Regional update: trends and issues in Asian development cooperation Yasuyuki Sawada Chief Economist and Director General Economic Research and Regional Cooperation Department Asian Development Bank Australasian Aid Conference 13 February 2018 Australian National University
Developing Asia s continued growth. GDP growth (%) 8 Developing Asia Developing Asia excluding NIEs 6 6.4 6.8 6.0 6.6 5.8 6.3 6.0 6.5 5.8 6.3 4 2014 2015 2016 2017 2018 Forecast NIEs = newly industrialized economies of Hong Kong, China; Korea; Singapore; and Taipei,China. Source: Asian Development Outlook December 2017 Supplement. 2
is supported by a synchronized trade rebound Growth in Nominal Exports Growth in Nominal Imports Jan 2015 to Sep 2016 Oct 2016 to Jul 2017 Jan 2015 to Sep 2016 Oct 2016 to July 2017 Bangladesh Azerbaijan Cambodia Myanmar Pakistan Brunei Darussalam Nepal Sri Lanka People's Rep. of China Kyrgyz Republic Tajikistan Hong Kong, China Brunei Darussalam Georgia Thailand Bangladesh Hong Kong, China Singapore Singapore Philippines Malaysia Malaysia India Indonesia Philippines People's Rep. of China Sri Lanka Thailand Republic of Korea Taipei,China Taipei,China Republic of Korea Indonesia Kazakhstan Azerbaijan Mongolia Viet Nam Armenia Georgia India Armenia Viet Nam Kazakhstan Pakistan Kyrgyz Republic Nepal Mongolia Cambodia -50-25 0 25 50-30 -20-10 0 10 20 30 % change, year on year % change, year on year Note: Unless otherwise indicated, 2017 data refers to the period January to July 2017. KGZ 2017 data ends in April; Cambodia, in May; and Bangladesh and Brunei in June. Sources: CEIC Data Company and Haver Analytics (accessed 15 September 2017). 3
Regional cooperation and integration (RCI) has been playing a pivotal role in Asian growth Intraregional Shares (% of total) = data unavailable; FDI = foreign direct investment (flows data); Equity = equity asset holdings (stock data); Debt = debt asset holdings (stock data). Note: Where 2016 data is not available, the latest year for available data is indicated in parenthesis (year). Source: ADB calculations using data from ADB. Asian Economic Integration Report 2017 (forthcoming). 4
.through subregional initiatives CAREC - Progress in road and railway projects surpassed 2020 targets - 7 CAREC members ratified WTO TFA - Power interconnection projects on track GMS - Completion of 3 new bridges along GMS economic corridor - Major progress in GMS CBTA activities - Harmonizing regional power trade policy EAST ASIA - Pilot PRC-Mongolia joint customs control - Regional knowledge sharing on economic zones - Continuous support for CAREC TF program SASEC - Improved links in Asian Highway Network - Electronic cargo tracking system launched - Arrangements for energy trade forged PACIFIC - Endorsement of the Framework for Pacific Regionalism - Submarine cable projects - ICT enabled projects 5
Development assistance will continue to play a key role in mobilising resources to support the SDGs 6
Much of aid flows destined to South and Southeast Asia Total Aid Flows to Asia and the Pacific by Subregion, 1995 2016 ($ billion, in current prices) 50 45 40 35 30 25 20 15 10 6.4% ($1.2 bn) 5.2% ($1.4 bn) 5.4% ($2.2 bn) 6.8% ($3.1 bn) 2.3% ($0.8 bn) 6.6% ($2.5 bn) 8 7 6 5 4 3 2 (%) 5 1 0 1995-01 avg. 2002-06 avg. 2007-11 avg. 2012-16 avg. 2002-06 avg. 2007-11 avg. 2012-16 avg. 0 Commitments Disbursements South Asia Southeast Asia Central Asia Pacific East Asia ADB's contribution (% total ODA to Asia) Source: ADB calculations using data from OECD. Creditor Reporting System. 7
Bulk of ODA targeted towards social and economic infrastructure and services Total Aid Flows to Asia and the Pacific by Broad Sector, 1995 2016 ($ billion, in current prices) 50 45 40 35 30 25 20 15 10 5 - COM COM DISB COM DISB COM DISB 1995-01 2002-06 2007-11 2012-16 Unallocated / Unspecified Other sectors (allocable) Commodity aid / General programme assistance Humanitarian aid Production sectors Multi-sector / Cross-cutting Economic infrastructure and services Social infrastructure and services COM = commitments; DISB = disbursements. Source: ADB calculations using data from OECD. Creditor Reporting System. 8
ADB s aid allocation mostly for economic infrastructure and services ADB's Aid Allocation by Broad Sector, 1995 2016 ($ billion, in current prices) 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 COM COM COM DISB COM DISB 1995-01 2002-06 2007-11 2012-16 Unallocated / Unspecified Other sectors (allocable) Commodity aid / General programme assistance Humanitarian aid Production sectors Multi-sector / Cross-cutting Economic infrastructure and services Social infrastructure and services COM = commitments; DISB = disbursements. Source: ADB calculations using data from OECD. Creditor Reporting System. 9
but Asia s infrastructure needs dwarf traditional funding sources $ trillion in 2015 prices 1.2 0.8 $ 0.98 [56%] $ 0.56 [32%] $1.7 trillion annual investment needed through 2030 0.4 0.0 $ 0.15 [9%] $ 0.05 [3%] ICT = Information and Communication Technology Source: ADB estimates based on country sources and Private Participation in Infrastructure Database, World Bank; World Development Indicators, World Bank. 10
600 Bridging the gap Infrastructure investment by financing source, excluding PRC,* 2016 2020, (annual average, $ billion in 2015 prices) Investments ($ billion in 2015 prices) 500 400 300 200 100 0 $195 Current Investment Private $62.5 Public $132.6 $121 Additional Public $187 $503 Additional Private Equity $47 Debt $140 Investment Needs * 25 countries minus the PRC Note: Numbers may not add up to total due to rounding. Source: ADB estimates based on data from country budget documents, NAS data from national statistic offices, IMF Investment and Capital Stock Dataset, Asian Development Bank Key Indicators 2016, World Bank World Development Indicators, World Bank Private Participation in Infrastructure Database. 11
Policies to close the gap Fiscal reforms Tax reforms; spending reorientation; prudent borrowing; and nontax revenues Promoting private participation Create conducive investment climate Make greater use of pubic-private partnerships (PPPs) Deepen capital markets Role of MDBs MDB infrastructure financing in Asia is 2.5% of current investment Growing share for the private sector Needs for enhancing both quantity and quality. To tap private investments, credit enhancement function of MDBs Role of new emerging donors 12
AIIB, BRI, and ADB AIIB BRI Cooperation to fill the infrastructure gap MOU signed in 2016 4 co-financed projects on going and more in pipeline Important in potentially bridging the infra gap MOU signed between China and MDBs in 2017 Positive social benefit indispensable Six identified CAREC Corridors overlap with key sections of BRI 13
ADB s Finance ++ approach Financing the Sustainable Development Goals requires a more integrated approach 14
Thank you! 15