Southeast Asia

ADB’s Mekong and Southeast Asia Departments were merged in May 2006 as part of the realignment of ADB’s regional departments. The merger placed the 10 countries in Southeast Asia under a single department (Southeast Asia Department).

Southeast Asia is an economically dynamic and socioculturally diverse region. Its countries have demonstrated strong economic performance, with an aggregate gross domestic product growth rate of over 5% in 2006. They have also made progress in implementing their reform agenda, including macroeconomic management, legal and regulatory frameworks, and governance. Development opportunities and challenges are different from one country to another.

Southeast Asia is known for its success in regional cooperation and integration. Its countries, which are at different development stages and have various needs, have benefited from working together toward common development goals. ADB’s realigning regional departments and Brunei Darussalam’s joining ADB in 2006 brought new opportunities to promote regional cooperation and integration. ADB worked closely with the governments to solve development problems facing countries eligible only for Asian Development Fund (ADF) resources as well as countries eligible for ordinary capital resources (OCR), while strengthening partnership with others, including Malaysia and Singapore. ADB’s closer engagement with these countries strengthened the programming approach to promoting connectivity and competitiveness and made it more meaningful, and increased the region’s sense of community by enhancing the countries’ links with each other.

ADB provided a total of $1.8 billion in loans to countries in Southeast Asia, of which 28% was from the concessional ADF resources. Lending operations financed under the ADF and OCR were 48% higher than average lending over the past 4 years. Cofinancing of $790.4 million was mobilized for lending operations. ADB provided 59 technical assistance projects totaling $51.4 million for project preparation ($13.6 million), advisory ($27.2 million), and regional technical assistance ($10.6 million). It also processed six Japan Fund for Poverty Reduction projects for $10.4 million, two Japan Fund for Information and Communication Technology projects for almost $1.0 million, and one project of $1.0 million for Indonesia from the Asian Tsunami Fund.

Greater Mekong Subregion (GMS). Two loans for the GMS were approved: the $42 million loan for the GMS Rehabilitation of the Railway in Cambodia, and the $60 million loan to Viet Nam for the GMS Kunming–Hai Phong Transport Corridor: Yen Vien–Lao Cai Railway Upgrading Project. ADB extended 11 technical assistance projects for project preparation, and studies and advisory support for regional cooperation from the Technical Assistance Special Fund and Japan Special Fund amounting to $6 million for the GMS. Key knowledge products were also upgraded and updated, including the GMS webpage, e-newsletter, and development matrix of priority subregional projects. The GMS governments finalized the transport sector strategy study. The GMS energy strategy study commenced and is expected to be completed in March 2007. The GMS Core Agriculture Support Program was prepared for endorsement by GMS agriculture ministers in April 2007. Support for the GMS Strategic Framework for Action on Trade Facilitation and Investment was initiated in 2006.

The GMS Core Environment Program started during the year. It is a 10-year program endorsed by the GMS Environment Ministers Meeting in May 2005 and by the Second GMS Summit of Leaders in July 2005. The program supports the broad-based sustainable development of GMS countries by mainstreaming the environment in the GMS Program. The Biodiversity Conservation Corridors Initiative, which aims to establish sustainable development and management regimes in five GMS biodiversity corridor sites, is the flagship program of the core environment program. The Working Group on Environment, whose members include representatives from the environment ministries of the GMS countries, is the steering and oversight body for implementing the core environment program. The Environment Operations Center was established in Bangkok, Thailand, in April 2006 to serve as the secretariat of the Working Group on Environment. The center also coordinates and facilitates the timely and effective implementation of the core environment program in collaboration with various partners in governments, nongovernment organizations (NGOs), and local communities.

Greater synergy between the GMS and national programs and strategies has been a strategic priority of the country strategy and program papers for the Lao People’s Democratic Republic (Lao PDR) and Viet Nam, which the Board endorsed in October 2006. The strategies and programs were closely aligned with the GMS regional cooperation strategy and program update, which was approved in September 2006. The update includes an indicative lending pipeline totaling about $1.6 billion over 2007–2009. The lending program covers investments in power interconnection and transmission, subregional roads and highways, sustainable tourism development, and flood management and mitigation. The technical assistance program for the 3 years totals $16.2 million and consists of 19 projects, including 10 to prepare investment projects and 9 to support advisory, research, and coordination work. ADB also carried out a concerted program of outreach activities, including Mekong development forums in Singapore in March and in Stockholm in April 2006, which provided a venue for engaging development partners, civil society, and the private sector on specific areas of interest in the GMS program. An Agence Française de Developpement (French Development Agency)–ADB retreat was held in January 2006 to improve coordination and effectiveness of the cofinanced programs of the two organizations in the Mekong. ADB also discussed with the Australian Agency for International Development the agency’s plan to intensify its involvement in the subregion.

The GMS program continued to promote inclusive development through regional technical assistance projects. In recognition of the risks of human trafficking in the subregion, it supported a regional anti-trafficking and safe migration project in cooperation with the United Nations Inter-Agency Project on Trafficking and several NGOs. It supported capacity building of developing member country agencies to combat human trafficking. It worked with NGOs to develop safe migration initiatives and community-based referral systems. It supported research on links between loss of land, livelihoods, and unsafe migration leading to trafficking. Under another regional initiative, ADB cooperated with national research institutions to carry out in-depth research on the impacts of regional economic integration on poverty in the GMS.

Indonesia–Malaysia–Thailand Growth Triangle. The growth triangle comprises Sumatra (Indonesia), the eight southernmost provinces of Thailand, and eight states in Peninsular Malaysia, with a total population of more than 65 million. The year witnessed a substantial deepening of the relationship between ADB and the growth triangle cooperation initiative. Following their first summit in December 2005, the leaders of the countries asked ADB to help them develop a 5-year road map and action plan to rebuild dynamism and refocus the initiative. This road map was prepared and submitted for endorsement at the second Indonesia–Malaysia–Thailand Leaders’ Summit held in Cebu, Philippines, January 2007. The summit endorsed ADB’s status as a development partner of the growth triangle. The ministerial meeting in September 2006 in Selangor, Malaysia, requested ADB’s assistance in implementing the road map after its formal endorsement, including the development of flagship cooperation projects and the creation of financial mechanisms for increasing public and private investments in infrastructure and other sectors. Under a new regional technical assistance, ADB will also help the countries improve project implementation, coordination, and monitoring, and identify sectoral opportunities for private investment in regional projects.

Brunei Darussalam–Indonesia–Malaysia–Philippines East ASEAN Growth Area. ADB is the regional adviser to the growth area. At the countries’ second summit held in December 2005, a road map and action plan were endorsed for subregional cooperation. ADB helped implement the road map, in part by launching a trade and investment database. The database is an important tool for decision makers to monitor and quantify developments in the area, and to prioritize investment projects. Stakeholders can now access the database through the website of the Brunei Darussalam–Indonesia–Malaysia–Philippines East ASEAN Growth Area Facilitation Center. Cooperation in easing trade also gained momentum. Senior customs, immigration, quarantine, and security officials from the area attended the first task force meeting on customs, immigration, quarantine, and security in August 2006, organized with technical assistance from ADB and the German Agency for Technical Cooperation (GTZ). They agreed to accelerate developing the area’s cooperation framework for customs, immigration, quarantine, and security to pilot-test the implementation of ASEAN agreements on easing cross-border movement of passengers and freight across land and maritime borders.

ADB helped prepare a draft action plan for development of the transport and energy sectors. In 2007, ADB will continue to support the area’s infrastructure development (transport and energy sectors); trade facilitation (harmonization of customs, immigration, quarantine, and security; and cross-border transport facilitation); and its efforts to improve coordination and monitoring with technical assistance approved in 2006. ADB will also explore opportunities in cooperation with other donors in the areas of agro-industrial development and environmental management.

Portfolio Management

Monitoring of portfolio performance and focus on the quality of projects were intensified. Regular portfolio review meetings were held at the division, department, and country levels, and the resident missions were further empowered, including through greater delegation of loans for administration, for more intensive and on-the-ground attention to portfolio management issues and quicker response time. The Southeast Asia Department’s Portfolio Management Unit within the Office of the Director General, established in March 2005 to better coordinate portfolio management, undertakes rigorous monitoring to ensure that targets are met and issues are quickly resolved. Portfolio performance in the region significantly improved over the previous year. Disbursements amounted to $2.0 billion by the end of 2006, showing a 21% increase over 2005 while contract awards increased by 26%, reaching almost $2 billion (Table 22). The higher disbursements and contract awards are largely attributable to a considerable expansion of the Philippine portfolio (Figure 10). ADB disbursed $833.0 million in 2006, the highest annual disbursement ever to the Philippines, including $750.0 million in program loan tranches and $83.0 million in project loans (Table 22). This resulted in the first positive net resource transfer of $268.5 million from ADB to the Philippines since 1997. Performance indicators for the 21 active loans remained sound, making the Philippines portfolio one of ADB’s best, and one of the lowest proportions of projects at risk. The percentage of loans at risk in the region is much lower than the ADB-wide average.