17 November 2008
Internal ADB evaluation finds unsatisfactory returns, lack of focus for selection, weak safeguards.
The Asian Development Bank's (ADB) internal evaluation unit has found that the ADB's private equity fund investments have produced "unsatisfactory" returns, selection has lacked focus while environmental and other safeguards have been weak. It is still unclear if the process of evaluation was up to standard.
The evaluation unit found that the nominal financial rate of return was low compared to ADB's average required rate of return. Seethapathy Chander, deputy-director general of ADB's private sector operations stated that this was because the nature of the investments was "small and disaggregated.
In contrast, the International Finance Corporation (IFC), the World Bank's investment arm, argues that the quality of the fund manager, not the nature of a project, is the key factor determining the performance of its funds.
The evaluation comes at a time that the ADB is seeking significantly to increase private sector involvement to 50 per cent of its projects by 2020 and coincides with a bid to update its environmental and social criteria for lending.
Stephanie Fried, of the Environmental Defense Fund, said the investment in private equity funds should be reconsidered, given the relatively poor financial returns and the apparent lack of attention to safeguards over the environment, indigenous people and involuntary relocation.
SOURCE:
ADB probe criticizes its own investments, John Aglionby, November 17, 2008 (FT website)