A year into ADB reforms: Assessments and projections

At last year’s annual meeting in Astana, Kazakhstan, Asian Development Bank President Takehiko Nakao rolled out a set of reforms that are meant to make the Manila-based financial institution more effective, increase its efficiency and help maintain its relevance in the region. Many of these reforms come as no surprise to ADB member countries as they were based on a midterm review and Strategy 2020, the bank’s blueprint to meet the challenges of a transforming Asia-Pacific. Some of the proposed changes were to improve the bank’s procurement system, promote knowledge sharing and open data, and increase its focus on partnerships. Perhaps the biggest item in the reform agenda was the proposal to merge the bank’s two main financial instruments, the Asian Development Fund and the ordinary capital resources. How have these reforms progressed a year after they were announced? Vinod Thomas, director general of the bank’s independent evaluation department, told Devex that it is important to look at the reforms in the right context. “[The reforms represent an] assessment of how Asia is evolving and how ADB contributes to that for a long period of time. There is the story there of ADB improving in the recent years that speaks to better results that Asia could get from the investments that ADB makes,” he explained. “With that background we point out critical areas for strengthening.” How these reforms can make institutional operations “get better results for efficiency” could spell the success of future bank projects, Thomas noted. But for real improvements to happen at each level and facet of bank operations, the ADB official stressed it is also important to understand the natural progression that led to these reforms — some of which were on the table even before Nakao took office. Below we assess four of the biggest changes implemented over the past 12 months, and sought input from Nakao and Thomas on what’s next for these reforms. ADF-OCR merger Merging ADF, the bank’s financial envelope for Asia-Pacific’s poorest countries, with OCR, its main funding pool for loans, has been discussed at length since it was announced in Astana. While some experts consider the plan “big and bold,” others have been a little skeptical, suggesting that the merger — which will provide ADB of up to $50 billion in resources — is an indirect answer to the rise of China’s rapidly growing Asian Infrastructure Investment Bank, which is expected to have at least $50 billion in starting capital. Nakao dismissed this in a previous interview with Devex, clarifying that discussions on the merger started as early as August 2013 — two months before Chinese President Xi Jinping announced his intention to establish AIIB. Presently, the fund merger looks set to boost the Manila-based institution’s lending resources roughly twofold. The next challenge now, according to the ADB president, is determining how to use these additional resources better. “The operations [committee] and I are happy to report that [the plan] was agreed by the donors — 34 countries — and now we have the majority support from our shareholders,” Nakao told Devex ahead of the 48th annual meeting in Baku, Azerbaijan, sharing that the bank plans to complete the merging process by January 2017. Thomas shared that during the roundup of evaluations of the bank’s various operations, the “most promising signal of where ADB can be effective going forward would be the [fund merger].” But as the bank’s chief evaluator mentioned, “the critical question that evaluators would look at is not just the volume of that lending, but how it would produce better results.” Focus on partnerships Given Nakao’s heavy emphasis on co-financing and engaging every development stakeholder in aid delivery, it perhaps comes as no surprise that the theme of this year’s annual meeting centers on partnerships. And indeed, the focus on partnerships drove some of the changes that happened at the bank over the past year. Shortly after the reforms were announced in Astana, a new public-private partnerships office was launched. The PPP office is directly under the bank president’s tutelage and will provide advisory services to the each of the bank’s projects that have a PPP component, including advocacy and capacity development, regulatory and legal framework development, and project design and development, among others. The establishment of this new office also prodded the bank to change the way its private sector operations department is handled, Nakao explained. This included crafting a new framework to promote smaller investment projects in frontier countries. These projects often require a lot of time before they can be implemented as “it takes some time to prepare for the whole discussion,” the bank president noted. As such, the new framework proposes new and improved processes to boost efficiency. Improving procurement ADB last year embarked on a seemingly arduous procurement reform process. The goal is to enable the Manila-based financial institution to “work smarter,” faster and more effectively. Given the scale and scope of ADB projects, a long and tedious procurement process contributes significantly to implementation delays. According to Nakao, the bank has since been able to cut the procurement process for some major projects by half — the target set by Sean O’Sulliven, ADB’s director general for operations services. Decentralization is one factor that has helped cut processing time significantly. About eight “sizable” ADB field offices, including Beijing, have been empowered to make procurement decisions and given oversight over projects in their areas, Nakao explained. “For smaller resident missions, we are also trying to delegate as much power. We are also out-posting staff from Manila to those places,” he shared. “So this decentralization or delegation of more power to the resident missions [gives us more leverage] to work more closely from the ground.” But while Thomas agrees that the bank has seen “a lot of areas of improvements over the last year, there more to be done.” The effectiveness of the procurement process, for instance, still “requires more work.” Knowledge and data The data revolution sweeping across the international development community has not spared ADB, which decided early this year to open all of its economic and development data and research to the public. The decision came as the bank recognized the importance of sharing knowledge and having access to good and reliable data in implementing more effective development projects. Through the Open Access Repository, a website launched in February, the public now has easy access to bank data, which hopefully can be used to design better-planned development interventions. Combining development financing with knowledge and data can “influence not just [the affected project] but on the whole program it is part of, especially if it is a big-ticket item,” Thomas explained. Further, this facilitates learning, replication and scale up of well-planned and executed programs. “Open data is a way of saying that there are these global public goods that can be achieved not only through free information and free access, but also through accessible and understandable data,” Thomas concluded. “It is a good that everyone else will benefit from. 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