Regional: Program to Enhance Capabilities of Sovereign Institutions in the Central and West Asia Region to Introduce Innovative Financing Modalities

Sovereign Project | 56136-001

The knowledge and support technical assistance (TA) program will address interests expressed by the governments of the developing member countries (DMCs) of the Central and West Asia Department (CWRD) of the Asian Development Bank (ADB) to enable leveraging of private capital for addressing the gaps in the financing of Sustainable Development Goals (SDGs) using innovative financing modalities.

Project Details

  • Project Officer
    Hegde, Abhishek Naveen
    Central and West Asia Department
    Request for information
  • Country/Economy
    Regional
  • Sector
    • Public sector management
Project Name Program to Enhance Capabilities of Sovereign Institutions in the Central and West Asia Region to Introduce Innovative Financing Modalities
Project Number 56136-001
Country / Economy Regional
Kyrgyz Republic
Pakistan
Tajikistan
Uzbekistan
Project Status Proposed
Project Type / Modality of Assistance Technical Assistance
Source of Funding / Amount
TA: Program to Enhance Capabilities of Sovereign Institutions in the Central and West Asia Region to Introduce Innovative Financing Modalities
Technical Assistance Special Fund US$ 3.13 million
Strategic Agendas Inclusive economic growth
Drivers of Change Gender Equity and Mainstreaming
Governance and capacity development
Knowledge solutions
Partnerships
Private sector development
Sector / Subsector

Public sector management / Reforms of state owned enterprises

Gender Equity and Mainstreaming Some gender elements
Description The knowledge and support technical assistance (TA) program will address interests expressed by the governments of the developing member countries (DMCs) of the Central and West Asia Department (CWRD) of the Asian Development Bank (ADB) to enable leveraging of private capital for addressing the gaps in the financing of Sustainable Development Goals (SDGs) using innovative financing modalities. The TA will focus on advising and assisting sovereign institutions_and their stakeholders_in strengthening their institutional capabilities for (i) developing a better understanding of various innovative financing modalities being implemented globally to address specific market failures and opportunities as well as institutional limitations; (ii) validating using complex financing modalities and de-risking mechanisms to tap new sources of private financing for SDG financing gaps; (iii) strengthening the role of sovereign institutions in enabling the flow of private institutional capital for economic additionality like high social impact investments; (iv) facilitating novel partnership/contracting arrangements with the private sector, such as outcome-based financing; (v) exploring innovative financing instruments to transfer disaster risks at central and regional levels;_ and (vi) exploring approaches and modalities that encourage blending of other sources of capital (donor, private, and other similar sources) with traditional forms of ADB financing, such as sovereign loans funded by ordinary capital resources or grants._The TA is aligned with ADB's Strategy 2030_to support DMCs in accelerating the development of approaches in catalyzing private financing for the achievement of the SDGs. The TA supports the implementation of SDG 9 and SDG 17.
Project Rationale and Linkage to Country/Regional Strategy

Limited fiscal resources of CWRD DMCs for the financing of SDGs. To achieve the key operational priorities (OPs) under ADB's Strategy 2030 objectives, the CWRD DMC sovereign institutions will have to be more effective in accelerating resource mobilization for SDG financing. The impact of the coronavirus disease (COVID-19) has been felt most acutely by some of the most vulnerable populations in the world, possibly even delaying the chances of these DMCs achieving their SDGs by several years._An immediate consequence of COVID-19 has been the rising public debt levels, increased sovereign risk, rating downgrades, and capital outflow, reduced tax revenues, marked drop in overseas remittances and reversal of social policy mandates._For women and girls, COVID-19 has further exasperated existing gender inequalities._The economies in CWRD DMCs have been further strained with the invasion of Ukraine._Pakistan's economic growth is expected to be slow in FY2023 (ending 30 June 2023) amid ongoing policy tightening, devastating floods and a high inflation rate._Furthermore, due to the lower global investments and remittances, Uzbekistan's and Tajikistan's economic growth is projected to be slower in FY2022 than in FY2021.

Weak sovereign institutional mechanisms. The COVID-19 pandemic has further exacerbated the challenges of mobilizing private sector funds for SDG-related investments._The challenges for sovereign institutions in operationalizing or scaling innovative financing solutions in private partnership for SDG-related sectors which are of a public service nature, such as healthcare and education, include_(i) ineffective cooperation modalities between private and public institutions; (ii) diverse organizational set-ups and management techniques; (iii) varied incentivization mechanisms and risk-return metrices; (iv) diverse legal provisions and governance mechanisms; and_(v) inadequate oversight from public sources.

Insufficient linkages to private sector resources to address the financing gaps. Although there is tremendous appetite and potential among private sector investors, the supply-side barriers include high initial transaction costs in developing a concept, lengthy design development stages, low risk-adjusted returns, disparate performance metrics, unfavourable contracting terms, and the lack of standardization for program design and delivery for several key SDG sectors, such as health, education, and climate change adaptation.

Lack of sovereign incubators or sandboxes to nurture novel ideas. Globally, innovative financing solutions like impact bonds,_guarantees, leasing, and impact investments have shown that they can unlock new sources of capital and address development challenges (footnote 7). Although there is tremendous interest among sovereign institutions in CWRD DMCs to evaluate various innovative financing solutions to address specific market failures, overcome institutional limitations, build suitable capacity for engaging with the private sector and implement such novel concepts as per internationally acceptable standards and practices, there is also a lack of understanding of innovative financing and global practices being implemented, at the government level. They are further constrained by a significant degree of uncertainty, a long-term time horizon for developing such solutions and the substantial financial resources needed to explore such novel concepts.

Impact

Institutional capacity of DMCs enhanced and financial resources for development mobilized.

Outcome

Capacity of CWRD DMCs to facilitate the mobilization of capital for the financing of SDGs improved.

Outputs

1. Institutional capability of sovereign entities for adopting innovating financing approaches enhanced

2. Knowledge support to sovereign entities on innovative financing modalities provided

Geographical Location Kyrgyz Republic - Nation-wide; Pakistan - Nation-wide; Tajikistan - Nation-wide; Uzbekistan - Nation-wide
Summary of Environmental and Social Aspects
Environmental Aspects
Involuntary Resettlement
Indigenous Peoples
Stakeholder Communication, Participation, and Consultation
During Project Design
During Project Implementation
Responsible ADB Officer Hegde, Abhishek Naveen
Responsible ADB Department Central and West Asia Department
Responsible ADB Division Office of the Director General, CWRD
Executing Agencies
Asian Development Bank
Timetable
Concept Clearance 09 Nov 2022
Fact Finding 29 Nov 2022 to 02 Dec 2022
MRM -
Approval -
Last Review Mission -
Last PDS Update 24 Nov 2022

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