Statement by the Honorable Taro Aso
Deputy Prime Minister of Japan and ADB Governor for Japan
at the Forty-Sixth Annual Meeting of the Board of Governors
of the Asian Development Bank
(Delhi, India, May 4, 2013)

I. Introduction

1. Mr. Chairman of the Board of Governors, Mr. President, Governors, Distinguished Guests,

2. I would like to start by expressing my sincere gratitude to the Government of India and the citizens of Delhi for their warm welcome that has been extended to me. Japan and India have been enjoying cooperative relationships in many respects, including from historical, economic, and human exchange perspectives. The Delhi Metro is one such emblem of our strong bilateral ties. Going forward, I would like to see the Japan-India relationship to be further developed, including in terms of economic cooperation.

3. Just in time before the Annual Meetings, Mr. Takehiko Nakao was freshly elected as ADB President with the strong support extended by member countries. Taking this opportunity, I would like to express my heartfelt gratitude to your support.

4. Under the presidency of Mr. Kuroda, ADB has successfully managed to become the premier development financial institution of the Asia-Pacific region. I would like to pay tribute to the achievements made by Mr. Kuroda during his tenure of ADB presidency. I wish Mr. Nakao the very best in assuming the important role of ADB presidency, drawing on his rich experiences in the areas of international finance and development.

II. Asia's rapid economic growth

5. Asia, underpinned by the existence of abundant educated people, stable macro-economic policy management, and large-scaled infrastructure as well, saw the surge of inward foreign direct investment from all over the world. This in turn, resulted in the rapid economic growth and poverty reduction of Asia.

6. As a member of Asia, Japan has been making utmost efforts in strengthening Asia's economic growth, from both the Government and the private sector. Japan's cooperation with Asia is multiform and has been playing an important role in creating the foundations for the growth in Asia: constructing infrastructure with concessional loans (yen loans), building human capital with technical cooperation, catalyzing private resources through JBIC (Japan Bank for International Cooperation), and contributions to the Asian Development Fund for low income countries and Japanese trust funds managed by ADB.

7. Asia improved its investment climate and became a favorite destination for investors. Against this backdrop, a large number of Japanese companies invested in Asia. By creating employment all over Asia, they are contributing to reducing poverty. This is not the end of the story. Japanese companies are making important contributions in the sophistication of Asian economies by inviting Asia to take part in the global supply chain and by transferring expertise and technologies to Asia.

8. Today, Asia is an indispensable part of the global supply chain. Asia's integration to the global economy is on its way. Some countries have already reached the status of advanced economies. Many others have attained the middle income country (MIC) status and are shifting from recipient countries of ODA to donor countries. In 2015, the ASEAN Economic Community will be established. Regional cooperation is set in motion in a number of sub-regions: Greater Mekong, Central Asia, and South Asia. As Asia promotes further integration within Asia, and as Asia continues to climb up the ladder of development, Asia's integration with the global economy will be further enhanced.

III. Walking together with Asia: a way forward for Japan

9. Japan, as a member of Asia, is fully committed to continue working together with Asia. Since Prime Minister Abe was sworn in last December, Asia has been at the forefront of the new government. Soon after assuming the post of the Prime Minister, Prime Minister Abe made a series of visits to Indonesia, Thailand, and Vietnam in January 2013. This was his first trip outside of Japan since the Abe government was sworn in. He also paid a visit to Mongolia in March 2013.

10. In my capacity as Deputy Prime Minister, I visited Myanmar from the 2nd of January. I conveyed Japan's commitment to actively help Myanmar's on-going democratization, national reconciliation, and economic reforms, and this, in close partnership with ADB, World Bank, and the IMF. It is my great pleasure to note that Japan played a leading role in resolving Myanmar's protracted arrears with the international community, in close consultation with ADB, World Bank, IMF, and the Paris Club as well. Moreover, I flew in to Delhi directly from Sri Lanka where I witnessed the day before yesterday that the reconstruction from the long-lasting and devastating civil war is firmly in progress. Today, Sri Lanka is boasting robust growth.

11. Expectations are high that Asia continues to grow strongly, as a center of global growth. At the same time, more than 800 million still live in absolute poverty. Sustaining robust growth is indispensable in reducing poverty. To this end, Asia needs to step up its efforts, while receiving assistance from other regions. Japan, as a member of Asia, is resolved to extend full support to the efforts made by Asia.

12. In his inaugural speech, President Nakao told us that Asia needs to address the "3 Is": Innovation, Inclusion, and Integration. Taking this opportunity, I would like to extend my full support to his vision to tackle the "3 Is."

13. In order to support Asia in addressing issues, Japan is resolved to pursue the following 5 commitments.

14. First, Japan is committed to make more active use of the concessional "yen loans," which has been making indispensable contributions to Asia's development. To this end, Japan has announced last month a package of improvements to the yen loans.

    1. Enhancing connectivity is the key to accelerating Asia's economic integration. To this end, Asia needs more infrastructures that cut across national and regional boundaries. Japan will make active use of concessional yen loans to strategic projects in upper-end middle income countries as well.

    2. Sectors other than infrastructure will also benefit from active support by the Japanese concessional yen loans. To this end, Japan has already made a significant reduction of interest rates for the following four sectors: global environment, health and medical services, disaster reduction, and human resource development.

    3. Asia is prone to natural disasters such as inundations caused by typhoons and earthquakes. Mega disasters cause the loss of human lives and annihilate the progress made towards economic development. Against this backdrop, Japan decided to establish the "SECURE" or "Stand-by Emergency Credit for Urgent Recovery," a new financing tool that allows the draw-down of funds in a timely manner immediately after the eruption of a qualified disaster incidence.

15. Second, Japan is committed to actively use JBIC so as to mobilize more private funds and to increase investment, starting from the infrastructure sector. To this end, Japan established the JBIC Facility for Equities in February 2013, followed by the establishment of the JBIC Facility for Lendings in April 2013. These two facilities will strengthen the economic integration between Japan and Asia, and consolidate Asia's economic development. JBIC will also continue providing guarantees to samurai bonds (Japanese Yen denominated bonds issued on the Tokyo financial market) issued by Asian countries. This will enable Asian countries to meet their financing requirements.

16. Third, Japan is committed to further enhance financial cooperation with Asia. The Chiang Mai Initiative, launched in the aftermath of the Asian financial crisis, has developed fully into a regional financial safety net that is indispensable in furthering economic integration in Asia. The Initiative is now equipped with AMRO, or the ASEAN+3 Macroeconomic Research Office, and has been multilateralized. Its size has been expanded to reach as much as $240 billion. Japan is also committed to actively promote bilateral financial cooperation with Asia countries beyond China and Korea among others. To start with, the Japan-India Bilateral Swap Agreement was expanded in December 2012 from $3 billion to $15 billion. Also, Japan has just released an announcement yesterday at the Japan-ASEAN Finance Ministers and Central Governors Meeting to revamp bilateral financial agreements with ASEAN countries.

17. Fourth, Japan, in partnership with ADB, is committed to extend tailor-made assistance to countries reengaging with the international community such as Myanmar, Afghanistan and Timor-Leste. Helping these countries will contribute to ensuring the stability of the whole region as well as enhancing economic growth. In the case of Myanmar, Japan, acting through JBIC, provided bridge loans to clear Myanmar's arrears to ADB and the World Bank. Supplementing ADB operations with timely assistance provided through trust funds is crucial. Through trust funds managed by ADB and other IFIs, Japan will extend support for building the capacity of public institutions while providing small-scale community-based projects to enhance inclusive growth and poverty reduction, in close partnerships with civil society organizations.

18. Last but not least, Japan is committed to strengthen its own economic growth. To break through the long-lasting deflation, the new government, which took office late last year, is implementing a bold policy package of a different dimension from before. In fact, the new government is resolved to promote the revitalization of the Japanese economy by aggressively implementing, in an integrated and forceful manner, three bazookas, namely: a "bold monetary policy," a "flexible fiscal policy" and an "ambitious growth strategy." I am confident that Japan's undertakings will consolidate Asia's growth as well.

IV. ADB's medium-to-long term strategy

19. Under the presidency of Mr. Kuroda, ADB produced "Strategy 2020" as its medium-to-long term guiding principles. To underpin the implementation of the Strategy, ADB succeeded in tripling its capital base in 2009. While ADB has firmed up its position as the premier development finance institution in the Asia-Pacific region, the economic situation surrounding the region has been evolving rapidly since the adoption of the Strategy.

20. President Nakao has just announced to initiate a mid-term review of the Strategy. Japan, on its part, will take active part in the discussion of the mid-term review. Japan's basic point is to enable ADB to take full part in the development of Asia.

    I welcome that ADB Management is providing several options for how to deal with ADB's capital base. Going forward, due consideration should be paid to the fact that not much time has elapsed since the tripling of the capital base and that most member countries are constrained with severe fiscal conditions. Japan, as the largest shareholder of ADB, will participate in the discussion in a constructive way, so as to formulate a consensus that is acceptable to all the member countries.

V. Concluding remarks

22. Mr. Chairman of the Board of Governors, Mr. President, Governors, Distinguished Guests,

23. Asia, as a global center of growth, has realized remarkable economic growth and significant poverty reduction. Going forward, Asia must redouble its own efforts and partner with the other regions in tackling the "3 Is" or the three agenda items mentioned by President Nakao. This will ensure that Asia continues to be a growth center of the world and to sustain robust growth.

24. ADB is expected to play a greater role in the future. To ADB, led by President Nakao, I wish all the best to assume a greater role in order to foster sustained growth of Asia. Japan is fully committed to cooperate with ADB that endeavors to sustain Asia's growth.

25. Thank you.

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