Catalog

	Table of Contents
p. 5 of 24 BACK | NEXT The Asian Development Bank Mobilizing Private Capital Assistance to Private Enterprises Eligibility for ADB Assistance Advantages of Working with ADB Extent of ADB Assistance Appraisal Criteria Loan Terms Security Procurement Accounting and Auditing Arrangements Corporate Governance Environmental Considerations Role of ADB in Supervising Investments Risk Principles for Investment Funds Sale of ADB Equity Investment Commercial Cofinancing Complementary Financing Scheme Guarantees Export Credit Agency Cofinancing Applying for ADB Assistance Processing Procedures Illustrative Private Sector Projects of ADB Contact Information

ADB’s Private Sector Operations: Catalyzing Private Investments Across Asia and the Pacific

---

Advantages of Working with ADB

ADB supports financial sector projects because this is key to the economic development of its DMCs,and capital markets projects have a significant catalytic impact in channeling foreign and domestic capital to productive sectors of the economy.Equally,sponsors of financial sector projects consider working with ADB because they can significantly benefit from the presence of a multilateral bank such as ADB.They approach ADB with their projects for a number of different reasons,including the following.

• ADB has been operating in the region for 35 years and has a 18-year record of private financial sector operations.
• As an established,multilateral development finance institution with a reputation for objectivity,ADB support for a project is a stamp of approval valued both by governments and other private sponsors or investors.
• As part of its policy dialogue with DMC governments,ADB is actively engaged in financial sector reform and can assist in promoting a more favorable environment and removing barriers preventing a sound project from moving forward.
• ADB main tains long-term relationships with institutional investors,banks,export credit agencies,and other official institutions and can help bring sponsors and investors together, in support of a proposed project.
• ADB has experience in helping structure and supervise financial sector projects,and can provide useful insights on project design based on lessons learned from past experience.
• ADB continues to contribute in developing best practices in the financial sector, particularly in the areas of corporate governance and risk management of banks and investment funds.
• Many sponsors find that ADB ’s goals as a development bank fit well with their own long-term objectives and contribute to a successful and more profitable project and a productive long-term relationship with ADB.Such developmental goals include
• building stronger local financial institutions
• transferring management know-how to DMCs and training local staff
• improving corporate governance
• increasing local capital market efficiency,liquidity,and scope
• improving compliance with laws and regulations,and
• supporting environmentally sound projects.

As a development bank,ADB has the objective of adding value to projects and not merely substituting for private capital in projects,which the private sector could do equally well or better on its own.ADB there- fore looks for projects that maximize its catalytic role and leverage of capital. ADB also looks for projects that it believes fit well with the policy reforms it is recommending,and the level of market sophistication and degree of state intervention in the relevant country.

ADB can participate in offshore,country,and regional funds and domestic mutual funds.Private equity funds are currently emphasized over funds that invest in listed securities,but both can be considered. ADB assesses the fund ’s investment focus and the fund ’s catalytic or developmental role,and requires that the fund be managed according to best governance,environment,social,and risk management practices.ADB can assist in designing suitable fund structures.

Supporting SMEs is a priority for ADB.These enterprises represent the future of the private sector in many countries and yet their development is often constrained by a shortage of capital and other impediments. Investment funds are an important way for ADB to help support enterprises that are too small for direct investment.Increasingly,it has been recognized that funding alone is not the full answer.It should be accompanied by advice and assistance in managing the enterprise.Such advice is often supplied by fund managers that take an active role in supervising their investments and improving corporate governance.In selective cases, complementary advisory units,funded separately through grants,may provide additional support and develop deal flow for the fund.

The wide-ranging benefits that the private sector can derive from expanded and improved infrastructure facilities and the catalytic role for ADB justify the priority ADB accords to financing infrastructure projects. The private sector has traditionally been most active in telecommunications and power generation,the sectors with shorter payback periods most conducive to privatization.F r this reason,the focus f ADB ’s operations is shifting more towards projects in water supply,waste treatment,toll roads,ports,airports,and light rail systems that are harder to finance using purely commercial sources.Also,ADB is beginning to consider social sector infrastructure,for example hospitals and schools,which until recently have seen little private sector involvement.ADB has significant experience in these sectors and can bring to bear the expertise of its sector and country specialists.

ADB assists in analyzing the feasibility out and developing the structure of infrastructure projects and provides financial support to qualified projects through equity investments,loans,and credit enhancement products including guarantees. ADB provides loan maturities tailored to the needs of the project up to a maximum of about 15 years.When blended with medium-term commercial financing, ADB loans can result in a better-balanced financial structure that meets the long-term funding requirements of infrastructure projects.ADB is also considering developing ways to assist in mobilizing local currency financing for infrastructure projects,on suitable terms,to better manage the foreign exchange exposure of projects dependent on local currency revenues.This may involve an ADB guarantee of a local currency loan or bond issue.

When appraising projects,ADB pays particular attention to the process of selecting the developers and suppliers,and to the environmental and social aspects,particularly poverty reduction.ADB ’s preference is for projects and sponsors that are selected through a fair and transparent competitive bidding process —often the best way to ensure that the terms of the project are reasonable for all the stakeholders.ADB will consider negotiated transactions that have not been subject to competitive bidding if the circumstances of the project justify this approach,but additional due diligence may be required to approve the project cost and structure. ADB will only participate in a project if the regulatory framework for the project is sufficient,and there is proper provision for recommending and approving tariff adjustments.

Back Eligibility for ADB Assistance	Next Extent of ADB Assistance