Closing Address at the 51st Annual Meeting – Takehiko Nakao | Asian Development Bank

Closing Address at the 51st Annual Meeting – Takehiko Nakao

Speech | 5 May 2018

Closing address by ADB President Takehiko Nakao at the 51st ADB Annual Meeting on 5 May 2018, in Manila, Philippines

Mr. Chair, ADB Governors, ladies and gentlemen:

I would like to express our deepest gratitude to the Government of the Philippines and its people for the warm hospitality and excellent arrangements. I would also like to thank all of you for your active participation.

Let me begin with three general observations about the world economy.

First, the economic outlook remains positive, with the region well positioned to sustain its growth momentum. However, there are several risks including a concern about inward looking policies.

Second, a significant factor driving future growth is advancements in technology such as robotics, artificial intelligence (AI), and “internet of things.” This will require proactive and comprehensive actions from governments and ADB to adapt and capitalize on opportunities, while minimizing the risks.

Third, the world economic center of gravity is shifting towards Asia and the Pacific. We should take these opportunities in a positive way while recognizing that challenges remain.

Much of the discussion over these past few days focused on our new strategy to 2030. I would now like to make 16 points about our operations and institution based on the key issues you have raised.

1. Support for Strategy 2030. Governors supported the broad directions highlighted in Strategy 2030 and ADB’s expanded vision to achieve a prosperous, inclusive, resilient, and sustainable Asia and Pacific, while emphasizing the need to sustain efforts to eradicate poverty.

2. Pursuing differentiated approaches across groups of countries. There was support for using differentiated approaches given the significant diversity across countries. It is important for ADB to remain engaged in Upper Middle-Income Countries (UMICs) through a combination of financing and knowledge services. But our support to UMICs should be focused on areas such as regional cooperation and integration, global public goods, and strengthening economic and social institutions to address new challenges such as aging, climate change, and environmental degradation. There was a consensus that ADB should prioritize its resources for poorer countries. Governors welcomed the increased focus on Small Island Developing States (SIDS) and Fragile and Conflict-Affected Situations (FCAS) in the new strategy.

3. Graduation, differentiated pricing, and sustainable lending framework. There were discussions on graduation policy and differentiated pricing. ADB will continue to implement its graduation policy. Some Governors supported an idea of applying differentiated pricing in our regular OCR lending to address the diverse situations of countries. The primary purpose of this differentiated pricing is not to increase ADB’s net income. If countries become richer, it is reasonable and fair to ask them to pay a little bit more as an extension of our current system of transitioning from grant only to concessional lending to market-based lending. Other Governors had reservations with differentiated pricing because ADB does not have an immediate need to build equity. As part of differentiated pricing, ADB will consider preferential pricing, for example, for countries transitioning out of concessional assistance. Some Governors emphasized the importance of organic capital growth and a sustainable financial framework toward the future. Building on our strong financial position following the successful ADF–OCR merger, we will develop more concrete proposals for differentiated pricing and long-term lending scenarios for further discussion.

4. Expanding private sector operations. There was a consensus that scaling up ADB’s private sector operations is crucial to strengthen infrastructure investment, achieve the Sustainable Development Goals, create jobs, and drive innovation. A key measure of ADB’s success will be the volume and quality of additional resources it mobilizes on top of its own financing. We will explore innovative ways to mobilize resources including the expanded use of credit enhancement products and management of third-party funds. Public–private partnerships will be a major area of emphasis. We will also help mobilize domestic resources by supporting improvements in the business environment and capital markets to crowd-in private sector financing to support development.

5. Scaling up support to address climate change and disaster risk management. Climate change and natural disasters will affect large sections of the Asian population, especially the highly vulnerable SIDS in the Pacific. Governors recognized the urgency to tackle these issues. Approvals for the financing of climate mitigation and adaptation reached a record $4.5 billion in 2017. We are in a good position to achieve our target of doubling annual climate finance to $6 billion by 2020. We will continue to scale up our climate finance. ADB will support countries to adhere to their nationally determined contributions under the Paris Agreement on climate change.

6. Accelerating progress in gender equality. Governors stressed the importance of promoting gender equality in our operations and our institution. ADB has been enhancing gender mainstreaming in all its projects and we will further strengthen these efforts in both sovereign and nonsovereign operations. We will design projects that help women and girls secure higher skills, better health, more jobs, and a larger voice in decision making.

7. ADB’s areas for work and selectivity. On the areas of ADB’s work under Strategy 2030, there is agreement on the continued importance of infrastructure investments combined with knowledge and expertise. Infrastructure investment is all the more important because of the need to address climate change and international calls to close the infrastructure deficit and promote growth. Some stressed the need for greater selectivity based on ADB’s comparative advantage. The country partnership strategy will continue to be the primary platform for defining ADB’s operational focus in each country. Governors underscored the need to support social sectors including health and education. Strengthening the health sector is increasingly important for addressing the growing challenge coming from the aging population. Enhancing the quality of education is critical for developing skills to adapt to new technologies. There is great potential to use new technologies for health, education, and financial inclusion.

8. Operational targets. Governors welcomed the operational targets on climate, gender, and commercial cofinancing. Some encouraged us to have more specific and ambitious targets. Our new corporate results framework for 2019 to 2023, which will be developed based on the new strategy, will include many more indicators and targets.

9. Deepening regional cooperation and integration. There were discussions about regional cooperation and integration, and the need to enhance connectivity between countries particularly in Central Asia and the Pacific region. ADB will continue to promote regional cooperation and integration based on its decades of experience. ADB will work with emerging international and regional initiatives.

10. Applying an appropriate mix of instruments. Some Governors stressed that ADB should provide its support with an appropriate mix of instruments including policy-based lending (PBL) and results-based lending (RBL) in addition to project lending. We will use PBL to promote reforms in key areas such as public financial management, capital markets development, and energy sector modernization, underpinned by strong policy dialogue with country counterparts. PBL will also be used to respond to crises in a timely manner. We will further refine and expand our products and instruments to provide tailored support to both public and private sector clients.

11. Concessional support. Governors emphasized the importance of concessional support especially to SIDS and those affected by fragility and conflicts. Strategy 2030 puts special focus on SIDS and FCAS. We will discuss the future of ADF during the midterm review of ADF 12.

12. Strengthening knowledge and technical assistance. Governors agreed that knowledge will be a critical part of our transformation toward 2030. ADB will strengthen its knowledge services, both tacit and explicit, in partnerships with knowledge institutions. We will work closely with countries to identify their needs and produce the most relevant knowledge products and services. We will use technical assistance (TA) resources to effectively generate and disseminate knowledge. We will continue to strengthen staff knowledge through our sector and thematic groups. ADB will support its member countries to strengthen measures against corruption, enhance environmental and social safeguards, promote financial integrity and tax transparency, and combat money laundering and the financing of terrorism.

13. Modernizing business processes and procurement. ADB will pursue a dramatic modernization of its business processes by taking advantage of available technology. It will further increase its operational efficiency and reduce the time for preparing and administering loans and TA projects without compromising quality and integrity. We will complete the roll out of the new procurement policy approved in 2017 to reduce procurement time, support the adoption of high-level technologies, and better address life-cycle costs.

14. Strengthening human resources. There was consensus for the need to make the best use of our human resources. ADB will strengthen its performance management, better recognize collaboration and innovation in annual work planning and performance assessment, and conduct leadership training programs. We will continue to promote diversity in our workforce and emphasize gender balance within the institution. The Respectful Workplace Initiative is in place to prevent harassment and bullying. A special unit for awareness raising, training, and investigation has been in operation since June 2016.

15. Enhancing partnerships. We recognize the importance of building strong partnerships with diverse institutions—private and public, traditional and new—and with civil society organizations. Governors emphasized the importance of better coordination with other multilateral development banks (MDBs). We are committed to further strengthening our collaboration with other multilateral institutions, including the Green Climate Fund, Asian Infrastructure Investment Bank, and the New Development Bank.

16. Instituting a One ADB approach. A One ADB approach will break down silos and bring together expertise across ADB. We will continue our efforts to increase synergies between public and private sector operations. We will strengthen our presence on the ground. ADB will enhance staff mobility between headquarters and resident missions.

We plan to complete Strategy 2030 by mid-2018. We already held extensive consultations. I appreciate the guidance from Governors during this Annual Meeting. We will continue to seek views from various stakeholders.

Ladies and gentlemen:

I would like to thank you again for the substantive and frank discussions.

Before I conclude, let me again express my deepest gratitude to the Philippines for hosting this year’s Annual Meeting. I would like to convey my heartfelt appreciation to Secretary Carlos G. Dominguez, Chair of the Board of Governors, for his strong and personal commitment to ensuring the success of this meeting. He and I met numerous times to discuss how we can make this meeting more substantive and focused.

I would also like to extend my thanks to our two Vice-Chairs, Ms. Sinha Lawrence, the Governor for the Federated States of Micronesia, and Ms. Ana Barreto, the Temporary Alternate Governor for Portugal.

Finally, the tireless efforts of staff from both the Philippine government and ADB made this meeting truly fruitful and memorable. Thank you very much.

Our task ahead is to reinvent ADB and meet the challenges of a transforming Asia and the Pacific. Together, let us continue our journey to achieve a prosperous, inclusive, resilient, and sustainable Asia and the Pacific.

Next year we will have our Annual Meeting in Fiji. This will be the first time for an MDB annual meeting to be hosted in a Pacific developing member country. It will highlight the achievements and development challenges of the region.

I wish you all a safe journey home and see you again next year in Fiji.