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Closing Address at the 52nd Annual Meeting – Takehiko Nakao

Speech | 4 May 2019

Closing Address by ADB President Takehiko Nakao at the 52nd ADB Annual Meeting on 4 May 2019 in Fiji

Thank you very much, Chairman Aiyaz Sayed-Khaiyum, Attorney-General and Minister for Economy, Civil Service and Communications of Fiji.

I would like to summarize this discussion.

I will speak broadly on six points: (1) regional economies, (2) Strategy 2030 and operations, (3) private sector operations, (4) concessional support, (5) differentiated pricing and graduation policy, and (6) organizational issues.

1. Regional Economies

The regional economy has been steady and some countries are even accelerating, supported by consumption and investment. Countries’ economies are also promoted by innovation and technological development in the region.

There are uncertainties, including trade tensions, and we should be vigilant. If trade tensions escalate, they could seriously undermine consumer and investor confidence and weaken growth in the region.

We should continue to pursue strong macroeconomic and structural policies and maintain open trade and investment regimes.

In this annual meeting, we also discussed sustainable tourism as a driver of growth. Tourism is becoming an important contributor to gross domestic product (GDP) and jobs. About 350 million international tourists arrived in Asia and Pacific countries last year, and this number has more than doubled since 2005. An increasing number of Asian people are enjoying tourism. To make tourism sustainable, we must protect the environment, cultural heritage, and communities through appropriate policies and regulations.

We discussed the importance of multilateralism. I believe national interests and multilateralism go hand in hand because we need international cooperation and collective action for the interests of people in nation states and the world. Multilateral frameworks, including multilateral development banks (MDBs) such as ADB, can make important contributions to the international community.

There was a discussion about the threat of terrorism, and we should collectively address this issue.

2. Strategy 2030 and Operations

Governors commended ADB on its achievements last year, including commitments and disbursements, private sector operations, and climate finance.

There was very broad and strong support for Strategy 2030. We are working on operational plans for seven priority areas, and action plans for private sector operations and knowledge management. We will continue to be guided by your ideas for finalizing them.

Governors emphasized the importance of the unfinished poverty reduction agenda. In that context, support for micro-, small-, and medium-sized enterprises and financial inclusion were discussed.

Social sectors are important and universal health coverage is one of the important issues that will be discussed in this year’s G20.

Gender equality is one of our seven operational priorities. Governors appreciated the target that at least 75% of the number of ADB’s committed operations will promote gender equality by 2030. The target is for both sovereign and nonsovereign operations. We will encourage private companies to include gender elements.

There was a discussion about infrastructure, especially quality and lifecycle considerations. In that context, debt sustainability should also be considered.

Tackling climate change is another priority. At least 75% of the number of ADB’s committed operations will be supporting climate actions by 2030. And, there was a discussion that the Pacific island countries and small island developing states are especially vulnerable, and require strong adaptation efforts in addition to mitigation.

Regarding the 2009 energy policy, because there have been many developments since then, such as the Paris Agreement and Sustainable Development Goals, we will review the energy policy, informed by the Independent Evaluation Department’s evaluation.

During this annual meeting, we launched the Action Plan for Healthy Oceans and Sustainable Blue Economies. Our oceans are in danger due to (i) increasing water temperatures, (ii) untreated wastewater and plastic pollution, and (iii) unsustainable fishing practices.

Governors stressed the need to pay greater attention to ocean health for the future of the planet, as well as lives and livelihoods of the people. Under the action plan, we will increase ADB investment and technical assistance to $5 billion by 2024.

There was discussion about the importance of disaster risk management and prevention. ADB’s quick and substantial supports after cyclones and earthquakes were appreciated by Pacific island countries and Indonesia.

Governors discussed the importance of regional cooperation and integration. ADB will cooperate with regional initiatives by countries.

Governors discussed that advanced technologies, innovation, and new ideas should be incorporated in our projects and programs.

Governors stressed that knowledge work is crucial. We are expanding this work using a One ADB approach, led by the Sustainable Development and Climate Change Department, sector and thematic groups, the Economic Research and Regional Cooperation Department, and the Department of Communications.

Governors underscored the importance of our corporate results framework. We should continue to monitor Strategy 2030 outcomes through a strong corporate results framework and evaluation.

3. Private Sector Operations

Governors appreciated Strategy 2030’s target that one-third of our operations by number by 2024 will be private sector operations.

There was a discussion on the importance of expanding to frontier economies and social sectors such as health and education.

In that context, the need to more closely look at risk and pricing, and the real impact on development, was mentioned. ADB is expanding staff resources for private sector operations and risk management, and will increase outposting to resident missions. We will also be opening an office in Singapore by the end of the year.

There was a discussion on the value of equity investment in addition to loan operations. Governors also supported the greater use of credit enhancement instruments.

In 2018, ADB secured commercial cofinancing (including short-term cofinancing) of $7.2 billion on top of $3.1 billion from our private sector operations. We should continue to expand it to achieve the Strategy 2030 target of every $1 financing from ADB for private sector operations being matched by $2.5 of long-term cofinancing.

Governors encouraged ADB to help make projects bankable, and highlighted the catalytic role of ADB. Our Office of Public–Private Partnership is undertaking more transaction advisory services and is effectively using the Asia Pacific Project Preparation Facility.

4. Concessional Support

Governors expressed their continued strong support for ADB’s grant operations through the Asian Development Fund (ADF) and other concessional assistance.

Fragile and conflict-affected situations like Afghanistan should continue to be supported. There was appreciation for ADB’s quick response in providing a $100 million grant for the displaced people in Bangladesh.

The strategic direction of ADF 13 (covering 2021–2024) should be considered as the number of grant-eligible countries will be decreasing in the future. We should also consider the use and scale of thematic set asides or thematic pools in the context of the ADF 13 replenishment discussion.

Governors discussed the need for income transfer from ordinary capital resources (OCR) to ADF. In the paper we provided for the ADF Donors Meeting in Fiji, we already included the increasing number of net income transfers from OCR for ADF 13 based on the numbers in the Board paper regarding the merger of the OCR balance sheet and ADF lending operations. I hope that we will see strong donor contributions to ADF 13 to continue substantial grant operations.

In that context, there was a very strong encouraging statement from Azerbaijan that they will start making contributions to ADF as a donor.

I hope that we also realize substantial support from traditional developed country donors for ADF as well as graduated developing members—Brunei Darussalam; Hong Kong, China; Republic of Korea; Singapore; and Taipei,China—and regular OCR countries—India, Indonesia, Kazakhstan, Malaysia, People’s Republic of China, and Thailand.

5. Differentiated Pricing and Graduation Policy

Governors discussed the need for differentiated pricing among our regular OCR loans reflecting the evolution of country situations.

Governors discussed the application of the graduation policy. This should be done in consultation with countries based on the three criteria of (i) per capita national income, (ii) availability of commercial capital flows on reasonable terms, and (iii) strength of key economic and social institutions, and in the context of country partnership strategies.

There was a discussion that the graduation policy and differentiated pricing should be applied properly and fairly. Continued engagement with upper-middle income countries (UMICs) was emphasized, focusing on such areas as climate change, the environment, and other regional public goods as mentioned in Strategy 2030.

6. ADB Organizational Issues

About ADB itself, we need a stronger staff base for implementing Strategy 2030. We will continue to recruit fresh talent. To develop and deploy our staff more effectively, we will promote staff mobility between departments, introduce flexible work arrangements, and continue to strengthen training for managers and staff.

There is a need for staff diversity, including gender. The percentage of women International Staff has increased to 36%, approaching the target of 40%. There was appreciation for the establishment of the Respectful Workplace Unit, and a discussion that we should continue to prevent harassment and misconduct, including sexual harassment.

There was discussion that the gender balance on the Board of Directors should also be improved with the cooperation of the Governors.

The continued efforts for efficiency in the administrative budget was mentioned. Governors noted that there will be a review of compensation and benefits. This should be based on the idea of attracting good talent, and in line with the mission of ADB to pursue poverty reduction.

I mentioned the ongoing review of governance at ADB based on the G20 Eminent Persons Group report. As part of ADB’s governance reform, we are reviewing the functional relationship between our Board of Directors and Management. The aim is to enhance our effectiveness by reorienting the Board’s focus to strategic priorities and adopting a practical risk-based approach that delegates greater responsibility to ADB Management.

There was a discussion that ADB’s financial sustainability should continue to be pursued. That is one of the areas that I pay attention to the most.

As encouraged by the G20 Eminent Persons Group, we need to have close coordination among MDBs and the International Monetary Fund. MDBs already collaborate with each other at various levels. MDB leaders meet at least three times a year. In addition, ADB staff from almost all departments have regular meetings with other MDB peers. Country platform is a possible instrument to enhance coordination. It should be based on the ownership of a country and focus on debt sustainability. We should involve bilateral financiers in addition to MDBs and target private sector mobilization.

7. Closing

Before closing, I would like to welcome Niue again as ADB’s 15th Pacific island member country and also our 68th member.

I would like to express again my appreciation to the government and people of Fiji; His Excellency Josaia Voreqe Bainimarama, the Prime Minister of the Republic of Fiji; and the Honorable Minister Aiyaz Sayed-Khaiyum, Attorney-General and Minister for Economy, Civil Service and Communications of Fiji, and Chair of the Board of Governors, for hosting this annual meeting. This is held for the first time in a Pacific developing member country. I believe all participants agree that this annual meeting has been very well organized, surrounded by the beautiful ocean and helped by perfect weather. Participants also enjoyed the culture and traditions of Fiji.

And I would like to appreciate the warm hospitality and hard work of the government staff, including the police and security personnel, hotel staff, and many volunteers. I would also like to thank the staff of ADB.

Finally, I thank the Republic of Korea for hosting the annual meeting next year. Fiji set a high bar, and I trust that the annual meeting next year will be another splendid event.

Thank you very much again. Have a safe trip home.