Executive Summary
The Asian Development Bank (ADB) is a group banks that was conceived in the early 1960s as financial hub institution that would foster economic growth, cooperation and development in the Asian region that was considered to be the poorest in the world. The bank initially intended to foster economic growth and to ensure that the member states cooperate in the process of alleviating poverty as a whole. The bank brought together both the public and private investment for the purpose of development coordination, promotes intra-regional trace, contribute to harmonious economic growth and coordinate development plans in the region. It started with 31 members but of now the membership has expanded to 61 members. The voting power of the member states depends on the amount of capital subscribed to the bank. The Asian Development Bank is governed by the Board of Governors, President, 4 Vice Presidents and head of the departments. At intervals of less than five years, the board of governors of the Asian Development Bank shall review the bank’s capital stock. Just in case of authorized capital stock increment, each member to the bank shall have an opportunity to subscribe under the terms and conditions which shall be determined by the Board of Governors. The Asian Development Bank operation principles shall be to provide principle for financing specific projects for the member states, selecting suitable projects, member states shall be required t submit loan proposals, ability of the loan repayment shall be considered, the bank shall review the suitable risk compensation of the loan and the special funds shall be used to procure goods and services produced in the member states. The success of the Asian Development Bank in the Asian region has been associated with good governance in terms of being transparent, predictable, participation and accountable.
Introduction
The Asian Development Bank (ADB) is a group banks that was conceived in the early 1960s as financial hub institution that would foster economic growth, cooperation and development in the Asian region that was considered to be the poorest in the world. In a ministerial Conference that was held by the United Nations Economic Commission in 1963 in regard to the Asian Economic Cooperation, a resolution was passed that set resolution was passed on how the Asian region economic development was be brought into reality through the establishment of the Asian Development Bank. After 31 agricultural regions had agreed to come together to form a single cooperation, the Asian Development Bank was established and Philippines Capital of Manila was chosen to host it (Guttal, 2005). During the initial stages of the bank, it focused on rural development and food production. The research shall focus on establishing the importance of the Asian development bank, its operations, memberships, challenges and opportunities it faces during its operation.
Importance of the Asian Development Bank research
The research in regard to the Asian Development Bank is intended to establish how the initiation of the bank led to the reduction of poverty in the Pacific and Asian region. The establishment of the Asian Development Bank provided technical assistance for execution and planning development through advisory services to its members facilitated and promoted investment of private and public capital for development, coordinated the development plans and polices and extended loans and equity investments to its developing member countries. Following the need to establish an economic cooperation that would achieve efficient utilization of the available resources in the Asian region, the Asian Development Bank was necessitated to be established for the sake of accelerating economic development in Far East and Asian Region (Groff, 2013). The reason for choosing Asian Development Bank for the research is to illustrate how the establishment of the bank led to the idle resources and funds mobilization in and out of the Asian region for the sake of establishing and fostering greater flow of development funds in the region. In addition, the establishment of the Asian Development Bank recognized the aspiration of promoting harmonious economic growth and development in the region and expansion of the internal trade from the Asian region member states to the external market in the international market. The bank was established with the objective of creating a financial institution in the Asian region that would have the basic character that would serve the financial and social needs of the Asian people at the time of the bank initiation.
In order to promote its purpose the bank promoted investment in the region in both private and public capital for development purpose. The bank was focused on giving priority to the regional, sub-regional, national programs and projects which would contribute to the most effective and….(Amadi, 2011). The bank met its members requests in the region of assisting them to coordinate their their foreign trade and to be specific intra-regional trade. The bank was established with the aim of formulating specific project proposals and to ensure that its members cooperate in such a manner deemed appropriate in accordance with the members’ agreement terms.
Brief historical background
The Asian Development Bank was established with the aim of facilitating development in both Asian and Pacific region. The bank initially intended to foster economic growth and to ensure that the member states cooperate in the process of alleviating poverty as a whole. The bank brought together both the public and private investment for the purpose of development coordination, promotes intra-regional trace, contribute to harmonious economic growth and coordinate development plans in the region. It started with 31 members but of now the membership has expanded to 61 members (Daft & Samson, 2014). The voting power of the member states depends on the amount of capital subscribed to the bank. The Asian Development Bank is governed by the Board of Governors, President, 4 Vice Presidents and head of the departments.
Main activities and operations
The subscription payment shall be made in five installments of 20 percent each. The initial installment to be paid by each member shall be required to be within thirty days after the agreement came to force. The second installment shall become due one year after the first force agreement while the other installments shall be made successful after one successive year. The bank shall basically accept the depository and promissory notes of the payable amount in the appropriate currency as agreed upon.
Based on the condition stipulated in the Asian Development Bank agreement the bank shall provide financial facilities to any agency or member concerned with economic development in the region. The bank shall succeed in its operations by making direct loans with the unimpaired paid-in capital, participating in the capital market using borrowed funds, investing the funds referred and guaranteeing economic development (Radika, 2013). The Asian Development Bank operation principles shall be to provide principle for financing specific projects for the member states, selecting suitable projects, member states shall be required t submit loan proposals, ability of the loan repayment shall be considered, the bank shall review the suitable risk compensation of the loan and the special funds shall be used to procure goods and services produced in the member states. The bank agreed to be guided by sound banking standards in its operations.
Membership and findings
Membership in the Asian Development Bank was agreed to be open to the associate members of the United Nations Economic commission for Far East, Asia, non-regional developed and regional undeveloped countries members to the United Nations (Daft & Samson, 2014). The eligible countries for membership shall be admitted under the terms and conditions which the Asian Development Bank might find reasonable upon the affirmative two-third vote of the bank’s governors. The research found that the countries would not become the members of the bank if they were not members of the United Nations Economic Commission and the total voting power to be represented by three fourth of the members. In case of the associate member states not responsible for the international relations conduct, the membership application in the bank shall be accompanied by responsibility where the members shall be responsible for all obligation of benefiting the membership.
Challenges and opportunities of the Asian Development Bank
The Asian Development Bank shall not accept assistance or loans which may limit, prejudice or deflect its functions and purpose in the Asian region. The bank’s President, staff, officers and Vice-President shall not interfere with the political affairs of its member states. It shall not interfere or influence the political characters of the leaders leading the member states. Therefore, the banks mandate shall only be confined to only economic considerations relevant to its decisions (Radika, 2013). The considerations shall be impartially weighed in order to carry and achieve the functions and the purpose of the bank. All the banks staffs shall be required to discharge their role and duty to the bank rather than any other authority. The bank members shall be required to respect international character of the specific duty rather than attempting to influence the discharge of other duties. The total amount of the outstanding equity and loans investments and guarantees which shall be made through the ordinary operations of the bank shall not be required to go beyond the unimpaired subscribed surplus, reserves and capital of the ordinary capital subscription. The special reserve provided under article seventeen of the agreement shall not be included in the ordinary operations of the bank. The loans made with the borrowed funds shall not exceed the total outstanding principal borrowed by the bank payable in similar currency (Godek, 2009). For the case of the funds invested in the equity capital from the ordinary capital resources of the Asian Development Bank, the total amount of the investment shall be required not to exceed 10% of the total amount of the unimpaired paid-in capital stock and including the ordinary capital resources but excluding the special reserves which are provided in the agreement. In addition, the equity investment amount shall be required not to exceed the equity capital percentage specified and determined by the board of directors. The bank shall not be required to control the interest of any entity except where investment safeguard is necessary for the member state and the bank.
As a matter of fact, the Asian Development Bank is a public sector institution sponsored by the tax payers in all the member states in form of direct financing or debt repayment. The bank is necessitated to raise its capital from the members’ contributions or through issuing of bonds on the capital markets in the world. As a result, the bank has been unable to match with the sustainable urban areas growth. The bank has been experiencing the challenges of managing the rapid rate of urbanization in order to ensure sustainable social and economic development (Daft & Samson, 2014). In addition, despite the fact that the bank has been bridging the demand and supply gap on infrastructures services it has not yet reach the necessary capacity required meet the urban development in the region. The forces of globalization have necessitates the cities to be globally competitive and because the Asian Development Bank has restricted the fund sourcing strategies it have been had for the member states to compete globally.
The opportunities for the Asian Development Bank has lead to stakeholder partnerships where the both the private and the public sector has been necessitates to work together to build capacities for enhancing revenues, expanding the resources and implementing improvement in all areas of growth and development. The Asian Development Bank has enabled several cities in the Asian region to formulate the development approaches which are based on long term visions (Blowfield and Frynas, 2005). The cities development has been an appropriate strategy necessary to complement both national and local development. The establishment of the Asian Development Bank became the engine for economic growth for the region. The fact that the region was being characterized with poverty, the bank ended up becoming the center of excellence for culture, health care, technological innovation, social services, communications and government administration. As a result, the establishment of the bank created great job opportunities for the both locally and international hence improving the living standards of the locals and more so alleviate poverty in the region.
The Asian Development Bank is the 2nd largest source of finance for development in the Asia Pacific region after World Bank Group. The bank provides loans to its member states, partial risk guarantees, and technical assistance to the government and private sector and equity investments for both sustainable development goals and millennium development goals for the region. The bank is based on the ideology that rapid economic growth is the appropriate path for development, efficient resource allocation while the private sector is the best avenue for goods and services deliverance (Mohammed, 2010). The only role of the government is to establish an enabling environment for the private organizations such as Asian Development Bank would participate in the economic activities areas. The success of the Asian Development Bank in the Asian region has been associated with good governance in terms of being transparent, predictable, participation and accountable. In conclusion, the four elements of good governance in Asian Development Bank have been as a result of giving priority to private sector needs rather than public interest priorities.
References
Amadi, R. (2011). Agreement Establishing the Asian Development Bank. London; Cambridge University Press.
Daft & Samson, (2014). Fundamentals of Management: Asia Pacific Edition PDF.
