1. At the core of Agenda 2030? Roundtable for Enhancing Inter-Regional Cooperation on Agenda 2030 Presentation made at the ACP House Isabelle Ramdoo Deputy Head, Economic Transformation Programme Brussels, 30 – 31 March 2016 Economic transformation, industrialization and extractives

2. 1.Agenda 2030: extractive sector, economic transformation and industrialization 2.SDG9: Special focus on regional infrastructure 3.Challenges and Policy prospects 4.Conclusion Structure of Presentation ECDPMPage 2

3. 1.Agenda 2030 Extractive sector, economic transformation and industrialization ECDPMPage 3

4. Page 4ECDPM SDGs and the extractive sector: Where do they intersect?

5. Focus on Infrastructure: Why it matters? Visualizing the deficits Source: African Union EnergyRailways

6.  Lack of infrastructure a significant barrier to mobility (people, goods and services), productivity and economic development World will require US$ 57 trillion in infrastructure investment from now to 2030. Energy and transport infrastructure are particularly important;  Regional cooperation and integration matters: Scope to leverage use of (regional) infrastructure for broader economic development: Africa’s geography is particularly challenging (biggest no. of landlocked countries) Essential benefit is to provide larger and more competitive markets, reduce transport costs and establish connectivity across countries.

7.  ACP (and Africa in particular) infrastructure needs are enormous… By 2030, Africa alone needs US$93 billion per year to bridge infrastructure deficits (current spending is only about $45 billion per year and the gap is therefore US$ 48 billion). More than half funded by public sector. Poor infrastructure and market fragmentation estimated to shave off at least 2% of Africa’s GDP annually; High transport costs inflate the price of goods by up to 75%; and reduce firm’s productivity by about 40%. Underdeveloped infrastructures skim off at least 2% of Africa’s annual growth. Access to electricity: 30% of the population compared to 70 - 90% elsewhere in the developing world (Asia, Central America and the Caribbean, Middle-East and Latin America) Road access rate: 34% compared to 50% elsewhere Access to water and sanitation: 65% of the population compared to 80 - 90% in other developing regions. Telecommunications penetration rate: ~ 3% compared to ~ 40% in other developing regions (very low penetration rate for broadband services) ECDPMPage 7

8. 2. What potential synergies? Extractive sector provide an important leverage ECDPMPage 8

9. Extractive industries are particularly large consumers, producers and contractors of infrastructures Extractives are expected to invest up to $ 2 trillion in resource-rich countries by 2030 Capex in infrastructure in bulk ore minerals can go up to 40% (mostly in transport) But infrastructure is not sufficient in itself: it cannot be transformative: If not well connected and integrated in spatial development; If it does not stimulate trade, investment and business development Therefore, a strong case to be made to leverage, share and optimise the use of mineral based infrastructure at national, but most importantly, at the regional level ECDPMPage 9

10. (Too) few examples in the extractive sector. Where they exist, partial successes (MDC – scope is narrow, roads only, short corridor; SAPP, South Africa driven, low trade (7% of energy needs) Lessons can be learnt from elsewhere (non-extractives, but regional focus) (Europe connectivity; Baltics; Central America) Reasons for success: 1.Political leadership; 2.Proper planning and coordination; 3.Strong institutions; 4.Clear regulatory frameworks, implemented, monitored and evaluated; 5.Incentives (Fiscal incentives for companies; industrial zones and business prospects for the private sector etc) But it is (really) happening? ….Yes but not enough…. ECDPMPage 10

11. 3. Key challenges and policy prospects Means of implementation ECDPMPage 11

12. 1. Funding requirements and deficits in Africa ECDPMPage 12

13. As a benchmark, it is estimated that developing countries need to invest 5 - 6% of their GDP in infrastructure to sustain their economic growth; Excluding IFIs, Govt budget spending is quite high: estimated to be 63% of spending on infrastructure (IMF: 2012) Other instruments at disposal of govt include: (i)Financial markets; (ii)Bonds (iii)SWF (iv)Sukuk finance Who is currently financing Africa’s infrastructure? (a) Govt finance: main single source of infrastructure finance ECDPMPage 13

14. (b) external sources ECDPMPage 14 Source: The Infrastructure Consortium for Africa Report, Dec 2014.

15. (i) Official Development Finance (ODA + IFC + AfDB) ECDPMPage 15 Source: Brookings, 2015

16. (ii) Private participation in Infrastructure ECDPMPage 16 Source: Brookings, 2015

17. (c): Non-OECD Financing: Eg. Chinese Finance ECDPMPage 17 Source: Brookings, 2015 Chinese infrastructure investment commitments in SSA by sector, 2007 - 2012

18. Sector v/s finance matrix ECDPMPage 18 Source: Brookings, 2015

19. 2. Synergies and project coordination at the regional level: can the tripartite serve as a model? Tripartite cooperation a good business case Three pillars if implemented can be a game changer Market integration - establish a FTA to bolster intra- regional trade through a wider market and value chain development, increased investment flows, enhanced competitiveness and development of cross-regional infrastructure Infrastructure development - to enhance connectivity and reduce costs of doing business and Industrial development to address productivity constraints ECDPMPage 19

20. Underscore the importance of the ACP as a facilitator and hub for cross-regional and cross-continental infrastructure. A niche, in particular: 1)Given the its geographical composition (second largest organization by size in the world; majority of sea-locked countries; spans across all continents); 2)One common asset (relevant for maritime transport or ICT), which is the ocean (not to underestimate its geopolitical importance); 1)The capacity of the ACP to leverage financing at a macro-level, and hence can help put forward innovative mechanisms to access large-scale funds; and 1)The only institution capable to federate inter-regional cooperation to discuss common goods. To conclude.. ECDPMPage 20

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