Asia-Pacific Development Journal - Volume 22, Issue 2, 2016

Bank credit is traditionally the largest source of finance in the Asia-Pacific region, but the role of capital markets has increased over time. There is substantial heterogeneity across countries. For capital markets to develop further, macroeconomic stability, strong property rights and enforcement of securities laws have been identified as particularly important considerations, together with building a state-of-the-art financial infrastructure, including trading platforms and clearing and settlement systems, and transparent information-sharing arrangements. Institutional investors tend to have long-investment horizons and, as such, contribute to the stability of the local market. It may therefore be appropriate to explore ways to increase their presence in the domestic bond and equity markets. Two possible approaches to accomplish this are to promote savings through national pension funds and insurance companies and to encourage the participation of foreign institutional investors in the domestic market by making it more accessible to them while at the same time being mindful of the risks to domestic financial stability associated with greater openness to international capital flows. Policymakers may also explore ways to take advantage of the emerging field of impact investment to support funding for projects that are intended to generate environmental and social impacts.

Several studies have shown the significant interlinkage between infrastructure and development among various economies in the Asia-Pacific region. Recognizing the central role of infrastructure in contributing to the improvement of human welfare and achieving the 2030 Agenda for Sustainable Development, the present paper looks into the following key areas: (1) status of infrastructure in Asia-Pacific economies and infrastructure financing; (2) evidence linking infrastructure and development; (3) public-private partnership (PPP) as an emerging infrastructure financing scheme for developing economies; and (4) the creation of new financial institutions for infrastructure financing in the region. Overall, the Asia-Pacific region’s large and expanding infrastructure needs may be addressed through various forms of financing. While tax revenues and borrowing will continue to be significant sources of financing for most economies in the region, PPPs and other emerging sources could play a major role in addressing infrastructure gaps.

Asia and the Pacific is one of the most disaster-prone regions and the possibility that climate change may exacerbate the frequency and severity of extreme weather events is a real threat to progress made towards achieving sustainable development. To secure sustainable development gains and build resilience in the region, there is an urgent need to undertake climate mitigation and adaptation action. Despite an estimated $391 billion in climate finance flows internationally in 2014, the gap between available climate finance and the financing required to limit global warming to two degrees Celsius and adapt to unavoidable impacts of climate change is growing. The present paper offers an overview of the climate finance landscape with a focus on the Asia-Pacific region, and of finance flows from international climate funds, multilateral development banks and subregional and national climate finance initiatives. The ultimate goal of the discussion is to provide policymakers in the region with an understanding of the state of climate finance and recommendations on approaches for mobilizing climate finance in the light of global efforts, regional trends and successful initiatives.

Over the years, the Asia-Pacific region has maintained its global lead position as the largest user of trade finance. Actively involved in international trade, Asian and Pacific small and medium-sized enterprises have been important contributors for sustaining the region’s lead position. Juxtaposed to the interregional high position enjoyed by the Asia-Pacific region as the largest user of trade finance in the world market, trade within the region is facing a persistent demand-supply mismatch and widening of trade finance gaps. Small and medium-sized enterprises, despite being the largest contributors to Asian international trade, are more adversely affected than large companies, giving rise to operational constraints and challenges. This has prompted some policymakers, national governments and international organizations to address the issues, invite suggestions to halt the persistent trend of the widening of trade finance gaps and take suitable measures to ease the flow of trade finance. Recognizing the importance and significant role of trade finance as an engine of growth, this paper reviews the status of and constraints to easy access to trade finance in Asia and the Pacific; assesses trade finance gaps estimated by institutional surveys; and identifies emerging issues and challenges, especially those faced by the small and medium-sized enterprise sector. Analysing the resultant policy implications, the paper finally brings to the forefront a set of remedial measures, presents recommendations together with a road map for policymakers to consider for implementation. The recommendations are innovative and suggestive of national action and regional cooperation.

Finance is fundamental to supporting sustainable development. It drives investment and jobs, which is the way most people escape poverty. Countries in the developing world face significant financing needs as they seek to modernize their economies, hence the importance of mobilizing all forms of finance (domestic, international, public and private) and ensuring they are put to their most effective use.