This was stated by the team of Central and West Asia Department (CWRD) of ADB in its project completion report. It said while the programme loan disbursed all of its tranches, the resources have not been used for the intended purposes either effectively or efficiently, The report said that by some measures only one quarter of the implementation framework has been achieved by the end of the SMEDP.
The Business Support Fund (BSF) suffered initial delays and for this reason did not benefit from the full 60 months of implementation originally envisaged. The plans to restructure and privatise the SME Bank were implemented in full till the point of sale, but the prospects of its privatisation are uncertain at least until the macroeconomic challenges facing Pakistan are fully resolved.
Overall, ADB report observed, the SMESDP is rated partly successful, despite having achieved more than 80 percent of the output performance indicators and targets included in the Programme Framework. While the programme loan disbursed all of its tranches, the resources have not been used for the intended purposes either effectively or efficiently.
ADB report observed that the scope of the SMESDP was wide and inputs from the programme loan and project loan intertwined and cut across several areas of complex, challenging reforms. This risked spreading co-ordination capacity too thinly from the outset and imposed a steep learning curve on any entity attempting to administer the project administration. These risks ended up causing additional difficulties during implementation, and perhaps this wideness and complexity of scope should be avoided in future ADB operations, the report suggests.
ADB report disclosed that awarding the role of executing agency to the Ministry of Finance was clearly a mistake in project design, since most of the activities were to be delivered by the Ministry of Industries, the Ministry of Labour, or the State Bank of Pakistan. The high turnover of project directors in the Core Programme Management Unit (CPMU) made it hard for the MoF to co-ordinate the many different work areas across the SMEDP.
The communication lines between agencies of the ministries involved and the CPMU were never effective in helping the implementing agencies overcome their many implementation challenges. The high-level co-ordination bodies established to monitor the SMESDP reform agenda seldom met. In the future, awarding of co-ordination roles to one of the various agencies involved in projects of this nature should be done based on ownership potential, as recognised during the preparatory work and design, ADB report pointed out.
The fact that, by design, the SMESDP left undefined most of the procurement and disbursements rules that should apply to the SME BSF component led to a long period of project implementation without any presentation of claims or withdrawal applications. This component was using resources disbursed to the government, budgeted against funds previously sourced from the programme loan. One lesson is that undertaking a procurement risk assessment exercise during preparation of the SMEDP would have highlighted the potential for some of the problems.
Perhaps, a specific capacity development component dedicated to mitigate these risks could have been designed in response. But these problems are not only a result of an underestimation of procurement risks; by a significant measure they are also due to the lack of close project implementation and monitoring effort by ADB.
ADB report pointed out that there is no substitute for review missions. If signs indicate that a loan or a component is likely to be unsuccessful, ADB should dispatch a review mission to discuss the matter and, if agreed, take decisive action to cancel the unused portion of the loan.
Including the CFC programme in the SMESDP as a component to be funded directly by Inter-governmental transfers, indirectly sourced from several tranche releases of the programme loan, tested whether the government's financial management and control systems could properly implement these activities. Instead of funding this programme through a project modality, ADB aimed to harmonise its support with the government's system and thereby reduce the transaction costs associated with differences in procedural requirements.
The SMEDP earmarked funds from the second and tranche for the CFC programme and included design details as policy conditions in the programme loan and as implementation milestones in the project loan to keep fiduciary risks and ensure original intentions and objectives were achieved. The second and the third tranches were disbursed but Technology Upgradation and Skills Development Company (TUSDEC) received only a portion of the funds from the MoF, with long delays and in a sporadic fashion. Only one of the four CFC projects had been established by the time this Project Completion Report (PCR) was prepared. The breach in the loan agreement that these delays represent was raised several times formally and informally from June 2008 onwards but not much progress has been made.
The report recommended that the innovative components of the SMEDP tested different project implementation solutions and were an attempt by ADB at more direct forms of policy intervention in industrial support. But if ADB is looking to support the government of Pakistan in the future through lending modalities that go beyond the traditional list of policy reforms packaged in tranche releases, both the Government and ADB must first learn the lessons of SMEDP.
The degree to which a project's effectiveness depends on how decisive and sustained the implementation effort is should not be underestimated, irrespective of how well the project may have been designed. Review missions are even more important in bringing about the rapport and informal information exchange through emails or phone conversations that establish full, open, detailed communication that is so crucial to effective project administration. Much room exists for effective interaction with the implementing agencies even in missions for parallel projects.