ADB Annual Report 2015
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ADB Annual Report 2015

Scaling Up to Meet New Development Challenges

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ADB Annual Report 2015

Scaling Up to Meet New Development Challenges

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The global development agenda changed dramatically in 2015. The international community adopted new sustainable development goals and agreed a new deal to tackle climate change. Both of them require massive financing and new ways of thinking about development. The 2015 Annual Report documents how ADB foresaw these changes and scaled up quickly to meet the monumental development challenges in Asia and the Pacific. In the process, ADB's total operations surged to $27.17 billion in 2015—the highest in ADB's history.

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Year
2016
ISBN
9789292575526
SCALING UP TO MEET NEW DEVELOPMENT CHALLENGES
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5.7%
EXPECTED ANNUAL GROWTH IN THE ASIA AND PACIFIC REGION IN THE NEXT 2 YEARS
The development landscape is changing. While the incidence of poverty continues to fall at record rates, development goals are becoming more ambitious and the outcomes more closely scrutinized.
Between 1990 and 2012, more than a billion people in Asia and the Pacific were lifted out of extreme poverty. Most countries in the region have since achieved middle-income status and their citizens now enjoy a better quality of life. The immediate outlook for Asia and the Pacific is also positive. Although economic growth has slowed from a high of 9.4% in 2010, the region is expected to post stable growth of about 5.7% for the next 2 years.
Despite these admirable achievements, half of the world’s poorest people still live in Asia and the Pacific. In October 2015, the international poverty line was adjusted to $1.90 a day, in 2011 purchasing power parity. Using this measure, about 451 million people in Asia and the Pacific, or one in every eight people, were still living in extreme poverty in 2012. The region also faces entrenched inequality, substantial infrastructure gaps, inadequate public services, and significant environmental risks.
There are also downside economic factors looming for Asia and the Pacific. Lower global commodity prices, declining trade due to slower growth in the People’s Republic of China (PRC), reduced remittances, financial volatility, and pressure on exchange rates may affect the region’s prospects.
At the same time, international development objectives are undergoing profound changes. In September 2015, the international community adopted a new global development agenda—the Sustainable Development Goals (SDGs)—which underscores the need for greater inclusion, more attention to climate change, promoting sustainable development, and ending poverty in all its forms.
The momentum of change continued in December when a new climate deal was forged during the 21st Conference of Parties on Climate Change (COP21) in Paris. In a showing of unprecedented solidarity, 195 countries signed a legally binding agreement to keep global warming below 2°C. This will require massive support for international climate financing and technical assistance.
ADB IN THE NEW DEVELOPMENT ENVIRONMENT
ADB is fully committed to playing a central role in financing the SDGs and supporting the COP21 agreement.
In July 2015, ADB joined other multilateral development banks for the Third International Conference on Financing for Development in Addis Ababa. The conference produced a renewed commitment to bolster financial support, technical assistance, and policy advice to back the new global development agenda.
ADB IS FULLY COMMITTED TO PLAYING A CENTRAL ROLE IN FINANCING THE SDGs AND SUPPORTING THE COP21 AGREEMENT
To deliver on this commitment, ADB is scaling up its capacity to meet new development challenges. The most significant move in this process is the approval in April of the merger of ADB’s concessional Asian Development Fund (ADF) loan portfolio with its ordinary capital resources (OCR) balance sheet, effective January 2017. Combining these resources will almost triple ADB’s equity base from about $17.5 billion to about $49 billion. A major benefit of the merger is that ADB will be able to increase assistance to developing member countries (DMCs) by up to 50%. ADB assistance to lower-income countries—those most in need—will rise by up to 70% by 2026. While the merger will become effective in January 2017, ADB has already started to scale up its operations. In 2015, OCR and ADF loan and grant approvals reached a record $16.29 billion, compared with $13.49 billion in 2014. Including technical assistance and cofinancing, total operations were $27.17 billion in 2015.
In October, ADB commenced negotiations with donors to replenish the ADF (11th replenishment) and the Technical Assistance Fund (6th replenishment). For the ADF, ADB has reached agreements with donors on strategic priorities for the 2017–2020 replenishment period—the first following the merger of concessional funds with OCR—and changes to the allocation mechanism to better serve the needs of recipient countries, especially small and fragile countries.
As well as providing larger volumes of financing, ADB intends to play a greater role in helping countries to use their own resources. It is strengthening its collaboration with other development partners, including new multilateral finance institutions such as the Asian Infrastructure Investment Bank (AIIB) and the New Development Bank. ADB has already started identifying potential cofinancing projects with AIIB in such areas as transport, renewable energy, urban infrastructure, and water supply.
ADB is also undergoing internal reforms to support the scaling up of operations. Following the approval of the Midterm Review of Strategy 2020 Action Plan in 2014, ADB began making comprehensive operational and organizational changes to streamline business processes and improve its effectiveness.
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STRATEGIC FOCUS: EMBRACING A BETTER FUTURE FOR ALL
In 2015, ADB continued to strive for inclusive economic growth across Asia and the Pacific. It invested in a range of programs and projects to create and expand economic opportunities, ensure broader access to these opportunities—especially for the poor and disadvantaged—and support social protection to reduce poverty and vulnerability. For instance, in India, a $273 million road project will create economic opportunities for people in selected rural states, by enhancing their access to markets and other centers of socioeconomic activity. In April, ADB revised its Guidelines on Inclusive Economic Growth to help ensure that each of its country partnership strategies adequately reflects how it will support inclusive economic growth. ADB drives social protection by ensuring access to essential services for disadvantaged people, including widows, the jobless, children in poor households, and people with disabilities. In Mongolia, a $150 million investment will help sustain financing for social welfare programs while the government reforms these programs. ADB is investing in a host of other projects to help expand health and education to disadvantaged people, bridge gender gaps, and deepen financial inclusion.
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ADB is committed to environmentally sustainable growth in Asia and the Pacific. In 2015, it approved 65 loan and grant projects for more than $7 billion, contributing to environmental sustainability. In June, to address the interconnected challenges of food security, agriculture, and environmental sustainability, ADB released its Operational Plan for Agriculture and Natural Resources, 2015–2020. The plan emphasizes the need to improve the management of natural resources and build climate resilience. In September—3 months prior to COP21 in Paris—ADB announced it would double its commitment to climate finance, with a target of $6 billion in direct climate investment annually by 2020.
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In 2015, ADB invested $3.8 billion—which leveraged $406 million in cofinancing—for regional cooperation and integration projects. This was supported by $94 million of technical assistance. ADB helped finance road improvement from Eindu to Kawkareik, enhancing trade between Myanmar and Thailand, and provided assistance to Samoa and Palau to broaden access to affordable information and communication technology services through a submarine cable network. ADB also helped the South Asia Subregional Economic Cooperation Program finalize motor vehicle agreements between Bangladesh, Bhutan, India, and Nepal and between India, Myanmar, and Thailand. These agreements will open routes to greater flows of passengers and freight. ADB is also preparing its Bank-wide Regional Cooperation and Integration Operational Plan, 2016–2020. The plan will address the region’s common challenges by strengthening connectivity, competitiveness, and cooperation in regional public goods and collective action through regional policy dialogue, regional institutions, and regional agreements.
$16.3 B
ADB’S RECORD LOAN AND GRANT APPROVALS IN 2015
SECTOR HIGHLIGHTS: BALANCING NEEDS ACROSS THE REGION
ADB invested $2.5 billion in clean energy projects across Asia and the Pacific in 2015. These investments will result in 618 megawatts of additional capacity generated from renewable energy, 4.5 terawatt-hours in electricity savings, and 24 million tons of carbon dioxide avoided when the projects are up and running. In 2015, ADB approved the first results-based loan for the strengthening of Indonesia’s electricity grid, followed by an industrial energy efficiency project in the PRC, supported transmission of renewable energy and regional energy trade in India, and promoted renewable energy development in the Maldives.
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ADB provided $2.8 billion directly to the transport sector and also to transport components of other sector’s projects in 2015, with an increasing emphasis on sustainability. A road safety project in Shaanxi in the PRC will see $200 million invested to introduce safety features expected to reduce road fatalities and serious injuries by 25%. In India, ADB invested $273 million in a rural connectivity program for 6,124 kilometers of all-weather roads. The project, designed with participation of local communities, includes training on road asset management, and provides employment opportunities to women. In Bangladesh, ADB approved a $200 million rail project for new trains and upgrades to the main lines on the key Dhaka–Chittagong and Dhaka–Khulna transport corridors.
SCALING UP
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Innovative Thinking Paves the Way to Scale Up
For over 40 years, low-income developing member countries of ADB received concessional loans and grants from the Asian Development Fund (ADF), while market-based loans were made from ADB’s ordinary capital resources (OCR).
Anticipating the emergence of the Sustainable Development Goals and the new thinking behind the Financing for Development agenda, ADB was already considering innovative ways to scale up operations to address evolving development needs.
In April 2015, the ADB Board of Governors and donors to the ADF unanimously consented to the merger of the ADF lending operations with the OCR balance sheets. This innovation allows ADB to leverage its concessional lending in a manner unique among multilateral development banks.
The merger increases ADB’s capacity first and foremost to support lower-income countries while it is also beneficial for middle-income countries. It also enhances ADB’s risk-bearing capacity to further support private sector operations. ADB will be in a stronger financial position to respond to any future economic crises and natural disasters. At the same time, the merger substantially reduces expected financing contributions from ADF donors.
To support the pursuit of the Sustainable Development Goals across Asia and the Pacific, the merger will allow ADB to bolster assistance to developing member countries in the coming years by as much as 50%. Lower-income countries—those which have traditionally received ADF loans and grants—will be the key beneficiaries. ADB assistance to these countries will rise by up to 70%, from the current level of $6.5 billion to $7.5 billion–$11 billion by 2026.
From 2017 onward, the ADF will focus exclusively on providing grant assistance to the most debt-distressed countries in Asia and the Pacific. ADB will provide concessional and market-based loans from the expanded OCR balance sheet.
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Over the year, ADB approved more than $2 billion for urban development projects. It maintained a focus on inclusive development and environmentally sustainable cities, to expand access to public services and improve mobility. ADB invested $450 million into projects to improve the urban environment of selected cities in three provinces of the PRC. The Urban Financing Partnership Facility allocated $15 million in financing to about 10 projects. This financing will improve the environmental conditions and livability in urban areas, and the ability of infrastructure to withstand the impacts of climate change. ADB’s Future Cities Program will, over a 15–20 year period, engage with select cities to develop planning principl...

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