Following a year of commitments and international agreements, the Asian Development Bank has announced that its operations and approvals have reached an all-time high of $27.15 billion in the past 12 months — an increase of around 19 percent from the $22.89 billion recorded in 2014.
The increase meant that in 2015, the bank was able to finance and implement more development projects in the region than ever before. And the provisional numbers, according to the bank, back the statement up: loans and grants to sovereign and nonsovereign clients grew by 23 percent to $16.58 billion (another record), while technical assistance and cofinancing were estimated at $144 million and $10.43 billion, respectively.
Indu Bhushan, director general of the strategy and policy department of the Manila-based institution, shared that given the growing stature of the countries in the region — and with it their demand for growth and development — it was natural for ADB to grow its operational numbers to help address such needs.
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“[There] is strong demand in the region. The region has of course huge demand for infrastructure and other development financing,” he told Devex in an exclusive interview. Asia-Pacific, according to bank estimates, needs about $800 billion per year on infrastructure investments alone. And this huge development demand is not likely to slow down any time soon, according to ADB estimates.
Asia-Pacific is the world’s most populous region and hosts two-thirds of the world’s poor. It is also a region where billions — perhaps trillions — of dollars of damage are consistently reported as a result of extreme weather events and other climate-related disasters.
But the region is also home of one of the most economically stellar groups of nations in the world. And as recently as last week, apart from ADB, the region also now plays host to two more multilateral financial institutions: the Shanghai-based New Development Bank, and the Beijing-headquartered Asian Infrastructure Investment Bank.
Officials from all three institutions have been cordial and diplomatic about the reality of a multi-MDB Asia-Pacific — with ADB and AIIB leaders vowing to collaborate on projects and bank operations — and they share, at least officially, the same sentiments: there is more than enough development programs to finance and issues to tackle in the region for the three banks to coexist without duplicating efforts.
However, questions remain as to how such efforts will pan out in practice. There is also the uncertainty on whether they can foster constructive competition to provide member countries with the most effective and efficient development programs, and whether the three regional institutions can each provide unique value-added elements in their operations moving forward.
In this case, ADB may have the advantage of history and experience. Asked what will characterize the bank’s operations in the coming year and beyond, Bhushan explained that it will focus more on President Takehiko Nakao’s vision of having a “faster, stronger and better ADB.”
“We'll continue to increase our lending, we'll continue to increase the quality of our lending, and continue to strengthen our partnerships,” he said. “We are a very respected institution in the region and we want to establish ourselves as the development bank of choice that people come to first.”
ADB management — despite facing recent internal issues concerning current and former employees regarding their benefits, compensations, and retirement plans — have been instituting reforms for the past year or so to improve operations, remain relevant in a fast-changing region, and provide more development solutions with more efficiency and maximum utility of resources.
Some of these reforms include a more streamlined procurement process, a faster approval process for certain projects, and the much-discussed merger of the bank’s two main financial instruments — the Asian Development Fund and the Ordinary Capital Resources.
But how did the fund merger — expected to almost triple the bank’s OCR equity from $18 billion to $53 billion — affect current operations when it was originally scheduled to start only in January 2017? The bank official explained that the board’s approval of the plan has given them the green light to expand resources and lend more.
“Suppose you know that you are going to get a huge bonus in December, you can already start to have more expenditure because you know money will come later even if you're spending more now,” Bhushan said. “The same thing is happening [with the merger].”
Bhushan said the results of these reforms have fueled the sizable increase in the bank’s operations — previously constrained by a smaller capital pool — and maybe even provide a glimpse of the future expansion of operational lending of the Manila-based financial institution.
“Because of the ADF-OCR merger, the headroom constraints were released so we could provide more resources and respond to those demands,” he said, adding that the merger will allow the bank to also increase its loans and grants portfolio by almost 21 percent to $20 billion from the current $16.58 billion.
Asked about the development issues that need to be focused for the Asia-Pacific region, Bhushan shared that while 2015 has been a year of agreements — including the Addis Ababa Action Agenda, the Sustainable Development Goals, and the Paris climate agreement — the next 12 months will be the time where “the real work starts.”
The next 12 months will surely be a challenging year for ADB. On top of continuing operations and implementation of development programs in the region, the bank is also — after eight years — going back to Europe to hold its 49th annual meeting in Frankfurt, Germany, in May to tackle a more sustainable cooperation approach as it attempts to stay relevant in development discussions and solutions in the Asia-Pacific region.
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