ECONOMY-ASIA: Crisis Forces Shift in ADB Focus

By Gustavo Capdevila Reprint | | Print |

Gustavo Capdevila

GENEVA, Apr 29 1998 (IPS) - The gravity of the crisis unleashed a year ago in Asia forced all available resources to be used to bail out the region, including Asian Development Bank (ADB) funds reserved for social programmes.

The urgent bail-out led to a change in the strategic orientation of the bank, which was originally conceived of as an institution designed to promote development in the region.

At least half of all loans granted by the bank in 1997 went to financial market reform programmes in countries hit by the crisis, “and rightly so,” said the chairman of the bank’s Board of Governors Nicolas Imboden, in his speech during the opening of the ADB’s assembly in Geneva Wednesday.

“The massive involvement of our bank in crisis management inevitably affects its functioning,” Imboden stressed. “Today, responding to the Asian crisis has become the most urgent priority.”

But we must ensure that the bank returns as soon as possible to its basic long-term objetives, including promotion of economic growth, poverty reduction, support for human development, improvement of the status of women and protection of the environment, he added.

ADB president Mitsuo Sato told the Board of Governors, which meets through Friday, that the bank would continue providing large- scale financial assistance to the crisis-stricken countries. “These operations are not undertaken at the expense of the bank’s normal assistance programs,” he ensured.

Nevertheless, the crisis has taught the bank that “we should further transform ourselves from a conventional financier project to a broad-based development institution to meet the changing needs of the environment,” he added.

The ADB pointed out that the stock markets of Bangkok (Thailand), Jakarta (Indonesia), Kuala Lumpur (Malaysia) and Manila (the Philippines) had lost 370 billion dollars or 63 percent of the combined Gross Domestic Product (GDP) of the four countries. South Korea’s stock market alone lost 60 percent of its value.

In comparison, the collapse of Chile’s banking sector in the 1980s cost around 40 percent of that country’s GDP, while Mexico’s more recent efforts to support creditors and debtors amounted to around 10 percent of GDP.

Sato said resources had also been used to help the affected economies cushion the social impact of the economic fallout, in support of the delivery of essential social services to the most vulnerable sections of their societies.

“The crisis has underscored the critical importance of good governance in terms of greater transparency and accountability in governmental functions, in the development process,” he remarked.

But not all of Asia has been heavily affected by the crisis, Sato underlined. In many places, progress on reform continues to be rewarded by economic improvement, and the fight against poverty is progressing steadily, he added.