African Development Bank head Omar Kabbaj highlights the Bank's continued key role in promoting the continent's prosperity

What are your development priorities in the next twelve months?

Our development priorities in the next twelve months are contained within the operational programme which we are framing for the years until the close of the decade and beyond. The programme identifies the following areas of focus: The overriding goal of our engagement is the promotion of economic growth that supports poverty reduction and social development. The Bank Group will, therefore, promote broad-based economic growth that will generate greater productive employment and earning opportunities for the poor. We will give priority to agriculture and the social sectors because of their high impact on poverty reduction. The Bank Group will also continue its support in the traditional areas of transport, public utilities, industry and communications.

We recognise the crucial role of the private sector in fostering sustainable growth. In this respect, we have formulated a new strategy to expand the scope and effectiveness of our private sector operations with a view to playing a catalytic role in increasing the resources needed for investment. First, the Bank will assist in the evolution of enabling environments through policy reforms. Second, the Bank will consolidate traditional areas of engagement in financing projects and equity participation and introduce new investment instruments. Third, the Bank will seek to increase its support for regional privatisation programmes. Fourth, the Bank intends to promote the development of small and medium-scale enterprises by providing more focused technical assistance.

I would add that the Bank Group is now in a better position to carry out its development priorities because we have gone far in implementing a programme of institutional reforms aimed at re-tooling the Bank so that it can meet its development objectives with greater effect. These reforms, which have been pursued since I assumed leadership of the Bank Group in September 1995, address issues in four main areas: Substantial progress has been made in these and related areas. Our objective is that, within the next two years, the African Development Bank will be in the same league as the other multilateral development banks.

Will you remain faithful to the Bank's philosophy of generating development from the grassroots?

We intend to accord greater priority to the participation of our stakeholders in our operations by taking deliberate and systematic steps to enhance broad-based development. In this regard, we collaborate with all the agencies operating at the grassroots. The thrust we place on this approach is based on the view that stakeholder participation enhances ownership of projects and programmes, thereby reinforcing their viability and sustainability in the long term. With this in view, we are planning to meet African and other NGOs later this year with the aim of charting more effective approaches for collaboration.

Are you confident for the future of Africa's poorest nations, for example Eritrea?

Part of my job as President of a pan-African institution dedicated to the continent's development is to inspire confidence in the collective future of Africa and its individual countries. This notwithstanding, we are particularly concerned about the growing poverty, heightened social strife and low growth rates in some of Africa's poorest economies. Indeed, by various counts, the continent's share of the world's poorest is rising. However, my hope is for a brighter future for Africa, based on several interrelated factors.

First, the poverty that ravages many African countries has been partly the result of an escalation in civil strife and armed conflict. In some of the poorest countries of Africa, civil wars were fought for decades, diverting human and financial resources from productive activities, exacting a heavy toll on the economy and perpetuating poverty and social and political divisions. This is why we applaud the return of peace to South Africa and elsewhere: peace in Mozambique and Eritrea is enabling governments to embark on social projects, to rebuild the infrastructure and to re-incorporate the rural sector into the economic mainstream.

Second, in the past decade, many African countries embarked upon policy reforms. The going has been tough and there have been a number of reversals. However, many countries, including a number of the poorest ones, have been able to achieve substantial economic improvements.

Third, the two factors outlined above have, in a number of cases, been accompanied by political pluralism and the strengthening of civil societies. The prospects for more responsive governments have improved.

It should be noted, however, that there is a need for continued donor assistance to the continent, especially to its poorest countries, if the prospects for sustainable growth are to improve.

On the subject of foreign assistance, how do you see links with the European Union developing?

The emergence of the EU has prompted differing reactions in Africa. On the one hand, a larger and thriving group of European countries could form bigger markets for African goods; a bigger and richer EU could also see greater funds reaching Africa. On the other hand, there is concern that policy co-ordination within the EU towards developing countries, particularly in the area of trade, may undermine Africa's relationship. The EU's other trading partners are increasingly challenging our preferential treatment, for example, under the Lomé protocols. Further, the planned expansion of the EU to eastern Europe will in the medium term claim a substantial amount of EU resources, possibly constraining resource flows to Africa.

Despite this pessimism, however, the development of the EU may herald a number of opportunities. Africa is rich in natural resources, and the scope for investment virtually unlimited. The North African countries have association agreements with the EU which, with their proximity to Europe and their relatively higher economic base, provide them with advantages to explore trade and investment opportunities with - especially - Mediterranean Europe.

I believe that future EU-African relations will largely depend upon the course taken by private investment and commerce. There are already a number of European companies prospecting in various parts of the continent, and the establishment of equity funds in European capitals for investment in Africa partly explains the increasing activity on Africa's emerging stock markets. Success in all these areas will partly depend upon rapid development of the information and telecommunications infrastructures. In both areas, European companies are at the development forefront.

However, while private sector investment and collaboration might be the way of the future, low-income African nations will, for a long time, still need public assistance from the EU in various development areas, including technical assistance, project investment, infrastructure development and tourism.

Finally, I might add that these are matters that have engaged us in both our operational and in our research activities.

How do you plan to deal with the apparent anglophone/francophone and regional/non-regional differences among the Bank's members?

The ADB comprises 77 countries in Africa, the Middle East, Asia, Europe and the Americas. It is natural, therefore, that situations will arise where differing views are expressed over certain policy or procedural issues. This does not, however, constitute a serious problem for the Bank. The success of the ADB's Annual General Meeting in May this year attests to this.

The ADB lost its Standard & Poor's AAA credit rating in 1995. Can it get it back?

The ADB is rated by four different agencies, three American and one Japanese. Of these, three, Moody's, Japan Credit Rating and Fitch, have confirmed the Bank's AAA rating. Only one agency, Standard & Poor's, lowered the Bank's rating from AAA to AA+ - still a high-grade rating. Standard & Poor's based its decision on a number of factors, including portfolio quality and declining profitability. We have taken major steps to address these issues.

With respect to portfolio quality, we are implementing an Action Plan for improving the quality of Bank Group Operations to enhance our capacity to design, implement and monitor operational activities. The measures relate to programming, strategies, lending policies and practices, monitoring and post-evaluation and operational reporting through the various stages of the project cycle.

With respect to profitability, it should be noted that the Bank's net income in 1995 amounted to over US$100 million, 25 per cent more than in 1994. This marked a reversal of the decline recorded in the previous two years. We expect even better results for 1996.

Recently, in New York, I made a presentation to the rating agencies on the Bank's financial position and its operations. Standard & Poor's representatives reacted positively to the progress made by the Bank in the past year. We are hopeful that the considerable strides made in strengthening the institution will be recognised by the agency.

One of the reasons cited by Standard & Poor's for reducing the ADB's credit rating was increased politicisation of Bank processes. Can you distance yourself from the political pressures associated with your job?

Let me start with my personal view of this. One of my more pleasant experiences at the Bank has been my relationships with the Boards of Governors and Directors, which have been conducted on the basis of what is to the good of the Bank. Since this is an approach with which I feel comfortable, it is one which I will pursue in the time to come. It should also be noted that the AGM in May was conducted in an efficient and business-like manner, with the needs of Africa paramount, unencumbered by excessive politicisation.

Arrears have risen to a reported US$800 million, most of this owed by poor or war-torn states. How do you plan to tackle the arrears problem?

We have made considerable efforts in this direction. In addition to measures implemented in the past, we adopted in March this year more rigorous assessment of country credit-worthiness; a reduced period before which sanctions against defaulting nations come into effect (from two months to one from due date); and greater co-operation with the Bretton Woods institutions in the settlement of arrears. In addition, a country's record in meeting repayment obligations will be taken into account in providing disbursement guarantees, as well as in deciding on resource allocation among countries.

It should be noted that, during the recent AGM, the Governors passed a resolution calling upon member states to liquidate fully their arrears to the Bank.

Finally, are you confident that the ADB can continue to play a significant role in African development in the years to come?

Yes. The Bank's principal mandate is to mobilise resources to support economic and social development in our regional member countries. Given the extent of poverty in our continent and the inability of most of its countries to access resources at market rates, the need for concessional borrowing will remain. It is, therefore, quite significant that donors have concluded consultations on the Seventh General Replenishment of the African Development Fund, which provided resources amounting to US$2.6 billion to finance operations in low-income countries in 1991-98. The Fund will support projects and programmes which, although necessary for development and poverty reduction, are unable to bear non-concessional borrowing terms. This is particularly the case with many projects in agriculture and rural development, education and health, transport and public utilities.

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©Kensington Publications 1996