Heightened Development Challenges for Asia’s Poorer Countries

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The FINANCIAL — Asia’s poorest and most vulnerable countries have seen moderate rates of economic growth and poverty reduction over the last ten years, but they have not shared in Asia’s success story. They face growing disparities in the provision of education, health, and other public services, environmental degradation, climate change, natural hazards, and food insecurity, says Independent Evaluation at the Asian Development Bank (ADB).

In an evaluation of the Asian Development Fund (ADF), which provides low-interest loans and grants to 29 low income countries in the region, Independent Evaluation said a renewed and more effective development effort is needed for these countries to narrow economic and social gaps with the region’s more advanced economies. The study noted that many countries receiving ADF financing are only slowly recovering from a series of disasters and the food, fuel, and financial crises in recent years.  

“The challenges and threats facing Asia’s low-income countries are escalating. The good news is that some have shown good development progress, but they remain vulnerable to socio-economic and environmental shocks that can severely affect this progress,” says Vinod Thomas, director general of Independent Evaluation, which assesses ADB’s operations.

“ADB and the other development partners in the region must increase the effectiveness of their operations in strengthening the resilience of these countries to multiple shocks, and pursue the many opportunities for progress,” says Thomas.

Some 650 million people live in the countries qualifying for ADF resources. Bangladesh, Cambodia, Nepal, Pakistan, and Viet Nam are the top five recipients of ADF concessional loans, receiving two-thirds of approvals since 2004. A number of small Pacific island states have received the highest levels on a per capita basis. 

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In its study, Asian Development Fund X and XI Operations: Opportunity amid Growing Challenges, Independent Evaluation said that ADB’s continued focus on promoting inclusive and sustainable growth will remain highly relevant going forward, alongside support for other priorities of regional integration, disaster risk management, addressing climate change, and food security. It also calls for more careful analysis of fragility and conflict in countries and regions where these risks are present, along with stronger project supervision. 

The study encourages ADB to complement its core infrastructure investments with stronger support for the social sectors, including social protection and agriculture. For example, ADB support for food security has traditionally focused on financing rural infrastructure, but more attention is needed for improving food safety nets and providing more direct support to agriculture.

Says the study’s principal author Benjamin Graham: “An infrastructure-plus approach is needed. Achieving inclusive growth not only requires infrastructure investments that help economic growth, such as power plants and roads, but also paying closer attention to lower-income groups and interventions for more equitable access to basic services and productive employment .” 

“Ending extreme poverty, addressing inequality, and pursuing more environmentally and socially sustainable growth are among the priorities in the new Sustainable Development Goals. For most ADF countries, the pursuit of these goals will be a struggle,” said the study.

Although ADF-financed projects have historically had low success rates, they have improved in recent years, driven by better results in health and social protection, agriculture and natural resources, and the energy sector. The study identified many highly-performing projects, some of which simultaneously supported inclusive growth and environmental sustainability, and encouraged ADB to replicate successful projects, where feasible, more systematically. 

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The planned increase in ADB’s resources starting in 2017, resulting from the merger of the ADF and the institution’s ordinary capital resources, will enable ADB to increase significantly concessional lending and grant support to ADF countries. This will allow ADB to invest far more in sectors which have seen limited support, but which are critical to achieving inclusive and environmentally sustainable growth.

Says Thomas: “Along with institutional reforms now underway, a better-resourced ADB provides a great opportunity for it to seek a higher level of effectiveness in the region’s poorest and most vulnerable countries.”


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