Assessment of How ADB Roads and Railways Projects Addressed Poverty Reduction

A Case Study from the 2007 Sector Assistance Program Evaluation of Asian Development Bank Assistance for Roads and Railways in the Peoples Republic of China

August 2007 Tyrrell Duncan Operations Evaluation Department

Abbreviations
ADB COS CSP EPRS PRC PRS RRP Asian Development Bank country operational strategy country strategy and program enhanced poverty reduction strategy Peoples Republic of China poverty reduction strategy Report and Recommendation of the President

Note
In this report, $ refers to US dollars.

Contents
Page I. II. III. IV. Role of Poverty Reduction in Project Design How Poverty Reduction was Addressed in RRPs from 1997 to 1998 How Poverty Reduction was Addressed in RRPs from 2000 to 2004 How Poverty was Addressed in RRPs in 2005 1 2 3 4

I.

Role of Poverty Reduction in Project Design

1. The evaluation of the Asian Development Bank (ADB) road and railway projects in the Peoples Republic of China (PRC) took into account changes in ADBs role and objectives.1 Growth was the overarching goal of ADB interventions prior to the country operational strategy (COS), 19972003. The COS retained economic efficiency as the number one goal, but expanded the growth objective to incorporate poverty reduction by promoting economic growth to reduce poverty in inland provinces. 2. With the approval of ADBs Poverty Reduction Strategy (PRS) in 19992, ADB sought to improve the orientation of its operations toward poverty reduction. For the next few years, it did so mainly by targeting interventions toward poor households, and by concentrating more attention on social development and governance. In 2004, ADB reviewed the PRS, and approved the Enhanced Poverty Reduction Strategy (EPRS)3. In the case of infrastructure interventions, including roads and railways, the EPRS required ADB to examine the broad channels for poverty reduction at the country and sector levels, but downplayed the former strategy of targeted interventions since it was found impractical. 3. The following assessment uses a set of benchmark criteria to examine how well the design of ADB road and railways projects in the 19972005 study period addressed poverty reduction. The benchmarks applied are (i) Benchmark 1. Did the project gather evidence and design approaches to address the causes of poverty? (ii) Benchmark 2. In choice of site and design, did the project explicitly address poverty reduction? (iii) Benchmark 3. Did the project design seek to reduce possible adverse impacts on poor people? (iv) Benchmark 4. Was the project linked to poverty-focused policy reforms and institution building? (v) Benchmark 5. Was the project designed as part of a package of integrated projects and programs? Did the design consider and address the possibility that the project might crowd out other poverty reduction projects?

1
2 3

ADB. 2007. Sector Assistance Program Evaluation of Asian Development Bank Assistance for Roads and Railways in the Peoples Republic of China. Manila. ADB. 1999. Fighting Poverty in Asia and the Pacific: The Poverty Reduction Strategy. Manila. ADB. 2004. Enhancing the Fight Against Poverty in Asia and the Pacific: The Poverty Reduction Strategy of the Asian Development Bank. Manila.

Assessment of How ADB Projects Addressed Poverty Reduction

(vi)

(vii)

Benchmark 6. Did the project background data establish the extent to which the situation of the poor in general, and that of the target groups in particular, could be assessed? Benchmark 7. Were assessment of poverty impact and benefit incidence carried out?

4. The assessment divides the study period into three subperiods to take into account changes in (i) from 1997 to 1999, covering the period prior to approval of the PRS, (ii) from 2000 to 2004, covering the period of the PRS and prior to approval of the EPRS, and (iii) 2005, when the EPRS replaced the PRS. 5. It is important to note that the benchmark assessment examines whether the report and recommendation of the President (RRP) included features relevant for poverty reduction in the design of a project. It does not consider whether those features added value compared with a without project case, whether they complemented or complicated existing implementation and funding arrangements for the executing agency and the other PRC authorities concerned, or the outcomes of project features. 6. Initially, a brief review was conducted of the RRPs for the PRC road and railway projects approved in the period immediately before 1997. This was to clarify how ADB treated poverty reduction in project design before it adopted poverty reduction as its overarching objective. The review examined whether poverty reduction was (i) a formally stated secondary objective, (ii) included as an issue but not a formal objective, or (iii) not included at all. Unsurprisingly, in view of the above historic background on how poverty reduction became operationalized in ADB, none of the four road projects approved in 19951996 referred to poverty reduction as a formal objective, and only mentioned it as an issue. The beneficiaries listed in the RRPs were limited to road users.

II.

How Poverty Reduction was Addressed in RRPs from 1997 to 1999

7. The RRPs for projects approved during the first 3 years of the COS (19971999, which corresponded to the period immediately prior to approval of the PRS), were assessed in relation to the seven benchmarks (para 3). A rating scale of 03 was used.4 The results are in Table 1. The five road projects were on average, rated satisfactory in relation to the benchmarks, with two projects close to highly satisfactory. In contrast with the pre-1997 period, poverty reduction was explicitly listed as an issue in all five of the road projects, and formally as a secondary objective in two. The road projects included considerable lengths of local and service roads to facilitate access to the expressway from within the project influence area. In the case of railways, both projects achieved a satisfactory score, with one scoring close to highly satisfactory.
4

For example, highly satisfactory = 3, satisfactory = 2, less satisfactory = 1, and unsatisfactory = 0.

Assessment of How ADB Projects Addressed Poverty Reduction 3

Table 1: Benchmark Assessment of Roads and Railways RRPs, 19971999

Project A. Roads 1. Hebei Roads Development 2. Chengdu-Nanchong Expressway 3. Changchun-Harbin Expressway 4. S. Yunnan Road Development 5. Shanxi Roads Development B. Railways 1. Shenmu-Yanan 2. Guizhou-Shuibai Year Loan No. BM 1 BM 2 BM 3 BM 4 BM 5 BM 6 BM 7 Average Scorea

1998 1998 1998 1999 1999

1617 1638 1641/2 1691 1701

3 2 2 2 1

3 2 2 3 3

2 2 2 2 2

3 2 1 2 0

2 1 2 3 2

3 3 2 3 3

3 3 1 3 3

2.71 2.14 1.71 2.57 2.00

1997 1998

1553 1626

3 3

3 3

2 2

2 2

2 2

2 3

0 3

2.00 2.57

BM = benchmark, RRP = report and recommendation of the President. a Unweighted average. Source: Sector assistance program evaluation team.

III.

How Poverty Reduction was Addressed in RRPs from 20002004

8. Following approval of the PRS in 1999, all road projects approved from 2000 to 2004 were located in the PRCs poor central and western provinces. Poverty reduction was explicitly listed as an issue in each of these RRPs, and special project features were included to increase the poverty reduction impacts. The benchmark assessment of the 11 road and four railway projects is in Table 2. 9. The benchmark scores for 20002004 improved upon those for 19971999. With an average overall benchmark score of 2.52, the road projects scored between satisfactory and highly satisfactory. On average, the four railway projects were even closer to highly satisfactory (2.82). Explicit poverty reduction features were included. Special project features were designed in the context of existing national or provincial plans and programs, and with regard to some key policy reforms. Close dialogue and coordination with the World Bank was highlighted in the RRPs. 10. It is interesting to note in relation to benchmark 5 that there was little attempt in any of the RRPs to claim that the special project features were genuinely additive. In the case of the local-roads components, most RRPs showed that ADB was financing a minor foreign exchange component of a larger local-roads package already defined and budgeted within the provincial roads development plan. There was no ex ante crowding out analysis. The special features for addressing HIV/AIDS in projects close to the PRCs western border were also presented as supplements to government initiatives already in place. The majority of the RRPs explicitly listed the various components of

Assessment of How ADB Projects Addressed Poverty Reduction

provinces' other (i.e. not having to do with roads) poverty reduction programs and described how the ADB road project features were adjusted to these. Table 2: Benchmark Assessment of Roads and Railways RRPs, 20002004
Project A. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. Roads Chongqing-Guizhou Road Development Shaanxi Roads Development Guangxi Roads Development South Sichuan Roads Development Shanxi Roads Development II Ningxia Roads Development West Yunnan Roads Development Xian Urban Transport Hunan Roads Development II Guangxi Roads Development II Gansu Roads Development Year 2000 2001 2001 2002 2002 2003 2003 2003 2004 2004 2004 Loan No. 1783/4 1838 1851 1918 1967 2004 2014 2024 2089 2094 2125 BM 1 3 2 2 3 2 3 3 1 3 2 3 BM 2 3 2 3 3 2 3 3 1 3 3 3 BM 3 2 3 2 3 3 3 2 2 3 3 3 BM 4 2 3 3 2 2 2 3 2 3 3 3 BM 5 2 2 2 2 2 2 2 2 2 2 2 BM 6 3 2 2 3 2 3 3 2 3 3 2 BM 7 3 3 3 3 2 3 3 2 3 3 2 Average Score a 2.57 2.43 2.43 2.71 2.14 2.71 2.86 1.71 2.86 2.71 2.57

B. Railways 1. Heifei-Xian 2000 1748 3 2. Ganzhou-Longyan 2001 1850 3 3. Yichang-Wanzhou 2003 2051 3 4. Dali-Lijiang 2004 2116 3 BM = benchmark, RRP = report and recommendation of the President. a Unweighted average. Source: Sector assistance program evaluation team.

3 3 3 3

3 3 3 3

2 3 3 3

2 2 2 2

3 3 3 3

3 3 3 3

2.71 2.86 2.86 2.86

IV. How Poverty was Addressed in RRPs in 2005

11. Following approval of the EPRS in 2004, ADB adjusted its PRS to become more country-specific, with less targeting of interventions. The country strategy and program (CSP) was to demonstrate how ADBs overall assistance would contribute to poverty reduction, and individual lending and nonlending interventions were no longer expected to be targeted directly to the poor. The EPRS stated that ADBs comparative advantage was in the area of assisting poverty reduction indirectly, rather than through targeted interventions.
In practice, a new set of project design principles needs to be instilled in road and railway projects to change from the bottom-up approach, and a new set of benchmarks would be needed to evaluate these.

12. The rationale for such an adjustment in strategy was echoed in the Operations Evaluation Departments 2006 Special Evaluation Study on Pathways out of Rural Poverty and the Effectiveness of Poverty Targeting.5 This provided strong support for this new perspective on how ADB could best support the PRCs initiatives to develop the countrys western regions. It showed the importance of widening the scope of the
5

ADB. 2006. Special Evaluation Study on Pathways Out of Rural Poverty and the Effectiveness of Poverty Targeting. Manila.

Assessment of How ADB Projects Addressed Poverty Reduction 5

CSP from site-specific individual projects in poor western areas to a broader national perspective. When appropriate, it also considered support for the creation of sustainable jobs in urban areas. Such jobs can provide opportunities for poor rural migrants coming from areas where the limitations for further farming intensification have been reached or exceeded. 13. The shift from a project-based to a country-assistance focus on poverty reduction under the EPRS has the following possible implications for ADB lending: (i) There may be a need to reconsider ADBs geographic targeting of assistance to the central and western provinces. While these are the poorest provinces, some 80% of the population reside in other parts of the country, and there are large pockets of low income rural and urban households nationwide. (ii) Each project intervention does not need to target the poor, or be designed and configured to benefit poor communities directly. In some instances, efforts to target interventions to poor households may have complicated project design and compromised more cost-effective means of ensuring that services are made accessible to the poor (e.g., ADB insistence on including rural roads components, which may have forced poorer municipalities to borrow for the provision of rural roads, rather than having these financed from their own resources or from central government grants). ADBs comparative advantage is in assisting poverty reduction indirectly, and that comparative advantage should be exploited. (iii) Poverty reduction should be monitored as an integral part of the CSP, rather than at the level of each individual project (except for projects that are classified as household targeted interventions). 14. The benchmarking of the three road and railway projects approved in 2005 is in Table 3. There is no sign of the projects being designed and monitored differently from a poverty reduction perspective than those approved during the 20002004 period. On the contrary, they have been designed and pursued just like the earlier projects. This could well be a result of the projects being identified and prepared for approval in 2003 and 2004 while the old PRS was the guideline for project design. The average benchmark score for the three approved projects is 2.57. Based on the principles and requirements of the PRS, this would be highly satisfactory. However, with the EPRS shift from a bottom-up to a top-down strategy for poverty reduction in ADB interventions, most of those seven benchmarks no longer provide a suitable basis for such poverty impact project assessment. In practice, a new set of project design principles needs to be instilled in road and railway projects to change from the bottomup approach, and a new set of benchmarks would be needed to evaluate these.

Assessment of How ADB Projects Addressed Poverty Reduction

Table 3: Benchmark Assessment of Roads and Railways RRPs in 2005

Project A. 1. 2. B. 1. Roads Central Sichuan Roads Development Hunan Roads Development III Railways Zhengzhou-Xian Railway Year Loan No. BM 1 BM 2 BM 3 BM 4 BM 5 BM 6 BM 7 Average Score

2005 2005

2181 2219

2 3

3 3

2 3

3 3

2 2

2 3

1 3

2.14 2.86

2005

2182

2.71

BM = benchmark, RRP = report and recommendation of the President. Source: Sector assistance program evaluation team.