A tale of two dragons
How a former young professional hailing from the Land of the Thunder Dragon became passionate to work on urban and social projects in the Red Dragon of Asia.
It took a magazine advertisement to change his entire life.
Sangay Penjor, Director of the East Asia Urban and Social Sectors Division (EASS), was once a research officer for the central bank of Bhutan, the Royal Monetary Authority, when one day he was flipping through the pages of The Economist. On the last page he saw an advertisement for the ADB Young Professionals (YP) Program. He submitted an application and the rest was history.
He has been with ADB for 27 years. And for most of that period he has been with East Asia, witnessing all of its transformations across various acronyms. According to him, in the 25 years he has spent in the current building of ADB headquarters, most of it has been in the exact same floor where his present office is located. He has seen all sections of the sixth floor, he said.
These changes in ADB, such as the shift from sector to country focus and the reorganizing of sectors, have shaped his career trajectory. With an undergraduate degree in finance and a master’s degree in management, he initially worked on financial and economic rates of return, ratios, and balance sheets for energy as a young professional, before he moved to agriculture and forestry and later settling into urban and water. All the while he was amassing a trove of experience and understanding of East Asia, particularly the People’s Republic of China (PRC), in addition to knowledge of the Pacific, Southeast Asia and South Asia having also worked in these areas. His greatest achievement to date is in the PRC, which he details in the interview below.
Along with this, he is credited with establishing a sustainable market-based housing finance and mortgage system in Mongolia. Sangay, however, left operations for about two years, switching to the Independent Evaluation Department in 2008 to widen his knowledge. He eventually returned – two years in South Asia and on to EASS – because as he puts it: he’s “an operational man”.
Today, the concurrent chair of the Urban Sector Group continues to play a vital role in the unstoppable urban growth of the PRC. His division, he underscores, is the only one that consists of both urban and water together with health, education, and social protection. And in a time when cities need to have a more inclusive urbanization and when rural-urban integration becomes increasingly important, he is poised to lead that charge—not unlike the wise and fearless mythical creature shared by the two major influences in his life.
“I think we need to integrate the social elements with urban strategies because these better address the key issues in urban centers like inclusive urbanization and rural-urban integration.”
Director, East Asia Urban and Social Sectors Division,
and concurrent Chair of the Urban Sector Group
You started out working on financials for energy. How or why did you switch over to urban?
Sangay: I started in the YP Program in 1990, where I was with energy for the first nine months. In those days, ADB was organized sector-wise, not country-wise. For instance, you had the Energy Industry Department and the Agriculture East Department (AED); so, what is now the East Asia Regional Department or EARD used to be AED. And before I graduated from the YP Program, I found a position as project economist in the Agriculture Division 1. My main responsibility was to do the financial and economic analysis of projects, cost estimates and financing plan, and all other economic and financial due diligence. I was with agriculture for three to four years.
At that time, AED also covered what are now Southeast Asia, East Asia, Central and West Asia, and the Pacific. While I was in AED, I had the opportunity to work for many projects in the Philippines. These include the Philippine Forestry Sector project, the Fisheries Sector project, and a development finance credit line for the Land Bank of the Philippines. I then joined the Agriculture East Forestry and Natural Resources division, and worked on some projects in China, like the Guangdong Tropical Crops Project, Agriculture Bank of China Project, and Yunnan Simao Reforestation and Pulp Mill Project, among others.
It was around 1996 when I jumped to urban, so from AEFN to AEWU or Agriculture East Water and Urban. Again I worked on some Philippine projects like the Subic Bay Urban Development project, improving the roads and drainage, and another in Clark Base, as well as projects in China, such as the Zhejiang Shanxi Water Supply Project.
What has been a defining moment of your ADB career?
Sangay: I think the one defining moment of my career was when the national guidelines for water tariffs were decreed in China. Basically, around the late 1990s, then Premier Zhu Rongji made a big speech where he emphasized the importance of water supply systems to move towards full-cost recovery and financial sustainability. With this strong emphasis from the top leader, the then Ministry of Construction and now Ministry of Housing and Urban-Rural Development approached ADB for a technical assistance (TA) to help them prepare the first-ever national guidelines on water tariffs.
The reason I’m proud of this is because five recommendations from the TA were incorporated into the final guidelines that were mandated nationwide, and we see the huge impact these guidelines have today on strengthened cost recovery and financial sustainability of water and wastewater operations and in establishing an enabling environment for the private sector.
First of the five recommendations, tariffs should be approved at the city or county level. Second, in setting water tariffs the water supply company must have full cost recovery as their main objective. Third, when a city or county is thinking of increasing tariffs, it is mandatory that they hold three public hearing meetings, so that there is adequate consultation with the affected people. Their views should be taken into account before a final decision can be made. Fourth, water supply companies should clean up their balance sheets so that only the assets and liabilities that are directly linked to providing efficient water services are in the balance sheet. Fifth recommendation is on lifeline tariffs, or block tariffs, meaning the first block is free for all whether you’re rich or poor. It’s the minimum required for human consumption. Then as you go up, like rich people who use more water for their garden or cleaning their cars, they are on a higher block. With block tariffs, the more you consume, the higher you pay.
These recommendations that were incorporated into the decree came out of the first of two TA projects I was handling. The second TA focused on how to implement this decree in the provinces and cities. ADB conducted a pilot of the implementing guidelines of the national guidelines in three cities: Fuzhou, Chengdu, and Zhangjiakou. I may be wrong but up to now I have not seen any TA that has had this kind of impact in China, resulting in a major decree and national regulations on water tariffs.
There continues to be a big push for development in President Xi Jinping’s new era. How do you marry this directive while addressing the issue of ghost cities, inequality, and other prevailing urbanization challenges in the PRC?
Sangay: There has been a major shift in China from being an export-led economy to domestic consumption. Unlike people in the West and other parts of Asia, Chinese are big savers, so that can be a challenge. They always keep their money in the bank for a rainy day. So to shift to a consumption-led economy, these people need to take some of that money and spend. There’s a lot of information campaign explaining the need for this.
They are also undertaking reforms in the household (hukoe) registration system. Since people are looking for greener pastures, many migrate to urban centers, creating some issues—one of which is household registration. The dilemma is while they may be located in a city, they are still registered in their original rural areas, meaning they don’t have access to health, education, and other benefits in the city they have migrated to.
The government wants people to have a hukoe based on their residence. So if you’re based in the city, you have to give up your rural hukoe. You then get a household registration in the city you have migrated to and receive all the benefits in the city. Implementation of the reforms, though progressing, are proving to be challenging. There is a target of providing 100 million rural migrants with full urban hukoe status by 2020. The government wants them to move to small- and medium-sized cities. They don’t want them to move to the large cities. But how do you incentivize people to move to the small- and medium-sized cities? I think one of the ways to do that is to really improve the urban environment in the small- and medium-sized cities, and also to make it age-friendly, have good landscaping, and employment opportunities.
As for ghost cities, there have been some cases because China for a long time has been more on land urbanization than people. The pace of urban expansion in built-up areas of cities has been faster than their pace of accommodating the population. In other words, it’s supply and demand with a focus on the former. By 2030 they say that 70% of the population will be in urban centers so even these ghost cities will be fully occupied. The good thing is the government has realized that land urbanization needs to be demand driven. In addition, the New Type Urbanization Plan issued in 2014 represents a major shift from land-based urbanization to people-centered urbanization. It focuses on improving the livability and quality of life of residents in the cities. ADB provided support through a TA called Study on Strategic Options for Urbanization in the PRC to undertake key urban research work and provide inputs and suggestion to the new plan.
Do you have any current exciting projects in East Asia?
Sangay: For urban, we recently have the Heilongjiang Green Urban and Economic Revitalization project. Heilongjiang is a province that ADB has been working with for more than 23 years. It has been a continuous strategic engagement with the province. This project is helping four mid-size cities in the East Heilongjiang, which were originally coal-thriving cities, to diversify their economies away from coal through agro-products and other non-coal-based industries. Some of these include herbal medicine, graphite (a high kind of mineral that is used in batteries for electric cars), and this special wood furniture they produce. The project aims to provide them with a roadmap to diversify and promote small-to-medium enterprises (SMEs). It also comprises improvement of the urban environment in the four cities, and financial intermediary loan for SMEs that are not able to secure long-term funds from commercial banks.
Aside from this, not about a specific project, but what makes our work exciting is how this is the only division in ADB where urban is combined with the social sectors. I think we need to integrate the social elements with urban strategies because these better address the key issues in urban centers like inclusive urbanization and rural-urban integration. This is a very good opportunity for our urban people and health and education specialists to work together, get to know what the other is doing, and prepare sound and sustainable projects integrating urban and social services. This is why the projects coming out from here are highly innovative.
Having been in the Philippines for so long, how do you preserve your roots and traditions?
Sangay: One way to keep your traditions alive is by going back to your home country regularly. We have a very large family who are still there and we have built a house high up in the mountains in the midst of the pine trees where we plan to retire. Sometimes we go home twice a year. Of course here we speak in our own language, as well as English since our kids speak English more. My two sons were born here in Manila. It is very interesting that on the first two years we’d go home with them, they would come down with the flu and every time we return to Manila they would be very healthy, no cough. They recover very fast here or simply miss the tropical climate!