During the 1950s, it was strongly felt that there should be a bank for Asia like the World Bank to meet the development needs of this region. This view was suggested for the first time at the ministerial Conference on Asian Cooperation held at Manila in December 1963. The Conference constituted a working group of experts which submitted its report to the UN Economic commission for Asia and Far East (ECAFE) at its session held at Wellington in March 1965. It was on the basis of this report that an Agreement Establishing the Asian Development Bank was drafted and adopted at the Second Ministerial Conference on Asian Economic Cooperation at Manila in November-December 1965. By January 1966, 33 countries had signed its Charter and the Asian Development Bank was set up on December 19, 1966 with its headquarters at Manila in the Philippines.
The main aim for the establishment of ADB was to supplement the work of the World Bank in Asia. Its objectives are:
- To promote public and private investment for economic development in the ECAFE region and Developing Member Countries(DMCs)
- To utilize the available resources for financing of economic development.
- To help the regional members in the coordination of their plans and policies for economic development to enable them to achieve a better utilization of their resources.
- To provide technical assistance for the preparation, financing and implementation of projects and programme for economic development, including the formulation of specific projects.
- To co-operate with the United Nations and its organs and subsidiaries, including, in particular, the ECAFE and other international institutions and organizations and national entities in the investment of development funds in the region.
- To undertake all such activities and provide such services which may fulfill the above objectives.
The membership of ADB is open to the following:
- Members of the ECAFE.
- Associated members of ECAFE.
- Other countries of the ECAFE region which are the members of the United Nations or any of its specialized agencies. It has a membership of 56 countries at present. Any country can become its member when two-third members of the Board of Governors cast their vote in its favour.
The ADB is managed by a President, Vice-President, and a Board of Governors along with an administrative staff. The President is the administrative head of the Bank. The Vice-President performs the duties of the President in his absence. Each member country nominates a Governor and an Alternate Governor to the Board of Governors. At least one meeting of the Board of Governors is held every year. The Board of Governors has delegated its executive power to the Board of Directors. The Board of Directors consists of ten members of whom seven belong to regional countries and three to non regional countries.
The Board of Directors takes all decisions relating to the Bank, passes its annual budget and presents the accounts of the Bank to the Board of Governors for approval.
There are certain functions which only the Board of Governors has to perform. They are:
a) Entry of new member.
b) Change in the authorized capital of the Bank.
c) Election of the President and administrators
d) Amendment in the Charter of the Bank.
The Bank started its operations with an authorized capital of $ 2.9 billion which was raised to $25 billion in 1992. Output of this, 50% had been contributed by Japan and the remaining by member countries. To increase its resources, the Bank issues debentures and accepts deposits from the special funds. To augment its resources further, the Bank borrows from the capital markets of the world.
The ADB performs the following functions:
1. Financial Assistance:
The Bank provides financial assistance in the form of grants & loans. It gives three types of loans: project loans, sector loans and programme loans. Project loans are tied to specific projects. Sectors loans are given to a number of related projects in a given sector. Programme loans cover more than one sector and relate to the implementation of a policy or programme for bringing about certain changes.
The Bank advances loans out of its Ordinary Funds Reserves/Ordinary Capital Reserves and Special Fund Reserve. The Ordinary Funds Reserve refers to the Bank’s ordinary capital resources OCR’s out of which direct loans are given for development projects or specific projects. For sector lending, the Bank has established a Special Funds such as the Asian Development Funds, Multipurpose Special Funds and Agriculture Special Funds.
The ADB sanctions for the following type of loans:
- To development finance institutions on the guarantee of the government.
- To small and medium enterprises on the government’s guarantee.
- To private enterprise in the form of equity and loans without government guarantee.
- To strengthen financial institutions and capital market.
- To public sector enterprises for privatization without government guarantee.
2. Technical Assistance:
The ADB also provides technical assistance to member countries out of the Technical Assistance Special Fund. The technical assistance is provided to the member in ECAFE region through their governments, agencies, regional institutions and private firms. It may be in the form of grants and loans or both.
The Bank’s technical assistance has two main objectives:
- To prepare and finance and implement specific national and/or regional development plans and projects.
- To help in the working of existing institutions and/or the creation of new institutions on a national or regional basis in such areas as agriculture, industry, public administration, etc.
3. Surveys and Research:
One of the ADB is to conduct surveys and research in order to formulate policies for the future and to promote regional economic integration.
4. Poverty Reduction:
Since the 1990s, Bank’s greater emphasis has been to promote employment and reduce poverty through improved efficiency, sustainable pro-poor economic growth and better development opportunities for the poor. In promoting economic growth, the Bank stresses the importance of increasing productivity also.
The ADB now pays more attention to human resources development, poverty reduction, social infrastructure development, urban environmental improvement and development, comprehensive economic and structural reforms, etc.