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Haruhiko Kuroda TalkAsia Interview Transcript
Airdate: June 18th, 2005 LH: Lorraine Hahn Block A: LH: Hello and welcome to TalkAsia, I'm Lorraine Hahn. My guest this week is Haruhiko Kuroda, President of the Asian Development Bank. Established in 1966, the ADB promotes economic and social development in the region, and has made poverty reduction its main goal. Most recently, its Asian Tsunami Fund has been helping countries hit by the disaster recover and re-build. Haruhiko Kuroda officially became the ADB's 8th president in February. Before that, he had an illustrious career with the Japanese Finance Ministry, and was special advisor to the Cabinet of Prime Minister Junichiro Koizumi. Mr. Kuroda, thank you very much for coming to Hong Kong; it's good to see you. You have ear-marked regional cooperation and integration as your priorities. Why are these so essential? HK: I think through economic integration, countries can accelerate growth and reduce poverty. That is overarching objective of ADB, and that is good for those economies and people living in developing Asia. LH: What though needs to be done to achieve this? HK: There are three ways: One is to promote infrastructure cooperation among countries in the region. Second, is promote financial cooperation so as to avoid any recurrence of financial crisis like we had in 1997 and '98. The third area is to promote trade and investment cooperation through the networking of FTAs in the region. By three ways I think we can push economic integration in the region further. LH: It sounds so easy, it sounds so straightforward doesn't it -- one, two, three, but it isn't. Your predecessors and many other people have been trying for years to do this right? HK: That's right. But after the currency crisis in 1997, Asian countries have understood the merit, the value of economic integration on the one hand, and the need of economic cooperation so as to avoid any negative sort of contagion coming from one country to another. So now Asian countries are determined to further economic cooperation and intensify economic integration so that ADB can assist them to do so. LH: Right. I wanted to ask you about the recent, and of course I'm sure you know, tensions between Japan and China, and how you feel about that both professionally and personally, as a Japanese. HK: You see now Japan is the largest trade partner for China PRC, and PRC is the largest trading partner for Japan. That means that the interdependence between the Chinese economy and Japanese economy is very high. And that interdependence is benefiting the two economies. So in spite of the latest political setback, I do think and I do hope that the economic integration will continue, economic interdependence will intensify and the two economies will continue to benefit from close economic relationship. LH: Right, moving on specifically to China and its economy, of course growing overseas interest in China. Do you see this continuing and China becoming more and more an important figure and player in this part of the world? HK: Yes definitely. Because Chinese economic growth will continue in coming years and decades, and that means the Chinese economy will become more important. It is already important, but will become certainly more important. LH: Do you see then China as the so-called "white knight"? HK: Yes I think the initially some Asian countries were somewhat concern about intensified competition from Chinese economy. But now they fully understand the benefit from growing economies in China and the...actually trade flows and investment flows among Asian economies, including Chinese economy, they are pushing economic growth higher than otherwise. So I think now people understand that the Chinese high growth is not a threat at all, it is an opportunity for many Asian economies in the region. LH: Right but people do fear that their currency should be more flexible, there should be a revaluation. Where do you stand on something like this? HK: I think the dollar peg system worked quite well for the Chinese economy in 1990s, but now it is not. So from domestic economic point of view, the Chinese currency regime should be made more flexible. So I think it's better to do so sooner rather than later. But the pace of exchange rate adjustment should be gradual, should be gradual. (LH: Not immediate right, not instant?) Yes it should be gradual. And I think the currency issue must be decided by the government in charge of the issue. So that means that the Chinese government can and should decide the most appropriate exchange rate regime. (LH: What is best for them...) Yes. LH: Mr. Kuroda we're going to take a very very short break. When we come back we'll talk to Mr. Kuroda about Asia and the aftermath of the devastating tsunami, and other challenges ahead for the ADB. Block B: LH: Welcome back, we're talking with Haruhiko Kuroda, the President of the Asian Development Bank. Mr. Kuroda you've had...you've just finished your first one hundred days in office, how has it been? Any surprises? HK: Oh it is very challenging but it is very exciting job, to be head of ADB, because ADB has contributed greatly to the development of Asian economies, and now because we are dealing with the tsunami reconstruction effort. LH: Asia is probably the most dynamic region in the world. However, two thirds of the population still remain in poverty, that's right? What is going to be the recipe for change for the situation? That is a lot of people. HK: Yes that's right. I think there are a few challenges here. One is of course Millennium Development Goals. Many economies, including the fastest growing economies like Chinese economies and Indian economies, they still face big challenge -- how to achieve Millennium Development Goals, reduce poverty, reduce child mortality, promote women involvement in the society and so on. So here ADB are the only development bank in the region, can help these countries to improve social conditions, economic conditions, achieve Millennium Development Goals; that is one thing. Another is the latest study made by ADB, World Bank, and the JB, showed huge need of infrastructure investment in Asia - something like 250 billion dollars every year. Here, ADB can further increase assistance (LH: Funding), yes funding to invest in infrastructure, needed infrastructure in the region. I think that is...and thirdly as we talked about regional cooperation, regional integration -- that is the key for continued growth in the region in coming years. So ADB is sort of coordinator for regional economic integration, certainly would like to assist regional countries to further cooperate with each other, further integrate their economies. LH: How long will this take? How realistic is... HK: Even in the next five years substantial economic integration will take place. Already we have seen so many FTAs, free trade agreements, negotiated, concluded. So in the next five years, substantial free trade agreement would be concluded in the region -- further intensifying economic integration. So I am hopeful that substantial progress will be made. LH: Right, how much has the recent, last year's tsunami disaster set the region back? HK: Oh yeah it was devastating event you see. Three hundred thousand people lost their lives, and people have become poor because of the tsunami devastation. (LH: Their livelihood is gone). That's right, so ADB has been trying its best to assist those people, countries, to restore their infrastructure, restore their livelihood. LH: So that's part of the 600 million...(HK: Oh that's right, yeah). Where is that money going? Is it going directly to the different countries and people? HK: Yes, that's right. You see 600 million dollars provided all in grants, not loans, this time unprecedented disaster. So we decided to provide all 600 million dollars assistance in grants. We have already decided almost all of 600 million dollars be provided to four countries -- India, Sri Lanka, Indonesia and Maldives. LH: But there is a worry Mr. Kuroda that the money is not getting where it should. And I'm not saying necessarily the ADB fund and such, but there are worries that corruption and mishandling of funds, is not seeing the money going to where it should go. HK: I think that issue is very important, crucial; we must avoid any corruption, particularly for tsunami reconstruction. So ADB has instituted various mechanisms to avoid any corruption in our assistance for tsunami reconstruction. And actually when I visited Indonesia, because I went to Banda Aceh and met many people affected by the tsunami, they asked us that the assistance be delivered soon, quickly, and that is very important. LH: When you talk about money I know you're also pushing ahead with the development of an Asian bond market. That's one of your pet priorities, why why? HK: You see two ways: One is if ADB issue local currency bond, the proceed of bond issue can be utilized for local currency lending. Some developing countries need foreign currency lending, foreign currency loan, but some others need the local currency loans. So we can diversify, we can make our operations more flexible; responsive to the needs of developing countries - that is one point. Another point is by issuing local currency bond in the region, we can develop domestic...regional bond markets. We have done so recently in Thailand (LH: With the baht?), that's right. Baht's bond we issued and it was hugely successful, and I'm sure that the bond market in Bangkok will further develop. LH: Personally, and I read this in the introduction, you have worked for many years with the Japanese government, advisor to Prime Minister Koizumi. How different is your job now at the helm of the ADB than being a special advisor? HK: In some sense it's completely different. You see I worked for the Japanese Government for more than 30 years. Now I'm working for the ADB, ADB has 63 shareholders, among them 45 regional countries and 18 non-regional countries. So I have to serve 63 countries rather than one country; this is a big difference. LH: So not just one boss, many many bosses. I'd like to ask you about the unique challenges, when you look at Asia overall. What do you think are the unique challenges that Asia faces? HK: I think two things: One is that Asia is diverse. ADB has its members from Afghanistan, through India, Pakistan, China and even some Pacific countries like Papua New Guinea and so on. Asia is diverse, they are so different so ADB must provide assistance tailor made to each developing country. That is one big challenge for ADB. Second is that the region is changing. You mentioned that Asia is the most dynamic region in the world -- that is true. But that means that the needs are changing, even India, PRC, their needs are changing because their economies are growing so fast. So we have to adapt our operations, our dialogue with these countries fast enough. Otherwise we will be lagged behind. LH: Mr. Kuroda we're going to take another very very short break. When we come back, what does the man at the helm of one of the region's most respected financial institutions do on weekends? Stay with us. Block C: LH: Welcome back, you're watching TalkAsia. Haruhiko Kuroda is my guest, and I'd like to ask Mr. Kuroda I mean not much is known about your personal life about your childhood. What was it like? I know you were born in Japan, what was it like? HK: You see I was born in Kyushu, southern part of Japan, which is much warmer and in some sense much open, and also close to Asia. So from my childhood I have been interested in Asia. I was grown up in Tokyo and I went to a university in Tokyo studying law. But after that I went to the United Kingdom to study economics. LH: As a child were you always interested in I don't know, math or economics or one of those instead of the arts? Were you more... HK: Yeah, when I was high school student I was much more interested in physics and mathematics. Even now I from time to time read books on mathematics or physics. LH: Wow, amazing. But you also like reading detective novels correct? HK: That's right, that's right, that's right. All detective novels. (LH: But why?) I read them in Japan or UK, you see on the one hand detective novels are logical, it has logical structure. On the other hand, details, psychology of people involved in a mystery or some...some case, these combinations are very interesting. LH: You have had an extremely successful career. Is this a lifelong dream for you that's been fulfilled? HK: It's a difficult question to answer. Between my career at the Ministry of Finance in Japan and my work at ADB, two years I taught at the Japanese University. Teaching at university was my dream. So in that sense I fulfilled my dream but only two years. LH: Why didn't it last any longer? HK: Oh, I was asked to become head of ADB so I left university January of this year. LH: So your ambitions even as a young man were to lecture, to teach? (HK: That's right, that's right). LH: What do you do when you're not working? I know you travel. HK: Yeah, yeah, yeah, travel a lot. But when in Manila, particularly during weekends, first of course I read a lot of books, and also I like swimming very much. In Japan as you know people can swim only in summer, but in Manila you can swim every month in the year. So for me it's good to live in Manila. LH: You have said that your favourite modern philosopher was Carl Popper, you learn from your mistakes. But a person in your position, with your experience -- do you have the luxury to do this? HK: Of course as president of ADB, I would like to avoid any failures, mistakes. That said, in the human world people make some mistake, big or small. But the most important point is of course trying to avoid mistakes but once you make a mistake you have to learn fully form your experience, from your failure so as to avoid recurrence of any mistake in the future. LH: What has been your biggest mistake? HK: Oh when I was working for the Ministry of Finance I worked in the tax policy field, and the Japanese government tried to introduce the VAT (LH: Yes I remember that), three times, twice failed, but finally it succeeded in. And in all three cases, three trials, I was somehow involved in this thing. So I have learned quite a lot from failures of tax policy. LH: Oh I see. If there was a legacy you wanted to leave under your belt, what would it be? HK: First and foremost of course I like to make ADB more responsive, more relevant, and more result oriented. That is to say ADB more effective, efficient; contributing greatly to the Asian development. By so doing I hope really in the next five years or so Asia will further integrate, further grow and further reduce poverty among people. That is most important point. LH: Mr. Kuroda thank you very much it's been a pleasure, thank you. (HK: Thank you very much indeed). And that is TalkAsia for this week, I'm Lorraine Hahn. Let's talk again next week. 
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