of grants, suggesting that a more sophisticated analysis was necessary. The quantitative experience of other countries could have been used as a basis for estimating the rate of return to individual banks.

As the TA part of the loan is crucial for its success, it would have to be included in any quantitative analysis. In fact, commercial banks are not eligible for a loan for systems modernization and automation until they successfully go through the ID stage.

Finally, while it is true that there are very large externalities to the development of a modem commercial banking system, this does not necessarily rule out the use of a rate of return centered on the more explicit costs and benefits. All it suggests is that a rate of return less than normal may be acceptable. Moreover, the minimum acceptable level is also likely to be dependent on the expected fiscal impact of the project.

# **Part IV: Conclusions and Recommendations**

Effective delivery of technical assistance continues to be a challenge, one which is only likely to increase if TA becomes more and more concentrated in sub-Saharan Africa and the transition economies in Eastern Europe, Central Asia, and Southeast Asia. In this document we began with a review of the most important criticisms of TA projects. Then we focused on the appraisal process. Our primary objective was to demonstrate the possibility of greater use of quantitative economic analysis in the appraisal process. In the last section we looked briefly at 40 ECA projects with significant TA, following this up with four case studies.

Our main conclusion is that there is a wide scope for the greater use of quantitative methodologies in the analysis of TA projects. While some of this analysis could be sophisticated and quite demanding, a large portion could be done using fairly simple techniques. In the ECA region we crudely estimated that 60 percent of the TA had a high potential for quantitative analysis. Moreover, the loans in the case studies all appeared to be good candidates for such, even though only the Hungary Tax Administration project was selected on that criteria. We recommend that all TA be classified according to the methodology suitable for its appraisal and evaluation. In cases where little or no quantitative analysis is used, the staff officer should provide a justification. In most such cases it will still be possible to conceptualize the problem in economic terms. We recommend that this procedure also be followed.

In our analysis we roughly estimated that 80 percent of the TA in investment projects was not necessary for the implementation of the project. In the 12 investnent projects for which an economic rate of return was calculated in the appraisal, the TA was never included in the estimate, despite the fact that we classified 53 percent of the TA as necessary for implementation of these projects. While essential TA should be included in the calculation of the economic rate of return, we also recommend that either a strong justification is given for the inclusion of nonessential TA or it should be omitted from the project. Our particular concern is that, given the small portion of the total loan of such TA and its non-essential nature, it will not be given sufficient attention in project implementation and monitoring.

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