Opening remarks by Ahmed M. Saeed, ADB Vice-President, Operations 2, at the CSIS Global Dialogue 2022, 27 April 2022
Minister Panjaitan, Mr. Hachiyama, Dr. Damuri, distinguished presenters and panelists, delegates:
A pleasant afternoon to you all. It is my honor to deliver opening remarks at the CSIS Global Dialogue 2022 under the theme “Windows for Recovering Together and Stronger.” I apologize I cannot be with you in person today, but I am excited to address this forum virtually.
John Maynard Keynes warned that many of us are, unwittingly, slaves to the thoughts of a forgotten and defunct economist. The world today confronts a host of unprecedented problems: a continuing pandemic, breakdowns in global governance, and climate change, to name only a few.
COVID-19 alone has scaled back years of socioeconomic gains in many countries across the world. The pandemic has impacted every facet of activity. Human losses have been sizeable and the toll on health care systems unprecedented.
It is the task of eminent bodies like the T20 to ensure that we do not confront next generation problems with last generation insights. We must act now to ensure we are ready for tomorrow’s challenges.
Everywhere we turn, new thinking is needed, and Multilateral Development Banks are of course no exception to this. At the Asian Development Bank, we have begun to question conventional thinking and experiment with new solutions on three levels. At the policy level. At the business model level. And at the governance level.
Looking at the policy and analytical space first, we must ask ourselves whether traditional and old-school tools for economic development are even appropriate considering how fast technologies develop. For example, system-wide structural transformations driven by fast evolving disruptive technologies must be better understood and integrated as key elements of climate transition processes.
Unfortunately, the current macro-modeling approaches commonly deployed for climate change are based mostly on conventional equilibrium frameworks focused on policy choices at the margin of optimally efficient systems. Such approaches do not pay sufficient attention to the role of diffusion of disruptive technologies. These could accelerate the pace of decarbonization. Nor do they pay attention to the feedback loops between public sector policy choices and innovation and the price curves of such technologies. Driving prices down will bring the goal of decarbonization nearer in the future and will allow for win-win climate outcomes.
As this process accelerates, I believe that over the next 10 to 20 years, we will find that for many emerging and frontier markets, decarbonisation is development. If we design interventions that continue to drive price curves on core renewable/decarbonization technologies downwards, there will be enormous opportunities for countries to proactively develop green industry and attract trillions of dollars in capital flows. But we have to provide the right policy advice and incentives to enable countries to position themselves for that. And we're not going to do that unless we think differently about economic theory.
The second level where ADB is questioning basic assumptions and looking to test new approaches is at the business model level. Here, we must ask ourselves some foundational questions, especially on how we do private sector mobilization. There's a ceiling on how much we can achieve simply through risk transfer. Our balance sheets are only so large. They can be optimized to be two or three or four times more effective, but they are not going to be 500 times more effective.
MDBs must pivot from having a historically closed architecture to an open architecture, and they must design tools that are fit for that purpose. ADB just closed its first deal under a new energy transition mechanism, which will accelerate the decommissioning of coal. What’s most exciting about this is that it took zero concessional capital. By designing better tools and interventions, we can solve problems by playing a catalytic role in financial intermediation and not just by addressing financial market failure.
The third level I want to mention is governance. What are the limits of progress for historical legacy institutions? How fast can they move? How much can they change? And are there hybrid governance models that bring global philanthropy and private sector knowledge into our MDB world in a better way? These are the ideas we are seeking to test at ADB. Just recently we created a partnership between the sovereign side of our bank and a private pool of capital focused on providing concessional financing for sustainable infrastructure. This platform, which is making an otherwise non-bankable deals bankable, is a scalable solution for working upstream with governments.
Ladies and gentlemen: These are testing times to reclaim the path to inclusive growth and to continue our journey to achieving the Sustainable Development Goals. It is imperative that we confront the problems of tomorrow with fresh thinking and new ideas. The T20 is an ideal venue for the disruptive thinking that will prepare us for tomorrow’s challenges. I encourage you to be bold in your ideas and I look forward to the outcomes of this forum. Thank you so much for the opportunity to be with you.