May 5, 2008
HP-964

Statement by Assistant Secretary for International Affairs Clay Lowery
before the 41st Annual Meeting of the Asian Development Bank

Madrid, Spain -- It is delightful to be here in Madrid for these meetings, and I would like to thank our gracious hosts, the Government of Spain and the City of Madrid, for their warm hospitality. We want to thank them for hosting the successful replenishment of the Asian Development Fund – which like Real Madrid's triumph last night – needed the final minutes for a result. Let me begin on a sad note and say that our hearts go out to the victims of the cyclone that hit Burma over the weekend.

In the United States, we are going through a difficult housing correction that has impacted our capital markets. We are taking a number of aggressive measures to minimize the downturn's effect. We believe our long-run fundamentals remain sound and we have confidence that we will work through this period.

Much of the rest of the world is suffering from large increase in global food prices, and the response requires both immediate and medium-term actions. We applaud the ADB's announced intention to take both kinds of action consistent with its comparative advantage and strategic vision. Structurally and strategically, we believe the most meaningful manner in which the ADB can contribute is by strengthening agricultural productivity through building rural infrastructure and providing appropriately scaled financing initiatives for farmers and rural organizations.

Asia is the world's fastest growing region, and despite the sharp rise in commodity and food prices and the recent slowdown in the United States, the ADB is forecasting growth in Asian developing economies of 7.6 percent in 2008. As the ADB itself forecasts, by 2020 Asia and the Pacific will account for more than 25 percent of global GDP in nominal dollar terms, have 90 percent of its population living in middle income countries and have only 2 percent of the population living on less than $1 per day.

While some countries have roared ahead, however, others have lagged behind and too many are still among the world's poorest countries. They need the institutional and policy reforms that create opportunities for private sector job creation, sustained growth and improved living standards. Infrastructure gaps prevent the connections to markets and products that drive essential private-sector commerce, both within and across borders. And where incomes have grown significantly, rapid growth is putting strains on the environment and natural resources.

To address these challenges, the ADB should put its efforts into three areas: building on the replenishment, adapting to changes in middle income countries, and strengthening institutional reforms.

First, we applaud the agreement's clear focus on the Bank's comparative advantage, focusing on four key areas – infrastructure finance, the enabling environment for private sector development, basic education, and preventing environmental degradation. On this last point, we look forward to close cooperation with ADB as the United States and other bilateral donors launch the Clean Technology Fund to help developing countries finance advanced technologies to cut greenhouse gas emissions.

Second, the ADB's role in middle-income countries has been a matter of rich debate among shareholders and we urge continued dialogue as we try to determine the optimal mode of engagement with countries that still face crucial development challenges even as they succeed and gain access to private financial markets. In some countries, this will mean shifting from financial assistance to fee-based policy guidance of the kind that the Bank is uniquely qualified to provide. Adaptation to change is a challenge, but it also presents a tremendous opportunity for the Bank to use its knowledge to help countries in new ways, and we look forward to helping the Bank stay true to its Charter.

Third, my boss Secretary Paulson likes to say that private entities that do not reform with the times go bankrupt, whereas public entities become irrelevant. At the ADB, we think a number of changes are needed to avoid being irrelevant. The ADB needs to ensure that it measures and manages for development results and its evaluation unit remains independent.

And, some have asked me why the United States cares so much about the human resources department. My answer is that the most valuable asset of the ADB is its people. The recruitment, retention, and career development of the kind of dedicated, qualified professionals needed by the Bank to fulfill its mission are central to the ADB's success. It is imperative that the management take concrete steps to professionalize human resources management. One place to start is scrapping the anachronism at many levels of the organization for a bias toward nationality as opposed to merit.

We think with efforts in these three areas – combined with the solid work in such countries as Afghanistan – the Bank will truly have a long-term strategy.

I would like to close by thanking President Kuroda and the entire bank staff for their work in preparing for our meetings here in Madrid, and my government looks forward to continuing our work with the Bank and fellow shareholders as we pursue our common vision of a region of growth and prosperity for all its citizens. Thank you very much.