TNAG-1489-FCO40-2046-Hong-Kong-and-the-Asian-Development-Bank-1986 — Page 57

help mobilize funds; and give advice to member governments which may want assistance in transferring public enterprises to the private sector.

I am pleased to report that early this month the Board of Directors approved the Bank's first loan to India. We look forward to playing a modest but effective role in support- ing India's economic development.

During last year's Annual Meeting, several Governors suggested that the ADB should introduce a domestic preference scheme for the procurement of goods and ser- vices in the developing countries. After hav- ing made an intensive study of the actual situation in developing countries, we are now proposing to introduce a price adjustment scheme for domestic goods, not to give them preferential treatment, but rather, to put them on equal footing with foreign goods.

The Bank's borrowings in international capital markets during the past year amounted to about $800 million. The Bank continued to diversify its sources of borrow- ing, and, in this regard, made the first offer- ing of yen-denominated bonds in the New York market. The average cost of borrowing for the year was 7.36 per cent which is a highly satisfactory outcome.

During 1985, the Bank approved the adoption of a pool-based variable lending rate. system which will come into effect in July 1986. This new system will bring the Bank's financial structure more closely in line with

prevailing market conditions and will allow the Bank much more borrowing flexibility which could lower overall borrowing costs. As a result, borrowers should, over time, benefit from lending rates which could be con- siderably lower than those possible under the traditional fixed lending rate system. This policy change requires that the Bank re- examine a number of related financial policy issues. That assessment is now under way and will be reviewed with the Board of Direc- tors later this year.

Net income on ordinary capital resources increased by 25 per cent to $257 million in 1985, indicating the Bank's continued strong financial performance.

In 1985, discussions were begun with Asian Development Fund donor countries on a further ADF replenishment. The replenish- ment, called ADF V, is intended to finance the Bank's concessional lending over the four- year period 1987 through 1990. I am happy to report that in the final meeting on ADF V held here during the last two days, the donor coun- tries reached agreement on an ADF V total of $3.6 billion.

I am also pleased to report that work on the Bank's new headquarters building is pro- ceeding on schedule. The main building con- tract and major specialized subcontracts have now been awarded, and the foundation laying ceremony was held earlier this month. This project underscores the Bank's confidence in the Republic of the Philippines as the location for the ADB's headquarters.

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