Catalog

President Meets the Press
ADB Review [ July - August 2004 ]

President Chino’s press conference was held at 12:00 noon on Monday, 17 May

President: Good afternoon, Ladies and Gentlemen. Thank you very much for coming to this press conference.

I am delighted to report to you that our Annual Meeting has been a great success, and I would like once again to express my appreciation to the Government of the Republic of Korea as well as to the government of Jeju Province for the excellent arrangements for this Annual Meeting. Ialso extend my sincere thanks to the organizers, who have looked after us so well during our stay here on Jeju Island.

Governors have welcomed the recently negotiated $7 billion replenishment of our Asian Development Fund, which, as Istated in my opening speech, clearly demonstrates the commitment of shareholders to ADB and our overarching goal of poverty reduction in the region.

Governors have also endorsed ADB’s continuing efforts to fight poverty. Many governors underlined the need for our Poverty Reduction Strategy to be aligned closely with national poverty reduction strategies and cited our commitment to helping our developing member countries achieve the Millennium Development Goals. Governors also expressed appreciation for the steps ADB has taken to improve its development effectiveness and its new focus on managing for results. Governors welcomed ADB’s new accountability mechanism to better address concerns of project-affected people; its moves toward greater transparency; and its efforts to prepare a new human resources strategy.

Commenting on the generally robust growth prospects of the Asia and Pacific region, some governors warned of possible risks and uncertainties ahead. In this regard, many governors spoke of the need to continue with structural reforms, capacity building, and improving governance.

Citing the extensive investment requirements for infrastructure across the region, governors encouraged ADB to work closely with governments and the private sector to meet the urgent needs for physical and social infrastructure.

Several governors reiterated the important role of the private sector in driving economic growth, which is a necessary condition for poverty reduction, and called on ADB to help improve the climate for private sector-led development.

Many governors called for greater efforts to promote regional cooperation, particularly the need to strengthen regional financial cooperation, citing such developments as bilateral swap arrangements under the Chiang Mai Initiative, the Asian Bond Markets Initiative, and the Asian- BondsOnline web site, which was launched just two days earlier here in Jeju.

The decisive ADF IX negotiations in Seoul, followed immediately by this very stimulating 37th Annual Meeting of ADB’s Board of Governors, have made our visit to Korea most productive. As you know, our next Annual Meeting will be in Istanbul, Turkey. I hope to see many of you there. Thank you very much. I now invite your comments.

Alan Wheatley (Reuters): Mr. Chino, I’d like to ask a question about ADB’s mission of reducing poverty. When ADB was established in Manila in 1966, the Philippines was one of the richest countries of Asia, it is now one of the poorest. Given your new focus on management for results, do you think ADB bears some responsibility for this sorry performance?

President: Since the establishment of ADB in 1966, ADB has been contributing substantially to the development of Asian countries. As a whole, economic and social conditions in Asian countries are much, much better than when ADB was created. Take Korea for example. Korea was one of the poorest countries when ADB was established. I recall that our third loan, immediately after the establishment of the Bank, was for the Seoul-Incheon express highway. Korea was then a borrowing country, now it is a donor country. In fact, Korea contributed very much to the recent successfully completed ADF. There are many countries which were once poor and which borrowed from ADB. Now many countries have graduated from ADB and have become donors. On the whole, economic and social conditions have improved very substantially over the past three to four decades.

But not all countries have developed at the same rate. Much has depended on the environment for development, and also the effectiveness of policies and their implementation. The Philippine economy is now moving in a better direction, with GDP expected to be 5.0–5.5% in 2004 and 2005, compared with 4.5% in 2003. This is not abad growth rate, although more can be expected. Complex factors work together to bring vitally needed foreign investment into the country. The budget deficit results in low levels of public investment, and the low levels of public investment in enabling environment including infrastructure, deter private investors. The financing of the Philippines’ large deficit keeps interest rates relatively high, and this discourages private investors. It is very important to improve the environment for private sector activities. Another factor is rapid population growth. If major economic and other necessary reforms are effectively implemented, we could expect a much higher growth rate that would reduce the problem of capital scarcity and low incomes.

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Kim Jae-Kyoung (Korea Times): I understand there are many Asian and Pacific countries that wish to join ADB. However, as far as I understand the US and Japan seem to be opposed to the idea of accepting Russia and North Korea into your organization. Is this a procedural problem, or is it related to a political deal within ADB?

President: New membership to ADB is determined on the basis of consensus among current shareholders. We need such consensus before we can proceed with steps relating to new membership. Since the1990s, North Korea has expressed interest in membership of ADB, but the consensus to proceed with processing this application has not been reached. I don’t want to go into details as to which country holds which position. I would just say that since there is no consensus among the shareholders we are not in a position to process this application. Russia also expressed firm interest in becoming a member of ADB in 1997. At that time, Board members were asked to seek the views of the capitals—the same process as in the case of North Korea. When a letter came expressing interest in membership in ADB, the Board members were asked to solicit the position of their capitals. There is no consensus yet.

Danny Yu (Asset Magazine): We note, Mr. President, that ADB reported record lending for 2003. We also note that loan disbursements have been on a long-term decline, and that there is a yawning gap between loans granted and loan disbursements. Can you tell us briefly what are some of the issues you face in terms of loan disbursements? Do you see loan disbursements in a long-term decline trend?

President: Thank you very much. The speed of disbursements depends on various factors. As you know, the international development community is increasingly concerned about the impact of projects on the environment, on people living at the site, and on resettlement. People are increasingly concerned about whether ADB—or any development bank—is in compliance with its own policies and procedures.

For both ADB and its member governments, much more time and energy are required in the formulation and implementation of a project. There is a tendency toward slow disbursement, but also there is tendency toward taking more time in project preparation and formulation. Governments, as well as our Bank, are cautious in the implementation of projects.

There are several other factors. For example, the more complicated a project or program becomes, the more expertise is required. Also, in some countries there may be a shortage of local funds. However, I don’t believe that this situation will continue. ADB is reviewing the matter intensively to find a shorter, more expeditious way of formulating projects. We are also encouraging governments to expedite implementation.

Danny Yu: In terms of resource transfers to developing member countries, the last couple of years have seen a reversal, so that DMCs have actually been transferring resources to ADB. A big component of that is prepayments. Are you worried about this trend in terms of DMCs actually transferring resources back to ADB?

President: Fortunately, several countries are now able to procure the resources they need on their own, and on more favorable terms. This is a good thing. If they have a chance of procuring funds by themselves on more favorable terms, we have no problem with that.

As you know, ADB is dedicated to poverty reduction, and our Poverty Reduction Strategy has three conceptual pillars—pro-poor sustainable economic growth, social development, and good governance. Some countries wish to borrow from us in order to pursue economic development and reduce poverty. If they are willing to borrow, we are willing to lend. Following the introduction of the London interbank offered rate (LIBOR)-based lending, the interest rate of ADB’s ordinary loans is not much higher than that of concessional loans. With such competitive lending terms, combined with our technical expertise and know-how, I am sure there will continue to be many countries willing to borrow from ADB. However, if countries are able to procure resources on better terms, that is very welcome. “

Danny Yu: And the impact on your financial resources?

President: With more resources at our disposal, we can lend more to those countries that really need them. I don’t think there is a negative impact on our financial position.

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