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Annual Report 2004 : 2004 in Review: Board of Directors' Report
FundingThe main instruments for providing help to ADB's DMCs are policy dialogue, loans, technical assistance, grants, guarantees, and equity investments (see pages 11–15). ADB offers a range of modalities and terms for loans aimed at improving performance. About 76.5% of cumulative lending comes from OCR from three distinct sources: private placements and capital markets in the form of borrowing, paid-in capital provided byshareholders, and accumulated retained income (reserves) that provides a buffer for risks. Loans are also provided from Special Funds. The ADF offers loans on concessional terms to members with low per capita gross national product and weak debt-repayment capacity. It is the only MDB concessional fund dedicated exclusively to economic and social development in the region. The ADF is financed by periodic, voluntary contributions from donors. A major constraint in 2003 was the level of available resources for concessional lending and technical assistance, a situation that might potentially jeopardize ADB's ability to deliver its program. Donor members met on four occasions from October 2003 to May 2004 to replenish the fund and endorsed an ADF IX program of $7 billion for 1 January 2005–31 December 2008 plus additional amounts for financing foregone interest on grants. This is significantly higher than the $5.7 billion agreed during ADF VIII. Donors pledged new, shared contributions of $3.2 billion plus additional, voluntary contributions; $3.7 billion will be provided from internal resources. ADF IX grants will assist countries making the transition from conflict to peace and stability, will help combat HIV/AIDS and other infectious diseases, and will support priority technical assistance. ADF IX includes a first-ever contribution from the PRC and renewed support from Malaysia. Other Special Funds are the Technical Assistance Special Fund, the Japan Special Fund, and the ADB Institute Special Fund. ADB also manages and administers additional funds: the Japan Scholarship Program, the Japan Fund for Poverty Reduction, and the Japan Fund for Information and Communication Technology. It also channels grants provided by bilateral donors to support technical assistance and soft components of loans. In recent years, thematic trust funds focusing on gender and development, governance, poverty reduction, water, energy, and the environment were established to support technical assistance operations and selected components of loan projects. Technical assistance funded through grants or loans helps maximize ADB's development impact. Most technical assistance grants are used for preparing projects and supporting advisory activities in areas such as law and policy reform, strengthening fiscal policies and procedures, good governance, capacity building, and natural resource management. ADB has a triple-A credit rating 3 and actively mobilizes financial resources through its cofinancing operations, tapping official, commercial, and export credit sources. Assistance to its DMCs creates an enabling environment for private sector development. ADB also directly finances private sector projects to assist commercial investors and lenders. (For more on ADB financial management, see www.adb.org/About/fnncemgt.asp.)
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