What role for policy frameworks?

The E15Second Expert Group Workshop on Extractive Industries

11 – 12 June 2015, Geneva

Isabelle RamdooECDPM

Anchoring mineral infrastructure in Regional Integration

Outline of presentation

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1. The context: why is this question important?

2. Why potential synergies? Some maps to illustrate

3. Where is it happening? Why (not)?

4. What roles for policy frameworks?

5. Key priorities

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; In Africa, high transport costs add up to 75% to price of goods; Underdeveloped infrastructures skim off at least 2% of Africa’s annual growth.

Extractive industries are particularly consumer and producer 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)

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.

1. The Context: Why is this question important?

Africa infrastructure needs are enormous…

Africa needs US$93 billion per year to bridge infrastructure deficits (current spending is only about $45 billion per year)

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)

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Visualizing the deficits

Source: African Union

Energy Railways

2. What potential synergies?

These maps say it all….

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Overview of mineral deposits in Sub Saharan Africa

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Mineral industry corridors

Infrastructure investments in Sub-Saharan Africa: Key sectors

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Source: Frost and Sullivan, 2013

(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 (access to cohesion in case of EU; industrial zones and business prospects in case of GMS)

3. Where is it happening? Why (not?)

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1. Any policy measure must ensure it fit the golden rules of:

Transparency: Any framework (regulatory, voluntary, incentives-based etc.) should be clear, well presented and accessible;

Predictability: Policy decisions should be well coordinated (among countries in the region) to prevent policy reversals or inconsistencies;

Flexibility: Policies should be developed in coordination with all stakeholders to avoid too rigid frameworks.

4. What role for policy frameworks?

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2. Regulations important:

When they exist, they should be implemented: Trade protocols, investment codes, road regulations, power pool MOUs should be duly implemented or countries must be supported to do so.

If they are not robust enough, they should be strengthened: Eg. Customs procedures for effective border posts.

If they are outdated, they should be adapted: E.g harmonisation of certain regulations to ensure cross-border infrastructure provision

If they do not exist, may be they should be created: Dedicated regional authorities to coordinate and ensure proper functioning of regional infrastructure (like the MCLI for e.g.)

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3. But regulations are not the panacea: Alternatives are important:

Incentives: Compensation mechanisms to incentivise private operators to share their infrastructure;

Sequencing: upfront project design and economic growth poles; Coherence: Bridge the disconnect between infrastructure policies

and agricultural/ industrial policies; Alignment of strategies and policies: national and regional

infrastructure priorities; Collaborative partnership and multi stakeholder approach:

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5. Key priorities

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Thank youwww.ecdpm.org

www.slideshare.net/ecdpm

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