World Economic Forum: Accelerating Infrastructure Delivery

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Context and Objectives of the Report

The needs for infrastructure in urban areas are vast. In the face of sustained urbanization across a majority of emerging market countries, many experts estimate that some 75% of all infrastructure investments will be needed in urban and peri-urban environments over the next 40 years.  Governments, bilateral donors and international financial institutions (IFIs) are increasingly conscious of this vast challenge. Indeed, with many countries continuing to face economic headwinds in the aftermath of the global financial crisis, the importance of infrastructure to spur and sustain economic activity is now established at the G20.  The response from the G20 has been consistent and sustained.

Infrastructure is an important driver of economic competitiveness in the present globalized investment landscape. Yet the divergence between the need for infrastructure and the ability of governments to deliver continues to widen, creating a bottleneck for growth and diversification. These gaps have widened in certain developed markets owing to limits imposed by public indebtedness and, in emerging markets, by the underestimation of the growing need for infrastructure due to population growth and urbanization. In both cases, more effective delivery mechanisms are needed.

To enable public- and private-sector decision-makers, including those in emerging markets in Africa, Asia, Latin America and Eastern Europe to accelerate the delivery of infrastructure, the World Economic Forum’s Global Agenda Council on Infrastructure is seeking to learn from the successful recent experience of IFIs by identifying the drivers of success, chief among them the prospect of strong economic and financial returns from projects.   These lessons are derived from a broad spectrum of international experience over the past 20 years, primarily in the water and urban transport sectors.  The IFIs represented are the European Bank for Reconstruction and Development (EBRD), the Asian Development Bank (ADB) and the International Finance Corporation (IFC).  n the view of the Forum’s Global Agenda Council on Infrastructure, these experiences are broadly applicable to many emerging market countries across various infrastructure sectors.

This paper focuses on the lessons of IFI experience in three areas: 

–– Funding and financing of infrastructure projects

–– Project preparation

–– Innovative funding approaches

This paper is organized as follows:

–– Section 1 shows how the proper array of incentives in contract design stimulates the effective use of the “user pays” principle in project finance.

–– Section 2 highlights the importance of project preparation in ensuring the sustainability of projects.

–– Section 3 illustrates the importance of creativity in project funding by discussing how capturing a share of the value added by infrastructure projects can help generate revenue in a fair and efficient way across a broad range of projects.

–– Section 4 provides conclusions.

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