These are best and the worst of times in Asia and the Pacific for development.
The region has experienced the fastest economic growth and reduction in income poverty worldwide. But nearly 550 million people still live below the $1.25 per day poverty threshold in a region where income disparities have widened in countries that make up 80 percent of its population. Urban challenges seem intractable, runaway climate change endangers all progress, and weak governance remains a concern in many countries across the region.
All are huge challenges for governments and their development partners. With a half-century of engagement in the region, the Asian Development Bank is well-placed to support the region, both as a lender for development and a facilitator of knowledge solutions. The core area for financing is likely to remain infrastructure, even as the region will have funding also from two new lenders for development: the Asian Infrastructure Investment Bank, planned to be established in Beijing later this year, and the New Development Bank of the BRICS emerging donor group of countries. What would be helpful is to have overall packages of infrastructure, social and environmental programs to help confront the biggest roadblocks to progress that countries face.
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And ADB is set to scale up its program in the region with the planned combination of its concessional Asian Development Fund lending operations and ordinary capital resources balance sheet. This will allow the institution to increase its annual financing commitments to countries to up to $20 billion, and if leveraged one to one with co-financing, up to $40 billion.
Beyond the ability to make more funds available to countries, however, the crucial task in Asia and the Pacific is making the most of available resources to raise their overall productivity. The past does provide valuable lessons on how to do so, but new considerations revise the choices to be made. For ADB, one way forward would have been simply to expand the allocations of lending in proportion to their current composition. But a better option would be to shift to a more effective mix of lending, driven by a new strategic direction.
The strategic thrust of ADB’s long-term Strategy 2020 aligns with the region’s need for greater inclusion, better environmental sustainability and stronger regional integration. This is the chance to make these goals integral to lending operations — with a two-pronged approach going forward.
The first part for Asia and the Pacific and for ADB would be about doing things right. In the past three years ADB has improved the performance of its portfolio of projects and programs. At the same time, more can be done in improving the efficiency of the portfolio in delivering outputs and outcomes and in sustaining results over time. Furthermore, getting the most from the portfolio also involves efforts to exploit synergies across themes, public and private sectors, and lending and knowledge, as well as efforts to build partnerships within and outside the organization. All this would be underscored by efforts to stay at the cutting edge of skills and knowledge.
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The second part is about doing the right things. The institution is positioned to shift its current infrastructure focus from physical output deliveries to higher outcomes. One way is to aim for far more climate-friendly infrastructure, blending climate-resilient projects and programs together with direct support for an environmentally sustainable Asia and the Pacific. Climate mitigation would be a vital part of this effort. Another is to support more inclusive infrastructure, coupled with greater attention to education, health and social protection. Blending investments in infrastructure with those in social sectors would have high payoffs.
ADB’s Independent Evaluation Department’s recent “Annual Evaluation Review 2015” of bank operations notes that the region must put in place infrastructure incorporating both climate change resilience and greater inclusion of lower-income strata in the growth process. ADB can support this direction. This would dovetail with the prospect of increased lending and raising returns to the projects with continued improvements in their design and delivery.
ADB’s emerging strategy and internal reforms are motivated by the value of an operational shift in the organization’s offerings in the direction of a more inclusive and climate-friendly portfolio. Such a shift will bring notable development gains to Asia and the Pacific, and for ADB, signify a niche and a solid business proposition.
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