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Asian Development Bank

November 2017

President
Takehiko Nakao

The views expressed in this presentation are the views of the author and do not necessarily reflect the views or
policies of the Asian Development Bank Institute (ADBI), the Asian Development Bank (ADB), its Board of
Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this
paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be
consistent with ADB official terms.
Azerbaijan ADB Regional Members(48 economies)
Uzbekistan Kazakhstan

Kyrgyz Republic Mongolia


Georgia
= Advanced
Armenia People’s Republic of China economies and
Tajikistan
graduated
Korea
Turkmenistan Nepal Bhutan Japan developing members
Lao PDR Hong Kong, China
Afghanistan India Myanmar
Taipei,China
Thailand Marshall Islands
Pakistan Bangladesh Viet Nam Philippines
Cambodia Micronesia Kiribati
Sri Lanka Brunei
Palau Nauru
Malaysia Tuvalu
Maldives Papua New Guinea
Solomon Islands Samoa
Singapore
Indonesia Timor-Leste Cook Islands

Fiji
Non-Regional Members(19 countries) Vanuatu
Australia Tonga
Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Italy, Ireland, Luxembourg, Netherlands,
Norway, Portugal, Spain, Sweden, Switzerland,
Turkey, United Kingdom, United States
New Zealand
2 2
Country Data (2016)
Population GDP Per capita GDP
(million) ($ billion) ($)
People’s Rep. of China 1,382.7 11,218 8,113
India 1,309.3 2,256 1,723
Indonesia 258.7 932 3,604
Pakistan 193.6 284 1,468
Bangladesh 161.5 228 1,411
Philippines 104.2 305 2,924
Viet Nam 92.6 201 2,173
Thailand 69.0 407 5,899
Myanmar 52.3 66 1,269
Republic of Korea 51.2 1,411 27,539
(reference: advanced economies)
Japan 126.9 4,939 38,917
United States 323.3 18,569 57,436
Germany 82.7 3,467 41,902
France 64.6 2,463 38,128
United Kingdom 65.6 2,629 40,096
Source: World Economic Outlook April 2017 database.

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Growth Rate (%)
2016 2017 2018
(forecast) (forecast)

Developing Asia 5.8 5.9 5.8


(excluding NIES) 6.3 6.4 6.3
People’s Rep. of China 6.7 6.7 6.4
India 7.1 7.0 7.4
Indonesia 5.0 5.1 5.3
Pakistan 4.5 5.3 5.5
Bangladesh 7.1 7.2 6.9
Philippines 6.9 6.5 6.7
Viet Nam 6.2 6.3 6.5
Thailand 3.2 3.5 3.6
Myanmar 5.9 7.7 8.0
Republic of Korea 2.8 2.8 2.8
NIEs=newly industrialized economies of Hong Kong, China; Rep. of Korea; Singapore; and Taipei,China.
Source: Asian Development Outlook 2017 Update.

4
Developing Asia growth moderated,
but remains healthy
Real GDP Growth (y-o-y, %)
12 Developing Asia Developing Asia excluding NIEs

10 9.6
8.1
8 7.1 7.0 6.8 6.6 6.4
6.3 6.3
6
9.4
4 7.4
6.4 6.4 6.4 6.0 5.8 5.9 5.8
2

0
2010 2011 2012 2013 2014 2015 2016 2017 2018
Forecast Forecast

NIEs=newly industrialized economies of Hong Kong, China; Rep. of Korea; Singapore; and Taipei,China.
Source: Asian Development Outlook 2017 Update.

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Factors behind the PRC’s growth
slowdown
• Cyclical factors
Economic growth – Excess capacity in
%
some sectors
16
Retail sales – Prioritizing financial
12
sector stability
Industrial value-
• Structural factors
GDP
8 added – Rebalancing from
investment- to
4 7.9 7.8 7.3 6.9 6.7 6.7 6.8 6.9 6.9 consumption-driven
growth
0
2012 2013 2014 2015 2016 Q3 Q4 Q1 Q2 – Declining working-age
2016 2017
population
Sources: Asian Development Outlook 2017 (September
– Convergence to
2017) database; CEIC Data Company. developed economies

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PRC shifts toward services- and
consumption-driven economy

Demand-side Supply-side Shares


% Shares in GDP % in GDP
100 100
9.5 8.6
80 80
48.4 51.1 Consumption 39.8 Agriculture
46.4
60 60
Investment Industry
40 40
Net exports Services
47.9 47.2 51.6
20 20 44.1

0 3.7 1.7 0
2010 2016 2010 2016

Sources: Asian Development Outlook 2017, ADB; national source.


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Asian Development Bank (ADB)
Headquarters Manila, Philippines
Founded in 1966
67 Members
Authorized Capital $ 143.0 billion (Dec 2016)

Major shareholders (capital share %): Japan (15.6%), United


States (15.6%), PRC(6.4%), India(6.3%)
* Paid-in capital: $7.2 billion (including $0.7 billion committed but not paid yet)
Callable capital: $135.5 billion

Annual Loan/Investment Approval $17.5 billion (2016)


* Including loans, ADF grants, guarantees, and equity investments, but excluding
technical assistance and cofinancing

Top recipients: India, PRC, Azerbaijan, Indonesia, Pakistan


Loan Outstanding $94.9 billion (Dec 2016)

Staff 3,092 (including international staff 1,103) (Dec 2016)


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Contribution by Members
• Ordinary Capital Resources (Capital Share/ Voting Power Share)
– Japan (15.6%/ 12.8%), United States (15.6%/ 12.8%), PRC (6.4%/
5.5%), India (6.3%/ 5.4%), Australia (5.8%/ 4.9%), Indonesia (5.4%/
4.7%), Canada (5.2%/ 4.5%), Korea (5.0%/ 4.3%), Germany (4.3%/
3.8%), others (30.4%/ 41.3%)

• Asian Development Fund (Cumulative Contribution)


– Japan (38.2%), United States (13.7%), Australia (8.0%), Canada
(6.0%), Germany (5.7%), United Kingdom (5.0%), France (4.1%),
others (19.2%)

• International Staff (1,103) (end of 2016)


– Japan (151), United States (144), India (80), Australia (66), PRC (57),
Korea (55), Canada (45), United Kingdom (49), Philippines (43),
Germany (39), Indonesia (32), Pakistan (30), France (37), others
(275)
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ADB Operations
• ADB provides loans, grants and technical assistance to developing
member countries in Asia and the Pacific.
• Loans are financed from ordinary capital resources.
– Regular OCR loans are provided to middle-income countries (per capita
income ≤ $7,025) at quasi market rate.
– Concessional OCR loans are provided to low income countries (per capita
income ≤ $1,185) at concessional terms (long maturities, low interest rate
including grants)
• ADF grants are offered to countries with limited debt repayment capacity
e.g. Afghanistan, Lao PDR
• Technical assistance includes capacity building, project preparation, and
research for developing members.

2016 Approvals * Loan Outstanding Equity **


Regular OCR $14.39 billion $ 67.6 billion $ 17.2 billion
Concessional OCR $ 2.56 billion $ 27.3 billion $ 30.9 billion
ADF Grants $ 0.52 billion
Technical Assistance $ 0.16 billion
* Excluding co-financing.
** Including Paid-in capital ($6.4 billion) and ordinary reserves (accumulated retained earnings: $10.8 billion).

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Annual Approvals of Loans and Grants
Ordinary Capital Resources (OCR) and Asian Development Fund Operations (ADF)
($ billion)

20.0
17.5
18.0 16.3
15.8
16.0 14.2
13.7 13.9 13.1 13.5
14.0
12.0 11.1 11.3
10.0
8.1
8.0 6.3
6.0
4.0
2.0
0.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Note: Figures reported in gross approval basis include loans, grants, equity investments, and guarantees.

11
ADB Operations
Ordinary Capital Resources (OCR) and Asian Development Fund Operations (ADF)
Approvals ($17.5 billion in 2016)

By Country By Sector

Water
9% (11%)
Public
Others Sector
India Management
26% (31%)
18% (16%) 11% (10%)
Finance
12% (16%) Agriculture
7% (5%)

PRC Education
12% (13%) 4% (4%)
Viet Nam Transport Health
4% (6%) 23% (17%) Industry and 2% (2%)
Trade
Philippines ICT
Azerbaijan 5% (0.5%)
5% (5%) 1% (1%)
10% (2%)
Bangladesh
6% (7%) Energy
Pakistan Indonesia 26% (33%)
9% (11%) 10% (8%)

Bracketed numbers are from 2015.

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ADB Operational Activities
- Approvals ($ million) -
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Loans and Grants*

Sovereign 9,760 9,421 14,024 11,809 11,752 11,300 12,611 11,610 13,655 14,960
Non-
sovereign 1,321 1,913 1,735 1,846 2,106 1,841 1,602 1,919 2,626 2,502
Subtotal 11,081 11,335 15,758 13,655 13,858 13,141 14,213 13,529 16,280 17,462

Technical
Assistance 154 190 203 175 148 151 156 159 141 169

Cofinancing 759 1,678 4,978 5,462 7,695 8,272 6,648 9,222 10,735 14,061

Total
Operations 11,993 13,203 20,939 19,293 21,700 21,564 21,017 22,909 27,157 31,692

* Figures reported in gross approval basis include loans, grants, equity investments, and guarantees.
Numbers may not sum precisely due to rounding
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ADB Operational Activities
- OCR and ADF Disbursements ($ million) -
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016**
Loans and Grants*

Sovereign 6,423 8,098 9,997 7,201 7,516 8,080 7,779 8,962 10,773 10,737
Non-
sovereign 606 725 507 865 792 615 924 1,229 1,567 1,743

Total 7,030 8,823 10,503 8,066 8,309 8,695 8,703 10,191 12,340 12,480

*Figures include loans, ADF grants, guarantees, and equity investments, but do not include technical assistance,
other special funds and cofinancing. Numbers may not sum precisely due to rounding.
Source: Controller’s Department, ADB.

.
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Organization Chart of ADB (as of June 2017) ADB Institute

Board of Office of the Public-


Private Partnership

Independent
Governors Office of the Ombudsperson
Evaluation
Department Office of the Auditor
Board of General

Office of the Directors(1) Office of Anticorruption


Compliance & Integrity
Review Panel Strategy, Policy and
Review Department
President -European Representative Ofc.
-Japanese Representative Ofc.
-North American Representative Ofc.
Managing Director
General Office of the Special
Project Facilitator

Vice President Vice President Vice President Vice President Vice President Vice President
(Operations 1) (Operations 2) (Knowledge Mgmt. & (Finance & Risk (Administration & (Private Sector &
Sustainable Dev’t) Management) Corporate Mgmt.) Cofinancing Ops.)

South Asia East Asia Sustainable Dev’t. & Controller’s Operations Services & Private Sector
Department (2) Department (2) Climate Change Dept.
Department Financial Mgmt. Dept. Operations Department

Economics Research & Budget, Personnel &


Central & West Pacific Regional Cooperation Treasury Mgmt. Systems Dept. Office of Cofinancing
Asia Department(2) Department (2) Dept.
Department Operations
Office of Administrative
Department of External
Relations
Services
Southeast Asia Office of Risk
Office of the
Department (2) Management Secretary
(1) Board of Directors currently consists of 12 Directors from Australia, Canada, China, Office of the
Germany, India, Indonesia, Italy, Japan, Korea, Pakistan, Thailand and the US, General Counsel
(2) Under regional departments, 29 local offices are located in 28 countries (Pacific Office of the Information &
Liaison Office located in Sydney is in charge of Pacific countries). 15 Systems Technology
Sector and Thematic Groups

Sector Groups Thematic Groups


• Education • Climate Change and
• Energy Disaster Risk Management
• Finance Sector • Environment
Development • Gender Equity
• Health • Governance
• Transport • Public-Private Partnership
• Urban • Regional Cooperation and
• Water Integration
• Rural Development and
Food Security (Agriculture)
• Social Development

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Remaining and New Challenges
in Asia and the Pacific

• Still 330 million people live in absolute poverty on less than


$1.90 a day
• Large infrastructure gaps
• Implementing the Sustainable Development Goals adopted
at the United Nations
• Implementing the climate change actions agreed at COP21
• Promoting private sector
• Enhancing gender equality
• Urbanization
• Aging
• Widening inequalities

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Poverty in ADB Developing Member Countries
$1.9/day (2011 PPPs) $3.1/day (2011 PPPs)
No. of Poverty Share of No. of Poverty Share of
Population Poor Incidence World Poor Incidence World
(million) (million) (%) Poor (%) (million) (%) Poor (%)
3,138
1,143 36.4 67.5 2,101 67.0 71.1
1999 (52%)*
3,381
812 24.0 61.2 1,788 52.9 67.8
2005 (52%)*
3,604
467 13.0 49.3 1,359 37.7 62.0
2011 (51%)
3,641
435 12.0 49.4 1,327 36.4 63.4
2012 (51%)*
3,678
330 9.0 43.0 1,173 31.9 60.7
2013 (51%)*
Note: *Ratio to the world population (6,049 million in 1999; 6,520 million in 2005; 7,013 million in 2011; 7,098
million in 2012; 7,182 in 2013).
Source: ADB estimates based on World Bank’s PovcalNet data for 34 DMCs (downloaded October 4, 2016).

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Infrastructure investment needs, 2016–2030
($ billion in 2015 prices, annual average)

Baseline Climate adjusted


% of % of
Total Total
GDP GDP
Central Asia 33 6.8 38 7.8
East Asia 919 4.5 1,071 5.2
South Asia 365 7.6 423 8.8
Southeast Asia 184 5.0 210 5.7
The Pacific 2.8 8.2 3.1 9.1
Asia and the Pacific 1,503 5.1 1,744 5.9
Source: Meeting Asia’s Infrastructure Needs (February 2017), ADB

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Infrastructure investment needs by sector,
2016–2030 ($ billion in 2015 prices, annual average)

% share Adaptation Mitigation


$ billion
to total ($ billion) ($ billion)

Power 982 56.3 3 200

Transport 557 31.9 37 —

Telecommunications 152 8.7 — —

Water and Sanitation 23 3.1 1 —

Total 1,744 100.0 41 200

Note: Based on climate-adjusted estimates.


Source: Meeting Asia’s Infrastructure Needs (February 2017), ADB
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Bridging the gap
Annual average infrastructure investment by financing source
excluding PRC*, 2016–2020 ($ billion in 2015 prices)
600
$187 $503
(3% of GDP) (8.2% of GDP)
500
Private
400 $249
$121
(2% of GDP)
300
$195
(3.2% of GDP)
200 Private
$62.5 Public
$254
100
Public
$132.6
0
Current Investment Additional Public Additional Private Investment Needs

* 25 countries minus the PRC


Note: GDP refers to projected annual GDP in 2016-2020. Numbers may not add up to total due to rounding.
Source: Meeting Asia’s Infrastructure Needs (February 2017), ADB

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Role for MDBs

• MDB infrastructure financing in Asia is 2.5% of


current investment
– Without PRC and India: MDB share > 10%
• MDB finance for infrastructure will rise
• For ADB
– Scales up annual loan and grant approvals from $17.5
billion in 2016 to more than $20 billion by 2020
– A growing share for the private sector
– Blends finance with expertise and knowledge, supports
policy reform, and promotes regional cooperation

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Key messages:
Attracting PPPs and strengthening capital markets
• Strengthen regulatory and institutional framework to
generate a pipeline of bankable projects for PPP

• Enact PPP laws, streamline procurement and bidding


processes, and establish independent PPP units to attract
private sector financing

• Deepen capital markets to attract long-term institutional


investors

• Improve government coordination and transparency, and


enhance capacity for project planning, design, and
implementation

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ADB TO DOUBLE ANNUAL CLIMATE FINANCING
TO $6 BILLION FOR ASIA-PACIFIC BY 2020
(announced on 25 September 2015)

• Doubling ADB’s annual climate financing to $6 billion by 2020,


from the current $3 billion.
– $4 billion for mitigation through scaling up support for renewable energy,
energy efficiency, sustainable transport, and building smart cities.
– $2 billion for adaptation through more resilient infrastructure, climate-
smart agriculture, and better preparation for climate-related disasters.
• Continuing to explore cofinancing with Green Climate Fund and
other partners. Mobilizing greater private resources. Issuing
more green bonds.
• Adjust its procurement systems in order to facilitate the
integration of cleaner and more advanced technology into its
projects
• Strengthen partnerships with centers of excellence to provide
cutting-edge knowledge and expertise
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Reforming ADB
• Enhancing lending capacity by combining Asian Development
Fund (ADF)’s equity and lending operations to the Ordinary
Capital Resources (OCR) balance sheet.
• Streamlining procurement procedures.
• More authorities delegated to Resident Missions.
• The office of Public-Private Partnership established.
• 7 Sector Groups (Transport, Energy, Health, Education etc.)
and 8 Thematic Groups (Gender, Governance, Environment
etc.) reconstituted with full time secretariats.
• Talent management initiative to enhance staff performance
and workforce planning to allocate staff resources more
efficiently.
• Strengthening private sector operations

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“Asian Century” Scenario
(global GDP composition)
<Source: “Asia 2050”, which is a study in 2011 commissioned by ADB>

Present(2016) “Asian Century” Scenario(2050)

Middle East & Sub-Saharan Sub-Saharan


North Africa Africa Rest of World Rest of World
Middle East & Africa
4% 2% 2% 2%
North Africa 2%
Latin America 3%
& Caribbean Latin America
7% & Caribbean
Asia 10%
32%

North America
North America 13%
27% Asia
52%

Europe
Europe 18%
26%

Asia’s GDP: $24 trillion (market FX rate) Asia’s GDP: $174 trillion (market FX rate)
Asia’s per capita GDP: $12,000 (PPP) Asia’s per capita GDP: $40,800 (PPP)
Population (billion) and Share (%)
2016 2050
Asia 4.12 (55%) 4.76 (52%)
World 7.44 (100%) 9.15 (100%)
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Asian Share of World GDP
70%

60%

50%

40%

30%

20%

10%

0%
1700 1820 1870 1913 1950 1970 1980 1995 2010 2020 2030 2040 2050
Source: Asia 2050: Realizing the Asian Century

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Eight Conditions for Economic Development
- Op-ed by President Nakao, Nikkei Asian Review (Feb 5, 2015) -

1. Infrastructure investment
2. Investment in health and education
3. Macroeconomic stability
4. Open trade and investment regimes: including streamlining
regulatory framework and reforming sate-owned enterprises
5. Public governance: anti-corruption, efficiency of delivering
services and quality of regulations
6. Inclusiveness and sustainability: sharing development fruits,
gender equality, environment, and climate change
7. Vision for the future
8. Political stability, security, and good relations with
neighboring countries
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