Students of economic history would be interested in this exhaustive account of the workings of the Asian Development Bank (ADB) since its inception 50 years ago. Written by Australian economist Peter McCawley, who has served on the bank’s board of directors, Banking on the Future of Asia and the Pacific: 50 Years of the Asian Development Bank discusses the history of the institution through three perspectives: Asia’s economic development, the evolution of the international development agenda and the story of the ADB itself.

The book follows a chronological order from the time when the idea of a development bank based in Asia was first mooted in the early 1960s, to when it was established in 1966, all the way through to the present. The chapters cover development in Asia and the role of the ADB separately and are arranged by decade. They begin with the “ferment and transformation” of the 1960s in Asia, go on to discuss how the growth momentum was established in the 1970s, and then describe the transformation in the region and the emergence of East Asia as an economic powerhouse in the 1990s. An important chapter deals with the Asian financial crisis of 1997, but the last few chapters reaffirm the resumption of East Asia’s growth trajectory. The book ends with a forward-looking, largely optimistic note on where Asia — and the ADB — are headed with regard to economic, social and human development.

It is interesting, but not surprising, to learn that the idea for the establishment of the ADB was first mooted by Japanese economists with Takeshi Watanabe, a former executive director at the World Bank, playing a central role. Watanabe went on to become the first president of the ADB. Japan’s central role in creating the bank in the face of a somewhat cool initial response from the United States ensured that it also has the largest proportion of shares in the bank’s capital and retains the privilege of always appointing the president of the bank from within the cadres of Japanese public servants.

A proposal that was initially met with little enthusiasm, yet resulted in an institution now half a century old

The chapter on the negotiations leading to the establishment of the bank has some interesting information, including the fact that not only was Iran one of the first countries to support the idea, but it was also a strong contender to house the institution, enthusiastically offering Tehran for the purpose. Nevertheless, when the bank was finally established, Iran did not join. The chapter also discusses how Watanabe’s presentation to the World Bank about the establishment of a new development finance institution in Asia met with little enthusiasm, pushing him to seek support from the United Nations Economic Commission for Asia and the Far East. Indeed, the fact that the bank was eventually headquartered in the Philippines and not in Japan — as Japan could not garner enough votes for the purpose — is also intriguing and demands more discussion.

And here is where the account falters. All of the above information is presented as just that: information or plain fact. There is no discussion of the politics and diplomatic rivalry underlying these events. The reader is left wondering why the Shah of Iran lost interest in the ADB, or why the World Bank, then the premier development institution, was not convinced by Watanabe’s argument that Asia needed more attention than it could provide, and that international capital markets could indeed accommodate another intermediate borrower. There is similarly no discussion of why, in spite of repeated ballots, Japan could not add to its tally of eight votes for its bid to have Tokyo host the bank. It would have been interesting to get a more nuanced account of these dynamics, particularly now that China has taken the lead in setting up a similar institution, the Asian Infrastructure Investment Bank, that reportedly is being viewed with some scepticism by the more established players.

A similar reluctance to discuss politics, war, or underlying social conflict presents itself throughout. The Vietnam war is glossed over as a period when “Southeast Asia was attracting growing attention from the United States,” with the only acknowledgment of the importance of the conflict being that it had “widespread political and economic implications” for the ADB (but there is no discussion of what these implications actually were, or why it was not till 1993 that ADB resumed lending to Vietnam). The dictatorships in Indonesia, the Philippines and Pakistan, to mention just a few in a region characterised by the existence of autocratic government, are only mentioned if they became the foci of unrest. This unrest, in turn, is only mentioned as an explanation of why growth may have slowed down. Instead, there is a sharp focus on the success of the Asian tigers (Singapore, Taiwan, South Korea and Hong Kong), and the second wave of Tiger Cub economies (Thailand, Indonesia, Malaysia and the Philippines).

One of the few occasions when the narrative opens up about the complexities of international relations is when the status of India and China is discussed. There is a detailed discussion on the machinations the bank had to engage in with regard to the membership of Taiwan, to accommodate China as a member in the early 1980s (these involved changing the nomenclature to identify Taiwan and removing all member-country flags from ADB headquarters). Similarly, the story is not followed through in noting the dilemmas faced when India decided to change its status from a non-borrowing to a borrowing member and the tensions this caused with the World Bank that had traditionally lent to the big economies in the region. There is no explanation of how the World Bank was placated, allowing India to become one of the ADB’s largest borrowers.

Readers from Pakistan may be disappointed because there is little content on the country’s economy, and a box item on the Turkmenistan-Afghanistan-Pakistan-India pipeline seems to not have been updated.

While the book does not really present a political economy perspective that would be of interest to the common reader, its value lies in its explanation of how lending operations actually work, the costs of financing and the priorities of international organisations. For example, it should be of interest to Pakistani policymakers that regional cooperation is now a major priority and the bank has launched a number of initiatives to support transnational projects. The ADB sees its role in such initiatives as a financier, a knowledge bank, a capacity builder and an honest broker. Such a role could be valuable for Pakistan as the country prepares to host the China-Pakistan Economic Corridor investments and look beyond into central Asia through its National Trade Corridor Improvement Programme.

For those who are interested in international development from a mainly technocratic perspective, this book contains a wealth of data and information. Its threadbare discussion of the Asian financial crisis will be interesting for students of macroeconomics, as will be the discussion on regional cooperation that clearly points to the bank’s interest in fostering cross-border relationships to ensure sustainability of its projects. The book would be a valuable addition to a university or college library, and will find a readership in economic policymaking circles.

The reviewer is a research and policy analyst

Banking on the Future of Asia and the
Pacific: 50 Years of the Asian Development
Bank
By Peter McCawley
Asian Development Bank
ISBN: 978-9292577919
522pp.

Published in Dawn, Books & Authors, July 2nd, 2017