Keynote Remarks at the Economic and Social Commission for Asia and the Pacific (ESCAP) Committee on Macroeconomic Policy, Poverty Reduction and Financing for Development, Third Session

Madame Executive Secretary, Excellencies, 
Distinguished Delegates, Dear Colleagues:
After nearly two years, we have still not fully emerged from the COVID-19 crisis.  Even as growth rates start to pick up globally, the recovery remains highly uneven, as many developing countries have lacked both the access to vaccines and the capacity to implement strong economic measures in support of a robust recovery. 

Moreover, recovering the output losses from the pandemic will be very difficult. To revert to the 2016-19 output trend by 2030, the world economy would have to achieve an annual growth rate of 3.5 per cent  – significantly above the pre-crisis trend of 2.9 per cent.  

Unfortunately, we already face increasing headwinds to economic recovery. More contagious variants of the virus and disruptions to production and exports from supply chain bottlenecks are hampering economic activities; fuel and food costs are soaring; and financial conditions may start to tighten as central banks withdraw some of the extraordinary monetary policy support.

We all remember how the Asia-Pacific region pulled the world economy out of the Global Financial Crisis in 2008. Even now several major Asian countries have been among the first to resume economic activities, because they contained the virus relatively well last year and entered the crisis with strong economic fundamentals. 

For the Asia-Pacific region, the pandemic will remain the greatest risk in the foreseeable future as uneven progress on vaccine rollout and many social restrictions persist. The spike in energy prices and power shortages will further disrupt the already strained supply chains. The region lost the equivalent of 140 million full time jobs in 2020, pushing a further 89 million people back into extreme poverty. 

The longer the pandemic persists, the larger the woes will become. Fiscal space has already shrunk due to pandemic-induced fiscal responses, economic slowdown, and reduced government revenues with a widespread increase in public debt levels. This limits the ability of the countries to continue with essential fiscal spending and investments. 

Your Excellencies, Ladies and Gentlemen, 

None of this is a surprise. The region, in fact, the whole world, was already off track in SDG implementation before the pandemic. COVID-19 has just exacerbated some already existing weaknesses and vulnerabilities. 

This Committee will deliberate on how to bring the region back on track towards the 2030 Agenda for Sustainable Development and mobilize financial resources during the current economic uncertainties. 

The resource question is key, and answering it requires transformative policy thinking and bold policy actions. But the thrust of that policy must be directed not only toward attracting new resources into sustainable investments, but also toward shifting the existing flow of investments away from unsustainable activities. 

There are many areas of the necessary infrastructure for sustainable development where private capital can take the lead—the digital infrastructure; renewable and clean energy; sustainable transportation; water and sanitation; sustainable buildings—freeing public resources to provide the goods and services less suited to private provision.

In attracting new resources, we must focus attention on creating the appropriate conditions for that investment—a pipeline of investible projects at scale; and reducing the perceived risk. The former may well require imaginative and innovative consolidation of projects to reach a critical mass. The latter requires efforts to de-risk private engagement economy-wide, not project-by-project.

But we should prioritize shifting the existing flow of resources away from unsustainable activities with equal if not greater vigor. It is inconsistent to push for investments in renewable energy while allowing or even encouraging continued investment in fossil fuels. That is a tremendous waste of scarce resources and an obstacle to achieving the SDGs. Because, Ladies and Gentlemen, as long as it is without consequence or profitable to do unsustainable things, people will continue to do them. 

And this brings me to the thrust of my argument today. We were off-track on SDG implementation even before the pandemic because our policies were not consistent with them. We must ensure that government policies and regulations, and above all, government budgets, are consistent and aligned with the SDGs. When this happens, the stage will be set for shifting the flow of resources toward the sustainable investments that are needed—governments can concentrate on providing the appropriate framing for those activities; leading by example, through sustainable public procurement, for instance; incentivizing sustainable alternatives and discouraging or prohibiting unsustainable ones; and ensuring that the difficult transitions are as just as possible.   

Of course, this sort of shift cannot happen overnight. Transitions take time and are often painful. But they do not happen by being delayed. Where immediate policy change is not possible, a credible commitment to that policy can often serve as a effective signpost to investors – policy predictability greatly reduces uncertainty and hence the perception of risk. Credible policy commitment also helps to build up public support for the direction of change, and to mobilize the engagement of stakeholders to achieve it. 

Ladies and Gentlemen, 

There is no trade-off between economic recovery and SDGs, either in the short or the long term. The resource constraints that all governments face does not condemn them to total inaction. The recovery from COVID-19 can be the opportunity to surmount the debilitating policy hesitancy once and for all, and to put in place the policies that will encourage and support the just transition to sustainability by all actors. Asia-Pacific, having been a driver for global economic growth, now can and should play a more prominent role as a leader for sustainable development.

I thank you.

File date: 
Wednesday, October 20, 2021

Elliott Harris