Beginning a New Chapter for Asia and the Pacific and ADB - Takehiko Nakao
Speech | 6 May 2017
Opening Address by ADB President Takehiko Nakao at the 50th Annual Meeting of the Board of Governors on 6 May 2017 in Yokohama, Japan
Good morning. Your Imperial Highness, The Crown Prince of Japan; ADB Governors; distinguished guests; ladies and gentlemen:
It is my privilege to join the Honorable Minister Taro Aso, Chair of the Board of Governors, in welcoming all of you to the 50th Annual Meeting of the Asian Development Bank, here in the City of Yokohama.
I would like to express my deepest appreciation to His Imperial Highness for honoring us with his presence.
Japan has always been a steadfast supporter of ADB. It is ADB’s largest shareholder and the biggest contributor to the Asian Development Fund, ADB’s concessional window for poorer countries. It has also contributed to major trust funds for poverty reduction and scholarships. Japan has provided important ideas about development and shared its experiences.
Yokohama represents a spirit of openness and innovation. Yokohama, in 1859, was one of the first ports opened to foreign trade, when Japan ended its isolationist policy of more than 200 years. More recently, Yokohama has been championing ideas of cleaner, greener, and more livable cities, and comprehensive disaster risk management, both of which ADB is also promoting.
We have about 6,000 participants registered for this Annual Meeting. This is the largest participation in the history of ADB.
On behalf of ADB, I would like to convey our most sincere gratitude to the Government and people of Japan, the City of Yokohama, and Mayor Fumiko Hayashi for their strong support and warm hospitality.
50 Years' History
As we commemorate ADB’s 50th anniversary, we have just published our 50-year history book. I would like to share some of my thoughts about our history.
When ADB was established in 1966, the Asia and Pacific region was defined by poverty. One of the most important challenges at that time was how to feed the region’s large and growing population. Agriculture was a priority sector for operations in ADB’s initial years.
Half a century later, Asia accounts for one-third of global GDP, and it contributes to more than half the world’s economic growth. The region’s rapid development has reduced poverty and raised the living standards of people. ADB has been a reliable partner in this remarkable transformation of Asia.
Before ADB was established, many ideas about creating a new development bank for Asia were proposed by policy makers, scholars, and the business community across Asia. ADB was created through the collective wishes and efforts of people within and outside the region.
"When ADB was established in 1966, the Asia and Pacific region was defined by poverty. Half a century later, Asia accounts for one-third of global GDP. ADB has been a reliable partner in this remarkable transformation of Asia."
Mr. Nyun from Myanmar, Executive Secretary of ECAFE (UN Economic Commission for Asia and the Far East), hosted initial preparatory meetings in Bangkok. A young Filipino lawyer, Mr. Florentino Feliciano, helped write the ADB Charter. A former World Bank president and investment banker from the US, Mr. Eugene Black, gave good advice.
And Mr. Takeshi Watanabe, a former vice-minister of finance from Japan with rich experience in international finance, played a central role in establishing ADB. He became the first ADB President.
In my view, ADB’s achievements over the past 50 years can be summarized in its three broad functions.
First is combining finance and knowledge to support developing member countries. Today, there is much discussion about mobilizing private resources to finance large development needs. But I would like to emphasize that ADB, itself, was created to mobilize private resources from global capital markets. Asia was desperately short of capital at the time of ADB’s establishment. By adhering to sound banking principles and establishing a strong credit profile, in 1969 ADB successfully issued its first bond in Deutschmark in Germany. ADB was the first international entity to issue yen-denominated bonds in Japan in 1970. That was the start of the “samurai” bond market.
In the past 50 years, ADB has provided about $270 billion of loans and grants, based on a cumulative $7 billion of paid-in capital contributions from 67 members, and $30 billion of contributions from 34 members to the Asian Development Fund.
When I visit developing member countries in the region, I always find that ADB is welcomed not only because of our financing, but also because of our knowledge and the expertise that ADB has gained through our operations across the region. In addition to a wide range of new technologies and ideas in infrastructure and social sector projects, ADB has introduced ways to care about the environmental and social impacts of projects in designing and implementing them.
The second major contribution of ADB is the promotion of good policies. Over the years, Asian countries have adopted prudent macroeconomic policies and open trade and investment regimes, as well as strong investment in infrastructure and education, all underpinned by clear long-term visions. I believe these policies have provided a basis for rapid growth in Asian economies.
ADB has been supporting good policies through high-level dialogue with state leaders and ministers, technical assistance, capacity building, and policy-based budget support loans. Based on intensive discussions with the authorities, ADB has also provided emergency loans when members were hit by crises, such as the oil crisis in the 1970s, the Asian financial crisis in the 1990s, and the global financial crisis more recently.
The third achievement of ADB is fostering regional cooperation and friendship. ADB itself was created by the idea of regional cooperation in Asia and the Pacific. Over the years, ADB has promoted subregional cooperation frameworks in Central Asia, South Asia, Southeast Asia, the Pacific, and the Greater Mekong subregion. Australia and New Zealand, ADB’s founding developed members in the region, have been strong supporters of initiatives for Pacific island countries.
Partnerships with non-regional member countries in North America and Europe have been critical. They have enhanced ADB’s financing capacity and contributed to concessional operations. Non-regional members have also provided many new ideas about development.
The motto of the first ADB President Watanabe was “listening to countries’ views before telling them what to do”. I am confident that his approach of respecting countries’ ownership and carefully attending to countries’ needs remains an integral part of ADB’s culture.
The Year in Review
Now, let me report to you on our accomplishments in 2016.
Two years ago at our annual meeting in Baku, Azerbaijan, I pledged to build a Stronger, Better, and Faster bank. We are making solid progress in achieving that goal.
Last year, we maintained good momentum in scaling up our operations. Total ADB operations last year, including cofinancing and technical assistance, reached $31.7 billion. Our own loan and grant approvals reached a record high of $17.5 billion, a 9% increase from the previous year. Out of this, ADB’s lending and equity investment to the private sector was $2.5 billion.
Our climate finance, for mitigation and adaptation, reached $3.7 billion, up from $2.6 billion in 2015.
In addition, cofinancing with our public and private partners increased to $13.9 billion. This includes our first two cofinanced projects with the Asian Infrastructure Investment Bank for roads in Pakistan and a natural gas project in Bangladesh.
The scaling up of our operations has become possible due to our innovative approach of merging the ordinary capital resources balance sheet and the Asian Development Fund lending operations, which became effective in January this year. The Asian Development Fund, which is now devoted exclusively to grant operations, will enhance ADB’s support to poorest countries and fragile and conflict affected countries.
Regional Economic Outlook
I would like to talk briefly about the economic outlook for Asia and the Pacific.
Developing Asia has been growing at about 6% annually, even after the global financial crisis. It will grow 5.7% this year. Excluding the four newly industrialized economies of Hong Kong, China; Taipei,China; the Republic of Korea; and Singapore, developing Asia’s growth rate is projected to be even stronger at 6.3% this year.
The People’s Republic of China is transitioning to more moderate and balanced growth. But, growth is gathering momentum in countries such as Bangladesh, India, Indonesia, Myanmar, the Philippines, and Viet Nam.
I am optimistic about continued robust growth in Asia. There is strong demand, notably consumption by a growing middle class and increasing investment in infrastructure. Asia also has strong supply side capacity, supported by extensive production networks in the region and ongoing structural reforms such as deregulation.
ADB's Role in Strategy 2030
Ladies and gentlemen:
Building on our achievements over the last 50 years, what should ADB do going forward?
While the region has done remarkably well, we cannot be complacent. Several challenges remain and new ones have emerged in Asia. 330 million people still live in absolute poverty on less than $1.90 a day. Implementing the Sustainable Development Goals and the climate actions agreed at COP21 in 2015 are collective priorities for Asian economies. We also face new challenges from urbanization, aging, and widening inequalities.
Against this backdrop, we have started discussing our new long-term strategy—Strategy 2030. I would like to touch on five priorities at this moment.
First, supporting infrastructure development will remain our priority. According to a recent special report by ADB, Asia will need $1.7 trillion per year in investments in power, transport, telecommunications, and water through 2030. This is more than double our previous estimate, reflecting additional investments needed to support continued growth and address climate change.
"While the region has done remarkably well, we cannot be complacent. Several challenges remain and new ones have emerged in Asia."
In supporting infrastructure, we will incorporate more advanced technologies. Our developing member countries care about maintenance costs and the resilience of infrastructure. They increasingly aspire for innovative technologies for their projects. And many innovative companies across the world, including in emerging economies, are keen to contribute to Asia’s development. We have already initiated reforms in our business processes for project preparation and procurement to promote greater use of advanced technologies.
The second priority is social sectors. In health, we will support universal healthcare systems and cross-border initiatives to combat communicable diseases such as malaria, tuberculosis, and HIV. In education, we will continue to support Technical and Vocational Education and Training, or TVET, and help improve the quality of secondary education.
Third, we will further promote gender equality. Gender has been a key area of ADB operations for many years, even before we adopted our first Policy on the Role of Women in Development in 1985. Gender is a cross-cutting issue that influences all social and economic processes. We will design projects that help women and girls secure higher skills, better health, more jobs, and a larger voice in decision making.
Fourth, we will step up efforts to mobilize private resources for development. This includes promoting greater and more effective use of public–private partnerships, or PPPs. This approach is not new. In the late 19th century in Japan, for example, many railways and electricity services were started through innovative private companies under concessions granted by the government. The first gas light in Japan was constructed in Yokohama in 1872, through the joint work of Japanese merchants and a French engineer.
In addition, ADB is directly financing private companies in such infrastructure as solar, wind and geothermal power, highways, telecommunications, and ports. And ADB is supporting an increasing number of private sector projects in education, health, and agriculture. Funding micro, small, and medium sized enterprises, through local banks, will remain a priority.
Regarding ADB’s private sector operations, I very much appreciate Japan’s contribution to the newly created trust fund called Leading Asia’s Private Infrastructure, or LEAP fund. It is based on an equity investment of up to $1.5 billion from JICA (Japan International Cooperation Agency), and it supports ADB’s lending and equity investments in private infrastructure projects. In 2016, only five months after it was set up, we approved two clean energy projects, in India and Indonesia, using this trust fund and ADB’s own resources.
Lastly, another priority for Strategy 2030 will be continued reforms in ADB itself. ADB will strengthen its sector and thematic expertise, enhance staff capacity, and streamline procedures. We will deepen our collaboration with civil society, academia, the private sector, and local authorities such as Yokohama.
I hope that we will receive many ideas from you during this Annual Meeting on how ADB can best contribute to Asia and the Pacific in the future.
Ladies and gentlemen:
"Today, we begin a new chapter in the history of ADB and the region. ADB will continue to work together with our partners to build a more vibrant, inclusive, and sustainable Asia and the Pacific."
At ADB’s inaugural meeting in Shiba, Tokyo in 1966, Eisaku Sato, Prime Minister of Japan, called the establishment of ADB “an event which marks the brilliant opening of a new era in the history of Asia.” It might have sounded too optimistic at the time, but we have achieved much more than many people expected.
Today, we begin a new chapter in the history of ADB and the region. Building on our achievements of the past 50 years, ADB will continue to work together with our partners to build a more vibrant, inclusive, and sustainable Asia and the Pacific.
I ask for your continued support.