OPERATIONS Development is not an end. It is a multidimensional and multilayered process, sustained by partnerships and projects that complement and build on each other. In pursuing its vision of a region free of poverty, the Asian Development Bank is both an element in the process and the catalyst that brings the elements together. This synergy is depicted on the cover of this Annual Report. The infrastructure development photographs are defined and bound together by the outline of a tulip, the national flower of Turkey—where the flower was first discovered and which was to have been the venue of the 36th Annual Meeting of the Board of Governors in 2003. Much like development, the lines of the tulip fan out, branch off, and come together again to create a new pattern. And the process continues. © Asian Development Bank 2003 Every effort has been made to ensure the accuracy of the data used in this publication. Variations in data in the Asian Development Bank (ADB) publications often result from different publication dates, although differences may also come from source and interpretation of data. ADB accepts no responsibility from any consequence of their use. The term “country,” as used in the context of ADB, refers to a member of ADB and does not imply any view on the part of ADB as to the member’s sovereignty or independent status. In this publication, $ refers to US dollars. Also available in CD-ROM and can be downloaded from ADB’s web site at http://www.adb.org/publications/. ISSN 306-8370 Printed in Singapore by Tien Wah Press (Pte) Ltd. ASIAN DEVELOPMENT BANK PROFILE he Asian Development Bank (ADB) was established in 1966 through a multilateral agreement ratified by 31 countries.1 It has 61 members, of which 44 are in Asia and the Pacific. ADB has its headquarters in the Philippines, and has offices worldwide, including resident missions in Afghanistan,2 Azerbaijan,2 Bangladesh, Cambodia, People's Republic of China, India, Indonesia, Kazakhstan, Kyrgyz Republic, Lao People’s Democratic Republic, Mongolia, Nepal, Pakistan, Papua New Guinea,2 Sri Lanka, Tajikistan,2 Uzbekistan, and Viet Nam. ADB also maintains a country office in the Philippines; a regional mission for Tthe South Pacific in Vanuatu; a special office in the Democratic Republic of Timor-Leste; and an extended mission in Gujarat, India. It has representative offices for Europe (in Frankfurt), for Japan (in Tokyo), and for North America (in Washington, DC). Our vision ADB's vision is an Asia and Pacific region free of poverty. Its mission is to help its develop- ing member countries (DMCs) reduce poverty and improve their living conditions and quality of life. ADB pursues a strategic agenda—sustainable economic growth, inclusive social development, and governance for effective policies and institutions—with three crosscutting themes: private sector development, regional cooperation and integration for development, and environmental sustainability. ADB’s main instruments in providing help to its DMCs are policy dialogues, loans, technical assistance, grants, guarantees, and equity investments. ADB offers a range of modalities and terms for loans, aimed at improving development performance. About 70% of ADB’s cumulative lending comes from its ordinary capital resources. These come from three distinct sources: private place- ments and capital markets in the form of borrowings; paid-in capital provided by shareholders; and accumulated retained income (reserves), which provide a buffer for risks arising from operations. ADB also provides loans from its Special Funds resources. The Asian Development Fund (ADF) is a special window for loans on concessional terms to members with low per capita gross national product and weak debt-repayment capacity. The ADF is financed by periodic voluntary contributions from donors. Other Special Funds are the Technical Assistance Special Fund, Japan Special Fund, and ADB Institute Special Fund. In addition, ADB manages and administers other funds: Japan Scholarship Program, Japan Fund for Poverty Reduction, Japan Fund for Information and Communication Technology, and channel financing of grants provided by bilateral donors to support technical assistance and soft components of loans. In recent years, thematic trust funds— focusing on governance, poverty reduction, water, energy, and environment—were established to support technical assistance operations and selected components of loan projects. Technical assistance activities funded through grants or loans help maximize ADB’s development impact. Most technical assistance grants are used for preparing projects and supporting advisory activities in areas such as law and policy reform, fiscal strengthening, good governance, capacity building, and natural resource management. ADB has a triple-A rating and typically raises about $4 billion–$5 billion a year from bond issues. It actively mobilizes financial resources through its cofinancing operations, tapping official, commercial, and export credit sources. ADB’s assistance to governments creates an enabling environment for private sector development. ADB participates directly in financing private sector projects to assist commercial investors and lenders. Our policy-making structure ADB’s highest policy-making body is its Board of Governors, which meets annually and comprises one representative from each member. The Governors elect the 12 members of the Board of Directors, with each Director appointing an Alternate. The President is elected by the Board of Governors for a 5-year term and is Chairperson of the Board of Directors. The President, assisted by three Vice-Presidents, manages the business of ADB. 1 The term “country,” as used in the context of ADB, refers to a member of ADB and does not imply any view on the part of ADB as to the member’s sovereignty or independent status. 2 To be operational in 2003. ANNUAL REPORT 2002 iii MESSAGE FROM THE CHAIRMAN OF THE BOARD OF DIRECTORS trong partnerships are essential for River. The six developing member countries (DMCs) have achieving our goal of an Asia and Pacific met often since then, and have formed what has region free of poverty. We forged many such become known as the Greater Mekong Subregion (GMS). partnerships in 2002—global, regional, They have developed shared projects and programs that organizational, and individual. These are bringing benefits to the entire subregion. The GMS partnerships strengthened ADB as an has become a model of regional cooperation and, in Sorganization and brought us that much closer 2002, it held its first summit to celebrate a decade of to our goal. partnership. This gathering set the stage for many more years of cooperation and allowed all of us to reaffirm ADB as a voice in the our commitment to creating a prosperous and equitable subregion. global community Another partnership ADB helped nurture in 2002— The importance of many Protecting the Coastal and Marine Waters of South voices speaking to an Asia—brought regional groups, such as the South Asia agreed objective—the Cooperative Environment Programme, together with voices of institutions and national agencies and international organizations such governments alongside as the United Nations Environment Programme. Through the voices of civil a network of centers of excellence in policy, legislation, society, businesses, and education, and communication, the partnership is stakeholders—was expected to build capacity and encourage knowledge vividly underscored at transfers to contribute to human security and conserva- the World Summit on tion of the region’s natural resources. Sustainable Develop- We also helped organize a meeting in 2002 at ment in Johannesburg. which a regional group of governments of small island It was also evident at nations of the Pacific, nongovernment organizations other conferences and (NGOs), and others concerned about water came symposiums I attended together to develop a unified approach to the problems in 2002. At the Interna- these nations face in managing this scarce resource. The tional Conference on result was a regional action plan for sustainable water Financing for Develop- management. ment, for example, more Alliances often grew out of existing relationships than 50 heads of state or and previously agreed priorities, such as working to government and over 200 clean the air we breathe. A partnership—the Clean Air ministers agreed to place Initiative for Asia Cities—was launched by ADB, the development finance at the World Bank, and others in 2002 to address the problem forefront of the global agenda. of air pollution in the region. We also joined the At this meeting, ADB and other International Labour Organization in promoting a decent organizations reiterated a shared work environment for all people in the region, and we commitment to the Millennium collaborated with the World Trade Organization in Development Goals. I noted in my promoting knowledge and capacity for open trade. address the importance of working closely with development partners ADB in partnership with its members to complement and build on one another’s strengths. ADB is, of course, a partnership of 61 members, and it enjoys a high level of trust and confidence among ADB as an alliance governments and civil society. Through this partner- ship, ADB has a tremendous opportunity to forge the broker broad-based strategic initiatives needed to enable the Several partnerships we developed poor to achieve peace and prosperity in the decades in years past reached important to come. milestones in 2002. For example, In 2002, we continued to build on this trust. Several in 1992, ADB had helped broker of our donor members have over the years provided an alliance of six countries ADB with untied grant funds to support technical that shared a common assistance and the soft components of loans. In 2002, a resource, the Mekong new thematic poverty-focused multidonor financing PRESIDENT’S MESSAGE arrangement was established, with the first contribution involvement when I visited Kabul earlier in the year. coming from the United Kingdom. The Netherlands made Their enterprise and determination to begin life anew another contribution to the cooperation fund for the was impressive.