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Developing countries raise climate ambitions to plot path out of pandemic

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Developing countries are building more ambitious plans to tackle climate change, with COVID-19 stimulus packages often serving as a springboard towards a greener recovery, the United Nations Development Programme (UNDP) said on Tuesday.

UNDP is supporting 115 developing countries, to enhance their Nationally Determined Contributions (NDCs) – the specific steps that each country intends to take to help meet the goals of the 2015 Paris Agreement, which committed the international community to restrict global warming to “well below 2 degrees Celsius” and aim, if possible, for 1.5C.

Signatories to the landmark Agreement are due to meet online for a Climate Ambition Summit on Saturday, marking the fifth anniversary of the pact, and to set out new and ambitious commitments for the next five years, which could provide a major boost for the next landmark meeting, COP26 in Glasgow, Scotland, next November.

“What that 1.5 (degree target) really stands for is a complete and utter transformation of the world. And the speed, and the scale at which we have to do that is unprecedented”, said Cassie Flynn, UNDP Climate Advisor.

‘Stakes could not be higher’

“The good news is that we have all of the solutions, we know what we need to do. We know what it takes to have clean energy, we know what it takes to increase our resilience to climate impacts…to protect nature. But we have to do it faster and bigger than we have ever done it before, and the stakes could not be higher.”

NDCs are supposed to show genuine progress compared to existing policies in three areas: mitigation, adaptation, and support. Each five-year NDC plan is like a chapter in the longer book of how the world will reach “net zero” carbon emissions by 2050, Ms. Flynn told a news conference in Geneva.

The COVID-19 pandemic meant that some developing countries supported by UNDP, which represent 22.5 per cent of global greenhouse gas emissions, would not have their new commitments ready until early 2021.

Pandemic opportunities

But the pandemic has also given the “Climate Promise” countries an impetus and an opportunity to aim higher, presenting plans that are far more robust than they might have been otherwise, said UNDP. And most are now linking their NDC plans directly to a post-pandemic green recovery.

“So it means that 80 per cent of this 115 are really looking at how they can be more aggressive in their plans to reduce emissions. And then when it comes to adaptation, increasing resilience to climate change, we have nearly every single country, so 97% plan to increase adaptation ambition”, Ms. Flynn said.

Although COVID-19 had delayed some of the NDC commitments, it has spurred on NDC planning, she added.

“In many cases, in the early days of COVID, we thought ‘oh is this going to slow us down’. And in many cases I think what’s happened now is this has sped us up, because these choices that countries are making when it comes to green recovery are happening within the climate conversations, and vice versa.”

More inclusive

The second generation of NDCs were shaping up to be far more inclusive than the first, Ms. Flynn said, especially in terms of gender and youth, as countries made sure they had all voices represented at the table. 

“We are seeing 91% of Climate Promise countries have included gender responsive activities within their thinking on the NDCs. And this includes everything from effective governance, to inclusion in planning processes, and also to developing these policy frameworks that ensure that women and girls are not just included in the moment of the decision, but also have the support in the long term to help bring that NDC to life.”

In the first generation of NDCs, about 40 per cent had a direct reference to children or youth, but that proportion had now jumped to 75 per cent.

“We have seen a dramatic increase in the inclusion of youth within Climate Promise countries”, Ms. Flynn said.

She cited Costa Rica as a leading exponent of making the link between COVID and a green recovery, with an NDC linked to a national decarbonisation plan.

Nigeria was another leading example, involving plans for agriculture and housing in NDC planning, and looking at the role of green jobs in jumpstarting the economy.

Compared to five years ago, countries were now thinking much more seriously about living with climate change, as climate disasters happened more frequently around them, Ms. Flynn said. Whereas in the past an occasional Category Five storm might oblige a country to rebuild, people were increasingly aware that those kind of storms were now coming more regularly. 

“People are looking at the world and they’re seeing wildfires they are seeing more increased storms they are seeing drought they are seeing sea level rise and trends happen around them. People are really seeing a lot of these impacts.”

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Development

New Financing to Help Indonesia Achieve a Deeper and More Resilient Financial Sector

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The World Bank’s Board of Executive Directors today approved a loan of US$400 million to support reforms that will help the Government of Indonesia increase the depth, improve the efficiency, and strengthen the resilience of the financial sector.

The COVID-19 pandemic has caused recession in Indonesia, with potentially long-lasting financial, fiscal, and social implications. While the banking system is well-capitalized and profitability is high, the lack of depth in the Indonesian financial markets increases the country’s vulnerability to external shocks. The new financing is designed to help the country address financial sector vulnerabilities heightened by the pandemic. It does so through support to measures such as extending financial services to previously underserved groups, reducing the costs of such services for individuals and businesses alike, and strengthening the capacity of the financial sector to withstand financial and non-financial shocks.

“The COVID-19 outbreak has made structural reforms to address financial sector vulnerabilities urgent. The Government of Indonesia is committed to strengthening the financial sector given its critical role in sustaining Indonesia’s growth and in reducing poverty, especially during the COVID-19 recovery phase. “ said Minister of Finance of the Republic of Indonesia, Sri Mulyani Indrawati.

The new development policy loan will support Indonesia’s financial sector reforms through three key approaches. First, it aims to increase the depth of the financial sector by expanding the  access to financial services – including by youth and women – broadening the range of financial products, and incentivizing long-term savings. These efforts would reduce Indonesia’s vulnerability to foreign portfolio outflows.

Second, it aims to improve the efficiency and lower the cost of the financial sector by strengthening the insolvency and creditor rights framework, protect consumers and personal data, and make payment systems more efficient and faster by utilizing digital technology. The latter will help large-scale social assistance payments to vulnerable people during the crisis.

Third, it aims to boost the capacity of the financial sector to withstand shocks by strengthening the resolution framework to avoid financial activities disruptions in the event of a bank failure, advancing the effectiveness of financial sector oversight and implementing sustainable finance practices.

“This financing complements the government’s efforts to cushion the financial sector and the overall economy from the impacts of the COVID-19 crisis. By making financial services more transparent, reliable and technology-oriented, savings can be channeled into the most productive investments  in a less costly, faster and safer way, thus opening opportunities for people to invest in their future and to protect themselves from unexpected shocks,” said Satu Kahkonen, World Bank Country Director for Indonesia and Timor-Leste.

The World Bank’s support to financial sector reforms in Indonesia is an important component of the World Bank Group’s Country Partnership Framework for Indonesia, whose engagement area on strengthening economic resilience and competitiveness contains a specific objective focused on increasing the depth, improving the efficiency and strengthening the resilience of the financial sector. The new financing is also based on the World Bank Group’s GRID (green, resilient, inclusive development) principles.

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The BRICS Foreign Ministers Meet To Review Progress

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Due to the current global situation of coronavirus pandemic, a meeting of Brazil, Russia, India, China and South Africa (BRICS) Ministers of Foreign Affairs/International Relations via videoconference was held early June under the Chair of Indian Ministry of Foreign Affairs. As stipulated by the guidelines, India took over in January 2021.

The five foreign ministers held a frank exchange of views on topical issues of the international agenda, including efforts to strengthen international institutions, regional conflicts, joint efforts to combat new challenges and threats, including the COVID-19 pandemic, and cooperation between the five states at multilateral fora.

They also discussed the current situation, and future prospects of cooperation between the five countries. In the context of the current epidemiological situation, all BRICS countries expressed their solidarity with India and its people. The burden has increased on the healthcare systems. Russia expresses willingness to continue helping India counter this dangerous virus.

Amid the coronavirus-caused crisis, the ministers give priority to invigorating business, trade, economic and investment ties inside BRICS. In this context, they consider it important to implement the BRICS economic partnership strategy endorsed by the leaders during the last summit in 2020.

During the discussions, they acknowledged that the number and complexity of the challenges to the international community and sustainable global development are growing. These are the threats of terrorism, transnational crime, including in the digital sphere, climate change and an expanding rift between the rich and the poor. These problems can be addressed collectively.

Following the meeting, the ministers approved a Joint Communiqué and a Joint Statement on Strengthening and Reforming the Multilateral System. At the 12th BRICS gathering last year, the Foreign Ministers of Brazil, Russia, China and South Africa extended full support to India for its BRICS Chairmanship in 2021 and the holding of the 13th BRICS Summit. The five BRICS countries together represent over 3.1 billion people, or about 40 percent of the world population.

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World Bank Supports the Modernization of Tajikistan’s Tax Regime

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The World Bank’s Board of Executive Directors approved today $50 million in grant financing from the International Development Association for the Tajikistan Tax Reform Operation. This project will support the implementation of the revised tax code and the modernization of the tax system to balance the objectives of domestic revenue mobilization and private sector development.

“When incentives are such that enterprises and investors actually benefit from being successful in their businesses and honest vis-à-vis the State, the private sector will start to play an increasingly larger role in fostering innovation, creating employment, and broadening the tax base,” said Jan-Peter Olters, World Bank Country Manager for Tajikistan. “A consistent tax code with predictable tax obligations, as currently prepared by the Government, is expected to promote a more dynamic, innovative, and export-oriented private sector—once decisions on tax audits will be based on risk assessments and consistency checks done within the Tax Committee.”

The Government of Tajikistan has made tax reform a priority, reflecting the increasing importance of improving the business and investment climate and enhancing the competitiveness of the national economy. With the new tax code, currently under review by the Government, Tajikistan seeks to modernize tax administration and base tax policy and revenue collection processes on international practice.

This reform represents a critical building block in efforts to meet the key objectives of the National Development Strategy to 2030, which is to increase people’s incomes by up to 3.5 times and halve poverty by 2030. To meet this goal, Tajikistan would need the contribution of a dynamic private sector, which can finance investments, foster innovation, create jobs, and increase exports.

Currently, the private sector in Tajikistan provides only about one-quarter of total investments and produces less than one-third of industrial output, while providing only limited formal employment opportunities in a young and growing economy. The COVID-19 pandemic has negatively impacted government revenues and tax collection efforts, while increasing the demand for social spending and levels of public debt. This context has made the tax reform even more urgent.

The Tajikistan Tax Reform Operation will contribute to the ongoing tax reform by: 1) simplifying the tax system; 2) enhancing the quality of taxpayer services, and 3) improving voluntary compliance.

The activities, which will support these three broad outcomes, include the development of secondary legislation necessary for implementation of the new Tax Code, the creation of a modern risk assessment methodology based on international experience to guide audits, the introduction of mechanisms for improved effectiveness and transparency of tax expenditures; the introduction of cost-benefit analyses for tax incentives; the simplification of tax reporting requirements and harmonization of tax and financial accounting reporting for selected taxes; the introduction of an automated VAT refund system; the automation of selected taxpayer services; the upgrade of taxpayer service standards based on taxpayer feedback; the implementation of digital signature and upgrade of ICT infrastructure in the Tax Committee; capacity development on modern approaches in tax policy and tax administration; and taxpayer outreach and education.

To maximize the impact of the project, the World Bank is using a financing instrument called Program-for-Results (PforR), which links disbursement of funds directly to the achievement of specific outcomes. The project will be implemented by the Ministry of Finance of the Republic of Tajikistan and the Tax Committee under the Government of Tajikistan over the next six years.

The World Bank is financing 21 projects in Tajikistan totaling $1.1 billion. Since 1996, the World Bank has provided over $2 billion in IDA grants, highly concessional credits, and trust funds for Tajikistan. The World Bank Group is committed to continuing its support for Tajikistan as it strives to improve the lives and meet the aspirations of its young and growing population. 

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