Aiding middle-income Asia ADB’s future role?

by Eric Johnston

KYOTO — The Asian Development Bank wrapped up its 40th annual meeting Monday with a broad agreement that the bank needs to reorganize but continue to financially assist the region.

Delegates were divided, however, on what the bank’s role should be and what kind of internal reforms were needed to achieve that role. It was also suggested that future projects linked to ADB funds may include nuclear plants.

Originally created to fund civil engineering projects in poor parts of Asia, much of the discussion focused on whether the bank should also focus more on the needs of rising middle-income countries in the coming years.

According to a report prepared by a panel of outside experts, including former U.S. Deputy Treasury Secretary Lawrence Summers, absolute poverty in most of Asia will have been eliminated by 2020 and more than 90 percent of Asians will be living in middle-income countries.

At a news conference wrapping up the meeting, ADB President Haruhiko Kuroda said the governors viewed positively the report by the experts.

“I have initiated a review of our Long Term Strategic Framework to which the Eminent Persons Group report provides important input. We will define, through consultations with stakeholders, our path to the future,” Kuroda said.

“Australia broadly supports the report, which will ensure ADB’s continued relevance to its middle-income country client groups and strengthened ADB engagement in areas that are becoming increasingly important to building the region’s overall prosperity,” said Christopher Pearce, head of the Australian delegation.

Other delegates, however, voiced opposition to the bank abandoning its traditional mandate of poverty reduction and attacked the report’s future scenario of a poverty-free Asia as wildly optimistic.

“Poverty reduction remains an enormous challenge in the Asian region, with close to 200 million people living on less than $2 a day,” the ADB’s South Korean governor, Okyu Kwon, said. “I also expect to see the bank’s future mission more sharply focused on weakly performing developing member countries.”

Discussions will soon begin among ADB governors on replenishing the Asian Development Fund, which the ADB administers. Japan has provided about $1.12 billion, or 35 percent of the total, to the fund during its current period, which expires next year.

Some governors, especially from developed countries in the West, believe that Asian countries with booming economies and large foreign reserves should contribute more to the fund, but many Asian countries are resisting.

“We welcome all donors and certain ADB donor countries have said they planned to increase their overseas development, which will include some money for the ADB. India, China, and Vietnam are growing, but they have pockets of poverty. We would be extremely happy if no country required assistance. But until a country graduates from a developing country to a developed country, the international community should continue to assist them,” Kuroda said.

Meeting in Kyoto a decade after the signing of the Kyoto Protocol, the bank’s role in promoting environmentally friendly development projects was also a major theme of discussion.

On Sunday, Japan announced it would provide $2 billion in loans and $100 million in separate funds to promote investment in alternate energy projects in Asia.

Finance Minister Koji Omi said the plan, the Enhanced Sustainable Development for Asia Initiative, is designed specifically to help developing countries.

To cut through the bureaucratic red tape involved in getting the two organizations to cofinance a project, Omi said a new scheme — Accelerated Co-Financing — with the ADB will also be introduced to forge closer links between the JBIC and ADB, thus enabling a rapid implementation of the loans.

“As a second pillar, Japan will establish two funds in cooperation with the ADB, namely the Asian Clean Energy Fund and the Investment Climate Facilitation Fund, and will contribute up to $100 million through these two funds to support such Japan-ADB cooperation, as well as the ADB’s assistance in these areas” Omi said.

There is a possibility some of the money could help finance nuclear power plants. “The use of nuclear energy, under strict conditions of safety and nonproliferation, can be a key solution for the climate change problem,” Omi said.

That comment surprised some delegates, who raised concerns about proliferation if the ADB funds reactors in developing countries with no nuclear power programs. ADB President Kuroda played down the possibility, saying he thinks this is not an area into which the bank would venture.