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When financiers can be agents of positive change

by Vinod Thomas

Contributing Writer

Homegrown reforms with the backing of the people have the best chance of lasting. But multilateral development banks can also promote positive change in their policy dialogues and loan formulations in countries. The Asian Development Bank’s (ADB) just-released long-term strategy — Strategy 2030 — promises to be distinct in envisioning greater social inclusion and environmental sustainability in the bank’s growing financial support for development projects and programs in Asia.

Strategy 2030 is pro-growth, as the bank’s previous strategies have been. The difference is the case it makes for achieving better-quality growth that is inclusive and environmentally sustainable, and longer lasting. The ADB, by supporting the greater participation of lower income groups in operations, sees an opportunity to help reduce the region’s rising inequality.

Similarly, by incorporating environmental sustainability and climate action in its business plan, the ADB — which has been working in the region for over half a century — is using its respected voice to urge governments to take better care of the environment. The tough challenge is to integrate these directions into the operational business cycle of designing, appraising, implementing and supervising projects, programs and policies.

Developing Asia’s economic growth rate for 2018 is expected to be 6 percent, little changed from 2017 and similar to the projection for 2019. Led by China and India, and Southeast Asia and other East Asian economies earlier, Asia has grown more rapidly than any other region. Developing Asia made up over 60 percent of global economic growth in 2017 and comprised a quarter of global income in 2016.

With this strong growth record, extreme poverty has been cut sharply across developing Asia. Yet extreme poverty persists in many countries in the region and its eradication continues to be a priority in Strategy 2030 — but with a qualification. This is the focus on reducing inequalities, which have risen sharply in the very decades that Asia has enjoyed its greatest economic success, especially China and India. For the ADB, reducing poverty includes accelerating gender equality, which remains a major concern.

The ADB’s portfolio has traditionally been heavily weighted on supporting infrastructure, as is the case for the newer, Beijing-based Asian Infrastructure Investment Bank. Infrastructure will continue to be central at the ADB, albeit with a refinement for the better. Strategy 2030 stresses that ADB investments in both infrastructure and social sectors are necessary for greater inclusion.

The president of the ADB, Takehiko Nakao, recently spoke about how the bank in the previous Strategy 2020 did not regard health as a priority sector for support, but that requests from countries had convinced him that the ADB needs to become active in this area.

Asia’s other big challenge is building climate and disaster resilience, and enhancing urban and rural environmental sustainability. Under Strategy 2030, three-quarters of the ADB’s lending to governments and businesses is envisaged to support climate mitigation and adaptation by 2030. This makes sense, as the region is increasingly bearing the brunt of a global rise in weather disasters, particularly storms and floods.

At the same time, the region, by virtue of its hefty reliance on fossil fuels for energy, is now a leading contributor to greenhouse gases, including carbon dioxide. Because of the close link between emissions and sea level temperatures, countries everywhere need to uncouple the connection between carbon emissions and economic output. Clearly, a low carbon growth path needs to be a top priority for Asia.

Multilateral development banks like the World Bank and the ADB have found that confronting complex issues like inclusion and environmental sustainability that cut across sectors calls for a thematic rather than a sectoral approach. Recognizing this, Strategy 2030 envisions a multi-disciplinary approach for emerging development issues such as rapid urbanization, with teams needing to work across sectors, such as energy and transport. The ADB wants to see a “One ADB” approach, hopefully breaking down the silos that typically characterize such organizations.

The process of developing Strategy 2030 as well as its implementation and evaluation matter greatly. This strategy drew on internal and external consultations, and it incorporated lessons from the ADB’s independent evaluation department. Effective implementation of the strategy through the delivery of lending operations will be crucial. Also vital will be the monitoring of targets and evaluation of results on the ground.

Asia continues to achieve higher growth rates than other regions, but shared well-being and ecological balance are under severe threat. The ADB has always been a welcome partner in Asian countries. With Strategy 2030, it has a crucial chance to make a difference in achieving a better quality of growth in the region.

Vinod Thomas is a visiting professor at the Asian Institute of Management, Manila, and formerly director-general of independent evaluation at the Asian Development Bank and the World Bank.