Shah Abdul Latif University Khairpur Mir’s

Department of Business Administration

Class BBA-III (A)

Subject: Financial Institutions and Markets

Teacher: Sir Asif Ali Channa

Topic:

“The Asian Development Bank”

Submitted by:

Muhammad Bilal Bugti (138)

Nadeem Ahmed Kalwar (146)

Shahzaib Mahar (166)

Muhammad Saleem Rajar (143)

Faiza Meerani (114)

 Contents
S.NO Topics Page No

1. Vision 2
2. Mission 2
3. Members 3
a. Regional 3
b. Non-regional 3
4. ADB support 4
5. The Asian Development Bank Promote 4
6. Key areas of Operation 4
7. ADB Operations 6
8. Ordinary Capital Resources 6
a. OCR Funding 7
9. Capitalization 8
10. Shareholdings 8
11. Conservative Financial Management 9
a. Lending limitation 9
b. Borrowing limitation 9
12. Asian Development Bank – Pakistan 10
13. Shareholding and Voting Power 10
14. Contributions to Special Funds Resources 10
15. ADB-Supported Projects and Programs 11
16. Non-sovereign Operations 14
17. Co-financing 15
18. Partnerships 15
19. Procurement 16
20. Goods, Works, and Related Services 16
21. Consulting Services 17
22. Operational Challenges 18
23. Future Directions 18

Group Members: Bilal, Nadeem , Shahzaib, Saleem & Faiza.

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 The Asian Development Bank
“Fighting Poverty, Improving Lives in Asia and the Pacific”

The Asian Development Bank (ADB) is an international development finance institution. It provides
loans, grants, and expertise to our developing member countries to help reduce poverty and
create a world in which everyone can share the benefits of growth.

 Founded 1966
 Total employees 3062
 Field offices 32
 Regional members 48
 Non-Regional members 19
 President Takehiko Nakao
 Headquarters Manila, Philippine

The Asian Development Bank (ADB) is an international development finance institution owned by 67
members, 48 of which are from Asia and the Pacific. Headquartered in Manila, Philippines and having
3062 employees.

Vision:
“An Asia and Pacific region free of poverty.”

Mission:
“To help its developing member countries reduce poverty and improve living
conditions and quality of life”

ADB’s vision is an Asia and Pacific region free of poverty. Its mission is to help its developing
member countries reduce poverty and improve the quality of life of their people. Despite the
region’s many successes, it remains home to approximately two-thirds of the world’s poor: 1.6
billion people who live on less than $2 a day, with 733 million struggling on less than $1.25 a
day.

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ADB Members
Regional Non-regional
 Marshall Islands
 Afghanistan  Austria*
 Federated States of
 Armenia  Belgium*
Micronesia
 Australia*  Canada*
 Mongolia
 Azerbaijan  Denmark*
 Myanmar
 Bangladesh  Finland*
 Nauru
 Bhutan  France*
 Nepal
 Brunei Darussalam  Germany*
 New Zealand*
 Cambodia  Ireland*
 Pakistan
 People’s Republic of  Italy*
 Palau
China  Luxembourg*
 Papua New Guinea
 Cook Islands  the Netherlands*
 Philippines
 Fiji  Norway*
 Samoa
 Georgia  Portugal*
 Singapore
 Hong Kong, China  Spain*
 Solomon Islands
 India  Sweden*
 Sri Lanka
 Indonesia  Switzerland*
 Taipei, China
 Japan*  Turkey*
 Tajikistan
 Kazakhstan  United Kingdom*
 Thailand
 Kiribati  United States*
 Timor-Leste
 Republic of Korea* * OECD member.
 Tonga
 Kyrgyz Republic
 Turkmenistan
 Lao People’s
 Tuvalu
Democratic Republic
 Uzbekistan
 Malaysia
 Vanuatu
 Maldives
Viet Nam

ADB is a multilateral development bank owned by 67 members, 48 from the region and 19 from
other parts of the world. ADB’s main instruments for helping its developing member countries
are policy dialogue, loans, equity investments, guarantees, grants, and technical assistance (TA).
In 2014, lending volume was $12.92 billion (113 projects), with TA at $158.88 million (256
projects) and grant-financed projects at $405.34 million (17 projects). In addition, $9.24 billion
was generated in direct value-added co-financing in the form of official loans and grants, other
concessional financing, and commercial co-financing such as B loans, risk transfer

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arrangements, guarantee co-financing, parallel loans, parallel equity, and co-financing for
transactions under ADB’s Trade Finance Program. From 1 January 2010 to 31 December 2014,
ADB’s annual lending volume averaged $12.10 billion. In addition, investment grants and TA
funded by ADB and special funds resources averaged $697.97 million and $156.69 million in TA
over the same period. As of 31 December 2014, the cumulative totals excluding co-financing
were $216.21 billion in loans for 2,729 projects in 44 countries, $6.87 billion in 256 grants, and
$3.75 billion in TA grants, including regional TA grants.

The Asian Development Bank helps to develop the region and its people
through its support for...
 Regional integration
 Inclusive economic growth
 Environmentally sustainable growth

The Asian Development Bank promote

 Private sector development/operations

 Good governance and capacity development
 Gender equity
 Knowledge solutions
 Partnerships

Key areas of operation

 Infrastructure
 Environment, including climate change
 Regional cooperation and integration
 Finance sector development
 Education

ADB is committed to reducing poverty through inclusive economic growth, environmentally

sustainable growth, and regional integration. Based in Manila, ADB is owned by 67 members,
including 48 from the region. Its main instruments for helping its developing member countries
are policy dialogue, loans, equity investments, guarantees, grants, and technical assistance.

The Asian Development Bank is a strongly capitalized, multilateral development bank dedicated
to reducing poverty in the Asia and Pacific region through inclusive economic growth,
environmentally sustainable growth, and regional integration.

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 The Asian Development Bank (ADB) was established in 1966 under the Agreement Establishing
the Asian Development Bank (Charter), which is binding upon the member countries that are its
shareholders. As of 31 December 2013, ADB had 67 members, of which 48 were drawn from
the Asia and Pacific region. Twenty-three ADB members were also members of the
Organization for Economic Co-operation and Development (OECD).

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ADB is headquartered in Manila, Philippines, and has offices worldwide including representative
offices in North America (Washington, DC), Europe (Frankfurt), and Japan (Tokyo). ADB’s staff
as of 31 December 2013 totaled 2,969 from 61 of its67 members.

ADB will aim to make substantive contributions toward its vision by focusing its support on
three strategic agendas: inclusive economic growth, environmentally sustainable growth, and
regional integration. Under ADB’s long-term strategic framework adopted in 2008, ADB defines
its role and strategic directions to guide operations through 2020, and enhances its relevance
and effectiveness in assisting its developing member countries (DMCs).

ADB Operations
To fulfill its mission, ADB promotes the economic growth and social development of its
developing member countries by means of a wide range of activities and initiatives. ADB
finances loan projects and programs in the territories of its DMCs. It also provides technical
assistance, grants, guarantees, and equity investments. ADB also facilitates policy dialogues,
provides advisory services, and mobilizes financial resources through co-financing operations
that tap official, commercial, and export credit sources. This maximizes the development
impact of its assistance. Operations are financed from ordinary capital resources (OCR) and
Special Funds. ADB’s Charter requires OCR and Special Funds to be at all times held and
used separately from each other.

Ordinary Capital Resources

ADB’s OCR operations are diverse, covering agriculture and natural resources, education,
energy, finance, health and social protection, industry and trade, public sector management,
transport and information and communication technology, multi-sector, and water supply and
other municipal infrastructure and services. OCR loans are generally reserved for DMCs that
have attained a higher level of economic development.

From its establishment through 31 December 2013, ADB had approved loans, net of
terminations and reductions, aggregating $155,491 million in its ordinary operations. As of 31
December 2013, the total amount of ADB’s loans outstanding, undisbursed balances of
effective loans, and loans not yet effective in its ordinary operations was $85,185 million.

Of this total, 92.7% represented sovereign loans, that is, loans to the public sector (member
countries and, with the guarantee of the concerned member, government agencies or other
public entities). About 7.3% represented non-sovereign loans, that is, loans to private sector
enterprises, financial institutions, and selected non-sovereign public sector entities.

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OCR Funding:
Funding sources for OCR include paid-in capital, retained earnings (reserves), and proceeds
from debt issuance. To finance its OCR lending operations, ADB issues debt securities in the
international and domestic capital markets. ADB’s debt securities carry the highest possible
investment ratings from major international credit rating agencies.

ADB’s capital structure provides the greatest levels of security for fixed-income investors.

A Strong Balance Sheet, Backed by Sovereign Shareholders Subscribed capital consists of paid-in
capital and callable capital. Paid-in capital constitutes the equity portion of capital available for
ADB’s OCR operations, including lending. This is supplemented by retained earnings and
leveraged by the proceeds of ADB’s borrowings. Callable capital is available to protect ADB’s
creditors—mainly investors in ADB’s bonds and holders of ADB’s guarantees—in the unlikely
event of large-scale default by ADB’s borrowers. ADB has never made a call on its callable
capital.
ADB’s shareholders consist of 48 developing and developed members in the Asia and Pacific
region, and 19 members from outside the region. Each shareholder is represented on the Board
of Governors, in which all of ADB’s powers are vested. As of 31 December 2013, ADB’s five
largest shareholders are Japan (with 15.7% of total shares), the United States (US) (15.6%),
People’s Republic of China (6.5%), India (6.4%), and Australia (5.8%). ADB members who are
also members of OECD hold 64.6% of total subscribed capital and 58.5% of total voting power.

Group Members: Bilal, Nadeem , Shahzaib, Saleem & Faiza.

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Group Members: Bilal, Nadeem , Shahzaib, Saleem & Faiza.
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Conservative Financial Management
ADB maintains the highest reputation as a borrower in financial markets as a result of strong
governance and conservative financial management.

Two fundamental principles underpin ADB’s strength:

 Lending limitation:
Under ADB’s lending policy, the total amount of disbursed loans, approved equity investments,
and the maximum amount that could be demanded from ADB under its guarantee portfolio
may not exceed the total amount of ADB’s unimpaired subscribed capital, reserves, and surplus
(excluding special reserve).

 Borrowing limitation
Under ADB’s borrowing policy, ADB’s gross outstanding borrowings may not exceed the sum of
callable capital of non-borrowing members, paid-in capital, and reserves (including surplus).
ADB’s conservative financial management policies have consistently held its loans and
borrowings well within these limits.

ADB’s total amount of disbursed loans, approved equity investments, and the maximum
amount that could be demanded from ADB under its guarantee portfolio was equivalent to
31.1% of the lending ceiling, while ADB’s gross outstanding borrowings were equivalent to
50.0% of the borrowing ceiling.

The primary objective of ADB’s investment strategy is to ensure the optimal level of liquidity
and capital preservation. Subject to this objective, ADB seeks to maximize the total return on
investments. As a result, ADB’s liquidity portfolio is managed prudently and conservatively.
Liquid investments are held in government and government-related debt instruments, time
deposits, and other unconditional obligations of highly rated banks and financial institutions. To
a limited extent, they are also held in corporate bonds that are rated at least A–.
ADB’s liquid investments consist of 24 currencies managed in portfolios specific to a designated
purpose. The purpose of the working capital portfolios (operational cash and cash cushion
portfolios) is to manage ADB’s short-term cash flow requirements and to hold the proceeds of
the borrowing transactions pending disbursement. The discretionary liquidity portfolio is
funded by debt and is intended to provide flexibility in executing ADB’s funding program by
borrowing ahead of cash flow needs, avoid refinancing risk from a concentration of large
borrowings, and smoothen the capital market presence. The equity-funded core liquidity
portfolio ensures that ADB can meet its minimum net cash requirement by sustaining an
uninterrupted supply of funds for 18 months under normal and stress conditions. The core

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liquidity portfolio is invested to ensure that the primary objective of a liquidity buffer is met.
The portfolio has been funded by equity, and the average duration of the major currencies in
the portfolio was about 2.1 years at 31 December 2013.

Asian Development Bank - Pakistan

As a foundation member of the Asian Development Bank (ADB), the Government of Pakistan
has been working with ADB since 1966. Assistance from ADB has helped to strengthen
Pakistan’s social and environmental safeguards, integrate environmentally sustainable
measures into government projects and programs, and strengthen public communication and
information sharing with partners.

Today, ADB remains one of Pakistan’s largest development partners, having provided more
than $25 billion in loans, as well as more than $200 million in grants, as of 31 December 2014.
This funding has included 316 loans to improve Pakistan’s infrastructure and services, and to
support reforms.

ADB and the Government of Pakistan have implemented the country partnership strategy
(CPS), 2009–2013, a $4.4 billion lending program to facilitate structural change, promote
investment, and improve Pakistan’s institutional effectiveness.

In 2014, ADB approved $1.4 billion in new commitments to assist Pakistan achieve key
infrastructure development and reform targets. Cumulative disbursements to Pakistan for
lending and grants financed by ordinary capital resources, the Asian Development Fund, and
other special funds amounted to $18.81 billion.

Shareholding and Voting Power

 Number of shares held: 231,240 (2.188% of total shares)

 Votes: 270,670 (2.049% of total membership, 3.147% of total regional membership)
 Overall capital subscription: $3.35 billion
 Paid-in capital subscription: $167.49 million

Contributions to Special Funds Resources

Pakistan has contributed to the Technical Assistance Special Fund (TASF), which provides grants
to borrowing members to help prepare projects and undertake technical or policy studies.
Contributions to the TASF (committed): $2.02 million Muhammad Sami Saeed is the Director
and Gaudencio Hernandez, Jr. is the Alternate Director representing Pakistan on the ADB Board
of Directors. Werner E. Liepach is the ADB Country Director for Pakistan. The Pakistan Resident
Mission was opened in 1989, and provides the primary operational link for activities between

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ADB and the government, the private sector, civil society stakeholders, and development
partners. The resident mission engages in policy dialogue, country partnership strategy
development and programming, and portfolio management, while also acting as a knowledge
base on development issues in Pakistan. The Pakistan government agency handling ADB affairs
is the Economic Affairs Division (Ministry of Finance, Revenue, Economic Affairs, Statistics and
Privatization).

ADB-Supported Projects and Programs

ADB has committed $5.1 billion in ongoing operational funding to develop Pakistan’s energy
security, transportation infrastructure, irrigation networks, urban services, social protection
services, and reforms.

ADB is Pakistan’s largest partner in the energy sector, with energy projects comprising more
than half the ADB portfolio for the country. In 2014, ADB approved assistance packages to help
Pakistan undertake key reforms in the power sector. This included funding to ensure energy
delivery to industrial and private consumers, and to build two vital power generation plants in
Sindh Province. The Jamshoro Power Generation Project, once completed in 2018, will add
1,300 megawatts (MW) to the country’s electricity grid. Reliability of the power distribution
network is also being enhanced through the investment of $167.2 million to upgrade 284 grid
stations.
In the transport sector, the Faisalabad–Gojrawala Motorway, 58 kilometers (km) of new
roadway funded by ADB, is likely to open to traffic in 2015. In 2014, ADB approved a loan of
$195 million for the National Highway Network Development in Balochistan Project, and two
loans totaling $327 million to build the 59-km Hasan abdal–Havelian Expressway. These
projects will significantly improve regional connectivity and transport efficiency. To improve the
capacity and efficiency of Pakistan’s aged irrigation system, ADB is providing a multi tranche
financing facility (MFF) of $700 million for financing the Punjab Irrigated Agriculture Investment
Program.
Rehabilitation work on key barrages and canals is also ongoing. In 2014, ADB approved new
assistance to rehabilitate the aging Trimmu and Panjnad barrages, to improve farm incomes
through increased productivity, while reducing loss of crops and livestock due to flooding.
In Sindh Province, over 6 million people in more than 20 secondary cities suffer a lack of basic
urban services.

Here, ADB funds the public North Sindh Urban Services Corporation to ensure quality water,
sanitation, and waste management services for 1.8 million people in six smaller cities.
ADB is also helping Pakistan to expand income support to poor families. A contribution of $430
million to the Benazir Income Support Program assists the poorest and most vulnerable groups,

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particularly women, to meet their basic needs, and contribute to the country’s overall
development.

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Group Members: Bilal, Nadeem , Shahzaib, Saleem & Faiza.
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Non-sovereign Operations
As a catalyst for private investments, ADB provides direct financial assistance to non-sovereign
public sector and private sector projects in the form of direct loans, equity investments,
guarantees, B loans, and trade finance. Since its inception, ADB has approved $1.06 billion in
non-sovereign financing for 29 private sector projects in Pakistan. Total outstanding balances
and commitments of ADB’s private sector transactions in the country as of 31 December 2014
was $639.6 million, representing 8.06% of ADB’s total non-sovereign portfolio. Power and
energy infrastructure projects are among the priorities for private sector operations.
Other priorities include transport and communication, urban public–private partnerships, and
social sectors. ADB’s Trade Finance Program (TFP) fills market gaps by providing guarantees and
loans through partner banks in support of trade. The TFP has done over 10,300 transactions
supporting over $20.5 billion in trade and over 6,000 small and medium-sized enterprises since
2004. In 2014, the TFP supported $3.8 billion in trade through over 1,900 transactions. In
Pakistan, the TFP works with 11 banks and has supported over $8.9 billion in trade between
2,613 transactions. In addition to filing market gaps, the TFP’s objective is to mobilize private
sector capital/involvement in developing Asia. In Pakistan, 53.6% of the $8.9 billion in trade
supported through the TFP was co-financed by the private sector.

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Co-financing
Co-financing operations enable ADB’s financing partners, governments or their agencies,
multilateral financing institutions, and commercial organizations, to participate in financing ADB
projects. The additional funds are provided in the form of official loans and grants, other
concessional financing, and commercial financing such as B loans, risk transfer arrangements,
parallel loans and equity, guarantee co-financing, and co-financing for transactions under ADB’s
TFP.
By the end of 2014, cumulative direct value-added (DVA) official co-financing for Pakistan
amounted to $1.39 billion for 32 investment projects and $58.6 million for 44 technical
assistance projects. Cumulative DVA commercial co-financing for Pakistan amounted to $5.70
billion for 18 investment projects. In 2014, Pakistan received $719.0 million loan co-financing
from the Government of Japan, the Islamic Development Bank, and the World Bank.

Partnerships
ADB continues to be an important development partner to the Government of Pakistan. ADB
assistance has helped to build highways, farm-to-market roads, hydroelectric power plants,
transmission lines, schools, hospitals, and communication infrastructure. ADB has also
developed critical facilities for rural and urban areas, underpinning energy and food security to
lift millions of people out of grinding poverty. Working closely with other multilateral and
bilateral development agencies, nongovernment organizations, and the private sector, ADB has
extended vital support for improvements to public infrastructure and services, as well as for
capital market development.

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ADB plays a leading role in donor coordination by hosting regular meetings of heads of
agencies. These provide a forum for discussion on, and alignment of, various development
issues and initiatives.

Procurement
Share of ADB’s Procurement Contracts

Each year, ADB provides loans, grants, and technical assistance to fund projects and activities in
its developing member countries, and several billion dollars in contracts to procure goods,
works, and consulting services. Most contracts were awarded on the basis of international
competition, which is open to firms and individuals from any ADB member, regional or non-
regional.
Procurement contracts for goods, works, and related services under loan and grant operations
totaled $6.59 billion in 2013 and $8.58 billion in 2014. Cumulative procurement, as of 31
December 2014, was $135.21 billion. Procurement contracts for consulting services under
loan, grant, and technical assistance operations totaled $511.13 million in 2013 and $555.30
million in 2014.Cumulative procurement, as of 31 December 2014, was $9.98 billion.

Goods, Works, and Related Services

From 1 January 1966 to 31 December 2014, contractors and suppliers were involved in 194,667
contracts for goods, works, and related services under ADB loan and grant projects worth
$135.21 billion. During the same period, 16,035 contracts were awarded to contractors and
suppliers from Pakistan worth $12.17 billion.

Group Members: Bilal, Nadeem , Shahzaib, Saleem & Faiza.

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Consulting Services
From 1 January 1966 to 31 December 2014, consultants were involved in 45,584 contracts for
consulting services under ADB loan, grant, and technical assistance projects worth $9.98 billion.
During the same period, 1,962 contracts were awarded to consultants from Pakistan worth
$231.61 million.

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Operational Challenges
The near-term economic outlook for Pakistan has improved, with somewhat higher growth and
lower rates of inflation being flagged. In the medium to longer term, a faster and more
sustained rate of economic growth is required to generate sufficient employment for a rapidly
expanding labor force. To achieve sustained higher growth, Pakistan will need to prioritize the
implementation of structural economic reforms—including taxation and other fiscal policies—
and take action to alleviate power shortages.

Low tax revenues, in-efficient public sector enterprises, and large subsidies, have contributed to
fiscal imbalances in Pakistan. These need to be addressed to encourage private investment, and
to sustain public investment in infrastructure, education, and health.

With considerable natural resources and ample scope to grow its economy, Pakistan must look
to improve agricultural productivity, and to expand markets for the manufacturing and service
sectors.

Future Directions
In line with the strategic priorities and development plans of the Government of Pakistan, ADB
is finalizing the country operational business plan, 2015–2017. This business plan will support
the strategic proposals contained in the ADB interim country partnership strategy, 2014–2015,
and the directions anticipated in the country partnership strategy, 2015–2019.
During the 2015–2017 period, ADB will help address Pakistan’s energy sector needs through
investments and policy reforms. Assistance will also be provided to develop transport
connectivity and economic corridors, better manage water resources and irrigation, promote
urban services, and support disaster risk management. Meanwhile, ADB and the government
will seek to stimulate private sector investment through the reform of public sector enterprises,
by generating long-term finance for infrastructure, and by facilitating public–private
partnerships.

Group Members: Bilal, Nadeem , Shahzaib, Saleem & Faiza.

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