Mr. Chairman, Mr. President, distinguished Governors, ladies and gentlemen,

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1 Statement by Mr. Jun AZUMI, Minister of Finance of Japan, at the Forty-Fifth Annual Meeting of the Board of Governors of the Asian Development Bank (Manila, Philippines, May 4, 2012) 1. Introduction Mr. Chairman, Mr. President, distinguished Governors, ladies and gentlemen, It is my pleasure to address you at the Forty-Fifth Annual Meeting of the Asian Development Bank (ADB). I would like to express my sincere gratitude, on behalf of the Government of Japan, to the Government of the Philippines and the people of Manila for their wonderful hospitality. Japan and the Philippines have built a good relationship through trade, investment, exchanges of people and economic cooperation. The two countries relationship has deepened further through such opportunities as the entry into force of a bilateral Economic Partnership Agreement (EPA) in I strongly hope that the two countries ties will be further strengthened in the future. Around one year has passed since the Great East Japan Earthquake that occurred in March of last year. I would like to use this occasion to express our appreciation again for the kind support we have received from countries and people around the world. 2. The Global economy and the Asian Economy Although the global economy is making gradual recovery, it remains unstable due to the European situation. While the Asian economy is leading the global economy with its high growth, the European sovereign debt issues remain concern. Following the announcement by Japan to contribute US$60 billion for the IMF, many countries also made commitment, resulting in an agreement to increase resources made available to the IMF by over $430 billion at the G-20 and International Monetary and Financial Committee (IMFC). This agreement should be great achievement not only for the Europe, but also for the Asian economy. 3. Replenishment of the Asian Development Fund In November last year, ADB President Kuroda was re-elected with the support from all the member countries. Under President Kuroda s leadership, the ADB has strengthened its capacity over the past year to respond to an expansion of its operations made possible after the fifth general capital increase (GCI V). I am also very pleased that donors reached an agreement on the replenishment of the Asian Development Fund (ADF). In the replenishment negotiations of the ADF, Japan has expressed an intention to contribute approximately billion yen (approximately 1.3 billion SDR), equivalent to 35% of 1

2 the total donor contributions, subject to the domestic approval process, with the belief that assistance to low-income countries in Asia and the Pacific is important, despite that Japan is in the middle of the restoration and reconstruction process following the Great East Japan Earthquake and is facing a severe economic and fiscal situation. I urge the ADB to steadily deliver development results on poverty reduction and economic development in Asia and the Pacific by making effective use of the contributed funds. In this ADF replenishment, the amount pledged by the Asian member countries exceeds the amount pledged by non-regional member countries, and the ADF graduates, namely, Indonesia, Kazakhstan and the Philippines, have expressed their intention to make contribution through the accelerated repayment to the ADF. While emerging Asian countries have become active in providing bilateral support through South-South cooperation, I would like to emphasize the importance of utilizing professional skills and expertise of Multilateral Development Banks. I expect that emerging Asian countries will further increase their contribution to multilateral institutions and mechanisms including the ADF. 4. Transformation of Asia and Role of the ADB (Transformation of Asia) Last year, the ADB published a report titled Asia 2050, based on the analysis of Asia in the next 40 years and challenges the region will face. This report depicted a future in which Asia will continue to grow to account for more than half of the global GDP. However, such a future cannot be realized without efforts. Asia is now transforming itself in many aspects. Despite continued economic growth, income inequality is widening in many Asian countries. The widening inequality may not only hinder social cohesion and risk social stability but also undermine sustainable economic growth. In addition, whereas the population of young people is expected to grow in South Asia, ageing is expected to accelerate rapidly in East Asia. The ageing of the population raises the risks of a decline in the working population, a drop in the savings rate and an increase in pressure on government finances due to pension payments and medical expenses. Japan is now trying to deal with ageing, and we may say that issues faced by Japan are heralding challenges which Asian and the Pacific countries will confront in the future. The ADB needs to carefully analyze challenges arising from the transformation that the region is undergoing and to strengthen assistance for developing member countries not only through lending operations but also through knowledge services such as policy advice. To that end, it is important that the ADB itself will enhance its knowledge capacity. (Disaster Risk Management) Last year, Asia was struck by many natural disasters, including the typhoon that hit the Philippines in December. I would like to express my condolences for the people who lost lives in 2

3 the disasters and offer my heartfelt sympathy for those affected by the disasters. Moreover, massive floods took place in the Mekong countries last year. The flood in Thailand in particular had a considerable impact on the global economy by disrupting international supply chains. Those natural disasters and their effects have reminded us of the need of mainstreaming disaster risk management. Under these circumstances, I welcome the agreement made in the ADF replenishment on the establishment of the Disaster Response Facility (DRF), which will provide assistance to low-income countries affected by natural disasters. I call for the ADB to provide assistance for restoration and reconstruction, in the aftermath of natural disasters through its facilities including the DRF, and further strengthen and mainstream disaster risk management. While investment in disaster risk management pays for itself, the challenge is how to effectively implement disaster risk management measures given a fiscal constraint. The top priority should be given to identifying regions vulnerable to disaster risks in each country and sharing that information among stakeholders. Next, it is necessary to make effective use of the limited resources according to the disaster risk profile of each country. Combining physical infrastructure development and knowledge-oriented measures such as establishing evacuation warning systems and related education is also needed. I expect that the ADB will provide support to each country to take appropriate measures against natural disasters, thereby enabling Asia to transform itself into a region more resilient to disaster risks. The ADB, in cooperation with Japan, has also started a research on the development of natural disaster risk insurance in major Asian cities. I hope that this effort be further accelerated and given higher priority. An international conference on disaster risk management will be held on the occasion of the annual meetings of the IMF and the World Bank in Japan this October, with the aim of sharing of lessons and knowledge that Japan learned from the Great East Japan Earthquake with the world. A site visit to the disaster-stricken region will also be arranged. I would like to invite you to participate in this conference. (Response to Climate Change) Many disasters, including floods and typhoons, are attributable to climate change as well. As greenhouse gas emissions from Asia are large compared with those from other regions, we may say that Asia is contributing to causing climate change. At the same time, Asia is a region considerably vulnerable to the impacts of climate change. Making proactive efforts to deal with climate change will enable Asia to avoid suffering from these impacts. Asia should take climate change measures for its own future. 3

4 The challenge that Asia faces in addressing climate change is how to achieve growth amid the constraints on energy and other resources. In Asia, we must achieve green growth, which seeks both economic growth and environmental protection. To support green growth by mobilizing private-sector funds, the ADB decided this year to make an equity investment in the Climate Public Private Partnership Fund. We would like the ADB to continue to make efforts to mobilize private-sector resources to deal with climate change. The ADB has a close relationship with the Global Environment Facility (GEF), whose activities Japan supports as a major donor, as the ADB is one of the executing agencies of the GEF. Currently, Dr. Naoko Ishii, Deputy Vice Minister for International Affairs of the Ministry of Finance, is running for the election for CEO of the GEF. She has knowledge and experience in the field of economic development as well as the experience of serving in managerial positions at an international organization. I believe she is the best candidate for the next CEO of the GEF. I would like to seek your supports for her candidacy. To discuss climate change and other issues faced by Pacific island countries, Japan will host the Sixth Japan-Pacific Islands Forum Summit in Okinawa this month. (Promotion of Regional Financial Cooperation) It is important to further strengthen regional financial safety net, in addition to the global financial framework such as the IMF, for which we agreed to enhance its resources as stated before. I am very pleased that agreement was reached yesterday on the expansion of the size of the Chiang Mai Initiative Multilateralization (CMIM) (doubling the lending facility to $240 billion) and on the introduction of the crisis prevention function at the ASEAN + 3 Finance Ministers and Central Governors Meeting held for the first time with the participation of central bank colleagues, thereby strengthening regional financial safety nets. To stabilize Asian financial markets, Japan is also pursuing bilateral cooperation to complement global institutions such as the IMF and regional initiatives. Japan expanded its bilateral currency swap arrangements with India and South Korea last year. I expect that such efforts will enable Asia to transform itself into a region more resilient to economic crisis. One of the lessons we learned from the Asian currency crisis is the need to develop a regional bond market with the aim of realizing a virtuous circle of financing investment in Asia by abundant savings within the region. Under the Asian Bond Markets Initiative (ABMI), launched in 2003, bond markets in Asia have been steadily growing over the past 10 years. I urge the ADB to make further efforts and provide more supports for this initiative to achieve more concrete progress by utilizing such schemes as the ASEAN+3 Bond Market Forum (ABMF) and the Credit Guarantee and Investment Facility (CGIF). 4

5 (The assistance to the Mekong region) Japan gives high priority to the Mekong region, promoting cooperation in the region. Last month, Japan hosted the Fourth Mekong- Japan Summit and reached an agreement on the importance of enhancing Mekong connectivity. Myanmar has made steps in areas including the measures toward democratization, national reconciliation, as well as political and economic reforms. In order to firmly establish this trend, the international community should strengthen support for Myanmar. At the Summit Meeting, the Government of Japan announced that it would restart its extensive assistance in various areas, including improving people s livelihood, capacity building and development of institutions, and developing infrastructure. We acknowledge that in order to advance democratization in Myanmar it is essential for the people of Myanmar to be able to enjoy the fruit of reform taking place. Japan intends to play a leading role in helping Myanmar s democratization and economic development including the settlement of its debt arrears while cooperating closely with Multilateral Development Banks including the ADB, the Paris Club, and relevant countries. (Assistance for Afghanistan) The transition of security operations from the International Security Assistance Force and the NATO force deployed in Afghanistan to the government of Afghanistan is scheduled to be completed by the end of We are now approaching a critical period. We have high regard for the ADB s leading role in promoting regional cooperation between Afghanistan and neighboring countries. To support Afghanistan s sustainable nation-building and development, Japan will hold a conference on Afghanistan in Tokyo in July this year in cooperation with the ADB. 5. Conclusion Mr. Chairman, Mr. President, distinguished Governors, ladies and gentlemen, As Asia experiences rapid transformation, it must tackle many challenges. Japan will continue to strengthen cooperation with the ADB and the member countries in order to bring prosperity to Asia and the Pacific. Thank you very much for your kind attention. (End) 5