Asian Development Bank

Asian Development Bank (ADB) isa regional development bank that promotes social and economic development in Asia. Asian Development Bank (ADB) was founded on 19 December 1966. In this article, you will learn about Asian Development Bank, objective, headquarters, role, history, organisation, achievements of Asian Development Bank providing key insights for GS Paper-II International Relations section of UPSC IAS Exam.

Table of Content

• What is Asian Development Bank (ADB)?              
• Objectives and Functions of Asian Development Bank (ADB):       
• Features of Asian Development Bank (ADB):        
• Organization structure of Asian Development Bank (ADB):            
• Member Countries of Asian Development Bank (ADB):   
• Types of financing provided by the Asian Development Bank (ADB):          
• History and contributions of Asian Development Bank (ADB):      
• Examples of Projects assisted by Asian Development Bank (ADB):              
• Criticisms of the Asian Development Bank (ADB):              
• Difference between world bank and Asian Development Bank (ADB)        
• Conclusion         
• Frequently Asked Questions       
• Reference           

What is Asian Development Bank (ADB)?

• The Asian Development Bank (ADB) is a regional development bank established in 19 December 1966 that aims to promote social and economic development in Asia.

Objectives and Functions of Asian Development Bank (ADB):

Objectives of Asian Development Bank:

• The main goal of the ADB is to combat poverty in Asia and the Pacific through inclusive economic growth, sustainable development, and regional integration.
• ADB achieves this by providing investments, such as loans, grants, and information sharing, in various sectors such as infrastructure, healthcare, finance, and climate change adaptation.
• Areas of Focus ADB’s lending: Education;Environment, Climate Change, and Disaster Risk Management; Finance Sector Development;Infrastructure;Regional Cooperation and Integration.

Functions of Asian Development Bank:

• Finance Sector Development: Financial sector and capital market development includes microfinance, small and medium-sized enterprises, trade finance and regulatory reforms to decrease poverty in Asia and the Pacific.
  • This was prioritised by the Private Sector Operations Department (PSOD) since 2002.
• Infrastructure: ADB supports the development of infrastructure, including transportation, communication, energy, water supply, sanitation, and urban development.
• Regional Cooperation and Integration: ADB promotes regional cooperation and integration, which enhances economic growth, reduces poverty and inequality, boosts productivity and employment, and strengthens institutions.
• ADB’s Private Sector Operations Department (PSOD) provides private sector lending including guarantees, equity, and mezzanine finance.
• ADB provides “hard” loans at commercial rates to middle-incomecountries and “soft” loans at lower interest rates to poorer countries in the region.
  • Both types of loans are sourced from the bank’s Ordinary Capital Resources (OCR).
• ADB acquires funding through bond issuances in global capital markets and relies on member countries’ contributions, earnings from lending operations, and loan repayments.

Features of Asian Development Bank (ADB):

• Headquarters of ADB is located in Mandaluyong, Metro Manila, Philippines.
• ADB operates 42 field offices in Asia and the Pacific and representative offices in Washington, Frankfurt, Tokyo and Sydney.
• ADB admits members from the UN Economic and Social Commission for Asia and the Pacific (UNESCAP) and non-regional developed countries.
• ADB’s total membership includes 68 countries.
  • Niue was the last member of Asian Development Bank.
• ADB closely follows the model of the World Bank, by using a weighted voting system that aligns with members’ capital subscriptions.
• ADB bank publishes an annual report that provides an overview of its activities, budget, and other relevant information for public scrutiny.
• Through the ADB-Japan Scholarship Program (ADB-JSP), students are enrolled in academic institutions across 10 countries in the region who will then contribute to the economic and social progress of their home countries.
• ADB holds the status of being an official United Nations Observer.
• The largest shares in ADB are held by Japan and the United States followed by China, India and Australia.

Organization structure of Asian Development Bank (ADB):

Board of Governors:

• The Board of Governors serves as the highest governing body of the bank and comprising a representative from each member countries.
• Among the Board of Governors, twelve members of ADB and their deputies are elected to form the board of directors.
• While eight of these members are selected from regional (Asia-Pacific) members, the remaining members are chosen from non-regional members.

President of ADB:

• The bank’s president also serves as the chairperson of the board of directors and oversees ADB’s operations.
• The bank’s president is elected by the Board of Governors.
• The president holds a five-year term and can be re-elected.
• Historically, the position of president has been held by a Japanese individual, due to its largest shareholding in the bank.
• The current president of ADB, Masatsugu Asakawa had assumed office on January 2020.

Member Countries of Asian Development Bank (ADB):

• 49 of 68 members are from the Asian and Pacific Region, while the remaining 19 members are from Other Regions.
• When a country decides to end its membership, the Bank facilitates the repurchase of that country’s shares as part of the settlement of accounts, following the provisions stated in paragraphs 3 and 4 of Article 43.

Country	Year of Joining
Afghanistan	1966
Armenia	2005
Australia	1966
Austria	1966
Azerbaijan	1999
Bangladesh	1973
Belgium	1966
Bhutan	1982
Brunei	2006
Cambodia	1966
Canada	1966
China	1986
Cook Islands	1976
Denmark	1966
Fiji	1970
Finland	1966
France	1970
Georgia	2007
Germany	1966
Hong Kong	1969
India	1966
Indonesia	1966
Ireland	2006
Italy	1966
Japan	1966
Kazakhstan	1994
Kiribati	1974
Kyrgyzstan	1994
Laos	1966
Luxembourg	2003
Malaysia	1966
Maldives	1978
Marshall Islands	1990
Micronesia	1990
Mongolia	1991
Myanmar	1973
Nauru	1991
Nepal	1966
Netherlands	1966
New Zealand	1966
Niue	2019
Norway	1966
Pakistan	1966
Palau	2003
Papua New Guinea	1971
Philippines	1966
Portugal	2002
Samoa	1966
Singapore	1966
Solomon Islands	1973
South Korea	1966
Spain	1986
Sri Lanka	1966
Sweden	1966
Switzerland	1967
Taiwan	1966
Tajikistan	1998
Thailand	1966
Timor-Leste	2002
Tonga	1972
Turkey	1991
Turkmenistan	2000
Tuvalu	1993
United Kingdom	1966
United States	1966
Uzbekistan	1995
Vanuatu	1981
Vietnam	1966

Types of financing provided by the Asian Development Bank (ADB):

• The Asian Development Bank (ADB) provides financial support for both private and public sectors.
• Private financing aims to drive investments towards develop and sustainable and inclusive growth in the region.
• Public-sector financing offers member countries the flexibility to pursue their development goals effectively.
• Sovereign financing portfolio includes 713 loans, 392 grants, 915 technical assistance (TA) projects, one guarantee, and one equity investment.
  • These financial instruments support member countries’ development aspirations.

History and contributions of Asian Development Bank (ADB):

1970s-1990s

• During the 1970s, the Asian Development Bank (ADB) has expanded its assistance to developing countries in Asia, encompassing education, health, infrastructure, and industry.
• The growing Asian economies has led to a demand for improved infrastructure to support their economic growth, prompting ADB to focus on enhancing roads and electricity provision.
• When the first oil price shock occurred, ADB has supported energy projects, particularly towards the development of domestic energy sources in member countries.
• ADB has increased its assistance to energy projects following the second oil crisis.
• In 1982, ADB had established its first field office in Bangladesh and expanded its collaboration with non-government organizations (NGOs) during the same decade.
• In the 1990s, ADB promoted regional cooperation among countries along the Mekong River, facilitating trade and collaboration.
• In response to the financial crisis that struck the region in the mid-1990s, ADB has implemented projects to strengthen financial sectors and established social safety nets for the poor.

After 1990s:

• In 1996, ADB members have supported the formation of Asian Development Bank Institute (ADBI) was established to develop strategies for Asia and the Pacific.
• ADB has approved its largest single loan during this crisis by providing a $4 billion emergency loan to South Korea.
• ADB has adopted poverty reduction as its goal in 1999.
• In 2008, the Board of Directors had adopted the Long-Term Strategic Framework (LTSF), which assists private sector development as ADB’s primary priority.
  • It will constitute 50% of the bank’s lending by 2020.
• The bank provided support during natural disasters, epidemic, including the 2004 Indian Ocean earthquake and tsunami and the severe acute respiratory syndrome (SARS) epidemic.
• In 2009, in response to the global economic crisis, Board of Governors of ADB has tripled the bank’s capital base to $165 billion.
  • This increase of 200% was the largest in ADB’s history and the first since 1994.
• In 2017, ADB has merged the lending operations of its Asian Development Fund (ADF) with its Ordinary Capital Resources (OCR).
• In 2020, ADB had extended a $2 million grant from the Asia Pacific Disaster Response Fund to support the Armenian government’s fight against the spread of the COVID-19 pandemic.
• The ADB has established the Asia Pacific Vaccine Access Facility (APVAX) in 2020 with a funding commitment to supports vaccine procurement, logistics, and distribution across the Asia Pacific region.

Examples of Projects assisted by Asian Development Bank (ADB):

• Afghanistan: Hairatan to Mazar-e-Sharif Railway Project
• Armenia: Water Supply and Sanitation Sector Project
• Bhutan: Green Power Development Project
• India: Rural Roads Sector II Investment Program; Agartala Municipal Infrastructure Development Project
• Indonesia: Vocational Education Strengthening Project
• Laos: Northern and Central Regions Water Supply and Sanitation Sector Project
• Mongolia: Food and Nutrition Social Welfare Program and Project
• Philippines: North–South Commuter Railway Project (Malolos–Clark Railway Project and South Commuter Railway Project), funded along with Japan International Cooperation Agency
• Solomon Islands: Pacific Private Sector Development Initiative

Criticisms of the Asian Development Bank (ADB):

• There is a huge influence of major donors like Japan and the United States on lending, policies, and staffing decisions.
• ADB lacks sensitivity towards local communities as their projects can negatively impact the human rights of poor and marginalized communities.
• The United Nations Environmental Program has criticized the ADB as a significant portion of the rural population, who rely on natural resources for their livelihoods, has been bypassed by the bank’s growth.
• ADB’s large-scale projects are related to social and environmental damage due to inadequate oversight.
• Its role in the food crisis has been criticised as it has disregarded warnings and pressurised governments to deregulate and privatize agriculture, leading to issues like the shortage of rice supply in Southeast Asia.
• The Private Sector Operations Department (PSOD) of the ADB has not achieved its target of 50% financing to the private sector by 2020.
• The PSOD is the only department generating profits for the ADB, while the majority of loans are provided to the public sector at concessional rates, causing financial difficulties and operating losses for the bank.

Difference between world bank and Asian Development Bank (ADB)

World Bank	Asian Development Bank (ADB)
World Bank has a world-wide coverage.	Asian Development Bank is a regional grouping.
World Bank provides assistance to all its member states.	ADB only provides assistance to Asian countries.
World Bank almost includes each country in the world.	Financing member countries are lesser.
World Bank covers more themes and projects then ADB.	The size of ADB’s assistance programme is smaller than the WB’s.
The WB private sector activities are addressed by another member of its group called the International Finance Corporation.	ADB itself has a private sector department.

Conclusion

Asian Development Bank has played a key role in funding and supporting many of its member nations at the time of crises ranging from epidemic to natural disasters. Such regional grouping shall be given more power, functions and fundings to enhance its role and make the region more developed than before. Asian Development Bank shall make more efforts to make the development more inclusive in order to achieve more inclusive and all-round growth.

Ref:Source-1

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