Green investment, revenue mobilisation, big data can help in Southeast Asia’s recovery — ADB
17 Mar 2021
Southeast Asian countries, which are recovering from the COVID-19 pandemic, can benefit from investments in green infrastructure, digital transformation, big data, and revenue mobilisation through tax reform, said the Asian Development Bank (ADB).
“As countries slowly begin to emerge from the devastating health and economic impacts of the pandemic, we now stand at a critical juncture. The COVID-19 pandemic offers a unique opportunity to rebuild for a more resilient, inclusive, and sustainable recovery,” its president Masatsugu Asakawa said in his keynote address at the Southeast Asia Development Symposium themed “Innovation through Collaboration: Planning for Inclusive Post-COVID-19 Recovery” in Manila today. The event was streamed live.
Asakawa said the pandemic presents all with unprecedented challenges; hence the need to forge a new path forward together, one which taps new ideas and technologies, and leverages the existing platforms for innovation and partnership.
According to him, developing economies in Southeast Asia can benefit from action in three key policy areas.
These include investing in environmentally sustainable development in five sectors, namely agriculture, oceans, urban and transport, waste management, and clean energy which could create 30 million jobs in the region by 2030.
“Second, they need to expand the tax base, by maximising tax compliance and simplifying the compliance process which will significantly boost governments’ revenue and better position them to finance pandemic recovery.
“Third (is) by making better use of big data, whereby countries can capitalise on the region’s digital transformation to enhance the delivery of health care, social protection, and education,” he said.
Asakawa noted that these green growth opportunities will require financing and one way ADB is collaborating with countries in the region to address these financing needs is through the ASEAN Catalytic Green Finance Facility, which is owned by the finance ministries of the 10 ASEAN member countries and ADB.
Southeast Asian countries can use this facility to access finance and knowledge for sovereign green infrastructure projects on sustainable transport, clean energy, and resilient water systems, he said.
In making better use of big data, he said, Southeast Asia’s digital transformation is well underway. As such, countries can capitalise on this opportunity by making better use of big data to transform key government sectors to allow for more effective service delivery.
“One area where innovation and collaboration using big data can play an important role is in supporting safe and effective vaccine programs,” Asakawa said.
In addition to collaboration, knowledge, and innovation, governments need reliable streams of revenue and this is a sobering reality, he said.
Countries in Southeast Asia have already allocated over US$420 billion for COVID-19 response measures, he noted.
“This unparalleled fiscal expenditure has been accompanied by a substantial reduction in the tax base.
“This is due in part to subdued economic growth. But there are also underlying public finance management issues that have been exacerbated by the pandemic.
“In fact, even before the pandemic, the average tax yield of most Southeast Asian countries was far below the 15 per cent of Gross Domestic Product threshold required for sustainable development,” he said.
Asakawa said that with long-term interest rates rising in the United States, it may put further pressure on many ADB developing member countries, in terms of macroeconomic management and fiscal policy.
Against this backdrop, as governments help the nascent recovery in the region to gather steam, they also need to begin preparing measures to strengthen domestic resource mobilisation (DRM), he said.
DRM not only helps secure sufficient funding, it also creates positive conditions to spark greener and more inclusive recovery.
“Introducing more progressive income tax and property tax systems can help address the worsening income gaps that have proliferated after the pandemic.
“A carbon tax can also be pursued to accelerate green investment. Countries in the region can work together to close tax loopholes that multilateral businesses can use to avoid tax burdens,” he said.
He added that as all of the measures being described required knowledge sharing and collaboration, ADB has recently established a regional hub for DRM and international tax cooperation, a hub that will promote greater collaboration among the region’s fiscal authorities as they pursue needed reforms.