ADB, KfW cofinancing deal 'first of many'

Electricity pylons at the Bangladesh-India Power Transmission Center, which was funded by the Asian Development Bank. A cofinancing partnership between the Manila-based financial institution and the German development bank KfW will focus and promote development cooperation in developing countries like Bangladesh and India. Photo by: ADB / CC BY-NC-ND

The Asian Development Bank recently signed its first cofinancing partnership with German development bank KfW Entwicklungsbank, in what the Manila-based institution hopes will be the beginning of many more similar agreements with other partners to meet Asia-Pacific’s development needs.

The $2 billion partnership announced last week is in line with the Manila-based financial institution’s Strategy 2020 framework, which calls for an increased focus on financial cooperation and partnerships to “bring added value and complement [ADB’s] efforts,” according to a top official.

“This is the first official cofinancing partnership launched since the midterm review [of Strategy 2020.] There are new cofinancing partnerships being developed as we speak for which the details are being perfected,” Rikard Elfving, the bank’s senior financing partnerships specialist, told Devex. “Strengthening and deepening cofinancing partnerships is an important pillar for ADB when delivering its agenda.”

Elfving clarified, however, that ADB will still focus more on quality over quantity, and explained that the emphasis should be on “broadening existing partnerships and explore new ones with a high potential to contribute to the region’s development objectives.”

Aside from KfW and the German government — the bank’s fourth largest bilateral cofinancier after Japan, France and South Korea with $700 million in investments in 2013 — ADB is also collaborating (or looking to partner) with the Inter-American Development Bank and SNV, a Dutch iNGO, among others.

The partnership comes at a crucial time as Asia-Pacific is at a development crossroads, with pockets of extreme poverty and growing inequality overshadowing rapid economic growth in many nations. The demand for infrastructure development funding alone is estimated at $800 billion annually for the next decade — a huge amount for any multilateral development institution to shoulder on its own, so many believe that cofinancing and partnerships could help fill the gap.

Specifics

ADB’s agreement with KfW will focus and promote development cooperation in developing member countries like Bangladesh, India, Indonesia, Mongolia and Vietnam. The priority sectors include energy, urban infrastructure, climate change, small and medium enterprise financing, vocational training and regional integration.

“KfW can provide up to $2 billion in official cofinancing for ADB projects, provided there is a good match to the countries and sectors that have been identified to the newly signed [memorandum of agreement],” Elfving said.

He added that apart from the financial cooperation, both sides will also look to collaborate in technical and research expertise, especially in economic research and staff exchange.

The leveraged additional resource will be available for DMCs on a loan basis with “no specific list of criteria” required for access aside from ADB’s usual policies like gender, safeguards, accountability and transparency, and the environment.

“ADB’s role is to act as a catalyst for development and leverage additional resources, beyond its own, for development projects in developing member countries,” Elfving concluded. “This is ADB’s current role and will continue to be its role going forward.”

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About the author

  • Lean 2

    Lean Alfred Santos

    Lean Alfred Santos is a Devex development reporter focusing on the development community in Asia-Pacific, including major players such as the Asian Development Bank and the Asian Infrastructure Investment Bank. Prior to joining Devex, he covered Philippine and international business and economic news, sports and politics. Lean is based in Manila.