STRATEGY2020 The Long-Term Strategic Framework of the Asian Development Bank 2008 2020
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STRATEGY2020
The Long-Term Strategic Framework
of the Asian Development Bank
20082020STRATEGY2020
The Long-Term Strategic Framework
of the Asian Development Bank
2008–2020
© 2008 Asian Development Bank
All rights reserved. Published 2008.
Printed in the Philippines.
Cataloging-In-Publication Data
Publication Stock No. BBK-2008-0930
ISBN 978-971-561-680-5
Cataloging-In-Publication Data
Asian Development Bank.
Strategy 2020: The Long-Term Strategic Framework of the Asian
Development Bank 2008–2020.
Mandaluyong City, Phil.: Asian Development Bank, 2008.
1. Strategic framework. I. Asian Development Bank.
The Asian Development Bank (ADB) encourages printing or copying information
exclusively for personal and noncommercial use with proper acknowledgement of
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In ADB’s varied developing member countries, bamboo has positive connotations.
Across Asia and the Pacific, bamboo symbolizes friendship, unity, and adaptability.
It is shown on the cover of Strategy 2020 in the form of a ladder, as the region can
draw on all of these connotations as it climbs the ladder of economic development
in partnership with ADB.
To ADB, bamboo also serves as a symbol of its commitment to the environment as
well as its deep roots in the Asia and Pacific region.
iiPreface STRATEGY2020
S
trategy 2020 is a product of wide and extensive consultations with our 67 member
countries. It achieves the objective of clearly establishing the Asian Development
Bank’s (ADB) role and its strategic direction to the year 2020. It also firmly sets
the goals of our institution in order to fulfill our vision—an Asia and Pacific region
free of poverty—a vision that can become a reality by 2020. Our long-term plan charts
ADB’s way forward to becoming a more effective institution based on results.
With Strategy 2020 in place, ADB is ready to forge ahead. There is much to be done,
and we are committed to change. Under Strategy 2020, we will redirect our focus onto
the region’s three critical strategic agendas: inclusive economic growth, environmentally
sustainable growth, and regional integration. We will position ourselves more strategically
as a partner and agent for change by promoting private sector development, good
governance, gender equity, knowledge solutions, and partnerships. We will refocus
operations in areas of comparative strength while embarking on new partnerships to
increase cofinancing and knowledge channeling. We will also act to configure resource
requirements and to mobilize funding, while ensuring operational efficiency. Plans for
enhancing human resources and our skills mix are under way, while further efforts are
being made to reduce the cost of doing business with us without sacrificing social and
environmental safeguards.
The tasks ahead of us are demanding, but we are excited to begin our operational
and institutional transformation to 2020. The Asia and Pacific region is changing dra-
matically, and ADB must keep pace and align itself to developing member countries’ new
needs and demands. We now have a sound long-term plan to do just that. Thus, it is
with great pleasure that I present Strategy 2020 to our development partners around the
world, with the hope that you join us in taking part in Strategy 2020 to realize our vision
of an Asia and Pacific region free of poverty.
Haruhiko Kuroda
President
Asian Development Bank
iiiSTRATEGY2020 Abbreviations
ADB – Asian Development Bank
ADF – Asian Development Fund
DMC – developing member country
GDP – gross domestic product
LTSF I – long-term strategic framework for 2001–2015
MDG – Millennium Development Goal
MIC – middle-income country
NGO – nongovernment organization
OCR – ordinary capital resources
PPP – purchasing power parity
RCI – regional cooperation and integration
SME – small and medium-sized enterprise
TA – technical assistance
NOTE
In this report, “$” refers to US dollars.
Stategy 2020 Task Force
Director General K. Sakai, Strategy and Policy Department (SPD)
Team leader C. W. MacCormac, Senior Director, Strategic Planning,
Policy and Interagency Relations Division, SPD
Team members S. Hattori, Principal Planning and Policy Specialist, SPD
M. Senapaty, Senior Planning and Policy Economist, SPD
V. B. Tulasidhar, Senior Economist (Regional Cooperation),
East Asia Department
L. Sillorequez, Administrative Assistant, SPD
V. Pacardo, Local Consultant, SPD
Steering K. Sakai (Chair)
Committee I. Ali, Chief Economist, Economics and Research
Department
S. Bajpai, The Secretary, Office of the Secretary
M. Kashiwagi, Treasurer, Treasury Department
M. Kawai, Dean, Asian Development Bank Institute
J. W. Lee, Head, Office of Regional Economic Integration
J. Miranda, Director General, Central and West Asia
Department
H. S. Rao, Director General, East Asia Department
X. Yao, Acting Director General, Regional and Sustainable
Development Department
ivTable of Contents STRATEGY2020
Executive Summary 1
1. Introduction 3
2. A Changing Asia and Pacific Region 5
Transformation of the Region and the Aid Architecture 5
Challenges Ahead 6
3. Vision and Strategic Agenda 11
4. A Partner and Agent for Change 14
Drivers of Change 14
Developing Partner Countries 16
Core Areas of Operations 18
Other Areas of Operations 20
5. Goals and Performance 22
ADB’s Transformation to 2020: Operational Goals 22
ADB’s Transformation to 2020: Institutional Goals 24
Managing Implementation of Strategy 2020:
ADB’s Results Framework 25
Utilizing the Results Framework 26
Next Steps 27
6. Resourcing the Strategy 28
7. Conclusion 30
Appendix 1: A Snapshot of Developing Asia and the Pacific 31
Appendix 2: Structure of the Asian Development Bank’s Results
Framework 35
vi
Executive Summary STRATEGY2020
R
apid economic growth in the will be to help its DMCs reduce poverty
ADB will
Asia and Pacific region and and improve living conditions and quality
significant shifts in the devel- of life. . . . refocus its
opment, aid, and financial land- ADB will pursue its vision and mission operations
scape have generated a need—and an by focusing on three complementary into five core
opportunity—for the Asian Development strategic agendas: inclusive growth, envi
Bank (ADB) to set a new strategic course. ronmentally sustainable growth, and
specializations
The new long-term strategic framework regional integration. To better mobilize that best
for 2008–2020 (Strategy 2020) will serve resources—including the region’s savings support its
as ADB’s corporate-wide planning docu- and inbound capital flows—and to maxi-
agenda, reflect
ment and give ADB a more relevant and mize returns on its unique regional experi-
innovative role in shaping the region’s fu- ence and comparative strengths within the DMCs’ needs
ture. Strategy 2020 replaces the long-term evolving aid architecture, ADB will focus and ADB’s
strategic framework for 2001–2015. on five drivers of change: (i) private sector comparative
By 2020, the Asia and Pacific region development and private sector operations,
could move to a higher level of economic (ii) good governance and capacity develop-
strengths, and
development. As growth continues, how- ment, (iii) gender equity, (iv) knowledge complement
ever, it may become increasingly difficult solutions, and (v) partnerships. efforts by
to reach those who remain excluded from ADB will also refocus its operations
development
its benefits. Disparities could widen within into five core specializations that best
and between ADB’s developing mem- support its agenda, reflect DMCs’ needs partners
ber countries (DMCs). This trend and the and ADB’s comparative strengths, and
mounting environmental costs could begin complement efforts by development part-
to threaten sustainability of their develop- ners: (i) infrastructure; (ii) environment,
ment. Chapter 2 of this paper describes including climate change; (iii) regional
the transformation of the region and the cooperation and integration; (iv) financial
challenges ahead. sector development; and (v) education. In
Chapters 3 and 4 discuss the new other areas, ADB will continue operations
strategic directions that will enable ADB to only selectively in close partnership with
address these challenges. Under Strategy other agencies.
2020, ADB will transform itself to meet Chapter 5 describes the operational
the challenges, while remaining dedicated and institutional goals under Strategy
to reducing poverty—its overarching goal 2020, including ADB’s plan to: (i) have 80%
since 1999. ADB’s corporate vision under of its operations in its new core operational
Strategy 2020 will continue to be “An Asia areas by 2012; (ii) scale up private sector
and Pacific Free of Poverty”, and its mission development and private sector operations
in all operational areas, reaching 50% of development banks to ADB’s perfor-
annual operations by 2020; (iii) scale up mance; and
support for environmentally sustainable • organizational effectiveness, to track
development, including projects to reduce performance in key areas.
carbon dioxide emissions and to address Chapter 6 discusses the investments
climate change; and (iv) increase its public required to address key development
ADB will
and private sector operations progressively challenges ahead and the need for ADB to
… adapt its at the regional and subregional levels to at have adequate concessional and noncon-
organizational least 30% of total activities by 2020. cessional resources to support its role as
structure Strategy 2020 will also require insti- a leading development finance partner in
tutional change. It will reestablish coher- the region.
to new and ence across ADB’s entire operational policy Through Strategy 2020, ADB will
expanded framework. Implementation of Strategy contribute to improvements in both
products 2020 will necessitate changes in the skills regional and global welfare. Ending poverty
mix of ADB’s human resources, requiring, in the Asia and Pacific region would be a
and services,
in turn, best practices to recruit and to historic achievement and is necessary for
particulary in retain staff. ADB will also adapt its orga- achieving the MDGs at the global level. Es-
private sector nizational structure to new and expand- tablishing market-based economies across
operations, ed products and services, particularly in the region would help harmonize growth
private sector operations, financial services, among DMCs and benefit the global econ-
financial knowledge management, and environ- omy by expanding trade and investment.
services, mental operations. Modernizing the region’s financial sector
knowledge Under Strategy 2020, ADB’s Manage- would enable DMCs to become more self-
ment will monitor and report on its effec- reliant for financing their development, and
management,
tiveness using a new results framework would contribute to global financial stabil-
and with four key measures: ity. Greater regional economic and policy
environmental • regional outcomes, by which the coordination, as well as improved gover-
operations region’s general development perfor nance in fragile situations, would facilitate
mance will be assessed through Millen- regional stability and enable a wider range
nium Development Goals (MDGs) and of intra- and interregional engagement,
other indicators; both private and public. And significant
• contribution to country outcomes, progress on energy efficiency and other
through which ADB’s role in its five measures to address climate change across
core areas of specialization will be developing Asia and the Pacific would
captured; produce positive impacts whose effects
• operational effectiveness, which applies would reach far beyond regional borders
indicators used by most multilateral and the present generation.
Introduction 1
STRATEGY2020
C
hange is at the heart of the Asian line than anyone had predicted. Today, Disparities in
Development Bank (ADB) ex- nonetheless, many people have little or
perience. However, seldom has no access to the benefits of this economic
incomes and
ADB’s readiness to address new expansion. Disparities in incomes and living living standards
challenges, accept new opportunities, and standards within developing member within DMCs
move in new directions been more relevant countries (DMCs) have grown faster, wider,
have grown
than in this first decade of a new century. and more worrisome than LTSF I had
The region’s growth has greatly surpassed anticipated. Economic growth is taxing the faster, wider,
the expectations upon which the long-term environment, hastening the depletion of and more
strategic framework for 2001–2015 (LTSF I) the region’s energy and natural resources, worrisome
was based 7 years ago. The economic ter- and feeding global climate change. These
rain has shifted, lessons have been learned, problems, individually and combined,
than LTSF I had
and aid and financial architecture rebuilt. imperil economic growth and could erode anticipated
With greater transformations almost cer- recent development gains and diminish
tainly ahead, ADB needs a new strategy those yet to come.
to guide the organization toward a new At the same time, new opportunities
Asia in 2020. It must make decisions and have been created that, if fully exploited,
prepare for the region’s future and ADB’s could help solve these problems. If sup-
place in it. ported and encouraged, for example,
LTSF I was based in part on appre- momentum toward regional cooperation
hensions raised by the Asian financial and integration (RCI) could help sustain
crisis that began in 1997, when many who and accelerate economic development.
had risen above the absolute poverty line The international capital markets—which
slipped back below it. It focused, right- some middle-income countries (MICs) are
ly then, on the poorest of the poor. The already tapping at favorable terms—could
region’s economy not only rebounded, it help finance development that benefits
grew at a breathtaking pace that lifted far
Poverty measures based on an international poverty
more people above the $1-a-day poverty line attempt to hold the real value of the poverty
line comparable across countries and constant
over time. The $1-a-day standard, measured in
1985 prices and adjusted to local currency using
purchasing power parities (PPPs), was chosen
for the World Bank’s World Development Report
1990: Poverty, because it is typical of the poverty
lines in low-income countries. Early editions of
World Development Indicators used PPPs from
ADB. 2001. Moving the Poverty Reduction Agenda the Penn World Tables. Recent editions use
Forward: The Long-Term Strategic Framework of 1993 consumption PPP estimates produced by the
the Asian Development Bank (2001–2015). Manila. World Bank.
Chapter 1
all. The region’s large savings could also The decisions involved in the creation of
be put to more effective use in DMCs. The Strategy 2020 have come after substantive
vibrancy of the private sector offers yet deliberations. A panel of eminent persons
more opportunities. was convened in June 2006 to assess the
The new long-term strategic frame- region’s future and how it will affect ADB’s
work for 2008–2020 (Strategy 2020) will role to 2020. The panel’s report, submit-
take up these opportunities and open ted to the President in March 2007, played
new paths for ADB to exercise its com- a central part in all subsequent discus-
parative strengths within the international sions, and was addressed by the Board
aid architecture that has evolved since of Governors at the 40th Annual Meeting
LTSF I. Strategy 2020 also fills a crucial in May 2007. Broad consultations were
corporate need. The proliferation of stra- conducted with the Board of Directors,
tegic documents within ADB—while each Management and staff, stakeholders, and
of value—has sometimes produced unin- DMC representatives, as well as with the
tended consequences, including redun- private sector and civil society. The recom-
dancy, overlap, and confusion regarding mendations in Strategy 2020 have benefit-
constraining cohesive planning, imple- ed from a wide array of studies, analyses,
mentation, and strategic hierarchy. ADB evaluations, and research, which suggested
needs a paramount strategic document that ADB could serve the region better
that lays out clear and consistent strategic and have greater impact only through
directions and provides the framework progressive change.
for the planning and financing of its
operations, organization, and business
processes.
ADB. 2008. Special Evaluation Study of the
Eminent Persons Group. 2007. Toward a New
Long-Term Strategic Framework: Lessons from Asian Development Bank in a New Asia. Manila:
Implementation (2001–2006). Manila. ADB.
A Changing Asia 2
and Pacific Region STRATEGY2020
Transformation of the adopted LTSF I. This new regional reality While not yet
Region and the Aid includes: rising incomes with a resulting
conquered,
Architecture decline in absolute poverty; high, sus-
tained inflows of capital; the coexistence, absolute
The region’s economy has grown at a in a once capital-deficient region, of high poverty could
record pace over the past few decades. In rates of savings and large unmet needs for be reduced to
the 1980s and 1990s, real per capita gross public and private investment; burgeoning
domestic product (GDP) rose more than intraregional trade and investment; and
as little as
6% annually in East Asia and 3% annu- improved technological skills and mana- 2% of DMCs’
ally in South Asia, while other developing gerial expertise of the population. Cities total population
regions in the world struggled to increase and towns have swollen in population
per capita income at all. The region’s GDP and area. The middle class has expanded
growth has accelerated again since the tremendously, with increasing resources
Asian financial crisis; from 1999 to 2006, to save and to spend. By 2020, the region
it averaged 6% per year. Asia’s share of could account for one third of world
global exports has soared from 16% in trade. Its share of global GDP in nominal
the 1980s to 27% today. It has the larg- dollar terms could double to almost one
est reserves and the highest savings rate in quarter—or as much as 45% in terms of
the world. With such sustained economic purchasing power parity (PPP). The region’s
progress across many parts of Asia, ADB’s savings could remain large, as could its
DMCs represent the developing world’s foreign reserves. Perhaps 90% of its people
best hope to achieve the Millennium could be living in countries that have
Development Goals (MDGs). achieved middle-income status, mostly
Rapid growth has produced funda- in megacities and urban areas. While not
mental changes in the region since ADB yet conquered, absolute poverty could be
reduced to as little as 2% of DMCs’ total
World Bank. 2005. Global Monitoring Report.
Washington, DC.
population.
The MDGs are a set of eight time-bound and mea- This outlook holds great potential
surable goals that respond to the world’s devel- for ADB and its development partners to
opment challenges, mostly by 2015, using 1990
achieve shared objectives within the evolv-
as a benchmark. The goals are to (i) eradicate
extreme poverty and hunger; (ii) achieve universal ing aid architecture. With proper effort
primary education; (iii) promote gender equality and support, the Paris Declaration on Aid
and empower women; (iv) reduce child mortality;
(v) improve maternal health; (vi) combat HIV/AIDS,
malaria, and other diseases; (vii) ensure environ-
mental sustainability; and (viii) create a global
For example, the middle class in the People’s
partnership for development. Indicators have been Republic of China increased from 65.5 million in
identified to measure progress against each goal. 2005 to 80.0 million in 2007.
Chapter 2
Effectiveness has the potential to population of the United States, still live
empower DMCs further to lead the devel- in absolute poverty defined as less than
opment process. If proper strategies are $1 a day. Almost half of the world’s ab-
devised and implemented, new sources solute poor live in South Asia alone (Ap-
and new mechanisms of external assis- pendix 1). One of every two individuals in
tance could raise the per capita allocation the region—or 1.7 billion people—remains
In preparing
of aid to the region. These circumstances poor, as measured against the $2-a-day
Strategy 2020, provide opportunities for ADB to act more benchmark (Appendix 1). This is one and
ADB identified selectively where its competitive strengths a half times the combined populations
nine leading are greatest. By becoming increasingly of the developed nations of the Organi-
focused, ADB can strengthen the special sation for Economic Co-operation and
challenges advantages it offers to all of its shareholders Development. In DMCs eligible for funding
facing the as a partner in the region’s development. from the Asian Development Fund (ADF),
region It can bring its expertise to partnerships 100 million people—15% of the popu-
that leverage the assistance of other inter- lation—still live in absolute poverty, and
national institutions and bilateral donors almost 400 million people—almost 60%
and offer private sector interests a unique of the population—subsist on less than $2
brand of support, allowing them to pro- a day. In the People’s Republic of China,
ceed with investments they might not other 452 million people live under this $2-a-day
wise make. With its extensive experience poverty marker, while in India the figure is
in and knowledge of the region, ADB can 868 million. Most DMCs also face obstacles
help reduce the costs of and increase the to achieving non-income MDG targets—
credibility of policy-relevant information issues inexorably intertwined with poverty.
and play an effective role in the region’s Child malnutrition is often high; almost
development assistance within the inter- half of the children in Afghanistan, Bangla-
national aid architecture. It can be a focal desh, India, and Nepal are undernourished.
point for cooperation and coordination in In addition, 1.9 billion people in the region
the development of the Asia and Pacific do not have access to basic sanitation. By
region. 2020, the percentage of people living on
less than $1 a day in the region could fall
Challenges Ahead to 2%, but this will require continued work
to sustain the current high rates of GDP
In preparing Strategy 2020, ADB identi- growth per capita, as well as additional
fied nine leading challenges facing the effort to ensure that the poor are able to
region. ADB examined all as potential op- participate in, benefit from, and contribute
portunities to apply its skills, experience, to the growth process.10
influence, and resources, and considered
those that might fall within the scope of
ADF is a major instrument of concessional financ-
ing, which has supported equitable and sustainable
Strategy 2020. development for the region since 1973. Funded by
ADB’s donor member countries, ADF offers loans
at very low interest rates as well as grants to help
1. Poverty Remains the Central reduce poverty in ADB’s poorest borrowing coun-
Challenge Facing the Region tries.
10
United Nations Economic and Social Commis-
More than 600 million people in the Asia sion for Asia and the Pacific, ADB, and United
Nations Development Programme, 2007. Millen-
and Pacific region, about double the nium Development Goals: Progress in Asia and
the Pacific 2007. Bangkok; Humphrey, J. 2006.
Endorsed on 2 March 2005 by more than 100 Prospects and challenges for growth and poverty
countries and development organizations, includ- reduction in Asia. Development Policy Review
ing ADB and 19 DMCs. 24.1.
A Changing Asia and Pacific Region
2. Disparities in Well-Being 3. Demographic Changes Will
Are Widening Within and Have Profound Implications for
Between DMCs Development
Rapid economic growth is not reaching all The region’s population will not only
population groups in DMCs proportion- expand—by an estimated 750 million
Population
ately. In terms of economic benefits and between 2004 and 2025—it will be
access to social services, large numbers of reshaped by demographic shifts that may growth will
people are being left behind or left out. have significant implications for govern- require the
In many DMCs, economic inequality has ment development policies and spending creation of
increased in the past 10 years when mea- on basic services like education, health,
sured by the Gini coefficient. The incomes and social security.13 Population growth
420 million jobs
and expenditures of the people at the top will require the creation of 420 million by 2030 in a
of the scale have grown considerably faster jobs by 2030 in a region where at least region where
than those of the poor.11 Without steps to 500 million of the existing labor force of
at least
stem and reverse these disparities, the risks 1.7 billion workers are already unemployed
this trend poses—including social instabil- or underemployed. Productivity and earn- 500 million of
ity—will continue to grow. ings must also be enhanced if income and the existing
Non-income inequality has also wors- living standards are to rise.14 At the same labor force
ened. In India, for example, about 5% time, the populations of some DMCs will
of children are severely underweight in age quickly, driving up their overall costs for
of 1.7 billion
the richest 20% of households, while the medical services. Particularly in DMCs where workers
figure is as high as 28% in the poorest life expectancy is rising, sound pension are already
20%.12 The children of the poor are also the systems and flexible labor policies and
unemployed or
least likely to survive to age 5. Most DMCs, practices to allow older workers to remain
particularly the large ones, also display employed will also be necessary. Another underemployed
gaping disparities between their geo- pressing demographic challenge is the
graphical regions. In the Philippines, the expansion of urban populations and the
national poverty rate is about 15%, but accompanying congestion, poverty, and
regional rates range from 8% to a stagger- pollution. Urban growth will test the plan-
ing 63%. In Indonesia, where the national ning and development capabilities of the
child malnutrition rate is 26%, regional region’s public service delivery systems.
rates vary from 18% to 40%. Wide dispari-
ties can also be found between the levels 4. Rapid Economic Growth Is Putting
of well-being in ADB’s individual DMCs: Severe Strains on the Environment
Malaysia’s per capita income, for example,
is 18 times Nepal’s. The harmonious eco- Unless approaches to economic growth
nomic development across the region that are altered to address pollution, the
is envisaged in the Charter has yet to be destruction of natural resources, and envi-
realized. ronmental degradation (including climate
change), the region’s prospects for strong,
13
Hussain, Athar, Robert Cassen, and Tim Dyson.
2006. Demographic Transition in Asia and its Con-
sequences. In Asia 2015: Sustaining Growth and
Ending Poverty. (IDS Bulletin 37 [3]) Brighton: Insti-
tute of Development Studies.
11
The Gini coefficient in Asia increased from 46.82 in 14
Felipe, Jesus and Rana Hasan. 2006. Labor Markets
1993 to 52.42 in 2003. in Asia—Issues and Perspectives. London: Palgrave
12
ADB. 2007. Key Indicators 2007. Manila. Macmillan for ADB.
Chapter 2
continuous economic progress are in jeop- as well as information and communica-
ardy. Environmental damage and resource tion technology infrastructure—deprives
depletion from fast growth are already many economies of private investment. In
impeding the region’s development and rural India, the lack of good infrastructure
reducing the quality of life—with the poor is undermining agricultural productivity,
most severely affected. The Asian energy and infrastructure gaps in the Philippines
The absence of
sector’s share of global carbon dioxide have held back industrialization and job
well-planned emissions have more than tripled from creation. These development bottlenecks
rural, urban, and about 8% in 1980 to about 28% in 2005 were created by low levels of public sector
interconnected (Appendix 1). The International Energy revenue mobilization, misguided public
Agency forecasts that the region’s energy spending priorities, weak institutions,
systems of demand will double by 2015.15 The region regulatory failures, and underdeveloped
infrastructure— has the highest air pollution levels in the financial systems that do not encourage
as well as world, despite slight improvements in the flow of long-term private capital into
some cities. Without greater efforts to infrastructure projects.
information and
safeguard the environment, pressure will
communication continue to build on the region’s land, 6. More Regional Cooperation
technology forests, water systems, wetlands, marine and Integration is Needed to
infrastructure— ecosystems, and other natural resources Address DMCs’ Challenges
upon which many of the poor depend for and Opportunities
deprives many their livelihoods. Urban centers will also
economies suffer—the Organisation for Economic RCI has vast potential for accelerating
of private Co-operation and Development reports economic growth, reducing poverty and
that eight of the 10 coastal cities at the economic disparity, raising productiv-
investment
greatest long-term risk from climate ity and employment, and strengthening
change and rising sea levels are in Asia. institutions. It can improve a poor country’s
possibilities for growth by expanding trade
5. An Infrastructure Deficit Is and joint investment with its neighbors,
Constraining Market-Led Growth strengthening transport and information
and Access to Social Services connections, and improving its informa-
in Many Countries tion and communication technology. In
South Asia, for example, the size and scat-
Neglect and years of insufficient investment tered nature of the region’s hydropower
in infrastructure have led to overcrowded, and natural gas resources—and the dif-
unsanitary, unhealthy living conditions in ferent sizes of its national economies and
the region’s large cities. Poor infrastructure associated energy demand levels and rates
also increases energy consumption, which of growth—suggest immense potential for
harms the environment. Although Asia has mutually beneficial integration and trade
built many examples of superior infrastruc- in energy and energy resources.16 RCI
ture over the past few decades, they are can narrow development gaps between
often exceptions that accentuate econom- DMCs. Building closer trade integration,
ic disparities within a city and between intraregional supply chains, and stron-
urban and rural areas. Furthermore, the ger financial links with neighbors that are
absence of well-planned rural, urban, and advancing more rapidly will allow smaller,
interconnected systems of infrastructure—
16
Jones, S. 2004. Regional Integration Through
Cross-Border Infrastructure. Framework Paper for
15
International Energy Agency. 2007. World Energy Oxford Policy Management. Oxford, United King-
Outlook. Paris. dom (November).
A Changing Asia and Pacific Region
slow-growth countries to speed their own especially in rural areas and the informal
expansion. sector. If the reach of financial systems
Progress in RCI has varied across can be expanded into rural areas, the rural
subregions. Although intraregional trade sector and its millions of poor will have
makes up 55% of the region’s total trade, more opportunities to take part in the
up sharply from about 43% in the early region’s growth.17
Future
1990s, East Asia accounted for most of
that increase. Asia also needs to pursue 8. DMCs Need More Emphasis competitiveness
“open regionalism,” keeping trade and on Innovation, Technology will be
investment links open with the rest of the Development, and Higher determined less
world. This will preserve what has been a Education
major factor in its economic success and
by low wages for
mitigate protectionism in other regions. Successful development not only requires labor and more
RCI can be a key building block in develop- closing the resource gap, but also bridg- by the ability
ing regional markets for goods and services ing the technology and knowledge gap
to produce
and ensure they remain unobstructed between the developed and developing
through close cooperation in policy formu- world. To achieve the MDGs, DMCs must and master
lation and regulatory design. build up their science, technology, and technology and
innovation capacities. Their future com- produce
7. Asia’s Financial Systems Are Not petitiveness will be determined less by low
Intermediating the Region’s Pool wages for labor and more by the ability
higher-value
of Savings Efficiently to Meet Its to produce and master technology and goods and
Growing Needs produce higher-value goods and services services
(footnote 4). DMCs will need to devise
The region needs to redouble efforts to strategies for advancing their own tech-
develop national and regional financial nology and associated capabilities, includ-
systems, including capital markets, with ing incentives for creating higher demand
particular emphasis on expanding volume for modern technology.18 Innovation can
and outreach. DMCs must realign the occur only when domestic capacity for
institutional frameworks of their financial knowledge absorption is high—and this
systems to the needs of the real sector. requires an educated labor force and
On one hand, this sector is increasingly quality academic institutions.19 Education
globalized, requiring cross-border finan- reduces poverty by enabling the poor
cial transactions. On the other hand, it is to obtain more productive jobs, higher
led by the private entities, which need risk wages, and a better quality of life.
capital, particularly for start-up companies
and small and medium-sized enterprises
(SMEs). The financial systems in most of
the region’s countries are still dominated
by banks. The underdeveloped capital
market limits investment for projects with
long gestation periods, such as infrastruc-
ture. In addition, financial systems in many 17
Rahman, Hossain Zillur and Mark Robinson. Gov-
DMCs still require stronger financial risk ernance and State Effectiveness in Asia. In Asia
2015: Sustaining Growth and Ending Poverty. (IDS
management, credit standards, and inter-
Bulletin. 37 [3]).
nal control procedures. Large segments of 18
ADB. 2007. ERD Policy Brief. No. 49. Manila.
the region’s population still have limited 19
World Bank. 2007. An East Asian Renaissance.
or no access to formal financial services, Washington, DC.
Chapter 2
9. Weak Governance May Prevent global financial stability. Greater regional
Many DMCs from Exploiting economic integration and policy coordi-
Economic Opportunities nation as well as improved governance
in fragile countries and situations would
The complex challenges created by rapid strengthen regional stability and raise the
economic growth have increased demands economic growth potential. Additionally,
ADB must
on public institutions’ capacity to design significant progress on energy efficiency
continue to and to implement better policies and strat- and climate change across developing Asia
help DMCs gain egies. The state must establish institutions and the Pacific would produce positive
access to and policies that maximize opportunities impacts far beyond regional borders and
for growth and poverty reduction. The eco- the present generation. Considering the
long-term funds nomic success of many DMCs will depend region’s size, population, and resources,
at reasonable on this kind of institutional progress, along overcoming its development challenges
terms, manage with a policy and regulatory environment and realizing the benefits is a global public
that fosters trade, investment, and tech- good.
risks, take
nology development. The key role of state Innovation, superior knowledge, new
collective institutions also often raises the related modalities of development assistance,
action, and governance challenge of corruption, which financial resources, and experience will be
deploy many DMCs face to varying degrees. Public required to address these challenges. In
sector institutions, including those in the many DMCs, the nature and scale of these
cutting-edge financial system, must adjust and reform challenges exceed the existing capabilities
knowledge to meet the demands of dynamic, open, and resources of governments and mar-
and technical and market-driven economies, as well as kets. This is especially true where coopera-
citizens’ calls for greater efficiency and tive action among countries is essential,
services to
transparency in managing public resources and where access to long-term finance is
complement and public service delivery. Countries must crucial to address large social costs and
financing do more to protect intellectual property benefits not captured by markets. It is also
rights and to uphold the rule of law. Fragile the case where conflict, weak governance,
countries and situations would benefit or weak capacity, make sound develop-
greatly from good governance and higher ment management contingent on external
levels of transparency—improvements that assistance and cooperation with develop-
could jump-start their economic develop- ment partners. ADB must continue to help
ment. DMCs gain access to long-term funds at
Achieving measurable and sustain- reasonable terms, manage risks, take col-
able progress on these challenges would lective action, and deploy cutting-edge
represent important contributions to both knowledge and technical services to com-
regional and to global welfare. Ending plement financing. ADB must also support
absolute poverty in the Asia and Pacific improved governance and gender equity,
region would be a historic achievement that catalyzing private sector development and
only recently seemed insurmountable. Rein- arranging partnerships with a broad range
forcing vibrant and modern market-based of institutions. To continue to be effec-
economies across the region would ben- tive in meeting the emerging challenges
efit the global economy by significantly of the region, however, ADB needs a clear
expanding trade and investment opportu- vision, a sound strategy, and the appropriate
nities. Modernizing the region’s financial financial and institutional capacity. The next
sector would enable DMCs to become two chapters set out the strategic direction
more self-reliant in financing long-term for ADB under Strategy 2020.
development and contribute to overall
10Vision and 3
Strategic Agenda STRATEGY2020
A
DB is committed to ending region can be accelerated when neighbor- It is now
poverty in the region. Poverty ing economies work within larger and freer
reduction has been ADB’s over- markets and when governments achieve
apparent that
arching goal since 1999 and common interests through common not only the
an important feature of its planning and efforts. ADB can make substantive contri- pace of growth
operations since its establishment. Ending butions toward this vision by focusing its
but the pattern
poverty is ADB’s—and the region’s—most support on three distinct but complemen-
important piece of unfinished business. tary development agendas of the region: of growth
The extraordinary economic expansion of inclusive economic growth, environmen- matters
recent years has made the eradication of tally sustainable growth, and regional
income poverty (i.e., those living on less integration.
than $1 a day) a possibility by 2020. All
of ADB’s shareholders—borrowers and 1. Inclusive Economic Growth
nonborrowers—and development part-
ners agree that the elimination of poverty A development strategy anchored in
is a paramount development objective, inclusive growth will have two mutually
a goal that underpins the central role of reinforcing strategic focuses. First, high,
the region’s DMCs in achieving the global sustainable growth will create and expand
MDGs. Therefore, ADB’s corporate vision economic opportunities. Second, broader
under Strategy 2020 will continue to be access to these opportunities will ensure
“An Asia and Pacific Region Free of Poverty” that members of society can participate in
and its mission to help its DMCs reduce and benefit from growth. Without proper
poverty and improve living conditions and attention and planning, it will become
quality of life. increasingly difficult for growth to reach
Economic growth has been the driv- the impoverished who remain excluded by
ing force in reducing poverty in the region. circumstance, poor governance, and other
However, it is now apparent that not market-resistant obstacles. The region must
only the pace of growth but the pattern promote greater access to opportunities by
of growth matters. Reducing poverty expanding human capacities, especially for
requires that more people become eco- the disadvantaged, through investments
nomically productive citizens and share in in education, health, and basic social pro-
a society’s growing well-being. The ability tections. It must also improve the poor’s
to achieve and to sustain poverty reduction access to markets and basic productive
depends on economic growth alongside a assets by putting in place sound policies
well-managed natural environment. Fur- and institutions. Finally, social safety nets
ther, the process of ending poverty in the must be strengthened to prevent extreme
11Chapter 3
deprivation. ADB’s support for achieving es and solutions and facilitate transfer of
inclusive growth in DMCs will include knowledge and technologies on environ-
investment in infrastructure to achieve mental management. In addition, ADB will
high sustainable economic progress, con- further strengthen regional initiatives for
nect the poor to markets, and increase mitigating and adapting to climate change
their access to basic productive assets. due to Asia’s rising contribution to carbon
Only growth
ADB will support investment in education dioxide emissions.
that is and essential public services, such as water
environmentally and sanitation, which particularly benefit 3. Regional Integration
sustainable the poor and women. These investments
will provide the opportunity for all to Paralleling its support for national pro-
can eliminate improve their standards of living, thereby grams that reduce poverty and raise living
poverty, since contributing to economic growth, poverty standards, ADB will step up implemen-
many of the reduction, and the mitigation of extreme tation of its RCI strategy. This strategic
inequalities. agenda will exploit the great promise
poor depend
The majority of the poor in the region, that RCI activities present for accelerating
on natural including most of the absolute poor, are economic growth, raising productivity and
resources for women. Women comprise the largest employment, reducing economic dispari-
their livelihoods group among those excluded from the ties, and achieving closer policy coordi-
benefits of the region’s economic expan- nation and collaboration in support of
sion. ADB will continue to emphasize regional and global public goods, includ-
gender equality and the empowerment of ing work to combat climate change and
women as fundamental elements in achiev- HIV/AIDS. ADB will assist DMCs to realize
ing inclusive growth. It will also work to growth through integration and closer links
increase investments aimed at providing with their neighbors. Regional cooperation
women with better access to education also often addresses shared resources
and other economic resources, such as (e.g., the Mekong River) on which the
credit. poor depend for their livelihoods. Larger
regional markets for goods, services, and
nvironmentally Sustainable
2. E capital will raise the efficiency of resource
Growth use and enhance the region’s global com-
petitiveness. Closer regional coordination
Asia’s robust economic growth is contri will elevate the overall quality of policy
buting to the depletion of the region’s and reinforce the abilities of countries and
natural resources, accelerating environ- regions to respond more effectively to sud-
mental degradation, both in urban and den or unexpected changes in economic
rural areas, and impacting climate change. circumstances. This scaled-up effort comes
Only growth that is environmentally sus- at an opportune time as leaders in the
tainable can eliminate poverty, since many region are increasingly committed to
of the poor depend on natural resources greater economic integration, open region
for their livelihoods. To realize environ- alism, and cooperation on a range of
mentally sustainable growth, ADB will transboundary issues.
support the use of environmentally friendly Under Strategy 2020, ADB is commit-
technologies, adoption of environmental ted to achieving sustained and equitable
safeguard measures, and establishment of development, improving the quality of life,
institutional capacities to strengthen their and eradicating poverty with the aim of
enforcement. Through regional coopera- contributing most effectively to the har-
tion, ADB will promote effective approach- monious growth of the region in keeping
12Vision and Strategic Agenda
with the Charter. A balanced integration as will recognizing and respecting efforts of
of these elements should be reflected in development partners within the region’s
ADB’s overall portfolio, as well as in indi larger aid agenda. Therefore, ADB assis-
vidual country partnership and regional tance programs and projects will conform
cooperation strategies. ADB believes that to what Strategy 2020 has determined
it can best work to eliminate poverty only will be the business of ADB in the 12 years
when its strategic agenda coincides with ahead—understanding where it can be
DMCs’ expressed needs. Country respon- most relevant and where it can have the
siveness will be vital under Strategy 2020, most impact.
13Chapter 3
4 A Partner and
STRATEGY2020
Agent for Change
ADB will Drivers of Change investments in DMCs will include direct
financing, credit enhancements, risk miti-
assume To pursue its vision and new strategic gation guarantees, and innovative new
greater—but agenda—and to make the greatest impact financial instruments. These tools will create
thoroughly on the region’s challenges—ADB will place value by attracting private capital and
emphasis on five drivers of change: (i) private deploying business management or techni-
assessed—risks
sector development and private sector opera cal expertise to specific sectors and trans-
and act as a tions, (ii) good governance and capacity actions. ADB will promote public–private
catalyst for development, (iii) gender equity, (iv) knowl- partnerships in all of its core operational
investments edge solutions, and (v) partnerships. Each areas, gaining experience first in MICs, and
driver provides an opportunity for ADB to then expanding these efforts to all DMCs.
that the private act more as an agent of change by stimulat-
sector might ing growth and synergizing broader devel- 2. Good Governance and
not otherwise opment assistance, and to be a more active Capacity Development
and better development partner.
be willing
ADB will increase support for good gov-
to make 1. Private Sector Development ernance and the building of development
and Private Sector Operations capacities, because this will improve the
cost-effective delivery of public goods
ADB will expand its work with the private and services and broaden inclusiveness.
sector to generate greater economic ADB will bring four elements of good
growth in the Asia and Pacific region. governance (accountability, participation,
ADB will assume greater—but thoroughly predictability, and transparency) deeper
assessed—risks and act as a catalyst for into the mainstream of its operations and
investments that the private sector might activities. It will regard accountability for
not otherwise be willing to make. It will do economic performance, effectiveness of
more to help DMCs attract direct private policy formulation and implementation,
sector investments that support inclusive and the efficient use of public resources as
growth and improve the environment. To essential to preserving financial resources
spur market-led growth, ADB will invest in for development purposes. ADB will work
infrastructure and advise governments on to make sure that the poor participate in
the basics of a business-friendly environ- meaningful ways in decision-making pro-
ment, including reliable rules, regulations, cesses that affect the management of
and policies that do not disadvantage resources on which they depend for sub-
private sector enterprise. ADB’s tools to sistence. To help regional integration fulfill
catalyze change through greater private its potential to catalyze growth, ADB will
14A Partner and Agent for Change
support the establishment of transpar- its gender and development policy21 and
ency and predictability in regulations and gender and development plan of action.22
decisions on cross-border issues, trade and
investment cooperation, regional financial 4. Knowledge Solutions
integration, and regional public goods.
ADB will attempt to reduce the pro- Knowledge is a powerful catalyst for pro-
ADB will play
found harm corruption inflicts on devel- pelling development forward and enhanc-
opment, particularly on the poor. ADB’s ing its effects. ADB will play a bigger part a bigger part
anticorruption efforts will be linked to in putting the potential of knowledge in putting the
broader support for governance and im- solutions to work in the Asia and Pacific potential of
provement in the quality and capacities of region. ADB’s unique abilities to contrib-
the public sector as a whole. It will continue ute and apply development knowledge are
knowledge
to focus on strengthening initiatives and rooted in its central position in identify- solutions to
systems that emphasize prevention and uti- ing trends within and across the region, work in the
lize the international framework embodied interdisciplinary and integrated assistance
Asia and Pacific
in the United Nations Convention against approach, and capacity to implement
Corruption. Under Strategy 2020, ADB insight and knowledge via large, attractive region
considers improving governance, curtail- financing. It will employ these advantages
ing official corruption, and helping make to support the more robust body of empir-
public institutions and organizations more ical knowledge needed to resolve current
capable as highly effective ways to increase and emerging obstacles to development,
private sector investments throughout the utilizing its multidisciplinary staff. ADB’s
region. knowledge services will address its clients’
immediate knowledge needs, while deter
3. Gender Equity mining and passing on best practices.
ADB will support pilot projects from which
As an agent of change, ADB will continue it will distill and disseminate lessons. ADB
to promote and support gender equity by will distribute knowledge in ways that
designing gender-inclusive projects and have both an immediate impact and cata-
paying careful attention to gender issues lytic force—for example, the knowledge of
across the full range of its operations. how a DMC can approach public–private
Research and experience over the last 10 partnerships to provide social services and
years confirm the importance of gender to achieve benefits for the poor.
equity as essential to poverty reduction, ADB’s ability to work closely and on a
improved living standards, and sustainable long-term basis with governments in the
economic growth.20 ADB will promote region gives it first-rate, country-specific
gender equity through operations that insights. ADB’s outlook, however, goes
deliver specific gender outcomes, such as well beyond any individual country. Its
improved access for females to education efforts to build and to apply knowledge
and health services, clean water, better will also include cooperation and inte-
sanitation, and basic infrastructure. The gration across countries and regions. Its
empowerment of women promises enor- knowledge will be continuously enriched
mous gains—economic and social, direct through (i) internal learning from opera
and indirect—that ADB will help its DMCs tional experience and communities of
capture. ADB operations will be guided by
21
ADB. 1998. Gender and Development. Manila.
20
ADB. 2006. Implementation Review of the Policy 22
ADB. 2007. Gender and Development Plan of
on Gender and Development. Manila. Action (2008–2010). Manila.
15Chapter 4
practice; and (ii) external learning from Developing Partner
long-term strategic partnerships with other Countries
international finance institutions and
world-class research institutions, including Under Strategy 2020, ADB’s graduation
ADB’s own regional knowledge hubs. policy23 will allow ADB to view individual
ADB has DMCs in terms of their progress on eco-
5. Partnerships nomic and development management
developed performance, and make decisions on their
productive To address the risks and challenges facing eligibility for ADF and ordinary capital
relationships the region, and to meet the many different resources (OCR). Looking beyond those
requirements for achieving inclusive important factors, ADB will take a holistic
with DMC growth, environmentally sustainable view of DMCs’ development challenges
governments, growth, and regional integration, ADB and capabilities, social and economic
World Bank, will engage in partnerships with a more environments, institutions, and histories
diverse group of institutions. Partnerships
International and tailor assistance and cooperation to
with international development agencies, individual countries along the following
Monetary Fund, multilateral and bilateral institutions, the perspectives:
World Trade private sector, nongovernment organiza-
Organization, tions (NGOs), community-based organiza- 1. Graduated DMCs
tions, and foundations will become central
United Nations to planning, financing, and implementing The expertise graduated DMCs can bring
agencies, and ADB operations. It will make use of all its to other DMCs is a valuable resource
other major natural attributes as Asia and the Pacific’s that ADB will leverage in its operations.
home development institution, includ-
multilateral The development of a stronger relation-
ing on-the-ground capabilities provided ship between graduated DMCs and ADB
and bilateral by more than 20 resident missions across under Strategy 2020 will include coopera-
institutions the region. ADB has developed produc- tion on policy dialogue and best-practice
tive relationships with DMC governments, approaches to policy reforms in DMCs,
World Bank, International Monetary direct financing of projects or cofinancing
Fund, World Trade Organization, United of ADB-assisted projects, and expanding
Nations agencies, and other major multi- the transfer of knowledge and technology
lateral and bilateral institutions. However, from graduated DMCs to borrowing DMCs
Strategy 2020 will expand the scope of in areas where the former have established
ADB’s partnership agenda beyond its cur- a comparative strength.
rent mainly official development finance
partners to include endeavors with the 2. Middle-Income Countries
private sector and private institutions.
ADB will be open to a new range of future The majority of Asia’s poor live in MICs.
partnership activities that can deliver aid In many cases, inequality has widened,
effectively, improve development results, affecting socioeconomic stability and fur-
and improve disaster and emergency ther development gains. Although many
assistance. Underpinning these partner- MICs possess, or have easier access to,
ships are likely to be the promotion of resources to address their development
new assistance modes, greater use of challenges, others have more limited access.
DMCs’ technical and managerial skills, MICs represent a strategic priority within
and closer collaboration with the private
23
ADB. 2007. Review of the 1998 Graduation Policy
sector in project cofinancing and use of of the Asian Development Bank. Working Paper.
market-based investment instruments. Manila.
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