The Asian Development Bank responded to the financial crisis
with all guns blazing. In just over a year after the crisis
began, the bank won a tripling of its capital base and has
since doubled its lending.
The banks ordinary, non-concessional, lending jumped
to $11 billion in 2009, an increase of 31% over 2008 and a near
doubling of the roughly $6 billion annually that the bank was
lending up to 2007.
Including concessional loans, total ADB lending in 2009 hit
a high of $13.2 billion. Without the capital increase it would
have been limited to one-third of this. By lobbying hard for a
major capital increase for the ADB, its president Haruhiko
Kuroda opened the door for multilateral development banks in
general to be given large capital increases in the wake of the
It is a massive challenge to gear up from being a $55
billion bank to becoming a $165 billion bank, says
executive director Phil Bowen. With the capital increase,
the ADB was able to respond very effectively to the systemic
Much of the ADBs additional lending since the crisis
has gone into quick-disbursing credits for budgetary support,
something that has given the ADB the appearance of a
mini-IMF in the eyes of some as the bank moved
quickly to help countries overcome the impact of the financial
crisis. Indeed, one of the successes of the bank has been the
way in which it has managed to become a short-term crisis
lender while continuing in its more traditional role as a
long-term project financier.
Other innovative forms of lending also helped prevent trade
from seizing up in Asia in the wake of the global recession.
Some $750 million was supplied last year through the
banks enhanced trade financing facility, a revolving
credit that kept trade moving in the critical post Lehman-shock
We are seeing in Asia a significant recovery, well
ahead of the rest of the globe, says one executive
director. I would not put it all down to ADB financing,
but it played a part. ADB money was used to good effect to
bolster economies, particularly those that could not access the
financing markets and others that would have had to pay
extremely high rates of interest.
SCORE CARD TRANSPARENCY
The surge in lending in the wake of the financial crisis has
coincided with what is generally agreed to be a quantum
improvement in the ADBs accountability to its
shareholders and other stakeholders, following the introduction
of what the banks managing director Rajat Nag describes
as a unique score card system of self-evaluation by
The Managing for Development Results Framework consolidates
in one annual report the Development Effectiveness
Review an assessment of the ADBs performance based
on agreed yardsticks, so that it can be monitored easily by the
banks 12-member executive board.
The system was introduced in 2008 but this year, for the
first time, presentation of the score card has been advanced
from the end of the year to the time of the annual meeting in
May. This way ADB governors can also monitor the banks
performance more easily a major advanced in
transparency, says one executive director.
In past years, some executive directors of the ADB have been
highly critical of the Bank over its management of issues
ranging from project assessment and performance to budgeting,
human resources policies and alleged failure to nurture private
sector interests in emerging markets. The ADB has also been
criticised by these resident country representatives over
lack of transparency.
Criticisms have reflected differences between the
Banks traditional Japanese (meaning
autocratic and rather opaque) management style and the demands
on the part of Western directors for greater openness and
accountability. Criticisms have become more muted now with the
advent of a reporting system which one ED says forces the
ADB to become more accountable.
The report to be presented to governors this year will show
measurable progress in addressing many concerns of
member countries, although it will acknowledge residual concern
over the ADBs relative lack of support for private sector
issues such as co-financing, compared to other regional
development banks. It will say too that the ADB is falling
short in education projects.
There is no other international financial institution
that has managed to develop a performance measurement-reporting
mechanism of this nature, says the director. The
ADB quite rightly has received quite a lot of credit for this
from other multilateral development banks and from bilateral
The ADB is the only one among the five multilateral
development banks to have this kind of results framework,
according to Kuroda. Many reports are made but not in a
comprehensive way, Kuroda tells Emerging Markets
in an interview. Ours is just one report, a living
document, showing the results of all operations. This is
a new and innovative approach to explain to our stakeholders,
including shareholders, how our operations are changing and
Eduard Westreicher, executive director for a group of
European member countries of the ADB, says: It is a very
laudable effort; the decision to open the doors and to be ready
to face critical questions is quite a step.
The ADBs readiness to face critical questions under
the results framework is applauded by those who have found it
difficult in the past to measure the extent to which the ADB is
achieving results, in areas such as poverty alleviation or
private-sector development, rather than making rhetorical
commitments to such goals.
In addition to achieving increased transparency in what some
non-regional representatives have traditionally seen as a
Japanese-style, top-down and autocratic institution, the ADB is
also working on further streamlining its business
A number of initiatives have been taken to cut back on
the processes involved in preparing loan proposals for the
board, says one ADB executive director. We will
start to see the benefit of that shortly. The expectation is
that these initiatives could cut loan processing times by about
All multilateral banks suffer from this problem of
taking too long to process loans. They will never do it as
quickly as commercial banks because there are so many
safeguards and accountability mechanisms we have to go through.
Nevertheless there are still ways in which we can reduce loan
A constant criticism of the ADB by non-regional directors
and governors and from the US especially has been
that the bank does not pay sufficient attention to development
of the private sector in the countries where it is active. They
say it is too engaged with the public sector to ensure a good
sectoral balance in the economy.
This seems set to change in the future: Under our
strategy 2020, private-sector development and private-sector
operations will comprise about 50% of the ADBs
operations, says one director. This is not
private-sector lending but private-sector development.
This means there has got to be a lot of gearing up not
only in private-sector operations but also in areas such as
risk management, because when you take on more private-sector
work, you are not getting a sovereign guarantee and hence your
risk goes up. So you have to have better risk management and
people to do that work.
A significant number of the 500 or so new staff that the ADB
is planning to add to its establishment of around 2,500 under
the medium-term 2020 strategy will be risk-management
specialists and other private-sector experts. Nearly 70% of
these new staff will be placed in resident missions rather than
in the banks Manila headquarters.
The ADB has been the subject of past criticism over human
resource management, in terms of the openness of recruitment
and its skills mix. Such criticism has abated, however.
The bank has taken these criticisms seriously and has put
a lot of time and effort into addressing them, says one
Indeed, Kuroda is now widely seen as having demonstrated
considerable administrative acumen during his five-and-a-half
years as president. As a result, he is tipped as a possible
candidate for the position of IMF managing director, should
Europe relinquish its traditional hold on the job.