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Asia-PacificMarch 27 2020

Development banks step up to Asia’s coronavirus challenges

Coronavirus has hit business across the world in a way never before seen during peacetime. Kimberley Long looks at how development banks in Asia are adapting their plans to support their clients through this unprecedented time. 
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Asian dev banks virus

Coronavirus has sent global markets into a tailspin, hitting the capital markets, trade and supply chains, and most importantly the health of millions of people in just a matter of weeks. In response, resources are being reallocated towards vital health and business services. And Asia's development banks are stepping up their response to meet the needs of their clients grappling with these extraordinary events. 

Where resources are being focused is changing. Tomoyuki Kimura, director-general of the strategy, policy and partnerships department at Asian Development Bank (ADB), says the bank will pivot its activities towards short-term support, with a priority on providing emergency funding for medical supplies and equipment. The ADB announced a $3.6bn injection in sovereign operations specifically to assist with the health and economic impacts of the outbreak. 

Previously planned projects may be postponed, however. “Some impact on existing projects will be unavoidable, although it is premature to make an assessment,” says Mr Kimura. “The ADB is working with governments to minimise the impacts and provide necessary support.” 

The bank is having to be nimble in its reactions. Mr Kimura adds: “We are very flexible in the use of resources, and can rally available resources to cover the most urgent situations. We can streamline business priorities to be more responsive, and work to quickly get board approval for any significant changes.” 

Business capital 

As well as supporting health projects, Asia's development banks are working to ensure businesses can survive. There is a pressing need to pump cash into companies struggling with the unexpected downturn. 

Mr Kimura says: “There is a need for urgent working capital. Companies and financial institutions are looking to supply chain finance and trade finance programmes to tackle the working capital finance needs.” 

In response, the ADB has made available $1.6bn in non-sovereign support for micro, small and medium-sized enterprises (MSMEs), and to assist trade. 

The European Bank for Reconstruction and Development (EBRD), meanwhile, which counts numerous locations in central Asia among its recipient countries, has pledged a €1bn solidarity package to provide liquidity, working capital and trade finance to both private and public sector clients across all countries of operation.

On a local level, the EBRD is looking at its clients and their economic sectors to work out how to best allocate responses. André Küüsvek, managing director for central Asia at the EBRD, says: “One can imagine that the SME sector in central Asia will be hit very hard and this is the biggest employer and contributor to gross domestic product in the region.” 

Mr Küüsvek explains the bank is aiming to be responsive to changes as they arise. “These are early days and it is difficult to tell what the exact impact will be," he says. "It is equally difficult to tell now what will be required most: the working capital, loan restructuring, grants or liquidity injections. The EBRD has been dealing with consequences of the 2008 financial crisis and, most recently, with after effects of the Ukraine-Russia conflict, so we know what to do and how to deliver in difficult times.” 

Tailored responses 

Development banks focused on clients with a specific set of requirements have also been stepping up their response. The Islamic Development Bank (IsDB) has set up a Strategic Preparedness and Response Facility worth $730m. This is split into $280m from the bank and the Islamic Solidarity Fund for Development for sovereign projects, $300m from the International Islamic Trade Finance Corporation to support trade finance, and $150m from Islamic Corporation for the Insurance of Investment and Export Credit for insurance coverage. 

Dr Bandar Hajjar, president of IsDB, says: “We have received several requests for assistance from countries in Asia, including Bangladesh, the Maldives, Kyrgyzstan and Tajikistan. We are considering allocating unutilised savings from the existing portfolio in these countries to respond to their most urgent needs in their respective health sectors. The bank is in discussion with the various government authorities in these countries to make sure that financial assistance is delivered in the most effective and swift manner.” 

For the Eurasian Development Bank (EDB), the focus is on the growth of its members market economies, and encouraging trade between them. Andrey Beliyaninov, chairman of the management board of the EDB, stresses that the focus has been on ensuring market stability. “Due to the risk to settlements, we are pushing for a move to local currency payments away from the US dollar," he says. "We currently oversee 155 accounts with 46 banks. We are expecting the situation to change as things develop, but we see no need to panic now.

“Things will change, but we will adapt to the situation. We will confirm all of the prospective investment projects and complete the required due diligence.” 

As well as serving their specific clients, development banks with Asian interests have also been looking at how they can work together. Mr Hajjar, who is also the chairman of presidents of the Multilateral Development Banks global group, says: “I am working closely with fellow development finance institutions to ensure we are providing unwavering and continued support to our member countries.” 

Mr Kimura adds that the ADB is also looking at collaboration. “We are working with the international agencies, the World Health Organisation, CVC [Credit Partners] in the US, the International Monetary Fund and other multilateral development banks to put together a coordinated effort,” he says. 

Healthcare infrastructure 

Institutions operating out of China are moving into the next phase of their coronavirus response. Based in Beijing, the Asian Infrastructure Investment Bank (AIIB) has been working closely with the Chinese government to strengthen the country’s public healthcare infrastructure. The bank sees the development of this infrastructure and the associated IT needs as being of vital importance in response to the virus. 

Jang Ping Thia, manager of the economics unit at the AIIB, says: “Developing economies will need to increase investments in healthcare and public health infrastructure. This is especially in the context of mega-trends such as urbanisation and increased trade connectivity. Without proper public health infrastructure such as clean water and sanitation, developing economies will remain vulnerable to such outbreaks. A country’s readiness to cope with epidemics is correlated with its quality of infrastructure.” 

He adds that the use of IT can actively help in the community response in dealing with an outbreak. “Mobile communications, broadband internet and computing have been used in epidemic response, and are particularly helpful in delivering information when transport services are curtailed," says Mr Thia. "During the ebola crisis, for example, several civil society groups leveraged text messaging to warn communities, some in far-flung villages, about ebola and how to avoid the virus. Mobile computing tools were also able to deliver standardised learning for health workers in the field, with information continuously updated as new procedures are corroborated.” 

Staff safety 

Part of the response of the development banks has been ensuring their staff remain safe throughout the pandemic. The ADB has postponed its annual meeting, due to be held in Incheon, South Korea, at the beginning of May, until September. The EBRD meanwhile has cancelled its 2020 annual meeting, which was scheduled to take place in London in May. 

“The ADB headquarters [in Manila] is now working from home,” says Mr Kimura. “But we are open for business and staff are continuing to work. We have functional IT operations for the tasks. We are still able to hold meetings with investors, management and the board through Skype.” 

Similarly, the EBRD has looked to flexible working. Mr Küüsvek says: “The EBRD has adopted a remote working pattern, which allows its employees to carry out their regular responsibilities without facing unnecessary risks associated with normal work and travel modes. We have robust procedures and IT solutions in place, which will allow us to remain fully operational.” 

The AIIB meanwhile is already looking towards resuming business as normal for its office staff. The bank had shut its doors over the lunar new year holidays and following the coronavirus outbreak moved to a period of remote working. As the crisis abated, it was able to welcome one-third of its staff back to its headquarters on March 16. Although there are strict social distancing restrictions and temperature checks in place, and the wearing of masks by members of staff required, it represents some hope that the banks will soon be operating again as normal.  

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Kimberley Long is the Asia editor at The Banker. She joined from Euromoney, where she spent four years as transaction services editor. She has a BA in English Language and Literature from the University of Liverpool, and an MA in Print Journalism from the University of Sheffield. Between degrees she spent a year teaching English in Japan as part of the JET Programme.
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