US support crucial to development fund

PUBLISHED : Monday, 29 April, 1996, 12:00am
UPDATED : Monday, 29 April, 1996, 12:00am

Now that some of Asia's countries have joined the rich men's clubs, why are they not prepared to contribute to the very fund which helped them grasp their own bootstraps? The question is being raised in Manila as Asian Development Bank (ADB) governors gather for their annual meeting when its key fund is in danger of running out of money and traditional sources of finance are becoming less amenable to funding soft loans to poor countries.

If a new round of donations to take the Asian Development Fund (ADF) into the next century is not agreed on, its future will be in doubt.

There is only US$1.45 billion in the kitty, and that is not enough to cover the lending programme that the ADF has planned for this year.

Unless it is replenished, many of Asia's poor may stay that way for longer, for poverty alleviation is one of the principal roles of the ADF.

By the fourth quarter of this year, the fund may have dried up, the bank has been warning, and it has been looking for donor countries to top it up with a further $4.5 million to take the aid programme to 2000.

In Manila yesterday, the ADB's shareholders met behind closed doors to discuss the future of the fund. There was a commitment to keep the fund going. The question that was not answered, and may not be, for months, is: How? Who will contribute, how much, and when? America is a key player, and is behind on its payments. Of the $780 million it pledged in 1992, it has yet to contribute $337 million, though the period of that round of donations ended last year.

It promised to at least meet its arrears, but in the ADB's Manila headquarters, the fear is that aid fatigue is setting in on Capitol Hill.

Twin deficits are more pressing and politically crucial, than irrigation schemes in Bangladesh. Hong Kong's position is expected to be more positive, according to insiders. It is in support of the ADF, and will put up its share, whatever that might be, given Legco approval. In the last tranche, the territory contributed $3 million.

The only question is whether China's lack of access to the ADF, on grounds of sheer size, could prove a political stumbling block.

Singapore, another Asian tiger now one of the richest countries in the world in terms of reserves versus gross domestic product (GDP), is adamant that it will not.

Although it enjoyed some ADB financing in its early years, before its rapid advance to its current status, it is now firmly ensconced in the free market camp, and believes it does its best work by guiding its entrepreneurs and statutory boards in making direct investments in developing neighbours.

With South Korea and Taiwan also reluctant to support the fund, Western donors, struggling with their own problems of deficits, high unemployment and slow GDP growth are wondering why they should help those who will not be helped by their own region.

Today the United States Under-Secretary for International Affairs at the Treasury, Jeffrey Shafer is to set out the US position. If it supports the ADF, it could be the key to unlocking funds from the rest of the world.