Keynote Address by Takehiko Nakao, President, Asian Development Bank, at the 14th CAREC Ministerial Conference on 25 September 2015 in Ulaanbaatar, Mongolia (as drafted).
Introduction
Your Excellency Prime Minister Saikhanbileg, Ministers and delegates from the CAREC countries, development partners, honored guests, ladies and gentlemen:
I am very pleased to join you at this 14th CAREC Ministerial Conference. On behalf of all of us, I sincerely thank the Government of Mongolia for hosting this Ministerial Conference, and the people of Mongolia for their gracious hospitality. I am very proud of the strong partnership that ADB and Mongolia have forged, and appreciate Mongolia’s intention to step up its support to CAREC.
Today, I will discuss three issues: economic prospects for the CAREC region; progress on the CAREC agenda; and ADB’s support for regional cooperation.
Economic prospects for CAREC countries and role of regional cooperation
Developing Asia has been the main source of global economic growth in recent years. Domestic policy reforms, concerted development efforts, benign primary commodity prices, and some strengthening of demand from the advanced economies have supported the region’s growth.
The current global economic landscape with lower primary commodity prices, lower remittances, and slower economic growth in trade partners is creating immediate additional difficulties for a number of CAREC countries. In response to the immediate difficulties, ADB extended $1billion in counter-cyclical support to Kazakhstan this year. And we are working on a $150 million budget support loan for Mongolia’s social welfare programs.
In this rather difficult global economic environment, CAREC countries should further strengthen regional cooperation and integration efforts. Enhancing the subregion’s connectivity, promoting trade and investment across borders, and improving access to external markets will help improve the prospects of the subregion as a whole.
Progress under the CAREC program
Today, I am happy to see that much progress has been made in all the priority areas of the CAREC program since we met in Bishkek last year.
Overall, the CAREC Program is expecting additional investments of $3.7 billion in 2015. Cumulative investments have reached $28.3 billion in the priority areas of transport, energy, trade facilitation, and trade policy. ADB has financed more than $10 billion of this total.
Implementation of the Transport and Trade Facilitation Strategy 2020 (TTFS 2020) and its Action Plan has been satisfactory. Implementation of road and rail projects continues along all corridors. Progress is being made in ports, logistics, border crossing points, and aviation. And the initial groundwork has been laid to launch a new initiative on improving road safety in the CAREC countries. This initiative is expected to be endorsed by the ministers today.
In the energy sector, various projects are being implemented or prepared to promote energy and power trade between the Central Asia and South Asia, and to develop a regional power market.
In trade facilitation, we are seeing progress in customs cooperation, especially in aligning national customs policies and procedures with the Revised Kyoto Convention. We also see good progress in modernizing customs information systems, and in pilot-testing of the joint customs control and coordinated border management. Most CAREC countries have either started, or plan to develop, national single window systems.
Countries have also accelerated their efforts to cooperate in the sanitary and phyto-sanitary (SPS) area. Today, a Common Agenda for Modernization of SPS Measures will be recommended for ministers’ endorsement. An ADB loan of $15 million for modernizing Mongolia’s SPS system will be approved before the end of this year. We are hoping to see the formulation of similar projects in other CAREC countries.
In trade policy, Kazakhstan completed key steps towards accession to the World Trade Organization (WTO) in July this year, and Azerbaijan and Uzbekistan have made good progress toward this goal.
CAREC has also increased its efforts to generate and disseminate knowledge for regional cooperation. Various training and capacity building activities were organized in the past year in the four priority sectors. Most importantly, the CAREC Institute’s physical base in Urumqi was officially launched in March this year.
Increased support by ADB for regional cooperation
ADB is committed to supporting regional cooperation. The midterm review of ADB’s Strategy 2020, approved in April 2014, reaffirmed the priority we accord to regional cooperation and integration. We are now developing a new Operational Plan for Regional Cooperation and Integration, which will provide improved guidance to ADB’s regional cooperation initiatives, including the CAREC program.
While ADB will continue to support improvement of physical connectivity across borders, we will need to take a step further toward “connectivity ++”. The first plus is trade facilitation. The second plus is developing economic corridors by creating regional and global value chains, special and border economic zones, and multimodal logistics facilities.
We will also expand our support for regional public goods, including the control of transboundary diseases and adoption of clean, efficient and low-carbon energy technologies.
In order to scale up our support in the CAREC region, we need a bigger lending capacity. During ADB’s 48th Annual Meeting held in Baku in May this year, ADB’s Board of Governors approved the proposal to merge the Asian Development Fund (ADF) lending operations with the Ordinary Capital Resources (OCR) balance sheet. The merger will allow us to increase our annual operations to as much as $20 billion, or 50% above the current level.
Earlier this year, I approved a proposal to establish a sovereign OCR set-aside facility to provide additional incentives for regional projects. We will pilot this facility between 2015 and 2017, earmarking an annual allocation of $500 million for sovereign regional cooperation projects for all OCR borrowers. I hope CAREC countries will be successful in tapping into these additional funds to support more regional projects.
ADB will also seek to increase co-financing with partners. For instance, In Baku in May and in Beijing this week, I met with Mr. Jin Liqun, who recently became AIIB’s President-Designate, and ADB and AIIB are already working together to identify co-financing opportunities including in CAREC countries.
Conclusion
Ladies and gentlemen, the CAREC program has a vision of “Good Neighbors, Good Partners, and Good Prospects”. By working closely together, let us test the possible, tap the potential, and see what we can achieve for greater prosperity in CAREC.
Thank you.
Speaker
