More private sector support is crucial, says ADB President

4th May 2016 Richard Forster

The President of the Asian Development Bank (ADB) has stressed the importance of promoting private sector development in his opening address at the Annual Meeting of the ADB, which is taking place in Frankfurt.

“The private sector is the engine of growth. It drives innovation and creates opportunities. It is the basis for Asia’s vibrant future,” said Takehiko Nakao, President of the Asian Development Bank.

As well as reiterating the bank’s commitment to double its climate finance to US$6 billion by 2020, which he first announced in September 2015, Nakao said one of the bank’s priorities was to stimulate investment by private partners in the business sector.

“We provide loans, equity investments, and guarantees to private companies that build and operate important infrastructure and for every dollar ADB provides, we mobilise at least US$4 more in commercial co-financing.”

ADB’s direct financing of private sector companies and projects amounted to US$2.6 billion in 2015, a 37 percent increase on the previous year. ADB financing takes the form of investments in companies particularly in the financial sector as well as support for public-private partnerships (PPPs).

“The most challenging part of PPP transactions is finding and preparing bankable projects that can attract private sector money,” added Nakao. “To support the preparation of PPPs, in January we launched the Asia Pacific Project Preparation Facility (AP3F) with support from the governments of Australia, Canada, and Japan.”

He cited examples of successful PPPs including the US$3.8 billion North–South Railway Project to upgrade 650 kilometres of railways in the Philippines and a US$10 billion gas pipeline project across Turkmenistan, Afghanistan, Pakistan, and India.

As well as setting up a new PPP Office, the bank has streamlined its approvals process for smaller projects to stimulate innovative deals in poorer countries.

In addition to the private sector, the President said climate finance and the creation of more jobs were the two priorities in the 50th year of the bank’s existence (it was founded in December 1966).

Climate finance of US$4 billion will support mitigation through investments in sustainable transport, clean energy, and energy efficiency. The bank has set aside US$2 billion for adaptation through more resilient urban infrastructure, climate-smart agriculture, and better preparation for climate-related disasters.

In terms of job creation, Nakao said: “Jobs empower people and reduce poverty in the most fundamental way. Employment opportunities, especially for our youth, are essential to make the economy vibrant and to promote social stability.”

While its investment in infrastructure has a direct effect on jobs, the bank has also set up education programmes in particular to promote the employment of young women and made loans to promote safer working conditions for example in the textile factories of Bangladesh.

“I believe this will also enhance the competitiveness of these factories as consumers around the world are now paying greater attention to the welfare of workers in value chains,” said Nakao.

ADB’s loan and grants approvals were US$16.3 billion in 2015, 21 percent higher than in 2014 and with US$10.7 billion in co-financing, total financial support to developing member countries reached US$27 billion in 2015.

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