News and Update: ADB tries to mitigate path to irrevelancy

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Update from Bank Information Center, 13 September 2007

The Asian Development Bank is contemplating changing mission its from “poverty reduction” to “inclusive, environmental friendly growth” and promoting “regional economic integration” as it tries to re-invent itself for the “New Asia.”

The Asian Development Bank is currently reviewing its Long-term Strategic Framework (LTSF). The Framework, initially intended to guide the organization from 2001-2015, has been put under the spotlight given the findings of the Eminent Persons Group (EPG) Report which called for a radical transformation of the Bank if it were to remain relevant to the needs of Asia’s growing economies up to year 2020.

Providing justification for the Review, the ADB cites the many changes that have engulfed the Asia-Pacific region since the Framework was first developed, namely: high rates of growth and a corresponding rise in incomes and inequality, high levels of domestic savings in many Asian countries, and a reduction of people living in absolute poverty.

Many observers of the Bank, including some of its member countries, feel a rethinking of its business model may reduce its commitment to work with the poorest countries in Asia. Others wonder if a shift in focus to cater to the stronger, middle-income economies of Asia is simply an effort by the Bank to lend more and thus safeguard its place in the global financial architecture.

While the ADB wishes to debate the merits of changing its mission from one of “poverty reduction” to promoting “inclusive growth”, and champions the concept of environmentally sustainable growth, more fundamental questions such as whether the Bank has statistics to show how its projects have contributed to poverty reduction on the ground, and whether its projects have actually directly contributed to environmental degradation, are still to be answered.

The current gap between policy and practice remains large and many worry whether an increase in lending and a continued focus on large scale infrastructure projects is the answer to the poverty still prevalent in the region.

Furthermore, the Bank has yet to articulate how regional integration as a mission in itself would contribute to poverty reduction, environmentally sustainable growth, and less inequality. Interestingly, the regional integration theme stresses “trade facilitation” (ease of cross-border trade by streamlining customs procedures etc) and “aid for trade”— two controversial themes that are being negotiated, but not resolved, at the WTO.

As part of the review, the ADB held regional consultations in Washington DC (Sept 5) and South Asia (Delhi, Sept 5-6). Unlike prior consultations, the ADB met with South Asian government officials, the private sector and civil society organizations in three separate gatherings over two days.

At the civil society meeting, questions were raised regarding the ADB’s reliance on $1/day figures for poverty statistics in countries such as India and the usefulness of using aggregate numbers for regions as diverse as South Asia and East Asia. Questions were also raised as to whether the current LTSF’s “strategic thrusts” and “thematic priorities” which identify inclusive and environmentally sustainable growth and regional integration as priorities were not simply being repackaged and elevated to the status of a new ADB mission. To this, Director-General of the Policy and Strategy Department, Mr. Sakai, responded, “In the end, we may decide we do not need to change anything.”

In response to questions regarding assessment of their current mission of poverty reduction and whether it has been successful, Mr Sakai said, “ADB is not just defining poverty by income but also by the Millenium Development Goal targets” which is interesting since the new draft LTSF proposes doing away with measuring impact using the MDGs as an indicator, and switching to new “inclusive growth” indicators which will be developed subsequently. He added, “Impact of operations on poverty reduction is quite difficult to measure.” He narrated that previous attempts to put poverty reduction targets in loans led to numerous problems and delays where “a simple highway project became very complex with numerous government departments getting involved” because of the need for secondary and tertiary roads that the poor use. He admitted that the ADB does not have adequate human resource capacity to address these issues. However, the ADB’s Operation and Evaluation Department (OED) is currently evaluating several projects to assess these issues.

Resources

ADB’s Long Term Strategic Framework (ADB website)

Eminent Person Group report (ADB website)

View audio and video reactions of ADB Governors to the EPG (ADB website)

ADB Policy Paper which provides the poverty statistics and rationale for its mission of “inclusive growth” (ADB website)

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