PUBLISHED : Monday, 09 July, 2001, 12:00am
UPDATED : Monday, 09 July, 2001, 12:00am

AN INTERVIEW with Asian Development Bank president Tadao Chino, published in this newspaper on Friday, cannot pass without comment. While the article did a good job of setting out what the ADB would like to do and be, there is another perspective to this institution and it needs to be offered in balance.

Let us start with the simple observation that when ADB staffers set out to do good in their campaign to win the war against poverty they do very well indeed.

It is a high life for them in Manila, enormous modern offices with sweeping galleries, homes over which we in Hong Kong would drool and great bundles of perks with every job. How grand to be a warrior against poverty.

Of course, there are a few trade-offs, among the most notable of which is something that, this being a family newspaper, we shall call apple-polishing.

I once attended one of those big ADB talking shops in Manila and for two days the team from our bank grovelled in front of stuffed shirts from finance ministries and central banks around Asia, laying on the praise good and thick for their efforts on behalf of humanity.

The only reason I did not choke from the embarrassment of it all was that everyone in this Alice in Wonderland world was doing it. The ADB is a political institution in every facet, a very political one indeed. Bear it in mind.

It had particular reason on this occasion for being so because of an embarrassment of its own. In its war against poverty it had decided that what Indonesian irrigation projects and the like needed was loans at low rates of interest.

There was an easy way to arrange this. Finance these projects in yen and deutschemarks, currencies that had these low rates of interest. What magic solutions you get when the ADB pioneers new financial techniques.

Of course, what then happened was that the foreign exchange value of the Indonesian rupiah (peso, rupee, baht, take your pick) fell while marks and yen strengthened, and the poor farmers had to pay back twice as much in their own currencies as they had borrowed, even before they looked at the interest charge.

The ADB took no losses. The governments of the countries concerned had guaranteed the loans and the poverty warriors could thus walk away from these triumphs, having the gall even then to boast that private sector banks could never have done it. Could, yes. Would, no.

And that brings up another point. The theory behind development banks is that governments set them up to fill a gap when they think that commercial banks in their countries are not yet mature enough to suffice.

Whether this is ever true except for short periods is debatable but it has certainly not been true in East Asia for the past 20 years. Hence the ADB's biggest client is now India, which would make sense were it not that India is also one of the World Bank's biggest clients. Why double up when one soft touch will do?

What our poverty warriors also seem to forget is that one of the biggest reasons countries remain poor is not that they start poor but that what money they have is grossly mismanaged, witness Pakistan, another big ADB client.

One reason the mismanagement continues is that the governments guilty of it are sustained by infusions of cash from institutions like the ADB. Cut off this lifeline, impose private sector disciplines and you get very quick reform.

It is a perverse fact of life that much of what the World Bank and the ADB do perpetuates poverty while they profess to alleviate it. A car park on that lot in Manila would serve the world better.