by Walden Bello
The most notable agreement to come out of the 33rd Annual Meeting of the Board of Governors of the Asian Development Bank meetings was formulated on the sidelines. This was the much publicized decision the ASEAN countries plus Japan, South Korea, and China to create a system of regional currency swap arrangements as a "firewall" against future financial crises.
Looking at the fine print, however, makes this development less significant than it seems.
It is, for one, a really a much diluted version of the Asian Monetary Fund (AMF) that was proposed by Japan right after the outbreak of the Asian financial crisis in mid-1997. That proposal was envisioned as a much more solid mechanism capitalized to the tune of $100 billion. The proposal in Chiang Mai was presented as a "network" of currency swap arrangements building on a more modest $200 million swap agreement among the big five ASEAN economies. No details were announced on the size of the funding being sought for the current proposal, though Eisaku Sakakibara, the influential former Vice Minister of Finance of Japan, told the press that some $20-$40 billion would be needed to have the arrangement really make a difference.
The studious avoidance of the world "Fund" by Japanese officials underlines the fact that Japan and the Asian countries continue to be prevented from making really bold steps by the desire not to ignite the open opposition of the United States. It was Washington and the IMF that killed the original AMF proposal in 1997, on the ground that it would compete with and weaken the IMF. Despite seemingly mild reactions to the current proposal, Washington continues to oppose the creation of any institution that would involve either a weakening of US influence over the economies in the region or supplant the role of the IMF. Access to the current swap arrangements are apparently envisioned as flexible in terms of policy reforms demanded of the recipient governments. Senior US Treasury Department official Edwin Truman warned against this, saying that the "central point in any regional surveillance arrangement has to be one that promotes timely economic and financial adjustment."
The US made its presence felt throughout the week-long discussions, and in ways that irritated other member governments. In response to demands for an increase in the Bank's capital resources, the US said that countries such as South Korea and Thailand, which had borrowed huge sums from the ADB and other multilateral agencies at the onset of the Asian financial crisis, should make an early repayment of their loans now that recovery was underway. Acccelerated repayment would provide resources for the ADB that would make capital increase less urgent.
Truman, the US Treasury Department representative, also faulted the ADB for not following up its anti-poverty rhetoric with concrete actions and for not implementing "good governance" as one of the major conditions of its lending to client governments, according to The Nation. Good governance and anti- poverty are two of the new policy directions that have been pushed on the ADB, mainly by the United States.
The fact that a relatively obscure official like Truman, instead of Treasury Secretary Larry Summers, headed the US delegation was seen by many as the US's way of expressing unhappiness about trends in the ADB.
While the US has been very vocal about good governance and other "new" policies, it has bee quite quite parsimonious when it comes to new cash commitments and keenly protective of positions it holds within the Bank, such as the office General Counsel. This has created strong feelings among many other member countries that the ADB should become a purely Asian institution since the larger part of its capital resources already come from Japan and other countries in the region itself. These feelings have surfaced at a time that in Washington itself, there are calls, notably from the US Congress, to downsize the World Bank and devolve many of its functions to the ADB and other regional development banks.
The ADB continues to be an institution dominated by Japan. But if devolution of development aid does become the trend, its importance will increase as a mechanism to channel Washington's influence in the region. Increasing tension between the US and an increasingly like-minded Asian bloc is likely to be the force that will greatly determine the future of the Asian Development Bank.