Catalog

	Table of Contents
p. 20 of 32 BACK | NEXT I. Introduction II. Assessment of Past Performance III. Rationale and Role IV. Operational Strategy V. Operational Improvements A. Single Project Exposure Limit B. Providing for Smaller Interventions C. Conflicts of Interest D. Screening of Projects E. Streamlining of Business Processes F. Strengthened Risk Management G. Strengthened Management of Nonperforming Investments H. Private Sector Operations at Resident Missions I. Enhancing Technical Assistance for Private Sector Operations J. Active Outreach Marketing K. Establishment of a Financial Reporting System VI. Resource Requirements VII. Conclusions and Recommendations

Private Sector Operations: Strategic Directions and Review : V. Operational Improvements

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C. Conflicts of Interest

81. A core strength of ADB’s approach to PSD emerges from its ability to deliver both public sector and private sector assistance. The increased focus on synergistic and cooperative efforts may result in increased potential for conflicts of interest, Such conflicts could arise, for example, where ADB, through a public sector department, is advising a DMC government in relation to the reform or restructuring of a sector and, at the same time, ADB, through PSG, has or is considering a private sector investment in the same sector. In this situation, the objectivity of ADB’s policy advice may be adversely affected or perceived to be adversely affected because ADB has a direct financial stake, through the private sector investment, in the outcome of the advice to the government. While this type of conflict of interest has almost always been regarded as more theoretical than real, the PSD Strategy recognizes the importance of managing conflicts of interest.⁵⁷

82. The risk of conflict of interest materializing in ADB is minimized because the public and the private sector activities are conducted by separate units. This strict separation within the organizational structure ensures separate handling of confidential information from clients and the professional management of conflict of interest issues.

83. In addition, disclosure of potential conflicts of interest will reduce the likelihood of such conflicts coming to a head. Detailed and open disclosure among all stakeholders—concerned ADB departments, host government, project sponsors, consultants, and other financiers—of the different interests represented in a situation will minimize actual conflicts. The new emphasis on public-private partnerships and ADB’s comprehensive approach to PSD will generate greater disclosure and discussion of likely private sector investments, and such investments may be designed as an integral or complementary part of the policy dialogue from the outset, though carried out as a part of PSO.

84. The potential for conflicts of interest is a reality that must be recognized as a necessary incident of ADB’s public and private sector operations. Such conflicts exist in EBRD, IADB, and the World Bank Group, and each has developed, within the existing organizational hierarchy, mechanisms to deal with conflicts that do not deter close collaboration to achieve synergy between the public and the private sector staff. A positive approach to dealing with conflict of interest issues will help defuse potential problems. The approach includes education of staff, especially those involved in policy advice, on conflicts of interest issues. A set of staff instructions will also be helpful to guide resolution of any such conflicts. These guidelines will be prepared and subsequently refined as lessons are learned from ADB’s experience and are drawn from the experience of other development partners.

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