Welcome Remarks from Principal Director, Department of External Relations:

Good morning ladies and gentlemen. My name is Ann Quon, I am the Principal Director with the Department of External Relations, and I would like to extend a warm welcome to all of you this morning, particularly to our Uzbek colleagues as well as those who've traveled from other countries to be with us. We welcome all of you. ADB as you know is a multilateral development institution. We're based in Manila. And we're very pleased to be holding our Annual Meeting here in Tashkent. This is the first time that we have come to Central Asia. We're very excited to be here and we're very much looking forward to substantive discussions over the next few days.

This press conference is really to set the scene for the four days of dialogue, discussion and meetings that will take place against the backdrop of the global economic recovery process, and I'm sure we'll be hearing a lot about the role that the Asia and Pacific region plays in this recovery process.

With this in mind I would like to introduce the Asian Development Bank's President, Mr. Haruhiko Kuroda, who would like to say a few words, and then after that we will open it up to questions from the floor. There is simultaneous translation so please avail yourselves of these headphones, so without any further ado - Mr. Kuroda.

President Kuroda Opening Statement:

Thank you. Good morning ladies and gentlemen. Thank you for joining us today. I'm very pleased to welcome you to Tashkent and I look forward to a productive Annual Meeting.

As you know, developing Asia has made a very quick turnaround from the global economic crisis. Many have called it a V-shaped recovery because, while overall growth plummeted from 9.6% in 2007 to 5.2% in 2009, we now anticipate growth to bounce back up to 7.5% this year and around 7.3% next year. While many challenges remain, we believe that the recovery has taken firm hold.

With additional resources from the General Capital Increase and the Asian Development Fund replenishment, ADB was able to provide substantial assistance for crisis-hit countries. Our operations increased to $16 billion in 2009 - 42% higher than the previous year. Our assistance included $2.5 billion from the Countercyclical Support Facility and a much-expanded Trade Finance Facilitation Program of $850 million. These efforts helped developing member countries sustain critical development expenditures in health, education and infrastructure, among others, and helped accelerate their economic recovery.

The big challenge now is to make the recovery sustainable over the long term. Despite much progress in recent decades, far too many of the region's people remain poor and without access to essential public services and economic opportunities. We estimate that more than 70 million people in the region would have escaped $2/day poverty in 2009 if growth rates had stayed at 2007 levels.

This year's Annual Meeting comes at a time when Asia's leaders are faced with some very important decisions. For one, they need to carefully time exit strategies to unwind emergency fiscal and monetary policy measures adopted during the global crisis. They need to put in place or expand social safety nets to cushion the impact on the poor of any future economic shocks, and step up their responses to serious environmental challenges, including, very importantly, climate change. Asian countries must also increasingly work together to expand cooperation and deepen economic integration. This will make the region overall more resilient, while providing benefits for economies at all levels of development.

Our seminar on the Post Crisis Agenda for Asia will no doubt generate very lively and productive discussions on these issues.

There are many lessons to be learned from the global crisis. In this respect I am very pleased to announce the launch today of a new publication, Resilient Asia Amidst the Global Financial Crisis. Based on papers and discussions by policy-makers and experts from around Asia, the book provides incisive analyses of origins of the crisis and will be a valuable resource to all of us in seeking to help avoid or mitigate future crises.

Let me conclude by extending my appreciation to our hosts in Uzbekistan for the support and exceptional arrangements they have provided for the event. And my thanks to all of you for your ongoing interest in, and support of, the Asia and the Pacific region. Thank you.

PD, DER: Thank you very much President Kuroda. And now I would like to open it up to questions from the floor. Before you ask your questions, could I ask you to identify yourself and your organization, and then we'll take the questions.

Q1. There is a view in the book that the [People's Republic of China] Chinese yuan is undervalued and needs to appreciate gradually. Is this real, representing the ADB's official view, and if not what is ADB's view?

A1. Thank you for raising this important issue. First of all, exchange rate is exchange rate between domestic currency and other currencies, foreign currencies so as such exchange rate issue has always bilateral or multilateral aspects, so naturally exchange rate issues, including the renminbi issue, would continue to be discussed at various forums, including international forums and meetings. Second, of course this book is a book of various papers written by those authors, and their views are not necessarily the views of ADB. Those views are the views of the authors. Thirdly, I myself think that it is probably in the interest of the Chinese economy to make its currency more flexible. I think it would help the Chinese economy to rebalance more smoothly, and that means that the Chinese economy can sustain high growth - or higher growth than otherwise - with enough flexibility of the exchange rate. Having said that, of course the when and how the exchange rate flexibility be given to the Chinese yuan must be decided by the Chinese government. It is up to the Chinese authorities to decide.

Q2. How do you see the financial crisis in Europe affecting Asia? Do you think that it is the right time for Asian economies to withdraw their stimulus measures?

A2. Thank you for raising another very relevant and important question. I myself think that the contagion, serious contagion, can be avoided quite soon. Hopefully within a couple of days, the European Union, European Central Bank and IMF will come up with a financial assistance package for Greece with sufficient resources and that would quickly calm the markets, which have been somewhat nervous over the past several weeks. At this moment, European economies and financial markets have not been much affected, so in that sense, the contagion to Asia has been limited or almost nil. But that cannot mean that we in Asia can disregard the situation in Europe. No, of course under a globalized economy you have to always carefully watch, monitor economic and financial market developments outside your region.

Now you specifically asked a question related to the exit strategies of Asian countries. I must say that Asian countries always adopted very prudent macroeconomic policies. Because of that, faced with the global financial and economic crisis, they were able to institute very substantial fiscal stimulus measures to counter the impact on their economies from the global financial and economic crisis. And they have succeeded in mitigating, alleviating and avoiding serious recession in their economies. Now, how exit strategies can be managed, I think when the crisis erupted, almost all Asian countries almost simultaneously adopted fiscal stimulus and monetary expansion. Now exit strategies should be coordinated, cooperated, but not synchronized. Exit strategies should be tailored to the countries' fiscal and economic situations. So, for instance the Chinese government, which has substantial fiscal space, has implemented the world's biggest fiscal stimulus and succeeded in recovering quite rapidly, but would continue to implement fiscal stimulus measures until the end of this year. That would be quite appropriate. But of course, the Chinese government should also carefully consider exit strategies because the economy is now very strong, although the fiscal situation is quite strong as well. Other countries with weaker fiscal positions may wish to exit from fiscal stimulus once the economies show some sign of growth.

So in short, at this stage, contagion from the European situation, centering on Greece, has not been discernable in Asia, and second, Asian countries have always been very prudent in managing macroeconomic policies and they would exit from their fiscal stimulus depending on their economic and fiscal situation, and I trust fully in their ability to carefully time and implement appropriate exit strategies.

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Q3. What is your inflationary outlook for the region?

A3. As the latest ADO, Asian Development Outlook showed, at this moment the inflationary outlook is relatively subdued, while the economies are growing very strongly. Now, of course depending on country situations, some countries like Viet Nam or India have already raised interest rates in view of their concerns about the potential inflationary pressures rising in their economies, while many others have not yet raised interest rates because inflationary pressures are not rising so much. So it all depends on the countries' situations. But at the same time, international factors like the food price, oil price, gas price, these are not country-specific but internationally decided, determined. And yet, it would affect countries differently. If one country is so much dependent on imported food or imported oil, higher oil prices or food prices may have disproportionately large impacts on inflation in that country. So I'm quite sure that Asian countries are carefully monitoring the outlook of oil and food price increases. So far, despite rapid recovery of Asian economies, oil prices have not risen so much. If you recall, the oil price situation in early 2008, the current level is not so high. But at the same time, some food prices have risen quite significantly, and that would be a matter of concern for some economies in the region. So, all in all, at this moment not all developing countries in Asia are faced with increasing inflationary pressure, but some countries are already faced with inflationary pressure rising, and are already started tightening their monetary policy. So all in all, if the current strong growth continues, increasingly many central banks in the region would adjust interest rates in order to avoid inflationary pressures rising. But at this moment, high inflation is limited to a small number of countries where already monetary tightening has been made.

Q4. How did Uzbekistan's economy perform during the economic crisis and what is ADB's outlook for the country this year and next? How is ADB assisting Uzbekistan?

A4. As you know, the Uzbek economy was certainly affected by the global financial and economic crisis, but to a lesser extent. If you look at some East Asian or some Southeast Asian economies, many of them experienced negative growth last year. But the Uzbek economy avoided such a situation. Also, currently the Uzbek economy is recovering quite strongly, partly because of the appropriate fiscal and monetary policies to strengthen domestic demand, and partly because of the recovery of commodity prices which are really important for the Uzbek export sector. So all in all, I can say the Uzbek government has responded to the global financial and economic crisis very appropriately, and because of that, and because of the recovery of commodity prices, the economy is now recovering very strongly. So, I think we can expect, for instance, the economy can achieve something like 8.5% growth this year, which is one of the highest among Asian developing countries.

Now, in Uzbekistan, ADB has been very active in providing technical assistance, financial assistance as well as policy dialogue. This evening, I am going to sign a number of loan projects for power, roads, water, and microfinance. These show the focus - or core areas - where ADB has been cooperating with the Uzbek government and we intend to further strengthen cooperation with Uzbek government - infrastructure including transport and power, water and microfinance. Of course education has been one of the key areas where ADB has provided a lot of assistance, and I do hope in addition to this financial and technical assistance, we can hope that our private sector operations would start in this country. Private sector operations are key for economic development and job creation, and I do hope that ADB can become even more active in this field of private sector operations.

Q5. Can you provide more details on ADB's projects in Uzbekistan, and the loans to be signed?

A5. Probably my staff could provide more details of the projects I am going to sign. As I said, the power and roads, as well as water - these infrastructure investments are really key and quite important, and the microfinance support is crucial for small and medium enterprise support in this country. And as far as the power project is concerned - this is a very big project - co-financed by JICA as well. So the Uzbek government, ADB, and JICA are financing this big power project, which is very energy efficient and could reduce CO2 gas emission substantially. There are many ways to calculate the amount of financial assistance, but one way is combining these loans for the power sector, roads, water, and microfinance. The amount would be more than $1 billion.

Q6. Is the Chinese economy leading the growth in the region?

A6. The [People's Republic of China] Chinese economy is leading the economic recovery in Asia and the Pacific. That is quite clear. Last year, it attained something like 8.7% growth which is probably one of the highest in the world, and this year we predict a 9.6% growth and basically the high growth will continue next year at 9.1%. That is our forecast. Clearly the Chinese economy has recovered and it is growing very rapidly. How and when its exit strategy should be managed, when and how the exit from fiscal stimulus and monetary expansion should be made, that must be decided by the Chinese authorities. But from my analysis, I think the authorities would exit from, or I should say, would readjust or adjust its monetary policy toward a more neutral position, because although the general price level in [PRC] China is not rising so much - that means the general inflationary pressure is not rising - but the real estate sector may be close to overheating and already the government has tightened control of bank lending to the real estate sector. So the next stage may be monetary policy adjustment.

Fiscal policy, as I said, had been very pro-active and has brought about quick, rapid recovery. The fiscal stimulus was introduced in late 2008 and re-implemented in 2009 and up to now. I think given the large fiscal space, and also the focus on various social protection policies and rural development, in those fiscal stimulus measures, the government may wish to continue the measures toward the end of this year. But certainly, given the very strong economic growth, sooner or later the government would exit from the very substantial fiscal stimulus measures. But at the same time, unlike other countries, the Chinese fiscal stimulus exit may be more in the composition, content of fiscal measures rather than the amount of fiscal measures. Certainly China does need to further improve social protection policies, social safety nets, and also rural development is crucial for reducing the gap between the urban areas and the rural areas. So the government, given the large fiscal space, may wish to continue fiscal measures, but not the same measures as they implemented during the crisis.

Q7: Is it possible for Asia to have a single or common currency like in Europe?

A7: Thank you. You raise a good question. On the first question, I think the single currency - or common currency - is really a substantial achievement in Europe. As you know discussions started more than three decades ago, and the Euro was created in 1999 so it's the eleventh year of the Euro. I think the Euro has contributed to the regional integration in Europe, and also contributed to the fast economic development of the economies which used to be less developed than the core economies like Germany and France and so on and so forth. So I must say that the single currency in Europe has been a great achievement, and has contributed to the convergence of economies in the Euro area. But at the same time, the current situation shows how challenging it is to align fiscal policies within the region, and this is a very important lesson to be learned by others who think about a common currency.

Now in Asia, we have not yet a common - or single - market. Unless and until you have a single market, common market, you cannot have a common, single n currency. At this moment only ASEAN is aiming at a common market, what they call ASEAN Economic Community. ASEAN+3 or ASEAN+6 have not yet concluded the free trade agreement or economic community single market agreement at all. So Asia is still at the stage where a single currency is not possible. Only after a single market is created, a single currency can be introduced. Of course, discussions on a common currency - or single currency - in Asia should be made, because as I have said, even in Europe it took more than three decades to realize a common currency. So discussion should start early, but the realization of a single currency or common currency in Asia, if it is achieved, would be a matter of a few decades.

Q8: What are ADB's plans for Azerbaijan and Central Asia?

A8: Central Asia's so-called CAREC, Central Asian Regional Economic Cooperation framework has been working quite well. ADB has been supporting it from the outset, and I hope regional cooperation and integration can expand to Caucasus countries, including Azerbaijan. Of course, Azerbaijan has substantial oil reserves, resources, and is growing very rapidly almost every year in double digits, which even by Asian standards is very amazing speed. Azerbaijan has become a member of ADB, and ADB started cooperation with the Azerbaijan government already, and cooperation has already brought about results, and I really hope that cooperation with Azerbaijan will be further strengthened and further enhanced, and regional connectivity, including not only Central Asian republics, but also those countries could be developed and could contribute to greater intra-regional trade and investment, so that the economic growth can be further created and further improved in the region.

PD, DER Closing Remarks: Thank you very much Mr. President. I think this has been a very good indication of the issues that are going to be raised over the next few days - economic recovery, regional cooperation and integration, among others. You have another opportunity to speak to the President at the end of the meeting when it closes on Tuesday, so we look forward to very rich dialogue in the course of the next few days. So we thank you for joining us here.

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