Counterpart funding and incentive issues in TA loans. Despite the challenges in project implementation, the project support unit (PSU) and local support unit (LSU) had utilized close to $4 million in counterpart funding, while ADB disbursed only 15% of the TA loan. As a result, the actual split between ADB and the government was 15:85, when the agreement was 70:30. Thus, a key lesson is that there should have been far greater oversight on the utilization of counterpart funds, as the ADB-financed expenditures and activities and overall progress of the TA loan lagged far behind. The resource utilization also shows a fundamental flaw in the design of TA loans, in which a significant share of resources is allocated for international consulting inputs. The various challenges in this TA loan, including protracted internal government approvals, delayed consultant selection. In future, ADB should very carefully examine the incentives of the executing and implementing agencies in utilizing resources. Core activities, such as recruitment of experts, are typically delayed while routine activities, such as maintenance of offices and vehicles, are approved on time, without a continuous assessment of project progress.
Mega City Development Project