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Monday 19 Mar 2018 | 09:52 | SYDNEY
Monday 19 Mar 2018 | 09:52 | SYDNEY

The Asian Development Bank's unfinished business

Photo: Alva Chien/Flickr



27 September 2017 11:50

In his recent Interpreter post, Richard Moore provides a handy summary of the work of the Asian Development Bank (ADB) over the past 50 years. He also poses questions about the future of the Bank. Moore is a former ADB Board member, so he is thoroughly familiar with debates about the Bank's role in Asia.

Put simply, as the ADB draws up its forthcoming Vision 2030 strategic plan, there are two main challenges. First, given that the huge project of building a strong Asia is hardly complete, the ADB needs to continue to do many of things it has done in the past. And second, the ADB should consider what new priorities it can take on over the next decade.

Moore questions whether an emphasis on the delivery of the ADB's traditional activities remains appropriate. He says that 'much of what it offers (money, knowledge and technical skills) is available elsewhere'. Further major reforms, he suggests, are needed.

Perhaps. But is it correct that the ADB's traditional activities have become less relevant? In its work during the past 50 years, the ADB has focused on promoting three broad functions. At the recent Annual Meeting in Yokohama, ADB President Nakao listed these as combining finance and knowledge to provide services to developing-country members, promoting good development policies, and fostering regional cooperation and friendship. Continued work in these three areas is still of major importance, and probably will be for most of the coming century. The need to mobilise finance 'both from within and outside the region' was listed in the ADB Charter in 1965 as one of the main goals underpinning the establishment of the Bank. Yet today, after a long period of astonishing growth since the 1950s, developing countries in Asia are still short of capital.

Good development policies will continue to be important throughout the coming century as well. Effective policies that strengthen economic reform, create social programs and improve governance will continue to be vital for continued growth in Asia.

Support for Asian regionalism was another of the key tasks set down by the founders of the ADB in 1965. The first sentence in the ADB Charter refers to 'the importance of closer economic co-operation as a means…for accelerating the economic development of Asia and the Far East'. The ADB has been particularly active in strengthening regional integration programs in the Greater Mekong Subregion and in Central Asia. These, along with numerous other programs, help build links across the region and in doing so reduce the risk of conflict.

It is true, as Moore notes, that there is support for some of these activities elsewhere. But it is modest. Further, the flow of other funds is often of a stop-go nature. Private sector capital flows, for example, have been marked by sharp boom-and-bust periods in Asia. In contrast, financing from international development banks such as the ADB has been much more reliable.

It is also true that some bilateral donor agencies provide assistance for the policy-oriented activities that the ADB supports. But one important advantage of the ADB's work in these areas is that it is carried out in close coordination with local partner agencies in Asia. Careful coordination of this kind is not always possible in bilateral aid programs.

Looking to the future, Moore sketches out an ambitious agenda for the ADB (many other observers do as well - see the Lowy Institute's 'Stengthening the Asian Development Bank in 21st Century Asia' and this piece by CSIS's Larry Greenwood). Moore suggests the Bank should address a wide range of challenges in Asia, including the need for reforms to break up monopolies, redirect subsidies, regulate powerful players and generate sufficient revenue to deliver additional public goods and services. He also suggests the Bank should stay engaged with middle-income countries, relook at how it contributes to the development of independent institutions and focus on the political economy of policy change.

This is a daunting list, and there is always a risk of overreach. One of the strengths of the ADB's work in recent decades is that the Bank has resisted pressures to spread itself too thinly. For the ADB to remain effective, this focus should be maintained.

The need to focus becomes clear when the limits to ADB resources are considered. The Bank has planned for a rapid expansion in lending following a highly innovative reorganisation of the ADB's balance sheet, which took effect at the beginning of this year. This reform is expected to allow an increase in ADB's annual loan and grant approvals by 50% to $20 billion in 2020.

It is true, as Richard Moore suggests, that the opportunity to embark on new programs is welcome. Nevertheless, Asia's needs are vast. Traditional challenges, such as poverty, inequality, aging, and the need for basic services like water and sanitation for poor people, remain urgent. As the Bank draws up the Vision 2030 plan for its work in the decade ahead, there is clearly a need to consider new approaches. But the huge amount of unfinished work across Asia should remain a priority as well.

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