Special Session:

CSN Development Report 2017:

Investing in infrastructure for an inclusive and sustainable future

30 November 2016

Oliver Paddison

Chief, Countries with Special Needs Section

Macroeconomic Policy and Financing for Development Division

Expert Group Meeting on the Regional Implementation of the Vienna Declaration and

Programme of Action for Landlocked Developing Countries

Expert group meeting on the regional implementation of the Vienna Declaration

and Programme of Action for landlocked developing countries2

Introduction

• Countries with Special Needs (CSN)

– Include LDCs, LLDCs and SIDS

– Continue to face structural challenges and vulnerability to external shocks

• Asia-Pacific CSN Development Report

– 2015: Building productive capacities to overcome structural challenges

– 2016: Adapting the 2030 Agenda for Sustainable Development at the National Level

– 2017: Investing in infrastructure for an inclusive and sustainable future

• Why infrastructure?

– A critical element of inclusive and sustainable development

– 2030 Agenda for Sustainable Development

– HLPF for sustainable development

– FfD follow-up forum

– Programmes of Action (IPoA, PVoA and SAMOA)

Expert group meeting on the regional implementation of the Vienna Declaration

and Programme of Action for landlocked developing countries3

Introduction (continued)• “Infrastructure” encompasses physical infrastructure, social

infrastructure and institutional infrastructure

• The Report focuses on

– Four types of physical infrastructure (transport, energy, ITC, and water

supply and sanitation)

– Four sources of finance (public sector, privates sector, bilateral donors

and multilateral development banks)

• The Report aims to

– Discuss the framework for integrating infrastructure for sustainable

development (Ch.1)

– Review the current state of infrastructure and identify gaps (Ch.2)

– Review various financing modalities (Ch.3)

– Assess economic impacts of developing infrastructure in CSN (Ch.4)

Expert group meeting on the regional implementation of the Vienna Declaration

and Programme of Action for landlocked developing countries4

Conceptual framework on infrastructure for sustainable

development

Expert group meeting on the regional implementation of the Vienna Declaration

and Programme of Action for landlocked developing countries5

IDI for CSN IDI links ‘significantly’ with growth

Infrastructure Development Index

IDI links ‘significantly’ with human development

0.0 0.2 0.4 0.6 0.8 1.0

Papua New GuineaAfghanistan

Solomon IslandsCambodia

VanuatuBangladesh

MyanmarLao PDR

Micronesia (F.S.)Nepal

MongoliaIndia

BhutanPakistan

TurkmenistanIndonesia

PhilippinesFiji

Sri LankaTajikistan

SamoaTonga

Viet NamUzbekistanKyrgyzstan

GeorgiaAzerbaijan

ThailandArmeniaMaldives

TurkeyChina

Iran (Islamic Rep. of)Malaysia

Russian FederationKazakhstan

New ZealandAustralia

JapanRepublic of Korea

Singapore

Index score (1= best, o= worst)

y = 5.3x + 5.9

R² = 0.7

0

2

4

6

8

10

12

0.0 0.2 0.4 0.6 0.8 1.0

Log

re

al

GD

P p

er

cap

ita

IDI score (1=best, 0=worst)

y = 0.6x + 0.4

R² = 0.9

0.00

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

0.90

1.00

0.0 0.2 0.4 0.6 0.8 1.0

HD

I sc

ore

(1

=b

est

, 0

= w

ors

t)

IDI score (1=best, 0=worst)

Source: ESCAP

Expert group meeting on the regional implementation of the Vienna Declaration

and Programme of Action for landlocked developing countries6

0 50 100

Maldives

Armenia

Kyrgyzstan

Kazakhstan

Uzbekistan

Tajikistan

Turkmenistan

Azerbaijan

Nepal

Fiji

Myanmar

Afghanistan

Bhutan

Tonga

Vanautu

Micronesia

Samoa

Lao PDR

Bangladesh

Cambodia

Papua New Guinea

Mongolia

Solomon Islands

0 50 100

ArmeniaAzerbaijan

KazakhstanKyrgyzstan

MaldivesSamoa

TajikistanTurkmenistan

UzbekistanTonga

MongoliaNepal

BhutanLao PDR

BangladeshAmerican Samoa

FijiFrench Polynesia

GuamKiribati

Marshall IslandsMicronesia

New CaledoniaPalau

MyanmarTuvalu

AfghanistanTimor-Leste

CambodiaVanautu

Solomon IslandsPapua New Guinea

Paved Road (% of roads) Access to electricity (% of pop.)

Current state of infrastructure in CSN

Expert group meeting on the regional implementation of the Vienna Declaration

and Programme of Action for landlocked developing countries7

Afghanistan

Armenia

AzerbaijanBangladesh

Bhutan

Cambodia

FijiKazakhstan

Kiribati

Kyrgyzstan

Lao PDR

MaldivesMarshall

IslandsMicronesia

Mongolia

Nepal

Papua New

Guinea

Samoa

Solomon

Islands

TajikistanTimor-Leste

TongaTuvalu

Uzbekistan

Vanautu

0

50

100

0 5000 10000 15000 20000 25000 30000

Acc

ess

to

im

pro

ve

d w

ate

r so

urc

e (

%)

GDP per capita

Source: ESCAP

Access to water supply and GDP per

capita

Fixed broadband subscriptions per 100

inhabitants, 2015

Current state of infrastructure in CSN

Expert group meeting on the regional implementation of the Vienna Declaration

and Programme of Action for landlocked developing countries8

Source: ESCAP

• Infrastructure is insufficiently

developed to cope with the

existing needs of CSN

• To complement the analysis, the

Report also aims to

– Review national development

plans and infrastructure

policies of CSN; and

– Conduct perception surveys

among national policymakers

Infrastructure development Index

Current state of infrastructure in CSN

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

IDI

sco

re (

1=

be

st,

0=

wo

rst)

Developed (3) Developing (15) LDC (9) LLDC (8) SIDS (6)

Expert group meeting on the regional implementation of the Vienna Declaration

and Programme of Action for landlocked developing countries9

Infrastructure financing requirement

• Large infrastructure financing

requirements: at least 9.1% of

GDP annually for CSN

– To meet the future demand (4-5 %)

– To cover the cost of maintenance

(3-5%)

– To fill the current gap (?% of GDP)

• A major portion is in the

transport sector, but needs are

growing for ICT and energy

• Climate change mitigation will

require additional fund

Future infrastructure financing

requirements

Expert group meeting on the regional implementation of the Vienna Declaration

and Programme of Action for landlocked developing countries10

Current infrastructure financing

• Infrastructure development can

be financed through

– Public sector (3-5% of GDP)

– Private sector (approx. 1% of GDP)

– ODA (0.7% of GDP)

– MDB (0.7% of GDP)

• These sources of finance will

not be sufficient to meet the

financing needs.

Composition of current

infrastructure financing in CSN

Source: ESCAP.

Expert group meeting on the regional implementation of the Vienna Declaration

and Programme of Action for landlocked developing countries11

How to fill the gap:

Public and private sectors

• Domestic public finance

– Expected to remain a significant source

– Should be used to crowd in private investment

• Private sector participation

– Concentrated in a few mega energy projects and privatization of ICT infrastructure

– Has potential to play a bigger role but requires a stable “investor-friendly” climate

– New sources need to be tapped

PPP, 2006-2015, % of GDP

Expert group meeting on the regional implementation of the Vienna Declaration

and Programme of Action for landlocked developing countries12

• Bilateral ODA and OOF

– Have played a limited role in CSN as they tend to focus more on social infrastructure

– Assistance from non-DAC countries may be increased

• MDBs and new regional initiatives

– Great present in LDCs, particularly ADB’s support to the transport sector and WB’s support to the energy sector

– Help CSN attract capital from the private sector

– New regional initiative (AIIB, ASEAN infrastructure fund, etc.) have the potential to help develop investible infrastructure projects in CSN

How to fill the gap:

Development cooperationComposition of development assistance for

infrastructure financing, million USD, 2014

Expert group meeting on the regional implementation of the Vienna Declaration

and Programme of Action for landlocked developing countries13

Economic impacts of infrastructure

• Impact analysis

– Infrastructure development and GDP per capita

– Infrastructure related exogenous policy shocks and welfare gains

• Scenario analysis

– Promoting infrastructure development policies through subregional and

bilateral initiatives

– Supporting infrastructure development at the regional level through cross-

border financing mechanisms

• Estimation of national and group-specific welfare gains

– National infrastructure development policies

– Subregional initiatives

– Regional financing mechanisms

Expert group meeting on the regional implementation of the Vienna Declaration

and Programme of Action for landlocked developing countries14

Key messages

1. CSN have made uneven progress over the past decades in

terms of their level of physical infrastructure development and

improving the overall quality

2. Traditional sources of financing will be inadequate to fulfil the

investment needs of CSN

3. Policy messages need to go beyond national borders, and

include aspects of regional architecture for infrastructure

development in a holistic manner

Expert group meeting on the regional implementation of the Vienna Declaration

and Programme of Action for landlocked developing countries15

Key questions for discussion

Planning: How should Governments prioritize various areas of infrastructure development? (sequencing or simultaneous approach)

Financing: Who has potentials to become new/emerging sources of infrastructure financing for CSN?

Cooperation: How can development cooperation be reoriented to provide long-term infrastructure financing to CSN?

Thank you

Macroeconomic Policy and

Financing for Development

Divisionhttp://www.unescap.org/events/APEGMVPOA2016