Strengthening co-financing strategies with the Asian Development Bank to address emerging challenges

THE BACKGROUND

In recent years, AFD and ADB have shared competitive advantages, which benefited each other. These advantages ranged from organizational design (knowledge-based and GMS historically rooted projects) to complementarities of expertise located at both AFD and ADB. AFDʼs flexibility, experience in innovative implementation schemes, appetite for risk and specific sectoral expertise can bring value to any form of partnership. While ADBʼs wide coverage of Asia through a strong network of country offices was perceived by AFD as a key advantage of the partnership, some “barriers to entry” were mentioned concerning some countries or markets, with ADB benefiting from its unique historical position, size and scope, but also imposing on partners the application of its procedures and prerogatives.

THE PROJECT

FINANCE FOR IMPACT conducted a performance review of co-financing operations of AFD and ADB. We analyzed the convergence of strategic mandates for the two organizations to promote a greater coherence of investments in the future. We reviewed the existing co-financing operational arrangements to seek more efficiency.

THE RESULTS

The mission confirmed that emerging needs in Asia called for stronger collaboration but also posed challenges to the definition and objectives of the AFD-ADB partnership. We contend that an upward trend in co-financing volumes could be sustained by the partners in Asia, with AFDʼs commitments in the region already 25% representing of its worldwide commitments. As demand increases in terms of financing needs, AFD and ADB will have greater incentives to engage in constructive co-financing operations. However, the AFD-ADB partnership is hampered by the lack of conceptual clarity, since the partners have different interpretations of how it should be pursued. A range of opinions signaled the different intentions of the partnershipʼs “founders”, with AFD seeking to enter markets in Asia in which ADB had secured a first-entrant strategic position, and ADB seeking to complement its leading resource mobilization strategy in monetary terms. Due to the widespread perceptions of the partnership, we concluded that it was important for the partners to align their strategies and objectives for the period 2010-2015. The existing convergence of strategic mandates may be an opportunity to promote greater coherence in the future. We noted that AFD and ADB shared many strategic objectives that could facilitate co-financing between the partners for the period 2010-2015. In particular, synergies could be developed by both AFD and ADB in the climate change and energy sectors. With respect to the private sector and non-sovereign lending, both AFD and ADB have also expressed interest in strengthening the partnership, but implementation of joint actions has been hampered by a few structural constraints. Several sectors appear to offer good opportunities to enhance the partnership, thus allowing ADB to attain its operational goals, i.e. scaling up private sector development to reach 50% of annual operations by 2020 and, in the medium term, developing an environmentally sustainable development agenda.