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ADB to have 'friendly competition' with WB, new CEO's style likely to benefit India

R C Murthy in Manila, the Phillippines

In a development that may prove a blessing in disguise for developing countries like India, the Asian Development Bank has decided to enter into "friendly competition" with the World Bank.

As a regional institution lending to governments and the private sector in Asia, the ADB coordinates its activities with the World Bank.

Competition is good for customers. In this case, it is the governments and the private organisations that will benefit, observers said.

After two-day deliberations at its annual meeting of the board of governors, the ADB has indicated that the Asian Development Fund VIII, which starts next year, will have a corpus of $ 6.3 billion.

With this, the new chief executive officer of the ADB, Tadao Chino, has signalled that he wants a sense of urgency in decison-making. Observers said Chino has the backing of Japan, his mentor-country.

The early shaping of the fund gives enough time for the ADB to formulate policies for poverty reduction and to evolve social safety nets so that poverty will not worsen in currency crisis-hit countries like Indonesia, Thailand and South Korea.

The ADF VIII may not benefit India, which is not a borrower from this soft-loan window. But indirectly, India does stand to gain. If Chino has his way, the decisions on the ordinary capital resources, a window that offers loans at market interest to all member-countries including India, will be hastened. The transparency he wishes to introduce in operations will also be of advantage to India.

Chino is keen on redefining the profile of the ADB and make its functioning transparent. An exercise to this effect is on to convince the shareholders, who are basically governments of 87 countries spread all over the world, and the public at large.

There is a view that the World Bank and the International Monetary Fund did not do enough and in time in Asia to ameliorate the economic crisis. This is in contrast to the Bretton Woods twins' rescue act in Mexico at the behest of the US. This is one reason that is believed to have led to the WB vs the ADB concept.

"From our point of view, the role of the ADB is not an extension of the work of the Bretton Woods institutions," Chino told Rediff On The NeT. As always, the ADB is expected to be guided by the view of Japanese government, which is the single largest donor at the bank.

So far, the US administration has been dragging its feet when it comes coughing up cash either at the ADB or at World Bank. Japan did not bother much at the World Bank since it has been playing the second fiddle.

There are apprehensions that the US Senate may block further funding of the ADB in spite the President Clinton's recommendations.

India is expected to reap the fruits of this inter-institutional competition if only it resolves problems with the ADB, whose loan commitments to India were just $250 million in calendar 1998 against the annual average of $ 1 billion earlier.

The lending has come to a virtual standstill because of Japanese indignation first over the Pokhran nuclear tests and more recently Agni II missile tests. This was echoed, albeit indirectly, by India's Finance Secretary Vijay Kelkar on Saturday at the ADB meet.

Intensive discussions between the Indian delegation and the Japanese officials are on. It is a moot point that the issue will be clinched fully without a political decision at New Delhi, where a caretaker government is functioning at present.

But the Indian stand is that since Japan along with the US abstained at the World Bank board deliberations February last, it cannot continue to have a negative posture. Whether Japan will adopt a posture in Manila that would different from the one it had in Washington remains to be seen.

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