DB's adoption of poverty reduction as its overarching objective means
that all its interventions must be prepared with poverty impact as the
primary focus in one form or another. ADB's Poverty Reduction Strategy
(October 1999) appropriately sets out the three pillars of poverty reduction:
pro-poor sustainable economic growth, social development, and good
governance. However, it should be recognized that existing economic theory
and cross-country empirical evidence are not likely to be a satisfactory guide
in terms of informing policy options for individual developing member countries
(DMCs) of ADB toward maximum poverty reduction. Pro-poor growth that is
favored by most international agencies including ADB can be interpreted asan outcome from a mix of interventions, but identification of such mix is a
complex undertaking in practice. A challenging operational task for ADB in
the short to medium term is to find a good balance between the two
intervention categories adopted: Poverty Interventions (of which Core Poverty
Interventions are a subset) and the other interventions (Loan Classification
System, November 2000). (This Handbook will refer to the second group simply
as Other Interventions throughout.) It can be broadly considered that Poverty
Interventions will be targeted projects while Other Interventions will be nontargeted
projects. ADB's Poverty Reduction Strategy (paragraphs 55-56)
recognizes that "it is often difficult in the case of individual countries to decide
how much emphasis to place on poverty interventions and how much on
growth-oriented investments. Where past performance in poverty reduction
has been weak or inequality is rising, the emphasis will be on governance
and social development. In countries where essential reforms have been
undertaken or are under way, growth-oriented investments will reduce
poverty…In each country, the mix and nature of projects will be shaped by
the poverty analysis (to be carried out for each DMC)."
As an intermediate step before country-specific poverty analysis can
better inform the appropriate intervention mix for poverty reduction, one could
think of some country grouping with which to broadly guide ADB's country
programming. For example, DMCs with demonstrated growth performance
but potential or alarming pace of increasing inequality and poor record of
poverty reduction might need more poverty interventions than growthoriented
projects. DMCs with relatively equitable institutional setup but weak
growth performance might need more growth-oriented projects than poverty
interventions. DMCs with less than mediocre record on both growth and
equitable institution and governance in general, including the economies in
transition, might need governance reform interventions before anything else
as a prerequisite to the possibility of poverty-reducing growth process. However,
truly useful information must come from country-specific studies. Some earlier
country-specific poverty studies undertaken by ADB include Quibria (1993,
1994) and Pernia (1994) covering Bangladesh, India, Sri Lanka, Indonesia,
Republic of Korea, Philippines, and Thailand. More knowledge at country
programming level must be accumulated over time to inform the exercise of
country strategy and program through economic and sector work (ESW).
This Handbook is intended as a reference material to assist ADB project
preparation in light of the economic analysis under the mandate of poverty
reduction. It provides workable recommendations for augmenting the current
practice. In accordance with the twofold loan classification, two separatetreatments are recommended. The main part of the Handbook (Chapters 3-5) is
devoted to the treatment of Poverty Intervention projects. It can be considered
as a detailed application of the ADB Guidelines for the Economic Analysis of
Projects (reproduced in Appendix 1). Treatment of Other Intervention projects
is discussed in Chapter 2. It should be noted that due to the specific focus on
the poverty impact of projects, this Handbook does not cover directly other
equally important aspects of project appraisal such as financial sustainability,
which needs continued attention. For general guidance on overall project
analysis, readers are referred to the Guidelines for the Economic Analysis of
Projects (ADB 1997).