Evolving Challenges in Asia: Role of Development Institutions

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1 Evolving Challenges in Asia: Role of Development Institutions Kazu Sakai Director General Strategy and Policy Department Asian Development Bank

2 Overview Asia s Development Challenges Addressing These Challenges Role of Development Institutions

3 High Levels of Poverty Remain Asia Pacific home to two-thirds of the world s poor Progress in Asia central to achieving global targets on poverty World Population below US$1.25/day = 1.24 billion World Population below US$1.25/day 1.4 billion Asian MICS = 59.8% Share of World Poor in Non-Asian Countries = 33.6% Share of World Poor in Asian Countries =66.4% Asian LICs = 6.6%

4 MDG Indicators Off Track Papua New Guinea Pakistan Lao People's Dem. Rep. Afghanistan 58.8 Nepal 57.1 India 54.5 Bangladesh 54.5 Mynamar 52.6 Cambodia 50.0 Fiji Islands 50.0 Kazakhstan 50.0 Tajikistan 47.6 Philippines 45.5 Bhutan 42.9 Indonesia 40.9 Uzbekistan 38.1 Timor-Leste 37.5 Thailand 30.0 Sri Lanka 28.6 Mongolia 27.3 Malaysia 20.0 Vietnam 17.6 Peoples Republic of China 16.7 Maldives

5 Rising Inequality % Changes in Gini coefficients between 1990s and early 2000s

6 Developing Asia is Predominantly MICs Two-thirds of the Asian poor are in MICs Most Asian developing countries already MICs: trend to continue Low (<US$1,026) Lower-Middle (US$1,026-US$4,035) Upper-Middle (US$4,036-US$12,475) High (>US$12,475) Current 6 are low income While 22 are lower to middle income 11 are upper middle income (Afghanistan, Bangladesh. Cambodia, Kyrgyz, Nepal, Tajikistan) (Armenia, Bhutan, Fiji, Georgia, India, Indonesia, Lao PDR, Mongolia, Pakistan, PNG, Philippines, Sri Lanka, Timor-Leste, Uzbekistan, Viet Nam, Kiribati, Marshall Islands, Micronesia, Samoa, Solomon Islands, Tonga, Vanuatu) (Azerbaijan, Cook Island, Malaysia, Kazakhstan, PRC, Thailand, Turkmenistan, Maldives, Nauru, Palau, Tuvalu) Projected (2024) Only 2 remain low income (Afghanistan, Nepal) 15 will be lower middle income (Bangladesh, Cambodia, India, Kyrgyz, Lao PDR, Pakistan, PNG, Philippines, Tajikistan, Uzbekistan, Viet Nam, Kiribati, Micronesia, Solomon Islands, Vanuatu) 19 upper middle countries (Armenia, Azerbaijan, Bhutan, Cook Island, Fiji, Georgia, Indonesia, Mongolia, Sri Lanka, Thailand, Timor-Leste, Turkmenistan, Maldives, Marshall Islands, Nauru, Palau, Samoa, Tonga, Tuvalu) 3 higher income (Kazakhstan, PRC, Malaysia)

7 GNI Per Capita in 2011 (Natural Log Scale) The Middle Income Trap MIC Range AZE PRC ARM GEO SRI BHU VIE IND LAO PAK KAZ MAL THA TKM TON FIJ INO FSM MON VAN KIR PHI UZB PNG SOL PAL 2011 MIC Range 14 of 26 Current MICs were MICs back in GNI Per Capita in 1993 (Natural Log Scale)

8 Lower Competitiveness Contributes To Middle Income Trap Competitiveness scores for Asian MICs mostly rose over 2006 to 2012 Asian MICs still rank between 25 (Malaysia) and 124 (Pakistan) in a list of 144 countries on the GCI Potential for raising competitiveness is substantial

9 Weak Institutions Undermines Growth Potential Quality of institutions needs improvement. 120 Government Effectiveness Percentile Rank (0-100) Government Effectiveness Percentile Rank (0-100) SIN SWZ PRC IND INO KAZ PAK PHI THA UZB VIE

10 The Challenge of Climate Change Share of World CO 2 Emissions Asian MICs 32.8% Rest of World 67.2%

11 Addressing These Challenges Through Inclusive and Green Growth - Mobilize savings for pro-poor investments - Strengthen social protection systems - Improve infrastructure and logistics - Modernize skills and knowledge for productivity and innovation - Reforms institutions for efficiency and effectiveness - Address climate change through adaptation and mitigation

12 Role of Development Institutions in MICs 1. Leverage Financing 2. Facilitate Knowledge Management 3. Promote Institutional Innovations 4. Support Regional Cooperation

13 1. Leverage Financing Assist governments to improve public resources management Develop domestic financial sector to raise long-term local currency finance Catalyze greater private sector investments Use credit enhancement products to tap private capital

14 2. Facilitate Knowledge Management Expand support for innovation and pilot-testing Promote knowledge-based networks with international centers of excellence and South-South collaboration Build research and development capacities in knowledge creating public and private institutions Mainstream knowledge focus in all operational and advisory support

15 3. Promote Institutional Innovations Provide long-term sustained support for institutional upgrading and reforms Foster greater results focus in national institutions through strengthening monitoring, evaluation, and accountability systems Build national and local capacities for effective delivery of social services, and improved cost-recovery for sustainability Expand capacity support to institutions providing green services including environmental agencies and climate change entities Support skills development and ICT technology adoption for raising competitiveness and efficiency of public and private institutions

16 4. Support Regional Cooperation Support regional cooperation to foster trade and competitiveness Better regional transport connectivity, logistics, and cross-border regulations to reduce costs and improve efficiency Improved trade policies and trade facilitation to expand markets Regional energy trade cooperation to provide energy security Support regional public goods to help address common concerns climate change natural disasters epidemics

17 Thank you