Private Sector Key to Growth and Poverty Reduction, Conference at ADB Told

News Release | 18 April 2005

MANILA, PHILIPPINES (18 April 2005) - An increased contribution from the private sector is key to economic growth and poverty reduction, ADB Vice-President Geert van der Linden told participants today at a conference on achieving results in private sector development.

The three day conference, held at ADB Headquarters in Manila, brings together nearly 100 representatives from governments, private sector, academia, and donor organizations from all over the Asia and Pacific region.

"Throughout Asia and the Pacific, private sector development and increasing the contribution of the private sector to the economy is key to economic growth and poverty reduction," said Mr. van der Linden.

"ADB's Asian Development Outlook, released earlier this month, shows that gross domestic product in developing Asia grew by well over 7% last year - the highest rate since the 1997 financial crisis. A major driver behind the high rate of growth was a marked revival of business investment."

However, he also noted that many studies have shown that private investors regard economic and regulatory uncertainties, macroeconomic instability, high tax rates, regulatory and administrative requirements, corruption, and insufficient infrastructure, finance and skills as significant barriers to investment.

Speakers in the conference include senior government officials from Malaysia, Nepal, Sri Lanka, Thailand, and Viet Nam. Department of Finance Assistant Secretary Gil Beltran is representing the Philippines. They are joined by academics from People's Republic of China, Indonesia, Republic of Korea, as well as a representative from the Federation of Indian Chambers of Commerce and Industry.

"The Millennium Development Goals and increasing globalization pose significant challenges for economies in Asia and the Pacific," Malaysian Minister Dato Mustapa noted in his keynote speech.

"The key challenge is how to focus government-led efforts in creating a conducive business environment."

The conference is looking at private sector development strategies as processes and examining how planning and executing them could be effective in accelerating reform by increasing accountability and focusing on results.

It provides an opportunity for exchange of good practices, challenges and lessons learned among countries from all over the region.

As an institution committed to poverty reduction, ADB actively pursues private sector development.

"Working with both the public and private sector, ADB has developed the expertise, and a range of instruments and approaches, to assist governments in achieving an environment in which the private sector can grow and prosper," Mr. van der Linden said.

"Through our public sector operations, we provide loans and technical assistance to assist governments, and these can take a number of forms. For example, we are currently working with Bangladesh, Viet Nam, Cambodia and PRC to improve the competitiveness of small and medium enterprises, including improved access to credit and related support services. On the infrastructure side, we are working with Bangladesh to facilitate private sector participation in the gas sector."

He added: "We also play an active role in private sector development through private sector operations. These include loans without government guarantees and equity."

ADB's involvement in both public and private sector operations uniquely positions itself to leverage private funds for large investment needs, and to promote partnerships between private and public sector players. ADB can mitigate investment risks through guarantee instruments, such as partial credit guarantees or political risk guarantees.

ADB will later publish a good practice reference guide for taking a strategic approach to private sector development.