Pavit Ramachandran: Digital transformation has been an inevitable trend and reform area in the post-pandemic recovery path

2021-04-09 18:15:19

Ulaanbaatar /MONTSAME/. On the occasion of the 30th anniversary of the ADB-Mongolia partnership, we interviewed Country Director of the Asian Development Bank (ADB) for Mongolia Pavit Ramachandran.

This year marks the 30th anniversary of the ADB–Mongolia partnership. What is your plan for this special occasion? What type of events and activities are you planning to organize this year?

-Thank you very much for inviting me to this interview. Yes, this year marks 30 years of Mongolia’s membership to the Asian Development Bank. We are honored to have been a trusted partner for the country’s transformation for the last three decades. The anniversary represents a key milestone and provides an opportunity to look back at our partnership with Mongolia over the past 30 years, understand achievements, learn from experience, assess the present development challenges, and provide some insights for our future engagement.

We are planning to commemorate the anniversary through a series of events and activities that will engage all key stakeholders, including the government, civil society, private sector, academia, youth, and media, in a forward-looking discussion. The series of events includes provincial level workshops, nationwide competitions, and a high-level innovative event. Starting the series, we have announced two competitions that are a journalistic story competition and students’ public speaking competition. Through a series of joint activities, we will reaffirm our commitment to help Mongolia achieve sustainable and inclusive development.

To date, ADB has committed $3.3 billion in cumulative assistance for projects across various sectors namely agriculture, education, energy, health, social protection. What were the most impactful projects in your opinion?

-As you have noted, ADB’s cumulative commitment has reached $3.3 billion to date. It includes loans, grants, and technical assistance for projects across various sectors including agriculture, education, energy, finance, health, social protection, transport, urban and rural development, industry and trade, and information and communications technology.

Over the course of our engagement in Mongolia, we have been able to provide support and expand our engagement across many sectors. The focus across these interventions is to address key development challenges, alleviate structural constraints and to improve the lives of people. As such, it is difficult to single out projects that were most impactful. But, let me give you some illustrations of projects that have contributed significantly to Mongolia’s development.

To date the transport sector has received the most financing covering roads, civil aviation, railways and logistics support, and urban transport development. One notable example is the western regional road project under which we helped construct nearly 420 kms of road as part of the western regional road corridor that connects Russia with the People’s Republic of China going through the centers of Khovd and Bayan-Ulgii provinces. This corridor connection is bringing economic growth and social development to a remote part of Mongolia. Since the completion of 110.8km road section in Bodonch canyon, the travel time has been reduced by 4-5 times. It is facilitating trade, strengthening Mongolia’s links with its neighboring countries, and changing people’s lives for the better.

I also want to emphasize the urban development sector. Since 1997, we have worked with the Government of Mongolia in finding and financing solutions to enable municipal governments to expand coverage and improve quality and reliability of urban services.  Last year, we have committed $43.65 million for the third tranche of an investment program that is improving urban services and ger area development. The $320 million investment program, of which ADB is financing $163.7 million, is supporting the development of six subcenters and is expected to directly benefit around 840,000 people.

It is constructing basic infrastructure including roads, flood protection channels, electricity cables, and water and sewerage pipelines, and improving social facilities including schools, health care centers, public spaces, housing conditions, and access to economic and social services.

Last month the Green Climate Fund approved $175 million to supplement a $560 million ADB program on aimags and soums green regional development. This program will provide a transformative model on green territorial development and urban–rural linkages where aimags and soums centers become anchors of green agribusinesses that promote sustainable, resilient, and high-carbon sequestration management in Mongolia’s rangeland. 

The last project I want to note is the Fifth Health Sector Development Project, which is closing this year after 9 years of implementation. The project has largely contributed to the strengthening of national blood safety standards by establishing an internationally accredited blood transfusion center. It has improved quality and safety of blood products and upgraded 26 blood banks in 21 aimags. The project also strengthened the medical waste management system in the country and improved hospital hygiene and infection prevention and control by fully upgrading sterilization departments in 27 hospitals and microbiology laboratories in 19 hospitals nationwide.

ADB recently approved a $100 million loan to strengthen Mongolia’s health sector and its response to COVID-19 pandemic. We notice that ADB is focusing more on health sector recently. Or maybe we see it that way because we are paying more attention to the COVID-19 related news?

-Improving people’s access to quality health services has been a longstanding and consistent priority in ADB’s operations in the country. Since 1993, ADB has been one of the largest multilateral development partners helping Mongolia reform its health care system. Our support has spanned comprehensive health system support and strengthening, including for primary health care reform, hospital sector reforms and sector governance, medicine and pharmaceutical procurement reforms, establishment of health insurance, health infrastructure, and human resource development. Building on our engagement in the health sector, we were able to move fast and provide comprehensive assistance to mitigate COVID-19 impacts in Mongolia.

As part of the support, we have recently approved a $100 million policy-based loan to strengthen the health system and help Mongolia become better prepared to respond to future health crises. The project will focus on four reform areas. First is strengthening planning and preparedness of the health sector and ensuring the availability of critical medicines and emergency supplies. Second is improving national pharmaceutical regulation and increasing hospital autonomy and good governance. Third is enhancing procurement in the health sector to increase efficiency and establishing a single purchaser for health services. And the last focus is safeguarding fiscal sustainability of the government over the next 3–5 years. With this loan, the total COVID-19 assistance from ADB now amounts to $349.7 million.

ADB updates its country partnership strategy for Mongolia every four years. The 30th anniversary is coinciding with the start of 2021-2024 country partnership strategy. What are your plans for the coming 4 years? Can we understand that ADB’s planned operations will correlate with priorities during and post COVID-19 pandemic?   

-Absolutely. ADB’s Country Partnership Strategy for 2021-2024 is closely aligned with ADB’s Strategy 2030, and Mongolia’s policy priorities in Vision 2050 and the Government Action Plan, 2021-2024. We are fully committed to provide a comprehensive package of support, including sovereign and non-sovereign loans, technical assistance, and grants to support Mongolia’s post-pandemic recovery and resilience.

The new strategy has three core pillars. First, the strategy aims to foster inclusive social development and economic opportunity. In this framework, we plan to support the response to COVID-19, including through vaccines, and provide continued and upgraded support to human development, specifically through health, education and skills development, social protection, job creation, and expanded operations in the private sector. Secondly, ADB is keen to support Mongolia’s infrastructure development to drive economic competitiveness and diversification through urban development, rural-urban connectivity, transportation and logistics, ICT, renewable energy, and improved public-private partnerships. Third, strengthening resilience for sustainable and green development is crucial for Mongolia because of a continued need to maintain macroeconomic stability, improve domestic resource mobilization, enhance environmental management and climate change adaptation, and promote green projects and developments.

Furthermore, the strategy will focus on several thematic priorities, including digital transformation, private sector participation, institutional capacity and development, gender equality, and civil society engagement.   

The world has learnt a lot from this pandemic. It has caused a negative impact that is three times bigger than the 2009 financial crisis. Some are optimistically projecting a very quick economic recovery. How is ADB projecting the post COVID-19 economic situation?

-In 2020, Mongolia’s GDP contracted by 5.3% in 2020, as envisioned in the Asian Development Outlook Supplement forecast, consistent with consensus forecasts.

We are expecting a gradual economic recovery in 2021, and our revised economic forecasts will be released in the Asian Development Outlook 2021 report on 28 April.

Expected economic recovery in the region and the PRC, as well as a stable outlook on commodity prices and exports will drive this economic prospect. However, economic revitalization will fully depend on how Mongolia mitigates the public health risk and implements its vaccination plan. The outlook for 2022 looks much better as COVID-19 concerns ease, supported by the vaccination in 2021, and increase in domestic demand, investments, and credit growth. Although, we are expecting a medium-term economic recovery in Mongolia, there are several downside risk factors, which may affect this outlook, including the COVID-19 related risks, deterioration of the investment climate, socio-economic issues, and financial sector risks. According to our baseline assumptions, economic recovery is expected though, the most critical issues are maintaining stable economic growth, and improving its inclusiveness and quality.

The world is going through the 4th industrial revolution that is based on science and innovation. When you assumed your office as a Country Director, you emphasized that the knowledge and innovation will be increasingly critical in ADB’s support to Mongolia.  What is ADB doing in this regard?

-Knowledge and innovation are central to ADB’s work across the region and this will not change in Mongolia under our new strategy. ADB is already doing a lot to increase digitization under the program for example, including in taxation, public investment, and civil registration. We believe that Mongolia has huge potential to use IT and digitization to improve service delivery but also to be a potential industry to drive economic growth in the future. We are very keen to support innovation and entrepreneurship – under our ADB Ventures Program, we support the Kite Accelerator Program, which is doing great work to try and match financing with innovative ideas in Mongolia.

We will also deepen our knowledge work to strengthen planning and financing in health, education, and social protection, enhance financial sector supervision, build MSME capacity through business advisory support and improve business environment and investment climate reform, including by aiming to unlock opportunities for the private sector operations. We will also aim to stimulate policy debate on important issues such as female labor force participation – our recent paper shows that reducing the gap between male and female labor force participation in Mongolia could boost growth by 0.5 percentage points every year. That’s a lot of growth.

According to the ADB’s flagship publication “Asian Economic Integration Report 2021”, digital platforms and other technology-based tools are providing new growth opportunities for businesses of all sizes and across all industries in Asia and the Pacific. What actions should Mongolia take to ensure steady economic growth after the pandemic?

-Of course, increased use of advanced technology and acceleration of digitization are essential for every country in the region to increase productivity and efficiency, and support growth.

Hence, digital transformation has been an inevitable trend and reform area especially in the post-pandemic recovery path. In Mongolia, digitization will be an integral part of upgrading public services and improving public sector reform process.

However, this is a complex issue, which requires policy commitment, well designed reform programs, private sector participation, and strong leadership. ADB stands ready to provide a package of expertise and assistance to support Mongolia’s efforts in institutional development and capacity building in digitization. 

Mongolia’s post-COVID-19 growth is obvious, but a lot will depend on optimal design and effective implementation of pandemic response measures. It will be very important for Mongolia to reduce the heavy reliance on mining, diversify the economy, create sustainable and quality jobs, enhance the investment and business-enabling environment, and maintain fiscal and debt sustainability. Therefore, building and strengthening economic resilience should be continued after the pandemic. When we talk about growth, we should focus more on its quality and sustainability, so accelerating structural reforms in various sectors such as public financial management, public services, financial sector reforms, domestic resource mobilization, private sector development, and green financing is vital for Mongolia’s medium and long-term growth outlook.

The pandemic had a negative impact on international relations. The countries are introducing new tools to strengthen their economic cooperation. One example is “Green gateway” – a temporary regulation between Mongolia and China. What opportunities do the countries have to boost their economic relations in these difficult times?

-Enhanced multilateral and bilateral foreign relations are critical for both pandemic responses and post-pandemic recovery. Looking beyond the pandemic, there will be a lot of competition for foreign direct investments. Mongolia’s foreign direct investment is dependent on single industry and single project, and investment climate reform has been slow. There has been a significant gap in Mongolia’s connectedness to regional economic, trade, and infrastructure cooperation and platforms. Thus, investment climate reform to enable attracting new investments, diversifying their sources, and enhance connectivity to the regional development initiatives is a top priority issue. The flip side of the coin is to deepen multilateral cooperation and enhance policy coordination with international financial institutions and development partners.

Proper review and monitoring are vital to successful implementation of development projects. How does ADB monitor the effectiveness and implementation of your projects?

I completely agree with you on the critical importance of strong review and monitoring of development assistance. As part of the design and monitoring of projects, ADB engages with key stakeholders, including the government, civil society, private sector and target beneficiaries to ensure that their perspectives are meaningfully considered. The projects design and monitoring framework is prepared during project processing in consultation with stakeholders. In this context, it is important to note that ADB-funded loans and grants are implemented by the government. Therefore, the responsibility for the project implementation including procurement, contract award and administration, rests with the government. We, for our part, have the obligation to ensure that the project proceeds are used with due attention to considerations of economy and efficiency, and they are used only for the purposes for which the project approval was granted. Our officers work closely with the government and its project implementation units to ensure this. They jointly review the project implementation regularly, at least twice a year.

-The bidding and contract awarding process strictly follows the government’s procurement policies and ADB’s procurement regulations. At the end of the project implementation, a project completion report is prepared to assess the effectiveness of the fund usage and evaluate whether the project has reached its intended impact and results. The completion reports are disclosed publicly on our website. All projects’ financial statements are audited annually by independent auditors and the audited financial statements are disclosed publicly.