budget of the asian development bank for 2020budget of the asian development bank for 2020...

ASIAN DEVELOPMENT BANK

BuDgET Of ThE ASIAN DEVELOPMENT BANK fOr 2020

November 2019

Asian Development Bank

November 2019

Budget of the Asian Development Bank for 2020 Distribution of this document is restricted until it has been approved by the Board of Directors. Following such approval, ADB will disclose the document to the public after excluding information subject to the exceptions to disclosure set forth in accordance with ADB's Access to Information Policy.

ABBREVIATIONS

ADB – Asian Development Bank ADF – Asian Development Fund CPS – country partnership strategy CRP – Compliance Review Panel CTL – Controller’s Department CUR – capital utilization ratio DMC – developing member country ELR – equity-to-loan ratio GRM – grievance redress mechanism IAE – internal administrative expense IED – Independent Evaluation Department IT – information technology MDB – multilateral development bank OCR – ordinary capital resources OCRP – Office of the Compliance Review Panel OSPF – Office of the Special Project Facilitator PCO – Pacific country office PSOD – Private Sector Operations Department SRP – Staff Retirement Plan TA – technical assistance TASF – Technical Assistance Special Fund US – United States WPBF – work program and budget framework

NOTES

(i) In this report, "$" refers to United States dollars. (ii) Numbers in this report may not sum precisely because of rounding.

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

Page

EXECUTIVE SUMMARY i

I. STRATEGIC AND INSTITUTIONAL CONTEXT 1

A. Strategy 2030 Progress and Other High-Level Priorities in 2020 1

B. Major Institutional Changes, Reforms, and Initiatives 3

II. THE 2020 WORK PROGRAM 4

III. BUDGET PLANNING AND FINANCIAL RESOURCES 8

IV. INDEPENDENT EVALUATION AND ACCOUNTABILITY MECHANISM 10

V. 2020 INTERNAL ADMINISTRATIVE EXPENSE BUDGET AND COST DRIVERS 12

A. Approach to 2020 Budget 12

B. Cost Drivers of the 2020 Budget 13

C. Staff Productivity Enhancements and Other Efficiency Measures 24

VI. CAPITAL EXPENDITURE BUDGET 29

A. 2020 Annual Capital Expenditure Budget 29

B. Ongoing Special Capital Expenditure Programs 31

VII. RECOMMENDATIONS 34

APPENDIXES 1. 2020 Budget: Internal Administrative Expenses 35 2. 2020 Budget: Annual Capital Expenditure 36 3. Indicative Work Program: Summary of Selected Deliverables 37 4. Budget Management Indicators 39 5. Price Factor Assumptions 44 6. Staff Positions by Department and Office, 2019–2020 45 7. Board of Directors 47 8. Independent Evaluation Department 48 9. Compliance Review Panel and Office of the Compliance Review Panel 49

10. ADB Headquarters Facilities Refurbishment Program 50 11. 2020 Budget: Depreciation 52 12. Update on ADB Actions to Improve Gender Equality 53

BOXES

1. Steps to Operationalize Strategy 2030 3 2. Maximizing the Use of Available Resources under Strategy 2030 7 3. Highlights of 2020 Independent Evaluation Department Work Program 11 4. Efficiency Gains Identified through the Systematic Gathering of Departmental

Highlights

27 5. Nonsovereign Operations—Loan IQ Phase 1 (Guarantees) 28

TABLES

1. Key Operations Outputs 5 2. Active Project and Technical Assistance Portfolio 6 3. Income and Expense Outlook, 2019–2020 9 4. Key Components of Budget Growth 14 5. Indicative Staff Requirements and Scope for Productivity Enhancements in 2020 15 6. Indicative Allocation of New Positions for 2020 16 7. Indicative Allocation of New Positions for 2020 by Location 17 8. Field Office Staffing and Expenses, 2019–2020 21 9. Estimated Savings from Staff Productivity Enhancements and Efficiency

Measures, 2020

25 10. Annual Capital Expenditure Budget 30

FIGURES

1. Budget Growth, 2010–2020 12 2. Budget Utilization Rates 13 3. Number and Percentage of Staff Positions in Headquarters and Field Offices by

Staff Category

17 4. Composition of Staff Positions in Field Offices by Staff Category 19 5. Human Resources Framework 22 6. Framework for Monitoring Efficiency Gains 26 7. Real-Time ADB 31 8. Digital Agenda 2030 Stage 1 32

2020 BUDGET MEMORANDUM

EXECUTIVE SUMMARY

The 2020 budget of the Asian Development Bank (ADB) is aligned with Strategy 2030 and supports the strategic and institutional priorities of the Work Program and Budget Framework, 2020–2022. The 2020 work program commitments comprise $18.2 billion and 130 projects for sovereign operations (from $17.6 billion and 120 projects estimated for 2019), $3.4 billion and 37 projects for nonsovereign operations (from $3.2 billion and 32 projects estimated for 2019), and $422.0 million and 237 projects for technical assistance (from $395.0 million and 270 projects estimated for 2019). Strategy 2030 is being implemented through the mainstreaming of the seven operational priorities—supported by seven operational plans, which were endorsed by the Board of Directors in October 2019. The operational plans will guide ADB operations and offer new opportunities to implement Strategy 2030 using integrated and differentiated approaches in project design, knowledge work, and financing. ADB will also focus on the quality of operations. Under Strategy 2030, ADB will significantly expand its private sector operations in support of the seven operational priorities to reach the targets of (i) one-third of ADB operations (by number) by 2024, and (ii) $2.50 of long-term cofinancing for every $1.00 of ADB financing by 2030. Business development efforts will continue to drive growth in transaction advisory services for public–private partnerships. The new Strategy 2030-aligned corporate results framework provides the overall direction toward achieving corporate results targets for 2019–2024. The framework indicators for Strategy 2030 operational priorities will be a significant shift in focus on cross-sectoral and thematic outcomes. The new framework will be a driving force in promoting cross-divisional and cross-departmental collaboration. Collaboration is more important than ever for delivering solutions that combine expertise across sectors and themes as well as public and private sector operations. ADB has developed operational performance metrics to measure collaboration between sovereign and nonsovereign operations. ADB has also introduced several measures to strengthen the One ADB approach. ADB will provide knowledge solutions that enhance operations and contribute to effective development outcomes by (i) delivering high-quality knowledge products and services to encourage discussion on policies, provide regional insights, and stimulate the adoption of innovative concepts; (ii) strengthening the application of tacit and explicit knowledge in operations in developing member countries; and (iii) improving the link between the country knowledge plan and the lending program. Technical assistance will continue to be an important modality for knowledge products and services. ADB will also focus on expanding knowledge partnerships.

Strategy 2030 is driving incremental budgetary resources and departments are reorienting the use of existing resources in line with the priorities of the strategy. The enhanced workforce analysis and established budget request processes continue to be based on business requirements and are aligned with the departmental work plans, which have been changed by Strategy 2030’s requirements. A wide range of complementary initiatives across ADB support the operationalization of Strategy 2030. Systematic monitoring of efficiency gains means that ADB will make better use of available resources, while budgeting remains prudent.

ii

The main cost drivers of the 2020 budget are (i) an increase in staff to support the seven operational priorities of Strategy 2030; (ii) information technology (IT) requirements, including implementation of IT reforms, which results in additional recurring administrative costs and depreciation; and (iii) support to resident missions.

In 2020, the estimated need for new positions is 122; however, 82 positions will be offset by staff productivity enhancement—as such, 40 net new positions are proposed. To support the implementation of Strategy 2030, about 82% of these new positions are for nonsovereign operations and related support, sovereign operations, and skills required for the seven operational priorities of Strategy 2030. The remaining 18% are for other priority needs related to direct and indirect operations support functions.

All projects under the Real-Time ADB IT reform program will be implemented by the end of 2020 and at least 10 projects under Digital Agenda 2030 stage 1 will be underway in 2020. IT governance arrangements ensure IT reform ownership by relevant departments and performance monitoring against defined criteria. IT reforms have delivered benefits in 2019, and further expected benefits have been reflected in the 2020 staff productivity gains. For the first time, the corporate results framework includes indicators tracking progress in digital transformation.

Resident missions represent One ADB in the field, including both sovereign and nonsovereign operations, which is essential to implementing Strategy 2030. ADB is reviewing the role of resident missions to examine options for their strengthening in order to successfully implement Strategy 2030. The review is expected to conclude in 2020 and will identify organizational, staffing, and resource implications, which will inform future budget strategies for field offices.

The Board of Directors discussed and approved the salary increase proposal separately on 20 November 2019. The comprehensive review of compensation and benefits, which happens every 5 years, started in 2019 and will end in 2020. The review will be conducted in the broader context of ADB’s ongoing human resources reforms.

The proposed net internal administrative expense budget for 2020 is $726.7 million, an increase of $36.2 million or 5.2% over the 2019 budget. This includes a price increase of 2.9% and a volume growth of 2.3%. Volume growth includes growth from existing special initiatives (IT requirements and support for resident missions) of 1.9% and other volume growth of 0.4%. The volume growth from meeting additional staff requirements for Strategy 2030, as outlined in the Work Program and Budget Framework, 2020–2022, is largely offset by staff productivity enhancements and other efficiency gains.

The proposed annual capital expenditure budget for 2020 is $25.5 million, which includes $14.5 million for headquarters facilities and field office pre-construction costs to be implemented under a 3-year rolling capital expenditure framework.

Activities and initiatives in support of organizational resilience are continuing. Further efforts to improve corporate management and administration, which include a human resources framework and investing in staff development, are also ongoing.

ADB has aligned the 2020 budget with the strategic and institutional priorities of Strategy 2030, while maintaining a prudent level of budget growth compared to 2019. This was achieved through making better use of existing resources by continuing to improve efficiency and productivity. This remains a key underlying principle in formulating the 2020 budget. ADB maintains a budget setting process that ensures business needs are accurately reflected.

iii

Table E1: Key Components of Budget Growth, 2019–2020 (%)

Item 2019

Budget 2020 Budget

Previewa Proposed

2020 Budget

Priceb

Increase of salary and salary-related benefits 1.0 1.7 1.6 Adjustment to other costs 0.7 1.6 1.3 Adjustment to SRP contribution rate (0.4)

Total price 1.3 3.3 2.9

Volume

Meeting operational priorities 2.7 3.1 2.8 Staff productivity gains (0.7) (1.8) (1.8) Other efficiency gains (2.1) … (0.6) (A) Subtotal (0.1) 1.3 0.4

Special initiatives Information technology requirements 1.9 1.7 1.7 Support to resident missionsc 0.5 0.3 0.2 Organizational resilience 0.1 0.1 0.0 Subtotal before SRP switch incentive scheme 2.5 2.1 1.9 SRP switch incentive scheme (1.0) (B) Subtotal after SRP switch incentive scheme 1.5 2.1 1.9 Total volume 1.4 3.5 2.3

Total budget growth 2.7 6.8 5.2 … = not applicable or not calculated, ( ) = negative, SRP = Staff Retirement Plan. Note: Numbers may not sum precisely because of rounding. a Budget growth as presented in the Work Program and Budget Framework, 2020–2022. b Included within price movements, the budgeted net impact of all currency movements against the US dollar was

−1.3% in 2019 and +0.2% in 2020. c Includes the new Pacific country offices and the ADB office in Singapore. Source: Asian Development Bank.

13.0 12.9

9.8

5.8

3.8 3.2

1.7 1.8 2.9 2.7

5.2 2.9

3.9

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Proposed2020

Figure E1: Budget Growth, 2010–2020(%)

Note:1. Growth shown is year-on-year approved budget growth and does not reflect actual budget utilization. 2. For comparability purposes, the one-time early separation program of 2016 and the Staff Retirement Plan switch incentive scheme of 2018 are excluded. Dotted lines indicate budget growth including these items.Source: Asian Development Bank.

iv

Table E2: Assumptions for Price Factor [This table has been removed in accordance with the exceptions to disclosure in the Access to Information Policy (para. 17.4.viii).]

To: Board of Directors

2020 BUDGET PROPOSAL 1. Pursuant to Section 15 of the By-Laws, this memorandum presents for the Board of Directors’ consideration the proposed budget of the Asian Development Bank (ADB) for 2020, as described in this paper and summarized in Appendixes 1 and 2. 2. The proposed 2020 budget is strategy-driven and built on ADB’s Work Program and Budget Framework (WPBF), 2020–2022.1 It has been formulated through an iterative planning process.

I. STRATEGIC AND INSTITUTIONAL CONTEXT

A. Strategy 2030 Progress and Other High-Level Priorities in 2020

3. Implementing ADB’s new long-term strategy—Strategy 2030 requires operationalizing its seven operational priorities: (i) addressing remaining poverty and reducing inequalities; (ii) accelerating progress in gender equality; (iii) tackling climate change, building climate and disaster resilience, and enhancing environmental sustainability; (iv) making cities more livable; (v) promoting rural development and food security; (vi) strengthening governance and institutional capacity; and (vii) fostering regional cooperation and integration.2 4. ADB is also focusing on the quality of operations by (i) emphasizing better strategic alignment; (ii) scaling up resource mobilization; (iii) incorporating advanced technologies and innovative ideas; (iv) promoting collaboration through the One ADB approach, knowledge creation, and knowledge sharing with clients; and (v) improving operational efficiency.

5. ADB will significantly expand its private sector operations in support of the seven operational priorities, with the goals of (i) increasing private sector operations to one-third of ADB operations (by number) by 2024, and (ii) targeting $2.50 of long-term cofinancing for every $1.00 of financing by 2030. ADB will pursue a dual mandate of development impact and profitability, while ensuring additionality and commercial sustainability.

6. The Board of Directors endorsed the operational plans for the seven priorities of Strategy 2030 in October 2019, following extensive consultations with key stakeholders within and outside ADB. The plans will guide ADB operations and offer new opportunities to implement Strategy 2030 using integrated and differentiated approaches in project design, knowledge work, and financing. 7. Corporate results framework. The new corporate results framework approved in September 2019 is aligned with Strategy 2030 and will provide the overall direction toward achieving corporate results targets for 2019–2024.3 The framework indicators for the seven priorities will significantly shift the focus from sector-based, output-focused corporate results management to cross-sectoral and thematic outcomes. The new framework will be a driving force in promoting cross-divisional and cross-departmental collaboration.

1 ADB. 2019. Work Program and Budget Framework, 2020–2022. Manila. 2 ADB. 2018. Strategy 2030: Achieving a Prosperous, Inclusive, Resilient, and Sustainable Asia and the Pacific.

Manila. 3 ADB. 2019. ADB Corporate Results Framework, 2019–2024: Policy Paper. Manila.

2

8. Budgetary alignment. While incremental budgetary resources are driven by Strategy 2030, departments are also reorienting the use of existing resources in line with Strategy 2030’s priorities. While all departments contribute to the implementation of the strategy, their roles vary within three broad categories:

(i) Steering role. The Strategy, Policy and Partnerships Department; the Sustainable Development and Climate Change Department; and the Budget, Personnel, and Management Systems Department set performance targets, implementation plans, and timelines, determine budgetary and human resource requirements, and monitor the progress of implementation.

(ii) Implementing role. The operations departments; the Procurement, Portfolio and Financial Management Department; Office of the General Counsel; Office of Risk Management; and Economic Research and Regional Cooperation Department have the most direct involvement in delivering the strategy, particularly in addressing the seven operational priorities, adopting differentiated approaches, expanding private sector operations, catalyzing and mobilizing financial resources, and strengthening knowledge services, while making continuous efforts in adopting the guiding principles of ADB’s operations.4

(iii) Enabling role. Other departments serve as the institutional backbone to enable implementation of the strategy through their essential support in areas such as information technology (IT), disbursements, treasury services, workplace enhancements, evaluations, audits, integrity, and public communications.

9. The enhanced workforce analysis and established budget request processes continue to be based on business requirements and are aligned with the departmental work plans, which have been changed by Strategy 2030 requirements. The widespread change and continued budgetary alignment are supported by a range of complementary initiatives across ADB (Box 1). 10. Asian Development Fund 13. Negotiations for the 12th replenishment of the Asian Development Fund (ADF 13) started in November 2019 and will continue until May 2020. ADF 13 will cover the 4-year period from 2021 to 2024. ADF is a strategic instrument to implement Strategy 2030 as it provides project grants to the poorest and most vulnerable of ADB developing member countries (DMCs). The Technical Assistance Special Fund (TASF) will be replenished at the same time.

11. One ADB. Collaboration across ADB is more important than ever to deliver integrated solutions that combine expertise across a range of sectors and themes as well as a mix of public and private sector operations. ADB has developed operational performance metrics that measure collaboration between sovereign and nonsovereign operations. To continue to strengthen a One ADB approach and incentivize the number of projected commitments delivered under joint leadership, several measures were introduced, including (i) a framework for nonsovereign financing of state-owned enterprises (to be jointly undertaken by regional departments and the Private Sector Operations Department [PSOD]), (ii) a greater role for regional departments in assessing the development impact of nonsovereign operations, and (iii) a guidance note to measure significant and meaningful collaboration between sovereign and nonsovereign operations.

4 The guiding principles for ADB’s operations under Strategy 2030 are (i) using a country-focused approach,

(ii) promoting innovative technology, and (iii) delivering integrated solutions.

3

B. Major Institutional Changes, Reforms, and Initiatives

12. Country partnership strategy business process. ADB is reviewing the country partnership strategy (CPS) business process to (i) determine the extent to which the 2015–2016 reforms have improved the quality of CPSs, (ii) assess whether the reforms have made processing CPSs more efficient, and (iii) identify further reforms to improve the CPS business process and align CPSs with Strategy 2030. Based on the findings and recommendations of the

Box 1: Steps to Operationalize Strategy 2030

ADB has undertaken a number of steps towards operationalizing Strategy 2030, listed below are examples of these steps.

Completed steps (i) New corporate results framework (aligned with Strategy 2030) approved. (ii) Operational plans for the seven operational priorities of Strategy 2030 approved. (iii) President’s annual planning directions issued to implement Strategy 2030. (iv) Operations performance metrics issued. (v) Templates for country partnership strategy, country operations business plan, and report and

recommendation of the President updated to be in line with Strategy 2030. (vi) Contingent disaster financing facility introduced to strengthen disaster resilience. (vii) Collaboration targets and reporting method defined for regional departments, Private Sector

Operations Department, and Office of Public–Private Partnerships. (viii) Independent Evaluation Department work plan aligned with Strategy 2030. (ix) Digital Agenda 2030 (stage 1) approved. (x) Leadership training forums improved. (xi) Country director forums strengthened. (xii) Departmental work plans aligned with Strategy 2030. (xiii) Performance management including 360-degree reviews for IS7–10 staff improved.

Ongoing steps

(i) Operational plan for private sector operations under preparation. (ii) Knowledge management action plan under preparation. (iii) Asian Development Fund replenishment discussions are ongoing. (iv) Diversification of financing terms for regular ordinary capital resources sovereign lending

operations under preparation. (v) Country partnership strategy reform review is ongoing. (vi) A Strategy 2030-aligned human resources framework is under preparation. (vii) Review of resident mission operations is ongoing. (viii) Innovation task force, with action plan to be finalized. (ix) Comprehensive review of compensation and benefits is ongoing. (x) Modern office fit-outs with open spaces to support collaboration and innovation is ongoing.

Budget-related steps (i) Strengthened workforce analysis methodology, including more systematic measurement and

monitoring of efficiency gains. (ii) Systematic gathering of departmental highlights improved, including information on

productivity enhancements and efficiency gains. (iii) Established budget focal persons in all departments, creating a One ADB budget network. (iv) Greater flexibility in budget management is being applied. (v) A holistic set of budget indicators has been established (Appendix 4). (vi) Reforms in capital expenditure budgeting are ongoing.

Source: Asian Development Bank.

4

review, which will be completed in late 2019, ADB will prepare the revised Operations Manual section on country partnership strategy (OM A2) and its staff instructions. The new CPS content and process will highlight the One ADB approach as well as integrated solutions for delivering ADB’s assistance to DMCs. 13. Corporate evaluation. The recent external review of the Independent Evaluation Department (IED) recommended developing a new evaluation policy that will cover both self and independent evaluation functions. A task team comprising staff from Management and IED was established to conduct background analytical and stocktaking work to identify gaps in the existing policy and guidelines. The stocktaking exercise is ongoing, and consultations are underway. The findings and recommendations of this exercise will guide the next steps. 14. Review of resident mission operations. The review will reassess resident missions’ roles and capacity with a view to further empower staff in the field, enhance resident mission–headquarters collaboration, sharpen ADB’s client orientation including delivery of demand-driven knowledge services, and promote One ADB collaboration in the field, particularly for sovereign and nonsovereign operations. 15. ADB products and instruments. ADB will continue to raise staff awareness of existing and new financing modalities and products, including the mainstreaming of results-based lending and introduction of the contingent disaster financing approved in 2019. The outreach program aims to ensure that staff are well-equipped to work with ADB’s DMCs in making the most effective use of appropriate financing modality for their projects. Outreach will include training for headquarters-based staff, particularly those from operations departments; and delivery of training to selected resident missions for staff and DMC officials. 16. Business process modernization. A high priority for ADB will be continued efforts to streamline business processes including through the use of digital technology. The reforms aim at positioning ADB as a more effective, efficient, responsive, and resilient institution.

II. THE 2020 WORK PROGRAM 17. Operations program. Consistent with the WPBF, 2020–2022, ADB plans to deliver 167 committed projects—130 in sovereign operations and 37 in nonsovereign operations—totaling $21.6 billion in commitments for 2020 (Appendix 3).5 Key deliverables in commitments and disbursements are in Table 1.6

(i) Sovereign operations. Projected sovereign commitments total $18.2 billion (130 projects). New projects will be financed by $534.0 million in ADF grants, $3.2 billion in concessional ordinary capital resources (OCR), and $13.9 billion in regular OCR.

(ii) Nonsovereign operations. Private sector operations continue to grow, with commitments projected to reach $3.4 billion (37 projects), or 22% (by project count) of total ADB operations.

(iii) Public–private partnerships. Business development efforts continue with the target of securing nine additional transaction advisory services mandates. The

5 ADB. 2017. Operational Adjustments and Change in Application of Existing ADB Policies Following the Introduction

of Commitments as Performance Measurement. Manila. A commitment is defined as the financing approved by ADB’s Board of Directors or Management for which the legal agreement has been signed by the borrower, recipient, or the investee company and ADB.

6 The operations program is anchored on the firm pipelines jointly identified by DMCs and ADB and is reflected in country operations business plans.

5

portfolio is estimated to increase by 14% from 28 to 32 transaction advisory services mandates, managed by the Office of Public–Private Partnerships.

Table 1: Key Operations Outputs

Item 2016 2017 2018 2019 2020 Key Operations Outputs

A. Projects Commitments ($ million) 13,255 19,692 21,576 20,772 21,609 Commitments (number) 119 129 164 152 167

B. Technical Assistance Commitments ($ million) 328 310 371 395 422 Commitments (number) 315 304 345 270 237

C. Disbursements ($ million) 12,489 11,676 14,760 14,410 16,054 Notes: 1. The operations outputs for 2016–2018 are actual figures, 2019–2020 are based on the WPBF, 2020–2022. 2. Commitments include sovereign and nonsovereign projects funded by ADF, concessional OCR, and regular OCR. 3. Disbursements targets for 2019 and 2020 cover (i) sovereign (projects and policy-based) and nonsovereign

operations; and (ii) loans, grants, and equity investments financed by ADF, concessional OCR, regular OCR, other special funds, cofinanced loans, and cofinanced grants fully administered by ADB.


18. Technical assistance program. In 2020, 237 new committed technical assistance (TA) projects totaling $422.0 million are planned, comprising 111 transaction TA projects and 126 knowledge and support TA projects. TA will be essential in supporting the implementation of Strategy 2030. TA operations will strategically focus on (i) knowledge and innovation, (ii) project preparation and implementation, and (iii) DMC capacity development. Sufficient TASF resources will be allocated to low-income countries and lower middle-income countries, countries with fragile and conflict-affected situations, and small island developing states. Meanwhile, ADB will strengthen the synergy between the lending pipeline and knowledge plan at the country level. 19. Disbursements. The disbursements for sovereign and nonsovereign operations in 2020 are estimated at $16.1 billion. This includes fully administered cofinanced loans and grants. In 2019, disbursements are expected to reach $14.4 billion. Estimates adopt a differentiated approach that considers the historical performance of the various groups of countries.

20. As of 30 June 2019, ADB had achieved disbursements of $3.8 billion of the $10.2 billion annual disbursement target on sovereign operations and fully administered cofinancing (excluding policy-based lending), compared with $3.2 billion for the same period in 2018. This comprised $3.6 billion for loans and $0.2 billion for grants. TA disbursements as of 30 June 2019 were $134 million compared with $130 million for the same period in 2018. 21. Portfolio management. By the end of 2020:

(i) the sovereign portfolio is expected to increase to 726 projects from 716 in 2019; (ii) the nonsovereign portfolio is expected to increase to 233 projects from 207 in

2019; and (iii) the TA portfolio is expected to reduce to 873 TA projects from 900 in 2019 (Table 2).

6

Table 2: Active Project and Technical Assistance Portfolio

(number) 2016 2017 2018 2019 2020 A. Project 821 853 897 923 959

Sovereign 622 637 666 716 726

Nonsovereign 199 216 231 207 233 B. Technical assistance 854 829 865 900 873

Note: Figures for 2016–2018 are actual figures of committed portfolios, while those for 2019–2020 are based on figures from WPBF, 2020–2022. Source: Asian Development Bank.

22. Cofinancing and partnerships. Mobilizing cofinancing (from sovereign and nonsovereign sources) and building strong partnerships are key elements of ADB’s value proposition, as emphasized in Strategy 2030. In 2020, ADB will continue to secure cofinancing and build partnerships that add value for DMCs in the form of (i) better results, consistent with ADB country-driven approach; (ii) enhanced efficiency and lower transaction costs for DMCs and other partners; and (iii) better alignment with the objectives of DMCs, ADB, and its partners. 23. ADB will mobilize grant resources for TA or sector or thematic trust funds, as these operations often can have disproportionally high impacts for a modest investment. Additional TA resources can also supplement the emerging areas requiring expertise and knowledge to deliver the Strategy 2030 on the ground.

24. ADB will make a special effort to reach new donors such as foundations, philanthropic institutions, or impact investors; and roll out initiatives to streamline trust fund operations. ADB is aligning its internal organization and business processes to achieve these objectives, including through investments in information platforms for enhanced client management, communication, and reporting. ADB’s efforts are underpinned by a revised, tighter definition of cofinancing that emphasizes value addition. Total cofinancing is projected to reach $12.6 billion in 2020 ($5.4 billion for sovereign operations and $7.2 billion for nonsovereign operations). 25. Knowledge program. Guided by Strategy 2030’s seven operational priorities, ADB will deliver integrated knowledge solutions that will help enhance its operations and contribute to effective development outcomes in DMCs. ADB will deliver high-quality knowledge products and services that encourage discussion on policies, provide regional insights, and stimulate the adoption of innovative concepts. TA will continue to be an important modality for knowledge products and services and will also pilot innovative approaches in specific areas or sectors, with the aim of replicating successful approaches on a larger scale (Box 2).

26. ADB will strengthen the application of its tacit and explicit knowledge into operations to provide knowledge solutions to DMCs. Knowledge products and services will support DMCs’ capacity strengthening and policy development, sharing best practices, knowledge, and expertise, as well as strengthening partnerships with global knowledge institutions. Knowledge products and services are provided by operations and knowledge departments, as well as by operational support departments. The link between the country knowledge plan and the lending program will be strengthened to improve synergies between knowledge work and delivery of knowledge solutions. Knowledge work will be supported through a combination of staff resources, TA (including trust funds), and knowledge partnerships with other institutions.

27. ADB will promote the adoption of innovative and advanced technologies to deliver high- development impacts. The Digital Technology for Development Unit will strengthen the application

7

of digital technology in each of the seven operational priorities. To support this, ADB will nurture an innovation culture, streamline business procedures that support innovation, and strengthen institutional and staff capabilities in promoting innovation.

28. The knowledge management group will continue to harness and share knowledge, test innovative ideas, conduct evidence-based research, and identify good practices to enhance ADB’s operations. They will continue to work with operations departments in identifying and capturing tacit knowledge from the early stages of project development.

29. In 2020, ADB will expand knowledge partnerships, not only at the global and regional levels but also at the local level. ADB will proactively engage with bilateral and multilateral partners, think tanks, universities, and the private sector to leverage expertise, innovation, and knowledge. ADB will benchmark with other multilateral development banks (MDBs) in assessing the reach, quality, and application of its knowledge in the DMCs.

30. ADB will also examine how DMCs develop their capacity to innovate. A thematic study on innovation ecosystems will discuss policy implications for developing innovation capability in DMCs. The study will be included as a special feature in the Asian Development Outlook 2020.

Box 2: Maximizing the Use of Available Resources under Strategy 2030

Following a One ADB collaborative and participatory process as well as extensive consultations with key stakeholders within and outside ADB, the Board endorsed the operational plans for the seven operational priorities of Strategy 2030 on 7 October 2019. The plans will guide ADB operations by using integrated and differentiated approaches in project design, knowledge work, and financing. In 2020, ADB will implement a work program guided by the operational plans, which cut across sectors and themes. While budget growth is prudent, ADB departments are realigning to deliver Strategy 2030 and implement the operational plans. ADB will apply the 3Bs (build, buy, and borrow) to maximize the use of available resources. Build. To support differentiated approaches under Strategy 2030, a Fragile and Conflict-Affected Situations Unit was established in the Sustainable Development and Climate Change Department (SDCC) in 2019. Through the annual sector and thematic training programs, events, and forums, SDCC develops staff and developing member country capacity and awareness on the latest trends in sector and themes, including the use of innovative and high-level technology. Buy. To fill skills gaps, ADB will hire technical assistance and staff consultants to support operations in implementing integrated projects. To support innovation, SDCC manages the experts pool that provides technical support and innovation such as on water utility, smart grids, railways, dams optimization, waste to energy, disaster insurance, climate change adaptation, gas, state-owned enterprises reform, financial technology service, agribusiness, education technology, elderly care, and smart cities. Borrow. ADB will continue to foster knowledge partnerships with development partners to improve the capacities of both ADB staff and developing member country counterparts in addressing key sector and thematic issues. To promote knowledge transfer, ADB leverages the experience of secondees from partner institutions. Operations departments are programming innovative and integrated projects that require multidisciplinary teams, changes in how departments work, optimization of workload, and the right incentives. To align with Strategy 2030 operational plans, ADB is also reviewing business processes and templates such as for project classification and procurement.


8

31. ADB’s research and analytical work will increasingly focus on key priority issues of Strategy 2030 such as (i) skills and jobs, (ii) macroeconomic resilience including debt sustainability and fiscal policy, (iii) infrastructure deficits, (iv) urbanization, (v) gender equity and demographic changes, (vi) regional cooperation and integration, and (vii) disaster risk management and climate change. As indicated in the strategy, ADB’s relevance will increasingly depend on its role as a knowledge institution. ADB will take a proactive role in providing quality knowledge and evidence-based research to support policies and reforms by DMCs. 32. Key knowledge products will continue to be organized and disseminated through flagship knowledge products, including (i) Asian Development Outlook, (ii) Key Indicators for Asia and the Pacific, (iii) Asian Economic Integration Report, (iv) country and sector diagnostic studies, (v) Asian Development Review, (vi) Asia Clean Energy Forum, (vii) ADB Transport Forum, (viii) Asia Water Forum, and (ix) other key publications. 33. Country strategies and business plans. During 2020, ADB will prepare seven CPSs and 40 country operations business plans. Sector assessments, road maps, and other studies and assessments will support CPS preparation. ADB will ensure that these are fully aligned with Strategy 2030. ADB’s Strategy, Policy, and Partnerships Department will directly assist country teams in the preparation of CPSs. The CPS business processes are undergoing review. 34. Board of Governors and Board of Directors. The 53rd Annual Meeting of the Board of Governors will take place in the Republic of Korea in May 2020. A $2.4 million budget is allocated for the meeting—15.7% lower than the 2019 budget allocation, because of the expected reduction in costs for travel, IT support, security, and other services. The budget allocation for the Board of Directors has decreased by 3.9% to $17.1 million based on changes to underlying assumptions for items including education assistance and relocation, which are driven by the expected Board composition and movements in 2020. Appendix 7 summarizes the Board of Directors 2020 budget.

III. BUDGET PLANNING AND FINANCIAL RESOURCES

35. Based on business requirements, the annual budget is prepared prudently as part of the iterative planning process, which also underpins the preparation of the WPBF and the annual review of ADB’s loan charges and allocation of net income. Alignment with Strategy 2030 is driving changes in ADB’s workforce composition and budgeting needs through focusing the work program on Strategy 2030’s operational priorities and increasing operations quality. 36. [Information in this paragraph has been removed in accordance with the exceptions to disclosure in the Access to Information Policy (para. 17.4.viii).]7

7 [Information in this footnote has been removed in accordance with the exceptions to disclosure in the Access

to Information Policy (para. 17.4.viii).]

9

37. Projected allocable net income. The impact of the proposed internal administrative expenses (IAE) budget and accruals adjustment to the allocable net income are reflected in the income figures (Table 3). Considered side by side, forecasts indicate that overall administrative expenses are expected to be fully covered by income from lending operations for 2019–2020.8 Contributing to ADB’s organic capital growth, the proposed 2020 IAE budget results in overall administrative expenses below the level of income from lending operations. Appendix 4 provides further analysis.

Table 3: Income and Expense Outlook, 2019–2020 [This table has been removed in accordance with the exceptions to disclosure in the Access to

Information Policy (para. 17.4.viii).]

8 Actual overall administrative expenses have also been fully covered by actual income from lending operations for

2014–2018.

10

38. [Information in this paragraph has been removed in accordance with the exceptions to disclosure in the Access to Information Policy (para. 17.4.viii).]9 39. [Information in this paragraph has been removed in accordance with the exceptions to disclosure in the Access to Information Policy (para. 17.4.viii).]

IV. INDEPENDENT EVALUATION AND ACCOUNTABILITY MECHANISM 40. Independent evaluation. The IED-proposed work program and budget for 2020 support its overarching strategic objective of strengthening its impact through high-quality evaluations, better alignment of its work to Strategy 2030, and enhanced knowledge management work (Box 3). 41. IED evaluations cover five levels (project, sector, country, thematic, and corporate) from micro, to meso, to macro assessments. IED also prepares an annual evaluation review, which gives an independent view on the overall performance of ADB and highlights results and issues from completed evaluations. For 2020, IED plans to deliver seven high-level evaluations: five corporate, thematic, sector-wide, and sector-level evaluations; one country assistance program evaluation; and the Annual Evaluation Review 2020. This reflects a rebalancing from eight to nine high-level evaluations annually in the past, with a corresponding increase in the delivery of meso and project-level evaluations and validations. It also reflects an adjustment to the perceived absorption capacity of higher-level evaluation work by the institution. An important milestone in 2020 will be the launch of IED’s technical assistance completion report validation function. 42. IED’s proposed budget for 2020 is $14.2 million—an increase of 5.8% over the 2019 budget, mostly because of an increase in staff costs (salaries and benefits), with additional authorized positions and with IED now fully staffed. The director general of IED prepared IED’s budget for 2020, and the Development Effectiveness Committee endorsed it. It is presented separately for Board approval (para. 129). Appendix 8 provides the details on IED’s 2020 budget.

9 [Information in this footnote has been removed in accordance with the exceptions to disclosure in the Access to


11

43. Accountability Mechanism. Based on the 2018 Learning Report on Implementation of the Accountability Mechanism Policy, complaints (from project-affected people) elevated to the Accountability Mechanism are on an upward trend. In response and following the core mandate of the Office of the Special Project Facilitator (OSPF), in 2020 OSPF will continue to provide timely facilitation of complaints that is fair to all stakeholders. In recognition of the need to strengthen the capacity of ADB project staff and implementing agencies in handling complaints at the project level, OSPF will continue to conduct demand-driven capacity building and training workshops on problem-solving and grievance redress mechanisms (GRM). OSPF is conducting analytical work in various countries to generate high-quality and impactful knowledge products that will document GRM experiences and identify important lessons on problem-solving that are useful for future ADB-assisted projects. OSPF is also in the process of developing targeted and meaningful capacity building initiatives such as eLearn modules on problem-solving and GRM. The completion of the awareness-raising and reference materials on compliance review in 2018 paves the way for more focused and substantive outreach by the Office of the Compliance Review Panel (OCRP) on compliance review in DMCs in 2019. Further, the Compliance Review Panel (CRP)

Box 3: Highlights of 2020 Independent Evaluation Department Work Program

A. High-level evaluations (7) (i) Corporate evaluation on Safeguard Policy Statement (ii) Thematic evaluation on ADB support for knowledge solutions for development (iii) Thematic evaluation on ADB support for public–private partnerships (iv) Sector-wide evaluation on ADB support for the energy sector (including the Energy Policy) (v) Sector-wide evaluation on ADB support for the transport sector (vi) Country assistance program evaluation for Bangladesh

(vii) Annual Evaluation Reviewa

B. Other evaluations (28)

(i) Validations of country partnership strategy final reviews (10)b (ii) Sector synthesis note on environmental and social performance in sovereign operations (iii) Systematic review on access to electricity and household welfare (iv) Topical paper on policy-based lending (v) Project performance evaluation reports on sovereign operations (9) (vi) Project performance evaluation reports on non-sovereign operations (4) (vii) Technical assistance performance evaluation reports (2)

C. Validations of project and TA self-assessments (i) 100% validation of circulated PCRs and XARRs (ii) Validation of TCRs (% coverage to be determined)

D. Evaluation knowledge management (i) Capacity development program within and outside ADB (ii) Outreach and learning events

(iii) Evaluation systems and databasec

(iv) Partnerships and networksd ADB = Asian Development Bank, IED = Independent Evaluation Department, PCR = project or program completion report, TCR = technical assistance completion report, XARR = extended annual review report. a Features a theme chapter on ADB Self-Evaluation System Part 2: Project Self-assessment. b Subject to availability of the country strategy final reviews (Lao PDR, Maldives, Mongolia, Pacific Approach,

Pakistan, Papua New Guinea, People’s Republic China, Tajikistan, Timor-Leste and Viet Nam). c Includes the cognitive search project; evaluation information systems (web site, lessons and success rates

databases, Management action record system); and the IED Management Dashboard. d Includes Evaluation Cooperation Group; Meeting of CODE Chairs and Heads of Independent Evaluation. Source: Independent Evaluation Department.

12

will continue to address complaints submitted to it and monitor the implementation of remedial actions for projects that went through compliance review, with support from OCRP. 44. The proposed budget of ADB’s Accountability Mechanism for 2020 is $3.0 million, comprising $1.2 million for OSPF and $1.8 million for the CRP and the OCRP (Appendix 1). 45. The CRP chair prepared the combined annual work plan and budget of the CRP and the OCRP, which was endorsed by the Board Compliance Review Committee in consultation with the President. The proposed budget of $1.8 million is presented separately for Board approval (para. 130) and the details are in Appendix 9.

V. 2020 INTERNAL ADMINISTRATIVE EXPENSE BUDGET AND COST DRIVERS A. Approach to 2020 Budget

46. ADB is aligning the budget with the strategic and institutional priorities of Strategy 2030. ADB’s work program is focusing on the priorities set out in Strategy 2030 as well as operations quality. ADB is maintaining prudent budget growth through making the best use of existing resources and continuing to improve productivity and efficiency. These are key principles in formulating the 2020 budget. 47. ADB will allocate adequate budgetary resources while improving budget management, strengthening organizational efficiency, and maintaining high budget utilization. ADB follows a rigorous budget-setting process. All resource requirements, including staffing, are subject to substantive reviews. This ensures business needs are reflected accurately, with budgetary emphasis given to departments directly implementing Strategy 2030, while considering past utilization trends. Figure 1 shows ADB’s budget growth from 2010 to 2020.

48. ADB has improved budget utilization through better budget management and improved recruitment. Utilization in 2019 will exceed the 10-year average of 94% (2009–2018) and the 2018 utilization of 95%. The forecast 2019 utilization rate is 97%, including budget carryover, which meets the corporate target of less than 5% unutilized budget. The utilization rate excluding budget carryover at the end of the second quarter of 2019 is 47% (42% in 2018). The budget is implemented with due consideration to exogenous factors such as (i) project implementation issues, (ii) inflation, and (iii) foreign exchange fluctuations. These factors remain fluid throughout

13.0 12.9

9.8

5.83.8

3.2 1.7 1.8 2.9 2.7

5.2 2.9

3.9

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Proposed2020

Figure 1: Budget Growth, 2010–2020(%)

Note:1. Growth shown is year-on-year approved budget growth and does not reflect actual budget utilization. 2. For comparability purposes, the one-time early separation program of 2016 and the Staff Retirement Planswitch incentive scheme of 2018 are excluded. Dotted lines indicate budget growth including these items.Source: Asian Development Bank.

13

the year and impact on the year-end budget utilization rate. ADB has never exceeded 100% utilization. Figure 2 shows utilization rates of the IAE and annual capital expenditure budgets from 2014 to 2018 and projected 2019 utilization rates.

Figure 2: Budget Utilization Rates


B. Cost Drivers of the 2020 Budget 49. The year-on-year budget growth is driven by internal and external factors, which ADB measures as volume growth and price increases. Budget growth also represents historic strategic decisions such as the special initiatives within the volume growth. [Information in this paragraph has been removed in accordance with the exceptions to disclosure in the Access to Information Policy (para. 17.4.viii).]10 50. Consistent with the WPBF, 2020–2022, ADB identified the main cost drivers in developing the 2020 budget: (i) additional staff to support Strategy 2030; (ii) IT requirements including implementation of IT reforms, which results in additional recurring administrative costs and depreciation; and (iii) support to resident missions. 51. The net IAE budget is $726.7 million, representing a 5.2% growth rate, or $36.2 million increase over the 2019 budget (Appendix 1). This includes a price increase of 2.9% and volume growth of 2.3% (Table 4). The assumptions for the price factor are in Appendix 5. 52. While the 2020 budget growth of 5.2% initially appears much higher than last year, three factors contributed to lower budget growth in 2019. These were (i) impact of exchange rate movement across all currencies against the US dollar, reducing the price increase by –1.3%; (ii) reduction of the Staff Retirement Plan (SRP) contribution rate, reducing the price increase by –0.4; and (iii) removal of the SRP switch incentive, reducing volume growth by –1.0%. After removing these factors, the comparable 2019 budget growth is 5.4%. The 2020 budget growth would be 5.0% if the impact of foreign exchange movements is removed. 53. Price increase is driven by two main factors: (i) the increase of salary and salary-related benefits, which is 1.6% of budget growth; and (ii) price adjustments for other costs of 1.3%, which



14

reflects the expected price increase for non-salary-related operating costs and administrative expenses. Both items are shown inclusive of the impact of foreign exchange movements. 54. Volume growth is 2.3%, which includes existing special initiatives of 1.9% and other volume growth of 0.4%. This includes the impact of meeting the operational priorities in support of Strategy 2030, largely from new staff positions (equivalent to 2.8%), which is offset by staff productivity gains (–1.8%) and other efficiency gains (–0.6%). The underlying increase in net staff positions has reduced from 85 in 2019 to 40 in 2020.

Table 4: Key Components of Budget Growth (%)

Item 2019

Budget 2020 Budget

Previewa Proposed

2020 Budget

Priceb

Increase of salary and salary-related benefits 1.0 1.7 1.6 Adjustment to other costs 0.7 1.6 1.3 Adjustment to SRP contribution rate (0.4)

Total price 1.3 3.3 2.9

Volume

Meeting operational priorities 2.7 3.1 2.8 Staff productivity gains (0.7) (1.8) (1.8) Other Efficiency gains (2.1) … (0.6) (A) Subtotal (0.1) 1.3 0.4

Special Initiatives Information technology requirements 1.9 1.7 1.7 Support to resident missionsc 0.5 0.3 0.2 Organizational resilience 0.1 0.1 0.0 Subtotal before SRP switch incentive scheme 2.5 2.1 1.9 SRP switch incentive scheme (1.0) (B) Subtotal after SRP switch incentive scheme 1.5 2.1 1.9 Total volume 1.4 3.5 2.3

Total budget growth 2.7 6.8 5.2 … = not applicable or not calculated, ( ) = negative, SRP = Staff Retirement Plan. Note: Numbers may not sum precisely because of rounding. a Budget growth presented in the Work Program and Budget Framework, 2020–2022. b Included within price movements, the budgeted net impact of all currency movements against the US dollar was

−1.3% in 2019 and +0.2% in 2020. c Includes the new Pacific country offices and the ADB office in Singapore. Source: Asian Development Bank.

55. Established special initiatives drive 1.9% of budget growth (reduced from 2.5% in 2019), including budget impacts from IT requirements of 1.7% and support to resident missions of 0.2%. 56. Salary increase. Salaries in the operational expense category are budgeted to increase by $12.2 million in 2020 (Appendix 1). This is made up of (i) the staff salary increase of $7.7 million;11 (ii) $3.3 million for new staff positions; and (iii) $1.2 million for other salary-related increases, such as confirmations and promotions.

11 This excludes the Board of Directors, IED, and the Accountability Mechanism. When including all categories, the

salary increase is $8.0 million.

15

1. Additional Staff to Strategy 2030

57. WPBF, 2020–2022 provides an indicative projection of ADB operations, strategic priorities, institutional reforms, indicative staffing resources, and budget requirements to achieve the goals of Strategy 2030. The annual workforce analysis exercise assesses the staffing requirements to meet ADB’s priority business needs for this medium-term period. ADB's methodology for analyzing and optimizing its workforce continues to be improved and refined in each successive iteration of the WPBF. In 2019, ADB's workforce analysis exercise was aimed at strengthening the links between work program output projections and workforce requirements in each department. To achieve its aims, the workforce analysis was refined to (i) expand department-specific outputs-per-staff ratio analyses across ADB; (ii) capture and encourage expected productivity enhancements; and (iii) expand analyses to allow for a comprehensive view of ADB’s workforce, including staff and staff consultants. 58. Priority business needs under WPBF, 2020–2022. The workforce analysis identified four main areas of growth that require additional staffing resources: (i) the continued expansion of nonsovereign operations—particularly in portfolio management and transaction support—such that private sector operations reach one-third of operations by number by 2024; (ii) skills gaps of about 90 types of highly specialized expertise and knowledge on emerging areas and underrepresented thematic skills, both of which are needed to enhance the quality of projects in support of the seven operational priorities; (iii) continuing support to sovereign operations (with a focus on small island developing states and fragile and conflict-affected situation countries in the Pacific) and efforts to rebalance the workforce across sovereign operations; and (iv) investing in support functions to help ADB’s operations deliver Strategy 2030.

59. Such support functions include (i) direct operations support functions that are largely impacted by the growth in nonsovereign operations, including risk management, legal, integrity due diligence, and evaluation activities; and (ii) indirect operations support functions that are impacted by ADB’s growth in general or relate to specific initiatives. The key focus of the indirect operations support will be upgrading the respectful workplace initiative, strengthening the management and administration of ADB’s field offices, delivering improved treasury operations and products including local currencies, and improving human resources management.12 60. Staff requirements for 2020. WPBF, 2020–2022 identified that 122 additional staff positions (87 international staff and 35 national staff) will be required in 2020 to deliver the projected outputs, if all departments continue to work at the same output-per-staff ratios as during 2017–2019. In other words, the gross requirements are 122 staff positions in 2020 (Table 5).

Table 5: Indicative Staff Requirements and Scope for Productivity Enhancements in 2020

(number of staff positions) Staff requirements IS NS Total Gross requirements 87 35 122 Offset through productivity enhancements (56) (26) (82) Net requirements 31 9 40

( ) = negative, IS = international staff, NS = national staff. Source: Asian Development Bank.

12 All areas are linked to the strategic directions and activities envisaged in Strategy 2030, such as (i) expanding private

sector operations, enhancing human resources, promoting digital transformation, greater field presence, and improving ADB products and instruments.

16

61. ADB’s effort to offset future staff requirements will be achieved through productivity enhancements.13 The refinements to the methodology for the workforce analysis in 2019 allowed ADB to capture and encourage productivity enhancements by (i) sharing staff resources across different departments and operations through short-term assignments, strategic staff placements, mobility framework, and pooled experts; (ii) modernizing business processes and accelerating digital transformation; (iii) making greater use of flexible position management, adjusting job roles and grades, and redeploying existing staff positions across departments; and (iv) improving staff performance management. These measures will enable departments to achieve higher outputs-per-staff ratios. Consequently, future workload increases can be absorbed by existing staff, thereby reducing the need for new staff positions. Overall productivity enhancements in 2020 are expected to save 82 staff positions (56 international staff and 26 national staff). 62. The indicative net new staff requirements for 2020 are estimated at 40. This comprises 31 international staff and 9 national staff. The new international staff positions are higher than national staff positions because the skills of additional staff for nonsovereign operations, expert pool, thematic experts, and various initiatives under Strategy 2030 need to be sourced from the international market. 63. Distribution of new positions by expertise and locations. Of 40 new staff positions, 23 staff positions (58%) will be for nonsovereign operations and related support, 5 staff positions (13%) for sovereign operations, and 5 staff positions (13%) for specific skills needed for the seven operational priority areas. The remaining 7 staff positions (18%) will be allocated for other priority needs for indirect operations support functions as highlighted in the WPBF, 2020–2022, as well as management of new strategic initiatives under direct operations support functions (Table 6).

Table 6: Indicative Allocation of New Positions for 2020 (number of staff positions)

Total

Area of Operations and Expertise IS NS No. % Nonsovereign operations and related support 15 8 23 57.5

(i) Investments and transaction support 8 3 11 - (ii) Portfolio management 2 1 3 - (iii) Risk management, legal, IDD and evaluation 5 4 9 -

Sovereign operations 5 - 5 12.5 (i) Infrastructure, transport and financial management 4 - 4 - (ii) Portfolio management 1 - 1

Skills for seven operational priority areas 5 - 5 12.5 (i) Expert pool 3 - 3 - (ii) Gender and FCAS/SIDS 2 - 2 -

Direct and indirect operations support 6 1 7 17.5 (i) Professional conduct 2 1 3 - (ii) IT system management 1 - 1 - (iii) Management of field offices 1 - 1 - (iv) Human resources management 1 - 1 - (v) Strategic partnerships 1 1 -

Total 31 9 40 100.0 FCAS = fragile and conflict-affected situations, IDD = integrity due diligence, IS = international staff, IT = information technology, No. = number, NS = national staff, SIDS = small island developing states. Source: Asian Development Bank.

13 ADB continues to pursue efficient use of existing staff and staff positions, such as flexible position management and

sharing staff and/or redeploying staff positions within and across departments.

17

64. In terms of distribution of the 40 new staff positions by location, 14 staff positions (10 international staff and 4 national staff) will be in ADB field offices. Table 7 presents the envisaged breakdown and deployment of new staff positions for 2020, across staff category and location. Appendix 6 outlines the full complement of staff positions at the beginning of 2020.

Table 7: Indicative Allocation of New Positions for 2020 by Location (number of staff positions)

Locations

IS

NS

Total

No. % No. % No. % Headquarters 21 68 5 56 26 65 Field officesa 10 32 4 44 14 35 Total 31 100 9 100 40 100

IS = international staff, No. = number, NS = national staff. a Figures include both field office and outposted positions. Source: Asian Development Bank.

65. The projected distribution of international and national staff positions in field offices and the headquarters for 2020 will remain similar to 2019.14 The percentages of international versus national staff positions have been stable at about 34:66 in field offices (i.e., 1 international staff position to 2 national staff positions) and 64:36 at the headquarters (i.e., 2 international staff positions to 1 national staff position) (Figure 3).

Figure 3: Number and Percentage of Staff Positions in Headquarters and Field Offices by Staff Category

* = estimate. Notes: 1. Field offices include 25 resident missions, Philippines Country Office, Pacific Liaison and Coordination Office,

ADB office in Singapore, Pacific Subregional Office, and Pacific country offices. Figures for field offices include outposting.

2. All figures are as of end December in each year. Figures for 2019 include international and national staff already outposted by 30 September, as well as those expected to be outposted by 31 December.


14 For the purpose of comparing the locational distribution of staff positions with technical expertise, taking a similar

approach to the corporate results framework, only international and national staff positions are assessed. ADB. 2019. ADB Corporate Results Framework, 2019–2024. Manila.

35% 35% 37% 38% 35% 33% 34%

66% 66% 65% 64% 63% 64% 64%

65% 65% 63% 62% 65% 67% 66%

34% 34% 35% 36% 37% 36% 36%

0

200

400

600

800

1,000

1,200

1,400

1,600

2014 2015 2016 2017 2018 2019* 2020* 2014 2015 2016 2017 2018 2019* 2020*

Field Offices and Outposting Headquarters

Po

sitio

ns

International Staff Positions National Staff Positions

18

2. Information Technology Requirements

66. In 2020, the remaining Real-Time ADB IT reform projects will be completed. In addition, at least 10 projects under Digital Agenda 2030 stage 1 will have commenced. New IT systems, once established, entail recurring annual costs for ongoing support and maintenance including cloud subscription costs. The 2020 budget includes these costs as well as new capabilities for reskilling of staff. 67. The growing number of IT users, the creation of seven country offices in the Pacific, and the establishment of offshore IT technical support to further enhance organizational resiliency have increased the IT budget. Savings gained through improvements in connectivity and application development as well as optimizing outsourcing contracts have been considered in formulating the IT budget. 68. IT reforms are supported by the special capital expenditure budgets of Information Systems and Technology Strategy III and the Digital Agenda 2030. The overall incremental impact of IT requirements in the 2020 administrative expense budget is $11.5 million (or 1.7% of the budget growth), which includes (i) the incremental depreciation from capitalized projects, estimated at $2.4 million; and (ii) the net incremental impact of supporting the new solutions and additional users of $9.1 million (after IT savings).15 The budget impact of IT reforms is closely monitored and in line with original IAE forecasts.

3. Support to Resident Missions 69. ADB has been promoting collaboration among sector divisions and field offices, which has resulted in strong collaboration during project processing and implementation while optimizing the large pool of talent and resources. Collaboration takes place through joint review missions, tripartite portfolio review meetings, and programming missions. Assigning procurement specialists to resident missions is facilitating procurement delegation and contributing to operational performance improvements through closer proximity to transactions. Staff outposting decisions, which impact IAE, are managed by the relevant departments based on evolving business requirements. Likewise, regional departments manage the allocation of discretionary budget to resident missions and are responsible for ensuring its effective use. 70. Review of resident mission operations. The purpose of the resident mission review is to examine options for strengthening ADB’s resident mission operations, in order to successfully implement Strategy 2030. The review will assess the cost-effectiveness of current arrangements for resident mission contributions to ADB operations and compare arrangements with development partners’ experiences. The review will examine how resident mission operations should be realigned to implement Strategy 2030’s key directions, particularly (i) resident missions functioning as a single window for all ADB products and services, (ii) expanding private sector operations, (iii) strengthening knowledge services, and (iv) reinforcing a One ADB approach. The review is expected to conclude in 2020 and will identify organizational, staffing, and resource implications, which will inform future budget strategies for field offices. 71. Staffing in field offices. ADB seeks out local expertise when the required skills are available. Local staff in the field have distinct advantages through local knowledge, networks, and language skills. When there is a skills shortage locally, ADB will consider the most appropriate

15 Of this amount, $6.3 million is for cloud-based platforms, $3.1 million is for contractual support services, $0.8 million

for communication, and –$1.1 million representing a reduction in software, maintenance, and other IT costs.

19

option—be it bringing existing staff with the required skills from headquarters or using international staff positions or consultants. All modalities have their benefits, and ADB applies the most appropriate modality to suit the need in the field while monitoring the budget impact of these staffing decisions. 72. At a bank-wide level, ADB estimates that 957 staff positions (202 international staff, 387 national staff, and 368 administrative staff) will be in field offices by the end of 2020, up from the 934 expected staff positions (185 international staff, 382 national staff, and 367 administrative staff) in field offices by the end of 2019.16 The gradual, yet sustained, increase is from (i) greater demand for national staff positions in field offices, and (ii) more outposting to meet identified skills gaps.17 Figure 4 provides a historical and projected breakdown on composition of staff positions in ADB field offices from 2014 to 2020.

Figure 4: Composition of Staff Positions in Field Offices by Staff Category

* = estimate. Notes: 1. Field offices include 25 resident missions, Philippines Country Office, Pacific Liaison and Coordination Office,

ADB office in Singapore, Pacific Subregional Office, and Pacific country offices. 2. All figures are as of end December in each year. Figures for 2019 include international and national staff already

outposted by 30 September as well as those expected to be outposted by 31 December. Source: Asian Development Bank.

73. Outposting. The number of outposted staff positions increased from 2014 to 2019, with outposted international staff positions increasing from 46 to 83 positions, and outposted national staff positions increasing nearly fivefold from 6 to 27 positions. Outposted administrative staff positions started with two positions in 2018 and will become five by the end of 2019. The key drivers of growth over the 5-year period were (i) sovereign operations from 2014 to 2016, (ii) procurement in 2017, (iii) nonsovereign operations from 2017 to 2019, and (iv) security and organizational resilience in 2018. In 2019, the nonsovereign operations growth in outposting includes positions in ADB’s new Singapore office, which is expected to commence operations in

16 Figures include international, national, and administrative staff already outposted by 30 September 2019, as well as

those expected to be outposted by 31 December 2019. 17 Outposting refers to international, national staff, and administrative positions that belong to headquarters but are

deployed to field offices. Outposting brings a wider range of skills together from different departments at a field office level, while maintaining the reporting structures. For example, staff outposted from PSOD and the Procurement, Portfolio and Financial Management Department work closely with field office staff (who belong to regional departments) but continue to be managed by their originating departments.

70% 67% 63% 58% 55% 55% 51%

98% 97% 96% 95% 91% 93% 92%

100% 100% 100% 100%99% 99% 99%

30% 33% 37% 42% 45% 45% 49%

2% 3% 4% 5% 9% 7% 8%1% 1% 1%

050

100150200250300350400

201

4

201

5

201

6

201

7

201

8

201

9*

202

0*

201

4

201

5

201

6

201

7

201

8

201

9*

202

0*

201

4

201

5

201

6

201

7

201

8

201

9*

202

0*

International Staff National Staff Administrative Staff

Po

sitio

ns

Field Office Positions Outposting

20

2020. Outposting is expected to reach 133 staff positions (98 international staff, 30 national staff, and 5 administrative staff) in 2020, with the largest increase coming from nonsovereign operations. 74. In addition to staffing considerations, ADB continues to improve the level of support to field offices and invest in physical field office presence. [Information in this paragraph has been removed in accordance with the exceptions to disclosure in the Access to Information Policy (para. 17.5.x).]18 75. Field office support. The field office support unit in the Office of Administrative Services coordinates and manages office improvement and renovation projects relating to (i) establishment, relocation, expansion, and renovation projects; (ii) lease and contract review; (iii) procurement; (iv) asset management; (v) maintenance; (vi) security and safety; and (vii) other related concerns. The role of the unit will be expanded to include (i) preparation of guidelines, procedures, and workflows, including the development of reporting tools and templates; and (ii) provision of floor plan design and layout to resident missions to assist with renovation, expansion, and relocation. 76. Field office security. Maintaining adequate security at resident missions requires outposting of security personnel. The proposed expansion and construction of stand-alone ADB premises will require additional security personnel to manage the security of those sites. This will result in an increase in security operational costs.

77. Pacific country offices. The Board approved the establishment of Pacific country offices (PCOs) in 11 small Pacific island countries in 2018. ADB staff are now present in 9 of the 11 countries. PCOs are fully established in four countries (Samoa, Solomon Islands, Tonga, and Vanuatu—countries where extended missions were previously established). Two more PCOs (Kiribati and Palau) will be opened by the end of 2019. The remaining PCOs (Cook Islands, Federated States of Micronesia, Marshall Islands, Nauru, and Tuvalu) will be completed in 2020. 78. Establishing the ADB office in Singapore. Expanding ADB’s private sector operations, including public–private partnerships, is a key pillar of Strategy 2030. Establishing the ADB office in Singapore is in line with ADB’s plans to increase its field presence by placing more private sector operations staff in regional markets. 79. The lease for the Singapore office space was signed in September 2019. Fit-out work started in October and completion is expected in November–December 2019. The office will have 12 staff, including representatives from PSOD and the Office of Public–Private Partnerships. 80. Overall field presence. Decisions on resident mission staffing and physical facilities impact on ADB’s budget. Direct field office costs are estimated at 21.7% of the 2020 net IAE budget. 19 The number of staff in resident missions will increase to 957 in 2020, and the budget resources for the field offices are also estimated to increase by $7.6 million over the 2019 level (Table 8).


Information Policy (para. 17.5.x).] 19 Direct field office costs consist of (i) operational expenses (staff costs, staff consultants, business travel, and

representation), (ii) administrative expenses, and (iii) estimated staff costs of outposted positions.

21

Table 8: Field Office Staffing and Expenses, 2019–2020

Budget Item 2019 2020 Number of field offices 39 40 Indicative staff in field offices 934 957 Operational and administrative expenses ($ million) 150.1 157.7 Share of net internal administrative expenses (%) 21.7 21.7

Notes: 1. Field offices include 25 resident missions, Philippines Country Office, Pacific Liaison and Coordination Office, ADB

office in Singapore, Pacific Subregional Office, and Pacific country offices. 2. Indicative staff in field offices is the projected figure as of 30 September 2019. Source: Asian Development Bank.

81. Supporting resident missions, including building capacity in the seven new PCOs and the establishment of a Singapore office, will result in annual incremental costs of about $1.6 million in 2020, to cover costs of office occupancy and related expenses, and depreciation of the one-time establishment cost of the office facilities. This accounts for about 0.2% contribution to the 2020 budget growth. In addition to the above budget impact, within the IT budget growth, $1.0 million is related to incremental IT support for resident missions.

4. Improvements in Organizational Resilience

82. Activities and initiatives in support of organizational resilience are ongoing and remain a priority. [Information in this paragraph has been removed in accordance with the exceptions to disclosure in the Access to Information Policy (para. 17.5.x).] Outposted hubs under the Controller’s Department (CTL) and Treasury Department have been established at the Viet Nam Resident Mission (for CTL) and the Thailand Resident Mission (for the Treasury Department). Business impact analyses and risk assessments as well as business continuity plans are progressively being completed for all departments. 83. To further strengthen ADB’s organizational resilience, a detailed study on reducing ADB’s concentration risk by establishing capacity to continue critical business processes outside of Manila is in the planning stages. The planned study is expected to be completed in 2020. 84. The Business Continuity Facility in Clark, Pampanga continues to support ADB’s organizational resilience. In the event of a major business disruption in Manila, it can act as one of the alternate sites where users can perform their critical business processes. Renovation works were recently completed to allow daily use by operations departments to support projects undertaken in the Philippines.

85. [Information in this paragraph has been removed in accordance with the exceptions to disclosure in the Access to Information Policy (para. 17.5.x).]20


Information Policy (para. 17.5.x).]

22

86. The 2020 budget impact is minimal but will increase from 2021 onwards, with completion of the enhanced access control and fire management system in 2020–2021 and subsequent additional depreciation and maintenance costs. In addition, within the IT budget growth, $1.1 million is related to incremental IT resilience.

5. Improving Corporate Management and Administration

87. ADB will continue to invest in staff, which are its most valuable asset. In 2020, ADB will focus human resources management on providing the skilled and highly capable workforce necessary to achieve the goals of Strategy 2030. This will include proactive management to ensure the priorities of the strategy are properly supported by highly motivated and trained personnel. Further efforts will be made to systematically capture and report on the outcomes and impact of increased investment in staff capacity development activities across ADB. 88. Human resources framework. The vision of the ADB workforce to support Strategy 2030 is a highly skilled, flexible, well-integrated workforce, working in an environment that promotes innovation and collaboration. The key pillars of the human resources framework (Figure 5) are (i) workforce planning, (ii) recruitment and retention, (iii) performance management, (iv) compensation and benefits, (v) learning and career development, (vi) diversity and inclusion, (vii) efficient human resources services, and (viii) corporate culture. The framework will encompass all current ongoing reforms and look to future reform areas to (i) increase workforce agility; (ii) strengthen talent management; (iii) review job levels; (iv) invest in human capital including leadership training and coaching; and (v) develop an enabling culture for Strategy 2030.

Figure 5: Human Resources Framework

HR = human resources Source: Asian Development Bank.

89. Recruitment. A total of 296 external recruitments (252 on board and 44 incoming) were completed by the end of September 2019 and a number of recruitments, including eight young professionals, are underway. Efforts have been targeted to (i) bring staff with expertise on innovative and multidisciplinary project design in sovereign operations, (ii) expand nonsovereign

23

operations, and (iii) increase ADB’s presence in the 11 Pacific countries. Women accounted for 40% of international staff recruitment at the end of September 2019. 90. In 2020, efforts will continue to further strengthen and streamline processes to improve recruitment and selection. This will allow the Budget, Personnel, and Management Systems Department to be more responsive to applicants, increase efficiency, and provide opportunities for strategic discussions with departments on ways to optimize existing resources. Efficiencies in recruitment improve budget utilization, while slower recruitment leads to gaps in staffing and budget underutilization.

91. Staff mobility. Mobility has become a key mechanism at ADB to provide opportunities for staff career development while enhancing collaboration and knowledge sharing across departments. The importance of mobility will continue through regular rotation exercises, short-term assignments, as well as talent reviews.

92. Career management. Strategy 2030 requires ADB to strengthen existing skill sets and build new ones to meet future business demands. ADB will review the grading system and develop a career management framework to facilitate lateral and vertical career growth based on critical skills and experiences. 93. Staff development. ADB will invest in training and development to build staff capacity to deliver Strategy 2030. Efforts will continue to (i) build staff and manager capability for agility, innovation, change management, and collaboration; (ii) support increased number of private sector and One ADB transactions; (iii) build sector and thematic knowledge to support integrated solutions to emerging priorities in our DMCs; and (iv) build digital transformation skills. Leadership development initiatives will be expanded with a central focus on innovation and change. ADB will continue programs on supporting an enabling culture and staff career development. Learning programs will include more real-time learning and further improve the classroom experience. 94. Performance management. Performance management establishes links from ADB objectives to departmental work plans to individual work plans, with an emphasis on improving performance through better quality and more frequent feedback. Over 160 managers and staff received training on how to have constructive performance conversations. The performance management reforms adopted in 2018 have facilitated an increased ability to address underperformance. Efforts will continue to support managers and staff in managing performance. 95. Compensation and benefits review. ADB conducts a comprehensive review of its compensation and benefits policies every 5 years to ensure that they continue to support the organization in attracting and retaining talent, in line with international trends and consistent with ADB’s mission. The next review started in 2019 and will conclude during 2020. It will (i) include a total remuneration market benchmarking exercise and a review of current policies, and (ii) establish a set of guiding principles for reward. The review will be conducted within the broader context of ADB’s ongoing human resources reforms. A consultancy firm has been engaged to support the review, and Management will consider the recommendations and present proposals to the Board of Directors toward the end of 2020. Any changes to policies are anticipated to be implemented in 2021. 96. Staff Retirement Plan and defined contribution plan. The IAE budget includes ADB’s contributions to the SRP and the defined contribution plan. The contribution to the SRP is budgeted at 24% of pensionable salaries, a rate determined by the Pension Committee based on

24

the SRP funding policy. [Information in this paragraph has been removed in accordance with the exceptions to disclosure in the Access to Information Policy (para. 17.4.viii).]

97. [Information in this paragraph has been removed in accordance with the exceptions to disclosure in the Access to Information Policy (para. 17.4.viii).] 98. Diversity and inclusion. ADB is committed to a diverse and inclusive workforce where everyone is treated with respect regardless of gender, nationality, ethnicity, religion, sexual orientation, physical ability, and thinking style. Institutional gender equality and efforts to attract, recruit, develop, and retain women international staff continues to be a priority (Appendix 12). ADB will also continue to promote inclusion of the lesbian, gay, bisexual, and transgender community as part of ADB’s commitment to diversity and inclusion. 99. Institutional procurement. Building on the significant institutional procurement reforms undertaken over the past several years, ADB continues to explore innovative procurement approaches to enhance speed, better quality, and value for money. ADB will further modernize institutional procurement by enhancing the eProcurement system and provide advanced procurement training for staff in 2020. 100. eLibrary. The ADB library continues to strengthen its digital content and access in support of ADB’s operations and knowledge work. About 90% of the library’s annual acquisitions budget is spent on electronic resources. The new cloud-based online library catalog allows access anytime and anywhere. C. Staff Productivity Enhancements and Other Efficiency Measures

101. ADB is changing and improving the way it works. Using available resources better will help ensure the budget is aligned with Strategy 2030 priorities. Departmental efficiency gains are being systematically monitored. Efficiencies will be tracked and will continue to inform decisions on budget allocations. Two processes work together as follows: (i) the strengthened workforce analysis exercise captures the productivity enhancements of different departments, including staff productivity improvements from IT and process reforms; and (ii) the departmental highlights process was enhanced, enabling departments to better capture their efficiency measures and results. Product owners are now responsible for systematically producing and tracking IT project benefits, which helps inform the departmental highlights submissions. In tandem, baseline data will continue to be strengthened to enable improved tracking and understanding of the anticipated additional changes and improvements to be made across ADB. More flexible budget management changes have also helped minimize budget growth.

25

102. The 2020 budget accounts for projected efficiency savings (Table 9). The change in workforce analysis methodology has resulted in increased savings being captured under staff productivity enhancements as compared with 2019. Overall savings are similar to those in the 2019 budget and they are expected to increase in future years as the benefits of IT reforms are realized. Other efficiency gains, primarily identified by the departmental highlights process, consist of cost savings such as improved contract terms. In general, efficiency savings are funds that arise from departments not having to incur a specific cost anymore, either through efficiency measures or more cost-efficient behaviors. These savings can (i) be redeployed between departments to support changing strategic priorities, (ii) remain in a department’s budget for internal reallocation, or (iii) allow staff to devote more time to higher value-adding work.

Table 9: Estimated Savings from Staff Productivity Enhancements and Other Efficiency Measures, 2020

($ million)

Item Estimated Incremental

Savings Staff productivity enhancements 12.6 Other efficiency measures 4.1

Information technology 1.0 Operations 0.6 Administrative services 1.1 Better budget management 1.4

Total productivity enhancements and other efficiency measures 16.7 Source: Asian Development Bank.

103. Staff productivity enhancements. Productivity of a department is expressed in terms of output-per-staff ratios, based on the departmental work plans.21 Departmental work plans are reviewed, translated into outputs, and ratios are then compared with previous years. The movement in the ratio of outputs to existing staff numbers is also compared with previous years.22 Efficiency gains are expected to comprise a portion of the improvement in this ratio, and only when necessary will additional staff numbers be provided to enable the department to achieve its work plan. Each department, in its department highlights submission, also qualitatively assesses its own productivity enhancements, including as a result of enhanced IT systems, to complement the quantitative improvements captured through output-per-staff ratios. 23 Staff productivity enhancements are expected to save $12.6 million in budgetary requirements in 2020, which is the equivalent of optimizing 82 positions.

21 The number of full-time equivalent staff consultants were also considered when estimating the output-per-staff ratios. 22 The output-per-staff ratios were derived from the departments’ actual outputs during 2016–2019. 23 The previous workforce analysis methodology estimated the full-time equivalent staff workdays to be saved by the

key ongoing and planned business process reforms and automation efforts. The previous methodology did not capture all ongoing and planned reforms and the workdays saved were likely to be underestimated. Efforts of staff consultants were also not captured.

26

104. Departmental highlights. For the 2020 budget, ADB has improved the recording of staff productivity and efficiency gains through a new systematic approach to capturing departmental highlights of changes and improvements (Figure 6). Information provided by departments on staff productivity enhancements deriving from such measures as process improvements, administrative simplification efforts, and other cost savings was effectively collected and reviewed. Reviews across departments continue to identify savings, process improvements, and realignments. Departmental budget focal persons and the related One ADB cross-department budget network have been integral in ensuring departments have adopted this culture of ongoing change and improvement, and better use of the available budget. Box 4 gives examples of other efficiency improvements that were identified in the departmental highlights.

Figure 6: Framework for Monitoring Efficiency Gains

S2030 = Strategy 2030, WPBF = work program budget framework. Source: Asian Development Bank.

27

105. Benefits from information technology reforms. The governance arrangements for the IT reforms ensure clear ownership of the reforms by relevant departments, as well as performance monitoring against six benefit categories: (i) efficiency, (ii) effectiveness, (iii) data consistency, (iv) resiliency, (v) risk reduction, and (vi) compliance. The ADB corporate results framework includes indicators tracking ADB’s progress in digital transformation. 106. The completed Real-Time ADB projects and other IT reforms have delivered a range of tangible benefits as identified and monitored by user departments. Key results include:

(i) Efficiency (a) The use of an online collaboration platform by more than 95% of ADB has

enabled real-time collaboration and improved the ease of finding and accessing documents. Paper consumption was reduced by 82% at the 2019 Annual Meeting as compared with the previous annual meeting.

(b) The delivery of the nonsovereign transaction system for guarantees brought 35% efficiency gains for each transaction processed by CTL and 560 person-days of savings a year for PSOD trade finance transaction processing, and reduced monthly and quarterly billing process time by half for CTL (Box 5).

(c) The new modern case management system for the Office of Anticorruption and Integrity saves almost 900 person-days per year.

(d) The new pricing and valuation system for Treasury structured products has reduced the valuation processing time of the Office of Risk Management by about 16 person-days a year.

(e) The use of a modern telecommunications platform has reduced meeting room booking lead time from 2 days to 2 minutes.

Box 4: Efficiency Gains Identified through the Systematic Gathering of Departmental Highlights

Information technology efficiency. In 2020 cost savings of $1.0 million are expected from transitioning from private networks to internet links for field offices, refinements in application developments, and optimizing outsourcing services during contract negotiations.

Operations efficiency. ADB is continuing efforts to minimize increases in travel and consulting budgets. More effective mission planning and use of video conference facilities is ensuring travel budget increases are minimal. Staff consulting engagements are being carefully considered, with increased use of national consultants over international consultants, cost sharing with external partners, and stronger collaboration between department experts and thematic groups reducing the growth in staff consulting requirements for 2020. These initiatives are expected to save about $0.6 million in budget requirements for 2020. Administrative services efficiency. Expected efficiency savings of $1.1 million in administrative services were a result of

(i) reduced travel costs of $0.6 million, through better negotiation for corporate hotel rates, use of an air travel card for airfare payments, and online reservation system;

(ii) leasing of equipment of $0.1 million; (iii) higher use of eLearning resources of $0.1 million; and (iv) other administrative services, including use of framework agreements and alternative

procurement arrangements, resulting in savings of $0.3 million. Source: Asian Development Bank.

28

(ii) Effectiveness (a) The extension of eProcurement system to 25 field offices has enabled more

transparent approvals for procurement transactions. (b) The establishment of the procurement complaints tracking system has

significantly improved ADB’s tracking and handling of procurement complaints.

(c) The automation of candidate screening and qualification workflow has enhanced user experience and eliminated time-intensive manual procedures.

(iii) Data consistency. Efforts to improve data consistency and quality including the establishment of ADB’s first “data dictionary” has enabled improved monitoring and reporting of operations data.

(iv) Resiliency, risk reduction, and compliance. Expanded disaster recovery capabilities, improved cybersecurity governance on ADB’s IT systems, and better detection tools for cyber threats have increased resiliency and reduced risks both in headquarters and field offices.

107. Better budget management. ADB has been encouraging improved budget management in departments to better use the approved budget. Improving the level of utilization has helped reduce budget growth as departments become accustomed to planning and managing tighter budgets. In addition to the needs of the work program, past patterns of budget utilization are considered for each department when formulating the 2020 budget allocations. This approach reduced the budget requirements for 2020 by $1.4 million. Departments that have not received the entire requested budget have been assured that should their utilization improve, or should new circumstances arise requiring additional resources, assistance will be provided to the extent possible. ADB will look to use both the contingency and budget carryover modalities to ensure utilization levels are maintained. Essential departmental work plans will not be compromised by the expected high utilization levels.

Box 5: Nonsovereign Operations—Loan IQ Phase 1 (Guarantees)

Loan IQ Phase 1 for guarantees went live on 23 September 2019, a significant milestone in the nonsovereign operations information technology change program.

Loan IQ is a comprehensive commercial lending system that was selected by ADB following an extensive rigorous evaluation exercise during 2016–2017. Project implementation started in July 2018.

This project supports ADB’s guarantees portfolio, which represents the highest volume of nonsovereign operations transactions and is integrated with other systems to automate the end-to-end flow of information across multiple systems.

The following benefits are expected:

1. Efficiency Gains (i) Faster transaction processing. Letter of credit issuances can be done in half the original time. (ii) Shorter time to market. SWIFT messages can be received on approval, rather than at the end of

the day. (iii) Billing and report automation. Monthly and quarterly billing can be done in half the original time.

2. Risk Reduction. System integration reduces the operational risk.

Loan IQ Phase 2 rollout is planned for February 2020 and will cover the loan portfolio and integration with new systems.


29

VI. CAPITAL EXPENDITURE BUDGET 108. ADB has two capital expenditure budget categories: (i) the annual capital expenditure budget and (ii) the special capital expenditure budget. Starting in 2020 on a phased basis, ADB will implement a 3-year rolling framework for certain annual capital expenditures, with the objective of increasing reliance on the annual capital expenditure budget and alignment with the financial year.24 109. Capital expenditure budgets differ from administrative expense budgets in that the spending is capitalized onto the balance sheet at the time of purchase or completion. Capital expenditure budget can only be provided for fixed assets.25 Capitalization is a result of project progress or fixed asset output delivery. Fixed assets are depreciated over their useful life, which varies, depending on the type of asset. Depreciation is expensed through the audited financial statements. ADB includes depreciation in the IAE budget. Budgeted depreciation is based on indicative project progress and capitalization (Appendix 11). 110. In 2019, ADB reviewed the capital expenditure budgeting practices of other MDBs to identify best practices. The MDBs reviewed all align capital expenditure budget with their financial years using a 3-year rolling approach with limited reliance on special capital expenditure budgets. Under the 3-year rolling capital expenditure budget approach, the annual capital expenditure budget envelope for year 1 is approved, while years 2 and 3 are indicative, based on rolling project planning pipelines. Subject to annual management review, the approved envelope will be available for 3 successive financial years and comprise several projects, with each project having a unique code, project manager, budget, and expected output with delivery timeline. Under the assigned project code, the individual project budget is managed and reported in line with the financial year, under the corresponding governance arrangements. Related fixed asset delivery reports, compared to original delivery schedule, are integral to this output-based approach.

111. Capital expenditure requirements for headquarters facilities and preconstruction costs for field office facilities will be provided through a 3-year rolling framework, commencing in 2020.26 This will allow ADB to assess the suitability of full implementation of a 3-year rolling framework while also allowing time for ADB to establish the necessary information management tools. During 2020, the Budget Monitoring and Control System will also be enhanced to manage capital expenditure budget using the One ADB capital expenditure project codes. A. 2020 Annual Capital Expenditure Budget

112. The 2020 annual capital expenditure budget is $25.5 million (Table 10 and Appendix 2). The 2020 annual capital expenditure budget is higher than originally forecast in the 2019 budget document. This is a result of the introduction of the 3-year rolling framework and the inclusion of additional critical works. Both IT and field office budgets are broadly in line with the amounts projected in the 2019 budget document.

24 Lessons learned during the first phase of the implementation will be reviewed prior to full implementation. 25 A fixed asset is an item purchased or built that has a useful life of more than 1 year. 26 [Information in this footnote has been removed in accordance with the exceptions to disclosure in the Access to

Information Policy (para. 17.5.x).]

30

Table 10: Annual Capital Expenditure Budget ($'000)

Item 2020 Budget A. Headquarters facilitiesa 11,693 Building infrastructure 9,285 Nonbuilding infrastructure 2,408 Transportation 249 Furniture 1,500 Equipment 659 B. Information technology 8,168 Computers and peripherals 4,073 Information technology infrastructure 3,404 Telecommunications 692 C. Field offices 1,843 D. Preconstruction costsa 2,795 E. Contingency 980

Total 25,479 Note: Numbers may not sum precisely because of rounding. a Prepared under the 3-year rolling framework. Source: Asian Development Bank.

113. Headquarters facilities. Included under the 3-year rolling capital expenditure framework, this budget category will fund the (i) rehabilitation of critical building systems and infrastructure to ensure the headquarters building can perform to acceptable standards and withstand any disruptions as a result of natural phenomena; (ii) creation of innovation spaces; and (iii) replacement of vehicles, equipment, and furniture. Improvements will be made in scoping facilities projects and the subsequent management and monitoring of these projects. Appendix 10 provides more details on the headquarters facilities projects. 114. [Information in this paragraph has been removed in accordance with the exceptions to disclosure in the Access to Information Policy (para. 17.5.x).] 115. Information technology. The budget will fund the replacement of (i) computer equipment and IT peripherals, (ii) IT infrastructure, and (iii) telecommunications equipment. About $3.0 million of IT infrastructure spending involves the replacement of routers, switches, servers, and storage to address obsolescence. 116. Field offices. The budget will fund resident missions’ periodic replacement of vehicles, furniture, office equipment, and IT peripherals; as well as minor renovation of office facilities. Provisions also include support for safety and security-related expenditures. 117. A contingency provision of 5% ($1.0 million) is included in the 2020 annual capital expenditure budget.27 This contingency is required to meet any cost overruns as well as urgent and unplanned requirements during 2020, particularly the security-related requirements in the field offices.

27 The 5% contingency is calculated excluding the preconstruction costs.

31

B. Ongoing Special Capital Expenditure Programs

118. The special capital expenditure budget is for items of high value and with a special purpose. They are funded separately from annual budgets, and the implementation period is generally 5 years. Special capital expenditure budgets can be approved by the Board at any time during the year, as the need arises, and are not tied to the annual budgeting process. 119. As part of the capital expenditure review, all open special capital expenditure budgets were reviewed. There are 15 open special capital expenditure budgets, of which, eight are completed and the budget will be closed by the end of 2019. The remaining seven special capital expenditure budgets are detailed in Appendix 11. 120. Real-Time ADB IT reform. Of the 14 modernization projects under the Real-Time ADB IT reform program, eight were completed as of October 2019, and four more are set to be completed by the end of 2019, (Figure 7). The remaining two projects targeted for completion in 2020 will put in place the following:

(i) an integrated end-to-end solution for nonsovereign operations; and (ii) a modern, flexible, and user-friendly platform for loan, grant, and TA

disbursement that replaces the old mainframe systems.

Figure 7: Real-Time ADB (as of October 2019)


32

121. Digital Agenda 2030 stage 1. Building on the progress made under Real-Time ADB, Digital Agenda 2030 stage 1 intensifies the IT modernization efforts through six programs to be delivered over 2019–2023. Nine projects were approved for implementation as of the end of October 2019, (Figure 8). 122. Digital transformation involves collaboration across ADB in the form of direction-setting, consultation throughout the project life cycle, road map development, design thinking and futures workshops, and system testing, among others. Staff will be key in contributing their relevant expertise and user experience to help in the design and implementation of these new IT tools and digital processes. They will also be integral in enabling successful adoption of new systems to deliver the intended benefits. A digital fitness program will be implemented to enhance staff skills in the adoption of digital technologies.

Figure 8: Digital Agenda 2030 Stage 1 (as of October 2019)


123. ADB headquarters building efficiency and security enhancement. The following subprojects were completed: (i) the last phase of the upgrade and rehabilitation of central air-conditioning system was completed in August 2019, and (ii) the new medical center for ADB headquarters was completed and became operational in September 2019. The remaining subprojects for completion in 2020 are (i) the renovation of restroom facilities, and (ii) the seismic improvement of headquarters facilities.

33

124. [Information in this paragraph has been removed in accordance with the exceptions to disclosure in the Access to Information Policy (para. 17.5.x).]28 125. Improving and expanding office facilities of resident missions. As of 30 September 2019, $2.8 million of the $10.0 million special capital expenditure budget had been allocated for the expansion or relocation of selected resident missions and implementation is ongoing. 29 The remaining funds will be used for relocation or expansion and refurbishment of other resident missions in 2020 and beyond. 126. Establishment of Pacific country offices. In September 2018, the Board approved the establishment of 11 PCOs, which involves the conversion of four extended missions (Samoa, Solomon Islands, Tonga, and Vanuatu) and the establishment of seven new PCOs in the Cook Islands, Federated States of Micronesia, Kiribati, Marshall Islands, Nauru, Palau, and Tuvalu, with a capital expenditure budget of $4.0 million to cover the one-time establishment cost of the seven offices.30 The seven new PCOs are expected to be completed and operational by the end of 2020.

127. Establishment of an ADB office in Singapore. In April 2019, the Board approved the establishment of an ADB office in Singapore, with a capital expenditure budget of $0.9 million to cover one-time establishment costs. The fit-out work of the office premises is expected to be completed in November–December 2019, with the office formally opening in January 2020.


Information Policy (para. 17.5.x).] 29 ADB. 2017. Budget of the Asian Development Bank for 2018 (Appendix 3). Manila. 30 ADB. 2018. Establishment of Pacific Country Offices. Manila.

34

VII. RECOMMENDATIONS 128. I recommend that the Board approve the budget consisting of

(i) the 2020 net internal administrative expenses amounting to $710,653,000 for the Asian Development Bank, excluding the Compliance Review Panel and the Office of the Compliance Review Panel, and the Independent Evaluation Department; and

(ii) the 2020 annual capital expenditure budget amounting to $25,479,000. 129. I recommend that the Board approve the 2020 budget for the Independent Evaluation Department, consisting of internal administrative expenses of $14,218,000. 130. I recommend that the Board approve the 2020 budget for the Compliance Review Panel and the Office of the Compliance Review Panel, consisting of internal administrative expenses of $1,847,000. Takehiko Nakao President 22 November 2019

APPENDIXES

Appendix 1 35

2020 BUDGET: INTERNAL ADMINISTRATIVE EXPENSES ($’000)

2019 2020

Item Budget Budget

A. Board of Governors 2,798 2,359 (15.7)

B. Board of Directors 17,800 17,098 (3.9)

C. Independent Evaluation 13,437 14,218 5.8

D. Accountability Mechanism 2,917 3,003 2.9Compliance Review Panel and Office of the Compliance Review Panel 1,799 1,847 2.7Office of Special Project Facilitator 1,118 1,156 3.4

E. Operational Expenses (excluding A, B, C & D) 516,608 538,611 4.3Salaries 274,625 286,808 4.4Benefits 156,600 164,478 5.0 Contribution to staff retirement plans

a65,092 67,454 3.6

Staff development 10,011 11,140 11.3Relocation 5,794 6,025 4.0Consultants 32,541 32,654 0.3Business travel 36,432 36,870 1.2Representation 605 636 5.1

F. Administrative Expenses (excluding A, B, C & D) 139,298 153,833 10.4Communications 9,558 9,819 2.7Office occupancy 33,206 33,598 1.2Library and subscription 6,428 6,760 5.2Office supplies 1,323 1,442 9.0Equipment, maintenance, and support 17,616 26,117 48.3Contractual services 38,527 40,712 5.7Insurance 6,892 7,033 2.0Depreciation 24,850 27,414 10.3Miscellaneous 898 938 4.5

Total Regular Programs 692,858 729,122 5.2

G. General Contingencyb 6,929 7,291 …H. Internal Administrative Expenses 699,787 736,413 5.2

I. Fee Reimbursementsc (9,299) (9,695) …J. Net Internal Administrative Expenses 690,488 726,718 d 5.2

2019

Estimate

2020

Estimate % Change

Gross IAE 699,787 736,413 5.2

Accounting Adjustments (44,956) 57,263 … Accrual for SRP (4,847) 85,573 …

Accrual for PRGMIP (2,178) 12,690 …Loan origination costsf (37,931) (41,000) …

Overall Administrative Expensesg 654,831 793,676 21.2

Note: Numbers may not sum precisely because of rounding.a

b

c

d

e

f

g


%

Change

over 2019

Accounting standards require that a portion of the loan origination costs be deferred and amortized over the life of the loan.The overall administrative expenses for accounting purposes include (i) gross IAE (this excludes fee reimbursements), (ii)

accrual estimates for the net periodic benefit cost for the SRP and PRGMIP, and (iii) adjustments for loan origination costs.

The estimates for the accruals for the SRP and PRGMIP for 2020 are based on preliminary projection provided by the

plan's actuary less ADB's expected contributions included in the 2020 budget.

Memo iteme

… = not applicable or not calculated, ( ) = negative, ADB = Asian Development Bank, DC Plan = Defined Contribution Plan,

IAE = internal administrative expenses, PRGMIP = Post-Retirement Group Medical Insurance Plan, SRP = Staff Retirement

Plan.

This includes contribution to SRP and DC Plan, but excludes contributions for the Board of Directors, Independent

Evaluation, and Accountability Mechanism. The budgets for SRP and DC Plan for these offices are included in the their

respective budget categories.

ADB maintains 1% of the budget as the general contingency to meet any shortfall under any budget category during the

budget implementation.

Net IAE for 2020 consists of $710.7 million for ADB, $14.2 million for Independent Evaluation Department, and $1.8 million

for the Compliance Review Panel and Office of the Compliance Review Panel.

Estimated costs for administering external funds, excluding Japan funds for which the costs are charged to the funds.

The memo item reconciles the budgeted internal administrative expenses and the administrative expenses recorded in the

financial statements. This approach is consistent with the quarterly budget utilization reports.

36 Appendix 2

2020 BUDGET: ANNUAL CAPITAL EXPENDITURE ($’000)

2019 2020 2021 2022 Item Budget Budget Indicative A. Headquarters facilitiesa 2,950 11,693 11,632 4,795

Building infrastructure 1,801 9,285 9,250 2,410

Nonbuilding infrastructure 1,149 2,408 2,382 2,385

Transportation 72 249 75 80

Furniture 0 1,500 1,500 1,500

Equipment 1,077 659 807 805 B. Information technology 6,469 8,168 8,917 7,194

Computers and peripherals 3,014 4,073 5,938 4,405

Information technology infrastructure 2,683 3,404 2,210 2,470

Telecommunications 772 692 769 319 C. Field offices 1,490 1,843 1,945 2,053 D. Supplementary budgetb 1,700 … … … E. Preconstruction costsa,c … 2,795 … … F. Contingency 550 980 1,034 1,091 Total 13,159 25,479 23,528 15,133

… = not applicable or not calculated. Note: Numbers may not sum precisely because of rounding. a Prepared under the 3-year rolling framework. b In October 2019, the Board approved a supplementary annual capital budget of $1.7 million for one-time payments

for long-term leases of land in India and Pakistan and additional capitalizable costs associated with the long-term land leases.

c [Information in this footnote has been removed in accordance with the exceptions to disclosure in the Access to Information Policy (para. 17.5.x).]


Appendix 3 37

INDICATIVE WORK PROGRAM: SUMMARY OF SELECTED DELIVERABLES

Key Outputs 2019 2020 Average

2021–2022 A. Projected Commitments in Asian Development

Fund and Ordinary Capital Resources Amount ($ million) 20,772 21,609 22,380 No. of committed projects 152 167 175

Private sector operations Amount ($ million) 3,150 3,400 3,560 No. of committed projects 32 37 45

Sovereign operationsa Amount ($ million) 17,622 18,209 18,820 No. of committed projects 120 130 131

1. Investment projects

Amount ($ million) 12,858 13,228 15,271 No. of committed projects 82 97 107

2. Policy-based lending

Amount ($ million) 3,443 1,996 2,194 No. of committed projects 16 13 13

3. Results-based lending

Amount ($ million) 300 1,646 1,132 No. of committed projects 1 5 7

4. Sector development programs

Amount ($ million) 829 1,296 175 No. of committed projects 6 10 2

5. Project readiness financing

Amount ($ million) 192 43 48 No. of committed projects 15 5 3

B. Multitranche Financing Facilities

1. Facilities Amount ($ million) 2,750 3,785 4,140 No. of committed facilities 1 7 8

2. Periodic financing requests

Amount ($ million) 2,831 2,621 3,680 No. of committed projects

9 15 18

C. Portfolio Management 1. Ongoing projects at year-end (no.) 923 959 1,017

Regional departments 716 726 736 Private Sector Operations Department 207 233 281

2. Disbursements ($ million) 14,410 16,054 17,468 3. Project completion reports (no.) 72 107 120

38 Appendix 3

Key Outputs 2019 2020 Average

2021–2022 D. Cofinancing

1. Sovereign cofinancing ($ million) 5,162 5,360 5,540 2. Nonsovereign cofinancing ($ million) 6,600 7,200 7,926

E. Technical Assistance Operationsb

1. New commitments ($ million) 395 422 432 2. No. of new committed TA projectsc 270 237 161

Transaction TAd 123 111 79 Knowledge and support TAe 147 126 82

3. Portfolio (no.) 900 873 798 4. TA completion reports (no.) 147 197 189

F. Transaction Advisory Services (no.) 1. New mandates 22 9 7 2. Mandates under implementation 28 32 32

G. Knowledge Products (no.)f 1. Regional departments 128 98 65 2. Specialized knowledge departments 130 111 89 3. Other departments 47 44 34

H. Country and Regional Strategies and Operations

Business Plans (no.) 1. Country partnership and regional cooperation

strategies 8 7 6 2. Country and regional operation business plans 40 40 40

no. = number, TA = technical assistance. Note: The indicative work program is as of 30 June 2019. It will be revisited during preparation of the staff’s annual results-based work plans. a Includes periodic financing requests but not multitranche financing facilities. b Includes cofinanced TA projects. c Excludes supplementary TA. d Transaction TA prepares, enhances readiness, develops capacity, and/or provides policy advice for a specific

project; helps deliver outputs or mitigate the project risks under a specific project through capacity development and/or policy advice; or develops a public–private partnership project under transaction advisory services.

e Knowledge and support TA is not directly linked to projects financed by the Asian Development Bank (ADB). Examples include capacity development, policy advice, and research and development. The outputs of the knowledge and support TA (i) are often fed into the preparation of government policies and strategies, and ADB’s policies, strategies, and plans; or (ii) may lead to a transaction TA to prepare a specific ensuing project. The decline in the number of new committed TA projects does not imply a reduction in knowledge products and services, as not all knowledge products and services are TA-funded.

f Using new typology introduced in December 2018, this appendix reports the following knowledge products and services of ADB: (i) flagship studies and events, (ii) signature products and events, (iii) special reports, (iv) technical studies, (v) working papers, (vi) policy briefs, and (vii) op-eds.

Source: ADB. 2019. Work Program and Budget Framework, 2020–2022. Manila.

Appendix 4 39

EBRD

IADB

WB

AfDB

ADB

0%

2%

4%

6%

8%

10%

12%

14%

16%

2010 2011 2012 2013 2014 2015 2016 2017 2018

EBRD IADB WB (IBRD + IDA) AfDB ADB

BUDGET MANAGEMENT INDICATORS A. ADB Efficiency Compared with Other Institutions 1. [Information in this paragraph has been removed in accordance with the exceptions to disclosure in the Access to Information Policy (para. 17.2.iv).] Figure A4.1: [This figure has been removed in accordance with the exceptions to disclosure in

the Access to Information Policy (para. 17.2.iv).]

Source: Asian Development Bank. 2. Further comparison of administrative expenses to the two-year average disbursements has been made using publicly available financial information (Figure A4.2). ADB has been flat since 2016, after steady declines beginning in 2013, and maintains the lowest ratio among peer organizations.

Figure A4.2: Ratio of Administrative Costs to 2-Year Average Disbursements

ADB = Asian Development Bank, AfDB = African Development Bank, EBRD = European Bank for Reconstruction and Development, IADB = Inter-American Development Bank, IBRD = International Bank for Reconstruction and Development, IDA = International Development Association. Source: Asian Development Bank.

3. Standard & Poor’s publication Supranationals Special Edition 2019 listed ADB’s business profile and financial profile as “extremely strong” and cited the merger of the lending operations

40 Appendix 4

10 11

79

53

2014 2015 2016 2017 2018 2019(F)

of ADB’s Asian Development Fund with its ordinary capital resources as providing an “extremely strong” capital position.1 4. The Multilateral Organization Performance Assessment Network (MOPAN) comprises 18 countries that share a common interest in assessing the effectiveness of the major multilateral organizations they fund.2 In 2017–2018, MOPAN assessed 14 organizations, including ADB. It rated ADB highly satisfactory for the key performance indicator that “organizational systems are cost- and value-conscious and enable financial transparency/accountability.”3 B. Budget Management Indicators 5. In addition to the above comparisons with other multilateral development banks, a holistic set of internal budget management indicators has been established to monitor ADB’s budget management performance. The budget management indicators include the five indicators from the corporate results framework, an indicator related to the internal administrative expenses of field offices, and a budget sustainability indicator. 6. ADB’s Corporate Result Framework, 2019–2024, is aligned with Strategy 2030 and was approved by the Board in September 2019.4 The framework includes an indicator on the quality of budget management, with a set target. 5 The other four tracking indicators are (i) share of operational expenses for direct operations support, (ii) internal administrative expenses (IAE) per $1 million disbursement, (iii) IAE per project approved, and (iv) IAE per project under administration.6 The tracking indicators have no specific targets. 7. Budget management. A new results framework indicator was introduced to the corporate results framework to measure the quality of budget management. This indicator shows the level of unutilized budget. The target level is 5% or less unutilized budget in any given year.7 In 2019, the unutilized budget is expected to be 3% or less. Figure A4.3 shows the 2019 forecasted unutilized budget and the historic level of unutilized budget.

Figure A4.3: Quality of Budget Management (% of unutilized budget)

F = forecast. Source: Asian Development Bank.

1 Standard and Poor’s. 2019. Supranationals Special Edition. October. 2 The 18 countries are Australia, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan,

Republic of Korea, Luxembourg, Netherlands, Norway, Sweden, Switzerland, United Kingdom, and the United States. MOPAN also has two observers: New Zealand and the United Arab Emirates.

3 MOPAN. 2019. MOPAN 2017–18 Assessments - Asian Development Bank. Paris. 4 ADB. 2019. ADB Corporate Results Framework, 2019–2024. Manila. 5 A results framework indicator tracks progress in the region or measures ADB’s progress toward achieving Strategy

2030’s vision. 6 A tracking indicator is a supplementary indicator that helps ADB track progress in areas of interest. 7 Unutilized portion (remainder) at the end of the calendar year of the IAE relative to the approved internal

administrative budget for the same period.

Appendix 4 41

8. Budget sustainability. In 2019, ADB improved the transparency of budget sustainability by comparing expenses with income in a side-by-side manner. The result is Figure A4.4, which compares income from lending operations with overall administrative expenses. 8 Overall administrative expenses are fully covered by income from lending operations.9 Figure A4.4: [This figure has been removed in accordance with the exceptions to disclosure in

the Access to Information Policy (para. 17.4.viii).]

F = forecast. Source: Asian Development Bank. 9. Strategic alignment. The share of actual operational expenses that are incurred by operations departments and direct operations support departments is increasing.10 Not only is this trend indicative of ADB’s strong focus on operations, it also points to improving efficiency in the indirect support departments. The share of actual IAE incurred by field offices is also increasing in line with increasing budgeted allocations, which supports the strengthening of ADB’s field presence. Figure A4.5 shows the trend of the spending.

8 Overall administrative expenses (covering loans, guarantees, equity investments and grants) include IAE,

accounting accruals for pension and post-retirement medical benefits, and adjusted loan origination cost. 9 Income from lending operation includes spread income and fees from regular ordinary capital resources operation

and income from concessional lending operation; net of the expected losses from loans and guarantees. It excludes income from liquid assets and equity investments.

10 Operations departments include the Central and West Asia Department, the East Asia Department, the Pacific Department, the South Asia Department, the Southeast Asia Department, the Private Sector Operations Department, and the Office of Public–Private Partnership. Direct operations support departments include the Controller’s Department; Economic Research and Regional Cooperation Department; Office of the Auditor General; Office of Anticorruption and Integrity; Office of the General Counsel; Office of Risk Management; Procurement, Portfolio and Financial Management Department; Sustainable Development and Climate Change Department; and Strategy, Policy and Partnerships Department.

42 Appendix 4

Figure A4.5: Strategic Alignment (%)

F = forecast. Source: Asian Development Bank.

10. Budget efficiency. The actual IAE per $1 million of disbursement has decreased from 2014 to 2016 and has leveled off at about $47,000 per million disbursed. 11 The actual IAE per project approved and the IAE per project under administration have remained relatively stable since 2014, although the latter is forecast to increase in 2019 because of lower growth in the number of projects under administration (Figure A4.6). 12

Figure A4.6: Budget Efficiency

F = forecast, IAE = internal administrative expenses. Source: Asian Development Bank.

11 Actual IAE per $1 million of disbursement is the total IAE in the last 3 years divided by the total amount of ordinary

capital resources and Asian Development Fund disbursements during the same period ($’000, 3-year average). 12 Project under administration is the average of the number of active projects at the beginning of the year and the

number of active projects at the end of the year.

2014 2015 2016 2017 2018 2019(F)

IAE per Project Approved ($’000)

2014 2015 2016 2017 2018 2019(F)

IAE per Project under Administration

($'000)

59.9

52.9

47.6 47.3 47.2 46.7

2014 2015 2016 2017 2018 2019(F)

IAE per $1 million Disbursement($'000)

17.618.1 18.1

20.3 20.621.7

2014 2015 2016 2017 2018 2019(F)

Share of IAE for Field Offices

81.2

83.0 82.9 83.4

83.7 84.2

2014 2015 2016 2017 2018 2019(F)

Share of Operational Expenses for

Direct Operations Support

Appendix 4 43

11. ADB continues to look for opportunities to improve efficiency. The key areas expected to generate substantial efficiency gains are through improvements in ADB’s underlying information technology and the streamlining of business processes. The key efficiency areas will result in higher staff productivity and other cost savings.

44 Appendix 5

PRICE FACTOR ASSUMPTIONS 1. The nominal budget growth comprises two factors: price increase and volume growth. Price increase is derived from external factors such as the movements in market prices and currency exchange rates. Applicable rates, based on relevant data sources, are used to compute price adjustments for all expense items to derive the overall price increase.

2. The volume growth is the nominal budget growth less the effects of price increases. Volume growth includes changes in the quantity of goods and services as well as established special initiatives such as information technology reforms and the organizational resilience program. 3. The price increase for the 2020 budget was computed using a price factor methodology discussed with the Asian Development Bank’s Budget Review Committee in 2014. Table A5 summarizes these price factor items and assumptions for 2020.

4. The Asian Development Bank’s expenditures are incurred in about 40 currencies. For the 2020 budget, the impact of the price movement (comprising the movements in market prices and exchange rate) is estimated at 2.9% of the budget growth.

Table A5: Assumptions for Price Factor [This table has been removed in accordance with the exceptions to disclosure in the Access to


Appendix 6 45

STAFF POSITIONS BY DEPARTMENT AND OFFICE, 2019–2020

Department/Office IS NS AS Total IS NS AS Total

A. President 73 49 53 175 82 56 56 194

Offices of Management 16 1 18 35 16 1 17 34

Office of the Special Project Facilitator 2 1 1 4 2 1 1 4

Office of the Auditor General 10 15 6 31 10 15 6 31

Office of Anticorruption and Integrity 14 14 6 34 15 16 6 37

Office of Professional Conduct a - - - - 2 1 - 3

Strategy, Policy and Partnerships Department 25 15 16 56 31 19 20 70

European Representative Office 2 1 2 5 2 1 2 5

Japanese Representative Office 2 1 2 5 2 1 2 5

North American Representative Office 2 1 2 5 2 1 2 5

B.

141 74 83 298 145 85 94 324

22 17 15 54 21 22 17 60

51 29 27 107 48 28 25 101

68 28 41 137 76 35 52 163

C. Operations 1 267 244 332 843 266 250 333 849

South Asia Department 133 136 176 445 133 136 176 445

South Asia Department (HQ) 112 30 66 208 112 30 66 208

Bangladesh Resident Mission 6 24 31 61 7 24 31 62

Bhutan Resident Mission 2 3 4 9 2 3 4 9

India Resident Mission 6 43 38 87 5 43 38 86

Nepal Resident Mission 4 19 20 43 4 19 20 43

Sri Lanka Resident Mission 3 17 17 37 3 17 17 37

Central and West Asia Department 134 108 156 398 133 114 157 404

Central and West Asia Department (HQ) 111 22 63 196 111 25 64 200

Afghanistan Resident Mission 4 13 15 32 4 14 15 33

Armenia Resident Mission 2 5 5 12 2 5 6 13

Azerbaijan Resident Mission 2 6 5 13 2 6 4 12

Georgia Resident Mission 2 6 7 15 2 6 7 15

Kazakhstan Resident Mission 2 7 5 14 2 7 5 14

Kyrgyz Republic Resident Mission 2 7 10 19 2 7 10 19

Pakistan Resident Mission 4 22 23 49 3 23 23 49

Tajikistan Resident Mission 2 6 11 19 2 6 11 19

Turkey Regional Office - 1 - 1 - 1 - 1

Turkmenistan Resident Mission 1 3 1 5 1 3 1 5

Uzbekistan Resident Mission 2 10 11 23 2 11 11 24

D. Operations 2 262 204 277 743 266 204 277 747

East Asia Department 75 55 81 211 74 55 80 209

East Asia Department (HQ) 66 14 36 116 65 14 36 115

PRC Resident Mission 6 30 33 69 6 30 32 68

Mongolia Resident Mission 3 11 12 26 3 11 12 26

Southeast Asia Department 134 104 137 375 136 108 141 385

Southeast Asia Department (HQ) 92 22 60 174 98 22 61 181

Cambodia Resident Mission 5 14 14 33 5 15 13 33

Indonesia Resident Mission 9 15 15 39 7 15 15 37

Lao PDR Resident Mission 5 12 12 29 4 11 12 27

Myanmar Resident Mission 7 6 5 18 4 8 5 17

Philippines Country Office 5 7 3 15 5 7 3 15

Thailand Resident Mission 3 5 6 14 3 4 7 14

Timor-Leste Resident Mission c - - - - 2 4 3 9Viet Nam Resident Mission 8 23 22 53 8 22 22 52

Economic Research and Regional

Cooperation Department b

Sustainable Development and Climate

Change Department

Start 2019 Start 2020 (Indicative)

Knowledge Management and Sustainable

Development

Department of Communications

46 Appendix 6

AS = administrative staff, HQ = headquarters, IS = international staff (including Management), Lao PDR = Lao People's Democratic Republic, NS = national staff, PNG = Papua New Guinea, PRC = People's Republic of China. a The establishment of the Office of Professional Conduct was approved in October 2019. b The Regional Corporation and Integration Thematic Group was transferred from the Economic Research and Regional Cooperation Department to

the Sustainable Development and Climate Change Department in January 2019. c Timor-Leste operations were transferred from Pacific Department (PARD) to Southeast Asia Department (SERD) in October 2019. Concurrently,

Timor-Leste Resident Mission was transferred from PARD to SERD. d There are 11 Pacific country offices, and some of them are in the process of operationalization. PARD in the headquarters, Pacific Liaison and

Coordination Office or Pacific Subregional Office oversees these offices. e The responsibility of the Office of Cofinancing Operations was transferred to the Strategy, Policy and Partnerships Department and the Sustainable

Development and Climate Change Department in April 2019. f Risk analyst staff who perform front-line risk analysis functions were transferred from the Office of Risk Management to the Private Sector Operations

Department in July 2019.

Department/Office IS NS AS Total IS NS AS Total

Pacific Department 53 45 59 157 56 41 56 153

Pacific Department (HQ) 39 8 21 68 43 8 21 72

Pacific Liaison and Coordination Office 4 7 7 18 5 7 7 19

Pacific Subregional Office 3 8 11 22 3 8 11 22

PNG Resident Mission 5 7 9 21 5 7 9 21

Timor-Leste Resident Mission c 2 4 3 9 - - - -

Pacific Country Offices d - 11 8 19 - 11 8 19

E.

137 72 73 282 139 78 64 281

Private Sector Operations Department 107 58 49 214 117 74 53 244

Private Sector Operations Department (HQ) 107 58 49 214 116 72 52 240

ADB Office in Singapore - - - - 1 2 1 4

Office of Cofinancing Operations e 8 10 13 31 - - - -

Office of Public-Private Partnership 22 4 11 37 22 4 11 37

F. Finance and Risk Management 90 103 175 368 91 92 169 352

Office of Risk Management f 35 34 26 95 36 22 22 80

Controller's Department 22 39 104 165 22 39 104 165

Treasury Department 33 30 45 108 33 31 43 107

G.

196 178 294 668 201 182 294 677

54 18 51 123 54 18 51 123

34 33 76 143 35 35 76 146

Office of Administrative Services 21 49 93 163 22 49 94 165

25 54 33 112 26 54 33 113

Office of the Secretary 12 8 18 38 12 9 17 38

Office of the General Counsel 50 16 23 89 52 17 23 92

H. Unassigned Positions 4 - 13 17 5 1 7 13

Subtotal 1,170 924 1,300 3,394 1,195 948 1,294 3,437

I.

16 - - 16 19 - - 19

Subtotal 1,186 924 1,300 3,410 1,214 948 1,294 3,456

J. Board of Directors 24 - 35 59 24 - 35 59

Director's Advisors 24 - - 24 24 - - 24

Staff Services - - 35 35 - - 35 35

K. Independent Evaluation Department 30 13 14 57 31 14 14 59

L. Office of the Compliance Review Panel 1 1 1 3 1 1 1 3

Total 1,241 938 1,350 3,529 1,270 963 1,344 3,577

Administration and Corporate

Management

Procurement, Portfolio and Financial

Management Department

Budget, Personnel, and Management

Systems Department

Office of Information Systems and

Technology

Young Professional Program and

Experts Pool

Start 2019 Start 2020 (Indicative)

Private Sector and Public-Private

Partnerships

Appendix 7 47

BOARD OF DIRECTORS ($’000)

% Change 2019 2020 over 2019 Item Budget Budget Budget

Salaries 9,170 9,259 1.0 Benefits 5,298 4,892 (7.7) Relocation 936 522 (44.2)

Business travel 844 890 5.5 Staff services 1,473 1,474 0.1

Othersa 79 60 (24.0) Total 17,800 17,098 (3.9)

( ) = negative. Note: Numbers may not sum precisely because of rounding. a Includes budget for dignitary hosting at headquarters and induction program of Board

members. Source: Asian Development Bank.

48 Appendix 8

INDEPENDENT EVALUATION DEPARTMENT ($’000)

% Change 2019 2020 over 2019 Item Budget Budget Budget

Salaries 6,561 6,955 6.0 Benefits 3,526 3,835 8.8 Consultantsa 2,310 2,363 2.3 Business travela 815 834 2.3 Representation 10 11 10.0 Administrative expenses 215 220b 2.3

Total 13,437 14,218 5.8 Notes: 1. Numbers may not sum precisely because of rounding. 2. This allocation does not include administrative overhead. a Includes resources for unprogrammed evaluation work and completion and/or launch of the

technical assistance completion report validation system. b Includes cost of outreach activities (e.g. media, multimedia, audio visual, etc.) and annual

membership fee under Asian Development Bank's partnership agreement with the International Initiative for Impact Evaluation (3ie) and allocation of $130,000 for contingency in 2020.


Appendix 9 49

COMPLIANCE REVIEW PANEL AND OFFICE OF THE COMPLIANCE REVIEW PANEL ($’000)

% Change 2019 2020 over 2019 Item Budget Budget Budget Compliance Review Panel 860 799 (7.1)

Salaries 323 294 (9.0)

Benefits 137 145 5.8

Business travel 60 40 (33.3)

Administrative expenses 340 320 (5.9) Office of the Compliance Review Panel 939 1,048 11.6

Salaries 292 300 2.7

Benefits 247 370 50.0

Relocation 92 46 (50.0)

Consultants 210 225 7.1

Business travel 78 70 (10.3)

Representation 1 1 0

Administrative expenses 20 35 75.0 Total 1,799 1,847 2.7

( ) = negative. Notes: 1. Numbers may not sum precisely because of rounding. 2. This allocation does not include administrative overhead. Source: Asian Development Bank.

50 Appendix 10

ADB HEADQUARTERS FACILITIES REFURBISHMENT PROGRAM [This appendix has been removed in accordance with the exceptions to disclosure in the Access

to Information Policy (para. 17.5.x).]

Appendix 10 51

52 Appendix 11

2020 BUDGET: DEPRECIATION ($’000)

Depreciation

Date of Approved 2019 2020 Item Approval Budget Budget Projection

Annual Capital Expenditure 7,708 9,542

Special Capital Expenditure 17,142 17,872

Closed special capital expenditure projects 5,002 5,034

Special capital expenditure projects to be closed 3,016 2,624

Ongoing special capital expenditure projects: 9,124 10,214

ADB headquarters building efficiency Jan-12 11,980 626 620

ISTS III: 2013–2018 Apr-13 64,972 8,432 8,474

Security, emergency systems upgrades and

fire management system Dec-17 12,430 17 67

Improving and expanding resident missions Dec-17 10,000 49 49

Establishment of Pacific country offices Sep-18 4,018 … 123

Digital Agenda 2030 Oct-18 118,300 … 700

Establishment of ADB office in Singapore Apr-19 904 … 180

Total Depreciation 24,850 27,414 … = not applicable or not calculated, ADB = Asian Development Bank, AO = administrative order, ISTS = information systems and technology strategy. Notes: 1. Numbers may not sum precisely because of rounding. 2. Depreciation of special capital expenditures shown above include projects under implementation and closed

projects not yet fully depreciated. 3. Depreciation period in years based on AO 4.04: building improvements (15), building equipment (10), other

equipment (5–7), furniture (10), vehicle (5), furnishings (5), computer equipment (3) and other IT equipment (2–5). 4. Special capital expenditure projects to be closed by end of 2019: (i) Expansion of ADB Headquarters Building and

Selected Resident Missions, (ii) ISTS II (2004–2009), (iii) Risk Management System, (iv) Asset and Liability Management System, (v) eServe Service Management System, (vi) [Information in this note has been removed in accordance with the exceptions to disclosure in the Access to Information Policy (para. 17.5.x).], (vii) Establishment of Myanmar Resident Mission, and (viii) Improving Office Facilities of Selected Resident Missions.


Appendix 12 53

UPDATE ON ADB ACTIONS TO IMPROVE GENDER EQUALITY 1. Gender data summary. Women make up 58.8% of the Asian Development Bank (ADB) total workforce as of 3 October 2019.1 Among international staff, 36.5% (466 out of 1,276) are women, an increase from 2018 and the highest share of international staff women to date. 2. Total international staff women’s share increased from 33.8% in 2015 to 36.5% at 3 October 2019.2 The target for international staff women is 40% by end of 2022. Women’s share by levels as of 3 October 2019 is as follows:

(i) international staff 9–10: women comprised 28.0% (14 out of 50), (ii) international staff 7–8: women comprised 24.4% (41 out of 168), (iii) international staff 4–6: women comprised 36.5% (320 out of 877), and (iv) international staff 1–3: women comprised 55.4% (87 out of 157).

3. The promotion share of international staff women has reached 38.5% as of 3 October 2019, an increase from 35.7% in 2018. The termination rate for international staff women as of third quarter 2019 is at 37.1%, a decrease from 38.7% in 2018. Appointments of international staff women are 40.2% of all international staff appointments, a decrease from 44.6% in 2018 but significantly higher than 34.7% in 2017 and 35.1% in 2016. 4. EDGE certification. ADB was certified by the Economic Dividends for Gender Equality (EDGE) at EDGE Move level in 2019, making ADB the first international financial institution to achieve this level. EDGE is the leading standard for workplace gender equality. While significant progress has been made, ADB is committed to continue to increase gender equality. 5. Sourcing, branding of ADB to women talent, and recruitment. Efforts to source women candidates continued. Women panelists continued to be represented at every step of selection and recruitment process. The 196 independent panelists in the new roster were trained on interviewing skills, including mitigating unconscious gender bias in selection. Out of the 196 independent panelists, 109 were women. ADB produced a series of videos to attract women professionals, featuring different women profiles in ADB and ADB’s strong commitment to strengthen gender equality. The EDGE Move logo is also used on the ADB website as a branding tool.

6. Respectful workplace. A review of the Respectful Workplace Unit two-year pilot was conducted by ADB and recommendations for improvement have been approved, including the establishment of an Office of Professional Conduct and a Professional Conduct Coordination Committee. 7. Gender pay gap analysis. Two gender pay gap studies—conducted by an international consulting firm and the Economic Research and Regional Cooperation Department (for international staff)—both found no significant unexplained gaps for gender-based pay at ADB (defined as <5%, an industry benchmark). The findings of the report were communicated to staff, and an improvement in staff perception on fairness of pay was shown in EDGE 2018 employee survey.

1 Total international staff includes the Board staff, staff on loan to the ADB Institute and staff on special leave without

pay. It excludes the President, vice-presidents, executive directors, and alternate executive directors. 2 Data from the Gender Dashboard as of 3 October 2019.

54 Appendix 12

8. Flexible work. Work from home (WFH) uptake from 1 September 2018 to 31 August 2019 increased compared with the prior 12-month period. Over 4,000 requests were received, a 31% increase from the last period. More than a third of the total ADB staff (1,130 employees) made use of WFH, a 12% increase from the last period. Vast majority of requests for WFH are within duty station. 9. Spouse employment support. ADB continued to support the attraction and retention of international staff via the Spouse Career Program. Career support and career transition guidance are provided to spouses and domestic partners of ADB expatriate staff in the form of career workshops, individual coaching sessions, career cafes, a LinkedIn group with information on networking events and job ads, and a dedicated website. To date, a total of 115 spouses have received support, 70% of whom are women. Of the 115, 45 have found a job, 34 of whom are women. 10. Leadership programs and diversity and inclusion workshops. New leadership development programs were created for 2019—Thrive (IS3–4), NS5–6), Engage (IS5–6), and Transform (IS7–8). Out of a total of 72 participants, 43% were female. The training course Working Effectively Across Cultures continued to be available in 2019 and 73% of the participants were women.

About the Asian Development Bank

ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific,while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region. Its main instruments for helping its developing member countries are policy dialogue,loans, equity investments, guarantees, grants, and technical assistance.

ASIAN DEVELOPMENT BANK6 ADB Avenue, Mandaluyong City1550 Metro Manila, Philippineswww.adb.org

budget of the asian development bank for 2020budget of the asian development bank for 2020...

Documents