Asian Development Bank runs risk of becoming 'irrelevant'

The United States, the Asian Development Bank's second-biggest donor, warned the institution on Tuesday it risked becoming irrelevant if it fails to adapt to the region's rapid economic expansion.

"It's important for the ADB to stick to its overall mission, but at the same time it's important for it to realise that it's an institution that needs to be almost continuously evolving," said US Assistant Secretary for International Affairs Clay Lowery.

"If it fails to evolve it's going to become irrelevant," said Lowery, who is heading the US delegation at the bank's board of governors meeting in Madrid.

"Our view is that the ADB is doing a pretty good job and it can do an even better job going forward, but it is going to have to evolve with the times," he told a news conference.

The United States is the second-biggest donor to the ADB after Japan, and the two countries are jointly the largest shareholders.

In a statement to the board of governors meeting on Monday, Lowery called on the ADB to make "institutional reforms," including steps to end what the US sees as a bias toward nationality over merit in its hiring practices.

He also urged it to "adapt to changes" in middle-income countries, referring to India and China.

"As time progresses and China becomes even wealthier, I think the ADB needs to figure out how it changes its products, how does it work in a different way with China," Lowery said on Tuesday.

The ADB is facing an internal row over its role and relevance in a region that has been transformed since the bank was founded 42 years ago to help developing Asian economies fight absolute poverty.

Washington also opposed the ADB's "Strategy 2020" long-term plan, which was approved by the bank's board this month.

"We worked with the management and other shareholders to try to get a strategy document that we were comfortable with, but we just never got there and so we voted our conscience," said Lowery.

"This is a financial institution, and financial institutions can put together strategic documents, but we usually want to see what are the resources that you are allocating against that strategy, what are the different types of scenarios that you are looking at in terms of lending volumes, in terms of operational products and how do they evolve over time.

"In this case the management did not really do that," he said.

ADB President Haruhiko Kuroda said on Monday the "Strategy 2020" envisages a region "free of poverty" through "inclusive growth, environmentally sustainable growth and regional integration."

"We at the ADB have set the stage for powerful change in the way we serve our developing member countries," he said in an inaugural speech to the board of governors.

The bank's long-term strategy has been largely overshadowed at the meeting by concerns over soaring food prices in the region.

Based in Manila, the ADB is owned by its 67 member countries – 48 from the Asia-Pacific region, and 19 from elsewhere around the world. (AFP)

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