UNCLAS SECTION 01 OF 03 STATE 041663

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PREL PGOV ETRD ECON EAID ADB
SUBJECT: DEMARCHE REQUEST: U.S. DEMONSTRATES SUPPORT FOR
ASIA WITH ASIAN DEVELOPMENT BANK GENERAL CAPITAL INCREASE


1. (U) This is an action request. Please see paragraph 7.

SUMMARY


2. (U) The United States continues to cultivate strong and
vibrant partnerships with countries in the Asia-Pacific
region, and these partnerships are ever more important during
the current global economic downturn. One of the ways the
United States has recently demonstrated its support for the
region is through its endorsement of a General Capital
Increase (GCI) for the Asian Development Bank (ADB). The
United States supports a 200% general capital increase for
the Bank, contingent upon Bank management's adoption of
reform measures and, second, Congressional support for the
increase. The Board of the Asian Development Bank will be
formally considering the general capital increase at the May
4 - 5 Annual Meeting in Indonesia. We urge host countries to
support the general increase paired with reforms in order to
ensure that the Bank continues to contribute most effectively
to poverty reduction in the region. End summary.

U.S. COMMITMENT TO ASIA


3. (SBU) The United States continues to cultivate strong and
vibrant partnerships with countries in the Asia-Pacific
region. Our partnerships with countries in this region are
even more important during the current global economic
downturn. Economic engagement continues to be a core link,
with the region accounting for one fourth of global economic
output, five of our top ten trading partners, over a quarter
of U.S. export sales, and a huge growth in energy demand.
Despite this connection, many Asian countries see the U.S. as
the main source of the current economic crisis and also
believe that we did not do enough to help the region during
its financial crisis in the late 1990s.


4. (U) The region served by the Asian Development Bank
includes Afghanistan and Pakistan. One of this
Administration's highest foreign policy priorities is to
address the dangerous instability there, with development
assistance a key component of our strategy. In 2008, the
bank provided over $8 billion in loans, grants and technical
assista

nce to countries throughout Asia, complementing U.S.
bilateral assistance.

ASIAN DEVELOPMENT BANK GENERAL CAPITAL INCREASE AT THE G20


5. (U) In an Annex to the April 2 London Summit Communiqu
entitled "Declaration on Delivering Resources Through the

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International Financial Institutions," G20 leaders agreed to
make an additional $850 billion available through the
International Monetary Fund (IMF) and the multilateral
development banks (MDBs). In regard to the Asian Development
Bank, G-20 leaders supported "a 200 percent general capital
increase at the Asian Development Bank and reviews of the
need for capital increases at the Inter-American Development
Bank, the African Development Bank and the European Bank for
Reconstruction and Development." Total capitalization of the
ADB will increase by approximately $100 billion.

REFORM AGENDA FOR THE ADB


6. (SBU) We urge host countries to support the ADB and its
programs as well as necessary reforms of the ADB and all
multilateral development banks to ensure they effectively
contribute to poverty reduction. U.S. support for the
general capital increase is contingent upon the ADB's
progress on reforms, to which the ADB has positively
responded. The Bank has agreed to revise its human resources
policies, upgrade risk management functions, and review its
current prohibition against publishing its list of sanctioned
companies. Another top priority is ensuring that the Bank's
safeguard standards are sufficiently robust and provide
adequate protection for the environment and people, while
protecting borrowers from liability. Full implementation of
these commitments will be essential in order to maintain and
build Congressional support for a capital infusion to the
ADB. ADB board members should be encouraging the Bank to
operationalize its commitments to reform.

ACTION REQUEST


7. (U) Department requests that Posts deliver the following
points to foreign ministries of host countries, recognizing
that the lead ministry (or ministries) with respect to
multilateral development banks is likely the finance
ministry.

-- The Obama Administration recognizes the crucial role that
Asia plays in the global economy and in creating a return to
sustainable economic growth.

-- Secretary Clinton has expressed America's commitment and
eagerness to work with leaders of Asian nations to resolve
the economic crisis that threatens many economies in Asia and
other regions of the world.

-- Support for Asian Development Bank (ADB) recapitalization
is a signal of our commitment to the region at this time of
severe global economic stress. We ask for your support for
the ADB and its programs.

-- We also recognize the need for continued ADB reforms. We

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ask for your support in encouraging the ADB to be diligent
and implement reforms to which it has committed in its March
16, 2009 working paper on the General Capital Increase (GCI).
Our priorities include stronger anti-corruption measures and
safeguard standards. Reforms in these areas will enhance the
effectiveness and efficiency of the ADB's deployment of
funds.

-- U.S. contributions to the Bank will require Congressional
approval. Continuing U.S. support for the general capital
increase will be contingent upon the ADB's progress on
reforms.

-- Some members of the U.S. Congress are concerned about the
Bank's inadequate anti-corruption measures and are pressing
for regular publication of the list of sanctioned companies.
We understand that the ADB is prepared to initiate
publication of such lists, and that it is determining the
best way to do this without increasing the Bank's liability.
We urge your representative to press the Bank to publish this
list, as the World Bank and other regional development banks
do.

-- We seek your assistance in ensuring that the Bank
fulfills all its reform commitments.

-- We encourage other ADB members to adopt and implement
strong domestic anti-corruption policies to ensure
consistency with international best practices.


8. (U) Please provide a front-channel message with host
government response to EAP/EP: Kathy Hadda and EEB/IFD/ODF:
Rachel Leatham and Marguerite Siemer by May 1. Department
appreciates Posts' assistance with this request.
CLINTON