| 1. Introduction |
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President Chino, Distinguished Members of the Board,
Ladies and Gentlemen: |
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It is a great honor for me to speak about Asia and the
Pacific and the Asian Development Bank at the bank’s headquarters here
in Manila. |
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Before starting my talk, I would like to express my
deepest condolences to the bereaved families of the many who were
tragically killed by the earthquake and tsunami in the Indian Ocean two
weeks ago. |
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As for disaster relief, I fully endorse the
declaration by Heads of the State in Jakarta last week. The pains felt
by Asian countries are our own pains. Disaster in Asia is nothing but
ours as well. |
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Japan will provide
assistance to the maximum extent possible in three ways: financial
resources, human resources, and knowledge and expertise. Japan has
pledged, for the time being, to extend up to US$ 500 million of grant
money as emergency assistance to cope with the damage. Furthermore,
Japan will call on other countries to jointly apply moratorium on public
debt services for a certain period of time, when any disaster-stricken
country so wishes. Japan dispatched specialists to devastated areas to
provide medical assistance. In order to prevent the repetition of the
tsunami disaster, Japan will make vigorous efforts to expeditiously
establish a Tsunami early-warning mechanism for the Indian Ocean
countries. |
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The G7 Finance Ministers
have already agreed that the ADB should make the strongest efforts
possible to provide financial assistance with other multilateral
institutions. Japan will also assist in reconstruction and
rehabilitation works of affected countries in every possible way. In
this regard, I would like to announce that Japan has decided to provide
an additional US$ 20 million through the Japanese trust funds at the ADB
for supporting relief measures in devastated areas. I also communicated
the same decision to the World Bank. Proactive and timely use of
Japanese trust funds in the ADB should be encouraged to prompt the ADB’s
operations. In addition, the Japan Bank for International Cooperation
has already started working with the ADB and the World Bank. |
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Today, I would like to talk
about four megatrends that surround us, four challenges the region
faces, four commitments Japan makes to the region, and four tasks the
ADB must take up. |
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When Tadao Chino assumed the
presidency of the ADB in 1999, he designated poverty reduction as the
ADB’s overarching goal and the ADB has committed itself to reform under
his strong leadership. I would like to commend the ADB for its
contribution to the region’s development by responding to the various
needs of the borrowing member countries. During this period, the Asian
economy has recovered from the currency crisis of 1997 and has continued
to record strong growth. The high growth enjoyed in East Asia,
particularly in China, has now been witnessed in South Asia as well.
Moreover, economic interdependence in the region has rapidly deepened.
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| 2. Four Megatrends |
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While congratulating the ADB
for these achievements, I would like to point out four megatrends that
surround us. |
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First, the
vortex of globalization which has forced the region’s policymakers to
think about how to sequence policies and institutional reforms in trade
and capital transactions; |
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Second, the expansion of
regional cooperation to strengthen linkages among the economies of the
region, thereby enhancing the synergistic effects of the merits of scale
and highlighting the diversity in the region’s economy; |
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Third, the issue of
urbanization and the various problems caused by the massive migration to
urban areas, while striving to achieve balanced growth between city and
rural areas and preserve the environment; and |
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Fourth, the demographic
challenge of aging societies, which requires each government to take
early policy actions to address the rising pressure on social security
expenditures. |
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| 3. Four Challenges Faced by
the Asia-Pacific Region |
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Even amid these megatrends,
the Asia-Pacific region is expected to be the heart of global
development throughout the twenty-first century, if we overcome the
following four challenges. |
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The first
challenge is poverty alleviation. Income poverty has been reduced in the
region as poverty incidence has declined from 32% in 1990 to 22% in
2000. The Asia-Pacific is thus likely to satisfy the income-related
Millennium Development Goals, or MDGs, for the region as a whole.
However, the region still has about 700 million poor people which are
the largest number in the world. Disparities in income have become a
serious issue in several countries. In addition, non-income-related MDGs,
such as reducing the child mortality rate and ensuring universal primary
education, are unlikely to be achieved at the current pace of progress.
To tackle these issues, it is important to maintain sustainable economic
growth and adopt an inclusive approach to extending its benefits to the
poor. |
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| Infrastructure
Development |
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The second challenge is infrastructure development.
Although many Asia-Pacific countries have attained remarkable economic
progress, many of them still lag behind in private-sector development.
Infrastructure to support vigorous private-sector activity is the
foundation of sustainable growth. Furthermore, poverty reduction cannot
be achieved without this sustainable growth. The mid-term estimate for
infrastructure demand in the region is US$250 billion per year according
to the ADB. To secure sustainable funding for infrastructure investment
while maintaining sound fiscal policy, it is absolutely essential that
we attract private-sector funding in addition to that from the public
sector. We must consider how to secure an appropriate fiscal space for
high-return investment and how to attract the private sector to invest
in infrastructure. |
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| Human Resource
Development |
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The third challenge is human resource development.
Asia’s high work ethic and the high priority placed on education have
played an important role in the prosperity of the region. This is
reflected in the fact that the East Asia and Pacific region almost
satisfies the MDG to ensure all children are able to complete a full
course of primary schooling. On the other hand, there are still many
children in the region who do not have the opportunity to receive
education due to poverty or gender discrimination. It is also essential
to strengthen secondary and tertiary education to keep up with
globalization. |
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The last, but not least, challenge is to enhance
governance. Economic development requires that the people trust the
government and that effective and consistent policies are implemented.
Public trust is necessary for the judicial system to function optimally
as well. To build up public trust, it is equally important that
corruption is combated and disciplined policies and adequate
institutions are established. Good governance is the key for inclusive
development and for successfully dealing with globalization. |
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I would also like to add that political and social
stability is a prerequisite for tackling these challenges. There
unfortunately remain quite a few post-conflict countries and politically
or socially unstable spots in the region. I believe that a positive
cycle should be created, where sustainable economic growth leads to
political and social stability which in turn creates new dimensions of
economic growth. |
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| 4. Japan and the
Asia-Pacific: Japan’s Four Commitments |
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Next, I would like to turn to the Japanese economy and
its relationship with the Asia-Pacific region. Japan makes four
commitments in this respect. |
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| Further Strides in
Structural Reform |
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First, Japan commits to making further strides in
structural reform at home. As a member of the region, Japan must address
the challenges it faces domestically, especially through fiscal and
structural reforms. Japan has made every effort to overcome its
prolonged deflation and to revitalize its economy by implementing
financial-system, regulatory, expenditure, and tax reforms. These
efforts are gradually paying off. Economic recovery led by domestic
private demand is continuing. Japan views the current recovery as a good
opportunity to make further strides in structural reforms, including the
reform of government expenditures and the tax system, to ensure
sustained growth in the future. I hope our accelerated structural
reforms and the resulting recovery will contribute to economic growth in
Asia overall. I also hope it will offer useful lessons for other
countries in the region about how to cope with such challenges as
reducing non-performing loans and revitalizing the manufacturing sector. |
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| Prevention of
Financial Crisis |
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Second, Japan is committed
to preventing the recurrence of a financial crisis in Asia. The
relationship between Japan and East Asia has become closer and closer in
recent years, and the stability of the Asian economy is becoming more
important for Japan. Under these circumstances, Japan has been actively
promoting monetary and financial cooperation in East Asia. For instance,
a network of bilateral swap arrangements has been established under the
Chiang Mai Initiative, or CMI–a regional arrangement under which the
ASEAN+3 countries provide foreign currency to a country in a currency
crisis by swapping with its local currency. The working groups have been
thoroughly reviewing the CMI to enhance its effectiveness based on an
agreement reached by the ASEAN+3 Finance Ministers last May. |
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| Mobilization of
Long-term Funds |
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Japan’s third commitment is to mobilize long-term
funds in the region. The Asian Bond Market Initiative, or ABMI, is
designed to eliminate mismatches of currency and maturity in regional
financing and to utilize the domestic savings in Asian countries for
regional investment. Concrete outcomes already have been achieved, such
as the issuance of ringgit-denominated bonds by the ADB in Malaysia last
November, and the issuance of baht-denominated bonds with a partial
credit guarantee by the Japan Bank for International Cooperation and
Nippon Export and Investment Insurance in Thailand in the second quarter
of last year. The Korean Primary Collateralized Bond Obligation, the
so-called Pan-Asian Bond, was also formulated with a guarantee by the
JBIC last December. |
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Another important element in this aspect is to
optimize the benefit of tax treaties in order to attract more foreign
direct investment. Japan is ready to revise its income tax treaties with
regional member countries. |
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| Promotion of Economic
Partnership Agreements |
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Japan’s fourth commitment is to promote economic
partnership agreements, or EPAs, which are comprehensive agreements
which cover far more elements than free trade agreements. Japan has
strengthened bilateral relations with Singapore by concluding an EPA
with the nation, and has reached an agreement on key matters for a
future EPA with the Philippines. Full-fledged EPA negotiations are
currently underway with Korea, Malaysia, and Thailand, and negotiations
with ASEAN as a whole will start this April. Moreover, Japan has agreed
with Indonesia to establish a joint study group with a view to
commencing EPA negotiations. |
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By fulfilling these four commitments, namely, making
further strides in structural reform, preventing financial crisis,
mobilizing long-term funds, and promoting EPAs, Japan shall act together
and advance together with the countries of the Asia-Pacific. |
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| 5. Four Tasks of the Asian
Development Bank |
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Now, I would like to touch upon the tasks of the ADB. |
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As President Chino has mentioned on several occasions,
Asia was the poorest region in the world before the establishment of the
ADB. The average per capita GNP in 1964 in developing Asia was only
US$90, less than the average in Africa, which was $150 at the time.
Forty years later, the Asian region has today developed to a high level.
Some extremists even argue that the ADB has completed its mandate. I
would like to emphasize, however, that many challenges still remain, as
I pointed out at the outset, and we need the ADB to continue to
implement its mandate. I look forward to the ADB, as the sole
international financial institution based in Asia, playing a pivotal
role in supporting developing member countries, or DMCs. In this regard,
the ADB must tackle following four tasks. |
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| Attention to the
Voices of the Region |
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First, the ADB must pay attention to the voices of the
region. The most fundamental and important role of the ADB is to
diagnose the individual situations of the DMCs as the region’s “home
doctor,” based on the mutual trust developed with the DMCs’ governments.
Based on the diagnosis, the ADB can then formulate appropriate
strategies and offer proper policy advice for individual DMCs’ needs.
The ADB is also required to respond to these nations’ needs in a more
flexible and timely manner and to formulate more analytical and focused
country strategies. To achieve this task, the ADB needs to strengthen
its policy dialogue with DMC governments. |
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| Clear Prioritization
of Operations |
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Second, the ADB must clearly
prioritize its operations. I would like to reiterate that sustainable
growth is essential for poverty reduction in low-income countries. I
understand that the ADB has consistently and strategically supported
infrastructure development for sustainable growth. Given the successful
economic outcomes of the region, the ADB should continue this strategy,
giving it a high priority among its activities. |
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As I mentioned before, to
link these positive outcomes to poverty reduction, it is indispensable
that the ADB adopts an inclusive policy in its assistance and places
priority on governance. |
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I hope these policy
priorities are effectively implemented through the ADF-IX. |
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Another priority should be
to deliver more effective support to middle-income countries. In
particular, by utilizing ordinary capital resources, the ADB should
strengthen private-sector operations and designate them as priorities in
country strategies and programs. |
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| Leadership in Regional
Cooperation |
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Third, the ADB must
demonstrate leadership in regional cooperation. The interdependency of
trade, investment, and finance within the region has increased
substantially. Promoting regional cooperation is a unique mandate of the
ADB as a regional development bank. International financial institutions
like the ADB are well positioned to handle cross-border issues which
cannot be solved by one country alone. The ADB is currently supporting
cross-border cooperation initiatives in the Greater Mekong Subregion, or
GMS, as well as in South Asia and Central Asia. These initiatives have
been making significant contributions to the region. I congratulate the
ADB on its recent contribution to the implementation of the GMS
Cross-Border Trade Agreement which was signed by the six Ministers of
the GMS on December 16 last year. |
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In addition to cross-border
projects, it is important for the ADB to contribute to the knowledge
dimension of regional cooperation. The ADB has been playing an important
role in the Asian Bond Market Initiative and in policy dialogue
regarding regional issues and the economic situation in individual
countries by providing information via its Regional Economic Monitoring
Units. Such contributions should be commended. Looking ahead, the ADB
should boost such support to the region by strengthening its knowledge
base. |
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Fourth, the ADB must enhance
its aid effectiveness. For this, the ADB’s culture must be made more
results-oriented, and each individual staff member must deliver better
outcomes. In this context, it is crucial to firmly implement a new human
resource strategy. Another important element in raising the efficiency
and effectiveness of the aid community as a whole is to enhance
coordination among donors. Countries borrowing from the ADB are also
nations to which Japan extends assistance. To improve aid effectiveness,
the ADB and Japan need to enhance coordination of their assistance
efforts. A good example appeared last month in Cambodia where Japan
pledged a yen loan for the telecommunications sector to enhance the
ADB’s reform strategy that was focused on this sector. I hope to
continue to develop our cooperative relationship in this way. |
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Japan will strongly support
the ADB’s efforts in tackling these tasks. Japan committed to contribute
35% of total resources of ADF-IX despite a tight budget situation.
Japanese trust funds will enhance the ADB’s strategic focus. Japan will
intensify efforts to enhance synergy between Japanese bilateral
assistance and the ADB’s operation. |
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| 6. Conclusion |
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I would like to
conclude by expressing my sincere appreciation to President Chino. Mr.
Chino has demonstrated excellent leadership in formulating the ADB’s
Poverty Reduction Strategy and Long-Term Strategic Framework. He also
has vigorously pursued the comprehensive reform of the ADB in terms of
its operations and organizational structure. His efforts have
strengthened the effectiveness of the ADB’s assistance to DMCs. I would
like to express my great respect and gratitude to him, once again, for
his contribution. |
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The eighth
president, Mr. Haruhiko Kuroda, will assume office next month. Japan
hopes that the ADB will play an even more prominent role in poverty
reduction under its new president. Japan pledges its continuing support
to the ADB and its activities. |
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In this context,
Japan hopes to invite the ADB to hold its Fortieth Annual Meeting in
Kyoto in 2007. I ask for your cooperation and support in this effort. |
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Thank you very
much. |
