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Private Sector Development Strategy

Policy Highlights

In March 2000, ADB unveiled its new PSDS aimed at strengthening the role of the private sector as the engine of growth in Asia. According to ADB, a robust private sector can play a key role in poverty reduction, the 'overarching goal' of the Bank. Growth, moreover, creates jobs that use the poor's main asset (i.e., labor) and increases the tax base that enables government to provide basic social services to the poor. ADB hails the new strategy as the instrument by which the Bank will 'harness the private sector's contribution to its vision of an Asian and Pacific Region free of poverty.'

ADB's PSDS is a major pillar in ADB's "overarching framework" of poverty reduction. In the Bank’s view, promoting private sector development will result in poverty reduction. In the Bank's reorganization in January 2002, its Private Sector Group was upgraded into a Private Sector Operations Department.

The Bank will play a more active role as a catalyst to increase private sector investment in the region. ADB uses a range of instruments -- such as policy dialogue and advice, program lending and technical assistance -- to help address problems that impede private sector growth in its Developing Member Countries (DMCs).

The new PSDS has three main thrusts, namely: (a) creating enabling conditions for business to flourish and an environment conducive to pro-poor growth; (b) generating business opportunities; and (c) catalyzing private investments.

The strategy will focus primarily on four areas of operation; (a) Governance in the public and private sectors; (b) Financial intermediation; (c) Public-Private Partnerships; and (d) Regional and subregional cooperation. ADB will support the development of workable public-private partnerships to involve the private sector in areas such as energy, water, wastewater treatment transport, telecommunications, and where practicable, the social sectors.

Through its public sector operations, ADB will support DMC governments in creating enabling conditions for business. Through its private sector operations, the Bank will catalyze private investments that deliver 'developmental impacts' or 'demonstrational effects'.

In its public sector operations, ADB will help shift the government's role from 'owner-producer' to 'facilitator-regulator' of private sector activities, freeing public resources for use in basic education, health services, and social safety nets ('fiscal space'). ADB will ensure that its public sector investments do not 'crowd out' the private sector, and that it takes all possible opportunities to 'crowd in' private sector participation.

In its private sector projects, the Bank should think 'development impact' which means creating employment opportunities, increasing income, improving access to public services and promoting effective competition and better corporate governance. ADB will continue to provide direct loans to private sector projects with focus on two sectors -- infrastructure and finance.

Although ADB’s private sector operations accounts for only a small percentage of the Bank’s total portfolio (~3-4%), ADB leverages much larger funds from commercial sources through its cofinancing mechanism. The Bank is seen as a source of 'comfort' by other lenders and investors. The Bank plays an important role as 'impartial advisor' and 'honest broker'. The Bank further says that its involvement in a project can exert influence on the design and implementation to ensure environmental protection and corporate governance.

To facilitate mobilization of commercial debt finance, ADB will intensify the use of cofinancing and guarantee instruments for mitigation of perceived risks. ADB will also support investment funds that reaches out to small and medium-sized enterprises, small infrastructure projects, technology companies, and other small projects that may not be cost effective for ADB to assist directly.

In 2002, ADB was also able to mobilize additional resources totaling US$2,851 million-about 50% of its total lending-through cofinancing arrangements with commercial sources, including export credits, US$2,097 million; the rest is with official sources, US$754 million.

In June 1995, ADB came out with a Private Sector Strategy that reaffirmed the use of the private sector to promote development. Sharper country focus, greater attention to the needs for physical and financial infrastructure in developing countries, and ways to help maintain sustained access to international loans and capital markets were the main thrusts of ADB's redefined private sector and cofinancing strategies and loan guarantee operations. See full version of policy

NGO Concerns

NGOs challenge the PSDS because of its increasing reliance on the profit-oriented private sector in the delivery of basic services like water, health, education and social security. Increasing costs have resulted in less and less access to these services especially by the poor. Attention should also be given to seeking alternative and viable solutions to long-time problems of public sector ineffectiveness. These solutions should look at various management and control/ownership models that will fully incorporate the concerns of various stakeholders (e.g., consumers, public sector workers, etc). Women are especially vulnerable to increasing privatization of erstwhile public goods, or burdens that had traditionally been shared by the community.

Contact at the ADB:
Director General Private Sector Operation Department (PSOD)

Related NGO Documents

A Call for a Responsible Economic Restructuring Framework , Asian Labor Network on IFIs-Philippines,
May 2002
ADB's PSDS: Private Sector as Engine of Growth (Briefer), Violeta Q. Perez-Corral, NGO Forum on ADB,
April 2001
ADB's PSDS: Private Sector as Engine of Growth (Guidebook), Violeta Q. Perez-Corral, NGO Forum on ADB, April 2001
Shifting Burdens from the Public Sector to Women's 'Public'/'Private' Lives, Violeta Q. Perez-Corral, NGO Forum on ADB, April 2001
ADB's Water Privatization Projects in Asia, Violeta Q. Perez-Corral, NGO Forum on ADB, April 2001
ADB News Releases on Privatization (1995-2000), NGO Forum on ADB, July 2000
Critique of Private Sector Development Strategy Working Paper, US NGOs, November 1999
Privatization - A Decade of Lessons Learned?, Violeta Q. Perez-Corral, NGO Forum on ADB, 1999
ADB's Private Sector Operations, Violeta Q. Perez-Corral, Asian NGO Coalition, April 1996

Updates

PPIAF Approves Two ADB Initiatives, March 2003
First Public-Private Partnership in India's Power Transmission Sector, January 2003
Indonesia's Power Project to Create Competitive Electricity Market , December 2002
Reforming India's Power Sector through State Utilities, December 2002
Pioneer BOT Power Project for Viet Nam, July 2002
Electricity Sector Reforms in Asia, May 2002
Private Solutions for the Poor, March 2002
Reforming Samoa’s Power Utility, December 2001
Greater Mekong Subregion Energy Forum, December 2001
Increasing Private Sector Role in Micronesia, December 2001
Private Sector Infrastructure Facility for Four Indian States, December 2001
Reforming Power Sector in India's Madya Pradesh State , December 2001
Privatization Program for Indonesia's SOEs, December 2001
ADB to Enhance Direct Assistance for the Private Sector, September 2001
New Pacific Strategy to Boost Private Sector , March 2001
1st ADB Poverty Forum Stresses Importance of Private Sector, February 2001
Private Sector Forum on SAGQ, November 2000
Thailand to Restructure State-Owned Specialized Financial Institutions, December 1999
Vietnam to Reform State-Owned Enterprises, December 1999
ADB Loans to Private Utility to Improve Water Distribution in Manila, September 1999
Reforming Indonesia's Power Sector, March 1999
ADB Loan to Help Privatize the Philippine's Power Sector, December 1998
ADB Road Project in Uzbekistan Helps New Private Contractors, December 1998
ADB Loan to Solomon Islands to Reform Public Sector, August 1998
ADB Approves $30 Million Liquidity Facility for AFIC, April 1998
ADB Takes Equity Stake in Finance Company to Develop India's Infrastructure , March 1998
ADB Helps Bhutan to Develop Private Sector, October 1997
ADB’s First ‘Sector Development Program’ Loan will Restructure Mongolia’s Education Sector, December 1996
ADB Supports BOT Projects for Infrastructure Development, July 1995
ADB Will Help Legal Frameworks in Asia, June 1995

PPIAF Funds Four ADB Projects (March 2003)

In 2002, the Public-Private Infrastructure Advisory Facility (PPIAF) approved funding for the following ADB projects: (a) The Pekanbaru Water Regulatory Study in Indonesia to develop a regulatory framework for water concessions in Sumatra ($75,000); (b) A regional study to devise a framework for financing merchant power plants in Asia ($450,000); (c) Regulating electricity and capacity building for the Energy Regulatory Commission in the Philippines ($320,000); and (d) Private sector participation in the sold waste management sector in Metro Manila ($75,000). In 2003, among the projects planned are the promotion of private sector initiatives in Mongolia's aviation sector, Asia's railways, the People's Republic of China's electricity market, and Indonesia's ports. The World Bank and the Governments of Japan and the United Kingdom established the PPIAF in July 1999 to help developing countries improve the quality of their infrastructure through private sector involvement; ADB joined the PPIAF in 2001. [back to top]

First Public-Private Partnership in India's Power Transmission Sector (January 2003)

ADB approved a rupee denominated loan equivalent to US$62 million for India’s first public-private partnership in the power transmission sector. A joint venture (JV) company will, on a build-own-operate-transfer (BOOT) basis, construct power transmission lines from Siliguri in West Bengal to Mandaula near the capital of Delhi. The JV company, Tala-Delhi Transmission Limited, will handle the operation for 30 years before turning it over to Power Grid Corporation of India Limited, a national transmission utility company owned by the Government of India. Due to be operational in 2006, the transmission lines will convey power from the Tala Hydro Electric Power Project in neighboring Bhutan as well as surplus power from India's eastern to northern region. The project will also promote subregional cooperation through energy trade.
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Indonesia's Power Project to Create Competitive Electricity Market (December 2002)

ADB approved a US$140 million loan for Indonesia to help create a new competitive electricity market in Java and Bali and reduce transmission bottlenecks, marking a major step in the ongoing restructuring of Indonesia's power sector through information and communications technology (ICT)-based equipment. The ICT equipment will be provided to PLN's (Perusahaan Listrik Negara, the State electricity enterprise) transmission entity that will later be separated into an independent company. This loan follows ADB's 1999 power sector restructuring program and the country's milestone Electricity Law, enacted in September 2002, which provides the legal framework for a competitive electricity market in Indonesia. Another major component is the Power Transmission Improvement Sector Project which will add 360 megawatt-amperes of capacity in Java and Bali and 276 kilometers of transmission lines to interconnect outer island power grids in East and South Kalimantan. [back to top]

Reforming India's Power Sector through State Utilities (December 2002)

ADB approved a US$150 million loan to India's Power Finance Corporation Ltd (PFC) to help reform the state power sector. PFC will onlend funds to state electricity boards and other state-level power utilities that make a firm commitment to institute reforms to make the sector operationally efficient and financially self-sustaining. The funds will be used to finance projects that will reduce system losses, increase operational efficiency, and improve service delivery to consumers. The loans will help upgrade transmission and distribution systems, build transmission and distribution facilities for system expansion, and modernize generating plants. PFC began lending to the power sector in 1988 and promoted reforms from 1996. The State Power Sector Reform Project is part of a drive to make state power sectors financially self-sustaining. It aims to support reforms in selected, reform-oriented states and establish independent regulatory bodies. It will also unbundle sector entities to make them commercially and operationally autonomous and efficient, as well as financially viable. The ADB loan will finance 60% of the total cost of the project. The project is due to be completed in December 2007. [back to top]

Pioneer BOT Power Project for Viet Nam (July 2002)

ADB approved a US$50 million loan for a pioneer BOT power project in Viet Nam and will also issue a political risk guarantee of up to US$25 million for commercial lenders. The total cost of building the 715 megawatt gas-fired combined-cycle power plant is US$480 million. The project will be developed and implemented under a BOT contract between Viet Nam's Ministry of Industry and the Mekong Energy Company Limited (MECO), a company set up specifically for the project. MECO is 56 percent owned by a wholly owned subsidiary of Electricité de France, one of the largest power utilities in the world, and 16 percent owned by a subsidiary of Tokyo Electric Power Company, the world's largest private power company with experience in gas, combined-cycle power operation. Another major stakeholder is Sumitomo Corporation of Japan with a 28 percent share. The power plant is located 75 km southeast of Ho Chi Minh City. ADB says that this pioneering project is significant because it marks the first time a power contract has been awarded through a “transparent and internationally competitive bidding process. The state utility, Electricity of Vietnam (EVN) will purchase the plant's output under a 20-year power purchase agreement. Similarly, the Vietnam Oil and Gas Corporation will guarantee the supply of natural gas for the project. The Government will guarantee the performance obligations of the Vietnamese counterparties under the project agreements. [back to top]

Electricity Sector Reforms in Asia (May 2002)

Energy ministers of Bangladesh, People's Republic of China (PRC), India, and the Philippines presented diverse scenarios of their countries' power needs and solutions and expressed a common view that privatization and deregulation are essential in power development. These views were expressed at a seminar on Electricity Sector Reforms in Asia held in May 2001 in Shanghai, PRC on occasion of the Bank’s 35th Annual Meeting. Xie Songlin, Vice President of the PRC's State Power Corporation, said PRC's accession into the World Trade Organization would "deepen" market-oriented reforms that would introduce competition to improve efficiency and lower costs. PRC's power sector has high capacity and wants to focus on distribution - transregional networks and nationwide interconnection to improve access of underserved areas to electricity, he said.

Bangladesh Minister of State for Power Iqbal Hassa Mahmood said that under planned reforms, power sector entities will be commercialized, services (generation, transmission, and distribution) will be segregated, and an energy regulatory commission established, in further support of a private sector power generation policy approved in 1996. Indian Minister of Power Suresh Prabhu said that over the next 10 years, India plans to install 100,000 megawatts of power - equivalent to the capacity it had developed over 100 years. Power distribution in India is another area that needs to be developed and is open for privatization. Every dollar invested in power generation needs a dollar in power distribution and transmission, he added.

Philippine Energy Secretary Vincent Perez Jr. said power reforms need to be accompanied by financial reengineering, particularly in managing the huge foreign debt of the country's National Power Corporation, incurred largely from a now-abandoned nuclear power plant project. Moreover, the fast tracking of BOT projects has led to excess power capacity in the Philippines. A Power Reform Act has been approved and power sector reforms include the sale of power transmission assets and privatization of the management of generating plants. The private sector meanwhile expressed the need for governments to stay out of the power sector. Colin Tam, president of the International Power Producers Association, challenged governments to give up their shareholdings in the industry and focus instead on regulatory functions, and that countries also need to improve related infrastructure such as transport, banking, and capital markets, restructure tariffs, and create a level playing field. [back to top]

Private Solutions for the Poor (March 2002)

ADB organized conference on Infrastructure Development: Private Solutions for the Poor – the Asian Perspective on 12-12 March 2002 at the Bank’s HQ in Manila. The conference aims to: help disseminate information on pro-poor infrastructure development by the private sector; and showcase lessons on pro-poor contract design, regulation, reform processes, the use of subsidies, and expanding and improving options for basic services delivery to communities and households, as a way of focusing private service provision to the poorest members of society. It builds on an earlier (May 2000) DFID (UK), World Bank, and PPIAF conference with the same title. [back to top]

Reforming Samoa’s Power Utility (December 2001)

ADB approved a US$6 million loan to increase Samoa’s hydropower generation capacity and expand electricity distribution through the Power Sector Improvement Project. The loan also involves policy reforms, including further commercialization of the state-owned utility, Electric Power Corporation (EPC). The project will expand the Afulilo hydropower scheme and install a third 2-megawatt (MW) generator in Ta'elefaga power station. [back to top]

Greater Mekong Subregion Energy Forum (December 2001)

ADB is organizing two important meetings in Hanoi in regard to the Greater Mekong Subregion (GMS) Cooperation Program in the Energy Sector. The Sixth Meeting of the Experts Group on Power Interconnection and Trade (EGP-6) on 13-14 December will review the Study on the Regional Indicative Master Plan for Power Interconnection in the GMS. This Master Plan study will serve as the road map for regional power integration. At the Eight Meeting of the Subregional Electric Power Forum (EPF-8) on 14-15 December, country delegations from Cambodia, Lao PDR, People's Republic of China, Thailand, and Vietnam, will share the developments in power sector policies and programs in their respective countries, including updates in power generation and transmission plans. An Inter-Government Agreement on Power Trade (IGA-PT), when adopted, will provide the overall framework under which GMS countries can advance regional electricity trade. back to top

Increasing Private Sector Role in Micronesia (December 2001)

ADB approved the US$13 million Private Sector Development Program which is designed to create more jobs and reduce dependence on external assistance. The Program is backed by a US$5 million policy loan and a US$8 million investment loan and has the following aims: (1) to improve the policy and legal environment for the private sector and strengthen the capacity to manage land, labor, and capital resources; (2) to increase production of tradable goods for domestic and export markets as well as develop a competitive service sector; and (3) to facilitate the use of land and property as collateral to access finance for business development. [back to top]

Private Sector Infrastructure Facility for Four Indian States (December 2001)

ADB approved two loans totaling US$200 million to set up a private sector infrastructure facility (PSIF II) for financing infrastructure projects in four reform-minded Indian states. Loans of US$100 million each will go to two national financing institutions, Infrastructure Leasing and Financial Services Ltd. and the Industrial Development Bank of India, to onlend for infrastructure projects in Andhra Pradesh, Gujarat, Karnataka and Madhya Pradesh. The projects must be at least 51 percent owned by the private sector. ADB will further provide a technical assistance grant of US$1.5 million to help these states promote private sector participation in developing infrastructure. [back to top]

PPIAF Approves Two ADB Initiatives (December 2001)

The Public-Private Infrastructure Advisory Facility (PPIAF) has approved two ADB initiatives to promote private sector involvement in infrastructure in the Bank's DMCs. The two initiatives are: (a) Pekanbaru Water Regulatory Study ($75,000) in Indonesia and (b) Framework for Financing Merchant Power Plants (MPP) in Asia ($450,000). The Indonesia Pekanbaru Regulatory Study will develop the regulatory framework for water supply concessions in Sumatra with guidelines for a central government Office of Regulation for the entire country. The MPP Regional Study aims to promote private sector investments in power generation. MPPs are power plant facilities financed without fully committed long-term power purchase contracts. The MPP model builds on the power sector restructuring efforts being pursued by many Asian countries. PPIAF is a multi-donor technical assistance facility established in July 1999 as a joint initiative of Japan, the United Kingdom and the World Bank; contributors include other major donors and ADB. [back to top]

Reforming Power Sector in India's Madhya Pradesh State (December 2001)

ADB approved loans totaling US$350 million ($150 million policy loan and $200 million investment loan) to help restructure the power sector in the central Indian state of Madhya Pradesh. The program loan will enhance the viability of the Madhya Pradesh State Electricity Board through financial restructuring and corporatize and commercialize the generation, transmission and distribution functions of the Madhya Pradesh State Electricity Board through the establishment of new companies in the power sector. Madhya Pradesh is the second state to receive such assistance, following Gujarat. [back to top]

Privatization Program for Indonesia's SOEs (December 2001)

ADB approved a US$400 million loan to Indonesia for a milestone governance and privatization program for state-owned enterprises (SOEs). The focus is now on accelerating long delayed SOE reforms, corporate restructuring and asset sales. According to ADB, poor governance in Indonesia's SOEs are mainly caused by government interference in day-to-day operations, lax internal controls, loopholes in accounting practices, and poor auditing standards and practices. Further, indiscriminate subsidies and protection have undermined SOEs. The ADB-assisted program will restructure and privatize SOEs. To counter resistance, the new system of corporate governance will give management greater authority and autonomy. The loan will be disbursed in three tranches which will be made available upon the Government meeting conditions of loan effectiveness. An additional US$1 million grant will review non-commercial operations with a view to transferring them from SOEs to private sector companies. Another US$2.6 million grant will strengthen SOEs' corporate governance and establish a fair and transparent process for dealing with employees made redundant as a result of the restructuring or liquidation of ailing enterprises. Under the new grant, ADB will help the Government introduce a performance incentive scheme in 30 SOEs, restructure at least 10 enterprises, and privatize at least five. Three-year restructuring and privatization plans will be prepared for another 30 SOEs. [back to top]

ADB To Enhance Direct Assistance For The Private Sector (September 2001)

ADB approved a strategy to enhance the impact of its direct assistance to the private sector in which the Bank will build on its strengths in infrastructure and capital market development to assist private sector projects in these two areas. Priorities will include energy, water, telecom and transport infrastructure projects. ADB will gradually extend its reach to new sectors opening up to the private sector, such as education and healthcare, to be done selectively on a pilot basis. ADB's prudential limit for private sector risk has been raised to $75 million per project, up from $50 million. To ensure that the Bank does not “crowd out" commercial lenders and investors, ADB's participation will continue to be limited to a maximum of 25 percent of project cost. ADB will also use its political risk guarantee and partial credit guarantee instruments to credit enhance transactions and attract long-term lenders (e.g., banks, pension funds and insurance companies). [back to top]

New Pacific Strategy to Boost Private Sector (March 2001)

ADB’s newly approved will focus on helping Pacific developing countries streamline their public sectors and boost private sector investment. The new strategy responds to five key challenges in the Pacific Island nations: Vulnerability due to remote locations and a narrow resource base, and susceptibility to natural disasters and global markets; Political instability and poor governance; Limited skilled human resources; Socio-cultural factors that affect politics and productivity; and Inadequate physical, technological and financial sector infrastructure for sustainable growth. ADB's strategy also underscores the importance of regional cooperation to collectively reap the benefits of economies of scale. ADB is also supporting regional cooperation in fisheries, air transport, financial sector restructuring, public sector management and governance in the Pacific. [back to top]

1st Poverty Forum Stresses importance of private sector (February 2001)

ADB hosted the first Asia and Pacific Forum on Poverty: Reforming Policies and Institutions for Poverty Reduction at ADB Headquarters in Manila on 5-9 February 2001. The Forum aimed to build consensus on reform and investment priorities in the region's economies. It also sought to identify concrete mechanisms which foster pro-poor policy reforms. The four-day forum organized by the Bank once more strengthened the Bank's belief that a robust private sector is essential in the creation of efficient markets that would provide better and more opportunities to reduce poverty. The keynote address on Poverty, Growth and the International Monetary System was given by Nobel Laureate for Economics Robert Mundell. Participants included various actors and stakeholders (e.g., policymakers, private sector groups, representatives of non-government and civil organizations, and international donors). Out of a total 300, some 20 NGOs were invited. [back to top]

Private Sector Forum of SAGQ (November 2000)

ADB sponsored and sent a large delegation to the Private Sector Forum on South Asia Subregional Cooperation in Calcutta, India in November 2000. This subregional growth initiative is also dubbed as the South Asia Growth Quadrangle (SAGQ), consisting of Bangladesh, Bhutan, India and Nepal. The event was organized by the Chambers of Commerce from the subregion to identify an investment program that will include an 'economic corridor' around the Bay of Bengal. ADB believes that a 'public sector-private sector partnership' is key to unlocking the subregion's potential, with the subregion offering a 'huge force of hardworking and disciplined workers at relatively low wages'. [back to top]

Thailand to Restructure State-Owned Specialized Financial Institutions (December 1999)

ADB approved a US$7.5 million financial assistance package to accelerate Thailand's financial sector reforms. The loan will restructure four state-owned specialized financial institutions (SFIs). The role of the Government in the financial sector will similarly be reviewed. Various forms of Government support for SFIs, and their effect on SFI operations, the real sector and financial markets will be assessed. [back to top]

Vietnam to Reform State-Owned Enterprises (December 1999)

ADB approved loans totaling US$100 million to accelerate the reform of Vietnam's SOEs, especially removing policies and practices that favor SOEs over private enterprises and renewing efforts to attract foreign investors. To facilitate SOE restructuring, labor mobility will be increased through a more flexible social insurance system to encourage workers to move away from loss-making SOEs to more productive areas without fear of losing their social safety net. To encourage private ventures, the Government will allow nonstate enterprises to use land-use rights as an equity contribution in joint ventures. An earlier ADB loan of US$54 million (December 1998) aimed to enable Viet Nam to orientate its vocational and technical education system towards the changing needs of the private sector and conduct labor market surveys. [back to top]

ADB Loans to Private Utility to Improve Water Distribution in Manila (September 1999)

ADB provided loans totaling over US$170 million to a private utility -- Maynilad Water Services, Inc. -- to improve and expand water distribution and wastewater treatment services in the Philippines capital of Manila. This is the Bank's first assistance to a privatized water and sewerage utility. The ADB assistance is part of a US$350 million debt package being raised by the water firm to meet its financing needs up to the year 2002. Maynilad is one of two concessionaires of the government-owned Metropolitan Waterworks and Sewerage System (MWSS) contracted to rehabilitate and operate the water system, reduce physical losses, check illegal usage and expand coverage over 25 years. Maynilad has assumed implementation of two MWSS projects which ADB funded earlier to increase water supply. [back to top]

Reforming Indonesia’s Power Sector (March 1999)

ADB approved two loans totaling US$400 million for Indonesia’s Power Sector Restructuring Program. One is a US$380 million loan to support a Government reform program for the sector. The other is a US$20 million loan for capacity building to establish a competitive electricity market. The state-owned utility, Perusahaan Listrik Negara (PLN), is incurring heavy losses; according to ADB, without reform it cannot survive. The restructuring program aims to establish a competitive market for electricity and increase private sector participation in the power sector in the Java-Bali region. The overall cost of the reforms is estimated at between US$1 billion and US$1.5 billion annually during 1999 and 2000 and US$4 billion in 2001. These costs are expected to be met by direct budgetary outlays, loans from multilateral and bilateral sources and part of the proceeds from the sale of PLN's assets in Java and Bali. The Export-Import Bank of Japan is expected to co-finance the program with US$400 million in yen equivalent under the New Miyazawa Initiative to help crisis-stricken Asian countries. [back to top]

ADB Loan to Help Privatize Philippines Power Sector (December 1998)

ADB approved a US$300 million loan to privatize power generation and transmission in the Philippines. Virtually all power generation is arranged through the financially-stricken government-owned National Power Corporation (NPC) which the project will prepare for privatization. Privatization will shift the heavy financial burden of power sector development from the public to the private sector. According to the Bank, moving it to the competitive world of private business will lead to more efficiencies in generation and distribution and will lower electricity charges for consumers. The ADB is also providing two technical assistance grants financed by the Japan Special Fund. One, for US$600,000, is to study electricity pricing and regulatory policy in a competitive environment. The other will study the impact of the program on consumers. The loan will finance some of the adjustment costs of the restructuring, which include the debt burden, the incorporation of long-term take-or-pay contracts with independent power producers into the competitive framework, and separation payments to employees. [back to top]

ADB Road Project in Uzbekistan Helps New Private Contractors (December 1998)

ADB approved a US$50 million road rehabilitation loan in which private contractors in the former centrally controlled economy of Uzbekistan would be given a chance to take part, in association with experienced international contractors. The project will also institute policy reforms and restructure institutions to better manage and maintain the country's roads. The collapse of trade after the breakup of the former Soviet Union led a drastic fall in transport demand. As Uzbekistan changes towards a market-based economy and as reforms create more competition and lower consumer costs, transport demand is expected to rise.
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ADB Loan to Solomon Islands to Reform Public Sector (August 1998)

ADB approved a US$25 million equivalent concessional loan to Solomon Islands to support critically-needed policy and institutional reforms in the public sector. The Asian crisis brought the Solomon Islands' logging industry to a standstill as prices have fallen below the cost of production, causing most logging firms to shut down. The ADB loan will support policy reform measures in four areas: macroeconomic and fiscal; public sector management, including public service reform, re-orientation of the public sector and movement toward performance-based management; public enterprises, including establishing regulatory frameworks, corporatization and privatization; and government institutions, which need to be more accountable and transparent. In addition, ADB is financing a technical assistance loan of US$1 million for the Privatization of State-Owned Enterprises to support the Government's privatization policy. [back to top]

ADB Approves $30 Million Liquidity Facility for AFIC (April 1998)

ADB approved a liquidity facility to Asian Finance and Investment Corporation Limited (AFIC) to support its short-term financial needs brought on primarily by the recent currency turmoil. AFIC was established in 1989 with 26 shareholders comprising the Bank and a group of international commercial banks. AFIC’s main purpose is to provide financing for private sector enterprises in the Bank’s developing member countries (DMCs) and concentrates on medium-sized industrial Projects. The liquidity facility was the Bank’s second loan to AFIC. [back to top]

ADB Takes Equity Stake in Finance Company to Develop India's Infrastructure (March 1998)

ADB agreed to take a US$15 million equity stake in the Infrastructure Development Finance Company (IDFC), a specialist financial institution which will channel funds into India's infrastructure development. The IDFC is a pioneering venture that will both attract private investment funds and urge the Government to remove further obstacles to inflows of private capital. IDFC aims to attract funds by establishing a high credit rating for itself, mitigating investment risks and lengthening payback periods for loans, an approach that has not been tried yet anywhere else. [back to top]

ADB Helps Bhutan to Develop Private Sector (October 1997)

ADB approved the Financial Sector Intermediation Facility (FISIF) for Bhutan which consists of two concessional loans totalling US$8 million, an equity investment up to US$790,000 in Bhutan National Bank (BNB) and a US$500,000 technical assistance grant for capacity-building. The FISIF aims to improve access to credit for private businesses, create a supportive legal policy environment for financial sector operations and private sector activities, and improve entrepreneurial and management skills. One US$4 million policy loan will introduce key reforms including rationalizing government control of private sector activity, liberalizing the interest rate structure, and rationalizing foreign exchange transactions. [back to top]

ADB’s First ‘Sector Development Program’ Loan will Restructure Mongolia’s Education Sector (December 1996)

ADB approved loans totalling US$15.5 million for the Education Sector Development Program as Mongolia’s education system has to meet new requirements as Mongolia moves from a planned to a market economy. This is ADB’s first application of a new lending modality -- the sector development program -- a package of policy reforms, investments and technical assistance designed to make a sector more cost-effective and responsive. The ADB will provide a $6.5 million policy program loan and a US$9 million investment loan. The policy program loan aims to, among others: expand cost-sharing and cost-recovery schemes for higher education; bring in cost-recovery for textbook publishing and distribution; support privatization and private sector schemes. [back to top]

ADB Supports BOT Projects for Infrastructure Development (July 1995)

ADB says that Asia's massive infrastructure requirements call for tapping the private sector through the build- operate-transfer (BOT) mechanism; the Bank will assist DMC governments in formulating and negotiating BOT projects. ADB estimates that over $1 trillion will be needed over the next decade to meet Asia's infrastructure investment, with energy and transport requiring a combined total of $450 billion. ADB cites innovations made by some governments of Malaysia and the Philippines in meeting their infrastructure demands, including -- the privatization of existing infrastructure assets in the telecommunications, ports, roads and power generation sectors; contracting out to the private sector the operation and maintenance of infrastructure services; and creation of new infrastructure facilities through build-operate-own/build-own-transfer (BOO/BOT) programs. ADB also describes the Philippines as the "role model" for Asia in the use of the BOT mechanism, noting the country's success in solving its power crisis by introducing an aggressive BOT program which opened up power generation to foreign investors. The BOT Center and the Coordinating Council of the Philippine Assistance Program have ed the way in developing comprehensive BOT laws, preparing suitable projects and acting as a one-stop investment promotion shop. The Bank says that, based on the Philippine example, similar BOT policies, programs and units are being promoted and developed with assistance from the Bank in other countries, such as Bangladesh, People's Republic of China and India. ADB is very keen to participate in BOT infrastructure investment, particularly in the power, toll road, mass transit and water supply sectors. The Bank has successfully participated in BOT projects and can invest up to $50 million as well as mobilize similar commercial cofinancing. [back to top]

ADB will help Legal Frameworks in Asia (June 1995)

ADB considers the development of sound legal frameworks as important for promoting private sector investments, privatization and capital market development; protecting the environment; improving the status of women; reforming the public sector; and strengthening public administration. The Bank will be significantly involved with its DMC governments in providing assistance, including expert legal advice and training, in the development of the legal dimensions of new regulatory systems. ADB has supported its DMCs in the development of appropriate social, economic and legal frameworks in key sectors since the 1980s.
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