Chaitanya Kalbag

MANILA, April 29, Reuter – The Asian Development Bank’s lending policies came under fire at its annual meeting and there were calls for a re-examination of its role. 

Indonesian Finance Minister J.B. Sumarlin said he was concerned that although loan approvals rose to a record high of 2.4 billion dollars in 1987, the bank’s actual transfer of resources plunged to 120.8 million dollars, the lowest in 15 years. 

“No multilateral institution…should be drawing more resources from its members than it contributes,” he said.

“Clearly this is an undesirable – and frankly, unacceptable – state of affairs for the leading development institution in the Asian and Pacific region,” Sumarlin added. 

South Korean Finance Minister Il Sakong said program loans and support for Asian private-sector enterprises represented only a small proportion of the ADB’s total lending. 

He said program lending, launched last year with a loan to Indonesia, was tied to policy dialogue. “This is a difficult proposition,” he said, adding the ADB must improve its research and draw on the experience of the International Monetary Fund and the World Bank in policy dialogue. 

“Policies must be supported with provision of adequate external financing,” said India’s Finance Minister, Narain Dutt Tiwari. “The question before the ADB is of its identity.” 

He said it had been argued that the role of the bank was that of a mediator between capital markets and member countries, but said this was more suited to a commercial bank than a development institution. 

“To strengthen the ADB’s capacity to play its full developmental role, it is our considered view that concessional resources need to be increased manifold,” he said. 

Tiwari also urged the bank to step up its share of co-financed projects, adding that it was costly to turn to commercial sources for co-financing. 

Kai Helenius, Finland’s under secretary for Foreign Affairs, said the bank must re-examine its liquid assets. 

At the end of 1987, liquid assets totaled 4.5 billion dollars, comprising 74.2 pct of undisbursed loan balances, 

“The ADB’s project loans have not been growing as much as we would like,” Bank of Japan Governor Satoshi Sumita said. He said the bank should not “stand immobilized” until a panel set up to examine the bank’s role in the 1990s submits its report. 

Sumarlin said recipient countries must also try to eliminate project delays and clear bottlenecks. 

He said donors could cooperate by creating more flexible channels for funds. He said many bank members were critically short of local currency counterpart funding for projects. 

“Clearly, traditional lending practices requiring matching local funds are becoming increasingly irrelevant to present needs,” he said. 

South Korea’s Il said Seoul’s external debt had been trimmed from a high of 45 billion dollars in 1986 to 34 billion at the end of March.

It said South Korea planned to recycle some of its trade surplus through development assistance and direct foreign investment. 

Qiu Qing, deputy governor of China’s central bank, sought to answer concern among the ADB’s smaller borrowers that Peking’s size would overwhelm them. 

“China will take fully into account the interests of the traditional borrowers and medium and small countries when using ADB loans,” he said. 

Peking joined the bank in 1986 and last year received its first two loans, totaling 133.3 million dollars.