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DRAFT for Comment

Asian Development Bank Strategy 2020 A Review of Strategy Changes and

An Assessment of New Opportunities for Collaboration

Iram Weiser, MPH, M.S. Joanne Beswick, M.A.

September 26, 2008

The authors would like to thank Stanley Wallack, PhD and Gary Gaumer, PhD for their contributions to this paper

_____________________________________________________________________ This analysis was funded by a grant from the Bill and Melinda Gates Foundation. The views

expressed are those of the authors and any errors or omissions are theirs.

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Executive Summary

Despite tremendous economic growth, Asia and the Pacific are still home to more than 600 million poor people surviving on a $1 a day. The Asian Development Bank (ADB) has responded to the challenge of alleviating this poverty by refocusing its operations with three development agendas—inclusive economic growth, environmentally sustainable growth, and regional integration. The new long-term strategy for its vision of a region free of poverty was launched in 2008, in the form of Strategy2020[1] – a document that aims to redirect and reposition ADB for a revised development role in a rapidly changing region and within the international aid architecture.

As part of its reshaping, the ADB has emphasized its commitment to partner with other development institutions and the private sector in order to catalyze the achievement of shared interests through collaborative efforts. As an important and new contribution to regional development, the ADB will promote investor confidence by assuming greater risks in its own investments in order to increase private sector investments and growth. Upon a sector-by-sector examination of the banks new strategic course, it becomes apparent that the ADB believes that poverty reduction can only be sustained if more people are economically productive, and that economic growth take place in an environment where neighboring economies work within larger and freer markets. Five core operational areas identified as ADB’s comparative strengths—infrastructure, environment, regional cooperation and integration, finance sector development, and education, will now receive the bulk of ADB lending. Health, agriculture and disaster & emergency assistance are part of a second tier of lending priority sectors.

Within the eight operational sectors defined by the ADB, there are areas of mutual

interest for the Gates Foundation where the goals of the two organizations may overlap, though they may be rooted in differing developmental paradigms. The ADB seeks to address poverty through inclusiveness, relying on the private sector to power economic growth and subsequent trickle down into benefits at the grassroots level. The GF operates on a more intervention specific basis, steering funding directly to poor and disadvantaged populations. But despite differences in perspective, a closer examination of the priority foci, strengths and capacities of the two organizations indicates a range of prospects for joint cooperation. Briefly reviewing these foci through the lens of the ADB priority sectors allows for the extraction of broad recommendations for meaningful synergy. Recognizing and adjusting for differences in knowledge, focus and strategy, the next step after identifying possible areas for joint cooperation would be addressing the nature of the collaboration. Initial collaboration falls into the categories of environment, finance sector development, health and education. Specific cooperative activities range from capacity building for human resources through joint planning and resource pooling, to investment in agro-technology to contend with environmental and agricultural fluctuations.

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Introduction

Established in 1966, the ADB is an international development finance institution whose central mandate has been the alleviation of poverty and improvement in quality of life for the Asia and Pacific region. At the onset of its activities, the bank focused much of its assistance on food production and rural development, and in the early 1970s, began to provide its first technical assistance grants. For most of its tenure, the Asian Development Fund of the ADB has provided investments for roads, water, sanitation, electricity networks and other essential infrastructure projects, targeting grants and low-interest loans to the poorest recipients. These activities were considered to be the central components of the ADB strategies for addressing regional poverty and livelihoods[2].

Over the last decade, the Asia and Pacific landscape has experienced dramatic changes,

in particular, a tremendous increase in economic growth, a diminishing incidence of absolute poverty, remarkable increases in per capita incomes, and unprecedented improvements in social indicators. However, these benefits have been spread unevenly across and within the countries of the region, resulting in an exacerbation of social and economic disparities so that an estimated one billion people continue to live in poverty today.

The dramatic changes in the region have lead to a restructuring of the ADB strategies for

poverty alleviation. In recognition of the increasing disparities between rich and poor and the prevalence of widespread regional poverty, the ADB has pledged that it will allocate USD 11.3 billion towards achieving eight Millennium Development Goals (MDGs), which range from halving extreme poverty to ensuring environmental sustainability by the target date of 2015. These new efforts, which cover 2009 - 2012, are 60 percent higher than the USD 7 billion that was designated for the 2005 – 2008 period[3]. Though achieving the MDGs is important for the ADB, the bank has clearly stated that it “cannot and will not attempt to meet all needs of all DMCs,” and that to “maximize results, efficiency, and impact, ADB will employ its financial and institutional resources in five core areas: infrastructure, environment, regional cooperation and integration, finance sector development, and education[1].” These five areas fall under the three ADB strategic development agendas of achieving inclusive economic growth, environmentally sustainable growth, and regional integration. The guiding principle is that sustaining growth and providing access to economic opportunities are the two pillars of inclusive growth. And through promotion of inclusive growth, the ADB believes that it is possible to accomplish the MDGs and thereby alleviate regional poverty.

In order to further the agenda of poverty alleviation, the ADB has a strong interest in

partnering with international development agencies, multilateral and bilateral institutions, the private sector, non-government organizations, community-based organizations, and foundations for the planning, financing, and implementing of its operations. In Strategy 2020, the long-term strategic framework (LTSF) for 2008-2020 period, the bank states that in order “to address the risks and challenges facing the region, and to meet the many different requirements for achieving inclusive growth, environmentally sustainable growth, and regional integration, ADB will engage in partnerships with a more diverse group of institutions[1].” To date, the ADB has developed productive relationships with developing member country (DMC) governments, the World Bank, the International Monetary Fund, the World Trade Organization, United Nations agencies, and other major multilateral and bilateral institutions. Now it seeks to expand the scope of its partnership agenda beyond official development finance partners to include endeavors with

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private sector institutions. Specifically, the bank seeks to partner with organizations that can deliver aid effectively, improve development results, and improve disaster and emergency assistance, through the use of innovative assistance modes, greater use of DMC technical and managerial skills, and close collaboration with the private sector in project co-financing and use of market-based investment instruments[1].

In light of the new partnerships that the ADB is likely to seek, collaboration on a range of

development projects with the Gates Foundation (GF) is of particular interest. This paper presents ADB’s planned modalities of engagement with the private sector and examines, on a sector-by-sector basis, the potential areas where current development interests of the ADB and GF might intersect. Upon investigation of these areas, the paper will then make broad recommendations for possible areas of cooperation. Modalities of Engagement with the Private Sector The ADB estimates that in order to achieve the MDGs by the 2015 deadline through operations in core areas such as infrastructure development and the environment, a total investment of up to USD 4.7 trillion will be required for infrastructure and investments of up to USD 100 billion annually will be needed for the environment. In addition, vast amounts of funding for financial sector development and education will also be necessary[4]. However, the bank argues that the key obstacle is not the availability of money in the region, but the absence of investor confidence as an impediment to investment in most DMCs. To remedy this, the ADB intends to draw upon its competitive strength: the ability to offer the private sector significant support, precipitating investments that otherwise might not be made[1]. Essentially, the crux of the new ADB modality of engagement with the private sector is that the bank will assume greater risks in order to spur investments that the private sector might not otherwise be willing to make. The bank will partner with private investors in co-financing development projects. ADB intends to function as a catalyst for investment through a “dual role of both banker and honest broker”[4]. As banker, it will assist DMC governments in accessing long-term funding at reasonable terms by attracting direct private sector investments that support inclusive growth and improve the environment. As broker, it will help mitigate risks, facilitate regulatory dialogue, and provide technical expertise. This entails the supervision of DMC governments in the creation of business friendly environments through institutional and policy reforms that would lead to operational efficiency and sustainability, and ultimately give potential investors what they currently lack - certainty, predictability, and confidence. These reforms target the creation of an enabling environment designed to advance private sector enterprise[1], through direct financing, credit enhancements, risk mitigation guarantees, and implementation of innovative new financial modalities. ADB will use these tools to promote public–private partnerships in all of its core operational areas, create value by attracting private capital and deploying business management or technical expertise to specific sectors and transactions. The risk mitigation products offered by the ADB to potential investors would include local currency financing and political risk insurance[4]. The ADB argues that because investors are not usually willing to take on the financial risks associated with currency mismatches, refunding, and interest rate changes, there is a need to address the lack of basic capital market structures. To

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cut through these risks, ADB intends to provide long-term, fixed-rate local currency financing in countries that do not have a functioning capital market[4]. ADB has been very clear that it seeks to increase partnership-based co-finance and operations. Co-financed lending will increase at a faster rate than ADB’s stand-alone financing operations, with a long-term objective of having total annual direct co-financing exceed the value of ADB’s standalone project financing[1]. A large portion of co-financing will be played out in the core ADB operational area of infrastructure development, where the bank would allow the private sector to act as either a project sponsor or an institutional bond or equity investor. And finally, the ADB also seeks to address the need for adjusting and augmenting human resources in private sector operational areas in order to develop the confidence and standards that investors are accustomed to[1]. This would entail that the ADB add new or enhanced skills staff, including conducting institutional management reforms that would involve the cost-effective mobilization, deployment, and retention of its technical staff throughout the region. Examples of private sector projects can be found in Appendix 1. ADB Sectors

The revamped ADB priorities are divided into eight sectors, five of which the ADB

delineates as its ‘core areas of development.’ These are (1) infrastructure, (2) environment, (3) regional cooperation and integration, (4) finance sector development and (5) education. According to Strategy 2020, the “ADB estimates that 80% of its aggregate operations will fall within [these] five core areas.” Furthermore the ADB “will also operate on a limited scale in other areas where its presence is needed.” These other areas are listed as (6) health, (7) agriculture and (8) disaster and emergency assistance. This rearrangement of what are considered priority sectors, particularly the diminished focus on health and agriculture, has come under significant criticism, calling into question the bank’s commitment to poverty alleviation in the face of potential economic growth. The following table lists the continuing, new and old priorities of the bank. Table 1: ADB Priorities ADB priority areas

Continuing priorities Financial sector development, Regional

cooperation and integration, Education, Physical infrastructure (transportation networks, water, sanitation, telecommunications, waste management)

No longer top priorities Health, Agriculture, Disaster and emergency assistance, Physical infrastructure in rural settings

New priorities Environment, Energy development

Given the shifts in sector focus, the ADB lending portfolio will be more heavily weighted

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in its new strategic and operational areas, differing from past portfolios in four respects: Increased concentration on the five core operational areas, which will comprise 80% of

total annual approvals by 2012 Radical scaling up of private sector development and private sector operations in all

operational areas Increased support for the development of the region’s private sector in terms of the

number of ADB-financed projects and share of annual operations with a target of 50% by 2020

Escalated assistance to support environmentally sustainable development The ADB intends to evaluate regional outcomes by monitoring progress through groups

of MDG indicators associated with its core operational areas. These will assess income and non-income measures of poverty, and evaluate growth, infrastructure, and the business environment and examine output indicators of transport, energy, water, finance, and education. Outcomes for the beneficiaries will also be broken down according to rural, urban, and regional areas. If the targeted MDGs are well on track by 2015, the bank intends to adjust its support to other areas. (For more information on ADB’s role in supporting MDGs, see Appendix 2). (1) Infrastructure

As the Asian economies took off in the late 1970s, spurring demand for better infrastructure to support their growth, the ADB turned its attentions towards assistance for the development of infrastructure. Initially this focus lay primarily on the improvement of roads and the provision of electricity. Later, after the first oil price shock, the ADB shifted more of its assistance to support energy projects, especially those promoting the development of domestic energy sources in DMCs. Later, in the 1980s after the second oil crisis, the ADB continued its support for infrastructure development, particularly energy projects and by the early 1990s, the ADB was supporting implementation of high priority sub-regional projects in transport, energy, and telecommunications, many of which were in what by then was known as the Greater Mekong Sub-region (GMS). To date, priority infrastructure projects worth around USD 5.2 billion have either been completed or are being implemented in the GMS. Among these are the upgrading of the Phnom Penh to Ho Chi Minh City highway and the East-West Economic Corridor that is expected to eventually extend from the Andaman Sea to Da Nang. Additionally, India has emerged as a focus for the improvement of infrastructure development[5], as it relates to establishment of physical infrastructure, telecommunications and amenities.

Because intraregional travel has increased substantially, there are a number of current and future infrastructure projects in the Asia and Pacific region including the Intergovernmental Agreement on the Asian Highway Network identifying 55 Asian cross-border highway routes among 32 member countries. Under this project, existing roads will be upgraded and new roads constructed to establish highway networks, improving links between East Asian countries, India, and Russia. The overarching goal is to connect Tokyo to Istanbul, passing through the Korean peninsula, PRC, and other countries in Southeast Asia, Central Asia, and South Asia. Other projects include a trans-Asian railway to facilitate movement of goods and people across Asia, particularly for landlocked countries such as Mongolia, and the Central Asian republics. This is expected to provide 14,000 kilometers of continuous rail link between Singapore and Istanbul with possible further connections to Africa and Europe.

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The ADB infrastructure operations are not limited to building physical assets. They also include improving the delivery of infrastructure services, which entails developing capacity for better infrastructure management, promotion of institutional and policy reforms that enhance operational efficiency and sustainability of infrastructure projects, and support of logistical systems to increase trade and investment.

Headlining infrastructure as a core ADB priority is crystallized in its latest strategy planning, much of which is to be coordinated in partnership with the private sector. The bank intends to scale up private sector development and private sector operations to 50% by 2020 for regional infrastructure (with special reference to water, sanitation and waste management). Significant criticism has been levied on the ADB in this regard, as much of the funding seems to be targeted toward the privatization of basic services and not for the funding of the infrastructure development in rural areas. Critics argue that thus far the privatization of infrastructure and basic services has not led to better services and poverty alleviation and that many of the loans have so far been almost completely wasted with marginal positive impact on the citizens. A prominent example is that of the ADB-funded water projects such as the Upper Watershed Management Project causing environmental and social damages to the areas where it was implemented in Sri Lanka. The ADB allocated USD 16.6 million to rehabilitate the watersheds suffering from forest degradation, in order to increase forest cover, raise crop productivity and contribute to poverty alleviation in affected communities. However, the project was plagued with corruption issues and was not successful in addressing the deforestation and soil degradation problems[6]. (2) Environment

For most of its first few decades in operation, the ADB did not have a clearly delineated policy on environmental issues, as environmental considerations were never of primary concern in its activities. This changed a little over a decade ago, when the ADB began work on addressing climate change, seeking access to new investment financing mechanisms in energy efficiency, renewable energy, and other low-carbon infrastructure. The impetus for the development of ADB environment policy comes from the stresses of rapid population increase, dramatic changes in production and consumption patterns, and massive rural-to-urban migration, transforming the way natural resources are used in Asia and the Pacific. These stresses are now manifested in polluted air, depleted biodiversity, degraded lands, exhausted aquifers, and polluted aquatic and marine ecosystems, as well as increasing exposure to hazardous and toxic wastes. The ADB states that “people’s health and longevity have suffered, natural resource-based livelihoods have been compromised, and ecosystem services and resources that underpin long-term economic development are at risk[1].” More pointedly, the ADB is concerned that Asia’s economic growth has been accompanied by resource depletion and environmental degradation, which serve to threaten individual physical security, economic well-being, and health.

The 1999 ADB Poverty Reduction Strategy examined the relationships between economic efficiency, social development, and environmental protection. Subsequently the banks first long-term strategic framework (LTSF) embraced environmental sustainability as a strategic crosscutting theme. In the current Strategy 2020 document, the ADB seeks to prioritize the integration of environmental considerations into all of its operations from the earliest stage, moving upstream toward a more strategic and comprehensive approach beyond operational policies targeted only at environmental assessment of individual projects. Interventions include targeted environmental and natural resource management, improvement of economic policies and institutional frameworks and a focus on global long term environmental issues. In this light,

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the ADB plans to strengthen its operational emphasis in activities related to a) climate change (promotion of low-carbon growth paths by improving energy efficiency, expanding the use of clean energy sources, reducing fugitive greenhouse gas emissions, modernizing public transport systems, addressing deforestation and protection of biological diversity, provision of clean water, and sequestration of carbon from the atmosphere to offset greenhouse gas emissions) and b) livable cities (reduction of air and water pollution, support of cleaner modes of transport, improving systems for solid waste management, and reducing urban waste). Mainstreaming these environmental considerations into DMC policies and investment programs and strengthening the legal, regulatory, and enforcement capacities of public institutions is now of central importance to the ADB.

Chief among these new areas of environmental concern is the issue of climate change – an area where the bank seeks to target its initial environmental interventions. Because of climate change, projections warn that 1.2 billion people in the Asia-Pacific region could experience freshwater shortages by 2020, while crop yields in Central and South Asia could drop by half by 2050. Asia’s major coastal cities are vulnerable to flooding, especially small island states such as Tuvalu and the Maldives, and coastal nations such as Bangladesh. Due to the potential calamity resulting from climate change, a significant proportion of future ADF resources is targeted to provide support for climate change mitigation.

In May of 2008, the ADB announced that the establishment of its Climate Change Fund, into which it would place an initial investment of USD 40 million. The goal is to facilitate greater investments in Asia and the Pacific to address the causes and consequences of global warming through financing for technical assistance, investment projects, research and other activities. The Climate Change Fund expands the resources available to address global warming from solely mitigation activities, such as clean energy and carbon financing, to a more holistic program that includes activities in mitigation and adaptation as well as financing projects. "In addition to supporting transition to low-carbon economies and establishing climate resilient infrastructure, this fund will allow ADB to address the cross-cutting social vulnerability issues related to climate change such as changes in livelihood, resettlement, and health impacts[3]." And because Asian developing countries are now the fastest growing source of new greenhouse gas emissions, this new fund will be instrumental as a resource pooling for investment in the Asian region.

Another major environmental initiative is the 2005 GMS (Greater Mekong Subregion) Core Environment Program (CEP) which coordinated conservation of natural systems to protect the quality of natural forests and biodiversity in the GMS. Additionally, under the CEP, the Biodiversity Conservation Corridors Initiative (BCI) protects high-value terrestrial biodiversity by establishing sustainable management practices and restoring habitat connectivity in these areas. Measures for reducing poverty among communities living in or near the economic corridors, defining appropriate land-use, and restoring connectivity of ecosystems are slated to take place in six BCI pilot sites[7].

(3) Regional cooperation and integration (RCI)

At the beginning of the 1990s, the ADB begin promoting regional cooperation in order to harmonize policies and initiatives by regional governments through either formal embodiment or informal agreement. The objective was to forge close ties among neighboring countries through an economic cooperation program. Since then, regional cooperation has been a critical

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component of the ADB strategy to accelerate the process of economic development of its DMCs, collectively and individually[8]. This has lead to support for various regional and sub-regional cooperation programs, including the Greater Mekong Subregion (GMS) Economic Cooperation program, the South Asia Subregional Economic Cooperation (SASEC) program, the Central Asia Regional Economic Cooperation (CAREC) program, and the Subregional Economic Cooperation in South and Central Asia (SECSCA) program.

After the Asian financial crisis of 1997, the ADB was asked by the Association of

Southeast Asian Nations (ASEAN) to support initiatives on regional monetary and financial cooperation. This included a number of regional initiatives for the prevention of communicable and infectious diseases such as avian influenza, HIV/AIDS, severe acute respiratory syndrome (SARS) and tuberculosis. Other regional initiatives have been designed to address energy efficiency, environmental management, and governance.

But as the Asian regional economic landscape has continued to change, the ADB has been prompted to seek not only regional cooperation, but also regional integration. The ADB defines “regional integration” as a process through regional economies become more interconnected. Such economic interconnection can result from market led, private sector driven actions and/or government led policies and collective initiatives. Regional integration is considered to be broader in scope than regional cooperation. The adoption of outward-oriented economic policies by an increasing number of countries, the rapid growth of large emerging market economies such as China and India, improved physical connectivity, significant trade liberalization and increased inflows of foreign direct investment, have set the stage for greater monetary and financial integration, further precipitating a shift from regional cooperation to regional integration. Mutually reinforcing, regional cooperation has deepened regional integration while regional integration has compelled governments to cooperate in the internalization of externalities created by integration.

The changing circumstances have highlighted several limitations to the earlier exclusive support for regional cooperation, such as fragmented efforts across departments and offices, varied quality of lending and non-lending services for regional cooperation because of the absence of a coherent strategy, and limited support for trade and investment integration, especially in view of the recent proliferation of free trade agreements in the region[8]. The current ADB RCI strategy has four pillars

Regional and sub-regional economic cooperation programs on cross-border infrastructure and related software

Trade and investment cooperation and integration Monetary and financial cooperation and integration Cooperation in regional public goods

The ADB argues that their RCI strategy will reduce DMC poverty and promote inclusive growth through increased physical connectivity, expansion of trade and investment, development of financial systems leading to macroeconomic and financial stability and improved environmental, health, and social conditions[8]. Clearly the emphasis on RCI is part of the larger ADB effort of transitioning the Asian region into a strong economic bloc.

(4) Finance sector development

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In the wake of the Asian financial crisis of 1997, the ADB began to mobilize additional resources for development from the private sector under the premise that the private sector was an important ally in driving growth and that it would be instrumental in financial sector restructuring. New markets were opening up as barriers to entry were lowered in previously highly protected banking, securities, and insurance sub-sectors, as well as pension fund management. The guiding principle was that when properly regulated and operating under competitive market conditions, the private sector would use resources more efficiently than the public sector. This lead to significant indirect financing of private enterprises through government-guaranteed loans to development finance institutions, creating enabling conditions for macroeconomic management, investment, trade, and price liberalization, reduced barriers to competition, and well-functioning financial and capital markets. In recent years the bank has sought to reinvent itself from a quasi-commercial bank to governments into a financial and technical advisory institution. A central concern of the bank has become the reduction of risk in the growing private sector of DMCs. In Strategy 2020, the ADB outlines its support for policy reform and institutional capacity building to strengthen regional financial systems. Through technical assistance and program loans, the bank supports the development of sound banking systems, the deepening and broadening of securities markets, and the creation of bond markets. Bank support is also targeted to the development of mortgage markets to facilitate housing finance, and the reform of pension and insurance systems to develop sources of long-term capital. Furthermore, the bank seeks to establish rating agencies and credit bureaus, to provide credit information on borrowers and securities issuers. Preference is given to institutions capable of rehabilitating the financial sector or in commercializing and privatizing state-owned banking systems. Overall, the ADB aim is that by restructuring the banking system, banks will become instruments of effective intermediation in support of labor-absorbing growth.

Turning attention to the local and primarily rural level, the ADB contends that “without access to formal financial services and sustainable social insurance, including pensions, the poor will be excluded from the growth process and its benefits[1].” The ADB seeks to address the extent to which targeted or policy lending will be used to channel funds to special needs, especially those of the poor. In order to promote inclusive growth, the bank intends to create an enabling environment for microfinance, rural finance institutions, and small to medium enterprises through use of technologies to expand the reach of the formal financial system to rural areas. Citing evidence indicating that it is advantageous to strictly limit guided credit, ADB argues that credit should be provided primarily for social purposes at unsubsidized rates. (5) Education

In 1970, ADB began to work in the education sector using a human resource management model which primarily focused on the demands of the job market. This approach resulted in an emphasis on technical and vocational training and higher education. During the first two decades, from 1970 to 1990, 48% of ADB’s investment in education went toward technical and vocational education, 28% went toward higher education, and only 11% was invested in basic education[9]. Most of these investments went toward building infrastructure.

In 1988, ADB moved to embrace the concept of basic Education for All (EFA) with a special emphasis on girls and women and the 1988 policy paper provided official recognition of primary education as a basic human right. This shift reflected the growing awareness that

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achievement of human development indicators, such as fertility rates, infant mortality and child labor are influenced by education. Thus, education was seen as a prerequisite to both economic and human development, with more emphasis being placed on the benefits of human development. Accordingly, between 1991 and 2001, investment in technical and vocational education was reduced to about 14% and investment in basic education climbed to 41% of ADB’s total investment in education[9]. Support moved from infrastructure to teacher training, curriculum development, planning and management and institutional capacity building. In the decade preceding the 2002 education policy paper, ADB’s investment in education remained steady at about 6% of its total investment portfolio[9]. The 2001-2015 strategic framework[10] incorporated work towards the eight Millennium Development Goals into ADB’s strategy for education. With only about 3% of education being financed by development agencies globally, ADB moved to examine ways in which it could target its activities to have the greatest, most effective impact in education sector development and poverty reduction.

In the last 10 years, the significant growth experienced in the Asian region has prompted the ADB to further modify its strategy for education. Some countries in the region have seen more growth in the school-age population while others have seen life expectancy rise with a corresponding increase in the age of their populations. Others have seen a rapid rise in urbanization. At the same time, globalization is affecting the region with some countries (e.g., Malaysia, Indonesia, Thailand, China, India) transitioning into competitive information-based market economies that call for highly skilled and better educated workers. Thus, there is a growing need to match the emerging economic opportunities with educated and skilled workforces. The ADB is seeking to address education sector needs according to the differing needs and demands of Developing Member Countries (DNCs). Thus, significant changes in allocation of investments are now evident across primary and secondary, Technical and Vocational Education and Training (TVET) and higher education systems. The strategy for less developed countries, such as Cambodia and New Guinea is to augment Education for All (EFA) by emphasizing equity, access and quality. In countries one step up, such as Viet Nam and Sri Lanka, ADB will add an emphasis on secondary education. Focus on TVET and higher education will increase in more developed countries, such as Indonesia, Malaysia, Philippines and Thailand. Very recently, demand for post-basic education has been increasing in Asia. Whereas between 2000 and 2004 60% of ADB financing in the education sector went to basic education, between 2005 and 2006, it was only 24%[11].

ADB has long viewed primary education as a basic human right and as a prerequisite to human development and social equity. As urbanization and globalization begin to take hold in many parts of Asia, education is being seen increasingly as fundamental to sustainable and inclusive growth with benefits both to the individual and to society. As a step to increase access and quality of education especially among those living in remote areas, ADB is supporting Information and Communication Technology (ICT)[12]. ICT is a means to provide aspects of education such as e-textbooks and e-teacher in-service training. Because costs have been decreasing, reaching the poor through ICT is becoming more feasible. (6) Health

From 1994 to 2005, the ADB’s lending in the health and population sector remained steady at between 2 and 3% of its total activity[13]. Between 2006 and 2007, investment in the health sector (loans and grants combined) fell to 1% of ADB’s total investments[11]. With investments in the agriculture sector also dropping (from 12% in 2006 to 2% of total investments

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in 2007[11]), the extant evidence does not show that the ADB is working toward allocating 20% of its total investments to Health, Agriculture and Emergency and Disaster Assistance (see Appendix 2). However, if the ADB were to increase its investments in these sectors to 20% of its total investments by 2020, this would amount to a significant increase compared to the current and past investment level.

Since 1999, the ADB has worked to identify and target core areas and populations it

seeks to reach with limited resources for health. The ADB resolved to address unmet needs in the region by targeting primary, preventive and women’s health care service delivery to the poor; in particular, to disadvantaged groups such as women, children, indigenous people and those living in rural areas[14]. This 1999 strategy shift constituted a clear change from an earlier focus on infrastructure development to a focus that engaged more complex aspects of health systems related to health care delivery. According to the 2003 Health Sector Annual Report[15], ADB increased its effectiveness in the health sector as a result of its tightened objectives and procedures. Positive outcomes were shown by: (1) a large increase in the number of loans using specific health-outcome indicators; (2) inclusion of cost-benefit and economic sustainability analysis in all loans approved since 2001; (3) inclusion of economic rate of return calculations in most projects; and (4) attention to supporting governance through health sector reforms and institutional capacity building.

In its 2005 Special Evaluation Study of the Health Sector[16], ADB pointed out that its 1999 policy reform facilitated important improvements in program results but it did not lead to growth in its lending portfolio and, accordingly, ADB continued to play a minor role in the sector. The ADB sees its capacity to perform well in the health sector as limited for several reasons including (1) lack of demand for health sector investments; (2) non-competitive financing products (given the expectation that social sectors should be financed through grants or soft loans); (3) the general perception that ADB lacks a comparative advantage in the health sector; (4) the lack of availability of ADF financing for India and China; (4) inadequate human resources to perform well in the complex health sector; (5) the internal belief that loans in the health sector are complex and risky; (6) the health sector was not included in the Country Partnership Strategy (CPS); (7) the perceived lack of absorptive capacity in DMCs’ health sectors; (8) the large number of donors already active in health; and (9) the trend in the health sector towards decentralization, which has increased the demand for financial and staff resources.

Constraints faced by the ADB in middle-income countries (MICs) were primarily in financing. The Eighth Replenishment of the Asian Development Fund (ADF IX) included an agreement to establish a grant program that could expand ADB’s involvement in the health sector, but the Bank needed a broader range of lower-cost products and a concessional lending mechanism to provide loans less expensively than ordinary capital resource terms (OCR). Strategies it considered are: (1) increasing co-financing with bilateral donors; (2) promoting more discussion on developing innovative financing modalities for MDGs; (3) further delineating the focus of health sector strategies within the poverty reduction strategy framework in collaboration with development partners; (4) innovating partnership development between the private sector and civil society; (5) changing ADF eligibility from country-based to sector-based considerations; (6) considering modified TA modalities.

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Moreover, in low-income countries, where the ADB had some increased success since the advent of the 1999 strategy, the Bank continued to question its ability to handle the demands of the complex, detail oriented health sector. Since 1999, the ADB demonstrated effective targeting capabilities to identify, locate and reach the poor and improve health[13]. Yet weaknesses remained in the areas of capacity building, the development of innovative financing strategies, coordination and harmonization with governments, development partners and stakeholders, and in program monitoring and evaluation. The most recent policy paper on health[16] did not identify a direction for its future work in the sector but it did mentioned the need to develop alternative loan and grant products to enable it to participate more fully in the health sector, it voiced a desire to resume its funding of health infrastructure and equipment, it emphasized the need to develop partnerships with other donors, the private sector and civil society, and it weighed staffing and resource considerations against its strategic options.

Strategy 2020 presents only a general overview of the ADB’s planned future involvement in the health sector and there have been no accompanying policy papers to provide more detailed information about new strategies. The health sector is not a priority focus in any of the current Country and Regional Partnership Strategies. Strategy 2020 suggests that the Bank’s activities in health will revolve primarily around infrastructure development related to water management and sanitation, the promotion of good governance practices in areas of public financing management and cost-effectiveness, and the ADB will be highly selective in its involvement with health programs by providing only defined and targeted assistance to prevent and contain the transmission of communicable diseases across borders. Other activities will be in the areas of education and human resources development in the health sector, and support for national health accounts and demographic and health surveys.

Until recently, ADB has worked primarily with governments of DMCs and international

organizations, but the Bank has expressed the desire to expand its circle of partners to include the private sector, NGOs and private foundations. In addition, the ADB is shifting its focus away from individual national level health programs towards integrating health initiatives into its priority sector work which spans across countries. Projects that have recently been considered suggest that the ADB is branching out in both of these ways. For example, in 2006 the ADB had plans to develop a private health equity fund with East West Capital Partners [17]. This fund was canceled in March 2008 for undisclosed reasons, but it would have addressed the supply side of the market through investments in pharmaceuticals manufacturing and medical technologies. The Bank was going to provide financing for the fund and, by doing so, had hoped to attract more local and foreign investments to the fund. Other presumed benefits of the fund would have been the development of profitable and sustainable private companies in the region and the achievement of MDGs in individual countries. The ADB currently has a project underway to address HIV/AIDS as a public health issue by incorporating cross-border prevention and containment activities into a larger infrastructure project[18]. On this project, ADB is working primarily with governments and international organizations such as UNAIDS (i.e., its traditional modality), and the Bank contracts implementation to NGOs.

Tables 1 through 3 (Appendix 3) present a summary of ADB health-related activities that

recently have been, currently are, or will soon be underway according to the Regional Cooperation Operations Strategies of the four Asian regions. These tables show a significant difference in the level of attention ADB is currently paying to health across the region, with more activity evident in the Greater Mekong and Pacific Regions, very little in South Asia and

14

none in Central Asia. Individual country partnership strategy papers are available at adb.org/Documents/CSPs/default.asp. (7)Agriculture

In 2006, the agriculture sector accounted for 12% of the GDP in East Asia and Pacific and 19% of the GDP in South Asia[19]. A sample of DMCs shows that an average of 43% of men and 41% of women worked in the agricultural sector between 2000 and 2005 (Appendix 4). The Bank’s work in this sector has been aimed at promoting liberalization through farm privatization, price liberalization and through fostering development of free markets. ADB has demonstrated a low level of investment in agriculture with only 8% of all approved loans between 1996 and 2005 earmarked for the sector (ADB Annual Reports). In addition, the program success rating of 52% in the 1990s [13] suggests that ADB’s work in this sector has been beset with problems.

Independent evaluations of agriculture activities over the last 20 years specify weaknesses in environmental management capacity such as poor irrigation and water management and problems with project management, such as substantial delays, lack of community preparation and involvement, distortion of investment incentives, insufficient attention to fair benefits distribution and inadequate funding for projects. Criticism of ADB’s activities in the sector are widely familiar[20, 21], with organizations such as NGO Forum on the ADB, Greenpeace and the United Nations Environment Program (UNEP) voicing frequent protest around environmental damage caused by ADB’s agricultural programs and the displacement of indigenous peoples. ADB has shown a lack of ability to understand local culture and land, manage the complexities of projects, provide maintenance for its projects and has not adequately addressed barriers to the market faced by farmers and businesses.

ADB’s Strategy2020 outlines a basic plan that includes supporting agriculture and rural development by investing in rural transport infrastructure, irrigation and water systems and by supporting microfinance. Activities in agriculture and rural development will be integrated with ongoing efforts in natural resources management and regional cooperation and integration. According to this very basic outline (there has been no new policy paper for agriculture since 1995), the ADB has not yet directly addressed what might be one of the most critical emerging areas for farmers and agribusiness. A 2008 discussion paper by the Asian Development Bank Institute reveals how the rapidly rising standards for quality, safety, traceability and process are increasing the technological and information needs of small farmers to access the market[22]. With the advent of the free trade movement, traditional institutions (i.e., government) no longer provide this crucial link, thus leaving small, rural, technologically disadvantaged and less well-informed farmers behind. There is no apparent evidence to date indicating that ADB will address this issue. (8)Disaster & Emergency Assistance

ADB’s Disaster and Emergency Assistance Policy (DEAP)[23] includes natural, technological and environmental hazards, health emergencies and country conflicts. The objectives of the policy are to (1) strengthen support for reducing disaster risk in DMCs; (2) provide rehabilitation and reconstruction assistance following disasters; and (3) leverage ADB’s activities by developing partnerships. The policy seeks to address prevention and mitigation of disasters as well as rehabilitation and reconstruction. Between 1987 and 2006, 25 DMCs received almost $6 billion in disaster and post conflict assistance in the form of loans, technical

15

assistance and grants. For this time period, there were a total of 235 disaster related projects. Irrespective of assistance type, 32.8% went towards mitigation, 27.5% went to provide emergency response, and 39.7% was invested in rehabilitation and reconstruction[23].

The ADB is collaborating with the World Bank to support a catastrophe risk insurance

scheme which was requested by Pacific Island governments. The MOF of Japan is another partner involved in discussions to explore risk pooling facilities[24]. Disaster and emergency assistance is an area where ADB will likely always play an important, if relatively small role in the region. By virtue of its name, location, membership and mission statement, ADB represents Asian countries and, as long as it exists, will be seen as a relevant and appropriate institution to intervene in crisis situations (e.g., cyclone Nargis hit Myanmar in May 2008 and ADB was one of the select task force members permitted to conduct a needs assessment a few weeks later[25]). Areas of Potential Synergy

The Asian Development Bank continues to maintain that its overarching goal is the

alleviation of poverty in the Asia and Pacific region. While this goal remains the same as it was before the presentation of Strategy2020, the new pathway toward achieving this goal is different from what might be expected of a development bank. ADB has adopted a set of macro-level strategies to maximize the economic growth that it hopes will be inclusive for all the individuals living in the region. These macro strategies emphasize approaches that will assist the private sector to expand and, at the same time, redirect ADB resources away from the needs of people, communities and the local systems with which they interact. Because ‘Inclusiveness’ is not directly addressed, it can be inferred to happen as a trickling down phenomenon of the benefits of economic growth. In contrast, the Gates Foundation makes its commitments based on intentions to improve the lives of those who are most vulnerable and hardest to reach – in other words, the poor and disadvantaged populations are explicitly targeted. Arguably, both approaches have merit, potentially heralding vast human development benefits, but neither approach fully addresses by itself the dynamics of development. Simply put, to alleviate poverty, people must engage in an economy, but to do that, a viable economy must exist.

The ADB and the GF share some of the same goals, but the identified solutions are based on different paradigms. In the areas where goals overlap, there seems to be real potential to leverage the strengths of each organization in order to increase impact. The strengths and culture of the organizations appear quite different. Whereas the GF is developing new ideas, technologies and approaches, such as vaccines, the ADB appears more focused on facilitating and directing existing mechanisms to enhance development. Given the differences in knowledge, focus and strategy, the first question that should be addressed is the nature of the collaboration. The options fall along a continuum from sharing information regarding what the entities have learned about what works and doesn’t work to improve the well-being of individuals, communities and countries. At the other end of the spectrum, one could conceive of a collaboration in which each party financially transfers or supports the other party in areas of mutual interest. Areas which are of greater interest to the GF, such as health, could be financially supported by the ADB. Whereas those in which the ADB has placed a higher priority and have greater knowledge, such as the development of financial markets and institutions, could be financial supported by the GF.

16

Between these end-points of the collaborative spectrum are project collaborations in areas of mutual interest. Below, we present four areas in which we see potential for meaningful synergy, with specific recommendations for cooperation. Our suggestions fall into a few categories based on their expected value added. These categories are: (1) joint sponsorship of regional strategic planning projects; (2) regional initiatives to leverage scale; and (3) joint participation in mission complementary projects. Following the descriptions of synergies, we present table 2, which lists ADB and GF priorities and indicates areas of potential collaboration by sector. While all are potential collaborations, we believe that the GF may want to select one at the outset given the political fall-out which has occurred regarding the new ADB strategy outlined in Strategy2020. Synergy 1 Environment Climate Proofing and Carbon Trading

There may be significant room for collaboration between the Gates Foundation and the ADB in the arena of environmental work. The new ADB focus on promotion of environmental sustainability is part of its restructured effort to promote economic growth, and the environment is also an area to where the Gates Foundation is increasingly turning its attention in grant-making decisions. Though the impetus for environmental work for the ADB seems to lie in its desire to forward economic growth, the activities it seeks to engage in, particularly with regard to climate change issues, may align themselves well with the GF priority concerns in this regard.

‘Climate proofing’ for food security

In February of 2008, combining the GF concern for food security, and their increasing interest in climate change issues, the GF sought to address food losses due to environmental causes by giving USD19.8 million for a 3 year investment to the International Rice Research Institute (IRRI) to develop stress-tolerant varieties of rice. The IRRI develops varieties of rice that can withstand environmental extremes, such as drought, submergence, salinity, iron toxicity, and low temperature. By breeding and developing strains of rice resistant to these stresses, the IRRI hopes to increase farm yields in the face of unpredictable weather[26], referred to as ‘climate-proofing.’ Initial successes include strains of rice able to withstand flooding for over a week with minimal yield loss. This is being introduced to farmers in Bangladesh, and the GF hopes that by 2011, such agro-ecological innovation will allow 300,000 farmers in South Asia to adopt improved rice varieties, dramatically increasing crop yields.

In terms of climate proofing, the ADB and GF could work together in the following ways:

Resource pooling and collaboration in project co-financing for joint sponsorship of environmentally sustainable projects related to food security

Exploration of innovative assistance modes through continued research and development of agro-technologies to counter climate change

Regional expertise of the ADB harnessed to the technical and managerial skills of the GF for distribution of this new technology

Exploration of market-based investment mechanisms for private sector interest in agro-technology

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Carbon trading The GF interest in climate change issues was manifested in the September 2007

investment of USD 150 million in a large carbon-trading fund designed to reduce carbon emissions of projects in China through the Kyoto Protocol's Clean Development Mechanism[27]. This was done through Peony Capital, a Beijing-based investment vehicle of a carbon trading fund backed by the GF. The crux of this investment is to fund two fuel switching projects with China’s biggest power generator in return for carbon credits[28]. Under the 2005 Kyoto Protocol, companies in signatory countries may offset their greenhouse gas emissions by funding CDM projects in developing countries such as China and India to obtain CER credits. Such credits, which represent carbon prevented from being released, can also be traded on the global market.

In terms of carbon trading, the ADB and GF could work together in the following ways: Exploration of market-based investment mechanisms to increase carbon trading Resource pooling and collaboration in investment of new private companies to engage in

carbon trading Joint planning of strategic partnerships with regional governments and private sector

partners interested in carbon trading through combined economic and political leverage Synergy 2 Finance sector development Microsaving and rural financial services

Though the Gates Foundation has traditionally not been involved in financial sector activities, it has recently entered the field of financial services in terms of banking for poor. In July of 2008, the GF announced that it would donate hundreds of millions of dollars over the next few years to programs designed to spur savings in poor countries – as part of its first focused effort to help improve basic infrastructure in poor countries[29]. This action is predicated on the evidence that saving is an important measure of the health of a society, and that there is widespread, unmet demand for savings programs in poverty-stricken areas[30]. Recent data has indicated that the demand for savings accounts outstripped demand for loans by a six-to-one ratio, according to a 2006 study by the Consultative Group to Assist the Poor, a World Bank-backed think tank that has advised the GF on its financial-services strategy.

The ADB has made clear indications that it is interested in addressing the dearth of

banking services in DMCs, and that it is aware of the challenges contributing to the complexity and cost of such an endeavor, including strict banking regulations and the lack of bank branches in rural areas that would allow customers convenient access to accounts. In particular, the ADB has made direct references to its interest in ‘micro-savings’ for poverty alleviation and its intention to involve the private sector in expanding such services. In terms of cooperation between the ADB and the GF, there is considerable potential for the two organizations to deliberate in the area of micro-savings programs and the development of rural banking systems. In order to address these issues, the GF is considering forging ties with telecommunications operators, banks and retailers, all organizations with which the GF has had limited connections in the past. The GF believes that commercial enterprises, banks and other profit-seeking businesses, can best serve the broadest swath of people by using tools such as capital markets to fund expansion[29].

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The ADB is interested in developing regulations also for private insurance. The GF

interest in economic security of individuals goes beyond property and casuality, which is critical to private sector corporate development. Insurance can play a critical role making necessary services and income available and inclusive. For example, developing health insurance regulations and expanding health insurance can pool risk across populations, allowing more resources to be allocated to the sicker and poorer populations. Income replacement products, such as life and disability insurance, protect the well-being of the family if the major earner is left incapacitated.

Possible areas for cooperation in this field are:

Research and development for testing of new business models and technologies to improve the access of financial services for small businesses, microentrepeneurs and the poor (mobile banking trucks, cell phone banking, etc)

Developing and testing rural banking insurance Research and analysis on the demand for financial services, and on ways to increase

impact and improve regulations of insurance products that provide economic security for individuals in the community.

Joint strategic planning and funding of educational programs for banks and individuals in positions to make regulatory changes to promote rural banking

Harnessing the regional expertise of ADB to the technical and managerial skills of GF to address issues of access

Complementary investments to accelerate rate of return in social outcome Synergy 3 Education and Health Cross-Sector Development

The ADB plans to commit significant attention to the development of the Education sector in the region by increasing investments in TVET and higher education and by supporting ICT. Explicit effort will be made to enable DMCs to produce more professionals to fill the demands of what is likely to be a fast growing job market. Strategy2020 does not delineate in detail the approach it will take in promoting professional development, but it is clear that there is both an opportunity and a need to analyze the current state of human resources for health professions as part of a strategy to foster well balanced development. Moreover, ADB has said it will conduct less traditional education such as ‘adult education.’ As a matter of inclusiveness, some of this investment should go towards educating targeted populations on how to access markets. Finally, both the ADB and the GF are becoming involved in the field of ICT. The ADB is currently supporting policy, pilot studies and conferences to promote innovations and diffusion of ICT throughout Asia as a means to increase education access and quality. There are opportunities for joint planning and joint participation between the ADB and the GF.

Areas of potential collaboration: Joint development of a human resource rationalization plan to examine supply and

forecast needs to (a) avoid redundancy in investments, (b) close gaps in subject areas and (c) promote a more balanced mix of the right professionals in countries where they are most needed. Part of this planning effort should address the current situation in the Philippines, India and Sri Lanka, which are known to be exporters of health professionals.

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The GF could develop mechanisms of consumer protection, consumer education and provide assistance developing social policies to promote inclusion of individuals in markets. These could be targeted education initiatives that run parallel to economic development activities of the ADB such as banking and insurance.

Joint planning and development of ICT initiatives. Synergy 4 Health Sector Support

The removal of health as a priority sector from ADB’s strategy signifies recognition by the bank that it has not demonstrated particular strength in this area. However, ADB has expressed the desire to develop partnerships with other agencies that specialize in health as a means to continue working in the sector. ADB has identified several areas in which it plans to continue its involvement in health. Most noteworthy for the GF is health education, human resource development, targeted health initiatives and the development of health equity funds. There are opportunities for the GF to engage the ADB in joint strategic planning, conduct regional initiatives to leverage scale and jointly engage in health projects. Whereas ADB is viewing economic development from a macro perspective, health care is a local service. However, the adequacy of services requires an approach that health system capacity with the needs of individuals. Given ADB interest in developing health programs that target needy populations, maternal health and rural populations, GF has the opportunity to work with ADB to develop the appropriate financing and delivery mechanisms for health care. The GF could also engage in work with the ADB to ensure that not only the supply-side but also the demand-side of the market is included as part of project strategy, design and implementation. Areas of potential collaboration:

Design a regional initiative to leverage scale in addressing the prevention and containment of infectious diseases across borders. ADB is already running programs that target transportation workers. The GF could augment this effort by providing technologies and technical and human expertise around delivery. In turn, ADB has garnered regional cooperation and has knowledge of the local conditions, logistics and the bigger regional picture. This effort could be brought to a regional scale using processes that are both streamlined across countries and adaptable to local needs, particularly for rural and disadvantaged populations.

Co-finance a health equity fund that incorporates both supply-side aspects (such as research and development) and demand-side aspects (such as risk pooling). Coordinate with ADB to promote inclusiveness and equity of health care delivery by creating market links between R & D, providers and individuals.

The joint resource rationalization plan and the consumer protection and education initiatives discussed under Synergy 3 also apply in this health sector support category.

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Table 2: ADB and GF Priority and Synergy Areas

Sector ADB priority area?

GF priority area for Asian region?

Synergy potential?

Infrastructure Yes No Low Environment Yes Yes High: climate

change (climate proofing, carbon trading)

Regional cooperation & integration

Yes

No Low

Finance sector development

Yes Yes High: micro-savings and provision of rural financial services

Education Yes No High: human resources for health and professional development

Health No Yes High: protection from and containment of infectious diseases

Agriculture No Yes Low Disaster & emergency assistance

No No Low

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References 1. Strategy 2020: The Long-Term Strategic Framework of the Asian Development Bank

2008–2020. 2008, Asian Development Bank: Mandaluyong City, Philippines. 2. Private Sector Development Strategy March 2000. 2000, Asian Development Bank:

Mandaluyong City, Philippines. 3. Asian Development Bank Opens New Climate Fund with $40 Million, in Climate Change

InfoNet 2008, Climate Change InfoNet 4. ADB Private Sector Development Brief. 2008, Asian Development Bank. 5. ADB's Country Strategy Programme 2005-07 - Infrastructure is the Core Focus, in

Business Line Financial Daily from THE HINDU Group of Publications. 2004. 6. Asian CSOs Urge Leaders to Reject ADB's Stragety 2020 Framework, in Voices for

Interactive Choice & Empowerment. 2008. 7. Greater Mekong Subregion History and Background. [cited 9/5/08]; Available from:

http://www.adb.org/GMS/gmsprog10.asp. 8. Regional Cooperation and Integration Strategy. 2006, Asian Development Bank. 9. Education: Our Framework, Policies and Strategies. 2003, Asian Development Bank:

Mandaluyong City, Philippines. 10. Moving the Poverty Reduction Agenda Forward in Asia and the Pacific. The Long-term

Strategic Framework of the Asian Development Bank (2001-2010). 2001, Asian Development Bank.

11. ADB Annual Report. 2007, Asian Development Bank: Manila, Philippines. 12. Technical Assistance Innovative Information and Communications Technology in

Education, and Its Potential for Reducing Poverty in the Asia and Pacific Region. 2005, Asian Development Bank: Manila, Philippines.

13. Nandakumar, A.K., Asian Development Bank Overview of Structure, Funding, Policy and Programs with Emphasis on the Health and Agriculture Sectors. 2007, Brandeis University: Waltham, MA.

14. ADB Policy for the Health Sector. 1999, Asian Development Bank: Manila, Philippines. 15. Health Sector Annual Report. 2003, Asian Development Bank. 16. Special Evaluation Study on ADB Policy for the Health Sector, O.E. Department, Editor.

2005, Asian Development Bank. 17. Proposed Equity Investment Asia Healthcare Fund L.P. 2006, Asian Development Bank. 18. Subproject 3: HIV/AIDS Prevention and Road Transport Projects - HIV/AIDS Prevention

and the Infrastructure Sector in the GMS. 2006, Asian Development Bank. 19. [cited 9/12/08]; Available from:

http://web.worldbank.org/WBSITE/EXTERNAL/DATASTATISTICS. 20. Fried, S., Summary of Concerns regarding the ADB’s Draft Safeguard Policy Statement:

Unacceptable Weakening of ADB Environmental and Social Standards Concerns regarding Proposed Continuation of Public Consultations Based on Deeply Flawed and Incomplete Documentation. 2008.

21. ADB: 40 Years of Debt, Poverty and Pollution, in NGO Forum on ADB. 2007. 22. Giovannucci, T.P.a.D., Standards and Agricultural Trade in Asia. 2008, Asian

Development Bank Institute: Tokyo, Japan. 23. Disaster Risk Management. [cited 09/15/08]; Available from:

http://www.adb.org/Disaster/glance.asp.

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24. Natural Catastrophe Risk Insurance Mechanisms for the Asia and Pacific Region. 2008, Asian Development Bank.

25. ADB, World Bank joins ASEAN assessment team to provide relief, in Mizzima: Specializing in Burma Related News and Multimedia. 2008.

26. Gates Foundation supports 'climate proof' rice in Africa, in Media Global: Creating global media awareness for Least Developed Countries 2008, United Nations Secretariat: New York, NY.

27. Gates' Otter Tail investment is consistent with his foundation's carbon curbing-goals, in MinnPost.com. 2008.

28. Bill Gates-funded Peony Capital Invests $136 Million in CDM Projects in Asia Cleantech 2007. 29. Guth, R.A., Giving a Lot for Saving a Little, in The Wall Street Journal. 2008. 30. Global Development: Financial Services for the Poor Backgrounder. 2008 [cited

9/11/08]; Available from: http://www.gatesfoundation.org/GlobalDevelopment/FinancialServices/FS_Backgrounder.htm.

31. ADB significantly expanding private sector programs, in Pacific Magazine. 2008. 32. ADB Private Sector Development Projects Database, Asian Development Bank.

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APPENDIX 1: Examples of ADB Modalities of Engagement with the private sector, 2008

The ADB has commenced support of private sector projects considered to have a positive impact in the development of the financial and infrastructure sectors. Some concrete examples of how the ADB is providing private sector support include:

(1) Operational area: Financial sector development Private Sector Development Initiative (PSDI), Pacific Islands With co-financing from the Australian Agency for International Development (AusAID), the ADB has been engaged in microfinance projects in the Pacific Islands. ADB activities in this region include the reform of commercial legal frameworks, and exploring new technologies to further expand financial services to rural areas, by partnering with commercial lending institutions with a commitment to microfinance[31].

(2) Operational area: Financial sector development Mekong Enterprise Fund II, Vietnam ADB committed to making a USD 10 million equity investment to the Mekong Enterprise Fund II (MEF) or 25% of the MEF's total share capital, whichever is less. The MEF is managed by Mekong Capital, a private fund management company based in Vietnam, which provides equity finance to private small and medium-sized enterprises (SMEs). The MEF aims to achieve a net internal rate of return (IRR) by investing in equity and convertible securities of Vietnamese private and equitized (i.e. corporatized) SMEs. The ADB contends that this project will catalyze private investment in SMEs, diversify financial channels, and improving SME governance[32].

(3) Operational area: Financial sector development Bank of China Ltd, China ADB acted as a minority investor by making a USD 75 million equity investment in the a state-owned commercial bank in the People's Republic of China. The ADB rationale for this financing is that it will promote the ongoing liberalization and privatization process of the PRC commercial banking sector by enhancing the privatization process through risk-mitigating comfort for other investors and that it introduces best practice corporate governance in the PRC banking sector[32].

(4) Operational area: Infrastructure development Krishnapatnam Ultra Mega Power Project, India The ADB is providing the Coastal Andhra Power Company a USD 250 million private sector loan to construct, operate, and maintain a 4,000 MW coal-fired power generation facility, a closed recirculating cooling system using sea water, and a water desalination plant. This is part of ADB’s new Country Strategy Program for India, addressing persistent infrastructure bottlenecks and lack of adequate long-term funds for infrastructure development[32].

(5) Operational area: Health, Infrastructure development Columbia Asia Hospitals Development, India The ADB is providing the Columbia Asia Hospitals Private Limited company with a USD 37 million private sector loan to construct, operate and ten hospitals in India. The ADB rationale for this loan is that it will promote private investment in healthcare infrastructure, and helping bridge the gap between the supply and demand of healthcare services and augment the limited availability of public resources in India[32].

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Appendix 2: ADB’s Role in Supporting the Achievement of Millennium Development Goals (MDGs)

The ADB published its Poverty Reduction Strategy in 1999 which laid out three main pro-poor components: sustainable economic growth, inclusive social development and good governance. Also included among the overarching foci were environmental sustainability, gender equity, private sector development and regional cooperation. An enhanced Poverty Reduction Strategy was issued in 2004 which included support for MDGs, stressing the importance of increased harmonization of poverty reduction efforts across countries and highlighting the need to manage results and build capacity. ADB has assumed both leadership and support roles in its approach to help countries attain MDGs in the Asian and Pacific region. Within ADB’s Country Operation Business Plans, MDGs are mainstreamed into country strategies. The majority of ADB’s country-level activities do not directly target MDG indicators for intervention. Instead, ADB follows its plan of economic growth but monitors the progress of MDGs in every business plan and provides countries with the tools they need to track improvements and look for weaknesses. The following is a list of the broad areas in which ADB works to assist countries to reach their MDGs:

MDGs are mainstreamed into country partnership strategies ADB is developing a statistical database on poverty and MDGs in the region called “Key

Indicators” ADB is developing statistical capacity to monitor MDGs by helping countries strengthen

their own databases ADB has approved TA grants to assist DMCs in creating, monitoring and analyzing the

MDG indicators UN-ESCAP and UNDP are partnering with ADB to support progress tracking, raise

awareness and improve the policies and institutions involved in achieving MDGs ADB and its UN partners have produced regional reports and technical papers and have

worked to improve and disseminate information and engage in advocacy in the region This information and more can be found by following these links: Poverty Reduction: http://www.adb.org/poverty/poverty-reduction.asp MDGs: http://www.adb.org/poverty/mdgs.asp

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APPENDIX 3: ADB Investments by Sector, 2006 and 2007 Operations By Sector: 2006 (in millions)

Sector Loan

amount PercentageGrant

amount PercentageTotal

Amount Percentage

Agriculture and Natural Resources

800.2 11%

130.6 24%

930.8 12%

Education

250.9 3%

46.7 9%

297.6 4%

Energy

1,369.5 19% 3.0 1%

1,372.5 17%

Finance

1,787.0 24%

72.1 13%

1,859.1 23%

Health, Nutrition and Social Protection - 0%

72.0 13% 72.0 1%

Industry and Trade 10.0 0% 0.5 0% 10.5 0%

Law, Economic Management, and Public Policy

220.0 3% 8.3 2%

228.3 3%

Transport and Communications

1,433.2 19%

131.4 25%

1,564.6 20%

Water Supply, Sanitation and Waste Management

638.8 9% - 0%

638.8 8%

Multisector

879.7 12%

69.9 13%

949.6 12%

Total

7,389.3 100%

534.5 100%

7,923.8 100% Operations By Sector: 2007 (in millions)

Sector Loan

amount PercentageGrant

amount PercentageTotal

Amount Percentage

Agriculture and Natural Resources

146.3 1%

22.8 3%

169.1 2%

Education

145.0 1%

61.0 9%

206.0 2%

Energy

1,403.7 14%

25.4 4%

1,429.1 13%

Finance

1,158.0 11% 2.0 0%

1,160.0 11%

Health, Nutrition and Social Protection 50.0 0.5%

31.0 5% 81.0 1%

Industry and Trade 95.0 1%

17.0 3%

112.0 1%

Law, Economic Management, and Public Policy

1,179.5 12%

16.5 2%

1,196.0 11%

Transport and Communications

3,925.8 39%

319.9 48%

4,245.7 39%

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Water Supply, Sanitation and Waste Management

408.2 4% 7.5 1%

415.7 4%

Multisector

1,594.1 16%

169.7 25%

1,763.8 16%

Total

10,105.6 100%

672.8 100%

10,778.4 100% * Both tables adapted from Table 5 (page 24) of ADB's 2007 Annual Report

27

Appendix 4: Current and Planned Health Initiatives by Region (Note: individual country business plans are available at http://www.adb.org/Documents/CSPs/default.asp. Country business plans may indicate future projects that are not reflected in these regional tables)

Greater Mekong Subregion Health Initiative Identified

Countries (if any)

Level of ADB

Assistance (if stated)

Development Goal

(if stated) or Division

Document Title for Reference

Available at www.adb.org

Regional capacity building for HIV/AIDS prevention, targeted intervention, 2009

Lao PDR ADF: $5M Govt: $5M

Cofinancing: $5M

Inclusive Social Development

Regional capacity building for HIV/AIDS prevention, targeted intervention, 2009

Viet Nam ADF: $15M Govt: $3M

Inclusive Social Development

Regional communicable disease control, 2010

Cambodia ADF: $9M Govt: $1.5M

Inclusive Social Development

Regional communicable disease control, 2010

Lao PDR ADF: $10M Govt: $.8

Cofinancing: $2M

Inclusive Social Development

Regional communicable disease control, 2010

Viet Nam ADF: $15M Govt: $3M

Inclusive Social Development

Project preparatory TA for communicable disease control 2008

Lao PDR, Viet Nam

RCIF: $500,000

Inclusive Social Development

Project preparatory TA for communicable disease control 2009

Cambodia, Lao PDR, Viet Nam

RCIF: $500,000

Inclusive Social Development

Regional TA to strengthen human resource development cooperation

Greater Mekong Subregion

Nonlending TA from TA

Special Fund: $200,000

Inclusive Social Development

Development Partner Assistance: Australia for HIV/AIDS infrastructure projects and human trafficking

Trade Facilitation: Customs and transit regime systems issues (consistency with ASEAN)

Development Partner Assistance: PRC through PRC Fund to support GMS Regional Health Forum

Strategic Framework for Action on Trade Facilitation and Investment

Development Partner Assistance: Sweden through HIV/AIDS Fund

Development Partner Assistance: UNESCAP for Health without Borders (funded by Dutch government) to address HIV/AIDS vulnerability among long distance road

Capacity Building in Sustainable Tourism Management and Private Sector Development

"Indicative Rolling Regional Cooperation Operations Business Plan, Greater Mekong Subregion 2008-2010"

28

Greater Mekong Subregion Health Initiative Identified

Countries (if any)

Level of ADB

Assistance (if stated)

Development Goal

(if stated) or Division

Document Title for Reference

Available at www.adb.org

transport workers Development Partner Assistance: UNESCO for HIV/AIDS prevention through ICT application

Development Partner Assistance: WHO for HIV/AIDS and communicable disease issues

Trade and Transport Facilitation

Pacific Region Health Initiative Identified

Countries (if any)

Level of ADB

Assistance (if stated)

Development Goal (if stated)

or Division

Document Title for Reference Available at

www.adb.org

ADB will look for ways to support sector wide approaches (SWAps) and will explore coordinated donor approaches to public goods such as surveillance and prevention of HIV/AIDS

11 of the 14 PDMCs are eligible to access the ADF. The recent ADF iX replenishment agreement allows grants to address HIV/AIDS

Education to build capacity in health service delivery strategies, resource allocation for social services and effective systems

Papua New Guinea, Marshall Islands, Federated States of Micronesia

KRA (key result area) in Education sector

"Responding to the Priorities of the Poor: A Pacific Strategy for the Asian Development Bank 2005-2009"

TA to address the socioeconomic implications of HIV/AIDS and strengthen the response, 2005-2007

All PDMCs $300,000 Economic Growth

Grant to support HIV/AIDS All PMDCs $8,000,000 Economic Growth

"Regional Operations Business Plan: Pacific 2008-2010"

29

Pacific Region Health Initiative Identified

Countries (if any)

Level of ADB

Assistance (if stated)

Development Goal (if stated)

or Division

Document Title for Reference Available at

www.adb.org

prevention and capacity development (dates: 2005-2010)

except Papua New Guinea and Timor-Leste

TA to conduct a Demographic and Health Survey in Pacific Island countries, 2005-2007

Marshall Islands, Nauru, Solomon Islands, Tuvalu

$1,000,000 Good Governance

TA to advance National Health Accounts, 2007-2010

$500,000 Good Governance

South Asia Health Initiative Identified

Countries (if any)

Level of ADB

Assistance (if stated)

Development Goal (if stated)

or Division

Document Title for Reference Available at

www.adb.org Regional Capacity Development TA to plan regional food security initiatives, 2008

South Asia Region

TA Special Fund:

$500,000

South Asia Agriculture, Natural Resources and Social Service

"Regional Cooperation Operations Business Plan, South Asia 2009-2010"

Subregional Economic Cooperation Nonlending for rural broadband connectivity: Expected to increase village access to e-health and e-education services

South Asia Non-lending products and

services

Central Asia Health Initiative Identified

Countries (if any)

Level of ADB

Assistance (if stated)

Development Goal (if stated)

or Division

Document Title for Reference Available at

www.adb.org None reported in document "Central Asia Regional

Cooperation Strategy and Program Update, 2006-2008"

30

Appendix 5: ADB Development Member Countries Sample of Agriculture Sector Employment

Employment in the Agriculture Sector 2000-2005 Country Male FemaleBangladesh 50% 59%Cambodia 61% 59%Indonesia 43% 45%Kazakhstan 35% 32%Malaysia 16% 11%Mongolia 43% 38%Philippines 45% 25%Sri Lanka 32% 40%Thailand 44% 41%Viet Nam 56% 60%Average 43% 41%source: http://siteresources.worldbank.org/dDATASTATISTICS/Resources/table2_3.pdf retrieved 9/15/08