Transforming Asia in an Era of Global Change: Challenges and Opportunities

Address by ADB President Haruhiko Kuroda at the 45th Annual Meeting of the Board of Governors, Manila, Philippines

I. Introduction

Excellencies, distinguished guests, ladies and gentlemen:

It is a great pleasure to welcome you to the 45th Annual Meeting of the Asian Development Bank. I am delighted to see such a strong turnout of ADB shareholders, development partners, and representatives of the private sector, civil society, NGOs and the media. Thank you for joining us today.

We are honored by the presence of His Excellency, President Benigno S. Aquino III, at our gathering this morning. On behalf of us all, I would like to offer our sincere thanks to the Government and the people of the Philippines for continuing to embrace our institution, and for their warm and gracious hospitality in hosting this Annual Meeting.

I want to extend our sincere appreciation to our shareholders for their ongoing support of the Bank, and particularly this year, the replenishment of the Asian Development Fund. We highly appreciate your generous support, despite the difficult challenges many of you face at home. We especially appreciate those members who increased their contributions, those who have become donors for the first time, and the graduated ADF recipients who accelerated their repayment to augment ADF resources. The substantive replenishment of $12.4 billion (7.9 billion in Special Drawing Rights) – 9.5% (11.1% in SDR terms) higher than the previous replenishment – clearly demonstrates your shared commitment to help the region’s most vulnerable people.  Thank you.

II. Asia in the Global Economy

Ladies and gentlemen: Forty-four years ago, delegates gathered here in Manila for the first Annual Meeting of the ADB Board of Governors. While ADB’s founders had great aspirations for Asia, few could have predicted that today, Asia would be such a powerful engine of global growth.

The world is experiencing a fundamental transformation. As advanced economies struggle to regain ground following the global financial crisis, developing Asia’s growth momentum, while slowing slightly, remains strong. While external demand is still weak, we expect the region will achieve overall growth of 6.9% this year and 7.3% next year.

Of course, ongoing difficulties in other parts of the world still present risks. Volatile capital flows still remain a concern. Keeping inflation low and asset prices stable, and sustaining growth through prudent macroeconomic and financial management, are also key challenges.

While developing Asia must remain vigilant against near-term risks, now is the time to push through with greater reforms to support the region’s long-term growth. There are large challenges ahead as Asia pursues its own transformation, but it can continue to drive global growth well into the future.    

III.Transforming Asia through Regional Cooperation and Integration

When we met in Bali at the onset of the global crisis in 2009, I spoke of the need to fundamentally restructure our approach to development and bring about a more sustainable global balance. This would require Asia, which now accounts for about 30% of global output, to continue to become as much a destination for goods and services as it is a leading source of producing them.

This process is already underway. Asia’s demand for its own goods and services is growing faster than external demand. And Asia’s current account surplus is shrinking. Still, more needs to be done.

Increased regional cooperation will help Asian countries take up common challenges and seize opportunities. This includes liberalizing trade within the region to further encourage rebalancing. It includes strengthening physical connectivity through investment in infrastructure, and building sophisticated financial systems to better channel Asia’s savings into productive investments at home.

The potential for progress through regional cooperation is visible across Asia and the Pacific. Cooperation has helped significantly reduce poverty in the Greater Mekong Subregion. It has led to increased connectivity and economic growth in Central Asia, more trade liberalization in South Asia, and a comprehensive approach to climate change in the Pacific. These and other shared achievements reflect the Asian wisdom that the richest tapestry is woven from many threads.

The Association of South East Asian Nations, or ASEAN, has become a driving force of regional cooperation and integration in Asia. With ADB participation, ASEAN recently took a major step in establishing the ASEAN Infrastructure Fund, which will play an important role in leveraging additional resources for infrastructure financing. I welcome the decision of ASEAN+3 governments to strengthen the Chiang Mai Initiative Multilateralization to increase financial stability.

I strongly urge developing member countries to continue their cooperative efforts within the region, and to strengthen South-South cooperation with other developing regions, such as Latin America. The world’s developing countries have much to learn from each other, and much to contribute to the global commons. Cooperation among them will help them to do so much more effectively.

IV.Transforming Asia through Inclusive, Green, and Knowledge-led Growth

Ladies and gentlemen: tomorrow’s successful economies will be well-governed economies, with broad access to opportunities and services to promote the wellbeing of their people and enhance their quality of life. They will thrive while reducing energy use to create a healthier, safer world for their children. They will innovate, take risks, and discover new ways to advance their society. These are the standards to which we all must aspire.

In short, tomorrow’s successful economies will focus not on growth alone, but on transforming themselves through growth that is inclusive, green, and knowledge-led.  Let me focus briefly on each of these elements.

Inclusive Growth

First, Asia needs strong growth to continue making headway against poverty. While the region can be proud of its record on poverty reduction, much remains to be done. Several hundred million Asian people still live on less than $1.25 a day. And growing inequalities and polarization exacerbate the problem. Growth in itself is therefore not enough; only through inclusive growth will this tremendous challenge be met.

Most countries in Asia are now pursuing an inclusive growth agenda. They are increasing access to opportunities so that more households, farmers, and small business owners can participate in and benefit from growth. They are working towards growth that employs more people, including women and disadvantaged groups. They are investing more in health, education and skills development, and expanding access to services and opportunities in lagging regions. As populations age, providing adequate social protection for the elderly will also need to be seriously considered.

Removing constraints to inclusive growth is key to ADB’s development strategies. To this end, for example, we are working with Cambodia and the Lao People’s Democratic Republic to implement social safety nets, community-driven development, and smallholder development projects. We are also helping implement a universal health insurance scheme in the state of Mizoram in India. On a larger scale, ADB support for economic corridor development across Central and Southeast Asia will greatly enhance people’s mobility and the transport of goods, allowing those in the poorest communities to access services and economic opportunities.

Here in the Philippines, the ADB-supported conditional cash transfer program is transforming the lives of poor children and poor families. In its pilot phase, school completion rates rose and health indicators improved substantially, paving the way to a brighter future for the country’s youth.

Green Growth

Second, a better quality of economic growth must be not only inclusive, but also environmentally sustainable. Green growth recognizes that environmental, social, and economic development complement – rather than compete with – one another. I believe that with commitment, the right policies and investments, and close regional cooperation, the Asia and Pacific region could lead the world toward a more sustainable and resilient future.

I am pleased to note that Asia is rapidly becoming a global leader in green investments, which are themselves becoming an engine of growth in the region. The People’s Republic of China  has become one of the world’s top installers of wind turbine and solar photovoltaic systems. India is strongly encouraging the rapid expansion of biogas, solar and other forms of renewable energy—especially for rural areas—through such innovative policies as its renewable energy certificates. With ADB support, many countries in Asia and the Pacific are adopting plans to reduce the intensity of carbon dioxide emissions and improve resilience to climate change. And more countries are working together to conserve natural resources and critical ecosystems, such as the Coral Triangle in Southeast Asia and the Pacific, on which a coastal population of more than 120 million people depends.

Asia must also work to build livable, inclusive, environmentally sustainable cities. Rapid urbanization has brought a multitude of environmental problems, which will only worsen as mass migration to cities increases. ADB is working with several member countries to address these problems. Our urban projects in Bangladesh and Georgia for example, are helping cities to improve transport, water supply, urban services and – ultimately – the quality of life of their people.

An ongoing study led by ADB Institute entitled Climate Change and Green Asia emphasizes that Asia is well positioned to adopt an agenda which fosters green growth. Together, we can succeed – in improving the health and wellbeing of our planet and providing impetus and inspiration to developing and developed economies alike.

Knowledge-Led Growth

Third, while following an inclusive and environmentally sustainable development path, Asia needs to also recognize the critical importance of knowledge-led growth. To be competitive, economies must combine productive resources more efficiently, use new technologies and creative ideas, and promote innovation and entrepreneurship.

In short, Asia needs institutional, governance and regulatory frameworks that will foster investment in research and development, protect intellectual property rights, offer incentives for innovations, and stimulate competition.

Asia also needs to invest more in modern and cost-effective economic infrastructure to support and sustain a knowledge-based economy and society. Businesses today are driven by international markets, global investment and sophisticated information networks. Investment in infrastructure, tertiary and vocational education, and research and development are essential to allow businesses to move up the value chain and succeed in this highly competitive environment.

ADB’s support for education, capacity development, information and communications technology, development of private enterprise and the finance sector, and other areas have helped developing member countries promote knowledge-led growth. Last year, for example, we drew on ADF funding to support Mongolia’s emphasis on higher education for improving the country’s long-term competitiveness. There are many other examples, and we are committed to doing more.

V. ADB in a Changing Asia

Ladies and gentlemen: The world is transforming. The region is transforming. And ADB is transforming by increasingly emphasizing these three critical elements of inclusive growth, green growth and knowledge-led growth.

Last year our operations grew to nearly $21.7 billion, including cofinancing, reflecting the growing demands of our developing member countries. Our portfolio performance is improving. And we are working hard to leverage resources through strong partnerships, including partnerships with the private sector. Our policy advice, capacity building for public-private partnerships, and financial assistance are helping to build private sector participation in the region’s development. Our private sector operations have more than doubled in the last 6 years, and have expanded into frontier sectors such as clean energy and energy efficiency.

While ADB financing remains vital to many of our DMCs, the needs and priorities of others are changing as they grow. It is not just finance they seek, but “Finance +” – finance plus knowledge. We recognize that we must do more to ensure our relevance as an effective development partner in a rapidly changing world. And, we will.

Our support for traditional development pathways – and for inclusive, green growth – has served the region well. To further increase the value we bring to our clients, we will significantly scale up our efforts to create, share and implement knowledge as an integral part of our operations. Among other efforts, we will more closely link our research, policy advisory services, and innovation-based operations to the priority needs of our clients. We will also develop new knowledge-based partnerships with recognized “centers of excellence,” and a knowledge results framework to strengthen ADB as a source of, and partner for, development knowledge.

We will also continue to work with you to improve the results of our investments. This year, we will review and refine our Corporate Results Framework. And we will conduct our third Global Perceptions Survey and our biannual Staff Engagement Survey to gain feedback from our clients and from our most important asset – our people. Along with the new Accountability Mechanism, adopted earlier this year, and the updated Public Communications Policy which is now being implemented, these initiatives will help ensure that ADB is transparent, accountable and results oriented in all its activities.

VI.Conclusion

Ladies and gentlemen: As we tackle the region’s large, unfinished development agenda, we must also embrace Asia’s growing role in a transforming world. I urge each and every one of us to work together as never before to ensure this global transformation is a harmonious one, resulting in higher and more equitably shared wellbeing among people the world over.

Above all, let us continue to relentlessly pursue our shared vision of an Asia and Pacific free from poverty. For 45 years you have placed your great trust in ADB. We accept, of course, that with that trust comes a grave responsibility. And so today we renew our determination to build an Asia and Pacific where every child is assured of enough food to eat, the right to good health care and education, a future with opportunity and the opportunity to grow and achieve, regardless of the circumstances of her birth; an Asia and Pacific in which every person can fully participate in, and contribute to, the welfare of his community, her country, and the world we all share.

Thank you.