Economic growth is tightly linked to increased infrastructure investments. Over the past two decades, and particularly during economic downturns such as the global financial crisis, redoubling investments in infrastructure has for many countries been a strategy to achieve growth. China was the first. In 1998 its former minister of the State Development Planning Commission, Zeng Peiyan, stated that the country’s targeted economic growth rate of 8% could only be achieved if infrastructure investment grew by 15-18% per year.
In 2019, more than 20 years later, the same thought is shared by the US government: “Stronger GDP growth from increased infrastructure investment would help boost the American economy, raise wages for American workers, and improve the standard of living in American communities.”
The need for social and inclusive development
The economic importance of infrastructure is widely understood. Now it’s time to recognise infrastructure’s vital significance to improving social and inclusive development.
Simply put, there is no inclusive development without infrastructure. Water and sanitation projects define basic health. Power projects provide electricity to improve extreme poverty. Information and communications technology projects catalyse drivers for productivity, innovation and business. Transport projects expand productivity and economic opportunities.
For the past decade China and the US have been the top spenders in infrastructure, yet their investment strategies in infrastructure have not yielded the expected and needed results for socioeconomic welfare. Both countries accumulated economic growth through building new infrastructure, but they have not been effective at addressing the unequal distribution of its economic and social outcomes. So, what is the situation for other countries, especially emerging markets?
The amount spent on infrastructure investment and GDP per head are poor indicators of development and prosperity. In its Inclusive Development Index (IDI) the World Economic Forum (WEF) concludes that IDI indicators declined in 27% of the 103 economies assessed over the past five years, even as their GDP per head increased. The trickled-down benefits of their infrastructure investment have clearly not been reaching society as a whole. So how can infrastructure foster more inclusive benefits?
Quality infrastructure could really deliver the expected socioeconomic outcomes, as it is directly correlated to the IDI. Accessibility, availability, affordability and acceptability of infrastructure are all basic benefits of inclusive infrastructure, especially if they are targeting vulnerable groups.
This has been an important discussion point at the recent G20 meeting of finance ministers and central bank governors held in Fukuoka, where the Principles for Quality Infrastructure Investment were endorsed. These principles encourage countries to implement infrastructure projects that comply with quality infrastructure principles, such as raising economic efficiency across the project life cycle; integrating environmental and social considerations; building resilience against natural disasters; and strengthening institutional and project governance.
Facilitating the economic empowerment of women
When inequalities within the household—knowledge gaps, lack of education and cultural restrictions—are addressed, higher gender parity in earnings can be achieved and a significant increase in human capital wealth can be generated.
To ensure inclusive infrastructure is streamlined throughout the entire project life cycle, the Global Infrastructure Hub created a Reference Tool for Inclusive Infrastructure for decision-makers and stakeholders. The tool defines six action areas for decision-makers to plan and execute large infrastructure projects looking at multiple social dimensions (see Figure 1)
Figure 1: Global Infrastructure Hub's Framework for Inclusive Infrastructure
The action areas contain practices and guidelines at every phase of the project life cycle. The tool uses eight case studies of infrastructure projects to illustrate different success factors for inclusive infrastructure development.
Infrastructure development should demonstrate social outcomes, which will help create more inclusive growth. This is no longer an aspiration. It is the bottom-line result societies across the world are seeking, regardless of income levels. Developed and developing economies have the same urgency to implement structural reforms to transform aspirations into action with a new global growth agenda that places people and living standards at the centre of national economic policies.