Tagged: PolicyEducation

Magdy Martínez-Solimán: Statement at the Policy Symposium on “Financing Asia’s Future Growth”

06 Apr 2015

Ambassador Mr.  Abulkalam Abdul Momen (PR of Bangladesh to the UN),

Ambassador Mr. Mr. Durga Prasad Bhattarai (PR of Nepal to the UN),

Ambassador Mr. Desra Percaya (PR of Indonesia to the UN) (TBC),

Mr. Lenni Montiel, Assistant Secretary-General for Economic Development, UN DESA

Mr. Shang-Jin Wei, Chief Economist, Asian Development Bank

It is my great pleasure to welcome you to this seminar on “Financing Asia’s Future Growth”. This symposium is timely and important. Timely because the third International Conference on Financing for Development, to be held in Addis Ababa, Ethiopia, in July 2015 is a historic opportunity for the international community to agree on an ambitious framework for the post-MDG era. It is also important because of the ongoing inter-governmental discussions both on FfD and on post-2015 development agenda.

I bring you warm greetings from Haoliang Xu, UNDP Regional Director for Asia and the Pacific. Mr. Xu sends his sincere and heartfelt apologies for not being able to be with you today. I am grateful for his invitation to Chair this Symposium.

I am especially pleased that this event is being jointly hosted between UNDP and the Asian Development Bank (ADB). This year’s Asian Development Outlook (ADO) will give us a reference to guide our discussions. The ADO is ADB’s flagship annual economic report, analyzing trends in and proposing forecasts for the Asia-Pacific region. ADO is smart and influential  also inside the UN’s development community and beyond.

Excellencies, distinguished delegates, Ladies and Gentlemen,

This year’s ADO has as its special theme “Financing Asia’s Future Growth.” The way in which the report approaches the challenge of financing is refreshing and extremely relevant for the broader discussion around finance for development.

In the MDG-era, financing was often conceived as tallying up the resources available from different sources (mobilized domestically as well as international private flows, ranging from FDI to remittances) available to developing countries to meet the MDGs, with the gap being filled with Official Development Assistance (ODA). Over the last 15 years, estimates abounded of the billions in ODA that would be required to meet the MDGs.

It is clear that this “gap-filling” approach is insufficient as we confront the implementation of the post-2015 agenda. The universality and broad breadth of the new agenda (from poverty eradication, to economics lifestyle changes towards sustainable patterns of production and consumption, to promoting peaceful and inclusive societies) imply that estimating gaps – which is only partially possible – will inevitable take us to amounts in the trillions of dollars. We need to think anew about how we approach the challenge of financing development. And we need to think big.

While doing so, I want to emphasize the continued importance – and value – of development aid. The Addis Ababa conference represents an opportunity for donor countries to reaffirm their longstanding commitment to allocate 0.7% of GNI to ODA as well as pledge to allocate at least 0.15-0.2% of GNI to the LDCs or more. The current draft of the Addis Ababa outcome document being considered even suggests that countries agree to meet these targets by 2020. But the post-2015 agenda cannot be achieved through aid alone. There is a need to consider other forms of international public finance for investments in communicable disease control, climate change adaptation and mitigation, science, innovation and new technologies. More public resources for climate finance are needed, but these should not come at the expense of ODA.

Even lumped together, all sources of public finance will not suffice. We need to find the right convergence between policy driven and profit led sources of development finance. Incentives are needed to ensure that private investment decisions move the world towards sustainable development aspirations. The progressive elimination of inefficient and ineffective subsidies could help to shift transportation and energy investments towards less fossil fuel intensive and more sustainable options, while releasing public resources for social and development purposes. The ADO argues that the current context of low world oil prices presents an opportunity in Asia for this type of fiscal reforms. In fact, the report shows that several countries in Asia are already seizing on this opportunity, either by reducing fossil fuel subsidies, increasing taxes on their use, or both. This is the type of policy action that sends the right incentives to people and businesses, while releasing public resources, that are important in the context of the new agenda.

Financing for development in the post-2015 era cannot be considered only in the context of ‘stable times’; there are fewer of them and we have to recognize that volatility is becoming the new normal. This is particularly relevant to Asia, a region especially vulnerable to extreme climate events. But there are many sources of risk beyond disasters, with the costs of shocks as diverse as conflict and disease outbreaks high and increasing.
And, of course, we continue to face recurrent economic crisis. Asia had a painful experience with a major financial crisis in 1997/1998. The ADO reminds us of the traumatic growth collapses that occurred in 1998: Indonesia’s economy contracted by 13 percent, the Republic of Korea’s by 6 percent, Malaysia’s by 7 percent, and Thailand by 11’s percent (from pre-crisis annual growth in excess of 7 percent in every country). The development setbacks were deep and long-lasting. But Asia also showed resilience and has put in place a range of policies to better protect countries from economic shocks. It has bounced back with energy. What we need to achieve sustainable development is for nations and communities to be resilient, not only to economic but to a wider set of shocks, so that they are able to anticipate, shape and adapt to the many shocks and challenges that can devour development gains. All development needs to be risk-informed.

Excellencies, distinguished delegates, Ladies and Gentlemen,

In this context, and without preempting the detailed presentation of the report and its special theme, I want to emphasize that the perspective taken in the ADO on how to finance Asia’s growth is particularly relevant. The challenge of financing is presented less as one of mobilizing resources (domestically or from abroad), and more as one of ensuring that the financial systems in Asia work to allocate savings to high-return and productive investments. This is the type of analysis that will enable us to think more broadly about financing, as a challenge of unlocking funding by pursuing policies that enable more efficient and effective resource allocation.

Excellencies, distinguished delegates, Ladies and Gentlemen,

Allow me, before I introduce our speakers, to elaborate briefly on the important of financing for the achievement of post 2015 as well as the importance of inclusive financial sector for the eradication of extreme poverty and reduction of inequality.

Today 2.5 billion adults – more than half of the world’s working adults – are excluded from formal financial services. This is most acute among low-income populations in developing countries, where approximately 80% of poor people do not have access. Access to well-functioning and efficient financial services can empower poor women and men. It is now well-established that giving low-income households access to formal financial services can help reduce poverty and inequality.

In the Pacific, financial inclusion is particularly challenging, where less than 10 percent of adults seem to have access to basic financial services. Challenging geography, poor infrastructure and the high costs associated with delivering services to sparse populations are barriers in this region. UNDP and UNCDF are therefore jointly implementing a Pacific-wide Financial Inclusion Programme (PFIP), which helps low-income households to gain access to quality and affordable savings, insurance, credit and other financial services and financial education. The programme, with funding from the Australian Government, the European Union and the New Zealand Government, also disburses grants to financial service providers. The programme aims to add one million Pacific Islanders to the formal financial sector by 2019 by spearheading policy and regulatory initiatives, facilitating access to appropriate financial services and delivery channels and by strengthening financial competencies and consumer empowerment.

As we consider the importance of financial systems to help finance the post-2015 agenda and the need to ensure financial inclusion, UNDP’s programme in the Pacific is an illustration of the comprehensive and inclusive development approaches that we will need to pursue to finance development.

Let me take a moment to introduce our guests here.

We have with us today, Mr. Shang-Jin Wei, ADB’s Chief Economist. Mr. Wei is a key spokesperson for ADB and oversees the Economics and Research Department. Mr. Wei previously served as Professor of Finance and Economics at Columbia University’s Graduate School of Business. Before joining Columbia University, he held senior positions at the IMF, at the Brookings Institution, and at Harvard University’s Kennedy School of Government.

Ambassador Mr. Abulkalam Abdul Momen, Permanent Representative of Bangladesh to the United Nations, New York, has been serving in this role since August 2009. Prior to that, he served as Chairman of the Department of Economics and Business Administration, Framingham State College. He also worked earlier in senior positions in the government of Bangladesh.

Ambassador Mr. Desra Percaya, Permanent Representative of Indonesia to the United Nations, New York, has been serving in this role since Feb 2012. Prior to this, Dr. Percaya was Indonesia’s Deputy Permanent Representative to the United Nations in Geneva. He has held a variety of posts related to multilateral diplomacy and international security since joining the Ministry of Foreign Affairs in 1986.

We have with us today Ambassador Mr. Durga Prasad Bhattarai, Permanent Representative of Nepal to the United Nations, New York. Prior to this, he served as the Permanent Secretary of Nepal’s Ministry of Foreign Affairs. A career diplomat, Mr. Bhattarai held senior posts in Nepal’s foreign service and government.

Finally, we have with us Mr. Lenni Montiel, the Assistant Secretary-General for Economic Development, at UN DESA. Prior to his appointment, Mr. Montiel was the Director for Economic and Social Affairs in the Executive Office of the Secretary-General, preceded by a distinguished career in development as a colleague of ours in UNDP.

Thank you.