ASEM Symposium on Eurasia transport & Logistics Network Seamless Eurasia: making connections The Korea Ministry of Land, Infrastructure and Transport Seoul September 9-11, 2015 Baher El-Hifnawi Global Lead, Development Corridors and Regional Integration

Presentation Outline Development Impact of Corridors Demand and Supply: The Financing Story The Bank’s Investment Support to Transport Corridors Planning and Prioritization Transport Facilitation Concluding thoughts ASEM Symposium on Eurasia Transport and Logistics Network

Development Impact of Corridors

Corridors support Economic Development Corridors constitute the backbone of a country’s transport network, providing efficient and low cost transport of goods and people in areas with high density areas. Beyond simply facilitating cheaper and more efficient movements of goods, people, and ideas across places, corridors may impact the distribution of economic activity and development across regions and promote poverty reduction and inclusive growth. This is so because: Corridors facilitate more efficient trade, which generates economic growth and expands market access. Corridors may expand factor mobility and access to education, health care and other services. Ultimately corridors may expand a poor household’s consumption possibility frontier ASEM Symposium on Eurasia Transport and Logistics Network

Corridors contribute to Inclusive Growth Moving forward it will be important to assess the project’s distributional outcomes and understand the causal change linking corridor development with Poverty Reduction ASEM Symposium on Eurasia Transport and Logistics Network

Development Impacts: The Evidence Ample evidence of links between well-conceived transport infrastructure and economic growth. but Less evidence of the impact of large corridor projects on job creation, on reducing poverty and on the wider sharing of prosperity. ASEM Symposium on Eurasia Transport and Logistics Network

Development Impacts—Example 1 Kazakhstan’s West China - West Europe Corridor World Bank finance $3.3 billion to upgrade trade route linking China to Russia and Western Europe Short term Impact -35,000 direct jobs Medium and long-term Impact -improved trade links, jobs, income growth and enhanced access to social infrastructure are to be quantified Euro-Asian Transport Corridors

Development Impacts—Example 2 Georgia - East West Highway Georgia is upgrading 350 kilometers of principal highway between the Black Sea and Azerbaijan World Bank financed $500 million of the total amount $2.3 billion (14% of Georgia’ s 2014 GDP) Expected Long-term Impact Georgia’s real GDP would be 4.2 percent higher household income gains ranging from 2.6 percent to 4.4 percent Euro-Asian Transport Corridors

Demand and Supply: The Financing Story

Massive Financing Needs World Bank Group: Up to $1.3 trillion annually for the next 5-6 years for infrastructure needs in developing countries. ADB: $800 billion for annual infrastructure needs, (about $200 billion in transport) Mckinsey’s: global demand of $57 trillion for the period 2013-2030. OECD: a gap of $400-500 billion with a total current spent of about $800-$900 billion annually. ASEM Symposium on Eurasia Transport and Logistics Network

Financing Opportunities—Changes in the Development Finance Landscape o China, India and other Middle Income Countries’ share of Global GDP was about 17% in 2000; is expected to reach 50% by 2050. o China’s launch of the One Belt, One Road Initiative and the $40 billion Silk Road Fund in February, o The launch of the BRICS bank o The launch of the AIIB with an initial capital of $100 billon o International private capital flows grew from $100 billion in 2000 to $1.2 trillion in 2013, (although the flows are volatile) ASEM Symposium on Eurasia Transport and Logistics Network

Mobilizing Private Finance is necessary but requires more work to secure o Strengthen the policy, regulatory and institutional frameworks for public private participation to ensure competition, openness and fairness o Strengthen the capacity of public institutions to manage the PPP process and to prepare bankable projects for private sector participation. o Securing funding for project preparation o Being selective in identifying projects for PPP. o MDBs offer a variety of products including loan, grant and partial guarantee products to leverage private resources as well as technical assistance. o The WBG’s IFC can contribute through its loan or equity participation and advisory services; and MIGA can provide guarantees to help leverage private funding. Euro-Asian Transport Corridors

The Bank’s Investment Support to Transport Corridors

Transport and ICT Support to Regional Integration (millions of USD) ASEM Symposium on Eurasia Transport and Logistics Network

Large Share of Transport and ICT’s Lending in Europe and Central Asia Supports Regional Integration thousands $US ASEM Symposium on Eurasia Transport and Logistics Network

A Sample of Bank-supported Regional Integration Projects in Asia and Emerging Europe Serbia: Corridor X Highway Project: US388 million. Kazakhstan (US$ 6.4 billion) Under implementation: South West and Center West projects: $3.2 billion. Under preparation: Center West Regional Development Corridor and Center South Road Corridor Project: $3.2 billion. Central Asia Road Links (US$ 108 million) Part of a regional, multiphase program. First phase Kyrgyz Republic: $54 million; Second phase: Tajikistan: $54 million Uzbekistan: Pap-Angren Railway Project: US$ 195 m lending (total cost $1.6 bill) ASEM Symposium on Eurasia Transport and Logistics Network

A Sample of Bank-supported Regional Integration Projects in Asia and Emerging Europe (cont’d) Georgia ($405 million) Fourth East West Highway Improvement Project (US$75 million) East-West Highway Improvement 3 (US$190 million) East-West Highway Corridor Improvement (pipeline - US$140 million) Ukraine (US$ 1,010 million) Second Road And Safety Improvement Project (US$450 million) Road Sector Development Project (pipeline – US$560 million) Belarus: Transit Corridor Improvement Project (US$250 million) ASEM Symposium on Eurasia Transport and Logistics Network

SWRP and EWRP (Ongoing) KAZAKHSTAN ASEM Symposium on Eurasia Transport and Logistics Network

TWO PROPOSED NEW PROJECTS – CSP and CWP KAZAKHSTAN Two different projects, two different challenges CSP – Centre South Road Corridor Project between Astana and Almaty CWP – Centre West Regional Development Project between Astana and Beyne ASEM Symposium on Eurasia Transport and Logistics Network

Planning and Prioritization

A few Guiding Principles o Multimodal planning seeking modal complementarity o Coordinated planning! o Incorporation of wider economic benefits and costs o Incorporation of environmental and social costs and benefits o Build in climate resilience and redundancy in network design. o Consider the contributions of ICT ASEM Symposium onn Eurasia Transport and Logistics Network

Examples of good planning models/practices OECD’s ITF global multimodal freight modal Multi-modal network roads, rail stations and networks, sea ports/routes, airports and commercial flights; modal choice allows of multi/inter modality A model of production and consumption centers around the globe. The EU’s TEN-T Network Comprehensive and Core Networks The South East Europe Transport Observatory (SEETO) Comprehensive, Core and Core Corridor networks ASEM Symposium on Eurasia Transport and Logistics Network

Transport Facilitation

Addressing non-physical barriers is necessary to unlock the potential of the infrastructure Bottlenecks at ports, borders or excessive government bureaucracy are today a key factor why many countries trade below their potential. A one-day delay reduces the export value of most goods by 1% in many countries; 7% for agricultural products, which is critical for the Western Balkans. Upgrading transport infrastructure along a major corridor to reduce travel time only to spend the saved time at the border is highly inefficient and could greatly reduce, if not negate, the benefits of the improved infrastructure. In many countries unpredictability of border-crossing times remains an issue contributing to a high logistics cost estimated at 16 percent of GDP, compared to about 8 percent in the EU and the US. Typically, much higher returns to addressing hte non-physical barriers ASEM Symposium on Eurasia Transport and Logistics Network

What are the “soft” Challenges to Transport Connectivity? Inconsistency between national and regional priorities Asymmetry in costs and benefits among neighboring countries investing in common infrastructure Landlocked countries are economically disadvantaged by lack of access to ports Diverging standards (e.g. on axle load of trucks) or weak transit regimes can lead to forced cargo transfer at borders, costly guarantee schemes, empty backhaul. ASEM Symposium on Eurasia Transport and Logistics Network

The World Banks Group’s Response to the Challenges Use corridor approach to help integrate economies (infrastructure, and services). Work with international and regional organizations for harmonization of technical standards, regulatory frameworks, more efficient utilization of infrastructure and access to markets. Help develop regional markets for services, including trucking and transport logistics. Finance integrated infrastructure investments on both sides of the border Tracking and reporting on corridor performance (e.g. average transit speed) The Bank is managing a Multi-Donor Trust Fund on Sustainable Logistics to come up with innovative and practical measures for reducing logistics costs. ASEM Symposium on Eurasia Transport and Logistics Network

Concluding Thoughts

Need to ensure that regional priorities are also national priorities Summing up Need for upstream analytical work which would help attract more financing to corridors and regional integration New resources available but the financing gap is large calling for careful planning and rationalization of corridors, and rigorous prioritization and phasing of investments. Need to make addressing the non-physical barriers a priority— devoting time and resources to address the issues Attracting private sector resources will not be easy and requires strong preparation Need to ensure that regional priorities are also national priorities ASEM Symposium on Eurasia Transport and Logistics Network

Thank You!