EvaluationIndependent

MyanmarInterim Country Partnership Strategy Final Review Validation, 2012–2014

CPS Final Review

Validation

Reference Number: FRV: MYA 2016-16

Independent Evaluation: VR-19

Validation Report February 2016

Myanmar: Interim Country Partnership Strategy

Final Review Validation, 2012–2014

This document is being disclosed to the public in accordance with ADB’s Public Communications Policy 2011.

NOTES

(i) The fiscal year (FY) of the Government of Myanmar begins on 1 April and ends on 31 March. "FY" before a calendar year denotes the year in which the fiscal year starts, e.g., FY2014 begins on 1 April 2014 and ends on 31 March 2015.

(ii) In this report, “$” refers to US dollars.

(iii) For an explanation of rating descriptions used in ADB evaluation reports, see: ADB. 2015. 2015 Guidelines for the Preparation of Country Assistance Program Evaluations and Country Partnership Strategy Final Review Validations. March. Manila.

Director General

V. Thomas, Director General, Independent Evaluation Department (IED)

Director

B. Finlayson, Director, Independent Evaluation Division 2, IED

Team leader N. Subramaniam, Principal Evaluation Specialist, IED Team members N. Gamo, Senior Evaluation Officer, IED

I. Garganta, Associate Evaluation Analyst, IED

The guidelines formally adopted by the Independent Evaluation Department (IED) on avoiding conflict of interest in its independent evaluations were observed in the preparation of this report. To the knowledge of IED management, there were no conflicts of interest of the persons preparing, reviewing, or approving this report. In preparing any evaluation report, or by making any designation of or reference to a particular territory or geographic area in this document, IED does not intend to make any judgments as to the legal or other status of any territory or area.

Abbreviations ADB – Asian Development Bank

ADF – Asian Development Fund

ASEAN – Association of Southeast Asian Nations

CSO – civil society organization

CDD – community driven development

COBP – country operational business plan

CPS – country partnership strategy

CPSFR – country partnership strategy final review

EU – European Union

FY – fiscal year

FESR – Framework for Economic and Social Reforms

GMS – Greater Mekong Subregion

GDP – gross domestic product

IED – Independent Evaluation Department

JFPR – Japan Fund for Poverty Reduction

JCPR – Joint Country Portfolio Review

MOC – Ministry of Construction

MOH – Ministry of Health

NGO – nongovernment organization

OCR – ordinary capital resources

OECD – Organisation for Economic Cooperation and Development

PBL – policy-based loan

PSOD – Private Sector Operations Department

PSM – public sector management

TA – technical assistance

Currency Equivalents (as of 30 September 2015)

Currency Unit – Kyat (MK)

MK1.00 = $0.00078

$1.00 = MK1289

Contents

Page

Acknowledgements vii

Executive Summary ix

Chapter 1: Background 1

A. Purpose, Scope, and Methodology 1

B. Country Context and Development Plans 2

C. ADB Country Strategies 3

D. Lessons and Issues Identified from Previous Country Evaluations 3

E. ADB’s Program and Portfolio Approved during the CPS Period 3

Chapter 2: Assessment of the Country Partnership Strategy Performance 6

A. Relevance 6

B. Effectiveness 10

C. Efficiency 14

D. Sustainability 16

E. Development Impacts 17

F. ADB and Borrower Performance 19

G. Overall Assessment 19

Chapter 3: Key Issues 21

Chapter 4: Quality of the Final Review 24

Appendix

Breakdown of Loans, Grants, Nonsovereign Operations, and Technical Assistance, 26 as of September 2015

Acknowledgements

This validation report was prepared by a team of staff and consultants from the Independent Evaluation Department. The team consisted of Nathan Subramaniam (team leader), Noel Gamo, Irene Garganta, and Gabriele Ferrazzi (consultant). Valuable inputs were also provided by Ben Graham as internal peer reviewer.

Executive Summary

The Independent Evaluation Department (IED) of the Asian Development Bank (ADB) validated the country partnership strategy final review (CPSFR) prepared by the Southeast Asia Department for Myanmar’s interim country partnership strategy for 2012–2014. The validation relied on findings from a 1-week field mission to Myanmar in September 2015, document analysis, interviews with relevant ADB staff at ADB headquarters, and feedback from a stakeholder survey. The CPSFR and this validation will contribute to the development of ADB's next country partnership strategy (CPS) for Myanmar for 2017–2020.

ADB Program

ADB reentered Myanmar in 2012 after a long absence, and sought to reengage with the government and stakeholders, establish full resident mission status, normalize the relationship with Myanmar through the clearing of arrears, and establish sufficient knowledge and capacity to prepare a full CPS. ADB aimed to build country capacity to support reforms and the design and implementation of projects.

In response to the wide-ranging reforms initiated by the government, ADB adopted a phased approach to reengagement. ADB’s diagnostic work provided the basis for preparation of an interim CPS for 2012–2014, which was endorsed by the ADB Board of Directors on 26 October 2012. The interim CPS was subsequently extended through 2015–2016. Technical assistance (TA) projects with a value of about $37 million were approved during 2012–2014, financed by the ADB TA program, trust funds, and bilateral cofinancing. Development partner cofinancing was secured for three Japan Fund for Poverty Reduction (JFPR) grant projects and 20 TA projects during 2012–2014. The ADB TA program comprised 34 projects that sought to build capacity, engage in dialogue regarding support for key reforms in many sectors, and prepare projects. ADB approved $968.6 million in lending and nonlending operations during 2012–2014.

Assessment

The validation reviewed loans, grants, and TA projects that were completed, active and newly approved during 2012–2014. To elaborate or clarify issues the validation drew selectively from two planning and strategy documents (the country operations business plans for 2014‒2016 and 2015‒2017, and the extension of the interim CPS to 2016). Because ADB has only recently reengaged with Myanmar, there are few closed projects with completion reports available. Consequently, the validation cannot provide a definitive assessment of outcomes and impacts for most projects.

Relevance. The interim CPS provided the framework for ADB’s reengagement in Myanmar. It was prepared through a consultative process, and aligned with government policies and plans. It responded to the priorities set under the government's Strategic Framework for Economic and Social Reforms 2012–2015, which stresses economic reforms, human resource development and people-centered approaches, agricultural development, private sector development, and infrastructure. Reflecting these objectives, the interim CPS sought to (i) build human

x Myanmar: Interim CPS Final Review Validation, 2012–2014

resources and capacity, (ii) promote an enabling economic environment, and (iii) increase access and connectivity.

The program was in line with ADB priorities as outlined in Strategy 2020,

although the lack of specific sector allocations (and heavy reliance on TA) precluded a full assessment against the core sector composition specified in Strategy 2020. The broad-based interim CPS provided ADB and the government with options to develop the country program, and the extensive TA in several subsectors enabled policy reforms and increased capacity in partner agencies. Three loans and three grants were approved in the interim CPS period.

The program design reflected the government’s requirements. From the start of the reengagement, ADB worked with other development partners and civil society organizations in some of its operations. It successfully pursued cofinancing, and joined ad hoc and formal institutions to coordinate with development partners.

The first actual loan to Myanmar, processed in January 2013, was a policy based loan (PBL) for $575.5 million, which helped address arrears and signaled the government’s commitment to wide ranging economic reforms. The PBL accounted for about 59% of the portfolio. By the end of the interim CPS period a programmatic focus began to emerge that emphasized ADB’s core sectors (i.e., transport, energy, and education). Private sector operations were vigorously pursued, and two operations were approved during 2012–2014. The broad set of initiatives initiated early in this period helped build momentum, and broad sector coverage. The validation rates the program relevant.

Effectiveness. ADB’s program helped Myanmar build human resources and capacity by strengthening institutional arrangements, legal frameworks and sector analysis, and planning. These activities increased the capacity to formulate projects in key sectors, and enabled ADB operations to pursue the design and early implementation of projects. ADB supported post-primary education analysis and policy dialogue within the government-led Comprehensive Education Sector Review (CESR). The original objectives of the interim CPS were largely achieved.

ADB made progress in promoting an enabling economic environment. There were varying degrees of progress achieved in liberalizing licensing requirements for imports and exports, streamlining business registration requirements, establishing a public debt unit in the newly created Treasury Department, enacting a public debt law, issuing treasury bills, and modernizing the companies act. Some progress was made in reforming customs operations to facilitate cross-border trade.

Infrastructure for access and connectivity was enhanced by reforming private sector provision in the power sector, and launching investment operations in power transmission, off-grid renewable energy, and road development. A new transport sector asset management system is in the early stage of implementation. Urban and water sector operations helped develop the capacity of local and regional government staff to plan, budget and prepare multisector urban development projects. Overall, progress was made with respect to sovereign operations, particularly through TA, but with the exception of the PBL no sovereign loan disbursements have been made.

The three JFPR grants approved in 2013–2014 included one focussing on health (HIV/AIDS prevention) and two addressing community-driven development (one each in rural and urban settings). All are in early stages of contracting and mobilization. These projects have been well received by the government, but design and capacity

Executive Summary xi

challenges delayed implementation. The often lengthy government approval processes also contributed to the delays. Private sector operations were rapidly launched, and several transactions approved, but only the connectivity project has started disbursement. Further work is required to institute a sector focus for future private sector operations. Based on these findings, the validation rates the portfolio effective in contributing to the intended broad objectives of the interim CPS, while emphasizing the preliminary nature of the rating.

Efficiency. The government was able to use the large, rapid-disbursement policy loan from ADB to support clearance of arrears, and signal its commitment to major economic policy reforms. Most of the sovereign and nonsovereign loan projects are still in the early stages of implementation and there are no project completion reports or validations available to provide estimates of actual economic internal rates of return. Both the sovereign project loans and the private sector operation’s Yangon urban renewal loan have experienced delays and have not started disbursement.

Inefficiencies are apparent for many TA projects that experienced delays or incomplete disbursements. In 2014, the completion dates of over half (54%) of ongoing TA projects had been extended. Government procedures were slow to adapt to ADB requirements, slowing planning and implementation of the TA, grants and loans that were approved. The importance of proper institutional mapping and capacity assessment is being recognized but so far efforts have been ad hoc and insufficient. Coordination gaps of ADB with other development partners and with government led to some misunderstandings and delays. The Enhancing Rural Livelihoods and Incomes grant project missed an opportunity to harmonize outputs with a much larger World Bank-financed project, creating additional compliance burdens for the government counterparts.

ADB experienced difficulties securing suitable premises for the resident mission, which weakened on-the-ground supervision. The small staff complement and lack of sufficient procurement and sector specialists stands in contrast to broad, growing program. Management from ADB headquarters will become more difficult as the program grows. The validation rates the program less than efficient in the use of ADB and country resources during the interim CPS period.

Sustainability. There is strong government ownership and commitment to ADB-supported reforms, sound sector plans and strategies, and steady improvement in recurrent costs and operations and maintenance practices in key sectors. Community and nongovernment organization (NGO) involvement in the three JFPR grant operations was designed to foster strong local ownership of the infrastructure and services provided. Support was provided to develop an asset management system for national roads. Once this is operational it will provide a clear overview of operation and maintenance needs and financing requirements. The CESR will identify cost-effective options, and should thereby help increase the sustainability of reforms.

Support was provided for improved power sector financial management that helped provide power companies with a timely and consolidated picture of their financial status. Support was also provided for municipal planning that strengthened the links between municipal financing and recurrent cost requirements. Offsetting these findings, there is a concern that ADB lacks a coherent approach to understanding the institutional arrangements and capacity needs of counterpart agencies and intergovernmental systems. There is a need to prepare short- to medium-term strategies to speed project implementation, while building long-term capacity. The validation finds the interim CPS program outcomes likely sustainable.

xii Myanmar: Interim CPS Final Review Validation, 2012–2014

Development impacts. Myanmar's macroeconomic situation improved significantly in recent years, due to the adoption of market-oriented policy reforms supported by ADB and its development partners. The clearing of arrears and provision of financing to Myanmar by ADB and its development partners has increased the country’s ability to tap international sources of development finance. Strong government-led economic policy reform has improved investor confidence. Deregulation of trade licensing, supported by ADB, has allowed Myanmar's external trade to grow rapidly. Improvements in Myanmar's visa policy and hotel licensing regime, as recommended in the ADB-supported Tourism Master Plan, facilitated an upsurge in visitor arrivals. With ADB support, institutions have begun to plan and manage their operations in ways more consistent with a participatory, market-driven economy.

Investments in connectivity are underway, and when finished will improve access to affordable and reliable power, transport, and related services. Myanmar will be better integrated into regional markets, boosting productivity and food security. More robust environmental impact assessments are being undertaken for investment projects, and it is likely this approach will also be adopted in other important areas (e.g., mining and forestry). The validation rates development impacts satisfactory.

ADB performance. ADB’s reengagement with the government focused on resolving outstanding issues, building trust, and developing a new program. It was able to learn from its actions by undertaking sector and institutional analysis and providing TA to build capacity, which underpinned the loans and grants that have been recently approved. However, some of the TA was provided in a supply driven fashion. ADB missed opportunities for harmonization (such as of institutional and capacity assessment studies) and alignment with government approaches (for example, with the rural community-driven approach of the Department of Rural Development). Nevertheless, ADB consulted with the government and Parliament, and generally collaborated well with other development partners. It actively sought out and engaged with civil society organizations. These operations are staff intensive, and ADB will need to establish a well-staffed resident mission that can support a growing portfolio to realise the projected development impacts. The validation finds ADB performance satisfactory.

Borrower performance. Strong government ownership was an important factor underpinning the achievement of the ADB TA project outputs and outcomes. Government counterparts generally made good use of the TA to enhance their individual and organizational capacity. Numerous challenges remain, related to unclear government systems, willingness to accept new practices, and readiness to cope with differing development partner systems. The government showed commitment to making improvements with respect to these issues, and exhibited leadership when engaging with development partners in various coordinating forums. The validation finds borrower performance satisfactory.

In conclusion, with the exception of efficiency, the validation confirms most of the self-assessments found in the CPSFR and derived a rating for the CPS 2012–2014 of successful.

Issues

Effect of social and ethnic tensions on the achievement of inclusive growth. Political and social conflicts in Myanmar pose a significant risk to the sustainability of the reform process, hindering the achievement of inclusive growth. If external

Executive Summary xiii

assistance is not well designed, it can exacerbate social and ethnic conflicts. ADB and other development partners recognize the need for conflict sensitivity in programming and have taken steps to access expertise in this area. ADB will need to ensure that efforts to integrate context-sensitive approaches into all ADB programs are carefully considered in the upcoming CPS to make sure its interventions do not cause harm.

Vulnerability to shocks and capital outflow. Myanmar’s increasing global integration exposes the economy to global trends and shocks. Its current account deficit is widening and international reserves held by the Central Bank of Myanmar cover only 2.75 months of prospective imports. Reliance on foreign direct investment is a sign of strength, but could become a vulnerability in times of stress. Political and social turmoil could undermine investor confidence, leading to a reduction in external financing. The International Monetary Fund is taking the lead in advising the government on these macroeconomic issues, but ADB can participate in a coordinated approach in monitoring the macro-economy. ADB could play a prominent role in helping to address these vulnerabilities and identifying ways of increasing resistance to possible shocks.

Decentralized governance. Myanmar is moving toward decentralized governance, on two tracks: (i) politically, through state restructuring, which hinges on peace accords with regional groups; and (ii) administratively through expenditure reassignment at all levels of subnational government. The latter approach has the greatest impact on ADB operations, and a deeper understanding of the extent to which it is happening and the demands it will make on ADB’s government partners and stakeholders is needed. ADB could facilitate further decentralization in the sectors it supports by helping to define a workable division of labor between national and subnational governments. In particular, ADB could help address issues such as the respective roles of deconcentrated units of the union, the regions and states, and the townships. Designs and implementation arrangements should take into account decentralization policies, and the need to enhance capacity and strengthen accountability relationships.

ADB financing modality and allocations. The size of the ADB resource envelope for Myanmar is somewhat uncertain, due to the expected merger of the Asian Development Fund (ADF) with ADB ordinary capital resources (OCR) in 2017, and an expected decline of allocations to Myanmar, from $286 million in 2015 to $206 million in 2016. The ADB pipeline and dialogue with government indicate the portfolio should be increasing over the next CPS rather than contracting. As noted in the CPSFR, the anticipated ADF allocations do not respond to the increasing infrastructure investment requirements. The ADF allocations do not accord with the anticipated expansion into additional subsectors envisaged in the ADB sector assessments and recent operational business plans. ADB is anticipating that the ADF-OCR merger will help increase the financing levels available for lending to Myanmar. The Myanmar country team notes that in recent ADF discussions, the proposal of a special allocation of 40% more than the 2013–2016 level for Myanmar has been positively received. It will be necessary to reconcile these various financing trends and policies in order to determine the resource envelope and concessionary terms that will be used to shape the new CPS.

Capacity and governance assessments and capacity development support. ADB recognizes that weak government capacity and governance systems strongly affect program success. It has sought to understand how project success is impacted by the new institutional landscape, and relevant political and social dynamics. Challenges to ADB operations are becoming evident in the design and early stages of implementation, and will be apparent in subsequent stages of implementation, and in the monitoring and assessment of results. ADB now has an opportunity to update

xiv Myanmar: Interim CPS Final Review Validation, 2012–2014

sector assessments to improve its understanding of the institutional arrangements and capacity vulnerabilities. TA could place more focus on the capacity of counterpart agencies, and more broadly, on the capacity of sector institutions. ADB could examine governance challenges that cut across sectors, and possibly call for TA and loans that target public sector management (PSM). ADB can work with other development partners to ensure a sufficient level of capacity assessment and support, and help the government to prepare a capacity development strategy.

Sector reviews and results framework. During the preparation of the next CPS there is an opportunity to update and deepen sector assessments and related road maps. Attention could be paid to PSM (in addition to the private sector focus now contemplated). These activities will have additional value if the reviews are implemented in close cooperation with the relevant government units so as to help them define useful sector indicators; they can also help ADB to establish an appropriate results framework to track progress.

Recommendations

As ADB prepares the program for the next CPS it should give attention to the following recommendations of the validation:

(i) Increase the amount and coherence of support for capacity development and more effectively harmonize strategies with development partners and align them with government systems and approaches. ADB efforts should include more overarching and comprehensive joint shared assessments and capacity development plans for its counterpart institutions. These documents should provide clear short- and long-term approaches for addressing identified capacity gaps. To reduce the management burden on government and ensure that the most robust models have broad support, funds should be pooled and implementation modalities harmonized among development partners, and with government systems.

(ii) Anticipate and support decentralization in ADB priority sectors and address conflict sensitivities. ADB can align projects with government policies and build subnational government capacity in planning, budgeting, and project management. An assessment for decentralization (as a subsector of PSM) that can be used to guide ADB strategy in the next CPS will provide a valuable mechanism to identify opportunities and challenges. Political and social conflicts pose a significant risk to the sustainability of the reform process, and ADB should build on ongoing efforts and continue to carefully consider conflict sensitivity in the upcoming CPS, and in project designs.

(iii) Continue to pursue inclusive growth objectives while prioritizing sectors and projects for operations. ADB TA has been very broadly spread, and ADB has approved or is preparing loan or grant operations in seven sectors (public sector management, energy, transport, urban and water, education, health, agriculture and rural development). Careful attention will be needed to ensure the program grows in areas of ADB strength and in line with inclusive growth priorities. While continuing to build on community driven development, education, and improving access and connectivity projects in power and transport sectors, incremental efforts are needed to incorporate project design elements to identify how the program will provide more equitable support within a sufficiently broad perspective of inclusive growth.

CHAPTER 1

Background

1. This report has been prepared by the Independent Evaluation Department (IED) of the Asian Development Bank (ADB). The report provides a validation of the ADB Country Partnership Strategy Final Review (CPSFR) for Myanmar for 2012–2014 that was prepared by operations.1

A. Purpose, Scope, and Methodology 2. The purpose of this validation is to provide an independent evaluation of the performance of ADB’s program. This validation identifies lessons that will contribute to the development of ADB's next country partnership strategy (CPS) for Myanmar for 2017–2020. 3. The validation reviewed completed, active and newly approved loans, grants and technical assistance (TA) during the interim CPS period (2012–2014). The validation employed the following evaluation criteria to assess the performance of ADB’s program: (i) relevance, (ii) effectiveness, (iii) efficiency, (iv) sustainability, and (v) development impacts. The validation team used the recently updated IED guidelines to prepare the validation.2 Because the program began only recently, very few projects have closed and have completion reports available. Consequently, the validation cannot provide a definitive assessment of outcomes and impacts for most projects.

4. The CPSFR validation was based on: (i) a desk review of relevant documents and reports such as the interim CPS 2012–2014 and subsequent strategies and plans;3 (ii) consultation with ADB staff, government agencies, development partners and the Myanmar Resident Mission (the Yangon and Nay Pyi Taw offices); and (iii) feedback from a stakeholder survey.4

1 ADB. 2015. Interim Country Partnership Strategy Final Review: Myanmar, 2012–2014. Manila.

2 ADB. 2015. Guidelines for the Preparation of Country Assistance Program Evaluations and Country Partnership Strategy Final Review Validations. Manila.

3 Chronologically, these subsequent strategies and plans are ADB. 2013. Country Operations Business Plan: Myanmar, 2014‒2016. Manila; ADB. 2014. Country Operations Business Plan: Myanmar, 2015‒2017. Manila; and the extension of the interim CPS 2012‒2014 to 2016. http://www.adb.org/sites/default/files/institutional-document/176063/icps-mya-2015-2016.pdf

4 Only two questionnaires were returned, and thus the feedback has been taken into account without specifically analyzing the responses.

2 Myanmar: Interim CPS Final Review Validation, 2012–2014

B. Country Context and Development Plans

1. Country Context 5. Myanmar serves as a gateway between East Asia, South Asia, and Southeast Asia. The country is rich in natural resources, including arable land, forests, minerals, natural gas, and freshwater and marine resources. In recent years, after a long period of economic isolation, Myanmar embarked on major economic, social, and political transformations, as reflected by the emerging democratic political system and an early stage market-based economy. 6. These reforms are showing positive results—Myanmar’s gross domestic product (GDP) is estimated to have grown by 8.3% in FY2013/14, driven mainly by construction, manufacturing, and services. This rapid growth can be explained in part by the low level of economic activity at the time of reengagement. Despite the remarkable changes seen in the last 5 years, Myanmar remains one of the world’s poorest countries, with a per capita GDP of $1,105 in 2014, which is one of the lowest in East Asia and the Pacific.5 7. Internal conflicts reignited in 2014, with clashes between the Myanmar national army and non-state groups in Kachin and northern Shan states, leading to displacement of civilians.6 In mid-2015, efforts were made by the government to reach a comprehensive ceasefire, but the process is frustrated by difficulties in gaining agreement among a large number of groups. A national ceasefire agreement was signed by eight of the ethnic groups in October 2015, and efforts to establish a political dialogue continue. 8. To maintain the reform momentum and realize its development goals, Myanmar must address important governance challenges. The government has acknowledged several governance weaknesses, such as the difficulties many ministries experience with planning, budgeting, transparent procurement, implementation, accounting, and reporting. With development partner support, the government has undertaken several reviews, including assessments of public expenditure and financial accountability; some have been supported by ADB.7 Myanmar had successful free and fair elections in November 2015. Potential challenges for development partners include identification of the priority areas to target support, resistance to linking support to conditions, and the need to gain unimpeded access to critical regions and target groups.

2. Country Development Plans 9. The government’s strategic direction is defined in the Framework for Economic and Social Reforms (FESR) 2012–2015, which identifies both concrete short-term results and initiatives required to establish the foundation for sustainable and equitable long-term development. The FESR stresses economic reforms, human resource development and people centered-approaches, agricultural development, private sector development, and infrastructure.

5 World Bank estimates. http://www.worldbank.org/en/country/myanmar/overview 6 Office of the United Nations High Commissioner for Refugees (UNHCR). 2015. 2015 UNHCR country

operations profile—Myanmar. http://www.unhcr. org/pages/49e4877d6.html 7 ADB. 2015. Country Performance Assessment. Manila.

Background 3

C. ADB Country Strategies 10. ADB reentered Myanmar in 2012 after a long absence, and sought to reengage with government and stakeholders, establish full resident mission status, normalize the relationship with Myanmar through the clearing of arrears, and establish sufficient knowledge and capacity to prepare a full CPS. ADB aimed to build country capacity to support reforms and the design and implementation of projects. 11. In response to the wide-ranging reforms initiated by the government, ADB adopted a phased approach to reengagement with Myanmar. ADB initially undertook extensive analysis, culminating in indicative sector strategies for ADB support in energy, transport and post-primary education. This initial diagnostic work provided the basis for an interim CPS, 2012–2014 that was endorsed by the ADB Board of Directors on 26 October 2012. This interim CPS was subsequently extended for 2015–2016 (footnote 3). 12. After approval of the interim CPS, assessments and road maps were prepared for the urban and water, and agricultural, natural resources and environment sectors. ADB’s program for Myanmar included high levels of TA and dialogue to support key reforms across a wide range of sectors. Umbrella TA allowed ADB to quickly respond to government demands, employing small projects that met important and urgent needs. Project preparatory TA was employed early in the interim CPS period and these initiatives began to translate into project loans in the third year of implementation of the interim CPS.

D. Lessons and Issues Identified from Previous Country

Evaluations 13. Previous evaluations of the Myanmar ADB program relate to the prior period of cooperation (1973–1988), and are not relevant to the current situation. ADB maintained some connection to the government during the period of isolation through the Greater Mekong Subregion (GMS) program, but these were low-intensity engagements. 14. Myanmar now faces unique opportunities and challenges, many of which are outlined and addressed in this validation report. ADB has the benefit of past experience reengaging with other Asian nations undergoing political reforms (e.g., Cambodia, Lao People’s Democratic Republic, and Viet Nam).

E. ADB’s Program and Portfolio Approved during the CPS Period

15. During the interim CPS period, ADB approved 34 TA projects with a value of about $37 million, which were financed by the ADB TA program, trust funds, and bilateral cofinancing.8 The Japan Fund for Poverty Reduction (JFPR) provided $26

8 In Figure 1, the TA total of 36 includes the extension of the interim CPS 2012–2014 through 30 September

2015.

4 Myanmar: Interim CPS Final Review Validation, 2012–2014

million to implement three grant projects.9 The TA helped develop institutional capacity within the government and prepare projects.

16. ADB approved $968.6 million in lending and nonlending operations during 2012–2014 (Table 1). A large policy-based loan (PBL) implemented in 2013 and designated as public sector management (PSM) enabled the rescheduling of the government’s arrears to ADB, and accounted for about 59% of approved lending during 2012–2014. In addition, a $60 million energy sector loan was approved in 2013, and an $80 million transport sector loan in 2014. For sovereign operations, a concessionary medium-term Asian Development Fund (ADF) allocation for Myanmar in 2013 consisted of $286 million per year for 2013–2015, and $206 million in 2016. By 2014, ADB had approved $190 million in nonsovereign projects, which were financed on commercial terms using ordinary capital resources (OCR).

Table 1: ADB Operations Approved ($ millions)

2012 2013 2014 2012–2014 1973–2014

Loans 0.0 635.5 230.0 865.5 1,396.4

Sovereign 0.0 635.5 80.0 715.5 1,246.4

Nonsovereign 0.0 0.0 150.0 150.0 150.0

Equity Investments/Guarantees 0.0 0.0 40.0 40.0 40.0

Nonsovereign 0.0 0.0 40.0 40.0 40.0

Grants 0.0 22.0 4.0 26.0 26.0

ADF 0.0 0.0 0.0 0.0 0.0

JFPR 0.0 22.0 4.0 26.0 26.0

Technical Assistance 5.4 19.3 12.4 37.1 47.9

TASF 4.6 6.8 4.0 15.4

JFPR 0.2 8.9 5.5 14.6

Others 0.6 3.6 2.9 7.1

Total 5.4 676.8 286.4 968.6 1,510.3

ADF = Asian Development Fund, JFPR = Japan Fund for Poverty Reduction, TASF = Technical Assistance

Special Fund.

Source: Asian Development Bank Independent Evaluation Department.

17. Few of the ADB operations have closed, and only seven (six TA projects and one loan) have a self-assessment (Table 2). Five of these projects were rated successful, and two TA projects were rated highly successful. IED has not yet validated or evaluated any operation in Myanmar. In reviewing this program, the validation considered the use of TA to support capacity building and institutional strengthening for management of development, as this was the primary focus of ADB’s program during 2012‒2014.

9 JFPR grant cofinancing for the following: Enhancing Rural Livelihood and Incomes Project in 2013, the

Greater Mekong Subregion Capacity Building for HIV/AIDs Prevention Project in 2013, and the Pro-Poor Community Infrastructure and Basic Services Project in 2014.

Background 5

Table 2: Self-Assessment Rated Operations

Loan or

TA No. Project Name Sectora Category

Date

approved

Closing

date

Amount

($ million) Rating

8113 Support for Trade Policy Development

PSM SSTA 16 July 2012

31 March 2014

0.225 HS

8114 Support for Improving the Business Climate

PSM SSTA 16 July 2012

31 May 2014

0.225 S

8136 Myanmar Tourism Master Plan

I&T SSTA 5 July 2012

30 Sept 2013

0.225 HS

8156 Improving Fiscal Revenue Mobilization

PSM SSTA 16 Aug 2012

31 March 2014

0.225 S

8190 Trade Facilitation Support for ASEAN Economic Community Blueprint Implementation

I&T SSTA 8 Oct 2012

15 March 2015

0.225 S

8216 Financial Management Assessment of Energy Sector

EN SSTA 19 Nov 2012

29 Apr 2014

0.160 S

2984 Support for Myanmar’s Reforms for Inclusive Growth Program

PSM Program Loan

14 Jan 2013

31 March 2013

575.5 S

ASEAN = Association of Southeast Asian Nations, EN = Energy, HS = highly successful, I&T = information and technology, PSM = public sector management, S = successful, SSTA = small-scale technical assistance. a Sector designation derived from the project information sheet. Source: Asian Development Bank Independent Evaluation Department.

CHAPTER 2

Assessment of the Country Partnership Strategy Performance

18. This chapter provides an assessment of the interim country partnership strategy.

Summary of the overall assessment is described in Table 3.

A. Relevance 19. The CPSFR followed the previous IED guidelines and differentiated between strategic positioning and relevance, whereas the 2015 guidelines treat both these dimensions under a single heading of relevance. 10 An aggregate of the final review’s findings for strategic positioning and relevance would derive a rating for the interim CPS of relevant. 20. Reengagement objectives and strategic positioning. ADB anticipated the challenge of reengagement, recognizing it would require a program to reconcile outstanding issues (arrears) and provide a basis to become familiar with the changed development context and institutional landscape of Myanmar. In this respect, the most important part of ADB’s strategic positioning was the need to design and implement a sound reengagement strategy. 21. The government's FESR 2012–2015 was in draft stage when the interim CPS was prepared. Key objectives in the FESR included: (i) achieving full economic integration with the Association of Southeast Asian Nations (ASEAN), in accordance with its ASEAN Economic Community 2015 schedules; (ii) realizing the millennium development goals and other human development objectives by 2015; and (iii) moving beyond least-developed-country status and transitioning to a knowledge-based economy. The government set goals for: (i) average annual GDP growth of 7.7%; (ii) growth of the industrial share of GDP from 26% to 32%, together with an increase in the services sector to reduce the current high share of agriculture; and (iii) growth in

10 Previous ADB validations undertook separate assessments and ratings of strategic positioning and

relevance (each with a weight of 10%), these criteria have now been combined in a new relevance assessment, as outlined in the 2015 Guidelines for the Preparation of Country Assistance Program Evaluations and Country Partnership Strategy Final Review Validations with an equivalent 20% weighting.

Assessment of the Country Partnership Strategy Performance 7

per capita GDP of 30%–40% from the base year of 2010 to help reduce the poverty incidence by 50% over 2000–2015.11 22. Reflecting the focus of the Myanmar government on reforms, ADB emphasized projects that would remove program impediments and implement activities that would support a productive future relationship. ADB developed an interim CPS to support the government in clearing its arrears, mobilizing an ADF financial allocation, and securing a host country agreement. In support of Myanmar’s reform and development needs, ADB sought to (i) build human resources and capacity, (ii) promote an enabling economic environment, and (iii) increase access and connectivity, while emphasizing the themes of good governance, environmental sustainability, private sector development, regional cooperation and integration, and gender. ADB’s program was in line with its corporate priorities under Strategy 2020.12 23. ADB grouped its sovereign program into three phases: (i) the first prepared initial economic and sector analyses for energy, transport and education that fed into the interim CPS;13 (ii) in the second phase, additional comprehensive sector assessments and road maps were prepared for the urban and agricultural sectors, and capacity development was provided across many sectors;14 and (iii) the final phase involved resumption of lending, focussing on energy and transport. This systematic approach entailed extensive consultation and country and sector diagnostics, and enabled ADB to address important development constraints facing Myanmar.

24. Programs were coordinated with the activities of other development partners. For example, in the energy sector ADB produced the Energy Master Plan, JICA the National Electricity Plan, and the World Bank the National Electrification Plan. ADB also cooperated in the government-led and multi-donor supported Comprehensive Education Sector Review. Coordination with development partners occurred through a combination of ad hoc initiatives and formal sector working groups. As a result, ADB succeeded in arranging cofinancing and agreeing on divisions of labor. ADB is a member of several government-led sector working groups called for in the Nay Pyi Taw Accord for Effective Development Cooperation.15 In association with the government, JICA, the World Bank, and ADB participated in the first Joint Country Portfolio Review in mid-2015.

25. Most development partners participated in several sectors, leading to most sectors having several active development partners. Many development partners provided support for education (including ADB, the World Bank, United Nations

Educational, Scientific and Cultural Organization, Department of Foreign Affairs and

11 ADB. 2014. Myanmar: Unlocking the Potential–Country Diagnostic Study. Manila. 12 ADB. 2008. Strategy 2020: The Long-Term Strategic Framework of the Asian Development Bank 2008–

2020. Manila. 13 ADB. 2012. Initial Assessment of Post-Primary Education (PPE) in Myanmar: Discussion Paper. Manila; ADB.

2012. Myanmar: Energy Sector Initial Assessment. Manila; ADB. 2012. Myanmar: Transport Sector Initial Assessment. Manila.

14 ADB. 2013. Myanmar Agriculture, Natural Resources, and Environment Initial Sector Assessment, Strategy, and Road Map. Manila; ADB. 2013. Myanmar Urban Development and Water Sector Assessment, Strategy, and Road Map. Manila.

15 The Nay Pyi Taw Accord for Effective Development Cooperation was presented to development partners by the minister of National Planning and Economic Development and approved by acclamation at the First Myanmar Development Cooperation Forum, Nay Pyi Taw, 20 January 2013. ADB participates in sector forums focusing on: agriculture and rural development, communications/IT, education, employment, environment, gender, hotel and tourism, public administration, public finance management, statistics, and transportation (see World Bank. 2015. Myanmar: Empowering People for Inclusive Growth. Myanmar Country Partnership Framework 2015–2017. Washington, D.C., p.51).

8 Myanmar: Interim CPS Final Review Validation, 2012–2014

Trade, and JICA). Several development partners worked in the energy sector, with lead support provided by the World Bank, ADB, and JICA. The World Bank had a greater presence in the health sector than ADB, providing substantial funding to the government to deliver universal health care to citizens. ADB pursued a more targeted approach, geographically and in terms of disease control (GMS Capacity Building for HIV/AIDS Prevention). With regard to transport, ADB’s initial focus was the improvement of the primary road network. JICA focused on the preparation the Myanmar’s National Transport Master Plan and the Project for Comprehensive Urban Transport Plan of the Greater Yangon. It followed up with a loan to improve a circular railway line to reduce the traffic volume in Yangon. Though not a primary focus, the World Bank supported roads as one of many activities in its rural community-driven

development project.

26. ADB worked closely with civil society organizations (CSOs) to design and implement programs in a coordinated manner. ADB engaged civil society by providing TA to Strengthen Civil Society Participation in ADB-Financed Operations, which supported inclusive growth in all its projects. This project began in 2013 and was completed in December 2014. The project prepared a stakeholder map of civil society participants in Myanmar, and developed good practice consultation guidelines and a consultation and participation plan for ADB. Similarly, ADB provided TA to maximize transport-related benefits through community engagement.

27. Human resources and capacity. ADB supported development of human resources and capacity through TA grants to selected government ministries in about 20 subsectors to help them manage the reform process by developing policy frameworks and institutional capacity.

28. Enabling economic environment. ADB provided a large policy-based loan,16 extensive policy advisory TA, and support for tourism development. This program was complemented with support to develop the policy and institutional framework for public-private partnerships, a regional business support initiative, and create a basis for ADB to pursue private sector operations. 29. Access and connectivity. ADB provided capacity building, regulatory, and investment support in the power, transport, agriculture, regional development, and urban and rural sectors. Special emphasis was accorded to Myanmar's participation in subregional cooperation activities, including an integrated corridor development for completion of the final 70-kilometer segment of the GMS East-West Economic Corridor in Myanmar's Kayin state. 30. Thematic support. Support was provided for gender equality, primarily to prepare gender situation analysis and encourage key stakeholders to use the findings in these studies.17 Support was provided in the application of environmental and social safeguards.18 For governance, support was provided in many areas, with 11 of the 40 TA projects designated as PSM (Figure 1). Diagnostic work on the country performance

16 ADB. 2012. Report and Recommendation of the President to the Board of Directors: Proposed Policy-Based

Loan to the Republic of the Union of Myanmar for Support for Myanmar’s Reforms for Inclusive Growth Program. Manila.

17 ADB. 2012. Technical Assistance to Myanmar for the Support to the Preparation and Dissemination of the Myanmar Gender Situational Analysis. Manila.

18 ADB. 2014. Technical Assistance to Myanmar for the Environmental Safeguard Institutional Strengthening. Manila.

Assessment of the Country Partnership Strategy Performance 9

assessment (CPA) focused on governance issues, and approved loan projects were prepared with risk analysis that followed ADB guidelines.19 31. Planned portfolio allocations. The interim CPS did not set out a portfolio envelope or sector allocations for 2012–2014. The county operations business plan (COBP) 2014–2016 (footnote 3) was the first operational document produced but lacks sectoral allocations covering the interim CPS period. It was therefore not possible to assess the interim CPS against the core sector Strategy 2020 commitments or the consistency of its implementation against the planned program. In view of ADB’s low level of familiarity with the Myanmar economy and institutional landscape in 2012, this shortcoming is understandable, but it did create monitoring difficulties for the country strategy. 32. Results monitoring framework. The interim CPS entailed significant design risk as it was not accompanied by an operational business plan or a results framework, and it was not clear how the program would be monitored. The sector assessments conducted in 2012 and 2013 did have some indicators and/or targets, but these were not referred to in the CPSFR. While the interim CPS approach to performance tracking was supported with waivers from management, an indication should have been given as to how success would be defined and implementation monitored. In particular, the strong emphasis on capacity development could have been accompanied by cross-TA indicators that might have provided ADB with evidence of achievements. Results frameworks at country and sector levels were included in the COBP 2015–2017, but the baselines and outcome targets were not defined, making it impossible to monitor and assess performance. ADB intends to accompany the CPS 2017–2020 with a results framework that reflects the most recent advances in ADB’s approach to monitoring program performance.20 33. Actual portfolio allocation. ADB’s program was very broad initially (Figure 1), and this ad hoc approach resulted in more TA projects than initially foreseen.21 Over time the program gained focus (e.g., in the 2015–2017 COBP), as key challenges were identified that lent themselves to ADB support in transport, energy, and private sector development. For example, the rapid growth in electricity use (about 13% annually) threatened to outstrip generation and transmission capabilities. The low quality of roads restricted the growing levels of commerce. ADB financed investments in these sectors as they reflected strategic priorities of the government and ADB.

19 The policy requires analysis and mitigation plans addressing identified project impinging risks, i.e., risk

assessment and risk management plans. ADB. 2006. Second Governance and Anticorruption Action Plan. Manila.

20 Consultation meeting with the validation team in the resident mission, September 23, 2015, Nay Pyi Taw. 21 Footnote 1.

10 Myanmar: Interim CPS Final Review Validation, 2012–2014

Figure 1: Number of ADB Projects by Sector in Myanmar (as of 25 September 2015)a

a Sector assigned is the dominant sector Source: ADB data.

34. Policy advisory and capacity development TA and grant support was provided across a wide range of sectors and subsectors, including: energy, power, transport, information and communication technology, tourism, irrigation, urban development and municipal infrastructure, education, finance, statistics, public financial management, and private sector development (Figure 1). The program included thematic initiatives to pursue policy objectives in areas such as trade and investment, trade facilitation, environmental and social safeguards, community and civil society participation, and disaster risk mitigation. The actual sovereign loan portfolio comprised the $575.5 million PBL in 2013, a $60 million energy project in 2013, and an $80 million road project approved in 2014. Excluding the PBL and private sector operations, the sector shares for the portfolio for the interim CPS period were: transport 41%, energy 34%, social development 14%, finance and PSM 6%, and urban development and water supply 5%. 35. Overall, both the planned and actual CPS program were aligned with the objectives of the government and ADB, and this validation rates the country program relevant.

B. Effectiveness 36. The CPSFR assessment of effectiveness referred to the expected outcomes of the interim CPS, but in practice it lacked a results framework, and the discussion centered on the reengagement and broad development objectives presented in the interim CPS. Accomplishments highlighted by the CPSFR included the approval of the program loan, two project loans in energy and transport, three grants, two nonsovereign operations, and the large TA portfolio. This program helped deepen ADB's knowledge and understanding of country conditions through analytic work; the building of trust and working relationships with numerous government agencies; and work to strengthen institutional arrangements, legal frameworks and sector analysis and planning. The preparatory work for sovereign and nonsovereign lending operations

A N R

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T r an s p o r t

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PS M

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2

4

9

5

3

11

4

4

1

1

1

0

2

1

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TA Loans Grants Loans under negotiation

Assessment of the Country Partnership Strategy Performance 11

has supported the entry by ADB operations into the design and early stages of implementation. The CPSFR rated the program effective (preliminary). 37. The effectiveness of sovereign operations is evaluated based on the likely degree to which the interim CPS succeeds in (i) building human resources and capacity, (ii) promoting an enabling economic environment, and (iii) creating access and connectivity. For nonsovereign operations, the evaluation of effectiveness focused on the creation of access and connectivity. 38. Human and institutional capacity. ADB viewed this effort as a crucial step in enabling medium-term engagement and effective development processes. ADB sought to improve institutional arrangements, legal frameworks and sector planning and project formulation capacity in the following areas: (i) statistics; (ii) public financial management; (iii) central banking; (iv) external debt management; (v) finance; (vi) private sector development; (vii) trade and investment policy; (viii) energy; (ix) transport, information and communication technology; (x) tourism; (xi) irrigation; (xii) agricultural trade facilitation; (xiii) urban development; (xiv) municipal infrastructure, (xv) environmental and social safeguards; and (xvi) community and civil society participation in development. 39. The CPSFR indicated that the competence of numerous government units was enhanced in important areas such as evidence-based policy making, market-friendly sector regulation, project formulation, and private sector promotion. Early in the interim CPS period, ADB assisted the government to develop policy and plans for the education sector, with a focus on addressing the lack of skills in the labor force. 40. Most of the TA projects generally delivered their outputs. Officials in several government agencies stressed the importance of ADB support for the strengthening of individual and institutional capacity. A more rigorous evaluation could be conducted by ADB to assess the degree to which the projects contributed to the capacity of the individuals and institutions that received support. The recent Joint Country Portfolio Review (JCPR), and other assessments—principally a report prepared by the Organisation for Economic Cooperation and Development (OECD)22—indicated that large gaps in individual and institutional capacity are impeding smooth implementation of official development assistance, and that this is the key constraint to achievement of larger development goals. 41. ADB sought to strengthen capacity in both the private sector and civil society. CSOs were made aware of ADB procedures through TA for Strengthening Civil Society Participation in ADB-Financed Operations. A civil society consultation and participation plan was under preparation at the time of the final review. The draft report asserted that “ADB’s efforts to engage civil society had been well received in Myanmar and ADB was seen as genuinely attempting to increase consultation and participation in its work.”23 Efforts were made to use CSOs in project delivery in areas such as their recruitment to mobilize communities in the Enhancing Rural Livelihoods and Incomes project.

22 In particular OECD. 2013. Multi-dimensional Review of Myanmar: Volume 1. Initial Assessment.

http://www.keepeek.com/Digital-Asset-Management/oecd/development/multi-dimensional-review-of-myanmar_9789264202085-en#page1

23 ADB. 2015. Draft Asian Development Bank Myanmar Civil Society Consultation and Participation Plan. Manila. p 10.

12 Myanmar: Interim CPS Final Review Validation, 2012–2014

42. ADB sought to amplify the voice of civil society in government in Nay Pyi Taw, recognizing the physical and psychological distance between nongovernment organizations (NGOs) and officials in the capital. This effort does not appear to have gone as far as consultative arrangements seen in other countries, where ADB has facilitated the empowerment of NGOs in strategic discussions of government policies and development partner program development. As a result, the effectiveness of these capacity development engagement efforts is unclear, but there is evidence of a strong ADB commitment to leverage civil society to strengthen design and facilitate implementation. 43. Creating an enabling environment. The interim CPS objective of creating an enabling environment was pursued through selected TA and the large PBL, which had the combined objectives of addressing arrears and encouraging a broad range of reforms.24 Policy-oriented TA supported reforms in the areas of: (i) fiscal sustainability, macroeconomic stability, and strengthening public finance; and (ii) increasing investment, trade and financial integration. Four of the self-assessed policy-oriented TA projects (Table 2) were rated successful or highly successful. 44. The achievement of the PBL provided by ADB (following the prior actions that enabled disbursement) was mixed when viewed against the expectations presented in the program’s Post-Program Partnership Framework, November 2012–December 2014 and the Medium-Term Direction, August 2011–December 2015 documents. Although a steering committee and reporting system were put in place in early 2013, reporting was not consistent,25 indicating the policy loan did not function as a key reference to the reform process. 45. The PBL facilitated the provision of several TA projects relevant to the outcomes presented in the loan design and monitoring framework. For example, subsequent TA enabled the government to reduce the time required to register companies by revamping and improving access to the system. The government is drafting a small and medium-sized enterprises law, and policies to expand private sector engagement in technical and vocational education and training and higher education. Other objectives have not yet been achieved, such as improving the coordination of a national agricultural extension program. 46. Expanding connectivity. A Joint Country Portfolio Review (JCPR) prepared in June 2015 notes that ADB’s current active project loan portfolio has made no official disbursements apart from the large policy loan disbursed in early 2013. However, progress is being made despite the delays. Following reengagement the initial energy investment project in Myanmar was the $60 million Power Distribution Improvement Project approved in 2013. This project was expected to rehabilitate the distribution network and enhance access to electricity for urban and rural consumers. The power distribution loan is now in an advanced stage of the bidding process. ADB TA for energy infrastructure has made important progress. This assistance was designed to improve coordination among institutions, provide capacity development and strengthen key energy agencies, and help identify and prepare priority projects. In 2014

24 Particularly the following TA: Support for Trade Policy Development; Trade Facilitation Support for ASEAN

Economic Community Blueprint Implementation; Improving Fiscal Revenue Mobilization; Support for Improving the Business Climate; Enhancing the Power Sector's Legal and Regulatory

Framework; and Strengthening Institutions for a Better Investment Climate. 25 ADB. 2015. Completion Report: Support for Myanmar’s Reforms for Inclusive Growth Program in Myanmar.

Manila.

Assessment of the Country Partnership Strategy Performance 13

$2 million in JFPR TA was approved to develop off-grid renewable energy that will benefit schools and other public infrastructure and serve as a demonstration project. 47. ADB supported national and regional-level transport connectivity by (i) strengthening institutional capacity, plans, and policies; (ii) identifying and preparing priority projects; and (iii) developing linked interventions to mitigate the potential adverse environmental and social impacts of increased movement of people and goods, including the prevention of HIV/AIDS. The $80 million Maubin-Phyapon Road Rehabilitation approved in Nov 2014 was the first ADB transport project in Myanmar. It is intended to improve access to markets and help the agricultural areas of the Ayeyarwaddy Delta realize their full economic potential. Loan disbursement has not yet begun, as the project is currently in the procurement process.26 ADB noted in related TA (Transport Sector Reform and Modernization) that the development of a transport program will take time because of the need for institutional strengthening.27 The TA will help ADB prepare reforms to address these institutional issues. 48. ADB’s programs for health and urban and rural development were based on dialogue, sector studies, and pilot community infrastructure. ADB-initiated projects include the GMS Capacity Building for HIV/AIDS Prevention (2013) for $10 million, Enhancing Rural Livelihoods and Incomes (2013) for $12 million, and Pro-Poor Community Infrastructure and Basic Services (2014) for $4 million.28 The health grant experienced difficulties finding an implementation modality to address the low Ministry of Health (MOH) capacity. A rural development project is about to be implemented in some villages. It is similar to a much larger community-driven development (CDD) project financed by the World Bank.29 The urban CDD project is focused on small-scale infrastructure that resulted in its placement with the MOC, and ADB is using an external entity (a consulting team) to “shadow” the MOC due to its unfamiliarity with the CDD model. 49. Private sector operations. Notwithstanding the early stage of reengagement and Myanmar’s post-conflict, low-income status, ADB’s Private Sector Operations Department (PSOD) was active in the country. ADB sought to encourage the private sector in Myanmar by providing equity, long-term debt, risk instruments, and catalyzing cofinance for private sector projects. Target sectors for ADB's nonsovereign support have included urban renewal, telecommunications, energy, and finance. Training in trade finance was provided to ten domestic banks. PSOD has processed three nonsovereign operations: (i) the Yangon Urban Renewal and District Cooling Project (2014); (ii) Yoma Strategic Holdings (Connectivity Infrastructure Development, 2014); and (iii) Nationwide Telecommunications Project (2015).

50. The rapid rate of engagement of PSOD reflects Myanmar’s focus on economic reforms and promotion of a business friendly environment. However, Myanmar has just transitioned from a low to a lower-middle income country, as defined by the World Bank, and the enabling conditions are weak. Consequently, PSOD’s rapid entry into Myanmar has necessitated reliance on known sponsors to lower the country risk. The

26 The ADB e-Operations database notes the large difference between the estimated and bid amounts. The

delay is due to issues with bank guarantees. 27 ADB. 2014. Technical Assistance to Myanmar for the Transport Sector Reform and Modernization in

Myanmar. Manila. 28 These projects were financed with three JFPR grants. A fourth (for $3 million) was approved in September

2015: ADB. 2015. ADB, Myanmar Sign $3 Million Grant Flood Relief. News Release. 2 September. Manila. 29 ADB has made a belated effort to align itself with the DRD model, but funding rigidities and its

commitment to a given number of villages has precluded achieving alignment in all of the townships covered. The World Bank country director stressed the desirability of such alignment.

14 Myanmar: Interim CPS Final Review Validation, 2012–2014

screening process led to the selection of one of the few entities that at that time could clearly be trusted in terms of governance—Yoma, a Singapore-based holding company. 51. As of December 2015, one of the two approved PSO projects led by Yoma—the Connectivity Infrastructure Development project—had started disbursements. Implementation of the Yangon Urban Renewal and District Cooling Project has been blocked by the inability of the sponsors to resolve project land issues, and no disbursements have been made. 52. PSOD’s current efforts in Myanmar are oriented toward reinforcing the public-private partnership model, in which strategic development sectors and subsectors are studied for investment needs and opportunities, and a bidding process is used to attract proponents. In this regard, PSOD expects Interconnection and Electrification Grid Studies TA will lead to bankable possibilities by 2018.30 53. On the basis of these findings, the validation rates the program effective, while emphasizing the preliminary nature of the rating—it is much too early to determine most project outcomes.

C. Efficiency 54. The CPSFR preliminarily rated the ADB program highly efficient. In line with IED guidelines, the validation focused on the economic internal rates of return and supporting indicators such as project process efficiency. However, the CPSFR concluded that actual economic rates of return could not yet be determined for most projects, thus preventing comparison of actual and initial estimates. The CPSFR noted the initial estimates of rates of return exceeded ADB’s 12% threshold, and in one instance reached 35%. 55. Following the approach used in the CPSFR, the validation considered the establishment of the ADB resident mission, which affected the efficiency of all operations. The program loan supporting Myanmar reforms for inclusive growth, disbursed in January 2013, accounted for most of the disbursement in the ADB program under the interim CPS. This single tranche was disbursed just 3 days after loan approval, and can be regarded as efficient. However, the loan was not representative of the entire program, which also comprised a large portfolio of TA projects, grants and project loans. 56. For the power distribution and road projects, ADB and the government implemented advance procurement actions through the use of preparatory TA in order to prepare and initiate the contract bidding process prior to loan effectiveness.31 The power distribution loan bidding process experienced difficulties, and two of the six contracts were cancelled by the government. It appears there was insufficient communication with the Ministry of Electrical Power, which resulted in a delay caused by the ministry’s attempt to favor national suppliers for some equipment; and was consequently financed by the government’s budget. The second cancelled contract is being rebid because a bidder was unqualified. The $80 million Maubin-Phyapon road

30 Validation team meeting with PSOD, 17 September 2015. Manila. 31 ADB. 2014. Report and Recommendation of the President to the Board of Directors: Proposed Loan to the

Republic of the Union of Myanmar for the Maubin–Phyapon Road Rehabilitation Project. Manila (risk assessment and risk management plan); and ADB. 2013. Proposed Loan to the Republic of the Union of Myanmar for the Power Distribution Improvement Project. Manila (risk assessment and risk management plan).

Assessment of the Country Partnership Strategy Performance 15

rehabilitation project loan has faced delays and not yet started disbursement, as the project is still working through the procurement process (footnote 26). 57. Similar problems occurred in the health sector, and the grant for Greater Mekong Subregion Capacity Building for HIV/AIDS Prevention has experienced delays due to a lack of clear MOH procedures for project administration and fund flows. ADB used external agencies to implement projects as a means of overcoming capacity gaps, but this was only partially successful, as it took 6 months under ADB’s procurement procedures to sole source UNAIDS as the project implementation agent. These circumstances indicate there was insufficient analysis of MOH capacity and ADB is now arranging a supplementary TA to conduct its own assessment of MOH.32 There were problems with coordination between ADB, other development partners, and the government, which led to some misunderstandings and delays. The Enhancing Rural Livelihoods and Incomes grant project failed to harmonize with a much larger CDD project financed by the World Bank, placing additional compliance burdens on government counterparts. 58. There is considerable evidence that the use of TA in the interim CPS program—which was the dominant implementation modality—was inefficient. The final review notes that several TA projects were extended 1 or more years past their initial closing dates, and over half (54%) of ongoing TA in 2014 was extended beyond the original completion date. Capacity constraints and the lack of familiarity with government and ADB procedures are listed as the main impediments. Several TA completion reports indicated that a substantial proportion of TA grants (20–45% in some cases) was not disbursed,33 suggesting the design was rushed or inadequate. 59. Most of the project supervision for the TA was carried out from ADB headquarters, although responsibility shifted to the resident mission beginning in 2014 as staff members were added. Supervision of projects from ADB headquarters was difficult, because of the distance and poor communication infrastructure in some government departments. These constraints had a negative impacted on project performance in some cases. For example, the government received inadequate or no explanation for the long delay in procurement related to a new office for debt management in the Ministry of Finance; the office space has no equipment and has not yet been renovated. Communication problems were experienced in both directions—ADB also had difficulty in staying abreast of and responding to government requests. 60. The few capacity development assessments that were prepared were ad hoc and undertaken late in the interim CPS period. There was limited coordination with development partners for shared assessments and capacity development plans. ADB recently cooperated with the World Bank and JICA in the preparation of a joint portfolio review that recognized these institutional challenges. The review highlighted bottlenecks to project design and implementation, and provided an action plan in which the first step was the identification of the government project cycle and its requirements.34

32 The intention to launch the assessment was conveyed by the grant project officer to the validation team in

meeting held on 18 September 2015 in ADB headquarters. 33 See for instance the completion reports for TA 8133, 8114, 8156, and 8190. 34 Government of Myanmar, Asian Development Bank, Japan International Cooperation Agency and the

World Bank Group. 2015. Myanmar: 2015 Joint Country Portfolio Review (JCPR): Myanmar Joint Country Portfolio Review Joint Action Plan 2015. Nay Pyi Taw.

16 Myanmar: Interim CPS Final Review Validation, 2012–2014

61. The JCPR report notes that projects faced considerable difficulties in implementation. These difficulties were attributed to the government’s lack of exposure to international best practices and limited experience. Gaps were particularly evident regarding the knowledge base and standard operating procedures for procurement. Government counterparts acknowledge these issues, but also point to ADB systems as the source of some inefficiency. The government indicated that it would be more efficient if project management units in line agencies were more integrated. 62. The establishment of the resident mission was difficult and not efficient. Prior to the full establishment of a resident mission, ADB logistics policies made it difficult for international staff to efficiently operate in Myanmar. ADB found it difficult to find suitable office premises in the commercial capital of Yangon and in the government capital of Nay Pyi Taw. The CPSFR noted that despite a number of moves, neither of the two offices represented ADB well or provided an environment that was conducive for staff to carry out their duties. Both offices will be moved again, and this should provide more conducive work environments. 63. On the basis of these findings, the validation rates the interim CPS program less than efficient, but notes it is too early to provide a definitive assessment.

D. Sustainability 64. The CPSFR assigned a rating of likely sustainable (preliminary) to the ADB program of support. It cited strong government ownership and commitment for ADB-supported reforms, sector plans and strategies, and capacity development efforts that were unlikely to dissipate. The CPSFR pointed to steady improvements in recurrent costs and to operations and maintenance practices in key sectors. The CPSFR demonstrated the government’s commitment by stating there had been no reversals in the ADB-supported reforms undertaken to date. 65. The views presented in the CPSFR need to be qualified in several respects. The reforms proposed by ADB were largely for initial framework changes, entailing new policies and legal instruments that are often relatively straightforward to approve. In contrast, implementation is typically much more difficult. The reforms have only recently been implemented, and it is not yet known if they will be sustained. Some reforms were preliminary and require additional or complementary reforms before the intended outcomes can be achieved. 66. The broad scope and initial nature of the reforms for the dominant program (the policy based loan) made it likely the reform measures would have a measure of success. This observation is not meant to diminish the considerable progress of reform, but rather to indicate the threshold set for the policy loan disbursement. Much additional work is required to achieve the desired outcomes defined in the results framework of the loan. In education for instance, the Comprehensive Education Sector Review has provided the rigorous sector-wide analysis, but the target for increasing the number of private institutions operating in technical and vocational education and training and higher education was not achieved. In agriculture, the government abolished the commercial tax on exports of several key agricultural commodities, but has not yet established a comprehensive land use planning and policy framework for agriculture and rural development. Whether these medium-term and other longer-term reforms will be achieved is difficult to determine. The achievement of the outcomes is dependent on the political situation in Myanmar, including the degree of political inclusion and adoption of democratic values. These values are necessary requirements

Assessment of the Country Partnership Strategy Performance 17

for the achievement and maintenance of peace, and the sustainability of reforms consistent with the interim CPS objective of inclusive growth. 67. At the project level, ADB paid attention to asset management systems, and provided TA to promote the sustainability of infrastructure financed by ADB and other sources. Support provided to communities to promote ownership of small-scale infrastructure and livelihood projects will yield benefits beyond the project life. Offsetting these results, ADB efforts to prepare relevant government units to undertake project management are not indicative of a clear capacity development strategy. Inadequate institutional assessments prior to engagement and reliance on measures to outsource project execution functions (as seen in the grants project management arrangements in MoH and MOC respectively) fail to provide a basis for developing sustained institutional capacity in a reasonable time frame. 68. On the basis of these findings, the validation rates the program likely sustainable, but notes a definitive assessment cannot yet be provided.

E. Development Impacts 69. The CPSFR rates development impacts as satisfactory (preliminary), noting the results of the country program initiated under the interim CPS will not be known until projects are fully implemented, well after the evaluation period is over. Actions taken by ADB, the government and other parties will affect the development impact. These caveats notwithstanding, the CPSFR anticipates ADB will provide a positive contribution to fiscal sustainability, investor confidence, socioeconomic performance, capacity development, and connectivity. 70. Capacity development. ADB made considerable effort to rapidly improve the capacity of counterparts in areas relevant to the objectives presented in the interim CPS. This activity enabled the preparation and implementation of several loans and grant-funded projects. Some TA was ad hoc, and in many cases the capacity outcomes were not well identified and tracked. There were exceptions; the TA on environmental safeguards included an explicit institutional assessment, mapping of policy frameworks, and the identification of associated capacity gaps.35 This type of rigor needs to become more common in the design of ADB programs. 71. Inclusive growth. CPSFR states ADB is making meaningful contributions to inclusive growth. However, this view is necessarily preliminary, and subject to the recognition ADB is one of many development partners supporting the government in pursuit of this goal. Furthermore, ADB is giving unequal emphasis to the three pillars underpinning the concept of inclusive growth. ADB places primary emphasis on economic growth, principally through development of power and transport connectivity. There is less evidence of contributions being made to ensure an equitable distribution of opportunities or safety nets. In subsequent strategies and plans, ADB could address these three pillars more comprehensively. There may not be equal activity on all three fronts, but ADB needs to indicate how it will support a broad approach to inclusive growth. 72. Connectivity. It is too early to be definitive about the development impact of the ADB operations developing connectivity, as the infrastructure projects approved so

35 ADB. 2014. Technical Assistance to the Republic of the Union of Myanmar for the Environmental Safeguard

Institutional Strengthening Project. Manila.

18 Myanmar: Interim CPS Final Review Validation, 2012–2014

far have been relatively few and they were started largely from late 2013 onward. As a result, most of the projects are in early stages of procurement. Unless substantial efforts are made to develop capacity in the relevant government executing and implementing agencies, there is a high risk of further delays, and a reduction in expected impacts. 73. Gender equality. ADB and selected United Nations agencies strengthened gender mainstreaming approaches in their development assistance programs in Myanmar. Specifically, ADB provided TA to support the preparation and dissemination of a gender situation analysis and associated advocacy materials for Myanmar, which is likely to have positive impacts.36 74. Good governance. The government’s administrative reform agenda is designed to improve service delivery by streamlining procedures, cutting red tape, increasing transparency, ensuring clean government and creating an efficient civil service. Discussions with stakeholders have focussed on four topics: (i) capacity development in the civil service, (ii) public service delivery, (iii) decentralization, and (iv) transparency and accountability. ADB is closely involved in strengthening governance, with a lesser focus on systems, and more on increasing the capacity of officials that will be responsible for project management of ADB-financed projects. ADB did not undertake a governance or PSM assessment to support the interim CPS, but did prepare a risk assessment and risk management plan that examined vulnerabilities in public financial management and procurement. Some TA sought to deepen this assessment and address certain vulnerabilities (e.g., the Financial Management Assessment of Energy Sector and Support for Strengthening Public Debt Management TA projects). 75. Environment and social safeguards. During the interim CPS period ADB assessed institutional arrangements to apply country environmental safeguards, introduced safeguards good practices, and prepared a capacity development action plan. A needs assessment and action plan was prepared for social safeguards, focused on the Ministry of Environmental Conservation and Forestry, which coordinates social safeguard issues. It is unclear to what degree the action plan has been implemented. Efforts by ADB to obtain broader development partner support for safeguard principles were unsuccessful (other development partners assessed that the objective of harmonizing safeguard principles across development partners was not achievable at the time). 76. Regional cooperation and integration. ADB support for Myanmar’s efforts to achieve regional integration date back to the GMS program. In the interim CPS period GMS projects were added (focusing on health and roads) or included in the pipeline (urban). ADB facilitated Myanmar's membership, currently as an observer, in the South Asia Sub-regional Economic Cooperation program. Support was provided to assist Myanmar to take advantage of economic opportunities provided by projects such as the Trade Facilitation Support for ASEAN Economic Community Blueprint Implementation (Myanmar). These initiatives will assist Myanmar to make the most of its strategic geographic location. 77. This validation rates development impacts as satisfactory, but notes that a definitive assessment cannot yet be made.

36 Support to the Preparation and Dissemination of the Myanmar Gender Situational Analysis.

Assessment of the Country Partnership Strategy Performance 19

F. ADB and Borrower Performance 78. ADB performance. In planning its reengagement with Myanmar ADB chose a sequence of activities that helped it resolve outstanding issues, build trust, and develop a new program. This generally prepared ADB to navigate Myanmar’s new institutional landscape, engage productively with institutions, and provide both TA and project loans. However, in some cases TA was provided in a supply driven manner. ADB missed some opportunities to harmonize outputs with other development partners (in the case of institutional and capacity assessment studies) and align with government approaches (e.g., the rural community-driven approach of DRD). 79. ADB collaborated well with other development partners and stakeholders. ADB cooperated with the World Bank and JICA in JCPR exercises. ADB has committed to taking the lead role for the 2016 JCPR, which will require the resident mission to actively liaise with the World Bank and JICA to monitor implementation of the 2015 joint action plan in collaboration with government counterparts. 80. ADB experienced difficulties supporting Myanmar prior to the establishment of a full resident mission. Even when the resident mission was established ADB continued to face problems finding suitable quarters and recruiting sufficient staff members with the requisite skills to match the growing program. This mismatch may affect its ability to scale up the program and adequately support the government. Overall, the country program was reasonably successful and the validation rates ADB performance satisfactory. 81. Borrower performance. Self-assessments of delivered TA provide confirmation of strong government ownership that was an important factor in achieving the outputs and outcomes from ADB projects. 82. The government made progress increasing its capacity, and has generally been receptive to initiatives by ADB and other development partners that sought to enhance the capacity of project management units. However, as the JCPR notes a continuing impediment to project implementation was the absence or lack of clear procedures governing development partner-funded projects. The government was slow in adapting its procedures to ADB requirements, which delayed planning and implementation. More effort will be required by the government to clarify its “standard” procedures, to note where they differ from those of development partners, and to determine how to make necessary adjustments. This is essential to allow ADB to expand its program without endangering implementation quality and results. 83. The capacity of the government to direct development partners is likely to increase over time. In 2013 the government established a broad forum to coordinate development partner contributions, which is chaired by the Ministry of National Planning and Economic Development, and it is performing effectively. Given these findings, the validation rates the borrower’s performance satisfactory.

G. Overall Assessment 84. ADB quickly became familiar with Myanmar’s needs and was responsive to the government’s requirements in terms of institutional capacity building, reform support, and loan project preparation. Projects are now starting to be implemented and the ADB program has the potential to grow substantially. However, its success will depend on

20 Myanmar: Interim CPS Final Review Validation, 2012–2014

the ability of ADB to increase resident mission capacity to more intensively support policy dialogue and manage project implementation. ADB will need to continue its efforts to harmonize operations with other development partners and align them with government objectives. Additional effort is required to build government capacity for project management, and to strengthen governance. It has lost some momentum after a strong start, perhaps having spread itself too thinly over too many sectors. 85. The validation rates the Myanmar interim CPS 2012–2014 successful, with a score of 1.8. The main difference between the validation’s findings and those of the CPSFR is a change from highly efficient to less than efficient (Table 3 summarizes the scoring and the reasons for the deviation).

Table 3: Comparison of the Overall Rating of the Interim Country Partnership Strategy

(2012–2014)

Evaluation Criteria CPSFR Ratings

Validation Ratings and

Weighting (Scoring)

Main Reasons for Rating Deviations and/or

Changes in Evaluation Nomenclature

Strategic

positioning/

Relevance

Satisfactory/

Relevant

Relevant

20% (2) = 0.4

Validated

Effectiveness Likely Effective

(preliminary)

Effective

20% (2) = 0.4

Validated

Efficiency Highly

Efficient

(preliminary)

Less than Efficient

20% (1) = 0.2

(i) Myanmar Resident Mission has lacked adequate quarters or sufficient staff/skills to support the expanding program.

(ii) 54% of ongoing TA projects in 2014 were delayed. Both sovereign project loans were delayed and the PSOD Yangon urban renewal project was delayed. Government procedures were slow to adapt to ADB requirements,– slowing planning and implementation. Several TA completion reports indicated that TA funds were not fully disbursed.

(iii) Institutional mapping and capacity assessment was ad hoc and insufficient

(iv) Development partner coordination experienced shortfalls leading to inefficiencies.

Sustainability Likely

Sustainable

(preliminary)

Likely Sustainable

20% (2) = 0.4

Validated

Development

Impacts

Satisfactory

(preliminary)

Satisfactory

20% (2) = 0.4

Validated

Overall Rating Successful Successful With a score of 1.8

ADB Performance Generally

Satisfactory

Satisfactory Validated

Borrower

Performance

Generally

Satisfactory

Satisfactory Validated

ADB = Asian Development Bank, CPS = country partnership strategy, CPSFR = country partnership strategy final review, PSOD = Private Sector Operations Department, TA = technical assistance. Source: Asian Development Bank Independent Evaluation Department.

CHAPTER 3

Key Issues

86. Effect of social and ethnic tensions on the achievement of inclusive growth. The persistence of political and social conflicts in Myanmar creates a significant risk to the sustainability of the reform process and the government’s commitment to an inclusive and prosperous society. There are widely voiced misgivings about the rapid flows of funding and assistance provided to Myanmar, and their potential to make the social and ethnic conflicts worse. The JCPR, held in mid-2015, identified the need for conflict-sensitivity due diligence. ADB has made use of a conflict expert, to help identify and address such concerns, but these steps may need to be further prioritized. 87. Recent literature highlights five key aspects of development resource allocation, which should: (i) reduce violence and ensure the public feels safe; (ii) ensure fair access to justice, livelihoods, resources and services; (iii) enable participation in decision-making and constructive resolution of grievances; (iv) aim for lower levels of corruption and bribery; and (v) reduce exposure to flows of drugs, arms, illicit finances and conflict commodities. ADB will need to carefully consider how to integrate context-sensitive approaches into all ADB programs in the upcoming CPS to ensure ADB interventions do not cause harm. ADB has an important role to facilitate peace and reconciliation in its program to strengthen the foundation for effectively pursuing inclusive growth. 88. Vulnerability to shocks and capital outflow. Myanmar’s increasing global integration exposes it to global trends and shocks, such as reduced global demand from the People’s Republic of China, and anticipated interest rate increases in the United States. The International Monetary Fund has estimated that the current account deficit widened to 5.5% of GDP in 2013/2014, and this gap was financed by foreign direct investment, new loans, and inflows related to telecommunications licenses. International reserves held by the Central Bank of Myanmar increased to $4.5 billion by end-March, 2014, covering 2.75 months of prospective imports;37 reserves should normally cover 4–5 months.38 The rate of foreign direct investment may slow if reforms stall or internal conflicts reduce investor confidence. While the International Monetary Fund is taking the lead advising the government on these issues, ADB can have a voice developing a coordinated approach to monitoring the macro-economy—as indicated in the risk assessment that underpinned the ADB policy loan.39 89. Decentralized governance. Myanmar is a very centralized nation, but it is shifting to a form of decentralized governance. This process is happening on two tracks, with the political track depending on peace and restructuring of the state (to a

37 IMF. 2014. Executive Board Concludes 2014 Article IV Consultation with Myanmar - Press Release No.

14/462October 6. Obtained 8 September 2015 at https://www.imf.org/external/np/sec/pr/2014/ pr14462.htm

38 J. Gottschalk. 2014. Overview: External Sector in Myanmar - Workshop for Staff of Ministry of National Planning and Economic Development. Nay Pyi Taw, Myanmar, June 2–3.

39 ADB. 2012. Report and Recommendation of the President to the Board of Directors: Proposed Policy-Based Loan to the Republic of the Union of Myanmar for the Support for Myanmar‘s Reforms for Inclusive Growth Program. Manila. Risk Assessment and Risk Management Plan.

22 Myanmar: Interim CPS Final Review Validation, 2012–2014

federal model) and a more administrative track—where expenditures (if not formal assignments) are being pushed down to the subnational government budgets. These processes explain why the government and development partners consider “decentralization and local governance are issues of critical importance to the country’s long-term development and priorities in the government’s reform agenda.”40 90. The first track for decentralization is focused on the states and regions, and it will be difficult, entailing political compromise and constitutional and legislative amendments. Many of the policy, technical, and coordinating capacities now at central level will need to be shifted and/or developed at state/region level. 91. Administrative decentralization has been underway since 2011, with an increasing amount of key service sector spending initiated by states, regions and cities (municipalities), or townships. Some parts of the government have expressed a desire to make townships—where many services will be provided and managed—the foundation for development.41 In certain ministries, this incremental budget shifting process has resulted in 75% of sector spending occurring at the subnational level. The ADB CPA noted that since 2012/2013, the Ministry of Education has been devolving school construction and primary education teachers to state/regional governments. The capacity of subnational governments to perform these functions is a concern. 92. ADB does not appear to be giving sufficient recognition to decentralization, perhaps because the first “systemic” track gets most of the attention; this is a high level and long term concern that remains in the background for ADB operations. Administrative decentralization will impact ADB effectiveness, as loan and grant operations are initiated at the subnational level, and this should be a focus for ADB. ADB could support the process of decentralization in the sectors where it is engaged (e.g. transportation, energy, urban and water, education), by helping to define a workable division of labor between the national and subnational governments, particularly with regard to the respective roles of deconcentrated units of the union, the regions and/or states, and the townships. ADB’s project designs and implementation can support decentralization by helping subnational governments to adhere to key national and sectoral priorities and strengthening accountability relationships. 93. ADB financing modality and allocations. Myanmar’s access to a medium-term ADF allocation in 2013 supported ADB’s strategic plan. The ADF is the only source of funding open to sovereign operations in Myanmar, and there is some uncertainty regarding the allocation over the next CPS period, due to the expected merger of ADF with OCR in 2017, and the expected decline of allocations to the country to $206 million in 2016. The ADB pipeline and dialogue with the government indicate there is demand for an increase (rather than a decrease) in the portfolio over the next CPS period. As the CPSFR notes, the anticipated ADF allocations do not respond to the country's increasing requirement for infrastructure investment, and do not accord with the anticipated expansion of subsectors proposed in the ADB sector assessments. For example, it is recommended that funding for investment in transport is expanded into rail, river, rural, and urban facilities. ADB and MOC (Public Works) have identified nine

40 Kyi Pyar Chit Saw and M. Arnold. 2014. Administering the State in Myanmar—An Overview of the General

Administration Department. October. Subnational Governance in Myanmar Discussion Paper 6. Myanmar Development Resource Institute's Centre for Economic and Social Development and The Asia Foundation. Yangon. p. iii.

41 M. Arnold et al. 2015. Municipal Governance in Myanmar: An Overview of Development Affairs Organizations. The Asia Foundation. Yangon. July 2015.

Key Issues 23

potential loan projects for 2014–2017, with a tentative lending amount of $795 million. 94. The Myanmar country team notes that in recent ADF discussions, a proposal of a special allocation of 40% more than the 2013–2016 level for Myanmar has been positively received. It will be necessary to reconcile these various financing trends and policies and give the government clarity on the resource envelope and concessionary terms for the new CPS. 95. Capacity and governance assessments and capacity development support. ADB invested heavily in diagnostic work in key sectors during interim CPS preparation and implementation. This analysis enabled ADB to design an expanded program for the next CPS period. Weak government capacity and governance systems strongly affect program success. It is crucial that ADB deepen its effort to develop institutional capacity and understand relevant political and social dynamics that influence project success. To date the challenges are most evident in the design and early implementation stages, but they will doubtless also occur in later implementation stages, and during results monitoring and assessment. In addition, the lack of attention to enforcement capacity could limit the impact of new laws and regulations. 42 96. Updated sector assessments should identify institutional arrangements and capacity vulnerabilities. TA projects should be rigorous in determining capacity development needs in counterpart agencies and more broadly within the institutions in the sector. A tight link is required between TAs and accompanying loans. ADB should examine governance challenges that cut across sectors to identify future areas of engagement. For instance, strengthening of internal/external audit systems at the national and subnational government levels would lead to institutional strengthening and practices that could affect all ADB operations. 97. ADB needs to consider its response to the Nay Pyi Taw Accord for effective development cooperation, possibly taking advantage of the European Union’s desire to forge a “common strategy and fund to support capacity development efforts.”43 The exploration of this opportunity is already underway, and the resident mission is hiring a consultant to explore aid effectiveness in the context of all development partner efforts. Hopefully, this shared resource will lead to strategies or a code of practice that helps to address the urgent needs of project implementation. 98. Sector reviews and results framework. The preparation of the next CPS provides an opportunity to update and deepen sector assessments and related road maps. These exercises are underway, and will help ensure the analysis is available and understood during preparation of the next CPS. Attention could be paid to PSM (in addition to the private sector focus now contemplated). If these reviews can be prepared in close cooperation with the relevant government agencies, it will help them define relevant sector indicators, and establish a results framework that can be used to support program monitoring and reporting.

42 ADB. 2013. Evaluation Lessons on Transition: Possible Implications for Myanmar. ADB Independent

Evaluation Department Working Paper. Manila. 43 European Union. 2013. Myanmar Development Cooperation Forum – EU Response to the Nay Pyi Taw

Accord. https://ec.europa.eu/europeaid/sites/devco/files/eu-response-nay-pyi-taw-accord-20130119_en.pdf

CHAPTER 4

Quality of the Final Review

99. In general, the CPSFR of the Interim CPS reflected the intent of the 2015 IED guidelines, although it retained the split between the strategic positioning and relevance criteria. The Interim CPS was not accompanied by a results framework, and this meant the CPSFR was not able to provide an overview of performance by assessing the ADB program against the three key objectives of the Interim CPS. 100. The CPSFR was satisfactory and of good quality. It was informative and balanced, tracing the approach and steps undertaken during ADB’s reengagement process, and assessed both the achievements and challenges encountered.

Appendix

APPENDIX: BREAKDOWN OF LOANS, GRANTS, NONSOVEREIGN

OPERATIONS, AND TECHNICAL ASSISTANCE, as of September 2015

PROJECT NAME FUND TYPE

AMOUNT ($ million)

DATE APPROVED

A. LOANS

LOAN NO. 2984 Support for Myanmar's Reforms for Inclusive Growth ADF 575.5 14-Jan-13

3084 Power Distribution Improvement Project (SF) ADF 60.0 06-Dec-13

3199 Maubin-Phyapon Road Rehabilitation ADF 80.0 26-Nov-14

Subtotal Loans 715.5

B. GRANTS

GRANT NO.

9174 Enhancing Rural Livelihoods and Incomes JFPR 12.0 11-Dec-13

9176 Greater Mekong Subregion Capacity Building for HIV/AIDS Prevention

JFPR 10.0 11-Dec-13

9177 Pro-Poor Community Infrastructure and Basic Services JFPR 4.0 27-Feb-14

0436 Myanmar Flood Emergency Response APDRF 3.0 21-Aug-15

Subtotal Grants 29.0

C. NONSOVEREIGN OPERATIONS

INVESTMENT NO.

7408 Yangon Urban Renewal and District Cooling Project OCR 90.0 26-Jun-14

7440 Yoma Strategic Holdings (Connectivity Infrastructure Development)

OCR 100.0 10-Dec-14

7450 Ooredoo Myanmar Limited (Nationwide Telecommunications)

OCR 150.0 30-Jun-15

Subtotal NSO 340.0

D. TECHNICAL ASSISTANCE

TA NO.

8136 Myanmar Tourism Master Plan OTHERS 0.2 05-Jul-12

8113 Support for Trade Policy Development TASF 0.2 16-Jul-12

8114 Support for Improving the Business Climate TASF 0.2 16-Jul-12

8156 Improving Fiscal Revenue Mobilization TASF 0.2 16-Aug-12

8190 Trade Facilitation Support for ASEAN Economic Community Blueprint Implementation (Myanmar)

JFPR 0.2 08-Oct-12

8187 Support for Education Sector Planning TASF/ OTHERS

0.6 10-Oct-12

8216 Financial Management Assessment of Energy Sector TASF 0.2 19-Nov-12

8244 Capacity Development and Institutional Support TASF 1.5 03-Dec-12

8251 Capacity Building Support for Project Identification TASF 1.5 10-Dec-12

8289 Strengthening Civil Society Participation in ADB-Financed Operations

TASF 0.2 11-Dec-12

8288 Support to the Preparation and Dissemination of the Myanmar Gender Situational Analysis

TASF 0.1 17-Dec-12

8304 Maximizing Transport Benefits through Community Engagement

TASF 0.2 21-Dec-12

8327 Developing the Asset Management Program for Myanmar Roads

JFPR 1.4 20-Feb-13

8330 Greater Mekong Subregion East-West Economic Corridor Eindu to Kawkareik Road Improvement

JFPR 1.5 21-Feb-13

8342 Power Transmission and Distribution Improvement JFPR 1.5 22-Mar-13

8356 Institutional Strengthening of National Energy Management Committee in Energy Policy and Planning

JFPR 1.4 24-Apr-13

Breakdown of Loans, Grants, Nonsovereign Operations, and Technical Assistance, as of September 2015

27

PROJECT NAME FUND TYPE

AMOUNT ($ million)

DATE APPROVED

8377 Capacity Development of the National Statistical System JFPR 1.2 06-Jun-13

8385 Support for Post-Primary Education Development TASF/ OTHERS

1.5 19-Jun-13

8398 Design of e-Governance Master Plan and Review of Information and Communication Technology Capacity in Academic Institutions

TASF/ OTHERS

1.5 04-Jul-13

8456 Transformation of Urban Management JFPR 2.0 20-Sep-13

8469 Enhancing the Power Sector's Legal and Regulatory Framework

OTHERS 0.9 01-Oct-13

8472 Mandalay City Urban Services Improvement TASF/ OTHERS

2.0 03-Oct-13

8527 Support for Strengthening Public Debt Management TASF 1.5 02-Dec-13

8532 Financial Sector Reforms TASF 1.0 04-Dec-13

8244 Capacity Development and Institutional Support (Supplementary)

TASF/ OTHERS

0.9 09-Dec-13

8583 Irrigation Command Area Development TASF 1.2 16-Dec-13

8624 Support for Public-Private Partnership Framework Development

OTHERS 2.0 27-Feb-14

8634 Skills Development for Inclusive Growth JFPR 2.0 02-Apr-14

8639 Interconnection and Electrification Grid Studies TASF 0.3 15-Apr-14

8651 Strengthening Institutions for a Better Investment Climate

JFPR 1.5 14-May-14

8657 Off-Grid Renewable Energy Demonstration JFPR 2.0 23-May-14

8705 Support for Sanitary and Phytosanitary Arrangements Development

TASF 0.2 25-Aug-14

8330 Greater Mekong Subregion East-West Economic Corridor Eindu to Kawkareik Road Improvement (Supplementary)

TASF 0.2 23-Oct-14

8342 Power Transmission and Distribution Improvement (Supplementary)

TASF 0.2 23-Oct-14

8758 Third Greater Mekong Subregion Corridor Towns Development

TASF/ OTHERS

1.4 17-Nov-14

8786 Environmental Safeguard Institutional Strengthening TASF 1.0 11-Dec-14

8788 Transport Sector Reform and Modernization TASF 1.0 11-Dec-14

8356 Institutional Strengthening of National Energy Management Committee in Energy Policy and Planning (Supplementary)

TASF 0.4 17-Dec-14

8532 Financial Sector Reforms (Supplementary) TASF 0.2 29-Dec-14

8915 Preparing Youth for the Workplace Sector Development Program

TASF 1.0 19-Jun-15

8921 Renewable Energy for the Nationwide Telecommunications Project

OTHERS 1.0 30-Jun-15

8472 Mandalay City Urban Services Improvement (Supplementary)

OTHERS 0.3 17-Aug-15

TA Subtotal 39.4

TOTAL

1,123.9 ADF = Asian Development Fund, APDRF = Asia Pacific Disaster Response Fund, ASEAN = Association of Southeast Asian Nations, JFPR =

Japan Fund for Poverty and Reduction, OCR = ordinary capital resources, SF = special fund , TA = technical assistance, TASF = Technical Assistance Special Fund. Note: Approval information updated up to 25 September 2015. Source: ADB database, Independent Evaluation Department.