The Australians are using their G-20 presidency to make a fresh start with the group’s infrastructure agenda, launching a new “Infrastructure and Investment” working group this week in Mexico City.
And not a moment too soon. A recent CGD study group Scott chaired concluded that this highly compelling agenda risks becoming a stale one absent some new approaches.
Our group came up with five new ideas, some big, some small, but all aimed at helping the G-20 have a demonstrable impact on meeting developing countries’ infrastructure needs. (Read this note for the full explanation.)
1. Commission a new global knowledge product for infrastructure investment, the “Investing in Infrastructure” survey. While “Doing Business” and other surveys have done a good job informing us how the lack of roads, ports, etc. are barriers to growth, this country-level survey would identify policy and regulation changes that could ease the challenges of actually investing in and building that infrastructure.
2. Cultivate a new generation of infrastructure investors by launching a sustained engagement with the pension fund community. With the long term investment horizon of pension funds and the long term returns of infrastructure projects, the two are a good match to meet development goals. But so far, a lack of practical engagement has left the estimated 20.7 trillion managed under pension funds untapped.
3. Unlock the project preparation process by focusing on the right role for public funding. Many infrastructure projects get stalled early on, due to lack of government capacity and mismatched funding opportunities for project preparation. Restructuring support for country governments to package and negotiate projects would catalyze infrastructure investment from its earliest stages.
4. Make a sustained commitment to the multilateral development banks. The emphasis on private sector involvement should not come at the cost of core support to the MDBs. Revisiting a one-time commitment to capital increases and coordinating on policy agendas could renew the effective leveraging of MDB capital for infrastructure.
5. Launch a new agenda on sovereign debt (particularly sub-national debt). Studying and addressing the uneven and confusing credit worthiness standards, which prevent many developing countries from accessing global bond markets, will help developing countries raise their own financing for infrastructure while appropriately managing the risks.
We hope these suggestions will help Australia make the most of the G-20’s infrastructure for development agenda this year and going forward. Working together with priorities already being set by developing nations, an engaged and “concrete” effort by the G-20 to strengthen infrastructure could catalyze growth and prosperity for all.