After 50 years of its long journey, the Asian Development Bank (ADB) is now facing a new global reality in the fast changing world. No doubt, the ADB has played a critical role in the last five decades to facilitate development process of the Asian countries. During the period, Asia, the largest continent of the globe, has changed a lot. From a poverty-ridden, disaster-porn and low-industrialised region, Asia now emerged as the gravity centre of global economy. History tells us that about 1,000 years back Asia was the gravity centre of the world economy which gradually shifted to Europe and later to North America, the United States to be precise. The course is now reversing fast where the role of ADB is crucial.
An article written by Dany Quah, professor of London School of Economics, in 2011 showed that 'in 1980 the global economy's centre of gravity was mid-Atlantic. By 2008, from the continuing rise of China and the rest of East Asia, that centre of gravity had drifted to a location east of Helsinki and Bucharest.' By extrapolating growth in almost 700 locations across the globe, the researcher projected that the world's economic centre of gravity would be located by 2050 in India and China, which means Asia.
EARLY DAYS: Creating an international financial institution for Asia was very challenging. The United States (US) opposed the idea initially floated in 1963 by the Economic Commission for Asia and the Far East (ECAFE) which was established in Beijing in 1947 and later turned into today's UNESCAP (The United Nations Economic and Social Commission for Asia and the Pacific). Initially, there was a plan to establish trade finance institution like the Organisation for Economic Cooperation and Development (OECD) to enhance intra-regional trade. But the idea of a regional development bank, forwarded by a young Thai banker named Paul Sithi-Amnuai, received much appreciation. The US opposition came as it had already established Inter-American Development Bank (IDB) in 1959.
The US, however, softened its stance mainly due to the Vietnam War which put the image of the country in trouble. The US also pushed Japan to participate actively in the process. When everything reached at a final stage, it was opposed by the Philippines. Later, things got settled and Manila became the headquarters of the new global bank with the presidency going to Japan. Initially, there were 31 members that has now reached 67, of which 48 are from the Asia and Pacific region.
During the early years, ADB focused mostly on food output and rural development as Asia was at that time an agro-based poor region. In the 1970s, ADB started to expand its area of operation and extended support for energy, though at a modest level. Asian Development Fund to provide low-interest loans to ADB's poorest members was established in 1974. In 1980s, beside energy, social infrastructure started to get priority in ADB financing.
EAST ASIAN MIRACLES: The dynamics of Asian economy started to change in the 1990s. The rise of Far-East and East Asian economies with faster growth drew global attention. 'East Asian Miracles' became the buzzword in the western world. Thailand, Malaysia, Singapore, Indonesia, Taiwan, Philippines and Hong Kong appeared as 'super seven' of Asia. But, the boom busted with huge outflow of hot money from these countries financial market. Currencies got hugely devalued, factories were shut down, unemployment soared and growth became stalled.
To fight the financial crisis, ADB had very limited tools in its hand, and it was the International Monetary Fund (IMF) which came up with a bailout package to ride out the crisis. But the IMF prescription worked partially and country like Malaysia even scraped the IMF recipe within a year. ADB, however, extended support with projects and programmes to strengthen financial sectors and create social safety nets for the poor. An emergency loan worth $4 billion was extended to the Republic of Korea by setting up the Asian Currency Crisis Support Facility.
FROM MDGS TO SDGS: Asia entered into a new century with the wound of the financial crisis. As the United Nations (UN) launched the Millennium Development Goals (MDGs), ADB took initiative to align its financing. It enhanced the support for poverty reduction and broader development. In the first decade of the new century, the Asian region faced severe acute respiratory syndrome (SARS) epidemic and ADB extended its support to fight the epidemic on the basis of regional cooperation. ADB also extend its focus area on regional connectivity and physical infrastructure building in its fifth decade.
Despite SARS and the global financial crisis in 2008, Asian economy reached a new high. In 2010, the region's Gross Domestic Product (GDP) increased by 9 per cent which was more than twice as much the global growth rate and also well above the 5.9 per cent rate recorded in Asia in the previous year.
The UN Agenda 2030 or Sustainable Development Goals (SDGs) was adopted in 2015 to turn the development process across the world pro-people and environmental-friendly. Comprising 17 broader goals and 169 related targets, countries including Bangladesh are committed to achieve the goals for a better, prosperous, greener, cleaner and equal world by the next 15 years. ADB is committed to support the initiative and also the climate deal.
BANGLADESH AND ADB: Bangladesh's relationship with ADB is quite interesting. The country joined the regional development bank in 1973 which was critical to reconstruct the war-ravaged country. In less than a decade, in 1982, ADB opened its first field office in Bangladesh. It was a significant event as ADB chose Bangladesh as a hub 'to bring operations closer to the people in need'.
As of December 31, 2016, ADB's cumulative lending to Bangladesh stood at $18.3 billion for 269 loans, $252.4 million for 422 technical assistance projects, and $787.10 million for 35 grants project. As of March 31, 2017, ADB's projects under implementation for Bangladesh comprised 90 loans and grants packages amounting to $7.6 billion and 32 technical assistance projects amounting at $28.58 million.
According the resident mission in Dhaka, ADB focuses its cooperation in Bangladesh on six sectors. These are: energy, transport, water and other urban infrastructure and services, education, finance, and agriculture, natural resources and rural development. Last year, ADB approved 10 projects for Bangladesh, with total loans worth $1.1 billion and technical assistance worth $7.85 million.
YOKOHAMA CALLING: This year ADB is celebrating 50 years of its existence with a mixed reaction of appreciation and criticism. Like the World Bank, ADB is also blamed for anti-poor development stance in many of the Asian countries.
The operations of the development bank reached a record $31.7 billion in 2016, up by 18 per cent from the previous year, with approvals of loans and grants of $17.5 billion. The target is $20 billion by 2020.
The challenges for ADB are multi-pronged, especially in a time of global turbulence. The inception of Asian Infrastructure Development Bank (AIIB) led by China is a new challenge. Although the AIIB has so far initiated only two projects-- one in Bangladesh and other in Pakistan-- it is going to compete with the ADB in near future. As the developing countries of the region are advancing faster, their demands for financing is increasing in diversified areas.
Against the backdrop, the Board of Governors of the ADB is going to meet in first week of May this year in Yokohama, Japan. It is the ADB governors' 50th annual meeting. All the finance or trade or relevant ministers of the member countries are Directors of the Board, with Mr Taro Aso, deputy prime minister (for finance) of Japan as chair. As the Board is the top policy formulating and decision making body, this meeting is quite important to devise the future path of the regional bank to deal with the upcoming challenges. The bank has to realign its strategies and action plans taking note of current global developments.