by Walden Bello*
The Asian Development Bank approaches its Year 2000 meeting in the highland city of Chiang Mai, Thailand, fearful of protesters, dogged by scandal, beset with confusion, burdened with an unimpressive record, and with rela tions with the Bretton Woods institutions at an all-time low.
The Bank has quietly abandoned plans to make Seattle as the site of next year's meeting, fearful of provoking the same sort of protests that did the World Trade Organization (WTO) in. But it cannot do anything about chang ing this year's venue, which will certainly be filled with hundreds of demonstrators from Thailand and the rest of the region.
Scandal Trailing the Manila-based Bank to Chiang Mai is probably the biggest scandal that has hit an ADB-supported project: the wholesale bribery of the Philippines House of Representatives to push through the privatization of the National Power Corporation (Napocor). Two representatives of Congress revealed that they each received 500,000 pesos ($12,500) despite their having voted against the bill, leading to strong suspicions that the majority that voted for the bill each received a greater payoff.
Critics of the privatization initiative are looking at a $1 million technical assistance grant from the ADB earmarked for lobbying the Philippine government for privatization of state enterprises as a possible source of f unds. This is not preposterous since the Bank has admitted to investigating 55 allegations of corruption involving its staff and executing agencies in the Asia Pacific region as of December 1999.
But the main accusation being laid at the doorstep of the Bank is that its pressure on the government to rush privatization might have prompted the administration of President Joseph Estrada to take short cuts to gather t he necessary votes. The ADB had conditioned further disbursements of its energy loan and an associated Miyazawa loan to the Philippines on passage of the Napocor privatization bill. Indeed, to push through its whole progr am of privatization, liberalization, and deregulation, the ADB reduced loan disbursements to the Philippines in 1999 to nearly zero--certainly a far cry from the $300 to $500 million annual outlay usually earmarked for th e country.
"Goal Congestion" It is, however, not only scandal that dogs the ADB but confusion in the ranks. For staff members, the days of funding and implementing physical infrastructure projects that could be subjected to narrow cost-benefit analysis are over. According to a senior staff member who spoke on condition of anonymity, people in the field are suffering from "goal congestion," that is, trying unsuccessfully to integrate the various objectives that donor governments have attached to lending in the last few years: poverty reduction, social development, sustainable development, promoting women's welfare, and good governance. "People are lost and bewildered, and most have no clue of how to even begin," he said.
"The problem is very real," he continued. "You have all these new goals, but the old baggage, the old goals, have not disappeared. You've somehow to get 'women and development' into the project design, and you get scolded if you don't know how to sneak it in. The result is incoherence."
The confusion and failure to integrate goals into project and program design is reflected in internal evaluations. Thus the Draft Asian Development Fund Report to the Donors states that although poverty reduction has been a central concern and is now the "overarching vision and goal," "few projects have been designed specifically to address this objective." Moreover, "there has been little lending directly targeted at women or the environ ment."
High Project Failure Rates Failure to integrate stated goals into the so-called "country operational strategies" (COS) is part of a broader pattern of failure. "Almost all forestry projects have failed--that is well known within the Bank," noted on e official knowledgeable of the Bank's environmental projects. Indeed, only 36 per cent of projects in the Agriculture and Natural Resources Sector are rated "generally successful." But this is not as bad as the record in the Social Infrastructure Sector (33 per cent) and the Finance Sector (15.2 per cent).
While the success rates in the Energy, Industry, and Transportation and Communications Sectors are high, an assessment by the Strategy and Policy Department says that across the board, "in most instances...operational per formance was far short of projections." This was due to "weaknesses in project design, particularly where there was weak institutional capacity and there were inappropriate policies. Implementation of most projects tended to focus on completion of their physical infrastructure components rather than institutional development and support service components and policy reforms."
The poor record in agricultural projects reflects the fact that the ADB, according to another senior staff member who refused to be identified, has been trying to get out of agriculture lending. The reason for this was t hat assessment of costs and benefits and project management were not as simple and straightforward as in energy and infrastructure programs. The resulting lack of a track record in agriculture poses a major problem, he co mmented, since "the future of Asia lies in solving the food security problem, not in providing more and more physical infrastructure. The Bank may have made a strategic mistake."
Good Governance: More Hype than Substance Among the new considerations that donors want to bring into lending decisions is "good governance" on the part of the borrower. The ADB prides itself with being the first multilateral lending agency to have a Board-approv ed policy statement on good governance, which it defines as governance marked by "accountability, participation, predictability, and transparency." Many Bank staff members are, however, very cynical about the new policy. Says one senior person, "It's a question of practising what you preach. There's a lot of discontent inside the Bank, precisely because it is one of the most non-accountable, non-participatory, and non-transparent institut ions around."
As an example, she pointed to informal rules that reserve certain positions to the dominant countries, in particular the US and Japan. The US speaks loudest when it comes to good governance, she said, but it considers key positions in the Bank "its private property, and no talk about democracy and transparency will change that." A good case is the position the General Counsel of the Bank. The US has locked up this position, an attitude th at has brought it criticism from the Board for "lack of transparency." Mindful of criticism, the US last year pushed to have a US citizen continue to fill the post but chose a US citizen from Hawaii who has a Japanese nam e.
MOF Colony?
While the US may be the most vocal when it comes to promoting new policies from poverty reduction to good governance, it is Japan that controls the institution. "The ADB is an institution funded by the Japanese, controlle d by the Japanese, and run by the Japanese" was the way one country representative to the Executive Board put it. Japan in this case means Japan's Ministry of Finance (MOF). The Ministry of Finance virtually determines wh o will be president--the current chief Tadeo Chino is a graduate of the MOF--and who fills the key position of head of Budget and Staffing.
The MOF's control of strategic posts is said to have had detrimental consequences for innovation for two reasons. One is ideological: the MOF is probably the most conservative of Japan's economic agencies. The other is st ructural: the chief of the Budget and Staffing Department, for instance, is replaced every three years by the MOF, "which means the occupant has no incentive to innovate and all the incentive to carry on as usual."
Ironically, Japanese control of the Bank has not resulted in the adoption of the bottom-up, participatory management that Japanese firms are noted for. Instead, the ADB has reproduced the overcentralized, hierarchic struc tures of the MOF. Said one senior informant: "The hiring of the lowliest programmer for a small project of the Bank must be approved by the president. And any travel by any Bank staff out of the [the Asia-Pacific] region must have the personal approval of the president." Said another official: "Hierarchy is everywhere; quality control is nowhere. This is, let's face it, a mediocre organization."
Proliferating Conditionalities
Despite its Jurassic characteristics, the Bank has not been immune to internal pressures and external events. For instance, pressure from some donor countries has pushed the Bank to devote more of its lending portfolio to program or "adjustment" lending, where loans for individual projects are made contingent on macroeconomic policy changes, like accelerated privatization, deregulation, and liberalization.
However, an internal review of the Bank's program lending dated Nov. 22, 1999 decries the "proliferation of policy conditionalities" in program loans, noting that the average number of conditionalities per program loan is 32! Practically admitting the failure of the Bank's conditionality-burdened program lending, the document states that "besides the issue of proliferation of conditionalities is the more basic issue of the efficacy of the policy conditionality approach."
It moves on to list the "shortcomings" of the conditionality approach: "(i) undermining ownership by the recipient government; (ii) a tendency to compensate for perceived lack of commitment/weak administrative, technical, and institution [sic] by increasing the detail and number of conditions in adjustment operations; (iii) an incentive for borrowers to exaggerate the difficulty of undertaking reforms; and (iv) partial reform syndrome--re form is acceptably implemented only at the expense of watering down the original requirements."
Conditionalities have alienated most client governments. The most controversial has been the case of Malaysia. After the outbreak of the Asian financial crisis, the ADB offered to lend to Malaysia, but only if that count ry undertook policy reforms demanded by the IMF. Malaysia refused and followed its own strategy to surmount the crisis, which was the exact opposite of the fiscal and monetary repression promoted by the IMF. Now that Mala ysia has proven both the IMF and ADB wrong with its successful effort to bring about a vigorous recovery, ADB officials are wondering if Malaysia will ever again borrow from the Bank.
Resenting the Fund The subordination of the ADB's approach to the IMF's overall strategy to deal with the Asian financial crisis still rankles within the Bank. Staff members resent the way that under IMF pressure, the ADB leadership in 1998 disregarded the usual loan approval process, which usually takes a year, to push through a massive $1 billion loan for Korea in less than a week! This might have been tolerated had the ADB contribution been part of a pr ogram that succeeded. Yet the IMF's harsh monetary and fiscal approach merely made the Korean financial crisis worse in 1998, leading many in the ADB staff and leadership to seriously question the relevance of the Fund's paradigm and the Fund itself as an institution.
The ADB's Japanese elite, in particular, is said to be particularly resentful of the way the IMF, with US support, killed the Japanese-initiated proposal to set up an Asian Monetary Fund (AMF) to deal with the crisis in l ate 1997. Now that the IMF has been proven wrong, there is strong support from within the Bank and its member governments in Asia to revive the AMF proposal, according to a senior official. "And if it is set up," she note d, "it will be a Fund that will look into each country's particular situation instead of applying a standard blueprint to all countries like the IMF does."
Competing with the World Bank If relations with the Fund are bad, the ADB's relations with the World Bank are "fiercely competitive," says a member of the Programs Department. It was not always so, since for years the World Bank was regarded as some s ort of "Big Brother," whose programs, projects, and organization were models for the ADB. What changed the relationship was World Bank President James Wolfensohn's articulation of the "Comprehensive Development Framework, " which ADB officials saw as an effort to subordinate the ADB and the other regional development banks to the World Bank, both organizationally and agenda-wise.
When Wolfensohn proposed moving the whole East Asia-Pacific Division of the World Bank to Singapore in 1999, the ADB saw that as an effort on the part of the World Bank to marginalize it or make it irrelevant. From then o n, the World Bank has been perceived as a threat. Which is why, according to several staffers, the ADB was cheered by the recommendation of the International Financial Advisory Commission (the "Meltzer Commission") appointed by the US Congress that the World Bank devolve most of its functions to the regional development banks.
All these developments are creating strong pressures from the Asian member countries of the ADB for the institution to define and structure itself as an institution that is really responsive to the needs of the region. "O ne school of thought gaining momentum questions whether we really need the US and Europe in the Bank," said one official. "Unlike the other regional development banks, the ADB derives the major part of its resources from the region itself, particularly Japan. The idea is to bring in resources from Taiwan and China to replace that now contributed by the Americans and Europeans." The problem with this approach, he noted, was the apprehension of some members about Japan's agenda once the countervailing power of the US and Europe is removed."
The region is changing, and the pressures of change are buffeting the ADB. Will it succeed in adapting itself to the changing needs of the countries and peoples in the Asian region?
Most of the senior staff members interviewed were sceptical.
"The projects will continue to be really traditional in approach, though there will be the necessary icing of pro-poor rhetoric to get the donors to loosen the purse strings," commented one. Another laughed, saying, "This is really a conservative institution. Asking it to change is like asking Japan's Ministry of Finance to change."
*Executive Director of Focus on the Global South and professor of sociology and public administration at the University of the Philippines.