How the Indo-Pacific can beat the SDG cash crunch
By: Naoko Ishii
The Indo-Pacific has much to lose as global events hinder international cooperation on sustainable development, but it also shows promising examples of success.
A handful of initiatives in the Indo-Pacific region show what can be achieved through international partnerships, even while fallout from global events hinders cooperation on development and climate action.
Global cooperation is the central theme of Sustainable Development Goal 17, but also the key to success across the other 16 goals.
The past year has shown why that success is so critical.
This year has seen the hottest summer on record, with average global temperatures projected to continue to rise, and more extreme weather conditions, including raging wildfires across the world. It is clear that the impacts of climate change have reached a breaking point.
These signs only further confirm what scientists have long warned us that we have already passed several of the Earth’s tipping points.
At the midpoint of the 2030 Agenda, we are also far off track on achieving the United Nations Sustainable Development Goals and fulfilling the commitments agreed by member states for the Paris Agreement in 2015.
These challenges are particularly acute in many countries in the Indo-Pacific region and at the current rate, the region is on track to miss the 2030 SDG target by several decades.
The impacts of the COVID-19 pandemic, the war in Ukraine, and climate change and related natural disasters have resulted in a ‘polycrisis’ across the region, placing enormous pressure on government revenue and increasing the need for large stimulus spending.
This has resulted in elevated debt levels and inflation in many Asia-Pacific countries and rising inequalities.
In May 2022, Sri Lanka’s government was forced to default on its debt for the first time and other countries in the region, such as the Maldives, Papua New Guinea and Tonga, are facing a high risk of debt distress.
The SDG financing gap, which globally is estimated at USD 4 trillion, has also widened significantly in many developing countries in the region. Indonesia, for example, saw a significant increase in the projected funding gap from USD 1.1 trillion (up to 2030) before the pandemic to USD 4.7 trillion in 2021.
Addressing these challenges by 2030 and beyond will require coordinated multi-stakeholder regional partnerships and cooperation to mobilise financing and human resources.
Sustainable Development Goal 17 cuts across all the goals and is foundational for achieving all of them.
It includes advancing multi-stakeholder and public-private partnerships, mobilising financial resources for developing countries, assisting countries in debt sustainability, increasing exports from developing countries, and deepening regional and international cooperation and capacity-building.
Achieving the goal is particularly critical for the Indo-Pacific region, where the economies of India and China are expected to account for nearly 75 per cent of the world’s GDP growth this year.
Their growth will have significant negative international spillover effects over the rest of East and Southeast Asia, which hold an enormous amount of natural capital through trade.
Negative spillover effects are economic externalities passed across countries, such as environmental degradation, typically seen in developing countries when high-consumption, richer countries utilise their resources.
The Indo-Pacific region is home to more than 60 per cent of the world’s population, and efforts towards decarbonisation and conservation of the region’s vast forests and natural ecosystems which transcend national borders cannot be made by individual countries in isolation.
The intense geopolitical competition in the region has hampered climate cooperation between many of the countries. For instance, China, Japan, and South Korea which together account for more than a quarter of global greenhouse gas emissions have each declared separate carbon-neutral goals.
Securing adequate climate financing also remains problematic. Financing large-scale regional green energy projects is often hampered by increased foreign exchange risks that limit local financial institutions’ capacity to provide long-term loans.
Sovereign guarantees essential to removing financial risk from large-scale projects are more difficult to obtain due to sovereign debt risks in the region.
Additionally, poorer countries in the region, particularly Small Island Developing States, are often unable to borrow levels of capital sufficient to meet their long-term sustainable development needs, and they face high borrowing costs, short maturities on debts, and poor credit ratings.
However, recent initiatives at the regional, national, and subnational levels in support of goal 17 that improve climate cooperation and financing across countries show what’s possible in the region.
In 2020, stakeholders endorsed the Association of Southeast Asian Nations Plan of Action for Energy Cooperation, which includes the ASEAN Power Grid to help produce and trade clean, cheap energy across the region.
Later that year, 15 countries, including members of ASEAN and five regional partners, signed the Regional Comprehensive Economic Partnership, to promote trade in the region, resulting in arguably the world’s largest free trade treaty.
The Belt and Road Initiative, an outbound infrastructure and investment initiative led by China, also has significant potential to promote global and regional cooperation on sustainable development, with more than 150 countries involved.
Yet, it faces debt and environmental sustainability challenges, and its success depends largely on deep policy reforms.
Australia’s low emission technology partnerships with India, Singapore, Japan, and South Korea, established as part of its efforts towards decarbonisation, have also shown promise.
At the national level, there are promising public-private partnerships to increase financing for Sustainable Development Goals in the region.
This has included the establishment of the SDG Indonesia One: Green Finance Facility, in partnership with the Asian Development Bank and Indonesia’s Ministry of Finance.
It is the first green finance facility in Southeast Asia and aims to address the lack of a large-scale pipeline of bankable green infrastructure projects in the country.
The initiative has the potential to kickstart more than USD 1 billion in green projects with opportunities for replication in other Indo-Pacific countries.
Elsewhere, Singapore’s Ministry of Finance and the country’s Central Bank the Monetary Authority of Singapore have formed a network with seven other central banks worldwide to promote best practices and sharing in green finance with other countries.
Singapore’s central bank and government have also established a ‘Green Bond Grant’ scheme to promote and ensure the issue of green bonds in Singapore.
These innovative financing partnerships and instruments are important for ensuring that financing solutions address both country and region-specific needs and vulnerabilities.
Improved partnerships and cooperation within the region between the public and private sectors can also further attract the capital and political support needed to fund critical sustainable development projects.
Countries could also take a collective approach to discussing solutions to broader international spillover impacts while acknowledging the private sector’s role in curbing spillovers.
This can be a practical way to start valuing natural capital assets like air, water, soil, and energy while also making the global supply chain more resilient.
The Taskforce on Nature-Related Financial Disclosures’ framework offers potential for companies and financial institutions to integrate natural capital into their decision-making and risk management.
Despite the challenges facing the Indo-Pacific region, with integrated regional cooperation and increased financing, countries can accelerate the move to a decarbonised world and towards the achievement of the Sustainable Development Goals.
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(The author is a faculty member at University of Tokyo in TokyoBy Naoko Ishii, University of Tokyo-(360info.org)