The future of Asia is what the Asian Development Bank's new president Haruhiko Kuroda says this year's annual meeting in Istanbul will be all about. That and the future of the ADB itself, he adds.
This is an ambitious vision for his first annual meeting as head of the Bank, but Kuroda hopes to help shape the future by using the ADB as an instrument to assist the economic integration of Asia – a role its founding charter allows for but which has never been fully exploited.
The former senior financial bureaucrat, who took over as president on February 1, is at 60 years old relatively youthful compared to previous holders of what by tradition has become a Japanese fiefdom at the ADB. A rather quiet and retiring man, although with a ready sense of humour, Kuroda brings to the ADB a new image and a new sense of mission.
What is his agenda? "First is to emphasize that Asia is diverse and changing, and that the ADB too has to adjust," says Kuroda, former vice minister for international affairs at the Japanese ministry of finance. "We need to be more flexible in adapting to the needs of members. Countries are changing so fast that if we are slow, our assistance may soon become outdated. The challenge is how to become more flexible and timely."
Regional cooperation
At the same time, he adds, the ADB must help promote regional economic integration. Within two months of taking office, he announced the setting up of a new Office of Regional Economic Integration at the Bank's Manila headquarters. "It will play an active role as catalyst, coordinator and knowledge leader in the area of regional economic integration," he says. "We are in favour of bilateral, sub-regional and regional integration."
This could prove to be enormously important because efforts at economic integration in Asia have been very fragmented compared with far more ambitious achievements in Europe and North America. The European Union and Nafta give tangible form to what is still only a concept in Asia. Regional cooperation needs administrative structures to support it, and that is what the ADB's president hopes to supply by his initiatives.
But he acknowledges the need to move cautiously. "Eventually we would like to have region-wide cooperation, but at this stage it is more realistic to facilitate arrangements for sub-regional cooperation," he says.
Powerful ADB shareholders such as the US have shown strong hostility in the past towards the idea of Asian nations getting too close, as in 1997 when the US attacked the idea (which some say was Kuroda's own brainchild) of launching an Asian Monetary Fund. The AMF idea lives on, however, in the form of the Chiang Mai Initiative – a network of currency swaps among Asian nations. Helping nurture the CMI will be one task that Kuroda's new Office of Regional Economic Integration will perform.
It will also look after the Asean+3 finance ministers' process (including the economic review and policy dialogue process, the Asian bond markets plan; Asean's surveillance process; the Apec finance ministers' process; and the Asia-Europe finance ministers process).
"We have to face reality," says Kuroda. "We are not a political institution. So we can only facilitate regional cooperation indirectly." The ADB has had some impressive if quiet achievements already in this direction.
It has begun welding together a number of Indo-Chinese countries under what is known as the Greater Mekong sub-regional development scheme; it has helped South Asian nations integrate their economies, and it is encouraging Central Asian Republics to cooperate in the economic sphere.
"Investing in infrastructure is one thing but facilitating real economic integration is quite another, because even if you have highways and power and telecommunications and yet trade among members is hampered by tariffs, regulations and bureaucracy, then real integration may not take place at all," the president says.
"So on the one hand, we help to build infrastructure and, on the other, we help countries to increase intra-regional trade through reducing tariffs and removing barriers."
Fostering economic togetherness in Asia will eventually lead to monetary and political cooperation among the countries concerned, says Kuroda. "Looking back at the experiences in Europe you see that attaining a single currency requires long-term efforts. For instance, the euro was created in 1999 after almost 30 years' effort by European countries. So even if a single currency were to be created in this region it would take 20 to 30 years before we could actually introduce it."
"Before that, I think we have to establish a single market. Trade agreements could help establish a single market, but trade and investment are one way and harmonization of domestic regulations and so on are another way to facilitate a single market emerging," he adds. "And that is extremely important by itself for fostering economic integration, reducing income disparity among countries, among people, further improving living standards and so on. A single market is required for a single currency."
Three wise men
This is where Kuroda's own strategy begins to look like that of a chess Grand Master. He has appointed one of his strongest allies, Masahiro Kawai, to head the ADB's new office for regional integration. A Tokyo University economics professor, Kawai was formerly chief economist for East Asia and the Pacific in the World Bank and Kuroda's deputy in the Japanese finance ministry between 2001 and 2003.
Yet another of Kuroda's former deputies, Takatoshi Ito, an economics professor, recently launched the Asian Bellagio Group in Bangkok, which will focus academic and central banking talent on how to achieve closer economic and monetary integration in Asia.
With this triumvirate – plus the support of the Japanese government (including prime minister Junichiro Koizumi to whom Kuroda served as special adviser until recently) –he has what aides say is "strong political backing" for his regional initiatives.
Kuroda insists that poverty reduction will remain the ADB's "over-arching objective". In order to realize poverty reduction "you need three things. Growth will help but growth is not everything. Growth, governance and social development are necessary," he says.
"Many countries in the region are making substantial progress and many may be able to attain the UN Millennium Development Goals, but there are some that are far behind. Even those that are making great progress [including China and India] may not be able to attain all of the MDGs."
The challenge for the ADB will be in coping with the needs of countries at very different stages of development, Kuroda says. Asia is home to advanced emerging market economies, but as a region it still has two-thirds of the world's poorest people.
A variety of strategies will be essential to meet this "unique" situation. The huge disparities in income and development will mean that the ADB has to focus on individual countries as well as on regional integration initiatives. "The region is changing so fast and the ADB has to adjust itself just as fast. That is not easy for an established institution," he adds.
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Haruhiko Kuroda: life lines
Haruhiko Kuroda was elected ADB president in November 2004. He officially assumed office on February 1. Before joining the ADB, he was special adviser to the cabinet of Japanese Prime Minister Junichiro Koizumi. He was also a professor at the graduate school of economics at Hitotsubashi University in Tokyo.
In a career spanning nearly four decades, Kuroda has represented Japan's ministry of finance at a number of international monetary conferences as vice minister of finance for international affairs.
During his terms as director-general of the international bureau and as vice minister of finance between 1997 and 2003, Kuroda helped design and implement the $30 billion Miyazawa Initiative. This was Japan's response to Asian economies hit by the 1997-1998 financial crisis. Under his leadership, Japan helped Asian nations establish the Chiang Mai Initiative, a network of currency swap agreements designed to avert another crisis.
Born on October 25, 1944, Kuroda holds a BA in law from the University of Tokyo and a master of philosophy in economics from the University of Oxford. He joined the ministry of finance in 1967. Eight years later, he was seconded to the International Monetary Fund. After returning to the ministry, Kuroda assumed a number of senior posts in the international finance and taxation bureaux.
While deputy director-general of the international finance bureau, he was responsible for Japan's official development assistance as well as relations with multilateral development financial institutions including ADB. He served as president of the ministry's research arm, the Institute of Fiscal and Monetary Policy, for one year before returning to the international bureau as director-general. Two years later, he was promoted to vice minister of finance for international affairs, responsible for policy planning, international coordination, and external representation.
After retiring from the ministry in 2003, Kuroda advised Koizumi on international monetary issues. He has written several books on monetary policy, exchange rate, international finance policy coordination, international taxation and international negotiations.
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"A single market is required for a single currency"