ADB ups lending and grant resources

Vincent Lingga, The Jakarta Post, Baku, Azerbaijan | Business | Mon, May 04 2015, 7:34 AM

The Asian Development Bank (ADB) is to increase its lending and grant resources by 50 percent to as much as US$20 billion annually after the board of governors approved a groundbreaking initiative to combine its lending operations: the Asian Development Fund (ADF) for poor countries and ordinary capital resources for middle-income members.

ADB President Takehiko Nakao told a news conference on the first day of the 48th ADB annual meeting in Baku on Saturday that the initiative, deliberated since 2013, would become effective in 2017.

“Combined with cofinancing, ADB’s annual assistance will reach as much as $40 billion in coming years from $23 billion in 2014,” Nakao added.

Last year alone, the Manila-based ADB leveraged a record $9.2 billion in cofinancing, which, combined with $13.7 billion from its own resources, saw total assistance reach $22.9 billion. 

Also in 2014, ADB and the Islamic Development Bank extended their cofinancing partnership until 2017, allocating up to $2.5 billion for projects across sectors including transportation, energy, urban development, social services, agriculture and private sector development. 

Nakao said that under the initiative, the ADB’s ordinary capital resources (OCR) would almost triple to about $53 billion in 2017 from $18 billion now. This will benefit middle-income coutries such as Indonesia, as they are currently entitled only to get loans from the OCR granted at maket-based rates, while the Asian Development Fund provides concessional loans and grants to poor countries.

 Acording to ADB reports, since its establishment in 1966, ADB has approved $30.19 billion in sovereign and nonsovereign loans, $432.06 million in technical assistance and $429.98 million in grants for Indonesia.

The ADB current country partnership strategy (CPS) for Indonesia focuses on inclusive growth and environmental sustainability, with priority given to natural resource management, education, energy, finance, transportation and water supply.

According to Nakao, the latest decision by the board of governors is a win-win situation because it will increase financial support for poorer members and expand capacity for operations in middle-income countries and the private sector. The merger of the two lending resources, he said, would also enhance ADB’s risk-bearing capacity and strengthen its readiness to respond to future economic crises and natural disasters. 

Nakao dismissed fears that the launch of the China-led Asian Infrastructure Investment Bank (AIIB) would lead to a battle over staff and projects, insisting that additional sources of finance such as the AIIB were welcome in view of the huge infrastructure gap in the region, which, he claimed, required at least US$8 trillion over the next 10 years.

“We will collaborate, cofinance and complement each other,” added Nakao after a meeting on Friday with Liqun Jin, secretary-general of the Multilateral Interim Secretariat of the Asian Infrastructure Investment Bank (AIIB).

More than 67 coutries in Asia — including Indonesia — Europe and Latin America have joined AIIB as founding shareholders, but Japan, perceived to be the dominant shareholder in the ADB, has not yet made up its mind.

The ADB, Nakao said, had answered questions from the AIIB at the staff level about procurement systems and safeguard policies, as well as legal issues. 

He acknowledged, however, that the bank needed to embark on initiatives to improve its work in the region. “We must make efforts to reform ourselves by increasing our lending capacity and strengthening knowledge and streamlining procedures,” Nakao added. 

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Finance Minister Bambang promotes new growth model

Vincent Lingga, The Jakarta Post, Baku | Business | Tue, May 05 2015, 8:04 AM 

Finance Minister Bambang Brodjonegoro said on Sunday the 1998 Asian economic crisis and the 2008 global financial crisis had prompted Indonesia to adopt a new growth model that emphasized inclusive and sustainable development with less dependence on commodities and on the international market.

“In the 1990s, Indonesia and most other developing countries in Asia emphasized high growth led by exports too much, but the two crises have prompted us to design and pursue a new growth model focusing on inclusive and sustainable growth,” Bambang told a seminar on Asian growth potential on the sidelines of the Asian Development Bank (ADB) annual meeting in Baku, Azerbaijan.

He added that the 2008 global financial crisis also provided Indonesia with the highly valuable lesson that it was not economically sustainable to depend too heavily on commodities and the international market. “So in 2009 when most countries suffered economic contraction, Indonesia was still able to grow by 4.9 percent because we relied on domestic consumer spending as the main growth driver,” said Bambang, who spoke as one of eight panelists at the seminar.

He cited macroeconomic and financial-sector stability, reduced dependence on commodities, downstreaming (adding value) of natural resources and connectivity to global supply chains as several of the main prerequisites for inclusive and sustainable growth.

Another panelist, China’s Finance Minister Lou Jiwei concurred saying that China also had embarked on a new program to stimulate domestic consumption to spur growth.

“After the 2008 global financial crisis we have become more realistic and set our new normal growth level down to 7 percent from an average 10 percent previously,” Jiwei noted.

ADB president Takehiko Nakao cited the latest ADB Asian economic outlook report as charting a still positive picture of the Indonesian economy this year, saying the government’s policy reforms would have an impact on economic growth sooner than expected.

The ADB forecast the Indonesian economy would grow by 5.5 percent this year and 6 percent in 2016, far more optimistic than estimates from the World Bank and the International Monetary Fund (IMF), which predicted the economy would grow by 5.2 percent this year.

But the ADB projection is based on the assumption that the new government’s rapid reform momentum is maintained, especially the acceleration in infrastructure building and budget disbursement.

Swiss governor of the ADB Beatrice Maser Mallor also emphasized the importance of inclusive growth for sustainable development because only with jobs could people have purchasing power.

The ADB “Asian Development Outlook 2015” report forecasts that developing Asia will maintain its strong economic growth of 6.3 percent this year and in 2016 supported by soft commodity prices and recovery in the major industrial 
economies.

Two other panelists at the seminar, Indian Finance Minister Arun Jaitley and Azerbaijan’s Finance Minister Samir Sharifov, also shared the same view that falling commodity prices were creating space for policy makers across the region to cut costly fuel subsidies and initiate other structural reforms. 

The finance ministers regarded this opportunity as one to build frameworks that would support more inclusive and sustainable growth in the longer term, pointing out that with such diverse circumstances in the region, different keys are needed to unlock growth. 

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ADB stronger on poverty alleviation, infrastructure

Vincent Lingga, The Jakarta Post, Baku | Business | Wed, May 06 2015, 8:02 AM 

The 67-member Asian Development Bank (ADB) ended its annual meeting on Tuesday with a 50 percent boost to its lending and grant resources to as much as US$20 billion a year and stronger institutional and financial capacity to help developing members prepare bankable infrastructure projects.

“This will scale-up our operations to eliminate poverty and promote sustainable development in the region,” ADB president Takehiko Nakao noted at the closing news conference in Baku, Azerbaijan. 

Nakao cited poverty, besides lack of infrastructure, as one of the region’s most pressing development challenges, pointing out that 544 million Asian people still lived on less than $1.25 a day. 

“However, according to a new measure developed by ADB last year, about 1.4 billion Asian people are categorized as poor — about 40 percent of the region’s total population. This is unacceptable,” Nakao added.

In infrastructure, ADB will focus on using the public-private partnership (PPP) plan more effectively, ensuring the operational sustainability of infrastructure projects and applying the highest standards for safeguard policies to protect people and the environment.

Nakao said ADB had undertaken rigorous vulnerability assessments for projects, as relatively small upfront investments based on such assessments could save lives and avoid large-scale infrastructure rehabilitation costs later.

He reiterated that ADB would cooperate and co-finance with the China-led Asian Infrastructure Investment Bank (AIIB) but based on “our shared understanding of the importance of international safeguard standards”.

In a related development on the sidelines of the ADB meeting here, the governments of Japan, Canada and Australia committed to providing a total of $64 million for an ADB facility to help developing member countries such as Indonesia prepare, structure and place PPP infrastructure projects in the market.

“Although there is keen interest to attract private investment into infrastructure, many countries still struggle with key success factors, mainly adequate implementation resources to prepare, structure and place transactions in accordance with international best practices,” noted Ryuichi Kaga, head of ADB’s PPP office, which was established last September.

Kaga cited Indonesia as a developing member that badly needed capacity building for infrastructure project preparations under the PPP plan.

The financial support will further be backed by the stronger institutional capacity ADB will gain from its PPP co-advisory agreement with eight global commercial banks to provide independent advice to governments in developing Asia on how best to structure PPP projects to make them attractive to private investors.

The eight banks are Bank of Tokyo-Mitsubishi UFJ, BNP Paribas, Credit Agricole CIB, HSBC, Mizuho Bank, Macquarie Capital, Societe Generale and Sumitomo Mitsui Banking Corporation.

ADB has estimated that developing Asia needs to spend $8 trillion between 2010 and 2020 on national infrastructure. Many governments hope to boost finance for energy, roads, railways, ports, airports, water and other key infrastructure through PPP projects.

The Indonesian government itself has estimated it needs at least $80 billion within the next year to speed up its infrastructure development. 

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