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We are keen on insurance sector, says ADB chief

Our Bureau

NEW DELHI, Jan. 18

THE Manila-based Asian Development Bank (ADB) is very interested in the opening of the domestic insurance sector and will look at opportunities in the non-banking financial sector in India, the Bank's President, Mr. Tadao Chino, said here today.

Addressing captains of industry on `Role of private sector in economic development', Mr. Chino said that the Bank will provide loans worth over $1 billion during the year 2000, up from $625 millions during the previous year. At least 50 per cent of the 5 0 loans this year will be channelised for state governments.

The meeting was jointly organised by the Confederation of Indian Industry (CII) and the ADB.

Mr. Chino said that recognising the importance of a dynamic private sector for rapid and sustainable growth and poverty reduction, ADB is developing a new private sector development strategy which is expected to be unveiled in the first half of this year .

``Under the new strategy, ADB envisages to intensify its support for private sector development in our developing member countries. Support for private sector development may be provided in three different ways, including assisting the governments create the enabling environment,'' Mr. Chino said.

The ADB President said that apart from assisting the governments to create the enabling environment, the other ways are to catalyse private sector projects through direct financing and risk mitigation and providing other direct and indirect benefits to t he private sector.

He said the ADB measures to help governments create an enabling environment include sound macro-economic management, deregulation in investment and trade, relaxation of price control, enhanced competition, well-functioning financial and capital markets, flexible labour markets, good infrastructure, equitable tax system and legal and judicial systems that protect property rights and enforce contracts.

Despite ADB's participation being relatively modest in private sector projects, this is seen as a source of comfort by other lenders and investors and hence facilitates mobilisation of commercial financing, Mr. Chino said.

Mr. Chino said the Bank generates specific business opportunities for the private sector by encouraging governments to explore the possibility of private sector involvement in projects. Many projects financed by the ADB, he said, may indirectly contribut e to private sector development by improving necessary infrastructure, such as road networks and power supply.

``Through these three ways, ADB can focus its efforts on the four strategic areas for promoting private sector development in the Asian context, including effective governance in the public and private sectors, effective financial intermediation, expande d public-private partnerships and regional and sub-regional cooperation,'' Mr. Chino said.

The ADB President expressed confidence that with the adoption of the new strategy, the Bank will be able to better address the issues impeding private sector development and thereby, prove more effective in tackling poverty reduction in the region.

Mr. Chino felt that India must address the issues of a large fiscal deficit, inadequate infrastructure, lack of skilled labour and insufficient domestic long-term financing to attain sustained economic growth of seven to eight per cent per year which is essential for the speedy alleviation of poverty. ``The ADB has endeavoured to support the Government's efforts in mitigating these constraints,'' Mr. Chino said.

Referring to ADB's assistance to India, he said that since 1986, ADB had extended 47 loans amounting to $7.7 billions. He said that the energy sector accounts for the largest share of 35 per cent of the cumulative assistance, whereas transport and commun ication account for 25 per cent, finance and industry 15 per cent, and social infrastructure 13 per cent. In addition, $285 millions was extended to selective private sector projects and entities, Mr. Chino said.