Senior Vice Minister of Finance of Japan,
at The Forty-seventh Annual Meeting of the Inter-American
Development Bank and Twenty-first Annual Meeting of
The Inter-American Investment Corporation
Belo Horizonte, Brazil
3 April 2006
I. Introduction |
| Mr. President, Distinguished Governors, Ladies and Gentlemen: |
| It is a great pleasure for me to address the 47th Annual Meeting of the Inter-American Development Bank and the 21st Annual Meeting of the Inter-American Investment Corporation. On behalf of the Government of Japan, I would like to express our gratitude to our hosts, the Government of Brazil and the people of Belo Horizonte, for their generous hospitality. |
| Okinawa that played host to our Annual Meetings last year is also home for many Japanese emigrants who have crossed the ocean to this country. Today, their population from Okinawa alone in Brazil totals more than 150,000, and in 2008 we will be celebrating the centennial anniversary of Japanese emigration to Brazil. I'm particularly pleased to be able to pass the Annual Meetings' baton from Okinawa to this closely connected nation of Brazil. |
| II. Welcoming President Moreno |
| Ladies and Gentlemen, |
| As the Chair of the Board of Governors, I would like to express my sincere gratitude to former President Iglesias for his enormous contribution to the Bank, and welcome his successor, Mr. Luis Alberto Moreno, to his first Annual Meetings. |
| In the first several months since taking office last October, President Moreno has demonstrated his leadership in various initiatives to address the regional development agenda. I had the pleasure of meeting him during his visit to Japan last November, and was deeply impressed by his commitment to office and willingness to take on whatever challenges that lie ahead. |
| I hope that President Moreno will continue to exhibit his strong leadership. |
| III. Challenges facing the Bank Group |
| Ladies and Gentlemen, |
| We the Japanese people have a sense of affinity with Latin America and the Caribbean through a long history of emigration. With such attachment to the region, Japan has actively engaged itself in Bank activities in order to contribute to the Bank's fight against poverty and income disparity in the region, utilizing Japan's experience in assisting development of Asian countries. |
| In the Latin American and Caribbean region, more than 120 million people, or a quarter of its population, still live on less than 2 dollars a day. Moreover, income disparity in the region remains wider than that in Asia. I must say that the fight against poverty and income disparity is far from over. |
| Against this backdrop, I would like to highlight three key challenges the Bank should address under the leadership of President Moreno in order to achieve equitable economic growth. |
| First, regional infrastructure development. |
| In Latin America and the Caribbean, public sector investments started to decline under severe fiscal pressures in the 1990s. Private sector investments also dwindled mainly due to the weak institutional capacity and inadequate regulatory frameworks. As a result, private sector investments in the region have declined markedly in recent years. Total investments in infrastructure (both public and private) fell from 3.7% of GDP in the early 1980s to an average of 2.2% around 2000. According to one survey, this insufficient infrastructure has had an adverse effect on productivity, making distribution cost in the region three times more than that in industrial countries. |
| In Asia, too, how infrastructure might be developed to support sustainable growth and poverty reduction has been a focus of discussion. Thus, with the support from the Japanese government, three institutions-the World Bank, the Asian Development Bank, and the Japan Bank for International Cooperation-have undertaken a joint study on infrastructure development in East Asia. Among its findings were the significance of strategic long-term vision and coordination among stakeholders-the public and private sectors, the international community and civil society-in addition to the need to secure financial resources. We hope that findings from this study could be utilized in Bank's efforts to enhance infrastructure investments in the Latin American and Caribbean region. |
| In this context, we welcome the Bank's establishment of the INFRAFUND, which is designed to scale up the region's infrastructure investments, while addressing the impediments to infrastructure development that exist in both the public and private sectors. |
| Second, private sector development initiatives. |
| Private sector development is indispensable to sustainable growth. To date, the Bank group has made great contributions to private sector development in the region through support of its private sector arms. More recently, the Private Sector Department in the Bank, in particular, has undertaken a number of innovative projects with high levels of development effectiveness such as a local currency bond guarantee for toll road construction and support of a program to expand the supply of power to the poor in rural areas. These projects succeeded in drawing upon private capital flows, or in realizing projects which were unable to be originated by private sector alone. |
| I am particularly pleased with the latest proposal by the Bank to expand the scope of its private sector activities by eliminating restrictions on eligible sectors and allowing transactions with public entities. The Bank as a group should maximize outcome from its private sector activities by having all its relevant arms-the Bank's Private Sector Department, the Inter-American Investment Corporation (IIC), the Bank-administered Multilateral Investment Fund (MIF) for which we all agreed on the replenishment of the resources in Okinawa, and regional departments in charge of improving business climate- closely coordinate with each other under the Office of the Private Sector Coordinator. |
| Third, natural disaster prevention. |
| As was the case in Hurricane Stan that hit Central America last year, natural disasters and the resulting damage are becoming a major threat to growth and the fight against poverty in the Latin American and Caribbean region. |
| What concerns us recently is that, due to the lack of sufficient consideration to vulnerability to natural disasters during the development process, damages caused by natural disasters tend to be more serious in those countries which have made progress in development. Once those countries are hit by natural disasters, not only would this lead to loss of life, but also countries could lose essential infrastructure and years of development efforts. This is nothing but a vicious cycle. |
| In this respect, there might be some lessons that can be learnt from Japan, a country with a long history of tackling natural disasters. May I remind you here that one of the turning points for us was our experience with the tsunami that came from your region. At dusk on May 22, 1960, a mega earthquake jolted Southern Chile, generating one of the most destructive tsunamis. The tsunami raced across the Pacific causing extensive destruction along its path. Its waves reached Hawaii in 15 hours and Japan in 22 hours. When they reached the shore of Japan, the waves were as high as 6 meters. This prompted Japan to develop a warning system for tsunamis originating abroad. |
| After spending years of efforts in this area, Japan obtained a range of highly sophisticated systems for damage mitigation. With such know-how Japan was able to take the lead in supporting many Asian countries to take action and set up a tsunami early warning system after the Indian Ocean tsunami in December 2004. |
| Natural disaster prevention has been an important issue for myself personally, since I have long experience in working in this field, first as a public servant and currently as a parliamentary member. So, I am particularly pleased that the Bank has established the Disaster Prevention Fund, recognizing the need for natural disaster prevention as a necessity to sustain growth. I would like to take this opportunity to announce that Japan is ready to contribute a maximum of 5 million US dollars over three years to support such initiatives of the Bank. Also, we will provide our know-how on disaster prevention that we have obtained throughout our effort to date. |
| Before closing, I would like to stress the importance of deepening discussions further on the issue of debt relief and the Fund for Special Operations (FSO) so that the Bank can find the best mixture of policies to attain its development goals. |
| IV. Conclusion |
| Ladies and Gentlemen, |
| This year marks the 30th anniversary of the Bank's admission of the 9 non-regional members. Japan reaffirms its commitment in contributing to the region's growth, as the largest non-regional supporter, and as a stable economic partner for Latin America and the Caribbean. We urge the Bank to play a significant role in the economic and social development of the region under the strong leadership of President Moreno. |
| In closing, I would like to thank the Board of Governors and Management for their advice and cooperation for the past year. I would like to express my very best wishes to the incoming Chair of the Board of Governors. |
| Thank you. |