Innovative financing, private sector engagement — ADB's vision for middle-income Asia

Farmers at the Moc Market in Vietnam, one of the Asian Development Bank’s developing member countries that have reached middle-income status. Photo by: ADB / CC BY-NC

As more of the Asian Development Bank’s developing member countries or DMCs have now reached or are on their way to reaching middle-income status, that doesn’t mean these nations no longer need assistance or to borrow money, as they continue to suffer high unemployment, ageing populations or environmental hazards, among other development challenges.

That’s precisely why ADB has included how to address this issue as one of the 10 priorities in the so-called “Strategy 2020,” the Manila-based institution’s long-term development blueprint for Asia-Pacific and ADB’s own role in the region reviewed last week.

Ahead of this year’s annual meeting in Astana, Kazakhstan on May 2-5, we spoke to Safdar Parvez, senior planning and policy economist at ADB's Strategy and Policy Department, who told us more about how the bank is adapting its business model to accommodate the new middle-income DMCs, with a new focus on innovative financing, project development and private sector engagement.

To help these countries, Parvez explained that ADB must be more innovative in its approach and the way it tackles the separate development challenges for middle- and low-income countries. Here are more highlights from our conversation about the 2020 Strategy:

Inequality, sustainable economic growth, energy, infrastructure and climate change will likely be among the top development issues for Asia-Pacific to be tackled at the ADB annual meeting. Of these, which ones do think should be prioritized to further development progress, and why? How can the bank help further development progress in these priority issues?

All of these challenges feed into one another: without energy and infrastructure, it is difficult to have economic growth or reduce inequality. However, growth that does not reach all segments of society and is not inclusive, or growth that happens without consideration for environmental impact, will not be sustainable. At the same time, climate change considerations should be mainstreamed into infrastructure design to ensure its sustainability. We are concerned by all of these issues and have set 10 priorities, as outlined in the midterm review, to address them.

Does the bank have any major policy changes in mind regarding operations ahead of the 2020 Strategy mid-term review? If not, how does ADB plan to discuss this issue at the annual meeting?

The midterm review found that Strategy 2020 remains valid and relevant in its broad strategic directions. However, in response to the rapid changes in the region, ADB has set out 10 priorities, seven to sharpen and rebalance ADB's operations and three to increase ADB's capacity and effectiveness. These priorities seek to improve ADB operations on the ground, build skills, and provide better service to client DMCs.

Many of the bank's borrower countries are on their way to or have reached middle-income status. How will ADB rebalance and sharpen its 2020 Strategy to ensure its engagement strategy is in line with the changing needs and financial capacities of its borrower countries?

ADB will adapt its business model to provide relevant and effective development services for middle-income countries. While lending may remain at its core, assistance to middle-income may need greater emphasis on innovative financing, on project development, and on working with the private sector. The challenges facing middle-income countries may require ADB to be more innovative in its approach, with much greater importance placed on knowledge and technical assistance and use of country systems. Also differentiated approaches will be developed to address the separate development challenges of lower middle income and upper middle income countries.

In terms of implementation and partnerships, ADB has been focusing more on a performance-based approach. How do you think this will affect implementers and the bank's level of engagement, particularly on technical and financial assistance? Will the focus be on localization, value for money, or both?

Performance-based approaches are critical to achieve results on the ground in developing member countries. Performance-based approaches, insofar as they would increase the use of country systems, will necessitate upgrading such systems to international standards and building requisite institutional and governance capacities. Therefore, continued use of technical assistance will required to strengthen such capacities. At the same time, developing countries will continue to need substantial financial resources to meet their critical development gaps. At the same time, the demands for efficiency and effectiveness to obtain the required results will mean an expanded focus on value for money.  

How does ADB encourage its implementing partners to go "local" while making sure development programs are implemented effectively and efficiently? Where should monitoring and evaluation come in to play?

ADB is gradually promoting the use of country systems in developing member countries, in line with emerging capacities. At the same time, ADB itself continues to invest in building up technical and institutional capacities at the country and local levels to ensure that development projects and programs continue to be implemented efficiently and effectively.  Together with supporting developing countries improve country systems, ADB also supports building of domestic contracting and consulting industries from the point of view of strengthening their role and contribution to national development projects. ADB emphasizes monitoring and evaluation at the country and project levels through results-based country partnership strategies and robust project design and monitoring frameworks. ADB also places a growingly strong focus on strengthening country-level monitoring and evaluation systems.  

ADB has long been seen as an enabling partner by the Asia-Pacific region. But on a different point of view, what should the member governments do to assist ADB in making sure development in the region is sustainable and effective, as well as being seen as a major driver of development like the World Bank?

ADB is a preeminent development institution of the Asia-Pacific region. We work very closely with our developing member countries in helping them make progress on their development agendas. In this process, we also learn from their development experiences and apply relevant lessons to other developing member countries. Development projects achieve the best results in country situations where governments and other stakeholders assume full ownership of development projects, invest in requisite institutional, technical, and managerial capacities, and develop robust monitoring and evaluation systems.

At the latest APEC summit, Chinese President Xi Jinping outlined a plan for a development bank that will fund infrastructure projects in developing Asia. While still just a plan, the proposed bank is likely to duplicate the work of the ADB-administered ASEAN Infrastructure Fund. Will the proposed bank be discussed at all at the annual meeting — particularly on ensuring duplication of efforts is minimized — or is it still too early for such discussions?

Given the large unmet development challenges and needs faced by the Asia-Pacific region, ADB welcomes the emergence of new development partners and is keen to work with them to provide complementary support to meet these challenges. With the unmet development challenges being so substantial, the chances of any duplication of efforts can be avoided with careful coordination.

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See more:

How to keep ADB relevant in a changing Asia
Is the time ripe for China's own aid agency?
Where does ADB spend its money?
ADB's plans to make itself more relevant, responsive and effective
ADB: Cofinancing, partnerships to bridge Asia-Pacific’s development gap

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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.