The report, entitled Making Money Work: Financing a Sustainable Future in Asia and the Pacific, argues that effective use of public and private, national and global sources of funding could fulfill current development funding needs, estimated at around USD1 trillion per year. The report is being released in advance of three 2015 global meetings which will set forth financing for development goals, ambitious sustainable development targets, and a new climate change agenda.
“Eliminating poverty, providing critical public services, and meeting infrastructure needs will require making every dollar count,” said Indu Bhushan, Director General of ADB’s Stategy and Policy Department. “In Asia and the Pacific, private sources could provide around USD10 trillion for developing countries. The challenge is to move more of this money toward investments that are essential to eliminate poverty and achieve sustainable development across the region.”
According to the report, while fiscal sources remain the most important basis of development finance across the region, the largest sums are in private hands. Potential sources of financing include over USD6.2 trillion in savings, much of which today is invested outside the Asia and Pacific region. Other sources like pension and sovereign wealth funds also hold enormous potential with USD3.5 trillion in assets. The report estimates that a 5% increase in trade financing could raise productivity and job creation by over two percent, a critical need for the region’s increasingly well-educated youth.
Governments can provide a supportive environment to mobilize private capital for development investments. Businesses too could respond to more aware consumers to play new roles as development partners.
The report notes that countries in the region recognize that they can do more to collect taxes, as they continue to lag behind other regions in this respect. Increasing tax collection, encouraging the creation of municipal bond markets, and better managing development spending will help national governments and municipalities provide services and badly needed infrastructure. Transfer fees on remittances, carbon and financial transaction taxes, and increasing financial inclusion across the region could also boost the funds available for financing the region’s development needs.
Official development assistance will remain an important source of finance, especially for low-income and fragile and conflict affected countries, which can be used much more strategically in the post-2015 environment. Multilateral development banks (MDBs), including ADB, will continue to help coordinate international action for regional challenges, while promoting and catalyzing private investment, and providing technical assistance. MDBs can also play an important role in crowding in, mobilizing, and aggregating funds.
ADB is expanding its own financial capacity to raise lending operations for support to lower income countries, enhance risk bearing capacity, support private sector operations, and strengthen preparedness for any future economic crises or natural disasters./.