There has been much discussion recently about the value of multilateralism. I am a strong believer that the multilateral system, which includes multilateral development banks, plays important roles to support the global community. The multilateral system does not conflict with the national agenda. It relies on the coordination and support of national governments and their taxpayers.
The Asian Development Bank (ADB)’s long-term corporate strategy — Strategy 2030, published last year — set priorities to support member countries and their people in line with major international commitments, such as the Sustainable Development Goals and the Paris Agreement on climate change.
These priorities include (i) addressing remaining poverty, including through better health, education and social protection, (ii) accelerating gender equality, (iii) tackling climate change, building disaster resilience and enhancing environmental sustainability, (iv) making cities more livable and (v) promoting rural development and food security.
We support these priorities by strengthening governance and institutional capacity in our member countries and fostering regional cooperation and integration. The ADB seeks to be a knowledge centre and aims to incorporate digital technologies, artificial intelligence, satellite systems and other advanced technologies in its projects, programs and technical assistance.
For MDBs to pursue their missions, they must continue to reinvent and reform themselves. Since the “Making the Global Financial System Work for All” report by the G20 Eminent Persons Group on Global Financial Governance was published last October, there has been renewed interest in how to reform MDBs.
Contrary to the perception that MDBs are not working in a coordinated way, MDBs have been strengthening their partnerships. MDB leaders meet at least three times a year to discuss global issues and enhance their coordination. MDB departments spanning regional operations and sectors, private sector operations, strategy, legal issues, treasury, independent evaluation and human resources have regular meetings. MDBs have close donor coordination with government agencies in member countries.
MDBs also work with the International Monetary Fund, especially, when considering budget support for our member countries. When the ADB considers policy-based lending, I always ask whether the IMF is supporting it. The ADB waits until an IMF program is agreed with the Government before proceeding with policy-based lending if it involves the balance of payment issues.
Strong collaboration is key to achieving greater development impact. MDBs must continue to collaborate, including with EPG’s proposed launch of a country platform, to promote economic stability and sustainable growth in member countries.
Second is a stronger focus on mobilising private sector resources. MDB lending and equity investment to private sector companies generally have an outsized impact on mobilising private resources and expertise. This is the reason ADB is increasing its private sector operations, especially, in frontier economies, startups and social sector projects, such as in vocational education and health care, in addition to projects in renewable energy, urban transport, water and sewerage.
We must be mindful, however, that private sector operations do not distort the market by crowding out private money or giving an unfair advantage to specific companies.
The ADB also promotes public-private partnerships by providing transaction advisory services, even without using its financial resources. We established a PPP office within the ADB to support the governments’ capacity building and to help design and structure PPP transactions. We must expand the use of credit enhancement instruments, including guarantees.
Regardless of sovereign or non-sovereign lending, MDBs are vehicles for mobilising private resources by issuing bonds in capital markets, thereby leveraging our shareholders’ contributions to our equity. MDBs have achieved a lot in the development of poor countries by de-risking development financing through their high credit ratings — AAA in the case of the ADB — and by recycling financial resources.
The third element of MDB reform is that, as the EPG report proposes, MDB governance needs to be brought up to date, reflecting the complexity of MDB strategic challenges and the needed shift in business models.
As part of the ADB’s governance reform, we are reviewing the functional relationship between our board and management. We aim to enhance our effectiveness by reorienting the board’s focus to strategic priorities and adopting a practical, risk-based approach that delegates greater responsibility to ADB management for project and program approvals.
As the scale and complexity of the ADB’s operations increase, we need a new model to achieve the dual targets of securing the role of the board on the direction of the ADB on the one hand, and enhancing efficiencies and speed in decision-making on the other.
Perspectives provided by the board collectively and by their constituencies individually are essential inputs to the work of the ADB. They represent development priorities, including quick and tailored responses to the needs of developing countries, the efficient use of taxpayer money of shareholding and donor countries, promotion of gender equality and environmental and social considerations.
At the ADB, the resident board in Manila, the Philippines, contributes to close and collegial discussions between board and management, even when there are differences in view between them and among board members. We share the ADB’s mission of a prosperous, inclusive, resilient, and sustainable Asia-Pacific region.
The ADB has also been implementing various reform measures.
These include:
(i) optimising the use of balance sheet by combining ordinary capital resources and Asian Development Fund lending operations so that we can expand our operations without seeking a capital increase,
(ii) establishing 15 sector and thematic groups supported by independent secretariats in the Sustainable Development and Climate Change Department to enhance the creation and sharing of knowledge across departments,
(iii) introducing guidance and procedures to ensure collaboration of sovereign and nonsovereign operations as ‘One ADB’,
(iv) increasing the role of the ADB offices on the ground in member countries, (v) modernising business processes and IT systems,
(vi) strengthening human resources management by increasing mobility, improving talent management and career development, and promoting diversity, including improving women’s representation in senior roles,
(vii) better engagement with civil society organizations and
(viii) continued efforts to keep the ADB efficient through the prudent management of our administrative budget.
National interests and multilateralism go hand in hand because, in the longer run, we need international cooperation and collective actions for the interests of people in nation states. By reforming MDBs, we will continue to contribute to the improvement of people’s lives in the global community.
Takehiko Nakao is the president of the Asian Development Bank and the chairperson of the ADB’s board of directors. He was elected president by the ADB’s board of governors and assumed office in April 2013. Nakao was the vice minister of finance for international affairs at the Ministry of Finance of Japan.