Pacific Regionalism and Stronger Regional Institutions : Paving Opportunities for ADFIP

1. Pacific Regionalism and Stronger Regional Institutions :Paving Opportunities for ADFIP Dr. Raymond N. Prasad Economic Adviser Economic Policy & Development Finance Pacific Islands Forum Secretariat

2. Outline Change Global Landscape Pacific Regionalism Regionalism & Development Finance Opportunties for ADFIP

3. Changing Global Landscape • Global Economy • Increased uncertainty in the short-to-medium term • BREXIT & US Elections • Focus will be on more inward looking economic policies • Progress in global market  slow or future not clear • Asia-Pacific – Biggest Concern is the Chinese Economy • Ramifications of the Chinese economic volatility: • Asian exporters to China • In the region  Australia & New Zealand  Implicitly to Pacific Island Economies • Q: What does this have to do with Regionalism?

4. Changing Global Landscape • Q: What does this have to do with Regionalism? • Global Economy is “Nature” whileRegionalism is “Nurture” • Regionalism is our key “Adaptation strategy” on our terms • PICs too small to impact alone but as a group represent a significant force in the global economy • Some Examples: • Global Recognition of “SIDS Group” and its challenges • Paris Agreement on Climate Change • Framework for Resilient Development in the Pacific (Forum Leaders’ Priority) • Parties to the Nauru Agreement – Fishing Revenues in PNA countries (Forum Leaders’ Priority) • Disaster Risk Insurance – PCRAFI Foundation + Multi-donor trust fund (Germany, US, Japan, UK)

5. Pacific Regionalism • Regionalism is essential and ultimate strategy in navigating the global economy and geo-politics • its’ not a smooth path either! • Pacific Regionalism has undergone is own fair share of criticism, costs and reforms • These are essential in mechanism design for regionalism • fit for purpose, dynamic, sensitive to a number of innate and external factors • No system is perfect you have to make it perfect and fit for purpose • Pacific Plan  Framework for Pacific Regionalism represents • the commitment and process to make it much more inclusive, transparent and accountable public policy process

6. Regionalism & Dev. Finance • Regionalism essential for PICs: • Solution to deliver Regional Public Goods • Alternative to an unachievable global solution • Regionalism  Sustainable Dev. Finance? • Cross-border investments and technology transfers • Potential for new regional financial mechanisms South-South investments (PNG and Fiji) Creating a regional market  ↓ diseconomies Regionalism  functional cooperation/integration Regional value chains and/or production sharing Harmonisation of financial regulation Elimination of nontariff barriers and dysfunctional regulatory asymmetries Cooperation and coordination in the area of macroeconomic policy New regional financial mechanisms: regional finance facility mobilise domestic savings across region develop regional capital markets Reduce risk  Risk pooling (Macro/Micro) Financing basic services infrastructure, energy, transport and ICT sectors warrant strong regional frameworks for improved outcomes

7. Pacific Regionalism • Regionalism is essential and ultimate strategy in navigating the global economy and geo-politics • its’ not a smooth path either! • Pacific Regionalism has undergone is own fair share of criticism, costs and reforms • These are essential in mechanism design for regionalism • fit for purpose, dynamic, sensitive to a number of innate and external factors • No system is perfect you have to make it perfect and fit for purpose • Pacific Plan  Framework for Pacific Regionalism represents • the commitment and process to make it much more inclusive, transparent and accountable public policy process

8. Opportunities for ADFIP • Opportunities within the Economy • Core role: financing development • Extended Core Role • Economic Stabilisation • Policy Intervention and time consistency –Impact on Credit Cycles  “Minsky Effect” • Policy Coordination – Central Banks and/or Government • Core ”node” in the Domestic Financing Network • Most countries started with the Development Bank “Node” (Commercial Banks followed) • Sectoral Intelligence – focus on what works

9. Economic Growth & Resilience Kernel Density of Real GDP Rate (%) 2004-2015 Level of Economic Growth Minimising Dispersion is Resilience Dispersion

10. Economic Growth & Resilience Box Plot of Real GDP Rate (%) 2004-2015 Min. Max. 3 Qtl 1 Qtl median Outliers mean

11. Opportunities for ADFIP • Opportunities within the Economy • Alleviating Financial stress + Counterparty risk • Look at and support Regional Options: • Why domestic taxpayers should finance regional projects? • Why not? • Bottom line  Profit - Increase the shareholder (Gov’t) value • Diversifies portfolio • All economic shocks are not same & how it impacts each PICs varies! • Ability to cross subsidise domestic “high cost” operations

12. Opportunities for ADFIP • Opportunities in the Region • Climate Change Finance • Blending Mechanisms • Sectoral Finance • Regional Economic Intelligence • Mitigating Risk and Uncertainty • Collaboration in other Regional Initiatives • CC Fragility & Grant Allocations • PIFS & WBG IDA Allocations • Financial Inclusion + Remittances • Private Sector Development (PS Dialogue + Proposal ACP Dev. Bank) • Economic Empowerment of Women • Role of • Development Banks (+DFIs) • MDBs + Donors

13. Financing Opportunities - ADFIP • Increasing investment in Economic resilience # Disaster Insurance - PCRAFI # Contingent Credit/Savings # Community Insurance # BoPSupport (MSG) # Regional Finance Facility (FEMM))

14. Thank You.