Q&A: ADB’s development effectiveness review, in-depth

The Asian Development Bank’s performance in 2017 is a mixed bag.

It surpassed its gender equality targets for sovereign operations but gained only a slightly larger share of female staff internationally. Climate change operations were on a high, but financing for health and education, including social protection-related operations, were off track.

The bank became faster in processing non-sovereign operations but took longer when it came to sovereign operations. Inequality declined in some member countries, but 326 million people continue to live in extreme poverty. More people in the Asia Pacific region have electricity access, but not from clean energy sources.

What exactly is going on?

We spoke to Bernard Woods, director of the results management and aid effectiveness division of the bank’s strategy, policy, and review department, for insight into the 2017 Development Effectiveness Review.

This conversation has been edited for length and clarity.

How do you measure your effectiveness when it comes to inclusive growth?

Inclusive growth is really a country-level phenomenon. So it’s how we can support that. That’s why for the first two pillars — growth and opportunities, and then access to opportunities — we don’t have a target. Because we feel that each country is going to have a different set of circumstances. For the third one, social protection, we do have a target.

We examine the projects and we have quite a complicated algorithm. So if a project — let’s say a highways project — is going to be pillar one, it’s more about economic growth. But if it’s about, let’s say, rural roads connecting farmers to markets, or people and villages to hospitals and clinics or schools, then it’s got an access to opportunities dimension, and becomes pillar two.

Pillar three is all about cash transfers and income support; insurance like social insurance, health insurance; or about labor market reskilling.

So each project, when it gets designed, gets categorized as to which pillar it’s going to align with. And that’s how we measure for this target.

What specific actions does ADB need to take, instead of just saying in the draft Strategy 2030 document that inclusiveness is important for the bank?

The key thing, from my perspective, is infrastructure. ADB is an infrastructure bank. Probably about 70 percent of what we do is infrastructure, even in social sectors like health and education, we may be building schools and clinics. So I don’t think people should think infrastructure isn’t about social sectors.

In our current version of the strategy — and this is, of course, subject to our governors’ discussion and board approval — we say there are four things that infrastructure should be: Green, inclusive, sustainable, and resilient. And those four things, I think, are going to set the clear direction for ADB moving forward for Strategy 2030.

Green means low carbon, it’s going to be environmentally friendly. Inclusive means it should benefit everybody — the elderly, disabled, poor, women, should all have equal access, as ADB Vice President Stephen Groff said. Resilient means that in the face of climate change the infrastructure should be able to withstand shocks, and sustainable means it should keep providing benefits five, 10, 15, 20 years from now, which means there should be money in place to pay for it, and capacity to maintain and operate it.

I think ADB’s recognized those four things in the past. But I think now with the strategy, those will give an additional emphasis to how our infrastructure operations line up with those four criteria. To me, that’s a crucial part of the strategy, in terms of directing and shaping what types of infrastructure we do.

ADB is increasingly positioning itself as a knowledge partner. How will that inform future discussions of development effectiveness?

Partnership works both ways. I think there’s a wealth of knowledge in ADB that we can transfer from one place to another. So we know what’s worked and what hasn’t worked in some countries in some contexts, and we can learn from that and see and adapt for other contexts.

For example, leapfrogging. There are areas that are now not connected to electricity. What do we know about connecting them to off-grid solutions? Whether it’s local, renewable solutions, microhydro electricity, or renewable energy, solar energy, that we could learn, say, from the People’s Republic of China, that we can then apply in Cambodia, for example. I think that’s the transfer that can be part of our knowledge solutions.

The other thing is learning from our partners. Partnership has to work both ways. I think there’s a lot of room for learning and understanding about fragile and conflict-affected countries in the Pacific, or upper-middle-income countries like the People’s Republic of China. And those become part of our so-called knowledge bank.

There are areas where ADB has strengths, such as infrastructure, for example. But in the report, it says you’re off track on health targets — how do you see ADB improving its effectiveness in this area?

I think one thing is direct health interventions. We’ve set a target of 3-5 percent investments by 2020, and with last year’s data, we’re heading in the wrong direction. So we have to boost the pipeline and do more direct health interventions.

Then I think there are other interventions that have a health effect. So transport, by providing people access, you enable people to get to health care facilities where maybe they didn’t have access before. Or in times of urgent need, they can get there quickly, as an example.

Then I think there’s a whole series of things we do in terms of working with governments on fiscal policy and their overall economic management that has spinoff effects for all sectors, including health.

So that’s coming from three different directions. One is direct health investments, which is one of our indicator measures and one we have to do more of. Then I think a better understanding of how the other things we do positively benefit health, which we need to do more investigation of. And then it’s more economic management, for example working with governments on tax collection. If we improve, boost tax collection, those taxes can be then used to fund health care.

I understand that health has kind of fallen off ADB’s priorities for a few years, but then you had the midterm review of Strategy 2020, wherein the board recommended that ADB should continue working on health. Was that a smart move for ADB, to go back and include it again, given your current performance?

The issue was that Strategy 2020 set out core and non-core areas. Health was a non-core — and that led to a kind of reduction in our capacity to do health.

Now the pendulum is swinging back the other way. We have a very active health sector group, I think it just takes a number of years. So from the MDR to now, we’ve seen more hiring of health specialists, we’ve seen more health projects.

So I definitely think it’s the right thing to do, especially when Strategy 2030 completely moves away from core and non-core. But I think it just takes time to staff up and to get the timelines in place.

The bank has come out with a new procurement framework, with the goal of bringing in more efficiencies and speeding up its procurement from approval to disbursement. But the review says, at least for sovereign operations, it has been slow. 

There’s been a number of things. One is we have had, in the past, issues with many, many small procurement packages. And each of those is taking a lot of time to go through. So we’ve pushed to have fewer and larger packages.

That’s worked. But one of the effects of that is that these larger packages now — there’s been an increase of those going to something we call the procurement committee. Any package over $40 million has to go to the procurement committee, and the procurement committee takes a lot longer to process them, with the regional departments doing the procurement themselves.

That’s been one positive thing: Less packages. But the side effect is more going to this procurement committee.

The other thing is really understanding the distribution in terms of time of the procurement transaction. What our indicator has shown us is that a small number of transactions took a really long time. There were some issues, some challenges. We measure in days — they took months.

The vast majority, I think 95 percent, were fairly close to the target level. So I think we can see our reforms are working, but there are a number of outliers which have negatively influenced the overall result. And in the next corporate results framework, we want to see how we can improve the measurement to understand whether the red is from the outliers or from a kind of generalized performance.

Under Strategy 2030 discussions, is there a chance that the way you measure ADB’s development effectiveness will change?

I hope so. We’re always trying to improve the framework. Every four years, we completely redo the framework; every two years, we tweak and adjust.

One of the things we want to do is have fewer indicators. And so, from my mind, we have 85 now, maybe we bring that down to 50. We need to focus on quality indicators rather than on the quantity. I think it’s what you count, not how many things you count.

If you have 85, maybe some are nice to know but not need-to-know. If we bring it down to 50, it’s clearly the need-to-know.

So more on quality implementation, how the ongoing portfolio is performing, the kind of speed we’re doing these things, and also trying to perhaps move to real-time results reporting, pushing beyond the one-year report.