Asian Development Bank

The Asian Development Bank (ADB) is a regional development bank established on 22 August 1966 to facilitate economic development of countries in Asia. The bank admits the members of the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP, formerly known as the United Nations Economic Commission for Asia and the Far East) and non-regional developed countries. From 31 members at its establishment, ADB now has 67 members - of which 48 are from within Asia and the Pacific and 19 outside. ADB was modeled closely on the World Bank, and has a similar weighted voting system where votes are distributed in proportion with member's capital subscriptions. At present, both the United States and Japan hold 552,210 shares, the largest proportion of shares at 12.756% each. China holds 228,000 shares (6.429 %), India holds 224,010 shares (6.317 %), the 2nd and 3rd largest proportion of shares respectively.

Organization


The highest policy-making body of the bank is the Board of Governors composed of one representative from each member state. The Board of Governors, in turn, elect among themselves the 12 members of the Board of Directors and their deputy. Eight of the 12 members come from regional (Asia-Pacific) members while the others come from non-regional members.

The Board of Governors also elect the bank's President who is the chairperson of the Board of Directors and manages ADB. The president has a term of office lasting five years, and may be reelected. Traditionally, and because Japan is one of the largest shareholders of the bank, the President has always been Japanese. The current President is Haruhiko Kuroda, who succeeded Tadao Chino in 2005.

The headquarters of the bank is at 6 ADB Avenue, Mandaluyong City, Metro Manila, Philippines, and it has representative offices around the world. The bank employs approximately 2,400 people, coming from 55 of its 67 member countries, and with more than half of the staff being Filipino.

1962-1972
ADB was originally conceived by some influential Japanese who formulated a "private plan" for a regional development bank in 1962, which was later endorsed by the government. The Japanese felt that its interest in Asia was not served by the World Bank and wanted to establish a bank in which Japan was institutionally advantaged. Once the ADB was founded in 1966, Japan took a prominent position in the bank; it received the presidency and some other crucial "reserve positions" such as the director of the administration department. By the end of 1972, Japan contributed $173.7 million (22.6% of the total) to the ordinary capital resources and $122.6 million (59.6% of the total) to the special funds. In contrast, the United States contributed only $1.25 million for the special fund.

The ADB served Japan's economic interests because its loans went largely to Indonesia, Thailand, Malaysia, South Korea and the Philippines, the countries with which Japan had crucial trading ties; these nations accounted for 78.48% of the total ADB loans in 1967-72. Moreover, Japan received tangible benefits, 41.67% of the total procurements in 1967-76. Japan tied its special funds contributions to its preferred sectors and regions and procurements of its goods and services, as reflected in its $100 million donation for the Agricultural Special Fund in April 1968.

Takeshi Watanabe served as the first ADB president from 1966 to 1972.

1972-1986
Japan's share of cumulative contributions increased from 30.4 percent in 1972 to 35.5 percent in 1981 and 41.9 percent in 1986. In addition, Japan was a crucial source of ADB borrowing, 29.4 percent (out of $6,729.1 million) in 1973-86, compared to 45.1 percent from Europe and 12.9 percent from the United States. Japanese presidents Inoue Shiro (1972–76) and Yoshida Taroichi (1976–81) took the spotlight. Fujioka Masao, the fourth president (1981–90), adopted an assertive leadership style. He announced an ambitious plan to expand the ADB into a high-impact development agency. His plan and banking philosophy led to increasing friction with the U.S. directors, with open criticism from the Americans at the 1985 annual meeting.

During this period there was a strong parallel institutional tie between the ADB and the Japanese Ministry of Finance, particularly the International Finance Bureau (IFB).

Since 1986
Its share of cumulative contributions increased from 41.9 percent in 1986 to 50.0 per- cent in 1993. In addition, Japan has been a crucial lender to the ADB, 30.4 percent of the total in 1987-93, compared to 39.8 percent from Europe and 11.7 percent from the United States. However, different from the previous period, Japan has become more assertive since the mid 1980s. Japan's plan was to use the ADB as a conduit for recycling its huge surplus capital and a "catalyst" for attracting private Japanese capital to the region. After the 1985 Plaza Accord, Japanese manufacturers were pushed by high yen to move to Southeast Asia. The ADB played a role in channeling Japanese private capital to Asia by improving local infrastructure. The ADB also committed itself to increasing loans for social issues such as education, health and population, urban development and environment, to 40 percent of its total loans from around 30 percent at the time.

Lending
The ADB offers "hard" loans from ordinary capital resources (OCR) on commercial terms, and the Asian Development Fund (ADF) affiliated with the ADB extends "soft" loans from special fund resources with concessional conditions. For OCR, members subscribe capital, including paid-in and callable elements, a 50 percent paid-in ratio for the initial subscription, 5 percent for the Third General Capital Increase (GCI) in 1983 and 2 percent for the Fourth General Capital Increase in 1994. The ADB borrows from international capital markets with its capital as guarantee.

In 2009, ADB obtained member-contributions for its Fifth General Capital Increase of 200%, in response to a call by G20 leaders to increase resources of multilateral development banks so as to support growth in developing countries amid the global financial crisis. For 2010 and 2011, a 200% GCI allows lending of $12.5-13.0 billion in 2010 and about $11.0 billion in 2011. With this increase, the bank's capital base has tripled from $55 billion to $165 billion.

Notable projects and technical assistance

 * Afghan Diaspora Project
 * Funding Utah State University led projects to bring labor skills in Thailand
 * Earthquake and Tsunami Emergency Support Project in Indonesia
 * Greater Mekong Subregional Program
 * ROC Ping Hu Offshore Oil and Gas Development
 * Strategic Private Sector Partnerships for Urban Poverty Reduction in the Philippines
 * Trans-Afghanistan Gas Pipeline Feasibility Assessment
 * Loan of $1.2 billion to bail it out of an impending economic crisis in Pakistan and ongoing funding for the countries growing energy needs, specifically Hydro-power projects
 * Micro finance support for private enterprises, in conjunction with governments, including Pakistan and India.
 * The Yichang-Wanzhou Railway project in the mountainous area of western Hubei Province and north-eastern Chongqing Municipality, China. (A US $500,000 loan, approved in 2003.)

Effectiveness
Given ADB's annual lending volume, the return on investment in lesson learning for operational and developmental impact is likely to be high and maximizing it is a legitimate concern. All projects funded by ADB are evaluated to find out what results are being achieved, what improvements should be considered, and what is being learned.

There are two types of evaluation: independent and self-evaluation. Self-evaluation is conducted by the units responsible for designing and implementing country strategies, programs, projects, or technical assistance activities. It comprises several instruments, including project/program performance reports, midterm review reports, technical assistance or project/program completion reports, and country portfolio reviews. All projects are self-evaluated by the relevant units in a project completion report. ADB’s project completion reports are publicly disclosed on ADB’s Internet site. Client governments are also required to prepare their own project completion reports.

Independent evaluation is a foundation block of organizational learning: it is essential to transfer increased amounts of relevant and high-quality knowledge from experience into the hands of policy makers, designers, and implementers. ADB’s Independent Evaluation Department (IED) conducts systematic and impartial assessment of policies, strategies, country programs, and projects, including their design, implementation, results, and associated business processes to determine their relevance, effectiveness, efficiency, and sustainability following prescribed methods and guidelines,. It also validates self-evaluations. By this process of evaluation, ADB demonstrates three elements of good governance: (i) accountability, by assessing the effectiveness of ADB's operations; (ii) transparency, by independently reviewing operations and publicly reporting findings and recommendations; and (iii) improved performance, by helping ADB and its clients learn from past experience to enhance ongoing and future operations.

Operations evaluation has changed from the beginnings of evaluation in ADB in 1978. Initially, the focus was on assessing after completion the extent to which projects had achieved their expected economic and social benefits. Operations evaluation now shapes decision making throughout the project cycle and in ADB as a whole. Since the establishment of its independence in 2004, IED reports directly to ADB’s Board of Directors through the Board's Development Effectiveness Committee. Behavioral autonomy, avoidance of conflicts of interest, insulation from external influence, and organizational independence have made evaluation a dedicated tool—governed by the principles of usefulness, credibility, transparency, and independence—for greater accountability and making development assistance work better. Independent Evaluation at the Asian Development Bank presents a perspective of evaluation in ADB from the beginnings and looks to a future in which knowledge management plays an increasingly important role.

In recent years, there has been a major shift in the nature of IED's work program from a dominance of evaluations of individual projects to one focusing on broader and more strategic studies. To select priority topics for evaluation studies, IED seeks input from the Development Effectiveness Committee, ADB Management, and the heads of ADB departments and offices. The current thrusts are to: (i) improve the quality of evaluations by using more robust methodologies; (iii) give priority to country/sector assistance program evaluations; (iv) increase the number of joint evaluations; (v) validate self-evaluations to shorten the learning cycle; (vi) conduct more rigorous impact evaluations; (vii) develop evaluation capacity, both in ADB and in DMCs; (viii) promote portfolio performance; (ix) evaluate business processes; and (x) disseminate findings and recommendations and ensure their use. IED's work program has also been reinterpreted to emphasize organizational learning in a more clearly defined results architecture and results framework. It entails (i) conducting and disseminating strategic evaluations (in consultation with stakeholders), (ii) harmonizing performance indicators and evaluation methodologies, and (iii) developing capacity in evaluation and evaluative thinking. All evaluation studies are publicly disclosed on IED's website (some evaluations of private sector operations are redacted to protect commercially confidential information). IED's evaluation resources are displayed by resource type, topic, region and country, and date. Learnings are also gathered in an online Evaluation Information System offering a database of lessons, recommendations, and ADB Management responses to these. Details of ongoing evaluations and updates on their progress are made public too.

Beginning 2006, acting within the knowledge management framework of ADB, IED has applied knowledge management to lesson learning, using knowledge performance metrics. Learning Lessons in ADB sets the strategic framework for knowledge management in operations evaluation. Improvements have been made that hold promise not only in IED but, more importantly, vis-à-vis its interfaces with other departments and offices in ADB, developing member countries, and the international evaluation community. In the medium term, IED will continue to improve the organizational culture, management system, business processes, information technology solutions, community of practice, and external relations and networking for lesson learning. Among the new knowledge products and services developed, Learning Curves are handy, two-paged quick references designed to feed findings and recommendations from evaluation to a broader range of clients Evaluation News report on events in monitoring and evaluation. Evaluation Presentations offer short photographic or Powerpoint displays on evaluation topics. Auditing the Lessons Architecture highlights the contribution that knowledge audits can make to organizational learning and organizational health.

Of the 1,106 ADB-funded projects evaluated and rated so far (as of December 2007), 65% were assessed as being successful, 27% partly successful and 8% as unsuccessful.

Criticism
Since the ADB's early days, critics have charged that the two major donors, Japan and the United States, have had extensive influence over lending, policy and staffing decisions.

Oxfam Australia has criticized the Asian Development Bank of insensitivity to local communities. "Operating at a global and international level, these banks can undermine people's human rights through projects that have detrimental outcomes for poor and marginalized communities." The bank also received criticism from the United Nations Environmental Program, stating in a report that "much of the growth has bypassed more than 70 percent of its rural population, many of whom are directly dependent on natural resources for livelihoods and incomes."

There had been criticism that ADB's large scale projects cause social and environmental damage due to lack of oversight. One of the most controversial ADB-related projects is Thailand's Mae Moh coal-fired power station. Environmental and human rights activists say ADB's environmental safeguards policy as well as policies for indigenous peoples and involuntary resettlement, while usually up to international standards on paper, are often ignored in practice, are too vague or weak to be effective, or are simply not enforced by bank officials.

The bank has been criticized over its role and relevance in the food crisis.The ADB has been accused by civil society of ignoring warnings leading up the crisis and also contributing to it by pushing loan conditions that many say unfairly pressure governments to deregulate and privatize agriculture, leading to problems such as the rice supply shortage in Southeast Asia.

The bank has also been criticized by Vietnam War veterans for funding projects in Laos, because of the United States' 15% stake in the bank, underwritten by taxes. Laos became a communist country after the U.S. withdrew from Vietnam, and the Laotian Civil War was won by the Pathet Lao, which is widely understood to have been supported by the North Vietnamese Army.

In 2009, the bank endorsed a $2.9 billion funding strategy for proposed projects in India. The projects in this strategy were only indicative and still needed to be further approved by the bank's board of directors; however, PRC Foreign Ministry spokesman Qin Gang claimed, "The Asian Development Bank, regardless of the major concerns of China, approved the India Country Partnership strategy which involves the territorial dispute between China and India. China expresses its strong dissatisfaction over this.... The bank's move not only seriously tarnishes its own name, but also undermines the interests of its members."

United Nations Development Business
The United Nations launched Development Business in 1978 with the support of the Asian Development Bank, the World Bank, and many other major development banks from around the world. Today, Development Business is the primary publication for all major multilateral development banks, United Nations agencies, and several national governments, many of whom have made the publication of their tenders and contracts in Development Business a mandatory requirement.

Members


ADB has 67 members (as of 2 February 2007). Names are as recognized by ADB. The year after a member's name indicates the year of membership. The largest share holders of the ADB are Japan and USA, each holding 15.57% of the shares. At the time a country ceases to be a member, the Bank shall arrange for the repurchase of such country's shares by the Bank as a part of the settlement of accounts with such country in accordance with the provisions of paragraphs 3 and 4 of this Article.

Republic of China (Taiwan) initially joined as "China" as a founding member representing the whole of China. However, its share of Bank capital was based on the size of Taiwan's capital, unlike the World Bank and IMF where the government in Taiwan had had a share representing the whole of China prior to the People's Republic of China joining and taking the Republic of China's seat. In 1986, a compromise was effected when the People's Republic of China joined the institution. The ROC was allowed to retain its membership, but under the name of Taipei, China — a name it protests. Uniquely, this allows both sides of the Taiwan Straits to be represented at the institution.