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ADB annual meeting, Beijing, 4-6 May 1989



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no. 56

TREASURER

EMBARGO

PRESS RELEASE

Statement by the Treasurer# The Honour able P.J. Keating# Κ · Κ

APB Annual Meeting# Beijing, 4-1 May 198»

It is a great pleasure to be present at this the 22nd Annual meeting of the Bank. It is an historic occasion in that this is the first multilateral meeting of this size to be held in the

People's Republic of China. We thank the Government and People of China, and especially the People of Beijing, for their generous hospitality.

This meeting is important also because it enables Governors respond to the report of the Panel of Experts on the role the Bank in the 1990s. Before commenting on that Report I wov like to make some brief comments on our region.

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The most rapidly expanding and dynamic region in the would economy today is the Asia-Pacific region.

As we look around the region, it is plain that exposure international trade is the single most effective way to ensi that our economies respond appropriately to changing econos conditions and opportunities.

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It is in our interest to work together to dismantle barriers to trade and invootmcnt. There wao a heartening breakthrough in the Uruguay round negotiations in Geneva last month, especially on agriculture. While there is a long way to go to turn these commitments into a practical process of freeing up world trace, Australia will be making every effort to achieve this go< 1.

Indeed, if we are to make our region as dynamic as the rest of

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the world seems to expect of us in the decades ahead, we mdst bring the Uruguay round to a successful conclusion.

In recognition of the growing importance and interdependence pf the Asia-Pacific region, the Prime Minister of Australia, l^r. Hawke, recently put forward a proposal for enhanced regional economic consultation and cooperation.

Australia is not proposing the establishment of a trading bloc. We remain firmly committed to multilateral trade liberalisation. We are seeking the views of our regional neighbours on the form in which enhanced cooperation and consultation may be advanced.

Within the region there is increasing emphasis toward markbt determined systems and deregulation. We fully support that trend. Apart from the startling economic performance achieved by a growing number of economies in the region, significant

readjustment is also occurring. The Philippines, Laos and Vietnam are involved in this process and Cambodia may hopefully commence on the process in the near term.

The ADB has the opportunity to play a key role in tfce

readjustment of these member countries and in demonstrating multilateral support for peace, security and economic and social advancement in Asia.

Turning to the Report, I would like to thank Mr. Okita and his Panel for all their work and also the consultants and staff wq-o assisted them in preparing this important document.

The Panel's recommendations are wide ranging and I believe provide broad guidance for Bank operations in the 1990s. ■

I think that there can be no disagreement with the Panel is emphasis that economic growth is fundamental to development, social advancement and the eradication of poverty within our

region. At the same time, as the Panel concludes, some groups within countries have not received adequate benefits from economic growth and the Bank will need to pay more attention to

this problem.

Over the last two years, demand for Bank resources has grov*> significantly. In meeting that growing demand it is

particularly important that the Bank maintains high quality ψ project and program preparation, adequate design standards and thoroughness in implementation. We believe there has been some tendency to sacrifice quality for quantity in the Bank's

lending. This will not however really help borrowing countries! It will add to external debt and servicing that debt will divert domestic savings and scarce foreign exchange from economic ana social programs of importance. We recognise management1k

efforts to improve project quality and look forward to further

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progress.

Covenants attaching to the Bank's loans should be designed to enhance the effectiveness of particular loans and, where a lean Is policy based, covenants should be based on realistic adjustment moasures. it is In the mutual Interest of the m n k and the borrowing member that covenants be complied with. Given the importance of a comprehensive post evaluation, or aucit process, I would like to congratulate the President for the werk

of the Post Evaluation Office and suggest that the Bank shot Id consider making public an annual report of post evaluation findings. I believe this would enhance the Bank's reputation and contribute to a greater understanding of the vital role of multilateral development banks. “

The Panel sees the Bank as predominately a project lender dnd recommends that program lending, which in character is often more like balance of payments support, should not exceed 15 fjer cent of total lending. I agree with this recommendation.

It is' important that the Bank's lending activities be developed in the context of detailed and frank policy dialogue with m e country concerned and through the preparation of expert country strategy statements. These should reflect agreement between ghe Bank and borrowing governments.

Country strategy statements should be approved by the Board and be reviewed regularly. They would need to be consistent with the development policies agreed between member countries and the IMF and the World Bank and should complement those policies. There needs to be a high level of consultation between the A|DB and the World Bank and the IMP.

Like the Panel, I support some increase in lending for velLl designed social infrastructure projects, including primary education and basic health services. such investments are integral to sustainable development and generally complement

economic growth. .

The Bank's resources are finite and borrowers will have to carefully assess the benefits that are anticipated from socijjl sector projects. '

In all of its activities the Bank should, as a matter of coursb, define the beneficiaries in order to assess the impact on tie living conditions of the poor and disadvantaged, including women who form a disproportionate share of Asia's poor.

As the Panel recommends, the Bank must also seek to ensure Jin its activities that the environment is protected and enhance».

Growth should not be encouraged at any price but should j>e

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designed to lift the general well being of the people of t^ie region. ·

We strongly support the Panel's endorsement of the private sector's key role in economic growth and its recommendation thkt the Bank place more emphasis on promoting that cootor. Thic mky not require a rapid expansion in direct lending to that sectbr although, where appropriate, the Bank should seek to encourage co-financing arrangements with the private sector to enhance t£e development process.

We believe the Bank should establish a comprehensive polity framework to guide its private sector operations and this shoujLd be aimed at

. facilitating a favourable policy environment for

investment in the private sector and assisting jun developing capital markets and financial instruments;

. financing relevant public sector infrastructure;

. improving cooperation with the International Finance Corporation;

. making the Bank's existing lending to the private sector through development finance institutions more effectivji; and

. developing policies which enhance co-f inancijig

activities.

The establishment of a separate entity such as the proposed Asian Finance and Investment Corporation could, if broadly supported, usefully assist in mobilising private funds fpr development, but it would need to be examined carefully.

A particular area of concern to my Government is the economic and social development of the Pacific Island member states of the Bank.

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The Bank's relationship with the South Pacific Developing toeiubOi countries is improving with the strengthening of the regional office in Vanuatu. We believe the office should become the focal point of the Bank's activities with its South Pacific member countries. There is a need for a more comprehensive

focus on the Bank's relationships with these countries. I urge that this question be the subject of a special study by tpe Bank.

There are some regional states which are not yet members of Dank. The Marshall Islands and the Federated Shales Micronesia must be allowed membership of the ADB. They

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regional developing countries which, in our view, satisfy the conditions for membership. We encourage support for thejir membership.

The Panel envisages the Bank playing a broader role in tne development of the Asia Pacific region. Like the Panel, I support the Bank in becoming more Involved in promoting regioryl cooperation and aid coordination. ·

Developing the Bank as a resource centre is integral to iJts broader role. This should aim to enhance its basic functlonjin promoting economic and social advancement in the Asia and Pacific region. Its role should be co-ordinated with that pf

other agencies and there needs to be a high level bf

consultation and co-operation.

The Bank's continued access to financial resources will be vitbl and therefore it will need the support of both regional and non- regional donors. We see merit in the Panel's suggestion fpr the provision of special incentives to encourage contributing

member countries to increase the size of their ApF

contributions. The ADF is the soft loan arm of the Bank and Tis particularly important in assisting the development of tne poorest members of our region. In the end the degree pf

financial support a member country is prepared to make to tne ADB should be the relevant factor in determining its overall shareholding within the Bank.

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All contributing member countries should be encouraged increase their participation in the ADB but the development the Bank should not be held back because individual members a unwilling to expand their participation.

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Australia supports the use of ADF resources by India and Chiha because of the low per capita income in both countries

However, these resources should not reduce the funds available to traditional borrowers because both have access to external resources - some of them concessional - from other sources.

We do not support the use of ADF funds for middle incoine

countries. ADF is a scarce resource for the most needy and Is provided to augment very limited domestic resources.

Middle-income countries are capable of both generating domestic savings and attracting external non-concessional finance fr>m commercial sources and concessional finance from bilateral

donors.

I am pleased to note that the Board is undertaking a review bf personnel policies as recommended by the Panel. The Bank's mix of skills needs to be improved. Recruitment, promotion aid contract renewals should ensure that the best staff, based an

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qualifications, proven work qualities and experience ate selected and advanced. Salary levels should be competitive and set to meet the skill needs of the Bank. Staffing policies should be fair and transparent.

The establishment of an external appeals facility would underpin the objectives of equity and fairness in the Bank's grievance procedure. Such a system is in place in the World Bank.

The role of the Board of Directors is a key determinant in the evolution of the Bank's policies. Management and the Board need to work in harmony. This is of major importance in a quickly changing environment where innovative responses are required.

Basically, the strength of the Bank lies not only in the quality of its staff but in the effectiveness of the relationship between Board and Management. Procedures aimed at improving this relationship should be examined.

The Board should now undertake a systematic review of tne Panel's recommendations and determine the policy approaches that might best be implemented in respect of those recommendations which are generally endorsed by Governors.

President Fujioka has indicated his wish to retire in November. On behalf of the Australian Government I thank Mr. Fujioka fpr - his long and dedicated service to the Bank. We wish the

President and Mrs. Fujioka a long and happy retirement.

Mr. Chairman, while great challenges remain, the Bank and its members should face them with confidence and optimism. There is much that this institution has achieved in Asia and the Pacific and we should take justifiable pride in that. Partly as a consequence of this Bank's efforts, the region Its

undergoing an economic and social transformation of breathtaking proportions.

The Asian Development Bank has achieved much in the past and with continued commitment from member countries it can makejsn even more important contribution in the future. Australia for its part is willing to make that commitment.

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