LOS ANGELES – Even before Japan’s official delegation to the latest annual meeting of the Asian Development Bank (ADB), held last week in Delhi, began arriving back in Tokyo, another gathering of some several thousand business, government, and social sector leaders — from Bill Gates to Tony Blair and Rupert Murdoch — had concluded here on the other side of the Pacific Ocean.
Focused on finding solutions to some of the world’s biggest challenges, from finance to biomedical research, the most recent Milken Institute Global Conference understandably featured frequent mention of Asia given the region’s and particularly China’s growing importance and economic rise. With the advent of “Abenomics,” Japan too was back as a topic of discussion.
There was little talk, though, of the Japanese-led Asian Development Bank (ADB) and its efforts to grow economies and fight poverty. That’s understandable, given the relatively small size of the ADB when contrasted with private sector capital flows and the size of Asia’s largest economies. And therein remains the challenge, and the opportunity, for the latest ADB president to be elevated from the ranks of Japan’s Ministry of Finance: how to ensure the multilateral development bank remains relevant at a time when Asia is changing faster than the ADB.
In a forgone conclusion, former Vice Minister of Finance for International Affairs Takehiko Nakao was elected April 28 as the ADB’s ninth president by its Board of Governors. No other nominees had emerged despite some talk of a possible challenge by China to Japan’s lock on the institution’s top job.
Longtime bureaucrat Nakao succeeds Haruhiko Kuroda, who resigned in March prior to his confirmation as head of the Bank of Japan. Nakao will complete Kuroda’s unexpired term as ADB president, which ends Nov. 23, 2016, and if history repeats, will himself begin a full term before resigning to pave the way for another successor from Japan’s bureaucracy.
Former ADB President Kuroda’s efforts at the Bank of Japan may well underscore and overshadow the ADB’s relatively limited impact on Asia when compared to the potential impact and consequences of BOJ policies leading to increased liquidity and Japanese capital flows to Southeast Asia and other parts of the region. BOJ policies may well be laying the foundation for future asset bubbles.
Once again, the latest ADB leader from Japan has the opportunity to bring ADB into the modern world, and elevate the organization above the politics, governance shortcomings and backroom deals that too often characterize much of Asia.
Even if Nakao is not the new and different kind of leader welcomed in recent years at the International Monetary Fund (IMF) and the World Bank — former French Finance Minister Christine Lagarde became the first female IMF head in July 2011, and Jim Yong Kim in 2012 became the first Asian-American and health expert to become World Bank president — the opportunity remains for him to bring a breath of needed fresh air and greater accountability to the ADB’s bureaucracy.
One critical change will be placing greater emphasis on development effectiveness and less emphasis on lending volume. Doing so also will improve the ADB’s reputation, impact and relevance. That means though understanding and embracing internally and externally that ADB is more than about the money.
A prescription for improving the ADB’s relevance should focus on what I refer to as the “three Ps” of responsible development: namely a focus on people, planet and partnership.
First, a renewed focus of the Bank on assisting the poorest people in the region’s least developed nations will be an important step forward in ensuring the Bank’s relevance. This will mean phasing out lending to China and other nations that have significant domestic financial resources as well as relatively easy access to international capital markets and investment. ADB efforts — and central bank policies — must not be a means of enabling nations to put off making tough fiscal decisions and further opening and developing capital markets.
This focus on people would also mean Nakao and his leadership team’s embracing longstanding recommended changes to the ADB’s management of its own people. Changes would include steps toward better retention and advancement of qualified female staff, a review of retirement ages, and ensuring that the institution’s budget, personnel and management systems are overseen by professionals chosen based on experience and ability, not nationality.
Second, the Bank must do more to ensure that development efforts are done with greater understanding of their impact on our environment and planet. This will mean strengthening and strict enforcement of ADB environmental and social safeguards.
A case in point is Burma, aka Myanmar. With Japan having provided some $3.7 billion in writeoffs of past bilateral loans and bridge loans to allow new international support and lending to resume, the ADB has been quick to map out tens of millions of dollars in new development assistance to Burma. This eagerness to lend was underscored by one of then-ADB President Kuroda’s last official visits: a call upon President Thein Sein in Burma.
As a potential major financier of energy, water and transport projects in Burma, the ADB under Nakao has an opportunity to shape more sustainable infrastructure investments and related policies and standards in that nation, and set an example for the entire Greater Mekong Subregion. This includes strengthened and more transparent policies to safeguard the environment and the lives of peoples who may well be relocated or otherwise impacted by Bank-supported projects.
Third, under Nakao, the ADB would be wise to focus more on fostering partnerships, not just with the World Bank and bilateral aid agencies, but with critical stakeholders in civil society and the private sector. Individual partners, the ADB included, must in turn focus on areas of expertise and core competency and exit areas where others can do better.
Partnership with the private sector also will require a thorough assessment of the financial and human resources presently allocated to the ADB’s private sector operations. Individual entrepreneurs and small and medium sized enterprises remain key drivers of growth and sustainable job creation in Asia, as they are in the rest of the world. ADB should embrace this.
At the Milken Institute Global Conference, the tagline was “Where the World Connects,” describing the opportunities for interaction with everyone from social entrepreneurs and institutional investors to businessman and former basketball star “Magic” Johnson and Paul Kagame, president of Rwanda.
The attendees in Los Angeles were certainly different from the government officials who gathered in India to welcome Nakao in his debut as ADB president, but we can hope the spirit of openness was the same. The world’s biggest challenges require a capacity to connect and to embrace change. That’s as true in Japan as it is at the ADB and the nations that the Bank seeks to serve.
Now it is up to the latest ADB president to prove the skeptics wrong. As Japan changes, so too should the ADB.
Curtis S. Chin served as U.S. Ambassador to the Asian Development Bank under Presidents Barack Obama and George W. Bush (2007-2010). He is now senior fellow and executive-in-residence at the Asian Institute of Technology, and managing director with advisory firm RiverPeak Group, LLC.