First ADF XI Replenishment Meeting: Opening Remarks

Speech | 8 September 2011

Opening remarks by Haruhiko Kuroda, ADB President, at the ADB Headquarters, Manila, Philippines.

Thank you, Madame Labelle. Good morning, ladies and gentlemen. It is my great pleasure to welcome you to ADB Headquarters for the first meeting of the ADF XI replenishment.

This replenishment will be a key priority for ADB management over the next year. Throughout the negotiations, we will discuss how ADF can best contribute to poverty reduction in the Asia and Pacific region from 2013 to 2016.

Ladies and gentlemen, these are challenging times. The global economic crisis has left many countries with substantially weaker fiscal and external outlooks. The Asia and Pacific region, overall, has fared relatively well. Asia has been one of the fastest growing regions of the world over the last decade, leading to a significant drop in income poverty. By some estimates, the number of people living on less than $1.25 a day has declined by 646 million between 1990 and 2008 and contributed significantly to global poverty reduction.

However, ADF countries have not shared fully in this prosperity and development. In fact, the development gap between ADF countries and other countries in the region is widening. This should be – and is – of grave concern, as these increasing disparities could undermine social cohesion and stability in the region.

Poverty continues to affect the lives of millions in ADF countries. Based on recent estimates, 27% of the population in ADF countries still live in absolute poverty, on less than $1.25 a day, and almost 60% live on less than $2 a day. Those living on less than $2 a day are extremely vulnerable and can easily slip back to absolute poverty.

While ADF countries have made some progress towards the non-income MDGs, it has been far too slow. As a group, ADF countries are on track to reach just over one-third of the non-income goals by 2015. The maternal mortality rate in ADF countries at 348 per 100,000 live births is more than twice as high as that in OCR countries. Child malnutrition is also more acute in ADF countries with 36% of children underweight, compared with 28% in OCR countries. The comparative figure for Sub-Saharan Africa is 27%.

ADF countries with the greatest needs are also the most vulnerable. Of particular concern are rising food and fuel prices, which undermine many aspects of economic and human development. More than one-third of ADF countries (10 out of 28) are currently classified as conflict-affected or in fragile situations. In addition, ADF countries are more vulnerable to crises and to the adverse effects of climate change, although they contribute very little to it.

ADF countries are also least equipped to deal with the challenges they face. They lag in economic and social infrastructure, and they suffer from weak governance and institutions and an environment not conducive to private sector development and private investment. Weak fiscal situations, which have been exacerbated by the global economic downturn, compound these problems. And there are renewed concerns that the uncertain economic outlook in developed countries could negatively affect growth in the region. The potentially adverse impact on ADF countries would be especially felt by the vulnerable, including the poor and women.

What does this tell us? Quite clearly, ADF countries must intensify their efforts to achieve the MDGs and address their other development challenges. And they need support from all of us in the international development community to do so. Official development assistance or ODA is an important component of the development effort. Thus, I would like to encourage all of you to provide significant new resources to ADF XI, as this will be the last replenishment before the target date for achieving the MDGs in 2015.

I believe our track record in deploying ADF assistance to date is good. The ADF has financed infrastructure and services to boost economic growth. It has assisted countries with fragile and conflict-affected situations. And it has helped women, children, and the poor to access quality education and health care, reliable electricity supply, clean water, and economic opportunities. The ADF has also helped countries improve their institutional capacities and implement needed reforms.

Among the reports we have prepared for this meeting, you will read about how ADF projects have brought concrete benefits to the people in the region. These include uninterrupted electricity supply to people in Afghanistan through the construction of 241 km of high-voltage transmission lines, representing 54% of such lines in the country. In Mongolia, the ADF was instrumental in the country's impressive achievement of education outcomes. ADF projects rehabilitated 44% of all classrooms in the country, and trained 90% of teachers in primary and secondary schools. ADF projects also supported major sector reforms.

To maximize the development impact of ADF operations, ADB continuously analyzes and responds to operational and organizational challenges. As you know, we have made internal reform a high priority for several years now and a great deal has already been accomplished. The successful implementation of the 2004 reform agenda improved ADB's business processes and quality assurance mechanisms for country partnership strategies, as well as investment programs and projects. Building on this, we now assess our performance regularly through the Development Effectiveness Review process that began in 2008, and take corrective actions where necessary. The new reforms adopted through this process are ensuring that the ADF continues to be a critical resource for reducing poverty in the poorer countries in Asia and the Pacific. However, the process is by no means complete and I can assure you that the consolidation of reforms to further strengthen ADB's institutional effectiveness will remain a top priority over the ADF XI period.

Looking forward, it is clear that our Strategy 2020 priorities remain relevant in the ADF context. ADF assistance for transport, energy, water, and other infrastructure, and basic public services such as education, promote inclusiveness by widening the circle of opportunities so that all members of society can participate in and benefit from economic growth. ADF will also seek to promote financial inclusion in the region to further extend the reach of opportunities and inclusive growth.

While growth remains a high priority under ADF XI, its sustainability will depend on how its impact on the environment is managed. The main environmental challenges facing ADF countries include climate–change related impacts (especially increased vulnerability to natural disasters), water scarcity, pollution and loss of forest cover, and loss of biodiversity. Under ADF XI, ADB will continue to support projects with environmental sustainability as a theme, and to address climate change as a priority.

Regional cooperation and integration play a critical role in accelerating economic growth and reducing poverty and economic disparities, both within and across countries. With decades of experience in Asia and the Pacific, ADB and ADF are ideally positioned to continue serving as catalysts for this process, linking national and regional priorities.

Under ADF XI, we propose to give special consideration to food security, in view of the recent food price inflation and its potential impact on poverty in ADF countries, fragile and conflict affected situations, and gender. In this meeting, we will be presenting in more detail what ADB plans to do in each of these areas except gender, which will be discussed in our next meeting. We will also discuss our approach to post-conflict assistance in Afghanistan and Timor-Leste, what to do with the Pacific set-aside and the regional set-aside, and the possible creation of a crisis response facility under the performance based allocation system.

Finally, we will be presenting preliminary scenarios of financial capacity to show how much internal resources can potentially be made available under ADF XI. Our preliminary analysis points to a drop in available internal resources due to a substantial reduction in liquidity drawdown compared to ADF X. As some of you may recall, almost SDR1.5 billion of usable liquidity was identified from the review of ADF's financial framework in 2007 and a large share of this (over SDR1 billion) was released as one-off addition to ADF X internal resources. A similar amount will not be available under ADF XI. However, we will present several options during the meeting to further enhance ADF XI internal resources and their potential impact.

Ladies and gentlemen, we face major challenges ahead. Our ADF countries expect us to remain a reliable partner in their pursuit of economic growth and poverty reduction. I believe ADB is well positioned to rise to these expectations. Based on your guidance, we will continue to look at ways to further strengthen the effectiveness of our assistance and enhance our internal resources. But we cannot do this alone. While we recognize that many of you face difficult economic times, your continued support and generous contributions to ADF XI are much needed to help shape the future of these countries.

Thank you very much. I look forward to a productive meeting