ADB at 50: Nakao on reform, re-election and revitalizing Asia-Pacific

When Takehiko Nakao delivers his opening address in Frankfurt, Germany, today, it will be his fourth annual meeting as president of the Asian Development Bank — despite having barely three years in the role.

The first time around, Nakao presided over 2013’s gathering after just a day on the job, the bank chief recalled, in an exclusive interview with Devex. “I came to Manila one day before the first annual meeting in Delhi,” he said.

This type of urgency — and many others — have characterized his time at the bank, where he has driven a pressing need for reform. From day one, he said, “I focused on how ADB can operate closer to the ground and how we can strengthen the operations by looking at the procedures.”

Now as he seeks re-election to his post in November, the ADB finds itself a changed institution in a fast-evolving regional environment. New donors and new infrastructure needs have popped up. Even greater reforms may well be needed if the ADB is to serve the region’s development. Nakao told Devex he wouldn’t be afraid to usher in more change.

A quick rise

Nakao's election to the top position of the region's oldest multilateral development institution was not, by his own admission, a straightforward affair. He assumed office following the March 2013 resignation of Haruhiko Kuroda, who had been nominated as a candidate for the governorship position at the Bank of Japan — a position he currently holds. Kuroda’s five-year term was cut short, and Nakao stepped in.

Recalling his first three years at the bank, Nakao seems amused narrating the many kinds of urgency he and the institution he now leads have experienced. Even now from his spacious office in Manila, the former Japanese finance official spoke with seriousness, a day before he was scheduled to fly to Frankfurt.

Nakao’s reforms have been dubbed pioneering. They include procurement and operational reforms, establishment of a public-private partnership advisory office, and the delegation of more authorities to resident and country missions. His flagship reform, however has been the merger of ADB’s two main financial instruments — the Asian Development Fund and the Ordinary Capital Resources — to boost lending capacity.

Changing tides

These reforms have been undertaken in a growing and diversifying donor environment in the Asia-Pacific region, with the rise of the Asian Infrastructure Investment Bank and the New Development Bank.

Nakao, in previous interviews, has downplayed the notion that he oversaw bank reforms in reaction to the new institutions. Instead, he has told Devex, they were a way to ensure ADB becomes more suited to solve the region’s evolving development issues.

“I tried to make [ADB] more adaptive and dynamic and more suitable to provide better knowledge and expertise integrated in the projects,” he said. “We are now starting to develop Strategy 2030. There is progress in Asia, but there are many remaining challenges so we should once again think [of] our strategy and focus and how we can increase our financing capacities.”

The former Japanese finance official, who tends to apologize whenever he feels he’s overexplaining his answers, was also quick to discuss the new institutions — particularly the Beijing-based AIIB — as well as the ADB’s current and future relations with them.

Nakao said that he and AIIB President Jin Liqun, a former ADB vice president and a panelist at one of the sessions at the annual meeting in Frankfurt, have had “long intensive discussions” over the past months. A memorandum of understanding has been signed Monday  to lay down a partnership framework between the two institutions moving forward.

“We have been supporting AIIB to prepare the policies for safeguards and procurement and so on,” he said. “Mr. Jin and I agree that we need finance for infrastructure and we need to pay more attention to environmental protection and social impacts and can continue to cooperate.”

A rougher road ahead?

Nakao, who is seeking reelection for a five-year term after the current one ends in November, will likely face a tough challenge in steering ADB, which is also facing internal challenges.

Last year, bank management proposed measures that will see the benefits and pension plans of current and former ADB employees cut or reduced significantly in a bid to rationalize the bank’s compensation and benefits policy. This restructuring has been met with considerable opposition from bank employees and retirees. But despite the outcries, the changes are expected to take effect fully in the next few months.

Nakao, who likes to gesture with his hands while speaking, explained that his intention to run is a manifestation of his desire “to continue to make as much contribution to make ADB’s function stronger, better and faster”, he said. “There are so many challenges.”

Some of these challenges may include making hard (and possibly unpopular) decisions that could ensure the ADB remains as relevant and essential in the region’s development as it was when first established in December 1966. If elected again, Nakao said he intends to lead with conviction at the forefront, even if it means changing the rules.

“My style is to tackle things we must do and I want to do things very proactively. My motto is if there’s a problem, we should address the problem sooner. Why do we need to wait?,” he concluded. “Rules can be changed if there is a reason. We cannot change rules everyday or they won’t be rules anymore. But if there’s a problem about the rule, why not change it.”

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