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How MDBs Can Unlock Private Finance for Development



Nakao Takehiko ADB President

Financing the Sustainable Development Goals (SDGs) is a huge challenge that will not be met through public money alone. Dramatic increases in private investment—both domestic and foreign—are needed. Multilateral development banks (MDBs) have a key role to play in unlocking this funding.

The Asia and Pacific region’s development needs are vast. In addition to SDGs, we must address infrastructure deficits and climate challenges. For infrastructure, recent ADB research estimates that $1.7 trillion is needed annually over 2016–2030 to maintain growth, eradicate poverty, and respond to climate change.

So how can MDBs help countries attract the private funds they need? I see several key actions.

The first is to expand MDBs’ private sector operations of lending and equity investment to the private sector to maximize leveraging impact. These operations can be both for infrastructure investment such as renewable energy, transport and water, or in social sectors such as technical education and aged care by private service providers. ADB’s private sector operations have doubled in the past 10 years to $2.5 billion in 2016. This was about 16% of ADB’s total approvals of $17.5 billion.

Through ADB’s private sector operations last year, an additional $5.8 billion in commercial cofinancing was mobilized. ADB helps to: (a) make projects viable through its participation; (b) improve the risk profiles of projects via credit enhancement products such as guarantees; and (c) pilot new approaches and technologies. ADB is expanding political risk and partial risk guarantees and supporting local currency project bond issuances by the private sector through credit enhancement.

Second is to support the growth of public-private partnerships (PPPs). When well designed and well delivered, PPPs can tap the significant funding and management expertise of the private sector for infrastructure and social services. ADB is supporting PPPs by helping countries enact laws and establish PPP offices, better preparing projects for the market including through its Asia Pacific Project Preparation Facility, and by providing transaction advisory services. ADB also finances private sector participants in PPPs.

One example of ADB’s support for PPPs is the Mactan-Cebu International Airport in the Philippines, where we helped the government to prepare a PPP deal to expand terminal services. Our private sector operations provided commercial financing of $75 million to the operator which was cofinanced by a syndicate of seven Philippine banks for $450 million. ADB’s PPP office is providing transaction advisory services for the Port Moresby International Airport in Papua New Guinea, a teaching hospital in Kazakhstan, a solar park in Cambodia, and many others.

We should admit that project finance in developing countries is not so easy in practice, because of various risks related to land acquisition, projection of revenues and costs, and regulatory changes. In addition, for foreign investors there are risks involved in converting to foreign exchange and remitting returns abroad. But there are still large opportunities for PPPs, especially for mobilizing domestic resources. I also believe that ADB’s involvement in PPPs, including through use of its credit enhancement products, can effectively reduce investors’ risks and promote bankable projects.

The third is to explore new options to mobilize finance, such as management of third-party funds. ADB manages one such fund, the Leading Asia’s Private Sector Infrastructure Fund (LEAP), established in 2016 with $1.5 billion of equity investment from the Japan International Cooperation Agency. As other MDBs are doing, ADB will explore opportunities to manage funds from private sources, such as pension funds, insurance companies, and asset managers.

In these three areas ADB is making serious efforts to mobilize additional resources from the private sector. But at the same time, I would emphasize that ADB’s operations, including sovereign, have always been about mobilizing private resources. One of the most important reasons for creating ADB in 1966 was to attract resources from international capital markets including the United States and Europe. At that time, Asia was poor, savings were limited, and foreign exchange was scarce. ADB successfully issued bonds in Germany in 1969, Austria and Japan (through the first yen-denominated Samurai bond) in 1970, and in the U.S. (with a AAA rating) in 1971.

ADB’s sovereign operations helped countries build essential infrastructure to entice private investment in industry, and strengthen education and health sectors which not only benefit people’s welfare but also set a basis for strong private sector activities. Policy-based lending to countries promoted structural reforms to enhance the business climate. It was also used to provide budget support during financial crises, helping governments maintain essential social expenditures and avoid a collapse of the market.

The combination of lending, whether sovereign or nonsovereign, with expertise in preparing and implementing projects has made an important contribution to the region’s development. ADB’s tradition of working together and closely with governments on the ground is appreciated. At the same time, we are increasing efforts to speed up our work by streamlining business processes, including for procurement. We are also incorporating more advanced and innovative technologies into our projects.

It is my belief that ADB’s lending operations should keep pace with the development needs of the region. To secure our financing capacity, ADB took the innovative step of merging its Ordinary Capital Resources (ADB’s main window to borrow from capital markets and lend with a certain spread) and concessional lending from the Asian Development Fund (which will continue to provide grants to low-income developing member countries). The merger, effective the beginning of this year, will increase annual loan and grant approvals by over 50% to more than $20 billion by 2020. This balance sheet optimization based on existing capital contributions from shareholders and donors presents a useful example to other MDBs.

On the funding side of our lending operations, we are also increasingly using innovative instruments such as green bonds, water bonds, and gender bonds. We are issuing more local currency bonds to support our local currency-denominated private sector operations.

To achieve the SDGs, meet infrastructure needs and address climate challenges, MDBs should play a critical role. Their own financing will continue to be important, especially by incorporating expertise and new technology. But MDBs should become more innovative and dramatically enhance their efforts to mobilize resources from the private sector.

Source: ADB


WEF 2020: A Blank Check on Climate Change Costs

Naseem Javed



At the WEF Davos 2020, is there already a blank check issued from stakeholder capitalists to Greta Thunberg to go and fix global climate damages? If not, too bad…just relax full payment may be coming.

First some facts; big and small governments have no money, big businesses have no money, what disappears in heavenly bushes of the paradise-accounting always stays there. The world is basically broke to fix this monumental problem; broke it’s mentally and crushed morally, broke is also the global populace, exhausted and restless, unless their survival on sustenance, equality and social justice not addressed at much faster rate over populism mobs may appear.

The Blank Check: Enters the five million small medium businesses of the world; a super economic force to reckon with on platform economy.

In broader strokes, as a simple example, The United States Business Administration, the SBA has some 13 million small medium size enterprises as members. Now imagine, if five million of such enterprises, already doing USD$2-5 million in annual turnover were placed on national mobilization of entrepreneurialism to boost special skills on innovative excellence to produce exportable quality. Now imagine if each one added only one-million in additional revenue to their current operations what will happen, basic math. Five million small enterprises times one million new revenue each equals 5,000,000 x 1,000,000 = 1,000,000,000,000 or one trillion.

Now imagine, if there were 25 million such enterprises scattered across the world, each adding two million dollars as a base per year that will be 50 trillion dollars… or 10 five times the revenue of the world’s five largest and most powerful technology companies. This is a wake-up call to exhausted economies. These operations are less new funding dependant they are execution hungry and deployment starved.

There are some 100 million SME in such mix around the world; if mobilized on national entrepreneurial platforms would have enough strength to help and fix local community issues, as entrepreneurs by their DNA are cause centric and will take care of such global climate issues, unlike short term shareholders on money schemes. The lack of discussion on SME revival are main reason, such silence proves lack of vision and global-age knowledge on entrepreneurial transformation and most importantly about global consumption and how to create real value creation. The spotlight on hedge funded value manipulations take all the attention and systematically the entrepreneurial talent of SME suppressed for not being glamorous enough on talk shows over earth shattering robotic technologies.

Fact: The world can easily absorb unlimited exportable ideas in unlimited vertical markets. Fact: The well-designed innovative ideas are worthy of such quadrupled volumes. Fact: The entrepreneurial and dormant talents of a nation are capable of such tasks. Fact: The new global age skills, knowledge and execution are now the missing links

The world is changing fast; this is no longer a cliché, now a serious warning: You can always tryout a change and start with some 500 small and medium enterprises in your own local region on national mobilization of entrepreneurialism protocols and measure the impact of innovative excellence on the local grassroots prosperity. Currently there are already 11,000 Chamber of Commerce in the world with combined membership of 45 million, somewhere here in lack of digital platforms are 25 million enterprises eager and ready to boost their revenues by million each. The art and science of global showcasing of its members with global bounce is a solid start on export strategy. Bold and open debates will streamline the fears of missing skills at the top to tackle such large scale deployments.

The rest is easy

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UNDP: Reshaping the Global Development Agenda



The establishment of United Nations Development Programme (UNDP) ushered a new era during the course of United Nations (UNs) exemplary journey.   In September 2000 at the Millennium Summit the world leaders pledged to reduce poverty by 2015 focusing on the eight Millennium Development Goals (MDGs) . After all, the UNDP has been able to take the lead in accomplishing global impact on humanitarian priorities.  As  a result  of this  effort the UNDP played a pivotal role in taking a billion people out of extreme poverty by  reducing global poverty by half over the last 30 years.  This was closely related to the UNDP’s visionary leadership reshaped the future of the global sustainable development agenda in the shortest possible time. Over the years UNDP projects have had measurable success in protecting the environment. For example the UNDP allocated over US$ 5600 million supporting   nearly 4600 new projects worldwide  (UNDP, 2019).  Of this the largest recipients in 2019 were Afghanistan, with an estimated total of  US$ 530 million.  The recent initiatives implemented by the UN development agency will begin to impact systematically and begin to grow in magnitude touching all aspects of human life over the coming decades.

One of the  most  important  components of the UNDP  journey   was the  Human Development Report (HDR) that  paved the  way  to  discuss  the meanings and measurements of human development that  can  enlarge  people’s choices.  Speaking at the launch of 2019 Human Development Report on 11 December 2019 the current   Administrator of the United Nations Development Programme Achim Steiner  said, “In terms of productivity, the report shows that the growing market power of employers is linked to a declining income share for workers. It argues that anti-trust and other policies are key to address the imbalances of market power”. It is noteworthy to mention after more than five decades of global outreach the UN development agency seeks to adopt a strategy addressing inequality and social exclusion, preventing and mitigating conflicts and disasters, economic recovery, development planning and inclusive sustainable growth.

Globally climate change has been a concern in the recent years. Renewable energy is considered to be one of the alternatives that can combat global warming and stabilise the climate. Roughly US$2.5 billion has been provided to 140 countries for climate change initiatives and the   UNDP was the largest implementer in combating climate change globally.

Another major area of worldwide concern was the displacement of people due to armed conflicts.  The United Nations High Commissioner for Refugees (UNHCR), Global Trends report findings shows conflict and violence have forcibly displaced 65.3 million people globally. The adoption of conflict and development analysis (CDA) tools designed by the UNDP   for building practitioners aims to strengthen peace and security in war and in post-war countries. However the UNDP remains committed to successfully strengthen democracy and good governance through transparent institutionalizing process in developing nations.. Infrastructures for Peace can be an important tool to prevent conflicts.  By laying a  solid foundation for Peace initiative designed by UNDP to strengthen the capacity and to manage conflict is one such successful programme. Today the United Nations Development Programme (UNDP) plays a fundamental responsibility with worldwide communities to address global, regional and national challenges. Since its inception the United Nations development agency has made significant solutions to world’s most pressing problems.

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China-Pakistan Economic Corridor: Promoting Perspectives from Pakistan

Abbad Farooq



China-Pakistan Economic Corridor (CPEC) is defined by the Government of Pakistan as “the growth axis and development belt featuring complementary advantage, collaboration, mutual benefits and common prosperity.” The mega-project is one of the largest bilateral investment (US$52 billion) underway anywhere in the world. Despite all the advantages, international media has shown weariness on CPEC on grounds of ‘debt trap and transparency,’ largely swayed by great power states who fear geopolitical repercussions. For a grandeur development program such as CPEC, it is natural to have opposition from states having vested interests of power. Therefore, in order to strengthen CPEC and make it inclusive, there is a need to strategically market CPEC at international platforms to address the apprehensions of regional and international partners. 

A flagship project of the Belt and Road Initiative (BRI), CPEC is in tandem with President Xi Jinping’s vision of ‘Chinese dream’, which avows to commercially link China to Africa, Europe and the Persian Gulf by ways of land and maritime routes. CPEC infrastructure projects, similarly in recognition of the vision comprises of mega-network of highways, railways, and energy pipelines to link Western China to the Arabian Ocean via the Gwadar Port. Pakistan and China have an efficacious history of economic cooperation; developments as diverse as the Karakoram Highway, Thar Coal Power Project, Karachi-Gwadar Coastal Highway, Chashma Nuclear Power Plant, and a number of hydro-power projects was achieved as a result of the bilateral partnership.

Pakistan’s business environment has considerably improved in recent years, as result of CPEC investment and projects. It is now ranked by World Bank Ease of Doing Business as 108 among 190, a considerable improvement by 28 places. Moody’s International has also upgraded Pakistan rating outlook to ‘stable’ from ‘negative’. Foreign companies, such as Hong Kong based Hutchinson Port Holdings have invested $240 million for the up gradation of container terminal at Karachi Port, which recently made history by welcoming largest ever container vessel in the country. According to the Parliamentary Secretary for Planning Development and Reform, Pakistan has completed 13 projects worth around 11 billion dollars, while 13 projects worth 18 billion dollars are under underway, and another 21 billion dollar projects are in the pipeline. According to estimates by financial pundits, the success of CPEC can provide a growth rate of 10 to 15 percent by 2030 to Pakistan’s economy.

A number of initiatives have been taken by the public and private sector institutes in Pakistan, to raise awareness regarding CPEC prospects and opportunities. International CPEC Workshop (ICPECW), Obortunity, a 2.5 weeks international learning and networking platform is annually organized by National Defence University (NDU), Islamabad. The workshops is based on lecture-discussions from leading experts on CPEC and BRI, comprising of networking dinners, seminars and meeting with leaders of state institutions in China and Pakistan. The 1st ICPECW was held from 17th April to 3rd May 2019 at Gwadar, Beijing and Islamabad. The 2nd International CPEC Workshop (ICPECW) will similarly be held from 2nd March to 19th March 2020, as a dedicated CPEC platform to bridge the gap between private and government circles. An initiative was also taken by Higher Education Commission (HEC), which established CPEC Consortium of Universities in Islamabad to promote business-to-business linkages between China and Pakistan. The scope of the Consortium has recently been enhanced by adding 56 universities from the two countries, to cover all major areas of higher education.

Nevertheless, Pakistan needs to take similar initiatives at international level. Foreign Office along with various international trade missions maybe tasked to hold seminars, workshops and conferences to raise awareness regarding CPEC. Regional organizations including the Shanghai Cooperation Organization (SCO), South Asian Association for Regional Cooperation (SAARC) and the Organization Islamic Cooperation (OIC) maybe taken into the loop for raising awareness regarding investment and growth opportunities of CPEC. It maybe added that strong economic ties has the prospective of pacifying antagonistic rivalry and lead to cooperation in other strategic areas. 

The turn in global events have aggravated the Western anxieties regarding the BRI as consisting of ‘predatory initiatives’ and CPEC has unfortunately become part of the spectra. The fact nevertheless is that 90 percent of developing country’s debt, including that of Pakistan is outstanding to Western institutions and countries. It is also striking to note that China as a result of indigenous reforms was successfully able to pull over 800 million people out of poverty, whereas according to analysts Pakistan continues to be meshed in cycles of stagnated growth and debt trap, despite the assistance of IMF. A diplomatic effort to promote Pakistan’s discourse on CPEC in the long-run would help enhance the scope of the project and gain the confidence of global investors.

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