ADB funded projects set record in Nepal

ADB country director says practice of so-called ‘bhagbanda’ must be abandoned by all means to ensure timely project execution

Kathmandu, February 27, 2017: The performance of projects funded by the Asian Development Bank (ADB) in Nepal “improved notably” in 2016, with the government setting new records in fund disbursement and contract awards.

The ADB, a Manila-based multilateral lending institution, set a target of disbursing $247 million in Nepal in 2016. Of this, $221 was disbursed, achieving 89.5 percent of the target.

The ADB had also set a target of awarding contracts worth $414 million in 2016. By the end of last year, contracts worth $369 million were awarded, which was 89 percent of the target.

“The contract award and fund disbursement were highest in ADB’s operational history in Nepal,” Diwesh Sharan, deputy director general for ADB’s South Asia Department, told the tripartite portfolio review meeting of ADB projects in Nepal on Sunday. “The achievements were made led by enhanced readiness of new projects and strong leadership in some of the projects.”

The projects that contributed to higher disbursement were Melamchi Water Supply Project, Supporting School Sector Development Plan, South Asia Subregional Economic Cooperation (SASEC) Power System Expansion and Kathmandu Valley Water Supply Improvement Project. These projects helped in disbursement of $79.9 million, or 36 percent of the total fund disbursed in 2016.

“There is very high positive correlation between strong project leadership and performance of the project, meaning project performance is stronger where it is led by a competent project director,” ADB Country Director Kenichi Yokoyama told the meeting organised jointly by the Ministry of Finance and the ADB. The rapid progress of projects, such as Melamchi and SASEC power and transport projects are testament to this, according to Yokoyama.

“So, the practice of so-called ‘bhagbanda’ [a Nepali word used to denote distribution of positions at different agencies based on allegiance to political parties] must be refrained or abandoned by all means to ensure timely project execution,” Yokoyama added.

The ADB has been operating in Nepal since 1969. Its active portfolio in the country stands at almost $2 billion with 25 loans of around $1.7 billion and 21 investment grants of around $328.3 million.

Of this fund, around 30 percent has gone towards water and urban sectors, 22 percent each in transport and energy sectors, 10 percent in Earthquake Emergency Assistance Project, 7 percent in education sector, 6 percent in agricultural and natural resources sector, and 3 percent in other sectors.

The progress of all the projects in these sectors, however, is not satisfactory, as $1.3 billion, or 65 percent of active portfolio of $2 billion, is yet to be disbursed, while contracts of $883 million, or 44 percent of active portfolio, are yet to be awarded.

One of the biggest hurdles to improving overall portfolio performance is excessive segregation of contracts and weak technical evaluation of bid documents, says ADB’s Portfolio Performance Review Report. Also, insufficient control of irregular practices in project and contract management has emerged as a barrier for smooth project execution, the report adds.

This was one of the reasons that led to the delay in completion of the Air Transport Capacity Enhance Project. A component of this project includes extension of runway at Tribhuvan International Airport by 300 metres, and construction of new 700-metre taxiway and terminal building.

The progress of this component stood at 17.4 percent in 2016, as against the target of 82 percent, the ADB report says.
“We have to build on the momentum of 2016 and achieve more in 2017. This will ensure achievement made in 2016 was not by accident,” Finance Secretary Shanta Raj Subedi said.

Best Performance Awards for 2016

Best Project Management Team Award
1. Melamchi Water Supply Projet
2. Kathmandu Valley Water Supply Improvement Project
3.  SASEC Power System Expansion Project

Best Project Team – Procumbent Process
1.  SASEC Power System Expansion Project

Best Project Team – Environmental Monitoring
1. Decentralized Rural Infrastructure and Livelihood Project- Additional Financing

Best Project Team – Gender Equality and Social Inclusion
1. Electricity Transmission, Expansion and Supply Improvement Project

Best Performing Contractors in 2016
1. Cooperative and Muratori and Cementisiti (CMC) di Ravennna from Melamhci Water Supply Project
2. KEC India Ltd (Subcontractor: Sigma Con Pvt Ltd) from Electricity Transmission Expansion and Supply Improvement Project
3. Ashis-Mahalaxmi JV from Decentralised Rural Infrastructure and Livelihood Project-Additional Financing

Best Performing Consultants
1. EptisaServicios de Ingenieria S.L. Spani- BETS Consulting Services Ltd from Melamchi Water Supply Project