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Infrastructure Development Key to Afghanistan’s Growth

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Focusing on infrastructure development will help bring about long-term growth in Afghanistan and address persistent issues affecting the country’s economic prospects, apart from security, including poor connectivity, poor access to limited energy supply, and low agriculture productivity, says a new Asian Development Bank (ADB) report.

In its Asian Development Outlook (ADO) 2019, ADB forecasts Afghanistan’s economy to grow by 2.5% in 2019 and 3.0% in 2020, from the 2.2% growth rate in 2018 on the back of drought, security and political challenges, as well as negative spillover from neighboring countries. ADO is ADB’s flagship annual economic publication.

“Better infrastructure can strengthen economic growth, enlist improved mobility to energize commerce and agriculture, and boost government revenues available for development spending,” said ADB Country Director for Afghanistan Mr. Samuel Tumiwa. “ADB is proud to be Afghanistan’s leading development partner in infrastructure development and regional cooperation, and remains committed to support the country build the needed infrastructure for poverty reduction.”

Pick up in the agriculture sector due to better weather conditions is expected in 2019. Inflation will accelerate to 3.0% in 2019 and 4.5% in 2020 with the lagged impact of 2018 currency depreciation and further depreciation expected in 2019 and 2020 as inflows of assistance slow. However, food prices are expected to remain low as agriculture recovers.

Domestic revenue is estimated to have reached 11.7% of gross domestic product (GDP) in 2018 due to enhanced tax administration and compliance, as well as measures against corruption in the customs department. Foreign aid comprised 56.3% of budget revenue, or 15.1% of GDP, to bring total revenue and grants to the equivalent of 26.4% of GDP.

The Afghanistan Living Conditions Survey, conducted in 2016 and 2017, revealed that only 36% of the population has access to safe drinking water nationally, only 31% of the population is connected to the electric grid, and only 63% of the rural population lives within 2 kilometers (km) of an all-season road, and road density is estimated at a low 15 km per 100 square km of territory, which is below the densities achieved by Afghanistan’s neighbors.

Some of the measures to enhance infrastructure development, according to the report, include a coordinated government approach to implement ongoing construction projects and upgrade its capacity in the design, implementation, and monitoring of investment projects. The government needs to address skills shortages and stimulate private sector investment in infrastructure development.

In addition, the government needs to seek sustainable infrastructure financing and look at innovative approaches to increase access to funding. Financing needed for the National Infrastructure Plan, 2017–2021, of about $1 billion annually exceeds available resources from development partners and domestic fiscal resources for new investment are limited.

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Fast-Paced Reforms Lead to Improvements in Ease of Doing Business Across Kazakhstan

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Regions of Kazakhstan have made doing business easier by improving business regulation over the past two years, says the World Bank in a new report released today.

According to the subnational Doing Business in Kazakhstan 2019 report, the pace of reform has been fast across Kazakhstan. Lower performing regions cut the gap with Almaty city, the top performer, by half on getting electricity and dealing with construction permits. These reforms are reducing red tape for entrepreneurs and are moving the whole country toward global good practices in business regulation. Good practices found throughout the individual regions pave the way for reform-minded policy makers to improve further by replicating best practices in other locations.

The government of Kazakhstan is adopting unprecedented system-wide reforms aimed at improving the business climate, and reducing administrative barriers and business costs As a result, today Kazakhstan is among the top 30 countries in the World Bank’s Doing Business ranking. For further dynamic development of entrepreneurship in the country, the World Bank’s assessment of whether an economy has good rules and processes at the local level will help us significantly improve the local business climate,” said Arman Dzhumabekov, First Vice-Minister of National Economy of the Republic of Kazakhstan.

This is the second Doing Business report on Kazakhstan, examining the performance of 16 locations – 13 regions, as well as the cities of Almaty, Nur-Sultan, and Shymkent. It expands the scope of coverage from the eight locations that were measured in the first report produced in 2017.

“As Kazakhstan strives to improve opportunities for all citizens and diversify its economy through increasing the contribution of small and medium-size enterprises, the right regulatory environment can help entrepreneurs overcome obstacles such as low productivity and corruption. Better managing the pace of reforms and addressing gaps in implementation will enable firms to realize their full potential and contribute to growth,” said Ato Brown, World Bank Country Manager for Kazakhstan.

To determine the ease of doing business for small and medium-size enterprises, the report measures four regulatory areas – starting a business, dealing with construction permits, getting electricity, and registering property.

Across the areas measured, Almaty city scores highest, leading on three indicators – getting electricity, registering property and dealing with construction permits. Nur-Sultan ranks first on starting a business, owing to the availability of electronic processes and uptake in the use of the E-Government system. East Kazakhstan and Pavlodar also share the top score with Almaty city on registering property. These regions keep land registry titles in digital format. No location does equally well across all areas measured, but each location ranks in the top half on at least one indicator. This leaves room for all regions to learn from each other.

Notably, all eight locations that were studied in both the 2017 and 2019 reports improved their business environment, with Nur-Sultan making the most significant progress. Of the 24 reforms implemented since 2017, eight reforms decreased the time to start a business by more than half, on average. Significant reforms were observed in getting electricity; all eight locations improved the quality and reliability of power supply. The cities of Nur-Sultan and Shymkent, as well as the Karagandy region made the largest improvements in this area, through the recording and reporting of data on the frequency and duration of power outages. All eight locations also eliminated the need for an expert opinion after external works and streamlined requests for technical conditions.

Globally, Kazakhstan is improving faster than many economies and is competitive in the time and cost of doing business; in three out of the four regulatory areas measured in this study, the time needed to complete all requirements has dropped at a faster rate, on average, than in the Europe and Central Asia region and high-income OECD economies. However, challenges remain in procedural complexity, especially in dealing with construction permits, and, at the regional level, there are gaps in the implementation of central government reforms.

Going forward, the key to success will be ensuring that national initiatives are properly implemented, so that entrepreneurs can benefit from efficient and good quality service delivery at the local level. Kazakhstan can improve further by increasing ownership at the local level. Local policy makers need to go beyond the national initiatives and address regional obstacles to doing business through practical solutions that make service delivery more efficient.

The annual Doing Business report measures 190 economies globally, with Almaty city representing Kazakhstan as its largest business city. The subnational Doing Business in Kazakhstan reports aim to gain a broader understanding of the regulatory environment for businesses across the country. Tools like Doing Business in Kazakhstan 2019 help identify the implementation gaps at the point of service in the regions, to inform the policy agenda.

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Reforms Building Momentum for Growth in Myanmar

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Myanmar’s economy is slowly regaining stability and picking up speed after a volatile 2018, according to a new World Bank report.

The Myanmar Economic Monitor projects Myanmar’s economy to grow at 6.5 percent in 2018/19. Growth continues to be broad-based, supported by the industrial and service sectors. Industrial activities revived, supported by strong performance in the garment sector and construction activities. Services remain the key driver of growth with momentum building in the wholesale and retail sector supported by reforms. However, large disparities in welfare persist across the country.

Acceleration of the reform agenda as envisioned in the Myanmar Sustainable Development Plan, along with targeted public investments and private sector participation, will lead to a consolidation of macroeconomic stability and help Myanmar maintain its momentum and meet its long-term growth targets,” said Gevorg Sargsyan, Head of Office, World Bank Myanmar.

The report includes an analysis drawing on the Multidimensional Welfare Indicator (MDI), prepared with the government, which indicates that most of the population in Myanmar faces overlapping disadvantages, with large disparities in welfare apparent at the state, region and township level.  Eighty-four percent of people faced disadvantages in one or more of the 14 indicators under the MDI, including education, employment, health, water and sanitation, housing, and assets. The MDI is being used to help target public resources and aid flows toward those who need it the most.

With growth expected to rise to 6.7 percent in 2020/21, the World Bank report projects a positive outlook for Myanmar’s economy despite a deteriorating global environment, due to accelerated implementation of reforms, infrastructure spending and investment in sectors such as wholesale and retail, insurance and banking that are undergoing liberalization. The external risks to the economic outlook include slowing global and regional growth and escalation of trade tensions and possible revocation of preferential EU market access.

Inflation is expected to stabilize at 6.6 percent in the medium term. The report notes that inflationary pressures could increase due to volatile global energy prices and the possibility that the government may increases electricity tariffs to bring them in line with the cost of power production.

“There are signs that market sentiment is rising due to the new laws being passed and starting to be implemented,” said Hans Anand Beck, Lead Economist, World Bank Myanmar. “Keeping these reforms going will be critical to continued economic momentum, for example through insurance liberalization, tax reform, and transparent investments in the power sector.” 

In the power sector, the report argues that Myanmar needs to invest twice as much and implement projects three times faster to meet growing demand.

The Myanmar Economic Monitor is a biannual analysis of economic developments, economic prospects and policy priorities in Myanmar. The publication draws on available data reported by the Government of Myanmar and additional information collected as part of the World Bank Group’s regular economic monitoring and policy dialogue.

The World Bank’s engagement on Myanmar focuses on social inclusion, particularly in conflict-affected areas, in support of the country’s historic political and economic transition.  With an emphasis on the importance of achieving peace and security as a foundation for inclusive and sustainable development for all communities in Myanmar, the Bank continues to provide technical and financial support, especially through high-impact projects. These focus on education, health services, access to electricity and other essential services, response to natural disasters, and inclusion of all ethnic groups and religions.

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International action can scale up hydrogen to make it a key part of a clean and secure energy future

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The world has an important opportunity to tap into hydrogen’s vast potential to become a critical part of a more sustainable and secure energy future, the International Energy Agency said in a major new report today.

The in-depth study, which analyses hydrogen’s current state of play and offers guidance on its future development, is being launched by Dr Fatih Birol, the IEA’s Executive Director, alongside Mr Hiroshige Seko, Japan’s Minister of Economy, Trade and Industry, on the occasion of the meeting of G20 energy and environment ministers in Karuizawa, Japan. The report – The Future of Hydrogen: Seizing Today’s Opportunities – finds that clean hydrogen is currently receiving strong support from governments and businesses around the world, with the number of policies and projects expanding rapidly.

Hydrogen can help to tackle various critical energy challenges, including helping to store the variable output from renewables like solar PV and wind to better match demand. It offers ways to decarbonise a range of sectors – including long-haul transport, chemicals, and iron and steel – where it is proving difficult to meaningfully reduce emissions. It can also help to improve air quality and strengthen energy security.

A wide variety of fuels are able to produce hydrogen, including renewables, nuclear, natural gas, coal and oil. Hydrogen can be transported as a gas by pipelines or in liquid form by ships, much like liquefied natural gas (LNG). It can also be transformed into electricity and methane to power homes and feed industry, and into fuels for cars, trucks, ships and planes.

“Hydrogen is today enjoying unprecedented momentum, driven by governments that both import and export energy, as well as the renewables industry, electricity and gas utilities, automakers, oil and gas companies, major technology firms and big cities,” Dr Birol said. “The world should not miss this unique chance to make hydrogen an important part of our clean and secure energy future.”

To build on this momentum, the IEA report offers seven key recommendations to help governments, companies and other stakeholders to scale up hydrogen projects around the world. These include four areas where actions today can help to lay the foundations for the growth of a global clean hydrogen industry in the years ahead:

  1. Making industrial ports the nerve centres for scaling up the use of clean hydrogen;
  2. Building on existing infrastructure, such as natural gas pipelines;
  3. Expanding the use of hydrogen in transport by using it to power cars, trucks and buses that run on key routes;
  4. Launching the hydrogen trade’s first international shipping routes.

The report notes that hydrogen still faces significant challenges. Producing hydrogen from low-carbon energy is costly at the moment, the development of hydrogen infrastructure is slow and holding back widespread adoption, and some regulations currently limit the development of a clean hydrogen industry.

Today, hydrogen is already being used on an industrial scale, but it is almost entirely supplied from natural gas and coal. Its production, mainly for the chemicals and refining industries, is responsible for 830 million tonnes of CO2 emissions per year. That’s the equivalent of the annual carbon emissions of the United Kingdom and Indonesia combined.

Reducing emissions from existing hydrogen production is a challenge but also represents an opportunity to increase the scale of clean hydrogen worldwide. One approach is to capture and store or utilise the CO2 from hydrogen production from fossil fuels. There are currently several industrial facilities around the world that use this process, and more are in the pipeline, but a much greater number is required to make a significant impact.

Another approach is for industries to secure greater supplies of hydrogen from clean electricity. In the past two decades, more than 200 projects have started operation to convert electricity and water into hydrogen to reduce emissions – from transport, natural gas use and industrial sectors – or to support the integration of renewables into the energy system.

Expanding the use of clean hydrogen in other sectors – such as cars, trucks, steel and heating buildings – is another important challenge. There are currently around 11,200 hydrogen-powered cars on the road worldwide. Existing government targets call for that number to increase dramatically to 2.5 million by 2030.

Policy makers need to make sure market conditions are well adapted for reaching such ambitious goals. The recent successes of solar PV, wind, batteries and electric vehicles have shown that policy and technology innovation have the power to build global clean energy industries.

As the world’s leading energy authority covering all fuels and all technologies, the IEA is ideally placed to help to shape global policy on hydrogen.

“We are very proud to have been able to use the breadth and depth of the IEA’s energy expertise to carry out the rigorous analysis for this study in collaboration with governments, industry and academic researchers,” said Dr Birol. “We are grateful to Japan, through its presidency of the G20, for requesting that we carry out this report, which recommends immediate, pragmatic steps to foster hydrogen’s development.”

Beyond this report, the IEA will remain focused on hydrogen, further expanding our expertise in order to monitor progress and provide guidance on technologies, policies and market design. The IEA will continue to work closely with governments and all other stakeholders to support efforts to make the most out of hydrogen’s great potential.

IEA

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