Asian Development Bank

Context: India inked a policy-based loan agreement with the Asian Development Bank (ADB), securing $400 million. The funds are earmarked to facilitate the development of high-quality urban infrastructure, enhance service delivery, and advance efficient governance systems, as outlined in a statement from the finance ministry.

More about the news:

Sub-programme 1, sanctioned in 2021 with a budget of $350 million, laid the groundwork for national-level policies and guidelines aimed at enhancing urban services.
In parallel, the more recent sub-programme 2 is dedicated to supporting investment planning and reform initiatives at both the state and urban local body (ULB) levels.
Specifically, sub-programme 2 aligns with the ongoing reforms led by states and ULBs to implement the national flagship program, Atal Mission for Rejuvenation and Urban Transformation (AMRUT) 2.0, which targets universal access to water supply and sanitation.
Urban Local Bodies will play a pivotal role in advancing modernization efforts, including building bylaw updates, land pooling, urban agglomeration, and comprehensive urban mobility planning with a focus on transit-oriented development.
These integrated planning processes incorporate climate and disaster resilience, promote nature-based solutions, enhance the urban environment, and boost cities’ financial sustainability by generating additional revenues.
Cities will be incentivized to enhance their creditworthiness through reforms targeting increased revenues, such as property taxes and user charges, coupled with efficiency improvements and streamlined expenditures.
This strategic approach aims to empower cities to explore innovative financing avenues, including commercial borrowings, municipal bonds issuance, sub-sovereign debts, and public–private partnerships, thereby addressing significant deficits in urban infrastructure investments.

About Asian Development Bank:

Founded in December 1966, the Asian Development Bank (ADB) is a regional development bank with its headquarters situated in Mandaluyong, Manila, Philippines.
The bank extends its membership to countries within the UN Economic and Social Commission for Asia and the Pacific, as well as non-regional developed nations.
Drawing inspiration from the World Bank, the ADB closely mirrors its structure, featuring a comparable weighted voting system that aligns with the capital subscriptions of its members.
This system ensures proportional representation in decision-making processes.
Furthermore, the ADB holds the distinction of being recognized as an official United Nations Observer.

Governance:

At the apex of the bank’s decision-making structure is the Board of Governors, comprising a representative from each member state.
From this assembly, the twelve members of the Board of Directors and their deputies are elected, with the Board of Governors themselves partaking in this selection.
Out of these twelve, eight are chosen from regional members in the Asia-Pacific area, while the remaining four are selected from non-regional members.
The Board of Governors is also responsible for the election of the bank’s president, who serves as the chairperson of the Board of Directors and oversees the management of the ADB.
The president’s term spans five years and is eligible for re-election.

Objectives and activities:

The Asian Development Bank (ADB) characterizes itself as a social development organization committed to alleviating poverty in Asia and the Pacific through the promotion of inclusive economic growth, environmentally sustainable practices, and regional integration.

Key operational areas include:

Education: While there has been significant progress in primary education enrolment rates in many developing countries in Asia and the Pacific, persistent challenges threaten economic and social growth. The ADB focuses on addressing these challenges.
Environment, Climate Change, and Disaster Risk Management: Recognizing that environmental sustainability is fundamental to economic growth and poverty reduction in the region, the ADB actively engages in initiatives related to overall environmental conservation.
Finance Sector Development: This involves initiatives such as capital market development, support for microfinance, small and medium-sized enterprises, and regulatory reforms to benefit the most vulnerable populations.
Infrastructure: A critical focus area encompasses infrastructure development, spanning transport, communications, energy, water supply, sanitation, and urban development.
Regional Cooperation and Integration: Introduced in 2004, regional cooperation and integration (RCI) is regarded as a longstanding priority. This process fosters stronger connections between national economies.

Financings:

The Asian Development Bank (ADB) extends ‘hard’ loans on commercial terms, primarily directed at middle-income countries in Asia.
It offers ‘soft’ loans to economically disadvantaged countries in the region, characterized by lower interest rates.
The ADB’s Private Sector Department (PSOD) possesses the flexibility to provide a diverse array of financial instruments beyond commercial loans, including guarantees, equity, and mezzanine finance, which combines elements of both debt and equity.
Funding for ADB’s operations is secured through various channels, notably by issuing bonds on the global capital markets.
Additionally, it relies on financial contributions from member countries, earnings retained from lending activities, and the repayment of loans.

Voting rights:

The Asian Development Bank’s top 10 countries, ranked by their significant capital contributions and corresponding voting rights, are as follows:

Japan (100.00)
United States (12.751)
China (12.751)
India (5.437)
Australia (4.913)
Indonesia (4.641)
Canada (4.469)
South Korea (4.315)
Germany (3.747)
Malaysia (2.468)

ADB Strategy 2030:

Within this framework, the ADB commits to sustaining efforts to eliminate extreme poverty while expanding its vision to realize a prosperous, inclusive, resilient, and sustainable Asia and the Pacific.
Aligned with major global commitments, the ADB will play a pivotal role in advancing the global infrastructure development agenda, recognizing it as a catalyst for worldwide economic growth.
ADB will broaden its interventions in social sectors such as education, health, and social protection. The institution aims to integrate its expertise across diverse sectors and themes to effectively address complex development challenges.
As a trusted development partner, the ADB will enhance the value it provides to its developing member countries (DMCs) by combining financial support, knowledge dissemination, and fostering partnerships.
It will maintain its role as a reliable financier and catalyst for financial mobilization.

The Asian Development Bank’s (ADB) support, encompassing public and private sector operations, advisory services, and knowledge initiatives, will be strategically focused on the following key operational priorities:

Addressing Remaining Poverty and Reducing Inequalities: ADB will intensify efforts in human development and social inclusion, addressing non-income dimensions of poverty. Emphasis will be placed on facilitating quality job creation, particularly by small and medium-sized enterprises and inclusive businesses.
Accelerating Progress in Gender Equality: ADB is committed to supporting operations that empower women and girls, actively mainstreaming gender considerations to narrow existing gaps. The goal is for at least 75% of ADB’s committed operations to promote gender equality by 2030.
Tackling Climate Change, Building Resilience, and Enhancing Environmental Sustainability: ADB aims to ensure that 75% of its committed operations actively contribute to climate change mitigation and adaptation by 2030.
Making Cities More Liveable: ADB will undertake crosscutting projects to enhance urban health, mobility, gender equality, and environmental sustainability. This involves exploring new funding sources for cities, fostering inclusive urban planning, and integrating climate resilience and disaster risk management.
Promoting Rural Development and Food Security: ADB will support efforts to improve market connectivity and agricultural value chain linkages, boosting both farm and nonfarm incomes. This includes promoting advanced technologies and climate-smart agricultural practices.
Strengthening Governance and Institutional Capacity: ADB will assist in public management reforms to enhance governance, creating an environment conducive to sustainable growth. This involves building resilience, responding to economic shocks, improving service delivery, and enhancing capacity and standards, all while adhering to fiduciary standards and implementing anticorruption measures.
Fostering Regional Cooperation and Integration: ADB will increase support for regional public goods and collective actions to mitigate cross-border risks. This includes strengthening subregional initiatives, enhancing financial sector cooperation, and facilitating knowledge sharing and collaboration.

Implementation:

To implement this strategy effectively, ADB will develop operational plans for each of the seven priority areas, outlining specific engagement approaches and skill requirements.
Country partnership strategies will further refine priorities at the country level.
The work program and budget framework process will be enhanced to align the annual work plan and resourcing with operational priorities.
A new corporate results framework will be established to monitor and measure implementation progress.
A “One ADB” approach will be instituted, consolidating knowledge and expertise across the organization to streamline the implementation of Strategy 2030.