ADB Annual Report 2014

Improving lives throughout Asia and the PacificANNUAL REPORTASIAN DEVELOPMENT BANK

CONTENTs3 President’s Message4 Board of directors6 financial HigHligHtscHaPter 18 Responding to the Needs of Asia and the PacificcHaPter 216 Central and West Asia20 East Asia24 Pacific28 south Asia32 southeast AsiacHaPter 336 Developing the Private sectorcHaPter 442 Delivering an Effective OrganizationUsB CONTENTsannual rePort 2014financial rePortoPerational dataorganiZational inforMationadB MeMBer fact sHeets

POVERTY ASIA AND E DOWN THE PACIFIC IS A More people have escaped poverty CHANGING A in the past 20 years FAST L than ever before E PREGIONAL FUNDINGGAPS TO$8 trillion for infrastructure$240 billion to neutralizeclimate change impact AND SO IS ADBADB’s long-term strategic framework Strategy 2020 There are still ADB’s Mi commits us to help the region and its people many challenges to tackle operation develop through: in our region—traditional ones and emerging ones. challInclusive Environmentally Regional AmDeBeTtomnthiueHsstipeaoclslihotoatlrleanngsefosrwmitthoeconomic sustainable integration Increase growth reforms and innovative emphasis growth solutions. inclusiven WHO WE ARE President Regional Takehiko Nakao members ADB is an international development finance institution. We provide loans, grants, and expertise to our developing member Members countries to help them alleviate poverty and create a world in which everyone can share in the benefits of growth.

INEQUALITY ADB AT WORK UP The gap between In 2014, our assistance totaled rich and poor is growing . BILLION includingEMERGING ISSUES $13.69 billion financed by ADB andAS NATIONS DEVELOP $9.24 billion in cofinancingAging populationsLack of good jobs REGIONSEnvironmental degradationPersistent poverty $5.21 billion $3.00 billion CENTRAL AND WEST ASIA EAST ASIA $0.58 billion $7.18 billion REGIONAL SOUTHEAST ASIA $6.75 billion $0.20 billion SOUTH ASIA PACIFICidterm Review of Strategy 2020 sharpens our SECTORS FINANCE HEALTHnal focus to better address the development 3.50 billion 0.03 billionlenges of a transforming region through: ENERGY 6.65 billion INDUSTRY & TRADE EDUCATION 0.98 billion 0.48 billioned Promoting Strengthening AGRICULTURE, INFORMATION &s on innovation and support for NATURAL RESOURCES & COMMUNICATIONness RURAL DEVELOPMENT resilience middle-income TECHNOLOGY countries 1.45 billion 1.79 millionHeadquarters Founded WATER & OTHER MULTISECTORManila, Philippines 1966 URBAN INFRASTRUCTURE 0.79 billion Total & SERVICES PUBLIC SECTOR employees 2.29 billion MANAGEMENT 2.41 billion TRANSPORT 4.36 billionNonregional ,Field o cesmembers

ANNUAL REPORTASIAN DEVELOPMENT BANK

MTR ACTION PLAN: ADB will expand support for the environment and adaption to climate change.2 ADB ANNUAL REPORT | 2014

President’s Message make ADB more efficient and effective. Helping the region address its enormous infrastructure needs will remain our focus, but we will channel more resources into areas where they’re needed most: private sector development, climate change, disaster risk prevention and management, and social protection. We will also double our investments in health and education. Inclusiveness, innovation, and a commitment to share our development knowledge and expertise will inform everything we do.Asia and the Pacific has undergone profound change since I’m pleased to share these initiatives in this report. Inthe turn of the millennium. Only 15 years ago, poverty was a September, for example, we established a public–privateblight on our region. Today, we have achieved the first of the partnership office to provide governments with advice onMillennium Development Goals—to halve extreme poverty— how to engage private sector financing and expertise forahead of the 2015 deadline. But statistics don’t always tell infrastructure projects (see page 37). We’ve also streamlinedthe whole story. As I visit projects around the region and our procurement process to minimize project delays (page 44).meet with our development partners, I see too many people An initiative to combine our concessional lending operationsliving in hardship. They may now earn more than $1.25 a with our ordinary capital resources balance sheet willday—the official measure of extreme poverty, which includes significantly enhance ADB’s lending capacity (page 14).about 700 million people—but it still isn’t enough to provideadequate shelter, nutritious food, or a safe environment for In 2014, ADB approved $22.93 billion in developmenttheir children. assistance, including $13.69 billion from ADB and special funds, and a record $9.24 billion in cofinancing. We also disbursedWhen defining extreme poverty, we must take into account over $10 billion for the first time in 5 years. These numbersthe impact on Asia’s poor of rising food prices and more emphasize ADB’s push for improved project implementationfrequent natural disasters. Doing so will raise the poverty and for greater private sector participation and cofinancingthreshold to $1.51-a-day and mean that almost 1.8 billion schemes to help fund the estimated $8 trillion required topeople are identified as poor. Poverty on this scale is close the region’s infrastructure gap over the next decade.unacceptable. Helping those who have fallen behind, or havenever caught up, must remain the priority. My resolve is that ADB remains proactive and responsive, striving for even greater achievements in poverty reduction as we approach 2020.The Asian Development Bank (ADB) has examined its own Takehiko Nakaopriorities. In 2014, some 6 years after we introduced our long- President and Chairmanterm strategic agenda, Strategy 2020, we again took stock to Board of Directorsensure we remained relevant and responsive to the evolvingneeds of our member countries. The Midterm Review (MTR)of Strategy 2020 called on ADB to sharpen and rebalanceits operational focus. In response, the MTR Action Plan,approved in July, contains more than 190 initiatives that willManagement TeamLeft to right: Vice-Presidents Bindu N. Lohani, Lakshmi Venkatachalam, Stephen P. Groff, Thierry de Longuemar, Bruce L. Davis, Wencai Zhang;Managing Director General Juan Miranda; The Secretary Woo Chong UmPresident’s Message 3

Board of DirectorsFront row, from left: Directors Maurizio Ghirga, Umesh Kumar, Maliami bin Hamad, Kazuhiko Koguchi, Robert M. Orr; President and Chairman of the Board of DirectorsTakehiko Nakao; Directors Yeo Kwon Yoon, Zhongjing Wang, Anthony Baker, Muhammad Sami Saeed, David Murchison. Back row: Alternate Directors René Legrand;Iqbal Mahmood; Khin Khin Lwin; Hideo Fukushima; Michael Strauss; M P D U K Mapa Pathirana; Wenxing Pan; Richard Sisson; Dominic Walton-France; GaudencioHernandez, Jr.; Armand Evers.Not in photo: Directors Bhimantara Widyajala, Richard Edwards; Alternate Director Mario Sander.T he Board of Directors is responsible for the approved $13.69 billion in loans, grants, equity investments, overall direction of ADB, including the approval guarantees, and technical assistance. of policies, loans, grants, equity investments, and guarantees. It also plays a vital role in COMMITTEE WORK ensuring that ADB shareholder guidanceis implemented. The Board’s work is supported by six committees: Audit, Budget Review, Compliance Review, DevelopmentThe Board approves work programs and budget frameworks, Effectiveness, Ethics, and Human Resources. Theseand the salaries and benefits of staff. It reviews and endorses committees meet several times throughout the year,ADB’s annual financial statements, the budget, and the providing guidance to Management and the Board.allocation of net income for approval by the Board ofGovernors at each annual meeting. The Board of Directors The Budget Review Committee faced new challenges inparticipates in various events during ADB’s annual 2014. ADB introduced a more integrated approach formeeting, which, in 2014, was hosted by the city of Astana, reviewing ADB’s lending capacity, operations, budget,Kazakhstan. and salaries and benefits. The approach included a new, iterative process for financial operations and budgetThe Board meets as often as required to manage the planning, and the Budget Review Committee led thebusiness of ADB. In 2014, it held 44 formal meetings and Board’s involvement in this process. The committee also25 informal meetings, seminars, and briefings. The Board considered the resources needed to implement the Midterm Review (MTR) of Strategy 2020 Action Plan and efficiency4 ADB ANNUAL REPORT | 2014

measures undertaken by operational and through more efficient and effective The Board group visitedadministrative staff. These issues were also management of its capital resources. This Bhutan in late Februarydiscussed at the annual Board–Management reform would strengthen ADB support to 2014. The group touredRetreat. vulnerable countries—mostly countries the ADB-funded accessing the ADF—to address persistent Urban InfrastructureOn the advice of the Budget Review poverty and economic fragility. Improved Development ProjectCommittee, the Board endorsed ADB’s financial capacity will also help confront in Thimphu, and theWork Program and Budget Framework, environmental challenges, infrastructure Dagachhu Hydropower2015–2017. The Board also approved the gaps, and conflict-affected situations. It will Project in DaganaAsian Development Bank Institute Three- provide increased support for private sector (pictured). It alsoYear Rolling Work Program, 2015–2017 and operations. received an audienceBudget for 2015. with H.M. Jigme Khesar ENGAGING OUR BORROWERS Namgyel Wangchuck, theThe Development Effectiveness Committee King of Bhutan, and metassists the Board to ensure that the programs The Board engages with developing member with senior governmentand activities of ADB are effective. In 2014, countries (DMCs) in several ways. It receives officials, includingthe committee considered a number of visiting delegations at ADB headquarters the Prime Minister,evaluations prepared by ADB’s Independent in Manila, and it considers and approves H.E. Tshering Tobgay.Evaluation Department. These included ADB country partnership strategies, which outlinesupport for inclusive growth, climate change, how ADB will assist each DMC to achieve theenhancing governance in public sector objectives of its development plan.operations, the role of technical assistancein ADB operations, and the performance In 2014, the Board endorsed countryof ADB’s Trade Finance Program. The partnership strategies for Azerbaijan, Bhutan,committee also considered the first phase Cambodia, and Fiji.of an operational review of ADB’s safeguardspolicy, and the first assessment of the The Board also undertakes missions toperformance of ADB assistance to Tajikistan DMCs in the form of Board Group Visits andbetween 1998 and 2013. consultations. Board Group Visits involve a number of Board members visiting particularCHANGING THE DYNAMICS countries to observe ADB operations, and to discuss development prioritiesDuring the year, the Board considered two and challenges with government officials,important issues affecting the strategic other development partners, business anddirection of ADB: the MTR of Strategy 2020, community groups, and people who benefitand a proposal to combine the lending from projects funded by ADB. Consultationsoperations of the Asian Development Fund involve Board members visiting the countries(ADF)—ADB’s concessional financing— they represent for discussions with theirwith the institution’s ordinary capital governments.resources balance sheet. Board Group Visits were conducted toThe Board was deeply engaged in the Bhutan and Nepal in February and Marchprocess for the MTR of Strategy 2020. Board 2014, to the Federated States of Micronesiamembers undertook consultations with their and the Marshall Islands in June, torespective constituencies and helped to Bangladesh in September, and to Cambodiaconvey the priorities of member countries and Viet Nam in October.to ADB. The Board held formal and informaldiscussions with ADB on aspects of the Board members also visited variousreview. municipalities in Leyte province and other areas of the Philippines affected by TyphoonThe Board discussed the issue of expanding Yolanda (internationally called Haiyan).ADB’s capital base, and considered a They met with recipients of ADB assistancenumber of measures aimed at enhancing and provincial and local officials, observedADB’s overall lending capacity. The Board ongoing reconstruction activities, and visitedprovided extensive advice on the proposal the ADB office in Tacloban City.to merge ADF lending with ADB’s ordinarycapital resources, which is expected toenhance the financial capacity of ADBBoard of Directors 5

Financial Highlights APPROVALS BY Financial OperatiOns FINANCING SOURCE, 2014 In 2014, ADB’s operations totaled $22.93 billion, of which $13.69 billion was Ordinary Capital Resources financed by ADB (ordinary capital resources [oCr] and Special Funds resources) and $9.24 billion by cofinancing partners. Sovereign operations,$10.438 B including official and technical assistance cofinancing, totaled $15.99 billion. nonsovereign operations, including cofinancing, totaled $6.94 billion. Special Funds Resources Disbursements totaled $10.01 billion, an increase of $1.47 billion (17%) from 2013. $3.250 B Sovereign and Nonsovereign Approvals, 2010–2014Direct Value-Added Cofinancing ($ million) 2010a 2011a 2012a 2013a 2014$9.237 B Sovereign 14,463 14,600 13,429 16,450 15,9906 loans 10,410 10,580 10,457 11,740 11,205 equity Investments Grantsb - 150 - - - technical Assistance 952 614 670 849 405 Direct Value-Added Cofinancing 171 137 146 149 148 official Cofinancingc 2,930 3,119 2,155 3,712 4,232 technical Assistance Cofinancingd 2,782 2,909 2,009 3,435 4,090 148 210 146 277 142 Nonsovereign 3,474 5,774 7,496 4,541 6,935 loans 815 1,250 916 1,425 1,714 equity Investments 235 131 Guarantees 190 44 128 142 185 Supply Chain Financee - 267 200 35 20 technical Assistance 2 5 Direct Value-Added Cofinancing - 6,117 - - official Cofinancingc 2,232 8 19 6 11 2 4,205 2,933 5,006 Commercial Cofinancingf - 6,097 135 194 B loans 2,229 4,204 200g 4,809 parallel loans 200 200 3,341 2,797 863g parallel equity 479 1,623 - 220g 1,503 trade Finance program - - 109 340 Cofinancing 1,549 2,381 2,344 - 2,039 Guarantee Cofinancingh risk transferi - - 2,279 8 - - 56 technical Assistance Cofinancingd 1 1 87 75 126 113 2 TOTAL 17,936 20,374 0 1 22,925 20,925 20,991 - = nil, 0 = less than $500,000. note: totals may not add up because of rounding. a excludes terminated loans, grants, equities, guarantees, and technical assistance. b refer to investment grants. c In 2014, the different sources of cofinancing were clarified by including a new category “other concessional cofinancing” comprising concessional financing from the private sector and public sources other than bilaterals and multilaterals. d In 2014, technical Assistance Cofinancing includes other concessional cofinancing. e Supply Chain Finance is a program that provides guarantees and loans (both without government guarantee) through partner financial institutions to support payments to suppliers and distributors of goods in ADB’s developing member countries. f In 2011, the definition of direct value-added (DVA) commercial cofinancing was clarified by providing detailed criteria for qualification of DVA cofinancing. the figures for 2010-2014 reflect the new definition. g B loans includes uS dollar and local currency complementary loans. h For loans provided by third parties and not fully guaranteed by ADB, such as partial credit guarantees or partial risk guarantees, the portion of loans that is not guaranteed by ADB is considered as net DVA cofinancing and reported in the year of signing the guarantee agreements. i this refers to the amount of ordinary capital resources allocation relief as a result of risk transfer arrangements, whereby a third party assumes risk under a guarantee or loan provided by ADB. the amount of allocation relief depends on the risk rating and nature of the counterparty. ADB AnnuAl report | 2014

available resOurces TOTAL DISBURSEmENTS, 2010–2014 ($ million)Authorized and subscribed capital stock amounted to $154.09 billion and$153.06 billion, respectively. the decrease in the authorized capital and 2010 7,976subscribed capital from 2013 to 2014 was mainly due to the strengthening of theuS dollar against the special drawing rights (SDr). other resources in oCr in 2011 8,266the form of revenue and net realized gains amounted to $1.26 billion, of which$605.34 million was generated from the loan portfolio, $351.67 million from 2012 8,592the investment portfolio, and $303.94 million from equity investment andother sources. resources in the form of contributions and revenue in ADB’s 2013 8,542Special Funds totaled about $480.67 million. these mainly included theAsian Development Fund of $427.70 million, the technical Assistance Special 2014 10,009Fund of $34.62 million, the Asian Development Bank Institute of $12.65 million,the regional Cooperation and Integration Fund of $3.66 million, and the Financial BORROwINGS (ORDINARY CAPITALSector Development partnership Special Fund of $1.88 million. RESOURCES), 2010–2014 ($ million)In 2014, ADB raised $14.25 billion in medium- and long-term funds through publicbond issues and private placements in 11 currencies. public offerings amounted 2010 14,940to $12.15 billion, which include two global benchmark bond issues denominatedin euro and uS dollars. the remaining $2.10 billion was raised through private 2011 14,446placements. 2012 15,067Among the highlights of ADB’s capital markets activities in 2014 were theissuance of its inaugural euro benchmark bonds totaling €1.5 billion ($2.1 billion 2013 12,725equivalent) in April 2014, the first offshore Indian rupee-linked bonds totalingrs3.0 billion ($49 million equivalent) in August, a return to the Canadian dollar 2014 14,724Maple market with C$400 million ($364 million equivalent) in September, anda second Dimsum bond amounting to CnY1.0 billion ($164 million equivalent) OPERATING INCOmE (ORDINARYin november. ADB continued to issue thematic bonds, raising $284 million CAPITAL RESOURCES), 2010–2014equivalent from its sale of water bonds. ($ million)ADB also raised $2.42 billion of short-term funds under its euro-Commercial 2010 548paper program. At the end of 2014, only $475 million remained outstanding. 2011 587Resources as of end of period 2012 465($ million) 2010 2011 2012 2013 2014 2013 469ordinary Capital resources Authorized Capital 163,843 163,336 163,512 163,840 154,092 2014 571 Subscribed Capital 143,950 162,487 163,129 162,809 153,056 paid-in Capital and reserves 16,420 16,938 outstanding Debt 15,878 16,534 64,762a 17,138 62,688Asian Development Fund 51,822 58,257 33,346 61,615 32,651 33,055 33,359 31,478a From 2012 onward, amount includes accrued interest and commission.FInAnCIAl HIGHlIGHtS 7

MTR ACTION PLAN: ADB will strengthen productivity and competitiveness by improving regional connections. Responding to the Needs of Asia and the Pacific8 ADB ANNUAL REPORT | 2014

T he Asia and Pacific region has a remarkable Turning the Soil to record of economic growth, delivering average Turn Lives Around annual expansion of 7.6% from 2004 to 2014. Though the pace of growth eased in 2014, Elham Musayev (pictured), 40, waited for years to turn it still averaged a robust 6.3% across the 45 the farming skills he had learned at his father’s side into aeconomies that make up the region. The next few years are small business. All he needed was a mini-tractor to boostalso expected to deliver growth rates above 6%. productivity—and the money to buy it with.The impact of such growth on the region has been Elham now grows cabbage, maize, and beetroot on landprofound. Between 1990 and 2011, approximately about 33 times the size of his old quarter-hectare plot, and950 million people were lifted out of extreme poverty, provides 40 people with jobs for 4 months every year.with the rate—currently calculated by the number ofpeople surviving on less than $1.25 a day—falling from His success—and that of thousands of other small55.3% to 15.3%. entrepreneurs in Azerbaijan in recent years—began with credit from AccessBank. Elham’s investments were madeBut these headline figures mask a range of development possible by an ADB loan to AccessBank, which helpedissues that continue to challenge the region’s policy makers. bring finance to Elham, and others generally excluded from state-owned bank credit services.Inequality, the gap between rich and poor, continues towiden as the benefits of economic growth are unevenly The project helped Azerbaijan reduce poverty and makedistributed. growth more inclusive by expanding banking services to the country’s comparatively poor, underserved rural areas.The region is exposed to greater environmental risks arising It also provided seed capital for the many micro, small, andfrom climate change, and it is vulnerable to economic medium-sized enterprises, like Elham’s, that provide jobs,shocks and natural hazards. The gap between infrastructure income, and services for the poor and the vulnerable.needs and available financing also remains a problem. The scheme helped spur private sector development inHundreds of millions of people remain in poverty. Azerbaijan. Private banks have grown their share in the finance sector’s total assets, loans, and deposits everyThough $1.25 a day remains the official measure of extreme year since ADB’s intervention. After a net loss in 2006,poverty, increasing evidence suggests that this indicator AccessBank has increased profits steadily, improved itsmay be set too low. When the poverty line is adjusted standards and operations, raised capital by issuing bonds,to reflect updated data and consumption patterns from and declared its first dividend.the region—and when food insecurity and vulnerabilityto economic shocks are considered—about 50% of the ADB took special care to ensure that AccessBank financedregion’s population in 2010 could have been classified as projects and businesses that were environmentally andliving in extreme poverty. socially sound—a process that involved knowledge sharing between the two institutions.These development challenges require an ambitious,strategic focus to spur high economic growth, whichis inclusive and environmentally sustainable, acrossthe region. MORE THAN68.75 MILLION TONS of cross-border cargo facilitated per year between 2011–2014Responding to the Needs of Asia and the Pacific 9

stRAtEGiC FoCUs: REsPonsiVEnEss, in July 2014, ADB adopted the Mtr of strategy 2020 ActionRElEVAnCE, EFFECtiVEnEss plan (Mtr Action plan). the plan consists of more than 190 initiatives that will enhance the responsiveness, relevance,to address evolving development issues and ensure and effectiveness of ADB operations. While infrastructurerelevant responses, ADB conducted a Midterm review investment will remain the core operational focus, the Mtr(Mtr) of its long-term strategic framework, strategy 2020. Action plan also outlined measures to further promote inclusiveness, innovation, and the leveraging of knowledge.the Mtr of strategy 2020, approved by the ADB Board ofDirectors in April 2014, assessed the existing and emerging in line with the Mtr of strategy 2020, ADB projects in 2014challenges for developing member countries (DMcs), and supported sustained, inclusive economic growth in areas andmapped out ways in which ADB can better serve all its regions where poverty levels are at their worst.member countries. Toward 2020: ADB’s Ten-Point Action PlaninsdtyitiSnOnutaSmsrrtmtteigooirnateinrucngnea,ttigilazhdotagieyhnnrinnlerageaanls,tnmataosagrntirecmaadm,nseaikngegesiennklitllmoitsenls,l,vse.eiaan,Bnwnticnteidvesccc.eniheoBntinamninevltscoleieevtovsineatam,usgamt,tieenvaiosodean.rnde. Poverty reduction and inclusive economic growth. Expand institution. suEpxpoanrtdtosuapcphoiervt etoraapcihdieavnedrianpcildusainvde einccolunsoimveicecgoronwotmhi.c Emgropwhathsi.zEemsopchiaslipzerostoecitaiol pnr,ofitneacnticoianl, ifinncalunsciioanl ,inacnldusiniocnlu, sive buansidneinscs.luPsriovveidbeusaidndesitsi.oPnraolvriedseoaudrcdeitsiofonralorwes-oinucrcoemsef,ofrragile, anlodw/o-irnccoonmfleic,tf-ragielec,taenddd/eovrecloonpflinicgtm-aemecbteerdcDouMnCtrsie. s (DMCs). Delivering value for 1100 0011 adPImfnoPmcadfEdirosacrodhirnaasarnortmaapvaeshntampntitsahoeargaettgsooegteaetreeeeintetmreorn.eimsimnornnsIveuinnaknsvieneprtakctinoomnrttuptroomtnueatrocanaamarncalarnailmnstldmnnaielredmeadegrnianessgeniattcnuostemettaelotpumeiaengcmeuprngcrhdecnroaarhdcnaetafrttae.nottefte.noegrdgerde. . money in ADB. Increase e ciencIyn,cereaescetievenceisesn,cy, 0099 0022e ectivenesasn,danindstinitsuttitiountiaolnal ecoencomnoiems.ieSst.rSeatrmealimnelinaendandstrengthsetnrebnugstihneenssbpursoincesses. pSryoscteesmseast.icSaylslyteamppaltyicraelslyultsapfrpalmy erewsourltkssfarat mtheewcoorrkpsoarat te,theccoournptorrya,taen, dcopurnotjeryc,talenvdels.project levels. cSiEpicRiccnnnoorotxreciftEccSpirfvotronnoehpumorooogteerxesadvfgrroranppiumnngrsseposeoiuncadtet-oranngtnesurnmpcrsadburrntnetitogtgtuteaahetromcdicaresitshiitsctltveuterohutlisnii’esitdivintoscgv-netpvutuinee’ybrtvisnni.prtpeunttr.eoeyaysopaarenrn..eratnosdetdensdresfrtdors r through greater0088spotpcatrsEiporhenatrrixceattrvneppEsiehenpnaxratrgisaxeatneeiptplsttomntoprnxatergrhaiuatcuepitrllsdtmtonnFuentaesihbrharuvierdnileslbdocinatuwneteiphbcrliienisAAdnlllbaosastiastwaasespohniionyDDsttAAllw,asaaaareeeisccstpBB,yDDnittnhrrw,iittaaeeaesaast’’ddoheBBssinnhrrl.tllttaay’’ddohessll. TTheheMMTTRRrerceocmommmenednedded 0033 regional thtahtaAt ADDBBshsahraprepnenanadndrerbeablaalnacnece connectivity. private sector, itistos poepreartaitoinoanlaflofcoucsu.sT. oToenesnusruere and civil society. thtahtarterceocmommmenednadtaitoinosnbs ebceocmome e 0044 InEfnrahsatnrcuectsuurpeport reraelaitliyt,yA, ADDBBdedveevleolpoepdedthteheMMTTRRofof dfeovreplooplimcye, nretg. uElnahtoarnyc,e KAndoowplteadngdeimsopluletmioennst. a 0077 StSrtartaetgeygy20220020AActcitoinonPlPalna.nT. Theheplpalnan suapnpdogrot vfoernpaonliccey,“OAdnoepAtDanBd” aimpprleomacehnftor isias afofrowrwaradr-dl-olokoiknigngprporgorgarmamtoto rergeufolartmosry. S, atrnedngthen imimprporvoeveAADDBBopoepreartaitoinosnos nonthtehe gopvuebrlnicainncferarsetfrourcmtusr.e all ADB dae“pOanrtemAeDntBs”to grgoruonudn,db, ubiuldildsksikllisll,sa,nadndprporvoivdiede Stmreanngatgheemnepnutblic appwroarkchtofgoertahlleAr mDBore bebtettetresresrevrivciecetotommemembebrecrocuonutnrtireise.s. insfyrastsetrmusc.tMuroere departcmloesnetlsy.tPorwomorokte ItIwt willilrlermemaianina a“l“ivliivnign”g”dodcoucmumenetn,t, meaneacgteivmeelynltesvyesrtaegme s. togethsyenr emrgoireescbloetsweleye. n MAoDreBereesocutirvceelys by upudpadtaetdedfrformomtitmime etototitmime etoto ledvevraegloepAinDgBlarregseorurces kPnromwloetdegseywneorrgkieasnd rerfleeflcetccthcahnagnignigngbubsuisniensessns eneedesds byindfreavsetrloupcitnugrelarger between knoopwerleadtigoens. inpfraosjetrcutcs.tuPreomprootje cts. work and operations. anadndimimplpelmemenetnattaitoinon Prpormivaotteespercivtoatre sector exepxepreireinecnecse.s. papratritciicpiaptaitoino.n.Expand assistance for private sector 0055 Privadtevseeloctpomrednetvaenlodpompenrattaionnds otope5r0a%tions. 0066 Expand assistanocfeafnonruparlivoaptersaetciotnosr dbeyv2e0lo20pm. ent EdrMenesoEeaivsdpnvfnuedooddslrolnuleeevrpsrevi-ceinmesivongplcenoecoondtnponnieetnimntssvnuiisgenveeilnteumoeocgnipdnoetermsguhmesoenslreebefttnevelroDetvairevotnnMhsalcev.neCeeicndsaeg.snd countries (DMCs). and opDereavteiolonps tmoo5r0e%inonfoavnantiuvaelfionpaenractiniogns by 2020. Develospomluotiroenisnnfoorvpartoivjecfitns.aEnnccinogusraogluetionsfor projects. Encourpaugbelipcu–bplriicv–apterivpaatretnpearrsthnieprss.hips. StSrtartaetgeygy20220020 MMiditdetremrmReRveiveiwew(M(MTRT)Ro) fof MMTRTRpuptustAs ADDBBonontrtarcakcktotoacahciheiveeve initnrtordoudcuecde.d. StSrtartaetgeygy20220020cocnodnudcutcetde.d. itsitstsrtartaetgeigcicgogaolaslbs yby2022002.0.10 ADB AnnuAl report | 2014

MTR ACTION PLAN: ADB will leverage its resources by developing larger infrastructure projects. ADB mobilized around $3.2 B in climate funding in 2014Responding to the Needs of Asia and the Pacific 11

A Joint Effort to Tackle DiseaseADB plays an important role in supporting the regional effortsthat help prevent communicable diseases from spreading acrossborders. With ADB support, countries in the Greater MekongSubregion (GMS) have developed systems to detect and addressdisease threats. This has helped avert the potential economic andsocial devastation that would result from uncontained pandemicssuch as avian influenza. The cooperation will also help the GMSrespond to new threats such as drug-resistant malaria, Ebola virusdisease, and other emerging diseases.The Regional Malaria and Other Communicable Disease ThreatsTrust Fund, managed by ADB, received over $35 million fromthe governments of Australia, Canada, and the United Kingdomto support critical regional and country-specific communicabledisease control in Cambodia, the Lao People’s DemocraticRepublic, Myanmar, and Viet Nam. The fund will support thesecond GMS regional health security project, which is currentlybeing prepared. AFP UNIVERSAL ENERGY It intensified efforts to create jobs and needed to support such partnerships. ItACCESS GETS A BOOST expand services such as electricity, water is also streamlining nonsovereign loans supply and sanitation, education, and health. for industries such as agribusiness, where In June 2014, ADB was projects can have a highly inclusive impact, selected as the host To help alleviate the environmental stresses and expanding operations in lower-income for the Asia-Pacific associated with rapid economic growth, ADB countries and frontier economies. committed $12.55 billion to projects with a Hub of the worldwide focus on renewable energy, energy efficiency SECTOR HIGHLIGHTS: INVESTING FOR Sustainable Energy for and conservation, sustainable transport, clean RESULTS All Initiative (SE4All). water, sanitation and waste management, and managing the effects of climate change. The MTR of Strategy 2020 reinforced ADB’s SE4All has goals of operational focus to respond to the dual universal energy access, ADB continues to promote regional challenges of energy security and climate cooperation and integration (RCI) as a means change by investing in clean energy. In 2014, doubling the share of of accelerating growth and reducing poverty, ADB surpassed—for the fourth year in a renewable energy in investing $3.4 billion in projects, leveraging row—its annual target of investing $2 billion the energy mix and $1.2 billion in cofinancing, and providing in energy efficiency and renewable energy technical assistance of $115 million for RCI projects. Total clean energy investments for scaling sup energy activities in 2014. the year amounted to $2.4 billion, comprising efficiency by 2030, investments in renewable energy, energy which align with ADB’s ADB has set a target that nonsovereign efficiency, and switching to cleaner fuel. development and operations will constitute Total lending approved in the energy sector vision for Asia at least half of its annual operations by 2020. in 2014 amounted to $6.6 billion, including and the Pacific. It is acting now to expand its nonsovereign investments from ADB’s own resources operations and strengthen its support for ($2.8 billion) and cofinancing ($3.8 billion). public–private partnerships (PPPs). These PPPs are typically long-term contractual ADB helps deliver sustainable transport arrangements between governments and the infrastructure and services that contribute private sector for financing and delivering to low-carbon, safe, and affordable transport infrastructure services. ADB has been networks. In 2014, ADB’s transport portfolio working to build the regulatory, institutional, accounted for about 28% of its total lending. financial, and commercial frameworks This included $805 million for railway projects, the largest commitment in its12 ADB ANNUAL REPORT | 2014

history. As Asia’s urban population continues to swell by Mongolia, more health clinics and doctors for the people in44 million a year, ADB estimates that 80% of new economic 10 municipalities of Bangladesh, and pilot health insurancegrowth will be generated in urban areas. in response, ADB has coverage for recipients of social assistance in pakistan.more than tripled its lending to urban transport operationscompared to the previous decade. ADB is closing in on its commitment to invest $2 billion annually for agriculture and food security. in 2014,in 2014, ADB approved $1.15 billion for projects supporting investment in the agriculture sector totaled $1.45 billion,urban development. these focused on developing inclusive, including $8.56 million in technical assistance. thecompetitive, and environmentally sustainable cities that investments aim to stimulate food production and processingpromote good governance. investments include $140 million chains through flood control, water resource management,for the development of secondary cities in Viet nam, such as and agribusiness development. ADB’s commitment toBuon Ma thuot, ha tinh, and tam Ky. this program aims to inclusive agriculture helps meet demand for safe andbuild greener and more climate-resilient cities by delivering nutritious food, while generating substantial business andbetter solid waste management, wastewater and stormwater employment opportunities in rural areas.systems, and roads.Almost 20 million people across Asia and the pacific will YOUR SAY:benefit from ADB’s total water lending of $2.88 billion in2014, spread across the water and other infrastructure and Because of the project we wereservices sector, and agriculture, natural resources and rural able to improve the reliability ofdevelopment sector. this investment makes good on ADB’s electricity to the national hospital.commitment to make water a core area of its operations, and This had a direct impact onexceeds the annual target of up to $2.5 billion. in 2011, ADB improving health care services.set a goal to increase the share of sanitation in total waterlending from 14% to at least 25% by 2020. the figure for 2014was already at 27.5%.ADB continues to devote significant resources to secondary Project engineer Tupai Mau Simanu on the benefits of aneducation, technical and vocational education and training expanded and improved power supply in Samoa(tVet), and higher education. in 2014, ADB’s educationinvestments, including cofinancing and special funds, tHEmAtiC HiGHliGHts: inClUsion FoR Allamounted to $976 million, of which 50% financed tVetand skills development in six DMcs. notably, Bangladesh, ADB supports gender equality and women’s empowermentcambodia, and sri lanka implemented programs to develop in its assistance across Asia and the pacific. ADB is helpingthe skills demanded by key industries, with over 260,000 to develop public policies and investments to improve theindividuals trained in Bangladesh alone. prospects for women and girls in various sectors, including education, tVet, infrastructure, finance, and enterpriseFinance sector operations in 2014 focused on financial development. in 2014, 55% of ADB’s sovereign projectsinclusion and infrastructure finance. ADB took measures to contained a strong focus on gender equality. Most notably,broaden financial inclusion through microfinance, improve more than 90% of ADB-supported education and healthfinancial conditions for small and medium-sized enterprises projects had high levels of gender equality over the past(sMes), and enhance capital markets and financial stability. 3 years. the percentages were also significant in agriculture,More profitable sMes will enable inclusive economic growth, water infrastructure, and urban infrastructure, with 80%–90%create resilient economies, and expand diversity in regional of projects demonstrating gender equality.and international supply chains. in 2014, finance sectorinvestment totaled $3.5 billion. gender-focused projects are making a difference on the ground. in pakistan’s sindh province, a coastal communityADB has committed to double its annual lending in the development project enabled 9,700 women in isolated ruralhealth sector by 2020. it is focusing on increasing operations areas to access skills training on livestock management,that support universal health coverage—the concept of horticulture, and other vocational skills. More than 1500making necessary health services affordable for all. While no women’s community groups were established, providingnew loans for health were approved in 2014, ADB continued a forum for women to contribute to the decision-makingto implement ongoing health projects in Bangladesh, process on important community issues like water supply andcambodia, the lao people’s Democratic republic, Mongolia, the building of other small scale infrastructure. the projectMyanmar, pakistan, papua new guinea, the philippines, and also facilitated national identify card registration for overViet nam. some of the benefits of these projects include 6,000 women who gained legal identity for the first time.improved quality and affordability of hospital services inresponDing to the neeDs of AsiA AnD the pAcific 13

In 2014, ADB provided$976 Mto support educationin Asia and the Pacificin 2014, ADB approved four private sector projects flooding in solomon islands, and funding for a program toincorporating measures for gender balance. these projects manage the risks of flood and riverbank erosion in Bangladesh.span education, agribusiness, housing, and financial ADB also supported post-disaster recovery and reconstructioninclusion. this compares with one project approved in 2013. in Afghanistan, cambodia, india, and tonga.ADB provided support for social protection in 2014. in the Mtr Action plan calls for further resources to be directedthe people’s republic of china (prc), where the size of toward improving governance and capacity development inthe aging population is growing rapidly, ADB provided operations and public sector management. ADB increased itsemployment training to improve elderly care services in focus on technological change in the public sector during 2014.Yichang city in hubei province. the city is expected to it backed the adoption and implementation of e-solutions inbecome a model for elderly care in the prc. countries such as Myanmar, where ADB is helping authorities to develop an e-governance master plan and benchmarkthe Mtr of strategy 2020 reaffirmed ADB’s commitment local information and communication technology capacities.to help the region tackle climate change and other in 2014, ADB became a multilateral member of the openchallenges to the environment. While continuing the government partnership, which supports country efforts tovital work of mitigating climate change, ADB is increasing advance open government and social accountability.its emphasis on adaptation. Mitigation measures includerenewable energy, energy efficiency, railways, and urban ADB stresses the need to develop knowledge solutionsmass transport. Adaptation involves incorporating climate that help DMcs address their development challenges. it isresilience into development planning, and strengthening the exchanging knowledge with the prc to provide input for thecapacity of DMcs to plan for and manage climate risks. ADB country’s forthcoming five-Year plan, and with indonesia tois providing access to global and regional sources of climate develop knowledge solutions for energy security, food security,finance, mobilizing around $3.2 billion in climate funding in and skills development. More broadly, it is initiating country2014—$2.58 billion from its own resources and $604 million knowledge plans with all DMcs to strengthen the deliveryfrom external resources. of knowledge solutions. it is also developing a database of knowledge products and services to centralize all of itsADB continues to emphasize the importance of disaster knowledge work.resilience, highlighting the need to integrate disaster riskmanagement with climate change adaptation. financing lEVERAGinG ADB REsoURCEs: moRE DYnAmiCincreased for disaster risk management, with 80 loans and solUtionsgrants integrating some aspect of disaster risk managementapproved. this included emergency assistance for severe Meeting the imposing financing needs of its DMcs is increasingly challenging for ADB and its donors. in response,14 ADB AnnuAl report | 2014

Managing ‘The Stuff of Life’ With water resources becoming increasingly stretched in many parts of Asia and the Pacific, the Midterm Review of Strategy 2020 requires ADB to focus on water efficiency and determining how “the stuff of life” can be most productively used and managed. An irrigation project in Bangladesh provides a good example. Under a public–private partnership, a first for ADB in irrigation, a private management team will be contracted under a performance-based management contract for the 5 years of the construction phase, leading to the engagement of an irrigation management operator for 15 years once construction is complete. At the farm level, water-saving practices will include a network of highly efficient distribution pipes stretching across about 17,000 hectares. Other innovations include the use of prepaid card meters to improve payment and accounting, and the piloting of solar pumps for about 60 hectares to explore sustainable power options.ADB has developed a proposal to broaden its capital base ADB established new trust funds in cooperationby absorbing the loan operations of the Asian Development with the governments of Australia, Japan, and theFund (ADF) into its ordinary capital resources (OCR) United Kingdom.balance sheet. ADB is also continuing to develop new measures toThe move is expected to almost triple ordinary capital encourage greater private investment in infrastructure,resources equity, enabling ADB to strengthen its financial particularly in the renewable energy sector. Theseposition, expand its risk-bearing capacities, provide include increased use of credit enhancement facilities,increased development assistance. larger focus on external resource mobilization through syndicated B loans and parallel loans (over $860 millionThe proposed new structure would also help deliver was attracted through ADB’s B-loan syndication activitiesincreased support for private sector operations, especially in 2014), and innovative use of concessional funding.in ADF countries. If approved by the Board of Governors, Through these, ADB is strengthening its ties with thethe proposal will be effective in January 2017. private sector as a source of external financing to help achieve its expanding development objectives.In addition to increasing its own lending capacity, ADBcontinued to seek innovative ways of leveraging its MORE THANresources to better address the region’s developmentneeds. ADB has set a goal of exceeding its own financing 1.66 MILLION TEACHERSwith cofinancing by 2020, and it is on target to meetthat goal. In 2014, ADB’s financing of $13.69 billion trained with quality orleveraged $9.24 billion of cofinancing. This included 52% competency standardsof commercial cofinancing and 48% official and other between 2011–2014concessional cofinancing, in addition to the nonsovereignsyndication operations.In 2014, ADB signed a cofinancing arrangement withGerman development agency KfW and the InternationalFund for Agricultural Development, and extended anexisting agreement with the Islamic Development Bank.Responding to the Needs of Asia and the Pacific 15

Central and C ountries in Central andWest Asia West Asia posted disparate economic results for 2014.Afghanistan, Armenia, Azerbaijan, Georgia, While some maintainedKazakhstan, the Kyrgyz Republic, Pakistan, high-growth momentum,Tajikistan, Turkmenistan, Uzbekistan others were affected by depressed markets in the Russian Federation and MTR ACTION PLAN: the subdued global outlook. ADB will provide more resources to low- Kazakhstan’s economic growth fell to its income, fragile, and/or lowest rate since 2009. The devaluation conflict-affected of the Kazakhstan tenge in February 2014 member countries. affected services, and falling oil prices reduced industrial output. In Uzbekistan, large government investment programs kept growth stable. Supported by public investments, the non-oil sector in Azerbaijan offset contraction in oil output and drove growth of the country’s economy, while Turkmenistan posted gross domestic product figures that were bolstered by new gas-field facilities. In the Kyrgyz Republic, growth slowed to 3.6% in 2014 as the economies of the Russian Federation and Kazakhstan weakened. Local currency depreciation of about 19% pushed inflation to 7.5%. Remittances fell by 5% with deterioration in the economies of Kazakhstan and the Russian Federation—­ where most Kyrgyz migrants work—and their currencies’ depreciation. Gold production and exports dropped, as the quality of extracted ore declined, exacerbated by the lower gold prices. Similarly, the Government of Tajikistan is bracing for severe impacts on its MORE THAN 2.3 MILLION hectares of land improved through irrigation, drainage, and/or flood management between 2011–201416 ADB ANNUAL REPORT | 2014

economy, with remittances expected to be down significantly enabling irrigated land to be returned to full productionin 2015. to create jobs for large numbers of migrant workers as soon as possible. restoring roads and bridges will allowreturning home, the government has requested budgetary travel and freight transport to resume. In December, ADBsupport from development partners, including ADB. approved a project that will also assess resources and technology in four off-grid Afghanistan provinces, and drawIn Georgia, growth picked up in 2014, driven by higher up a renewable-energy development plan.domestic demand, exports, and foreign direct investment.Armenia’s economic expansion slowed, mainly due to lower new development assistance will help the Kyrgyz republicsupply-side growth. improve the quality and relevance of its education system, while policy and project loans across pakistan’s entire powerIn Afghanistan, the withdrawal of international security sector will help tackle its chronic energy crisis.forces, and the transition to full Afghan responsibility forsecurity, put pressure on public spending. YOUR SAY:the region, particularly its landlocked countries, remains We used to wake early to fetchconstrained by high transport costs. Some countries are firewood for cooking breakfaststill experiencing increases in poverty rates above 30%, and for our children before they wentrenewed efforts are required to provide solid platforms to school. Biogas means we canfor inclusive growth. the Kyrgyz republic and tajikistan sleep longer and prepare mealscontinue to suffer power shortages in winter, while pakistan in minutes.and Afghanistan face energy deficits all year round. Shameem Bibi, mother of five, discusses an ADBoPERATionAl HiGHliGHTS livelihood support project in Pakistan.In 2014, ADB approved total new lending of $2.75 billion In Armenia, ADB, in collaboration with the european Bank forto governments in Central and West Asia, supported by reconstruction and Development, agreed to fund a project$1.16 billion in cofinancing, and $38.16 million in technical to rehabilitate the aging national power transmission system.assistance. the new lending and grants went to energy this work will make power supplies across the country more(57%), transport (25%), public finance and management reliable and efficient.(8%), environment and natural resources (5%), urbanservices (3%), and emergency assistance (2%). Contract DRiVinG TRADE BY SHARinG KnoWlEDGEawards and disbursement levels were $1.89 billion and ADB’s knowledge products and services in Central and West$2.33 billion, respectively. Asia covered a broad spectrum of issues in 2014, with a focus on promoting private sector growth.It was an important year for relations between ADB andAzerbaijan. In September, ADB approved a new country the Central Asia regional economic Cooperation (CAreC)partnership strategy, outlining its assistance to Azerbaijan for program remained central to producing knowledge, and its2014-2018. It will support Azerbaijan’s national development efforts included a study on the economic corridor betweengoals by focusing assistance on transport, energy, water, Almaty in Kazakhstan and the Kyrgyz republic capital,and other urban infrastructure and services. During the Bishkek. A growth diagnostic study was also finalized foryear, ADB approved funding for two vital transport projects: the Kyrgyz republic.one will reconstruct bridges and rehabilitate local roadsin the Ganja-Gazakh region; the other will construct Knowledge-sharing events, such as conferences and30 kilometers (km) of highway between Jalilabad and workshops, aimed to facilitate trade, analyze opportunitiesShorsulu. for economic diversification, promote tourism, and improve competitiveness in agricultural markets across the region.ADB established an innovative partnership with Kazakhstan training programs were offered to central bankers andin 2014, signing a cofinancing framework for resources drawn officials from ministries of finance on bank regulation, riskfrom the national Fund of Kazakhstan. the framework management, and the supervisory capacity of financialbreaks new ground for the effective stewardship of funds regulators.used to develop infrastructure, small and medium-sizedenterprises, and the finance sector.When Afghanistan experienced the worst flash flooding inat least a generation, affecting more than 125,000 people in27 provinces, ADB responded with emergency assistance toreconstruct irrigation systems and rural roads. the projectwill help prevent flood erosion by funding retaining walls,CentrAl AnD WeSt ASIA 17

Smoother, Safer Travel In Armenia, a workshop was held on the country’s in Kazakhstan’s Remote experience with policy and institutional reforms in municipal Areas water systems. The workshop analyzed past and present practice, and provided a summary on reforms, lessons For the people of Zhambyl Oblast in Kazakhstan, poor roads learned, and future plans. High-level government officials have made life difficult. Personal travel and the freight of from Timor-Leste, in the Pacific region, also attended the goods have been burdensome, especially during the winter workshop to learn firsthand how Armenia has transformed months, with small trucks often overloaded to dangerous its water sector by implementing reforms and partnering limits. with the private sector. ADB has worked to alleviate these difficulties for poor and In Azerbaijan, ADB helped the government develop a remote people, providing $224 million to support the now- master plan to prioritize investment in power, which will completed section of CAREC Corridor 1 between Taraz and make electricity delivery more reliable and reduce power Korday in Zhambyl Oblast. Stretching for 125 kilometers, outages. ADB also supported government efforts to the section of road has benefited about 400,000 people. investigate possible private sector participation in the It created around 1,600 jobs during the peak construction power sector. period and, since completion, has reduced travel times, made the movement of goods and people easier, and THE DIRECT ROUTE TO REGIONAL COOPERATION provided the impetus for new small businesses such as gasoline stations and garages, to be established along the The CAREC Program continued to be the centerpiece new road. of ADB regional development assistance in Central and West Asia. Since the program began in 1996, ADB has The people living in Zhambyl Oblast now have vastly invested $24.6 billion in 158 projects that back regional improved access to basic social services and facilities, cooperation and integration (RCI). CAREC projects including clinics and schools, and it is far easier to travel to remained focused on transport, energy, trade facilitation, markets and business areas in Almaty, Korday, Merke, and and trade policy. Taraz. Personal safety is also improved, thanks to dedicated footpaths that separate pedestrians from oncoming cars ADB helped bolster RCI through a combined grant and loan and trucks, while culverts ensure that animals are kept away of $102 million to help complete 250 km of road connecting from the main road. the Kyrgyz Republic and Tajikistan. This project helped lower transport costs, not only between the two countries, So nowadays, when winter descends on the people of but also to and from their neighboring countries, including Zhambyl Oblast, they do not feel quite so isolated, thanks the People’s Republic of China (PRC). ADB provided a to development assistance provided in part by ADB. further $224 million to complete 125 km of road sections between Taraz and Korday in Zhambyl Oblast, Kazakhstan. The total investment program for CAREC Corridor 1 is The road provides faster and more comfortable travel; more supported by ADB, the Islamic Development Bank, and diversified economic opportunities, including in service the Japan International Cooperation Agency. It aims to sectors such as tourism; and stronger competitiveness in eventually improve 470 kilometers of roads in Zhambyl interregional agricultural and dairy-product markets as local Oblast. Its continued implementation will promote products reach more distant destinations in larger volumes sustainable economic development in Kazakhstan, and in better condition (see box). increase domestic and international trade, and improve the efficiency of road transport between Almaty and Shymkent. CAREC is exploring further options to rebuild domestic transport networks, improve cross-border transit corridors,18 and create economic corridors to allow the benefits of economic diversity to flow between countries. At the 13th CAREC Ministerial Conference, held in the Kyrgyz Republic, officials launched a pilot initiative for the Almaty–Bishkek economic corridor. Representatives from the two cities also signed a memorandum of understanding covering the service sector. At the ministerial conference, ADB and other delegates also reached an agreement to establish the CAREC Institute at Urumqi in the Xinjiang Uygur Autonomous Region of the PRC. The institute’s mission is to enhance the quality of the CAREC Program by generating knowledge and building capacity to accelerate economic growth. ADB will provide ADB annual report | 2014

PLACEHO$LA2DDB4haEs.in6vResteBd in 158 projects under CARECtechnical assistance and administrative universal pension system financially AN ECONOMY BACKsupport to the institute during its initial sustainable—aims to ensure equitable ON TRACKperiod of operation. social security for women, particularly women entrepreneurs running micro, small, ADB provided $165 millionINCLUSIVE GROWTH THROUGH and medium-sized enterprises. It also to help build 75 kilometersEDUCATION AND BUSINESS encourages more effective delivery of railway between of social services by supporting related Mazar-e-Sharif andADB works to expand economic public–private partnerships and Hairatan on the borderopportunities for the poor and the infrastructure projects. with Uzbekistan. In itsmarginalized of Central and West Asia, and first year, the railwayto encourage the entrepreneurial spirit of In Armenia, ADB approved a loan of carried 2 million tons ofwomen in the region. $49 million and a technical assistance grant petroleum and petroleum of $900,000 to support the sustainability products, 540,00 tonsIn the Kyrgyz Republic, ADB supported an of the road and water sectors, and to help of flour, and 340,000education program that will introduce a achieve the government’s development tons of constructionrental scheme to increase the availability of priorities for 2014–2025. This program materials. Total tradetextbooks to schoolchildren. This program employs results-based management between Afghanistan andwill also provide more resources to schools for government. The approach will address Uzbekistan increasedin remote and poor areas. planning, budgeting, implementation, about 35% in 2012. and monitoring protocols within and In July, the railway receivedIn Georgia, ADB provided support between sectors. a US Treasury Departmentto increase public spending on social award for developmentassistance programs, pensions, and impact.social infrastructure. This assistance ishelping increase savings and investments 19generated by households, domestic firms,and government. The program—whichintroduces reforms to make the country’sCENTRAL AND WEST ASIA

east Asia F ollowing years of rapid expansion, economic growth The People’s Republic of China, Mongolia moderated in the countries of east Asia in 2014. the people’s MTR ACTION PLAN: republic of China (prC) ADB will support achieved steady but controlled economic rapid and inclusive expansion, as the government continued economic growth, to emphasize the quality, rather than emphasizing social quantity, of growth. Growth in Mongolia, protection. while still outpacing global and regional averages, slowed to single-digit levels. rapid economic growth has transformed the prC to an upper middle-income country with significant gains in poverty reduction and quality of life. the challenge lies in developing new engines of growth that will generate economic growth to benefit all. the country must address issues such as environmental protection, inequality, finance sector regulation, local government debt, and private investment in state-owned enterprises. one positive sign in 2014 was that the prC introduced a regulatory framework for the Shanghai free trade zone. this will provide a testing ground for service sector development, and for liberalizing the finance sector. to improve capital flows and transfers, the prC also doubled the daily trading band of the yuan, and connected the stock exchanges of Shanghai and Hong Kong, China. In Mongolia, a steep fall in foreign direct investment, depressed commodity prices, and delayed mining projects contributed to the economic slowdown in 2014. the national currency MORE THAN 64,900 km of roads built or upgraded between 2011–201420 ADB AnnuAl report | 2014

depreciated by 13.8% in 2014. A more diversified economy, The Greening of Gansuessential for job creation, remains a priority to prevent areturn to economic overheating, and to reduce the country’s When the stable supply of electricity arrived in her villagereliance on mining revenues. of Bajiaowan in the northwest People’s Republic of China (PRC) province of Gansu, life changed for Zhang HuipingOPERATIONAL HIGHLIGHTS (pictured with her family). It was 2006, and the ability to use modern electrical appliances, such as a refrigerator,In 2014, ADB provided $1.66 billion for 14 loan and grant freezer, rice cooker, and washing machine, helped easeprojects to East Asia, and $29.41 million for 52 technical the daily strain on Mrs. Zhang, who spent her days herdingassistance programs. This assistance, together with sheep. “We used to kill a sheep and had to finish eating$167.48 million in cofinancing, was allocated to transport the whole sheep within a couple of days,” she said.(49%), urban and social services (36%), energy (9%), and “Now, with the freezer, we don’t have to worry about thenatural resources and rural development (6%). meat spoiling.”ADB’s program in the PRC is evolving to reflect an emphasis Thanks to ADB support in building three hydropoweron innovation, providing added value, and delivering projects stations along the Heihe River Basin, electricity will comewith high development impact. In 2014, lending assistance to Bajiaowan village and many others like it. With a totalof $1.49 billion covered 11 projects across energy, natural capacity of 800 million kilowatt-hours annually, the stationsresources and rural development, transport, and urban and provide a clean, renewable, and cost-efficient source ofsocial services. energy.ADB committed $692.55 million in loans to the PRC’s The city of Zhangye, located along the midstream of thetransport sector. Part of this funding is supporting an inland Heihe River, also benefits from the project. Zhangye’swater transport project in Anhui Province, and a project economy was traditionally based on farming and animalto make rail travel more energy-efficient and safer for husbandry, but, with the rise of industrial development,passengers in Yunnan Province and the Guangxi Zhuang Zhangye faced shortages of electricity. The ADB-supportedAutonomous Region. The loans are also helping to improve power stations helped resolve these shortages.urban public transport for commuters in Jiangxi Ji’an, andmaking travel and trade easier for the people of Yunnan Pu’er The three hydropower stations are expected to reducethrough cross-border transport and rural road projects. greenhouse gas emissions by 630,000 tons a year, equivalent to replacing about 300,000 tons of standardADB has made significant investments in urban development coal annually.in the PRC, including $500 million for projects in Jilin, Gansu,Hubei, and Yunnan. These projects will improve services and These hydropower projects were registered with the Cleanfacilities in urban infrastructure, solid waste management, Development Mechanism (CDM), an incentive under thewater supply, environmental pollution control, and flood United Nations Framework Convention on Climate Changemanagement. In Guangdong Province, a commitment to promote clean energy projects in developing countries.of $100 million is helping to protect water resources and CDM-registered projects can sell their certified emissionimprove water security. reductions to generate additional revenue. By the end of 2014, the three hydropower stations received carbonIn the education sector of the PRC, ADB is supporting a revenues of $30.5 million under the CDM.$50-million project for technical and vocational educationand training (TVET) in the Baise municipality of the Guangxi 21Zhuang Autonomous Region. This project is helping developa flexible and responsive training curriculum that delivers theskills needed by industry. If successful, it could be replicatedelsewhere across the PRC.Aside from support for project preparation ($6.79 million),ADB technical assistance to the PRC in 2014, totaling$11.18 million, focused on policy and advisory services,along with capacity development, to support governmentpolicy reform measures and preparation of the PRC’s13th Five-Year Plan.ADB provided $168.5 million in sovereign loans for threeprojects in Mongolia. A $170-million transport project, ofwhich $125 million was approved in 2014, is constructingEAST ASIA

A BLUEPRINT FOR 293 kilometers (km) of roads that will link development, transport, TVET, and public– THE PRC’S FUTURE Mongolia’s isolated western region with private partnerships (PPPs). Assistance the PRC to the south, and with the Russian helped stage a knowledge-sharing platformIn Beijing on 23 October Federation to the north. The project will on PPPs in Beijing, foster an initiative to 2014, ADB President increase jobs, facilitate trade, and foster exchange information on rural–urban social and economic development in the poverty, and establish an eco-compensation Takehiko Nakao led the region. A loan of $18.5 million will assist hub at the China Agricultural University. “One ADB” knowledge Darkhan, the third-largest city in Mongolia, ADB also produced 70 knowledge products to construct a modern wastewater and services, and organized 80 knowledge- working group for treatment plant that will benefit more sharing activities, for the PRC and Mongolia the People’s Republic than 80,000 people and protect the in 2014. Kharaa River. ADB also pledged $25 million of China (PRC). The to promote technical and vocational In 2014, the PRC became the first country group engaged in education, helping Mongolians to learn to benefit from the “One ADB” approach, the skills suitable for jobs in agriculture, an important element of the Action Plan policy dialogue with construction, and transport. that arose from the Midterm Review of the Government of the Strategy 2020. The approach encourages PRC on the formulation Technical assistance amounting to ADB departments to work together to $9.95 million was provided to Mongolia to create knowledge solutions for developing of its 13th Five-Year support the energy, finance, and transport members. It also promotes interaction Plan. ADB highlighted sectors, as well as to improve public sector between ADB field offices to share management. knowledge across regions. Utilizing the the importance of “One ADB” approach, ADB provided policymarket-driven industrial WORKING AS ‘ONE’ IN EAST ASIA recommendations in October 2014 to help the PRC transition to a high-income transformation for During 2014, ADB strengthened its country. These recommendations were the PRC, supported knowledge-sharing activities in East Asia. It discussed ahead of the formulation by rigorous structural helped create new knowledge platforms and of the PRC’s 13th Five-Year Plan, 2016–2020. reforms, following the hubs that focused on green growth, urbanpolicy direction the PRC itself has adopted. ADB is helping construct ADB ANNUAL REPORT | 2014 293 KM of roads in Mongolia’s isolated western region22

DEVELOPmENT BEYOND BORDERS increase trade, raise incomes for emerging entrepreneurs, and provide jobs.ADB continued to support the prC’s participation in theGreater Mekong Subregion (GMS) program for economic A grant from the Japan Fund for poverty reduction helpedcooperation. loans of $350 million will help improve road train over 1,400 Mongolian herders in improved pastureinfrastructure and the urban environment in Yunnan management, to bolster their resilience to climate changeprovince, along the GMS north–South economic Corridor. and natural disasters. ADB is also helping to improvethrough a memorandum of understanding between the services for Mongolians with disabilities, and expand theprC and Viet nam, development assistance also aided the nationwide telemedicine network for the country’s poor.establishment of cross-border economic zones and jointmaster plans—boosting trade and investment between the ADB continued its support for Mongolia’s food stamptwo countries. program in 2014. this program helps provide nutritious food to those regarded as being among the poorest 5% ofIn 2014, ADB provided support for the prC and Mongolia the population.to continue to work with other developing membercountries under the Central Asia regional economic YOUR SAY:Cooperation (CAreC) program. ADB drove key activitiesof the program, which included streamlining customs We’re lucky to receive pasture,processes, administering transport agreements, and livestock, and business training,improving the control of animal diseases across borders. as well as financial support, fromIt also helped physically connect the people of east Asia, the project. We hope this willvia the now-completed international corridor linking generate more income for ourulaanbaatar to the prC border at erlian, and 293 km members.of roads to link western Mongolia to the prC and therussian Federation. Ts. Battumur discusses an ADB-supported program to help Mongolia’s herders deal with the impact of climate change.FINDING LONG-TERm ANSWERS TO POVERTY A PATH TO ENVIRONmENTAL SUSTAINABILITYIn 2014, ADB continued its work to raise standards of living In January 2014, ADB signed two memorandums offor the people of the prC and Mongolia, especially for the understanding with the Ministry of environmentalimpoverished and disadvantaged. protection and the national Development and reform Commission in the prC. these agreements aim to preventADB supported a project to better deliver water in the and manage air, water, and soil pollution, and to deviseprC’s Chaonan District, Guangdong province, benefiting innovative approaches to climate protection.about 1.23 million people. It is also helping the poorin Baishan and Baicheng cities in Jilin province, by ADB has committed to support a $150-million districtimproving urban transport and water supply. In Yunnan heating project—using low-carbon, low-emissions naturalprovince, financial assistance is improving the lives of gas technology—in Hohhot city in the Inner Mongoliathe impoverished in three secondary cities of Chuxiong Autonomous region. It is also providing technicalprefecture, by helping to upgrade flood management, assistance to develop low-carbon transport in the ningxiasolid waste management, and other basic urban Hui Autonomous region, design energy-efficient railwayinfrastructure services. buildings, and help reduce air pollution in Beijing.ADB supports the prC in developing workforce skills that In Mongolia, ADB is also supporting the implementation ofmeet the demands of its diversifying economy, with training the Integrated Water Management plan for the tuul riverprograms focusing on less developed regions. In 2014, ADB Basin, contributing to the water security of ulaanbaatarhelped develop a competency-based curriculum for tVet and surrounding areas.while also training teachers, and upgrading facilities andequipment. In tertiary education, ADB helped the Ministry 23of education develop policies to improve the employmentprospects of university graduates. It also supported thetraining of caregivers, especially for care of the elderly, inYichang, Hebei province.In Mongolia, ADB is working to expand the reach of thefinance sector, to help develop micro, small, and medium-sized enterprises. Because these enterprises make up 98%of all businesses in the country, ADB’s efforts will helpeASt ASIA

Pacific W hile the Pacific region saw overall The Cook Islands, Fiji, Kiribati, the Marshall Islands, the Federated economic growth States of Micronesia, Nauru, Palau, Papua New Guinea, Samoa, accelerate slightly Solomon Islands, Timor-Leste, Tonga, Tuvalu, Vanuatu in 2014, results among individual countries varied MTR ACTION PLAN: widely. ADB will aim to increase share of The region’s growth of 5.3% was largely education to 6%–10% driven by its two biggest economies, of total financing Papua New Guinea (PNG) and Timor- by 2020. Leste. Fiji held successful elections in 2014, which contributed to sustained growth of 3.3% and a positive outlook in the island nation. Both Tonga and Solomon Islands were struck by natural disasters that slowed growth and burdened public finances in these two economies. The small Pacific island economies remain largely dependent on public spending to support economic growth, often financed through official development assistance. ADB is supporting fiscal reform programs to put these economies on a more sustainable financial footing, along with structural reforms to encourage development of the private sector. Few places in the world are as exposed as the Pacific to the impact of climate change and natural disasters, and ADB is working to develop infrastructure that can withstand extreme natural events and sea-level rise. It prioritizes climate and disaster resilience in its investment projects, and funds the renewable energy portfolio to support climate change mitigation and reduce reliance on fossil fuels. MORE THAN 17.3 MILLION students benefiting from new or improved educational facilities between 2011-201424 ADB ANNUAL REPORT | 2014

ADB and Fiji: An Enduring Partnership Fiji became a member of ADB in 1970. ADB has since provided a total of $417.26 million in loans and $30.72 million in technical assistance. It has focused on promoting economic growth, creating jobs, and reducing poverty, through investments in economic infrastructure, improved public sector management, and private sector development. Following a military coup in 2006, ADB approved additional financing of $49.8 million in 2009 to complete existing investments. Rehabilitation of 235 kilometers of road improved the lives of 13,000 Fijians, while investments in water supply and sewerage systems reached over a quarter of Fiji’s population. In 2009 and 2012, emergency assistance totaling $19.6 million was disbursed to respond to severe floods, helping rebuild the livelihoods of many thousands of people in the key industries of tourism, sugar, and agriculture. In December 2014, ADB approved a new country partnership strategy for Fiji, and committed $100 million for a transport project. The World Bank will also commit funding to this project through ADB systems, a new level of collaboration between the two institutions. A $100-million water and sanitation project is currently under development.In 2014, ADB focused on better connecting Following internationally recognized INADEQUATE WATER:the countries of the pacific. It worked elections in Fiji in September 2014, COUNTING THE COSTon linking investments in transport and ADB resumed full engagement with thecommunications to the delivery of services government, committing $100 million to Inadequate water supplyacross the region. these efforts are helping support the rehabilitation and upgrade of and sanitation in Kiribati’sdeliver health, education, and financial roads and ports. main center, Southservices to outer islands and other remote Tarawa, has contributedcommunities. In timor-leste, additional financing of to high rates of $11.78 million for the country’s major waterborne diseases, withADB also committed in 2014 to an annual transport project is continuing the 35,000 reported illnessesminimum allocation of $3 million from upgrade and climate-proofing of over per year linked to poorthe Asian Development Fund to its 100 kilometers of roads. the project water, sanitation, andsmallest developing members—Kiribati, provides work for many local people, hygiene. An ADB studythe Marshall Islands, the Federated States particularly women, and helps to build a sought to estimate theof Micronesia (FSM), nauru, palau, and national network of reliable, safe roads to economic costs associatedtuvalu. the allocations will tackle growth reduce travel times and prevent accidents with this situation, toconstraints and increase well-being in for the timorese people. enable more informedthese countries. policy responses. The In pnG, a loan of $187.48 million total annual economicoPERATionAl HiGHliGHTS supported expansion of lae port by burden of water-related building a tidal basin, a multipurpose issues was estimatedIn 2014, ADB approved $185.75 million for berth, and terminal works. Another loan to be $534–$1,04514 loan and grant projects in the pacific of $109 million is helping to improve roads for every household inregion along with $26.65 million in technical in pnG’s Highlands region and bolster air South Tarawa.assistance for 25 projects. lending and services in the country. these initiativesgrant assistance, supplemented with aim to link people in poor and remote 25$30.94 million of cofinancing, focused on areas of pnG to markets and governmenttransport (67.7%), energy (18%), and public services.sector management (6.2%).pACIFIC

ADB financing of $36.42 million to the Cook Islands, nauru, member countries (DMCs) in the pacific to exchangeSamoa, and Solomon Islands is helping to boost investment information and encourage South–South collaboration inin renewable energy across the pacific and improve the macroeconomic forecasting and long-term fiscal planningreliability of electricity services. and modeling.In response to natural disasters in tonga and Solomon HUnDREDS oF iSlAnDS, onE ViSionIslands, ADB acted swiftly to provide $17.94 million inemergency loans and grants. After floods in Solomon Islands In May 2014, the pacific Islands Forum leaders endorsedin April 2014, ADB quickly disbursed a grant of $200,000 a new framework to speed up and intensify regionalfrom the Asia pacific Disaster response Fund. A loan of cooperation and integration (rCI). the framework calls for$6.61 million and grant of $6.61 million backed up efforts to greater direct engagement by development partnersreconstruct roads and bridges. In tonga, ADB responded to identify regional priorities, and to align support withto tropical Cyclone Ian in January 2014 by approving an regional needs.$8.79-million project, cofinanced by new Zealand tohelp reconstruct—with necessary climate- and disaster- ADB is working to address the region’s complexproofing—the country’s electricity network and schools. development issues, promote the development of the private sector, implement structural reforms of state-ownedADB continues to work with other development partners, enterprises, and improve the pacific’s trade and transportpromoting good governance policy across the region. links. In 2014, with extensive support from Australia,In 2014, funding of $12.1 million, including collaborative business regulatory frameworks were simplified andcofinancing by new Zealand and the World Bank, was harmonized to encourage trade across sevenactivated to strengthen fiscal stability in Kiribati. pacific DMCs. YOUR SAY: As part of timor-leste’s preparations for membership in the Association of Southeast Asian nations (ASeAn) and We no longer have to rely on other regional initiatives, ADB helped document the legal kerosene to light our lamps, and institutional frameworks for trade and investment and we can use solar power to in the country, and map the reforms needed for regional recharge our mobile phones. integration. Solomon Islander Joyce Suite’e, trained by ADB to repair ADB is supporting rCI through an ongoing investment solar panels, discusses the benefits of solar power. program for pnG to upgrade the country’s air services. A second tranche of $130 million was signed in 2014SolUTionS THRoUGH knowlEDGE SHARinG to strengthen the safety, accessibility, and reliability ofADB was active in strengthening knowledge sharing 21 airports owned and operated by the government, andthroughout the pacific in 2014. ADB publishes the serving more than 3 million people annually. the projectPacific Economic Monitor, with contributions from other will open up new economic opportunities in regionaldevelopment partners such as the International Monetary centers by connecting provinces with major domestic andFund (IMF) and the World Bank. the publication provides international markets.updates on the economic performance of pacific countries,complemented by policy briefs relevant to the region’s In education, ADB provided $1 million to help the universitydecision makers. each December, the Pacific Economic of the South pacific (uSp) complete construction on anMonitor focuses on fiscal performance. expansion of its Kiribati campus. the funds were drawn from a $19 million loan package provided by ADB to uSpADB complemented the publication’s December 2014 in 2012 to help the university improve learning facilitiesedition with a regional knowledge-sharing workshop, held and provide innovative information and communicationin conjunction with the pacific Islands Forum Secretariat, technology (ICt)-based distance learning programs atthe pacific Islands Centre for public Administration, and regional campuses. the project will allow more studentsthe IMF’s pacific Financial technical Assistance Centre. across the pacific to undertake quality academic studies,the workshop brought together 10 of the 14 developing and help establish regional education networks.26 liFTinG THE PACiFiC oUT oF PoVERTY to reduce poverty in the pacific, ADB has placed a stronger focus on creating jobs by expanding business prosperity and commercial sustainability. A project to support agribusiness in Samoa is addressing market constraints and barriers to export. A new regional ADB AnnuAl report | 2014

facility for business investment was approved in 2014, with A Flying Start forcofinancing by Australia, to help develop small and medium- Island Businesssized enterprises. Not so long ago, registering a new company in SolomonADB is supporting a number of financially inclusive Islands was a bureaucratic process. Aloysio Ma’ahanao,initiatives to help low-income households save money to an accountant, remembers those times without fondness.invest, pay for unexpected expenses, and eventually move “Under the old Companies Act, it took up to 3 months.beyond subsistence living. Women and rural residents, who Under the new act, the longest it takes me is 2 days. Theoften cannot access basic financial services, are a particular registration itself takes about 5 minutes.”focus for this assistance. The quick business registration process that Aloysio’sTo foster inclusive transport services, ADB supported clients now enjoy is a result of regional reforms madenew interisland shipping in Solomon Islands and Vanuatu through the Pacific Private Sector Development Initiativethroughout 2014. This assistance is upgrading infrastructure (PSDI). These PSDI reforms include reducing theand establishing schemes to subsidize services for remote time required to start a new company and increasingdestinations, which would otherwise not be commercially opportunities for people to access credit to operate aviable. business. Outdated laws and regulations that hindered business were amended. Through the initiative, theDevelopment assistance is also helping implement policies, governments of Pacific island countries have eliminated theregulations, and legislation to improve basic service delivery, need to use lawyers when incorporating a new company,and allow for socially inclusive pricing policies across Pacific and removed cumbersome identification requirements.DMCs. The initiative is supported by grants from ADBTHE VALUE OF THE ENVIRONMENT ($6.1 million) and the governments of Australia ($41.74 million) and New Zealand ($4.5 million).In the Federated States of Micronesia (FSM) in 2014,ADB supported government plans to promote tourism Solomon Islands is one of the 14 Pacific developing memberthat benefits the environment while providing jobs countries benefiting from this regional technical assistance.for locals. The company registry in Solomon Islands is now fullyIn Kiribati, ADB supported the government’s management online, with fast company name searches, simpleof tuna fishing license agreements. The new approach aims forms, and automated checking of completed businessto reduce fishing quotas to sustainable levels in the medium documents. The reforms reduced the cost and time ofterm, while increasing revenue to help fund public goods incorporating a business from $336 to $175 and fromand services. 45 days to less than 2 days. A new Secured Transactions Act and the related electronic registry had significant impactIn several Pacific island economies, scarce water resources on business loan approval time, reducing it from 28 days topose severe strains on living conditions. An infrastructure 1 day, through better access to information by local banks.development project in the FSM improved wastewater With more companies operating in the private sectorsystems and invested in safe and sustainable water supply to and better access to finance in Solomon Islands, new jobbenefit more than 9,500 residents in Kosrae, Pohnpei, and opportunities have been created.Yap. A similar water supply and sewerage project in Fiji wascompleted in 2014, benefiting around 250,000 residents ofthe Suva–Nausori area.In August, ADB participated in the Third InternationalConference on Small Island Developing States in Samoa.In September, at the Renewable Energy Forum, ADBpledged support for the expansion of sustainable, reliable,and affordable energy across the region.It also affirmed its commitment to renewable energy byapproving a solar project worth $24.28 million for the CookIslands. The project is expected to save 1.09 million litersof diesel consumption every year, and cut carbon dioxideemissions by 2,930 tons.PACIFIC 27

South Asia S outh Asia achieved strong, stable economic growth in 2014, withBangladesh, Bhutan, India, the Maldives, nepal, most of the region’s economiesSri lanka posting impressive gains. MTR ACTION PLAN: India’s economy grew by 7.4% ADB will aim to invest in 2014–2015 on the back of increases in $2 billion annually for investment and industrial production. agriculture and food Sri lanka recorded 7.4% growth driven by security by 2020. strong external demand and the recovery of local investment in a low-interest rate, low-inflation environment. A good harvest, together with growth in the service sector and remittances, saw nepal’s economy grow by over 5%. In Bangladesh, relative political stability bolstered business confidence, helping the economy to expand by 6.1%. this was in spite of weak monsoons and a slowdown in exports. Meanwhile, the economies of the Maldives (with 6.8% growth driven largely by tourism) and Bhutan (with 4% growth driven largely by hydropower production) will need to be diversified to ensure sustainable growth. Inflationary pressures, evident in the first half of 2014 after a spike in food prices, abated across the region. Supported by tighter monetary policies in India and Bangladesh, consumer demand softened, and prices stabilized at lower levels. the region’s development challenges included poor connectivity between countries, inadequate infrastructure, and a growing skills gap. to address these challenges, the South Asia Subregional economic Cooperation (SASeC) program was expanded to include every country in the region. MORE THAN 5 million households with new or improved water supply between 2011–201428 ADB AnnuAl report | 2014

oPERATionAl HiGHliGHTS to address skills shortages, and to improve productivity. ADB invested $300 million in initiatives to address theseIn 2014, ADB supported South Asia with $4.05 billion challenges.for 31 projects and $49.39 million in technical assistance.operations focused on areas critical to achieving sustainable In 2014, efforts continued to improve gender equalityand inclusive growth. these areas included infrastructure, in South Asia, with 61% of ADB projects in the regionenergy security, urban development, and education and incorporating elements for gender balance. these included askills training. high number of projects in education and skills development, agriculture and rural infrastructure, and urban development.India was the largest borrower in the region at 54% of totalloans, followed by Bangladesh at 22%, and Sri lanka at 11%. SHARinG KnoWlEDGE To SHARE REWARDSthe value of contracts awarded to implement projects ADB not only provides development knowledge to memberreached $3 billion (project loans and grants only), and countries, but works to ensure this knowledge is shareddisbursements amounted to $2.62 billion (including policy- within and between countries. In 2014, ADB’s Capacitybased programs). ADB strengthened its relationships with Development resource Centre trained more than 1,300other development partners, and raised almost $1.14 billion in state and local government officials in India on ADB policiescofinancing, which represented 28% of its total operations. and procedures. topics included procurement and contract management, water management, road safety, agribusinessInfrastructure accounted for 79% of ADB assistance to infrastructure, construction management, and municipalSouth Asia. accounting reforms.ADB increased its investment in the transport sector by YOUR SAY:$1.63 billion in 2014. this included $500 million for theregion’s first cross-border road project that includes linking Before the construction of thenortheast India to Myanmar. In Sri lanka, an $800-million bridge, you had to take a journeyproject to upgrade rural roads is connecting producers to of over 14 hours to reach themarkets, and spreading the benefits of recent economic southern plains of Nepal. Thesuccess. In Bangladesh, ADB contributed $505 million, and journey takes around 4 hours now.the european Investment Bank cofinanced an additional$175 million, to improve rail passenger and cargo movements Project director Umeshananda Misra discusses reducedthroughout the country and across the region. travel times from the central hills of Nepal, thanks to the ADB-financed Khurkot bridge.In the energy sector, ADB invested $500 million in cleanenergy in India and mobilized $253 million in cofinancing regular publications provide economic forecasts andfrom the european Investment Bank. ADB also invested macroeconomic analyses to individual countries and the$180 million to expand national grid capacities in nepal, region. Country-specific reports include the Bangladeshand to enable sharing of clean energy in the region and Quarterly Economic Update and the Macroeconomic Update:another $158.5 million in clean energy projects in Bhutan and Nepal.the Maldives. the Climate Investment Fund and bilateraldonors provided $83.2 million in cofinancing for clean energy In 2014, ADB produced gender-specific reports forprojects in the Maldives and nepal. In Sri lanka, $300 million Bhutan and the Maldives. these reports provide a basisof investment is helping to develop clean energy and for identifying gender issues in the design phase of projectimprove system efficiency and reliability. development, while contributing to country partnership strategies between ADB and developing member countries.ADB is committed to urban development in South Asia, For the education, energy, transport, and urban developmentapproving $500 million in 2014 for a program to undertake sectors, tailored videos will help communicate goodmajor reforms in the urban sector and improve water practices for creating gender balance.supply and wastewater services in India’s rajasthan state. InBangladesh, it helped improve the resilience of coastal towns nEW oPPoRTUniTiES FoR REGionAl STREnGTHto climate change and natural disasters. In nepal, ADB is In 2014, the Maldives and Sri lanka joined existing regionalworking to ensure that urban projects are designed to be members in the SASeC program. this opens up promisingmore inclusive, through approaches such as output-basedaid and community development. these approaches aredelivering clean water to more people, and expanding jobopportunities for nepal’s urban poor.the individual governments of South Asia face threecommon challenges in human development: to create jobs,SoutH ASIA 29

Nelson Sees a Road Ahead opportunities for the six developing member countries of South Asia to collaborate on transport, energy, and trade For 55-year-old Nelson Wickramasekara (pictured), facilitation. To support this collaboration, ADB provided a ADB assistance to Sri Lanka’s transport sector means record $1.2 billion in lending and grant financing to SASEC his children have the chance to grow up free of the burden projects. Bangladesh, Bhutan, and Nepal acted quickly to of debt. improve trade facilitation, successfully carrying out policy reforms to modernize their customs departments Nelson has sold fruits along the Kandy–Mahiyangana a year ahead of schedule. Regional energy cooperation national highway for nearly 30 years and, before being was underpinned by project preparations for three upgraded by an ADB-supported project to rehabilitate hydropower projects, and for a second transmission Sri Lanka’s national roads, the ‘highway’ was little more than line crossing the border between Nepal and India. ADB a dusty road with limited traffic and very few tourists. also committed to work with the Government of India to develop the country’s initiative for dynamic economic Today, the Kandy–Mahiyangana national highway is a and industrial corridors. modern road with steady traffic, including a growing number of tourists who use it to get to the historic sites in GROWTH THAT EMBRACES EVERYONE the area. ADB builds inclusive growth objectives into all operations in Nelson has seen a 30% increase in his sales since the road South Asia. In 2014, ADB backed technical and vocational was improved, and he has invested the extra money into education and training programs to help women gain valuable buying a van. Nelson’s son now uses the van to operate a skills for employment. In the transport and energy sectors, school transport service, generating additional income for ADB supported projects that opened up markets for small the family and providing a better way of life for its future businesses in rural areas, allowing them to tap into broader generations. demand and enjoy higher incomes. “I have been able to pay off my debts,” Nelson said. “I can In Bangladesh, ADB is working to expand the power system, build a financial foundation so that my children will be free improve energy efficiency, and increase access to education of debt.” and health care. A $700-million investment will help connect 450,000 households—including many impoverished ones— As well as improving the Kandy–Mahiyangana national to the power grid, while reducing outages and shortages. highway, ADB involvement in Sri Lanka’s transport sector Under a pilot initiative under this project, around 4,000 has focused on upgrading a network of national and disadvantaged farming families will benefit from 200 solar- provincial roads, and improving the country’s premier powered irrigation pumps. Another program promoting container port in the capital, Colombo. To date, 634 inclusive growth seeks to develop a skilled labor force through kilometers of expressways and national highways have been better funding for secondary education. ADB support is built or upgraded, while 1,707 roads in provincial, district, also helping to build 12 comprehensive reproductive health and rural areas have been constructed or improved. care centers and 26 primary health care centers near slums and other densely populated areas. At least 30% of The result of this work has been to bring all Sri Lankans, all services, including the provision of vital medicines, are particularly those in rural and remote areas, closer to provided free to the poor. Women are a focus for free health markets, improving the business prospects of people like services, and mobile outreach services are provided weekly Nelson Wickramasekara. for the homeless and extremely poor. In India, support for electrification projects in Madhya Pradesh includes training30 of 20,000 women to manage microenterprises. The skills program in Kerala focuses on vocational training and youth employment. About 60% of ADB assistance in India goes to lagging states. In Nepal, projects financed by the Japan Fund for Poverty Reduction provided business and skills training to 2,000 poor households marginalized by ethnicity or caste. ADB also helps achieve inclusive growth for South Asia as a region. Projects to connect roads in the SASEC region will upgrade critical regional highway links and two land ports in Bangladesh, boosting connectivity and trade between countries. These upgrades will benefit farmers and the broader economy by increasing trade volumes, improving ADB ANNUAL REPORT | 2014

ADB is helping connect power to 450,000 households in Bangladesh CORBIStraffic flows, and reducing the loss of In Bangladesh, ADB is helping address the PLANTING SEEDSperishable goods. By improving customs impacts of climate change through work OF HOPE IN NEPALprocedures, ADB is also streamlining to reduce the risk of flood and riverbankthe movement of goods in and out of erosion and improve environmental ADB provided aBangladesh, Bhutan, and Nepal. These infrastructure in coastal towns. $20-million grantmeasures will ultimately drive down costs to Nepal to developfor farmers, and reduce prices paid by poor In India’s Karnataka state, ADB is agribusiness andconsumers. promoting climate-resilient development improve livelihoods for in the urban water supply and sanitation people in remote, high-PROSPERITY WITH THE PLANET sector, and integrated water management mountain areas of theIN MIND in agriculture. country. The grant aims to create 7,500 new jobsOver two-thirds of ADB projects in ADB helped Nepal protect its river by 2017, supporting oneSouth Asia contribute to environmentally watersheds through efficient irrigation of South Asia’s poorestsustainable growth. and water management projects. It areas. In May 2013, Suk also provided technical assistance to Prasad Sherpa (pictured)ADB is helping the Maldives to preserve implement an agricultural program started an apple orchardthe fragile ecosystem on which the country promoting land use that is environmentally in the Mustang district,depends for its tourism and fisheries friendly and sustainable. investing aroundindustries. A project to increase the capacity $12,000 in a nursery andof the wastewater treatment plants that In Sri Lanka’s mountainous Central storehouse for saplings.serve Mahibadhoo and Fonadhoo improved Province, ADB is backing a green Today, Suk Prasadsanitation for all 571 households on those hydropower project on a river near produces between 5,000islands. Meanwhile, a grant from the Moragolla. The project will deliver a clean, and 6,000 apple saplingsADB Strategic Climate Fund, combined cheap, stable supply of energy to the grid. per year.with support from the European InvestmentBank and the Islamic Development Bank, 31is helping the Maldives move toward moreefficient mini electricity grids based onrenewable energy.SOUTH ASIA

Southeast Asia S ustaining growth and reducing infrastructure bottlenecksBrunei Darussalam, Cambodia, Indonesia, the Lao People’s were among Southeast Asia’sDemocratic Republic, Malaysia, Myanmar, the Philippines, key development challengesSingapore, Thailand, Viet Nam in 2014. ADB focused on three critical areas: public sector management MTR ACTION PLAN: reforms, requirements in infrastructure ADB will promote and social services, and mobilization natural resource of cofinancing. ADB maintained policy management and dialogue with all its member countries, integrated disaster risk and tailored its projects to meet the management. development challenges faced by each country. Across the region, economic growth eased, following contractions in investment, government spending, and global demand for the region’s exports. In Indonesia, government policies aimed to rein in inflation and the current account deficit. the new government’s ambitious program to reduce fuel subsidies, which should free budget funds for infrastructure and social development, began in november 2014. recovery in exports, and expanded private consumption and investment, generated gross domestic product growth in the philippines in the first half of the year. However, growth was moderated by the slower pace of government spending and public construction. Cambodia saw economic growth ease in 2014, reflecting slower growth in tourism and exports of garments and footwear, and rice. In the lao people’s Democratic republic (lao pDr), economic growth remained stable. Fiscal problems, which had earlier led to payment delays, abated MORE THAN 12.3 million tons of greenhouse gas emissions reduced per year between 2011–201432 ADB AnnuAl report | 2014

In 2014, ADB provided new lending of $2.99 B to Southeast Asia’s public sectorin 2014, although the country’s fiscal deficit ADB approved a new country partnership ASEAN CORPORATEremained large and public infrastructure strategy with Cambodia. This strategy GOVERNANCEprojects faced delays. focuses on rural–urban–regional links, and SCORECARD human and social development. ProjectsMyanmar posted growth that was approved in 2014 include a road improvement To promote transparencystimulated by rising investment. This project that will rehabilitate 729 kilometers and encouragerise was attributed to improved business (km) of rural roads across nine provinces, investment, ADB andconfidence, higher commodity exports, giving 620,000 people better access to the ASEAN Capitalrising production of natural gas, tourism, markets, jobs, and social services. An urban Market Forum publishedand credit growth. Meanwhile, an increase water supply and sanitation project will the ASEAN Corporatein direct investment fueled Viet Nam’s provide cleaner and safer water to 551,000 Governance Scorecard:economic growth. In the long term, people in nine towns, improving public Country Reports andachieving high rates of growth will require health, promoting investment, and expanding Assessments 2013–2014.deeper structural and governance reform. employment opportunities. The Scorecard considers international bestOPERATIONAL HIGHLIGHTS In Indonesia, ADB approved a loan of practices to assess the $400 million to support reforms that will corporate governance ofAcross Southeast Asia during 2014, ADB improve public and private investments. publicly listed companiesprovided new lending to governments of This funding will help the country reach its in the ASEAN region.$2.99 billion, supported by $1.6 billion in average medium-term economic growthcofinancing (including cofinancing under target of between 7% and 9% per year, forthe ASEAN Infrastructure Fund [AIF]), the next 10 years. Meanwhile, an $80-millionand $71.66 million in technical assistance. sanitation project will improve hygiene forThis lending was primarily directed to 70,300 urban households.public sector management (41%), transport(14%), education (14%), and finance (14%). In the Lao PDR, ADB has provided a loan ofContract awards and disbursement levels $15 million to help strengthen the country’sreached $1.79 billion and $1.8 billion, governance framework. The assistance willrespectively. 33SOUTHEAST ASIA

support reforms in public administration and public financial the ADB-supported ASEAN Corporate Governance Scorecardmanagement. supported the work of the Association of Southeast Asian nations (ASeAn) to raise corporate governance standards,An $80-million transport project in Myanmar will bring develop an integrated capital market, and increase thepeople and produce closer to markets, by rehabilitating visibility of publicly listed companies to investors.54.5 km of roads between Yangon and one of the nation’smost productive agricultural areas, Ayeyarwaddy Delta. In May 2014, ADB hosted a regional conference in Manila, promoting the 3e concept of economic competitiveness,through a $350-million program to increase environmental sustainability, and equity. Attended by 170competitiveness in the philippines, ADB is helping to delegates, the conference shared the operational frameworkraise the employment prospects of Filipino youth, develop for “Greeen cities” and showcased urban growth modelsskills and services in tourism, and reform the country’s that can be replicated across Southeast Asia.business and investment climate in the longer term.A loan of $250 million will improve service delivery by local CloSER REGionAl CollABoRATiongovernments, contributing to inclusive growth. ADB demonstrated strong support in 2014 for regional YOUR SAY: integration in Southeast Asia. It attended the 5th Greater Mekong Subregion (GMS) Summit, endorsing a pipeline For a long time after the typhoon, of 92 priority projects valued at $30 billion. It also our classroom was a tent. We got participated in the 6th GMS economic Corridors Forum, wet when it rained and hot when fostering cross-border economic zones, logistics centers, it was sunny. Our classroom and industrial estates. is now repaired and we find it easier to study. In 2014, ADB approved $108 million for a regional tourism infrastructure project that will help create 129,000 tourism- 12-year-old student Honeylette Molina from the related jobs across Cambodia, the lao pDr, and Viet nam. Philippines’ Leyte island under ASeAn subregional programs, ADB supported priority projects to enhance regional connectivity. theseIn Viet nam, ADB is implementing a $320-million program to projects included work to upgrade and expand roadshelp improve the efficiency and transparency of state-owned through Kalimantan in Indonesia and Mindanao in theenterprises. Another program, with funding of $230 million, philippines. Meanwhile, Indonesia, Malaysia, and thailandwill help lift Viet nam’s competitiveness through reforms to collaborated via a summit to endorse a green city action planbanking, fiscal policy, and public sector administration and for Melaka in Malaysia. ADB assisted with the developmentaccountability. the program will also address state enterprise of the plan, which will serve as a blueprint for other cities onmanagement, public investment management, and the economic–environmental balance.business environment. to improve the reliability of powersupply for businesses and residents of Ha noi and Ho Chi the AIF, which is administered by ADB, cofinanced twoMinh City, ADB is financing a $172-million energy project to projects totaling $140 million. one project will provide betterinstall or upgrade 200 transmission lines. sewerage and wastewater treatment facilities in Indonesia; the other will improve power system reliability and reduceA PARTnERSHiP in KnowlEDGE greenhouse gas emissions in Viet nam. Myanmar joined theADB made significant headway during 2014 to support AIF’s board in 2014, so that all 10 ASeAn member countries,knowledge outcomes in Southeast Asia. along with ADB, are now AIF shareholders.In January 2014, ADB organized a high-level knowledge SHARinG THE BEnEfiTS of GRowTHpartnership conference, held in Jakarta, to strengthen itsinformational ties with the Government of Indonesia. the In 2014, to help sustain inclusive growth in Southeast Asia,conference identified more effective knowledge solutions for ADB provided support to disaster-affected communitiesenergy security, skills development, and food security. and other vulnerable groups.A publication was produced titled Unlocking the Potentialfor Geothermal Energy, which provides inputs to Indonesia’s In the philippines, ADB approved cofinancing ofrevised geothermal law. $479 million to restore basic social services and rebuild communities affected by typhoon Yolanda (international name Haiyan). this work will rebuild homes and livelihoods for people in 900,000 households across more than 6,000 communities. A loan of $300 million will assist the government to establish an effective senior high school system, enhancing34 ADB AnnuAl report | 2014

employment opportunities for youth. This program is New Prosperity forexpected to better teach about 5.9 million students over an Ancient Trade Route3 years. More than 1,200 years ago, during the Tang Dynasty,In Cambodia, ADB paved the way for over 40,000 poor merchants from the Yunnan region the People’s Republic ofand disadvantaged women to undertake training that will China began forging trade routes to carry aromatic tea andimprove their basic skills and enhance their chances of other goods to the far corners of Asia.gaining employment. It also approved additional financingto rehabilitate 257 km of rural roads and help 284,400 poor One of these southern caravan trails meandered throughCambodians recover from flood damage. what is today Luang Namtha Province in the Lao People’s Democratic Republic (Lao PDR), then crossed the MekongIn Indonesia, ADB assistance will help upgrade basic River into Thailand.infrastructure, and create new homes for people living inthe slums of 20 cities, impacting the lives of 670,000 ADB helped to revitalize these old trade routes for thelow-income families. people of the Lao PDR. It supported the construction of the Route 3 Highway, stretching from the country’sA loan of $21 million will assist livestock farmers in the northern border with the People’s Republic of China (PRC)Lao PDR to operate commercially. ADB will help improve to the southern border with Thailand. It also financed theanimal husbandry and meat processing techniques, while construction of the 4th Thai–Lao Friendship Bridge, whichproviding training in accounting, marketing, and the use of spans the Mekong River.business plans to access credit. “After the road was completed, trade volume increased moreFor central Viet Nam, ADB approved $85 million of than 70%. Then, after the Friendship Bridge was completedadditional financing to support the upgrading of about last year, trade volume increased a further 12%,” said29,000 hectares of potentially productive land. This funding Tinnawat Silarug, chief of investigation at Thailand’s Chiangis also strengthening infrastructure to increase agricultural Khong Customs House.productivity and manage the effects of natural disasters.ADB supported a project to improve lower secondary Every morning, long convoys of trucks from the PRC andschools in Viet Nam, with a focus on over 640,000 students the Lao PDR stream across the bridge into Thailand,from ethnic minorities. It also supported a microfinance carrying produce, equipment, and other goods that will beprogram to give low-income bank customers access to small in Bangkok’s bustling markets by nightfall. Tourism has alsoloans that are sustainable and affordable. markedly increased for the Lao PDR. “We have more tourists than ever visiting this part of our country—about 20,000ENVIRONMENTAL SUSTAINABILITY people a month,” said Sibounheuang Phanthalak, directorIN SOUTHEAST ASIA general of the 4th Mekong Friendship Bridge in the Lao PDR. “Most of the tourists are from the PRC and Thailand, butADB continued to support climate change adaptation and we’re getting more from ASEAN and western countries, too.”the environmentally sustainable management of naturalresources across Southeast Asia. It helped rehabilitate and With northern border crossings up significantly, theimprove the climate resilience of rural roads in Cambodia, Lao PDR’s export volume increased threefold betweenwhile providing support to a pilot program to improve urban 2008 and 2012. The road and the bridge are at the heart ofwater supply and sanitation infrastructure in the country’s this transformation, helping deliver greater prosperity toTonle Sap Basin. communities all along this revitalized trade route.In Viet Nam’s two largest cities, Ha Noi and Ho Chi MinhCity, projects will improve energy efficiency, promote trafficefficiency, and reduce greenhouse gas emissions, with fundsfrom the Clean Technology Fund.ADB helped mobilize resources to implement action plansin Indonesia, Malaysia, and the Philippines under theCoral Triangle Initiative that will help conserve andregenerate coastal and marine resources, while enablingcommunities to generate wealth.SOUTHEAST ASIA 35

MTR ACTION PLAN: ADB will expand private sector development and operations to 50% of annual operations by 2020. Developing the Private Sector36 ADB ANNUAL REPORT | 2014

A s a cornerstone of economic growth ADB also increased the use of risk transfers as a way throughout Asia and the pacific, private of attracting third-party institutional capital into sector development is a primary focus of its investment activities, while better managing its own Strategy 2020. limited capital. ADB has long been an important financier ADB introduced several reforms to its private sectorof private infrastructure and financial intermediaries, and operations during the year. As a result, ADB approvedthis was highlighted again in 2014. In a landmark year, private sector financing at volumes 19% higher in 2014ADB approved 25 private sector projects for a total of compared to 2013, with the number of deals at record levels.more than $1.9 billion, while cofinancing of over $5 billion B-loan syndication activity was also particularly strong,was generated. As it further expands its engagement mobilizing over $860 million.with the private sector, ADB will promote inclusive andenvironmentally sustainable growth across the region. BOOSTING SKILLS AND SUPPORTING BUSINESS ADB recognizes that the resources required to plan,the Midterm review (Mtr) of Strategy 2020 requires prepare, and deliver private investment opportunities can beADB to become more active as a project developer, helping significant for individual governments. It therefore providesprepare and bring projects to market. In response, ADB extensive support to help improve the skills of public serviceestablished the office of public–private partnership (oppp) officials who are involved in preparing bankable projects forin September 2014. the office provides transaction advisory private investment. ADB also works to help create businessservices to help countries prepare and deliver bankable environments that enhance the commercial viability ofpublic–private partnerships (ppps). these partnerships are private investment.essentially long-term contracts between governments andprivately owned companies to build and maintain public YOUR SAY:infrastructure. the ppp approach has been adopted globallyas a model for delivering high-quality and sustainable The funding line for housinginfrastructure projects. However, in developing Asia, the from ADB has made owninguse of ppps has been impeded by a lack of resources to one’s home not just a dream butprepare appropriate projects for market. the oppp supports a reality.ADB regional departments in their operations to promoteand implement ppps. ADB reinforced its commitment in Lakshman Silva, Chief Executive Officer of DFCCnovember 2014 by establishing the Asia pacific project Vardhana Bank in Sri Lankapreparation Facility (Ap3F). this facility will provideassistance to the public sector agencies responsible for Enhancing Capacity and Sharing Knowledgepreparing and structuring ppps in developing member ADB is collaborating with the World Bank and thecountries (DMCs). Inter-American Development Bank to create a globally recognized ppp certification and credentialing program.ADB’s financing assistance to the private sector in 2014 this will help establish professional standards in ppp designcomprised various modalities. these included loans, and implementation for public officials and participants fromequity investments, credit enhancement products such as private enterprise.guarantees to banks, and B loans (funded by other banks). ADB is also providing tailored support to individual DMCs.MORE THAN In october, it conducted an assessment of ppps in Malaysia with the national ppp unit, sharing international17,900 MW best practice to support their intended expansion of infrastructure ppps, as well as for sharing Malaysia’sof energy generation experience with other DMCs in Southeast Asia. In Myanmar,capacity installed it is working with the government to lay the foundationsbetween 2011–2014 for a national ppp program. In February, ADB approved technical assistance to the Ministry of electric power to help increase private investment in power generation, along withDeVelopInG tHe prIVAte SeCtor 37

AFP support for planning and public debt management. This means ADB is now engaged in PPP policy development Opening the Pipeline of and project management readiness in every country in Private Investment Southeast Asia. High-quality infrastructure—from reliable power and water In Timor-Leste, the Pacific Private Sector Development supplies to well-built roads and airports—is central to a Initiative (PSDI) worked with the PPP unit to strengthen country’s development. In Asia and the Pacific, however, the country’s ability to manage projects, particularly those there is a serious lack of infrastructure. ADB puts the for water, power, and transport. region’s infrastructure investment needs at $8 trillion from 2010 to 2020. Creating Positive Environments for Enterprise Through its support for policy and regulatory reforms, Public–private partnerships (PPPs) can be an effective ADB strives to improve business conditions for private tool to narrow the region’s infrastructure gap. PPPs are enterprise in individual DMCs. These reforms include contractual arrangements where a government partners more secure and transparent business regulations, and with the private sector to deliver infrastructure services. simpler tax and trade policies. From simple contracts for privately-run services to more complex agreements such as build–operate–transfer, where In December 2014, ADB approved the formation of private parties finance, build, and operate over a fixed period the Mekong Business Initiative. The initiative, which is to generate returns before transferring ownership to the funded by $10 million from the Government of Australia, government. will focus on policy advice and advocacy to improve the business environment in Cambodia, the Lao People’s Good advice and preparation is key to structuring PPPs that Democratic Republic (Lao PDR), Myanmar, and entice private finance. In the Philippines, for example, ADB Viet Nam. It aims to increase the number of small and has been working closely with the government to prepare medium-sized enterprises in these countries to 1.5 million and implement PPPs for years. From just 11 projects in 2010, by 2023. the Philippines now has 61 potential PPPs valued at about $3 billion or just over 1% of gross domestic product. The 61 In Indonesia, ADB supported a range of reforms to projects include highways, national railways, urban light rail improve the country’s commercial environment, including transit, classrooms, hospitals, and airports. One example, initiatives to accelerate priority infrastructure projects, a PPP for the Mactan Cebu International Airport will now and the establishment of a PPP unit in the Ministry of upgrade and expand facilities, which are straining to cope Finance. with increased traffic and tourists. Demonstrating end-to- end PPP support, ADB also played a key role in mobilizing In the Lao PDR, ADB assisted the government to develop the debt financing, including $75 million of its own. a PPP regulatory framework and prepare four prefeasibility studies in education and health. Projects like this prove that ADB can be more than a financier. The MTR of Strategy 2020 concluded that PPP In the People’s Republic of China (PRC), ADB has preparation and advisory resources were key. In September, assisted in the preparations for a national law, drafting of ADB established the new Office of Public–Private procedures, and guidance on PPPs. These activities are Partnership to provide independent transaction advisory aimed at increasing business confidence and attracting services to developing member country governments more private investment, especially in infrastructure. and help structure bankable PPP projects. These services ADB is also assisting the PRC to establish a fund that will include financial structuring, due diligence, documentation, provide government financial support to PPPs. marketing, evaluation, and facilitating financing. The office will also help to coordinate ADB’s PPP operations. In Nepal, ADB helped the government prepare draft policy, legislation, and guidelines to build solid regulatory38 and institutional frameworks for PPPs. As of December 2014, the government had identified five potential PPPs, and plans to implement pilot projects to showcase potential. Across DMCs in the Pacific, the PSDI has helped reduce lending risk and expand access to credit. The introduction of secured transactions and personal property securities will enable borrowers to use movable or unfixed assets as collateral for loans. Since 2006, the PSDI has supported ADB ANNUAL REPORT | 2014

the passage of laws in eight Pacific DMCs, six of which also development. Education and agribusiness also emerged ashave established registries for secured transactions. In 2014, focus areas.the PSDI designed financial products to expand the use offrameworks for secured transactions in Timor-Leste and The year was notable for projects with strong gender focus.other Pacific DMCs. A number of flagship projects contained measures that allow women and girls to access more readily education,Preparing and Delivering Projects for Private employment, and finance. These projects span ruralParticipation education and affordable housing finance in India, foodTo stimulate greater private investment, ADB provides value chain development in Cambodia and India, andextensive support to DMCs to identify and prepare viable financial inclusion in Tajikistan.and bankable projects, and ensure that well-developedprojects are realized. Moving into New Areas ADB expanded its private sector operations into a numberADB support to the PPP Center in the Philippines resulted of new areas in 2014.in the preparation and award of three national PPP projectsin 2014. As of December, seven projects were under It made its first investment in privately operated education,bidding, while 39 projects were in preparatory phases. with a commitment of $2 million to Hippocampus LearningWorld Economic Forum and G20 reports in 2014 cited the Centres (HLC) in India. HLC runs preschool and after-Philippines as a prime example of how governments can school coaching programs for children in rural India, withpromote and manage PPPs. each center supervised by a woman teacher from the local community. This is a pioneering, low-cost system forADB is also backing PPPs for projects that extend supplementary education in rural areas, where the reach ofbeyond national borders. In April, it provided technical formal education has been limited or badly constrained.assistance—cofinanced with the Government of Canadaand International Enterprise Singapore—to enhance In another first, this time in private agribusiness acrossregional project development under the Association of borders, ADB committed $16.5 million to support AkaySoutheast Asian Nations (ASEAN). This assistance will also Flavours & Aromatics, which operates in Cambodia andfurther efforts to link PPPs with the ASEAN Infrastructure India. The company is investing to add value in the supplyFund (AIF). chain for spices, from climate-resilient and inclusive farming models to processing and export. This project aimsADB continues to advise the Government of Mongolia on to promote regional trade and foreign direct investmentthe country’s first PPP project, a $1.3-billion heat and power in Cambodia, while reducing rural poverty by creatingplant in Ulaanbaatar. In June 2014, a private consortium opportunities for poor farmers.agreed with the government to construct, finance, operate,and maintain the project over a 25-year period. In Central During 2014, ADB commenced its private sector operationsand West Asia, ADB continues to advise the consortia of in Myanmar, making two significant investments to improvenational gas companies working to prepare and tender the the country’s commercial infrastructure. It approved total1,800-kilometer Turkmenistan–Afghanistan–Pakistan– financial assistance of $120 million—comprising a loan, anIndia (TAPI) natural gas pipeline project. A milestone was equity investment, a B loan, and a political risk guarantee—achieved in November 2014 with the incorporation of the to revitalize about 10 acres of downtown Yangon, theTAPI Pipeline Company Limited. country’s largest city. The area will become a thriving central business district located next to the central railway stationADB has also secured endorsement and support from other and the Bogyoke Market. The development consists ofmultilateral development banks, international organizations, a hotel with serviced apartments, two office towers,and some major national development banks, to develop a retail podium, a residential tower, restoration of a heritagejointly project preparation software under the International building, and Myanmar’s first district cooling plant.Infrastructure Support System. The software will provide ADB also approved a loan of $100 million for connectivityguidance and templates to help the public sector better infrastructure in Myanmar. The project will developprepare infrastructure projects that can attract private telecommunications towers, establish cold storage facilities,investment. and support a logistics fleet company.DELIVERING FINANCIAL ASSISTANCE For the first time, ADB provided support for a port servicesTO TARGETED SECTORS company. It approved a loan of $40 million to Ocean Sparkle, one of India’s leading port operators, to acquire tugboats,Throughout 2014, ADB continued to support financial platform supply vessels, and tug supply vessels. The loanmarket intermediaries and infrastructure development is expected to boost confidence for private investment inin the areas of energy (particularly renewable energy), India’s port operations and maritime infrastructure.water supply and sanitation, transportation, and urban 39DEVELOPING THE PRIVATE SECTOR

In the philippines, ADB approved a loan of $75 million to private credit in the banking system, through a direct loanGMr Megawide Cebu Airport Corporation to expand and of $75 million and a B loan of $25 million to Hatton nationalrenovate the passenger terminals of the Mactan Cebu Bank. this funding will contribute to inclusive growth andInternational Airport. this is the first ADB loan to the recovery in post-conflict areas.aviation sector in the philippines, and a landmark ppp forthe country. As the only international airport in the Visayas Directing Trade Finance Where It’s Neededregion that can handle large numbers of passengers, added Without sufficient finance to support export and importcapacity at Mactan Cebu International Airport will create activities, trade cannot deliver its full potential to generatenew employment opportunities in the region. economic growth, create jobs, and reduce poverty.Expanding Capital Markets and Financial Services In 2014, ADB conducted a study that estimated the globalDuring 2014, ADB intensified its support for micro, small, market gap for trade finance at $1.9 trillion, of whichand medium-sized enterprises—engines of inclusive growth approximately $1 trillion is required in Asia. Companiesand key contributors to poverty reduction. It provided a surveyed said that expanding access to trade finance by 15%$20-million loan to DemirBank in Azerbaijan, a $40-million would result in 21% higher production and a need to hire 17%loan to Khan Bank in Mongolia, and an $11-million more people.investment (comprising a loan, equity, and a B loan) toAccessBank in tajikistan. through its trade Finance program (tFp), ADB works to close market gaps for trade finance by providing banks withto develop agriculture and agribusiness in India, ADB guarantees and loans that support trade.provided loans of $200 million each to Axis Bank andYeS Bank. the loans will be used to help provide finance In 2014, the tFp facilitated almost 2,000 transactions valuedto poor farming households and women on low incomes at over $3.8 billion, with over $2 billion cofinanced by banks,in rural areas. ADB also approved an equity investment of private insurers, an export credit agency, and International$40 million in olympus Capital Asia V Fund, supporting enterprise Singapore. over 98% of tFp transactions weremiddle-market Asian companies operating in agribusiness in countries accessing the Asian Development Fund, andand food, financial and business services, and environmental support was provided to 1,549 small and medium-sizeddevelopment. enterprises, with 246 trade transactions between DMCs. A report on the tFp released by the Independent evaluationAn equity investment of $30 million in Asia environmental Department concluded that the tFp had significantlypartners II is helping to stimulate private equity participation contributed to trade in Asia and to the developmentin environmental finance across Asia and the pacific, aiding of a trade financing sector which would not otherwiseenvironmentally sustainable growth in the region. have existed.In India, ADB committed $125 million to Dewan Housing Providing Finance for Vital InfrastructureFinance Corporation to provide loans to low-income In 2014, ADB continued to pave the way for the privatecustomers, at least half of them women, to buy affordable sector to participate in core infrastructure projects aroundhousing. this investment will help reduce poverty, create the region.jobs, and raise standards of living. In the key area of renewable energy, ADB approved an equityIn Sri lanka, ADB is helping to expand access to finance investment of $50 million to renew power Ventures, afor infrastructure development, and add to the level of leading developer of wind-generated energy in India. It also approved a loan of $100 million to ACMe Solar energy to MORE THAN develop 200-megawatt solar photovoltaic power generation capacity across several projects in India. $15 BILLION In the conventional energy sector, ADB approved a loan of trade finance of $75 million for a 341-megawatt gas power project in supported between Bangladesh. the project will help alleviate Bangladesh’s 2011–2014 severe power shortage, while reducing greenhouse gas emissions compared with coal or hydrocarbon power generation. to improve wastewater and sewerage for the rural poor in the prC, ADB provided a direct loan of $100 million and a B loan of $200 million to support the construction of a40 ADB AnnuAl report | 2014

ADB approved 25 private sector projects for a total of more than $1.9 B in 2014series of small-sized wastewater treatment power, alleviating Georgia’s dependence on PPPs: A GLOBALplants, and to build associated sewage fossil fuel. ADB approved a direct loan of PERSPECTIVEpipelines across the country. the project $75 million and mobilized $15 millionis focused on rural townships situated from the Canadian Climate Fund for the With public–privatealong rivers, with significant environmental private Sector in Asia. It also worked closely partnership (PPP)challenges and on other areas sensitive to with the International Finance Corporation becoming anclimate change. and the european Bank for reconstruction increasingly effective and Development in cofinancing this means of meeting theFostering Cofinance and Partnership challenging project. development challengesADB’s private sector operations leveraged of Asia and the Pacific,significant commercial resources to In 2014, ADB innovatively utilized sharing knowledgesupplement its own pool of capital during concessional funding from the Clean on PPP experiences is2014. It raised over $5 billion through technology Fund (CtF). In Indonesia, vital. ADB, togethercofinancing, including over $2 billion following the successful financing of with the World Bankgenerated through the tFp. there was the Sarulla geothermal project in 2013, and the Inter-Americanrobust growth in syndicated B loans and ADB approved a loan of $50 million for a Development Bank,parallel cofinancing. ADB’s private sector 240-megawatt geothermal project across has published aoperations will continue to play a key role the Muara enim, lahat, and pagar Alam second version of thein mobilizing third-party capital, which is a regencies of South Sumatra, approximately PPP reference guide.strong focus under Strategy 2020. 225 kilometers from palembang. In It presents a global northeastern thailand, ADB approved a overview of approachesleveraging bank and development loan of $53 million and deployed $30 million and experiences in PPPpartner resources is critical, given limited from the CtF for an 80-megawatt wind implementation, alongADB capital and the growing needs of farm in the Sap Yai District of Chaiyaphum with more extensive casethe region. In Georgia, ADB backed the province. the project will further diversify studies from Asia anddevelopment of a hydropower project in thailand’s energy mix, and help the country the Pacific and Inter-the southwestern region of Adjara—its meet its clean energy targets. American regions.first commitment to a private energyproject in the country. the project aims 41to supply the Adjara region and selectedparts of northern turkey with reliableDeVelopInG tHe prIVAte SeCtor

MTR ACTION PLAN: ADB will become a more dynamic, agile, and innovative institution. Delivering an effective organization42 ADB AnnuAl report | 2014

T he Midterm Review (MTR) of Strategy 2020 Independent Evaluation: delivered a resounding recommendation: Fundamental for that ADB streamline its operations to provide Effectiveness better service to its member countries. In September 2014, ADB hosted an international ADB moved quickly to introduce measures to conference at its headquarters in Manila to mark 10 yearsstrengthen its capacity and effectiveness. It recalibrated of independent evaluation at ADB. This event attractedits business model and institutional settings to improve more than 200 participants, including representatives fromproject implementation, mobilize greater financial 26 developing member countries. Attendees discussed theresources, introduce additional flexibility into managing power of evaluation, learning, and innovation in addressingstaff resources, and strengthen knowledge work. the development challenges of Asia and the Pacific.To achieve economies of scale and deliver value for ADB’s evaluation process changed dramatically in themoney, ADB established a working group to improve decade between 2004 and 2014. It progressed fromproject quality assurance and streamline its processes providing assessments of completed programs and projectsin financing operations. In July 2014, it launched a new to providing insightful, predictive, long-term input intoprocess for allocating technical assistance, linking corporate policies and programs.incentives with performance, and increasing transparency.To improve project readiness, it extended by 2 years the The Independent Evaluation Department (IED) has playedpilot period of the facility used to quickly disburse finance an important role in shaping ADB policies and direction.to developing member countries (DMCs) for project In 2014, the IED prepared its own, highly influentialdevelopment. It updated its corporate results framework, assessment of ADB’s Strategy 2020.and is refining its guidelines for results frameworks at thecountry and project levels. This assessment helped to inform the Midterm Review (MTR) of Strategy 2020, with actions identified inADB further refined its products and processes, which the assessment contributing to the areas of inclusion,are expected to enable it to transfer risk to a broader set sustainability, and development effectiveness in the MTR ofof commercial cofinanciers, freeing up existing capital for Strategy 2020.new transactions. Country evaluations have fed into the preparation ofADB is determined to become a more dynamic and country partnership strategies and operational plans,agile institution. In 2014, it moved to reinforce staff skills, as well as the design of programs and projects. In 2014,incentives, and human resource practices. Regional IED finalized evaluations on governance, natural disasters,departments began sharing staff to bridge skills gaps, social protection, and inclusive growth, which havestrengthen teamwork, and ensure that knowledge and contributed to the strategic and operational directionsexperience is transferred across regions. Field offices, of ADB. Corporate evaluations on the role of technicalalso known as resident missions, are being strengthened, assistance in ADB operations, an operational review of thetoo. They will play a larger role in managing knowledge institution’s safeguards policy, and the performance of itsoperations, and have more authority to make decisions on Trade Finance Program delved into ADB’s processes andprocurement and disbursements. programs.ENSURING ADB DELIVERS RESULTS 43Development ResultsThe Development Effectiveness Review (DEfR) process,introduced in 2008, measures ADB’s progress towardcorporate targets and drives decision making. The 2014DEfR assessed ADB’s performance through 91 indicatorsadjusted to reflect the Midterm Review (MTR) of Strategy2020 Action Plan and upgrades to the corporate resultsframework. It found that ADB’s operational successcontinued to rise, and did so mostly within budget.For the first time, ADB achieved over 80% of its targetoutcomes. Activities such as cofinancing, public–private partnerships, disbursements, budget efficiency,project quality at entry, and operational alignment withStrategy 2020 all improved. The DEfR also found thatimplementation delays, and the uncertain financialDELIVERING AN EFFECTIVE ORGANIZATION

Plan Points to Improved Procurement In 2014, ADB approved a 10-point action plan for procurement reform, as an integral part of the Midterm Review of Strategy 2020 Action Plan. The procurement action plan and associated reforms set out to reduce procurement time, increase administrative efficiency, and improve project delivery, while maintaining sound financial oversight. At each step in a project’s cycle—from country partnership strategy and project concept to project preparation and contract implementation—risk is considered and weighed to determine procurement actions. The reforms, which are now being implemented, provide for review of, and greater reliance on, country systems. They include revision of procurement thresholds, including international competitive bidding limits and prior- and post-review limits. A new administratively efficient post-review method has been introduced, and procurement decision-making is further delegated and decentralized to regional departments and field offices. An online procurement review system has been launched, and action has been taken to enhance practices in engaging consulting services to improve quality and reduce time. A GUIDING LIGHT ON sustainability of many outcomes need sovereign operations using country (public RENEWABLE ENERGY particular attention. financial management and procurement) systems. Almost all ADB operations On 27 February 2014, Complementing the DEfR process, approved in 2014 were clearly linked to, ADB Vice-President ADB published Together We Deliver or contributed to, output indicators in Bruce Davis announced in May 2014. The publication profiles country sector results and targets that ADB headquarters projects supported by ADB that achieved of DMCs’ national development plans. had switched to using strong development results, and outlines The use of country systems captures 100% renewable energy. examples of best practice and innovation. the use of public financial management The offices are now systems and country procurement systems. powered using energy Progress on Global Partnership Due to growth in policy-based operations,generated by geothermal ADB is committed to the effective ADB’s performance on this indicator development cooperation principles improved to 55% overall in 2014 from plants in Tiwi and that were agreed at the Fourth High 50% in 2013, but still below the baseline Makiling–Banahaw, Level Forum on Aid Effectiveness in of 59%. both of which are on the Busan, Republic of Korea in 2011. The main Philippine island principles highlight country ownership, During 2014, ADB contributed to the of Luzon, in addition to focus on results, inclusive partnerships, first High-Level Meeting of the Global solar power generated transparency and accountability, and Partnership for Effective Development support for fragile and conflict-affected Cooperation in Mexico, which reaffirmed by ADB’s rooftop states. The Global Partnership for effective development cooperation solar panels. These Effective Development Cooperation principles and highlighted new priorities— geothermal and solar (GPEDC) was launched at the 2011 South–South cooperation and knowledge sources meet the entire meeting and provides a framework to sharing, domestic resources mobilization, energy requirements of track progress on the principles. middle-income countries, and business as ADB headquarters. a partner in development. ADB published ADB tracks its progress using two Global Partnership for Effective Development methodologies from the GPEDC Cooperation: What it Means for ADB, which framework: operations aligned with served as ADB’s report after the Mexico country-owned results frameworks, and meeting.44 ADB ANNUAL REPORT | 2014

Since 2004, ADB has saved $1.1 M by reducing electricity, water, and paper consumption; and solid wasteTransparency and Disclosure ADB is also strengthening its field offices. It is implementingADB improved its transparency in 2014, and this was outposting arrangements, and establishing regional hubsrecognized in the Aid transparency Index, which measured staffed with specialists in safeguards, social development,the transparency of 68 of the world’s leading donor procurement, and disbursement. It is also building aorganizations. ADB’s ranking jumped to fifth in 2014, up more gender-balanced, diverse, and inclusive workplace,five places compared with 2013. ADB was the top-rated through principles included in all human resource policiesmultilateral development bank in the index, with its and programs.transparency measure increasing from about 57% in 2013 to83.8% in 2014. Learning and Development ADB continued to develop its staff, to meet business needsAs well as disclosing new categories of loan documents in and for personal growth. In 2014, 119 internal programs2014, ADB rolled out an upgraded tracking system to capture were conducted, attended by 2,195 staff. enhancingADB responses to information requests received via its leadership and management skills was a priority. Somewebsite. It also provided staff with updated guidance on programs aimed to develop new managers, supervisors,implementing disclosure requirements. mission leaders, and mission team members, while an orientation program for new directors and countrySTRENGTHENING STAFF CAPACITY directors was also launched. other training programs aimed to reduce risks in procurement, improve projectHuman Resource Management implementation, and respond to financial reporting andIn 2014, ADB adopted a range of new measures to audit requirements. ADB also introduced online programsensure that its DMCs are serviced by the most talented on leadership, and diversity and inclusion. During theand motivated professionals available. the new talent year, ADB provided 42 specialized programs and relatedmanagement initiatives included increased use of social activities to support its regional operations and maximizemedia for recruitment, focused outreach and recruitment to knowledge sharing among DMCs. these events werefield offices, streamlined staff evaluation periods, and more attended by 248 staff from various ADB field offices acrossspecific managerial selection. ADB also enhanced succession the Asia and pacific region.planning and introduced renewable fixed-term contractsand 360-degree feedback for senior positions. It conducted Safeguardsan annual talent review exercise to better assess staff ADB worked with DMCs in 2014 to strengthen their legalperformance and potential, and established a structured skills frameworks and institutional capacity on safeguards. It alsoaudit to identify gaps in existing organizational skills.DelIVerInG An eFFeCtIVe orGAnIZAtIon 45