Evaluation Study Reference Number: CAP: REG 2008-73 Regional Cooperation Assistance Program Evaluation December 2008 Greater Mekong Subregion: Maturing and Moving Forward Operations Evaluation Department ABBREVIATIONS AADT – annual average daily traffic ACMECS – Ayeyawady–Chao Phraya–Mekong Economic Cooperation Strategy ADB – Asian Development Bank ADF – Asian Development Fund ADTA – advisory technical assistance ASEAN – Association of Southeast Asian Nations BCI – Biodiversity Conservation Corridors Initiative CASP – Core Agriculture Support Program CBTA – Cross-Border Transport Agreement CDC – communicable disease control CPI – consumer price index CPS – country partnership strategy CSP – country strategy and program DMC – developing member country EdL – Electricité du Laos EIRR – economic internal rate of return EOC – Environment Operations Center EPA – environmental performance assessment FIRR – financial internal rate of return GDP – gross domestic product GMS – Greater Mekong Subregion GMS-BF – GMS Business Forum GMS-SF – GMS Strategic Framework GZAR – Guangxi Zhuang Autonomous Region HCMC – Ho Chi Minh City HDM – Highway Development Management HIV/AIDS – human immunodeficiency virus/acquired immunodeficiency syndrome HRD – human resource development IIRSA – Initiative for Integration of Regional Infrastructure in South America IRI – international roughness index JSF – Japan Special Fund Lao PDR – Lao People’s Democratic Republic LTSF – Long-Term Strategic Framework M&E – monitoring and evaluation MDG – Millennium Development Goals MRC – Mekong River Commission MTCO – Mekong Tourism Coordination Office NGO – nongovernment organization NH – national highway NPV – net present value OCR – ordinary capital resources OED – Operations Evaluation Department OREI – Office of Regional Economic Integration PCR – project completion report PPAR – project performance audit report PPTA – project preparatory technical assistance PRC – People’s Republic of China RCI – regional cooperation and integration RCIS – regional cooperation and integration strategy RCSP – regional cooperation strategy and program RED – Road Economics Decision RETA – regional technical assistance RN – route national RRP – report and recommendation of the President RSDD – Regional and Sustainable Development Department SEA – strategic environmental assessment SERD – Southeast Asia Department SFA-TFI – Strategic Framework for Action on Trade Facilitation and Investment SIWG – Subregional Investment Working Group STFWG – Subregional Trade Facilitation Working Group TA – technical assistance TWG – Tourism Working Group UNDP – United Nations Development Programme UNESCAP – United Nations Economic and Social Commission for Asia and the Pacific UNWTO – United Nations World Tourism Organization VOC – vehicle operating cost WGA – Working Group on Agriculture WGE – Working Group on Environment NOTE In this report, “$” refers to US dollars. Key Words regional cooperation, regional integration, gms, adb, asian development bank, greater mekong subregion, adb gms, cambodia, lao, myanmar, china, thailand, viet nam, development effectiveness, roads, roads maintenance, performance evaluation, transport, infrastructure, energy, tourism, trade facilitation, environment, agriculture, health, social Director General H. Satish Rao, Operations Evaluation Department (OED) Director and H. Hettige, Operations Evaluation Division 2, OED Team Leader Team Members M. Gatti, Senior Evaluation Specialist, Operations Evaluation Division 2, OED N. Singru, Evaluation Specialist, Operations Evaluation Division 2, OED G. Crooks, Evaluation Specialist, Operations Evaluation Division 2, OED R. Lumain, Senior Evaluation Officer, Operations Evaluation Division 2, OED B. Palacios, Senior Evaluation Officer, Operations Evaluation Division 2, OED C. Roldan, Senior Operations Evaluation Assistant, Operations Evaluation Division 2, OED Operations Evaluation Department, RE-1 CONTENTS Page EXECUTIVE SUMMARY i MAP I. INTRODUCTION 1 A. Background 1 B. ADB Regional Cooperation Strategy 3 C. GMS Program Structure and Organization 6 D. Coordination within ADB 9 E. Economic and Social Background 11 II. TOP–DOWN ASSESSMENT (STRATEGIC AND INSTITUTIONAL PERFORMANCE) 12 A. Strategic Assessment 12 B. Institutional Assessment 16 C. Value Addition 21 D. ADB Performance 22 III. GMS EVALUATION: BOTTOM–UP 28 A. Transport and Trade Facilitation 29 B. Energy 37 C. Tourism 42 D. Environment 43 E. Agriculture 44 F. Health and Other Social Sectors 46 IV. CONCLUSIONS, ISSUES, LESSONS, AND RECOMMENDATIONS 47 A. Conclusions 47 B. Issues 49 C. Lessons 50 D. Recommendations 50 APPENDIXES 1. ADB Financial Support for the GMS 53 2. ADB Lending and Nonlending Operations in the GMS (1992–2007) 63 3. Greater Mekong Subregion and Regional Public Goods 67 4. Selected Lessons from Experience on Regional Cooperation 70 5. Economic Analysis of Greater Mekong Subregion Road and Power Projects 74 6. Expected Regional Cooperation Impacts and Outcomes in the GMS Loans 87 WORKING PAPERS (available upon request) The guidelines formally adopted by the Operations Evaluation Department (OED) on avoiding conflict of interest in its independent evaluations were observed in the preparation of this report. Although H. Satish Rao, Director General, OED, headed the East Asia Department, and Ramesh B. Adhikari, Director of Operations Evaluation Division 1, worked for the Southeast Asia Department, they were not involved in preparing, implementing, or supervising Greater Mekong Subregion projects. Mr. Adhikari supervised the report up to peer review. John Weiss and Carmencita Balbosa were the consultants. To the knowledge of the management of OED, there were no conflicts of interest among the persons preparing, reviewing, or approving this report. EXECUTIVE SUMMARY Introduction The Greater Mekong Subregion (GMS) program, an activity-based subregional economic cooperation program, began in 1992 under the sponsorship of the Asian Development Bank (ADB). It covers six countries—Cambodia, Lao People’s Democratic Republic (Lao PDR), Myanmar, Thailand, Viet Nam, and Yunnan Province and Guangxi Zhuang Autonomous Region of the People’s Republic of China (PRC). ADB assumed the role of the GMS Secretariat as well as roles of a facilitator, financier, honest broker, and technical adviser. An independent evaluation study of the GMS program undertaken by the Operations Evaluation Department (OED) in 1999 found that overall progress in the first 7 years of operation had been satisfactory, but it raised concerns about the lack of focus of the GMS program and limitations on the availability of ADB resources for regional cooperation. Its lessons included, among others, the need to demonstrate “regional” impacts, the importance of providing linkages between the national and regional programs, and the necessity for ADB to have an exit strategy. Only about a third of the lessons have been adopted so far. Given the limited time lag between the establishment of the GMS program and the 1999 evaluation, it was not possible to draw inferences about the program’s impact. The initial 10 years of the GMS program were characterized more by sector-specific initiatives rather than a holistic vision. It was not until November 2001 that the countries adopted a 10-year GMS Strategic Framework (GMS-SF) covering 2002–2012. Meanwhile, ADB developed a regional cooperation strategy and program (RCSP) in 2004 to complement country strategies and programming for 2004–2008. The overarching objective of the RCSP is supporting pro-poor sustainable growth. The ADB-wide regional cooperation and integration strategy of 2006 aims explicitly to move away from a focus on standalone projects and programs toward a more strategic approach. At the request of the Southeast Asia Department, OED undertook a regional cooperation assistance program evaluation (RCAPE) of ADB’s support to the GMS program. It is the first RCAPE done by OED and will provide directional inputs toward the next RCSP for the GMS program. It evaluates ADB-cofinanced GMS operations during 1992–2007. It does not, however, evaluate the operations financed by other aid agencies or by GMS member countries, nor does it cover any GMS activities in Myanmar, where ADB has no operational activity. It uses the evaluation framework developed for country assistance program evaluations involving a combination of “top–down” and “bottom–up” perspectives. The counterfactual is reviewed in the assessment of ADB’s past value added. Study Findings Member countries have benefited from subregional cooperation in the GMS, although tangible progress in terms of significant regional economic impact has been slow. From its outset, the GMS program was designed as a relatively flexible, activity-based program as opposed to a rules-based form of cooperation. This means that member countries collaborate on specific activities involving limited cooperation and limited lending to key sectors—principally roads and power infrastructure, and to a lesser extent tourism. ADB has provided 40% of the funds (about $3.5 billion for GMS loans and special grants and about $82 million for GMS technical assistance [TA]) for the ADB-sponsored GMS program, while another 35% has come from member countries and 25% more from other development partners. ii The negative comments on some aspects of the GMS should not detract from the overall judgment that progress, while slow, has been positive. Despite problems in individual sectors and projects, ADB has played an important catalytic role,