In case of Jamshoro power generation project, the total contract award amounted to only $22.8 million or 2.5% of the approved loan amount even after 58% of time had elapsed. PHOTO: FILE
Usual bureaucratic inefficiencies, startup delays and extremely complex procedures defined by the ADB for awarding contracts of projects remained some of the key reasons behind the dismally low disbursements.
As of the end of December 2016, Pakistan could utilise only $1.8 billion or 27% of the total loans, showed official documents of the Manila-based lending agency.
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As there is a time value of money as well, Pakistan is paying 0.15% in “commitment charges” on majority of the undisbursed amount. The $4.63 billion includes both expensive and concessionary loans.
In 2016, it took almost five months to make a project loan effective after its approval from the Board - a time that can easily be shortened to a couple of weeks. However, projects’ start-up compliance was better than the previous year’s when it stood close to seven months.
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The ADB-financed portfolio is not moving at a swift pace despite the fact that its Country Director, Werner Liepach, has easy access to Q Block - the seat of the Finance Ministry - and to Finance Minister Ishaq Dar. In other countries, it is rare that heads of lending agencies meet with the top political leaderships, according to officials who have worked in these organisations at the international level.
This week, the ADB and Pakistan completed the review of the country portfolio for the period of December 2016. By end 2016, the ADB-financed total active portfolio increased to $6.7 billion including policy loans. The portfolio is comprised of 37 investment projects and one sector reform programme.
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However, the project portfolio review revealed that the chronic issues affecting the disbursement of loans largely remained unaddressed even in the last year. This denied or delayed the intended benefits the policymakers conceived while seeking these foreign loans.
“The Executing Agencies/Implementing Agencies’ delays in decision-making, inherent problems of administering the contracts and performance of supervisory and management consultants undermine economy and efficiency in delivery”, noted the ADB documents.
Due to slow progress, the ADB even cancelled $193.6 million loan amount in 2016. Six projects remained problematic last year.
Problems
The situation was equally worse in the energy sector- supposedly the PML-N government’s top priority area. There were 14 active loans worth $2.9 billion in the energy sector but disbursements stood at only $440 million last year.
At the end of 2016, out of 30 active loan projects, 24 projects were rated as “on track” but the amounts could not be fully disbursed in these projects. The pace of work on the project could be one genuine reason for less disbursement. But when one compares the figures of contract awards with the cumulative disbursements, the bureaucratic inefficiency appears to be the reason behind the slow financial progress. The cumulative contract awards stood at $2.9 billion by the end of last year but the disbursements against these awards amounted to $1.8 billion.
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The ADB said that in 2016 the institutional arrangements of Project Management Units (PMUs) remained a challenge. The project management unit of Energy Efficiency Investment Program could not be made functional despite lapse of seven long years. A PMU at NTDC remained understaffed for almost all of 2016 and resultantly project implementation suffered in the absence of adequate resources.
The PMUs of CAREC Border Services Project, Water Resources Development Project could not be fully established by the end of 2016.
In terms of lending modality, the multi-tranche financing facility (MFF) accounts for 31% of the active loan portfolio. However, except for the MFF in the Agriculture sector, more than half of the MFF amount remained uncommitted. A substantial underutilisation was in the transport and energy sectors.
Since 2011, the energy sector accounted for nearly half of Pakistan’s active portfolio, standing at $2.9 billion by end of 2016.
In case of Jamshoro power generation project, the total contact award amounted to only $22.8 million or 2.5% of the approved loan amount even after 58% of time lapsed. Some of the key reasons for delayed procurement are related to unavailability of designs, weak procurement capacities of the government agencies, litigation and delays in PMU establishment, according the ADB.
However, Pakistani authorities blamed the ADB for the delay due to complex procedures for the award of contracts.
In the eyes of the ADB, lack of effective understanding of ADB’s procurement guidelines, general lack of understanding of national and provincial procurement rules, absence of a fully functional internal approval mechanism and frequent transfer/posting of key project staff were reasons behind the delays.
Published in The Express Tribune, March 19th, 2017.
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