Asian Development Bank Is Chartered Summary

  • Last updated on November 10, 2022

The Asian Development Bank provided financing for the economic development and industrialization of Asian nations, uniting those nations in the common goal of modernization and economic growth.

Summary of Event

In December, 1963, the First Ministerial Conference on Asian Economic Cooperation First Ministerial Conference on Asian Economic Cooperation (1963) Ministerial Conferences on Asian Economic Cooperation , held in Manila, Philippines, under the auspices of the United Nations Economic Commission for Asia and the Far East Economic Commission for Asia and the Far East, U.N. (ECAFE), endorsed a proposal to establish a regional development bank for Asia to supplement World Bank World Bank activities in the area. On November 1, 1965, at the Second Ministerial Conference on Asian Economic Cooperation Second Ministerial Conference on Asian Economic Cooperation (1965) , also held in Manila, the Agreement on Establishing the Asian Development Bank was adopted. Representatives from twenty-two countries signed the charter for the bank on December 4, 1965. Nine more countries subsequently signed the document in early 1966. Asian Development Bank Foreign aid;Asia Modernization [kw]Asian Development Bank Is Chartered (Dec. 4, 1965) [kw]Development Bank Is Chartered, Asian (Dec. 4, 1965) [kw]Bank Is Chartered, Asian Development (Dec. 4, 1965) Asian Development Bank Foreign aid;Asia Modernization [g]Southeast Asia;Dec. 4, 1965: Asian Development Bank Is Chartered[08710] [g]Asia;Dec. 4, 1965: Asian Development Bank Is Chartered[08710] [g]Philippines;Dec. 4, 1965: Asian Development Bank Is Chartered[08710] [c]Banking and finance;Dec. 4, 1965: Asian Development Bank Is Chartered[08710] [c]Economics;Dec. 4, 1965: Asian Development Bank Is Chartered[08710] [c]Manufacturing and industry;Dec. 4, 1965: Asian Development Bank Is Chartered[08710] [c]Diplomacy and international relations;Dec. 4, 1965: Asian Development Bank Is Chartered[08710] Nyun, U Watanabe, Takeshi Uquaili, Nabi Baksh Mohammed Sidiq Sat{omacr}, Eisaku Black, Eugene

The signing of the charter of the bank marked the beginning of a new era in the history of Asia. The establishment of the bank promised economic independence and regional cooperation among the Asian countries, without help from Europe and the United States, in the mobilization and allocation of external resources, either from governments or from the world capital markets. The bank would also aid the financing of projects that would contribute not only to the development of individual member countries but also to the integrated development of the region as a whole.

The bank was set up in response to widespread dissatisfaction among the Asian countries with World Bank lending in the early 1960’s. There was a perceived need to supplement World Bank activities in Asia because allocation of loans by the World Bank was not evenly distributed among the developing countries. Only one-third of World Bank aid had gone to ECAFE developing countries, which had half of the world’s population. Even within Asia, the distribution was hardly balanced. Lending was concentrated in India and Pakistan. Moreover, loans were allocated to infrastructure projects, as opposed to agriculture or industry.

There is no consensus as to who first thought of the idea of an Asian development bank. The establishment of the bank represented a culmination of efforts of several persons who championed the idea to Asian countries as well as to developed countries outside the region. ECAFE was instrumental in establishing the bank. Since the 1950’s, the staff of ECAFE had been advocating regional economic cooperation. At the nineteenth session of ECAFE, in early 1963, a resolution was passed calling for accelerated measures for regional economic cooperation.

The outcome of this resolution was that a ministerial conference was convened in Manila, in December of the same year. U Nyun, the executive secretary of ECAFE, gathered a group of experts who would assist the countries of the region in preparing for the First Ministerial Conference on Asian Economic Cooperation by undertaking technical investigations and making recommendations on practical measures for promoting ECAFE regional economic cooperation. The group met in August and discussed the idea of the establishment of an Asian development bank, put forward by Paul Sithi-Amnuai Sithi-Amnuai, Paul , a Thai banker, early in January, 1963.

Concurrently, unaware of the efforts at ECAFE, a Japanese group had been meeting regularly in Tokyo since October, 1962, to work out a proposal for a regional development bank. The group was headed by a Japanese economic journalist, Kaoru Ohashi Ohashi, Kaoru , joined by Makato Watanabe Watanabe, Makato and some other Ministry of Finance officials and bankers. Takeshi Watanabe, then representing Japan at the World Bank in Washington and destined to become the founding president of the Asian Development Bank, joined the group in February, 1963.

By the summer of 1963, the group had reached the conclusion that an Asian development bank was needed to supplement World Bank activities in Asia and that support from the United States was necessary in order to tone down the dominant image of Japan. Support from Japan came from Eisaku Satō, then a minister in the Hayato Ikeda cabinet and later prime minister, and from other leading politicians. Support was not echoed, however, from the United States. The project was put on hold in late 1963.

In contrast, at the ECAFE, efforts toward the realization of an Asian development bank proceeded in earnest. When ministers went to Manila in December, 1963, for the first full-scale Ministerial Conference on Asian Economic Cooperation, they accepted the idea of a regional development bank in principle. The idea was not discussed in detail and remained far down the list of priorities. After the Manila conference, U Nyun convened another group of experts to give detailed consideration to the establishment of an Asian development bank.

This group—the Ad Hoc Working Group of Experts on the Asian Development Bank Ad Hoc Working Group of Experts on the Asian Development Bank —met in Bangkok in October, 1964, under the chairmanship of Nabi Baksh Mohammed Sidiq Uquaili, managing director of the Pakistan Industrial Credit and Investment Corporation and subsequently the finance minister of Pakistan. One of the members of the group was Takeshi Watanabe, who had received blessings from Prime Minister Ikeda and other top Japanese officials. At this meeting, the two distinct streams of thought, one from Japan’s group and one from ECAFE, finally converged. The experts completed their report on October 30, 1964. They endorsed the concept of an Asian development bank and considered the bank’s capital structure. The group, however, did not have time to draft the charter.

The proposal was presented to the twenty-first session of ECAFE, held in Wellington, New Zealand, in March, 1965. Representatives of developed countries from the region, Japan, Australia, and New Zealand expressed interest in principle for the establishment of an Asian development bank, but Japan was still waiting for support from other developed countries, particularly the United States. Developed countries outside the region, including the United States, did not plan to subscribe capital to the bank. A consultative committee was authorized to take matters further.

Two weeks later, the U.S. position changed. In order to balance military escalation in Vietnam, President Lyndon B. Johnson Johnson, Lyndon B. [p]Johnson, Lyndon B.;Vietnam War decided to offer economic aid to the region to entice the Vietnamese to come to the conference table or at least to show neutral Asian governments that American policy in Asia did not depend solely on military force. Lobbying efforts by R. Krishnamurti Krishnamurti, R. , director of trade of ECAFE, to Eugene Black, former president of the World Bank and special adviser to President Johnson, led to the Asian development bank project being accepted by the United States as one of the projects qualifying for aid. Japanese prime minister Satō hastily announced that Japan would subscribe $200 million to the bank. With U.S. and Japanese support, the bank’s future was assured. From later June to early December, 1965, the Consultative Committee and later a formal Preparatory Committee wrestled with the detailed clauses of the bank’s charter, which was signed by representatives of twenty-two countries on December 4, 1965.

Significance

The major impact of the establishment of the Asian Development Bank was that, for the first time in history, Asian countries agreed to a common cause and worked together at the regional level to foster economic growth and cooperation in Asia and to accelerate the process of economic development of the developing member countries Developing nations (DMCs) in the region, collectively and individually. The bank was chartered to play a major role in achieving these goals. To that end, the bank would make loans and equity investments for the economic and social advancement of developing member countries, provide technical assistance for the preparation and execution of development projects and programs, promote investment of public and private capital for development purposes, and respond to requests for assistance in coordinating development policies and plans of member countries. In its operations, the bank was required to give special attention to the needs of the smaller or less developed countries and give priority to regional, subregional, and national projects and programs that would contribute to the harmonious economic growth of the region as a whole. Thus, through its lending operations and programs of technical assistance the bank would contribute substantially to Asia’s growth and modernization.

The impact would be felt in several areas. In regard to development financing, although the bank’s financial resources were limited compared to the needs of the DMCs and could meet only a fraction of their external financing requirements, the bank was in an excellent position to assist prospective regional borrowers in raising funds from normal commercial sources or in the world’s capital markets, providing expert advice and direction or perhaps setting up guarantee or insurance programs to help smooth the borrowing processes. Cofinancing, with official as well as commercial and export credit sources, and equity investment in projects would be important parts of the bank’s activities.

The other area in which the bank would have a significant impact was the development of financial markets. By encouraging investment in the region by helping DMCs to restructure their economies, particularly their financial sectors, the bank could do much toward developing and strengthening Asia’s own capital markets. A strong financial infrastructure in turn could provide a conducive business climate for private enterprise and raise investors’ confidence. In addition to stimulating local private enterprise, increased involvement by the bank in private sector operations could help bring significant new volumes of private foreign capital to the region to supplement existing public flows. Moreover, the bank could assist DMCs in enhancing the efficiency, autonomy, and accountability of public sector enterprises.

The bank would probably have its most significant impact on Asia through its efforts to assist the region in industrialization. The bank’s lending policies would have a significant impact on various types of industries. In general, funds were made available to develop industries producing essential goods for development (especially agricultural inputs), to support efficient import substitution, and to promote exports. Thus cement, petrochemical, and fertilizer industries as well as machinery manufacturing and automobile components production would receive funding and support for industrial research and extension facilities. In the long run, the bank’s operations would concentrate on export production based on the comparative advantages of the DMCs. The bank also encouraged DMCs to develop policy frameworks that would lead to private sector-oriented industrial growth. Consistent with this strategy, the bank could use its policy-based program lending facilities to support the creation of a more conducive policy environment and to strengthen the institutional framework to promote growth and efficiency of the industrial sector.

Establishment of the bank made possible more extensive cooperation in international trade and involvement in the promotion of Asian intraregional trade as well as coordination of the region’s trading activities with the rest of the world. In trade, the bank could facilitate the growth of exports from Asia by supporting trade-related research and training. It could help develop export capabilities of DMCs by promoting manufacturing industries, strengthening infrastructure, improving financial systems and economic policies, and encouraging investment.

The bank would also have a significant influence on business attitudes and practices, which had long been a serious barrier to effective modern growth in parts of Asia. As an organization with real leverage and influence on the decision making of its members by virtue of its power to make or withhold loans, and as an institution capable of commanding attention and respect throughout the region, the bank affected how business was conducted. It promoted equal opportunity rather than favoritism and espoused Western standards for business conduct. For example, the bank adopted the World Bank’s procedures for international competitive bidding in connection with the awarding of procurement contracts. In summary, the establishment of the Asian Development Bank was one of the most significant steps in the history of Asia toward regional economic development and cooperation. Asian Development Bank Foreign aid;Asia Modernization

Further Reading
  • citation-type="booksimple"

    xlink:type="simple">Asian Development Bank. A Continent in Change: Thirty Years of the Asian Development Bank. Manila, Philippines: Author, 1997. Self-published official history of the Asian Development Bank.
  • citation-type="booksimple"

    xlink:type="simple">Huang, Po-Wen, Jr. The Asian Development Bank: Diplomacy and Development in Asia. New York: Vantage Press, 1975. This book portrays the formation and early years of the bank. Based on official documents and personal interviews. Appendixes include some basic facts about the bank.
  • citation-type="booksimple"

    xlink:type="simple">Walter, Graham M. Evaluation of ADB Projects. Tokyo: Asian Development Bank Institute, 2005. Evaluation of the successes and failures of projects undertaken by the Asian Development Bank.
  • citation-type="booksimple"

    xlink:type="simple">Watanabe, Takeshi. The Doors Are Open: Selected Addresses by Takeshi Watanabe. Makati, Rizal, Philippines: Office of Information, Asian Development Bank, 1967. This compilation reveals how the role of the bank has evolved and how operating policies consistent with that role have been formulated since its inception.
  • citation-type="booksimple"

    xlink:type="simple">White, John. Regional Development Banks: The Asian, African, and Inter-American Development Banks. New York: Praeger, 1972. Provides the earliest evaluation of the development banks by an outsider. Contrasts the three regional development banks and argues for the transfer of resources away from global institutions, notably the World Bank group, to regional institutions, notably regional banks.
  • citation-type="booksimple"

    xlink:type="simple">Wilson, Dick. A Bank for Half the World: The Story of the Asian Development Bank, 1966-1986. Manila: Asian Development Bank, 1987. An official history of the bank’s first two decades. Chronicles the happenings and development of the bank in detail, including descriptions of key people connected with the bank.
  • citation-type="booksimple"

    xlink:type="simple">Yasutomo, Dennis T. Japan and the Asian Development Bank. New York: Praeger, 1983. This book contains details of the controversial negotiations over the headquarters site of the bank in the chapter on “The Manila ’Shock.’” Discusses the role of Japan in the bank.

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