The Asian Development Bank (ADB) is working closely with Southeast Asian countries to chart a course towards an equitable and enduring recovery in the wake of the pandemic. A new report, Southeast Asia: Rising from the Pandemic, provides a comprehensive assessment of the impact of the crisis triggered by the coronavirus disease (COVID-19), and sets forth policy recommendations to help countries rebound from the pandemic.
Ramesh Subramaniam, Director General of ADB’s Southeast Asia Regional Department, unpacks the key findings of this new report, and shares his thoughts on how various forms of ADB assistance can support countries’ transition to a more sustainable development trajectory.
1. Southeast Asia’s economy has started to rebound after unprecedented shocks resulting from the pandemic, but recovery has been uneven. What are the key challenges facing the region?
We are encouraged to see Southeast Asia’s economic recovery taking hold, yet countries remain confronted with worsening poverty and widening disparities across many spheres. There is a divergence in growth amongst countries, disproportionate job losses for young and low-skilled workers and women, and uneven access to digital education and training, which particularly disadvantages the poorest and most vulnerable. If these scars from the pandemic are left untreated, there is a risk of poverty and inequality intensifying and spilling over generations.
On top of these challenges, climate change threats continue to grow more severe, widespread, and costlier. Again, it is the poorest and most vulnerable who will be hit hardest by the effects of a climate change, further exacerbating societal divides.
2. What should be the priorities for Southeast Asian countries as they chart a course to recovery with scarce fiscal resources?
In our new report, ADB recommends several policy measures Southeast Asian nations can adopt to improve productivity and competitiveness. This includes strengthening social assistance programs; fortifying national health systems, including focusing on universal health care; accelerating human capital investments, trade reforms, and digitalization; accelerating green infrastructure development; and boosting fiscal revenues.
Increased investments in social protection, labor market programs, and education are of paramount importance to counter the erosion of human capital and address rising poverty and inequality. Equally important are improvements to national healthcare systems, which contribute to growth through higher labor participation rates and enhanced productivity in the workplace.
Given the dramatic shift to digitalization, it is imperative to reap the dividends of this transformation by promoting technological adoption among small enterprises and trading systems to foster resilience. Also vital are measures to deepen Southeast Asia’s integration into regional and global value chains, which can boost incomes and lift people out of poverty.
As climate change is intertwined with other development challenges, it should form the bedrock for regenerating economies. Green and low-carbon development pathways can spur job creation and reduce the risk of future pandemics. Action is urgently needed as the window to avert the dire consequences of climate change is closing, according to the IPCC’s latest findings.
Financing all of these needed investments will require enhanced domestic revenue mobilization and international tax cooperation, as well as fiscal prudence to manage rising levels of debt and deficit.
3. How is ADB helping in sustainable recovery efforts?
ADB’s ASEAN Catalytic Green Finance Facility is supporting countries’ sustainable recovery by helping to develop numerous bankable green and blue projects in the region.
ADB has recently launched the Energy Transition Mechanism, and is working with Indonesia, the Philippines, and Viet Nam to facilitate countries’ transition out of coal into cleaner energy solutions. ADB has also partnered with prominent regional and global financial institutions to establish an Asset Regeneration Platform to boost the bankability of climate-focused investments.
We need to ensure that recovery is not only green, but also blue. To that end, ADB has recently established a Southeast Asia Blue Finance Hub to accelerate the development of a pipeline of “blue” projects that improve the sustainability and conservation of the region’s oceans, water bodies, and marine ecosystems.
In addition, ADB is leading efforts to revitalize the region’s tourism industry. The Southeast Asia Sustainable Tourism Facility was launched last year to help countries prepare sustainable tourism projects, catalyze financing, deliver digital tourism services, and boost the sector’s tax revenues. The facility aims to contribute to key tourism-related priorities set out by the Association of Southeast Asian Nations (ASEAN) and subregional tourism strategies in the region.
Against a fiscally constrained backdrop, ADB recognizes the need for innovative financing instruments to not only raise funding for recovery, but also to channel investments toward initiatives for SDG attainment. ADB’s SDG financing support includes technical assistance for Thailand on its issuance of social and sustainability bonds, and a $150 million loan for the SDG Indonesia One–Green Finance Facility, amongst others. ADB’s publication, the SDG Accelerator Bond, shares cutting-edge knowledge on green recovery and financial instruments to advance SDG progress.
Source: Asian Development Bank