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p. 3 of 6 BACK | NEXT Introduction Background Review of Asian Development Bank Policy and Assistance Directions and Policy for the Asian Development Bank Conclusion Recommendation

Disaster and Emergency Assistance Policy

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Review of Asian Development Bank Policy and Assistance

Existing Asian Development Bank Policies on Disasters and Emergencies

16. ADB has approved two major emergency policies to assist its DMCs: (i) Rehabilitation Assistance to Small DMCs Affected by Natural Disasters was approved in 1987 to address the special needs of small Pacific DMCs and the Maldives;¹⁰ and (ii) Rehabilitation Assistance After Disasters, approved in 1989, applied to all DMCs.¹¹ ADB supplemented these policies in 1997 with a change in the loan ceiling for emergency loans to small DMCs.¹² This increased the loan ceiling for emergency rehabilitation assistance loans for small DMCs from $0.5 million to $2.0 million.

17. The major rationale for ADB involvement in rehabilitation was that timely intervention would allow an affected DMC to maintain its development momentum. Without such intervention, its momentum could be interrupted as the DMC reallocates scarce budgetary resources away from development to disaster-related activities. In the absence of rehabilitation, possible disinvestments of the existing capital stock could mean that such stock may no longer contribute to the production of goods and services.

Policies for Small Developing Member Countries, 1987–1997

18. The Rehabilitation Assistance to Small DMCs Affected by Natural Disasters Policy, applicable only to Maldives, Papua New Guinea, and the small Pacific island states, emphasized immediate assistance to address urgent rehabilitation requirements following natural disasters. ADB designed this policy to help it respond flexibly when helping these DMCs rapidly overcome the immediate disruptive effects of natural disasters on key infrastructure. ADB makes funds available within 6 weeks of receiving a request for assistance, with project completion envisioned within 12 months. The policy originally mandated a maximum loan amount of $0.5 million, but this was increased to $2.0 million in 1997 (para. 16). In that same year the loan utilization period was increased from 12 months after the disaster to 12 months after loan effectiveness. Loans were made available at prevailing Asian Development Fund (ADF) terms to eligible DMCs and at best available ordinary capital resources (OCR) terms to OCR borrowers. Imprest accounts were used to speed up disbursements. Under the policy, only simple repair and rehabilitation activities intended to meet immediate needs were to be financed. Longer-term capacity building and reconstruction involving detailed design, engineering, and consulting services were to be provided through traditional project lending.

19. To implement more flexible and more rapid assistance, the policy introduced as much procedural simplification as possible into loan processing. For example, only in-house expertise was to be used in formulating assistance, removing the need for outside consulting services. Given that much assistance involves imported materials and civil works, the policy recommended a program loan approach to support the importation of materials needed for basic repair work. This approach helped borrowing DMCs overcome the budgetary constraints that often accompany disasters. Hence, the emphasis of the program assistance was almost exclusively on restoring the situation to what it had been before the disaster.

20. Given the small amounts involved and the simple repair work envisaged, the policy waived the requirement for an appraisal report,¹³ although a standardized report and recommendation of the President (RRP) was still required for Board presentation. The policy also specified that Board consideration be sought under special abbreviated procedures within 1 week after the Board received the RRP. The objective of these procedures was to make assistance available within 6 weeks of receiving a request from an eligible DMC.

Policy for All Developing Member Countries, 1989

21. The 1989 policy, intended to be implemented in parallel with the 1987 policy, was meant to apply to all DMCs. Since that time, however, ADB has learned important lessons about appropriate and effective disaster response mechanisms from its growing experience with certain small DMCs. Other lessons came from observing the experiences of the World Bank, of the Inter-American Development Bank (IDB), and of various UN bodies.

22. While the 1987 policy focused essentially on simple repair activities intended to return a country to its pre-disaster status, the scope of the new policy was wider and focused on addressing disaster rehabilitation in an informed way. The new policy moved ADB away from merely responding reflexively to disasters by providing financing for rehabilitation activities after disasters had struck. For the first time, ADB explicitly helped DMCs reduce their vulnerability to natural hazards and identify ways to prevent disasters or mitigate their effects after they had occurred. The major elements of the 1989 policy included the following:

1. introduced a typology of the causes and effects of disasters;
2. defined ADB’s response during various phases of post-disaster situations more clearly;
3. identified the nature, focus, and coverage of rehabilitation projects;
4. introduced detailed, yet simplified, guidelines for processing rehabilitation projects;
5. adopted a project approach in preference to the earlier program lending approach;
6. targeted rehabilitation loans toward restoring infrastructure and production activities, including capacity building and modernization;
7. mandated that risk analysis and disaster prevention measures be included in all ADB projects in disaster-prone DMCs;
8. specified that a sector approach was to be followed to permit flexibility during project implementation;
9. applied existing ADB policies on loan savings, advance procurement, domestic cost financing, and retroactive financing in a liberal fashion;
10. coordinated disaster responses at all levels (local, national, and international) closely with those of other external funding agencies, nongovernment organizations (NGOs), and community groups;
11. sought least-cost solutions in view of the perceived difficulties in calculating economic internal rates of return;
12. specified that disaster rehabilitation projects would carry standard ADF terms for ADF-eligible DMCs, while best available OCR terms for grace periods and maturities would apply to OCR borrowers;
13. specified that disaster prevention and mitigation activities along with regional cooperation were to be promoted; and
14. included non-natural disasters, e.g., wars, civil strife, and environmental degradation.

Assistance Provided Under the Policies

23. Appendix 1 provides detailed information about the allocation and use of ADB loans and technical assistance (TA) under the previous policies. Most (83%) ADB emergency assistance loans (EALs) during 1987–2002 were provided to address emergency situations following natural disasters, with the remainder going to assist in post-conflict situations (Figure 1). Most resources were allocated to restoring and rehabilitating infrastructure, with much smaller amounts dedicated to non-infrastructure goods and services (Figure 2).





24. As Figure 3 shows, ADB’s annual lending for emergency assistance has fluctuated considerably from year to year; however, the proportion of total ADB lending devoted to disaster and emergency assistance has increased substantially. During 1999–2002 emergency loan assistance averaged about 5.5% of total ADB lending, up from 1.0% in 1987. An analysis of loan distribution by regions shows that DMCs in South Asia and the Greater Mekong Subregion (GMS), generally the poorest DMCs, received almost 70% of all EALs (Figure 4).





25. Other key data regarding ADB emergency assistance include the following: (i) more than three quarters of operations are multisectoral, (ii) TA has been the main instrument that ADB has used to provide direct assistance for disaster and emergency prevention, and (iii) most (61%) loans were financed from highly concessional ADF resources. For OCR loans, ADB made extended grace periods (7 years) and maturities (30 years) available to borrowers. For those countries eligible for an ADF/OCR blend, whenever possible ADB attempted to provide rehabilitation loans from ADF resources only, either solely or for the bulk of the loans. Furthermore, only a few projects were cofinanced (Appendix 2).

Evaluation and Lessons of Experience

Loans for Rehabilitation Assistance

Review and Analysis

26. The 1987 and 1989 policies emphasized a speedy response by ADB and its borrowers, with projects to be completed 3 years after the disaster. Specific steps to increase flexibility and streamline loan processing included (i) the preparation of detailed guidelines and instructions to improve efficiency and reduce processing time, including a detailed operations manual that spelled out the new policy and provided comprehensive, step-by-step staff instructions; (ii) the waiver of the appraisal report; (iii) a liberal interpretation of existing ADB policies; (iv) the use of loan savings for disaster projects; and (v) the speeding up of procurement procedures and consultant recruitment.

27. Appendix 3 summarizes major operations evaluation findings for ADB emergency assistance activities. While most disaster rehabilitation loans met their objectives, they tended to encounter considerable delays in Board approval and longer-than-expected project implementation periods. While the policy prescribed a 3-year completion period, the actual duration from the disaster to loan completion averaged 4 years. Contributing factors included weak institutional capacity, shortages of technical and managerial skills, procurement delays, poor communications, lack of counterpart funds, and delays in recruiting consultants.

28. Rehabilitation loans encountered many of the same institutional and absorptive capacity constraints ADB encounters in its other operations. Therefore, even though ADB streamlined its own procedures and speeded up the project cycle, borrowers have not always managed ADB assistance effectively for several reasons: (i) poor absorptive capacity; (ii) weak institutions; and (iii) less-than-optimal ADB supervision of projects, despite explicit policy statements spelling out the need for especially intensive supervision of rehabilitation projects. Disparities in the number of supervision missions undertaken during loan implementation have also occurred, with the frequency of reviews ranging from 21 to 74 weeks.

29. While important new challenges arose in relation to disaster and emergency relief in the 1990s and the international community developed new approaches, ADB evolved from a project lender to a full-fledged development institution; however, its disaster policy remained unchanged. As a consequence, rehabilitation projects frequently omitted important enhancements to project work, e.g., evaluations of the environmental and social impact of projects. ADB did not evaluate the environmental impact of most rehabilitation projects, the rationale being that as the project goal was to rehabilitate existing structures, no negative environmental impacts would result. The sense of urgency and the compressed time frames characteristic of post-disaster situations left little time for carrying out detailed environmental impact assessments or for establishing baseline data for future comparisons; however, several projects specified that environmental impact assessments should be performed for subprojects during implementation.

30. Rehabilitation loans have also typically not included detailed social assessments or fully involved beneficiaries or communities in project design, but, given the disproportionate impact of disasters on the poor and ADB’s overarching concern with poverty reduction, the social dimension of projects is vitally important.

31. The 1989 policy specified that economic internal rates of return need not be calculated to justify emergency projects based on the rationale that the large sunk costs of rehabilitation projects ensured high economic returns. Instead the policy stressed least-cost solutions commensurate with the requirements of the post-disaster situation and with long-term requirements for development and disaster prevention. Project performance audit reports and project completion reports show that the economic returns of emergency loans have indeed been high.

32. ADB has made major changes in the way it evaluates the environmental and social dimensions of projects since the 1989 policy was approved. ADB reassessed its goals and priorities in 1999, leading to a formal commitment to poverty reduction as the institution’s overarching objective through its adoption of the Poverty Reduction Strategy.¹⁴ ADB’s Long-Term Strategic Framework builds on the Poverty Reduction Strategy by using three “pillars” for development: (i) pro-poor sustainable economic growth, (ii) inclusive social development, and (iii) good governance for effective policies and institutions. ADB’s Medium-Term Strategic Framework (2001–2005) provides an operational framework for implementation.¹⁵ ADB’s new policy on disaster and emergency assistance has been formulated within this context.

Lessons Learned

33. Analysis of the performance of rehabilitation projects over time suggests an absence of a systemic use of results and lessons learned. While some lessons of earlier projects were reflected at the country level, they were not integrated or applied ADB-wide. ADB has treated rehabilitation after disasters as a series of discrete events, with limited institutional memory and no central focal point for guiding these important operations. The new policy (Chapter IV) seeks to address this situation by applying important lessons learned over the last 15 years to a new and more effective approach to emergency assistance.

34. The following are some key lessons drawn from project performance audit reports, project completion reports, and discussions with ADB staff:

1. DMCs’ capacity to develop disaster prevention and management plans should be enhanced before disasters strike. Such plans ensure that a disaster response proceeds in an orderly and integrated fashion and in a manner that addresses the DMCs’ long-term requirements. Hazard mapping and land-use planning are key instruments for such capacity building.
2. Executing agencies should not unilaterally alter standards for rehabilitation works during implementation, and complex components requiring extensive preparation and detailed design work should not be employed.
3. ADB’s institutional focus should remain on rehabilitation as a core concern, with intensive policy dialogues left to other forums. Such policy issues are part of ADB’s normal operations and are specifically sought during the detailed poverty analysis and participatory processes that underlie the country strategy and program (CSP).
4. Rehabilitation loans should feature a flexible implementation process that allows ADB to respond effectively to changing conditions. RRPs should clearly spell out risky assumptions, and their validity should be reexamined at implementation milestones to permit design modifications to be made on time.
5. Frequent review missions are required.
6. ADB should provide financing for operation and maintenance to ensure sustainability, especially during the initial stages when a government’s financial situation is particularly strained. Mechanisms for cost sharing need to be devised.
7. Training local staff in damage assessment, vulnerability analysis, natural hazard risk evaluation, and cost-benefit analysis should enhance the economic and social impact of emergency assistance and mitigate the effects of any similar catastrophes.
8. Environmental considerations and poverty reduction concerns must be part of the decision-making equation. The link between disaster prevention plans and environmental protection and poverty reduction strategies should be clearly defined.
9. Rehabilitation loans involve the functioning of integrated facilities. Therefore, the entire set of subprojects must be completed.
10. The economic return of rehabilitation projects tends to be high. Although rigorous cost-benefit analysis may not always be possible, “quick and ready” estimates should be provided, especially for subprojects, to establish their relative importance for meeting the priorities of a well-focused disaster response.

Disaster Mitigation and Prevention Activities

35. The 1990s saw growing recognition among the international community generally, and at ADB and among its DMCs specifically, that initiatives to mitigate the effects of natural hazards before they develop into disasters are essential. Thus, in addition to financing rehabilitation loans under the 1989 policy ADB has provided DMCs with disaster-mitigation loans and TA. ADB also provides regional technical assistance (RETA) to help reduce the impact of natural disasters when they do occur. In contrast with rehabilitation projects, mitigation projects are inherently long term and are processed using normal ADB operation procedures and do not, therefore, fall under the 1989 policy.

Disaster Mitigation Projects

36. Many ADB operations not conventionally perceived as disaster related actually have significant disaster mitigation implications. An obvious example is flood-control projects that protect production facilities, infrastructure, and people from recurrent floods. However, many other projects incorporate important disaster mitigation components, including those encompassing reforestation, watershed management, community development, urban development, coastal protection, agricultural diversification to disaster-resistant crops, slope agriculture, and land-use planning. Such activities help reduce the incidence of natural phenomena that lead to catastrophic events, and as a secondary effect may lessen future demand for rehabilitation projects after disaster.

37. ADB does not report such mitigation activities as a separate lending category. For the analysis presented here, a computerized search of ADB lending records was carried out to identify projects involving disaster-mitigation activities, even if such activities were only a component of the project.¹⁶ Operation staff reviewed the resulting project list for completeness, leading to the identification of additional projects that included mitigation components that were not reflected in the projects’ titles. This exercise identified 25 mitigation projects, primarily related to flood hazards, and accounting for $1.7 billion in loans (Appendix 4). The 2001–2002 pipeline also included four mitigation projects, three of them in the PRC, totaling $489.2 million.

38. The overall figure given in the previous paragraph probably underestimates ADB’s total lending for disaster-mitigation activities. Many more projects most likely included mitigation components that could not be readily identified, for example, projects that treated hazard risks from an engineering perspective by including design specifications such as earthquake-resistance engineering standards and consideration of 100-, 50-, or 25-year floods.

39. Analysis of the post-evaluation ratings of mitigation projects, as well as the findings of project performance audit reports and project completion reports, suggest that the following three factors in particular are essential for project effectiveness:

1. good project design;
2. effective operation and maintenance to ensure that mitigation structures are always in a condition to meet their objectives when natural hazards occur; and
3. strong institutional development to support structural and preventive measures, e.g., increased disaster awareness, community preparedness, early warning systems, effective land-use planning, and sound and enforceable building codes. Such measures should be part of the core design of natural disaster mitigation projects and should be integrated into country strategies and programs.

Technical Assistance

40. ADB has processed at least 60 TAs since 1987 that can be readily identified as having directly involved disaster-related activities. These TAs have included (i) hardware solutions for hazard management, (ii) software solutions to enhance disaster preparedness, (iii) protective infrastructure and related project preparatory TAs, and (iv) rehabilitation and prevention through advisory TA. Such TAs build capacity and enhance institutions in DMCs.

41. In addition to country-specific TAs, ADB has funded four RETAs to address regional disaster issues, and as with all ADB regional work, these RETAs fostered regional cooperation. The first three RETAs reflected ADB’s concerns about disaster reduction following approval of the rehabilitation policies after disasters in the late 1980s. These three RETAs demonstrate ADB’s contributions to the UN’s International Decade for Natural Disaster Reduction (IDNDR).¹⁷ The fourth, more recent, RETA was mobilized in response to the huge forest fires of 1997/1998 and the resulting haze, considered one of the major worldwide natural disasters of the century.¹⁸

42. ADB’s first disaster-related RETA led to the dissemination of important disaster management information in two books. The first book summarized lessons learned in selected DMCs, with a focus on overall strategies for disaster mitigation and on technological and management issues.¹⁹ The second, essentially a handbook, summarized state-of-the-art disaster management techniques for practitioners in DMCs.²⁰ These books are among ADB’s best-sellers and are still in demand more than a decade later as references in the field and as texts for university and training courses throughout the region. However, they do not reflect the scientific, methodological, and institutional solutions that evolved during the IDNDR and are thus no longer well suited to meet the requirements of the UN International Strategy for Disaster Reduction, the successor to the IDNDR. New approaches should embody the lessons of operational experience over the last decade and evolving best practices.²¹

43. The second RETA established a regional focal point for disaster-related activities through institutional strengthening of the Asian Disaster Preparedness Center (ADPC), at the Asian Institute of Technology. The objectives of the RETA were to strengthen ADPC’s institutional and managerial capacity and to prepare strategic and business plans for ADPC covering training, damage assessment, policy formulation, information dissemination, and financing requirements. This RETA, approved in 1993 helped ADPC evolve into a strong regional presence with an enhanced capacity to react effectively and comprehensively to the complex demands of operational disaster management. (Note, however, that ADPC only overcame the institutional impediments to implementing the RETA’s recommendations in 1999).

44. The third RETA supported the World Conference on Natural Disaster Reduction within the framework of the IDNDR in Yokohama, Japan, in 1994. ADB financed participation by 23 DMC delegates and supported an analysis of the economic impact and policy implications of disasters. The Yokohama conference represented an important turning point for the IDNDR, with the Yokohama Declaration providing an action plan for the remainder of the decade.

45. The fourth RETA was designed to strengthen the capacity of the Association of Southeast Asian Nations (ASEAN) to prevent and mitigate transboundary atmospheric pollution. It was triggered by the forest fires of 1997/1998. The objectives of the regional haze action plan developed by an ASEAN task force were to (i) prevent forest fires through better management policies and rigorous enforcement, (ii) establish operational mechanisms to assess land use and monitor forest fires, and (iii) strengthen regional land and forest firefighting capabilities and other mitigation measures.

46. In summary, these RETAs reflect ADB’s emphasis on regional cooperation in its disaster-related work. They reflect a shift away from disaster response toward disaster prevention, which the International Strategy for Disaster Reduction and the international community are now focusing on. Through concerted country-level efforts and regional cooperation, DMCs can more effectively pool regional resources to reduce hazard vulnerability. ADB will continue to deploy RETAs to support DMCs’ efforts to strengthen their disaster management systems.

Post-conflict Operations

47. The past decade has seen a proliferation of conflicts and civil strife around the world. Conflicts flared in many DMCs, leading ADB to provide assistance in post-conflict situations in Afghanistan, Cambodia, Solomon Islands, Sri Lanka, Tajikistan, and Timor-Leste (formerly known as East Timor). In each of these cases, ADB and other development partners faced the difficult challenges involved in intervening to overcome the cycle of conflict, economic decline, and growing poverty. The main objective was to ensure timely and adequate assistance in a strategically sound manner.

Post-conflict Experience

48. ADB has financed five post-conflict projects in five DMCs amounting to $367.2 million (Appendix 1, Table A1.1). These activities were justified under the 1989 policy, which covered natural and non-natural disasters, e.g., wars and civil strife. Consistent with the 1989 policy, ADB interventions in post-conflict situations focused almost exclusively on infrastructure rehabilitation, an area in which ADB has traditionally been strong. Hence, post-conflict operations did not differ substantially from rehabilitation projects after natural disasters. ADB interventions were focused almost exclusively on the direct material destruction caused by civil strife. Longer-term structural development issues were to be addressed through ADB’s normal country assistance program.

49. The 1989 policy recognized that reduced public and private investment and the deterioration of existing capital stock often compound the direct destruction caused by war and civil strife. In addition, serious personnel problems often occur due to migration and a lack of education and training. More broadly, war and civil strife contribute to slower economic growth; weak public administration and institutions; and deteriorating or destroyed infrastructure, urban centers, and production facilities. Nevertheless, ADB’s operating focus under the 1989 policy was on infrastructure rehabilitation. In practice, this made addressing certain salient aspects of post-conflict situations difficult, in particular, urgent institutional and governance requirements and the special needs of displaced people and former combatants.

50. A good example of ADB post-conflict assistance occurred in the case of Timor-Leste, which received support under special arrangements that drew on a separate trust fund for Timor-Leste (Box 2).

51. ADB’s past activities in post-conflict countries have generally been of an ad hoc nature. Post-conflict situations typically require making substantive structural changes rather than simply reestablishing pre-conflict conditions. Policy dialogue, formulation, and implementation are particularly important. TA to support medium-term improvements in governance and institutional capacities is vital. Thus, the 1989 policy is not suited to meeting the special demands of post-conflict situations, as ADB’s experience in Timor-Leste has shown. This policy specifically excludes policy dialogue and policy conditionalities from ADB activities in a disaster rehabilitation context or in post-conflict situations.

New Approach to Post-conflict Situations

52. Post-conflict situations have much higher visibility and priority than in past decades, particularly among MDBs. This shift began during the 1970s and 1980s, as MDBs’ operations evolved to include responding to emerging world challenges, e.g., oil price shocks, natural disasters, and conflict. The post-conflict issue came to the forefront of the international agenda in the 1990s, as exemplified by the Group of Seven summit in Halifax in 1995.²² The MDBs, including ADB, now give priority to global public goods, which include peace, security, and postconflict reconstruction.²³ The international community as a whole is now more aware of the need to prevent conflicts and to respond quickly to help post-conflict countries move along a solid path of economic and social development. The higher visibility of post-conflict situations also obliges MDBs, including ADB, to pay special attention to communications with other external funding agencies and with beneficiary communities, as well as with the media and other concerned parties.

Box 2: Post-conflict Assistance for Timor-Leste

The people of Timor-Leste voted overwhelmingly for independence in 1999. Within weeks, an estimated 70% of the country’s physical infrastructure had been destroyed and close to 80% of the population displaced. Three months later, in December 1999, the Trust Fund for East Timor was created at a donors’ meeting in Tokyo. Priorities for use of the fund were set with support from the Asian Development Bank (ADB) and the World Bank.

ADB took on the task of rehabilitating infrastructure, with initial efforts focused on the urgent need for roads, ports, water, and power. Comprehensive support for capacity building was needed in all areas. Road rehabilitation and maintenance work linked previously isolated communities and created an estimated 300,000 person-days of employment. Two water supply projects brought safe water to 240,000 people in rural areas and 15,000 in Dili, the capital. These two labor-intensive projects created an estimated 90,000 person-days of employment.

Since operations began in Timor-Leste, ADB has approved 20 technical assistance projects worth $8.7 million (11 substantially completed and 9 ongoing). Many support projects funded by the trust fund with project preparation and capacity building. These activities reflect a shift in ADB’s focus from emergency, humanitarian, and security needs to development activities. ADB’s port and microfinance projects maintain a consistent focus on poverty reduction and contribute to post-conflict economic and social development.

A poverty assessment undertaken by the Government, ADB, Japan International Cooperation Agency, United Nations Development Programme, and World Bank provided information used to prepare the country’s first national development plan in May 2002. The plan includes a national poverty reduction strategy focused on (i) promoting opportunities for the poor; (ii) improving access to basic social services; (iii) enhancing security, including reducing vulnerability to shocks and improving food security; and (iv) empowering the poor.

Source: ADB. 2002. Annual Report: Special Theme. Rehabilitation and Reconstruction. ADB’s Role in Afghanistan and the Region. Manila.

53. ADB’s Poverty Reduction Strategy implicitly recognizes that conflict is both a cause and a consequence of inequality and inequity. Poor people are often unable to obtain basic services because (i) institutions are not accountable, (ii) local elites dominate the political process and control private sector resources, (iii) corruption is widespread, (iv) social relationships are inequitable, and (v) poor people lack experience with participation. ADB recognizes that conflict has direct and indirect effects on development and is committed to helping DMCs develop mechanisms to manage conflict effectively.

54. Of the many factors that contribute to conflict, poor governance is among the most important. Countries can avoid conflict if people build agreements and resolve differences through mutually acceptable processes. ADB’s policy on governance reflects its concern with the environment, institutions, and processes whereby citizens interact with each other and with government agencies and officials.²⁴ An overall assessment of governance in a country identifies areas that need to be addressed under a reform program. In particular, improving public administration, building capacity, and promoting service delivery can mitigate or prevent conflict. In its governance work ADB works with its DMCs to improve accountability, participation, predictability, and transparency. While always important, these attributes take on increased relevance in post-conflict situations. The resumption of ADB activities in Afghanistan illustrate its approach to improved governance and policy dialogue in post-conflict situations (Box 3).

55. Another factor that exacerbates conflict at the country level is pervasive corruption. ADB fights corruption based on its Anticorruption Policy,²⁵ which has three objectives: (i) support competitive markets and effective public administration, (ii) support explicit anticorruption efforts, and (iii) ensure that ADB-financed projects and ADB staff adhere to the highest ethical standards. ADB implements this policy by supporting national anticorruption measures. In addition to best practices within ADB, the institution adapts those from interventions identified or implemented by the Asia-Pacific Economic Cooperation, Organization for Economic Cooperation and Development, UN, and World Trade Organization. Responsible and transparent communications in post-conflict situations can also assure shareholders about the proper use of financial assistance provided.

56. The recurring problems of insurgency and criminality are rooted in the widespread poverty and economic exclusion that characterize many poor Asian and Pacific DMCs. The demonstrated linkage between social unrest and underdevelopment provides a compelling rationale for regional cooperation. ADB’s policy on regional cooperation defines ADB as (i) a provider of information to DMCs, (ii) an “honest broker” among DMCs, and (iii) a means of leveraging public and private sector resources into regional investments.²⁶ These three mutually supportive roles enable ADB to encourage information sharing and dialogue; provide forums for that dialogue; and assist (as requested) in regional cooperation through project identification, development, and financing.

Box 3: Resumption of Asian Development Bank Activities in Afghanistan

Afghanistan was a founding member of the Asian Development Bank (ADB) in 1966, with operations beginning in 1969. In 1979, following the Soviet occupation of the country, ADB suspended its operations in Afghanistan, a suspension that continued for more than two decades. During this period Afghanistan was devastated by external aggression and civil war. The country’s economy and physical infrastructure were in ruins, and the social, political, and ethnic fabric destroyed.

The 2001 Bonn Agreement created a broadly based political authority, the Interim Administration of Afghanistan. ADB worked with its partners to conduct a needs assessment during the Tokyo Ministerial Conference on the Reconstruction of Afghanistan in January 2002. The preliminary needs assessment provided the basis for the international community’s pledge of $4.5 billion in development assistance to address agreed sector priorities and policy and institutional frameworks. ADB pledged $500 million of highly concessional loans and grants over 30 months, ending on 30 June 2004. ADB also acted as the lead agency for a comprehensive needs assessments of the agriculture, transport, education, and environment sectors.

ADB worked closely with the Government to develop a country-owned and country-driven approach to post-conflict assistance. The Government’s strategic thrusts for reconstruction include (i) promoting security and human development, (ii) rebuilding physical infrastructure, and (iii) enabling the creation of a viable private sector as the engine for sustainable and inclusive economic growth. These elements fed into Afghanistan’s initial Country Strategy and Program (CSP), which emphasized helping the Government with its rehabilitation and reconstruction efforts to support a seamless transition from humanitarian relief to reconstruction and development assistance. The CSP included short-term, highimpact projects, including grant-financed pilot projects in key sectors, and medium-term policy and institutional reform measures through capacity-building technical assistance (TA) and program lending. After endorsement by ADB’s Board of Directors on 28 May 2002, the CSP provided the basis for the approval of a $187-million emergency assistance package.

After the United Kingdom’s Department for International Development (DFID) provided grant funds of nearly $18 million to clear Afghanistan’s arrears with ADB, ADB resumed operations. In 2002 ADB approved a $150 million loan for the Post-conflict Multisector Program, the first loan to Afghanistan by an international financial institution since 1979. Two TAs totaling $15.1 million and three grants totaling $22 million were approved in 2002.

ADB completed its CSP update for Afghanistan in April 2002. In 2003–2005, ADB will establish an appropriate mix of modalities of assistance, taking into account the evolving situation in Afghanistan and the Government’s desire to balance project and program assistance. Drawing on the Government’s plans and priorities, ADB expects to meet requirements of $600 million in concessional assistance and $58 million in grant assistance over the period. Detailed programming is being worked out in close consultation with the Government.

Source: ADB. 2002. Annual Report. Special Theme. Rehabilitation and Reconstruction. ADB’s Role in Afghanistan and the Region. Manila.

57. Regional cooperation can help reestablish normal economic processes after conflict has occurred. For example, when the GMS was established as a subregion in ADB in 1992, relations between the six participating countries were strained due to war and related conflict. Trade and other forms of economic activity were limited, despite the clear and strong rationale for subregional cooperation. Among the highly visible benefits of GMS operations have been investments in 10 critical physical infrastructure projects. Less visible, but equally important, have been wide-ranging yet carefully negotiated institutional mechanisms for cooperation (Box 4).

Box 4: Asian Development Bank Activity in the Greater Mekong Subregion

The Greater Mekong Subregion (GMS) Program, supported by the Asian Development Bank (ADB) and other external funding agencies, is activity driven and results oriented and covers "hard" and "soft" aspects of cooperation. High-priority subregional projects have involved transport, energy, telecommunications, the environment, human resource development, tourism, trade, and private sector investment. The GMS Program is based on continuing consultation and dialogue among member countries at ministerial and operational levels. Major subregional agreements have facilitated transborder movements of goods and people and have developed energy interconnection and trade.

ADB has financed 15 projects in the GMS. Priority infrastructure projects worth $2 billion have either been completed or are being implemented. They include upgrading the Phnom Penh (Cambodia)-Ho Chi Minh City (Viet Nam) highway and the east-west corridor connecting northeastern Thailand, Lao People’s Democratic Republic, and central Viet Nam. GMS governments have provided approximately $1 billion for these regional investments, while ADB has extended loans amounting to $887 million and has helped mobilize $300 million in cofinancing. A total of $57 million in grant resources has supported joint initiatives focusing on human resource development, tourism, the environment, trade, and investment. In addition, a total of $65 million in TA has been provided by ADB ($42 million), cofinanciers ($15 million), and GMS governments ($8 million).

An important achievement of the GMS Program has been the remarkable groundswell of good will among member countries that had led to increased trust, better international relations, and stability in the subregion. Given that five of the six countries belong to ASEAN, the GMS Program is also helping reduce the development gap between old and new ASEAN members.

Source: ADB GMS Unit.

58. ADB’s recent experience with the fight against severe acute respiratory syndrome (SARS) reinforces the importance of regional cooperation,²⁷ as acknowledged at ASEAN’s special meeting on SARS held in Bangkok in April 2003. At the meeting regional leaders agreed to improve regional and international exchanges of information and experience to define and improve countermeasures against the epidemic.

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