COVID-19’s challenge to donors and international institutions in Asia

Asia World

Author: Peter McCawley, ANU

In the face of COVID-19, leaders are focussed on protecting their own citizens and their own economies. The last few weeks have delivered a huge shock to the idea of globalisation and in its place the nation-state is making a powerful comeback. After all, when we are keeping a careful distance from even close friends, suggestions of giving attention to international links seem irrelevant. But the implications of these changes in thinking toward globalisation are significant for developing countries in Asia and the provision of aid.

A worker walks past inside the Asian Development Bank (ADB) headquarters in Manila (Photo: REUTERS/Cheryl Ravelo).

A worker walks past inside the Asian Development Bank (ADB) headquarters in Manila (Photo: REUTERS/Cheryl Ravelo).

The rapid transmission of the virus across international borders has already dramatically illustrated the way that all sorts of key linkages now exist across the world. We can pull up the drawbridges for a time but at some stage we will need to start lowering them again. It will be hard to know when to start doing this and which drawbridges to lower first.

Because the international shock is global, its consequences will be far reaching, so key parts of the response will need to be global as well. International institutions across the world were transformed after the Second World War when the Bretton Woods financial system was created in 1944 and the United Nations was established in 1945. When the worst of the current crisis has passed, there will need to be much discussion about reforms needed in global and regional relationships.

In the interim, two developments across Asia are worth noting.

First, the main international response to the growing distress in developing countries across the region is being coordinated through the multilateral system. The World Health Organization (WHO) has implemented a range of programs to help countries in Asia respond to the crisis.

The WHO is doing its best, but its resources are pitifully limited. The annual budget of the WHO is around US$4 billion per year. This is less than US$1 per year for every person in the developing world. It hardly seems enough — especially when we know that there are many viruses in the developing world which pose a risk to the global community.

Large economic responses are needed from the international community. Developing countries in Asia will need to cope both with instability in international financial markets and quickly announce programs to bolster domestic economies.

The International Monetary Fund, the World Bank and the Asian Development Bank (ADB) have all announced emergency packages. The World Bank and the International Financial Corporation have announced a US$14 billion Fast Track Facility for projects to limit and respond to the spread of coronavirus, starting with projects in around 40 countries.

The ADB is providing policy support to policymakers and has announced a US$6.5 billion package in financial assistance. It also released a set of lessons on ‘responding to the coronavirus’ which summarises key global experiences, as well as the 2020 Asian Development Outlook with the latest worrying forecasts on growth in the region.

Second, the international response at the bilateral level is characterised by weakness.

Two aspects of the bilateral response are striking. One is that almost no Western donor country has shown interest in providing support to developing countries in Asia. Rich countries are unleashing staggering levels of resources to deal with problems inside their borders while most developing countries are hopelessly ill-equipped to cope. For most Western donor countries, this is not their finest hour. This collective response of Western nations sends a powerful message to developing countries — for this one, you are on your own. The corollary is that Asian countries should look to expand their own forms of regional cooperation.

The second aspect of the bilateral response is that China is quickly stepping up to the mark. In extending aid across Asia, China is building on numerous earlier programs of regional cooperation. In 2005, for example, China provided finance to establish a ‘Poverty Reduction and Regional Cooperation Fund’ in the ADB.

Southeast Asia has welcomed China’s support. Indonesian Defense Minister Prabowo Subianto personally welcomed goods from China when they landed in Jakarta.

Jusuf Wanandi from the Centre for Strategic and International Studies (CSIS) in Jakarta set out the issues clearly when he provided a summary of China’s role in dealing with ASEAN’s COVID-19 issues. This included steps announced at the Special ASEAN–China Foreign Ministers’ meeting on Coronavirus held in Laos in late February.

Wanandi notes that although international cooperation coordinated through the G20 proved effective in responding to the global financial crisis in 2008, since then ‘the G20 has become a more bureaucratic entity’ and therefore could ‘hardly contribute anything when the coronavirus became a pandemic’.

It is early days yet. But going by the way things look at present, there is unlikely to be much international support from OECD nations for developing countries in Asia to respond to the crisis. To the extent that there will be international support, assistance will for now largely come from multilateral agencies and China.

Peter McCawley is Honorary Associate Professor in the Indonesia Project at the Crawford School of Public Policy, The Australian National University. He was formerly an Australian Executive Director on the Board of the Asian Development Bank, Manila.

This article is part of an EAF special feature series on the novel coronavirus crisis and its impact.

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