ADB Says Legal and Institutional Reform Essential for Inclusive Development

MANILA, PHILIPPINES (4 May 2004) - ADB, in its Annual Report 2003, stresses the need for developing countries to strengthen law and institutional reforms to achieve inclusive development that will benefit the poor and other disadvantaged groups.

In the Report's special theme chapter on "Law and Institutional Reform: Catalysts for Inclusive Development in the Asia and Pacific Region," ADB says the benefits of prosperity must improve the lives of all. Inclusive development means allowing the poor, indigenous peoples, and other vulnerable groups to participate and share in the benefits of development. This is in line with ADB's overarching goal of reducing poverty in the Asia and Pacific region.

Of 62 public sector loans approved in 2003, a total of 39 projects amounting to $3 billion or 51% of total public sector lending were aimed at poverty reduction, according to the Annual Report. Ten were for core poverty intervention projects and 29 were for poverty intervention projects. In addition, grants from the Japan Fund for Poverty Reduction totaling $35.3 million were approved for nine projects. Also in 2003, ADB signed partnership agreements to reduce poverty with the People's Republic of China, Kazakhstan, Kiribati, Samoa, Solomon Islands, Timor-Leste, Tuvalu, and Vanuatu.

"Legal and institutional reforms must provide new channels through which those who have been historically left behind can overcome their individual and common predicament," says ADB. "To make economic growth the most effective and enduring engine for inclusive development, excluded groups must fully participate in and meaningfully benefit from it."

Expanded educational opportunities and social protection such as minimum wage, old age pensions, disability insurance, and adequate health services were also identified as measures, which will "help make graduation from poverty a sustained achievement."

With the help of ADB, developing member countries in Asia and the Pacific are preparing their own course of action to achieve economic growth and inclusive development, and ADB encourages countries to share experiences with one another through its programs on regional cooperation.

ADB says most countries, however, have taken legal and institutional reforms as a reaction to crises as was seen during the 1997 Asian financial crisis. ADB asks countries to take the initiative instead. "Country after country in the region has adapted institutional and legal frameworks in the face of crises, but the cost of crisis-led reform is often high. The region's prospects will be improved if reforms anticipate demands and pave the way for changes."

States face the challenges of strengthening governance and creating and sustaining robust public institutions in an increasingly competitive global environment. "Investments in good governance need to be an integral part of poverty reduction strategies," says ADB. Failure to do so, ADB warns, will "deter economic growth and will disable attempts to achieve inclusive development."

ADB has adopted policies to advance inclusive development such as the Poverty Reduction Strategy (1999), which provides a comprehensive framework for ADB's approach to inclusive development and explicitly states that poverty reduction is ADB's primary goal. Other policies include the Governance Policy (1995), Gender and Development Policy (1998), Policy on Indigenous Peoples (1998), Social Protection Strategy (2001), and Environment Policy (2002).

ADB has promoted inclusive development in many countries. To improve market functioning and access to resources for pro-poor economic growth, ADB has actively collaborated with the People's Republic of China in developing bankruptcy laws and regulations on antidumping, subsidy and countervailing duties and safeguards.

In the wake of the financial crisis, ADB provided assistance to improve financial governance to Indonesia, strengthen market regulation and supervision in Thailand, and reform the capital market and nonbank financial sectors in the Philippines. ADB also provided assistance to countries not directly affected by the crisis through institutional reforms in the financial and corporate sectors in Cambodia, Kyrgyz Republic, Lao People's Democratic Republic, Marshall Islands, and Pakistan.

To promote institutional reforms for good governance, ADB has supported an Access to Justice Project in Pakistan to pursue judicial, police, and administrative reforms; increase the efficiency of judicial and police services; and support greater equity and accessibility in justice services for the poor and the vulnerable. In the North West Frontier Province, the number of pending court cases has been reduced considerably as a result. The Project is removing barriers and encouraging women to enter the legal and judicial professions.

ADB has also worked to ensure better access and empowerment for disadvantaged groups such as projects to improve decentralized health services in Indonesia, a health sector development program in Papua New Guinea, and a health project in Cambodia. Addressing gender exclusion, ADB has mainstreamed gender into its operations since the 1980s. An example is a health care project in Bhutan where gender-sensitive policy reforms were suggested.

The importance of education has been one of ADB's primary areas of support to its DMCs. In a global economy where education, particularly higher education, is increasingly becoming the arbiter of competitive success, educational opportunities must be expanded at levels not tried before.

To support indigenous peoples, ethnic minorities, and bonded laborers, ADB's Greater Mekong Subregion Northern Economic Corridor project ensures that benefits of development reach ethnic groups there; the Sindh Rural Development project in Pakistan focuses on bonded laborers, promoting greater transparency for accounting of debts and payments, and civic education on the rights of tenants.

The Pacific developing member countries have also benefited from ADB assistance in microcredit, legal and institutional reform, diversification in production, and macroeconomic management. In 2003, ADB took a major step by preparing its first Regional Cooperation Strategy and Program for the Pacific.

For more information, see http://adb.org/documents/reports/annual_report/2003/. To order a free copy of the Annual Report 2003, send e-mail to adbpub@adb.org

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