:00:13. > :00:18.That's it from me but now it is We are used to the idea that we're
:00:18. > :00:24.living in ASIO's century, that China and India are leading an
:00:24. > :00:31.irreversible shift of power from west to east. -- Asia's. Maybe now
:00:31. > :00:41.it is time to challenge that new orthodoxy. Asian Nations are facing
:00:41. > :00:46.
:00:46. > :00:56.huge challenges, poor governance and environmental degradation. My
:00:56. > :00:57.
:00:57. > :01:07.guest is Rajat Nag, from the Asian Development Bank. Are reports of
:01:07. > :01:07.
:01:07. > :01:16.Asia's economic advance somewhat premature? Rajat Nag, welcome to
:01:16. > :01:22.HARDtalk. Thank you. Thank you very much. It strikes me that in recent
:01:22. > :01:30.years, Asia has hardly been short of investment. What exactly is the
:01:30. > :01:35.point of the Asian Development Bank. The way you introduce did it is
:01:35. > :01:40.spot-on. There is a certain euphoria about Asia and the reality
:01:40. > :01:45.is they receive huge unfinished agenda. We have done very well. We
:01:45. > :01:50.have done well on poverty, in comes have increased. Asians are
:01:50. > :01:56.healthier and more educated. But there are still 600 million people
:01:57. > :02:06.without access to clean water. Two- thirds of the world's poor live in
:02:07. > :02:07.
:02:07. > :02:13.Asia. $1.25 a day. That is a huge unfinished agenda. We have a lot of
:02:13. > :02:20.work to do. And I come back to my point, which was based on some raw
:02:20. > :02:30.facts. Last year you disbursed up to $20 billion worth of investment.
:02:30. > :02:30.
:02:30. > :02:37.We approved more and disburse to west. China, $50 billion overseas
:02:37. > :02:43.in 2009 and it says by 2013, that figure will be of $100 billion.
:02:43. > :02:48.important thing is not the amount of money that has been provided.
:02:48. > :02:55.You should look at what is being invested in China. China can invest
:02:55. > :03:00.around Asia so what seems to me China represents a force, a wall of
:03:00. > :03:05.money, investment money, that you cannot defeat -- compete with.
:03:05. > :03:09.we are providing China is not money. They do not need it. It needs
:03:10. > :03:15.access to knowledge and best practices. We invested an
:03:15. > :03:19.environmental project. Carbon capture, energy efficiency. That
:03:19. > :03:22.will reduce China's carbon footprint, which will be useful for
:03:22. > :03:28.China and the rest of the world said there is an important synergy
:03:28. > :03:34.here. That is a proposition I would like to test. Before we get there,
:03:34. > :03:38.people watching this will be looking at the world economy and
:03:38. > :03:41.looking at the sense of doom we see in the rich industrialised West and
:03:41. > :03:46.wondering whether you, as the leading figure in Asian economic
:03:46. > :03:54.analysis, believe it is bound to have an impact on the Asian economy.
:03:54. > :03:59.Will it? Certainly. We will be affected by what happens in the
:03:59. > :04:04.West but because our macro-economic fundamentals are strong in Asia,
:04:04. > :04:07.debt is lower, we have strong domestic demand, we will be able to
:04:07. > :04:15.weather the economic crisis much better and we are forecasting
:04:15. > :04:21.growth in Asia this year of about 7.5%. Edit down. A bit down since
:04:21. > :04:25.April. But the West is not doing as well. I wonder if that is wildly
:04:25. > :04:29.optimistic and based on the fact that Asia recovered so quickly and
:04:29. > :04:34.impressively from the financial crisis of 2008 but this time around,
:04:34. > :04:38.it could be difference and worse. One of the leading American
:04:38. > :04:44.economic analysts told us last week but in his opinion, we are looking
:04:44. > :04:50.at the phrase "the great contraption", to be compared to the
:04:50. > :04:55.Great Depression. It is hard to see how Asia will continue to grow.
:04:55. > :04:59.Does that mean there will be orderly resolution of the US-owned
:04:59. > :05:03.crisis? That is a heck of an assumption. One has to make certain
:05:03. > :05:09.assumptions based on what we see happening and if that does not
:05:09. > :05:15.happen, we have to look at all the numbers again. We feel that 7.5% in
:05:15. > :05:20.that neighbourhood it is not. has what one of China's best known
:05:20. > :05:25.economic analysts, now the Chief of the Beijing International Finance
:05:25. > :05:29.Forum, said. He said China is entering a tough period indeed.
:05:29. > :05:35.Inflation and growth rates are conflicting with each other and it
:05:35. > :05:40.is troubling. It is troubling. Not only in China but in India.
:05:40. > :05:44.Inflation rip pressures. It prevents -- presents several
:05:44. > :05:51.challengers. Given the fundamentals as we see it, but potential for
:05:51. > :05:58.economic growth is strong. What it will come down to from 7.5, we
:05:58. > :06:04.cannot say but there will be a need on a greater balance in. Asia will
:06:04. > :06:11.have to become consumer a share, not just factory Asia. I have been
:06:11. > :06:14.hearing that for a long time. China takes that seriously and eases its
:06:14. > :06:18.monetary and fiscal policy and encourages domestic consumption.
:06:18. > :06:22.The inflation rate could go a whole lot higher and it could be looking
:06:22. > :06:27.at a bubble, particularly in terms of property which could be damaging
:06:27. > :06:34.to China and the rest of the world. That is why we have said inflation
:06:34. > :06:39.is a concern. Asia's macro-economic management has been pretty sound
:06:39. > :06:44.and these factors are balanced but what we are see in his -- saying is
:06:44. > :06:53.Asia has to consume more. Not irresponsibly, like Europe or
:06:53. > :06:56.America, but much more. Asia consumes 10% of the electricity.
:06:56. > :07:01.We're not saying in we go up to American levels but certainly,
:07:01. > :07:05.consumption levels in Asia can increase. Consumption we might come
:07:05. > :07:11.back to as a philosophy to drive growth but before we get there, let
:07:12. > :07:17.us think a little deeper about your bank, the Asian Development Bang.
:07:17. > :07:22.It seems anachronistic back the bank, its two most intellectual
:07:22. > :07:29.partners, are the United States and Japan. It is a throwback to the
:07:29. > :07:38.1960s. That is the shareholder in now. We had a capital increase last
:07:38. > :07:43.year. Shareholder has tripled our capital. -- shareholders. When
:07:43. > :07:47.you're taking big investment decisions and you say it is very
:07:47. > :07:53.important in the terms of how you want to affect Asian growth, the
:07:53. > :08:02.biggest and most influential voices are coming from America and Japan?
:08:02. > :08:06.China and Coria are important shareholders. -- Korea. Path is
:08:06. > :08:11.America and Japan. That is changing. It should be changing now.
:08:11. > :08:16.The important thing is how we increase our operations, how we
:08:16. > :08:18.leverage our resources to fight poverty because poverty is a huge
:08:18. > :08:23.challenge, and unfinished agenda in Asia.
:08:23. > :08:28.How does it work, this idea that to fight poverty best by sticking to
:08:28. > :08:38.aid decades old notion that a development is all about building
:08:38. > :08:39.
:08:39. > :08:45.big project. -- to a decades-old. Building dams and highways. How
:08:45. > :08:48.does that alleviate poverty? For it does significantly. We supported a
:08:48. > :08:53.huge bridge in Bangladesh which made a big difference to poverty
:08:53. > :08:57.levels in Bangladesh because it connected the poorest part of
:08:57. > :09:01.Bangladesh with the south-western part. Infrastructure by it self is
:09:01. > :09:05.not enough but it is a very necessary condition for growth.
:09:05. > :09:09.Growth is necessary to reduce poverty. One of the signature
:09:09. > :09:19.pieces of infrastructure you have invested in this in the greater
:09:19. > :09:21.
:09:21. > :09:27.Mekong River sub region, a huge hydro power project, in Laos. Local
:09:27. > :09:30.people report it has drastically reduced fish stocks and a damaged
:09:30. > :09:36.agricultural production, affecting the lives of tens of thousands. How
:09:36. > :09:39.was that part of poverty alleviation? That project was one
:09:39. > :09:43.of the first projects, done in the 1990s. They are still feeling the
:09:43. > :09:47.effects today. As soon as we learnt about it, we were there and many of
:09:47. > :09:54.these issues have been addressed. You should look at other projects
:09:54. > :10:00.we have supported. Another one you referred to in a previous programme.
:10:00. > :10:03.That project has now got the best practices on resettlement, on
:10:03. > :10:12.safeguards so we learnt from mistakes but those projects are
:10:12. > :10:18.making a difference to the people. Action Aid. They have looked at
:10:18. > :10:21.some of your biggest infrastructure projects and say you have
:10:21. > :10:28.exaggerated the poverty problem and created new environmental to a
:10:28. > :10:34.branch. -- damage. They say you have not served to deliver the poor
:10:34. > :10:39.a decent life. We have heard this and we are in dialogue with them
:10:39. > :10:48.and others. It is not quite right. We have to look at the figures.
:10:48. > :10:55.Asia has reduced poverty. 50% were poor in 1970. That is down to 20%.
:10:55. > :11:01.With respect, this is a question of making sense of the micro and the
:11:01. > :11:07.macro. They are saying some of your biggest signature schemes are
:11:07. > :11:11.counter-productive. That is where I disagree. They are not. I do agree
:11:11. > :11:15.that all these large infrastructure projects have some affects and
:11:15. > :11:18.sometimes negative. We are conscious of that. We have
:11:18. > :11:28.safeguard policies which try to avoid that him back but when we
:11:28. > :11:34.cannot, we minimise it. -- impact. Income generation. Exactly the
:11:34. > :11:37.point you made. Those safeguards are not working. A watchdog group
:11:37. > :11:40.accused you of consistently sideline in civil society
:11:40. > :11:45.organisations who want to complain about adverse affects of your
:11:45. > :11:49.policies. With all due respect, and we talk to them frequently, we have
:11:49. > :11:53.an accountability mechanism. It is a question of whether you were
:11:53. > :11:57.listening or just talking at them. We listened but we have
:11:57. > :12:00.stakeholders who include the civil society, who include the
:12:00. > :12:05.government's, the other shareholders, the affected people
:12:05. > :12:10.and we have to build a consensus. - - governmentgovernmentmes, civil
:12:10. > :12:14.society might feel we have not listened to them a but we listened
:12:14. > :12:18.to others as well. Here is perhaps the biggest point of all. You have
:12:18. > :12:23.said sustainability is important and he expressed concern about
:12:23. > :12:28.environmental degradation. -- you. Is it not the case that so much of
:12:28. > :12:36.what you are funding, the economic growth you're sitting in Asia, is
:12:36. > :12:41.having an extraordinarily come to - - counter-productive affect?
:12:41. > :12:44.have to keep it in perspective. 800 million people in Asia are up
:12:44. > :12:49.without access to electricity. That is the population of North America
:12:49. > :12:56.and Europe combined. Providing them wi wi we have to have
:12:56. > :13:04.options. Renewables will be the best. Nuclear? Maybe. Wind and
:13:04. > :13:10.solar, we support and strongly. They can provide and the 10% of the
:13:10. > :13:16.requirement and wind dies down, the sun gets covered over. They are not
:13:16. > :13:24.reliable. Is this a way of you financing coal-fired power
:13:24. > :13:30.stations? No. How many are your financing? We are financing one.
:13:30. > :13:36.Fewer and fewer. Let mwer. Let mHow do you provi you provicity?
:13:36. > :13:44.Renewables on not enough. Nuclear as an option but it has issues.
:13:44. > :13:54.Hydropower has downstream effects. Cole is another one. -- coal. It is
:13:54. > :14:00.
:14:00. > :14:06.the cheapest in Asia, renewables on the balance. When we Finance call,
:14:06. > :14:10.-- coal, we look at all other options. We want to look at the one
:14:10. > :14:15.with the lowest carbon footprint. This is a difficult one for you.
:14:15. > :14:19.The smile of pleasure on your face, you refer to meet the degree at
:14:19. > :14:24.which India and China are going to see car owners rise. He replied
:14:24. > :14:28.that as a positive. The construction of 30,000 kilometres
:14:28. > :14:32.of new roads have been financed. That should be applauded but he was
:14:32. > :14:37.simply inviting more and more Asians who do not a dry individual
:14:37. > :14:47.cars to acquire and use their own cars and if that continues, that
:14:47. > :14:48.
:14:48. > :14:53.That is the point - not that we would have the consumption levels
:14:53. > :15:01.of a miracle or Europe but that people with a bicycle could be
:15:01. > :15:06.justified to have a motorcycle or scooter. We are very involved in
:15:06. > :15:13.ent. It is not just a question of
:15:13. > :15:17.providing the roads. It must be sustainable. Asia is down there in
:15:17. > :15:24.terms of car ownership and consumption. It is conceivable that
:15:24. > :15:34.it will increase but it must be sustainable. The question is how
:15:34. > :15:35.
:15:35. > :15:40.much you ape Western models of consumption driven quarry if. --
:15:40. > :15:44.growth. "someone who thinks a lot about this and he said: Too many
:15:44. > :15:51.Asians go to US business schools and take on an ideology dearer.
:15:52. > :15:55.They are smart but they are intellectually neutered. People
:15:55. > :16:00.like that just to buy into western growth models. A think we should
:16:00. > :16:06.take the best from everywhere. Western universities, if they give
:16:06. > :16:13.the best education, I will go there. But we should not have a Western
:16:13. > :16:19.presumption -- consumption model. We will have an Asian model. You
:16:19. > :16:26.cannot say, it is good for you to have no electricity. But you do not
:16:26. > :16:32.need three cars in the garage. It is not a bin a Western model - it
:16:32. > :16:35.is a question of coming up with our own model. So it is A delicate
:16:35. > :16:40.Balance. Do you think you got it wrong when you decided to fund
:16:40. > :16:48.private water companies? They are improving water supply in Asia but
:16:48. > :16:53.at a price that some people in Asia are finding unacceptably high.
:16:53. > :17:03.should give an example of manilla, where I live. It is a water
:17:03. > :17:05.
:17:05. > :17:11.supplies are owned by a private company. -- Manila. But had to
:17:11. > :17:21.decide what is acceptable? We keep talking about water supply. The
:17:21. > :17:22.
:17:22. > :17:28.poor pay the highest price. They need to either buy bottled water or
:17:28. > :17:37.they drink polluted water. We need people to pay zero. I think society
:17:37. > :17:41.and the poor are better off than being told, there is no water
:17:41. > :17:45.supply. You say you want an Asian style of economic development that
:17:45. > :17:50.strikes a balance. How do you square that with the fact that some
:17:50. > :18:00.of the most vulnerable communities in the world when it comes to the
:18:00. > :18:02.
:18:02. > :18:05.effects of climate change, how do you squeeze your belief in quoth
:18:05. > :18:10.with the fact that in Bangladesh or the Philippines there are people
:18:10. > :18:20.who right now are facing potentially disastrous
:18:20. > :18:25.consequences? Absolutely. Asia is very concerned. Nine out of ten
:18:25. > :18:29.cities in Asia will be submerged if sea levels rise. Two-thirds of
:18:29. > :18:35.people in Asia depend on agriculture so they are affected by
:18:35. > :18:45.climate change. It is one thing you tell me you are concerned but could
:18:45. > :18:54.it affect the investment decisions that you make? It is not a question
:18:54. > :18:57.of getting over coal. We want to invest in Hydra. Ever a time you
:18:57. > :19:04.making investment decision on coal- fired power one could say that you
:19:04. > :19:11.are at inviting suicide For your own region. No. It is a question of
:19:11. > :19:19.has sensibly do it. You do not just turn off the light. -- how you
:19:19. > :19:26.sensibly do it. I suggest we look at the options available. Asia is
:19:26. > :19:31.unilaterally taking steps on reducing greenhouse gas emissions.
:19:31. > :19:40.We are looking at how we can produce and consume much less. But
:19:40. > :19:45.China end India and Japan and Korea have done is investigate these
:19:45. > :19:52.alternatives. We are investigating many of these projects. Asia could
:19:52. > :19:56.say, let the west take care of it, but I do not think the answer is
:19:56. > :20:02.not to consume. You have talked to other Asian governments about where
:20:02. > :20:05.you can best put your money to work. At what point do you think
:20:05. > :20:09.yourselves at the bank, we should not necessarily give them money at
:20:09. > :20:12.all because there are such serious Governance transparency and
:20:12. > :20:21.accountability issues that we can never trust them to disperse the
:20:21. > :20:27.funds properly. That is a valid point. He does not stop you
:20:27. > :20:37.dispersing the money! We put everything through a simple filter.
:20:37. > :20:47.When our actions make a difference, we believe that being there and
:20:47. > :20:51.
:20:51. > :20:55.Steyne engaged and raising issues... Give me one recent case. They are
:20:55. > :20:59.fantastically serious governance issues. Give me one time when you
:20:59. > :21:06.still up to officials and demanded they change their practices or
:21:06. > :21:16.demanded the removal of individuals. In eight of the countries I
:21:16. > :21:17.
:21:17. > :21:22.mentioned. We have procurement systems that are robust. We have
:21:22. > :21:26.sanctioned individuals and companies in the last seven years.
:21:26. > :21:32.Who have you ever close down a project because of corruption? Yes.
:21:32. > :21:39.With several governments. A give me one government. A day is not fair
:21:39. > :21:49.to give you one country. You are talking about transparency!
:21:49. > :21:54.
:21:54. > :22:04.billion worth of investments, we have. We have cancelled loans for
:22:04. > :22:07.
:22:07. > :22:11.issues including Governance, so we did take actions. It is very
:22:11. > :22:15.important that we talk about the specifics with the Government's
:22:15. > :22:20.Private lives. A not with people like me so their populations back
:22:20. > :22:27.in Asia know what is drawing on. The important thing is: What effect
:22:27. > :22:32.does it hurt? You issued a report and posed the question: Is Asia are
:22:32. > :22:38.going to be economically Supreme by 2050 or will it fall into the
:22:38. > :22:47.middle income trap and never fully advance took nation status? It is
:22:47. > :22:54.probable but not pre-ordained. If Asia does not mend its Governance...
:22:54. > :23:00.There are two things not happening well: Fear is rising inequality and
:23:00. > :23:06.rising governance issues. Things are getting worse. In some
:23:06. > :23:13.countries. We are very concerned about Governance. If Asia does not
:23:13. > :23:16.handled this issue,... The two giants of Asia, China and India,
:23:16. > :23:22.would you say they are getting worse when it comes to Governance
:23:22. > :23:28.and inequality? In a quality is getting worse in both countries,
:23:28. > :23:32.years. Governance is not just corruption - there is a rule of law,
:23:33. > :23:40.accountability, effectiveness. Both of them are just about at the same
:23:40. > :23:44.level, which is not good enough. You started by saying there is a
:23:44. > :23:51.danger of too much euphoria. You have poured a bucket of cold water
:23:51. > :23:58.on it. I have not. I have been realistic. I have said it is too
:23:58. > :24:05.early to pop the champagne cork because when you visit Asia it is