|The Role of the Asian Development Bank
in Regional Development
When the bank was founded, the framers of its charter laid down two major operating principles. First, it was to function as a financial catalyst that would promote both the mobilization of domestic savings and the transfer of foreign savings to developing member countries. Second, the bank was to stimulate and help member countries develop economic cooperation among themselves.
I believe that these two fundamental objectives remain appropriate and attainable. But I also believe that the best means of achieving these objectives can, and should, vary according to the changing environment surrounding the developing member countries and the bank.
Indeed, there have been some changes in that environment. First, many countries in the Asia and Pacific region in the early 1960s had just pulled themselves out of a prolonged period of social instability or were in the midst of it. Consequently, their level of productivity and extent of participation in the world development process were almost insignificant. Today, these countries as a whole have successfully demonstrated that they can make the region a dynamic center of growth, given an environment that is conducive to development.
Second, all the members of this institution are now more dependent on each other for their economic prosperity and social stability. As the economies of developing member countries grew, those of developed countries also became more dependent on them and vice versa. Moreover, even the developing member countries have shown a trend of increasing interdependence. In short, we are all here together-more so than ever before.
Third, let us turn our attention to the instigators of this change. They are the people of these countries; the same people who at one time were considered by many to be incapable of accomplishing such a change. The new Asian was given relative freedom to chart his destiny through the market economy with the basic tools that he needed. This bank has been one of the providers of such tools.
I am of the view that these phenomenal changes are of a continuing nature. In order to move ahead, I want to suggest that the bank take a bolder look at the total development process and provide the people with new tools. I say this rather belatedly, as I recently learned of the work conducted by the task force of the bank and the Advisory Committee on the bank's Operational Priorities and Plans for the 1980s. They concur with much of my own thinking.
Regarding the role of financial catalyst, the time may have come for the bank to explore ways and means of addressing itself directly to the private sector. In our region, the record shows that countries with a strong private sector developed their economies faster than others, and their continued growth and exposure to the international environment are prerequisites for the prosperity of the region. I am most pleased to learn that the bank has already taken some actions in this direction. Whether the tool used is equity investment, guarantee of bonds, a project loan, or a sector loan, the bank could take a bolder and more flexible attitude to realize this worthy objective.
My next proposition is about the role of the bank as a partner with member countries in formulating development strategies. When it was founded in the mid-1960s, the bank's chief mission was to promote the transfer of foreign exchange resources to developing member countries. Consequently, the bank has more or less specialized in project financing. This approach is still relevant to developing member countries, especially to those whose institutions are in the early stages of development. Yet for group B and C countries, a bit more leeway should be given to borrowers in the form of sector loans and liberal loan administration powers. This suggests that the bank must take special care so as not to become, consciously or otherwise, another layer of bureaucracy over that of national governments. Instead, it is advisable that the bank exercise its influence to persuade governments to reduce market interventions and red tape.
I am convinced that the proposed policy dialogue and resource center concept are both timely and beneficial to the regional economy. In time, the bank is certain to develop its analytical capability and participate in policy dialogues with governments. The injection of informed, realistic alternatives is essential in this part of the world, where the pluralistic view of society has not finally taken root.
Policy dialogue is not an easy proposition. If it is done without a good understanding of the country-specific socioeconomic setting, it runs the risk of being resisted as unwarranted intervention in domestic affairs. Furthermore, if the bank approaches its members with uniformly preset paradigms on development strategy, that too is likely to be counterproductive.
Finally, let me address myself to another role that the bank can play. A policy dialogue, as I gather, is an interaction between the bank and a developing country. The bank could also have policy dialogues with developed member countries. As its sister agencies have long since been doing, this bank can express its views on the financial and trading policies adopted by developed countries. Protectionism and high interest rate policies have cast a long and dark shadow over the regional economy in the past few years. Development banks must not spare efforts in order to create an environment that is suitable to the realization of its investment objectives, and we all know that the success of a development strategy is as much a function of external environment as of national policies. One may inquire whether such an action will ever be effective at all considering the dependence of multilateral development banks on the governments of donor countries. By itself, it may not be. But in this world of many views and forces, each should speak of its own mind in order to find its ally. After all, a multilateral development bank is the child of an open and free economy, historically as well as conceptually.
The Asian Development Bank has been a proud joint venture by regional and nonregional members. Together, we helped make this region a source of wonder in good times and a source of hope in others. I am confident that we shall continue to do so in the future.