May Special Capital Expenditure Budget Proposal: Improving Office Facilities of Selected Resident Missions

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1 May 2013 Special Capital Expenditure Budget Proposal: Improving Office Facilities of Selected Resident Missions

2 ABBREVIATIONS ADB Asian Development Bank BPBM BPMSD OAS OIST Budget and Management Services Division Budget, Personnel and Management Systems Department Office of Administrative Services Office of Information Systems and Technology NOTE In this report, "$" refers to US dollars. Vice-President Director General Principal Director Director Team leaders Team members B. Davis, Administration and Corporate Management Y. Kanzaki, Budget, Personnel, and Management Systems Department (BPMSD) H.J. Yu, Office of Administrative Services (OAS) E. Zhukov, Budget and Management Services Division, BPMSD C. Nantham, Lead Facilities Planning and Management Specialist, OAS K. Wangdi, Senior Budget and Management Services Specialist, BPMSD M. Concepcion, Associate Facilities Planning and Management Coordinator, OAS J. Santiano, Associate Budget and Management Services Analyst, BPMSD C. Trinchera, Senior Facilities Planning and Management Officer, OAS In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

3 CONTENTS Page I. INTRODUCTION 1 A. Background 1 B. Implementation of Special Capital Expenditure Budget Approved in II. BUSINESS REQUIREMENTS 1 A. Current Situation 1 B. Space Optimization Program 3 C. Options 3 III. THE PROJECT 3 IV. CAPITAL EXPENDITURE BUDGET AND IMPLEMENTATION ARRANGEMENTS 4 A. Capital Expenditure Budget Requirement 4 B. Depreciation and Impact on Internal Administrative Expenses 4 C. Implementation Arrangements 4 D. Benefits and Risks 5 V. RECOMMENDATION 5 APPENDIXES 1 List of ADB Field Offices 6 2 Status of Implementation of Special Capital Expenditures Budget Approved in Indicative Schedule of Depreciation and Associated Maintenance 8

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5 I. INTRODUCTION A. Background 1. The Asian Development Bank (ADB) established its first resident mission in Bangladesh in Since then, ADB has continuously strengthened the operations of resident missions and refined its business model. ADB adopted the resident mission policy in February 2000, expanding the role of resident missions to include country programming, country relations, and policy support beyond their original focus on project administration. 1 The expanding role of the resident missions allows ADB to respond to developments more effectively on the basis of better understanding of local conditions in each borrowing developing member country. After the adoption of the resident mission policy, the number of resident missions grew rapidly from 13 in 2000 to 27 in Reviews of the resident mission policy in 2002, 2007, and 2008 confirmed the successful implementation of the decentralization model, which enabled wider scope for resident mission operations but entailed significant increases in staff numbers. 3. To equip ADB to fully implement the resident mission policy and to sustain its positive impacts to date, the Work Program and Budget Framework, outlined a 3-year transformation program that highlighted the need to further augment staff strength. During , 138 additional staff positions 2 were allocated to resident missions, accounting for about 28% of the 500 new positions created during the period. Appendix 1 shows total authorized staff positions in the field offices. 4. The increase in staffing and expansion of the resident mission operations outpaced investments in office infrastructure and support services. Adequate resources for office infrastructure and services are required to sustain the gains made in strengthening operations through the accelerated pace of decentralization in favor of resident missions since B. Implementation of Special Capital Expenditure Budget Approved in In 2009, the Board of Directors approved a special capital expenditure budget of $5.00 million to expand and/or relocate selected resident missions. 3 This was intended to support the anticipated staff expansion in resident missions and the resulting requirement for additional space. The budget was based on the initial needs assessment of some resident missions. In , Management allocated $4.95 million to expand and/or relocate seven resident missions, in Afghanistan, Bangladesh, India, Nepal, Pakistan, Thailand, and Uzbekistan. The details of the special capital budget allocation for these resident missions and the status of capital project implementation are in Appendix 2. II. BUSINESS REQUIREMENTS A. Current Situation 6. The recent expansion and/or relocation of the seven resident missions under the 2009 special capital budget helped ADB to meet some of its requirements for additional office space. 1 ADB Resident Mission Policy. Manila. 2 Includes eight outposting from the headquarters. 3 ADB Special Capital Budget Proposal: Expansion of ADB Headquarters Building and Selected Resident Missions. Manila.

6 2 However, several other resident missions have fully optimized the use of their existing office space and require expansion to accommodate current and anticipated staff strength. Moreover, following the conclusion in 2012 of the 3-year transformation exercise, and with continuing efforts to strengthen ADB s operations by decentralizing operations to resident missions, ADB needs to make reasonable investments to improve and sustain office infrastructure and facilities in resident missions. 7. Several resident missions have occupied the same office building over a number of years largely because of the limited availability of office space in host countries. In some cases, rental is prohibitively expensive, and relocating requires significant investments in refitting and associated costs. On the other hand, staying at current locations is not a favorable option for some resident missions as their buildings age and deteriorate, posing safety risks and making buildings unsuitable for office occupancy and/or expansion. As an example, the conditions of office facilities and the difficulties being faced by some resident missions are highlighted: (i) [Information in this para. has been removed in accordance with para. 97 (i and vii of ADB s Public Communications Policy (2011).] (ii) [Information in this para. has been removed in accordance with para. 97 (i and vii of ADB s Public Communications Policy (2011).] (iii) [Information in this para. has been removed in accordance with para. 97 (i and vii of ADB s Public Communications Policy (2011).] (iv) [Information in this para. has been removed in accordance with para. 97 (i and vii of ADB s Public Communications Policy (2011).] (v) [Information in this para. has been removed in accordance with para. 97 (i and vii of ADB s Public Communications Policy (2011).]

7 3 8. Several other resident missions may require renovation, upgrading, or relocation, depending on the condition of the current office facilities and the need to accommodate future increases in the number of staff, consultants, service providers and contractual staff. B. Space Optimization Program 9. Under this project, the space optimization program will consider the number of (i) authorized international, national, administrative staff positions and outposted staff from the headquarters in the short and medium term; (ii) staff from aid agencies; (iii) secondees from government organizations; (iv) service providers and contractual staff; and (v) requirements for common space for consultants and support facilities such as rooms for conferences, meetings, training, storage, and public information centers. Based on these, the office space required will be determined toward identifying suitable office space. C. Options 10. Options to improve office facilities in selected resident missions will be carefully assessed from a cost benefit perspective. Where feasible, the current premises will be improved. Where it is found more cost-effective, office relocation will be considered. Any proposal to relocate a resident mission will be separately submitted for Management approval. Currently, ADB owns the Bangladesh and India resident mission office buildings, while the remaining 25 resident missions are leased commercial or residential properties. Any proposal to purchase resident mission premises will be submitted for separate approval by the Board of Directors. Under normal circumstances, the decision whether to lease or own an office building is based on (i) the operational benefits considering the size of the loan portfolios over the medium and long term, (ii) security, (iii) financial cost benefits, and (iv) the long-term prospects of ADB operations in the host country. Though it may be financially viable for ADB to own a building in some countries, it is generally difficult to purchase land or secure a long-term lease because of local government regulations and prevailing market conditions. In May 2012, the Management approved to relocate the Nepal Resident Mission in response to safety and environmental issues otherwise beyond its control. In the past, the resident missions in Georgia, Indonesia, Kazakhstan, and Mongolia had to be relocated in response to political, commercial, and legal issues. Therefore, there are several factors that affect the decision on the location of resident missions. III. THE PROJECT 11. The project will improve the facilities of selected resident missions by renovating and upgrading office structures and facilities, and by relocating offices where necessary. The proposed special capital expenditure budget will cover fitting out offices, including telecommunications and other information technology infrastructure, furniture and other equipment, and associated costs. Details of the cost components for each resident mission capital budget proposal will be prepared for Management consideration.

8 4 IV. CAPITAL EXPENDITURE BUDGET AND IMPLEMENTATION ARRANGEMENTS A. Capital Expenditure Budget Requirement 12. During the preparation of 2013 budget, the Budget, Personnel, and Management Systems Department (BPMSD) requested from resident missions indicative capital budget requirements for improving the office facilities in In coordination with the regional departments, resident missions submitted capital expenditure budget requests totaling [Information in this para. has been removed in accordance with para. 97 (i and vii of ADB s Public Communications Policy (2011).] In consultation with the Office of Administrative Services (OAS) and the regional departments concerned, the BPMSD reviewed the requests and worked out a [Information in this para. has been removed in accordance with para. 97 (i and vii of ADB s Public Communications Policy (2011).] 13. Beginning with the 2012 budget, the Budget Review Committee of the Board of Directors advised ADB to reflect in the budget an indicative pipeline of special capital expenditure expected to be brought to the Board of Directors for approval during the year. Accordingly, an indicative special capital expenditure program of [Information in this para. has been removed in accordance with para. 97 (i and vii of ADB s Public Communications Policy (2011).] B. Depreciation and Impact on Internal Administrative Expenses 14. The fitting out works of leased offices will be depreciated over the lease period. The value of furniture and other equipment required as part of improving the office facilities will be depreciated in line with agreed policies and procedures for capital expenditure. The proposed special capital expenditure budget of [Information in this para. has been removed in accordance with para. 97 (i and vii of ADB s Public Communications Policy (2011).] Based on the indicative depreciation [Information in this para. has been removed in accordance with para. 97 (i and vii of ADB s Public Communications Policy (2011).] C. Implementation Arrangements 1. Institutional Arrangements 15. Any resident mission requiring funding for improving the office facilities will have to seek separate approval from Management through the BPMSD and the OAS. The BPMSD, OAS, and Office of Information Systems and Technology (OIST) will conduct, in collaboration with the regional department at headquarters and the resident mission, a detailed review and analysis of each request for capital budget allocation. Based on the merits of each proposal, the BPMSD and the OAS will recommend the budget allocation for Management approval. After Management approval, the Board of Directors will be informed of each capital budget allocation. 16. The resident mission receiving the capital budget allocation shall be responsible for implementing the proposed improvement of the office facilities in coordination with the OAS and the OIST. The resident mission will report quarterly to the BPMSD the status of implementation by providing details on commitments and actual budget utilization. Further, the resident mission will coordinate with the Controller s Department for proper recording and booking of approved capital expenditures.

9 5 2. Implementation 17. Subsequent to Management approval of the capital budget allocation for improving office facilities in a resident mission, goods and services such as technical, project management, and construction services will be procured in accordance with agreed procedures on institutional procurement and contract administration. 18. In coordination with the OAS and the OIST, the resident mission will undertake the project following the implementing guidelines and procedures for field offices set out in the resident mission operating guidelines. 4 D. Benefits and Risks 1. Benefits 19. The proposed improvement of the office facilities of selected resident missions will provide secure and safe workplaces for staff and conducive and contiguous work environments that will improve efficiency and productivity. This need for a conducive work environment was confirmed by staff response to the 2012 staff engagement survey. Office relocation can open opportunities to negotiate competitive rental rates. Improved office infrastructure will (i) facilitate ADB s decentralized operations and efficient response to the developing member country; (ii) provide a suitable office space to accommodate authorized international, national, administrative staff positions and outposted staff from the headquarters in the short and medium term; staff from aid agencies; secondees from government organizations; service providers and contractual staff; and requirements for common space for consultants and support facilities such as rooms for conferences, meetings, storage, and public information centers; and (iii) provide proper training facilities to staff and country officials directly involved in portfolio management. 2. Risks 20. Factors that currently pose risks to some of the resident missions include (i) wear and tear of aging buildings from inclement weather and seismic activity; (ii) office proximity to public roads and thoroughfares without proper security standoff space and therefore vulnerable to disturbances arising from public demonstrations; (iii) commercial and legal issues between landowners and building property management, which could cause premature lease termination; (iv) poor ambient air quality; and (v) clearance of building permits and occupancy certification not being forthcoming from the local government. These risk factors will be considered in reviewing proposals for improving the office facilities and relocation. Every effort will be made to mitigate them. V. RECOMMENDATION 21. The President recommends that the Board of Directors approve the special capital expenditure budget of $10,000,000 for the improvement of the office facilities of selected resident missions. 4 ADB. Resident Missions Operating Guidelines.

10 6 Appendix 1 Department/Office List of ADB Field Offices Start of Operation 2013 Authorized Staff Positions IS NS AS Total Resident Missions and Liaison Offices Afghanistan Resident Mission January Armenia Resident Mission June Azerbaijan Resident Mission November Bangladesh Resident Mission July Bhutan Resident Mission a Cambodia Resident Mission December Georgia Resident Mission August India Resident Mission December Indonesia Resident Mission July Kazakhstan Resident Mission January Kyrgyz Republic Resident Mission April Lao PDR Resident Mission May Mongolia Resident Mission August Nepal Resident Mission November Pacific Liaison and Coordination Office August Pacific Subregional Office June Pakistan Resident Mission July Philippines Country Office November PNG Resident Mission October PRC Resident Mission June Special Liaison Office in Timor-Leste February Sri Lanka Resident Mission October Tajikistan Resident Mission November Thailand Resident Mission January Turkmenistan Resident Mission June Uzbekistan Resident Mission January Viet Nam Resident Mission February Representative Offices European Representative Office December Japanese Representative Office November North American Representative Office October Extended Mission Extended Mission in Myanmar August Total AS = administrative staff, IS = international staff, Lao PDR = Lao People s Democratic Republic, NS = national staff, PNG = Papua New Guinea, PRC = People s Republic of China. a The establishment of Bhutan Resident Mission was approved by the Board in October Sources: (i) ADB Bank Representative Offices in Donor Countries: Establishment of a North American Office. Manila. (ii) ADB A Review of the Japan Representative Office. Manila; (iii) ADB A Review of the European Representative Office. Manila; (iv) ADB Review of Resident Missions Operations. Manila; (v) ADB Budget of the Asian Development Bank for Manila; (vi) regional departments and resident missions.

11 Appendix 2 7 Status of Implementation of Special Capital Expenditures Budget Approved in 2009 [Information in this para. has been removed in accordance with para. 97 (i and vii of ADB s Public Communications Policy (2011).]

12 8 Appendix 3 Indicative Schedule of Depreciation and Associated Maintenance ($) [Information in this para. has been removed in accordance with para. 97 (i and vii of ADB s Public Communications Policy (2011).]

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