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ADB Announces $6.5 Billion Initial Response to COVID-19 Pandemic

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The COVID-19 pandemic has become a major global crisis, requiring forceful action at national, regional, and global levels, according to ADB President Masatsugu Asakawa. Photo: ADB

The Asian Development Bank (ADB) today announced a $6.5 billion initial package to address the immediate needs of its developing member countries (DMCs) as they respond to the novel coronavirus (COVID-19) pandemic.

“This pandemic has become a major global crisis. It requires forceful action at national, regional, and global levels,” said ADB President Masatsugu Asakawa. “With our developing member countries, we are formulating an aggressive set of actions to combat the pandemic; to protect the poor, the vulnerable, and wider populations across the region; and to ensure economies will rebound as swiftly as possible. Based on close dialogue with our members and peer institutions, we are deploying this $6.5 billion rescue package to meet the immediate needs of our members.”

Mr. Asakawa stressed that “ADB stands ready to provide further financial assistance and policy advice down the road whenever the situation warrants, on top of the $6.5 billion package.”

The initial package includes approximately $3.6 billion in sovereign operations for a range of responses to the health and economic consequences of the pandemic, and $1.6 billion in nonsovereign operations for micro, small, and medium-sized enterprises, domestic and regional trade, and firms directly impacted. ADB will also mobilize about $1 billion in concessional resources through reallocations from ongoing projects and assessing possible needs for contingencies. ADB will make available $40 million in technical assistance and quick-disbursing grants.

To provide the support package to DMCs as quickly and flexibly as possible, ADB will seek adjustment in its financing instruments and business processes. Subject to approval by ADB’s Board of Directors, this will include faster access to emergency budget support for economies facing severe fiscal constraints, streamlined procedures for policy-based lending, and universal procurement with flexible and faster processes.

The pandemic demands a coordinated response and strong collaboration among countries and organizations. ADB will further strengthen its close collaboration with the International Monetary Fund, the World Bank, regional development banks, the World Health Organization, and major bilateral funding agencies including the Japan International Cooperation Agency, as well as the US Centers for Disease Control and private sector organizations, to ensure effective implementation of its COVID-19 response.

Since its first COVID-19 response on 7 February 2020, ADB has already provided more than $225 million to meet urgent needs of both governments and businesses in DMCs. ADB’s COVID-19 response to date includes:

7 February 2020: A $2 million grant to enhance infectious disease prevention, detection, and response in the People’s Republic of China (PRC) and the Greater Mekong Subregion;

27 January to 17 February 2020: $1.5 million in loan savings from the ongoing GMS Health Security Project allocated to procure essential equipment for detection and personal protection;

25 February 2020: A CNY130 million ($18.6 million) private sector loan to a Wuhan, PRC-based pharmaceutical distributor to enable the continued supply of essential medicines and personal protective equipment;

26 February 2020: A second grant window was established with an initial $2 million allocation to help DMCs contain COVID-19 and improve resilience. Additional financing is being mobilized for this grant window;

12 March 2020: $200 million made available through ADB’s Supply Chain Finance Program for companies manufacturing and distributing medicines and other items needed to combat COVID-19. Through its partner financial institutions, ADB can provide essential working capital to such companies;

13 March 2020: A $3 million grant to support the Philippine government’s response to COVID-19, including the purchase of emergency medical supplies and the delivery of effective health care services;

13 March 2020: A $600,000 grant from the Health System Enhancement Project to finance preventive and response efforts in Sri Lanka, including disease surveillance and the provision of medical supplies and equipment;

13 March 2020: $100,000 was reallocated from the Tajikistan Maternal and Child Health Integrated Care Project to finance COVID-19 prevention and mitigation, medical supplies, and equipment;

18 March 2020: $1.4 million was reallocated from the Fifth Health Sector Development Project in Mongolia to procure essential medical equipment for early detection, emergency care, and management of severe respiratory diseases. ADB also approved a $225,000 small-scale technical assistance to strengthen Mongolia’s national capacity for infection prevention and control.

The financial instruments that provided the above measures are available for all ADB DMCs.

ADB’s initial economic analysis and associated data files were published on 6 March 2020 in The Economic Impact of the COVID-19 Outbreak on Developing Asia. It provided estimates of the impact on developing Asia—and on individual economies and sectors in the region—through numerous channels, including sharp declines in domestic demand, lower tourism and business travel, trade and production linkages, supply disruptions, and health effects.

ADB will publish updated estimates of the economic impact of the pandemic in its Asian Development Outlook 2020 to be released on 1 April 2020. 

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Renewables Increasingly Beat Even Cheapest Coal Competitors on Cost

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Renewable power is increasingly cheaper than any new electricity capacity based on fossil fuels, a new report by the International Renewable Energy Agency (IRENA) published today finds. Renewable Power Generation Costs in 2019 shows that more than half of the renewable capacity added in 2019 achieved lower power costs than the cheapest new coal plants.

The report highlights that new renewable power generation projects now increasingly undercut existing coal-fired plants. On average, new solar photovoltaic (PV) and onshore wind power cost less than keeping many existing coal plants in operation, and auction results show this trend accelerating – reinforcing the case to phase-out coal entirely. Next year, up to 1 200 gigawatts (GW) of existing coal capacity could cost more to operate than the cost of new utility-scale solar PV, the report shows.

Replacing the costliest 500 GW of coal with solar PV and onshore wind next year would cut power system costs by up to USD 23 billion every year and reduce annual emissions by around 1.8 gigatons (Gt) of carbon dioxide (CO2), equivalent to 5% of total global CO2 emissions in 2019. It would also yield an investment stimulus of USD 940 billion, which is equal to around 1% of global GDP.

“We have reached an important turning point in the energy transition. The case for new and much of the existing coal power generation, is both environmentally and economically unjustifiable,” said Francesco La Camera, Director-General of IRENA. “Renewable energy is increasingly the cheapest source of new electricity, offering tremendous potential to stimulate the global economy and get people back to work. Renewable investments are stable, cost-effective and attractive offering consistent and predictable returns while delivering benefits to the wider economy.”

“A global recovery strategy must be a green strategy,” La Camera added. “Renewables offer a way to align short-term policy action with medium- and long-term energy and climate goals.  Renewables must be the backbone of national efforts to restart economies in the wake of the COVID-19 outbreak. With the right policies in place, falling renewable power costs, can shift markets and contribute greatly towards a green recovery.”

Renewable electricity costs have fallen sharply over the past decade, driven by improving technologies, economies of scale, increasingly competitive supply chains and growing developer experience. Since 2010, utility-scale solar PV power has shown the sharpest cost decline at 82%, followed by concentrating solar power (CSP) at 47%, onshore wind at 39% and offshore wind at 29%.

Costs for solar and wind power technologies also continued to fall year-on-year. Electricity costs from utility-scale solar PV fell 13% in 2019, reaching a global average of 6.8 cents (USD 0.068) per kilowatt-hour (kWh). Onshore and offshore wind both declined about 9%, reaching USD 0.053/kWh and USD 0.115/kWh, respectively.

Recent auctions and power purchase agreements (PPAs) show the downward trend continuing for new projects are commissioned in 2020 and beyond. Solar PV prices based on competitive procurement could average USD 0.039/kWh for projects commissioned in 2021, down 42% compared to 2019 and more than one-fifth less than the cheapest fossil-fuel competitor namely coal-fired plants. Record-low auction prices for solar PV in Abu Dhabi and Dubai (UAE), Chile, Ethiopia, Mexico, Peru and Saudi Arabia confirm that values as low as USD 0.03/kWh are already possible.  

For the first time, IRENA’s annual report also looks at investment value in relation to falling generation costs. The same amount of money invested in renewable power today produces more new capacity than it would have a decade ago. In 2019, twice as much renewable power generation capacity was commissioned than in 2010 but required only 18% more investment.  

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Palestinian Economy Struggles as Coronavirus Inflicts Losses

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An abrupt decline in economic activities and pressure on the Palestinian Authority (PA)’s finances have placed Palestinian livelihoods at high risks, as the impact of the Coronavirus (COVID-19) continues to hit the economy hard. After growth of a mere 1% in 2019, the economy is projected to contract by at least 7.6% in 2020. Beyond the immediate crisis, lifting restrictions on the development of digital infrastructure and fostering better regulations could play an important role in stimulating an already faltering economy.

With the COVID-19 pandemic in its third month, the crisis is affecting Palestinian lives and livelihoods. The Palestinian Authority has acted early and decisively to save lives. However, several years of declining donor support and the limited economic instruments available have turned the ability of the government to protect livelihoods into a monumental task. Hence, external support will be critical to help grow the economy during this unprecedented period,” said Kanthan Shankar, World Bank Country Director for West Bank and Gaza.

The new World Bank economic monitoring report* highlights critical challenges facing the Palestinian economy. The economy may shrink by at least 7.6%, based on a gradual return to normality from the containment, and by up to 11% in the case of a slower recovery or further restrictions. The PA’s fiscal situation is expected to become increasingly difficult, due to a decline in revenues and substantial increase in public spending on people’s medical, social and economic needs. Even with reallocations of some expenditures, the financing gap could increase alarmingly, from an already high $800 million in 2019 to over $1.5 billion in 2020 to adequately address these needs.

Even prior to the Coronavirus pandemic, more than a quarter of Palestinians lived below the poverty line. The share of poor households is now expected to increase to 30% in the West Bank and to 64% in Gaza. Even more striking is the youth unemployment rate of 38%, well beyond the Middle East & North Africa’s regional average. The economy’s potential remains confined by restrictions on the movement of people and goods. The report makes a case for developing a digital economy to help bridge this divide and create high-end jobs.

The digital economy can overcome geographic obstacles, foster economic growth and create better job opportunities for Palestinians. With its tech-savvy young population, the potential is huge. However, Palestinians should be able to access resources similar to those of their neighbors’, and they should be able to rapidly develop their digital infrastructure as well,” added Shankar.

The report emphasizes that digital infrastructure is foundational to the development of a digital economy. At a time when other countries are contemplating the use of 5G, the Palestinian territories are among the last places in the Middle East to launch 3G in the West Bank and 2G in Gaza. The operators are at a competitive disadvantage, facing restrictions on access to spectrum, sites for network coverage and import of certain telecom equipment. They compete against operators who can offer unlicensed 4G/LTE services in the West Bank and 3G in Gaza for those in proximity to Israeli networks (through pre-paid SIM cards).

The World Bank report recommends specific reforms to be made in collaboration with Israel, including the revival of the Joint Telecommunications Committee to resolve bilateral issues, agreeing on a timeframe for the allocation of 4G spectrum and ultimately 5G, lifting restrictions on equipment needed to introduce new technologies, and mitigating the effect of unauthorized telecom activity in the Palestinian territories.

It also calls on the PA to act on developing a comprehensive strategy for the sector, establishing an independent regulator and prioritizing the passing of a new telecommunications law in line with international best practice. The role of the donors is vital to provide support for the institutional development needed in the telecom sector, help with innovative financing schemes to mitigate the political risks and increase private sector investment.

*The report will be presented to the Ad Hoc Liaison Committee (AHLC) during a virtual meeting on June 2, 2020. This will be a policy-level meeting for development assistance to the Palestinian people.

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How to promote the resilience of the food production sector during a pandemic

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A scientific roundtable, organized through a webinar, gathered food regulators and representatives of the food production sector from Asia, Europe, South America and the Middle East. It was co-hosted by the International Union of Food Science and Technology (IUFoST), the Sustainable Food Systems Division of the United Nations Industrial Development Organization (UNIDO) and the Food Risk Analysis and Regulatory Excellence Platform(PARERA) of Université Laval, Québec, Canada. 

The roundtable enabled participants to share perspectives of the food production sector and  food regulators on the challenges they face, some of the solutions they have developed and the lessons learnt as part of their efforts to prevent the disruption of food production and to contribute to maintaining the safety of products and consumer confidence.

The roundtable highlighted key enablers to the food supply chain’s ability to cope with the pandemic, in particular the ability to adapt to the constraints of limited transportation and to diversify suppliers by introducing more local and/or regional providers, and to prevent and mitigate food and ingredient shortages while encouraging and supporting the local production sectors minimally affected by the consequences of the pandemic. 

Participants highlighted the importance of collaboration and partnerships established amongst regulators and between regulators and food producers to support each other in the development and dissemination of guidance related to COVID-19 mitigation measures and how they can be adapted and applied in the context of food production settings. The development of innovative solutions to execute food regulatory functions such as remote audits, inspections and assessments have contributed to limiting the constraints associated with the current pandemic. 

The roundtable concluded with agreement on the need to continue investments to address food production sector deficiencies, such as making available more localized processing operations in order to create more opportunities for the primary production sector and to contribute to its resilience. It also highlighted the need to further examine food supply chains towards a better redistribution between global and local/regional supply, while supporting additional efforts towards innovative operationalization of food regulatory requirements and functions by regulators and food producers alike.

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