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ADF VIII Donor's Report: Fighting Poverty in Asia
Summary of Conclusions and Recommendations by ADF Donors
All ADF operations revolve around the overriding goal of poverty reduction. The IDGs
for the 21 st Century provide a long-term context for monitoring ADF’s contributions to reducing
regional and global poverty. Sustainable poverty reduction from ADF operations will be
dependent on the support for a development process in poor countries in Asia that: involves
systematic inclusion of the poor, women and other disadvantaged groups; gets demonstrable
results that generate sustainable development impacts; allocates scarce resources on the basis
of performance including performance on better governance; contributes to improving the
environment; and contributes to a more equitable society by removing barriers to greater
opportunities for the poor.
ADF Donors agreed on a series of specific recommendations to improve ADF’s
effectiveness. These are set out in the attached ADF VIII Donors’ Report and summarized
below.
COMMITMENT TO POVERTY REDUCTION
The International Development Goals (IDGs)
Donors recommend that ADB use the IDGs, including any Asian-specific IDGs
which could be prepared through ADB assistance, as the long-term strategic
benchmarks against which ADB plans operations and views performance in
DMCs. (para. 7 and Table 1)
Implementing ADB’s Poverty Reduction Strategy
Donors agreed that the primary responsibility for finding solutions to mass
poverty in Asia lies with developing countries themselves. However, success will
depend on the united efforts of government and civil society, and on strong
support from the international community, including ADF. For all stakeholders,
the strategies chosen to reduce poverty should be comprehensive enough to
address its many causes. Those strategies should empower the poor to take on
a greater role in the development process, in particular strengthening their
participation and influence in decision-making processes at all levels of
government and public administration. Donors recommended that ADB make
cross-cutting issues (gender, environment, core labor standards, and regional
cooperation) integral components of country strategies. (para. 52)
The three pillars (i.e., pro-poor sustainable economic growth, social
development, and good governance) of ADB’s Poverty Reduction Strategy are
mutually reinforcing. ADB’s commitment to pursue them and link them in the
poorer DMCs with the participation and support of DMC stakeholders will
ultimately determine the development effectiveness of ADF’s operations. Donors
recommended that ADB expand its financing on the social sectors by investing in
primary and secondary education, basic health, clean water, sanitation, and
basic social services. (para. 52) Donors recommended that ADB use its Poverty
Reduction Strategy to govern the planning, implementation and evaluation of all
ADF VIII-financed operations. (para. 29)
High-level forums will take place in various DMCs, including ADF borrowers, and
DMC governments will be expected to sign partnership agreements with ADB.
Appendix 4 provides an indicative implementation schedule of related activities.
Donors recommended that ADB follow this timetable in close cooperation with
other development partners. (para.57)
Donors recommended that ADB ensure that various methodological
improvements, as well as expanded statistical databases on poverty in the
Region be developed taking into account existing databases and other technical
assistance being provided by other development partners in individual DMCs.
(para.56)
Donors requested a report to be provided at the ADF VIII Mid-term review on
progress on implementation of ADB’s poverty reduction strategy in ADF
borrowers. (para.57)
OPERATIONAL PRIORITIES
Development Partnership
Donors recommended that ADB ensure that practical steps be taken, including
staff training, to put partnership principles into practice. (para.35)
Donors recommended that ADB incorporate the Comprehensive Development
Framework (CDF) principles into its strategic planning and integrate the analysis,
results and recommendations of the DMC’s poverty reduction strategy, and
where appropriate the technical analysis of other development partners, into the
design of ADB’s country strategy, and to use the CDF principles in promoting
development in the Region. ADB’s Partnership Agreements and country
strategies should be consistent with PRSP processes in DMCs.(paras.41 and
57)
Donors recommended ADB take the lead in strengthened donor coordination in
DMCs in situations where ADB has a comparative advantage to do so and when
requested by the Government, and to play an active role in donor coordination in
situations where it does not take the lead role. (para.33).
Donors recommended that ADB participate fully in the process of formulating
comprehensive national poverty reduction strategies in ADF borrowers through a
collaborative process led by the Government and involving all relevant
stakeholders. (para. 57) Donors also recommended full implementation of the
“Protocol on Collaboration Among MDBs/IMF on the Preparation of Poverty
Reduction Strategies in Low-Income Countries” (Appendix 3). (para.53)
Donors recommended full implementation of the 28 January 2000 joint
memorandum “ADB-World Bank Cooperation: Framework and Structure”
(Appendix 2). Donors noted that ADB will use this Framework as a starting point
to develop a memorandum of understanding with the World Bank and urged the
ADB to initiate appropriate actions. (para.53)
Donors recommended that ADB participate, as an observer, in future
concessional replenishments for the International Development Association (IDA)
and the African Development Fund (AfDF). (para.42)
Performance-based Allocation System for ADF Resources
Donors recommended that ADB prepare a policy on performance-based
allocation for ADF resources on the basis of ADB’s proposal (Appendix 5)
endorsed by Donors in the negotiations and submit it to the Board of Directors
before the end of 2000. Donors expect that the policy and associated staff
instructions and guidelines will begin to be implemented and tested in early 2001
followed by full implementation of the system for determining ADF VIII allocations
starting in year 2002. Donors called on ADB to make every effort to apply the
principles of the system in the 2001-2003 CAPs to be discussed by the Board in
October 2000, while recognizing that the system will be in a transition phase.
Performance-based allocation of ADF resources will apply to all ADF borrowers
on an annual basis. Donors recommended that the country allocations derived
from the performance-based allocation system be presented to the Board of
Directors for endorsement in a formal meeting of the Board. Donors also
requested that ADB report to Donors, at the time of the ADF VIII Midterm
Review, on the implementation of the performance-based allocation system in
2001 and 2002. (paras. 62 and 125)
Acknowledging the strong relationship between governance and economic
impact, Donors recommended that ADB systematically assess the quality of
governance for all DMCs and strengthen the linkage between the quality of
governance and ADF lending levels. Support to DMCs with poor governance
(which occurs when a borrower is not pursuing policies conducive to pro-poor
sustainable economic growth, social development and good governance) should
be scaled back to non-lending services, or stopped entirely if necessary. Support
to countries with weak governance (which occurs when a borrower has poor
policies but is making sustained efforts to improve them) should mainly target
strengthening of institutional capacity and basic human needs. (para. 60)
Donors reaffirmed that one of the distinguishing features of ADB’s Charter is the
directive to give special consideration to the needs of small countries. Donors
recommended that ADB’s performance-based allocation system should treat
small-island economies as a separate category and also recommended that a
specific amount could be set apart for them as a group, and this could be
allocated among them using the system being adopted for the main ADF
borrowers. (para. 61)
Because of the centrality of governance issues in sustainable development
efforts, Donors agreed that DMCs’ commitment to governance reforms and to
combat corruption should be recognized. Donors recommended that any new
ADB policy on a performance-based allocation system for ADF resources must
include governance as a central criterion of a performance rating to determine
future ADF lending to a DMC. (para. 66)
Governance
Donors underscored the importance of interrelationships between political and
economic issues in socio-economic development. They endorsed ADB taking
due account of the demonstrable and direct economic effects on development
from noneconomic factors. Donors consider that certain issues such as
democratization and respect for human rights, can also have important long-term
implications for the capacity of a country to initiate and sustain programs for
effective poverty reduction, economic adjustment and growth, and environmental
sustainability. They stressed that governance is a broad-based concept intended
to encompass all factors that impact on a country’s ability to assure sustained
economic and social development and reduce poverty and noted that these
factors should be addressed in a manner compatible with ADB’s Charter.
(para.26 and 64)
Donors noted that ADB’s role as a major development institution in the Region
meant that ADB will be required to enhance its efforts to maintain its key position
in the area of governance reforms focused on poverty reduction, and in leading
the fight against corruption. In this regard, Donors approved of ADB’s intention
that governance activities become increasingly focused on those areas that can
disproportionately benefit the poor in a demonstrable manner. Donors supported
the ambitious medium-term agenda and the Action Plan for ADB’s governance
activities (Appendix 6). Donors recommended full and timely implementation of
the Action Plan in ADF VIII. (paras. 67 and 70). Donors requested ADB to submit
the Action Plan for approval by the Board of Directors before the effectivity of
ADF VIII. (para. 124)
The Private Sector
Donors recommended full implementation in ADF VIII of ADB’s Private Sector
Development Strategy, approved by the Board in March 2000. Under the
strategy, ADB will use both its public and its private sector operations to help
create an enabling environment for the private sector, including the effective
establishment and implementation of the rule of law and international standards
for corporate governance, tackling problems that impede private sector growth in
the DMCs and the contribution of the private sector to poverty reduction. (para.
72)
Infectious Diseases and HIV/AIDS
Core Labor Standards (CLS)
Donors recommended that ADB address the promotion of CLS on two fronts.
First, ADB mainstream CLS considerations in planning its projects and programs.
Second, ADB continue to support direct investments in projects that will enable
ADB and its DMCs to address CLS issues in a more holistic manner. (para. 77)
Donors recommended that the framework and action plan for addressing CLS
issues in the design and implementation of ADB operations be completed as
soon as possible so that it will be applied in ADF VIII. (para. 78)
Donors recommended that ADB formalize its relationships with international
organizations that promote CLS. (para. 80)
Gender and Development
Donors recommended that in ADF VIII, ADB increase the number of loans
focusing directly on gender equality, and that gender equality considerations are
mainstreamed in loan operations. (para. 81)
Donors recommended that increased investments providing poor women with
access to education, health, income, and employment opportunities form the
basis of ADB interventions to address poverty reduction. (para. 82)
Donors were encouraged that the administrative arrangements for establishing
the external forum on gender have been completed and that the first meeting of
the forum would take place in the third quarter of 2000. To ensure effective
dialogue, Donors recommended that Management and senior staff also meet
with the gender forum members. (para. 84)
Donors recommended that further collaborative work and cofinanced regional
GAD initiatives be undertaken with regional organizations, other donors, and
NGOs. (para. 86)
Environment
Donors concluded that there is a strong link between the environment and
poverty. Environmental degradation, through amongst other things overfishing,
deforestation, erosion and excessive cultivation in marginal areas, reinforces
poverty by further eroding the livelihood possibilities for the poor. In such
circumstances, Donors also concluded that the need to improve the conditions
for women deserves special attention. Donors recommended that in ADF VIII
special attention be given to the environment-poverty nexus. (para. 87)
Donors recommended that ADB integrate environmental concerns and expertise
at each stage of the Poverty Reduction Strategy country-level process leading to
the Partnership Agreement between ADB and the DMC. (para. 91)
Donors recommended that ADB continue with the integration of environmental
expertise in the country programming cycle to ensure that country strategies fully
incorporate environmental concerns--both to avoid programs and projects
entering the pipeline which are unacceptable from an environmental perspective,
and to strengthen environmental assistance across sectors. (para. 91)
Donors recommended that the environment policy and revisions to the
environmental assessment guidelines be finalized in a timely manner so that they
may apply during the ADF VIII period. (para. 91)
Cooperation among Developing Member Countries
Donors recommended ADB examine how support for Regional cooperation could
be better organized, funded and implemented—within the Long-Term Strategic
Framework (LTSF)—as a more focused and core part of ADB operations in
DMCs taking into account ADB’s comparative advantages. (para. 97)
Donors recommended that ADB should consider development of a regional
operational strategy and allocate an appropriate amount of total lending in ADF
VIII for regional and subregional cooperation projects representing priority
investments in ADF borrowers and to report on this at the time of the ADF VIII
Mid-Term Review. (para. 97)
Donors recommended that ADB continue its support to the Greater Mekong
Subregion program, as well as preparations for a medium-term regional
assistance plan for Central Asia, including ADF borrowers. (para. 96)
Donors recommended that ADB continue to work with the South Asia Growth
Quadrangle towards the promotion and financing of specific cross-border
projects, or national projects with subregional implications. (para. 96)
Money Laundering
Donors recommended that ADB combat money laundering in poorer DMCs
through operations that develop and improve their regulatory framework and
supervisory systems for the financial sector, and the legal framework for
effectively dealing with the proceeds of drugs and similar crimes, as well as
through operations in the financial and corporate sectors that promote
transparency practices and good governance principles, including effective
internal controls. Donors requested ADB to prepare a policy paper on ADB’s role
in combating money laundering and to submit it to the Board of Directors for
approval. (paras. 98 and 125)
Drug Trafficking
Donors recommended that ADB take a strategic position on drug trafficking
related issues, adopting a multisectoral approach. Where relevant, drug
trafficking related issues should be covered in country strategies, and the Bank
should seek opportunities to support alternative development projects in those
key drug producing nations where it has lending programs. (para. 99)
CORPORATE GOVERNANCE AND INTERNAL SYSTEMS
ADB’s Internal Governance
Donors recommended that a Development Effectiveness Committee of the Board
be established. (paras. 100 and 127)
Donors specifically recommended that the Board of Directors should be more
closely involved in the process leading to the formulation of the CSP and that the
Board of Directors endorse the CSP at a formal meeting. (para. 127)
Donors recommended a strengthened and more independent Inspection
Function, and the Function should have oversight of private sector projects.
(para. 129)
Donors recommended that ADB’s Management work with the Board of Directors
on the implementation of the internal governance reforms that have been
identified and on any additional initiatives that may be warranted. Donors also
recommended that these initiatives be pursued forcefully and in full consultation
with the Board. (para. 128)
Improving Evaluation and the Linkage to Planning Operations
Operational Business Processes and Portfolio Management
Donors recommended that ADB continue to improve its procedures and practices
for project quality and portfolio management, identify key areas of weakness,
make specific recommendations to the Board, and undertake corrective
measures as a matter of priority. (para.103)
Donors emphasized that two key areas of operational importance are (i) the
revised country programming processes and (ii) the revised loan/TA preparation
processes, and noted, with approval, that ADB has commenced revision of the
relevant guidelines for staff and expect them to be finalized and distributed to
staff by 1 October 2000 followed by workshops in the last quarter of the year to
familiarize staff with the new procedures. These revisions should recognize the
planned implementation of an ADF performance-based allocation system and
governance action plan. Donors recommended that all relevant actions
(Appendix 8) be completed in a timely manner for application in ADF VIII. (para.
102)
Donors recommended that ADB review its system of internal financial controls,
identify key weaknesses, make recommendations to the Board, and undertake
corrective actions, as appropriate, as a matter of priority. (para. 104)
Strengthening Resident Missions
LENDING FINANCIAL MANAGEMENT, AND RESOURCE MOBILIZATION
Eligibility and Access to ADF VIII Resources
Donors reaffirmed the Board’s approval in December 1998 of a graduation policy
for the DMCs, and recommended continuation of eligibility as applied to ADF VII
for allocating resources in the planned ADF VIII period (2001–2004). A list of
planned borrowers of ADF VIII resources is provided in Appendix 10. Allocation
to these DMCs in the first year of ADF VIII will be based on initial implementation
of a formal performance-based allocation system, and in part on the existing
CAPs for 2001. Allocations to these DMCs in 2002-2004 will be based on the full
implementation of ADB’s performance-based allocation system for ADF
resources. (para. 108)
Donors endorsed ADB’s intention to assist reconstruction in East Timor through
ADF-financed operations, if and when East Timor becomes a member of ADB.
Donors noted that Azerbaijan may become eligible for ADF resources. (para.
109)
Given ADB’s overarching objective of poverty reduction and the large proportion
of Asia’s poor that live in India, Donors had a discussion on access to ADF VIII
resources by India. After extensive deliberation, a consensus on India’s access
could, however, not be reached. (para.110)
ADF Financial Management
Donors recommended to extend the existing planning systems in ADF for
managing risk, with one change, namely the conduct of operational planning in
Special Drawing Rights (SDRs) to alleviate commitment risk. Second, Donors
also recommended that ADB adopt the IDA practice and have no loan loss
provision for ADF loans. (paras.115 and 116). Donors recommended that their
contributions be encashed on the basis of a fixed schedule on an approximately
pro rata basis among Donors (Annex 2 of the ADF VIII Resolution). (para. 122)
Donors recommended that the issue of financing TA be considered in the Mid-term
review of ADF VIII. (para.123)
ADF VIII Replenishment and Burden Sharing
The ADF VII replenishment will cover the four-year period 1 January 2001 to 31
December 2004. Donors agreed to a replenishment size of $5.645 billion
consisting of a recommended $2.905 billion of new Donor contributions, and
$2.740 billion of commitment authority to be generated from existing resources.
(paras. 112 and 120) (Table 3)
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