Greater Flexibility in Allocation of Loans Urged

Needs of developing countries must come first, Asian Development Bank told


By BRIAN COVERT
and KEN MORITSUGU
STAFF WRITERS

OSAKA — Member countries of the Asian Development Bank called Tuesday for greater flexibility in its lending practices.

At the annual meeting of the bank’s board of governors, many members also expressed concern about the adverse effects of growing protectionism in the industrialized nations.

The U.S. delegate, Charles Dallara, on the other hand, expressed concern about the quality of some recent projects.

“We have had problems with some of the projects brought before the board of directors lately,” said Dallara, a senior U.S. Treasury official.

The Asian Development Bank has been accused in the past year of making insufficient evaluations of some of the projects for which it has later granted money.

Dallara did not criticize any particular projects by name.

Finance ministers and top government officials from 30 countries, including China, Indonesia and India, delivered their statements to the board meeting Tuesday. Nine other representatives are scheduled to make speeches in today’s final session.

Most of the speakers Tuesday said the bank must respond to the need of developing countries to make economic adjustments to revive export earnings devastated by the fall in commodity process and the slowdown in world economic growth.

The pressing adjustment problems of the Asia-Pacific region may occasionally have to come before the bank’s long-term development priorities, said Indonesian Minister of Finance Radius Prawiro.

“It is important for the bank to recognize this.”

“Failure to be sensitive to this economic imperative could, over time, reduce the ADB to a marginal role,” said Prawiro, “leaving the (developing countries) to grapple on their own with the problems of adjusting to change.”

Most of the speakers urged the bank to focus more on program and sector lending, rather than just specific project lending in the region.

Program loans provide funds for fuller utilization of existing facilities, and sector loans allow funds to be used for more general purposes, instead of being tied to particular projects.

Prawiro called for an increase in the bank’s ceiling on program lending, which currently holds it at 20 percent of the total.

“It is my belief that the full potential of the bank’s program lending has not been tapped in the past,” he said.

He said more flexibility is needed in securing sectoral loans for developing countries, such as Indonesia.

“This is clearly an instrument of which the bank should make increasing use in the future,” he said.

“It is important that more flexibility be offered in sector expenditures if this is to become truly attractive” to developing countries, he said.

South Korea’s Minister of Finance In Yong Chung agreed that the development bank should show more willingness to adapt in the areas outlined by Prawiro.

Under a “tightly controlled” project-lending policy, he said, “the financier could lose touch” with current economic needs.

Korea and the United States were among the members that expressed support for a proposal to set up a task force of government representatives and experts to examine the medium- and long-term needs of member countries and to formulate a strategy for the future.

The United States and some other developed country members said the bank should use its lending process to spur policy changes that will lead to sustained, long-term growth.