A brief history of the Asian Development Bank

BySam Ursu

A brief history of the Asian Development Bank

The origins of the Asian Development Bank, or ADB, stretch all the way back to 1956 when, following the successes of the Marshall Plan in reconstructing post-war Europe, Japan’s finance minister began talks with America’s Secretary of State to create a financing and development institute for the Asia-Pacific region. Japan even offered to provide most of the initial funding for the newly created institution, but the United States was not interested, and so the plan was shelved.

A second attempt at creating the ADB occurred in 1962 when several leading economists from Japan formed a study group to analyze the potential of creating a development bank for the Asia-Pacific region. Despite the group being helmed by Takeshi Watanabe, a senior economist with the Japanese government, with a plan to structure the ADB similarly to its structure, the World Bank initially discouraged the creation of the ADB.

However, the idea was also simultaneously brought forward at a trade conference for the Economic Commission for Asia and the Far East (CAFE, now known as UNESCAP) in 1963, where it was more warmly welcomed. An expert group was then convened by CAFE to analyze the initiative, and Takeshi Watanabe was chosen as the chairperson.

Takeshi Watanabe/Photo Credit: ADB

As American interventions in Vietnam were beginning to expand throughout the 1960s, U.S. President Lyndon B. Johnson felt that the ADB could play a role as part of America’s larger goal to assist Asia, and thus, the United States pivoted to supporting the creation of the ADB, and Takeshi Watanabe was elected as its first president in 1966.

Initially, as Japan was the driving force behind its creation and its primary founder, it was expected that the ADB’s headquarters would be in Japan. However, the ADB decided to put the matter to a vote, and nine members chose Manila in the Philippines versus eight for Tokyo. From its incorporation, ADB had 31 members, including 11 members from developed nations outside the Asia-Pacific Region. Today, the ADB has 68 members, of which 19 are from developed countries outside the Asia-Pacific region.

What is the Asian Development Bank?

The Asian Development Bank (ADB) was founded on December 19, 1966, as a regional development bank under the leadership of Japan. Its headquarters are located in Mandaluyong in the greater metropolitan area of Manila in the Philippines.

The ADB was created to be a financial institution that would be “Asian in character” as it works to promote economic growth in what remains one the poorest regions of the world.

ADB headquarters, Philippines /Photo Credit: ADB

What Does the ADB do?

The Asian Development Bank provides loans, technical assistance, grants, and equity investments to countries in the Asia and Pacific region of the world in order to promote social and economic development.

Most of the Asian Development Bank’s early work focused on increasing food production and rural development. However, following the OPEC oil crisis in 1973, the ADB responded by providing more funding for domestic energy development and offering low-interest loans to developing nations. In the 1980s, the ADB established a framework for improving cooperation with non-government organizations (NGOs) in order to better deliver social development efforts in the region. Following the Asian Financial Crisis in 1997, the ADB pivoted towards making poverty reduction a top priority.

Following the Millenium Summit of the United Nations, the ADB committed itself to helping implement the Millenium Development Goals (MDGs) in the region, increasing programs for education, gender equality, and environmental sustainability. Following the SARS epidemic in 2003, the ADB also began working to provide assistance in combating infectious diseases.

Today, the Bank focuses on six key areas that align with the UN’s Sustainable Development Goals (SDGs): education, health, transport, energy, finance, and climate change.

The ADB also works in partnership with NGOs and private companies to improve capital markets and the business infrastructure of developing countries in the region.

In 2020, ADB reported an overall portfolio of US$116.5 billion, or US$15.3 billion more than in 2019, and has awarded 6,931 development contracts with an overall value of US$10.3 billion.

Thinking about doing business with ADB? Check out DevelopmentAid’s webinar on procurement guidelines with the bank.

Who Owns the ADB?

The Asian Development Bank’s governing and ownership structure was set up from the beginning on a similar foundation as that of the World Bank in which voting is weighted in proportion to the amount of shares that each member holds in the organization.

Currently, its founding nation Japan and the United States together control approximately 30% of the shares of the Bank, with Japan being the single largest shareholder. Other major shareholders in the ADB are China (approximately 6.4%), India (6.3%), and Australia (5.7%).

The Asian Development Bank is operated by a Board of Governors which is composed of one representative from each member state. The Board then votes to choose 12 of their members to serve as the Board of Directors, with eight members coming from members from the Asia and Pacific region and the other four from non-regional members.

The Board of Governors is also responsible for electing a president who serves a five-year term as the chairperson of the Board as well as being responsible for the bank’s operations. Because Japan founded the ADB and remains the largest shareholder of the bank, every single president of the Asian Development Bank has been from Japan.

ADB logo/Photo Credit: ADB

What Does “ADB” Stand For?

ADB stands for the Asian Development Bank. This is not to be confused with the African Development Bank which usually goes by the acronym “AfDB” whereas the Asian Development Bank is simply known as “ADB”.

What are the ADB’s Goals?

According to the bank’s website, the goal of the Asian Development Bank is to build a prosperous, inclusive, resilient, and sustainable Asia and Pacific region while working to eradicate extreme poverty throughout the region.

The ADB’s goal is to maximize the developmental impact of its financial assistance through providing advisory services, financial resources (including co-financing operations, loans, and grants), equity investments, and by facilitating policy dialogues.