Statement

by

Ms. Fekitamoeloa Katoa ‘Utoikamanu

Under-Secretary-General

High Representative

for the Least Developed Countries, Landlocked Developing Countries

and Small Island Developing States

2017 Special Meeting of the Economic and Social Council (ECOSOC)

“Innovations in infrastructure development and sustainable industrialization”

Session 1: The Industrialization-Infrastructure Nexus in Developing Countries

31 May 2017, 11:15 – 13:00

Venue: ECOSOC Chamber (UNHQ)

  • H.E. Mr. Frederick Musiiwa Makamure Shava, President of ECOSOC
  • H.E. Mr. Macharia Kamau, Permanent Representative of Kenya to the United Nations
  • Excellencies, Distinguished Delegates,
  • Ladies and Gentlemen,

I am honored to address this Special Meeting of the Economic and Social Council on innovations in infrastructure development and sustainable industrialization.

As mentioned during the opening session, the strong linkage between industrialization and poverty reduction is of crucial importance to the vulnerable countries. My Office advocates for the 92 vulnerable countries, which are categorized into three main groups; least developed countries, landlocked developing countries and small island developing states. Many of the specific challenges’ these three groups of countrieshave in the area industrialization and infrastructure are highlighted in the 2030 Agenda. In addition, the Istanbul Programme of Action for the Least Developed countries for the Decade 2011-2020 and the Vienna Programme of Action for Landlocked Developing Countries for the Decade 2014-2024, highlight the importance of infrastructure development and value addition in the manufacturing and agricultural sectors for sustainable development and structural transformation. Similarly, the SAMOA Pathway for Small Island Developing States prioritizes agriculture, infrastructure and service industries.

All the three groups of vulnerable countries have limited productive capacities, and many are experiencing declining value addition in manufacturing and agriculture. Intensified efforts to address the infrastructure - industrialization nexusis critical to enable the LDCs, LLDCs and SIDS to achieve economic diversification and become more competitive in international markets.

Excellencies,

Ladies and Gentleman,

There are 48 least developed countries with a population of around 900 million people. Structural transformation in LDCs has been slower compared to other developing countries. The average share of manufacturing in LDCs increased marginally from 12.1% in 2014 to 12.7 % in 2015.There is consensus that building infrastructure, especially in energy and ICT, is a precondition for achieving structural transformation as well as reaching many of the SDGs in LDCs.

Yet, only 38 per cent of the population in LDCs had access to electricity in 2014 and the lack of access to energy remains a key impediment for industrialization and economic growth. However, encouraging examples do exist. The pace of development has been especially remarkable in Lesotho and Ethiopia, where energy access grew on average 13 and 6 per cent annually, respectively, from 2000 to 2012. In both countries, the energy sector is regarded as a source of economic growth and export revenues.

My Office has taken a strong role in promoting energy access. We recently organized two regional meetings, in Tanzania and Nepal, to discuss challenges in securing finance for sustainable energy in LDCs, and to exchange views on ways and means to respond to these challenges, both at the national, regional and global levels. These regional meetings yielded many practical recommendations for accelerating energy access, For example, it was highlighted that moving a project from initial plan to bankable project requires a significant amount of time and resources for preparing feasibility studies, environmental impact assessments, and requesting permits etc. Thus, increased funding for project preparation at the early stages is particularly important for accelerating the energy infrastructure transformation in LDCs.

As stated earlier, information and communication technologies (ICT) is also of key importance to vulnerable countries. ICT, in particular broadband applications offer significant multiplier effects in the areas of agriculture, education, health, trade and governance, inter alia. For example, E-banking can support LDCs in expanding access to financial services in conjunction with other measures. A success case in this regard is that of the M-Pesa initiative in Eastern Africa, which has contributed to employment in service sectors such as finance, education and healthcare. Despite such clear benefits to poor communities, access to ICT, is still limited. The number of Internet users in LDCs per 100 people was only about 12.6 in 2015.

Similar to the meetings on energy that I referred to earlier, my Office also organized a regional meeting on broadband for African Least Developed Countries in March in Dakar, Senegal. It was clearly elaborated at the meeting that limited access to finance is one of the biggest challenges for countries that face resource constraints and, at the same time, confront competing priorities. There was a strong recognition by participants thatstronger partnership between the private sector and national governments would lead to effective deployment and use of broadband. In addition, they emphasized the need to subsidize deployment of broadband to underserved areas, in particular, rural areas.

Excellencies,

Ladies and Gentlemen,

The 32 LLDCs suffer from a unique geographical disadvantage, which combined with critical infrastructure deficiencies, and poor trade facilitation result in high transport and overall trade costs. The LLDCs pay almost double in trade costs when compared to their neighbouring coastal countries. These high costs reduce competitiveness, diminish export profits, inflate the prices of imported inputs for manufacturing, discourage investment and undermine LLDCs’ efforts to fully gain benefits from global flows of knowledge, technology, capital and innovation.

To facilitate the implementation of the Vienna Programme of Action, particularly in relation to infrastructure development, OHRLLS organised several activities in 2016. These include: A High Level Seminar on Accelerating Sustainable Energy for all LLDCs through Innovative Partnerships co-organised with Government of Austria, UNIDO, and Sustainable Energy for All and a High Level Meeting on Sustainable Transport of the LLDCs co-organised with Government of Bolivia and DESA.

Similarly, Small Island Developing States (SIDS) form a diverse group of countries which share common characteristics in terms of their geographic remoteness, narrow economic base and isolation from major global markets. The geographic composition of island archipelagos, in the form of stretch of many islands surrounded by the sea, increases their dependence on transport and communication systems, which serve as a life line for inter-island connectivity and trade relations with the rest of the world. In the case of many SIDS, disparities in economic and social development are persistent among the different islands within the same state due to limited transport and connectivity between the remote islands and the main island.

I would also like to underline the role that transport plays in the industrialization-infrastructure nexus. The inadequate levels and quality of transport infrastructure in LDCs, LLDCs and SIDS forms a major impediment for economic growth. Reducing high trade costs and integration into regional and global value chains requires addressing various infrastructure deficiencies in vulnerable countries. This includes both the hard infrastructure and the soft infrastructure, which comprises of trade facilitation, legal framework and institutions. Whereas improved physical infrastructure for transport includes roads, bridges, railroads, seaports, inland waterways, airports, and supporting infrastructure at the borders and intermodal points.

Improved transport links together with strong national policies and creation of industrial parks can successfully contribute to the economic growth. For example, based on its national strategies, Ethiopia has created enabling conditions to industrialization and has been heavily investing on infrastructure, energy, access to improved technology and information, and established numerous industrial parks. Ethiopia’s economy grew 9.6 per cent in 2015, making it fastest growing LDC economy.

Excellencies,

Ladies and Gentlemen,

It has clearly emerged from the discussions I just alluded tothat there exists strong national ownership and political will for transition. These countries are eager to scale-up and speed-up their infrastructure, energy, ICTand transport initiatives.

Yet, achieving a resilient infrastructure and sustainable industrialization in vulnerable countries will require financial and technical support and strong partnerships with various stakeholders.

Nevertheless, access to finance remains a key challenge. The main constraints for accessing finance include lack of scale, lack of substantial local investment, institutional capacity constraints, poor or non-existent credit ratings, as well as low project preparation capacities and skills to deploy financing models that encourage blended finance to attract more funds. Investment has to come from all sources and it needs to increase rapidly.In this regard, public private partnerships will have an important role to play.

While there can be no doubt that opportunities for Public Private Partnerships exist, PPPS can present their own set of challenges, and this is especially so in vulnerable countries. Limited financial resources and capacity, including those concerning lack of capacities to manage major undertakings, approaches to PPPs need to be specifically tailored to meet their aspirations and overcome their constraints.

Another challenge relates to building of an enabling environment to attract private sector investment including foreign direct investment. That said, I would like to emphasize that it is important that development partners including multilateral development banks provide technical support to vulnerable countries in this respect.

Last, I would also like to highlight the great potential of regional cooperation. Regional economic integration can greatly help to boost the economic potentials ofLDCs, LLDCs and SIDS and it should be an integral part of the way forward in strengthening the industrialization-infrastructure nexus in vulnerable countries.

In conclusion, let me once again express my gratitude to all of you for beinghere today and I am looking forward to fruitful discussions for the benefit of the most vulnerable countries.

Thank you for your kind attention.

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