Reform and Regional Cooperation Key to Maintaining Progress in Asia, Says ADB President

JEJU, REPUBLIC OF KOREA (15 May 2004) - Having learned from the Asian crisis, Asian countries are now on a more solid and sustainable growth path, but further structural reforms and increased regional cooperation are crucial to maintain progress, peace and prosperity, said ADB President Tadao Chino today.

Speaking at the opening of ADB's 37th Annual Meeting of the Board of Governors he noted that while income poverty has declined in the Asia and Pacific region, progress had been limited in achieving the Millennium Development Goals (MDGs). Unless efforts are redoubled, he warned, the region - home to two-thirds of the world's poor - is at serious risk of failing to achieve the MDGs relating to health, education, gender and environment.

In a wide ranging speech entitled "Inclusive Development and Closer Economic Integration: Keys to a Peaceful, Prosperous, Poverty-free Asia and Pacific Region," he said it was imperative to accelerate harmonious economic growth of the region as a whole, with special regard to smaller or less developed countries and to strengthen regional cooperation.

Given the region's strong economic fundamentals, the economies of developing Asia and Pacific are expected to show robust growth, he said. However, several risks remain. At the global level these include geopolitical concerns, rising oil prices and imbalances in industrial economies. Other risks such as a slowing of financial and corporate reforms are related to the region. "All of these risks underscore the importance of close cooperation and continued implementation of key policy and structural reforms in the region," he said.

Reviewing ADB's performance in 2003, Mr. Chino noted that a comprehensive review of ADB's poverty reduction strategy confirmed its soundness as an operational framework for the Bank's overarching goal of poverty reduction.

The review, said Mr. Chino, also recommends that poverty reduction efforts be further strengthened by:

• Continuing to support governance and policy reforms;
• Including MDG targets in ADB's country strategies and programs;
• Aligning assistance more closely with national poverty reduction strategies; and
• Continuing to strengthen coordination with its development partners.

Mr. Chino said that a dynamic private sector is crucial for sustainable economic growth and ADB will continue to improve basic infrastructure and support policy, institutional, regulatory and judicial reforms to enhance governance.

Strengthening capital markets is another crucial part of this support, reflected by a pioneering rupee bond issue in India earlier this year and support for ASEAN+3's Asian Bond Markets Initiative, he added.

Improved infrastructure is needed for the efficient delivery of goods, services, and information, including basic social services to the poor; providing an enabling environment for private sector development; and promoting broad-based growth.

The Asia and Pacific region needs more than US$250 billion a year in infrastructure investments with the financing shortfall a serious constraint to continued growth and achieving the MDGs, said Mr. Chino. ADB will continue to explore innovative approaches to finance infrastructure, he pledged.

ADB's support for regional cooperation programs in the Mekong, Southeast Asia, Central Asia and South Asia has significantly improved connectivity, reduced barriers to intraregional trade and investment, and addressed cross-border issues such as environmental degradation, human trafficking and narcotics, he noted.

"The most significant benefits of regional cooperation, however, are stability, peace and security based on mutual trust and goodwill created by countries increasingly working together," he said.

To counter another Asian financial crisis, regional cooperation has been expanded to cover information exchange and economic surveillance, currency swap arrangements, and regional bond market initiatives, said Mr. Chino. "Combating corruption is another area where regional cooperation plays an increasingly important role," he added.

With progress in market-oriented reforms and a narrowing in growth performance across the subregions, linking the subregions has gained momentum, said Mr. Chino. Reconstruction in Afghanistan, for example, has accelerated cooperation between Central and South Asia. More recently, the South Asian Association for Regional Cooperation Summit in Islamabad paved the way for accelerated cooperation between South Asia and the rest of the region, said Mr. Chino.

Looking ahead, the ADB President noted a distinct trend towards broader Asia-wide economic cooperation and integration. He said that the number of free trade agreements and other regional cooperation arrangements is increasing and there is a growing view that the region as a whole should strive for closer economic integration.

"ADB's work in regional cooperation over the decades, and particularly since the early 1990s, places it in a unique position to help the region rise to this historic challenge," he said.

Mr. Chino said that ADB is firmly committed to enhance its development effectiveness and recent moves reflecting this include a new accountability mechanism to better address concerns of project-affected people; a new results-based management approach; and a new public communications policy to promote greater information-sharing about ADB operations and to encourage more public feedback.

Turning to the resource requirements of ADB, the President again warmly thanked ADB's donor shareholders for their strengthened support and generosity in the fight against poverty with the recent $7 billion replenishment of the Asian Development Fund, agreed in Seoul on Wednesday. He noted, however, that ADB's assistance and operations must also respond to the development needs of middle-income countries: "It is essential that ADB has adequate ordinary capital resources available to expand, accelerate and sustain poverty reduction, and respond to emergencies."

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