 It's great to see this theatre full and there are more people in the Overflow Theatre and of course we're being live streamed around the world. Before we get proceedings underway, let's start by acknowledging the first Australians and the traditional owners of the land on which we're meeting and let us all pay our respects to the elders of the Nunnerville people past and present. So our opening speaker today is the Minister of Foreign Affairs for the Welcome. We're going to try and time this so that we have the welcome and then just so the welcome finishes, the Minister walks in. So we'll see how we go. To deliver the welcome, I'd like to first of all introduce Michael Wesley. Michael is our new Dean. He was formerly head of the Bell School of International Affairs here. But he's now the Dean of the College of Asia and the Pacific. So please welcome Michael Wesley. Friends and colleagues, one and all. It's a great pleasure to be kicking off such an important and prestigious event. I'd like to begin by acknowledging and celebrating the first Australians on whose traditional lands we meet and pay my respects to the elders of the Nunnerville people past and present. Welcome to the 2017 Australasian Aid Conference, the fourth in this annual series. I understand 500 participants have registered for the conference and that registrations had to be closed due to capacity issues. As well as the many people in this lecture theatre, as Stephen mentioned, I understand that there are more in the lecture theatre next door and more again who are watching around the world via live streaming. This conference brings together academics and practitioners in the area of aid and international development. The sharing of views and airing and debating of research, which fora like this encourage, is very much what the ANU and the Crawford School of Public Policy in particular are all about. I'd like in particular to thank Harold Mitchell for his very generous contributions to our Development Policy Centre, stretching back now to 2012. Without that support, this conference and much more would not be possible. Harold will be joining us for dinner tonight, where the Mitchell Humanitarian Awards will be launched. I also want to acknowledge and thank the co-host for this conference, the Asia Foundation, and welcome the Foundation's President David Arnold back to the ANU. It's very fitting that this conference is being opened by the Foreign Minister, Julie Bishop, who opened the first Australasian Aid Conference in 2012. Now in the first year of not her first, but her second term of government, we look forward very much to what she has to say. The ANU has had good relations across government, but perhaps none are more close than our relationship with the Department of Foreign Affairs and Trade. Whether it is the Indonesia project or our partnership with the University of Papua New Guinea or the sponsorship of our state society and governance in Melanesia over the coming months and years, especially in the context of the new Foreign and Trade Policy White Paper. In closing, I wish you the very best for a successful conference. I welcome you all once again to the Australian National University and I hope you enjoy the next two days of public policy engagement. Thank you. And I'd now like to call on David Arnold, who's the President of the Asia Foundation, to welcome you on behalf of the Asia Foundation. Well, thank you very much. Good morning, everyone. Dean Wesley, Professor Helen Sullivan, Professor Howes. It's a great pleasure and a delight for the Asia Foundation to be, again, co-conveners of this important conference, which, as has been noted, draws together diverse expertise on development policy from across Australia and the region. I think the growing attendance at this conference, year after year, affirms that despite declining aid budgets, there's actually widespread interest among officials, academics, and practitioners in sharing development policy to tackle global development challenges. I really want to congratulate Professor Stephen Howes on the superb program for this year's conference. I have to confess that I wish I could divide myself into six different parts so that I could sit in on multiple sessions during each of the time slots that are shown in the program. And it's a real tribute and a credit to the Crawford School and the Development Policy Center that this conference has attracted such a large and devoted following within the international development community globally. For those of you that are not familiar with the Asia Foundation, and there may be some here who haven't heard of us, we're a non-profit, non-governmental international development and foreign affairs organization founded in 1954. Our headquarters is in San Francisco, and we have offices in Washington, D.C., and in 18 countries, a long-standing presence and is deeply embedded in the local societies in which we work. Working with local partners in government, civil society, the private sector, and the academic community, we support and implement programs in five main areas, governance and law, women's empowerment, economic development, the environment, and international cooperation. Since 2004, we have greatly benefited from support, cooperation, and partnership with the Australian government, including for the past several years an institutional partnership with the Australian Department of Foreign Affairs and Trade, for which we are very grateful. We also enjoy excellent cooperation with colleagues here at ANU, including the Crawford School Development Policy Center and, of course, the College of Asia and the Pacific. One of the sessions this morning, one of the panels is entitled, AIDS Changing Landscape, and nowhere is that landscape changing more rapidly and dramatically than across Asia. 21st century development cooperation has some unique characteristics, in particular, the rise of Asia and the growth of South-South cooperation, which has challenged the norms of traditional aid and expanded the choices for developing countries. Over the past seven years, the foundation that has been implementing a program focused on Asian approaches to development cooperation are changing the development cooperation landscape and how these changes can support and foster more successful, equitable, and sustainable development. Through this AADC program, we've been able to contribute Asian perspectives to the global development discourse, produce knowledge about Asian development providers, and also facilitate the sharing and exchange of best practice between established aid donors and emerging new Asian aid providers. Last evening at the pre-conference reception, we launched India's approach to development cooperation, a unique edited volume of essays which traces and analyzes the evolution of Indian development cooperation, highlighting its significance to global development and as an effective tool of Indian foreign policy. This book is just one example and one product coming out of the AADC program. I have to say here a word of thanks to both the Australian government and to the Korea Development Institute for their ongoing and steadfast support of the AADC program. Another significant shift in 21st century development cooperation for a plenary panel discussing how and why private sector partnerships are an essential and growing feature in these countries' approaches to development cooperation. In closing, the Asia Foundation is delighted to be collaborating again with ANU's Development Policy Center on this timely program, this conference partnership in the future. I think as we look at the program that has been prepared for us, I think you will all agree that we have a superb opportunity for new thought leadership, sharing exchange and conversation about emerging patterns of development aid and assistance and development policy across the region. I invite and encourage each of you to take full advantage of the talent and expertise in this room and on the various panels and I am delighted to join and welcome you to this important conference. Well, thanks very much, David. And let me just say we annually welcome Anthea and Gordon from the Asia Foundation. This is the first time we've had you here to join the conference. So thanks very much for making the time. Well, talking about timing, I think we timed it pretty well because I understand the minister's on her way. So I'll save my song and dance act for another time. And I do have some housekeeping remarks but I'll reserve those two after the minister's speech. So the minister does have fairly short time constraints but thank you very much for making the time minister. And I was just saying we've timed it perfectly because we've just concluded the welcoming remarks from our dean and the president of the Asia Foundation and on our handover to Margaret Harding who's the deputy vice chancellor who will be chairing the opening address. So please welcome Margaret Harding. Thank you, Professor Howes and a very warm welcome to all our guests here this morning from the ANU, from the department, distinguished guests, ladies and gentlemen. It's a great privilege and a pleasure for me to introduce the foreign minister and deputy leader of the Liberal Party, the Honourable Julie Bishop. Julie, we are incredibly appreciative that you've been able to make time to get away from what we know is an incredibly busy agenda down at Parliament today here and we're delighted to have you here this morning to give the opening address. The minister has served as Australia's foreign minister since 2013 and the deputy leader of the Liberal Party since 2019. She did open here the first Australasian Aid Conference back in February 2014. And minister, you'll be glad to know that the conference has gone from strength to strength since that event. Not only have the numbers attending increased from reaching 500 this year and requiring registrations to be closed, creased from about 50 in 2014 to 120 this year. So it's very fitting that we have you here this morning to open the Australasian Aid Conference this year here. Please note that apart from the people attending the event this morning in person, we also have an overflow lecture theatre and we do have hundreds also watching this event live streaming. Time is very limited. I will just let you know in advance that depending on how long the address goes, there may or may not be time for questions, but without further ado, please join me in welcoming to the stage the Minister of Foreign Affairs, the Honourable Julie Bishop. Good morning, everyone. And yes, the constraints of the parliamentary schedule. Well, in fact, the composition of the House of Representatives means that I have to be back in the House at 9.30. I don't get leave these days. So thank you, Professor Harding, for the introduction. Michael Wesley, good to see you and distinguished guests, friends all. These are challenging times for those of us working in international policy. The geopolitical landscape has entered a period of rapid change. We've seen that in the United States with the election of President Trump on the back of policies designed to reframe America's relationship with other nations. In Europe, Britain's decision to leave the European Union has undermined European solidarity and given momentum to anti-EU parties on the continent. The orthodoxy of increasing interconnectedness in international relations has essentially been turned on its head. We see the same trends in many other countries, including Australia, where some people are questioning whether globalisation and international economic engagement have delivered in their interests. Strains of protectionism and economic nationalism appearing in nations around the world. Australia is an open, export-oriented market economy and our economic growth, our prosperity, our standard of living depends on our ability to sell our goods and services to consumers in marketplaces around the world. Yet politicians are being urged to respond to calls to revisit and re-examine the terms of our engagement with the world. I believe we have to be advocates for the benefits of open liberalised trade and investment and explain how and why it's in our interests in terms of jobs and economic growth. International development faces the same pressures as other areas of policy. So like other strands of globalisation, our international aid sector must step up and explain and re-explain in clear and effective terms why it's in our national interest to support the development of developing countries. The benefits are often less visible at home, harder to quantify and harder still to communicate effectively. The result is that Australia's $3.8 billion aid program is often seen through the outdated lens of some sort of benevolent charity. To a large degree, that outdated perspective misses the extent to which Australia's aid program works in our national interest as much as in the interests of those in the developing countries. Currently, all around the world, more than 65 million people are on the move, fleeing war, persecution or major failures of governance. Through our aid program, Australia plays a significant role in addressing the needs of refugees and displace people within their own countries or as close to their countries as possible. That is countries of first asylum. We do that by helping to educate the children, creating job opportunities and helping to make people's lives safer. The announcement I made of a $220 million package of humanitarian assistance to meet the needs of Syrian refugees was motivated by these factors. So working through aid organisations, our package helped support Jordan and Lebanon in educating and allowing access to jobs for millions of Syrian refugees living in those countries, waiting to go home to Syria when the conflict is over. But without that assistance, the refugees would be more likely to move further afield in search of safety, movements that could further destabilise countries in the region and beyond. In Myanmar, another example, Australia helps educate more than 30,000 children in displaced communities. We help make women and girls feel safer by investing in services that respond to gender-based violence and work to prevent it. We've deployed Australian protection experts into UNHCR and local humanitarian organisations and support organisations, such as Red Cross, Save the Children and the UN Population Fund to deliver education and protection to the most vulnerable. Our aid program also seeks to tackle the root causes of instability, which often comes from political or social upheaval. Regional stability can be threatened when individual societies descend into chaos and our experience in the Solomon Islands in the past decade or so is a clear example of the effectiveness of interventions when supported by local communities. The regional assistance mission, Solomon Islands, Ramsey, was an example of regional cooperation to help stabilise a vulnerable state. Now, Australia invested $2.5 billion over 14 years, helping to restore law and order to the Solomon Islands. It's evident that had we not so invested, we would have been dealing with a far more precarious situation in our neighbourhood. Countering violent extremism in the region is another obvious way our development program works to promote stability and prosperity in line with our national interests. In 2015, in addition to the many lives it took, terrorism wiped $96 billion off global GDP. The ongoing conflict in Syria, to put it in context, has set that country back 30 years at least in terms of lost economic growth. Associated with extremism, terrorism is a force multiplier for the irregular movement of people, civil instability, weak governance, and for health epidemics. It also diminishes opportunities for trade, reduces investment and slows economic growth, all critical factors undermining regional and global security and prosperity. As a result, I've unveiled a new framework to guide aid programs in countering violent extremism in our region. And this is an important step that offers fresh ways to support regional security. The framework will guide spending decisions to ensure Australian aid investments support countering violent extremism work in locally appropriate targeted and sensitive ways. Last year, Australia worked with other developed countries to change the rules on the use of official development assistance. The changes mean that certain peace and security assistance to developing countries, including non-coercive approaches to countering violent extremism, is now ODA eligible. Stability also comes under huge pressure during natural disasters. In our part of the world, the Pacific is vulnerable to the full range of natural disasters and particularly cyclones, earthquakes and tsunamis. Natural disasters can be catastrophic for economic development, particularly for small states. Cyclone PAM in Vanuatu and Cyclone Winston in Fiji caused damage and losses equivalent to 64% of 31% of their GDP, respectively. More than half the population of Vanuatu and Fiji were affected, causing major upheaval and dislocation. Australia's aid program builds the resilience of our neighbourhood, so national governments and local communities are better prepared to respond to natural disasters. To mitigate the impact of natural disasters, we invest in early warning systems. We pre-position supplies to quickly and effectively make a difference after disaster strikes. We've also invested in innovation to embrace new technologies and ideas to improve humanitarian responses through our Pacific humanitarian and humanitarian supplies challenges where we called for new ideas and approaches to tackle this issue. We're rolling out the use of drones, for example, in assessing the damage caused by natural disasters so we can more quickly identify areas of greatest need. As severe weather events become more frequent and more damaging with climate change, it is in Australia's national interest to keep our region stable and secure by working with our aid partners in the Pacific. Climate change is an immediate concern for our neighbours and for that reason we've committed a billion dollars to helping developing countries in our part of the world and beyond deliver their climate change priorities. We also want to make sure that the most vulnerable countries, particularly in the Pacific, can access the climate finance they need. As co-chair of the Green Climate Fund Board, Australia has secured more than 130 million dollars in additional funding for the Pacific. This is a global board, so we're focusing on securing funding for the Pacific, helping build security and stability in our neighbourhood. We are working with other governments in our region and with private enterprise to meet the challenge of mitigating and adapting to climate change, mindful of the need to maintain long-term economic stability. Another area where our aid program helps make our region a better and safer place is in health. Regional health threats present an immediate and ongoing challenge to our national health, which is why our government made an election commitment to invest an additional 100 million dollars in regional health security. In our region, HIV, AIDS and drug-resistant TB strains are much more widespread than in Australia, so helping countries limit the spread of disease also helps inoculate us against outbreaks of disease here. Economic modelling suggests a SARS-like outbreak in our region, if it were not quickly contained, could cost as much as 121 billion dollars without counting the human toll. I've also made the health sector a priority for the innovative partnerships that we're entering into that can extend our reach and effectiveness. Our Water Abundance Prize is one such partnership struck with the X Prize Foundation. This is an innovation incubator based in California, and I visited it recently. They are doing extraordinary work around the world, and we've partnered with them and with India's Tata Group. Together, we're hoping to tackle the challenge of water security, a particularly acute problem in the Indo-Pacific region, and a problem that presents in the form of chronic health challenges. Our approach is a $2 million prize to discover an innovative and effective technology to harvest water from air. Another innovative partnership is our investment in M-Supply, a project to map health facilities and digitally manage the supply of essential medicines. By using smartphones to replace paper-based health systems, M-Supply will ensure our Pacific Island neighbours have the tools they need to meet health challenges, including in emergencies. This will be a first for the region and the world for that matter, enabling crowdsourced medical supplies in a simple and effective manner. Our partnership with Bloomberg Philanthropies on Data for Health is another great example of how innovation supports health systems, helping developing countries to better plan for service delivery needs. In one component, Bloomberg and the Australian government through DFAT are augmenting traditional public health surveys with new, faster mobile phone surveys, leading to improved data and greater use of evidence in public health financing decisions for countries in our region. Introducing mobile phone data collection eliminates the need for field operations, potentially reducing the time to carry out a survey from two years to less than six months. The innovation exchange that I launched in 2015 has been leading the way the government approaches intractable problems in development, finding solutions by embracing collaboration, partnership and bold new perspectives. This new approach to aid delivery has broken some transformative new partnerships, including those I've mentioned today. I've also mainstreamed gender equality and the protection of women in crisis across our development program. I've set a target that at least 80% of our aid investments must effectively address gender issues in their implementation. If the right thing to do is a matter of principle, it's also the smart thing to do as improving gender equality promotes economic prosperity. Access to sexual and reproductive health services, particularly family planning, also helps reduce maternal and child mortality. Such needs often increase during disasters, so Australia supports access to sexual and reproductive health services, including safe birthing, access to contraception and services for victims of rape during times of crisis. So far through the SPRINT program for sexual and reproductive health in crisis and post-crisis settings, we've helped over 890,000 people during humanitarian crises, including Fiji, Nepal, the Philippines and elsewhere. Today, I announce a further $9.5 million in funding over the next three years, the International Planned Parenthood Foundation, to deliver this essential program, which saves lives and rebuilds communities. I'm pleased that Director-General Milasi of IPPF is with us today. It's important that our support has an impact, and so I also announced today that the Australian government is supporting an $9.5 million partnership with ANU and with the International Women's Development Agency to research and implement a program that analyses the extent of the disadvantage faced by individuals, particularly women and girls, in these scenarios. The result will be the individual deprivation measure, a data tool for policy makers to better target our aid and improve its effectiveness. So congratulations to ANU and the International Women's Development Agency. My address today is putting our aid program through the perspective of Australia's national interest. We must bring the Australian taxpayer, the Australian public with us. Many of our projects support sustainable and inclusive growth in partner countries. More prosperous, inclusive societies are more stable ones. That drives regional and Australian prosperity and supports regional and our security. In part for that reason, when we came to government, I directed that 90% of our aid program be spent close to home in our region where we can make the biggest difference and where we, particularly in the case of the Pacific, have a special responsibility. It is a fact that the private sector continues to be the most important driver of economic growth that helps lift people out of poverty. Nine out of 10 jobs come from the private sector. So I've directed that all new programs explore ways to involve the private sector to leverage our funding and embrace more effective ways to achieve our aims. I've launched a business partnerships platform which works with business to tackle development challenges in our region. For example, under the business partnerships platform, the Department of Foreign Affairs and Trade is working with Mastercard, Vietnam's Bank for Social Policy and the Asia Foundation to deploy the first mobile banking platform for low-income populations in Vietnam. We're working with Digicell to provide affordable solar energy solutions to off-grid households and small businesses in Papua and New Guinea. Economically productive infrastructure is also part of this work, connecting entrepreneurs of all sizes to business opportunities. Roads that connect ports to industrial hubs, bridges that connect buyers and sellers, these are the gateways to economic opportunity in the emerging economies of the Indo-Pacific. Through the private infrastructure development group, we're helping to de-risk infrastructure investments across South and Southeast Asia and mobilise private sector funding. We're also about to commence a second phase of our market development facility which uses market-based approaches to increase employment in rural and urban areas. Trade too is crucial, creating more jobs in our region. Higher incomes means more stable, successful partners for Australia. That's why we've committed to increasing our trade-related assistance to 20% of the total, the total of our aid budget by 2020 and working to facilitate more trade amongst countries in our region. It's also why we support education through the aid program. According to the World Bank, with each additional year of education, the risk of conflict drops by 20%. In the Philippines, for example, a large portion of Australia's aid focuses on Mindanao, home to a sizeable Muslim population. In this region alone, 76,000 children are now going to school, where previously they had no education. Education is the key to economic opportunity and the best counterweight to conflict and extremism. By opening up opportunity for students, we make Australia and the region a safer, more stable place. I've also initiated, along with my fellow counterpart foreign ministers from Mexico, Indonesia, Korea and Turkey. It's called MIKTA, Mexico, Indonesia, Korea, Turkey, Australia. It's a new informal grouping of countries that are influential in their respective regions. I've initiated an innovation challenge focused on increasing access to education in emergencies, particularly for girls. We'll officially launch this MIKTA challenge in April and we'll be seeking innovative solutions from around the globe to help target the complex issues, keeping children from getting the education they need. Ladies and gentlemen, there are many ways in which development assistance is building sustainability and resilience in our region and thereby it is in Australia's national interest. Now, this is an important point, too often lost, because support for our invaluable aid program has to come from home, from the Australian taxpayer. So Australia's taxpayers must support it and that will come with a better appreciation of its purpose, its intent and the outcomes. Inevitably, development assistance has a global focus. There's a reason why Australia came together with partners from all around the world to negotiate the 2030 Agenda for Sustainable Development. Development is a global concern and the best, most sustainable solutions will come about through global cooperation. The 2030 Agenda gives us a global framework, one that recognises the scale of the task, requires the mobilisation of resources well beyond those available to national governments. Foreign direct investment, remittances, trade and innovative sources of private finance are all critical, as these would dwarf the collective funds from aid programs. However, our aid program has a vital place and I look forward to engaging with you as Australia's aid program continues to evolve as a crucial tool to advance our national interest which is best served through regional stability and prosperity. Thank you. My life is dictated by the... We're a year of time. Okay, let's go for two questions and then I'll run and the driver is better be ready. Please put your hand up. Please fit in the short and concise. Do we have a mic? There's one up there. Okay, lady in the middle here. Thank you. In getting women a program in touch is organised by the Australian Government to look at women's income empowerment. I love the reference to empowering women and girls but what about getting financing really the finance sector and private sector thanks to say their part? Thank you for the question. The empowerment of women is a pillar of our aid program particularly in the Pacific and that is empowering women by encouraging them to take leadership positions in communities, in business, in politics and beyond. It's about empowering them economically and I'll come back to that. It's also about dealing with the scourge of domestic and sexual violence against women. So on those three pillars, we are doing a lot of work with a lot of programs and our third ambassador for women and girls, Dr. Shaman Stone, who has taken up her position. She will be focusing on these issues. We have partnerships with a number of banks including Westpac and ANZ in the Pacific to enable women to have access to finance and microfinance. We're working with other organisations that specialise in providing that access to microfinance in the Pacific. We have a number of programs in P&G and elsewhere to give women the opportunity to set up small businesses, particularly in markets, to provide much safer environments for them, to work in some of the open markets. So the focus is very much on ensuring that women have the means, the tools, the resources to be able to start and maintain businesses. And we've had some wonderful examples of how this has really transformed the lives of not just families, but whole villages and communities. One second question, right on the back row. Yep. Many thanks for your presentation. The thrust of why you say we should support aid is increasing Australia's security. The next big challenge is the negotiations which start in March about getting rid of nuclear weapons. What exactly is the Australian government proposing to do in that regard, please? Well, the Australian government has, for many years, been an active global participant in numerous forums about non-proliferation and ridding the world of nuclear weapons. We are also pragmatic about our approach and ensure that what we do will actually have the outcome that we all desire. We work closely with Japan in our initiative on non-proliferation of nuclear weapons, and I have met with Foreign Minister Kishida on a number of occasions, including in Hiroshima, his hometown, to draw attention to this issue. We work through the forums in the United Nations and other initiatives to do our part to make the world a safer place. Thank you. Okay. Minister, thank you again for this important making time to come in today's schedule. We would, she is leaving as we go, but listen for the audience, really, I think that's tremendous to actually have the two new investments announced today, and in particular, I'd like to really acknowledge warmly the very strong tripartite relationship between INU, the International Women's Development Agency, and DFAT in terms of the initiative that's been announced and funded for the INU today. But please join me again in thanking the minister as she leaves and rushes back to Parliament for attendance today. All right, well, the rest of you, please stay. Ha ha ha, don't all go. We're gonna go straight on now to the, that was the opening address, and now we're gonna have the keynote address, and the advantage of starting earlier is that we're gonna have more time for the keynote address, so we don't need to rush. We will break early for the morning tea, which was meant to be at 11, so we'll break it about quarter to 11 because there's so many people that would be good anyway. Before we start the keynote address, I need to make a few housekeeping announcements, so just bear with me as I go through those. As has been mentioned, this is the fourth time we've held the conference, and it has got bigger every year. In fact, I was going back through the programs and I noticed first year we had three parallel sessions, that was in 2014, then 2015 we had four parallel sessions, last year we had five parallel sessions and we started earlier on the second day, and this year we've got six parallel sessions and we're still starting earlier, so it has got bigger every year, I think it's also got better, we reject more papers, we reject a higher proportion, so I think the quality's gone up. We're trying a few new things this year, we're, apart from these opening addresses, we're moving towards more Q and A type approach for the plenary sessions. We've got this thing called the three minute aid pitch, which is more like a debate, a competition, something a bit different. There are more submitted panels, which have been put to us that we've accepted, and then of course the dinner tonight is also gonna be quite different this year. So it is a bigger and I hope a better event and I hope you all enjoy it. Of course with Sony people, they will be invariably precious and please do bear with us and give us all your feedback as you go and at the end. I wanna thank the conveners, I know we always thank people at the end of the conference, but by then most of you have gone, so I'm also gonna thank them at the start. My fellow conveners, Antia Malacala from the Asia Foundation, Joel Negan, is Joel here. Joel had some family issues, but I'm sure he's on his way. And Camilla Burcock from the Development Policy Center, we convene the conference, plus there are three people who really do all the organizational work, Macarena Rokas who's there and Ashley Bederidge who's around and again Camilla Burcock. So it's an enormous amount of work as you can imagine, organizing a conference like this and we're really grateful to the three of them. And then we have a large number of volunteers and also our own staff who run around during the event and beforehand to make sure everything goes smoothly and that includes Sienna Lake, Brittany Bederidge, Dave Irachi, Jackie Batten, Harriet Conron, Stephanie Rail, Eloise Adset, Mike Cookson, Rowan Fox, Henry Sherrill, Tara Daftar and Husni Hushan. So maybe we could just put our hands together and thank all these good people. Lunch and coffee are downstairs and down that long corridor near the entrance. There are toilets all around the place. Timekeeping is important. We do try and keep to time in this conference so please make an effort during those lunch and tea breaks to get back so we can start the next session on time. That also goes for the parallel sessions. If you're a chair for a parallel session, please help us keep those parallel sessions running to time and make sure there is enough time for questions and answers. Otherwise they can easily be consumed by just the speakers. So every session will have a chair and also support staff and the support staff do have signs, five minutes to go, two minutes to go and stop. So please get together between the chair and the support staff and work out how you're gonna run the session. There is some discretion, of course, depending on the session, but the sort of default is 15 minutes per speaker. So don't be shy in enforcing those time limits who really depend on you. We are also this year we're gonna record and podcast all the parallel sessions. So if you're feeling paralyzed by the choice, you don't need to worry because you can always listen to the one you can't make it on the podcast. So it is really important to chair, make sure there should be a recorder there. The support staff will look after that, but just please make sure that does happen because I'd hate there to be a session that went unrecorded. Here in the Melonglo we'll be live streaming throughout. So please make sure you use the microphones when you're asking a question, especially in this lecture theater, otherwise we might be able to hear in this theater, but you won't be audible on the live streaming. We do have a wireless access and you can find the codes, password and username and so on up on these posters. Thank you on the various theater seminar rooms. So do log in and make sure you tweet. This conference our hashtag is AAC 2017. That brings me to this three map that's on tomorrow morning I think and that is a sort of eight, it's like a three minute thesis. This is a three minute aid pitch. There are ideas around aid. Whenever we say aid, it's actually aid in international development including the name of the conference, but these are ideas around aid in international development. So and at the end you're meant to vote for the one you like the most. So you need to bring your phone to that session or your tablet or your laptop. You need to bring the voting, the voting is digital. So just wanna forewarn you on that. And then for the dinner tonight, we do have the dinner seems to be sold out. So do make sure and you had to register separately. So do make sure you're registered for the dinner. Of course, encourage you to come but just check that you're registered. Normally we have an after dinner speaker. We will have speakers but we are rewarding. We have this new award called the Mitchell Humanitarian Award that we launched last year. And we've written up a number of aid profiles that sort of document and celebrate the lives and the activities of inspirational people and organizations supported by Australian aid. There's very interesting stories and that's the short list for this Mitchell Humanitarian Award. And we'll be joined at dinner by Harold Mitchell and by Senator Connie Perravanti-Wales. So it should be a great night. Please come along for the dinner. The other social event of the final drinks at the end. So that's the incentive to stay to the end of day two. Finally, feedback. We do have an online feedback form and the URL is on the back of your name tag. So we have these fancy new name tags this year and the URLs here. So please fill out that online feedback form. All right, well, those are all the announcements from me. So I'm now going to hand over to Helen Sullivan. Helen is the new director of the Crawford School. She just started about four weeks ago, I think, but she's been a tremendous support already of our center in this conference. So I'm really grateful to you, Helen, for that. And please now welcome Helen Sullivan to the podium. Thank you, Stephen. As Stephen says, I'm still relatively new and although I'm new here, I did accept the job a while ago and as part of my induction, I came up and down a few times and met many, many of the new colleagues, but not Stephen, because Stephen was always somewhere else, doing something else. And I think Stephen has acknowledged the great many contributors, including the Asia Foundation and others who have made this conference the success that it is. But of course, none of it would be possible without the extraordinary work that Stephen has done in putting this conference on the map. And he does it with an incredible mixture of determination and modesty, both of which are things relatively rare in academics, I can assure you. So Stephen, my heartfelt congratulations to you for what I know is gonna be a great part. Okay, and now for the hard part, apparently. It's my very great pleasure to introduce the keynote speaker for the conference. For those of you who were here last night when we couldn't quite work out what it was, but it was some launch of the World Development Report on Governance and Law and our fantastic speakers on our wonderful, wonderful all-female panel discussing the report. There was an awful lot of discussion about the significance of governance, the significance of the law and the way in which different aspects of governance and the law interacted to affect the success or otherwise of policy interventions. But of course, the missing bit in all of that, it felt to me, was the state. What happens to the state in this context where we're paying so much more attention for good reasons to the role of the law, to the ways in which we think about the rules, both formal and informal, that govern what we do and how we try to do it. And so it's entirely appropriate that we have for our opening keynote address, Michael Wilcock, who is going to talk about exactly that. How do you enhance the strategies available to the state to build the state's capability? And he's going to talk about that in relation to two key areas. First, and Foreign Minister Julie Bishop talked a little bit about this, how do you deal with complex and contentious tasks? How do you build the state's capacity to build good systems of justice, for example, to develop really effective forms of regulation? But also, how do you do those things which are perhaps less attention-grabbing but much more reliant on successful human interaction? Things like good and consistently improving classroom teaching, longer-term care and things like that. Michael argues that these are fundamentally different kinds of challenges, and he's going to take us through both the nature of the challenges, but also give us some idea about solutions. Now, I first came across Michael's work some time ago now, when we were all talking about social capital. Anybody remember that? And Michael was one of relatively few people who could crystallize both the value of that concept but also think about it much more broadly in terms of development. You will know many of you that Michael is the lead social development specialist in the World Bank's Development Research Group, but he's also a part-time lecturer in public policy at the Harvard University's Kennedy School of Government. Some of you may have heard of that too. He works across a range of areas and his bio is attached to the program, so I won't embarrass him or delay the interactions by going into it in any more detail, except to say that he has been a powerful, if not towering presence, both in the region but also internationally, for thinking about how we understand effective use of aid and international development. But also, I think, is one of those relatively rare people who can see a cross between the developed and the developing. And I think that is, and again, it was one of the things that came up in the discussion last night. That's one of those boundaries that is increasingly becoming blurred, if not entirely traversed. And certainly, the book launched last night, the book that Anthe has edited is evidence of some of the traversing of those traditional boundaries. So I feel absolutely confident that we are in for a spectacular keynote address, and we will also, because we've all got up a bit earlier this morning, have plenty of time for questions and discussion. So please join me in welcoming my comments to the stage. Fantastic. Thank you so much for that welcome. Thank you to all of you for coming and a special welcome to those that have traveled a long distance to be here. I usually teach on a Friday afternoons at the Kennedy School, and there's only one person other than the family member who could convince me I should come to Australia between classes to present here, and that is Steven. One of the component bits of social capital theory you may recall is this idea called the norm of reciprocity. And about a dozen years or so ago, Steven, in a wearing a different hat as the chief economist of AusAid, as it was, very generously gave a group of us from the World Bank a very generous sum of money to work on these very vexing questions around how prevailing traditional justice systems engage with the state. Had no real reason other than perhaps sympathy or compassion on these crazy people from the World Bank who were trying to articulate and instantiate an alternative approach to doing that. And given how you respond to what I'm about to say, you can either thank or blame Steven because a large part of my contribution to this project comes as a result of the many years that the team of us at the bank and by extension through a range of other development actors really came to not just try and rethink a lot of the work in the justice sector, but as we'll see through the extended work program that I have with my good friends and colleagues at the Kennedy School, Lance Pritchett and Matt Andrews combining their respective disciplinary and sectoral and country expertise in public administration, in economics, in health and education, in public financial management, in budget reform. Across all these different sectors, the three of us really started to see great commonalities with regards to how our prevailing aid architecture was responding to these particular questions and challenges. And what follows is my rendering at least of these particular musings as they've manifest themselves in a new book. Literally just came out last week. Part of our strategy for the dissemination of this is not just to talk about it in forums such as this, but to make it as widely available as to everybody as possible. So we've paid Oxford University Press a pretty hefty sum up front to enable anyone and everyone around the world to be able to download a free copy of this book. We are very committed to trying to get this into the hands of not just people that come to nice conferences like this, but to people who will never have that opportunity, people who wake up every morning, trying to make the world a better place in their own corner of the universe, but for whom a book like this would otherwise perhaps be a month's salary. And indeed the book is dedicated to people who do. The three of us kind of refer to ourselves as impatient academics. We like to think we can hold our own in the scholarly space. That's kind of what we do for a living. But we either currently or have previously worked at the World Bank, we are very much committed to trying to learn from and engage with people who spend their lives often in circumstances that we can't imagine, often in circumstances that are enormously difficult and even life-threatening to try and do some of this work. So a large part of this book draws from those experiences but it is explicitly committed to those people that wake up every day trying to do this kind of stuff because that's what's really hard about this. So the talk I'm going to give as has been flagged is around this issue of now, which I'm calling for present purposes, the hard part. A large part of, all aspects of development are difficult. So there's no questioning that. Doing the things that we know how to do still plenty more of opportunity for doing that kind of work. But much of what we've encountered today, I suggest, is a product of success rather than as much of development value. When you increase life expectancy, for example, from 45 to 65 and celebrate that, you completely transform what a public health system actually has to do to deliver for its people. Having spent the last 18 months living and working in Malaysia, we've wrestled with precisely those kinds of challenges. As you achieve millennium development goals around education, which were largely butts on seats kind of goals, enrollment goals, and you get to levels where 70 and 80% of kids in most developing countries now can show up at a building every day called a school, you then immediately create this big pressure for implementation, for ensuring that when these kids show up that the opportunity cost on their time and on their family's income are actually being realized in real learning and actual education, not just the glorified child-minding. We know how to build the buildings. We know how to print textbooks. We know how to write curriculums. The hard part, as it has always been, is the social component, is the people component. And those issues that then not only require people to engage with each other, but increasingly also often require concerted opposition and resistance. And that's the essence of what politics and government is about. It's trying to help things work for most people most of the time, but in that process managing very different conceptions of what it is that the government itself should be doing. And oftentimes imposing on people things they would rather not have things imposed on them, like taxes, for example. Those are remarkable that we live in a world, most of us, in this room, where we can legitimately expect the government to take a fairly healthy proportion of our income each year and put into a common pot and then distribute it around. That's a pretty new thing in human history, understood in the longer term. Many countries today are still at that process of trying to figure out how they will negotiate a social contract between their citizens and the state in a way that will enable something like difficult, hard-won resources to be taken from them and put into a common pot and then used to do everything from national defense to filling potholes in roads. Those are the big implementation challenges that I think keep getting harder. And as we heard from the minister before, these challenges in the 21st century aren't just developing middle income countries, they're very much ever-present in first-world countries as well. So in short, the development challenge is never really over. It just keeps getting harder. And as much as it's important to celebrate the achievements, and I'll outline some of those shortly, developments this kind of crazy quest to imagine, as a colleague of mine in Britain once called it, that we can do history in a hurry, that we can somehow compress these time frames that took, and agendas that took centuries to implement and that are still unrealized in many domains. So somehow humans can get above or outside of all of that, design great plans, fund it, implement it, realize it, evaluate it, proclaim it. And yet that's a very particular visioning of how the world works, a very particular visioning of what outside agents can or should or might do when they are invited or find themselves in a space where that is being asked of them. So I think for me and for the team of us that are working on these particular issues, the big issue that we're trying to mobilize people around is not just having an arguments about policy, my policy versus your policy, mine's got a more rigorous evidence based to it, dah, dah, dah, dah. I'm saying whatever the policy is that you articulate, is there an implementing apparatus underneath that or behind that that could actually do whatever it is that you want it to do. And if it couldn't, what is your strategy for helping it to move in a direction that would close that gap between what is desired and what's actually currently possible. And so this whole book is already an attempt to try and understand why that is such a difficult challenge, why we keep engaging with this despite such modest accomplishment and yet trying to outline a vision for an alternative. So that's all my way of setup. What I'm gonna do in ways that overlaps a lot with the framing that the World Development Report team put forward yesterday is to just begin with some familiar problems that we face in the world pertaining to questions like poor governance and weak institutions. But from that to some unfamiliar explanations. We have some familiar explanations but I think we need to wrestle very explicitly with this question of if institutions matter so much and if governance matters so much, how do we explain the fact that A, human welfare for the most part has been never better in human history than it is right now despite the headlines we might infer from the newspapers. And if the challenge of building institutions is as difficult as it is, how has it been able to not just continue but to actually expand all over the world despite the fact that its accomplishments are at best modest and in a age where we increasingly want to quite reasonably to insist on some form of evidence base underpinning what we do. But if that isn't there, how is it that this game is keeping on being played? And if we can answer those questions then I think we need to create a space for trying to both articulate and more challengingly instantiate an alternative to orthodoxy. The big existential question for me why I got into this business because I'm a social guy, my PhD is in comparative historical sociology was just one that I was so conscious that the aid architecture that we have, the organization that I work for, everything from the Ford Foundation to the National Bureau of Economic Research, all of these big institutions all came into existence at a particular moment in history when the challenges were largely to do with stuff. Building roads and bridges, setting up large scale agriculture and macroeconomic or financial reform. And our systems on a good day actually do that job pretty well. In the 21st century though, those challenges still continue, but we're now asking them to do things they were simply never set up to do. Gender empowerment, constitutional reform, building the rule of law, free and fair elections, human rights, the list goes on and on for all the things that we rightly know because that's what is the zeitgeist of the 21st century. These are the way in which we talk to each other. These are the things we demand and expect of our governance systems all over the world. But our aid architecture simply was not set up to do that. And a large part of this agenda is kind of trying to fix the airplane while it's flying through the air, that's what it feels like. Dealing very imperfectly with the systems as they are and the very good people that are the stewards of those systems who wake up every day trying to make sure that system does what it's supposed to do. And yet also square with that imperative this rising and I would suggest never ending demand to try and move our systems of aid into a space where they can actually engage with the problems that now confront us in addition to the ones they've already been set up to do. And that I suggest requires not just deferring to one or a handful of academic disciplines. These problems necessarily transcend the disciplinary space. They cover the full spectrum and we need to figure out in ways that is not yet obvious how we structure an aid apparatus that can indeed accommodate and incorporate that array of different knowledge, forms and sources that are before us. We need to be inspired I think by our forebears who in the midst of the Second World War and in the Cold War were brave enough to articulate something like the aid system that we have now. That made perfect sense more or less at that particular time. But if you read the history of these particular times and read what Roosevelt and Churchill were doing when they actually had to cry and make a case for, not unlike the minister before us, in the midst of a war when millions of people were dying around why doubling down on a system that had clearly failed like the League of Nations was actually the best bet going forward that we have to go back to that and revisit it and reimagine it and put it in place to do the work of mid-century. So if this is an appeal as much to younger people as it is to people with gray hair in the room, that is our challenge. That's the opportunity. That is the thing we have to figure out to do and just hope that it isn't World War Three that prompts that to happen. We live in a world where there is a fundamental mismatch between what our prevailing systems are structured to do and which they do very well I think for the most part but we're just adding and adding all the time not unreasonably to what we expect that agenda to do because the world is more complicated, countries get more sophisticated, they get more integrated. All those things just require a much more capable state and a much more capable international system in order for those to actually work together and our systems were not designed to do that and we've got to figure out in ways that are entirely non-obvious what that input's gonna look like. So in this institutional space we have a long-standing recognition over the centuries, over the disciplines, over the ideological spectrums for people that have argued in effect that something like institutions really matter for development. Particularly prominent among those is this call for the rule of law. Adam Smith and his letters in jurisprudence was very explicit about that as a key ingredient. PCC taxis and the tolerable administration of law being all that is needed to turn countries from states of Barbary into modest civilizations. You can tell that story for a whole bunch of countries in the world that are now at middle income status that if they're stable, if they've provided a minimum set of legal administrative systems to their people, have been able to get hold of the macroeconomic fundamentals and some basic infrastructure, you can get to middle income status in the 21st century and increasing numbers of countries are finding themselves in precisely that space. Or I should say by extension, we now see though the very force of those agreements now consolidated as number 16 and 17 of the sustainable development goals. Remarkable wording actually which you either take completely cynically and say they only made it there because no one actually takes them seriously at all, which is one rendering or reading of those words, right? That we should create, provide access to justice for all and build effective, accountable and inclusive institutions at all levels. That's fantastical speech, right? To articulate and imagine that somehow 197 countries in the world are all gonna, yep, that's really what we're gonna do. We're gonna commit ourselves to doing that. We're gonna create indicators for it. We're gonna map and measure our progress on attaining those things. So what the cynics reading of that is, it's so fantastical we can say and sign whatever we like and never be held accountable to because it's so general and vague. Or you can realize that lots of smart people like you in this room met for years over many countless sessions to actually hammer out these kind of agreements and produce something like a first ever global consensus in the world history for dealing with these kind of problems in that way. That's amazing actually. I gave a seminar like this three months before the Sustainable Development Goals. We took a poll of how many people thought that wording was actually survive. If the Saudis, the Chinese, the Americans and the Russians all had to actually put their hand up and sign. Only a handful of people wagered that they would actually make it through and it did, right? And here we are at 17, strengthen the means of implementation. So we now actually have as close as you're gonna get to a mandate from the international community for worrying about these kind of things, for all the cynicism that one can level against it. This, as imperfect as it is, is a product of about as a global compact and global consensus as you could possibly get in the 21st century. And it doesn't provide marching orders to romp into countries and tell them what to do. And that's the antithesis I think of a lot of this, but it does create an important convening space for thinking about and revisiting these long standing concerns about the importance of institutions, the importance of not just having them look nice and be articulated in well crafted language, but in order for these to be realized and implemented so they actually do what they're supposed to do. So the narrative arc I'm gonna follow for the next little bit is sort of, I'm gonna depress you before I hopefully raise your spirits a little bit. So as it happens, I think the state of implementation systems around the world is very polished, indeed frighteningly scary as far as I'm concerned. Why I do crazy things like travel halfway around the world on two days to give a talk like this is because I think it's so important that our whole profession and all of us involved in development in one shape or form recognize just how important this question of implementation is and yet also recognize that we have to do something very different in order for this to start moving in a direction that actually helps to achieve what it's supposed to achieve. Now, there's been a longstanding recognition that these kinds of issues are not achieving what they want to achieve. One of my favorite passages from an Indonesian reformer in the 1930s laments, and I have to quote this because it's so wonderful. All this stuff that you guys are trying to do in the name of development fits so well with our own style or is so far removed from it that we can use it at best as decoration and not as material to build with. Oh, I love that. Material to build with. It looks cute. We put it up with paintings on the wall and sort of decorates our world. It looks nice and you guys can photograph it and count it and measure it and deem it to be this thing called development, but it's not us. It's not something we can work with. It's not material we can build with. And that kind of lament I think is very powerful because it continues to this day that people in the name of development or in the name of their own professional expertise will go into countries and try and do things that often with very good intentions, but nonetheless, nah, it's just decoration. It just ends up being something that looks nice and doesn't actually do what it's supposed to do in large part because it isn't perceived as legitimate on the part of those people that have to live with the kinds of changes and reforms being after them. I'm in the field of rule of law since the whole field of law and development began in 1974 with a very famous paper by Truback and Galanta of recognition right from the get go that this was a fielding crisis that we're essentially cutting and pasting our way around the legal reform business. None of this was sticking. Indeed, it looked like decoration as well. My constitution looks great because it's been scorecarded by global integrity to receive a high rating and thus it must be a good system. One of the weird days in the lives of the three of us doing this kind of work, we noted before we're departing for Uganda that global integrity had rated the quality of its constitution 99 out of 100 in terms of its legal craftspersonship. As a document, as a piece of legalese, it didn't get any better than the constitution of Uganda. Literally we arrive in Kampala to be greeted with a headline of $100 million, I forget the exact number, a very large sum of aid monies being canceled from DFID, from the British Development Agency, why, because of a corruption scandal. So it's document, as on paper, looked fabulous with regards to its decoration in terms of its content as articulated, no doubt by very well-meaning, well-paid consultants who helped them write, not just the constitution of the anti-corruption law, but then recognizing that oftentimes or so often that those systems can't do the work that is being asked of them. Tom Carruthers in an important book on this question in the early parts of this century, 2006, declared quite boldly and provocatively, we need a whole new approach to this. And so in many respects we took, we in the Justice for the Pork program at the World Bank, somewhat main gloriously, took that as our mandate to try and actually figure out, okay, what would a very different approach to doing this stuff look like? And how would we go about building a team and a coalition and resourcing and the authorizing environment to do this kind of work when by definition doing something different means it might not work and that can have lots of consequences for careers, for budgets, for media, for all sorts of things. So the broader point here is that there's been long-standing recognition. This is what I'm articulating here is not a new critique as such. What is amazing is that this critique over the decades has been utterly impervious in changing what is being done. It doesn't matter how many, every generation, every decade, a major book in the 50s and the 60s would come along and lament this particular state of affairs. And yet here we are on the 21st century and we still see these kinds of practices being perpetuated. So why and how is that actually able to be achieved? There seems remarkably to very little cumulative expertise or a cumulative body of knowledge accruing around this. One can be diligent and read through the literature and craft a narrative about this but as a professional body of practice, the imperatives within our organizations are so powerful to deal with risk by replicating something that's been deemed to work elsewhere, better yet if it's been able to be glossed and imbued with legitimacy by fancy researchers from Harvard or MIT, but it really prevents us from doing a lot of this harder work that I'll talk about shortly. In particular this hard work of figuring out how to get beyond just creating more decorations for people's countries and more actual legitimate material that they can work with, allow the critique from the world. So the depressing part of all this though is that not only have these critiques been ignored and they've largely been impervious in terms of shaping change, the success of these systems is very modest as well. The changes that have been sought have been very modest in terms of what they've been able to achieve. This somewhat unclear diagram but I think we've tried to color code it at least in terms of different categories. On the vertical axis, these are just sort of countries as they started and then the rates of change across the top with their improving flatlining or declining and we do the best we can to try and work with an array of different cross-national data sources from around the world to create a state capability index of one kind or another. If you're unimpressed by big national stuff, rest assured I'm gonna dig down deeper as we go along. That's why it's depressing because the stuff manifests itself at all levels. But the point here is that those countries that are circled up there, Indonesia, Colombia, Turkey, South Africa, Albania, Saudi Arabia, Uruguay and Croatia are the only countries in the world that are now in the developing country space that we can tell are on pace to become Portugal, to become the lowest level of functionality and still be in the OECD, whereas one of my colleagues calls it, still be at the level that you can play in the European Cup, right? Which is kind of Greece-Portugal kind of level. Still, notionally, you're actually part of the OECD, not Denmark, we used to say get to Denmark, now we just say get to Portugal. We would lower our standards. Be good enough to be part of the developed club countries of the world. How long is that gonna take? As best we can tell on the current trajectories over the last 20 years or so, which is more or less the only time space for which we have anything like long-running data to try and measure this stuff, only those countries there are on path to becoming a high income country by the end of this century. So even a country like Indonesia, roughly 68 or 70 years or so, two or three generations before that's gonna actually happen. Now, these are just crude extrapolations. You should take this seriously, but not literally, which is to say we've done the best we can with deeply imperfect data, but we're trying to just begin with a mud map, as it were, of the current state of institutional capability around the world. And it's very modest. Croatia's already there. Uruguay is notionally next in line to be there, but other than a few other countries there, like those in the Middle East, like Saudi Arabia, it's still just many decades beyond anyone's professional career. In this room, when you can celebrate the arrival of your country or the country you are working in or with or for into the function, moderately functional countries of the world. That's very depressing, I think, because we've spent so many billions of dollars trying to do this stuff and one could argue counterfactually, potentially that, wow, it could be even worse if we hadn't spent it. But it's a bit of a stretch. I think most of the time, what we've just seen inexorably because of globalization and because of integration and all the rest of it, that states are simply being asked to do way more than they were ever set up to do and they can't do it. And we have to have, anybody has to have a serious strategy for how we respond to that particular challenge. The way we've responded to that happens to be a variant on what we've always done with these things, which is to cut and paste our way to reform. We introduce systems that look like they work somewhere else and we bring them in and we imagine that if they work well in context next, they will work equally well in context y or if they work at a pilot at scale x that we can turn that into scale 10x and get 10 times the impact that we had achieved. But as I like to say, that sort of relationship between x and y and 10x and 10y is great mathematics and terrible social science. It's, there's not a lot we can realistically infer on the basis of small scale things to assume that when these become national projects, for example, they will achieve commensurate levels of success with them. So these are the challenges that we face. They're inexorable and big. Here's a look at a particular country. This is Guatemala and the high capability line is that thick one at the top and the low capability bar is the one at the bottom. If you look at how long it will take for Guatemala to reach this upper bound or even in the most optimistic scenario, it's just these weird, fantastical numbers of 2,000 years, right? So that's the kind of trajectory and pace of change that we're dealing with in violent, consequential countries of Central America where these problems bleed very quickly into other countries all around them. And there we're just talking, take it literally, take it seriously, but not literally. So I recognize that the pace of change in these countries is simply not going to get them to the level of capability that they need and want to be able to not just do meet bureaucratic targets like those articulated in the sustainable development goals, they're not gonna be able to do what they themselves would want to do, even at the most basic levels for their own people. So this pace of change is very glacially slow and in too many countries it's not only slow, it's actually getting worse, it's getting negative and so by extension it'll take infinity or never for those kinds of achievements to be realized. That's the depressing part. But wait, it gets worse. This is education in India. Education's a really good one for nerdy people who like to study functionality of systems because thanks to the OECD and a bunch of other groups around the world, there are periodic attempts to try and test the capability of education systems on not just on the butts on seats measures, but our kids actually learning what they need to learn. And the simplest way of reading this particular graph is basically just to show that each successive cohort going through Indian primary education are able to do less and less. And the task here I should stress, as you can read from the top, a percentage of children who can do a two-digit subtraction. That is the percentage of kids that can do percentage two-digit subtractions at standard four to like grade four roughly in the Indian context. Not only is that number low, it's getting worse every successive cohort. And if I overlay the demographic projection on how many more kids are going to be coming through the Indian education system in the next 20 years and I toppled that with a national commitment to reaching unilateral or universal enrollment levels in education, that's just a very scary picture to start contemplating about how low those particular systems are. Now, this is not just in poor countries, this is an even scarier one. This is measuring the capability of tertiary graduates in Jakarta, Indonesia. They are scoring at the same level, tertiary graduates, people with university degrees are getting degrees from tertiary institutions in Jakarta that are at the level of producing students who can perform the same levels of students that have dropped out of high school in Denmark. So at that current pace, roughly, again, seriously, but not literally, about 128 years for a system that's working for elites. Most people who are going through higher education are gonna be people in the upper end of the spectrum. So these systems aren't just working for low-income poor people in attending everyday elementary schools or primary schools. They're not even working for people that are already pretty far along in their own education system as well. And these are publicly available data collected by the OECD. There's no sort of deep reveal here. This is you can publicly access this kind of information yourself. And yet it's incredibly sobering. And recognizing just how strongly imperatives are to keep pushing people through a system and yet recognizing those systems can't really function at the levels that we want them to function for those people that are already there and for those people that are working and being educated at the top end of their own class and education systems. And all of those should be deeply, deeply sobering for all of us to recognize just how difficult and unhappy are the trend lines with regards to what these systems are doing. To their enormous credit, I should stress the Jakotans or the Indonesians in general keep signing up for these kind of tests, right? Most countries that finish at the bottom of these league tables every year will very conveniently not show up the next time around because this kind of evidence is just often very difficult, not surprisingly, for their own political leadership to deal with. It's not no one delights in receiving that kind of news, but to their enormous credit, Indonesians keep signing up because they are committed to trying to figure out how to make this system better. And the only way they'll know whether it's getting better is to be able to have some pretty rigorous evidence, comparable standardized measures that will help to be able to do that. Now I'm a researcher, you can probably tell this next comment's coming from and going to. I think this is a huge role that the international development agencies can play in helping to fortify and get a much better handle on what the state of the world looks like for people currently trying to reform those systems. If you care about higher education in Jakota or in Indonesia more generally, having something like that kind of evidence is sobering at the one hand, but it also provides a platform on which some sensible decision making and some prudent decision making can go forward. And that's enormously through Indonesia's credit that they keep coming back to these kinds of tests precisely because they want to be able to move that kind of agenda forward. I suggest if it's like that in Jakota, I can only imagine what would it be like if you looked at those kinds of test results from other countries in the world that aren't anywhere near as sophisticated in their tertiary education sector as the Indonesians are. So those are the kind of challenges that we face. This is not just figuring out how to tax and regulate. This is how to do something that everybody more or less wants to work. There's no opposition force trying to stop tertiary education from working in Indonesia. Everybody wants this system to work and yet even there, when we want it to work, it's still really struggling. The easiest thing, this is even more sobering. The easiest thing that governments do anywhere in the world is deliver mail. It is entirely logistical. It has no discretionary components to it all and some of my colleagues at Harvard a few years ago decided to do a simple little test of one nice little feature of postal systems around the world is that they're all part of a universal agreement, an international postal union agreement that has 157 countries that have signed up to a whole bunch of different standardized things that they will do. One of those things that they have pledged to do is that if they receive a mis-addressed envelope, they will return it to the country from whence it came. So the policy is crystal clear. It is uncontroversial and highly logistic and as basic as it can possibly be. And 157 countries have said that yes indeed, when they receive those letters, they will send them back from whence they came. So my good colleagues sent out 10 mis-addressed envelopes to all 157 countries in the world, set their stopwatches and waited to see how long it would take for these within 30 days. That was the other part of the rule. And I won't go into the details. If you're a tech, you can celebrate because your country got them all back. But what's really interesting for where I'm gonna go with this in the next couple of minutes is to recognize that on this most basic task that you're asking governments to do, the spectrum was literally zero to 100, right? There were countries, and presumably we would like to think Australia would be up here as well, but in this other 25 countries in the world, including the countries that you might otherwise expect would be able to return mis-addressed envelopes. Like, I don't know, Egypt and Russia, you would think they would have a long-standing, venerable postal order that would figure out how to return these particular letters, right? But my point here for the present purpose is to show whether you're doing this with cross-national data, whether you're doing it with systems, education-type data in low-income countries like India, middle-income or aspiring middle-income countries like Indonesia, or even when you're doing it on the most basic, standardized, uncontroversial, entirely logistical tasks that are being asked of governments around the world, there is enormous variation, is the polite way of putting it. The less happy rendering is that even these basic tasks are struggling to be performed in many countries around the world. And we will not be realistically close to being able to proclaim success in this space of implementation, in the space of delivering justice to all and all the rest of it, if that is the parlor state of the institutions of the world that we currently live in. Now, the twist to all of this is though that I still keep insisting that institutions really, really matter, even if we the world are really struggling to engage with these issues and try and reform them. But I think anyone in development who, and if you're everything from how you explain what you do for a living to your parents, right through to how you make a pitch to funders and donors of one kind or other, should be very clear that we are in a business that for the most part has succeeded at least on certain kinds of indicators. We might not have succeeded in getting mis-addressed envelopes to be returned, but these renewable people, including Nobel Prize winner, Angus Deaton, have written numerous books documenting how unambiguously it is the case that we live at about the best time in human history that's ever existed. If you wanted to, if you were to be randomly born at any particular time in human history and have a pretty decent shot of being able to make it to 50 years old, you'd choose now, right? If you wanted to have a recently, the decent chance of getting education at any time in human history, you would choose now. If you wanted to have a chance of having your basic human rights even being articulated and minimally recognized, you would choose now. And so with various different groups around the world that chart these kinds of things, democracy, power of women, war and violence, healthier, every one of those particular metrics is going up, right? And so we are not in a failing business. We are not in a empirical space where all the stories are negative. Most of the stories, at least at the most basic sort of levels are pretty important in terms of selling very clear and unambiguous accounts of how the world is actually a better place. Now, for me, at least the graphs I've just shown you and the ones that are on this slide might appear to be a little out of sync with each other. How can we have widespread, ideologically diverse people winding up behind claims that institutions really matter when, A, they're not really working that great, and yet the outcome space, at least at these broad aggregate measures of human welfare, seem to be very much heading in happy directions. So if it was the case that you really needed to have good institutions, you would think that we would have corresponding measures here showing us that, in fact, these indicators weren't achieving what they were supposed to achieve. I think the way to make sense of these two divergent trends of a world getting better in terms of basic human indicators and flatlining or declining in terms of its institutional capability is to recognize that you can actually do a lot of good things in the world by doing standardized things at scale. Immunizing babies, for example, has revolutionized the life expectancies, giving people ending basic, or not so basic, forms of civil war and all the stuff that Steve Pinker describes in his book. Despite, again, what the headlines say, the world, for the most part, is much safer now than it has ever been. There are fewer wars that are occurring. So when you have, as Adam Smith very prudently predicted, when you have peace, easy taxes, and a tolerable administration of justice, you can get lots of good things happening. The unhappy story of the 20th century was that we didn't have a lot of stability, we didn't have a lot of peace, and we did have quite onerous forms of government that were, in fact, suppressing a lot of these basic sources of human welfare enhancement. So we live in a world that I think that has gone about as far as it can go by paving paradise and putting up a parking lot, by being able to build lots of infrastructure around the world. And if you go to Malaysia, as I said, where I've spent the last 18 months, man, they've got some of the best infrastructure anywhere and you can get pretty much anywhere you wanna go. They have a very capable team of people that run their finance and macroeconomic divisions, very good technocratic class, in other words. And if you have lots of infrastructure, never had a civil war in their particular case, and you have capable administrators overseeing the economic fundamentals of a country, you can get yourself to middle income status pretty well. But, and where Malaysia is a modal country in the kind of story I'm telling you here, now they face all these big other challenges that aren't just reducible to interest rates, exchange rates, exchange rate balances, all the rest of it. All their challenges are to deal with, in some sense, the challenges of success. The fact that they now have huge numbers of kids in school is great, but those education systems are not performing well at all for their people. Half the people, half of the 15 year old population of Malaysia is at standard two with regards to literacy and numeracy, which basically means they can just read a headline in a newspaper and can do single digit or at best double digit forms of addition and subtraction. That's it, half a population in a country poised to be coming into rich country status. What does that do when half of its population can't get a job, when half its population is not able to be part of the rest of the society? Those are the big implementation challenges for which there isn't a well-established toolkit or which there will be no future E equals MC squared moment when somebody finally cracks the code of how to do those kind of tasks. They're not those kinds of tasks and we need a very different kind of decision-making apparatus and implementation system to deal with problems for which there aren't solutions, for which there aren't incrementally, incremental progress towards something like a Eureka moment when something is decided and agreed upon as the right way to do that. We have something like that, I think, in central banks. So I mentioned that up on here. The groups of people over the last few decades that are comprised of the central banking community of the world have pretty much figured out how to end things like hyperinflation. There's a few exceptions in Zimbabwe, a few other places for exceptional reasons. For the most part, there is a body of expertise embodied in people like central bankers who have been able to figure out how to tame hyperinflation and the world is a better off because of that. But we've been arguing since Plato how to figure out how to govern ourselves. We've been arguing for centuries how to figure out how to constrain the power of unruly elites or how to stop dictators or kings and queens from being able to do whatever the hell they want. There isn't an answer to that kind of question but the challenges that this very success of enhancing human welfare creates drives a lot of these big tensions and creates big wedges between what citizens expect and what their systems can actually deliver. Alex de Tocqueville and many other great thinkers throughout the ages have repeatedly recognized that this was a very fragile moment in any country's development process was when things were getting better, when the revolution of rising expectations as Crane Brinton called it in the 1930s, this sense in which you actually achieve and do what you're supposed to be doing and at some notional level, you stop all the awful things happening and you give people a decent shot at life but then those expectations keep on going and the systems underneath them just can't keep up and that has always and everywhere been a big recipe for unhappiness and indeed for revolution in many countries and I think those of us in development really don't have a sense that we're kind of in the small R revolution's business. We don't know about changing things and those changing processes in most historical cases have not gone smoothly, would be the polite way of putting it. You don't get from here to there in some nice little neat straight line, there's all sorts of changed trajectories that underpin all of these processes and we need to be much more sensitive to the fact that we're entering much of those trajectory spaces without any real clear sense of what that trajectory itself might even look like. So the really complicated problems that we now confront, which aren't just the ones to do with infrastructure logistics and central banks, the really complicated ones are these ones to do with high discretion and high human interaction and then even in the harder space where we don't really know what the answer is and we will never know what the answer is and where they require us to actually impose and things on citizens or on criminals for that matter that they might otherwise reject or not want to happen. Everyone in this room, I am assuming most people in the everyone in this room at least has an undergraduate education, that's 15,000 hours of human interaction to produce you. Just to produce a person who can come to an international aid conference takes at least 15,000 hours, if not more, of education to be able to produce you. That's an amazing organizational accomplishment that we take for granted for the most part because we are like fish in water, we live through that system and regarded it as entirely normal and the benefit of taking a slightly more historical approach is to recognize that that's kind of weird to live in a world where everybody goes to elementary school and goes to a building every day run by the government to be told a particular form of history, to be told a particular rendering of how the world works and to be able to be given a whole cosmology for how to think about the world. But the present point is for many developing countries in Indonesia here is another good example where even in the most far-flung rural areas you will see a school, you will see buildings, you will see people called teachers more or less showing up for work every day but those systems often struggle to deliver, to actually implement those things. So getting the high discretion, the fact that teaching isn't just about working your way through a standard curriculum and droning on in front of people for hours and hours every day, it actually entails crafting a particular message to particular students with particular learning styles. It's a very, the whole profession of teaching and if you're a parent of younger students or even older ones, you care very deeply about whether the teacher is able to actually do that. Those are very highly transaction-intensive, highly discretionary types of decisions. But when you're in the space then where you up the ante even more and move to the world where we're trying to figure out what solutions are because we don't know what they are and we can't know what they are or where they inquire in positions like imposing taxes of one kind or other or imposing regulations on very powerful firms, those take very robust organizational systems in order for those things to actually happen. Even in the most basic sense, like parenting, across human history, there have been about 18 billion experiments in how to do the most primal tasks that humans do, which is to raise the next generation. Is there an equals MC squared for being a good parent after 18 billion experiments that doing the most basic tasks we do? No, it's a terror every time a little creature of joy is in your arm because you don't know what to do. And that's kind of like, I think it's kind of like what governance systems by extension are kind of like that kind of problem, right? We haven't figured out how to raise kids because there's no equals MC squared for how you raise a kid. There's no equals MC squared for how you design an effective constitution. There's no equals MC squared for how you design a representative democracy that will universally work everywhere. They just, there isn't one, but we can get kind of closer approximations maybe as long as we don't produce decoration. As long as we don't join duantara in lamenting the fact that in our attempts to try and do these things, we short circuit the learning process and imagine that just by surrounding ourselves with nice sounding words and formulas that we can actually then achieve what we think we're supposed to be achieving. Having fun? This is great. Okay, now it gets better. So the standard accounts for all of this and this is something echoed in the WDR launch yesterday is that, well, the reason all this happens is because there's a lack of political will. People aren't really serious about this stuff. There's a lack of capacity in some shape or form. It's something to do with culture or their history or that there's just entrenched corruption of one kind or another or if only they'd adopt the best practices. If only they'd do what we told them to do because we're the experts and we know, then things would be a lot better. Well, that's one way of interpreting that. But I think we have to ask these bigger questions. If the institutions are getting worse, how is it that human welfare gets better? I don't think that's just to do with political well. I don't think those are to do with these questions of culture or those kind of things. I think it's largely because people are starting from, many countries are starting from a very low base and you can get really big improvements when you stop slaughtering each other, when you start inoculating babies, when you start improving the quality of financial systems and get people access to markets through basic infrastructure and clean water, you can revolutionize the society by doing those things and there's plenty more to that to be done. Let me be clear, right? There's plenty more roads to be paid, plenty more, although the minister was talking about about clean water, if that's your passion in life and development, then you should go do that. What I'm talking about is for those of it who wake up every day stressing out about why even rich countries haven't yet figured out how to constrain elite power, why rich countries haven't figured out how to get along with each other and then arm themselves with nuclear weapons and then worry about how you constrain that form of power. Those are the questions that for which we really, really don't have any particular answers. But in terms of millennium development goal type stuff that was happening at the turn of the century where our indicators of access very much were based around input provision, like all the millennium development goals around education, for example, were all enrollment goals. Even the gender empowerment goals were all just about equal enrollment in schools. We don't care whether they're equally enrolled in crappy schools. If they're equally enrolled, then we're happy. Well, now we're not happy with that, rightly so. Now we think, no, it's not good enough. We wanna be able to actually get both boys and girls learning stuff when they show up to school every day and if they're gonna give up life sewing soccer balls, then they better get a decent education for where they're gonna go. How do we fix that? That's what we're all trying to figure all this stuff out. How has this game been able to continue? Well, we largely think because our prevailing, as I said before, our prevailing administrative systems just aren't set up to do this and so they have to fake their way around it in order to be able to sustain their own legitimacy. One way you can do that, as I just mentioned with the case of education, is to measure your inputs rather than your outcomes. So if you're, and you measure your compliance with systems. So we often, another thing we could add up to the top there, it is actually up there, low capacity. We think, oh, these people need more training. So you can spend lots of money very diligently being able to train people in the latest use of software, for example, which will raise no hackles here back in Canberra. It'll be entirely legitimate use of funds that can have zero impact in actually changing how things get done. You can build brand new courthouses using state-of-the-art technology. They can be situated just so that they capture sea breezes and thus don't need air conditioning and have a low carbon footprint, tick. There's all these things you can do that will entirely be in compliance with the existing systems, which can credibly be presented even in parliament as legitimate and effective uses of public resources and which can have very little impact in actually changing the functionality of the system. So we should never underestimate that what I'm proposing, which is to focus more on the performance of those systems, is actually a quite radical agenda. If you actually stood up and looked at the kind of data I showed you on the Indonesian versus the Denmark system of higher education, how's that gonna go down? Not very well. I can show you that I held lots of classes after school to mentor students. I can show you that I uploaded the latest software on to smartphones. I can show you that I hired a bunch of consultants to come and help to reorganize their education ministry. All of that can be absorbed millions of dollars and be entirely legitimate use of money. There's no horror story here of corruption, of malfeasance or of incompetence. It's all just doing what our systems ask them to do. And the higher the risk, the higher the likelihood that it will double down on doing precisely those kinds of things. The higher the risk, the higher the likelihood that you won't actually try and do something innovative, you'll cover your backside by claiming that what you're doing represents the best practice. So if someone challenges you or someone dares to suggest that what you're doing isn't working, you say, I'm just doing what people at MIT using a randomized control trial showed me was the rigorous way of being able to do this particular thing. And research can get caught up then in a very weird game where it ends up being complicit in doing things that were probably very effective in one particular context but then get moved into a new space where these questions of discretion, of human interaction, of unknownness and contestability simply are unable to mean that these transfers of ideas across different cultural and political spaces don't seem to work so well. So then what we do is make this as I use the example of the anti-corruption situation in Uganda or with other kinds of reforms that are enacted everywhere else and we call this isomorphic mimicry. You create a system like snakes and butterflies, you create camouflage essentially that dress it up on the outside as it was long ago recognized by Mr. Deontara. You create the decoration, you create it so that it looks like it's really functional but it isn't. So we use one of the opening illustrations in our book is of a paper bridge. From a distance it looks like a bridge, it can be photographed as a bridge, it can be hailed as a bridge but if you even try to ride a tricycle over it, it will collapse, right? So that's the second point here that we do with premature load bearing. We ask these systems to do tasks that they really, really can't do. And that's not to do just with something to do with intelligence or something to do with culture or any of these other kind of things. So there might be important reasons to understand that the context in which those things are happening but even in middle income countries or even with well-established administrative systems for education like those in India, those aren't doing what they're supposed to be able to do and they're getting worse at doing what they're doing and at least as far as we can measure it and then dealing with yet more expectations, loading up more and more burdens on what we ask those systems to do is just seems to me a recipe for a pretty quick and repeated failure which in turn delegitimizes the whole process of the reform and sets in motion what we then call a capability trap, a situation where high expectations yet, the response to a high expectation is to create a system that looks like it's effective because it's copied and pasted from somewhere else, buys you short-term success because you can claim that what you've done is consistent with the way the rest of the world is responding to these particular challenges but then when you ask it to actually do what you're asking it to do, it won't do it. Kind of like grafting skin and any other kind of analogies for these things that you can come up with. Transplanting them requires deep immersion in very different ways of doing it. Okay, so now we get happier. Critique is one thing. Critique itself is easy in some senses. Being able to articulate why things are the way they are is not gonna get you fired most of the time and especially if you're doing it from an academic base, it's kind of what you make a living doing. The much harder part is actually imagining and instantiating what an alternative to that system would look like and working within the prevailing system that you have to try and get it to do something a little bit better. That's the hard bit. And so it's why our book is dedicated to frontline professionals because those are people that have to try and figure out oftentimes in their own minds in a quite schizophrenic sense about how to narrow the gap between what they actually do and what they think needs to be done on a day-to-day basis and how they report into the system in order to be able to keep their job and be able to ensure that the Excel spreadsheets all line up in ways that don't get them fired. So narrowing that gap is a key part of what we're trying to do. I think one key thing that right off the bat that we can recommend as a central thing is to recognize that as I showed you with the postal survey results, there's enormous variation always in doing high complex tasks. Anything that's difficult is gonna be done pretty well by a bunch of people and muddled through by a bunch of others and be diabolically awful at somewhere else, right? So one of the things that India is now doing very well, I think, and what we're starting to think about doing in Malaysia and other worlds is just to produce some basic maps of functionality across the country. My good friend and colleague, Bob Plitgard, does some wonderful work on anti-corruption around this and said, look, it's not the case that the Philippines is corrupt, right? There are particular countries, particular cities, particular ports, particular sectors where corruption is way worse than others and other places where it's squeaky clean where everybody shows up for work and does their job and manages to figure out how to actually stop the bad guys from doing their stuff. And so rather than having an anti-corruption strategy that sort of imagines that if we have a better law and we have more sermons on the evils of corruption from the top, we actually work at a more mezzo level and try and map, like a weather map with highs and lows, right? Where things are working pretty well and where things are. That can be the first basis for having a much more constructive conversation. Rather than thinking you have to import someone else's solution, recognize there's probably a solution already lurking out there somewhere. Someone somewhere somehow has probably figured out how to do a much better job in the particular administrative space that already exists. And figuring out where those people are and celebrating what they do and putting those people on the pedestal as the experts for navigating that system, I think is a crucial role that external third parties can play. And it happens to be, I think a very crucial role that research can play and to be able to take and begin the process of being able to look at what the standard deviations look like behind the means. What the variance looks like that accompanies these otherwise big picture stories that I've just been relating to. I'll have some other graphs coming up on that shortly. But the big challenge here is really how we engage with these deep complex problems and how we figure out an alternative approach to that. And our particular version of this is something we call PDIA, problem-driven iterative adaptation. I'll spend a few minutes just quickly going through that before we wind up. This is a particular approach that as I mentioned at the beginning, integrates three different disciplines, six different sectors and nearly 75 years of development experience. So we're trying to distill in our own minds at least quite a lot of experience with these issues in various different countries around the world. But the essence of a PDIA approach is recognizing that learning to do difficult things for organizations is more or less acquired the same way that individuals learn how to do difficult things. You don't learn to speak a language by receiving lectures on it. You don't learn to ride a bicycle by going to courses on how to ride a bicycle. You do not learn how to play the cello by sitting down on watching fancy YouTube videos on how to play the cello. You play the cello badly until you get a little bit better and until you can play Happy Birthday and then you can play Twinkle, Twinkle, Little Star and eventually you can play, if you persist and do something, you can actually do something which is really difficult to do at high capability. It's how we all learn to speak. It's all how we learn to foreign language if we learn to learn one by being awful until we figured out iteratively how to get much better at it. And that's just not how we engage most of the time with organizational reform in countries. We think that we have to change what the systems look like as our business and imagine that the form drives the function that what things look like is axiomatic to what they do. The organizational chart actually reflects how power is distributed in a country or an organization when there's often a huge mismatch between what the system says it looks like with regards to power, for example. And as the WDR showed us yesterday, often a big gap between what that system says it does and what it actually looks like, where power is actually structured within organization. That's a huge big task for doing sort of the combination of the anthropology and the sociology and the politics of organizations to be able to figure out exactly what those different components look like. And that's, I think, the central part of what this PDA approach is really starting with problems and then figuring out what the variance in that space of responding to those problems already looks like. And recognizing that, as Lance likes to say, that you can't struggle without the struggle, right? You've gotta drop the balls hundreds of times until you can figure out how to keep the three balls going in the air. And yelling at people or preaching at people about the joys of juggling and never giving them any balls and never letting them actually try to do it is just a recipe for suddenly being given people balls and being asked to do it. And if Lance was giving this talk, he'd randomly toss three balls to someone in the audience and say, start juggling, because I told you it's important. And of course, they wouldn't be able to do it because the balls would go everywhere and they wouldn't be able to do it. The capability to juggle would be really low. So the approach that we're taking is in some sense as boring and as unsophisticated. It's just letting people have long periods of time. We ought to figure out how to actually do what needs to be done. And there's often so many things that need to be done rather than relying on external experts coming in and casting their gaze over a scene and saying, your problem happens to be this and what do you know? I happened to have a solution for it. It's saying, well, let's get you to nominate and prioritize your local problems and then you figure out collectively over a process of time how you're going to acquire the capability to respond to those very specific kinds of challenges. So another way of juxtaposing this is to say that what we're trying to do is to build capability of state organizations while producing results or success gets you good institutions, not good institutions gets you success. That's the inverse of how we tend to think about it. I think the institutions are the words that are written down on paper or the organizational chart. How did Toyota become Toyota? How did Honda become Honda? How did the US Postal Service become the US Postal Service? How did the Australian government that matter become the Australian government? It wasn't born the way it was. It acquired what levels of capability it has over long periods of time and because none of us were part of that process and it's beyond our historical memory, we think it was always like that. It wasn't always like that. It required its capability over many, many decades and is able to do incredibly complicated things like manage billion dollar pension funds and be able to keep metal tubes at 36,000 feet without crashing. All these amazing things happen because high capability organizations underpin every single aspect of that. What we haven't, nobody's ever figured out is how we are gonna do that same kind of, build that same kind of capability in countries and or in sectors where those kinds of capabilities simply aren't in evidence right now. Now, another way in which we think this is different from orthodoxy, if you look at the way that what drives actions in places like my own organization at the World Bank being big development agencies, we are constantly largely focusing on best practices of one kind or another or compliance with an existing set of international norms and agreements, which again is often entirely legitimate. But largely, you count successes by delivering lots of inputs and if you move lots of money, then largely you are deemed to be a successful employee. You have lots of advanced planning. We do things called monitoring evaluation but most of that focuses on very short term issues pertaining to, largely pertaining to compliance. So monitoring is about making sure you didn't break rules. And then evaluation done through, again, very important parts of the bank but often with feedback loops that are occurring years after when anything might be useful with regards to using that feedback in real time to be able to make some necessary adjustments. If you're working for a smaller development agency of an NGO of one kind or another, it's often at a scale that simply isn't able to aggregate into something that can be working at large levels for most people. Indeed, if it's working by definition as a non-government organization, it's working outside of or parallel to the state. And it's an open question then as to whether those actors, complements or substitutes about whether those actions, even when done effectively through a non-government organization, help to raise the bar or whether they take away talent that might otherwise be working for the state to be able to do that kind of work. Often very boutique in terms of what it does. M&E often not taken very seriously and indeed the smallness of what is being done is itself celebrated because it generates lots of heartwarming stories, nice documentaries, lots of photographs of people that are clearly probably, no doubt, it's better off than they were before. That's a very different development task to building the capabilities of states to regulate big international Fortune 500 companies to be able to respond to crises of one kind or another. All of these require very sophisticated forms of state capability which are not really in evidence in the strategies that either big or small development agencies enact. Our approach largely argues instead that we should be beginning not with the selling of solutions or advocating around a particular set of themes necessarily but helping people to nominate and prioritize their own problems which may or may not be ones that we know how to actually address. But the legitimacy of the change process is so central and the ability to be able to acquire these initial forms of capability we think are really crucially dependent on people being able to regard the legitimacy of what they're doing as being primal. Secondly, we need to understand that the authorizing environment which in with this stuff occurs is really crucial as well. None of this happens in the case of the World Bank unless the country director approves it by extension other people further up the administrative food chain. This is not something you just waltz into a country and decide to do. This is something that even when it's or especially when it's being done through donors as is the case with DFAT's relationship in Indonesia it's being done explicitly because the Indonesian government themselves wants to try and do something like this as its strategy for reform and they provide from the ministerial level down the authorizing environment for doing that. Why is that so important? Well, not just because of the legitimacy and the appropriate legitimacy it confers on it but because failure is a very likely companion on doing things in different ways. When you try something innovative by definition a high percentage of the time it probably won't work and bureaucratic systems of all kinds are usually very skittish about failure and trying to explain it and trying to pretend it didn't happen is a large part of what bureaucracies try to do because they're inherently very risk averse organizations but not always. There's high variability even in that space even within an organization like the World Bank there are very creative country directors who are willing and able to explore very different ways of doing that and part of what it means to be a bureaucratic entrepreneur I think is being able to map your landscape be able to tell where these highs and lows are with regards to the likelihood that you will receive effective authorizing for the kind of stuff that you need to do. Let me conclude by giving you some really good examples of these questions pertaining to variation. This is the economic growth variation in the United States, at the county level the extent to which variation occurs with in the response to the traumas associated with the global financial crisis. Huge variation in something that we often only turn about at the aggregate level what was the growth rate of the United States when it was 1.8 or something over the last five years but that masks a huge variation with all the different politics and consequences underneath that. Here is the results from a book we did two years ago looking at absenteeism in health clinics in various different countries in the Middle East. This is the extent to which people show up or don't show up for work. Everywhere between less than 10% to more than 80%. Huge variation and the beauty of working in these countries is that the policy of course is very centralized. It's identical. The policy is exactly the same. Show up for work every day and do your freaking job. And yet that's the variation that occurs. So why is that? How is that occurring? Why is it that these guys show up for work every day and these guys blow up and you don't care? Having a research agenda and a capability agenda built around trying to figure out how to help those guys look more like those guys I think to me is a really central part of what our agenda is all about. And I'm pleased to say what DFAT itself is very much supporting. It's also I think something that's very relevant for working here with indigenous communities in Australia where we have centuries worth of lots of money, lots of good plans on paper being implemented with decades of accomplish which my good friend Mark Moran has written about so compellingly. So these capability for implementation issues aren't just poor country problems. They're rich country problems. They never go away. There is no equals MC squared moment we are waiting for but we have to keep waking up every day to figure out how to make these systems work a little better. We have to work with the legacies and the imperatives of the systems that were bequeathed to us. But the challenge for the 21st century is how we develop a very different kind of aid apparatus. Not that it does everything differently but at least engages with these kinds of questions in ways that makes much more sense and I think are consistent historically with how our own systems acquire the capability that they have. I hope the rest of this conference can help to flesh out some of these things. Thanks very much. Thank you. Thank you. No, I can go on too long. No, no, I mean it is evident from the passion and the level of thought that you have in the book that there's a huge amount to say and it's just that we're on a time scale and we really want to bring some people in. I know that you've all been here for a while but I think there are bound to be many questions, many more than we can take but let's take a couple of questions. So just here. It's on its way to you, don't worry. Thank you. My name is Juliet Hunt. I'm a long-term practitioner and gender equality activist and much of what you say really resonates with my experiences in the field, whether it's with working with women's rights organisations or with the multilaterals or the bilaterals. So my question is about the role of civil society. Can you comment on that? Because in terms of, for example, gender-based violence and getting laws into place, we don't have the evidence about implementation. We know, we have research that shows the importance of autonomous civil society and sorry to all the lovely people from INGOs in the room, I'm not asking you about INGOs. I'm talking about actual local civil society. Okay, take a few, what do you want to add for that one? Chris Roche from La Trobe University. Thanks Michael, that was great. Monique and Jerry Sternin's book on positive deviance underlines the importance of the social learning process about who is discovering the variance and it seems to me that a lot of the problem at the moment with some of this literature is that who is discovering the variance and why is a bunch of outside experts and the rest of it, it isn't actually the people who need to doing this. I just wondered if you had thoughts on that. Yep. Yep, almost there. There's somebody with a hand here. Thanks for that. Thank you, good morning. I'm Rupert Simons from Publish What You Fund and a former student of Matt Andrews. I have a question about data. So I'm a transparency campaigner and former development practitioner. One thing that transparency people have in common with researchers is we love data and we like that data to increasingly to be open and shared with everyone. But the agenda as you've said it out which I largely agree with poses a problem for transparency campaigners because the sort of adaptive flexible programming that you advocate is much more difficult to document and give evidence of the impact of particularly ex ante. So the risk averse programmer who seeks more data to document what works is gonna default to the risk averse programs not to the adaptive programs that you advocate. How can we get out of this transparency trap? Right. I have the answers but you'll have to wait. No, no, no. I'll start with the data one. They're ones first. I work for the World Bank and by articles of association my main interlocutors are governments. So a large part of what we were doing in Malaysia by extension with other governments around the world is doing what governments should be doing which is just to have a much broader and better set of understandings about their own world. So it's not about the data agenda is here is not about having white guys from Harvard come in and run a bunch of surveys to tell people about the world. It's to work with the prevailing systems of data administration that are already in these countries but often in a very parlous state and being able to help governments do what it is a government's job to do. And so that's why the book is called Building State Capability because we're trying to not, it's not called building donor capability it's called building state capability because the focus is primarily on helping governments to do what they already are doing or need to do and have a mandate to do but just often as I showed in the early part of the presentation just doing often in a very inadequate way. In the, that diagram I showed you before with regards to variants in attendance at health clinics in Yemen. One of the other amazing things we did as part of that study was to look at variation in schooling outcomes in Palestine or in a bunch of places. The Palestine is the best example where it's a war zone 70 cent of some places have fathers that are just dead in jail or just absent. And yet the variants around the quality of the education with quality of the schools in Palestine was really amazing and we found just by looking at the data and by verification with other local officials there's one particular school that is producing students that on that get average global scores on the TIMS test those tests of international tests of mathematics and science. And that's just phenomenal, right? That in a war zone in a rural part of Palestine there's a school somewhere working with exactly the same textbooks exactly the same teachers unions exactly the same training colleges that teachers come from and are turning those ingredients into something that produces kids that are some of the most amazing people that ever want to meet. Now as it turns out in that role civil society groups played a huge role because it wasn't just awesome teachers that were you know wowing kids every day with new lessons and new visions of the world a large part of this happened because so we discovered because parents were being actively brought into the problem solving process, right? How can we help your kids do better in school? Well people with fancy degrees in education reform will have very particular ideas about what should happen because they're experts, they're smart people they're being paid a lot of money to be there so they will come up with something that they want to have happen. What we learned as a result of doing this research in this amazing school in Palestine was that what the principal had done was in effect PDAA, she'd said okay well there's an old number of reasons why kids might not be doing so well on their homework for example let's figure it, let's talk with the students and with parents about what they think they can do to help their kids do better on homework and it turned out as a result of discussions with parents and with community organizations and the rest that one of the big problems was homework and the kids weren't doing homework because they came from families that were pretty large and there was just raucous noise from the moment the kids all came from school so they had no quiet time to actually do their homework. So the solution to that was let's try and commit as a community to be able to create a half an hour between four and four thirty every day when the child will be left alone in the home to be able to focus on doing their homework, right? I pretty strongly guarantee you no education PhD person in the world would think yeah, yeah, yeah that's what I would have first suggested as the thing they should do, right? What was the other thing that they did? They recognized that many of these kids were illiterate but they came from families where parents were illiterate where they couldn't read and write and parents were actually really intimidated by the school they weren't helping their kids with their school because their schoolwork because they themselves had never been to school they didn't know what homework kind of was beyond in the basic abstraction and certainly couldn't help their kids with the schoolwork so they have a program every afternoon where they bring once every month where they have an open house essentially and walk parents through the school building and say this is where your child sits every day for six hours learning about astronomy this is where they learn about geographies this is where they learn about Arabic and so they're just lowering that social distance between an abstraction called a school and a building where my child goes every day to try and learn something about the world, right? So those were very specific things that were being done using evidence of one kind or another where civil society groups, in this case a very vibrant and active equivalent of a PNC Parents and Citizens Association had jointly committed to figuring out how to engage through a problem solving process but when I articulate this the bar here is so low this is just not at all how things mostly are done, right? I happened to be in Palestine when a big report was being launched by an international agency about how to fix school reform, right? How to reform schools to get them up to global standards. The principle of the school that I had just literally spent a whole weekend was sitting in the back row up around there was not once even asked her opinion about anything to do with the state of the school system in her country. I just said, I felt like saying get it to give a 10 minute impromptu speech it'll be way better than what have you guys are saying from the outside. But I also asked her, I said how many times have international groups actually come to your school to try and learn from you about what you're doing to try and make your school system work? She said, well, I've been a principal for 28 years and I think this is the second time that someone's actually come. That's how surreal it is the way in which we conduct these things and what a huge gap there is between what the outside system thinks its job is to do when it is in box on something like school reform and what could actually be done by recognizing that whether it's manifest in formal survey type data or just by hanging out in a village and trying to understand the anthropology of how this thing is structured and how different coalitions of actors and groups within the village are producing these kinds or co-producing these kinds of outcomes. That's the essence of really what I'm talking about here. How you forge a compact, a legitimate compact that is able to tap into various different forms of expertise, various different forms of authorizing that is needed to make these systems function and being in places like war zones and in rural parts of Palestine to get there, I had to drive in a vehicle for two hours with eight inch thick doors that I didn't get machine gun down on the way there. That's what those kids are, that's what teachers are showing up to work every day to function in and they can get kids to perform at the same standard as average kids in Australia. That's unbelievable, right? That's high functioning capability systems that's happening because they figured out how to manage and navigate their own space and that should be the normal way in which we do it and I shouldn't have to be standing here regaling you with the wow story. We've got to make that decision-making mechanism and those systems how we more routinely do things. Okay, I'm very conscious of time and I've been on his feet for a long time and it's good to be a portion of that and also if you take another round of questions you won't have a cue break. So I think it's important that I'm going to be able to refresh them before we go on to the next slide. Michael, thank you so much for getting a call. Thank you. Thank you, thank you. That's all the stuff we're doing other than writing books. That's all the other stuff we're doing. What the ADB should be doing in the 21st century Asian context. What we're going to do in today's session is going to run a little bit like this. I am one of the authors of the report. My name is Anne-Rio King. I'm a non-resident fellow at the Lowy Institute and with my colleagues also from the Lowy Institute, Hannah Burke and Jonathan Pryke, we have co-authored this report. We're going to give you a bit of an overview of the report for a few minutes. So if you haven't had a chance to read beyond the executive summary or you haven't even had a chance to read the executive summary, we'll help you through it. So you get a bit of a feel for what we're talking about. We've got three panelists. Emma Fan, who's the person in charge of ADB's Pacific Coordination Office based in Sydney. Mike Callahan, who is a long time public official. That's his title, but he's really very important in terms of the past with Treasury, et cetera. And very importantly, most recently, chaired the latest replenishment of the Asian Development Fund. And like me is a non-resident fellow of the Lowy Institute. And then we have Peter Macaulay, who's had a long time association with the ADB, as well as with Oze before that. And has also been head of the Asian Development Institute in Tokyo. And has for the last little while been writing the 50-year history of the ADB. He didn't want me to tell you that he's also my former boss a long time ago. But that's the way it is. I have to declare my interest, so much. So, that's the panel. And Jonathan is the head of our malinesia program at the Lowy Institute. And Hannah's been with the Lowy Institute for some time, but unfortunately, really unfortunately, this is her last week with the Lowy Institute. And she's going to be joining DEFATs next week. Is it next week? Yeah, there you go. So, she'll become a familiar face in Canberra to many of you, no doubt. She'll be fabulous to work with. So, what's this report about? And why have we done it? Basically, we were asked, it was an unusual genesis to the program of foundation in the US called the Smith Richardson Foundation, which I'll be friends. I didn't know about it before we started this. But it's a significant philanthropic organization based in Washington that has money to answer significant questions of import, particularly for the US every year. And it commissions various reports to in an effort to answer those questions. And the question it had on its mind last year was what is the relevance of the Asian Development Bank in 21st century Asia? Given the headlines of the prosperity of Asia, why should there still be such an institution called and being the Asian Development Bank? And we have attempted to answer that question. Looking at it from three particular perspectives, the geopolitical aspects affecting the Asian Development Bank, the development challenges that it needs to tackle in Asia over the next little while, and then the sorts of development economics and financing models that are ways in which the ADB could help to address those challenges and respond to the geopolitical environment. So the three of us are going to give you an overview of our perspective chapters. So I'm going to ask Hannah to come up and she'll tell you what she found in terms of the years and the size of things. So I had, I think, the most interesting chapter to look at, which was chapter one, looking at the due political context of the Asian Development Bank. I think the real comparative advantage that this report has is that Low Institute we're an independent organization and we can talk about some of the political challenges for the bank, so the bank can't talk about itself. And I think it was clear yesterday with the launch of the World Bank Report that you can never separate politics from development. So chapter one really looks at who is driving the bank and the interests of some of the major donors. And although the donor-borrow relationship has changed a lot, there is still a lot of influence by the people who give the most to the bank. It's also really interesting given that the due political context in Asia is changing so rapidly, you could do a whole report alone on how China's development finance is challenging the ADB. But briefly I'm going to talk about three different aspects. Firstly, the new actors, so the Asian Infrastructure Investment Bank and the new development banks and how they have been portrayed as potential competitors of the ADB. I'm going to talk briefly about Japan and the US who share the major shape, shareholding and voting importance within the bank. And then I'll also talk about the emerging donors China and India as donors, their relationship with the bank. And arguably they probably already emerged as donors in the region. So the dynamics between these four countries are going to be very important for the future of the Asian Development Bank. So briefly, one of the reasons as Amory alluded to, we believe that this report was actually commissioned because these two new multilateral development banks, which have a very Asian focus, the Asian Infrastructure Investment Bank is obviously a Chinese initiative. China has a lot of, say, and also a lot of regional members have signed up as well. The new development bank only has five countries so far, the BRICS countries, but it is headquartered in Shanghai. And again, there's clearly an Asian flavour to it. One of the things we found in the report is that these new banks are not going to replace the work of the ADB, the numerous regions. Also, the development challenges in Asia are so great and the infrastructure gap alone means that all these multilateral development banks are going to have to work together. It's also important to recognise that the ADB, the AIIB and the NDB all have very different mandates. So one of the things that we think is the strength of the ADB is that it has retained this focus on poverty and development. The AIIB uses very different language. It's focused exclusively on regional infrastructure and there's a lot more discussion about finding a return on investment and this is driven by China wanting to lend into big profitable projects. It also has a much bigger scope, so the ADB has 67 member countries spanning the Asia Pacific whereas the AIIB potentially has, will have 82 members this year, if 25 countries that are lining up to join do end up exceeding and a much more global membership actually. The new development bank is more of an economic cooperative at the moment and you hear a little bit less about it. But I think it's interesting to talk about because again it's seen as challenging the development discourse and trying to do something new even the name about being a new development bank. It was interesting to say as well, talking about the World Bank, considering this idea of second best practice in addition to best practice because at the launch of the new development bank they talked about next best practice and using country standards. So despite these new actors, we are going to report that the bigger challenge for the future of the ADB is actually engaging China and India as bigger donors within and being active participants of the ADB rather than new actors per se. It's also difficult due politically because US and Japan who are the major leaders of the ADB are not members of ISIS in New Bank. It's worth commenting briefly on this sort of dual relationship between Japan and the US. Japan obviously has very close and intimate relationship with the ADB. Every president of the ADB has been Japanese and Japan has been incredibly generous in its financing and you've got to remember when the Asian Development Bank was set up it was the first multi-lateral institution really where by an Asian country. On the other hand the US has had a much more hot and cold role with the ADB probably because it has such a big say in so many of the multi-lateral institutions and even visiting the ADB office in Washington it's completely dwarfed by the massive World Bank and IMF headquarters. Obviously talking about geopolitics the election of President Trump and a very unstable US administration is a huge challenge for the whole Asian region and the fact that the US is a major donor of the ADB. We actually hope one of the recommendations of the ADB says politically neutral and keep under the radar because the last thing you want is a middle-sum US voice within the ADB trying to use the ADB as a geopolitical tool. Lastly just comment briefly on China and India again which we see is so important for the future of the ADB. And we are optimistic that China and India there is value for China and India in playing an active role in the ADB for a number of reasons. Firstly because both countries have a very positive relationship with the ADB if they've benefited a lot. India is one of the largest recipients and China also gets a certain amount of technical expertise and policy advice that it really needs. The ADB needs China-India engaged because of their sheer economic and geographic size and given regional connectivity as a big part of the ADB's work it makes sense that India and China are involved and they're going to be central to big regional projects. There's also a geopolitical incentive for both India and China to play an active role in the ADB given that they both want to be responsible region operators and they're also concerned about the development of their near region. Both of them have difficult relationships with some of the neighbouring countries and the ADB allows them to invest and put development into their region in ways that they cannot do bilaterally. So the recommendations that came out of chapter one this is part of our 13th set of recommendations are really that the ADB should stay politically neutral. However, there still needs to be discussion of governance reform within the bank and giving a larger say to regional members which at the moment their weight in the bank does not match their economic weight and also that the ADB should continue to cooperate with the new banks which is already started to do in a good way. Thanks very much Hannah. I was responsible for chapter two looking at the development challenges so I'll give you a brief overview of what we identified as the big challenges facing the region and therefore relevant to ADB. No surprise, reducing poverty and achieving inclusive growth was absolutely core in terms of the big challenges. I think what's important when you're looking at what's happening in Asia is the headlines are very positive. I mean IMF itself has determined that Asian GDP or contribution to the global economy will be greater than the US and EU combined in two decades. I mean already represents something like 40% of global GDP but the reality is that it also is home to a very large number of very poor people. In fact, it is home to almost half of the world's extreme poor, 326 million out of something like 766 million of course those figures change but you get the idea that proportionally despite its economic success, I don't even use the word prosperity, despite its public economic success there is still a huge issue to be dealt with in terms of reducing at least extreme poverty across the region. I think the other thing too in terms of the region is the rise of inequality which is actually ironically and disappointingly far hand in hand with the economic success. In part this is because some of the ingredients that have contributed to the success are also contributing to the growth in inequality and the stand out of this is in China. I think the other thing when you're looking at the region is realising that the Asia Development Banks developing country members, the majority of them are actually middle income countries. That looks good at first blush but in actual fact the majority of those are lower middle income countries and I'd like to point out that just looking at it from a dollar perspective, the income per capita for lower middle income countries of course ranges between 1,000 to 4,000 US per person per year and you compare that with the OECD per person per capita which is around about 39,000 US, you can see there is a huge gap and the fact that we call the middle income countries is frankly very misleading in terms of what's really happening on the ground and of course then you've got the way in which that average per capita income is measured and you will see the disadvantage increase ever more. So poverty and inequality are still outstanding. Big challenge that we identified and again this is not something new but it persists and therefore the main big challenge and that's the infrastructure and connectivity gap. The ADB itself in 2009 identified a gap in the facility, an infrastructure gap that would require something in the vicinity of $8 trillion US to actually address that gap and a later report in 2012 just confirmed its findings and confirmed the sorts of challenges needed to be overcome to at least start to address that gap in some meaningful way. Governance and legal frameworks absolutely essential in terms of the approach to addressing the gap, understanding the risk for private sector, private sector has to play a very important role in addressing the gap, the risks need to be understood in the five public officials so that there can be a more realistic approach to addressing what needs to be done for the private sector to step up to it. Also understanding the impact on communities and the environment that's absolutely fundamental and how to address that big issue of connectivity across the region, sub-regionally and the region itself, that's a very large challenge for everyone. The third big challenge and again this is something that we all face is not just climate change and other environmental issues. The environment aside from climate change is something that has suffered enormously, we see that in terms of the pollution and environmental degradation that has occurred in the wake of the economic growth, particularly some of the larger, more dynamic economies in Asia notably China and notably India as well. Addressing that is absolutely fundamental. So they're the three big, won't be surprised by the issues but there are two others that tend to influence and need to be addressed. One of them is not necessarily negative but it does need governments in a field for the ADB and supporting governments in addressing some of the policy issues that need to be dealt with. Demographics, Asia is the second fastest aging region percent increase of over 60 by 2030 compared to the US's 41% and Europe's 23%. That's a big change in demographics for Asia. I mean the big issue is is it growing old before it actually grows rich to be able to deal with the sort of population changes that are occurring? The other big issue for the region is urbanization. Not as big as you would think at first but still important because of the pace of urbanization and the need to adjust policies to address the sorts of services and other financial impact of movement from rural to urban centers. Again, none of this is necessarily negative but needs policy to address the changing dynamics of what the demographics present. The other or the final one that we look at is the so-called middle income trap. I mean there's debate about whether there is such a thing as a middle income trap, does it actually exist? But we will see that only a small number of the middle income countries have actually graduated to upper middle income countries. And the question is why when initially there was a lot of expectations that there would be a faster move to the upper middle income category, why has there been what you could describe as stagnation, is this policy, is this financial wearer at all, is this capacity? There are questions that need to be asked and again, 80Bs are looking at what some of the policy settings could be to address it. So that's the five big issues that we saw as the development challenges. Conclusions included the 80B needs to continue to focus on poverty and inequality. It needs to continue its core focus on infrastructure. In our discussions we found some stakeholders wanted 80B to expand its agenda beyond what has been traditionally its core focus. We don't agree with an expansion. There's already a huge shock for it doing what it does best and we would like it to stick with what it does best. I'd now like to ask Jonathan Bright to come and he will talk about the development financing challenges. Thanks, Henry. Sorry about that, Peter. We're trying to get someone to come in. Anyway, Hannah, I'm shocked that you thought chapter one was the best chapter to work on. You've not seen three chapters three? Come on. And I also haven't forgiven my two co-authors for not letting me put a PowerPoint up. I would have bored you to death with all of these slides and all this amazing data we've been able to collect for this project. But I do encourage you to look at the report with a hard copy which is sitting outside and also online because if you go online you can get these graphs get really interactive and you can go a long way back to see how the 80B's learning practices have changed over time. Now, chapter three is broken down into two parts really. The first looks at the nature of development finance in Asia and then the second gets into really the nuts and bolts of how the 80B actually operates and how it is evolving in the 21st century. So I'm going to quickly run through all of that and then bring us around to our recommendations, conclusions and hopefully give us some kind of exception in Q&A. So the first section looks at the changing nature of development finance in Asia and acknowledges the 80B's shrinking role as a primary financial supplier in the region. As countries throughout Asia have continued to grow their ability to mobilize domestic resources has improved but revenues as a percentage of GDP is still well below where donor countries in the region are. At the same time, international capital flows in Asia have dramatically grown. In 1980, 80B lending to member countries made up 10% of total inflows to a foreign aid revidences and foreign direct investments to member countries. In 2014 that numbers down to 1%. This is undoubtedly a good thing for Asia with this economic growth and new financial resources pooling hundreds of millions of people out of poverty but it also poses legitimate questions about the role and relevance of the 80B in the 21st century. You know, if it's as a supplier is losing its relevance over time what is really its role in the 21st century? But it's important to recognize however the supply of development finance is only half of the equation. As Asia continues to rapidly develop and urbanize and the quality public infrastructure is vastly out serving supply. Emery already mentioned that $8 trillion number that's being thrown around a lot which was conveniently put together by the 80B but it just illustrates that the demand for public infrastructure in the region both new and renewal is just insatiable. And because of the public goods nature of most infrastructure investment many sources of external finance that are starting to muscle out the 80B finance such as foreign direct investment, remittances or quality equity don't actually address these issues and fill that gap. The rising public debt in many countries also restricts their ability to domestically invest in infrastructure. And yeah, by looking at the nature of the found financial supply in the region and the sheer size of the man it's clear that multilateral development finance is critical not just because of the funding it can provide but also because of the unique mandate that banks like the 80B enjoy. It's able to tackle poverty reduction and focus on public goods infrastructure that is not feasible for other forms of finance. It can also help to establish a pipeline of actual projects in the region assist governments to reform regulatory environments to allow for more investment, provide critical technical expertise in the countries, work on cross-regional initiatives and act as an honest and neutral broker in the region. So that's the first section really covers the supply and demand of the development finance in the region and talks about the gap that the 80B can help build. But it also acknowledges that the nature of the development finance is rapidly changing and while the 80B funding is still critical it needs to continue to evolve and adapt at the same pace as Asia is rapidly changing. The second section has a second instance of nuts and bolts and this is how the bank is adapting to a new role in the 21st century and what more needs to be done. In this section we discussed some of the things that really run through this and this section we discussed how the 80B is rapidly scaling up its lending activities. When you adjust for inflation it has put ruble in its annual lending since 1980 and will continue to grow up to 2020 and expects to lend US $20 billion a year by 2020 in hopes to double that amount through co-financing investments for 40 billion a year. So that's an insignificant amount of money. We've then looked at how SAP and the bank and overall numbers have not kept up with this rate at which lending is scaling and how the professional workforce continues to remain highly centralized and we know this is a controversial issue within the bank and outside the bank and I expect our participants to dive into the matter. We look at how contributions to the bank's concessional lending among the ADF have rapidly declined now that the bank is taking the ambitious step of merging their financial arms together. While this should be welcome and also creates risks for elements of the bank's work that provide critical value added to the region notably technical assistance. We look at who the bank lends to noting that the bank is that lending is heavily concentrated in larger countries in Asia. Over the history of the bank 60% of total lending has been concentrated in five countries and 82% of total lending has been concentrated in 10 countries. This has still led $54 billion to the rest of Asia but this point in particular raises concerns our graduation from the bank's lending activities. It's also important to note that when you disaggregate this to a per capita level across Asia, you know, this is where poverty is concentrated in these countries. The large countries are also where there's a large need. We also look at the role of knowledge within the bank arguing that this is the point of significant weakness. So a race through all the, oh, sorry, and we also look at how sectoral allocations make a change. So a race through all this illustrates the scope of the chapter, but I also wanted to leave it to cover some recommendations. So because we cover so much of the last policy of the bank in this section, we also have a lot of recommendations that have to actually change. First and foremost, we cover up the ADB's graduation policy and argue that it must be reformed if the ADB is to remain a long-term poverty-oriented lending institution fit for all of Asia in the 21st century. The banks should also continue to experiment in lending in creative ways and maintain its portfolio of concessional lending. The ADB needs to maintain high standards in all of its, all states of the project's lifetime. This includes front-end planning, contracting and procurement, as well as back-end projects and provision and monitoring and appraising. At the moment, we are concerned that maybe there's too much focus on one end and not the other. And it needs to be a balancing act, more a balancing act in the future. Banks should consider a general staff increase comparable to those that have followed past general capital increases. The ADB must open up its hiring policies at all levels of the bank. Funding for technical assistance should be streamlined and at the moment, there are more than 100 different funds for technical assistance of the bank and it's a nightmare to figure out how to actually access the funding. So it should be streamlined and maintain at appropriate levels to create a pipeline of bankable projects in Asia and not just for those projects but to make itself as looking to invest. Start-up and decision-making should be further decentralized from Manila while maintaining an appropriate hierarchy and I'll leave it at that and we can move on to the next section without panel discussions. What the report's all about. I'm going to encourage some reactions to it. I'm going to start with Mike on my left. I want to see what he thinks of the report. Okay, well, thanks very much indeed, Anna Ryan. It's a pleasure to be here. I'll start off with a compliment and say I think it's a very good report and in fact I can go further and I can say that I think it's one of the best independent reports on the ADB that's currently around. The trouble is it's very easy to say that because I don't think there are many independent reports in the ADB, independent in the sense that it wasn't sponsored or paid for by the ADB and basically that's a pity that there isn't. There was a short article in The Economist on the ADB last December and you very rarely see the ADB mentioned in international publications like The Economist and it basically had the headline that the incumbent is under pressure from China and the thrust of it was that here we have the AIIB, it's on the scene, it's getting all the attention but the Forgotten Bank, they rather well established a very impressive track record. People aren't really focusing on it but it is coming under pressure and it sort of sums it up I think the problem that yes all the focus has been on the AIIB but people haven't really, and what it's going to do and what its challenges are and anything like that but there really hasn't been a lot on Asia's long standing banks so I think that's why this report is so important that it is missing and it's a problem. So I hope this report actually attracts a lot of attention because it is, it is very important to answer one of the fundamental questions that you said at the very start, is it still needed basically given the development in Asia, everything like that? I think you've answered it absolutely right. It is needed, it is needed to deal with the poverty that's still in Asia but it's also to deal with helping the development of Asia, to progress Asia. It is, the ADB is very important for Australia and I think Australia should be spending more time and thinking about the ADB and why the discussion of these things. So in that sense, that's why I think it's very important that the ADB can make the positive contribution of combating poverty in Asia, in promoting the economic development in Asia and that's why it really needs a lot more attention but it is absolutely right that it does have to change. It is under pressure but this pressure isn't simply from the AIIB but perhaps it's the catalyst for it. It is which is captured in the report and I think the pressure of it has to keep up with the changes that have been taking place in Asia, the development in Asia, the rise of the emerging markets in Asia, the whole geopoliticals, everything you said, you can't be stagnant, you can't stay, you've got to move and adapt with that if you're going to be relevant and that's the biggest danger I think in one sense of any of the ADB and any international institution. You've got to keep relevant to the members and you've got to stay relevant to the members and it's very easy to say than actually do but it has to change. I think that's one thing that comes out of your report. Yes, the ADB has to change in some respects who would question that and clearly saying it has to change doesn't say you don't give up what are the virtues of the ADB, what are its strengths and I think that's important that you picked up on that. One in particular that you highlighted was and I think Hannah may have highlighted it was about neutrality. It has to keep, it's the honest broker, it keeps that neutral player, don't get caught up while the geopolitical politics are going around, you don't get caught up in them. Again, it's going to be increasingly difficult I think. It's very easy to say keep a low profile while we see what happens in the US but that's easier said than done and I think that's really going to be a challenge. But President Narko is absolutely right when he says he's aiming for a faster, stronger, better bank and again easy to say but it's one of the main focuses that the ADB has to deal with. How do you deal with that? And the problem is multilateral bodies are so inherently difficult to change that just the most inefficient organisations you could structure in terms of the way to put together and develop decision-making structure and everything. So to get a change is important but I think we should recognise what are the, I think some of the successes of the ADB and one of those is the combining the OCR and the ADF concessional lending within the ADB that happened under President Narko. That's cutting edge I think in terms of multilateral development banks and it's quite an achievement but that was achieved and I think we have to recognise that. But the challenge is keeping it going forward and now some of these things, one of them I'd say a recommendation that you had in your report about the ADB should stay within its mandate. Now in some respects that's sort of a leading question if you stopped there because the bank should always be operating in the mandate that is set by its members. But one of the things and you've come to the conclusion that yes it should stay on poverty, addressing inequality, focus and infrastructure. You mentioned that there are these pressures to broaden it. I sort of got the impression that there's a lot more pressures to want to broaden it to try and deal with the whole range of the SDGs, everything like this. And I think while it's one thing to say what it should be, what it should be its mandate, I think one of the challenges is making sure the membership actually agree what is the mandate of the bank. It has to respond to the circumstances, to the changes. But I just wonder whether we and how you get that and that really goes to a core of the efficiency of the bank is to make sure that everyone agrees as to what it should be doing. So I think that's one challenge, it's up there. The governance issues that were raised by Hannah, I think they are absolutely right if you're adjusting for the changes that are taking place in Asia. Of course we have to allow China in India to play a bigger role, to have a bigger say, have bigger representation. But that's gonna be very hard because it requires other members letting China play a bigger role, letting China have a bigger representation. And this is one of the things I've highlighted a lot when we say that the bank should change to do these things. What we're really saying is a lot of the members in the bank have to change their perceptions, their attitudes and policies towards the ADB. That's to let the governance change. And many of the other things will come in terms of even the way that they try to micromanage the bank. And on the governance, I do think it's inevitable at some stage that we have to move away. Well, all the benefits from a Japan-led ADB, it will have to move eventually. It's gonna take a long time. We're not gonna see a capital increase within the ADB for a long time to let China and India have a bigger say. I think it's gonna take a while to see the sort of a stranglehold to some extent that Japan has over. But I do think of it's really gonna be the Asia Development Bank for the 21st century. Part of that, there's gotta be this process of change that we'll see going forward. I think there's gonna be change in the internal governance in the sense that countries right now, my impression is they all wanna get in there and micromanage a lot. And I'm sure all the 103 different technical funds that John O mentioned about, I'm sure this is all each donor wanting to have its own trust fund. So of course, he wants to manage it, wants to control it, and that's part of the problem. If you really wanna get the bank operating, you gotta give management, tell them what's expected of them, let management get on to do it, and you gotta step back a bit. Even to the point of your recommendation on increasing the staff, my feeling a bit is that that management, they've gotta take those decisions, he'll be accountable for the outcome, that you sort of come in saying, what, who you should be employing, what, how the numbers should employ everything like, that's sort of a management thing that you've gotta keep management responsible. The last thing I just mentioned is the one I think is so important in the infrastructure, how can the ADB actually help fill the gap of the infrastructure gap in Asia? We keep talking about it, and you do raise it in that area on the, I think, new mandalities of lending, et cetera, but I think this is really the key, to some extent, of maintaining that relevance. The balance sheet lending approach, I think, inevitably is very limited. Being the catalyst to try and access the private sector to try and facilitate them, that really is where the ADB can have a really powerful, big impact, and that is more co-financing, more helping countries in project preparation, actually delivering on what is almost, you hear it time and time again, we need the pipeline of bankable projects so people can invest in. Getting on and doing it really requires challenges, and I think it requires enormous challenges for the ADB, also in letting go to some extent of the control you have, you want to have it over, high standards in terms of all the projects and meeting all the requirements and the safeguard standards, and letting that where you step back a little bit, you're a facilitator when you're in the co-financing, there's some enormous changes that have to take place there. So I think that's really one of the big areas of the future covered in the report, but I really think that's a most important one. But on the whole, I think it's an excellent report, and I'm glad it's out there. Thanks very much, and we'll accept the compliments. But I just want to take up a point that you made, Mike, about the forgotten bank, and I'm going to ask Peter McCauley if he's got any views about this reputation of the bank, being the forgotten bank. Well, I'm a little bit puzzled by the discussion, I guess. I think it's forgotten in Australia, I'd certainly say that, but whether that's the fault of the bank, or whether that's the fault of the way Australia looks at things, I'm not sure. Without going into specific details, I must say I've seen a range of incidents here in Canberra where presidents of the bank have visited, and have, I would have to say, not been very well received, frankly. My former colleague, John Ayers, and I were at the Asian Development Bank. I was, we were both on the board in 92 and 94, and John and I used to joke that we were the lost patrol. We would try to get in touch with Canberra, and we would meet with an enormous yawn. Now I'm not complaining about it, but it's an Australian attitude, as well as a bank attitude. I'll say a few more words about this later, but I suppose my own view is that Australia needs to think, well, we often discuss this, Australia needs to consider its relations with Asia. And I'm not really sure that despite all of the discussion, I'm not sure that this is really happening. We talk a lot, we put out lots of reports, but I'm not sure to what extent it's happening. It's happening in certain ways, but in many others it's not happening. I'll say a few words about that later. Sure, so you're here. Oh, I see, okay. All right, no, I thought we were giving Emma the first go. I have two main comments about the report. One is to comment on the role of the ADB, and the other is to say a few words about what Australia might learn from the ADB. Recommendation one talks about the way the ADB should be more vocal about its development credentials and role in the region. So let me say a few things about that. I'd agree, I think that the bank does not sell itself well. It has too many messages, and certainly as Donald Trump has taught us, we need to keep the messages short and very clear. And that's a basic message in communication in these things. When you ask the bank what it does, it often lists about 20 things. And the bank suffers, forgive me for saying this, Emma, the bank suffers from a terrible disease called listitis, as indeed does the Canberra public service. The bank talks in lists. You never see a list that is less than five items long and often 10 items long. The bank, as I see it, does three main things. When you strip aside all of the discussion about what it does, it does three main things. These things are very effective. They're in the interests of Asia, they're in the interests of Australia, they're in the interests of the world. And we can think of the three main things curiously enough by considering, by remembering that the bank is a multilateral development bank. It's an MDB. So let's take them backwards. Bank, development, and multilateralism. First, the bank is a bank, but it is a bank in a broad sense. It is involved in the astonishing job of capital accumulation in Asia. It is involved itself in the job of capital accumulation in Asia. That is, it borrows particularly from Northern Hemisphere markets and tries to invest the capital in the region. Borrowing is probably easier than investing the money, than in promote using the money in the region. Now, this has been a challenge for 50 years, how to use money effectively within the region, and there is currently a great debate going on about how to promote infrastructure. It is glaringly obvious that the levels of infrastructure in the region are still very low. It's also glaringly obvious when you look at the figures that Asia faces an immense task of capital accumulation. The levels of capital accumulation in Asia, measured in any sensible way, are considerably less than 10% per capita of the levels of capital accumulation in Western countries. I keep coming back from Indonesia or Manila, coming back, getting out of the plane at Sydney Airport, and I keep getting hit, impressed by the extraordinary amount of capital we have in this country. And Western countries have extraordinary levels of capital, and across most of Asia, levels of capital are very low. So there is a huge job of capital accumulation. I've got one favorite figure, let me give you the favorite figure. It's a proxy for levels of capital. Electricity consumption per capita, and this is just a proxy for investment in the energy sector more broadly than electricity. Energy consumption per capita in Australia at present, on an overall basis, is about 10,000 kilowatt hours per capita. That's roughly the figure in OECD countries. In Indonesia and in the Philippines, the figure is 700, 7%. In India, it's 5%, and in the lower-income countries, it's, sorry, I shouldn't be talking about percent, 700 kilowatt hours per capita in Indonesia and the Philippines compared with 10,000 in Australia, 500 in India, and maybe two or 300 in places like Myanmar and Bangladesh. These countries face an enormous challenge of investing in the power sector and in a wide range of other sectors, and this huge degree of capital accumulation is going to continue for the next 50 or 100 years. We're talking about the most extraordinary level of capital accumulation that the world has ever seen, and it is just beginning. We think that we've seen a lot of it in China, but it is just beginning. So that's the bank's role. The bank, as a bank, has tried to invest in this, and it has also tried to invest much more broadly in mobilising capital through capital markets. It has encouraged the development of capital markets. It has, including bond markets, it has strengthened those markets, particularly after the Asian financial crisis. So the role of capital accumulation is an important role in the bank, for the bank. The second one is the development role. In the second decade of the bank's existence, because in the first decade, it emphasised its banking role, in the second decade, it moved out to become much more of a development institution. The fourth president of the Asian Development Bank, Fujioka-san, placed a lot of emphasis on expanding its knowledge and expanding its role as a development institution. It began to publish a lot more, it began to hold many more seminars, it began to focus much more on policy. So the bank expanded out from being a bank into a development agency, and it has continued that role for the past 30 or 40 years. So it's much more than a bank. It is a major development institution in the region. And then in the third decade of its activities, starting in the late 80s and extending into the early 90s, the bank became much more multilateral, because the two giants of Asia began to borrow. India and China moved into the bank and started borrowing which they had not done before. This transformed the bank, and at the same time, it extended its regional activities first in the greater Mekong sub-region, because fortunately in 1991, there were the Paris Peace Accords, peace broke out, and there was an opportunity for the bank to expand regional activities. And of course, the communism collapsed, 1991, and the Central Asian Republics got going, and the bank was able to extend its activities in the Central Asian Republic. So the bank became an institution that worked in regionalism, emphasising development and capital accumulation. It became a fully-fledged MDB. I want to say just a couple of words about the role of that for Australia, because I would argue that in Australia's approach to Asia, it is there is room, let me be diplomatic about it, there is room for improvement in each of those areas. Take capital accumulation. Australia's relations, economic relations with Asia, give very specific emphasis to trade relations with the region. Trade is important, but the region itself is very focused on capital, capital accumulation of many kinds. And Australia has traditionally been a capital importing country, and therefore we don't think much about capital exporting, but we need to give more emphasis on our investment relations with the region. I'd like to see the Department of Foreign Affairs and Trade rename to the Department of Foreign Affairs investment and trade so that there is more attention on our financial relations and all that goes with it. We might even consider establishing new institutions to improve our own capital flows. There would be nothing wrong with Australia being both a capital importing and significantly exporting country to the region. Second, development. We talk a bit about development, but development is an all-embracing concept, and we don't understand it very well in Australia. Our economic dialogue in Australia is about macro and micro institutions, but presidents of the bank have spoken about the two faces of Asia, shining Asia and shivering Asia, and we need to understand those dilemmas. The third is regionalism. Australia is a little hesitant about regionalism. Our colleague of many of us, Graham Dobell, well-known Australian journalist, recently suggested that Australia might consider becoming a member of ASEAN. I think that's a rather controversial line, but it is interesting to consider it. It's interesting to consider what the implications would be. We really do need over a period of 30 years or more to consider what are our real relations with Asia, and that will involve us changing and our links with the region, and that is really captured under the regionalism head. So the ADB focuses on being a bank, finance, development, and regionalism, and I think there are lessons for us in that as well. Thank you very much. Thanks so much, Peter. Thank you. It's really a pleasure to be here with distinguished speakers and panelists. Coming to this report, I think it's an excellent report. It's very timely. What does it bring when it brings in obviously independence? This report has not been commissioned by ADB. We are consulted, but at the end of the day, we played no role in shaping the overall final conclusion of the findings, and we welcome this kind of report. Excuse me. Second, it is this consultative process. The authors and the approach they have taken have been very open-minded, and they need receiving as many as possible the comments, suggestions, and that applies a professional judgment in shaping the final report. And then the thirdly, of course, is the quality of the report itself. It is very impressive in such a short time you have gathered so much information and have gained so much in depth understanding of the bank, and I think really, really appreciate your efforts and congratulations to you on the report. Coming to some of the substantial matters that this report has covered, the first question, of course, obviously, as suggested by the title is, will it be remain relevant in today's world and maybe even in the next 15 years? And the conclusion is a resounding yes, and we definitely agree with that conclusion. Not only just for self-interest, but also, I think, based on professional judgment, it has to be this conclusion. One, ADB's overarching vision and mission is to eradicate poverty in the Asia and Pacific region. Poverty reduction remains an unfinished business. We know over the past 20, 30 years, nearly one billion population, like 800,000 million population have been lifted out of poverty, but still half of the world's poor live in Asia. And the definition of poverty has also changed. Just like in the past, just one or two years ago, the definition of extreme poverty is your per capita income, $1.25 a day, and that now has been raised to about $2. $1.90 a day. And that should be the case. Many things in the past, which is considered a luxury food, today has been considered as the basics. For example, mobile phones and so forth. And the definition of poverty needs to keep pace with this kind of thinking. The second is about the vulnerability. In addition to the extreme poverty, a large number of people live just on the borderline of the extreme poverty and can easily slip back to extreme poverty because of health situations, natural disasters, losing jobs, and so forth. And in addition to this kind of a traditional role that the bank still needs to play, we also have many emerging challenges. Climate change, global warming, and the kind of events that have global or regional implications, such as communicable diseases, and which all cause for public actions. And the bank is a natural instrument in dealing with many of these challenges. So that, of course, the relevance is not only to the case that the world provides this space for an organization to play such a role. It's also whether the organization itself can fulfill this kind of a mandate. That comes down to the strengths and the capacity of the organization to deliver on its mandate. And ADB has been constantly reforming. Actually, if we read some of our own reports, we are, so, we are the harshest critic of ourselves, especially since 2008 when the bank adopted the strategy for Nifongi. Along with it, we have introduced the results framework, which is considered the bank among the MDBs, and it was also the first MDB to do so. In that, we have been extremely frank about all the problems we are confronting at the project implementation level. The kind of desire we and the various governments want to achieve, and the frustration that the actual achievements often fall short of what is expected. So, since 2008, the reform has been constantly being explored and implemented, but since 2008, the pace has been increased, and we have introduced many concrete reforms at both the strategic level and the operational level. And we have been trying very hard to have project, so-called design ready, which means do many things upfront before the project is approved. And today it continues to be a struggle, but we're continuously trying to move towards those kinds of directions. And our human resource reform, naturally it's very controversial, very difficult for any organization. Last year, for the first time, the bank introduced the early separation on inbound voluntary basis. In the past, it all has been voluntary to really promote better match between staff skills and work requirements. So, I think coming down to the report, it's an excellent report. If you are going to produce the next volume, my suggestion is at least a few things on the international finance landscape. Also, maybe look at similar organization. Are we moving towards the same direction? What are the some of the unique experiments we can learn from each other? The second thing is maybe have some operational depth. Look at the project cycle. We are our bottlenecks. We ourselves are constantly exploring, but having your expert independent view will be very important. And certainly, for being working on the Pacific, I would suggest you at least have one chapter. Not a piece of it. Thanks very much Emma. I should explain, we should have explained at the beginning, that the report very much does just focus on Asia because Asia has a very specific economic context. And as we know, those of us who've worked on the Pacific, the Pacific has a different context. And so really we felt that the bank probably needs to have a bit of a different approach to its operations in the Pacific. But I think we'd be very happy to take on board a report that looks specifically at the Pacific. It would be a very different beast, that's for sure. Look, I want to thank the three of you for being so kind to us, but I think you've been too kind to us. I would like to see if any of you have got some criticisms or you feel that the report had some gaps which we really should have addressed. And then we'll open it up to the audience. You might have actually identified those gaps as well. I'd just start by, I think Emma made a comment that she made as the one that sort of expressed it much better than I was thinking about. And I see it's a cheap shot sometimes. So it's the important one of, it's one thing to make recommendations, but how do you get there? And I think as Emma said, when you look at some of the bank material, they've been doing wanting to get lots of these reforms, talking about things, but actually getting there, it's always fell short really in terms of practice. So in part of what the bank really wants, if it wants to improve is perhaps not so much as setting new goals at what it should be, but how do you help translate it into practice? And that's the really difficult bit. And I'd go back to what I said so much about, I think, is the challenge of actually changing the views of the member countries and that's a real problem. And it's a half on a thing I've said all the way through is when we talk about the bank, we're doing something. We've got to actually identify, who do you mean by the bank? Do you mean management? Do you mean staff? Do you mean countries? And a lot easier for management to try to do, but they're hampered by actually getting countries to change their views. And that mishmash is the real problem of trying to get from the recommendation to actually putting it in practice. I suppose that's sort of a gap and it's a cheap shot because that's so hard. I wouldn't know how to do it. That's I think one aspect that's probably could be more focused. Okay. You were commissioned by an American institution, the Smith Richardson Foundation. So you've taken a rather global view. I would like to see more emphasis on what Australia should do. Instead of wagging our finger at the bank, which we often do, the international community does. And there's been quite a few studies of the bank as a matter of fact, Mike, I can give you a bibliography later. I've spent two years going through them, including the bank itself is surprisingly critical. Before these sorts of strategic reviews, they've done a thing called strategy 2020 and strategy 2030. They go out and they talk to stakeholders and they come back with a list of comments that stakeholders have made. And I tell you, it burns your ears. It is to the credit of the bank that it publishes it. It publishes it internally and it's on the web. So there is no shortage of sharp criticisms of the bank. But I would like to see Australia look at itself. I mean, we have to relate to Asia. We have to relate to, we have to work out what we are going to do. And if we simply join the rest of the international community of wagging our finger at the bank, and there is absolutely no shortage of this, absolutely no shortage, including John Ares and I and lots of others on the board. We used to enjoy wagging our finger at the bank once or twice a week. And it's been going on for 50 years. So I'd like to see more emphasis on what Australia should do. And I'll just end on this one. There is no topic that is, in which there is more continuity. No topic that has not been continuously discussed in the bank from the very first day of its establishment as Quo Vardis the bank. You can walk up and down the corridors of the bank. You can sit in the cafeteria of the bank. You can attend dozens of seminars or discussing Quo Vardis the bank. What we really have to do is work out what we Australia do. What is our comparative advantage? How do we relate to it? What are our interests? And how do we forward those interests? But this was funded by an international institution. I understand that. But next time we need to place more attention on ourselves. I think. As I mentioned, I think that the report is very adopted as a strategic view. And all the macro perspectives at the end of the day need to translate into operations and the results. Without that, we don't have any credibility. And I would love to see the report. Take a few projects. Look at the project cycle and see where we are falling short of our expectations and desires. And many lessons we have learned many times. And it has that really face back into the new generation of projects. That's been a very difficult process because of the different views, resource allocations, incentives, and so on. But we have to come up with that. And without improving our performance, despite the kind of natural relevance exist in the world, we will, ourselves, become irrelevant. OK, thank you for that. I'm going to open it up to all of you now. If you could wait till the microphone comes to you and if you could tell us who you are. And you can ask any of us, I think, if that's all right with the panellists plus my two co-authors. Yeah, any questions? Hi, I'm Jamal Garrett. I'm a freelance journalist who works in the Pacific. I have two questions. One is to Emma. What is your... I mean, the Pacific, the ADB's doubling at some finance in the region over the next five years. But you're facing competition from bilateral loan arrangements that are more flexible than the ADB. What are you changing in terms of the flexibility and your ability to meet that competition? And what are you finding the challenges in doing that? And my second question is to Peter Crawley. What would you like to see Australia? How should Australia be approaching the ADB differently? Yes, that's a very good question. I think, first, we need to view what is competition. Competition has become the issue when the demand for the services has come lower that you're competing for the services needed by the countries. I don't think we have reached that stage. As the report has pointed out, the demand for infrastructure, for services, for policy allies, for capacity development remain tremendous and there are so many unfulfilled gaps. And it's not really not hard to find places you can make a significant contribution. So if that is the situation that we're not competing really for opportunity, then the issue is can you deliver? I think that internally looking at our delivery capacity, the kind of value for money we can provide to our shareholders to the developing member countries, that's more important than there are some new, at least at this stage that some newcomers have come. So I think the second element is in this space, the MDB and development agency space, often we have turned the competition into collaboration for the mutual benefits of all the organizations. This probably is true for many regions, but especially for the Pacific. We have so many jointly financed projects or we have so many commonly shared policy matrix in supporting reforms. And at the end of the day, we found that we all benefit. That doesn't mean we don't have different opinions and they're the element of professional competition, but often it's at a very operational level and it can be quite easily addressed. At the broadest level, I would like to see Australia be a better partner with Asia, developing Asia, particularly developing Asia. And the Asian Development Bank is a case study of that. The ADB is only one part of that. We should think about our partnerships with other institutions in Asia as well. How can we be a better partner? I think we can be a better partner in two ways, two main ways. We need to be clearer on what we want in terms of our national interest, but in terms of a broad national interest. If we're going to have a partnership, our national interests need to be framed in terms of working with partners and bearing in mind their interests as well. If it's a partnership, it means that you consider what other people want and you consider how you link into them. And I don't think Australia always does that particularly well. If we place excessive emphasis on our own narrow national interest, it means that we do not consider sufficiently the interests of our partners and they will notice it and they will bear it in mind. So I'm saying, I'm not sure that in that sense, Australia is yet a good partner. We don't understand the needs of our region very well and we don't link in with it very well. The second thing we need to do, and I'm afraid this is a fact of life in the international sphere, is that you need to back it up with resources. If you want it to be taken seriously, especially if you're a rich kid on the block, especially if you're one of the wealthiest countries in the region, you need to step up to the mark with resources and we're reluctant in doing that as well. I understand that, I understand that, but there will be costs. If you don't contribute to an organisation or an institution, other people notice it and they bear it in mind. So we need to do two things. We need to some extent change our attitudes, define our approaches better and we need to support it with resources. I'd argue those two things are in our national interests, broadly defined, not narrowly defined. We can do that specifically with the ADB, but I would like to see it more broadly. Well, Peter, I completely agree with you and conveniently up until the 28th of February, the consultation process of the Australian White Paper of Foreign Policy is still open, so you should make a submission. Any other questions? Yes. I'm Johnny, as I'd like to make a comment about Australia's working relations with ADB and it builds on the report's emphasis that the core role of the bank in helping to provide high quality infrastructure will remain immensely important and it builds also on Emma's observation that the bank has known how real the problems are of doing that work well all the way through the project cycle. The Office of Development Effectiveness, part of that, reviewed in I think 2014 Australia's non-core contributions to ADB along with World Bank and UN funds. And this is money which went into sexual funds, country or regional funds for parallel, a binocular project intended to link with an ADB project or program loan. The report was published, I think, two years ago, early 2015 and as one of the authors, can I say, I hope that if you read it, it is as positive as we wanted it to be about how highly effective some of that work had been, particularly where ADB did a good job but where the bilateral aid program meant that Australia had country knowledge and the means to complement some of its binocular work where that was going to be helpful to borrowing countries, government agencies. I hope we emphasized that that was money very well spent and the recommendations in that report were to keep doing that to do more obviously. Not numerous little jobs but to consolidate in the sexual funds in the case of ADB or co-financing complementary projects in those very few countries such as Indonesia where the Australian binocular program gave deep aid officials the ability to help ADB select, design and implement. Have you got a comment on that? No? Thank you. Yes, please. Several speakers have spoken about the existence of poverty in South East Asia, women in the other parts of Asia and in addition, where it alluded to the inflow of capital from various private sources in particular which presumably would be geared to commercial projects. I'm wondering whether one of the bank's role would be to finance more or would be to concentrate more on the poverty aspects and if that is so, what sorts of things do the speakers feel the bank should do? Anybody on the panel? Well, I'll comment briefly first. In responding to all of these things, the bank is a bank and it has to bear in mind what borrowers want. It can influence, I guess, what loans it pumps out of the door but say Colin, this is Colin Barlow who's worked for many years in Eastern Indonesia. This is Tangara Timur. Colin, as you and I know, there are serious levels of poverty in Eastern Indonesia. Well, a lot of that depends on whether the Indonesian government itself wishes to choose to borrow from the bank to invest in Eastern Indonesia. So the wishes of borrowers are fairly important and in the bank there is always a tug of war to some extent between the borrowers and the donors. Now the donors and the bank itself can have some say in this and can perhaps encourage Indonesia to work, for example, to take a specific example in Eastern Indonesia or on specific matters of concern, perhaps more attention to the interests of women or poor people in urban areas and it is easier for the bank to do that if it has grant or near grant funds. So very early in the bank's operations a soft loan facility was established but the bank being a bank can only support soft loans if donors support it. So in a sense Colin, I suppose I'd argue it bounces back to you and me in Australia. If we see this as important, the Australian government needs to lend resources to make resources available to the bank and I suppose to Indonesia as well if we wanted to, we have to put our money where our mouth is. We shouldn't really be looking so much to the bank. The bank can only, it's a bank. It can only survive in a market. If we think it's important, we have to put up resources. Sorry, I'm sad to that. We mentioned in the report that the bank also can experiment in new ways. One thing we touch on is the idea of soft sovereign lending. So you can lend to states or smaller regional groups within the country so you can be more targeted to the areas where infrastructure is in the greatest deficit or probably needs of the highest. But again, it's a trade-off between what do the borrowers actually want. But it's an idea of a conversation something we're having and this is just, many of the conversations the bank is having internally and as their contributors to the bank can keep pushing. There are problems of risk, of course. If you start lending to regional institutions they tend to be riskier and you get into problems of sovereign risk. Does the central government guarantee these? And what happens when those sub-sovereign institutions decide they don't want to pay? Which can happen? I think your question is a very good one. And both come actually as well as officially. Those who have worked in ADB know how much tension and struggle have got this kind of question called. One, I think, when it comes to poverty clearly it remains very important. But what are the key drivers for poverty reduction? And one's full of thought and there is overwhelming evidence, especially in our region, about the role of growth in poverty reduction. I mean, by and large the most impressive poverty reduction over the past 40 decades has happened in China and that owns a lot to the strong and sustained growth and there is overwhelming and pure co-evidence to show that. So therefore that underpins the bank's continued effort in supporting large infrastructure which may not be specifically targeting certain groups that will lift the overall growth trajectory in the country. But then I think the National Bank will see itself as exorbitant under pressure to do some targeting. Therefore we also actually have set specific landing targets about the second pillar, the so-called equality for education for opportunities. The first one is expanding the opportunity through growth. The second one is to make sure as many people as possible can benefit from the opportunity. So health, education and so on. The third dimension is about social protection. For those people because of very inherent characteristics cannot benefit in the growth process even when opportunities are made equal for example because of disability and so on. And then there is a social protection element. So the bank is working on all these three fronts under the so-called inclusive growth definition which includes these three pillars of expanding opportunities, equal opportunities and the social protection. But it is constantly under pressure to swing to definitely focus on a daily basis. We have time for one last question. Has anybody thought? Thanks for the presentation. So I guess picking up on that theme a little bit I noticed two graphs in this report. One is the one about growing inequality in Asia and specifically points to though there has been great poverty reduction in China that inequality has rapidly increased at the same time. There's another graph that looks at the sectors where ADB lens and notes that the biggest change has been in the agriculture sector from over 20% in the 70s down to 6%. So I can't help but seeing some kind of equivalence there or perhaps a role and I'd have to question why ADB would take a strategy to reduce that sectoral engagement. Obviously I'd take the point that it makes loans to whoever wants loans but if it's about development then investing in the sector that is the most poverty reducing sector. More poverty reducing by two to four times as other sectors why would it reduce that part of its portfolio so significantly? There's been a fairly sharp drop in the demand for lending from borrowers. This particularly occurred when China and India began to borrow. China and India were far more interested in borrowing for particularly infrastructure and to some extent industry and their demands to borrow for the agriculture sector fell but more generally it appears to have fallen off across a lot of other borrowing countries as well. Central Asian republics for example are very interested in roads. There's a big demand for borrowing from the bank for infrastructure hard infrastructure particularly for roads and for power. So basically it's what the customers want. The customers in the sense of the borrowing countries who are making the borrowings. Now the bank can influence it to some extent but at the end of the day countries borrow they take the view they take a very strong view on this they are the borrowers they're going to have to pay it back it's their money and they're quite up front about this they're quite clear in talking to the bank we don't necessarily hear them so much but the bank hears them. But the other part is what's really on the plane where public expenditures go and the philosophy has changed and the banks operations have changed along with this. Early days we do have more lending to agriculture but also industry and trade even for manufacturing factories and so on. But I mean over time the philosophy has changed that there are certain places the government should play a role more like public goods and this kind of aspect of the infrastructure which is the foundation for all the sectors to lift up to be lifted up so that on the plane the shift. The second thing is economic structures in countries that are changing but there's tremendous change in urbanization and sometimes the agriculture productivity grows in some countries for example China and so on and it goes to the urbanization which has trade labor to more production lately and not only lifted the overall productivity but also even for the agriculture sector because the arable land is so small you really cannot absorb such a large labor force. So I think the bank is not in the urbanization it is responding to the developing member countries needs and it is also constantly reflecting on where we should put the value for the highest level of value for them. That brings us to the conclusion of this session I want to thank our panellists and also my co-authors and you too for making such a great contribution. Thank you.