ADB

NEWS FROM THE ASIAN DEvELOPMENT BANk

January 2011

East Asia Needs to Look at Currency Cooperation
overnments and monetary authorities in emerging East Asia need to cooperate more on exchange rates and other policies to turn the swift post-crisis recovery into more balanced, long-term growth. “Regional exchange rate cooperation—if handled wisely—can ensure intraregional exchange rate stability while allowing inter-regional flexibility; thus helping promote intraregional trade and investment, and rebalance the region’s sources of growth,” said the special section of the latest edition of ADB’s Asia Economic Monitor, released in December.
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$3B Transport Projects to Ease Gridlock in Ho Chi Minh City
he ADB Board of Directors has approved a $1.1 billion finance package for two major transportation projects in Viet Nam that will help unclog Ho Chi Minh City’s overcrowded roadways. ADB will provide $540 million toward a $1.4 billion project to construct a second mass transit line in Ho Chi Minh City, and an additional $636 million for a $1.6 billion project to construct a modern expressway to the south of the city. “These projects will significantly reduce traffic congestion, help lower traffic accidents, and abate carbon emissions,” said James Lynch, Director of ADB’s Transport and Urban Development Division for Southeast Asia. Private vehicles currently dominate Viet Nam’s transportation landscape, and in Ho Chi Minh City, road infrastructure is reaching saturation point. With the population of the greater Ho Chi Minh City area expected to grow from its current 9 million to almost 14 million by 2025, traffic will continue to intensify, particularly as more
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A 350-meter height elevation between the reservoir and the Nam Theun 2 power station enables the generation of 6,000 gigawatts of electricity per year.

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Lao PDR Hydro Project Spurs Development, Improves Lives

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am Theun 2, the Lao People’s Democratic Republic’s (Lao PDR) largest hydropower facility, was officially inaugurated on 9 December signaling a new era for growth, development and poverty reduction in the landlocked Southeast Asian country. Over 90% of the electricity generated by the project is being sold to Thailand, providing Lao PDR with a $2 billion revenue stream over the next 25 years. The funds are earmarked for the nationwide improvement of health and education services, and other poverty alleviation programs. “This project is a testament to the fact that when hydropower projects are done right, in a socially and environmentally responsible manner, the benefits are considerable,” said Kunio Senga, Director General of ADB’s Southeast Asia Department.
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IN THIS ISSUE
NEWS ADB President Urges Developing Asia to Invest in Solar Energy 2 ADB Sets Up Pooled Infrastructure Fund for Afghanistan 3 SpEEcH The Call to Action: Moving Forward with Solar Energy in Asia and the Pacific 4 FEATURE Bhutan: Homegrown Career Opportunities 6 pROJEcT NEWS $300M Program to Expand Access to Housing in Indonesia 7 $200M Loan to Help Deliver Sustained, Higher, and Pro-Poor Growth 7 $250M Risk Program to Expand Microfinance to the Poor 8 $250M Road to Help Lift Economy in PRC’s Yunnan Province 8 $200M Loan to Deepen Financial Sector Reform in Philippines 9 REGULAR SEcTIONS Publications 10 Opportunities 11 Operations Updates 12

What’s Inside
Bhutan

Homegrown Career Opportunities
Bhutan’s fast-growing economy requires many skilled workers. an aDB-funded project aims to ensure the local population is qualified to do them. Read the story on page 6.

NEWS

ADB President Urges Developing Asia to Invest in Solar Energy
he Asia Solar Energy Initiative (ASEI)—a major program launched by ADB in May last year to identify and develop large capacity solar projects—will increase the amount of solar power generated in Asia and the Pacific six-fold to 3,000 megawatts (MW) by mid-2013, said ADB President Haruhiko Kuroda. Opening the second meeting of the Asia Solar Energy Forum (ASEF) in Tokyo on 1 December, Mr. Kuroda urged governments in Asia and the Pacific to invest in solar energy to help ensure their future growth is environmentally sustainable. The forum, a major component of the ASEI, is the premier platform for sharing solar energy knowledge, tracking solar development projects, and discussing new solar power proposals and incentive mechanisms. Mr. Kuroda noted that Asia and the Pacific’s high economic growth rates, continuing population growth, and current and projected energy demand gap provide a huge market opportunity and potential for solar energy development.
Lao pDR Hydro project… (Continued from page 1)

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“Asian countries will need to aim to maintain economic progress and improve energy security, while simultaneously charting a new low-carbon development path,” he said. The forum coincided with the United Nations Framework Convention on Climate Change (COP16) talks in Mexico in December, where delegates from around the world looked for ways to reconcile the twin challenges of economic growth and environmental sustainability.

Mr. Kuroda hailed Asia and the Pacific’s embrace of renewable technologies, such as solar energy, which he said should benefit from finance and technology transfers from developed countries irrespective of the formal outcome of the COP-16 negotiations. Before the launch of ASEI, the region produced less than 500 MW of solar power from installed plants. The capacity is expected to reach 1,000 MW by 2011, and to 3,000 MW by May 2013. n

Asian countries will need to aim to maintain economic progress and improve energy security, while simultaneously charting a new low-carbon development path
Haruhiko kuroda ADB President

Before the Nam Theun 2 project, more than half of the families in Nakai Plateau villages, where the project is located, lived in poverty. Child mortality rates were high, clean drinking water was scarce, and sanitation was almost nonexistent. “Today, the vast majority of residents say they are better off than ever before,” said Mr. Senga. Families who had to move to make way for the dam have been provided with new hardwood homes complete with electricity, clean water, and sanitation facilities. These improvements, coupled with improved healthcare services, have resulted in a measurable decline in child and infant mortality rates, with parasitic infections falling by 90%. The transition from subsistence livelihoods, based on slash-and-burn agriculture, to a more settled agricultural market economy has not always been easy for many households, but families report their food security has notably improved since their move. “This is an incredibly complex project, and numerous challenges have arisen along the way,” said Mr. Senga. “By working closely with communities, we strive to address their concerns—from compensation to the need for more land—and to introduce programs tailored to their specific needs. We will continue to closely monitor the situation.” The project has also placed great emphasis on environmental management. Over $60 million 2 January 2011

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Former residents of Nakai Plateau now fish the waters that cover their old homes. Abundant fish stocks in the reservoir provide many resettled villagers with a lucrative income.

has been invested in downstream water quality management, with better than expected results. The Nam Theun 2 Power Company is also disbursing $1 million annually for the protection of the 4,000-square-kilometer Nakai-Nam Theun Biodiversity Conservation Area. Nam Theun 2 will release 35 times less greenhouse gases than a coal-fired power plant of equivalent size, and the biodiversity

conservation area will help sequester an additional 40–60 million tons of carbon dioxide (CO2) emissions. ADB provided $120 million in support of the $1.43 billion project. Twenty-seven different financing institutions supported the project, including the World Bank, the European Investment Bank, and Agence Française de Développement. n

NEWS

ADB Sets Up Pooled Infrastructure Fund for Afghanistan

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DB will set up a new fund that will pool public and private resources to help Afghanistan finance much-needed infrastructure. ADB’s Board of Directors has approved the creation of the Afghanistan Infrastructure Trust Fund, with ADB as its manager. It will provide an opportunity to bilateral, multilateral, and individual contributors to partner with ADB in financing infrastructure investments such as roads, railways, airports, energy facilities, and irrigation systems, and improve the livelihood of the Afghan people. “The objective is to pool resources and to leverage cofinancing support from the private sector and other development partners,” said Juan Miranda, Director General of ADB’s Central and West Asia Department. A fghanistan’s infrastructure requirements are estimated at $4 billion over the next 3 years—far more than the government or any single funding agency can provide. Among key areas of need are stronger transport links, energy security, partnerships for the development of mineral resources, and support for private sector development. At the Kabul International Conference on Afghanistan in July, the international community called on ADB, as the country’s lead development partner in the infrastructure sector, to set up a dedicated fund. The Government of Afghanistan’s Minister of Finance, Dr. Omar Zakhilwal, said: “The ADB is renewing its enduring commitment to

Michael Barrow

Afghanistan’s infrastructure requirements are estimated at $4 billion over the next 3 years. The Afghanistan Infrastructure Trust Fund will leverage additional financing from the private sector and other development partners.

Afghanistan by establishing the Afghanistan Infrastructure Trust Fund, which will serve to fund the next generation of key infrastructure projects throughout the country.” The fund will provide grant cofinancing alongside ADB-funded infrastructure projects, with resources supplementing those provided by ADB through its own operational budget. The Afghan Ministry of Finance and ADB will work together to ensure that the Afghanistan Infrastructure Trust

Fund is efficiently utilized to support the highest priority infrastructure projects and leverage additional financing from the private sector and other partners. The trust fund will also rely on ADB’s operational and project management expertise to enable the Government of Afghanistan to implement the country’s key infrastructure development plans. ADB is Afghanistan’s fourth largest development partner overall with assistance of nearly $2.2 billion between 2002 and 2009. n

$3B Transport projects… (Continued from page 1)

people make the switch from motorbikes to cars as incomes rise. The 11.3-kilometer metro rail line will stretch from Ben Thanh in central Ho Chi Minh City, near the city’s largest market, out past the Tan Son Nhat International Airport to Tham Luong. Under the project, 9.3 kilometers of the mass transit line will run underground, with 2 kilometers of elevated and transition track. Approximately 213,000 passenger loadings per day are expected during the first year of operation in 2017, rising to 300,000 per day by 2020 and over 700,000 daily loadings by 2035. The metro rail will reduce travel time along the corridor by 20% from 2010 levels, with traffic accidents expected to fall by 30%. The ADB-backed metro rail line will be constructed in coordination with other metro rail lines being developed in Ho Chi Minh City, the first of which has been significantly funded by the Japan International Cooperation Agency.

These projects will significantly reduce traffic congestion, help lower traffic accidents, and abate carbon emissions

James Lynch Director, Transport and Urban Development Division ADB’s Southeast Asia Department
When the full expressway opens in 2017, through-traffic will be able to bypass the city center, reducing east–west travel time by 80% and traffic accident rates by 10%. Mindful of climate change, the expressway is designed to be flood-proof, with half of the road consisting of bridges and viaducts. The Government of Japan is expected to provide $635 million for the Ben Luc–Long Thanh Expressway Project, with the Government of Viet Nam providing the remaining $337 million. n January 2011 3

The 57-kilometer expressway between Ben Luc and Long Thanh will further alleviate traffic in the center of Ho Chi Minh City, while facilitating the transport of goods between the major ports of Ho Chi Minh City. “Today, vehicles traveling from east to west have to pass through the heart of Ho Chi Minh City,” said Mr. Lynch. “This causes major gridlock, increases logistics costs for businesses, and measurably hinders the city’s economic growth.”

SPEECH

The Call to Action: Moving Forward with Solar Energy in Asia and the Pacific
the following excerpt is from the closing remarks delivered by aDB Vice-President for Private Sector and Cofinancing Operations Lakshmi Venkatachalam on 2 December at the 2nd Meeting of the asia Solar Energy Forum (aSEF) in tokyo, Japan.
Introduction
Today, we are witnessing what can truly be described as a “clean energy surge” in A sia, w he re s e ve ral countr ie s are vying to gain recognition in terms of their “renewable energy country attractiveness index.” Japan’s solar market is expected to grow at a very healthy pace, thanks to the government’s climate policies, including a feed-in tariff subsidy for households. This is expected to see a four-fold growth in Japan’s solar panel market by 2020 from a level of $5.8 billion in 2009. Likewise, the Chinese solar industry is also becoming of great importance in the “cleantech” global marketplace, with its investment across the whole clean technology sector reaching $13.5 billion in the third quarter of 2010. Investors are looking at Asia as the new El Dorado for returns. For an investment theme that did not exist 10 years ago, cleantech is already showing the potential to deliver successful returns. an informed community before leaving Tokyo. The society may be our biggest souvenir from this forum but not our only takeaway as we return to our respective bases of work. The last 2 days have also given us the broad spectrum of entry points to participate in solar energy development in Asia and the Pacific. The four solar energy showcases, from India, China, Thailand and Uzbekistan, described by ADB in this forum, are only a taste of a much larger pie. The untapped potential for solar resources in the region is considerable and the availability of large tracts of land adds to the feasibility of pursuing solar energy projects in the region. Running parallel to the untapped resources is an untapped market. Today, about 900 million people in our region continue to suffer without much-needed access to energy. By 2030, primary energy demand is expected to double, driven by rapid economic growth and increased economic activities, population growth and urbanization, higher living standards, and greater consumption by households. Recognizing this potential, ADB has therefore set the ambitious target of assisting in identifying, developing, and implementing 3,000 megawatts (MW) of solar generation projects for the next 3 years in Asia and the Pacific under the Asia Solar Energy Initiative. If any of you have a prospective solar energy project in Asia and the Pacific, and would like to engage ADB in seeing it come to fruition, please approach us. You’ve met many of my colleagues during this forum, and they can be your first points of contact in moving forward with your prospective programs with ADB. Fortuitously, many of our developing member countries are making it easier for developers to penetrate the untapped solar energy generation market. President kuroda yesterday mentioned some of the national solar promotion programs in the region. Today, I would like to mention the various renewable energy promotion policies being set in place nationally. various countries in the region are making available a broad menu of institutional incentives, such as feed-in tariffs; capital subsidies, grants and rebates; invest-

Key messages from the 2nd Meeting of ASEF and the Call to Action
Clearly we have covered a lot of ground, from the various discussions in both our formal sessions and informal conversations. Plus, we crossed an important milestone today. Yesterday, we had no reliable mechanism to disseminate lessons learned and best practices on solar energy and stable grid development in Asia and the Pacific. We had

Running parallel to the untapped resources is an untapped market
no consistent venue to facilitate technology transfer, to inform policy and decision-making, and to assimilate suitable tools for project appraisal and financing in the region. Who would we ask for an inventory of solar energy projects in our part of the world? Today, we have the A sia Solar Energy Forum. Our decision to establish the forum as 4 January 2011 smart grid and storage solutions piloted and scaled-up in the region. The region and the world can then learn from these lessons and ultimately formulate a more effective and efficient solar development program that will benefit all of us. These lessons can guide future project development efforts. So we encourage you to take full advantage of and enroll in such

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ADB vice-President for Private Sector and Cofinancing Operations Lakshmi venkatachalam

a not-for-profit society secures us. One advantage of institutionalizing the Asia Solar Energy Forum is that it enables Asia and the Pacific to be a living laboratory for many of the frontier and frontline solar energy systems and solutions presented over these 2 days. The forum can be a venue for the region to synthesize and analyze the various technology trends, market breakthroughs, measurement and modeling techniques, and

SPEECH
ment or other tax credits; energy taxes; and public investments through various financing modalities. These are helping to create the enabling environment at the national level for project developers to rapidly advance the development of renewable energy, including solar energy applications. Today, the commercial viability of solar energy over the longer term, as compared to other forms of competing renewable energy, rests largely on the expectation that the cost of solar energy will approach grid parity within a decade or so. In the meantime, the sector will, of necessity, have to rely on renewable energy promotion programs and incentives being instituted through policy in the region. Given the nascent stage of the solar power sector, it is my belief that if solar power generation is to be really ramped up in the region, some amount of policy-driven hand-holding of this sector, through a consistent level of incentives, as listed above, will indeed be needed for some time to come in order to continue to attract investments. If such policy-driven incentives are abruptly withdrawn, there is a strong risk of investments in this sector migrating to other forms of renewable energy, such as hydro, which at the moment are generally more viable. This is a challenge and a risk that the solar power sector faces, and we must, along with the governments in the region, ensure that this first phase of solar technology development, up until it can stand on its feet, is well-supported through incentives and directed programs. very soon, ADB will make available resources from the Asia Accelerated Solar Energy Development Fund under the Asia Solar Energy Initiative to help facilitate the project develop-

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A line of solar power panels in Shenyang, the capital of Liaoning Province. The People’s Republic of China is already a dominant player in the renewable energy industry.

to support contributions from government agencies, international organizations, bilateral funding agencies, the private sector, and civil society organizations. Thus, we look forward to seeing all of you as partners in the Asia Accelerated Solar Energy Development Fund, where your minimal resource contributions can leverage into major industry gains.

ADB’s Involvement in Private Sector Solar Power Generation
Let me now take this opportunity, in my capacity as the vice-president responsible for ADB’s private sector operation, to briefly update you on ADB’s engagement with the private sector in the solar power generation

tenors. Up to 100 MW of generation capacity is expected to be supported by this initiative. We are, simultaneously, looking at several discrete grid-connected and off-grid projects for direct assistance, and also providing technical assistance for the development of large-scale solar parks in two states in the country. To summarize, in congruence with the objectives of ADB as a whole, its Private Sector Operations Department has also set for itself a very lofty target for supporting the solar power generation sector in our region, and we look forward to support from stakeholders such as you in fulfilling our target.

Conclusion
At the end of 2 days, a path has been laid out before us. It leads to a mature solar energy industry and market in Asia and the Pacific. But treading it will not be easy, and we must recognize this in order to persevere in the face of adversity. The existing systems are biased toward traditional energy sources. There is a gestation period before knowledge and institutional capacity on solar energy applications reaches the point when solar energy is commonly understood, and therefore, supported. This is why ADB is invested in pump-priming solar energy development in the region, and we need as many collaborators as there are willing. We hope you will join us. Subscribe to the Asia Solar Energy Forum, engage us on getting up to 3,000 MW of solar generating capacity in the region in the next 3 years, and contribute to the Asia Accelerated Solar Energy Development Fund. We eagerly look forward to your partnership. n January 2011 5

Very soon, ADB will make available resources from the Asia Accelerated Solar Energy Development Fund under the Asia Solar Energy Initiative to help facilitate the project development process
ment process. This fund will encourage private sector investments by keeping transaction and opportunity costs low for the sector, and by offering risk mitigation and incentive generation products to promote solar energy development that is not readily available from other general purpose funds. This ground-breaking solar fund will be structured as a multidonor trust fund available to support projects in all developing member countries. It will be open sector in some of our member countries. During 2010, we have provided financial support for the development of three solar power generation plants in Thailand, aggregating over 100 MW. We are also currently working closely with the Government of India, in line with its National Solar Mission, in developing a Solar Power Generation Guarantee Facility which is expected to mitigate risks of lending to solar power projects and extend loan

FEATURE

BHUTAN

Homegrown Career Opportunities
Bhutan’s fast-growing economy requires many skilled workers. an aDB-funded project aims to ensure the local population is qualified to do them.
By Floyd Whaley
rashigang, Bhutan—Chimi Yuden does not mind getting her hands dirty. The 19-yearold from the eastern Bhutanese city of Trashigang spent 8 months in an auto-repair training course in the capital city of Thimphu after identifying a career opportunity. “There are more vehicles on the roads now,” she said. “This is a good career for the future.” When she graduates and returns to Trashigang, she will be the city’s first female auto mechanic. She said many of her classmates work on the farms or are homemakers, but she is proud to have taken a different path. “This is a chance to earn more than I could on the farm,” she said.

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Giving Workers a Tune-Up
Yuden benefited from the ADB-supported Basic Skills Development Project, which champions vocational training programs in Bhutan. The Thimphu Institute of Automobile Engineering (TIAE) was established in August 2007, along with five other vocational training institutes under the project. As a result of the project, vocational training capacity in Bhutan has increased from 400 to 1,193 students. TIAE not only teaches new mechanics but also serves as an example for other auto shops. Since 1981, Bhutan has diversified from traditional subsistence to a modern market economy, but the skills of its workers have been unable to keep up with the robust pace of growth. “Now, Bhutan is dependent on skilled technical people from other countries,” said Tshewang Norbu, from the Ministry of Finance. “Most auto mechanic jobs are filled by other nationalities. We need these skills to be developed in Bhutan by Bhutanese.” The course is designed to upgrade the standard of repair and working conditions in auto shops. The 25 students in the automobile engineering program will bring international standards to the repair shops where they work. “The acute shortage of trained personnel at all skill levels has continuously been a major impediment to the national development in Bhutan,” said Yasushi Hirosato, Principal Evaluation Specialist at ADB. “Developing indigenous human resources to improve the efficiency and productivity of public and private agencies is the long-range development objective.” 6 January 2011

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Chimi Yuden (right) will be the first female auto mechanic in her town through the ADB-supported Basic Skills Development Project. She studies at an auto-repair training center in the capital city of Thimphu.

Putting the Workforce behind the Wheel
As Bhutan’s economy develops, significant growth in employment, particularly in construction, manufacturing, and business services follows. However, according to the project completion report in 2010, the education system, and specifically the technical and vocational education system, could not meet labor demand despite the increasing number of educated youths that entered the labor market, because most of them lacked the necessary skills. The magnitude of the potential job opportunities for Bhutanese workers is apparent. On the other hand, if the pace of economic growth and industrialization continues without the participation of educated Bhutanese in the workforce, the country will face a major problem. Urban unemployment is already increasing, so developing employable skills is a national priority. However, the country still lacks adequate vocational training, a labor administration system for private sector employment, and an effective labor market monitoring system. A lack of reliable statistics also makes it difficult to assess the domestic labor market. The Rural Development Skills Project (RSDP), which is financed by a grant of almost $2 million from the ADB-administered Japan Fund for Poverty Reduction, helps rural Bhutanese to develop their income-generating skills, complementing the Basic Skills Development Project. The RSDP has thus far provided basic skills training to a total of 681 villagers in three rural

districts. During off-farm seasons, the program teaches people basic modern trades such as carpentry, electrical wiring, masonry, plumbing, and hairdressing. “The new skills developed under the project will not only provide the villagers means to earn income during off-farm seasons, but it could also save them house repair costs,” said Hiroyuki Ikemoto, an ADB economist and team leader for the project.

The Value to the Village
RSDP has also taught a number of master trainers and business trainers, produced educational curriculums and manuals, and will teach over 1,200 villagers by the end of its 4-year period. Graduates will be registered in a database that will be available to relevant government offices to enhance trainee recruitment. Villages will also benefit from the program, as on-the-job training will include the construction of public toilets and hostels for schoolchildren. The project has provided vocational education and training for new graduates, unemployed youth, domestic laborers, women, and the rural poor, reinforcing Bhutan’s efforts to develop local technical skills. Back in Thimphu, Yangchen, a 21-year-old student from the eastern town of Pemagatshel is working hard. Her four brothers are proud she has enrolled in the auto-repair training course, she said. She dreams of returning to Pemagatshel to open her own repair shop. “This is a valuable skill in my village,” she said. n

PROjECTS

$300M Program to Expand Access to Housing in Indonesia
he ADB Board of Directors approved a $300 million rupiah-denominated program that will provide fixed-rate loans to private commercial banks for mortgage on-lending. “There is a large, unmet demand for housing finance in Indonesia, along with limited access to long-term rupiah funds, particularly at fixed rates,” said Philip Erquiaga, Director General of ADB’s Private Sector Operations Department (PSOD). “The Housing Finance Program will help to improve access to finance for a broader segment of consumers, including first-time moderate income home buyers. Additionally, developing the housing finance market in Indonesia is important, as the financing of housing plays a major role in the stability of a country’s entire financial system.” Indonesia currently has an estimated shortage of about 8 million homes. With rapid urbanization, particularly in the capital Jakarta, an additional 800,000 homes annually for the next 20 years are needed. At the same time, mortgage lending by commercial banks is limited and largely confined to higher income groups, with banks finding it difficult to source long-term funds to support mortgage finance. Increasing the availability of housing to a wider cross section of the population

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Home buyers talk to sales agents during a housing exhibition in Indonesia’s capital Jakarta. The country has an estimated shortage of about 8 million homes. With rapid urbanization, particularly in Jakarta, an additional 800,000 homes annually for the next 20 years are needed.

is central to the government’s efforts to alleviate housing shortages, reduce poverty and slums in cities, and encourage private sector-led growth. Along with helping to build the financial sector and alleviate housing shortages, ADB’s

The financing of housing plays a major role in the stability of a country’s entire financial system
Philip Erquiaga Director General ADB’s Private Sector Operations Department

funding will also aid job creation in the private housing construction and real estate industries and support broad-based economic growth. A key element of the program will be technical assistance to help participating banks strengthen mortgage underwriting skills. This technical assistance is being funded from an ongoing Housing Finance Capacity Development technical assistance project covering South and Southeast Asia. “Technical assistance training tailored to the needs of each bank will help boost their skills and this is critical for the prudent growth of the mortgage market in Indonesia,” said Christine Engstrom, Senior Investment Specialist in PSOD. n

$200M Loan to Help Deliver Sustained, Higher, and Pro-Poor Growth

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DB is providing $200 million to Indonesia for further reforms to speed up sustainable economic growth and accelerate the government’s drive to reduce poverty. ADB’s Board of Directors on 14 December approved the loan for the Sixth Development Policy Support Program, the last in a series of initiatives to help the Government of Indonesia advance its medium term reform and development agenda. The programs, which began in 2004, have been jointly prepared with the World Bank and Government of Japan. “These latest reforms will help support higher pro-poor economic growth over the medium term,” said Edimon Ginting, Senior

Country Economist in ADB’s Indonesia Resident Mission. Indonesia has made significant gains in growth and poverty reduction in recent years, but economic expansion is still below levels seen prior to the 1997 to 1998 Asian financial crisis, while about 40% of the population remains clustered just above the national poverty line, leaving them vulnerable to economic shocks. Measures to stimulate inclusive growth, cut poverty, and improve access to public service delivery have become key priorities for the government. The sixth program of reforms focuses on improving the investment climate, strengthening public financial management and gov-

ernance, and accelerating poverty reduction and access to public services for the poor. It covers initiatives such as establishing a national single investment window, simplified investment licensing procedures, and the development of a national logistics framework. In the public financial management area, the program supports measures such as performance-based budgeting, better cash forecasting, and an integrated financial management information system. To improve social assistance and further reduce poverty, measures such as conditional cash transfers, health insurance for the poor, and a National Community Empowerment Program, have been put in place. n January 2011 7

PROjECTS

$250M Risk Program to Expand Microfinance to the Poor
he ADB Board of Directors approved on 13 December a Microfinance Risk Participation Program, marking ADB’s first large-scale private sector microfinance initiative. The program will allow ADB to partner with financial institutions that actively lend to microfinance institutions (MFIs) in ADB’s developing member countries, and to share the default risk on underlying MFI loans. The proposed program will support the expansion of lending to MFIs, in turn enabling increased provision of financial services to the underserved. This will help address the significant unmet demand from the poor for financial services, and provide additional funding for micro-borrowers. Under the terms of the program, ADB will typically assume up to 50% of the default risk on loans made to MFIs, in aggregate up to a maximum of $250 million. “Microcredit has been shown to play an important role in providing seed money for businesses and improving the lives of the poor,” said Philip Erquiaga, Director General of ADB’s Private Sector Operations Department. “This program will allow microfinance institutions to expand lending to segments of the population who currently lack access to funds.” The microfinance industry has boomed in recent years with Asian institutions estimated to have over 47 million borrowers as of the end of

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Luis Enrique ascuii

vendors sell tomatoes and other vegetables at a market in Tonga. The Microfinance Risk Participation Program will support the expansion of lending to microfinance institutions, which will in turn provide increased financial services to underserved groups, such as poor households, women, and cash-strapped small enterprises.

2008, with outstanding loans of over $10 billion. Demand is enormous, with as many as 600 million to 1 billion poor workers worldwide needing services, including a large number in Asia and the Pacific, home to two-thirds of the world’s poor. Microfinance businesses seeking to serve this market are hampered by limited access to finance from banks, exchange rate issues, and other barriers.

The risk sharing arrangement, proposed by ADB to a range of international and local financial institutions, will allow these participants to boost loans to microfinance institutions, which in turn will result in scaled-up assistance to groups currently unable to access funds, such as poor households, women, and cash-strapped small enterprises. n

$250M Road to Help Lift Economy in PRC’s Yunnan Province

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DB is to finance road improvements in Yunnan in the People’s Republic of China (PRC), which will complete an expressway network for the west region of the province, and introduce community-based road maintenance practices. ADB’s Board of Directors approved a $250 million loan for the Yunnan Integrated Road Network Development Project, which will build a new 135-kilometer long expressway, completing an east–west corridor transport route in western Yunnan. It will be the last of five ADB interventions to support the rollout of the National Expressway Network Plan in the province, and will also fund the rehabilitation and maintenance of over 1,200 kilometers of local and rural roads in poor condition. “These improvements will cut travel time and vehicle operation costs, reduce traffic accidents, and provide increased opportunities for farm and nonfarm economic activities,” said Xiaohong Yang, Principal Transport Economist in ADB’s East Asia Department. January 2011

Yunnan, a mountainous, landlocked province in the southwest, with a high rural poverty incidence, has been steadily developing its road network, but there are issues with surface quality and maintenance in many areas that increase travel time, result in a high incidence of road accidents, and undermine the province’s economic development. A key element of the project is support for a community-based system to maintain around 650 kilometers of rural roads, which will incorporate, for the first time in an ADB project in the PRC, specific gender mainstreaming measures. This initiative will help develop women’s rural road maintenance groups for rural road routine

maintenance. A technical assistance grant of $200,000 will be provided for this output of the project, which will generate local employment opportunities for the poor. “This system, which incorporates payment for labor and training for community members, has the potential for wider replication as it will introduce a cost-effective and efficient method of maintenance for remote, rural roads,” said Ms. Yang. About 9.7 million people are expected to benefit from the project. The project is expected to cut the average travel time on project roads by 40% and reduce vehicle operating cost on them by 38% upon its completion. n

A key element of the project is support for a community-based system to maintain around 650 kilometers of rural roads

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PROjECTS

$200M Loan to Deepen Financial Sector Reform in Philippines

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DB will provide a $200 million loan to the Philippines for financial sector reforms to improve financial sector stability, increase the efficiency and liquidity of markets, and strengthen the regulatory environment in the wake of the global economic crisis. ADB’s Board of Directors on 7 December approved the assistance for phase 2 of the Financial Market Regulation and Intermediation Program. Capital markets in the Philippines have matured, but to support the government’s growth and poverty reduction targets under its Medium Term Development Plan, the investor base needs to be broadened, and market access improved to mobilize savings. This requires stepping up the level of intermediation between savers and investors. At the same time, the global financial crisis highlighted gaps in the Philippine financial sector, which are addressed in the policy actions for phase 2. These include measures by the central bank to boost stability, such as providing additional liquidity to the banking system, and the doubling of the deposit insurance ceiling for bank account holders. To encourage industry

consolidation, a program of incentives to encourage weaker rural banks to merge with stronger ones has been launched. “The crisis demonstrated the importance of maintaining financial sector stability, as well as the need to maintain sound and well-coordinated regulatory oversight to reduce vulnerabilities,” said Stephen Schuster, Senior Financial Sector Specialist in ADB’s Southeast Asia Department. Steps have been taken to beef up regulatory oversight. The enforcement powers of the Philippine Deposit Insurance Corporation have been strengthened, and the Security and Exchange Commission’s (SEC) market surveillance capacity has been increased, while measures to improve coordination amongst regulators have also been taken. To develop an efficient and liquid secondary securities market, the SEC has laid down the framework for over-

the-counter trading, including a central trade reporting system, as well as listing requirements and rules, which will pave the way for trading in corporate bonds on the fixed income exchange. “All these actions will lead to a deeper, more diversified and resilient system, resulting in improved access to finance and a greater contribution to growth and poverty reduction from the financial sector,” said Mr. Schuster. To maintain the reform momentum, ADB and the Government of the Philippines have also agreed to a 2-year post program monitoring framework to gauge the impact of actions taken to date, and to push ahead with further measures to improve the regulatory environment and enhance public debt management. The loan from ADB’s ordinary capital resources has a 15-year term with a grace period of 3 years and an annual interest rate determined in ac-

The investor base needs to be broadened, and market access improved to mobilize savings

East Asia Needs to Look… (Continued from page 1)

Emerging East Asia’s large, long-standing trade surpluses against developed economies’ increasing debt have raised tensions culminating in calls for emerging East Asia to allow its currencies to appreciate to match its growing economic strength. Asia’s swift recovery from the recent global crisis is also drawing foreign investment to the region. Managing capital inflows to prevent asset price bubbles has also become a concern. “Rapidly growing interdependence in trade and finance and the increasing importance of spillovers and contagion effects within the region make regional exchange rate cooperation essential,” said Iwan Azis, Head of ADB’s Office of Regional Economic Integration, which prepared the report. “At the same time, regional currency flexibility against major currencies outside the region would help emerging East Asia better manage capital flows and respond to external shocks.” The Asia Economic Monitor suggests the best way forward would be for East Asian economies to adopt informal monitoring zones for their exchange rates against an external reference currency or a basket of currencies. Any big shift outside those nonbinding zones would prompt confidential discussions to reduce deviations. Over time these arrangements could become more formal.

The report assesses the outlook for emerging East Asia, which comprises the 10 economies of the Association of Southeast Asian Nations (ASEAN), plus the People’s Republic of China (PRC); Hong Kong, China; Republic of Korea; and Taipei,China. The report notes that the weaker outlook for the global economy coupled with the phasing out of fiscal and monetary stimulus within the region means economic growth in the region should moderate this year. Average growth in emerging East Asia is likely to be 7.3% in 2011 after growing 8.8% in 2010. In its Asian Development Outlook 2010 Update, published in September, ADB had predicted growth of 8.4% for the region last year after a 5.2% expansion in 2009. The 2010 upgrade was in large part due to the faster-thanexpected growth in the PRC. ADB has raised its 2010 growth forecast for PRC to 10.1% from the previous forecast of 9.6% in September. ADB still expects the PRC economy to expand 9.1% in 2011. In a separate special note reassessing the overall performance of developing Asia—that is, 45 developing economies of Central Asia, East Asia, South Asia, Southeast Asia, and the Pacific—ADB upgraded its 2010 forecast to 8.6% from the 8.2% it forecast in September. The 2011 forecast for developing Asia is still 7.3%.

The 2010 growth forecast in Central Asia was increased to 5.9%from the previous forecast of 5.1%. ADB still expected the economies of South Asia to expand 7.8% in 2010 and the Indian economy to grow by 8.5%. Southeast Asia was forecast to grow 7.5% in 2010, up from the 7.4% forecast in September. The forecast for the economies of the Pacific remained the same at 4.3% in 2010. A separate report released by ADB, also in December,showed that the Pacific Island economies benefited from the gradual recovery in the world economy and the firm Australian economy, but fiscal conditions in some Pacific economies remain a concern. The latest edition of Pacific Economic Monitor noted an upturn in remittances in recent months after a marked decline over the early part of last year. There has also been an overall increase in tourism and in the prices of some key commodities. However, the weak global economy reduced government revenues and the ADB report finds that fiscal policy remains expansionary in much of the Pacific. n Download the Asian Economic Monitor at www. adb.org/documents/reports/asian-economicmonitor/201012/default.asp and the Pacific Economic Monitor at www.adb.org/Documents/ Reports/PacMonitor/pem-issue06.asp January 2011 9

PUBLICATIONS

New Publications
Institutions for Regional Integration: Toward an Asian Economic Community
This joint ADB–ADB Institute study looks at the institutional framework for regional cooperation and integration and analyzes why, despite the dense network of institutions, Asia remains “institution light.” It recommends some principles and options to strengthen institutional architecture to achieve an Asian economic community.

UPCOMING EVENTS
January 2011
18 to 20 ADBI-OECD Roundtable on Labor Migration in Asia: Recent Trends and Prospects in the Postcrisis Context ABD Institute Tokyo, Japan Contact: John West jwest@adbi.org 27 Transforming Transportation 2011 The World Bank Washington D.C. Contact: EMBARQ emabarq@wri.org

Knowledge Management on Air Quality: Case Studies

This report presents a subregional case study on the application of the Clean Air Scorecard in Bangkok, Jakarta, and Manila; a case study on stationary source emission standards in Sri Lanka; and a study on environmentally sustainable transport in kathmandu, showing how information and communication technology can effectively contribute to building the capacity of policy makers and strengthening policy development processes.

Information and Communication Technology for Development: ADB Experiences

March 2011
2 to 3 ADB Business Opportunities Fair (BOF) ADB Headquarters Manila, Philippines Clarisse Santos BOF Secretariat csantos.consultant@adb.org

As these cases from ADB would show, access to information and communication technology (ICT) alone will not result in significant, lasting change. It is the adoption of appropriate technology that makes the difference, paralleled with an enabling policy environment, a responsive and needs-based approach, improved individual and institutional capacity, nurtured partnerships with key stakeholders, leadership by local champions, effectively managed change, and sustained support.

An Agenda for High and Inclusive Growth in the Philippines
The Asian Development Bank has identified four critical constraints as having impeded Philippine economic growth: (i) tight fiscal situation; (ii) inadequate infrastructure, particularly in electricity and transport; (iii) weak investor confidence due to governance concerns; and (iv) inability to address market failures, leading to a small and narrow industrial base. In light of this, dramatic improvements in revenue generation, infrastructure provision, and enterprise development assume central importance in the government’s economic policy agenda. The study identifies the measures needed to support these thrusts, along with key sector growth drivers that would ensure both accelerated growth and broad-based participation and benefits within the economy. For more information, visit www.adb.org/publications

June 2011
20 to 24 6th Asia Clean Energy Forum 2011: New Business Models and Policy Drivers—Building the Low-Carbon Future ADB Headquarters Manila, Philippines Aiming Zhou Energy Specialist azhou@adb.org

The Asian Tsunami: Aid and Reconstruction After a Disaster

The death toll following the 2004 Asian tsunami—close to 230,000 people—was stunning. The devastation that the tsunami caused highlights the need to strengthen approaches to disaster risk reduction activities across Asia. Summarizing hundreds of reports and articles about the disaster, this book underlines the fact that global disaster risks are highly concentrated in poor countries. And within those countries, it is usually poorer communities who are especially hard-hit when disasters strike. For more information, visit www.adbi.org/publications.books
For more information, visit www.adb.org/news/calendar.asp

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January 2011

OPPORTUNITIES

Business Opportunities
The proposed ADB projects below offer business opportunities for contractors, consultants, and investors. Energy • Regional, TA: Promoting Energy Efficiency and Renewable Energy in the GMS • Regional, TA: Promoting Renewable Energy, Clean Fuels, and Energy Efficiency in the GMS Environment • Regional, TA: Greenhouse Gas Emissions Assessment Methodologies in Sustainable Transport • Regional, RETA: Enabling Climate Change Responses in Asia and the Pacific—Design of the Climate Public– Private Partnership Fund • Viet Nam, TA: Support to Central and Local Governments in Implementing Urban Environmental Projects Finance • Regional, TA: Strengthening the Capacity of Asia-Pacific Economic Cooperation Financial Regulators Training Initiative (APEC FRTI) • Regional, RETA: Assessing Financial Landscape and Formulating Milestones for Monetary and Financial Integration in ASEAN, Phase 2 Governance and public Management • Lao People’s Democratic Republic, TA: Capacity Strengthening of the National Statistics System • Viet Nam, TA: Support for the Preparation and Implementation of the Results-based Socioeconomic Development Plan 2011–2015 Health, Nutrition, and Social Development • Bangladesh, TA: Secondary Education Sector Development • Regional, TA: Enhancing Public and Civil Society Partnerships in Service Delivery in the Pacific • Sri Lanka, TA: Capacity Development for Local Authorities in Urban Services Delivery Infrastructure • Bangladesh, TA: PPP Option Study for Urban Infrastructure Development (formerly PPP Option Study for Bulk Water Supply System) Multisector • Viet Nam, TA: Integrated Rural Development Sector Project in the Central Provinces (Supplementary) • Regional, RETA: Selected Evaluation Studies for 2010, Phase 2 Trade and Investments • Regional, TA: Capacity Building for Implementing Private Sector-Led Integration in South Asia • Indonesia, Grant: Sustainable Livelihood Systems for Indigenous Peoples in Indonesian Heart of Borneo Transport and communications • Viet Nam, TA: Ho Chi Minh City Ring Roads 3 & 4

For more information, visit www.adb.org/Business/Opportunities/new.asp
ASEAN = Association of Southeast Asian Nations, GMS = Greater Mekong Subregion, PPP = public–private partnerships, RETA = regional technical assistance, TA = technical assistance.

Career Opportunities
Energy Specialist
Energy Division, central and West Asia Department Job purpose
Identify, develop, implement, and administer loans, technical assistance projects, and nonlending products and services in the energy sector. Contribute to the development of energy sector policy in the developing member countries. Work with broad policies and objectives, working directly with clients, with supervision for critical tasks.

counsel (Operations)

counsel (Law and policy Reform)
Office of the General counsel
Job purpose Support the Office of the General Counsel (OGC) in achieving its key result areas by contributing to the development and mainstreaming of ADB’s law and policy reform program, including designing and implementing technical assistance projects within ADB’s developing member countries and across the region, as well as advocacy, dissemination, and knowledge building. Work with broad policies and objectives, working directly with clients, with supervision for critical tasks.

Office of the General counsel
Job purpose Support the Office of the General Counsel in achieving its key result areas by providing legal advice and documentation support to ADB’s sovereign and/or non-sovereign operations, including processing and administration of sovereign loans for projects and policy reform programs, cofinancing arrangements with multilateral and bilateral organizations, guarantees, project finance, corporate loans and equity investments. Work with broad policies and objectives, working directly with clients, with supervision for critical tasks. Deadline: 14 January 2011

Deadline: 18 January 2011

Deadline: 14 January 2011

For more career opportunities and information, visit www.adb.org/employment

January 2011

11

ADB

Volume 43, Number 1 • January 2011 Publisher: ann Quon Editor: andrew Perrin Associate Editor: Ma. Liza Solano Layout Artist: Ronnie R. Elefaño ADB Review provides a monthly electronic digest of activities of the Asian Development Bank. Opinions and materials in ADB Review do not necessarily reflect the official views of ADB. Materials may be reprinted with credit given to ADB Review. Comments may be e-mailed to review@adb.org. To subscribe, send an e-mail to review@adb.org; fax a message to +63 2 636 2648; or write to ADB Review, Department of External Relations, Asian Development Bank, 6 ADB Avenue, Mandaluyong City, 1550 Metro Manila, Philippines. For the web version, go to www.adb.org/review.

Operations Updates, 2010
Nonsovereign Operations ADB has approved 16 nonsovereign projects worth $1,44 billion.

a

Sovereign Lending ADB approved last year 85 loans to 20 developing member countries totaling $7.69 billion. Approved loans from ADB’s ordinary capital resources (OCR) total about $5.59 billion, while $2.10 billion came from ADB’s concessional Asian Development Fund (ADF).

Grants ADB has approved 45 grant-financed projects totaling $642.3 million, and 226 technical assistance projects worth $202.00 million.

Recipients of ADB Loans, 2010 ($ million)
Country Bangladesh Cambodia PRC Georgia India Indonesia Kazakhstan Kyrgyz Republic Marshall Islands Mongolia nepal Palau Pakistan Amount 1,249.00 85.00 970.88 185.00 1,737.58 85.00 323.00 88.20 9.50 8.00 154.90 16.00 270.00 13.00 400.00 16.00 457.17 300.00 655.00 670.00 ADF 449.00 85.00 – 85.00 – – – 88.20 9.50 8.00 154.90 3.40 270.00 13.00 – 16.00 107.17 – 265.00 550.00 OCR 800.00 – 970.88 100.00 1,737.58 85.00 323.00 – – – – 12.60 – – 400.00 – 350.00 300.00 390.00 120.00 5,589.06

Source of Grant-Financed projects, 2010 ($ million)
aDF CCF/aPRDF Other Sources Total 566.19 11.50 64.65 642.34

aPDRF = asia–Pacific Disaster Response Fund, CCF = Climate Change Fund.

Source of Technical Assistance Grants, 2010 ($ million)
aDB-funded Japan Special Fund JFPR RCIF CCF Other Sources Total 97.46 11.00 16.76 12.40 2.95 102.65 243.22

CCF = Climate Change Fund, JFPR = Japan Fund for Poverty Reduction, RCIF = Regional Cooperation and Integration Fund.

ISSn: 0118-8674

Papua new Guinea Philippines

Source of ADB Loans, 2010
Asian Development Fund 27%

ADB Online
www.adb.org
n To read ADB Review online, go to www.adb.org/review n For information, e-mail information@ adb.org or go to www.adb.org n To explore business opportunities with ADB, go to www.adb.org/Business/ Opportunities n For publications, go to www.adb.org/ Publications n For the latest news, go to www.adb.org/News

Samoa Sri Lanka thailand uzbekistan Viet nam Total

7,693.23 2,104.17

– = nil, PRC=People’s Republic of China

Ordinary capital resources 73%

Nonsovereign Operations, 2010 ($ million)
Sector Equity Loan 488.11 70.00 40.00 36.62 634.73 Total 536.11 225.00 40.00 66.62 867.73 Partial Credit Guarantee – 250.00 – – 250.00 B-Loan 220.00 – – 100.00 320.00 Energy 48.00 Finance 155.00 transport and ICt – Water Supply and Other Municipal Infrastructure and Services 30.00 Total 233.00
– = nil, ICt = information and communications technology. a as of 30 november 2010 totals may not add up because of rounding.

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January 2011

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