Infrastructure market lacks ‘bankable projects’ say development banks

The seven major multi-lateral development banks (MDBs), plus the International Monetary Fund (IMF) have issued a statement on global infrastructure development, aimed at the leaders of the world’s 19 largest economies plus representatives of the European Union (G20), who are meeting in Brisbane, Australia this week.

Although the MDBs say they collectively finance US$ 130 billion of infrastructure projects a year, they say there is still a shortfall between what is being built and what needs to be built – the so-called ‘infrastructure gap’. A joint statement from the MDBs and IMF said, “The infrastructure gap in emerging and developing economies is broadly estimated at over US$ 1 trillion per annum.”

While they say they are working on attracting more private finance and institutional investors to the global infrastructure market, the group of MDBs also said there was a need for legal and regulatory changes in many countries. “We are 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 (PPP),” the statement said.

However, it added that the problem was not so much the availability of funds, but more the lack of financially viable projects. “The critical barrier to achieving an uplift in infrastructure investment in emerging and developing economies is not a lack of available finance, but an insufficient pipeline of bankable projects ready to be implemented.”

In response, the MDBs said they were strengthening their project preparation facilities (PPFs). Other initiatives include developing a harmonised approach among to project preparation and supervision, including the use of standard procurement policies and documents, and environmental and social safeguards. They are also developing standard systems for cost-benefit analysis of projects and ways of assessing project “executability” assessments. Systems are also being developed to measure and report on development effectiveness once projects are complete.

The statement 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.”

The statement was issued by the African Development Bank (AfDB), Asian Development Bank (ADB), European Bank for Reconstruction and Development (EBRD), European Investment Bank (EIB), Inter-American Development Bank (IDB), Islamic Development Bank (IDB), World Bank and the IMF.