Opening Address by President Takehiko Nakao at the 48th Annual Meeting in Baku, Azerbaijan on 4 May 2015.
Excellency, President Ilham Aliyev, distinguished guests, ladies and gentlemen:
Good morning to you all.
I am delighted to welcome you to this 48th Annual Meeting of the Asian Development Bank (ADB).
First of all, I offer my deepest condolences to the people of Nepal and other affected countries for the tragic loss of lives and property caused by the recent earthquake. I was encouraged by the strong support expressed by the international community at the Partnership Forum for Nepal hosted by ADB yesterday. We stand ready to help in this challenging time.
Ladies and gentlemen,
ADB and Azerbaijan have been partners in development for 15 years. In these 15 years, Azerbaijan’s real per capita income has grown by four times, and poverty has declined dramatically. This is a clear testament to the country’s commitment to sustainable development.
On behalf of all of us here today, I would like to convey our deepest appreciation to the Government and people of Azerbaijan for inviting us to this beautiful city of Baku.
The Year in Review
Let me start with reporting to you the progress ADB has made over the past year. ADB’s operations continued to perform well. In 2014, ADB approved nearly $14 billion in loans, grants, and equity investments. With cofinancing of over $9 billion, our total financial assistance reached a record high of $23 billion.
Unless loans and grants are disbursed, they will have no impact on development. In 2014, disbursements from our own resources exceeded the $10 billion mark. This is 17% higher than in 2013 and a record disbursement in recent years. This disbursement level reflects our vigorous efforts to improve project implementation.
I firmly believe that, in order to serve our client countries better, ADB must have a strong financing capacity. This is particularly important in the face of the region’s vast infrastructure financing needs.
I am therefore very pleased to confirm that our 67 Governors have unanimously approved the proposal to combine the Asian Development Fund (ADF) lending operations with the ordinary capital resources (OCR) balance sheet. ADB started deliberations on the proposal in the summer of 2013, shortly after I took office. Thanks to your constructive feedback, understanding, and support, this groundbreaking idea became a reality in a very short period. Once again, I would like to express my deepest appreciation for your endorsement. With this, ADB’s financing capacity will dramatically increase by up to 50% starting January 2017.
Economic Outlook for Asia and Pacific
Let me turn briefly to our assessment of the Asian economy.
Growth in Asia and the Pacific remains strong. Robust domestic demand and prudent macroeconomic policies will continue to underpin the region’s economic growth momentum. Countries are implementing politically difficult but much needed structural reforms in areas such as liberalization of trade, investment, and labor markets. We expect the region to maintain a growth rate of 6.3% this year.
The revival of the US economy and strengthening recovery of the Eurozone and Japan will reinforce Asian growth. Lower oil prices also support growth and have provided an opportunity to cut fuel subsidies in several countries. Commodity exporting countries should enhance their efforts to diversify their economies and strengthen resilience to price volatility.
Persistent Poverty in the Region and Global Development Initiatives
Ladies and Gentlemen:
The region has a remarkable record of fighting poverty. But as recently as 2011, 544 million people were still living under the traditional poverty threshold of $1.25 a day. Last year ADB developed a new poverty measure taking into account the consumption basket specific to Asia’s poor, food costs that rise faster than the general price levels, and vulnerability to economic shocks and natural disasters. If we apply this new poverty measure, the number of absolute poor rises to 1.4 billion, or about 40% of the region’s total population.
Such high poverty is unacceptable. Poverty must be defeated decisively, and soon.
2015 is a momentous year for global development initiatives.
We expect the post-2015 development agenda, namely the Sustainable Development Goals, to be finalized in September. Another important event this year is the 21st Conference of the Parties for Climate Change in Paris this December, where a new climate deal will most likely be struck.
The success of these global initiatives on poverty and climate change will depend largely on actions by Asia and the Pacific ─ after all, the region has 54% of the world’s population and around 35% of world GDP, and will account for more than 60% of global growth this year.
ADB’s role in the region is important.
Today, I would like to highlight three areas in which we will scale up our support to eliminate poverty and achieve sustainable development in Asia.
First, sustainable infrastructure for inclusive growth and poverty reduction. Actually, infrastructure such as transport, energy and water accounts for about 80% of ADB’s operations. We will maintain our focus on infrastructure and further scale up our operations in this area.
Infrastructure is not only the basis for economic and industrial development. It is also indispensable for human development, raising standards of living and reducing poverty.
Cross-border infrastructure is also critical to expand trade, create jobs and increase incomes regionally. ADB has long promoted regional cooperation and integration. We support enhanced connectivity through roads, railways, and power lines in Central Asia, South Asia and other parts of the region. Communication networks in Pacific island countries are also an ADB priority.
The public sector alone cannot bridge the region’s huge infrastructure financing gaps. Much larger investments from the private sector are needed. We must use public-private partnerships (PPPs) more effectively. To promote large-scale PPP projects in the region, we have established a new PPP office in ADB. During this annual meeting, ADB has signed a Memorandum of Understanding with 8 international commercial banks to provide joint advice to client countries on developing PPP projects. We have also created an Asia Pacific Project Preparation Facility, assisted by several donor countries.
To realize lasting benefits from infrastructure, we need to ensure its operational sustainability. For example, ADB is helping Myanmar’s government strengthen its capacity to manage road infrastructure and establish a road condition database to identify maintenance priorities.
In building infrastructure, safeguard policies to protect people and the environment are essential to make such projects sustainable and inclusive. I want to emphasize that these standards should not be interpreted as an undue burden imposed on borrowers. We must learn lessons from past experiences around the world where projects sometimes have had unintended negative impacts on people and the environment. We should also support developing countries to improve their own safeguard systems. ADB will continue to apply the highest standards to serve the increasing demands of societies in developing countries.
Ensuring Quality Education and Healthy Lives
Second, ADB will double its assistance in education and health, in line with last year’s Midterm Review of Strategy 2020.
Education and health empower people. And, educated, skilled and healthy populations provide the backbone for a country’s growth. The famous Azerbaijani poet Huseyn Javid said “It is enough to look at schools to know the progress and regression of a nation.”
Many countries in Asia have achieved near-universal primary school enrollment rates. But most countries still face challenges with school completion ratios, and the quality of secondary and tertiary education. ADB is expanding support for quality education with an emphasis on higher education and vocational training.
In Bangladesh, I had the opportunity to visit an ADB-assisted model Islamic school that provides secondary level education to girls and boys together. I was impressed by how well the school integrates science and technology education with religious subjects.
On my recent visits to Cambodia and Lao, I was encouraged by the enthusiasm of students, including many female students, learning to repair motorbikes and grow organic vegetables in ADB funded vocational schools. One mother in Vientiane told me with tears in her eyes that, without ADB’s support, her son could never expect to pursue his dream of becoming an engineer.
In the health sector, our focus is on improving delivery of health services and strengthening efficiency of health systems, including promotion of universal health coverage. For example, in Mongolia, we have helped the majority of the population access health care services through setting up a health insurance scheme, building family clinics, and training health workers.
Fighting communicable diseases based on regional cooperation is another priority. In the Greater Mekong Subregion, we are supporting prevention and control of Malaria and HIV-AIDS, thanks to donor-supported trust funds.
Urgent Action on Climate Change
And third, it is important to combat climate change to make Asia’s development more sustainable. In 2014, we committed about $2.4 billion for mitigation, and over $700 million for adaptation. Using our expanded financial capacity, we will strengthen our support for energy efficiency and renewable energy, sustainable transport, climate change resilience and disaster risk management.
We are leveraging our resources by attracting private resources in solar, wind and other renewable energy projects. Last year, ADB successfully launched a $400 million joint venture to make private equity investments in climate-friendly companies. We will further expand our own private sector operations, mobilize higher co-financing for such transactions, and develop new investment funds.
We are also working closely with multilateral funds such as the Climate Investment Funds. I am proud that ADB is the first among Multilateral Development Banks to be accredited by the Green Climate Fund. We have already started identifying innovative projects to be cofinanced with this new organization.
Much of the climate change mitigation and adaptation action will have to take place in cities. This is especially important in Asia, where rapid urbanization is taking place, particularly in middle-income countries. By 2050, over 3 billion people or about 65% of Asia’s population will live in cities. This poses a challenge, but also provides opportunities for building cleaner, greener and more resilient cities.
In Georgia, China, India and many other countries, ADB is supporting mass public transportation, energy efficient buildings, and waste management in cities. Here in Baku, we are helping to introduce a clean urban bus network system. To make cities more resilient, we undertake rigorous risk assessments for our projects. Relatively small upfront investments based on such assessments can save lives and avoid large-scale rehabilitation costs later.
We will also develop disaster risk financing instruments such as disaster insurance for small island countries and mega cities.
Stronger, Better and Faster ADB
While emphasizing these three areas, WE WILL OF COURSE PURSUE other priorities based on the Midterm Review of Strategy 2020. We will strengthen operations in fragile and conflict-affected situations, and continue to work toward gender equality. We will also help improve governance and capacity of our clients, deepen financial inclusion, enhance food security and agriculture productivity, and respond to the development needs of middle income countries, including increasing inequality and rapid urbanization.
Ladies and Gentlemen:
To scale up our operations, achieve sustainable development in the region, and be an important contributor to the new global development initiatives, I want ADB to be stronger, better and faster.
This starts with our stronger lending capacity. The merger of ADF and OCR will increase ADB’s annual operations to as much as $20 billion, or 50% over the current level. Our assistance to poor countries will increase by up to 70%. There will be much more room to expand our private sector operations. Including cofinancing, our annual operations will be as high as $40 billion.
The stronger lending capacity offers an opportunity, but WE MUST USE IT WELL. We are already actively working with our client countries to identify new projects and programs for our finance. We will also continue to maximize cofinancing opportunities. We will cooperate and cofinance with the Asian Infrastructure Investment Bank (AIIB).
Given the region’s large financing needs, the expanded lending capacity from the merger may not be sufficient over time, and we may have to ask for your support for a capital increase in future.
To be stronger, together with our financing, we will also best utilize our expertise, diverse and devoted staff, 28 field offices, time-tested best practices, and long-standing relations with client countries and other development partners.
We must also be better. We should provide better knowledge services and innovative solutions to our client countries. For this purpose, we are strengthening our 7 sector groups such as energy and transport, and 7 thematic groups such as governance and gender, which work across operations departments. While maintaining country focus in our institutional structure, we have adopted a “one ADB” approach to generate, share and use first class expertise across the entire bank.
We need to be faster. We will do so without compromising project quality and standards for safeguards and procurement. As I reported last year, we are already streamlining business procedures and delegating more authority to field offices. As a result of these reforms, we have so far cut by half the internal processing time for procurement contracts. But much more remains to be done.
Let me conclude.
ADB is implementing a clear strategy to realize our vision of Asia and the Pacific free of poverty. We will continue to promote sustainable development and scale-up our support for infrastructure, education and health, climate change and other areas.
To achieve this;
First, we will have stronger financial capacity, and we will use it well.
Second, we will provide better knowledge services and innovative solutions.
Third, we will be faster in responding to our clients.
I will continue to consult you closely on our transformations to meet the changing needs of Asia and the Pacific. Together with you, we will develop a concrete plan to scale-up our operations and start thinking about a new strategy beyond 2020.
I count on your continued strong support.
Thank you. Çox sağ olun.