Asian Development Bank

Having made this point, I want to, first, talk about the Asian Development Bank, and then later, about some wider issues. At the broadest level, one of ADB’s key goals is to tackle poverty in the Asia-Pacific region. ADB’s President Chino, has given great emphasis to this goal. Traditionally, ADB has approached the task of tackling poverty using mechanisms such as support for good economic policies and for individual projects in developing countries. However, like many other international agencies, in recent years we have been urged to pay more attention to newer, non-traditional issues such as governance. In response, using the limited resources that we have -- and stretching them a bit further -- we have been giving more attention to governance issues. In discussing these governance programs supported by ADB I can provide you extensive lists of activities in individual countries which may, perhaps, sound rather impressive. But the truth of the matter is that if you look at the amount of money that we have been able to spend, then the impact has sometimes been less impressive because the resource constraints are very real indeed.

Nevertheless, it may be useful if I sketch out a few general details of ADB's work in the governance area. (Additional details are available at the following ADB website: http://www.adb.org/Governance/default.asp.*) Like other institutions, we focus on some main principles. The current emphasis gives special attention to the four areas of (1) accountability, (2) participation, (3) predictability, and (4) transparency.

In developing our programs under these four headings we have tried to be practical. In operational activities, therefore, we have focused on seven types of work. (Additional information is at http://www.adb.org/Governance/gov_practices.asp*). These are:

• public administration,
• public financial management,
• sub-national and local governance,
• corporate regulatory frameworks,
• legal and justice reform,
• participation of civil society, and anticorruption programs.

Let me say a few words about each of these types of work.

Public administration and financial management

As I say, in implementing these programs we try to take a realistic and practical approach. We are aware, for example, that the resources available to support good in developing countries are often stretched. Pubic servants are often grossly underpaid and the facilities available to help them carry out their duties are often very poor. Often public officials don’t have access to the kinds of excellent facilities that we take for granted in rich countries. In addition, we have focused on public financial management in an effort to improve the financial mechanisms of governments.

Sub-national and local governance

We have also been very aware in recent years of the importance of sub-national and local governance. Looking across the Asian region it is very clear that there has been a significant trend in many countries towards decentralization. Perhaps the most dramatic recent example of decentralization has been in Indonesia but in there are similar developments in other countries as well. As an example, the ADB Institute here in Tokyo is supporting a major study on decentralization in Philippines. These changes can impose considerable strains on the process of government. In Indonesia, recent reforms have introduced large changes into government arrangements at both the central and regional level. I doubt that many of the people in rich countries who are so willing to be critical of countries like Indonesia appreciate the scope of reforms that many developing countries are grappling with.

Corporate regulatory frameworks

Both the Asian Development Bank in Manila and the ADB Institute here in Tokyo have done considerable work on corporate regulatory frameworks. Across the international donor community we have all been aware of problems with weak supervision of financial institutions in rich countries. Doubtless we all remember the consequences of the collapse of Barings Bank in the mid 1990s. It is clear, then that good corporate governance of both financial and non-financial institutions is very important because the costs of failure can sometimes be very high.

Legal and justice reforms

Another area of attention in the governance agenda has been the need for legal and justice reforms. These days we hear a lot about the need to develop good legal systems in developing countries. It is, of course, very desirable to strengthen legal systems in poor countries. But -- and here I speak as an economist who has an eye on costs -- I should mention that one aspect of these legal reform discussions that surprises me is that one hears little about the likely financial costs of reform programs. Indeed, to listen to some commentators the costs involved are not a key issue at all. Some commentators talk as if reform of the legal system was a free good. But it is not. I would therefore like to see more discussion about the costs of reforming legal systems. I would like to see a more explicit recognition of the fact that we cannot have good legal systems in developing countries unless the resources are available. And bearing in mind what I said earlier about shortages of resources, I am obliged to conclude that in many developing countries legal systems are unfortunately going to remain very weak for decades to come. To believe in anything else -- to believe that we can improve and progress for free -- is wrong.

It is useful in this context to look at legal system costs in rich countries or in the international system. It is not unusual for just one major United Nations commission in a developing country, or one major Presidential inquiry in a rich country, to report total budgetary costs of around $10 million or $20 million -- or even $100 million -- over the course of an inquiry. The truth is that the full costs of legal systems in developing countries are likely to be extremely expensive. We therefore need to face up to the difficult implications of a situation where developing countries themselves do not have the financial resources to guarantee good law, and where donors are also unable to provide adequate resources because of the many competing calls on foreign aid budgets. In any case, one cannot hope to get much justice on a figure of $1 per person per month.

Participation and anticorruption programs

In addition to these areas of work on governance, ADB also has projects to strengthen participation of civil society and a range of specific anticorruption programs designed to help reduce and eliminate malpractice in government in official agencies across the region.