Author: Arslan Sheikh Published: 08 April 2021
An event organized by LSE Saw Swee Hock Southeast Asia Centre, on 18 Mar 2021.
Speaker: Masatsugu Asakawa, President of the Asian Development Bank (ADB)
Chaired by Hyun Bang Shin, Professor of Geography and Urban Studies at London School of Economics and Political Science and Director of the LSE Saw Swee Hock Southeast Asia Centre
ADB Headquarter, Mandaluyong, Philippines (Source- Flickr)
President Masatsugu discussed the theme of the event: Getting Developing Asia Back on Track. This event was organised on the backdrop of Asia being successful in transition from a low-income agrarian economy in the nineteen sixties to a global manufacturing powerhouse in the twenty-first century. As the COVID-19 pandemic threatens to hinder the progress of Asia, Masatsugu discussed the contributions the ADB will make towards the development of Asia and how it is ready to help its developing members towards a path of resilient and sustainable recovery through deeper regional cooperation.
The ADB was founded in 1966 and its headquarters is located in Manila, Philippines. Its main role is to help its developing members in the Asia and the Pacific, such as Bangladesh and Fiji, through combining finance and knowledge; promoting good policies; and catalysing regional cooperation. It also helps its members in sustaining efforts to eradicate extreme poverty.
The Economic Outlook for Developing Asia
Preliminary data from Asian Development Outlook database shows that the developing Asia’s Gross Domestic Product (GDP) was forecasted to contract by 0.4% in December 2020, less than the 0.7% contraction predicted in the Asian Development Outlook 2020 Update in September. An economic contraction is a decline in national output as measured by GDP. Growth will rebound to 6.8% in 2021, but the prospects diverge within the region. Masatsugu said that this rebound will not be a V-shaped recovery. He also added that the vaccine developments and roll out whose progress varies across economies have tampered the risks of a prolonged pandemic.
The impact of COVID-19 has not been uniform throughout the economies of Asia and the Pacific regions because of their different stages of development. Projected growth in East Asia in 2020 was 1.3%, whereas the People’s Republic of China (PRC) and Taipei grew by 1.6%. China recovered more quickly than expected and growth in 2021 is forecasted at 7.0% in the region. The previous South Asia forecast for 6.8% contraction and now is set to 6.1% in line with an improved projection for India. As recovery accelerated, by 9.0% and contraction to 8.0%, growth will return during 2021. This year there are expectations of growth at 7.2% in South Asia and 8.0% in India. The recovery in Southeast Asia continues to lag as virus containment efforts in the larger economies hamper economic activity. However, on the other hand, growth forecasts for Central Asia and the Pacific are unchanged since September. Central Asia is still projected to contract by 2.1% this year, and the Pacific economies by 6.1% as global tourism continues to languish.
‘’Commodity exporters like Kazakhstan, Azerbaijan, and Mongolia that were hit by lower prices in 2020, will benefit this year from recovery in commodity markets,’’ said Masatsugu.
However, he also said that tourism dependent countries such as Maldives and Fiji will recover slowly because of the impact of COVID-19 on tourism.
Turning to the region’s largest economy. i.e., the PRC, is expected to follow a three-phase economic growth, first with its 2.3% growth in 2020 which was followed by an above-normal rise of 7.7% in 2021, finishing with a suspected return to a moderate growth thereafter.
Masatsugu highlighted that the pace of the PRC’s growth has been slowing each year and recommended the PRC policymakers to strike a balance between achieving sufficient growth and structural issues. He emphasized the need of rebalancing from an investment centered growth to a consumption-driven one. The PRC needs to introduce reliable sustainable social security to its aging population, and shift to a more advanced development phase driven more by innovation than low-cost labour. He also highlighted the key points of PRC’s 14th Five-year plan which included non-GDP growth targets related to climate change, enhancing innovation and industry, domestic market development boosting consumption, and people’s wellbeing and demographics.
The worldwide economic effect of the pandemic varies from a loss of $4.8 trillion to $7.4 trillion (5.5% to 8.7% of GDP) in 2020, with a further $3.1 trillion to $5.4 trillion (3.6% to 6.3% of GDP) in 2021. More than one-fourth of these losses were experienced by developing Asia. The prolonged pause in global tourism, coupled with heightened travel aversion, implied substantial tourism losses into 2021 and bodes ill for many tourism dependent economies in developing Asia.
ADB’s Response to COVID-19
After briefing the impact of COVID-19 on the economy, Masatsugu discussed the response of the ADB to COVID-19.
He informed that the ADB announced a $20 billion comprehensive COVID-19 response package on April 13, 2020.
As of December 31, 2020, the ADB committed $16.3 billion to Developing Member Countries (DMCs) and the private sector. He further highlighted the mobilisation of $10.9 billion through co-financing from development partners and commercial co-financing. The ADB also provided $190 million in technical assistance and quick-disbursing grants to forty-one DMCs for urgent needs. Furthermore, the ADB worked closely with the World Bank and United Nations (UN) agencies to procure and deliver essential medical supplies and equipment. As far as the private sector is concerned, the ADB provided $442 million in direct private sector lending and $2.4 billion through short-term financing program. Through these measures, the ADB is committed to mitigate the threats of COVID-19 on economic, social, and developmental gains in Asia and the Pacific.
ADB’s Support for COVID-19 Vaccine
On December 11, 2020, the ADB announced a $9 billion Asia Pacific Vaccine Access Facility (APVAX). Masatsugu explained the two aims of APVAX which includes (i) Rapid Response in procuring vaccines, and (ii) Project Investment in system and capacity for distribution. In addition to APVAX, Masatsugu said that the ADB will support vaccines through Non-sovereign Operations for supply and trade financing and through technical assistance for needs assessments.
Masatsugu elucidated five priorities to achieve a prosperous, inclusive, resilient, and sustainable Asia and the Pacific.
First, by deepening regional cooperation and integration through the enhancement of regional trade and investment, to diversify the value chain and strengthen regional health security. Second, by investing in human capital and social protection to address worsening inequality and opportunity gaps, strengthening the health system, and accelerating gender equality. Third, by promoting green infrastructure to boost economic activity, this will allow to generate jobs while strengthening resilience and mitigating the impact of climate change. Fourth, by harnessing digitalization with an accelerating transition to digital economy while closing the digital divide and ensuring cyber security. Finally, fifth, by strengthening Domestic Resource Mobilization (DRM) to ensure stable sustainable financial resources in achieving the Sustainable Development Goals (SDGs) while closing the tax loophole. ADB’s new Regional Hub for DRM and International Tax Cooperation will support this agenda.
Masatsugu concluded his presentation by emphasizing the efforts of ADB towards the Conference of the Parties (COP) 26 which will take place in November 2021 in the United Kingdom. It includes aligning operations with the Paris Agreement, scaling up adaptation and resilience, inclusive recovery and maintaining a momentum through dialogue and outreach.
The ADB has made increasingly important contributions to Asia's, and particularly East Asia’s, regionalism over recent years. The ADB's role has turned out to be more significant because of the strong developmental attributes of East Asia's new regionalism. This is not least because, as a regional development bank, the ADB prefers linking development, regionalism, and capacity-building together when promoting regional cooperation and integration in Asia and the Pacific.
Arslan Sheikh is currently a MA Candidate at Defence Studies Department, KCL. He did his previous postgraduate studies in Modern History, focusing on Indian subcontinent. His research interests include international security, conflict resolution, comparative politics, and water diplomacy.
Featured image by https://www.flickr.com/photos/asiandevelopmentbank/50996043037/.
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