[asia-apec 1730] FT: Poorest Asian countries face cuts by ADB

[Kevin Yuk-shing Li]

Financial Times
February 12, 2001

Poorest Asian countries face cuts

By Hugh Williamson in Manila

Poor Asian countries will from next year face cuts in concessional loans from
the Asian Development Bank (ADB) if they fare poorly on new performance
criteria that include ratings for governance and corruption.

In many countries, "poor government systems are holding back economic
development", said Clay Wescott, a senior ADB public administration
specialist, on the fringes of a regional conference organised by the bank on
reducing poverty.

Separately, the Manila-based bank presented a relatively upbeat outlook for
the achievement of an internationally agreed target of halving extreme global
poverty in the 20 years up to 2015.

Mr Wescott said the ADB was under pressure from western donors to link soft
loans from its Asian Development Fund (ADF) to the performance of recipient
countries on issues including progress on economic reforms, poverty
reduction, and governance. Donors last year agreed on a $5.6bn ADF
replenishment.

In governance assessments already completed in Thailand and Vietnam, the ADB
found that approximately 30 per cent of public expenditures in both countries
"vanished via fraud and corruption", Mr Wescott said.

The ratings, which aimed to help recipient countries, would not be published,
he said, adding however that it was important that countries now know "they
are competing against each other".

On halving poverty by 2015, the East Asian region had "already reached the
target" and south Asia was "on track" to do so, Karti Sandilya, manager of
the ADB's poverty reduction unit, said.

Average levels of extreme poverty in East Asia fell from 28 per cent in 1990
to 15 per cent in 1998, Mr Sandilya said, adding that the figure was now 14
per cent or below.

The average in South Asia fell from 44 per cent in 1990 to 40 per cent in
1998, but was projected to decline sharply to 14 per cent by 2008, he said.
Almost 900m Asians live in extreme poverty, two-thirds of the world's poor.

The commitment to halve the number of people living on the equivalent of $1 a
day between 1995 and 2015 was agreed at a series of United Nations
conferences in the early 1990s, and reconfirmed at the UN Millennium summit
last year.

The UN's International Fund for Agricultural Development (IFAD) said this
week that the 2015 target would probably not be met, largely because
attention and resources had shifted from reducing rural poverty, even though
most poor people live in the countryside.

Referring to IFAD's pessimistic view, Mr Sandilya agreed rural poverty was a
key problem but said the ADB "stands by" its assessment that Asia can meet
the 2015 target.

Mr Sandilya said the conference - which involved 200 delegates from Asian
governments, civil society, academia and donor organisations - had agreed
that while economic growth was vital to reducing poverty, "not all growth
reduced poverty to the same extent".

The impact of growth depended on levels of inequality, penetration of new
technology and other factors, he said.