Broadening financing options for infrastructure in Emerging Asia

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By Kensuke Tanaka, Head of Asia Desk, and Prasiwi Ibrahim, Economist at Asia Desk, OECD Development Centre 


Learn more about this timely topic at the upcoming
1st International Economic Forum on Asia
Register today to attend on 14 April 2017!


Kensuke-Prasiwi-AsiaForumAgreeing on the need for new infrastructure is one thing; finding a sustainable way to finance it is another. According to the ADB, an estimated USD 26 trillion (or USD 1.7 trillion per year) will need to be invested in infrastructure in its developing member countries1  between 2016 and 2030 if these economies are to maintain their growth momentum, eradicate poverty and respond to climate change2  .Given the scale of investment needed, countries in the region will not have sufficient funds to meet demand. Indeed, financing infrastructure investment has been a considerable challenge for the region. Political factors can further complicate financing when they lead to the inefficient allocation of public funds. How best to finance infrastructure is, therefore, a key concern for policy makers in the region.
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The value of sharing experiences in urban redevelopment

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By Dr. Koki Hirota, Chief Economist, Japan International Cooperation Agency (JICA)


Learn more about this timely topic at the upcoming
1st International Economic Forum on Asia
Register today to attend on 14 April 2017!


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A future image of the Cebu metropolitan area

Catastrophic floods and earthquakes have hit Asian cities such as Manila, Bangkok or Kathmandu in recent years more than ever before. Air pollution in Delhi, Dhaka or Beijing has turned more and more dangerous, threatening the lives of residents. All this as the international community agreed on Sustainable Development Goal (SDG) 11 to “make cities and human settlements inclusive, safe, resilient and sustainable.” Responding to this call, the Japan International Cooperation Agency (JICA) decided to allocate 35% of its financial co-operation programme last year to urban development.

Why? Urbanisation in developing countries is happening fast. Ten mega cities of over 10 million people existed in 1990; that number increased to 28 in 2014 and is projected to reach 41 in 2025 (UN [2014]). Urban areas in Shanghai expanded by 8.1% annually between 2000 and 2010 and by 4.0% in Jakarta. Tokyo, in comparison, expanded by 0.2% (World Bank [2015]). Dhaka became a mega city in just 40 years from a population of 1 million. Many other Asian mega cities took only 50 to 70 years to reach that level, which is a much shorter time than what advanced economies experienced.

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The SDGs, Domestic Resource Mobilisation and the Poor

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By Nora Lustig, Samuel Z. Stone Professor of Latin American Economics, Director of the Commitment to Equity Institute at Tulane University, nonresident senior fellow of the Center for Global Development and the Inter-American Dialogue, and non-resident senior research fellow at UNU-WIDER 1


Learn more about this timely topic at the upcoming
Global Forum on Development on 5 April 2017.
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E_SDG goals_icons-individual-rgb-01Countries around the world committed to the Sustainable Development Goals (SDGs).  However, achieving some of the SDGs could happen at the expense of the overarching goal of reducing poverty, at least in the short-run.2  One key factor to achieving the SDGs will be the availability of fiscal resources to deliver the floors in social protection, social services and infrastructure embedded in the SDGs. A significant portion of these resources is expected to come from taxes in developing countries themselves, complemented by transfers from the countries that are better off.3 In developing countries, however, raising additional taxes domestically for infrastructure, protecting the environment and social services may leave a significant portion of the poor with less cash to buy food and other essential goods.  Continue reading

Speeding ahead with a rear-view vision: the looming crisis of air pollution in Africa

By Dr Rana Roy, Consulting Economist, author of The Cost of Air Pollution in Africa, OECD Development Centre Working Papers, 2016

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WHO Global map of modelled annual median concentration of PM2.5

Africa is speeding toward a new crisis: an explosive increase in air pollution, with all its human and economic costs.

Africa is by no means alone in suffering the modern curse of air pollution. No less than 92% of the world’s population is now exposed to pollution levels exceeding World Health Organisation limits.[1] Nor is Africa “over-represented” in the global death toll from air pollution as it stands today. The total of premature deaths attributable to each of the two main types of air pollution, ambient particulate matter pollution (APMP) and household air pollution (HAP), stood at around 3 million.[2] Of these, Africa accounted for around 250,000 premature deaths from APMP, less than its share of the global population would suggest, and over 450,000 premature deaths from HAP, roughly in line with its share. In comparison, it is China, with its 900,000 deaths from APMP and 800,000 deaths from HAP that dominated the global death toll in 2013. Continue reading

Can the G20 make a difference for development?

By Federico Bonaglia, Senior Counsellor to the Director at the OECD Development Centre

Can the G20 really make a difference for development? The short answer is yes. The long answer is that the G20 can actually do more and should not miss the opportunity offered by the SDGs to deepen its engagement on global development. How can we upgrade the development agenda? In a two-part Development Post, the author explores the first question here. Look for a second submission that delves into the G20’s forward-looking agenda for development.

With the tragic Paris events weighing on their minds, G20 leaders gathered in Antalya last week and reaffirmed their commitment to strong, sustainable and resilient growth for all, including low-income and developing countries. Why does this matter for development and the recently approved Sustainable Development Goals? The reasons are substantial. First, the sheer size of the G20 economies and the transmission mechanisms that link their actions, or inaction, to the development prospects of the rest of the world cannot be ignored. Second, G20 leaders possess convening and agenda-setting power and their like-minded approach to development demands attention. Third, the value of each G20 country’s own respective development experiences can contribute to inform developing countries in their efforts.

Indeed, development has a special place in the G20. Different from other fora, the G20 has not evolved into a pledging platform for development initiatives. Just think of the 2005 G8 Gleneagles Summit, with its ambitious plans to double aid and undertake massive debt relief, or other G7/G8 initiatives on water (Evian), food security (L’Aquila), maternal health (Muskoka) or the Middle East and North Africa transition (Deauville). The G20 countries representing 85% of the world’s GDP are focusing instead on promoting an enabling global environment to spur development and enhance the role of developing countries as new poles of growth[1].

For its part, the OECD has been involved in the design and implementation of the G20 development agenda since the adoption of the G20 Seoul Multi-year Action Plan on Development. And the G20’s own progress reports offer information on whether commitments in the development field are on track. Consider the impact of some of the G20’s actions on developing countries:

Lifting G20 growth: The Brisbane Growth Strategies, which outline structural reforms to lift growth in each G20 country, would raise G20 GDP by roughly 2.1% by 2018 if fully implemented and have potential spill-over effects on developing economies. Lifting the growth of G20 countries – or failing to do so – will ultimately affect developing countries through trade, investment, migration and technological channels.

Coordinating macroeconomic policies: Macroeconomic coordination is likely to have – at least in the short term – a much larger effect on developing countries than structural reforms in G20 countries. While we understand the implications of these policies for the G20, the implications for developing countries, through interest rates, global liquidity and capital flows, have yet to be fully explored.

Reforming the international tax system: Developing countries stand to benefit from the G20-OECD Base Erosion and Profit Shifting (BEPS) project, set to end double non-taxation of multinationals and increase transparency through the automatic exchange of information. G20 leaders’ call to action to strengthen tax capacities by offering officials as Tax Inspectors Without Borders or supporting the strengthening of tax revenue statistics is welcome. These measures will help developing countries harness the potential created by reforms to the global tax system, such as tackling tax evasion and reducing tax loopholes.

Lowering the cost of remittances: Remittances to and from G20 countries account for almost 80% of global remittance flows. G20 countries announced measures to reduce the cost of sending remittances, including enhancing competition among money transfer operators. Globally, remittances totalled U.S. $436 billion in 2014, more than three times official development assistance, and are the largest source of private external finance for several developing countries. By taking steps to promote effective intermediation, receiving countries can further amplify impact.

Boosting infrastructure investment: The G20 was instrumental in placing infrastructure bottlenecks on the development agenda. The actions taken are wide-ranging, from calling multilateral banks to modify their internal procedures and incentives for financing infrastructure projects to identifying priority projects with developing countries. With support from the OECD and the World Bank, the G20 has distilled principles and indicators to help countries mobilise private investment for infrastructure. The G20 is also committed to working with investors and developing countries to better appraise the risks and returns of these investments.

Enhancing global food security: The G20 Action Plan on Food Security and Sustainable Food Systems is the culmination of five years of intense discussions and initiatives. Since its inception, the G20 debated the volatility of commodity prices and lagging agricultural productivity growth. It convened relevant organisations to develop a consensus on causes and possible remedies and established a global monitoring system for food stocks. This plan has the potential to help advance food security in developing countries and globally.

Sharing knowledge: Many G20 development deliverables are global public goods and contribute to knowledge sharing. These are distilled into databases and toolkits to support better policy making in developing countries. Consider, for example, the development of indicators on skills and of toolkits to design inclusive green growth strategies or enhance agricultural productivity.

Assessing the impact of G20 actions on development outcomes is not easy and, to the best of our knowledge, no rigorous attempt has been made so far to that end. Challenges include:

  • identifying relevant G20 actions or inputs and quantifying their magnitude;
  • choosing a baseline, such as GDP growth, well-being or jobs, for the appropriate outcomes to be measured in partner countries;
  • mapping the transmission channels from G20 actions to development outcomes in terms of finance, trade, migration or technology;
  • estimating the net effect of different and maybe offsetting actions; and
  • distinguishing between the G20’s direct attribution versus its contribution to observed outcomes.

Yet, efforts to address some of these concerns have been made. The Turkish presidency released a framework mapping the whole-of-G20 contributions to development. But given such challenges, the yardsticks to identify impact will have more to do with the convening and consensus-building power and the effective implementation of commitments rather than quantitative economic assessments. Closely monitoring implementation and involving developing countries in discussing the G20’s development agenda and its impacts will have to remain a priority for future presidencies.

[1] In 2010, G20 leaders acknowledged that “narrowing the development gap and reducing poverty are integral to [the] broader objective of achieving strong, sustainable and balanced growth and ensuring a more robust and resilient global economy for all.”

 

How the private sector can advance development

By Lorenzo Pavone, OECD Development Centre EMnet Co-ordinator; Kate Eklin, Policy Analyst; Myriam Grégoire-Zawilski, Programme Assistant; Josep Casas, Trainee

The Millennium Development Goals (MDGs) launched in 2000 centred on addressing basic human needs throughout the developing world. The recently adopted Sustainable Development Goals (SDGs) for the post-2015 era focus on economic growth, social inclusion and environmental protection as interconnected dimensions of broader global development. Unlike the MDGs, achieving this new set of ambitious goals calls for bolder action from diverse actors across society, whose collective efforts outweigh what they could deliver individually. And the private sector is not least among these actors. Why? Business-led initiatives, such as research and development partnerships, knowledge-sharing platforms, technology and skills transfer, and infrastructure investment have the potential to kick-start development, enable productivity gains, generate better quality jobs, strengthen skills and promote technological advances. Continue reading

Getting ready for the next wave: Towards a more dynamic and inclusive Latin America

By Mario Pezzini, Director of the OECD Development Centre, and Angel Melguizo, Head of the Latin America and Caribbean Unit at the OECD Development Centre.

Latin America and the Caribbean enjoyed a decade of strong growth between 2004 and 2013. Growth averaged 3.8% and in some years over 5%. They were helped along by growth in China and other emerging economies that raised demand and prices for exported commodities such as food, metals and fuels.

This led to an extraordinary easing of financial conditions, especially after the global financial crisis. Latin America was riding good times. However, the extraordinary external conditions blurred the true state of the region’s domestic supply and demand situation. Now the good times are over – at least for a while – and it is easier to check out the true shape of the regional economy. Continue reading