With Asia still facing many developmental challenges despite remarkable growth in the past few decades, Asian Development Bank (ADB) president Takehiko Nakao on Thursday lamented that the region was still home to over 800 million people steeped in poverty.

“It is disheartening that in a region of such rapid progress, we still have a population of more than 800 million people living in absolute poverty. This, along with growing inequality, remains an overarching challenge,” Mr. Nakao said in his opening statement at a press conference at the 46th annual meeting of the ADB Board being held at the Indian Expo Mart at Greater Noida (Uttar Pradesh) in the National Capital Region (NCR).

At a time when multilateral lending agencies such as the ADB were expected to not only extend greater assistance to lift the 800 million out of abject poverty but also help many Asian “middle income” countries to find ways to overcome the middle income trap, the challenge was all the more great for Mr. Nakao, who took over as president of the Manila-based institution late last month, said.

He indicated that the bank’s lending programme may have to be lowered, simply because its investments were not fetching adequate returns.

Explaining the ‘Catch 22’ situation of sorts that the ADB was facing, Mr. Nakao said: “We have no solid base of capital to continue to lend at higher levels than before. But, of course, there are challenges to keep [up] this level of lending. We have now entered a level of lending of $10 billion compared to $5-or-6 billion before. But can we keep [up] this level of lending? That itself is a challenge....”

“Because our income from investments of surplus resources, which is mostly lent to European countries, that return on investment is smaller than expected because of lower interest rates. So we hope to solve this issue of maintaining a sustainable lending level. We are working on this issue,” he said.

Such a prospect did not augur well for India, especially since it was the biggest recipient of ADB assistance. In 2012, it extended loans worth $2.4 billion and the assistance was spread across sectors such as transport, energy, commerce, industry, trade and finance. Despite the tight financial position, Mr. Nakao noted, the ADB would still be interested in promoting a number of projects in India that include the Delhi-Mumbai Industrial Corridor and other highway and railway projects. However, with the lending capacity of multilateral agencies being “limited,” he sought to stress need for private sector participation in infrastructure projects in emerging economies such as India.

Indicating the extent of shortfall in infrastructure funding, he pointed out that while the requirement of Asian countries over the 10-year period would be $8 trillion, the bank’s capacity of extending assistance would be $10 billionMr. Nakao said poverty could be eradicated only through infrastructure development and, towards this end, co-financing with the private sector and attracting offshore funds would “act as a catalyst in promoting infrastructure finance.”

To a query on the growth potential of Asian economies, he said the expansion was more robust than expected after the global meltdown in 2008.

“It is because of domestic and indigenous demand that India, China and other emerging market economies in Asia have enjoyed stronger growth and I think it will continue.”

He also projected that while advanced economies for now would continue to have slower growth, Asian economies would have stronger growth led by a strong consumption demand.


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