Welcome remarks by Ahmed M. Saeed, ADB Vice-President, Operations 2, at the ASEAN Showcase Event, 7 April 2022
Honorable Deputy Prime Minister, Minister of Economy and Finance Dr. Aun Pornmoniroth, distinguished guests, ladies, and gentlemen.
Welcome, all, to ASEAN’s high level Showcase Event on Mobilizing Financial Resources for the Post COVID-19 Economic Recovery. Dr. Pornmoniroth, my colleagues at ADB and I appreciate the opportunity to collaborate with you and your team on this session.
In the early days of the pandemic, it was not uncommon to hear that viruses do not discriminate, that COVID-19 represented an equal threat to us all. With the perspective of hindsight however, we now know how wrong we were. COVID-19 is most certainly a disease that discriminates. The poorest countries, the weakest firms, the most vulnerable individuals amongst us—all have suffered disproportionately.
COVID-19 arrived in an already unequal world, exacerbating its pre-existing fault lines. The countries of ASEAN have been on a difficult but steady, multidecade march towards more evenly shared economic prosperity. But in our region alone, there are now approximately 4.7 million more people in extreme poverty than there would have otherwise been. Unskilled and informal workers, women and the young, all have been hit harder than those who were better positioned.
Education in particular is one area where the impact is expected to persist. An ADB study found that school closures in Southeast Asia contributed to a close to 2% decline in future earnings, per student, per year. These numbers will be much higher for children from disadvantaged families, resulting in lower lifetime earnings for the poorest.
We must resolve ourselves to do what we can to make up for this lost ground. To do that we will need work harder and smarter, most important, we will need to work together.
We will need to work harder in terms of widening and digitizing our social safety nets and investing in quality healthcare and education to build a more resilient economy.
We will need to work smarter, in terms of leveraging the latest technologies and insights, in building towards a netzero future.
And finally, and in many ways, most important we must work together. The problems of the future are beyond the capacity of any single institution, even including governments, to resolve. Collaboration with a sense of common purpose will be the key ingredient of successful action.
All of this demands adequate funding, and the mobilization of financial resources at scale to fund COVID-19 recovery and response.
So how do we generate these huge financial resources?
The public sector is strained in the wake of COVID, but it will always be the first building block. We can certainly do better at mobilizing public sector resources, whether this is by raising more tax and non-tax revenues, reorienting government spending, or through prudent borrowing. Improving domestic resource mobilization remains the critical foundation for lasting recovery.
This can be achieved for example by strengthening tax systems and closing loopholes through international tax cooperation, and by deepening local currency bond markets.
In ASEAN, some governments have embarked on critical tax reforms to bridge revenue shortfalls in the backdrop of COVID-19 and to improve tax systems for achieving post-pandemic economic recovery and long-term development goals such as the SDGs.
Indonesia, for example, enacted the Tax Harmonization Law, which aims to improve fairness of the country’s income tax and VAT systems and introduces for the first time, carbon taxes as a step towards addressing the climate challenge.
In the Philippines, the Comprehensive Tax Reform Program has brought in a fairer and more efficient tax system through many much-needed reforms, raising for example “sin” taxes to fund Universal Healthcare, expanding the VAT base, and reducing personal and corporate income taxes.
Thailand has also embarked on improving taxpayers’ services and voluntary tax compliance through the use of mobile applications and ICT technologies. The government is pushing forward key action plans of the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting (BEPS) to address emerging tax challenges from the digital economy.
As you may know, ADB has established a new regional tax hub, and domestic resource mobilization is moving to the center of our policy priorities.
A second avenue for mobilizing capital is by catalyzing the private sector for environmental and social investments. These include work to strengthen the legal, regulatory, and institutional framework; to develop infrastructure expertise and pipeline; and to enhance project design. In all these areas, ADB is working to develop innovative financial models and bankable projects in order to attract the private sector.
In September 2021, for example, we signed a memorandum of understanding with HSBC, Temasek, and Clifford Capital Holdings to set up a new debt financing platform to boost commercial development of sustainable infrastructure projects in Asia, with an initial focus on Southeast Asia. The platform targets critical bankability issues for projects by addressing policy and regulatory constraints that hinder private investment in sustainable infrastructure and making available private capital sourced concessional funding at the transaction level. We are now working closely with our partners to source and develop a pipeline of projects.
A third area where we could work better together to mobilize capital is through blended finance and efforts to leverage public capital to mobilize private resources including through regional financing vehicles.
We already heard mention of the ADB-supported ASEAN Catalytic Green Finance Facility (ACGF) which assists countries’ sustainable recovery by helping to develop bankable green and blue projects in the region. Owned by ASEAN countries and managed by ADB, ACGF facilitates access to $2 billion from development partners, and helps de-risk and improve the bankability of green projects, as well as to attract private investment.
We have also recently established the Energy Transition Mechanism. This instrument will leverage the power of blended finance to accelerate retirement or repurposing of coal-fired power plants, and support transition to a green economy. We aim for this to be a new model for acceleration of coal plant retirement across the region, with the goal of a massive reduction in carbon dioxide emissions.
COVID-19 provided us all with a painful reminder of the fragility of development progress. We can take nothing for granted and know that we are most effective and strongest when we work together. Let us resolve to work harder and smarter, and in all things let us resolve to work together across ASEAN.
Thank you again for joining us. I hope that today’s event will help us identify additional opportunities to advance our common agenda of shared prosperity across this important region that we all share.
Thank you.