Local currency issuance on the rise

Fiji, the host of the Asian Development Bank’s 2019 annual meetings, is a fitting illustration of the challenges facing the bank. Much like the ADB itself, the Pacific Island nation needs to respond to climate change and is pushing to enhance its relevance in an increasingly globalised world. It is looking to benefit from improved technology and connectivity across the region, but also faces challenges integrating a diverse population and ensuring its growth is sustainable. “Many of these issues are more salient in the Pacific countries,”...

The Asian Development Bank has a broadly stable outlook on Asian economic growth, seeing a slight decline to 5.7% this year from 5.9% in 2018. The future of global trade, however, remains the “key uncertainty”, according to Yasuyuki Sawada, the bank’s chief economist. “Tensions between the US and China are still very high,” he said. Negotiations between the two economic powers have so far failed to produce much progress, even though the talk of escalation that dominated 2018 has softened. The challenge for economists, then, is that either...

The head of the ADB’s private sector operations evidently has a healthy appetite for risk. Ahead of the 2019 annual meetings, Mike Barrow will be spending some of his free time deep underwater surrounded by sharks. Barrow may be an experienced diver, but his sense of adventure will stand him in good stead as the bank scales up its exposure to Asia’s private sector. The ADB’s long-term strategy calls for Barrow’s department to make more commercial investments in companies and projects that are not government-owned, with the goal of filling...

The ADB is facing something of an existential crisis. Its traditional sources of funding – shareholder contributions and donations from higher-income governments – are drying up at the same time as the region’s needs are changing radically. The bank’s future lies in its ability to mobilise additional resources, both from established public sector partners and – increasingly – with new sources of commercial and concessional finance. “The world is changing. Our traditional co-lenders and grant donors … many of these people have their own...

When Papua New Guinea was rocked by a 7.5 magnitude earthquake in February 2018, the resulting damage forced the country’s biggest liquefied natural gas project to shut down for almost two months. GDP growth tumbled from 3.0% in 2017 to just 0.2% in 2018 as the hit to exports and the massive clean-up bill took a toll on the economy. Smaller countries fare even worse. Cyclone Gita – a severe tropical cyclone with winds reaching over 230km/h – caused damage equivalent to 38% of Tonga’s annual GDP in the same month, while losses in Vanuatu from...

More Indian companies are heading overseas in search of funding after the country’s central bank relaxed its long-standing restrictions on offshore borrowing. The Reserve Bank of India issued new rules on external commercial borrowing (ECB) in January, lowering minimum maturity requirements and scrapping previous sector-specific limits. Bankers are expecting more Indian companies to issue offshore debt after a number of state-owned issuers moved quickly to take advantage of the new rules. “We’re seeing a lot more conversations taking place with...

As world leaders gather on the outskirts of Beijing for the second Belt and Road summit in late April, they could be forgiven for wondering what to make of the flagship initiative a little bit over five years since it was first unveiled by Chinese President Xi Jinping. Washington and Brussels have become increasingly sceptical over the geopolitical implications of the Belt and Road initiative, with the US leading resistance to what it sees as debt-trap diplomacy from an emerging economic superpower. Some of the largest recipients of Belt and...

New World Bank President David Malpass said he would not alter the lender’s commitment to fight climate change, but pledged to step up its anti-poverty mission and to evolve the bank’s relationship with China. Malpass, who started at the Bank on April 9, was nominated by US President Donald Trump. Some development professionals feared that he would pursue Trump’s “America First” agenda at the bank by resuming financing for coal power projects and pressuring China. But Malpass told reporters that he will pursue the World Bank’s climate change...

When the World Bank set out to raise money for an ambitious international immunisation programme in 2008, the Japanese capital market was the obvious choice. The combination of a Triple A rating and a worthy cause was an instant hit with retail investors, kicking off a funding programme that went on to raise over US$2bn for the International Finance Facility for Immunisation in a variety of currencies. Since then, Japan has developed into a major market for social finance, where investors tie funding to a specific cause or theme. The Asian...

Sustainable finance is taking root in Asia’s bank loan market as lenders step up their focus on environmental and social investments and industry associations introduce additional protocols to standardise market practices. The Asia Pacific Loan Market Association and two global bodies launched a new framework in March tied to borrowers’ sustainability performance, following up on the introduction of green loan standards last year. The Sustainability Linked Loan Principles (SLLPs) were developed in conjunction with financial institutions that...

The concept of a ‘Blue bond’ is catching on after the small island state of the Seychelles priced the first deal of its kind in October. Aimed at protecting oceans, the US$15m bond, developed with the assistance of the World Bank, was placed to three investors: Calvert Impact Capital, TIAA’s Nuveen and Prudential Financial. Though small, the deal points to growing awareness of ocean health – a key issue for island nations that rely heavily on fishing or tourism, such as Fiji, the host of the ADB’s 2019 annual meetings. The Seychelles bond has a...