Road to 2030 Consultation Paper: Considerations for ADB s New Strategy
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1 Road to 2030 Consultation Paper: Considerations for ADB s New Strategy I. Introduction and Purpose 1. ADB is beginning to prepare its new long-term strategy leading to The strategy will outline a vision and key directions for ADB s engagement with developing member countries (DMCs). It will describe how ADB aligns with the Sustainable Development Goals (SDGs) approved in September 2015 and the new global climate agreement agreed in Paris in December The strategy will also emphasize organizational, staffing and business process reforms to strengthen the efficiency and effectiveness of ADB s engagement going forward. A new corporate results framework will be developed to monitor and report progress on the implementation of the new strategy. 2. The strategy preparation will follow a fully consultative process involving ADB staff, Management, Board, and shareholders. Extensive consultations with DMC officials, private sector, and civil society are also being organized. 3. The purpose of this short paper is to identify and highlight key strategic and institutional issues for consultations with the various external stakeholders of ADB. This is a background paper being shared in advance of the planned DMC consultations so that participants are prepared to discuss the identified issues and raise any other issues they feel are important in connection with the preparation of ADB s new long-term strategy. The consultations will focus on both the what and the how questions pertaining to the new strategy. II. Background: Strategy 2020 and the Midterm Review Action Plan 4. Strategy 2020, the present long-term strategic framework for the ADB, was approved in Strategy 2020 articulated the vision of An Asia and Pacific Region Free of Poverty. It focused ADB s mission on three strategic agendas: inclusive economic growth, environmentally sustainable growth, and regional integration. In order to leverage ADB s regional experience and comparative strengths, Strategy 2020 also emphasized five drivers of change: private sector development and private sector operations, (ii) good governance and capacity development, gender equity, knowledge solutions, and (v) partnerships. Strategy 2020 noted that 80% of ADB s resources will be concentrated in five core areas: infrastructure;; (ii) environment, including climate change;; regional cooperation and integration;; financial sector development;; and (v) education. 5. A Mid-Term Review (MTR), 2 completed in April 2014, noted the satisfactory implementation of Strategy 2020 and recommended a 10-point program on future strategic and organizational directions focused on: (ii) (v) poverty reduction and inclusive economic growth, environment and climate change, regional cooperation and integration, infrastructure development, middle-income countries, 1 ADB Strategy 2020: The Long-Term Strategic Framework of the Asian Development Bank, Manila. 2 ADB Midterm Review of Strategy 2020: Meeting the Challenges of a Transforming Asia and Pacific. Manila.
2 (vi) (vii) (viii) (ix) (x) private sector development and operations, knowledge solutions, financial resources and partnerships, delivering value for money in ADB, and organizing to meet new challenges. III. Motivations for Preparing a New Strategy 6. The directions articulated in Strategy 2020 and the MTR remain broadly relevant. However, there are several new relevant developments that require ADB to revisit and update its corporate strategy and realign its operations in order to stay relevant and effective as a regional development bank. These developments include the following: 7. Asia-Pacific s fast-changing development landscape. The development landscape of Asia and Pacific is changing fast. ADB needs to adapt to these changing circumstances. DMCs are becoming more diverse in terms of economic strength, development needs and capacities. Upper middle-income countries (MICs) have emerged with higher living standards and stronger capacities, but still facing complex challenges. Lower middle-income Asia is rising but remains generally constrained by remaining poverty;; growing inequality (including pervasive gender inequity);; climate change-related and environmental vulnerability and fragility;; rapid urbanization;; insufficient infrastructure;; weak private sector development;; skills, technology and productivity gaps;; demographic change and youth unemployment;; and weak governance and quality of institutions. Particular challenges of small island and fragile economies which remain vulnerable and constrained by geography, small population size, and low institutional capacities also remain profound. 8. New global development agendas. ADB s new strategy will need to demonstrate alignment with the emerging international agenda, including the goals and results to be agreed for The new strategy will need to respond to the SDGs, which represent a broad and ambitious development agenda. The strategy must also consider the outcomes of the Conference of Parties on Climate Change (COP 21) in Paris, which reached a universal and legally binding agreement to address climate change issues. The new strategy will also have to respond to the Financing for Development Conference in Addis Ababa, which sought to develop credible financing arrangements to implement the SDGs through adopting an integrated approach that leverages both public and private finance. 9. New development finance institutions. The emergence of new development finance institutions, including the Asian Infrastructure Investment Bank, the Green Climate Fund, and the New Development Bank, will help address huge development financing gaps of Asia and Pacific and offer ADB expanded opportunities for collaboration and cofinancing. Strong partnerships with these and other institutions will be vital for ADB to effectively leverage its resources and provide effective and efficient development services to client DMCs. 10. ADB s expanded lending capacity. The significant expansion in ADB s lending capacity starting in 2017, by combining Asian Development Fund (ADF) lending resources with the ordinary capital resources (OCR) balance sheet, will have a substantial impact not only on the scale of ADB operations but also on the nature of ADB s strategic partnerships with client DMCs. The ADF-OCR merger requires consideration of issues including the allocation of increased resources along ADB s different business lines, staff and administrative budgets, the current organizational structure, and business processes.
3 IV. A New Vision for ADB? 11. Given the changing development landscape of the Asia-Pacific region, the emergence of the new global development agenda, and ADB s quest to remain relevant and responsive, a key question is whether ADB should retain or change its existing vision (An Asia-Pacific free of poverty?) The vision question is important because it has a significant signaling and messaging impact with regards to the overall future strategic direction and operational priorities of the institution. 12. The current vision is appealing in its powerful message and brevity. However, it does not capture Asia and Pacific s key emerging challenges such as inclusion and equity, sustainability and resilience, region integration, and others. A pursuit of a broader vision may help ADB to better support client countries in progressing on the wide-ranging and comprehensive mandate of the SDGs. It may also enable ADB to prepare to better respond to an increasingly middle-income Asia and Pacific, where extreme poverty is sharply declining, but where inequality is rising and quality of lives depend on creating jobs and opportunities, building inclusive societies, and creating healthier and sustainable natural environments. With these factors in view, one of the several possible formulations of a new vision could be: An inclusive and resilient Asia-Pacific region free of poverty. Views and proposals of DMCs are requested on the new vision statement for ADB. V. Engagement Principles 13. ADB s engagement with client countries will need to be based on a set of core principles that will be carried through in designing and delivering development assistance. These principles will be decided in consultation with stakeholders and could include the following: (ii) ADB needs to adopt differentiated operational approaches in a country, country groups, and sub-region. In particular, engagement must differentiate across diverse client groups such as upper middle-income countries and countries in fragile and conflict-affected situations. ADB needs to maintain a strong country focus. ADB will provide assistance that is relevant and responsive to the most pressing development challenges of each client country. Together with country focus, a stronger sector focus will need to be built to ensure that ADB has the capacity to respond to increasingly sophisticated requests for support from client countries in the various sectors and areas of operations. ADB s engagement must include a focus on knowledge transfer and innovation, an area on which client countries place an increasing premium with respect to ADB financing. ADB s engagement must consider opportunities for long-term financing and knowledge partnerships so as to maximize leverage of ADB s resources and expertise. VI. Strategic Priorities 14. Consultations with DMCs and other stakeholders are very important to determine and decide ADB s strategic priorities going forward. These strategic priorities will need to directly support the development prospects of DMCs and will need to help ADB progress on the vision of a poverty-free, inclusive and resilient Asia. For purposes of discussion, the following strategic priorities may be considered:
4 15. Supporting sustained and inclusive growth. Promoting economic growth that is inclusive and equitable is critical for the elimination of poverty, the reduction of inequality, and the creation and expansion of access to economic opportunities. 16. Catalyzing private sector investment and expertise for development. Promoting the role of the private sector, both upstream (improving the investment environment) and downstream (direct investments) is vital to help create quality jobs and expand economic and business opportunities in Asia and Pacific. 17. Mainstreaming gender equality. Gender mainstreaming and direct investments in women and girls (for example for women-run small and medium enterprises, access to financial services, vocational education and health and social protection) are important to promote inclusion and participation of women in economic and social development. 18. Supporting climate change and the environment. ADB has already announced to double its annual assistance for addressing climate change from the current $3 billion to $6 billion by Many client DMCs need external support to meet their intended nationally determined contributions pledged under COP 21 in Paris to address climate change. 19. Strengthening governance and institutions. Governance bottlenecks could be addressed by adopting programmatic approaches to support structural and sector reforms, promoting transparent and accountable public systems, supporting domestic resource mobilization and strengthening of public expenditure management, and building institutional capacities. 20. Enhancing productivity and competitiveness. The potential to use new technology, including information and communication technology, to raising productivity and competitiveness is immense. Client DMCs need support for investments that rely on modern technology to enable innovation and efficiency and that result in widening the benefits of development interventions. 21. Deepening regional cooperation and integration. Client DMCs value ADB s role in promoting regional cooperation and integration through strengthening cross-border infrastructure, trade facilitation, and collective action and cooperation in areas such as energy, climate change, air pollution, natural disasters and the control of infectious health epidemics. 22. Given the long-term horizon (2030) of the strategy, and the changing landscape in the region, it is proposed that the new strategy remains flexible in responding to the development needs and challenges of client DMCs. A subset of medium-term (five year) operational priorities could be identified for more immediate implementation in close consultation with client DMCs. VII. Engagement Modalities 23. To implement the above-mentioned and other strategic priorities, the new corporate strategy will also need to focus on the question of the how. As part of this implementation question, the consultations will include seeking views and perspectives from stakeholders on ADB s modalities of engagement with DMCs going forward. Some key issues in this regard are the following: How should ADB expand private sector nonsovereign operations?
5 (ii) What types of innovations are needed in ADB s sovereign public sector modalities? What is the potential for expanding public-private partnerships? What type of knowledge services and policy support can ADB provide that would be of the most use for client DMCs? VIII. Business Processes, Policies and Organizational Reforms 24. Consultations with client DMCs will specifically focus on obtaining ideas about how ADB can further strengthen and streamline its business process and strengthen its staff skills and organizational structure to improve its efficiency and effectiveness and reduce transaction costs for clients. Key issues to be discussed will include the following: Reducing ADB s response time (though business process reforms, decentralization, and other measures);; (ii) Improving efficiency (through greater use of IT, further reforming and strengthening procurement process and policies, and exploring the use of country systems);; Improving project quality and implementation (through stronger project designs, building institutional capacities, and strengthening incentives and accountability for implementation);; Improving staff skills and capacities to better respond to client needs;; and (v) Strengthening organizational structures to better support client DMCs, including the role of resident missions. IX. New Corporate Results Framework 25. The consultations will also cover discussions on a new corporate results framework, which is being prepared, as targets in ADB s current results framework will expire in The new results framework will be aligned with the directions of the new corporate strategy and with the SDGs.
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