U.S. Loses Stature at Asian Development Bank : Isolated From Other Member Nations Because of Emphasis on Private Sector

On his first overseas trip as President, George Bush described his visit to Tokyo, Beijing and Seoul last month as designed to underscore American “plans to play a strong and affirmative role as an Asian power.” But the United States is casting a far different image at the Asian Development Bank, the region’s No. 1 international financial institution.

Indeed, Washington is seen as dragging its feet on financial support to the bank, which it helped establish and in which it has shared equal leadership with Japan. The 23-year-old bank assists developing countries that are members and provides loans and technical assistance to governments and private agencies in such countries.

However, staking out a role that many critics call nagging and negative, the United States has charged that the ADB pays too little attention to the private sector. Also, the United States has voted against about 10% of the bank’s recent loans in an effort to force countries that receive the aid to overhaul their domestic economies, thereby reducing government involvement and opening their markets.

Increasingly, the United States is finding itself isolated among the 47 nations that own the bank. And into the vacuum has stepped Japan, whose enthusiasm and support for the ADB stand in vivid contrast with the American position.

One Japanese official, speaking privately, said he believes that if the United States asked Japan to take over ADB leadership, Tokyo would agree to do so. But “they haven’t asked,” he noted.

Bank President Masao Fujioka expressed irritation with both American parsimony and an insistence by the U.S. representatives to the bank on making loans to private enterprise--even in countries that have no private business firms.

Reagan Effort Cited

Even so, Fujioka stressed in an interview that “I do not regard (disputes with the United States) as a war.”

On the American side, the U.S. representatives, who are appointed by the Treasury Department, find themselves engaged in a miniature version of Washington’s beleaguered defense against Tokyo’s growing global financial power.

One major American motive in helping to establish the bank in 1966, when U.S. financial power dominated the world, was to encourage a more active economic and political role by Japan in Asia. At the time, Washington accepted equal ownership ratios and voting rights in the bank with Tokyo and agreed informally that the institution’s president would always be Japanese. Each nation currently holds a voting share of 16.4%.

Much of the dispute stems from an effort by the Reagan Administration, beginning in 1985, to change some of the practices of the ADB and other regional development banks.

“It would be a grave mistake to break the relationship of parity with Japan,” said one U.S. official, who spoke on the condition that he not be identified. “The ADB is the only financial institution in Asia in which the United States is a member. We should stay in this institution . . . and keep our eyes open to the opportunities that are developing in Asia.”

Big Japanese Contribution

In recent years, however, the United States has kept its bank contributions of a type that are tied to voting shares equal to Japan’s only by inducing Tokyo to hold back. At the same time, American donations to a separate ADB fund for “soft” loans to developing nations--those given at low or no interest, or repaid only in the borrower’s currency--have been dwarfed by Japan’s.

By the end of 1988, Japan’s total soft-loan contributions of $5.9 billion amounted to 53.2% of the money the bank lends, compared to the United States’ $1.4 billion, or 12.6%.

American representatives fear that if the United States allows Japan to gain the upper hand, U.S. interest in the bank will plunge.

“We would allow ourselves to slip to a second-echelon power in the bank,” the U.S. official predicted.

One key American staff member at the bank has repeatedly criticized the U.S. government’s change in attitude.

The United States’ “role and image” in the ADB, as well as in the World Bank and the International Monetary Fund, is marked by “flagging financial support,” S. Stanley Katz, vice president in charge of operations, said in a recent interview.

Katz, who has made similar points in several speeches, said the United States “is frequently seen as demanding, negative and pursuing its own agenda--sometimes working at cross-purposes with the missions of the (three international) organizations.”

He complained: “The United States still seems to view Asia as a question of strategic balances, protection of sea lanes and defense perimeters. These interests, while important, should not continue to obscure the fact that it is commerce and economics--not defense--that now drives the region.”

Katz insisted that the United States’ problems with the ADB run deeper than disagreements with policies and operations. A general ignorance of Asia has caused the American presence in such areas as trade and exports to not keep pace with the region’s surging growth, he said.

“Asia just doesn’t figure prominently inside the beltway (surrounding Washington),” he said. “Japan does, but not the region as a whole.”

Fujioka, who has served as ADB president since 1981, said “the (bank’s) staff from other countries would agree” with Katz’s charges. “Katz has been here for 10 years,” he said. “He knows the internal situation very well.”

Japanese representatives, meanwhile, say they are happy with the status quo. Recently they sought a larger voting share on the bank’s 12-member board, but they now insist that they do not want to surpass the United States.

“When we look at the clout, including military power, the United States holds in international councils, we don’t think that the time has come for Japan to take over from the United States,” said Shoji Mori, Japan’s ambassador to the ADB. “Rather, we believe we should join hands with the United States in seeking Asian development.”

In the United States, Congress has never balked at allocating the share of funds needed to retain equal voting rights with Japan, the American official insisted. And although it has blocked U.S. contributions to the soft-loan fund, that stems in large part from domestic budgetary problems, which have forced cutbacks to all international economic organizations.

In addition, this official said, appreciation of the yen and other currencies has made so much cash available for ADB loans that “we’ve almost got money coming out of our ears.”

Mori, noting a 50% increase in the bank’s soft loans between 1986 and 1988, agreed that ADB has sufficient funds for now. But he contended that the Americans have been tardy in meeting deadlines for soft-loan contributions and said that Japan hopes the Bush Administration will “make efforts to catch up in carrying out U.S. promises.”

Fujioka, meanwhile, charged that the American lack of enthusiasm is directed “not only toward this bank but toward foreign aid in general.”

American “aid fatigue” has prevailed for 10 years, reflecting huge U.S. budget deficits, he said. “Japan also has a budget deficit,” he added pointedly, “but it is willing to spend money for aid.”

Asked if he were concerned about diminishing U.S. support for the bank, Fujioka said: “What’s the use of being concerned? It is simply a reality. We must learn how to live with it.”