news from ero june 2001

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On 14 March, the AsianDevelop-ment Bank (ADB) launched itsnew Long-Term Strategic Frame-

work (LTSF) to help the developing na-tions of Asia and the Pacific eradicateextreme poverty by 2015. The LTSF isembodied in a new document, “Movingthe Poverty Reduction Agenda Forwardin Asia and the Pacific,” that spells outADB’s plans and priorities.

The LTSF is a major reassessment ofADB’s goals and policies that two years agoresulted in the announcement that extremepoverty for one in four Asians was an unac-ceptable human condition, and that pov-erty reduction would be the overarchinggoal of all ADB activities. It sets out anagenda for carrying out the poverty reduc-tion strategy in the next 15 years.

To enhance its effectiveness and toremain relevant to the changing needs ofthe region, ADB has continually been adapt-ing its priorities, assistance modalities, andorganizational structure. ADB first reori-ented its operational priorities in the early

1980s. This was followed by a change inthe 1990s that resulted in more emphasison social infrastructure projects that targetedthe poor and projects to improve the envi-ronment.

The Asian and Pacific region has con-tinued to change in profound ways sinceADB formulated its earlier long-term strat-egy a decade ago. The context in whichADB will operate over the next decade orso will be dramatically different from that ofthe 1990s. The challenge of reducingdeeply entrenched poverty in the regionremains more daunting than ever, andrequires new approaches and commit-ments.

ADB has integrated its new long-termstrategy with the International Develop-ment Goals, seven broad benchmarks forreducing poverty worldwide by 2015 thatwere agreed upon at a series of UnitedNations-sponsored world conferences dur-ing the past decade. “ADB has chosen a 15-

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>eadline news do not encourageoptimism about East Asia. Imple-

menting reform measures is diffi-cult, particularly in the financial and corpo-rate sectors, and mounting concern overglobal slowdown clouds the quick economicrecovery that offered promise in late 1999and early 2000. However, significantchanges are unfolding—changes that im-pact on the institutional underpinnings ofeconomic management and social devel-opment. It is institutional building andthe capacity of a society to bring aboutinstitutional change that will determinewinners and losers in that part of theworld.

Institutions as rules. Douglas North,the Nobel Laureate, made clear that insti-tutions are the rules of the game in a society.They define, for example, a system of propertyrights; regulations that curb the worst formsof fraud and anticompetitive behavior; therule of law; and sociopolitical arrangementsthat mitigate risk and manage social conflicts.Characteristically, each rule performs adistinct function but its effectiveness hingeson being complemented and supplementedby others. Together, they form a hierarchicstructure of mutually supporting direc-tives that influence jointly and canimpact decisively the development ofnations.

At the top of this institutional hierarchyis a set of policies that marks out the work-ings of an economy in the short term. Nextcomes a set of regulations that should sup-port the functioning of markets, while legalcodes and other laws that define propertyand other rights would in turn underpin thisregulatory system. These should be foundedon transparent institutions such as the judi-ciary that would enforce the long-termsecurity of property rights and adjudicateclaims of right violations. And, all these lay-ers would be supported by base institutionsthat foster political participation and externalenforcement, and maintain civil and socialorder. This perspective of seeing institutionsin a hierarchic order (with respect to theirsocial and economic functions) offersimportant insights into the process of reformand restructuring now taking place inEast Asia.

Realigning institutions. First, arealignment of institutions, following thehierarchy outlined, is a significant feature of

a process of reforms. Changes in one set ofpolicies or institutions lead typically to the need to overhaul related institutions. This process can be observed in the series ofchanges taking place as the countriesaffected by the Asian crisis attempt to dealwith corporate debt restructuring. For ex-ample, the problems of corporate debt over-hang and insolvency have led to measuresfor financial liquidation and bankruptcy pro-ceedings that have also required changes inexisting laws and judiciary systems. Andnew rules on corporate governance arebeing developed to improve standards ofcorporate practice. Overall, the crisis hasaccentuated the importance of institutionalchange and underscoredt h e need formore. O n eim-

portant areaconcerns so-cial protectionsystems.

In the past, governmentsin the region relied heavily on growthto resolve social welfare questions. They in-vested in human capital but provided lim-ited formal social insurance. Still, the severesocial dislocations caused by the crisis testedthe limits of this approach. They generateddebate over the need to revise the implicitsocial contract between the state and societyto cushion more social groups from fu-ture shocks. The debate centered on newinstitutional responses for provision of so-cial insurance, reform of industrial relationsand labor market issues, education, decen-tralization, and persistent or structuralpoverty.

The time dimension of institu-tional change. Time lags between initiat-ing changes and achieving their ultimateimpact can be long. Governance reformscan be especially time-consuming becauseof vested interests. Changes at lower layers

of the institutional hierarchy will take longerto make themselves felt. Since variousinstitutions evolve at different speeds, con-flicts and contradictions among them willarise. Depending on the institutional circum-stances, some can be addressed smoothlywhile others cause major and sometimesviolent frictions.

Indonesia is perhaps the most pro-nounced example. But, paradoxically, thepolitical and social difficulties observed inthat country are part of the painful processof institutional reform. Despite the manyproblems it faces, post-crisis Indonesia ismore transparent than before and demandfor broad participation in policy making isincreasing. Indonesia needs to sustain itsincipient economic recovery and manageconflicts over changes. The scale of institu-tional change is massive and the process is

complex. A key challenge facing thecountries affected by the crisis is to

manage the institutional realignmentwhile minimizing the associated so-

cial costs.Strategies for institu-

tional change. Popular views—thatthe policy changes and reforms being

implemented in East Asia are exter-nally driven—reveal misguided per-

ceptions. Institutional change is part ofsocial and economic transformation. It takesplace as a process of evolution and adapta-tion, and it involves broad participation andconsensus building. No one set of institu-tional arrangements can be claimed as su-perior to the others in terms of overallperformance. Strategically, institutions needto be developed locally, based on localknowledge and hands-on experience andexperimentation. In the past, East Asiancountries have shown a remarkable capac-ity for adapting to and undertaking institu-tional change. The crisis is not and shouldnot lead to rejection of what made East Asiaa success and the institutional capacity thatwas built along the way. This capacity toinitiate and facilitate change needs to con-tinue—if only because transformations aretaking place regionally and globally.

Regional responses for institu-tional change. Since the crisis, countriesin the region devote more attention to theregional aspects of institutional building, anarea in which European countries have muchexperience. Besides the Association of

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Southeast Asian Nations and the Asia-PacificEconomic Cooperation (which were alreadyin place prior to the crisis), new regionalinitiatives are being pursued. These includethe creation of the Manila FrameworkGroup, the formation of the ASEAN regionalsurveillance process, and the Chiang MaiInitiative for an expanded regional currency-swap network. These intensified efforts atregional cooperation in East Asia reflectgrowing awareness of the need for jointinstitutional approaches to deal with issuesof common interest. In general, promotinggreater regional cooperation enables theparticipating countries to explore jointlyeconomic opportunities and gain fromcomplementarities. A regional approach isalso effective in tackling cross-border prob-lems arising from security conflicts, environ-mental issues, drug trafficking, andmigration. Addressing these issues at theregional level will help contribute to globalsecurity and prosperity.

Conclusion. The challenge of institu-tional change in East Asia is demanding.

Effective management of the changes willpay off because, in the end, institutionalcapacity to do so will decide whether a coun-try succeeds in bringing lasting prosperityto its people. The multilateral developmentbanks are important partners in this processof change. They need also to address a keyinternal institutional issue—how to balancethe role of development banker and that ofinstitutional development advisor.

This article is adapted from About Institutions,a speech that Geert van der Linden, Director, Pro-grams Department (East), Asian Development Bankdelivered at the IIA Chatham House Conference onEast Asia: Has Reform Revived the Miracle? held inLondon on 19-20 March 2001.�

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7he logical framework approach nei-ther guarantees a good project de-sign nor replaces other instruments

of project management. But it helps to:• Analyze the situation existing during project

preparation;• Set objectives;• Establish a logical hierarchy of means

by which objectives will be reached;• Identify clusters of project outputs;• Determine how accomplishments

might be monitored and evaluated;• Flag the assumptions on which a

project is based; and• Summarize a project in a standard

format.The logical framework also supports

creative analysis. It is a rare project thatunfolds exactly according to plan. Dur-ing project administration, one must payclose attention to the cause-and-effectrelationships between activities, outputs,and component objectives. Repeatedly,one must make certain that inputs foractivities are deployed successfully. Orone must adjust the means of attainingcomponent objectives, including the defi-nition of outputs, the mix of activities, andthe indicators derived to measure thenewly defined targets. Administration canbecome complex and it helps to havestructure.

Because of this, I deepened andextended the logical framework approachusing the template shown below. (It listshere only two targets per output). For eachcomponent, I examined methodicallywhether targets were being achieved, howthe activities were being implemented, andhow activities could be improved. I thenitemized individual action plans, which Imonitored constantly.

I found that systematic analysis of out-put accomplishment led to telling improve-ments in efficiency, effectiveness, andrelevance. It clarified materially the chainof causality in a project design. Our readersmay wish to try this approach, bearing inmind that a logical framework matrix is notset in concrete. Tell us what you think.�

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7he Asian Development Bank(ADB) is prepared to lend Indone-sia between US$600 million and

US$1.2 billion annually over the next threeyears, subject to the country’s improvedperformance in key areas of reform such asreducing poverty and improving gover-nance and macroeconomic stability. ADB’sactual level of assistance will depend onIndonesia’s performance, absorptive capac-ity, and financing needs: ADB stressed thatIndonesia will only qualify for assistance atthe higher end of the lending range after itmeets the following conditions:• Appropriate measures to improve mac-

roeconomic stability;• Progress in reducing poverty;• Resolution of difficulties of decentrali-

zation and creating real decision-mak-ing capability at local governmentlevel; and

• Improvement in implementation ofADB projects to ensure more efficientuse of lending resources.The lending level is part of ADB’s new

Country Operational Strategy for Indone-sia, which focuses on the crucial need forpolicy reforms and identifies five key areasthat will guide its assistance:• Helping to create and strengthen

institutions;• Promoting private sector development;• Improving regional equity through

stronger geographical focus on rural andless developed areas;

• Investing in human and social devel-opment, with better social protectionof vulnerable groups; and

• Strengthening environmental manage-ment.The new strategy builds on ADB’s

recently completed Poverty Assessment forIndonesia. This report stresses theimportance of sound macroeconomic man-agement and financial sector reforms andthe need for good governance and sustain-able management of the country’s naturalresources and environment.

“ADB would be flexible and responsiveto the country’s changing political and eco-nomic conditions over the next three yearsand continue to support policy reforms.However, without improved governance,ADB’s programs will not have a sustainableimpact on poverty,” said Jan P.M. vanHeeswijk, Director, ADB Resident Missionin Indonesia.

Indonesia is one of ADB’s major clients,borrowing some US$1.2 billion annuallybefore the economic crisis in 1997. During

the crisis, lending commitments increasedsubstantially to US$1.8 billion in 1998 andUS$1.5 billion in 1999. To date, Indonesiahas borrowed nearly US$17.7 billion tofinance key development projects.

Indonesia has experienced extraordi-nary upheavals in recent years, and the eco-nomic crisis has jeopardized past success.“At the peak of the crisis, an additional15 million people fell below the povertyline, showing the vulnerability of the poorto economic shocks,” said van Heeswijk.During the crisis, ADB provided assistancein close cooperation with other internationalfunding agencies to support the Government’srecovery programs. The new countrystrategy provides a fresh starting pointthat includes a more participatory approachto meeting the extraordinary challengesthat face the people and Government ofIndonesia.

In another development, ADB plans tosign a milestone poverty reduction partner-ship agreement with Indonesia this year.“This will be a big step in im-plementingthe new country strategy for Indonesia,added van Heeswijk. ADB is entering suchpartnerships with every developing mem-ber country and has already signed agree-ments with Bangladesh and Mongolia.�

7he Asian Development Bank (ADB)will rebuild earthquake-devastated

Gujarat in India with the help of aUS$500 million emergency loan approved on26 March. To ensure prompt and efficient imple-mentation of the reha-bilitation project, ADBhas established an extended office atGandhinagar, close to the earthquake-affectedareas.

The loan will support the stategovernment’s efforts to reconstruct andrestore essential infrastructure, especially inthe districts of Kachchh, Jamnagar,Surendranagar, and Rajkot. About 40 per-cent of the loan will be for addressing hous-ing needs and the balance for urban andrural infrastructure, restoring power supply,and providing livelihood rehabilitation.

“ADB’s quick action in reply to the stategovernment’s appeal for assistance reaf-firms our flexibility and responsiveness tothe country’s changing economic and socialconditions,” says Yoshihiro Iwasaki, Direc-tor, Programs Department (West) who hadled a team of high-level officials from head-quarters in Manila to Gujarat within days ofthe catastrophe to discuss assistance withthe state government. In addition, ADB hadalso dispatched a team of experts to assistthe state government.

The new ADB office, an extension ofits New Delhi-based Resident Mission, willprovide better coordination in implement-ing the Project. “The extended office willstrengthen our client orientation as theProject focuses on early restoration of

economic and social activity in the affectedareas,” says Frank Polman, ADB’s ResidentRepresentative in India.

On 26 January, an earthquake measur-ing 7.7 on the Richter scale wreaked de-struction across the industrialized state ofGujarat. Thousands were killed and thou-sands more were left homeless. The totalcost of ADB’s project for Gujarat EarthquakeRehabilitation and Reconstruction isUS$625 million, of which ADB will finance80 percent. The state government willfinance the remainder. ADB’s loan will comefrom its ordinary capital resources and isrepayable over 30 years, including a seven-year grace period. The interest rate will beADB’s pool-based variable lending rate forUS dollar loans.�

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year timeframe for its new LTSF,” says ShojiNishimoto, Director, Strategy and PolicyDepartment, “because it correlates with theschedule for achieving the InternationalDevelopment Goals. ADB has been play-ing and will continue to play a large role inhelping its developing member countriesreach these goals.” The InternationalDevelopment Goals are to:• Reduce the incidence of extreme po-

verty by half between 1990 and 2015;• Achieve 100 percent primary school

enrolment by 2015;• Eliminate gender disparities in primary

and secondary education by 2005;• Reduce infant and child mortality by

two thirds between 1990 and 2015;• Reduce maternal mortality ratios by

three quarters between 1990 and 2015;• Expand access to reproductive health

services to all women by 2015; and• Implement in all countries a national

sustainable development strategyby 2005 and to reverse the loss ofenvironmental resources by 2015.

ADB’s agenda for advancing the poverty re-duction strategy recognizes three core areas ofintervention:• Sustainable economic growth:broad-

based, growth-promoting activitiesthat enhance socially and environ-mentally responsible development;

• Inclusive social development: in-vestments in social support programs,and for equity and em-powerment,especially for women and disadvan-taged groups; and

• Governance for effective policiesand institutions: support for publicsector management, legal and judi-cial reform, and public accountabil-ity and procedures to give stakeholdersmore effective participation in decisionmaking.These three core areas are comple-

mented by three crosscutting themes tobroaden and deepen the impact of thecore poverty reduction interventions:• Promoting the role of the private sec-

tor in development, in consonance with

the private sector development strategyadopted by ADB last year, and includingthe mobilization of private sector re-sources to address the challenges of devel-opment;

• Supporting regional cooperation andintegration for development, to pro-vide wider development options,address shared problems, and poolinformation; and

• Addressing environmentalsustainability, by putting environmen-tal considerations in the forefront ofdevelopment planning, and reversingthe enormous and costly environmen-tal degradation and damage that havealready occurred.The LTSF reflects ADB’s position as the

only multilateral bank in Asia and the Pacificwith a regional focus, and will emphasizeADB’s role as a broad-based developmentinstitution. “The development challengesof the region are far beyond the capacitiesof any one institution,” says Nishimoto. “TheLTSF will enable us to be selective in ourinvestments and to take a long-term approach:to focus our resources on the things wedo best and to be more efficient in ouroperations.” Greater selectivity in operationswill be accompanied by a much strongercountry and client focus, and this willbe achieved through stronger countryleadership and ownership of the developmentagenda.�

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7he Asian Development Bank’s(ADB’s) Pacific Strategy for theNew Millenium, which was approved

on 20 March, will focus on helping Pacificdeveloping countries streamline theirpublic sectors and boost private sectorinvestment.

“Our next phase of reform support willconcentrate on public sector efficiencies andpromoting the private sector. These arecritical areas which will create more jobs andraise incomes and the quality of life,” saidADB’s co-manager of Pacific OperationsDivision, Cedric Saldanha. He noted that thefirst phase of reforms in the 1990s focusedon macroeconomic stability and good gov-ernance, following the fiscal crises manycountries faced in the early 1990s.

The Strategy responds to five key chal-lenges facing Pacific Island nations:• Vulnerability because of remote loca-

tion and a narrow resource base, andsusceptibility to natural disasters andglobal markets;

• Political instability and poor gover-nance;

• Limited skilled human resources;• Sociocultural factors that affect politics

and productivity; and• Inadequate physical, technological, and

financial sector infrastructure for sus-tainable growth.ADB will adopt four strategic objec-

tives:• Continuing support for economic, gov-

ernance, and public sector reform;

• Promoting private sector development;• Encouraging a more active role for

women in social, economic, and politi-cal spheres; and

• Supporting environmental manage-ment.In addition, ADB will support strength-

ening capacity for governance, economicmanagement and public services, improv-ing physical and information technologyinfrastructure development, strengtheningfinancial sector management, and enhanc-ing the role of civil society.

Robert Siy, also co-manager of ADB'sPacific Operations, said that in dealing withthe wide diversity of the Pacific developingcountries, ADB will apply its overall Strat-egy selectively as follows:• In the countries which are resource-rich

but have poor growth and high popu-lation rates such as Papua New Guinea,Solomon Islands, and Vanuatu, the strat-egy will focus on governance, publicsector reform, and poverty reductionthrough social and infrastructure invest-ments;

• In the more economically advancedcountries with a higher skill base, mod-erate resource potential and relativelylow poverty such as Cook Islands, Fiji

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Islands, Federated States of Micronesia,Samoa, and Tonga, the Strategy will pro-mote private sector growth throughpolicy reform and physical and financialsectors strengthening; and

• In the island atolls of Kiribati, MarshallIslands, Nauru, and Tuvalu, which areseverely disadvantaged by their small-ness, isolation, and weak resource base,the Strategy is to establish and expandtrust funds to support the sustainablefinancing of basic services. It is also tosupport niche markets for tourism anda sustainable use of marine resources.ADB’s Strategy also underscores the

importance of regional cooperation to reapcollectively the benefits of economies ofscale. ADB is currently supporting regionalcooperation in fisheries, air transport,financial sector restructuring (includingaddressing money laundering), public sec-tor management, and governance. Inaddressing these challenges, ADB is work-ing closely with other donors, particularlyAustralia, Japan, New Zealand, theUnited Kingdom, the United States, andthe European Union, and other mu-ltilaterals.�

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8

=and producing economically usefulcrops, trees, or livestock can be managed to sustain yields. Techniques

exist that protect land even in fragile eco-systems. But almost everywhere, land isbeing degraded through overgrazing,overcultivation, destruction of woodlandand vegetation, or poor irrigation practices.Why? It is easy to point to ignorance, over-population, or short-term gain. But singleexplanations are always inadequate. Rea-sons lie in the social, political, and economiccircumstances that put pressure on the landusers to manage land in a non-sustainableway. So, understanding why land usersdegrade land means embracing the rangeof relations affecting land users and theirintercourse with the world at large.

A chain of explanations. Land deg-radation occurs because of repeated land-use decisions under specific conditions.Subtle (and not so subtle) incentives under-pin each decision. Yet, they enter thepicture at one point along a chain ofexplanations. To begin, physical changesin soil and vegetation leading to land degra-dation become noticeable at a site—forexample, sheet and gully erosion, or bushor weed encroachment. This leads to symp-toms that impact on the land user, such asfalling or increasingly variable yields, or in-creased morbidity and mortality of livestock.These symptoms are brought about by spe-cific land-use practices at the site (e.g., treefelling, short fallowing periods, overstock-ing, plowing down slope, or planting cropsthat provide no ground cover or protectionfor the soil when it rains).

Why does the land user treat the landin this way? Causes are found in the imme-diate circumstances, an important level ofexplanation and knowledge that has to dowith access to resources, skills, assets, andtime horizons—to name a few—but also tothe nature of agricultural society (includingthe distribution of rights to land, laws ofinheritance, and the gender division oflabor). Higher still, one can examine howthe state affects land management throughlaws on tenure, prices, or agriculturalextension. Finally, one can study importantinternational forces that act through the stateto affect land management. They relate to

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foreign debt, oil prices, or structural adjust-ment programs. To sum up, the chain ofexplanations pulls together:• Recognized physical changes at a site;• Symptoms affecting the land user;• Specific land-use practices at the site;• The resources, skills, assets, time ho-

rizon, and technologies of the landuser;

• The makeup of agricultural society;• The makeup of the state; and• The global economy.

… and logical interventions. In viewof these, understanding why land degra-dation takes place necessitates a politicaleconomy perspective locating analyseswithin specific social formations and ex-plaining development processes in termsof the costs and benefits that they carryfor different social classes. Interventionscan then be made at all points along thechain. They would seek to address thepolicy, market, and institutional failuresthat break or pervert the necessary cor-relations between scarcity and prices,costs and benefits, rights and responsibili-ties, and actions and consequences.

Olivier Serrat, Liaison Officer, EuropeanRepresentative Office, Asian DevelopmentBank contributed this note.�

9

�orests provide countless products ofvital use and are a source of livelihoodto millions. For those reasons, abuse

of forest resources has intensified dramati-cally in the wake of improved methods ofexploitation, processing and transport,growth of external markets, and rapidlyexpanding populations. Since forests alsoplay a key role in the ecosystem, deforesta-tion has led to desertification, soil erosion,flooding, loss of biodiversity, and poorerenvironments for the poor. If that were notenough, some contend too that deforesta-tion changes the atmospheric oxygen andcarbon dioxide balance—which alters thealbedo and accelerates the greenhouseeffect. So, with growing unease about theconsequences of deforestation, attention isshifting from production to conservation.Sadly, an environmental management per-spective that ignores the environmentalconflicts at hand sways it.

The beneficiaries of deforestation.Deforestation happens because it is profit-able. That is why the perspective of thosewho gain from it, in conflict with one another,is of interest. The beneficiaries are:

��• Governments, since pioneer settlements

divert attention from pressing social prob-lems;

• National treasuries, which derive foreignexchange earnings from forest products;

• Commercial loggers (legal and illegal);• People employed in the logging and

wood-processing industries;• Commercial interests that use deforested

lands to grow a product for the market,speculate on land near roads and newsettlements, and buy and sell charcoal orfuelwood;

• Local commercial businesses that ben-efit from frontier settlements;

• Urban consumers of charcoal andfuelwood, who pay a price that does notinternalize the costs of deforestation;

• Consumers in industrialized countries, whoalso profit because the prices of tropicalforest products do not reflect their truevalue;

• International corporations trading tropi-cal forest products; and

• Migrant farmers and shifting cultivators,who benefit from the removal of forestcover because it allows them to farm.1

Clearly, the process of de-forestation is not amenable totechnical solutions. It does nothinge on the relative meritsof different silviculturalpractices or the choice ofthe discount rate. It isfueled by conflictinginterests over the useof forest resources. Sofar, in many develop-ing countries, the an-

swer has been thatthe forests belong

to loggers andtheir allies—the interestsof commu-nities andthe many

sectors thatuse or influ-

ence forestshave never re-

ceived much no-tice. Yet, to control

the process of deforesta-tion, it is necessary to identify all

those who benefit from it. Only

then will policy, market, and institutional instrumentsfor sustainable development work.2

A framework for conflict resolution.Demand for wood will rise by one third overthe next 10 years. Worsening conflicts amongforest users might be avoided if a cross-sectoral approach were adopted. Such anapproach would identify all the sectors andgroups that benefit from forests; define thebenefits and establish objectives for sustain-ing and balancing them; and state how theobjectives will be achieved. The intentionwould be to resolve conflicts by integratingcompatible uses of forest resources or zoningwhere uses are incompatible. Solutions wouldpermit the establishment of a stable forestcontinuum accommodating changing cir-cumstances. Backed by (now) informedpolicy, market, and institutional instruments,the continuum would encompass protectedforests in their natural state, managed naturalforests, shifting cultivation, agroforestry, andplantations.

Toward sustainable forest strate-gies. Deforestation will be addressed mostsuitably by a multidisciplinary approach thatemphasizes, against a pragmatic realizationthat societies (and forests) are dynamic, thesocioeconomic and political environment inwhich deforestation takes place. The advan-tages of social ingenuity over technicalingenuity should not be overlooked. Astable system of markets, legal regimes(including property rights), financial agen-cies, and institutions is a prerequisite to anyeconomic and social progress. But devel-oping countries are ill-endowed with thissocial capital and their ability to create andmaintain it is being eroded by the veryenvironmental problems they are hopingto address.

Olivier Serrat, Liaison Officer, EuropeanRepresentative Office, Asian DevelopmentBank contributed this article.�

1 The benefits they derive are short-lived. Theclearance process must be repeated elsewhereafter a couple of years because of insect plagues,weeds, and soil impoverishment.

2 Also, these instruments need to consider themotives of the agents of deforestation. The pooreke out a living and perform much of theexpansion of agriculture into previously for-ested areas. But logging, some agriculture, andsome charcoal making are carried out for com-mercial reasons.

10

�n 25 April, 160 participants metin Lyon to discuss economicprospects and business oppor-

tunities in the Asian and Pacific region.The European Representative Office

and Entreprise Rhône-Alpes Internationalorganized the event. Regional coopera-tion was a special theme, drawing on theexperience of the Four Motors for Europe(the regions of Baden-Württemberg,Catalonia, Lombardy, and Rhône-Alpes)and the Asian Development Bank’s(ADB’s) programs in the Greater MekongSubregion and the central Asian repub-lics.

The ADB Day gathered senior staffof ADB, officials from the French Gov-ernment, the Four Motors for Europe,

and representatives from the private sector,nongovernment organizations, and academia.The keynote speakers were John Lintjer, ADB’sVice-President for Finance and Administration;

Jean Agnes, President, Lyon Chamber ofCommerce and Industry; Fabienne Levy, Vice-President, Rhône-Alpes Region; Clarisse Reille,President, Entreprise Rhône-Alpes International;Rémi van Lede, Director, East Asia and OceaniaDepartment, Directorate of External EconomicRelations, French Ministry of Economy, Finance,and Industry; and Christine Wallich, Director,Infrastructure, Energy, and Financial SectorsDepartment (West) and Head, Private Sector Group,ADB. In the morning, discussions focused oneconomic prospects, regional cooperation, andbusiness opportunities. In the afternoon, parallelpanel discussions offered insights to success throughtestimonies from European enterprises, civil society,and ADB.�

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Policy, Financial, and Adm inistra tive Papers

Bo r r o w in g Pr o g r am f o r 2 0 0 0 (2 5 Jan u ar y)

M em b er sh ip o f Po r tu g al (2 5 Jan u ar y)

Resid en t M iss io n Po l i cy (1 7 Feb r u ar y)

Est ab l i sh m en t o f a Resid en t M iss io n i n t h e

Peo p l e's Rep u b l i c o f Ch in a (2 4 Feb r u ar y)

Review o f Ser v i ce Ch ar g es f o r t h e

A d m in i s t r at i o n o f Gr an t Co f i n an cin g f r o m

Bi l at er al So u r ces (1 4 M ar ch )

Review o f t h e A sian D evel o p m en t Ban k 's

In co m e O u t l o o k an d A l l o c at i o n o f 1 9 9 9 N et

In co m e (2 8 M ar ch )

Pr i vat e Sect o r D ev elo p m en t St r at eg y (3 0

M ar c h )

Par t i al Cr ed i t Gu ar an t ee Ch ar g es (1 3 A p r i l )

Est ab l i sh m en t o f a Resid en t M iss io n i n

Th ai l an d (1 9 A p r i l )

Co o p er at i o n w i t h Jap an — Jap an Fu n d f o r

Po v er t y Red u c t i o n (2 3 M ay)

Fin an c e f o r t h e Po o r — M icr o f i n an c e

D evelo p m en t St r a t eg y (6 Ju n e)

Co o p er at i o n w i t h Sp ain — T ec h n i c al A ssi s t an c e

Gr an t Fu n d (2 8 Ju n e)

Co o p er at i o n w i t h D en m ar k — Tec h n i cal

A ssi s t an c e Gr an t Fu n d (2 7 Ju l y)

Est ab l i sh m en t o f a Resid en t M iss io n i n

M o n g o l i a (1 A u g u st )

Th r ee- Year Ro l l i n g Wo r k Pr o g r am an d Bu d g et

Fr am ew o r k (2 0 0 1 - 2 0 0 3 ) (5 O ct o b er )

Seven t h Rep l en i s h m en t o f t h e A sian

D evelo p m en t Fu n d (2 No v em b er )

A r r an g em en t s f o r T r an sf er o f Pr o jec t

D evelo p m en t Fu n d Gr an t s f r o m t h e Glo b al

En vi r o n m en t Faci l i t y (2 1 No v em b er )

Review o f Pap u a New Gu i n ea's Classi f i cat i o n

Un d er A D B's Gr ad u at i o n Po l i cy (1 4

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Est ab l i sh m en t o f t h e D evelo p m en t

Ef f ec t i ven ess Co m m i t t ee (2 0 D ec em b er )

Working Pap ers

Pr o m o t i n g Go o d Go ver n an ce : A D B's M ed iu m -

Ter m A g en d a an d Act i o n Plan (2 6 A p r i l )

Pr i vat e Sect o r O p er at i o n s — St r a t eg i c

D i r ect i o n s an d Review (3 1 Ju l y)

Review o f t h e Par t i al Ri sk Gu ar an t ee o f t h e

A sian D ev elo p m en t Ban k (1 A u g u st )

Wat er f o r A l l : T h e Wat er Po l i cy o f t h e A sian

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12

�n 17 April, 80 bankers, industrial-ists, government officials, academ-ics, and journalists attended the

launch of the Asia Forum in Frankfurt.The Forum was established to foster

dialogue on Asia. The first meeting exam-ined where the region is in its recoveryfrom the Asian financial crisis of 1997. JohnLintjer, the Asian Development Bank’s(ADB’s) Vice-President for Finance andAdministration, explained that Indonesia,the Republic of Korea, Malaysia, the Phil-ippines, and Thailand—the countries mostaffected by the crisis—registered growthof about 7 percent in 2000 despite thecollapse of their stock markets and theweakness of their currencies. Domestic in-vestment, long the laggard, is beginningto pick up. With the adoption of more flex-ible exchange rates and the move towardexplicit inflation targeting, there is greaterclarity and coherence in macroeconomicpolicies.

But growth in these countries will slowmarkedly to less than 4 percent in 2001—Asia’s developing countries as a whole mayachieve growth of about 5 percent—inresponse to the slowdown of the USeconomy. This underscores the need to

accelerate the pace of structural reforms,especially those touching nonperformingloans, insolvency systems, and standards forbanking supervision, accounting, disclosure,and shareholder rights. Still, growth can onlybe sustained with a strong private sector. Anenabling environment that encourages bothdomestic and foreign investments must exist. Its main elements are well known: soundmacroeconomic management, efficientfinancial markets, flexible labor markets, socialsafety nets, good infrastructure, equitable taxsystems, effective regulation, open markets,and legal and judicial systems that protectproperty rights and enforce contracts.

John Lintjer highlighted also ADB’s con-tributions to the creation of level playing fieldsthrough partial credit guarantee and politicalrisk cover. ADB’s political risk guarantee pro-gram, for example, has been revamped torestore confidence in Asia among interna-tional investors. The scope of coverage nowincludes expropriation, currency inconvert-ibility, nontransfer risk, political violence, andbreach of contract.

ERO hopes to convene the Asia Forumon a quarterly basis. Do suggest themes ofdiscussion and suitable resource speakers forfuture meetings.�

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news from ero june 2001

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