You are on page 1of 104

ASIAN DEVELOPMENT BANK | 2010

43rd Annual Meeting of the Board


of Governors, Tashkent, Uzbekistan

Asian integration
and implications
for global growth
an official publication of the ASIAN DEVELOPMENT BANK | 2010
Asian Development Bank_Ads.indd 2
3/16/2010 6:53:39 PM
MINDING
YOUR
BUSINESS.
National Australia Bank Limited knows how to mind your business – because it’s
ours too. Our Australasian expertise and global reach means financial institutions
from Australia, Asia, New Zealand, Europe and the US can have a committed partner
for all transactions. From simple cash management, working capital services, risk
management through to structured, credit and capital markets solutions – turn to
National Australia Bank.
We know your business because we know our business.

Contact us
www.wholesale.nabgroup.com
www.nabasia.com

Chris Foskett Howard Chui


Global Head FIG – Banks and Diversified Financials Head of Financial Institutions, Asia
245 Park Avenue, 28th Floor New York, NY 10167 Level 27, One Pacific Place, 88 Queensway, Hong Kong
T: +1 212 916 9551 E: christopher.foskett@nabny.com T +852 2822 9855 E: howard.chui@nabasia.com
Andrew Williamson Ian Griffin
Head of Banks & Diversified Financial Institutions, Australia Director, Financial Institutions Group, Banks & DFIs
Level 24, 255 George St, Sydney 88 Wood Street, London EC2V 7QQ
T +61 (0)2 9237 1694 E: andrew.williamson@nab.com.au T +44 (0)20 7710 2415 E: ian.griffin@eu.nabgroup.com

© 2010 National Australia Bank Limited ABN 12 004 044 937 AFSL 230686 MCA0310.
FINAL PROOF

Publisher Ann Quon Published by:


Group Editorial Director Claire Manuel
Executive Editor Eric Healy
Editor-in-Chief Floyd Whaley
Managing Editor Lauren Rose-Smith
Sub-Editors Nick Gordon The Asian Development Bank
Samantha Guerrini 6 ADB Avenue,
Mandaluyong City 1550, Philippines
Group Art Director David Cooper Tel: +632 632 4444
Art Editors Nicky Macro www.adb.org
James White
Zac Casey In partnership with:

Group Sales Director Andrew Howard


Sales Manager James Johnston
Sales Executives David Amos Newsdesk Media Inc.
Geraldine Roux 700 12th Street, NW, Suite 700
Alex Smith Washington, D.C. 20005
Tel: +1 (202) 904 2423
Client Relations Director Natalie Cleur Fax: +1 (202) 904 2424
www.newsdeskmedia.com
Vice President Business Development Maysoon Kaibni
Newsdesk Media Group publishes a wide range
of business and customer publications. For
Deputy Chief Executive Hugh Robinson further information please contact Alan Spence,
Publisher and Chief Executive Alan Spence Chief Executive Officer or Maysoon Kaibni,
Vice President Business Development.
Newsdesk Media Inc. is a member of the
Pictures: Asian Development Bank, Corbis, Getty, PA Photos, Reuters. Newsdesk Media Group of companies.
Cover image: © Paul Souders/Corbis
Printed by Oriental Press (UK) Ltd
ISBN: 978-1-906940-18-8

© 2010. The entire contents of this publication are protected by copyright. All rights reserved. No part of this publication may be reproduced, stored
in a retrieval system, or transmitted in any form or by any means: electronic, mechanical, photocopying, recording or otherwise, without the prior
permission of the publisher. The views and opinions expressed by independent authors and contributors in this publication are provided in the
writers’ personal capacities and are their sole responsibility. Their publication does not imply that they represent the views or opinions of the Asian
Development Bank or Newsdesk Media Inc. and must neither be regarded as constituting advice on any matter whatsoever, nor be interpreted as
such. Advertising of any specific commercial product, process, service by trade name, trademark, manufacturer, or otherwise, in this publication
does not constitute or imply ADB’s endorsement, recommendation, or favoring of any of the product or the entity thereof. The reproduction of
advertisements in this publication does not in any way imply endorsement by Newsdesk Media Inc. of products or services referred to therein.

ASIAN DEVELOPMENT BANK | 2010 5


FINAL PROOF
CONTENTS

INTRODUCTION

11 Haruhiko Kuroda
President of the Asian Development Bank,
Chairman of ADB’s Board of Directors

15 Rustam Azimov
First Deputy Prime Minister and
Minister of Finance, Republic of
Uzbekistan, and Chair of the Board of
Governors of the ADB

21 Opportunities ahead
48 Welcome to the 43rd Annual Meeting
of the Board of Governors of the
Asian Development Bank

58
Governors’ MESSAGES
23 Gudrun Kopp
Governor for Germany in the ADB

27 Pranab Mukherjee
Governor for India in the ADB

33 Xie Xuren
Governor for the People’s Republic of
China in the ADB

35 Joakim Stymne
Governor for Sweden in the ADB

37 Korn Chatikavanij
Governor for Thailand in the ADB

39 Neal Wolin
Deputy Secretary, U.S. Treasury

80
Issues facing Asia and the Pacific
43 Promoting the 3Rs—Reduce, Reuse,
and Recycle
Creating resource-efficient economies and
zero-waste cities

48 Asia and the Pacific working


together to strengthen the
global economy
An integrated Asia and Pacific
stands the best chance of promoting
inclusive growth during the global
economic downturn

58 Finding the global thermostat


Asia and Pacific nations are developing
strategies to head off a climate
change disaster

64 A path out of the woods


As Asia looks beyond the global economic
crisis, nations are redefining their growth
and development strategies

ASIAN DEVELOPMENT BANK | 2010 7


FINAL PROOF
CONTENTS

ADB in the spotlight


71 ADB’s history of service
XX
Four decades working in Asia and
the Pacific

74 Catalyzing investment
ADB’s partnerships with the private
sector are a powerful tool for funding
responsible development

77 Strategy 2020
Transforming the Asian
Development Bank to respond to a
changing region

80 Methane: from pollution


to solution

85
An innovative project in the People’s
Republic of China is improving the
environment and the economy

83 Taking care of families


Family health centers in Tajikistan
bring care to rural communities

85 Putting the Philippines in the


fast lane
ADB’s support for the renovation of
a highway north of the Philippines’
capital of Manila has transformed the
area’s economic landscape

88 Measuring for success


A new review system for measuring
ADB’s effectiveness is paving the way
for a more client-focused,
results-driven organization

Uzbekistan and Central Asia


in the spotlight 88
90 Central Asia Regional Economic
Cooperation program partnership
90
showing results
The Central Asia Regional Economic
Cooperation program is bringing together
the diverse nations of Central Asia

94 ADB projects link the nations of


Central Asia
Projects in Central Asia cover trade,
transport, energy, and a broad range
of other sectors

99 Uzbekistan at the heart of


Central Asia
The Country’s many assets make it
appealing to a wide range of investors

8  2010 | ASIAN DEVELOPMENT BANK


Buildings
Communications
Education
Energy
Environment
Health
Industry
International development
Oil and gas
Transport
Urban development
Water

LEADING THE WAY FOR A


SUSTAINABLE FUTURE
At Mott MacDonald we are adding value on a host of Asian Development Bank funded projects
through sustainable solutions and innovative ideas. We use our global experience and
professional excellence to implement large-scale urban infrastructure projects encompassing
water supply, drainage, solid waste, roads, sanitation and community buildings. We bring best
practice, cutting edge solutions and holistic thinking to each project and its development, to

Our multidisciplinary capability for urban infrastructure projects of varying size and complexity,
cover the complete spectrum of services from project design, conceptual planning, social
assessment and stakeholder analysis, site planning, master planning, detailed feasibility studies,
urban rejuvenation and regeneration to detailed engineering, construction supervision and project
management.

www.mottmac.in

US_ad_tenmplate.indd 1 13/04/2010 17:25:38


35 years of consistent performance
More than 300 projects worldwide
Numerous ADB projects in the first
decade of the Millennium
TERA International Group, Inc. expresses warm greetings to all participants
in the ADB’s 43rd Annual Meeting in Tashkent. We appreciate having the
• Technical opportunity to contribute our expertise to ADB activities for development
Assistance in all CAREC member countries and others, including Bangladesh, Lao PDR,
and Sri Lanka. It was an honor for TERA to assist in the development of the
• Due Diligence CAREC Transport and Trade Facilitation Strategy and Action Plan, based on
which ADB is implementing a wide range of projects throughout the CAREC
• Feasibility Studies region. We wish you a successful meeting and look forward to continuing to
work together in building a prosperous and sustainable future for Asia.
• Planning & Design
• Construction
Supervision
• Capacity
Development
& Training

TERA International Group, Inc.

Corporate office: Sterling, Virginia, USA


Permanent offices: Beijing, PRC; Manila,
Philippines; Istanbul, Turkey; Bishkek,
Kyrgyz Republic; Ulaanbaatar, Mongolia

E-mail: info@teraint.com
www.teraint.com
FINAL PROOF
FOREWORD

Mr. Haruhiko Kuroda


President of the Asian
Development Bank

Chairman of ADB’s
Board of Directors

a region of
strength and
resiliEnce
O
ver the last two years, Asia, like the growth and put the region’s stability at risk.
rest of the world, has been battered The global crisis has added to the challenges
by the global economic downturn, and set back progress on achieving the Millen-
which deeply affected its exporting nium Development Goals. Thus, as the region
economies. While the crisis is not yet over, Asia, emerges on the path to recovery, it must work
as a whole, has begun to emerge and should soon hard to strengthen its resilience to future crises
return to healthy rates of growth. In fact, it is and promote the sustained high growth that is
Asia’s quick rebound that is leading the world out essential for poverty reduction.
of global recession. Key to this is a rebalancing of growth toward
There is, however, no room for complacency. more domestic consumption and more trade
Despite decades of rapid economic and social within the region. Asia—and the world—has
progress, the Asia and Pacific region is still home benefited tremendously from the “open regional-
to the majority of the world’s poor. Wide dispari- ism” growth model wherein regional value chains
ties in income and living standards persist—and have produced final products for export to more
indeed are growing—both within Asia’s develop- advanced world markets. This open regionalism
ing economies and among them. Access to critical needs now to be complemented by measures that
public services such as clean water, proper sanita- will allow Asia itself to be a greater consumer of
tion, primary health care, and basic education is its own goods and services.
denied to millions of the region’s people. Pockets At the domestic level, Asian countries need to
of extreme poverty exist in rural and urban areas develop policies and strengthen social safety nets
alike. The looming threat of climate change will to put more resources in the hands of individu-
exacerbate these problems, with adverse effects als, families, small and medium-sized enterprises
on water, food, fuel, and livelihoods. Failure to (SMEs), and service industries catering to domes-
address these major challenges will hamper future tic demand.

ASIAN DEVELOPMENT BANK | 2010 11


FINAL PROOF
FOREWORD

At the regional level, Asian and Pacific countries ADB is firmly committed to helping the region
ADB PRESIDENT face yet another major challenge, and a significant manage its challenges and achieve its aspirations
HARUHIKO Kuroda opportunity—to accelerate regional cooperation for development.
visitS a secondary and integration to achieve their shared potential Our Strategy 2020 provides the framework,
school in Viet Nam and common aspirations. To do this will require with an emphasis on inclusive economic growth,
hard work on many fronts, from improving phys- environmentally sustainable growth, and region-
ical connectivity to removing barriers to intrare- al cooperation and integration. It identifies
gional trade, particularly behind-the-border the private sector, good governance, gender
obstacles to freer trade in goods and services. equity, knowledge and partnerships as key drivers
A single, region- of change, and focuses
wide free trade agree- our investments in
ment, for example, We are strengthening infrastructure, environ-
would encourage ment, regional coop-
participation from
our partnerships with eration and integration,
low-income coun- other development finance sector develop-
tries and reduce institutions, community- ment and education.
trade-related business With significantly
costs, particularly based organizations and increased resources,
for SMEs. Asia also the private sector our capacity to support
needs to improve the the region’s develop-
investment climate, ment has expanded
strengthen domestic financial markets, and dramatically. We are strengthening our part-
support the establishment of regional capital nerships with other development institutions,
markets to better tap and mobilize the region’s community-based organizations and the private
ample resources. sector to leverage more financing and expertise,
The Asia and Pacific region has time and and to help build capacity among all partners for
again proven to be a region of great strength and the region’s development.
resilience. How it handles its substantial challeng- I am grateful to all who have contributed their
es as it emerges from the global crisis will have views in this collection of articles, which reflects
an impact not only on individual countries and some of the issues that will be discussed during
the region itself, but also on the world at large. our Annual Meeting here in Tashkent.

12  2010 | ASIAN DEVELOPMENT BANK


Rain Advert A4:Layout 1 3/15/10 2:14 PM Page 1

Make your way through the storm with Guy Carpenter.


The industry’s top professionals, most advanced tools and
reliable analytics better equip you to face today’s challenges,
so you can seize every opportunity and move confidently
towards a brighter future. Contact your Guy Carpenter broker
or visit GCCapitalIdeas.com.
Unlocking Uzbekistan

Uzbekistan contains some of the most


promising investment opportunities in the world,
and some of the most stable conditions in the
CIS. However, as with all emerging markets, the
key to successfully unlocking the upside is
effectively to cover the downside.

No insurance company is better placed to offer


you political risk insurance for investment in and
trade with Uzbekistan than a British registered
company specialized on political risks insurance
only - Uzbekinvest International Insurance
Company Limited.

Uzbekinvest International Insurance Company


has access to both unrivalled local knowledge
and unparalleled international expertise. As
such it is the vital key to unlocking successful
investment in this remarkable market.

Uzbekinvest International Insurance Company Limited


The Chartis Building, 58 Fenchurch Street, London EC3M 4AB
Tel: +44 (0)20 7954 8397 Fax: +44 (0)20 7954 8872 www.uzbekinvest-london.com
Uzbekinvest International Insurance Company Limited is authorised and regulated by the Financial Services Authority (FSA no.: 202923).
Registered in England: company number 2997845.
FINAL PROOF
FOREWORD

Dr. Rustam Azimov


First Deputy Prime Minister
and Minister of Finance,
Republic of Uzbekistan,
and Chair of the Board
of Governors of the ADB

WELCOME TO
TASHKENT
I
t is a great honor and pleasure for Uzbeki- The decision the ADB Board of Directors
stan to host the Asian Development Bank’s made this year to lend Uzbekistan $1.14 billion
(ADB) first ever Annual Meeting of the to finance implementation of strategic projects
Board of Governors in Central Asia. It is a —including construction of regional motorways,
significant event both for ADB member countries modernization of the energy sector and develop-
and for the world community. On behalf of the ment of microfinancing—is evidence of the high
people and Government of Uzbekistan, I would level of our cooperation. ADB’s portfolio of finan-
like to welcome my fellow Governors of the ADB, cial assistance to Uzbekistan has thus increased to
the delegates of the Bank’s 67 member countries, $2.43 billion.
observers from multilateral organizations, media The ADB-led regional cooperation program
representatives and other distinguished guests. in Central Asia has reached a new stage with the
The meeting confirms and strengthens the active implementation of ADB’s regional proj-
solid relationship between Uzbekistan and the ects aimed at supporting the development of the
ADB, which began its development partnership region’s states, and most importantly, the recov-
in 1995. Despite the continuing world financial ery of the social and economic infrastructure
and economic crisis, Uzbekistan is experiencing of Afghanistan.
a dynamic economic transformation that is rede- The leadership of Uzbekistan has consistently
fining its role in the region and around the world. implemented measures to support ADB initiatives
The Republic has been successfully implement- and projects on the economic development of
ing its anti-crisis program and structural reforms Afghanistan. At the request of ADB, the Republic
under the guidance of President Islam Karimov. of Uzbekistan has agreed to the construction of
The ADB has been a strong and lasting partner in the Surkhan-Naibabad-Kabul transmission line,
this process. thus increasing the existing transmission capac-

ASIAN DEVELOPMENT BANK | 2010 15


FINAL PROOF
FOREWORD

ity in order to supply Kabul with electric power ing world crisis. The diverse participants of the
24 hours a day. Uzbekistan has been a partner of
the Uzbekistan meeting offer an important opportunity to build
Organizing ADB in the construction of the first railroad and strengthen relationships among the many
Committee hasin Afghanistan on the Hayraton-Mazar-e-Sharif sectors of society involved.
prepared a route. The construction and utilization of Along with official events, the Uzbekistan
the railroad will contribute to social and econom-
cultural events Organizing Committee has prepared a cultural
program FOR ic development and strengthening stability events program to give Annual Meeting partici-
in Afghanistan.
PArticipants and pants and guests the opportunity to acquaint
The Government of Uzbekistan and the ADB
guests of the ADB themselves with Uzbekistan’s cultural heritage
share the goal of reducing poverty and improving
annual meeting and historical monuments, including the unique
people’s lives. The work we do at this meeting is architecture of ancient Tashkent, Samarkand,
vital to furthering this goal. Bukhara, and Khiva.
In addition to the official program, and impor- The meeting’s host city, Tashkent, is famous as
tant business of the meeting, we hope the gath- one of the world’s science and cultural centers.
ering will serve as a forum for the discussion of The Academic Opera and Ballet Theatre are archi-
the economic, social and development issues tecturally unique structures, while Theatrical
facing Central Asia, Square offers meeting participants a place to relax
The Government of and the Asia and and enjoy the ambience of this historic city.
Pacific region as a Let me once again welcome all participants to
Uzbekistan and the whole, and imple- the 43rd Annual Meeting of the Board of Gover-
ADB share the goal of mentation of anti- nors of the ADB. I hope you enjoy our beautiful
crisis programs of country and bring fond memories of your experi-
reducing poverty and the region’s states at ences here to your colleagues, friends and fami-
improving people’s lives the time of continu- lies at home.

16  2010 | ASIAN DEVELOPMENT BANK


FIELD OF EXPERTISE:
> Transport and Communications
> Water Supply and Sanitation
> Agriculture and Natural Resources Management
> Education and Health
> Cross-cutting themes

OUR SERVICES:
> Feasibility studies and Project design
> Project management and implementation
> Advisory services
> Procurement
> Institutional development

Untitled-2.indd 6 09/04/2010 17:03:35


DEAR PARTNERS AND COLLEAGUES

The open joint-stock commercial bank “Uzbek Industrial and Construction Bank” is one
of the leading universal commercial banks of the Republic. It finances large investment
projects in sectors such as oil and gas, and the energy and chemical industry. It also
provides a wide range of banking services to small-scale and private business. The
bank is becoming increasingly involved in large-scale structural transformations, and
investment projects on modernization, technical and technological re-equipment of
industry, support and financial improvement of enterprises, and dynamic increase of
resource bases. Constantly escalating investment potential, high levels of capitalization,
and diversification of financial resources ensure that the bank has an active role in the
Republic’s investment program and establishes the OJSCB “Uzpromstroybank” as one
of the largest investment centers of Uzbekistan today.
The high level of service, reliability proved by time, exclusive professionalism of
management, efficiency in work, unconditional state support, and adequate capitalization
allow the bank to show stable financial results of activity from year to year.

We express sincere appreciation to shareholders, clients and partners for their trust,
mutual understanding and successful cooperation. We assure them that the OJSCB
“Uzpromstroybank” will follow the priorities of steady government and effective
development, and that it will bring its worthy contribution to the development of
Uzbekistan’s economy.

We are always open for new partners and cooperation.


From Tonga to Tashkent,
ADB is bridging
people and places.
ADB has a mission—to reduce poverty and improve the quality of life
of people in Asia and the Pacific. We’ve been at it for more than 40 years.
Funding sustainable infrastructure to bring energy, clean water, and sanitation to all.
At the forefront of climate change efforts. Supporting transport and
communication projects. Offering microfinance to women. Providing policy support
and expertise to national and local governments. Promoting regional cooperation
and development. Bridging people and places wherever we work.

From 1 to 4 May, delegates from 67 member countries will come together in


Tashkent, Uzbekistan, for ADB’s 43rd Annual Meeting of the Board of Governors to
discuss development issues for the region. To find out more, visit www.adb.org.

www.adb.org
FINAL PROOF
INTRODUCTION

Welcome to the 43rd Annual Meeting of the Board


of Governors of the Asian Development Bank

OPPORTUNITIES AHEAD
T
he annual meetings of the Asian Devel- in Tashkent, Uzbekistan, will involve about 3,000
opment Bank (ADB) are statutory delegates and will mark the first time that ADB
occasions for the Governors of ADB’s has held its annual meeting in Central Asia.
members to provide guidance on ADB This year’s meeting will include a robust menu
administrative, financial, and operational direc- of seminars at which ADB officials, government
tions. The meetings provide opportunities for leaders, and private sector experts will be able to
member governments to interact with ADB staff; participate in discussions dedicated to key issues.
nongovernment organizations; members of the The People’s Republic of China, India, the Lao
media; and representatives of observer countries, People’s Democratic Republic, and the host coun-
international organizations, academe, and the try Uzbekistan will also offer presentations.
private sector. The seminars include: Cities for the 21st Centu-
Annual meetings, which are held in a member ry and the New Mantra of 3Rs—Reduce, Reuse,
country in late-April or early-May each year, are Recycle; Asian Integration and Global Growth;
attended by ministers of finance and economic Development Effectiveness Review 2009: ADB
planning, senior government officials, represen- Scorecard; Financing Climate Change and
tatives of the multilat- Sustainable Development Action in Asia and the
This year’s meeting will eral development bank Pacific; Reform of the Global Monetary System;
community, investment Linking Asia’s Capital Markets (sponsored by
include a robust menu bankers, representatives Standard & Poor’s); Institutional Investors Round-
of seminars IN which ADB of nongovernment orga- table: Green Shoots of Recovery—Prospects for
nizations, and members Asia in the New Economy; and Post Crisis Agen-
officials, government of the media. da for Asia.
leaders, and private ADB’s 43rd Annual ADB’s 43rd Annual Meeting of the Board of
Meeting, to be held Governors will offer a diverse range of voices
sector experts will at the Uzexpocentre discussing the economic and development issues
be able to participate Central Exhibition Hall, of the region.

ASIAN DEVELOPMENT BANK | 2010 21


NUMBER ONE
SSA Issuer in the market
Municipality Finance Plc
has been selected by large
international banks as
last year’s best issuer in
the public sector entities’
category. Let us quote our
voters:

”It is not one thing that makes them good,


but a whole package put together.”
-US Bank-

”There are various little things that set them


apart. They are open to all types of funding,
vanilla and structured. They are the issuer
that says yes.”
-Eurozone Bank-

www.munifin.fi

Municipality Funding Plc


MTN-i: Markets Choice, SSA Issuer of the Year.

Municipality Finance Plc is the most reliable, active


and innovative credit institution that offers a diverse
range of financial services for municipal sector
investments and state-subsidised housing production
in Finland.

ADB_ilmo.indd 1 12.3.2010 15:52:35


FINAL PROOF
GOVERNORS’ MESSAGES

The Honorable
Gudrun Kopp
Governor for Germany
in the Asian
Development Bank

Parliamentary State
Secretary

Federal Ministry for


Economic Cooperation and
Development, Germany

Supporting asia’s
private sector
T
he 43rd Annual Meeting of the Asian They are the backbone of the economy. It is
Development Bank (ADB) is taking therefore vital that these companies in particular
place during a crucial time for the Asia receive support.
and Pacific region. As the world recov- The private sector also plays an important role in
ers from the global economic crisis, support for promoting ecologically sustainable development.
development in the region and worldwide is now Renewable energy and energy efficiency are areas
more important than ever. where private enterprises can make significant
Germany, a founding member of the Asian contributions in the fight against climate change
Development Bank, is the third largest sharehold- by transferring their environmentally friendly
er among its non-regional members. Germany technologies to developing countries.
is a vigorous supporter of socially inclusive and However, in many partner countries struc-
ecologically sustainable economic development tural deficits still hinder the development of a
worldwide. In order to help the poor, Germa- competitive private sector. In order to create a
ny fosters development through both bilateral business-friendly environment and foster dynam-
instruments and multilateral organizations such ic entrepreneurial activities, the political, legal
as ADB. and institutional framework must be improved.
One focal area of support under the new Access to financial services, in particular for
German government is the development of the micro, small and medium-sized companies, is
private sector. Germany is the largest bilateral crucial in this context.
donor in this area. We are convinced that support- Germany fully supports ADB’s activities in
ing the private sector is the most effective way of terms of furthering the development of the private
creating employment and income. Private sector sector in its developing member countries. In
activity is key to mobilizing domestic resources particular, we welcome the fact that ADB intends
and fighting poverty and to creating an environ- to scale up its activities in support of the private
ment of freedom in which all individuals can real- sector significantly as part of its Strategy 2020,
ize their economic potential. and that development effectiveness and results-
According to the United Nations Industrial orientation are of core importance to ADB.
Development Organization (UNIDO), micro, We look forward to a productive meeting in
small and medium-sized enterprises constitute 90 the historic city of Tashkent and a vibrant discus-
percent of all companies worldwide and employ sion of the important issues facing Asia and
60 percent of people in developing countries. the Pacific.

ASIAN DEVELOPMENT BANK | 2010 23


FINAL PROOF
GOVERNORS’ MESSAGES

The Honorable
Pranab Mukherjee
Governor for India in the
Asian Development Bank

Minister of Finance,
Government of India

GLOBAL GROWTH
AND ASIA
A
t the 43rd Annual Meeting of the tion of banks and better balance-sheet manage-
Asian Development Bank (ADB), ment. India required a modest stimulus of about
we gather after having survived the 2 percent of its GDP to recover from the crisis,
onslaught of a huge global crisis, not demonstrating its basic structural strength and
of our making but one that engulfed the whole the effectiveness of its regulation.
world. With the resilience that Asian economies As balancing of growth takes place in the global
proved to have, we economy, I would
now are back to the like to highlight that
path of growth. We India, along with deeper integration
have been able to some other economies within Asian econo-
not only contain mies on a mutually
the damage but also
in Asia, was fortunate beneficial basis would
to gain a substantial in weathering the global provide a window of
lead in the recov- opportunity to all of
ery of our national
downturn better than us in Asia to capital-
economies and the many others ize on the strength
global economy. of the vibrant econo-
I am happy to note that India, along with some mies in the region and help in reducing the shocks
other economies in Asia, was fortunate in weath- from a global crisis. Linkages between neighboring
ering the global downturn better than many countries help in overcoming structural constraints
others. India has done well in core economic and bottlenecks and providing improved access to
areas like regulatory supervision, recapitaliza- markets. I think that the vast potential demand in

ASIAN DEVELOPMENT BANK | 2010 27


FINAL PROOF
GOVERNORS’ MESSAGES

our region, particu- given that the Asia Pacific work together for
Indian Finance larly in the People’s greater global integra-
Minister Pranab Republic of China region is a particularly tion, including closer
Mukherjee (left) and India, could challenging place, policy cooperation.
and Zhou be more effectively Asia will increas-
Xiaochuan, used, together with regional integration ingly play a global
Governor, greater intrare- is itself a challenge decision-making
People’s Bank of gional production role, though Asian
China (right) and trade networks, growth and integra-
to enhance the catalytic role played by the tion would not be a substitute for overall global
Asian region in the global recovery. However, economic growth. I hope that all of us here can
given that the Asia Pacific region is a particularly rise to the challenge so that we can provide to
challenging place because of its heterogeneity and our citizens truly inclusive growth that would
its diverse mix of some of the most dynamic and provide increased economic opportunities and
fragile economies of the world, regional integra- broader access to all sections of the population
tion is itself a challenge. for them to partake in the economic progress
I take this opportunity to urge other nations to attained through growth.

28  2010 | ASIAN DEVELOPMENT BANK


LET’S
CONNECT
AFRICA

TO THE
WORLD

& THE WORLD


TO AFRICA

With international representation in over 30 countries around the world,


we are able to combine our local market expertise and network with
our emerging market capability to make the right connections.
www.standardbank.com/cib
Moving Forward

Standard Bank Plc which is a member of the London Stock Exchange, the London Bullion Market Association and the London Metal Exchange and a firm authorised and
regulated by the Financial Services Authority has approved this notice for distribution in accordance with United Kingdom regulatory and legislative requirements. MC 09/13

SB8067 Asian Development Bank Ad.indd 1 16/4/10 12:19:41


FINAL PROOF
GOVERNORS’ MESSAGES

The Honorable
Xie Xuren
Governor for the People’s
Republic of China in the
Asian Development Bank

Minister of Finance,
People’s Republic of China

Policies and
Measures for
Balanced Economic
Growth in THE PRC
T
he Chinese government attaches great such as housing for low-income residents, liveli-
importance to balanced economic hood-related projects in rural areas, social under-
growth and sticks to the long-term strat- takings, indigenous innovation, energy conserva-
egy of making domestic demand expan- tion, emission reduction and eco-environment
sion the basic footing for economic development. protection, in an aim to strengthen the weak links
We have actively taken measures to increase the in economic and social development and fully
income of urban and rural residents, in particular, boost consumption by investment.
low-income groups, raise the social security level Meanwhile, the government is paying greater
and create favorable conditions for consump- attention to the balanced growth of domestic and
tion. To encourage household consumption, we external demand, giving incentives to enterprises
have increased expenditures on areas related to to upgrade their export products mix, encourag-
people’s livelihood, including education; health ing import and promoting trade structure optimi-
care; social security; job creation; cultural devel- zation and international payment balance.
opment; housing for low-income residents; and In 2009, the contribution of domestic demand
improved policies for upgrading the structure of to GDP growth amounted to 144.8 percent, effec-
consumption in housing, motor vehicles, etc. tively offsetting the impact of a significant drop
In 2009, final consumption contributed 52.5 in net exports. The Chinese government will
percent to economic growth, up by 6.8 percent- make further efforts to expand domestic demand,
age points over the previous year. Investment in particular, consumption demand, strongly
also grew steadily. From the fourth quarter of advance economic restructuring and growth
2008 to 2010, the central government made new pattern transformation, and build a model of
investments of 1.18 trillion Yuan, which would economic growth jointly driven by consump-
help mobilize additional social investment with tion, investment and export, thus promoting
the total investment reaching 4 trillion Yuan. This the stable and relatively fast development of
4 trillion Yuan is mainly for investment in areas the economy.

ASIAN DEVELOPMENT BANK | 2010 33


FINAL PROOF
GOVERNORS’ MESSAGES

Mr. Joakim Stymne


Governor for Sweden in the
Asian Development Bank

State Secretary of
International Development
Cooperation

Ministry for Foreign


Affairs, Sweden

Women’s economic
empowerment
W
omen in Asia experience a access to health and education is a driving force
pay gap of 54 to 90 percent for human development, poverty reduction and
compared to men. The low economic growth. Other key areas are access to
participation rate of women land and property rights, agricultural develop-
in the workforce costs Asia billions of dollars ment, entrepreneurship and social protection.
annually. Women’s economic empowerment The Asian Development Bank has an important
is important to ensure gender equality. It also role to play in enabling progress and promoting
strengthens economic growth and development. women’s role as economic actors. There is a need
International research is very clear on this. In to remove barriers to female entrepreneurship,
India, between 1990 and 2005, the areas with the encourage inclusive financial services and trade
highest percentage of women in the labor force policies, and to ensure equal access to decent and
saw the fastest economic growth, and the largest productive work. In many places, micro-credit
reductions in poverty. is accessible to women but such schemes do not
Gender equality is a strong part of the interna- always address the issue of the size and duration
tional legal framework. The gaps between women of loans women may need. Measures to address
and men have narrowed. Change is possible. But these issues could include investing in product
despite the progress, there are areas of concern. development that responds to the need for larger
Women are often still denied opportunities to loans and longer terms in micro-credit programs.
learn, study, work and enjoy their fundamental Countries need to recognize and remunerate
human rights. Gender inequalities result in sub- women in their critical role as agricultural produc-
optimal resource allocations, and have a negative ers, and need assistance in overcoming restrictive
impact on growth. labor markets as well as social and culture norms
One of the most efficient ways to improve that restrain women’s activities.
human rights and social justice is to create condi- We know that the empowerment of women
tions for women to develop as economic actors will help power economic growth. Let us jointly
and to give individuals greater freedom of choice continue this important work. Asia cannot afford
and action. That women can control their own to exclude half of its workforce.

ASIAN DEVELOPMENT BANK | 2010 35


ADVERTISING FEATURE
FINAL PROOF
GOVERNORS’ MESSAGES

The Honorable
Korn Chatikavanij
Governor for Thailand in
the Asian Development
Bank

Minister of Finance,
Thailand

thailand’s economic
landscape
T
he 2008-2009 global economic crisis the region through Free Trade Liberalization. A
is reshaping Thailand’s economic and more robust trade and investment structure will
financial landscape. Prior to the crisis be more able to withstand risks arising from the
the global economy was heavily influ- global rebalancing process as export destinations
enced by the West, with the consumption-oriented will become more balanced, given a larger propor-
U.S. economy ever-increasing spending, leading to tion of trade with China and other countries in
a large accumulated current account deficit as the Asia as shown in the table below.
export-driven counterparts channeled the surplus
back to support further spending. In other words, Share of Thai Exports (%)
the global economy as a whole was too dependent Country 2004 2009
on the external demands of Western economies. USA 16.1% 10.9%
When this demand faltered in the context of an EU 14.3% 10.5%
emerging turmoil in the financial system, the glob- Japan 14.0% 10.3%
al economic crisis was unavoidable. PRC 7.4% 10.6%
While there have been indications that the worst ASEAN-9 22.0% 21.3%
of the economic crisis is behind us in this region,
Source: Macroeconomic Policy Bureau, Fiscal Policy
the global economy remains at risk from endemic Office, Ministry of Finance, Thailand
economic and financial imbalances which are not
sustainable. In the post-crisis landscape, most The third strategy is to promote regional coop-
export-driven economies are at risk from the eration in ASEAN and ASEAN+3 frameworks.
global rebalancing process which will see limited Regional economic integration and cooperation
external demand from traditional Western econo- have resulted in a multilateral mechanism to safe-
mies and more volatile capital flows. Developing guard against potential volatility in capital flow.
economies must reposition themselves for a new On this, Thailand strongly supports the establish-
growth paradigm. ment of the Chiang Mai Initiative Multilateralisa-
In response to the impending challenges from tion (CMIM) under ASEAN+3, which is the first
this global rebalancing process, the Royal Thai multilateral currency swap arrangement in Asia.
Government has adopted three strategies. The first Thailand believes that CMIM is a crucial finan-
strategy is to strengthen our domestic economy cial instrument which would provide immediate
through the Government’s comprehensive medi- financial support through currency swap transac-
um-term investment program worth Baht 1.43 tions to the CMIM participants facing balance-
trillion (USD 43 billion). The “Invest for Strength of-payments and short-term liquidity. Moreover,
2009-2012” campaign is mostly concentrated on Thailand and other ASEAN+3 countries have
hard and soft infrastructure projects, which will agreed to establish a regional economic surveil-
not only increase domestic consumption, make lance unit as an early warning mechanism to
Thailand less dependent on external demand, but detect signs of any impending economic or finan-
also lay a solid foundation for the private sector’s cial turmoil. These mechanisms will promote
competitiveness in the medium term. stability in financial markets and may help to
The second strategy is to promote trade within prevent future financial crisis.

ASIAN DEVELOPMENT BANK | 2010 37


comprehensive
strength...
diverse capabilities

Mongolia
Feasibility Study of
Ukhaa Hudag –
Nagaland Gashuun Sukhait
Design, Construction Railway Line:
New Delhi Supervision, and » Study of alignment
Capacity Development Management options
Puerto Rico for the NCRPB: Consultancy:
Island-wide Transport » Design of operational
Maryland » Technical assistance for » Replace 19 existing and requirements
Plan: capacity development
Interstate I-95 Section construct 7 new water
» Transport system of the National Capital reservoirs » Economic and financial
100 Corridor: plan to promote Region Planning Board appraisal, business plan
» $1 billion USD program economic development (14 districts in 4 states, » Replace 91km of and bankable report
to add express toll lanes and environmental 100+ agencies) water supply network,
construct 46km of » Environmental impact
sensitivity
» Design, design » Detailed project reports sewer network statement, bill of
management, » Includes all modes to train NCRPB in quantities, and cost
procurement, and – highway, transit, project preparation » Development of solid estimation
construction oversight pedestrian, airport, and processes waste management
system » Conclusive study
management for 15 seaport
contracts
» Structured workshops, leading to design and
» Three alternative technical lectures, » Preparation of operation construction of new
» Toll gantry and toll improvement plans and on-the-job training and performance railway
infrastructure design, a selected plan of 25 exercises, study tours, monitoring systems
traffic operational projects and advisory services » Project start up in 2010
analyses
» Travel demand model to » Systems have been
» Successful delivery of analyze highway system enthusiastically
program – on schedule needs embraced and readily
and within budget implemented

www.WilburSmith.com
FINAL PROOF
FOREWORD

Mr. Neal Wolin


Deputy Secretary of the
Treasury, United States
of America

Expanding Access
to Finance in
Afghanistan
T
he United States congratulates the and commercial banks—necessary to generate
Asian Development Bank (ADB) on its economic activity and lay the foundation for
43rd Annual Meeting of the Board of regional trade and investment. In partnership with
Governors. As a founding member of other major donors, the ADB has led global efforts
the Bank, the United States is proud of the ADB’s to help one of its own founding member states
accomplishments over the last four decades and make real progress towards achieving a more stable
committed to the development goals and objec- and secure future for generations to come.
tives of ADB’s member states. Founded in a As we continue working together to help the
period of post-conflict reconstruction, when Afghan people build a better future, efforts to
many member states were themselves emerging improve Afghanistan’s physical infrastructure
from economic dislocation and turmoil, the ADB remain vital. At the same time, we must comple-
has repeatedly met the challenge of helping its ment those efforts with a focus on expanding
most vulnerable member states build economic access to financial services, especially in Afghani-
systems, create jobs, and alleviate poverty for stan’s rural areas.
Asia’s poorest. Today, less than 5 percent of Afghans use banks
Following in this long tradition, we commend and the formal financial system. The rest of the
the Bank’s sustained engagement with Afghan- population relies on small-scale personal savings
istan—one of the most important develop- or short-term loans from friends and family, or
ment challenges facing the international donor makes do without. Without access to finance,
community today. What happens in Afghanistan Afghan entrepreneurs cannot grow their busi-
will have far reaching consequences for the entire nesses, farmers cannot invest in new tools or
continent and, indeed, the world. equipment, and families cannot find credit to
The ADB is one of the largest donors to Afghani- improve their lives. Expanding access to finance
stan. Over the past eight years the ADB has been in Afghanistan is a challenge. Afghan banks lack
instrumental in helping build Afghanistan’s infra- both the physical presence and the specific exper-
structure—roads, power plants, irrigation systems, tise needed to build a commercially sustainable

ASIAN DEVELOPMENT BANK | 2010 39


FINAL PROOF
FOREWORD

business outside of the major urban centers. electronic funds transfer network. There are
Expanding However, the challenge is not insurmountable, technical, commercial, and regulatory challenges
access to finance and the ADB can play a key role in helping to to setting up such a nation-wide system, but the
in Afghanistan address it. successful examples of mobile and electronic
is a challenge, First, we must help Afghan commercial payment systems elsewhere in the world prove
as fewer than banks to develop products and services that are that it can be done—and that it can help trans-
5 percent of tailored to rural needs. These include small- form lives of the rural poor.
Afghans use banks scale demand deposit and savings accounts, and This is a critical period for Afghanistan and an
and the formal specific credit facilities for small and medium- opportunity for all donors, especially the ADB,
financial system size enterprises and agricultural sector lending. to make a lasting difference in a country emerg-
Through the ADB, donors can provide banks ing from generations of conflict. We invite the
with the training and technical assistance that ADB to partner with the United States to help
they will need to assess collateral and cred- expand access to rural finance in Afghanistan.
itworthiness in rural areas. This will allow As we look to the future, there has never been a
lending to be commercially sustainable, without more important time to deepen and consolidate
having to rely on costly and distortionary govern- donor engagement with our Afghan partners.
ment subsidies. The United States is pleased to have deep-
Second, we can assist Afghan banks in devel- ened our partnership with the ADB for more
oping electronic platforms that will allow them than four decades. We look forward to continu-
to reach rural customers without having to build ing our partnership with the ADB, particularly
an expensive branch network across the country. on Afghanistan, so that the Afghan people
To provide the greatest reach at the lowest cost, are a productive and positive force for change
an electronic system will be necessary, whether in the Asia-Pacific region for generations
via mobile phones, smart cards, or an expanded to come.

40  2010 | ASIAN DEVELOPMENT BANK


All Rights Reserved.
© 2010 EYGM Limited

Building the future?


At Ernst & Young, we’re proud to support
Asian Development Bank in its mission of
“Meeting the challenge of global growth.”
Leveraging lessons learned in both
the government and commercial sectors,
we help bring a fresh perspective to your
operations, helping to make them leaner
and more effective.
Building a better tomorrow really makes
a difference.
ey.com/gps
FINAL PROOF
Issues Facing Asia and the Pacific

Creating resource-efficient economies and zero-waste cities

Promoting the
3Rs – Reduce, Reuse,
and Recycle
T
o be responsible for almost 80 percent ingly difficult to ignore the huge environmental
of national income does not come Cities must challenges involved.
without a cost. As the most aggres- lead the way The strain on nonrenewable and finite resourc-
sive wealth-makers and job provid- in promoting es is overwhelming with 44 million people
ers, Asian cities also use about 85 percent of the resource joining cities each year—equivalent to 120,000
energy consumed by these countries and gener- conservation people being added each day. This daily increase
ate about 75 percent of their greenhouse gas initiatives requires the construction of more than 20,000
emissions. Per capita carbon dioxide emissions new dwellings, 250 kilometers of new roads, and
are almost as high as those of Western cities. The additional infrastructure to supply more than
region is also home to 200 million urban poor, 6 megaliters of potable water.
and is witnessing an overall population boom of Now more than ever, we confront the perils of
3 percent per year. Rising pollution and sea levels thoughtless resource consumption, waste genera-
put trillions of dollars of economic output and tion, and greenhouse gas emissions. The choices
hundreds of millions of people at risk. Given the we make today will determine the extent of our
speed at which cities are growing, it is increas- cities’ livability and sustainability in the future.

ASIAN DEVELOPMENT BANK | 2010 43


FINAL PROOF
RUNNING HEAD

What Cities Can Do region remains low by global standards, leading to


Making our cities cleaner and more resource- high levels of waste per unit of output. By manag-
efficient requires new approaches, new forms of ing resources more efficiently, cities can eliminate
engagement, and bolder commitments. Cities must some of their waste and cut down on the need for
lead the way in promoting initiatives that make raw materials.
resource conservation a way of life. As centers of To achieve a circular economy, it is necessary
population, business, and education, they can be to address the disconnect between planners and
effective champions for altering current produc- service providers, urban planning and financ-
tion and consumption patterns, and can provide ing, and most significantly resource planning and
models that national governments can adopt. urban development frameworks. A whole-system
Towards this end, the 3Rs (reduce, reuse, and approach needs to be applied in the design of
recycle) approach is a good starting point. buildings, landscapes, and service infrastructure
Urban development requires a delicate balance to reflect the goal of creating zero-waste, self-
between economic productivity, social equity, sufficient cities.
and ecological protection. Unfortunately, the Given their narrow fiscal bases and limited
efficiency with which the region’s land, energy, access to market-based finance, cities need a good
infrastructure, and transportation are used in the mix of income-generating activities, budget trans-

44  2010 | ASIAN DEVELOPMENT BANK


FINAL PROOF
RUNNING HEAD

fers, incentives, and creative regulatory policies ance but flexible enough to accommodate specific
the ADB-supported to optimize resource use. approaches to meet the same requirements.
Lahendong Industries that use prohibited materials, create Governments should complement these
Geothermal excessive pollution, or exceed limits on raw measures by supporting innovations in energy
Plant, IN MANADO, materials should face legal and financial penal- supply infrastructure, energy efficiency technolo-
INDONESIA, ties. Through zoning, building codes, and the gies, resource-saving pricing schemes, standards-
harnesses THE permitting process, cities can encourage build- based regulation for energy efficiency, and urban-
earth’s power ing designs that conserve energy and resources. demonstration pilot programs.
to provide clean, Enterprise development can also support low- City managers need timely information on
sustainable energy energy, zero-carbon, and recycling technologies, resource-saving approaches that have been
and can provide incentives for the safe reuse of successful elsewhere and can be applied locally
industrial byproducts. Examples of using the and more broadly. Ways must be found to dissemi-
market to enhance regulations include the Euro- nate practical know-how and experiences through
pean Union Emission Trading System and the cap- peer networks, regional knowledge hubs, compet-
and-trade policies introduced in the United States itiveness analyses, city visioning exercises, and
in the 1990s to reduce acid rain. To be effective, support for environmental demonstration pilot
policies must be strong enough to ensure compli- programs. Lastly, there is a need to engage citizens

ASIAN DEVELOPMENT BANK | 2010 45


FINAL PROOF
Issues Facing Asia and the Pacific

in budgeting, investment planning, and providing cities to treat at least 70 percent of their waste-
A tricycle USING feedback on service delivery through surveys, citi- water and obliges industrial enterprises to use
liquefied zen report cards, and performance benchmarks. recycled wastewater.
petroleum gas. As a result, there is now a demand for waste-
ASIAN CITIES MUST Promoting the Circular Economy water treatment plants to sell high-quality recy-
MONITOR THE The 3Rs approach has been around for decades, cled wastewater to industrial enterprises. This
ENVIRONMENTAL particularly in the areas of solid waste manage- model reduces groundwater and surface water
IMPACTS OF THEIR ment, energy conservation, pollution control, and use and provides additional revenue for the treat-
PRODUCTION AND water reuse. However, its application is largely ment plants. Another promising model is the
CONSUMPTION sporadic and small-scale, and it is rarely included promotion of wastewater reuse for landscaping,
in national legislation. So far, just one develop- greening, and recreation parks in major indus-
ing Asian country has adopted this approach as a trial complexes. Reusing treated wastewater has
central plank of its national policy to address the already benefited most of the PRC’s cities and
environmental costs of rapid growth. economic zones.
In 2008, the People’s Republic of China (PRC) While the law’s full force has yet to be realized,
adopted the Circular Economy approach to main- the PRC has taken the first steps to chart a new
stream activities that reduce, reuse, and recycle course. Other Asian countries can learn from the
materials and minimize environmental impacts. It country’s experiences in implementing policy,
integrates cleaner production and industrial ecol- building capacity, and enlisting public support to
ogy in a broader system encompassing industrial achieve a circular economy.
firms, networks or chains of firms, eco-industrial
parks, and regional infrastructure to support Moving Toward a Smaller
resource optimization. Environmental Footprint
Unlike circular economy laws in developed Maintaining growth in the context of rapid
countries, the PRC’s strategic objective is to urbanization requires Asian cities to examine
achieve energy efficiency rather than to reduce the environmental impacts of their production
waste. Supplying energy to feed the growing econ- and consumption beyond the city or munici-
omy has become a serious concern in the PRC, and pal jurisdiction. This also means giving serious
promoting the circular economy is one response. consideration to the finite nature of resources in
The circular economy law mandates that manu- the wider national, regional, and international
facturers not only recycle when it is economically contexts. Clear targets, supported by enabling
advantageous, but also save water, refrain from legislative, political, technical, and financial
using certain toxic materials, and find ways to measures, can minimize the ecological footprint
reuse or sell industrial waste. It also requires large of Asia’s cities.

ASIAN DEVELOPMENT BANK | 2010 47


FINAL PROOF
Issues Facing Asia and the Pacific

An integrated Asia and Pacific stands the


best chance of promoting inclusive growth
during the global economic downturn

Asia and the Pacific


Working Together
to Strengthen the
Global Economy
S
ince emerging from the financial crisis of turn, regional cooperation and integration has
1997–1998, Asian countries have placed taken on greater urgency and highlighted new
greater emphasis on working togeth- areas of concern.
er. Better dialogue, increased people- The current crisis has highlighted the need for
to-people exchange, more economic ties, and more effective and thoughtful financial regulation.
improved physical connectivity have built stron- The United States and the countries of Europe
ger links throughout the region. have yet to come up with a unified or harmo-
As Asian nations grapple with the conse- nized approach; and in Asia, where economic
quences of the current global economic down- and social differences are very pronounced, the

48  2010 | ASIAN DEVELOPMENT BANK


FINAL PROOF
Issues Facing Asia and the Pacific

challenges to such regulation are even greater. intrinsic relationships between coordination of
The region has diverse systems of financial regu- regional monetary and fiscal policies for greater
lation with different agencies in different coun- efficiency and integration.
tries handling different functions and responsi-
bilities. A key question is: how will Asia, with its Asian Integration in its Infancy
diverse systems, be able to provide a region-wide Unlike in Europe, where governments delegated
response to the challenges of strengthening finan- several powers to strong regional institutions,
cial regulation? integration in Asia so far has been driven by
The region also needs to rebalance its growth by markets. Asian integration remains focused more
increasing the contribution that domestic demand on economic issues than on political concerns,
and income can provide to economic growth. and it is unclear to what extent nations in the
This, in turn, implies a shift toward services and a region would be eager to compromise their
better quality of life for Asian citizens in the long sovereignty to join together.
run. As domestic demand increases, the transition But as an economic force, Asian countries
of Asia’s production from primarily an export have much to gain from greater integration. As
industry—two-thirds of products produced in Asia continues to grow, its economic and finan-
Asia are exported from the region—to an expan- cial power has become substantial. By 2020,
sion of regional exports will be a key challenge Asia’s gross domestic product is likely to be 50
for regional cooperation in years to come. percent larger than that of the European Union
The global economic downturn has provided or North America, according to Emerging Asian
some important insights into the working of Regionalism, A Partnership for Shared Prosperity, a
an acclaimed model of economic integration: landmark study on Asian integration conducted
the approach to monetary union followed by by the Asian Development Bank (ADB).
the European Union. The European Union is “Most importantly, the projections suggest that
facing problems associated with a lack of fiscal Asia’s regional links are likely to intensify further:
harmonization to complement the common on the demand side, the region’s spending power
currency and the monetary policy decisions is set to outstrip growth in the rest of the world;
taken in Frankfurt. The European Central Bank on the supply side, its production capabilities are
sets monetary policy for the eurozone, but its likely to continue to expand and diversify,” the
member nations decide their own fiscal policy. study said.
This model is now revealing itself to be incon- Policy makers in Asia and the Pacific will be
gruent with the needs for a complete regional tasked with determining how closely their coun-
economic union. In other words, the design of tries and economies should be tied together, and
the monetary union decided with the Maastricht what support systems will need to be in place to
Treaty of 1992 appears to be incomplete. Asia’s make their plans succeed.
challenge, as it works to strengthen monetary Some observers argue that the best-case scenario
policy coordination in the region, is to learn would be an Asia with completely open borders
from Europe’s experience and to realize the and open trade, such as the vision presented by

ASIAN DEVELOPMENT BANK | 2010 49


Stephan Alessio

Liliane Lu

ACROSS THE WORLD,


WE STAND BY YOU WITH EXPERT SOLUTIONS IN EXPORT FINANCE.

“Lending to emerging markets remains an integral part of our core activities for the years ahead.

At the same time, Multilaterals, such as ADB, are key players in providing financing solutions to foster

trade and growth. Today’s long-standing relationship between Société Générale Corporate and

Investment Banking and Multilateral Institutions is proving to be increasingly appropriate for our clients

in the current global economic climate.” Liliane Lu and Stephan Alessio, Export Finance Experts.

www.sgcib.com LEADERS IN TRADE


Awards

2009

We stand by you
INVESTMENT BANKING – GLOBAL FINANCE – GLOBAL MARKETS
Société Générale is a credit institution and an investment services provider (entitled to perform any banking activity and/or to provide any investment service except the operation of Multilateral Trading Facilities) authorised by the French Comité des Établissements de
Crédit et des Entreprises d’Investissement, and regulated by the French Commission Bancaire and the Autorité des Marchés Financiers and, for the conduct of its UK business, by the Financial Services Authority. Société Générale benefits from the EC passport
authorizing the provision of investment services within the EEA. This material has been prepared solely for information purposes and does not constitute an offer from Société Générale to buy or sell or a solicitation of an offer to buy or sell any security or financial
instrument, or participate in any trading strategy. Not all financial instruments offered by Société Générale are available in all jurisdictions. Please contact your local office for any further information. © 2010 Société Générale Group and its affiliates.
FINAL PROOF
Issues Facing Asia and the Pacific

ADB President Haruhiko Kuroda in an opinion With relatively low wages, sophisticated tech-
article published in the Straits Times in Septem- nologies, and an educated labor force, Asian
ber 2009. countries have dominated the manufacturing
“I envision an Asia where countries are industry. In recent years, advances in communi-
seamlessly connected by land, sea, and air; cations and technology have led to the develop-
where there are no barriers to trade; where ment of production networks, which are becom-
goods and services move freely across borders; ing increasingly important in the region.
where capital can be transferred unimpeded; Production chains are broken into small
an Asia where people are free to settle where steps and each step is undertaken at the most
they can best use their skills,” President Kuroda cost-efficient location. Sometimes this involves
said. “I envision an Asia that tackles challenges a single company with operations in different
together, in a collegial manner, with common countries, and sometimes it involves several
purpose. An Asia free from poverty, where companies working together. “By enabling
countries forge strong partnerships for shared economies to specialize in narrower niches,
prosperity, and where political differences are production networks allow them to enter inter-
assuaged by the common ideal of bettering the national markets with a more limited range of
lives of our citizens.” skills than previously,” notes the ADB study,
With Asia and the Pacific accounting for more Emerging Asian Regionalism, A Partnership for
than half of the global population and almost one- Shared Prosperity.
third of the world’s gross domestic product, more Developing countries benefit because they
integration in the region would lead to tremen- can participate in the larger market, and the
dous economic power. Enhanced regional coop- global economy benefits because companies
eration would also benefit the global economy, can take advantage of cost efficiencies. These
particularly if trade continues to open up across networks have increased trade among Asian
the world. nations and have helped bring prosperity to
a number of countries. A large share of the
Integration Evolves from Need finished goods is still bound for Europe or the
The push to establish regional integration United States.
emerged after the Asian financial crisis of This pragmatic, flexible approach to coopera-
1997–1998. The crisis helped governments real- tion has some advantages: countries or subre-
ize that despite structural differences, they Asian countries gions can integrate according to their needs as
had common interests. Countries restructured are dominating specific opportunities arise; and as partnerships
their finance systems and joined together to manufacturing. strengthen and more trade networks are estab-
establish plans for cooperation and emergency THey can keep lished, smaller groups join larger ones to forge
assistance. Since then, the region has been hit wages low while deeper partnerships.
by natural disasters and health threats such as offering buyers By focusing on trade and actual production
severe acute respiratory syndrome (SARS) and technological needs, integration will remain market-friendly.
avian influenza. Leaders have seen the value of know-how, and Because new business opportunities will arise,
working together to address shared problems an educated private enterprise will see integration as advan-
and coordinate responses. labor force tageous. Greater financial success will lead to
greater support for integration.
“It is also important to recognize that being
pragmatic and flexible does not mean taking a
laissez faire attitude,” President Kuroda said in
a 2008 speech. “In fact, Asian leaders face the
daunting challenge of managing the emergence
of regionalism. This requires not just vision, but
also effective communication and, when needed,
policy coordination or the creation of common
regional institutions.”

Establishing Formal Integration


In addition to the somewhat informal economic
networks that have developed, countries in the
region have turned to free trade agreements to
provide a formal framework for the integration
of trade and finance markets.
Members of the Association of Southeast
Asian Nations (ASEAN) have committed to form-
ing a free trade area for goods, labor, and foreign
investment by 2015.

ASIAN DEVELOPMENT BANK | 2010 51


FINAL PROOF
Issues Facing Asia and the Pacific

In an effort to prevent a recurrence of the 1997


collapse, ASEAN member countries, along with
the People’s Republic of China (PRC), Japan, and
the Republic of Korea (ASEAN+3), have commit-
ted to greater financial cooperation through
the Chiang Mai Initiative, which is now being
multilateralized. These countries also started the
Asian Bond Markets Initiative so that regional
savings could be used for regional investment.
Analysts have noted that bilateral and subre-
gional trade agreements have multiplied in recent
years. In addition to trade, these agreements
generally address financial considerations, such
as investments, and aim to create economies of
scale that can compete with those achieved by
the PRC and India.
Consolidating these multiple and overlapping
free trade agreements into a single East Asian free
trade agreement could help mitigate the harmful
“noodle bowl” effects of different rules of origin
and standards, notes the September 2007 ADB
study ASEAN+3 or ASEAN+6: Which Way Forward?
Consolidation at the ASEAN+6 level would yield
the largest gains to East Asia—while the losses
to non-members would be relatively small, the Seamless Asia. In addition, Asia needs to spend
study says. AN INTEGRATED approximately $290 billion on specific regional
In Asia, finance markets tend to be more inte- ASIA WILL CALL infrastructure projects in transport and energy
grated with global markets than with each other, FOR THE MIGRATION that are in the pipeline. Of these regional proj-
according to ADB. The lack of oversight and OF Workers ects, 21 high priority projects that could be
supervisory frameworks is risky for the region, implemented by 2015 at a cost of $15 billion have
and the lack of well-functioning bond markets been identified. The successful implementation
hurts local currency funding for long-term of these high-priority projects and their wider
investment projects. The efficiency of capital regional benefits would create a strong drive
allocation is reduced, and economic growth is toward further strengthening regional infra-
hurt. Underdeveloped finance markets and vary- structure networks. This amounts to an overall
ing regulatory frameworks are serious barriers infrastructure investment need of about $750
to financial integration. billion per year during this 11-year period.
Asian economies would eventually benefit from Since 1992, cooperation in the greater Mekong
global free trade, and ADB recommends adopting Subregion has led to the completion of $10 billion
an open, rules-based global system of trade and worth of projects, including the Phnom Penh to
investment consistent with the framework of the Ho Chi Minh City highway and the East–West
World Trade Organization. Economic Corridor from Myanmar to Da Nang
in Viet Nam, according to ADB. More than 150
Beyond Trade Agreements and Finance new projects have been proposed. Eventually,
In addition to developing the regulatory frame- Yunnan Province of the PRC and northern Lao
work to support integration, Asia needs to build People’s Democratic Republic could be connect-
roads, bridges, communications, and energy ed to international seaports in Thailand and Viet
systems that will improve physical connections. Nam. Goods and people, including tourists, may
Improving connectivity in the region would move about easily in the subregion.
bring Asia large welfare gains through increased Workers will also need to move around freely
market access, reduced trade costs, and more in an integrated Asia, which means restrictions
efficient energy production and use, notes the on mobility within countries and between coun-
ADB study Infrastructure for a Seamless Asia. If the tries will have to be lifted. The top three coun-
required investment toward pan-Asian connectiv- tries of origin for international migrants are
ity is made in the region’s transport, communica- in Asia, according to ADB. Together, the PRC,
tions, and energy infrastructure during 2010–2020, India, and the Philippines send 63 million work-
developing Asia’s real income during that period ers abroad. In return, those countries receive
and beyond could reach $13 trillion. about $70 billion in remittances a year. Migration
Between 2010 and 2020, Asia needs to invest raises incomes in source countries, where wages
approximately $8 trillion in overall national are low, and in host countries, where migrants
infrastructure according to Infrastructure for a complement a higher-productivity workforce.

52  2010 | ASIAN DEVELOPMENT BANK


Your Gateway To
Unrivalled Insights
On Credit Rating
Malaysia’s premier credit-rating
agency at a glance
An essential part of Malaysia’s financial • Islamic ratings In 2008, RAM Ratings published The Malaysian
landscape, RAM Rating Services Berhad (“RAM • Project finance ratings Sukuk Market Handbook – Your Guide to the
Ratings”) plays a pivotal role in providing crucial • Structured finance ratings Malaysian Islamic Capital Market – the first of its
and independent credit opinions that investors • Public finance ratings kind – as a comprehensive guide that serves as a
and other market participants need, with a view practical tome for institutions and professionals.
to being more confident about their investment Sector Specialisation The handbook covers, among others, applicable
and financial decisions. • Construction Shariah principles, the regulatory framework,
• Electrical and electronics the role of Shariah advisors, legal and tax
Incorporated in 1990 as the pioneer in the • Financial services considerations, rating approaches and market
provision of credit-rating services for the • Infrastructure and utilities infrastructure.
Malaysian capital market, our rating portfolio • Manufacturing
encompasses a vast range of local and foreign • Oil and gas To date, RAM Ratings has rated more than
corporates, multinational banks, insurance • Plantations USD76 billion (or RM266 billion) of sukuk issues
or takaful companies, government-linked • Real estate from various sectors. RAM Ratings remains a
and other public-financed entities, myriad • Retail dominant force in the domestic market, with
complex investment vehicles and the ringgit- more than 65% of the industry’s rated value.
denominated securities they issue, structured- Our Rating Publications
finance transactions backed by receivables or • Islamic Finance Bulletin Providing Direction
other financial assets, and Islamic securities • Banking Bulletin Apart from ratings, RAM Ratings’ holding
(commonly known as sukuk). • Corporate Default Study company – RAM Holdings Berhad (“RAM
• Credit insights and sector round-ups Holdings”) – has two other main subsidiaries:
As one of the region’s most experienced rating • Rating rationales RAM Consultancy Services Sdn Bhd,
agencies, we are able to capitalise on our • Quarterly results commentaries which supplies innovative risk-management
understanding of the market when arriving • Rating criteria and methodologies solutions as well as strategic business
at astute credit evaluations. Underscored by • Rating summaries and advisory services; and RAM Ratings
our renown in the rating business, our credit (Lanka) Limited, which provides credit-rating
assessments have been habitually used as Achievements in Islamic Finance services to the Sri Lankan market. There
points of reference by regulators, the financial RAM Ratings has been voted the top are also two units within the holding company
community and the investment fraternity. RAM domestic rating agency in the Asia-Pacific, that furnish economic research and training
Ratings is a public limited company and is wholly and has also had the honour of being named services, areas where we possess almost two
owned by RAM Holdings Berhad. the most influential rating agency in the decades of experience.
region. In 2006, RAM Ratings was
Key Specialisation Areas / Capabilities designated the World’s Second Best Islamic As part of our initial ventures en route to our
As the financial market becomes more complex, Rating Agency as part of the Islamic Finance longer-term vision, we are also directly involved
funding and investment decisions – however News Awards. in other developing markets such as Sri Lanka,
minute – can lead to considerable gains or losses. Bangladesh, Pakistan and Kazakhstan. In the
This is why the investment community and those On top of our core business of credit rating, regional arena, RAM Holdings is a member of
active in the broader financial markets have RAM Ratings is always mindful of the the Association of Credit Rating Agencies in
been increasingly and continuously seeking the importance of educational and information- Asia (or ACRAA).
autonomous analysis, views and statistics provided dissemination activities towards the
by RAM Ratings. Our ratings have become a development of the Islamic capital market. In Through our presence in these international
primary component of the financial scene. consonance with this, we have consistently taken financial markets, RAM Holdings is able to keep
initiatives to promote investor and market our finger on the pulse of global developments
Our Rating Services education, in particular the launch of our and activities. We are well poised to provide
• Corporate ratings very own home-grown product – the Islamic guidance of exceptional quality, service, integrity
• Financial institution ratings Finance Bulletin. and objectivity.

RAM Rating Services Berhad

RAM
Suite 20.01, Level 20
The Gardens South Tower, Mid Valley City
Lingkaran Syed Putra, 59200 Kuala Lumpur, Malaysia
Tel: +603 7628 1000
Fax: +603 7620 8251
Email: ramratings@ram.com.my
RATINGS
www.ram.com.my
FINAL PROOF
Issues Facing Asia and the Pacific

Although migration of unskilled workers strengthened by regional cooperation, could


remains controversial in many countries, migra- bolster Asia’s role as a new and stabilizing engine
tion of skilled labor is more accepted. The of global economic growth,” the study notes.
ASEAN Economic Community is striving to free As a powerful player in world trade, Asia could
up the flow of skilled workers by 2015, and some bring new ideas that lead to global productivity
ASEAN nationals already have access to short- gains. As Asian capital markets become stronger
term visas, according to Emerging Asian Regional- and safer, they will contribute to the efficiency
ism, A Partnership for Shared Prosperity. and stability of global markets.
Beyond finances, regional integration offers “While Asian regionalism is primarily motivat-
countries a chance to coordinate more effective- ed by the desire to advance welfare in the region,
ly on cross-border health emergencies, disasters, it would not do so by detracting from develop-
and environmental issues. These are problems ment elsewhere,” states the ADB study Emerg-
that do not stop at international borders, and ing Asian Regionalism, A Partnership for Shared
they can be dealt with more effectively when Prosperity. “On the contrary, Asian regionalism
governments share resources and information. can help to sustain global economic progress at
High population density and limited medical a time when other major regions are reaching
services mean some Asian countries are particu- economic maturity.”
larly vulnerable to epidemics. HIV, SARS, and
avian influenza quickly morphed from local into
regional health concerns.
Regional cooperation could also help make
disaster response faster, more effective, and less
European
costly. Integration would include regional early
warning systems, disaster-management and Integration
recovery plans, and information sharing.
Environmental concerns are increasing in the
region, especially since growth has been tied
Compared with
to worsening pollution, rising greenhouse gas
emissions, and accelerating resource depletion.
Asian Integration
There are concerns that climate change could
leave some coastal regions under water, turn As Asia takes steps to become more integrated, there is a tendency to
farmland into wasteland, and cause mass migra- look to the European Union as a model. But there are significant differ-
tion and economic devastation. Cities have poor ences between the two regions, and the countries of Asia and Europe
indoor and outdoor air quality, and untreated have been drawn to integration for different reasons. The Asian Develop-
waste flows through urban waterways. ment Bank’s report Emerging Asian Regionalism, A Partnership for Shared
Successful growth benefits everyone in a Prosperity points out:
society. Regional integration in Asia can help
reduce poverty and raise the standard of living • E urope and Asia have very different political histories. In Europe,
in disadvantaged countries. Poverty has fallen World War II struck a huge blow to nationalism. Nations saw the
in all integrating Asian economies, and social advantages of working together rather than independently. In Asia,
welfare has been improved as more money has World War II struck a blow to colonialism. Countries became inde-
become available for services such as health care pendent, and national identity highly valued.
and education. • The European Integration Project began in 1957 and was driven by
government policy, while the need to cooperate to strengthen region-
Implications for Global Growth alism in Asia began a few decades later. Global economic interdepen-
If Asian integration is successful, the region dence is much greater now than it was 60 years ago, as is mobility of
could become a leader in opening trade in the capital and labor, and existing trade agreements have to be taken into
rest of the world. As Asia’s competitiveness consideration when crafting an integration framework.
becomes more linked to production networks • Geographically, politically, culturally, and economically, the countries
and other forms of integration, the region will of Asia have far more variation than the countries of Europe.
need greater access to global markets. • By the time Asian countries started working together, most had already
“Global liberalization remains the ideal formed their own global financial relationships. In Europe, capital markets
context for Asian trade, and thus the top prior- evolved sequentially after the creation of the Common Market.
ity of the region’s integration strategy,” accord- • In Europe, a few countries at similar stages of development formed
ing to Emerging Asian Regionalism, A Partnership the core of the union. As it grew, a more diverse collection of coun-
for Shared Prosperity. “Asia now has the leverage tries was added to the mix. In Asia, regional production networks
to project its commitment to the world trading have already connected a more diverse group of economies.
system in the global policy arena.” • In Europe, political leaders and diplomats played a key role in plan-
If the strategy works, Asia’s economies would ning and crafting agreements. In Asia, market forces are motivating
integrate not just with each other, but also integration.
with the rest of the world. “Asian dynamism,

54  2010 | ASIAN DEVELOPMENT BANK


The forces of nature can strike at any time.
Let’s discuss how to plug our defences.
As the Earth’s climate is changing, so are the frequency and intensity of floods and storms. What’s the answer: retreat from the
most hazardous locations? Protect vulnerable areas with sea walls, drainage systems and better building codes? Or take measures
to transfer the financial risk and rebuild? All we know at Swiss Re is that, as our climate changes, we must adapt apace. Which is
why we’re helping countries and communities develop strategies to protect themselves against the forces of nature. Risk is the raw
material we work with; what we create for our clients is opportunity.

Plug into www.swissre.com

ADB_PLUG_EN_GBR_090410.indd 2 09.04.10 11:59 ADB_


ADVERTISING FEATURE

Making societies more resilient to large risks


From natural catastrophes to climate change, from food shortages to epidemics – in today’s increasingly
interconnected world there is a growing need for systematic identification, assessment and mitigation
of global risks, as well as for adaptation to them. Swiss Re works with governments, civil society organi-
sations and academia to develop effective risk transfer solutions to make societies more resilient.

We are constantly reminded that natural helping them rebuild their livelihoods if a Redeploying public-private insurance
disasters are unforeseeable in their timing disaster wipes out crops and livestock. The solutions
and unpredictable in their impact. An esti- public sector can support the development Swiss Re believes that public-private
mated 3.4 billion people worldwide are of a robust risk management framework partnerships such as these are a good and
already threatened by natural hazards, for the agricultural sector through various efficient way to provide adequate coverage
and insured losses from natural catastro- measures including premium subsidies and to local populations exposed to large risks.
phes have jumped from an average loss participation for catastrophic events. An enhanced dialogue between public and
USD 5.1 billion per year in the period The Beijing municipal government for ex- private sector partners is critical for finding
1970–89 to USD 27 billion annually over ample supports the local agricultural insur- tailor-made solutions that make societies
the last two decades. By 2030, increasing ers with coverage for loss ratios in excess more resilient to large risks. Together with
climate risks could cost countries up to of 160 percent of the insurance premium such partners, Swiss Re has produced a
19 percent of their total gross domestic and in turn has bought reinsurance cover- number of innovative transactions. Among
product, according to the 2009 report age for such events from Swiss Re. them are weather index solutions in Africa
“Shaping Climate-Resilient Development” and India or parametric natural catastrophe
by the Economics of Climate Adaptation Using weather-based index insurance covers for Caribbean nations. Together
(ECA) working group. As a result, many in India with the World Bank and with the help
countries urgently need to find ways to Maharashtra, a large rural state in the of Swiss Re, the Mexican government
address the risks that are threatening them. centre of India, suffered three years of crip- launched catastrophe bonds to transfer
The ECA study finds that 68 percent of the pling drought between 2000 and 2004. the risks associated with earthquakes and
expected losses from climate change can The drought caused terrible hardship for hurricanes to the capital markets. The pay-
be averted using appropriate adaptation two-thirds of the region’s inhabitants who out of the Mexican MulitCat bond is linked
measures. And for damage that cannot be depend on agriculture for their livelihoods. directly to pre-defined triggers, in this case
prevented at a justifiable expense, govern- Some starved, several farmers reportedly related to the strength of the earthquake
ments can off-load risk to the private insur- committed suicide, and many families fell or hurricane. Insurance solutions designed
ance and capital markets. Yet, the exact role below the poverty line. Drought and its to provide funding for immediate disaster
of insurance as a partner in delivering new impact on agriculture are one of the great- relief have substantial potential for being
risk transfer solutions for large risks is not est potential threats to India’s economy replicated elsewhere because they can
widely known among governments. The in the coming 20 years. Decision makers readily be adapted to the specific risk expo-
following examples illustrate the value of in Maharashtra can choose from a wide sure of other regions.
such partnerships. range of infrastructural, engineering or
behavioural measures to avert drought. But For further questions, please contact
Expanding agricultural insurance for the most severe, least frequent disaster Reto_Schnarwiler@swissre.com.
in China events, insurance generally proves to be
In February 2009, drought struck the the most cost-effective measure. Weather- Swiss Reinsurance Company Ltd
northern and central regions in China. based index insurance is the most attrac- Swiss Re is a leading and highly diversi-
These two farming regions are vital for tive choice for this region. The key benefit fied global reinsurer. The company
feeding the country’s growing population. of such an insurance approach is that it can operates through offices in more than
By 2030, they are projected to produce a cover up to an estimated 70 percent of the 20 countries. Founded in Zurich,
quarter of China’s food crops. Rains eventu- economic value lost and pays out much Switzerland, in 1863, Swiss Re offers
ally eased the drought, but this latest event quicker than a traditional indemnity-based financial services products that enable
called attention to a looming problem, as insurance policy. It does so using an index risk taking essential to enterprise and
climate change could lead to a 50 percent that defines this payout as a function of progress. The company’s traditional re-
increase in drought losses in Northeastern weather data, such as rainfall or tempera- insurance products and related services
China within the next two decades. Several ture, rather than individual losses. for property and casualty, as well as the
measures are available to avert drought-re- life and health business are comple-
lated losses in this region. Among them are mented by insurance-based corporate
soil conservation techniques or the building finance solutions and supplementary
of water reservoirs. But not all damage can services for comprehensive risk man-
be avoided. And so agricultural insurance agement. Swiss Re is rated “A+“by
plays an important role in protecting farmers Standard & Poor’s, “A1”by Moody’s and
against large losses to their income and “A”by A.M. Best.

11:59 ADB_PLUG_EN_GBR_090410.indd 3 09.04.10 11:59


FINAL PROOF
Issues Facing Asia and the Pacific

Asia and Pacific nations are developing


strategies to head off a climate change disaster

Finding the Global


Thermostat
A
few hours south of Bangkok lies not addressed in an aggressive way, according to
a vision of what some fear could climate experts.
be Asia’s future. The temple Khun The extreme end of the scenario is displace-
Samut Chin, which once sat in the ment of people because of a climate-related
middle of a vibrant community, near a school, a catastrophe, such as inundation and wiping out
clinic, homes, and farms, now appears to be on of villages, or submergence of agricultural land
an island. rendering it useless for farming. In other situ-
The temple stands precariously on a spit of ations, fields could dry out and farmers would
land in Samut Prakarn province that juts into no longer be able to make a living. In such cases
the Gulf of Thailand. Electricity lines that were entire communities could be displaced.
once on land now run through the ocean near the While scenarios leading to the sudden destruc-
temple, and some parts of the village that once tion of communities are possible, climate experts
surrounded the temple are 4 meters underwater. see the slow erosion of livelihoods as more like-
The community that the monks serve has had to ly. Climate change will probably have low-level
retreat to higher ground, and can only be reached impacts over a longer period that will gradu-
via a rickety footbridge. ally become stronger, eroding resilience to more
Coastal erosion due to land subsidence is likely extreme events.
the principal reason behind the disappearance of At the 2009 United Nations Climate Change
the village, and no one claims that it is due only to Conference in Copenhagen, policy makers,
sea level rise caused by climate change. But those researchers, and development organizations
who study the impact of global warming on Asia negotiated strategies that form a road map to a
say the migration of the little village that once brighter future, but it is unclear whether the glob-
surrounded Khun Samut Chin temple should be al community can muster the political will to take
seen as a warning sign. the necessary action.
According to climate change experts, Asia and The Asian Development Bank’s (ADB) long-
the Pacific could be facing a grim future. Island term strategic framework, Strategy 2020, bluntly
nations could see the ocean encroaching, while lays out the important role countries in the region
higher water temperatures and ocean acid- must play and the consequences of doing noth-
ity could destroy coral and kill fish. Powerful ing: “Unless approaches to economic growth
typhoons could hammer Asia’s coastlines more are altered to address pollution, the destruction
often, crops could fail and livestock could die, of natural resources, and environmental degrada-
triggering food price hikes. tion (including climate change), the region’s pros-
Bearing the brunt of this nightmare scenario pects for strong, continuous economic progress
would be the region’s poor, are in jeopardy.”
According to who are least able to contend At the Copenhagen Summit, delegates focused
with food and water shortages, on strategies to contend with global warming
climate change outbreaks of disease, and high- and changing weather patterns. The resulting
experts, Asia and er prices. agreement, known as the Copenhagen Accord,
These are some of the prob- provides mitigation and adaptation assistance to
the Pacific could be able scenarios the region could developing nations.
facing a grim future be facing if climate change is Participants agreed that nations should work

58  2010 | ASIAN DEVELOPMENT BANK


FINAL PROOF
Issues Facing Asia and the Pacific

together to reduce carbon emissions and keep the and raised living standards, but they have also
average global temperature rise below 2 degrees as part of ITS resulted in higher concentrations of greenhouse
Celsius. Developed countries pledged $30 billion focus on gases in the atmosphere. Deforestation and
in immediate assistance, and set the goal of mobi- environmentally poor land-use practices also contribute to global
lizing $100 billion in annual assistance by 2020. sustainable warming, because of the loss of carbon-seques-
The accord noted that the reduction of carbon development, ADB tering vegetation.
emissions associated with economic growth will is helping and Ironically, the carbon emissions that result
require careful adjustments in developing coun- encouraging the from economic growth threaten the continued
tries, where “economic and social development use of clean prosperity of the region. The impacts of climate
and poverty eradication are the first and overrid- energy sources change are expensive, and range from repairing
ing priorities.” storm-damaged infrastructure to dealing with
ADB considers climate change to be one of the mass migration.
most significant threats to the economy and secu- A 2009 study by ADB and the United King-
rity of Asia and the Pacific, therefore a commit- dom estimated that by 2050 land value losses in
ment to fighting the causes and consequences of Indonesia, the Philippines, Singapore, Thailand,
climate change is essential to successful develop- and Viet Nam could amount to between $6.69
ment in the region. billion and $22.1 billion for regular flooding, and
Strategy 2020 addresses climate change as part an additional $0.46 billion to $6.68 billion for
of ADB’s focus on environmentally sustainable extreme flooding.
development toward a vision of a region free
of poverty. ADB is helping developing member ADB’s Response
countries reduce emissions by encouraging the ADB has been scaling up its climate change
use of clean energy sources, improving transport actions since 2005. Each of ADB’s five regional
systems, and promoting better water manage- departments—Central and West Asia, the Pacific,
ment and land-use practices. At the same time, South Asia, East Asia, and Southeast Asia—has
programs are in place to help countries build resil- recently prepared a climate change implementa-
ience to the adverse impacts of climate change. tion plan to better align climate-related invest-
ments and associated policy and institutional
Growing Prosperity, Growing Problem support with the priorities of ADB’s developing
In Asia, economic growth has caused carbon member countries.
dioxide emissions to more than triple since 1980. ADB is promoting the integration of climate
Coal and oil use have increased, and prosperity change mitigation and adaptation into its devel-
has put more cars on the region’s roads. Indus- opment activities throughout the region. This
trialization and urbanization have created jobs includes working with multiple partners and

ASIAN DEVELOPMENT BANK | 2010 59


Public
private
partnerships

Programme
management

Sustainable Climate
energy change

Sustainable
Water
urban
scarcity
development

for the 21st century.


FINAL PROOF
Issues Facing Asia and the Pacific

intensifying efforts to help fill gaps in financing, In the Pacific, where islands are at risk from
technology, capacity, and knowledge. Green rising sea levels and more powerful storms, ADB
Core priorities of ADB’s climate change miti- technologies is investing in marine and coastal management
gation and adaptation program are scaling up such as wind to increase the resilience of agriculture, fisheries,
clean energy, including expanding the propor- power are being and tourism. ADB is also supporting the devel-
tion of renewable energy supply in Asia and the developed opment of up to eight national databases and
Pacific and promoting energy efficiency; promot- across asia a consolidated regional database to collect and
ing low-carbon, climate-resilient transport and analyze risk, hazard, and vulnerability data.
urban development; investing in climate-resilient In South Asia, where millions of farmers and
development; furthering sustainable land use and coastal dwellers are vulnerable to climate change,
forest management; and supporting associated ADB is working with local governments to
policy and institutional strengthening. support irrigation system resilience and develop
In Central and West Asia, the terrain is made coastal flood protection measures. Projects are
up of high mountains, large rivers, extensive also being undertaken to reduce greenhouse gas
grasslands, and inland bodies of water. In an area emissions by introducing clean technologies for
that already experiences periodic drought, water energy, transport, and urban development.
scarcity is expected to become a problem. ADB Methane released from landfills contributes to
efforts are focusing on agricultural water manage- global warming, and waste material in dumpsites
ment and hydropower. Drought-resistant crops, leads to toxic seepage. In Rajasthan, India, ADB is
improved irrigation efficiency, and rehabilitation promoting organic waste composting. The proj-
of degraded forests are part of the response. ect not only reduces methane emissions, it also
With support from ADB, Kazakhstan, the allows businesses to market and sell compost.
Kyrgyz Republic, Tajikistan, Turkmenistan, In Khulna, Bangladesh, ADB is supporting
and Uzbekistan have formed the Central Asian a water supply project by providing climate-
Countries Initiative for Land Management. The proofing measures to help withstand the threats
program focuses on conservation of dryland of sea-level rise, saltwater intrusion, flash floods,
ecosystems, water resource management, and and increased cyclonic activity. The country is
sustainable food production to improve lives in considered one of the most vulnerable to climate
rural areas. change because of its extensive low-lying deltas,
In Pakistan, ADB is promoting energy efficiency inadequate infrastructure, and high dependency
through projects that include the world’s largest on natural resources.
compact fluorescent lamp installation program. In Southeast Asia, long coastlines with dense
The goal is to install 30 million new fluorescent populations are at high risk from climate change.
lamps, replacing low efficiency incandescent Investments are being made to protect infrastruc-
bulbs. ADB is also working with the government ture and industries such as tourism, agriculture,
to develop an $8.5 billion energy sector invest- and fisheries. In addition, this region will benefit
ment plan. from the Forest Investment Program under the
In East Asia, winter power supplies heat 450 Climate Investment Fund (CIF) administered by
apartment blocks with inadequate thermal ADB and other multilateral development banks
insulation in the city of Ulaanbaatar, Mongolia, to help reduce emissions from deforestation and
where the average winter temperature is –20 forest degradation. ADB is also providing support
degrees Celsius. ADB is supporting the Ulaan- for greater energy efficiency, renewable energy
baatar Urban Rehabilitation Project to retrofit expansion, and improved management of trans-
buildings with insulation to decrease heat loss. port systems and waste.
So far, pilot retrofits have saved up to 70 percent In the Philippines, ADB’s Energy Efficiency
in annual heating requirements. Project will distribute 13 million compact fluores-

ASIAN DEVELOPMENT BANK | 2010 61


FINAL PROOF
Issues Facing Asia and the Pacific

cent lamps to low-income households and estab- sive undertaking, which is often out of reach for
lish an energy service company to improve ener- developing countries.
gy efficiency in the commercial, industrial, and ADB will continue to aggressively support tech-
public sectors. It is estimated the project could nology transfer for climate change mitigation and
save $120 million per year in fuel costs, and it is adaptation, and to develop innovative financing
part of a $2.78 billion clean energy program with mechanisms to ensure technology is available
core financing from the CIF. where it is needed.
The establishment of a marketplace for the
Paying for Climate Change Response transfer of low carbon technologies is one solu-
ADB is providing innovative financing mecha- tion being developed by ADB to overcome high
nisms, and has seen impressive leverage in terms front-end costs associated with new technologies.
of attracting additional funding. This has encour- Membership would be open to holders of low-
aged the financing of investments that promote carbon technology patents, users, philanthropies
environmentally sustainable growth. funding technology transfer, governments, and
Under the goals of Strategy 2020, support for commercial banks. Financial assistance would be
environmentally sustainable growth will comprise available to help bridge the gap between patent
at least 40 percent of ADB investments in the next holders and users. The objective would be the
10 years. The plan calls for ADB to “expand its rapid, extensive diffusion of low-carbon technol-
promotion of, and investment in, sound envi- ogies in Asia and the Pacific.
ronmental management, while simultaneously
capitalizing on its operational strengths, such as Moving Forward
infrastructure development and finance.” Strategy 2020 calls for ADB to form new partner-
The need for financing of environmental proj- ships with a diverse group of institutions, includ-
ects is great. Aside from infrastructure, the aver- ing international development agencies, multina-
age annual investment needs for environmen- tional and bilateral institutions, the private sector,
tal projects in Asia and the Pacific is as high as nongovernment organizations, community
$100 billion. This includes at least $30 billion groups, and foundations. ADB has already devel-
for renewable energy, $28 billion for adaptation oped relationships with specialized agencies of
to climate change, $14 billion for the United Nations, the World Bank,
energy efficiency, and $8 billion for the International Monetary Fund, the
water resources. By joining forces with World Trade Organization, research
During the Copenhagen Summit, centers, international environmental
it was pointed out that ADB’s research institutions, organizations and other groups.
annual investments in clean ener- ADB can learn about more ADB will develop new partnerships
gy increased from $226 million in to collaborate with the private sector
2003 to $1.7 billion in 2008, and are
potential alternative and private institutions. In addition
expected to increase to $2 billion by energy sources to increasing funding options for
2013 under the new energy policy. projects that combat climate change,
At the February meeting of the the new partnerships will enhance
ADB Advisory Group on Climate Change and ADB’s knowledge base and help raise the effec-
Sustainable Development in New Delhi, ADB tiveness of aid throughout the region.
President Haruhiko Kuroda reiterated ADB’s By joining forces with research institutions, ADB
commitment to financing programs that address can learn about more potential alternative energy
climate change. sources. ADB has partnered with the Government
“In this effort, we are working with a number of Australia to form the Global Carbon Capture
of partners on three fronts,” he said. “Mobilizing and Storage Institute to explore commercial-scale
concessional resources through mitigation and carbon capture and storage in Asia.
adaptation funds; catalyzing private sector invest- ADB is also working with the Poverty Environ-
ments; and maximizing the use of market-based ment Forum, the International Center for Agricul-
mechanisms, such as through the Carbon Market tural Research in the Dry Areas, the Consultative
Initiative.” Group on International Agricultural Research,
The Carbon Market Initiative, which has mobi- and the International Food Policy Research Insti-
lized more than $150 million to cofinance Clean tute to learn more about the effects of climate
Development Mechanism projects, also provides change on food and agriculture.
technical and marketing support for the sale of
certified emission reductions globally. A Future in Doubt
At Khun Samut Chin, the temple south of Bang-
Support for Technology Transfer kok, volunteers have built a seawall in an attempt
Another challenge in the struggle to cope with to keep back the ocean. Repairs are frequent, and
climate change is technology transfer. Research for now the water is at bay; but, says one monk:
and development of new technologies is an expen- “For the future, we don’t know.”

62  2010 | ASIAN DEVELOPMENT BANK


FINAL PROOF
Issues Facing Asia and the Pacific

Above: To euis
eugait accummy
nonsed eummassy
num velit iusto

Co-Benefits: The “Win–Win” Strategy


for Addressing Climate Change
An integrated approach to managing climate change, energy, and air pollution makes sense and can offer both global and local
benefits in the form of lower greenhouse gas emissions, reduced local air pollution and lower associated health and climate change
risks, improved energy security, and large cost reductions, according to the Clean Air Initiative for Asian Cities (CAI-Asia) Center.
The co-benefits approach is supported by the UN Intergovernmental Panel on Climate Change, which in its Fourth Assess-
ment Report, released in 2007, stated that “Integrating air pollution abatement and climate change mitigation policies offers
potentially large cost reductions compared to treating those policies in isolation.”
Air quality management has a much greater chance of success if placed in a broader context, according to CAI-Asia. Asians
are concerned about air pollution in their cities because they can see and smell smog, smoke-belching vehicles, and industrial
stacks. At the same time, climate change is now recognized as a major global challenge, resulting in an emerging global consen-
sus on the need for mitigation and adaptation.
However, it will take years for climate change awareness to trickle down to the thousands of cities where local action is need-
ed. Air pollution and climate change have the same drivers: increased energy use, growth of vehicle fleets, and industrializa-
tion. Moreover, the effects of air pollution and climate change are interlinked, i.e., some air pollutants—especially black carbon
(soot)—also contribute to global warming, while climate change may also increase air pollution, e.g., ground-level ozone.
Therefore, addressing air pollution provides a unique opportunity to mitigate global climate change through immediate local
action. The urgency for cities to address the global threat was highlighted in the recent World Bank publication, Climate Resilient
Cities: A Primer on Reducing Vulnerabilities to Disasters, which noted that cities are likely to be most adversely impacted.

Ondit, es pota,
There are other urban development issues to which improved air quality management can contribute and generate additional
co-benefits, such as reduced traffic congestion, improved public health, and energy security and affordability. Air pollution may

vertime inemus
not always be the driver for change, but air quality improves if actions are taken in related areas. For instance, rising oil prices
may lead a government to support the conversion of diesel buses to compressed natural gas, which in turn leads to reduced
emissions from buses.

fuiur. Astus is
Similarly, restrictions on the size and number of vehicles can reduce congestion and make cities more livable. Hence, air qual-
ity management and climate change efforts can go hand-in-hand and should consider broader sustainable development issues,
such as environmental protection, social progress, and economic growth.

pessus me nos
The CAI-Asia Center promotes reductions in air pollution and greenhouse gas emissions from the transport, energy and other
sectors by translating knowledge to policy and action. It was established in 2001 by the Asian Development Bank, the World
Bank, and the United States Agency for International Development as part of a global initiative that also includes Latin America

iaedientem, que
and sub-Saharan Africa.

publiaet
ASIAN DEVELOPMENT BANK | 2010 63
FINAL PROOF
RUNNING HEAD

As Asia looks beyond the global economic crisis, nations are


redefining their growth and development strategies

A Path Out of
the Woods
A
s Asia emerges from the most devas- ADB President Haruhiko Kuroda on the topic.
tating global economic crisis since “The crisis could have costly and long-lasting
World War II, leaders are looking for effects on human welfare, as families with few
ways to build a strong recovery and alternative employment opportunities and little
reduce vulnerability to future economic turmoil. or no access to credit are forced to reduce the
Although developing countries were initially quantity and quality of their food intake, with-
stung by a sharp drop in demand for exports draw children from school, or postpone health
and a loss of foreign capital, stimulus packages care,” President Kuroda said.
have helped them rebound, according to a study The downturn has hindered efforts to reduce
commissioned by the Asian Development Bank poverty. ADB researchers estimate that if growth
(ADB) earlier this year. Overall, the region is had continued at the same rate as before the crisis,
expected to move from 5.2 percent growth last there would have been about 54 million fewer
year to over 7 percent growth this year. people living in extreme poverty in Asia in 2009.
While signs of recovery are encouraging, the Asia is home to two-thirds of the world’s poor,
recession has been especially devastating for the with 1.8 billion people living on less than $2 a day,
region’s poor, according to a recent speech by and 903 million in extreme poverty earning less

64  2010 | ASIAN DEVELOPMENT BANK


FINAL PROOF
Issues Facing Asia and the Pacific

economies since the financial crisis of 1997–1998,


including stronger finance sectors, greater politi-
cal stability, and better regulation. Some econo-
mies have increased domestic demand, reducing
their dependence on exports. Central banks have
also successfully kept inflation under control.
Several areas of concern for policy makers
were noted in the report. The ratio of finan-
cially mobile capital to foreign reserves remains
high in Indonesia, the Republic of Korea, and
Viet Nam, the report noted, and this could affect
economic resiliency. However, it also pointed out
that in some cases large accumulations of foreign
exchange reserves have provided a useful buffer
against financial shock.
The analysis also noted that the buildup of
public debt is a particular concern for India and
the Philippines, because these countries are limit-
ed in using fiscal stimulus to buffer their econo-
mies in an emergency. Another issue that the
report highlighted is the dependence on import-
ed energy in the newly industrialized economies,
which have high per capita energy consumption.
More efficient energy use should be a priority in
both the public and private sectors.
In Central Asia, South Asia, and the Philippines,
remittances from overseas workers remain an
than $1.25 a day. The majority of the poor, includ- important part of the economy. The study noted
ing most of those in extreme poverty, are women. The ADB’s Strategy that remittances from the Middle East remained
Moving forward, President Kuroda said the 2020 highlights strong, as new workers continued to be hired, but
region will need to focus on strengthening recov- the importance other areas cut back the hiring of foreign workers
ery efforts, ensuring inclusive growth, rebalanc- of investment to protect local jobs.
ing growth, emphasizing open regionalism, and in education The study concluded that stimulus packages
building greater regional cooperation. throughout asia have been key to helping economies recover, and
warned that finding the right time to end those
Glimpse of Recovery programs could prove difficult for individual
While the region as a whole is recovering from governments.
the crisis—particularly the People’s Republic of “While we believe developing Asia is leading
China (PRC), India, and Indonesia—some coun- the global economic recovery, it is still too early
tries are still struggling. to relax vigorous efforts to restore demand and
The ADB report Global Economic and Financial stabilize financial systems,” President Kuroda
Crisis Impact on Developing Asia and Immediate said. “In particular, exit strategies for fiscal stimu-
Policy Implications notes that much of the recov- lus must be carefully timed. The recovery could
ery is pinned on policy support in developed falter if policy makers tighten too early. But tight-
countries. In Asia’s largest market, the United ening too late may lead to higher inflation and
States, unemployment is high and household unsustainable fiscal deficits and large debts.”
savings are down.
Real estate markets, particularly commercial Inclusive Growth: The Fight
properties in the United States and the United Against Poverty
Kingdom, are still risky, according to the report. In poorer countries, the long-term effects of the
Growing public debt is also a problem, and economic crisis could linger for years. A December
protectionism remains a temptation for govern- 2009 report on ADB’s response to the crisis noted
ments faced with rising unemployment. that while the crisis affected different countries
Asian economies have been more resilient than in different ways, the poor and vulnerable were
those of other areas during the crisis, the report generally affected by changes in labor markets.
found. “Policy responses were critical in explain- “As overseas consumer demand has fallen,
ing this resilience, with the credibility of policy labor-intensive export industries such as textiles,
agencies, especially the central bank and the lati- garments, and electronics have faced increasing
tude for monetary and policy responses, being pressure to lay off workers,” the report stated.
key to resilience.” “Industries catering to local demand have also
The report found improved conditions in Asian contracted in response to lower consumer confi-

ASIAN DEVELOPMENT BANK | 2010 65


Some
climate
change
solutions
just don’t
want to
STOP

They’re called light-emitting diodes. LEDs for short. They use 90% less energy
than conventional bulbs, making them a tool in the fight against climate change.
LEDs practically never stop—lasting decades. This makes them especially valuable
for traffic lights, street lamps, autos, appliances, lighting for rural areas that have
little or no electricity, and so much more.

ADB is switching Asia on to a low carbon growth path through funds for
public use of LED traffic lights. We fund LEDs for domestic lighting in
rural areas in place of kerosene, candles, and other nonelectric alternatives.
And we continuously shine a spotlight on new opportunities to use them.

ADB. Investing in climate change solutions for Asia and the Pacific.

www.adb.org
FINAL PROOF
Issues Facing Asia and the Pacific

dence. Women have been particularly affected.” million stand-by arrangement of the International
farm workers in Some workers have turned to informal work, Monetary Fund and a $60 million program loan
the philipPines. with low wages and no security, or migrated from and grant from ADB aim to provide social welfare,
agriculture has cities back to rural areas. In the Philippines and health and education services, and improved
provided work Thailand, agriculture has served as a safety net living conditions for the poor. Other programs
during the global during the crisis. While industrial jobs were lost, are designed to feed preschool children, provide
financial crisis, employment in agriculture grew, but many of free textbooks, and help prevent older children
but it is often these jobs involved working informally as unpaid from dropping out of school.
informal and family members. Other workers who lost indus- Political leaders will need to focus on policies
unpaid trial jobs stayed in urban areas, but moved to that support inclusive growth, both to create
more affordable housing, putting greater pressure economic opportunities and to make sure that all
on the housing stock. members of society have access to these opportu-
Developing Asian countries need to expand nities, according to ADB. The organization’s long-
social safety programs, particularly those relating term planning document, Strategy 2020, spells out
to education, health, water supply, and sanitation, the importance of social programs in the region.
according to the ADB. “Without proper attention and planning, it
“This will help contain the adverse impact will become increasingly difficult for growth to
of the crisis on the poor and vulnerable, and reach the impoverished who remain excluded by
build human capital for sustained and inclu- circumstance, poor governance, and other market-
sive economic growth,” President Kuroda said. resistant obstacles,” the document states. “The
“Equally important, governments must help region must promote greater access to opportuni-
prevent millions of the vulnerable from sliding ties by expanding human capacities, especially for
into poverty by building appropriate, effective, the disadvantaged, through investments in educa-
and sustainable social safety nets, including exist- tion, health, and basic social protections.”
ing community-based mechanisms.”
Some social safety programs are already being Rebalancing Growth
rolled out in the region. In the PRC, a massive As the world emerges from the crisis, policy
three-year health care reform program was makers in Asia will face slower growth as a result
launched, and pension plans were introduced in of higher oil prices, costs associated with climate
rural areas. Bangladesh, Indonesia, Kazakhstan, change, and a more volatile global economy,
the Philippines, and Viet Nam obtained ADB according to the ADB report on policy implica-
loans to protect social spending programs and tions. American consumer spending growth will
prevent worsening poverty. In Mongolia, a $230 drop, with a corresponding impact on the demand

ASIAN DEVELOPMENT BANK | 2010 67


FINAL PROOF
Issues Facing Asia and the Pacific

for Asian products.


To cope with the changing economic landscape,
countries will need to become more resilient
to external shocks. To do this, analysts recom-
mend boosting domestic demand and reducing
dependence on exports to developed economies.
Promoting regional demand for final demand
exports (as opposed to goods in process) is part of
the rebalancing process.
“External demand for Asian goods and services,
including tourism, may remain sluggish for quite
some time until advanced economies have fully
recovered from the recession,” President Kuro-
da said. “Thus, Asian economies need to adjust.
Building domestic and regional demand is essen-
tial to produce the high rates of growth needed
over the long term to reduce poverty.”
Better social safety nets will help stabilize
domestic demand, as unemployment benefits
and other social payments would allow people
to continue making purchases in an economic
downturn.
The PRC has also found that programs that
encourage home ownership can trigger consum-
er spending, because new homeowners need
appliances, home products, and services linked
to housing. Increased spending on infrastruc-
ture can also stimulate local economies, improve
worker education, and provide stronger transport remain heavily reliant on remittances, which
and communication links for integration with support domestic spending by family members
other economies. back home. While this has provided a steady
By improving the competitive framework in income stream during the downturn and helped
their countries and forcing private companies reduce poverty, economists warn that remit-
to compete with one another, policy makers can tances are vulnerable. In some countries, such
spur innovation, the ADB report noted. as Nepal, the attraction of working abroad has
In addition to reducing the dependence on created a major brain-drain, undermining the
exports, Asian countries should diversify their domestic economy.
trade partners. With consumer demand in the As opportunities are created in the PRC, India,
US and Europe falling, this would be a good and other emerging market economies in Asia,
time to increase trade with Latin America and workers may be able to move to these areas.
the Middle East. However, the ADB report cautions that such a
As the PRC and India shift their manufactur- process would likely be slow. There are still many
ing focus to producing higher-cost, higher-value available workers in the PRC and India, and regu-
products, they will create opportunities for other lations would have to be changed to make the
Asian nations to develop lower-cost, labor-inten- hiring of foreign workers easier.
sive manufacturing plants. To lure these business-
es to their countries, policy makers will need to Regional Trade, Regional Cooperation
reform labor laws to make hiring and firing easier, Developing countries in Asia need to work
streamline the processes for registering compa- together to reduce their reliance on trade with the
nies, and reduce crime and corruption. US and Europe. Countries should gradually but
Countries that currently target tourists from steadily look for ways to increase intraregional
Europe and North America could create incen- trade and investment, according to ADB.
tive packages aimed at tourists from the PRC, “Clearly, rising unemployment and dimming
India, and other Asian countries. The ADB report economic prospects have increased the tempta-
suggests marketing to Indian tourists by offering tion of resorting to protectionism, which will
special packages with the option of vegetarian only prolong the crisis and weaken the recovery,”
meals on flights, and in hotels and restaurants. President Kuroda stated. “We need to recognize
Although remittances are still an important that while protectionist policies may bring short-
source of income for some countries, job cuts in run benefits, they also increase the risk of derail-
the US could send many of these workers home. ing the recovery and undermine longer-term
Bangladesh, the Philippines, and Sri Lanka growth prospects.”

68  2010 | ASIAN DEVELOPMENT BANK


FINAL PROOF
Issues Facing Asia and the Pacific

currency integration, and the substantial political


will needed to make it happen, analysts currently
do not see this as a viable goal.
“Policy makers should avoid using up scarce
bureaucratic resources and limited political good-
will on huge initiatives which do not have pros-
pects of yielding tangible benefits at the ground
level within the next few years,” the report recom-
mends. “Instead, the focus should be towards
smaller-scale efforts.”
There are steps countries in the region could
take to work more closely and become a more
unified economic force. The analysts recommend
more bilateral agreements that would allow finan-
cial institutions in one country to acquire banks
in another country, expanded financial sector
privileges in regions that straddle borders, and
expanded efforts to achieve cultural harmoniza-
tion and mutual recognition.
By working together, thinking globally, coor-
dinating regionally, and acting nationally, lead-
ers will be able to learn from the crisis and build
a more stable foundation to withstand future
shocks, President Kuroda said.
“It is clear that Asia will be unable to fully
return to its rapid pre-crisis growth rates unless
recovery is sustained globally as well,” President
Kuroda said. “Accordingly, poverty reduction will
Eventually, the development of a single, integrat- not be sustained at the pace of the pre-crisis years,
ed financial market in Asia would give the region unless sources of growth are rebalanced more
an advantage in future global economic upsets. toward domestic and regional demand, and made
The ADB report notes that at present, the econo- more inclusive. It is imperative for the region
mies of Asia are more closely tied to the global to bring growth back to its higher trajectory, to
economy than they are to one another. However, cover the lost ground on poverty reduction and
given the many obstacles to integration, especially to support global recovery.”

Connecting Countries
Physical connections between countries increase intraregional trade in goods and services. The ADB report Global Economic
and Financial Crisis Impact on Developing Asia and Immediate Policy Implications recommends a four-pronged approach to building
physical connections:

• F ocus on connection projects that serve likely market demand. Since most cargo travels in and out of the region by air and
ship, the development of compatible port facilities throughout the Pacific, the South China Sea, the Indian Ocean, and the
Persian Gulf should be a priority. Similarly, the region should look at creating a network for air cargo shipments, preferably
under an open skies agreement.
• Construct a network of pipelines and transmission lines. The PRC and India need energy, and other Asian countries have a
surplus of oil, gas, and hydro power. By constructing a network of pipelines and transmission lines, leaders can overcome
historic distrust and bureaucratic hurdles to provide resources and income that benefit everyone. A technical institution
trusted by all parties can serve as an intermediary.
• Use the success of subregional connections created within the Greater Mekong Subregion as a model for other parts of Asia.
Regional energy networks, including pipelines and transmission lines, could link the countries of the Central Asian Regional
Economic Cooperation with parts of the PRC. In South Asia, a road could be constructed between Bangladesh and Nepal
through India, linking the east–west national highway in India with the Greater Mekong Subregion in Thailand. The result
would be a roadway linking India with Viet Nam.
• Consider development of some pan-Asian corridors and networks: roads, railways, power lines, and pipelines. The smaller,
intraregional connections will help to improve relations and boost economic clout, but they will not achieve the larger goal
of Asia-wide cooperation and integration.

ASIAN DEVELOPMENT BANK | 2010 69


FINAL PROOF
ADB in the Spotlight

Four decades working in Asia and the Pacific

ADB’s History
of Service
T
he Asian Development Bank (ADB) was industry. The gradual emergence of Asian econ-
conceived amid the postwar rehabilita- omies in the late 1970s spurred demand for
tion and reconstruction of the early better infrastructure to support economic growth,
1960s. The vision was of a financial so ADB focused on improving roads and provid-
institution that would be Asian in character and ing electricity.
foster economic growth and cooperation in the Cofinancing operations began to provide addi-
region—then one of the poorest in the world. tional resources for ADB projects and programs.
A resolution passed at the first Ministerial The year 1970 saw ADB’s first bond issue in Asia—
Conference on Asian Economic Cooperation held worth $16.7 million—in Japan. A major landmark
by the United Nations Economic Commission for was the establishment in 1974 of the Asian Devel-
Asia and the Far East in 1963 set that vision on the opment Fund to provide concessional lending to
way to becoming reality. ADB’s poorest members.
The Philippine capital of Manila was chosen to That same decade, when the world suffered oil
host the new institution—the Asian Development price shocks, ADB directed more assistance to
Bank—which opened on December 19, 1966, with support energy projects, especially those promot-
31 members to serve a predominantly agricultural ing the development of domestic energy sources
region. Takeshi Watanabe from Japan was the in member countries.
first President. By decade’s end, some Asian economies had
For the rest of the 1960s, ADB focused much improved considerably and graduated from ADB’s
of its assistance on food production and rural regular assistance.
development. The next three years saw ADB’s
first technical assistance, loans (including the Harnessing Private Sector Power
first on concessional terms in 1969) and bond In the 1980s, it became clear that the private
issue (in Germany). sector was an essential ally in driving growth, and
ADB made its first direct equity investment. ADB
An Emerging Region also began to use its track record and impeccable
Assistance expanded in the 1970s into educa- credit rating to mobilize additional resources for
tion and health, and then to infrastructure and development from the private sector.

ASIAN DEVELOPMENT BANK | 2010 71


FINAL PROOF
ADB in the Spotlight

In the wake of the 1980s oil crisis, ADB contin- countries achieve the Millennium Development
ued its support for infrastructure development, Goals and to enhance development effectiveness.
particularly energy projects. ADB also increased In recent years, ADB has embarked on a broad
resources devoted to “social infrastructure,” development agenda in the region, which has
including gender, microfinance, environmental, included responding to unprecedented natural
education, urban planning, and health issues. disasters, committing more than $850 million for
In 1982, ADB opened its first field office—a recovery of the areas hit by the Asian tsunami
Resident Mission in Bangladesh—to bring opera- disaster of December 2004 and a $1 billion line
tions closer to their intended beneficiaries. Later of assistance to help victims of the October 2005
in the decade, ADB approved a policy support- earthquake in Pakistan.
ing collaboration with nongovernment organiza- In response to the food price spike in 2007-2008,
tions to address the basic needs of disadvantaged ADB pledged to double lending for food security
groups in its developing member countries. to $2 billion per year.
In addition, ADB revamped its work in
Bringing the Region Together the vital energy sector. The 2009 Energy
ADB started the 1990s by promoting regional Policy aligns ADB’s operations to meet energy
cooperation, forging close ties among neighbor- security needs, and facilitates a transition to a
ing countries through an economic cooperation low-carbon economy.
program in the Greater Mekong Subregion. ADB’s work in the region was bolstered by the
This focus on regional cooperation has contin- decision of the Board of Governors to triple ADB’s
ued over the years with a variety of key programs, capital base from $55 billion to $165 billion, giving
including the Asia Bond Market Initiative (ABMI), it much-needed resources to respond to the global
which is designed to promote bond market devel- economic crisis and to the longer term develop-
opment in the region. ADB’s Carbon Market ment needs of Asia and the Pacific. The increase
Initiative (CMI) has also brought together coun- enabled ADB to significantly scale up assistance,
tries in the region to tap into the growing global with overall operations growing by 42 percent
carbon market. from $11.3 billion in 2008 to $16.1 billion in 2009.
In 1995, ADB became the first multilateral
organization to have a Board-approved gover- ADB Today
nance policy to ensure that development assis- Today, ADB has become one of the premier
tance fully benefits the poor. Policies on the regional development organizations in the world
inspection function, involuntary resettlement, and an established partner with developing and
and indigenous peoples—designed to protect the developed countries throughout Asia and the
rights of people affected by a project—were also Pacific, and worldwide.
approved. As an international development finance insti-
ADB’s membership, meanwhile, continued tution, ADB has retained and confirmed its core
to expand, with the addition of mission of helping its developing
several Central Asian countries member countries reduce poverty
following the end of the Cold War In recent years, ADB has and improve the quality of life of their
and the dissolution of the Soviet people. Currently, ADB is owned and
Union. embarked on a broad financed by 67 members, of which 48
But in mid-1997, a severe finan- development agenda are from the region and 19 are from
cial crisis hit the region, setting
back Asia’s spectacular economic
in the region, which has other parts of the globe. ADB employs
more than 2,500 people from more
gains. ADB responded with proj- included responding than 50 member countries.
ects and programs to strengthen ADB’s main partners are govern-
financial sectors and create social
to unprecedented ments, the private sector, nongov-
safety nets for the poor. To that natural disasters ernment organizations, development
end, ADB approved its largest single agencies, community-based organiza-
loan—a $4 billion emergency loan tions, and foundations.
to the Republic of Korea—and established the The future of ADB is clear under Strategy
Asian Currency Crisis Support Facility to acceler- 2020, a long-term strategic framework adopted
ate assistance. in 2008. As part of the strategy, ADB will follow
The crisis was an epiphany for ADB. Recogniz- three complementary strategic agenda: inclusive
ing that development was still bypassing many in growth, environmentally sustainable growth, and
the region, ADB adopted poverty reduction as its regional integration.
overarching goal in 1999. There have been dramatic reductions in income
poverty in the more than four decades since
A Longstanding Partner in Asia ADB was founded in 1966, but—as Strategy 2020
The new century brought both hope and tragedy, as outlines—there is important work to be contin-
well as a new focus on helping its developing member ued in the decades ahead.

72  2010 | ASIAN DEVELOPMENT BANK


Highways & Bridges
Railway Projects
Airports & Runways
Urban Infrastructure
Mining & Power Projects
Irrigation Projects

Registered office:
Pankaj Galaxy, Second Floor, Plot No.8, Sector 12,
Dwarka, New Delhi–110075, India
Tel: +91-11-32923064
E-mail : delhi@vijaiinfrastructure.com
Corporate office:
B–5/21, Vishal Khand, Gomti Nagar, Lucknow – 226010, India
Tel: +91-522-2303942 /3241645 Fax:+91-522-2300858
E-mail: lucknow@vijaiinfrastructure.com
vee_lko@rediffmail.com

www.vijaiinfrastructure.com
FINAL PROOF
ADB in the Spotlight

ADB’s partnerships with the private sector are


a powerful tool for funding responsible development

Catalyzing
Investment
A
t the French Medical Institute for The project is one small aspect of a broad range
Children in Kabul, Afghanistan, a of services offered by Roshan, Afghanistan’s larg-
complex diagnosis used to mean est mobile telecommunications operator. Roshan
daunting choices for parents. If the has been able to expand its mobile network
results of the hospital’s magnetic resonance imag- nationwide and offer such services as lifesaving
ing scanner needed further scrutiny, sick children telemedicine with assistance from the Private
had to make the arduous journey to Pakistan to Sector Operations Department of the Asian
find more expertise. Development Bank (ADB).
Today, as part of a pioneering telemedicine proj- ADB provided an initial loan of $35 million in late
ect that links doctors in Kabul with more experi- 2004, followed by a $40 million loan in mid-2006.
enced staff at the Aga Khan University Hospital The second loan was accompanied by a comple-
in Karachi, Pakistan, images from the scanner mentary financing scheme of up to $30 million and
are transmitted instantly to specialists more than a political risk guarantee of up to $15 million. In
1,000 kilometers away. July 2008, ADB provided a third loan of $60 million
“If we have a complicated diagnosis, it takes just and a $10 million political risk guarantee.
one click to put the pictures on our server and send “In an environment such as ours, ADB has filled
them to the Aga Khan University Hospital, which the gap where commercial banks have feared to
can send us back a report within 24 hours,” says Dr. tread and has brought more value by consistently
Khalid Ansari, a radiologist at the Kabul hospital. fighting to represent the legitimate concerns of

74  2010 | ASIAN DEVELOPMENT BANK


FINAL PROOF
ADB in the Spotlight

the private sector to the Government of Afghani- proponents from sudden changes in government
THE TELE-MEDICINE stan, something a purely commercial entity may pronouncements, policies, and priorities. Govern-
PROJECT AT THE not always be able to do as effectively,” says Altaf ments in the region recognize ADB’s involvement
FRENCH MEDICAL Ladak, chief operating officer of the company. in a project as the international community’s
INSTITUTE FOR imprimatur of support.”
CHILDREN in KABul, Catalyzing Investment The bulk of ADB’s nonsovereign operations
AFGHANISTAN The package of loans, guarantees, and comple- emanate from the Private Sector Operations Depart-
mentary financing schemes that ADB developed ment (PSOD). Newly approved financial assistance
in partnership with Roshan illustrates its strategic in 2009 reached $1.7 billion consisting of $309
role in Asia and the Pacific. million in direct loans, $220 million in equity invest-
“ADB strongly believes that money is not our ments, $72 million in partial credit risk guarantees,
core product,” the Private Sector Operations $220 million in B-loans, and $850 million in Trade
Department notes in information it provides to Finance Facilitation Program loans and guarantees.
investors and stakeholders. ADB does not provide
financing to industries that private sector funding Supporting Pro-poor Growth
can adequately and effectively serve. ADB offers ADB also works with the private sector to trans-
something far more strategic and important than fer knowledge to its developing member coun-
money alone. It offers development of the private tries. Critical finance tools and concepts such as
sector in the countries in which it operates. cash flow analysis, risk management, and credit
ADB helps build the enabling environment for assessment, are virtually unused in many emerg-
private sector participation in development by ing economies. ADB helps by assessing a project’s
providing peace of mind for investors. needs and introducing the tools and concepts that
“Governments in developing economies have will ensure its viability.
been known to intervene in large-scale projects, By adhering to ADB’s environmental and social
often due to the absence of a well-conceptualized safeguards, ADB projects supporting the private
or articulated regulatory framework, to the detri- sector comply with international best practices. The
ment of investors whose interests may be jeop- ultimate goal of this work is to support pro-poor
ardized by such moves,” the department notes. growth and deliver a solid development impact by
“ADB’s entrance into a transaction changes its catalyzing private investments as a way that achieves
dynamics and helps shield the project and its equitable economic development.

ADB’s Private Sector Products


Loans: The Asian Development Bank (ADB) offers traditional hard currency loans, whether senior or subordinated, as well as
other types of mezzanine finance. Interest rates and other terms vary, depending on a company’s or an infrastructure project’s
needs and risks. ADB considers prevailing market rates in the relevant country and sector, country factors, and transaction risks
to determine rates.

Equity investments: ADB may invest directly in a company. It offers financing through equity investments, including direct
equity investments in the form of common shares, preferred stock, or convertibles; or mezzanine financing and subordinated
loans. Equity investments in corporations, especially financial institutions, occur before an initial public offering. ADB does not
seek a controlling interest in an investee company, and will not assume any management responsibilities; it will, however, reserve
the right to appoint a nominee to the board of directors of its investor companies and selected board committees and will exercise
voting rights as a shareholder. It will maintain regular contact with company management and require periodic reports on the
progress of capital projects, operating performance, the financial condition of the enterprise, and economic value added.

Guarantees: To catalyze capital flows into and within developing member countries, ADB grants guarantees for eligible
projects. As such, it enables financing partners to transfer to ADB certain risks that they cannot easily absorb or manage on their
own. ADB’s guarantees support infrastructure projects, financial institutions, and capital market investors and trade financiers,
and cover a wide variety of debt instruments. Guarantees may provide either comprehensive (financial risk) or limited coverage,
including political risk.

Syndication arrangements: ADB also offers syndication arrangements that enable it to transfer some or all of the risk
associated with its direct loans and guarantees to its financing partners.

Technical assistance: ADB also offers technical assistance to borrowers in the form of cash flow management advice, risk
management, and other financial tools.

ASIAN DEVELOPMENT BANK | 2010 75


Comprehensive
Comprehensive Project
Project Management
Management .. .. ..
.. .. .. Concept
Concept through
through Commissioning
Commissioning

Pre-Project
Pre-Project
Activities
Activities

Design
Design
Commissioning Engineering
Commissioning Engineering
Support Activities
Support Activities

Construction Procurement
Construction Procurement
Monitoring Assistance
Monitoring Assistance

Project
Inspection and Project
Inspection and Management
Expediting Management
Expediting

Engineering
Engineering a
a Better
Better Tomorrow
Tomorrow
Registered office : Matulya Centre A, 249 Senapati Bapat Marg, Lower Parel (West), Mumbai - 400 013, India.
Registered office : Matulya Centre A, 249 Senapati Bapat Marg, Lower Parel (West), Mumbai - 400 013, India.
Tel : 00 91 22 - 66624743 Fax : 00 91 22 - 66624723 e-mail : mail@tce.co.in Website : www.tce.co.in
Tel : 00 91 22 - 66624743 Fax : 00 91 22 - 66624723 e-mail : mail@tce.co.in Website : www.tce.co.in
Offices : Mumbai Bangalore Delhi Kolkata Pune Chennai Jamshedpur
Offices : Mumbai Bangalore Delhi Kolkata Pune Chennai Jamshedpur
USA South Africa Qatar Oman Abu Dhabi
USA South Africa Qatar Oman Abu Dhabi

TCE Ad A4 2009 stg 2.indd 2 17/06/09 12:42 PM


FINAL PROOF
ADB in the Spotlight

Transforming the Asian Development Bank


to respond to a changing region

Strategy 2020
T
he Asian Development Bank (ADB) ADB’s transformation strategy toward achiev-
PRESCHOOL seeks to eradicate poverty in the Asia- ing its 2020 goals is kept on track by aligning its
OUTSIDE NARYN, Pacific region. Through its Long Term operational planning, human resources, business
Kyrgyzstan. Strategic Framework for 2008–2020— processes, institutional structure, and its policies
IMproving known as Strategy 2020—approved in April 2008, and strategies.
education is part ADB outlines a clear plan for helping to improve The work program and budget framework 2009–
of the strategy the quality of life and the living conditions of the 2011 is a key ADB document that ensures Strategy
2020 framework more than 600 million people in the region who 2020 commitments are turned into operational
survive on $1 a day. activities with corresponding budget allocations.
The challenges are great. The Asia-Pacific The success of Strategy 2020 also depends on
region faces serious development issues rang- ADB’s human resources, i.e., the skills mix and
ing from the recent financial crisis and a lack of professionalism of its staff members, and hence
consistent good governance, to rapid population their ability to support the goals of Strategy 2020.
growth and climate change. The ADB strategy ADB recognizes it will need to continue to hire
outlines a plan to fight poverty and meet the chal- and retain a skilled and diverse group of people
lenges ahead by refocusing on three core agendas: in order to remain relevant and keep pace with
regional integration, inclusive economic growth, a dynamic Asia-Pacific region. In early 2009, the
and environmentally sustainable growth. Advisory Group on Institutional and Human
To achieve these three core agenda items, Strat- Resource Management for the Asian Development
egy 2020 identifies five components for change Bank was appointed to help achieve this goal.
that will be emphasized in all ADB operations: ADB is also focusing on its institutional struc-
encouraging good governance; supporting gender ture. It is evaluating which organizational arrange-
equality; developing the private sector; help- ments will best benefit country ownership of
ing developing countries gain knowledge; and development projects and programs, and is trying
expanding partnerships with other development to meet the diverse needs of clients by allowing
institutions, community-based organizations, and departments more flexibility in determining their
the private sector. organizational structure.

ASIAN DEVELOPMENT BANK | 2010 77


FINAL PROOF
ADB in the Spotlight

ADB is streamlining its policies, corporate and other interventions typically more valued by
strategies, and business processes in an effort to women,” noted the vice president. “Accordingly,
lower the transaction costs of project preparation the CDD approach can have an important impact
and implementation; and it is reducing documen- by ensuring that women are better included in
tation requirements and decentralizing decision the decision-making process, that they are better
making to resident missions. empowered, and that they can also share the
benefits of growth and development.”
Community-Driven Development
The institutional changes are designed to enhance Massive Investment
the support ADB provides to help developing One of the downsides of Asia’s economic growth
member countries achieve inclusive growth, has been its contribution to the depletion of the
invest in sustainable economic progress and region’s natural resources and speeding up envi-
increase poor people’s access to markets and basic ronmental degradation in rural and urban areas,
productive assets. factors that have contributed to climate change.
Under the strategy, ADB will also support invest- To engender environmentally sustainable
ment in education and basic public services, such as growth, Strategy 2020 outlines ADB’s support for
water and sanitation, which will greatly benefit the the use of environmentally friendly technology,
poor—particularly women, who comprise the larg- the application of environmental safeguards, and
est group excluded from the benefits of the region’s the establishment of institutions to enforce envi-
economic expansion. The strategy looks to empow- ronmentally beneficial practices.
er the communities that are served by ADB. Through Strategy 2020, ADB aims to help devel-
ADB Vice President for Knowledge Management oping member countries realize their growth
and Sustainable Development, Ursula Schaefer- potential through closer links with their neigh-
Preuss, said in December 2008 that community- bors, including regional cooperation over shared
driven development (CDD) is an essential core resources and markets for goods and services.
strategy for combating poverty in the region. Closer regional cooperation will also enhance
“CDD projects have the important potential to these countries’ ability to respond more effectively
empower poor communities and strengthen the to crises, such as a regional economic downturn.
voice of marginalized groups in decision-making. The Asia-Pacific region will require massive
This is particularly important to promote gender investment in the coming years to meet the chal-
equality, and enhance the access to social services lenges outlined. An internal ADB study estimates
for women and young girls,” Ms. Schaefer-Preuss that $4.7 trillion will be needed by 2015 for the
said in a speech at a conference at the ADB’s region’s infrastructure requirements; including
Manila headquarters on CDD and Strategy 2020. $3.1 trillion for new capacity, and the balance for
“When cultural practices restrain women from capacity replacement.
attending or speaking at community meetings, The region’s finance sector development
they often result in under-investment in health requirements will also be high. ADB estimates
services, literacy programs, water supply systems, that approximately $197 billion in investments

78  2010 | ASIAN DEVELOPMENT BANK


ADB in the Spotlight

will be needed over the next decade to capitalize ADB will expand its range of partnership activi-
banks in South Asia alone. ties in an effort to improve disaster and emergen-
Under Strategy 2020, ADB will help develop cy assistance and deliver aid more effectively. It is
institutions, products and services, and financial open to a range of future partnership activities.
infrastructure to support the finance sector at the In a speech on March 8, ADB President
national and regional levels. Haruhiko Kuroda noted that Strategy 2020 identi-
It will also seek to create an environment in fies such partnerships as one of the key drivers
which microfinance, rural finance institutions, of change.
and small and medium-sized enterprises can “Partnerships with international development
flourish; and will explore ways in which technol- agencies, multilateral and bilateral institutions,
ogy can help extend the reach of formal finance the private sector, nongoverment organizations,
into rural areas. community-based organizations, and foundations
The scale of the annual investment required have become central to planning, financing, and
to address the region’s pressing environmental implementing ADB operations. Underpinning
issues is estimated at around $100 billion. This these partnerships are new assistance modes,
includes $28 billion for adaptation to climate greater use of our developing member countries’
change, $30 billion for renewable energy, $14 technical and managerial skills, closer collabora-
billion for energy efficiency, and $8 billion for tion with the private sector in project cofinanc-
sustainable management of water resources. ing, and the use of market-based investment
For education, ADB estimates that a $7 billion instruments,” President Kuroda said.
annual shortfall will need to be met to achieve
universal primary education by the 2015 deadline Delivering Results
of the Millennium Development Goals. As part of the strategy, ADB recognizes the impor-
ADB will continue to support and expand tance of carefully monitoring and evaluating its
Engineers inspect efforts to promote higher quality and more acces- work and taking the appropriate actions based on
an ADB-supported sible basic and secondary education, especially the findings.
natural gas for its poorer and smaller developing member Accordingly, it has developed a corporate
project in countries, so that quality education is accessible results framework that will track progress in long-
Thailand to everyone. term development outcomes and in specific activ-
Education, finance sector development, region- ities. Management has been using the corporate
al cooperation and integration, environment, and results framework to examine specific but wide-
infrastructure are the five core areas to which ADB ranging indicators in line with Strategy 2020’s
aims to direct 80 percent of its lending by 2012. vision and strategic direction to measure results,
monitor progress, and take corrective measures
Developing Partnerships where warranted.
By 2020, around 50 percent of ADB operations ADB is the first multilateral development bank
will be in private sector development and private to adopt a corporate-wide results framework
sector operations, and 30 percent will be in for measuring the effectiveness of its work and
regional cooperation and integration. reporting the findings to the public.
Some of the key features of the operational Over the more than four decades ADB has been
changes under Strategy 2020 include promoting operating, Asia and the Pacific have made great
knowledge solutions, accelerating private sector strides in social and economic development, but
development, becoming operationally selec- progress has been uneven and millions of people
tive and focused, and expanding the scope of remain desperately poor.
ADB’s partnerships. The region is home to two-thirds of the world’s
poor. Nearly 1.8 billion people in Asia and the
Pacific live on $2 or less a day.
Strategy 2020 describes the transformation ADB
needs to undergo to meet the changing and chal-
Forging Ahead lenging needs of the region. It emphasizes that
poverty eradication can only be achieved if more
“Strategy 2020 is a product of wide and extensive consultations with people are able to be economically productive, if
our 67 member countries. It achieves the objective of clearly establish- economic growth takes place in a well-managed
ing the Asian Development Bank’s role and its strategic direction to the natural environment, and if neighboring countries
year 2020. It also firmly sets the goals of our institution in order to fulfill work within freer and larger markets to achieve
our vision—an Asia and Pacific region free of poverty—a vision that can shared interests through regional cooperation.
become a reality by 2020. Our long-term plan charts ADB’s way forward Under Strategy 2020, ADB will endeavor to
to becoming a more effective institution based on results. With Strategy achieve optimal results in its investments and
2020 in place, ADB is ready to forge ahead.” – Strategy 2020, The Long- knowledge-based assistance, delivering larger
Term Strategic Framework of the Asian Development Bank amounts of aid more effectively and with great-
er impact.

ASIAN DEVELOPMENT BANK | 2010 79


FINAL PROOF
ADB in the Spotlight

An innovative project in the People’s Republic of China is


improving the environment and the economy

Methane:
from Pollution
to Solution
80  2010 | ASIAN DEVELOPMENT BANK
FINAL PROOF
ADB in the Spotlight

cause of methane gas emissions, a greenhouse gas


21 times more potent than carbon dioxide.
In the PRC, more than 13 billion cubic meters
of methane are released into the atmosphere each
year. As a result, about 60 percent of cities do not
meet minimum standards for air quality, and acid
rain falls on about a third of the country.
Methane gas is found naturally in coal beds.
But it is highly explosive: every year at least 5,000
miners die from mining accidents in the PRC,
mainly caused by methane explosions. To keep
working conditions safe, methane needs to be
drained during, and sometimes before, under-
ground coal mining operations.
When captured, methane is a clean energy
source: its use does not produce soot or lead to
acid rain; it has the highest energy content of all
fossil fuels; it is the main constituent of natural
gas, one of the cleaner energy sources; and its
use can replace the burning of coal, wood fuel,
synthetic waste gas (a low-energy mixture of coal
and biomass or municipal waste), and petroleum-
based fuels.
The removal of methane from coal mines increas-
es coal mine safety and efficiency, reduces green-
house gas emissions, and improves air quality.

Using Methane Efficiently


To meet the government’s commitment to address
climate change by developing clean and renew-
able energy as an alternative to coal, the country’s
Eleventh Five-Year Plan (2006–2010) aims to cut
pollution by 10 percent and reduce energy inten-
sity by 20 percent.
But the question is: what will be the most effi-
cient way to do so?
In 2004, the Asian Development Bank (ADB)

W
ei Jiusheng drives a methane- approved a $117.4 million loan for the Coal Mine
powered taxi and earns about Methane fuel Methane Development Project in Jincheng to
CNY3,000 ($440) a month, extraction from demonstrate how new technologies can increase
substantially more than most Coal mines, the the production and use of methane.
drivers in his city. People’s Republic Jincheng is one of the major “coal cities” in
When Wei drove on gasoline, he says, filling of China. METHANE Shanxi Province, and its coal mines are rich
the fuel tank was so costly, he was barely able to IS A CLEAN ENERGY in methane. This is called coal mine methane
support his wife and child. When he learned that SOURCE (CMM) when released into mine shafts by under-
he could save money by using methane gas, Wei, ground coal seams during mining operations,
27, converted his old car. and coal bed methane when released through
To reduce air pollution and promote the use bore holes drilled from the surface into under-
of methane gas, the municipal government later ground coal seams.
made it mandatory for all taxis and buses in The ADB-supported project captures and
Jincheng to be converted to bi-fueled vehicles, produces CMM for a 120-megawatt power
with gasoline to be used only as a backup fuel. plant—the world’s largest methane power plant,
Many owners of private vehicles have also which transmits and distributes CMM to resi-
switched to bi-fueled cars because this cuts their dential, commercial, and industrial consumers in
fuel expenses in half. Jincheng. Coal bed methane is produced mostly
for transport fuel supply.
Transforming Methane By capturing methane, the project will reduce
The People’s Republic of China (PRC) is the larg- methane emissions by 265 million cubic meters,
est coal producer and consumer in the world, which is equivalent to 4.4 million tons of carbon
getting more than 70 percent of its energy from dioxide emissions, and will save more than
coal. Coal is the dirtiest fossil fuel and a major 430,000 tons of coal per year, experts say.

ASIAN DEVELOPMENT BANK | 2010 81


FINAL PROOF
ADB in the Spotlight

The project will benefit from the sale of carbon the same time. These changes reduced costs,
credits under the Clean Development Mech- A gas station increased efficiency, and improved working
anism—an agreement under the Kyoto Proto- attendant fills conditions. Also, because they are better able to
col that allows industrialized countries with a up a methane- control temperatures, chefs do not have to worry
greenhouse gas reduction commitment to invest powered taxi in about over- or under-cooking their dishes.
in ventures that reduce emissions in developing Jincheng City, According to Wang Keping, director of
countries as an alternative to more expensive in THE PEOPLE’S Jincheng Finance Bureau, CMM has been distrib-
emission reductions in their own countries. The REPUBLIC OF uted to 80 percent of Jincheng households since
sale of carbon credits under this mechanism will China’s Shanxi the end of 2008.
bring in an estimated total revenue of more than province The average annual cost for gas supply is
$100 million by 2012, which can offset the cost of CNY350 ($51.47) per family, instead of CNY2,000
the power plant. ($294.11) for coal. “It not only reduced house-
holds’ expenses, but also liberated women from
Consistent, Even Supply time-consuming cooking,” says Wang.
Jincheng East Glassware Company, one of the
industrial users which benefits from the project, Energy Impact: Taking the First Steps
upgraded their four furnaces in 2008 from coal According to the China Coal Information Institute,
to methane gas. Each furnace saves the company a government think tank, 4.3 billion cubic meters
about CNY1,000 ($147.05) per day, compared to of methane were captured by coal mines in the
the cost of burning coal. PRC in 2007. Government incentives helped bring
“More importantly, the production quality about this 26 percent annual increase in capture.
has improved as the temperature of furnaces has The Jincheng municipal government plans
stabilized with consistent gas supply,” says Li to cover the whole city with CMM distribution
Yuqing, general manager of the company. pipelines to supply more than 60,000 households
The temperature of the methane gas-fueled with gas for heating and cooking by 2011. It will
furnaces fluctuates by only 10ºC, while coal-fueled also provide compressed gas products to other
ovens fluctuate much more. As a result, says Li, places as far away as Shenzhen and Hong Kong
methane gas ensures that the glass melts evenly, in southern PRC.
without creating imperfections, such as bubbles, “The success of this project in Jincheng will not
in the glass. Also, due to the even burning of the only have significant impact on climate change and
methane gas, Jincheng East Glassware Company improvement of miners’ safety and energy security,
uses its raw materials 20 percent more efficiently, but demonstrates the great effort of the central and
wasting less in the glassmaking process. local governments along with corporate partner-
In addition, switching from coal to gas has ship to work effectively together toward a common
improved air quality in the workshops, greatly goal,” says Merlita Pajarillo, energy specialist in
reducing the incidence of respiratory disease. ADB’s Energy Division, East Asia Department.
The three-star Grant Guesthouse on the main This effort is only the first step. It will establish
street of Jincheng has replaced its coal-burning a model for thousands of coal mines across the
boiler for heating and cooling with a gas-fueled country, leading to cleaner air and a better envi-
boiler. It upgraded its kitchen equipment at ronment for the people of Jincheng.

82  2010 | ASIAN DEVELOPMENT BANK


FINAL PROOF
ADB in the Spotlight

Family health centers in Tajikistan


bring care to rural communities

Taking Care
of Families
A
t first glance the new health center Reducing the travel time that once sepa-
in Kyzrok Village may seem modest, rated large regional hospitals and remote rural
but it is a far cry from the old train areas has been a key component of the proj-
carriage that for many years received ect: With the introduction or rehabilitation of
patients in this remote district about five hours family health centers, people no longer need to
northeast of Tajikistan’s capital, Dushanbe. travel long distances for most types of medical
“We certainly didn’t have the type of facility treatment.
we have now,” laughs Valijon Hakimov, a doctor
who has worked in Rasht District for 35 years. Reaching Patients, Reducing Mortality
“The old structure was just a wagon, so we Local health officials say this community-based
couldn’t provide timely or good quality services approach has yielded instant results.
to the local population.” Hakimov says he has seen a massive drop in
In the past, doctors in rural areas such as the infant mortality rates since the Kyzrok Village
Rasht district would often health center was complet-
treat patients in mosques, ed in 2008.
schools, kindergartens, or
To date, the Health “We don’t have infant
any other available spaces. Sector Reform mortality cases like
By contrast, the new before,” he said. “It used
health center in Kyzrok
Project has trained to be that we’d have 10 to
Village was designed and 134 doctors and 12 cases of infant mortal-
constructed specifically to 588 nurses in family ity every year. But now,
serve the medical needs of pregnant women are
the community. The bright group practices getting the timely support
and cheerful space—two that they need, and
large treatment rooms separated by a welcoming so last year we did not have any cases
reception and waiting area—now serves a popu- at all.”
lation of some 18,000 people. The project also places a strong emphasis on
retraining medical personnel to better serve
Reforming Tajikistan’s Health Sector community needs in rural areas rather than at
The facility is one of 27 health centers construct- large-but-distant district hospitals.
ed in Tajikistan under the Health Sector A training program at Rasht District Hospital
Reform Project, funded by the Asian Development is helping specialist doctors and nurses become
Bank (ADB). The project was designed to provide family practitioners capable of handling a wide
equitable access to health services in poor areas range of common ailments at local level.
with high rates of infant and maternal mortality. To date, the Health Sector Reform Project has
The project offers a free health package trained 134 doctors and 588 nurses in family
to patients including basic neonatal and group practices.
postnatal care, immunizations, treatment for “A person is much more likely to visit a local
common diseases such as tuberculosis, and regu- health center a kilometer away as opposed to
lar checkups. traveling 30 kilometers to a large district hospi-
Financed by a $7.5 million ADB loan, the proj- tal,” says Hakimov. “The proximity of efficient
ect has also set up quality control mechanisms health centers to the rural population means
for medicines, and constructed two regional we’ve seen an acute drop in infectious diseases
warehouses for storing pharmaceuticals. such as typhoid and tuberculosis.”

ASIAN DEVELOPMENT BANK | 2010 83


Getting policies and services
right does not, by itself, result
in effective governance…
Government institutions
need to continuously improve their
strategies and capacities to substantially
impact on the quality of life of their people.

WHAT WE ARE
CPRM Consultants, Inc. is a Philippine-based consulting organization dedicated to providing
strategic, innovative, operational as well as pragmatic responses to development,
governance and institutional capacity issues.

THE SERVICES WE PROVIDE


CPRM provides a wide range of governance, public sector reform and development expertise
to national and local government institutions and civil society organizations.

SERVICE AREAS SECTORS

• Public Sector Reform • National oversight governance


Role of government, public financial management,
• Legislature
government reorganization, local government,
devolution / intergovernmental relations, anti-corruption • Health and social welfare

• Institutional Capacity Development • Education


Capacity assessment, policy development • Justice and law enforcement
and reform, organization and systems engineering,
change management and training, and ICT planning • Urban development and housing

• Urban Development • Local government


Urban planning and design, city economic strategy • Human rights and gender

OUR CUSTOMERS
CPRM provides these services to national government institutions, local governments, and civil society
organizations, and to development organizations and multi-lateral and bilateral funding agencies.

CPRM Consultants, Inc.


64 Malakas St. Baranggay Piñahan, Quezon City, Philippines
Te: (632) 633-0211 • (632) 633-02-13 • Fax (632) 633-02012
Email: admin@cprm.com.ph
Website: http://cprm.com.ph
FINAL PROOF
ADB in the Spotlight

ADB’s support for the renovation of a highway north of


the Philippines’ capital of Manila has transformed the
area’s economic landscape

Putting the Philippines


in the Fast Lane
A
t World Wide Auctioneers, north of A Dramatic Shift
ABOVE: the ADB Manila, business people from all over The North Luzon Expressway Rehabilitation and
and the Philip- the world wander among hundreds of Expansion Project of the Asian Development
pines government trucks, cranes, and other heavy equip- Bank (ADB) helped renovate an 83.7-kilometer
have renovated ment. They are deciding what they want to bid on section of the road and build or rehabilitate 14
The North Luzon at an upcoming multimillion-dollar auction. interchanges, 24 bridges, and 31 overpasses from
Expressway, The global business people, the heavy equip- Manila to the Clark Special Economic Zone in
helping businesses ment they are buying, and the auction company Pampanga province.
to thrive, have one thing in common: they are here because The project, a long time in the making, resulted
making life easier of the North Luzon Expressway. in a landmark financing plan that engaged the
for commuters, “Most of our equipment comes up the North private sector in infrastructure building in a new
encouraging Luzon Expressway from the Manila port, and way. In the early 1990s, the government recog-
tourism, and most of our customers come up the highway nized the need to upgrade and modernize the
bringing from the Manila airport,” says Eric Montandon, 30-year-old highway. The road had fallen into
communities chair and chief executive officer of World Wide disrepair, with flooded sections, potholes, and
closer together Auctioneers, which also maintains auction sites traffic congestion.
in Lebanon, the United Arab Emirates, and the Despite the highway’s poor condition, traffic
United States. grew significantly from 1992 to 1997. Commuters
Says Montandon, “We wouldn’t have been able had little choice but to take the highway, whatever
to locate our business here without the renova- its condition. It was the only major thoroughfare
tion of the expressway.” going north from Manila.

ASIAN DEVELOPMENT BANK | 2010 85


FINAL PROOF
ADB in the Spotlight

The government and ADB, the lead financ-


ing agency, worked together to assemble a
$378 million loan package, provided primarily
by the private sector. ADB provided a loan of $45
million and coordinated the loan of $25 million
by a group of international commercial banks.
For users of the highway, the impact has been
dramatic. The road used to be a heavily pot-holed
two-lane thoroughfare where overloaded trucks,
speeding buses, and private vehicles dangerously
competed for space. Today, it is a safe, smooth
tollway with good lighting, modern signage, and
vigorous enforcement of traffic laws.

Signs of Growth
“We have seen this business thrive due to the
renovation of the highway,” says Adonis Baluyot,
former chairman of the North Luzon Express-
way Billboard Association. “The business barely
existed before. People didn’t want to put their
company advertisements on the old road.” way made our location more convenient.” Now,
He notes that more than 50 billboards have he says, travelers heading north or returning
been erected since the renovation, creating to Manila can easily stop for a meal along
dozens of jobs for those who install and main- the way.
tain the billboards, raising millions of pesos An ADB review of the highway renovation proj-
in revenue for advertising companies, and driv- ect found that the average daily traffic from Janu-
ing business toward the companies that use ary to March 2009 was at 149,430 vehicle entries,
the billboards. the highest first-quarter traffic since commercial
“There is a saying that the economic health of operations started in 2005, and 2.87 percent high-
an area can be judged by the number and qual- er than the highest previously recorded—145,258
ity of billboards,” says Baluyot. “If so, this area’s vehicles in 2007.
economy is very healthy.”
Bringing Families Together
Travelers Welcome The highway’s renovation has shown impressive
The highway also opened up the picturesque results, but for Elmer Rotoni, it’s all about his
areas in the north to greater tourism. The Spanish one-year-old son, Carl. The professional driver
colonial city of Vigan, the historic rice terraces of works in the northern province of Zambales,
Ifugao, and the beaches of La Union and Pagud- but his wife and young son live in the
pud used to be easily reached only capital city.
by air. It required a much more Before the upgrade of the high-
arduous road trip to reach some of
An ADB review of the way, Rotoni, 41, spent weeks away
the top tourist destinations. Today, highway renovation from his wife. The commute was
most areas can be reached in a day. project found that the too unpredictable and arduous to
In Central Luzon, the area that complete regularly. After the high-
benefits most from the new high- average daily traffic from way was renovated, Rotoni could
way, tourism has risen steadily January to March 2009 was reliably time his commute to his
in the last three years, according family to about two and a half hours
to the Philippines Department of at 149,430 vehicle entries from his provincial workplace
Tourism, with a 24 percent increase to Manila.
from 2007 to 2008. In 2009, the region had a total Now, Rotoni can get home after work on Friday
of 550,277 visitors. nights and play with his young son before he
Jim Sebree, a retired United States Air Force sleeps, then spend every weekend with his fami-
officer, operates the popular Cottage Kitchen ly, and be back to work Monday morning. He can
Café in Angeles City, adjacent to the highway. He also get home quickly for family emergencies or
has seen business increase by about 15 percent special occasions.
since the upgraded highway opened. In response, “Even though I was only about 100 kilometers
Sebree has doubled his floor space and taken on from my family, I couldn’t get home to see them
new employees. because of the bad road. Now I see them every
“It used to be a real challenge, getting to our weekend and I’m a bigger part of their lives,”
place before they fixed the highway,” says Sebree. says Rotoni. “For me, the highway has meant the
“People always enjoyed our food, but the high- reunion of my family.”

86  2010 | ASIAN DEVELOPMENT BANK


The AES Corporation is a global power company with generation and
distribution businesses. Through our diverse portfolio of thermal and
renewable fuel sources, we provide affordable and sustainable energy in
29 countries. Our workforce of 27,000 people is committed to operational
excellence and meeting the world’s changing power needs. To learn more,
please visit www.aes.com

THERMAL WIND

SOLAR HYDRO

GENERATION TRANSMISSION & DISTRIBUTION

Head Office: Regional Head Office for Asia & Middle East:
The AES Corporation AES Transpower Pte Ltd
4300 Wilson Boulevard 7 Temasek Boulevard
Arlington, VA 22203, USA Suntec Tower One, #09-01
Tel : (1-703) 522-1315 Singapore 038987
www.aes.com Tel: (65) 6403-9688 Fax: (65) 6835-9918
FINAL PROOF
ADB in the Spotlight

A new review system for measuring ADB’s effectiveness is paving


the way for a more client-focused, results-driven organization

Measuring
For Success
I
n the decades since the Asian Development operations for achieving the goals of Strategy
Bank (ADB) began its operations in 1966, 2020. It allows ADB to pinpoint where it has been
Asia and the Pacific has changed dramati- successful in its work, where challenges remain,
cally. Living standards have soared in the and where remedial action is required.
wake of surging economic growth, industry has At the heart of the review is the corporate
surpassed agriculture in many countries, urban- results framework, which has 70 performance
ization has taken off, and the region is now taking indicators covering four levels: the development
its rightful place as one of the powerhouses of the progress Asia and the Pacific is making, ADB’s
global economy. own contribution to regional development, how
At the same time, despite major inroads into well ADB is managing its operations, and how
poverty reduction, there are still more than 900 efficient ADB is as an organization. The indicators
million people living on less than $1.25 a day. allow ADB to compare its achievements against
Many developing member countries are off track to baseline data and quantified targets, highlight-
achieve the 2015 Millennium Development Goals, ing trends, successes, and weaknesses across its
and the destructive financial and economic crisis entire business operations.
which has been buffeting the globe since 2008 has “The framework allows ADB to improve its
provided a major setback to poverty reduction. focus on delivering tangible benefits to clients;
Faced with these challenges, ADB has fine it clarifies the targets ADB should achieve to
tuned its strategic thrust, approving in 2008 a maximize its contribution to development in the
new long-term development blueprint: Strategy region; and it helps ADB to better plan its work,
2020. Supported by a general capital increase in to objectively monitor progress, and to make
2009 and the replenishment of its concessional informed decisions which result in an improved
Asian Development Fund financing window, performance,” says Managing Director General
ADB now has an expanded resource base with Rajat Nag.
which to help meet the sharply rising demands of The adoption of a “scorecard system” for
developing member countries. The volume of its measuring performance is a major milestone for
operations is set to rise from around $10 billion a ADB: it is the first multilateral development bank
year in 2006–2008, to around $13 billion a year in to adopt a corporate-wide results framework
2010–2012. for measuring the effectiveness of its work and
Having the resources and strategic framework reporting the findings to the public.
to pursue development goals is one thing; ensur- The review provides a mechanism for improv-
ing that those resources are used ing ADB’s responsiveness and accountability to
ADB is making steady effectively, and that there is a stakeholders, and for fulfilling its commitment to
clear and objective mechanism the 2005 Paris Declaration on Aid Effectiveness—
progress toward its for measuring progress, are just a pledge by international aid agencies and their
output targets for as critical. partner countries to improve the outcomes of
To that end, ADB has created their work.
its core sectors— the Development Effectiveness It is also an integral part of ADB’s managing for
infrastructure, Review. The review serves as a development results process. This recently adopt-
“report card” providing the infor- ed management approach makes the delivery of
education, mation ADB needs to system- clearly defined and measurable results the focus
and finance atically monitor and adjust its of all of ADB’s work.

88  2010 | ASIAN DEVELOPMENT BANK


FINAL PROOF

A measurement system, which incorporates The findings of the review are also incorporated
green, amber, and red lights, is used to determine A Teacher and into ADB’s three-year work program and budget
if progress is on track, stagnant, or regressing. pupil at a school framework planning process, ensuring perfor-
By highlighting areas of strength and weakness, in Uzbekistan. mance data is used more systematically than has
the review gives management the detailed infor- The 2009 review been the case in the past.
mation it needs to take decisive action, making showed that core The 2009 review—ADB’s third annual report
the decision-making process more dynamic and sectors, such as card—shows a mixed picture. ADB is making
results-focused. The managing director general improvements in steady progress toward its output targets for its
and heads of departments have regular, open education, are core sectors—infrastructure (energy, transport,
meetings to assess work outcomes, discuss making steady and water), education, and finance. Client and
emerging and persistent issues, agree on steps for progress partner perceptions of ADB’s effectiveness rose.
improvement, and monitor results to ensure ADB Signs of improvement were also seen in ADB’s
is achieving its targets. support for gender mainstreaming in its new oper-
“Red lights signal the need to take swift reme- ations and in staff perceptions about the corporate
dial action and it is our responsibility as manage- commitment to knowledge management; and the
ment and senior staff to initiate the necessary five-year upward trend in the volume of approved
steps,” says Ms Noriko Ogawa, head, Results financial assistance continued. ADB delivered its
Management Unit. services to its clients much faster.
Decisions made at the meetings are implement- The review also highlighted some weaknesses:
ed by the relevant departments or offices. Over about a quarter of ADB’s recently completed invest-
the past two years, numerous steps have been ment operations failed to achieve their objectives
taken, or are being taken, to remedy or strength- fully, the success rate of its completed technical
en areas where weaknesses have been identi- assistance projects continued to decline, and perfor-
fied. These include measures to improve project mance in cofinancing operations remained weak.
performance management, the streamlining of “The findings show stiff challenges remain and
business processes, gender mainstreaming, and there is no room for complacency. Crucially though,
the creation of country development effectiveness the review helps management pinpoint key perfor-
briefs. In the light of the review’s findings, ADB is mance issues, giving it the information it needs to
also boosting human and budgetary resources to take time-bound, tangible actions to strengthen or
support its expanding operations. improve operations,” says Mr. Nag.

ASIAN DEVELOPMENT BANK | 2010 89


FINAL PROOF
RUNNING HEAD

The Central Asia Regional Economic Cooperation Program


is bringing together the diverse nations of Central Asia

CAREC Program
Partnership
Showing Results
C
entral Asia is a region on the move. eight countries and six multilateral institutions
As it rapidly rebuilds the ancient that have a unified goal to promote development
transport and trade routes that once through cooperation. Development can mean
connected Europe to Asia, recognizes many things, but for CAREC there are two over-
its strategic potential as a neighbor of both the riding priorities: accelerated economic growth
People’s Republic of China (PRC) and India, and and poverty reduction.
invests billions of dollars of new funds in the The program’s participating nations are
coming decade, Central Asia will step up to real- Afghanistan, Azerbaijan, the PRC, Kazakhstan,
ize its vast potential. Regional integration—in fact the Kyrgyz Republic, Mongolia, Tajikistan,
reintegration—is the focus these days, and as it and Uzbekistan. These nations are working
gathers speed, the possibilities are limitless. in tandem with their partners from the Asian
But every regional development plan needs Development Bank (ADB), the European Bank
cooperation, not to mention focus and team- for Reconstruction and Development, the Inter-
work. This is where the Central Asia Regional national Monetary Fund, the Islamic Develop-
Economic Cooperation (CAREC) Program is ment Bank, the United Nations Development
so important. The program is a partnership of Programme (UNDP), and the World Bank.

90  2010 | ASIAN DEVELOPMENT BANK


RUNNING HEAD

Globally Connected Asia finance and guarantees through, and in conjunc-


The program is based on promoting and facili- CAREC’S succesS tion with, international and developing member
tating regional cooperation, but what does that LIES IN ITS country banks. Emerging market companies have
mean? For those involved in CAREC, it means economic and long found it difficult to access the credit they need
focusing on priority areas including transport, project-based for critical exports and imports, and in many coun-
trade facilitation and policy, and energy. In 2009 focus on THE tries this has held back both the development of
the program mobilized about $4 billion to support priority sectors new industries and overall economic growth.
projects in these sectors. While the benefits to of transport, “Making it easier for companies to get hold
Central Asia will be vast, neighboring countries energy, and trade of trade finance should boost their business and
across the region can also realize their immense encourage them to expand and create jobs,” says
potential as the reintegration of Eurasia moves Robert van Zwieten, a director in ADB’s Private
forward. CAREC serves as a proactive facilita- Sector Operations Department.
tor of the projects and policies that are critical to Four banks in Azerbaijan signed agreements
trade expansion and sustainable development. under the Trade Finance Facilitation Program
During a conference in Tashkent on February between 2006 and 2008. ADB has also signed
16, ADB President Haruhiko Kuroda summed up agreements with banks in Afghanistan, Paki-
the region’s crucial role: “Central Asian countries stan, and Tajikistan, and is looking to bring the
ultimately contribute to a larger vision of a truly program to Mongolia and Uzbekistan.
integrated and globally connected Asia: seamless-
ly connected and working in common purpose.” Seizing Economic Potential
The expansion of trade within the CAREC A prerequisite for economic globalization in
countries is only the beginning, of course. To Central Asia, just as in the European Union or
the east, the PRC continues its strong econom- the Association of Southeast Asian Nations, is
ic performance, and will soon replace Japan economic integration. Countries cannot operate
as the world’s second-largest economy. To the in isolation and expect to realize their economic
south, India is approaching double-digit growth, potential. The CAREC Program provides a clear
while Pakistan is beginning to expand its private direction for the region to step up and seize its
sector. And the Russian Federation, beyond the economic potential, but at the same time it keeps
northern borders of Central Asia, has a large the focus firmly on reducing poverty.
economy that reaches far into Europe. There Research by ADB suggests that increased
is growing demand for improved connections regional cooperation, coupled with key economic
between Europe and Asia, and given their stra- reforms, could help CAREC countries double
tegic location at what has long been referred to their per capita incomes within a decade. If real-
as the crossroads of the world, CAREC countries ized, poverty could fall from more than 40 percent
have the opportunity to emerge as a center for currently to 25 percent or less by 2015.
trade and commerce. These statistics should serve as great motiva-
To help them on their way, ADB is expanding tors for regional cooperation, but there is much
its $1 billion Trade Finance Facilitation Program work to be done to reach the finish line. Experts
throughout Central Asia. The program provides say that significant investment must be made in

ASIAN DEVELOPMENT BANK | 2010 91


FINAL PROOF
Uzbekistan and Central Asia in the Spotlight

infrastructure, particularly transport, as roads and program, increasing capacity building, improv-
rail networks must be upgraded and expanded. ing “connectivity” to enable businesses to access
Central Asia, like many other parts of the world, both regional and global markets, and taking new
must better manage its resources, including those approaches to development. And with themes
that it shares, such as water and energy. comes action, namely moving ahead with regional
Increased trade among CAREC countries networks for transport corridors, energy markets,
means that outdated customs operations must be and trade-related infrastructure projects to physi-
upgraded or overhauled, and the rules governing cally connect the region. The CAREC program,
trade relationships must be streamlined. There above all, aims to underscore the region’s role
are many challenges, but the rewards are vast. as a Eurasian land link—a revitalized Silk Road
In 2009 alone, the multilateral partners of CAREC complete with new asphalt and bridges.
approved nearly $4 billion worth of projects in How important is transport to the program?
grants and loans. Most of these were for road, rail, The past decade has seen billions of dollars
and energy projects, but some were for trade facili- invested to upgrade key links throughout the
tation and related initiatives. This is unique for a region, and to modernize trade infrastructure
regional organization in Central Asia. and systems. Between 2008 and 2017, according
to CAREC, a further $24 billion will be allocated
A Long-term Vision for a new network of six transport and trade
The Comprehensive Action Plan sets out CAREC’s corridors between the region’s major economic
regional integration and cooperation. This was centers. The corridors will also connect Central
developed after intensive consultations among Asia eastward to the PRC; south to India, Paki-
member countries and was endorsed in October stan, and the Persian Gulf states; north to the
2006. In the joint ministerial statement follow- Russian Federation; and west to Europe.
ing the endorsement, the attending ministers According to the CAREC report on transport
said: “By working together to promote and facili- and trade facilitation, Connections to Prosper-
tate regional cooperation initiatives, we believe ity: “The potential is vast. Trade among all the
substantial gains will accrue to the peoples of major subregions of the Eurasian continent has
Central Asia and neighboring countries. By more than doubled since 1995. Today, annual ENERGY IS A key
reducing trade barriers and other impediments to trade between East Asia and the European area for the
development, we will ensure economic growth is Union tops $650 million. This growing inte- CAREC PROGRAM
sustained, livelihoods are improved, and progress gration of Eurasian subregions is creating real
is made toward achievement of the Millennium demand for faster, cheaper, and more reliable
Development Goals.” transport connections.”
The Comprehensive Action Plan’s programs, Kazakhstan, for example, is participating in
under the slogan “Good Neighbors, Good Part- one of two major transport and trade link proj-
ners, Good Prospects,” stress a long-term vision of ects scheduled for completion in 2012. In coop-
economic growth and poverty reducion. If there eration with the CAREC Program, Kazakhstan is
was a fourth phrase, it would be “Good Coop- reconstructing a 2,715-kilometer corridor, known
eration.” The CAREC nations were drawn to the as Corridor 1b, linking the western region of
benefits of regional cooperation, but they were the PRC to Western Europe. One assessment of
also warned by UNDP in 2005 about the price of the benefits of the reconstructed corridor is that
noncooperation. Failure to come together in a Kazakhstan’s real gross domestic product will be
regional forum would have meant lost economic 68 percent higher by 2020. The good news will
opportunities: lack of access to markets, no new spread to Kazakhstan’s neighbors, who are esti-
spurs for job creation, and slower progress in mated to see their combined gross domestic prod-
reducing poverty. uct rise 43 percent by 2020.
Economics aside, a lack of regional cooperation Some of the key constraints to transport
means less joint preparedness for natural disas- development identified by ADB include difficult
ters, increased environmental destruction, cross- terrain, poor or underdeveloped infrastructure,
border disease outbreaks, and general insecurity. and government policies that impede private
What makes CAREC successful is that the focus investment, such as limited access to financing.
has been purely economic and project-based, Furthermore, the logistics are characterized
with a focus on priority sectors of transport, by intense competition among many enterprises
energy, and trade. The countries recognized their that are small, financially weak, and limited in
common problem with infrastructure, particular- the services they offer. ADB reports also note
ly transport and energy, and the need to increase that trade among CAREC members and between
intraregional trade. CAREC and the rest of the world is limited by
cumbersome and out-of-sync customs proce-
Connectivity dures, while cross-border trade in the region is
Besides cooperation, the key themes of the action hampered by different inspection standards and
plan include having a strategic direction for the unofficial payments at borders and along routes.

92  2010 | ASIAN DEVELOPMENT BANK


FINAL PROOF
RUNNING HEAD

Challenges Remain also stresses that CAREC countries should maxi-


CAREC has some hurdles to jump in terms of mize the benefits of the Central Asian Power
maximizing its trade potential. The program’s System, and cooperate on the use of energy and
Trade Policy Strategic Action Plan states that, water resources.
while average tariffs in member countries have Speaking on the eve of the Ulaanbaatar confer-
been generally below 10 percent, the policies ence, Juan Miranda, director general of ADB’s
vary widely across the region from liberal to Central and West Asia Department, pointed to the
quite restrictive. Member countries also vary successes of CAREC since its inception:
with regard to their international trade status, “We are seeing greater energy security, effi-
such as membership of the World Trade Orga- ciency, and trade, and landlocked countries
nization, and partnership in multi- are working together more closely
ple overlapping trade agreements. to improve connectivity and create
The main goals of the CAREC trade What makes CAREC jobs,” he said, citing the example of a
approach are to increase openness to transmission line bringing electricity
stimulate stronger growth and reduce successful is that from Uzbekistan to Kabul, the capital
poverty; to ensure all eight member the focus has been of Afghanistan, as an example of the
countries become members of the tangible benefits of CAREC coopera-
World Trade Organization; and to purely economic tion. “In bringing electricity to Kabul,
continue to build capacity in trade and and project-based CAREC has shown the humane and
trade policy, which varies in strength transformative effects of regional
among the members. cooperation and collaboration. The city now
Another key area for the program is energy. has a 24-hour power supply, compared with two
Last year, senior CAREC officials asked donors to hours a day just a few months ago.”
work with them to prioritize actions to take under CAREC ministers are quick to agree that the
the program’s Energy Action Plan Framework. program has expanded economic opportunities
The plan, endorsed at the 8th CAREC Ministe- to millions of people, and it continues to do so
rial Conference in Ulaanbaatar, Mongolia in in spite of the global economic downturn. In his
October 2009, looks at opportunities for region- keynote address to open the 8th CAREC Minis-
al integration through power development, to terial Conference, President Kuroda pointed out
be carried out through 2013. The plan identifies that the global economic downturn had under-
three strategic issues for which cooperation is scored the value of the regional cooperation
needed, starting with ensuring energy security embodied by CAREC: “Crisis creates opportuni-
and efficiency, and promoting regional trade ty, and, working together, CAREC members can
by optimizing integrated transmission and use this challenge to strengthen partnership and
expanding generation infrastructure. The plan expand collaboration,” he said.

ASIAN DEVELOPMENT BANK | 2010 93


FINAL PROOF
RUNNING HEAD

Projects in Central Asia cover trade, transport,


energy, and a broad range of other sectors

ADB Projects Link


the Nations of
Central Asia

I
n the landlocked heart of a superconti- Cooperation (CAREC) Program, these corridors
nent, the Asian Development Bank (ADB) will provide critical regional connectivity.
is supporting a grand revival of ancient “The flow of trade and people through these
trade routes that once linked Europe and corridors will, among other benefits, generate
Asia. The digital-age version of the historic Silk additional revenues for the CAREC countries
Road caravan trails envisions a dynamic network through which the corridors pass,” ADB Presi-
of six road and rail mega-corridors with state- dent Haruhiko Kuroda has stated.
of-the-art border crossings and transnational CAREC members Afghanistan, Azerbaijan, the
energy supply channels, to capitalize on the vast PRC, Kazakhstan, the Kyrgyz Republic, Mongo-
under-tapped potential of Central Asian states as lia, Tajikistan, and Uzbekistan lie at the geograph-
the transit cradle for the accelerating integration ic and economic crossroads of an increasingly
of Eurasia. integrated Eurasian continent. To appreciate the
The spectacular web of regional transport and extent of their underused potential, consider this:
energy corridors spanning this underused cross- while trade between the European Union and
roads region will connect the vibrant powerhouses East Asia has reached $650 billion, almost none of
of the People’s Republic of China (PRC) and other it passes through Central Asia. Railway networks
parts of East Asia to the Middle East and Europe, do not connect enough key cities, potholed roads
and the developing economies of South Asia and imperil the transport of manufactured goods,
Iran to the huge markets of the Russian Federa- antiquated border crossings are cumbersome and
tion and the European Union. Within the member require uncompetitive waiting periods, and ener-
states of the Central Asia Regional Economic gy supplies are patchy.

94  2010 | ASIAN DEVELOPMENT BANK


FINAL PROOF
Uzbekistan and Central Asia in the Spotlight

CAREC states span a strategic stretch of 4,000 ing up the region’s trade, energy, and transport
kilometers (km) of some of the planet’s most trying The web of sectors, aiming for accelerated economic growth
terrain: endless steppes, harsh deserts, massive regional and poverty reduction.
mountain ranges soaring up to 7,400 meters, energy corridors Trade facilitation and trade policy are the foci
and pockets of land so low that they include the Within the of ADB’s trade development projects in Central
second-lowest city on Earth. Nearly all CAREC CAREC Program Asia. The idea is to harmonize and simplify trade
states are completely landlocked; with the excep- member states procedures so as to slash transaction costs and
tion of the PRC, which nevertheless is home to will provide time; to encourage free movement of goods and
the city further than any other in the world from critical regional businesspeople; to make laws and regulations
a seaport. Flanking the CAREC member states are connectivity more transparent; and to share information on
the Russian Federation and the booming former trade issues.
Soviet satellite states to the north; Japan and East The Integrated Trade Facilitation Program’s
Asia’s tiger economies to the east; Iran, Pakistan, targets for reform are: simplification and harmo-
and India to the south; and the ever-expanding nization of custom procedures, customs modern-
European Union beyond the Caspian Sea and the ization, and data exchange; risk management
Black Sea to the west. and post-entry audit; joint customs control; and
With its CAREC partners—the European Bank regional transit development. This program also
for Reconstruction and Development, the Inter- promotes single-window schemes to streamline
national Monetary Fund, the Islamic Develop- transport, freight forwarding, trade logistics, and
ment Bank, the United Nations Development customs. A performance measurement and moni-
Programme, and the World Bank—ADB is ramp- toring scheme was implemented in 2009.

ASIAN DEVELOPMENT BANK | 2010 95


FINAL PROOF
Uzbekistan and Central Asia in the Spotlight

Other initiatives include uniform application other areas to enhance trade efficiency and infor-
of value-added and excise taxes on domestically mation access for SMEs.
produced and imported goods, cutting tariffs, The goals of this project are to boost SME border
abolishing quantitative restrictions, and reducing trade, target the availability of at least two new
barriers to transit and border trade. financial products for border traders, and expand
Trade within and beyond the CAREC region credit volumes for SMEs. There is significant scope
is limited by cumbersome and non-harmonized for greater crossborder SME trade in Asia, particu-
customs procedures, different inspection stan- larly between the PRC and Mongolia.
dards, and unofficial payments at borders and
along routes, according to a series of ADB reports Getting Traction in Central Asia
on the state of transport and trade logistics in In the transport arena, ADB’s projects aim to
CAREC states. create competitive corridors across the CAREC
These reports identified difficult terrain, poor region; facilitate efficient crossborder movement
infrastructure, limited access to financing, and of people and goods; and develop safe, people-
government policies as key constraints to invest- friendly transport systems.
ment in trade and transport. Investments focus on six CAREC transport
corridors: Europe–East Asia (Corridor 1); Medi-
Financing Trade terranean–East Asia (Corridor 2); Russian Feder-
To bolster credit access, ADB is extending ation–Middle East and South Asia (Corridor 3);
trade finance through an expansion of its Trade Russian Federation–East Asia (Corridor 4); East
Finance Facilitation Program (TFFP) to Central Asia–Middle East and South Asia (Corridor 5); and
Asia. Under the TFFP, finance and guarantees Europe–Middle East and South Asia (Corridor 6).
are provided by ADB to support trade in devel- ADB’s support for Corridor 1 includes funding
oping nations. the Western Europe–Western PRC Corridor Devel-
“Making it easier for companies to get hold of opment Program through Kazakhstan, covering
trade finance should boost their busi- 2,715 km, with $340 million of a $700
ness and encourage them to expand million multitranche financing facility.
and create jobs,” said Robert van In the transport arena, Elsewhere on Corridor 1, ADB is lending
Zwieten, director of ADB’s Private ADB’s projects aim to $70 million to finance the improvement
Sector Capital Markets and Financial of a 488 km section of road between the
Sectors Division, of which the TFFP create competitive Kyrgyz Republic capital Bishkek, near
is a part. corridors across the border of Kazakhstan, and Torugart
Four Azerbaijani banks—Access on its border with the PRC.
Bank, Azerigazbank, Bank of Baku, the CAREC region Currently, ADB is supporting the
and Bank Respublika—signed agree- second phase of the upgrading of the
ments under the TFFP between 2006 and 2008, Bishkek–Torugart road. A combined $50 million
and agreements have been signed with banks loan and grant facility issued in July 2009 is financ-
in Afghanistan and Tajikistan. ADB is hoping ing improvement of a 75 km stretch of the two-
to expand the program to more banks in Azer- lane road. It is part of a corridor that supports the
baijan and to launch the TFFP in Mongolia livelihoods of more than 500,000 people and is the
and Uzbekistan. country’s main trading link with the PRC. Funds
also go toward construction of a border-control
Boosting Small and facility and training and skills development for
Medium-Sized Businesses local road engineering graduates.
ADB is financing a study of market and finance “Improving transport infrastructure and border
barriers with the aim of helping small and medi- operations in the Kyrgyz Republic will lower the
um-sized enterprises (SMEs) in Central Asia boost cost of domestic transport and international traf-
transborder trade. fic, as well as transit traffic, and it supports the
SMEs make up the vast majority of all firms in objective of increased trade and integration with
the region and are considered critical to balanced large markets in South Asia, the PRC, the Russian
growth. A lack of market information and finan- Federation, and Turkey,” said Prianka Senevirat-
cial products and services for SME border trad- ne, principal transport specialist in ADB’s Central
ers has prevented them from achieving their and West Asia Department.
growth potential. Goods moved along the Bishkek–Torugart road
ADB has provided a $1.5 million technical assis- account for about half the Kyrgyz Republic’s trade
tance grant to survey border traders, financiers, with the PRC. The road traverses three of the coun-
and border posts; and to assess the policy and try’s poorest provinces, where many people rely
regulatory changes needed to improve SME trad- on it to transport goods to market. Large sections
ers’ access to finance. The study is also formulat- of the road are in poor condition, resulting in long
ing proposals on new financial products for SME travel times and high operating costs. Completion
traders and will help address changes needed in of this project is slated for December 2013.

96  2010 | ASIAN DEVELOPMENT BANK


Tajikistan “This line will boost freight volumes, lower
ADB is LENDING In Tajikistan, ADB is supporting improvement of costs, raise the profile of Afghanistan as a tran-
$70 million to the 120 km road between the capital, Dushanbe, sit route, and complement two major transport
finance the and its northern border with the Kyrgyz Republic corridors being developed under the Central Asia
improvement through a $20 million loan. Regional Cooperation Program,” said Balabhaska-
of a 488 km A surge in trade and traffic along the route has led ra Reddy Bathula, transport specialist with ADB’s
section of road to the premature deterioration of the road surface. Central and West Asia Department.
between Bishkek “The rehabilitated road will reduce travel time Hairatan is a gateway for almost half of
and Torugart and transport costs, as well as improve access and Afghanistan’s imports and much of its humani-
prices for agricultural goods, create job oppor- tarian relief goods.
tunities, encourage commercial activities, and The Afghanistan railway project will also
improve the delivery of services, especially to upgrade Hairatan’s station yard, build a transship-
the poor, women and children,” said Hee Young ment terminal, and provide institutional support
Hong, financial specialist for ADB’s Central and to develop a railway sector plan.
West Asia Department. The project is the first phase of a larger rail
The loan is being used to improve several network planned for the country, including links
areas of the highway, including an emergency to western city of Herat, Tajikistan, and Pakistan,
bypass road, and a landslide-prone section near and is part of CAREC’s broad push to improve
the border with the Kyrgyz Republic. The high- connectivity throughout the region.
way passes through some of Tajikistan’s poor- Meanwhile, ADB is helping Afghanistan to
est parts. Its dilapidated condition has left many conduct a study on the development of a railway
areas isolated and unable to easily transport network across its north and other parts of the
goods to market. country, with links to its main western city, heart,
and northern neighbor, Tajikistan.
Afghanistan In the PRC, ADB is assisting the upgrading of a
In Afghanistan, ADB is supporting the construc- 287 km stretch of road between Korla and Kuqa.
tion of a 75 km railway between Hairatan on its In Mongolia it is assisting the improvement of
northern border with Uzbekistan and its second Corridor 4a and 4b near the PRC border.
largest city Mazar-e-Sharif with a $165 million Azerbaijan is receiving ADB support to
grant. The railway—which in effect will be an upgrade parts of Corridor 2, Kazakhstan is
extension of the Uzbekistan railway network—is receiving ADB support to improve a 540 km-long
expected to be completed by October 2010. section of road between Aktau and Karakalpak-
Afghanistan is strategically located as a poten- ya, Uzbekistan is receiving ADB support in the
tial transit route in Central Asia for goods reconstruction of a 131 km section of road along
destined for ports in Pakistan and the Caspian, the border with Kazakhstan.
and onwards to South and East Asia, the Middle ADB is also helping formulate a crossborder
East, and Europe. However, trade volumes are agreement between the Kyrgyz Republic, and
heavily constrained by weak transport systems. Tajikistan.
In the case of Hairatan, freight railed from inside The performance goals of CAREC’s transport
Uzbekistan stops at the border and then has to be development programs are to: improve 100 percent
offloaded and reloaded into trucks, causing delays of regional road corridors by 2017; increase the
and raising costs. volume of transit trade via CAREC corridors to

ASIAN DEVELOPMENT BANK | 2010 97


FINAL PROOF
Uzbekistan and Central Asia in the Spotlight

5 percent of trade between Europe and East Asia border to Pul-e-Khumri near Kabul.
by 2017, from less than 1 percent in 2005; increase The new line is the first step in building a
the intraregional trade volume by 50 percent from network that will eventually connect many other
2017; and reduce border crossing times along the parts of the country that still lack electricity.
CAREC corridors by 50 percent by 2012, and a A further $50 million loan-and-grant assistance
further 30 percent by 2017 compared to 2007. package will help connect some 1.2 million people
in rural Afghanistan to the network.
Energy The new transmission corridor is part of the
In the energy field, ADB-funded projects capital- massive North East Power System (NEPS) Proj-
ize on the attractive energy markets in eastern ect that has been undertaken by a range of part-
and southern PRC, India, Iran, and Pakistan, ners including Germany, India, Japan, the United
along with new strategic transit opportunities for States, the Islamic Development Bank, and the
oil and gas through Georgia, the Russian Federa- World Bank.
tion, and Turkey. In addition, ADB is financing new transmission
Regional projects envisage a series of phased lines linking Afghanistan with Tajikistan. The 247
investments aimed at improving energy security, km Tajikistan–Afghanistan 220-kV Interconnec-
efficiency, and trade. They include transmission tion Project is due for completion in 2010.
projects, generation projects, and energy efficien- Among power generation projects, ADB is
cy and clean energy projects. providing technical assistance to Uzbekistan’s
A dazzling highlight of ADB’s support of Central Talimarjan Power Project, and is expected to
Asia’s energy sector is the stabilization of Kabul’s provide finance for the generation and associated
electricity supply for the first time in decades. transmission project. Completion is scheduled
A new 420 km transmission line between for 2013. ADB is also financing the rehabilitation
Uzbekistan and the Afghan capital now supplies of Tajikistan’s Nurek 500-kilovolt switchyard, due
power to Kabul. Some 90 megawatts are transmit- for completion by 2013.
ted along the line and this is expected to increase In the clean energy field, ADB is support-
to 150 megawatts. ing carbon finance activities in the PRC, the
“For the first time in more than a generation, Kyrgyz Republic, Mongolia, Tajikistan, and
Kabul’s 4 million people can now enjoy the bene- Uzbekistan. It has also approved a regional
fits of a stable source of electricity,” said Juan technical assistance project on climate change
Miranda, director general of ADB’s Central and which will help climate-proof projects financed
West Asia Department. by ADB in the region. In the Kyrgyz Republic,
The electricity travels across treacherous ADB is providing technical assistance for a trans-
mountain terrain. ADB funded the portion of the mission and processing metering project for
line running 217 km from Afghanistan’s northern approval in 2010.

Working with ADB


How brokers, credit insurers, lawyers, and other professionals can partner with ADB

Professionals interested in collaborating with the Asian Development Bank (ADB) to bolster the trade, energy, and transport
prospects of member states of the Central Asian Regional Economic Cooperation (CAREC) Program can find project details
and information on expression of interest (EOI) lodging processes on ADB’s website at www.adb.org/Business/Opportunities/
default.asp
All proposed and approved projects are listed online in full detail, with accompanying project summaries. A consulting servic-
es recruitment notice (CSRN) is posted alongside each proposed and approved project. Individual consultants and entity consul-
tants can find consulting services recruitment notices at www.adb.org/Documents/Guidelines/Consulting/default.asp?p=cnsltng
covering the following sectors: agriculture and natural resources, energy, finance, health and social protection, industry and
trade, public sector management, transport and information and communication technology, and water and other municipal
infrastructure and services.
The CSRN provides detailed information on the consulting services required for ADB financed or administered projects. The
CSRN includes the consultant’s terms of reference and is posted on ADB’s website before shortlisting, enabling consultants to
prepare expressions of interest that are more specific and focused on the project.
An EOI may be submitted online for any project for which a CSRN has been posted. Hard copies may also be submitted. EOIs
should also be sent to the executing agency listed in the project summary. Once bids are approved, procurement notices for each
approved project are posted online. For each approved project, ADB shortlists six consulting firms and invites them to submit
bids. Bidders for contracts for ADB financed projects must be nationals of ADB members.

98  2010 | ASIAN DEVELOPMENT BANK


FINAL PROOF
Uzbekistan and Central Asia in the Spotlight

The country’s many assets make it


appealing to a wide range of investors

Uzbekistan at
the Heart of
Central Asia

99
FINAL PROOF
Uzbekistan and Central Asia in the Spotlight

U
zbekistan, with its once-glittering world’s top cotton exporters). Industrial products
cities of Samarkand and Bukhara, and processed foods are next in importance after
was a pivotal trade crossroads on the cotton and gas as its key export items.
steppes and deserts of the caravan-era As of 2008, intraregional trade was most impor-
ancient Silk Road. Now, in 21st-century Central tant for Afghanistan (48 percent of total trade
Asia, its strategic location has thrust it back into turnover), Tajikistan (45 percent), and Mongolia
the same vital role as the region steps forward to (40 percent), followed by the Kyrgyz Republic (32
bridge Europe and the Middle East with Asia once percent), Uzbekistan (17 percent), and Kazakh-
again, creating the “New Silk Road.” stan (15 percent). Based on bilateral trade figures,
Uzbekistan links South Asia (via Afghanistan), trade with Uzbekistan is of relatively large impor-
the Middle East (via Turkmenistan), and Europe tance for Afghanistan and Tajikistan, and of rela-
(via Kazakhstan). tively average importance for Kazakhstan and the
The nation’s comparatively large popula- Kyrgyz Republic.
tion (Uzbekistan’s population of 26.7 million is Uzbekistan’s immense natural energy resources
the largest in Central Asia), double-landlocked give it the potential to play a major role in redress-
status, five international borders, proximity ing the energy deficits in other Central Asian
to Afghanistan and the huge markets of South countries and in South Asia.
Asia, and its vast gas and oil wealth make it a Uzbekistan is increasingly looking at selling
critical player in regional cooperation, with more energy resources to other Central Asia coun-
huge potential both to contribute to and gain tries, the People’s Republic of China and South
from improved trade, energy, and transport Asia countries (via Afghanistan), where demand
connectivity. Its stable political system, resil- for natural gas and electricity is very high.
ience to the global financial crisis, and some As one of three central Asian states sharing
bold economic initiatives make it appealing to Afghanistan’s northern border, Uzbekistan has
foreign investors. the comparative advantage of deeper links to the
Uzbekistan’s terrain is rugged: huge markets of India and Pakistan than
desert covers the north, lowlands some of its neighbors which are orien-
dominate the northwest, and Uzbekistan’s tated more to the Russian Federation.
mountains stretch across its south.
It lies between two rivers: the
competitiveness would An Important Gateway
Amudarya and Syrdarya. Agricul- benefit from regional Uzbekistan is increasingly relevant for
ture still underpins its economy,
contributing one-third of gross
cooperation initiatives South Asia, as an important gateway to
other key markets.
domestic product, but industry that reduce its physical Uzbekistan is already supply-
and services are catching up fast. and economic distance ing electricity to the Afghan capital
Its prime exports of cotton, gas, Kabul, stabilizing its famously erratic
gold, and copper must traverse from markets power supply for the first time in
large distances; its railways and decades. A new 420-kilometre (km)
highway networks need upgrad- transmission line between Uzbeki-
ing and extending; and its border crossings and stan and the Afghan capital now carries power
customs procedures need modernizing to bring to Kabul. Some 90 megawatts are transmitted
trade costs down. along the line and this is expected to increase
to 150 megawatts.
Transport Corridors “This critically important project achieved what
Three of the six transport corridors being devel- once seemed out of reach: a steady supply of elec-
oped under the Central Asia Regional Economic tricity to Kabul,” said Asian Development Bank
Cooperation (CAREC) Program swing through (ADB) President Haruhiko Kuroda. “The project,
Uzbekistan: Corridor 2 (Mediterranean–East which underscores Uzbekistan’s crucial role in
Asia), Corridor 3 (Russian Federation–Middle the region, has benefited 4 million people and laid
East–South Asia), and Corridor 6 (Europe–Middle the foundation for a network to reach many other
East–South Asia). parts of Afghanistan that are still without access
Reducing trade costs is a priority for double- to electricity.”
landlocked Uzbekistan, according to officials. ADB funded the construction of a 217 km
The country’s competitiveness would benefit section of the power supply line from the Uzbek-
from regional cooperation initiatives that reduce Afghan border to Pul-e-Khumri near Kabul.
its physical and economic distance from markets, ADB is also funding, with a $165 million
allowing it to offer speedy, time-definite deliv- grant, the construction of a 75 km railway line
ery of the goods and services in which it has a connecting Uzbekistan with Mazar-e-Sharif, the
comparative advantage. second largest city in Afghanistan, via Hairatan
Uzbekistan is attempting to diversify from its on the Afghanistan–Uzbekistan border. The
reliance on cotton and gas exports (it is one of the new line will form a key trade corridor between

100  2010 | ASIAN DEVELOPMENT BANK


Among projects approved for ADB funding in
Uzbekistan is the CAREC Corridor 2 Road Invest-
ment Program. ADB approved a $900,000 techni-
cal assistance grant last year, and a proposed $715
million loan is up for approval this year.
The goal is to create improved, safe, and effi-
cient roads in Uzbekistan that will enhance
national and international transport connectivity.
Regional transport corridors will help Uzbekistan
gain better access to regional and transregional
markets. ADB pursues synergies in transport
infrastructure and trade facilitation by linking
investment support for transport projects to tran-
sit facilitation.
The projects are helping to secure access to
profitable markets in large neighboring countries
for exports from the Central Asian republics, and
to reduce transaction costs and facilitate transit
across the region.
With ADB assistance, 660 km of railway has
already been upgraded along one of the key
regional transport corridors. Another 341 km of
railway track on the Samarkand–Budjara–Khodja-
davlet route and parts of the line between Djizakh
and Samarkand were rehabilitated in 2006.
The project provided modern tracklaying and
maintenance equipment, supplied and installed
an optical fiber telecommunications system and
computerized financial accounting system, and
supported human resources development.
A proposed loan of $350 million for the Tali-
marjan Clean Power Project is also up for approv-
al this year. The project will increase regional
trade in electricity, improve the electricity supply
in Uzbekistan, and reduce greenhouse gas emis-
sions. Completion is scheduled for 2013. A techni-
cal assistance grant of $1.5 million was approved
in 2009 for the Talimarjan Power Generation and
Transmission Project.

Investment Appeal
Politically and economically, Uzbekistan appeals
to foreign investors. Its government has ambitious
modernization plans and economic centers (such
as the Navoi Free Industrial–Economic Zone), an
economy that has been very resilient to global
the two countries. It is due for completion by financial shocks, and a sizeable market by Central
the end of 2010. a Road leading Asian standards. Sectors where Uzbekistan has a
Within CAREC, Uzbekistan’s electricity gener- from Samarkand potential comparative advantage include food and
ation is a natural complement to the hydropower to Shakhrisabz, agri-processing, light manufacturing (including
potential of the Kyrgyz Republic and Tajikistan, Uzbekistan. textiles), and natural gas.
say officials. During the winter months, when the ADB-funded ADB-funded projects in Uzbekistan are reduc-
Tajikistan and the Kyrgyz Republic have short- CAREC Corridor 2 ing the physical and economic distance to outside
ages of electricity, they could import electricity Road Investment markets through efficient transport and customs
from Uzbekistan; in the summer months, when Program aims to facilitation, while also pursuing water and energy
the Kyrgyz Republic and Tajikistan have surplus improve the cooperation opportunities.
electricity from hydropower, they could theoreti- country’s roads Uzbekistan has received 29 loans from ADB
cally export this to Uzbekistan so that Uzbekistan totaling $1.23 billion and technical assistance
could export more of its natural resources outside worth $37.1 million since becoming a member in
the region. This is the premise for regional coop- 1995. It is now ADB’s 15th largest shareholder and
eration in energy in Central Asia. 13th largest borrower.

ASIAN DEVELOPMENT BANK | 2010 101


FINAL PROOF
ADVERTISER INDEX

ADVERTISER
INDEX
AECOM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
AES Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
ASIAN DEVELOPMENT BANK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20, 66
Asian Institute of Technology (AIT) . . . . . . . . . . . . . . . . . . . . . . . . 36
CPRM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Ernst & Young . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Guy Carpenter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Halcrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
HB Consultants Ltd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
IKS Group of companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
India Infrastructure Finance Company Ltd . . . . . . . . . . . . . . . . . 6
International Bank of Azerbaijan . . . . . . . . . . . . . . . . . . . . . . . . . 42
Jaiprakash Power VentureS Limited . . . . . . . . . . . . . . . . . . . . . . . . 70
Jaypee Infratech LIMITED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
LarsEn & Toubro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Metso . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Mott MacDonald . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Munich RE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Municipality Finance Plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
National Australia Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Ram Holdings Bhd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Shah Technical Consultants Pvt Ltd . . . . . . . . . . . . . . . . . . . . . 103
Siemens Ltd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Société Générale CIB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Standard BANK PLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
State Bank of India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Swiss Reinsurance Company Ltd . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
TCE Consulting engineers limited . . . . . . . . . . . . . . . . . . . . . . . . . . 76
TERA International Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Uzbekinvest International Insurance Company LIMITED . . . 14
Uzpromstroybank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Vijai Infrastructure limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Wilbur Smith Associates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Zarai Taraqiati Bank Ltd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

102  2010 | ASIAN DEVELOPMENT BANK


WE ARE A 34 YEAR OLD FIRM SPECIALIZING
IN WATER & WASTEWATER CONSULTING

300+ Employees in 11 offices

600 Million USD Project cost of 7 Major ongoing


Bank-Funded Projects as Design
& Supervision Consultants

2.5 Billion USD Project cost of 6 Major ongoing


JICA funded Projects as Project
Management Consultants

4.0 Billion USD Ongoing Capital Investment


Managed as Consultants

35 Million USD Order book Position

6.0 Million USD Turnover for year 2009-2010

Completed Mumbai (Pop. 15 Million)


Delhi (Pop. 14 Million)
Projects Kolkata (Pop. 13 Million)
Chennai (Pop. 7 Million)
Bengaluru (Pop. 6 Million)

International Dubai, Qatar, Libya,


USA, Vietnam, Maldives
Projects and Bangladesh

Shah Technical Consultants Pvt Ltd


ISO 9001:2008
407 Raheja Centre, 214 Nariman Point, Mumbai – 400021, India
Phone: +91 – 22 – 2282 0018, 2287 1061 Fax: +91 – 22 – 2202 3714 Email: stc@stc.co.in
Website: www.stc.co.in
When it comes to climate change, isn’t there
more to stick into the sand than your head?

How can we meet one of the biggest challenges of our times? The answer:
with big ideas, such as harvesting solar power in the desert sands. Exploiting
the limitless solar energy found in the earth’s deserts is a huge step towards
restructuring energy supply with a greater bias towards renewable energy and
low-carbon technology. And so Munich Re initiated a dialogue with visionary
partners, with one goal in mind: to find a new way of balancing the needs for
security of supply, climate protection and economic viability.

To find out what a significant role deserts could play in climate protection,
visit our website at www.munichre.com

MR_Desertec_gb_210x276_AsianDevelopment_RZ01_ICv2.indd 1 25.02.2010 15:03:17 Uhr