Setting the stage: Post-pandemic recovery―regional experience and lessons - Bambang Susantono
Speech | 15 April 2021
Speech by Bambang Susantono, ADB Vice President for Knowledge Management and Sustainable Development, at the Government of Indonesia-ADB 2021 High-Level Policy Dialogue, 15 April 2021
Minister Sri Mulyani, colleagues and friends, ladies, and gentlemen:
It is an honor to lead this session on how the Asia and Pacific experience with COVID-19 can help shape a workable strategy for a vibrant post-pandemic recovery. In many ways, Indonesia is a microcosm of the region. Islands that rely on tourism, for example, were devastated, as were several of our developing members in the Pacific and elsewhere. The same was true for members that rely on natural resources, agriculture, industry for manufacturing and exports, and services―similar to specific areas within Indonesia. How governments responded and the private sector adapted also holds lessons on what worked and what did not as the pandemic evolved.
A recovery strategy must integrate immediate to long-term priorities
What is clear is that the recovery will accelerate transformation across many facets of the economy and people’s lives. Perhaps the most immediate challenge is financial and the increased need for resource mobilization. But a recovery strategy must integrate essential mid- and long-term priorities as well. These include:
- taking advantage of the digital economy;
- ensuring a green recovery;
- fostering the right human capital for future jobs;
- defining where we can be most competitive;
- attracting greater private sector participation; and
- maximizing the benefits of regional cooperation.
They are all interconnected, so any strategy must address all these holistically.
Finance and resource mobilization
Markets were volatile after the initial lockdowns across the region. However, the extraordinary fiscal, monetary, and financial policy measures helped ease conditions and contained most financial stability risks. So, any recovery strategy must reduce risks and boost financial stability through macroprudential policies, among others.
It became clear during the pandemic that the sustainable development goals must be a core component of a recovery strategy. For example, increasing micro-, small- and medium-sized enterprise access to finance will strengthen their resilience and role in economic development and dynamism. This alone promotes a number of SDGs, but it also serves to channel more investments to financing SDGs.
As we have already begun to see, digitizing finance with Fintech solutions offers massive, more inclusive, growth opportunities. They expand markets and allow for better livelihoods. But they must be secure and guard against abuse. Also, from the resource mobilization perspective, taxation systems must adapt to the ever-expanding e-commerce world. As you may know, we announced last September that ADB will establish a regional hub for domestic resource mobilization and international tax cooperation. It will be a platform for countries and our partners to collaborate and coordinate needed development support.
ASEAN Catalytic Green Finance Facility
The pandemic also accelerated the need for measures to attract greater private sector involvement in the recovery and in attaining the SDGs. Traditional public-private partnerships will not be sufficient. More innovative and bankable solutions are needed, such as in blended finance.
A good regional example is ADB’s ASEAN Catalytic Green Finance Facility, or ACGF. This helps mobilize domestic and private resources as we move forward. It supports sourcing public and private financing for infrastructure to promote environmental sustainability and contribute to combating climate change. Through the ACGF, ADB is supporting Thailand, the Philippines, and Indonesia in green, social and sustainability bond issuance.
That brings me to how a green recovery will create new competitive sectors.
Green recovery will create new competitive sectors
The pandemic serves as a stark reminder that the recovery must be green, resilient, inclusive, and sustainable. It will lead to a ‘new economy’―one that not only maintains environmental and climate goals but is suited to a low carbon world. It will manage the environment sustainably while avoiding stranded assets.
This green effort can be led at many levels—global, regional, national—or local. To make good decisions, the key lies in understanding the long-term economic and social benefits that derive from pursuing an environmentally sustainable, low-carbon and climate-resilient recovery. Some may be skeptical that a green, inclusive and sustainable recovery requires economic compromise or entails high additional costs. But it is rather about spending better, not necessarily spending more.
So, what can governments do? One important policy option is to create incentives that lead toward a more circular economy. We already mentioned using market-based instruments for sustainable financing and development. Once priority sectors are defined, there can be enhanced support for relevant value chain development and promotion of nature-based solutions. None of these are simple, but with adequate funding, as well as strong awareness and local expertise, success stories in applying a circular economy are growing worldwide.
And that leads to the third “most important” element of a recovery strategy―human capital development and the future of jobs.
Human capital development and the future of jobs―which sectors to prioritize?
The future of jobs is at the heart of our region’s future development. We published a study in January on Reaping the Benefits of Industry 4.0 through Skills Development in High-Growth Industries in Southeast Asia. While the research was done prior to the pandemic, the findings remain most relevant today and for the recovery. It covered two priority growth sectors in Cambodia, the Philippines, Viet Nam, and here in Indonesia. The recommendations involved strategies to expand country-wide digital knowledge and capabilities, online or distant learning, the use of digital platforms, education technology, and simulation-based learning.
It showed that implementing fourth industrial revolution technologies could bring large returns to businesses. In automotive manufacturing in Indonesia, for example, 76% of employers believed productivity from these technologies could grow 25% by 2023. Yet greater awareness is needed. For instance, in Cambodia, employers did not really understand 4IR technologies—and thus expected only limited benefits. So it is critical that a system is created that links employers from growth industries with training institutions to support the skills and competencies needed for these relatively new technologies.
Improving digital skills and applying EdTech solutions will build competency for future jobs. But it is only possible if we can expand access, reduce the digital divide, and make learning inclusive across all education levels and with a gender lens. Through digitalization, we will see more girls integrated into the e-learning system and more female entrepreneurs enter the digital economy.
Regional cooperation and integration―globalization vs. slowbalization
Finally, I would like to emphasize that no country can go it alone in today’s interconnected world. Let me briefly address globalization and what The Economist calls “slowbalization”.
After the global financial crisis, globalization became stunted. After rising rapidly from 1995 to 2007, exports using global value chains levelled off dramatically. But the political developments that helped fuel the shift are beginning to ease. And I believe that the ongoing digital transformation―accelerated by the pandemic and perhaps institutionalized during the post-pandemic recovery―could very well shift the meter back.
Driving this initially will be the necessity for regional health security, whether controlling virus spread or cooperating on vaccine distribution―when they are more readily available.
One major change caused by the pandemic was on supply chain infrastructure. There is some reshoring, diversification, and even duplication to minimize the risks of disruption. This allows for greater flexibility. But it also means greater supply chain efficiency and innovation over time. This assumes behind-the-border bottlenecks are reduced. Also, it is worthwhile to note that regional cooperation is critical when tackling climate issues and disaster risk reduction.
Regional cooperation can also enable more equitable digitalization. It can help countries to share connectivity assets and infrastructure better and establish common standards and interoperability of technologies.
In sum, all these issues depend on resource mobilization. They depend on building competitiveness where there is advantage. And most important, they depend on developing the best human capital to drive the recovery strategy forward.
Today we have four very distinguished discussants who will delve into the details of the points I have highlighted. So, let me say thank you and hand the floor over to them.