ADB eyes to double operation for DMCs in next 4 to 5 years

THE Asian Development Bank (ADB) is keen on doubling its private-sector operations in the next four to five years in response to rising demand from developing member- countries (DMCs) like the Philippines.

In a phone interview, head of private-sector lending at ADB Todd Freeland told the BusinessMirror that demand for private-sector lending is rising among DMCs because of the economic growth that these economies are experiencing.

Freeland said within five years, the Manila-based multilateral development bank projects that almost all of the DMCs will reach middle-income or upper middle-income status.

“Most of developing Asia is rising up out of poverty and certainly within the next five years, almost all of developing Asia will be in the middle-income or upper middle-income category, and when an economy evolves into those stages, their needs evolve, as well,” Freeland said.

“What we have found is that once [you] get to the middle-income strata, you are better equipped, better prepared, and you actually need the private sector to take a bigger role in the overall development equation and so we’re just responding to that need,” he added.

The World Bank, which has the most used income classification information, classifies the Philippines as a lower middle-income country with a per-capita income of between $1,046 and $4,125.

Upper middle-income countries, meanwhile, have a per-capita gross national income of $4,126 to $12,735. Upper middle-income countries that are also part of ADB’s list of DMCs include Malaysia and Thailand.

“We’re on a significant growth trajectory as you’ve seen in the press release, we’re up about 60 percent over the last two years. We’re going to hopefully double those operations again over the next four or five years,” Freeland said.

In a news statement, ADB said that it has approved a record $2.6 billion of new financing and investments for the private sector in 2015, a 37-percent increase from a year earlier and 62 percent higher than in 2013.

With this, ADB said its private sector-investment portfolio has increased to over $8 billion, while its private-sector operations are now targeted to double from current levels by 2020.

ADB seeks to catalyze the flow of third-party commercial financing into its transactions through a variety of cofinancing and risk-mitigation products.

In 2015 ADB’s private sector cofinancing was over $4.5 billion, representing over 40 percent of total ADB cofinancing volume during the year, and including nearly $1.5 billion of B loan syndications and risk transfers across such diverse markets as Azerbaijan, the People’s Republic of China, India and Myanmar.

ADB also continued to ramp up its efforts to create more commercially viable public-private partnerships (PPP) in the region, highlighted by its service as transaction advisor for the Philippines’s largest-ever PPP, a $3.8-billion investment in the North South Railway and commuter rail line.

“By promoting an improved business climate, with enhanced access to more flexible financing solutions and trade facilitation tools, ADB is helping the private sector create high quality jobs and increase living standards across Asia and the Pacific,” ADB President Takehiko Nakao said.

ADB also said its private-sector operations also reached record levels in strategic priority sectors in 2015, including climate change, frontier economies, gender equality and inclusive business.

The Manila-based multilateral said over 30 percent of private-sector transactions in 2015 were focused on climate change and/or renewable energy.

This included the first “green bond” in the region for a geothermal operator in the Philippines, an innovative credit-enhanced project bond for the refinancing of a wind-power company in India, and the financing of new wind-power generation in Thailand.

Further, over 40 percent of transactions in 2015 were in frontier economies—defined as lower-middle-income and low-income countries, excluding India.

It added that two-thirds of private-sector transactions in 2015 contained specific gender elements, including projects that directly target women, as well as those that connect households to services that are relatively more beneficial to women, such as access to health, finance, energy and water.

In addition, inclusive business transactions targeting the economically disadvantaged accounted for 26 percent of ADB’s private-sector financings during the year, and the majority of the bank’s over $750 million of financing to financial institutions in 2015 was directed to financial inclusion and gender equality in diverse markets, such as Georgia, India, Kyrgyz Republic  and Sri Lanka.

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