ADB: It needs a new agenda for change
The Asian Development Bank has recently concluded its 45th annual meeting of board of governors in Manila. Established in the mid-sixties, ADB has grown in size and prestige over the decades.
It has more than doubled its membership from 31 to 67, provided loans, grants and other forms of development assistance amounting to a quarter of a trillion dollars, raised its capital base five times to $165 billion, and maintained consistently highest ratings from international credit rating agencies.
The bank has justifiably earned a reputation as an efficient financial institution.
Yet the more important question is: how has the bank fared in its role as a development institution? It is true that ADB provides only a tiny fraction of financing even for countries that are most aid-dependent. It is also true that its lending to its member countries has achieved at best mixed results.
According to the bank's evaluation department, the performance of its sovereign lending kept on declining since 2000 after reaching a peak success rate of 70 percent, though the performance of its non-sovereign lending is somewhat better.
Nevertheless, the bank played a laudatory role in providing finance to poorer countries with few financing options or in offering liquidly to distressed economies that were in financial turmoil.
During the last half century, Asia has attained spectacular economic success that brought more people out of poverty than any comparable period in human history.
Despite this enormous success, a large swathe of humanity in developing Asia remains trapped in abject poverty, with 1.8 billion people subsisting on less than two-dollars a day.
This spectre of human deprivation manifests itself in many forms -- pervasive hunger, ubiquitous illiteracy, widespread malnutrition and high infant and maternal mortality rates. Two thirds of the world's hungry, three-fourths of the world's illiterates and two-thirds of the world's malnourished children live in Asia.
The magnitude and complexity of the human development challenge facing Asia far exceeds that of the rest of the world combined. The bank, whose motto is to fight poverty in Asia and the Pacific, has its work cut out for it.
Moving forward, the bank needs to further improve on its past performance. This would require ADB to embrace changes in its operations, internal governance and current personnel practices, research and evaluation.
First, the bank needs to adopt a more holistic approach to development that goes beyond a single-minded pursuit of growth to incorporate -- more directly -- concerns of sustainability, equity, and other human development dimensions.
It needs to be more innovative and strategic in its development assistance. The bank should maintain -- except in two areas -- a hands-off policy while allowing borrowing countries a freer hand in planning and implementing investments and formulating policies.
The first relates to corruption that it should pursue aggressively when it suspects of malfeasance; the second relates to policy advice, which it should offer generously, only when sought.
Second, in a recent op-ed in the Wall Street Journal, the former US ambassador to ADB Curtin Chin has noted about a governance deficit at the bank. The top leadership of the bank is currently determined by an unwritten quota-system.
According to this system, the president of the bank is selected among its senior officials by the ministry of finance of Japan, which -- along with the United States -- is the single majority shareholder of the bank.
While the president is supposed to be elected by a simple majority, it is currently conducted through a mock consensus, where a senior official from the ministry of finance of Japan is selected without any alternative candidates from other countries.
Not only is the president selected in an uncompetitive and nontransparent way, senior positions from vice presidents to department heads are similarly rationed. It is a quota system where other considerations often override merit.
As Ambassador Chin has summed up, the bank's personnel practices have been "less than world class".
Abandoning the current practices for a transparent, competitive and merit-based system will augur well for ADB.
The quota system is an antithetical to a competitive, globalised world and is incongruent with the concept of good governance that the bank so eloquently advocates to its member countries.
As a development institution, the bank can organizationally reinvigorate itself from its bureaucratic torpor by having development professionals with actual development experience at its helm.
The bank may consider introducing a ¡°double majority ¡°system to select its president, whereby a candidate for the president will have to earn the majority from both donors and borrowers. A similar double majority system, which preserves the interests of both groups, has been in vogue in other regional development banks.
Third, the bank needs to strengthen its role as a knowledge center. Asia offers an interesting narrative of development -- its successful Asian economies have not always followed the playbook of orthodox economics.
This heterodox, pragmatic approach to economic development requires careful review and analysis, which the bank is at a vantage position to offer.
In the past, the bank's research and analysis work has been both fragmented and deficient -- it has been more of an aggregator than a generator of research.
Through revamping research, the bank should contribute to a sophisticated understanding of the development process in Asia, something from which the global development community can benefit.
Finally, discussion of foreign aid has become increasingly contentious -- much of it has to do with the relative scarcity of aid resources and the murky evaluation issues surrounding the assessment of aid.
In recent years, to garner an aura of objectivity, most international development institutions have gone on to create in-house, ¡°independent ¡°evaluation departments.
Truth be told, the idea of in-house, independent evaluation is essentially an oxymoron.
To overcome the cloud of suspicion on the objectivity of evaluation, truly independent, external evaluation entities -- akin to independent credit rating agencies -- would be desirable.
As a premier development bank, perhaps the bank can take a lead in this initiative.
MG Quibria is a professor of international development at Morgan State University, USA. He could be reached at: firstname.lastname@example.org.