Annual Report 2006

ADB’s human resources management supported its reform agenda, particularly the aim of making the institution more results-focused. A dual career path was introduced to strengthen strategic leadership in key technical areas. ADB completed an enhanced separation program that responds to a shift in sector focus under the second medium-term strategy (2006–2008).

Knowledge management efforts were strengthened with an agreement to increase coordination among the four knowledge-focused departments and the mainstreaming of knowledge management into ADB’s operations.

Information technology (IT) systems were improved and IT security strengthened. A new IT product was launched to enhance knowledge sharing in ADB and with external partners: the C-Cube is designed to allow easier information sharing within communities of practice. Financial control mechanisms were strengthened.

Through seminars and workshops, ADB raised awareness of, and compliance with, its anticorruption policy and procedures.

More efficient procedures and processes increased workplace safety and security, improved administrative services, and led to substantial savings.

Human Resources

The human resources strategy is a key element of ADB’s reform agenda. The strategy aims to establish a merit-based human resources management system that supports ADB’s vision and objectives. It commits ADB to improving the effectiveness of its human capital, to introducing a new performance management and rewards system, and to improving leadership throughout ADB.

ADB improved the quality and timeliness of recruitment and selection by introducing several changes, including a two-panel structured interview process for external candidates, results-based job descriptions, and interview skills training. Further improvements to the recruitment and selection process will be implemented.

The shift in sector focus under the second medium-term strategy requires an adjustment in the staff skills mix. ADB completed an enhanced separation program, involving 32 professional and 85 local staff members. Furthermore, 30 positions were sequestered and strategically reallocated to operations departments and other priority areas. ADB prepared to launch a strategic recruitment initiative to fill the gaps in its talent and skills.

The second cycle of the new performance management system was implemented to continue the effort to promote a results-oriented work culture. Implementation proved to be managerially demanding. Revisions are under way to support a more merit-based culture.

ADB reviewed its learning and development program to identify better ways to meet its business needs. To enable its managerial leaders to take on more demanding roles, ADB provided learning and development support on managerial and leadership skills.

ADB has established a systematic talent management process for identifying potential leadership and managing their development. An assessment and development center will be established in 2007 to provide the foundation for the developmental growth of ADB’s potential managerial leaders.

A nonmanagerial dual career path was introduced to provide leadership in strategic technical areas and to respond to the need to professionally reward and retain ADB’s highly valued technical talent. Initiatives to support an inclusive environment were implemented.

During the first 2 years of the strategy’s implementation, ADB has carried out a significant number of activities to improve the effectiveness of its human capital and introduce a new performance management and rewards system. Strengthening of leadership and accountability throughout ADB to initiate and sustain the culture change is an ongoing process and challenge that will require more time. The implementation of most of the strategy’s action plans or initiatives will be completed or under progress by the end of 2007 as planned. ADB will continue to implement several ongoing initiatives beyond 2007 to achieve the strategy’s objectives.

Staffing

At the end of 2006, ADB’s staff totaled 2,405 from 54 of its 66 member countries: 5 members of Management, and 856 professional and 1,544 local staff members, of whom 465 or about 19.3% are in field offices. There were 2 appointments and 1 departure in Management, 70 appointments and 97 departures of professional staff members, while 122 local staff members joined ADB and 147 left. The share of women professional staff members has remained constant at 29%.

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Thirty positions were sequestered and strategically reallocated to operations departments and other priority areas. ADB prepared to launch a strategic recruitment initiative to fill the gaps in its talent and skills

Compensation

Consistent with ADB’s market-based compensation system, the Board approved a 4.4% increase in the salary budget for 2007 for professional staff, 3.5% of which will be used for performance-related salary increases and the balance for performance and team bonuses. The Board also approved a weighted average increase of 9.2% for national officers and administrative staff at headquarters for 2007. An overall weighted average increase of 13.8% for national officers and administrative staff in 25 field offices will be implemented in 2007.

The Board approved a new pension plan effective 1 October 2006 for staff hired from this date onward. The new plan is similar to the current one but provides fewer ADB-guaranteed benefits and more staff-directed contributions. The new scheme will have a lower pension accrual rate and will be noncontributory for staff participants, with an option to contribute to the discretionary benefit scheme to top up their staff retirement plan benefits.

Changes were made to the Group Medical Insurance Plan for pensioners. The reimbursement rate was reduced from 80% to 75%, and the stop-loss benefit was reintroduced but at slightly higher limits with no ADB subsidy. Cost-effective improvements to the plan were introduced, such as more advantageous reimbursement rates for generic drugs and the inclusion of phytomedicines, additional services for physiotherapy and ultrasound, and expansion of the vaccination program for staff and dependents at the ADB Medical Center.

Benefits administration was streamlined by introducing more self-service facilities—the certification request system, benefits self-service, staff loan system, and home country travel system—which allow easier online access by staff to their personal benefits information. The ADB alumni portal was expanded from an e-mail forwarding service for former ADB staff to an information portal for pensioners on their retirement and insurance benefits.

The Board approved a new pension plan effective 1 October 2006 for staff hired from this date onward

Internal Administrative Expenses

Internal administrative expenses totaled $299.4 million, with savings amounting to $13.5 million against the original budget of $312.9 million. Overall savings were primarily attributed to lower-than-expected staff-related costs because of lower staff years resulting from the implementation of enhanced separation program; and lower-than-anticipated relocation costs, business travel, and administrative expenses. About $1.4 million was transferred from the general contingency to the offices of the directors ($0.8 million) and the Operations Evaluation Department ($0.6 million) to meet increase in staff related costs.

For 2007, the net internal administrative expenses budget is $332.9 million. The increase over the 2006 budget reflects a price growth of 5.2% and a volume growth of 1.2%. An estimated $4.1 million is expected to be recoverable from administrating trust funds of multilateral and bilateral institutions.

A modest real budget growth in 2007 ensures adequate funding for high-priority work programs and initiatives, including aligning priorities with the second medium-term strategy through country partnership and regional cooperation strategies; strengthening support to portfolio management, including continued delegation of projects and country portfolio management to resident missions; ensuring quality at entry of new projects; supporting the increasing demand for private sector operations in ADB’s developing member countries; strengthening risk management, especially credit risk management; and improving ADB’s catalytic role through financing partnerships that mobilize resource commitments from cofinanciers to ADB’s developing member countries.

The 2007 budget also includes an annual capital budget of $3.7 million, mainly to fund cyclical capital expenditures for headquarters facilities and information technology equipment, and to meet the replacement and acquisition requirements of field offices.

Administrative Services

The strategic work program of the Office of Administrative Services focused on improving workplace safety and security and delivering responsive, high-quality administrative services across ADB.

The office continued its programs to improve and streamline business processes. A more efficient monitoring and control mechanism for mailing documents generated annual savings of about $300,000. ADB reduced the number of computer printers, standardized the use of toner, and enhanced copiers’ capability, leading to annual savings of $80,000. Outsourcing opportunities were identified, leading to further savings in staff resources. The continued implementation of the International Organization for Standardization (ISO) objectives and programs contributed to savings in electricity, water, and paper consumption, amounting to $117,000.

A modest real budget growth in 2007 ensures adequate funding for high-priority work programs and initiatives

Knowledge Management

In the second year of the implementation of the knowledge management framework, ADB continued to mainstream knowledge management into its operations while strengthening the coordination of the four departments that focus specifically on this issue.

In November 2006, ADB launched a knowledge management tool that enables staff to share and disseminate information gathered or needed in project or working groups. C-Cube can also be used for secure knowledge sharing with external stakeholders. The external community of practice for managing for development results used C-Cube technology to discuss with developing member country government officials issues related to managing for development results, good practices, and lessons learned. C-Cube allows users to chat and hold virtual conferences or meetings. Users can access files or documents from anywhere, anytime; hold online discussions; monitor the task performance of other group members; plan or schedule meetings; and search for information.

The four knowledge departments—Asian Development Bank Institute, Economics and Research Department, Office of Regional Economic Integration, and Regional and Sustainable Development Department—established arrangements to strengthen coordination among themselves to avoid duplication and improve synergies in their knowledge management work. The departments agreed to examine existing quality control processes and to jointly and regularly prepare major publications, preferably one publication a year. The first one—Infrastructure for Regional Cooperation in Asia—slated for completion in 2008, will be led by the Asian Development Bank Institute.

Four other ADB departments established knowledge management units, and all departments appointed knowledge management coordinators. These arrangements were designed to promote best practices and mainstream knowledge management into ADB’s operations.

To disseminate knowledge in developing member countries, ADB established five regional knowledge hubs in partnership with government and nongovernment development partners in key areas of operational relevance: clean energy at The Energy and Resources Institute (India); the 3Rs—reduce, reuse, recycle—at the Asian Institute of Technology (Thailand), with support from the United Nations Environment Programme Regional Resource Centre for Asia and the Pacific; public finance at the Center for Public Finance and Regional Economic Cooperation at the Asian Institute of Management (Philippines); climate change at Tsinghua University (People’s Republic of China); and public–private partnership in infrastructure at the Emerging Markets Forum (Singapore).

The e-Asia and Knowledge Partnership Fund, set up with a $20 million contribution from the Government of the Republic of Korea, will also support knowledge management in the Asia and Pacific region. The fund, administered by ADB, will, among other things, help developing member countries reduce the digital gap and share knowledge and experience.

Asian Development Bank Institute (ADBI). The mission of the Tokyo-based ADBI is to identify effective development strategies and improve the capacity of development agencies and organizations in ADB’s developing member countries. ADBI retained its focus on its four priority theme areas of poverty reduction, regional cooperation, governance, and private sector development, choosing infrastructure for regional cooperation as an area of specialization. ADBI responds to stakeholders’ requests for assistance in research, capacity building, and training.

Among the books the ADBI published were Poverty Strategies in Asia and Policies and Institutions for Advancing Regional Development: The Philippines in Comparative Asian Context. It also released studies on cross-border infrastructure, contract farming, market facilitation for the poor, and renminbi revaluation. Work on the private sector and governance included a study on comparative corporate governance in the banking sector.

ADBI actively collaborates with the World Bank, Inter-American Development Bank, UN agencies, and other international organizations and development partners on research and training (e.g., in conducting distance-blended learning courses). Its capacity-building and training program focused on strengthening policy implementation and management capacity for development programs under the four priority themes. ADBI conducted 20 training courses, trained more than 1,600 participants, produced 8 workshop reports, 68 CD-ROMs, and, for the first time, offered 3 distance learning courses.

ADBI was actively involved in strengthening the knowledge management framework with ADB’s knowledge departments. As part of knowledge management activities, about 90 independent expert reviews of development-oriented CD-ROMs have been posted on ADBI’s website. The website received international recognition with an honorable mention in the inaugural Web for Development awards.

Economics and Research Department. The department’s main role is to conduct policy research and disseminate the outputs, both in ADB and in the Asia and Pacific region. The department launched the Portal for Statistics Resources, a one-stop service on statistics available to all ADB staff. It also coordinated the international comparison program for the Asia and Pacific region. The program is a system for comparing GDP and its components, converted into a single currency using purchasing power parities, eliminating the shortcomings of using market exchange rates. Regular publications included the Asian Development Outlook and its update, with assessments of the economic outlook for the region as well as discussions of topical issues such as the impact on the region’s economies of rising oil and commodity prices, the effect of the end of quotas on Asia’s textile and clothing industries, and the challenges and opportunities created by free trade agreements.

Office of Regional Economic Integration. The office is ADB’s focal point for knowledge management related to regional cooperation and integration, a key priority under the second medium-term strategy. The office’s knowledge products helped promote regional policy dialogue on cooperation and integration. It published six working papers on regional economic integration as well as two issues each of its regular publications, the Asia Economic Monitor and the Asia Bond Monitor. The office disseminated information and analyses through its two websites: the Asia Regional Integration Center and AsiaBondsOnline. It helped build capacity in developing member countries through a series of seminars.

Regional and Sustainable Development Department. The department is responsible for knowledge management across ADB and coordination of regional public goods. It supports quality and efficiency in all ADB operations. It focuses on sector and thematic issues and has a strong operational orientation. The department’s knowledge management center coordinated the discussions of the four knowledge departments during 2006. As such, it helped reach agreement on closer cooperation between these departments, mainly by coordinating work programs and holding regular meetings of department heads.

ADB continued to mainstream knowledge management into its operations while strengthening the coordination of the four departments that focus on this issue

ADBI’s capacity-building and training program focused on strengthening policy implementation and management capacity for development programs under the four priority themes

Information Systems and Technology

The Office of Information Systems and Technology continued to streamline operations, respond to technology changes and user demands, and accelerate the implementation of the information systems and technology strategy capital expenditure program. The new Technology Division within the office introduced an enterprise architecture road map to guide technology decisions for the organization.

The Information Technology (IT) Committee approved 12 principles to align ADB’s IT goals with its overall operations. Financial control mechanisms were strengthened in line with the internationally recognized COBIT (control objectives for information and related technology) framework.

The implementation of IT rules and regulations received Management approval and formed the basis for high-level data and information security. Security simulations, penetration tests, and audit reviews performed on business systems and equipment substantiate the progressive and comprehensive strengthening of information and communications systems security. Intensified awareness of information security risks and password protection were communicated through road shows to further improve IT security throughout ADB.

In the area of knowledge management, key projects completed under information systems and technology strategy include a collaborative software solution for communities of practice and the initial release from the document repository system. The document repository is envisioned as the sole, common, easily accessible repository for key ADB documents. It features a search and retrieval facility as well as an enterprise-wide classification structure used to identify, track, and retrieve information. Four departments have started using the repository.

The office adopted a proactive relationship with its client departments to provide better and higher levels of service. A performance management system using the balanced scorecard was initiated to improve internal performance and accountability. Under the e-mail server upgrade project, users benefited from increased e-mail capacity, additional firewall protection, and printer optimization.

To ensure better alignment between business and IT, the office embarked on a business improvement program that is expected to eliminate redundancies in processes, data entry, and reporting. The engagement model introduced allows users to be directly involved with the development and execution of their IT needs.

Staff skills in new technologies and specialized areas such as COBIT, performance management scorecard, IT service, and project management were upgraded through extensive training programs.

Staff skills in new technologies were upgraded through extensive training programs

Audit and Integrity

The Office of the Auditor General, through its Financial, Administrative and Information Systems Division, conducted independent appraisals of ADB’s operations. These appraisals have helped strengthen internal controls and efficiencies in the financial, operational, and IT areas. Through its Integrity Division, the office addressed alleged incidents of corruption and fraud in ADB activities, conducted staff workshops, initiated a series of regional anticorruption seminars, and worked with national audit institutions of developing member countries in carrying out project procurement-related audits. These activities have helped increase staff’s as well as borrowers’ awareness and compliance with the anticorruption policy and procedures, and enhanced their capacity to detect and prevent fraud and corruption.

The Financial, Administrative and Information Systems Division completed 25 audits in 2006, including audits of internally managed investments, operations of a resident mission, technical assistance trust or grant funds, and several consultant contracts. IT reviews covered data security of ADB’s network environment, selected databases and operating systems, and disaster recovery testing of critical systems. The office also monitored the progress of outstanding recommendations and verified that corrective actions have been undertaken.

ADB barred 37 firms and 31 individuals in 2006 as a result of corruption investigations, making a total of 311 firms and individuals currently ineligible to participate in ADB-financed activities. The Integrity Division, which enforces ADB’s anticorruption policy, received 171 complaints during the year.

The Integrity Division also conducted five project procurement-related audits to reduce weaknesses that may allow fraud, corruption, or abuse in ADB-financed projects. Supreme audit institutions of borrower countries participated in some of these audits, reinforcing ADB’s ability to share this audit knowledge and support capacity development.

The Integrity Division further contributed to a Joint International Financial Institutions Anticorruption Task Force comprising seven multilateral development banks and international financial institutions. As a result, ADB approved harmonized definitions of fraud and corruption with those of the other international financial institutions and agreed on common principles and guidelines for investigation.

The Integrity Division’s 2006 Annual Report is at: www.adb.org/Documents/Reports/Anticorruption/OAGA-Annual-Report-2006.pdf.

ADB barred 37 firms and 31 individuals in 2006 as a result of corruption investigations, making a total of 311 firms and individuals currently ineligible to participate in ADB-financed activities