ADB raises share of project funding
ADB raises share of project funding
P. Parameswaran, Agence France-Presse, Manila
The Asian Development Bank (ADB) is to substantially increase
its share of funding for projects in developing member countries
to help them tide over fiscal and other financial constraints,
officials said.
The Manila-based bank's funding share has been between 40 and
80 percent of the cost of projects since 1998.
Effective Jan. 1, 2003, ADB's minimum share would rise to 65
percent but the ceiling would remain largely unchanged, Ann Quon,
the bank's director of external relations, told AFP Thursday.
"The bottomline is that ADB is now able to provide a larger
proportion of project cost financing than done previously," she
said.
Although the change applies only to new project loans, it will
be a welcome relief to nearly 33 countries banking on the ADB for
funding of projects ranging from micro-finance banking to sewage
systems.
Compared with other multilateral financial institutions, such
as the World Bank and the Japan Bank for International
Cooperation, the ADB gives the smallest funding share for
projects.
"The new ruling will now narrow the difference between ADB and
the other multilateral financial institutions in terms of
percentage of project share funding," Quon said.
In devising the change, the ADB also considered the tighter
fiscal situation in the region and the "lingering" effects of the
Asian financial crisis in 1997/8 and the subsequent Russian
financial crisis, she added.
Last year, ADB lent a total of $5.7 billion by taking stakes
in 76 projects, mostly in Asia, including in Afghanistan where it
resumed operations for the first time in 23 years.
ADB's loan value is expected to increase substantially in 2003
with its higher share in project funding.
The ADB's project cost-sharing limits are based largely on a
country's per capita gross national product (GNP) and external
debt repayment capacity, officials said.
Under the new criteria, Quon said, ADB would shoulder 65
percent of project costs -- from 40 percent previously -- in the
Philippines, Fiji, Kazakhstan, Malaysia, Thailand, Turkmenistan
and Uzbekistan.
In China, India, Indonesia and Papua New Guinea, ADB's stake
in projects would increase from 60 percent to 70 percent.
The bank's funding limit would be raised to 75 percent from 70
percent in Azerbaijan, Bangladesh, Marshall islands, Federated
States of Micronesia, Pakistan, Sri Lanka, Tonga and Vietnam.
ADB would however maintain its 80 percent funding limit in
Afghanistan, Bhutan, Cambodia, Kiribati, Kyrgyzstan, Laos,
Maldives, Mongolia, Myanmar, Nepal, Samoa, Solomon Islands,
Tajikistan and Vanuatu.
The bank's largest borrowers last year were India at about
$1.2 billion, Pakistan at $1.1 billion, China at $900 million and
Indonesia at $800 million.
The ADB has 61 member economies as its shareholders, of which
Japan and the United States are the largest.
Thomas Crouch, ADB's Philippine country director, said the
bank's new ruling on project cost-sharing limits was in line with
its emphasis on social development.
In the Philippines, for example, projects might not
necessarily generate income but contributed to poverty
eradication -- the bank's key goal, he told AFP.
Crouch said the ADB was considering financing several projects
in the agriculture, social and finance sectors in the Philippines
this year, including in the troubled and poverty-stricken
southern Mindanao area.
"The projects we are hoping for in the Philippines include a
non-bank financial governance program, like involving bond
trading and micro-finance, as well as in education and water
resources," he said.
Last year, the bank allocated $40 million dollars in project
loans in the Philippines and supported reforms in the country's
key power sector through a partial credit guarantee for a $500-
million bond issue.