Financing the Sustainable Development Goals (SDGs) is a huge challenge that will not be met through public money alone. Dramatic increases in private investment—both domestic and foreign—are needed. Multilateral development banks (MDBs) have a key role to play in unlocking this funding.
The Asia and Pacific region’s development needs are vast. In addition to SDGs, we must address infrastructure deficits and climate challenges. For infrastructure, recent ADB research estimates that $1.7 trillion is needed annually over 2016–2030 to maintain growth, eradicate poverty, and respond to climate change.
So how can MDBs help countries attract the private funds they need? I see several key actions.
The first is to expand MDBs’ private sector operations of lending and equity investment to the private sector to maximize leveraging impact. These operations can be both for infrastructure investment such as renewable energy, transport and water, or in social sectors such as technical education and aged care by private service providers. ADB’s private sector operations have doubled in the past 10 years to $2.5 billion in 2016. This was about 16% of ADB’s total approvals of $17.5 billion.
Through ADB’s private sector operations last year, an additional $5.8 billion in commercial cofinancing was mobilized. ADB helps to: (a) make projects viable through its participation; (b) improve the risk profiles of projects via credit enhancement products such as guarantees; and (c) pilot new approaches and technologies. ADB is expanding political risk and partial risk guarantees and supporting local currency project bond issuances by the private sector through credit enhancement.
Second is to support the growth of public-private partnerships (PPPs). When well designed and well delivered, PPPs can tap the significant funding and management expertise of the private sector for infrastructure and social services. ADB is supporting PPPs by helping countries enact laws and establish PPP offices, better preparing projects for the market including through its Asia Pacific Project Preparation Facility, and by providing transaction advisory services. ADB also finances private sector participants in PPPs.
One example of ADB’s support for PPPs is the Mactan-Cebu International Airport in the Philippines, where we helped the government to prepare a PPP deal to expand terminal services. Our private sector operations provided commercial financing of $75 million to the operator which was cofinanced by a syndicate of seven Philippine banks for $450 million. ADB’s PPP office is providing transaction advisory services for the Port Moresby International Airport in Papua New Guinea, a teaching hospital in Kazakhstan, a solar park in Cambodia, and many others.
We should admit that project finance in developing countries is not so easy in practice, because of various risks related to land acquisition, projection of revenues and costs, and regulatory changes. In addition, for foreign investors there are risks involved in converting to foreign exchange and remitting returns abroad. But there are still large opportunities for PPPs, especially for mobilizing domestic resources. I also believe that ADB’s involvement in PPPs, including through use of its credit enhancement products, can effectively reduce investors’ risks and promote bankable projects.
The third is to explore new options to mobilize finance, such as management of third-party funds. ADB manages one such fund, the Leading Asia’s Private Sector Infrastructure Fund (LEAP), established in 2016 with $1.5 billion of equity investment from the Japan International Cooperation Agency. As other MDBs are doing, ADB will explore opportunities to manage funds from private sources, such as pension funds, insurance companies, and asset managers.
In these three areas ADB is making serious efforts to mobilize additional resources from the private sector. But at the same time, I would emphasize that ADB’s operations, including sovereign, have always been about mobilizing private resources. One of the most important reasons for creating ADB in 1966 was to attract resources from international capital markets including the United States and Europe. At that time, Asia was poor, savings were limited, and foreign exchange was scarce. ADB successfully issued bonds in Germany in 1969, Austria and Japan (through the first yen-denominated Samurai bond) in 1970, and in the U.S. (with a AAA rating) in 1971.
ADB’s sovereign operations helped countries build essential infrastructure to entice private investment in industry, and strengthen education and health sectors which not only benefit people’s welfare but also set a basis for strong private sector activities. Policy-based lending to countries promoted structural reforms to enhance the business climate. It was also used to provide budget support during financial crises, helping governments maintain essential social expenditures and avoid a collapse of the market.
The combination of lending, whether sovereign or nonsovereign, with expertise in preparing and implementing projects has made an important contribution to the region’s development. ADB’s tradition of working together and closely with governments on the ground is appreciated. At the same time, we are increasing efforts to speed up our work by streamlining business processes, including for procurement. We are also incorporating more advanced and innovative technologies into our projects.
It is my belief that ADB’s lending operations should keep pace with the development needs of the region. To secure our financing capacity, ADB took the innovative step of merging its Ordinary Capital Resources (ADB’s main window to borrow from capital markets and lend with a certain spread) and concessional lending from the Asian Development Fund (which will continue to provide grants to low-income developing member countries). The merger, effective the beginning of this year, will increase annual loan and grant approvals by over 50% to more than $20 billion by 2020. This balance sheet optimization based on existing capital contributions from shareholders and donors presents a useful example to other MDBs.
On the funding side of our lending operations, we are also increasingly using innovative instruments such as green bonds, water bonds, and gender bonds. We are issuing more local currency bonds to support our local currency-denominated private sector operations.
To achieve the SDGs, meet infrastructure needs and address climate challenges, MDBs should play a critical role. Their own financing will continue to be important, especially by incorporating expertise and new technology. But MDBs should become more innovative and dramatically enhance their efforts to mobilize resources from the private sector.
Maldives Ventures into the Blue Economy
Almost half of Maldives’s population and more than 70 percent of its critical infrastructure lie within 100 meters of its shoreline
This close proximity to the ocean makes the island nation a prime location to benefit from the Blue Economy, which refers to the sustainable use of ocean resources for economic growth and better lives.
But with 1,190 coral islands scattered over 90,000 square kilometers, Maldives’ dispersed geography also provides unique challenges.
Water is a prime example.
While almost all residents of the capital city Male’ have access to safe water, this proportion drops to 15 percent for those living in outer atolls.
Research predicts that per capita groundwater and rainwater availability will decline by 34 percent by 2035 while demand will continue to increase.
To make matters worse, rising sea levels caused by climate change will likely further foul water as saltwater seeps into the ground in many areas.
Sewage and a growing amount of waste also threaten the pristine environment that contributes to tourism revenues.
Preserving wetlands and marine ecosystems
To preserve its shores and boost its burgeoning blue economy, Maldives’ Ministry of Environment is implementing the Coastal Protection Projects with support from the World Bank.
The projects focus on protecting coral reef and coastal wetlands, which are rich in biodiversity and have immense recreational value and act as bulwarks against coastal erosion.
The Maldives boasts over 250 species of corals and 41 islands with unique wetland ecosystems.
Since it started in 2013, the Coastal Protection Unit in the Ministry of Environment and Energy has completed projects on fifteen different islands.
By protecting these marine ecosystems and its fauna, Maldives is also protecting two sectors, tourism and fisheries, which contribute almost 80 percent to its economy.
Building on these efforts, the government has also committed to modernizing fisheries and preventing overfishing while also exploring the massive potential of mariculture to help diversify the sector.
Managing waste better
Solid waste has reached unsustainable levels in Maldives, threatening its pristine environment.
The country’s resort islands and its international airport generate nearly six times the waste produced by local populations.
Untreated sewage contaminates groundwater: A 2010 survey in 70 islands reported that water was not suitable for drinking in almost all of them.
Innovative solid and liquid waste management is urgent as Maldives currently does not have policies or regulations in place to reduce the use of hazardous chemicals in its industries and agriculture
The Government of Maldives is keen to implement a national solid waste management strategy to increase bulk water uptake as an alternative to plastic bottles as well as promote recycling and reuse.
The capital city Malé, which is home to one-third of the population, shows that achieving environmental sustainability is possible. All residents are connected to a sewerage system and universal access to sanitation has been achieved.
Now, the World Bank is supporting the construction of a sewerage treatment plant in Hulhumalé, in the south of the North Male Atoll, to prevent untreated sewage from being released into the ocean.
Overall, out of 186 islands, 66 have adequate sewer facilities, while work on 27 other islands is ongoing.
The Maldives is turning obstacles into opportunities to boost its blue economy and create a more sustainable future for its citizens.
Kleptocracy Under Democracy
Power comes with dire consequences if it is misemployed. Great minds orchestrate a great nation but a corrupt mind razes it as personal gain pollutes honor and pride. Ruler of a country clasps great amount of power. On a stork of a pen destiny of people can be changed. However what if that pen is in hands of an amoral mind.
Across the globe reverberates of democracy can be heard. But the question still remains that is there is an actual democratic world order or are we just modern slaves being exploited by the power, wealth and technology.
A quite basic and easily comprehendible understanding of how democracy works is that it sows the seed where transparency and mutual benefit can grow and people become the one who are torch bearers. Society grows as a collective unit in a democratic order. Emancipation of people is prime concern in the democratic society and they are catered at every level.
Whereas kleptocracy, derived from a Greek word “klept” which means steal or thieve, is a form of government where corrupt rulers exploit the resources and population for personal gains or uses state resources to enrich themselves. In order to increase personal wealth corrupt leaders maneuver any means at their disposal indulging themselves in committing more crimes.
However with the advancement in globalization and spread of dubious democratic norms across the globe have made things worse, not realizing that one size doesn’t fit all. Systems are changing, absolute democracy is a far sighted phenomenon. Now even near to actual democracy rarely exists except Scandinavian states. Democracy index 2018 published by The Economist revealed stats about the democracy across the globe. Even United States of America was numbered at 25th number in top 30 democratic countries. It was also categorized under flawed democracies. Whereas first five were the Scandinavian countries having Norway at the top.
Under the veil of democracy self-interest of an individual or specific flock is being wangled. On plight of humanity individual or groups who holds power imbibe their benefits. Power no longer remains an instrument to direct and regulate society but to tranquilize the populace and suck the benefit out of greater pain.
Corruption perception index of 2018 revealed that more than two-thirds of the countries secured to score below 50 with an average score of 48 out of 100. It also states that countries have failed to curtail corruption and also to take considerable measures to uproot it. One needs to understand that when the leaders become economic poachers it steadily annihilates the society.
What usually happens is such individuals after gaining throne shift tides of economic rivers to their own pots. Instruments like trade policy is often not used to further the national interest but the business interest of a single wealthy individual or a handful. Tenure is considered as a business deal to extract maximum benefit. Often individuals make the deals on the form of government to enrich the few. New denotation of democracy seems to be that when there are many hands to snaffle then it is regarded as “democracy” and when there is one hand or few then it is labeled as monarchy or dictatorship.
Across the globe there is a wave of populism where contestants of throne are getting votes on populist narratives. Sedatives like populism, ethno-nationalism put the contestant into power but put rest asleep. Heaps of national wealth is looted by the ones who are
When the economics are being controlled and manipulated by few hands it often leads to debts and ultimately when there is less circulation of wealth and money the society and economy itself collapses. If the dynamics of world kept going the way they are then after the Great depression of 1929 and the financial crisis of 2007-08 there is next big economic collapse around the corner and world is waiting for it to happen.
Iraq corruption menaces both average citizens and outside investors
While Iraqi forces are still undertaking the slow, grueling effort to defeat the last vestiges of the Islamic State (IS), and 1.8 million people remain displaced, an equally important and perhaps even more complex political and humanitarian challenge is looming over Iraq. That challenge? Iraq’s egregious levels of corruption, which have poisoned the fundamental relationship between the Iraqi state and its citizens.
As protesters in Iraq’s southern port city of Basra made clear last year, corruption in their country does not just mean acts of bribery, but an entire parasitic “looting machine” that extracts resources and deliver nothing in return. Nor are everyday Iraqis the only ones at risk from the country’s endemic culture of graft, with some of the country’s largest investors – such as the French telecommunications giant Orange – seeing their investments expropriated and themselves kicked out of a market that nonetheless badly needs their support.
A parasitic relationship
The fundamental lack of credibility and legitimacy of Iraq’s official government institutions is at the center of the country’s myriad difficulties, from the government’s frighteningly incompetent attempts to fight off IS during the group’s initial onslaught in 2014 to the graft that seems to have permeated every link in the national bureaucracy.
Perhaps the best way to show the extent corruption impacts the governance of Iraq is to take a close look at one of the oft-touted “success stories” of post-war construction: the semi-autonomous Kurdistan Region of Iraq (KRI). Iraq’s largely autonomous Kurdish region, often held up as a model for the rest of the country, is ruled as a fiefdom by powerful Barzani family, who recently gained an almost “monarchic” degree of control after two of its members, Masrour Barzani and Nechirvan Barzani, were recently respectively elected Prime Minister and President of the regional government.
When the Economist Intelligence Unit once claimed that corruption in the Kurdistan region is “not perceived” to be as bad as in the rest of Iraq, it pointed out this is a “small accolade given that Iraq is ranked 171/177 in Transparency International’s Corruption Perception Index.” A closer look reveals the only research suggesting the KRI is less corrupt seems to be a UN report that relies on asking civil servants how many bribes they are offered. If the results this study are to be believed, the percentage of civil servants being offered bribes in one of the most corrupt countries on Earth stands at only 4% in the KRI and 5% in Baghdad, percentages that fly in the fact of reality.
Orange shows no one is safe
One doesn’t need to depend on international statistics to see the depth of corruption in Iraqi Kurdistan. Last month, a deeply reported article in French weekly Le Journal du Dimanche explained how telecoms multinational Orange and its partner firm Agility, two of Iraq’s largest foreign investors, stand to lose more than $810 million and see themselves stripped of their shares in the Iraqi mobile operator Korek by the country’s telecommunications commission (CMC). While the regulators claim that Orange and its partner failed to “honor their commitments,” the companies insist they are being expropriated via a corrupt process.
The key detail in their accusation? The fact that Korek’s managing director is Sirwan Barzani, Nechirvan Barzani’s first cousin and a key figure in the aforementioned Barzani family. Sirwan Barzani, according to court filings from the companies, has misappropriated tens of millions of dollars from the firm through shady loans and self-dealing.
Allegations that Sirwan Barzani and his allies had managed to corrupt Iraq’s CMC were seemingly proven by the Financial Times last year, which discovered the chief executive of the regulatory body living in a London house that belonged to Barzani’s business partners. Over the weekend, the World Bank’s International Center for Settlement of Investment Disputes (ICSID) agreed to take up Agility’s claims against the Iraqi government.
Steep price to pay
Why would one of Iraqi Kurdistan’s most powerful figures manipulate regulatory officials to expropriate major investors? To prevent those investors, it seems, from exercising their options for full control over Korek. With other major companies like Germany’s Siemens and the US-based GE pursuing their own contractors to help Iraq rebuild and expand its highly inadequate infrastructure, the Korek expropriation could have a major chilling effect.
The fiasco surrounding the Barzani family’s willingness to expropriate one of the country’s most prominent investors also speaks to the sheer sense of immunity Iraqi leaders feel when it comes to taking the country’s wealth for their themselves. While the leadership of the KRI presents itself as a reliable partner for the West, the region’s economic statistics remain dismal despite years of outside aid.
Despite its oil wealth, the region faces both a recession and high unemployment – over 20% for those aged 18-34 and 69% among women under 24 – as well as rolling blackouts. Factional control over construction projects and government ministries, meanwhile, has left public education in Iraqi Kurdistan facing dire shortages of both schools and teachers. Of the KRI’s approximately 6,800 schools, it is estimated that 25% need to be demolished and fully half are in need of renovation. Paralyzed by political infighting, the regional government has not seen to any of these pressing needs.
While international companies like Orange enjoy access to outside recourse, ordinary Iraqis find they seemingly have no choice but to live with systematic corruption and unaccountability every day. Faced with such a bleak picture, and unless the governments ruling over Iraq fundamentally rethink their handling of the country’s resources, it is only a matter of time before the next great period of instability begins.
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