External Advisory Panel on the Future of the Asia and Pacific Region

Technical Assistance Report Project Number: 40155 June 2006 External Advisory Panel on the Future of the Asia and Pacific Region The views expressed herein are those of the consultant and do not necessarily represent those of ADB’s members, Board of Directors, Management, or staff, and may be preliminary in nature. ABBREVIATIONS ADB DMC LTSF MDG MTS SPD TA – – – – – – – Asian Development Bank developing member country long-term strategic framework Millennium Development Goal medium-term strategy Strategy and Policy Department technical assistance TECHNICAL ASSISTANCE CLASSIFICATION Targeting Classification Sector Subsector Theme Subthemes – – – – – General intervention Multisector – Capacity development, Governance, Economic growth Client relations, network and partnership development, institutional development, organizational development NOTE In this report, “$” refers to US dollars. Director General Director K. Sakai, Strategy and Policy Department (SPD) C. W. Maccormac, Strategic Planning, Policy and Interagency Relations Division, SPD S. Hattori, Principal Planning and Policy Specialist, SPD Team leader I. INTRODUCTION 1. In 1981/82, the Asian Development Bank (ADB) launched its first comprehensive review of its operations, led by an external advisory group and financed under a regional technical assistance (TA), 1 to guide its strategy and policies for the 1980s. The review was updated in 1986/87 by ADB staff. In late 1987, a study on ADB’s role as a regional development bank in the rest of the century was begun at the suggestion of several governors. Funded under another TA,2 the study called as well for the formation of an external panel of eminent persons. The recommendations of the panel became The Asian Development Bank in 1990s: the Panel Report, also known as the Okita Report. The report formally set in motion ADB’s strategic planning and the drafting of a long-term strategic framework (LTSF) for ADB’s transformation into a broader-based regional development bank in the 1990s. 2. In late 1997, ADB laid the groundwork for a review of its vision for the new millennium, and in 1999 it made poverty reduction its single, overarching objective. A region free of poverty is the vision that underpins the 2001–2015 LTSF. The LTSF was prepared with the assistance of yet another external advisory panel of distinguished public and private sector leaders3 and through open and candid dialogue with ADB stakeholders. Under the LTSF, the core strategic areas for ADB’s interventions in 2001–2015 are: (i) sustainable economic growth, (ii) inclusive social development, and (iii) governance for effective polices and institutions. The LTSF has three crosscutting themes: (i) the role of the private sector in development, (ii) regional cooperation and integration for development, and (iii) environmental sustainability. 3. While the 2001–2015 LTSF largely remains relevant in its focus, recent changes in the context of ADB’s operations cannot be ignored. New developments and the dynamic environment of the Asia and Pacific region prompted the ADB President, at the 39th annual meeting in Hyderabad, India, to announce ADB’s intention to undertake a consultative and comprehensive midterm review of the LTSF. The goal is for ADB to realign its operations to stay relevant and effective as a regional development bank in achieving its overarching objective of a region without poverty. To initiate this process, it is proposed that a panel of eminent persons be convened to provide insights on the region’s future and how it will affect the future role of ADB. The panel’s views will be discussed at ADB’s annual meeting in 2007 and will be the basis for a comprehensive and consultative review of the LTSF. II. ISSUES 4. The Asia and Pacific region is undergoing dramatic change. ADB must change as well and align itself to the region’s rising needs and demands to stay relevant and responsive to its developing member countries (DMCs), achieve the overarching objective of a region free of poverty, and attain the Millennium Development Goals (MDGs). Although ADB’s LTSF for 2001– 2015 is still relevant in many respects, many factors not foreseen at the time of its preparation have emerged as driving forces of change in the region, as a review of the implementation of the first medium-term strategic framework (MTSF-I) and the preparation of the second medium-term strategic framework (MTSF-II) have shown. 1 2 3 ADB. 1981. Technical Assistance for Study of the Bank’s Operational Priorities and Plans for the 1980s. Manila. ADB. 1987. Technical Assistance for Study of Role of the Bank in the 1990s. Manila. The external advisory panel was funded by a technical assistance: ADB. 2000. Technical Assistance for the External Advisory Panel on a Long-Term Strategic Framework. Manila. 2 5. For instance, higher-than-expected economic growth in emerging economies like the People’s Republic of China and India is transforming the region into a dynamic business and industrial environment, attracting significant foreign investment. The region as a whole is marked by sustained economic growth (averaging 6% per year in the past 5 years) and greater financial strength, as well as a rapid reduction in the proportion of people living in absolute poverty. Yet more than 621 million live on $1 or less a day, and 1.9 billion on less than $2 a day. There are clear signs of accelerating disparity between DMCs, and between segments of the population within a DMC, requiring a closer scrutiny of the sharing of the benefits of high economic growth and of the impediments to equitable and inclusive development. 6. High economic growth is taxing the environment and accelerating the depletion of energy and other mineral resources. Fast-paced urbanization—36% of the Asian population is now urban—is taking a toll on urban infrastructure, and on the quality of air and water supply. Moreover, rural poverty remains high, and reported progress in ensuring access to clean water in rural areas is below the MDG target for many countries. There is also a growing awareness of the importance of promoting good governance and combating corruption so that aid flows translate into economic growth and poverty reduction. Weak governance and corruption affect the poor most. The effects are particularly poignant for the weakly performing countries without sound policies and institutions to govern well and fight corruption. There is thus a need to rethink strategic priorities and put in place innovative measures to build capacity in the DMCs where governance is poor and corruption rife. 7. On the other hand, the region also offers promising opportunities. The growing momentum toward regional cooperation and integration is likely to enhance the potential for sustained economic growth, while overcoming risks to growth and equitable and inclusive development. Among the measures being considered are developing cross-border infrastructure and software, facilitating regional trade and investment, strengthening monetary and financial cooperation, and promoting regional public goods. ADB, as a regional development bank, can be expected to play an important role in supporting such regional initiatives. The growing presence of the private sector in regional development also creates new opportunities for ADB. While ADB’s private sector operations have gained in magnitude, realigning ADB’s operations to further promote the private sector and partner with it for the development of the region would yield significant results. 8. Given the evolving opportunities and challenges of the Asia and Pacific region, there is now a need for a consultative and comprehensive review of ADB’s LTSF. The review would lead to an effective realignment of ADB’s operational priorities with the needs of its dynamic operational environment to achieve the overarching objective of poverty reduction and attain the MDGs of the DMCs. Before the review, however, there must be a shared consensus on the current and future operational environment of ADB and the role ADB will play as a trusted partner in regional development. III. A. Impact and Outcome THE TECHNICAL ASSISTANCE 9. The TA will enable ADB to clearly prioritize its operational challenges and opportunities, identify elements essential to staying relevant and effective as a regional development bank, and obtain sound guiding principles for a comprehensive midterm review of the LTSF, planned for 2007. The LTSF review will benefit from a clearer perspective shared with all stakeholders, and from a 3 well-defined direction and basis for its approach. The TA4 design and monitoring framework is in Appendix 1. B. Methodology and Key Activities 10. ADB will invite six persons of internationally recognized eminence and stature to take part in panel discussions as members of the eminent persons group. The group will meet four times to advise ADB on its future role. The panel will (i) identify key drivers of change, elements of economic growth, and major risks to and constraints on economic growth and equitable and inclusive development in the Asia and Pacific region; make recommendations on the future role of ADB within the dynamic operational environment of the region; and on the basis of the foregoing recommendations, further discuss and formulate guiding principles for a comprehensive midterm review of the LTSF. (ii) (iii) 11. The group will discuss and advise ADB on the following major issues, among others: (i) key trends that will shape the region’s future success, challenges, and risks; (ii) development assistance to sustain success and manage risks; (iii) the role of ADB in providing such assistance; (iv) the most relevant types and modes of assistance; and (v) the most effective methods of delivering assistance. The discussions will derive value from the independence of the group’s members and from their insights, which are not readily available within ADB. The Strategy and Policy Department (SPD) of ADB, in consultation with other relevant departments, will prepare a concise paper with basic background information for the panel discussions, but the discussions themselves will be free-flowing and unconstrained. 12. After each panel discussion, SPD will prepare a synthesis report with the help of international and national consultants. Each synthesis report will include feedback from ADB stakeholders; in addition, the consultants will ensure that the discussions are based on current and accurate information by seeking more data and information from ADB stakeholders or other sources as necessary. 13. The final report will contain the discussions and recommendations of the panel, together with the guiding principles for the comprehensive midterm review of the LTSF. This report will be presented at ADB’s 40th annual meeting in Kyoto in May 2007 to support deliberations among ADB stakeholders, and will be the basis for ADB’s review of the LTSF in consultation with its stakeholders. C. Cost and Financing 14. The total cost of the TA is estimated to be $700,000 equivalent, to be financed on a grant basis from ADB’s TA funding program. Appendix 2 gives details of the cost estimates and financing plan. The views expressed herein are those of the consultant and do not necessarily represent those of ADB’s members, Board of Directors, Management, or staff, and may be preliminary in nature. 4 The TA first appeared in ADB Business Opportunities on 19 June 2006. 4 D. Implementation Arrangements 15. SPD will implement the TA over 11 months, from July 2006 to May 2007. ADB will invite six persons of internationally recognized eminence and stature to serve in their individual capacities as members of the external advisory panel. The outline terms of reference for the external advisory panel are in Appendix 3. 16. ADB will also hire one international consultant for 4 person-months and one local consultant for 8 person-months, for a total of 12 person-months of consulting input. The outline terms of reference for these consultants are in Appendix 4. Individual consultants will be directly selected and hired according to ADB’s Guidelines on the Use of Consultants and other arrangements satisfactory to ADB for the hiring of consultants. 17. As outlined in the terms of reference (Appendix 4), the consultant team will produce several reports, each of which will be discussed with ADB. About 2 weeks after the consultants are hired, the international consultant will submit the inception report to ADB. The report will contain: (i) the preliminary plan and organization of the four sessions of the external advisory panel, and (ii) the work program of the consultants. 18. After each session of the external advisory panel, a synthesis report highlighting issues and proposing the next steps will be prepared. A final draft report will be submitted to ADB by March 2007. It will (i) identify key drivers of change, elements of economic growth, and risks to and constraints on economic growth and equitable development in the region; (ii) make recommendations on ADB’s future role; and (iii) present guiding principles for the midterm review of the LTSF. The international consultant will incorporate in the report all the relevant comments on the report from the members of the panel and other ADB stakeholders. IV. THE PRESIDENT'S DECISION 19. The President, acting under the authority delegated by the Board, has approved the provision of technical assistance, not exceeding the equivalent of $700,000 on a grant basis, for supporting the External Advisory Panel on the Future of the Asia and Pacific Region, and hereby reports this action to the Board. Appendix 1 5 DESIGN AND MONITORING FRAMEWORK Design Summary Impact Asian Development Bank’s (ADB’s) medium and longterm strategic frameworks effectively realigned to meet the needs of the dynamic operational environment to achieve ADB’s overarching objective of poverty reduction and attain the Millennium Development Goals (MDGs) of the developing member countries (DMCs) Outcome A clear perspective and a coherent framework shared with all ADB stakeholders for effectively undertaking the comprehensive midterm review of ADB’s long-term strategic framework (LTSF) in the context of its dynamic environment Outputs Final report: (i) identifying key drivers of change, elements of economic growth, and risks to and constraints on economic growth and equitable development in the region; (ii) making recommendations on ADB’s future role; and (iii) presenting guiding principles for the midterm review of the LTSF Activities and Milestones Performance Targets/Indicators Data Source/Reporting Mechanisms Economic statistics of DMCs Statistics on poverty and progress report on MDGs of DMCs Review of ADB performance Quality-of-life indices and data Assumptions and Risks Stronger developmental impact, measured by gross national product growth and ratio of poverty reduction across DMCs Improving trends in portfolio performance and in the ratio of successful projects Assumptions ADB’s capacity to adapt to changing global and regional economic and financial conditions Availability of adequate ADB resources Risk Readiness of ADB as an institution to make the necessary realignments Coherence and usefulness of the direction and approaches formulated for the comprehensive midterm review of the LTSF Feedback from the working group to be appointed for the comprehensive midterm review of LTSF Feedback from all stakeholders during the comprehensive midterm review Synthesis report on consultations and discussions of the panel, to be prepared by the international consultant Final TA report Assumption Consensus and agreement among ADB stakeholders on the perspective and framework for the comprehensive midterm review of the LTSF Relevance and usefulness of the report for a comprehensive midterm review of ADB’s LTSF Degree of consensus attained on the report among the panel members Assumptions Panel consensus on major issues Adequate inputs from ADB’s stakeholders Risk Timely plenary sessions of the panel Inputs The views of panel membersare those of the consultant and do not necessarily represent to provide Selection expressed herein and formation of the external advisory panel ADB those of ADB’s members, Board of Directors, Management, or staff, and may be preliminary in nature. $700,000 to fund the Selection and hiring of international and local consultants formation of the Holding of four panel sessions and stakeholder consultations (as required) external advisory panel ($360,000), services of 6 Appendix 1 Activities and Milestones Submission of draft final report to ADB Inputs international and local consultants ($196,000), the three panel sessions ($60,000), and contingencies ($84,000) ADB stakeholders (DMCs, Board members, ADB management, and staff) to provide inputs as required by the external advisory panel, and the international and local consultants Christopher W. Maccormac Director Strategic Planning, Policy and Interagency Division Strategy and Policy Department Date: Kazu Sakai Director General Strategy and Policy Department Date: Appendix 2 7 COST ESTIMATES AND FINANCING PLAN ($’000) Total Cost Item Asian Development Bank (ADB) Financinga A. Panel Members 1. Remuneration and Per Diem 2. International and Local Travel Subtotal (A) B. International Consultants 1. Remuneration and Per Diem 2. International and Local Travel 3. Administration and Support Cost Subtotal (B) C. National Consultants D. Panel Sessions/Stakeholder Consultation E. Miscellaneous Costs F. Contingencies Total Financed by ADB’s technical assistance funding program. Source: ADB estimates. a 240.0 120.0 360.0 144.0 20.0 10.0 174.0 22.0 50.0 10.0 84.0 700.0 The views expressed herein are those of the consultant and do not necessarily represent those of ADB’s members, Board of Directors, Management, or staff, and may be preliminary in nature. 8 Appendix 3 TERMS OF REFERENCE FOR THE EXTERNAL ADVISORY PANEL 1. The Asian Development Bank’s (ADB) long-term strategic framework (LTSF) for 2001– 2015 sets out a strategic framework for ADB’s actions to pursue its vision of an Asia and Pacific region free of poverty. Adopted from ADB’s poverty reduction strategy approved in 1999, LTSF’s core areas of intervention were identified as pro-poor sustainable economic growth, social development and good governance. The medium-term strategy I: 2001–2005 (MTS I) translated the LTSF into actionable medium-term strategies, responding to the region’s urgent development needs. The medium-term strategy II (MTS II), covering three years from 2006 to 2008, is the second in the series of the medium-term strategies within the LTSF time horizon. 2. Although the LTSF remains relevant in many respects, in reviewing the implementation of MTS I and in preparing MTS II, it was recognized that many factors not envisioned at the time of LTSF preparation have emerged as driving forces of change in the region. While MTS II introduces strategic measures to the already identified and immediate regional challenges, ADB intends to undertake a more comprehensive midterm review of the LTSF so that it may continue to be relevant and effective as a regional development bank. In initiating this process, it was proposed that a panel of eminent persons be convened to provide insights on the region’s future and their implications to the future role of ADB. 3. The following are the terms of reference for the external advisory panel. 4. To advise the ADB regarding its priority operational challenges and opportunities within the dynamic global/regional environment, the elements essential for maintaining ADB’s operational relevance and efficacy as a regional development bank. The Panel’s final report will provide a strategic perspective that can be shared with all stakeholders and provide basis for formulating relevant approaches for conducting a comprehensive midterm review of the LTSF. 5. The Panel to be constituted for the purpose of this study will consist of six persons of internationally recognized eminence and stature, and will be invited to serve in their individual capacities. The panel is expected to commence work in July/August 2006 and submit its final report to ADB President by March 2007. 6. (i) (ii) It is proposed that the Panel study and advise on the following: recent key changes and prospects in the region and the main driving forces; key long-term development challenges facing the region, including risks to the region’s inclusive and sustainable development, and measures to address these risks; evolving global environment (including the environment for official development assistance) and implications for Asia and the Pacific; recommendation on the future role of ADB as a regional development bank within the dynamic operational environment of the Asia and Pacific region; and key issues that ADB needs to take into account in conducting a comprehensive midterm review of ADB’s LTSF. (iii) (iv) (v) Appendix 3 9 7. As deemed necessary, the Panel, from time to time, may seek inputs from ADB stakeholders, including the members of the Board of Directors, ADB’s client countries, ADB Management and its Staff. 8. The Panel may examine any other aspects of the global/regional economy and their implications for ADB’s operations which it considers pertinent and recommend any measures it regards as being in the interest of ADB and its membership. The views expressed herein are those of the consultant and do not necessarily represent those of ADB’s members, Board of Directors, Management, or staff, and may be preliminary in nature. 10 Appendix 4 TERMS OF REFERENCE FOR THE CONSULTANTS A. International Consultant 1. An internationally recruited consultant with expertise in strategic planning, policy development, and stakeholder consultation processes will be engaged for 4 person-months. The consultant will be responsible for assisting SPD in (i) planning, organizing, coordinating, and facilitating the four panel sessions of eminent persons group and stakeholder consultations, as required; drafting the background/issues briefs for each panel session and stakeholder consultations, as required, to enable focused discussions and derive desired outputs from the sessions and consultations; obtaining inputs from ADB stakeholders from time to time as deemed necessary by the panel; drafting at the end of each panel session a synthesis paper summarizing the deliberations and conclusions of the panel; summarizing in a short paper the strategic issues raised and approaches discussed after consultation with each stakeholder; drafting and finalizing the final report by end March 2007, with all relevant comments from the eminent persons group and stakeholders incorporated; and providing full support to the project officer on matters pertaining to successfully holding the four panel sessions, undertaking stakeholder consultations as required, and completing the final report. (ii) (iii) (iv) (v) (vi) (vii) B. National Consultant 2. A national consultant will render 8 person-months of services to assist the international consultant, the members of the eminent persons group, and the project officer on the following: (i) background research for issues briefs, synthesis paper of panel sessions, summary on stakeholder consultations, draft final and final report of the panel; logistic arrangements and administrative support for holding of the panel sessions; and logistic arrangements and administrative support for the members of the panel as required for their travel and participation in the panel sessions. (ii) (iii)