MR. DAVID THEIS, WORLD BANK GROUP PRESS SECRETARY: Good evening, David. And good morning, everyone else, on the call. Thanks very much for dialing in to us and hope you're all keeping well.
I'm David Theis, the World Bank's Press Secretary, and welcome to this on-the-record call with World Bank Group President, David Malpass, who is joined by our Vice President for the East Asia and Pacific Region, Victoria Kwakwa, who I'm sure many of you have likely met.
Mr. Malpass will give brief remarks over the phone, and then we will turn to your questions. And if I can ask that everyone stay on mute and when we open up for questions, please click the "Raise Hand" button at the bottom of the participant list--that will be on the top if you're on an Apple device. And of course, you can feel free to put your question in the chat, if you prefer.
We have several reporters on the line and would like to get to all of you. So, please, only one question per outlet. Thank you again for joining. And Mr. Malpass, over to you, sir.
MR. DAVID MALPASS, WORLD BANK GROUP PRESIDENT: Thank you very much, David. Good morning, everybody. Good afternoon, good evening, and great to be with you with Victoria.
East Asia and the Pacific was the first region hit by the COVID-19 virus. It continues to grapple with an unprecedented crisis. It's also one of the first regions to see a rebound. Our latest forecast for 2021 suggests 4 percent growth, excluding China; and 7.7 percent with China, but growth is highly uneven across countries and sectors. For the first time in two decades, we're seeing a halt in the critical gains made in reducing poverty across East Asia and the Pacific. We now expect 29 million people to become poor, living on less than $5.50 a day by the end of 2021, due to COVID-19.
The immediate priority for developing countries is widespread access to COVID-19 vaccines that match their deployment programs. We've strongly encouraged advanced economies to release their vaccine options in order to accelerate vaccinations in developing countries. I chair a taskforce on COVID-19 vaccines which includes the IMF, WHO, and WTO. We've called for the G20 to share doses, provide financing to close the residual gaps, and remove all barriers to the export of inputs and finished vaccines. The current supply shortages and logistical constraints mean that many countries in the region may not fully vaccinate their populations until 2024, even as new variants emerge.
In response to the sharp increase in demand, the World Bank has increased our available financing for vaccines to $20 billion globally over the next 18 months. We've already committed $1.1 billion to countries in East Asia and the Pacific: Cambodia, Indonesia, Laos, Mongolia, Papua New Guinea, and the Philippines, and we're eager to commit more.
Stimulus and social protection measures are critical; however, these must be adaptable, well-targeted, and fiscally sustainable. Policies are introduced to mitigate the impacts of the pandemic and they must be complemented by fiscal reforms capable of facilitating greater relief spending without sacrificing public investment. The private sector is also important to the region's growth, including small and medium-sized enterprises.
We're providing grants to the countries that are most in need, including fragile and small states. Investments in social safety nets and digital cash transfer programs are critical during the crisis. They protect women, children, and the disabled the most. To help build the infrastructure for digitalization, we're investing in ways that will also benefit financial inclusion and rapid crisis response. I want to say a word on this. The investments are heavy for digital infrastructure systems, but they may be critical in East Asia and the Pacific over the course of the pandemic.
In Malaysia, there's a universal national ID system; there's wide mobile phone coverage; and high financial inclusion. And these have helped government assistance to reach more than 10 million beneficiaries.
Public debt is an issue. It's increased by 7 percentage points of GDP, on average. Countries have expanded their social safety net, and they've ramped up their stimulus, but that's also increased the amount of debt. In some countries, the debt burdens are no longer sustainable. The World Bank is working jointly with the IMF in order to use the Common Framework in order to provide debt relief for countries and create the fiscal space they need. Governments in the region currently raise, on average, only 18 percent of GDP through taxation; that's one-third less than in other emerging markets. Some are continuing to spend more than 1 percent of GDP on energy subsidies. Those are regressive, and they should be reduced as part of both the effort to have fiscal balance and the effort to have an impact on climate.
Improving the tax systems can help offset the costs of necessary social spending programs. As the largest contributor to greenhouse gas emissions, the East Asia Pacific Region is critical to global efforts to combat climate change. Some of the highest emitters need to achieve a transition away from coal and find ways to reduce emissions from heavy industry through new technologies, such as carbon capture and storage and new developments in technologies, including hydrogen and nuclear.
Over the last decade, the region has scaled up coal power generation to meet its energy needs. Globally, there's over 250 gigawatts of coal-fired power plants that could come online in the near to medium term, with most of it in Asia. Investments in cleaner energy and natural assets are key in order to create tomorrow's employment and economic opportunities.
Last month, we launched the new World Bank Climate Change Action Plan. It's going to create a shift in paradigm in order to connect development and investment and to focus on priorities in terms of reducing greenhouse gas emissions. We're also investing heavily in diagnostics in order to better understand the integration of climate and development, and to identify the main reductions that are needed in greenhouse gas emissions. This will be particularly important in China, Indonesia, Vietnam, and the Philippines, and we're working on Country Climate and Development Reports, a new World Bank diagnostic, in order to aid in this effort.
Another environmental challenge is marine plastics. East Asia is the epicenter of plastic waste. It's being discharged from rivers and into the seas, and it's degrading the environment and hampering livelihoods. We have more than $2 billion in our project pipeline, and we're working with countries around the region to address plastic pollution at every stage of the value chain. This includes investments to improve solid waste management; also, to help companies rethink product and package design; and advise on policies that will create incentives to better align with environmental considerations.
I would now be very happy to welcome questions and thank you for joining this evening/this morning. Thanks.
MR. THEIS: Thanks very much, David. And as a reminder, if you click the participant list, you can see the "Raise Hand" button that allows you to raise hands. I'd like to call on folks in order, if I can. So, please feel free to do that.
And I see the first question out of the gate is Enda Curran from Bloomberg. Enda, over to you.
MR. ENDA CURRAN: Thanks very much, Mr. Malpass and all. Hope you can hear me.
Just one follow-up question on your uneven recovery points, Mr. Malpass. It's actually on youth employment. Youth employment was hit quite hard in Asia, but could you give me a sense, please, how the recovery in youth employment is going in Asia? And perhaps not just Asia, but globally, is the improvement in youth employment keeping up with the improvement in older-age or adult employment? Any thoughts on youth employment recovery would be greatly appreciated. Thank you.
MR. MALPASS: Thanks for that. It’s a huge and important problem. There's not enough of a recovery in youth employment. This is a big challenge for countries to allow new entrants into the market. That gets to a host of issues - education and skills which need to be improved; also, into new business formation, which is a critical starting point for lots of new entrants. I think this remains a huge challenge.
Let me make the broader point that COVID-19 deepened the inequality that already existed in many of the developing countries. It’s of grave concern that you go from a situation that was already unequal, oftentimes with vulnerable workers or with young workers not having jobs, and it became measurably worse with COVID-19.
I think your point is very important. What we're trying to do is work with countries to build a stronger recovery from COVID-19 as that occurs. One of the key aspects of that is to recognize that it's going to be a different business environment. Many countries are going to be changed fundamentally. For example, countries that were very dependent on tourism may find it difficult to recover that business. We hope some will and that can create jobs. Also, green jobs will be an opportunity for some of the young workers.
But I want to end where I started, that it's vital that there be skills and training. Oftentimes, that can come from the private sector itself in order to create those new jobs. Thanks.
MR. THEIS: Thank you very much. It looks like the order is now Karen Lema, first; and then going to Keith. So, Karen, over to you, from Reuters.
MS. KAREN LEMA: Good morning, Mr. David Malpass. Thank you so much for this briefing. I just wanted to ask if you are concerned about the two-speed recovery, given the divergent vaccination rollouts among developed and developing nations?
MR. MALPASS: Short answer is yes, absolutely. What we're seeing, and it's very distinct, is those countries that are more fully vaccinated are having a stronger recovery. It’s creating a two-speed recovery process, and one way to think about that is it's leaving a lot of countries behind because of the lack of vaccines and the weakness of the recovery that's occurring in those countries. This is the reason why we have a major focus on expanding the reach of vaccines.
I don't know if you saw the accounts two weeks ago, but we've had what we think is a major advance in Africa with contracts that are coming from vaccines that are produced in Africa, and we're able to finance those contracts. UNICEF is going to be able to deploy and it's operating through the African Union and through an AVATT program that's created opportunity there.
I mentioned in my opening remarks the number of programs we have in East Asia and the Pacific that are available for World Bank financing. We have sizable, ample funding available for vaccines, but we need to have the advanced economies release their options on vaccines so that more vaccines can flow. Thanks.
MR. THEIS: Thank you very much. And next is Keith Bradsher from The New York Times. Keith, over to you.
MR. KEITH BRADSHER: We've seen car sales down here in China in June. Year on year, we've seen weaknesses in service spending.
How sustainable is China's economic recovery, and what are the implications for the world in terms of the global recovery if consumer spending doesn't seem to bounce back as maybe people had hoped as pandemic concerns start to fade? Thank you.
MR. MALPASS: Thank you. The recovery was quite strong in the earlier months. My understanding of the auto sales is it's in part attributable to the shortages of chips. There are some technical supply constraints. Also, I saw China had reduced the reserve requirement, and that will add some liquidity.
I think as we look at it…China had a very fast pace of recovery over the last year. It's going to be hard to maintain that rate of recovery and we're seeing it in some of the spotty data. But my sense is that those countries that can avoid new waves of COVID cases can have a recovery, given the buoyancy in some of the advanced economies, including the U.S.
Victoria, anything to add on that point or either of the previous ones?
MS. VICTORIA KWAKWA, WORLD BANK VICE PRESIDENT FOR EAST ASIA AND PACIFIC: Sure, David, let me add a little bit, thank you, on China, just to add to what you said.
Our forecast is about 8.5 percent for China. Its exports are recovering quite strongly due to the global recovery. We're also seeing that, even domestically, you're having private investment and consumption also coming in a little bit stronger. Granted, what happens on the pandemic is going to remain important for their economic outcomes. We saw recently in Guangdong, that with the outbreak there and the lockdown, it did have some impact on the PMIs.
It’s going to be important to continue to keep the virus in check. But our sense is that improved labor market conditions are likely to sustain consumption in 2021 and support quite a robust growth in 2021.
Of course, in the medium term, China needs to continue to work on the rebalancing effort, in their policies around social security reforms, reforms of the Hukou system, more progressive taxation, which will support the more vulnerable income groups and will also promote more consumption, because these are groups that tend to spend more out of what they earn. These are all areas that will be important for China to focus on for more sustainable and longer-term recovery, and of course, ensure that their growth aspirations are more consistent with climate.
There are quite a few things they can do. They can look at carbon taxation and the emissions trading system that will be launched soon, expanding it to the larger economy. There are things to be done on that side as well. But in the short term, in 2021, our projections still remain around 8.5 percent. Thank you.
MR. THEIS: Thank you both very much. We have Antonio Sampaio next, joining us from Timor. Antonio, how are you? Over to you.
MR. ANTONIO SAMPAIO: Hi, how are you? Mr. Malpass, Timor, as other countries, has provided already at this stage two rounds of financial support to businesses and to families, and so on. But Timor has been sort of getting hit by the pandemic later than other countries. The first year was okay, and now it's improving a bit again, but the beginning of the year was very, very dangerous for the country. And so, the economy continues to lag.
Do you think that the support packages for businesses should continue in cases where lockdowns are in place, so the effects of pandemic restrictions exist? And how effective do you think they've been in the countries where they have been given? Thank you very much.
MR. MALPASS: Thank you. I know Timor had some vaccination support from Australia which is, I'm sure, very welcome.
The business support is important in allowing those businesses that are going to survive to continue doing business during the shutdown. Different countries have had different experiences with the business support programs that they have. I think there's a lot of differentiation in the quality of those support programs and in their ability to reach the right businesses that really need it and are in need.
I don't know the Timor program enough to give a response to that, but in general, I think there should be a strong focus both on the vaccination effort, getting as many people vaccinated as quickly as possible; and then getting to a point where the economy can reopen, and that then gives the support needed for the small businesses.
The reason I'm hedging a little is that different countries have had quite different responses. In some, they've supported the businesses, so the businesses keep the employees on the books, and that's the way of having a social safety net. In other countries, the aid has been given directly to the workers and the businesses have maybe closed but then families are in a position to reopen businesses when the economy reopens. I just think it's important to recognize the different experiences in different countries. Thanks.
MR. THEIS: Thank you very much. And next, we have Gwen Robinson joining us from Nikkei Asia. Gwen, hi.
MS. GWEN ROBINSON: Thank you very much. Good morning, Mr. Malpass and team. I want to address the issue of Myanmar which, as everyone has seen, has basically fallen off a cliff since the February 1st coup. The World Bank came out with a growth forecast of, I think, minus 9.6 percent for the year. That was, I think, around April. You're about to come out with a new set of estimates for Myanmar, I believe, and as I think everyone's seen, the country has not only encountered horrendous shutdowns due to the coup, violence, the paralysis of the banking system; but actually, now, of COVID exploding in the country.
Could you basically perhaps give us your view of the situation there and how much more the country is likely to see economic growth collapse? But also, I think, the prospect that there be overflow in the region. Myanmar is at the heart of mainland Southeast Asia, and so far, I think there's been an attitude that it's contained and it's just this terrible problem contained in its borders. But there’s a lot of overflow already into Thailand with refugees and concerns about COVID and the violence.
MR. MALPASS: That was a long question but thank you for it. It's important.
MS. ROBINSON: I'm really sorry.
MR. MALPASS: That's all right. No, we are gravely concerned by the situation and share the emotion that you expressed in the question.
We're closely monitoring what's going on and assessing the situation. We earlier on put a temporary hold on all our disbursements in Myanmar in recognition of the situation. We ceased processing withdrawal applications as of February 1st. This is a problem that's been extending. I'm going to turn to Victoria in a moment because she's following this much more closely. The economic situation that we had, at one point, assessed at minus 10 percent, we think now looks as if it will be an even bigger contraction or a worse contraction, as we go forward.
To add to the concerns, the COVID situation has gotten worse, and the vaccination program has not been proceeding. It's in disarray… I'm gravely concerned about the situation in Myanmar, and the World Bank is as a whole, following the developments with concern. Victoria, things to add?
MS. KWAKWA: David, thank you. Let me add a little bit on this.
As David said, we're really concerned about the situation in Myanmar. We're concerned about the economic conditions and we're also concerned about how the COVID situation is rapidly deteriorating. As you said, you cannot assume that Myanmar is an island. It's going to spill over to the other countries. That's a regional issue that needs to be looked at very carefully.
It’s a very difficult situation, given the civil disobedience movement. It’s not clear how well health facilities are working, and how well services including vaccination can be provided in the public sector.
On our side, we're working very closely with the UN, and there's also a UN Special Envoy who's trying to bring different parties together. What we're hoping is that, through all this, we will get some way to begin to really work around vaccines with others. If channels could be open for us to work with other stakeholders, third parties, some of the private sector, we could very quickly mobilize vaccines and deployment support to address some of these issues. The UN is leading on conversations with the authorities and we're hoping that we can get a breakthrough that allows us to go in and really help on this issue which is critical, as you said, for Myanmar, but also for countries in the region.
ASEAN is also concerned about this and they're also having a meeting in the next little while. We hope that, with ASEAN's effort, with the efforts that are being made by the UN Envoy, with the UN system in-country, with our discussions with the authorities, that there can be a breakthrough. And so, we get the space to do some work around the vaccines question, because that's also going to then impact the economy and have some beneficial outcomes. Thank you.
MR. THEIS: Thanks very much. All right. Next, we have Unursaikhan Soronzonbold joining us from Bloomberg, Mongolia. Go ahead, over to you.
MS. UNURSAIKHAN SORONZONBOLD: Thank you very much. Hello, everyone.
My question is that central banks around the world are under pressure of inflation. The Consumer Price Index is increasing, and it stands to be intensified more. Do you think this is transitory or central banks should start moving? South Korea and New Zealand are about to tighten their monetary policy. When do you think the Mongolia Central Bank should tighten their monetary policy?
MR. MALPASS: I'm going to fall back on the point that different countries are different in terms of the timing of their monetary policy cycle.
One of the things that I think is important is that currency values be maintained or be observed as one of the added concerns in the inflation cycle. If you have a situation where there's inflation in the U.S., as the data showed high inflation today, and if a country also has currency weakness on top of that, it adds to the inflation pressure. I think that's one of the factors that developing countries have to take into consideration.
As far as whether it's transitory, clearly, there's been a huge amount of both monetary stimulus and fiscal stimulus, both of which are pushing demand higher. An issue in the length of time of the inflation is how quickly can supply be enhanced, be expanded? We were talking earlier about auto sales in China, but one of the issues is with the chip production; can that supply be expanded in order to allow some of the inflation that's showing up in the auto markets to be relieved.
Similarly, in the oil and gas markets, there's been challenges on the supply side that are contributing to the rise in prices. There was a very big Wall Street Journal story about that, today, that I think is reason for people in emerging markets to be concerned about the inflation rate.
One thing I want to add is, as we look into the outlook, we've already expressed that it's a two-track, or an unequal global recovery and global expansion. Adding to that is the risk that there will need to be interest rates in the future by the major central banks in order to combat an inflation problem, and that would add to the concerns that are already evident in emerging markets. I think it's important for governments to think about how to allow the supply mechanisms within their economies to expand soon through new investment, new employment. Those will help with the inflation problem. Thank you.
MR. THEIS: Thanks very much. And next we have Pham Trung out of Vietnam. Go ahead, please.
MR. PHAM QUYNH TRUNG: Good evening, Mr. David Malpass. Good evening, Ms. Victoria Kwakwa.
I had questions about Ho Chi Minh City. As you might know, coronavirus is hitting many industrial parks in Ho Chi Minh's City, Vietnam's economic hub. The authorities in Ho Chi Minh City are enforcing a very strict lockdown to curb the virus, and this caused great concern for foreign investors and foreign business in Ho Chi Minh City.
What do you think about the recent situation in Ho Chi Minh City, as well as Vietnam in general, and how sustainable is Vietnam’s recovery? Thank you so much.
MR. MALPASS: Thank you. As I expressed in my opening, we are concerned about the waves of COVID infections that are being seen in many of the developing countries, and we think it's vital that there be access to vaccines and wider deployment, wider application of vaccines as quickly as possible.
I don't know the exact situation in Vietnam, and I'm going to turn to Victoria to see if she can add to that. Thanks.
MS. KWAKWA: Sure, David, let me come in. Thank you for that question.
As we all know, Vietnam did very well in the first several months, at least last year, in the response to COVID, and had a very highly effective testing, tracing, and isolation policy that really worked on the containment front. As early as May 2020, Vietnam was able to open up and it reaped a lot of benefits from that. Apart from China, Vietnam was the only country that had positive growth in the East Asia and Pacific region last year.
Now, unfortunately, we've had new variants of the disease and that is proving very difficult for a lot of countries, including Vietnam, to handle. You’ve seen the outbreaks that are ongoing in Vietnam. I think in a very short time, in about 10 weeks or so, the COVID numbers have increased by over 300 percent, from what I understand, for the country as a whole. This is huge; it hasn't stopped yet.
The unfortunate situation for Vietnam is that they weren't as quick in making provisions for vaccine supply. They’re a little behind in access to vaccines, and that's a major concern, because with the new variants that we're seeing, vaccination becomes even more imperative. With the Delta variant that is very prevalent in Ho Chi Minh City, I don't know how it can be brought under control without some lockdown measures. I think that if the government is able to get access to its vaccines quickly, the orders that it's made or through some of the donations that other governments are making, prioritizing the industrial zones, the industrial heartlands, and workers in there would really be important.
We hope that these vaccines come in quickly, and I think that the policies of testing, tracing, and isolation continue to be important, even at this time. But I think if the virus can be gotten back under control, then Vietnam does have a lot going for it in terms of growth. Last year, as I said, it benefitted a lot in terms of electronic exports and did very great in that. We saw a lot of companies move to Vietnam; it had more of a competitive advantage All of these things are there that can be tapped for the future, but unless those short-term issues get taken care of, then they are not going to be able to get the benefit as much. Of course, there are other structural reforms that are needed to create a more robust basis for competition in the economy, and those reforms need to continue to take place.
MR. MALPASS: Thank you, Victoria. I'll switch subjects a little bit. We haven't mentioned, but I want to, the importance of the supply side of the vaccine issue, as well.
IFC has been involved in expanding the supply. Two weeks ago, they announced an expansion that will be underway in South Africa for Johnson & Johnson vaccines. I think in Asia we can look to added supply and ways to increase the supply, as well as freeing up the excess doses from the advanced economies. I want to mention that the pace of approval of vaccines through WHO will be an important variable in how many vaccines are available during the rest of 2021 and into 2022. Thanks.
MR. THEIS: Thanks very much. And next, we have Cindy Yeap, from Malaysia. Cindy, over to you.
MS. CINDY YEAP: Thank you. Hi, everyone. Mr. Malpass, the World Bank strongly encourages advanced countries to release extra vaccines. Data-wise, what does the World Bank research say about what is it in for them to release the vaccines, and how much would global growth and growth in East Asian countries like Malaysia potentially be helped if these extra vaccines are released immediately?
MR. MALPASS: Yes, thank you. What's in it for them is a world that's got a stronger economy, plus less of an environment that causes the variations. It's very important that vaccinations be available broadly in the world, including to developing countries and poorer countries, because there's transmission worldwide of the disease.
It's clearly very beneficial to the advanced economies to give up excess doses in order for those to be available in developing countries. I want to be clear on that.
I'm sorry, I forgot your second question. Cindy, what was your second question?
She was muted. I lost it.
MR. THEIS: Sorry. We'll move right along to -
MS. YEAP: Sorry.
MR. THEIS: Oh, go ahead, Cindy.
MS. YEAP: Yes, my second question was how much would growth be aided and with the immediacy [of vaccines availability].
MR. MALPASS: Thanks. I knew it was a good question and I wanted to answer it.
I, along with Kristalina, Ngozi, and Tedros did a joint op-ed a week or so ago, noting the economic benefits that come from vaccinations. We think it's one of the best investments. It's clearly a huge return on investment for the country and for the world. It's clear it would add percentage points to the GDP growth of countries as their vaccination rates go higher. It’s hard to be specific in that, but the dollar value of having broad vaccinations is in the trillions of dollars for the world, many trillions of dollars for the world.
MR. THEIS: Thank you, and now, we'll turn to May Kunmakara from Phnom Penh. May, over to you.
MR. MAY KUNMAKARA: Thank you very much, David.
I have a question regarding how the spread of coronavirus has been affecting mostly in the public sector and this is affecting the government’s income-generating for the tax revenue. How will the slow income from the tax collection affect the government spending for this year? How will this affect the economic recovery after the coronavirus hit hard on the Cambodian economy, and how has the World Bank been involved to avoid any shocks on Cambodian economy? Thank you.
MR. MALPASS: I'm going to turn to Victoria. But the general point, worldwide, as the pandemic hit, the revenues of governments went down a lot.
I was in Venice last week and sat next to the Slovenian Finance Minister, and I think their revenues in 2020 were down some 30 percent. They're recovering now and their growth rate is positive in 2021. That’s one country's experience.
What I wanted to dramatize is the huge impact that it has had on revenue collection, and that makes all the more important the early recovery…We didn't talk about it, but the World Bank Group as a whole, our commitments over the last 15 months of the pandemic reached $157 billion. That's an increase of 60 percent over the previous 15 months. It’s been a major effort by the World Bank to provide support, including with Cambodia.
Let me turn to Victoria.
MS. KWAKWA: Sure, David thanks. To be honest, the question wasn't very clear. The audio wasn't very clear. But let me make a few comments about our perspectives on the growth possibilities in Cambodia.
Like other countries in the region, Cambodia is also struggling to address the new variants. It’s had to do significant lockdowns, even though, Cambodia, by now, has the highest share of the population vaccinated in much of the region, or maybe the second highest, after Singapore.
That is good, but that's still not quite where they need to go, and they're trying to do more. Our estimates are that Cambodia could grow at about 4 percent, assuming that they're able to be successful in getting these new variants under control and right on the back of some improvements in exports and leverage the trade agreements that they've signed and some anticipated reforms in terms of foreign investments later in the year.
Now, on the downside, it could be as low as just 1 percent, particularly if they're not able to get a good handle on the pandemic. The country also has a bit more fiscal space and they can continue some of the spending that is needed, particularly on the investment side to continue to support growth, but they do have risks. There was a huge construction boom that was happening just before COVID, and that stalled a bit. We're also seeing that, as firms are weakened by the pandemic, there are implications for the banking sector and there will be vulnerabilities there. Those areas need to be looked at very carefully to make sure that you don't have a lot of macro instability drivers building up in the economy.
I hope this answers, or gives some information, that is relevant to your question which, unfortunately, I didn't hear very clearly. Thank you.
MR. THEIS: Great. Next, we have Maureen Simeon from the Philippines. Maureen.
MS. LOUISE SIMEON: Hi, good morning, Mr. David. How do you view the Philippines growth trajectory this year given this slow COVID-19 vaccination rollout? Some are saying that the country is at risk of becoming a basket case because of lingering economic growth as compared to other countries in Asia-Pacific.
Also, I want to get your thoughts on the importance of aggressive fiscal spending and additional taxation for the country and other developing economies, as well, as they recover from the pandemic. Thank you.
MR. MALPASS: Thank you. There have been a number of key structural reforms in recent years that I think are still available to pay benefits for The Philippines. I think what we have to recognize is that COVID has been a devastating blow around the world, including for The Philippines. We've worked with them on a vaccination program, and I think there's progress being made on that.
A key part of how countries develop is in how to allow businesses to be created and The Philippines has made progress on streamlining some of those processes; that's been important. I think there are obstacles. Countries around the world are facing obstacles due to COVID and due to political strains that are going on.
I'm going to turn to Victoria to discuss. We’ve been aware of the importance of legislative changes that are being considered. Victoria.
MS. KWAKWA: Sure, David, thank you.
You said some commentators see The Philippines as likely to become a basket case. I don't see that's how we see it at all. I think there is still a strong reform agenda that is being implemented. We have supported some of this both in the financial sector and on reforms to do with competitiveness, and all of these are important to address some of the structural impediments to long-term growth.
Now, of course, the country has been strongly hit by COVID. As David has said, some of our support is being rolled out. Some vaccines arrived in June, under our financing of Moderna vaccines; a first batch of them arrived on June 27th. That should also really contribute to the vaccination effort. Last year, The Philippines’s economy shrunk by 9.5 percent. That was a big one, but I think that with the vaccination that's in process, with some of the reforms that are ongoing, we will see a rebound in 2021. The Philippines will need to continue to address some of the structural constraints to long-term sustainable growth. But we don't see it as a potential basket case, at all.
MR. MALPASS: I'm sorry to come back. What I was referring to, is there is a negative list for foreign direct investment, and I think there are things that The Philippines can do now that makes it more attractive to investment, and that will help with the recovery process, so I just wanted to mention that. Thank you.
MR. THEIS: Great. And Lia, we'll get to you in a moment, but after Maureen's hand was up, we got a question from ABC Australia in the chat. David, Victoria, if you have a minute longer for a couple more questions that came in.
You identified, David, plans for new coal-fired power generation capacity in Asia as a major challenge to global efforts to curb climate change. How urgent is it that Asian economies make a rapid transition to net zero? Do you believe the existing targets laid out by some Asian NDCs are especially ambitious? Is it imperative that countries have laid out a clear timeline, including Australia, to meet net zero?
There’s all of that. Thank you.
MR. MALPASS: Those are huge questions or issues facing Asia because of their dependence on the expansion of coal-fired electricity generation. I mentioned in my opening remarks the 250-gigawatt expansions that are in the works, which is very large by global standards.
That needs to be addressed country by country for the Asian countries, and worldwide, but we're talking today about Asia. The critical step is identifying, country-by-country, the process that can be used to bend the curve. Emissions are going up in many countries including, for example, in Vietnam, in China, in India, because of permits that have already been granted.
In order to bend the curve, there has to be decisions made on decommissioning old coal-fired electricity generation plants and/or also reducing the dependence on planned expansion of coal-fired electricity. That means finding substitutes. That is being built into countries' NDCs, the Nationally Determined Contributions that go to the Paris Agreement. But as we look at the NDCs, not enough is being done by various countries. That's where the World Bank is putting effort into working with countries to try to strengthen their NDCs and, in particular, create a just transition away from coal that will actually bend the curve in terms of the projected output of greenhouse gases from the coal-fired electricity generation.
MR. THEIS: Thank you. And Lia, now, we're turning to you from China Daily. Lia Zhu, go ahead.
MS. LIA ZHU: Thank you. My question is, given the growth of China, what role can China play to drive the global economic recovery, and how do you see the World Bank can work with China to help with the global recovery? Thank you.
MR. MALPASS: Thank you. That is important. China's economy is the second biggest in the world. It is likely to be the largest in the world in coming years. Its activities that benefit the rest of the world become very important to global growth. I'll mention some things that it can do.
One is to allow its growing demand to be met by products from elsewhere in the world. Countries benefit from global trade and from imports, as well as from exports, because the imports allow innovation, they allow dynamism. As China looks to its future, it should be allowing a better balance between investments that are aimed at the internal market and by not putting so much emphasis on investments aimed at the export market. That would be one.
Another important aspect of China's interaction is through the investment flows that are going to developing countries. I think there can be substantial improvement in the transparency of those investment flows and of the debt that's associated with those investment flows. These are important both from the standpoint of the recipient country - the country that's being invested in can get a better outcome if the investments are more transparent - but it also benefits China, because there's a more sustainable relationship with the countries. Those are two of the issues where there can be exchange.
One thing that we've worked with, and I've talked with Chinese leaders, and Victoria knows this a lot, is China sharing its experience with the rest of the world. China made remarkable progress on poverty reduction through programs that allowed good ideas in one part of China to be transmitted to other parts of China. There's a scalability that's been very helpful in China's experience with poverty reduction, and that includes in the agriculture area, in the small manufacturing area, in the transportation area, where innovations in one part of the country are used in other parts and I think they are applicable in other parts of the world as well. These are some ideas.
Victoria is an expert in these. Want to add, Victoria?
MS. KWAKWA: No, David, thank you. Not much more to add.
I think the other thing is just China's weight in the global climate challenge; and therefore, all the work that we're doing with China to help China sharpen its NDCs as it prepares for the COP, and also meet its long-term decarbonization plans, as have been indicated by President Xi. That clearly is going to be very important for the global community and also for global growth, long term.
MR. MALPASS: Thank you, Victoria. That was the most direct answer to the question, how can China help and participate in the rest of the world? Through global public goods…the classic issue of global public goods is the particulates that go from one country and are transmitted to other countries.
Marine plastic is a very clear physical example and carbon dioxide is a gas example of activities that in one country have an impact on the rest of the world, and China's engaged in that. We're very engaged in China in those issues and I think there's some progress being made but lots more needed. Thanks.
MR. THEIS: Thank you. There are a few more questions in the chat, but I know we're running over and it's getting late in D.C. My colleagues on the East Asia team have offered to send those answers in writing to the three reporters that have written in, if that's all right, unless folks want to stay on. But I think we've run over already.
MR. MALPASS: These were great questions. Thank you, David, and thanks, everybody, and thanks, Victoria.
MR. THEIS: Thank you all very much. Thanks for joining. Appreciate it.
MS. KWAKWA: Thank you everybody.