My Vision for ADB: Strive Together to Attain Sustainable and Inclusive Growth in the Region with Innovative and Tailored Solutions - Masato Kanda (2024)

ADB has played a vital role in the development of the Asia and Pacific region not only helping it become the engine room of global growth today but ensuring the region is resilient and inclusive. The many crises and challenges currently confronting us, from climate change to digitalization and gender equality, require continually striving for ADB to remain the most trusted partner for all members. Throughout my nearly four decades as a government official, I have had the tremendous opportunity to work with many dedicated professionals in the region committed to a shared vision of economic stability and prosperity, and poverty eradication.

If I am afforded the immense privilege of being the next President of ADB, I will steadfastly commit to ensuring ADB can achieve its vision of delivering sustainable and inclusive growth to the region with innovative and tailored solutions, in alignment with the updated Strategy 2030. I can only do this by working with each and every member and delivering the New Operating Model so the ADB remains a client-first bank that maximizes its development impact, underpinned by talented and diverse staff.

1. Background

Since its inception in 1966, ADB has played a vital role in supporting developing member countries (DMCs) in Asia and the Pacific. Throughout its history, it has worked unflinchingly on the arduous tasks, including, most notably, facilitation of the recovery after the 1997 Asian financial crisis. Each time it faces a crisis, ADB has provided innovative solutions. The launch of the ADF (Asian Development Fund) and the bond issuance to enhance its support to DMCs after the oil shock in 1970s is a case in point. ADB also helped DMCs achieve a solid track record of growth through its financial and non-financial instruments. The real growth rate of Emerging and Developing Asia over the past 10 years was 5.6 percent, 2.5 percentage points higher than global growth.

However, despite the clear progress toward sustainable and inclusive growth, significant challenges remain. The ongoing climate crisis and the risk of another pandemic as serious as COVID 19, indicate that ADB should be even bolder to address global public goods (GPGs) and regional public goods (RPGs). Moreover, while ADB needs to tackle these emerging tasks at a regional and global scale, it remains responsible for supporting DMCs address country-specific challenges, including not least poverty reduction. It is paramount that ADB remains the most trusted partner in the region.

Over more than 60 years, Japan has been working with all member countries. As a former official at the Japanese Ministry of Finance, in particular during my time as Vice-Minister of Finance for International Affairs, I have had the privilege to work with inspiring leaders, dedicated professionals, and wonderful friends across Asia and the Pacific. Nothing could make me happier than the opportunity to continue to work with all of them to establish a clear pathway toward the ADB’s vision: to achieve a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty.

The rest of this Vision Statement is organized as follows. In the next section, I describe the challenges and unique opportunities for the region. In section 3, I elaborate on my suggested direction that ADB should head toward. Section 4 concludes with my unwavering commitment to help champion sustainable growth in the region.

2. Challenges and opportunities

Climate change. The DMCs, in particular Small Island Developing States (SIDS) in the Pacific, are prone to natural disasters stemming from climate change, such as typhoons, cyclones, and rising sea levels. Moreover, Asia and the Pacific emits almost half of the world’s greenhouse gases, partly reflecting its high energy demand. However, its coal plants are relatively young, and its grid coverage is limited, complicating the transition to net-zero. Against this backdrop, ADB has spearheaded innovative climate change initiatives as the region’s climate bank. Nevertheless, bolder actions are still warranted, both on the mitigation and adaptation fronts.

Infrastructure gap. Infrastructure lays a fundamental basis to eradicate poverty, boost potential growth and enhance regional connectivity. The region still faces a glaring gap in infrastructure. ADB has estimated that developing Asia will need $1.7 trillion annually to close the gap in infrastructure, and this figure could be larger given the modest growth over the past several years. At the same time, more actions are needed for boosting the quality of infrastructure investment, strengthening climate resilience, achieving high environmental and social standards, preserving biodiversity, and creating jobs.

Poverty. The number of people who are below the poverty line rose significantly after the COVID-19 crisis, setting back the fight against poverty in Asia and the Pacific by at least two years. Income poverty is often associated with poor health and lack of education, hampering human capital development and restraining growth. Rapid economic growth and a stable macroeconomic environment in the region would help address poverty across the region but this can only be achieved with certain policy actions such as those outlined below.

Inequality. Economic growth in the region has come with widening inequality, in particular after the COVID-19 crisis. Inequality could damage social stability and cohesion and undermine economic dynamism. Also, while rapid urbanization has provided an increasing number of citizens with access to better public services (education, water and sanitary services, transportation), it can widen the gap with vulnerable people that do not have access to such basic services and the social safety net.

Diversity. Asia and the Pacific boasts a wide variety of cultures and ethnicities. This has required, and will continue to require, ADB to tailor its supporting tools to country-specific circumstances, with due regard to size, income distribution, population dynamics, and social norms of each DMC. On procurement, while ADB remains committed to maintaining high environmental and social standards, it also needs to take country systems into account.

Gender. ADB needs to further pursue gender equality in line with its vision. Our journey is yet to be completed: according to the United Nations, the participation of women in the labor force in Asia and the Pacific is below the global average, as is the promotion of women in leadership positions. ADB should continue to be the thought leader to transform the lives of women, by helping DMCs take decisive steps toward gender equality, while recognizing country-specific cultural and social circumstances.

Private capital mobilization. One of the ADB’s New Operating Model (NOM)’s priorities is a shift toward the private sector. Yet, the amount of private capital mobilization has been significantly below the aspiration of various development agendas, including the Paris Agreement. Mobilizing private capital is easier said than done. The upcoming discussion on the ADB’s Private Sector Development Action Plan will lay a foundation for the ADB’s medium-term efforts to boost private capital mobilization and enable a stronger private sector in line with the ADB’s vision.

Domestic resource mobilization. In many DMCs, tax revenues are still short of supporting their own sustainable development. The Asia Pacific Tax Hub, established in May 2021 under President Asakawa’s leadership, has helped DMCs modernize their tax systems through strategic policy dialogues, institutional capacity building, knowledge sharing, and collaboration with development partners. The potential benefits of domestic resource mobilization include more private capital mobilization through blended finance.

Digitalization. Digital technologies can be an enabler that brings transformational impacts, allowing DMCs to leapfrog the development process that advanced economies took much longer to go through. At the same time, rapid progress in digitalization comes with costs and risks, including a digital divide and cyber threats. With the approval of its Strategy 2030 Midterm Review, ADB is pursuing a more active role on digital transformation as one of the new strategic focus areas.

3. Ways forward

I will now elaborate how I would work toward achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific if I were elected as President of ADB. I will maintain the “client-first” principle as the organization’s highest priority by tailoring the role of ADB to specific challenges faced by all DMCs. Moreover, ADB should fully utilize its well-established collaboration between the sovereign and non-sovereign sectors, which is one of the ADB’s great strengths. My vision below is also crafted with a clear purpose to augment the updated Strategy 2030 with the organizational vision statement and the new strategic focus areas (climate action; private sector development; regional cooperation and public goods; digital transformation; and resilience and empowerment). For this purpose, I would ensure that the Capital Utilization Plan will be ambitious and fully utilize different financial resources.

Providing innovative financial climate solutions to DMCs. ADB has established its reputation as an innovator in climate and development finance, exemplified by IF-CAP (Innovative Finance Facility for Climate in Asia and the Pacific), which is expected to be officially launched soon. By focusing squarely on the development-climate nexus under the Climate Change Action Plan, ADB should continue to be the region’s climate bank, in line with climate as the first enhanced focus area. In the context of the ongoing MDB Evolution and the CAF (Capital Adequacy Framework) Review, ADB must be a role-model for other MDBs (Multilateral Development Banks) to foster climate mitigation and adaptation.

Promoting private capital mobilization. With the new quantitative targets under Strategy 2030, ADB should pursue ambitious goals of mobilizing and enabling private capital, by taking concrete actions under the upcoming Private Sector Development Action Plan. Closer engagement with global and regional market participants and industry experts, as well as deepening of domestic capital markets, would help bring much needed private financial flows for sustainable growth.

Supporting domestic resource mobilization. ADB should remain committed to helping DMCs strengthen their revenue base, paving the way for the achievement of self-sustained development over time. ADB should also make sure that this effort serves as a key ingredient for policy discussion in the context of policy-based loans (PBLs). The Asia Pacific Tax Hub should continue to play an instrumental role in this regard, by providing comprehensive diagnoses on and solutions to the underlying structural problems of revenue shortfalls.

Fostering regional cooperation and integration. Trade and investment flows are increasingly interconnected within the region, and hence fostering regional cooperation will help garner needed development financial flows and create a favorable macroeconomic environment in the region. ADB should further promote cross-border connectivity, trade integration, and financial links, all of which are regional public goods. Regional procurement, which is being considered in line with the ADF14 agreement, is of particular importance.

Striking the balance between GPG/RPG and country-specific demand. ADB must strategically calibrate its resource allocation so that it can help deliver GPGs/RPGs, such as air quality management, biodiversity, food and nutrition security, pandemic prevention, preparedness and response, and pollution prevention, while still paying due regard to country-specific circumstances. Enhanced policy dialogue with DMCs, along with in-house analyses on externalities in the region, should be made a priority. Staff incentive structures could be also fine-tuned in line with such an organization-wide ambition.

Prioritizing digital transformation in a cross-cutting manner. ADB should be responsive to high client demand for digital solutions, including digital connectivity and digital literacy, among others. ADB should actively pursue policies to bring the maximum benefits from digitalization across all different sectors and pursue synergies with other development priorities, such as private capital mobilization, infrastructure development, and regional connectivity. Strengthening its support to social start-up companies with cutting-edge digital technologies could complement these efforts.

Mainstreaming gender in overall ADB operations. A pathway to gender equality is not uniform, differing from one country to another. The new commitment following the Midterm Review of Strategy 2030 must be attained with all possible measures. ADB should continue to be a champion of gender equality in its operations to empower women in DMCs. To lead by example, ADB should also continue to promote gender equality across the organization.

Maximizing development impact by tailoring ADB solutions to country-specific development and climate needs. The ADB’s clients widely differ in their size, level of development, development needs, and risks of vulnerabilities and fragility. ADB should fully employ its diagnosis provided by regional VPs/Departments, while ensuring that Country Partnership Strategies benefit from various analytical works by the Sector Group, Governance Thematic Group, Economic Research and Development Impact Department, and other departments. Also, outcome orientation remains a necessary condition to better achieve the organizational vision. The new window to address fragility under ADF14 could be a successful example to address immense challenges faced by fragile and conflict-affected situations (FCAS), as well as SIDS.

Utilizing knowledge products for operations on the ground. As a regional knowledge bank, ADB has produced a wealth of analytical and knowledge products. While they are undoubtedly used by research institutes in the regions, ADB needs to be more aggressive in disseminating its analytical expertise to country and sector operations on the ground, including lending activities and policy dialogue.

Fully operationalizing the NOM. Implementing the NOM requires continuous efforts on a multi-year basis. ADB needs to accelerate the transition to a more climate-focused and private sector-oriented business model, particularly to address global and regional challenges at scale. Staff incentive structures should be designed to establish a critical link with organization-wide priorities, such as GPGs/PRGs as well as decentralization. Also, diversity of the staff should remain one of the ADB’s core values.

Enhancing partnerships with MDBs and DFIs. The development challenges in front of us cannot be solved by ADB alone. ADB should enhance its collaboration with other MDBs and venture into new types of cooperation, such as exposure exchange, beyond traditional co-financing and knowledge sharing. ADB could also strengthen ties with bilateral DFIs (Development Finance Institutions) in the region to create synergies and improve administrative efficiencies while maintaining high environmental and social standards.

4. Closing remarks

The socio-economic environment surrounding Asia and the Pacific has drastically changed since the ADB’s inception: now, the region is suffering from chronic natural disasters more often, with severer magnitude; inequality is widening despite increased national income per capita; and uncertainty is looming in the global economy and financial markets. Worse, all these complex problems are inter-connected. ADB is the only organization in the region that helps tackle these challenges, with its unparalleled financial firepower, highly motivated and dedicated staff, and regional convening power.

More recently, ADB performed immensely in the context of the MDB Evolution over the past two years. The international community is striving hard to redefine the roles of MDBs and update their financial and operational models. Undoubtedly, ADB is, and will continue to be, a frontrunner in this global goal: it has created lending headroom of US$100 billion over the next ten years through its rigorous CAF review, launched innovative financial instruments, and aligned its tools and environmental and social standards with its peers. I am confident that the ADB’s support to DMCs in the region can be a role-model for other MDBs.

I would also like to emphasize that throughout its history, ADB has built trust among all stakeholders inside and outside the region, including DMCs, donors, civil society, development partners, staff, and management. It is this trust that has enabled ADB to shine as a long-standing home doctor, provide the highest value-add to its clients, and connect leaders and professionals in the region.

With these strengths, ADB has positioned itself as the most trusted and dedicated organization in Asia and the Pacific. I would like to devote all my expertise and knowledge to this great organization and work toward its vision, together with colleagues and friends from the region and beyond. I am more than ready to serve to all members.

Subjects
  • ADB administration and governance

Related

  • News release: Voting Set to Open for Next ADB President
My Vision for ADB: Strive Together to Attain Sustainable and Inclusive Growth in the Region with Innovative and Tailored Solutions - Masato Kanda (2024)
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