Top ADB aid recipients in 2012

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There is a lot going on at the Asian Development Bank. The multilateral institution recently elected a new president  in former Japanese vice minister of finance for international affairs Takehiko Nakao and will be holding its annual meeting in Delhi, India, on May 2-5. The annual meeting will be guided by the theme “Empowerment through Development.”

Over the course of the past few years, ADB’s expenditures have grown steadily by an average of 18.6 percent per year. From fiscal year 2008 to 2012, ADB’s budget increased significantly from $12.2 billion to $21.6 billion. The share of non-sovereign expenditures, as part of the overall budget, has risen from 17.6 percent in 2008 to 58.5 percent in 2012. The largest pool of money is the Asian Development Fund which provides long-term loans at concessional rates for member countries that have low income per capita and poor credit standing. The Asian Development Fund has grown by only an average of 1.4 percent over the last three years.

ADB’s budget is classified into three main areas: (1) ordinary capital resources (2) special funds, and (3) co-financing.  The bank’s main budget sources are OCRs, which refer to short-term financial products that are generally lent at commercial rates to member countries that have attained high levels of economic growth. Special funds refer to financing partnership facilities and other trust funds that are administered and co-financed by ADB, including the Asian Development Fund. Co-financing refers to arrangements under which ADB and one or more donor governments finance a project or program in partnership with a developing country.

This Devex chart and analysis breaks down the top ADB aid recipients in 2012 as the regional development bank enters its 46th annual meeting under brand new leadership.

Uzbekistan

Total aid: $3.3 billion

Top sectors: Transportation and ICT (33.3 percent), energy (23.3 percent), water (11 percent)

From being the sixth-highest aid recipient in 2011, Uzbekistan received the largest aid in 2012. Aligned with the Uzbek government’s Welfare Improvement Strategy, ADB‘s aid assistance to the Central Asian country is focused on supporting its transformation into a modern industrial and service economy. A road reconstruction project is currently being implemented in Uzbekistan under the ADB-administered Central Asia Regional Economic Cooperation, which intends to develop Central Asian countries into transport corridors in order to facilitate cross-border trade in Europe and Asia. For 2012-2014, ADB allocated $2.4 billion for Uzbekistan according to the bank’s Country Partnership Strategy.

Vietnam

Total aid: $3.1 billion

Top sectors: Transportation and ICT (31.2 percent), energy (21.5 percent), agriculture and natural resources (13.8 percent)

Consistent with the government’s Socio Economic Development Strategy, ADB’s engagement with Vietnam supports the country’s goal to become an upper middle-income country and eventually a modern industrialized nation by 2020. Sustaining the country’s economic growth – which was hampered by significantly less lending due to bad loans in 2012 – is one of the bank’s main objectives in Vietnam. ADB is actively involved in policy dialogue over the country’s macroeconomic management, particularly in enhancing the country’s banking sector and tax system. ADB has allocated $385 million for 2013-2014 and $395 million for 2015 for the country.  

India

Total aid: $2.7 billion

Top sectors: Energy (34.6 percent) and transportation and ICT (31.5 percent)

India’s rapid growth has done very little to decrease economic inequality in the sub-continent. ADB’s aid assistance to the South Asian country aims to reduce interstate economic disparities by expanding its operations in lower income states. Key to the geographical expansion of ADB’s operations in India is enhancing the infrastructure of poor states in order to attract investments and improve basic service delivery.  In December 2012, the bank provided $300 million for a 900-km road renovation project in Chhattisgarh, which aims to improve rural residents’ access to market and social services. The bank’s third-largest shareholder is slated to receive $2.2 billion and $2.1 billion for 2013 and 2014 respectively from ADB. A new Country Partnership Strategy for 2013-2017 is also being drafted.

China

Total aid: $2.1 billion

Top sectors: Transportation and ICT (49.6 percent), energy (15.1 percent), water (12.2 percent)

Due to its ongoing geopolitical assertiveness in the region, China was seen as a potential challenger for control of ADB. However, as ADB’s fourth-largest aid recipient in 2012, China’s environmentally unsustainable economic growth needs to be addressed. The bank’s engagement in China therefore focuses on promoting inclusive development and environmental protection. Tackling the risks of the carbon-driven economy of the world’s most populated country has been one of the challenges of ADB’s climate change agenda. One of the recently signed loans of the bank to address China’s environmental problems is a package of $200 million that allows smaller cities to transform solid waste into sources of clean energy. As the world’s second largest economy, China is not eligible for ADF financing. For 2012-2014, ADB allocated indicative lending of $1.4 billion to its second-largest shareholder, according to the latest operational Country Partnership Strategy.

Bangladesh

Total aid: $1.6 billion

Top sectors: Energy (24.1 percent), transportation and ICT (21.2 percent), agriculture (14.7 percent)

The principal objective of ADB’s engagement in Bangladesh is to enhance economic growth and reduce poverty. In line with the government’s Sixth Five-Year Plan, the bank intends focus on Bangladesh’s transport connectivity, energy efficiency, and disaster risk reduction. In November 2012, ADB signed two loans worth $1 billion to support Bangladesh’s energy and finance industries. These comprised a $700 million loan to strengthen the country’s power supply and another for $300 million to boost the country’s financial market investments. In addition, ADB will administer a grant from the Japan Fund for Poverty Reduction, one of the bank’s trust funds, which will finance the trial production of innovative crop insurance products intended to protect the harvests of Bangladeshi farmers from natural disasters.

For 2011-2015, the country is set to receive a total of $4.5 billion in financing from the bank.

Thailand

Total aid: $1.3 billion

Top sectors: Energy (35.6 percent), transportation and ICT (20.3 percent), finance (16.4 percent)

Considered a regional economic hub, Thailand has been successful in reducing poverty levels. ADB’s engagement focuses on promoting private sector investment and regional connectivity, strengthening infrastructure and logistics, and addressing environmental degradation. In order to generate higher levels of private investment, non-sovereign lending has become a key component of ADB’s operations in Thailand, with an estimated $310 million currently being spent in renewable energy, environmental sustainability and water supply. In 2012, 80 percent of ADB’s aid to Thailand was from co-financing. The Southeast Asian country is set to receive financing worth $120 million and $340 million for 2013 and 2014, respectively. A new Country Partnership Strategy for 2013-2016 is also being formulated at the moment.

Indonesia

Total aid: $1.28 billion

Top sectors: Public sector management (18.8 percent), finance (14.9 percent), agriculture (14.3 percent), energy (13.5 percent)

The formulation of the government’s “pro-poor, pro-job, pro-growth, and pro-environment” national development plan shows that Indonesia has various challenges to overcome. Unlike in other countries, ADB’s aid to Indonesia is not concentrated on a few sectors. The country’s diverse and changing development needs require that the bank’s lending priorities and initiatives be constantly flexible. Public sector management received the largest ADB funding. The bank signed a $57.8 million loan in November 2012 to strengthen the auditing system of the highly decentralized Indonesian government. On the same month, ADB agreed to support a $300 million program that would improve the transport connectivity between the urban and rural areas of this large country. For 2013-2014 ADB – Indonesia’s top donor in 2012 – allocated $1.7 billion for the Southeast Asian nation.  

Pakistan

Total aid: $1.07 billion

Top sectors: Energy (22.6 percent), agriculture (16.4 percent), finance (14.2 percent), public sector management (13.4 percent)

ADB is Pakistan’s second largest donor in 2012. The bank’s assistance focuses on helping the country attract investments and create jobs. The bank recognizes that higher economic growth requires structural reforms, specifically in the areas of income generation and energy supply. To address current energy crisis, Pakistan gets natural gas from a 1,800-km pipeline that connects the country to Central Asia’s largest energy suppliers. After nearly two decades of negotiations, the Turkmenistan-Afghanistan-Pakistan-India pipeline project is operational and administered by ADB. Pakistan is set to receive $2.2 billion from ADB for 2013-2014.

Philippines

Total aid: $1.06 billion

Top sectors: Energy (25 percent), public sector management (20.2 percent), agriculture (14.8 percent)

The Philippines currently enjoys an upgraded credit rating and large volumes of capital inflows. The surge of financing into the country is a strong indication of sound macroeconomic management. However, as the country’s poverty incidence remains high, the bank’s partnership with the Philippines emphasizes higher but more inclusive economic growth. Promoting infrastructure investments is one of ADB’s main priorities in the country.  In December 2012, the bank inked a $300 million five-year program that supports electric-powered tricycles to address the transportation needs of Metro Manila and other urban areas in the Philippines. The country is set to receive an indicative $1.72 billion lending program from the bank for 2013-2014.

Kazakhstan

Total aid: $694 million

Top sectors: Transportation and ICT (59.4 percent), public sector management (16.6 percent), finance (14.1 percent)

ADB’s programming in Kazakhstan aims to assist the Central Asian country reach high-income status. The bank intends to foster economic competitiveness and diversification to facilitate job creation. Kazakhstan is seen to become a stable and progressive transport corridor that will connect Europe with Asia. A $1.3 billion highway modernization project under the CAREC program is now being implemented in the province of Almaty.  Based on the current Country Partnership Strategy for Kazakhstan, the bank allocated $1.6 billion for 2012 to 2016.

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About the author

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    Juan Carlos Concepcion

    Juan Carlos is an analyst at the Devex Manila Office where he provides business information by producing early intelligence, donor funding strategy, and project reports. A strong advocate of civic education, he also teaches undergraduate courses on Philippine politics and governance.