| United
World:
Mr Haruhiko Kuroda, when you assumed the ADB presidency
in February you brought years of legal, economic and
political experience to the table. As Japan’s
former Vice-Minister of Finance, you possess a unique
perspective on development assistance in Asia. In a
globalized world economy, stronger monetary and infrastructure
cooperation is essential to encourage trade and investment
among ASEAN members. One of you priorities will be to
focus on regional monetary issues and financial infrastructure
projects.
I would like to commence this interview by obtaining
your first impressions on the current state of the Asian
Development Bank, and which would be your main goals
for your ADB presidency.
Mr. Kuroda:
The Asian Development Bank is a relatively small division,
particularly compared to the World Bank. The World Bank
may have staff of nearly ten thousand, or something
like that. On the other hand, ADB’s staff including
professionals, national officers and local staff all
included slightly more than two thousand. Therefore,
we are much smaller than World Bank or other international
organizations. At the same time, I think ADB has been
very successful in promoting and contributing to the
economy of the region.
As you know, parts of our region remain desperately
poor. Let me give you one example of comparison - When
I attended the meeting of American Development Bank
in Okinawa a few weeks ago, I found out that the total
number of population in America is less than seven hundred.
Almost 700 million people in Asia and the Pacific continue
to survive on less than one dollar a day. We have China,
India, Bangladesh, Indonesia, countries in which this
occurs This reality presents this institution and each
of its members with a huge responsibility: We must strengthen
the effectiveness of development aid, and we must create
new, sustainable economic opportunities for the people
of this region. This is a responsibility I take very
seriously, and one to which I will dedicate all my energy
in the years ahead.
Coming to ADB just a few weeks ago, I have found out
that it is relatively small and well managed. I think
it is a consolation, but at the same time, we have so
many challenges. Also, since the economies are growing
quite fast, the social situation in the region changes
so rapidly that ADB must continue to adjust itself to
the changing needs of the region. It is one of the most
challenging tasks for ADB. We are happy that we are
even one of the most dynamic groups in the world. Last
year the growth rate of Indonesia was 7.6%. The environment
is changing so rapidly. You cannot be complacent, because
then you’d be far behind the changing trends.
Last year, developing Asia grew by
7.3% - the highest rate of growth since the 1997 Asian
financial crisis. Nearly all developing countries in
Asia grew by more than 5% in 2004. Whether these high
rates of growth will continue depends largely on the
performance of the world economy as a whole. But domestic
demand, strong investor sentiment and other factors
bode well for the foreseeable future.
The needs are also changing. Therefore,
I must say that my welcome to ADB has been very exciting,
and very challenging.
United World:
The region has just come out of a heavy financial
crisis at the end of the 90’s, and now it is trying
to reposition itself. Financially, you have very strong
emerging countries, such as China, Indonesia, and Malaysia.
What is the reality of today’s Asia?
Mr. Kuroda:
You have described the situation very well. From 1997
to 1998, we had the worst kind of financial crisis in
East Asia, including of course, Thailand, Indonesia,
and Korea. The crisis was really devastating, but fortunately,
the economies affected by the crisis were able to overcome
the amount of crisis. In the last couple of years, the
economies have regained momentum. Most of them have
come back to normal performance. In the meantime, China
(PRC) and India, which were not really affected by the
crisis, continue to grow. And now, they are one of the
fastest growing economies, not only in the region but
also in the world. Therefore, the economic landscape
has really changed.
The region has overcome a substantial
amount of crisis, and regained momentum in growth, and
now two economies, including India, are growing very
fast, continuing global growth. That said, I still have
to remind you that the growth rate is still less than
the average growth we had before the crisis. Some countries
like Indonesia have not yet come back with a very high
growth as experienced before the crisis.
I am quite hopeful for the Philippines.
Philippine economy recorded 6.1% growth last year, which
is the highest in the last, I think, 15 years. So it
is good news that the Philippine economy is making significant
progress. But there are a number of challenges facing
the Philippine economy. One of them is, of course, fiscal
consolidation. In this part of the world, many countries
are growing quite rapidly, and very importantly they
have very good fiscal conditions. I think an improved
fiscal condition is one of the prerequisites for sustainable
economic growth. Therefore, growth has accelerated,
inflation has degenerated, and the fiscal situation
has seen further improvements. Indonesia has overcome
its fiscal deficit after the crisis almost completely.
Its fiscal deficit is only about 1% of the GDP which
is quite low.
I would also like to refer to the expansion
outside the frontiers of ASEAN and its financial corporation.
I think in the future, in the coming five years or so,
countries such as India, Australia, may also be included
in the network and that would help the economy of the
region to accelerate their growth and integration.
United World:
As architect of the Chiang Mai Initiative, you have
witnessed firsthand the benefits of currency swap arrangements.
Some leaders are calling for an Asian Monetary Fund,
which would help stabilize exchange rates and inject
more stability into the financial markets. In your view,
what are the strategies that need to be followed in
order to establish an Asian Monetary Fund? What would
be the likelihood of such initiative in the short term?
Mr. Kuroda:
A proposal to establish an Asian monetary fund was made
during the currency crisis in 1997. That proposal itself
was shelved, so to speak, after some discussions among
related parties. However, in the last several years,
the so-called ASEAN+3 came up with the so-called Chiang
Mai initiative under which a network of bilateral swap
arrangements was established. Already the swap arrangement
has put out nearly $40 billion, and recently they have
decided to double the amount.
A financial safety net is now created
to avoid the recurrence of currency crises. There was
significant progress to secure financial and macroeconomic
stability in the region. I think the Chiang Mai initiative
will be further strengthened in coming years.
United World:
One of our main concerns is the position of the
smaller countries in the region such as Cambodia and
Vietnam, which are at present in high-need for asistance
and international aid. In your view, what would be the
future role of smaller and less favoured countries in
the reigon, and how can the bigger players ensure that
the development of the economy is unified?
Mr. Kuroda:
Again, maybe I am a bit optimistic but I tend to think
that smaller or poorer countries with less developed
economies tend to benefit more. Look at the European
Union which has expanded to 25 countries from 15 countries.
Which countries benefited more? Of course, the smaller
countries with the less developed economies, such as
Portugal or Greece, while Germany and Italy suffer.
So, I think if only they integrated ASEAN further it
would be Cambodia or Vietnam that woud benefit most.
Of course, I do not want Singapore to suffer greatly,
but the tendency is like that. But based on the European
experience, they even expanded to 25 countries. New
members are still joining.
As you know, compared with Europe,
the economic integration in this region has been largely
market driven. If you look at statistics related to
intraregional trade and investment, you can find that
this region is as integrated as Europe (when it was
considering integration). But in recent years, there
have been major efforts by regional governments to foster
regional economic integration through various institutions
and various agreements. First and foremost are ongoing
negotiations over bilateral, subregional, regional FTA
agreements. I'm quite sure that in coming years this
effort will bring about tangible results in further
integrating the economies in the region.
United World:
How do you see the role of the Asian Development
Bank in the near future, especially on boosting the
economy of Asia, and encouraging further regional integration?
What would be your key priorities in this context?
Mr. Kuroda:
In this context, ADB will assume a more proactive role
as catalyst, and as a coordinator, for regional cooperation
and integration. This is a special and unique mission
of a regional development bank. And closer integration
is an area of critical importance to the competitiveness
of Asian economies in today's global market. We have
to encourage further integration, and we can do more
I think that the economic integration is key for further
prosperity. So this is one thing. Another challenging
issue is how to make the ADB more flexible, responding
to the needs of each country. Even if you take a look
at the ASEAN countries you will see their differences
in income level. Just compare Cambodia, Vietnam with
Philippines or Malaysia. Income levels differ significantly
from one country to other. The size of the countries
as well; Indonesia is the largest Muslim country in
the world, having more than 200 million people. Vietnam,
Thailand, and also the Philippines, have more than 20
million people, but Korea and Laos have around 5 million,
and perhaps Singapore has around 3 million. Even the
ASEAN countries are so diverse, and yet they are trying
to integrate.
You see 600 million dollars provided
all in grants, not loans, this time unprecedented disaster.
So we decided to provide all 600 million dollars assistance
in grants. We have already decided almost all of 600
million dollars be provided to four countries -- India,
Sri Lanka, Indonesia and Maldives.
But to summarise - First and foremost
I would like to make ADB more responsive, more relevant,
and more result oriented. That is to say ADB more effective,
efficient; contributing greatly to the Asian development.
By this I hope in the next five years or so Asia will
further integrate, further grow and further reduce poverty
among people. That is the most important point.
United World:
To conclude, what message would you like to emphasie
to the merican audience on the potential of Asia.
Mr. Kuroda:
I would like to emphasize that Asia will continue to
grow, to develop, and will continue to relieve poverty,
and that basically means a bright future. Asia is a
great opportunity for the world. I would like to say
that there is so much potential but also there are many
poor countries in this region. China and India are growing
at a fantastic rate, and they are contributing greatly
towards relieving poverty.
United World:
Thank you vey much Mr. Kuroda and we wish you all
the sucess in your new post.
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