Moderator: Ann Quon
Officer-In-Charge, Office of External Relations

Proceedings

Ms. Quon: Good afternoon ladies and gentlemen and thank you for joining us today. I'm very pleased to have the opportunity to introduce you to ADB's new president, Mr. Haruhiko Kuroda. President Kuroda is ADB's 8th president. And as many of you know 8 is a very auspicious number for Asians so we think this is a very good sign for ADB and for the region. Mr. Kuroda comes to ADB with a wealth of experience and expertise in international finance focused particularly on the Asia and Pacific region. His career at Japan's Ministry of Finance is distinguished by a number of significant achievements. For example, following the 1997 financial crisis in the region, Mr. Kuroda played an integral role in the Miyazawa and Chiang Mai initiatives which together helped restore and strengthen many of the region's economies. More recently, Mr. Kuroda has served as special adviser to the Japanese Prime Minister and as professor of the graduate school of economics at Hitotsubashi University in Tokyo. He has also written several books on topics like monetary policy and international negotiations. As the region's developing countries grapple with new and ongoing challenges and seek to capture opportunities for sustained growth, ADB's role will be more important than ever. So we are very fortunate indeed to have a president of Mr. Kuroda's stature. Without further ado, I would now like to ask Mr. Kuroda to deliver a few words to you. Thank you.

Mr. Kuroda: Good afternoon and thank you for joining us today.

I have been in Manila a little more than a week now and I would like to first thank the Philippine people and the Philippine Government for their very warm reception and hospitality. I am looking forward to life in Manila and to learning more about the Philippines, as well as ADB's other member countries.

Before I say a few words about my plans as ADB President, let me briefly update you on some aspects of our response to the recent tsunami in the Indian Ocean.

The tremendous loss of life caused by the tsunami brought Asia and the world together to provide emergency relief to hundreds of thousands of people whose lives were shattered on December 26. As you know, ADB was among the first organizations to pledge assistance to the affected countries. So far, we have identified $600 million in readily available funds and another $175 million in reprogrammed funding for Indonesia, Maldives, Sri Lanka and India.

The tsunami response is now shifting from the relief phase to the rehabilitation and reconstruction phase. It is critical that the international community maintain the significant momentum of the relief effort as longer-term work on restoring livelihoods, rehabilitating communities, restoring social services, and rebuilding infrastructure moves into high gear.

I am determined to ensure that the Asian Development Bank, as Asia's development partner, will meet the central needs of the affected countries. Coordination among the many governments and bilateral and multilateral donors involved in the rebuilding process will be a crucial component of success. With this in mind, I have taken the initiative to host a ""High-Level Coordination Meeting on Assistance to Tsunami Affected Countries"" here at ADB Headquarters on March 18.

The meeting will take stock of recovery achievements and pledges of support, and seek to reach a common understanding of the major considerations in delivering effective rehabilitation and reconstruction programs over the next four to five years. The meeting will help to ensure that the world's attention remains focused on tsunami support and that donor support for, and confidence in, the affected countries remains high.

I have invited Ministers from the affected countries, donor countries, and senior representatives from the United Nations, the World Bank and other multilateral organizations, to attend this important conference. The magnitude of the tsunami disaster demands that the rebuilding process is rapid, efficient and meets the critical needs of affected communities. ADB is committed to ensuring that affected areas get the funds and the assistance they need as quickly as possible.

Now, I would like to say a few words about my work at ADB more broadly in the coming years. I am honored by the opportunity to serve as ADB President. This institution plays a critical role in the Asia and Pacific region. Our role involves financial support for specific projects to reduce poverty and promote wide economic growth. And, importantly, our role involves providing inputs and insights to our member Governments as they shape the policies and the institutions that will determine how they are able to help their people improve their lives.

As you know, parts of our region remain desperately poor. Almost 700 million people in Asia and the Pacific continue to survive on less than one dollar a day. This reality presents this institution and each of its members with a huge responsibility: We must strengthen the effectiveness of development aid, and we must create new, sustainable economic opportunities for the people of this region. This is a responsibility I take very seriously, and one to which I will dedicate all my energy in the years ahead.

The Asia and Pacific region is changing rapidly and ADB will respond to the changing needs of developing countries in a timely and flexible manner. To strengthen our contribution to stability and growth in the region, we will focus on three key areas:

• ADB will be more client-oriented
• We will act as a catalyst for greater regional economic integration, and
• We will streamline our procedures, reduce bureaucracy and improve our range of financial instruments to ensure they can meet the priority needs of our borrowing members.

ADB does a lot of things very well. But in every institution there is room for improvement, and a need for new and innovative thinking. As we work to meet the unique needs of each of our borrowing members, ADB will strengthen its role as a knowledge organization. We will improve our research function to ensure we are providing the critical thinking and data our members need to make wise policy decisions and create practical development plans that can be effectively implemented.

ADB will also assume a more proactive role as catalyst, and as a coordinator, for regional cooperation and integration. This is a special and unique mission of a regional development bank. And closer integration is an area of critical importance to the competitiveness of Asian economies in today's global market.

Before I take your questions, I would like to say that I have come to ADB with both hope and determination. My hope-and my belief-is that the Asia and Pacific region is entering a new era of development. My determination is that ADB will continue to help our developing member countries strengthen their economies, create new opportunities for their people, and broadly improve standards of living for the people of Asia and the Pacific.

I am now happy to answer your questions.

Ms. Quon: Thank you. If I could ask you to identify yourself and your news organization before you ask your question.

Ms. Cerojana: I'm Tess Cerojano from the Associated Press. Can you please give us more details on the meeting that you plan to host here in March? Are you targeting new pledges and how much would that be?

Mr. Kuroda: As I said at the outset we are now entering the rehabilitation and reconstruction phase. Needs assessments have been made by ADB and the World Bank and also with other bilateral as well as multilateral donors. And I expect assessments will be completed by the time we intend to meet in Manila on March 18th. That means that we will make the rehabilitation and reconstruction phase smooth and quick. I think affected countries, including Maldives, Sri Lanka, Indonesia and India need adequate assistance in a timely manner. So the major objective of having a high level coordination meeting on assistance to tsunami affected countries is, as I said before, to take stock of recovery achievements and pledges of support and seek to reach a common understanding of the major considerations in delivering an effective rehabilitation and reconstruction program which may be over in the next four to five years. So the major objective is to facilitate coordination among bilateral and multilateral donors with respect to rehabilitation and reconstruction exercises in the four severely affected countries. And I am very hopeful that at a high level meeting we can come up with a common understanding, a common kind of strategy for rehabilitating and reconstructing areas surrounding the Indian Ocean.

Mr. Landingin: Roel Landingin from the Financial Times. Sir, can you share with us some of your ideas about regional integration. For example, what is the character of this integration? Or any models that you have in mind? And more importantly, the timetable, if you may, important milestones. And you know, the general strategy that you think should be followed to arrive at integration? And what is ADB's role in it.

Mr. Kuroda: As you know, compared with, for instance, Europe, the economic integration in this region has been largely market driven. If you look at statistics related to intraregional trade and investment, you can find that this region is as integrated as, for instance, Europe (when it was considering integration). But in recent years, there have been major efforts by regional governments to foster regional economic integration through various institutions and various agreements. First and foremost are ongoing negotiations over bilateral, subregional, regional FTA agreements. I'm quite sure that in coming years this effort will bring about tangible results in further integrating the economies in the region. Secondly, of course, various financial cooperations including the Chiang Mai initiative, and Asian Bond Market initiative are taking place, making the capital markets more integrated in the region. In the future perhaps even exchange rate cooperation may take place in the region. In the meantime ADB has been encouraging regional and subregional economic integrations for instance through the Greater Mekong Subregion program. And also South Asia and Central Asia are following the precedence shown by the Greater Mekong Subregional program. This is one way that ADB can support and foster further regional economic integration. Another way is, of course, supporting various integration efforts by regional governments. As you know from the outset ADB has been providing various assistance, supplying various inputs to the ASEAN+3 Finance Ministers process by way of Chiang Mai initiative, by way of the Asian Bond Market initiative. I expect in perhaps 5, 10 years, the whole region will accelerate further regional economic integration through market force but also through various efforts by regional governments. And I'm determined to facilitate this kind of economic integration in the region through ADB's various activities and operations.

Mr. Wang: Good afternoon Sir. I am Burd Wang, Chinese Guangming Daily. As you know that you are expert in international monetary management and you have been called by some reporters the founder of Asian single currency. So during your next term as the President of ADB, what measures or steps will you take in order to push the Asian single currency?

Mr. Kuroda: Thank you. Again, looking back at the experiences in Europe you know that attaining a single currency requires long-term efforts. For instance, the Euro was created in 1999 after almost 30 years efforts by European countries. So even if a single currency is to be created in this region it would take 20, 30 years before actually we can introduce such a single or common currency. Before introducing a single currency I think we have to establish a single market. FTAs, subregional, regional FTAs could help establish a single market, but trade and investment are one way and harmonization of domestic regulations and so on are another way to facilitate a single market emerging in this region. And that is extremely important by itself for fostering economic integration, reducing income disparity among countries, among people, further improving living standards and so on. And of course it is prerequisite for any single currency. A single market is required for a single currency. So a single currency is very long-term objective. We should first try to improve our market conditions, try to create a single market in this region. That is I think the task ADB can help. Already we have been helping as I said before in various ways, but further efforts are needed by ADB as well as by regional governments.

Ms. Baguioro: Luz Baguioro from the Straits Times. Sir, the ADB issued a report last month saying that the December 26 tsunami threw 2 million more people into poverty. I'd like to ask what types of assistance does ADB hope to provide affected countries to help them grapple with this increased poverty burden?

Mr. Kuroda: Immediately after the tsunami incident we sent a number of staff to those areas affected by the Indian Ocean tsunami. Of course, we are very much strong in rehabilitation and reconstruction rather than immediate relief activities. But still we did our best efforts in the initial stage. And then as I said before we have been involved in joint assessments of the damage made in those areas, jointly with the World Bank and other bilateral donors. In the meantime we decided to establish the Asian Tsunami Trust Fund to which we will transfer $600 million in new resources, which can be utilized for rehabilitation and reconstruction in the region. And also we decided to utilize another $175 million in re-programmed funding for those countries. I'm quite sure that these resources, in total, something like $775 million, can be a very important element of assistance for the seriously affected DMCs in the region. And of course there are so many needs in these areas, first and foremost water supply, sanitation facilities - these must be improved - and housing conditions must also be improved quite quickly. And then of course various infrastructure, physical infrastructure including roads, communication and others we have to provide substantial assistance to improve the situation. And also the restoration of livelihood is a very important element of our assistance to the region. So we have been acting quite quickly and also in collaboration with the international community. ADB is the most important institution in this region. That is true, but we cannot act alone. We have to act with the international community. We have to act in collaboration with other developing partners including World Bank, UN agencies as well as bilateral donors. Of course, the four countries in the region, the four affected countries in the region, governments of which, of course, must be in the driver's seat but I think ADB can provide substantial assistance in coming months and years.

Mr. Estayo: Good afternoon, I'm Max Estayo from Malaya newspaper. Sir, there has been a lot of good news from the Philippine economy lately. What are your recommendations so that we can further accelerate growth? And what are issues that we need to address?

Mr. Kuroda: I know that the Philippine economy recorded 6.1% growth last year, which is the highest in the last, I think, 15 years. So it is good news that the Philippine economy is making significant progress. But there are a number of challenges facing the Philippine economy. One of them is, of course, fiscal consolidation. In this part of the world, many countries are growing quite rapidly, and very importantly they have very good fiscal conditions. I think an improved fiscal condition is one of the prerequisites for sustainable economic growth. So the fact that the Philippine economy achieved quite high growth last year was good but in order to sustain high growth in coming years the Philippine government must improve its fiscal situation. I understand that the government is doing this, trying to improve the fiscal condition through various means. Another area of further efforts required is, I think, improvement of the investment climate. FDI inflows to the Philippines certainly are recovering but further efforts are needed to improve the business environment and the investment climate so as to attract more foreign investment to this country because the Philippines has great potential to grow, to improve economic conditions and substantially reduce poverty. But that potential has not yet been fully realized. So I am hopeful that further efforts are needed. I just mentioned two but there may be further structural reforms needed in some other areas.

Ms. Burgos: Good afternoon, Mr. Kuroda. I'm Arlene Burgos from Kyodo News. Can you tell us more about this assessment that ADB and the World Bank did? You said you are expecting this to be finished before the March 18 meeting.

Mr. Kuroda: I think in the four countries, Maldives, Sri Lanka, Indonesia and India, now three countries - Maldives, Sri Lanka, and Indonesia - we started our joint needs assessment quite early, so they are in the very final stage of assessment. On the other hand it was quite recent when India requested assistance regarding tsunami so it may take a few more or several weeks before we complete the whole needs assessments of the four countries. But I'm quite sure that by the time of the conference, a complete needs assessment will be made. Of course this kind of exercise is subject to change, depending on changing circumstances, but I'm quite sure, reasonably sure that by the time of the conference in Manila the international community will have a more or less complete assessment of needs. And then we can discuss, come up with a strategy for rehabilitation and reconstruction. We can reach a common understanding of various programs and projects to be pursued in coming months and years. I'm quite sure that at the conference we will agree on a common strategy for rehabilitation and reconstruction.

Ms. Burgos: This means that the assessment would tackle things like which industries need most help because you said that the conference should be able to answer, to respond to that assessment.

Mr. Kuroda: Yes, yes. Of course the details may be fleshed out later, but basically, yes, the strategy, the common strategy should be agreed upon at the conference. Yes.

Ms. Deogracias: Good afternoon. I'm Charmaine Deogracias of NHK. Epidemics have proven to greatly impact economies in recent years. Will we see more of assistance in this respect under your watch?

Mr. Kuroda: Tsunami is, of course, a natural disaster. And we experienced a very heavy blow as the latest tsunami in the Indian Ocean showed. But infectious diseases and environmental degradation and so on, particularly, communicable diseases or infectious diseases are serious problems facing not only this region, but also the world as a whole. As we recall, a few years ago, we experienced SARS. A very serious, and I can't say devastating, but very serious disease affecting some countries in the region. Avian flu again reported in some countries in the region could become a serious one. Although at this stage, I don't see bird flu as serious as SARS, which we had a few years ago. But we have to be mindful potential risks of infectious diseases like that. Of course, at this stage, human to human transmission of bird flu is not reported. So at this stage, we can be more secure. But still, I think, various infectious diseases, including bird flu, could pose a serious problem for our development efforts. Of course, again, the international community, including WHO and FAO and so on should collaborate and so I don't say that ADB is the sole agency in the region who is responsible for this kind of exercise. But I must say that collaboration with other agencies is extremely important. Here of course, is a typical case of the importance of collaboration among international institutions, bilateral institutions.

Mr. Estayo: In one of the previous ADB reports, the agency suggested that the Philippine undertake monetary tightening. Does that recommendation still hold true today?

Mr. Kuroda: As far as I know, inflation is decelerating in the Philippines. That is a good sign of macro economic balance being restored. But always, the authorities should be mindful of the potential risk of rekindling inflation. Inflation can come from within your economy but also it can come from outside of your economy. Oil prices are high and that would affect your economy. Also some commodities are extremely high. That will also affect your economy. On the other hand, the Filipino peso has been appreciating. That would tend to decelerate, that will tend to reduce your inflation. So all in all, I think all in all, your inflationary situation has significantly improved but your rate of inflation is still relatively high in the region because it is not two-digit anymore. And the rate of inflation is decelerating. That is a good sign of your macroeconomic control. But I think the authorities should be alert of the potential risk of inflation. And that is particularly important for the Philippine economy which has historically speaking, experienced a relatively high rate of inflation in the region.

Mr. Wang: Hi sir. Last week, in the London G7 ministry meeting, Chinese representatives denied to appreciate Chinese Renminbi. What is your reaction to this and also what is your view, what is your opinion regarding Chinese Renminbi appreciation? If you think that the Chinese Renminbi should be appreciated, when it should be appreciated and what percentage should be raised?

Mr. Kuroda: I understand that the G7 meeting, held a few days ago in London, came up with a communique and also a short statement by G7 and Chinese authorities. In both statements I can see the ongoing discussions among G7 and Chinese authorities regarding the exchange rate issues which may not be restricted, limited to China only. I myself think that the dollar peg may have significantly contributed to the stabilization of the Chinese economy, which experienced very high inflation in the early 90s, but now the dollar peg may not make much sense for the Chinese economy, which has grown quite rapidly and which has more or less stabilized. The inflation rate is very low. In such circumstances, a more flexible exchange rate regime would be more appropriate for the Chinese economy. The change of exchange rate regime must be made by the relevant authorities, as you can see from the IMF charter. The IMF charter says that member countries can choose a floating exchange rate or a fixed exchange rate or any exchange rate regime they like that, they think appropriate. But I think a greater flexibility would be more appropriate for the Chinese economy at this stage. How and when the Chinese authorities decide a new exchange rate regime, that anyway should be up to China and I'm hopeful that in due course the authorities would come up with a more appropriate, more flexible exchange rate regime for China. That is good for China, that is good for the Chinese economy and also that is good for economies in the region because the Chinese economy is such a strong economy with which many developing member countries in the region are trading in a massive way. So it is very important that China continues, maintains sustainable growth with a sustainable exchange rate regime.

Mr. Landingin: Some sort of follow up to my earlier question on regional cooperation and integration; Would you say that what you are advocating is an acceleration of the phase of regional integration and if so, how is ADB going to do about it, in its role as catalyst and coordinator?

Mr. Kuroda: Look at the Greater Mekong sub-regional program, the core is of course infrastructure, physical infrastructure built up in that sub-region; building bridges, building highways, to connect the six economies in that sub-region but at the same time ADB has been constructive in encouraging, fostering trade cooperation among the six nations because such a thing is important to maximize/utilize physical infrastructure built through the sub-regional projects and in various ways ADB can help the countries in the region to facilitate trade and investment among themselves. As I said before, ADB from the outset has been providing various technical and intellectual assistance to the ASEAN+3 finance ministers' process. We have been providing economic analysis on ASEAN+3 economies. ASEAN+3 finance ministers make economic review and policy dialogue based on our input. And the Asian bond market initiative is another case where ADB has been quite active providing various technical assistance. Also as you know, ADB has been quite active in issuing local currency-denominated bonds. We are almost always the first in issuing local currency bonds in many Asian markets and we are determined to continue to be the first in issuing various local currency- denominated bonds which would be quite useful for our operation in those areas but would also be instrumental in further developing local, regional bond markets in Asia and the Pacific. I'm sure that ADB, although it has been making various efforts, can step up, can strengthen its role as regional coordinator or catalyst for further regional economic integration.

Ms. Quon: On that very challenging and uplifting note, can I bring this press conference to a close. Thank you very much ladies and gentlemen and I hope we have further opportunities in the future for you to dialogue with the President.