Asian Development Bank (ADB)
Asian Development Bank was created in this context. Efforts to create ADB had started in August 1963, but they gained momentum only after the USA and Japan offered to subscribe U.S. $200 million each during April 1965. The formalities were completed by mid 1966 and ADB came into being from the 22nd of August of that year. It started functioning in December 1966. Its membership was open to the regional countries and the non-regional developed countries from where resources were to be obtained. ADB has 67 members.
Organization Structure of Asian Development Bank
The apex policy making body is the Board of Governors which is composed of representatives from members countries. In all there are 57 governors. The policies are implemented by the Board of Directors. The chairman of the Board of Directors is the President and professional and non-professional staff members. In practice, decisions are taken by consensus, although there is provision for voting. Every member country has one basis vote plus proportional votes depending upon the number of shares held in the capital structure. The regional members carry over two-thirds of the votes.
Role/ Functions of Asian Development Bank
1. Lending Operations: As per the Articles, any developing member country of the region can borrow from Asian Development Bank for any public or private sector enterprise. Funds are channeled from OCRs if the borrowing country possesses the necessary debt service capacity. If not, concessional loans are provided from the special funds. While lending, ADB takes into account the following consideration:
- General economic conditions of the borrower,
- Its access to other sources of funds,
- Its actual need for the funds and its development plans and priorities.
It aids only those projects that are economically and socially viable. Economic viability includes among other things, technical feasibility, financial soundness of the project,removal of economic bottlenecks, and raising of productivity, etc.
2. Co-Financing: Asian Development Bank lends not only on its own account, but also participates in co-financing activities, particularly when the project cost is large. It also arranges for the participation of other public and private finance-lending institutions so that the borrowers get large resources and the lending risk of individual lenders is reduced.
3. Technical Assistance: Technical Assistance is channeled for identifying, implementing and operating of projects or for strengthening the capability for formulating of development strategies in developing member countries (DMCs). Technology transfer is often a part of technical assistance. It is normally provided out of TASF either as a loan or as a grant.
4. Equity Investment: Equity investment is available to private-sector enterprises and to financial institutions. The practice was started in 1983. Now it is common. This way ADB also provides risk capital.
5. Regional Cooperation: Besides the traditional role of financing projects and programmes, ADB helps the process of regional cooperation among DMCs. Since different member countries are at different stages of development, regional cooperation benefits them all. A phased approach is being followed since 1992.
- In the first Phase, Asian Development Bank tries to create awareness through locating the potential areas for cooperation and through quantifying the potential benefit.
- In the second Phase, it identifies the particular projects and programmes. In the third phase, funds are extended for identifies projects and programmes that enhance regional cooperation.