69th Arab Coordination Group Meeting - Lakshmi Venkatachalam | Asian Development Bank

69th Arab Coordination Group Meeting - Lakshmi Venkatachalam

Speech | 6 July 2011

Opening remarks by ADB Vice President - Private Sector and Cofinancing Operations Lakshmi Venkatachalam at the 69th Arab Coordination Group Meeting on July 6, 2011 in Vienna, Austria

Excellencies, distinguished guests, ladies and gentlemen.

At the outset, let me convey my thanks and appreciation to the Secretariat of the Coordination Group and OFID for inviting me.

I am indeed honored to have the opportunity to be a part of the 69th Arab Coordination Group Meeting and share with you our thoughts on the various development challenges facing Asia today, and how partnerships constitute a key element of our Long Term Strategy to successfully address these challenges. I am here today to explore with you possible areas of cooperation as we work towards actualizing our shared vision of a strong and well developed Asia that is free from the scourge of poverty.

Let me begin by highlighting some of the salient aspects of ADB's development mission, as enshrined in our Long-Term Strategic Framework – the Strategy 2020. Our Strategy 2020 is focused on three complementary strategic agendas, namely, inclusive growth, environmentally sustainable growth and regional integration. It also envisages that 80% of our financing will be targeted towards 5 core areas, identified as (i) infrastructure, (ii) environment (iii) regional co-operation and integration, (iv) financial sector development, and (v) education. Through our support to these areas, our aim is to help our developing member countries reduce poverty and improve living conditions and quality of life. Strategy 2020 also envisages a significant scale-up of our private sector development and operations, which will comprise 50% of ADB's operations by 2020. Within this overall framework, ADB tries to maximize the impact of its operations by focusing on five drivers of change: private sector development, good governance and capacity development, gender equity, knowledge solutions, and partnerships. We have developed a comprehensive corporate results framework to assess the development impact of our operations and conduct a rigorous analysis of our operations, tracked through the annual publication of a comprehensive Development Effectiveness Review Report.

Let me now focus on why we believe that partnerships are so critical to ensure that our operations are effective. Collaboration with partners helps us achieve what we could not do on our own. It allows us to pool our resources and capitalize on the competitive advantages of each of our partners. It lets us share knowledge and helps improve the design and implementation of our programs. Given the region's growing needs for development finance, ADB is targeting a substantial increase in cofinancing over the next several years, and we anticipate that annual direct cofinancing will exceed the value of ADB's stand-alone project financing by 2020. The creation of a new Vice Presidency, which I represent, to oversee ADB's private sector and Cofinancing Operations underscores ADB's commitment to private sector operations and partnerships, identified as two of the most important drivers of our operations in the coming years.

According to the latest Asian Development Outlook published by the ADB, developing Asia is “on a firm path to recovery”. This is being led by not only China and India but also other emerging economies such as the ASEAN states. Developing Asia is expected to grow at 7.8% in 2011 and 7.7% in 2012, moderating somewhat from the region's fast-paced growth of 9% in 2010.

However, notwithstanding this positive growth outlook, development challenges faced by Asia remain enormous. Despite its many successes, Asia is home to hundreds of millions of the world's poorest people. Our goal of equitable and sustained development requires, in addition to economic growth, strong social safety nets and healthcare systems to protect the poor and the vulnerable. In addition to huge investments in essential sectors like water, energy, education and skills development, a rapidly urbanizing Asia needs investments to develop clean and liveable cities and also in rural and remote communities to improve quality of life therein. Achievement of the non-income MDGs is, you will agree, strongly dependent on such investments. Finally, in a world seriously threatened by environmental degradation and beset by natural disasters, there is a compelling case for supporting green growth and developing sound mechanisms for disaster mitigation and preparedness. In short, it is both quantity and quality of growth that will need to be focused upon, going forward.

And what are the keys to meeting these challenges – well, we can only underscore the importance of strong leadership, commitment to good governance, huge infrastructure investments (both in hard and soft infrastructure) to achieve inclusive growth, sound financial systems that enhance economic resilience by accelerating growth, facilitate diversification and increase job opportunties, and finally, knowledge creation and sharing both within the region and beyond. Investment in innovation and technology, and promotion of entrepreneurship will be critical for achieving sustained growth in the region.

But let me return to our developing member countries' need for infrastructure investments. By our estimates, the region needs about $750 billion of investment each year through 2020 to finance infrastructure alone. A significant part of the increased funding requirements for developing Asia will necessarily have to come from commercial sources. We are actively seeking to enhance our commercial cofinancing activities through our complementary financing schemes and credit enhancement products. However, there are crucial aspects of our work that cannot be accomplished on commercial terms, such as sector analyses, project development and preparation, and local capacity building. ADB provides concessional loans and grants for these purposes from our Asian Development Fund funding sources and our internal resources, such as our Technical Assistance Special Fund. However, these need to be complemented by additional, external funding if we are to respond adequately to the needs and priorities in our developing member countries.

It is here that our relationship with cofinancing partners, such as this Coordination Group, takes on such an important dimension. I observe that we have a lot in common in terms of our priorities and strategic agendas for assisting developing countries. Combining resources and coordinating our efforts only makes sense, as this is how we will ultimately achieve the best outcomes for the people and countries common to all of our institutions. And it is important to realize that these synergies do not emerge only from pooling our financial resources, but also from combining our knowledge and experience, and harmonizing our development priorities. Streamlining our administrative procedures also reduces demands on our client countries.

Let me, at this point, place on record our appreciation of the solid and growing relationship we have with many of you present here today. We already have a strong and longstanding relationship with OFID, with whom we have cofinanced 89 projects for over three decades, and have, at our Annual Meeting held in May 2011 further consolidated this relationship through the signing of a Memorandum of Understanding with OFID. With the Islamic Development Bank, we already have a Memorandum of Understanding in place since 2008, and have cofinanced over 20 initiatives. We have also worked extensively with the Kuwait Fund, and to a lesser extent, with the Abu Dhabi Fund and the Saudi Fund. These existing relationships with you are a testament to our commitment to work with you in a concerted manner, and we are genuinely committed to furthering our efforts in identifying further cofinancing and collaboration opportunities with you in the future.

Let me conclude by recalling the words of ADB's President Kuroda at the recently held Annual Meeting of the ADB in May 2011.

“Given its significant growth in the past decades, it is possible to imagine a more prosperous Asia in coming decades: An Asia that holds the majority of the world's middle class, where poverty is no longer a central issue; an Asia characterized by effective public services, quality infrastructure, sound financial systems and stable societies; an Asia and Pacific rising in harmony with the rest of the world, contributing to global stability and prosperity.

What can be envisioned can be achieved. But such achievement is not preordained. Asia must decisively confront its medium and long term challenges with purpose and passion. Doing so will help not only Asia and the Pacific, but also the world, to achieve a more balanced, equitable and sustainable growth.”

And let me now reiterate that it is by partering with you that we will receive the right stimulus and support to put Asia firmly on the path to a strong and sustainable development.

I would now like to request Ms. Hua Du, Director of our Office of Cofinancing Operations, to give you a presentation on the various cofinancing modalities being offered by ADB, and the new partnership initiatives that we are currently considering. I look forward to your questions and comments and the discussions that will follow.

Thank you very much.