Manila: The Asian Development Bank (ADB) has “seriously compromised” the independence of its watchdog department and the bank must act to restore its own credibility, according to a report commissioned by the multilateral lender.
The report reviewed ADB’s operations evaluation department (OED), which monitors the billions of dollars in loans made by the bank to Asian nations each year and assesses their impact.
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ADB said on Thursday the report would form a part of a review of the department—due to be completed in December—and there was no immediate action planned.
Bank president Haruhiko Kuroda “regards it as an important input into the review of the OED which is currently being undertaken by a working group”, an ADB spokeswoman said.
The report criticized the ADB management for a “lack of consultation and transparency” in replacing the head of the operations evaluation department last year despite a board committee recommending an extension of his term, and in the selection process for his replacement.
“As a result, potentially very qualified candidates saw no reason to apply,” said the report, posted on ADB website earlier this month.
“The review has concluded that the independence of OED, both real and perceived, has been seriously compromised.”
“The review concludes that these concerns are both broad enough, and deep enough, to warrant action to restore the credibility, not just of OED, but also of the ADB itself.”
For more than a year, some of ADB’s donors, including the US, have been expressing concern about its governance and lending policies, especially the large amounts lent to fast growing economies such as China and India.
Last year, the Manila-headquartered ADB approved loans worth $10.1 billion (Rs46,763 crore now), the highest since its creation in 1966, of which India got $1.4 billion and China, $1.3 billion. Pakistan was the highest recipient with just above $2 billion.
The top 10 recipients accounted for 90% of the grants and loans approved in 2007, although ADB lists 40 developing countries that are eligible to receive its funds.
The row last year over the head of the watchdog department also drew criticism from donors.
The governments of Canada, Denmark, Finland, Ireland, Norway and Sweden said in a joint letter at the time they were “troubled that this incident raises concerns that the bank is not following best practice and the independence of the director general of the OED is not, in fact, completely assured”.
The review of the department also said that the unit’s resources were inadequate.
“There has been no increase in resources, both financial and human, provided to OED since 2003,” it said.
It said ADB had to accept honest assessment of its operations.
“ADB management must become more open to critical feedback, and more receptive to continuous questioning on how to do things better,” it added.