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Greater Mekong Subregion Environment Ministers' Meeting

Keynote Address by
Liqun Jin
Vice-President, Operations 1
Asian Development Bank

25 May 2005
Shanghai, People's Republic of China

Excellencies, Honored Guests, Ladies and Gentlemen:

This meeting marks an important milestone in cooperation and shared concern for the Greater Mekong Subregion environment.

We are here today - the six GMS member countries, ADB and its development partners - to consider and agree on a systematic and integrated approach to conserving the natural systems of the GMS. Such an approach is urgently needed as a significant step forward to realize the full benefits of GMS cooperation.

To date, the benefits of the GMS program have been impressive. Due in large part to the subregion's rapid economic growth, the number of people earning less than $1 per day has fallen by a remarkable 56% since 1990. At the same time, access to basic human needs such as clean water and proper sanitation has increased significantly.

However, the GMS is not immune to the tremendous pressure that rapid growth puts on the environment. Across Asia and the Pacific, lands have been deforested and degraded, major areas of biodiversity lost, and air and water quality has significantly declined. While many developing countries in the region have formulated national environmental action plans, strengthened regulatory systems and enhanced their environmental institutions, much more remains to be done. The sobering fact, borne out by a number of recent studies, is that even with strong economic growth, reasonable social development and institutionalized environmental policies and actions, the formidable strains on the environment have to be addressed with committed and painstaking efforts.

In GMS, forests, wetlands, mangroves and coral reefs, which, are critical to eco-environmental balance, cry out for protection. Sound management and use of natural resources must be made a priority in economic development. Sustained economic growth, backed-up by a well planned and environment-friendly investment program, will provide hope to the 44 million people in the region who still struggle to survive on less than $1 a day.

The crucial question, then, is how to finance sustainable management and use of natural resources. Recent trends show that public spending on the environment is declining. On a global scale, official development assistance for sustainable forest management declined by almost 50% in the last decade, and support for and protected areas fell by over 60%. This declining trend must be reversed. First and foremost, it must be understood that spending on environment is an investment, not just an expenditure. Second, we can no longer heavily rely on donations, grants and government subsidies as major sources of funding to finance environmental management. We must:

• utilize available funds efficiently for well thought-out, targeted and results oriented priority environmental projects,
• increasingly use market-based incentives to encourage the private sector to contribute to financing and managing the environment, and
• recognize that both the public and private sector have an important role to play in eco-environment management, and it is effective public-private partnership that can make a difference.

Far-reaching trends in globalization have been reshaping the contemporary world. These trends are characterized by rapid technological advances, which are largely taking place in the private sector. Traditionally, we have relied heavily on government interventions in the economy to manage the environment, and overlooked the role of the private sector in the provision of environmental goods and services. Clearly, significant opportunities exist for the private sector to use its technological expertise to capture opportunities and play a larger role in environmental management.

Provision of ecosystem services is one example. Researchers have estimated the value of global ecological services to be in the range of $18-61 trillion. In the past, market failures have prevented the private sector from taking advantage of such opportunities. But today, innovative private sector initiatives, backed by necessary flexible regulatory frameworks, have made market exchange of ecosystems services possible. New York City planners, for example, saved about $4.5 billion by paying upstream land owners to maintain land use patterns that would ensure clean water to the city. Carbon trading has generated $115 million worth of private sector investments on forests, mainly in developing countries. In Costa Rica, the Government pays landowners for ecosystem services provided by their forestlands. The Government of Costa Rica has already paid about $100 million to landowners under this program, using both public and corporate contributions.

ADB has been working to adapt to these emerging trends. For example, in the Nam Thuen 2 hydroelectric project, financed by ADB, the World Bank and other public and private partners, the corporate sector will pay $31.5 million to maintain and enhance and watershed services in Lao PDR.

While many market-based approaches are at a pilot stage, there is good potential to apply such approaches in the GMS over time. What are needed are vision and a concrete plan that takes into account the emerging markets for ecosystem services in the GMS.

Market exchange of ecosystem services is relatively new, but there are many well-established markets for environmental products and services. The World Bank estimated that, in developing countries, the economic cost of environmental degradation is in the range of 4-8% of GDP. Reducing air and water pollution in the People's Republic of China to its own standards would generate savings of billions of dollars per year. In the case of air pollution, these benefits can be partly achieved through private sector initiatives such as harnessing markets and investing in renewable energy resources, boosting availability of natural gas, and improving public transport systems. Thus, aligning environmental management objectives with the interests of private sector can help ease the drain on public financing.

According to one estimate, the world market for environmental goods and services is currently valued at $515 billion, and forecasts show that it will grow up to $688 billion by the year 2010. The organic food market and clean production sector show similar trends. The environmental market in industrialized Asia was $19 billion in 1996 and is estimated to be over $50 billion in 2005. In the GMS countries, a proactive approach will allow the corporate sector to capture tremendous business opportunities in these areas.

ADB is committed to working in strategic partnership with our developing member countries to increase private sector engagement in development, including the management of environmental resources. For this reason, we chose to focus on the role of the private sector in our 2005 Asian Environment Outlook (AEO). The report, entitled "Making Profits and Saving Our Planet: Corporate Responsibility for Environmental Performance in Asia and the Pacific," will include recommendations for enhancing the role of the private sector, and we will be following up on those recommendations to improve environmental sustainability across the Asia and Pacific region.

Alongside these efforts, of course, we must focus on the other half of the equation - that is, the efficient utilization of available funding. And that brings me back to our key purpose today.

The Core Environmental Program (CEP), the topic of today's discussion, represents a systematic and integrated approach to sustainably manage shared natural resources in the GMS, for the present and the future. The CEP is based on state-of-the-art knowledge in environment management, and was developed under the supervision of GMS Working Group of Environment, or WGE. It was designed using a participatory and consultative process, which culminates in our meeting today. I applaud and congratulate the WGE for taking on this crucial initiative.

Later this morning, representatives of the GMS countries will present the details of the program to the honorable Ministers of Environment. You will note that the six components of the CEP provide the means to address the immediate and long-term stress that rapid economic growth would otherwise exert on the environment and natural resources of the Subregion.

I would like to particularly draw your attention to the Biodiversity Conservation Corridor Initiative, or BCI. This key initiative addresses the urgent issue of fragmented landscapes arising from economic development, and the impact this fragmentation has had on biodiversity in the GMS. Under the BCI, the establishment of biodiversity corridors will harmonize economic development with conservation, and protect the ecological and environmental services that underpin development objectives.

Ladies and gentlemen, Ministerial endorsement of the CEP and implementation of the BCI is an important step along the way to the Second GMS Summit of Leaders, which will be held in Kunming on 4 and 5 July 2005. Through our deliberations today, I urge you to consider the positive role we can play in advancing economic growth and poverty reduction while protecting the environment. I am convinced that with wise stewardship from its leaders, the GMS environment can be conserved to provide sustainable livelihood for people across the Subregion today, and for future generations.

I wish you all the very best in your deliberations and a pleasant stay in Shanghai. Thank you for your kind attention.