Friday, August 28, 2009

Working and Achievement of Asian Development Bank

During 1950s, it was strong by felt that there should be a bank for Asia like the World Bank to meet the development needs of this region. This view was suggested for the first time at Ministerial Conference on Asian Cooperation held at Manila in December 1963. This conference constituted a working group of experts which submitted its report to the UN Economic Commission for Asia and Far East (ECAFE) at its session held at Wellington in March 1965. It was on the basis of this report than an Agreement for establishing the Asian Development Bank was drafted and adopted at the Second Ministerial Conference on Asian Economic Cooperation at Manila in November-December 1965. By January 1966, 33 countries had signed its Charter and the Asian Development Bank was setup on 19 December 1966 with its head quarters at Manila in the Philippines.

Working of Asian Development Bank (ADB)

The Asian Development Bank (ADB) performs the following functions.

1. Financial Assistance: The Bank provides financial assistance in the form of grants and loans. It gives three types of loans; project loans, sector loans and programme loans. Project loans are tied to specific projects. Sector loans are given to number of related projects in a given sector. Programme loans cover more than one sector and relate to the implementation of policy or programme for bringing about certain changes.

The Bank advances loans out of its Ordinary Funds Reserve and Special Funds Reserve. Ordinary Funds Reserve refers to the Bank’s ordinary capital resources out of which direct loans are given for the development projects or specific projects. These consist of the financing of foreign exchange or local currency components of the cost of specific projects. The Bank also lends to development banks of member countries for re-lending to specific projects. All direct loans are “hard loans” repayable over 15 years with a three-year grace period. The interest rate is determined in accordance with ADB’s pool based variable lending rate system for US dollar loans.

For sector lending, the Bank has established Special Funds such as the Asian Development Fund, Multipurpose Special Fund and Agriculture Special Fund. Loans out of these funds are given for projects of high development priority, for longer periods and at lower rates of interest than for ordinary loans. These are called “Soft-loans”. The Special Funds are different from the Bank’s Ordinary Capital resources. The Bank contributes 10 percent of its paid in capital to these funds and the remaining amount comes as donations from its member countries. For lending out of Special Funds, the sanction by two thirds to the total number of Governors of the Bank is required.

The ADB grants loans on the basis of certain criteria. At the time of evaluating projects that it proposes to finance, the Bank considers their economic, technical and financial feasibility their effects on the general activity of the concerned country their contribution to the removal of economic bottle necks, and their capacity to repay the loans. In granting loans to the various types of projects, the ADB charter does not impose any restrictions. Even the minimum limits of loans are left open to be decided by the Bank on merits and viability of the projects.

2. Technical Assistance: The ADB also provides technical assistance to member countries out of the Technical Assistance Special Fund. The technical assistance is provided to the members in ECAFE region through their governments, agencies, regional institutions and private firms. It may be in the form of grants or loans or both. The Bank’s technical assistance has two main objectives. First to prepare and finance and implement specific national and regional development plans and projects, and second to help in working of existing institutions and the creation of new institutions on a national or regional basis in such areas as agriculture, industry, public administration etc. The Bank also provides advisory services under its technical assistance programme. It sends its own experts and even hires consultants from other institutions on short and long missions for setting up or reorganising institutions for project implementation in member countries.

3. Survey and Research: One of the functions of ADB is to conduct surveys and research in order to formulate policies for the future and to promote regional economic integration. It brings out an annual report in which it highlights the achievements, prospects and failure relating to the economic development of the member countries of ECAFA region and also suggests measures to solve their problems.

4. Poverty Reduction: One the basis of a report submitted by a Panel of ADB Experts in 1989, the bank has pledged its future direction towards achieving the twin objectives of maximising its impact on developing member countries, achievement of sustainable economic growth and corresponding reductions in poverty in the Asia Pacific region. The Banks greater emphasis in the 1990’s was on poverty reduction, social infrastructure and conservation of natural environment. In promoting economic growth, the Bank stresses the importance of increasing productivity. Productivity improvements depend on new investment, the efficiency with which new and existing capitals are used and incorporation of technological changes. The Bank encourages domestic resource mobilization to finance new investments, private sector development and public sector reform to improve efficiency. The Bank targets resources where private sector provision is inadequate and seeks to involve the private sector in services formerly left to the public sector. The ADB now pays more attention to human resource development in order to develop suitably skilled and capable manpower in developing member countries. Progress of Asian Development Bank:

The ADB has been playing an important role in providing finance in the form of loans and grants to the member developing countries for their development. The ADB was setup in 1966, for the first time it sanctioned loans amounting to $41.6 million in 1968. Its total assistance to developing member countries has risen to $32 billion in 1991. The Bank has been providing assistance in the fields of agriculture and agro-based industries, energy industry and non-fuel minerals, development banking, education health and population planning.

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