Statement by Mr. KiyoshiKodera, Temporary Alternate Governor, Milan, Italy |
I. Introduction |
Mr. Chairman, Mr. President, distinguished Governors, ladies and gentlemen: It is a great pleasure for me to address the 44th Annual Meeting of theInter-American Development Bank and the 18th Annual Meeting of theInter-American Investment Corporation in Milan. On behalf of the Government ofJapan, I would like to express our gratitude to our hosts, the Government ofItaly and the people of Milan, for their warm hospitality. Japan's economy is still facing a difficult situation with a continued pricedecline. Our government, together with the Bank of Japan, is determined tocontain deflation and achieve sustainable economic growth by strongly andcomprehensively mobilizing such policies as tax and budget rationalization,reducing non-performing loans, and promoting deregulation. |
II. State of the Regional Economy and Re-electedPresident |
Now to the countries in Latin America and the Caribbean region. In 2002, somecountries were affected by serious economic crises; some faced continuedpolitical turmoil. Thus, a number of countries seemed preoccupied with dealingwith these situations. However, we mustn't forget that steady economicmanagement was witnessed in certain countries, and strong commitments to fiscaland economic reforms were pledged in the countries with new administration. Against these diverse political and economic backgrounds, the IDB faces enormouschallenge. At this juncture, the re-election of President Iglesias, a man withrich experience and great leadership, is most reassuring. Japan will continue tosupport him. |
III. IDB's Roles and Current Tasks |
For the past year, among various IDB operations, much attention was focused onemergency loans. To support financial and economic crisis countries, IDB hasalso proposed the Trade Finance Reactivation Program and a new framework for theGuarantee Disbursement Loan Program. I recognize the need for such new schemes. However, I must emphasize that emergency loans are nothing but short-termmeasures of an urgent nature, and that a fundamental solution must be toincrease capital inflows by implementing structural reform over a medium term. After all, the fundamental role of IDB is to provide long-term developmentfinancing and not to help regional countries address their balance of paymentdifficulties, like the IMF would do. The core of capital inflows to LatinAmerica and the Caribbean in the 1990s was direct foreign investments,particularly in natural resources and for privatization. However, in order toattract such capital inflow, the regional economy has to address medium- tolong-term structural issues and one should recognize counter-cyclical measureshave a certain limit as to what could be achieved. The role the IDB should play instead is to restore medium- to long-terminvestments and capital inflows, by promoting public-sector reform in the regionand increasing its efficiency as well as transparency, while implementingcomprehensive measures to address financial sector reform and other structuralproblems. Also, allow me to point out another major issue. While many countries in thisregion enjoy higher income levels than Asia, the region has not made noticeableprogress in its fight against poverty. To help accomplish the MillenniumDevelopment Goals, I believe that the Bank should play its part in bringingpolitical and economic stability to the region, by securing a social safety net,supporting SMEs, and helping increase the efficiency of the social servicedelivery, in addition to providing support in such basic areas as education andhealth. Good Governance is also required to underpin these activities. In this context,we strongly support the policies the IDB is now implementing to promoteModernization of the State and Decentralization. We trust that these policieswill contribute to redistribution of income and poverty reduction. Furthermore, with regard to expansion of the private sector program, highlightedin the report of the External Advisory Group last year, we believe it isessential to first review the role of Private Sector Department of IDB, IIC, andMIF, and then to explore an efficient and effective framework of coordination.In this regard, Japan welcomes the fact that such discussion was initiated inthis meeting in the context of IIC reform. |
IV. Greater Development Effectiveness andResults-focused Operations |
After Monterrey and Johannesburg, effective and efficient use of ODA funds hasbecome a greater focus of attention than ever for not only taxpayers in donorcountries but also people in recipient countries. For multilateral development banks to increase the development impact of theiroperations, it is important for them to further enhance coordination with otherdevelopment partners, while improving their own governance and transparency. Asfor IDB, it is essential to increase the development impact awareness of itsmanagement and staff, thus creating a results-focused culture. This can be done,for example, by setting appropriate development effectiveness indicators evenfrom the project design phase, strengthening monitoring and ex-post evaluation,and enhancing the independent evaluation function. For objective assessment of development impacts, it is indispensable to setcountry-specific development goals that take into account the circumstance ofeach country and to establish appropriate monitoring indicators. For efficientmanagement of this goal setting process, IDB needs to define common developmentgoals / indicators by coordinating with the government of each country and theWorld Bank. I hope active discussions on this point will continue among relevantparties. |
V. New Capital Adequacy Framework |
When we look at the financial profile of IDB, we notice that its lending isconcentrated to a limited number of countries whose country risk profile hasincreased dramatically in the past year, thus exposing the entire portfolio to aheightened credit risk, a situation not fully recognized before. Yet, thecurrent financial management policy is not designed to reflect such a risk in anaccurate and timely manner. Thus, we urge the Bank to introduce a new CapitalAdequacy model that will determine appropriate level of loan loss provisioning. To maintain the highest rating by the international capital market, appropriatecredit risk management is mandatory. For that, IDB must consider variousmeasures to allow for more efficient distribution of funds, such as establishinga risk management system for tighter control of exposure risks. I hope that IDBwill implement appropriate financial policies at the earliest possible time,based on a new Capital Adequacy model designed to ensure financial soundness ofthe Bank. |
VI. Anti-Terrorism |
Ever since September 11, 2001, the international community has implementedvarious initiatives to fight against international terrorism. As for Japan, wehave taken an active part in the global efforts by enacting domestic laws inJune last year, which were essential to implement the International Conventionfor the Suppression of the Financing of Terrorism, as well as by revising ourForeign Exchange and Foreign Trade control Law. The counter-terrorism actions the IDB has taken since September 11 are highlycommendable. Japan also welcomes the latest financing by MIF to combat moneylaundering. It represents a progress in the fight against money laundering as ameans to cut off funds from terrorists. I hope that the IDB Group will continueto implement these measures, in close consultation with other relevantinstitutions in the international framework. |
VII. Japan's Contribution to IDB and Okinawa as aCandidate for the Host of the Meetings |
Despite a 5.8% cut in our total ODA budget for fiscal 2003, we are hopeful thatwe could secure a 13% increase in our contribution to the Japan Special Fund,which our government created in the IDB. This demonstrates Japan's unchangedcommitment to contribute to the growth of Latin America and the Caribbeaneconomies through IDB, and to continue to serve as a bridge between this regionand Asia. In this context, we would like to host the 2005 Annual Meetings in Okinawa. Aswe seek the adoption of our bid by the Board of Governors, we would appreciateyour support and endorsement. |
Thank you. |