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Asia-PacificApril 26 2021

Financing the Covid-19 vaccine in emerging Asia

Ensuring Asia’s population has access to Covid-19 vaccines has required the public and private sector to step up with financial support.
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Financing the Covid-19 vaccine in emerging Asia

Battling the coronavirus requires a joined-up international approach; however, as has already become apparent, many countries are surging ahead with their vaccine programmes, while others are yet to administer a single dose. 

To combat this inequality, and the inherent risks this brings to both economic recovery and virus suppression, financial institutions across Asia have stepped forward to ensure smaller economies are being provided with support to obtain and distribute essential vaccines. 

HSBC has teamed up with the Asian Development Bank (ADB) to provide $300m in financing for the vaccine rollout in the region. The focus of the collaboration is to support the supply chain in the vaccine production and distribution process. Taking the form of trade finance loans, supplier financing and working capital, the facility aims to support the entire supply chain. 

This will fill the gap of sovereign support, which has mainly been on the distribution side. Surath Sengupta, global head of financial institutions and portfolio management at HSBC, explains: “On the supply chain side, there are not just the tier-one suppliers that are producing the lipids for the vaccines, but also the tier-two suppliers creating the glass vials. They’re all required to make sure there are adequate supplies of the vaccine. Our aim is to make sure the supply chain financing reaches all of those who are connected to vaccine production, and as deeply as possible.” 

The ADB made available a $500m vaccine import facility as part of a $9bn project launched in December 2020. The collaboration with HSBC forms part of a co-financing initiative with private sector partners — a move which the ADB forecasts could result in the facility supporting $1bn of vaccine-related imports within a year. This agreement follows a $1.2bn partnership between HSBC and ADB, signed in July 2020, to support personal protective equipment (PPE) suppliers.

Mr Sengupta says private financing plays an important role in the pandemic response. “Normally, vaccines have significant lead time for pharma companies to develop the supply chains and distribution networks, and ensure the adequate dosage is available. But right now, demand far outstrips supply. These supply networks need to be further extended and strengthened, as this is likely to be an annual vaccination programme,” he explains. “This needs to have not only supply chain financing, but working capital financing to keep the supplies going. One way this can be achieved is through public–private partnerships, like the one we have entered into with the ADB.” 

Joined-up approach 

Gavi, the vaccine alliance co-launched the Covid-19 Vaccines Global Access (Covax) scheme in conjunction with Coalition for Epidemic Preparedness Innovations (Cepi), Unicef and the World Health Organisation (WHO) in June 2020. Although this is a global initiative, there has been strong support for Asian nations, including sending supplies to Timor Leste, Fiji and Samoa. This project has seen further support from organisations such as the World Bank. 

A collaborative effort is also helping to increase the rollout. The World Bank and the ADB have provided $100m as part of a co-financing project in Bangladesh. The Asian Infrastructure Investment Bank’s (AIIB’s) first vaccine programme was also a co-financing project with the ADB, providing a $300m loan to the Philippines for the procurement of vaccines. 

Joachim von Amsberg, vice-president of the AIIB, explains: “[The programme] supports the Philippines government in providing vaccines for approximately 50 million people — 43.8% of the population. It is critical to support the country’s vaccination targets and plan to protect the vulnerable population, and accelerate its economic recovery path.” 

Our aim is to make sure the supply chain financing (SCF) reaches all of those who are connected to vaccine production, and as deeply as possible

Surath Sengupta, HSBC

The AIIB has established a $13bn crisis recovery facility (CRF) to support public- and private-sector entities for the 18 months through to October 2021. Working with other international partners is helping to accelerate the vaccination programme. “AIIB’s financing for vaccine purchases is well coordinated with other international partners, such as the World Bank, ADB, WHO and the Covax initiative,” Mr von Amsberg says.

He continues, “We join partner multilateral development banks to co-finance procurement and deployment of eligible vaccines under the CRF, assuring adherence to international standards. Our collaboration with co-financing partners in our vaccine-financing projects is consistent with our mission to promote regional cooperation and partnership in addressing development challenges.” 

Providing support also means giving the ability to direct funds to the areas of the distribution programme in most need of support. A spokesperson for the World Bank says: “The World Bank funding is designed to be flexible. It can be used by countries to procure doses through Covax, or other sources, as they become available. It can also finance other key deployment and health system strengthening activities, such as medical supplies, PPE, vaccine cold-chains, training health workers, data and information systems, and communications and outreach campaigns to key stakeholders which are key to ensuring vaccination acceptance.” 

The World Bank has created a $12bn envelope covering 24 months to support developing countries in the vaccine programmes globally. As of April 2021, five Asian countries have received more than $1.2bn in support: Afghanistan ($113m), Bangladesh ($500m), Mongolia ($50.7m), Nepal ($75m) and the Philippines ($500m). These funds are provided as grants or loans with highly concessional terms. 

Long-term developments 

Setting up a Covid-19-focused plan allows other planned medical processes to continue. They do not want to risk pushing other essential vaccination programmes to the side to prioritise the Covid-19 rollout. The WHO, for example, is still running programmes to combat measles, rubella, and Japanese encephalitis. Shanella Rajanayagam, a trade economist at HSBC, says: “From a macro perspective, the Covid-19 supply chain is still scaling up, and focus and resources are going towards that. It remains to be seen whether there would be any trade-offs further down the line for other vaccines when these supply chains are scaled up for the Covid-19 jabs, rather than their existing suite of vaccines.” 

Even with the vaccine rollout in place, there is a further need to ensure they are reaching the right people and providing support across the community. Mr von Amsberg says: “The AIIB calls for swift and accelerated actions to increase vaccine availability and speed up vaccine rollout. These include expanding vaccine production and accelerating vaccine approvals to ensure availability for the frontline health workers and the most vulnerable population. There should also be enhanced social mobilisation and communications to increase demand for vaccine and address vaccine hesitancy.” 

Looking to the long term, providing support for vaccinations will help to slow the widening economic gaps being seen between countries that have moved on from the worst of the pandemic and those still in its grip. Referencing its spring 2021 edition of ‘South Asia Economic Focus: South Asia Vaccinates’, the World Bank spokesperson says: “The economic benefits of vaccination are huge. The vaccination campaign in south Asia is estimated to prevent a cumulated 10% gross domestic product (GDP) loss in the year 2022 and beyond, at a cost of up to 0.55% of GDP in the region.”

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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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