Double investment on infrastructure needed: expert
Double investment on infrastructure needed: expert
Double investment into developing infrastructure is needed to drive growth and alleviate poverty across the globe, an expert has suggested.
Director of the Secretariat of the Intergovernmental Group of Twenty-Four (G24) on International Monetary Affairs and Development, Mr Amar Bhattacharya stressed on the need to double investment at the 17th World Congress of the International Economics Association (IEA) held in Jordan on June 7-10.
He stated that infrastructure development with a focus on providing basic public services to the poor, which include access to electricity, safe water, roads and sanitation, remains important.
The director explained that 1.4 billion people across the globe still do not have access to electricity, 2.6 billion people do not have access to sanitation and one billion people do not have access to safe water.
In addition, he said, it is also recognised that infrastructure is central to growth, development and climate change.
“It is that centralisation that is now bringing the focus on infrastructure in rich and poor countries alike,” he told the congress on Monday.
Developing infrastructure is also important for structure transformation from agriculture-based countries into industrial and service-based nations as well as the transformation of urbanisation.
In the next two and a half decades, two billion people will move to urban centres, pressing the need for governments to work harder to prepare necessary facilities for this urbanisation.
“Providing them with the kind of livelihood they need and the associated employment and services is going to be the biggest challenge,” Mr Bhattacharya said.
According to him, recent analysed data showed that actual investment spending in infrastructure in the developing countries has already reached one and a half trillion dollars.
But there is a need to double the spending to three trillion dollars to meet what Mr Bhattacharya described as the needs and aspirations of infrastructure development.
A significant increase in spending on infrastructure development has been seen in China, India, oil-rich gulf countries and much of the sub-Sahara.
However, Indonesia and Brazil are spending as low as 2.7 percent and 2.1 percent of gross domestic product respectively on infrastructure.
Amid greater investment need for infrastructure, the director also stated greater finance should be sought from other sources rather than the public budget to lessen the spending burden on the public budget as has been the case in the past.
As high as 60 percent of the one and a half trillion dollars, which was spent to develop infrastructure in developing countries, was financed by the public purse.
Banks around the world massively cut lending to private sector borrowers for infrastructure development as this lending was always long-term whereas the deposits they received were mainly short-term thereby creating potential difficulties.
“Banks today play a very small role in the financing of infrastructure both domestically and internationally,” he said, adding that there is a big issue for the private sector regarding obtaining loans from ban ks.
On the other hand, institutional investors, ancient funds and sovereign wealth funds are well-placed to provide long term loans but, out of the 75 trillion global ancient assets and long term institutional assets, less than one percent is invested in infrastructure in both developing and developed countries. Therefore changing the mix of private finance from banks to long term investors is important, he said.
To meet the financial requirement for three trillion dollars, Mr Bhattacharya suggested the need for a new approach to sourcing finance from both the public sector and development banking functions, public and private.
“Re-engineering that will be one of the central challenges facing us now,” he told the congress.
The triennial congress, hosted by Columbia Global Centre of the Middle East, brought together leading scholars and economists. The Congress features the work and findings of leading scholars in economics and related fields, and provides an excellent forum to present research.
The United Nations Department of Economic and Social Affairs also partnered with the IEA to organise a number of policy sessions relevant to developing countries.
vientiane times
