is considered less likely. However, with the properly-designed ongoing Banking Sector Reform Program, focusing on improving lending quality and requiring the SCBs to sign governance agreements before proceeding to further implementation, sustainability prospects of ADB assistance to this sector can be improved. 12. Institutional Development, Policy Dialogue, and Other Effects. During the FSPL-II implementation, ADB pursued, together with IMF and the World Bank, collective policy dialogue and provided additional support through two TAs (TA 3146 and TA 3466) to assist the Government in preparing the countrys comprehensive strategy for banking sector reforms. The framework was used as a basis for the subsequent IMFs ongoing Poverty Reduction and Growth Facility and ADBs ongoing Banking Sector Reform Program. The FSPL-I and FSPL-II generated some positive institutional outcomes since (i) BOL was provided with the tools of monetary control and emerged as the apex institution to oversee the banking sector and exercise monetary control for stability, (ii) an interbank market and a check clearing system covering all provinces has been established, and (iii) staff skills of the SCBs have improved. However, SCBs institutional reforms were generally limited to consolidation, corporatization, and restricted operational and organizational improvements. Key reform issues (e.g., weak SCB governance and autonomy, which has been inhibiting enforcement and implementation of prudential regulations) were not adequately addressed. This has led to the failure of SCBs recapitalization. BOL was not able to increase SCBs autonomy through joint ventures, management contracts, and reduced government ownership. Overall, institutional development and other effects of ADB assistance to this sector are considered modest (partly satisfactory). 13. Lessons and Recommendations. (i) Realistic assessment and systematic capacity building of the agencies involved in implementing reforms, together with their preparedness and willingness to own them, are of utmost importance for the success of any reform program; (ii) The implications of reform measures should be well thought out and discussed during program processing to avoid unduly implementation delays; (iii) Future assistance should aim at (a) facilitating the entry of new private banks and improving the loan security enforcement environment which is the biggest constraint to extending the reach of the banks to small- and medium-sized enterprises; and (b) addressing the SCBs bankrupt position to make them autonomous, commercially viable, and sustainable (e.g., by improving corporate governance of the SCBs and their clients, reducing SCBs policy loans, establishing a regime of compliance and reporting for the prudential regulations); (iv) Properly designed and sequenced economic, thematic, and sector works (ETSWs) or capacity building ADTAs should precede the processing

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of program loans and be used to build ownership of policy reforms; and (v) Future program loans should be more manageable, with sharply focused reform agenda. Probably, a program cluster modality based on a cash on delivery basis should be considered. 3. Energy Sector

14. Sector Issues. The Lao PDR is recognized as a least-developed country with a very low electrification ratio. Only about 20% of the countrys total households and less than 2% of the countrys rural households have access to electricity. The hydropower subsector is still in its infancy since only about 3.5% (627 megawatts) of hydropower potential in the country (over 18,000 megawatts) has been developed. 15. Relevance. During the CAPE period (19862004), ADBs Country Program assistance to the energy sector consisted of 9 loans for $237 million, 7 PPTAs for $4.4 million, and 10 ADTAs for $7.7 million. These amounts corresponded to 23%, 18%, and 11% of the total amounts of loans, PPTAs, and ADTAs respectively (Table A3.1A3.3, Appendix 3). ADBs Country Program assistance to this sector is considered highly relevant to the Country Strategy objectives since it provided investments in essential infrastructure, facilitating private sector development and market transformation, which was one of the priority areas in all of three periods of the Country Strategies. Although the Xeset Hydropower Project and the Nam NgumLuang Prabang Power Transmission Project started before ADBs first Country Strategy to the Lao PDR (1991), they were very relevant to the Governments Second Plan (19861990) aimed at transforming the economy into a market-based system. The Theun Hinboun Hydropower Project (THHP) (1994) was the first joint venture of the Government with the private sector for financing, construction, and operation of a power plant. In terms of project design, projects in this sector are generally well designed. However, the design of the THHP and the Nam Leuk Hydropower Project (1996) did not sufficiently take into account possible negative environmental and social impacts. Mitigation activities have to be undertaken afterward. Thus, ADB assistance to the energy sector is considered relevant, rather than highly relevant. 16. Efficiency. All projects in this sector suffered delays, although some managed to catch up and close on schedule. Some projects encountered major cost overrun, while others had significant cost underruns. The economic internal rates of return (EIRRs) were generally high, ranging from 12% to 31% (Table A5.5, Appendix 5). Project facilities have been generally well utilized. Overall, ADB assistance to the energy sector is regarded as efficient. 17. Sustainability. Civil works and equipment of the projects in this sector are designed and built to operate for over 50 years with proper maintenance and equipment overhaul. With the support of expert assistance for special problems, the Electricit du Laos (EdL) can maintain and operate hydropower stations and the transmission and distribution systems with high efficacy and long-term sustainability. Regarding financial sustainability, EdLs financial status has been weak due to subsidized electricity tariffs and unpaid account receivables from government agencies. However, sustainability prospects of ADB assistance to the energy sector are considered likely, but at the lower end of the range, because the participation by private power producers is expected to help ease the financial condition. EdL will need to restructure electricity tariffs to reduce subsidies and strengthen its financial position. 18. Institutional Development, Policy Dialogue, and Other Effects. The EdL has developed a strong capability in project preparation, procurement, and implementation of ADB projects. Although some projects resulted in greater negative socio-environmental effects than originally envisaged at project design, policy dialogue was conducted such that the associated

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private power producers under the THHP have agreed to carry out long-term mitigation actions which are going on well. Since the Nam Leuk Hydropower Project is located within the Phou Khoa Khouay National Biodiversity Conservation Area (park), although not within the core area of the park, environmental remedial actions for the park will be supported by the Environmental Fund under the ongoing ADB-financed Environment and Social Program. Other major policy dialogue in this sector included (i) the development of a legal framework to promote private power development in 1996 under the THHP, and (ii) the preparation of a financial recovery plan for the EdL under the Power Transmission and Distribution Project. The projects in this sector also brought about positive non-quantifiable socioeconomic effects: (i) strengthening the Greater Mekong Subregion (GMS) ties with Thailand through the exports of electricity; (ii) creating employment of many unskilled labor (including women) during project construction; (iii) providing electricity supply to villages adjacent to the projects hydropower plants and by means of shield wire electrification to households along the high voltage transmission lines; (iv) facilitating subsequent constructions of access roads, schools, health centers, and markets; and (v) improving the quality of life through accessibility to lighting, radio and television, and use of electrical appliances (including irrigation pumps). Given some negative environmental impacts, the overall positive institutional development and other effects of ADB assistance to the energy sector are regarded as significant (satisfactory), rather than highly satisfactory. 19. Lessons and Recommendations. (i) Adequate project preparation is necessary to avoid cost overrun and underrun, and to mitigate costly negative socio-environmental impacts; (ii) ADB support to this sector should continue, in particular to derive more benefits from the GMS integration in terms of electricity exports; (iii) Future ADB support to this sector should develop an efficient public-private partnerships framework for greater involvement of the private sector in financing and operations; (iv) The issue of EdLs financial viability should be addressed (e.g., through tariff restructuring); and (v) Although ADBs rural electrification projects have been a success, information from the CAPE field surveys indicate some evidence that the electricity is not reaching the very poor. Future support should address this issue. 4. Transport Sector

20. Sector Issues. Transport in the Lao PDR is almost exclusively road-based, and will remain so for the foreseeable future. The road network carries more than 70% of freight and 90% of passenger traffic. Despite many advances in its national network, the country continues to lag behind its neighbors in road infrastructure. The estimated national road network density is extremely low: about 0.14 kilometer (km) per square km. The 32,600-km road network consists of national (22%), provincial (28%), urban (4%), and local roads; including district, rural, and other roads (46%). Many of the local roads are earth tracks, typically inaccessible during the rainy season, except to 4-wheel drive vehicles. Four of the 18 provincial capitals remain without sealed, all-weather, road links. The aviation subsector in Lao PDR is small and relatively undeveloped, accounting for less than 10% of national transport passenger traffic, with negligible freight traffic. There are two international airports, at Vientiane and Luangprabang, and 17 small domestic airports/airfields throughout the country. 21. Relevance. During the CAPE period (19862004), ADBs Country Program assistance for this sector consisted of 12 loans for $344 million, 10 PPTAs for $3.8 million, and 16 ADTAs for $9.7 million. These amounts corresponded to 33%, 15%, and 14% of the total amounts of loans, PPTAs, and ADTAs respectively (Table A3.1A3.3, Appendix 3). ADBs Countrys Program assistance to this sector is considered highly relevant to the Country Strategy objectives since it provided investments in essential infrastructure to enhance connectivity and stimulate market transition, which was one of the priority areas in all three periods of the

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Country Strategies for the Lao PDR. The CAPE classifies the road projects into four categories according to their locations as follows: (i) Group 1 focused on the North, (ii) Group 2 on the South, (iii) Group 3 on GMS, and (iv) Group 4 on rural access. With this logical grouping, it is discernible that the design of the road projects was highly relevant. For example, from the mid1980s, when substantial international assistance to this sector had begun, through 2000, the primary focus of most funding agencies has been on the improvement of the National Road (NR 13). NR 13 is the major trunk roadthe backbone of the road networktraversing North and South of the country from Vientiane, with NR 13N terminating in the North near the border of the Peoples Republic of China (PRC) in Luangnamtha, and NR 13S terminating in the South in Champasack at the Cambodia border. Together with other funding agencies, ADBs decision to concentrate early efforts on improving NR 13 through the projects under Group-1 was the right choice. The Group-2 projects were also highly relevant because they targeted improvements of national and provincial roads in the southern part of the country. In addition, they were integral to the World Banks Southern Transport Project and Second Highway Improvement Project (Pakse-Savannakhet) as well as the former Soviet Unions financing of the bridge linking NR 13 at Pakse on the Se Done River. Similarly, the Group-3 projects were highly relevant not only to the Lao PDR, but also to the neighboring GMS countries. The Group-4 projects were relevant to countrys needs because they aimed at providing the rural poor with better access to markets, employment, and social facilities which, in turn, contributing to poverty reduction. The Airports Improvement Project is also relevant because it addressed priority safety issues. Overall, ADB assistance to the transport sector is regarded as highly relevant to the Country Strategy objectives and the countrys needs. 22. Efficiency. Most transport projects suffered from long implementation delays. The average implementation delays on the Group-1 projects amounted to 27 months, Group-2 projects to 38 months, and Group-3 projects to 24 months. However, with improved institutional capacity of the Ministry of Communication, Transport, Post, and Construction (MCTPC); the delays had been reduced substantially to 12 months for the last completed project (the Champasack Road Improvement Project). The airport project was extended more than 4 years beyond the appraisal target, with doubled project cost. However, its EIRR was acceptable at 12%. The EIRRs of the road projects are generally high, ranging from 12% to 29% (Table A5.5, Appendix 5). Considering these indicators altogether, ADB assistance to the transport sector is regarded as efficient, but at the lower end of the range. 23. Sustainability. In the aviation subsector, increased passenger traffic and over-flights traffic would be sufficient to finance the required minimal O&M to keep aviation facilities in good condition, which is attested to by the recent international certification. In the road subsector, the shortage of recurrent budget increases the risks that current investments will not be maintained or will deteriorate at a faster rate than new infrastructure is being added. The Road Maintenance Fund was established under the World Bank assistance, with ADBs contribution of $2 million. The Government has committed to sustain the Fund and continue implementing the future fuel levies and other road user charges. Overall, sustainability prospects of ADB assistance to the transport sector are regarded as likely, but at the lower end of the range. 24. Institutional Development, Policy Dialogue, and Other Effects. Capacity building to the Ministry of Communication, Transport, Post and Construction (MCTPC) has been a key element of ADB support to this sector through a series of ADTAs over the past 2 decades. MCTPC has also been the target of extensive capacity development schemes by other funding agencies (e.g., the Japan International Cooperation Agency, Swedish International Development Agency, and the World Bank). MCTPC has absorbed the capacity development assistance generally well. This was reflected in its ability to reduce implementation delays from

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the average of more than 24 months to 12 months in the last completed project. In addition to ensuring government commitment in road maintenance, major policy dialogue in this sector was through the formulation of the Road Transport Law (passed in 1999) under the Champassak Road Improvement Project to develop private transport consulting/ contracting industries. On the environment aspect, all recent road projects have addressed environmental issues. A major step forward was the forming of the Environmental and Social Division within MCTPC. Gender issues have only been addressed in recent years, but are still not accepted by most MCTPC engineers as an issue that they need to deal with. As more ADB road projects penetrate isolated mountainous areas, MCTPC is acknowledging the need to consider ethnic minorities in road construction. The importance of the resettlement/compensation issues has widespread acceptance throughout MCTPC. There has been a recent significant change among MCTPC officials in the realization of the importance of the GMS cooperation. They have accepted that the GMS projects can offer important potential benefits to the Lao PDR even if the country acts only as a transit country to much of the international traffic. In addition, the projects in this sector brought about non-quantifiable socioeconomic benefits as follows: (i) creating employment of many unskilled labor during project construction, (ii) providing greater economic opportunities through increased market access and reduced travel time, (iii) increasing plantation of cash crops in every village along the road links between Vientiane and Luangprabang, and (iv) improving security situation along the roads due to increased travel speed. In sum, institutional development and other effects of ADB assistance to the transport sector are regarded as substantial (highly satisfactory). 25. Lessons and Recommendations. (i) Continuity--both in terms of staff and project design--is key to project success; (ii) To achieve better subregional integration, an integrated approach transcending countries is crucial to enhance the benefits of a coherent and continuous regional focus and the synergies created in the earlier projects. Future projects could benefit from an appropriate complementarity of different infrastructure segments to create synergies at lower costs; and (iii) Future projects should continue to increase community participation and strengthen MCTPCs capacity and awareness in socio-environmental management (e.g., encroachment in the area adjacent to the project roads) and monitoring, and to support the Road Maintenance Fund as well as road safety (including inter-modal safety issues). 5. Education Sector

26. Sector Issues. The shift to a market-based economy under the 1986 NEM would require a more efficient education system. At the beginning of the 1990s, the countrys education system was characterized by low access and quality. Although education indicators have been improved over the past decade, they remain less than satisfactory. For example, during 19912003, gross enrollment rates (GERs) increased from 105% to 113% at the primary level and from 32% to 50% at the lower secondary level. In 2003, the GERs were only 26% at the upper secondary level, 5% at the postsecondary level, and about 2% at the tertiary level. During 19912003, repetition rate and dropout rate at the primary level decreased from 30% to 20% and 11% to 9%, respectively. There remain high access disparities by gender, ethnic minority groups, and locations. The Governments National Growth and Poverty Eradication Strategy has identified education as one of the priority sectors and the Government has taken a number of initiatives aimed at providing education for all, with the approval of the National Action Plan of Education for All in 2005. 27. Relevance. During the CAPE period (19862004), ADBs Country Program assistance for the education sector consisted of 4 loans for $73 million, 6 PPTAs for $2.6 million, and 10 ADTAs for $5.6 million. These amounts corresponded to 7%, 11%, and 8% of the total amounts

126

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of loans, PPTAs, and ADTAs, respectively (Tables A3.1A3.3, Appendix 3). ADBs Country Program assistance to this sector is considered relevant to the Country Strategy objectives since it provided essential investments in basic social services, which was one of the priority areas in the 1991 Country Strategy. The support was also relevant to one of the priority areas in the 1996 Country Strategy and 2001 Country Strategy and Program, namely human resources development. The Country Programs also assisted in preparing some sector strategies, first through an ADTA (TA 1130)5 in 1989, which was instrumental to the formulation of the countrys medium-term education strategy (1990). Two loans (the Education Quality Improvement Projects [EQIP-I] and the Postsecondary Education Rehabilitation Project [PSERP]), guided by this strategy, were thus relevant to the countrys education strategy at that time. In 1998, the Country Programs provided another ADTA (TA 3014)6 to support the preparation of the 5-year Education Sector Development Plan, which was the basis for the development of the countrys Education Sector Strategic Vision (20012020). The remaining two loans (the Basic Education Girls Project [BEGP] and the Second Education Quality Improvement Project [EQIP-II]) were guided by this strategy, which focused on basic education. These loans were also relevant to ADBs Education Policy, which gives priority to basic education (primary and lower secondary). Although the PSERP diverted from this priority, it was needed at that time to quickly develop essential skills of the labor force to facilitate the countrys smooth transition to a market system. In terms of the relevance of project design, it was generally appropriate in most projects, except for the first project (EQIP-I), which put more emphasis on teacher training without adequate links to or improvements of school curricula. Overall, ADB assistance to the education sector is considered relevant. 28. Efficiency. Project facilities in the past and ongoing projects were generally well utilized. The EQIP-I helped to rationalize teacher training colleges through consolidation, and so did the PSERP which amalgamated postsecondary colleges into the National University of Laos (NUOL). The project achieved increased student-teacher ratio from 7:1 to 20:1, higher than envisaged at appraisal. Substantial amount of resources in education will be saved if the multigrade model piloted under the BEGP is replicated nationwide where relevant. In terms of project implementation, although initial delays were observed in the establishment of project implementation units (PIUs), appointment of counterpart staff, and consultant selection in the ongoing projects, cost overruns have not been observed. Inadequate coordination among funding agencies resulted in competition among projects to mobilize counterpart staff because each funding agency created its own PIU, which is not a regular part of the Ministry of Education (MOE) operations. Overall, ADB assistance to the education sector is regarded as efficient. 29. Sustainability. NUOL established under the PSERP is likely sustainable as it has implemented demand-based special courses to levy sufficient tuition fees, together with boarding and lodging fees, for cost recovery. For the basic education projects, the nature of the projects does not allow cost recovery activities. The emphasis on capital investments in many projects would require more recurrent funds for O&M. There has been inadequate allocation of recurrent funds from the Government due to low public revenues, hence, inadequate textbooks and low teacher salaries and motivation. However, with the recent establishment of the government-owned Lao Holding State Enterprise, it is expected that more foreign exchange earnings from future electricity exports will be accounted for as public revenues and used for priority sectors (including education). Thus, sustainability of ADB investments in the education sector is considered less likely, but with good prospects of becoming likely, depending on

5 6

TA 1130: Education Sector Study, for $380,000, approved in 1989. TA 3014: Education Sector Development Plan, for $530,000, approved in 1998.

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127

government commitment to channel more revenues from electricity exports to this priority sector. 30. Institutional Development, Policy Dialogue, and Other Effects. Institutional development and policy dialogue in this sector included (i) establishment of NUOL as an autonomous body, which was allowed to introduce cost recovery measures under the PSERP; (ii) establishment of the National Teacher Education Advisory Board, Teacher Development Center, and teacher training colleges through consolidation of small teacher institutions under the EQIP-I; and (iii) development of the National Teacher Education Plan-Policy Statement, and a proposal for improving teacher conditions (including teachers salaries and timely payments) under the EQIP-II. In addition, ADB also provided two additional ADTAs (TA 1776 and TA 2097)7 to promote private education. Both TAs were assessed as generally successful by the technical assistance performance audit report as they helped (i) establish the Department of Private Education in MOE; and (ii) promulgate general guidelines, rules, and regulations for private education. Since then, private schools, especially at the secondary and vocational levels, have been growing in Vientiane and other urban towns, although the proportions of private schools are still small (12%, 1%, and 2% in 2002 at the pre-school, primary, and secondary levels, respectively). 31. Some projects in this sector also produced satisfactory gender and ethnic minority effects, particularly the BEGP and EQIP-II. Both included strategies to address gender and ethnic minority issues and the former has already generated favorable gender and ethnic minority effects as described in the main text under the subsection on ADBs sector outcomes (Table A4.1, Appendix 4, column 2). Overall, institutional development and other effects of ADB assistance to the education sector are considered significant (satisfactory). 32. Lessons and Recommendations. (i) The impacts of the basic education projects have been constrained by (a) inadequate coordination among funding agencies to improve access and quality of basic education in a coherent manner to avoid competing and piecemeal efforts; and (b) inadequate recurrent funds allocated by the Government to maintain project facilities and activities, provide textbooks, and improve teacher salaries/motivations; (ii) To address both problems, a programmatic approach such as the sector-wide approach should be adopted to pool resources from participating funding agencies in a phased manner and allow recurrent costs to be financed by other funding agencies if ADB cannot do so; (iii) Another option to address the problem of inadequate counterpart funds and recurrent funds is to adopt a budget support modality, such as program loans; (iv) Since textbooks are the most important learning resource for students, availability of textbooks should be ensured before initiating any quality improvement project; (v) Any future assistance in this sector should focus on consolidating achievements made under the ongoing projects in improving quality of basic education and increasing access by girls and ethnic minority groups; (vi) Active involvement of the executing agency from the initial stage of project design is necessary to help build ownership and minimize start-up delays; and (vii) Integration of PIUs in regular MOE operations is necessary to benefit from capacity building activities. 6. Health Sector

33. Sector Issues. The health status of the Lao PDR, particularly in remote rural areas, has been low as indicated by low life expectancy (54 years), high infant mortality (87 deaths per
7

TA 1776: Encouraging Private Sector Education, for $74,000, approved in 1992; and TA 2097: Private Sector Education Development, for $400,000, approved in 1994.

128

Appendix 4

1,000 live births), high child mortality rate (106 deaths per 1,000 live births), and high maternal mortality rate (530 per 100,000 live births), based on the most recent data. Only 52% of total population has access to safe drinking water, and 51% safe sanitation facilities. 34. Relevance. During the CAPE period (19862004), ADBs Country Program assistance to the health sector consisted of two loans for $25 million, two PPTAs for $0.95 million, and three ADTAs for $1.75 million. These amounts corresponded to 2%, 4%, and 3% of the total amounts of loans, PPTAs, and ADTAs respectively (Table A3.1A3.3, Appendix 3). ADBs Country Program assistance to this sector is considered highly relevant to the Country Strategy objectives since it provided essential investments in basic social services, which was one of the priority areas in the 1991 Country Strategy. The support was also relevant to one of the priority areas in the 1996 Country Strategy, namely human resources development, and to the countrys socioeconomic development plans during that time. Given that both projects in this sector were to support primary health care (PHC), they were responsive to ADBs Health Policy (1999), which emphasized the need to maintain the current emphasis on PHC, including reproductive health, family planning, and nutrition to increase cost effectiveness of investments. As regards the relevance of project design, the projects put too much emphasis on civil works and equipment (e.g., 40% of the total project cost in the second project), which was rather high for a PHC project in remote areas. Overall, ADB assistance to the health sector is considered relevant. 35. Efficiency. The first project (Primary Health Care Project) was feasible, cost-effective, and appropriate for the health needs of the community. Similarly, the second project (Primary Health Care Expansion Project) is consolidating and expanding the PHC activities. Utilization of health services and facilities has improved due to the availability of drugs at the health centers and village health volunteers. However, the cost recovery scheme without sufficient fee waving scheme tended to limit access by very poor households. Overall, ADB investments in the health sector are regarded as efficient. 36. Sustainability. Although the Ministry of Public Health has shown high ownership to the PHC projects, the Government generally lacks sufficient recurrent funds. The recurrent budget allocated from the central Government to the health sector has been about 3% of the total recurrent budget over the past years. Provincial budget is the main source of recurrent spending for provincial/district/village health services. Real per capita spending on health by province decreased from $0.99 in 2001 to $0.75 in 2004. As such, the ongoing project has included one covenant to ensure that the health budget for the targeted provinces will be maintained at the 2000 fiscal year level and increased in real terms. Health facilities have adopted cost recovery measures, including the Drug Revolving Fund to generate revenue needed to ensure regular supply of essential drugs. This scheme has been extended to the village level through drug kit program. With the recent establishment of the government-owned Lao Holding State Enterprise, it is expected that more foreign exchange earnings from future electricity exports will be accounted for as public revenues and used for priority sectors (including health). Thus, sustainability of ADB investments in the health sector is considered less likely, but with good prospects of becoming likely, depending on government commitment to channel more revenues from electricity exports to this priority sector. 37. Institutional Development, Policy Dialogue, and Other Effects. The two projects and associated ADTAs helped improve the PHC management system and prepare the PHC policy, which identified strategic priorities, delivery system, and organizational structure guiding PHC expansion in the future. The Rural Development Division is making efforts to coordinate all PHC services at the Ministry of Public Health. However, overall institutional capacity development

Appendix 4

129

activities have limited effects on planning and management because TA consultants did not focus on transferring knowledge and skills to the counterparts. Establishment of different project coordination units for different funding agencies projects, together with limited coordination among them, have overburdened the officials and increased transaction costs. There was also limited success in developing and delivering a bundle of PHC services in a unified manner as envisaged in the PHC policy. Thus, fragmentation of service delivery among different vertical programs has continued and the administrative burden on staff increased. Service delivery has also been affected due to the problem in deployment of staff in rural and remote areas due to low salaries and delayed payments of health personnel, and confusions in the roles of health centers, villages, districts, and provinces in planning, budgeting, financing, managing, and monitoring of the sector associated with partial implementation of the decree on deconcentration. 38. However, the two projects substantially addressed gender and ethnic minority issues. There were many female PHC workers being trained. The focus on PHC not only benefited children, but also mothers. The projects targeted ethnic minorities in many poor Northern provinces. The beneficiaries of the first project were 0.5 million, of which 50% were ethnic minorities (Table A4.1f, Appendix 4). The second project adopted four strategies to increase access to ethnic minorities to PHC: (i) increasing physical access, (ii) making services appropriate to their needs, (iii) making services socially acceptable through their training and participation as village health volunteers to provide PHC services, and (iv) improving affordability of services through financing arrangements. In sum, although the institutional effects were moderate, the social effects were substantial. Overall institutional development and other effects of ADB assistance in the health sector are considered significant (satisfactory). 39. Lessons and Recommendations. (i) Active involvement of the executing agency from the initial stage of project design would help minimize startup delays. (ii) Any future ADB assistance in this sector should discourage high proportion of civil works, but focus more on consolidating achievements in improving access and quality of PHC. (iii) This will be consistent with a recommendation in the Special Evaluation Study on ADB Policy for the Health Sector (2005), which emphasized the need to promote PHC by building on its strengths and supporting structural changes for good governance, and to help the Government take on the health function of a modern bureaucracy. (iv) A policy-driven sector-wide management (SWIM) approach should be adopted to increase coordination among funding agencies and avoid doing projects in a vertical manner, which resulted in separate programs for immunization, malaria control, family planning, etc. (v) Finally, the SWIM should be upgraded to the sector-wide approach to mobilize financial resources from various funding agencies in an integrated manner. 7. Urban Development Sector

40. Sector Issues. Although the Lao PDR is essentially a rural country, the urban sector has been expanding since the adoption of the NEM, both through increased economic activities and rural-urban migration. About 18% of the total population (0.85 million) live in urban areas, comprising (i) Vientiane, the capital city, with a population around 200,000; (ii) four largest provincial capitals (secondary towns)8 with populations around 20,00060,000; and (iii) small towns with populations around 5,00020,000. In the early 1990s, urban centers were poorly served with deteriorating infrastructure. The absence of interconnected drainage networks resulted in frequent flooding, causing damages to commercial establishments and private
8

Including Thakhek, Pakse, Savannakhet, and Luangprabang.

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Appendix 4

homes. Coupled with lack of proper sanitation and solid waste disposal systems, urban environmental conditions and population health/hygiene remained poor. The urban population having access to improved sanitation increased from 24% in 1990 to 51% in 2002. 41. Relevance. During the CAPE period (19862004), ADBs Country Program assistance to the urban development sector consisted of 4 loans for $88 million, 6 PPTAs for $2.7 million, and 4 ADTAs for $2.6 million. These amounts corresponded to 8%, 11%, and 4% of the total amounts of loans, PPTAs, and ADTAs, respectively (Tables A3.1A3.3, Appendix 3). ADBs Country Program assistance to this sector is considered relevant to the Country Strategy objectives since it provided essential investments in physical infrastructure and basic social services, which were the priority areas of the 1991 Country Strategy. The support was also relevant to enhancing economic growth and broadening its impact as emphasized in the 1996 Country Strategy, and improving the environment and reducing poverty as stressed in the 2001 Country Strategy and Program. However, only recently did the Country Programs assist in preparing a sector strategy (sector investment plan) under the ongoing Small Towns Development Sector Project. The plan reflects the countrys need for basic urban infrastructure and services and provides the basis for investments in the sector until 2010. In terms of the relevance of project design, it was generally appropriate, except for the sanitation (septic waste management) component in the first two projects, which was problematic due to lack of adequate demand from and consultation with the target beneficiaries. Overall, ADB assistance to the urban development sector is regarded as relevant. 42. Efficiency. One of the factors reducing efficiency in the completed and ongoing projects has been the delayed/non payment of counterpart funds by the Government to contractors. This resulted in substandard work and delayed implementation. However, although the completion of the Vientiane Integrated Urban Development Project was delayed by 1 year, with some cost overruns, the EIRRs for individual subprojects were calculated by the project completion report (PCR) to be generally higher than at appraisal (e.g., about 15% for the drainage component and ranging from 27% to 67% for various sections of the upgraded roads). The efficiency of the recently completed Secondary Towns Urban Development Project would have benefited from the experience gained under the first project. Thus, ADB investments in the urban development sector are generally regarded as efficient. 43. Sustainability. The Vientiane and four provincial Urban Development Administration Authorities (UDAAs) have been able to generate incomes for their own O&M to some extent, although the former is more likely sustainable given that 60% of its O&M requirement is selffinanced. The solid waste management component of the Vientiane Integrated Urban Development Project is also operating on a self-financing basis. Several sources of incomes are yet to be tapped as fees from existing sources remain low. So far, project facilities are in operable condition and of good quality, which will help improve income base. Overall, sustainability of ADB investments in the urban development sector is considered likely. The prospects will increase once the implementation decrees of the Law on Local Administration is issued to provide legal status to UDAAs. 44. Institutional Development, Policy Dialogue, and Other Effects. UDAAs have been successful in income generation, with the passage of the Law on Local Administration in 2003. These are key factors explaining the achievement of the sector outcomes. However, it takes an inordinately long time before the decrees required to implement the Law can be issued, which are expected in 2007. This reflects weak governance/judicial system and inadequate government ownership/commitment to facilitate the reform procedures. In addition, rather than immediately establishing five fully-fledged urban municipalities, the Government plans to pilot

Appendix 4

131

test the concept first in Vientiane and Luangprabang. These are likely to deter the good potential of the institutional outcomes. Overall, institutional development and other effects of ADB assistance to the urban development sector are considered significant (satisfactory). 45. Lessons and Recommendations. (i) Success of ADB interventions depends largely on policy dialogue and government ownership/commitment to pursue/expedite policy and legal reforms; (ii) Stronger government ownership/commitment is needed to provide adequate counterpart funds; (iii) To minimize delays in project implementation and reduction in project scope due to cost overruns, it is important to recruit sufficiently-qualified or experienced contractors and suppliers; (iv) To make project design more realistic, it is necessary to conduct consultation with the target beneficiaries during the design stage to create sufficient demand and participation; (v) Any future assistance in this sector should focus on creating a critical mass by consolidating the past investments in Vientiane and the four secondary towns, rather than expanding to new and less-densely populated urban areas; and (vi) Cross-sectoral assistance, rather than scattered assistance across sectors and locations, should also be explored with such related sectors as water supply and health to create synergies and efficiency in the utilization of scarce resources. 8. Water Supply and Sanitation Sector

46. Sector Issues. In the early 1990s, only about 28% of the urban population had access to piped water. Water provision in most urban areas during that time was dependent, where available, on deteriorating water supply systems. To remedy this situation, the Government issued a Water Supply Sector Policy Statement in 1999 to set a target of supplying dependable, safe water supply to 80% of the urban population by 2020. About 52% was achieved in 2000. 47. Relevance. During the CAPE period (19862004), ADBs Country Program assistance for the water supply and sanitation sector consisted of 4 loans for $52 million, 5 PPTAs for $1.9 million, and 4 ADTAs for $1.3 million. These amounts corresponded to 5%, 8%, and 2% of the total amounts of loans, PPTAs, and ADTAs, respectively (Tables A3.1A3.3, Appendix 3). ADBs Country Program assistance to this sector is considered relevant to the Country Strategy objectives, since it provided essential investments in physical infrastructure and basic social services, which were the priority areas of the 1991 Country Strategy. The support was also relevant to improving the environment and reducing poverty as stressed in the 2001 Country Strategy and Program. ADB started to assist in the preparation of a sector strategy (sector investment plan) under the ongoing Water Supply and Sanitation Sector Project, based on the 1999 Water Supply Policy Statement. The plan has guided the development of the countrys urban water supply sector in the past 5 years, including investments funded by ADB and others. It was updated in 2004 to reflect the Governments increasing emphasis on improving small towns, particularly those in the poorest districts. In terms of the relevance of project design, most of the projects in this sector, except the ongoing one, had suffered from inappropriate design of the water supply systems, some of which were too costly for the small urban environment. This resulted in incomplete components and poorly/non functioning facilities. Although ADB support to this sector was generally relevant to the Country Strategy objectives, it encountered serious design problems. Thus, it is considered less relevant overall. 48. Efficiency. Two of the four subprojects in the Southern Provincial Towns Water Supply Project (SPTWSP) were non-functional and had to be remedied by the Norwegian Agency for Development Cooperation and a subsequent ADB project. The project performance audit report (PPAR) indicated an overall EIRR of 20% for the project as a whole (Table A5.5, Appendix 5). However, this high rate EIRR masked the fact that for two subprojects, the EIRRs were negative

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Appendix 4

since there were virtually no benefits at all. The original scope of the Rehabilitation and Upgrading of Vientiane Water Supply Project could not be completed and had to be completed by the Agence Franaise de Dveloppement. The PCR indicated an EIRR of 15% but this did not take into account the additional financing required to complete the project as designed. If this were done, the EIRR would probably drop below 12%. The Northern Provincial Towns Water Supply and Sanitation Project, with poor design due to ineffective consultant selection and contractor supervision, left the seven selected towns with partially functional and defective systems, two of which had been abandoned. The remaining five need remedial work to function efficiently. The PCR indicated an EIRR of 18.5%, but the PPAR indicated a negative EIRR, using a different methodology and taking into account the fact that the water produced was not bacteriologically safe to drink. The main cause of such problems was an underestimation of the needs (including consultancy) for project preparation, detailed design, and project supervision. These were exacerbated by an endemic lack of counterpart staff and counterpart funds. Overall, ADB investments in the water supply sector can only be described as less efficient. 49. Sustainability. Some provincial water supply companies are doing well in terms of cost recovery, raising almost all of the funds they need to be self-financing. Many others have a long way to go, and their long-term viability is in doubt due to below-capacity operations and high O&M costs associated with the poor project design. Overall, sustainability prospects of ADB assistance to the water supply sector are considered less likely, unless careful remedial works are provided to upgrade the deficient systems to operate fully and efficiently. 50. Institutional Development, Policy Dialogue, and Other Effects. In 1998, water supply provision was decentralized and the Lao Water Supply Company converted into the Vientiane Water Supply Company. Separate water supply companies were set up in each province and still receive guidance and training from the Vientiane Water Supply Company. A major achievement of the policy dialogue has been the comprehension and acceptance by government authorities (at least at the national level) that, ultimately, water supply systems must be self-financing and financially sound. The establishment of the Water Supply Authority assisted under the ongoing Water Supply and Sanitation Sector Project, as overall regulator of water supply companies, played a major role in this regard. Unfortunately, while it was established in 1999, its Charter has yet to be approved and implementing decrees are yet to be issued. The long delay reflects inadequate government commitment/ownership. Overall, institutional development and other effects of ADB assistance in the water supply sector are considered significant (satisfactory) as they helped turn the Vientiane and provincial water supply companies into operating agencies with financially sound goals. This contributed to the achievement of some sector outcomes. However, the sector performance is considered less effective because the outcomes achieved so far were much below appraisal targets (para. 131 of the main text). 51. Lessons and Recommendations. (i) Success of ADB interventions depends largely on policy dialogue and government ownership/commitment to pursue/expedite policy and legal reforms; (ii) Stronger government ownership/commitment is needed to provide adequate counterpart funds; (iii) To avoid deficiencies in outputs and inefficient water supply systems, adequate project preparation, with careful project design and selection of qualified consultants, is required. Some of the project towns were really little more than villages which border on being more rural than urban. Thus, they were unlikely to finance the expensive and sophisticated water supply systems being provided; and (iv) Serious consideration should be given to funding the remedial works required on a priority basis.

Table A4.1a: Results Matrix of the Agriculture and Natural Resources Sector Sector Outputs of ADB Interventions Sector Inputs of ADB Interventions List of Key DPs in the Sector

Countrys Achievement of Long-Term Impacts/Results

ADBs Contributions to Intermediate Sector Outcomes/Results

Thematic Pillar I: Pro-Poor, Sustainable Economic Growth x ADBs disbursements in the ANR sector accounted for 9% of total disbursements of all DPs (20002003) AFD, AusAID, EU, Germany, JICA, SIDA, Switzerland, US, various UN agencies, and World Bank

APL and SAPL x sustained agriculture growth rate of 4.3% (19952004) x increased rice yields from 2.5 tons/ha to 3.2 tons/ha (1995 2004) x achieved food selfsufficiency in rice

APL and SAPL x increased FDIs from almost negligible to $88 million during the period prior to the start of the APL and by the end of the SAPL (1989 1995) x increased rice production from 1.35 million tons to 2.5 million tons after program completion (19962004)

However, major impediments to doing business and commercial agriculture continue to persist.

However, overall investment climate remains poor.

APL and SAPL x reduction of state interventions by promoting divestments of agriculture SOEs x deregulation of the marketing of agricultural produce x removal of input/output subsidies x provision of land rights to farmers x restructuring of MAF and strengthening MAF services to ANR x deregulations of domestic and foreign trades ITPP x tree planting of about 6,000 ha, compared to the target of 9,000 ha (67% of output target)

ITPP x jeopardizing the financial soundness and viability of APB, and making the task of turning it into a viable institution serving the farming community even more difficult than it had been prior to the project

ITPP x generation of a large number of nonperforming loans (NPLs) to APB (87% of loans for the project have been classified as NPL in 2004)

CMISP x reduced labor cost of about 70 persondays/year (19962004) due to reduced repairs needed on the irrigation systems in the project areas x incremental rice yields between 0.5 tons/ha and 2.0 tons/ha (19962004) due to improved reliability of water supply in the project areas

CMISP x completion of 47 irrigation subprojects, covering 3,563 ha (2,679 ha in the wet season and 884 ha in the dry season) (out of the target of 3,800 ha) x improvement of 342 km of access road and 46 km of feeder roads (out of the targets of 60 km and 90 km, respectively) SCSPP x setting up of 56 microfinance groups x practice of cropping demonstration

Appendix 4

SCSPP x assistance to 1,493 households (by 56 microfinance groups) to invest in weaving operations, livestock production, and

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Countrys Achievement of Long-Term Impacts/Results trials x improvement/construction of 55 km of district roads and 61.5 km of rural tracks x provision of material support to 36 small-scale irrigation schemes covering 308 ha DIDMSP Rehabilitation of irrigation infrastructure on 9,000 ha (out of the target of 10,000 ha)

ADBs Contributions to Intermediate Sector Outcomes/Results

Sector Outputs of ADB Interventions

Sector Inputs of ADB Interventions

List of Key DPs in the Sector

Appendix 4

intensified agriculture x reduction in the areas under shifting cultivation from 1,200 ha to 565 ha (1999 2005)

ADB = Asian Development Bank, AFD = Agence Franaise de Dveloppement, ANR = agriculture and natural resources, APB = Agriculture Promotion Bank, APL = Agriculture Program Loan, AusAID = Australian Agency for International Development, CMISP = Community-Managed Irrigation Sector Project, DIDMSP = Decentralized Irrigation Development and Management Project, DPs = development partners, EU = European Union, FDI = foreign direct investment, ha = hectare, IFAD = International Fund for Agricultural Development, ITPP = Industrial Tree Plantation Project, JICA = Japan International Cooperation Agency, km = kilometer, MAF = Ministry of Agriculture and Forestry, NPL = nonperforming loan, SAPE = Second Agriculture Program Loan, SAPL = Second Agriculture Program Loan, SCSPP = Shifting Cultivation Stabilization Pilot Project, SIDA = Swedish International Development Cooperation Agency, SOE = state-owned enterprise, t/ha = ton per hectare, UN = United Nations, US = United States.

Table A4.1b: Results Matrix of the Financial Sector and Private Sector Development
Sector Outputs of ADB Interventions Sector Inputs of ADB Interventions List of Key DPs in the Sector

Countrys Achievement of LongTerm Impacts/Results

ADBs Contributions to Intermediate Sector Outcomes/Results

Thematic Pillar I: Pro-Poor, Sustainable Economic Growth

FSPL-I x approval of the Bankruptcy Law and the signing of interbank market regulations x providing BOL with the tools to control money supply x improving the payment system x recapitalizing SCBs x loosening control over interest rates x extending banking services to the northern region x providing a legal framework for domestic enterprises x establishing a land registration office x continuing progress on privatization x establishing a national/central enterprise registration office x ADBs disbursements in the financial sector and PSD accounted for 19% of total disbursements of all DPs (20002003) ADB, AusAID, EU, Germany, IMF, UNDP, and World Bank

FSPL-I and FSPL-II Limited impacts: x increased deposit ratio slightly from 10.6% of GDP to 18.2% (19952004) x decreased share of credit to the private sector in the net domestic credit to the economy from 82% to 60% (19952000) x increased M2/GDP slightly from 14% (1995) to 17% (2000), and 20% (2004), indicating that the depth of the financial sector remained shallow

FSPL-I Improved financial intermediation, such as x reduced real lending interest rate from 6.2% to 3.1% (19912000) x increased credit to private enterprises from KN119,413 to KN1,041,520 (19952000)

FSPL-II Negative outcomes: x decreased return on assets of two SCBs (BCEL and LDB) from 0.1% (1998) to -3.4% (2000) and -4.9% (2004) x increased NPLs of the two SCBs from 35% of their portfolio (1993) to 39% (1998), 52% (2000), and 64% (2004)a

Appendix 4

FSPL-II x consolidation of the seven SCBs into three (BCEL, LDB, and APB) x adoption of a chart of accounts by all banks and completion of international audits of the SCBs x establishment of a separate Supervision and Examination Department in BOL x building of market support infrastructure for the banking system (e.g., issuing regulations for interbank market activities, establishing a deposit protection scheme, and establishing the Credit Information Bureau in BOL) x establishment of a legal basis for non-bank instruments x establishment of a social security fund/pension scheme for employees of public and private enterprises

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Countrys Achievement of LongTerm Impacts/Results x provision of 33 training courses and workshops to 1,220 bank staff BSRP x amendment of the law on Peoples Court x issuance of policy statement on micro-finance x processing of a decree on the Banking Law and drafting of the Anti-Money Laundering Legislation x establishment of the commercial division court at the Vientiane Municipal Court x drafting of the revised Secured Transaction Law x adoption of comprehensive SCB restructuring plans and governance agreements x recovery of KN70 billion of NPLs in two SCBs (BCEL and LDB) x operationalization of international banking advisors x implementation of an ICT project at the two SCBs x adoption of new credit and portfolio management policies by the two SCBs x implementation of a restructuring plan by APB

ADBs Contributions to Intermediate Sector Outcomes/Results

Sector Outputs of ADB Interventions

Sector Inputs of ADB Interventions

List of Key DPs in the Sector

Appendix 4

ADB = Asian Development Bank, APB = Agriculture Promotion Bank, AusAID = Australian Agency for International Development, BCEL = Banque pour le Commerce Exterieur Lao, BOL = Bank of Laos, BSRP = Banking Sector Reform Program, DPs = development partners, EU = European Union, FSPL-I = First Financial Sector Program Loan, FSPL-II = Second Financial Sector Program Loan, GDP = gross domestic product, ICT = information and communication technology, IMF = International Monetary Fund, KN = Kip, LDB = Lao Development Bank, M2 = broad money supply, NPL = non-performing loan, PSD = private sector development, SCB = state-owned commercial banks, UNDP = United Nations Development Programme. a Estimated figures.

Table A4.1c: Results Matrix of the Energy Sector

ADBs Contributions to Intermediate Sector Outcomes/Results Sector Outputs of ADB Interventions Sector Inputs of ADB Interventions List of Key DPs in the Sector

Countrys Achievement of Long-Term Impacts/Results

Thematic Pillar I: Pro-Poor, Sustainable Economic Growth

for XHP, NSHDP, THHP, and NLHP x construction and operation of 45 MW (XHP), 40 MW (NSHDP), 210 MW (THHP), and 60 MW (NLHP) power plants, totaling 355 MW NNLPPTP x installation of a 208 km 115 kV transmission line from the Nam Ngum hydropower station through Vangvieng to Luang Prabang PTDP x installation of a 225 km 115 kV transmission lines from existing grid to Xieng Khouang, Xayaburi, and Xai Muang Feurang NARPDP x installation of a 274 km 115 kV transmission line
Appendix Appendix 3 4 137

for XHP, NSHDP, THHP, and NLHP x provision of energy generation capacity of 137 GWh/yr (19912004), 129 GWh/yr (19972004), 1,533 GWh/yr (19982004), and 268 GWh/yr (20002004), respectively x generation of foreign exchange earnings from energy exports to Thailand of $50 million (19912004), $31 million (19972004), $402 million (19982004), and $37 million (20002004), respectively

x ADBs disbursements in the energy sector accounted for 24% of total disbursements of all DPs (20002003)

ADB, JBIC, NORAD, SIDA, UNDP, and World Bank

Total outcomes of four projects combined included x provision of energy generation capacity of 2,067 GWh/yr (19912004) x contribution to 70% of the countrys energy generation capacity by 2004 x generation of foreign exchange earnings from energy exports to Thailand of $520 million (19912004)

x tripled electricity generation capacity of the country from 1,027 GWh/yr to 3,094 GWh/yr) (19912004) x increased utilization of the countrys hydropower development potentiality to 3.5% (19912004) x increased electricity access to 20% of total households (19982004) x increased electricity access to 2% of rural households (19982004) x increased export diversification from 8% of energy export share to 27% (19942004) x achieved a reasonably high economic growth rate of about 6%/yr (19942004) x achieved poverty reduction from 39% to 33% (19982003)

for NNLPPTP, PTDP, and NARPDP x provision of electricity connections to 18,000 households (19982004), 25,646 households (20032004), and expected 27,000 households by 2008, respectively

Total outcomes of three projects combined included x provision of electricity connections to 70,646 households x contribution to 36% of the countrys electricity connections

ADB = Asian Development Bank, DPs = development partners, GWh/yr = gigawatt-hour per year, JBIC = Japan Bank for International Cooperation, km = kilometer, kV = kilovolt, MW = megawatt, NARPDP = Northern Area Rural Power Distribution Project, NLHP = Nam Leuk Hydropower Project, NNLPPTP = Nam Ngum-Luang Prabang Power Transmission Project, NORAD = Norwegian Agency for Development Cooperation, NSHDP = Nam Song Hydropower Development Project, PTDP = Power Transmission and Distribution Project, SIDA = Swedish International Development Cooperation Agency, THHP = Theun Hinboun Hydropower Project, UNDP = United Nations Development Programme, XHP = Xeset Hydropower Project.

138

Table A4.1d: Results Matrix of the Transport Sector

Sector Outputs of ADB Interventions Sector Inputs of ADB Interventions List of Key DPs in the Sector

Appendix 4

Countrys Achievement of Long-Term Impacts/Results

ADBs Contributions to Intermediate Sector Outcomes/Results

Thematic Pillar I: Pro-Poor, Sustainable Economic Growth

Group-1 projects ( the Third, Fourth, Fifth and Xieng Khouang Road Improvement Projects) x upgrading/construction of 508 km of NR 13N, which completely upgraded the primary north-south road connection between Vientiane and the northern part of the country, via Luangprabang x upgrading/construction of 300 km of NR 1 and NR 7, connecting from NR 13 to the northwest part of the country x upgrading/construction of 100 km of access/feeder roads in Xiengkhouang province Group-2 projects (the Second, Sixth, and Champasack Road Improvement Projects) x upgrading/construction of 193 km of NR 13S and NR 16W, including bridges and ferries x upgrading/construction of 275 km of provincial roads x upgrading of 53 km of access/feeder roads in Champasack province Group-3 projects ( the East-West Corridor and Northern Economic Corridor Projects) x upgrading/construction of 152 km of NR3 and NR9, including bridges and ferries x upgrading/construction of 160 km of x ADBs disbursements in the transport sector accounted for 14% of total disbursements of all DPs (20002003) ADB, AusAID, Germany, JICA, PRC, SIDA, Thailand, and World Bank

x increased traffic by 200% for passengers and 80% for goods x decreased travel time between Vientiane and Luangprabang from 23 days to 8 hours

x increased provincial GDP per capita in the South from $230 to $353 (20012004) x increased monthly consumption in Champasack from KN33,480/household to KN1.05 million/household (19972003) x increased average income from agriculture in Champasack from KN0.42 million/household to KN2.44 million/household (19972003) x increased number of SMEs in Champasack from 1,106 to 2,761 (19962003) x quadrupled hotel rooms in Champasack from about 306 to 1,300 (19982003) x more than doubled tourist number in

x increased traffic counts in Champasack by about 22%/yr (20012004) x decreased bus passenger fees (due to reduced vehicle operating costs) in Champasack by 8% since 2002 x increased access of villages in Champasack by a truck in the wet season from 43% to 52% (19972003)

Countrys Achievement of Long-Term Impacts/Results

ADBs Contributions to Intermediate Sector Outcomes/Results

Sector Outputs of ADB Interventions

Sector Inputs of ADB Interventions

List of Key DPs in the Sector

access/feeder roads Group-4 projects (the Rural Access Roads and Rural Development Projects) x upgrading/construction of 592 km of 9 rural access/feeder roads scattered throughout the country

x Contribution to 7% of the countrys total road network (16% of national roads, 3% of provincial roads, and 6% of access/feeder roads) during 1994 2004 Total Outputs Achieved by All Road Projects Combined x upgrading/construction of 2,333 km of the countrys road network (1,153 km of national roads, 275 km of provincial roads, and 905 km of access/feeder roads) Airports Project x Improvement of the countrys three major airports (versus the target of four) at Vientiane, Pakse, and Savannakhet for modern and high capacity terminal buildings and better safety systems

Champasack from about 28,000 to 66,000 (19982003) more than doubled hotel rooms in the country from about 5,000 to 12,000 (1998 2003) almost double tourist number to the country from about 600,000 to 900,000 (19982003) achieved a reasonably high economic growth rate of about 6%/yr (19942004) achieved poverty reduction from 39% to 33% (19982003)

x Increased international traffic from 2,855 flights to 4,202 flights x Increased passengers in international flights from 180,190 persons to 238,089 persons x Increased international freight from 664,720 kg to almost 2 million kg during 20002004

ADB = Asian Development Bank, AusAID = Australian Agency for International Development, DPs = development partners, GDP = gross domestic product, JICA = Japan International Cooperation Agency, kg = kilogram, km = kilometer, KN = kip, PRC = Peoples Republic of China, SIDA = Swedish International Development Cooperation Agency, SME = small and medium enterprises, yr = year.

Appendix 4

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Table A4.1e: Results Matrix of the Education Sector

ADBs Contributions to Intermediate Sector Outcomes/Results Sector Outputs of ADB Interventions Sector Inputs of ADB Interventions List of Key DPs in the Sector

Appendix 4

Countrys Achievement of Long-Term Impacts/Results

Thematic Pillar II: Inclusive Social Development x achieved enrollment at TTCs of 4,468 in 1999 x increased female enrolment at TTCs from 41% to 48% (1992 1999) x increased ethnic minority enrolment at TTCs from 25% to 30% (19931999) EQIP-I x establishment of NTEAB and TDC x development and implementation of new nationwide preservice teacher training curriculum x consolidation and upgrading of eight TTCs x provision of training to admin. staff, curriculum developers and teacher trainers (780 in-country and 375 shortterm overseas) EQIP-II x preparation of the National Teacher Education Plan and Policy Strategy x provision of training to teacher trainers at the 8 TTCs and the Teacher Education and Development Center x construction of multi-grade schools and classrooms x recruitment and training of teachers x decentralization of school management in 12 project districts in 6 provinces for Phase I x increased university (NUOL) enrollment from 8,137 to 18,366 (19962002) x increased university studentteacher ratio from 7:1 to 20:1 PSERP x establishment of NUOL, with 7 campuses and 10 faculties x reorganization of HTVED under MOE x provision of training to admin. and faculty staff (431 short-term overseas and 46 x ADBs disbursements in the education sector accounted for 11% of total disbursements of all DPs (20002003) ADB, AFD, AusAID, Belgium, EU, Germany, JICA, NORAD, SIDA, Switzerland, UNICEF, and World Bank

Access x increased overall NER of PE from 76% to 83% (1998 2003) x increased NER of PE for girls from 72% to 79% (1998 2003) x increased overall GER of PE from 105% to 113% (1991 2003) x increased GER of PE for girls from 93% to 105% (1991 2003) x increased overall GER of lower secondary education (LSE) from 32% to 50% (19912003) x achieved 26% overall GER of upper secondary education in 2002 x increased adult literacy rate from 60% to 75% (1995 2002)

Quality x decreased repetition rate of PE from 30% to 20% (1991 2003) x decreased dropout rate of PE from 11% to 9% (19912003) x increased promotion rate of

Countrys Achievement of Long-Term Impacts/Results

ADBs Contributions to Intermediate Sector Outcomes/Results (19962002) BEGP x development of multi-grade schools and construction of classrooms in 52 project districts x recruitment and training of more than 300 teachers from ethnic minority groups in project areas long-term fellowships)

Sector Outputs of ADB Interventions

Sector Inputs of ADB Interventions

List of Key DPs in the Sector

PE from 59% to 71% (1991 2003) x increased survival rate of PE from 48% to 62% (1991 2003) x decreased proportion of untrained teachers of PE from 23% of total teachers to 19% (19992003) x increased enrollment in TTCs by 4%/yr (19992003) In 6 project districts (20022004) x increased new enrollment of PE by 14% for girls, and 9% for boys x increased GER of PE from 119% to 128% for boys (and remained constant for girls) x increased NER of PE from 66% to 79% for girls, and 64% to 76% for boys x decreased grade 1 dropout rate from 14% to 2% for girls, and 10% to 3% for boys x decreased overall dropout rate from 14% to 2% for girls, and 12% to 2% for boys x decreased grade 1 repetition rate from 41% to 35% for girls, and 52% to 37% for boys

ADB = Asian Development Bank, admin. = administrative, AfD = Agence Franaise de Dveloppement, AusAID = Australian Agency for International Development, BEGP = Basic Education (Girls) Project, DP = development partner, EQIP-I = Education Quality Improvement Project, EQIP-II = Second Education Quality Improvement Project, EU = European Union, GER = gross enrollment rate, HTVED = Higher, Technical and Vocational Education Department, JICA = Japan International Cooperation Agency, LSE = lower secondary education, MOE = Ministry of Education, NER = net enrollment rate, NORAD = Norwegian Agency for Development Cooperation, NTEAB = National Teacher Education Advisory Board, NUOL = National University of Laos, PE = primary education, PSERP = Postsecondary Education Rehabilitation Project, SIDA = Swedish International Development Cooperation Agency, TDC = Teacher Development Center, TTC = teacher training college, UNICEF = United Nations Childrens Fund, WB = World Bank, yr = year.

Appendix 4

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Table A4.1f: Results Matrix of the Health Sector

Appendix 4

Countrys Achievement of Long-Term Impacts/Results

ADBs Contributions to Intermediate Sector Outcomes/Results

Sector Outputs of ADB Interventions

Sector Inputs of ADB Interventions

List of Key DPs in the Sector

Thematic Pillar II: Inclusive Social Development

PHCP x construction of 73 health centers, and 3 small district hospitals, x renovation and provision of equipment to five existing hospitals with emergency services in two provinces x provision of basic training to 5,970 health staff x strengthening of drug revolving funds scheme at district hospitals and health centers to supply of essential drugs x establishment of an M&E system at the project provinces x development of a PHC policy and nationwide implementation of an integrated PHC system of planning, budgeting, and monitoring PHCEP x improving physical facilities of provincial and district hospitals and health centers in eight provinces x upgrading the network of hospitals and health centers x increasing access to PHC at the village level through the provision of training to village health volunteers (especially ethnic minorities) in eight project provinces x improving the quality and management of health services, including integration of the immunization program and other preventive programs x strengthening 18 provincial health offices x building up capacity to provide strong leadership for health sector planning and budgeting x ADBs disbursements in the health sector accounted for 10% of total disbursements of all DPs (20002003) ADB, AFD, AusAID, JICA, PRC, SIDA, UNDP, UNFPA, UNICEF, WHO, and World Bank

PHCP x increased PHC access to 0.5 million mountainous people (20002004) x reduced IMR from 125 per 1,000 live births to 82 (1996 2001) x reduced CMR from 176 per 1,000 live births to 106 (19962001) x increased coverage of fully immunized children aged 1223 months from 20% to 32% (19962001)

x decreased IMR from 104 per 1,000 live births to 87 (19952002) x decreased IMR among poor from 140 per 1,000 live births to 107 (19952000) x reduced MMR from 656 per 100,000 live births to 530 (19982000) x increased child delivery at hospitals from 10% to 21% (19992003) x increased contraceptive prevalence rate from 23% to 32% (1995 2000) x increased rate of full child immunization from 32% to 43% (1995 2000) x increased rate of children under five treated under mosquito nets from 14% to 21% (19952003)

PHCEP x increased access to PHC from 41% of villages in eight project provinces to 81% (20022004)

ADB = Asian Development Bank, AFD = Agence Franaise de Dveloppement, AusAID = Australian Agency for International Development, CMR = child mortality rate, DPs = development partners, IMR = infant mortality rate, JICA = Japan International Cooperation Agency, M&E = monitoring and evaluation, MMR = maternal mortality rate, PHC = primary health care, PHCP = Primary Health Care Project, PHCEP = Primary Health Care Expansion Project, PRC = Peoples Republic of China, SIDA = Swedish International Development Cooperation Agency, UNDP = United Nations Development Programme, UNFPA = United Nations Population Fund, UNICEF = United Nations Childrens Fund, WHO = World Health Organization.

Table A4.1g: Results Matrix of the Urban Development Sector

Sector Outputs of ADB Interventions Sector Inputs of ADB Interventions List of Key DPs in the Sector

Countrys Achievement of Long-Term Impacts/Results

ADBs Contributions to Intermediate Sector Outcomes/Results

Thematic Pillar II: Inclusive Social Development

VIUDP x construction of 2.3 km of main drainage channels and upgrading of 11.6 km of main drainage channels (100% completion) x construction of 9,710 m of secondary drainage network (75% completion due to land acquisition problem) x construction of a solid waste management system (100% completion) x construction of 3.7 km of new road (80% completion due to land acquisition problem and cost overrun) x strengthening of 6.3 km of paved roads (60% completion due to cost overrun) x construction/rehabilitation of 9 km of footpaths x establishment of UDAA for Vientiane STUDP x strengthening of 19 km of strategic road x surfacing of 37 km of town center roads x reconstruction of 26 km of access roads x construction of 20 km of new footpaths x construction of 4 km of flood embankments x provision of masonary lining for 140 m of riverbank x protection for 1,550 m of riverbank x lining of 16,000 m2 of storm water outfalls x setting up of solid waste sites in the four towns x establishment of UDAAs for the four towns VUISP x ongoing (more than 50% completed) x ADBs disbursements in the urban development, and water supply and sanitation sectors combined accounted for 19% of total disbursements of all DPs (20002003) ADB, AFD, and JICA

x increased proportion of urban population having access to improved sanitation from 24% to 51% (19902002)

VIUDP and STUDP x ability of some UDAAs to raise their own incomes for the O&M of urban infrastructure x institutionalization of UDAAs through the passage of the Law on Local Administration formulated under TA 3331 x increased access to improved urban environment to 362,000 urban population (30% of total urban population) in 2004 x reduced damages and destruction due to flooding (100% reduction in Thakhek in 2004) x increased number of businesses in the downtown urban areas (30% increase in Thakhek in 2004)

Appendix 4

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Countrys Achievement of Long-Term Impacts/Results x includes both citywide infrastructure improvements and village area improvements STDSP x just out of start-up period x consists of urban infrastructure, environment, village upgrading, livelihood improvement, and capacity building components

ADBs Contributions to Intermediate Sector Outcomes/Results

Sector Outputs of ADB Interventions

Sector Inputs of ADB Interventions

List of Key DPs in the Sector

Appendix 4

ADB = Asian Development Bank, AfD = Agence Franaise de Dveloppement, DPs = development partners, JICA = Japan International Cooperation Agency, km = kilometer, m = meter, m2 = square meter, STDSP = Small Towns Development Sector Project, STUDP = Secondary Towns Urban Development Project, TA = technical assistance, UDAA = Urban Development Administration Authority, VIUDP = Vientiane Integrated Urban Development Project, VUISP = Vientiane Urban Infrastructure and Services Project.

Table A4.1h: Results Matrix of the Water Supply and Sanitation Sector
Sector Outputs of ADB Interventions Sector Inputs of ADB Interventions List of Key DPs in the Sector

Countrys Achievement of Long-Term Impacts/Results

ADBs Contributions to Intermediate Sector Outcomes/Results

Thematic Pillar II: Inclusive Social Development

SPTWSP x construction of two new water treatment plants at Pakse and Saravane x rehabilitation of distribution network x extension and rehabilitation of distribution water mains RUVWSP x rehabilitation of 58.9 km of supply pipes x extension of piped supply system by 22.4 km x construction of 25.9 km of transmission pipes x construction of a 2,000 m3 reservoir NPTWSSP x construction and rehabilitation of water supply systems in the seven towns x ADBs disbursements in the urban development, and water supply and sanitation sectors combined accounted for 19% of total disbursements of all DPs (20002003) ADB, AFD, JICA, and NORAD

x increased proportion of urban population having access to clean water supply from 28% to 52% (1990 2002)

SPTWSP, RUVWSP, and NPTWSSP x success in turning provincial water supply companies into operating agencies, independent from the Nam Papa Lao, with their own income-generating capabilities x increased access to dependable piped water supply to about 500,000 people in 2004 (42% of total urban population or 10% of total country population), consisting of x 41,000 people under SPTWSP (about 50% below target) x 195,000 people (new connections) and 80,000 people (extension of existing systems) under RUVWSP x 76,000 people under NPTWSSP x Expected 100,000 people after WSSSP has been completed WSSSP (more than 80% completed) x construction of water supply systems in five towns (completed) x construction of facilities in seven towns (ongoing) x expansion of construction to three further towns with loan savings x establishment of WASA as the regulatory body of overall water supply companies

WSSSP x reduced time in collecting water from shallow wells, rivers, or streams of about 3 hours per day per household by using piped water x reduced cost of water by $10$30 per month through the use of piped water

ADB = Asian Development Bank, AfD = Agence Franaise de Dveloppement, DPs = development partners, JICA = Japan International Cooperation Agency, km = kilometer, m3 = cubic meter, NORAD = Norwegian Agency for Development Cooperation, NPTWSSP = Northern Provincial Towns Water Supply and Sanitation Project, RUVWSP = Rehabilitation and Upgrading of Vientiane Water Supply Project, SPTWSP = Southern Provincial Town Water Supply Project, WASA = Water Supply Authority, WSSSP = Water Supply and Sanitation Sector Project.

Appendix 4

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Appendix 4

Figures A4.1A4.6: Field Visits by the Country Assistance Program Evaluation (CAPE) Mission Team
Figure A4.1: Figure A4.2:

Electricity Lights Up the Beautiful Sky, Xanakham, Vientiane Province (Loan 1558: Power Transmission and Distribution Project).

Rice Mill, transferred to more effective hydropower grid from diesel supply, Xanakham, Vientiane Province (Loan 1558: Power Transmission and Distribution Project).

Figure A4.3:

Figure A4.4:

Ongoing construction of ADB funded Project, Vientiane Province (Loan 1793: Rural Access Roads Project).

CAPE team conducting field interview, Vientiane Province (Loan 1793: Rural Access Roads Project).

Appendix 4

147

Figure A4.5:

Figure A4.6:

Primary School, Xiengkhouang Province (Loan 1621: Basic Education [Girls] Project).

Health Center, Xiengkhouang Province (Loan 1348: Primary Health Care Project).

148

Table A4.2: Summary Description of Projects and Programs (19862004)

Components Location

Appendix 4

Objectives

Loan 0965(SF)LAO: Agriculture Program Increase and diversify agricultural production; improve farm productivity; and promote agricultural exports. (i) Provide necessary foreign exchange and budgetary support to finance the Programs implementation during the period of economic transition associated with the introduction of new economic mechanisms; (ii) strengthen institutional capability in the agriculture sector; and (iii) assist the Government in introducing further policy initiatives for the establishment of a more commercially-oriented agriculture sector which would increase rural incomes and savings, as well as foreign exchange earnings. NA

Loan 1180(SF)LAO: Second Agriculture Program Enhance and consolidate the economic performance of the economy by sustaining the process of policy and institutional reform needed to make the dominant agriculture sector a more dynamic and better-integrated sector.

(i) Reform and develop economy-wide and Ministry of Agriculture and Forests (MAF)-specific intervention policies to facilitate the development of agriculture product and factor markets and improve the policy environment for competitive private sector-led development of the agricultural economy; (ii) reform and strengthen public institutions to rationalize and enhance institutional support and the regulation of agricultural development; and (iii) develop MAFs technology transfer and natural resource management capabilities.

NA

Loan 1295(SF)LAO: Industrial Tree Plantation (i) Reestablish tree cover on unstocked and degraded forest lands; (ii) production of wood raw materials for industrial use (pulp, sawn timber, fireboard, etc.) and as alternative wood sources for construction materials and fuelwood; and (iii) establish a policy and institutional framework for development of sustainable industrial tree plantations.

(i) Part A provision of a credit facility for smallholder farmers and private enterprises to finance the establishment of industrial tree plantations on about 9,000 hectares (ha) of unstocked and degraded forest land; (ii) Part B establish pilot block and pilot smallholder farmer plantations on 560 ha; (iii) Part C improve management support including nursery improvement, public awareness programs, incremental staffing and logistical support.

Vientiane, Borikhamxay, Savannakhet and eight districts in Vientiane Prefecture

Loan 1688(SF)LAO: Shifting Cultivation Stabilization (i) Improve the income of upland farmers; and (ii) conserve natural resources through (a) the establishment of environmentally sustainable, diversified sedentary farming systems as alternatives to shifting cultivation, and (b) provision of basic rural infrastructure in an environmentally sustainable manner.

(i) Institutional strengthening and capacity building, (ii) diversified sedentary farming systems development, (iii) village-based development, (iv) rural infrastructure development, and (v) project management.

Huaphanh Province

Loan 1949(SF)LAO: Smallholder Development (i) Achieve increased production and marketing of diversified, non-rice dry-season cash crops, livestock, and fisheries; (ii) improve smallholder access to domestic and international markets, and market information; and (iii) increase investment in value-adding agribusiness.

(i) Improve farmers technical knowledge of integrated farming systems through farmer support services, and access to market information and inputs; (ii) stimulate investment through agribusinesses and marketing; (iii) improve physical access to produce markets and reduce marketing costs through rural infrastructure; and (iv) project management.

Savannakhet (six districts), Champassak (six districts), Khammuane (two districts), and Vientiane (two districts).

Objectives

Components

Location

Loan 1488(SF)LAO: Community-Managed Irrigation Sector (i) Increase agricultural production on a sustainable basis; (i) Assist communities to organize themselves to participate in the (ii) increase the food security and incomes of about 6,000 selection, design, implementation, and subsequent operation and farm families, most of whom are small landholders; and (iii) maintenance of irrigation systems; (ii) implement community-managed improve watersheds by reducing shifting cultivation and irrigation (CMI) schemes to improve irrigation in parallel with construction promoting tree planting. of rural access roads, appropriate agricultural/aquaculture extension, and environmental monitoring and watershed protection efforts; (iii) construct two district feeder roads to link CMI schemes in remote areas to the national road network; (iv) support project management (planning, implementation, and monitoring) in CMI development at the national, provincial, and district levels.

Vientiane, Borikhamxay, Huaphanh, Xiengkhouang, and the Xaysomboun Special Region

Loan 1788(SF)LAO: Decentralized Irrigation Development and Management Sector Facilitate sustainable growth in agriculture production, (i) Assist irrigators to organize themselves in water-user associations resulting in (i) overall economic growth through increased (WUAs); (ii) rehabilitate existing irrigation systems as part of the irrigation yields and better quality of agricultural produce, and (ii) management transfer process; (iii) provide appropriate extension poverty reduction through increased agricultural income for services to farmers; (iv) increase government capacity and that of the farmers and employment generation for the landless. provincial and district agriculture and forestry service offices, to support and sustain farmer-managed irrigation; and (v) provide institution building support to WUAs.

Borikhamxay, Vientiane Municipality, Vientiane Province, Savannakhet, Xayabury, and Luangprabang

Loan 1933(SF)LAO: Nam Ngum River Basin Development Sector (i) Institutionalize an integrated water resource management system to (i) Foster and institutionalize an integrated water resource strengthen the capacity of the Water Resources Coordination Committee management system in the mainstream planning process of to coordinate efforts at the central and provincial levels; (ii) help the the Government at the central and provincial levels, and (ii) support investment interventions in relatively degraded parts Hydropower Office devise a more effective reservoir management regime and river basin modeling to optimize power generation, mitigate floods, of the Nam Ngum River Basin to provide sustainable and improve water-use efficiency; (iii) promote watershed management livelihood opportunities for poor and ethnic communities. to strengthen the capacity of the Integrated Watershed Management Unit of MAF and its relevant provincial and district departments, increase crop productivity and irrigation efficiency, improve livestock and fisheries management, and preserve and restore forest resources.

Xiengkhouang, Vientiane, Xaysomboun/Vientiane, Xaysomboun/Xiengkhouang

Loan 2086(SF)LAO: Northern Community-Managed Irrigation Sector Increase agricultural production and income-earning (i) Community mobilization, (ii) institutional capacity building for better opportunities in the project area through the development of participatory planning facilitation and technical management, (iii) community-managed irrigation schemes with strong community managed irrigation investment, and (iv) agricultural extension community ownership. and resource use planning.

11 districts in the provinces of Luangprabang, Xayabury, Xiengkhouang, Huaphanh, and the Xaysomboun Special Region

Loan 0846(SF)Xeset Hydropower (i) Increase the countrys foreign exchange earnings through the export of the Projects surplus power to Thailand; (ii) promote the utilization of the countrys indigenous and renewable hydropower resources as a replacement of imported diesel fuels; and (iii) stimulate economic activities in the southern provinces of Champasack and Saravane and

Provide 181 gigawatts of electrical energy per year through the construction of the following: (i) a concrete weir across the Xeset River; (ii) a waterway system from the intake to the power house, and a 230 meter-long tailrace channel; (iii) a surface power house equipped with three 12 megawatt (MW) and two 3 MW turbine generators; (iv) two 26 million volt-amperes (MVA), 6 kilovolt (kV)/115 kV transformers and one

Provinces of Champasack and Saravane

Appendix 4

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150

Objectives 3 MVA, 6 kV/22 kV transformers located in a switch-yard, and all necessary switchgear and monitoring/control equipment; and (v) engineering consultancy services for project implementation and supervision.

Components

Location Appendix 4

improve the overall living conditions of the people in southern Laos through electrification, thus leading to balanced regional development.

Loan 0928(SF)LAO: Nam Ngum-Luangprabang Power Transmission (i) Extend the 115 kV electric power transmission system in (i) Install a 115 kV single circuit power transmission line 208 kilometers the Vientiane province northwards from the Nam Ngum (km) long from the Nam Ngum hydropower station through Vang Vieng to hydropower station through Vang Vieng up to the city of Luangprabang; (ii) construct a 115 kV facility at the terminals of the Luangprabang, and (ii) provide suitable substation facilities transmission line at Nam Ngum and Luangprabang, and substation to pick up the demand for electricity in the project area. facilities at Luangprabang and at Vang Vieng; (iii) provide equipment and tools for the Luangprabang City power distribution system to improve its reliability; and (iv) provide engineering consultancy services to carry out detailed design, prepare tender documents and supervise implementation of the Project.

Luangprabang Province

Loan 1063(SF)LAO: Xeset Hydropower (Supplementary) Finance the cost overrun incurred on the foreign currency cost of the civil works component of the Xeset Hydropower Project Same as in Loan 0846LAO

Saravane Province

Loan 1214(SF)LAO: Nam Song Hydropower Development Expand the countrys electricity generation capacity thereby allowing for (i) increased foreign exchange earnings from the export of surplus electricity to Thailand, (ii) enhanced development of agro-based and other industries, and (iii) saving foreign exchange resources by substituting domestically produced hydroelectricity with imported hydrocarbon fuels.

(i) Part A Nam Song Hydropower Development (involves the construction of a concrete weir on the Nam Song River to divert water through natural valleys to generate an additional 137 gigawatt-hour of electricity per annum); (ii) Part B Nam Leuk Engineering (includes the supplementary site investigation to confirm the viability of the subproject); (iii) Part C Nam Mang 3 Feasibility Study (includes the examination of the feasibility of diverting water from the Nam Ngang River into the Houay Hopheng sub-basin to generate 30 MW of electricity and about 155 gigawatt-hour of energy per annum); (iv) Part D Electrical Metering Equipment (involves the procurement of about 10,400 consumers electricity meters to improve the accuracy of Electricit du Laos (EdL) metering capacity in Vientiane.

Vicinity of Nam Ngum Reservoir

Loan 1308(SF)LAO: Nam Ngum-Luangprabang Power Transmission (Supplementary) Enable the Government to complete the project by financing Same as in Loan 0928LAO the cost overrun, which was incurred due to increased foreign currency costs of civil works

Luangprabang Province

Loan 1329(SF)LAO: Theun-Hinboun Hydropower Support economic growth through the enhancement of foreign exchange earnings by the export of electric power to Thailand.

Provide (i) civil works associated with the intake dam, waterways, powerhouse, and auxiliary structure; (ii) supply and installation of 2x105 MW vertical shaft turbine generating units; (iii) supply and installation of station auxiliaries, switchgear, etc; (iv) supply and installation of metal structures (sluice and radial gates, etc); (v) a 100 km-long, 230 kV double

Between Borikhamxay and Khammuane provinces

Objectives circuit transmission line, including a metering station at Thakhek on the Thailand border and provision for a switching station and a future substation; (vi) consulting services for project implementation.

Components

Location

Loan 1456(SF)LAO: Nam Leuk Hydropower (i) Support the optimal development of the countrys power subsector; (ii) provide generating capacity to meet domestic demand and increase exports of electricity to Thailand; (iii) strengthen the capabilities of EdL to prepare, design, and implement environmentally sustainable projects; and (iv) strengthen the management and protection of the National Biodiversity Conservation Area at Phou Khao Khouay where the Project is located. Construct the following structures: (i) a dam across the Nam Leuk river to raise the water level and form a storage reservoir; (ii) a power station with two turbine-generator units of 30 MW each; (iii) a diversion weir and intake on the Nam Poun, a stream that joins the Nam Leuk downstream of the dam; and (iv) a switchyard and a double-circuit transmission line to the substation at Pakxane.

Phou Khao Khouay

Loan 1558(SF)LAO: Power Transmission and Distribution (i) Supply electricity to Xiengkhouang, Xaysomboun, (i) Install 158 km transmission line from Nam Leuk to Xiengkhouang, 73 Xayabury, and Xanakham areas involving about 22,700 km of line from Xiang Ngeun to Xayabury, and 94 km of line from Nam consumer connections in 150 villages and provincial towns; Ngum to Muang Feuang; (ii) install four 115/22 kV substations and about (ii) extend Vientiane Plain Rural Electrification by providing 350 km of medium-voltage and 400 km of low-voltage distribution around 8,000 additional consumer connections, and associated substations; and (iii) replace/rehabilitate overloaded lines, deteriorated medium-and-low voltage distribution in 200 more villages; wood poles, and old distribution panels in Vientiane City. and (iii) rehabilitate power distribution facilities in Vientiane City.

Xiengkhouang, Xaysomboun, Xayabury, Xanakham, and Vientiane Plain

Loan 2005(SF)LAO: Northern Area Rural Power Distribution (i) Extend the transmission and distribution system in (i) Reinforce and extend the high-voltage (115 kV) power grid; (ii) northern rural areas to provide electricity to rural low-income construct associated medium- (34.5/22 kV) and low-voltage (400 volts) communities, and to improve their living standards and distribution systems; and (iii) provide consulting services to help EdL in economic condition; and (ii) help the Government restructure detailed project design, implementation supervision, and other capacity the power sector, and strengthen EdL project management building activities. capacity and operational efficiency.

Provinces of Xiengkhouang, Xayabury, Oudomxay, Luangnamtha, and Xaysomboun Special Region

Loan 1061(SF)LAO: Financial Sector Program Assist in the development of an efficient and responsive financial system to meet the development needs of the nascent private sector and the economy in general.

(i) Improve the overall policy environment for the financial sector by encouraging market-oriented interest rates and more effective monetary management mechanisms; (ii) enhance the institutional base of the financial sector by strengthening existing institutions, establishing new institutions and financial instruments, developing professional banking standards and expertise, and strengthening the legal basis for commercial banking activities; and (iii) support the development of the private sector through strengthening the legal basis for private sector activities and the provision of more efficient banking and other financial services and the reactivation of the Governments privatization program.

NA

Appendix 4

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152

Objectives

Components

Location

Appendix 4

Loan 1458(SF)LAO: Second Financial Sector Program (i) Mobilize a greater amount of domestic savings, particularly long term savings, and allocate them efficiently to promote private sector development; and (ii) strengthen macroeconomic management through the development of a sound and market-responsive banking system. (i) Strengthen the autonomy and commercial orientation of the stateowned commercial banks (SOCBs); (ii) strengthen the Bank of Lao PDRs supervisory function by implementing and enforcing prudential regulations; (iii) restructure and consolidate SOCBs; (iv) build market infrastructure; and (v) develop human resources and capacity building in SOCBs and the Agriculture Promotion Bank. NA

Loan 1931(SF)LAO: Banking Sector Reform (Technical Assistance [TA] Loan) Foster improvements in the governance of the SOCBs by (i) Implement operational restructuring modules; and (ii) upgrade introducing modern banking policies and procedures and information technology to allow more accurate reporting to management, reversing the financial performance of SOCBs. the shareholder, and the supervisor, and increase efficiency and control in processing transactions. NA

Loan 1946(SF)LAO: Banking Sector Reform Program Support government efforts to foster efficient financial intermediation and ensure a sound banking system capable of supporting economic growth and extending rural outreach.

(i) Develop the banking sector through the reduction of the number of SOCBs, increased competition, and operational restructuring of the remaining SOCBs; (ii) strengthen the enabling environment and judicial oversight of the commercial banking sector; (iii) facilitate access to credit by small- and medium-sized enterprises through a secured transactions system and improved financial disclosure; and (iv) develop a policy and institutional environment conducive to rural and micro finance.

NA

Loan 1970(SF)LAO: Greater Mekong Subregion (GMS): Mekong Tourism Development (Lao Peoples Democratic Republic [Lao PDR]) Reduce poverty through increased economic growth and (i) Part A Tourism-Related Infrastructure Improvements (comprising Luangnamtha, Luangprabang, employment opportunities, increased foreign exchange urban environmental improvements, small airports extension and Khammuane, and Champasack earnings, and promote the conservation of the natural and rehabilitation, access roads improvement, and river tourism); (ii) Part B cultural heritage. Pro-Poor, Community Based, Tourism Development (comprising, among others, institutional strengthening and community participation program, awareness program on tourism benefits and negative impacts including environmental and cultural conservation, and gender development program); (iii) Part C Subregional Cooperation for Sustainable Tourism; and (iv) Part D Implementation Assistance and Institutional Strengthening (including consulting services for project management support, tourism development and subregional cooperation, and incremental administration costs and project administration equipment).

Loan 1266(SF)LAO: Airports Improvement (i) Provide enhanced civil aviation infrastructure to support reliable and safe all-weather operations to relevant International Civil Aviation Organization standards for all project airports in Lao PDR and international over-flight traffic.

(i) Support the Governments efforts to enhance civil aviation safety; (ii) increase the countrys foreign exchange earnings by the introduction of additional over-flight international traffic routes; (iii) remove existing infrastructure constraints on the growth of international and domestic air services; (iv) assist the development of commercial, agricultural, and tourism activities in the respective project areas and the sub-region; and (v) promote a more balanced development of the air transport network throughout the country and the sub-region by facilitating a larger

Major airports in Vientiane, Luangprabang, Savannakhet, and Pakse; and minor domestic airports in Phonsavanh, Luangnamtha, Houayxay, Oudomxay, Xayabury, Saravane, Xamneua, Thakhek, Phongsaly, and Attapeu

Objectives movement of both domestic and international passengers.

Components

Location

Loan 0788(SF)LAO: Second Road Improvement (i) Reduce transport constraints in the area covered to facilitate the efficient movement of goods and passengers; (ii) stimulate crop production in a potentially rich agricultural area and to reduce wastage of paddy; (iii) support rural development by enhancing the mobility of rural communities and providing better access to health, education, and social amenities; and (iv) strengthen domestic capabilities in the design, construction, and maintenance of rural roads. (i) Rehabilitate and upgrade two provincial roads (one from Ban Huay to Pakxong and the other from Ban Huay He to Saravane) and strengthen or replace bridges; (ii) procure equipment, including spare parts, tools, and materials for road construction and workshops; (iii) provide base field workshop and two mobile field workshops for service and maintenance of the road construction equipment; and (iv) provide consulting services to assist the Executing Agency in detailed engineering, construction management, and on-the-job training for staff.

Provinces of Champasack and Saravane

Loan 0866(SF)LAO: Third Road Improvement (i) Reduce transport costs and facilitate the efficient movement of goods and passengers in the project influence area; (ii) support rural development by enhancing the mobility of rural communities; (iii) strengthen domestic capabilities for designing, constructing, and maintaining the countrys road network; and (iv) support the Governments road maintenance program. (i) Rehabilitate and improve about 162 km of national roads from Vientiane to Vang Vieng in the province of Vientiane; (ii) procure supplementary equipment and spare parts for road construction and workshop; (iii) provide light road maintenance equipment and spare parts and imported materials, to support a 3-year time slice (19891991) of the Governments road maintenance program of national and provincial roads in the provinces of Vientiane, Champasack, and Saravane, and Vientiane Municipality; (iv) establish a base field workshop in Vientiane province for service and repair of the Projects equipment fleet; and (v) provide consulting services for detailed engineering and construction management.

Provinces of Vientiane, Champasack Saravane, and Vientiane Municipality

Loan 1009(SF)LAO: Fourth Road Improvement (i) Provide all-weather access to the northern provinces from Vientiane; (ii) reduce transport costs and facilitate efficient movement of goods and passengers; (iii) support rural development by enhancing the mobility of rural communities; (iv) strengthen domestic capabilities for designing, constructing, and maintenance capacity in the northern provinces.

Road Improvement Component: Northern Vientiane Province and the provinces of Luangprabang, Xayabury, and Xiengkhouang Periodic Maintenance Component: Northern provinces of Phongsaly, Luangnamtha, Bokeo, Oudomxay, and Huaphanh

(i) Improve about 230 km of national road (NR) number 13; (ii) replace all deteriorated bridges on NR13; (iii) establish a workshop and related facilities to accommodate staff and service equipment and necessary spare parts and imported materials to support a 3-year time slice of the Governments road maintenance program of national and provincial trunk links in the northern influence area of the Project; and (iv) provide consulting services for detailed engineering of the Projects road improvement and bridge replacement components, construction supervision, management of the Projects road improvement and bridge replacement component, and training of staff in connection with the road maintenance component.

Loan 1108(SF)LAO: Fifth Road Improvement (i) Provide all-weather access to the northern provinces from Luangprabang, (ii) reduce transport costs in the project area as well as facilitate the movement of goods and passengers in the proposed project area, (iii) support rural development and the mobility of rural communities, and (iv) continue enhancing the Governments road maintenance capacity.

Provide (i) civil works relating to the improvement of NR13 (about 116 km) and construction of 11 permanent bridges on the section; (ii) provide supplementary road maintenance equipment, spare parts, and imported materials to support the Governments road maintenance program over 19921995; and (iii) consulting services for the construction supervision for road improvement and bridge construction.

Road Improvement Component: Northern Vientiane Province and the provinces of Luangprabang, Xayabury, and Xiengkhouang Periodic Maintenance Component: Northern provinces of Phongsaly,

Appendix 4

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154

Objectives

Components

Location Appendix 4 Luangnamtha, Bokeo, Oudomxay, and Huaphanh

Loan 1234(SF)LAO: Sixth Road Improvement (i) Provide all-weather access to the provinces of Sekong and Attapeu and within the provinces of Champasack and Saravane, (ii) reduce transport costs and induce efficient movement of goods and passengers, (iii) support rural development and increase earnings of low income groups by enhancing the mobility of rural communities, and (iv) continue the privatization process in the road construction industry. (i) Improve about 193 km of provincial road numbers 13B and 18B to bitumen paved standard including construction of about 27 permanent bridges; and (ii) provide consulting services for detailed engineering and construction supervision of the civil works component, and for TA-related preparation works for a future road project.

Provinces of Attapeu, Champasack, Saravane, and Sekong

Loan 1369(SF)LAO: Champasack Road Improvement (i) Provide continuous all-weather road access for local transit traffic between the Thai border at Chong Mek and the Cambodian border; (ii) support economic growth and employment generation in the road influence area; (iii) reduce transport costs for the Projects roads traffic and thereby support agricultural, industrial, and tourism development in the road influence area; (iv) continue to support the Governments road maintenance program (19961999); and (v) further the privatization process in the road construction and maintenance industry through contract sizes that are also attractive to domestic bidders.

(i) Improve about 200 km of NR10 and NR13 providing access to Thailand and Cambodia via Pakse town and about 16 km of adjoining feeder roads, (ii) periodic road maintenance support for about 400 km of important national and provincial roads, (iii) provide consulting services for construction and maintenance supervision of the Project, and (iv) detailed engineering of the proposed Xiengkhouang Road Improvement Project.

From Pakse towards Cambodia and Thailand and the western bank of the Mekong River in Champasack province

Loan 1533(SF)LAO: Xiengkhouang Road Improvement (i) Reduce transport costs and provide Xiengkhouang province with economically maintainable, all-weather access to the rest of the country; (ii) increase employment opportunities and income generation and reduce poverty in the project area; and (iii) improve the Governments delivery of road infrastructure.

(i) Improve NR7 West (between Phoukhoun and Phonsavanh, and Xiengkhouang); (ii) improve NR7 East between Phonsavanh and the Viet Nam border; (iii) improve NR1 between Phonsavanh and Muang Khoun (31 km); (iv) improve selected feeder roads (100 km); (v) capacity building in maintenance, project management, and enterprise development; (vi) environmental improvements; and (vii) provide consulting services for construction supervision and detailed engineering.

Xiengkhouang Province

Loan 1727(SF)GMS: East-West Corridor (Lao PDR) (i) Promote economic activities and facilitate trade between and among the Lao PDR, Thailand, and Viet Nam; and (ii) improve the prospects for poverty reduction along the EastWest Corridor (a priority development corridor that connects Northeast Thailand to central Viet Nam through central Lao PDR).

(i) Rehabilitate Road 9 between Muang Phin and Dene Savanh at the border with Viet Nam (about 78 km), and (ii) consulting services.

About 78 km of Road between Muang Phin and Dene Savanh

Loan 1795(SF)LAO: Rural Access Roads Reduce poverty by improving access roads in four provinces.

(i) Improve about 220 km of rural access roads, (ii) build about 100 km of feeder roads in Huaphanh Province, (iii) support a road construction and

Huaphanh Province

Objectives improvement environmental impact monitoring program in ecologically sensitive areas, (iv) support objectives of the Road Maintenance Fund, and (v) strengthen community development through participatory approaches to road construction and maintenance.

Components

Location

Loan 1989(SF)LAO: GMS Northern Economic Corridor (i) Facilitate trade and investment in the GMS region; (ii) reduce transport costs in the regional project influence area; and (iii) increase the efficiency of the movement of vehicles, goods, and passengers. (i) Construct the project road (approximately 228 km of national route 3) from Houayxay in Bokeo province to Boten in Luangnamtha province, (ii) implement an area development plan, and (iii) capacity building at the provincial and sector levels.

Houayxay in Bokeo Province to Boten in Luangnamtha Province

Loan 2085(SF)LAO: Roads for Rural Development Project Induce economic development and social integration, and (i) Rehabilitate selected roads to remote rural regions, (ii) provide funding thereby reduce poverty, through the connection of all district for supplementary road maintenance, (iii) execute a road safety and provincial centers in the Lao PDR, both to each other improvement project, and (iv) initiate a transport services tariff and policy and to the Lao national. study to increase efficiency in the provision of road transport.

Provinces of Attapeu, Borikhamxay, Vientiane, and Xayabury

Loan 1103(SF)LAO: Education Quality Improvement Improve the quality of primary and lower secondary education by addressing key issues in (i) teacher education and (ii) instructional materials development and distribution.

(i) Develop the teacher education system and (ii) provide instructional materials for primary and lower secondary schools and for teachers colleges.

Vientiane

Loan 1374(SF)LAO: Postsecondary Education Rehabilitation Reform postsecondary education to supply necessary (i) Develop the operational framework for the National University of Laos human resources efficiently and effectively. (NUOL) including its management system, academic structure, and support mechanisms; and (ii) enable NUOL to deliver academic programs of acceptable standard for essential foundation studies and in the fields of economics, management, and science.

Vientiane

Loan 1621(SF)LAO: Basic Education (Girls) (i) Provide educational facilities in primary education in 50 districts, and strengthen capacities at the central and provincial levels to plan, manage, and implement school construction and school development programs; and (ii) promote community participation in school management to increase the enrollment and retention of children, particularly girls, in primary schools.

(i) Expand access and improve retention through the provision of villagebased primary schools to selected unserved and/or underserved small ethnic minority communities that are conducive to learning, staffed by trained teachers, and equipped with adequate learning materials; (ii) improve relevance, quality, and efficiency of learning by creating an integrated quality improvement system to support increased enrollment and retention of children, particularly girls, in ethnic minority areas; and (iii) strengthen management systems and capacity of the Ministry of Education.

Provinces of Borikhamxay and Attapeu; the districts of Sanamsay, Phouvong, Thatong, Lamane, La, Mai, Boun-Tai, and Namo

Appendix 4

Loan 1844(SF)LAO: Second Education Quality Improvement (i) Improve the relevance, quality, and efficiency of primary (i) Improve the quality of teaching and learning in 70 districts in nine and secondary education; (ii) expand access to and improve provinces, (ii) increase access to and participation in primary education in retention in primary schools especially of girls and ethnic 41 districts in four provinces, and (iii) strengthen management capacity of minority children in the poor, underserved areas of the the Ministry of Education and improve project implementation capability country; and (iii) strengthen the institutional capacity of of the different administrative units to manage tasks allocation to

Focus areas: Bokeo, Champasack, Luangprabang, Savannakhet, Xayabury, and Vientiane Limited quality improvement program:

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Objectives provincial/district education services and communities/villages. Luangnamtha, Saravane, and Xiengkhouang

Components

Location Appendix 4

central, provincial, district, and village level administrations to plan and manage the decentralized education system and implement the Project.

Loan 1348(SF)LAO: Primary Health Care (i) Establish primary health care services at the village level to improve access to basic curative and preventive services, (ii) enhance the quality of care provided by both the public and private sectors, and (iii) improve the quality of drugs available to consumers. (i) Strengthen primary health care services in the provinces of Xiengkhouang, Oudomxay, and Thathom district; (ii) strengthen inservice training in primary health care to improve health workers skills and knowledge; (iii) help the Ministry of Public Health strengthen its ability to regulate the private sector to ensure quality and supply of drug supply; and (iv) carry out benefit monitoring and evaluation in the project areas.

Provinces of Xiengkhouang and Oudomxay, and Thathom in the Xaysomboun Special Region

Loan 1749(SF)LAO: Primary Health Care Expansion Improve primary health care coverage for the rural poor by (i) expanding and improving the quality of primary health care in the northern region, and (ii) strengthening the institutional capacity for primary health care.

(i) Improve access to quality primary health care in the northern region, and (ii) strengthen the institutional capacity of the Ministry of Health to develop primary health care services particularly in the national and provincial organizational structures.

Provinces of Bokeo, Huaphanh, Luangnamtha, Oudomxay, Phongsaly, Xiengkhouang, Luangprabang, and Xayabury

Loan 1867(SF)LAO: Environment and Social Program Assist the Lao PDR to implement a targeted policy reform agenda for environmental management and social safeguards in the energy and transport sectors, with particular focus on hydropower and roads.

(i) Strengthen national policy and a regulatory framework for environmental management and social safeguards; (ii) undertake measures to enhance policy implementation and capacity at sector and provincial levels; (iii) improve compliance and enforcement; (iv) promote river basin management as a multisector and integrated planning framework for energy and transport development; and (v) establish sustainable financing mechanisms, including an environment fund.

NA

Loan 1362(SF)LAO: Vientiane Integrated Urban Development (i) Reduce damage caused by flooding in the high-value city centers and (i) Improve the physical well-being and health of the relieve logging in the low-income high density areas by constructing new population of Vientiane; (ii) institutionalize urban planning main drainage channels and upgrading existing primary channels; (ii) and strengthen the development control system; (iii) improve the living environment by reducing the occurrence of surface establish an institution specifically oriented to the citys water pollution through better on-site sanitation; (iii) extend the solid urban management; and (iv) increase the capacity of sector agencies to mobilize financial resources for sustaining urban waste management service to the entire city in phases by 2000; (iv) strengthen the main arterial road network, improve road pavements, and investments. provide all-weather access to urban villages and subcenters; (v) promote community participation in the construction and maintenance of urban infrastructure and delivery of urban services; and (vi) provide implementation assistance and institutional strengthening.

Vientiane

Loan 1525(SF)LAO: Secondary Towns urban Development (i) Improve the urban development though appropriate urban (i) Part A Community Awareness and Education Program (includes infrastructure, and the effective and sustainable promotion of community involvement in the projects and contribution to management of urban services; (ii) further human the delivery of sustainable urban services); (ii) Part B Environmental Improvements (includes improvement of drainage, septic waste, and development through environmental improvements; and (iii)

Luangprabang, Thakhek, Savannakhet, and Pakse

Objectives solid waste management); (iii) Part C Infrastructure Improvements (includes construction of new roads and bridges, resurfacing and patching of existing roads, introduce improved traffic management systems, construction of flood embankments, and stabilization of river embankments); and (iv) Part D Implementation Assistance and Capacity Building (includes incremental staffing and operational costs connected with Project Management Unit and Project Implementation Units, equipment, logistics, and other support).

Components

Location

support economic growth through the development and management of sustainable and well-planned infrastructure development and urban services.

Loan 1834(SF)LAO: Vientiane Urban Infrastructure and Services (i) Support decentralization and urban governance reforms (i) Part A: Citywide Urban Infrastructure and Services (comprising critical and the process toward an autonomous, well-functioning, missing links of primary and secondary roads and drainage, efficiency and self-sufficient urban local government; and (ii) to target improvements in solid waste management, traffic management and investments in infrastructure and services to maximize the safety, and institutional infrastructure and maintenance improvements); utility of existing infrastructure by closing the remaining gaps (ii) Part B: Village Area Improvements (through the adoption of a and focusing on secondary- and tertiary-level infrastructure demand-led and participatory approach); and (iii) Part C: Comprehensive and services. Capacity Building Program (includes support for the accomplishment of the urban policy and institutional reform agenda, and enhancing the planning, operation and maintenance, revenue mobilization, and financial management capabilities of Vientiane Urban Development Administration Authority).

Vientiane

Loan 1994(SF)LAO: Small Towns Development Sector (i) Improve the living conditions of the small towns communities, especially the poor, by improving the urban environment, increasing access to essential urban infrastructure and services, and enhancing livelihoods; and (ii) support the establishment and development of decentralized and dedicated institutional and management frameworks for effective, responsive, and sustainable provision of urban infrastructure and services in small towns.

(i) Part A Urban Infrastructure and Services Improvements (includes, [a] town-wide infrastructure and amenities, [b] town cleanliness and environmental services, and [c] village upgrading and livelihood promotion); and (ii) Part B Support for Project Implementation, Community Processes, and Capacity Building (focuses on activities supporting the implementation of infrastructure improvements, civic awareness, community dialogue and partnering processes, and building the capacity of Urban Development Administration Authority in the project towns).

Initially identified towns: Phonsavanh, Xamneua, Vang Vieng, and Pakxane. The remaining towns will be admitted into the Project based on an agreedupon criteria.

Pakse, Attapeu, Saravane, and Sekong

Appendix 4

Loan 1122(SF)LAO: Southern Provincial Towns Water Supply (i) Part A Pakse Water Supply Development (consists of a new 15,000 (i) Rehabilitate and upgrade the water supply systems of cubic meter/day [cmd] water facility, rehabilitation of distribution network, Pakse, Attapeu, and Saravane; and (ii) construct a new temporary rehabilitation and decommissioning of existing treatment water supply system for Sekong to meet the Governments plant); (ii) Part B Attapeu Water Supply Development (consists of a waters supply targets, improve the health of the population, new 2,000 cmd water production facility, extension of distribution water and support economic growth. mains and rehabilitation of existing mains, service connections, and water meters); (iii) Part C Saravane Water Supply Development (consists of a new 2,000 cmd production facility, extension of distribution water mains, and rehabilitation of existing mains, service connections and water meters); and (iv) Part D Sekong Water Supply Development (consists of a new gravity-fed 2,000 cmd production facility, a new distribution network and new metered service connections).

157

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Objectives

Components

Location

Appendix 4

Loan 1190(SF)LAO: Rehabilitation and Upgrading of Vientiane Water Supply Improve water supply service in Vientiane Prefecture by (i) Part A Rehabilitation and Expansion of the Reticulation System increasing coverage from 42% of the present population to (consists of the repair or replacement of water mains, valves, fire 55% of the population in 2000. hydrants, service connections, and water meters, and the expansion of the reticulation system); (ii) Part B Construction of Transmission Pipelines (consists of new transmission pipelines to interconnect with new and existing service reservoirs); (iii) Part C Construction and Rehabilitation of Service Reservoirs (consists of the construction of two new 2,000 cubic meter service reservoirs and rehabilitation of an existing 200 cubic meter service reservoir); (iv) Part D Institutional Support (consists of consulting services, assistance to Project Management Units, provision of institutional support to Nam Papa Lao (NPL), assistance in the preparation and implementation of a public information campaign and a Benefit Monitoring and Evaluation System, and provision of long-term advisors to NPL); and (v) Part E Rehabilitation and Expansion of Chinaimo Water Treatment Plant and Pipeline Extension (rehabilitation and expansion of the existing intake, increase water abstraction rate and water treatment plant capacity, and construct a new 40,000 cmd water treatment plant). Vientiane

Loan 1267(SF)Northern Provincial Towns Water Supply and Sanitation (i) Part A Water Supply Systems Development (includes (i) Improve the physical well-being and health of the comprehensive source development, setting up production and treatment populations in the project towns; (ii) improve the urban environment by providing public sanitation infrastructure; (iii) facilities, and constructing and commissioning appropriate distribution systems in each project town); (ii) Part B Environmental Improvements foster community participation in sustaining public utility (includes improvement of public sanitation facilities); and (iii) Part C services; and (iv) improve NPLs overall management and Implementation Assistance and Institutional Strengthening (includes the operational capabilities. provision of project management support, staff training, and design and implementation of a community awareness and education program).

Phonhong, Pakxane, Phonsavanh, Xayabury, Houayxay, Phongsaly, and Xamneua

Loan 1710(SF)LAO: Water Supply and Sanitation (i) Establish a regulatory framework for the urban water supply sector, (ii) develop sustainable operational framework for the decentralized management of water supply, (iii) build capacity in provincial water supply organizations, (iv) implement water supply and sanitation systems in 12 of the highest priority small towns in the sector investment plan, and (v) expand the water supply distribution system and sanitation facilities for Vientiane.

(i) Part A Community Awareness and Participation program (designed to promote community involvement, contribute to the delivery of sustainable water supply services, and educate the communities about environmental sanitation and health linkages); (ii) Part B Improved Water supply and Sanitation in Small Towns (includes the implementation of piped water supply systems and sanitation improvements to about 12 small towns throughout the country); (iii) Part C Vientiane Water Supply System Expansion and Sanitation (consists of expanding the reticulation system; construction of robust and conventional water treatment plants; construction of transmission mains, storage facilities, and distribution systems; individual metered connections; establishment of sanitary on-plot treatment units for excreta disposal; construction of localized communal drainage networks); and (iv) Part D Implementation Assistance and Capacity Building (provide

Small towns and periurban areas of Vientiane

Objectives project management support, engineering design, construction supervision, and capacity building in financial management and operation and maintenance).

Components

Location

cmd = cubic meter per day, CMI = community-managed irrigation, EdL = Electricit du Laos, GMS = Greater Mekong Subregion, ha = hectare, km = kilometer, kV = kilovolt, Lao PDR = Lao Peoples Democratic Republic, MAF = Ministry of Agriculture and Forestry, MVA = million volt-amperes, MW = megawatt, NA = not applicable, NPL = Nam Papa Lao, NR = national road, NUOL = National University of Laos, SF = special fund, SOCB = state-owned commercial bank, TA = technical assistance, WUA = water-user association.

Appendix 4

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Table A4.3: Projects under the Greater Mekong Subregional Program

Financing Cofinancing 195.5 38.5 JBIC

Appendix 4

Loan No. 1 1325 2 1329 3 1369 4 1456 5 1503 6 1659 7 1660 8 1691 9 1727 10 1728 11 1945 12 1969 13 1970 14 1971 15 1989 28-Oct-03 16-Dec-03 2-Dec-04 4-Apr-05 31-Dec-09 31-Dec-09 548.0 1,450.0 31-Dec-08 95.0 31-Mar-08 582.0 250.0 44.3 180.0 120.0 174.1 23.7 328.0 122.5

Country PRC Lao PDR Lao PDR Lao PDR Cambodia Cambodia Viet Nam PRC Lao PDR Viet Nam Cambodia Cambodia Lao PDR Viet Nam Lao PDR

Project Name Yunnan Expressway Theun Hinboun Hydropower Champassak Road Improvement Nam Leuk Hydropower Development Siem Reap Airport Pnom Penh to Ho Chi Minh City Highway Pnom Penh to Ho Chi Minh City Highway Southern Yunnan Road Development East-West Corridor Project East-West Corridor Project GMS: Cambodia Road Improvement GMS: Mekong Tourism Development GMS: Mekong Tourism Development GMS: Mekong Tourism Development GMS: Northern Economic Corridor

Date Approved 29-Sep-94 8-Nov-94 31-Aug-95 10-Sep-96 12-Dec-96 15-Dec-98 15-Dec-98 24-Jun-99 20-Dec-99 20-Dec-99 26-Nov-02 12-Dec-02 12-Dec-02 12-Dec-02 20-Dec-02 ADB 150.0 60.0 48.0 52.0 15.0 40.0 100.0 250.0 32.0 25.0 50.0 15.6 10.9 8.5 30.0 Government 311.4 14.5 12.1 22.1 2.0 12.7 44.8 520.3 28.0 72.0 17.5 5.1 3.3 3.7 7.3

Estimated Total Loan Closing Project Cost ($ million) Date 6-Sep-00 461.4 14-Oct-98 270.0 26-Jul-01 60.1 31-Mar-02 112.6 31-Mar-04 17.0 30-Jun-04 52.7 30-Jun-05 144.8 31-Mar-04 770.3 30-Sep-05 205.0 31-Dec-04 387.0 30-Jun-07 77.5 30-Jun-08 20.7 30-Jun-08 14.2 30-Jun-08 12.2 30-Jun-07 95.8 145.0 JICA and JBIC 290.0 JBIC and World Bank 10.0 OPEC Fund

16

2014

PRC

Western Yunnan Roads Development

17

2052

Cambodia

Cambodia: GMS Transmission Project

18 19

2116 2162

PRC Lao PDR

Dali-Lijang Railway Project (Yunnan Province) Nam Theun 2 Hydroelectric Project

Total (19 Projects)

5,376.3

1,481.3

1,725.1

58.5 Governments of PRC and Thailand 157.9 AFD and domestic commercial bank 27.0 World Bank and Nordic Development Fund 40.0 AFD 1,207.5 AFD ($27.0 million), PROPARCO ($27.0 million), and consortium of commercial banks 2,169.9

ADB = Asian Development Bank, AFD = Agence Franaise de Dveloppement, GMS = Greater Mekong Subregion, JBIC = Japan Bank for International Cooperation, JICA = Japan International Cooperation Agency, Lao PDR = Lao People's Democratic Republic, No. = number, OPEC = Organization of Petroleum Exporting Countries, PRC = People's Republic of China, PROPARCO = Socit de Promotion et de Participation pour la Coopration Economique.

Table A4.4: Benefits from Greater Mekong Subregional Cooperation in the Energy Sector Nam Song Project Theun Hinboun Project Nam Leuk Project

Xeset Project

Year Export Sales (GWh) ($ million) 1,645 1,584 245 Export Sales (GWh) ($ million)

Total Generation (GWh) Total Generation (GWh) 137

Total Sales (GWh) Total Generation (GWh)

Export Sales (GWh) ($ million)

Annual

Total Generation Export Sales (GWh) (GWh) ($ million) Appraisal Estimates 181 Actual Achievement 3.7 3.5 2.7 4.1 3.6 5.8 4.8 2.3 4.8 4.5 2.8 2.9 2.5 1.6 86 161 163 87 128 120 158 126 1,538 1,589 1,578 1,479 1,458 1,556 9,197 1,533 (6.8%) 10,040 1,469 1,213 1,439 1,487 1,486 1,455 1,432 1,528 83 159 162 86 126 118 103 125 3.1 6.1 6.0 2.5 3.5 3.4 3.0 3.6 1,212 1,439 1,487 1,485 1,454 1,427 1,521 10,025 1,467 48.6 59.6 60.9 59.3 58.3 56.4 59.3 402.4 58.9

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Total Average

144 137 107 142 96 177 136 79 161 168 148 156 157 116

127 119 91 129 88 160 115 55 126 118 100 101 86 54

286 262 245 248 254 1,295 268 9.4%

283 260 242 246 247 1,278 264

8.2 7.2 6.9 7.1 7.2 36.6 7.6

1,923 1,471 49.5 1,028 963 31.2 137 105 3.5 129 120 3.9 Difference of Annual Average from Appraisal Target (%) (24.3%) (5.8%)

GWh = gigawatt-hour. Source: Staff estimates based on data from the Electricit du Laos.

Appendix 4

161

Figure A4.7: A Logic Model for Evaluation of Loans Under the Country Assistance Programs (19862004) by Strategic/Thematic Objectives

162

From Market Economy to Poverty Reduction

Appendix 4

Broad-Based, Sustainable Economic Growth

Inclusive Social Development and Environment

Good Governance

Rural Development and Market Linkages Human Resources Development

Private Sector Development and GMS Integration

Environment and Other Social Development

Capacity Building to Improve Governance

Capacity Building in Other Related Areas

Loans Environment (2%) - Environment and Social Program (01) Urban Development (8%) - Vientiane Integrated Urban Development (95) - Secondary Towns Urban Development (97) - Vientiane Urban Infrastructure and Services (01) - Small Towns Development Sector (03) Water Supply and Sanitation (5%) - Southern Provincial Towns Water Supply (91) - Rehabilitation and Upgrading of Vientiane Water Supply (92) - Northern Provincial Towns Water Supply and Sanitation (93) - Water Supply and Sanitation (99)

13%

63%

9%

15%

0%

0%

Agriculture and Natural Resources (7%) Energy (23%) Education (7%) - Xeset Hydropower (87) - Education Quality Improvement (91) - Agriculture Program (89) - Second Agriculture Program (92) - Nam Ngum-Luang Prabang Power - Postsecondary Education - Industrial Tree Plantation (93) Transmission (88) Rehabilitation (95) - Shifting Cultivation Stabilization (99) - Xeset Hydropower (Supplementary) (90) - Basic Education (Girls) (98) - Smallholder Development (02) - Nam Song Hydropower - Second Education Quality Development (92) Improvement (01) Water Resources Management - Nam Ngum-Luang Prabang Power and Irrigation (5%) Transmission (Supplementary) (94) Health (2%) - Community-Managed Irrigation Sector - Theun-Hinboun Hydropower (94) - Primary Health Care (95) (96) - Nam Leuk Hydropower (96) - Primary Health Care Expansion (00) - Decentralized Irrigation Development - Power Transmission and Distribution (97) and Management Sector (00) - Nam Ngum River Basin Development - Northern Area Rural Power Sector (02) Distribution (03) - Northern Community-Managed Irrigation Sector (04) Finance, Industry, and Private Sector Development (8%) - Financial Sector Program (90) - Second Financial Sector Program (96) - Banking Sector Reform-TA Loan (02) - Banking Sector Reform Program (02) - GMS: Mekong Tourism Development (Lao PDR) (02)

Transport (33%) - Airports Improvement (93) - Second Road Improvement (86) - Third Road Improvement (87) - Fourth Road Improvement (89) - Fifth Road Improvement (91) - Sixth Road Improvement (93) - Champassak Road Improvement (95) - Xieng Khouang Road Improvement - GMS: East-West Corridor (Lao PDR) - Rural Access Roads (00) - GMS: Northern Economic Corridor (02) - Roads for Rural Development Project

GMS= Greater Mekong Subregion, Lao PDR = Lao People's Democratic Republic, TA = technical assistance. Source: Regrouped from Table A3.1 (Appendix 3).

Figure A4.8: A Logic Model for Evaluation of Advisory Technical Assistance Under the Country Assistance Programs (19862004) by Strategic/Thematic Objectives
From Market Economy to Poverty Reduction

Broad-Based Sustainable Economic Growth

Inclusive Social Development and Environment

Good Governance

Rural Development and Market Linkages Human Resources Development

46% Environment (2%) - Strengthening Environmental Planning and EIA Capacity (95) - Strengthening Social and Environmental Management (98) - Capacity Building for Environment and Social Management in Energy and Transport (01) Urban Development (4%) - Southern Area Development Master Plan Study (86) - Establishing Municipal Administration Systems (95) - Support for Urban Development Administration Authorities (97) - Capacity Building for Urban Development Administration Authorities (99) - Strengthening Economic and Financial Management (93) - Preparation of National Procurement Regulations for the Public Sector (95) - Institutional Strengthening of the Procurement Monitoring Office - Phase II (97) - Establishing the National Audit Office (98) - Public Investment Program (99) - Enhancing Government Accounting Regulations and Procedures (99) - Capacity Building in Project Financial Management (01) - Institutional Strengthening of Public Investment Management (01) - Institutional Strengthening of the National Audit Office (01) - Enhancing Government Accounting Regulations and Procedures Phase II (03) Education (8%) - Education Sector Study (89) - Institutional Strengthening of Ministry of Education (91) - Curriculum Development for Teacher Education (91) - Encouraging Private Sector Education (92) - Strengthening Labor Market Monitoring and Analysis (93) - Private Sector Education Development (94) - Postsecondary Education Management Development (95) - Capacity Building in Job Training (97) - Education Sector Development Plan (98) - Strengthening Decentralized Education Management (02) Health (3%) - Strengthening the Ministry of Public Health (95) - Capacity Building for Primary Health Care (00) - Social Protection in the Lao PDR: Issues and Options (02) 11% 8% 7%

Private Sector Development and GMS Integration

Environment and Other Social Development

Capacity Building to Improve Governance

Capacity Building in Other Related Areas

6% Macroeconomic Management, Development Planning and Monitoring (6% - Assistance in Preparation of Third 5-Year Plan (90) - Formulating the Third 5-Year Plan - Phase II (90) - Debt Recording and Management System (90) - Human Resource Planning (92) - Establishing an Institutional Framework for a Policy Research Institute (93) - Establishing an Aid Coordination and Monitoring System (96) - Strengthening the Capacity of Aid Coordination and Monitoring (99) - Participatory Assessment of Poverty in the Lao PDR (00) - Participatory Poverty Monitoring and Evaluation (00) - Northern Region Strategic Action Plan (02) - Institutional Strengthening for Poverty Monitoring and Evaluation (04) Gender (0%) - Capacity Building of the Lao Women's Union (01)

ADTAs

22%

Water Supply and Sanitation (2%) - Institutional Strengthening of the Water Supply Sector (91) - Institutional Support to Nam Papa Lao (92) - Strengthening Planning Capabilities in Nam Papa Lao (93) - Northern and Central Region Water Supply and Urban Development (04)

Appendix 4

Agriculture and Natural Resources (15%) Energy (11%) - Agricultural Research (89) - Xeset Hydropower (87) - Tropical Forestry Action Plan (89) - Xeset Hydropower (Supplementary) (90) - Improvement of Agricultural Statistics (89) - Ngum Hydropower Station Operational Improvement Study (89) - Study of National Agriculture Manpower and National Extension - Institutional Improvement to Electricit du Laos Luang Prabang (89) Service (89) - Study of National Crop - Nam Ngum-Luang Prabang Power Development and Seed/Planting Transmission (Part C) (90) Material Multiplication (89) - Nam Ngum-Luang Prabang Power - Pesticides and Environmental Transmission (Part C) Control (89) (Supplementary) (92) - Theun-Hinboun Power (94) - Second Forestry Development (Institutional Support) (89) - Corporate and Financial Development of Electricit du Laos (96) - Tropical Forestry Action Plan (Supplementary) (90) - Power System Planning in the - Livestock Sector Policy Ministry of Industry and Handicraft (96) Development and Industry - Study for Establishing the National Restructuring (90) - Agriculture Sector Third 5-Year Grid Company (96) Plan Programming (90) - Analyzing and Negotiating Financing - Institutional Development and Options for the Nam Leuk Hydropower Project Cost Overruns (99) Strengthening of the Ministry of Agriculture and Forestry (92) - Power Sector Strategy Study (99) - Study to Evaluate the Impact of Finance, Industry, and Private Agriculture Program Lending (93) - Institutional Support to Department Sector Development (14%) of Forestry (93) - Restructuring of the Financial - Institutional Support to Agricultural Sector (88) Promotion Bank (93) - Restructuring of Monetary and - Institutional Development and Banking Systems (89) Strengthening of the Ministry of - Review of the Financial Sector (89) Agriculture and Forestry (Phase II) - Restructuring of the Monetary and (95) Banking Systems - Phase II (90) - Agriculture Strategy Study (97) - Long-Term Credit Facility Support (90) - Towards Implementation of the - Debt Disposal Unit (90) Agriculture Strategy (00) - Commercial Bank Training (92) - Agribusiness Support and Training - Commercial Bank Training (02) (Supplementary) (94) - Marketing Support for Organic - Mechanism for Tendering Produce of Ethnic Minorities (04) Government Paper (93) - Capacity Building for Smallholder - Pension Fund and Leasing Legislation (93) Livestock Systems (04) - Poverty Reduction Through Land - Human Resource Development in Banks (94) Tenure Consolidation, Participatory Natural Resources Management and - Development of Commercial Bank Linkages to Micro and Small Local Communities Skills Building (04) Enterprises (94) - Review of Banking Sector Policies and Portfolios (95) - Restructuring and Consolidation of the State-Owned Commercial Banks (96)

163

Figure A4.8 - Continued

164

From Market Economy to Poverty Reduction

Appendix 4

Broad-Based Sustainable Economic Growth

Inclusive Social Development and Environment

Good Governance

Rural Development and Market Linkages Human Resources Development

46% 11% 8% 7%

Private Sector Development and GMS Integration

Environment and Other Social Development

Capacity Building to Improve Governance

Capacity Building in Other Related Areas

6%

ADTAs

22%

Water Resources Management and Irrigation (7%) - Review of the Irrigation Subsector (89) - Strengthening and Restructuring Irrigation Development (93) - Strengthening and Restructuring Irrigation Development (Supplementary) (93) - Nam Ngum Watershed Management (96) - Institutional Strengthening of the Water Resources Coordination Committeee (98) - Implementation of the Water Sector Action Plan (99) - Study of Gender Inequality in Women's Access to Land, Forests, and Water (04)

- Development of an Interbank Market (96) - Commercial Banking Capacity and Efficiency Enhancement (98) - Development and Application of the Secured Transactions Law and Bankruptcy Law (98) - Rural Finance Development (TA Cluster) (00) - Strengthening Corporate Governance and Management of State-Owned Commercial Banks (00) - Strengthening Corporate Governance and Management of State-Owned Commercial Banks II (02) - Management Reorganization and Strengthening of the Lao Wood Industries Corporation (86) - Evaluation and Promotion of Investment Proposals in the Industrial and Mining Sectors (89) - Mineral Exploration and Development Plan (89) - Industrial Sector Study and Strengthening of the Ministry of Industry and Handicrafts (90) - Strengthening the Industrial Waste Management Capability of the Ministry of Industry and Handicraft (92) - Integrating the Poor in Regional Trade through Standard-Setting for Private Sector Development (03) - Integrating the Poor in Regional Trade through Industrial Standard Development- Phase II (04) - Improving the Management Efficiency of State-Owned Enterprises (89) - Study on Privatization in Lao PDR (90) - Establishing of a Privatization Coordination Unit in Lao PDR (90) - Domestic Financing Mechanisms for Privatization (92) - Foreign Investment Capacity Enhancement (97) - Investment Climate and Productivity Study (03) - Advisory Assistance on Small and Medium-Sized Enterprise and Private Sector Development (03)

Transport (14%) - Road Maintenance Study (86) - Implementation of Second Road Improvement (86)

Figure A4.8 - Continued

From Market Economy to Poverty Reduction

Broad-Based Sustainable Economic Growth

Inclusive Social Development and Environment

Good Governance

Rural Development and Market Linkages Human Resources Development

46% 11% 8% 7%

Private Sector Development and GMS Integration

Environment and Other Social Development

Capacity Building to Improve Governance

Capacity Building in Other Related Areas

6%

ADTAs

22%

- Implementation of Second Road Improvement (Supplementary) (91) - Road Maintenance Training (87) - Implementation of Third Road Improvement (87) - Road Maintenance and Equipment Training (91) - Road Maintenance and Equipment Training (Supplementary) (92) - Prestressed Concrete Bridge Training (91) - Privatization and Management of Road Sector Institutions (93) - Institutional Strengthening of the National Airports Authority and Lao Civil Aviation (93) - Upgrading of the School of Communication and Transport (94) - Feeder Roads Maintenance Training (95) - Management Information System in MCTPC (95) - Management Information System (Phase II) (97) - Management Information System (Phase II) (Supplementary) (00) - Road Infrastructure for Rural Development (98) - East-West Corridor Coordination (99) - Assessing a Concession Agreement for the Lao PDR Component of the Chiang Rai to Kunming Highway (00) - Strengthening Social and Environmental Management Capacity in the Department of Roads (00)

ADTA = advisory technical assistance; EIA = environmental impact assessment; GMS = Greater Mekong Subregion; Lao PDR = Lao People's Democratic Republic; MCTPC = Ministry of Communication, Transport, Post and Construction; TA = technical assistance. Source: Regrouped from Table A3.3 (Appendix 3).

Appendix 4

165

166

Appendix 5

PORTFOLIO PERFORMANCE OF LENDING PROGRAM Table A5.1: Project Performance Ratings (as of 31 December 2005) (%) Implementation Progress HS S PS U
9.1 4.9 6.6 90.9 92.7 86.9 1.2 3.3 1.2 3.1

Group
Lao PDR Mekong Region ADB-wide

HS
4.5 2.4 2.0

Development Objectives S PS U
95.5 96.3 95.7 1.2 2.0 0.4

= not applicable, ADB = Asian Development Bank, HS = highly satisfactory, Lao PDR = Lao Peoples Democratic Republic, PS = partly satisfactory, S = satisfactory, U = unsatisfactory. Source: Relevant Central Operations Service Office database of ADB, and Staff estimates.

Table A5.2: Financial Performance Indicators

Item
Contract Awards ($ million) - Project Loans - Program Loans Disbursements ($ million) - Project Loans - Program Loans a Disbursement Ratio (%) - Project Loans - Program Loans b Net Resources Transfer ($ million) - Project Loans - Program Loans

Proj.

2001 Actual
51.8 51.8 0.0 44.7 44.7 0.0 18.9 18.9 0.0 34.6 36.2 (1.6)

2002 Proj. Actual

30.9 25.9 5.0 52.0 47.0 5.0 20.9 20.5 25.4 43.2 38.2 5.0 48.6 43.7 4.9 19.5 19.1 24.7 37.7 34.5 3.2

2003 Proj. Actual

49.8 34.8 15.0 64.6 49.6 15.0 21.1 18.1 48.0 34.9 29.7 5.2 54.7 49.5 5.2 19.9 20.3 16.6 40.5 37.8 2.7

2004 Proj. Actual

77.8 62.8 15.0 61.8 46.8 15.0 18.4 15.3 52.3 54.8 54.8 0.0 48.5 48.5 0.0 14.6 15.9 0.0 31.0 33.6 (2.6)

2005 Proj. Actual

69.0 54.0 15.0 76.4 61.4 15.0 22.8 20.1 50.2 87.0 75.7 11.3 78.7 67.5 11.3 23.5 22.1 37.8 58.8 50.1 8.7

59.0 59.0 0.0 37.4 37.4 0.0 15.8 15.8 0.0

= not available, ADB = Asian Development Bank, Proj. = projected. Note: Figures may not add or be exact due to rounding. a Disbursement ratio = disbursements during the period/(undisbursed net loan balance at the beginning of year + effective loan amount approved during the period). b Net resources transfer = (disbursements from public sector loans) - (principal repayments + interest during construction + service charges). Source: Central Operations Service Office database of ADB, and Staff estimates.

Table A5.3: Actual Contract Award Trends (20012005) Item 2001 2002 2003 2004 2005 Lao Contract Awards 51.8 43.2 34.9 54.8 87.0 ($million) Lao Contract Award 26.1 18.4 13.1 20.3 40.1 Ratio (%) ADB-Wide Contract 14.2 17.7 17.4 15.0 22.2 Ratio (%)
ADB = Asian Development Bank. Source: Recalculated from relevant ADB databases.

Figure A5.1: Contract Award Ratio Trends of All Active Loans (20012005)
50.0 40.0 % 30.0 20.0 10.0 0.0 2001 2002 Lao PDR 2003 Year 2004 2005

ADB-Wide

ADB = Asian Development Bank, Lao PDR = Lao People's Democratic Republic. Source: Calculated from Table A5.3.

Appendix 5

167

Table A5.4: Actual Disbursement Trends (19952005)

Item
Lao Active Loans ($ million) - Project Loans - Program Loans Lao Disbursements ($ million) - Project Loans - Program Loans Lao Disbursement Ratio (%) - Project Loans - Program Loans ADB-Wide Disbursement Ratio (%)

1995
303.1 303.1 0.0 56.6 41.8 14.9 18.7 13.8 0.0 18.4

1996
305.9 280.9 25.0 85.3 72.9 12.4 27.9 26.0 49.5 17.7

1997
277.3 265.0 12.3 88.1 88.1 0.0 31.8 33.3 0.0 25.2 19.1

1998
271.4 259.9 11.6 66.0 66.0 0.0 24.3 25.4 0.0 29.3 19.8

1999
240.8 228.7 12.1 46.8 46.8 0.0 19.4 20.4 0.0 22.2 17.6

2000
239.8 228.0 11.8 51.0 39.7 11.3 21.3 17.4 95.6 20.5 18.3

2001
237.0 237.0 0.0 44.7 44.7 0.0 18.9 18.9 0.0 20.5 19.4

2002
248.6 229.0 19.6 48.6 43.7 4.9 19.5 19.1 24.7 22.2 16.3

2003
274.5 243.2 31.3 54.7 49.5 5.2 19.9 20.3 16.6 20.2 17.1

2004
333.3 304.6 28.7 48.5 48.5 0.0 14.6 15.9 0.0 17.7 14.2

2005
333.3 304.6 28.7 78.7 67.5 11.3 23.6 22.1 37.8 20.7 14.6

- Project Loans 17.8 17.4 ADB = Asian Development Bank. Source: Recalculated from relevant ADB databases.

Figure A5.2: Disbursement Ratio Trends of All Active Loans (19952005)

35.0 30.0 25.0 % 20.0 15.0 10.0 5.0 0.0 1995 1996 1997 1998 1999 2000 Year Lao Disbursement Ratio (%) ADB-wide Disbursement Ratio (%) 2001 2002 2003 2004 2005

ADB = Asian Development Bank. Source: Calculated from Table A5.4.

Figure A5.3 Disbursement Ratio Trends of Project Loans (19952005)

35.0 30.0 25.0
%

20.0 15.0 10.0 5.0 0.0 1995 1996 1997 1998 1999 2000
Year

2001

2002

2003

2004

2005

Lao Disbursement Ratio (%)

ADB-wide Disbursement Ratio (%)

ADB = Asian Development Bank. Source: Calculated from Table A5.4.

168

Appendix 5

Table A5.5: Efficiency Indicators

Actual Total Project ADB Approved Cost Amount $ Million Weight $'000 20.3 32.2 240.2 111.2 403.9 89.9 20.6 26.1 48.6 37.1 31.4 51.9 305.6 27.7 27.7 11.0 41.2 15.9 0.05 0.08 0.59 0.28 1.00 0.29 0.07 0.09 0.16 0.12 0.10 0.17 1.00 1.00 1.00 0.16 0.60 0.23 15,000 31,500 60,000 52,000 158,500 15,000 12,000 19,000 39,000 34,000 26,000 48,000 193,000 20,000 20,000 9,600 9,500 13,000 12.1 15.0 18.5 23.6 18.4 11.8 13.1 20.6 17.5 NA 68.1 805.3 1.00 32,100 383,600 (neg.) 13.1 6.8 (neg.) (neg.) 0.9 (neg.) (neg.) 20.0 21.8 30.8 10.4 EIRR PCR % EIRR PPAR % 14.3 Latest EIRR % 14.3 21.8 18.5 11.8 16.7 12.0 20.9 29.4 17.9 15.6 17.7 17.9 17.0 36.0 36.0 20.0 15.0 (neg.) 13.1 6.8 (neg.) (neg.) 0.9 (neg.) (neg.) NA

Loan No. Energy Sector 1. 928(SF)/ 1308((SF) 2. 1214(SF) 3. 1329(SF) 4. 1456(SF) Transport Sector 5. 1266(SF) 6. 0788(SF) 7. 0866(SF) 8. 1009(SF) 9. 1108(SF) 10. 1234(SF) 11. 1369(SF)

Title Nam Ngum-Luang Prabang Power Transmission Nam Song Hydropower Development Theun-Hinboun Hydropower Nam Leuk Hydropower Sector Wide

18.5 11.8

Airports Improvement Second Road Improvement Third Road Improvement Fourth Road Improvement Fifth Road Improvement Sixth Road Improvement Champassak Road Improvement Sector Wide Urban Development Sector 12. 1362(SF) Vientiane Integrated Urban Development Sector Wide Water Supply and Sanitation Sector 13. 1122(SF) Southern Provincial Towns Water Supply 14. 1190(SF) Rehabilitation and Upgrading of Vientiane Water Supply 15. 1267(SF) Northern Provincial Towns Water Supply and Sanitation Houayxay Pakxane Phongsaly Phonhong Phonsavanh Xayabury Xamneua Sector Wide Total

12.0 20.9 24.7 13.3 12.0 17.7 17.9

29.4 17.9 15.6

36.0

ADB = Asian Development Bank, EIRR = economic internal rate of return, NA = not applicable/available, neg. = negative, No. = number, PCR = project completion report, PPAR = project performance audit report, SF = special fund. Source: Regrouped from relevant ADB databases.

Appendix 6

169

QUESTIONNAIRE FOR CLIENT/STAKEHOLDER SURVEYS

Name of organization.. 1. What is your perception about the Asian Development Banks (ADB) role in providing lending and nonlending assistance to the Lao Peoples Democratic Republic (Lao PDR)? 1 = as major donor in general 2 = as major donor in many sectors 3 = as major donor in a few sectors 4 = as minor donor 2. Please specify the sectors that you think ADB has been lead donor. 3. Are there any sectors that you think ADB should reduce/withdraw assistance? If yes, please specify sector(s) and reason(s). 1 = no 2 = yes (specify sector[s]).. (specify reason[s])you may tick more than one answer below. a = ADB does not seem to do well in such sectors b = ADB is doing well, but other donors roles are more prominent c = ADB is doing well, but there should be more joint efforts with other donors d = others (specify). 4. What is your perception about the level of aid coordination in the country? 1 = highly satisfactory 2 = generally satisfactory 3 = needs some improvements 4 = needs a lot of improvements 5. What level of aid coordination do you think the country needs most? 1 = strategic level (needs more consultations among development partners to harmonize country strategies and programs to align more with the Governments priority areas/sectors to achieve Millennium Development Goals in a coherent manner, and to avoid duplicative/piecemeal efforts) 2 = dialogue level (needs more collective policy dialogue among donors to pursue key policy issues with the Government in a coherent manner to increase Governments commitment to the required reforms and to avoid inconsistent/conflicting policies) 3 = technical working group level (needs more meetings or joint efforts at the technical working group level, including preparing country joint portfolio review) 4 = other levels (specify)..

170

Appendix 6

6.

What do you think about ADBs efforts in aid coordination with other development partners (e.g., government agencies, donors, private sector groups, civil society, and nongovernment organizations)? 1 = highly satisfactory 2 = generally satisfactory 3 = needs some improvements 4 = needs a lot of improvements

7.

Please suggest way(s) in which ADB should improve aid coordination activities (you may tick more than one answer). 1 = doing more discussions/consultations with other development partners to increase harmonization of its country strategy and program (CSP) with those of other donors and with the Governments development priorities/needs 2 = doing more collective policy dialogue 3 = doing more joint meetings with other donors to harmonize implementation procedures (including preparing country joint portfolio review) 4 = others (specify).

8.

How do you perceive ADBs assistance in terms of relevance to the countrys development priorities? 1 = highly relevant 2 = relevant 3 = partly relevant 4 = not relevant

9.

How do you perceive ADBs assistance in terms of achievement of development outcomes/impacts in the key sectors assisted? 1 = highly effective 2 = effective 3 = partly effective 4 = ineffective

10.

How do you perceive ADBs assistance in terms of sustainability of its projects in the key sectors assisted? 1 = very likely 2 = likely 3 = less likely 4 = unlikely

11.

How do you perceive ADBs assistance in terms of contributions to strengthening institutional capacity of government agencies to deliver services more effectively? 1 = substantial 2 = significant 3 = moderate 4 = negligible

Appendix 6

171

12.

How do you perceive ADBs assistance in terms of contributions to improving governance (e.g., improving rules and regulations to increase transparency/ accountability of government agencies and to facilitate private sector development)? 1 = substantial 2 = significant 3 = moderate 4 = negligible

13.

What is your perception about the role of ADBs Lao Resident Mission (LRM) in helping improve ADBs operations? 1 = very useful 2 = useful 3 = not very useful 4 = not useful

14.

Please suggest way(s) to improve LRMs operations in the future (you may tick more than one answer). 1 = LRM staff should discuss/consult with concerned development partners more often 2 = LRM staff should visit project sites more often 3 = LRM staff should be more client-oriented 4 = others (specify)...

15.

What do you perceive as the strength(s) of ADBs operations (you may tick more than one answer)? 1 = responsiveness to the countrys development needs 2 = continuity in key sectors 3 = fostering beneficiary/country participation and ownership 4 = others (specify)...

16.

What do you perceive as the weakness(es) of ADBs operations (you may tick more than one answer)? 1 = lack of a well-integrated, programmatic modality (e.g., sector wide approach [SWAP]) to provide systematic and coherent assistance in some sectors 2 = overly ambitious and complex project/program design in some sectors 3 = lack of synergies between related sectors 4 = others (specify)..

17.

Please suggest way(s) to improve ADBs operations in the future (you may tick more than one answer). 1 = focusing on a smaller number of sectors (specify sectors.. ) 2 = delegating more projects to LRM to administer 3 = adopting the SWAP in some sectors 4 = others (specify)...

172

Appendix 6

18.

What do you perceive as the main obstacle for adopting the SWAP? 1 = different definitions of the SWAP concept among donors 2 = insufficient capacity of concerned government agencies to adopt/implement the SWAP 3 = insufficient coordination among donors to encourage the Government to start adopting/initiating the SWAP 4 = others (specify).. .

19.

To what extent do you think the countrys development agenda (e.g., the National Growth and Poverty Eradication Strategy and current medium-term plan) have been led by the Government? 1 = fully led by the Government 2 = generally led by the Government 3 = generally led by donors 4 = fully led by donors

20.

What do you think is the most important way to improve Governments leadership and ownership in the countrys development agenda? 1 = improving overall aid coordination among development partners 2 = improving coordination system among government agencies responsible for planning, aid mobilization, and poverty monitoring 3 = increasing government participation in the design of donors projects and country strategies and programs 4 = others (specify) ..

21.

To achieve sustainable poverty reduction, what do you think should be the countrys development priorities in the next 5 years? . .

22.

Do you think the country will have sufficient budget to achieve long-term development objectives identified in the National Growth and Poverty Eradication Strategy? 1 = no 2 = yes

23.

What do you perceive as the major development constraints/challenges of the country? . .

Appendix 7

173

HARMONIZATION OF DEVELOPMENT PARTNERS STRATEGIES AND PROGRAMS 1. Table A3.9 (Appendix 3) shows overall external assistance in terms of disbursements provided to the Lao Peoples Democratic Republic (Lao PDR) by all development partners (DPs), including bilateral (19) and multilateral funding (10) agencies and international nongovernment organizations (NGOs) during 20002003.1 The total amount of external assistance rose from $359 million in 2000 to $417 million in 2003. The resulting cumulative assistance over the 4-year period of 20002003 is about $1.6 billion. Bilateral agencies accounted for 54% of the total cumulative assistance over the 4-year period, followed by multilateral agencies (43%) and NGOs (3%). Of the bilateral agencies, Japan has been the largest source, accounting 26% of the cumulative assistance, followed by Peoples Republic of China (6%), Germany and Sweden (4% each), Australia (3.5%), and France (3%). Of the multilateral agencies, the Asian Development Bank (ADB) has been the largest source, accounting for 13% of total cumulative assistance, followed by the World Bank Groups International Development Association and the United Nations agencies (8% each). Other multilateral agencies accounted for 3% of total cumulative assistance or less. 2. Japans bilateral assistance, through the Japan International Cooperation Agency (JICA), has been directed by Japans Official Development Assistance (ODA) Charter and the Medium-Term Policy on ODA.2 According to its Country Assistance Evaluation of Laos: Summary (March 1995) for 19972003, Japans ODA played an important role in the socioeconomic development of the country, accounting for about 50% of the total of all the bilateral ODA to the country. The evaluation findings highlighted the needs for (i) aid coordination with active participation of Japan, preferably a leading role; (ii) setting clear aims and objectives for each priority sector/subsector at the policy level; (iii) taking account of lessons learned from the monitoring and evaluation of assistance in formulating future plans; and (iv) ensuring ownership by the Government and other funding agencies of the projects supported by JICA, including the sharing of output and outcome information with other relevant agencies. The strategic objective of JICAs country assistance is to support self-help efforts toward poverty reduction and realization of self-reliant and sustainable economic growth. 3. Frances bilateral assistance, through the Agence Franaise de Dveloppement (AFD), 3 gives increasing space to regional cooperation, such as the development of trade and the rise in power of the so called Greater Mekong Initiative supported by ADB. This initiative centers on building a web of liaison infrastructure (transport, power, and telecommunications). AFD together with ADB has set up a specific study fund to address the issue of transport infrastructure and natural resource management in the Mekong River Basin. Poverty alleviation remained AFDs priority in 2003, with emphasis on employment and water. AFD also provided subsidies in the country for aid to the Government, study and project preparation funds, and contributions to commercial capacity building programs. 4. Based on the current Country Strategy for Development Cooperation for Laos (2004 2008), the strategic objective of Swedens bilateral assistance, through the Swedish International Development Cooperation Agency,4 is to help create conditions whereby poor people can improve their situations with two priority areas: (i) strengthen the countrys capacity to reduce poverty on a long-term and environmentally sustainable basis; and (ii) promote and
1 2 3 4

Data are show disbursed amounts, rather than approved amounts, of assistance. JICA. 2005. An Outline of the First Draft of Japans Country Assistance Plan for the Lao PDR. Tokyo. AFD. 2004. Annual Report 2003. Paris. Swedish International Development Cooperation Agency. Country Strategy for Development Cooperation, Laos (January 2004December 2008). Stockholm.

174

Appendix 7

strengthen conditions for democracy, rule of law and respect for human rights. Emphasis is placed on reforms, with the following sub-goals: (i) improved opportunities for economic and social development among the upland population, inter alia, with a conflict prevention objective; (ii) improved conditions for environmentally sustainable development; (iii) improved universal basic education; (iv) strengthened national research capacity; (v) greater respect for human rights and principles of rule of law; and (vi) strengthened democratic governance and increased capacity in public administration. 5. The bilateral assistance of Australia, through the Australian Agency for International Development, is guided by the Laos-Australia Development Cooperation Program (20042010). The strategic objective of the assistance is to advance Australias national interest by assisting the Lao PDR to improve the pre-conditions for poverty reduction and sustainable development. The priority areas which directly reflect and support the aims of the National Growth and Poverty Eradication Strategy (NGPES) are (i) building human capital, (ii) promoting the growth of the market economy, and (iii) reducing the vulnerability of the poor. The basic principle is to promote national ownerships of programs and projects through sustainable capacity building and peoples participation. 6. The 2002 United Nations Development Assistance Framework (20022006) focuses on (i) development and poverty eradication policies and strategies; (ii) response to basic human needs; (iii) sustainable use of natural resources and preservation of cultural heritage; and (iv) human rights, gender equality, and governance. 7. The European Union assistance is guided by the European Commission-Lao PDR Country Strategy Paper (20022006). This strategy outlines three priority areas: (i) rural development, together with the social sectors (education and health); (ii) trade sector; and (iii) governance. 8. At present, the World Bank assistance is guided by the 2005 Country Assistance Strategy (CAS),5 with the strategic objective of supporting the implementation of the NGPES in two priority areas: (i) sustaining growth through improved management of key drivers, including regional integration and private sector development, as well as rural development and natural resources management; and (ii) improving social outcomes and reducing vulnerability through strengthened public financial management and service delivery capacities, and targeted poverty reduction programs. These priority areas are complemented by two additional CAS priorities: (i) adopting a strategic approach to capacity development and partnership in support of better NGPES results; and (ii) supporting the implementation of the Nam Theun 2 Project as an example of area-based sustainable natural resources development that contributes to growth, social outcomes, capacity development, and stronger partnerships. 9. In sum, poverty reduction has been the overarching goal of all of the bilateral and multilateral agencies, including ADB which identified poverty reduction as the strategic objective of the 2001 Country Strategy and Program, with four priority areas, namely (i) rural development and market linkages, (ii) human resources development, (iii) sustainable environmental management, and (iv) private sector development and sub-regional integration. However, there are substantial variations in sectoral priorities across different funding agencies, depending on their historical involvements in a particular sector and on specific concerns identified in the assistance framework. In terms of sectoral breakdown, Table 4 of the main text shows that transport and communications has been the largest sector absorbing 23% of the cumulative
5

World Bank. 2005. Country Assistance Strategy for Lao PDR. Washington, D.C.

Appendix 7

175

assistance by all DPs during (20002003). Agriculture, natural resources, and rural development received the second largest share (18%), followed by education and health (16%), energy (13%), urban development and other social infrastructure, including water supply and others (12%), and finance and industry/trade (6%). Table 4 of the main text also shows cumulative assistance by ADB out of the total amount by all funding agencies in each sector (during 20002003). As shown, ADB has been a major funding agency in a number of sectors, especially energy (24%), finance and industry/trade (19%), urban development and infrastructure/water supply (19%), and transport (14%). Given that ADBs cumulative assistance for all sectors combined (during 20002003) was 13%, making it the second largest funding agency (exceeded only by Japan), its cumulative assistance by sector of 14% and above (such as in transport, urban development and infrastructure, and energy) are thus considered high. ADBs cumulative assistance in other sectors accounted for 11% in education; 10% in health; and 9% in agriculture, natural resources, and rural development. 10. Overall, the funding agencies strategic objectives and priority areas in the Lao PDR are generally regarded as complementary in addressing the countrys needs as they involve all key sectors. However, aid coordination/harmonization among them remains weak as reflected in the absence of the use of a coherent program-based or sector-coordinated modality (e.g., sectorwide approach) to avoid piecemeal efforts and outcomes.

176

Appendix 8

GOVERNMENT'S FISCAL SUSTAINABILITY PROSPECTS BY SECTOR Fiscal Year 2000/01 14,950.00 3,140.80 1,229.70 1,911.10 1,229.70 22.50 3.20 18.60 159.40 6.50 47.80 13.90 41.40 916.40 21.01 8.23 12.78 8.23 0.15 0.02 0.12 1.07 0.04 0.32 0.09 0.28 6.13 100.00 39.15 60.85 100.00 1.83 0.26 1.51 12.96 0.53 3.89 1.13 3.37 74.52

Item 1. GDP (Kip billion, current prices) 2. Overall Expenditure (Kip billion) Recurrent Expenditure Capital Expenditure 3. Recurrent Expenditure (Kip billion) Agriculture, Rural Development, and Natural Resources Industry and Energy Finance Social Sector - Education - Human Resources Development - Health - Culture and Information - Social Welfare Others (Unexplained Categories) 4. Overall Expenditure (% of GDP) Recurrent Expenditure Capital Expenditure 5. Recurrent Expenditure (% of GDP) Agriculture, Rural Development, and Natural Resources Industry and Energy Finance Social Sector - Education - Human Resources Development - Health - Culture and Information - Social Welfare Others (Unexplained Categories) 6. % of Overall Expenditure Recurrent Expenditure Capital Expenditure 7. % of Recurrent Expenditure Agriculture, Rural Development, and Natural Resources Industry and Energy Finance Social Sector - Education - Human Resources Development - Health - Culture and Information - Social Welfare Others (Unexplained Categories)

1998/99 8,788.00 1,719.00 449.30 1,269.70 449.30 7.00 1.00 3.00 42.40 4.60 20.80 3.10 20.10 347.30 19.56 5.11 14.45 5.11 0.08 0.01 0.03 0.48 0.05 0.24 0.04 0.23 3.95 100.00 26.14 73.86 100.00 1.56 0.22 0.67 9.44 1.02 4.63 0.69 4.47 77.30

1999/20 12,848.00 2,754.60 1,050.20 1,704.40 1,050.20 14.10 1.50 8.50 45.40 5.10 22.50 8.50 28.40 916.20 21.44 8.17 13.27 8.17 0.11 0.01 0.07 0.35 0.04 0.18 0.07 0.22 7.13 100.00 38.13 61.87 100.00 1.34 0.14 0.81 4.32 0.49 2.14 0.81 2.70 87.24

2001/02 17,400.00 3,161.00 1,376.10 1,784.90 1,376.10 27.00 4.10 16.20 184.60 6.50 60.30 18.10 47.00 1,012.30 18.17 7.91 10.26 7.91 0.16 0.02 0.09 1.06 0.04 0.35 0.10 0.27 5.82 100.00 43.53 56.47 100.00 1.96 0.30 1.18 13.41 0.47 4.38 1.32 3.42 73.56

2002/03 21,422.00 4,249.40 1,667.00 2,582.40 1,667.00 26.10 4.30 19.70 175.10 6.40 48.60 16.70 52.80 1,317.30 19.84 7.78 12.05 7.78 0.12 0.02 0.09 0.82 0.03 0.23 0.08 0.25 6.15 100.00 39.23 60.77 100.00 1.57 0.26 1.18 10.50 0.38 2.92 1.00 3.17 79.02

GDP = gross domestic product, Lao PDR = Lao People's Democratic Republic. Source: Ministry of Finance, Lao PDR. 2005. Financial Statements 19982005. Vientiane; and Staff estimates.

MANAGEMENT RESPONSE TO THE COUNTRY ASSISTANCE PROGRAM EVALUATION FOR THE LAO PEOPLES DEMOCRATIC REPUBLIC

On 12 May 2006, the Director General, Operations Evaluation Department, received the following response from the Managing Director General on behalf of Management:

A.

Overall Assessment

1. Management appreciates the opportunity to review and comment on the Country Assistance Program Evaluation (CAPE) for Lao Peoples Democratic Republic (Lao PDR) prior to the Development Effectiveness Committees (DEC) discussion on the CAPE. We note the cooperative efforts made by the Operations Evaluation Department (OED) for the CAPE preparation and the complicacy involved in evaluating past performance in the developing member countries (DMCs) that have a limited information base. It is understood that the OED evaluation team endeavored to address this challenge by adopting a combination of quantitative and qualitative assessment techniques. It is regarded timely and appropriate that the CAPE assessed the performance of ADBs country operational strategies and assistance programs to Lao PDR for 1986 2004, and identified key lessons and recommendations for consideration of the Lao PDR Country Team during preparation of the forthcoming Country Strategy and Program (CSP) and its subsequent implementation. We note the overall successful rating for the CSP performance at all levels combined. B. Lessons Learned, Recommendations, and Conclusion

2. Management notes the importance of the lessons identified by OED. The following are Managements responses to the specific recommendations of the CAPE. OED Recommendation 1: Need to Address the Problems of Limited Government Absorptive Capacity and Ownership/Commitment. ADB should consider (i) determining the Lao PDRs cost-sharing ceiling based on the aggregate portfolio of the next CSP period during the preparation of the 2006 CSP and (ii) discussing the issue of high aid intensity ratio with other development partners and pursuing collective policy dialogue with the Government. This objective would be to determine whether the total amount of development assistance should be reduced to be more in line with absorptive capacity and how to improve the Governments capacity in raising more domestic revenues so as to reduce the countrys dependence on foreign assistance in the long run.

Management Response: a) Management agrees with the CAPE recommendation. ADB is sensitive to the importance of absorptive capacity and is currently working with the Government to address binding constraints to development effectiveness. This issue has been reflected in ADBs adjustments to current lending and non-lending operations for Lao PDR and in the proposed changes to strategic direction under the forthcoming CSP. More specifically, it is reflected in ADBs ongoing support to public expenditure management strengthening, and continued policy dialogue with the Government and development partners directed at improving financial management, revenue mobilization, and the fiscal situation. b) On specific actions, we would like to note the following: (i) ADBs Southeast Asia Department (SERD, then Mekong Department) delegated portfolio management to Lao PDR Resident Mission (LRM) that conducts annual and quarterly Portfolio Review Missions. The annual mission identifies the systemic issues adversely impacting on portfolio performance and prepares a mitigation action plan. Both the counterpart funding issue, and pace and extent of agreed reforms have been identified, and corrective actions are being discussed with the Government. ADB will continue to perform these assessments and will apply the new cost-sharing framework during the implementation of the new CSP. In 2005, the Government, ADB, World Bank, and the Swedish International Development Agency jointly conducted the annual review, and prepared a joint Portfolio Effectiveness Review (JPER) which is currently being implemented. Joint assessments will continue and be broadened to include other development partners. (ii) Both the Government and development partners identified the countrys dependence on external assistance as an issue. The Government has set a target to exit least developed country status by 2020; however, in the short-run, the dependency on external assistance will remain significant as identified in the draft 6th Five-Year Socio- Economic Development Plan (SEDP6).1 The Government, ADB, and other development partners are conducting policy dialogue on the issue of aid dependency through various forums, including the round table process (RTP) for aid coordination. Considering the specific CAPE recommendation, ADB has requested the chairperson of the informal working group on macroeconomics and private sector development to table the issue of Official Development Assistance (ODA) dependence with the working group. Work commenced on implementation of the new cost sharing framework and will be finalized during CSP implementation when inputs from the ongoing public expenditure review, medium term expenditure framework, priority sector costing exercise, and harmonization action plan are available. OED Recommendation 2: Need for Sector Selectivity. Given the lower indicative planning figure of $22.7 million for 2006 ($30 million in 2005) compared with the average of $55 million over the CAPE period for the Lao PDR, and concerns over the Governments limited absorptive capacity, the next CSP should focus on a smaller number of sectors.

The National Growth and Poverty Eradication Strategy (NGPES) has been integrated into the Sixth 5-Year Socio-Economic Development Plan (SEDP6).

Management Response: a) Management agrees with the CAPE recommendation. focus/selectivity as a pre-requisite for the new CSP.

ADB

identified

sector

b) Specific Actions: In the Lao PDR CSP Initiating Meeting on 26 April 2006, the Lao PDR Country Team received Managements direction to reposition ADB assistance to sharpen focus and to maximize impact. This would include (i) repositioning ADBs public sector lending to concentrate on integrated support for government programs of policy and institutional reform, and strategic investments in the main sectors highlighted in SEDP6; (ii) using non-lending services to address strategic priorities, such as governance and support of the revenue management arrangements agreed under the Nam Theun 2 Hydropower Project through the joint Government/ADB/World Bank public expenditure management strengthening program (PEMSP); and (iii) forging positive synergies between the national and GMS program. OED Recommendation 3: Need for Stronger Harmonization and Partnerships with Other Development Partners. In line with the expectations stated in the Paris Declaration, ADB should develop more strategic partnerships with other development partners (e.g., joint preparation of CSP and sector strategies, cofinancing strategy, and program-based or sector-coordinated approaches) to provide a more coherent assistance program. This will help reduce the Governments transaction costs, enhance its role in leading the countrys development agenda, and increase the possibility for other development partners to finance future recurrent costs after project implementation. Management Response: a) Management agrees with the CAPE recommendation: In the JPER Action Plan prepared in November 2005, it was agreed to assist the Government prepare a Harmonization Action Plan (HAP), in consideration of the Paris Declaration. The forthcoming CSP is premised on aligning and enhancing partnering principles, as well as responding to the Governments request to align with SEDP6, reduce transaction costs, move towards sector coordinated approaches, and address binding constraints to poverty reduction. b) Specific Actions: ADB and the World Bank hosted joint harmonization/alignment workshops for the Government and development partners, and follow-up workshops with the key Government executing agencies. Work has commenced on the HAP and will include development of frameworks for capacity development for the priority sectors for consideration in the CSP. This will be valuable input into the government-owned initiatives for harmonization/alignment. ADB will continue to support the Governments harmonization and alignment initiatives including the Governments requests for option assessments of sector development approaches in the priority sectors, adoption of sector coordinated approaches, implementation of the JPER Action Plan, and continued participation in the RTP.

OED Recommendation 4: Need to Improve the Results Achieved by Program Lending. Given the disappointing results of program lending, ways must be found to improve performance if use of this modality is to be continued. Management Response: a) Management agrees with the CAPE recommendations. In addition to the CAPE, we have identified similar issues under SERDs CSP Completion Report and pre-CSP analytics for selective sectors where program loans have been and/or are being implemented. In particular, these exercises identified the need to carefully assess client preparedness, as this is critical to identifying the appropriate lending modality and program design. b) Specific Actions: ADB has commenced consultations with both the Government and development partners on programmatic approaches in various sectors. In its ongoing sector work under the new CSP, ADB will coordinate closely with the Government and development partners to assess client preparedness for program lending and reflect this in the 3-year lending/non-lending program. In sectors identified for programmatic approaches, ADB will carefully assess the appropriate lending/non-lending instruments, align policy matrices to government priorities and degree of readiness, and develop appropriate results frameworks. In order to feed lessons learned into the strategy, program, and project designs, ADB will continue to carefully monitor and mitigate performance of program loans and/or programmatic approaches under the annual JPER and quarterly portfolio review exercise, as well as through regular review missions. OED Recommendation 5: Need to Strengthen Sector Strategies with Focus on Governance, Anticorruption, and the Enabling Environment for Private Sector Development. The lack of good sector strategies resulted in diffused investments and failure to achieve sector outcomes. The role of ADTAs and economic, thematic, and sector work should be strengthened to develop sector strategies to guide future ADB operations. Management Response: a) Management agrees with the CAPE recommendation. Both the CAPE and CSP Completion Report identified the need for strengthened sector strategies and greater integration of core thematic areas into our operations. ADB is committed to supporting the Government in strengthening their sector assessments and related policy frameworks, and to supporting the realization of priorities of the SEDP6. b) Specific Actions: In response to both the CAPE and the Sector Assistance Program Evaluation (SAPE) for the Agriculture and Natural Resources Sector in Lao PDR (December 2005), as well as in consideration of reduced Asian Development Fund (ADF) allocations to Lao PDR, ADB has reprioritized its 2006 TA resources in order to advance its sector work in the agriculture, natural resources, and environment sector through an ADTA on Institutional and Policy Analysis of Agriculture and Natural Resources Sector in Lao PDR. The Government has recently formed a sector working group to strengthen sector focus/selectivity, efficiency, and effectiveness in the sector. This working group will oversee the implementation of the ADTA. The proposed ADTA will also assist the Government develop its roadmap for operationalizing the SEDP6 for the agriculture, natural resources, and environment sector. In the education sector, ADB is currently assisting the Government,

in close coordination with other development partners, to develop a common policy framework for the education sector under the PPTA for a Basic Education Development Loan. In addition, an ADTA is under preparation for the Government and development partners to work together towards a sector or programmatic approach to education sector development. In the health sector, ADB will continue to remain focused on primary health care through the national program. The Government has prepared a strategy for the sector which ADB and other development partners are assisting the Government to operationalize through three core working groups. For the transportation sector, a GMS Transport Sector Strategy has been prepared for consideration of member countries. It is aligned with national strategies and priorities, and proposed to be largely operationalized in Lao PDR during the forthcoming CSP period. Similarly, a GMS strategy for the energy sector is under preparation and will guide future operations in the sector. Prioritization and costing exercises for the SEDP6 priority sectors are being undertaken by the Government with support from various development partners. As part of CSP preparations, the Lao PDR Country Team has prepared draft sector assessments and roadmaps as well as thematic assessments for proposed ADB assistance 20072011. OED Recommendation 6: Need to Improve the Management of the TA Program. Many ADTAs did not perform well due to limited government commitment. This was particularly true for TAs that were not attached to any project. ADB should improve the management of TAs by (i) improving the link between lending and nonlending programs; (ii) programming TAs strategically; (iii) focusing on achievement of TA outcomes, rather than outputs; and (iv) increasing government participation in TA design and implementation to increase client ownership. Management Response: a) Management agrees with the CAPE recommendation. SERDs self assessment under the CSP Completion Report and pre-CSP sector/thematic diagnostics and portfolio review also identified the need to more closely align the TA program with the strategic focus of the CSP. This will be done during formulation of the forthcoming CSP. b) Specific Actions: SERD has recently conducted a TA rationalization exercise, which reduced the department-wide number of TAs by 4050% while aligning TA support to the CSPs. Under the forthcoming Lao PDR CSP, TAs will be aligned with the results framework to be developed and carefully monitored during CSP implementation to enhance performance and development effectiveness of the TA program. As the CSP will be closely aligned to the SEDP6, the TA program will be linked to Government priorities, thus instilling greater government ownership and participation. Finally, as the CSP is being developed in a consultative manner, the TA program will also complement and/or supplement interventions of other development partners in key sectors with ADB participation.

OED Recommendation 7: Need to Balance the Coverage of the next CSP with Available ADB Resources. Given the need to strengthen aid coordination, policy dialogue, and project implementation at the field level, LRMs role should be strengthened with increased delegation of authority and redeployment of staff. This should be considered in relation to the regional role of the Thailand Resident Mission. Management Response: a) Management agrees with the CAPE recommendation. In the past 23 years, SERD has been decentralizing its responsibilities, including rationalizing the respective roles of sector divisions and resident missions, and matching the countrys needs and staffs skill mix both in the sector divisions and resident missions. b) Specific Actions: Under the recent ADB organizational realignment, SERD has deployed one additional professional staff position to LRM, and during CSP preparation, will conduct a further assessment of needs and required skill mix. Other positions have been redeployed to other resident missions in the region from which LRM can draw resources and enhance client and partner responsiveness. LRM has also commenced to strengthen its cadre of national officers to take increased responsibilities for portfolio management, project administration, and other selective operations functions. Staff members appointed as LRM focal points will continue to support non-operational matters, including knowledge products and services, policy issues, and cross-cutting areas.

BOARD OF DIRECTORS DEVELOPMENT EFFECTIVENESS COMMITTEE

CHAIRS SUMMARY OF THE COMMITTEE DISCUSSION ON 17 MAY 2006

Country Assistance Program Evaluation (CAPE) for Lao Peoples Democratic Republic (Lao PDR) 1. The Development Effectiveness Committee (DEC) discussed the CAPE for Lao PDR. Being the first CAPE for Lao PDR, the study by the Operations Evaluation Department (OED) had comprehensively assessed the performance of ADBs country operational strategies and assistance programs to Lao PDR from as far back as 1986, the year the country initiated its transition to a market oriented economy. The DECs objective was to feed its views directly to Management and the Country Team as the latter started the process of formulating the new country strategy and program (CSP) for Lao PDR, and to inform the full Board of its conclusions on a timely basis. An informal Board seminar for the new CSP was scheduled shortly after the DEC meeting and formal Board consideration of the CSP was planned in October 2006. 2. At the meetings onset, the Chair reminded the committee that a supplementary assessment that should be considered integral to the discussion of the CAPE was the previously completed Sector Assistance Program Evaluation (SAPE) for the Agriculture and Natural Resources (ANR) Sector in Lao PDR, a sector that continued to be of strategic importance in ADB assistance to Lao PDR. 3. DEC generally considered that the CAPE for Lao PDR set a high standard in methodology, thoroughness of analysis, and construction of conclusions, and that it might be a good model to follow in the application of the recently completed guidelines for CAPE preparation. The incorporation in the evaluation framework of basic elements of the Common Performance Assessment (COMPAS) of multilateral development banks (MDBs) was commended, as was the participatory process used in the CAPE preparation. At the same time, DEC members suggested that future CAPEs might consider a more concise format. 4. DEC acknowledged that the Management Response to the CAPE, which was circulated to the committee prior to the meeting, added significant value to the process because it clearly indicated how Management intended to respond to each of the CAPEs recommendations. The DEC noted that Management had generally agreed with all of the seven recommendations of the CAPE and that these were to be key considerations in formulating the new CSP: (i) address the problems of limited Government absorptive capacity; (ii) focus on a smaller number of sectors; (iii) strengthen harmonization and partnerships with other development partners; (iv) improve the results achieved though program lending; (v) strengthen sector strategies with a focus on governance, anticorruption, and the enabling environment for private sector development; (vi) improve management of the technical assistance (TA) program; and (vii) strengthen ADBs Lao PDR resident mission (LRM). 5. Referring to the highly participatory CAPE process undertaken, Director General, OED highlighted the strategic interaction with Government that had been achieved through the process. As a result, the CAPE incorporated the specification by the government of Lao PDR of six key areas in which it believed ADB needed to improve: (i) more effective project monitoring by increasing the role of LRM, (ii) focusing on a smaller number of sectors, (iii) using sector coordinated approaches, (iv) increased harmonization and collective policy dialogue among

donors, (v) improving capacity development assistance, and (vi) more focus on sustainability. The DEC noted the close congruence of these Government-perceived areas for ADB improvement with the CAPEs independent recommendations. The DEC expected the new CSP to address these concerns and recommendations up front. 6. In elaborating on the CAPEs recommendations, OED staff explained that the overall context was the considerable variation of ADB performance evaluated across sectors and that the two most important lessons from the CAPE were: (i) continuity of assistance was the key to achieving development effectiveness, and (ii) diffused investments failed to achieve development effectiveness. 7. Director General of the newly realigned Southeast Asia Department (SERD), which now included responsibility for the Mekong sub-region, reiterated Managements appreciation of the value and timeliness of the CAPEs participatory process and product toward preparation of the new CSP for Lao PDR and Managements general agreement with all of the seven recommendations. He emphasized that the new CSP will be on solid ground because it will be fully aligned both to the CAPEs findings and to Governments 6th Five-Year Socio-Economic Development Plan. ADB was also aligning its assistance strategy and program with those of its development partners. He explained that, in this overall context, hard choices will have to be made in the CSP, particularly in sector selectivity under a significantly decreased ADF allocation for Lao PDR. The DEC endorsed the importance of such hard choices. 8. On assessments in the CAPE as these pointed to key issues to be addressed in the CSP, various DEC members emphasized that: (i) how the CSP should approach and incorporate support for governance as a key result area remained a major strategic concern, e.g., how could ADB leverage its support for governance in a sector in which its project investment role was very limited. It was noted that the CAPE had rated the overall performance of ADB operations in improving governance and MfDR capacity to date as only partly satisfactory; responding to a major concern expressed by SERD management regarding an anticipated reduction in ADF allocation for the future Lao PDR program, the core issue would be not in the reduction but in how ADB could substantially assist in strengthening Government absorptive capacity, both financial and institutional; in the specific case of Lao PDR, an underlying strategic issue was how to increase citizen participation in decision making and broaden economic and social opportunities for all. The CSP should set out the incentives for such moves; considering the weak capacity of institutions, harmonization was important not just among the MDBs but also with other significant development partners such as bilateral agencies; and ADB had a responsibility to learn why many program loan conditions had not been met in the past and to improve the design and implementation of program lending if this assistance modality is to be used in the future. It was observed that two major reasons for some of the conditions not being met were weak ownership and overambitious and sometimes unrealistic targets.

(ii)

(iii)

(iv)

(v)

9. Country Director, LRM, who was to lead the CSP preparation, reaffirmed the operational value and usefulness of the CAPE as well as the SAPE for the ANR sector in positioning the CSP, which would move from a project to a sector approach. The CSP would also benefit significantly from the joint portfolio effectiveness review with the World Bank and from the work

of eight thematic groups recently formed for donors by Government. He was encouraged that Governments commitment to the envisioned development thrusts, as incorporated in its Fiveyear Plan, had significantly increased and recently been translated into concrete initiatives, including in the difficult areas of governance, corruption, and peoples participation. He also reported that Government had formally bought into the Paris Declaration. 10. The DEC Chair informed SERD management of certain recommendations the DEC had made for the Uzbekistan and Indonesia CSPs at previous DEC meetings, which it also recommended should apply to other new CSPs, namely that consideration be given to including in the CSP: x x x a section explaining specifically how the strategy had been translated into an operational program, so that the linkage was clear; a section explaining how lessons learned from past portfolio performance were taken into account in the CSP; and a section documenting the CAPEs recommendations and the DECs recommendations on these, and explaining how the CAPE and DEC recommendations were taken into account in the CSP.

11. In conclusion, DEC generally endorsed the seven recommendations of the CAPE toward the formulation and implementation of the next CSP for Lao PDR. The committee emphasized that in addressing these recommendations, the CSP was expected to be based on further indepth analysis and include detailed strategies and programs particularly in the areas of assisting Government to improve absorptive capacity and governance, and grounded in a results and incentives framework. 12. Nam Leuk Hydropower Project. Referring to a recent inquiry sent by International Rivers Network (IRN) to Director General, OED to follow up on outstanding actions on the recommendations made in OEDs performance evaluation report, the DEC took the occasion to discuss such information from SERD. SERD management reported that earlier in the month, Government had agreed to use uncommitted loan funds toward the required remedial actions that remained outstanding. The DEC recommended that the next step was for management to formally respond to the letter from IRN, elaborating the update provided to the committee in greater detail. DEC agreed with SERD management that here was a good example of how, even after a loan was closed, ADB could continue to pay attention to important follow-up actions required for a client, including any necessary mitigation measures, based on the proactive cooperation and support of a development partner on the ground, in this case IRN. DEC members accepted SERD's proposition that ADB's responsibilities in regard to a loan project were not open ended and that local governments, communities and citizens also carried responsibilities for sustaining both project benefits and mitigating measures. However, DEC members stressed that ADB bears ongoing responsibility for delivering against the project design approved by the Board and its policies and procedures. DEC drew special attention to the recommendation in the Nam Leuk project evaluation report that ADB build modest contingency funding into such projects to provide the ability to take prompt remedial action where warranted. Agus Haryanto Chair, Development Effectiveness Committee 29 May 2006