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Annual Report 2003 : Moving the Poverty Reduction Agenda Forward: Priorities and Outcomes

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Strategic Priorities

ADB’s strategic priorities are defined in the Poverty Reduction Strategy and the LTSF which sets out the agenda and the broad implementation strategy to realize its vision of an Asia and Pacific region free of poverty¹. The key strategic priorities are (i) sustained, pro-poor economic growth; (ii) inclusive social development; and (iii) good governance. The LTSF also ensures country ownership, partnerships with key stakeholders, and use of new assistance modalities. The Framework is being implemented through three sets of 5-year medium-term strategies (see http:// www.adb.org/Documents/Policies/MTS/2001/). The current medium-term strategy stresses the importance of attaining the MDGs, of enhancing development effectiveness, and of ensuring that ADB’s interventions are focused at the country level.

ADB is committed to working in close partnership with other key development agencies, including the United Nations Development Programme (UNDP), United Nations Economic and Social Commission for Asia and the Pacific, and the World Bank, to support DMCs to achieve the MDGs. ADB’s work is guided by the provision of the Millennium Development Compact that identifies a core role for the regional development banks in financing regional public goods and in encouraging regional integration and cooperation. In addition to these areas, ADB is also a major contributor to key investment areas identified by UNDP as vital for achieving the MDGs, including (i) human development, (ii) increased productivity on small farms, (iii) investment in basic infrastructure, (iv) promotion of small and medium enterprises (SMEs) and entrepreneurship, (v) good governance, and (vi) promotion of environmental sustainability and urban management. In addition, ADB continues to place high priority on capacity building in DMCs to allow for improved data collection and implementation of activities and provision of services for achieving the MDGs.

Recognizing the diversity of impediments to poverty reduction in individual countries, ADB ensures its support is fully compatible with national policies and strategies. Where such policies are inadequate, ADB supports their improvement. This includes formulating national poverty reduction strategies in close partnership with other development agencies. To date, ADB has supported poverty reduction strategies in over 20 DMCs and has identified several areas for improved impact, including (i) greater focus on the nonincome dimensions of poverty; (ii) further stress on participatory approaches; (iii) capacity building for poverty monitoring, strategy development, and implementation; and (iv) development of a comprehensive poverty monitoring framework to measure achievements in poverty reduction.

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Sustained, Pro-Poor Economic Growth

Critical links exist among economic growth, employment, and poverty reduction. ADB supports sustainable, inclusive, pro-poor economic growth that fully integrates the environmental and social considerations of each country. Strategic areas of focus are the following.

Creating the Conditions for Growth

In coordination with the International Monetary Fund, the World Bank, and other development partners, ADB emphasizes achieving and maintaining macroeconomic stability, improving fiscal management, and aiding financial sector restructuring. ADB is also working with its DMCs to develop institutional and regulatory frameworks conducive to private sector development.

Investing for Economic Growth

ADB places high priority on investing in physical and technological infrastructure, especially to boost the effective functioning of product and labor markets essential for propoor economic growth. Developing human capital is also a key area of operations.

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Holistic Approach to Promoting Employment

This is based on (i) macroeconomic stability and faster economic growth; (ii) assistance to employers, including SMEs; (iii) support for effective functioning of labor and other markets; and (iv) labor force development through education and training. ADB promotes the use of core labor standards, especially those that ensure the protection of poor and vulnerable groups.

Inclusive Social Development

ADB is a main proponent of equitable social development and a major source of support for such critical areas as education and training, health, water and sanitation, housing, and—more recently—social protection. Inclusive development means that no one is excluded, that no group is left behind.

A core feature of ADB’s social development activities is mainstreaming gender initiatives both through stand-alone interventions and through integration into lending and technical assistance operations. Emerging gender problems such as the trafficking of women and girls are especially emphasized. Where ADB lacks the experience to tackle such issues, it partners with specialized agencies. ADB is also working to eliminate barriers that women face in finding employment, including access to credit, availability of day-care services, and adherence to labor standards.

ADB supports formulating social policies that focus on pro-poor approaches, that involve the private sector and civil society, and that are fiscally viable.

With an appropriate policy environment in place, ADB focuses on developing sustainable social services for the poor by investing in physical infrastructure and equipment, institution and capacity building, and optimizing the design of social service programs.

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Social Protection

ADB’s Social Protection Strategy (see http://www.adb.org/SocialProtection/strat.asp) addresses labor markets, social insurance, social assistance schemes to protect communities, and child protection. The Social Protection Network has taken the lead in recruiting and deploying specialists, issuing guidelines, and engaging in dialogues with partners such as nongovernment organizations (NGOs), labor unions, and the International Labour Organization.

Since the approval of the Strategy in 2001, both awareness and practical application of labor standards have gradually increased among ADB staff. ADB’s core labor standards initiatives are implemented within the context of the Strategy. Main areas of work include development of a handbook on core labor standards, guidelines for the design of risk and vulnerability profiles, and tools for integrating core labor standards into procurement.

Street children fall under core labor standards as child labor. In 2003, an important study on street children was finalized² as was a practical guide for ADB staff and others³. Two roundtable discussions with NGOs working with street children were held. The Street Children’s Art Competition produced the publication If I Had the Chance...⁴

Regional technical assistance on disability issues was completed in 2003. Two publications—The Disability Handbook and The Disability Manual—are in process.

Indigenous Peoples

ADB continued to strengthen the implementation of its 1998 Policy on Indigenous Peoples (see http:// www.adb.org/Documents/Policies/ Indigenous_Peoples/). Twenty-one (30%) of the 68 public and private sector projects reviewed triggered policy safeguards; five public sector projects were found to have significant impact and required the preparation of an Indigenous Peoples Development Framework. In addition, 15 public sector and 1 private sector project were found to have limited impact requiring specific actions or provisions in the loan agreement.

A review mission of one project found that identifying the affected indigenous peoples and applying ADB’s definition in the context of a country’s indigenous peoples policy is a problem. This can be addressed if the project can identify the indigenous peoples’ local context and address their specific concerns.

In 2003, ADB participated in regional and global discussions on safeguarding the interests of indigenous peoples and disseminated the results of the capacity building project (see http://www.adb.org/Documents/Reports/Indigenous_Peoples/). ADB conducted an NGO roundtable discussion on indigenous issues; took part in the UNDP’s Regional Initiative to Strengthen Policy Dialogue on Indigenous, Highland, and Tribal Peoples’ Rights and Development; and participated in the Conference on Human Rights, Ethnic Minorities, and Religions. Progress was made in harmonizing ADB’s indigenous peoples policy with that of the World Bank. ADB’s indigenous peoples web page was launched in November 2003 (see http://www.adb.org/IndigenousPeoples). ADB also provided orientation on the indigenous peoples policy to headquarters and resident mission staff and to government officials.

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Involuntary Resettlement

ADB reviewed compliance of projects approved in 2003 to its 1995 Policy on Involuntary Resettlement (see http://www.adb.org/Documents/Policies/Involuntary_ Resettlement). The review encouraged early screening of projects to assess and manage risks and to set standards for resettlement planning and implementation. Thirty-seven (54%) of the 68 projects and equity investments approved had involuntary resettlement impacts and required resettlement plans and/or resettlement frameworks. Of those, 18 had significant impacts, and 10 had less significant impacts. Nine projects required resettlement frameworks. Revised guidelines on involuntary resettlement were included in the Operations Manual. Briefing sessions for ADB staff were initiated to familiarize them with involuntary resettlement safeguards (see http://www.adb.org/Documents/Manuals/Operations/OMF02_29oct03.pdf).

ADB assisted DMCs in developing and implementing national resettlement policies and helped build the capacity of executing agencies in implementing social safeguards and resettlement management. ADB held training workshops for its staff and representatives of executing agencies in Bhutan, Cambodia, People’s Republic of China (PRC), and Viet Nam. ADB also implemented country-specific technical assistance to enhance national resettlement policy standards in the Lao People’s Democratic Republic (Lao PDR), Sri Lanka, and Viet Nam (see http:// www.adb.org/resettlement/activities.asp) and expanded its web site on resettlement (see http://www.adb.org/resettlement).

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Participatory Development

Participatory development activities included production of a compendium of exemplary case studies of ADB project and programming activities that illustrates the importance of experience-based capacity building and stresses the necessary balance among a supportive institutional context, a learning environment, and participatory tools.

Training workshops were offered in participatory rural appraisal/ participatory learning and action and in participatory monitoring and evaluation.

Good Governance

ADB recognizes that good governance is an essential condition for poverty reduction. Without effective governance institutions, structures, and services, a country cannot progress and equitable development for its people cannot be achieved. The Governance Agenda and Action Plan for 2000–2004 committed ADB to the following: (i) taking a lead role in promoting good governance in the region; (ii) elevating governance issues to the top of the development agenda; (iii) building consensus on regional benchmarks, codes of conduct, and indicators of good governance; and (iv) enhancing the quality of governance in DMCs. These objectives are monitored and reported on at regular intervals. Advocacy also includes policies and strategies on procurement, participation of civil society, anticorruption, anti-money laundering, and counterterrorism. Furthermore, ADB sponsored regional seminars and training workshops to highlight governance and continued to work with the Organisation for Economic Cooperation and Development on developing an anticorruption action plan for Asia and the Pacific.

ADB's strength in promoting good governance stems from its status as a trusted partner of its DMCs and its emphasis on extensive analysis, consultation, and policy dialogue. Since the adoption of the governance policy in 1995 (see http:// www.adb.org/Documents/Policies/ Governance/), the principal focus has been on policy and institutional reform and development. ADB's support is grounded on the needs assessments conducted under country governance assessments and on other such studies. Special attention is given to incorporating governance in regional and country strategies and programs and their updates.

ADB continued to support DMC efforts to develop public services that impact positively on economic growth and social development. Key issues addressed included law and policy reform, public sector management and accountability, private sector development, legal and judicial systems, civil society participation, and corruption. Innovations in governance activities were emphasized including pilot testing new approaches under facilities such as the Governance Cooperation Fund established in 2002 with Canada and Norway providing initial contributions. As part of ADB’s greater focus on measuring results, it explored the potential for results-based management in DMCs.

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Public Sector Governance, Transparency, and Investment

In recent years, particularly since the Asian financial crisis in 1997, ADB has focused increasingly on the importance of good public sector governance for creating a sound investment environment to accelerate country development and to ensure good governance practices within enterprises. In the Governance Agenda and Action Plan, one of the main themes is supporting developing country governments to strengthen the enabling environment for investment.

To attract investments, ADB has helped countries improve the quality of legislation and economic regulation. The formulation of legal and regulatory frameworks encourages investor confidence through improved standards of treatment of both domestic and foreign investment interests. Judicial reform projects in the PRC and Pakistan are making these countries’ judicial systems more predictable and reliable.

ADB has helped DMCs improve regulatory frameworks, particularly in energy, banking, capital markets, bankruptcy, and liquidation. For example, ADB-financed capital market program loans to Bangladesh, India, Pakistan, and Philippines resulted in legal reforms to strengthen the oversight and enforcement capabilities of securities and stock exchange regulators. In Azerbaijan and Uzbekistan, ADB provided assistance by developing an effective framework for promoting and strengthening agencies that regulate competition. ADB helped the Sri Lankan power sector to establish independent regulation and a tariff-setting mechanism, to introduce competition and commercialization by changing management practices, and to encourage private sector participation in the sector by developing a transparent business environment.

In some cases, ADB has offered limited financial and fiscal incentives to help countries induce investment in less desirable locations and to overcome transaction costs. ADB helped promote investments through fiscal incentive reforms such as the duty suspension schemes in the Fiji Islands and Samoa. In the Maldives, ADB assistance contributed to establishing a Pacific investment capital fund in collaboration with the World Bank.

The quality of customs administration is an important consideration for potential investors; poor administration is a deterrent since uncertainty and unpredictability make investment decisions difficult and increase the cost of transactions. To secure transparent, stable, simple, and predictable conditions for domestic and longterm, cross-border investment, particularly foreign direct investment, comprehensive reforms are often needed, including training, legislation, and computerization for customs administration. ADB held workshops in Central Asia to help the Kyrgyz Republic and Tajikistan attract foreign investment, improve institutional capability, and strengthen the legal and regulatory framework in line with international standards and conventions. This region is keen on fostering economic alliances in infrastructure, trade, and investment.

In Bangladesh and the Federated States of Micronesia, ADB support helped formulate privatization strategies and initiate effective, smooth, and transparent stateowned enterprise-related reforms. In Indonesia, Pakistan, and Samoa, ADB helped facilitate corporate restructuring and privatization of state-owned enterprises. Privatization of telecommunication services was supported in Thailand.

Promoting Good Corporate Governance

ADB actively pursues and encourages good corporate governance in all aspects of its business endeavors within DMCs. ADB works in countries like Mongolia in public sector reform to upgrade the capacity of shareholders, boards directors, and boards of supervisors in state enterprises to be privatized. At the level of creditor and investor, ADB works closely with regulators, state-owned enterprises and private businesses to emphasize and help implement good governance practices.

Assistance was provided to Mongolia in legal and procedural aspects related to restructuring and recapitalization of insolvent banks. ADB also provided technical assistance in promoting efficient insolvency regimes, particularly with respect to cross-border insolvency. Technical assistance to Indonesia, Philippines, and Thailand aimed specifically to facilitate the exchange of ideas between courts in handling cross-border insolvency cases. ADB was active in developing insolvency procedures to deal with state-owned enterprise reorganization and liquidation in the PRC, establishing a new regulatory framework for secured transactions in Indonesia, and introducing a collateral security registration system in Viet Nam. ADB was also active in improving the regulatory systems affecting the environment. (For more on institutional reforms, see the theme chapter that starts on page 12.)

Governance Policy on Money Laundering and Antiterrorism Financing

A policy was approved in April 2003 enabling ADB to increase its assistance to DMCs to fight the financing of terrorism and to encourage anti-money laundering initiatives (see http://www.adb.org/Documents/Policies/ADB_Money_Laundering_Terrorism/money100.asp). It further provided the umbrella framework for improving ADB’s cooperation and coordination with other organizations engaged in these areas. The policy has also enabled ADB to strengthen its internal system to protect its own funds from misuse.

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