Infrastructural Devt as Catalyst for Economic Growth

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Collaboration for better infrastructure delivery by stakeholders was the focus of discussion at the first Global Infrastructure Forum jointly organised by the multilateral development banks (MDBs) in partnership with the United Nations (UN) at the recent 2016 World Bank/IMF Spring Meetings in Washington, DC, USA. Funke Olaode reports

It has often been said that any country’s economic growth revolves around investment in infrastructural development most especially in good roads and energy while bridging the infrastructure gap is essential to achieving the global Sustainable Development Goals (SDGs) and ending poverty.

Though it seems developed countries have tackled this issue, developing countries most especially in Africa are the worst hit. According to recent reports by the United Nations, 1.2 billion people still live without electricity; over 663 million don’t have access to safe drinking water; over 60 per cent of the world population lack access to internet, 2.4 billion lack access to improved sanitation while at least one quarter of the rural population is not served by good roads.

Forum for Collaboration

Against this backdrop, the inaugural global infrastructure forum was held at the recent 2016 World Bank/IMF Spring Meetings in Washington, DC. The forum brought together, for the first time, leaders of the multilateral development banks (MDBs) as well as development partners and representatives of the G20, G-24, and G-77, with the aim of enhancing multilateral collaborative mechanism to improve infrastructure delivery globally.

The forum was mandated by the Addis Ababa Action Agenda on financing for development and this year’s theme was ‘Spending more, spending better on infrastructure.’
It sought to enhance coordination among MBDs and their development partners so they can better support creation of sustainable, accessible, resilient, and quality infrastructure in emerging markets.

Rallying Point

While the challenge of boosting infrastructure investment in emerging markets is key to achieving the SDGs, the United Nations Secretary General, Ban Ki-moon, noted that it is necessary to mobilise for infrastructural development because there is a gap due to many years of neglect decay and low investment in infrastructure.
“Colombia has the largest infrastructure initiatives. Infrastructure is the best tool to boost Africa in this time when economy seems to be on the slow side. In this regard, we need to encourage public private partnership (PPP). And to solve these problems, we need to combine technology and human.

“Above all, without combined effort of human and resources, it will be difficult to achieve this. And that is why we need to work together and mobilise private sector to be involved”, he added.

Crucial Observations

While the forum stressed that blended finance and risk sharing are important innovations in infrastructure financing, it noted that overcoming the challenge of implementing these policy tools to expand the financial resources available to countries and investors is essential to close infrastructure gap in and to implement the SDGs; thus calling for a blend in finance.

The forum also observed that governments invest billions of dollars annually in infrastructure projects, which are long term that will shape the course of development in their countries.
Yet it noted that deep uncertainties about future conditions pose formidable challenges to make near-term decisions that make long-term sense infrastructure projects, and therefore, a lot of incentives are needed to encourage private and public sectors to invest on infrastructure in their member countries.

Impact of Corruption

Lending his voice to the call for global infrastructure development, President of Africa Development Bank (AfDB), Dr. Akinwunmi Adesina said it is a welcome development, but noted that impediments revolve around waste, mismanagement and corruption.

For the call to be effective, he said communities must be involved because they also are stakeholders. To him, “the importance of good governance is also key for accountability, transparency and satisfaction. The problem is not capital really but bankable projects. Again if the projects are awarded and fall into wrong hands, its execution is substandard or a waste.

“When you look at Africa, whether in terms electricity, rail, port, transnational highways; these are very critical for Africa to integrate for its economy to be able to play big in the bigger market, And when you look at the infrastructure deficit of the continent today it is more than $50 billion gap in terms of infrastructure, and if you don’t fix that gap it means we are going to shed off 5 per cent of our GDP growth in Africa, which we cannot afford now.

“Again, when you look at infrastructure, the most important one is electricity. It is mind-boggling for me that 138 years after electricity was discovered by Thomas Edison, we can still not light up Africa. Today, over 600 million don’t have access to electricity in Africa. In African Development Bank, we have a prioritise Light up Africa and power Africa initiative. I told Kim that if there is anything we are going to agree on is to power Africa. For us at the Bank, we are going to put in $12 billion in the next five years into energy sector. And we are also hoping to leverage between $45 and $50 billion from the private sector.

“And for this to happen, we have to pay attention to the fact most investments on infrastructure in a year is from the public sector. So I agree with Jim Kim that we have to optimise around how these are used efficiently. At the end of the day, the money in the capital market far exceeds than what Africa can put together. And that is why we launch Africa 50 to help leverage on the Sovereign Trust Fund and the pensions. For me the future of Africa is within Africa and not outside of Africa. And to make it a reality, we need to mobilise the resources in the continent to solve the infrastructural problems.”

Leveraging Loans

In his remarks, World Bank Group President Jim Yong Kim said the importance of World Bank as a guarantor in these difficult terrains is that it was created as a leverage to provide loans at a lower rate than what they can get anywhere.

“I hope ministers of finance will see us as a fantastic investor. And that is why they have to leverage on public private partnership. The key point is that countries should spend more and spend better on infrastructure”, the bank boss said.

Lamenting how poverty has continued to ravage humanity, Kim it was announced for the first time that the percentage of people living in extreme poverty around the world was projected to fall under 10 per cent globally in 2015. Today, roughly 700 million people live in extreme poverty, a reduction of more than 1 billion people than 15 years ago, he noted.

“But the weakening global economy threatens our progress toward ending extreme poverty by 2030. In the global economy, there are not many bright spots around the world — the United States is one among the developed economies and India is another among the middle-income countries. Growth remains weak in Europe and Japan, and among emerging economies, Russia and Brazil are projected to post negative growth once again. We have just downgraded our global growth economic forecast this year to 2.5 per cent from 2.9 per cent”, he added.

QUOTE

“The future of Africa is within Africa and not outside of Africa. And to make it a reality, we need to mobilise the resources in the continent to solve the infrastructural problems”