The sports journalist David Epstein’s best-selling book, “Range”, begins with the story of tennis great Roger Federer, who arrived at the pinnacle of his profession after a wandering journey through “basketball, handball, tennis, badminton over his neighbor’s fence and soccer.” Epstein argues that Federer achieved greatness precisely because he had the breadth of experience needed to innovate and adapt. Epstein decries the cult of specialization, which he describes as dividing the world into “parallel trenches,” in which “everyone is digging deeper into their own trench and rarely standing up to look in the next trench over.”
While the message is directed at individuals, it holds equally true for governments and development finance institutions such as the Asian Development Bank (ADB), especially in the midst of an unprecedented pandemic. This crisis that demands an innovative and inter-disciplinary response. The Ministry of Finance and ADB have taken measures to break the constraints imposed by silos of narrow expertise and reacted quickly in new and innovative ways to address COVID-19.
For example, the early and unprecedented fiscal stimulus enacted by the Indonesian government in 2020 reflected precisely the kind of innovative thinking needed in the early stages of pandemic-induced lockdowns. The government quickly obtained parliamentary approval to raise the deficit to 6.34% of gross domestic product. Equally, if not even more ground-breaking, was the effort to enlist Central Bank support for the government’s fiscal response through a temporary burden-sharing agreement to finance public goods.
The ADB responded similarly by creating a new $20 billion policy support instrument to address COVID-19 related fiscal costs in Asia and the Pacific, $1.5 billion of which was disbursed to Indonesia. With this budget support, ADB’s sovereign operations in Indonesia rose to $3.4 billion in 2020, the highest ever, and total disbursed budget support to Indonesia from all development partners reached $6.9 billion. This collaboration between the Ministry of Finance and development partners paved the way towards the $47 billion COVID-19 response (PEN) budget that helped more than 71 million people and 12 million micro-, small-, and medium-sized enterprises (MSMEs) withstand the first wave of pandemic impact.
This crisis is uniquely inter-disciplinary and has forced policy makers to make decisions that incorporate inputs from a broad variety of fields, including public health and economics. Recognizing this challenge, ADB has stepped up its engagement on policy issues, collaborating with international experts to host dialogues for the Government of Indonesia on fields as diverse as supply chain risk for critical food items, medical supplies, MSME recovery, the survival of the tourism industry, the use of big data to support social assistance delivery, and vaccine distribution.
Looking ahead, we will need to build on the current collaborative approach. The challenges ahead include managing the potential pandemic escalation, implementing vaccination strategies, and charting the economic recovery. Complementing its successful measures to secure the urgently needed financing for pandemic response, the government has developed sound, and in many ways game changing, strategies and policies to ensure equitable access to vaccines for all Indonesians, as well as to accelerate economic recovery. The government has allocated about $3.4 billion for vaccine procurement in 2021. Through its early and anticipative purchases, the government secured more than 329 million doses of vaccine from various producers as of January 2021. By the end of 2021, the government aims to vaccinate about 182 million Indonesians. This ambitious move will help keep people safe, create herd immunity as well as bolster the confidence of the people and markets. To this end, ADB will continue to seek ways to support Indonesia’s vaccine rollout, for example, through its new $9 billion facility for vaccine access across Asia.
As daunting as the current situation may be, as we emerge from the COVID-19 crisis it is imperative that we look ahead and at ways to build back better. We must now begin to lay the foundation for a resilient, smart and green recovery. The climate challenge, more so than any other, will force a continuation of the broad and interdisciplinary approach characterized by the response to the current crisis. We will, for example, need to work together in order to scale up ADB’s support for the development of a green recovery framework, and innovative capital market instruments such as transition bonds and sustainability linked bonds.
The process of “building back better” will also help us deepen structural reforms in areas such as competitiveness, reducing investment barriers, and upgrading the country’s manufacturing capacity, as reflected for example in the government’s innovative structural reforms to attract investment, promote private-sector participation and accelerate growth. The Omnibus Law, for example, was designed to simplify more than 70 existing laws and regulations to consolidate licensing powers, adopt a risk-based business licensing process, encourage foreign investment, and establish a facilitative framework for MSMEs business establishment and operation.
These efforts may be made more difficult by a fiscally constrained backdrop, and the government will therefore move forward with even greater urgency to reform domestic resource mobilization and international tax cooperation. The government has already been forward looking in anticipating the growth of information technology-based industries, and has started to tax online businesses, while actively participating in setting global standards on digital taxation. With Indonesia’s support, ADB is establishing a new regional hub focused on these issues. Indonesia’s multilateral partners play a crucial role in helping the country address this as well as the critical recovery and other development issues.
By taking an innovative, collaborative and interdisciplinary approach, the government and ADB can help Indonesia emerge stronger from the pandemic and set the country on its path to achieve Vision 2045. We have already made great progress together towards this goal, but more effort will be needed in the months and years ahead.
