Making Money Work

Towards a Roadmap for Re-orienting Development Finance for the 2030 Sustainable Development Agenda

ANURADHA RAJIVAN

Asian Development Bank 10 November 2015, Bangkok

OUTLINE

• The challenge

• ADB gets prepared

• Future directions

OUTLINE

• The challenge

• How is ADB getting prepared

• Future directions

ESCALATED AMBITIONS

From Deprivations to All People and the Planet

Millennium Development Goals Sustainable Development Goals

UN-led dialogues Country-led, ambition has ballooned

8 Goals; 18 Targets; 48 Indicators

Focus: Deprivations, poor countries

Environment, inequality only partially addressed

17 Goals; 169 Targets!

(Indicators to come)

Focus: Sustainable development, all countries

3 equal pillars: economic prosperity, social equity

and environmental responsibility

Incremental progress Transformational and long-term durable gains

Global partnership – Goal weakly formulated,

partially monitored (MDG 8)

Stronger partnerships – implementation under each

Goal & SDG 17

Demands on official statistical systems recognized

late; not matched by resources

This challenge will continue and escalate; better

recognized

Development finance =

largely ODA

Financing for development =

All moneys

SDGs poised to influence national action and

development cooperation for the next 15 years

• Asia drives global progress by sheer size

– Population more than 50%; GDP share around 40%

• Even though share of extreme poverty has come down, size also means large absolute numbers of deprived people

• Diverse economies require recognition of complexity and SDG customization in the responses

– Upper middle income countries

– Lower middle income countries

– Low income, fragile and conflict affected

– Structural bottlenecks and capacity deficits are varied

The region’s progress matters to global progress

Getting the diagnosis and entry points right is critical …

Multiple actions are called for; and yet… • Money is a distinct enough … and • an important enough bottleneck to need

dedicated attention

OUTLINE

• The challenge

• ADB gets prepared

• Future directions

ADB is engaged in the SDG and FfD

dialogues

• Collaborates with UN partners to support sustainable development in Asia and the Pacific

• Joins other MDBs globally to identify expanded funding opportunities for countries

• Explores concrete ways to expand finance for SD: to inject more & attract more $$

What sums are we talking of?

Approx $1 trillion annual to eradicate poverty and bridge

MDG and infrastructure gaps (rough cost estimates)

Whatever be the specific numbers, it is clear that the sums

are large

$ billion

Source: ADB, 2015. Making Money Work: Financing a Sustainable Future in Asia and the Pacific. Manila

Where is the money? Private flows far outstrip public finance in Asia and Pacific

$ billion, annual

• Asia is a region of savers…but invests elsewhere

• Bulk of funds are in private hands, dispersed, not programmable

• Domestic fiscal funds inadequate – greater potential

• Long term funds – yet to be fully unlocked

• Plugging leaks > ODA

(2012-2

014 e

stim

ate

s)

ADB will support through two streams

(i) Investments in human needs,

infrastructure and cross-border public goods

(i) Promote access to wider

financing for development, including private sources and climate finance

Customized to country conditions, based on

ADB’s comparative advantage.

Strategy 2030: ADB has already started work on a

new long term strategy to respond better to the greater ambitions, evolving development landscape, and a changing Asia and Pacific.

Advance Actions

• Enhanced financial capacity – To $20 billion, which is 50% higher than the

current level (with the ADF and OCR combination effective Jan 2017)

– Support to poor countries to increase by up to 70%

– Climate financing to double from $3 to $6 billion annual by 2020

• Renewed focus on poorest countries - ADF grant replenishment ongoing

Collaborations and Capacities • Maximize the leverage potential of ADB

resources by strengthened co-financing, PPPs, lower risk: each ADB dollar results in more than a dollar of investment

• Improve absorptive capacity of countries by strengthening PSM/governance, fiscal space, and TA for project development and PPPs

• Strengthen knowledge partnerships and

diagnostics.

OUTLINE

• The challenge

• ADB gets prepared

• Future directions – for a regional roadmap

1. Widen domestic fiscal space with country-specific actions o MDBs and partners can help - subsidy prioritization, procurement,

apart from raising revenues o Cooperate across borders on stemming leaks o Operationalise options like NRM, SWF, Haj funds, other

2. Use public sources to draw-in more of Asia’s

savings and funds towards SD o Lower risks, extend tenor, match time-horizons better o Engage more systematically with pvt sector (e.g., CEO-led

initiative like the WBCSD)

Expand Public Sources and Leverage Better

– Focus on widening subnational fiscal space through increasing own-source revenues (tax and nontax), predictable devolution

– Nurture options for municipal finance through muni bonds, national development banks, and other subnational and multi-country options

Harness Sub-national Opportunities in FfD

3. Asia’s rapid urbanization needs city-level SD investments, counter serious infrastructure deficits

Dhaka, Karachi, Manila, Mumbai, Shanghai, Jakarta…

The region has half the world’s megacities…facing serious economic and ecological stress

− Asian Development Fund is considering establishing additional grant fund for cross-border public goods and disaster risk reduction

4. Such investments tend to be underfunded from domestic resources due to high regional/external spill-over effects and have global benefits

Incentivize financing of cross-border public goods

through international concessional finance

− Collaborate on knowledge gaps for definitional clarity and track additionality of climate finance over ODA

− Address capacity gaps in project development to promote climate resilient public and private investments

− Incentivise clean energy investments and energy efficiency

− Tailor climate finance to the type of exposure, e.g. the ocean-based economies of the Pacific to sea-level rise, or the mountainous countries of South Asia to potential Himalayan glacial melt.

5. Address the bottlenecks of definitions, additionality, access, capacity, customization

Incorporate Climate Finance in a FfD Framework

6. Assess investments, both public and private, based on contribution to SD

o Develop agreement on updated indicators for results

o Development effectiveness can include metrics on private finance, e.g., pvt funds mobilized per dollar of official funds

o Dialogue with businesses and financial markets to forge agreements w.r.t contribution of private sector – extent to which pvt funds are SDG-promoting

Count and Account Each Dollar Better

Every dollar has an impact, + or –

Every dollar needs to count towards SD

Thank you all!

“The only development worth having is sustainable development”

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