- The COVID-19 pandemic strained national budgets and became the greatest challenge to governance and public sector management in recent years.
- Responding to the COVID-19 governance challenge, 161 out of 180 cofinanced projects in 2020 supported good governance and institutional capacity in some form.
- In the new normal, ADB and its financing partners will continue to strengthen governance and institutional capacities through investments and knowledge work.
ADB will support public management reforms to improve governance and create an enabling environment for sustainable growth by
- supporting public management reforms and financial stability
- strengthening service delivery
- strengthening capacity and standards
COVID-19 as a Governance Challenge
Within weeks after the World Health Organization declared the COVID-19 disease a Public Health Emergency of International Concern in January 2020, governments worldwide imposed lockdowns and other public safety measures to stop the spread of the disease. In many countries, such measures disrupted economic activities, prompting governments to increase public spending to support failing businesses and households with diminished incomes, despite also suffering from revenue and tax losses. The COVID-19 pandemic strained national budgets and became the greatest challenge to governance and public sector management in recent years.
In developing Asia, many governments were unprepared and struggled with adopting emergency fiscal measures, while protecting already overworked healthcare systems and placating the concerns of their constituencies. Managing public financial resources became critical, particularly for countries with limited economic resources. The role of governments, especially in public sector management, has never been more important.
Responding to the COVID-19 governance challenge, ADB and its financing partners provided $7.8 billion in total cofinancing for pandemic response public sector management projects in 2020, apart from other governance projects. About 1611 out of 180 cofinanced projects in 2020 supported good governance and institutional capacity in some form.
Cofinancing Solutions for Public Sector Management
In April 2020, ADB rolled out its COVID-19 Pandemic Response Option (CPRO)2 operations to help governments finance programs to mitigate the impact of the pandemic. On 23 April, the first cofinancing loans on public sector management were approved for Indonesia (with the Asian Infrastructure Investment Bank [AIIB] and KfW) and the Philippines (with the AIIB). These initial stimulus packages were geared to keeping government operations afloat to implement social assistance programs; boost resources for COVID-19 prevention and control; and safeguard productive sectors and workers, such as in health and finance, from the economic downturn.
Indonesia received the largest cofinancing sum for a public sector management project, a $1.1 billion loan for the Indonesia: COVID-19 Active Response and Expenditure Support Program, cofinanced with Australia. The AIIB was ADB’s top cofinancier for public sector management in 2020, cofinancing $3.9 billion for nine projects.
Preparing for Better Governance in the New Normal
As the pandemic continues to disrupt our cities and communities, ADB is actively supporting governments in strengthening service delivery and capacity under the new normal. Non-COVID-19-related public sector management projects with cofinancing committed in 2020, amounting to $26.1 million for 19 projects focus on continuing capacity development programs for governance institutions. In Fiji, a cofinancing project with Australia is supporting the implementation of a program to improve public financial management. In Kazakhstan, an ADB project is advancing digital technology solutions in municipal services, e-commerce, agribusiness, green economy, and finance, with cofinancing from the Republic of Korea e-Asia and Knowledge Partnership Fund. Australia, New Zealand, and the World Bank are supporting a post-pandemic macroeconomic resilience program in Tonga to encourage long-term growth. ADB is complementing these country programs with 14 governance-related regional projects and technical assistance focused on adapting to the new normal, such as adopting new technologies, strengthening social protection, and improving public financial management.
As governments continue to find ways to deal with the new normal until COVID-19 vaccines become widely available, ADB and its financing partners will continue to strengthen governance and institutional capacities through investments and knowledge work in four key areas. These are fiscal risk and debt management, domestic resource mobilization, infrastructure governance and state-owned enterprise reforms, and localizing the Sustainable Development Goals. This will be further supplemented by ADB’s governance risk assessments, which will inform ADB’s engagement to further support governance and institutional capacity initiatives across the Asia and Pacific region.