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Asian Development Bank
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1075701
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Asian Development Bank
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Vernon C. Loen and Charles Leppert Files
Vernon Loen's and Charles Leppert's General Subject Files
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Federal budget
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The original documents are located in Box 2, folder "Asian Development Bank" of the
Loen and Leppert Files at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
remain with them. If you think any of the information displayed in the PDF is subject to a valid
copyright claim, please contact the Gerald R. Ford Presidential Library.
Digitized from Box 2 of the Loen and Leppert Files at the Gerald R. Ford Presidential Library
file Bank Department
8114 do hand-
Key talking point: $362 million over three years for
hard loans and the last $50 million installment for
1010
soft loans. Only about 2 1/2 percent of this $412
million would be a budget outlay this year, about the
same next year, and 70 percent is only guaranteed
capital that should never become an actual outlay.
FORD & LIBRARY ОТУНАВ
OF
THE
TREASURY
THE SECRETARY OF THE TREASURY
THE
WASHINGTON
1789
September 16, 1974
Dear Congressman:
I understand the leadership intends to bring H.R.
11666, a bill authorizing additional U.S. resources for the
Asian Development Bank, to the House floor on Thursday,
September 19. Identical legislation, S. 2193, passed the
Senate by unanimous consent on August 1, 1974.
As the U.S. Governor of the Asian Development Bank,
I would like to be sure that you and other members of the
House have information that will be useful in forming
your judgments on this legislation. With that in mind, I
am attaching a summary sheet on the bill and some questions
and answers on the Asian Development Bank itself.
I have also attached a copy of a response President
Ford has just sent to Congressman Henry B. Gonzalez, in
which the President expresses his full support of H.R.
11666 and his belief that passage of the bill would not be
inconsistent with the current need for strict control of
government spending.
Needless to say, I share completely the President's
view that H.R. 11666 is acceptable legislation in terms of
fiscal responsibility. Here is why: of the $362 million
to be made available to the Asian Bank's hard loan window
over the next three years, $289 million (80 percent) is
guarantee capital with no probability of expenditure.
The bulk of the remainder, together with the $50 million
proposed for contribution to the Bank's concessional
loan fund, is to be in the form of non-interest bearing
letters of credit that will not be fully drawn down until
many years in the future.
U.S. participation in the Asian Development Bank has
wide support in the U.S. business community, including
particularly the American Chambers of Commerce in all of
the countries of the Pacific region. Other countries have
FORD
- 2 -
already committed their contributions, and our share --
less than 20 percent -- is modest compared to them.
Passage of this legislation would demonstrate that
the United States is prepared to play a constructive role
in Asia by addressing the problems of abject poverty that
exist there. I hope you will give it your careful con-
sideration.
Sincerely yours,
William E. Simon
Attachments
FORD & LIBER 078838
ADB AUTHORIZING LEGISLATION - H.R. 11666
FACT SHEET
Asian Development Bank (ADB) - H.R. 11666
--
Authorizes funds for Ordinary Capital (hard
window) and Special Funds (concessional loans)
Ordinary Capital
--
Authorizes $362 million over 3 years for
U.S. subscription to first replenishment
of ADB since establishment in 1965
--
Subscription will restore U.S. voting power
to 17 percent (parity with Japan). U.S.
vote fell to 8 percent as result other of
countries going ahead with their subscrip-
tions last year
--
Bulk (80 percent) of annual installments of
$121 million each will consist of no-expendi-
ture callable capital to serve as guarantees
for private market borrowings.
Special Funds
--
Authorizes final $50 million of U.S. $150
million contribution ($100 million authorized
March 1972)
--
Other developed countries to contribute fur-
ther $375 million (beyond $250-300 million
already provided); cumulative U.S. share in
special funds after this $50 million would
be under 20 percent
--
No appropriation required until FY 1976;
outlays will be stretched out still later
--
Overall replenishment package accomodates to
U.S. position on shares and timing; proposal
was carefully explored with Congress from
earliest stages
-- Identical legislation (S. 2193) passed the Senate by FORD
unanimous consent on August 1, 1974.
ADB BASIC INFORMATION
1. What is the ADB?
The Asian Development Bank is an international develop-
ment finance institution established for the purpose of
lending funds, promoting investment and providing technical
assistance and generally fostering economic growth and
cooperation in the Asian region.
2. How was the ADB established?
The ADB was established in 1966, as a result of Asian
countries' initiative in the Economic Commission for Asia
and the Far East (ECAFE) to seek the establishment of a
regional development bank for Asia. The U.S. is an original
member of the ADB. The Bank is located in Manila.
3. Where does ADB get its funds?
The Ordinary Capital of the ADB consists of paid-in
capital subscriptions on Bank members, and borrowings in
private markets, which are guaranteed by the callable portion
of members' capital subscriptions. The Special Funds of the
ADB have been voluntarily contributed by member countries,
through bilateral arrangements with the ADB. These funds have
come from developed member countries of ADB.
4. What is the cumulative U.S. share of ADB's Ordinary Capital?
The U.S. has contributed $241 million as its original
capital subscription. Since the U.S. has not yet participated
in the Ordinary Capital increase approved by the ADB Board of
Governors in 1972, our share of contributions has dropped
from 20 percent to 8 percent.
5. What is the U.S. share of the new ADB Special Funds?
The U.S. share of the new Special Funds, the Asian
Development Fund, will be $150 million out of a total of
$525 million -- a 28 percent share. Taking into account
$250-300 million of earlier contributions by others, the
cumulative U.S. share would be under 20 percent.
FORD
- 2 -
6. What does the ADB lend for?
The ADB lends principally to finance specific projects --
whether part of national, sub-regional, or regional
development programs -- in agriculture, electric power,
industry, transport and communications, water supply and
education. The ADB also provides technical assistance to
member countries for the coordination of economic policies,
and the preparation, financing and execution of development
projects and programs.
7. What are ADB loan terms?
ADB lending includes Ordinary Capital (conventional)
loans and Special Funds (concessonal) loans.
Ordinary Capital loan terms are 7½ percent interest per
annum; 10-27 year term, and 2-7 years grace. Concessional
loans from Special Funds carry an interest rate from 1½
to 3 percent, with a 15-30 year term and 3-10 year grace
period.
8. Who receives ADB loans?
The 23 developing regional member countries are eligible
loan recipients; as a policy matter, some do not borrow from
ADB.
9. What countries have received the most money from the ADB?
As of December 31, 1973, the largest ADB loan recipients
were Korea ($247 million), Philippines ($184 million),
Malaysia ($139 million), Pakistan ($138 million) and Thailand
($122 million).
10. What sectors have received the greatest amount of ADB
financing?
Electric power (26.5 percent) ; industry including
development banks (24.9 percent); transport and communications
(23.9 percent).
11. How good are ADB projects?
Every ADB project is developed by a Bank team of economists,
financial analysts and technical experts who assure that each
aspect of the project is technically feasible and economically
and financially viable. Close supervision by the Bank and
FORD
rigorous international bidding ensure both effective and
efficient project implementation.
- 3 -
12. Will any ADB funds go for oil imports?
No. The ADB finances only loans for projects, which
must be used to procure project associated services and
equipment.
13. What are some examples of ADB projects?
In the last year for example the ADB has financed:
Afghanistan: $14.9 million Special Funds loan for 266
kilometer road, linking fertile agricultural area with the
existing national highway system.
Indonesia: $5.3 million Special Funds loan for electric
power system rehabilitation and extension, allowing connec-
tions to 20,000 new customers.
Thailand: $21 million Ordinary Capital loan to Bangkok
Electricity Authority for extension of electric power to
100;000 households.
14. How does the U.S. exert its influence on the ADB?
The U.S. is represented on the ADB Board of Directors
by a Director who casts 7.5 percent of the votes. The ADB
Board reviews all ADB projects and policies developed and
proposed by the ADB. The U.S. Director is supported by the
National Advisory Council which meets every week to review
ADB projects and policies, and by the Treasury's Inspector
General for International Finance, who reviews projects in the
field.
15. How are ADB projects evaluated?
Largely as a result of U.S. insistence, the ADB in 1973
made its Economic Office responsible for post-project
evaluation. This office has submitted two reports to the
Board and further evaluations are in process.
16. What has been the impact of ADB on the U.S. balance of
payments?
Cumulative ADB procurement in the U.S. was $34 million
at the end of 1973. In addition, an unknown amount of the
U.S. contribution returns to the U.S. indirectly through ADB
recipients' increased demand for imports from the U.S. because
of these borrowers' improved growth rates. After two years of
negative impact on the U.S. balance of payments, there was a
FORD
shift in 1972 to a positive impact. Data for 1973 are not
yet available.
- 4 -
'17. What is the timing of these proposed contributions to
the ADB?
Participation in the Ordinary Capital increase will
involve three annual payments of $121 million, largely of
no-cost guarantee capital. The U.S. contribution to ADB
Special Funds will be paid in one installment of $50 million,
in the form of a non-interest bearing letter of credit.
18. Does the ADB lend to countries which have expropriated
U.S. property?
The issue of lending to countries which have expropriated
foreign-owned property without adequate compensation has not
arisen in ADB operations. The U.S. expects the Bank will be
careful to avoid lending in such situations. The Bank is aware
of the practice of other international development institutions
of refraining from loans in such situations, unless adequate
progress and good faith negotiations have been made towards
resolving the disputes. The ADB is also aware of the views
of the U.S. Congress and the U.S. Administration in these
matters.
19. Does the ADB lend to OPEC countries?
The only member of OPEC which is a member of the ADB --
and thus an eligible recipient -- is Indonesia. Despite
increased oil revenues, Indonesia's per capita income remains
very low -- $130 per year. No further soft loan assistance
from ADB is foreseen, but Indonesia continues to need assistance
on conventional terms to effectively pursue its economic
development efforts.
20. Will the OPEC countries contribute to the ADB?
Although no concrete arrangements have yet been made,
discussions are under way with OPEC members in many fora to
determine ways in which these oil-rich countries can assume a
greater role in providing resources for the development efforts
of the poor countries of the world.
21. Can the ADB lend to Vietnam?
is
FORD
BALO
The Republic of Vietnam is a member of the ADB and thus
eligible for assistance from the Bank. Through March 31,
1974 Vietnam had received $24.2 million in loans from ADB, of
which $20.3 million were concessional funds. These loans,
representing only about 2 percent of total ADB lending, were
for water supply, telecommunications, fisheries development,
irrigation and agricultural development. They are designed to
assist the basic economy and the people of Vietnam, and are in
no way related to military or political aspects of the Vietnam
situation.
THE WHITE HOUSE
WASHINGTON
September 16, 1974
Dear Mrs Gonzalez:
In regard to your letter of August 19, I can assure you
of my full support of H. R. 11666, which would
authorize further United States resources for the Asian
Development Bank.
Like the other international development lending institu-
tions in which the United States participates, the Asian
Development Bank supports important international
economic and foreign policy objectives of the United
States. It does this in a way that permits the financial
burden to be shared with other developed countries SO
that the United States bears only a small share of the
cost.
You are correct that I am intensely concerned about
Government expenditures. But the proposed legislation
need cause no misgivings in that regard. By far the
greatest proportion of the authorization is in the form of
contingent guarantee authority, with no foreseeable ex-
penditures. Almost all of the balance is in the form of
non-interest bearing letters of credit that will not be
fully drawn down until many years into the future.
A bill identical to H. R. 11666 has already passed the
Senate. I believe II. R. 11666 deserves the strong
support of the House so that the United States can join
with others who have already contributed to the Bank's
R.
FORD
2
program of assistance for poor nations throughout
the Asian region.
Sincerely, Known R. Fort
The Honorable
Henry B. Gonzalez
Chairman, Subcommittee on
International Finance
Committee on Banking and Currency
House of Representatives
Washington, D. C. 20515
SALE B. FORD