Town Hall with the President - Takehiko Nakao | Asian Development Bank

Town Hall with the President - Takehiko Nakao

Speech | 21 September 2017

Speech by ADB President Takehiko Nakao at the Town Hall with the President on 21 September 2017 at ADB Headquarters, Manila, Philippines

Good afternoon. Thank you for joining this town hall meeting. I am pleased to see the participation of so many colleagues from resident missions.

At an Insight Thursday event earlier this year, I had a chance to speak with you about ADB’s 50-year history. I talked about the important contributions that ADB has made to the region's development and poverty reduction, and what role ADB should play in the future.

Today, I would like to focus on the future, what ADB will need to do to stay responsive to the changing needs and aspirations of its developing member countries (DMCs), and how that relates to you as ADB staff.

Our challenges

Despite significant progress, as I visit our DMCs and meet with their leaders, I am always reminded that challenges remain.

Extreme poverty is far from being eradicated in our region as 330 million people still live on less than $1.90 a day. Achieving the more ambitious Sustainable Development Goals and addressing climate change calls for collective efforts by all. Widening inequality in the region points to the need to focus on inclusive growth. Gender equality needs to be vigorously pursued.

A recent ADB study shows that developing Asia will need to invest $1.7 trillion per year in infrastructure through 2030. We also face new challenges from urbanization and aging. Rapidly changing technologies present both challenges and opportunities.

ADB has an important role to play in helping countries respond to these challenges and achieve their development ambitions.

Thanks to the merger of the Asian Development Fund (ADF) lending operations and Ordinary Capital Resources (OCR), we have an opportunity to significantly expand our operations without worrying about capital headroom for some time. This is an advantage that many of our multilateral development bank peers do not have.

We have started working on our new long-term strategy—Strategy 2030—to spell out our future approach. We had a very good discussion with the Board on the evolving direction of the Strategy at a retreat earlier this month.

I would like to share with you some of my thoughts on our Strategy.

Operational priorities

Looking forward to 2030, our client countries continue to need our help to eradicate poverty and also to promote greater prosperity, inclusiveness, and resilience. To do so, I see the following eight priorities.

Differentiated approaches at the country level

First, as our countries vary widely in terms of their size, development challenges, financial needs and capacities, we will need to use differentiated approaches to address their specific needs.

ADB will continue to prioritize poor and vulnerable countries, including those in fragile and conflict-affected situations (FCAS).

Most of our countries will become middle-income countries by 2020. We will continue to engage upper middle-income countries in the context of global and regional public goods such as climate change and regional cooperation and integration; help them strengthen their institutions; and facilitate their sharing of knowledge with other DMCs.

Infrastructure

Second, infrastructure will remain a major operational focus for ADB, given our strong track record and the region’s large financing gaps. We will continue to invest in key areas such as energy, transport, water, and urban sectors.

In doing so, we will seek to promote greener and more inclusive infrastructure and help DMCs integrate more advanced technologies into infrastructure projects.

ADB will also prioritize improving access to basic infrastructure in lagging areas and projects that improve regional connectivity.

In addition to financing physical investments, a major focus of ADB’s assistance will be to build capacity for planning, financing, implementing, and maintaining infrastructure.

Social sectors

Third, we will strengthen our support for social sectors.

In health, we will expand our portfolio to combat communicable disease, promote rural health, and help achieve universal healthcare coverage.

Recognizing the potential impacts of aging, we will help strengthen social protection and health financing systems in selected countries.

Technical and vocational education and training (TVET) that responds effectively to the evolving demands of the labor market and changing demographics will be a key focus area. We will continue to support improving quality and access to secondary and higher education.

Integrated approach to development

Fourth, complex problems like urbanization cut across several sectors—transport, power, public health—and require integrated solutions. We will promote an integrated approach to development, beyond narrow sector approaches.

Thematic priorities like gender, climate change, the environment, and governance should be explicitly incorporated in ADB projects in addition to sector-level considerations. Accelerating progress on gender equity will be a priority throughout all our operations.

Mobilization and catalyzation

Fifth, given the huge financing needs in the region, a key measure of our success will be the volume of additional resources we mobilize, on top of our own financing. We will expand our official and commercial cofinancing. We will also pursue cofinancing from charitable organizations.

We must secure more support for our trust funds from donors to finance technical assistance and innovative pilot projects in such areas as climate change, education, health, gender, and entrepreneurship.

ADB will proactively use guarantees and other credit enhancement products, and support public–private partnerships (PPPs). PPPs offer great potential to mobilize public and private resources for development. ADB will scale up its transaction advisory services to help clients structure PPPs and develop pipelines of bankable projects.

We will also continue to support DMCs to improve the business environment, and mobilize domestic resources.

Nonsovereign operations

Sixth, we will further expand our nonsovereign operations (NSOs). I believe that NSOs will become more and more important to ADB. More DMCs will move to upper middle-income status or graduate from sovereign borrowing, and the private sector will be more central to these economies.

We will continue to promote an increased role for the private sector in clean and renewable energy, sustainable transport, and financial inclusion. We will also diversify our NSOs to areas such as agribusiness, health, education, manufacturing, and tourism.

ADB is committed to exploring greater investment opportunities in frontier markets and low-income countries.

NSOs should be guided by a dual mandate of development impact and profitability. For ADB to be a catalyst for private sector investments, our NSO interventions must be profitable. Such profits contribute to building up our capital, which in turn will increase our lending capacity both for sovereign and nonsovereign operations.

Developmental impact and profitability are strongly linked. We are considering a balanced portfolio approach, as each project cannot be expected to provide maximum returns in terms of both development impact and profitability. Through a portfolio approach, ADB can maximize overall outcomes on the dual mandate.

As our nonsovereign operations expand, we need to continue to provide solid reasons for why we, as a multilateral development bank, undertake NSOs. The key reasons of course are that we bring additionality in terms of introducing best practices, addressing market failures, and crowding in private sector resources. We will always be mindful not to distort markets or crowd out private sector activities.

Quality and knowledge

Seventh, as we are scaling up our operations, we should also pay attention to smaller projects and quality. I firmly believe that projects smaller in amount in social sectors and FCAS can have a large development impact.

ADB’s continued relevance will increasingly depend on our knowledge. Even when DMCs can tap other sources of financing, clients often turn to ADB as our financial assistance is combined with knowledge to design and implement projects, new technology, and best practices.

ADB’s sector and thematic groups, working together with operational departments, will play a key role in embedding knowledge solutions in sovereign and nonsovereign projects.

Incorporating advanced technologies and innovative approaches involves certain risks. I would like to stress that even if there are some setbacks as you try to bring in new ideas, your efforts will be appreciated.

Besides tacit knowledge embedded in projects, we will develop knowledge products and services that cater to different needs. Such knowledge products and services can be provided by all departments, including the Office of the General Counsel, Treasury Department, Office of Risk Management, and Office of Anticorruption and Integrity.

Efficient delivery

Finally, unless our loans and grants are disbursed, they will have no impact on development. We must continue our efforts to ensure project readiness and improve business processes for timely project processing and implementation. We must diligently implement the new procurement policy.

We are modernizing our IT systems. This morning I went through the training on Office 365. These new IT platforms will strengthen our capacity to serve our members more effectively, and bring efficiency to our daily work. I encourage all staff to proactively embrace these changes.

One ADB

Now I would like to talk about the importance of One ADB. Implementing our priorities and achieving our mission require full use of our collective and diverse skills as One ADB.

In particular, I would like to emphasize the need for closer integration between our sovereign and nonsovereign operations. We must remove any walls that exist between sovereign and nonsovereign staff.

As NSOs become more central to ADB’s operations, the Private Sector Operations Department’s (PSOD) involvement should be increasingly driven by sector specific needs in individual DMCs. We will identify areas and projects for PSOD potential engagement based on discussions with the authorities as well as the private sector at the sector and/or country level.

PSOD, regional departments, sector and thematic groups, and the Office of Public–Private Partnership must work closely together in planning operations and developing solutions for clients. I would like to see PSOD staff participate more actively in country programming. PSOD staff will participate in Board discussions on individual country partnership strategies (CPS).

To support the One ADB approach, we will increase staff training across the Bank. This will include training regional department staff in NSO-related skills and training PSOD staff in business processes related to country programming and CPS preparation.

In parallel, we will continue to decentralize and expand staff outposting to field offices to stay closer to clients and markets.

As I mentioned recently during the country directors’ forum, country directors represent ADB in every aspect of our work, including sovereign and nonsovereign operations, knowledge work, external relations, and economic research.

My commitment to you

ADB’s achievements over the past 50 years would not have been possible without skilled and motivated staff. As I have mentioned previously, people are our most important asset. It is crucial to strengthen the capacity and skills of our staff to remain relevant and keep pace with a rapidly changing Asia and the Pacific region.

As our operations expand, we are increasing staff numbers and administrative budget, while continuing to pursue cost efficiency and optimization.

ADB will continue to improve its human resources (HR) framework to ensure that we have high-performing staff in the right places at the right time. Let me elaborate on some key HR reforms.

First, improving gender balance within ADB is a key priority. We will need persistent action and outreach to hire, retain, and promote qualified women. We are aiming to move from the current rate just below 35% of International Staff (IS) women to our target of 40% by the end of 2022. It is essential that senior managers actively pursue this agenda. I urge VPs and Heads of Department to take action.

Second, enhancing mobility is crucial for ADB. It will support the optimal use of human resources in the spirit of One ADB and give more opportunities to staff for career development. The new mobility framework will facilitate the appropriate placement of returning staff from resident missions to headquarters.

We will launch the first phase of the mobility framework. Your feedback matters, and we will continue to listen to your views.

Third, we are putting in place a strengthened performance management system to enhance staff productivity and motivation. The system aims to reward good performers, address poor performance, and identify areas for improvements.

Better and frequent communication about work programs and performance between managers and staff will be promoted. We are also introducing annual 360 degree feedback for staff at IS7 and above in the context of the upcoming performance review exercise.

Fourth, leadership programs. Since 2016, ADB has invested in a series of leadership development programs to nurture and develop effective leaders. I am pleased to report that 103 senior staff (directors and above) have already participated in these programs.

Managers should demonstrate strong communication and team-building skills. Their words and actions will be critical in championing and demonstrating the One ADB approach across our institution.

Fifth, more flexible work arrangements. Ensuring a flexible workplace is an essential building block to implement ADB’s business effectively and to strengthen career development. We have recently introduced revised Work from Home guidelines to clarify the policy and criteria.

Sixth, let me reiterate the importance of a respectful workplace. I will continue to hold all managers responsible for creating a respectful workplace under the Code of Conduct. The Respectful Workplace Unit in the Office of Anticorruption and Integrity is now operational and accessible to all staff.

In addition, we are recruiting a new Ombudsperson this year. Once appointed, the Ombudsperson will be accessible to all staff in headquarters and field offices.

Closing

In closing, I believe that ADB has been a reliable partner in the historic transformation of Asia and the Pacific over the past 50 years. Our continued success will depend critically on the hard work and professionalism of dedicated staff. We will keep a strong sense of mission.

I look forward to your continued support.