Manila-based Asian Development Bank (ADB) recorded private sector investments of up to $2.6 billion in 2015 with over 40 per cent of transactions were in “frontier economies” or lower-middle-income and low-income countries.
The figure is also a 37 per cent increase from 2014, and 62 per cent higher than in 2013.
ADB president Takehiko Nakao said they believe private sector is a key engine of growth in developing Asia and a critical partner in alleviating poverty.
“We are substantially expanding our private sector financing and investment operations to meet the rapidly changing needs of this dynamic region,” Nakao said. “By promoting an improved business climate, with enhanced access to more flexible financing solutions and trade facilitation tools, ADB is helping the private sector create high quality jobs and increase living standards across Asia and the Pacific”
ADB earlier disclosed it made investing in frontier economies a priority, citing the institution focuses its capital on countries that have traditionally had more difficulty in securing private sector financing.
ADB reported the expansion has brought its private sector investment portfolio to increase to over $8 billion, and its private sector operations are now targeted to double from current levels by 2020.
The bank recently revealed its approvals of loans and grants, technical assistance, and co-financing increased 19 per cent in 2015 or $27.15 billion compared to $22.89 billion in 2014.
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Alongside the growth in overall volume, ADB’s private sector operations also reached record levels in strategic priority sectors in 2015, including climate change, frontier economies, gender equality, and inclusive business.
Among ADB’s notable frontier economy transactions included its first ever deal in Bhutan to support agribusiness, its first power and telecommunications financing in Myanmar, its first liquid natural gas deal in Pakistan and several financial institutions’ transactions in the southern Caucuses and Central Asia.
Also over 30 per cent of private sector transactions in 2015 were focused on climate change and renewable energy, including the first “green bond” in the region for a geothermal operator in the Philippines, an innovative credit-enhanced project bond for the refinancing of a wind power company in India, and the financing of new wind power generation project in Thailand. Of the nine private sector energy investments approved in 2015, seven are considered “green projects”.
Likewise ADB continued to ramp up its efforts to create more commercially-viable public-private partnerships (PPP) in the region, highlighted by its service as transaction advisor for the Philippines’ largest ever PPP, the $3.8 billion investment in the North South Railway and commuter rail line.
Fully two-thirds of private sector transactions in 2015 contained specific gender elements, including projects that directly target women, as well as those that connect households to services that are relatively more beneficial to women, such as access to health, finance, energy and water.
Another of its key highlights in 2015 called “inclusive business” transactions, targeted the economically disadvantaged, accounting for 26 per cent of ADB’s private sector financing during the year, and the majority of the bank’s over $750 million of financing to financial institutions in 2015 was directed to financial inclusion and gender equality in diverse markets such as Georgia, India, Kyrgyz Republic, and Sri Lanka.
ADB seeks to catalyse the flow of third-party commercial financing into its transactions through a variety of cofinancing and risk mitigation products.
ADB noted also in 2015 that its private sector co-financing was over $4.5 billion, representing over 40 per cent of total ADB cofinancing volume during the year, and including nearly $1.5 billion of B loan syndications and risk transfers across such diverse markets as Azerbaijan, the People’s Republic of China, India, and Myanmar.