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Building on Momentum
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Your Excellencies, Ladies and Gentlemen: I am delighted to join the Chairman, Mr. Ibrahim H. Çanakci, Undersecretary of Treasury of Turkey, in welcoming you to the 38th Annual Meeting of the Board of Governors of the Asian Development Bank (ADB).
We are honored by the presence of the Honorable Ali Babacan, Minister of State in charge of Economy of Turkey, at our gathering this morning.
I would like to thank the Government and the people of Turkey for their warm hospitality in welcoming ADB to Istanbul, a city once known as the capital of capital cities, and one which literally spans two continents. And I would like to extend a warm welcome to all representatives of our development partners, the global financial community, civil society, nongovernment organizations (NGOs), and the media.
Let me also express my deep condolences to all member countries that lost citizens in the recent tsunami. To the Governors of the devastated countries, be assured of ADB’s lasting commitment to the recovery efforts. And to all ADB shareholders, sincere thanks and appreciation for your generosity in assisting these efforts.
Ladies and gentlemen: In the city of Colombo, a small girl has clean water to drink. In Vientiane, a mother uses her own sewing machine, and sells her goods on the global market. In Banda Aceh, a family will have a new house to replace the home devastated by the tsunami. That is what development is all about: changing lives, creating opportunities, working together to bring new hope for a brighter future.
In less than a generation, development—in its broadest sense-has changed the face of Asia. In the last 15 years alone, more than 200 million people in the region have broken free of poverty. Progress has been remarkable. But significant challenges still remain.
In Asia and the Pacific, almost 700 million people—two thirds of the world’s desperately poor—still struggle on less than $1 a day. In some parts of Asia, three out of four women are illiterate. Millions of people, especially in rural areas, have no access to clean water and sanitation. Infant mortality rates in some countries are up to 20 times higher than in developed countries. Seven out of 10 of the region’s poorest people live in the largest and fastest growing economies. In a region of such dynamic growth, these high levels of poverty are simply unacceptable.
The Millennium Development Goals (MDGs) have set the targets to cut poverty in half and raise living standards around the globe. Can the MDGs be achieved in Asia and the Pacific? That is up to all of us. But one thing is clear: if they are not achieved in Asia, they will not be achieved at all. And if they are, the benefits will be profound—not only for Asia, but also for the world.
Today, at our 38th Annual Meeting, we reaffirm our shared vision of an Asia and Pacific free of poverty. A vision of thriving modern economies well-integrated with each other, and with the world.
Sustained, rapid growth is fundamental to achieving this vision. In developing Asia, a 1% increase in household income is associated with a 2% decline in poverty. But growth alone is not enough. To fully realize our vision, I see us moving into a new era of development—more interdependent, more integrated, and more inclusive. A new era of development where nobody is left behind.
This is a moment full of promise. Developing Asia is in the midst of a fundamental and far-reaching transformation. It is no longer on the periphery of the global economy—it is central to global economic progress. Based on purchasing power parity, developing Asia now accounts for almost 30% of global gross domestic product.
Recognizing that what benefits one can benefit all, countries in developing Asia are pursuing regional cooperation. Free trade agreements are proliferating. Intraregional trade now accounts for nearly half of all trade in Asia.
People in developing Asia no longer just aspire to development—they expect it. Governments are implementing key policy reforms, improving regulatory frameworks, and strengthening internal governance and institutions. They are seizing opportunities, and achieving unprecedented development performance. And the international community has committed to investing in developing countries that demonstrate results.
The real potential for achieving higher levels of development effectiveness lies in Asia. Asia is clearly a region where development works. And Asia represents the world’s best hope for meeting the MDGs.
Ladies and gentlemen: Over the past 4 decades, ADB has invested over $113 billion in Asia and the Pacific, including $5.5 billion in loans and technical assistance last year. ADB has made many contributions to development in the region and in our developing member countries (DMCs). We should all be proud of the work we do every day to contribute to Asia’s growth and prosperity.
"We must take on a larger role in helping close developing Asia’s massive infrastructure financing gap, estimated at more than $250 billion a year"
But dynamic changes in the region also mean that ADB must change. To assist our DMCs in achieving the MDGs, the new era of development requires that ADB become more relevant, more responsive, and more focused on results.
As you know, ADB’s reform agenda is comprehensive and challenging framework for institutional change and renewal. After 4 months in office, I am confident in the progress we are making. We will continue to build upon this progress to further strengthen our development effectiveness. Let me briefly describe the principles of relevance, responsiveness and results, as they apply to ADB.
To remain relevant in the new era of development, ADB must address some fundamental challenges, both internally and in our DMCs. For example, we are concerned that our lending levels have been stagnant, that the net transfer of resources to some countries has turned negative, that our operations are sometimes too broad in scope, and that we are not maximizing the significant expertise and knowledge embodied in our institution.
To deal with these issues, we must strive for greater focus and selectivity in our operations. This is the only way we can offer and sustain high-quality products and services to our clients. We must also scale up our financial assistance, especially to support attainment of the non-income MDGs. To meet basic human needs across the region, much more investment is needed in sectors such as water supply, sanitation, education and health care. Special attention is needed to improve the lives of women in the region, and to address the increasing spread of HIV/AIDS. We also need to engage more effectively with postconflict and fragile states, in close partnership with others.
We must take on a larger role in helping close developing Asia’s massive infrastructure financing gap, estimated at more than $250 billion a year. To do so, we are working with our DMCs as well as the private sector to finance priority infrastructure projects that improve access for the poor and contribute to economic growth. We are also pursuing innovative ways to catalyze higher levels of private sector investment in infrastructure and other sectors.
Our next Medium-Term Strategy will set out the specific priorities we intend to address over the next 5 years. These priorities will be achieved within the context of our unique role in promoting closer regional cooperation and integration. To do so, we will build upon our existing subregional initiatives, such as those in the Greater Mekong Subregion, Central Asia, and South Asia. We will deepen our partnerships with regional bodies, such as ASEAN+3, in order to improve trade and financial linkages.
The recently established Office of Regional Economic Integration will serve as a focal point for these efforts, and will further enhance our role in promoting regional cooperation and integration. As we move forward, it is essential that inclusiveness underpins these efforts in order to reduce income disparities, and to ensure the benefits of growth are more equitably distributed, both across countries, and within countries.
Ladies and gentlemen, let me talk about the principle of responsiveness.
The round-the-clock work of our staff in response to the tsunami showed me what ADB is capable of. The $600 million Asian Tsunami Fund was truly a collective effort to mobilize financial resources so desperately needed by tsunami-affected DMCs. But the new era of development requires more.
To be responsive, we must be timely in all our operations. This year, in a concerted effort to reduce the preparation time for projects and improve project implementation, we will introduce a number of changes to our business processes and internal procedures. We have already streamlined some procedures for procurement and consulting services, and additional changes will be submitted to our Board soon.
To be responsive, we must be timely in all our operations....To be responsive, we must be innovative.... To be responsive, we must be more flexible"
To be responsive, we must be innovative. Last year, to assist bond market development, ADB launched its debut local currency bond issues in India and Malaysia. This year, we plan to issue local currency bonds in Thailand, Philippines, and People’s Republic of China. We are developing, and will soon pilot test, new financial instruments and modalities, including local currency financing, subsovereign lending, refinancing, and a multitranche financing facility. To support this initiative and to strengthen our institutional profile, we plan to establish an independent, comprehensive credit and financial risk management unit.
To be responsive, we must be more flexible. This includes less restrictive cost- sharing arrangements and expanding items that are eligible for ADB financing. This will also harmonize ADB’s financing regime with that of other multilateral development banks.
Ladies and gentlemen, ultimately the value we add to our borrowing member countries and our shareholders depends on achieving demonstrable results.
All of us at ADB are accountable for ensuring that we achieve results. Our Board of Directors is accountable for results. Our management team is accountable for results. And ADB staff members are accountable for results.
As part of the bank-wide implementation of the Managing for Development Results framework, our focus is shifting from activities and inputs to outcomes and impacts. At the project level, for example, our new design and monitoring framework helps identify results early on, along with more specific indicators to monitor progress. We have also prepared results-based country strategies and programs on a pilot basis and will expand this initiative to all of our DMCs.
We are applying our new Performance-Based Allocation policy to allocate Asian Development Fund IX loan and grant resources to our ADF borrowers on the basis of economic management, socially inclusive development, governance, and portfolio performance. And our new Human Resources Strategy includes staff performance plans to promote increased accountability at the individual level, and as part of staff contributions to teams, divisions, and departments.
As we move forward, we are committed to adhering to the highest levels of accountability and transparency. Our new Public Communications Policy places ADB at the forefront of multilateral development banks in terms of transparency and access to information. It gives the public improved access to documents and commits us to greater openness and dialogue with stakeholders. The Office of External Relations will soon be upgraded to a department, and our representative offices will be placed within the new department. Both of these actions will strengthen ADB’s external relations.
To achieve results, we must continue the fight against fraud and corruption. As we work with our DMCs to strengthen their key accountability institutions, we must also guard against corruption and fraud within the Bank and in all ADBfinanced projects. The newly established Integrity Division in the Office of the Auditor General is but one example of this ongoing effort.
Excellencies, partners and friends: Today, I have spoken of a more integrated and inclusive Asia and Pacific—a new era of development, characterized by tremendous challenges, but also by a wealth of opportunities. It is an era in which we are all engaged, to which we are all committed. Against this backdrop, I have outlined some of the priorities for achieving results as a regional, relevant, and responsive organization.
ADB is your institution, and your continued support and engagement are essential. I look forward to hearing your views and engaging with you on how ADB can best assist the region in meeting its challenges and in fulfilling its tremendous potential. And I ask you to join me in charting the course for our institution to help build a future of hope, opportunity, and prosperity for all the people in Asia 89and the Pacific.
Thank you.
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