Asian Development Bank wears gentler face

By Glenn Scott
Advertiser Staff Writer

Despite the fact the Asian Development Bank channeled $6 billion in grants and loans into the Asia-Pacific region last year, officials know their institution is relatively unknown in Hawai'i.

•	More information about the Asian Development Bank

To prepare for the bank's annual meeting May 7-11 at the Hawai'i Convention Center — and the attention sure to accompany the gathering of 3,000 international participants — leaders have paid a series of visits here to familiarize residents with the multilateral agency and to emphasize the complexities of its mission.

They have sought to defuse criticism and explain the workings of their $45 billion development bank, one of the more ambitious of a handful of such institutions around the world. The chief message: In a post-Cold War era, the bank's role is evolving from an institution funneling money into huge construction projects to one striving to promote more fundamental social and economic change.

The annual meeting will draw many types of people, and more than a few opinions. At the top of the official protocol list will be the board of governors — the finance ministers of the bank's 59 member countries. With the bank's profile rising as its globalizing influence grows as an issue, however, many others assembling in Honolulu may find themselves briefly on a world stage: bankers, business people, social scientists, international relations experts, project managers, economists, protesters and, of course, journalists.

Among them will be N. Cinnamon Dornsife, the U.S. executive director to the bank. She met earlier this month in Honolulu with a series of civic groups to discuss the bank and her initiatives to open its activities for more public scrutiny.

Dornsife, who holds the U.S. rank of ambassador, sits on the bank's 12-member board of directors and represents the U.S. point of view in shaping policy decisions.

"We need more outreach," Dornsife said. "That's why I'm here."

Friend of elite or poor?

After ailing Indonesian banks were closed in 1997, security guards blocked the paths of depositors. The ADB gave Indonesia $3.5 billion as part of a $23 million bailout. Advertiser library photo • Nov. 3, 1997

The Asian Development Bank was created to mirror the work of the World Bank, which was started in 1944 to fund loans intended to rebuild war-devastated Europe.

The ADB came into being in 1966 as wealthier Western democracies sought to offer support to Asian countries. Similar development banks serve Latin America and Africa.

The Asian Development Bank has the charge to work in a part of the world with the majority of the world's poor, many in three of the four most populous countries: China, India and Indonesia. It makes money available through loans for long-term projects and programs; technical assistance grants; and investments.

Last year, the bank's financial activities totaled $6.1 billion. It issued $5.85 billion in loans, $172 million in technical assistance grants and $78.2 million in equity investments. The $6.1 billion represented an 18 percent rise over the bank's $5.2 billion disbursed in 1999, said Ian Gill, a bank spokesman.

India, the Philippines, China and Indonesia were the largest borrowers last year. Top grant recipients were Sri Lanka, Indonesia, China, India, Pakistan and Laos.

The most common type of loans lately have gone toward what the bank calls "social infrastructure," a category that includes projects to improve water supplies and sanitation. Last year, about 44 percent of the lending went into such projects, which included wastewater treatment in the Chinese city of Wuhan, a family health and nutrition program in Indonesia and a vocational education program for the Marshall Islands.

The membership is made up of 31 countries in Asia, 12 Pacific Island nations, Australia, New Zealand and 16 other non-regional donor countries such as the United States, Canada, Great Britain and the Netherlands. Portugal has been approved as the 60th member but has not completed the process.

The United States and Japan are the major shareholders, each having contributed 16 percent of bank assets. Several countries in Asia (China, India, Indonesia, South Korea) and elsewhere (Canada, Australia, Germany) hold 5 percent to 6 percent.

Money a balm or an ill?

The challenge for the bank has been to select and manage development projects that meet the demands of its varied constituencies. Historically, the bank sought to fund some large projects, including dams and hydroelectric plants. But those huge public works projects often drew the ire of conservationists and cultural activists who argued that the related costs of social dislocation and environmental degradation were too great.

ADB Watch, an umbrella group for activists opposed to the bank's practices, has opened an office in Honolulu to publicize such criticisms before and during the annual meeting.

The group, in its head-on confrontation, describes the bank as an unaccountable and undemocratic institution that further impoverishes Asia's poor through projects that primarily benefit donor governments and private contractors.

A seven-page critique on the ADB Watch Web site, for instance, questions the bank's accountability. It says, in part: "Decisions on large projects with significant social and environmental impacts are made in remote offices at the central government or international level with little input from members of civil society or the local communities who are the intended 'beneficiaries,' of development projects."

Lately, the bank has begun to shift emphasis away from large and commercially viable projects to more long-term, social programs meant to improve conditions to allow for self-sustaining economic growth. In addressing poverty, for instance, the bank recently adopted these goals:

• Reduce the incidence of extreme poverty by half between 1990 and 2015.
• Achieve 100 percent primary school enrollment by 2015.
• Eliminate gender disparities in primary and secondary education by 2005.
• Reduce infant and child mortality by two thirds between 1990 and 2015.
• Reduce maternal mortality ratios by three fourths between 1990 and 2015
• Expand access to reproductive health services to all women by 2015
• Implement national sustainable development strategies by 2005 to reverse the loss of environmental resources by 2015.

To James Mak, a University of Hawai'i economics professor, the shift makes sense. He said development banks were created to fill the void during periods of market failure, when the private sector could not marshal enough capital to help.

That's not the case now.

"The world has changed," he said. "The private capital market moves trillions of dollars each year into developing countries."

Mak, who has written articles suggesting new directions for the bank, said the jury is still out on the ADB shift in 1999 to adopt poverty reduction as its primary goal. But he said it is a more worthy and noble ambition "to help people help themselves, if we can, rather than to lend them money for projects."

Aid a help or an imposition?

All this has given supporters and critics alike much to discuss. Top bank administrators maintain that they welcome dialogue and include dissonant voices in their planning processes. They say they're anticipating a reasoned public response as the annual meeting moves to this remote U.S. location.

Last spring, the bank held its meeting in Chiang Mai, Thailand, where 2,000 or more protesters gathered to object to bank-funded operations, particularly those that displaced Thai villagers or threatened habitats for subsistence lifestyles.

This year, Dornsife insists that organizers, while balancing the need for security, will honor what she calls Americans' sacred right of free speech.

As for policy significance, Dornsife points to the timely value of the meeting for the Bush administration and new Treasury Secretary Paul O'Neill, who will serve as meeting chairman. The schedule affords him two chances to formally address the meeting to lay out the Bush administration's policy course on Asia and international development issues.

Dornsife, a Clinton appointee, predicted that O'Neill will call for more accountability and productivity.

"This will be a great opportunity for the host country to direct the agenda," she said.

Meeting organizers can expect some worldwide attention once more than 400 credentialed journalists begin covering the issues. Even though the annual meeting will include its share of lukewarm procedural matters, discussions likely will heat up as participants and protesters focus on the institution's methods of financial leverage — from supportive incentives to stern conditions tied to funding.

Sessions inside the center will feature seminars covering dozens of issues, including ways of shaping up corporate governance, halting money laundering and weighing the impacts of technology on Asian and Pacific Island cultures. Bank officials say, however, that most of the discussions should ultimately revolve around the bank's primary goal: reducing poverty.

Some presentations will be aimed primarily at local business people — as many as 1,000 are expected —Êseeking the expertise and regional connections to get involved on the business side of national development programs.

Outside, debate likely will be more pointed. Protest leaders, for instance, have sought permits to organize a march on May 9.

Scholars and others who study multilateral development issues often agree that these banks are involved in delicate diplomatic balances. On one side, donor countries like the United States require assurances that their funds are properly spent. But when rich countries try to impose too many conditions on nations struggling to meet the basic needs of their people, the donors' demands can appear patronizing, profiteering or neo-colonial.

"No one appreciates a heavy hand," said Dornsife.

As for a more extreme option — offering no development help at all — bank officials argue against that as irresponsible in a shrinking, interdependent world. In a report last year, bank officials asserted that 830 million people in Asia and the Pacific lack access to safe drinking water and more than 2 billion lack healthy sanitation facilities.

The bank, without pinning blame, termed the problem a "major human tragedy."

Profit or betterment?

New bank strategies approved last month for Pacific Island nations reveal how policies are evolving. The strategies concentrate on improving government efficiencies and promoting private business growth. As in other areas, bank officials say they also want to encourage stronger roles for women and support better environmental management.

"These are critical areas which will create more jobs and raise incomes and the quality of life," said Cedric Saldanha, a manager for the bank's Pacific operations.

As wealthy countries such as the United States push for conditions tying loans to demands for reforms and accountability, though, some observers want officials to recall the source of some inefficiencies.

One source: the Cold War's geopolitical rivalry. Gerard Finin, an East-West Center researcher specializing in the Pacific Islands, said the United States and other allies dropped large sums of bilateral aid on several island nations as a means to keep them dependent on the West and to ensure "strategic denial" of ships from Soviet bloc countries.

Western powers at that point, he said, were willing to tolerate dependent systems with bloated bureaucracies. Now, years later, ADB members tend to scold island-nation leaders for inefficient systems when, Finin argues, bank members were complicit in creating them.

Hal McArthur, UH research relations director, said his years of consultation and competition for contracts led him to be wary of another issue: corruption. Although bank activity is closely monitored, he said the game can change as borrowing countries administer projects at local levels, where bribery is part of life.

"The bank is a business with a social mission," he said, "but it indirectly supports a private development and construction industry."

Dornsife said the bidding process continues to become more of an open book, and the bank's inspectors try to ensure that programs are run honestly. New grassroots efforts, she noted, aim to enlist residents near project sites to blow the whistle on illegal activity.

However, noting that American companies were first overall in procurement during the past four years she said U.S. interests appear well represented.

The related issue, she noted, is equity. Just as event hosts in Hawai'i are hoping the meeting will generate commerce and opportunity, every country wants to make sure its bidders win a slice of the bank's substantial pie.

Glenn Scott can be reached by telephone at 525-8064 or by e-mail at gscott@honoluluadvertiser.com.