At the Asia Infrastructure Forum (AIF) held in Singapore last week, government representatives from both Bangladesh and Cambodia, two of the region’s developing countries, highlighted inadequate financing as the key hurdle now stopping their pursuit of sustainable infrastructure projects.
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Salman Rahman, private industry and investment adviser to the prime minister of Bangladesh, acknowledged that more climate-resilient infrastructure needs to be built given how the country, with most of its urban population settled in low-lying coastal areas, faces the looming threat of sea level rise.
“In fact, Bangladesh will be one of the worst affected countries by climate change. From what we understand, if the sea level goes up by half an inch, one quarter of Bangladesh will go under; and if it goes up by a full inch, three quarters of Bangladesh can become submerged. But we are facing a lot of challenges in getting the proper financing to deal with climate-related risks,” he said.
The country has also been hit by high energy prices in the wake of the war in Ukraine, spurring a struggle to source cheaper fuel for thousands of its petrol stations. Bangladeshis have had to endure electricity blackouts of up to 13 hours a day in recent weeks, noted Rahman.
“We were succeeding in moving away from fossil fuels. Plans to build new coal-fired power plants had been scrapped and there weren’t plans for any to enter into production in the next three years, but because of the price increase of gas, especially of liquefied natural gas (LNG), we now find ourselves having to go back to coal,” he said, highlighting that renewables expansion is capital-intensive and particularly difficult for resource-strapped countries.
LNG prices have soared nearly 80 per cent since before the Ukraine war started in late February this year, according to regional pricing indexes, and developing countries like Bangladesh have had to bow out of buying LNG on the spot market.
Cambodia’s economy and finance ministry secretary of state Vanndy Hem, speaking on the same panel, also said that given current global economic uncertainties, working out the national budget to continuously pursue its sustainable infrastructure goals is very challenging, and finance and economic aid have not been forthcoming from global institutions as well as developed countries.
“On the macroeconomic front, we need to be very prudent and we have to keep debt low. But at the same time, growth is slowing down, and we need growth and need it to be sustainable, so we are trying to finance that imbalance,” said Hem.
Cambodia, as this year’s Asean chair, has also called on other member states of the regional grouping to support its initiative to establish an Asean “Green Deal” to tackle climate change. The Green Deal, fashioned after a similarly-named initiative by the European Commission and which comes with a set of proposals to make climate and taxation policies fit for a sustainable economic model, should cover infrastructure and energy, said Cambodia’s prime minister Hun Sen at the 55th Asean Foreign Ministers’ Meeting.
Who foots the bill for the energy crisis?
Both Cambodia and Bangladesh, as low-income countries confronting severe structural impediments to sustainable development, are considered by the United Nations as Least Developed Countries (LDCs). There are currently 46 countries on the list, and Cambodia is not set to “graduate” from the list until after 2025.
Bangladesh, along with Laos, will exit the list by 2026, although observers are worried that the current fuel crisis might draw the country into economic turmoil and become a setback for its development.
The calls for developed countries to fulfil their pledges on providing adequate climate finance for LDCs are re-emerging as the COP27 climate conference, scheduled to be held in Sharm el-Sheikh, Egypt, in November, takes place in the shadow of the war in Ukraine, as well as rising energy and food prices around the world.
Addressing reporters at a press conference in New York where he presented the third report by the Global Crisis Response Group last Wednesday, UN secretary general António Guterres had condemned the record profits of energy companies during a global energy crisis. “It is immoral for oil and gas companies to be making record profits from this energy crisis on the backs of the poorest people and communities and at a massive cost to the climate,” he said.
Highlighting that the combined profits of the largest energy companies in the first quarter of this year are close to US$100 billion, he called on governments to tax these profits and use the funds to support vulnerable people and countries through the energy crisis.
“Many developing countries are drowning in debt, without access to finance, and struggling to recover from the Covid-19 pandemic and could go over the brink.”
The Organisation for Economic Cooperation and Development (OECD), in its latest report, confirmed that high-income countries, which had pledged to deliver $100 billion a year by 2020 to help poorer countries reduce emissions and prepare for the effects of global warming, had fallen short of their promise.
Corroborating new estimates, OECD concluded that total climate finance provided and mobilised by developed countries for developing countries amounted to $83.3 billion in 2020, representing an increase of 4 per cent from 2019, but still fell $16.7 billion short of the US$100 billion target.
New portal to bring visibility to infrastructure projects in the region
Aaditya Mattoo, chief economist, East Asia and Pacific, of the World Bank Group, described the phenomenon as “increasing miserliness” from the world’s rich countries. Adaptation finance has not been forthcoming from developed countries, and developing countries are now hit by other problems such as energy supplies becoming less reliable, he told the audience while moderating a panel session at the Asia Infrastructure Forum.
Rahman added that developing countries need rich nations to do significantly more. “At the COP26 climate summit in Glasgow last year, our Prime Minister already made an impassioned plea for more financing help. There have been continuous appeals from the United Nations too. But the results have not been promising,” he said.
Estimates put the infrastructure needs of Asian developing countries at $1.7 trillion per year, well beyond what any of the existing sources are able to provide.
At the AIF, the Singapore authorities also launched a project portal that links up interested parties – governments, developers and financiers – for the development of specific infrastructure projects in Asia. This would help overcome the high costs involved in searching for partners, said Lavan Thiru, executive director of Infrastructure Asia, organiser of AIF.
As of the time of publication, there are 11 infrastructure projects listed on the new portal, with a value exceeding $2.7 billion. Indonesia leads the number of listed projects with five; Cambodia and Philippines have two each. These include projects for the development of water supply and waste management systems, as well as railway development projects.
