The Hindu Business Line : The ABC of ADB

THE one near-certainty in Kerala's political landscape is a see-saw movement of electoral fortunes between the ruling United Democratic Front (UDF) and the opposition Left Democratic Front (LDF).

You don't need to be a psephologist to know that. And if you are in the exalted position of the Leader of the Opposition, you can flaunt your psephological proclivities to brash levels, as V.S. Achuthanandan did last week.

At a sit-in by LDF Members of the Legislative Assembly to demand a session to discuss the Asian Development Bank (ADB) loan to Kerala, the Opposition Leader said that should the LDF return to power in the next elections, it will not repay the loan.

Ah, if only all our children had the same licence to write off the loans that we took from the likes of HDFC and LIC! Unfortunately, for lesser mortals, a bank is a bank, and defaulting on loans has legal implications that generations to come will scarce forget.

ADB, too, is a bank. And it certainly did not forget that primary role when it approved last week a $200 million equivalent loan to support Kerala's Modernising Government and Fiscal Reform Program (MGP).

The Government of the Netherlands is co-financing the programme of fiscal reform and social development with a $50-million grant, to be administered by ADB.

In this case, the borrower is the Government of India, which will determine the lending conditions to the Kerala Government. The executing agencies for the MGP are the State Government's Office of the Chief Secretary and the Finance Department.

To be sure, ADB is aware of the controversies its presence in Kerala will create. Its President's report to the Board Of Directors assesses the political risks associated with the loan thus: "Some interest groups are opposed to fiscal and structural reform and they do not understand the costs to the State economy of continuing with status quo policies even though the various measures have evolved through extensive discussions and analysis within Kerala. The cost of not implementing reforms, and the potential risks to present and future livelihoods will be well understood in a State that has high literacy."

But no one is leaving anything to chance. The State Government has prepared a communications strategy to improve awareness and understanding of its reform plan.

It plans to place a series of articles in all major Malayalam and English newspapers in the State. At least four articles will each deal with one aspect of importance or concern, followed by comments and opinions by leading academics and social scientists regarding the programme.

Radio, television, seminars and meetings will be the other avenues of getting the message across to the citizens. And that is this: The MGP will enhance the State's social and economic development by increasing accountability and pro-poor outcomes, improving service delivery and fostering sustainability.

It will push for fiscal sustainability, improved quality, equity and value-for-money of public services, and better targeting and quality of poverty reduction programmes and social services. It will also try and increase transparency, responsiveness, accountability and efficiency of State and local self-Governments.

These may be honourable intentions, but the problem with the ADB is its image. Founded in 1966 with 31 members, ADB is headquartered in Manila and currently boasts 61 member-countries.

As a multilateral institution, it receives resources from countries and lends money to the Central banks of developing member-countries in Asia. It currently has around $45 billion in capital, and loans about $5-6 billion annually.

ADB's largest donors, and thus its largest shareholders, have always been Japan and the US. The bank has always had a Japanese president. The bank shares with the World Bank and the International Monetary Fund (IMF) a neo-liberal economic philosophy that swears by streamlining Government and creating attractive settings for investment. All this is in the hope that employment will expand and prosperity will "trickle down" to all members of society.

Throughout its history, ADB has almost unvaryingly chosen the development path of industrialisation and large-scale capital investment.

This, aver critics, has often been at the cost of sustainable, long-term development.

ADB's critics say that its policies displace thousands, if not millions, of people from their homes, and destroys irreplaceable cultures and ways of life.

This is unlikely to happen in Kerala, where civil society is strong enough to function as a countervailing force.

Nonetheless, the ADB-funded reform programme can expect to face more of Achuthanandan-style vitriol.

The writer can be contacted at kg@tug.org.in

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