President Kuroda: Thank you for joining us. I very much appreciate that many media have attended the meeting here in Istanbul. I believe the Annual Meeting in Istanbul was a great success. We discussed a wide range of issues among the Governors, and with various people. And during the meeting, they, particularly the Governors, provided valuable insights and perspectives that will certainly help shape ADB's future efforts in supporting economic growth and poverty reduction in developing member countries (DMCs) in Asia and the Pacific.
A few things I would like to outline: First, the Governors very much recognize that the region has experienced stronger economic growth in recent years. Of course, growth has not been uniform and significant disparities exist and persist across countries and even within countries. So further reductions in poverty and achievement of the Millennium Development Goals (MDGs) will require increased support from the international community.
Second, many of the Governors commended ADB for its leadership role and quick response in addressing the aftermath of the tsunami. They also welcomed and appreciated ADB's ongoing reforms to improve our relevance and responsiveness and results.
Thirdly, I am very much pleased to report that the Governors expressed strong support for ADB's commitment to increase its efforts in the areas of regional cooperation and economic integration in particular. Of course a lot of efforts have been made by ADB and by developing member countries to ensure further cooperation and further economic integration. Many Governors mentioned the importance of infrastructure development and private sector operations. A clear message came out of this Annual Meeting, as well as such meetings as ASEAN+3 Finance Ministers' meeting - that is, the importance of moving forward to support the region's financial and economic integration. Many emphasized the importance of DMCs in bringing about a functioning capital market integrating with the global financial market in the context of globalization. This issue will continue to be quite important.
Finally, let me express my thanks to the Government of Turkey for their excellent arrangements and to the people of Istanbul for their warm hospitality, which contributed a great extent to the very fruitful discussions we had in Istanbul.
Perhaps I should stop here and respond to your questions and comments.
Mr. Hartojo Wignjowijoto, Chairman of the Institute of National Capacity Studies in Jakarta: I am a good friend of Takatoshi Ito. He is my classmate at Harvard and I spent time at Tokyo University several years ago. But I don't speak Japanese.
Infrastructure is public utilities. And public-private partnership is risk sharing because public utilities come with costs. Even in Japan ports are subsidized by the government of Japan. While in developing countries like Indonesia, they treat infrastructure as a profit center, and as you know, an economic profit center is quite different from socio-political economic profit. My question is, is this partnership acceleration or deceleration of corruption by grid? Thank you.
President Kuroda: I must say that infrastructure investment is extremely important for economic development and poverty reduction in developing member countries. Now, there are many ways to finance infrastructure development. One way is lending - OCR lending or concessional lending to DMC governments to build up, invest in infrastructure. Another way is to utilize so called public-private partnership - that is becoming increasingly quite important. Of course, when public-private partnership is utilized, naturally, this infrastructure investment should bring a higher rate of return. In some rural areas, infrastructure investment or infrastructure building, although quite necessarily useful, may not bring about a high financial rate of return. In the case of the first option, lending to the public sector, through OCR lending or concessional lending, may be useful. So my answer is that infrastructure building is necessary and appropriate for economic growth and poverty reduction. There are many appropriate ways to finance those infrastructure investments.
Ms. Monica Houston, Dow Jones Newswires: You talked a lot about economic cooperation and strengthening among countries. I just would like to ask if during the discussions there were any targets or parameters set for that kind of cooperation. And in addition, I also would like to ask if there's any more information you can give us about ADB bonds, for example, which countries are likely to be the first recipient?
President Kuroda: First, the Governors discussed various subregional, regional economic cooperations. I must say that there are three ways: One is infrastructure cooperation. Second is financial cooperation. Third is trade and investment cooperation. We can see various forms of subregional cooperation in these areas taking shape. And some, for instance, in the Greater Mekong Subregion (GMS) have been strongly supported by ADB and are well underway. In the future, these various subregional efforts and three areas - a three-pronged effort - would tend to be interlinked, interconnected and I don't say merged, but would be related, interrelated with each other so that really important progress in regional economic integration will be enhanced. On bond issues - ADB intends to issue local currency bonds in Thailand, the Philippines, and the People's Republic of China. At this stage, I can't say anything is definite but it might be in the order of the names of countries I mentioned.
Mr. Klaus Engelen, Handelsblatt: Mr. President I only wanted to ask first on the technical matter before asking my real question. The first is, as an academic you probably know better than anybody else what we have to understand is the multilateralization of the Chiang Mai Initiative that is discussed here. But my real question is basically a follow up to the speech of the British governor that I found extraordinarily interesting -- talking about the future of the Bank, particularly in reference to the margin prospects. Big countries like PRC and India pre-pay their loans. The future margin looking ahead is threatening the bread-and-butter business of your Bank. And one can ask with the torrent of private sector flows and the huge amounts of foreign currency reserves in this region, where do you see the future of, let's say, regular lending of the institution that pays for the soft lending like in the Tsunami crisis and also for the operation of the Bank?
President Kuroda: Thank you. First, on the second question: ADB has many instruments: OCR lending is one, ADF loans another, ADF grants, and so on. By the way, the Tsunami assistance through the Asian Tsunami Fund are all in grants. And also, we have private sector operations. So utilizing these various instruments, ADB can continue to play a very important role in developing economies, and reduce poverty in Asia and the Pacific. If you pick up one particular country, for instance, then, of course, that country may develop its economy and become a more or less developed country, and so may graduate from any assistance from MDBs like ADB. But Asia and the Pacific is a quite diverse and huge area. There are many economies, which as I emphasized at the outset, that continue to need external assistance to reduce poverty, to attain MDGs, particularly, non-income MDGs. Yes, with respect to individual countries, some of them may hopefully and happily graduate. But ADB's role will continue to be important in coming decades.
On CMI multilateralization. I don't know whether ""multilateralization"" is legitimate English or not, but there are many ways to multilateralize, I suppose. And the basic thing is to make the functioning of the network of bilateral swap arrangements smooth and efficient. And I understand ASEAN+3 finance ministers decided to aim at improving the functioning of bilateral swap arrangements so that they can be better coordinated, so to speak, when needs are felt by member countries.
Ms. Lindsay Whipp, Bloomberg News: My question concerns the South Korean Finance Minister's speech yesterday in which he called for support from ADB in respect to North Korea. And in helping it on its way to eventually becoming a member. What is ADB's response to that? Thank you.
President Kuroda: ADB membership is decided by a consensus among existing members. I don't think there is a consensus among members to accept North Korea at this stage.
Mr. Douglas Bakshian, Voice of America: Asia is in this period now of super growth in its economy. It's leading the world economy. If US companies are invested here, it's all happening here. What's the greatest danger - economic danger - Asia faces in this new era of super growth?
President Kuroda: Two things: One is in the short run - this year, next year, or something like that. I think the greatest challenge is higher oil prices. If the current extremely high oil prices continue, one year, two years, then that would certainly affect the growth prospects of many countries in the region. I mean, even Malaysia, which is an oil exporter, could be affected negatively through the sort of second round effect of slowing down in regional growth and global growth. So in the short run - short and medium run - high oil prices are the greatest challenge we have.
In the long run, whether the region can cooperate, can integrate, is extremely important. And in Asia and the Pacific, of course we have huge countries, but at the same time, we have many small-medium sized economies. And particularly for them, regional economic integration is key for the economies to continue to grow and continue to be competitive in the global market. So, whether regional economic integration, regional economic cooperation can be sustained and enhanced in the medium to long run, that is very crucial. And I hope that momentum can be sustained and even be enhanced and ADB is prepared to provide any support for regional economic integration efforts by member countries.
Mr. Bakshian: You are saying that there is a risk of economic cooperation declining?
President Kuroda: I don't like to say so, but for instance, FTAs are proliferating. It is very good. But if each FTA is different from others and if FTAs are not completely consistent, but broadly consistent with each other, that might create some problems, although, basically, FTAs would be quite good for regional economies. So I don't say that there is a risk of regional economic integration and cooperation efforts declining. I don't think so. But although efforts will be sustained and momentum will be kept, good cooperation is necessary.
Mr. Mynard Macaraig, AFP: Sir, in your speech, you said that ADB should be more focused and selective. And yet many of the Governors were asking that ADB should increase its lending and of course, many of them were also calling for more infrastructure. So how would you reconcile this?
President Kuroda: I think all of us are concerned about the fact that net resource transfers to DMCs have become negative in recent years. So how to revive, revitalize our efforts. The key is, of course, to make our assistance more focused, selective, effective, useful, and attractive for developing member countries. And infrastructure investments, certainly, huge amounts of infrastructure investments are required, needed in many DMCs, and so the natural way to provide more assistance, or step up, upgrade our financial assistance to DMCs is to make further efforts to provide infrastructure financing. But there are many ways, and I outlined many ways to make our assistance more relevant and responsive.
Mr. Engelen: I don't feel I got a good answer on my question on the margin. You see, I am trying very simply to ask a very simple question that other delegations have been talking about after the speech of the British governor. It is simply that how can you make sure, assuming you have a long term for the next years, that you get a good margin in the regular business, I mean the credit margin between the raising the funds and lending the funds in OCR. Under these conditions, you change, you know, the lending formula. That is a big difference. And then, on the funding side, things have changed also. So there is considerable theory or thought. What do you think will you be or maybe you have a margin strategy to secure the bread and butter business of this Bank?
President Kuroda: Let me say this. ADB enjoys a triple A status. That means that ADB can raise money from the capital market at very low cost at low interest rates. And that money can be lent to DMCs, of course with some margin added, but still at very favorable interest rates for DMCs. Of course, some countries, some developing member countries may become so developed and can enjoy very, very low interest rates. But you have to bear in mind that we are lending quite long term. I mean, even if fairly developed DMCs borrow money from the market, if it is 20 years, 25 years, the interest rate tends to be very high and so still compared with our OCR lending, their borrowing cost in the market may be higher. So we finance our operations and lend OCR at rates that will still be very much more favorable, competitive for DMCs. Now we don't intend to widen our margin because actually we have been reducing our margin so as to make our OCR lending more favorable for DMCs because we are not a private institution; we are a public financial institution supported by 63 shareholding governments to provide development financial assistance to DMCs.
Mr. Wignjowijoto: The smallest margin is the strong indication of the efficiency of the ADB because the larger margin is not a good indication. My question, my previous question that you avoided answering, but I am more than willing to talk privately. Indonesia is the most corrupt country. There are two types of corruption in Indonesia: corruption by greed, is like public and private partnership is corruption by greed, and corruption by need because of small salary of the civil servant. Could you kindly comment on the margins - small margin and also corruption by needs and by greed because of partnership?
President Kuroda: I may not understand fully your two questions, particularly how they are interrelated. Margin as I said before, we have been maintaining quite a low margin for OCR lending. And we continue to enjoy triple A status and that means that low funding cost would continue to be translated into a very favorable OCR lending rate with, of course, some margin, but the margin is kept low.
Corruption, accountability, governance - these are very important issues, and ADB has been making its best effort to avoid any corruption, fraud within the Bank and in ADB-financed activities including loans. We have been making significant progress, but I agree that further progress is needed. And also, we have been collaborating with DMCs to eliminate corruption in these countries. I don't want to specifically mention Indonesia, and so on. But in Indonesia also, the government is making its effort and ADB has also been making best efforts in Indonesia.
Mr. Murat Basboga, NTV News Channel (NBC, Turkey): One of the Turkish newspapers used a headline like ""Turkey as the China of Europe"". Do you agree with the assumption, in particular entrepreneurship dynamism?
President Kuroda: Turkey attained, I think, 9.9 percent growth last year. And inflation decelerated to one digit for the first time in the last 30 years. The fiscal situation improved greatly. It now has 6.5 - 7 percent of GDP equivalent primary surplus, which is perhaps one of the largest primary surpluses ever maintained by any country including DMCs. So, it is true that in the last year and a half, Turkey's economy has turned around and has made great progress achieving macroeconomic stability with high growth. And this is, I think, brought about by prudent macroeconomic policies as well as structural reforms pursued by the government. So I am hopeful that with continued reform, the Turkish economy will be able to grow quite rapidly in coming years and decades. In that sense, the Turkish economy can be compared with the PRC economy. But, of course, the PRC is a huge country, as you know, with a population of 1.3 billion. Its GDP is really huge and is also growing quite rapidly. But growth rate wise, certainly, you can compare the Turkish economy with the Chinese economy but the structure, scale and comparative advantage in these economies, they are quite different.
Ms. Sharna Moldre, Asia Pacific Development Review: Mr. President, we've heard this week a lot about your vision for the new era of development and indeed about a new vision for the Asian Development Bank. My question though is more about the vision that you have for your presidency and what you are most hoping to achieve, and what your hallmark will be.
President Kuroda: At this Annual Meeting, which is for me the first Annual Meeting, I outlined challenges and the future cause of ADB in coming years. Some changes, reforms would immediately take place, but some others may take more time. But basically, I think, in the next five years, the region will really be transformed to become even more dynamic... of course, at this stage, it is sufficiently dynamic, but more dynamic and more integrated economy. How to assist the region to reduce poverty, to attain MDGs, to further enhance inclusive growth? That is the role of ADB. And I outlined the policies and strategies of ADB under my presidency it should aim at, and I really hope that these policies, reforms will make ADB more relevant, more responsive, and more result oriented. And of course, this is my intention, and whether I am successful or not can only be judged by everyone except me.
Finally, I would like to remind you that next year's Annual Meeting, 39th Annual Meeting, will be held in Hyderabad, India from May 4th to 6th. So I hope many of you will come again to our Annual Meeting in India next year. Thank you very much for joining us.