Friday, April 22, 2011

The Development Challenge


Many South Asian countries continue to receive financial and technical support from the Asian Development Bank. However, development planners and practitioners urge ADB for reform in its policies and procedural approach in order to be truly reflective of its commitment to poverty reduction

The Asian Development Bank (ADB) was established in 1966 with a commitment “to help its developing member countries reduce poverty and improve the quality of life of their people”. It is financed by 67 member countries, and works closely with development agencies, governments and in the private sector, providing financial and technical assistance. A brief description of some assistance projects provided by the ADB to some South Asian countries from the ADB website is as follows:

India is a founding member of the Asian Development Bank (ADB) and its fifth largest shareholder. Loans amounting to $22,228.15 million have been approved for various projects in India since 1986, which include among others, the clean energy initiatives and rebuilding and reconstruction projects. In support of Tata Power project, ADB provided a loan covering about 70% of the project cost. To assist the effected people of 2001 Gujrat earthquake, in which nearly 2 million people lost their homes and thousands lost their lives, ADB approved a $350 million project in financing housing, rebuilding infrastructure, and restoring power supply and livelihoods.

Pakistan, the 13th largest shareholder, has received about $ 20 billion in loans so far, utilized in supporting development initiatives in infrastructure, energy, social sectors and governance. In 2005, as Pakistan struggled to handle the worst earthquake of its history that affected 3.5 million, the ADB provided valuable assistance in various forms, including loans for materials used in rebuilding and reconstruction. Similarly, when the 2010 floods impacted 20 million people, sweeping away 2.2m hectares of farmland, the ADB not only sought to establish a trust fund for other partners to channel their contribution, but approved a $3 million grant with 200 million pledged over the next two years for urgent relief and rehabilitation needs.

Sri Lanka has received $4.69 billion in loans and $104.8 million for 238 technical assistance projects since joining the ADB in 1966. ADB’s support provides opportunities for Sri Lanka’s disadvantaged communities to tackle the effects of years of conflict, and natural calamities like the 2004 tsunami. Important Microfinance and skills training is also provided by the ADB-supported projects to empower women, giving them a choice to stay near their families rather than migrate to the Middle East as domestic workers, where they are employed in menial jobs and suffer widespread abuse. ADB has also been actively involved in helping Sri Lanka’s underfunded educational system get back on track, providing electricity to schools, scholarships for students and teachers, and capacity building.

Bangladesh joined the Asian Development Bank (ADB) in 1973, and is one of the largest borrowers of concessionary Asian Development Fund resources. The cumulative lending in 2009 amounted to about $10.89 billion for loans, with $195.15 million for technical assistance grants for 348 projects.

Despite injecting millions of dollars into development spending in Asia, the ADB has received strong criticism from the international community for being a highly centralized and unaccountable institution, catering more to the demands of its major donors, Japan and the US, thereby contributing to serious setbacks for the very people it aims to help. There are strong objections to policy reforms and privatization of state institutions advocated by the ADB in borrowing countries, which result in downsizing and, hence, increased joblessness. The member governments, when pressurized to keep up with debt as well as maintaining growth, often are forced to take the route of increased taxes and result in less long term benefits for their populations.

Oxfam Australia has criticized the ADB of insensitivity to concerns of local communities by undermining “people's human rights through projects that have detrimental outcomes for poor and marginalized communities.” The bank has been charged by NGOs with causing displacement of 100,000 to 150,000 people in Asia each year due to ineffective implementation of its well-meaning but lop-sided approach to development planning and implementation

ActionAid, an international anti-poverty agency formed in 1972, has called for wide ranging reforms of the ADB, and asserted, “Because of their failed instruments, poverty is higher, you see rising unemployment, you see malnutrition, all over Asia.” More than 10% of the total external debt of the Asia Pacific is also owed to the ADB. Although some of these poorest countries perpetually struck in the cycle of debt could benefit from write-offs, there was strong opposition expressed by Director General of ADB, Mr. Nag, against the idea of debt cancellation when it came up as part of the UN MDGs and insisted, “We as an institution do not do that. We believe that we are a developmental institution, but are also a bank”.

The bank has also received criticism for its lack of insight, or will to implement, environmental safeguards in pursuit of its goals, often resulting in short term development value but long term environmental damage, like the coal-powered fire station in Thailand. A US-based NGO, Environmental Defense, has charged that “The ADB's environmental categorization is significantly weaker than that of the World Bank, which requires all projects classified as sensitive to undergo an environmental assessment. But such an assessment is not always required for ADB projects classified as sensitive.”

Other issues where ADB has come under fire is its disregard for issues of larger political implications, like the territorial dispute between India and China where the ADB endorsed a $2.9 billion funding strategy for proposed projects for India Country Partnership strategy, directly impacting India’s relations with China. China expressed strong condemnation of the bank’s move which “not only seriously tarnishes its own name, but also undermines the interests of its members.”

In conclusion, ADB’s strategies might be more effective if they promoted a balance between economic growth and ensuring livelihood sustenance for the disadvantaged populations of South Asia. Moreover, planning development initiatives with full participation of local communities and other relevant stakeholders, rather than catering to international marketing concerns would bring better results and appreciation for the well-meaning but constantly challenged role that the ADB struggles to play in its anti-poverty initiatives.

SOUTHASIA, The Development Challenge APRIL 2011