ISLAMABAD, July 5: Dissatisfied with under-utilisation of loans, the Asian Development Bank (ADB) plans to restrict its lending to four sectors in Pakistan — namely agriculture, irrigation and water resource management, roads, and power transmission and generation.

However, the ADB said it could consider funding for major dams at a later stage.

“ADB has too many loans in its Pakistan portfolio across too many sectors and sub-sectors that need to be aligned better with available staff and technical assistance resources. Since the ADB is unlikely to double or triple the number of staff assigned to support its Pakistan operations, which is what its current portfolio probably requires, the number of loans and the sector and/or sub-sector spread needs to be reduced,” the bank’s latest study made available to Dawn said.

The study titled “Country Assistance Programme Evaluation 2007” called for adopting a strategy envisaging careful selection in giving out loans to Pakistan. It said that delayed project implementation and extensions to loan closing dates were a perennial problem in Pakistan.

During 1985-2006, 85 per cent of closed loans required an extension, although this improved to 67 per cent for 2001-2006. “Other inefficiencies include delays in making loans effective and a high level of cancellations (24 per cent for loans closed since 2001).”

ADB’s operations had performed well in the past in the identified sectors (or sub-sectors in the case of irrigation and water resource management, and technical and vocational education). These sectors were now core sectors under the ADB’s second medium-term strategy for 2006-2008. Under this scenario, while ADB would maintain a large public sector lending portfolio in its core lending sectors or sub-sectors, private sector operations and public-private partnerships would be increased to become a significant part of the ADB’s operations in Pakistan in each of these sectors. The bank would move out of the health, water supply and sanitation, and urban development sectors, as well as some agriculture sub-sectors.

The strategic framework guiding operations had not produced a desirable level of focus or coherence in the programme. Although responsiveness was a positive characteristic, it could lead to undesirable consequences in the absence of a firm strategic management. Any strategic framework must provide the basis for achieving focus and coherence, it observed.

The report suggested that the ADB should ensure that it understood the nature, extent, and drivers of corruption in each sector in which it engages. “Governance indicators are poor in Pakistan compared with other countries in South Asia. Corruption is endemic. Transparency International’s corruption perceptions index for Pakistan has been relatively constant,” it said. As required under the Second Governance and Anti-corruption Action Plan, this would involve conducting risk assessments and preparing risk management plans. Overcoming corruption was likely to involve greater use of country systems (particularly for procurement), as well as capacity development for implementation.

The study said the ADB should try to significantly increase its private sector operations in the country in a manner that created synergies with public sector operations.

The balance needs to be adjusted between lending and economic, sector, and thematic work and policy dialogue. The second element should be emphasised more to ensure that operations were underpinned by a more rigorous analysis, and that the ADB becomes recognised as a leading source of ideas in its sectors of core focus.

The report noted that Pakistan’s social indicators were below those countries with similar per capita incomes, and had improved slower than countries with similar growth rates. Compared with Bangladesh, India and Sri Lanka, Pakistan’s school enrolment was lower, adult illiteracy was higher and infant and child mortality rates were higher. Bangladesh, a poorer country than Pakistan, exhibited better social indicators, including infant and child mortality rate, education index and female gross primary enrolment ratio.