A New ADB in a Rapidly Changing Region
Opening Address by
Haruhiko Kuroda
President, Asian Development Bank
At the 41st Annual Meeting of the Board of Governors
5 May 2008
Madrid, Spain
Introduction
Excellencies, distinguished guests, ladies and gentlemen:
It is a privilege to welcome you to the 41st Annual Meeting of the Asian Development Bank – the first to be held in Spain. I would like to thank the Government of Spain, and indeed all our shareholders, for their continued support of ADB. And thanks to all of you for joining us today.
I particularly want to express my appreciation to the Government of Spain and the City of Madrid for their very warm and gracious hospitality and the excellent arrangements they have made. This is indeed a beautiful and inspiring setting for us to talk about a new ADB in a rapidly changing and dynamic Asia and Pacific region.
We draw inspiration from Europe – from its well integrated economies, its investment in people, and its passion for a clean and green environment; and from the European Union, with its commitment to open markets, rule of law and good governance. Adherence to these values has produced significant benefits for all while ushering in an enduring stability and prosperity.
Asia in the Global Economic Environment
Ladies and gentlemen: these are troubling times for the world economy. On the heels of turmoil in the financial markets and an economic slowdown in the US and elsewhere, soaring food prices are hitting the poor very hard.
This price surge has a stark human dimension and has greatly affected over a billion people in Asia and the Pacific alone. Their purchasing power has been eroded placing them at a greater risk of hunger and malnutrition.
In a finely balanced production supply situation, the inventories of food grains are at their lowest levels in decades. Reduced supplies, increased demands, record high energy prices, steep depreciation of the US dollar, and trade restrictions imposed by some countries have all combined to cause the price surge in recent months. The focus must now be on the soaring prices, and our immediate responses.
With high food and energy costs together stoking inflation in Asia and the Pacific, prudent macroeconomic management is essential. Equally critical are measures such as targeted income support to protect the food entitlements and livelihoods of the most vulnerable. With food and fuel together accounting for 75% of expenditures in poor households, the absence of such measures could seriously undermine the global fight against poverty and erode the gains of the past decades.
ADB is prepared to respond with immediate financial assistance to relieve fiscal pressure on affected countries. We will also increase our support to international and national agricultural institutions, such as the International Rice Research Institute and the International Food Policy Research Institute, whose work is aimed at improving agricultural productivity. Simultaneously, we will continue to finance agriculture related infrastructure such as irrigation systems, rural roads and rural finance in our developing member countries.
Looking ahead, there is good reason to be optimistic about the future. Since the financial crisis ten years ago, the region has become more dynamic and resilient than ever. More open and competitive markets, better fiscal management, reduced short-term external debts, restructured banking and corporate sectors, and more flexible exchange rates provide a buffer against external shocks.
Even in today’s uncertain global economic environment, Asia remains a strong and stable contributor to global growth, and a leader in poverty reduction. But this is no time to step back – quite the contrary. The global fight against poverty will be won or lost in our region. And it will depend upon efforts by all of us to boost social and economic development in the region through and beyond the threshold of opportunities.
Matching ADB’s Strengths to the Region’s Changing Needs
With this in mind, we at ADB have set the stage for powerful change in the way we serve our developing member countries. Our new long-term strategic framework – Strategy 2020 – clearly defines a vision: a vision of an Asia and Pacific free of poverty; a region where the vast majority have joined hands on the path to prosperity. It defines ADB’s role in pursuing this vision through inclusive economic growth, environmentally sustainable growth, and regional integration. And it identifies five key drivers of change: the private sector; good governance and capacity development; gender equity; knowledge; and partnerships.
The vision is achievable. And with money and ideas, we can make it a reality. In this context, I am very pleased that donors concluded the ADF X negotiations last week here in Madrid. These vital financial resources – more than $11 billion – will support progress toward the Millennium Development Goals in our poorest member countries. I would like to thank our donor members for their generous contributions to ADF X. Our next task will be to determine the appropriate level of resources to meet the growing investment needs of all our developing member countries. And I look forward to further discussions with our shareholders on this important issue.
Inclusive economic growth
The challenges of Asia’s unfinished development agenda are immense. Hundreds of millions of Asian people remain mired in desperate poverty. We need to make growth more inclusive – to expand access to opportunities so that all can participate, regardless of their individual circumstances. This will require strong, sustained investment in infrastructure and education, as well as in health programs and social services for the poorest.
In particular, Asia’s infrastructure demand – estimated at more than $300 billion a year - needs to be met to ensure inclusive growth and poverty reduction. Roads, energy, water, telecommunications – these are the lifelines connecting families and communities to a brighter future.
And this makes ADB’s role more relevant than ever. Infrastructure development is the single largest share of our lending operations and a key area of our expertise.
Our track record is strong. In Nepal, for example, our Rajapur Irrigation project boosted average household income for small farmers by a very impressive 75%. In Bhutan, an ADF funded electrification project has meant better health and education, more opportunities for poor families to generate income, and less pressure on forests as a source of household fuel. Infrastructure is equally critical in Asia’s cities, which will have to provide roads, housing, water and other services to an additional 44 million people annually for the next 25 years.
All of this presents a huge opportunity for investors and partners around the globe to take part in the unfolding success story that is Asia. To this end, we are examining the potential of establishing a dedicated infrastructure financing facility to mobilize resources that complement ADB’s own market-based and concessional financing. We welcome and highly appreciate the support and keen interest of member countries in this initiative. By bringing public, private, bilateral and multilateral partners together, I am confident that we can help the region meet this massive challenge.
Environment and climate change
As we do so, we will substantially increase our attention to the environmental consequences of growth – including climate change. Climate change is a fundamental threat to achieving Asia’s development objectives, and to life and livelihoods.
ADB will do its part to mitigate climate change and help people cope with altered environments. Through our Asia Pacific Carbon Fund, generously supported by seven European countries, we will provide over $150 million to cofinance clean energy projects. We are investing an additional $100 million in five funds to mobilize about $1 billion for clean energy over the next three years. Our Energy Efficiency Initiative is on track to reach its annual target of at least $1 billion this year. And our Sustainable Transport program is piloting a number of cleaner, more integrated urban transport solutions.
I am pleased to announce that we will also establish a Climate Change Fund, with an initial contribution from ADB resources of $40 million. The Fund will allow a more holistic approach to climate change mitigation and adaptation, including forestry and land use, changes in livelihood, health impacts, and increased emergencies and disasters caused by climate change.
Over the past two years, around 15% of ADB projects included environmental components or objectives. As the region’s development bank, we must do more. Within the next four years, environment and climate change will grow to represent a significant share of ADB’s total lending and technical assistance. We are committed to taking a leadership role in helping our developing member countries respond to environmental degradation and climate change to create a more sustainable future for us all.
Regional cooperation and integration
As Asian and Pacific countries grow, Asian leaders increasingly see the value of working together to link economies to one another, improve trade and investment flows, strengthen financial systems and protect their economies and their people from cross-border financial, health, environmental and other risks.
The European Union has proven the value of regional cooperation and integration. Asia can learn much from Europe. But Asia also differs from Europe in important ways. Its economic, political, social, institutional and cultural diversity has given rise to a multi-speed, multi-track approach to economic integration.
All subregions of Asia and the Pacific are working toward closer cooperation and integration and it is essential that this continue. We are pleased to be part of such efforts. We have seen in the Greater Mekong Subregion (GMS) the impact on people’s lives of such cooperation. From its roots as an alliance for economic cooperation, the GMS program has blossomed into a robust multi-faceted partnership. A partnership that invests in people and programs to create a more inclusive, environmentally sustainable subregion – well integrated within itself, with its neighboring countries, and with the global economy. With similar initiatives underway in South and Central Asia, in the Pacific, and elsewhere, the GMS shows us what can be achieved region-wide.
Demand for ADB’s assistance in regional activities is growing: demand for cross-border infrastructure; demand for technical assistance for trade and finance; and demand for regional public goods and knowledge products.
ADB is responding. In addition to substantial funding, we established a Regional Cooperation and Integration Fund last year to support non-lending activities that forge closer links among neighboring economies. And I am pleased that our book “Emerging Asian Regionalism” was launched at this annual meeting.
We believe strongly in the power of regional and subregional initiatives to enhance stability, increase prosperity, and improve the lives of the poor. By 2020, such initiatives will account for at least 30% of ADB’s operations.
Partnerships – the Key to Success
These three broad strategic directions – inclusive economic growth, environmentally sustainable growth, and regional cooperation and integration – will characterize ADB’s contribution to ending poverty in Asia and, in a larger sense, to global welfare. To accomplish our objectives, we will focus on our own comparative advantages. And we will cooperate closely with our development partners. By complementing each other’s strengths and more widely sharing knowledge, together we can close the remaining development gaps.
We have already achieved much through partnerships. A good example is Bangladesh, where, led by ADB, ten development partners worked together on a very successful project to enhance the quality of primary education. We actively engage civil society, including non-government organizations, in our operations.
We have also established several financing partnership facilities, including those for clean energy and water financing. And in keeping with the Paris Declaration, we are striving for closer collaboration with our bilateral and multilateral partners.
Under Strategy 2020, partnerships will be a key element in planning, financing and implementing our projects and programs. Working together means achieving together what no one sector or agency can achieve alone.
Private sector development
As Asia looks toward a brighter future, strong partnerships with the private sector, across and outside the region, will be essential. A robust private sector is the key to attracting investment and innovation. And it is the source of jobs and economic opportunities for the hundreds of millions of Asian people who today remain unemployed or underemployed.
With operations in both public and private sectors – both under one roof – ADB has a unique advantage in effectively supporting this driver of growth. We support governments’ efforts to improve the climate for business and investment, including financial sector development. And at the same time, we offer strong support for private sector driven development projects.
By 2020, we see private sector related projects and programs comprising half of ADB’s annual operations, in keeping with the region’s development needs. Along with our growing focus on climate change and region-wide issues, this will help transform ADB to better serve the region’s evolving needs. We will continue to fund national and regional projects and programs. But we will also substantially enhance our ability to mobilize resources, remove obstacles to inclusive growth, and ensure that Asia’s new prosperity is shared by one and all.
Concluding Remarks
Ladies and gentlemen, Asia’s development goals are ambitious. And ADB must respond. It will mean more change, strong commitment and greater focus. We will need to reskill and further strengthen our human resources so that we can rise to the challenges of a rapidly changing Asia and Pacific. A review of our human resources strategy, informed by our recently completed staff engagement survey, will be central to this task.
I believe the strategic directions and approaches I have outlined today will make a significant contribution to the long-term social and economic progress of our region. With your ongoing strong support, we can help Asia realize its potential as a fully developed part of the world, a partner in global prosperity, and a beacon of hope for the advancement of societies everywhere.
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