In 1950 Detroit was an engineering hub: home of Ford Motorcars and the heart of the American auto industry. In 2013 the city filed for bankruptcy, in the largest such claim in US history.The first half of the 20th century saw a massive period of growth for the city – in 1930, at the peak of the industry, the workforce comprised 90,000 people. The city seemed to embody the American dream, a hub of both large and small manufacturers, a hive of industry and the classic fantasy of urban development.
By the millennium the entire municipality had fallen apart. Between 1950 and the present day thepopulation has shrunk 63 per cent. The violent crime rate in the city is five times the national average and an astonishing 40 per cent of the city streetlights don’t work. The decay in the city seems infectious.
Bill Drayton, founder of Ashoka, claims Detroit as the perfect illustration of standing still. He attributes the failure to survive to the failure to adapt, “The world up to now has been organised for efficiency and repetition, think assembly line, think law firm… and that has made sense […]But it doesn’t work anymore, it’s failing, really badly.”
Drayton claims that the rate of change in society is accelerating faster than ever before. The capacities and responsibilities of governments, employers, workers and individuals are changing at an alarming pace. “Two to three decades ago, Computer Aided Design eliminated 40 per cent of what architects do, soon 50 to 60 per cent of what doctors and nurses do is going to be automated – this is going to keep happening”, predicts Bill. He observes “The world up to now has been organised for efficiency and repetition, think assembly line, or think of a law firm… and that has made sense.”
Re-posted from Asian Development Blog
By ADB Blog Team on Tue, 21 April 2015
IFC has been doing a lot of interesting work on investing in the BOP to reduce inequality and close the income gap for those at the base of the pyramid. What more can be done to foster inclusive business, especially in Asia and the Pacific?
We have been focusing on private sector projects and transactions, but I think we can do more on the policy level, discussions with governments. I think that’s where for instance ADB provides good examples, supporting government policies that promote inclusive business in countries like the Philippines or Indonesia. Those things we haven’t tried much at IFC, but are probably areas we can work on and collaborate with ADB.
What about multilateral development banks – what should their role be?
There is a number of areas where we can do much more, and better. For example, one thing we’re still trying to figure out is distributor finance for small-size distributors, retailers, and consumers, From the normal banking perspective, these are risky borrowers, but the microfinance experience tells us that in fact small borrowers may have a very good track record in repaying loans. This could apply to small distributors as well. Maybe we can come up with a solution to show banks how these are not as high-risk as they perceive. Maybe IFC can partner with ADB, other multilaterals, donors, or foundations to manage this risk better. That could be huge, in my opinion, especially if you think in terms of the impact it could have on the ground.
How would you work with national and local governments to help change that perception?
Traditionally, IFC does not really have the expertise in this area, which we leave to our sister organization, the World Bank. We are working with the World Bank to try to have a more integrated approach with governments. This is one of the areas where I think we can learn from ADB, which has the private and public sectors under one roof.
What are the main challenges and opportunities for inclusive business in Asia and the Pacific?
One specific opportunity in Asia is population density, for instance in India and Indonesia. That makes it a little bit easier to approach the base of the pyramid and achieve economies of scale, compared to Africa or Latin America. Probably, the challenge, which we have not experienced yet but I can see in 10-15 years, is balancing the increased economic activity and the impact on the environment and natural resources. Inclusion is pushing for everyone to attain a higher income and benefit from economic growth, making growth more “democratic,” but that also impacts the environment and the sustainability of natural resources. You always have to balance that. Some projects are trying to address this challenge, like off-grid power schemes to give poor people access to electricity and reduce greenhouse gas at the same time.
Do you see any Asian economies that are going to be more at risk than others with this problem?
Those with high population density, especially in urban areas.
Which sectors do you think inclusive business can be more easily scaled up right now in Asia and the Pacific?
Agribusiness and information and communications technology—as a mix of finance and the information and communications technology sector—both have great potential to be scaled up in this region. Mobile payments and other new technologies can enable access to financial services for the base of the pyramid, and even other services like health and education. I believe it’s easier to expand in those areas. Infrastructure is another matter: there is big potential, but how we get there remains to be seen. In particular, if you don’t design infrastructure projects in an inclusive, integrated way, the potential will never be fully realized.
Re-posted from Asian Development Blog. http://blogs.adb.org/blog/5-myths-about-partnering-civil-society
With support from ADB’s Poverty and Environment Fund, a multi-purpose cooperative in the Philippine capital demonstrated how civil society and communities working together can improve livelihood opportunities while also looking after the environment.
Tue, 14 April 2015 By Suzanne Nazal
“Partnership” is an overused and sometimes misused term. If you google the word, it takes you to resources relating to business ventures and cooperative arrangements with the end view of maximizing profit.
In development discussions, however, how and when do we use “partnership?” And how do civil society and NGOs come in?
ADB’s engagement with civil society organizations (CSOs) and NGOs has been evolving since ADB’s 1998 policy on cooperation with NGOs came into effect. ADB’s Strategy 2020 long-term strategic framework highlights partnerships with development institutions—including CSOs—as central to ADB’s project development processes. Yet, there are a number of misconceptions about working with CSOs, which create challenges not only for ADB but for other development institutions as well.
1. Confrontation. There is an age-old perception that CSOs only operate as watchdogs and confront institutions like the ADB when they detect negative behavior. This is rapidly changing, though. While many NGOs continue to raise issues in relation to ADB projects, most of our operations actually involve constructive engagement with civil society groups. CSOs cooperate with ADB in various ways, for instance when village organizations help ADB carry out health services, or when CSOs share their expertise in disaster response, are just two examples.
2. Engaging with CSOs is expensive and time consuming. Consulting with CSOs may take time and resources. Experience shows, however, that working with CSOs—especially in the early stages of the project cycle—brings about better development results. Getting community-based organizations, women’s groups, and other nonprofits involved can provide important on-the-ground information that is not otherwise readily available. Meaningful consultation helps mitigate risks, leads to improved project outcomes, and prevents costly project delays. At the end of the day, organizing dialogue could turn out to be the most efficient way to manage successful projects.
3. Contracting equals partnership. Contracting CSOs as consultants is only one of the ways to work with CSOs. ADB recognizes the knowledge and expertise that CSOs can offer in our projects. But partnership should go beyond engaging CSOs merely as hired hands. Genuine participation happens when civil society representatives are able to contribute to decision making and influence project outcomes.
4. CSOs have weak capacity to engage. While small organizations typically lack the institutional capacity to engage with institutions like ADB, many CSOs in countries with a more established civil society sector have been able to engage very effectively not only with multilaterals, but also with governments and the private sector as well. At the international level, organizations like Oxfam and WWF have a large capacity to share their expertise in key global development dialogues.
5. One size fits all. There is no single formula to making civil society partnerships work. One needs to take into account the local context to be effective, consider carefully the sociopolitical situation of the country in question, and the capacity and preparedness of CSOs to successfully engage.
The first step to developing true, full, and effective partnerships with CSOs is debunking these myths. All development actors should identify mutual objectives in the overall goal of poverty reduction, recognize the advantages of working in partnerships, and invest time and resources in them. This would benefit everyone.
By Pratish Halady on Mon, 20 April 2015 (Publish on Asian Development Blog)
Discussions I’ve had around public-private partnerships (PPPs) in Asia have typically focused on India and the PRC because of their strong deal volumes. Having listened to and interacted with agencies in several ASEAN countries, I believe ASEAN is at an inflection point that could soon make it the bustling PPP market ADB has long been working toward. Here are three reasons why I’m excited about ASEAN:
1. New regulatory frameworks. New PPP laws are being approved in countries with lots of potential for PPPs. Thailand enacted its Private Investment in State Undertaking Act in 2013, and followed it up by creating a dedicated PPP unit and a PPP strategic plan. Viet Nam’s PPP Decree was issued in February 2015 and targets key issues including dispute resolution and foreign currency guarantees. Myanmar is a unique example where the absence of a legacy framework could actually expedite development of a modern PPP framework. One reason these reforms are particularly exciting is that they incorporate market feedback with the aim to open up the PPP markets.
2. International interest. The last two years have seen increasing international interest in ASEAN projects. The Nam Ngiep hydropower project in the Lao PDR, the Sarulla geothermal project in Indonesia, the Mactan Cebu airport rehabilitation in the Philippines, and others are not only landmark deals, but are significant because of the increasing interest from international sponsors and financiers.
3. The Philippines. ASEAN has a healthy PPP ecosystem in the Philippines. From just 11 projects in 2010, the Philippines now has 61 potential PPPs – 9 of which already have been awarded, valued at about $3 billion or just over 1% of GDP. Larger projects are in the pipeline, for example the North–South Rail Project, as well as projects in social sectors such as health and education.
To maintain this momentum for regional PPP development, the following are needed.
1. Project preparation funds. Several countries such as the Philippines, Indonesia, and Thailand already have project development facilities. Others, like Viet Nam, are setting them up. The feedback from agencies is that more is needed, often in the form of technical assistance from multilaterals to support project preparation, feasibility studies, and transaction advisory. To serve this need, ADB and donors have created technical assistance facilities, for example the ASEAN Infrastructure Center of Excellence, which can help public sector clients accelerate project development through hiring world-class consultants.
2. Patient advisors with policy experience. Unlike in developed markets such as Canada and the UK, a formulaic approach to transaction advisory will not work in ASEAN. First, templates don’t exist for many sectors in many countries under new PPP frameworks, so the trail has yet to be blazed. Second, since templates don’t exist, situations have arisen where, for example, ADB as advisor had to pause the transaction and work with client agencies to make certain policy changes to ensure bankability. Third, some countries still don’t have adequate capacity for PPPs in their agencies. Here it is important for the advisor to be an entity which has commercial acumen, but also has deep policy expertise and the client’s trust.
3. Viability gap funding (VGF) for transport projects. Changing income levels combined with less-than-robust population data increases uncertainty in projecting a project’s financials over a long concession period. Thus, project bankability often cannot rely solely on user fees and requires VGF and/or availability payment structures supported by the sovereign’s credit quality. Multilaterals can help by structuring sovereign lending and credit enhancement products to support VGF or periodic availability payments.
4. Deeper capital markets. Local and regional capital markets need to be deeper and broader to channel Asia’s large savings into infrastructure investment and to increase domestic liquidity. In addition to developing the capacity of banks for project finance, a project bond market will help to (i) provide an alternative source of funding for large deals which cannot be supported through bank debt alone, (ii) reduce refinancing risk through the issuance of bonds with longer tenors, and (iii) create opportunities for institutional investors in infrastructure. As cross-border bond investors typically seek investment-grade credits which most ASEAN countries cannot achieve due to sovereign rating caps, credit enhancement is necessary. To support this, ADB invested in the ASEAN-focused Credit Guarantee and Investment Facility which provides bond wraps similar to a monoline insurer, and is exploring credit enhancements on project bonds through its private sector operations department.
5. Deal pipelines. Investor and lender feedback shows they are more likely to draw comfort if a country is committed to a PPP program, rather than a one-off transaction. Here, neighboring countries can take a cue from the Philippines, whose large and publicly viewable pipeline signals a clear long-term commitment to its PPP program. The Philippine Investment Alliance for Infrastructure, an infrastructure-focused private equity fund developed jointly by ADB, Macquarie, and the Philippines’ Government Services Insurance System, was partly justified by the country’s strong PPP deal pipeline. Similarly, Indonesia has announced a pipeline including 43 deals worth $52 billion in total.
ADB has supported progress across the spectrum, ranging from capacity development to project development and financing, and is helping countries draft PPP laws, train government officials, and develop capital markets. In response to clients’ need for specialized advice on landmark projects, ADB now provides transaction advisory services through its newly established Office of Public–Private Partnership, and is in the process of establishing the Asia Pacific Project Preparation Facility to accelerate PPP project preparation.