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Developing Asia Needs to Invest More Than 5% of GDP Over Next Decade for Infrastructure

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Developing Asian countries need to invest more than 5% of their gross domestic product (GDP) over the next decade to be able to meet the infrastructure needs of their fast-growing economies, says a newly launched book co-published by the Asian Development Bank (ADB).

According to Infrastructure Financing in Asia, a new book edited by ADB Vice-President for Knowledge Management and Sustainable Development Mr. Bambang Susantono, many, if not most, of the countries in the Asia and Pacific region are currently investing less than the proposed 5% of GDP for infrastructure development. At this rate, financing infrastructure to maintain and sustain economic growth and development will be a tough challenge.

An ADB report has estimated that infrastructure needs in developing Asia and the Pacific will exceed $22.6 trillion through 2030, or $1.5 trillion per year. The estimates rise to over $26 trillion, or $1.7 trillion per year, when climate change mitigation and adaptation costs are incorporated.

To address this challenge, the book offers a variety of policy approaches, such as wide-ranging public finance and institutional reforms to create a stronger enabling environment for public–private partnerships. It provides out-of-the box solutions in the form of tax financing, mass transit investments, and smart energy grids investments to help meet the infrastructure financing gap.

The book explores alternative financing methods to unlock long-term funding from institutional investors and offers mechanisms to deepen the region’s bond markets. For example, the book dives into the efforts of countries under ASEAN+3—Brunei Darussalam, Cambodia, People’s Republic of China, Indonesia, Japan, Republic of Korea, Lao People’s Democratic Republic, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Viet Nam—in developing local currency bond markets to provide long-term local financing. It also examines the use of green bonds to finance sustainable growth in Asia.

“Developing Asia must strive to find new, innovative, outside-the-box financing solutions to meet its huge infrastructure investment needs. I am confident that this rich collective volume prepared by experts from inside and outside ADB will set forth some concrete and specific directions for infrastructure financing, as well as provide food for thought,” Mr. Susantono said in the book launch today.

The book, co-published by World Scientific, documents the evolution of Asia and the Pacific’s infrastructure over the past 50 years and reviews the pivotal role of infrastructure in supporting the region’s robust growth and social development. It is co-edited by ADB Principal Economist Mr. Donghyun Park and Economist Ms. Shu Tian.

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Development

ADB Calls for Just, Equitable Transition Toward Net Zero in Asia and Pacific

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Asian Development Bank (ADB) President Masatsugu Asakawa today called for countries in Asia and the Pacific to take bold action to address climate change while ensuring fair and equitable economic growth amid the coronavirus disease (COVID-19) pandemic.

“The task of addressing climate change is not only urgent, but also inextricably linked to an inclusive and lasting recovery from the pandemic,” said Mr. Asakawa at the Indonesian Ministry of Finance–ADB 2021 International Climate Conference. “With shared commitment and international cooperation, we can make the transition to net zero and achieve climate resilience, so that our region emerges stronger than before.”

The one-day virtual conference attracted about 800 people from the public and private sectors, development partners, think tanks, and academia to discuss international good practices that can help ADB developing member countries transition to low-carbon, resilient economies and pursue a green, resilient, and inclusive recovery from the COVID-19 pandemic.

The event highlighted Indonesia’s commitment to meeting its nationally determined contributions (NDCs) under the Paris Agreement, as well as steps it has taken to support the development of a low-carbon, resilient economy.

“Indonesia has mainstreamed climate change into our National Medium-Term Development Plan 2020–2024 and established a national Action Plan, both on mitigation and adaptation,” said Indonesian Vice Minister of Finance Suahasil Nazara. “In the near future, we will use this recovery phase post-COVID-19 pandemic to pursue our climate and sustainability agenda.” Indonesia will chair the G20 in 2022.

Asia and the Pacific is responsible for more than half of global greenhouse gas emissions. Recent analysis predicts that global energy-related CO2 emissions will grow by nearly 5% in 2021, as demand for coal, oil, and gas rebounds. About 80% of the growth in coal demand is expected to come from Asia.

The Paris Agreement aims to keep the rise in global temperatures to well below 2°C, preferably to 1.5°C, compared to pre-industrial levels. ADB’s sovereign operations will be fully aligned with the goals of the Paris Agreement by 1 July 2023 and its nonsovereign operations by 1 July 2025. ADB will scale up investments in adaptation and resilience to at least $9 billion from 2019 to 2024 to support Asia and the Pacific’s recovery from the COVID-19 pandemic. The measures will contribute to ADB’s commitment to deliver $80 billion in climate finance between 2019 and 2030.

Mr. Asakawa said ADB will support Indonesia’s transition toward a low-carbon, resilient economy and help the country meet its NDC targets. Strengthening resilience is one of the three focus areas in ADB’s country partnership strategy for Indonesia. That includes climate change mitigation and adaptation and green recovery, as well as disaster risk management and finance.

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Human Rights

UNSC calls for ‘immediate reversal’ of Turkish and Turkish Cypriot decision on Varosha

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The United Nations Peacekeeping Force in Cyprus (UNFICYP) controls the buffer zone between the opposing sides. UN Photo/Eskinder Debebe

The Security Council said in a statement released on Friday that settling any part of the abandoned Cypriot suburb of Varosha, “by people other than its inhabitants, is “inadmissible”. 

The presidential statement approved by all 15 Security Council members, upheld that “no actions should be carried out in relation to Varosha, that are not in accordance with its resolutions”. 

“The Security Council condemns the announcement in Cyprus by Turkish and Turkish Cypriot leaders on 20 July 2021 on the further reopening of part of the fenced-off area of Varosha”, the statement continued. 

‘Deep regret’ 

“The Security Council expresses its deep regret regarding these unilateral actions that run contrary to its previous resolutions and statements.” 

The statement calls for “the immediate reversal of this course of action and the reversal of all steps taken on Varosha since October 2020.” 

The statement followed a closed-door briefing earlier in the day by the outgoing UN Special Representative, Elizabeth Spehar

The Mediterranean island has been divided between Greek Cypriot and Turkish Cypriot communities for 47 years, and a Security Council resolution of 1964 recommended the establishment of a peacekeeping force to maintain law and order and help end inter-communal strife.  

According to news reports, on Wednesday, Greek Cypriot leaders appealed to the Council over plans by Turkish Cypriot authorities to revert a 1.35 square-mile section of Varosha, from military to civilian control, and open it for potential resettlement. 

The self-declared Turkish Republic of Northern Cyprus (TRNC), which is backed by Turkey, made the initial announcement a day earlier, that part of the suburb would come under civilian control.  

Guterres statement 

On Wednesday, the UN Secretary-General António Guterres expressed his deep concern over Wednesday’s announcements by Turkey and Turkish-Cypriot leaders, on re-opening Varosha, and said that the UN’s position “remains unchanged and is guided by the relevant Security Council resolutions”.  

In a statement issued by his Deputy Spokesperson, Farhan Haq, Mr. Guterres called on all sides “to refrain from any unhelpful actions and to engage in dialogue to bring peace and prosperity to the island through a comprehensive settlement”. 

“The Secretary-General has repeatedly called on all parties to refrain from unilateral actions that provoke tensions and may compromise the ongoing efforts to seek common ground between the parties towards a lasting settlement of the Cyprus issue”. 

‘Just settlement’ 

The Security Council statement concluded with a reaffirmation of its commitment “to an enduring, comprehensive and just settlement, in accordance with the wishes of the Cypriot people, and based on a bicommunal, bizonal federation, with political equality”. 

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Africa Today

Partnership with Private Sector is Key in Closing Rwanda’s Infrastructure Gap

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The COVID-19 (coronavirus) pandemic has pushed the Rwandan economy into recession in 2020 for the first time since 1994, according to the World Bank’s latest Rwanda Economic Update.

The 17th edition of the Rwanda Economic Update: The Role of the Private Sector in Closing the Infrastructure Gap, says that the economy shrank by 3.7 percent in 2020, as measures implemented to limit the spread of the coronavirus and ease pressures on health systems brought economic activity to a near standstill in many sectors. Although the economy is set to recover in 2021, the report notes the growth is projected to remain below the pre-pandemic average through 2023.

Declining economic activity has also reduced the government’s ability to collect revenue amid increased fiscal needs, worsening the fiscal situation. Public debt reached 71 percent of GDP in 2020, and is projected to peak at 84 percent of GDP in 2023. Against this backdrop, the report underlines the importance of the government’s commitment to implement a fiscal consolidation plan once the crisis abates to reduce the country’s vulnerability to external shocks and liquidity pressures.

“Narrowing fiscal space calls for a progressive shift in Rwanda’s development model away from the public sector towards a predominantly private sector driven model, while also stepping up efforts to improve  the efficiency of public investment,” said Calvin Djiofack, World Bank’s Senior Economist for Rwanda.

According to the Update, private sector financing, either through public-private partnerships or pure private investment, will be essential for Rwanda to continue investing in critical infrastructure needed to achieve its development goals. The analysis underscores the need to capitalize further on Rwanda’s foreign direct investment (FDI) regulatory framework, considered one of the best in the continent, to attract and retain more FDI; to foster domestic private capital mobilization through risk sharing facilities that would absorb a percentage of the losses on loans made to private projects; and to avoid unsolicited proposals  of public–private partnership (PPP) initiatives; as well as to build a robust, multisector PPP project pipeline, targeting sectors with clearly identified service needs such as transport, water and sanitation, waste management, irrigation, and housing.

While the report findings establish clearly the gains of public infrastructure development for the country as whole, it also stressed that these gains tend to benefit urban and richer households most.

 “Rwanda will need to rebalance its investment strategy from prioritizing large strategic capital-intensive projects toward projects critical for broad-based social returns to boost the potential of public infrastructure to reduce inequality and poverty,” said Rolande Pryce, World Bank Country Manager for Rwanda. “Any step toward the Malabo Declaration to allocate 10 percent of future infrastructure investment to agriculture, allied activities, and rural infrastructure, will go a long way to achieving this goal.

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