Inclusion mantra

The collapse of the global economy has forced development financial institutions such as the Asian Development Bank to shift their focus from capitalism at all costs to compassionate capitalism.

Prime Minister Manmohan Singh greets ADB President Takehiko Nakao at the 46th annual meeting of the Board of Governors of the ADB in Greater Noida on May 4.

THE four-day annual conclave of the Board of Governors of the Manila-based Asian Development Bank (ADB), held in Greater Noida from May 2 to 5, was long on posturing and short on substance. An institution dwarfed by post-War multilateral development bodies such as the World Bank and the International Monetary Fund (IMF), the regional development bank set up to take care of the development concerns of countries in the Asia-Pacific region seldom lived up to the hype surrounding international financing institutions.

India is one of the founding members of the ADB, which came into being in 1966. New Delhi came to a tacit understanding not to borrow from the bank since, given the small size of the ADB and India’s massive borrowing needs, that would have crowded out smaller Asian countries. But this policy of self-abnegation could not be followed for long in view of India’s increasing dependence on overseas institutional development finance. This policy change was also helped by the third General Capital Increase of the ADB in 1983 by which the enhanced capital resources enabled the bank to start lending to India in 1986. By the end of 2012, the ADB financed projects in India with a cumulative lending of nearly $29 billion.

With a staff of 3,000, the ADB is not at all a small institution. Its new President, Takehiko Nakao, admitted in his address to the session that the ADB was by far the largest multilateral institution based in Asia and the Pacific. “By playing a more effective role as a catalyst in mobilising finance and knowledge, we can serve this region even better,” he observed. The bank’s operations in 2012 totalled nearly $22 billion, including about $8 billion in co-financing.

Nakao pointed out that despite Asia’s remarkable growth in the past few decades, it still had a population of more than 800 million people living in absolute poverty. “This, coupled with growing inequality, remains an overarching challenge” for the bank, he said. It is, therefore, small wonder that the bank chose the theme of “Development through empowerment”. The theme encompasses concerns that are crucial to sustaining high and inclusive growth in developing Asia.

For the regional development bank patterned after the World Bank/IMF, the ill effects of the Washington Consensus and the neoliberal economic policies, which all international financial institutions had been advocating in the post-War reconstruction and development of the world economy, hold important lessons.

The global financial meltdown has brought about a tectonic shift from capitalism at all costs to compassionate capitalism so that people bypassed by reforms get livelihood security to contribute their mite to the growth process. This also paved the way for international financial institutions to reinvent themselves by focussing on the poor lest they should lose their relevance.

At the inaugural session of the conclave, the ADB chief said that Asia had to focus on innovation, inclusion and integration if it was to achieve sustainable growth. Prime Minister Manmohan Singh and Union Finance Minister P. Chidambaram, who spoke subsequently, highlighted the huge challenges that remained in a region where inequality was increasing rapidly and where many countries were struggling to attain the Millennium Development Goals.

As infrastructure finance of more than $8 trillion is one of the most clamant needs of the Asian region in the coming decade, Manmohan Singh and Chidambaram pointed to the key role the ADB must play in garnering support and finance from the private sector.

A new report titled “Empowerment and Public Service Delivery in Developing Asia and the Pacific”, launched at the meet, was critical of the delivery and quality of public services, which could not keep pace with the meteoric growth rate seen in many economies in the region. As India prides itself on having delivered high growth until 2010-11 before the onset of the slowdown, it is time the authorities took their cue from the report to overcome institutional inadequacies in the provision of public services and the delivery of public goods at affordable cost and in adequate measure.

The Nobel laureate Amartya Sen suggested that developing countries learn their lessons on service delivery from the post-War achievements of Korea and Japan. He underscored the crucial role the ADB should play in the delivery of services to those in dire need of them.

India’s track record in public services delivery came in for review and rebuke by panellists at the session. The annual meeting served to send out the message that development banks know that they need to focus on the common concerns of the poor and the efficient delivery of public services.