By Tony Lopez
Asian Development Bank stands for three things. It is Asia, the world’s most dynamic and fastest-growing region (no thanks to ADB). It is development. It is a bank.
Of the three, the bank aspect has been the one thing ADB has lived up to. ADB is a profit-making machine. Have no doubts about it.
As for development, I doubt that the substantial progress of Asia in the last 15 years can be attributed to ADB’s presence in the region. Robust development would have taken place, even without ADB, thanks to the resilience and productivity of Asians, the region’s strategic location and enormous resources, and the strong arm tactics of the region’s governments. That development was mostly priviate-sector-financed.
ADB is a bank with $164 billion in capital and $58 billion in debts. It has more than $222 billion in readily available funds. But it dispensed only $12.6 billion in ordinary loans and $1.9 billion in low-cost Asian Development Fund money last year. The $14 billion is a drop in the bucket considering Asia’s huge development financing needs.
When ADB was formed in 1966, poverty in Asia was massive. Today in Asia, poverty is still massive. Says President and Chairman Haruhiko Kuroda in ADB’s 2011 annual report:
“Poverty reduction remains the greatest challenge for developing Asia and the Pacific. Although significant progress has been made in reducing income poverty, large pockets of deprivation remain, and disparities both within and across countries continue to grow.
“Nearly half of Asia’s citizens—about 1.8 billion people—still live on less than $2 a day. Many reside in megacities with populations of over 10 million, where pollution compounds the problems associated with mass urbanization.”
According to its 2011 annual report, in 2010, ADB received a “mixed” rating in effectiveness in poverty and human development key performance indicators (KPIs). ADB was rated “poor.” Despite ADB, Asia is unlikely to meet six of 12 Millennium Development Goals (MDG) targets.
As for being Asian, well, ADB is more western than Asian. ADB was part of the troika (along with the World Bank and International Monetary Fund) that advocated severe fiscal discipline and taxation that impoverished millions of Asians in the 1980s and 1990s.
ADB was not of much help in the financial crisis of 1997 and the global recession of 2008.
ADB was supposed to teach good economic management to the region’s governments using its loans and technical assistance as carrot. But the economies of the countries that control ADB like Japan, the United States, France and the United Kingdom, are badly mismanaged. Europe and the US together own a third of ADB and both are in economic doldrums.
Japan owns 15.56 percent of ADB, the US 15.56 percent, Germany 4.34 percent, France 2.33 percent, and UK 2.05 percent.
Did the Philippines benefit from ADB being in Manila? Not much.
In fact, ADB’s presence in the national capital region didn’t add any iota of confidence among investors and lenders of the country, especially during the crippling crisis years of 1983-1984 when the world stopped dealing with the Philippines and in the 1970s when our central bank had barely $2 million in effective reserves.
In four waves of foreign investments that swept through Asia in the last 20 years, the Philippines failed to capture a significant portion. The country received a pittance. The bulk of FDIs went to China, Thailand, Malaysia, and Vietnam.
Even today, the Philippines receives only an average of $2 billion in foreign investments annually.
China rakes in more than $100 billion in FDIs– money it doesn’t need at all.
Yet, amazingly, China borrowed $1.59 billion from ADB last year, No. 5 borrower, after Vietnam $3.6 billion, India $3.1 billion, Pakistan $2.88 billion, and $2.29 billion. ASEAN’s economic dynamo, Indonesia borrowed $805 million (No. 8 in loan value).
You may ask, with $3.3 trillion in foreign reserves (which is nearly eight times ADB’s subscribed capital), why does China have to borrow $1.59 billion from ADB – for what? To buy fishing boats? I understand the Chinese borrowings went to clean energy. For that matter, why does India have to borrow from ADB? It already has $296 billion in reserves.
The Philippines presents an abject lesson in ADB’s apparent failure of mission in this country.
When ADB was established in Manila in 1967, the Philippines had ten times more exports than either Taiwan or South Korea. Today, it is the other way around. The Philippines, in fact, was the second richest country in Asia, after Japan. Manila was importing maids from Hongkong. Singapore, Malaysia and Brunei were hardly nation states. The Philippines virtually had no economic rivals in Southeast Asia.
About a fourth of Filipinos in 1967 were poor. Today, still a fourth of Filipinos are poor. The Philippines is Asean’s economic laggard and perceived as one of the region’s most corrupt in governance.
Is there a correlation between ADB being in Manila in nearly half a century and the Philippines’ economic and political decline during the period?
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