Asean
Asian Development Bank defies G20
Authors: Stephen Howes, Robin Davies and Ashlee Betteridge, ANU
There’s a strong and welcome trend toward appointing the leaders of major international organisations through competitive processes — except in Asia.
The Asian Development Bank (ADB), whose president has just stepped down to head Japan’s central bank, looks set to appoint its new president just as it has always done: in a hurry, behind closed doors, without competition, and with the nomination coming from Japan.
At their 2009 summit in Pittsburgh, G20 leaders agreed that the head of any international institution should be appointed through an ‘open, transparent and merit-based process’. Subsequently, leaders of the World Bank, the IMF and the European Bank for Reconstruction and Development were all for the first time replaced through open contest.
In reality, there wasn’t much chance that the World Bank and IMF jobs would be awarded to anyone other than Jim Yong Kim and Christine Lagarde, but the nationality of the victors might be less predictable next time around. As for the European Bank for Reconstruction and Development presidency, few would have bet on a UK candidate, given that London is the seat of the bank, but respected UK civil servant Suma Chakrabarti beat a strong field on merit.
Cross to Asia and the vacancy left by ADB president Haruhiko Kuroda, effective 18 March 2013. All is eerily quiet. The ADB’s charter requires that Kuroda’s replacement be elected by the bank’s governors, and that candidates be nationals of regional member countries. In practice, ADB presidents — eight of them since the Bank’s founding in 1966 — have always been nominated by Japan and rubber-stamped by everybody else. Could this really be happening again?
One searches the ADB’s website in vain for any hints as to the appointment process for Kuroda’s replacement. There’s no information on how and by when to nominate, nor any selection criteria. If one actually asks the ADB, they reveal that the nomination period opened on 7 March and closed on 24 March — a remarkably short window of two weeks. Following that, governors will have a month to ‘elect’ the new president. Only the identity of the successful candidate will be publicly announced.
The Japanese quickly nominated Takehiko Nakao, deputy finance minister for international affairs, in terms that make it clear they expect no alternative candidate. The ADB’s host country, the Philippines, has welcomed his nomination, fatalistically stating, ‘we look forward to working with him’. Indonesia has also indicated that it expects the ADB presidency to stay with Japan. At this stage, no other candidates are known to have been put forward.
The ADB’s closed-door and almost certainly uncompetitive presidential appointment process now stands in stark contrast to the processes used by other international financial institutions. Japan’s candidate might well be strong, but one can easily think of other good ones. Boediono, Indonesia’s vice president and former head of the country’s central bank, has the financial and leadership credentials. Australia’s former treasurer Peter Costello would have been another credible candidate.
The ADB has taken important steps to improve its transparency and accountability in recent times. It was the first multilateral development bank to publish an annual review of development effectiveness. It has recently reinvigorated its accountability mechanism, which provides an avenue of appeal for people negatively affected by its operations. And it is making more project-level information available, including audit-related information.
These and other improvements have been recognised in recent comparative assessments of multilateral organisations conducted by the United Kingdom and Australia, which have rated the ADB very highly indeed. The bank’s shareholders demonstrated strong confidence in the institution in 2009 when they agreed to increase its capital base by 200 per cent, to US$165 billion.
By defying the G20 on the leadership issue, and by putting politics ahead of merit, the ADB is putting its recent reputational gains, and indeed its future effectiveness, at risk. It is not only the process for hiring the president that needs to be overhauled at the ADB. Vice presidential positions, of which there are now six, are also allocated to particular countries and groupings. And Japan has a stranglehold on some other key, senior jobs.
Why is the ADB ignoring the G20, a body where Asian countries are well represented? One plausible reason is fear of Chinese domination. This would explain the early support by the Philippines and Indonesia for the presidency staying with Japan. If so, this unedifying process is bad news not just for the ADB but for the future of Asian cooperation.
Stephen Howes is Director, Robin Davies is Associate Director, and Ashlee Betteridge is a Research Officer at the Development Policy Centre, The Australian National University.
A version of this article was first published here on AsiaOne.
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Asian Development Bank defies G20
Asean
ASEAN weathering the COVID-19 typhoon
Author: Sandra Seno-Alday, Sydney University
The roughly 20 typhoons that hit Southeast Asia each year pale in comparison to the impact on the region of COVID-19 — a storm of a very different sort striking not just Southeast Asia but the world.
Just how badly is the COVID-19 typhoon thrashing the region? And what might the post-crisis recovery and reconstruction look like? To answer these questions, it is necessary to investigate the strengths and vulnerabilities of Southeast Asia’s pre-COVID-19 economic infrastructure.
Understanding the structure of the region’s economic house requires going back to 1967, when Southeast Asian countries decided to pledge friendship to one another under the ASEAN framework. While other integrated regions such as NAFTA and the European Union have aggressively broken down trade barriers and significantly boosted intra-regional trade, ASEAN regional economic integration has chugged along slower.
Southeast Asian countries have not viewed trade between each other as a top priority. The trade agreements in the region have been forged around suggestions for ASEAN countries to lower tariffs on intra-regional trade to within a certain range and across limited industries. This has lowered but not eliminated barriers to intra-regional trade. Consequently, a relatively significant share of Southeast Asian trade is with countries outside the region. This active extra-regional engagement has resulted in ASEAN countries’ successful integration into global value chain networks.
A historically outward-facing region, in 2010 around 75 per cent of Southeast Asian commodity imports and exports came from countries outside of ASEAN. This share of extra-regional trade nudged closer to 80 per cent in 2018. This indicates that ASEAN’s global value chain network embeddedness has deepened over time.
Around 40 per cent of ASEAN’s extra-regional trade is with the rest of Asia. From 2010 to 2018 Southeast Asian countries forged major trade relationships with four Asian countries: China, Japan, South Korea and India. Outside Asia, the United States is the region’s major trading partner. ASEAN’s trade focus on Asia’s largest markets is not surprising. Countries tend to establish trade relationships with large, geographically close, and culturally similar markets.
Fostering deep relationships with a few large markets, however, is a double-edged sword. While it has allowed ASEAN to benefit from integration in global value chains, it has also resulted in increased vulnerability to the shocks affecting its network connections.
ASEAN’s participation in global value chains has allowed it to transition from a net regional importer in 1990 to a net regional exporter in 2018. But the region’s deep embeddedness in a small and tightly-coupled network cluster of extra-regional global value chain partners has exposed it to disruption to any and all of its external partners. By contrast, ASEAN’s intra-regional trade network structure is much more loosely-coupled: a consequence of persistent intra-regional trade barriers and thus lower intra-regional trade intensity.
In the pre-COVID-19 period, ASEAN built for itself an economic house held up by just five extra-regional markets, while doing less to expand and diversify its intra-regional trade network. The data shows that ASEAN trade became increasingly concentrated in these few external markets between 2010 and 2018.
This dependence on a handful of markets does not bode well for risk and crisis management. All of the region’s major trading partners have been significantly affected by COVID-19 and this in turn is blowing the ASEAN economic house down.
What are the ways forward? The immediate task at hand is to get a better picture of the region’s position in global value chain networks and to get on top of managing its network risk exposure. Already there are red flags around the region’s food security arising from its position in food value chains. It is critical to look for ways to introduce flexibility into existing supply chains for greater agility in responding to crises.
It is also an opportune time for ASEAN to harness the technology transfer gains of global value chain participation and invest in innovation-driven diversification of products and markets. The region’s embeddedness in global value chain networks certainly places it in a strong position to readily access large export markets not just in Asia but also Europe and the Americas.
Over the longer term, ASEAN is faced with the question of whether it should seriously look…
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