Opening Address by ADB President Takehiko Nakao at the Opening Session of the Board of Governors at the 51st ADB Annual Meeting on 5 May 2018 in Manila, Philippines
ADB Governors, distinguished guests, ladies and gentlemen:
It is my privilege to join the Honorable Secretary Carlos G. Dominguez, Chair of the Board of Governors, in welcoming all of you to the 51st Annual Meeting of the Asian Development Bank.
I would like to thank the Government of the Philippines and its people for the excellent arrangements and warm hospitality.
The Philippines played a key role in establishing ADB in 1966, and ever since has been home to ADB. The firm commitment and support of the government over the years has been essential to the success of our operations throughout Asia and the Pacific. And as Secretary Dominguez mentioned to me one year ago, this annual meeting in Manila is an important opportunity to start “reinventing ADB.”
Today, the Philippines is among the fastest growing economies in the region based on strong investment and consumption. President Rodrigo Roa Duterte’s administration has been implementing a comprehensive 10-point socioeconomic reform agenda, which includes investing in people and promoting rural development. The government is also implementing an ambitious “Build, Build, Build” infrastructure plan.
ADB is financing urban mass transport in Manila and Davao, the railway connecting Malolos and Clark, roads and bridges in Mindanao, and clean water and sanitation in local communities. ADB is also supporting school-to-work programs, financial inclusion and capital market reform, and conditional cash transfers to poor families in the Philippines.
II. The Year in Review: Achievements and Innovation
Let me now report on our achievements in the past year.
ADB continues to respond to the growing needs of the region. In 2017, ADB’s own financial commitments, including loans, guarantees, and equity investments, were a record $20 billion. Of these amounts, our private sector operations amounted to $2.3 billion, and they mobilized commercial cofinancing of $5.7 billion. Including official and commercial cofinancing and technical assistance, ADB’s total commitments last year were $32 billion, a 26% increase from 2016.
Approvals for the financing of climate mitigation and adaptation reached a record $4.5 billion in 2017, a 21% increase from the previous year. We are in a good position to achieve our target of doubling annual climate finance to $6 billion by 2020.
These strong results were made possible by our solid capital base, thanks to the successful merger of the Asian Development Fund lending operations with the ordinary capital resources balance sheet—which took effect at the start of 2017.
We need further efforts to accelerate disbursements and increase cofinancing. ADB approved a new procurement policy in 2017 to reduce procurement time, support the adoption of high-level technologies, and better address life-cycle costs.
Along with our increased volume of operations, we are promoting innovative approaches and advanced technologies. For example, in Indonesia and Pakistan, we are using satellite data and remote sensing to improve irrigation. In the Pacific, we are supporting a regional disaster contingent financing program that will enable budget support to countries in the immediate aftermath of disasters.
On the funding side, ADB stepped up efforts to raise local currency funding to meet the growing demand for local currency loans in our private sector operations. ADB also issued new thematic bonds such as gender bonds and health bonds.
III. Regional Economic Outlook
I will now turn briefly to the economic outlook for Asia and the Pacific.
Developing Asia grew by 6.1% in 2017, and we expect growth will be 6% in 2018. Excluding the four newly industrialized economies (Hong Kong, China; Republic of Korea; Singapore; and Taipei,China), developing Asia’s rate of growth is expected to be 6.5% in 2018. It is encouraging that global and regional trade has started to grow robustly again since the beginning of last year.
The People’s Republic of China is expected to grow 6.6% in 2018, even as its growth continues to gradually moderate. In India, growth should pick up to 7.3%. The Association of Southeast Asian Nations (ASEAN) region, with a large total population of 650 million, is continuing to grow at 5.2%. The recent rebound in oil prices has helped relieve fiscal pressures in oil-producing economies in Central Asia.
In countries like Bangladesh, Cambodia, the Lao People’s Democratic Republic, Myanmar, the Philippines, and Viet Nam, growth continues at 7% or even more. At this pace, gross domestic product (GDP) will double in about 10 years.
Although challenges remain, Asia and the Pacific is well positioned to sustain its growth momentum, supported by robust private consumption and investment, and anchored by sound macroeconomic policies and structural reforms. Active trade and foreign direct investment are the foundation of Asia’s economic success and are essential for continuing solid growth. Despite current disputes among some countries, we firmly believe that countries should make utmost efforts to maintain and foster an open multilateral trade system.
IV. Rise of New Technology and Impacts on the Region
One significant factor that will help drive the region’s future growth is advancements in technology. Allow me to expand on this issue.
New technologies are emerging faster than people can imagine. New technologies such as robotics, artificial intelligence (AI), and “internet of things” have huge potential to raise productivity and improve our daily lives. In Asia, young entrepreneurs and homegrown innovations are becoming an increasingly important part of the economy.
At the same time, there is growing concern that the rise of new technologies could cause widespread job losses. ADB’s research, however, as described in our Asian Development Outlook 2018 report, indicates that there are several reasons to be more optimistic.
First, a job, whether it is cognitive or manual, comprises many kinds of tasks. New technologies often can automate only some of those tasks, not the whole job.
Second, job automation takes place only where it is both technically and economically feasible. Even if automatic sewing machines can produce T-shirts, if they require a huge capital investment, they cannot compete with human workers who are paid reasonably.
Third, as our research shows, higher incomes driven by higher productivity may substantially increase demand for products, more than offsetting job losses caused by new technologies.
Fourth, new technologies create new occupations and industries. In the early 20th century, auto mechanics and car dealers emerged alongside the car industry. Today, we are seeing many new types of high-skilled jobs in information and communications technology (ICT), health care, education, and all kinds of business and consumer services.
Nevertheless, new technologies can alter the skills required for certain jobs and cause unemployment. Advances in technology may make the less-skilled more likely to experience lower wages, thereby widening income inequality.
This will require proactive and comprehensive actions by governments on skills development, labor regulation, social protection, and income redistribution. Governments must promote ICT infrastructure, protect personal data and privacy, and ensure fair competition.
Governments can also apply new technologies to improve public service delivery. In education, for example, adaptive learning and remote technologies will enhance learning outcomes in schools. Telemedicine, AI, and the use of big data will have great potential to improve health services.
V. A New Strategy towards 2030
Ladies and gentlemen:
Last year, we celebrated ADB’s 50th anniversary and reflected on our past achievements. Today, I would like to speak about the future and our new long-term Strategy 2030.
Our region has experienced a fundamental transformation. Half a century ago, Asia was the poorest region in the world. Today, the economic center of gravity is shifting to Asia and the Pacific, and almost all our developing member countries have advanced to middle-income status.
Yet, large challenges remain, and new ones are emerging. There is still persistent poverty. We must address rising inequality, growing environmental pressures, and rapid urbanization. Aging in some countries and an increasing youth population in others present opportunities as well as challenges.
Strategy 2030 will renew our strong commitment to eradicate extreme poverty in the region and expand our vision to achieve a prosperous, inclusive, resilient, and sustainable Asia and the Pacific.
These aspirations will be aligned with the international agenda, such as the Sustainable Development Goals and the Paris Agreement on climate change.
Recognizing different conditions in our developing member countries, we will pursue differentiated approaches. The country partnership strategy will continue to be the primary platform for defining ADB’s operational focus in each country.
I would like to highlight 10 priorities in Strategy 2030.
First, ADB will tackle remaining poverty and increasing inequalities. We will help create quality jobs, promote secondary and tertiary education, expand universal health care, and strengthen social protection programs. We will focus on lagging areas and pockets of poverty even in middle-income countries.
Second, we will help accelerate progress in gender equality. We will continue to incorporate gender elements when we design and implement projects and programs. We will support gender-focused projects in education, health, and financial inclusion. We will promote gender equality in decision making through our projects and technical assistance.
When I was in Bangladesh this February, I visited an ADB-supported ICT laboratory at a rural school. I was impressed by the enthusiasm of girls and boys to study ICT. One girl stood up and said she wanted to be a satellite engineer for the National Aeronautics and Space Administration (NASA) in the United States. Prime Minister Sheikh Hasina of Bangladesh was proud when I shared this story with her.
Third, we will scale up our support to combat climate change, build climate and disaster resilience, and enhance environmental sustainability. ADB will help countries to achieve their Nationally Determined Contributions under the Paris Agreement. We will invest in the conservation and restoration of natural capital. We will improve the water-food-energy nexus.
Fourth, we will build livable cities that are competitive, green, resilient, and inclusive. ADB will support multimodal mass public transport systems in cities, clean water and sanitation, and urban health facilities. ADB will help cities expand sources of funding and enhance inclusive, integrated, and participatory urban planning.
Fifth, we will promote rural development and food security. ADB will focus on developing agricultural value chains from farm-to-market through investments in rural roads, storage facilities, and mobile connectivity. We will foster advanced technologies in farming.
Sixth, we will strengthen governance. ADB will support public sector management reforms through policy-based lending and dialogue. ADB will help governments enhance their capacity to prepare, implement, and operate high-quality projects. And we will help raise standards globally for environmental and social safeguards, sound financial management, and anti-corruption.
Seventh, we will foster regional cooperation and integration. We will build on our experience in subregional cooperation initiatives since the 1990s in Central Asia, South Asia, Southeast Asia, and the Pacific. We will promote regional public goods such as transportation and logistical networks, and protection against communicable diseases. We will support a regional approach to energy security, education, tourism, and financial stability. ADB will cooperate with existing and emerging international and regional initiatives.
Eighth, we will mobilize private sector resources to meet the region’s huge development financing needs. Our private sector operations help fill market gaps and promote private sector participation in infrastructure and other development finance. We will further scale up our private sector operations, widen their geographic coverage including new and frontier markets, and expand operations in social sectors such as health and education.
We will also continue to promote the effective use of public–private partnerships. We will enhance resource mobilization through credit enhancement operations and cofinancing with bilateral and multilateral partners.
Ninth, we will further strengthen our role as a provider and facilitator of knowledge. I strongly believe that ADB’s value addition is combining finance with knowledge, whether tacit or explicit. We will develop and deliver integrated solutions that extend across sectors. ADB’s knowledge work will strengthen the network of scholars and think tanks in Asia and beyond, and offer Asian perspectives.
Tenth, implementing the new strategy will require a stronger, better, and faster ADB. We will continue to use our financial resources efficiently and creatively. We will invest in our workforce, promote diversity including gender balance, and ensure a respectful workplace. We will expand our presence on the ground. We will dramatically modernize business processes to speed up our services to clients.
A One ADB approach will break down silos and bring together expertise across ADB. We will continue to work with a wide range of partners.
VI. Closing Remarks
Ladies and gentlemen:
We plan to complete Strategy 2030 by mid-2018. We already held extensive consultations. I appreciate the guidance from Governors at this Meeting. We will continue to seek views from various stakeholders, including civil society organizations.
Our task ahead is to reinvent ADB and meet the challenges of a transforming Asia and the Pacific.
In the Philippines, there is a proverb “Kung may tinanim, may aanihin,” which means “The seeds we plant today offer harvest for the future.”
Together, let us continue our journey to achieve a prosperous, inclusive, resilient, and sustainable Asia and the Pacific.