U.S. vote underlines unease about ADB policies

By Raju Gopalakrishnan

MANILA (Reuters) - A row has broken out between the Asian Development Bank and the United States, one of its biggest donors, over the multilateral agency's lending policies and function, bank and other officials say.

Just over two weeks ago, Washington voted against the ADB's long-term strategy, which charts the policies it hopes to adopt until 2020, the ADB's Web site www.adb.org says.

Britain abstained, but the rest of the 12-member board of the Asian multilateral lender approved it. The ADB holds its annual meeting in Madrid on May 3-6, where the strategy will be discussed by the bank's governors.

"We opposed the long-term framework because we believed it needed further improvements including an increased focus on the very poorest countries in the region and a better results measurement framework," a U.S. Treasury Department official said in Washington.

The official added that Washington nevertheless remained committed to the ADB and its aim of reducing poverty in Asia, but officials in Manila said they were concerned that U.S. funding commitments could be cut because of the row.

Bank officials said the U.S. disquiet appeared to be focused on the ADB's lending policies to middle-income countries, such as India and China, the fastest growing economies in the world.

When the ADB was formed in 1966, much of the region was mired in poverty and in need of help, but this was no longer the case.

"Asia has changed much quicker than the ADB," said an official, who declined to be named.

There also appeared to be more emphasis within the ADB on the amounts being loaned rather than the impact the loans would have, the officials said.

Last year, the Manila-headquartered ADB approved loans worth $10.1 billion, the highest in any year since it was set up, of which India got $1.4 billion and China $1.3 billion. Pakistan was the highest recipient with just over $2 billion.

The top 10 recipients accounted for 90 percent of the grants and loans approved in 2007, although the ADB lists 40 developing countries among its ranks that are eligible to receive funds.

The ADB has 67 members, of which 48 are from the region. Japan and the United States hold just over 15 percent each of the capital, and the bank's president is traditionally from Japan.

CONSENSUS

ADB President Haruhiko Kuroda has said despite the U.S. vote, there was a general consensus on bank strategy and that Washington was not opposed to the basic thrust of its policy.

He noted also that loans to India, China and other middle income countries were at market-linked rates while poorer nations were given soft loans under the Asian Development Fund (ADF) concessional window.