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Item 3a Infrastructure and sustainable development: state of play in central asia and the caucasus

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Infrastructure and sustainable development: state of play in central asia and the caucasus

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Item 3a Infrastructure and sustainable development: state of play in central asia and the caucasus

  1. 1. INFRASTRUCTURE AND SUSTAINABLE DEVELOPMENT: STATE OF PLAY IN CENTRAL ASIA AND THE CAUCASUS Kumi Kitamori, Head of Green Growth and Global Relations Division, Environment Directorate Alin Horj, Policy Analyst Paris, 30 September 2019
  2. 2. Why does sustainable infrastructure matter for Central Asia? Mapping hotspots projects in the region 2 Agenda
  3. 3. Source: International Transport Forum Central Asia is far from production and consumption centres and has limited participation in value chains
  4. 4. Transport connectivity in Central Asia needs to be scaled-up… Source: International Transport Forum
  5. 5. Source: International Transport Forum …to improve connectivity and decrease logistic costs
  6. 6. Central Asian countries have progressed in their infrastructure network roll out, but quality has not always kept pace with growing demand Quality of infrastructure in selected countries of Central Asia and the Caucasus 0 10 20 30 40 50 60 70 80 90 100 Road connectivity Quality of roads Railroad density Efficiency of train services Airport connectivity Efficiency of air transport services Access to seaport services Electrification rate Electric power transmission and… Exposure to unsafe drinking water Reliability of water supply Kazakhstan Georgia Mongolia Azerbaijan Kyrgyz Republic Tajikistan Source: World Economic Forum (2017) 75% of infrastructure needs replacement or maintenance in Kazakhstan (ADB)
  7. 7. Estimated investment gap in infrastructure in the region amounts to 6.8% of GDP until 2030  Infrastructure development is prominent on the agenda of economies in the region  Historically, investment has been state-led, with limited interest from foreign investors  In Central Asia and the Caucasus, investment needs amount to USD 492 bn until 2030 or USD 38 bn per year Estimated Infrastructure Needs by Region, 2016-2030 (USD billion in 2015 prices) - 1 2 3 4 5 6 7 8 9 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 East Asia South Asia Southea stAsia Central Asiaand Caucasu s The Pacific Investment needs Investment needs incl. climate adjusted estimates Total investment needs as % of GDP US$ Billion % of GDP13,781 Source: ADB. 2017. Meeting Asia's Infrastructure Needs. Manila
  8. 8. Regional connectivity initiatives are an opportunity to attract capital in the region CAREC Infrastructure investments of around USD 31.5 billion to promote connectivity in the region. The six CAREC corridors are:  Corridor 1: Europe–East Asia  Corridor 2: Mediterranean–East Asia  Corridor 3: Russian Federation–Middle East and South Asia  Corridor 4: Russian Federation–East Asia  Corridor 5: East Asia–Middle East and South Asia;  Corridor 6: Europe–Middle East and South Asia
  9. 9. China`s Belt and Road Initiative is also poised to further increase the connectivity of the region 0 5 10 15 20 25 30 35 Energy Metals Chemicals Transport Otherin billion USD Between 2005-18, infrastructure investments totaled USD 61 billion with the energy sector dominating the landscape (over 68%) Map of China`s Belt and Road Initiative Source: Mercator Institute for Chinese Studies (2017])Source: American Enterprise Institute (2019), China Global Investment Tracker Chinese investments in the region have increased rapidly in recent years
  10. 10. Most countries in the region have improved the investment climate but further reforms are needed to leverage private investments 0 200 400 600 800 1000 1200 inmillionUSD More needs to be done: access to finance tax rates and regulations inflation and corruption FDI still flowing disproportionately to extractive and fossil fuel projects Between 2003 and 2017, 43% of greenfield FDI of a total of USD 229 billion belonged to coal, oil and natural gas sectors Top three most attractive destinations: Kazakhstan, Azerbaijan, and Uzbekistan The legal framework for investment improved but implementation challenges persist Source: OECD based on fDi Markets
  11. 11. Opportunities and threats for Central Asia OPPORTUNITIES • Significant environmental externalities in the absence of strong environmental criteria • Low local benefits if countries become only transit corridors • Fiscal burden • Vulnerability to climate change and carbon lock-in • Better integration in global and regional value chains • Capturing co-benefits of international investments for national and regional development • Channelling energy investment in innovation THREATS
  12. 12. Why does sustainable infrastructure matter for Central Asia? Mapping hotspots projects in the region 12 Agenda
  13. 13. Mapping of High Impact Infrastructure Projects in Central Asia and the Caucasus Tracks around 900 projects under construction and planned covering five sectors with minimum value of USD 10 million Coverage: Azerbaijan; Georgia; Mongolia; Kazakhstan; Kyrgyz Republic; Tajikistan; Turkmenistan and Uzbekistan. Sources: MDBs and National Dev Banks; Commercial Databases; Think Tanks; Investment Promotion Agencies; Ministry websites; News;, etc. Dual track objective: Assess state of play of infrastructure in the region Identify hotspots based on economic, social and environmental impact Transport Energy Industry Mining and quarrying Water
  14. 14. Methodology and limitations Methodology for selection of hotspots* Scale Project status Connectivity impact Environmental impact LimitationsOnly large-scale infrastructure projects above USD 10 million Categories: -Planned -Under construction -Completed -Cancelled Negative and/or positive environmental impact • Comparability of data • Double counting projects and their values • Underestimation of infrastructure projects • Accuracy of project status Contribution to regional and domestic connectivity integration *Hotspot projects defined as large-scale infrastructure projects with high impact in terms of economic, environmental and social outcomes
  15. 15. Overview of investment projects in Central Asia and the Caucasus Oil and gas pipelines, 62 852 (12%) Upstream oil and gas, 122 726 (23%) Electric power transmission and distribution, 15 298 (3%) Electricity generation, 88 014 (16%) Manufacturi ng, 117 948 (22%) Mining and quarrying, 40 015 (7%) Transport, 94 213 (17%) Water, 4 917 (1%) 0 20 40 60 80 100 120 140 160 180 200 Kazakhstan Azerbaijan Mongolia Uzbekistan Georgia Tajikistan Turkmenistan Kyrgyz Republic Energy Industry and mining Transport Water in billion USD Inventory covers 546 billion USD of investment projects, focusing on energy (53%), manufacturing (22%), transport (17%), mining (7%); and water (1%) Kazakhstan (33%) and Azerbaijan (23%), and Mongolia & Uzbekistan (11%) undertake most investments Investment projects planned and under construction in Central Asia and the Caucasus, by sector In USD million Source: OECD analysis Energy, Manufacturing, and Transport continue to dominate the investment landscape Source: OECD analysis
  16. 16. Developments in the renewable sector in Central Asia remain insufficient Coal and natural gas, 16 407 (40%) Renewable energy, 3 948 (10%) Hydropower, 20 339 (50%) Electricity generation projects, planned and under construction by fuel (In MW) Around 50% of electricity generation projects are in hydro-power plants (or 20 339 MW), while coal and natural gas-fired electric power plants account for 40% of the total. Hydropower projects are primarily in countries with high hydropower potential, but with an increased risk regarding climate change (e.g. Georgia and Tajikistan) Note: Renewable energy includes solar PV and wind, while coal and natural gas includes coal-fired electric power plants and natural gas-fired electric power plants. Source: OECD analysisSource: OECD analysis Tracking around 441 energy projects accounting for USD 289 billion of investments. Upstream oil and gas (42% and electricity gen. projects (30%) dominate investments. Electricity generation capacity, breakdown by country 0 2000 4000 6000 8000 10000 12000 Mongolia Tajikistan Georgia Uzbekistan Kazakhstan Kyrgyz Republic Azerbaijan Turkmenistan Hydropower Coal and natural gas Renewable energy in MW
  17. 17. Transport investments in Central Asia mainly focus on roads The initial mapping tracks around 257 transport projects accounting for USD 94 billion of investments. Large scale road projects dominate the investment landscape. Developing the road transportation network continues to be a priority for governments (e.g. Nurly Zhol Program) A large number of road projects fall under CAREC corridors Airports, 987 (1%) Intermodal, 743 (1%) Ports, 3 854 (4%) Railways, 29 770 (32%) Roads, 56 801 (60%) Roads; Railways, 2059 (2%) Transport projects in Central Asia and the Caucasus, planned and under construction by sub-sector In USD million 0 5 10 15 20 25 30 35 40 45 Kazakhstan Georgia Mongolia Uzbekistan Tajikistan Azerbaijan Kyrgyz Republic Turkmenistan in billion USD Kazakhstan, Georgia and Mongolia undertake most investments in transport infrastructure Source: OECD analysis Source: OECD analysis
  18. 18. • Current projects in the pipeline could potentially prevent us from delivering the objectives of the Paris Agreement: – Strong focus on roads, with insufficient vehicle emission and fuel standards. – The energy mix is not shifting fast enough to renewable energy, with continued realiance on coal with advserse effect on local air pollution as well as the climate. – A very strong reliance on hydro power in some countries, with growing threat of climate impacts and competitions for water resources’. – The use of renewable energy sources is an important component of sustainable development strategies in some countries, but currently planned renewables investment seems insufficient to meet established national goals. • Access to data and information is a challenge. There is a need to improve tracking of infrastructure connectivity investments in the region. Currently, there is a lack of comprehensive information on planned and under construction projects at the country level, which could be complemented with information provided by individual countries. Conclusion
  19. 19. • What are the main barriers to developing a pipeline of infrastructure projects in line with SDGs and climate goals? Questions for discussion / Вопросы для обсуждения • Каковы основные препятствия на пути развития инфраструктурных проектов в соответствии с целями устойчивого развития и климатическими целями?

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