ADB's challenge: to compress Asian inequality

The Asian Development Bank is eager to reduce poverty and inequality in Asia. Ahead of the bank’s annual meeting in Delhi in May, Rajat Nag, the agency’s managing director general, offers some views on where he sees the agency’s strategy evolving in the coming years.

  • 11 Apr 2013
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Asiamoney (AM): What do you think have been among the ADB’s key successes over the past five years? Where do you feel it has relatively underperformed?

Rajat Nag, Asian Development Bank (RN): As you know we adopted the Strategy 2020 [in 2008] and that gave us a coherent, focused, strategic framework to reduce poverty in Apac [Asia Pacific], to ensure that our country partnerships respond to need of the country and reflect our comparative advantage. It allows us to be more selective and hopefully more effective.

At the same time we initiated our institutional corporate framework in 2009. This allows us to…not just track efficiency but also our effectiveness. In last five years we have also had a significant capital increase of 2005 our lending level was US$7.5 billion and by 2012 it had become US$21.2 billion including core financing. This was a significant increase in operations to respond to the needs of the region.

On the challenges side we still need to improve our implementation. At the end of the day it’s what matters, we still have implementation delays that hamper successful delivery output and outcomes. Our success rate is close to 80%, but still we’d like to get it higher. I’d say that [a success rate of] 85%-90% would certainly be something we would want to achieve and are working towards.

It’s not just the achievement of projects individually that’s important but the development outcome too. We can build a school and do it well but what’s important is to get the literacy rate high, and get them [the children] to graduate. We have to focus on outcomes.

AM: I believe that the ADB’s overall goal is to end poverty in the region by 2020. Does the bank require greater financial assistance / cooperation from shareholders to meet this target?

RN: Ending poverty in the region is our ultimate goal but not by 2020. It will probably take a bit longer than that. It’s true that the level of poverty [broadly defined as having to live on less than US$2 a day] is coming down significantly in Asia, but a large number of the poor are in middling-income countries, such as India and China.

Most importantly we have to concentrate not just on reducing poverty, but also to recognise rising inequality and vulnerability in the region. People may go from under to over poverty line, but a natural disaster or a health shock can mean that they slip under the line once more. So we need to look also at equality and ensure growth is inclusive, as we have seen that as we have grown so has inequality.

The region’s Gini [coefficient, a measure of inequality in which 0 is complete equality and 1 complete inequality] has moved from 0.39 to 0.46. And our growth needs to be inclusive and consider environmental issues as well.

We need to look at [poverty reduction] in a comprehensive way, where degradation and inequality is a concern.

AM: Will your goals require gradually rebalancing the bank’s resources towards the most needy, least-developed nations?

RN: It’s something we wrestle with all the time. Even middle-income countries such as China and India house a large amount of poor, so we work in these regions. In China we increasingly work in interior, heading westwards, over to rural. India we work on the poorer states and therefore one has to be fairly discerning at a country level and within a country where we have most impact. There is no question that over time we like countries to move up ladder. And we bring in private sector. Some countries’ ultimate test is if [they can attract] private sector capital.

AM: Are there plans for the ADB to increase its cooperation with other development banks and state-affiliated agencies, such as the China Development Bank?

RN: Absolutely. We recognise that we don’t have enough resources to meet needs of region so it makes sense to cooperate and co finance with other institutions and private sector.

AM: A former senior member of the ADB told me he feels that development agencies by their nature lack focus, and that the ADB was strongest when focusing on infrastructure. This is one of the five core areas on which the bank focuses but will this area be increasingly emphasised in the future?

RN: One of the defining features of strategy 2020 recognises this issue of selectivity. On the one hand given the needs of our region each country needs a lot of help and our feeling is that institutions need respond to those needs. On the other hand what are the comparative advantages of the institution?

We don’t want to be so focused as to only do one thing but we do not want to do too many things and not do anything very well. Eighty percent of our work is in five core areas [these being infrastructure, environment, regional cooperation and integration, finance sector development and education].

We will continue to focus on infrastructure, it’s what we do well and we have a good track record. Last year almost 70% of approvals were for infrastructure projects. We’ll focus on areas of comparative advantages but not give up on other needs. We’ll work more closely with other development partners and see who can do what better. The private sector is an element of this; by 2020 we said 50% of our new annual lending will be in private-sector operations directly or towards that sector.

This interview has been edited by Asiamoney.

  • 11 Apr 2013

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