Re-defining ADB

The 39th annual meeting of the Asian Development Bank (ADB), held in Hyderabad last week, provided an appropriate occasion to take stock of the region's economic performance and examine the main threats to its sustainability. There is no question that Asia, on the whole, has been the success story of the post-war "development" era. As ADB President Haruhiko Kuroda pointed out in his remarks at one of the sessions of the meeting, Asia's share of world GDP grew from 15 per cent in 1960 to 30 per cent in 2005. The region now has four of the largest economies of the world and is currently growing appreciably faster than any other region, so its share of world GDP will continue to increase. Poverty incidence, in percentage and absolute terms, has declined dramatically. The degree of co-ordination amongst countries in the region has been increasing with an expanding network of trade, investment and economic co-operation agreements between them.

As outstanding as this performance record is, the participants at the meeting had to concede that the impact had not been uniform, both across and within countries. Several parts of the region lag behind the rest in terms of their development indicators. There are a variety of factors at work, from hostile local conditions to inadequate public investment to relatively recent entry into the global mainstream for the nation-states of Central Asia. Clearly, however, with the cumulative experience of successful development strategies within the region, it is no big secret as to what needs to be done in these situations, and who needs to do it. Under the circumstances, the inevitable question is going to be: Is the ADB relevant any more? Whether in terms of knowledge, experience or financial resources, has the multilateral institution become obsolete?

While this question was apparently not addressed directly at the Hyderabad meeting, it did influence several themes that were discussed at the event. One reflection of this was the focus on major threats to the sustainability of Asian economic growth. The region's increasing energy intensity is a critical one in the current global oil scenario. Balancing the rising demand for energy accompanying rapid growth with the compulsion to conserve, calls for innovative mixes of fiscal and technological solutions, in which the ADB can clearly play a role in designing as well as supporting. Another threat is the region's heavy dependence on exports to the US, whose trade deficits are significantly accounted for by Asian trade surpluses. Reducing the region's inherent vulnerability in this situation requires both short-term measures for managing risk and structural changes in the volumes of intra-regional transactions.

The question that the ADB has to answer is whether it has the organisational capability to rise to the new demands of the region. Recognition is one thing, successful restructuring of an organisation that has spent four decades addressing issues that are no longer priority quite another. The lessons that emerged from Hyderabad are clear. A regional multilateral funding organisation still has a role to play in sustaining Asia's climb to affluence. But is the ADB in its current shape ready and able to play that role?