Keynote speech by Masatsugu Asakawa, President, Asian Development Bank, at the 2020 ADBI Annual Conference on The Impacts of the COVID-19 Pandemic and its Policy Implications, 1 December 2020
Ladies and gentlemen, it is my pleasure to address you today at the ADB Institute’s 2020 Annual Conference. I am joining this annual conference today for the first time as ADB President, and it is also the first ADBI Annual Conference to be held virtually.
While we are still tackling the immediate health, economic, and social impacts of the coronavirus disease (COVID-19) pandemic, I believe this conference offers us a valuable opportunity to step back and examine the broader implications of the crisis through different lenses—from the macro and micro level, to short- and long-term perspectives.
I. The impacts of the COVID-19 pandemic on Asia and the Pacific region
When I assumed office as President of ADB on January 17 this year, I little imagined that overall growth of developing Asia in 2020 would be negative. We now expect it to be -0.7%. This would be the first contraction in six decades; with the exception of the People’s Republic of China, where growth is expected to be 1.8% this year.
While we do expect developing Asia to rebound strongly by 6.8% next year, we cannot anticipate a V-shaped recovery, as it will take some time for countries to recover to pre-pandemic levels of GDP growth.
Another alarming estimate is that an additional 80-160 million people in the region will be pushed back into poverty, reversing much of the poverty reduction that was achieved in recent years. Despite all the social and economic hardships already endured by so many people across Asia and the Pacific, the pandemic has yet to show signs of ending anytime soon. In fact, many countries are suffering from the second and the third wave of contagion.
II. ADB’s response to the COVID-19 pandemic
Since the very early stage of the pandemic, ADB has been providing financial and knowledge support to governments and the private sector. In particular, we announced a $20 billion comprehensive response package in April, structured across three pillars.
First, ADB has been providing grants and technical assistance since the earliest stages of the pandemic to help governments purchase health supplies and equipment. Second, ADB provided quick-disbursing countercyclical financing through a new instrument called the COVID-19 Pandemic Response Option, or CPRO, that is providing assistance for strained government budgets, with particular focus on supporting poor and vulnerable groups. Third, ADB is supporting the private sector with much-needed liquidity and working capital, as well as short-term financing for trade and supply chains.
As of 20 November, ADB committed about $14.4 billion in assistance and mobilized an additional $8.4 billion in co-financing from development partners. Our knowledge operations and partnerships have been as vital to our response as our financing, because they enable us to identify needs and enhance the effectiveness of our support.
Right now, we are working intensively to develop a new mechanism that will ensure safe, speedy, and equitable access to vaccines throughout developing Asia, especially for poor and vulnerable populations. Our goal is to help our developing members formulate national COVID-19 access plans; build strong vaccine delivery systems; and purchase safe and effective COVID-19 vaccines in a timely manner. We will implement this in close collaboration with the COVAX Facility, other multilateral development banks, and UN agencies.
III. ADB’s priorities to rebuild for a lasting recovery
As we provide support to our developing members to overcome the pandemic, ADB and the ADB Institute should work with them to better understand the implications of the crisis and the importance of laying a firm foundation for a sustainable, inclusive, resilient recovery.
I see five priority areas that will equip the region to rebuild smartly and return to a path of growth and prosperity.
The first area is deeper, wider, and more open regional cooperation and integration. While some worry that globalization will retreat after the pandemic due to travel bans and trade restrictions, I believe that globalization will return, but it will take a different shape.
To help our developing members adapt to these new and evolving forms of globalization, ADB will continue to promote stronger regional cooperation and integration. This includes support to diversify supply chains; to develop regional public goods, including collective prevention of disease outbreaks; to strengthen regional approaches for addressing climate change; and to enhance regional financial safety nets.
The second priority area is addressing inequality. COVID-19 has disproportionately struck poorer households and medium, small, and micro enterprises (MSMEs) with few resources to cushion the blow due to weak social safety nets, lower levels of financial access, and lack of health coverage. Strong investments in education, health, and social protection will be critical to this effort, while also focusing on gender equality.
The third priority is ensuring that the recovery is green and resilient. ADB has not wavered from its ambitious target in Strategy 2030 of providing $80 billion in cumulative climate financing by 2030, with 75% of our total number of operations focusing on climate change mitigation and adaptation.
The fourth priority is ensuring that our developing members capitalize on increased digitalization. The pandemic has been a catalyst for e-commerce, cashless payments, and virtual interactions. Governments and the private sector need to harness the power of these and other new technologies, by providing adequate digital infrastructure while also addressing the digital divide and strengthening cyber security.
Finally, all of these priorities require the mobilization of sufficient domestic financial resources. The pandemic has significantly increased government deficits, adding to the challenges that many of our developing members already faced before the pandemic, as tax revenues struggled to keep pace with the steady economic growth. If left unaddressed, these financial challenges facing our members could threaten the achievement of the Sustainable Development Goals.
Enhancing international tax cooperation should also be a key agenda item for our developing members, so that they are better equipped to tackle the aggressive tax planning of some multi-national companies, which has resulted in base erosion and profit shifting, or BEPS. This is a significant issue because, once globalization returns, Asia and the Pacific will regain its status as the strongest engine of global growth—and in turn, the region will draw large investments from multilateral corporations. Countries and international organizations have to work together to ensure that the profits of these companies are taxed in the localities where the value and profits were generated.
To address these issues, ADB is establishing a regional hub on domestic resource mobilization and international tax cooperation, which will facilitate knowledge sharing between developing economies and development partners.
IV. ADB’s continuing commitment to knowledge work
Before I conclude, let me emphasize the important role that knowledge creation plays in ADB’s efforts to achieve these and many other policy priorities. Collaboration between ADB’s knowledge and operational departments and ADBI will be essential to this effort.
For example, during ADB’s Annual Meeting in September, ADB and ADBI presented our joint findings on the regional economic impact of COVID-19, which drew on surveys of MSMEs, farmers, households, and the tourism industry. Our other ongoing joint work includes a focus on financial cooperation among ASEAN+3 countries, to address challenges and opportunities in the areas of financial inclusion and financial stability posed by the rapid development of financial technology, or fintech.
The empirical evidence generated through our research collaborations is absolutely essential for policymakers and ADB’s operational departments, as they prioritize, deliver, and evaluate their interventions. These findings are especially critical during this time of economic, health, fiscal, and climate challenges. I expect ADBI to further adapt its research and capacity building to meet the fluid circumstances and evolving needs of ADB’s clients, and effectively harness ADBI’s network of universities and think tanks.
I have no doubt that we will emerge from the current crisis as a more resilient region. This conference, and your ongoing dedication to rigorous research and knowledge creation, will equip our developing members across Asia and the Pacific to achieve even more prosperous, inclusive, resilient, and sustainable development. Thank you for your good work and please stay safe.