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Download Financing for Sustainable Development: Challenges and Opportunities for LDCs Anuradha Rajivan Asia Development Bank
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Financing for Sustainable Development: Challenges and Opportunities for LDCs Anuradha Rajivan Asia Development Bank Roundtable on LDCs and 2030 Agenda for Sustainable Development 9:30 ‐ 10:45 am, 3 Dec 2015, Bangkok Outline • Altered development landscape • A spectrum of LDCs challenges • Opportunities to boost finance • Action by ADB Outline • Altered development landscape • A spectrum of LDCs challenges • Opportunities to boost finance • Action by ADB Traditional idea of development finance Financing model underpinning the MDGs based on public funds as “development finance” – domestic resources – official development assistance – debt cancellation A huge shift in thinking accepted at Addis: From development finance to financing for development • Traditional ODA under pressure • New actors multiplying (non‐DAC donors, philanthropy, climate finance, new banks) • Domestic fiscal space needs more attention • New finance instruments present new opportunities – guarantees, local bonds • Traditionally passive sources – pension, haj, sovereign wealth, insurance • Private savings mobilization for development investments Funds available but fragmented Private flows far outstrip public finance in Asia and Pacific, 2012‐2014 $ billion, annual • • • • • Asia is a region of savers…but invests elsewhere Bulk of funds are in private hands, dispersed, not programmable Domestic fiscal funds – greater potential Long term funds – yet to be fully unlocked Plugging leaks > ODA Outline • Altered development landscape • A spectrum of LDCs challenges • Opportunities to boost finance • Action by ADB Adoption vs Adaptation of global goals in AP External Support for Decentralization Reforms and Local Governance Systems in the Asia-Pacific: Better Performance, Higher Impact? 25-27 August 2015, Manila, Philippines CAM: UXO, Edn AFG: Security, Literacy LAO: UXOs Gender MYA: Infra, integration PACIFIC: Widened scope of Poverty Note: Not official map Countries adapted the global goals to specific contexts to reflect local conditions: Added a new goal, supplemented targets, and modified indicators. Asia Pacific LDCs are highly diverse WB Income Classification (GNI per capita in 2013 $) Constraints Country Landlocked Afghanistan Small Island Lower Low middle FCAS (<=1,045) (1,0464125) Bangladesh Bhutan Timor-Leste Tuvalu Vanuatu 4 5 6 ADF GrantsBlend only COLonly Myanmar TOTAL OCR Blend Kiribati Nepal Solomon Islands Cambodia Lao PDR Upper middle (4,12612,745) ADB Concessional Lending Classification 5 6 1 2 5 2 Note: FCAS=countries in fragile and conflict‐affected situations; OCR=Ordinary Capital Resources; and ADF=Asian Development Fund. 3 Challenges to be overcome in mobilizing funds • Narrow tax base and weak tax administration • Very small private sector • Underdeveloped financial markets ‐ banking sector, capital markets • High remittance costs • Challenges in accessing donor support due to varying reporting requirements and sector‐ specific policy conditions • Absorptive capacity ‐ governance and institutional capacity constraints Outline • Altered development landscape • A spectrum of LDCs challenges • Opportunities to boost finance • Action by ADB Available FfD in LDCs Financial resources in LDCs (% to GDP) 60 Personal remittances 50 Foreign direct and portfolio investments Domestic investment 40 30 Aid and other official flows 20 Government revenues 10 2000 2005 2010 Latest (2013-2014) Source: World Bank Development Indicators online database (accessed 26 Nov 2015). • Private international flows are rising (remittances and foreign investments ) and are two times ODA flows • Domestic resources are far larger than all external finance flows – domestic investment at 29% and government revenues at 15% of GDP • Ratios of ODA and remittances to GDP are significantly higher in LDCs compared with other countries in Asia‐Pacific Despite overall decline in ODA, aid flows to LDCs shows an uptrend • ODA remains a significant source in LDCs and those in structurally difficult situations Net official development assistance received (BillionUS$) 14.0 • A suite of cross‐sector reforms is preferred over fragmented sector‐ specific reforms to facilitate access to funds 6.0 • Use of national systems preferred 4.0 • Underutilized options for some: Natural resource revenues and sovereign wealth funds • More of ODA can be used strategically to develop and draw‐ in other options, including domestic. 12.0 10.0 8.0 2.0 - 1990 1994 1998 Constant 2012 US$ 2002 2006 2010 Current US$ Source: World Bank Development Indicators online database (accessed 26 Nov 2015). What we heard from countries, including LDCs • Manage public finance efficiently and effectively to widen fiscal space, more so when it is limited • Promote private sector and financial markets development and mobilize private finance Oversight and regulatory function to safeguard public good Address capacity deficits in project development and management to attract private investments in sustainable development projects and infrastructure • Explore multi‐country options to pool resources, build capacities, and develop stable financial and capital markets • Increase transparency and accountability in governance of natural resource revenues Outline • Altered development landscape • A spectrum of LDCs challenges • Opportunities to boost finance • Action by ADB ADB’s soft window: The Asian Development Fund Sharper ADF focus on needs of poorest countries in Asia Pacific • Address remaining poverty, expand access to economic opportunities, and reduce vulnerability • Complete the unfinished MDGs, address the more ambitious SDGs • Respond locally to disasters and environmental concerns, accounting for expected climate change impacts • Support regional public goods • Create conditions to mobilize private investment and domestic revenues to complement ODA The ADF is a partnership between ADB and its members. Financed mainly by contributions of ADB members, it supports the most vulnerable countries in the region. Overall ADB response • ADB is upscaling its financial capacity More funds will flow from the combination of ADF lending operations with the Ordinary Capital Resources balance sheet effective 1 Jan 2017. ADB’s total annual financing capacity will increase to as much as $20 billion by 2020—50% higher than the current level. ADB’s assistance to poor countries will rise by up to 70%. • Leverage ODA to multiply financing for development to benefit the poor ADB will help increase attractiveness of development investments by working with countries to draw in more private sources, strengthen financial markets, broaden fiscal space, and access climate funds. ADB also aims for robust cofinancing partnerships so the leverage potential of ADB resources is fully utilized. • Strengthening other collaborations Co‐financing and non‐sovereign, to help countries access funds from wider sources , including climate funds Knowledge partnerships for better diagnostics and monitoring Thank you all!
