ADB chief seeks U.S. funding despite disquiet

A security guard stands outside the Asian Development Bank's (ADB) headquarters in Manila in this May 2008 file photo.

MANILA (Reuters) - The head of the Asian Development Bank was in Washington on Wednesday to seek U.S. support for additional funding, an official said, amid increasing questions from Congress about the functioning of the multilateral institution.

A spokeswoman for the Manila-based ADB said Haruhiko Kuroda, the president of the bank, would hold talks with U.S. Treasury Secretary Timothy Geithner later on Wednesday on a general capital increase for the institution.

The ADB is seeking is seeking to at least double its capital base from $55 billion. Donors are likely to decide by May, when the bank holds its next annual general meeting.

The United States, the biggest donor to the ADB along with Japan, has long called for more lending to aid poverty reduction in Asia's poorer economies, away from fast-developing nations. In 2007, the largest recipients of ADB funds were India, China, Pakistan and Vietnam.

In a letter to Geithner seen by Reuters on Wednesday, Senator Richard Lugar, the ranking Republican on the Senate Foreign Relations Committee, asked whether an increase in funding was appropriate given the global economic crisis.

"In light of the fact that nearly 50 percent of the ADB's regular lending in 2008 went to India and China, two fast-growing countries with access to private capital markets, one must ask whether the bank could do more with its current lending authority if it concentrated on its mission of poverty reduction in the least developed countries," it said.

Some donors have sought to link the increase in funding to speedier internal reforms at the development bank.

"If you determine that a capital increase is appropriate, I believe it is crucial that it be linked to specific commitment by the bank to undertake certain reforms," Lugar said in his letter to Geithner.

Some members of the ADB's board, who represent both borrowers and donors, are concerned about the bank's review of its energy and social safeguards policies, and the need for internal reforms, including staff management issues.

Last month, several NGOs wrote to the bank saying that its energy policy review was not transparent and the language adopted in the drafts of new policies diluted safeguards.

U.S. Democratic Senator Patrick Leahy and Representative Barney Frank said in another letter to Geithner last week that there were concerns the review could "weaken existing mechanisms for transparency and oversight" and "fall short of international standards and practices of other multilateral development banks".

The ADB has maintained that reforms that were currently ongoing were part of a self-improvement process rather than in exchange for any additional capital infusion.

"It is not a condition for capital increase but it is fair the shareholders ask us and hold us accountable for it," Rajat Nag, the ADB's managing director-general, said in an interview to Reuters earlier this month.

A higher borrowing base would allow the development bank to raise more funds which it can lend out to support emerging Asian economies. The ADB has said it expects much slower growth for the region than previously forecast because of the global downturn.

The 67 members of the ADB include 48 from the region and 19 from elsewhere, mostly Europe and North America.