Call To Launch Financial Products

The Asian Development Bank, traditionally an institution for doling out aid, now needs to launch financial products and market them aggressively, advisers to the bank said yesterday.

A report released on the sidelines of the ADBs annual meeting in this southern Japanese city suggested that the banks Private Sector Group (PSG) be expanded.

There is a possibility that, unless the PSGs products are aligned to the market place, the ADB will be marginalised in its efforts to become a major force in promoting private-sector infrastructure, the report by an ADB/IIF Working Group said.

The IIF (International Institute of Finance) is an association of financial institutions around the world which conducted the study for the 56-member ADB to help it seek new direction in what is the worlds fastest growing region.

 

The ADB, established 30 years ago to help Asian countries in their early stages of economic development, is now getting sidelined as private capital flows overtake official aid.

Increasingly we will be marginalised and dwarfed without finding our relevance in the new environment, ADB president Mitsuo Sato said last week ahead of the Fukuoka meeting.

ADB launched the Private Sector Group in 1995 to face the new challenges in the economically diverse region. But its products still need to be improved, and it should more effectively publicise its operations, the report said.

Private flows to 29 major emerging market economies rose to a record $255 billion in 1996, more than double the level in 1992 and the flows remained strong this year, the IIF said.

Officials flows are projected to rise to $6 billion in 1997 from $1 billion last year.

The ADB should therefore shift from mere lending to providing risk guarantees, Michael Thresh of NatWest Markets and co-chairman of the working group said in the report.

It recommended raising the amounts the ADB could commit to underwriting and risk-sharing arrangements with private- as well as public-sector partners.

The group recommended that the ADB consider providing political-risk insurance supporting both equity and debt.

Members of the bank, who were meeting in Fukuoka for the second day of their three-day annual get-together, were also told the ADB should consider selling portions of its existing loan portfolio.

This could contribute to the development of a secondary market in Asian private-sector infrastructure project debt, the report said.

The recommendations, if implemented, would signal a dramatic turnaround in the banks image as a bureaucratic organisation in which officials are too scared to implement changes.