Growing Together: Economic Integration for an Inclusive and - escap

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CHAPTER FOUR 109 Enhancing regional financial cooperation to develop and operate both economic and social infrastructure. Some governments have made considerable progress in the areas of institutional development, capacity-building, streamlining administrative processes and financing and approving new projects. Important steps have included: formulating PPP policy frameworks (Bangladesh, India, Indonesia, the Republic of Korea); enacting new laws or amending existing ones to create a PPP-supportive environment (Cambodia, Fiji, Indonesia, the Philippines, Republic of Korea, Turkey, Viet Nam, and many states in India); establishing institutional mechanisms to provide government grant/support to PPP projects (Bangladesh, India, Republic of Korea); establishing special infrastructure financing institutions (Bangladesh, India, Indonesia, the Russian Federation); creating special PPP units in government (Australia, Bangladesh, Fiji, India, Indonesia, Malaysia, Pakistan, Republic of Korea, Sri Lanka, Turkey); streamlining administrative processes (India, Republic of Korea), among others. As a result there has been a considerable increase in PPPs for infrastructure. Between 2005 and 2009, some 826 projects worth around $204 billion reached financial closure. However, a few countries, namely China, India, the Russian Federation and Turkey accounted for a bulk (82 per cent) of these projects. In the aftermath of the global financial crisis, some governments have been reinvigorating PPPs as a part of stimulus packages sometimes through policy and fiscal measures, such as debt guarantees, direct financial stakes, tax free bonds, lower equity capital requirements and sharing interest rate risks. International financing institutions have also considered various measures. For example, the International Financial Corporation (IFC), the private-sector arm of the World Bank, created a global $300 billion equity fund and a loan financing trust to support PPPs. There is need for building capacity for fuller exploitation of PPPs for infrastructure development in the region. This would include a better understanding about PPPs at the policymaking level with a clear policy on risk sharing, capacity for developing bankable projects and managing contracts, standardized administrative processes and project documents, clear legal and regulatory regimes and availability of long-term finance. In these areas, regional cooperation for sharing of development experiences and capacity-building drawing upon expertise of countries that started earlier may be fruitful. Regional organizations, such as ESCAP and the ADB, may assist in building such capability in the region. 17 Regional cooperation to reform the international financial architecture: The de-velopment of a regional financial architecture would also enable the region to coordinate its policies and develop a regional perspective on the reform of the international financial architecture, including on issues such as an SDRs-based global reserve currency, a global tax on financial transactions to moderate short-term capital flows and international regulations for curbing excessive risk taking by the financial sectors. The Asia-Pacific region has eight members in the G-20, namely Australia, China, India, Indonesia, Japan, the Republic of Korea, the Russian Federation and Turkey. This is more than any other region and highlights systemic importance of the region. With effective coordination of their positions, these countries will have greater influence in shaping the reform of the international financial architecture, so that it is best tuned to their developmental needs. In these and a host of other areas, the Asia and Pacific region has the opportunity to further integrate and coordinate its actions, thus not only ensuring its recovery and future dynamism but also supporting the global economy to the greatest extent possible. The ESCAP Commission at its 66 th Session held in Incheon, Republic of Korea in May 2010, adopted a resolution seeking a task force to elaborate the elements of a regional financial architecture that could assist the Asia-Pacific region with increased capital availability for infrastructure development. 18 As per the request, the secretariat is engaged in further work on the subject that will hopefully feed into the policy agenda of the region in the coming years.
ENDNOTES 1 Wealthy defined as individuals with net worth that exceeds $1 million. 2 International Financial Services London, 2009. 3 For instance, Thailand’s Bangkok International Banking Facilities (BIBF) has been significantly scaled down and Malaysia’s Labuan International Offshore Financial Centre is no longer available as an offshore market for MYR-foreign currencies after the imposition of capital controls in 1998. 4 A non-deliverable forward (NDF) is a contract in which counterparties settle the difference between the contracted NDF rate and the prevailing spot rate by an agreed notional amount. In contrast to a forward contract, where the full value of the amount contracted is delivered at the time of settlement, in NDF contracts only the difference between the NDF rate and the spot rate is delivered, which reduces counterparty risk considerably. 5 Erol and Ozuturk, 2011. 6 UNESCO, “ Archives of international organizations: Asian Development Bank”. Available from www.unesco. org/archives/sio/Eng/presentation.php?idOrg=1002 (accessed May 2012). 7 Asian Clearing Union, “History”. Avaiable from www. asianclearingunion.org/History.aspx. 8 “Asean+3 to double Chiang Mai Initiative safety net to $240 Bln”, Wall Street Journal, 3 May 2012. Available from http://online.wsj.com/article/BT-CO-20120503-703698. html. 9 Rajan, 2008. 10 See www.asianeximbanks.org/meeting10.asp. 11 ADB and ADBI, 2009. 12 Bhattacharyay, 2010. See also Fay, 2001; Chatterton and Puerto, 2005; Yepes, 2004. 13 Inderst, 2009. 14 Bodie and Briere, 2011. 15 CAF has also been successful in tapping the United States, European and Japanese markets owing to its investment grade, though the costs are significantly higher as it is rated at A+. 16 For instance, it is well known that investing in climatesmart infrastructure would also reduce the frequency or size of disasters, but the lack of sufficient investment in such infrastructure results in more disasters, adding to higher costs altogether. 17 ESCAP, 2011b. 18 See E/ESCAP/66/L.11, 19 May 2010. Photo by Salapol Ansusinha 110
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iv Growing Together articulates a n
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viii CONTENTS (continued) Page Chap
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x FIGURES I.1. Real rates of growth
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xiv ABBREVIATIONS (continued) CEPA
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xviii The term “Pacific” in thi
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