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ADF X 2nd Donors' Meeting

Opening Remarks by
Haruhiko Kuroda
President
Asian Development Bank

26 November 2007
Vientiane, Lao People's Democratic Republic

Honorable Prime Minister,
Your Excellencies, and
Ladies and Gentlemen,

It is most appropriate that we are meeting here in Vientiane to discuss ADF X. Laos is an ideal location for you to see for yourselves how your contributions to the Asian Development Fund have helped some of the least developed countries of our region fight poverty. We see the challenges they face, and what ADB is doing on the ground to assist these countries. Allow me to thank the Government of Lao People's Democratic Republic on behalf of all of us for inviting us to hold these discussions in Vientiane.

As I mentioned in Kyoto, and again in Sydney last September, poverty is still the greatest challenge in developing Asia and the Pacific. While significant progress has been made in poverty reduction in the region, especially in the faster growing economies, about 100 million people in ADF countries are still living on less than $1 a day. Another 300 million, about 60% of the population in these countries, survive precariously on less than $2 a day. There are also large gaps in attaining the Millennium Development Goal targets by 2015.

We have made detailed demand assessments for the ADF X period based on project pipelines developed by our operations departments. These are in line with ADF X strategic priorities discussed in Sydney. In particular, the overall assistance program will focus on accelerating inclusive and environmentally sustainable growth. The program is grounded in country project pipelines that are in line with their individual strategies. The largest proportion of the program, totaling about 56%, would be allocated to infrastructure sectors. It is a robust pipeline that will require sizable replenishment.

In keeping with our Charter mandate and comparative strengths as a regional institution, we have long supported regional cooperation activities. Regional cooperation is a complex process requiring long gestation period. For example, it was almost after five to six years of concerted efforts in the Greater Mekong Subregion that the first cross-border infrastructure projects were ready to be implemented. Similarly, we are now seeing a gathering momentum of cross-border projects in other subregional economic programs in Central Asia and South Asia. This is generating a strong demand for regional projects in ADF countries.

What I have just described are assessments of needs. Actual allocation to individual countries will be determined through the PBA system, and our criteria laid out in the PBA policy for regional cooperation projects. We would like to increase our assistance to Afghanistan. We also need to strengthen our support to ADF countries' efforts at climate change mitigation and adaptation. Work in this field has just begun, and we have a huge task ahead of us.

Over the next two days, we will provide you with more details of our assessment of demand for ADF X resources. Based on these demand projections and modest additional provisions to the Technical Assistance Special Fund, I am proposing a replenishment of $11.5 billion.

This represents an increase of 50%, or 40% in real terms, over ADF IX. I believe this is well justified because the region still faces a huge poverty challenge, and this is the last opportunity to step up assistance to the DMCs in time to help them achieve MDGs. However, to finance this replenishment, we will draw as much as possible from ADF internal resources and OCR net income transfers. At the same time, I will seek your strong support for financing the remaining $4.5 billion, which represents a 25% increase over your ADF IX contribution.

Ladies and gentlemen, we recognize that ADB's institutional effectiveness, particularly human resources management, is vital to effectively deliver the complex development agenda facing us. You have emphasized this in our discussions last September in Sydney. The matter was also discussed in the recent Board and Management Retreat on the Long-Term Strategic Framework.

I believe that through the Managing for Development Results initiative, we are becoming more results-oriented. ADB is more selective in its operations today, clearly focusing on the intersection of clients' demands and our own comparative strengths. ADB is also a more decentralized organization today, with a fifth of our staff located in our 23 resident missions, and many of our functions now delegated to these resident missions. This has enabled us to become more responsive to our clients. We will discuss these and other reforms in a separate session tomorrow. Building on our achievements and further consolidating the reform program is an important item on my agenda as the President of ADB.

In my closing remarks in Sydney I had referred to human resource management. I have started discussions on the subject with our Board in the context of the ongoing review of LTSF. Human resource management is a complex matter, and we need further discussions on many elements of the issue before we decide on changes. However, after listening carefully to you and our Board members, I have made the following specific decisions.

• First, I will introduce a flexible recruitment practice, including the use of fixed-term contracts with differentiated employment conditions and salary. This is to secure skills needed for some specific areas for our activities, such as non-sovereign operations, assistance for public-private partnerships, knowledge services and some support functions.
• Second, for senior staff appointments at Level 9 and Level 10, generally I will have the position simultaneously advertised internally and externally, so that we can generate a larger pool of qualified candidates for consideration by Management. I will make the final decision based on consultation with Vice Presidents. If deemed appropriate, interviews will be conducted not only with external candidates but also with internal candidates. In addition, I may seek additional assessments from an executive firm.
• Third, following the staff engagement survey in early 2008, I will conduct a comprehensive review of the Human Resource Strategy with the assistance of external experts. I will consult the Board before finalizing the scope of the review as well as during the review process. Based on its outcome, further revisions on HR issues may be made as needed.
• Fourth, I will make staff engagement surveys a regular exercise to be carried out every two to three years.

Ladies and gentleman, we face major challenges ahead. Our ADF countries expect us to remain a reliable partner in their pursuit of development. We at ADB will do all we can to rise to these expectations. But we can only get there with your support, your sound advice, and your generous contributions to ADF X.

Thank you.