Catalog

	Table of Contents
p. 2 of 26 BACK | NEXT I. Introduction II. Changes in Development Environment and Agenda III. Themes for Organizational Effectiveness IV. Objective and Principles of Organizational Change V. Analysis of Options VI. Main Features of Organizational Change VII. Complementary Changes VIII. Challenges and Responses IX. Budget Implications and Implementation Plan X. Conclusions XI. Recommendations

Reorganization of the Asian Development Bank

---

II. Changes in Development Environment and Agenda

5. ADB’s Charter requires it to “foster economic growth and cooperation in the region” and “to contribute to the acceleration of the process of economic development of the developing member countries in the region, collectively and individually.” The Charter states that “the operations of the Bank shall provide principally for the financing of specific projects…” In its initial years, ADB translated this mandate into the role of a project financing institution. This approach was based on the assumption that growth and development would result from the transfer of capital and technology to ADB’s developing member countries (DMCs). For 20 years, under this paradigm, ADB successfully implemented an extensive project finance program in its DMCs.

6. In the late 1970s, a major change in development paradigm focused on the importance of improving the overall policy and investment environment. This led to a broader view of ADB’s development mandate: promoting improvements to the policy environment, in addition to the provision of capital to DMCs. A new modality of program lending was developed to address policy reform. During this period (mid-1980s to mid-1990s), ADB acted both as project financier and promoter of policy reforms in DMCs.

7. In the 1990s, development thinking evolved further. At the same time, the dimensions of development grew in scale and complexity. DMC governments increasingly took the role of catalyzers and promoters of development, with a clear shift of focus to policy formulation and strengthening institutional frameworks. This changing role of government also required ADB to expand objectives and services to DMCs to focus on governance and institutional issues.

8. In the last two years, ADB has further reassessed the development needs of the Asia Pacific region. While much has been achieved by some DMCs, the region still houses the majority of the world’s poor and disadvantaged. The achievements of some Asian DMCs only highlight what has yet to be achieved in the rest. Confronted with this reality, combating poverty in the Asia and Pacific region has become ADB’s fundamental challenge. ADB has adopted poverty reduction as its overarching goal, and developed a comprehensive strategy to combat poverty in the region. Building on this strategy as well as other policy initiatives, ADB has recently adopted its LTSF, which commits ADB to supporting the International Development Goals. Recognizing the important role of the private sector in development, ADB has also adopted a wide-ranging private sector development strategy.⁷ The Medium-Term Strategy (MTS),⁸ which has been submitted to the Board, provides more detailed guidance on how ADB should work with its DMCs to achieve these goals. With this, the strategic reorientation process has been completed.

9. ADB always has been responsive to the changing needs of the environment, as articulated in the LTSF: “To remain an effective institution relevant to the changing needs of the region, ADB has continually been adapting its priorities, assistance modalities, and organizational structure, and has transformed itself from what was essentially a project financier to a full-fledged development institution.”⁹ On the organizational front, major changes have included

1. creating the Private Sector Division (1986);
2. restructuring the single country department into two departments: programs east and west (1987);
3. increasing regionalization into east and west groups (1987-1991);
4. establishing the Environment Division (1987-1989) and Social Dimensions Unit (1992);
5. establishing the Strategic Planning Unit (1991);
6. implementing a number of major changes in 1995:
   1. creating regional vice presidencies, each with one programs and two projects departments (east and west);
   2. establishing the Office of Pacific Operations (OPO);
   3. merging the Office of Environment and the Social Dimensions Unit into the Office of Environment and Social Development (OESD), reporting to the President;
   4. merging the Development Policy Office and Strategic Planning Unit to create the Strategy and Policy Office, (now Strategy and Policy Department [SPD]); and
   5. upgrading the Cofinancing Division into the Office of Cofinancing Operations; and
7. strengthening resident missions (RMs) under a new policy (2000).

10. With ADB’s strategic reorientation, the next step is to review the organization’s ability to deliver the new agenda. In addition, three other “triggers” call for institutional change:

1. ADB’s clients and shareholders expect greater responsiveness to their concerns in an increasingly dynamic development environment. ADB’s structure and processes should change to meet these expectations.

2. Other multilateral and bilateral development partners look to ADB for evolving and stronger partnerships. ADB’s structure and organization should be fully capable of effectively engaging these partners in development.

3. Internal reviews, surveys, and discussions with staff indicate the need for change. There is growing feeling that the current organizational systems result in unnecessary internal transaction costs and create avoidable impediments and stress for staff.

11. In response to these imperatives for change, ADB has already started to address organizational issues with the redesign of operational business processes and the RM Policy. These changes must now be carried forward in a more comprehensive way.

____________________

Back I. Introduction	Next III. Themes for Organizational Effectiveness