Catalog

Governor's Address
Opportunities and Challenges in a New Era
ADB Review [ July - August 2004 ]

More than ever, the world’s economies are going to sink or swim together

Hun-Jai Lee
Deputy Prime Minister and Minister of Finance and
Economy, and Chair of ADB’s Board of Governors

Governors and Delegations of ADB Member Countries, President Chino and ADB Staff, Distinguished Guests from Investment Banks, Credit Rating Agencies, and International Financial Institutions, Ladies and Gentlemen: Let me welcome you all to the 37th Annual Meeting of the Asian Development Bank, here in our beautiful island of Jeju.

Let me also extend my warmest welcome to Luxembourg and Palau as new members of ADB.

I would also like to extend my deep appreciation to the staff for organizing this annual meeting.

It has been a long time, indeed 34 years, since the Republic of Korea last hosted the ADB annual meeting in Seoul. I consider myself truly privileged to be delivering this speech today, as the Chair of the Board of Governors.

Ladies and Gentlemen, I am pleased to be able to say that we are facing an outlook for the global economy, which is on the whole relatively bright.

For the most part, Asia, US, EU, and other regions have entered a phase of economic recovery, though some more firmly than others.

And Asia has certainly been leading this recovery from the front.

According to ADB’s Asian Development Outlook released last month, the developing Asian economy is expected to grow 6.8% this year and 6.7% next year.

Asia is likely to remain a major growth engine over the coming years and, given its dynamism, will increasingly become a player of major weight in the global economy.

In my mind, the next few years are likely to present us with a great opportunity to further our goals of reducing poverty and enhancing co-prosperity in the Asian region.

That said, Ladies and Gentlemen, not all risks to the economic outlook have been lifted.

There continues to be the risk of terrorism, while oil prices are at a 14-year high.

In addition, the global economy appears to be transitioning away from an extended phase of low interest rates.

And this has brought to the surface concerns about how mature and emerging markets will react to rising interest rates.

Ladies and Gentlemen, it is my view that we have entered a new era of unprecedented symbiosis.

More than ever, the world’s economies are going to sink or swim together on the tide of the global business cycle.

And more than ever, the world’s policy makers must be appreciative of this symbiotic relationship when contemplating their policy actions.

Of course, even more so in the new era, sound macroeconomic policies and continued economic reforms will remain the bedrock of sustainable economic growth.

However, it has also become essential to continue with the push for greater regional financial cooperation to prevent the recurrence of crises.

Efforts in this regard include the Chiang Mai Initiative, the Asian Bond Market Initiative, and short-term capital flow monitoring.

Ladies and Gentlemen, let me now turn briefly to how I see the task ahead for ADB to advance its primary goal of poverty reduction.

First, there has to be focus on growth. This is not the only recipe for poverty reduction, but certainly an important one.

"It has also become essential to continue with the push for greater regional financial cooperation to prevent the recurrence of crises"

Second, in order to achieve balanced and equitable growth, we must strive to create more jobs, while expanding educational opportunities. I have long felt that equality in education opportunity is an essential element of achieving equality in economic opportunity.

Of course, we must not forget the importance of establishing social safety nets.

Especially in the knowledge-based economy, the digital divide may become one of the major sources of income gaps.

Therefore, as the President emphasized, we must focus more on narrowing the digital divide to achieve balanced economic development.

ADB needs to be equipped with instruments to this end. I will come back to this issue a little later.

Third, we need to increase women’s participation in economic activities.

Women’s participation will increasingly influence the competitiveness of a country, as future high-tech industries will depend more on women’s professional skills and delicate touch.

Fourth, to ensure environmentally sustainable growth, we need to consider environmental issues while pursuing development from the outset.

If investment decisions are not fully cognizant of environmental considerations, there will be enormous long-run costs from environmental degradation.

Fifth, we must improve transparency and accountability in every sector of our economy.

This has to be a key element of market-based reform, because unless we eliminate corrupt and wrongful practices and improve governance, growth cannot be sustainable. I believe the Asian financial crisis has proved this point.

Lastly, broad-based and sustainable growth can be achieved only when regional countries work together in our efforts. Cooperation among development organizations is also a necessity. I hope ADB will play a leading role in this regard.

I look forward to hearing your views on the economic outlook and risks, the appropriate set of policies, and the task ahead for ADB.

Ladies and Gentlemen, so far, ADB has performed very well.

ADB is leading the poverty reduction effort in the Asia and Pacific region and has achieved outstanding progress.

Prime examples are the remarkable progress in reducing poverty in China and India.

President Chino’s strong leadership and ADB staff’s devoted efforts deserve credit for ADB’s accomplishments.

Currently, under the objective of the Millennium Development Goals (MDGs), ADB is furthering its reform efforts to pursue results-based management.

Recent steps in this direction include the adoption of performance-based allocation of resources and the reform of the organization, business processes, and governance.

Yet, there is no room for complacency. Considering the World Bank’s recent announcement that it will be difficult to expect attainment of the MDGs in many regions by 2015, ADB has to do more.

Above all, ADB needs to address possible risks coming from increasing net transfer of resources from recipient countries back to ADB, speed up disbursement, and put more resources into technical assistance.

In this regard, I welcome the success just a few days ago of the negotiations of the Asian Development Fund IX replenishment, which will provide valuable technical assistance grant in particular.

I would appreciate the views of delegates concerning reform of ADB and future direction.

With the 2015 deadline of the MDGs approaching, we have come to a point where we must set directions beyond 2015.

Now, let me speak briefly as the Governor for Korea. As always, the Republic of Korea strongly supports ADB’s continuous reform efforts to attain the MDGs.

As an important step in this direction, let me propose the establishment of a Knowledge Partnership Fund, a trust fund financed by the Korean Government.

This Fund will serve as an effective channel to transfer the Republic of Korea’s experience and knowledge.

We additionally propose to establish the e-Asia Fund within ADB, also financed by the Korean Government.

When established, the Fund will be used to promote e-government, e-learning, e-trade, e-commerce, and e-procurement in the region.

In closing, Ladies and Gentlemen, we are likely to face both opportunities and challenges in this new era.

To turn even the challenges into opportunities, ADB must have a robust vision and a clear set of policy guidelines. And effective cooperation among ADB members will be a must.

More than ever before, the world’s economies will rise or fall together. Let us embrace this new era, Ladies and Gentlemen, and rise. Rise together.

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