Financing for Development Dr Financing for Development Dr. Shamshad Akhtar, Under-Secretary-General of the United Nations & Executive Secretary of The Economic and Social Commission for Asia and the Pacific Dialogue of the Executive Secretaries of the Regional Commissions with the UN General Assembly Second Committee Monday, 23 October 2017, 10 a.m.-1 p.m.

Gross savings 10 Asia-Pacific countries rank among the world’s top 20 in terms of gross savings rate. Overall, the region has significant financial capacity to support sustainable development and the key is how to channel it to where it is most needed. Source: WDI

City finance Local governments in Asia-Pacific face significant vertical fiscal imbalances and heavily depend on central government transfers for local expenditure.   Share of Total Public Expenditure Share of Total Public revenue Country Subnational Upper Tier Lower Tier Bangladesh 15 5 10 2 1 India 66 33 30 3 Indonesia 35 7 28 8 5.5 2.5 Japan 60 20 40 Republic of Korea 45 25 Pakistan 6.5 0.5 Philippines 11 14 7.5 China 70 50 Thailand Viet Nam Source: ESCAP, forthcoming. Tax Policy for Sustainable Development in Asia-Pacific, Chapter 2. Data originally from Blane Lewis and Bob Searle. 2010

Tax revenue Public revenues can contribute more to SDG financing by increasing the role of personal income tax and wealth taxes. Currently, the tax structure in the region is skewed towards indirect taxes and corporate income tax.

Tax incentives Shadow/informal economy can lead to serious tax base erosion in developing countries, which can create pressure for governments to provide tax incentives to stay in the formal sector. Source: ESCAP, forthcoming. Tax Policy for Sustainable Development in Asia-Pacific, Chapter 3. Data originally from IMF, Government Finance Statistics; Hassan and Schneider (2016).

GST reform in India Tax revenue can also be increased by increasing the efficiency of taxation. The new GST in India will replace a wide range of indirect taxes imposed by the centre and the states, including central government customs, excises and services taxes.

Tax and inequality Despite fast growth and significant poverty reduction, the share of lower income groups in total consumption uniformly deteriorated between 1990s and 2010s. Source: ESCAP, forthcoming. Tax Policy for Sustainable Development in Asia-Pacific, Chapter 4. Data originally from ESCAP, based on World Development Indicators

Tax and inequality Wealth inequality is much higher in Asia-Pacific countries and typically peaks after income inequality peaks. Source: ESCAP, forthcoming. Tax Policy for Sustainable Development in Asia-Pacific, Chapter 4. Data originally from Credit Suisse, Global Wealth Databook 2016

Tax Revenues and Income Inequalities

Social Transfers and Income Inequality

Social Transfers and Tax Revenues

Infrastructure financing Newly established multilateral financing institutions will double the sources of multilateral & cross-border infrastructure financing in Asia-Pacific. ADB - Asian Development Bank EDB - Eurasian Development Bank AIF- ASEAN Infrastructure Fund SDF - SAARC Development Fund AIIB - Asian Infrastructure Investment Bank NDB - New Development Bank SRF - Silk Road Fund Source: ESCAP estimation based on official announcements and reports

Capital market Local currency bond market remains small in most Asia-Pacific developing countries, but fast bond market growth in countries like China and Thailand show its potential. Source: ESCAP, Working Paper, 2017. State of Finance in Asia and the Pacific. Data originally from ADB Asia Bond Online 2017.

Average Maturity Of Corporate Bonds (in years) Capital market The mismatch of demand for long-term financing and the relatively short maturity of corporate bonds in developing Asia-Pacific remains a significant challenge. Average Maturity Of Corporate Bonds (in years)   2000 2005 2009 2010 2011 2012 2013 2014 Advanced Economies United States 7.89 11.92 9.51 10.26 10.44 10.57 11.11 11.41 Germany 5.14 12.33 5.42 5.8 6.06 6.93 6.94 7.99 Financial Hubs Hong Kong China 4.1 7.9 9.6 5.9 8.6 9.2 6.1 6.47 Singapore 4.6 4.2 5.1 4.7 7.4 4.8 5.25 Mature Markets Japan 6.97 8.05 7.31 6.75 5.99 6.87 Rep of Korea 3.1 2.9 3.4 3.8 5 5.63 Australia 9.18 6.78 11.9 11.32 10.73 8.62 10.2 Growing Giants China 3.83 India 6.7 6.6 6 5.5 6.92 Emerging Countries Indonesia 3.9 4.3 4.4 … Thailand 5.13 Malaysia 2.7 1.1 7.1 7.7 Philippines 5.4 6.4 7.6 8.3 8.7 Source: ESCAP, Working Paper, 2017. State of Finance in Asia and the Pacific. Data originally from Ratna Sahay, Jerald Schiff, Cheng Hoon Lim, Chikahisa Sumi, and James P. Walsh. 2015. “The Future Of Asian Finance”. International Monetary Fund.

Capital market The stock markets in a number of Asia-Pacific emerging countries are already large in terms of market capitalisation, yet much less active compared with more mature markets in advanced countries. A. Stock Market Cap to GDP ratio in 2014 B. Stock Market Turnover Ratio in 2014 Countries Stock Market Turnover Ratio Kazakhstan 7.6 Sri Lanka 8.6 Philippines 16.1 Indonesia 21.2 Malaysia 29.1 Viet Nam 36 India 50.9 Republic of Korea 149.8 Japan 113.8 World 162.9 Source: ESCAP, Working Paper, 2017. State of Finance in Asia and the Pacific. Data originally from World Bank Indicators 2017 and World Bank Global Financial Database.