Strategie 148

S t r at eg i e S 1 4 8
Combating Poverty Our Objectives in the Regional Development Banks
Combating Povert y our objeC tives in the regional DeveloPment banks
Contents
1.
The Regional Development Banks

1.1 1.2 1.3 the status of the regional development banks objectives and principles of our strategy overview of the regional development banks 1.3.1 shareholder structure and financial basis 1.3.2 the special role of the rDbs 1.3.3 reform and adaptation in the rDbs
3 3 3 5 5 6 7 10 10 11 13 18 18 19 22 24 24 25 28 33 33 33 36 37
2.
Our Objectives in the African Development Bank

2.1 2.2 2.3 regional background key data our current concerns
3.
Our Objectives in the Asian Development Bank

4.
Our Objectives in the Inter-American Development Bank

5.
Our Objectives in the Caribbean Development Bank

Annex
1. the regional Development Banks

1.1 The status of the regional development banks

america, ahead of the World Bank, and is thus the main bank in the region. Caribbean Development Bank (CDB), including the Special Development Fund (SDF), with its headquarters in Barbados/ West indies. the CDB is by far the smallest rDB in which germany is a shareholder and can be classed as a sub-regional organisation.
We regard the regional development banks (rDBs) as an important element of the multilateral financial system. With their specific regional mandate and their substantial financial resources, they constitute the second pillar of the international development banking system alongside the World Bank group. as an integral part of regional governance structures, they make a major contribution to regional self-governance and thus play a part in avoiding any overstretch of the global institutions. germany has a share in the capital and the special funds of the following regional development banks:

Over the past three years, the regional development banks have together provided, on average, more than USD 15 billion in loans and grants every year equivalent to around two-thirds of the volume of commitments of the World Bank group (i.e. around USD 25 billion from the iBrD, iDa and iFC together) over the same period.
African Development Bank (afDB), including the african Development Fund (afDF), with its official headquarters in abidjan/Cte divoire, but temporarily located in tunis, tunisia. in view of the special efforts that are required to achieve the Millennium Development goals in africa, the afDB must increase in relevance in both financial and conceptual terms. Asian Development Bank (asDB), including the asian Development Fund (asDF), with its headquarters in Manila/Philippines. the asDB has a strong position in the region due to its large volume of business and, not least, its close contacts with regional member countries. Inter-American Development Bank (iDB), including the Fund for Special Operations (FSO), with its headquarters in Washington DC/USa. the iDB is the largest multilateral financial institution in Central and Latin
1. Objectives and principles of our strategy the objective of our membership in these institutions is to gear their policies in their specific region towards poverty reduction and sustainable development. this takes place within the framework of the core development policy objectives adopted by the Federal Ministry for economic Cooperation and Development (BMZ), namely to reduce poverty worldwide, build peace and bring about democracy, promote equitable forms of globalization, and protect the natural environment. We also utilise our input into the work of the rDBs as a means of contributing to the policy discourse about key political and economic trends in the region concerned. We participate in the institutional debate within the rDBs in order to:
drive institutional reform processes, with the aim of enhancing the development policy performance of the rDBs, promote rational and especially sectoral prioritisation, and thus make the comparative advantages of each regional bank more visible, further strengthen harmonisation with other donors in general and alignment with our bilateral development cooperation in particular.

longs. the post of eD is filled according to an established rotation arrangement based on the level of shareholding in the rDBs. it is important to maintain germanys strong presence on the Boards of Directors in future too, in order to utilise the specific opportunities that it offers for involvement and for exerting influence in these institutions. Strengthening the German presence. We must, firstly, make every effort to intensify the contacts between German institutions and the rDBs through more regular visits by representatives of the BMZ, the german implementing organisations, the parliamentary arena and the business community. Secondly, we must work to improve the number of German staff in the rDBs. the development and implementation of an international human resources development strategy would do much to improve german candidates prospects of success in recruitment competitions. a pilot project currently under way with the afDB has resulted in four experts from gtZ and KfW being deployed to strategic management roles within the afDB. this type of personnel linkage between bi- and multilateral development cooperation should be pursued further in future. Better alignment of bilateral development cooperation with the development cooperation undertaken by the RDBs. through the targeted contribution of our bilateral expertise (sectoral and regional), on the one hand, and by drawing on the knowledge gained from the rDBs multilateral engagement, on the other, we aim to facilitate closer alignment between these two pillars of development cooperation.
to ensure that we are able to make an effective contribution to achieving these objectives, we must gear our efforts towards the following:

Maintaining Germanys financial commitment to the RDBs and their funds. With its shareholdings, germany is one of the largest donors after the USa and Japan and is still ahead of France and the United Kingdom in some areas and can thus influence policy-making in the rDBs. For germany to be able to exert this influence in future too, it must make regular and reliable contributions to the special funds in line with its capacities (fair burden-sharing), whereby the capacities of the relevant institution must also not be ignored. Safeguarding the German presence on the Boards of Directors of the RDBs. germany has a presence, through its appointees, on all the decision-making and supervisory bodies and, as a rule, is represented on the Board of Directors by an Executive Director (ED) who speaks for the constituencies to which germany be-
a constituency is a group of several countries set up for the purpose of exercising voting powers. the composition of the constituencies in the various institutions is dealt with in more detail in the chapters on the individual development banks.
this should take place through the following specific measures

through strategic cooperation we want to utilise the rDBs leverage more systematically in the interests of bilateral development cooperation. We intend to exert greater influence over the formulation of the rDBs country programmes through alignment and coordination, and also through co-financing. Finally, we want to learn from the rDBs positive experiences and new development policy strategies, thereby drawing on best practice for the benefit of bilateral development cooperation.
if appropriate, other like-minded states) in order to form strategic partnerships on key decisions in the rDBs, e.g. in advance of the annual Meetings and negotiations on the replenishment of the special funds. The objectives and strategy elements described in this paper will shape our policies in the coming years and will be subject to further review at the appropriate time.
1. Overview of the regional development banks 1.3.1 Shareholder structure and financial basis every member country is represented on the Board of Governors, the banks highest policymaking body. the Board of Directors is responsible for the conduct of the banks general operations. the member countries are represented on the Board of Directors by an Executive Director (ED) who speaks for the constituency to which these member countries belong (in the Caribbean Development Bank, constituencies only exist among the borrowing regional members). the capital of the regional development banks comes from member country subscriptions. each members voting power on the Board of governors and Board of Directors is determined by its shareholding. Based on the liability (callable capital) assumed by their shareholders, the rDBs raise funds on the international capital markets. Due to their capitalisation (including the donors callable capital) and the reserves they have built up over the years,
Better coordination of European cooperation, thereby strengthening the European position. in the rDBs there are, for the most part, no constituencies which consist purely of eU members, making it more difficult to agree joint eU positions. However, this starting point is not an insurmountable hurdle. Our eDs are requested to consult with each other in advance of important decisions. the regular dialogue with other european capitals on rDB-related matters is being deepened. We are making efforts, not only within the constituencies, to formulate comprehensive joint strategic positions in the form of Constituency Strategy Papers, in order to coordinate the engagement of the constituency partners and focus our joint political influence more effectively. We are also making efforts to utilise coordination mechanisms with eU Member States (and,
the europeans distribution across several groups can also be seen as an advantage in certain circumstances, as the impact of pooled voting powers is increased if joint eu positions are supported by a majority in the individual constituencies. however, it must be borne in mind that the influence of the european/non-regional countries is limited overall as the regional members hold the majority of voting powers.
the regional development banks enjoy the highest credit rating (triple a), which allows them to obtain substantial low-interest loans on the market, which they can then pass on to the borrowing regional members on preferential terms. the poorest countries also benefit from loans (often known as credits) on particularly soft terms, as well as grants from the RDBs special funds. Due to the low debt sustainability of a relatively large number of countries in africa, the afDF, but also to a lesser extent the asDF, play a particularly important role as development financiers in their specific region. these funds cannot be fully self-financing due to their soft lending conditions and non-repayable grants, and are therefore replenished by the donor countries at regular intervals, generally every three to four years. the replenishment negotiations offer us an important tool to steer the banks policies, as it is here that the overall policy direction and objectives are set. 1.3. The special role of the RDBs the sphere of action of the rDBs and their special funds is limited to the geographical region of their specific borrowing regional members. in other ways too, the rDBs have distinct features which set them apart from other globally operating multilateral financial institutions such as the World Bank, albeit to varying degrees:

also provide most of the personnel. this creates regional ownership which is important in development policy terms. Well-performing rDBs with which the member countries can identify to a high degree the world banks for africa, asia and Latin america facilitate political dialogue, policy-making, projects and programmes which enjoy a higher level of acceptance than those controlled by external partners. this enables the rDBs to act as a catalyst from which other development institutions, including german development cooperation, can benefit. the rDBs are viewed as an important element of the regional governance system, defined as the totality of public and private institutions which regulate regional affairs on a cooperative basis. as regional financial institutions, they often work with regional political organisations, from which they are also granted specific mandates in some areas. intensive relations also exist with the UNs regional institutions, the economic and trade communities, and development organisations. the rDBs are networked with sub-regional, national and indeed global institutions in a process of conceptual and strategic discourse as well as via numerous co-financing arrangements. this embeddedness varies according to region. in this web of connections, the regional development banks can play a key role in driving the regional development agenda and further deepening regional integration.
in all the rDBs, the majority of the capital and voting power is generally held by the borrowing regional members, who
in the rDbs, a distinction is made between non-regional, non-borrowing regional and borrowing regional members. For example, the usa is the afDbs largest (non-regional) shareholder, while the largest borrowing regional member is nigeria; in the iDb, the united states is also the largest (in this instance regional) shareholder, followed by brazil and argentina as borrowing regional members. in the asDb, the usa and japan (nonregional and regional respectively) top the list of shareholders, while the largest borrowing regional member is China. more detailed information can be found in the chapters on the individual rDbs.
Over their many years of operations, the rDBs and their staff most of whom come from the region concerned have built up extensive knowledge and particularly close political contacts in africa, asia, Latin america and the Caribbean. their know-how and wealth of experience relate to classic social and development topics as well as to the wide range of new topics such as establishing and safeguarding the quality of public institutions (good governance). they utilise this knowledge if necessary in cooperation with the World Bank group in driving the international development agenda. The need for clear prioritisation this does not absolve the rDBs of the need to develop and utilise their comparative advantages continuously through clear prioritisation. issues which lend themselves to this process include not only topics such as regional integration, good governance or private sector promotion but also and especially pro-poor infrastructure development. the banks should also take on thematic leadership and leadership functions by acting as a lead agency in selected sectors. this must be underpinned by raising their profile as knowledge banks, by improving their analytical and practice-oriented research capacities and driving forward the development of an effective external structure (decentralisation). The relationship with the World Bank Group the rDBs role in the multilateral institutional architecture, and especially their relationship with the World Bank Group, must constantly be reviewed. an overlap of development activities, coupled with duplication of structures, can result in a weakening of the multilateral development banking systems efficiency. On the other hand, the rDBs offer specific added value for development policy, especially in terms of their potential for regional specialisation and ownership.
Building on the notion of comparative advantages, we are working for the continuous strengthening of the role of the rDBs in a performancebased and demand-driven multilateral system. in this context, the rDBs are not viewed purely as niche organisations but as specialised alternative providers of banking products and know-how for the region. However, this must not give rise to competition with the World Bank in which the banks constantly undercut each other by offering lower and lower interest rates, ever more generous terms, and increasingly low standards. instead, our approach is based on the concept of better allocation efficiency in a system of cooperation competition with the World Bank group. this means that the rDBs and the World Bank engage in conceptual, ideas-based competition and that the rDBs regional specialisation should be meaningfully enhanced by the World Banks global perspective, experience and analytical capacities. ideally, this should be reflected not only in joint cooperation and co-financing projects with the World Bank but also in the alignment and harmonisation of basic methodologies or adoption of joint standards. 1.3. Reform and adaptation in the RDBs Over the past ten years, the rDBs have undergone a radical process of reform and adaptation, which has been additionally boosted by the adoption of the Millennium Development goals. Whereas in the past, the focus was more on economic development and the financing of major infrastructure projects, the main objectives today are implementation of the Millennium Development Goals, poverty reduction and sustainable development. We also expressly welcome the rDBs endeavours to substantially enhance their development effectiveness. as part of the implementation of the Paris Declaration on aid effectiveness, a series of reforms has been initiated in this context:
creation of more effective organisations through internal reforms in order to do justice to the development requirements of the 21st century (MDgs); formulation of new policies and strategies which reflect the current level of development policy knowledge and experience; introduction of improved processes and control mechanisms in order to safeguard the quality of projects and programmes.
rDBs are seeking to define actual development outcomes as a benchmark for their work. this system is now being established at project and country level, e.g. through the incorporation of MDg and PrSP indicators into country strategy papers. this reform also represents a radical rethink in the implementation of development cooperation, replacing the traditional inputbased approach with a results-based system which has greater development policy relevance. the new debt sustainability framework to determine the share of grant financing. alongside the World Bank group (iDa), the afDB has set financial cooperation with the indebted countries in its region on a radically new footing; the asDB will follow suit. this means that the banks special funds can significantly increase the proportion of grants within the total allocation of funding: up to 44 per cent for afDF X, and up to 21 per cent for asDF iX. For example, 29 out of the 38 poorest countries in sub-Saharan africa will now receive grants instead of loans, and for 26 of these countries, afDF assistance will be in the form of grants only (i.e. 100 per cent). the models applied by the afDB and asDB are based on the new debt sustainability framework developed by the World Bank/iMF, thereby ensuring general uniformity of the system while permitting rDB-specific differences. the models are only now being trialled and are open to further adjustment. We take the view that this new policy, which provides for an appropriate mix of loans and grants, will allow the debt problem to continue to be addressed consistently in the spirit of the HIPC initiative, with a precise analysis of poor countries capacities to repay loans
this is an ongoing reform process which will require further implementation in the coming years. emphasis should be placed on the following aspects as they illustrate the relevance of the new policies:

Performance-based allocation framework for partner countries. this system, which was only recently introduced, distinguishes between partner countries on the basis of their performance in the reform process and establishes positive incentives for reforming countries. From an identical starting position (poverty level), good performers receive substantially more loans/grants than bad performers. Classification in a country category is based on a comprehensive assessment of the countrys policies (governance) and a review of the banks current country portfolio. this new allocation framework matches shareholders commitment to taking a more critical and selective approach to country allocations in future, in order to enhance the effectiveness of resource allocation. Results-based management. in this medium- to long-term reform process, the
in the afDb, for example, a distinction can be made to a maximum factor of .
by comparison, the figure for iDa is 8 per cent.
now and in future being adopted as the basis for the terms on which funding is delivered. afDB and asDB, in concert with the World Bank group, are thus taking on a lead role in the further development of financial systems geared towards debt relief. Further development of financial instruments. the rDBs largely base their financing operations on investment projects. With the continual improvement in the macroeconomic and budgetary framework conditions (budget control) in the partner countries, however, there are increasing opportunities to participate in new joint financial instruments (basket financing and budget support). the policy-based operations to support comprehensive policy and sector reform programmes, including legal, regulatory and institutional reform, will thus increase in importance in future, while the proportion of project-based investment funding will decrease. We welcome this development because it will strengthen joint approaches by the major multilateral actors. However, to enhance the effectiveness of resource allocation, it is essential to align allocation to borrowing countries performance in the reform process, and to apply this approach rigorously. the instruments to verify the development outcomes of these policy-based operations require further refinement, and new instruments are currently under discussion. at the same time, the rDBs are endeavouring, by means of the innovative financial instruments mentioned and a more flexible and client-oriented lending policy, to maintain their attractiveness in
the middle-income countries (MICs) (e.g. China, india and Brazil), where the commercial banking sector is increasingly gaining in competitive significance. in asia and Latin america in particular, statesector borrowers are increasingly turning to private commercial banks, with the result that the rDBs are losing market shares especially in relation to infrastructure loans. So what we expect from the asDB and the iDB in particular from now on are future-oriented strategies which reflect the need to redesign banking products specifically for the MiCs. Local currency lending and the granting of loans to sub-national entities are initial steps which have been taken in the right direction.

Harmonisation and coordination with other donors. against the background of the Paris Declaration on aid effectiveness, a key concern is to give greater priority to principles such as ownership (i.e. partner countries exercise effective leadership in their development process), alignment (i.e. donors base their overall support on partner countries national development strategies, institutions and procedures), and managing for development results (i.e. managing resources and improving decision-making for results). the rDBs are thus involved in the development of more streamlined procedures in the practical cooperation with partner countries. the initial focus here is on harmonising the criteria governing financial management and government procurement in the context of donor financing. the rDBs are therefore seeking to cooperate more closely with the World Bank on these issues.
10
2. Our Objectives in the african Development Bank

2.1 Regional background

Sub-Saharan africa is the region where achieving the Millennium Development Goals poses the greatest challenges. Current trends indicate that only a few countries can expect to halve poverty by 2015 or achieve the health and education targets. in this region, therefore, there is a longerterm need for the continuation and expansion of the external financing provided by the donor community, in order to close the funding gaps and respond adequately to the challenges posed by the HiV/aiDS pandemic. Violent conflicts with sometimes substantial regional spillover effects, along with weaknesses in the political systems and institutions, remain key problems on this continent. economic and social development is impeded by various structural deficits, including, first and foremost, inadequate diversification of the economy and high vulnerability to exogenous shocks (climate, world market prices), inadequate framework conditions in which to improve the investment climate (legal instability, corruption, high costs due to poor infrastructure, small consumer markets and a lack of financial services), the states poor performance in public service delivery (education/ health), low rates of saving and investment, and unfavourable terms of trade. Climate change and overexploitation and poor management of natural resources, in some cases combined with high population growth, are causing the degradation of livelihood bases and thus have the potential to cause distribution conflicts as well. On the other hand, a new political dynamic is emerging which is resulting in a more diverse overall picture of africa:
the New Partnership for africa's Development (NePaD) and the african Union (aU) bear witness to the political will on the african continent to step up its own efforts in the interests of peace and development in africa. although setbacks have occurred in some conflict regions, the overall trends are positive. the number of countries which have achieved a relatively high level of political stability, peaceful changeovers of power and a clear reform orientation has increased. Furthermore, an increasing number of african countries have attained a hitherto unprecedented level of macroeconomic stability and are achieving economic growth rates higher than their rate of population growth. in 2005, growth in sub-Saharan africa exceeded the 5 per cent mark, with inflation rates dropping to an all-time low notably in those countries which are characterised by good governance and political stability.
this development is boosted by an international environment which appears to be more willing than before to make a contribution to the attainment of the Millennium Development goals. Key decisions such as the major donor countries commitment to the goal of increasing ODa to 0.7 per cent of gross national income (gNi) by 2015 and to cancel 100 per cent of multilateral debt claims on countries that have reached the completion point under the enhanced HiPC initiative are intended to flank the efforts being made by the african countries themselves. What is still required, how-
11
ever, are agreements within the WtO framework that would offer african countries better economic development prospects via trade policy.
2.
Key data

shadow. against this background, and in light of the regional challenges in subSaharan africa, the key task now is to expand the Funds lending operations. this implies an enhancement of the Banks institutional status (see goal 4). The African Development Bank Group the african Development Bank group comprises the african Development Bank (AfDB, founded in 1963), the african Development Fund (AfDF, founded in 1973) and the Nigeria trust Fund (NTF). the Bank and the Fund are multilateral financial institutions established to promote the economic development and social progress of their regional member countries (rMCs). the Bank has 77 members; the 53 regional members hold the majority share of the Banks authorised capital, i.e. 60 per cent. the Funds current membership consists of the 24 non-regional members of the Bank along with the afDB itself, the United arab emirates and South africa. Due to the political crisis in Cte divoire, the Bank is temporarily located in tunis/tunisia. the afDBs total subscribed capital stands at SDr 33 billion. With around 1000 staff (about 650 of them professionals) and an annual lending volume of SDr 2.3 billion8, the Bank is the largest African development institution. Clients the increasingly marked country differentiation described in 2.1 has prompted the Bank to classify its regional member countries in three categories for the
in its Vision of 1999, the Bank declared poverty reduction to be the overarching goal of its activities and since then has operationalised this consistently in its sector papers. For the german government too, poverty reduction is the main strategic focus for achieving the Millennium Development goals in africa (see also Program of action 2015).

The Bank's come-back the Bank has fully recovered from its institutional crisis of the early 1990s. the confidence of the financial markets and donors has been restored by the Banks very good financial indicators and its regaining of the triple a rating from all the major financial agencies. an independent evaluation carried out by the British Institute of Development Studies (2004) shows that the Bank has undergone a successful consolidation process in the last ten years and has produced comprehensive policy papers and strategies on a sound conceptual basis for all key areas of its operations. the german government endorses this view. the real test to come, however, is how the Bank will perform in implementing the current policies. the Bank has thus regained the capacity and the opportunity to expand its role as a development bank on the african continent and to step out of the World Banks
on the organisational structure, see Chapter the ntF will not be dealt with in more detail here as it is irrelevant in terms of its lending volume. 8 annual average for the period 00 0, including hiPC
1
purposes of political and economic evaluation and the country portfolio reviews. analysis of the three categories shows that Group A countries have achieved significant improvements in their economic performance. the challenge here is to consolidate the reforms and utilise these macroeconomic successes in the interests of poverty reduction. in Group B, on the other hand, the structural reforms need to be implemented more fully and stronger growth incentives established. Group C is trailing far behind. in these countries, it has not yet been possible to implement reforms, and in many cases, the primary task is to stabilise the conflict countries through special programmes and identify solutions to clear the arrears that have accrued on earlier loans.

is based on a country-specific debt sustainability analysis. Under afDF X, it was agreed that 29 out of the 38 afDF countries will in future receive grants instead of loans, and that for 26 of these countries, afDF assistance will be in the form of grants only (i.e. 100 per cent). the Bank prioritises infrastructure investment, specifically transportation, water, and energy, and the financial sector. More than 50 per cent of its resources flow to the North african region. the Fund focusses its cooperation on rural development/agriculture and the social sector (education, health), with one-third of the funding going to West africa, one-third to east africa, and the final one-third being apportioned between Southern and Central africa.

The Bank's operations the Bank is financed from equity capital and from funds it raises on the capital market. By contrast, the Fund has to finance its projects primarily from contributions from the non-regional member countries, from returns and, to a lesser extent, from profit transfers from the Bank. In total (1967 2005), the afDB group has provided more than SDR 36.7 billion in development funding to its regional member countries.
Whereas the afDB currently restricts its lending at near-market conditions to 15 creditworthy middle-income countries (MiCs), the Fund provides concessional loans and grants to the poorest countries in africa. the proportion of grants provided
The increasing importance of the Fund Due to the considerable increases achieved at the replenishment negotiations0, the Funds operations have been substantially expanded. this situation contrasts with developments at the Bank its regular operations have declined due to the current low interest rates on the international capital markets, which have opened up alternative financing options for the afDB countries. as a result, the relative importance of the afDF instrument is increasing, with 60 per cent of total commitments being channelled through the Fund in 2005. the afDF is therefore becoming more important for the continent, also due to the low debt sustainability of the sub-Saharan african countries. However, the afDFs available financial resources amount to just 25 30 per cent of the iDas africa operations, and
Group A close to satisfactory: benin, burkina Faso, Cameroon, ethiopia, gambia, ghana, lesotho, mali, mauritania, mozambique, senegal, tanzania, uganda and Zambia; Group B somewhat satisfactory: Cape verde, Central african republic, Chad, Djibouti, eritrea, guinea, kenya, madagascar, malawi, niger, nigeria, rwanda and sao tome & Principe; Group C unsatisfactory: angola, burundi, Comoros, Congo, DrC, Cte divoire, guinea-bissau, sierra leone, sudan, togo and Zimbabwe.
0 afDF iX: +8% and afDX iX: +%
1
the World Bank group continues to maintain its clear thematic leadership in africa. Compared with the other regional development banks in asia and Latin america, too, the afDB is the smallest bank in terms of its lending operations. germany's involvement germany has been a member of the Bank since 1983 and holds a 4.1 per cent share of the Bank's capital, making it the largest European shareholder. germany has been a founding member of the Fund since 1973. the tenth replenishment of the Fund (afDF X) for the period 2005 2007 has a volume of SDr 3.6 billion. germanys share in afDF X is 6.6 per cent, making germany one of the five largest contributors and enabling it to exercise a considerable influence on the Funds policy and general operations.
With its policies geared towards poverty reduction and the promotion of sustainable economic growth, the afDB thus enjoys our full support. We are working to ensure that the afDB group plays an active role in the implementation of the MDgs. in this context, we also focus on the obligation inseparable from the MDg process to enhance the quality and effectiveness of development cooperation. associated fields of activity for the BMZ include the development of banking policy guidelines and pro poor project design.
Identifying the Banks comparative advantages, taking on thematic leadership
germanys influence is also strengthened as a leading member of one of the Banks constituencies. the high degree of agreement with the other three members of our constituency (United Kingdom, Netherlands and Portugal) on almost all major issues concerning development policy and bank policy means that the constituency is able to play an important role in the Board of Directors.
We believe that an important aspect of policy implementation is to make the Banks comparative advantages more visible in future. Only in this way can the Bank hold its own against the competition from the World Bank group and take on thematic leadership on selected issues. We will therefore continue to monitor and steer Bank policy in this respect. in the german governments view, based on experience to date and in light of political sensitivity and the economic and regional importance of the themes, the following topics are suitable for (potential) thematic leadership:

2.
Our current concerns
Political stability, social development and sustainable economic prosperity on our neighbour continent are of key concern to europe.
NEPAD Initiative and Good Governance: We believe that institutional development and advice on the implementation of good governance are of crucial importance for africa and that the Bank can play an important role in this context. in many african
see also Paris Declaration on aid effectiveness (march 00) the New Partnership for Africas Development (nePaD) was launched by african leaders in 00 in order to offer the continent a new development perspective. it is the first comprehensive development initiative to be devised on the african continent itself. key elements include a commitment to african ownership of the continents development process and to good governance, the rule of law, legal stability and conflict management as essential prerequisites for development.
1
countries, the public institutions are weak and/or inefficient, with the result that the state cannot adequately perform core functions or deliver key public goods and services. this is a relatively new field of activity for the Bank, and we welcome the Banks intention to expand this area in future. From our perspective, firmly embedding the Bank in the NePaD process is therefore important in political terms, given that this is a home-grown african initiative with broad political resonance. at institutional level, with the establishment of a NePaD Support Unit in the Bank in 2004, there is now a body which is responsible internally for coordinating the Banks involvement in the NePaD process, and, externally, provides advice to the NePaD Steering Committee and the NePaD/african Peer review Mechanism (aPrM) Secretariat. in this way, the Bank can make a contribution to NePaDs successful operation. Here, the focus is on the further implementation of the Banks NEPAD mandate as lead agency in the fields of infrastructure and Banking and Financial Standards. Here, the afDB could develop synergies and enjoy the advantages of specialisation vis-vis the World Bank group, for example through systematic networking with subregional development banks (e.g. BOaD, eaDB, BDaC). Furthermore, the Bank can collaborate with the economic Commission for africa in the field of economic and corporate governance and support the aPrM as a strategic partner. Regional economic cooperation and integration: this field of activity is derived, on the one hand, from the NePaD mandate (see above) and, on the other hand, from the overarching economic significance
of this issue for africa (small markets, low level of commercial exchange, inadequate regional infrastructure, weak african regional organisations). Under afDF X, the allocation for multinational projects was increased to 15 per cent of total resources. this gives the afDB (unlike the World Bank) a political mandate and a financial platform to engage in multinational projects. in view of the massive investment required in this area, selectivity and achieving the maximum possible impact must be the guiding principles in project selection. Water: the Bank has increased its commitment to the development of africas water resources and is supporting a range of initiatives: the Banks own Rural Water Supply and Sanitation Initiative, the African Water Facility (led by the african Ministers Council on Water AMCOW) and the NEPAD Water and Sanitation Programme (including the Nile Basin Initiative). the financial requirement calculated for the rural water supply alone totals USD 15 billion to 2015. We take the view that the Bank can play a leading and coordinating role in the mobilisation of the requisite resources and in the implementation process within the framework of country cooperation. We support the Banks commitment in the water sector, not least because it is a priority of germanys bilateral development cooperation and an area in which we wish to intensify cooperation substantially (see goal 5). Conflict prevention and post-conflict management: in view of the relatively high number of (post-)conflict countries in africa and the regional impacts of fragile states, there is a specific need also in the
Primarily fiscal management, legal stability, a regulatory framework for the private sector, and anti-corruption measures.
1
Banks own interests to address this issue. the risk to investments undertaken, the value of the current project portfolio and the problem of payment arrears directly affect the (development policy) balance sheet and the Banks scope for action and, on a cumulative basis, can also have negative impacts on refinancing conditions. the development of appropriate capacities, strategies and adapted instruments is a key challenge for the Bank in future.
research: these aspects were a key point of criticism in the independent evaluation, as the task of building economic/sectoral capacities and know-how was left almost entirely to the World Bank. the afDB has also been unable, to date, to develop its own strategies on core topics such as poverty reduction and pro-poor growth in africa. in our view, these deficits must be addressed in order to enhance the Banks competitiveness. Under afDF X, it was agreed that these deficits would be addressed through the appointment of economists and sector specialists and the development of research capacities in the Banks key areas of activity. Moreover, to create synergies, cooperation with relevant regional actors (e.g. the eCa) must be institutionalised. germany is working to ensure that the Bank presses ahead with the development of these areas as a matter of priority and that the requisite funding is allocated from the annual budgets. in this context, we also expect a significant improvement in the efficiency of the recruitment process.

Completing the Banks organisational and structural reform
through the various reorganisations undertaken in recent years, the Bank has set the course for its development into an effective organisation. in our view, however, there are still some areas which need to be pursued further and driven forward:

Development of an effective external structure: Under afDF X it was agreed to speed up the decentralisation of the Banks operations and thus enhance its proximity to clients and its visibility. By the end of 2006, a total of 25 field offices had been established in priority countries. We expect the new external structure, with additional personnel and more substantial outsourcing of tasks, to bring about significant improvements in quality, e.g. as regards policy dialogue, donor harmonisation, faster processes, and quality of the portfolio. We are therefore contributing as a matter of principle to meeting the additional costs associated with decentralisation. Building knowledge management and an area for application-oriented
Streamlining management structures: the Bank is very hierarchical in terms of its organisation, with a strong focus on the President. Centralised work processes were essential for the Banks consolidation in the 1990s. However, now that the Bank has been re-established on a sound footing, we believe that a modern, decentralised management culture (with shorter and faster decision-making processes) is required. We are therefore working to ensure that appropriate measures are adopted under a new President. Development of a results-based management (RBM) institution: the Bank has
see also section .
1
initiated its transformation into an rBM institution. However, tangible results can only be expected in the medium to long term, as new processes, indicators and tools must be developed and coordinated within the framework of a global partnership. the german government emphatically supports this process and will pursue the consistent implementation of rBM.

priate physical conditions for its operations and also enhance the professionalism of the Banks personnel through new appointments.
Developing innovative instruments
The Fund's governance structure: the german government is in favour of broadening the membership structure of the Fund in favour of regional countries (strengthening african ownership). at present, South africa is the only african country to be represented in the Fund. Otherwise, africa is represented in the Fund solely by the Bank, which holds 50 per cent of the total voting power. We regard this structure as economically unsound (conflict of interests with the Bank) and politically problematical (ownership).
We welcome the fact that at the forthcoming discussions regarding the eleventh replenishment of the african Development Fund resources (afDF Xi), further consideration will be given to reform. However, we also expect an increased willingness on the part of the management, other donors and especially the regional countries to initiate change, which will also play a role in future shareholdings in the Fund. We will continue to build further alliances here, e.g. in our constituency and with South africa.

the Bank has created a number of new instruments which demonstrate its innovative capacity in relation to africa-specific solutions. they include, in particular, the Post Conflict Country Facility, the introduction of performance-based allocation, the expansion of grant funding through a new multilateral debt sustainability framework, and the introduction of a new generation of (enhanced results- and PrSP-based) country strategy papers. We welcome these new instruments because they set the technical and, indeed, the political quality of cooperation on a new footing and thus take account of the key success criteria of development cooperation (enhancing development effectiveness) in an exemplary way. However, we also believe that there is a need to develop the Banks financial instruments further. For example, the Banks operations are still firmly rooted in the classic model of project financing. the Bank only participates to a limited extent in policy-based lending (PBL), i.e. structural and sectoral adjustment programmes. a number of donors are critical towards any expansion of the Banks activities in this regard and have enforced a maximum of 25 per cent for PBL under afDF X. However, we believe that the Banks future will also be determined by its ability and willingness to participate in joint financing. as africas main bank, more pro-active participation by the afDB in the political development of PBL would be desirable: for example, the Bank should play a more visible role in determining the governance criteria within the framework of budget support.
Permanent location: the temporary relocation of the Banks headquarters from abidjan to tunis due to the crisis in Cte divoire has clearly demonstrated the need for a politically stable location for the Bank in future. in a discussion about a (new) permanent location, we will voice our support for the development of criteria which ensure that the Bank enjoys appro-
1
We therefore expect the Bank to participate in these approaches, initially under the World Banks leadership, and gather experience (and minimise risks). through the development of relevant sectoral and economic expertise and the establishment of field offices (see goal 2 above on both points), key conditions are being put in place for this process.
Finally, following the recent launch of the MDri by g8, financing is required to offset the loss of returns to the afDF resulting from debt relief, so extra funding must be provided by the donor countries (additionality) to compensate fully for this shortfall.
Expanding bilateral cooperation with the Bank Providing the requisite resources the german government is seeking closer alignment between bi- and multilateral development cooperation. this includes more intensive cooperation with the afDB in future. By funding the deployment of four german experts (since mid 2005) in strategically important areas of the Banks operations (strategic planning, budget management, water and environment), our aim is, firstly, to influence the specialist work of the Bank and, secondly, to gather experience in the deployment of personnel for future measures. Furthermore, in early 2006 we concluded a framework agreement with the Bank on future cooperation (areas, instruments). Moreover, we are seeking to engage in more intensive direct cooperation with the Bank in the form of co-financing arrangements or joint thematic work. a key prerequisite for this process is better coordination of afDB activities with donors represented in-country; this means that before preparing reports for the Board, for example, review missions/field offices must consult lead donors more systematically than before.
Measured against the MDg targets, the resources available to the Bank must be significantly increased in order to achieve visible, effective and efficient country contributions based on economies of scale. in the past, average commitments amounted to just SDr 19 million per Fund country, with average loan size of around SDr 16 million. in other words, with an average of just 1 2 projects per country, the Banks status is akin to that of a medium-sized bilateral donor. We believe that the country allocations and the level of financial contributions must increase. this means that in light of the MDgs, future replenishments must constantly grow. as a supplement to this, a greater share of the profits from the banking operations should be made available to the Fund and/or to special development initiatives. the Banks sound reserve position would allow this to occur.
multilateral Debt relief initiative (mDri)
1
3. Our Objectives in the asian Development Bank

3.1 Regional background more unstable and vulnerable to crises and conflicts. Nonetheless, in east and South asia, the proportion of the poor in the total population has steadily decreased over the past three decades. Overall, the success in halving poverty worldwide by 2015, as envisaged in the Millennium Development goals (MDgs), will largely depend on the extent to which the asian countries are able to achieve the necessary progress. the disparities are also apparent from economic indicators. gNi per capita spans a wide range, from USD 200 to USD 26,600. in 2005, overall economic growth stood at 7.4 per cent, with 8.0 per cent predicted for 2006. Yet the figures for the sub-regions vary considerably: in 2005, for example, Central asia achieved a growth rate of 10.9 per cent, compared with just 2.7 per cent in the Pacific region. Similar diversity can be noted with regard to inflation. the overall figure for 2005 was 4.0 per cent, but while inflation in taiwan stood at just 0.8 per cent and in Singapore at 1.2 per cent, the rate in Mongolia, afghanistan, Laos and many Pacific island states exceeded 10 per cent. Similarly, the level of democratisation in the asia-Pacific region also varies considerably. india, for example, has enjoyed comparatively stable democratic conditions for a long time, and recent developments in indonesia also show promise. Long-term dialogues on democracy and human rights are being conducted by various parties with China. However, the situation in Myanmar and North Korea in particular, but also in several other countries, remains highly problematical. Furthermore, corruption and a lack of efficient state administrative structures pose a
in many respects, the countries of the asia-Pacific region are extremely diverse. the region includes, for example, three of the worlds four most populous countries as well as some of the smallest island states. alongside these geographical and demographic disparities, there are also considerable variations in the levels of development, which have become even more pronounced in recent decades. Due to the ongoing globalisation process, the increase in external trade and growing financial flows, many asian countries have achieved substantial development progress which has been further accelerated by the rapid spread of information and communications technology. Countries such as india and China have established their status as regional centres of gravity and now count among the anchor countries of german development cooperation. in other asian countries such as afghanistan or timor-Leste, by contrast, the primary task is to resolve the simmering conflicts, or deal with their impacts, against the background of a low level of development. the asian crisis of 1997 shattered confidence in the regions economic development. its impacts can still be felt today and pose a major challenge to development cooperation. it has also become apparent that those countries which have been economically successful over recent decades are still suffering from major institutional weaknesses. Setbacks have occurred, notably in the field of poverty reduction. if the World Banks definition of poverty as less than USD 1 a day of income is applied, then asia is home to more than 600 million poor people, making the region even
the asian anchor countries are China, india, indonesia, Pakistan and thailand.
1
serious problem in many countries. the continued existence and in some cases the proliferation of terrorist movements also pose serious problems for the region and, ultimately, for europe as well. the sometimes very rapid economic development has also left its marks on the regions natural resources. in the conurbations in particular, environmental degradation has taken on dramatic forms. Soaring energy consumption and the resulting greenhouse gas emissions in many countries in the region exacerbate this problem and, in particular, contribute to global climate change. the destruction of tropical forests is no less damaging. Natural disasters such as the tsunami at the end of 2004, but also the more recent devastating earthquake in Pakistan and neighbouring regions in October 2005 have presented new challenges for the region. there are also health challenges, such as SarS or bird flu, as well as the spread of HiV/aiDS, to cite just a few examples.
the asDB, which was founded in 1966, has equity capital of around USD 54 billion. Due in particular to the guarantees of the donor countries, the Bank enjoys the highest possible rating on the international capital markets (triple a rating). the AsDF was set up in 1973 and is replenished regularly every four years. the asDB and the World Bank rank equally as the largest donors in the region. Members the Bank currently has 65 members, of which 47 are regional members and 18 are non-regional. the regional member countries hold the majority (around 64 per cent) of the capital. Due to the significant development progress achieved by some countries, however, the capital and voting power of the regional developing countries now lies below 50 per cent. Nonetheless, the strong presence of regional forces has resulted in a high level of identification of borrowing member countries with the Bank (ownership). this is one of the Banks comparative advantages over other institutions (as described in the introductory chapter). the largest shareholders are the USa and Japan (with 15.68 per cent each). Most of the Banks 2400 staff (including 878 professionals) come from the region, which provides a pool of local expertise and further enhances the Banks local ownership. Mandate, goals and operations the asDBs overarching objective is poverty reduction based on pro-poor, stable and sustainable economic development and social progress in the asian economies, some of which are still growing rapidly.
3. Key data The Bank Group The Asian Development Bank Group comprises:

the Asian Development Bank in the narrower sense (asDB) the Asian Development Fund (asDF) other funds, such as the Japan Fund for Poverty reduction (JFPr) and the technical assistance Special Fund (taSF)8.
on the organisational structure, see Chapter . 8 these Funds have relatively little significance compared with the bank and the asDF and will not be discussed in more detail here.
japan, australia and now south korea as an oeCD country are regional members, but are not developing countries.
0
as with the other regional banks, a distinction is made within the asDB between the financing provided from the Banks ordinary capital resources (OCr) and that provided by the Fund. the loans from the Banks ordinary capital resources are granted on near-market terms. the repayment periods are between four and 30 years. By far the majority of this lending flows into infrastructure projects, especially the transport, communications and energy sectors, but also into investment in governance and administration. AsDF loans are provided on concessional terms to the poorest member countries with limited or no debt repayment capacity. they typically carry minimal rates of interest over long repayment periods, ranging from 24 to 32 years (including an 8-year grace period). Since 2005, non-repayable grants have also been provided from the Fund, amounting to up to 21 per cent of total commitments. Whether, and to what extent, a country receives grants or loans on soft terms is currently determined by performance-based criteria (linked to reform) and other factors; in future, however, it will be determined by the countrys debt sustainability. Furthermore, performance-based criteria linked to reform are also applied for the granting of (additional) loans from the Fund over and above the basic allocation. Criteria include factors such as good governance and macroeconomic/social indicators. the Fund primarily supports social development projects such as education and healthcare, propoor growth and reduction of absolute poverty, but also aims to mitigate the impacts of civil wars and promote post-disaster reconstruction. the resources for the asDF come from member countries contributions, pledged at the replenishment negotiations which take place every four years, and from repayments of earlier loans,
which provide around half the total volume of resources. Japan is the largest contributor, providing around one-third, followed by the USa and the other developed countries. However, asian developing countries or emerging economies (e.g. China, india, Korea, Malaysia and thailand) are increasingly playing a role as contributors to the Fund. Under asDF iX (2005 2008), a USD 7 billion total replenishment of the asian Development Fund was agreed. in 2005, the Bank and the Fund approved loans worth $5.8 billion; in addition, there were equity investments, grants and technical assistance, so that the total volume of commitments stood at USD 7.4 billion, with a further USD 1.5 billion being invested in a multi-tranche financing facility for major infrastructure projects. Since their founding, the total commitments of the Bank and the Fund amount to some USD 116 billion. Within its overarching objective of poverty reduction, the Bank has now identified three pillars:

pro-poor, sustainable economic growth, inclusive social development, and effective governance policies and institutions (good governance).
these priorities represent a shift away from the earlier, almost exclusive focus on infrastructure projects towards a broader and more comprehensive approach which includes sector policy programmes. three cross-cutting themes complement these three pillars. these are, firstly, promoting the role of the private sector. this is essential in order to harness the potential of the private sector including small and medium-sized enterprises to generate growth and employment.
1
a second theme is regional cooperation and integration in asia. as well as supporting existing organisations, the Bank has formed sub-regions in which it not only promotes regional economic integration but also carries out transnational infrastructure projects in the fields of transport, energy and telecommunications. and thirdly, due to the growth policy being pursued in asia, which is especially harmful for the environment, and whose impacts are particularly visible in the major conurbations, the Bank has also identified sustainable development as a key cross-cutting theme. as well as promoting progressive environmental and social standards, the asDB has among other things set up a Facility which identifies and offers support for projects qualifying for global emissions trading. However, in light of the regions growing energy needs, particularly in middle-income asian countries (especially China and india), even more intensive efforts are required to increase the use of renewable energies and improve energy efficiency. Social standards must also be given adequate consideration in the context of sustainable development. recently, the Bank has emerged as a key partner in the reconstruction of post-conflict countries such as afghanistan and timor-Leste. the asDB also responds swiftly and comprehensively to natural disasters such as the tsunami. the asDB carries out reconstruction and development programmes in conjunction with the World Bank, other international organisations, bilateral donors and governments. Drawing on its reserves and the 2004 annual profit, the asDB established a USD 600 million tsunami Fund and provided further resources in the form of loans. an additional USD 175 million was redirected from ongoing projects and programmes to the tsunami effort. the Banks response to the major earthquake in Pakistan and neighbouring regions was also swift: it provided USD 10 million in emergency relief, partly by redirecting resources from projects that had already been approved. the Bank also established a Pakistan earthquake
Fund with an initial USD 80 million of grant funding. a loan of USD 220 million was also provided by the asian Development Fund. Challenges and reforms the diversity of borrowing member countries described above creates different needs and expectations of the Bank and its operations. While the poorer countries which mainly benefit from funding from the asDF are generally satisfied with the Banks services, other clients see a need for reform. Demand for loans from the Banks ordinary capital resources is decreasing due to the competition from the commercial banking sector, especially in the middle-income countries (MICs). to some extent, the Bank has already responded to this situation and has made its loan portfolio more flexible in recent years. today, up to 20 per cent of the volume of commitments can be allocated in the form of loans for sector or structural reforms (known as policybased/programme lending). in essence, these are a form of budget support, with borrowing member countries committing to undertaking reforms in specific sectors or areas. However, for policy-based/programme lending in particular, the Bank needs to further increase its commitment and develop its expertise. Furthermore, the Bank recently voted to allow credits and loans to be paid in selected local currencies for more developed borrowing member countries. the advantage for borrowers is that this minimises their exposure to exchange rate risk. Nonetheless, for middle-income countries, the asDB offers bundled expertise in specific areas (infrastructure) which they can make use of on a targeted basis, which often gives the asDB an advantage over the World Bank. the asDB must ensure that it maintains this lead by further developing its competences and building borrowing member countries confidence. this includes, in particular, a stronger focus as well as

sectoral prioritisation. in parallel, it must streamline its bureaucracy, especially in its lending operations, and enhance its flexibility. the Bank should also allocate its resources more equitably: at present, eight countries receive 83 per cent of the lending volume, with smaller and mediumsized countries at a disadvantage. insofar as the Bank is focussing to a greater extent on selected policy-based/programme lending in the public sector, it needs to radically overhaul and expand its private sector portfolio at the same time. the fact is that in future, many of the infrastructure projects traditionally funded by the asDB will be implemented by the private, not the public sector. Here too, new loan products are required, e.g. in lending operations for non-state or sub-state agencies, which means easing the requirement for state guarantees. in all these fields of activity, the Bank in common with the other regional banks is increasingly focussing on results-based management and development effectiveness in line with the Paris Declaration.0 evaluations have shown that there is room for improvement in both project planning and implementation. in order to improve development outcomes and donor harmonisation, greater involvement of the asDBs field offices in the borrowing member countries is required. this should be one of the key reforms addressed by the Bank. Germanys involvement germany has been a shareholder in the Bank since its founding and has a 4.331 per cent share in the capital of the asDB, with a 3.768 per cent share of the voting power. germany has joined the United Kingdom, austria, turkey and Luxembourg to form a constituency which in total controls 7.287 per cent of the votes.
at the ninth replenishment of the AsDF, germany contributed 156.5 million, amounting to 5.78 per cent of the total volume.
3. Our current concerns instability on the asian continent can have grave political, economic and social consequences for europe too. Furthermore, the MDGs can only be achieved worldwide if asia also makes sound progress. the region has the potential to do so, but it contains many conflict flashpoints as well as the largest absolute number of the worlds poor. the asDB is a key pillar for poverty reduction and the promotion of political, economic and social stability in asia. the BMZ is working to ensure that the asDB fulfils its commitments in relation to the MDgs and their implementation; in particular, in the adoption of banking policy guidelines and project approval, the BMZ seeks to ensure that these are pro poor in focus. So that the Bank can continue to play its key role in future, the BMZ will support it as it undertakes the reform projects outlined above. a key issue, in this context, is the internal reform agenda relating to results-based management. the commitment to development effectiveness is a further key element in ensuring the success of the Banks work, and its implementation must be supported and promoted. Regional integration and cooperation, extending beyond straightforward infrastructure connectivity, will crucially determine asias ongoing economic success. the european experience can make a contribution here too. Beyond these overarching issues, together with our partners in the constituency, we have agreed a number of core themes which we particularly wish to support.
0 see introduction (Chapter ).

Supporting institutional reforms
moting sustainable development. in this context, renewable energies and energy efficiency are a priority area for infrastructure development. Developing and implementing solutions which are tailored to the needs of borrowing member countries must be promoted even more vigorously, with a particular emphasis on a strategy for middle-income countries. as many programmes in the MiCs in particular require substantial funding but also a reform of the framework conditions at the same time, we are working in suitable cases for the consistent deployment of the budget support instrument, especially in concert with other donors. in this context, we stress the need, mentioned above, for a review of the Banks private sector portfolio.
in the asDB, as in the other regional banks, the BMZ has set itself the objective of supporting and monitoring the implementation of reform processes, especially as regards the outcomes and effectiveness of development. a further key element of the future reforms must focus on internal aspects within the Bank itself. Firstly, the division of responsibilities is currently unclear. this applies especially to the relationship between the Management, the Board of Directors and the President/Vice-President. Secondly, decision-making processes need to be made more transparent. early and more intensive involvement of the Board of Directors, as the body representing the shareholders, in all current business is desirable. Moreover, the BMZ is in favour of strengthening the role of field offices through their expansion and the delegation of tasks. this will enable local expertise to be utilised more effectively, especially in the preparation of country strategies, which must be linked in with national poverty reduction strategies to a greater extent. in addition, further decentralisation will embed the Bank even more effectively in the region and strengthen ownership.
Promoting cooperation with other donors and with bilateral development cooperation
the BMZ will support the asDB in these reform projects and will also actively promote them. in this context, harmonisation, coordination and cooperation with other multi- but also bilateral donors play an important role. as in all the regional banks, the BMZ does not operate alone but within the framework of its constituency and in conjunction with other european donors and like-minded states. together with our constituency, we are therefore developing a joint strategy in the form of a Constituency Strategy Paper, and we are also pursuing opportunities for more intensive cooperation with our other european partners. germany also coordinates its bilateral aid for asia with the asDB; this includes some co-financed projects.
Supporting key priorities
Infrastructure development will remain one of the asDBs core tasks for the foreseeable future. We want to work on a targeted basis to ensure that the funding allocated to this priority benefits the poor (pro-poor). an important thematic priority, in this context, is water/sanitation. the BMZ will also support the asDB, in particular, in pro-

4. Our Objectives in the inter-american Development Bank

4.1 Regional background ple) still live on less than two US dollars a day and about 15% survive on less than one dollar a day. Most of the extreme poor live in rural regions, many of them in large and relatively wealthy countries such as Mexico and Brazil. in countries such as Haiti, Nicaragua, Honduras, guatemala and Bolivia, the proportion of the population living in extreme poverty is much higher. it is currently assumed that Latin america will be successful in achieving some of the MDGs by 2015, but this is unlikely to include the goal of halving the proportion of people living in extreme poverty (MDg 1). Improvements in income distribution and access to services and basic infrastructure are critical factors without which the poverty reduction targets cannot be achieved in Latin america; the same applies to more stable economic development and a reduction in the levels of crime, which have reached alarming proportions throughout the region. Formally, all the Latin american countries with the exception of Cuba are now democracies. However, the lack of broad-impact (pro-poor) economic recovery coupled with continued and widespread corruption has disappointed large sections of the population and contributed to a loss of legitimacy on the part of the state and government. in some countries, this has led to social protests and unrest, and even government crises. to some extent, however, these conflicts have helped to strengthen democratic rules. recent election results indicate a shift towards more socially-oriented policy models, although these have yet to be translated into practice, or have not yet proved their worth. the pressure on natural resources in the region has further increased. Protecting global environ-
In macroeconomic terms, the Latin american and Caribbean region has developed positively in recent years. as early as the 1990s, key macroeconomic indicators were generally improving. the majority of the regions countries now belong to the middle-income countries (MICs), albeit the lower MiCs in most cases. after the financial and economic crisis in the late 1990s, which persisted until 2003 in many countries, the regional economy has stabilised and generally recovered, aided by external factors, notably the positive development of raw material prices and the more stable situation on the world financial markets. at internal level, lower budget deficits, falling exchange rates, moderate inflation and improvements in public finances have exerted a positive influence. Latin americas economic growth has steadily increased from 0.5 per cent (2002) to 5.6 per cent in 2004, remaining relatively stable at 4.3 per cent in 2005. this growth is underpinned to a substantial and increasing extent by private national and international corporations. Latin americas competitiveness, however, is inadequate, especially compared with asia. the regions debt remains very high. the stability achieved as well as the continued economic recovery are therefore heavily dependent on interest rate developments, especially in the USa. a positive aspect is the increasing interest in regional cooperation and integration examples are the growing number and deepening cooperation of regional economic and trade communities. at the same time, in no other region of the world are social inequalities as pronounced as they are in Latin america. almost 40 per cent of Latin Americas population (i.e. about 210 million peo-

mental assets such as the amazon rainforest will continue to require substantial support in future. in view of the massive environmental problems, especially in conurbations, issues relating to environmentally compatible production methods, especially in the energy and industrial sectors, are becoming an increasing focus of attention. this must be viewed in the context of the substantial need for infrastructure expansion in individual countries, and indeed across the region as a whole. the largest MiCs in the region (e.g. Mexico, argentina and Brazil) have a particular responsibility in relation to environmental and climate protection. against this background, socially and environmentally compatible economic development, more equitable distribution of income and opportunities, the further development of democratic processes, eliminating discrimination against indigenous peoples and protecting natural resources are key factors for more sustainable development in future.
the IDB itself was founded in 1959 as the first of the regional development banks. it has its headquarters in Washington DC, USa. in terms of its capital (USD 101 billion) and volume of commitments, it is the largest of the regional development banks and for a number of years now has been the largest publicly financed donor to the Latin American and Caribbean region, ahead of the World Bank. Due in particular to the guarantees of its donor countries, the Bank enjoys the highest possible rating on the international capital markets (triple a rating). Via the FSO, a special fund established within the iDB framework, the Bank can grant concessional loans to the poorest countries in the region. the iiC, which also has its headquarters in Washington, began operations in 1989. its task is to promote the private sector, especially small and medium-sized enterprises. the MIF, founded in 1993, is administered as an independent fund by the iDB and aims to develop micro and small enterprise primarily on the basis of grants and promote the development of innovative funding concepts. the Bank group is currently undergoing an intensive reform process. as a result, it is likely to be able to respond to the main challenges in the region in an even more targeted manner in future and, at the same time, consolidate its position as a modern, demand-oriented financial institution which, in terms of its development focus, will continue to be an attractive partner for economically buoyant MiCs and the private sector as well. Mandate and objectives it is the Banks task to further economic and social development in the Latin american and Caribbean countries which are members of the Bank and encourage their cooperation. as regards the
4.
Key data
The IDB Group in transition the inter-american Development Bank group consists of:

the Inter-American Development Bank (IDB), the Fund for Special Operations (FSO), the Inter-American Investment Corporation (IIC) and the Multilateral Investment Fund (MIF).
the term the bank will also be used below.
iDb/Fso granted a total of around usD . billion in loans to latin america and the Caribbean during the 00 financial year, compared with a total of usD . billion from the ibrD/iDa.

Banks policy direction and the objectives pursued by it, a shift in focus has occurred over the last 12 years. in the 8th capital increase (iDB-8) in 1994, the Board of governors mandated the Bank to assign the highest priority to poverty reduction and social equity. this has led to the emergence of two overarching objectives for the Bank: to promote poverty reduction and social equity as well as sustainable economic growth. Members the iDB currently has 47 members (28 regional and 19 non-regional countries). the majority of the capital shares are held by the borrowing regional members (just over 50 per cent). the largest individual shareholder is the USA with a 30 per cent shareholding. the borrowers with the highest voting power are Brazil and Argentina (10.8 per cent each), Mexico (6.9 per cent) and Venezuela (5.8 per cent). the non-regional members hold just over 16 per cent of the shares in total, with Japan being the largest nonregional shareholder with just over 5 per cent. this ownership structure reflects the weight of the Latin american countries in their bank, and also demonstrates the importance attached by the USa to the Banks role in the region. a relatively new feature is the interest of Asian countries in membership of the iDB. Whereas Japan has been a member of the Bank since 1976, the Republic of Korea acceded in 2005 and is thus the newest non-regional member. the Peoples Republic of China continues to show strong interest in membership. in essence, one of the motives prompting nonborrowing countries to join the Bank is that only companies from member countries are entitled to participate in tenders for iDB contracts.
Overall, the shareholder structure has resulted in a high level of identification of regional members with the Bank (ownership), and coupled with a high level of regional expertise, is one of the Banks major comparative advantages in fulfilling its mandate. Boards as with all the other multilateral development banks, each member country is represented in the Board of Governors, the Banks highest policymaking body. the Board of Executive Directors is responsible for the Banks operations. in this body, a total of 14 Executive Directors represent the members on the basis of constituencies. the iDB has an extensive field structure, with 26 offices in the region, a representation in europe (Paris) and an office in Japan. Reforms in order to fulfil its mandate and achieve the above-mentioned objectives, the iDB embarked on comprehensive reforms of its substantive work, structures and instruments back in 1994. Over recent years, the BMZ has worked intensively to ensure that the following four priority areas were defined as the focus of the Banks work:

Reform of the social sectors with the aim of reducing poverty and eliminating social injustices; Modernisation of the State in the region, especially through consensusbuilding in the implementation of reforms involving civil society, good governance and combating corruption;
usa and Canada count as regional members.
see Chapter see Chapter

Improving the competitiveness of the Latin american and Caribbean economies within an increasingly integrated global market; Promoting regional integration.
reforms in specific policy domains or sectors. in addition, the Bank can provide loans for emergency relief in order to cushion social hardship in the event of financial crises caused by external factors. the Banks annual volume of commitments (iDB+FSO) in 2003 2005 amounted to an average of USD 6.6 billion; its total commitments since 1961 stand at around USD 138 billion. in 2003 2005, the IICs annual commitments averaged USD 233 million, and its cumulative commitments since commencing operations amount to USD 2.1 billion. Depending on their economic and social development, members receive loans from ordinary capital resources at near-market conditions, concessional soft loans from the Fund for Special Operations (FSO), interest subsidies from the intermediate Financing Facility (IFF) or grants for technical cooperation. For the allocation of concessional resources from the FSO and iFF, the iDB like other rDBs has introduced a system of performance-based allocation8. Due to the relative economic prosperity of many of the borrowing regional members, the loans at near-market conditions play by far the most significant role, while the FSO (average annual commitments of USD 500 million to five FSO countries) is relatively unimportant compared with the far larger Funds of the African Development Bank and Asian Development Bank. the iDB is economically successful. its net revenue in 2005 amounted to USD 762 million, with 53 per cent of the loan volume going to poverty reduction projects. During the first few decades of
in addition, environmental sustainability is regarded as a cross-cutting theme which should be mainstreamed in all areas of activity. the Bank has now established these objectives and priorities at strategic level. However, their practical implementation (sector policies, projects, programmes) is still not fully complete. Besides this (substantive) new focus, reforms are also under way with the aim of modernizing the organisational structure of the Bank, enhancing development effectiveness and improving processes and evaluation mechanisms. as with the other rDBs, this includes results-based management, the development of new financial instruments, and the expansion of cooperation and harmonisation with various other donors. these approaches are vigorously supported by germany, as explained in more detail below. Operations/challenges in common with the other rDBs and the World Bank, the iDB mainly provides investment loans and guarantees to finance projects in the abovementioned priority sectors. in addition, and in response to changing demand on the part of the borrowing countries, the Bank is increasingly granting loans for the purpose of structural and sectoral reforms (policy-based loans). these are primarily a form of budget support for which, in return, the borrowing countries undertake
see Chapter
at present, only the following countries qualify for the Fso and iFF: Fso - bolivia, guyana, haiti, honduras and nicaragua; iFF - surinam, ecuador, el salvador, guatemala and Paraguay. 8 see Chapter almost 0 per cent of the banks borrowing members are miCs, and per cent of lending goes to miCs.

its operations, the iDB was traditionally regarded as an infrastructure bank, and made a substantial contribution to infrastructure development in the region. With the introduction of reforms, this priority has shifted, and around half the loans granted in 2005 were allocated to reform of the social sectors, more than one-third to improving competitiveness (including transport, energy and communications), and around 15 per cent to modernisation of the state. More recently, the focus has shifted back towards infrastructure financing, primarily in response to the continuing deficits in this area0. it has been apparent for some time that the IDB is in competition with other financial institutions. as a result of the relatively high level of development and increasing stability in many borrowing countries, they increasingly have access to a range of sources of finance, both public and private. in essence, this freedom of choice is desirable from a development perspective. However, in order to bring its comparative advantage as a regional development bank to bear in future too and maintain the Banks economic base, the iDB intends to carry out further reforms of its structures and instruments with the aim of achieving demand-oriented policies. as regards its lending policy, the Banks response to the new demands is responsible flexibility of its loan instruments and portfolio. With the New Lending Framework 2005 2008 which was recently adopted to guide its lending operations, the Bank has established a sound strategy in this context. On this basis, up to around USD 2.5 billion can be deployed for policy-based loans; this is likely to amount to around 35 40 per cent of the commitment volume. Furthermore, the Bank intends to a limited extent to allow credits and loans to be paid in selected local currencies
0 it is estimated that at least per cent of regional gDP (amounting to around usD 80 billion in 00) is required annually for the expansion of infrastructure in order to bring it up to a similar level to that of korea (Wb, 00, infrastructure in latin america & the Caribbean: recent Developments and key Challenges).
for more developed borrowing member countries in future. the advantage for borrowers is that this minimises their exposure to exchange rate risk. Germanys involvement Germany has been a member of the iDB since 1976 (and the iiC since 1986) and like France, italy and Spain respectively holds 1.89 per cent of the capital shares (and the same in the iiC). germany has formed a constituency with Belgium, israel, italy, the Netherlands and Switzerland which holds 5.1 per cent of the voting power. germany and italy take it in turn to provide its executive Director. in the eighth replenishment of the FSO, germany contributed around USD 7 million, i.e. around 3.53 per cent of the replenishment volume.
4.
Our current concerns
germany and the Latin american countries have well-established historical relations based on close social and economic links. the special quality of these relations and the major importance of the IDB for economic and social development in the region form the basis for our membership of the iDB. From a development policy perspective, germanys engagement in the iDB is important for the following reasons:

through the iDB, germany has the opportunity to contribute to poverty reduction and sustainable development and thus to the achievement of the MDGs in the region, especially in middle-income countries (MiCs) with persistent poverty. germany's engagement in the iDB enables us to participate in strategically impor-

tant decision-making processes which affect the entire region, individual countries and also global public goods.

germany's engagement can also be seen as a way of supporting and contributing to regional integration and regional governance processes.
The primary objective of german engagement in the iDB is poverty reduction through the promotion of sustainable, pro-poor development.
Supporting institutional reforms
the BMZ aims in particular to support the Bank in implementing the priorities formulated on the basis of its new mandate (see above) and play a constructive part in the reform processes initiated by the Bank. in relation to this objective, German focusses its support on the following aspects:

clear improvement in country programming (better analysis of the economic and fiscal situation and the debt sustainability of the borrowing countries, improved criteria for the development success of the projects) and a stronger focus of the Banks activities on partners strategies, institutions and procedures (alignment) are, from the BMZs perspective, key prerequisites for better results in the individual financing activities. in this context, we expect the iDB to support its borrowers in formulating the requisite economic and institutional reforms and shaping regional integration in a socially compatible way. the aim here is to develop and implement targeted pro-poor growth strategies for the countries of Latin america. the requisite reforms are being supported by the BMZ and must take place in close alignment with other multilateral donors in the region. in the interests of development effectiveness and the attainment of the MDgs, the status of rural development in the Banks portfolio must be enhanced. the BMZ will in future bring its influence to bear in the Bank in order to achieve progress in this area.

Strengthening development effectiveness With substantial input from germany, the Bank has over the past two years set itself a challenging agenda with the aim of improving the effectiveness of its activities in the interests of poverty reduction and propoor growth. in this way, it aims to create a comprehensive culture of results-based management in the Bank. the agenda comprises internal reforms within the Bank as well as capacity-building for better results-based management in the borrowing countries and the regional offices.
Demand-oriented adaptation of financial instruments germany supports the Banks efforts to develop financial instruments which are flexible and demand-oriented and which facilitate cooperation with other bi- and multilateral donors. in this context, we consider it absolutely essential that the individual needs of the borrowing countries which vary considerably in terms of their size, economic capacities, level of debt, etc. are taken into appropriate account.
in light of the Paris Declaration on Aid Effectiveness in particular, the BMZ is calling on the Bank to act swiftly in implementing this agenda. a
From the BMZs perspective, the classic investment loans must continue to be one of the Banks key instruments in future too, as the need
see Chapter
0
for investment capital in the region is still very high. at the same time, the BMZ is in favour of sectoral approaches as well as budget support, which can be expanded step by step, in pace with the progress made in the partner countries. the shift of focus in the Banks lending operations toward loans for sectoral and structural reform, described above, is not without its problems, however. the proportion of policy-based loans in the total portfolio is purposely limited. although the Bank has developed guidelines for policy-based lending, clear conditions must also be formulated for lending for sectoral reforms. The measurability of development outcomes of this form of lending must also be improved. the BMZ will focus on ensuring that the reform of the financial instruments takes place in close alignment with other donors in order to improve the opportunities for joint financing. as a general principle, loans should only be granted if they do not impede sustainable debt management by the countries concerned.

based project and portfolio management, and to grant the regional offices a more pro-active role, e.g. in identifying suitable mechanisms for the implementation of major sectoral programmes.
Support for core sectoral priorities
Improving the external structure at present, a debate about reforms of the Banks external structure is under way. the responsibility of the field offices has so far largely been confined to monitoring project implementation in-country, whereas the development of strategic policies and lending programmes with the borrowing countries has been the responsibility of the Banks headquarters. this structure makes it more difficult to tailor the lending programmes to the specific conditions in-country and undermines the regional offices ownership of the reform processes initiated by the Banks headquarters. the BMZ supports the Bank in its endeavours to engage in more intensive strategic dialogue with partners incountry, notably in relation to results-
Improving environmental and resource protection improving environmental and resource protection has moved higher up the iDBs agenda recently. the Bank motivated in part by a critical public has set itself the goal of taking on regional leadership in the development of and compliance with stringent environmental and social standards. this accords with our understanding of the Banks special responsibility for protecting regional and global public goods, such as the amazon rainforest, which means that it should perform an active coordinating role in this sector.
in line with this understanding of its role, the Bank with active input from germany drafted and adopted an environmental Strategy in 2003. this identifies environmental and resource protection as a cross-cutting task which must be supported by all the Banks advisory and financing operations. the Environmental Policy adopted in late 2005 establishes binding instruments to implement this strategy. Our task is to support the Bank in operationalising this policy, especially in the context of the major infrastructure projects which the Bank is funding in the region. in relation to renewable energies and energy efficiency, too, germany will continue to give impetus to environmentally compatible develop especially the initiative for the integration of regional infrastructure in south america (iirsa) and the Plan Puebla Panam (PPP)
1
ment of the Banks activities. this is also a rational approach from an economic perspective: while the high world market price of oil which is anticipated in the medium term will benefit oil exporters such as Mexico, Venezuela and ecuador, it will impose a significant burden on the (net) oilimporting countries in the region. this makes improving energy efficiency and harnessing the substantial potential of renewable energies an attractive option. in 2004, at germanys initiative, a Strategic Partnership Agreement for Cooperation on Renewable Energy Development and Energy Efficiency was concluded between the BMZ and the iDB. the agreement aims to promote awareness of the positive development opportunities afforded by the use of renewable energies and better energy efficiency, and aims to strengthen the iDBs engagement in this area.

the top of the iDBs agenda. germany supports the Bank in its endeavours to join up its private sector operations to a greater extent and integrate the various organisational units, as far as possible, into a single, efficient entity. together with other partners, germany is working to ensure that the Bank groups private sector operations focus on those areas which are especially relevant to poverty reduction and propoor growth. With our support, the Bank must ensure that in its private sector activities too, the results-based management agenda is implemented in line with the Banks objectives.

Promoting the private sector in the interests of pro-poor growth in the coming decades, development and competitiveness in Latin America will substantially depend on the promotion of the private sector in the form of small, medium-sized and large companies. the private sector has a massive funding requirement which is generally not being met at present. Much of the private sector has little or no access to credit, especially the small and micro enterprises which are particularly important for job creation and therefore for poverty reduction and the dismantling of inequalities. the iDB group has made private sector promotion in the region one of its core tasks. However, with its poorly coordinated private sector units, it is currently not in the best position to respond to this task.
Promoting good governance / modernisation of the state although modernisation of the state / good governance has been a priority for the iDB for some years, many institutions in the state sector, society and the banking system are still too weak. recent research findings from the iDB demonstrate the key importance of effective and efficient institutions for the success of policy reforms. the BMZ therefore expects the iDB to work even more intensively on institutional capacity-building and intends to support this process.
Promoting cooperation with other donors and with bilateral development cooperation
the Bank is involved in the existing international forums on donor coordination and harmonisation; it has signed the Paris Declaration on Aid Effectiveness. the BMZ will monitor and support measures by the Bank to implement the Paris Declaration on aid effectiveness in the iDB. For example, there is still potential in the borrowing countries to improve the coordination between
against this background, the reform of the iDB groups private sector activities is currently at
as well as the iDbs Private sector Department (Pri, which mainly provides loans for major private sector infrastructure projects), the iiC and miF (see above) also provide funding for private sector activities.

the iDB and other bi- and multilateral donors. the regional offices should be given more opportunities to network in-country with other donors. the BMZs objective, in conjunction with other european members, is to make the IDB the lead agency in the cooperation with other donors in those areas in which it has a comparative advantage in specific sub-regions / countries. in turn, however, this means that it must accept the lead role of other donors in non-priority areas of activity. at the same time, the BMZ is seeking closer alignment of bilateral development cooperation with the development cooperation being undertaken by the iDB. this means supporting, in particular, reforms being undertaken by the iDB in priority areas of German development cooperation in Latin America poverty reduction, modernisation of the state, and sustainable development/nature and resource protection. Close cooperation with the iDB also via the german implementing organisations in these areas, which we regard as especially important, will also contribute to the success of bilateral cooperation.
an example of this alignment is the above-mentioned Strategic Partnership Agreement for Cooperation on Renewable Energy Development and Energy Efficiency between the BMZ and the iDB. in the further implementation of the IDBs Environmental Strategy, there is still scope for pro-active support from German bilateral development cooperation. Bilateral projects to promote environmental NgOs or environmental education in selected countries could be aligned with iDB activities to a greater extent in future. this would help to create an informed public which would demand that their governments guarantee compliance with existing standards. Finally, germanys role in the co-financing of IDB projects should also be mentioned, especially in relation to the water sector, decentralisation, and municipal development funds. the iDBs active co-financing portfolio amounts to USD 182 million, with germany being the second largest co-financier after Japan. the largest multilateral co-financier is the World Bank.
as at september 00

5. Our Objectives in the Caribbean Development Bank

5.1 Regional background contributed significantly to reducing poverty in the region. in 2005, the countries of the region achieved average growth between 1 and 5 per cent, although the figure would have been higher without the numerous tropical cyclones and ensuing damage in the region. indeed, some unaffected countries recorded very high rates of growth, notably anguilla (15.9 per cent) and trinidad and tobago (7 per cent). inflation ranged between 1 per cent (Bahamas) and 13.9 per cent (Jamaica). Per capita gNi also varies considerably, from around USD 1000 in guyana to 45 times that figure in the Cayman islands. the average for all regional member countries currently stands at USD 6100. these relatively positive figures cannot obscure the fact, however, that some of the regional member countries are among the most heavily indebted countries in the world. CDB member guyana, for example, has qualified for debt relief under the Multilateral Debt relief initiative (MDri).
the countries in the Caribbean vary widely in terms of size, population size, resources and level of development (economic and social), but they all face similar problems and are highly vulnerable to exogenous shocks:

exports concentrated on a few agricultural products (sugar, bananas, rum) and hence heavy dependence on international market and price fluctuations and preferential regulations; heavy dependence on fluctuating foreign currency revenues from tourism; limited natural resources and correspondingly high import dependence; small domestic markets that have relatively high infrastructure costs and are scarcely amenable to industrialisation; frequent natural disasters, such as tropical cyclones and volcanic eruptions.
5. Key data The Bank Group the Bank group comprises the Caribbean Development Bank (CDB) in the narrower sense, which was founded in 1969 and lends from its ordinary capital resources (OCr) and from funds it raises on the capital markets, and the Special Development Fund (SDF), set up in 1983. Various other funds such as the Venezuelan trust Fund are also administered by the CDB. Members at the present time the Bank has 25 members: 20 regional and five non-regional members
With the exception of Jamaica with 2.6 million inhabitants, all the borrowing member countries belong to the group of Small Island Developing States (SiDS; population threshold 1.5 million for each state) and their total population is around six million. However, this figure will double with Haitis agreed accession to membership of the CDB. although some of the member countries now belong to the group of middle-income countries (MICs) due to revenues from tourism and the activities of foreign corporations, this has not

(Canada, China, germany, italy and the United Kingdom). Most of the borrowing regional members are former (mainly British) colonies. a number of Caribbean territories which have not (yet) gained their independence also count formally as members. Colombia, Venezuela and Mexico are non-borrowing regional members. The CDBs largest shareholders are Jamaica and Trinidad & Tobago with 17.91 per cent each, followed by Canada and the United Kingdom with 9.63 per cent each. Haitis agreed accession poses a major challenge in both financial and personnel terms. Surinams accession is also in preparation. the Bank is making active efforts to secure other non-regional donors as shareholders; the european investment Bank, among others, is already engaged in relevant negotiations with the Bank. in the CDB too, each members voting powers are determined by its share of capital stock. the Banks statutes require that the regional members hold not less than 60 per cent of the shares; at present, regional members hold 63.75 per cent, but this is likely to change with the accession of new members. Due to the presence of particularly creditworthy donor countries among its shareholders, the Bank enjoys a Triple A credit rating. the CDBs organisational structure is similar to that of the other regional development banks. a specific feature is that only the smaller members are organised in constituencies, which means that there are five non-regional and 12 regional executive Directors. the Board of Directors meets five times a year at the Banks headquarters in Barbados. Mandate, goals and operations the CDB lends on near-market terms from its ordinary capital resources (OCr) and from funds it
anguilla, montserrat, british virgin islands, Cayman islands, turks and Caicos islands. as a result, many publications state that there are regional members and therefore members in total. see introduction, Chapter .
raises on the capital markets. Interest rates track market trends and were set at 6 per cent for the public sector and 8 per cent for the private sector during the first half of 2006, with rates being reviewed semi-annually. the repayment period is between 17 and 22 years, including a grace period of up to five years. at present, the Bank has 17 Caribbean borrowing member countries; not all of them have adopted national poverty reduction strategies as yet. as well as its banking operations involving ordinary capital resources, the CDB also has a Special Development Fund (SDF), from which it lends on concessional terms or provides non-repayable grants to the poorest member countries. the proportion of grants in the total volume of commitments is very high in the Caribbean compared with elsewhere. the interest rate is set at between 2.5 and 5 per cent, with repayment periods ranging from ten to 30 years, including a grace period of five to ten years. the decision as to whether a country receives loans or grants from the Fund, and on which terms, is determined by classification in country groups, which at present is still based primarily on per capita gross national income (gNi). However, the CDBs criteria are due to be brought into line with the debt sustainability model applied by the World Bank, the afDB and, in future, the asDB. the Fund is replenished by donor countries every five years. the replenishment negotiations for SDF Vi were concluded in October 2005. a total of USD 257.5 million is available around 40 per cent more than under SDF V. the largest contributions were provided by Canada and the UK, which each contributed USD 44 million. in addition to lending on soft conditions, the Fund can also provide grants for up to 30 per cent of total resources.

the volume of commitments since 1970 totals around USD 2.6 billion, with around USD 139 million being provided in 2005. the CDB is thus the smallest of the regional development banks of which germany is a member. the overarching goal of the CDB is poverty reduction as a contribution to the achievement of the Millennium Development goals. in 2004, a targeted strategy for this purpose was adopted by the Board of Directors. the Bank continues to support borrowing member countries in preparing Poverty reduction Strategy Papers (PrSPs). the funding provided from OCr and the SDF has traditionally been used to improve the transport and communications infrastructure and to develop the financial sector. the Bank is increasingly focussing on the avoidance and mitigation of natural disasters, to which the Caribbean is particularly prone, especially tropical cyclones. Here, the Bank provides ring-fenced financial resources and engages in technical cooperation. this is important, not least, for the tourism industry, a key sector in the Caribbean. Furthermore, the CDB has increasingly focussed on soft-sector infrastructure and the social sector in recent years, with themes such as water/ sanitation, education, health, and HiV/aiDS having greater priority. this was part of the Strategic Plan 2000 2004, which aimed to bring about a shift of emphasis towards social sectors. the new version of this Strategic Plan for 2005 2009 focusses primarily on good governance and better environmental resource management as well as on poverty reduction. a larger proportion of funding is now being allocated to regional integration and cooperation, which is especially important in the context of the Caribbeans small economies with a concentration on a few sectors. Besides the Caribbean Court of
Justice (CCJ), for which the CDB provided a relatively large sum of money in 2004, the expansion of the CARICOM Single Market, which came into operation in January 2006, will be a priority in future. in view of the low number of members which have joined to date, the Single Markets expansion is key. Overall, the Banks support for regional integration has proved indispensable, and it has established a comparative advantage through its local expertise and good contacts with governments in the region. Challenges and reforms For a long time, this relatively small institution was regarded as inefficient, a factor which, not least, prompted Frances withdrawal from the Bank in 2000. Since then, however, the CDB has initiated various internal reforms known as the Change Management Programme with the aim of making its management more effective and efficient. Various positive outcomes have already been achieved, notably zero rounds in the administrative budget. Nonetheless, both the member countries and the Banks management see a need for further reforms in this area, with a particular focus on lean management and streamlining unnecessary bureaucracy. Overall, however, the Bank has established a reputation among its partner countries as a reliable institution which is swift to respond in the event of disasters. as in the other regional banks, the CDB has been committed since 2003 to results-based management. it has also initiated performance-based allocation of funding, albeit with less emphasis on the good governance aspect than the other regional banks. Since last year, the CDB has also been formally mandated to grant policy-based loans. these are primarily a form of budget support for which, in return, the state undertakes to initiate specific policy measures/reforms, although there is no requirement for these measures to be funded by the loans themselves.

in order to hold its own against the larger international financial institutions operating in the Caribbean region and to be able to justify and expand its own role and range of activities, the CDB must in future define its comparative advantages more sharply and intensify its commitment in these areas. as well as the general comparative advantages offered by regional development banks, the CDB itself considers that its many years of experience in promoting regional integration, as well as its clear cost benefits compared with larger institutions, are its particular strengths. Germanys involvement germany has been a member of the Bank since 1989 and holds 5.77 per cent of the shares of the CDB and 5.75 per cent of the voting power the same proportion as China and italy. although germany did not participate in the fifth replenishment of the Fund (SDF V), the Federal republic rejoined the sixth replenishment (SDF Vi) following the reforms mentioned above. germanys contribution stands at USD 12.17 million (6.6 per cent of the total volume), making germany the third largest donor after Canada and the UK. as germany has scaled down its bilateral development commitment in the Caribbean substantially, its cooperation with the region now mainly takes place via the CDB. the german executive Director operates from the office of the World Banks executive Director in Washington DC.
security risks in these and other areas. From our perspective, therefore, the key concerns are poverty reduction and decreasing the regions vulnerability to exogenous shocks. Despite gratifying economic growth rates in some MiCs in the region, poverty reduction is not being achieved equally across the board; indeed, social inequalities are actually increasing. the BMZ will therefore support the CDB and the regional members in mainstreaming poverty reduction in all areas of project development. Furthermore, there must continue to be a focus on the conservation of natural resources not least in view of the regions vulnerability to natural disasters. Climate change is already making its mark on the Caribbean. given the importance of tourism as a key source of revenue in many countries in the region, protecting its natural resources (including water) is essential for economic reasons too. the BMZ supports the CDB in undertaking environmental compatibility assessments from the project planning stage onwards. Furthermore, the BMZ continues to support the CDBs private sector strategy, since the private sector, especially in the MiCs, is playing an increasingly significant role, notably in the provision of infrastructure services. the BMZ continues to support the Banks efforts in relation to internal reforms and especially the successful completion of the Change Management Programme. Other key elements of this process are results-based management and development effectiveness. in a small institution such as the CDB, harmonisation with other donors plays an important role, and the BMZ will actively support this process as well.
5. Our current concerns Stable political, economic and social conditions in the Caribbean countries will help to avert

annex
Regional Development Banks: Total subscribed capital (in USD billion) Germanys share in RDBs total subscribed capital (in %)
100 90 80 70 60 50 40 30 20 10 0 AfDB AsDB
100.95
6 5.77 5 4 3 2 1.896 1 0 AfDB AsDB IDB CDB 4.36
4.126
50.163
30.924
0.705 IDB CDB

Volume of RDB Funds (contribution agreed), cumulative, in USD billion
RDBs annual commitments, in USD billion (Average for 2003-2005)
30
26.16
AfDB AfDF IDB FSO AsDB AsDF

0.542 AfDF AsDF FSO 19732005 19732005 19602005 SDF 19832005
1.57 1.82 6.146 0.513 4.399 1.332
20 10 0
21.417
9.671
CDB 0.109 SDF 0.028
German contribution to the last replenishment of the RDB Funds (in %)
6.61 6 5.78 5 4 3 2 1 0 AfDF X AsDF IX FSO VIII 3.53
6.61
SDF VI

The RDBs sectoral commitments in % (Average for 2003-2005)
AfDB
10.01 % other
AsDB/AsDF
37.00 % transport and communications 14.80 % energy 7.40 % Water and sanitation 9.70 % law, public admin., econ. management 5.30 % agriculture, natural resources 5.10 % Finance 20.70 % other
10.19 % Water and sanitation 16.40 % energy
21.52 % transport
29.63 % Finance
12.25 % multisector
AfDF
22.70 % social sector 12.58 % Water and sanitation 3.18 % energy 17.47 % transport 19.71 % multisector 0.99 % other 23.37 % agriculture/rural development
IDB/FSO
11,47 % reform of public administration 7,34 % Financial sector reform 18,42 % other 7,46 % energy 6,94 % transport and communications 5,36 % multisector credits, pre-investments 43,01 % social investment
0
CDB/SDF
35.89 % disaster relief 6.91 % social, health, education 11.00 % other 30.31 % transport and communications 8.16 % energy, water 7.73 % Finance, industry, tourism
Commitments by country in % (Average for 2003-2005)
AfDB
22.38 % tun 11.81 % egy 9.89 % CaF 7.03 % multinational 4.08 % gab 13.19 % other 31.62 % mor
AfDF
16.39 % multinational 8.94 % DrC 7.12 % eth 5.16 % gha 5.10 % sen 5.17 % bFa 5.00 % ugD 47.12 % other
1
AsDB/AsDF
CDB/SDF
26.93 % jamaica 19.74 % india 5.51 % st. kitts and nevis 15.80 % Pakistan 9.58 % indonesia 5.29 % vietnam 6.51 % bangladesh 22.06 % other 5.68 % grenada 21.02 % Pr China 18.08 % guyana 5.49 % st. lucia 7.54 % st. vincent and the grenadines 6.54 % trinidad and tobago 24.23 % other
IDB/FSO
17.02 % argentinia 7.84 % brazil 13.75 % Colombia 17.67 % mexico
6.90 % Peru 5.06 % venezuela 31.76 % other
Published by the Federal Ministry for economic Cooperation and Development Development education and information Division Bonn Office Postfach 12 03 22 53113 Bonn germany Phone: + 49 (0) 228 99 535 - 0 Fax: + 49 (0) 228 99 535 - 35 00 Berlin Office Stresemannstrae 94 10963 Berlin Phone: + 49 (0) 30 18 535 - 0 Fax: + 49 (0) 30 18 535 - 25 01 poststelle@bmz.bund.de www.bmz.de Editors: Dr. rolf Drescher Final editing: Jutta Wagner Responsible: Dr. Julia Lehmann Hady riad Dr. Silvia Morgenroth As at: March 2007

Strategie 148

Hochgeladen von

Dokumentinformationen

Originalbeschreibung:

Originaltitel

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Strategie 148

Hochgeladen von

Copyright:

Verfügbare Formate

S t r at eg i e S 1 4 8

Combating Poverty Our Objectives in the Regional Development Banks

Combating Povert y our objeC tives in the regional DeveloPment banks

The Regional Development Banks

Our Objectives in the African Development Bank

Our Objectives in the Asian Development Bank

Our Objectives in the Inter-American Development Bank

Our Objectives in the Caribbean Development Bank

Combating Povert y our objeC tives in the regional DeveloPment banks

1. the regional Development Banks

Combating Povert y our objeC tives in the regional DeveloPment banks

Combating Povert y our objeC tives in the regional DeveloPment banks

this should take place through the following specific measures

Combating Povert y our objeC tives in the regional DeveloPment banks

Combating Povert y our objeC tives in the regional DeveloPment banks

Combating Povert y our objeC tives in the regional DeveloPment banks

by comparison, the figure for iDa is 8 per cent.

Combating Povert y our objeC tives in the regional DeveloPment banks

Combating Povert y our objeC tives in the regional DeveloPment banks

2. Our Objectives in the african Development Bank

Combating Povert y our objeC tives in the regional DeveloPment banks

Combating Povert y our objeC tives in the regional DeveloPment banks

0 afDF iX: +8% and afDX iX: +%

Combating Povert y our objeC tives in the regional DeveloPment banks

Identifying the Banks comparative advantages, taking on thematic leadership

Our current concerns

Combating Povert y our objeC tives in the regional DeveloPment banks

Combating Povert y our objeC tives in the regional DeveloPment banks

Completing the Banks organisational and structural reform

see also section .

Combating Povert y our objeC tives in the regional DeveloPment banks

Developing innovative instruments

Combating Povert y our objeC tives in the regional DeveloPment banks

multilateral Debt relief initiative (mDri)

Combating Povert y our objeC tives in the regional DeveloPment banks

3. Our Objectives in the asian Development Bank

Combating Povert y our objeC tives in the regional DeveloPment banks

Combating Povert y our objeC tives in the regional DeveloPment banks

Combating Povert y our objeC tives in the regional DeveloPment banks

Combating Povert y our objeC tives in the regional DeveloPment banks

0 see introduction (Chapter ).

Combating Povert y our objeC tives in the regional DeveloPment banks

Supporting institutional reforms

Supporting key priorities

Combating Povert y our objeC tives in the regional DeveloPment banks

4. Our Objectives in the inter-american Development Bank

Combating Povert y our objeC tives in the regional DeveloPment banks

the term the bank will also be used below.

Combating Povert y our objeC tives in the regional DeveloPment banks

usa and Canada count as regional members.

see Chapter see Chapter

Combating Povert y our objeC tives in the regional DeveloPment banks

Combating Povert y our objeC tives in the regional DeveloPment banks

Our current concerns

Combating Povert y our objeC tives in the regional DeveloPment banks

Supporting institutional reforms

Combating Povert y our objeC tives in the regional DeveloPment banks

Support for core sectoral priorities

Combating Povert y our objeC tives in the regional DeveloPment banks

Combating Povert y our objeC tives in the regional DeveloPment banks

Combating Povert y our objeC tives in the regional DeveloPment banks

5. Our Objectives in the Caribbean Development Bank