Sustainable Ocean Economy Country Diagnostics of Cabo Verde


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Sustainable Ocean for All Series
SUSTAINABLE OCEAN ECONOMY COUNTRY DIAGNOSTICS OF CABO VERDE

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This paper is published under the responsibility of the Secretary-General of the OECD. The opinions expressed and the arguments employed herein do not necessarily reflect the official views of OECD member countries. This document, as well as any data and any map include herein, are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. Please cite this paper as OECD (2022), “Sustainable Ocean Economy Country Diagnostics of Cabo Verde”, Development Co-operation Directorate, OECD Publishing, Paris. Comments, questions and other inquiries are welcome and may be sent to [email protected] This document is also available on O.N.E Members and Partners under the reference: DCD(2022)21. Join the discussion: @OECDdev
SUSTAINABLE OCEAN ECONOMY COUNTRY DIAGNOSTICS OF CABO VERDE © OECD 2022

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Abstract
This report presents new data on, and a comprehensive, cross-sectoral analysis of Cabo Verde's ocean economy. It examines economic and sustainability trends, assesses the country’s ocean governance architecture, and explores policies and financing instruments for a more sustainable ocean economy. In light of the impacts of the COVID-19 crisis, the report suggests that Official Development Assistance and other innovative financing mechanisms be maximised to make the ocean a driver for a resilient and inclusive recovery.
SUSTAINABLE OCEAN ECONOMY COUNTRY DIAGNOSTICS OF CABO VERDE © OECD 2022

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Foreword
Sustainable Ocean Economy Country Diagnostics are part of the OECD Sustainable Ocean for All Initiative. They provide country-specific evidence for developing countries to address the increasing pressures on marine and coastal ecosystems (e.g. from pollution, overfishing, climate change, etc.) and chart a new course for sustainable development through the conservation and sustainable use of ocean and coastal resources. They are founded on a multi-dimensional understanding of sustainability, encompassing social, environmental and economic dimensions. They reflect a holistic view of the ocean economy as a complex set of varied and highly interconnected sectors requiring co-ordinated and missionoriented policy making. Sustainable Ocean Economy Country Diagnostics are built upon three analytical pillars (Figure 1): (i) Economic and sustainability trends: to understand the size and composition of a country’s ocean economy as well as key environmental stressors and socio-economic sustainability across ocean economy sectors; (ii) Governance and policy instruments: examining a country’s institutional architecture governing the use and conservation of the ocean and existing policy instruments and approaches aimed at increasing the sustainability of the ocean economy; (iii) Financing flows and instruments, with a specific focus on development finance, to understand the scope and nature of Official Development Assistance (ODA) in support of a more sustainable ocean economy, as well as innovative financing mechanisms to mobilise private and public finance. This Sustainable Ocean Economy Country Diagnostics of Cabo Verde uses the OECD’s unique statistical sources and multi-disciplinary expertise on the sustainable ocean economy. This includes original ODA figures developed using a dedicated methodology, to be visualised and downloaded on the Data Platform for Development Finance for the Sustainable Ocean Economy (https://oecd-main.shinyapps.io/ocean/).
Figure 1. OECD Sustainable Ocean Economy Country Diagnostics: Analytical framework
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Acknowledgements
This report was prepared as part of the OECD Sustainable Ocean for All Initiative with generous support from the Government of Portugal. The report was authored by Daniel Prosi and Piera Tortora, with the latter also providing overall direction for the report. It was prepared under the oversight of Jens Sedemund, Team Lead for Environment and Climate Change, with the strategic guidance of Haje Schütte, Head of Financing for Sustainable Development Division, in the OECD Development Co-operation Directorate. The report was informed by structured interviews and consultations held with the kind support of the Embassy of Portugal in Praia. Interviews and consultations were held with representatives from relevant Cabo Verdian ministries and government bodies, development partner representatives, think tanks, civil society and the private sector, including from: Ministry of Foreign Affairs, Ministry of Tourism, Ministry for the Environment, Ministry for the Maritime Economy, Ministry of Science and Technology, National Statistical Office, Fisheries Department, Port Authority, representatives from the Embassies of Portugal as well as People’s Republic of China [hereafter “China”], Luxembourg, Spain, USA, EU, and representatives from United Nations, UN Food and Agriculture Organisation, and World Bank. The authors would like to acknowledge comments and suggestions from OECD members and colleagues, including Claire Jolly, Kumi Kitamuri, Eija Kiiskinen, Anita King, Alejandro Guerrero-Ruiz, Will Symes, Rolf Schwartz, as well as from Joseph Catanzano from the UN Food and Agriculture Organisation.
SUSTAINABLE OCEAN ECONOMY COUNTRY DIAGNOSTICS OF CABO VERDE © OECD 2022

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Table of contents

Abstract

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Foreword

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Acknowledgements

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Executive Summary

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1 The urgency of transitioning to a sustainable ocean economy

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1.1. A global transition to sustainable ocean economies is urgent and possible

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1.2. Small island developing states and Cabo Verde stand to benefit from more sustainable

management of their ocean economies

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2 The ocean economy of Cabo Verde: Economic trends and sustainability stressors 12

2.1. Cabo Verde’s ocean economy in the context of its overall economic development and the

COVID-19 crisis

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2.2. Economic structure and trends of Cabo Verde’s ocean economy

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2.3. Socio-economic sustainability trends

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2.4. Environmental sustainability trends

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3 Governance and financing of Cabo Verde’s ocean economy

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3.1. Institutional architecture and governance

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3.2. The structure of finance for Cabo Verde’s ocean economy

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4 Setting sail for sustainability: Opportunities and tools for fostering a sustainable

ocean economy

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4.1. Integrated and cross-sectoral policy tools

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4.2. Transformational areas that could act as SDG multipliers

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4.3. Accessing finance for a sustainable ocean economy and sustainable development under

surging debt

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5 Conclusion

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References

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SUSTAINABLE OCEAN ECONOMY COUNTRY DIAGNOSTICS OF CABO VERDE © OECD 2022

FIGURES
Figure 1. OECD Sustainable Ocean Economy Country Diagnostics: Analytical framework Figure 2.1. Large variations in GDP per capita across islands point to significant inequalities Figure 2.2. Cabo Verde’s GDP growth has been strongly impacted by the COVID-19 crisis Figure 2.3. Cabo Verde’s maritime connectivity remains below that of peers according to the Liner Shipping Connectivity Index Figure 2.4. Evolution of artisanal and industrial fishery landings Figure 2.5. Sub-components of the Ocean Health Index for Cabo Verde, 2019 Figure 3.1. Cabo Verde's Ocean Strategy Figure 3.2. Cabo Verde: composition of financial inflows (excluding commercial loans) Figure 3.3. ODA commitments towards Cabo Verde's ocean economy Figure 3.4. Composition of ODA for the ocean economy (2008-2019)

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4 14 15
19 22 28 32 34 36 39

TABLES

Table 3.1. Examples of large ocean-related development finance projects since 2008 (> USD 1 million)

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SUSTAINABLE OCEAN ECONOMY COUNTRY DIAGNOSTICS OF CABO VERDE © OECD 2022

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Executive Summary
Economic and sustainability trends
Cabo Verde is a small island developing State (SIDS) and a Lower Middle Income Country (LMIC), whose economy and prosperity depend on the health and sustainable use of the ocean. The ocean makes up 99% of Cabo Verde’s territory and constitutes its most important link to the rest of the world. In the past two decades, Cabo Verde’s ocean economy has grown fast mainly because of a quickly expanding marine tourism sector, which contributed to lifting the country out of the Least Developed Country (LDC) status in late 2007. Tourism is the largest economic sector of the country’s ocean economy as well as of its national economy overall. It accounts directly for more than 20% of GDP and indirectly contributes an estimated 45%. In 2019, more than 819 000 tourists stayed on the archipelago, inhabited by 550 000 people. Fisheries and maritime transport are the next two largest sectors of Cabo Verde’s ocean economy. Fisheries includes both artisanal fisheries, a pillar for the livelihoods of small coastal communities, and the growing industrial fishing sector for processed fish products and the export market. A growing mariculture sector is also emerging. The third pillar of the country’s ocean economy is the expanding maritime transport and port infrastructure, driven by the ambition to become a logistics and supply hub in the mid-Atlantic. Small size, a highly concentrated economy and geographic isolation make Cabo Verde susceptible to economic shocks, natural disasters and the impacts of climate change and environmental degradation. Its dispersion over 10 islands, 600 km off the West African coast poses unique challenges and high costs when it comes to service provision, effective patrolling of territorial waters and advancing infrastructure such as electricity grids. Tourism has transformed parts of the country but is concentrated on two islands, and has led to the rapid deterioration of natural capital. The sector has thus far failed to integrate into the local economy and supply chains: its reliance on imports reduces the scope for backward and forward linkages to the rest of the economy and for more diffuse economic benefits.
Governance and policy instruments
The government of Cabo Verde attaches high importance to protecting its marine natural capital and to a development path centred on a sustainable ocean economy. The country, one of the few with a dedicated ministry, has created the Blue Economy Observatory to provide technical assistance and promote institutional co-operation in ocean governance. This recognises the cross-cutting nature of ocean governance that affects a multitude of economic sectors and social issues. Cabo Verde’s high-level strategy on the ocean economy focuses on the trajectory, sources of investment and on-the-ground implementation of ocean-based economic growth. It is part of the country’s commitment to implement the 2030 Agenda, and includes explicit links to the SDGs, particularly SGD 14, and the African Union’s Agenda 2063. In terms of data, the Statistical Office is conducting a satellite accounting exercise in co-operation with Portugal, to better ascertain the economic contribution of
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ocean economy activities. The government promotes Marine Spatial Planning (MSP) as a means to operationalise this strategy. Clearly outlined Marine Protected Areas (MPAs) would facilitate the patrolling and control of some important areas that may offer benefits for marine ecosystems and local communities.
Financing flows and instruments
Cabo Verde needs to mobilise more domestic public finance and private investment to effectively foster economic, social and environmental sustainability and offset decreasing levels of concessional finance experienced since LDC graduation in 2007. Public debt stood at 128% of GNI in 2019.
Official Development Assistance (ODA) to Cabo Verde’s ocean economy has increased since 2017 but remains low relative to the central importance of the latter for the country. While Cabo Verde’s ocean economy makes up between half and two thirds of the overall economy, only 13% of allocable ODA in 2017-2019 targeted ocean economy sectors and marine conservation. Further, less than half of the ODA towards the ocean economy went to projects that actively enhanced its sustainability. The bulk went to infrastructure projects, in particular port infrastructure, with no explicit sustainability considerations. Marine protection programmes in Cabo Verde are left to be financed predominantly by private philanthropies.
Way forward: leveraging the ocean economy for sustainable development and a blue recovery
Cabo Verde’s strong reliance on the tourism sector has amplified the impacts of the global economic downturn and travel restrictions due to the COVID-19 pandemic. On average, it suffered much larger economic consequences than other developing countries, plunging into the worst recession in its recent history. A vulnerable, small and undiversified economy, Cabo Verde must use the economic recovery as an opportunity to build forward better, bluer and more inclusive.
Building forward better is a critical opportunity to address growing anthropogenic pressures that threaten Cabo Verde’s unique biodiversity and its development prospects. One of 11 global biodiversity hotspots, Cabo Verde’s most important anthropogenic pressures result from the joint impact of climate change, ocean acidification, overfishing and marine pollution, especially of plastics.
Emerging sectors, such as mariculture and renewable energy, can help Cabo Verde harness the benefits of the country’s extensive marine resources, if developed through an integrated, multi-sectoral approach. Marine renewable energy with smart grids incorporating desalination plants and energy storage facilities could set the country on track towards energy autonomy, while addressing water shortages.
Exceptional COVID-19 development assistance and new global financing mechanisms could help a more sustainable recovery in Cabo Verde. New sources of liquidity and exceptional support measures need to be integrated in a blue sustainable recovery plan and associated financing strategy. Cabo Verde can expand the toolbox of innovative instruments to lower its debt burden and increase liquidity, through its access to the Debt Service Suspension Initiative launched by the G20, and potentially through a proposal to re-allocate a special USD 650 billion Special Drawing Rights (SDR) to vulnerable countries. Cabo Verde can also explore innovative debt-relief instruments, such as debt-for-ocean swaps, to free up resources for investment in sustainable ocean economy activities. In addition, it can tap into emerging sovereign borrowing instruments for sustainable investments, such as blue bonds and sustainability-linked bonds, although the constraint of public debt makes it necessary to explore other instruments simultaneously. Finally, Cabo Verde can enhance the volume and stability of tax revenues to finance sustainability through tax reforms and better management of key industries, such as tourism, where revenues could be earmarked for conservation efforts in order to safeguard Cabo Verde’s large natural wealth for the future.
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1 The urgency of transitioning to a
sustainable ocean economy
1.1. A global transition to sustainable ocean economies is urgent and possible
A healthy ocean is at the heart of human well-being, a healthy planet and a prosperous economy. The ocean forms more than two thirds of the earth’s surface and is an integral part of the cultural identity of many countries and communities. It provides humanity with a range of indispensable ecosystem services and natural assets that are key to economic and social well-being. The ocean plays a key role in regulating the climate, producing half of the earth’s oxygen and absorbing more than 90% of the heat resulting from anthropogenic greenhouse gas emissions. The ocean provides habitat for marine species, including many that people depend on for food, and nutrient cycling. Marine and coastal ecosystems offer flood control, protection from natural disasters, natural hazards and from pollution. The ocean is also critical for the global economy and livelihoods of billions of people. More than 90% of world trade uses sea routes and many economic sectors are either directly or indirectly dependent on ocean resources. They include traditionally exploited marine resources – either living resources (fish) or non-living resources (oil and gas) – as well as the use of the ocean for tourism, research and shipping.
The acceleration of ocean-based economic activities creates new development opportunities for coastal communities, as well as risks to be managed. Well-established economic sectors that depend on the ocean and coastal resources have expanded significantly in recent years. International tourism, for instance, has expanded from 25 million international arrivals in 1950 to a projected 1.8 billion by 2030 prior to the COVID-19 crisis. The off-shore oil and gas sector, which accounts for the largest share of the ocean economy today, is expected to record a USD 2.79 billion growth in off-shore oil and gas pipeline markets during 2020-24 (Technavio Research, 2021[1]) after a sudden halt in early spring 2020 because of the impact of the COVID-19 crisis. Further, a new range of economic activities located in the ocean have recently emerged as new technologies have opened the way for new economic opportunities. Among the fastest-growing sectors are off-shore wind energy; aquaculture and mariculture; and marine biotechnologies, while rising and long-term demand for minerals and metals, along with the depletion of land-based resources is leading to growing commercial interest in exploiting resources on the seabed in national waters and the high seas. These new and intensifying economic activities risk putting additional pressure on marine ecosystems that are already under unprecedented conditions of ocean acidification, ocean warming, pollution and loss of oxygen (IPCC, 2019[2]). Therefore, it is critical that new and emerging economic activities are pursued in a way that conserves and sustainably uses ocean resources. Ocean economy sectors that integrate sustainability can create new opportunities for developing countries, including more jobs, cleaner energy, improved food security, and enhanced resilience.
The COVID-19 crisis must be turned into an opportunity to set ocean-based sectors on a sustainable footing. While the COVID-19 crisis has halted key ocean-based sectors – particularly marine and coastal tourism and cruise shipping – demand for marine resources such as food, energy, minerals, leisure and other needs of a growing global population will persist (OECD, 2020[3]). The policies and interventions for the recovery from the crisis therefore create an opportunity to fundamentally rethink and
SUSTAINABLE OCEAN ECONOMY COUNTRY DIAGNOSTICS OF CABO VERDE © OECD 2022

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Sustainable Ocean Economy Country Diagnostics of Cabo Verde