"ADB in Asia and the Pacific: Promoting Sustainable, Inclusive Economic Growth"
G. van der Linden
Vice-President, Knowledge Management and Sustainable Development
Asian Development Bank
To: The Rotary Club of Manila
11 August 2005
Manila, Philippines
I. Introduction
President Cesar Ubaldo, Immediate Past President Alejandro Yap, distinguished officers and members of the Manila Rotary Club, ladies and gentlemen:
Although I have lived and worked in Manila for over 25 years, I have seldom had the occasion to formally address members of my own community in a setting such as this.
I was therefore delighted when your president asked me to come here today and talk about the Asian Development Bank and its role in Asia and the Pacific region. I am also pleased to be joined by Ms. Shamshad Akhtar, Director General of our Southeast Asia Department.
Let me first take this opportunity to pay tribute to Rotary International as it celebrates its hundredth anniversary of service.
The benefits your club and its members have brought to the world - especially the developing world - are many and substantial.
One cannot help but be in awe of Rotary's vision and passionate commitment to eradicate polio worldwide. If I recall correctly, the Polio-Plus program was based on Rotary's highly successful immunization project here in the Philippines.
Of course, this same level of vision and commitment is evident in all Rotary projects - from ensuring clean water in the poorest communities, to helping young men and women realize their highest aspirations.
Yours truly is a global network with a boundless spirit of service to humanity, and I salute you for your many achievements in this community and beyond.
Today, I would like to talk today about the region's economic record, and some of the challenges ahead. First, however, let me provide a brief overview of the Asian Development Bank.
II. ADB in the Region
As the development bank of the region, ADB has made poverty reduction its overarching goal. And with 63 member countries as our shareholders, including 18 that lie outside the region, and professional staff representing more than 50 nationalities, this, like Rotary, is a global endeavor.
Since its founding in 1966, ADB has invested more than $113 billion in the region's development. Last year we approved $5.5 billion in loans and technical assistance grants. Here in the Philippines, we invested around half a billion dollars over the last four years, in areas like physical infrastructure, health sector development, private sector projects, agrarian reform, basic education and microfinance.
Our work focuses on sustainable economic growth, inclusive social development and good governance., the three pillars of our Poverty Reduction Strategy.
As Asia continues to grow, our challenge as an institution is to continuously rethink and update our approaches and services - in essence, to evolve in step with the region.
Let me turn now to the economic picture.
III. The Asia and Pacific Region - Progress and Prospects
From today's vantage point, the pace and scope of change in Asia have been nothing short of spectacular.
Japan's stunning post-war performance, the East Asian economic miracle, the rise of the Newly Industrialized economies, and the explosive growth in the People's Republic of China - and, more recently, India and Viet Nam -have launched the region into a position of economic prominence not seen for some 200 years.
As a result, Asia's share of world GDP has nearly doubled - from 13% in 1960 to 25% in 2000. Literacy rates have improved dramatically - from just over 50% in 1970 to an estimated 80% today for the region as a whole. And life expectancy has increased by more than 20 years over the past half century. These are truly impressive accomplishments.
ADB's Asian Development Outlook, released in April of this year, confirms that developing Asia is leading the world in economic growth.
In 2004, developing Asia grew by an aggregate 7.3% - the best performance since the 1997 financial crisis. Nearly all developing economies in the region grew by more than 5%, and real growth in the Philippines reached its highest level in more than two decades, at 6.1%.
Whether these high rates of growth will continue depends on the performance of the world economy as a whole, as well as on sound policies by regional countries themselves. In the short term, the less favorable external environment is expected to lead to a moderate slowdown in many East Asian countries, including the Philippines. Two risks that must be taken seriously are continued high oil prices and the risk of a disorderly adjustment of the global imbalances.
Over the longer term, however, we believe developing Asia will remain a preferred investment location. Provided countries continue to strengthen the macroeconomic environment through economic, governance and administrative reforms, as well as improvements to infrastructure, there is every reason to expect that robust growth should continue.
Poverty Reduction - An Ongoing Challenge
Along with rapid growth, the region has made impressive progress with poverty reduction. Between 1990 and 2002, the number of people living on less than a dollar a day in Asia and the Pacific declined from over 920 million to about 690 million.
But, we should not fool ourselves about the scale of the challenge that still remains.
For one thing, the dollar a day standard is not sufficient to reflect the magnitude of poverty in modern-day Asia. If we use a more realistic $2 a day, some 1.9 billion of the region's people are still extremely poor, including around 46% of Filipinos.
And, as we know, income is not the only measure of poverty.
According to the United Nations Millennium Project, the largest share of the world's people who lack access to safe water and proper sanitation, who are undernourished and who live in slum conditions are here in the Asia and Pacific region. The region also accounts for nearly half of the world's child mortality.
As ADB President Haruhiko Kuroda has said, Asia is a region with two faces - one that is feeling the benefits of growth, and one that is not.
It is disturbing to note that recent studies show that inequality in Asia is growing. Even at the current rate of progress, the number of Asian people living on less than a dollar a day will still be about 320 million ten years from now. But if growth slows and inequality grows, that number could easily rise to almost 430 million
Another threat is Asia's alarming state of environmental degradation. It is estimated that 460 million hectares - 13 percent of all used land in Asia - have been lost through degradation - an area equivalent to the size of India. The statistics for water and air pollution are equally grim, putting already tenuous livelihoods at risk.
The overarching challenge, therefore, is to ensure that growth is sustainable, that it does not lead to further environment degradation. And that it is inclusive, so that neither countries in the region, nor groups of people within them, are left behind.
IV. The Challenges Ahead
This task is neither simple nor easy,. I would like to highlight four areas that will require particular attention, and where ADB intends to take on a larger role in the years ahead.
Infrastructure
First, massive infrastructure investments are needed to sustain the region's growth and improve equitable distribution of opportunities.
We are all aware of the tangible impact that infrastructure services can have on poverty. Rotary's many water and sanitation projects are also helping people in the Philippines and around the world stay healthy, stay in school and stay productively employed.
About 60% of ADB's lending is focused on infrastructure projects that improve access to services and provide a foundation for economic development. One example is the Rural Infrastructure Development Project in Zamboanga del Norte and Zamboanga Sibugay Provinces - an initiative that has had a significant impact on raising rural incomes by increasing crop intensities and reducing transport costs.
A recent study jointly conducted by ADB, the World Bank and the Japan Bank for International Cooperation confirms the importance of infrastructure in supporting economic and social development. It shows that, in East Asia alone, over $1 trillion is needed over the next five years to meet infrastructure demands and sustain the pace of growth.
Private Sector Participation
Clearly, this level of investment is beyond the reach of governments. The second area of focus is, therefore, to attract private investment. Nowhere is the private sector more critical than in this important task of infrastructure development.
According to the report mentioned earlier, if certain prerequisites are met, the money will follow. These prerequisites include good governance, capable institutions and adequate human resources. Countries that get the fundamentals right are far more likely to attract private sector investment than those who do not.
Working with both the public and private sectors, ADB has developed the expertise to help governments achieve an environment in which the private sector can grow and prosper.
We have also had good success in mobilizing substantial private sector resources for infrastructure. Over the last three years, our overall lending for infrastructure has remained relatively steady, averaging about $3.2 billion a year. However, our lending to the private sector for infrastructure has grown, and has mobilized additional resources ranging from about $900 million in 2002 to $1.8 billion in 2004, and a potential $7 billion this year.
Obviously, there is much more to do, and we are now looking at a number of changes in the products that we offer and in our business processes to better respond to this enormous challenge.
Regional Cooperation
The third area is regional cooperation and economic integration, where we can build on a significant and growing trend.
In recent decades, we have seen monetary and financial cooperation advance in East Asia through the Chang Mai Initiative, designed to reduce the risk of liquidity crises, the Asian Bond Market Initiative, to reduce the overdependence on bank financing and mobilize the region's vast savings and the ASEAN +3 dialogue. Trade among East Asian countries has increased from 35% of all trade in 1980 to 54% in 2003. Intraregional investment is becoming significant. And connectivity among countries through shared infrastructure is growing.
ADB is strongly supporting this economic regionalism. An example of increased connectivity is found in the Greater Mekong Subregion, or GMS, where rapid development of a transport grid along key economic corridors, is stimulating industry, tourism and trade, and opening up opportunities for intraregional business. Over $3.4 billion has now been invested in GMS projects, and similar ADB initiatives are underway in Central Asia, South Asia and among the Pacific island countries.
We are convinced of the benefits of these efforts: regional cooperation is a key factor in sustaining continued rapid growth; it also offers smaller, weaker economies a greater opportunity to share in the benefits of the region's overall growth. And, countries can join hands in responding to regional challenges such as epidemics and water sharing.
The recent establishment of the Office of Regional Economic Integration within ADB will allow us to take a more focused, coordinated and proactive approach to ensure that the benefits of cooperation flow to all countries within the Asia and Pacific region.
Environmental Sustainability
Fourth and finally, we must alter our development path to one that is more environmentally sustainable. Given the size of Asia's population and economy, our collective action on these issues - or inaction - will make or break the environmental future of the entire planet.
Fortunately, more and more people, governments and private sector in the region are realizing the necessity of incorporating sound environmental practice into the economic development process.
As Asia's partner in development, ADB has an active role in helping to achieve the vision of a prosperous, clean and green Asia and Pacific region. Over the past decade, we have provided loans worth more than $6 billion for projects with environmental components and technical assistance grants worth over $30 million for specific environmental initiatives.
These include local programs, such as a vehicle inspection program in the City of Chongqing to reduce air pollution; working with national governments, like that of Cambodia to promote sustainable management and conservation of the Tonle Sap Lake Basin; and collaboration with governments and other international partners to address the problem of dust and sandstorms in East Asia.
We also are taking measures to address global concerns through our partnership with the Global Environment Facility and our Clean Development Mechanism Facility, which is attracting private financing for projects to reduce greenhouse gas emissions.
Within the region, there is a burgeoning demand for environmental infrastructure investment to expand wastewater treatment and clean water supplies, to reduce air pollution, to widen the use of clean and renewable energy, and to provide efficient public transport.
The costs of undertaking these kinds of projects will be very high, and the related policy tasks substantial. Because we work with both the public and private sectors, ADB is well positioned to help mobilize the necessary financial resources for these investments.
Concluding Remarks
Ladies and gentlemen, promoting economic development and reducing poverty in Asia and the Pacific is the biggest challenge of our times. Building infrastructure, private sector development, regional economic cooperation and protecting the environment are among the tasks that we need to take up vigorously.
Great strides have been made, but much remains to be done to bring education, employment opportunities, better health, clean water and other necessities of life to the poorest of the poor. It is a mission that requires the participation of all of us - development agencies, governments, the private sector, civil society and individual citizens - if it is to be accomplished.
Rotary's contributions to this mission represent humanity's highest ideals of service and voluntarism, and provide an inspiration to us all. On behalf of the Asian Development Bank, thank you once again for inviting me today. I wish you all the best in your future endeavors.
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