Ensuring Sustainable and Resilient Recovery and Growth in ASEAN+3 - Masatsugu Asakawa

Speech | 3 May 2021

President’s intervention by Masatsugu Asakawa, President, Asian Development Bank, at the ASEAN+3 Finance Ministers’ and Central Bank Governors’ Meeting (AFMGM+3), 3 May 2021

Your Excellencies, ministers, governors, good morning, it is an honor to join you today. 

I will first update you on ADB’s pandemic response and then discuss two policy priorities to help ensure a sustainable and resilient recovery while reigniting growth in ASEAN+3. 

ADB’s response to the coronavirus disease (COVID-19) pandemic

Since announcing ADB’s $20 billion support package in April last year, we have already committed $17.4 billion out of this package through grants, technical assistance, and loans to governments and businesses. We also mobilized $12.8 billion in cofinancing. 

ADB’s COVID-19 Pandemic Response Option, or CPRO, provides quick-disbursing budget support for countercyclical economic stimulus in our developing member countries (DMCs). So far we have provided $10.2 billion in CPRO to 26 countries, including $5.0 billion for five ASEAN economies. 

ADB support for COVID-19 vaccines

We are also helping our DMCs procure and deliver safe and effective vaccines, swiftly and equitably. 

Last December, we launched our $9 billion vaccine initiative―the Asia-Pacific Vaccine Access Facility, or APVAX. 

We recently signed a $425 million loan for the Philippines and $450 million for Indonesia. We also provided grants to Afghanistan and Pacific countries. Fourteen additional APVAX projects, worth more than $3.8 billion, are in the pipeline. 

Unfortunately, supply shortages are limiting vaccine availability in the region. ADB recently revised its vaccine eligibility criteria so that vaccines can be procured swiftly from more diverse sources, while also ensuring safety and efficacy aligned with the World Bank and COVAX. 

Enhancing the vaccine production capacity is imperative to mitigate this demand-supply gap issue, and we must expand investment in vaccine manufacturers in the region, including in Korea, Indonesia, Thailand, and Viet Nam.

Key policy issues to ensure sustainable and resilient recovery and growth

Let me highlight two key policy priorities to ensure a strong and inclusive recovery.

The first is to support the digital transformation that has accelerated during the pandemic.

The second is to enhance domestic resource mobilization (DRM) capacity in our DMCs. 

Let me elaborate on these.

Bridging the digital divide is crucial for unlocking the digital potential

The pandemic has catalyzed rapid digitalization including e-commerce, cashless payments, and virtual interactions. We must take advantage of this momentum. 

At the same time, we must address the digital divide. In the Asia-Pacific region, only 45% of the population is connected to the internet, where gaps exist based on location, age, gender, skills, and cultural and social norms. 

Lack of infrastructure and un-affordable prices for connectivity contribute to these gaps, and we are helping our DMCs to address them.

For example, in 2019, ADB signed its first-ever financing for a satellite worth $50 million to provide affordable high-speed broadband connections to remote areas in the Pacific and larger island nations like Indonesia and the Philippines. 

ADB is also providing technical assistance to strengthen digital literacy in education projects in Bangladesh, and developing technology-related education programs in Sri Lanka.  

Improving domestic resource mobilization through international cooperation 

Let me move to the second key issue: enhancing capacity for DRM. 

Addressing the widening fiscal deficits and mounting debt from pandemic responses is a key prerequisite for an enduring recovery. 

The tax-to-GDP ratio averages 14% for ASEAN and 18% for the Plus three economies―lower than the average for developing Asia and OECD, respectively. This suggests ample room for boosting revenues and strengthening tax collection in ASEAN+3 economies.

Digitizing tax systems and international tax cooperation can help mobilize revenue and fight tax avoidance. Multinational investments are growing in ASEAN+3 markets, but an increasingly borderless digital economy is making it easier for firms to shift profits to low-tax jurisdictions. We need to ensure all parties pay their fair share of taxes by closing cross-border tax loopholes through collaboration. 

To date, six ASEAN members joined the Inclusive Framework on Base Erosion and Profit Shifting (BEPS) to address aggressive tax planning by multinationals. And eight ASEAN countries joined the Global Forum on the automatic exchange of information, which is critical to combat tax evasion. All Plus Three economies are members of both.

The Asia Pacific Tax Hub 

The Asia Pacific Tax Hub, announced last September, will be officially launched in the following tax session today. 

The Tax Hub will ramp up ADB’s support on DRM through three important building blocks: first - a medium-term revenue strategy; second - a road map for the automation of tax administrations; and third - proactive participation in international tax initiatives in collaboration with development partners including the IMF, OECD, and World Bank.

As a next step, we propose establishing a Steering Committee to bring together key development partners and DMCs that are willing to actively engage in the Tax Hub. We will then organize a first High-Level Conference under the Tax Hub later this year to share the progress and plans on the three building blocks, including details of the operations of the Secretariat and Steering Committee.