Why knowledge-embodied finance is the key to Asia’s future prosperity

In this episode, Jeffrey Saviano, EY Global Tax Innovation Leader talks with Bruno Carrasco, Director General and Chief Compliance Officer with the Asian Development Bank’s (ADB) Sustainable Development and Climate Change Department.

Jeffrey Saviano

Hey, Better Innovation. It's Jeff. We are recording this episode today, I think, right smack in the middle of season five. We have a really interesting guest lined up today. I think this is such a fresh perspective for the show.
You're going to love this one. We have Bruno Carrasco with us in the Better Innovation Studio today. Bruno has worked at the Asian Development Bank for more than 23 years serving many, many countries in the region. He's such an expert in a wide range of areas, including governance, public sector management and economic in general. Bruno was most recently the chief of the ADB's governance thematic group. He defined the bank's work on domestic resource mobilization on infrastructure governance, state owned enterprise reforms, and fiscal decentralization in general. And today, Bruno is the director general for Sustainable Development and Climate Change at the ADB. He's originally from Spain. He was educated in the UK and Canada. He's got his doctorate in economics from the University of Essex, master's degree from the University of British Columbia.
And he first started university at the University of Montreal with a bachelor’s in economics. We bring to you today our faithful Better Innovation listeners. Bruno Carrasco from the Asian Development Bank. Here we go. Bruno, welcome to the show.

Bruno Carrasco

Good morning, Jeff. It's a pleasure to be here.

Saviano

I have to say, Bruno, it is just wonderful for our audience, our better innovation audience to have you on the show today. We're going to focus our conversation on a few key topics. Can give a quick example of that for the audience. We'll talk about the support from the Asian Development Bank that you're providing in the region during the pandemic. And we'll talk about innovation across climate change and sustainability. And if that isn't enough, Bruno will even hit on new ways to promote public private sector collaboration. How's that? That would be a lot for us today. What do you think? Think we can do it?

Carrasco

It sounds most exciting. Over to you, Jeff.

Saviano

Well, and Bruno, you have had such an interesting career. You've worked at the ADB for more than two decades. I have to ask, how did somebody from Spain who was educated in the UK and also in Montreal wind up working with the ADB in such an important region in the world?

Carrasco

All right. Good question. So, to answer that, I'll have to take you back a few years. So, I was in 1991 working as a junior economist in the UNDP field office in Maputo, Mozambique. At that point I was completing my third year and as I was coming to the end of my contract, I suddenly saw an article, an advertisement rather in The Economist.
And the advertisement was from the Asian owned bank, and they were looking for young professionals. So, having completed that stint, I said, Okay, this sounds like a very exciting next adventure. I applied and well, it took a little while. I finally did get a reply and in 1993 I joined the bank as the end professional.

Saviano

Oh, that is so interesting. And it literally started from an ad in The Economist.

Carrasco

Absolutely. Who would have thought? Right. But I got, I used to be subscribed to I would get my economist with a few weeks behind schedule in my office and in there I saw the article and I applied.

Saviano

Bruno, that's so interesting. Tell us about what you were studying at the time and what field you were hoping to get into. All right. So, I had at that time I had completed my master's degree at the university British Columbia. I did my master's in economics. And from there I decided to get some experience. So, I went to the UNDP. I got an assignment in Mozambique and in Maputo I was basically working with the various ministries, Ministry of Finance, Ministry of Planning to develop really foundational work in terms of national accounts, looking at some statistics, basic statistics and that was mostly in the form of technical assistance projects that UNDP provided. I always had a keen interest in development as I was doing my master's, and I thought that that field experience would be great. Now, what I didn't say is that between 91 and 93, I embarked in my Ph.D. program at the University of Essex and that's where in some ways I decided that I needed to deepen a little bit some of my foundational work with always the idea that I would come back to the development work, which was a passion already at that time
That was the aim. So, you had a pretty, pretty good sense that you wanted to be into development. So, when you saw that ad and was there anything particular about this part of the world that interests you at that time?

Carrasco

I think that at that time I was quite I was young. I was, I think, 23 years old. I had a lot of curiosity about the different regions in the world. I had, going back to my background. I was born in Spain and then I left and spent my formative years in the U.S. and then in Canada. So, I had to very much the idea of traveling and seeing parts that I was not familiar with. One of which was, of course, Asia. I had enjoyed my time in Africa. And I thought, well, here's an opportunity. I may not get many such opportunities. So, I decided to go for it. At that time, there was, of course, a lot of interest in a lot of the developments that were happening in Asia. And I thought that working at the Asian Development Bank couldn't have been a better and more promising opportunity.

Saviano

And what a great institution that has played such an important role in the region, and especially the role that the ADB has played, for example, in the economic and fiscal recovery during the pandemic. You led teams at the ADB that was at the center of that effort. What were some of the key initiatives, Bruno, that the ADB launched during that time to stabilize economies during this pandemic?

Carrasco

So that's a very good question, because really the pandemic hit it hit the world, but it hit Asia Pacific in many ways that from the very beginning. We, of course, didn't know what that magnitude of the pandemic would be, what would be the severity. We worked as one ADB, so management came in and the view was that we had to take some measures as the Regional Development Bank to support our developing member countries. And we obviously saw that there was early on a sense that with the lockdown, with layoffs and the implications that this had on the well-being of people across the region, we needed to start thinking big in terms of particularly countercyclical support. So, we were sent back home in March. I was working in the headquarters and due to confinement, we worked from home and we realized that we had to put some big ideas on the table. So, the management put together to, I think, very, very important programs. Looking back with hindsight and these were really transformative. The first one was what we called the COVID 19 pandemic response option or CIPRO. And just to get a sense of how quickly we put this into action, by March of 2020, we had approximately six and a half billion dollars that we had ready for deployment and that started in April of 2020 but we soon realized that given the magnitude, that amount would not be sufficient to be able to have sufficient impact in helping our countries with that stimulus and counter-cyclical policies and packages. So, we ramped up to $20 billion and that I think was the beginning of what you know was a sizable set of packages that help our countries. And what is important is that not only was it, you know, quick disbursing budgetary support, but it was really focused on three areas strengthening the health systems of the countries, providing the social safety nets that were critical and of course, supporting businesses, including the small, micro, small and medium enterprises. Now, the other important program that we had come later in 2020 and that was following the discovery and manufacturing of the first vaccines. We realized very much from the beginning that if countries were to in some ways get into a phase that they could cope with the pandemic and start looking at recovery, we needed to ensure vaccines were available across the region. And you know how difficult it was in the early days, those vaccines were simply not available.

Saviano

Yes.

Carrasco

So, we put together what was called the Asia-Pacific Vaccine Access Facility. And there we were able to come up with a $9 billion package to help our countries procure and deliver safe and effective vaccines. So, as you can see, if we put together the two large programs 20 billion in pandemic response, 9 billion in vaccine procurement, it was a very, very important support that we gave our countries and I think that in many ways reflected a management team that was very much acutely aware of what the implications were, that we had to act fast, that we had to act proportionately in size. And I think that led to a lot of how would I say it helped mitigate a lot of the downside that could have been much worse in the absence of the programs. I wanted to say, Jeff, that we saw very good positive responses from countries. So, they basically did take important initiatives themselves in terms of expanding on the fiscal programs that they put in place, creating more expansionary monetary policy to be able to provide, among other things, the greater liquidity and the measures taken by the countries supported by these ADB programs, I think helped shield the region from what could have been a more drastic and severe outcome in terms of that downturn and recession and the impact on people.

Saviano

Well, thank you for going through that, Bruno. And it's such an impressive commitment to the region and response that the ADB held. I'm just so curious from a technology and perhaps other infrastructure standpoint, do you feel like many of the countries were ready to receive stimulus that such important levels as ADB provided and it had the pipes, if you will, to get those funds to the small businesses and individuals that needed them? Talk a bit about the infrastructure and the readiness of countries to move quickly during such an important time early in the crisis.

Carrasco

Right. So, there's no doubt that we have a very vast set of countries across the Asia Pacific. And there are some countries that had already fairly sophisticated health systems that in large part could absorb those resources were stronger. And in terms of being able to take their own measures to help contain the pandemic And there were other countries that just didn't have those health systems in place, didn't have the safety nets in place. And so, we had a very, very different set of countries that we had to deal with. So, one thing that was clear was that we had to provide support in line with that absorptive capacity. We had to make sure that we had technical assistance that in many ways helped in terms of supporting the countries with, you know, the policy framework that that was called for. We had also and this is an important point to note, we had in the regular course of business programs that were supporting a lot of the kind of the measures to address the vulnerabilities across the sectors of the population. So as an example, both in the Philippines and Pakistan, we had conditional cash transfer programs. And when the crisis hit, when the pandemic hit, we were able to use those programs to be able to channel those funds as part of the social safety net to those most vulnerable segments of the population. The systems were already there. The registrars were already there. And so that would be, in my view, a very critical element to be able to draw down on these resources quickly, which is what was required and try to mitigate some of the impacts, worst impacts in terms of, you know, people who lost their jobs, people who then fell into extreme poverty. So, this is an example of how, you know, our regular line of business was there to support this work.

Saviano

And of course, the pandemic impacted the economic development of countries in the region quite differently. Some nations and communities were, of course, hit much harder than others. What were some of those stark differences in the economic recovery across the region?

Carrasco

Right. So, I would say, first of all, if we step back a little bit, we have countries that came into the pandemic in a very different set of circumstances as I mentioned before. But also, you know, we had countries that had very different structures in terms of their economies. So those two factors in some ways were determining factors in terms of where countries were in the midst of the pandemic. Now, in terms of what I think were key factors, here is that, you know, those countries that, for example, relied heavily on tourism sector, on transport sector that had big transport hubs, those were obviously more severely impacted than other countries in Asia that perhaps had more of an IT industry exposure. And so obviously, the pandemic hit countries in a very different way.
In addition, and this, I think, is the critical point, when the vaccine program starts to kick in, we see a very uneven reaction or response. Some countries were able to procure vaccines, others less so. We had a clear understanding that any recovery had to be led by an expansion of the vaccine program so that we could get people back to work, so that we could get investment coming in. And so, for example, we have countries such as Singapore, Korea, Cambodia, Malaysia and even People's Republic of China that right now would have a very high level of vaccination rate of probably 80% and above. And yet we have other countries still that have vaccination rates of about 20% of the population. So, you can see it's very uneven. And that right now is what we're seeing. Those countries that have been able to vaccinate large parts of population, that have been able to bring back workers who have been laid off, lost their jobs back into their former jobs, are the ones that we're seeing recovering now more strongly. So, I think that's one at least factor that that we've seen in terms of that recovery process.

Saviano

And much of that, I'm sure, is cultural and those differences by country across the region. And of course, the pandemic was not the first economic crisis that that hit in the region. You can go back to 1997 and the Asian financial crisis. I'm sure that the recovery this time around was dramatically different from the crisis back in 1997. Any thoughts on that Bruno.

Carrasco

Right. Good, good question Jeff. I actually was involved in part of the recovery programs following the Asian crisis in 97-98. And I think first of all and it escapes a lot of us that if you look at the downturn of Asia as a whole, as a result of the pandemic, that downturn has been much worse than the downturn that we saw during the Asian crisis.
Now part of that is that the Asian crisis affected a number of countries very severely, but not across the region as we've seen with the pandemic. So, we have to put that perspective in place. But I think that what we've seen also similar during the pandemic during the Asian crisis was the devastating effect that it had on vulnerable people, and especially the setback in terms of what is our primary objective, which is poverty alleviation. So, during the COVID pandemic, we've unfortunately seen a halt in the decades of progress that we've made in terms of poverty alleviation. And as an example, in 2020 alone, we estimated that largely reflecting the drop in economic activity, it pushed those lying in extreme poverty to approximately 78 to 80 million people in the region. So, that included vulnerable groups, including women, youth, informal workers, migrants, etc. So, we've seen similar factors playing. But I think that what we've seen during the pandemic that we were not always able to observe during the Asian crisis was a very proactive role on the part of the governments across the region in taking responses, post positive policy responses, including what I alluded to before, the expansionary fiscal and monetary policies that surely contained some of the downside risks that we would have seen otherwise. And for that matter, I think that it was something that, by and large, it could have it could have been, you know, a situation of greater chaos and disruption than what it turned out to be. This is not to say that it didn't create tremendous pressures, dislocation, loss of families, obviously deaths but I think overall it's been from that. Certainly, from a policy perspective, it's been handled very well. I would say. Now, in terms of the other considerations, that is important to bear in mind. Many of these countries had already started investing in the social sectors in health and education. And so those that were a little bit ahead of the curve in terms of those investments, they were better able also to address some of the, you know, greater disruptions from the pandemic. And there, again, we see a range of countries there, those countries that didn't have the health systems, they were forced really to confine to take very blunt measures because there was no other measure to avoid the contagion and the intensity of the of the pandemic. So interesting to see these various developments at play.

Saviano

And so much work left to do. Of course, it'll take one other aspect that you mentioned early on is the important role of domestic resource mobilization and specific actions by the countries themselves. It's not as though that that they could just wait for the ADB to solve all of their problems, that it really takes that village. It takes in the aggregate organizations like ADB and other civil society organizations on the ground in countries and countries themselves. As if the recovery wasn't complicated enough for ADB and the important role that you were doing, Bruno, your role changed dramatically at the ADB during the pandemic. You had a bit of a pivot in your career to climate change and sustainability, leading those efforts now at the ADB. And at least I can say from my perspective, what an interesting time to assume these responsibilities during the lead in to the COP26 UN Climate Summit. I'm just so curious, Bruno, what are the climate change and sustainability priorities now for the ADB as just to pick up on our last conversation as ADB is still aiding countries that are reeling from their pandemic, what about climate change and sustainability?

Carrasco

Right. So that's another very important development challenge that we're all facing, of course. And I think that we need to put some perspective into it now in that we often refer to the fact that the climate change battle will be won or lost in Asia. And why is that? Well, nearly 50% of global GDP is sourced out of Asia, and slightly over 50% of global greenhouse gas emissions are sourced in Asia. So, you can see that that size matters here. In addition, the Asia-Pacific region is extremely vulnerable to extreme weather events largely traced to global warming, including such things as typhoons, floods, droughts. And these of course, destroy communities. They take lives and it comes at a large cost to the economies as they wipe out large parts of that infrastructure asset base that they have. Now with President Asakawa, he came in early 2000 as our president and he has been taking a very proactive leadership role in the context of climate change challenge. So last year, in the run up to COP26, we raised the level of ambition in terms of climate change financing on our own source, climate change financing. Cumulatively from 2019 to 2030 we raised it by about $20 billion from 80 billion that we had before to 100 billion. Now with that, we are committed to becoming the climate finance bank for the region. But, just going a little bit beyond we had a strong presence last November in Glasgow. We did have a number of, I think exciting contributions in terms of initiatives that I think attracted quite a bit of interest. We were able to mobilize close to a billion dollars in financing in terms of these various initiatives that we announced and some of them, you know, range from such things as getting more contribution to adaptation which is always the harder of the to do in adaptation and mitigation. We have the Community Resilience Partnership. We had a lot of interest in terms of developing further the carbon markets. We did also announce a very exciting initiative which is known as the energy transition mechanism. And the idea there is to be able to look at how we can start decommissioning coal power plants. And that is also very exciting to the extent that we have to look at how we could mobilize funds from the private sector, from philanthropists, and if we can blend that with some grant financing, we have the possibility not just to stop the flow of new coal plants. And of course, with the ADB's recently approved energy policy, we have a clear no to coal projects, but also, we can start reducing the stock of existing coal plants that are still very prevalent in the region. So, these were some of the of the initiatives Jeff, but I think that overall, we're mainstreaming climate change across the Asian Development Bank. We see that there is a tremendous opportunity to use the pipeline of projects that institutions like the ADB and other multilateral banks are known for and be able to even expand that using guarantee facilities that will help us to expand the reach on climate finance projects.

Saviano

And Bruno, you were in Glasgow for the conference is that right?

Carrasco

I was, yes.

Saviano

Was there was there a particular message or outcome, any aspect of Glasgow that you feel will be particularly important for the region? Give us one important takeaway from your time at COP26.

Carrasco

Right. So, I think that there was an increasing challenge of going to Glasgow where we still weren't sure whether there could be a physical convening of the meeting where the pandemic was still very much present and active in many countries. So, I think the organizers, the UK did a fantastic job in being able to bring everyone together. Obviously, we always expect there to be a greater level of ambition. I think we managed to move the needle and that was an important step forward in terms of the climate change agenda. I think that we will probably remember the famous wording that we were unable to phase out coal but we're facing down coal and I think that's an important step in that direction. And I think I would say that in line with our own work, the importance of adaptation and focusing much more on the need to address adaptation constraints and urging developed countries to at least double the funding for adaptation of the 2019 levels to 2025 by at least 40 billion. That's with calls to for MDBs like ourselves and the private sector to come in. I think that sets a clear trajectory in terms of what is at stake. What do we need to do? So, I think that overall, the combination of measures will keep us going. We're obviously working hard in implementing many of those initiatives that were announced in in Glasgow. And like always building towards the next COP27 in Egypt and trying to keep not just to building the momentum but coming up with new initiatives that can again capture the focus and resources to be able to make that progress and that push forward. Just maybe to say, we recognize also that the nationally determined contributions we need to get countries to be more ambitious. And for that, of course we have to recognize that not only is there a resource transfer involved, but also technology transfers as countries transition towards cleaner renewable sources of energy. I appreciate the point, Bruno knows about the reliance on coal in the region in particular, and it won't happen overnight. Many countries won't be able to pivot from that overnight to renewable sources. One of the key outcomes of COP26 was to achieve net zero emissions by 2030, just given the reliance that many countries in the region still have on coal and in other fossil fuels. Do you think that would be achievable in many countries in the region?

Carrasco

So, some countries are likely to be able to meet that target others. We fear they may not. I think that right now the NDC national chairman contribution assessment, what it does show is that even if all the commitments that were announced are successfully implemented, we would still it would still only get us to 1.8 degrees Celsius, where of course the aim is to keep it within the 1.5 degrees Celsius range. So, obviously it's not enough. And that remains a daunting task. And of course, that's where institutions like the Asian Development Bank play an important role. So, it is not necessarily a question if it is realistic, because we know that it has to get done. And so, there is still a need to elevate the awareness and awareness raising but it also, I think, there needs to be a recognition that we're all in it together, that there are various stakeholders, governments, private sector, civil society. And we all have a role in making sure that we can reach that, that net zero target by 2050. I remain generally an optimist. I do think that the glass is half full rather than half empty. But we need to be still very strong. We cannot be complacent. And I think we need to raise the level a further notch or two as we get ready for COP27.

Saviano

We are here today with Bruno Carrasco with the Asian Development Bank. I'm Jeff Saviano. This is the Better Innovation podcast. And Bruno, one of the aspects of the pandemic recovery that we're witnessing here at EY and I can say from our work in our advanced technology lab are the opportunities for public private partnerships. I think what we're seeing around the world there is such a need and a desire for the best of the private sector and the public sector, multilateral organizations, finance and organizations coming together in new ways in order to help with the recovery and especially from an economic standpoint, as we were getting ready for this interview Bruno, you introduced a new phrase to me, this idea of knowledge embodied finance. Take us through what you mean by that.

Carrasco

So again, I'll probably have to step back a little bit. As a as a development bank, Jeff, we recognize that we have to be fundamentally relevant to our clients. And here we're talking largely across developing member countries. Increasingly, these countries do not see ADB as a source of financing. They can many of them can mobilize funding in the capital markets. Others may still need to come to us, but we recognize for us to remain relevant. We need to be more than just a source of financing. We need to be able to address some of the developed challenges that they have.
And for that matter, we need to be what we refer to as a solutions plus plus bank. The first plus would be finance. The second plus would be knowledge as we advance in our journey to become a knowledge bank. We would bring knowledge first and finance second. And I think that's already happening with a lot of our upper middle income developing countries where they are looking at such things as new innovations, new technologies that can be applied to address many of their developing challenges. I think that, for that matter, we have embarked in this journey to become a knowledge bank. We have approved last year a very important policy or action plan called the Knowledge Management Action Plan. And what the plan does is it tries to bring together the pillars of people in culture, process and systems and relationships to provide the high quality, relevant knowledge to support our lending. So, when we talk about the knowledge embodied in our loans, what we mean to say is that you know, the countries are able to borrow and they get more than just a financing solution.
They get a solution that may embody some latest technology that can be applied. It may embody some modeling in terms of, say, climate change and one in 20 years, you know, extreme weather events. It could mean building something based on some work that we've done with big data. And I think that's what makes the difference. And that's what we have to strive to become a knowledge-based institution that can be much more relevant and a stronger partner in our countries as they address many of these challenges and look towards greater wealth creation.

Saviano

And that knowledge transfer would undoubtedly assist in capacity-building within these countries that I think the essence of what you're saying, Bruno, is that that the ADB just can't write a check and solve all of the problems in the world. But it's the knowledge, perhaps it's the data to provide data driven insights for countries. It could be technology. It's hard to imagine today that there are many large and significant material development efforts that do not include technology. And even with the advent of new technologies and how they're being applied in countries, they will need support. They'll need support in how to install, how to maintain and no technology system is ever complete that would need to be maintained and additional features and functions down the road. Is that the nature of the support that the ADB provided in that in that capacity to help and assist in building capabilities within nations?

Carrasco

Very much so, Jeff. I mean, we have traditionally had loans across different modalities, from project investment type loans to policy based loans and results based loans. But we also have the technical assistance work that is very, very important in terms of precisely what you mentioned, the capacity development, the building of know-how, the transferring of new ideas. And that is something that we value very much because it allows for countries not just to leapfrog as we've seen with mobile telephony, for example, but also to be able to aspire to overcome many of the acute constraints that were not easily solvable in the past. And I think that any way you look at it, that's the value addition really that can be brought to countries. And it's a more and more and increasingly we see countries that are able to address many of those deficiencies. But at the same time, a lot of the challenges are becoming more and more complex. And we were just talking before about climate change you know, how do you how do you address climate change when you have a host of other priorities that you need to look at and to address. So, then you have to get even smarter in saying, okay, how is it that I can combine some investments that will help me in terms of maybe not just getting you know, building that that road that can withstand that one in 20 year extreme weather event, but how can I make sure that with that investment I'm also being able to address some of the, say, sustainable development goals that that we're also very committed to supporting our countries on. So, these are some of the questions that arise and where you see how knowledge can help in that and that dilemma that many countries still face.

Saviano

And we're finding that the best of the economic response around the world has included some element of public private partnerships. And then can you talk a bit about that in the region and how important are public private partnerships to the ADB? How does it help, for example, in in building capacity or in your notion of knowledge embodied finance? That knowledge doesn't all have to come from the ADB, it can come from the private sector as well. Is that fair, Bruno? And can you give an example of such a partnership and how it has impacted countries in the region?

Carrasco

Sure. So, for us, the solutions are source from many different parts. And we increasingly recognize that whatever we do the need to bring in the private sector is critical. And there is a greater recognition that we can do much more if we are able to facilitate private investment into many of our development projects. And it's an area that, you know, we have made some important gains. And it is something that our countries are very much asking us to be able to do more with them. So, we have, of course, both our private sector department within ADB that looks at providing non-sovereign instruments. And we also have the Office of Public Private Partnership that looks at how PPPs can help address some of the challenges that that that they face. I think that we recognize that, not all projects may fit the bill for, for good PPP work as we know but we are able to do more as we combined a very important function which is the transaction advisory services that we have in our case in the bank and that help countries to look at designing, structuring projects that can free up, shall we say, some of the public funds for maybe projects that have less of an income generation activity and therefore it can make our resources go further in terms of addressing some of those challenges. We've done a lot of interesting work. One of the areas that we're looking at now Jeff more and more is urban development and integrating more of our development resources into cities. And we've got on the one hand, all of the infrastructure that's required to provide the services that cities need to attract people to thrive. And so, we've got this idea of strengthening livable cities. But we also have on the other side of the coin how to make cities investible. So how can they become more attractive to addressing private funding? In many instances, as you know, tariff and tariff setting are a constraint in terms of being able to generate the revenues to be able to make or attract rather private investment. But we see that there's a lot of potential in terms of blending resources. And this, I think, is one way of creating opportunities where more and more parts of services that can be provided in the urban space can have some contribution in terms of PPP investments. We generally, you know, look at many, many initiatives and I think that a lot of the work is still in the areas of road, road networks and road transport There is obviously an income generation activity, particularly if you look at tollways and whatnot, that make it attractive.
But our challenge now is to move that towards areas where perhaps the incomes are still the revenue generation is still not as strong. But if we can blend some grants with some ODA and a little bit of private sector funding, we may be able to generate enough revenues to start building that interest on the part of the private sector.

Saviano

And perhaps even starting with the notion that the ADB has what seems like a formal office for public private partnerships and programs and recognizing the importance of that. And we've seen moves from many countries in the region to remove those barriers to foreign direct investment. Also, could mean offering incentives and actually having not just tax incentives which are, you know, very important area that we look at, at EY, but removing any barriers around infrastructure and making it easier and managing risk for the private sector in investing in a particular country. Because isn't that really at the end of the day, isn't it about risk management and steps that the ADB can take in order to help countries manage and the private sector manage that risk?

Carrasco

Absolutely, Jeff. I mean, I think you hit it on the nail, you know, we talk a lot about how we can build greater comfort, greater buffers to help de-risk some of these projects. And a lot of times as much as we would like to, to have that that investment coming from the private sector, maybe the stepping stone is a PPP type arrangement where we can look at how we can share the risk bearing capacity. I think there are a lot of interesting initiatives across all Asia Pacific. We were talking before about capacity. This is another area where we need to invest a lot in capacity, in being able to negotiate well, to be able to make it attractive. And a lot of times the dilemma is, are we getting enough value for money and on the other hand, we often hear, are we holding on to too much of that risk? So, how do we get that balance right? But I did want to come back on your earlier question because you had asked me for an example and I did not reply to you. So, I've got I've got a good example that I wanted to mention, and that is Cambodia. So, this one is what we call a 1ADB approach and its integrated. And here what we did was that we supported The First Solar Park project in Cambodia and in the Southeast Asia region. And with competitively bid projects achieving the lowest solar PV tariff in ASEAN. So that was a great achievement. And here again, we're proud to note that we were working in partnership, the sovereign side of the public sector side of ADB, which provided the planning and policy support as well as some of the investment in the energy sector. While the Office of Public Private Partnership provided the, what I mentioned earlier, the transaction advisory support and through ADB’s Non-Sovereign window, there was also a private sector loan in the downstream. So, a tremendous example of how we can bring public private PPP blending. And to end we end up getting a of an extremely competitive product. So that I thought was probably one of the better example.

Saviano

A good example of public private partnership, also a good example of renewable energy in an important country in the region. And of course, these aren't just government problems or the ADB's problems. These are world problems that that exist cross-sector, across the public and private sector with commercial enterprises included in that as well. And frankly, one of the aspects that we've observed coming out of the pandemic through these partnerships is that, that there is some advancement of governance principles Just imagine you have, let's say, you know, 20 or more people around a table representing multiple organizations that need to come together and govern themselves in a new way to achieve a particular outcome. And one of the factors that we observed in these partnerships coming out of the pandemic is that, that the opportunity to advance and actually innovate in new governance models that frankly, perhaps now there's a greater opportunity for these organizations to come together, greater incentive for the public good. Did you see advancements in governance? And do you see that perhaps there's still some work to do in the world to promote greater governance of these complex financing and other arrangements that are put in place to support countries?

Carrasco

So, I guess my answer always is that we need to be able to have institutions that work well that are not dependent on a particular individual with leading that institution. And we have clear rules to the game of how we operate. It's clear that the better governance that we have, the greater the development outcomes that we can achieve. And I've worked before in the in the governance sphere. It's not the easiest of work, as you can appreciate. But we have to continue to press on to strengthen those governance reforms. We recognize that, you know, there's a lot of work that has to be done still across many, many countries. We recognize that, you know, we make progress and then we can slow down and then we have to pick up again.
I would say that that in certain areas, it's a little easier to have that discussion and those reforms and things like public financial management, procurement policies, the whole anti-corruption initiatives that that many countries have subscribed to. Those are important entry points that allow us to make further inroads in this area. I think at the end of the day, we still believe in the principles of voice accountability, transparency and these are the higher principles that we do a lot of work through our technical assistance that I was referring to before, Jeff, and where we do also a lot of knowledge products. So, presenting how some countries have been addressing some of these issues. We had a series called Governance Briefs. And I think that through that soft lens we can achieve also quite a bit of progress. Again, it takes time. And we recognize that in the end, it's in everyone's advantage to move towards higher governance principles.

Saviano

I was so fortunate to collaborate with the ADB. During the pandemic, we had a conference for tax authorities within the region and how innovative technologies can support and really saw firsthand the reach that ADB has and how respected the ADB is throughout the region and providing just such important work and not just financing, but as you had said earlier, Bruno, the knowledge that countries need as they emerge from the pandemic. You certainly are giving us hope that the world can be both innovative and climate conscious. And that's I think that's a really important message for our listeners today. Before we close out the interview. Bruno, we have a final segment on Better Innovation. We have a series of rapid questions and answers for our guests. What do you say? Are you up for that today? Bruno?

Carrasco

Let's try it. Let's try it just. Yeah, why not?

Saviano

Let's do it. Okay. All right. Here we go. First question, what book do you have on your nightstand?

Carrasco

I just read Premonition, which I'm sure you've heard about Michael Lewis.

Saviano

Yes. And for our listeners, I can say that I think you did turn and you were looking for your nightstand. If I could just provide that visual for our listeners. So that's an actual representation of what perhaps may be on your nightstand or on your desk someplace.

Carrasco

I have like, I usually read two or three books at a time, and I thought that one was probably the most appropriate one to share with you. And you read it.

Saviano

I love it. Great. All right. You're on a roll. Here we go. Second question, tell us about a historical figure whom you admire.

Carrasco

Nelson Mandela.

Saviano

Wonderful. Why is that? What is it about Nelson Mandela?

Carrasco

I think A, what he stood for, B, you never lost hope. And see, all of that thinking managed to transform the country in a relatively peaceful fashion and made it an example for many other countries that are aspiring, aspiring to make those changes.

Saviano

His love of people, love of his country second to none. Last question, Bruno. What do you see as our greatest opportunity to build back stronger as we emerge from the pandemic?

Carrasco

So, I think that we have to recognize that resources are limited, that right now all our focus should be on green resilience. Inclusive recovery. And if we are able to work intelligently, if we're able to generate the resources that we will need to be able to finance that. It should take us to a higher level in terms of the development agenda and it is essential because we have faced this pandemic. We know that there may be others around the corner, and we have to be much more resilient.

Saviano

I think that is a terrific point for us to anchor on today. Bruno, what a great discussion. I really appreciate you stayed up late for this interview. Thank you for that. And our Better Innovation listeners will be much smarter as a result.
So, thank you again for coming on the show.

Carrasco

It was a real pleasure Jeff. I enjoyed it. And it was great to talk to you.

Saviano

Thank you so much.

Carrasco

Thank you so much.

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Jeffrey Saviano

EY Global Emerging Technology Strategy & Governance Leader

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Episode 6

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56m 54s

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Why knowledge-embodied finance is the key to Asia’s future prosperity

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Jeffrey Saviano

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