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II.

PROJECT CYCLE
This chapter describes Japan’s ODA loan project cycle. The project cycle, in general,
consists of a series of similar procedures followed by other donors. However, some of the
steps described below are unique to ODA loans.
ODA loans usually follow a sequence of standard procedures. They are: project identifi-
cation, preparation, appraisal, ex-ante evaluation, prior notification, exchange of notes,
loan negotiation, loan agreement, project implementation and supervision, ex-post evalua-
tion and monitoring after project completion. The lessons learned from ex-post evaluation
and monitoring after project completion provide useful information, and are fed back to the
preparation, appraisal and implementation of future projects. Thus the whole series of pro-
cedures forming the circle is called the project cycle.
Each step of the project cycle corresponding to the ODA loan process was described
below and the overview of these steps was shown in Figure 1.

1. Identification on identified projects in preparation for possi-


Project identification is the first stage of the ble future financing.
project cycle. Initially, projects that meet key
development needs are identified. Then indi-
vidual project concepts go through screening. 2. Preparation
As a result of this screening, a decision is In the preparation stage that follows, pre-in-
made as to whether an identified project vestment studies are conducted for the project
should proceed to project formation. Project selected in the identification stage in order to
concepts may originate from a number of bring the project to the level of maturity
sources, including the government of the amenable to appraisal by JBIC. These studies
country seeking ODA loan financing (the for project formation usually take the form of
Borrowing Country Government), its regional feasibility studies and are carried out by the
government, bilateral or multilateral aid agen- Borrowing Country Government, or by bilat-
cies and the private sector. Some projects are eral/multilateral aid agencies, private firms or
identified in the course of the analysis and official institutions. Aid agencies sometimes
study of the development plan for a specific provide technical cooperation and funding for
region or sector, or from a master plan (M/P) them. The feasibility study (F/S) involves
that may consist of several potential projects. more detailed examination of the project’s
In any case, projects should be selected in line economic, social, financial and technical feasi-
with the development goals, strategy and bility, and its environmental impacts (includ-
needs of the borrowing country. ing comparison with alternatives).
JBIC frequently conducts studies on macro- The Japan International Cooperation Agency
economic developments of developing coun- (JICA), a Japanese aid agency, conducts feasi-
tries, examining individual sectors’ agenda bility studies (F/S) and prepares master plans
and their significance in national development, (M/P) that lay down the basis for project for-
as well as on their development strategies. mation as part of its grant-funded technical co-
Policy dialogues are often held with their govern- operation activities. In addition, JBIC con-
ments and bilateral/multilateral aid agencies. ducts studies funded by a facility called the
JBIC also sends a fact-finding (F/F) mission, if Special Assistance for Project Formation
necessary, to conduct initial analysis and study (SAPROF), one type of its Special Assistance

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Figure 1. Project Cycle and ODA Loan Procedures
Japanese Recipient Country
Project Cycle
Government
JICA JBIC (Borrower)

Mid-Term Strategy Project Identification


Aid Policy Country/Sector Country Strategy Paper & Formation
study Research by JBIC Institute
Country/Sector Survey
Project Formulation
Identification Feasibility
Study/Development Fact Finding Mission (F/F)
& Study (F/S)
Study
Preparation
Expert Dispatch Program
EIA Loan Request

Supervisory
Committee SAPROF

Government Environmental Categorization


Mission Made Public

Expert Dispatch Program


Appraisal Appraisal Mission
& Prior
L/A Notification Loan Negotiation

Exchange of Environmental Review & Ex-Ante


Notes (E/N) Evaluation Findings Made

Loan Agreement (L/A)

Detailed Procurement Special


Design (D/D) Supervision Assistance
for Procurement Project
Project Expert Dispatch Program Disbursement Management Implementation
Implementation & Management
Mid-Term SAPI
Supervision
Acceptance of
Trainees
Project
Completion

Project Evaluation Project Completion Report

Ex-Post SAPS
Ex-Post
Evaluation Operation
Evaluation
& Grant Aid for &
Follow-Up Rehabilitation Maintenance
Monitoring Follow-Up
Monitoring
Expert Dispatch Program

 
    
      
      

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Facility (SAF), to assist the borrowing country ③ The Government of Japan formally ap-
in project formation. SAPROF studies are de- proves that appraisal be conducted for the
scribed in Chapter III. proposed project and informs the Borrowing
Once the feasibility study has been con- Country Government through diplomatic
ducted and its findings have been approved by channels or by sending a government mission.
the Borrowing Country Government, it makes ④ JBIC discloses the environmental category
a request to the Government of Japan for an classification of the project at its website in
ODA loan. The request, accompanied by the accordance with the Environmental Guide-
feasibility study report and the project imple- lines.
mentation program (I/P), should be submitted ⑤ The Government of Japan then sends a
through the Japanese Embassy in the borrow- mission to the borrowing country and en-
ing country. In parallel, the environmental gages in comprehensive discussions from a
screening form for the project should be sub- broader perspective of national develop-
mitted to JBIC as well. The Borrowing ment, including macroeconomic conditions
Country Government should take care to en- and the relevance of the project in the coun-
sure that the feasibility study covers all the in- try’s development policies and plan.
formation required for the appraisal conducted ⑥ JBIC sends an appraisal mission to confirm
by JBIC (as described in Chapter IV and V). the viability of the project by examining
In particular, if the project is likely to have a economic, social, financial, technical and
significant impact on the environment, Envi- environmental aspects of the proposed pro-
ronmental Impact Assessment (EIA) should be ject, as well as the operation, maintenance
conducted, and the EIA report should be sub- and monitoring systems of the project exe-
mitted to JBIC prior to appraisal by JBIC. cuting agency (the Executing Agency). The
Details of procedures regarding environmental appraisal mission engages in detailed dis-
issues are described in Section 1 (3) of Chapter cussions with the Borrowing Country
IV(see P.13)and Section 10 of Chapter V Government, while conducting a field sur-
(see p.26) as well as JBIC Guidelines for vey of the project site.
Confirmation of Environmental and Social ⑦ Based on the results of the appraisal by
Considerations (the Environmental Guidelines). JBIC, the Government of Japan makes a deci-
sion as to whether the project is suitable for
ODA loan financing, and determines the
3. Appraisal and Ex-Ante Evaluation loan amount and terms.
JBIC conducts appraisal for the well-pre-
JBIC discloses the results of its environmen-
pared project for which a request for ODA
tal review (undertaken in accordance with the
loan has been made. The appraisal proceeds in
Environmental Guidelines) as well as the ex-
the following steps:
ante evaluation report of the project at its web-
① JBIC reviews the feasibility studies (F/S) of site swiftly after signing the loan agreement.
the project and the relevant information ob-
tained through sector studies and fact-find-
ing missions. 4. Prior Notification, Exchange of
② JBIC recommends the project suitable for Notes and Loan Agreement
appraisal to the Government of Japan The Government of Japan notifies the
(specifically the Ministry of Foreign Borrowing Country Government its decision
Affairs, the Ministry of Finance and the to extend an ODA loan at a consultative group
Ministry of Economy, Trade and Industry). meeting, in other international conferences or

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through the Japanese embassy in the borrow- Procurement of goods and services for pro-
ing country. This is called prior notification. ject implementation should follow, in princi-
Afterwards, the two governments enter into ple, international competitive bidding (ICB) in
negotiations for a formal agreement. When line with the JBIC’s Guidelines for Procure-
agreement is reached, the two governments ex- ment under JBIC ODA Loans, which stipulate
change notes confirming the matters agreed policies and procedures with regard to pre-
upon. Stipulated in the exchange of notes qualification (P/Q), bidding documents, tender
(E/N) are the name of the project, the amount evaluation and contracts based on the principle
and terms of the loan and other bilateral issues of economy, efficiency, transparency and non-
such as tax treatment or marine insurance. discrimination. JBIC reviews these procure-
JBIC then embarks on negotiations for a ment procedures based on provisions in the
loan agreement with the Borrower (which may loan agreement in order to ensure that a pro-
be the Borrowing Country Government, a gov- ject will be implemented by a well-qualified
ernment agency or other entities). The loan and competent contractor.
agreement, by which JBIC makes its financing The two sets of Guidelines above were re-
commitment, set forth legal rights and obliga- vised in October 1999.
tions pertaining to the loan, laying out details In addition, JBIC sets Sample Bidding
of the loan amount, terms and conditions, the Documents for various types of goods and ser-
purpose, scope and content of the project, the vices as well as Evaluation Guide for Prequa-
Executing Agency, procurement conditions, lification and Bidding under JBIC ODA loans.
disbursement procedures and General Terms JBIC recommends the Borrowing Country
and Conditions for ODA Loans (GTC). Government to use these documents for
smooth implementation of procurement proce-
dures.
5. Procurement and Disbursement Disbursement of loan proceeds is made with
After the loan agreement is signed, the pro- the progress in implementation and in re-
ject enters the implementation stage. First, sponse to a request for disbursement from the
consultants are hired. They provide services Borrowing Country Government.
for engineering design, supervision of imple-
mentation and capacity building of the
Executing Agency and other entities involved 6. Supervision of Implementation
in the project. Consulting services play an im- During implementation of the project, JBIC
portant role in ensuring the efficient and effec- monitors its progress, conferring with the
tive preparation and implementation of the Borrowing Country Government, where neces-
project. Consultants are employed based on sary, with a view to ensuring the smooth and
the international practice of the “short list efficient implementation of the project. JBIC’s
method” in accordance with JBIC’s Guidelines supervision covers both the implementation of
for the Employment of Consultants under the project (including physical construction,
JBIC ODA Loans. Under the short list method, engineering, and institutional development of
one consulting firm is selected after assessing the relevant environmental regulatory agency
the proposals submitted by 3 to 5 designated and beneficiary groups) and the overall loan
firms that have an international reputation for process (including effectuation of the loan
competence and experience. In some cases, agreement, procurement, disbursement, pay-
detailed design (D/D) may be done with ment of interest and repayment of the princi-
JICA’s technical assistance. pal). In some projects, JICA may provide ad-

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vice and guidance by dispatching experts to monitors the operation and maintenance of the
the project site or hold training sessions in project for a certain period in order to ensure
order to improve institutional capacities and effective operation and maintenance and to
develop human resources for project imple- sustain project benefits over the medium and
mentation. long term. If ex-post evaluation or follow-up
JBIC reviews the progress in implementa- monitoring identifies improvements needed in
tion by sending supervision missions and dis- operation and maintenance, appropriate advice
cusses with the Executing Agency and the rel- may be provided by JBIC. JICA experts may
evant higher authorities to solve any problems also give guidance and advice, where neces-
emerged or to take necessary measures to ad- sary. Furthermore, JBIC may conduct a study
dress them in a timely and effective manner. by the Special Assistance for Project Sustaina-
The periodic progress report on implementa- bility (SAPS), one type of the Special Assistance
tion, required under the loan agreement and Facility (SAF), where necessary. This SAPS
prepared by the Executing Agency, serves to study undertakes an intensive examination of
identify, at an early stage, any problem that may obstacles or constraints hindering the effective
arise in the course of project implementation. operation and maintenance of the project and
JBIC may conduct a study by the Special makes recommendations on necessary mea-
Assistance for Project Implementation (SAPI), sures for improvements.
or SAPI study, to assist the Borrowing In the case where changing circumstances
Country Government in implementing and su- require additional financing, for example, for
pervising the project effectively and effi- rehabilitation of project facilities in the course
ciently. This facility is one type of the Special of project operation and maintenance after its
Assistance Facility (SAF) of JBIC, and a SAPI completion or where the urgency, profitability
study may be used to address obstacles and and scale of such assistance make it difficult
problems affecting project implementation. for an ODA loan to deal with such situation,
grant assistance may be extended for addi-
tional funding by the Government of Japan
7. Ex-Post Evaluation (grant assistance for rehabilitation).
Upon completion of the project, JBIC under-
takes ex-post evaluation by reviewing the en-
tire process of appraisal, implementation, and 9. Feedback to Project Preparation
operation and maintenance. Based on such re- and Appraisal
view, ex-post evaluation assesses the perfor- Findings of the monitoring and supervision
mance of the project relative to the initial plan, of project implementation, ex-post evaluation
including the scope and extent of its benefits and monitoring after project completion are
and impacts, and considers whatever issues for fed back to other similar projects in the initial
improving performance. This is done based on stages of the project cycle as lessons learned
the project completion report (PCR) to be sub- from the project. If problems or difficulties
mitted by the Borrowing Country Government arise in project implementation or operation
as required by the loan agreement. and maintenance, technical assistance is
needed, the Borrowing Country Government is
required to report to and consult with JBIC on
8. Monitoring after Completion this matter. Recommending remedial measures
JBIC draws lessons for operating the com- based on problems identified in SAPI and
pleted project from ex-post evaluation. JBIC SAPS studies facilitates this feedback process.

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