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[00:00:12]

It's 13th of July, and you were listening to Cookie Time, a podcast on markets and economies from DBS Group research here in Singapore and Timor, Bakht chief economist.

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Welcome you to our twenty first episode. Our guest today is David Patton, regional director of East Asia and Pacific of the International Finance Corporation, known widely as IFC. IFC is a member of the World Bank Group and it is the largest global developed institution focused exclusively on the private sector in developing countries. The event has over three decades of experience in risk management, portfolio management origination and managing all aspects of the business for East Asia and Pacific. While he has spent over two decades of the IFC in a previous life with stints in ABN Amro and Bank of America.

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Today, we'll talk to us about his operations in Asia and give us a sense of its engagement in the region touching on the ongoing pandemic as well as climate change. Patrick, welcome to Copy Time. Thanks.

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Thanks so much for having me. It's a real pleasure to have you, sir. Let's start with the IMF's role in the region. You look at 16 countries across the Asian Pacific. Give us a sense of your engagement in these markets, perhaps in dollars invested and the sort of portfolio that you have across industries and sector. Sure.

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So let me just start out by giving you a sense of what we've achieved in the last fiscal year area. Just got over. Ireland is the 30th of June. So last year globally, we did close to 23 billion dollars in long term commitments. This includes the amount of capital we've mobilised in this region, which is East Asia and the Pacific. We did about four point three, slightly less than four point three billion dollars. This was, again, long term.

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And what we've mobilised and in terms of break down the financial sector is the bulk of what we do, because that's how we achieve our strategic objectives through the financial sector for financial inclusion and inclusive growth. Next is a cluster we have called manufacturing, agri, agri business and services. That's the next biggest. And third is infrastructure, which is where I think we are playing a lot of emphasis. So roughly four point three billion, about 40 percent in financial services, about 35 percent in manufacturing, agriculture and services and the remainder in infrastructure.

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All right. So infrastructure is, of course, a big play, but I clearly agree has become a big thing as well. What kind of instruments are you typically investing in equities or bonds and what's the mix? And also, is it all IFC money or you are also sort of an investment manager for other multilateral organizations? The bulk of our investments are in debt kind of instruments, and about 70 to 75 percent is debt and about 25 to 30 percent is equity and mezzanine.

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So that's the rough breakdown. But also within debt, we've been moving more towards capital markets. About five years ago, we were doing almost 100 percent of our debt instruments were loans. Today, that number is I think we are about a 20 five percent of our debt is into bonds. And that is really linked to what we are trying to do in terms of developing capital markets. So capital markets development is a key pillar of our strategy across the region.

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So we've been focusing a lot on that debt. OK, and in terms of geography, would it be safe to say China and India are your two biggest markets?

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Yeah, so India is by large our biggest country globally. And China comes in, depending on which you're at, could be at number two, three or four. So that's the real mix of the two dominant markets are India and China.

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When we look at Asia Pacific and within ASEAN, what would be the most dynamic places? So over the last year and I think the two countries where we are seeing a lot of activity on our Vietnam, lot of potential, we think in Vietnam, a lot of focus on it in Vietnam, the other country where we remain very optimistic as Indonesia new government just in the current pandemic notwithstanding, we were hoping there'd be a lot more reform there. This despite that, I think they are moving towards a lot of reform.

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So we think that that could be another very big market for us in terms of what we call our middle income countries. I can see your optimism out of Indonesia and your beautiful, but it showed that you were being taken today. Wonderful. We think we will love to talk about Vietnam and Indonesia with you a little later in the conversation. But in terms of your engagement with the region, so you talked about capital that you put in play. But beyond that, I mean, I know like the World Bank and the IMF are big into capacity building and technical assistance and so on.

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You are coming, of course, straight into the private sector, not necessarily always engaging with the government. So you're sort of a broader, if you will, in your approach to the region. So what do you sort of underwrite financing? Do you consult? Do you help with public private partnerships and stuff like that? Sure.

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Coming to the first point that you raised and you talked about it earlier as well, in addition to doing our own capital, we also deploy and we assist with third party capital. So on the debt side, the standard instrument that we've used in the past is mobilization through syndicated loans. So, you know, we talk to commercial banks, we're going into a project. We get the commercial banks to come in and lend alongside with us. Then the second thing we also do is we also mobilize other MDD, you know, some of the other DFI, the European ones.

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We work with Abebe, we work with people like NDB if necessary. So we also mobilise capital from other entities. Over the past few years, we've also developed a platform called LEMSIP, which is a platform through which we mobilise capital from in some cases governments, in some cases insurance companies. So this could be to risk some of the money that's going in, but also to try and give our clients the full package. And last but not least, we also have an asset management company which manages third party capital for equities.

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So we have different funds. We have an Asia fund, we have an infrastructure fund, we have in Africa fund. We have a financial institutions fund. So we have a lot of investors here and they invest equity capital alongside us. So that's on the financing side. On the what I would say the consulting or technical assistance side. Yes, we do work directly with governments or we work jointly with our colleagues at the World Bank. We have you may help them with reform, but in particular we focus a lot on the investment climate because the purpose of that is really how do they get more private sector investment into the economy?

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So we work a lot with governments. Then we also work with clients at an individual level. So there we have multiple sort of touch points we can work with them on. One very big topic nowadays is sustainability. So you have a bank that wants to issue a green bond. So we not only have to issue of the green bond, we will also work with them in terms of sometimes training their teams. How do they go about marketing for this?

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How do you get sustainability into a DNN? We also work with some banks and companies in areas like risk management when it comes to the financial sector. We touched upon agriculture in the beginning of their food safety and supply chain. Issues are very big, so we work with a lot of our clients there. And last but not least, Pippy's are a very critical part of what we do. And we do work with governments in structuring people and have them attracting investment.

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And I just want to mention that traditionally people were really focused on infrastructure. Today we can say that we have gone beyond infrastructure, are looking at people in the healthcare space, we're looking at people in affordable housing. So I think the scope of purpose is expanding as we speak. And that, we feel, is a great way. If structured appropriately. How do you get private capital into segments of the market, which we're not attracting a lot of private capital previously?

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Very good. And when you say that, you know, banks or other clients, if they're interested in investing in certain markets or certain projects, you sort of join hands with them. How do these people or these institutions find you? I mean, is it a part of a historical relationship or there's like a marketplace where IFC is advertising its capabilities and the private sector sort of joined hands? So I think most financial institutions have a sense of who you are.

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So typically it's us reaching out to them saying we have this project. We can provide espera policies. We're only allowed to provide twenty five percent of the capitalization of the project. So assuming the sponsor brings in another twenty five, 30 percent, there's still a gap of between 40 to 50 percent. So there we will reach out to these different entities, could be commercial banks, could be other Deffeyes and try and mobilize them and invest alongside us. So that's traditionally how we've done it.

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But I'll just touch upon something very interesting that in the past, I think by and large, a large part of our business has been when a client comes to us with a project and, you know, I'm planning on putting up a hotel in certain countries in Fiji and we need financing for it. But what we are trying to do it now is we are trying to create more bankable projects. So we work with governments, we work with the private sector.

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Case in point being, we're looking at an area like assisted living, which is important in Asia because you have an aging population in many countries. So you have we work with government. We work with our colleagues at the World Bank to try and do some amount of reform and then try and convince the private sector to come in in this space. So we're also trying to create our own projects nowadays.

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Fantastic. So it goes both ways. We think maybe we should touch on the current moment so we have this extraordinary crisis with the pandemic. You invest both in frontier markets as well as in emerging markets in Asia and Asia-Pacific. How have your portfolio or your markets that you invest in, how has that held up? What have been surprises, if you will, in terms of resiliency as well as vulnerability? What are your sort of key takeaways over the last four or five months of extraordinary times?

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So I think, you know, we I think we still to see the sort of bottom of where we are right now. And traditionally there is a time lag between six to nine months between a crisis hitting and a portfolio getting hit. So much as I'm quite happy to say, by and large, our portfolio has held up, given the circumstances, given the extent to which we're seeing a lot of economic disarray or damage, our portfolio has held up relatively well.

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But I'd like to keep I'd like to hold on to that thought for a moment, because I think there could be some more downside going forward than what we did and all this debate a little bit. You know what we did as soon as the crisis hit and it hit us in East Asia first, starting with China, is we actually started preparing for some sort of a relief package saying how can we help our clients with terms of very quickly providing them with liquidity so that they can get over this current downturn.

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So that's the first thing that we are trying to do, is how do you help your own clients actually survive the crisis? Because liquidity starts to become scarce at times, especially with your competitor to Tier three companies, because banks are being very cautious. As you can imagine, the demand side has slowed down very significantly in many markets and in many cases, supply chains were being disrupted. So the objective, what we were trying to do is to really see how we can provide liquidity to some of our clients.

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And we had some crisis response facilities which have been pretty well received, I would think, in the market. Now, in terms of resilience, I think a lot of people were surprised with how the financial sector still remains relatively resilient in most markets. And there's a good reason for that is, you know, everybody was the last crisis, which was just about 11, 12 years ago. People were expecting the current crisis. You know, human psychology is you expect more of the same.

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But this is not really a banking crisis. This is not a financial sector crisis. So I think to that extent, compared to what a lot of people thought, I think the banking sector so far, and there is more downside, like I said earlier, has come out OK. Now, what has happened within the banking sector is the non financial institutions, the NBA, FIES, they've obviously been hard to hit because they didn't have the kind of access to liquidity that a commercial bank has had, an area which got hit very quickly and I think will take some time to recover this year in tourism is a very.

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Part or a very important component of many economies in this region, as you can imagine, and based on some analytical work that we've done for every direct job that you create in tourism, you could create between six to eight indirect jobs so that at the moment the you know, the globe has never seen something like these travel lockdown's that we're seeing today. And because of that, tourism literally overnight started to dried up. So that sector, I think, has been harder hit than what we had imagined because nobody thought that the scope of the lockdown's is going to be that severe right across the world.

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So that's where I would come out. I think a lot of other sectors, we are acting green shoots. We are seeing economies picking up. Part of it, I believe, is catching up. You know, when you haven't spent for three or four months and as soon as lockdown's are being lifted and you have an opportunity, you will go out and try and eat. You will try and spend money going out, having a good time. And there's also a lot of stuff that you would have wanted to buy, which you haven't bought over the last three or four months.

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So I think we are seeing some pickup in that. But I think it really varies from country to country, and it's too early to say how strong or how sustained that demand that we're seeing today is going to continue to make.

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You know, we are sitting here in Singapore, you're sitting in Hong Kong, and most of our conversation is about the West and South Asia, East Asia. You, of course, spent a lot of your time looking at the Pacific. So tell us about the economy, as you mentioned casually earlier about Fiji. But you can tell us a little bit about how these other economies, which at least on paper, look so remote that dependency should not be affecting them.

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But are they also getting hit? Yeah, the good news is that most of the island economies did not get impacted in terms of the number of cases they had. You know, you had a few cases in Fiji and they were able to sort of, you know, lock down. And I think so they've come out of that, by and large, being smaller places, Solomon Islands, Vanuatu, the number of cases haven't been much. But talking about a country like Fiji, tourism is a very, very big part of the economy.

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And with the travel bans, that sector has been hit very hard. So based on what we know and it's in the press, they are really talking about creating travel corridors or travel bubbles. So any of the island economies in most of them do rely very heavily on tourism. They have been sort of in some ways they've been harder hit than they should have because they managed to control the virus or the pandemic. But the sort of effects that has caused because of the stoppage of travel or travel bans, that's hit them hard, then some of the other markets are, you know, a lot more reliant on natural resources.

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And we all saw oil prices coming down. I think there's been a typical slowdown in commodity prices because of the overall slowdown in demand. So countries like being are also witnessing that at the same time. So the island economies have been pretty hard hit. But I think the good news is that the governments are reacting well, there is a lot of support that we hope that we can garner collectively and that should, I think, help them to bounce back.

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But I think critical to a lot of the economies bouncing back is going to be the ability of people to travel again and tourism picking up.

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Right. And unless we have a pretty decent and effective treatment around Koban 19, it'll be tough for tourism to come back, at least the confidence around tourism to come back. We back the other side of the trade, tourism, going trade. And in 2009, trade finance was deeply affected. Now we all know that in Asia and in particular a region that has built its economic model by and large around trade, it's been heavily disrupted. And there's been a lot of concern about the economic outlook given the contraction of trade.

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But with respect to the mechanism of trade, trade, credit financings, settlement, port movement and so on, has that been affected as badly as it was in 09 or. We have learned some lessons and we put them in place this time.

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So I think this time around what happened in 09 is that financial markets pretty much froze, as you remember. And when financial markets freeze, obviously the ability of banks to continue providing great finance starts to go down. So this time and again, it really depends on which market you talk about. We haven't seen it. I don't think it's been that serious. Yes, some international banks decided to cut their lines and that's why we actually stepped up in Vietnam.

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In less than a week, we increased our trade finance capacity for banks by almost 300 million. So I think that the impact has been a lot less. Because I think is I think, like you correctly said, regional banks and local banks have become a little more resilient to global shocks, this one notwithstanding, because of the lessons they learned in 97, 98 during the Asian financial crisis and more recently, the global financial crisis. So I think the impact on the ability to finance trade flows has been less impacted.

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I think this time around it's more about supply chains were just cut off because in some countries, manufacturing came to a halt. So, you know, and in this day and age where supply chains are so integrated that you literally have, you know, buttons coming from somewhere, threat coming from somewhere, even when it comes to government, let alone complex electronic instruments or gadgets. So I think that really caused some concerns and some amount of disruption. But I think, by and large, in Asia, we are seeing that opening up industrial domains under some sort of lock down Indonesia, parts of the Philippines.

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But Vietnam is very open. Thailand is getting to be open. China is opening up. So we are seeing a lot of countries have opened up. So that has improved trade flows. Obviously, the question on everybody's mind is, as a result of what we've just been through, will countries start to start, you know, want to reduce their reliance on cross-border trade and have sort of what we're talking about restoring starting. So let's see how that pans out.

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But it's a bit too early to say how exactly that will pan out, in my view, at least. Well, let's stay with that subject a little longer, if you would allow me to the imperative, if you will, for reassuring to build a more resilient economy that is not as dependent as external linkages. It's a trade off. Right, because we have prospered tremendously in the last three decades, keeping our markets open and being part of the supply chain, particularly in outside of North Asia.

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You think that we're seeing a decisive shift and do you see that as a mixed blessing? Do you think that it's an and out negative?

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It's I think there are two things here. One is companies want to reduce their reliance on a single country. And so and that trend that started well before the current crisis hit us. So, you know, this is something that we witnessed for many decades. You know, companies will want I mean, and if it's part of normal risk management. So we had a lot of manufacturing moving to Vietnam and I wouldn't say moving to Vietnam. It's not that people backed up from, say, China and moved to Vietnam.

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I think they just expanded in Vietnam by and large. So that trend, I think, will continue. And that trend, I think, makes sense from a risk management perspective. So you may want to instead of two countries, you may want to add manufacturing facilities in three or four countries. But if people are talking about moving manufacturing and being 100 percent reliant and sort of know and reducing trade flows, I think they're the big question is going to be there is going to be a cost.

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So either the company is willing to reduce margins or the consumer is willing to pay more or the government is willing to subsidize the cost differential and the current state of play. I think all three are hot. So I think certain sectors, we will see that countries will say this is of national importance for us. This is a security risk for us. So those sectors we may see a little bit more reassuring. Otherwise, I think it's a big question mark on whether we'll see to the extent people think it may happen.

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Like I said, it's a matter of course, if you can produce something as competitively as when you were importing it, then I think it makes a lot of sense to do it. Why not your your you know, from a cost benefit analysis, it makes a lot of sense. But if it means paying more, I think someone has to be willing to bear that cost. Really.

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Right. Paying more is the big question for a variety of things, including the issue of insuring, but also the broader issues like who's going to pay for adjusting our economy, for example, climate change and stuff like that. So whenever I go to the website and see press releases from IFC, I always see a couple of words very intensively use. One is, of course, the issue of inclusive growth and inequality, and the other is climate change.

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And so would you give us a little sense of this commitment to climate change in general? And you touched briefly on green financing earlier. If you could elaborate on that a little bit more.

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So you made a comment? I would, if I may repeat. You said that there may be a cost to climate change. So I think there definitely is going to be a cost to climate change. In terms of the negatives, I think climate risk is a major risk. I think if I was a central bank governor today, I would be asked. The banks in my country to understand how much risk their portfolios are carrying because of the impact of climate at the same time, I think climate is a huge opportunity.

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I mean, you look at a thing like green buildings here, payback periods have reduced to between two to three years. And it doesn't take a rocket scientist to know that if I was to construct a green building as against what I call a brown building five, seven years from now, the green building will have more value. So climate is embedded is an important thing to talk about. It's an imperative because not only does it mean risk, but I also think it makes a lot of business sense and it is about reducing our carbon footprint.

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At one level, reducing a carbon footprint means can we use more to more efficiently? Can we use energy more efficiently? Can we manage our waste more efficiently and productively? You look at plastics, I think that's going to be I mean, the plastics I now see have now been seeping into our our food chain, the food supply chains. So the health impact that climate is going to have in the not so distant future is going to be very significant in terms of the stress it will put upon healthcare systems and health care costs.

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So clearly, this is important for us and at all levels will be a lot more focused on climate over the last few years. And for example, the previous year, 48 percent of our investments in this region, East Asia and the Pacific, were related to climate. And that's the percentage I would like to hope we can continue to increase that. You're just ended. It was a bit lower because of a lot of our investments went towards the crisis response in the immediate term, you know, in terms of liquidity support to some of our clients.

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But I think that the percentage, the proportion of our climate related investments will only keep going up over the next few years. So that is really fundamental and I am a big believer in that. But certainly not. And I don't believe it should be a CSR activity. In fact, the other day I was in a webinar and someone was linking climate investments to CSR and I said, no, I don't think that's the way to do it. If it doesn't make money, be careful because you cannot keep putting CSR activities for decades.

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And it and I'll give you an example personally. When I used to be risk averse to investments in renewable energy, which was in wind or solar, I actually declined three of them because I said they don't make sense from a business perspective. Tariffs at twenty five cents don't make sense when you could get for solar or wind, when you could get coal at eight cents at that point in time. Today, that math has completely changed because solar prices have come down to five cents in many countries.

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Wind is coming down quite rapidly as well. So whether it's energy, whether it's green buildings and the reason I talk a lot about green buildings, because I think urbanization is going to be a major sort of factor in the coming few decades, at least in this part of the world. In Asia, urbanization means you need more housing, you need more schools, you need hospitals, you need all the other social infrastructure. You need office space. So which means you're going to have a lot of construction coming up.

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And it's important that all of that is done correctly in a climate friendly and green way. It's important that we expand and build new cities in a way that it makes a lot of sense in terms of how you manage waste water. And I touched upon plastics. I think plastics, as I call it, the new cancer that's emerging. And it's quite scary, actually, what's happening with plastic waste. So we are doing a lot of work on that front as well.

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Yes, I think I read somewhere recently about like eating seafood is like exposing us to consuming, literally consuming plastic particles because it's just taking over the seawater around the world. You mentioned something earlier about green buildings taking two or three years to get the full payback. I want to touch on that momentarily, because I know that's close to your heart and I'm very curious to learn more about that. But before I go there, in the last four or five months, you've been in intensive discussions with companies in your portfolio as well as governments.

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Do you fear that this pandemic will distract us from the climate change imperative, or do you think in other countries or in East Asia in general, there is sufficient resolve among government officials and corporate boardrooms to maintain the momentum that has been painstakingly built up.

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So I'm quite confident when I talk to my counterparts in government that they would all like a green recovery. When I talk to a lot of our clients, they would also like a green recovery. But what I am a bit concerned about is if I have a dollar accessed, one dollar today, will I be using that one dollar to keep my factories running or will I be using that one dollar to reduce my carbon footprint? And I think that's where an institution like us steps in, because we would like to make sure that our climate that our clients have access to enough capital to not only ensure their economic and financial viability so that they can continue because, you know, at the end of the day, if companies stop operating, it's going to have a disastrous effect on climate.

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You know, idle factories means more unemployment, and that will directly and indirectly create havoc in the markets and in the atmosphere in many ways, you know, just wastage and things being thrown around. So I think what is critical is that we ensure that governments and the private sector has access to capital so that not only can they survive the short term volatility, but make sure that they use this opportunity to start improving efficiency and productivity, which ultimately help their bottom line.

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And I'll give you a case in point. I was talking to a couple of hotel companies and a lot of them are having very low occupancy. And I said, so clearly, you need some amount of capital to pay the bills. You need some amount of capital to do routine capex. But, hey, why did you use this opportunity since a lot of your hotels are running at very low occupancy to retrofit your buildings into green buildings? And I have to say that some of them have taken it quite seriously and they are exploring it.

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So these are the kind of things that I think we are pushing, including when we talk to our our banking clients. This is a great time for our banking clients for saying to talk to their clients, to try and make sure that we are having what is called what we are calling a green recovery.

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A green recovery is absolutely critical. And I've sort of myself been writing about this issue because the point is, if we're going to have a world where capacity in certain areas would be too much, there's no point in spending money to finance a recovery there. But at the same time, an area where we need to build capacities and the green area. And so it's it's a no brainer in terms of, you know, we're printing all this money, we're going to spend it.

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We should spend it on a green recovery for sure. OK, so now this takes me to the area closest to your heart. Vivec, I know the first time we met, you talked passionately about green infrastructure in urban areas and you've touched upon this already. But let's take a deeper dive into both the area of renewable energy generation in the urban area and sort of green, sustainable infrastructure. I recall you mentioning some striking facts to me about how inefficient urban infrastructure is today.

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Would you sort of walk us through that?

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Yeah. So one has to see the way urbanization has happened across. And I wouldn't say all but many parts of Asia as cities have just expanded organically. Planning has been, I would say at best, mediocre, if not poor, and therefore better. It's how do you construct sort of construction that sort of break it up? So one is the fundamental thing is you keep growing. You don't manage things like flow of traffic, for example. So that leads to inefficiencies.

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That leads to a much higher amount of pollution. So that's one. How do you plan? Second, again, planning your water, recycling of water, managing waste water efficiently, all these things. But most important, I would say, is the whole issue around green buildings. So as you have more and more construction, I believe it should be green because it makes very good business sense. Like I said earlier, building is green, building brown, which will have more, which will have more value five, seven years down the road.

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Doesn't take a rocket scientist to know. Payback period started to. I'm down depending on standards, depending on which country, but it's typically, I'm told it could be around three years, give or take a year or so. But the real opportunity is that you've already got and in Asia at least, construction survives a long time. You know, buildings. I'm living in a building which is at least 20 years old. I think my office building in Hong Kong is at least 20, 25 years old.

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So, you know, when you have buildings which were built 25, 30, even 40 years ago, these are pretty inefficient when it comes to use of power. How do the air conditioning or heating system work? How is the management of water? So I think there's a big opportunity there, not only for us to finance and focus on building new, making sure all new buildings are green. But also what I mentioned earlier in the tourism example is how do you retrofit existing buildings?

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So that is a huge opportunity. I think that we should all try and capitalize on seconders when you see an empty rooftop. But at least when I see an empty rooftop of a large office building or a supermarket chain or a hypermarket, the first thing that comes to mind is what stops you from putting solar panels. And it's that that is not the roofs that are being used. Yes, you can have a small garden on the side, but the rest of the roof please use it to put solar panels and that will help you not only reduce costs, but also reduce our carbon footprint.

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So there's a lot of innovation that can be done. And, you know, I touched upon traffic management earlier, you know, that that could be a big issue going forward. I think because it's a waste of time. You spend a lot of fuel, which means you spend money and you breathe a lot of the pollution that comes out of that. So, again, a triple whammy is what I would say. So, you know, putting this all together again in the context of urbanization, I think not only should we be focusing on greener growth, but we also need to start decarbonising our existing assets.

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And so retrofitting buildings and coming up with other innovative ideas to try to decarbonise some of our higher polluting assets today. When I when I read about green infrastructure in Europe or the U.S., there is a lot of investment happening on smart grids like in the US, for example, the Midwest and the West basically abandoned the amount of land for solar and wind. But that's not where the demand for energy is. So you have to build smart infrastructure to take that energy to the urban centers in Asia.

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Do we see a comparable type of work being done?

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So I think it's still early stages, but we are seeing it. We are seeing, you know, if not just smart grid, but we are seeing similar things. We are seeing a lot more what I would say, home solar panels and solar panels on people's home systems. We are seeing micro grids coming up. We are seeing many grids coming up. I actually think it's early stages, but that's something that we are focused on because I think the future of energy supply is going to be very different than what we've seen over the past 50, 100 years.

[00:35:37]

I think we're going to see a lot more of this microgrid, many grids, and all of it will come with a technology or a digital component, which was what hopefully will make them into smart grids. So I'll give you an example of what we are hoping to finance in Myanmar. And we've already done a pilot is where, you know, there are telecom towers in urban in rural areas. Are these telecom towers traditionally because energy penetration or penetration of power is not very high in Myanmar?

[00:36:03]

So these were being run by diesel generators and a telecom tower strong 24/7. We are not so very polluting. So a client of I said, you know what? I'm going to buy a piece of land near these telecom towers, but upson solar panels and provide them with an a battery system so I can provide them with solar energy 24/7. But because typically a telecom tower will also be in that area with relative high population density. I will also then use the same solar plant or expand it a little bit and provide what we call these microgrid, where they're providing power to villages or villages within a certain diameter from that particular plant.

[00:36:46]

So we are seeing some very interesting examples like this. We're also talking about something similar when it comes to gas. How do you reach the remote islands of the Philippines and Indonesia, which today a lot of them are actually using diesel and HFA, which is quite polluting and expensive. So coming up with solutions, which could either be renewable in terms of gas or something with a lower carbon footprint, like renewables, like solar or wind or a lower carbon footprint using gas.

[00:37:14]

So I think we are behind Europe today, but I think we are playing catch up and I'm quite sure that we will get there very soon. Not to fund all this green project, you need green dollars and you touched upon earlier about how you've been involved in sort of being banishments and so on, how is 20, 20 looking like in terms of issuances and is there sufficient investor interest in that as well?

[00:37:42]

So the good news is I don't think we've seen any waning of investor interest when it comes to climate. In fact, I would say to the contrary, you have more global funds coming out with pronouncements on how they want to invest in sustainability. So that is, I think is really good news. And I think almost every major global fund you talk to today will either have set up a separate fund for sustainability funds or will be putting a sort of viewing that investments into a sustainability lens.

[00:38:12]

So I don't really see financing as a major obstacle as of today that can change. I think what we need is, in some cases, foster reform from governments and in some cases the private sector buying into this at a much faster speed rate than what we're seeing today. I want to ask you a little bit about two countries where you engage quite intensively and are capturing investor attention substantially. One is Vietnam, a very trade oriented and has been one of the more resilient economies in space in the last few months.

[00:38:48]

And the other is Indonesia, which, of course, because of its exposure to tourism and commodities, has had a tough time. And of course, pandemic management is still a big question mark. Would you give us a sense of where these two economies are heading to, both in terms of the things that we talked about, climate change and so on, but also the overall economic trajectory?

[00:39:09]

Sure. I think one is it's I mean, it's going to be hard to compare them because they're very different countries, you know, even in terms of geographically out. So let's start with Vietnam. So Vietnam was already seeing a significant pick up and was doing very well economically. And I think it's been publicly acknowledged on the way Vietnam actually managed the pandemic has been quite remarkable. And if I when I talk to my colleagues today, that's one of the first offices where people were back in office and it was almost business as usual.

[00:39:40]

So they seem to have bounced back. I think their focus should continue being on building world class infrastructure. They've focused a lot on that over the past few years and we're hoping that they'll continue doing that. The challenge that Vietnam is going to face, I think, is that at the end of the day, it still relies quite heavily on exports, whether it's services like tourism, which is effectively an export, but also manufactured goods. I mean, Vietnam is becoming quite an important manufacturing hub for a lot of companies globally today.

[00:40:12]

And if you are going to see a global recession or a global slowdown, which means demand will get hit. So I think that's where I think Vietnam has to be prepared for a bit of a slowdown, depending on what happens globally, something completely beyond their control. You know, everyone argues that domestic consumption, we can pick up and compensate. I think that's true to some extent. I don't know how much it gets. I think the jury's out on that.

[00:40:35]

But I think at least in terms of economic management, the sort of debt levels that Vietnam is controlling, I think it's all leaning quite positively. And from our perspective, it remains an important country in Indonesia. On the other hand, I think was more reliant on things like tourism, coupled with commodities, relative less value addition. And I think that's where Indonesia is, I think going to have a slightly slower recovery than Vietnam. And then you add to that the complexity of the country itself.

[00:41:10]

I'm told from one end to another, it's far longer than the United States. I think it's eight hours to fly from one end of Indonesia to another. So just managing a country of that size and magnitude when it comes to a pandemic is going to be definitely needs management at a scale that I don't think any country is geographically that spread out as Indonesia is managing. That has been clearly a challenge and that will continue to be a challenge economically. I think you've got a fairly reform minded team.

[00:41:38]

And despite what's been going on, the feedback we've been getting in the discussions we've had with them, they are trying to push through some fairly significant reform. We are hopeful that it happens because at the end of the day, in my 22 years that I've seen, I've clearly seen a link between FDI flows, GDP growth, stock market, a lot of that is actually linked to reform. So if those reforms can be pushed through those reforms to take place, I think Indonesia will have a slow recovery, but we'll have a solid recovery.

[00:42:09]

Quite hopeful that now I have to say that looking at Indonesia the last few months, while everybody has been sort of focused on how successful Vietnam has been in terms of pandemic management and economic response, as you correctly point out, Indonesia has it has had its challenges. But at the same time, the last couple of months, macroeconomic data as well as financial market data would suggest that investors have not lost confidence in Indonesia. And fundraising, which was a bit challenging in February March, have become significantly easier or so just like you, I share a great deal of sort of congenital optimism about Indonesia, and let's hope that our optimism would be rewarded over time.

[00:42:51]

We thank you very, very much for your insights. Very helpful to know what IFC is doing in this region in these very challenging times.

[00:43:00]

Once again, thank you so much for having me. I do think this region is going to lead the recovery. It's clearly economically it's far ahead. And I just hope that continues. But it's not going to be easy and it's going to take a lot of strict sort of reforms and strict fiscal management, I think, on the side of the government.

[00:43:23]

I think one thing for sure, that IFC will be standing by the authorities and the private sector. Of Asia along that way, thanks again, thanks to our listeners for your time. You can find all our research publications and multimedia by Googling TB's research library.