Asian Development Bank
Asian Development Bank was established in 1966 with a view to finance development needs of Asia and neighboring Pacific region. The ultimate goal of ADB is to promote the region into a free from poverty area. But the fact is millions of people of this area are still fighting with poverty for survival.
Out of 67 member countries of the bank 48 are regional members and 19 are non-regional. Its head quarter is at Manila in Philippines. It has 26 country offices in member countries and 3 representative offices in Tokyo, Frankfurt and Washington. It has a total manpower of 2800 people from 59 countries. In the year 2010 ADB approved USD 17.5 billion of finance to deserving members for development and economic growth.
ADB believes that each human being has got every right to fulfill his basic needs through his work. But 1.8 billion of people in the region are living below poverty level. Asian Development Bank works in partnership with governments, specialists and other financial organizations for achieving its goal.
On the way to establish Asian Development Bank an agreement was formulated and signed by the member countries in 1966. This document is also called the ADB Charter. The major points of the charter are as follows:
- Purpose of the bank
- Functions and Membership
- Borrowing power and others
- Organization and systems of Management
- Withdrawal/Suspension of membership
- Status, Immunities, Exemptions and Privileges
- Final Provisions
- Annex A: Initial Subscription of the member countries to the Authorized Capital
- Annex B: Election of Directors
The charter came into effect on 22 August, 1966. To complement the charter, the bank generated a set of By-Laws defining rules of businesses of it. So the bank performs its operation as per the charter and the by-laws.
As per the charter the bank has a Board of Governors. Each member country has a representative in the Board of Governors and each of the governors has an alternate Governor from his/her country. The Alternate Governor is not authorized to vote in presence of the Governor.
In the Annual general Meeting the Board elects a Chairman from the Governors and the tenure of the Chairman is till the next AGM.
Powers of the Board of Governors
The Board of Governors is vested with all powers of ADB. The Board delegates its most of the powers to the Board of Directors except the following:
- Admission of new members and the conditions of such admission
- Increase /Decrease of the Bank’s authorized capital
- Suspension of a membership
- Decision of any appeal against the decision of Board of Directors regarding interpretation of the Charter
- Final decision of any agreement with other international institutions
- Election of the President and Directors of the Bank
- Determination of remuneration/salary and other terms of contract of services of the President, Directors and the alternates
- Review and approval of the audit report, balance sheet, and profit/loss of the Bank.
- Determination of reserves and net profit distribution
- Amendment of this Charter
- Termination of the Bank’s activities and distribution of assets
- Any other power as specifically mentioned for the Board in the Charter
The Board of Governors retains full authority to intervene into any matter exercised by Board of Directors. After reasonable intervals the Board may decide through voting, which countries are to be considered as developed and which are developing.
The governors and alternates are remuneration less posts. But the Bank may reimburse them reasonable money spent for attending meetings.
Procedures of the Board Meetings
The Board has to meet in an annual general meeting every year. The Board may call a meeting whenever it is felt necessary. The Board of Directors, when needs a meeting of the Board of Governors, may arrange one. When five of the member countries request, the Board of Directors may call a meeting of the Board of Governors.
A minimum, two third voting members’ presence is enough for a quorum of the meeting.
The Board of Governors is empowered to set a rule for arranging vote of the governors on a specific issue instead of a meeting.
The Board of Governors and the Board of Directors are authorized to create some subsidiary bodies if it’s felt necessary and appropriate for smooth functioning of the Bank.
Board of Directors
The Board of Directors comprises of 10 members. Seven of them are elected by regional Governors and rest three is chosen by non-regional members of the Bank. A member of the Board of Governors isn’t eligible for being a Director.
Directors are to be highly competent in Economics and Finance. Their election process is as prescribed in the Annex B of the Agreement. An alternate is chosen for each Director to represent him/her in absence of the principal. Two Directors must not be from the same nation. Similar the case is for the alternates. An alternate can participate in the meeting, but he/she can only cast his/her vote if the principal is absent.
A Director is appointed for two years and after completion he/she may be elected for another term. Till the take up of a newly elected Director, the predecessor has to continue to be in office.
Powers of the Board of Directors
In general the Board of Directors is supposed to provide direction and guideline in performing the Bank activities. To do so the Board will utilize all the powers given to it by the charter and the powers delegated by the Board of Governors. The following tasks are the specific responsibility of the Board but not limited to those.
- Preparation of the working paper for the Board of Governors
- Making decisions in accordance with the guide lines of the Board of Governors regarding loans,
- guarantees, investment in equity capital, having credit from elsewhere, presenting technical
- assistance and other functions of the bank.
- Submission of yearly accounts to the Board of Governors for approval in each AGM
- Approval of the annual budget of the Bank
Working Procedure of the Board of Directors
The Board of Directors normally carries out its duties staying at the head quarters and meets time to time as demanded by normal activities of the Bank.
A majority of members, at least two third of the total voters, fulfills the quorum for a meeting of the Board.
The Board of Governors may approve a regulation to allow a member for sending a representative to the meeting of the Board of Directors who has no representation in the board. Such representative won’t have voting power.
The President is elected by the Board of Governors. His/her term is five years. As a President takes up his/her office, can’t remain a governor or a Director or an alternate of any of them. After completion of term a President may be re-elected.
The President is the Chairperson of the Board of Directors without any voting power except deciding vote.
From legal point of view the President represents the Bank.
The President recommends one or more persons as Vice-President and the Board of Directors may appoint accordingly.
The Board of Directors determines the responsibilities and authorities of the Vice-President(s). If there is more than one V.P. one of them is designated as ranking V.P. who chairs the Board in absence of the President.
The Vice-President(s) participates in Board meetings but have no power to vote except as the acting President’s deciding vote.
The total capital resources of the Bank are divided into two parts, ordinary capital resource and special fund resource.
Ordinary capital resource comprises of authorized capital stock, borrowed fund, repayment of loans, income from loans and guarantees and other income that is not earned from any special fund.
Special fund resource is developed by the following:
- Part of paid-in capital set aside and contribution to a special fund
- Funds received to be included in a special fund
- Repaid money against loans or guarantees arranged from a special fund
- Income of any banking operation performed with above funds
- Any resource specified for a special fund
The Bank nurtures the following themes to achieve its goal of a developed and poverty free region.
- Build up capacity of the members to perform on its own
- Encounter change of climate
- Environment friendly and sustainable growth
- Gender equality in development
- Good governance
- Reduction of poverty
- Development of the private sector
- Increase cooperation among regional countries
- Develop the social conditions
- Development of urban life
Sectors of priority
Keeping the themes in mind ADB fixed its priority at the following sectors:
- Food security
- Trade and industry
- Management in public sector
- Social protection
Food scarcity in the area has compelled the Bank to shift its focus from agriculture to food. The Bank is working on multi directional food security for the developing countries.
ADB has a long history of financing for education in member countries. Till now the bank has released $ 8.2 billion as loan and grant in the sector. The developing members of the bank are striving to ensure quality education for their people and ADB is supporting their effort.
The projected energy demand of Asia and the Pacific by 2030 is just double of present. So it’s not an easy task to meet that high demand. The developing members are struggling and the bank is beside them as per its commitment for clean energy.
Financial sector of member countries is a concern of the Bank. Capital market, micro finance, SMEs and regulatory reform are assisted by ADB.
ADB extends cooperation to improve health of millions in Asia and the Pacific through betterment of management, water supply and sanitation facilities.
As a part of poverty reduction in the region ADB provides assistance in expanding information and communication technology and making IT easily accessible for the poor.
Small and medium scale enterprises play an effective role for employment generation and economic growth in developing countries. In turn the process reduces poverty. Naturally the Bank has taken steps to help this sector and to encourage regional trade within partners.
Corruption is a powerful evil in the developing countries that eats up much of the out puts of good efforts. ADB’s focus on public sector is to improve management and thus reduce corruption.
The most vulnerable section of the society in developing countries deserves some protection till now to survive. So ADB’s focus centers at this. Expansion of protection net benefits the poor and also the total society.
Transportation facility is the backbone of all development. ADB very correctly addresses this field. 24% of the bank’s total loan is spent for developing transport infrastructure in the member countries.
Safe water is most essential for survival. Such water is not easily accessible to all in the region. The Asian Development Bank cooperates its members to improve their safe water sources and to preserve all water bodies.
Partners for Development
ADB believes that partnership is very important for achieving the goals. Partnership of the Bank with international and national financial institutions may help the region to overcome the challenges and risks. The Bank has developed collaboration with World Bank, European Bank for Reconstruction and Development, European Investment Bank and many other similar organizations. It has signed memorandum of understanding or grant agreement with organizations like Global Environment Facility (GEF), Organization for Economic Cooperation and Development (OECD), World Health Organization (WHO) and World Trade Organization (WTO).
Asian Development Bank is collaborating with different UN forums for performing better in improving the region. These UN forums are ESCAP, FAO, ILO, UNAIDS, UNDP, UNICEF and some more.
ADB established effective bilateral relationship with institutions like Australian Agency for International Development (AusAID) and similar French, German and Japanese development agencies.
It has cooperation understanding with regional organizations like ESCAP and SAARC. Moreover this bank has partnerships with civil societies, academicians and researchers also.
Asian Development Bank’s mission is to help the member countries in their struggle for economic advancement.
The ultimate aim of the programs is helping the member countries to reach a well to do, modern economy. Thus each of the country would be in coherence with each other and the rest of the world.
The instruments of the programs are loans, grants, policy dialogue, technical assistance and equity investments.
In course of time ADB has become a leader in development policy making and implementation, exchange of knowledge in different forums, and publication of knowledge in print and electronic media.
The bank has gathered a group of experts in economics, sociology, engineering, gender, environmental science and many more in the organization. They are working professionally in a concert to reduce poverty and achieve sustainable growth in the region.
One of the basic strategies of Asian Development Bank is preservation of environment as the deterioration of the system affects the poor most. The symptoms of endangered environment are already visible.
It’s now agreed by all that only public sector can’t fulfill the demand of economic progress. So the advancement of private sector in developing countries is emphasized by the Bank.
From 2007 to 2010 the Bank has financed from Asian Development Fund to carry out the following:
- Construction of 34800 schools
- Training of 253000 teachers
- Construction and up gradation of 29400 kms of highways
- Water connection to 1.6 million new houses
- Electricity connection to 1.19 million new houses
- Microfinance to 1.8 million accounts
So it can be said that ADB is proceeding relentlessly to its goals of poverty free Asia and the Pacific.