The motto in the Global Infrastructure Hub, entity of G20 dedicated to monitoring projects and assisting governments on infrastructure fronts, is to build an agenda that is “sustainable, resilient and inclusive”.
More than a distant horizon, these need to be the magic words for governments in the 21st century. That is what Marie Lam-Frendo, CEO of the organization, who spoke to EXAM right after the G20 finance ministers meeting this month.
From the US to Europe or Latin America, countries are once again betting on infrastructure as a remedy for the post-pandemic. But the world has changed since the New Deal of the 1930s, and simply building bridges and generating low-skilled jobs may no longer be enough: finding a more sustainable economic model and reducing inequalities will be key points in the global “new infrastructure”.
“Countries are embracing a transformational recovery,” says Lam-Frendo.
See below for the main excerpts from the interview, granted by email — and read the full report “Running to catch up”, on post-covid infrastructure, published in this month’s issue of EXAM.
Historically, infrastructure has been seen as a way out of different crises—we can remember the 1929 crisis or even the Marshall Plan in postwar Europe. Are governments pursuing the same strategy now?
Infrastructure is central to crisis recovery as it first boosts productivity in the short term and then also brings medium and long term economic gain. In this crisis, it couldn’t be different: Infrastructure is part of the recovery plan around the globe and we’re working within the G20 to track those plans — for example, the $1.2 trillion bipartisan package that was approved by the US government.
On the other hand, in the last global crisis, in 2008, the post-crisis infrastructure seems to have been less discussed than this time, at least in most countries. What’s the difference now?
For the first time in a century, governments are having to respond to a global health crisis that has direct economic consequences. Governments are aware that what we are experiencing is not the same as the 2008 global financial crisis or other past crises, so the answer is not the same either.
Governments see infrastructure as a central element of post-covid recovery in terms of growth, but also to achieve goals that countries have already established through various multilateral forums in recent years, such as the Paris Agreement.
The discussion so far appears to be centered on advanced economies — especially the US under the Biden administration. How do you see middle and low income countries dealing with infrastructure investments?
I see two opportunities for low- and middle-income countries. First, the immediate benefit to their populations due to the strong relationship between infrastructure and productivity, in addition to the long-term benefits to the economy.
And second, developing countries can jump straight to inclusive, resilient and sustainable infrastructure development if they take advantage of market demand, which has a growing pool of capital available with a focus on ESG [sigla para meio-ambiente, social e governança].
Can countries that don’t invest now fall behind?
As discussed at the G20 finance ministers’ meeting this month, recovery is slowing down in developing countries, so there is a real case for pushing forward transformational infrastructure plans in those countries, and thus avoiding deepening an uneven recovery.
But countries also cannot wait for multilateral or financial institutions to help them solve these problems. It is important for these countries to have an infrastructure vision and deliver results based on it. An example of a country doing this is Brazil itself, which has created an ambitious strategy to attract more private investment in infrastructure. Among some measures are the opening of an infrastructure hub and some innovative approaches to mitigate exchange rate risks in concession contracts.
Some emerging countries are already coming from a process of deindustrialization, and have barely reached the current infrastructure of advanced economies, let alone the modernizations into which countries like China and the US are pouring money. How to do this in the midst of the crisis and with galloping public debt?
When it comes to attracting infrastructure investments, developing countries need to have the right governance to ensure that the vision for the country and its citizens translates into correct infrastructure planning. They should also think of ways to reduce risk in their projects, working to, for example, improve their credit rating, ease of doing business and with targeted risk mitigation instruments.
We have in the G20, for example, the InfraCompass tool, designed to help countries understand where they are performing well and where they can improve, and governments and experts must carry out this type of analysis.
It is also important for governments to show that they can successfully own, develop and implement projects, as infrastructure will remain largely under government control and cannot rely solely on private investments. This will send a strong and positive signal to the private sector that governments are willing and able to build the right capacities in their institutions to allow these projects to be developed and implemented. Some possible mechanisms to centralize these processes is the creation of dedicated infrastructure agencies, which can work with all important departments, as well as infrastructure banks.
And what should be the priorities when planning post-covid investments?
Sustainability, resilience and inclusion are becoming market demands, so actively developing projects on these fronts has a double positive effect — countries are able to help their long-term vision while meeting market demands.
Sustainability is something we share globally and it’s important to act collectively. But when it comes to infrastructure that is inclusive and resilient, this is something that every country owes its citizens as there is a direct benefit to the community.
Are fronts such as connectivity and reducing inequalities examples?
When planning infrastructure for post-covid, countries must have a vision where infrastructure can act as an enabler. It is important to work from the top down to ensure that infrastructure is well planned and financed. And beyond that, infrastructure will only deliver its value if it’s kept out of political cycles. An example of this is Saudi Arabia’s development plan, Saudi Arabia’s Vision 2030.
This article is part of the special “Running to Take the Delay”, published in this month’s edition of EXAME. Read the full article here.
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