Early insights into ADB's priority sectors for 2018-2020

MANILA — In 2017, the Asian Development Bank merged its lending windows so as to allow it to increase and expand its lending portfolio amid growing resource needs of its member countries and in the face of competition from emerging sources of infrastructure funding in the region. But where might the bank allocate those resources? The data isn’t complete yet, but available information from the bank’s 2018-2020 country operations business plans for 37 developing member countries — which Devex examined over the past few weeks — provides early indications on priority sectors and how much money is expected to flow to countries. It also provides insights on some of ADB’s biggest projects for climate financing, which plays a central role in the bank’s upcoming strategy. The data reveal that indicative ADB commitments — which can change in the course of discussing or negotiating projects — to the 37 member countries will reach more than $75 billion over the next three years. The bulk of the money is likely to come from the bank’s lending windows, with less than 5 percent forming grants and technical assistance. A large part of that funding is projected to cover projects in the transportation sector, followed by projects related to energy, and governance and institutional development. A quarter of the projected funding is expected to be spent in India, where the bank aims to support the country in its quest to address current bottlenecks toward further and sustainable economic growth. This includes improving the environment for investments and boosting the skills and capacity of workers in high-growth areas such as in manufacturing, but for the most part, the investments will be in infrastructure development focused on improving India’s connectivity and urban settings. Some of the projects is also focused on building India’s environmental sustainability and climate mitigation efforts and resilience. An emerging sector The data reveal ADB’s growing portfolio on governance and institutional development, which, based on Devex estimates that included 2017 projects, totaled $18 billion or 15.8 percent. Note that this sector is not an official classification. Rather, Devex uses the sector “governance and institutional development” to broadly encompass a number of sectors from the World Bank Group’s official classification. All the sectors under this “umbrella” category are related to public administration, public institutions, and provision of social services. Projects under this category include a $500 million Affordable Rural Housing Program in Uzbekistan, a $400 million Trade and Competitiveness Program in Pakistan, and a $900 million worth of two Fiscal and Public Expenditure Management Subprograms in Indonesia. Climate finance Climate change is a major concern in many countries across the Asia Pacific region where ADB operates. It is contributing to the increasing intensity and frequency of natural disasters and extreme temperatures, threatening the existence of small island developing states, putting a strain on food and water sources, and posing health risks. Already, the region’s average losses due to disasters amount to $200 million daily, according to ADB estimates, and this is expected to rise even further with the region’s rising vulnerabilities to climate change. ADB, made aware of the impacts of climate change in the region and the increasing needs of its member states to mitigate its effects, has made climate change a central part of its work. In 2017, the bank launched an operational framework that will provide long-term direction for ADB in supporting its member states in their efforts toward climate resilience and in lowering their greenhouse gas emissions. The framework is aligned with ADB’s strategy to 2030, currently being drafted, but in which ADB places emphasis on building a “more inclusive, sustainable and resilient Asia and the Pacific.” Given the centrality of addressing the impacts of climate change in the region in ADB’s future work, we looked at data in the country operation business plans to get an understanding on how much ADB is projected to spend on climate financing to 2020 and the types of projects the bank plans to finance within this time frame. Data presented here is meant to provide early insights to those looking to engage on business opportunities with ADB and are based on Devex estimates, thus should be viewed as preliminary information. As data from ADB’s country business operation plans do not explicitly detail whether a project covers climate financing or not, Devex relied on a list of keywords and pulled data from projects whose titles and descriptions included "adaptation," "climate," "disaster,” "efficiency,” "green,” “mitigation,” "resilience," "solar," and "wind." The data shows some consistency with ADB’s climate financing trends, and puts ADB in a good position to meet its climate financing target of $6 billion by 2020. In 2017, the bank reached a record of $4.5 billion in climate financing, according to preliminary figures released last month. Based on Devex estimates, some of ADB’s biggest climate-related projects active since 2017 or still in the pipeline include a $3.2 billion Green Energy Corridor and Grid Strengthening Project and $1.08 billion Solar Rooftop Investment Program in India; a $1.06 billion Power Generation Efficiency Improvement Project in Uzbekistan; four projects on Sustainable Energy Access in Eastern Indonesia with a total cost of $3.2 billion; a $768.2 million disaster management fund, and $1.14 billion hydropower development investment program in Pakistan; and a $740 million hydropower project in Dudh Koshi, Nepal. The amounts provided are the total estimated requirements of each project. ADB will be providing part of the money required, but the bank expects part of each project’s total will be shouldered by a third-party financier. In most cases, this is the borrowing government, but there are instances when part of the funding will be financed by other funders, such as for example the Japan Fund for Poverty Reduction or a bilateral donor such as Australia or the United Kingdom’s Department for International Development.