Asian Development Bank
The ADB is Asia's regional multilateral development bank, founded in 1966 with Japan and US as co-dominant shareholders (15.6% voting power each). Despite losing the headquarters vote to Manila by a single ballot (9-8), Japan controls the presidency—every ADB president for 60 years has been Japanese.
ADB demonstrates the lichen symbiosis pattern: Japan/US provide the structural shell (capital, AAA rating), while Asian developing countries provide the institutional purpose. Neither can function without the other, but power is asymmetric.
ADB lost its headquarters to Manila by a SINGLE VOTE despite Japan founding and financing the bank. In November 1966, after three rounds of voting, Manila defeated Tokyo 9-8 (one abstention). Japan's consolation prize: an unwritten rule that every ADB president would be Japanese, which has held for 60 years. Japan also issued the world's first Samurai bond in 1970 (6 billion yen), opening Japan's domestic market to foreign issuers—pioneered by ADB.
Key Facts
Power Dynamics
Weighted voting: Japan and US each hold 15.6%; China 6.4%; India 6.3%. Board of Governors (68 members) holds all formal powers; Board of Directors manages operations
Japan is the 'senior partner' despite equal voting with US. Every president since 1966 has been Japanese (current: Masato Kanda, Feb 2025). Close ties between ADB and Japanese Ministry of Finance create personnel and policy continuity. China's subordination (6.4% voting power despite being world's 2nd-largest economy) drove creation of AIIB in 2013, where China holds 26%
- Japan-US axis: combined 31.2% can block initiatives requiring supermajority
- Borrower resistance: implementation delays function as de facto veto (Bangladesh 48% funds undisbursed)
- Board consensus culture gives influential members informal veto
- Japan (dominant shareholder, presidential monopoly, MOF pipeline)
- US (geopolitical cover, AAA rating support, coordinated on China)
- China (AIIB competitor, forced to cooperate via co-financing)
- Regional borrowers (India, Indonesia, Pakistan, Bangladesh)
Revenue Structure
Asian Development Bank Revenue Sources
- Bond issuance (AAA-rated) 70% →
- Paid-in capital and reserves 20% →
- Lending income 10%
$161B outstanding across 51 currencies
2009 tripling: $55B → $165B callable capital
AAA rating addiction—entire model requires Moody's/S&P/Fitch AAA status. Downgrade would spike borrowing costs, potentially creating death spiral. Preferred creditor status is implicit (market custom), not contractual—if countries started defaulting on ADB, would trigger rating downgrade. Callable capital ($165B) has never been tested; would require domestic legislative appropriations in crisis
Similar to World Bank model but regional. ADB + World Bank combined provide only $20B/year to Asia vs $1.7T annual infrastructure need. AIIB (China-led) is 1/3 ADB's size but with <10% of staff—leaner, faster. ADB retains 50+ years regional expertise and first-mover advantage in Asian capital markets
Decision Dynamics at Asian Development Bank
COVID-19 emergency (2020): 12-21 day disbursement for policy-based lending with pre-met conditions. $1.5B India COVID response approved quickly. Policy-Based Lending allows immediate large-scale disbursement when conditions pre-fulfilled
Philippines South Commuter Railway: massive land acquisition delays, procurement issues, administration changes. $2.41M commitment fees paid in 2023 alone. Bangladesh agriculture: 92% of funds ($329M) uncontracted, 96% undisbursed
Land acquisition, weak implementing agency capacity, complex procurement processes, political instability (Bangladesh uprising halted projects 2 months), project readiness failures (insufficient preparation before Board approval)
Failure Modes of Asian Development Bank
- 1980s AFIC scandal: private sector operations 'highly unsuccessful with losses and financial scandals'—damaged credibility for decades
- 2007-08 Food Crisis: accused of ignoring warnings, pushing conditions that pressured deregulation
- Thailand Mae Moh coal plant: widespread environmental damage, symbol of oversight failures
- Georgia Shuakhevi Hydropower (2017): tunnels collapsed 2 months after opening, still leaking water
- Project success: only 55% successful for non-sovereign operations (2021-2023)
- Environmental/social safeguards 'usually up to standards on paper but often ignored in practice'
- Weak project selection and poor project readiness
- Borrower capacity mismatch: ADB standards exceed many government capabilities
- Japanese presidential monopoly limits diversity of approaches
- Middle-income graduation dilemma: China still borrowing despite running own MDB
AAA rating downgrade from major sovereign defaults. Callable capital call failure if US/Japan refuse legislative appropriations. AIIB eclipse if China-led alternative scales and attracts better talent/projects. Climate-induced correlated defaults across vulnerable Asian coastal economies
Biological Parallel
Japan/US provides the structural framework (capital, governance, AAA rating) and protective environment (preferred creditor status, risk management). Asian developing countries provide legitimacy and institutional purpose—without borrowers, no development bank. Neither can function without the other. This is obligate mutualism: Japan/US need Asian development demand to justify ADB's existence; Asian countries need AAA-rated capital access. Power is asymmetric: fungus controls structure but dies without algae. Like lichens, ADB is slow-growing but resilient (survived 1997 Asian Crisis, 2008 Financial Crisis, COVID). China's AIIB is a competing lichen colony growing on adjacent substrate.
Key Agencies
12 members (8 Asia-Pacific, 4 non-regional); approves strategies and operations
Direct lending to private companies; grew 41x from 2001-2007
Concessional lending to poorest countries; merged with OCR in 2017