January 14, 2020: The Asian Development Bank (ADB) will sharpen the focus of its private sector operations on complex, innovative, smaller, and sometimes riskier projects in challenging markets and sectors, and enhance efforts to address climate change and support women under an operational plan that will guide ADB’s nonsovereign assistance over the next five years.
The Operational Plan for ADB’s Private Sector Operations, approved today, notes that a healthy private sector is key to meeting persistent development challenges. In Asia and the Pacific, these include financing gaps that thwart the construction of modern infrastructure, slow the creation and growth of businesses, and suppress household savings by excluding poor communities and particularly women from the banking system.
“ADB’s private sector operations will lead by example to bridge these gaps and meet the challenges of our rapidly changing region,” said the Director General of ADB’s Private Sector Operations Department Mr. Mike Barrow. “We will champion new products, financing structures, and companies, and expand our work in emerging sectors such as agribusiness, education, and health, while sharpening our already substantial focus on addressing climate change. We will redouble our efforts in countries facing unique development challenges like those in fragile and conflict-affected situations and small island developing states, and will focus heavily on investments that benefit women.”
A larger share of private sector projects will be higher risk, innovative, and strongly developmental. Smaller projects with high development impact will be encouraged. To manage risks and ensure financial sustainability, lending and investment decisions will be based on a thorough understanding of risks and rewards. Smaller deal sizes and a more diverse range of countries, sectors, and clients will help to manage portfolio risk.
“ADB will prioritize development impact and pursue quality of investment over volume while managing risk effectively,” said Mr. Barrow. “This is vital in our renewed focus on the region’s most vulnerable countries, where smaller and perhaps riskier projects in areas like tourism or agribusiness can have an outsized development impact.”
Private sector operations will support the priorities of ADB’s Strategy 2030. The operational plan’s core sectoral objectives include clean energy, environmental infrastructure such as waste management, low-carbon transport, accessible information and communications technologies, agribusiness, quality education and health services, and a vibrant financial sector. ADB will build initiatives to support the incubation of cutting-edge technologies for the region.
Loans and guarantees will remain principal instruments, but the nonsovereign product range will be revamped. Local currency financing will expand to constitute most private sector financing by the end of the five-year period. Equity investments are targeted to double, and support will increase for public–private partnerships including advisory services provided by ADB’s Office of Public–Private Partnership. Expanded partnerships with institutional investors will allow ADB to promote development without distorting local markets, with every dollar in financing for its private sector operations matched by two and a half dollars of long-term cofinancing by 2030.
ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.