[Congressional Record Volume 146, Number 66 (Wednesday, May 24, 2000)]
[Extensions of Remarks]
[Pages E826-E827]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




              TRENDS CONCERNING THE ASIAN DEVELOPMENT BANK

                                 ______
                                 

                          HON. SPENCER BACHUS

                               of alabama

                    in the house of representatives

                        Wednesday, May 24, 2000

  Mr. BACHUS. Mr. Speaker, I rise today to inform my colleagues about 
several recent disturbing trends at the Asian Development Bank [ADB]. 
The Bank recently concluded its annual meeting in Chiang Mai, Thailand. 
Two of my Banking Committee staff recently attended the annual meeting 
at the invitation of the U.S. Department of the Treasury.
  By way of general background, the Asian Development Bank [ADB] was 
established in 1966. The Bank also operates a concessional, below 
market rate, lending facility; the Asian Development Fund [ADF] created 
in 1974. There are 58 member countries, 42 of which are based in the 
Asia-Pacific region and 16 are non-regional. The United States and 
Japan are the largest shareholders in the Bank, each with a 16 percent 
ownership share.
  The purpose of the ADB is to promote sustainable development in the 
poorer countries of the Asia-Pacific region through project investment 
lending, policy reform lending and advice, and technical assistance. 
Through 1999, the United States has received over $4.6 billion in 
business procurement from the Asian Bank Group.
  By tradition, Japan nominates the president who also serves as 
chairman of the board. In many ways, the ADB is a very Japanese 
institution. The president selects board committee members and 
committee chairs. He appoints Japanese nationals from the Ministry of 
Finance in Tokyo to serve as the treasurer, and the head of the 
important Budget and Personnel Department. Japanese staff occupies 
other key management positions, notably the head of the Strategy and 
Policy Department and at least one of the two powerful programming 
department directorates.
  Under the leadership of the Bank's previous president, Mitsuo Sato, 
the ADB established an enviable track record as one of the most 
progressive and reform-minded of any of the multilateral development 
banks. President Sato worked closely with the United States and other 
shareholders to inaugurate a series of sweeping and forward-leaning 
policy changes designed to increase substantially the institution's 
development effectiveness.
  Among these reforms was a decision to invest more in basic human 
capital (for example, basic education, health and sanitation), an 
effort to strengthen project quality, increase the transparency and 
accountability of its own operations, establish an information policy 
based on the presumption of disclosure, the creation of an inspection 
panel, the formulation of an explicit governance and anti-corruption 
policy, a coordinated effort together with UNICEF to improve child 
nutrition and early childhood development, a proactive policy for 
outreach to non-governmental organizations [NGOs], as well as a gender 
and development policy.
  But President Sato stepped down in early 1999. He was succeeded by 
Tadao Chino, a former Vice Minister of Finance for International 
Affairs. In style, outlook, and temperament, he appears quite different 
from his predecessor. More consequential, he appears to be taking the 
institution in the wrong direction--a direction that is far less 
multilateral and less inclusive.
  From the outset of his tenure, the ADB has become notably less open 
to the views of others, including the United States. Indeed, Bank 
management has aggressively advanced its own agenda over the concerns 
and even strong objections of the United States and other shareholders.
  Examples of the high-handed management style of the Bank's new 
leadership includes unilateral exclusion of the United States from 
chairing the Board's Budget Review Committee even after repeated 
protest from the Treasury Department; programming excessively high 
lending levels in order to accelerate discussion of a general capital 
increase; and resistance to formalized cooperation with the World Bank. 
More broadly, key policy and operational issues are advanced quickly 
over the objection of major donor shareholders when it suits Bank 
management, and capriciously stalled when it does not.
  The United States during the 1999 annual meeting raised many of these 
internal governance and management issues. But it would appear that 
precious little progress has been made. Whereas the Bank was once a 
reform leader, it now lags not only the World Bank but every other 
regional multilateral development bank [MDB] in embracing needed 
reforms and has been resisting calls for more substantive change in the 
Asian Development Fund negotiations [ADF-8].
  To be fair, the Bank under President Chino has embraced poverty 
reduction as its overarching mandate. But this occurred only after 
repeated calls from the United States and other major shareholders that 
a poverty reduction policy paper be presented to the board by the time 
the ADF-8 replenishment negotiation began in October 1999. The Bank 
remains far behind in turning this policy commitment into operational 
practice.
  Most recently, President Chino is resisting the United States nominee 
for the Bank's American vice president. By tradition, there has always 
been a U.S. national as vice president, a European vice president, and 
a vice president representing a non-borrowing regional. The current 
U.S. vice president, Peter Sullivan, will retire this summer. Chino is 
mounting an unprecedented challenge to Treasury's candidate. Never 
before has a Japanese Bank president challenged the right of the United 
States to name its candidate for vice president. Why the resistance? I 
have no first hand knowledge, but would note that a recent issue of 
Emerging Markets speculates that if the strong-minded, experienced 
candidate were appointed to a vice-presidential slot at the Bank, ``she 
could begin chipping away at the power exercised from `behind the 
throne' by the small clique of Japanese `advisors' to the president.'' 
Whatever the case, it is incumbent on the United States to support its 
nominee and insist that U.S. prerogatives be respected.
  Moreover, I understand that President Chino has literally created a 
fourth vice president with wide-ranging powers without consulting the 
board. He disregarded concerns repeatedly raised by the U.S. Executive 
Director's office that the reorganization of the functions of the 
Strategic Policy Department should not be undertaken without consulting 
the board. The department director is a Japanese national.
  More broadly, President Chino's pattern of stonewalling the United 
States and other member donors has been repeatedly in his non-
responsiveness to the concerns of interested parties outside the Bank. 
It has been reported that he refused to receive representatives of 
student and NGO protesters at the annual meeting in Thailand. He may 
even have been less than courteous to his Thai hosts at an important 
official function involving members of the royal family.
  In addition to numerous internal governance and the above personnel 
issues, there is also a growing concern that Bank management is trying 
to turn the ADB into a defacto secretariat for a future ``Asian 
Monetary Fund.'' As Members may recall, Japan earlier proposed to 
create an ``Asian IMF'' during the worst of the global financial crisis 
of 1997-1998--an idea that had only tepid support within the region and 
which was opposed by the United States.
  However, elements of this approach have begun to insinuate themselves 
into the organizational structure of the ADB. First, in March 1999 the 
Bank approved the ``Asian Currency Crisis Support Facility.'' This $3 
billion fund, financed entirely by Japan but administered by the Bank, 
was established to provide guarantees to Asian crisis countries on 
sovereign bond issues, in conjunction with ADB loans. Among other 
issues, this mechanism inappropriately would allow obligations under 
the facilities to be accorded preferred creditor status.
  In addition, the Finance Ministers of the Association of Southeast 
Asian Nations [ASEAN] asked in 1999 that the Bank temporarily house its 
economic monitoring secretariat. Over U.S. resistance, the ADB 
established and expanded this surveillance unit, in possible 
competition with the IMF. Contrary to view of some United States 
economists, like Stephen Roach of Morgan Stanley, I suspect few Asian 
countries would want to participate in a Japan-led regional monetary 
fund, in large measure because of what is perceived by many in the 
region as Japan's ongoing failure to confront and deal with its 
militarist past. On the other hand, many of these countries are 
borrowers from both the ADB and Japan. They may be persuaded to go 
along with Tokyo in a desire

[[Page E827]]

not to disadvantage themselves when they request the Japanese 
Government at the ADB for loans and to position themselves to receive 
additional foreign aid credits from Japan.
  Mr. Speaker, it sadly appears that the Asian Development Bank is at a 
crossroads. Confidence is eroding in the capacity of the institution to 
pursue effective development strategies in a manner that is 
accountable, participatory, and transparent.
  At the risk of presumption, it would appear high time that the 
administration make clear in no uncertain terms its deep concern over 
the present leadership at the Bank. As the chairman of the authorizing 
subcommittee with jurisdiction over the international financial 
institutions, I would simply note that both Treasury and the ADB should 
be on notice that an institution that pursues the narrow objectives of 
a few, adopts a haughty and intolerant management style, and now lags 
all other regional MDBs in key reforms is unlikely to command broad 
congressional support.
  In conclusion, Mr. Speaker, wise leaders on both sides of the Pacific 
understand that, despite our occasional differences, the two major 
shareholders of the ADB--Japan and the United States--must work 
together if the Bank is to effectively address poverty reduction as 
well as help meet the many other needs and challenges of the Asia-
Pacific region in the 21st century. I hope and expect our two great 
countries can work hand in hand at the ADB, as we have so often in the 
past, to uplift the lives of people throughout the region and reach our 
common goals to foster sustainable development.

                          ____________________