Annual Report 2006

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ADB celebrated its 40th anniversary in 2006, looking back on 4 decades of cooperation with the governments and peoples of Asia and the pacific. This region has made tremendous progress, helping 300 million people rise out of extreme poverty.

The region continued to show impressive growth in 2006, with the people’s Republic of China and India emerging as major players in the global economy. On the other hand, about 1.9 billion people—nearly half the population of this region—still live on $2 a day or less. More than 620 million of them live in extreme poverty on $ a day or less. In this region of increasing prosperity, one in five people do not have access to safe drinking water and almost 50% do without proper sanitation. An estimated 4 million children died before reaching their fifth birthday. poverty in all its aspects remains the region’s most daunting problem.

ADB therefore remains focused on its vision of an Asia and Pacific region free of poverty. To help achieve its goal of substantially reducing poverty in the region, ADB adopted its second medium-term strategy to guide its operations from 2006–2008. Responding to emerging challenges in the region, the strategy is built around five priorities: catalyzing investment for development, strengthening inclusiveness, promoting regional cooperation and integration, managing the environment, and improving governance and preventing corruption.

ADB’s operational model was adjusted to support these priorities. In particular, since ADB cannot do everything everywhere and do it well, it identified core sectors where it will focus its operations. These sectors, in which ADB will build a critical mass of expertise, include road transport, energy, urban infrastructure, rural infrastructure, education, and financial services. The sectors have been selected based on their relevance to ADB’s broad strategic priorities, client country demands, and ADB’s track record of quality project delivery. In line with this selected focus, 73% of all public sector loans and Asian Development Fund (ADF) grants approved in 2006 were in these sectors.

To help ADB refine its longer-term goals, I convened a panel of eminent people, led by UNCTAD Secretary General Supachai Panitchpakdi, to advise ADB on key trends and development challenges in the region. The report of this eminent person’s Group is an important input to a comprehensive review of ADB’s long-term strategic framework to be conducted in 2007. The report will be discussed at the Governor’s Seminar at ADB’s 40th annual meeting in Kyoto, Japan.

At the Frankfurt meeting to review the progress of ADF IX replenishments, ADF donors noted that ADB had made significant progress in achieving some aspects of its reform agenda. They called for a closer alignment of the ADF grant framework with that of the International Development Association, and a joint debt sustainability assessment with the International Monetary Fund and the World Bank. A Board paper on proposed changes to the ADF grant framework to accommodate these recommendations will be prepared in 2007.

In 2006, ADB adopted a regional cooperation and integration strategy to fight poverty and promote growth through collective action. In an increasingly interdependent world, the new strategy will enable ADB to move beyond the stand-alone subregional programs of the past to a more strategic approach to cooperation and integration.

One area where the world’s interdependence is painfully obvious is that of greenhouse gas emissions and climate change. As Asian economies continue their rapid economic growth, their energy needs are rising sharply. This is particularly true of the people’s Republic of China and India. In 2006, ADB retained a focus on its clean energy and environment program, promoting investments in energy efficiency and further developing a carbon market initiative to provide up-front financing and technical support to clean development mechanism projects. To disseminate knowledge on these important issues, ADB joined government and nongovernment development partners in Asia to establish regional knowledge hubs.

ADB worked with other multilateral development banks to organize an International Financial Institutions Anti-Corruption Task Force that established a consistent and harmonized approach to combat corruption in the activities and operations of the institutions. This initiative led to standardized definitions of fraudulent and corrupt practices and common principles and guidelines for investigations. ADB also worked with other multilateral development banks in designing a joint investment framework for clean energy and development. ADB continued to work with its bilateral and multilateral development partners to harmonize strategies, programs, and procedures. ADB hosted the 2006 Asian Regional Forum on Aid Effectiveness to support the implementation of the Paris Declaration in Asia.

Internally, ADB made important progress in implementing its reform agenda to make the institution more relevant to the region, more responsive to the needs of its members, and more focused on achieving results. Among other things, ADB revised its private sector development framework and developed its second governance and anticorruption plan.

To better serve client countries at different stages of development, ADB worked to clearly define its separate approaches to guide its support to middle-income and weakly performing countries.

For the second year in a row, ADB increased its assistance to its developing member countries. ADB approved loans, technical assistance, and grants amounting to $8.17 billion in 2006 compared to $7.11 billion approved in 2005, and $5.34 billion approved in 2004. Mving forward, we will continue to fight poverty and inequity, promote inclusive development, and contribute to building an Asia and pacific region where all have access to the essentials of life—education, health, safe drinking water, and proper sanitation.

For 40 years, ADB has been a steadfast partner in the region’s development process. Our institution is proud to be a part of the amazing economic and social progress that has lifted hundreds of millions of people out of poverty. We look forward to working with all our members and shareholders as we take the next steps on this journey toward greater and more widely shared peace, security, and prosperity.

HARUHIKO KURODA

President and Chairman
Board of Directors