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Annual Report 2004 : Part 2: Poverty Reduction : Thematic Priorities
Promoting the Role of the Private Sector in DevelopmentADB plays an important role in facilitating private sector development to support sustainable economic growth and poverty reduction in Asia and the Pacific because of its capacity to provide both public and private sector operations in a complementary way. This enables ADB to work with governments to increase opportunities for private sector involvement in the economy in an integrated manner. ADB supports private sector development through policy dialogue; by support for institutional, legal, and regulatory reforms; by increasing the availability of financial services; by creating opportunities for private sector participation in projects; by catalyzing private investment through direct financing and risk mitigation under guarantee schemes; and by improving corporate governance. Access to finance and related services is an important concern in the region. Much of the private sector in developing countries consists of SMEs that create jobs and develop local technology. ADB support to SMEs in 2004 included policy interventions for Bangladesh, Cambodia, and Viet Nam to assist governments in establishing the institutional framework for SME development and to improve governance, regulatory reforms, and access to credit. ADB also catalyzed private investments by providing loans and equity to institutions and funds that facilitate access to finance for SMEs. In addition, financial sector program loans were approved for Sri Lanka and Viet Nam to reform and strengthen financial markets and to increase the availability of financial products and services, especially long-term funds to the private sector. In the Lao PDR, ADB and the government began reforming aspects of commercial and financial legislation that impede private sector development. Similarly, ADB and the government reviewed the framework for industrial standards to support the implementation of consistent quality standards. In line with ADB's strategic objective to increase and broaden the flow of capital into more countries, equity investments and private sector loans were approved for six countries compared with three in 2003. Key projects in 2004 included commitments to support telecommunication facilities in Afghanistan and a newly privatized state-owned bank in Mongolia as well as support to the Philippines' Local Government Unit (LGU) Guarantee Corporation that provides protection against default to private financial institutions and other investors in LGUs. ADB also has an important role to play in facilitating publicprivate partnerships particularly at a time when the investment community lacks confidence in developing countries. For Pakistan, ADB approved technical assistance for facilitating public-private partnerships in national highway development. ADB continues to take the lead in developing innovative solutions and measures to mitigate risks and encourage private sector investments in its DMCs. An example of risk mitigation is the Afghanistan Investment Guarantee Facility approved in 2004 to provide political risk guarantees to eligible investors and financiers to facilitate private sector investment into Afghanistan. The magnitude and complexity of regional cooperation for development have led the public sector to realize that private sector resources, both intellectual and financial, need to be tapped to supply the demand for regional capacity building and infrastructure development. ADB devoted significant efforts to catalyze private sector interest in the regional cooperation programs it supports by organizing public-private sector consultations, approving technical assistance for facilitating cross-border trade and investment in the Greater Mekong Subregion and by endorsing a regional trade facilitation and customs cooperation program for East and Central Asia.
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