Program Performance Audit Report

Marivic P. Dela Cruz

Informations

• Publié par: Curah
• Nombre de lectures: 30
• Langue: English

Extrait

ASIAN DEVELOPMENT BANK PPA: BAN 23441










PROGRAM PERFORMANCE AUDIT REPORT


ON THE


SECOND INDUSTRIAL PROGRAM
(Loan 1147-BAN[SF])


IN


BANGLADESH









July 2000 CURRENCY EQUIVALENTS
Currency Unit – Taka (Tk)


At Appraisal At Program Completion At Operations Evaluation
(November 1991) (April 1994) (March 2000)

Tk1.00 = $0.027 $0.025 $0.020
$1.Tk37.64 Tk40.13 Tk51.00






ABBREVIATIONS

ADB – Asian Development Bank
BFIDC – Bangladesh Forest Industries Development Corporation
BTMC – ladesh Textile Mills Corporation
EA – executing agency
GDP – gross domestic product
ICIR – Interministerial Committee on Industrial Reforms
ICP – Interministermittee on Privatization
MOI – Ministry of Industries
PCR – project completion report
PME – public manufacturing enterprise
PPAR – program performance audit report
SDR – special drawing right
TA – technical assistance











NOTES

(i) The fiscal year (FY) of the Government ends on 30 June.
(ii) In this report, “$” refers to US dollars.




Operations Evaluation Office, PE-546 CONTENTS

Page


BASIC DATA ii

EXECUTIVE SUMMARY iii

I. BACKGROUND 1

A. Rationale 1
B.Formulation
C. Objectives and Scope at Appraisal 2
D. Financing Arrangements 2
E.Program Completion Report
F. Evaluation 3

II. IMPLEMENTATION PERFORMANCE 3

A. Policy Reforms and Institutional Development 3
B. Procurement and Disbursement 6
C. Management of the Program 6
D. Effectiveness of Technical Assistance 6

III. PROGRAM RESULTS 7

A. Achievement of the Objectives 7
B. Sustainability 10

IV. KEY ISSUES FOR THE FUTURE 10

A. Program Formulation 10
B.Ownership and Political Commitment 12
C. Accountability and Governance Structures 13

V. CONCLUSION 14

A. Overall Assessment 14
B.Key Lessons for the Future
C. Follow-Up Actions 16

APPENDIXES 17







BASIC PROGRAM DATA
Second Industrial Program (Loan 1147-BAN[SF])


PROGRAM PREPARATION/INSTITUTION BUILDING
TA No. TA Project Name Type Person- Amount Approval
Months Date
1635-BAN Strengthening of Institutional Framework for AOTA 12 $400,000 2 Jan 1992
Restructuring Public Manufacturing
Enterprises
1636-BAN Improvement of Labor Productivity in Public AOTA 9 $325,000 2 Jan 1992
Manufacturing Enterprises
1637-BAN Implementation of Privatization Program for AOTA 21 $446,000 2 Jan 1992
Public Manufacturing Enterprises

As Per ADB
KEY PROGRAM DATA ($ million) Loan Documents Actual
1ADB Loan Amount/Utilization–SDR ($ equivalent) 90.5 ($125.0) 45.2 ($62.3)
2ount/Cancelation–SDR ($ $62.7)

KEY DATES Expected Actual
Fact-Finding 10-22 Mar 1990
Appraisal 20 Oct-1 Nov 1990
Loan Negotiations 18-20 Nov 1991
Board Approval 17 Dec 1991
Loan Agreement 24 Dec
Loan Effectiveness 16 Mar 1992 20 Jan 1992
First Disbursement 13 Oct 1992
Program Completion 1 Dec 1993 25 Apr 1994
Loan Closing 30 Jun 1994 Apr
Months (Effectiveness to Completion) 20.50 27.15

BORROWER The People’s Republic of Bangladesh

EXECUTING AGENCY Bangladesh Bank and Ministry of Industry

MISSION DATA
Type of Mission No. of Missions Person-Days
Appraisal 1 97
Program Administration
Review 5 76
Tripartite Meeting 2 5
3
Program Completion 0 0
Operations Evaluation 1 30


ADB = Asian Development Bank, AOTA = advisory and operational technical assistance, BAN = Bangladesh, SDR =
special drawing right, TA = technical assistance.
1 As of December 1991.
2 As of April 1994.
3 No program completion review mission was undertaken. The program completion report was prepared based on a
desk study. EXECUTIVE SUMMARY
Reforms as a process of change -- no blueprints please!
During the early 1990s, the Government of Bangladesh implemented a series of reforms
to improve economic performance. The objectives were to (i) create competitive industries, and
(ii) enhance private sector development. Complementing the reforms for trade and exchange
rate liberalization, the Government began reforms to reduce its presence in manufacturing
activities. From 1988 to 1990, the Asian Development Bank provided policy-based loan to
introduce policy reforms for the steel and engineering, textiles, and leather industries. The
Second Industrial Program (the Program) was expected to continue the process of improving
the overall policy environment to promote industrial growth and efficiency. The new
Government’s 1991 industrial policy was accompanied by an ambitious agenda of policy
reforms; the Program was essentially designed to support implementation of this policy as it
related to public manufacturing enterprises (PMEs). The Program was also to implement
divestment and privatization measures for selected PMEs.
On 17 December 1991, the Board approved the Program loan for SDR90.456 million
(about $125 million). Three technical assistance (TA) grants were provided to assist the
Government with program implementation. The TAs supported (i) development of a legal
framework for institutional reform of PMEs, (ii) development of modalities and mechanisms for
privatization, and (iii) assessment of human resources of PMEs and labor productivity of the
manufacturing sector.
The Program focused on seven major areas of reforms: (i) minimizing the Government’s
role in the industry sector in general and in manufacturing in particular, (ii) enhancing
managerial autonomy and accountability of PMEs, (iii) enhancing financial autonomy and
accountability of PMEs, (iv) implementing privatization of PMEs, (v) rationalizing employment,
(vi) developing policy actions for the environment, and (vii) supporting institutional reforms to
provide better oversight of PMEs.
The first tranche of SDR45.228 million was disbursed in two installments in February
and April 1992. Because of the considerable delays in meeting the policy covenants, the second
tranche of the loan was canceled on 24 April 1994. The loan was closed in April 1994. The
program completion report prepared in December 1997 rated the Program as unsuccessful.
This program performance audit report presents an analysis of the Program’s design
and implementation arrangements, an assessment of the Program's effectiveness in initiating
and implementing policy reforms, and overall impact on the industrial economy. Although the
Government announced the new industrial policy in 1991 and initiated wide ranging policy
reforms, overall implementation has been weak and uneven. Several policy covenants remain
unfulfilled.
An important impact expected from the Program was the reduction of the role of the
Government and particularly PMEs within the overall economy. The PMEs’ share in investment,
output, value added, and employment has been reduced substantially.
A major aspect of PME reform was to provide a proper legal framework to enable the
PMEs and sector corporations to function as autonomous companies. By June 1992, all of the
PMEs were to be incorporated under the Companies Act. This legal change was seen as the iv
starting point for restructuring, as it freed the existing PMEs from heavily regulated procurement
processes, and labor and pricing procedures. It was expected that such autonomy would help to
make PMEs commercially viable. The Government did not agree with a crucial policy covenant
of giving PMEs the autonomy to allowmarket wages for their employees. As a result, although
most PMEs now exist as companies, overall autonomy of their boards remains weak. The
financial performance of PMEs continues to remain an area of concern as PMEs continue to
report large losses. The overall financial liabilities of PMEs also remain high. The Program was
not successful in reducing negative fiscal burden of PMEs.
While the Program specified various measures for privatization of PMEs, overall
implementation has been very slow and remains largely incomplete. Only three units were
privatized during program implementation, compared with the target of substantial divestment of
14 units and privatization of 20 textile mills.
This audit report identifies three major issues as determinants of program performance:
(i) program formulation and design weaknesses, (ii) ownership and political commitment, and
(iii) accountability and governance structure. The Program was complex because it aimed to
reform a sector that had chronic performance problems. The Program had several design
deficiencies, and did not incorporate in-depth analysis of institutional structures and government
processes to identify barriers to reforms.
Policy reforms usually require strong po