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.