CS73: Introductory Statement at the High-level Exchange of the Special Body on LDCs, LLDCs, and SIDS

Delivered at the Special Body on Least Developed, Landlocked Developing and Pacific Island Developing Countries - High level Exchange during the 73rd Session of the Economic and Social Commission for Asia and the Pacific in Bangkok, Thailand.

Excellencies,
Distinguished delegates,
Ladies and gentlemen.

It is a great pleasure to welcome you to the High Level Exchange of the Special Body on Least Developed, Landlocked Developing and Pacific Islands Developing Countries; and to share with you some of the main findings of this year’s Countries with Special Needs Development Report. This year, our focus has been Investing in Infrastructure for an Inclusive and Sustainable Future; a theme which flows out of our previous analysis on bolstering productive capacity and integrating the 2030 Agenda for Sustainable Development into national development plans.

The 2030 Agenda’s Sustainable Development Goal 9 focuses on promoting investment in sustainable infrastructure, the benefits of which are uncontested. Upgrading old and building new infrastructure increases productivity, growth, competitiveness, and if done intelligently, supports social development. In the short term, building new infrastructure can boost demand and employment through construction work. In the longer term, it helps to keep growth sustainable. The academic consensus in this field is overwhelming. Infrastructure, growth and poverty reduction go hand in hand.

Improved access to infrastructure empowers rural areas, connects people to markets and can support climate change adaptation and mitigation. Each country has its own set of vulnerabilities, but through our analysis we have identified common challenges which a multilateral approach could help overcome. Least Developed Countries need to expand their productive capacities and increase their levels of social and economic development, while equitably sharing the benefits. Landlocked Developing Countries need to overcome the disadvantages of being landlocked which inhibit their ability to engage with the global economy. By expanding trade, intensifying production networks and accelerating investment in transport, ICT and energy infrastructure, these countries can become land-linked. Small island states face significant challenges due to their small size and lack of economic diversification which limits economies of scale. Geographical fragmentation and isolation, and the existential threat of the impact of climate change are big challenges requiring the collective effort of the international community.

To capture the multidimensional character of infrastructure, ESCAP has created the Access to Physical Infrastructure Index which focuses on the four sectors of physical infrastructure: transport; energy; information communication technology; and water and sanitation. The Access to Physical Infrastructure Index has been calculated for 41 countries in the Asia-Pacific region, including 23 CSNs. It confirms the significant infrastructure deficits of these countries. If infrastructure access in CSN countries were increased to the level of other developing countries in the region, by 2030 their combined GDP would increase by as much as $134 billion, or 6 per cent.

Let me say a few words about the challenges in the four areas of infrastructure examined, starting with transport. Road density is low in countries with special needs, particularly in large countries such as Kazakhstan and Mongolia. In many CSNs, only a small proportion of roads are paved and maintenance is underfunded. Many CSN only spend between 20 and 50 per cent of what is needed to maintain their road network. The efficiency of rail transport in these countries is held back by different technical standards across the region, as well as by multiple missing links in rail infrastructure which prevent the rail network functioning as a continuous system. We estimate some 11,000 km of missing links in the Trans-Asian Railway network, or around 9% of the existing network. Over sixty per cent of these missing links, totaling some seven and a half thousand kilometers are in CSNs.

In the energy sector, the principal issues facing CSNs is limited energy access as about 45 per cent of the population in CSNs, or 140 million people, do not have access to electricity. Provision of electricity is a fundamental need and its positive correlation to the human development index - a composite measure of life expectancy, education, and per capita income - are striking.

There are also profound differences between CSNs in terms of energy access. Seven of the 12 Landlocked Developing Countries in the region have achieved universal electricity access. Although many of the Least Developed Countries have made progress through grid extensions and decentralized electricity provision over the past two decades, in most of them less than 60 per cent of the population has access to electricity. Small island states, particularly those in the least developed category, have also struggled to lift electrification rates. As island economies, they face additional challenges of fragmentation, lack of scale and isolation which inhibit the provision of power generation and transmission infrastructure. However with the right support, the development of small scale decentralized power options, based on renewable energy can surmount many of these challenges. Many of the Pacific Island states have put in place ambitious renewable energy targets which are building scale and increasing experience in renewable power solutions.

In ICT, spreading technology could accelerate human progress significantly. Mobile technology could improve the way public services such as health and education are delivered via e-Health applications and e-Learning platforms. Telecommunication infrastructure is an essential driver of effective governance in countries with thinly spread and isolated populations. Broadband enabled technologies, such as smart grids or intelligent transport systems are just some of the efficient approaches that drive growth in all sectors of the economy. A good broadband network could underpin the movement of goods, services, people and money across countries. Yet internet access is low in many CSNs. There were fewer than five fixed broadband subscriptions per 100 inhabitants in 2015, although most Landlocked Developing Countries perform better. As well as investment, a supportive regulatory environment in this area needs to be developed across all CSNs to support ICT development.

Access to clean water and the safe disposal of waste is the focus of the Sustainable Development Goal 6. It is crucial to improving social well-being. Only 53 per cent of people in rural areas in Landlocked Developing Countries, and 56 per cent of rural areas in the Least Developed Countries, have access to clean water. Not only is access to clean water essential for good health, but it also frees up time which can be dedicated to more productive activities. I would add that rapid urbanization is placing an increased strain on water supply and sanitation infrastructure – which in turn highlights another challenge as the local governments responsible frequently do not have power or financial wherewithal to respond effectively.

Indeed, closing these infrastructure gaps will require significant financial resources. We estimate that taking population growth, increasing urbanization and the impact of climate change into account, CSNs will require average annual investments equivalent to 10.5 per cent of GDP . This far exceeds current infrastructure funding of between 5 to 7 per cent of GDP. These needs are particularly acute in the small island least developed countries (Timor-Leste 21.1 per cent of GDP and Kiribati 14.4 per cent of GDP) and in Landlocked Least Developed Countries such as Afghanistan - 18.5 per cent of GDP - and Nepal 15.7 per cent of GDP.
It is clear that a more effective use of existing funds for infrastructure development is needed, but that many CSNs face challenges in terms of delivering public services and raising additional financial resources. Public sectors suffer from low efficiency in delivering public services and generating economic growth through infrastructure. On the revenue side, tax collection is too low. Previously, an 18 per cent tax-to-GDP ratio is estimated to be needed in developing countries for the MDGs to be met. But in 13 out of the 17 CSNs for which data is available, the ratios are below that level.
Governments can strengthen infrastructure investment in the region by proper planning and coordination across relevant ministries. Complementary policy measures should be undertaken, supported by stronger institutional governance for project execution, respect for property rights and the rule of law to ensure the benefits of infrastructure are shared by all. Infrastructure development frameworks for policy design and implementation are important for this purpose - bringing various sectors together. Overall, our work to deepen regional economic cooperation and integration, as well as mega initiatives such the Belt and Road Initiative, can support our overall efforts to bolster infrastructure capacity in CSNs.

Excellencies, ladies and gentlemen,

With this background on the broad challenges highlighted by our report, the purpose of this High-Level Exchange is to:

(1) identify in further detail the opportunities associated with infrastructure development, such as prioritization, cross-sectoral coordination, and institutional capacity for implementing projects and ensuring sustainable and effective use of infrastructure;

(2) understand challenges and opportunities at the national level for financing infrastructure, including through mobilizing domestic public finance; as well as enhancing private sector participation and PPPs; and

(3) discuss the future role of development assistance and cooperation in developing regional infrastructure such as large transport corridors and information superhighways.

The outcome of this panel discussion will contribute to national and regional strategies for infrastructure development and the implementation of the SDGs in Asia and the Pacific.

I thank you and look forward to your active participation in the panel.