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Address to the Board of Governors

by
Tadao Chino
President
Asian Development Bank

10 May 2002
Shanghai, PRC

Strengthening Partnerships for Poverty Reduction in Asia and the Pacific

I. Introduction

Your Excellencies, Ladies and Gentlemen, I am delighted to join the Chairman, the Honorable Xiang Huaicheng, Minister of Finance of the People's Republic of China, in welcoming you to the Thirty-Fifth Annual Meeting of the Board of Governors of the Asian Development Bank.

I would like to extend our deep appreciation to His Excellency Jiang Zemin, President of the People's Republic of China, for honoring us by his presence this morning. I would like to express gratitude to the Government and the people, of the People's Republic of China for their warm hospitality in welcoming ADB to Shanghai, one of the economic, financial, and trade centers of the world. ADB is proud to have worked together with the city and its people in the building of the Nanpu and Yangpu bridges, and in the Suzhou Creek environmental project. Special thanks are due to the Honorable Chen Liang Yu, Mayor of Shanghai, and the Shanghai Preparation Committee for their tireless efforts to ensure the success of this important meeting.

I am also pleased to note that this is ADB's 2nd Annual Meeting in the People's Republic of China. Our 22nd Annual Meeting was hosted in Beijing in 1989.

Today I would like to bid a special welcome, on behalf of ADB's entire membership, to the Governor for Portugal, whose country has become the 60th member of ADB.

We gratefully acknowledge Portugal's contributions to the Asian Development Fund.

I would like to express a special "welcome back" to the Governor for Afghanistan whose country, a founding member, has reactivated its partnership in development with ADB.

I also extend a warm welcome to all representatives of our development partners, including multilateral and bilateral institutions, members of the global financial community, civil society, nongovernment organizations, and our friends in the media.

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II. Regional Economic Performance

Mr. Chairman, Governors, Ladies and Gentlemen, our developing member countries, or DMCs, recovered strongly from the Asian financial crisis of 1997-98, recording an average growth rate of 6.4 percent in 1999 and 7.0 percent in 2000. The year 2001, however, saw a synchronized global economic slowdown, and the tragic events of 11 September adversely affected many DMCs across the Asia and Pacific region. As a result, aggregate growth slowed to 3.7 percent.

In contrast to the generally weak performance of 2001, the economic news has been encouraging in 2002 and provides the basis for a stronger medium-term growth outlook in Asia and the Pacific. The United States' recovery seems on track with strong growth in the first quarter, economic performance in Europe is improving, and there are positive signs from Japan. These trends contribute to an improved economic outlook for developing Asia. Within the region, domestic demand in many DMCs is responding to macroeconomic stimuli and emerging as a source of growth. Aggregate economic growth for developing Asia is expected to strengthen during 2002 and 2003, and Asia will continue to be one of the fastest growing regions of the world.

Despite these upward trends, several risks remain. Externally, they include the pace of recovery of the global economy as well as oil price levels. On the domestic front, sustained recovery depends on the implementation of policy and structural reforms, particularly in the financial and corporate sectors. ADB will continue to work closely with its DMCs to accelerate the reform process to help the region grow and prosper in an increasingly competitive global economy.

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III. Key Events at ADB Last Year

Mr. Chairman, Governors, Ladies and Gentlemen, 2001 was a year of enormous challenges, but under your guidance and with your strong support, ADB responded effectively to the needs of its DMCs, and strengthened its institutional capacity to achieve its overarching goal of poverty reduction. Allow me to report to you five of the most important events at ADB since last year's Annual Meeting in Honolulu.

First, we reviewed ADB's organizational structure. Our purpose was to see how we could strengthen ADB's capacity to deliver its mandate of poverty reduction and more effectively respond to the needs of its borrowing member countries. The outcome is a new organizational structure that became effective on 1 January of this year. The transition has been virtually without disruption, and we are already seeing many benefits. These include a stronger country focus, improved internal coordination, and greater emphasis on knowledge management.

Second, ADB adopted new processes for preparing Country Strategies and Programs for our DMCs. To strengthen country ownership and implementation, Country Strategies and Programs are closely aligned with each country's own development plans and priorities. We emphasize strong stakeholder consultation, especially with our development partners, NGOs, and civil society.

Third, ADB introduced the LIBOR-based loan product, or LBL product, in July 2001 for loans from our ordinary capital resources. Compared with ADB's former loan products, LBL products offer borrowers more flexibility in the choice of currencies and interest rates. Given the current market environment, LBL lending rates are substantially lower than those for pool-based loan products. ADB will continue to strive to offer the best loan products at competitive terms.

Fourth, ADB's first inspection case was carried out in 2001 and brought to conclusion earlier this year. The inspection process yielded many useful lessons for ADB. I have already created a steering committee and a working group to review ADB's Inspection Function. Concurrent with this review, we are conducting a comprehensive review of the Operations Manual, and updating it to ensure timely incorporation of all relevant operational policies. External consultations are an integral part of the Inspection Function review process. We are actively seeking the views of all stakeholders, including government officials as well as representatives from NGOs, the private sector, and civil society.

Fifth, in the wake of 11 September, ADB has been at the forefront of international efforts to assist Afghanistan and its neighboring countries. Early last month, I visited Kabul to meet with Chairman Karzai and Ministers of the Afghanistan Interim Administration. I reassured them of ADB's firm commitment to assist in Afghanistan's recovery and reconstruction. ADB also responded swiftly to the needs of affected neighboring countries, and we strengthened our lending and technical assistance programs to Pakistan and many Central Asian republics. ADB's rapid response would not have been possible without the strong support we received from our Board of Directors, close collaboration with our development partners, and the hard work and dedication of our staff.

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IV. Challenges Ahead and ADB's Responses

Ladies and Gentlemen, many of the major challenges facing our DMCs are reflected in the Millennium Development Goals. The three challenges I wish to highlight today are reducing poverty, addressing environmental degradation, and promoting regional cooperation. ADB is working closely with its DMCs and development partners to address these challenges.

Reducing Poverty

Poverty reduction is the greatest challenge facing developing Asia and the Pacific. ADB's mission is to reduce poverty in its broadest dimension and within a desirable time frame. Our DMCs share this commitment as well as our vision of an Asia and Pacific region free of poverty. However, developing Asia is still home to two-thirds of the world's poor. Achieving the ultimate Millennium Development Goal of eradicating extreme poverty depends first and foremost on the reduction of poverty in Asia.

Poverty is multidimensional. The three pillars of our Poverty Reduction Strategy - pro-poor, sustainable economic growth; social development; and good governance - are the most critical elements. The Asian financial crisis clearly illustrated that even gains made through many years of rapid and sustained growth can all too quickly be reversed. Continued economic growth is required to maintain progress in reducing poverty. To achieve this, we need structural reforms, technological progress, sufficient investment, and financial stability. The private sector is the engine of growth. Given the huge infrastructure requirements of the region, ADB's Private Sector Development Strategy calls for a more active involvement of the private sector, including public-private partnerships.

The second pillar of ADB's Poverty Reduction Strategy is social development. We all know the utmost importance of education, health care, water supply and sanitation, shelter, and the need to pay special attention to women and children. Our Social Protection Strategy, Water Policy, and Gender and Development Action Plan, all finalized in 2001, are aimed at further strengthening our social development agenda.

The third pillar is good governance. In order to achieve pro-poor, sustainable economic growth, to develop a strong private sector, and to support a healthy, well-educated, equitable, and inclusive society, good governance is essential. In this regard, the tragic events of 11 September underscored for all of us the importance of united efforts to combat money laundering and terrorist financing. As part of ADB's efforts to promote good governance, and in support of its anticorruption policies, we are now preparing a policy paper on combating money laundering.

Addressing Environmental Degradation

The second challenge I wish to highlight is overcoming environmental degradation. Over the past four decades, rapid population growth, dramatic changes in production and consumption patterns, and massive rural-to-urban migration have all contributed to environmental degradation across the region. Unless environmental degradation is reversed in key areas, achieving the Millennium Development Goal of environmental sustainability will not be possible.

Environmental sustainability is one of the three crosscutting themes of ADB's Long-Term Strategic Framework. ADB is reaffirming its long-standing commitment to the environment with a new Environment Policy that will integrate environmental considerations into all aspects of ADB's operations. It will also help target ADB assistance to DMCs that are trying to respond to priority environmental concerns at the local, regional, and global levels. Addressing environmental degradation requires strong partnerships. Accordingly, ADB is continually strengthening and expanding its partnerships with international agencies, the private sector, NGOs, and civil society. In this context, we are actively participating in preparations for the World Summit on Sustainable Development to be held in Johannesburg later this year.

Promoting Regional Cooperation

Third, ADB's Charter identifies the promotion of regional cooperation as one of ADB's specific obligations. The Charter cites regional cooperation as a means to achieve more efficient use of regional resources, make economies more complementary, and promote the expansion of foreign trade, in particular intraregional trade. As the special theme chapter in our Annual Report for 2001 emphasizes, regional cooperation is essential for DMCs to integrate into the world economy and to share in the benefits of growth.

The Asian experience also shows that regional cooperation can be a powerful means to minimize the risks of globalization. One good example of risk management through regional cooperation is ADB's support for regional information exchange and economic surveillance within ASEAN and ASEAN+3. At the subregional level, ADB is actively supporting several initiatives, including the Greater Mekong Subregion program, the South Asia Subregional Economic Cooperation program, and the Central Asia Regional Economic Cooperation program. ADB is also promoting regional cooperation in the Pacific. This is consistent with our Charter requirement to pay special attention to the needs of smaller member countries.

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V. The Importance of Continued Shareholder Support

Mr. Chairman, Governors, Ladies and Gentlemen, these challenges are immense. But our Mission is clear. Since becoming President, I have focused much of my attention on ensuring that ADB effectively addresses the needs of its DMCs, and that it has the necessary means to accomplish its mission. When I assumed office in January 1999, I immediately declared poverty reduction as ADB's overarching goal. Ten months later, in November 1999, our Board of Directors unanimously approved ADB's Poverty Reduction Strategy.

Today, ADB is better positioned than ever to execute its mission. We now have a solid foundation of policies and strategies, firmly grounded in our Long-Term Strategic Framework, to focus and guide our operations. We have aligned our organizational structure and business processes to support our activities and programs. To enhance development effectiveness, we have strengthened our Operations Evaluation Department and established the Board Development Effectiveness Committee. Performance-based allocation of ADF resources is also underway. Many of the essential building blocks are now in place for ADB to deliver its mandate of poverty reduction. We have also laid the groundwork to ensure the most efficient and effective use of available financial resources; nonetheless, support from all shareholders is essential to respond to the development challenges facing the Asia and Pacific region.

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VI. Concluding Remarks

Mr. Chairman, Governors, Ladies and Gentlemen, in conclusion, I would like to tell you of my recent experiences in Sri Lanka and Afghanistan. Earlier this year, immediately after the ceasefire, I visited a conflict-stricken area in northern Sri Lanka, near Vavunia. My visit demonstrated the commitment of ADB, along with other development partners, to assist the Government in post-conflict rehabilitation and achieving lasting peace. My visit to a refugee camp, a district hospital, and a girls' high school showed me how difficult life is for the affected people. The school, built for 1,500 students, now accommodates more than 4,000, including many children from internally displaced families. Many students are studying in old refugee shelters on the edge of the campus. However, I was deeply moved by the shining eyes of the students. The enduring spirit and commitment of the teachers and schoolchildren will never be erased from my memory.

During my visit to Afghanistan in early April, I walked through the city of Kabul. The devastation in many parts of the city was worse than anything I could have imagined. I visited one elementary school. Most of its roof was gone. The shattered walls were riddled with bullet holes. But teachers-most of them women-and girls and boys alike were hard at work making up for the lost years, and building a brighter future together. No matter how dilapidated, this was a place for children who could now hope and dream.

These brief, but powerful experiences have reaffirmed my conviction that all nations and all people of Asia-indeed all people everywhere-should live together, work together, grow together, and deepen mutual cooperation. For this can surely lead to a better Asia, to a better world.

Ladies and Gentlemen, under your continued guidance, ADB is firmly committed to an Asia and Pacific region free of poverty. Because Asia is home to two-thirds of the world's poor, the fight against global poverty must be won here in this region. It is my firm intention that ADB should be at the very center of the global endeavor to realize a world where all can live with dignity and hope.

Thank you.

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