What Is The Purpose of Asian Development Bank?
Asian Development Bank
The Asian Development Bank (ADB) supports initiatives in developing member countries that have a positive effect on economic and social development via operations in the public and private sectors, advisory services, and knowledge assistance.
Regional development bank
|Formation||19 December 1966 (1966-12-19)|
|Type||Multilateral Development Bank|
|Purpose||Social and Economic Development|
|Region served||INDO- PACIFIC|
|President||Masatsugu Asakawa (from 17 January 2020)|
|Main organ||Board of Governors|
The ADB was patterned after the World Bank and uses a weighted voting method similar to the World Bank’s. ADB’s annual report covers its activities, budget, and other data.
ADB-JSP enrols 300 students yearly in 10 countries in the Region. Scholars are expected to contribute to their home nations’ economic and social growth after completing their degrees. ADB observes the UN.
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Japan and the U.S. possess 15.571% of shares as of 31 December 2020. China, India, and Australia each have 6.429%.
The Board of Governors, with one representative from each member state, establishes bank policy. The Board of Governors elects the 12 directors and deputies. Eight of the twelve members are regional (Asia-Pacific) members.
The Board of Governors elects ADB’s president, who chairs the board and runs the bank. The president may be reelected every five years. The bank’s president has always been Japanese since Japan is a major stakeholder.
Masatsugu Asakawa is president. Takehiko Nakao succeeded Haruhiko Kuroda in 2013.
The bank has 42 field offices across Asia and the Pacific and representative offices in Washington, Frankfurt, Tokyo, and Sydney. The bank employs 3,000, or 60 of 68 members.
List Of Presidents
Masatsugu Asakawa became ADB president on 17 January 2020.
Japan’s Finance Minister Hisato Ichimada recommended a new financial organisation for Southeast Asia in 1956. A year later, Prime Minister Nobusuke Kishi declared that Japan will sponsor a regional development fund using resources from Japan and other industrial nations.
The US rejected the proposal, therefore it was scrapped. “Banking the Future of Asia and the Pacific: 50 Years of ADB,” July 2017.
In 1962, a Tokyo economist suggested a study committee to construct an Asian development bank to a Tokyo financial consultant. In 1963, the group met weekly to discuss putting up a new organisation, drawing on Watanabe’s World Bank expertise.
The World Bank’s chilly response discouraged the research group.
Young Thai economist Paul Sithi-Amnuai suggested the proposal at an ECAFE trade meeting in 1963. (ESCAP, March 2007, “The first parliament of Asia,” p. 65). Despite early scepticism, support for a new bank surged.
Japan was asked to join an expert panel studying the proposal. With Watanabe’s nomination, ECAFE and Japan proposed a new bank. The US was initially on the fence, not opposed but not ready to contribute funds.
A new bank for Asia quickly fit into a bigger programme of aid to Asia planned by President Lyndon B. Johnson in the context of rising U.S. military backing for South Vietnam.
As a prominent actor, Japan wanted ADB headquarters in Tokyo. Bangkok, Colombo, Kabul, Kuala Lumpur, Manila, Phnom Penh, Singapore, and Tehran indicated interest.
At a ministerial meeting in Manila in November/December 1965, the 18 potential regional members of the new bank voted three times. Tokyo lost the first round on 30 November, thus a second vote was conducted the following day at noon.
Japan led, but it was inconclusive, so a final vote was taken after lunch. Tokyo won the third poll, 8-9, with 1 abstention. The Japanese were confused and upset that Manila would host the new development bank.
Watanabe stated in his ADB memoir, “I felt like my carefully raised kid had been ripped away.” (Asian Development Bank, 1977, p. 16)
In 1966, when the new bank in Manila was being prepared, the president was a top priority. Eisaku Sat nominated Watanabe. Watanabe originally refused, but other nations pressured him.
Watanabe was elected first President of the Asian Development Bank on 24 November 1966.
By 1972, Japan had contributed $173.7 million (22.6%) to regular capital resources and $122.6 million (59.6%) to special funds. The US gave $1.25 million to the fund.
ADB concentrated on food production and rural development after its 1960s founding. Asia was impoverished then.
Indonesia, Thailand, Malaysia, South Korea, and the Philippines received 78.48% of ADB loans between 1967 and 1972. Japan got 41.67 percent of all 1967-1976 procurements.
In April 1968, Japan donated $100 million to the Agricultural Special Fund based on its favoured industries, regions, and commodities and services.
Watanabe led the ADB until 1972.
In the 1970s, ADB helped Asian developing nations with education, health, infrastructure, and industry. The development of Asian economies in the late 2000s fueled demand for greater infrastructure to sustain economic expansion. ADB prioritised roads and energy.
After the first oil price shock, ADB allocated more aid to energy projects, notably those supporting local energy sources in member nations.
In the 1980s, under pressure from the Reagan administration, ADB grudgingly started engaging with the private sector to boost the effect of its development aid to impoverished Asian and Pacific nations.
ADB boosted its energy projects after the second oil crisis. In 1982, ADB launched its first field office in Bangladesh and increased its collaboration with NGOs (NGOs).
Inoue Shiro and Yoshida Taroichi led Japan in the 1970s. Fujioka Masao, the fourth president (1981–90), had a strong manner and launched an ambitious strategy to grow the ADB.
The Bank’s headquarters in Pasay City, Philippines, opened on November 18, 1972. The Department of Foreign Affairs (Philippines) took over ADB’s former Pasay headquarters in the early 1990s.
In the 1990s, ADB helped Mekong River nations trade and collaborate. After the Cold War, numerous Central Asian nations joined ADB, expanding its membership.
ADB reacted to the 1997 financial crisis by strengthening banking sectors and creating social safety nets for the disadvantaged. During the crisis, ADB loaned South Korea $4 billion. In 1999, ADB prioritised poverty alleviation.
Private sector financing boomed in the early 2000s. The institution has had similar activities since the 1980s (under pressure from the Reagan Administration), but early efforts were unsuccessful due to low loan volumes, losses, and financial scandals involving AFIC.
In 2002, a new ADB team dramatically expanded private sector financing. The ADB’s Private Sector Operations Department (PSOD) increased 41 times faster than in 2001.
This culminated in March 2008 when the Board approved the Long Term Strategic Framework (LTSF). This statement declared that the ADB’s top objective was private sector growth, which should account for 50% of its loans by 2020.
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In 2003, the severe acute respiratory syndrome (SARS) outbreak swept the area, and ADB helped nations work together to manage infectious illnesses including avian flu and HIV/AIDS.
ADB also reacted to natural catastrophes in the region, contributing more than $850 million for recovery in India, Indonesia, Maldives, and Sri Lanka. Pakistan earthquake victims received $1 billion in loans and grants.
In 2009, ADB’s Board of Governors tripled its capital base from $55 billion to $165 billion to response to the global economic crisis. It’s ADB’s first 200% hike since 1994.
Asia emerged as a new economic development engine in 2010, while being home to two-thirds of the world’s impoverished. Increasing wealth in the area widened the income divide, leaving many behind. ADB fostered economic development via loans and grants.
In response to government changes, the ADB reengaged in Myanmar in 2012. ADB launched a Myanmar office in April 2014 and began loans and grants.
In 2017, ADB merged ADF and ordinary capital resources (OCR). This allowed OCR to increase yearly loans and grants to $20 billion by 2020, 50% more than before.
ADB granted Armenia $2 million from the Asia Pacific Disaster Response Fund in 2020 to combat the COVID-19 epidemic. In the same year, the ADB gave Electric Networks of Armenia a $20 million loan to guarantee energy throughout the epidemic and granted $500,000 in regional technical support to purchase PPE and medical supplies.
Objectives And Activities
The ADB aims to reduce poverty in Asia and the Pacific via inclusive economic growth, ecologically sustainable growth, and regional integration. This is done via investments in infrastructure, health care services, financial and public administration systems, preparing countries for climate change, and better managing natural resources.
80% of ADB’s loans is focused in five operating areas.
- Education –Most Asian and Pacific developing nations have seen remarkable increases in primary school enrolment rates in the previous three decades, but severe problems threaten economic and social progress.
- Environment, Climate Change, and Disaster Risk Management – Asia and the Pacific’s economic development and poverty reduction need environmental sustainability.
- Finance Sector Development – An economy’s financial system is vital. It produces wealth for the poorest and most vulnerable in society Microfinance, SME growth, and regulatory changes are key to reducing poverty in Asia and the Pacific.
- PSOD’s top focus since 2002- Trade finance is one of the PSOD’s most active sub-sectors. PSOD funds billions of dollars in letters of credit annually throughout Asia and the globe.Transport, communications, electricity, water supply, sanitation, and urban development.
- Regional Cooperation and Integration – President Kuroda presented RCI to the ADB in 2004. It was a longtime objective of the Japanese government to regionalize national economy.
- It accelerates economic development- reduces poverty and inequality, boosts productivity and employment, and strengthens institutions.
- Private Sector Lending – Reagan’s administration pushed for this ADB priority. This initiative wasn’t a priority until President Tadeo Chino brought in Robert Bestani.
- The Private Sector- Operations Department (PSOD) evolved rapidly from the ADB’s smallest to biggest funding arm. This resulted in the Board’s adoption of the LTSF in March 2008.
The ADB provides “hard” commercial loans to middle-income Asian nations and “soft” loans with reduced interest rates to impoverished countries. Both sorts of loans will come from the bank’s ordinary capital resources (OCR) commencing in January 2017.
PSOD offers more than commercial loans. Guarantees, equity, and mezzanine financing are also available (a combination of debt and equity).
In 2017, ADB’s “nonsovereign” activities loaned $19.1 billion, $3.2 billion to private firms. ADB’s 2017 grants and cofinancing totalled $28.9 billion.
ADB issues bonds in global capital markets. It also depends on member donations, lending revenues, and loan repayments.
|$ million||%||$ million||%||$ million||%||$ million||%|
Private Sector Investments
ADB offers direct loan, equity, and mezzanine financing to private firms for projects with proven social benefits. ADB’s involvement is restricted, but it leverages private capital to finance these projects by owning no more than 25% of each transaction.
On some projects, ADB works with other organisations to augment funds. In 2014, other organisations funded $9.2 billion of ADB’s $22.9 billion in activities. The Bank engages with several multilateral organisations, says Principal Communication Specialist Jason Rush.
Funds And Resources
ADB administers more than 50 financial partnership facilities, trust funds, and other funds totaling several billion each year for social and economic development projects throughout Asia and the Pacific. ADB issued 5-year offshore INR-linked notes to generate Rs 5 billion.
On 26 Feb 2020, ADB raises $118 million from rupee-linked bonds, supporting the expansion of India International Exchange and contributing to a $1 billion yield curve from 2021 to 2030.
Access To Information
ADB’s information disclosure policy presumes all institution-produced material should be public unless there’s a reason to keep it hidden. The policy requires accountability, openness, and prompt information and document requests.
ADB does not divulge personal privacy, safety, some financial and commercial information, and other exclusions.
Notable Projects And Technical Assistance
Since the ADB’s early days, opponents say Japan and the U.S. have influenced financing, policy, and personnel choices.
Oxfam Australia attacked the Asian Development Bank for insensitivity. Global and multinational banks may harm human rights via initiatives that hurt impoverished and underprivileged populations.
UNEP criticised the bank, saying in a study that “most of the expansion has bypassed more than 70% of its rural people, many of whom rely on natural resources for lives and incomes.”
Large ADB projects were criticised for lacking monitoring, causing social and environmental harm. Thailand’s Mae Moh coal-fired power plant is a contentious ADB project.
Environmental and human rights groups argue ADB’s environmental protections policy and policies for indigenous peoples and involuntary relocation are frequently neglected in reality, too ambiguous or weak to be effective, or not implemented by bank employees.
The bank’s participation in the food crisis is condemned. Civil society accuses the ADB of disregarding warnings leading up to the crisis and contributing to it by pressing loan terms that unjustly compel governments to deregulate and privatise agriculture, causing issues like the rice supply deficit in Southeast Asia.
In fact, although the PSOD ended off that year with $2.4 billion in financings, the ADB has drastically dipped below that level in the years thereafter and is not on track to achieve its stated target of 50% private sector financings by 2020.
Critics note that the PSOD is the sole ADB-generating department. With most loans being concessionary (sub-market) loans to the public sector, the ADB faces financial difficulties and operational losses.
Largest Countries And Regions By Subscribed Capital And Voting Power
The table below shows the 20 biggest nations by ADB subscribed capital and voting power as of December 2020. As of 23 March 2019, ADB has 68 members: 49 from Asia and the Pacific, 19 from other regions.
A member’s membership year appears after their name. When a nation stops being a member, the Bank repurchases its shares as part of the settlement of accounts with that country, under Article 43, paragraphs 3 and 4.