Box 3: Republic of Korea Financial Sector Program and Institutional Strengthening of the Financial Sector Projecta
Highly Successful
By 1996, the Republic of Korea had become the world’s 11th largest economy. Many industrial conglomerates had grown rapidly on borrowed capital and were highly leveraged. Interlocking relationships between the corporate and finance sectors, and the accommodative role of government, meant that many financial institutions did not operate within prudent, market-driven norms. In mid-1997, the currencies, stock markets, and other asset prices in Southeast and East Asian economies, including the Republic of Korea, depreciated rapidly, causing panic among investors and financial institutions. Several smaller conglomerates in the country declared bankruptcy but were not bailed out by the Government, which had been the practice in the past. Confidence in the Republic of Korea’s finance sector eroded. Demands were made for the repayment of foreign exchange loans, and a foreign exchange crisis was imminent. The Government approached the international community for emergency assistance. As part of the package, the Asian Development Bank provided a $4 billion program loan aimed at restructuring the entire finance sector. This was the bank’s largest loan ever, and it was processed in record time.
Evaluation found that the program had a very high level of government ownership of the intended reforms. It had addressed fundamental structural weaknesses in the finance sector. The coverage of the reforms and their sequencing had been appropriate. The reforms facilitated the elimination of nonviable institutions, opened the sector to competition, and improved the regulatory framework and market oversight. Finance sector indicators improved rapidly in 1998, and the finance sector is now healthier and less vulnerable to external shocks.
a Available: www.adb.org/documents/ppers/kor/31651-kor-pper.pdf
Box 4: People’s Republic of China Anhui Environmental Improvement Project for Municipal Wastewater Treatment and Industrial Pollution Abatement a
Successful
Rapid economic growth in Anhui province in the 1990s resulted in increases in nutrients and pollutants entering Chao Lake with concomitant algal blooms, fish kill, and pollution of the water supply of Hefei and Chaohu cities. The project was the first major initiative of a massive cleanup campaign. It aimed to improve the water quality in Chao Lake and reduce wastewater, air, and solid waste pollution in Hefei and Chaohu. It had six subprojects: two treatment facilities for Hefei and Chaohu, and industrial pollution abatement for four top industrial polluters in Anhui.
The project was implemented as envisaged, although there were some cost savings and a delay in implementation. Implementation of project components varied, ranging from excellent to less than satisfactory. The two wastewater treatment plants improved the environment by treating about 310,000 cubic meters of polluted water per day. The wastewater treatment ratios of these two plants are among the highest in the country. The four industrial pollution abatement subprojects improved the quality of products; reduced air, water, and solid waste pollution discharges; and reduced resource inputs by improving production efficiency.
The project was relevant and effectively and efficiently helped to address pollution in Chao Lake, targeted as a top priority for environmental cleanup by both Anhui and the State Council. The recalculated economic internal rate of return was 16.4% and the recalculated financial internal rate of return was 8.4% (higher than the cost of capital). With some exceptions, the subprojects were generally well maintained, but the poor financial performance of some enterprises may adversely affect the sustainability of some. Despite their satisfactory financial internal rates of return, the project is assessed as less likely to be sustainable (without the Government’s coverage of debt). The project has achieved significant impacts on institutional strengthening of environmental management and on the operation and maintenance of wastewater treatment facilities.
The two associated advisory TA operations achieved significant results. Training courses were conducted for operators of municipal and industrial wastewater treatment facilities throughout Anhui in environmental monitoring, operation, maintenance, and management of such facilities. A permanent training center was established using the training manuals and equipment provided under the TA. A long-term integrated environmental management plan was formulated to improve water and air quality and solid waste management in the Chao Lake basin. The outputs of the TA were highly relevant, timely, and instrumental for the formulation of the Chaohu Environmental Improvement Plan, approved by the State Council, and included in Anhui’s 10th Five-Year Plan. More than 80% of the investment projects recommended to improve environmental quality in the Chao Lake basin have either been, or are being, constructed.
a Available: www.adb.org/documents/ppers/prc/28241-prc-pper.pdf
Box 5: Indonesia Health and Nutrition and Social Protection Sector Development Programsa
Successful
A sector development program is a combination of investment (a project) and policy-based (a program) components designed to meet sector needs in a comprehensive and integrated way. In 2006, OED evaluated the sector development programs for health and nutrition and for social protection in Indonesia. These were OED’s first evaluations of that lending modality. Both programs were designed and implemented in response to the 1997 financial and economic crisis that undermined social well-being in Indonesia by increasing unemployment, reducing family incomes, and raising prices of necessities. As a result, there was a substantial increase in the number of people living in poverty and a reversal of social development progress achieved over the preceding two decades. The Government’s limited budget constrained the delivery of essential and basic services, preventing people—especially the poor and vulnerable groups—from accessing quality health care and educating their children.
The health and nutrition sector development program aimed to secure for the poor access to essential health, nutrition, and family planning services; maintain the nutritional status of vulnerable groups; and reduce the incidence and impacts of communicable diseases associated with poverty and malnutrition. It supported fundamental reforms through the development of pro-poor health policies, structures, and systems. The project was designed to improve and maintain the health and nutrition of the population and secure continued access to essential health, nutrition, and family planning services. The program helped the government institute policy reforms. The project produced most of the expected outputs. Project interventions largely reached the intended beneficiaries. These included (i) health card distribution to the poor; (ii) revitalization of community-based health posts that provide prevention and promotive health, nutrition, and family planning services, and community volunteers; and (iii) provision of maternal care, family planning, and immunization services. However, complementary and supplementary feeding for infants, children, and pregnant women with high caloric deficiency, as well as assistance for schoolchildren, reached fewer than expected. Key health indicators suggest that the general health and nutrition status of the population, including family planning practice, improved. Maternal deaths were contained by promoting prenatal care, increasing the number of deliveries attended by professionals, and enhancing the referral system for high-risk cases. The health of infants and children was improved by intensifying outreach by paraprofessionals and ensuring support for immunization programs. A pro-poor-based planning and resource allocation system was established. Furthermore, mechanisms were put in place to minimize misuse of resources and to resolve complaints.
The purpose of the sector development program for social protection was to reduce impoverishment while introducing sector reforms to strengthen social services delivery in anticipation of decentralization. The program loan provided support to government policies aimed at maintaining access of the poor to social services; maintaining the quality