Economic and Social Security Cluster, 8 Sept. 2004 Asia-Europe People's Forum.

Economic and Social Security Cluster, 8 Sept. 2004 Asia-Europe People's Forum.

POVERTY ALLEVIATION, DEBT AND EQUITABLE DEVELOPMENT, THE ROLE OF POVERTY REDUCTION STRATEGY (PRS) AND ASIA DEVELOPMENT BANK (ADB).

The role of Germany and other European donor-countries and NGO activities

by Ulrike Bey
Asienhaus, Germany

Germany, one of the original 31 founding member countries, is an important donor country of the
ADB. It is the third-largest shareholder among the non-regional members. Of the current 63
members , Germany is the ninth largest shareholder and owns 4,37 per cent of the total shares in the
bank. The voting power of the German government amounts 3,8 percent among the total
membership and 10,87 percent from the total non-regional membership. It has an overall capital
subscription of US$ 2,27 billion and a paid-in capital subscription of US$ 159,30 million(1).
Out of the 14 European donor countries, Germany is the largest donor. (The biggest donors with the
highest voting power are the US and Japan).
Altogether the European have a combined voting power of 16,8 percent, which is higher than that of
Japan and the US. However, the European countries are clustered in different constituencies. The
EU countries have three constituencies which is equivalent to three seats in the 12-strong Board of
Directors. Together with Austria, Luxembourg, the United Kingdom and Turkey, Germany forms a
constituency and is represented in the Board of directors by one Executive Director (ED). The
combined voting power of this five-country-constituency is 7,2 percent.
Although donor countries in their national development policies are committed to poverty reduction
as an overarching goal – also formulated in the ADB’s policy - , and all have signed the UN
Millennium Goals the countries follow to some extent their own national agendas, namely when it
comes to contracts for the implementation of projects.
The use and effectiveness of the German contribution to the ADB is monitored by the German
Federal Ministry for Economic Co-operation and Development (BMZ). The Federal Ministry of
Finances (BMF) and the Federal Foreign Office (AA) also participate in specific decision-making
that concerns their scope of responsibilities.
According to the government, Germany’s involvement in the decision making and supervisory bodies
of regional development banks and the World Bank is an instrument for influencing these
development institutions towards the realization of sustainable development(2).

Special Funds and Resources
Donor countries contribute to Special Funds and Resources, namely the Asian Development Fund
(ADF) and to the Technical Assistance Special Fund (TASF). The ADF lends money to the poorest
ADB member countries at concessional interest rates at 1,5% over a long term of 24 to 30 years. It
is replenished every four years and increased since ADB announced its Poverty Reduction Strategy.
In ADF VIII Germany contributed US$ 1,37 billion (overall committed contribution US$ 18,18
billion). ADF IX was replenished in spring 2004. Germany committed to contribute but did not set
an amount because the new budget of the ministry has not yet been adopted.
The Technical Assistance and Special Fund provides money for project preparation and technical
and feasibility studies. In 2002 Germany committed US$ 18,56 million.

Cofinancing
An additional source for project financing is Co-Financing. Bilateral or private sources (commercial
financial institutions, official funding agencies, export credit agencies) are mobilised to increase the
cash flow. It is attractive for donor countries to co-finance projects because a "political risk
guarantee" is provided by ADB and the government. Besides, co-financing is tied money: Lucrative
contracts to convene or implement some co-financed projects go to companies from the financing
countries(3).

Privatisation and Corporations
Beside the damaging effects to people and environment „privatisation" is an issue of concern to many
NGOs.
The main pillar for ADB’s poverty reduction strategy is the development of the private sector as the
engine of growth to reduce poverty. Promoters of this strategy encourage the idea that delivery of the
poor from poverty could be done through public-private-partnerships that will provide services,
which are otherwise not possible for the government to provide to its poor.
Since ADB was founded in 1966, private sector corporations based in donor countries have
benefited immensely from goods, related services and civil works (GRSCW) contracts of ADBfunded
projects in the region. They get a share in the procurement contracts which were facilitated
through their country’s influence within the ADB.
It is therefore not surprising that thirty seven percent (US$ 20,1 billion) of the US$ 54,3 billion
awarded contracts for goods and services went to companies from donor countries with high voting
power: Japan, US and Germany (4).

Top 5 companies from top 4 donor countries with the most goods, related services and
civil works (GRSCW) contracts (1995-1999)

JAPAN ($342 million)

Mitsui and Co
1. Mitsubishi
2. Mitsui Engineering and Shipbuilding
3. Itochu
4. Marubeni

US ($209 million)

1. Cooper Rolls
2. Westinghouse International
3. AT&T
4. Raytheon Company Electronic Systems
5. Cargill Fertilizer

GERMANY($166 million)

1. Siemens AG
2. Man B&W Diesel AG
3. KGH Schulze
4. Dyckerhoff & Widmann
5. UNICO

UK ($43 million)

1. NVPSKG
2. Balfour Beatty
3. Acme Maris (China)Ltd
4. Siemens PLC
5. British Steel

Source: NGO Guidebook on ADB Series Vol.1 Nr.2

Many of theses companies awarded contracts from ADB loans and technical assistance are the
biggest companies in the world. Many are involved in large-scale infrastructure projects using
technologies that are either no longer politically acceptable or commercially viable in developed
countries.
Private companies, large engineering and construction companies in donor countries (particularlay
Japan, US, Germany, UK) and consulting companies in donor countries, therefore are some of the
immediate beneficiaries of ADB lending over the past three decades.
In 2001 and 2002 Germany’s share of procurement contracts totalled US$ 2,70 billion and US$
4,46. The cumulative procurement from 1967 to the end of 2002 was US$ 67,29 billion.
The following German companies benefited between 1 January 1998 to 31 December 2002 from
ADB projects as contractors and suppliers and the corresponding sectors(5).
In terms of Consulting projects, German consultants had been involved in 74 out of the total 3696
contracts between January 1985 to December 2002. The projects are worth US$ 90,62 million
(total US$ 2,03 billion).
Seeing all this statistics one has to bare in mind that all those projects and lending policy is done in
the name of „poverty reduction".
To conclude, Germany’s membership in the ADB does on the one hand comply to German
development policy, and its contribution to the bank is part of the ODA. On the other hand Germany
gains big benefits from - of course - the interest rates, but also from companies and corporations
which get lucrative contracts. Even if the governments have good intentions many projects are
questionable and do not necessarily make the lives of the poor better. Many projects, in fact, add to
the problems of the poor.

Role of NGO-engagement in the North
The responsible Ministries of the Donor governments have to assess whether and to what extend the
ADB’s operations achieve their promised development goals as they are spending public money.
The „achievement of the development goals" or the „success" of the projects is difficult to measure,
since the effects of the ADBs development operations are largely translated in socio-economical and
environmental costs and benefits. For this assessment the governments do not rely on independent
evaluations but on performance evaluations and reports prepared or commissioned by the ADB
itself.(6)
There are many NGOs and local stakeholders that report about disastrous project failings, negated
interests of local communities, inadequate information disclosure and failing accountability. These
reports seem not to reach the desks of the decision makers(7).
In many European and other donor countries is the local NGO attention for the ADB still very low.
In the Netherlands, for example, two organisations are following the bank’s activities, Both ENDS,
Friends of the Earth International.
In Germany, a recent development is the establishment of a NGO working group on the ADB. It is a
network of Asia-focused NGOs and interested individuals associated with organisations that are
engaged in development issues especially in Asia. The ADB is an issue or should be an issue for
them because the bank acts as a key player in development in the region.
Our tasks and challenges are:

• Raising awareness among the public that our government is a member and donor country to the
  ADB and spending tax money. As citizen and taxpayer of an important shareholder and donor
  country we want to be convinced how our money is valued and not wasted by the ADB in the
  name of poverty reduction in Asia and the Pacific.
• Engaging the government to ensure, that the positive developments in German politics and wellmeaning
  international policies of the German government is being reflected in its co-operation
  activities with the Bank (as said before, Germany claims that it exerts influence in the governing
  bodies of the bank).

Example: Forest Policy
When in 2003 the new forest policy was drafted, one group member inquired with the German ADB
governor Dr. Uschi Eid about the compatibility of the German Forest Policy with the ADB policy.
And Dr. Uschi Eid replied, that indeed the German Forest Policy is superior to the ADB policy. She
described the latest draft as „unfortunately behind our principles and minimum standards for this
sector; it does not reach the quality of the ‘Operational Standards’ of the World Bank."
How can Germany endorse this ADB policy and further give loans to the bank?

• monitoring of private sector / German companies that are involved in Germany’s co-financed
  projects with the ADB and those which are getting those lucrative procurement contracts.
• Strengthening the co-operation with Southern partners: make local stakeholders heard at the
  decision making tables as they know best about the actual impacts of the ADB operations
  Without this input from local stakeholders, it is impossible, even for well-intending donor-countries,
  to properly assess the ADB’s operations, and to critically consider their contribution to ADF / ADB,
  and the strength of the Northern NGOs in our advocacy efforts is the work of the groups in the
  South
• Boomerang effect: NGOs in the North sometimes have easier access to information (due to
  transparency policies): we can obtain information from the German BMZ about projects in for
  example Cambodia or Laos, which Cambodians cannot get.
• collaboration with other European NGOs to build efforts in order to develop a critical and
  committed engagement with the ADB: raise concerns, calling for transparency, fair and genuine
  participation of all stakeholders, and greater accountability.

1. ADB Fact Sheet on Germany, www.adb.org
2. BMZ, „Combating poverty - Our Goals in the Regional Development Banks", April 2003 www.bmz.de
3. see A Handbook on the Asian Development Bank, Focus Asien 16, 2004, p19
4. NGO Guidebook on ADB Series Vol.1; Nr. 2, ADB’s Private Sector Development Stratetgey (PSDS): Private
   Sector as the Engine of Growth 2001, p4
5. ADB Fact Sheet on Germany, www.adb.org
6. See Henneke Brink "On the Asian Development and Donor Countries that Hear and See Little Evil" in:
   BanglaPraxis Vol. 2, No. 1, June 2004
7. ibid.