Opening Remarks at the Second ADF XI Replenishment Meeting

Speech | 5 December 2011

Opening remarks by Mr. Haruhiko Kuroda, President, Asian Development Bank at the Second ADF XI Replenishment Meeting, 5 December, 2011, Pan Pacific Sonargaon Hotel, Dhaka, Bangladesh

Honorable Minister,
Mme Chair,
Ladies and Gentlemen,

On behalf of all of us, I thank the Government of Bangladesh for inviting us to hold the second ADF XI replenishment meeting in Dhaka.

Bangladesh is an appropriate venue for our discussion – and an ideal showcase of how your contributions to the Asian Development Fund (ADF) help our developing member countries fight poverty. I understand that some of you visited project sites yesterday. You saw the everyday challenges people face, and what ADB is doing on the ground to assist them. As I mentioned in Manila last September, poverty remains a persistent challenge in ADF countries. While the region overall has made significant progress in reducing poverty, about 150 million people in ADF countries are still living on less than $1.25 a day. And measured by the $2 poverty line, almost 315 million, or nearly 60% of the population in ADF countries, remain extremely vulnerable. There are also large gaps to be bridged if we are to attain the Millennium Development Goal targets by 2015.

Given the size of the challenges and the limited resources available, it is imperative that we continue to strive to be more efficient and effective to maximize impact of our assistance. During our meeting last September in Manila, we had a preliminary discussion on results. This morning, after the break, ADB's Independent Evaluation Department will present findings from two special evaluation studies on ADF operations and Management for Development Results. These studies show encouraging improvements in operational effectiveness over the past decade, but a lot remains to be done.

As you know, ADB has placed internal reform on high priority for several years now, and I believe a great deal has already been accomplished. We have become more results-oriented and transparent. We are also more selective in our operations, clearly focusing on matching clients' needs with ADB's comparative strengths. We have also taken a number of measures to improve project performance and outcomes. And ADB is now more decentralized, which has enabled us to become more responsive to our clients. Some of these measures are fairly recent and their full impact has yet to be realized. However, let me assure you that building on our achievements and further consolidating the reform program will remain a top priority for ADB Management. And I am confident that our operational effectiveness will improve further in the years to come.

After lunch today, we will provide you with detailed demand assessments for the ADF XI period. Demand for ADF resources is expected to amount to $12.9 billion over 2013-2016, in line with the ADF XI strategic priorities discussed in Manila. Based on your guidance, ADB will continue to pursue Strategy 2020 priorities under ADF XI, focusing on three complementary development agendas: (i) inclusive economic growth, (ii) environmentally sustainable growth, and (iii) regional integration. Within this framework, we will give special consideration to three special themes: gender, fragile and conflict affected situations and food security.

We will also discuss the proposed fifth replenishment of the Technical Assistance Special Fund (TASF). Technical assistance is important to help ADF countries develop capacity and knowledge, and prepare projects. While ADB has been providing more intensive technical assistance support in ADF countries, the ratio of technical assistance to loans and grants has declined over the last decade. To avoid further decline, we propose that the size of the TASF be maintained at the same amount as under ADF X in real terms, or 3% of the size of ADF XI, whichever is higher.

To meet the projected demand for ADF resources and the proposed TASF replenishment, a total ADF XI replenishment of $13.3 billion would be needed. This is equivalent to an 11% increase in real SDR terms or a 19% increase in nominal terms compared to ADF X. We realize this is not realistic, given current financial conditions. We will therefore present, later this afternoon, three alternative financing scenarios. Although varying in ambition, they are all much more modest than the projected demand. Following our last meeting in Manila, we have also significantly strengthened our resource enhancement options to further contain burdens on donors. I fully recognize the difficulties that many of you are facing today. But let us also recognize the huge poverty challenges that ADF countries continue to face and aspire together for a substantive replenishment.

Under each of the financing scenarios presented, 85% of resources will be allocated through the Performance Based Allocation system. Implementation of the refined performance based system under ADF X has resulted in more ADF resources being allocated to better performing countries, and a significant increase in the allocation to the ADF-only countries. It has also reduced allocation volatility and significantly strengthened ADF's support for regional cooperation and integration. No major changes to the system are proposed under ADF XI. Based on your guidance in the first ADF XI meeting in September, 4.5% of PBA resources will continue to be earmarked for Pacific countries and 10% of the total ADF XI resources will be set aside for regional projects.

During the meeting in Manila, you agreed to end Timor-Leste's special post conflict treatment under ADF XI. However, further discussion is needed on Afghanistan. Under each of the three replenishment scenarios presented, post-conflict premium for Afghanistan is estimated at around 5% of total ADF XI resources, based on Option 2 for post-conflict phase-out that many of you supported in Manila. Another issue needing further discussion is the possible creation of a disaster response facility by earmarking a portion of PBA resources for this purpose. Based on the feedback you provided in Manila, we have significantly modified our proposal for the facility. These issues will be revisited over the next two days.

Tomorrow, we will provide you with more details on how we are going to operationalize our approach to inclusive growth, including the promotion of gender equality. We will also discuss how we are planning to use ADF and other resources to promote private sector development and investment in ADF countries over the ADF XI period, ADB's procurement eligibility restrictions, and the first draft of the ADF XI donors' report.

Ladies and gentlemen, we have a busy agenda ahead of us over the next two days. Let us thoroughly discuss all outstanding issues, so that we can bring the negotiations to a successful conclusion when we meet in Manila next March.

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