Address to Asian Development Bank’s 47th Annual Meeting
Hon Todd McClay
Minister of Revenue
7 May 2014
Address to Asian Development Bank’s 47th Annual Meeting – Astana, Kazakhstan
Fellow Governors, Mr President, ladies and gentlemen,
New Zealand extends its thanks to the Government of Kazakhstan, and to the staff of the Asian Development Bank, for their efforts organising this 47th Annual Meeting of the ADB.
We congratulate Takehiko Nakao on completing his first year as President of the ADB. We look forward to your continued leadership.
I would like to start by extending New Zealand's deepest sympathies to the people of the Solomon Islands for the severe flooding they endured during the early part of April, coincident with two significant earthquakes. New Zealand is committed to ensuring an effective initial response and looks forward to working with ADB and other partners to assist in recovery.
The Asia-Pacific region is in a period of transition to more moderate and sustainable growth. The region’s growth is forecast to pick-up over 2015 and 2016 and is adjusting well to somewhat slower and more sustainable growth. Global economic risks appear more manageable than last year.
The New Zealand economy is poised for a period of robust growth following very modest activity in the wake of the Global Financial Crisis. GDP increased by 2.7% in 2013, driven by activity associated with the Christchurch earthquake rebuild, strong terms of trade and a recovery in consumer and business sentiment. The Government expects growth to strengthen as the rebuild continues.
Our economic policy has sought to cushion the shock of the Global Financial Crisis and a large earthquake, while we are rebuilding our future resilience as the economic recovery gathers pace. As the economy reaches capacity, monetary policy is scheduled to tighten and fiscal policy expects the Budget to return to surplus in 2014/15.
Having a strong and resilient economy enables our enduring commitment to helping reduce poverty and support continued economic growth in the Asia Pacific region. New Zealand continues to become more deeply integrated in Asia Pacific.
But substantial challenges remain within the region. We need to continue to reduce the number of people living in poverty in our region – and strong and sustainable growth needs to remain at the heart of poverty alleviation efforts. We support the focus of the Asian Development Outlook that fiscal policy must be used with greater efficiency, without compromising the fiscal prudence which has so far been beneficial for the region. Increased expenditure in health and education can help foster greater equality and inclusive growth within the region.
We are a strong supporter of the role the Asian Development Bank has to play in these challenges. It is important that the Bank continues to look at its operations to ensure it remains effective and relevant. We have three key messages in this regard.
Strategy 2020 Mid-Term Review
I would like to commend President Nakao for the consultative process that has been followed during the review of Strategy 2020 and the spirit of reform that has been brought to the exercise.
The review of Strategy 2020 recommends that the Bank continues to implement 80 percent of its focus on its five core areas; infrastructure, environment, regional cooperation and integration, financial sector development, and education. However, there is a need to re-balance our efforts and encompass country priorities in areas such as education and health. Nonetheless, the Bank must continue to remain focussed on its core areas of strength and rely on other development partners to address other challenges that face the region.
A key focus for the next year should be implementing commitments made in the mid-term review, in particular, the effort to improve staff incentives to focus on results and project implementation. The improvements that New Zealand would most like to see as a result of the mid-term review are in reducing the high level of project delays and increasing project success rates, especially in the Pacific where the 50% success rate is lower than the Bank wide average.
We recognise that, since 2009, that ADB has increased its in country presence to nine consultants in Pacific member countries where previously there were no staff on the ground on a permanent basis, except in Fiji. These capable people are doing an excellent job and their presence is a substantial improvement from 2009.
We believe, though, that a stronger staff presence on the ground is needed to improve project implementation. In eleven of our Pacific developing member countries there are no resident missions and no ADB staff. The mid-term review has committed to greater decentralisation which needs to include empowering and resourcing our operations in the Pacific.
Deepening Engagement of the ADB in the Pacific
New Zealand has a long and deep relationship with countries in the Pacific, with whom we share many close cultural, historical and people to people links. Most Pacific nations are small and geographically isolated, making them more vulnerable to external economic shocks and climatic events.
Therefore we welcome the intention in the mid-term review to expand the Bank’s support for integrated disaster risk management. We also urge the Bank to continue to support its members to access global climate change funds that are necessary for Pacific members to adapt to a future where extreme weather events are expected to be more frequent and severe.
We make special mention and commend the Bank’s leading role in supporting the aspirations of Pacific member countries in switching from fossil fuel to renewable sources of electricity generation.
This September Samoa will host the Third International Conference on Small Island Developing States. This conference will focus the world’s attention on special challenges that small island states face in achieving sustainable development. New Zealand is supporting this important event as a member of the Conference’s Preparatory Committee.
We are confident that Samoa will host a successful event that will raise awareness of the unique challenges facing small island states.
The focus of this annual meeting is the significant challenge faced to meet the financing needs of the fast growing Asia region. Over the past year the Bank has shown that it is taking the issue Bank lending capacity.
The Bank’s lending from its Ordinary Capital Reserves is still a drop in the bucket when it comes to the massive infrastructure financing needs of the region. Low interest returns on capital and Bank’s equity constraints mean that current levels of lending cannot be expanded. This will impede the Bank’s ability to reach its target of having private sector operations making up 25 percent of new approvals by 2020 or have the ability to assist with counter cyclical lending in the event of regional or global crisis.
In the lead up to the annual meeting we have been presented with a proposal to merge a large portion of the Asian Development Fund balance sheet with the Ordinary Capital Reserves, which would significantly increase overall lending capacity.
New Zealand is cautiously optimistic about this idea, subject to us ensuring that sovereign exposures are adequately protected from credit risk and protecting the access of the poorest and most vulnerable of ADB’s developing country members to concessional lending. We believe that our collective energy should be focused on assessing this proposal as a top priority. Other options such as a capital increase should only be considered once we have exhausted all other options.
In summary, New Zealand values opportunities such as this Annual Meeting which allows us to engage with and share our priorities for the ADB. Discussions at this Annual Meeting continue to demonstrate the importance of the Bank’s vision – an Asia and Pacific region free of poverty. New Zealand remains committed to continuing this important work with you all.