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Improving Maritime Logistics to Boost Indonesia’s Competitiveness and Reduce Poverty

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A US$300 million loan approved today by the World Bank’s Board of Executive Directors will help the Government of Indonesia deepen reforms to reduce the costs and improve the reliability of the country’s maritime logistics.

The Second Indonesia Logistics Reform Development Policy Loan (DPL) builds on the reforms supported by the first Logistics DPL approved in November 2016 and addresses some of the key bottlenecks in the movement of goods within and across Indonesia’s borders.

“Efficient maritime logistics is vital for higher growth of the manufacturing, agriculture and service sectors,” said Rodrigo A. Chaves, World Bank Country Director for Indonesia and Timor-Leste. “Better logistics will increase the country’s competitiveness and also help poverty reduction by lowering the price of goods and services in remote regions, especially in Eastern Indonesia.”

Inefficient port operations, uncompetitive logistics services markets and lengthy trade procedures hinder Indonesia’s competitiveness. Ports are often a bottleneck in the country’s logistics chain, hampered by inadequate infrastructure, burdensome regulations and low productivity.

These constraints contribute to the higher costs of logistics for manufacturing firms in Indonesia compared to Thailand and Vietnam and to the lower logistics performance of Indonesia relative to other countries in the region, as measured by the World Bank’s Logistics Performance Index.

“In the world’s largest archipelago, with around 17,000 islands, the logistics supply chain is typically long and fragmented. This project will address some of the main bottlenecks at various points of the supply chain,” said Massimiliano Calì, World Bank Senior Economist.

The project’s main focus is on strengthening ports’ governance and operations, enabling a competitive business environment for logistics service providers, and making trade processing more efficient and transparent.

Reforms supported by the first Logistics DPL have already caused benefits to Indonesia, including an acceleration of new port projects with additional private sector participation, increased entry of operators in logistics markets and a reduction of time and costs of trade processing.

The World Bank’s support to Indonesia’s logistics sector is a vital component of the World Bank Group’s Country Partnership Framework for Indonesia, which focuses on government priorities for transformational development impact. This DPL is also leveraging additional lending from the Government of Germany through the German Bank for Development (KfW) and the Government of France through the Agence Française de Développement (AFD).

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Environment

Five things you should know about disposable masks and plastic pollution

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The fight against plastic pollution is being hit by the COVID-19 pandemic, as the use of disposable masks, gloves and other protective equipment soars, but UN agencies and partners insist that, if effective measures are put into place, the amount of plastics discarded every year can be significantly cut, or even eliminated.

1) Pollution driven by huge increase in mask sales

The promotion of mask wearing as a way to slow the spread of COVID-19 has led to an extraordinary increase in the production of disposable masks: the UN trade body, UNCTAD, estimates that global sales will total some $166 billion this year, up from around $800 million in 2019.

Recent media reports, showing videos and photos of divers picking up masks and gloves, littering the waters around the French Riviera, were a wake-up call for many, refocusing minds on the plastic pollution issue, and a reminder that politicians, leaders and individuals need to address the problem of plastic pollution. 

2) A toxic problem

If historical data is a reliable indicator, it can be expected that around 75 per cent of the used masks, as well as other pandemic-related waste, will end up in landfills, or floating in the seas. Aside from the environmental damage, the financial cost, in areas such as tourism and fisheries, is estimated by the UN Environment Programme (UNEP) at around $40 billion.

The UN Environment Programme (UNEP) has warned that, if the large increase in medical waste, much of it made from environmentally harmful single-use plastics, is not managed soundly, uncontrolled dumping could result. 

The potential consequences, says UNEP, which has produced a series of factsheets on the subject, include public health risks from infected used masks, and the open burning or uncontrolled incineration of masks, leading to the release of toxins in the environment, and to secondary transmission of diseases to humans.

Because of fears of these potential secondary impacts on health and the environment, UNEP is urging governments to treat the management of waste, including medical and hazardous waste, as an essential public service. The agency argues that the safe handling, and final disposal of this waste is a vital element in an effective emergency response.

“Plastic pollution was already one of the greatest threats to our planet before the coronavirus outbreak,” says Pamela Coke-Hamilton, UNCTAD’s director of international trade. “The sudden boom in the daily use of certain products to keep people safe and stop the disease is making things much worse.”

3) Existing solutions could cut plastics by 80 per cent

However, this state of affairs can be changed for the better, as shown by a recent, wide-ranging, report on plastic waste published by The Pew Charitable Trusts, and sustainability thinktank Systemiq.

The study, “Breaking the Plastic Wave: A Comprehensive Assessment of Pathways Towards Stopping Ocean Plastic Pollution”, which was endorsed by Inger Andersen, head of the UN environment agency UNEP, forecasts that, if no action is taken, the amount of plastics dumped into the ocean will triple by 2040, from 11 to 29 million tonnes per year.

But around 80 per cent of plastic pollution could be eliminated over this same period, simply by replacing inadequate regulation, changing business models and introducing incentives leading to the reduced production of plastics. Other recommended measures include designing products and packaging that can be more easily recycled, and expanding waste collection, particularly in lower income countries.

4) Global cooperation is essential

In its July analysis of plastics, sustainability and development, UNCTAD came to the conclusion that global trade policies also have an important role to play in reducing pollution. 

Many countries have introduced regulations that mention plastics over the last decade, an indicator of growing concern surrounding the issue, but, the UNCTAD analysis points out, for trade policies to be truly effective, coordinated, global rules are needed.

“The way countries have been using trade policy to fight plastic pollution has mostly been uncoordinated, which limits the effectiveness of their efforts, says Ms. Coke-Hamilton. “There are limits to what any country can achieve on its own.”

5) Promote planet and job-friendly alternatives

Whilst implementing these measures would make a huge dent in plastic pollution between now and 2040, the Pew/ Systemiq report acknowledges that, even in its best-case scenario, five million metric tons of plastics would still be leaking into the ocean every year.

 A dramatic increase in innovation and investment, leading to technological advances, the report’s study’s authors conclude, would be necessary to deal comprehensively with the problem.

Furthermore, UNCTAD is urging governments to promote non-toxic, biodegradable or easily recyclable alternatives, such as natural fibres, rice husk, and natural rubber. These products would be more environmentally-friendly and, as developing countries are key suppliers of many plastic substitutes, could provide the added benefit of providing new jobs. Bangladesh, for example, is the world’s leading supplier of jute exports, whilst, between them, Thailand and Côte d’Ivoire account for the bulk of natural rubber exports.

“There’s no single solution to ocean plastic pollution, but through rapid and concerted action we can break the plastic wave,” said Tom Dillon, Pew’s vice president for environment. As the organization’s report shows, “we can invest in a future of reduced waste, better health outcomes, greater job creation, and a cleaner and more resilient environment for both people and nature”.

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ADB Finances Largest Private Gas Power Plant to Improve Access to Energy in Bangladesh

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The Asian Development Bank (ADB) has signed a $200 million financing package with Reliance Bangladesh LNG and Power Limited (RBLPL) to build and operate a 718-megawatt (MW) combined-cycle gas-fired power plant in Bangladesh. The project will ease ongoing energy shortages and drive further private sector investments in the country’s power sector.

The assistance comprises a $100 million loan from ADB and a further $100 million loan from the Leading Asia’s Private Infrastructure Fund (LEAP), which will be administered by ADB. The financing agreement was signed by the Director of Infrastructure Finance, South Asia, Central Asia, and West Asia at ADB’s Private Sector Operations Department Shantanu Chakraborty, and Chief Executive Officer of RBLPL, Ranjan Lohar. The project is cofinanced by the Japan Bank for International Cooperation as well as four commercial banks, with insurance for the commercial banks provided by Nippon Export and Investment Insurance.

“This highly energy efficient project will help address a widening gap between the demand and supply of electricity in Bangladesh, which is critical for continued industrial and economic growth,” said Mr. Chakraborty. “ADB has been instrumental in mobilizing crucial commercial financing, incorporating best practices in environmental and social standards, and establishing precedents for future financings of similar large scale projects in Bangladesh by boosting investor and lender confidence.”

“RBLPL is privileged to have the support of international development banks including ADB for this power plant project in Bangladesh,” said Mr. Lohar. “Through the project, RBLPL aims to contribute towards the country’s robust economic growth.”

Despite a significant increase in installed generation capacity in Bangladesh over the past decade, demand for electricity is not yet fully met through domestic supply. To help close the gap, the Government of Bangladesh continues to emphasize greater private sector investments in power generation. The plant will be located on the banks of the Meghna River, southeast of Dhaka. It will boost national generation capacity by about 4%, reducing the need for electricity imports and the use of environmentally harmful and expensive fuels like coal and oil. ADB has been involved in this project as a leading anchor lender since the early stages of its development.

LEAP was established in 2016 with a $1.5 billion capital commitment from the Japan International Cooperation Agency. It is focused on delivering high quality and sustainable private sector infrastructure projects that reduce carbon emissions, improve energy efficiency, and offer accessible and affordable health care, education, and communication services to ADB’s developing member countries.

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South Africa: COVID-19 pandemic raises the urgency of structural reforms

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South Africa responded swiftly to the COVID-19 pandemic, but the sharp drop in activity adds to long-standing challenges and raises the urgency of structural reforms, according to a new OECD report released today.

In the latest Economic Survey of South Africa, the OECD indicates that the nationwide lockdown enacted in March 2020 reduced activity in mining and industry while bringing the tourism, entertainment and passenger transport sectors to a near-standstill. Growth has collapsed, unemployment is rising and more will need to be done to strengthen responses to the crisis and ensure that the recovery brings about sustainable and more inclusive development.

The Survey recommends a wide range of measures to improve the quality of and access to health care and support businesses and people. This includes lowering interest rates; providing temporary financial support to households and businesses; and extending financial relief in sectors hard hit by the crisis, particularly if there is a renewed virus outbreak later in the year.

The pandemic adds to South Africa’s long-standing challenges, the Survey says. Under a so-called double-hit scenario, a new outbreak affecting South Africa and its trading partner countries will curtail exports, deepening the recession to -8.2% in 2020, and limiting the recovery in 2021 to GDP growth of just 0.6%. In the single-hit scenario, where a second wave of the virus is avoided, economic activity will still fall by 7½percent in 2020 before picking up progressively to growth of 2½percent in 2021.

Presenting the Survey today, OECD Economics Department Country Studies Director Alvaro Pereira said: “South Africa cannot afford to delay reforms. It is essential to undertake reforms to restore long-run fiscal sustainability and growth, while continuing to support the economy in the short run.”

Macroeconomic and structural policies are needed to put growth on a sound footing going forward. Bold fiscal measures are needed to curb spending pressures and restore fiscal sustainability, including taking steps to reduce the government wage bill and transfers to state-owned enterprises. Structural policy reforms to boost competition, restructure state-owned enterprises, improve the regulatory framework and improve public investment in transport infrastructure, skills and education are also called for.

The pandemic has demonstrated that further action is needed to build an inclusive social protection system. The Survey suggests South Africa consider additional means-tested support for households below the food poverty line, better coverage for informal workers and a gradual increase to the public financing of health care, through a form of public insurance.

The tourism sector was hit hard by the pandemic and resulting containment measures, yet it has good potential to contribute to the economy and future employment growth, the Survey said. Implementation of electronic visa programmes for emerging target markets and increasing the number of countries falling under the visa-waiver agreement will boost arrivals, while a reduction of red tape and regulatory burden for entrepreneurs and small enterprises will improve market access. Investments in transport and tourism infrastructure have to be aligned to connect tourists to places.

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