The Taiwan Banker

The Taiwanese financial sector is generally familiar with the International Monetary Fund (IMF), of which Taiwan is not yet a member, which could be called the ‘United Nations of finance.’ It is however less familiar with the Asian Development Bank (ADB), the regional multilateral bank to which it is closest, and of which Taiwan is a member. The 57th ADB Annual Meeting of the Board of Governors was held in early May in Tbilisi, the capital of Georgia. During the meeting, board members including finance ministers, central bank governors, and senior government officials reviewed the development direction of the Asia-Pacific region and various future operational challenges for the of ADB. Stakeholders such as financial institutions, civil organizations and media representatives also attended. Taiwan’s Minister of Finance Chuang Tsui-Yun also led a delegation as a director. Lei Chung-Dar, Chairman of the ROC Bankers Association, also attended with colleagues of the Association. Taiwanese banks may want to consider international business opportunities through the ADB. Financial assistance to countries affected by climate change In what was probably the most important outcome of this meeting, the donor member states agreed to jointly contribute to the 14th tranche of the Asian Development Fund and the 8th tranche of the Technical Assistance Special Fund, adding approximately US$5 billion to support grants from 2025-2028 to assist the economies most in need of emergency assistance, especially for Pacific Island countries which are vulnerable to the impact of climate change, as well as aid to fragile, conflict-affected nations for climate change adaptation and disaster risk reduction. This was approximately 22% more than the US$ 4.1 billion of the 13th tranche, marking the consensus of donor countries on the importance of the climate crisis and their trust in ADB’s use of grant funds to assist developing member countries (DMCs). Another important outcome was the affirmation and support by the majority of member states to reform the multilateral development bank. Because the ADB is an international financial institution, its operations are stable, credit ratings are usually good, and risk of borrower default is low. It has an AAA credit rating, and can access the international financial market to raise funds at minimal cost. It provides cost-effective loans to developing countries, as well as credit guarantees for higher-risk projects. However, in order to maintain its credit risk rating so that it can continue lending during crises or after large defaults, its measurements and operations often reflect a conservative risk appetite. ADB commenced a series of capital adequacy reforms in 2023 to maximize its impact on international socio-economic development and increase its ability to support development, so the amount of capital available will expand accordingly. It currently aims for sufficient financial capacity to finance a cumulative US$100 billion in climate response projects by 2030, and also calls on all countries and the private sector to participate in syndicated financing in response to global climate change. A focus on developing countries in Asia-Pacific The ADB currently has 68 member countries and funds development projects and programs among its DMCs through loans, equity investments, guarantees, grants, and technical assistance. It provides policy dialogue and advisory services, and mobilizes global financial market resources through syndicated lending. It is a leading AAA borrower in international and domestic capital markets, and has issued bonds in 49 currencies in different markets, which have received the highest ratings from major international credit rating agencies. Since the launch of its green bond program in 2015, it has regularly participated in the green bond market to help DMCs reduce their greenhouse gas emissions and adapt to climate change. The funds raised help support Ordinary Capital Resources (OCR) operating projects. OCR loans are usually provided to developing members with a higher level of economic development. In 2023, ADB provided US$23.6 billion to DMCs in the form of loans, grants, equity investments, guarantees, or technical assistance, including US$3.8 billion for private sector operations. , and it also worked with its partners to raise an additional US$16.4 billion in syndicated lending. Working with ADB to find projects in Southeast Asia There are two main ways for Taiwanese investors to participate in opportunities involving the ADB. One is to participate in its fundraising, such as in its green, blue or themed bond issues, which have excellent credit ratings and transparent fund use information, and can be placed in low-risk portfolios. Along these lines, they can also directly participate in syndicated loans, such as a large financing case worth US$279 million just approved this April for a solar photovoltaic project with a Thai energy development company. ADB serves as the mandated lead arranger in this case, and anticipates another two times that amount (an estimated US$600 million) from development funds or other sources. Investment institutions such as Canada, Germany, and the Netherlands or the Export-Import Bank of China have already expressed interest; Taiwanese financial institutions also can consider establishing partnerships with ADB. Second, they can participate in procurement bids from DMCs for projects financed by ADB. ADB assists in management of some project tenders for loans to DMCs. Stronger contract competition and partnerships promote the market for high-quality services with the best cost performance, benefiting the projects. Taiwanese project consulting companies, contractors, non-governmental organizations (NGOs), and civil society organizations with the interest and ability can make use of ADB to search for investment opportunities. This Annual Meeting demonstrates that ADB member countries are optimistic about the development prospects of the Asia-Pacific region and are willing to provide funding in response to climate change. They also trust the operational governance of ADB, and support it in capital expansion. Currently, only a few Taiwanese banks do business with ADB: the overseas business departments of Hwa Nan Bank, First Bank, and Chang Hwa Bank, as well as Bank SinoPac, KGI Bank, and Sunny Bank, have jointly worked with it on loans in Vietnam. The reason for the low number of transactions may be a lack of attention and relevant information on ADB. Also, the barrier to entry for the international financial industry may be high, along with the initial cost of participation, resulting in a low return on investment. Under the call of the government’s New Southbound Policy, however, Taiwanese manufacturers have expanded to Southeast Asia and even South Asia. Taiwan’s financial industry can participate in opportunities with ADB and join the development direction of its international financial peers in response to climate change, contributing to global public finances. I would encourage interested banks to explore new blue ocean markets and deepen cooperation with international financial markets, thereby promoting the growth, diversification and resilience of Taiwan’s financial system for mutually beneficial common prosperity. The author of this article is currently a director advisor appointed by the Ministry of Finance to the Board of Directors of the Asian Development Bank.