Fifty years after it began operations, the Asian Development Bank spent its golden anniversary looking to the past as it attempts to shape its future in a turbulent and unpredictable era.
In the decades since the bank’s 1966 launch, some $270 billion in loans and grants have been disbursed in a region that has experienced immense change over the past half century. But it is the present and future that loomed large during last week. With a rapidly changing global climate, a growing wealth gap, and mass youth underemployment in the region, development in Asia is becoming an ever more complex idea.
The bank offered a raft of new agreements on climate financing, technology, and gender and health. But ADB President Takehiko Nakao also reaffirmed the bank's central belief that infrastructure is the key to development.
Bank officials repeatedly highlighted the $1.7 trillion that the region is anticipated to need in infrastructure each year. That figure was also used to dispel talk that China's Asian Infrastructure Investment Bank could elbow out the ADB.
But cooperation, not competition, was what bank officials sought to stress.
Apart from co-financing deals with the AIIB and other banks, there was much talk about the growing role of public-private partnership. These partnerships will be used for everything from health care to education.
With the rise of private partnership, and with many countries shifting out of lower or middle income status, ADB officials spent the week agitating hard for the bank’s relevance.
At the close of the four-day meeting, here are the key takeaways of ADB’s 50th annual meeting in Yokohama.
Cooperation, not competition
That was the message sent by President Takehiko Nakao at his opening press conference. While many are keen to paint the emerging AIIB as a competitor of ADB, Nakao insisted the needs of the region are so great in the coming decades that more partners can only help.
“We can cooperate with the AIIB because they are focusing on infrastructure with a leaner system,” he told reporters Thursday. “We need more investment in infrastructure.”
In a speech given Saturday, Nakao drove home that message.
“According to a recent special report by ADB, Asia will need $1.7 trillion per year in investments in power, transport, telecommunications, and water through 2030. This is more than double our previous estimate, reflecting additional investments needed to support continued growth and address climate change,” he said. “I am optimistic about continued robust growth in Asia. There is strong demand, notably consumption by a growing middle class and increasing investment in infrastructure.”
The future is PPPs
As the bank doubles down on its belief that infrastructure is the key to driving economic development, it is making public-private partnerships a cornerstone of its Strategy 2030.
In its 2016 Development Effectiveness Review, the bank said it fell short of its targets for private sector operations. “To reach the 2020 target for private sector operations, approvals will need to increase by 66% during 2016–2020,” the report notes. Next year, ADB plans to introduce a new, non-sovereign operational framework to help it meet those targets.
The bank this week also launched a new dispute resolution mechanism specifically for PPPs, or what is called the Infrastructure Referee Program, whose goal is to help cut down delays and risks often seen in PPP projects. It also launched a publication called the PPP Monitor, which “tracks the development of the PPP business environment across ADB member countries and provides insight for the public sector on structuring a sound environment for PPPs.”
On Friday, meanwhile, ADB and Canada announced a joint $151 million trust fund to encourage private sector investment in climate change and gender-related projects.
PPPs, stressed ADB officials, are the key to continuing the region’s significant growth.
But not everyone is thrilled about the shifting direction.
“Rampant commercialization of government assets that are built up in communities over years do not actually grow the communities, do not actually provide them with a real living capacity to move beyond what has been the very reason ADB wanted to go in to address poverty issues,” said Karen Batt of PSI.
In his closing press conference, Nakao addressed how despite the bank’s seeming pivot to the private sector, he doesn’t see it as prevailing over public investments, noting “everything is important.”
See more Devex coverage of the ADB 50th annual meeting:
Fifty years on, ADB has built up a wealth of knowledge. This is a unique asset, insist ADB officials, that the bank can offer and that will ensure its relevancy in the decades to come.
In his press conference, Nakao explained that the reason a country like China, which has plenty of resources of its own, continues to borrow from ADB is hardly because of the money alone.
“Finance plus knowledge,” said Nakao.
Many countries in the Asia-Pacific region are expected to suffer serious impacts from climate change, a situation that threatens to unwind decades of hard won development.
Throughout the week, ADB officials made clear their commitment to combatting climate change.
On Sunday, the bank announced it would offer Fiji $1.5 million to support its presidency at COP23 and would join its advisory panel. A day earlier, Nakao told the opening session of the Board of Governors that the bank increased climate financing to $3.7 billion in 2016, up from $2.6 billion in 2015. On Friday, the bank and Canada launched the $151 million Canadian Climate Fund for the Private Sector in Asia II. It also released its 2016 Development Effectiveness Review, which found that “ADB’s climate change mitigation and energy projects, including renewable energy, achieved 100% of their intended outputs in 2016. Nearly half of all ADB projects supported climate change adaptation and mitigation efforts.”
The German government and ADB launched the Asia Pacific Climate Finance Fund, or ACliFF, on Saturday, another climate fund, but one that promises to be more flexible, comprehensive, and targeted toward small entrepreneurs that are at high risk from the effects of climate change.
But even as energy giants India and China are slowing the growth of new coal power plants, some worry the efforts may yet fall short. A number of countries have made nationally determined commitments, or NDCs, to cut their greenhouse gas emissions under the Paris agreement. But success requires big emitters such as the U.S. and China to significantly scale down their emissions, and governments, particularly in Asia, to shift to clean energy.
“I personally believe that whether the Paris agreement is achieved or not depends on what happens here in Asia. This is the region where electricity use is projected to double in the next 25 years or so, and right now most of that would be through coal,” Frank Rijsberman, director general of the Global Green Growth Institute, told Devex in a video interview. “So if we can’t convince the governments that they need to shift away from coal and use clean energy, I don’t think we’re going to be able to achieve the scenario of staying below 2 degrees.”
ADB, Rijsberman said, is a key player in getting countries to make the shift. The question is if the bank can be “nimble enough” to make this happen.
Devex reporter Jenny Lei Ravelo contributed to the reporting of this story.
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