Regional banks and advanced economies as keys to Global South’s sustainable growth

Part 3: The case for an ASEAN Development Bank and the expanded role of advanced APAC economies

As the Global South aims to strike a balance between sustainability and development, the topic of whether an ASEAN Development Bank (ADB) is necessary to complement the current regional Multilateral Development Banks (MDBs) comes up. Can developed Asia-Pacific (APAC) economies, such as South Korea and Japan, also take on a larger role in aiding the Global South, both as a strategic extension of their own economic interests and as a moral obligation? This section examines these issues, emphasising how advanced economies and regional solutions can promote sustainable development in the Global South.

The need for an ASEAN Development Bank

With a population of more than 680 million, ASEAN is one of the world's most vibrant economic blocs. However, it has serious infrastructure deficiencies; according to the Asian Development Bank (ADB), the area needs to invest $2.8 trillion in infrastructure between 2016 and 2030 in order to combat poverty, sustain growth, and adapt to climate change. 

An ASEAN-specific development bank could more successfully handle particular regional issues, even though current MDBs like the ADB and AIIB have achieved progress.

An ASEAN Development Bank could:

1. Tailor solutions to regional needs: Cross-border transportation networks, regional energy grids, and transboundary water management are some of the unique issues that ASEAN nations face. A regional bank would be able to create focused solutions because of its contextual knowledge
2. Enhance regional integration: Through funding connectivity-promoting initiatives like the Trans-ASEAN Gas Pipeline or the ASEAN Power Grid, an ADB might hasten resilience and economic integration
3. Leverage local expertise: An organisation with an ASEAN concentration could more effectively utilise local networks and expertise, guaranteeing that projects are both economically and culturally suitable
4. Mobilize regional capital: There are substantial savings pools and quickly expanding economies in ASEAN. By using these resources, an ADB could lessen its dependency on global or Western MDBs

The potential of regional banks like the Islamic Development Bank (IsDB) and the Development Bank of Latin America (CAF) is demonstrated by their success. For instance, with an emphasis on regional needs like digital connectivity and renewable energy, CAF has funded more than $200 billion in infrastructure projects throughout Latin America. In a similar vein, an ASEAN Development Bank might emerge as a key component of the sustainable growth of the area.

The expanded role of advanced APAC economies: Japan and South Korea

As developed economies in the Asia-Pacific region, South Korea and Japan have a unique opportunity to support the Global South on a bigger part. Both nations have advanced technology, strong financial systems, and a wealth of infrastructure building expertise. In addition to supporting global sustainability, they can strengthen their own economies by entering new markets and forming alliances by increasing their involvement.

Japan’s role:

Through the Asian Development Bank and the Japan International Cooperation Agency (JICA), where it has considerable sway, Japan has long been a pioneer in development funding. Japan is a logical partner for the Global South due to its proficiency in renewable energy, disaster resilience, and high-quality infrastructure. For example:

• Japan has backed the Mekong-Japan Cooperation Framework, which supports the development of human resources, infrastructure, and climate resilience in Southeast Asia
• Japan has pledged more than $200 billion to infrastructure projects in Asia and beyond through its Partnership for Quality Infrastructure (PQI), with a focus on innovation and sustainability

South Korea’s role:

South Korea, a leader in digital innovation and green technology worldwide, can also be very important. The Export-Import Bank of Korea (KEXIM) and the Korea Development Bank (KDB) have already provided funding for a large number of projects in the Global South. As an illustration:

• By 2050, South Korea hopes to be carbon neutral thanks to its Green New Deal, and poor nations can benefit from its knowledge of solar energy, battery storage, and smart grids
• The largest wind farm in Africa, the Lake Turkana Wind Power Project in Kenya, is one of the energy and infrastructure projects funded by the Korea-Africa Economic Cooperation (KOAFEC) initiative

Mutual benefits for APAC economies and the Global South:

1. Economic growth: Japan and South Korea can create new markets for their products and services by investing in the Global South, which will boost their own economies
2. Energy security: By assisting renewable energy initiatives in the Global South, we can lessen our dependence on fossil fuels worldwide and improve everyone's access to energy
3. Geopolitical influence: Especially in areas like Southeast Asia, Africa, and Latin America, South Korea and Japan can increase their geopolitical influence by broadening their development footprint
4. Climate leadership: By spearheading international sustainability initiatives, these nations can establish themselves as climate leaders and support global objectives such as the Paris Agreement

The potential of renewable energy in the Global South

There is a wealth of renewable energy potential in the Global South, especially in the areas of solar and hydropower. Africa alone has the capacity to produce 10 terawatts of solar energy, which would be sufficient to light the whole continent multiple times over, according to the International Renewable Energy Agency (IRENA). Similar to this, the Global South has enormous hydropower potential; the Grand Ethiopian Renaissance Dam (GERD), for example, is anticipated to produce 6,450 MW of electricity, making it Africa's largest hydroelectric power plant.

However, substantial investments in energy storage and infrastructure change are necessary to realise this promise. The IEA estimates that in order to modernise and extend power infrastructures in emerging nations, $1.2 trillion in investment would be required by 2030. This entails implementing smart grid technology, integrating renewable energy sources, and modernising transmission and distribution networks.

The middle ground: a balanced approach

A balanced strategy that incorporates the best features of both Asian and Western models is the "middle ground" in this context. In order to accomplish sustainable development goals, it entails giving the Global South countries the financial and technical assistance they require while also respecting their sovereignty and priorities.

This method acknowledges that there isn't a development option that works for everyone. Every nation has different potential and problems, thus development plans need to be customised for the local environment. For instance, certain nations might place more emphasis on social services like healthcare and education than others on the construction of infrastructure. 
The significance of collaboration and partnerships is also emphasised by the middle ground. Building coalitions of stakeholders, including governments, MDBs, the commercial sector, civil society, and local communities, as well as encouraging South-South collaboration and information sharing, are all part of this.

Final summary

The shift to global sustainability necessitates creative ways to close the gap between environmental care and development. Multilateral Development Banks (MDBs) are in a unique position to spearhead this endeavour, but their narrow regional focus and one-size-fits-all strategy sometimes hinder their efficacy. The evolution of MDBs to better serve the Global South has been examined in this opinion, with a focus on the growing role of advanced Asia-Pacific (APAC) economies like South Korea and Japan as well as the necessity for regional solutions like an ASEAN Development Bank.

This commentary's initial section criticised the Western-centric approach to development finance and emphasised the Asian model's complementary advantages, which are best illustrated by organisations such as the Asian Infrastructure Investment Bank (AIIB). The second section looked at the shortcomings of the current infrastructure funding arrangements, especially with regard to grid transformation and green energy, and offered practical answers for governments in the Global South and MDBs. The final section argued in favour of an ASEAN Development Bank to tackle regional issues and urged developed APAC economies to take a more active role in aiding the Global South, both as a strategic extension of their own economic interests and as a moral obligation.

We can build a sustainable future that benefits both the Global North and the Global South by encouraging cooperation between regional and international organisations, utilising the Global South's potential for renewable energy, and empowering local communities. MDBs, governments, and advanced economies are being urged by this article to put aside bluster and adopt creative, inclusive, and workable solutions.

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