Economic and Social Survey for Asia and the Pacific 2018 – Mobilizing finance for sustained, inclusive and sustainable economic growth.

By Shamshad Akhtar
BANGKOK, Thailand, May 7 2018 (IPS)

Asia and the Pacific remains the engine of the global economy. It continues to power trade, investment and jobs the world over. Two thirds of the region’s economies grew faster in 2017 than the previous year and the trend is expected to continue in 2018. The region’s challenge is now to ensure this growth is robust, sustainable and mobilised to provide more financing for development. It is certainly an opportunity to accelerate progress towards achieving the 2030 Agenda for Sustainable Development.

Shamshad Akhtar

Recent figures estimate economic growth across the region at 5.8 per cent in 2017 compared with 5.4 per cent in 2016. This reflects growing dynamism amid relatively favourable global economic conditions, underpinned by a revival of demand and steady inflation. Robust domestic consumption and recovering investment and trade all contributed to the 2017 growth trajectory and underpin a stable outlook.

Risks and challenges nevertheless remain. Rising private and corporate debt, particularly in China and countries in South-East Asia, low or declining foreign exchange reserves in a few South Asian economies, and trends in oil prices are among the chief concerns. Policy simulation for 18 countries suggests a $10 rise in the price of oil per barrel could dampen GDP growth by 0.14 to 0.4 per cent, widen external current account deficits by 0.5-to 1.0 percentage points and build inflationary pressures in oil-importing economies. Oil exporters, however, would see a positive impact.

These challenges come against the backdrop of looming trade protectionism. Inward-looking trade policies will create uncertainty and would entail widespread risks to region’s export and their backbone industries and labour markets. While prospects for the least developed countries in the region are close to 7 per cent, concerns persist given their inherent vulnerabilities to terms-of-trade shocks or exposure to natural disasters.

The key questions are how we can collectively take advantage of the solid pace of economic expansion to facilitate and improve the long-term prospects of economies and mobilize finance for development as well as whether multilateral institutions, such as the World Trade Organization membership can resolve the global gridlock on international trade?

Economic and financial stability along with liberal trade access to international markets will be critical for effective pursuit of the 2030 Agenda. Regional economies, whose tax potential remains untapped, now need to lift domestic resource mobilization and prudently manage fiscal affairs. Unleashing their financial resource potential need to be accompanied by renewed efforts to leverage private capital and deploy innovative financing mechanisms. The investment requirements to make economies resilient, inclusive and sustainable are sizeable − as high as $2.5 trillion per year on average for all developing countries worldwide. In the Asia-Pacific region, investment requirements are also substantial but so are potential resources. The combined value of international reserves, market capitalization of listed companies and assets held by financial institutions, insurance companies and various funds is estimated at some $56 trillion. Effectively channelling these resources to finance sustainable development is a key challenge for the region.

The need to come up with supplementary financial resources will remain. Public finances are frequently undermined by a narrow tax base, distorted taxation structures, weak tax administrations, and ineffective public expenditure management. This has created problems of balanced fiscalization of sustainable development, even if the national planning organizations have embraced and integrated sustainable development agenda in their forward looking plans.

Despite a vibrant business sector, the lack of enabling policies, legal and regulatory frameworks, and large informal sectors, have deterred sustainability and its appropriate financing. The external assistance from which some countries benefit is insufficient to meet sustainable development investment requirements, a problem often compounded by low inbound foreign direct investment. Capital markets in many countries are underdeveloped and bond markets are still in their infancy. Fiscal pre-emption of banking resources is quite common. For those emerging countries which have successfully tapped international capital markets, a tightening of global financial conditions means borrowing costs are on the rise.

Our ESCAP flagship report, Economic and Social Survey of Asia and the Pacific 2018 (Survey 2018) which has been launched today calls for stronger political will and governments strengthening tax administrations and expanding the tax base. If the quality of the tax policy and administrations in Asia-Pacific economies matches developed economies, the incremental revenue impact could be as high as 3 to 4 per cent of GDP in major economies such as China, India and Indonesia and steeper in developing countries. Broadening the tax base by rationalizing tax incentives for foreign direct investment and introducing a carbon tax could generate almost $60 billion in additional tax revenue per year.

But government action must be complemented by the private sector to effectively pursue sustainable development. The right policy environment could encourage private investment by institutional investors in long-term infrastructure projects. Structural reforms should focus on developing enabling policy environment and institutional setting designed to facilitate public-private partnerships, stable macroeconomic conditions, relatively developed financial markets, and responsive legal and regulatory frameworks.

Finally, while much of the success in mobilizing development finance will depend on the design of national policies, regional cooperation is vital. Coordinated policy actions are needed to reduce tax incentives for foreign direct investment and to introduce a carbon tax. For many least developed countries, the role of external sources of finance remains critical. In many cases, the success of resource mobilization strategies in one country is conditional on closer regional cooperation. ESCAP’s remains engaged and its analysis can support the planning and cooperation needed to effectively mobilize finance for sustained, inclusive and sustainable economic growth.

Dr. Shamshad Akhtar is the Under-Secretary-General of the United Nations and Executive Secretary of Economic and Social Commission for Asia and the Pacific (ESCAP)

Low Awareness Restrains Growth of Solar Technologies

A young woman admires a parabolic solar cooker at a solar fair in Rusape, Zimbabwe. Credit: Tonderayi Mukeredzi/IPS

A young woman admires a parabolic solar cooker at a solar fair in Rusape, Zimbabwe. Credit: Tonderayi Mukeredzi/IPS

By Tonderayi Mukeredzi
RUSAPE, Zimbabwe, May 7 2018 (IPS)

Every year, Amos Chandiringa, 43, a farmer in Nemaire village in Makoni district in northeastern Zimbabwe, laboriously waters his tobacco nursery with a watering can. The toil of the job often leaves him without the energy or time to do other household chores.

“I live near a dam, so I’ve access to plenty of water, but I cannot do much with the water because I lack the necessary technology to mechanise my farming. Installing an electric or diesel water pump have been options, but that is expensive,” he tells IPS.Government, solar last mile distributors and development agencies say using solar electricity to power irrigation pumps, process harvests and for preservation of crops can transform rural lives.

In February, Chandiringa was privileged to host a combined farmers’ field day and solar fair at his homestead for the first time in his area and in the history of his farming career.

Solar entrepreneur Isaac Nyakusendwa says farmers like Chandiriga could make light work of their farming and multiply their yields if they used solar pumps to draw water from the dam to irrigate their crops or to use in the home.

Although farming is the occupation of most people in Rusape and other areas of rural Zimbabwe, the usage of solar photovoltaic systems remains limited mainly to lighting and entertainment.

Government, solar last mile distributors and development agencies say using solar electricity to power irrigation pumps, process harvests and for preservation of crops can transform rural lives by providing better crop yields, higher incomes and reducing the physical labor of farming.

Nemaire councillor Sam Maungwe says farmers in his area earn good money, mostly from tobacco farming, but due to poor knowledge of solar technologies, many of them spend their earnings on radios and household furniture.

“Farmers here largely grow tobacco, hence the area suffers from a double strain of wood cutting for tobacco curing and firewood. The use of solar in farming by our farmers would be good as it will lengthen their farming season and increase their income,” Maungwe tells IPS. “But more importantly, we want our farmers to extend the use of solar to tobacco barns so that they stop the indiscriminate cutting down of trees for tobacco curing.”

Petronella Karima, an extension officer, says there should be more platforms to educate rural farmers and expose them to new, affordable technologies because most of them are not aware of the capabilities of solar products.

“Many use solar for entertainment. Some have big solar home systems in their homes, but they don’t know that they can use it to water their crops and install water in their homes. With the knowledge they got from the solar exhibition, I believe many will now use solar to irrigate their crops and to harvest water,” Karima says.

Chiedza Mazaiwana, the Power for All Campaign Manager at Practical Action Zimbabwe, says awareness of renewable energy solutions is relatively low, with market penetration of solar lighting and home systems estimated at only 3%.

She says consumer literacy on renewable energy products is critical in unlocking the huge potential of renewable products in off grid rural communities.

“Lack of knowledge is a major barrier to the development of the solar market. Most potential rural customers are unaware of recent advances in solar technology, reductions in the cost of the technology, availability of financing solutions such as the pay-as you-go (PAYG) model that allows them to access technologies and products that would ordinarily be beyond their reach,” she adds.

The past distribution of poor quality products and installations have also undermined trust and reduced demand, making it very hard for businesses to establish a presence in rural areas.

However, as part of a rural solar market development effort, government, renewable energy firms and development agencies are concertedly using field days and solar fairs to encourage the use of solar energy as a way of improving livelihoods in rural areas.

Solar fairs are emerging as a key platform for awareness raising and consumer education on solar for off-grid communities and for solar distributors to create business linkages with farmers. Other methods include media campaigns and the use of trusted opinion leaders such as chiefs, head teachers and faith leaders to spread the word about the novelty of renewable energy solutions. This method has proved particularly effective in East Africa.

Nyakusenda, who is the chairman of the Renewable Energy Association of Zimbabwe, a grouping of solar distribution companies says, “Lack of knowledge about solar energy and its capabilities is one of the many barriers scuttling the development of the solar market. Through combined field day and solar fairs, we are facilitating, and giving farmers a perfect and rare opportunity to shop for and to interact with suppliers of solar products in one place thereby expose them to quality products and genuine companies.”

He says the PAYG model allows the farmers to pay a nominal deposit for a renewable product of their choice, and finish the payment in small, cheap monthly instalments.

During the fairs, young males and females have been particularly attracted to solar powered lighting, entertainment and communication gadgets while women liked solar cooking stoves and older males got attracted to water pumping systems.

Practical Action’s gender officer Tony Zibani says the use of solar technology can ease the triple burden of work on women and reduce gender-based violence in the homes as chores performed by women would be lessened by technology.

Over 60% of Zimbabwe’s population do not have access to energy and rely on solid biomass fuels such as firewood, charcoal and kerosene as their main cooking fuel – solutions that are expensive, unreliable and environmentally unsustainable.

While the demand for energy in rural areas is increasing, the provision of electricity is skewed greatly towards higher-income households and urban areas, leaving out a large proportion of the rural population.

Mazaiwana asserts that decentralized electrification solutions are the fastest, most cost-effective and sustainable approach to universal energy access, in addition to providing economic opportunities for communities.