LOCAL businesses were among the top beneficiaries of the nonsovereign operations (NSOs) of the Asian Development Bank between 2008 and 2020, an ADB Independent evaluation revealed.
Data showed the country received a total of $682 million or 3 percent of the commitments. The debts financed eight projects in the Philippines.
The data also showed the Philippines also received the most nonsovereign technical assistance (TA) grants worth $3.3 million between 2008 and 2020. This covered 11 projects and accounted for 2 percent of the total TA NSOs for the period.
“From 2008 to 2020, there was a noticeable uptrend in the amount and number of committed NSO projects,” the ADB’s Independent Evaluation Department (IED) said.
The ADB approved $26.9 billion in 350 private sector projects and $143.2 million in 141 technical assistance projects during the review period.
The evaluation found that ADB delivered “additionality” in 69 percent of the evaluated nonsovereign projects, although the satisfactory rate has been trending downward.
The ADB’s IED said that while additionality interventions have contributed to positive development outcomes, mainly in the energy and finance sectors in Southeast Asia, South Asia, and Central and West Asia, their full potential for value addition was “diluted by an inadequate system for ex ante assessment and monitoring of additionality during the review period.”
The IED explained that additionality is a core principle that guides ADB’s support for the private sector and is classified as either financial or nonfinancial additionality.
It added that financial additionality entails the provision of financing that is not readily available from the commercial market at reasonable terms. Nonfinancial additionality is provided through contributions to risk mitigation, standards setting, or capacity building.
“This variance in the application of additionality is risky because of the possibility that, at least in some cases, ADB’s support could distort the market and crowd out private financing,” IED Director General Emmanuel Jimenez, however, said.
“This can negatively impact the long-term sustainability of economic development, including attracting much-needed resources to combat climate change and meet other sustainable development goals,” he added.
The ADB said “additionality more specifically refers to the multinational lender’s set of inputs or services that help. lead to unique value addition, ultimately leading to anticipated development results.”
“For these inputs and services to qualify as ‘additional,’ they have to complement and not substitute for what the private sector can provide,” the ADB said.
The IED recommended that the Manila-based multilateral lender should strengthen its approach to additionality in its private sector operations to ensure that it does not crowd out or displace private and commercial financing.
The report recommends that ADB includes additionality and development effectiveness as core areas of strategic focus for its nonsovereign operations, including making financial additionality a minimum precondition for project approval.
The report also recommended that ADB scale up the good practice of assessing additionality when preparing country partnership strategies.
The IED also said there is a need to further integrate “additionality” into existing systems to ensure better tracking, monitoring, and reporting and institute a capacity development and training program on additionality for staff and other stakeholders.
