The FINANCIAL — Tourism-dependent countries have been particularly hard-hit by the COVID-19 pandemic, as their economies have been adversely affected by global travel restrictions. The Asian Infrastructure Investment Bank (AIIB) recently approved a USD20-million financing to the Cook Islands—one of the world’s most tourism-driven economies—to provide social and economic assistance to the country to mitigate economic disruption and support economic resilience. The loan is AIIB’s first project in the Cook Islands and is funded by AIIB’s COVID-19 Crisis Recovery Facility (CRF).
This project is cofinanced with the Asian Development Bank as part of the Cook Islands’ COVID-19 Active Response and Economic Support Program. Tourism revenues in the Cook Islands exceed 60 percent of GDP. Related sectors accounted for 36.7 per cent of the total workforce in 2016, or around half of all private-sector employment. The pandemic’s impact on the travel industry and its vast value chain has posed a significant threat to the country’s employment and economy, which is estimated to have contracted by 7 percent in FY2020.
In the same vein, an earlier AIIB financing of a USD50-million loan to the Republic of Fiji shared the same objective of minimizing the uncertain socio-economic impact on AIIB members given their heavy dependence on the international tourism market. In addition, the Bank’s USD7.3-million loan to Maldives supports a sustainable environment, which is crucial to its tourism-reliant economy.
“As our members navigate the impact of the global pandemic, AIIB’s liquidity support helps strengthen their response measures and sustain economic development,” said AIIB Vice President, Investment Operations, D.J. Pandian. “As a multilateral development bank, our countercyclical lending to economies heavily reliant on tourism can help them build economic resilience and provide financial relief to the socially vulnerable group, including livelihood support.”
AIIB’s loans for tourism-dependent members promote social protection and economic resilience to prevent long-term damage to the productive capacity, including human capital, of their economies. Financing alleviates government fiscal pressures by strengthening health care response measures, protecting livelihoods and providing economic relief for affected businesses.
According to the United Nations World Tourism Organization (UNWTO), tourism is one of the sectors most affected by the COVID-19 pandemic, impacting economies, livelihoods, public services and opportunities on all continents. All parts of its vast value chain have been affected. Global travel restrictions to contain the ongoing COVID-19 pandemic, including the closure of many borders, caused international tourist arrivals (overnight visitors) to decline by 70 percent in January-August 2020 compared with the same period last year.1
AIIB’s CRF provides up to USD13 billion of financing to both public and private-sector entities facing serious adverse impacts as a result of the pandemic. As of Dec. 17, 2020, AIIB’s Board of Directors has approved a total of 27 projects amounting to over USD7 billion to help 19 members navigate the challenges of these highly uncertain times. The CRF is designed to be flexible and adaptable to emerging demand in AIIB’s members. Top areas of focus include immediate health-sector needs (pandemic preparedness, medical equipment), economic resilience (protecting the productive capacity of the economy) and financing to address liquidity constraints in infrastructure and other productive sectors. Additional projects being proposed under the CRF can be found on AIIB’s website.
