Mar 17, 2013

Asia - ADB in need of new direction

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BANGKOK - With Asian Development Bank (ADB) President Haruhiko Kuroda set to resign from his post on March 18, speculation about his replacement has already commenced.

The ADB is one of the largest multilateral financiers of infrastructure projects and programs in Southeast Asia. From renewed engagement with Myanmar, to a wide range of proposed energy and transport infrastructure projects across Asia, to far-from-finished in-house efforts to improve effectiveness and impact, the ADB's next leader will have a full agenda.

Based on past practices and traditions, that next president is likely to be Japanese and male. Dedicated to supporting Asia's poorest nations fight poverty through loans, grants and technical assistance, the ADB has been led by a Japanese national ever since the institution's founding, with strong US support, in 1966.

For three and a half years under US Presidents Barack Obama and George W Bush, I served as the US ambassador to the ADB and continued the bipartisan US push for a more efficient and effective ADB.

Representatives from finance, trade or development ministries from Singapore, Thailand, Malaysia and Indonesia, among others, also then sat on the ADB's Board of Directors. All 10 Association of Southeast Asian Nations (ASEAN) countries are ADB members and shareholders.

My time overlapped with Kuroda, who was the most recent ADB leader to be chosen from the ranks of former high-ranking Japanese Ministry of Finance (MoF) officials or others with close ties to the ministry.

First chosen as ADB president in 2004, Kuroda was reelected for a full five-year term beginning in November 2006. He was re-elected for another five years in 2011, though some speculated even then that he might resign, clearing the way for another Japanese official to move into the post. Japanese Prime Minister Shinzo Abe recently tapped Kuroda to serve as the next head of the country's central bank.

Officially, the ADB's next president will be chosen from nominees put forth by member governments, including possible nominations from within ASEAN. In reality, a former Japanese MoF official is likely to be chosen and might already have been identified internally in the backrooms of Tokyo.

A senior Japanese official currently at the International Monetary Fund (IMF), Naoyuki Shinohara, is one rumored contender; another speculated candidate is Japan Vice Minister of Finance for International Affairs Takehiko Nakao. Potential Chinese, Indian or Southeast Asian contenders for the post will thus likely need to restrain their hopes.

Supporters of more effective international financial institutions, this writer included, make a strong case for the top jobs to be held by qualified candidates from these organizations' major shareholders and largest financial contributors. A dynamic, different kind of leader for the ADB from Japan could well be a boost to the ADB and to Tokyo's continued hold on the institution's presidency.

The US is the major shareholder at the World Bank. Japan and the US are the ADB's co-equal largest shareholders, with Japan providing significant added financial support. Together, these two nations have been major supporters of the ADB's engagement in Southeast Asia, including in the Philippines, Vietnam, Indonesia, Cambodia and Laos.

The ADB was also able to win - thanks in part to initial reform efforts and commitments undertaken by Kuroda - US and others' support to triple the institution's capital base from US$55 billion to $165 billion during my time at the bank. That capital infusion gave the ADB more resources to respond to the 2008-9 global economic crisis as well as the longer term development needs of the region.

This included significant new funding to finance growth-stimulating infrastructure and other investments in Southeast Asia. In 2011, Vietnam was the ADB's third-largest recipient of approved ADB financing that year, trailing only China and India. Excluding contributions from co-financing partners, this included approval for loans of some $1.36 billion. Indonesia, Laos and the Philippines, meanwhile, were awarded roughly $580 million, $500 million and $362 million respectively last year in approved loans and grants from the ADB.

Under Kuroda's presidency, the ADB has aimed to promote greater regional integration in Southeast Asia. An alphabet soup of ADB-supported initiatives - some more successful than others - range from the Coral Triangle Initiative (a multilateral partnership of six countries formed in 2007 to address threats to one of the world's most biologically diverse regions) to the Brunei Darussalam-Indonesia-Malaysia-Philippines East ASEAN Growth Area (an initiative launched in 1994 by four national governments to help close development gaps).The ADB has also been a major financier of programs advancing the so-called Greater Mekong Subregion, or GMS.

All these efforts will need to be strengthened and built upon under the next ADB president. At the same time, project effectiveness, not just their dollar value, will be a critical area of focus for the bank's next leader. Kuroda was perhaps less successful in addressing internal management challenges and entrenched traditions at the ADB. Rightly or wrongly, less-than-world-class ADB practices were often perceived by some as favoring Japanese and South Asian staff over those from Southeast Asia and elsewhere in the region.

During the last few years, the World Bank and International Monetary Fund (IMF) - both founded in 1944 out of Bretton Woods, New Hampshire, to advance development and financial stability - have seen major changes. Former French minister Christine Lagarde became the first woman to take the reins of the IMF. Korean-American physician Jim Yong Kim, meanwhile, became the first from outside of politics and finance to lead the World Bank.

While European and the US nationals retained locks on the top positions, the selection processes and discussions were more transparent than ever before. That trend has not yet reached Asia's leading international organizations and their top shareholders, including the ADB and Japan, which many believe need to think differently about how the supposedly best qualified candidates are chosen to staff, manage and lead them.

Even if there is a limited chance that the next ADB president will be from Southeast Asia, most observers agree he - or she - should come from a wider pool of qualified candidates than just from Japan's bureaucracy. Indeed, all ADB staff should be recruited, chosen and promoted transparently through a merit-based process that benefits and rewards the best applicants, whether from the US, Southeast Asia or elsewhere.

Using nationality as a primary factor for hiring or promotion is constraining and potentially damaging in the long run to employee retention and morale. Cynics often point out that the "best qualified" people overseeing the most important ADB functions - particularly budget, personnel and management systems - are disproportionately bureaucrats from Japan.

This approach to human resources has both helped and hindered the ADB's own development and focus on fighting poverty across the Asia-Pacific region. It also has contributed - perhaps unfairly - to some resentment toward Japanese leadership at the ADB.

When the ADB was founded more than 45 years ago, Southeast Asia was a vastly different region than the dynamic one it is today. To be sure, Asia and the world's major multilateral financial institutions also have changed significantly since then. But for the ADB to keep pace with a fast-changing region, Japan's approach to the ADB must evolve more quickly.

Pre-ordained as the outcome may be, the "search" for the ADB's next president will ideally locate a candidate that will do more to hold the institution's management accountable for shortcomings not just in development results but also in areas like staff retention and recruitment of qualified women. Such a change at the top would benefit the people of the poorest and least developed nations that the ADB seeks to serve, including here in Southeast Asia.

Curtis S Chin

Curtis S Chin served as US Ambassador to the Asian Development Bank under Presidents George W. Bush and Barack Obama (2007-2010). He is currently a senior fellow and executive-in-residence at the Asian Institute of Technology and a managing director with RiverPeak Group. 

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