February 2020

Maldives

2014–2019

Country Partnership Strategy Final Review Update

CURRENCY EQUIVALENTS

(as of 12 December 2019)

Currency Unit – rufiyaa (Rf) Rf 1.00 = $0.0647 $1.00 = Rf 15.45

ABBREVIATIONS

ADB – Asian Development Bank ADF – Asian Development Fund ADTA – advisory technical assistance BDS – business development service BDSC – business development service center CAPE – country assistance program evaluation COBP – country operations business plan CPS – country partnership strategy CPSFR – country partnership strategy final review CPSFRU – country partnership strategy final review update DMF – design and monitoring framework EIB – European Investment Bank EIRR – economic internal rate of return GDP – gross domestic product GMEIWM – Greater Malé Environmental Improvement and Waste Management (project) HDFC – National Housing Development Corporation plc ICPS – interim country partnership strategy IMF – International Monetary Fund IMSMED – Inclusive Micro Small and Medium Enterprises Development (project) ISDB – Islamic Development Bank KHEP – Kulhudhuffushi harbor expansion project kWh kilowatt-hour MDG – millennium development goal MEA – Maldives Energy Authority MIRA – Maldives Inland Revenue Authority MOFT – Ministry of Finance and Treasury MSME – micro, small, and medium-sized enterprise MW megawatt NSW – National Single Window (project) PCR – project completion report POISED – Preparing Outer Islands for Sustainable Energy Development (project) RRP – report and recommendation of the President to the Board of Directors SMEs – small and medium-sized enterprises SASEC – South Asia Subregional Economic Cooperation SDFC – Small and Medium Enterprise Development Finance Corporation TA – technical assistance TCR – technical assistance completion report WAMCO – Waste Management Corporation Limited

NOTES

(i) The fiscal year of the government ends on 31 December. (ii) In this report, “$” refers to US dollars.

In preparing any country partnership 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

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EXECUTIVE SUMMARY i

I. INTRODUCTION 1

A. Previous Assessments 1

B. Review Portfolio 2

II. STRATEGIC CONTEXT 3

III. ASSESSMENT OF THE STRATEGY AND PROGRAM 5

A. Relevance 5

B. Effectiveness 14

C. Efficiency 19

D. Sustainability 25

E. Development Impacts 31

F. ADB and Borrower Performance 38

G. Overall Assessment 41

IV. LESSONS AND RECOMMENDATIONS 43

A. Country Partnership Strategy Preparation and Design 44

B. Project Selection and Design 45

C. Project Implementation 47

D. Scope of Sector Operations 47

V. CONCLUSIONS 50

APPENDIXES 1. ADB Operations for Maldives Approved During 2014–2019 2. Prior ADB Operations in Maldives Completed During 2014–2019 3. Background on Mature Projects 4. Country Economic Indicators 5. Interim Country partnership Strategy Results Framework 2014–2015

EXECUTIVE SUMMARY

This final review update assesses the strategy and operations under the Asian Development Bank's (ADB) interim country partnership strategies (ICPS) and country operations business plans (COBPs) in Maldives from 2014 to 2019, updating the previous final review and its validation that covered the period 2007 until the end of 2013.

The country’s development policy context during 2014–2019 was characterized by

variable clarity and consistency. Both the Seventh National Development Plan for 2007–2011 and the Strategic Action Plan for 2009–2013, that had provided a solid anchor for the Country Partnership Strategy (CPS) 2007–2011 and the following ICPS 2012–2013, had expired. There was no replacement strategic document available from 2014 onward, except for the manifesto of the party that won the 2013–2014 elections. In 2016, the new administration downplayed the previous government’s emphasis on decentralization and declared as a priority the development of the Greater Malé region, where it envisaged that over time, at least 70% of the population would be residing. The 2018 elections brought a change in government and policy orientation.

ADB operations during 2014–2019 took place in this variable policy environment and

centered around five sovereign loans: one previously approved in 2012 to promote small and medium enterprise development, and one each in the energy (2014), transport (2016), water and other urban infrastructure and services (2018), and industry and trade (2019) sectors. All projects were supported by capacity building technical assistance (TA). Of the nine advisory TAs implemented during 2014–2019, six closed during the period (five had been approved before 2014). ADB continued to implement a loan and equity investment for housing finance (approved in 2007) and this comprised the nonsovereign operation during the evaluation period.

Based on the following considerations, the aggregate score of ADB‘s strategy and

assistance program to Maldives in 2014–2019 is 2.1, corresponding to a successful rating. The strategy and program during 2014–2019 are rated relevant. The direction of ICPS

and COBPs and the resulting operations maintained continuity with past areas of ADB assistance while responding to government policy shifts. Operations were well aligned to both government and ADB strategic priorities, and based on past national strategies and sector plans. ADB provided analytical support in the development of sector or geographic strategies and declined to finance operations whose viability could not be confirmed. The geographic balance was in favor of outer islands with about 60% of total investment, consistently with the need to promote inclusive growth, without refusing to address critical environmental issues of waste management in the Greater Malé region. ADB established regular coordination with the World Bank, United Nations, and Japan, key partners with active long term programs and presence in the region. Cofinancing was proactively and successfully pursued with the Islamic Development Bank and European Investment Bank. The funding level grew steadily, and the emphasis on grant support combined with good disbursement performance turned an initial negative resource transfer into a positive inflow of external funds from midway through the period, avoiding any negative impact on the deteriorating external debt situation. The analytical foundation of operations was sound, the choice of project modality appropriate, and technical assistance was routinely employed to address policy and capacity constraints. Faced with changing priorities, ADB was not able to strategically program operations for the long term, but responded with projects that were well in line with country priorities and well received even through administration changes. The downside of this approach was the need to develop sector assessments as new projects were being prepared, instead of using them as a base for establishing priorities. This translated into the choice of irrelevant sector result indicators, particularly for maritime transport.

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Based on the assessment of four completed or mature projects (one nonsovereign) and

six completed advisory TA, ADB’s program is rated effective (at the high end). Support for micro, small, and medium-sized enterprises (MSMEs) achieved all the intended outcomes and 12 out of 14 outputs, increasing the lending to MSMEs and strengthening sector institutions like the Credit Information Bureau and laying the foundations for a Register of Secured Transactions. Nonsovereign support for the privatization of the Housing Development Finance Corporation transformed it into a commercially viable, private sector-led company that could compete and grow to cover more than half of the mortgage financing market in Maldives, with positive secondary effects on the domestic residential construction industry. ADB is making a major contribution to the introduction of renewable energy and the reduction of carbon emissions and tariff subsidies. Assistance for the installation of hybrid solar battery- energy efficient diesel generation capacity in 48 out of 187 inhabited islands is well placed to achieve the objectives of the ADB-funded component and has leveraged considerable cofinancing to cover 89 of the remaining 139 islands. In spite of initial delays in finalizing the design and procurement, the Kulhudhuffushi Harbor should be operative by the end of 2020 and satisfy increased transport demand facilitating access to markets, health, and education in the northern region. TA supporting capacity development and public finance management has brought forth improvement in fiscal management and strengthening country planning.

On balance, ADB operations during 2014–2019 are rated efficient (at the low end). All

projects’ economic rates of return estimated before approval exceeded—sometimes substantially—hurdle rate. Three of the five were designed with due consideration for the cost effectiveness of alternative technical options, and preliminary indications suggest that the objectives will be met or exceeded within the available investment budget. Two out of the three complete or mature projects are rated less than efficient due to implementation delays and significant design changes during implementation that resulted in suboptimal utilization of resources. Overall portfolio performance indicators of timeliness of effectiveness, contract awards, disbursements and share of project at risk improved compared to the earlier 2007–2013 period, and are comparable to small island and South Asian countries. TA operations and knowledge products were delivered efficiently, contributing to the preparation of relevant national planning documents..

ADB operations in Maldives during 2014–2019 are likely sustainable. The estimated rates of return at the time of approval were at least double the average cost of capital, leaving a solid margin for potential downward corrections. Less than 6% of the nearly $120 million of ADB assistance were reimbursable loans, and even those were at concessional terms, thus eliminating the concern for repayment of the capital investment and improving the projects’ financial rates of return. The projects and technical assistance implemented have enjoyed strong political support in spite of changing governments. Institutional strengthening and resiliency to environmental challenges including climate change have been systematically built into project design. Some uncertainties come from the government’s support for operations of BDSC for SMEs and the nearly completed Kulhudhuffushi Harbor, and the political will to implement measures to ensure sufficient cost recovery to cover operations and maintenance costs.

The development impact of ADB operations is satisfactory. At the sector level, completed

and mature operations have made a substantial contribution to addressing significant economic challenges for the country, with sufficiently extensive coverage or important demonstration effects. By proposing improvements to the Small and Medium Enterprises Law, testing the potential of BDSC, and facilitating the establishment of business incubators, the Secure Transaction Registry and the Credit Information Bureau, the Inclusive MSME Development

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project has performed an important demonstration role that exceeds the relatively small size of its credit line and opened the door to the creation of a government finance corporation dedicated to MSME lending. Nonsovereign support has strengthened and firmly established a private provider of mortgage lending. Power sector operations that introduced renewable generation to 160 out of 187 islands have reduced costs, subsidies, and carbon emissions, while creating an environment that favored the future participation of small private providers in photovoltaic generation. The Kulhudhuffushi Harbor has the potential to facilitate access to education, health, and market opportunities in the important and somewhat underserved northern region, strengthening connection with Malé and the nearby islands and atolls, and supporting regional decentralization. It can also act as a catalyst for urban development on a large nearby area of reclaimed land yet unutilized. While these achievements are considerable, challenges still remain with regard to improving lending practices and institutions, ensuring financial sustainability in the power and port sector, and enhancing capacity. In terms of overall development challenges and goals, the contribution of ADB’s Maldives program has addressed all ADB’s Strategy 2020 strategic agenda and drivers of change, at times with cross-sectoral or cross-cutting impact.

Given the responsiveness to country needs even under changing political circumstances,

the sufficient level of coordination that avoided unnecessary overlaps and proactively promoted cofinancing, and the continuing effort to support project implementation in the absence of a field office in Maldives, ADB performance is rated satisfactory. Government performance has been satisfactory with regard to commitment to international development goals, compliance with loan covenants and conditionalities, and provision of project implementation unit staff and counterpart funding. The lack of clear strategic direction, limited capacity of executing and implementing agencies, and scarce attention to donor coordination have detracted from Government performance, that is rated satisfactory (but at the low end).

The review yields several lessons: in CPS preparation (i) the lack of a formally approved

national strategy did not preclude ADB from providing relevant assistance, confirming the importance of close policy dialogue and flexibility; (ii) Malé region actors demonstrated that they are well positioned to attract development cooperation resources, and it is important to respond proportionally to the needs of more peripheral locations; (iii) ADB is well placed to mobilize cofinancing that increases the scale and impact of its operations; (iv) political interference and insufficient consultation can lead to design and implementation problems; and (v) lack of a well-developed and updated results framework makes CPS assessment more difficult. In project selection and design, (i) knowledge products that provide a national or sector framework make a useful contribution to appropriate investment decisions; (ii) supplementary financing is an efficient way of augmenting the impact of a successful project; (iii) low readiness and insufficiently detailed design contribute to delays and complicate implementation by requiring scope changes and adjustments to implementation arrangements; (iv) climate change, and particularly its impact on sea levels and storm surges, presents a primary risk, given the country’s topography and low elevation; and (v) the concept of cost recovery and the expectation that users will pay for the services they receive are not deeply ingrained in the collective mindset in Maldives, with expectations that the government will subsidize tariffs and cover operations and maintenance costs, challenging financial sustainability. In ensuring smooth project implementation, capacity building TA should be coupled with robust government monitoring and enhanced ADB communication.

Learning from past experience, when preparing the next country partnership strategy,

ADB should: (i) focus its involvement to ensure that it addresses critical needs and constraints within the available funding envelope and cofinancing prospects and periodically reassess priorities; (ii) ensure a balanced geographic distribution of its resources to promote inclusive

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growth; (iii) leverage its capability to prepare bankable projects through approaches that can be scaled up to accommodate cofinancing; (iv) use participatory approaches to strategy and project design; and (v) thoroughly prepare and periodically review and adjust the CPS results framework. In project selection and design, ADB should (i) make provisions for TA that allows rapid response to requests for analytical and planning support; (ii) design projects in a manner that allows topping up for scope expansion in the case of successful implementation; (iii) systematically utilize ADB instruments and approaches that support advanced detailed design, procurement, and project readiness; (iv) pay close attention to climate proofing of infrastructure investment and use or mobilize grant financing to address the incremental cost; and (v) study and pilot test, if necessary, robust cost recovery arrangements to avoid adding to an already precarious fiscal balance. In project implementation, the government must establish more robust internal systems to supervise progress on key activities and trigger remedial actions, and ADB must find ways of enhancing communication on project progress to approach real time monitoring.

In establishing future sector priorities, there is room for promoting continued improvement

in finance sector practices through policy dialogue and possibly TA support, and for increasing the pool of finance, possibly through nonsovereign operations. Past ADB experience can be used to pragmatically support new infrastructure requirements in maritime transport in line with the sector’s master plan and the new national development plan’s focus on regional and subregional centers. In power, after taking stock of and addressing any still unmet investment needs for hybrid solar battery-energy efficient diesel generation in smaller islands, there is scope for encouraging the addition of private rooftop generation, storage capacity, and further diversification of power generation sources to promote energy security, environmental sustainability, and competitive pricing.

These possible areas of future engagement should be subjected to more detailed sector

analysis, consistency check with national plans and priorities, broad-based consultations, and verification of the extent to which other (private, public, or external) sources of financing are already responding to these needs. New areas of engagement should also be considered and assessed, relying on the same criteria. ADB operations in Maldives during 2014–2019—a period characterized by political transitions and policy reversals—have been successful, largely due to active dialogue and flexibility in response. In some sectors the expected development impact is significant, in spite of some inefficiencies and implementation delays, and concerns over financial sustainability. With more clearly defined national goals and plans, ADB should build on recent experience and explore emerging requirements to engage through a full CPS in addressing Maldives’ future development challenges in a focused and disciplined manner.

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I. INTRODUCTION

1. This Country Partnership Strategy Final Review Update (CPSFRU) assesses the assistance strategy and program of the Asian Development Bank's (ADB) interim country partnership strategies (ICPS) and country operations business plans (COBPs) for Maldives from 2014 to 2019, updating the previous final review and its validation that covered the period until the end of 2013.1 It follows ADB's guidelines for the preparation of country assistance program evaluations and country partnership strategy final review validations, which are based on five criteria: (i) relevance, (ii) effectiveness, (iii) efficiency, (iv) sustainability, and (v) development impacts, and includes an assessment of ADB's and the government's performance.2 Lessons and recommendations were drawn for the preparation of the next country partnership strategy (CPS) for 2020–2024. In particular, the CPSFRU assesses the performance of the 2014 Maldives ICPS (2014–2015), the 2015 Maldives ICPS for 2016, and the COBPs covering the entire period.3 It covers all loans, grants, and capacity development technical assistance (TA) approved from 2014 to 2019, and those approved in previous years and closed during the review period, including key knowledge products and nonsovereign operations.

A. Previous Assessments

2. The assessments of ADB’s support for Maldives up to 2013 (Table 1) show an improvement in the overall success, sustainability, development impact, ADB and borrower performance in recent years (after 2010), compared to the longer and earlier period (1978–2010).

Table 1: Previous Assessments of ADB Support to Maldives Criterion CAPE 2011 CPSFR 2014 CPSFRV 2015

Overall assessment Partly successful Successful Successful Strategic positioning Satisfactory Highly satisfactory Satisfactory Relevance Relevant Highly relevant Relevant Efficiency Less efficient Efficient Efficient Effectiveness Effective Effective Effective Sustainability Less likely sustainable Likely sustainable Likely sustainable Development impact Partly satisfactory Satisfactory Satisfactory ADB performance Partly satisfactory Satisfactory Satisfactory Borrower performance Partly satisfactory Satisfactory Satisfactory

Upgrade from previous assessment. Downgrade from previous assessment. ADB = Asian Development Bank, CAPE = country assistance program evaluation, CPSFR = country partnership strategy final review, CPSFRV = CPSFR validation. Sources: ADB. 2011. Country Assistance Program Evaluation. Manila; ADB. 2014. Country Partnership Strategy Final Review – Maldives 2007–2013. Manila; ADB. 2015. Maldives Country Partnership Strategy Final Review Validation, 2007–2013. Manila.

1 Previous ADB assessments and evaluations include a Country Assistance Program Evaluation dated September

2011, carried out by the Independent Evaluation Department (IED), covering the period from 1978 until the end of 2010; and Country Partnership Strategy Final Review – Maldives 2007–2013, completed by the South Asia Department in 2014 and validated by IED in 2015.

2 ADB. 2015. 2015 Guidelines for the Preparation of Country Assistance Program Evaluations and Country Partnership Strategy Final Review Validations. Manila.

3 ADB. 2014. Interim Country Partnership Strategy: Maldives, 2014–2015. Manila; ADB. 2015. Interim Country Partnership Strategy: Maldives, 2016. Manila; and ADB’s Maldives country operations business plans from 2014 to 2019. Before 2016, Interim CPS were prepared when circumstances (e.g., changes in government, need to synchronize CPS (ICPS) preparation with the national planning cycle) advised against preparation of a full CPS. Since 2016, ICPS are only prepared for engaging with a new developing member country or re-engaging with an existing developing member country after a protracted interruption. In other cases, an enhanced COBP justifies extension of the existing CPS until the new one is formally in place, and may include, when appropriate, a required change in strategic focus.

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3. The 2011 Country Assistance Program Evaluation (CAPE) found that ADB support for improved fiscal management and for the port, energy, and education sectors had a positive impact, while operations for regional development of outer islands, tsunami emergency response, and the finance sector were not as successful. It underlined how the weak fiscal situation and financial position of project entities undermined sustainability of ADB-supported investment, while implementation delays reduced efficiency. The CAPE recommended that ADB narrow the sector focus of its operations and foster long term engagement through sector strategies, shift its capacity building support from implementation consultants to advisory technical assistance (ADTA) with a longer time horizon, address implementation delays, leverage development partners support to increase the funding envelope, support involvement of all stakeholders in strategy formulation and program preparation, and increase interaction with government counterparts through a dedicated focal point in Sri Lanka or Maldives. 4. The 2015 CPS Final Review (CPSFR) found that ADB operations had been successful and recommended continuation of ADB involvement in power, transport, infrastructure development in Malé, and small and medium enterprise development. It suggested greater attention to capacity building through the support for the education sector, and to monitoring and updating of indicators that would allow better tracking of progress in the CPS achievements.

5. The 2015 CPSFR Validation found that ADB had been successful in supporting public sector management through a more robust taxation system, along with energy, transport, and micro, small, and medium-sized enterprise (MSME) development. It suggested that support for MSME and expansion of the Malé Port had been too narrowly focused, limiting ADB’s contribution to economic growth, inclusion, and connectivity outside the Malé region. It recommended that ADB future operations help diversify the economy and build capacity for decentralization of financial management to local governments; promote inclusiveness through support for vocational, technical, post-secondary, and tertiary education; address issues of land degradation, improper waste disposal, and groundwater depletion; mainstream environmental sustainability into project design; and strengthen government project management capacity through on-the-job training.

B. Review Portfolio

6. ADB operations during the period centered around five loans: one previously approved in 2012 to promote small and medium enterprise development, and one each in the energy (2014), transport (2016), water and other urban infrastructure and services (WUS) (2018) and industry and trade (2019) sectors. All projects were supported by capacity building TA. As a consequence, sector and project assessments largely coincide, once the related TA operations are considered. Of the five projects, the first was completed in 2018 and its project completion report (PCR) prepared in 2019, and the two in power and energy are at a mature stage of implementation (Table 2). The last two projects approved in 2018 and 2019 are still in their early implementation stages, so most conclusions in the evaluation are based on the first three and the available PCR and TA completion reports (TCR). Of the nine TA implemented during 2014–2019, six were closed (five of which had been approved before 2014), and three have TCRs.4 No new nonsovereign operation was processed between 2014 and 2019. A loan and equity investment for housing finance approved in 2007 is ongoing, and its extended annual review report (XARR) was prepared in 2016. This operation was complementary to sovereign support for small and medium-sized

4 According to the 2015 guidelines, project preparatory TA (PPTA) is not separately assessed. Five PPTA for $4.25

million (of which $1.7 million in cofinancing) were approved during the period, and one cancelled shortly thereafter due to a change in government investment priorities.

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enterprise (SME) financing, and its assessment is discussed under the private sector development sector alongside sovereign operations. The list of approved and completed operations is presented in Appendixes 1 and 2. Project profiles including the updated design and monitoring framework (DMF) for the two mature sovereign projects that were preliminarily rated are presented in Appendix 3. Table 2: Implementation Progress of Maldives Project Portfolio as of 31 December 2019

Project (Approval Year) Time Elapseda Contract Awardsb Disbursementsb

IMSMED (2012) 100% 100% 100% POISED (2014) 91% 91% 79% KHEP (2016) 85% 89% 59% GMEIWM (2018) 23% 28% 1% SASEC NSW (2019) 5% 68% 0.3%

GMEIWM = Greater Malé Environmental Improvement and Waste Management; IMSMED = Inclusive Micro, Small, and Medium-sized Enterprise Development; KHEP = Kulhudhuffushi Harbor Expansion Project; POISED = Preparing Outer Islands for Sustainable Energy Development; SASEC NSW = South Asia Subregional Economic Cooperation National Single Window. a Time from effectiveness to 31 December 2019 compared to time from effectiveness to the most recently approved closing date. b The ratio uses the net total project amount as the denominator, so even though part of active loans may be cancelled without awarding additional contracts, the ratio is below 100% until a loan is closed. Sources: Project data sheets and November 2019 Tripartite Portfolio Review Meeting background documentation.

II. STRATEGIC CONTEXT

7. In the years prior to this review period, Maldives had been affected by catastrophic external events: the 2004 tsunami, which destroyed nearly two-thirds of the country’s capital stock,5 and the global financial crisis, that significantly reduced tourist arrivals from affected countries and caused a 7.2% economic contraction in 2009.6 The country has since recovered, achieved upper middle-income status by World Bank standards in 2010, and saw economic growth averaging 6.1% annually during 2014–2018, driven by tourism and construction. 7 It achieved most Millennium Development Goals (MDGs) before or by 2015; and has the highest per capita gross domestic product (GDP) in South Asia. 8. The country faces significant development challenges: it is remote and endowed with limited land-based resources, and vulnerable to environmental degradation, climate change, and natural disasters—features common to many small island economies—since most of the islands are only about a meter above sea level. Geographic dispersion of the population and limited public sector capacity make service delivery challenging.8 The economic base is narrow and dominated by government enterprises, the tourism sector, and more recently, construction. As a result of the narrow demand base, the mismatch of skills with employment opportunities, and relatively lower female and youth participation rate on the supply side, labor force participation is low, and employment opportunities scarce, particularly in the more remote atolls. The economy faces structural deficits in the balance of payments current account (caused by high import dependency

5 Damage caused by the tsunami was valued at about $470 million or close to 62% of the gross domestic product.

Source: ADB. 2011. Maldives: Country Assistance Program Evaluation. Manila. 6 ADB. 2019. Key Indicators for Asia and the Pacific 2019. Maldives Country Table. Manila. 7 Maldives became a middle-income country in 2010 according to the World Bank criteria that ADB follows. It was

upgraded to middle-income status by the United Nations in 2011. 8 The country covers an area of 90,000 square kilometers in the Indian Ocean, and its population lives in about 200

islands, 70% of which are inhabited by fewer than 1,000 people. Source: ADB. 2014. Interim Country Partnership Strategy. Maldives 2014–2015. paras. 4 and 5. Manila.

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and limited export revenues) and the public budget (because of the high cost of providing services, price subsidies, and public employment). In the last decade, the external financing of large infrastructure improvements in the Malé area (airport, bridge, land reclamation, and housing) has placed the country at high risk of debt distress, even if macroeconomic conditions have stabilized (Appendix 4). These challenges and vulnerabilities are reflected in ADB’s ICPS and enhanced COBP for the period.9 9. The 2014–2019 period was marked by uncertain domestic situation. Contested elections in 2013, 2014, and 2018 resulted in successive governments with different visions and policy objectives for the country, and were accompanied and followed by periodic unrest and protests and some policy reversals.10 Previously, the Seventh National Development Plan for 2007–2011 and the Strategic Action Plan (SAP) for 2009–2013 provided a solid anchor for the CPS 2007–2011 and the following ICPS 2012–2013. No such document and limited policy clarity existed from 2014 onward, except for the manifesto of the party that won the 2014 elections (Box 1) and some sectoral/thematic documents.11 The government formed after the 2013 presidential and 2014 parliamentary elections initially expressed the intention to prepare a new national development strategy (NDS). In 2016, the government abandoned the idea of an NDS and declared as a priority the development of the Greater Malé region, where it envisaged that over time at least 70% of the population would be residing. A Greater Malé Region Development Concept Plan prepared with ADB assistance and discussed by cabinet, was only partially implemented. The elected government in 2018 emphasized again the importance of decentralization and regional development in the initial drafts of national strategies and plans that have been disclosed so far. ADB adapted to this unclear policy environment by approving an ICPS for 2014–2015 in 2014, a second ICPS for 2016 in 2015, and by continuing to engage through consultations and annual country programming thereafter.

Box 1: The 2014 Government Manifesto

The manifesto served as the basis for the government’s programs in key sectors. It contained programs on youth and women development, health, education, infrastructure, tourism, agriculture and fisheries, national security and social protection, energy and the economy. Its infrastructure program focused on harbor protection, efficient inter- and intra-atoll transportation network and grid, establishment of effective sewerage systems, and safe drinking water for all. In private sector development, the government aimed towards a business-friendly dynamic economy that would create opportunities for global investors, individual entrepreneurs, and small and medium enterprises. Programs on the environment included creating a healthy living environment through regular disposal of waste in the Malé area, ensuring safe disposal of waste produced in the islands, and ensuring that every island is free of garbage dumps. Source: ADB. 2016. Country Partnership Strategy. Maldives 2016–2019. Zero Draft for Consultation Purpose. Manila

9 ADB. 2014. Interim Country Partnership Strategy. Maldives 2014–2015. paras. 4–17. Manila. The document also

references analysis preformed when previous CPS and ICPS were prepared. 10 For example, the government in power during 2012–2018 emphasized population concentration in the Greater Malé

area as a means for providing services at a manageable cost, whereas the previous and current government embraced an approach based on decentralization. Appendix 4 contains data on country economic indicators on various sets of variables from 2014 to 2018 (the period of coverage of the CPS Final Review Update).

11 These included the Maritime Transport Plan developed with support from the Australia–ADB South Asia Development Partnership Facility, the Small and Medium Enterprises Act ratified in April 2013, and the Climate Change Policy Framework ratified in 2015.

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III. ASSESSMENT OF THE STRATEGY AND PROGRAM

A. Relevance

10. This section assesses the relevance of ADB’s assistance strategy, as articulated in the ICPS and COBP and implemented through project and TA operations, based on the following three criteria:

(i) Appropriateness of ICPS and COBP objectives in meeting the country’s needs and ADB objectives;

(ii) Strategic positioning (i.e., sector choice, consistency, complementarities, donor division of support, partnerships); and

(iii) Sector program relevance and design quality. 1. Appropriateness to Country Needs and ADB Objectives 11. Alignment with Country Needs and Government Priorities. ADB’s ICPS 2014–2015, ICPS 2016, and the COBP prepared during the review period had to contend with the evolving development policy environment discussed in para. 9. They did so by maintaining continuity with previous ADB assessments and responses to the country’s needs. The 2007–2011 CPS and 2012–2013 ICPS, rated relevant by the 2015 CPSFR Validation, had focused ADB investment operations on three sectors: transport, power, and SME development, following an initial phase dedicated to capacity and institutional strengthening through TA support. During the 2007–2013 period, ADB also provided unplanned but much needed support for economic recovery and structural strengthening of public revenues in close coordination with other development partners (IMF, World Bank). 12. Following the successful response to the economic crisis, ADB support during 2014–2019 initially focused on a subset of previously defined priorities: energy and transport under the ICPS 2014–2015, and transport under the ICPS 2016, while continuing to implement the 2012 Inclusive Micro, Small, and Medium-Sized Enterprises Development (IMSMED) Project, and TA to strengthen tax administration and energy sector regulation. Installation of hybrid solar battery-energy efficient diesel generation capacity combined with distribution grid improvements under the 2014 Preparing Outer Islands for Sustainable Energy Development (POISED) grant—the largest energy sector operation in Maldives to date, covering up to 160 islands—aimed at reducing both fuel imports (that comprised nearly 15% of GDP) and government energy subsidies (that covered approximately 50% of the cost of electricity), while helping Maldives achieve its objective of energy diversification and carbon neutrality. The 2016 Kulhudhuffushi Harbor Expansion Project (KHEP) grant complemented earlier investment in Malé Port, with the objective of strengthening regional harbor facilities outside the Malé region, in line with the Maritime Transport Master Plan, whose preparation ADB had previously supported. These investments were aligned to the priorities initially expressed by the government that came into power in 2013, that included diversification of energy sources and establishment of a robust maritime transport system to foster access.12 One nonsovereign operation approved in 2007, a loan and equity investment in the National Housing Development Corporation Plc (HDFC) to support privatization of the public housing finance institution and the development of the mortgage market and financial sector, remained active during the period.

12 ADB. 2016. Country Partnership Strategy. Maldives 2016–2019. Zero Draft for Consultation Purpose. para. 19.

Manila.

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13. The 2016–2018 COBP reflected the government’s request to shift the focus of ADB assistance to the Greater Malé region, a significant variation from the draft CPS that ADB had in the meantime prepared based on earlier government indications to target primarily outer atolls with a focus on infrastructure connecting communities to public services and markets, development of SME, and improved environmental management. 13 The COBP tentatively included two projects for Greater Malé Connectivity Improvement and Greater Malé Environmental Improvement and Waste Management (GMEIWM) in the future pipeline. While responding to the shifting government priorities, the COBP also pointed out that detailed analytical work and further consultations would be required to support the change.14 To provide these underpinnings, ADB postponed finalization of the draft 2016–2019 CPS, and offered support for the preparation of a Greater Malé Region Development Concept Plan that would provide a planning framework for possible future interventions. The following year’s COBP 2018–2020 dropped the connectivity project that envisaged large scale and costly bridge construction because the project’s economic viability could not be confirmed, and retained the environmental improvement project—an urgent priority because of the impact on inadequate management of waste in Thilafushi on the densely populated nearby islands. 15 The GMEIWM project was approved in 2018 to establish a modern waste collection, transfer, and disposal system; improve community-based outer island waste management systems; build institutional capacity for sustainable services delivery; and raise public awareness in reduce, reuse, recycle behaviors. A follow-up Greater Malé Waste to Energy Project was introduced by the 2019–2021 COBP. This project, and the potential installation of liquified natural gas power generation under the Greater Malé Energy Sector Project introduced in the 2020–2022 COBP, further supported both environmental sustainability and supply diversification in the power sector. 14. In line with earlier CPS priorities and government objectives to improve the business environment, the 2019–2021 COBP also introduced the South Asia Subregional Economic Cooperation National Single Window Project (SASEC NSW), to promote trade facilitation and regional cooperation and integration through the electronic management of cross-border control procedures. Until then, Maldives had participated in some regional TA projects for trade facilitation and transport, but had not directly taken action to implement their recommendations. While trade facilitation is one of the focus areas in the SASEC operational plan, it had not been prioritized in earlier strategies. ADB and Maldives took advantage of emerging momentum among South Asian trading partners to support modernization of Maldives trade infrastructure and related business processes through this project that made use of regional cooperation grant funds.

15. Alignment with ADB Corporate Strategies. Country strategies during 2007–2013 were based on three pillars: pro-poor economic growth (through operations promoting sustainable energy, MSME and private sector development); inclusive social development (by improving access through transport investment); and good governance (through the improvement of public financial management, the regulatory framework, and institutional capacity in the sectors of ADB involvement). ICPS and COBP during 2014–2017 continued supporting these priority areas

13 The new Operations Manual Section 2 issued on 20 September 2016 removed earlier provisions for preparation of

an interim CPS with a maximum time horizon of 2 years when there is considerable uncertainty, stipulating that an enhanced COBP can extend the existing CPS implementation period, and reflect, as appropriate, any change in strategic focus that may be required (ADB. 2016. Operations Manual. Operations Procedures Section A2/OP, footnote 4 to para 2. 20 September. Manila). Given the significant shift of focus and uncertainty about future development priorities, ADB opted to continue operations from 2017 onward on the basis of previously established strategic priorities and ongoing dialogue through annual consultations and country programming missions.

14 Back-to-office report of the country programming and consultation missions held on 10–14 April 2016 and 23–25 April 2017.

15 The 2015 CPSFR Validation had also recommended that ADB should consider addressing issues of land degradation and improper waste disposal.

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through the implementation of ongoing projects for MSME development and tax revenue management, and through new operations in sustainable energy and maritime transport, both core areas of infrastructure development in line with Strategy 2020 priorities. Operations approved in 2018 and 2019 were in new areas for Maldives program (waste management and regional cooperation), but well aligned with both Strategy 2020 and Strategy 2030 operational priority areas of making cities more livable and fostering regional cooperation and integration.

16. Appropriateness Rating. The direction of ADB ICPS and COBPs and the translation into operations during 2014–2019 was appropriate. It ensured continuity with earlier strategies and government priorities consistent with Maldives needs (outer islands power sustainability and Kulhudhuffushi Harbor expansion), while responding to development policy shifts. When government priorities changed in 2016, placing greater emphasis on the Malé region, the programming of ADB operations was responsive but measured, fostering in-depth analysis that eventually resulted in discarding an unviable bridge connectivity project request, whose time frame was too rushed to perform adequate feasibility analysis, while supporting environmental improvement through better waste management, as requested by the government and as recommended in the 2015 CPSFR Validation. In the last year since the November 2018 government change that shifted development policy back from centralization in the Greater Malé area to regional decentralization, ADB provided initial support for a waste-to-energy project that combines environmental management with diversification in power generation, both significant unmet needs for Maldives, and promoted regional cooperation and integration in the area of trade. Further diversification of the energy mix is envisaged in the 2020–2022 COBP, that includes funding for the feasibility study and possible financing of liquified natural gas power generation facilities. These new strategic directions were supported by project-specific analysis, but not by a comprehensive strategic approach, because preparation of a full CPS had been postponed annually due to government and policy changes. Nevertheless, they were fully consistent with ADB’s Strategy 2030 operational priority areas, and well received by the new government.16 2. Strategic Positioning 17. Sector Choice, Consistency, and Focus. ADB operations during 2007–2013 successfully helped strengthen the tax base, supported economic recovery, promoted SME development, strengthened the financial sector through nonsovereign support for the mortgage market and the privatization of the leading sector institution, and invested in Malé Port upgrading. While confirming the success of these operations, the 2015 CPSFR Validation questioned the previous CPS’s phased approach (capacity building in Phase I followed by investment in Phase II), arguing that capacity development takes time to mature and is best delivered when part of a well-defined long term agenda that can work hand-in-hand with investment. The CPSFR Validation also considered investment in the Malé Harbor insufficient to promote connectivity and inclusion due to lack of complementary support in the atolls; lamented interruption in the continuity of past ADB support for the education and fishing sector; and suggested that ADB should help address environmental degradation, in addition to supporting progress towards carbon neutrality. 18. Figure 1 shows the sector breakdown of the active loans and grant projects and technical assistance during 2014–2019. Between 2014 and 2017, ADB operations maintained a very selective focus and strong continuity by concentrating on the previously identified sectors of

16 During the country consultation mission held on 11–13 December 2018 to brief Ministers and senior officials on

ADB’s ongoing and planned operations in Maldives, government representatives expressed commitment to both ongoing and planned projects for 2019–2021, noting that they are in line with the priorities of the new administration. Source: Back-to-office report of the consultation mission on ADB operations in Maldives, 18 December 2018.

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energy and maritime transport, while addressing some of the concerns raised by the CPSFR Validation. Operations in energy and transport were relevant and based on sector assessments conducted in preparation for the 2014–2015 ICPS. In the power sector, support for renewable energy expansion and grid improvement were consistent with the overall goal of reducing carbon emissions, while providing additional macroeconomic benefits in terms of reduction in energy price subsidies and fossil fuel imports.17 In transport, expansion of the Kulhudhuffushi Harbor, a regional port identified in the Maritime Transport Master Plan complemented the previous improvement of Malé Port through investment in atoll facilities. When the sector focus was broadened in 2018–2019, the diversification into trade facilitation expanded previous support for private sector development, while environmental and waste management improvement responded to earlier recommendations by the CPSFR Validation to consider this area for future ADB support. In both cases, the choice of projects and sectors was relevant, and background sector assessment were prepared during project preparation. To address capacity constraints, each investment operation approved during 2014–2019 was accompanied by capacity strengthening TA that supported sector institutions beyond the narrow boundaries of improving project implementation.18

Figure 1: Loan, Grant, and Technical Assistance Program 2014–2019 (Percentage of active operations by amount, excluding cofinancing)

Source: ADB operations listed in Appendixes 2 and 3. Includes $1.95 million project preparation technical assistance not analyzed in this review.

17 Government subsidies for domestic consumers covered over 50% of the cost of electricity, particularly for outer

islands, and accounted for Rf 1 billion out of Rf 30 billion of the government budget. Petroleum products accounted for 31% of total imports in 2012. Sources: ADB. 2014. Interim Country Partnership Strategy. Maldives 2014–2015. Sector Assessment (Summary): Energy. Paras. 2 and 4. Manila; and mission interviews in November 2019 with the director general of the Ministry of Environment.

18 Grants 0409 and 0410 for Preparing Outer Islands for Sustainable Energy Development were complemented by supplementary financing for TA 8000 Capacity Development for the Maldives Energy Authority; Grant 0429 for Kulhudhuffushi Harbor Expansion was accompanied by TA 9155 for Sustainable Harbor Operations and Maintenance; Grant 0580 for Greater Malé Environmental Improvement and Waste Management by TA 9543 for Strengthening Capacity for Sustainable Solid Waste Management in the Greater Malé Region; and loan 3794 for SASEC National Single Window by TA 9739, SASEC National Single Window, all processed in conjunction with the respective investment operations.

20.0

55.0

9.7

33.1

Active Loan and Grant Program

Industry and trade Energy

Transport Water and urban services

0.7

0.8

1.3

1.1

0.1

3.5

Active Technical Assistance Program

Industry and trade Energy

Transport Water and urban services

Gender Public sector management

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19. Geographic Focus. The two ICPS and ADB operations approved during 2014–2019 balanced transport and energy development in lower income outer islands ($65 million) with waste management in Greater Malé, where environmental problems are more acute because of population density ($35 million), and included one national level operation for trade facilitation for $10 million. The geographic focus was consistent with previous national plans and ADB strategies’ focus on inclusive growth through outer islands development, while accommodating the shift towards the Greater Malé region initiated in 2015 by the government. 20. Aid Harmonization and Effectiveness. Maldives development partnership fora were not held by the Government after 2010 and resumed in 2019. During this period, the Government encouraged development partners instead to specialize in providing assistance to different sectors or thematic areas to reduce duplication, overlap, and minimize transaction costs. Opportunities for coordination were also limited by the relatively few development partners with active long term programs in the country. ADB had previously collaborated closely with the World Bank and International Monetary Fund (IMF) in responding to the 2009 economic crisis through an Economic Recovery Program loan and related technical assistance to bolster public sector revenues. Coordination during the review period took instead the form of complementary division of labor in the energy sector, where ADB financed public sector investment in grid strengthening and renewable energy generation in the majority of outer islands; waste management with ADB focusing on Malé and World Bank on other regions; and public finance, with ADB focusing on revenue mobilization and the World Bank on expenditure management. ADB continued to consult with development partners (notably the World Bank, UNDP, and Japan) during country consultations and country programming missions.

21. ADB was quite proactive during the period in pursuing cofinancing opportunities, with the Islamic Development Bank (ISDB) in the IMSMED project and POISED, with the European Investment Bank (EIB), and the Strategic Climate Fund also for POISED, and potentially with the Asian Infrastructure Investment Bank for the waste-to-energy project, currently under preparation. As Table 3 shows, the amount of cofinancing mobilized was substantial relative to the ADB program (88% of ADB financing), even though not all of it came to fruition promptly. ISDB support for POISED was redirected by the Government towards the waste management sector, and the EIB loan, signed in 2016, was only declared effective on 21 November 2019, delaying implementation of POISED in 81 islands. To remedy the funding gap caused by the reallocation of ISDB support ADB is considering supplementary financing for POISED equivalent to $10 million in 2020. Once completed, the project geographic span coverage will be significant, serving 86% of the 187 inhabited islands in the country.

Table 3: Cofinancing of ADB Projects in Maldives 2014–2019 Project ADB

($ million) Cofinancing

($ millioin) Source

IMSMED 10.02 10.30 ISDB POISED 38.00 77.00 EIB (50) GCF (12), ISDB (10),a

JFJCM (5) GMEIWM 33.07 2.00 JFPR KHEP 10.19 – SASEC NSW 10.00 – Total 101.28 89.30

- = no cofinancing mobilized; ADB = Asian Development Bank; EIB = European Investment Bank; EU = European Union, GMEIWM = Greater Malé Environmental Improvement and Waste Management, IMSMED = Inclusive Micro, Small, and Medium-Sized Enterprise Development; ISDB = Islamic Development Bank; JFJCM = Japan Fund for the Joint Crediting Mechanism; JFPR = Japan Fund for Poverty Reduction; KHEP = Kulhudhuffushi Harbor Expansion

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Project; POISED = Preparing Outer Islands for Sustainable Energy Development; SASEC NSW = South Asia Subregional Economic Cooperation National Single Window; SCF = Strategic Climate Fund, a = ISDB support for POISED was eventually redirected to the waste management sector. Sources: RRP of the various projects.

22. Funding Level. The size of ADB’s Maldives program grew from an annual average of $10.5 million ($8.1 million in sovereign operations and $2.4 million of nonsovereign financing) during 2007–2013 to an annual average of $15.1 million of ADB sovereign financing during 2014–2019.19 Policy changes in the Asian Development Fund (ADF) resource allocation were largely responsible for this increase: a base allocation of $3 million for every ADF recipient country was introduced in 2015, and raised to $6 million in 2017, and $13 million in 2019. The ADF–ordinary capital resources merger in 2016 further increased Maldives annual ADF allocation to $20.2 million in 2017, and to an average of $13.4 million during 2018–2019 (Table 4). Country operations promptly responded to these increased allocations, and in fact average annual approvals during 2014–2019 were 47% higher than WPBF allocations, taking advantage of available funds. To facilitate preparation of projects with larger impact, annual country allocations were sometimes combined to increase project size. The proactive pursuit of cofinancing nearly doubled the amount that ADB was able to channel directly or indirectly to Maldives during the review period. Annual allocations of TA funds were approximately $1 million, and actual approvals somewhat higher at $1.2 million, due to cofinancing for a total of $1.9 million mobilized from the Strategic Climate Fund and more recently from the High Level Technology Fund.

Table 4: Comparison of Planned and Actual ADB Allocations to Maldives ($ million)

2014 2015 2016 2017 2018 2019 Total 2014–2019

Annual Average

WPBF allocation 4.0 6.0 5.0 20.2 12.4 14.4 62.0 10.3

COBP resource parameters 4.0 6.6 8.5 20.2 12.4 14.4 66.1 11.0

Actual ADB approvals 38.0 0.0 9.7 0.0 33.1 10.0 90.8 15.1

Total including cofinancing 110.0 5.0 9.7 0.0 35.1 10.0 169.8 28.3

TA approvals 0.850 1.5 0.5 0.6 2.3 1.5 7.2 1.2

Disbursements 1.3 2.5 7.0 11.5 6.9 10.6a 39.8 6.6

Net resource transfer –5.0 –3.7 1.6 6.6 0.1 n.a. –0.4b -0.1b

ADB = Asian Development Bank, COBP = country operations business plan, n.a. = not available, TA = technical assistance, WPBF = work program and budget framework. a = Up to third quarter 2019. b = Covers the period 2014–2018 only. Sources: ADB. 2013 to 2019 Work Program and Budget Framework. Manila; ADB. 2013 to 2019. Country Operations Business Plan. Manila; ADB. 2014 to 2019. Annual Report. Manila.

23. The increased financing minimally affected the country’s external debt exposure. Until 2016, Maldives was eligible for 100% grant allocation. In 2017 and 2018, Maldives was classified as a country at high risk of debt distress and received its concessional fund allocation as 100%

19 If we exclude the $35 million Economic Recovery Program approved in 2009 to complement other international

financial institutions support to address macroeconomic imbalances resulting from the steep drop in tourism following the international financial crisis of 2008, the annual sovereign lending program during 2007–2013 averaged $2.9 million. No nonsovereign operations were approved during 2014–2019. The lack of effective convertibility of the rufiyaa, the generally weak capacity of the private sector in key areas (financial management and accounting), and the lack of a skilled workforce were given as the main constraints to initiating private sector operations. While COBPs repeatedly mentioned that ADB would explore potential private sector operations to support capacity building and promote the expansion of tourism and emerging export industries, none materialized during the review period.

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grant subject to a 20% volume discount. 20 Only in 2019 was the allocation changed to 50% concessional loans and 50% grants, because Maldives was found to be in breach of the nonconcessional borrowing policy.21 Net resource transfer, previously negative due to repayment obligations for past loans, turned positive in 2016, due to higher disbursement of grant-financed projects. The structural shift towards non-reimbursable sources of ADB financing will have positive consequences on Maldives future external debt obligations, even though the impact will be relatively small: Maldives debt exposure towards ADB, at $86 million at end 2018, only represents 4.5% of the country’s total external public and publicly guaranteed debt. Disbursements of ADB support (mostly in the form of grants) totaled $ 39.8 million during 2014–

2019, equivalent to 3.6% of the country’s incremental public and publicly guaranteed external debt, that increased from $746.4 million at end 2013 to $1.85 billion at end 2018.22 In spite of the uncertainties over government policy directions, ADB was able to sustain a high level of financial engagement and contribute to Maldives’ development financing needs during the review period. 24. Strategic Positioning Rating. The strategic positioning of ADB assistance was satisfactory. Sector choice was consistent with Government and ADB priorities and supported by sector assessments at the project level. Capacity building support was provided through technical assistance for every investment operation. The geographic focus privileged outer islands (59% of investment) but accommodated the shift in Government policies towards the Greater Malé region. Coordination with the few other development partners active in the country was regularly conducted, and cofinancing proactively pursued with very tangible results. Funding was substantially increased, exceeding indicative country allocations and producing a positive net resource transfer, without exacerbating the stressed public debt situation. 3. Sector program relevance and design quality 25. This section assesses the extent to which the choice of ADB-financed projects, TA, and knowledge products was relevant to ADB's strategy. Program relevance is assessed using three subcriteria, since the partnerships and coordination with other development partners was already discussed in the “Strategic Positioning” section (paras. 21–22):

(i) quality of special analyses, assessments, and plans prepared for the CPS; (ii) choice of modalities; and (iii) quality of indicators and targets used in the ICPS and sector results

frameworks.

20 IMF. 2019. Maldives. 2019 Article IV Consultations. Washington, DC. 21 Maldives was found to be in breach of the International Development Association (IDA) Non-Concessional Borrowing

Policy, which requires IDA grant recipient to seek external concessional loans defined to be with a minimum grant element of 35%. IDA found that Maldives signed external loans on nonconcessional terms, including the sovereign bond between 2015 and 2017. Hence, IDA's Non-Concessional Borrowing Policy committee decided to have IDA allocations to Maldives changed to half grant, half IDA credit. ADB's similar policy—ADB. 2016. Concessional Assistance Policy. Manila—states (in para. 31 regarding Nonconcessional Borrowing by Grant Recipients) that, if ADF grant recipients begin accumulating nonconcessional debt by using borrowing headroom freed up by the switch from concessional loans to grants, country allocations will be reduced or their terms hardened to deter such country from expanding their nonconcessional debt. Thus, in 2019, Maldives will be provided 50% concessional lending and 50% ADF terms. Source. ADB. 2019. Country Operations Business Plan. Maldives 2020–2022. para. 4. Manila.

22 According to the IMF, Maldives public and publicly guaranteed debt stood at $ 3.8 billion in 2018. Of this, external debt accounted for about 50%, or $1.9 billion. Source: IMF. Staff Report for the 2019 Article IV Consultation. Debt Sustainability Analysis. paras. 1 and 2. Washington, DC. By comparison, cumulative loan and grant disbursements to Maldives between 1978 and 2018 amount to $184 million. Source: ADB. 2019. Asian Development Bank Member Fact Sheet. p. 1. Manila. Data for the end-2013 external public and publicly guaranteed debt are from ADB. 2019. Key Indicators for Asia and the Pacific, 2019. Maldives country table, page 7. Manila. Data on Maldives outstanding loans by ADB are from ADB. 2019. 2018 Financial Report. p. 56. Manila.

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26. Quality of Analyses, Assessments, and Plans. As summarized in Table 5, all ADB operations were based on well documented sector assessments, with the possible exception of the Kulhudhuffushi Port investment, where the ICPS results framework remained focused on the previously supported Malé Port. Assessments were comprehensive, clearly identified sector constraints, policies, and institutions and relied on national sector documents and plans. Coverage of development partners’ activities was not very comprehensive, partly as a result of their limited number and narrow sector engagement. In the water and urban services (waste management) and industry and trade sector, where ADB involvement was not envisaged in the ICPS prepared until 2016, sector assessments were developed when projects were identified and prepared. In all cases, the resulting projects addressed relevant sector constraints on the basis of problem tree assessments, and had clear and monitorable results frameworks. In addition to sector assessments, when government policy shifted towards a more decisive focus on investments and population concentration in the Greater Malé region. ADB proactively supported through technical assistance the preparation of a framework for the Greater Malé Region Development Concept Plan, to ensure that adequate background analysis was available to support investment decisions.

Table 5: Quality of Sector Assessments

Criteria Energy Transport Water and Urban Infrastructure and Services

Industry and Trade

Assessment of sector constraints

Clear and compelling

ICPS assessment focused on Malé

Port

Not in ICPS; clear and well

documented in RRP

Focused on MSME in previous ICPS, refocused

on trade facilitation in RRP

Data support Well documented Limited Well documented Adequate Analysis of sector policies and institutions

Included in sector assessment and project design

Broadly laid out in ICPS

Included in sector assessment and project design

Detailed and well presented

Reliance on national sector plans

Aligned with national energy

policy and sector road map

Aligned with Maldives Maritime

Transport Masterplan,

developed with ADB support

Greater Malé Region

Development Concept Plan, prepared with ADB support; 2015 National Solid Waste Management

Policy

Maldives Custom Service Strategic Plan 2014–2018

envisaged a focus shift from tax

revenue collection to trade facilitation

Development partners activities covered

Clear ADB–World Bank division of

labor

Yes Not mentioned in sector

assessment or RRP; discussed in

RRP appendix

Not mentioned in sector

assessment or RRP; discussed in

RRP appendix Problem tree analysis

Developed in ICPS; adjusted in

project RRP

Developed in ICPS for all

subsectors (land, sea, and air);

adjusted in project RRP

Developed in RRP Developed in RRP

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Correspondence between project objectives and sector constraints

Strong: project addresses relevant

investment, policy, and

capacity constraints

Not strongly supported due to general focus of

sector assessment. Refocused in

RRP

Strong: project addresses relevant

investment, policy and capacity constraints

Strong: project addresses relevant

investment, policy and capacity constraints

Results framework Indicators

Included in ICPS. Refined in project

RRP

Focused on Malé port in ICPS; Refocused in

RRP

Clearly identified in RRP

Clearly identified in RRP

Choice of modality Appropriate: Project grant with capacity building

TA

Appropriate: Project grant with capacity building

TA

Appropriate: Project grant with capacity building

TA

Appropriate: Project grant/loan

with capacity building TA

Overall assessment

Strong Medium Strong Strong

ICPS = interim country partnership strategy, RRP = Report and Recommendation of the President to the Board of Directors, TA = technical assistance. Source: CPS Final Review Team.

27. Choice of Modalities. In the previous CPS period (2007–2013), ADB had made use of program lending and accompanying TA to urgently address, in close coordination with other IFIs, short term macroeconomic imbalances, in addition to project lending and grants for investment operations. When the crisis response needs had been addressed, ADB operations shifted back to the more traditional project modality, accompanied by capacity building TA support, an appropriate instrument to respond to the investment and institutional strengthening requirements of the country. Results-based lending is an untested modality in Maldives, and the size and duration of the investment programs was not to justify use of multitranche financing facilities, therefore project grants or loans were an appropriate modality. No new nonsovereign operations were approved, citing constraints resulting from the nonconvertibility of the Rufiyaa, weak country sovereign rating, weak private sector management and accounting capacity, and insufficiently skilled workforce. 28. Country and Project Results Framework. The results frameworks that accompanied the 2014–2015 and the 2016 ICPS were essentially updates of the previous one, and only included the energy and transport sector in 2014–2015 and the transport sector in 2016. They identified two country-level outcomes and four indicators for the energy and transport sector linked to ADB operations to promote renewable energy in the outer islands and the expansion of Malé North Harbor. Indicators for the energy sector were aligned with sector analysis and priorities, but unrealistic (25% of the population gaining access to renewable power over a 2-year period). Those in the transport sector continued to focus on the expansion of Malé Port even though the project had been completed in 2012, instead of reflecting the pipeline’s evolving focus on regional ports (Kulhudhuffushi). The 2016 framework was modified to exclude the road sector, following consultations with the government that eliminated that sector from ADB’s assistance program. The Country Operations Business Plans from 2017 onward, that were meant to fill the gap in strategic direction while the new national development plans were delayed, only contained a qualitative identification of “country assistance result areas” and associated ADB fund allocation, without any indicators or performance metrics. 29. More detailed indicators are contained in project DMF. Sector assessments and results frameworks attached to each project were appropriate and sufficiently detailed. Changing circumstances and policies at the country level resulted in a more flexible pipeline of projects, and

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as a result sector assessments were developed alongside new projects, and not beforehand to guide sector and project selection.Overall, the formulation and monitoring of expected results was delegated from the country program to the project-specific level, and reviewed periodically through tripartite portfolio review meetings and periodic project review missions. 30. Sector Program Rating. ADB’s Maldives sector program was relevant. While the evolution of the pipeline reflected shifting government priorities, its analytical foundations were sound. Sector assessments were clear, well documented, and based on national strategies or plans, some of which had been developed with ADB assistance (Maritime Transport Master Plan and Greater Malé Region Development Concept Plan). The program squarely addressed development constraints identified through previous analysis, used an appropriate modality (project operations), and paid attention to policy and institutional development, providing in every instance TA to address these complementary dimensions. Private sector development was supported only indirectly, and the potential for nonsovereign operations not fully explored. The main shortcoming lied in the inadequate updating of country results frameworks to reflect the shifting direction of ADB operations.

5. Overall Relevance Rating 31. The ICPS and program during 2014–2019 are rated relevant. The direction of ICPS and COBP and the resulting operations maintained continuity with past areas of ADB assistance while responding to government policy shifts. Operations were well aligned to both government and ADB strategic priorities, and were based on prior national strategies and available sector plans. ADB provided analytical support in the development of sector or geographic strategies and declined to finance operations whose viability could not be confirmed. The geographic balance of ADB operations favored outer islands with about 60% of total investment, consistently with the need to promote inclusive growth, without refusing to address critical environmental issues of waste management in the Greater Malé region. Coordination with other development partners was limited due to their reduced number and the government’s preference for specialization in different sectors or areas, but cofinancing was proactively and successfully pursued. The funding level grew steadily, and the emphasis on grant support combined with good disbursement performance turned an initial negative resource transfer into a positive inflow of external resources from 2016 onward, without negative impact on the deteriorating external debt situation. The analytical foundation of operations was sound, the choice of project modality appropriate, and technical assistance routinely employed to address policy and capacity constraints. Faced with changing priorities, ADB was not able to strategically program operations for the long term, but the response was well in line with country priorities and well received even through administration changes. The downsides of this approach were the need to develop sector assessments as new projects were being prepared, instead of using them as a base for establishing priorities. In addition, ICPS Results frameworks were not updated, and contain indicators that are either unrealistic (25% of the population with access to renewable power by 2015 when the 2013 baseline was zero) or irrelevant (traffic in the Malé harbor, a completed project, instead of Kulhudhuffushi harbor, the new maritime sector investment).

B. Effectiveness

32. This section assesses the effectiveness of ADB operations during 2014–2019 on the basis of the achievement of outcomes and outputs in completed or mature projects, as documented in

15

completion or progress reports. 23 The ICPS 2014–2015 and 2016 results frameworks (Appendix 5) only contained unrealistic or irrelevant indicators and do not provide a sound basis for assessing effectiveness of ADB operations, that must be analyzed at the project level for updated results frameworks of mature projects (Appendix 4).24 1. Private Sector Development (Small and Medium-Sized Enterprises and

Finance) 33. ADB operations during 2014–2019 built on previous support for private sector development, focusing on the limited availability of financing and on advancing sector institutions.25 IMSMED was rated effective in the 2019 project completion report. In spite of considerable implementation inefficiencies, all DMF outcome indicators and 12 out of 14 output indicators were achieved, along with 21 out of 22 gender-related activities and all quantitative targets under the Gender Action Plan. As of June 2018, 967 active MSMEs were registered, corresponding to a five-fold increase over the baseline. The range of business development services (BDS) was expanded through seven BDSCs and the business incubator program. During April 2015–June 2018, 3,525 MSME business consultations and visits were made, exceeding the DMF target of 1,500 MSMEs receiving BDS. Access to credit has increased through the MSME schemes offered by ADB, ISDB, Bank of Maldives, and the government. As of March 2019, 201 MSMEs had benefited from both ADB’s and IDB’s credit lines, representing a 235% increase over the DMF baseline of 60. 34. Field visits during a mission carried out in November 2019 confirmed that some of the institutional changes promoted through IMSMED and related TA had borne fruit. Amendments to the SME Law are now undergoing final review before being submitted to the Attorney General and Parliament, and the Credit Information Bureau was functioning and routinely used by credit institutions. A Bank of Maldives branch manager in an outer island, who had been previously employed as a BDSC officer, confirmed that availability of lending—while still limited—has improved compared to before the project, and a person with stable employment could now obtain loans without collateral. On the other hand, the Secured Transaction Register was not significantly utilized, because the practice in lending institutions is to personally check the physical collateral and require deposit of the property title while the loan is active. The BDSC on the same island had reduced the quantity and quality of its staff due to funding shortfall, and was only performing limited services and outreach. BDSC clients interviewed during the mission pointed out that the long time required to request and disburse the loans and the practice to disburse in tranches pending verification of how the initial disbursement had been utilized severely reduced the effectiveness of the loans in addressing working capital requirements—the most common reason for borrowing—because it was not feasible to order an expanded inventory in small lots.

23 Of the five sovereign projects concluded or initiated by the end of 2019, three are at a sufficiently advanced stage to

assess effectiveness: IMSMED (industry and trade); POISED (power); and KHEP (transport sector). The nonsovereign loan end equity investment in HDFC has now been active for 12 years, its performance was assessed, and ADB is pursuing an exit strategy. Six of the nine ADTA active during 2014-2019 have now closed, and four have been rated in TCR.

24 In the energy sector, the 2014–2015 ICPS centers on the indicator “At least 25% of the population to have at least 5% of installed power capacity from renewable resources by 2015 (2013 baseline: 0%).” The indicator is unrealistic considering that POISED was declared effective on 19 January 2015. In the transport sector, the ICPS contains three indicators for “increased and more efficient intra- and interisland movement of people and goods: (i) number of passengers from the atolls to Malé; (ii) inbound container throughput; and (iii) average dwell time of cargo vessels, all based on Malé Port, whereas operations in the 2014–2019 period focused on Kulhudhuffushi. The indicators are therefore irrelevant in assessing the period under review.

25 A $7.5 million loan for the Private Sector Development Project had been approved in 2008 and closed in 2013.

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35. The nonsovereign loan and equity investment in HDFC contributed to the development of housing finance, an important segment of the domestic financial market. It was rated satisfactory for both business success and environmental, social, health, and safety performance. 26 The privatization helped transform HDFC into a commercially viable, private sector-led company that could compete, grow, and develop effective ways to meet the mortgage financing needs of the people of Maldives. During its 7 years of operation from privatization to 2015, HDFC grew to become the dominant player in the housing finance market. Its assets grew fivefold from 2008, when ADB invested in the company, to 2018.27 By end 2015, its active loan portfolio had reached Rf1 billion, but its nonperforming loan ratio was 2%. With the introduction of Islamic banking products, repricing of interest rates, and extension of housing loan tenors to 20 years, HDFC is poised to continue delivering needed finance, with positive secondary effects on the domestic construction industry. HDFC established policies for an environmental management system in accordance with ADB’s guiding principles. No involuntary resettlement occurred and no impacts on indigenous peoples were observed as a result of ADB’s investment in HDFC. Some of the achievements under IMSMED (establishment of a Credit information Bureau and of the foundations for a Secured Transactions Registry) will contribute to strengthening the institutional framework within which credit corporations such as HDFC operate.

2. Energy Sector 36. POISED, with disbursements equivalent to 76% and contracts awarded for 92% of the ADB grant amount by 31 December 2019, seems well placed to achieve its outcomes and outputs, and be rated likely effective or highly effective. The installation of hybrid photovoltaic-energy efficient diesel systems, battery storage, and distribution grid upgrading has made use of renewable energy a reality in 48 islands.28 In the islands covered by the project, 7.5 megawatts (MW) of solar photovoltaic generation capacity, 56 diesel generators for 11.6 MW, and battery storage for 5.6 MW were installed under the ADB component. As a result, diesel consumption per kilowatt-hour (kWh) produced has declined from 0.29–0.55 liters before the project to 0.24–0.34 liters, resulting in total savings of of 2.98 million liters of diesel and 7,980 less metric tons of carbon dioxide (CO2) emissions. As a result of fuel savings and lower fuel prices, the islands covered by the project tariffs now exceed the cost of production by 53%, whereas they covered less than 50% of the cost in 2011.29 The road map for transition to renewable energy for different types of islands has been prepared and is now undergoing final review, with finalization expected in January 2020. A total of 200 FENAKA and STELCO staff from eight atolls have been trained, and 12,300 consumers (9,000 of them women) and 6,303 students (3,077 of whom female)

26 ADB. 2016. Extended Annual Review Report. Housing Development Finance Corporation Plc (Maldives). Manila 27 Project data sheet as of 4 December 2019: https://www.adb.org/projects/41914-014/main#project-pds. 28 Distribution grid upgrading, that absorbed about 25%–25% of the project cost, makes it possible to integrate

intermittent renewable energy into the distribution system and lays the ground for future expansion of solar generation for individual producers. Sources for the data used in this paragraph are the Ministry of Finance and Treasury, executing agency for POISED, and the leaflet by the Ministry of Environment. Republic of Maldives. 2019. A Shift Towards Clean Energy in Maldives. December. Malé.

29 Phase 1 installed 2.3 MW of solar photovoltaic generation, 252 kWh of battery storage, and 7 diesel generators for 1.8 MW in five pilot islands. Phase 2 installed an 8-MW diesel generator in Malé. Phase 3 nearly completed installation and commissioning of 5.2 MW of photovoltaic generation, 5.4MWh of battery storage, and 49 diesel generators for 9.8 MW in 43 additional islands. All are operating with the exception of four islands where delayed powerhouse construction by FENAKA postponed commissioning. On an annual basis, between November 2018 and November 2019, 1.97 million liters of diesel were saved, corresponding to a cost of Rf14.56 million and 5,196 metric tons of CO2.The cost of production with hybrid-diesel systems averages $0.15 per kWh, against average tariffs of $0.23.

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participated in outreach programs.30 With EIB financing finally declared effective on 21 November 2019, the project must now recover lost time in the remaining islands. When completed, it would have upgraded systems into hybrid solar/diesel generation and strengthened the grid to favor further utilization of renewable energy sources in 160 out of 187 inhabited islands, and is likely to achieve the stated ICPS outcome of at least 25% of the population having at least 5% of installed capacity from renewable sources. 31 37. Technical assistance to the energy sector to improve the regulatory environment, build the capacity of the Maldives Energy Authority (MEA), and support the integration of solar generation into the system was effective. All four outputs were achieved: (i) on the regulatory side, licensing and technical regulations were prepared, a road map prepared in 2014 was reviewed and updated in 2017 based on the evaluation of Phase 1 of POISED, and finalized in 2018. The road map was extended to review new relevant technologies for Malé City, outer islands, and resort islands. A tariff framework was finalized through a consultative process and a draft tariff model was used to train MEA staff; (ii) 19 MEA staff were trained in tariff setting and investment planning; (iii) a compliance framework was prepared and a software tool to monitor utility performance developed; and (iv) consultants prepared a framework for feed in tariffs, competitive tenders, and net metering to support the integration of solar generation.32 Lack of adequate operating budget and limited qualified staff continue to have an impact on MEA’s ability to perform its function, and are a cause of concern for the ultimate effectiveness of the TA support. 3. Transport Sector 38. KHEP had awarded all contracts and disbursed 51% of the ADB grant amount by the end of 2019. Following initial delays in the detailed design and awarding of the construction contract, which in turn delayed the beginning of construction to December 2018, physical progress is now strictly on schedule against targets. A request to realign the harbor entry channel and related structures was voiced by the local council but subsequently dropped. Training on port operations, passenger safety, and livelihood opportunities was delivered, but in spite of that the local council’s capacity to manage the improved infrastructure seems doubtful. Sector outcomes and indicators in the two ICPS prepared during the period focused on Malé Port and are not particularly relevant to assess progress of the KHEP project. No data on the outcomes identified in the KHEP DMF for number of passengers or volume of goods transiting through the Kulhudhuffushi Harbor is available pending completion of the structure, but given the island’s role as a weekend market and its health and education facilities that attract traffic from neighboring islands, there are good probabilities that they will materialize as expected and the project can be considered likely effective.

30 Staff were trained in project supervision (61), operations and maintenance of diesel generators and control systems

(10), solar photovoltaic hybrid systems (10), and various facets of engine and plant maintenance (25). Of the 135 trained before November 2019, 11 were women.

31 The ADB-financed component covered 48 islands. Under the EIB-financed component, the contract for Phase 2b for Haa Dhaalu (13 islands) was signed in May 2017 but was expecting effectiveness for the project to be declared before awarding the contract; feasibility reports for 50 islands under phases 3b and 4a had been submitted to EIB for approval, and had been approved for the 26 islands under 4a, with bidding expected to commence once the EIB loan was effective. The site survey for 18 additional islands under phase 4b had been completed and the feasibility report was under preparation. Source: ADB. 2018. Aide Memoire for the Review Mission Grant 0409/0410/0429 MLD: Preparing the Outer Islands for Sustainable Energy Development. 2–3 July. para 4. Manila. ADB has included $10 million of additional financing in the 2020 country program to complete the project in the islands left uncovered by the redirection of expected ISDB cofinancing funds towards other operations.

32 ADB. 2019. Completion Report. Maldives: Capacity Development of the Maldives Energy Authority. Manila.

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4. Other Recent Sectors (Water and Urban Services, Industry and Trade)

39. Implementation progress on the recently approved GMEIWM and NSW is still too limited to formulate an assessment on their ability to deliver the expected benefits, but progress is broadly on schedule, engagement of the relevant government agencies is high, coordination on the ground seems satisfactory, and there are no reasons at the moment to doubt their future effectiveness. No results frameworks were developed in the sector assessments that accompanied these projects, so the assessment of their effectiveness will essentially be tied to the individual projects’ DMF. 5. Public Sector Management 40. Three technical assistance projects, two for the enhancement of tax administration and one to strengthen capacity for operations management, were completed during the period. The first two were the logical continuation of the emergency support jointly provided by ADB and other international financial institutions to help Maldives overcome the economic crisis of 2008. ADB’s role in the economic recovery program had been to support expansion of the revenue base, to help Maldives address long-standing structural budget deficits, while the World Bank focused on expenditure management and the IMF provided a standby financing facility. The 2015 CPSFR Validation had rated ADB assistance for public sector management highly relevant and highly effective in supporting the key central agencies that form the backbone of the fiscal management institutional structure, pointing to the introduction of the business profit tax and of differentiated goods and services taxes (GST) for the nontourism and tourism sector as key achievements. 41. TA 7946, Developing the Revenue Administration Management Information System, was highly effective. It provided the necessary information system integration of the tax and revenue management system with the public accounting system, Maldives Monetary Authority, National Center for Information Technology, and banking institutions and met the related training requirements, automating the administration of the new taxes and broadening the tax base. Proactive TA management through changes of scope and supplementary financing to address expanding requirements allowed the TA to exceed all outcome targets. Between 2011 and 2014, businesses registered as tax filers increased by 93%, and persons registered for GST by 73%. Appeal cases fell from 1% of total registered taxpayers in 2010 to 0.2% in 2014. Tax collection costs fell from 0.8% of revenue collected in 2011 to 0.5% in 2014. By contrast, TA 8525 for Enhancing Tax Administration Capacity was rated less than effective, since it achieved its objectives to improve audit capacity, but legislation on the new personal income tax and corporate profit tax was not introduced due to lack of political will, and the TA was unable to complete the software upgrading for taxpayer services automation. Japan’s Domestic Resource Mobilization Fund in 2018 provided additional financing for Strengthening Tax Administration Implementation which successfully conducted a diagnostic system audit and completed the SAP Business Intelligence Business Office application for the Maldives Inland Revenue Authority. 42. TA 8070 for Strengthening Capacity for Operations Management, approved to enhance the management of external assistance by the Government of Maldives, ended up producing widely diversified outputs to respond to shifting and evolving priorities, from the improvement of communications with ADB and other development partners through videoconferencing equipment to support for portfolio reviews, preparation of a national development strategy and of the Greater Malé Region Development Concept Plan, updating of the operations manual for the Resource Mobilization and Debt Management Division of the Ministry of Finance and Treasury (MOFT), and pre-feasibility study of land transport investment (bridges). The TA was rated as effective in the TCR. It essentially served as a flexible pool of funds to allow ADB to promptly respond to diverse

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unplanned requests for knowledge inputs into the government decision-making process, and was replenished twice through supplementary financing. A follow-up TA for Capacity Building for Country Programming and Portfolio Management, approved in 2018 and augmented through supplementary financing in 2019, appears to pursue essentially the same objective, with an initial focus on supporting capacity building for portfolio management and formulation of strategies such as the new National Development Plan. 43. Impact of Frequent and Numerous Adjustments. Changes of scope and implementation arrangements, contract variations, and supplementary financing are quite common in all Maldives projects. They do not seem to have negatively affected effectiveness of ADB operations, and in fact in many cases, they have a proactive response to changes in government and ensuing adjustments in priorities, or to evolving circumstances affecting approved projects, unsatisfactory procurement outcomes, unanticipated knowledge or capacity building requirements that required expansion of the scope of TA support. Nevertheless, frequent scope changes are far from ideal as they absorb resources on both the government and ADB side and, when they cannot be promptly addressed, produce delays in project implementation. 44. Rating. With a few exceptions, most of the operations approved and implemented in Maldives during the 2014–2019 period have been rated or have the potential to be effective, regardless of sector. Flexibility in adapting to changing circumstances or responding to unplanned implementation issues has been essential to allow the achievement of the planned outputs and desired outcomes, in the face of limited capacity and in some cases long start-up periods.

C. Efficiency

45. This section assesses the efficiency in delivering ADB support to Maldives during 2014–2018, according to the two criteria outlined below:33

(i) Economic returns and cost-effectiveness against benefits; and (ii) Implementation efficiency of completed and mature operations.

46. Economic Returns and Cost-Effectiveness. Table 6 shows the economic rates of return estimated at the time of project design. Most cost–benefit analyses performed relied on conservative assumptions. For example, the elasticity of traffic in Kulhudhuffushi harbor to GDP growth was projected at 0.7–0.8, to account for lower per capita incomes and tourism activity in the northern region compared to Malé. Time savings by traders using the National Single Window online application for import-export documents were valued at the minimum wage. The cost-benefit ratio of solar photovoltaic generation in POISED was calculated over a 25 year period, even though longer panel duration is not uncommon. An 18 year project duration was used for IMSMED even though repayment tenor for loan component was 32 years. For IMSMED no economic cost-benefit analysis was performed, and project documents only estimated financial rates of return and weighted cost of capital.34

33 The third efficiency criterion, share of program loans in the overall portfolio, is not applicable, since no program loans

were approved or implemented during the CPSFRU period. 34 ADB. 2012. Economic and Financial Analysis. Appendix to Proposed Loan and Grant. Republic of the Maldives.

Inclusive Micro, Small, and Medium-Sized Enterprises Development Project. Para 7. Manila. See below more discussion in para 62 and Table 9

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Table 6: Project Economic Rates of Return Estimated at Approval (%) Project EIRR Range Hurdle Rate at the Time

of Approval IMSMED n.a. 12 POISED 31.3a 12

KHEP 12.7 12 GMEIWM 17.5 9

SASEC NSW 13.6 9 HDFC (NSO)b 13.8 12

EIRR = economic internal rate of return; GMEIWM = Greater Malé Environmental Improvement and Waste Management; HDFC (NSO) = Housing Development Finance Corporation (nonsovereign operation); IMSMED = Inclusive Micro, Small, and Medium-Sized Enterprise Development; KHEP = Kulhudhuffushi Harbor Expansion Project; n.a. = not available/applicable; POISED = Preparing Outer Islands for Sustainable Energy Development; SASEC NSW = South Asia Subregional Economic Cooperation National Single Window. a = five sample island subprojects. Source: ADB. Various Years. Economic analyses appendices to the respective Reports and Recommendations of the President. Manila. b = Ex-post rates calculated in the project extended annual review report (XARR), Appendix 3. The figure in the EIRR column represents the real economic return on invested capital. The real return on invested capital was 11.8%. Sources: Economic analysis linked documents to the respective Reports and Recommendations of the President for the various projects.

47. In the power and waste management projects, various technical options were considered before selecting the most efficient. POISED performed investment optimization analysis utilizing the HOMER software to compare diesel, solar photovoltaic, and wind power as options for power generation based on the total cost for generation and energy storage investments, fuel costs, operational and maintenance costs, and replacement costs over a period of 25 years to identify the least-cost option, and pilot tested the approach on the islands of Addu City, B. Goidhoo, Th. Buruni, Ga. Vilingili, and Lh. Khurendhoo. GMEIWM assessed alternative design options for (i) waste collection, (ii) transfer, (iii) treatment, and (iv) disposal to identify the most economical for meeting demand in terms of scale, materials, and technology. The SASEC NSW project also assessed a range of technical alternatives and their viability along with least-cost analysis. 48. Less attention to alternative technical options was paid in IMSMED and KHEP. Detailed design and engineering for the Kulhudhuffushi Harbor expansion was only performed after project approval, and the consultation process does not appear to have been adequate since requests for design adjustments were received during project implementation and again raised as late as November 2019, during the Tripartite Portfolio Review Mission, even though the local council eventually agreed to maintain the original project design. Implementation and fund flow arrangements, the financing mechanism for business development centers, and consulting services requirements under IMSMED do not appear to have been adequately designed: the project experienced continuous adjustments to both implementation and disbursement approaches, 12 changes in procurement plans, 27 revisions in disbursement projections, and significant reallocations of both loan and grant proceeds.35 49. No EIRR was calculated for IMSMED ex-ante or ex-post. The PCR, however, found that the project had met all expected outcome and 12 out of 14 output indicators, often exceeding targets, in spite of the design flaws highlighted above. Preliminary outcome indicators for POISED are quite positive, as discussed in the effectiveness and development impact sections of this CPSFRU. No benefits can be delivered until KHEP is operational, but interviews with stakeholders

35 ADB. 2019. Project Completion Report. Maldives: Inclusive Micro, Small, and Medium-Sized Enterprises

Development Project. Appendixes 4 and 8, paras. 30 and 36. Manila.

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in Kulhudhuffushi suggest that traffic volumes are expected to be high, as the island is a regional market, and a trade, transport, health, and education hub.36 50. The economic performance of the nonsovereign HDFC was rated satisfactory. HDFC’s inclusive business model helped cultivate the products and services of SMEs in the value chain as suppliers of construction materials and services. HDFC also helped deepen the finance sector by pioneering the issuance of domestic corporate bonds that were subscribed by institutional and retail investors. Economic return on invested capital of the project was calculated at 1.3 times the weighted average cost of capital. ADB investment profitability was also rated satisfactory. 51. Overall Sovereign Portfolio Performance. A comparison of key portfolio indicators between the 2007–2013 and 2014–2019 periods in Maldives and with other comparable countries in South Asia and ADB (Table 7) shows that the time between approval and effectiveness has fallen by one third for projects and by one half for TAs, a sign of close relationship and coordination between ADB and the government. Contract award performance improved somewhat compared to the previous period, and was slightly above ADB average, but was still weaker than in comparator countries. Disbursement ratios were lower compared to 2007–2013, largely because the 2014–2019 Maldives portfolio did not include any fast disbursing policy-based loan, but starting in 2017 they became equal or better than comparator countries and the ADB average. The percentage of projects at risk was lower than the ADB average and other small island countries, though higher than for other South Asian countries. Overall, portfolio performance was comparable or slightly better than during 2007–2013, when the portfolio had been rated efficient. Two TA projects that supported government capacity to plan and implement ADB operations, and the systematic use of capacity building TA with every project approved helped keep the portfolio on track and improved efficiency.37

36 The CPS Final Review mission visited Kulhudhuffushi harbor and met with the contractors, supervising engineers,

and members of the local council, who expressed this opinion, on November 12, 2019. 37 TA 8070, Strengthening Capacity for Operations Management for $825,000 and TA 9515, Capacity Building for

Country Programming and Portfolio Management for $1,050,000.

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Table 7: Comparative Sovereign Portfolio Performance

Country (Group) 2007–2013

2014 2015 2016 2017 2018 2019a 2014–2019

TIME TO EFFECTIVENESS (months)

Maldives 7.7 3.73 – 6.07 – 3.93 4.6 5.2 CONTRACT AWARD RATIOb

Maldives 24.3 1.5 25.3 21.9 65.0 14.7 27.5 26.0 South Asia comparatorsc n.a. 17.3 18.7 40.3 29.7 37.0 20.8 27.3

Small Island Countriesd n.a. 24 23 23 28 41 19 26.3 All ADB 25.9 27.8 26.2 29.7 27.6 25.7 17 25.7 DISBURSEMENT RATIOe

Maldives 28.3 17.5 5.6 17.0 26.1 21.1 21.9 18.2 South Asia comparatorsc n.a. 28.7 12.7 15.3 18.3 15.3 21.1 18.6

Small Island Countriesd n.a. 18 19 21 27 17 19.5 20.2 All ADB 19.3 21.5 19.3 20.3 21.7 21.1 19.8 20.6 PROJECTS AT RISK (%) Maldives 23 – – 33 33 25 n.a. 18.2f South Asia comparatorsc 14 17 14 21 12 15.6f Small Island Countriesd 37 28 35 42 26 n.a. 33.6f

All ADB 32.8 20 24 20 27 14 n.a. 21.0f

TECHNICAL ASSISTANCE OPERATIONS (Maldives)

Time from approval to signing (months)

2.6 1.47 – 1.37 0.20 0.78 1.2 1.3

Fund utilization of closed TAs

n.a. 100% – – 87% 86% – 89

– = no approvals or closings in the year, ADB = Asian Development Bank, n.a. = not available or not applicable, TA = technical assistance.

a Up to third quarter of 2019, except disbursement ratio which covers till Q4 2019. b Contract award ratio is the ratio of total contracts awarded in a given year to the uncontracted balance of signed

loans and grants at the beginning of the year, including the amount of newly signed loans and grants during the year. c Bhutan, Nepal, and Sri Lanka. d Excludes Maldives. e

Disbursement ratio is the ratio of the total disbursements in a given year to the undisbursed balance of signed loans and grants as of the beginning of the year.

f 2014-2018. - = n.a. = Sources: for a: Portfolio and Financial Management Department database. For d: Controller’s Department. Data for ADB

and comparator country groups are from ADB. 2008–2013, 2015, 2017, 2018 Annual Portfolio Performance Report. Manila. For Maldives, data are from ADB. 2016 and 2019 Maldives TPRM Materials for Discussion. https://www.adb.org/sites/default/files/institutional-document/500841/appr-2018.pdf.

52. Individual Project Performance. IMSMED implementation was less than efficient. As documented in the PCR, the project required two extensions for a total of 18 months, caused by (i) changes in government and policy priorities; (ii) turnover in PMU staff and consultants; (iii) delays in the signing of financing agreements and project effectiveness; (iv) delays in the establishment of PMUs; and (v) cumbersome management of consultancy and procurement packages. Changes in both implementation arrangements and fund flow mechanisms were required. Of the original amount, loan utilization reached only 29% because of cancellations, while

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grant utilization was 93.5%. Disbursement projections were revised 27 times, the original allocations for consulting services and credit lines were substantially altered, and the original procurement plan was updated 12 times. 53. POISED can be rated efficient. Timeliness of implementation suffered from the withdrawal of ISDB cofinancing and for the long delays in achieving effectiveness for the substantial ($50 million) EIB share of project funding, but implementation of the ADB-financed component in all 48 islands was largely on track, despite the complexity in project management during simultaneous installation and commissioning in dispersed islands. 54. KHEP implementation was less than efficient. Detailed design and all procurement were carried out only following project approval. While the expression of interest for the project management consultant (who prepared the detailed design) and PMU staff were invited before grant approval, the project required considerable time up front to complete the detailed design and preparation of bid documents. The initial designs were rejected twice. The construction contract had to be rebid because the first time no responsive proposal was received, possibly because the financial standards were too stringent for a relatively small construction contract. Finally, design issues with regard to the port access channel were raised periodically during project implementation, well after the design and a substantial amount of the construction had already been completed. 55. A comparison of the available data on contract awards and disbursements for one completed and two mature projects in Maldives with the ADB average for project loans and grants during 2014–2018 (Figure 2 and Table 8) and show fairly similar patterns between Maldives and ADB, with Maldives projects showing slower start-up in the first few years of implementation.38

Figure 2: Comparative Contract Award and Disbursement Performance

Source: Table 8.

38 S curves are not perfectly comparable beyond year 3 because ADB-wide Annual Portfolio Performance Review data refer to 420 ADB project loans and grants closed in 2014–2018, whereas the portfolio of Maldives includes only one closed and two mature projects, with 7, 5, and 3 years of implementation history, respectively. Data for the first 3 years in Figure 1 include all Maldives project (KHEP, POISED, and IMSMED), data for years 4 and 5 only two projects (POISED and IMSMED), and data from year 6 onward only one project (IMSMED). Ratios are based on the cumulative contract awards, disbursements, and amount of the projects active n years after effectiveness.

0

20

40

60

80

100

120

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7

Cumulative percentage

ADB contract awards Maldives contract awards

ADB disbursements Maldives disbursements

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Table 8: Normalized Contract Award and Disbursement Profiles (%) (First year after approval made equal to year 1)

Project Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7

Contract Awards IMSMED 4 35 76 89 93 100 100 POISED 23 42 64 65 92 – – KHEP 82 88 88 – – – –

Maldives 29 48 69 67 92 99 100 ADB 37 59 74 86 92 96 97

Disbursements IMSMED 2 24 48 67 86 98 73 POISED 2 18 38 60 76 – – KHEP 3 16 51 – – – –

Maldives 2 18 41 60 77 98 100 ADB 9 25 43 63 78 88 94

– = not yet available, because the year falls in 2020 or beyond; ADB = Asian Development Bank; IMSMED = Inclusive Micro, Small, and Medium-Sized Enterprise Development; KHEP = Kulhudhuffushi Harbor Expansion Project; POISED = Preparing Outer Islands for Sustainable Energy Development. Sources: ADB. 2015, 2017, 2018. Annual Portfolio Performance Report. Manila; ADB. 2019. Completion Report. Maldives: Inclusive Micro, Small and Medium-Sized Enterprise Development Project. Appendix 5; Tripartite Portfolio Review background material, various years. Manila.

56. TA operations were efficient. Among the positive developments, the average time taken from approval to signing of TA agreements decreased from 2.6 months in 2007–2013 to 1.3 months in 2014–2019, and fund utilization in closed TA was high, at 88% for three PPTA and 91% for six ADTA.39 Supplementary financing was used in one out of four PPTA and five out of nine ADTA, to take advantage of simplified procedures. On the other hand, the price for high utilization of TA resources was the long delay in completion: on average PPTA lasted 112% more than planned (2.8 years vs. 1.3 years) and ADTA 116% more (4.2 years vs. 1.9 years). Given the limited annual allocation of TA resources to Maldives (approximately $1 million annually) the extension of TA duration allowed ADB to respond to requests for assistance through reprogramming of available funds. The use of TAs with a broad scope (for example TA 8070 and TA 9515 for capacity building for country programming, portfolio management, and operations management) supported such responsiveness. Of the four TA for which completion reports are available, two were rated efficient, and two less than efficient. The lower efficiency rating were caused by cumbersome recruitment and frequent changes of several individual consultants, who proved unqualified to complete the information technology upgrades of the taxpayer services module for the Maldives Internal Revenue Agency and by the implementation delays in TA 8070, caused by frequent changes in government priorities that required corresponding adjustments in TA scope and duration. 57. Knowledge Products were delivered mostly through technical assistance operations and regional or ADB-wide programs. ADB supported preparation of the Maritime Transport Master Plan, the Greater Malé Development Concept Plan, and the ongoing Eighth National Development Plan 2019–2028 through the national TA program, and is currently supporting preparation of the energy road map, and possibly the future updating of the tourism master plan. Regional operations supported trade facilitation, maritime transport, climate and disaster risk resiliency, and regional energy cooperation with a focus on solar technology and energy efficiency under the SASEC framework. Given the limited availability of TA funds for Maldives national program, these approaches are an efficient way of enhancing the delivery of knowledge products and services to the country.

39 PPTA 8268, 8829, and 9520; and ADTA 7946, 8000, 8070, 8525, 8614, and 9155.

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58. Rating. All projects had ex-ante economic rates of return that exceeded—sometimes substantially—the cost of capital. Three of the five were designed with due consideration for the cost-effectiveness of alternative technical options and preliminary indications suggest that the objectives will be met or exceeded within the available investment budget. Two out of three complete or mature projects are rated less than efficient due to implementation delays and significant design changes during implementation that resulted in suboptimal utilization of resources. Available overall portfolio performance indicators of timeliness of effectiveness, contract awards, disbursements, and share of project at risk improved over the earlier 2007–2013 period, and are in line with comparable small island and South Asian countries and ADB averages, considering that the portfolio of Maldives did not include any fast-disbursing program loans in 2014–2019. TA operations and knowledge products were delivered efficiently, contributing to the preparation of relevant national planning documents and making use of regional activities. On balance, ADB operations during 2014–2019 are rated efficient (at the low end). D. Sustainability

59. This section assesses the sustainability prospects of outputs and outcomes and their resilience to risks. Sustainability encompasses different dimensions: (i) financial, or the ability to operate and maintain the investment for its useful life; (ii) institutional, or the capacity of the organizations responsible for the project to make full use of the investment; (iii) sociopolitical, i.e., the acceptance, support, and policy environment that will ensure continued utilization of the benefits; and (iv) technical and environmental, i.e., the ability to withstand degradation caused by the natural environment in which the project is situated. The extent to which possible risks were adequately mitigated also forms part of the assessment. 60. Before assessing performance at the sector or project level, it is useful to review the key challenges to sustainability in Maldives. Financially, the structural budget deficit caused by the high cost of delivering services, high share of government employment, and limited political willingness to adopt cost recovery measures through user payments commensurate with the cost of public services posed a structural challenge to the long term funding of recurrent expenditures, including operations and maintenance. Institutionally, limited capacity and high turnover in public sector employment challenge the ability to provide long term support to development activities, even though several newly created agencies (for example, the Maldives Internal Revenue Agency [MIRA]) have demonstrated the ability to adhere to high standards. Politically, frequent and contentious changes in leadership and the accompanying policy direction have made it challenging to ensure continuing policy support, even though approved ADB operations have been to a large extent endorsed by successive administrations without requests for significant changes. Environmentally, the threat of sea level increases associated with climate change and the proximity to a coastal environment test the durability of investment. Every project faces these challenges and must successfully address them to ensure sustainability. 61. Financial Sustainability and Cost Recovery. Earlier ADB operations and technical assistance completed during the period supported an expansion of the government revenue base, partially addressing the structural public budget deficit that has accompanied Maldives for decades. The share of total revenues to GDP has remained above 26% since 2014, cushioning partly the even greater growth in public expenditures during the same period.40 While the situation of public finances continues to raise concerns, each of the projects has attempted to ensure financial sustainability: the IMSMED project, by seeking stable funding sources for the Business Service Centers (BDSC); POISED, by structurally reducing power generation costs and the need

40 See Appendix 4. Source: ADB. 2018. Key Indicators 2019. Manila.

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for subsidies through solar installations; KHEP, by undertaking a feasibility study for the introduction of harbor user charges; GMEIWM by assessing through financial analysis that the project will generate sufficient revenues to cover full operations and maintenance (O&M) costs if the Waste Management Corporation Limited (WAMCO) will implement regular tariff revisions; NSW by charging for export and import documentation. All the projects have all attempted to create the preconditions for cost recovery and O&M financing. Whether they will succeed will depend on discipline and political will, particularly for operations in support of private sector development and maritime transport. 62. Financial rates of return and the weighted average cost of capital estimated during project preparation are shown in table 9.41 Financial analysis was performed at appraisal for IMSMED, but it was not updated when the PCR was prepared. Both POISED and KHEP were financed as grants and did not have revenue-generating objectives, though some measures were introduced to cover operating costs. NSW is expected to produce financial returns well in excess of the weighted average cost of capital. In all three cases, however, it is not possible to update the initial estimates because the projects are still under implementation.The financial internal rate of return for ADB’s equity investment in HDFC was calculated at 22.7%, equivalent to 1.3 times the cost of equity.42

Table 9: Project Financial Rates of Return Estimated at Approval (%)

Project FIRR Value or Range Weighted Average Cost of Capital IMSMED 11.96 –2.95 POISED 4.9–13.8 1.2 KHEP n.a. n.a.b GMEIWM n.a.a n.a.b

SASEC NSW 6.97–7.52 2.86 HDFC (NSO)c 19.2 11

FIRR = financial internal rate of return; GMEIWM = Greater Malé Environmental Improvement and Waste Management; HDFC = Housing Development Finance Corporation (nonsovereign operation); IMSMED = Inclusive Micro, Small, and Medium-Sized Enterprise Development; KHEP = Kulhudhuffushi Harbor Expansion Project; n.a. = not available/applicable; POISED = Preparing Outer Islands for Sustainable Energy Development; SASEC NSW = South Asia Subregional Economic Cooperation National Single Window. a = WAMCO and project revenues are projected to cover operating expenditures until 2032, if average 4% annual tariff increases are applied. b = The project is financed as a grant. c = Ex-post rates calculated in the project extended annual review report (XARR), Appendix 3. The real return on invested capital was 11.8%. Sources: Financial analysis linked documents to the respective Reports and Recommendations of the President for the various projects.

63. The concept of small scale lending without collateral and the Credit Information Bureau promoted under IMSMED are now firmly established, to the point that a new SME Development

41 The financial analysis for IMSMED presented a few peculiarities: (i) the financial benefits of the project were

quantified in terms of the projected incremental revenues from increased tourism arrivals as a result of the project, even though only 9% of the loans and 13% of the funds were actually lent to the tourism sector;41 and (ii) the weighted average cost of capital (WACC) was calculated in real terms, based on a domestic inflation rate of 7% and an international inflation rate of 0.3%, yielding a negative WACC of -2.95%, largely due to the -4.45% real cost of government funding. Sources; ADB. 2012. Economic and Financial Analysis. Appendix to Proposed Loan and Grant. Republic of the Maldives. Inclusive Micro, Small, and Medium-Sized Enterprises Development Project. Manila. Para 5, and ADB. 2019. Project Completion Report. Maldives: Inclusive Micro, Small, and Medium-Sized Enterprises Development Project. Manila. Table A9.4

42 ADB. 2016. Extended Annual Review Report. Housing Development Finance Corporation Plc (Maldives). Manila.

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Finance Corporation has been established by the government for this purpose. Privatization supported through ADB nonsovereign lending and equity investment helped transform HDFC into a commercially viable, private sector-led company. The combination of the loan and equity structure proposed by ADB not only allowed HDFC to expand its lending activities but also helped narrow its maturity gap and lower its debt–equity ratio from a high of 7:1 in 2007 to 1.7:1 in 2016. The biggest threat to IMSMED achievements is the financial survival of BDSC, a risk already highlighted in the previous CPSFR: an initial plan to charge user fees was shelved and would have probably generated insufficient revenues, discouraging potential patrons from using their services. It was replaced by a proposal to develop an SME park in Hullumalé and use the revenues to pay for BDSC expenditures, but this was also temporarily put on hold as a result of government changes and the need to assess feasibility. For the time being, the limited support for BDSC comes from a government-established Business Center Corporation, funded by government budget, that may eventually sell its loan supervision services to the newly established government SME Finance Corporation, a creative but not necessarily robust arrangement.43 64. Political decisions on tariff levels will determine the financial sustainability of investments in other sectors. Cost savings resulting from the combination of solar photovoltaic and diesel generation and battery storage have brought generation costs (Rf2.3 per kWh) below the average tariff level (Rf3.5 per kWh) in the project islands. This cost reduction makes POISED financially sustainable, and will reduce the current level of subsidies to private power consumers. KHEP’s periodic dredging requirements will be met at the national level by the Public Works Service under the Ministry of Housing and Urban Development. The Kulhudhuffushi local council does not seem inclined to impose user fees once the port is completed, relying instead on expected increases of transfers from the central government pledged by the new administration. GMEIWM will generate revenues from collecting monthly tariffs of Rf150 per household, marginally higher than the average tariffs imposed by the informal sector (Rf125 per household).44 This level of cost recovery would be sufficient to cover operating expenses throughout the life of the project. However, it is too early to assess whether WAMCO will be able to implement tariff increase by 4% annually on average to cover operating expenditures (that are expected to increase by 3% annually in line with inflation). NSW will charge users a fee for processing import and export transactions and rely on the productivity improvements associated with information technology to maintain the fee level low. Looking at the portfolio as a whole, financial sustainability is facilitated by the large share of grant financing of ADB operations, which reduces the need to recover the investment cost through user charges. Introduction of incremental tariff adjustments linked to some objective indicator like inflation, cost of fuel, or other parameters may be the most politically acceptable way of ensuring long term cost recovery in all four cases. 65. Institutional Strengthening. Following recommendations from the previous CPSFR and its validation, all investment projects approved since 2014 have been accompanied by capacity building technical assistance (TA). The design of the TA components includes elements that support not only the immediate implementation of the project (procurement, supervision) but typically also covers the preparation of laws, regulations, and procedures needed for the investment to function properly, and the strengthening of systems and institutions in the executing and implementing agencies. IMSMED supported the expansion of BDSC, the Credit Information

43 Field interviews suggested that there is willingness to pay for essential services related to preparation of business

plans required to seek financing and for complying with tax obligations, but the focus on more generic business outreach and the loss of qualified staff resulting from 2 years of reduced financing limited the BDSC ability to offer such services. Demand for more general business, marketing, and human resource management advice is softer, and may not be sufficient to generate revenues, even if the BDSC staff were qualified to offer such services.

44 Informal solid waste collection services use cycles for transportation instead of motorized vehicles, thus reducing operating costs.

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Bureau, and the Secured Transaction Registry. The HDFC loan and equity investment established HDFC as a viable, well capitalized private lender with debt instruments listed on the Maldives stock exchange, that in 2016 held 50.9% of the housing finance market in the country. ADTA enhanced capacity of the MEA, and extensive technical training for utility staff and sensitization programs among all groups of island communities were delivered under POISED. Capacity building of WAMCO staff and preparation of a recycling market study will assist business planning and operations under GMEIWM. Operating manuals and a tariff study for port operations were prepared under KHEP. A potential weakness of the capacity building in ports operations delivered under KHEP to local council staff is the superficial coverage of the training, delivered nearly 2 years before project completion to staff not presently involved in port operations, with the likelihood that whatever was communicated would be forgotten by the time the harbor is completed. Contracting out of port operations to the nearby regional port, currently managed by Maldives Port Limited, seems a more likely option to ensure professional operations of the facility. 66. Political and Social Support. The projects included in the 2014–2019 program are in areas of high priority for both the outgoing and new administration: promotion of the private sector and small enterprises, reduction of the carbon footprint and of fuel import dependency, improvement of environmental conditions in Malé, and improvement of domestic connectivity through maritime transport. Laws and regulations needed to provide the legal and regulatory framework have been developed, or amended, often with TA support. The SME Law amendments are being finalized for submission to Parliament. 45 The Solid Waste Management Act, that incorporates the reduce–reuse–recycle and polluter-pay principles is being revised to address the requirements of waste-to-energy conversion that will be featured in the planned Greater Malé Waste to Energy Project now under preparation. Outreach to stakeholders has been carried out under POISED and is planned under GMEIWM to ensure buy-in of the local communities, and a threshold participation of women in such activities is routinely required. Different government philosophies on decentralization and local participation have in the past affected the level of consultation in project design. The negative effects of insufficient consultation and political factors are now being felt in KHEP, that has faced a request to realign the harbor entrance channel during implementation and again only months before the expected completion of the project. Going forward, ADB should capitalize on the new government’s openness to dialogue and participation to ensure proper consultation in the preparation of the new country strategy, program, and projects, and to generate the needed social and political support. 67. Environmental Sustainability. All projects with physical infrastructure components were designed to mitigate risks associated with climate change. Solar photovoltaic systems under POISED will be mounted on 3–4 meter-high structures and other project facilities are expected to be resilient to climate change through compact and preassembled systems resistant to extreme weather conditions. Design of Kulhudhuffushi Harbor under KHEP considered the impacts of climate change such as the increase of the mean sea level and storm surges, including shore protection features. All facilities built under GMEIWM will adopt climate change and disaster-resilient design features including enhanced engineering designs such as strengthened seawalls, raised floor elevations, and enhanced drainage systems, and soft interventions, such as disaster and emergency planning and awareness building.

45 In consultation with the Ministry of Economic Development, the (i) Competition and Fair Business Practices Act,

(ii) Enterprise Start-up Act, and (iii) Privacy and Personal Data Protection Act were also drafted. Recommendations were provided in areas where currently no legislation exists such as (i) e-commerce, (ii) privacy and data protection, (iii) electronic and mobile payments, (iv) intellectual and industrial property, (v) competition and market conduct rules, (vi) trusteeship and beneficial interests, (vii) collective investments, and (viii) standards for goods and services.

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68. Sector Level Assessment. The 2015 guidelines on CPS Final Review require that the sustainability assessment be based on the aggregation of sector level determinations. Since many of the findings have already been discussed under the four main sustainability risk categories, Table 10 briefly summarizes the breakdown at the sector level. 69. In addition to the above sectors, ADB completed technical assistance operations to support of public sector management. Financially, these operations strongly promoted sustainability not only of the specific interventions but of the country as a whole by expanding the tax base and improving revenue collection in a manner that seems difficult to reverse. Institutionally, ADB operations strengthened two key organizations for development financing: the new and promising MIRA, and the division in charge of external resource mobilization and debt management within MOFT, but recent experience shows that when external consulting support was temporarily unavailable, project implementation performance began to suffer and previous tendencies to delayed action resurfaced, questioning the long term impact of this support. Socially and politically, the consolidation and expansion of the tax base seem to have been well received by successive administrations and not particularly questioned by the general public, since they mostly affect the corporate and tourism sector. Environmental risks do not significantly affect these types of operations, that can be rated overall sustainable, with a warning note that internal capacity within MOFT and outreach to the public on the merit of further tax base expansion will both need strengthening.

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Table 10: Sector Level Sustainability Assessment

Dimension Private Sector (SME and Finance)

Power Transport Water and Urban

Infrastructure and Services

Industry and Trade

Financial • 7% nonperforming loans compared to 12% for BML

• Financial support for BDSC uncertain

• HDFC equity to loan ratio improved

• 30% average reduction in power generation cost bring the average generation cost below average tariffsa

• Study for port user charges performed

• Local council not likely to impose them

• Tariff covers operation costs if updated regularly

• Households are used to pay for services

• Fees will continue to be charged for import–export documents

Institutional • SME Law amended and supporting services created

• MEA capacity increased

• Training delivered, but not well targeted

• Capacity building and recycling market study under ADTA

• Coordination established among agencies involved.

• IT system builds on and harmonizes existing ones

Sociopolitical • SME law amended

• SDFC established

• Carbon reduction goal prominent in national policy

• Consultation process inadequate

• Solid Waste Management Act under preparation

• Consultations held during design

• Project should simplify process for private operators

Environmental • HDFC established policies for environmental management system

• Structures elevated and weatherproofed

• Sea level and shore protection features included

• Enhanced engineering (seawalls, floor elevation, drainage)

• Not applicable

Rating Likely sustainable (borderline)

Likely sustainable

Less than likely sustainable

Likely sustainable

Likely sustainable

ADTA = advisory technical assistance, BDSC = business development service center, BML = Bank of Maldives, HDFC = National Housing Development Corporation plc, MEA = Maldives Energy Authority,SME = small and medium-sized enterprise, SDFC = Small and Medium Enterprise Development Finance Corporation. a Based on 0.24–0.34 liters per kWh generated before and 0.29–0.55 liters after the project. Source: Assessment team, based on project documents and field interviews.

70. Rating. ADB operations in Maldives during 2014–2019 are likely sustainable. Financially, estimated rates of return at the time of approval were at least double the average cost of capital, leaving a solid margin for potential downward corrections. All projects made strong efforts to

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address financial sustainability. Less than 6% of the nearly $120 million of ADB assistance were reimbursable loans, and even those were at concessional terms, thus eliminating the concern for repayment of the capital investment and improving the projects’ financial rates of return. The projects and technical assistance implemented have enjoyed strong political support in spite of changing governments. Institutional strengthening and resiliency to environmental challenges including climate change have been systematically built into project design. Some uncertainties come from the government’s support for operations of BDSC for SMEs and the nearly completed Kulhudhuffushi Harbor, and the political will to implement measures to ensure sufficient cost recovery to cover operations and maintenance costs. The average of ratings for project sectors in Table 9 and public sector management in para. 68 confirms this assessment. Three of the 5 – which represent 83% of projects by amount – are rated likely sustainable. In particular, POISED has brought electricity production cost below tariffs and GMEIWM will charge fees comparable to current levels.

E. Development Impacts

71. This section assesses the contribution of ADB‘s program of support to the country‘s achievement of high-level development results. Performance is assessed against three subcriteria:

(i) progress towards achieving sector goals; (ii) progress towards achieving overall and cross-cutting country and ADB goals; and (iii) extent of positive and negative unintended impacts.

72. The lack of a national development strategy or plan after 2013 and of a full ADB CPS makes it difficult to set explicit benchmarks against which development impact can be measured. The 2014 government electoral manifesto emphasized—among other priorities—economic development through tourism, agriculture, and fisheries, and a business-friendly environment; the maritime transport infrastructure needed to support it and ensure access to economic, health, and education opportunities; and a healthy living environment through waste management, safe drinking water, and effective sewerage systems. Midway during the administration, greater emphasis was placed on developing the Greater Malé Region as a pole to concentrate population from outer islands. The manifesto of the new government that won the 2018 elections focused on human rights and freedoms, citizens’ empowerment and strengthening of governance and legal guarantees. The draft National Development Plan 2019–2028 emphasizes human resources development, housing, environmental stewardship and resilience including carbon neutrality, and decentralization through a hierarchy of regional and subregional centers. 73. ADB’s previous CPS 2007–2011 focused on power, SME development, and finance to promote economic growth; maritime transport to improve access to social services; and public sector management to improve good governance. These priorities were reaffirmed in the three ICPS approved since then, with a diminishing focus on public sector management following completion of the 2009 Economic Recovery Program and related TA, and the addition of waste management and trade facilitation within the SASEC regional framework. At the highest levels, the sectoral priorities for ADB operations during 2014–2019 can be reconstructed as in Table 11. On the ADB side, Strategy 2020’s agenda (inclusive economic growth, environmentally sustainable growth, and regional integration) and five drivers of change (private sector development, good governance and capacity development, gender equity, knowledge solutions, and partnerships) provided the framework for Maldives operations.

Table 11: Reconstructed Priorities for ADB Assistance to Maldives 2014-2019

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Private Sector

Development Energy Transport Water and

Urban Infrastructure and Services

Industry and Trade

Impact

Enhanced economic activity outside Malé by establishing SMEs on the atolls [and] facilitating private sector development beyond the tourism sectora

All citizens provided with access to reliable, affordable, and sustainable energy supply

Improve physical and economic access, develop multimodal infrastructure on identified high priority atollsa

A healthy living environment created in the Greater Malé capital region and its outer islands

Efficient international trade facilitation ensured. Faster, cheaper, and more predictable cross-border trade in the SASEC subregion

Outc

om

e

An integrated SME development model including a network of BDSC and innovative financing arrangementsa

At least 25% of the population to have at least 5% of installed power capacity from renewable sources

Increased and more efficient intra- and inter-island movement of people and goods

At least 90% of all solid waste generated in the project area collected and processed

Efficiency in cargo clearance improved

BDSC = business development service center, SASEC = South Asia Subregional Economic Cooperation, SME = small and medium-sized enterprise.

a = From the CPS Results Framework of Maldives 2007–2011 Country Partnership Strategy. Sources: ADB. Manila. Various years. Country Partnership Strategy. Maldives 2007–2011; Interim Country Partnership Strategy 2012–2013, 2014–2015, and 2016. Manila.

74. Sector Impacts. While it is still early to measure the impact of ADB operations approved in 2018–2019, the preliminary sector impact assessment of completed and mature ones is rated satisfactory. By testing the potential of BDSC, facilitating the establishment of business incubators, the Secure Transaction Registry and the Credit Information Bureau, and improving the SME Law, IMSMED has performed an important demonstration role that exceeds the relatively small size of its credit line. Private sector credit grew constantly since 2014, increasing from Rf15 billion to nearly Rf25 billion at end-October 2019, and became more diversified, with tourism enterprises’ share declining from about one-half to one-third over the same period (Figure 3). Total lending of $2.7 million by the project over 5 years represents less than half of 1% of the volume of annual private credit. However, unsecured lending up to Rf50,000 for working capital is now practiced, security requirements for larger loans have been reduced from 150% to 130%, and most notably the government has established in March 2019 a SME Development Finance Corporation (SDFC) and allocated Rf340 million in 2019 for its lending operations. Combined with planned allocations of Rf450 million in 2020 and Rf600 million in 2021, the corporation will potentially count after the first three years of operations with a loan portfolio of about $1.2 billion that should allow it to tap sources of capital and external funding on the basis of its assets and track record.46 Even the more problematic component, BSDC, may find in the coming years a stable source of financing by providing loan originating and monitoring services to the SDFC, while Bank of Maldives—the conduit for the IMSMED credit line—took on board the BDSC concept, opening its first business center in Addu City, followed by one in Malé on 12

46 The corporation lends up to Rf5 million, including unsecured loans up to Rf1 million, with an average maturity of 6–

7 years and average interest of 7%–8%. By contrast, Bank of Maldives business loans charge on average 12%-13%. During the first 6 months of operations, the SDFC received loan applications for Rf1.2 billion.

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November 2019, with others planned in Hulhumalé and Kulhudhuffushi. 47 Accordingly, the IMSMED PCR rated it satisfactory for development impact.

Figure 3: Private Credit Growth, 2008–2019 (million Rf, annual percentage change)

Note: personal loans were not classified as a separate category prior to June 2015 Source: Maldives Monetary Authority

75. Support to housing finance through the nonsovereign HDFC loan and equity investment also had a satisfactory impact in terms of development results. The effect of the ADB loan and equity investment on private sector development and ADB strategic objectives was rated excellent in the XARR. The privatization helped transform HDFC into a commercially viable, private sector-led company that now serves more than half of the domestic mortgage market. The project contributed measurably to: (i) meeting an urgent need for housing finance in Maldives, (ii) increasing the availability of mortgage lending and strengthening the finance sector, (iii) generating jobs and additional revenue, and (iv) broadening and deepening the domestic financial market through the issuance of corporate bonds subscribed by institutional and retail investors. ADB’s additionality was rated satisfactory. ADB’s investment came at a time when the government needed long-term funding to sustain the operations of HDFC. If ADB had provided only a long-term loan, it would have still satisfied HDFC’s immediate debt funding needs. However, the equity investment that helped in the privatization of HDFC proved to be a more sustainable solution and had a discernible impact on HDFC’s development. The infusion of additional equity and its expanded capitalization enabled HDFC to increase leverage during 2011–2016 without the need for additional equity during this period. ADB’s investment also encouraged other international financial institutions and commercial banks to provide debt funding to HDFC since 2011.

47 Bank of Maldives. 2019. BML OPENS NEW BUSINESS CENTRE IN MALÉ TO STEP-UP SUPPORT FOR

BUSINESS. Public Relations Department press release. 12 November https://www.bankofmaldives.com.mv/system/file/3239/originals/PR_-_BML_Opens_New_Business_Centre_in_Malé_to_Step-Up_Support_for_Business.pdf.

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76. Problems remain. Collateral is still widely demanded by bank lending to SMEs, and physical checking of assets is standard practice compared to the use of Secured Transactions Registry information. Funding is limited by the small financial base of the country and the reluctance to deposit funds in the banking system. A persistent budget deficit largely funded through domestic debt absorbs financial resources, crowding out the private sector. Demand for advisory business services and willingness to pay for them are low, and BDSC are underfunded and understaffed, and not attractive employers for competent professionals. Financial institutions do not have a constant presence in outer islands, and lending is still focused on the larger centers. Political interference in lending decisions, not uncommon even during IMSMED, is likely to thrive when SME financing is managed by a public institution, and even though nonperforming loans are rare, it may distort resources from more productive uses. 77. POISED aims—when the components cofinanced by EIB and planned ADB supplementary financing will be completed— at covering 160 out of 187 inhabited islands. The result will be to raise the share of renewable energy generated in residential islands, producing savings in both CO2 emissions and imported diesel fuel consumption. The improved efficiency has finally pushed generation cost below tariff levels in project islands, a necessary step to reduce unsustainable subsidies. The 48 islands already covered by the ADB-funded component that is nearing completion have a population of 85,108, equivalent to 16% of the country’s 533,941 inhabitants.48 As a collateral benefit, strengthening of the grid and regulations currently under development with support from the POISED TA, will allow the integration of private rooftop and solar farm generating capacity and is encouraging the Government to consider the introduction of net metering. Among the issues that will need addressing, the potential demand increase induced by the more stable supply may challenge the installed capacity levels, and integration with solar rooftop generation and additional storage may become necessary. This will in turn require an appropriate and well targeted regulatory environment, to balance incentives with economic and financial sustainability.49 If these concerns are addressed, the project has the potential to create a likely highly satisfactory development impact, given the scale of expansion in the utilization of renewable energy. 78. Kulhudhuffushi Harbor has the potential to facilitate access to education, health, and market opportunities in the important and somewhat underserved northern region, strengthening connection with Malé and the nearby islands and atolls, and supporting the regional decentralization objectives of the new administration. Given the large extent of unutilized reclaimed land next to the new harbor (the multicolored area just below the harbor in Figure 4), the port can also act as a catalyst of local urban development and generate additional revenues for the local council, if the plan is responsive to local economic potential and demand. Financial sustainability and day-to-day management of the port’s operations remain a concern given the limited experience of the local council in this area and the propensity not to impose user charges. Overall, its development impact is likely satisfactory.

48 The 2014–2015 ICPS Results Framework set as a goal for at least 25% of the population to have at least 5% of

installed power capacity from renewable sources by 2015. The EIB-funded component recently declared effective will cover 89 additional islands Sources: POISED data and http://statisticsmaldives.gov.mv/maldives-in-figures-december-2019/. The World Bank’s $27.7 million ASPIRE program, which combines grant funds with an International Development Association guarantee to attract private sector investment in solar photovoltaic generation has disbursed $1.95 million as of 31 December 2018, facilitating installation of $1.5MW of capacity in Malé, with generation costs of $0.21 per kWh, and is engaged in the possible retrofitting of the Hulhumalé bridge with photovoltaic panels, with a bid coming in at $0.11 per kWh, a sign that further reductions in solar generation costs is possible.

49 Loan financing of the non-ADB components will somewhat lower the financial rate of return of systems expansion.

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Figure 4: Kulhudhuffushi Proposed Land Use Plan

Source: Maldives Ministry of National Planning and Infrastructure.

79. TA operations are not rated for development impact but, in spite of some failures in developing the appropriate software to facilitate interaction with taxpayers beyond the blueprint stage, the impact of all three TAs that supported public sector management can be considered highly satisfactory. The capacity of MIRA and its ability to conduct tax audits (from 880 in 2012 to 2,092 in 2017), the number of registered taxpayers (+137% during 2012–2017), tax compliance (from 79% in 2016 to 83% in 2017), and tax revenues (from 12.3% of GDP in 2012 to 17% in 2017) all grew significantly. 50 Needed planning documents were prepared and used for investment prioritization. 80. Other Development Impacts. As already discussed in the relevance section of this review, all projects were well aligned to government priorities and complemented previous ADB investments and government programs. By providing a planning framework for the Greater Malé Region in 2016 and supporting preparation of the Eighth National Development Plan, ADB also provided a knowledge platform for the coordination of development efforts, regardless of their source, and alerted the government to the potential feasibility challenges of some proposed investment, notably bridge connections. If successfully executed, the projects and TA activities will contribute to important dimensions of national development. 81. Cross-Cutting Objectives. The lack of a full CPS prevented the articulation of country-specific goals matching ADB’s strategic framework. Nevertheless, ADB operations during the period are remarkably aligned to ADB’s three strategic agendas, likely relevant and likely to have satisfactory development impact (Figure 5). Support for SME, nonsovereign housing finance, power supply enhancement, and maritime infrastructure development all contribute to economic

50 ADB. 2018. Completion Report. Maldives: Enhancing Tax Administration Capacity. page 3. Manila.

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development. Concentration of the majority of investment (two-thirds of ADB’s infrastructure financing) in outer islands promoted inclusiveness and resulted in allocation of matching resources from government and other development partners, contributing to equalizing opportunities in a country where incomes and employment prospects are higher in the capital region. Even the project geographically focused on the capital area (GMEIWM), will make a disproportionate contribution to the poor: distribution analysis calculated that the project will have a poverty impact ratio of 25.8% against a poverty rate of 15% in Maldives, and even lower in the Malé area. 51 Extensive development of renewable energy sources in a country previously completely dependent on fossil fuels (through POISED), and remediation of degraded solid waste disposal sites and practices (through GMEIWM), in the capital region, where nearly 40% of the country’s population resides, addressed two major areas of environmental sustainability. The planned Waste-to-Energy project will further diversify energy generation in the capital region by producing electricity through an incineration plant. Trade facilitation through simplified cargo clearance for imports and exports is a pragmatic first step to promote regional cooperation in an area with immediate and tangible efficiency returns. ADB experience in other regions (notably the Greater Mekong Subregion and Central Asia Regional Economic Cooperation) has demonstrated that pragmatism and concrete achievements are essential to gradually advance the cause and impetus for regional cooperation.

Figure 5: Maldives 2014–2019 Program and ADB 2020 Strategic Agendas

ADB = Asian Development Bank, SASEC = South Asian Subregional Economic Cooperation, SME = small and medium-sized enterprise. Source: CPSFR team.

82. Drivers of Change. Operations in Maldives during 2014–2019 have also actively utilized and have been likely relevant and likely to have satisfactory development impact in promoting Strategy 2020’s drivers of change. Private sector development has been the driving force of both IMSMED and HDFC, and NSW will contribute to improving the ease of doing business in the

51 ADB. 2018. Report and Recommendation of the President to the Board of Directors. Proposed Grant and Technical

Assistance Grant and Administration of Grant Republic of Maldives: Greater Malé Environmental Improvement and Waste Management Project. Appendix 8. Economic Analysis. Para 17.

•Address financing constraints to SME development•Establish ancillary support services for small businesses•Strengthen housing finance institutions and funding•Enhance transportation to outer islands• Improve and stabilize power supply in outer islands

Inclusive economic growth

•Reduce dependency on fossil fuel power generation• Improve waste management in the most dense urban area•Build resiliency to climate change in infrastructure design

Environmentally sustainable growth

•Failitate trade with other SASEC countries•Coordinate maritime transport

Regional cooperation

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country. Governance has been supported through enhanced tax compliance, improved laws and regulations, and fact-based development planning. Each operation through associated ADTA, and some freestanding TA for operations planning and management have aimed at enhancing the capacity of counterpart agencies. Gender equity has been promoted through a small-scale TA to Support Improved Advocacy and Implementation of the Gender Equity Law,52 but more importantly by mainstreaming gender in Maldives operations through the preparation of gender action plans including provisions to ensure adequate consultation and participation of women in SME lending (IMSMED), power demand and waste management outreach (POISED and GMEIWM), and the design of Kulhudhuffushi Harbor. (Box 2). Knowledge solutions were pursued actively by bringing new technology through project design (solar photovoltaic-diesel hybrid generation systems, waste-to-energy processing of solid refuse, IT systems for import–export processing), and by expanding the conceptual approach to maritime transport, regional, and national planning through TA support. Partnerships were pursued pragmatically through joint operations, division of labor, and cofinancing for key projects, to expand available resources beyond ADB’s financing envelope for Maldives.

Box 2: Approaches to Gender Mainstreaming in Maldives 2014–2019 Under IMSMED, key achievements in promoting gender equity included (i) gender and youth-related inputs for amendments of the SME Act (2013) and drafting of the national gender policy based on a study on the barriers to and opportunities for women’s engagement in MSMEs; (ii) an increase in business loans to women and youth through BDSCs; and (iii) partnerships with women associations, educational institutions, and business networks. Women-led MSME received 96 out of 164 loans (58%), exceeding the target of 15% set during project preparation. The Gender Action Framework (GAF) for POISED includes the following key outputs: (i) household demand side management program to improve energy efficiency, targeting women household consumers who will link up with and further develop FENAKA’s community outreach program; (ii) creation of an enabling environment for developing women’s microenterprises; (iii) promotion of women’s employment and training during subproject construction, and operation and maintenance of the electricity assets on the islands; (iv) training for FENAKA and STELCO staff in gender-inclusive community outreach approaches; and (v) a gender-mainstreamed management system to be designed and implemented. The island women’s development committees will be mobilized for community outreach and awareness-raising activities. Social development specialist services in gender and development were recruited to support the utilities in implementing the GAF. The provisions in the gender action plan of the GMEIWM project include (i) participation of women in community-based waste management activities in poor outer island communities, (ii) capacity building on gender for project stakeholders, (iii) promotion of equitable access to project-related jobs, and (iv) equal opportunity employment across positions in WAMCO. During KHEP project preparation, findings from consultations with women guided the design of practical and implementable gender-inclusive features that include (i) integrating features friendly to the elderly, women, children, and the disabled in the designs of the harbor, including separate toilets and ablution and prayer facilities for male and female passengers, lighted waiting rooms, and disability-friendly access; (ii) mandating that two of the five members of the grievance redressal committee are women; and (iii) including a provision in the civil works contract to promote compliance with all applicable labor laws, including not employing child labor for construction, encouraging increased employment of women and the local poor, and setting equal wages for men and women for work of equal value. BDSC = Business Development Service Centers; SME = small and medium enterprise; FENAKA = FENAKA Corporation Limited; GMEIWM = Greater Malé Environmental Improvement and Waste Management (project); KHEP = Kulhudhuffushi harbor expansion project; MSME = micro, small and medium enterprises; IMSMED =

52 TA 8614-MLD for $100,000 focused on supporting first the passage of a Gender Equality Law through increased

public awareness, and then on ensuring “de facto” application of the law by sensitizing police, court personnel, and judges on the content and importance of the law and on technical aspects of its application. The TA closed in September 2017 and its completion report is expected in the first or second quarter of 2020.

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Inclusive Micro Small and Medium Enterprises Development (project); POISED = Preparing Outer Islands for Sustainable Energy Development (project); STELCO = State Electricity Company; WAMCO = Waste Management Company. Sources: Reports and Recommendations of the President of the four projects; and ADB. 2019. Completion Report. Maldives: Inclusive Micro, Small, and Medium-Sized Enterprise Development Project. Para. 15, Appendix 7. Manila.

83. No significant unanticipated consequences resulted from ADB operations. The recovery of tourism and the economy in general magnified the positive impact of the revenue diversification and enhancement measures supported through technical assistance. Low fossil fuel prices resulting from moderate global economic activity dampened but did not eliminate the benefits resulting from the introduction of renewable sources in Maldives’ energy mix. 84. Rating. The development impact of ADB operations is rated satisfactory. At the sector level, completed and mature operations have made or are likely to make a substantial contribution to addressing significant economic challenges for the country, with sufficiently extensive coverage or important demonstration effects. In terms of overall development challenges and goals, the contribution has again been considerable, spanning all ADB’s Strategy 2020 strategic agendas and drivers of change.

F. ADB and Borrower Performance

1. ADB Performance 85. ADB’s performance assessment is based on the following three subcriteria: (i) responsiveness to the country’s needs, (ii) aid coordination, and (iii) project supervision. 86. Responsiveness to Country Needs. As already discussed in the “relevance” section, ADB’s ICPS, enhanced COBP, and operations were responsive to the government’s overall policy directions even in the absence of explicit planning documents to guide them. When geographic priorities shifted, ADB was able to maintain a balance in investment location that favored the more disadvantaged outer islands, while providing both knowledge support (through the Greater Malé Region Development Concept Plan) and relevant investment in environmental improvement and solid waste management in the Malé area. ADB also supported the request for assistance in the formulation of the Eighth National Development Plan 2019–2028. Project design quality improved during the period: frequent and significant changes in budget and implementation arrangements in IMSMED and long delays and adjustments in detailed design under KHEP gave way to greater project readiness under POISED, GMEIWM, and NSW. The relatively short time between approval and effectiveness (particularly for TA operations) shows that the projects were responsive to demand and coordination between ADB and the government was solid.

87. Aid Coordination. ADB took a pragmatic approach to aid coordination. The other major source of multilateral finance, the World Bank approved operations worth approximately $128 million with a focus on environmental risk and public finance management, fisheries, renewable energy, and youth employability during the 2014–2019 period, an amount comparable to ADB’s $108 million.53 Coordination between the two international financial institutions took mostly the form of periodic consultation and division of labor (geographically in the case of waste management, with ADB focusing on the Greater Malé region and World Bank on Regions II, IV,

53 Source: extracted from the World Bank website compilation of Maldives projects:

https://www.worldbank.org/en/region/sar/projects/all?countryname_exact=Republic+of+Maldives&qterm =&lang_exact=English.

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and V, or by counterpart, with Word Bank focusing on private renewable energy generation through ASPIRE, and ADB on the public system side through POISED). ADB also routinely coordinated with other development partners (the United Nations and Japan) by making visits to Sri Lanka where some partners are based during country consultations and country programming missions. Finally, ADB was able to proactively engage the ISDB, the EIB, and preliminarily the Asia Infrastructure Investment Bank for support in waste management, power, and SME development projects, mobilizing resources equivalent to 78% of the amount approved by ADB during 2014–2019. Political and technical reasons delayed the effectiveness of the EIB support for renewable energy until 2019, affecting the pace of implementation in the areas covered by its financing, but did not compromise the pilot testing and implementation of ADB’s investment. 88. Project Supervision. ADB supervised the implementation of projects and TAs through review missions and semi-annual tripartite portfolio review meetings, which started in 2010. Tripartite portfolio review meetings were conducted at least annually under the chairmanship of the Ministry of Finance and Treasury and attended by all implementing agencies, and resulted in detailed action plans with explicit deadlines for remedial actions. The meetings have been effective and have made a significant contribution to improving portfolio performance. Adequate efforts were also made to facilitate project implementation and to anticipate and address problems in the field, starting with the approval of ADTA that included consulting services for implementation support. Retroactive financing was included in all four projects approved since 2014, and advance contracting in three of them, but in practice they were not utilized.54 No safeguard issues were encountered, since all projects approved or implemented during the period were category B or C and mostly utilized public land without the need for resettlement and limited environmental impact. Follow-up on financial management issues raised in audited project financial statements is not considered satisfactory, and could be improved through greater involvement of staff with financial management expertise during implementation. The only completed project during the period (IMSMED) saw 14 project review missions in seven years (for a total of 54 staff days) and seven tripartite portfolio review meeting missions during which project progress was discussed, averaging two review missions, 7.7 staff days, and 1 tripartite project review mission annually. Completion reports for IMSMED and the two TA supporting tax administration improvements rated ADB performance satisfactory. ADB work quality was rated satisfactory also for the HDFC loan and equity investment: the various aspects of loan administration were performed carefully by successfully balancing the management of risk and client service requirements.

89. Rating. Given the responsiveness to country needs even under changing political circumstances, the sufficient level of coordination that avoided unnecessary overlaps and proactively promoted cofinancing, and the continuing effort to support project implementation in the absence of a field office in Maldives, ADB performance is rated satisfactory. Greater use of advance contracting and retroactive financing and closer attention to financial management issues would strengthen ADB and project performance

2. Government Performance 90. The government‘s performance in the design and delivery of the partnership program was assessed against the following subcriteria: (i) achievement of MDGs and monitoring of the sustainable development goals (SDGs); (ii) government ownership, participation, and capacity in the management of development assistance, including development partners’ coordination; (iii) compliance with loan covenants and conditionalities; and (iv) adequacy and timeliness of the government in establishing project implementation units and providing counterpart funding.

54 The exceptions were NSW, and some advance action under KHEP.

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91. MDG and SDG. As noted in the previous CPSFR, by 2010, Maldives had achieved five out of the eight MDGs ahead of schedule, making it South Asia’s only “MDG+” country.55 Progress was substantial in eradicating extreme poverty and hunger; achieving universal primary education; reducing child mortality; improving maternal health; and, combating HIV/AIDS, malaria and other diseases. These achievements were a reflection of the country’s robust economic development with strong commitment to the social sectors, particularly health and education. On the other hand, progress was relatively slower toward achieving gender equality and women’s empowerment, ensuring environmental sustainability, and developing a global partnership for development. Even though MDGs were achieved at the national level, there still exists considerable unevenness in quality and coverage. Inequalities remain between Malé and the atolls, as well as between atolls. Some indicators, such as prevalence of malnutrition among children younger than age 5, raise serious concerns. The SDG have significantly widened the level of goals, targets, and indicators. In some areas, (for example, maternal and child health, access to education, and availability of electricity, and mobile phone network coverage) Maldives has already essentially achieved the SDG. In other areas progress is slower or difficult to monitor because of insufficient data coverage. It is noteworthy that the Maldives Bureau of Statistics has embraced the challenge, publishing a (however incomplete) SDG report in 2018, only 3 years after their adoption. Overall, government performance regarding MDG and SDG is satisfactory. 92. Government Participation in the Management of Development Assistance. The lack of a government strategy or development plan was an obstacle to the formulation of an ADB CPS during the review period. Drafts of both the national plan and the next CPS were prepared but not formally adopted, and priorities for ADB assistance had to be negotiated on the basis of election manifestos or opportunistically based on priorities expressed during country consultation and country programming missions. This did not result in diluted ownership: successive administrations largely confirmed their commitment to the operations ADB had initiated, requesting only occasional adjustments to the pipeline as they saw appropriate (for example, the Laamu Gan–Fonadhoo Community Connectivity PPTA was approved in October 2015 but never declared effective, and the ensuing project was first postponed to 2018 and then replaced, in the 2017–2019 COBP, by connectivity and waste management projects in the Greater Malé region). Funding for bridge connectivity was subsequently dropped when the economic viability could not be established. 93. In all projects, MOFT was declared the executing agency, with different implementing agencies depending on the sector of ADB involvement and the specific mandates of the line ministries. In 2019 the official development assistance management and external debt management functions were reorganized into two divisions (Resource Mobilization Division and Debt Management Division) under the Resource Mobilization and Debt Management Department. Since both functions are still under the same Department, this change will not impact on ADB’s operations in Maldives. Inspite of capacity building TA support provided to MOFT and to implementing agencies with each project, the capacity of the executing and implementing agencies to prepare bid documents, evaluate proposals, conclude procurement and administer projects is still limited, particularly if they are not familiar with ADB procedures and requirements, and delays tend to occur in the absence of close follow-up. Steering committees meet on urgent issues and provide necessary guidance, but it has been difficult to hold regular meetings due to the unavailability of committee members. Of the three operations for which completion reports are available, one (IMSMED) rates borrower performance less than satisfactory, while the two ADTAs for tax administration support give one satisfactory (TA 8525) and one highly satisfactory rating

55 Ministry of Finance and Treasury. 2010. Millennium Development Goals: Maldives Country Report 2010. Malé.

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(TA 7946). The procurement process is normally slow, resulting in major project implementation delays. The rapid expansion of public capital expenditure financed through external debt has severely strained capacity: capital expenditure more than tripled from Rf2.1 billion at end-2013 to Rf8.7 billion at end-2018, and foreign borrowing went from Rf472 million to Rf5.4 billion during the same period, largely to finance airport, bridge, and housing construction in the Malé capital region.56 94. Aid Coordination. Following the 2010 donor forum where donors pledged $320 million for the next 3 years, the government did not organize other broad coordination opportunities until the Maldives Partnership Forum in June 2019, where the main thrust of the draft Eighth National Development Plan were presented.57 Coordination was largely carried out bilaterally with each development partner. The expansion of nonconcessional borrowing placed Maldives at high risk of debt distress and triggered in 2019 a breach of the nonconcessional borrowing policy, forcing the World Bank and ADB to harden the terms of their assistance to a blend of grants and concessional loans. 95. Compliance with Loan Covenants and Conditionalities. Most covenants under IMSMED were complied with, with some exceptions for the coverage of the Credit Information Bureau (inclusion of data from telecommunications operators) and operations of the Secured Transactions Registry, that remain outstanding. Negotiations and amendments to several covenants, particularly concerning the flow of funds, were necessary to obtain compliance. The submission of audited financial statements is in general timely, with a couple of exceptions for the Bank of Maldives and Ministry of Economic Development in 2015, but follow-up on issues and recommendations emerging from audited project financial statements is insufficient. Detailed monitoring of the projects’ results framework is presented at each TPRM and discussed between the government and the ADB mission. 96. Project Implementation Units and Counterpart Funding. Project implementation units were generally established by the time of effectiveness, and remained fully staffed (with occasional vacancies due to personnel turnover) for the duration of ADB projects. In some cases (IMSMED) they were kept beyond project completion, to ensure consistency with components cofinanced by other development partners (ISDB). The government provided required counterpart funding and other support for all projects and indicated willingness to finance the completion of projects if ADB funds were not sufficient or could not be extended (for example in relation to KHEP design adjustments). 97. Rating. Government performance has been satisfactory with regard to commitment to international development goals, compliance with loan covenants and conditionalities, and provision of PIU staff and counterpart funding. The lack of clear strategic direction, limited capacity of executing and implementing agencies, and scarce attention to donor coordination and financial management issues have been largely suboptimal. Government performance is rated satisfactory (but on the lower end).

G. Overall Assessment

98. Table 12 (section A) shows sector ratings for each criterion and their aggregation using the share of ADB funding as weights. When the total value of operations (including cofinancing)

56 ADB. 2019. Key Indicators for Asia and the Pacific 2019. Maldives country tables page 5. 57 The government hosted a donor coordination meeting for solid waste management and support for public finance

management. Sector level coordination was organized depending on necessity.

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is used as a weight, the predominance of the energy sector (81% of operations) slightly increases the ratings. When a simple unweighted average of the four sectors is used, the efficiency rating (1.5) becomes less than efficient at the borderline. Cross-cutting objectives are rated below (section B).

Table 12: Sector/Project Ratings and Average Overall Ratings

A. Sector % of ADB

funding

Relevance Efficiency Effectiveness Sustainability Development Impact

Overall Rating

PSD 13% 2 1 2 2 2 1.8 Energy 71% 2 2 2.5 2 2.5 2.3

Transport 13% 2 1 2 1 2 1.6 PSM 3% 2 2 2 2 3 2.2 (A)

Weighted average sector rating

–n.a.

2.0

1.7

2.4

1.9

2.4

2.1

Sensitivity Analysis Weighted average

with cofinancinga

–n.a. 2 1.8 2.4 1.9 2.4 2.2

Simple average rating

–n.a. 2.0 1.5 2.1 1.8 2.4 2.0

B. Cross-Cutting Objectives Inclusive economic

growth 2 2.5

Environmentally sustainable growth

2 3

Regional cooperation 2 2 (B) Cross-cutting

average 2 2.5

Combined score (A+B)

2 1.7 2.4 1.9 2.4 2.1

Rating Relevant Efficient (low end)

Effective (high end)

Likely sustainable

Satisfactory Successful

n.a.= not applicable, PSD = private sector development, PSM = public sector management. a = when cofinancing is included, the sector weights shift from 13% to 12% for PSD; from 71% to 81% for energy; from 13% to 6% for transport; and from 3% to 1% for PSM. Source: Ratings given in the relevant sections of this CPSFRU.

99. The last column (Table 12) shows sector scores as a simple average across the five criteria, and the last two rows in the table show the overall scores and ratings calculated combining sector and cross-cutting objective score where applicable, without including the assessment of ADB and government performance, as prescribed in the 2015 guidelines for CPSFR Validations. Table 13 summarizes the scores and weights for each criterion, and the total score.

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Table 13: Overall Rating of Maldives CPS (2007–2011) and ICPS (2012–2013)

Evaluation Criteria Rating Score Weight Weighted Score

Relevance Relevant 2.0 20% 0.40 Efficiency Efficient (low end) 1.7 20% 0.34

Effectiveness Effective (high end) 2.4 20% 0.48 Sustainability Likely sustainable 1.9 20% 0.38 Development impact Satisfactory 2.4 20% 0.48

Overall assessment Successful 2.08

CPS = country partnership strategy, ICPS = interim country partnership strategy.

Note: Weighted score between 1.6 and 2.5 is rated successful.

100. The aggregate score of ADB‘s strategy and assistance program to Maldives is 2.08, corresponding to a successful rating. ADB operations were relevant because they addressed significant development constraints identified through prior analysis, and flexibly adapted to changing government policies and priorities while retaining integrity and safeguarding technical feasibility. Nonsovereign operations complemented sovereign ones by strengthening an important and growing segment of the finance sector. The program was efficient (at the low end). Projects were usually designed after considering various technical options and had adequate ex-ante economic and financial rates of return. Important knowledge products were delivered utilizing limited TA resources. Overall portfolio performance improved compared to the previous period and was in line with comparable South Asian and small island states. Implementation delays and design changes resulted in some cases in suboptimal utilization of resources. 101. With a few exceptions, most project and TA operations were—or have the potential to be—effective in achieving the planned development outcomes and deliver the supporting outputs, in some cases exceeding expectations. Flexibility in adapting to changing circumstances and responding to unplanned implementation issues has been essential to allow the achievement of the planned outputs and desired outcomes, in light of limited capacity and in some cases insufficient project readiness. The program is likely sustainable, provided that the government recognizes the need and implements measures to ensure sufficient cost recovery to cover operations and maintenance costs. Political support for the program has been strong, institutions have been moderately strengthened, and climate resilience elements have been incorporated into infrastructure project design. Since grant financing accounted for 94% of ADB operations, no debt burden of any significance was created. Finally, development impact is likely to be satisfactory. At the sector level, complete or mature operations have made or have the potential to make a substantial contribution either quantitatively (introduction of renewable energy generation to the majority of islands, reduction of the significant negative environmental impacts of the current solid waste management system in the densely populated Greater Malé region) or qualitatively (through the demonstration effect of nonsecured lending to SME and the modernization of cargo clearance procedures).

IV. LESSONS AND RECOMMENDATIONS

102. The review of ADB ICPS, COBP, and operations during 2014–2019 yields several lessons and recommendations that should be taken into account when preparing the next period of engagement between ADB and Maldives. Lessons (in bold) and recommendations (in bold italics) are presented together, to show the logical sequence from the analytical findings to the proposed approach.

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A. Country Partnership Strategy Preparation and Design

103. The lack of a formally approved national strategy or plan does not preclude ADB from providing relevant assistance. Some of the operations with the potentially highest impact (POISED, GMEIWM) were programmed on the basis of ICPS and dialogue with government without the anchor of a national planning document. ADB struck a realistic but principled balance when considering shifting government requests, by listening carefully, providing technical and analytical background for decision-making (support for the Greater Malé Development Concept Plan), and demonstrating rigor when making investment decisions (accepting to support waste management but questioning the economic feasibility of bridge connections in the capital region). Consultations and policy dialogue with the government must go beyond the content of written official documents—often too comprehensive and ambitious—and must be open to recognizing and seizing opportunities for impactful operations, even if they do not completely align with earlier strategies. 104. The recently approved Strategic Action Plan 2019–2023 and the Eighth National Development Plan 2019–2028 under preparation should provide a robust basis for planning ADB operations in Maldives for the medium term. Due to their comprehensive and aspirational nature, such national planning documents tend to highlight national needs and demands well above national capability and resources to address them. ADB must engage in thorough and frank discussions to define and focus the extent of its involvement to ensure that it addresses critical needs and constraints within the available funding envelope and cofinancing prospects rather than unrealistic political priorities. Even if ADB assistance is relatively small compared to the funds that Maldives can obtain from bilateral assistance, its demonstration impact can be considerable. Maldives’ unmet development needs are sufficiently ample that it should not be difficult to identify sectors and areas of ADB involvement that build on ADB’s comparative advantage and are a high priority, technically, and politically. Continuing dialogue should ensure that specific operations meet all three criteria, and that the strategic direction of ADB’s operations is adjusted if needed during the CPS period. 105. Capital region actors have demonstrated that they are well positioned to attract development cooperation resources. Shifts in Government policy during the review period have encouraged ADB to commit a larger share of its resources to the Greater Malé region in recent years. This effect has been compounded by the large concentration of bilateral aid (particularly for transport and housing infrastructure) in Malé and Hulhumalé. While concentration of nearly 40% of the population makes service delivery easier and feasible, ADB should not forget that lower incomes, reduced employment opportunities, and underserved communities tend to be located in outer islands, and that their weaker voice should be amplified in the national debate, to respond proportionally to the needs of more peripheral locations. To pursue inclusive growth, ADB should engage with the government to ensure a balanced geographic distribution of its resources and of the projects it supports. 106. ADB is well positioned to mobilize cofinancing to increase the scale and impact of its operations in Maldives. During 2014–2019, ADB mobilized cofinancing equivalent to nearly 80% of its own resources. The sources of these funds typically did not have a presence or program in Maldives, and relied on ADB’s appraisal and negotiation capabilities for the bulk of project preparation. While maintaining ongoing coordination with development partners that have a more stable program in Maldives, ADB should leverage its capability to prepare bankable projects that attract other concessional financing sources (EIB, European Union and other bilateral European parties, AIIB, ISDB, climate funds) by developing sufficiently large investment opportunities through approaches that can be scaled up to accommodate

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opportunistic fund supply. Some of the projects already in the pipeline (waste-to-energy and liquified natural gas power generation) should be good candidates for future cofinancing. 107. Insufficient consultation and political considerations have led to occasional design and implementation problems. The modifications being requested during the early stages and again at a very advanced phase of KHEP implementation could result in unnecessary expenses and delays or may weaken project acceptance and sustainability. A national climate that discouraged participation may be partially responsible for this problem, but the consequences on project efficiency are nevertheless obvious. The currently elected government and Maldivian society have expressed a desire for more open and consultative approach to development. ADB should ensure that its next CPS and the projects it includes are based on sound consultations and participatory processes. 108. The lack of a well-developed results framework for the country strategy makes assessment of ADB operations more difficult. The absence of a full CPS made it necessary for this final review update to check program achievements against partial results frameworks included in ICPS, result areas defined in COBP, and sector assessments and DMF that accompanied individual projects. The conclusions reached are more fragmentary than a full-fledged CPS results framework would have allowed. ICPS and COBP did not adequately update overall goals and related indicators, which in some cases were not adjusted or relevant (for example, the transport sector results framework included in both the 2014–2015 ICPS and the 2016 ICPS shows outcome indicators based on traffic in Malé Port, that had been completed, rather than in Kulhiddhuffushi Harbor, that was the objective of new operations). A full results framework should be included in the next CPS. If priorities change or interim strategies or enhanced COBP become the guiding documents, the results framework should be thoroughly adjusted accordingly, and not simply repeated with minor adjustments. B. Project Selection and Design 109. Knowledge products that provide a national or sector framework make a useful contribution to appropriate investment decisions. By supporting the Maritime Transport Master Plan, the Greater Malé Region Development Concept, and preparation of the Eighth National Development Plan, ADB has helped successive administrations to base development decisions on more rigorous analysis, even though in some cases reliance on these planning documents has been limited. A presentation on the preliminary technical due diligence of the bridges connecting the Greater Malé Region on 24 April 2017 during the country programming and portfolio review mission allowed MOFT and the Ministry of Housing and Infrastructure to appreciate the complexities and trade-offs involved, understand the order of magnitude of the funding required, and recognize the need for a more rigorous technical and economic study based on realistic traffic projections that reflect expected future developments in the affected islands. The study also allowed ADB to decline funding the previously planned Greater Malé Connectivity Improvement Project, since its economic viability could not be confirmed.58 On the other hand, the Maritime Transport Master Plan, completed a few years ago, is apparently already being replaced without much utilization. ADB should continue making provisions for national or regional TA that allows a rapid response to requests for analytical support, along the lines of TAs 8070 and 9515 during the review period, but at the same time try to ensure that requests for support correspond to real priorities.

58 ADB. 2017. Maldives TPRM, CPM, and Country Consultations; 23–25 April 2017 — Back-to-Office Report. Memo

from Economist, SARC to Director General, SARD. Manila. 28 April 2017. Para. 8; and ADB. 2018. Country Operations Business Plan. Maldives 2018–2020. Para 7. Manila.

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110. ADB has frequently made use of supplementary financing to expand project scope (POISED) or address emerging technical assistance requirements (for revenue administration, ADB operations programming and management, strengthening of the Maldives Energy Authority).59 Supplementary financing is an efficient way of augmenting the impact of a successful project, and adjust the scope to use additional grant or concessional funds that may become available. As in the case of cofinancing, where appropriate, ADB could design projects in a manner that allows topping up for scope expansion in the case of successful implementation. 111. Projects approved during the early years of the review (IMSMED and KHEP) showed a low level of readiness and insufficient detailed design. As a result, implementation was delayed and complicated by the need to process changes in scope, procurement, and implementation arrangements. Most country programs in ADB, and certainly in SARD, have placed greater emphasis in recent years on project readiness, to the point that for projects in India, contract award is required before loan negotiation. Even if most Maldives projects during the review period included provisions for retroactive financing and advance procurement action, these possibilities were not systematically utilized. In earlier projects, implementation details were not fully fleshed out, or detailed design and engineering was postponed after project approval. ADB now has mechanisms to address these problems. Since 2015, the President can approve PPTA (including cluster TA) up to $5 million, and project readiness financing (also in the form of grants for eligible countries like Maldives) can be used for feasibility study, detailed engineering design, limited project start-up activities, and pilot testing of project design. 60 ADB should sensitize the Government about the benefits of high project readiness by systematically utilizing instruments that support detailed design and project readiness in all its Maldives projects. 112. Climate change, and particularly its impact on sea levels and storm surges, presents a primary risk in Maldives, given the country’s topography and low elevation. Infrastructure projects under implementation have included climate-proofing designs to mitigate the impact of environmental changes and risks. ADB should continue to pay close attention to climate proofing of the infrastructure investment it supports in Maldives, and where appropriate should use or mobilize additional grant funds to address the incremental cost of climate resilience. 113. The concepts of cost recovery and “user pay” principle are not deeply ingrained in the collective mindset in Maldives. There are expectations that government will bear the cost or subsidize operations and maintenance costs or maintain artificially low tariffs to preserve access and affordability. While this approach has produced fairly high levels of welfare and access to services, it is not conducive to the sustainability of investment, and in a country with a structural budget deficit, it can jeopardize the standards of living and availability of services for future generations. It is important that the approach to operations and maintenance, including its financing, be carefully analyzed—and if necessary pilot tested—in future ADB projects to ensure financial sustainability. Cost recovery and lifetime investment cost should be an important criteria in the design and appraisal of future ADB projects, to avoid adding to an already precarious fiscal balance.

59 Grant 0410-MLD and TA 7946, 8000, 8070 (twice), and 9515 all made use of supplementary financing. 60 ADB’s Vice-Presidents have delegated authority to approve project readiness financing operations with a value not

exceeding $15 million, a threshold abundantly adequate for Maldives projects. ADB. 2018. Project Readiness Financing. Operations Manual. Section D16 para 7.

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114. Gender mainstreaming has been pursued systematically in ADB operations in Maldives. Key approaches have included (i) targeting women (and youth) in project-related consultations, outreach, and training; (ii) involvement of women associations; (iii) setting quantitative targets for inclusion of women in various project components (lending, representation on committees, participation in training); and (iv) capacity building of project and executing agency staff in gender sensitivity and gender inclusion. Continued attention to gender dimensions and consultation of all groups that may require special outreach (women, youth, disabled) in the next CPS and individual ADB operations can contribute to inclusive project design and the equitable distribution of benefits.

C. Project Implementation

115. Even when capacity building TA is provided to central executing agencies (MOFT) or implementing agencies, it is not always sufficient to support smooth implementation. Capacity development TA processed in conjunction with projects has extended beyond simple implementation support, covering such areas as the improvement of related legal frameworks (NSW), performance of a recycling marketing study (GMEIWM), feasibility study of user charges, and training in safety and income-generating livelihood opportunities (KHEP), but consulting services for procurement and implementation assistance have formed the core of these TA activities. While this support has been necessary to keep implementation on track, it has not always been sufficient, and even brief absences of support consultants have had immediate repercussions on project schedules. The government must establish more robust internal systems that monitor progress on key activities and trigger remedial actions, and ADB must find ways of enhancing communication on project implementation. Mobile phone-based periodic reporting, telephone, or videoconference contact, and the presence in Maldives of staff familiar with ADB procurement and procedures (possibly through extended missions) can help tighten implementation management. 116. Government answers to issues raised in audited project financial statements are delayed and unsatisfactory. Given the importance of financial management issues to ensure project integrity, closer attention and follow-up should be devoted since the beginning of project implementation. Inclusion of financial management staff in the implementation team and participation as needed in review missions would facilitate the improvement of ADB and government performance in this area.

D. Scope of Sector Operations 117. The general suggestions provided below are based on lessons learned from recent ADB operations. They should be subjected to more detailed sector analysis, consistency check with national plans and priorities, broad-based consultations, and verification of the extent to which other (private, public, or external) sources of financing are already responding to these needs. New areas of engagement should also be considered and assessed, relying on the same criteria. 118. Private Sector Development. Ranking at the 147th place out of 190 in the Ease of Doing Business index, Maldives still has significant room for improving the climate for private sector development.61 As shown in Figure 6, obtaining credit and trading across borders, two areas directly addressed in ADB operations during 2014–2019 through the IMSMED and NSW projects, are among the dimensions requiring particular attention. While the index focuses on institutional

61 World Bank. 2019. Economy Profile. Maldives. Doing Business 2020. Washington, DC.

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arrangements for the concession of credit (credit information systems and strength of legal rights), a significant quantitative constraint in Maldives comes from the crowding out of private investment by public debt. A structural budget deficit has resulted for years in growing public debt, funded until recently largely from domestic sources, mostly treasury bills sold to commercial banks and treasury bonds bought by the Maldives Monetary Authority.62 With 22% of their assets invested in treasury bills returning 3.5%–4.5% interest and another 18% deposited at the central bank at 1.5% interest, financial institutions only pay 1.5% interest on deposits, and 2.4%–4.8% on time deposits, providing little incentive to the public to deposit their money in banks. The resulting limited supply of funds, combined with the captive utilization of 40% of financial institutions’ resources to finance government debt at below market rates in turn limits credit supply to the private sector and increases its cost to 9.6%–11.6% annual interest, and more for SME with limited creditworthiness.63 This “crowding out” is the primary cause for the lack of private sector financing in the Maldivian economy.

Figure 6: Ranking on Doing Business Issues

Source: World Bank. 2019. Economy Profile. Maldives. Doing Business 2020. Washington, DC.

119. Unless and until Maldives public sector budget structural constraints are addressed, two sets of actions can continue improving credit availability, an area that ADB has supported in the past through the 2008 Private Sector Development and 2012 IMSMED sovereign projects and the two nonsovereign operations approved in 2007 with the Maldives Finance Leasing Company PVT Limited and in 2008 with HDFC. On the institutional and regulatory side, ADB can continue through policy dialogue (and TA if necessary) to improve the flow of information through expansion of the Credit Information Bureau and Secured Transaction Registry, and the removal of obstacles to SME lending resulting from current attitudes and lending practices. On the financing side, ADB could consider nonsovereign support to SDFC if, during the initial 3 years of guaranteed government funding, it is able to demonstrate that it operates on a sound commercial basis, free from political interference in lending decisions. Financing could be combined with support for strengthening internal governance, systems, and procedures making SDFC a relevant competitor in the area of small business finance, much like HDFC is in the housing finance space.

62 In October 2019, out of Rf31.1 billion of domestic claims on the central government, Rf11.8 billion of treasury bills—

government securities with maturity of 1 year or less— (out of Rf18.4 billion) were held by commercial banks and Rf6.2 billion by other financial corporations. Out of Rf9.2 billion of treasury bonds, Rf6.1 billion were held by the central bank and Rf3.1 billion by other financial corporations. Source: Maldives Monetary Authority. Claims on Central Government by Ownership, 2013–2019. http://mma.gov.mv/#/statistics/fiscalsector .

63 Sources: Maldives Monetary Authority. 2019. Table 7.7 Assets and Liabilities of Other Depository Corporations, 2013–2019 and Table 8. Interest Rates, 2013–2019. http://mma.gov.mv/#/statistics/financialsector.

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120. The country’s small size and the presence of state-owned enterprises in key sectors of the domestic market (finance, domestic trade, telecommunications, transport)64 and institutional barriers like weak judicial processes and enforcement of contracts, skill gaps in the workforce, and mismatch with labor demand, constrain the potential for nonsovereign operations. Tourism and fisheries are the two sectors best connected to international markets, and potential ADB involvement could be considered, subject to a clear demonstration of additionality compared to the actors already active in these spaces. 121. Transport. ADB has been engaged in maritime transport since the beginning of operations in Maldives.65 In the past 15 years, ADB has supported expansion of Malé Port and Kulhudhuffushi Harbor, preparation of the Maritime Transport Master Plan and of a business strategy for port development. Maritime transport and bridge connectivity in the Greater Malé region are among the highest priorities of the current (and past) administration. Given the large scale of resources needed for bridge construction, if ADB remains engaged in the sector, seems preferable that its operations continue focusing on maritime transport infrastructure, supporting implementation of the Maritime Transport Master Plan and the priorities of the National Spatial Plan to strengthen the role of the five regional urban centers and nine subregional centers. Through its involvement, ADB could also ensure that investment plans are commensurate to the actual expansion in demand that can be expected, and accompanied by realistic allocations for operations and maintenance, avoiding over-ambitious infrastructure that may become difficult to sustain in the long term. 122. Power. With the generalized introduction of renewable energy to the majority of the islands through POISED and the planned waste-to-energy plant in Thilafushi, ADB will have contributed significantly to the diversification of energy supply in Maldives. As a first step, ADB should take stock of the extent to which the upgrading of hybrid solar battery-energy efficient diesel generation facilities has covered all relevant locations, and help address any unmet need so that the 100% access to electricity already enjoyed by Maldivian households is delivered in the most sustainable manner. Should ADB continue to engage in the sector, potential future involvement to explore includes: (i) adjustments to the regulatory and tariff environment to encourage privately financed rooftop photovoltaic generation, taking stock of the problems faced and results achieved under the World Bank-supported ASPIRE initiative; (ii) possible bridge financing to encourage wider adoption of renewables by households and private operators; (iii) expansion of energy storage solutions where economically and financially viable; and (iv) further diversification of power generation sources to promote energy security, cleaner generation compared to diesel-fueled plants, and competitive pricing of electricity. 123. Other Sectors. Figure 7 shows the historical distribution of ADB operations by sector since 1978. Leaving aside multisector operations undertaken in early years and more recently to help rebuild after the 2004 tsunami and crisis-related support for public sector management in 2009, the only sector where ADB has not been engaged for the last 16 years is education. ADB supported postsecondary education development in 1998 and employment skills training in 2003. The previous CPSFR Validation suggested that ADB consider supply side initiatives to enhance education and skills by supporting postsecondary and tertiary education and technical and vocational education and training, to build up the human resources base and facilitate employment and inclusive growth. Human capital gaps were evident in most sectors of ADB

64 “Maldives state-owned enterprises earned profit of US$97m in Q1 2019”. Maldives Independent , July 18, 2019.

https://maldivesindependent.com/business/maldives-state-owned-enterprises-earned-profit-of-us97m-in-q1-2019-146670.

65 The first (unsuccessful) loan in 1981 (Loan 0513) was for Interisland Transport, for $1 million. It was followed in 1988 by the first loan (0911) for Malé Port Development for $6.4 million.

50

operations during 2014–2019, and attempts were made to address them at the sector level through technical assistance, but this approach can only have limited impact. While ADB may be asked or consider providing support for this sector, it should carefully consider (i) whether it is appropriate to further diversify operations in Maldives in light of the available resource envelope, and (ii) how ADB’s role would complement with operations of other development partners (notably the World Bank) already active in the sector. Given the long ADB absence from this sector, new sector analysis that identifies a clear way forward and in-depth consultation with the government and sector actors would be required before committing to this area.

Figure 7: Cumulative ADB Commitment by Sector (as of December 2019)

EDU = education, ENE = energy, FIN = finance, IND = industry and trade, MUL = multisector, PSM = public sector management, TRA = transport, WUS = water and other urban infrastructure and services. Note: Includes sovereign and nonsovereign loans, ADF grants, and grants from other special funds. Source: Procurement, Portfolio and Financial Management Department.

V. CONCLUSIONS

124. ADB operations in Maldives during 2014–2019—a period characterized by political transitions and policy reversals - have been successful, largely due to active dialogue and flexibility in responding. In some sectors the expected development impact is significant, in spite of some inefficiencies and implementation delays, and concerns over financial sustainability. With more clearly defined national goals and plans, ADB should build on recent experience and its strong relationship with the Government to engage through a full CPS in addressing Maldives’ future development challenges in a focused and forward-looking manner.

Appendix 1 51

ADB OPERATIONS FOR MALDIVES APPROVED DURING 2014–2019 ($ million)

Project Number

Title Sector Type Approved Amount

($ million)

Approval Date

Projects and Programs

G-0409 / G-0410 /

Preparing Outer Islands for Sustainable Energy Development

ENE Project 55.00 29 Sep 2014

G-0429 Kulhudhuffushi Harbor Expansion TRA

Project

9.69 16 Aug- 2016

G-0580 Greater Malé Environmental Improvement and Waste Management

WUS Project

33.07

28 Jun 2018

G-9195 Improving Community-Based Solid Waste Management in Small Outer Islands of Zone 3

WUS Project

2.00

28 Jun 2018

G0646 / L3794

SASEC National Single Window IND Project 10.00 30 May 2019

Total 109.76

Capacity Development Technical Assistance

9155 Sustainable Harbor Operation and Maintenance

TRA CDTA 0.50

16 Aug 2016

9515 Capacity Building for Country Programming and Portfolio Management

PSM CDTA 1.05 19 Apr 2018

9543 Strengthening Capacity for Sustainable Solid Waste Management in the Greater Malé Region

WUS CDTA 0.50 28 Jun 2018

9739 SASEC National Single Window IND CDTA 0.50 30 May 2019

Total 2.55

Memo item: Project Preparation Technical Assistance

8829 Kulhudhuffushi Harbor Expansion TRA PPTA 0.75 16 Dec 2014

9372 Greater Malé Environmental Improvement and Waste Management (cofinancing)

WUS PPTA 0.60

(1.00) 6 Jun 2017

9520 SASEC National Single Window IND PPTA 0.20 9 May 2018 Excludes PPTA 8972 – Laamu–Gan–Fonadhoo Community Connectivity for $0.60 million approved by ADB on 6 October 2015 but cancelled before any disbursement at the request of the government on 28 April 2016. CDTA = _ capacity development technical assistance, ENE = energy, IND = industry and trade, PPTA = project preparation technical assistance, PSM = public sector management, SASEC = South Asia Subregion Economic Cooperation, TRA = transport; WUS = water and other urban infrastructure and services. Source: South Asia Regional Department.

52 Appendix 2

PRIOR ADB OPERATIONS IN MALDIVES COMPLETED DURING 2014–2019 ($ million)

Project Number

Title Sector Type Approved Amount

($ million)

Approval Date

Closing

Date

Projects and Programs

L-2867 / G-0290

Inclusive Micro, Small, Medium-Sized Development Project

IND Loan 10.02 25 May 2012 30 Jun 2018a

Total 10.02

Private Sector Investment

41914-014

Equity and Loan to Housing Development Finance Corporation

FIN Equity/Loan 12.000 24 Apr 2007

Active

Total 12.00

Capacity Development Technical Assistance

7946 Developing the Revenue Administration Management Information System

PSM CDTA 0.725b 5 Dec 2011 30 Sep 2014a

8000 Developing Capacity of the Maldives Energy Authority (cofinancing)

ENE CDTA 0.800b

(0.400) 14 Dec 2011

31 Mar 2018

8070 Strengthening Capacity for Operations Management

PSM CDTA 0.825b 4 Apr 2012 28 Feb 2018a

8525 Enhancing Tax Administration Capacity

PSM CDTA 0.850 4 Dec 2013 31 Dec 2017a

8614 Support for Improved Advocacy and Implementation of the Gender Equality Law

PSM CDTA 0.100 17 Dec 2013 30 Sep 2017

Total 3.300

Memo item: Project Preparation Technical Assistance

8268 Outer islands Sustainable Energy Development (cofinancing)

ENE PPTA 0.400

(0.700) 10 December

2012

13 July 2015

CDTA = capacity development technical assistance, ENE = energy, FIN = finance, IND = industry and trade, PPTA = project preparation technical assistance, PSM = public sector management. a Project completion report or technical assistance completion report available. b The amount includes supplementary financing approved at a later date. Source: South Asia Regional Department.

Appendix 3 53

BACKGROUND ON MATURE PROJECTS

PREPARING THE OUTER ISLANDS FOR SUSTAINABLE ENERGY DEVELOPMENT (GRANT 0409/0410/0429-MLD) Status as of 30 September 2019

I. PROJECT DETAILS AND PROGRESS

A. Project Description

• The Preparing the Outer Islands for Sustainable Energy Development (POISED)

Project supports the introduction of renewable energy and energy efficiency to reduce dependence on diesel in Maldives, improve the electricity sector financials, capacity development of utilities, and address key macroeconomic issues through tapping into indigenous and cheaper sources of electricity.

B. Project Impact

• More sustainable energy sector based on renewable resources. • Increase contribution of renewable energy in the supply mix of Maldives to 25% (2009

baseline: less than 1%). • All islands initiate electricity sector decarbonization and the reduction of carbon dioxide

(CO2) emissions to 0.6 kilograms (kg) of CO2/kilowatt-hour (kWh) (2009 baseline: 0.9 kg of CO2/kWh) through energy efficiency and renewable energy.

C. Status of Achieving Project Outcomes

Outcome Indicators Targets Actual achieved by

November 2019 31 December 2019

Shift towards clean and cost-effective energy sources

Gradual reduction in diesel consumption on outer islands

0.1–0.3 liters/kWh consumed (2012 baseline: 0.45–0.70 liters/kWh consumed on outer islands)

0.24–0.34 liters/kWh (after solar installation) 0.29–55 liters/kWh consumed (previous)

Electricity tariffs on average cover less than 50% of costs

Tariff coverage to improve to cover to 100% of costs (2011 baseline: Less than 50% of costs)

On islands where project has been completed:

• Cost of production $0.15

• Average tariff • $0.23

CO2 emissions reduced in the power sector (2019 baseline forecast: 400,000 tons)

Target of 40,000 tons in the power sector (2011 baseline: 400,000 tons)

Average CO2 emission per liter of diesel used 2.68kg and number of liters saved in islands where project is completed 2,977,468 kWh/year

54 Appendix 3

D. Status of Achieving Project Outputs

Outputs Target 31 December 2019

Achievement by November 2019

Renewable-energy ready grid systems developed for outer islands and greater Malé region.

21 MW of solar photovoltaic, 7 MW of energy storage designed and installed; 20 MW of diesel generator sets replaced; and the distribution grids upgraded in 160 islands

9.07 MW of solar photovoltaic installed 5.50 MW of energy storage installed Distribution grids upgraded in 48 islands

Enhanced capacity of MEE, STELCO, and FENAKA to implement renewable energy grid interventions

Road map for transition to renewable energy including procurement, project management, technical and financial management and safeguard support implemented. Up to 60 FENAKA and STELCO staff (target includes at least 25% women) trained to implement the road map for renewable energy systems and to scale up proven solutions. A gender-inclusive community outreach program implemented to raise awareness on renewable energy and household demand-side management, targeting island women’s development committees and women household consumers in the outer islands covered under the project Target: at least 50% of participation in all community outreach activities are women Reduced off-peak and/or shoulder rate tariffs provided for women-led micro- and small enterprises

Status of road map Road map was revised with support from ADB consultants. The document is now under review. Consultant is expected to visit in December 2019 to conduct final consultation meetings. The road map is expected to be finalized in January 2020. 135 staff trained (11 women) 12,300 participants in outreach program (6,303 students) Approximately 9,000 women participating in outreach program (3,077 female students) Tariffs cannot be adjusted. In some case installation of photovoltaic panels on the residence has been proposed.

E. Status of Project Inputs and Activities

No Inputs/Activities Status

1 Phase 1 bidding and contract awards - Awarded in 2015

(awarded in 2016) Commissioned and connected to grid in Q3 2017. Final operational training for utility staffs scheduled in July 2018.

2 Phase 2 bidding and contract awards

(awarded in 2017)

Phase 2(b) 14 islands (Haa Alif) – ADB funded Phase 2(a) 13 islands (Haa Dh) – EIB funded

Contract awarded in August 2017. Installation in progress for Phase 2(b) 14 islands (Haa Alif) – ADB funded – 10 islands were already commissioning and connected to grid . Remaining of 4 islands commissioning is delayed due to FENAKA powerhouse expect completion of phase 2(b) by Octo Contract awarded in September 2017. The EIB loan was declared effective only on 21 November 2019e yet and hence advance payment to initiate project implementation not mobilized before that date.

Appendix 3 55

3 Phase 3 bidding and contract awards (Sh and N – 26 islands) – awarded in December 2017.

Contract awarded in December 2017.

The installation is in progress and expect installation

and commissioning of 26 islands by December 2019.

4

Phase 4 bidding (Commence bidding in end 2019) EIB funded projects

Bid document preparation in progress and expect commencement of bidding by December 2019. Expect contract award for packages in Q3 2020.

5 Consulting services for design, implementation In place

6 Implementation of GAP Ongoing

7 Battery Energy Storage Systems (BESS) at Addu City – JFJCM ( awarded in December 2018)

The design of BESS is in progress and expect commissioning of BESS by Q2 2020.

II. MILESTONES, FINANCIAL PROGRESS, IMPLEMENTATION ARRANGEMENTS

A. Loan Milestones B. Loan Amount

Approval 29 Sep 2014 Original Loan 55.00 Signing 09 Dec 2014 Canceled – Effective 19 Jan 2015 Net Loan 55.00 Original Closing 30 Jun 2020

Revised Closing –

Time Extension –

Time Remaining 24 months

C. Contract Awards and Disbursements ($ million)

Indicators 2015 2016 2017 2018 2019

Contract Awards

Target 13.00 19.00 5.20 2.30 15.26 Achieved 12.66 10.47 12.27 0.09 15.26 Cumulative 12.66 23.13 35.40 35.48 50.75

Disbursements Target 1.30 13.30 18.07 6.03 6.44 Achieved 1.04 8.98 11.05 11.80 8.84 Cumulative 1.04 10.01 21.06 32.86 41.70

D. Implementation Arrangements

Executing Agency Ministry of Finance and Treasury

Implementing Agency Ministry of Environment and Energy Fenaka Corporation Limited State Electric Company Limited

Name and Contact details of Project Director

Mr. Ahmed Ali Project Coordinator, PMU ahmed.ali@environment.gov.mv

56 Appendix 3

KULHUDHUFFUSHI HARBOR EXPANSION PROJECT

(GRANT 0489-MLD) Status as of 21 October 2019

I. PROJECT DETAILS AND PROGRESS

A. Project Description

The project will construct a passenger and cargo harbor in Kulhudhuffushi Island, as an expansion to the existing multipurpose harbor. For the investment in the harbor infrastructure to be effective and sustainable, a TA will be provided and attached to the project to enhance the institutional capacity of the operator in harbor operation, maintenance, safety and financial management. The TA is also designed to help promote income-generating livelihood opportunities for local communities in the region.

B. Project Impact

The impact of the project will be enhanced access to services, markets, people and harbors through an integrated transport system with greater accessibility and affordability for all residents.

C. Status of Achieving Project Outcomes

Outcome Indicators Targets Actual (2019)

Interisland connectivity in the northern region improved

By 2020: a. Number of passenger trips at

Kulhudhuffushi Harbor (2015 Baseline: 51,731 trips)

Increased by 75.9%

Not measurable before completion

b. Goods arriving at Kulhudhuffushi Harbor (2015 Baseline: 43,251 tons)

Increased by 17.5%

Not measurable before completion

c. Number of students enrolled in tertiary and higher education (2015 Baseline: 1,098 students)

Increased by 10%

Not measurable before completion

D. Status of Achieving Project Outputs

Outputs Target Actual (2019)

1. Harbor passenger and cargo capacity in Kulhudhuffushi increase

By 2020: 1a. A new passenger and cargo harbor and ancillary facilities constructed and operational, including quay wall, breakwater, revetments, dredging of main harbor basin up to 4 meters below mean sea level, and ancillary facilities, e.g., administrative building and trading facilities.

Construction commenced on 26 December 2018 and is on track. Physical progress as of 30 September 2019 is 61% against target of 61%.

2. Institutional capacity in harbor operation, maintenance, safety, and financial management strengthened

2a. At least 3 staff of the Secretariat of Kulhudhuffushi Council and 10 staff of the Public Works Services trained in harbor operation, maintenance, safety, and financial management.

Trainings undertaken in January and February 2018.

Appendix 3 57

2b. A feasibility study for implementing harbor charging scheme in Kulhudhuffushi and the action plan for its implementation are completed.

Final Feasibility Report on Harbor User Charging submitted in April 2018.

2c. Harbor safety campaign conducted in Kulhudhuffushi and at least 20 vessel drivers trained in safety for passengers.

Trainings undertaken in January and February 2018.

2d. At least 50 local inhabitants (30% of whom are women) trained in income-generating livelihood opportunities

Trainings undertaken in December 2017.

E. Status of Project Inputs and Activities

No Inputs/Activities Status

Output 1: Harbor passenger and cargo capacity in Kulhudhuffushi increased

1.1 Undertake advance recruitment of project management

consultant by March 2016.

Consultant recruitment commenced in March 2016.

1.2 Award project management consultant contract by October 2016.

PMC contract signed on 30 March 2017.

1.3 Prepare detailed design, cost estimates, and bidding documents by April 2017.

Detailed design, cost estimates, and bidding documents completed on 19 March 2018. Invitation for Bids issued on 13 April 218.

1.4 Award civil works contract by January 2018 and complete by June 2019.

Contract signed on 12 December 2019 and works commenced on 26 December 2019. Contract completion date on 20 March 2020.

Output 2: Institutional capacity in harbor operation, maintenance, safety, and financial management strengthened

2.1 Award capacity building consultant contract by July 2017. CDTA consultant’s contract signed on 4 August 2017 and mobilized on 13 August 2017.

2.2 Deliver training in harbor operation, maintenance, safety, and financial management by December 2017.

Trainings and workshops were undertaken in January and February 2018.

2.3 Carry out feasibility study on harbor charging scheme and prepare action plan by September 2017.

Final Feasibility Report on Harbor User Charging was submitted in April 2018.

2.4 Perform harbor safety campaign and training for vessel drivers on passenger safety by November 2017.

Trainings and workshops were undertaken in January and February 2018.

2.5 Deliver training on income-generating livelihood opportunities by August 2017.

Trainings were undertaken in December 2017.

58 Appendix 3

II. MILESTONES, FINANCIAL PROGRESS, IMPLEMENTATION ARRANGEMENTS A. Grant Milestones B. Grant Amount

Approval 16 Aug 2016 Original Grant 9.690 Signing 05 Oct 2016 Canceled - Effective 14 Feb 2017 Net Loan 9.690 Original Closing 30 Jun 2020

Revised Closing -

C. Contract Awards and Disbursements ($ million)

Indicators 2016 2017 2018 2019

Contract Awards

Target .94 7.60 - 1.25 Achieved .25 7.65 .67 - Cumulative .25 7.90 8.57 8.57

Disbursements Target - .27 1.25 5.60 Achieved - .27 1.25 3.43 Cumulative - .27 1.52 4.95

D. Implementation Arrangements

Executing Agency Ministry of Finance

Implementing Agency Ministry of National Planning and Infrastructure

Name and Contact details of Project Director

Ms. Fathimath Shaana Farooq Director General, Infrastructure Department Telephone No.: +960 3004164 Office Address: Ameenee Magu, Malé 20392

Appendix 4 59

COUNTRY ECONOMIC INDICATORS Fiscal Yeara

2014 2015 2016 2017 2018 2019(e/f)

A. Income and Growth

1 GDP per capita ($, current prices) 8,428.7 9,011.5 9,238.4 9,613.4 10,384.7 10,668.4b

2 GDP growth (%, constant prices) 7.3 2.9 6.3 6.8 6.9 6.5c a. Agriculture -0.3 -0.4 1.5 8.3 4.8 …

b. Industry 16.2 18.1 8.9 10.7 10.5 …

c. Services 7.0 2.4 6.7 6.0 6.5 …

B. Saving & Investment (% of GDP, current prices) 1 Gross domestic investment 27.86 27.16 26.66 25.83 … …

2 Gross domestic saving 44.47 41.51 34.29 33.69 … …

C. Money and Inflation (annual % change) 1 Consumer price index 2.1 1.0 0.5 2.8 -0.1 0.15c

2 Liquidity (M2) 14.9 12.1 -0.2 5.2 3.4 …

D. Government Finance (% of GDP) 1 Revenue and grants 26.7 27.4 27.6 27.8 27.1 27.4b

2 Expenditure and onlending 29.1 34.0 37.6 30.9 32.3 33.1b

3 Overall fiscal surplus (deficit) -2.4 -6.5 -10.0 -3.1 -5.2 -5.7b

E. Balance of Payments 1 Merchandise trade balance (% of GDP) -45.0 -40.4 -42.1 -40.4 -45.6 …

2 Current account balance (% of GDP) -3.2 -7.4 -23.5 -21.7 -26.1 -18.0c

3 Merchandise export ($) growth -9.1 -20.3 6.8 24.3 6.6 …

(annual % change)

4 Merchandise import ($) growth 15.1 -3.4 10.6 6.3 24.2 …

(annual % change)

F. External Payments Indicators 1 Gross official reserves (including gold, 3.7 3.6 2.6 3.0 2.9 …

in months of current year's imports of goods)

2 External debt service (% exports of 2.3 2.3 2.6 2.7 3.1 …

goods and services)

3 External debt (% of GDP) d 20.2 17.0 19.4 25.2 26.1 …

G. Memorandum Items 1 GDP (current prices, Rf billion) 56.9 63.1 67.3 72.9 82.0 87.8

2 Exchange rate (Rf/$, average) 15.41 15.41 15.35 15.41 15.41 15.38

3 Population (million)e 0.44 0.45 0.48 0.50 0.52 …

GDP = gross domestic product; e/f = estimates/forecasts, Rf = Rufiyaa a/ Fiscal year ending 31 December. b/ Figures for 2019 are revised government’s estimates. c/. Based on revised forecasts from ADB’s Asian Development Outlook (ADO) 2019 Update and ADO 2019 Supplement December. d/ This is net of state-guaranteed debts. e/ Values are mid-year estimates from World Bank and include all residents regardless of legal status and citizenship. Sources: Maldives Monetary Authority. 2020. December 2019 Monthly Statistics. Male’; United Nations Statistics Division. National Accounts Main Aggregates Database (accessed 9 January 2020); World Bank. World Development Indicators Databank (accessed 9 January 2020).

60 Appendix 5

Appendix 5 61