ADB facing pressure to change
Unmet infrastructure needs revealing cracks in the system
RINTARO TOBITA and JUN ENDO, Nikkei staff writers
TOKYO -- As the Asian Development Bank finds its regional hegemony threatened by the China-backed Asian Infrastructure Investment Bank, members of the ADB are pushing for internal reform.
During the 50th annual meeting that ended Sunday in Yokohama, delegates took issue with the ADB in a number of areas. German representatives called for the bank to focus more on mobilizing private-sector funding. The Indian contingent said the country can no longer afford to take out loans that are excessive relative to its budget.
Although Asia's infrastructure demand amounts to $1.7 trillion annually, ADB member nations are unable to keep pace. Vietnam, which is dealing with growing budget deficits, is approaching a self-imposed borrowing limit.
"Many countries cannot increase government spending," said a source close to the ADB. Inadequate tax collection systems leave those places without the means of securing necessary revenue.
The ADB, led by Japan and the U.S., has supported infrastructure development over the past half century mainly by lending to governments. But those countries are finding it increasingly difficult to shoulder the massive financing required, and the old model is reaching a breaking point.
In 2014, the ADB created a department dedicated to bringing private-sector funds to the public sector, but the bank has a long way to go before it can respond effectively to pressing needs.
Member nations also complain about the ADB's decision-making process. Projects should be approved more quickly, Indian Finance Minister Arun Jaitley said. About 75% of the 3,000-plus ADB staffers work at the headquarters in Manila, making it difficult for the bank to be thoroughly responsive to the needs of each Asia-Pacific nation.
Changes are being made to delegate more authority to local offices and reduce average approval times -- about two years now -- by six months. But an ADB insider says those reforms are only about 30% complete.
"If the AIIB is a medical specialist who only invests, then the ADB is a family doctor who regularly consults patients about their conditions," said a senior ADB official. The bank still holds the distinction of helping Asia climb out of abject poverty.
But critics point out that the ADB has become so large that enacting reforms where members see eye-to-eye has become challenging. And with the AIIB looming in the shadows, the ADB does not enjoy much of a grace period. "The next five years will determine" how the Asian order is shaped, said a senior ADB official.