Keynote speech/presentation by Shalmali Guttal, Executive Director of Focus on the Global South, during the "Asian People's Call on Challenging the Asian Development Bank's Immunity Conference". 20 April, 2017, University of the Philippines - School of Labor and Industrial Relations.

1. Changing Landscape of
Development Finance in Asia &
Concerns for Civil Society
Shalmali Guttal
Focus on the Global South
April 20 2017

2. What is happening to Development in Asia?
We need to rethink financing for development to attract new
partners and to entice private investment to developing
countries.
Over the last two decades the private sector has become a more
active development partner. Improvements in financial inclusion,
led by private sector-led microfinance schemes and mobile
banking, and a global wave of public-private partnerships to
build infrastructure are but two examples. But these are just a
teaser of the potential benefits of private sector involvement in
development.
Stephen P. Groff ADB Vice-President for East Asia, Southeast Asia and the Pacific. How
private sources of development finance could be key to Asia's future

3. Development has become neoliberal and IFIs have
a huge hand in this (SAPs; policy reforms)
• Development model based on and driven by achieving rapid, high
economic growth (except for Bhutan)
• Operationalized through privatization, trade and investment
liberalization, and market/corporate friendly regulation.
• Public interest redefined and expressed in market terms
• Public-Private-Partnerships serve as covers for privatization of critical
sectors, eg., water, health, education, energy, transportation…
• Countries offering incentives to attract FDI, especially in physical
infrastructure, manufacturing, selected services…

4. Financialisation of development
• Increased presence of instruments to raise resources through finance
capital—index portfolios, basket funds, bundled mortgages and
securities, etc. (banks invest savings in capital markets & projects)
• Era of revival of sustainable development + increasing financialisation
• Green bonds (to finance Paris commitments, clean development)
• Green Economy (UNEP)—establish new nature-based markets
• Finance has become too big, inter-connected, unchecked
(“innovative”) for govts to control; recurring financial crises reverse
development gains;

5. New Generation Free Trade Agreements (FTAs)
beyond WTO
• Trade liberalization (”free trade”) pushed through bilateral,
regional, plurilateral, global trade & economic partnership
agreements
• AFTA in ASEAN; SAFTA in South Asia (stalled)
• Myanmar, Thailand, Laos, Vietnam Cambodia: ACMECs
• India with Finland and China; Philippines with Japan; China-
ASEAN; EU-ASEAN; EU-India; EU-South Korea
• Trans Pacific Partnership (TPP)--stalled
• Regional Comprehensive Economic Partnership (RECP): ASEAN
10, China, India, NZ, Australia, Japan, S Korea
• Movement towards larger Free Trade Area of the Asia-Pacific
(FTAAP).

6. Why worry about these agreements?
• They include investment: our economies are opened up for
corporations to set up shop, with rules that enable them to operate
and maximize their profits at the cost of the rights of workers,
peasants, fisherfolk, local food producers & local entrepreneurs,
indigenous peoples, and ordinary citizens;
• Governments expected to enact laws that enable/facilitate corporate
profits & allow corporations to not be subjected to financial, social,
environmental, health, human rights regulations;
• Deepen the privatisation of key services and infrastructure
• Stronger Intellectual Property Rights protections—medicines, seeds..

7. Investment State Dispute Settlement (ISDS)
mechanisms (corporate impunity)
• Protect investors’ rights; arbitration mechanisms in the International
Centre for the Settlement of Investment Disputes (ICSID) or the UN
Commission on International Trade Law. Under ISDS:
• Investors can sue govts over public policies, laws and regulations that
inhibit their revenues and operations; or, if govts want to change terms of
agreement for public interest: eg, taxation, user fees for toll roads,
environmental protection, workers’ wages/benefits, land acquisition,
public procurement of food from local producers, etc.
• Huge costs to the taxpayers in legal fees, court appearances, payments for
damage; just the fear of these costs can create a chilling effect on the
appetites of governments to regulate.
• But workers who are exploited by investors, people who are displaced by
investment projects, or negatively affected in other ways cannot sue them.

8. Development finance
• Development finance gone far beyond ODA, grants, loans; now
encompasses a broad range of financial services like equity, loans and
guarantees to private entities.
• Objectives of development finance also expanded to include the
facilitation of trade and capital flows, financial deepening, and the
strengthening of capital markets.
• Private finance/capital becoming prominent in both, public & private
sector operations of IFIs & GovtFDI; loan or guarantee given to a
private investor for build-operate-transfer infrastructure project, etc.
• State agencies/enterprises seek private capital for expansion, services

9. • General consensus about centrality of pvt capital in sustainable dev
finance—part damage control; part need for capital
• Private sector has always been involved in large infrastructure
projects in most Asia Pacific countries
• Private sector investments will always go to the sectors they can
profit from: transportation and energy infrastructure; large retail;
land based—eg SEZ; resource development—irrigation, plantations,
extractive industry, etc.
• Mega infrastructure frameworks like DMIC, GMS, economic corridors
and OBOR demand big capital; scale of operations facilitate/invite
private participation in physical operations & financing (big bundles)

10. ADB Private Sector Financing
• ADB approved $2.5 billion in new private sector financing in 2016.
Including co-financing, ADB mobilized $8.3 billion for private sector
projects in the region, a 15% increase over last year & a new record
• Accelerated overall support for energy projects in 2016, which
comprised 60% of private sector financing for the year.
• Other sectors: agribusiness; financial institutions-micro finance, SME
• Private sector operations targeted to grow; major expansions in
funding for infrastructure, agribusiness, climate change and
renewable energy, and inclusive business.
• Co-financing will increase

11. Cooperation among IFIs & between IFIs &
private finance
• AIIB + World Bank: Indonesia Regional Infrastructure Development Fund;
Tarbela 5 Hydropower Extension project
• AIIB + ADB: Bangladesh Natural Gas Infrastructure & Improvement project
• AIIB and NDB (BRICS) signed MoU in April 2017 for comprehensive
framework for AIIB-NDB cooperation-- infrastructure and sustainable
development projects, enable co-financing opportunities, etc.
• AIIB + IFC signed an International Swaps and Derivatives Association (ISDA)
Master Agreement to enhance their capacity to make investments in
emerging-markets projects, especially in Asia’s infrastructure sector;
“demonstrating innovative ways to scale up development finance through
capital market solutions”; IFC already entered in such agreements with the
African Development Bank, the ADB & EBRD

12. ADB Trade Finance Program (TFP)
• Estimated global trade finance gap is $1.6 trillion. $692 billion of the gap is
in developing Asia (including India and the People’s Republic of China).
• Provides guarantees and loans to banks to support trade—import/export in
Asia’s most “challenging markets”
• Backed by AAA credit rating, ADB’s TFP works with over 200 partner banks;
the program supports range of transactions, from commodities & capital
goods to medical supplies & consumer goods.
• Persistence of unmet demand for trade finance is widely recognized as a
development issue. Financial institutions are exploring ways to better
engage with SMEs. MDBs are expanding range of instruments to support
banks and firms in emerging economies.

13. The Leading Asia’s Private Infrastructure Fund
LEAP--2016
• ADB & Japan International Cooperation Agency (JICA) to established
new fund to support private infrastructure investments across Asia-
Pacific
• Capitalized by $1.5 billion in equity from JICA & will help mobilize
some $6 billion in investments.
• Became operational in August 2016and over $200 million of LEAP
funds were allocated through end-2016 in renewable energy projects
in India and Indonesia.

14. IFIs and Private Finance
• Standard Chartered Bank Malaysia Berhad and ADB have signed a
RM80 million (about 18.1 mill US$) supply chain finance (SCF)
agreement for SMEs get working capital in Malaysia (April 2017).
• October 2016: ADB agreement with Citi to expand local currency
lending to the microfinance sector under the Microfinance Risk
Participation and Guarantee Program--facilitate up to $100 million of
local currency loans to microfinance institutions in developing Asia.
• IFC: risk capital for financial institutions and businesses at an early
stage; infrastructure investment; PPPs

15. Concerns for Civil Society
• How can CS get accurate, full information about policies & projects in
this new complex scenario? Pvt sector protected by commercial
confidentiality clauses, etc.
• With so many policy, planning, financing, enabling, implementing
actors in the mix, how do we monitor what is pushed/enforced in the
name of development?
• Immunity – Impunity for govts, financiers, corporations
• Creation of compliant civil society through multi-stakeholderism
• We have to fight CS as much as corporations, IFIs, govts…

16. Some Action Points
• Link struggles for justice, ending IFI immunity & corporate impunity,:
ISDS, FTAs, accoutability – safeguard mechanisms, etc. (problem too
huge for single issue strategy—we have to march together
• Use regional – international governance instruments to the maximum
extent, creatively: Maastricht Principles (ETOs); HR conventions
(ESCR, ICCPR, ICAAED, UNDRIP, ILO, etc.); CFS Tenure Guidelines; FAO
SSF guidelines; even Ruggie--be ruthless in ”cherry picking”
• Use UN HR Special proceedures
• Legal actions against IFIs, corporations, govts: national-international

17. • Inform, educate, politise, organise, mobilise: build peoples power
• Produce knowledge to challenge mainstream discourse: debt audits,
reality of projects, programmes—eg dams, land governance,
extractive industry, privatisation of services; impacts of corporate
retail, agribusiness, pharmaceuticals, etc.
• Monitor privatisation-financialisation – local debt traps/cycles; costs
of goods-services
• Build our vision of public interest, well being; how will we finance
these? -- lots of creativity needed but we have the experience &
expertise in our ranks