Governors slam report on ADB’s future

05/05/2007 | Anthony Rowley

The report of the Eminent Persons Group setting out the bank's strategy up to 2020 has been criticized for failing to address the bank's crucial challenges

The report of an Eminent Persons Group (EPG) on the ADB’s future ran into a hail of criticism from some governors yesterday

The opposition ranged from claims that the group’s recommendations would pull the bank away from its mission to reduce poverty, to allegations that they would take it into competition with the private sector in financial markets.

The challenges came at a governors’ seminar in Kyoto, which provided ADB member countries’ representatives with the first opportunity to respond publicly to the report. It was published a month ago by the six-member EPG and looks at the bank’s strategy up to 2020.

But the EPG had been denied access to senior staff in the bank, and the group’s findings lack support in the institution, one senior ADB official told Emerging Markets. “The staff hate it”, the official said.

The EPG, headed by UNCTAD secretary general Supachai Panitchpakdi, foresees an expanded, restaffed and reshaped bank, serving countries that are headed “upmarket” in development terms. The “new ADB” must abandon a narrow focus on poverty and support faster and more inclusive growth, raise productivity and foster technological development and knowledge management, the group argued.

ADB president Haruhiko Kuroda praised the “boldness” of the EPG, which included outside experts such as former US Treasury secretary Lawrence Summers and Deutsche Bank Group vice chairman Caio Koch-Weser and leading Asian figures. Japanese finance minister Koji Oji said the ADB needs to be “reborn”.

Summers, in a telephone interview with Emerging Markets, said that the ADB’s role would have to change in a changed economic environment, to embrace areas where markets were “reluctant”, such as the environment, and increasingly on harnessing expertise.

Indicating support for plans to take the bank into foreign exchange reserves management, Summers said that in the largest Asian countries, the ADB’s challenges “have more to do with managing the accumulation of reserves than if you were attracting capital from abroad”.

But Afghanistan’s finance minister Anwar Ul-Haq Ahady complained that “only 10%” of the EPG’s report is devoted to Asia’s poor countries. Ahady challenged the EPG’s assumption that most Asians will be living in middle-income countries within a decade or so from now. “Even in 2020, poverty in this region may be much greater than the report suggests,” he said.

Bangladesh’s governor at the ADB, Mirza Azizul Islam, complained that the EPG report “does not spell out how to achieve inclusive economic development” in Asia and how to overcome problems of urbanization. Islam also insisted that “development must start at a national level”, and that development agendas could not be set solely by a more activist ADB.

Sources in the ADB suggested to Emerging Markets that the EPG had not paid sufficient attention to the fast-expanding role of the private sector in Asia and the contribution that this is making to development. It also overlooks the major contribution that private sector activities make to the ADB’s own earnings, the sources suggested.

Nobuyuki Idei, chairman of the advisory board of Japan’s Sony Corporation and a member of the EPG, said that a more important theme for Asia’s future development would be “public-private sector cooperation”.

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