The GI Hub welcomes the Canadian Government’s strong commitment to sustainable development, and growing the world’s economy through effective infrastructure planning and investment. We sincerely thank Prime Minister Trudeau for Canada’s generous contribution to the GI Hub, and look forward to working together to improve infrastructure procurement and delivery around the world.
The GI Hub welcomes the commitment from the G20 Leaders in addressing the infrastructure financing gap and encouraging more private sector investment.
The third meeting of the G20 Infrastructure Working Group (IWG) was held in Sydney, Australia from the 4th to the 6th of June, with the GI Hub playing an active role.
This year, the Global Infrastructure Hub (GI Hub) again attended the Annual Meetings of the World Bank and IMF, held in Bali, Indonesia, alongside the meetings of G20 Finance Ministers and Central Bank Governors. Trade tensions dominated many of the multilateral meetings, with all sides calling for a workable solution to be found. The leaders and representatives of smaller nations among the G20 and the IMF and World Bank community were pointed in their remarks that escalation of tensions between major economic powers was already having exponentially greater impacts on smaller economies.
In Buenos Aires on 23 March, the G20 Finance Ministers announced that infrastructure would remain a priority for at least the next three years—a very welcome announcement for those in the private sector who have long called for greater global coordination of efforts in this area.
Over the last decade, much has been written about globalisation and how we’re more connected than ever before. In the infrastructure world, we think of connectivity as the “linkages of communities, economies and nations through transport, communications, energy, and water networks across a number of countries” .
When we as consumers decide to invest our money—whether through shares, bonds, or other instruments—we look at whether our investment will deliver a solid financial return. It makes sense then that the same risk-return principle is applied to investments in infrastructure.
Infrastructure can often be used as a pawn in the political chess game, not only at a federal level between political parties, but at a foreign policy level too. It’s crucial that a cross-border infrastructure project has political support and cooperation from all parties involved, and that it’s being supported not for political gain, but to further regional development. A lack of strong political leadership can be detrimental to a cross-border project, and weak capacity can be a deterrent to investors.
As outlined earlier in this blog series, private investors are looking for reliable returns to justify the risks that they are taking. Financing and procurement of cross-border projects will often be more complex than national projects due to the scale of the project and compounded risks, and the financial returns may be more uncertain than for national projects.
Risks can be hard to define, manage and mitigate. In infrastructure projects that cross regional or national borders and involve multiple parties from both the public and private sector, these risks may be amplified.
With a growing global focus on attracting private sector investment into infrastructure and utilising the public-private partnership (PPP) model, it is crucial that governments focus on the entire duration of a PPP contract. Efforts need to extend beyond ‘achieving financial close’ and beginning construction or ‘cutting the ribbon’ for commencement of services.
While the infrastructure financing gap is huge, one of the main constraints to infrastructure development is not a lack of finance, but instead, a lack of well-prepared, bankable infrastructure projects.
Disputes in public-private partnerships (PPPs) globally involving key performance indicators (KPIs) represent 20 per cent of all disputes, as highlighted in our data using a representative sample of projects from around the world.