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Infrastructure investments must be sustainable – Development banks

By on November 16, 2014

The heads of multilateral development banks, including the African Development bank, and the International Monetary Fund have stressed that infrastructure investments globally must be sustainable.

The MDBs, which said they provide over $130bn of financing for infrastructure annually, made the comment while commending the G20 for the emphasis it had placed on infrastructure over the past few years.

The views of the MDBs were contained in a joint statement, which was published on the World Bank’s website on Thursday.

In addition to the IMF, the MDBs are the African Development Bank, Asian Development Bank, European Bank for Reconstruction and Development, European Investment Bank, Inter-American Development Bank, Islamic Development Bank, and the World Bank Group.

They said, “Just as important as the quantity of spending is the quality of infrastructure spending. Infrastructure investments need to be sustainable: fiscally, economically, socially and environmentally.

“MDBs help countries to select the right projects, and design them for effectiveness and efficiency, maximising their impact on growth and jobs. Through policy dialogue, we assist countries in thinking through what the public sector is best placed to provide, and where partnering with the private sector can promote greater efficiency, in the context of each country’s institutional capacity and policy environment.

“We work with countries to identify, allocate and mitigate the full range of risks associated with infrastructure projects, including, with the IMF, fiscal commitments arising from certain kinds of participation of the private sector in provision of public infrastructure.”

The statement added that the IMF also worked with countries to put in place sound fiscal frameworks and integrated budget processes that enhance management of the public investment budget, while also monitoring and containing risks stemming from any associated accumulation of public debt.

On the G20, they said, “We also welcome the new G20 Global Infrastructure Initiative and look forward to contributing to its implementation.”

They explained in the statement that infrastructure was vital to tackling poverty and promoting inclusive growth, adding that infrastructure helped to improve access to basic services, especially for poor people, links producers to markets and connects countries to the opportunities in the global economy.

According to the development banks and the IMF, well-functioning infrastructure is essential to overcoming bottlenecks to growth in emerging and developing economies, and as an enabler of private sector led growth.

They added, “No country has developed without access to well-functioning infrastructure. At a time when the outlook for global growth is disappointing, investment in infrastructure can play an important role in boosting short-term demand, as well as bolstering longer-term supply capacity.”

On their role in infrastructure development, they said, “We work on the ground in countries at all levels of development, under country-owned and country-led strategies to support the full life cycle of infrastructure development – from advice on sectoral and business climate reforms, and project preparation, transaction structuring and financing, through to implementation and ongoing maintenance, as well as monitoring and evaluation of development impact.

“We help countries not only to build resilient infrastructure, but also to build the institutional capacity to manage that infrastructure over the longer term.”

Despite their willingness to support the G20’s infrastructure drive and similar initiatives by governments globally, the MDBs stressed that the needs were immense.

“The infrastructure gap in emerging and developing economies is broadly estimated at over $1tn per annum. Meeting these needs will require renewed efforts to mobilise resources from existing as well as new sources of finance, including from institutional investors,” they said.

Upstream, they said they were working with countries to create an enabling environment to mobilise investment through regulatory reforms and robust tender processes and legal frameworks for Public Private Partnerships.

We are scaling up our efforts to develop the information base necessary to attract investors, working with partners to undertake assessments of country readiness for PPPs and building databases of projects and information on project documentation and project performance,” they added.

 

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