Asian Development Bank - interview

NGO criticises ADB and questions its ability to reduce poverty

Article published on the 2009-05-05 Latest update 2009-05-05 14:16 TU

The delegates at the ADB annual meeting in Bali, Indonesia on 4 May 2009
(Photo: Reuters)

Rajat Nag, Managing Director of the Asian Development Bank has told RFI it will be “providing more assistance to the poorer countries” in the region, despite criticism from ActionAid, who say it has not been successful in reducing poverty in the region.

The ADB, which was established in 1966 to help promote social and economic development in the Asia-Pacific region, agreed last week to increase its capital base.

“The governors approved the tripling of our capital from 55 billon dollars, to 165 billion dollars, which is a very significant increase, the highest ever,” said Nag. “This enables us to be much more responsive now, to the needs of our region, particularly in the context of the global financial crisis,” he added.

An annual meeting of member countries began in Bali, Indonesia on Monday. And the world economic crisis has been high on the agenda.

“Asia has been very severely affected by the crisis, and the crisis is as much a social crisis, as an economic one,” Nag told RFI.

President of the ADB, Haruhiko Kuroda (R) in Nusa Dua, Bali island on 2 May 2009
(Photo: Reuters)

He says it is vital to ensure that investment yields real results.

“The important thing here is to make meaningful investments, we want infrastructure investments, we want fiscal stimulus, but they cannot and should not be bridges to nowhere,” he said.

But the ADB’s infrastructure projects have drawn criticism from ActionAid, who do not think they really help the poor.

“ADB policy has destroyed their livelihoods, created more environmental damage, and really has exaggerated poverty,” said Rashed Al Madmud Titumir, a spokesperson for ActionAid.

He says that policies of the ADB, and their approach to investment has actually made it harder for those fighting poverty.

“If the bank was successful in terms of its strategy, then definitely we would have seen some improvements of the lives of the poor,” Titumir told RFI. “Liberalisation, deregulation and privatisation - it has not served the purpose of the poor to achieve a decent life,” he added.

Nag, who has been with the ADB for more than 20 years, does not agree.

“We will obviously be providing more assistance to the poorer countries or the ones which need our assistance more,” he told RFI. “We will not be increasing our lending to China, in spite of the huge capital increase. We will be increasing our lending to countries such as Indonesia, Thailand, Vietnam, Bangladesh and Pakistan,”

He says the ADB is going to look into improving countries’ welfare systems, explaining that although there is a reasonable savings ratio in most of Asia, it is used to pay for welfare.

“At the moment, Asia saves about 34 per cent or so, of its GDP, because there’s no active social protection network in any meaningful way,” Nag told RFI.

ActionAid wants to see increased use of local knowledge in designing and implementing projects.

“Because of their failed instruments, poverty is higher, you see rising unemployment, you see malnutrition, all over Asia,” said Titumir.

Nag was very clear on cancelling national debt, an idea that was first discussed as part of the UN’s Millennium Development Goals.

“We as an institution do not do that. We believe that we are a developmental institution, but are also a bank,” he said.

He thinks it is the responsibility of the international community.

“It cannot be diminished in any way, other than if the international community were to say we want to write off the debt, or forgive the debt of country A, B and C. But then we would expect these developed countries to pay us, on the behalf of the developing countries, we would still have to clear our books as it were […] it would have to be a part of a debt release programme,” he said.

“I believe that debt forgiveness is not the issue, the issue is to make sure that the countries have access to capital with which to undertake productive investments, which will contribute to fighting poverty,” he added.

ActionAid calls for wide ranging reforms of the ADB, including its structure of governance and voting.