H.E. Mr. Shogo Arai
Parliamentary Secretary for Foreign Affairs
Shanghai Conference on Scaling Up Poverty Reduction
Shanghai, China, May 26, 2004

First of all, let me start by saying a lot of thanks to the World Bank, which managed this meaningful conference in Shanghai and also by congratulating the Government of China for hosting this important meeting.

I would also like to extend my congratulation to China's great economic achievements in recent years which provide us with a strong inspiration for this occasion.

I would also like to thank Dr. Kiyonga, Mr. Afif and Dr. Virmani for their very insightful presentations.

I will now begin by some of the impressive details we have learned from the 3 reports for each country.

Uganda: The report introduces the difficult history and very courageous steps the country took. The country had experienced conflict since 1986, but was able to reduce the percentage of those living under poverty from 56% to 35%. This is a very encouraging success under difficult circumstances.

Indonesia: The country has marked remarkable 7% growth over the last 35 years. It resulted in remarkable reduction of those living under poverty, 60% in 1865 to 11% in 1996. The report is interesting in that it outlines both the times of difficulty and that of improvement.

India: The report mainly dealt with the government's policies and institutional framework, and illustrated their relation to the economic growth through categorization of specific case studies, especially those that were successful. Again, we can see that poverty reduction is a difficult but nonetheless achievable goal.

What I learned most from three cases is, first of all, the importance of strong political leadership, reliable and hard-working bureaucrats, strong and functioning institutions and good relations between owner countries and external donors. Three cases show that whether in peaceful time or in time of crisis, poverty reduction will not be possible without these factors. The second lesson I learned is the fact that, drastic reduction of poverty was the result of rapid economic growth. Commonly seen in 3 case studies, economic growth is a precondition for the alleviation of the poor. The third lesson is the case in which there are urgent need to maintain people's minimum standard of living, and therefore economic growth is not practically possible.

With the aim of inviting more useful comments on the report of case studies, may I put forward several remarks on these elements which I have learned as to be important.

First, as to the importance of strong leadership and institutions, my belief is that good governance is a prerequisite in building a peaceful and prosperous country. If these endeavours along with sufficient governance continue for a sufficient amount of time, a country will surely emerge. The principle of rules of law and law enforcement discipline are the key factors of good governance. Many Asian political leaders whom I met in recent months have strongly emphasized the need of introducing an efficient law-enforcement system to their countries.

The legal and efficient bureaucratic system is absolutely necessary for sustainable development. Bureaucracy around the world usually has a desire of self-perpetuation. And existence of a powerful government often allows the possibility of corruption to occur. Accordingly, check through political, judicial and public surveillance systems is needed to help keep bureaucracy in good shape. Transparency of their activities is required.

Only in very few number of countries are the incomes of government officials are paid solely by tax revenues. In some countries, government business or corruptive way of means are the sources of official's salaries.

In my notion, leaders should stand at the bottom of his people, supporting them by his shoulders. Civil servants' business is to serve his clients - the people - in response to their demands. Bureaucrats should be humble and should not become rich ruling class of the society. Back in Japan's transitional 150 years ago, almost all government leaders were from low or lower-middle class families.

Second point I would like to raise is the relation between economic growth and eradication of poverty. It is universally true that sustainable economic growth is necessary for continuous poverty reduction. Then, two questions could be raised. First, how to make economy in certain regions or countries grow continuously, and what are the necessary environment or conditions for them. Second, if a country achieves sufficient economic growth, what should be done to reap its benefits for the better off of the poor people.

It is obvious that various patterns of economic growth exist, each different according to time and place. Due to my limited capacity and time, I will not go into details at this moment. However, I do like to take up one issue and stress on the importance of mobilizing all sources of funding for development, especially through trade and investment. There is a limit to the extent to which we can rely on ODA. The flow of money transferred through trade and investment is significantly larger than that transferred through ODA. Therefore, one of the main objectives of ODA should be to facilitate trade and investment in developing countries. Direct investment from outside the region is a powerful "fertilizer" for the economy, because the investment is usually combined with the management and marketing that is globally competitive. For making the use of FDI, it is necessary to create favorable investment environment and to establish the rules which enable the profits from investment to be reinvested within the region. I should also like to add that inward tourism flows are one of the most peaceful and useful generators of incomes and employment. Tourism can become a powerful tool for job creation and economic growth.

We must also remember that even in economies which have achieved economic growth, there could be a problematic disparity between the rich and the poor. Then the governments need to consider the way of transferring the fruits of economic growth to the less prosperous regions and people. I understand that governments often do so by spending government money for infrastructure construction in rural areas, social security or subsidies for farmers. However, governments need to consider the effectiveness of these measures, since they often become heavy burden on the financial situation at the national-level. In any event, governments need to implement strong political will in income redistribution.

Third and last point of today's lesson is concerning the case where the linkage between economic growth and poverty reduction is not applicable because of such factors as domestic and cross-border conflicts, wide-spreading infectious disease and shortage of food. In such situation, it is crucial to empower the poor by providing necessary environment for increased production of agriculture, primary health services, primary education and access to credits and infrastructure services. As an example, Indonesia's Kecamatan Development Program (KDP) reported in the document is a very impressive case. I think this program was successful particularly because it allowed the villagers to make their own choices about what they need in cooperation with the local government and other actors.

The importance of putting people at the center of our concerns is in line with the concept of "human security" which calls for the protection of individuals from various threats such as conflicts, poverty and infectious disease and for the empowerment of individuals. As one of the main author of this idea, we are pleased to note that it is gaining support internationally.

Mr. Chair, I have come to end of my remarks. Development is a major challenge which requires broad range of activities over a considerable period, thus it is not easy to come up with a universally applicable prescription. Nevertheless, I am confident and optimistic that we shall reach the goal.

It is my sincere wish that the results of this conference contribute significantly in scaling up our efforts to achieve the Millennium Development Goals. And I would like to stress that Japan has been and will continue to play the important role in supporting the efforts of developing countries through its Official Development Assistance and other measures.

I conclude my humble remarks by reiterating the deepest appreciation to the World Bank, the Government of China, our excellent moderator and three reporters.

Thank you.

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