Development no longer possible without effective climate action: ADB president

CLIMATE change is front and centre at a gathering of the world’s finance ministers and central bank governors in Incheon, South Korea as development is “no longer possible without effective climate action”, said Asian Development Bank (ADB) president Masatsugu Asakawa. 

Asakawa was concluding a panel discussion at the 56th ADB Annual Meeting on Wednesday (May 3), during which Bank of Korea governor Rhee Chang-yong said countries should focus on “structural reform” rather than become reliant on fiscal policy in the face of banking stress. 

Calling this an important lesson gleaned from the global financial crisis, he said: “We should not make the mistake (of using) the widening fiscal policy to enhance gross restructuring. We need to focus on structural reform.”

Asakawa and Rhee were speaking at a governors’ seminar discussing policies that can support Asia’s rebound, alongside finance ministers from India and Indonesia, and a representative from Germany. While fiscal policy approaches were a key theme, the conversation veered towards climate action at times.

Indonesia Finance Minister Sri Mulyani Indrawati carried Rhee’s point forward, and said a reliance on monetary and fiscal policy would only worsen the fiscal position. 

The greatest difficulty for many countries now, she said, was how to lift fiscal consolidation – government policy intended to reduce deficits and the accumulation of debt – without jeopardising the recovery of the economy. The answer, she added, was very clear: structural costs.

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Extending the conversation to the topic of energy transition, Niels Annen, Parliamentary State Secretary for Germany’s Federal Ministry for Economic Cooperation and Development, said the Just Energy Transition Partnerships (JETPs) and ADB’s Energy Transition Mechanism (ETM) “should not be seen as a contradiction”. 

JETP is a financing cooperation mechanism aimed at helping heavily coal-dependent emerging economies with their energy transition, while the ETM involves developing financing mechanisms that are tailored to political-economic conditions in specific countries. 

Annen stressed the importance of such tools, adding: “Even for rich countries like Germany, phasing out coal required massive investments in the affected communities for reasons of social justice.”

Dr Sri Mulyani said the transition to a green economy cannot be made up of just nice-sounding policies. “It is really important not to just make a speech and create a policy that you are going to remove coal and go to renewables. You really have to look at all these environmental, social, as well as governance (issues),” she remarked.

If a coal-fired power plant is going to be retired earlier, the government will have to identify what its impacts are to communities and workers tied to the project, and identify the types of programmes that need to be designed to address those issues, she added.

As a show of her priorities, she ended the panel by saying that the most pressing policy for Asean now is anything that can raise productivity. She called it “the most sustainable source of growth”. 

“It may not be sexy or interesting, but it is important,” she added. “Whether you are talking about education, labour skill, macro policy or even infrastructure to improve mobility, these are areas which are big enough platforms to raise productivity.”