ASIAN DEVELOPMENT BANK - Annual Report 2014

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Improving lives
throughout Asia
and the Pacific
ANNUAL
REPORT
ASIAN DEVELOPMENT BANK
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3 PRESIDENT’S MESSAGE
4 BOARD OF DIRECTORS
6 FINANCIAL HIGHLIGHTS

CHAPTER 1

8 Responding to the Needs of Asia and the Pacific

CHAPTER 2

16 Central and West Asia
20 East Asia
24
28 South Asia
32 Southeast Asia

CHAPTER 3

36 Developing the Private Sector

CHAPTER 4

42 Delivering an Effective Organization

USB CONTENTS

ANNUAL REPORT 2014

FINANCIAL REPORT

OPERATIONAL DATA

ORGANIZATIONAL INFORMATION ADB MEMBER FACT SHEETS

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$0.20 billion PACIFIC HEALTH $0.03 billion INDUSTRY & TRADE $0.48 billion INFORMATION & COMMUNICATION TECHNOLOGY $1.79 million MULTISECTOR $0.79 billion
$2.41 billion
including billion PUBLIC SECTOR MANAGEMENT
8 THEAST ASIA
EAST ASIA $7.1 SOU TRANSPORT $4.36 billion
$3.00 billion FINANCE $3.50 billion
ENERGY
$6.65 billion
& SERVICES $2.29 billion
$6.75 billion SOUTH ASIA WATER & OTHER
$5.21 billion
URBAN INFRASTRUCTURE
In 2014, our assistance totaled $22.93 BILLION $13.69 billion financed by ADB and $9.24 billion in cofinancing REGIONS SECTORS EDUCATION $0.98 billion AGRICULTURE, $1.45 billion
ADB AT WORK CENTRAL AND WEST ASIA $0.58 billion REGIONAL NATURAL RESOURCES & RURAL DEVELOPMENT
Founded 1966 Total employees
support for countries
Strengthening middle-income
2,997
Field offices
2014 Promoting innovation and resilience 32
INEQUALITY UP The gap between rich and poor is growing Headquarters Manila, Philippines
Nonregional members
EMERGING ISSUES AS NATIONS DEVELOP Aging populationsLack of good jobsEnvironmental degradationPersistent poverty
challenges of a transforming region through: 19
Increased
ADB’s Midterm Review of Strategy 2020 sharpens our operational focus to better address the development emphasis on inclusiveness
Regional members
48
Members
are still ges to tackle —traditional o transform to hallenges with President Takehiko Nakao 67
d emerging ones. solutions.
There must als hese c
ASIA AND FAST SO IS ADB any challen m our region in nes an o ADB Toni Hipolitomeet t reforms and innovative
THE PACIFIC IS
CHANGING
AND Regional integration
growth
2008 sustainable
Environmentally
develop through:
is an international development finance institution. We
POVERTY DOWN More people have escaped poverty in the past 20 years than ever before WHO WE ARE ADB provide loans, grants, and expertise to our developing member countries to help them alleviate poverty and create a world in which everyone can share in the benefits of growth.
commits us to help the region and its people
ADB’s long-term strategic framework Strategy 2020 Inclusive economic growth
REGIONAL FUNDING GAPS TO 2020 $8 trillion for infrastructure $240 billion to neutralize climate change impact
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ANNUAL
REPORT
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ASIAN DEVELOPMENT BANK

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MTR ACTION PLAN:
ADB will expand
support for the
environment and
adaption to climate
change.
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ADB ANNUAL REPORT | 2014

President’s Message

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Asia and the Pacifi c has undergone profound change since the turn of the millennium. Only 15 years ago, poverty was a blight on our region. Today, we have achieved the fi rst of the Millennium Development Goals—to halve extreme poverty— ahead of the 2015 deadline. But statistics don’t always tell the whole story. As I visit projects around the region and meet with our development partners, I see too many people living in hardship. They may now earn more than $1.25 a day—the offi cial measure of extreme poverty, which includes about 700 million people—but it still isn’t enough to provide adequate shelter, nutritious food, or a safe environment for their children.

When defi ning extreme poverty, we must take into account the impact on Asia’s poor of rising food prices and more frequent natural disasters. Doing so will raise the poverty threshold to $1.51-a-day and mean that almost 1.8 billion people are identifi ed as poor. Poverty on this scale is unacceptable. Helping those who have fallen behind, or have never caught up, must remain the priority.

The Asian Development Bank (ADB) has examined its own priorities. In 2014, some 6 years after we introduced our longterm strategic agenda, Strategy 2020, we again took stock to ensure we remained relevant and responsive to the evolving needs of our member countries. The Midterm Review (MTR) of Strategy 2020 called on ADB to sharpen and rebalance its operational focus. In response, the MTR Action Plan, approved in July, contains more than 190 initiatives that will

make ADB more effi cient and eff ective. Helping the region address its enormous infrastructure needs will remain our focus, but we will channel more resources into areas where they’re needed most: private sector development, climate change, disaster risk prevention and management, and social protection. We will also double our investments in health and education. Inclusiveness, innovation, and a commitment to share our development knowledge and expertise will inform everything we do.

I’m pleased to share these initiatives in this report. In September, for example, we established a public–private partnership offi ce to provide governments with advice on how to engage private sector fi nancing and expertise for infrastructure projects (see page 37). We’ve also streamlined our procurement process to minimize project delays (page 44). An initiative to combine our concessional lending operations with our ordinary capital resources balance sheet will signifi cantly enhance ADB’s lending capacity (page 14).

In 2014, ADB approved $22.93 billion in development assistance, including $13.69 billion from ADB and special funds, and a record $9.24 billion in cofi nancing. We also disbursed over $10 billion for the fi rst time in 5 years. These numbers emphasize ADB’s push for improved project implementation and for greater private sector participation and cofi nancing schemes to help fund the estimated $8 trillion required to close the region’s infrastructure gap over the next decade.

My resolve is that ADB remains proactive and responsive, striving for even greater achievements in poverty reduction as we approach 2020.

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Takehiko Nakao President and Chairman Board of Directors

Management Team

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Left to right: Vice-Presidents Bindu N. Lohani, Lakshmi Venkatachalam, Stephen P. Groff , Thierry de Longuemar, Bruce L. Davis, Wencai Zhang; Managing Director General Juan Miranda; The Secretary Woo Chong Um

PRESIDENT’S MESSAGE

Board of Directors

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Front row, from left : Directors Maurizio Ghirga, Umesh Kumar, Maliami bin Hamad, Kazuhiko Koguchi, Robert M. Orr; President and Chairman of the Board of Directors Takehiko Nakao; Directors Yeo Kwon Yoon, Zhongjing Wang, Anthony Baker, Muhammad Sami Saeed, David Murchison. Back row : Alternate Directors René Legrand; Iqbal Mahmood; Khin Khin Lwin; Hideo Fukushima; Michael Strauss; M P D U K Mapa Pathirana; Wenxing Pan; Richard Sisson; Dominic Walton-France; Gaudencio Hernandez, Jr.; Armand Evers.

Not in photo : Directors Bhimantara Widyajala, Richard Edwards; Alternate Director Mario Sander.

he Board of Directors is responsible for the overall direction of ADB, including the approval of policies, loans, grants, equity investments, and guarantees. It also plays a vital role in T ensuring that ADB shareholder guidance is implemented.

The Board approves work programs and budget frameworks, and the salaries and benefi ts of staff . It reviews and endorses ADB’s annual fi nancial statements, the budget, and the allocation of net income for approval by the Board of Governors at each annual meeting. The Board of Directors participates in various events during ADB’s annual meeting, which, in 2014, was hosted by the city of Astana, Kazakhstan.

The Board meets as often as required to manage the business of ADB. In 2014, it held 44 formal meetings and 25 informal meetings, seminars, and briefi ngs. The Board

approved $13.69 billion in loans, grants, equity investments, guarantees, and technical assistance.

COMMITTEE WORK

The Board’s work is supported by six committees: Audit, Budget Review, Compliance Review, Development Eff ectiveness, Ethics, and Human Resources. These committees meet several times throughout the year, providing guidance to Management and the Board.

The Budget Review Committee faced new challenges in 2014. ADB introduced a more integrated approach for reviewing ADB’s lending capacity, operations, budget, and salaries and benefi ts. The approach included a new, iterative process for fi nancial operations and budget planning, and the Budget Review Committee led the Board’s involvement in this process. The committee also considered the resources needed to implement the Midterm Review (MTR) of Strategy 2020 Action Plan and effi ciency

ADB ANNUAL REPORT | 2014

measures undertaken by operational and administrative staff . These issues were also discussed at the annual Board–Management Retreat.

On the advice of the Budget Review Committee, the Board endorsed ADB’s Work Program and Budget Framework, 2015–2017. The Board also approved the Asian Development Bank Institute ThreeYear Rolling Work Program, 2015–2017 and Budget for 2015.

The Development Eff ectiveness Committee assists the Board to ensure that the programs and activities of ADB are eff ective. In 2014, the committee considered a number of evaluations prepared by ADB’s Independent Evaluation Department. These included ADB support for inclusive growth, climate change, enhancing governance in public sector operations, the role of technical assistance in ADB operations, and the performance of ADB’s Trade Finance Program. The committee also considered the fi rst phase of an operational review of ADB’s safeguards policy, and the fi rst assessment of the performance of ADB assistance to Tajikistan between 1998 and 2013.

CHANGING THE DYNAMICS

During the year, the Board considered two important issues aff ecting the strategic direction of ADB: the MTR of Strategy 2020, and a proposal to combine the lending operations of the Asian Development Fund (ADF)—ADB’s concessional fi nancing— with the institution’s ordinary capital resources balance sheet.

The Board was deeply engaged in the process for the MTR of Strategy 2020. Board members undertook consultations with their respective constituencies and helped to convey the priorities of member countries to ADB. The Board held formal and informal discussions with ADB on aspects of the review.

The Board discussed the issue of expanding ADB’s capital base, and considered a number of measures aimed at enhancing ADB’s overall lending capacity. The Board provided extensive advice on the proposal to merge ADF lending with ADB’s ordinary capital resources, which is expected to enhance the fi nancial capacity of ADB

through more effi cient and eff ective management of its capital resources. This reform would strengthen ADB support to vulnerable countries—mostly countries accessing the ADF—to address persistent poverty and economic fragility. Improved fi nancial capacity will also help confront environmental challenges, infrastructure gaps, and confl ict-aff ected situations. It will provide increased support for private sector operations.

ENGAGING OUR BORROWERS

The Board engages with developing member countries (DMCs) in several ways. It receives visiting delegations at ADB headquarters in Manila, and it considers and approves country partnership strategies, which outline how ADB will assist each DMC to achieve the objectives of its development plan.

In 2014, the Board endorsed country partnership strategies for Azerbaijan, Bhutan, Cambodia, and Fiji.

The Board also undertakes missions to DMCs in the form of Board Group Visits and consultations. Board Group Visits involve a number of Board members visiting particular countries to observe ADB operations, and to discuss development priorities and challenges with government offi cials, other development partners, business and community groups, and people who benefi t from projects funded by ADB. Consultations involve Board members visiting the countries they represent for discussions with their governments.

Board Group Visits were conducted to Bhutan and Nepal in February and March 2014, to the Federated States of Micronesia and the Marshall Islands in June, to Bangladesh in September, and to Cambodia and Viet Nam in October.

Board members also visited various municipalities in Leyte province and other areas of the Philippines aff ected by Typhoon Yolanda (internationally called Haiyan). They met with recipients of ADB assistance and provincial and local offi cials, observed ongoing reconstruction activities, and visited the ADB offi ce in Tacloban City.

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The Board group visited Bhutan in late February 2014. The group toured the ADB-funded Urban Infrastructure Development Project in Thimphu, and the Dagachhu Hydropower Project in Dagana (pictured). It also received an audience with H.M. Jigme Khesar Namgyel Wangchuck, the King of Bhutan, and met with senior government offi cials, including the Prime Minister, H.E. Tshering Tobgay.

BOARD OF DIRECTORS

Financial Hi hli hts g g

FINANCIAL OPERATIONS

APPROVALS BY FINANCING SOURCE, 2014

Ordinary Capital Resources $10.438 B Special Funds Resources $3.250 B Direct Value-Added Cofi nancing $9.237 B

In 2014, ADB’s operations totaled $22.93 billion, of which $13.69 billion was fi nanced by ADB (ordinary capital resources [OCR] and Special Funds Resources) and $9.24 billion by cofi nancing partners. Sovereign operations, including offi cial and technical assistance cofi nancing, totaled $15.99 billion. Nonsovereign operations, including cofi nancing, totaled $6.94 billion.

Disbursements totaled $10.01 billion, an increase of $1.47 billion (17%) from 2013.

Sovereign and Nonsovereign Approvals, 2010–2014

($ million)	2010a	2011a	2012a	2013a 2014
Sovereign	14,463	14,600	13,429	16,450 15,990
Loans Equity Investments Grantsb Technical Assistance Direct Value-Added Cof nancing	10,410 - 952 171 2,930	10,580 150 614 137 3,119	10,457 - 670 146 2,155	11,740 11,205 - - 849 405 149 148 3,712 4,232
Of cial Cof nancingc	2,782	2,909	2,009	3,435 4,090
Technical Assistance Cof nancingd	148	210	146	277 142
Nonsovereign	3,474	5,774	7,496	4,541 6,935
Loans	815	1,250	916	1,425 1,714
Equity Investments	235	44	131	142 185
Guarantees	190	267	128	35 20
Supply Chain Financee	-	-	200	- -
Technical Assistance	2	8	5	6 11
Direct Value-Added Cof nancing	2,232	4,205	6,117	2,933 5,006
Of cial Cof nancingc	2	-	19	135 194
Commercial Cof nancingf	2,229	4,204	6,097	2,797 4,809
B Loans	200	200	200g	220g 863g
Parallel Loans	479	1,623	3,341	109 1,503
Parallel Equity	-	-	-	- 340
Trade Finance Program	1,549	2,381	2,344	2,279 2,039
Cof nancing
Guarantee Cof nancingh	-	-	87	75 8
Risk Transferi	-	-	126	113 56
Technical Assistance Cof nancingd	1	1	0	1 2
TOTAL	17,936	20,374	20,925	20,991 22,925

= nil, 0 = less than $500,000.

Note: Totals may not add up because of rounding.

a Excludes terminated loans, grants, equities, guarantees, and technical assistance.
b Refer to investment grants.
c In 2014, the diff erent sources of cofi nancing were clarifi ed by including a new category “other concessional cofi nancing” comprising concessional fi nancing from the private sector and public sources other than bilaterals and multilaterals.
d In 2014, Technical Assistance Cofi nancing includes other concessional cofi nancing.
e Supply Chain Finance is a program that provides guarantees and loans (both without government guarantee) through partner fi nancial institutions to support payments to suppliers and distributors of goods in ADB’s developing member countries.
f In 2011, the defi nition of direct value-added (DVA) commercial cofi nancing was clarifi ed by providing detailed criteria for qualifi cation of DVA cofi nancing. The fi gures for 2010-2014 refl ect the new defi nition.
g B Loans includes US dollar and local currency complementary loans.
h For loans provided by third parties and not fully guaranteed by ADB, such as partial credit guarantees or partial risk guarantees, the portion of loans that is not guaranteed by ADB is considered as net DVA cofi nancing and reported in the year of signing the guarantee agreements.
i This refers to the amount of ordinary capital resources allocation relief as a result of risk transfer arrangements, whereby a third party assumes risk under a guarantee or loan provided by ADB. The amount of allocation relief depends on the risk rating and nature of the counterparty.

ADB ANNUAL REPORT | 2014

AVAILABLE RESOURCES

Authorized and subscribed capital stock amounted to $154.09 billion and $153.06 billion, respectively. The decrease in the authorized capital and subscribed capital from 2013 to 2014 was mainly due to the strengthening of the US dollar against the special drawing rights (SDR). Other resources in OCR in the form of revenue and net realized gains amounted to $1.26 billion, of which $605.34 million was generated from the loan portfolio, $351.67 million from the investment portfolio, and $303.94 million from equity investment and other sources. Resources in the form of contributions and revenue in ADB’s Special Funds totaled about $480.67 million. These mainly included the Asian Development Fund of $427.70 million, the Technical Assistance Special Fund of $34.62 million, the Asian Development Bank Institute of $12.65 million, the Regional Cooperation and Integration Fund of $3.66 million, and the Financial Sector Development Partnership Special Fund of $1.88 million.

In 2014, ADB raised $14.25 billion in medium- and long-term funds through public bond issues and private placements in 11 currencies. Public off erings amounted to $12.15 billion, which include two global benchmark bond issues denominated in euro and US dollars. The remaining $2.10 billion was raised through private placements.

Among the highlights of ADB’s capital markets activities in 2014 were the issuance of its inaugural euro benchmark bonds totaling €1.5 billion ($2.1 billion equivalent) in April 2014, the fi rst off shore Indian rupee-linked bonds totaling Rs3.0 billion ($49 million equivalent) in August, a return to the Canadian dollar Maple market with C$400 million ($364 million equivalent) in September, and a second Dimsum bond amounting to CNY1.0 billion ($164 million equivalent) in November. ADB continued to issue thematic bonds, raising $284 million equivalent from its sale of water bonds.

ADB also raised $2.42 billion of short-term funds under its Euro-Commercial Paper Program. At the end of 2014, only $475 million remained outstanding.

Resources as of end of period

Resources as of end of period
($ million)	2010	2011	2012	2013 2014
Ordinary Capital Resources
Authorized Capital	163,843	163,336	163,512	163,840 154,092
Subscribed Capital	143,950	162,487	163,129	162,809 153,056
Paid-in Capital and Reserves	15,878	16,534	16,420	17,138 16,938
Outstanding Debt	51,822	58,257	64,762a	61,615 62,688
Asian Development Fund	32,651	33,055	33,346	33,359 31,478

TOTAL DISBURSEMENTS, 2010–2014	TOTAL DISBURSEMENTS, 2010–2014
($ million)
2010	7,976
2011	8,266
2012	8,592
2013	8,542
2014	10,009

BORROWINGS (ORDINARY CAPITAL	BORROWINGS (ORDINARY CAPITAL
RESOURCES), 2010–2014
($ million)
2010	14,940
2011	14,446
2012	15,067
2013 12,725
2014	14,724

OPERATING	INCOME (ORDINARY
CAPITAL RESOURCES), 2010–2014
($ million)
2010	548
2011	587
2012	465
2013	469
2014	571

a From 2012 onward, amount includes accrued interest and commission.

FINANCIAL HIGHLIGHTS

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MTR ACTION PLAN:
ADB will strengthen
productivity and
competitiveness by
improving regional
connections.
Responding to the Needs
of Asia and the Pacific
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ADB ANNUAL REPORT | 2014

he Asia and Pacifi c region has a remarkable record of economic growth, delivering average annual expansion of 7.6% from 2004 to 2014. Though the pace of growth eased in 2014, T it still averaged a robust 6.3% across the 45 economies that make up the region. The next few years are also expected to deliver growth rates above 6%. The impact of such growth on the region has been profound. Between 1990 and 2011, approximately 950 million people were lifted out of extreme poverty, with the rate—currently calculated by the number of people surviving on less than $1.25 a day—falling from 55.3% to 15.3%.

But these headline fi gures mask a range of development issues that continue to challenge the region’s policy makers.

Inequality, the gap between rich and poor, continues to widen as the benefi ts of economic growth are unevenly distributed.

The region is exposed to greater environmental risks arising from climate change, and it is vulnerable to economic shocks and natural hazards. The gap between infrastructure needs and available fi nancing also remains a problem.

Hundreds of millions of people remain in poverty.

Though $1.25 a day remains the offi cial measure of extreme poverty, increasing evidence suggests that this indicator may be set too low. When the poverty line is adjusted to refl ect updated data and consumption patterns from the region—and when food insecurity and vulnerability to economic shocks are considered—about 50% of the region’s population in 2010 could have been classifi ed as living in extreme poverty.

These development challenges require an ambitious, strategic focus to spur high economic growth, which is inclusive and environmentally sustainable, across the region.

MORE THAN

68.75 MILLION TONS

of cross-border cargo facilitated per year between 2011–2014

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Turning the Soil to Turn Lives Around

Elham Musayev (pictured), 40, waited for years to turn the farming skills he had learned at his father’s side into a small business. All he needed was a mini-tractor to boost productivity—and the money to buy it with.

Elham now grows cabbage, maize, and beetroot on land about 33 times the size of his old quarter-hectare plot, and provides 40 people with jobs for 4 months every year.

His success—and that of thousands of other small entrepreneurs in Azerbaijan in recent years—began with credit from AccessBank. Elham’s investments were made possible by an ADB loan to AccessBank, which helped bring fi nance to Elham, and others generally excluded from state-owned bank credit services.

The project helped Azerbaijan reduce poverty and make growth more inclusive by expanding banking services to the country’s comparatively poor, underserved rural areas. It also provided seed capital for the many micro, small, and medium-sized enterprises, like Elham’s, that provide jobs, income, and services for the poor and the vulnerable.

The scheme helped spur private sector development in Azerbaijan. Private banks have grown their share in the fi nance sector’s total assets, loans, and deposits every year since ADB’s intervention. After a net loss in 2006, AccessBank has increased profi ts steadily, improved its standards and operations, raised capital by issuing bonds,

ADB took special care to ensure that AccessBank fi nanced projects and businesses that were environmentally and socially sound—a process that involved knowledge sharing between the two institutions.

RESPONDING TO THE NEEDS OF ASIA AND THE PACIFIC

STRATEGIC FOCUS: RESPONSIVENESS, RELEVANCE, EFFECTIVENESS

To address evolving development issues and ensure relevant responses, ADB conducted a Midterm Review (MTR) of its long-term strategic framework, Strategy 2020.

The MTR of Strategy 2020, approved by the ADB Board of Directors in April 2014, assessed the existing and emerging challenges for developing member countries (DMCs), and mapped out ways in which ADB can better serve all its member countries.

In July 2014, ADB adopted the MTR of Strategy 2020 Action Plan (MTR Action Plan). The plan consists of more than 190 initiatives that will enhance the responsiveness, relevance, and eff ectiveness of ADB operations. While infrastructure investment will remain the core operational focus, the MTR Action Plan also outlined measures to further promote inclusiveness, innovation, and the leveraging of knowledge.

In line with the MTR of Strategy 2020, ADB projects in 2014 supported sustained, inclusive economic growth in areas and regions where poverty levels are at their worst.

Toward 2020: ADB’s Ten-Point Action Plan

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Organizing to meet new challenges. Poverty reduction and inclusive economic growth. Expand
Strengthen staff skills, incentives, and Strengthen staff skills, incentives, and supEx p ort to achieve rapid and inclusive economic growth. and support to achieve rapid and inclusive economic
institutional arrangements. Become a more institutional arrangements. Become a Emphasize socigrowth. Emph a size sol prote c ial protection, financial inclusion, tion, financial inclusion, and inclusive
dynamic, agile, and innovative institution.more dynamic, agile, and innovative business. Provide additional resources for ow-income, fragile, and inclusive business. Provide additiona l resources for
institution. and/or conflict-low-income, fr a ffected developing member countries (DMCs).gile, and/or conflict-affected DMCs.
money in ADB. Delivering value for Increase 1010 0101 Increase support Environment and climate
efficiency, effectiveness, Increase efficiency, for the environment and for change. for the environment and for Increase support
effectiveness, and institutional and institutional adaptation to climate change.
econec o mies. Streamline and nomies. Streamline and Promote natural resource adaptation to climate change.
Promote natural resource
strengthen business procstrengthen busin ess es. 0202 management and integrated management and integrated
processes. Systematically Systematically apply results 0909 disaster risk management. disaster risk management.
apply results frameworks at frameworks at the corporate,
the corporate, country, and country, and project levels.
project levels. Expand support
Regional for cross-border
cooperation and infrastructure
integration. investments.
Expand support for
cross-border Strengthen
The MTR recommended The MTR recommended infrastructure countries’
resources and Explore ways to Financial that ADB sharpen and rebalance its operational focus. To ensure that ADB sharpen and rebalance its operational focus. To ensure 0303 investments. Strengthen productivity and competitiveness
partnerships. expand ADB’s 0808 that recommendations become that recommendations become countries’ through greater
Explore ways to capital base and reality, ADB developed the MTR of reality, ADB developed the MTR of productivity and regional
strengthen ADB’s expand ADB’s Strategy 2020 Action Plan. The plan Strategy 2020 Action Plan. The plan competitiveness connectivity.
strengthen ADB’s partnerships with capital base and partnerships with other multilateral and bilateral ground, build skills, and provide improve ADB operations on the is a forward-looking program to ground, build skills, and provide improve ADB operations on the is a forward-looking program to through greater regional connectivity.
other multilateral institutions, the better service to member countries. better service to member countries.
private sector, and and bilateral It will remain a “living” document, It will remain a “living” document,
institutions, the civil society. updated from time to time to updated from time to time to
and civil society. private sector, reflect changing business needs reflect changing business needs and implementation and implementation experiences. experiences. 0404 Infrastructure development. support for policy, Enhance support for policy, regulatory, and governance Enhance
“One ADB” approach for Knowledge solutions. together more closely. Adopt and implement Adopt and implement a all ADB departments to approach for all ADB departments to work between knowledge knowledge work and Promote synergies work together more synergies between closely. Promote a “One ADB” operations. 0707 0505 regulatory, and governance reforms. Strengthen public infrastructure management systems. More effectively leverage ADB resources by developing larger infrastructure projects. reforms. Strengthen public infrastructure management systems. More effectively leverage ADB resources by developing larger infrastructure projects. Promote
work and operations. Promote private sector private sector
Expand assistance for private sector 0606 participation. participation.
Private sector development and operations. development and operations to 50% Middle-income countries.
Expand assistance for private sector development of annual operations by 2020. Ensure continuing relevance and Ensure continuing relevance
and operations to 50% of annual operations by Develop more innovative financing responsiveness to the evolving and responsiveness to the
2020. Develop more innovative financing solutions solutions for projects. Encourage development needs of DMCs.evolving development needs
for projects. Encourage public–private partnerships.public–private partnerships. of developing member
countries (DMCs).
20082008 20142014 20202020
Strategy 2020 Strategy 2020 Midterm Review (MTR) of Midterm Review (MTR) of MTR puts ADB on track to achieve MTR puts ADB on track to achieve
introduced.introduced. Strategy 2020 conducted.Strategy 2020 conducted. its trategic goals by 2020.it s strategic goals by 2020.
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ADB ANNUAL REPORT | 2014

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MTR ACTION PLAN:
ADB will leverage
its resources by
developing larger
infrastructure
projects.
ADB mobilized around
$3.2 B
in climate funding in 2014
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RESPONDING TO THE NEEDS OF ASIA AND THE PACIFIC

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A Joint Eff ort to Tackle Disease
ADB plays an important role in supporting the regional eff orts
that help prevent communicable diseases from spreading across
borders. With ADB support, countries in the Greater Mekong
Subregion (GMS) have developed systems to detect and address
disease threats. This has helped avert the potential economic and
social devastation that would result from uncontained pandemics
such as avian infl uenza. The cooperation will also help the GMS
respond to new threats such as drug-resistant malaria, Ebola virus
disease, and other emerging diseases.
The Regional Malaria and Other Communicable Disease Threats
Trust Fund, managed by ADB, received over $35 million from
the governments of Australia, Canada, and the United Kingdom
to support critical regional and country-specifi c communicable
disease control in Cambodia, the Lao People’s Democratic
Republic, Myanmar, and Viet Nam. The fund will support the
second GMS regional health security project, which is currently
being prepared.
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UNIVERSAL ENERGY ACCESS GETS A BOOST

In June 2014, ADB was selected as the host for the Asia-Pacifi c Hub of the worldwide Sustainable Energy for All Initiative (SE4All). SE4All has goals of universal energy access, doubling the share of renewable energy in the energy mix and scaling sup energy effi ciency by 2030, which align with ADB’s vision for Asia

It intensifi ed eff orts to create jobs and expand services such as electricity, water supply and sanitation, education, and health.

To help alleviate the environmental stresses associated with rapid economic growth, ADB committed $12.55 billion to projects with a focus on renewable energy, energy effi ciency and conservation, sustainable transport, clean water, sanitation and waste management, and managing the eff ects of climate change.

ADB continues to promote regional cooperation and integration (RCI) as a means of accelerating growth and reducing poverty, investing $3.4 billion in projects, leveraging $1.2 billion in cofi nancing, and providing technical assistance of $115 million for RCI activities in 2014.

ADB has set a target that nonsovereign development and operations will constitute at least half of its annual operations by 2020. It is acting now to expand its nonsovereign operations and strengthen its support for public–private partnerships (PPPs). These PPPs are typically long-term contractual arrangements between governments and the private sector for fi nancing and delivering infrastructure services. ADB has been working to build the regulatory, institutional, fi nancial, and commercial frameworks

needed to support such partnerships. It is also streamlining nonsovereign loans for industries such as agribusiness, where projects can have a highly inclusive impact, and expanding operations in lower-income countries and frontier economies.

SECTOR HIGHLIGHTS: INVESTING FOR RESULTS

The MTR of Strategy 2020 reinforced ADB’s operational focus to respond to the dual challenges of energy security and climate change by investing in clean energy . In 2014, ADB surpassed—for the fourth year in a row—its annual target of investing $2 billion in energy effi ciency and renewable energy projects. Total clean energy investments for the year amounted to $2.4 billion, comprising investments in renewable energy, energy effi ciency, and switching to cleaner fuel. Total lending approved in the energy sector in 2014 amounted to $6.6 billion, including investments from ADB’s own resources ($2.8 billion) and cofi nancing ($3.8 billion).

ADB helps deliver sustainable transport infrastructure and services that contribute to low-carbon, safe, and aff ordable transport networks. In 2014, ADB’s transport portfolio accounted for about 28% of its total lending. This included $805 million for railway projects, the largest commitment in its

ADB ANNUAL REPORT | 2014

history. As Asia’s urban population continues to swell by 44 million a year, ADB estimates that 80% of new economic growth will be generated in urban areas. In response, ADB has more than tripled its lending to urban transport operations compared to the previous decade.

In 2014, ADB approved $1.15 billion for projects supporting urban development. These focused on developing inclusive, competitive, and environmentally sustainable cities that promote good governance. Investments include $140 million for the development of secondary cities in Viet Nam, such as Buon Ma Thuot, Ha Tinh, and Tam Ky. This program aims to build greener and more climate-resilient cities by delivering better solid waste management, wastewater and stormwater systems, and roads.

Almost 20 million people across Asia and the Pacifi c will benefi t from ADB’s total water lending of $2.88 billion in 2014, spread across the water and other infrastructure and services sector, and agriculture, natural resources and rural development sector. This investment makes good on ADB’s commitment to make water a core area of its operations, and exceeds the annual target of up to $2.5 billion. In 2011, ADB set a goal to increase the share of sanitation in total water lending from 14% to at least 25% by 2020. The fi gure for 2014 was already at 27.5%.

ADB continues to devote signifi cant resources to secondary education , technical and vocational education and training (TVET), and higher education. In 2014, ADB’s education investments, including cofi nancing and special funds, amounted to $976 million, of which 50% fi nanced TVET and skills development in six DMCs. Notably, Bangladesh, Cambodia, and Sri Lanka implemented programs to develop the skills demanded by key industries, with over 260,000 individuals trained in Bangladesh alone.

Finance sector operations in 2014 focused on fi nancial inclusion and infrastructure fi nance. ADB took measures to broaden fi nancial inclusion through microfi nance, improve fi nancial conditions for small and medium-sized enterprises (SMEs), and enhance capital markets and fi nancial stability. More profi table SMEs will enable inclusive economic growth, create resilient economies, and expand diversity in regional and international supply chains. In 2014, fi nance sector investment totaled $3.5 billion.

ADB has committed to double its annual lending in the health sector by 2020. It is focusing on increasing operations that support universal health coverage—the concept of making necessary health services aff ordable for all. While no new loans for health were approved in 2014, ADB continued to implement ongoing health projects in Bangladesh, Cambodia, the Lao People’s Democratic Republic, Mongolia, Myanmar, Pakistan, Papua New Guinea, the Philippines, and Viet Nam. Some of the benefi ts of these projects include improved quality and aff ordability of hospital services in

Mongolia, more health clinics and doctors for the people in 10 municipalities of Bangladesh, and pilot health insurance coverage for recipients of social assistance in Pakistan.

ADB is closing in on its commitment to invest $2 billion annually for agriculture and food security. In 2014, investment in the agriculture sector totaled $1.45 billion, including $8.56 million in technical assistance. The investments aim to stimulate food production and processing chains through fl ood control, water resource management, and agribusiness development. ADB’s commitment to inclusive agriculture helps meet demand for safe and nutritious food, while generating substantial business and employment opportunities in rural areas.

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YOUR SAY:

Because of the project we were able to improve the reliability of electricity to the national hospital. This had a direct impact on improving health care services.

Project engineer Tupai Mau Simanu on the benefi ts of an expanded and improved power supply in Samoa

THEMATIC HIGHLIGHTS: INCLUSION FOR ALL

ADB supports gender equality and women’s empowerment in its assistance across Asia and the Pacifi c. ADB is helping to develop public policies and investments to improve the prospects for women and girls in various sectors, including education, TVET, infrastructure, fi nance, and enterprise development. In 2014, 55% of ADB’s sovereign projects contained a strong focus on gender equality. Most notably, more than 90% of ADB-supported education and health projects had high levels of gender equality over the past 3 years. The percentages were also signifi cant in agriculture, water infrastructure, and urban infrastructure, with 80%–90% of projects demonstrating gender equality.

Gender-focused projects are making a diff erence on the ground. In Pakistan’s Sindh Province, a coastal community development project enabled 9,700 women in isolated rural areas to access skills training on livestock management, horticulture, and other vocational skills. More than 1500 women’s community groups were established, providing a forum for women to contribute to the decision-making process on important community issues like water supply and the building of other small scale infrastructure. The project also facilitated national identify card registration for over 6,000 women who gained legal identity for the fi rst time.

RESPONDING TO THE NEEDS OF ASIA AND THE PACIFIC

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In 2014, ADB provided
$976 M
to support education
in Asia and the Pacifi c
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In 2014, ADB approved four private sector projects incorporating measures for gender balance. These projects span education, agribusiness, housing, and fi nancial inclusion. This compares with one project approved in 2013.

fl ooding in Solomon Islands, and funding for a program to manage the risks of fl ood and riverbank erosion in Bangladesh. ADB also supported post-disaster recovery and reconstruction in Afghanistan, Cambodia, India, and Tonga.

ADB provided support for social protection in 2014. In the People’s Republic of China (PRC), where the size of the aging population is growing rapidly, ADB provided employment training to improve elderly care services in Yichang city in Hubei Province. The city is expected to become a model for elderly care in the PRC.

The MTR of Strategy 2020 reaffi rmed ADB’s commitment to help the region tackle climate change and other challenges to the environment . While continuing the vital work of mitigating climate change, ADB is increasing its emphasis on adaptation. Mitigation measures include renewable energy, energy effi ciency, railways, and urban mass transport. Adaptation involves incorporating climate resilience into development planning, and strengthening the capacity of DMCs to plan for and manage climate risks. ADB is providing access to global and regional sources of climate fi nance, mobilizing around $3.2 billion in climate funding in 2014—$2.58 billion from its own resources and $604 million from external resources.

ADB continues to emphasize the importance of disaster resilience , highlighting the need to integrate disaster risk management with climate change adaptation. Financing increased for disaster risk management, with 80 loans and grants integrating some aspect of disaster risk management approved. This included emergency assistance for severe

The MTR Action Plan calls for further resources to be directed toward improving governance and capacity development in operations and public sector management. ADB increased its focus on technological change in the public sector during 2014. It backed the adoption and implementation of e-solutions in countries such as Myanmar, where ADB is helping authorities to develop an e-governance master plan and benchmark local information and communication technology capacities. In 2014, ADB became a multilateral member of the Open Government Partnership, which supports country eff orts to advance open government and social accountability.

ADB stresses the need to develop knowledge solutions that help DMCs address their development challenges. It is exchanging knowledge with the PRC to provide input for the country’s forthcoming Five-Year Plan, and with Indonesia to develop knowledge solutions for energy security, food security, and skills development. More broadly, it is initiating country knowledge plans with all DMCs to strengthen the delivery of knowledge solutions. It is also developing a database of knowledge products and services to centralize all of its knowledge work.

LEVERAGING ADB RESOURCES: MORE DYNAMIC SOLUTIONS

Meeting the imposing fi nancing needs of its DMCs is increasingly challenging for ADB and its donors. in response,

ADB ANNUAL REPORT | 2014

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ADB has developed a proposal to broaden its capital base by absorbing the loan operations of the Asian Development Fund (ADF) into its ordinary capital resources (OCR) balance sheet.

The move is expected to almost triple ordinary capital resources equity, enabling ADB to strengthen its fi nancial position, expand its risk-bearing capacities, provide increased development assistance.

The proposed new structure would also help deliver increased support for private sector operations, especially in ADF countries. If approved by the Board of Governors, the proposal will be eff ective in January 2017.

In addition to increasing its own lending capacity, ADB continued to seek innovative ways of leveraging its resources to better address the region’s development needs. ADB has set a goal of exceeding its own fi nancing with cofi nancing by 2020, and it is on target to meet that goal. In 2014, ADB’s fi nancing of $13.69 billion leveraged $9.24 billion of cofi nancing. This included 52% of commercial cofi nancing and 48% offi cial and other concessional cofi nancing, in addition to the nonsovereign syndication operations.

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Managing ‘The Stuff of Life’
With water resources becoming increasingly stretched in
many parts of Asia and the Pacifi c, the Midterm Review of
used and managed. An irrigation project in Bangladesh
be contracted under a performance-based management
contract for the 5 years of the construction phase, leading
to the engagement of an irrigation management operator
for 15 years once construction is complete. At the farm
level, water-saving practices will include a network of
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highly effi cient distribution pipes stretching across about
card meters to improve payment and accounting, and the
piloting of solar pumps for about 60 hectares to explore
sustainable power options.
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ADB established new trust funds in cooperation with the governments of Australia, Japan, and the United Kingdom.

ADB is also continuing to develop new measures to encourage greater private investment in infrastructure, particularly in the renewable energy sector. These include increased use of credit enhancement facilities, larger focus on external resource mobilization through syndicated B loans and parallel loans (over $860 million was attracted through ADB’s B-loan syndication activities in 2014), and innovative use of concessional funding. Through these, ADB is strengthening its ties with the private sector as a source of external fi nancing to help achieve its expanding development objectives.

MORE THAN

1.66 MILLION TEACHERS

trained with quality or competency standards between 2011–2014

In 2014, ADB signed a cofi nancing arrangement with German development agency KfW and the International Fund for Agricultural Development, and extended an existing agreement with the Islamic Development Bank.

RESPONDING TO THE NEEDS OF ASIA AND THE PACIFIC

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Central and
West Asia
Afghanistan, Armenia, Azerbaijan, Georgia,
Kazakhstan, the Kyrgyz Republic, Pakistan,
Tajikistan, Turkmenistan, Uzbekistan
MTR ACTION PLAN:
ADB will provide more
resources to low-
income, fragile, and/or
confl ict-aff ected
member countries.
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ountries in Central and West Asia posted disparate economic results for 2014. While some maintained C high-growth momentum, others were aff ected by depressed markets in the Russian Federation and the subdued global outlook. Kazakhstan’s economic growth fell to its lowest rate since 2009. The devaluation of the Kazakhstan tenge in February 2014 aff ected services, and falling oil prices reduced industrial output. In Uzbekistan, large government investment programs kept growth stable.

Supported by public investments, the non-oil sector in Azerbaijan off set contraction in oil output and drove growth of the country’s economy, while Turkmenistan posted gross domestic product fi gures that were bolstered by new gas-fi eld facilities.

In the Kyrgyz Republic, growth slowed to 3.6% in 2014 as the economies of the Russian Federation and Kazakhstan weakened. Local currency depreciation of about 19% pushed infl ation to 7.5%. Remittances fell by 5% with deterioration in the economies of Kazakhstan and the Russian Federation —where most Kyrgyz migrants work—and their currencies’ depreciation. Gold production and exports dropped, as the quality of extracted ore declined, exacerbated by the lower gold prices.

Similarly, the Government of Tajikistan is bracing for severe impacts on its

MORE THAN

2.3 MILLION

hectares of land improved through irrigation, drainage, and/or fl ood management between 2011–2014

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ADB ANNUAL REPORT | 2014

economy, with remittances expected to be down signifi cantly in 2015. To create jobs for large numbers of migrant workers returning home, the government has requested budgetary support from development partners, including ADB.

In Georgia, growth picked up in 2014, driven by higher domestic demand, exports, and foreign direct investment. Armenia’s economic expansion slowed, mainly due to lower supply-side growth.

In Afghanistan, the withdrawal of international security forces, and the transition to full Afghan responsibility for security, put pressure on public spending.

The region, particularly its landlocked countries, remains constrained by high transport costs. Some countries are still experiencing increases in poverty rates above 30%, and renewed eff orts are required to provide solid platforms for inclusive growth. The Kyrgyz Republic and Tajikistan continue to suff er power shortages in winter, while Pakistan and Afghanistan face energy defi cits all year round.

OPERATIONAL HIGHLIGHTS

In 2014, ADB approved total new lending of $2.75 billion to governments in Central and West Asia, supported by $1.16 billion in cofi nancing, and $38.16 million in technical assistance. The new lending and grants went to energy (57%), transport (25%), public fi nance and management (8%), environment and natural resources (5%), urban services (3%), and emergency assistance (2%). Contract awards and disbursement levels were $1.89 billion and $2.33 billion, respectively.

It was an important year for relations between ADB and Azerbaijan. In September, ADB approved a new country partnership strategy, outlining its assistance to Azerbaijan for 2014-2018. It will support Azerbaijan’s national development goals by focusing assistance on transport, energy, water, and other urban infrastructure and services. During the year, ADB approved funding for two vital transport projects: one will reconstruct bridges and rehabilitate local roads in the Ganja-Gazakh region; the other will construct 30 kilometers (km) of highway between Jalilabad and Shorsulu.

ADB established an innovative partnership with Kazakhstan in 2014, signing a cofi nancing framework for resources drawn from the National Fund of Kazakhstan. The framework breaks new ground for the eff ective stewardship of funds used to develop infrastructure, small and medium-sized enterprises, and the fi nance sector.

When Afghanistan experienced the worst fl ash fl ooding in at least a generation, aff ecting more than 125,000 people in 27 provinces, ADB responded with emergency assistance to reconstruct irrigation systems and rural roads. The project will help prevent fl ood erosion by funding retaining walls,

enabling irrigated land to be returned to full production as soon as possible. Restoring roads and bridges will allow travel and freight transport to resume. In December, ADB approved a project that will also assess resources and technology in four off -grid Afghanistan provinces, and draw up a renewable-energy development plan.

New development assistance will help the Kyrgyz Republic improve the quality and relevance of its education system, while policy and project loans across Pakistan’s entire power sector will help tackle its chronic energy crisis.

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YOUR SAY:

We used to wake early to fetch fi rewood for cooking breakfast for our children before they went to school. Biogas means we can sleep longer and prepare meals in minutes.

Shameem Bibi, mother of fi ve, discusses an ADB livelihood support project in Pakistan.

In Armenia, ADB, in collaboration with the European Bank for Reconstruction and Development, agreed to fund a project to rehabilitate the aging national power transmission system. This work will make power supplies across the country more reliable and effi cient.

DRIVING TRADE BY SHARING KNOWLEDGE

ADB’s knowledge products and services in Central and West Asia covered a broad spectrum of issues in 2014, with a focus on promoting private sector growth.

The Central Asia Regional Economic Cooperation (CAREC) Program remained central to producing knowledge, and its eff orts included a study on the economic corridor between Almaty in Kazakhstan and the Kyrgyz Republic capital, Bishkek. A growth diagnostic study was also fi nalized for the Kyrgyz Republic.

Knowledge-sharing events, such as conferences and workshops, aimed to facilitate trade, analyze opportunities for economic diversifi cation, promote tourism, and improve competitiveness in agricultural markets across the region. Training programs were off ered to central bankers and offi cials from ministries of fi nance on bank regulation, risk management, and the supervisory capacity of fi nancial regulators.

CENTRAL AND WEST ASIA

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Smoother, Safer Travel in Kazakhstan’s Remote Areas

For the people of Zhambyl Oblast in Kazakhstan, poor roads have made life diffi cult. Personal travel and the freight of goods have been burdensome, especially during the winter months, with small trucks often overloaded to dangerous limits.

ADB has worked to alleviate these diffi culties for poor and remote people, providing $224 million to support the nowcompleted section of CAREC Corridor 1 between Taraz and Korday in Zhambyl Oblast. Stretching for 125 kilometers, the section of road has benefi ted about 400,000 people. It created around 1,600 jobs during the peak construction period and, since completion, has reduced travel times, made the movement of goods and people easier, and provided the impetus for new small businesses such as gasoline stations and garages, to be established along the new road.

The people living in Zhambyl Oblast now have vastly improved access to basic social services and facilities, including clinics and schools, and it is far easier to travel to markets and business areas in Almaty, Korday, Merke, and Taraz. Personal safety is also improved, thanks to dedicated footpaths that separate pedestrians from oncoming cars and trucks, while culverts ensure that animals are kept away from the main road.

So nowadays, when winter descends on the people of Zhambyl Oblast, they do not feel quite so isolated, thanks to development assistance provided in part by ADB.

The total investment program for CAREC Corridor 1 is supported by ADB, the Islamic Development Bank, and the Japan International Cooperation Agency. It aims to eventually improve 470 kilometers of roads in Zhambyl Oblast. Its continued implementation will promote sustainable economic development in Kazakhstan, increase domestic and international trade, and improve the effi ciency of road transport between Almaty and Shymkent.

In Armenia, a workshop was held on the country’s experience with policy and institutional reforms in municipal water systems. The workshop analyzed past and present practice, and provided a summary on reforms, lessons learned, and future plans. High-level government offi cials from Timor-Leste, in the Pacifi c region, also attended the workshop to learn fi rsthand how Armenia has transformed its water sector by implementing reforms and partnering with the private sector.

In Azerbaijan, ADB helped the government develop a master plan to prioritize investment in power, which will make electricity delivery more reliable and reduce power outages. ADB also supported government eff orts to investigate possible private sector participation in the power sector.

THE DIRECT ROUTE TO REGIONAL COOPERATION

The CAREC Program continued to be the centerpiece of ADB regional development assistance in Central and West Asia. Since the program began in 1996, ADB has invested $24.6 billion in 158 projects that back regional cooperation and integration (RCI). CAREC projects remained focused on transport, energy, trade facilitation, and trade policy.

ADB helped bolster RCI through a combined grant and loan of $102 million to help complete 250 km of road connecting the Kyrgyz Republic and Tajikistan. This project helped lower transport costs, not only between the two countries, but also to and from their neighboring countries, including the People’s Republic of China (PRC). ADB provided a further $224 million to complete 125 km of road sections between Taraz and Korday in Zhambyl Oblast, Kazakhstan. The road provides faster and more comfortable travel; more diversifi ed economic opportunities, including in service sectors such as tourism; and stronger competitiveness in interregional agricultural and dairy-product markets as local products reach more distant destinations in larger volumes and in better condition (see box).

CAREC is exploring further options to rebuild domestic transport networks, improve cross-border transit corridors, and create economic corridors to allow the benefi ts of economic diversity to fl ow between countries. At the 13th CAREC Ministerial Conference, held in the Kyrgyz Republic, offi cials launched a pilot initiative for the Almaty–Bishkek economic corridor. Representatives from the two cities also signed a memorandum of understanding covering the service sector.

At the ministerial conference, ADB and other delegates also reached an agreement to establish the CAREC Institute at Urumqi in the Xinjiang Uygur Autonomous Region of the PRC. The institute’s mission is to enhance the quality of the CAREC Program by generating knowledge and building capacity to accelerate economic growth. ADB will provide

ADB ANNUAL REPORT | 2014

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ADB has invested
$24.6 B
in 158 projects under CAREC
----- End of picture text -----

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technical assistance and administrative support to the institute during its initial period of operation.

INCLUSIVE GROWTH THROUGH EDUCATION AND BUSINESS

ADB works to expand economic opportunities for the poor and the marginalized of Central and West Asia, and to encourage the entrepreneurial spirit of women in the region.

In the Kyrgyz Republic, ADB supported an education program that will introduce a rental scheme to increase the availability of textbooks to schoolchildren. This program will also provide more resources to schools in remote and poor areas.

In Georgia, ADB provided support to increase public spending on social assistance programs, pensions, and social infrastructure. This assistance is helping increase savings and investments generated by households, domestic fi rms, and government. The program—which introduces reforms to make the country’s

universal pension system fi nancially sustainable—aims to ensure equitable social security for women, particularly women entrepreneurs running micro, small, and medium-sized enterprises. It also encourages more eff ective delivery of social services by supporting related public–private partnerships and infrastructure projects.

In Armenia, ADB approved a loan of $49 million and a technical assistance grant of $900,000 to support the sustainability of the road and water sectors, and to help achieve the government’s development priorities for 2014–2025. This program employs results-based management for government. The approach will address planning, budgeting, implementation, and monitoring protocols within and between sectors.

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AN ECONOMY BACK ON TRACK

ADB provided $165 million to help build 75 kilometers of railway between Mazar-e-Sharif and Hairatan on the border with Uzbekistan. In its fi rst year, the railway carried 2 million tons of petroleum and petroleum products, 540,00 tons of fl our, and 340,000 tons of construction materials. Total trade between Afghanistan and Uzbekistan increased about 35% in 2012. In July, the railway received a US Treasury Department award for development impact.

CENTRAL AND WEST ASIA

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----- Start of picture text -----

East Asia
The People’s Republic of China, Mongolia
MTR ACTION PLAN:
ADB will support
rapid and inclusive
economic growth,
emphasizing social
protection.
----- End of picture text -----

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ollowing years of rapid expansion, economic growth moderated in the countries of East Asia in 2014. The People’s F Republic of China (PRC) achieved steady but controlled economic expansion, as the government continued to emphasize the quality, rather than quantity, of growth. Growth in Mongolia, while still outpacing global and regional averages, slowed to single-digit levels.

Rapid economic growth has transformed the PRC to an upper middle-income country with signifi cant gains in poverty reduction and quality of life. The challenge lies in developing new engines of growth that will generate economic growth to benefi t all. The country must address issues such as environmental protection, inequality, fi nance sector regulation, local government debt, and private investment in state-owned enterprises.

One positive sign in 2014 was that the PRC introduced a regulatory framework for the Shanghai free trade zone. This will provide a testing ground for service sector development, and for liberalizing the fi nance sector. To improve capital fl ows and transfers, the PRC also doubled the daily trading band of the yuan, and connected the stock exchanges of Shanghai and Hong Kong, China.

In Mongolia, a steep fall in foreign direct investment, depressed commodity prices, and delayed mining projects contributed to the economic slowdown in 2014. The national currency

MORE THAN 64,900 KM of roads built or upgraded between 2011–2014

ADB ANNUAL REPORT | 2014

depreciated by 13.8% in 2014. A more diversifi ed economy, essential for job creation, remains a priority to prevent a return to economic overheating, and to reduce the country’s reliance on mining revenues.

OPERATIONAL HIGHLIGHTS

In 2014, ADB provided $1.66 billion for 14 loan and grant projects to East Asia, and $29.41 million for 52 technical assistance programs. This assistance, together with $167.48 million in cofi nancing, was allocated to transport (49%), urban and social services (36%), energy (9%), and natural resources and rural development (6%).

ADB’s program in the PRC is evolving to refl ect an emphasis on innovation, providing added value, and delivering projects with high development impact. In 2014, lending assistance of $1.49 billion covered 11 projects across energy, natural resources and rural development, transport, and urban and social services.

ADB committed $692.55 million in loans to the PRC’s transport sector. Part of this funding is supporting an inland water transport project in Anhui Province, and a project to make rail travel more energy-effi cient and safer for passengers in Yunnan Province and the Guangxi Zhuang Autonomous Region. The loans are also helping to improve urban public transport for commuters in Jiangxi Ji’an, and making travel and trade easier for the people of Yunnan Pu’er through cross-border transport and rural road projects.

ADB has made signifi cant investments in urban development in the PRC, including $500 million for projects in Jilin, Gansu, Hubei, and Yunnan. These projects will improve services and facilities in urban infrastructure, solid waste management, water supply, environmental pollution control, and fl ood management. In Guangdong Province, a commitment of $100 million is helping to protect water resources and improve water security.

In the education sector of the PRC, ADB is supporting a $50-million project for technical and vocational education and training (TVET) in the Baise municipality of the Guangxi Zhuang Autonomous Region. This project is helping develop a fl exible and responsive training curriculum that delivers the skills needed by industry. If successful, it could be replicated elsewhere across the PRC.

Aside from support for project preparation ($6.79 million), ADB technical assistance to the PRC in 2014, totaling $11.18 million, focused on policy and advisory services, along with capacity development, to support government policy reform measures and preparation of the PRC’s 13th Five-Year Plan.

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The Greening of Gansu

When the stable supply of electricity arrived in her village of Bajiaowan in the northwest People’s Republic of China (PRC) province of Gansu, life changed for Zhang Huiping (pictured with her family). It was 2006, and the ability to use modern electrical appliances, such as a refrigerator, freezer, rice cooker, and washing machine, helped ease the daily strain on Mrs. Zhang, who spent her days herding sheep. “We used to kill a sheep and had to fi nish eating the whole sheep within a couple of days,” she said. “Now, with the freezer, we don’t have to worry about the meat spoiling.”

Thanks to ADB support in building three hydropower stations along the Heihe River Basin, electricity will come to Bajiaowan village and many others like it. With a total capacity of 800 million kilowatt-hours annually, the stations provide a clean, renewable, and cost-effi cient source of energy.

The city of Zhangye, located along the midstream of the Heihe River, also benefi ts from the project. Zhangye’s economy was traditionally based on farming and animal husbandry, but, with the rise of industrial development, Zhangye faced shortages of electricity. The ADB-supported power stations helped resolve these shortages.

The three hydropower stations are expected to reduce greenhouse gas emissions by 630,000 tons a year, equivalent to replacing about 300,000 tons of standard coal annually.

These hydropower projects were registered with the Clean Development Mechanism (CDM), an incentive under the United Nations Framework Convention on Climate Change to promote clean energy projects in developing countries. CDM-registered projects can sell their certifi ed emission reductions to generate additional revenue. By the end of 2014, the three hydropower stations received carbon revenues of $30.5 million under the CDM.

ADB provided $168.5 million in sovereign loans for three projects in Mongolia. A $170-million transport project, of which $125 million was approved in 2014, is constructing

EAST ASIA

293 kilometers (km) of roads that will link Mongolia’s isolated western region with the PRC to the south, and with the Russian Federation to the north. The project will increase jobs, facilitate trade, and foster social and economic development in the region. A loan of $18.5 million will assist Darkhan, the third-largest city in Mongolia, to construct a modern wastewater treatment plant that will benefi t more than 80,000 people and protect the Kharaa River. ADB also pledged $25 million to promote technical and vocational education, helping Mongolians to learn the skills suitable for jobs in agriculture, construction, and transport.

development, transport, TVET, and public– private partnerships (PPPs). Assistance helped stage a knowledge-sharing platform on PPPs in Beijing, foster an initiative to exchange information on rural–urban poverty, and establish an eco-compensation hub at the China Agricultural University. ADB also produced 70 knowledge products and services, and organized 80 knowledgesharing activities, for the PRC and Mongolia in 2014.

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A BLUEPRINT FOR THE PRC’S FUTURE

In Beijing on 23 October 2014, ADB President Takehiko Nakao led the “One ADB” knowledge working group for the People’s Republic of China (PRC). The group engaged in policy dialogue with the Government of the PRC on the formulation of its 13th Five-Year Plan. ADB highlighted the importance of market-driven industrial transformation for the PRC, supported by rigorous structural reforms, following the policy direction the PRC itself has adopted.

In 2014, the PRC became the fi rst country to benefi t from the “One ADB” approach, an important element of the Action Plan that arose from the Midterm Review of Strategy 2020. The approach encourages ADB departments to work together to create knowledge solutions for developing members. It also promotes interaction between ADB fi eld offi ces to share knowledge across regions. Utilizing the “One ADB” approach, ADB provided policy recommendations in October 2014 to help the PRC transition to a high-income country. These recommendations were discussed ahead of the formulation of the PRC’s 13th Five-Year Plan, 2016–2020.

Technical assistance amounting to $9.95 million was provided to Mongolia to support the energy, fi nance, and transport sectors, as well as to improve public sector management.

WORKING AS ‘ONE’ IN EAST ASIA

During 2014, ADB strengthened its knowledge-sharing activities in East Asia. It helped create new knowledge platforms and hubs that focused on green growth, urban

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----- Start of picture text -----

ADB is helping construct
293 KM
of roads in Mongolia’s
isolated western region
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ADB ANNUAL REPORT | 2014

DEVELOPMENT BEYOND BORDERS

ADB continued to support the PRC’s participation in the Greater Mekong Subregion (GMS) program for economic cooperation. Loans of $350 million will help improve road infrastructure and the urban environment in Yunnan Province, along the GMS North–South Economic Corridor. Through a memorandum of understanding between the PRC and Viet Nam, development assistance also aided the establishment of cross-border economic zones and joint master plans—boosting trade and investment between the two countries.

In 2014, ADB provided support for the PRC and Mongolia to continue to work with other developing member countries under the Central Asia Regional Economic Cooperation (CAREC) Program. ADB drove key activities of the program, which included streamlining customs processes, administering transport agreements, and improving the control of animal diseases across borders. It also helped physically connect the people of East Asia, via the now-completed international corridor linking Ulaanbaatar to the PRC border at Erlian, and 293 km of roads to link western Mongolia to the PRC and the Russian Federation.

FINDING LONG-TERM ANSWERS TO POVERTY

In 2014, ADB continued its work to raise standards of living for the people of the PRC and Mongolia, especially for the impoverished and disadvantaged.

ADB supported a project to better deliver water in the PRC’s Chaonan District, Guangdong Province, benefi ting about 1.23 million people. It is also helping the poor in Baishan and Baicheng cities in Jilin Province, by improving urban transport and water supply. In Yunnan Province, fi nancial assistance is improving the lives of the impoverished in three secondary cities of Chuxiong prefecture, by helping to upgrade fl ood management, solid waste management, and other basic urban infrastructure services.

ADB supports the PRC in developing workforce skills that meet the demands of its diversifying economy, with training programs focusing on less developed regions. In 2014, ADB helped develop a competency-based curriculum for TVET while also training teachers, and upgrading facilities and equipment. In tertiary education, ADB helped the Ministry of Education develop policies to improve the employment prospects of university graduates. It also supported the training of caregivers, especially for care of the elderly, in Yichang, Hebei Province.

increase trade, raise incomes for emerging entrepreneurs, and provide jobs.

A grant from the Japan Fund for Poverty Reduction helped train over 1,400 Mongolian herders in improved pasture management, to bolster their resilience to climate change and natural disasters. ADB is also helping to improve services for Mongolians with disabilities, and expand the nationwide telemedicine network for the country’s poor.

ADB continued its support for Mongolia’s food stamp program in 2014. This program helps provide nutritious food to those regarded as being among the poorest 5% of the population.

YOUR SAY:

We’re lucky to receive pasture, livestock, and business training, as well as fi nancial support, from the project. We hope this will generate more income for our members.

Ts. Battumur discusses an ADB-supported program to help Mongolia’s herders deal with the impact of climate change.

A PATH TO ENVIRONMENTAL SUSTAINABILITY

In January 2014, ADB signed two memorandums of understanding with the Ministry of Environmental Protection and the National Development and Reform Commission in the PRC. These agreements aim to prevent and manage air, water, and soil pollution, and to devise innovative approaches to climate protection.

ADB has committed to support a $150-million district heating project—using low-carbon, low-emissions natural gas technology—in Hohhot city in the Inner Mongolia Autonomous Region. It is also providing technical assistance to develop low-carbon transport in the Ningxia Hui Autonomous Region, design energy-effi cient railway buildings, and help reduce air pollution in Beijing.

In Mongolia, ADB is also supporting the implementation of the Integrated Water Management Plan for the Tuul River Basin, contributing to the water security of Ulaanbaatar and surrounding areas.

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In Mongolia, ADB is working to expand the reach of the fi nance sector, to help develop micro, small, and mediumsized enterprises. Because these enterprises make up 98% of all businesses in the country, ADB’s eff orts will help

EAST ASIA

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----- Start of picture text -----

Pacific
The Cook Islands, Fiji, Kiribati, the Marshall Islands, the Federated
States of Micronesia, Nauru, Palau, Papua New Guinea, Samoa,
Solomon Islands, Timor-Leste, Tonga, Tuvalu, Vanuatu
MTR ACTION PLAN:
ADB will aim to
increase share of
education to 6%–10%
of total fi nancing
by 2020.
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hile the Pacifi c region saw overall economic growth accelerate slightly W in 2014, results among individual countries varied widely.

The region’s growth of 5.3% was largely driven by its two biggest economies, Papua New Guinea (PNG) and TimorLeste. Fiji held successful elections in 2014, which contributed to sustained growth of 3.3% and a positive outlook in the island nation. Both Tonga and Solomon Islands were struck by natural disasters that slowed growth and burdened public fi nances in these two economies.

The small Pacifi c island economies remain largely dependent on public spending to support economic growth, often fi nanced through offi cial development assistance. ADB is supporting fi scal reform programs to put these economies on a more sustainable fi nancial footing, along with structural reforms to encourage development of the private sector.

Few places in the world are as exposed as the Pacifi c to the impact of climate change and natural disasters, and ADB is working to develop infrastructure that can withstand extreme natural events and sea-level rise. It prioritizes climate and disaster resilience in its investment projects, and funds the renewable energy portfolio to support climate change mitigation and reduce reliance on fossil fuels.

MORE THAN 17.3 MILLION students benefi ting from new or improved educational facilities between 2011-2014

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ADB ANNUAL REPORT | 2014

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In 2014, ADB focused on better connecting the countries of the Pacifi c. It worked on linking investments in transport and communications to the delivery of services across the region. These eff orts are helping deliver health, education, and fi nancial services to outer islands and other remote communities.

ADB also committed in 2014 to an annual minimum allocation of $3 million from the Asian Development Fund to its smallest developing members—Kiribati, the Marshall Islands, the Federated States of Micronesia (FSM), Nauru, Palau, and Tuvalu. The allocations will tackle growth constraints and increase well-being in these countries.

OPERATIONAL HIGHLIGHTS

In 2014, ADB approved $185.75 million for 14 loan and grant projects in the Pacifi c region along with $26.65 million in technical assistance for 25 projects. Lending and grant assistance, supplemented with $30.94 million of cofi nancing, focused on transport (67.7%), energy (18%), and public sector management (6.2%).

Following internationally recognized elections in Fiji in September 2014, ADB resumed full engagement with the government, committing $100 million to support the rehabilitation and upgrade of roads and ports.

In Timor-Leste, additional fi nancing of $11.78 million for the country’s major transport project is continuing the upgrade and climate-proofi ng of over 100 kilometers of roads. The project provides work for many local people, particularly women, and helps to build a national network of reliable, safe roads to reduce travel times and prevent accidents for the Timorese people.

In PNG, a loan of $187.48 million supported expansion of Lae Port by building a tidal basin, a multipurpose berth, and terminal works. Another loan of $109 million is helping to improve roads in PNG’s Highlands region and bolster air services in the country. These initiatives aim to link people in poor and remote areas of PNG to markets and government services.

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INADEQUATE WATER: COUNTING THE COST

Inadequate water supply and sanitation in Kiribati’s main center, South Tarawa, has contributed to high rates of waterborne diseases, with 35,000 reported illnesses per year linked to poor water, sanitation, and hygiene. An ADB study sought to estimate the economic costs associated with this situation, to enable more informed policy responses. The total annual economic burden of water-related issues was estimated to be $534–$1,045 for every household in South Tarawa.

PACIFIC

ADB fi nancing of $36.42 million to the Cook Islands, Nauru, Samoa, and Solomon Islands is helping to boost investment in renewable energy across the Pacifi c and improve the reliability of electricity services.

In response to natural disasters in Tonga and Solomon Islands, ADB acted swiftly to provide $17.94 million in emergency loans and grants. After fl oods in Solomon Islands in April 2014, ADB quickly disbursed a grant of $200,000 from the Asia Pacifi c Disaster Response Fund. A loan of $6.61 million and grant of $6.61 million backed up eff orts to reconstruct roads and bridges. In Tonga, ADB responded to Tropical Cyclone Ian in January 2014 by approving an $8.79-million project, cofi nanced by New Zealand to help reconstruct—with necessary climate- and disasterproofi ng—the country’s electricity network and schools.

ADB continues to work with other development partners, promoting good governance policy across the region. In 2014, funding of $12.1 million, including collaborative cofi nancing by New Zealand and the World Bank, was activated to strengthen fi scal stability in Kiribati.

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YOUR SAY:

We no longer have to rely on kerosene to light our lamps, and we can use solar power to recharge our mobile phones.

Solomon Islander Joyce Suite’e, trained by ADB to repair solar panels, discusses the benefi ts of solar power.

SOLUTIONS THROUGH KNOWLEDGE SHARING

ADB was active in strengthening knowledge sharing throughout the Pacifi c in 2014. ADB publishes the Pacifi c Economic Monitor , with contributions from other development partners such as the International Monetary Fund (IMF) and the World Bank. The publication provides updates on the economic performance of Pacifi c countries, complemented by policy briefs relevant to the region’s decision makers. Each December, the Pacifi c Economic Monitor focuses on fi scal performance.

member countries (DMCs) in the Pacifi c to exchange information and encourage South–South collaboration in macroeconomic forecasting and long-term fi scal planning and modeling.

HUNDREDS OF ISLANDS, ONE VISION

In May 2014, the Pacifi c Islands Forum leaders endorsed a new framework to speed up and intensify regional cooperation and integration (RCI). The framework calls for greater direct engagement by development partners to identify regional priorities, and to align support with regional needs.

ADB is working to address the region’s complex development issues, promote the development of the private sector, implement structural reforms of state-owned enterprises, and improve the Pacifi c’s trade and transport links. In 2014, with extensive support from Australia, business regulatory frameworks were simplifi ed and harmonized to encourage trade across seven

As part of Timor-Leste’s preparations for membership in the Association of Southeast Asian Nations (ASEAN) and other regional initiatives, ADB helped document the legal and institutional frameworks for trade and investment in the country, and map the reforms needed for regional integration.

ADB is supporting RCI through an ongoing investment program for PNG to upgrade the country’s air services. A second tranche of $130 million was signed in 2014 to strengthen the safety, accessibility, and reliability of 21 airports owned and operated by the government, and serving more than 3 million people annually. The project will open up new economic opportunities in regional centers by connecting provinces with major domestic and international markets.

In education, ADB provided $1 million to help the University of the South Pacifi c (USP) complete construction on an expansion of its Kiribati campus. The funds were drawn from a $19 million loan package provided by ADB to USP in 2012 to help the university improve learning facilities and provide innovative information and communication technology (ICT)-based distance learning programs at regional campuses. The project will allow more students across the Pacifi c to undertake quality academic studies, and help establish regional education networks.

LIFTING THE PACIFIC OUT OF POVERTY

ADB complemented the publication’s December 2014 edition with a regional knowledge-sharing workshop, held in conjunction with the Pacifi c Islands Forum Secretariat, the Pacifi c Islands Centre for Public Administration, and the IMF’s Pacifi c Financial Technical Assistance Centre. The workshop brought together 10 of the 14 developing

To reduce poverty in the Pacifi c, ADB has placed a stronger focus on creating jobs by expanding business prosperity and commercial sustainability.

A project to support agribusiness in Samoa is addressing market constraints and barriers to export. A new regional

ADB ANNUAL REPORT | 2014

facility for business investment was approved in 2014, with cofi nancing by Australia, to help develop small and mediumsized enterprises.

ADB is supporting a number of fi nancially inclusive initiatives to help low-income households save money to invest, pay for unexpected expenses, and eventually move beyond subsistence living. Women and rural residents, who often cannot access basic fi nancial services, are a particular focus for this assistance.

To foster inclusive transport services, ADB supported new interisland shipping in Solomon Islands and Vanuatu throughout 2014. This assistance is upgrading infrastructure and establishing schemes to subsidize services for remote destinations, which would otherwise not be commercially viable.

Development assistance is also helping implement policies, regulations, and legislation to improve basic service delivery, and allow for socially inclusive pricing policies across Pacifi c DMCs.

THE VALUE OF THE ENVIRONMENT

In the Federated States of Micronesia (FSM) in 2014, ADB supported government plans to promote tourism that benefi ts the environment while providing jobs for locals.

In Kiribati, ADB supported the government’s management of tuna fi shing license agreements. The new approach aims to reduce fi shing quotas to sustainable levels in the medium term, while increasing revenue to help fund public goods and services.

In several Pacifi c island economies, scarce water resources pose severe strains on living conditions. An infrastructure development project in the FSM improved wastewater systems and invested in safe and sustainable water supply to benefi t more than 9,500 residents in Kosrae, Pohnpei, and Yap. A similar water supply and sewerage project in Fiji was completed in 2014, benefi ting around 250,000 residents of the Suva–Nausori area.

In August, ADB participated in the Third International Conference on Small Island Developing States in Samoa. In September, at the Renewable Energy Forum, ADB pledged support for the expansion of sustainable, reliable, and aff ordable energy across the region.

It also affi rmed its commitment to renewable energy by approving a solar project worth $24.28 million for the Cook Islands. The project is expected to save 1.09 million liters of diesel consumption every year, and cut carbon dioxide emissions by 2,930 tons.

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A Flying Start for Island Business

Not so long ago, registering a new company in Solomon Islands was a bureaucratic process. Aloysio Ma’ahanao, an accountant, remembers those times without fondness. “Under the old Companies Act, it took up to 3 months. Under the new act, the longest it takes me is 2 days. The registration itself takes about 5 minutes.”

The quick business registration process that Aloysio’s clients now enjoy is a result of regional reforms made through the Pacifi c Private Sector Development Initiative (PSDI). These PSDI reforms include reducing the time required to start a new company and increasing opportunities for people to access credit to operate a business. Outdated laws and regulations that hindered business were amended. Through the initiative, the governments of Pacifi c island countries have eliminated the need to use lawyers when incorporating a new company, and removed cumbersome identifi cation requirements.

The initiative is supported by grants from ADB ($6.1 million) and the governments of Australia ($41.74 million) and New Zealand ($4.5 million).

Solomon Islands is one of the 14 Pacifi c developing member countries benefi ting from this regional technical assistance.

The company registry in Solomon Islands is now fully online, with fast company name searches, simple forms, and automated checking of completed business documents. The reforms reduced the cost and time of incorporating a business from $336 to $175 and from 45 days to less than 2 days. A new Secured Transactions Act and the related electronic registry had signifi cant impact on business loan approval time, reducing it from 28 days to 1 day, through better access to information by local banks. With more companies operating in the private sector and better access to fi nance in Solomon Islands, new job opportunities have been created.

PACIFIC

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----- Start of picture text -----

South Asia
Bangladesh, Bhutan, India, the Maldives, Nepal,
Sri Lanka
MTR ACTION PLAN:
ADB will aim to invest
$2 billion annually for
agriculture and food
security by 2020.
----- End of picture text -----

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outh Asia achieved strong, stable economic growth in 2014, with most of the region’s economies posting impressive gains.

India’s economy grew by 7.4% in 2014–2015 on the back of increases in investment and industrial production. Sri Lanka recorded 7.4% growth driven by strong external demand and the recovery of local investment in a low-interest rate, low-infl ation environment. A good harvest, together with growth in the service sector and remittances, saw Nepal’s economy grow by over 5%. In Bangladesh, relative political stability bolstered business confi dence, helping the economy to expand by 6.1%. This was in spite of weak monsoons and a slowdown in exports. Meanwhile, the economies of the Maldives (with 6.8% growth driven largely by tourism) and Bhutan (with 4% growth driven largely by hydropower production) will need to be diversifi ed to ensure sustainable growth.

Infl ationary pressures, evident in the fi rst half of 2014 after a spike in food prices, abated across the region. Supported by tighter monetary policies in India and Bangladesh, consumer demand softened, and prices stabilized at lower levels.

The region’s development challenges included poor connectivity between countries, inadequate infrastructure, and a growing skills gap. To address these challenges, the South Asia Subregional Economic Cooperation (SASEC) program was expanded to include every country in the region.

MORE THAN

5 MILLION

households with new or improved water supply between 2011–2014

ADB ANNUAL REPORT | 2014

OPERATIONAL HIGHLIGHTS

In 2014, ADB supported South Asia with $4.05 billion for 31 projects and $49.39 million in technical assistance. Operations focused on areas critical to achieving sustainable and inclusive growth. These areas included infrastructure, energy security, urban development, and education and skills training.

India was the largest borrower in the region at 54% of total loans, followed by Bangladesh at 22%, and Sri Lanka at 11%. The value of contracts awarded to implement projects reached $3 billion (project loans and grants only), and disbursements amounted to $2.62 billion (including policybased programs). ADB strengthened its relationships with other development partners, and raised almost $1.14 billion in cofi nancing, which represented 28% of its total operations.

Infrastructure accounted for 79% of ADB assistance to South Asia.

ADB increased its investment in the transport sector by $1.63 billion in 2014. This included $500 million for the region’s fi rst cross-border road project that includes linking northeast India to Myanmar. In Sri Lanka, an $800-million project to upgrade rural roads is connecting producers to markets, and spreading the benefi ts of recent economic success. In Bangladesh, ADB contributed $505 million, and the European Investment Bank cofi nanced an additional $175 million, to improve rail passenger and cargo movements throughout the country and across the region.

In the energy sector, ADB invested $500 million in clean energy in India and mobilized $253 million in cofi nancing from the European Investment Bank. ADB also invested $180 million to expand national grid capacities in Nepal, and to enable sharing of clean energy in the region and another $158.5 million in clean energy projects in Bhutan and the Maldives. The Climate Investment Fund and bilateral donors provided $83.2 million in cofi nancing for clean energy projects in the Maldives and Nepal. In Sri Lanka, $300 million of investment is helping to develop clean energy and improve system effi ciency and reliability.

ADB is committed to urban development in South Asia, approving $500 million in 2014 for a program to undertake major reforms in the urban sector and improve water supply and wastewater services in India’s Rajasthan state. In Bangladesh, it helped improve the resilience of coastal towns to climate change and natural disasters. In Nepal, ADB is working to ensure that urban projects are designed to be more inclusive, through approaches such as output-based aid and community development. These approaches are delivering clean water to more people, and expanding job opportunities for Nepal’s urban poor.

The individual governments of South Asia face three common challenges in human development: to create jobs,

to address skills shortages, and to improve productivity. ADB invested $300 million in initiatives to address these challenges.

In 2014, eff orts continued to improve gender equality in South Asia, with 61% of ADB projects in the region incorporating elements for gender balance. These included a high number of projects in education and skills development, agriculture and rural infrastructure, and urban development.

SHARING KNOWLEDGE TO SHARE REWARDS

ADB not only provides development knowledge to member countries, but works to ensure this knowledge is shared within and between countries. In 2014, ADB’s Capacity Development Resource Centre trained more than 1,300 state and local government offi cials in India on ADB policies and procedures. Topics included procurement and contract management, water management, road safety, agribusiness infrastructure, construction management, and municipal accounting reforms.

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YOUR SAY:

Before the construction of the bridge, you had to take a journey of over 14 hours to reach the southern plains of Nepal. The journey takes around 4 hours now.

Project director Umeshananda Misra discusses reduced travel times from the central hills of Nepal, thanks to the ADB-fi nanced Khurkot bridge.

Regular publications provide economic forecasts and macroeconomic analyses to individual countries and the region. Country-specifi c reports include the Bangladesh Quarterly Economic Update and the Macroeconomic Update: Nepal .

In 2014, ADB produced gender-specifi c reports for Bhutan and the Maldives. These reports provide a basis for identifying gender issues in the design phase of project development, while contributing to country partnership strategies between ADB and developing member countries. For the education, energy, transport, and urban development sectors, tailored videos will help communicate good practices for creating gender balance.

NEW OPPORTUNITIES FOR REGIONAL STRENGTH

In 2014, the Maldives and Sri Lanka joined existing regional members in the SASEC program. This opens up promising

SOUTH ASIA

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opportunities for the six developing member countries of South Asia to collaborate on transport, energy, and trade facilitation. To support this collaboration, ADB provided a record $1.2 billion in lending and grant fi nancing to SASEC projects. Bangladesh, Bhutan, and Nepal acted quickly to improve trade facilitation, successfully carrying out policy reforms to modernize their customs departments a year ahead of schedule. Regional energy cooperation was underpinned by project preparations for three hydropower projects, and for a second transmission line crossing the border between Nepal and India. ADB also committed to work with the Government of India to develop the country’s initiative for dynamic economic and industrial corridors.

GROWTH THAT EMBRACES EVERYONE

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Nelson Sees a Road Ahead
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For 55-year-old Nelson Wickramasekara (pictured), ADB assistance to Sri Lanka’s transport sector means his children have the chance to grow up free of the burden of debt.

Nelson has sold fruits along the Kandy–Mahiyangana national highway for nearly 30 years and, before being upgraded by an ADB-supported project to rehabilitate Sri Lanka’s national roads, the ‘highway’ was little more than a dusty road with limited traffi c and very few tourists.

Today, the Kandy–Mahiyangana national highway is a modern road with steady traffi c, including a growing number of tourists who use it to get to the historic sites in the area.

Nelson has seen a 30% increase in his sales since the road was improved, and he has invested the extra money into buying a van. Nelson’s son now uses the van to operate a school transport service, generating additional income for the family and providing a better way of life for its future generations.

“I have been able to pay off my debts,” Nelson said. “I can build a fi nancial foundation so that my children will be free of debt.”

As well as improving the Kandy–Mahiyangana national highway, ADB involvement in Sri Lanka’s transport sector has focused on upgrading a network of national and provincial roads, and improving the country’s premier container port in the capital, Colombo. To date, 634 kilometers of expressways and national highways have been built or upgraded, while 1,707 roads in provincial, district, and rural areas have been constructed or improved.

The result of this work has been to bring all Sri Lankans, particularly those in rural and remote areas, closer to markets, improving the business prospects of people like Nelson Wickramasekara.

ADB builds inclusive growth objectives into all operations in South Asia. In 2014, ADB backed technical and vocational education and training programs to help women gain valuable skills for employment. In the transport and energy sectors, ADB supported projects that opened up markets for small businesses in rural areas, allowing them to tap into broader demand and enjoy higher incomes.

In Bangladesh, ADB is working to expand the power system, improve energy effi ciency, and increase access to education and health care. A $700-million investment will help connect 450,000 households—including many impoverished ones— to the power grid, while reducing outages and shortages. Under a pilot initiative under this project, around 4,000 disadvantaged farming families will benefi t from 200 solarpowered irrigation pumps. Another program promoting inclusive growth seeks to develop a skilled labor force through better funding for secondary education. ADB support is also helping to build 12 comprehensive reproductive health care centers and 26 primary health care centers near slums and other densely populated areas. At least 30% of all services, including the provision of vital medicines, are provided free to the poor. Women are a focus for free health services, and mobile outreach services are provided weekly for the homeless and extremely poor. In India, support for electrifi cation projects in Madhya Pradesh includes training of 20,000 women to manage microenterprises. The skills program in Kerala focuses on vocational training and youth employment. About 60% of ADB assistance in India goes to lagging states.

In Nepal, projects fi nanced by the Japan Fund for Poverty Reduction provided business and skills training to 2,000 poor households marginalized by ethnicity or caste.

ADB also helps achieve inclusive growth for South Asia as a region. Projects to connect roads in the SASEC region will upgrade critical regional highway links and two land ports in Bangladesh, boosting connectivity and trade between countries. These upgrades will benefi t farmers and the broader economy by increasing trade volumes, improving

ADB ANNUAL REPORT | 2014

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ADB is helping connect power to
450,000
households in Bangladesh
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traffi c fl ows, and reducing the loss of perishable goods. By improving customs procedures, ADB is also streamlining the movement of goods in and out of Bangladesh, Bhutan, and Nepal. These measures will ultimately drive down costs for farmers, and reduce prices paid by poor consumers.

PROSPERITY WITH THE PLANET IN MIND

Over two-thirds of ADB projects in South Asia contribute to environmentally sustainable growth.

ADB is helping the Maldives to preserve the fragile ecosystem on which the country depends for its tourism and fi sheries industries. A project to increase the capacity of the wastewater treatment plants that serve Mahibadhoo and Fonadhoo improved sanitation for all 571 households on those islands. Meanwhile, a grant from the ADB Strategic Climate Fund, combined with support from the European Investment Bank and the Islamic Development Bank, is helping the Maldives move toward more effi cient mini electricity grids based on renewable energy.

In Bangladesh, ADB is helping address the impacts of climate change through work to reduce the risk of fl ood and riverbank erosion and improve environmental infrastructure in coastal towns.

In India’s Karnataka state, ADB is promoting climate-resilient development in the urban water supply and sanitation sector, and integrated water management in agriculture.

ADB helped Nepal protect its river watersheds through effi cient irrigation and water management projects. It also provided technical assistance to implement an agricultural program promoting land use that is environmentally friendly and sustainable.

In Sri Lanka’s mountainous Central Province, ADB is backing a green hydropower project on a river near Moragolla. The project will deliver a clean, cheap, stable supply of energy to the grid.

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PLANTING SEEDS OF HOPE IN NEPAL

ADB provided a $20-million grant to Nepal to develop agribusiness and improve livelihoods for people in remote, highmountain areas of the country. The grant aims to create 7,500 new jobs by 2017, supporting one of South Asia’s poorest areas. In May 2013, Suk Prasad Sherpa (pictured) started an apple orchard in the Mustang district, investing around $12,000 in a nursery and storehouse for saplings. Today, Suk Prasad produces between 5,000 and 6,000 apple saplings per year.

SOUTH ASIA

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----- Start of picture text -----

Southeast Asia
Brunei Darussalam, Cambodia, Indonesia, the Lao People’s
Democratic Republic, Malaysia, Myanmar, the Philippines,
Singapore, Thailand, Viet Nam
MTR ACTION PLAN:
ADB will promote
natural resource
management and
integrated disaster risk
management.
----- End of picture text -----

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ustaining growth and reducing infrastructure bottlenecks were among Southeast Asia’s key development challenges S in 2014. ADB focused on three critical areas: public sector management reforms, requirements in infrastructure and social services, and mobilization of cofi nancing. ADB maintained policy dialogue with all its member countries, and tailored its projects to meet the development challenges faced by each country.

Across the region, economic growth eased, following contractions in investment, government spending, and global demand for the region’s exports.

In Indonesia, government policies aimed to rein in infl ation and the current account defi cit. The new government’s ambitious program to reduce fuel subsidies, which should free budget funds for infrastructure and social development, began in November 2014. Recovery in exports, and expanded private consumption and investment, generated gross domestic product growth in the Philippines in the fi rst half of the year. However, growth was moderated by the slower pace of government spending and public construction.

Cambodia saw economic growth ease in 2014, refl ecting slower growth in tourism and exports of garments and footwear, and rice. In the Lao People’s Democratic Republic (Lao PDR), economic growth remained stable. Fiscal problems, which had earlier led to payment delays, abated

MORE THAN

12.3 MILLION

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tons of greenhouse gas
emissions reduced per
year between 2011–2014
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ADB ANNUAL REPORT | 2014

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----- Start of picture text -----

In 2014, ADB provided
new lending of
$2.99 B
to Southeast Asia’s public sector
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in 2014, although the country’s fi scal defi cit remained large and public infrastructure projects faced delays.

Myanmar posted growth that was stimulated by rising investment. This rise was attributed to improved business confi dence, higher commodity exports, rising production of natural gas, tourism, and credit growth. Meanwhile, an increase in direct investment fueled Viet Nam’s economic growth. In the long term, achieving high rates of growth will require deeper structural and governance reform.

OPERATIONAL HIGHLIGHTS

Across Southeast Asia during 2014, ADB provided new lending to governments of $2.99 billion, supported by $1.6 billion in cofi nancing (including cofi nancing under the ASEAN Infrastructure Fund [AIF]), and $71.66 million in technical assistance. This lending was primarily directed to public sector management (41%), transport (14%), education (14%), and fi nance (14%). Contract awards and disbursement levels reached $1.79 billion and $1.8 billion, respectively.

ADB approved a new country partnership strategy with Cambodia. This strategy focuses on rural–urban–regional links, and human and social development. Projects approved in 2014 include a road improvement project that will rehabilitate 729 kilometers (km) of rural roads across nine provinces, giving 620,000 people better access to markets, jobs, and social services. An urban water supply and sanitation project will provide cleaner and safer water to 551,000 people in nine towns, improving public health, promoting investment, and expanding employment opportunities.

In Indonesia, ADB approved a loan of $400 million to support reforms that will improve public and private investments. This funding will help the country reach its average medium-term economic growth target of between 7% and 9% per year, for the next 10 years. Meanwhile, an $80-million sanitation project will improve hygiene for 70,300 urban households.

In the Lao PDR, ADB has provided a loan of $15 million to help strengthen the country’s governance framework. The assistance will

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ASEAN CORPORATE GOVERNANCE SCORECARD

To promote transparency and encourage investment, ADB and the ASEAN Capital Market Forum published the ASEAN Corporate Governance Scorecard: Country Reports and Assessments 2013–2014 . The Scorecard considers international best practices to assess the corporate governance of publicly listed companies in the ASEAN region.

SOUTHEAST ASIA

support reforms in public administration and public fi nancial management.

An $80-million transport project in Myanmar will bring people and produce closer to markets, by rehabilitating 54.5 km of roads between Yangon and one of the nation’s most productive agricultural areas, Ayeyarwaddy Delta.

Through a $350-million program to increase competitiveness in the Philippines, ADB is helping to raise the employment prospects of Filipino youth, develop skills and services in tourism, and reform the country’s business and investment climate in the longer term. A loan of $250 million will improve service delivery by local governments, contributing to inclusive growth.

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YOUR SAY:

For a long time after the typhoon, our classroom was a tent. We got wet when it rained and hot when it was sunny. Our classroom is now repaired and we fi nd it easier to study.

12-year-old student Honeylette Molina from the Philippines’ Leyte island

In Viet Nam, ADB is implementing a $320-million program to help improve the effi ciency and transparency of state-owned enterprises. Another program, with funding of $230 million, will help lift Viet Nam’s competitiveness through reforms to banking, fi scal policy, and public sector administration and accountability. The program will also address state enterprise management, public investment management, and the business environment. To improve the reliability of power supply for businesses and residents of Ha Noi and Ho Chi Minh City, ADB is fi nancing a $172-million energy project to install or upgrade 200 transmission lines.

A PARTNERSHIP IN KNOWLEDGE

ADB made signifi cant headway during 2014 to support knowledge outcomes in Southeast Asia.

In January 2014, ADB organized a high-level knowledge partnership conference, held in Jakarta, to strengthen its informational ties with the Government of Indonesia. The conference identifi ed more eff ective knowledge solutions for energy security, skills development, and food security. A publication was produced titled Unlocking the Potential for Geothermal Energy , which provides inputs to Indonesia’s revised geothermal law.

The ADB-supported ASEAN Corporate Governance Scorecard supported the work of the Association of Southeast Asian Nations (ASEAN) to raise corporate governance standards, develop an integrated capital market, and increase the visibility of publicly listed companies to investors.

In May 2014, ADB hosted a regional conference in Manila, promoting the 3E concept of economic competitiveness, environmental sustainability, and equity. Attended by 170 delegates, the conference shared the operational framework for “GrEEEn cities” and showcased urban growth models that can be replicated across Southeast Asia.

CLOSER REGIONAL COLLABORATION

ADB demonstrated strong support in 2014 for regional integration in Southeast Asia. It attended the 5th Greater Mekong Subregion (GMS) Summit, endorsing a pipeline of 92 priority projects valued at $30 billion. It also participated in the 6th GMS Economic Corridors Forum, fostering cross-border economic zones, logistics centers, and industrial estates.

In 2014, ADB approved $108 million for a regional tourism infrastructure project that will help create 129,000 tourismrelated jobs across Cambodia, the Lao PDR, and Viet Nam. Under ASEAN subregional programs, ADB supported priority projects to enhance regional connectivity. These projects included work to upgrade and expand roads through Kalimantan in Indonesia and Mindanao in the Philippines. Meanwhile, Indonesia, Malaysia, and Thailand collaborated via a summit to endorse a green city action plan for Melaka in Malaysia. ADB assisted with the development of the plan, which will serve as a blueprint for other cities on economic–environmental balance.

The AIF, which is administered by ADB, cofi nanced two projects totaling $140 million. One project will provide better sewerage and wastewater treatment facilities in Indonesia; the other will improve power system reliability and reduce greenhouse gas emissions in Viet Nam. Myanmar joined the AIF’s board in 2014, so that all 10 ASEAN member countries, along with ADB, are now AIF shareholders.

SHARING THE BENEFITS OF GROWTH

In 2014, to help sustain inclusive growth in Southeast Asia, ADB provided support to disaster-aff ected communities and other vulnerable groups.

In the Philippines, ADB approved cofi nancing of $479 million to restore basic social services and rebuild communities aff ected by Typhoon Yolanda (international name Haiyan). This work will rebuild homes and livelihoods for people in 900,000 households across more than 6,000 communities.

A loan of $300 million will assist the government to establish an eff ective senior high school system, enhancing

ADB ANNUAL REPORT | 2014

employment opportunities for youth. This program is expected to better teach about 5.9 million students over 3 years.

In Cambodia, ADB paved the way for over 40,000 poor and disadvantaged women to undertake training that will improve their basic skills and enhance their chances of gaining employment. It also approved additional fi nancing to rehabilitate 257 km of rural roads and help 284,400 poor Cambodians recover from fl ood damage.

In Indonesia, ADB assistance will help upgrade basic infrastructure, and create new homes for people living in the slums of 20 cities, impacting the lives of 670,000 low-income families.

A loan of $21 million will assist livestock farmers in the Lao PDR to operate commercially. ADB will help improve animal husbandry and meat processing techniques, while providing training in accounting, marketing, and the use of business plans to access credit.

For central Viet Nam, ADB approved $85 million of additional fi nancing to support the upgrading of about 29,000 hectares of potentially productive land. This funding is also strengthening infrastructure to increase agricultural productivity and manage the eff ects of natural disasters. ADB supported a project to improve lower secondary schools in Viet Nam, with a focus on over 640,000 students from ethnic minorities. It also supported a microfi nance program to give low-income bank customers access to small loans that are sustainable and aff ordable.

ENVIRONMENTAL SUSTAINABILITY IN SOUTHEAST ASIA

ADB continued to support climate change adaptation and the environmentally sustainable management of natural resources across Southeast Asia. It helped rehabilitate and improve the climate resilience of rural roads in Cambodia, while providing support to a pilot program to improve urban water supply and sanitation infrastructure in the country’s Tonle Sap Basin.

In Viet Nam’s two largest cities, Ha Noi and Ho Chi Minh City, projects will improve energy effi ciency, promote traffi c effi ciency, and reduce greenhouse gas emissions, with funds from the Clean Technology Fund.

ADB helped mobilize resources to implement action plans in Indonesia, Malaysia, and the Philippines under the Coral Triangle Initiative that will help conserve and regenerate coastal and marine resources, while enabling communities to generate wealth.

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New Prosperity for an Ancient Trade Route

More than 1,200 years ago, during the Tang Dynasty, merchants from the Yunnan region the People’s Republic of China began forging trade routes to carry aromatic tea and other goods to the far corners of Asia.

One of these southern caravan trails meandered through what is today Luang Namtha Province in the Lao People’s Democratic Republic (Lao PDR), then crossed the Mekong River into Thailand.

ADB helped to revitalize these old trade routes for the people of the Lao PDR. It supported the construction of the Route 3 Highway, stretching from the country’s northern border with the People’s Republic of China (PRC) to the southern border with Thailand. It also fi nanced the construction of the 4th Thai–Lao Friendship Bridge, which spans the Mekong River.

“After the road was completed, trade volume increased more than 70%. Then, after the Friendship Bridge was completed last year, trade volume increased a further 12%,” said Tinnawat Silarug, chief of investigation at Thailand’s Chiang Khong Customs House.

Every morning, long convoys of trucks from the PRC and the Lao PDR stream across the bridge into Thailand, carrying produce, equipment, and other goods that will be in Bangkok’s bustling markets by nightfall. Tourism has also markedly increased for the Lao PDR. “We have more tourists than ever visiting this part of our country—about 20,000 people a month,” said Sibounheuang Phanthalak, director general of the 4th Mekong Friendship Bridge in the Lao PDR. “Most of the tourists are from the PRC and Thailand, but we’re getting more from ASEAN and western countries, too.”

With northern border crossings up signifi cantly, the Lao PDR’s export volume increased threefold between 2008 and 2012. The road and the bridge are at the heart of this transformation, helping deliver greater prosperity to communities all along this revitalized trade route.

SOUTHEAST ASIA

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MTR ACTION PLAN:
ADB will expand
private sector
development and
operations to 50%
of annual operations
by 2020.
Developing
the Private Sector
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ADB ANNUAL REPORT | 2014

s a cornerstone of economic growth throughout Asia and the Pacifi c, private sector development is a primary focus of Strategy 2020. A

ADB has long been an important fi nancier of private infrastructure and fi nancial intermediaries, and this was highlighted again in 2014. In a landmark year, ADB approved 25 private sector projects for a total of more than $1.9 billion, while cofi nancing of over $5 billion was generated. As it further expands its engagement with the private sector, ADB will promote inclusive and environmentally sustainable growth across the region.

The Midterm Review (MTR) of Strategy 2020 requires ADB to become more active as a project developer, helping prepare and bring projects to market. In response, ADB established the Offi ce of Public–Private Partnership (OPPP) in September 2014. The offi ce provides transaction advisory services to help countries prepare and deliver bankable public–private partnerships (PPPs). These partnerships are essentially long-term contracts between governments and privately owned companies to build and maintain public infrastructure. The PPP approach has been adopted globally as a model for delivering high-quality and sustainable infrastructure projects. However, in developing Asia, the use of PPPs has been impeded by a lack of resources to prepare appropriate projects for market. The OPPP supports ADB regional departments in their operations to promote and implement PPPs. ADB reinforced its commitment in November 2014 by establishing the Asia Pacifi c Project Preparation Facility (AP3F). This facility will provide assistance to the public sector agencies responsible for preparing and structuring PPPs in developing member countries (DMCs).

ADB’s fi nancing assistance to the private sector in 2014 comprised various modalities. These included loans, equity investments, credit enhancement products such as guarantees to banks, and B loans (funded by other banks).

MORE THAN

17,900 MW

of energy generation capacity installed between 2011–2014

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ADB also increased the use of risk transfers as a way of attracting third-party institutional capital into its investment activities, while better managing its own limited capital.

ADB introduced several reforms to its private sector operations during the year. As a result, ADB approved private sector fi nancing at volumes 19% higher in 2014 compared to 2013, with the number of deals at record levels. B-loan syndication activity was also particularly strong, mobilizing over $860 million.

BOOSTING SKILLS AND SUPPORTING BUSINESS

ADB recognizes that the resources required to plan, prepare, and deliver private investment opportunities can be signifi cant for individual governments. It therefore provides extensive support to help improve the skills of public service offi cials who are involved in preparing bankable projects for private investment. ADB also works to help create business environments that enhance the commercial viability of private investment.

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YOUR SAY:

The funding line for housing from ADB has made owning one’s home not just a dream but a reality.

Lakshman Silva, Chief Executive Offi cer of DFCC Vardhana Bank in Sri Lanka

Enhancing Capacity and Sharing Knowledge

ADB is collaborating with the World Bank and the Inter-American Development Bank to create a globally recognized PPP certifi cation and credentialing program. This will help establish professional standards in PPP design and implementation for public offi cials and participants from private enterprise.

ADB is also providing tailored support to individual DMCs. In October, it conducted an assessment of PPPs in Malaysia with the national PPP Unit, sharing international best practice to support their intended expansion of infrastructure PPPs, as well as for sharing Malaysia’s experience with other DMCs in Southeast Asia. In Myanmar, it is working with the government to lay the foundations for a national PPP program. In February, ADB approved technical assistance to the Ministry of Electric Power to help increase private investment in power generation, along with

DEVELOPING THE PRIVATE SECTOR

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AFP
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Opening the Pipeline of Private Investment

High-quality infrastructure—from reliable power and water supplies to well-built roads and airports—is central to a country’s development. In Asia and the Pacifi c, however, there is a serious lack of infrastructure. ADB puts the region’s infrastructure investment needs at $8 trillion from 2010 to 2020.

Public–private partnerships (PPPs) can be an eff ective tool to narrow the region’s infrastructure gap. PPPs are contractual arrangements where a government partners with the private sector to deliver infrastructure services. From simple contracts for privately-run services to more complex agreements such as build–operate–transfer, where private parties fi nance, build, and operate over a fi xed period to generate returns before transferring ownership to the government.

Good advice and preparation is key to structuring PPPs that entice private fi nance. In the Philippines, for example, ADB has been working closely with the government to prepare and implement PPPs for years. From just 11 projects in 2010, the Philippines now has 61 potential PPPs valued at about $3 billion or just over 1% of gross domestic product. The 61 projects include highways, national railways, urban light rail transit, classrooms, hospitals, and airports. One example, a PPP for the Mactan Cebu International Airport will now upgrade and expand facilities, which are straining to cope with increased traffi c and tourists. Demonstrating end-toend PPP support, ADB also played a key role in mobilizing the debt fi nancing, including $75 million of its own.

Projects like this prove that ADB can be more than a fi nancier. The MTR of Strategy 2020 concluded that PPP preparation and advisory resources were key. In September, ADB established the new Offi ce of Public–Private Partnership to provide independent transaction advisory services to developing member country governments and help structure bankable PPP projects. These services include fi nancial structuring, due diligence, documentation, marketing, evaluation, and facilitating fi nancing. The offi ce will also help to coordinate ADB’s PPP operations.

support for planning and public debt management. This means ADB is now engaged in PPP policy development and project management readiness in every country in Southeast Asia.

In Timor-Leste, the Pacifi c Private Sector Development Initiative (PSDI) worked with the PPP unit to strengthen the country’s ability to manage projects, particularly those for water, power, and transport.

Creating Positive Environments for Enterprise Through its support for policy and regulatory reforms, ADB strives to improve business conditions for private enterprise in individual DMCs. These reforms include more secure and transparent business regulations, and simpler tax and trade policies.

In December 2014, ADB approved the formation of the Mekong Business Initiative. The initiative, which is funded by $10 million from the Government of Australia, will focus on policy advice and advocacy to improve the business environment in Cambodia, the Lao People’s Democratic Republic (Lao PDR), Myanmar, and Viet Nam. It aims to increase the number of small and medium-sized enterprises in these countries to 1.5 million by 2023.

In Indonesia, ADB supported a range of reforms to improve the country’s commercial environment, including initiatives to accelerate priority infrastructure projects, and the establishment of a PPP unit in the Ministry of Finance.

In the Lao PDR, ADB assisted the government to develop a PPP regulatory framework and prepare four prefeasibility studies in education and health.

In the People’s Republic of China (PRC), ADB has assisted in the preparations for a national law, drafting of procedures, and guidance on PPPs. These activities are aimed at increasing business confi dence and attracting more private investment, especially in infrastructure. ADB is also assisting the PRC to establish a fund that will provide government fi nancial support to PPPs.

In Nepal, ADB helped the government prepare draft policy, legislation, and guidelines to build solid regulatory and institutional frameworks for PPPs. As of December 2014, the government had identifi ed fi ve potential PPPs, and plans to implement pilot projects to showcase potential.

Across DMCs in the Pacifi c, the PSDI has helped reduce lending risk and expand access to credit. The introduction of secured transactions and personal property securities will enable borrowers to use movable or unfi xed assets as collateral for loans. Since 2006, the PSDI has supported

ADB ANNUAL REPORT | 2014

the passage of laws in eight Pacifi c DMCs, six of which also have established registries for secured transactions. In 2014, the PSDI designed fi nancial products to expand the use of frameworks for secured transactions in Timor-Leste and

Preparing and Delivering Projects for Private Participation

To stimulate greater private investment, ADB provides extensive support to DMCs to identify and prepare viable and bankable projects, and ensure that well-developed projects are realized.

ADB support to the PPP Center in the Philippines resulted in the preparation and award of three national PPP projects in 2014. As of December, seven projects were under bidding, while 39 projects were in preparatory phases. World Economic Forum and G20 reports in 2014 cited the Philippines as a prime example of how governments can promote and manage PPPs.

ADB is also backing PPPs for projects that extend beyond national borders. In April, it provided technical assistance—cofi nanced with the Government of Canada and International Enterprise Singapore—to enhance regional project development under the Association of Southeast Asian Nations (ASEAN). This assistance will also further eff orts to link PPPs with the ASEAN Infrastructure Fund (AIF).

ADB continues to advise the Government of Mongolia on the country’s fi rst PPP project, a $1.3-billion heat and power plant in Ulaanbaatar. In June 2014, a private consortium agreed with the government to construct, fi nance, operate, and maintain the project over a 25-year period. In Central and West Asia, ADB continues to advise the consortia of national gas companies working to prepare and tender the 1,800-kilometer Turkmenistan–Afghanistan–Pakistan– India (TAPI) natural gas pipeline project. A milestone was achieved in November 2014 with the incorporation of the TAPI Pipeline Company Limited.

ADB has also secured endorsement and support from other multilateral development banks, international organizations, and some major national development banks, to develop jointly project preparation software under the International Infrastructure Support System. The software will provide guidance and templates to help the public sector better prepare infrastructure projects that can attract private investment.

DELIVERING FINANCIAL ASSISTANCE TO TARGETED SECTORS

Throughout 2014, ADB continued to support fi nancial market intermediaries and infrastructure development in the areas of energy (particularly renewable energy), water supply and sanitation, transportation, and urban

development. Education and agribusiness also emerged as focus areas.

The year was notable for projects with strong gender focus. A number of fl agship projects contained measures that allow women and girls to access more readily education, employment, and fi nance. These projects span rural education and aff ordable housing fi nance in India, food value chain development in Cambodia and India, and fi nancial inclusion in Tajikistan.

Moving into New Areas

ADB expanded its private sector operations into a number of new areas in 2014.

It made its fi rst investment in privately operated education, with a commitment of $2 million to Hippocampus Learning Centres (HLC) in India. HLC runs preschool and afterschool coaching programs for children in rural India, with each center supervised by a woman teacher from the local community. This is a pioneering, low-cost system for supplementary education in rural areas, where the reach of formal education has been limited or badly constrained.

In another fi rst, this time in private agribusiness across borders, ADB committed $16.5 million to support Akay Flavours & Aromatics, which operates in Cambodia and India. The company is investing to add value in the supply chain for spices, from climate-resilient and inclusive farming models to processing and export. This project aims to promote regional trade and foreign direct investment in Cambodia, while reducing rural poverty by creating opportunities for poor farmers.

During 2014, ADB commenced its private sector operations in Myanmar, making two signifi cant investments to improve the country’s commercial infrastructure. It approved total fi nancial assistance of $120 million—comprising a loan, an equity investment, a B loan, and a political risk guarantee— to revitalize about 10 acres of downtown Yangon, the country’s largest city. The area will become a thriving central business district located next to the central railway station and the Bogyoke Market. The development consists of a hotel with serviced apartments, two offi ce towers, a retail podium, a residential tower, restoration of a heritage building, and Myanmar’s fi rst district cooling plant. ADB also approved a loan of $100 million for connectivity infrastructure in Myanmar. The project will develop telecommunications towers, establish cold storage facilities, and support a logistics fl eet company.

For the fi rst time, ADB provided support for a port services company. It approved a loan of $40 million to Ocean Sparkle, one of India’s leading port operators, to acquire tugboats, platform supply vessels, and tug supply vessels. The loan is expected to boost confi dence for private investment in India’s port operations and maritime infrastructure.

DEVELOPING THE PRIVATE SECTOR

In the Philippines, ADB approved a loan of $75 million to GMR Megawide Cebu Airport Corporation to expand and renovate the passenger terminals of the Mactan Cebu International Airport. This is the fi rst ADB loan to the aviation sector in the Philippines, and a landmark PPP for the country. As the only international airport in the Visayas region that can handle large numbers of passengers, added capacity at Mactan Cebu International Airport will create new employment opportunities in the region.

Expanding Capital Markets and Financial Services

During 2014, ADB intensifi ed its support for micro, small, and medium-sized enterprises—engines of inclusive growth and key contributors to poverty reduction. It provided a $20-million loan to DemirBank in Azerbaijan, a $40-million loan to Khan Bank in Mongolia, and an $11-million investment (comprising a loan, equity, and a B loan) to AccessBank in Tajikistan.

To develop agriculture and agribusiness in India, ADB provided loans of $200 million each to Axis Bank and YES Bank. The loans will be used to help provide fi nance to poor farming households and women on low incomes in rural areas. ADB also approved an equity investment of $40 million in Olympus Capital Asia V Fund, supporting middle-market Asian companies operating in agribusiness and food, fi nancial and business services, and environmental development.

An equity investment of $30 million in Asia Environmental Partners II is helping to stimulate private equity participation in environmental fi nance across Asia and the Pacifi c, aiding environmentally sustainable growth in the region.

In India, ADB committed $125 million to Dewan Housing Finance Corporation to provide loans to low-income customers, at least half of them women, to buy aff ordable housing. This investment will help reduce poverty, create jobs, and raise standards of living.

In Sri Lanka, ADB is helping to expand access to fi nance for infrastructure development, and add to the level of

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MORE THAN
$15 BILLION
of trade fi nance
supported between
2011–2014
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private credit in the banking system, through a direct loan of $75 million and a B loan of $25 million to Hatton National Bank. This funding will contribute to inclusive growth and recovery in post-confl ict areas.

Directing Trade Finance Where It’s Needed

Without suffi cient fi nance to support export and import activities, trade cannot deliver its full potential to generate economic growth, create jobs, and reduce poverty.

In 2014, ADB conducted a study that estimated the global market gap for trade fi nance at $1.9 trillion, of which approximately $1 trillion is required in Asia. Companies surveyed said that expanding access to trade fi nance by 15% would result in 21% higher production and a need to hire 17% more people.

Through its Trade Finance Program (TFP), ADB works to close market gaps for trade fi nance by providing banks with guarantees and loans that support trade.

In 2014, the TFP facilitated almost 2,000 transactions valued at over $3.8 billion, with over $2 billion cofi nanced by banks, private insurers, an export credit agency, and International Enterprise Singapore. Over 98% of TFP transactions were in countries accessing the Asian Development Fund, and support was provided to 1,549 small and medium-sized enterprises, with 246 trade transactions between DMCs. A report on the TFP released by the Independent Evaluation Department concluded that the TFP had signifi cantly contributed to trade in Asia and to the development of a trade fi nancing sector which would not otherwise have existed.

Providing Finance for Vital Infrastructure

In 2014, ADB continued to pave the way for the private sector to participate in core infrastructure projects around the region.

In the key area of renewable energy, ADB approved an equity investment of $50 million to ReNew Power Ventures, a leading developer of wind-generated energy in India. It also approved a loan of $100 million to ACME Solar Energy to develop 200-megawatt solar photovoltaic power generation capacity across several projects in India.

In the conventional energy sector, ADB approved a loan of $75 million for a 341-megawatt gas power project in Bangladesh. The project will help alleviate Bangladesh’s severe power shortage, while reducing greenhouse gas emissions compared with coal or hydrocarbon power generation.

To improve wastewater and sewerage for the rural poor in the PRC, ADB provided a direct loan of $100 million and a B loan of $200 million to support the construction of a

ADB ANNUAL REPORT | 2014

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----- Start of picture text -----

ADB approved 25 private sector
projects for a total of more than
$1.9 B
in 2014
----- End of picture text -----

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series of small-sized wastewater treatment plants, and to build associated sewage pipelines across the country. The project is focused on rural townships situated along rivers, with signifi cant environmental challenges and on other areas sensitive to climate change.

Fostering Cofi nance and Partnership

ADB’s private sector operations leveraged signifi cant commercial resources to supplement its own pool of capital during 2014. It raised over $5 billion through cofi nancing, including over $2 billion generated through the TFP. There was robust growth in syndicated B loans and parallel cofi nancing. ADB’s private sector operations will continue to play a key role in mobilizing third-party capital, which is a strong focus under Strategy 2020.

Leveraging bank and development

partner resources is critical, given limited ADB capital and the growing needs of the region. In Georgia, ADB backed the development of a hydropower project in the southwestern region of Adjara—its fi rst commitment to a private energy project in the country. The project aims to supply the Adjara region and selected parts of northern Turkey with reliable

power, alleviating Georgia’s dependence on fossil fuel. ADB approved a direct loan of $75 million and mobilized $15 million from the Canadian Climate Fund for the Private Sector in Asia. It also worked closely with the International Finance Corporation and the European Bank for Reconstruction and Development in cofi nancing this challenging project.

In 2014, ADB innovatively utilized concessional funding from the Clean Technology Fund (CTF). In Indonesia, following the successful fi nancing of the Sarulla geothermal project in 2013, ADB approved a loan of $50 million for a 240-megawatt geothermal project across the Muara Enim, Lahat, and Pagar Alam regencies of South Sumatra, approximately 225 kilometers from Palembang. In northeastern Thailand, ADB approved a loan of $53 million and deployed $30 million from the CTF for an 80-megawatt wind farm in the Sap Yai District of Chaiyaphum Province. The project will further diversify Thailand’s energy mix, and help the country meet its clean energy targets.

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PPPs: A GLOBAL PERSPECTIVE

With public–private partnership (PPP) becoming an increasingly eff ective means of meeting the development challenges of Asia and the Pacifi c, sharing knowledge on PPP experiences is vital. ADB, together with the World Bank and the Inter-American Development Bank, has published a second version of the PPP reference guide. It presents a global overview of approaches and experiences in PPP implementation, along with more extensive case studies from Asia and the Pacifi c and InterAmerican regions.

DEVELOPING THE PRIVATE SECTOR

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----- Start of picture text -----

MTR ACTION PLAN:
ADB will become
a more dynamic,
agile, and innovative
institution.
Delivering an Effective
Organization
----- End of picture text -----

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ADB ANNUAL REPORT | 2014

he Midterm Review (MTR) of Strategy 2020 delivered a resounding recommendation: that ADB streamline its operations to provide better service to its member countries. T

ADB moved quickly to introduce measures to strengthen its capacity and eff ectiveness. It recalibrated its business model and institutional settings to improve project implementation, mobilize greater fi nancial resources, introduce additional fl exibility into managing staff resources, and strengthen knowledge work.

To achieve economies of scale and deliver value for money, ADB established a working group to improve project quality assurance and streamline its processes in fi nancing operations. In July 2014, it launched a new process for allocating technical assistance, linking incentives with performance, and increasing transparency. To improve project readiness, it extended by 2 years the pilot period of the facility used to quickly disburse fi nance to developing member countries (DMCs) for project development. It updated its corporate results framework, and is refi ning its guidelines for results frameworks at the country and project levels.

ADB further refi ned its products and processes, which are expected to enable it to transfer risk to a broader set of commercial cofi nanciers, freeing up existing capital for new transactions.

ADB is determined to become a more dynamic and agile institution. In 2014, it moved to reinforce staff skills, incentives, and human resource practices. Regional departments began sharing staff to bridge skills gaps, strengthen teamwork, and ensure that knowledge and experience is transferred across regions. Field offi ces, also known as resident missions, are being strengthened, too. They will play a larger role in managing knowledge operations, and have more authority to make decisions on procurement and disbursements.

ENSURING ADB DELIVERS RESULTS

Development Results

The Development Eff ectiveness Review (DEfR) process, introduced in 2008, measures ADB’s progress toward corporate targets and drives decision making. The 2014 DEfR assessed ADB’s performance through 91 indicators adjusted to refl ect the Midterm Review (MTR) of Strategy 2020 Action Plan and upgrades to the corporate results framework. It found that ADB’s operational success continued to rise, and did so mostly within budget. For the fi rst time, ADB achieved over 80% of its target outcomes. Activities such as cofi nancing, public– private partnerships, disbursements, budget effi ciency, project quality at entry, and operational alignment with Strategy 2020 all improved. The DEfR also found that implementation delays, and the uncertain fi nancial

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Independent Evaluation: Fundamental for Eff ectiveness

In September 2014, ADB hosted an international conference at its headquarters in Manila to mark 10 years of independent evaluation at ADB. This event attracted more than 200 participants, including representatives from 26 developing member countries. Attendees discussed the power of evaluation, learning, and innovation in addressing the development challenges of Asia and the Pacifi c.

ADB’s evaluation process changed dramatically in the decade between 2004 and 2014. It progressed from providing assessments of completed programs and projects to providing insightful, predictive, long-term input into corporate policies and programs.

The Independent Evaluation Department (IED) has played an important role in shaping ADB policies and direction. In 2014, the IED prepared its own, highly infl uential assessment of ADB’s Strategy 2020.

This assessment helped to inform the Midterm Review (MTR) of Strategy 2020, with actions identifi ed in the assessment contributing to the areas of inclusion, sustainability, and development eff ectiveness in the MTR of Strategy 2020.

Country evaluations have fed into the preparation of country partnership strategies and operational plans, as well as the design of programs and projects. In 2014, IED fi nalized evaluations on governance, natural disasters, social protection, and inclusive growth, which have contributed to the strategic and operational directions of ADB. Corporate evaluations on the role of technical assistance in ADB operations, an operational review of the institution’s safeguards policy, and the performance of its Trade Finance Program delved into ADB’s processes and programs.

DELIVERING AN EFFECTIVE ORGANIZATION

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Plan Points to Improved
Procurement
In 2014, ADB approved a 10-point action plan for procurement
reform, as an integral part of the Midterm Review of Strategy
2020 Action Plan. The procurement action plan and associated
reforms set out to reduce procurement time, increase
administrative effi ciency, and improve project delivery, while
maintaining sound fi nancial oversight. At each step in a project’s
cycle—from country partnership strategy and project concept
to project preparation and contract implementation—risk is
considered and weighed to determine procurement actions.
The reforms, which are now being implemented, provide for
review of, and greater reliance on, country systems. They include
revision of procurement thresholds, including international
competitive bidding limits and prior- and post-review limits.
A new administratively effi cient post-review method has
been introduced, and procurement decision-making is further
delegated and decentralized to regional departments and fi eld
offi ces. An online procurement review system has been launched,
and action has been taken to enhance practices in engaging
consulting services to improve quality and reduce time.
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A GUIDING LIGHT ON RENEWABLE ENERGY

On 27 February 2014, ADB Vice-President Bruce Davis announced that ADB headquarters had switched to using 100% renewable energy. The offi ces are now powered using energy generated by geothermal plants in Tiwi and Makiling–Banahaw, both of which are on the main Philippine island of Luzon, in addition to solar power generated by ADB’s rooftop solar panels. These geothermal and solar sources meet the entire energy requirements of ADB headquarters.

sustainability of many outcomes need particular attention.

Complementing the DEfR process, ADB published Together We Deliver in May 2014. The publication profi les projects supported by ADB that achieved strong development results, and outlines examples of best practice and innovation.

Progress on Global Partnership

ADB is committed to the eff ective development cooperation principles that were agreed at the Fourth High Level Forum on Aid Eff ectiveness in Busan, Republic of Korea in 2011. The principles highlight country ownership, focus on results, inclusive partnerships, transparency and accountability, and support for fragile and confl ict-aff ected states. The Global Partnership for Eff ective Development Cooperation (GPEDC) was launched at the 2011 meeting and provides a framework to track progress on the principles.

ADB tracks its progress using two methodologies from the GPEDC framework: operations aligned with country-owned results frameworks, and

sovereign operations using country (public fi nancial management and procurement) systems. Almost all ADB operations approved in 2014 were clearly linked to, or contributed to, output indicators in country sector results and targets of DMCs’ national development plans. The use of country systems captures the use of public fi nancial management systems and country procurement systems. Due to growth in policy-based operations, ADB’s performance on this indicator improved to 55% overall in 2014 from 50% in 2013, but still below the baseline of 59%.

During 2014, ADB contributed to the fi rst High-Level Meeting of the Global Partnership for Eff ective Development Cooperation in Mexico, which reaffi rmed eff ective development cooperation principles and highlighted new priorities— South–South cooperation and knowledge sharing, domestic resources mobilization, middle-income countries, and business as a partner in development. ADB published Global Partnership for Eff ective Development Cooperation: What it Means for ADB , which served as ADB’s report after the Mexico meeting.

ADB ANNUAL REPORT | 2014

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Since 2004, ADB has saved
$1.1 M
by reducing electricity, water,
and paper consumption;
and solid waste
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Transparency and Disclosure

ADB improved its transparency in 2014, and this was recognized in the Aid Transparency Index, which measured the transparency of 68 of the world’s leading donor organizations. ADB’s ranking jumped to fi fth in 2014, up fi ve places compared with 2013. ADB was the top-rated multilateral development bank in the index, with its transparency measure increasing from about 57% in 2013 to 83.8% in 2014.

As well as disclosing new categories of loan documents in 2014, ADB rolled out an upgraded tracking system to capture ADB responses to information requests received via its website. It also provided staff with updated guidance on implementing disclosure requirements.

STRENGTHENING STAFF CAPACITY

Human Resource Management

In 2014, ADB adopted a range of new measures to ensure that its DMCs are serviced by the most talented and motivated professionals available. The new talent management initiatives included increased use of social media for recruitment, focused outreach and recruitment to fi eld offi ces, streamlined staff evaluation periods, and more specifi c managerial selection. ADB also enhanced succession planning and introduced renewable fi xed-term contracts and 360-degree feedback for senior positions. It conducted an annual talent review exercise to better assess staff performance and potential, and established a structured skills audit to identify gaps in existing organizational skills.

ADB is also strengthening its fi eld offi ces. It is implementing outposting arrangements, and establishing regional hubs staff ed with specialists in safeguards, social development, procurement, and disbursement. It is also building a more gender-balanced, diverse, and inclusive workplace, through principles included in all human resource policies and programs.

Learning and Development

ADB continued to develop its staff , to meet business needs and for personal growth. In 2014, 119 internal programs were conducted, attended by 2,195 staff . Enhancing leadership and management skills was a priority. Some programs aimed to develop new managers, supervisors, mission leaders, and mission team members, while an orientation program for new directors and country directors was also launched. Other training programs aimed to reduce risks in procurement, improve project implementation, and respond to fi nancial reporting and audit requirements. ADB also introduced online programs on leadership, and diversity and inclusion. During the year, ADB provided 42 specialized programs and related activities to support its regional operations and maximize knowledge sharing among DMCs. These events were attended by 248 staff from various ADB fi eld offi ces across the Asia and Pacifi c region.

Safeguards

ADB worked with DMCs in 2014 to strengthen their legal frameworks and institutional capacity on safeguards. It also

DELIVERING AN EFFECTIVE ORGANIZATION

promoted the sharing of knowledge on managing safeguards among member countries. A total of 118 projects were screened and reviewed for potential impacts related to the environment, involuntary resettlement, and indigenous peoples. ADB conducted orientation seminars to improve staff ’s ability to address sensitive issues relating to safeguards. It held two thematic workshops: one on assessing and mitigating biodiversity impacts in projects; the other on improving environmental management planning and implementation. At the country and project levels, ADB provided training to DMC offi cials, implementing agencies, and project management units on implementing and monitoring safeguard plans and frameworks. It also carried out activities with key development partners to help reduce the costs of safeguard compliance at the country and project levels.

MAKING THE MOST OF ADB RESOURCES

Internal Administrative Resources

Through new effi ciency and cost-reduction measures, ADB’s administrative expenses grew only slightly in 2014. Net internal administrative expenses (IAE) totaled $528.44 million, including administrative expenses for the Independent Evaluation Department. The total represents a utilization rate of 88.3% against the original budget of $598.39 million. The budget carryover of $11.97 million, which is 2% of the net IAE budget, brought the net IAE after budget carryover to $540.4 million, representing a utilization rate of 90.3%. Savings were realized mainly from staff costs; staff development and relocation; business travel; consultants; and other administrative expenses such as communications, offi ce occupancy, offi ce supplies, contractual services, insurance, depreciation, and miscellaneous expenses.

The net IAE budget for 2015 is $617.7 million. Modest additional resources of 3.5% over the 2014 midyear budget estimate are required to eff ectively implement the MTR Action Plan, but over half of this additional allocation is expected to be covered through effi ciency measures. The 2015 budget also includes an annual capital budget of $8.8 million to fund cyclical capital expenditures.

Risk Management

ADB maintains a corporate culture that is acutely risk aware. It implements business processes that allow departments and offi ces to monitor, mitigate, and manage the specifi c risks associated with their operations. In 2014, in line with its increased activity in the private sector, ADB paid particular attention to underpinning its management of credit risks associated with private lending. It devoted substantial resources to improving the credit process for private sector transactions, implementing a new technology platform for credit risk management, and launching a new operational risk management approach across the organization. ADB also provided technical assistance to fi nancial institutions in Central Asia and the Pacifi c to expand their knowledge and capability in risk management.

Audit

ADB’s Offi ce of the Auditor General (OAG ) provides independent and objective audit and advisory services designed to improve ADB operations. It provides assurance that internal controls designed to manage risks and achieve ADB’s development objectives are operating effi cently and eff ectively. It also plays a key role in evaluating and monitoring implementation of ADB operational and strategic policies.

It issued 19 audit reports in 2014, covering sovereign operations, nonsovereign operations, risk management, treasury, information technology, and fi nance and administration. It monitored the implementation of audit recommendations, and validated the actions of business units to mitigate risks.

The OAG also completed 16 advisory engagements on internal processes, provided advice on the audit requirements of donors and cofi nanciers, and participated in key committees. ADB departments and offi ces consult with OAG for advice on a new process or for training. It also collaborated with external agencies on professional practices in internal auditing, and launched an internal auditing apprenticeship program.

In August 2014, the OAG hosted the fi rst forum for heads of internal audit for the Philippines’ Association of Government Internal Auditors.

Integrity and Anticorruption Activities

ADB proactively addresses any corruption in activities it fi nances, supports, or administers. In 2014, it blacklisted 139 individuals or organizations for integrity violations. During 2014, ADB held 55 training events on integrity, and developed 14 knowledge products to share insights from integrity investigations and procurement-related reviews.

ADB staff and external stakeholders are doing more to prevent and report integrity concerns. In 2014, the number of reports by ADB staff of possible integrity violations reached 89, while reports by external parties increased to 132. In April, ADB hosted the 5th International Financial Institutions Private Sector Integrity Conference, which was attended by 35 participants from the International Monetary Fund, the World Bank, regional banks, International Finance Corporation, Multilateral Investment Guarantee Agency, Council of Europe Development Bank, European Investment Bank, and European Investment Fund. ADB led discussion on policies, processes, and approaches for ensuring integrity in private sector operations.

Administrative Services

ADB has invested in providing its staff with safe, secure, and comfortable workplaces that respect the natural environment. In February 2014, ADB announced that it would use 100% renewable energy to power its headquarters, preventing approximately 7,800 tons of greenhouse gas emissions by the year’s end. Other green initiatives and conservation programs in 2014 saved around $100,000. Since 2004, the organization

ADB ANNUAL REPORT | 2014

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Accountability: Building
on 10 Years of Feedback
ADB marked 10 years of the Accountability Mechanism in October.
The Accountability Mechanism provides avenues for people
who have been adversely aff ected by ADB-assisted projects to
voice objections, seek solutions to problems, and report alleged
noncompliance with ADB operational policies and procedures. The
mechanism consists of two separate but complementary functions:
problem solving (led by the Offi ce of the Special Project Facilitator
– SPF) and compliance review (led by the independent Compliance
Review Panel – CRP). In 2014, SPF reviewed the cases of people
aff ected by ADB-supported projects in Samoa’s Promoting
Economic Use of Customary Land technical assistance and the
Agribusiness Support Project. Problem solving in this complaint
is still ongoing, while a complaint on Nepal’s Decentralized Rural
Infrastructure and Livelihood Project was resolved amicably among
its stakeholders. The CRP issued a report of its review of a railway
project in Cambodia. Elements of noncompliance were found in the
railway project, and ADB worked throughout the year with aff ected
parties to address these issues.
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has saved $1.1 million by reducing its consumption of electricity, water, paper, and generation of solid waste. The modernization of air-conditioning and elevator systems will result in annual savings of about $650,000 in electricity and maintenance costs. New models for business travel and food services, and the phased implementation of an electronic requisition and management system, are expected to produce savings of $1.2 million. ADB achieved ISO 22301:2012 certifi cation in April 2014 for meeting business continuity management requirements and standards.

About the Third Atrium: The Third Atrium of ADB headquarters was offi cially opened on 11 November 2014. The new building provides 31,000 additional square meters of offi ce space and facilities. While it refl ects the architectural character of the main building, its carbon footprint is signifi cantly lower and environmental impact is minimized. Features include increased natural lighting; rainwater harvesting and roof drainage; a skylight that generates electricity; solar panels on the roof deck; energyeffi cient air conditioning, lighting, and elevators; native plants with minimal watering needs; and drip irrigation.

Information Technology

In 2014, ADB improved and upgraded its information and communication technology (ICT) systems and knowledge base to meet the recommendations of the MTR of Strategy

Implementation of wireless services in headquarters, and e-mail access on personal mobile devices, allowed staff to eff ectively access and share information. Systems were deployed to make project procurement faster, and to provide online access to administrative services. ADB decentralized operations to fi eld offi ces by optimizing ICT connections between fi eld offi ces and headquarters, ensuring fast, accessible, reliable, and secure exchange of information. It also provided training to fi eld offi ce staff to improve ICT knowledge and make ICT use more productive. ADB conducted the ICT Week 2014 knowledge-sharing event, bringing together ADB staff , aid and development specialists, and technology experts.

Mutual Understanding

The ADB ombudsperson promotes collaboration among ADB staff , providing informal help to resolve workplace issues. In 2014, more than 150 staff sought assistance from the ombudsperson to resolve concerns. To raise awareness of the service, the ombudsperson made presentations to all departments within headquarters and each fi eld offi ce. He also met periodically with the ADB President and senior management to provide feedback on emerging workplace concerns. The ombudsperson made presentations on best practices at the International Ombudsman Association Annual Conference and the United Nations and Related International Organizations Ombudsman and Mediators Group meeting.

DELIVERING AN EFFECTIVE ORGANIZATION

ACKNOWLEDGMENTS

Board of Directors Working Group on the Annual Report 2014

Richard Sisson (Chair); Hideo Fukushima; Gaudencio Hernandez, Jr.; René Legrand; Michael Strauss; Wenxing Pan *

* Replaced Alternate Director Guoxi Wu on 2 December 2014.

The Board of Directors Working Group on the Annual Report 2014 would like to thank all ADB departments and offices for their contributions to this report.

COVER PHOTO: India’s chili farmers will reap the benefits of a $16.5-million loan from ADB to one of the country’s leading spice producers, which will help the company expand their products and markets. CREDIT: Rakesh Sahai/ADB

Every effort has been made to ensure the accuracy of the data used in this publication. Variations in data in ADB publications often result from different publication dates, although differences may also come from the source and interpretation of data. ADB accepts no responsibility from any consequence of their use.

By making any designation of or reference to a particular territory or geographical area, or by using the term “country” in this document, ADB does not intend to make any judgments as to the legal or other status of any territory or area.

In this publication, “$” refers to US dollars.

ISSN 306-8370 Publication Stock No. FLG147007

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Printed in the Philippines

Asian Development Bank 6 ADB Avenue, Mandaluyong City 1550 Metro Manila, Philippines [email protected] www.adb.org

Subscriptions to ADB’s Annual Report are available to reference libraries and institutions. To subscribe, e-mail [email protected]

==> picture [91 x 149] intentionally omitted <==

Annual Report 2014 is printed using vegetable oil-based inks on recycled paper.

Printed on 100% recycled paper

VIII

The region is changing fast. ADB too must change. ADB President Takehiko Nakao speaking at ADB’s 47th Annual Meeting in Astana, Kazakhstan in May 2014.

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AI assistant

ASIAN DEVELOPMENT BANK — Annual Report 2014

64443_rns_2015-05-10_62763e6a-76fd-4841-9319-4c3d64c868ff.pdf

CONTENTS

CHAPTER 1

CHAPTER 2

CHAPTER 3

CHAPTER 4

USB CONTENTS

President’s Message

Management Team

Board of Directors

COMMITTEE WORK

CHANGING THE DYNAMICS

ENGAGING OUR BORROWERS

Financial Hi hli hts g g

FINANCIAL OPERATIONS

Sovereign and Nonsovereign Approvals, 2010–2014

AVAILABLE RESOURCES

Resources as of end of period

Hundreds of millions of people remain in poverty.

MORE THAN

68.75 MILLION TONS

Turning the Soil to Turn Lives Around

STRATEGIC FOCUS: RESPONSIVENESS, RELEVANCE, EFFECTIVENESS

Toward 2020: ADB’s Ten-Point Action Plan

UNIVERSAL ENERGY ACCESS GETS A BOOST

SECTOR HIGHLIGHTS: INVESTING FOR RESULTS

YOUR SAY:

THEMATIC HIGHLIGHTS: INCLUSION FOR ALL

LEVERAGING ADB RESOURCES: MORE DYNAMIC SOLUTIONS

MORE THAN

1.66 MILLION TEACHERS

MORE THAN

2.3 MILLION

OPERATIONAL HIGHLIGHTS

YOUR SAY:

DRIVING TRADE BY SHARING KNOWLEDGE

Smoother, Safer Travel in Kazakhstan’s Remote Areas

THE DIRECT ROUTE TO REGIONAL COOPERATION

INCLUSIVE GROWTH THROUGH EDUCATION AND BUSINESS

OPERATIONAL HIGHLIGHTS

The Greening of Gansu

WORKING AS ‘ONE’ IN EAST ASIA

DEVELOPMENT BEYOND BORDERS

FINDING LONG-TERM ANSWERS TO POVERTY

YOUR SAY:

A PATH TO ENVIRONMENTAL SUSTAINABILITY

OPERATIONAL HIGHLIGHTS

YOUR SAY:

SOLUTIONS THROUGH KNOWLEDGE SHARING

HUNDREDS OF ISLANDS, ONE VISION

LIFTING THE PACIFIC OUT OF POVERTY

THE VALUE OF THE ENVIRONMENT

A Flying Start for Island Business

MORE THAN

5 MILLION

OPERATIONAL HIGHLIGHTS

SHARING KNOWLEDGE TO SHARE REWARDS

YOUR SAY:

NEW OPPORTUNITIES FOR REGIONAL STRENGTH

GROWTH THAT EMBRACES EVERYONE

PROSPERITY WITH THE PLANET IN MIND

PLANTING SEEDS OF HOPE IN NEPAL

MORE THAN

12.3 MILLION

OPERATIONAL HIGHLIGHTS

YOUR SAY:

A PARTNERSHIP IN KNOWLEDGE

CLOSER REGIONAL COLLABORATION

SHARING THE BENEFITS OF GROWTH

ENVIRONMENTAL SUSTAINABILITY IN SOUTHEAST ASIA

New Prosperity for an Ancient Trade Route

MORE THAN

17,900 MW

BOOSTING SKILLS AND SUPPORTING BUSINESS

YOUR SAY:

Enhancing Capacity and Sharing Knowledge

Opening the Pipeline of Private Investment

Preparing and Delivering Projects for Private Participation

ASIAN DEVELOPMENT BANK Annual Report 2014