Tuesday, 6 May 2008 4:18 AM

A New ADB in a Rapidly Changing Asia-Pacific

MADRID, SPAIN - The Asian Development Bank (ADB) is set for a change in the way it serves its developing member countries in a rapidly evolving and dynamic Asia-Pacific region, ADB President Haruhiko Kuroda said at the official opening of the organization's 41st Annual Meeting in Madrid today.

His comments came amid a new challenge facing the world: rising food prices, which are threatening more than 1 billion people in the Asia-Pacific region alone. Mr. Kuroda said the ADB stands ready to help countries overcome this threat, which could "seriously undermine the global fight against poverty and erode the gains of the past decades."

Despite the troubling times for the world economy, there is reason to be optimistic about the future with many Asia-Pacific countries' economies more dynamic and resilient than ever, Mr. Kuroda told about 3,000 leaders of government, the private sector, academe and civil society from around the world attending the meeting.

"Even in today's uncertain global economic environment, Asia remains a strong and stable contributor to global growth, and a leader in poverty reduction," he said.

The Annual Meeting was held after the successful conclusion of negotiations for the replenishment of ADB's Asian Development Fund, which provides concessional loans and grants. "These vital financial resources - more than $11 billion - will support progress toward the Millennium Development Goals in our poorest member countries," Mr. Kuroda said.

To help countries meet the challenges, ADB has developed a new long-term strategy, Strategy 2020, which outlines a change in the way the organization will serve the region to achieve the goal of an Asia-Pacific free of poverty.

In the short-term to deal with the food crisis, ADB stands ready to provide immediate financial assistance to relieve countries' fiscal pressure. The organization will increase its support to international and national agricultural institutions, while simultaneously continuing to finance agricultural-related infrastructure, such as irrigation systems, rural roads and rural finance programs.

Mr. Kuroda said that prudent macroeconomic management by governments in the region is essential with high food and energy costs stoking inflation. Equally critical are measures such as targeted income support to protect the food entitlements and livelihoods of the most vulnerable.

"This price surge has a stark human dimension and has greatly affected over a billion people in Asia and the Pacific alone," Mr. Kuroda said.

Beside the food crisis, the development challenges in the region are immense despite the high levels of economic growth seen in many countries in recent years. More than 1.7 billion Asians - three times the population of Europe - live each day on less than $2.

With this in mind, Strategy 2020 outlines a new focus for the organization on inclusive economic growth, environmentally sustainable growth and regional integration. The new strategy identifies five key drivers of change: the private sector, good governance and capacity development, gender equality, knowledge, and partnerships.

To make growth more inclusive will require strong, sustained investment in infrastructure and education, as well as in health programs and social services for the poorest. Asia currently has an infrastructure investment gap of about $300 billion a year.

"Roads, energy, water, telecommunications - these are the lifelines connecting families and communities to a brighter future," Mr. Kuroda said.

Infrastructure development is the single largest share of ADB's lending operations and the organization is considering establishing a dedicated infrastructure financing facility that complements ADB's own market-based and concessional financing.

ADB will substantially increase its attention on the environmental consequences of growth, especially climate change. Mr. Kuroda announced that ADB will establish a new Climate Change Fund with an initial contribution from ADB of $40 million. The fund will complement the organization's other funds that promote clean energy and energy efficiency.

The new fund will "allow a more holistic approach to climate change mitigation and adaptation, including forestry and land use, changes in livelihood, health impacts, and increased emergencies and disasters caused by climate change," Mr. Kuroda said.

He said the new strategy provides a goal of increasing ADB's support for regional cooperation initiatives to 30% of its operations by 2020. The organization already supports several initiatives that promote closer ties between neighboring countries. "The European Union has proven the value of regional cooperation and integration. Asia can learn much from Europe," Mr. Kuroda told the delegates.

As Asia looks toward a brighter future, strong partnerships will be essential, especially with the private sector, which is the key to attracting investment and innovation, and is the source of jobs and economic opportunities. By 2020, ADB sees private sector development and private sector operations comprising half of its annual operations.

"Along with our growing focus on climate change and region-wide issues, this will help transform ADB to better serve the region's evolving needs. We will continue to fund national and regional projects and programs. But we will also substantially enhance our ability to mobilize resources, remove obstacles to inclusive growth, and ensure that Asia's new prosperity is shared by one and all," Mr. Kuroda said.