"What happens in Asia on climate change is of global importance"

Takehiko Nakao is President of the Asian Development Bank (ADB) since 2013. He is the ninth president of the bank and as his predecessors coming from Japan. 60 year old Nakao has served as an advisor at the International Monetary Fund (IMF). He was also the Japanese representative at the G7 and G20 summits in 2012.

When ADB was founded in 1966, Asia was one of the poorest regions of the world. Today, it is one of the most dynamic regions. However, challenges still remain. Where do you see the most important challenges for Asia in the future?

While developing Asia has achieved a lot in terms of economic development and poverty reduction, as many as 450 million people are still in extreme poverty. Gender equality should be enhanced. Climate actions continue to be an urgent priority. The private sector should be further developed. More effective regional cooperation is needed.

Most of Asia’s economies continue to grow fast. Still, income disparities are widening. What efforts is ADB making to overcome social inequality?

To address inequality, ADB supports the creation of economic and job opportunities through a strong focus on infrastructure development, with a growing emphasis on targeting poorer and lagging regions in our developing member countries (DMCs). In addition, ADB is expanding its support for human development, including skills training and vocational education to enhance the employability of the labor force.

As part of its work with the private sector, ADB is strengthening investment climates in DMCs and expanding support for micro, small and medium enterprises, and for inclusive business development, which provide significant employment and entrepreneurial opportunities. Finally, ADB is supporting social protection programs and social safety nets for the poorest populations in the region.

In 2014, the independent evaluation of ADB’s Strategy 2020 stated that environmental degradation in Asia is a major challenge. What progress has been made in the meantime concerning environmental sustainability?

Many countries in Asia and the Pacific have put in place green growth policies. They have made strong commitments to pursue economic growth in a way that limits carbon emissions and ecological degradation. Contrary to perception, leaders of developing countries in the region know the importance of such policies and wish to be a part of global efforts for mitigating emissions.

That said, much more needs to be done. Rapid urbanization means air, land, and water quality is deteriorating. We need to work harder to channel funds—particularly private sector funds—and to tap expertise, new approaches and technologies to achieve environmental sustainability in this dynamic region of ours.

With Asia being one of the most vulnerable regions in the world to climate change, ADB will double its annual climate financing to USD 6 billion by 2020—with USD 4 billion dedicated to mitigation efforts, notably renewable energy and energy efficiency, and USD 2 billion for adaptation such as resilient infrastructure and better preparation for climate-related disasters.

For the first time, ADB is holding its Annual Meeting in Germany. What results do you expect?

We expect many issues to be discussed in Frankfurt including connectivity, trade and investment between Asia and Europe, and the opportunities and potential crisis spillovers associated with the increased Asia-Europe linkage. As we start gearing up to mark our 50th anniversary later this year, I hope this will be a constructive and productive meeting.

We also have many specific issues of interest in common with our German hosts, including the private sector and its role in development, the importance of small and medium enterprises, the financial sector and strengthening commercial banks, and the need to create high quality jobs, including through vocational training and high quality workplaces. This in turn raises the question of how to improve workplace safety and conditions—an issue that Germany is promoting in Bangladesh for instance with its garment industry—and how to move developing countries up the value chain.

Another major topic is climate change and how to deliver on COP 21 commitments. Germany is an important advocator on this topic. What happens in Asia on this issue is of global importance, given that one third of global greenhouse gas emissions are from Asia and about one third of global production is in Asia.

How could Germany contribute to a successful outcome from the Annual Meeting?

Germany’s decision to host the 2016 Annual Meeting reflects its long-term commitment to development and sustainability across Asia and the Pacific, and the increasingly important economic and trade links between Germany, the European Union, and our region.

We are pleased that Germany proposed Frankfurt because of its prime location as a financial and business center in Europe. ADB’s first bond was launched on the Frankfurt market in September 1969. It will help attract attention to Asia's development agenda among a large number of participants from both the public and private sectors.

ADB and KfW signed a $2 billion cofinancing partnership in 2014. How do you value the progress of the partnership?

The partnership with KfW has allowed ADB to scale up and expand cofinancing operations in sectors of highest priority, with 84 % of the cofinanced projects in climate and renewable energy. To date, six projects totaling USD1.35 billion (65 %) out of the USD2 billion have been agreed on.

Initially only five countries were covered under the memorandum of understanding. However, due to the success of the partnership, ADB and KfW agreed to include Afghanistan, the People’s Republic of China, Myanmar, Nepal, and Sri Lanka, along with the existing priority countries—Bangladesh, India, Indonesia, Mongolia, and Viet Nam.

ADB and KfW have also undertaken a staff exchange program to better understand each other’s business processes and to harmonize and coordinate cofinancing opportunities.

In late 2015, we held a high-level KfW delegation to review progress and to discuss future collaborations linked to the Sustainable Development Goals and climate change. The next high-level meeting is planned for the first quarter of 2017 in Frankfurt.

Questions by Charlotte Schmitz.