Many people in the Pacific may not be aware that the Asian Development Bank (ADB) is about to ask all of its members for a general capital increase (GCI) – or more simply, a large capital injection.
The Pacific Institute of Public Policy (PiPP) has released a briefing paper in an attempt to explain what the proposed GCI means for Pacific island countries and  highlights the need for Pacific leaders to consider the ramifications of an increase on national budgets as well as ensuring that their voice is heard in the debate.
“Traditionally, the Pacific contributes little to the general capital of the ADB and so its representation on the board is left to others. This call for views on increased membership contributions presents as a great opportunity for the Pacific to be heard and to also influence the debate” says Mr Nikunj Soni, Executive Director of PiPP.
The increased membership contributions are required to boost the ADB’s general capital and so enable the bank to borrow more and so lend more to members.
The ADB has formally asked shareholders to consider 100 percent, 150 percent and a 200 percent general capital increase.”The impact of the global economic crisis on the Pacific region has yet to be fully understood” further proposal to increase contributions by 250 percent and 300 percent has been put forward by India.
It is expected that the ADB Board of Directors will release a final draft paper proposing the preferred GCI (anticipated to be 200%) on Monday 23 March, 2009. The Bank would then seek final say from the Board of Governors as to their position on the increase at its meeting in Bali on 4 May, 2009.
The PiPP briefing paper notes that if Pacific leaders are to be heard, they will have to act quickly and suggests a number of options including:
1. Asking for more time
2. Securing bi-lateral donor support to fund the additional amounts
3. Recommend one of the lower amounts that have little or no direct cash impact such as the 100% increase
4. Accept a higher GCI increase and seek some reforms of the ADB in exchange.
“The impact of the global economic crisis on the Pacific region has yet to be fully understood, which makes it even more important for Pacific leaders to make an informed and timely decision on this matter” says Mr Soni, adding that “the recently announced MOU between the ADB and the Pacific Islands Forum Secretariat is an indication that the relationship between the Bank and the Pacific is maturing, and in this light we call on each Pacific country to consider its options carefully, discuss with their representative on the executive, and more importantly vote in line with the wishes of their people and governments”.
