Japan Special Fund Annual Report 2009
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JAPAN SPECIAL FUND ANNUAL REPORT 2009 Crisis and Beyond: Shaping Asia's New Development Paradigm There are countless success stories across developing Asia and the Pacific. Our region still faces many challenges and must work hard to address the stark inequalities and hardships facing the poor. Yet it continues to be a region of great hope and tremendous opportunity. With the full confidence and support of our shareholders, the Asian Development Bank will work hand in hand with all partners to help the region through these difficult times and to help build a more vibrant, prosperous, sustainable, and inclusive society in Asia and the Pacific, and in the world at large. — Haruhiko Kuroda President Asian Development Bank 42nd Annual Meeting Bali, Indonesia 4 May 2009 CONTENTS I. Basic Facts and Features 1 A. Overview 1 B. Purpose 1 C. Types of Technical Assistance 2 II. Japan Special Fund Operations in 2009 3 A. Operational Highlights 3 B. Voices from Various Regions 11 C. Technical Assistance Completion Reports on Japan Special 20 Fund-Financed Projects D. Cumulative Contributions from the Government of Japan 20 E. Review of Activities 20 F. Financial Statement 25 G. Annual Report of Activities 25 Appendixes 26 1 The 67 Members of the Asian Development Bank 26 2 Japan Special Fund Technical Assistance Approvals by 27 ADB in 2009 3 Japan Special Fund Technical Assistance Completion 31 Reports in 2009 4 Revised Operating Framework for the Japan Fund for 34 Poverty Reduction 5 Financially Closed Japan Special Fund Technical Assistance 50 Grants, 1988–2009 6 Completed Japan Special Fund Technical Assistance 126 Grants, 1988–2009 7 Ongoing Japan Special Fund Technical Assistance 129 Grants, 1988–2009 8 Use of the Japan Special Fund 138 Financial Statements, Management's Report on 144 Internal Control over Financial Reporting, and Independent Auditors’ Report ABBREVIATIONS AND ACRONYMS ADB Asian Development Bank CDTA capacity development technical assistance JSF Japan Special Fund NEC National Environment Commission PASAI Pacific Association of Supreme Audit Institutions PATA policy and advisory technical assistance PPTA project preparatory technical assistance PRAI Pacific Regional Audit Initiative RDTA research and development technical assistance TA technical assistance TFFP Trade Finance Facilitation Program WOP water operators’ partnership NOTE In this report, “$” refers to US dollars. In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area. JAPAN SPECIAL FUND ANNUAL REPORT 2009 1 I. BASIC FACTS AND FEATURES A. Overview 1. The 2009 annual report of the Japan Special Fund (JSF), funded by the Government of Japan, is the 13th prepared by the Asian Development Bank (ADB) since the fund’s inception in 1988. It describes JSF operations in 2009, provides background and details on implementation, and highlights the fund’s achievements during the year and over its history. The report reflects the JSF's commitment to promoting regional cooperation and capacity development, as shown when it provided $2 million in technical assistance (TA) for trade finance capacity development.1 B. Purpose 2. The JSF supports ADB’s TA program with untied grants that ADB administers. It helps ADB developing member countries (Appendix 1) restructure their economies in response to the changing global environment, broaden their opportunities for new investment, and prepare loan projects. The JSF places particular emphasis on industrialization, natural resource development, human resource development, and technology transfer. It also supports ADB's efforts to promote regional cooperation and integration and capacity development. The Japan Special Fund supports ADB’s technical assistance program with untied grants that ADB administers 1 ADB. 2009. Regional Technical Assistance for Trade Finance Capacity Development. Manila (TA 7264-REG, $2,000,000, approved on 31 March, financed by the Japan Special Fund). 2 JAPAN SPECIAL FUND ANNUAL REPORT 2009 C. Types of Technical Assistance 3. The JSF is administered by a small team under a funds coordinator in ADB’s Office of Cofinancing Operations, which also oversees other trust funds provided by the Government of Japan. 4. In 2009, the JSF started to use redefined types of TA to reflect the outcomes of different TA products. The JSF supports the four main TA types defined as (i) project preparatory TA (PPTA), (ii) capacity development TA (CDTA), (iii) policy and advisory TA (PATA), and (iv) research and development TA (RDTA). The table shows the relationship between TA objectives and the current and previous types of TA. Current and Previous Types of Technical Assistance TA Objectives Current Type Previous Type Identifying, formulating, and preparing country or PPTA PPTA subregion development projects Enhancing the capacity of executing agencies and other CDTA ADTA development partners, including support for project implementation Formulating and coordinating development strategies, PATA ADTA, plans, and programs, and undertaking sector-, policy-, and issue-oriented studies of countries or subregions RETA Undertaking sector-, policy-, and issues-oriented studies RDTA RETA of Asia and the Pacific ADTA = advisory TA, CDTA = capacity development TA, PATA = policy and advisory TA, PPTA = project preparatory TA, RDTA = research and development TA, RETA = regional TA, TA = technical assistance. Source: Asian Development Bank. The Japan Special Fund supports project preparatory, capacity development, policy and advisory, and research and development technical assistance JAPAN SPECIAL FUND ANNUAL REPORT 2009 3 II. JAPAN SPECIAL FUND OPERATIONS IN 2009 A. Operational Highlights 5. ADB technical assistance approvals for Japan Special Fund financing. In 2009, ADB approved 42 JSF-funded TA projects (Appendix 2) totaling $41.6 million and representing 16% of the total amount of TA that ADB approved during the year. Notable among them was the regional TA for trade finance capacity development, which was one of the five TA projects that received $2 million each in grant funding from the Government of Japan through the JSF. In 2009, ADB approved 42 JSF-funded technical assistance projects totaling $41.6 million 6. Trade Finance Facilitation Program. The Trade Finance Facilitation Program (TFFP) was set up in 2004 and expanded to a $1 billion program in March 2009 after ADB perceived a growing and urgent need to help address the lack of finance that was holding back trade, particularly in developing economies. Under the program, the AAA-rated ADB provides loans and guarantees through, and in conjunction with, local and international banks to back trade transactions. 7. In addition to providing finance, the TFFP links the banks into global trading and banking networks. This builds relationships and spurs knowledge sharing that will help the banks and their clients in the longer term. The Trade Finance Facilitation Program builds relationships and spurs knowledge sharing that will help the banks and their clients in the longer term 4 JAPAN SPECIAL FUND ANNUAL REPORT 2009 8. In 2009, ADB has signed TFFP agreements with banks in Bangladesh, Indonesia, Nepal, Pakistan, Sri Lanka, and Viet Nam. It expects to continue to expand the geographic scope of the program to Central Asia and elsewhere in 2010. 9. Without JSF support, the TFFP would not have been able to deliver substantial results in 2009 and at the height of the financial crisis. The JSF was critical to the TFFP's expansion, as it provided $2 million in TA grants. In 2009, the TFFP supported (i) $1.9 billion in trade, with the bulk of support going to support trade in Bangladesh, Indonesia, Pakistan, and Viet Nam; (ii) 263 small and medium-sized enterprises; (iii) intraregional trade, as over 55% of the portfolio supported trade between companies in Asia; and (iv) trade between ADB developing member countries, representing 47% of the portfolio. One transaction in particular supported the export from Japan of medical equipment to Nepal. With JSF support, the TFFP was able to deliver substantial and measurable development impact in some of Asia's most challenging markets. Without Japan Special Fund support, the Trade Finance Facilitation Program would not have been able to deliver substantial results in 2009 and at the height of the financial crisis 10. Other Japan Special Fund-financed technical assistance in 2009. The following are descriptions of some JSF-financed TA projects approved in 2009, most of which address agriculture and natural resources, the sector that received the most assistance from the JSF. JAPAN SPECIAL FUND ANNUAL REPORT 2009 5 11. Rural development in the Chittagong Hill Tracts of Bangladesh. ADB and the Government of Japan are providing financial support to lay the groundwork for a project that will strengthen water resources management and aid rural development in the Chittagong Hill Tracts of Bangladesh. The JSF will provide a PPTA grant of $900,000,2 and the Multi-Donor Trust Fund of the Water Financing Partnership Facility $265,000, totaling $1.165 million. ADB and the Government of Japan are providing financial support to lay the groundwork for a project that will strengthen water resources management and aid rural development in the Chittagong Hill Tracts of Bangladesh 12. The PPTA will examine the potential for small-scale water resources infrastructure and improved rural access investments with community participation. Skills-development training will be given to community groups so that they can be fully involved in planning, 2 ADB. 2009. Technical Assistance to Bangladesh for Second Chittagong Hill Tracts Rural Development. Manila (TA 7432-BAN, $900,000, approved on 7 December, financed by the Japan Special Fund). 6 JAPAN SPECIAL FUND ANNUAL REPORT 2009 implementing, and operating rural infrastructure. Support will also be given to strengthen and build capacity in the Ministry of Chittagong Hill Tracts Affairs, Chittagong Hill Tracts Regional Council, and three hill district councils.