The ADB is Strengthening Support for Sustainable Development in Asia and the Pacific
When the Asian Development Bank (ADB) was established in 1966, Asia and the Pacific was a primarily agricultural and still largely poor region. Today it’s a very different story. Extreme poverty ($1.90 per day) declined from 55 % in 1990 to about 7 % of the total population of developing Asia of 3.8 billion people in 2015. The region is now a leading engine of global growth.
ADB has played a meaningful role in this transformation by financing high-quality development projects, providing policy advice, and mobilizing funding from outside the region. A key reason for ADB’s establishment was to attract resources from international capital markets. ADB issued Deutschemark-denominated bonds in Germany in 1969, followed by Austria and Japan (through the first yen-denominated Samurai bond) in 1970, and in the United States (with a AAA rating) in 1971.
ADB’s support for sustainable development has evolved with the region. In 2018, our lending and grant operations were a record $21.6 billion, an increase of 55 % from 2013 when I became President. Our new longterm corporate strategy—Strategy 2030—will guide our future efforts. Its priorities include (i) addressing remaining poverty; (ii) accelerating gender equality; (iii) tackling climate change, building disaster resilience, and enhancing environmental sustainability; (iv) making cities more livable; and (v) promoting rural development and food security.
Despite rapid progress, the region’s sustainable development agenda remains unfinished. Years of economic growth have caused severe environmental degradation and social impacts. Some cities in East and South Asia suffer from high levels of air pollution and are less livable. Inadequate waste management results in water pollution, including ground water. Deforestation and land degradation accelerate biodiversity loss and contribute to climate change.
A central challenge is how to help countries finance efforts to achieve the Sustainable Development Goals (SDGs). Given the size of the region’s population, meeting key SDGs on poverty, hunger, and lack of access to social services will depend critically on Asia and the Pacific’s success. The region also has opportunities to shape global efforts to reduce greenhouse gas emissions, as it accounted for 48% of global carbon dioxide emissions in the energy sector in 2016.
The scale of the funding needed is too great for governments to deliver on their own. ADB estimates that $1.7 trillion is needed annually for investments in infrastructure alone over 2016–2030 to maintain growth, eradicate poverty, and respond to climate change. More private investment is urgently needed but can be difficult to secure, especially given concerns about the risk of investing in developing countries.
How can multilateral development banks (MDBs) help countries achieve sustainable development? I see several key actions:
First is to increase support for private sector investment. In 2018, ADB’s private sector operations climbed to a record high of $3.1 billion. This was complemented by a record $7.2 billion in commercial cofinancing. We intend to expand private sector operations to number one-third of our total operations by 2024.
ADB’s lending and equity investments in private companies help generate jobs, growth, and innovation. We plan to expand and diversify these operations into new and frontier markets, scale up financing for agribusiness, support social sectors such as health and education, and widen coverage in transport, water, waste and sanitation, and information and communication technology. In terms of product innovation, ADB will strengthen credit enhancement activities to mobilize more cofinancing from private sector partners.
ADB’s Strategy 2030 will guide their future efforts
ADB private sector investments are already supporting efforts to combat climate change in many countries. In Samoa, for example, ADB supported the installation of up to 4 megawatts of solar power generation owned and operated by an independent power producer. The project is helping the country lower its dependence on fossil fuels and reduce carbon emissions. Secondly, MDBs must support public- private partnerships (PPPs). Well-designed and implemented PPPs can tap the significant funding and management expertise of the private sector for infrastructure and social services. ADB is providing transaction advisory services for projects in such countries as Bangladesh, Myanmar, Pakistan, and the Philippines. In addition to delivering much-needed transport, energy, and urban infrastructure, these advisory services are expected to strengthen the capacity of involved agencies and create a template for future PPPs. ADB’s involvement in PPPs, including through the use of its credit enhancement products, can effectively reduce investors’ risks and promote bankable projects. The third step is to explore new options to mobilize finance such as third-party funds for ADB’s private sector operations. Leading Asia's Private Infrastructure (LEAP) Fund, established in August 2016 with $1.5 billion of equity investment from Japan, has so far committed $497 million to education, health and clean energy projects in India, Indonesia, Mongolia, the Philippines and Thailand. A fourth action is to address climate change. In 2018, ADB approved $3.6 billion in financing for climate change adaptation and mitigation. Our work includes scaling up support to address climate change, disaster risks, and environmental degradation; accelerating efforts to reduce greenhouse gas emissions; ensuring a comprehensive approach to building climate and disaster resilience; promoting environmental sustainability; and increasing the focus on the water– food–energy security nexus.
ADB aims to ensure that by 2030 at least 75% of its committed operations will support climate change mitigation and adaptation. Climate finance from ADB’s own resources is targeted to reach $80 billion for 2019–2030. ADB has successfully accessed concessional financing from multilateral climate funds such as the Green Climate Fund and Climate Investment Funds to scale up its climate operations. In addition, multi-donor trust funds such as the Asia-Pacific Climate Finance Fund, established in 2017 with initial support from Germany, will enable ADB to support the development and implementation of innovative financial risk management products such as guarantees and insurance to help unlock capital for climate investments. A fifth priority is to integrate advanced technologies such as AI, robotics, and satellite imaging into our operations and to pursue quality. There are many opportunities to use technologies in financial inclusion, health, and education in remote areas, and make infrastructure more resilient to severe and frequent weather events. ADB's procurement policy encourages borrowers to place increased emphasis on quality and value for money throughout the procurement cycle. ADB established sector groups such as energy, transport, water, urban, and health as well as thematic groups such as gender and climate change so that knowledge is shared across regional departments and partnerships with knowledge institutions across the world are strengthened.
Major role of German companies in ADB projects
Sixth is implementing safeguard policies regarding social and environmental impacts – critical elements of MDB projects. Although safeguard policies are sometimes regarded as a burden to countries, they are in fact a service to help countries address such issues as resettlement of indigenous people and environmental damage to forests and river basins. ADB is sharing its knowledge about safeguard policies with the newly established Asian Infrastructure Investment Bank.
Seventh, MDBs should integrate social considerations into infrastructure investment, in line with Principle 5 of the G20 Principles for Quality Infrastructure Investment adopted at the G20 Finance Ministers and Central Bank Governors Meeting in Fukuoka, Japan, in June 2019. For instance, ADB includes gender equality elements in its infrastructure work such as women-friendly facilities in transport and urban projects, and in health and education projects. In Bangladesh we support scholarships for women engineers in an energy transmission project.
Finally, stronger partnerships are crucial. Cooperation between countries is a prerequisite for sustained development. ADB is the region’s leading multilateral sponsor of regional cooperation and will continue to foster regional cooperation through subregional cooperation platforms in the Greater Mekong Subregion, Central Asia, South Asia, Southeast Asia, and the Pacific. No single development organization can hope to address sustainable development challenges without help. In each of these areas, therefore, collaboration with other development partners is central to our work. ADB places great importance on collaboration with bilateral development institutions in member countries, including Germany. Over the past 5 decades, Germany has contributed $6.39 billion in capital subscriptions and $2 billion in resources for Special Funds, dedicated to ADB’s poorest developing member countries. German companies have played a major role in ADB projects, with nearly $6 billion in procurement contracts involving goods and services originating in Germany. Achieving the SDGs will require intensified cooperation between development organizations, their member countries, and increasingly with the private sector. With the strong support of partners like Germany, ADB will continue to play a meaningful role in completing the region’s development agenda.