Re-Imagining Asia and the Pacific in a Post-Pandemic World

Transcript

Zeinab Badawi, Host:

Hello, and a very warm welcome to the 54th Annual Meeting of the Asian Development Bank's Board of Governors.

I'm your host for this conversation with ADB President, Masatsugu Asakawa, or as he prefers to be known, President Masa, for short.

This is the second year that the meeting, over the next three days of the ADB Board of Governors is being held in a virtual format because of the impact of COVID-19.

No one in any corner of the world has been left untouched by what we now know is the most devastating pandemic in a century.

Many of us sadly have seen family, friends, and colleagues affected by the virus, and the threat to livelihoods is absolutely widespread.

But as countries battle with both the health challenges and the economic fallout, there is a great deal of hope that modern science and the vaccines coming on stream will provide us with a way out so we can approach this annual meeting with a degree of optimism.

Throughout the last year, ADB has been playing a critical role across Asia and the Pacific supporting the most vulnerable populations and helping its developing member countries forge a path forward to recovery.

Well, over the next three days, you're going to hear much more about these efforts in sessions exploring various aspects of the Bank's plans to promote a green, resilient, and more inclusive recovery.

And spearheading ADB's efforts in response to COVID-19 is, of course, President Masa.

President Masa, wonderful to be with you in this conversation, terrific.

Hello from London to you in Manila.

Now, you know what, when you became President of the Asian Development Bank in January 2020, I bet you had no idea what was going to happen, of course, the COVID-19 pandemic hit us very soon after.

So what have the past 18 months been like for you?

ADB President Masatsugu Asakawa:

Zeinab, good to see you again.

I clearly remember that we had a very nice chat, at last year's virtual annual meeting in September.

At that time, I was, honestly, hoping that this year, we could have a face-to-face Annual Meeting in Georgia, in May, but even after one year, still this pandemic is rising, and people are really suffering from the huge impact caused by this pandemic.

For myself, I left my family back in Tokyo, so in Manila, I'm living there alone, but totally occupied with operational issues with ADB, to cope with COVID-19, but also in the context of our medium-term Strategy 2030.

Zeinab Badawi, Host:

Like everybody else in the world in the past year, your staff have been working from home, but you chose to go into the office at your headquarters in Manila, every day, wearing a smart suit, like the one you're wearing right now. How has that been for the Bank, operationally, everybody working from home in their own countries?

ADB President Masatsugu Asakawa:

Zeinab, actually, we had to shut down our headquarters as early as mid-March, last year, and almost at the same time, the whole area of Metro Manila got locked down. Even as of today, after one year, we see almost nobody working in this building. So most ADB staff are working
from home.

Nonetheless, I'd like to say that if you look at our performance last year, for example, if you look at our lending volume, our commitment amount, our delivery amount, and also our borrowing program from the capital markets, every figures are a record high in our history.

So while I'm really grateful for both the modern technology and the staff, I feel we're working around the clock.

This year, I decided to put the highest priority on well-being of staff.

Zeinab Badawi, Host:

Just give us a brief overview of what kind of effects that the pandemic has had on the people of the region because it started off as a health crisis and then it quickly became an economic and social and even perhaps political crisis.

ADB President Masatsugu Asakawa:

Quite regrettably, I have to say that income inequality situation and also absolute poverty situation will surely get worsened. That needs to be urgently addressed by everybody.

Right now, our DMC governments, developing member country governments are trying to address these poverty issues urgently by enhancing their social protection programs included in their counter-cyclical, fiscal spending policies.

That's good. That's very much needed from the very urgent point of view, but from a little bit more longer-term perspective, if we'd like to make our recovery more inclusive and sustainable, I think what is needed is to have those poor people, vulnerable people participate in the recovery process, participate in the growth process, participate in the development process by  securing high-quality jobs for them. And from our point of view as an international financial institution, what is really needed to that end is to invest more and more in human beings. And more concretely, more investment in education sector and health sector. Those sectors are very, very significant to ensure that our growth pattern is more inclusive and sustainable.

Even before this pandemic crisis took place, of course, ADB did provide our resources, assistance in those areas.

From now on, I'd like to see a bit more expansion of our operation in those areas.

Zeinab Badawi, Host:

I want to just remind you of the fact that on the 6th of April [2020], at the height of the pandemic when we could see what was going on, you decided to go to a food bank distribution center in a rundown part of Manila and you were actually active in handing out some of the food parcels to the people there.

ADB President Masatsugu Asakawa:

Zeinab, I was delighted to join that initiative actually. I went to one of the relatively poor regions of Metro Manila with rice and canned food.

Initially, I saw the people's face who were already suffering from this pandemic and economic crisis caused by this pandemic, but later I saw also a big smile of people and also expressions of gratitude for us.

Those faces really inspired my hard work throughout last year and even now.

Zeinab Badawi, Host:

But it's also had effects such as, for example, we know that women have suffered much more in the pandemic. They're more likely to lose their jobs, and sadly some of them obviously having to stay at home are enduring degrees of domestic violence on a great scale right across the world.

That must be something of great concern to you.

ADB President Masatsugu Asakawa:

Oh yes. Very much.

Thank you very much for pointing out this very important issue, Zeinab-san.

Unfortunately, still women and girls are among the most severely affected group by this pandemic.

Once again, I noticed that every developing country's governments are trying to address these issues, by for example, including appropriate policy measures, such as unconditional cash transfer and/or food subsidies to women and girls in vulnerable households.

We are really supporting that kind of policy orientation to address this issue.

But at the same time, one thing we should not forget is the fact that one of the devastating consequences of this pandemic is increased number of domestic violence as you rightly mentioned.

Domestic violence has been triggered by this pandemic, but even worsened by the prolonged lockdown measures which have forced the victims to stay with abusers with little access to help.

So this is also an urgent issue I need to address. And ADB has been discussing with DMC governments to secure necessary resources for this kind of gender-based violence support program.

Zeinab Badawi, Host:

That's one example of what the Bank has been doing because you're seen very much as being at the forefront of the response to the COVID-19 pandemic.

Give us a couple more examples of the assistance you've been providing.

ADB President Masatsugu Asakawa:

Right after this pandemic broke out, January, February last year, the first request we did receive from our DMCs was the grant money from ADB for them to procure very critical medical supplies such as masks, ventilators, testing kits, and PPEs, and so on.

So we provided the necessary assistance in the form of technical assistance to many, many DMCs.

Then, I would say after March, April last year we started to receive another type of request from our DMC governments, which is for us to provide loans to finance their fiscal expenditure.

So in order to respond to that kind of request, ADB introduced a totally new financing instrument called CPRO, C-P-R-O, which stands for COVID-19 Pandemic Response Option which is a quick-disbursing budget financing instrument and including with the CPRO as our main elements, we announced last April, US$20 billion COVID-19 assistance package.

By the end of December last year, we already committed to almost US$17 billion out of this US$20 billion package in the form of grants, technical assistance and loans to our DMC governments and also to private sectors.

So that was what we did last year.

Zeinab Badawi, Host:

But I must ask you one particular aspect of ADB's response. This issue of vaccines.

What is the Bank doing specifically to try to ensure that everybody everywhere can get access to vaccines because that's seen as the way of getting out of this terrible crisis?

ADB President Masatsugu Asakawa:

Exactly. Vaccines are really hope for everybody. Actually, every DMC government are now preparing vaccinations for their people.

Quite recently, what is needed is additional financing for them to procure safe and effective vaccine, as well as plan and also knowledge to ensure equitable and effective vaccines distribution systems in each DMC.

After we heard that kind of request, we once again launched a new type of financing scheme called APVAX, Asia Pacific Vaccine Access Facility with a total amount of US$9 billion in December last year.

This APVAX, a new financial financing instrument, takes care of two things.

One is, as I mentioned, it would provide necessary financing for our DMCs to procure necessary amount of vaccines together with other IFIs. It also takes care of necessary investment for them to introduce the appropriate vaccine distribution scheme including super cold chains and so on.

And in March last month, we already approved two financing under this APVAX, one for Philippines, one for Indonesia.

Right now, we are working on many other countries who have tapped these finances.

Zeinab Badawi, Host:

But there are a lot of people who are saying, look, of course, the world is rightly focused on the vaccine rollout program and responding to the emergency needs of COVID-19. But look, they're saying, "don't forget the big challenges that humankind faces."

Of course, here, I'm talking about climate change. As though we needed any reminding about the importance of doing something about that we saw the recent cyclone and floods in Indonesia and Timor-Leste and dozens of people losing their lives.

Tell me, in terms of climate change, what is the Bank continuing to do both in mitigation and adaptation?

ADB President Masatsugu Asakawa:

Actually this region, the Asia-Pacific region is accountable for almost 50% of CO2 gas emission. If you look at the first three quarters of last year, we saw some reduction of CO2 emission. I would say 7-8% compared with 2019 but already in the fourth quarter of last year, we saw the rebound of CO2 emission as the global economy started to recover.

So that needs to be properly controlled and we should definitely aim at achieving a green recovery.

Needless to say, this is the year of COP26. ADB together with other MDBs has committed to align our operation with the Paris Agreement through a couple of measures.

First by aligning each of our operations to either mitigation or adaptation target of Paris Agreement.

Second by ramping up our climate financing.

And thirdly by enhancing our capacity-building efforts in DMCs in this context.

Under the Strategy 2030 we have introduced two concrete numerical targets.

The first target says by 2030, at least 75% of our total operation in number should address adaptation and/or mitigation.

The second numerical target says that between the year 2019 and 2030, for those 12 years, we should aim at providing climate financing with the amount of US$80 billion cumulatively.

Secondly, talking of our endeavor to enhance our capacity-building activities in our DMCs, another thing we're trying to do is to provide necessary advice and resources to let DMC economy less and less dependent on fossil fuels, by setting standards and regulations and also by introducing low-carbon and climate-resilient technology such as renewable energy storage, smart grids and such as carbon capture.

Zeinab Badawi, Host:

And a very important aspect to all this is, of course, domestic resource mobilization.

It's such a critical fact.

Also, international tax cooperation.

Now, I know from your past career that you're something of a tax expert both domestically in Japan, and also international, so this is your real forte.

So just explain to me why you think domestic resource mobilization and international tax cooperation are such a big cause that you are championing at the ADB?

ADB President Masatsugu Asakawa:

Thank you, Zeinab.

This is one of my most favorite topics. Right now, obviously, our DMC, and not only DMC but every developing countries are under enormous pressure on budget and public debt resulting from a large-scale countercyclical fiscal expenditures.

I'm not saying that's not needed, that's a bad thing,

But the resulting accumulation of public debt, especially if the debt is denominated in US dollars, would be my concern from two perspectives.

One perspective is if we look back at our history, whenever any developed countries, especially the US, the country of key currency start to hike its interest rate in the context of monetary policy normalization, then quite often we saw huge, huge impact put on the capital markets of both developing and emerging countries.

Those are the kind of pressures, first of all, for the interest hike in those countries, and then pressures for capital outflow, and then pressures on depreciation of their currencies.

Second thing, it will be a good idea for any developing countries try to rely on more and more domestic resources, by reducing their dependency on external finance.

Domestic resource means taxation, tax revenue.

If you look at their tax-to-GDP ratio, it's not really encouraging here in our region. The figure is relatively low compared with the other part of the world which means, in other words, there's
much room for them to increase tax revenue by restructuring their tax policy or enhancing tax administration capacity.

I am of a view that this region of Asia-Pacific would continuously attract foreign investment in the form of investment by multinationals. That's fine, they are welcome to come here, but if multinationals are coming here and conduct economic activities and make profit, then they should pay a fair amount of tax.

This international tax cooperation initiative is very much relevant and beneficial for Asia Pacific region.

ADB decided to launch a so-called "regional tax hub" to promote both DRM and ITC, domestic resource mobilization initiative, and international tax cooperation initiative to promote tax policy dialogue, to promote information-sharing exercise, and to promote capacity-building  initiatives to that end.

So I hope as many DMCs would participate in this hub in that context.

Zeinab Badawi, Host:

Right. And another key foundation stone of  the Asian Development Bank throughout its history has been regional cooperation and integration.

And I know that you are a very accomplished flute player and, you're used to playing in an orchestra where everybody's got to be coordinated and so on, but here you are as President of the Asian Development Bank having to be the conductor.

How confident are you that you can enhance regional cooperation and integration in order to make sure that the Asia Pacific region recovers from the COVID-19 pandemic?

ADB President Masatsugu Asakawa:

This is a very important subject.

Regional cooperation is really ADB's DNA.

It's clearly prescribed in our Charter.

I can think of a couple of areas where we can enhance our regional cooperation efforts. For example, first, we could try to diversify our regional supply chains to complement global supply chains to make the whole system more robust and resilient.

Secondly, we should really enhance our regional health security under the current pandemic, and even under the future pandemic. For example, surveillance exercise, monitoring, reporting.

Those exercises can be done jointly by the neighboring countries in the same region and vaccination can be also conducted jointly, mainly because of its nature of public goods.

And thirdly, we can consider to strengthen our regional financial safety net.

Zeinab Badawi, Host:

Finally, now, you've outlined a great deal of the program that the ADB has been carrying out in response to the pandemic, but when you're just looking at Asia as a whole, you've got this young, vibrant technologically, digitally savvy population, and there are many commentators who say the 21^st century is the Asian century.

How far do you think the pandemic perhaps has rocked Asia? Has it really pushed it off this course of being the economic powerhouse of the world?

ADB President Masatsugu Asakawa:

Yes, I firmly believe that this region of Asia Pacific will continuously to be an engine for the global growth, economic growth by overcoming many, many challenges we're now facing.

Let me reiterate a couple of things.

One is, this pandemic has really increased the fiscal vulnerability of our developing member countries. So the DRM initiative is very, very crucial in this context.

Secondly, digitalization. Once again, this COVID-19 has accelerated the transition of our economy to digitalization. ADB, also, tried to integrate some modern technologies to our operation as much as possible, but here we have to be careful with one thing.

In order to make our recovery and development paths more sustainable and inclusive, we need to reduce the digital divide. 50% of global population has no access to broadband connections. So internet connections need to be improved dramatically, and also, the cost of connection needs to be reduced, and usability of connections need to be improved.

And finally, globalization once again. I'm quite sure that globalization will come back, and we need to enhance our global cooperation to fight against this COVID-19 which is also of such a global nature.

I do believe that enhanced regional cooperation in this region would surely contribute to the rapid and robust recovery of world economy. And ADB is most happy to support that.

Zeinab Badawi, Host:

Well, you heard it here. The death of globalization is greatly exaggerated. You say it's still with us.

President Masa, thank you so much.

I know when you first started your studies at Tokyo University and then at Princeton in the United States, you had thought at one point you might become a journalist, but then you went into economics and finance.

I'm glad you didn't become a journalist because I, the journalist, have really enjoyed tremendously putting these questions to you and listening to your answers.

Thank you so much indeed.

Thank you from all of us to President Masa for being with us in this conversation, a curtain-raiser that kicks off the 54th Annual Meeting of the Board of Governors of the Asian Development Bank.

To all our annual meeting participants, welcome again to the annual meeting, but for now from me, Zeinab Badawi in London, it's goodbye.

Manila, President Masa, isn't it?

ADB President Masatsugu Asakawa:

Bye, bye now.

Zeinab Badawi, Host:

Bye.