by Piyaporn Hawiset
16 May 2000
Amidst growing anti-Asian Development Bank (ADB) sentiment among ordinary Thai people, senior ADB officials painted a picture of an institution in confusion prior to the bank's 2000 meeting in Thailand that started on May 5, 2000. The Asian Development Bank approached its Year 2000 meeting in Chiang Mai, fearful of protesters, dogged by corruption scandal, beset with confusion and burdened with an unimpressive record.
The bank had quietly abandoned plans to make Seattle the site of the 2001 meeting, fearful of provoking the same sort of protests that did the World Trade Organization (WTO) in. But it could not do anything about changing the location for its 2000 meeting, which was filled with hundreds of demonstrators from Thailand and the rest of the region angry at the social and economic damage the banks programs have caused and will cause to ordinary people while supporting and further enriching the eocnomic and political elite.
Trailing the Manila-based Bank to Chiang Mai was probably the biggest scandal that has hit an ADB-supported project: the wholesale bribery of the Philippines House of Representatives to push through the privatisation of the National Power Corporation (Napocor). Another scandal was the selection of a British-Thai team of consulting engineering firms to carry out a technical assistance attached the controversial $600 million Agricultural and Water Resources Management Restructuring Loan over the much favoured Canadian-Thai engineering firm even though it was revelaed political meddling by Thailand's ex-prime minister Banharn Silapa-archa not only resulted in the ouster of Pongpol Adireksan as minister of Thailand's Ministry of Agriculture and Cooperatives, but brought into the open schemes by Banharn to use the British-Thai team of consulting engineers to ensure the technical assistance will permit his strategy to siphon money from the loan to be fulfilled. This is not preposterous since the Bank has admitted to investigating 55 allegations of corruption involving its staff and executing agencies in the Asia Pacific region as of December 1999.
It is, however, not only scandal that dogs the ADB but confusion in the ranks. For staff members, the days of funding and implementing physical infrastructure projects that could be subjected to narrow cost-benefit analysis are over. According to a senior staff member who spoke on condition of anonymity, people in the field are suffering from "goal congestion," that is, trying unsuccessfully to integrate the various objectives that donor governments have attached to lending in the last few years: poverty reduction, social development, sustainable development, promoting women's welfare, and good governance."The confusion and failure to integrate goals into project and program design is reflected in internal evaluations. Thus the Draft Asian Development Fund Report to the Donors states that although poverty reduction has been a central concern and is now the "overarching vision and goal, few projects have been designed specifically to address this objective."Failure to integrate stated goals into the so-called "country operational strategies" (COS) is part of a broader pattern of failure. "Almost all forestry projects have failed-that is well known within the Bank," said one official knowledgeable of the bank's environmental projects.
Indeed, only 36% of projects in the Agriculture and Natural Resources Sector are rated "generally successful."But this is not as bad as the record in the Social Infrastructure Sector (33%) and the Finance Sector (15.2%).
While the success rates in the energy, industry, and transportation and communications sectors are high, an assessment by the Strategy and Policy Department said that across the board, "in most instances...operational performance was far short of projections."This was due to "weaknesses in project design, particularly where there was weak institutional capacity and there were inappropriate policies." The poor record in agricultural projects reflects the fact that the ADB, according to another senior staff member, who refused to be identified, has been trying to get out of agriculture lending. The reason for this was that assessment of costs and benefits and project management were not as simple and straightforward as in energy and infrastructure programs. The resulting lack of a track record in agriculture poses a major problem, he said, since "the future of Asia lies in solving the food security problem, not in providing more and more physical infrastructure. The bank may have made a strategic mistake." Among the new considerations that donors want to bring into lending decisions is "good governance" on the part of the borrower. The ADB prides itself with being the first multilateral lending agency to have a board-approved policy statement on good governance. This is a euphemism for trying to do away with corruption which in itself has done nothing more than enrich the wealthy at the expense of nearly destroying the countries' economic systems and damaging the lives and livelihoods of the majority of ordinary people
Many bank staff members are, however, very cynical about the new policy. One senior person pointed to informal rules that reserve certain positions to the dominant countries, in particular the US and Japan. The US speaks loudest when it comes to good governance, she said, but it considers key positions in the bank "its private property, and no talk about democracy and transparency will change that."A good case is the position of the General Counsel of the bank. The US has locked up this position, an attitude that has brought it criticism from the Board for a "lack of transparency."Mindful of criticism, the US last year pushed to have a US citizen continue to fill the post but chose a US citizen from Hawaii who has a Japanese name. This is because the US aims to use the ADB as its instrument to ensure economic neo-colonialism of the region for its multinaitonal corporations. It has thus far been largely successful, although the protests in Chiang Mai suggest that ordinary people have begun to see through the charade of democracy and good governance and all that.
While the US may be the most vocal when it comes to promoting new policies from poverty reduction to good governance, it is Japan that controls the institution. Japan in this case means Japan's Ministry of Finance (MOF). The Ministry of Finance virtually determines who will be president-the current chief Tadeo Chino is a graduate of the MOF-and who fills the key position of head of budget and staffing.
The MOF's control of strategic posts has had detrimental consequences for innovation for two reasons. One is ideological: the MOF is probably the most conservative of Japan's economic agencies. The other is structural: the chief of the budget and staffing department, for instance, is replaced every three years by the MOF.
Ironically, Japanese control of the bank has not resulted in the adoption of the bottom-up, participatory management that Japanese firms are noted for talking about. Instead, the ADB has reproduced the overcentralised, hierarchical structures of the MOF. But then again, Japanese culture thinks in this fashion. Despite its Jurassic characteristics, the bank has not been immune to internal pressures and external events. For instance, pressure from some donor countries has pushed the bank to devote more of its lending portfolio to program or "adjustment" lending, where loans for individual projects are made contingent on macroeconomic policy changes, like accelerated privatisation, deregulation, and liberalisation. However, an internal review of the Bank's program lending dated Nov. 22, 1999 decries the "proliferation of policy conditionalities" in program loans, noting that the average number of conditionalities per program loan is 32! Practically admitting the failure of the bank's conditionality-burdened program lending, the document states that "besides the issue of proliferation of conditionalities is the more basic issue of the efficacy of the policy conditionality approach." Conditionalities have alienated most client governments.
The most controversial has been the case of Malaysia. After the outbreak of the Asian financial crisis, the ADB offered to lend to Malaysia, but only if that country undertook policy reforms demanded by the IMF. Malaysia refused and followed its own strategy to surmount the crisis, which was the exact opposite of the fiscal and monetary repression promoted by the IMF. Now that Malaysia has proven both the IMF and ADB wrong with its successful effort to bring about a vigorous recovery, ADB officials are wondering if Malaysia will ever again borrow from the Bank. The subordination of the ADB's approach to the IMF's overall strategy to deal with the Asian financial crisis still rankles within the bank. Staff members resent the way that under IMF pressure, the ADB leadership in 1998 disregarded the usual loan approval process, which usually takes a year, to push through a massive $1 billion loan for Korea in less than a week! This might have been tolerated had the ADB contribution been part of a program that succeeded. Yet the IMF's harsh monetary and fiscal approach merely made the Korean financial crisis worse in 1998, leading many in the ADB staff and leadership to seriously question the relevance of the fund's paradigm and the fund itself as an institution.
The ADB's Japanese elite, in particular, is said to be particularly resentful of the way the IMF, with US support, killed the Japanese-initiated proposal to set up an Asian Monetary Fund (AMF) to deal with the crisis in late 1997. The AMF would have siphoned vast amounts of money to Japan and its economic and political elite. Now that the IMF had been proven wrong, there was strong support from within the bank and its member governments in Asia to revive the AMF proposal, said a senior official. Competing with the World BankIf relations with the fund are bad, the ADB's relations with the World Bank are "fiercely competitive," said a member of the Programs Department. It was not always so, since for years the World Bank was regarded as some sort of "Big Brother," whose programs, projects, and organization were models for the ADB. What changed the relationship was World Bank President James Wolfensohn's articulation of the "Comprehensive Development Framework," which ADB officials viewed as an effort to subordinate the ADB and the other regional development banks to the World Bank, both organisation and agenda-wise.
When Mr Wolfensohn proposed moving the whole East Asia-Pacific Division of the World Bank to Singapore in 1999, the ADB saw that as an effort on the part of the World Bank to marginalise it or make it irrelevant. From then on, the World Bank has been perceived as a threat. Which is why, according to several staff, the ADB was cheered by the recommendation of the International Financial Advisory Commission (the "Meltzer Commission") appointed by the US Congress that the World Bank devolve most of its functions to the regional development banks. The two so-called development institutions are busy fighting each other which obviously means they are not genuinely interested in promoting true development and helping ordinary people out of the seemingly ceaseless poverty.
All these developments created strong pressures from the Asian member countries of the ADB for the institution to define and structure itself as an institution that is really responsive to the needs of the region. "One school of thought gaining momentum questions whether we really need the US and Europe in the Bank," said one official. "Unlike the other regional development banks, the ADB derives the major part of its resources from the region itself, particularly Japan. The idea is to bring in resources from Taiwan and China to replace that now contributed by the Americans and Europeans." The problem with this approach, he noted, was the apprehension of some members about Japan's agenda once the countervailing power of the US and Europe is removed."The region is changing, and the pressures of change are buffeting the ADB. Will it succeed in adapting itself to the changing needs of the countries and peoples in the Asian region?Most of the senior staff members interviewed were sceptical.
"The projects will continue to be really traditional in approach, though there will be the necessary icing of pro-poor rhetoric to get the donors to loosen the purse strings," said one. "But it is nothing more than rhetoric, unfortunately, because diplomatic and economic expediency always dicates at the end of the day."
Another laughed, saying, "This is really a conservative institution. Asking it to change is like asking Japan's Ministry of Finance to change."
Relief initiative stalls
The Asian Development Bank wrapped up its 33rd annual meeting on May 8 in the same way that it started--confusion, and with plans to combat poverty in disarray due to differences among major shareholders. Tadao Chino, the bank president, in a face-saving measure, said at a closing press conference that most of the 58 member countries were behind the capital-raising program needed to meet the goal of sharply reducing the region's poor, now numbering 900 million, by 2025.
Unlike Japan, the United States opposed the initiative, while some European members expressed reservations. The US and Japan are the main shareholders, each holding 16% of voting power in the bank. The US wants the bank to show more effective use of existing funds by a better selection of projects to really serve the needs of recipients and not the political and economic elite of the recipient countries and of Japan.
In a board meeting on May 7, the US said Washington "did not foresee a need, or the prospect of broad support" for more funds for the bank. Asked about the American position, Mr Chino, a Japanese national, said: "Most countries represented on the board of governors support the initiative." The Europeans had neither opposed nor supported the call.
"We need the resources," he said. "Without government representatives' support, we can't do anything."In contrast to Washington, Mr Chino, in a statement released at the end of the meeting in Chiang Mai, said he had noted broad support for the bid over the three days that the annual meeting was held.
"In order to fight poverty across developing Asia, and to achieve progress towards the International Development Goals, the ADB needs adequate resources," the statement said.
The bank will undertake a study on more financial support which will be tabled for a decision from the board of governors at the next convention in Honolulu [in 2001], Finance Minister Tarrin Nimmanahaeminda told a separate press conference.
Calls for reforms at the bank, greater co-operation among Asian countries as they recover from the financial crisis, and more private-sector participation were key issues taken up by the board of governors chaired by Mr Tarrin.
They agreed that the bank had to be reformed to better cope with changing situations in the region and better serve their needs. Asian countries had to build up intra-Asia relations and boost relations with the global community, while their private sectors had to be brought in to participate in the bank's activities. In the face of growing calls for reforms, Mr Chino said the bank was ready for the challenges ahead, and would prove as much by turning its vision on poverty reduction into action.
New offices to be opened in the region and close consultations with all stakeholders would bring about better performance by the bank, he added.