Remarks at Africa-China Sustainable Cooperation on Economic Structural Transformation, Towards 2030 Agenda

July 5, 2018

Remarks of Mr.  Tegegnework Gettu

United Nations Under-Secretary-General and UNDP Associate Administrator

At the “Africa-China Sustainable Cooperation on Economic Structural Transformation, Towards 2030 Agenda” – Djibouti, 5 July 2018

Your Excellency Mr. Ismail Omar Guelleh, President of the Republic of Djibouti,

Excellencies,

On behalf of the Administrator of UNDP, Mr. Achim Steiner, I would like to thank  the Government of the Republic of Djibouti, the Ports and Free Zones Authority in Djibouti, the China Council for the Promotion of International Trade, the Ministry of Commerce of the People’s Republic of China, and Made in Africa Initiative for organizing the first International Africa-China Economic Forum and Exhibition in Djibouti, and for selecting UNDP as a partner in this important endeavor for Africa, and for the world.

As the theme of this forum indicates, economic structural transformation is crucial for progressing towards the 2030 Agenda for Sustainable Development and to achieve the Sustainable Development Goals. Multi-stakeholder partnerships and regional collaborations such as the one between Africa and China, for which Djibouti plays a pivotal role, provide many opportunities for promoting economic growth, industrialization and investment for sustainable development in Africa and beyond.

I would like to start my remarks by stressing why structural transformation is essential in the case of Africa. First of all, economic structural transformation and industrialization are key to bring people out, and to keep them out, of poverty.

The aspiration of the 2030 Agenda to ‘leave no one behind’ can only be achieved with a combination of two elements: first - effective social protection, and second - improved creation of decent jobs, especially to generate sustained income for the large and growing segment of young people.

Youth in Africa are the future of the continent and will soon become the agents of change for a better, sustainable, prosperous and peaceful world. Therefore, it becomes extremely critical to invest in youth, in Africa and elsewhere, as per the Agenda 2030 which calls on educating and training people, leveraging new technologies for sustainability and employment generation to reduce inequalities and address gender disparity.

Structural transformation and diversification is also crucial to build resilience to shocks, be it those driven by commodity price volatility, by natural hazards like droughts, conflict and instability, or epidemics such as Ebola. Diversification away from agriculture and from primary commodities is a buffer against these shocks and an effective way of mitigating these risks.

Structural transformation is also essential for long-term environmental sustainability on the continent. The patterns of growth in Africa have been resource-intensive, be it by exploring minerals and hydrocarbons, or agriculture. By any measure, Africa is still extremely rich in natural resources, but only structural transformation, diversification and a transition towards labor-intensive manufacturing, will enable African countries to chart sustainable development pathways.

According to the findings of an African Economic Outlook report prepared jointly by AfDB, OECD and UNDP, two thirds of the investments required in urban infrastructure up to 2050 are yet to be made, and with adequate policies, these investments can increase agricultural productivity, stimulate industrialization, and high value-added services, and ensure that no one will be left behind.

Investing in sustainable and resilient infrastructure is indeed a pre-requisite for achieving the SDGs and addressing climate change. Such investments will not only help boost economic growth, increase demand, and create jobs in the short-term, but also lay the foundation for long-term growth and increase resilience of societies to climate shocks and other disasters.

Globally, whereas the infrastructure gap is significant, there is no shortage of capital as the total stock of global financial assets is around $300 trillion. Mobilizing private resources to reduce the global infrastructure gap is key.  While private participation in infrastructure has fallen each year since 2015 when the Addis Ababa Action Agenda was adopted, initiatives such as this forum bring together an array of public and private partners across the continents, to build trust and discuss innovative ways to integrate market and promote investments, so that this trend can be reversed.

As highlighted in the 2030 agenda discussion, realizing this universal agenda of peace and prosperity requires mutual efforts. It requires new partnerships, particularly with the private sector as a significant source of investment for the SDGs, which will be an even more valuable partner as it adopts business practices in line with inclusive sustainable development.  As a positive trend, we see the growing interest of the private sector in linking investments to sustainability objectives. According to a recent KPMG report, 93 percent of the world’s 250 largest companies in terms of revenue are now reporting on sustainability. Impact investors, who have the intention to generate environmental, social and governance impacts alongside financial returns, hold assets under management of around $22 billion.

However, more is needed to ensure that the global financial system channels savings towards investments in areas in need for the SDGs, including investing in sustainable and resilient infrastructure. For example, international institutional investors with longer-term liabilities hold around $80 trillion, which is a significant potential source of finance for sustainable development.  Yet, for instance, the largest pension funds invest only 3 percent of their global assets in infrastructure, and even a lower percent in African countries. Investment in sustainable development requires long-term investing that price longer-term risks, such as those associated with climate change.  Nevertheless, much investment remains excessively short-term oriented due to incentives in the financial system.

In order to address this gap, the financial system needs to be reoriented, which requires creating motivation and incentives. Governments have a major role to play to create incentives to align private finance with sustainable development priorities. This can be done through subsidies or guarantees as well as through strengthened policies and institutional, legal and regulatory frameworks.

Better aligning investment flows with sustainable development is critically evident for infrastructure investments. What is decided now in terms of investment will lock in development paths for many decades. Accordingly, it is crucial for infrastructure plans to include adequate stakeholder consultations, and incorporate climate impact, resilience, and gender assessments, so that they contribute to create a better future.

Infrastructure plans are linked to money flow, therefore, it is equally crucial for African countries to have access to risk-informed types of financing that are most suitable to their needs.  Examples include financing instruments used for investments in sustainable and resilient infrastructure, which are essential for disaster risk reduction, and do not exacerbate other risks such as debt distress.

As I conclude my remarks, allow me to go back to the beginning of my speech and stress the importance of partnerships and regional and inter-regional collaboration – as per commitments under SDG 17.  China’s Belt and Road Initiative is an important example of enhanced inter-regional cooperation, aiming to promote the connectivity of African, Asian and European countries through better infrastructure connectivity, closer trade relations, financial integration, and policy coordination. Today, we show a practical example through gathering in Djibouti, a historical place where people, culture, traditions and trade meet.

I look forward to the Forum’s discussions on the progress related to this initiative. We stand ready, as UNDP, to support ways to promote the opportunities for economic collaboration and private sector transformation across the globe, and support cooperation efforts between Africa and China for enhancing sustainable development, and for ensuring that no one is left behind.

Thank you.