Evolving Challenges in Asia:

Role of Development Institutions

Kazu Sakai Director General

Strategy and Policy Department

Asian Development Bank

Overview

• Asia’s Development Challenges

• Addressing These Challenges

• Role of Development Institutions

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

Share of World Poor in

Non-Asian Countries =

33.6%

Asian MICS = 59.8%

Asian LICs

= 6.6%

Share of World Poor in

Asian Countries =66.4%

World Population below US$1.25/day = 1.4 billion World Population below US$1.25/day = 1.24 billion

MDG Indicators Off Track

Papua New Guinea

Pakistan

Lao People's Dem. Rep.

Afghanistan

Nepal

India

Bangladesh

Mynamar

Cambodia

Fiji Islands

Kazakhstan

Tajikistan

Philippines

Bhutan

Indonesia

Uzbekistan

Timor-Leste

Thailand

Sri Lanka

Mongolia

Malaysia

Vietnam

Peoples Republic of China

Maldives

75.0

68.2

63.6

58.8

57.1

54.5

54.5

52.6

50.0

50.0

50.0

47.6

45.5

42.9

40.9

38.1

37.5

30.0

28.6

27.3

20.0

17.6

16.7

15.0

Rising Inequality

% Changes in Gini coefficients between 1990s and early 2000s

Developing Asia is Predominantly MICs

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

(Afghanistan,

Bangladesh.

Cambodia, Kyrgyz,

Nepal, Tajikistan)

While 22 are lower to

middle income

(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)

11 are upper middle

income

(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)

• Two-thirds of the Asian poor are in MICs • Most Asian developing countries already MICs: trend to continue

The Middle Income Trap

14 of 26 Current MICs were MICs

back in 1993.

ARM

AZE

BHU

PRC

FIJGEO

INDPHI

KAZ

INO

LAO

MAL

FSM

PAK

PAL

PNG

KIR

SOL

SRI

THA

TONTKM

UZB

VAN

VIE

MON

6

7

8

9

10

5 6 7 8 9 10

GN

I Per

Cap

ita

in 2

01

1 (N

atu

ral L

og

Scal

e)

GNI Per Capita in 1993 (Natural Log Scale)

2011 MIC Range

1993 MIC Range

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 2012-2013

• Potential for raising competitiveness is substantial

Weak Institutions Undermines Growth Potential

• Quality of institutions needs improvement.

0

20

40

60

80

100

120

SIN SWZ PRC IND INO KAZ PAK PHI THA UZB VIE

Government Effectiveness Percentile Rank (0-100)

Government Effectiveness Percentile

Rank (0-100)

The Challenge of Climate Change

Asian MICs 32.8%

Rest of World 67.2%

Share of World CO2 Emissions

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

Role of Development Institutions in MICs

1. Leverage Financing

2. Facilitate Knowledge Management

3. Promote Institutional Innovations

4. Support Regional Cooperation

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

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

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

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

Thank you