The world’s top multilateral financial institutions are upbeat about Australia’s plans to host the global infrastructure hub recently envisioned by the G-20.
“We … welcome the emphasis the G-20 has placed on infrastructure over the past few years [as well as] the new G-20 Global Infrastructure Initiative and look forward to contributing to its implementation,” said a joint statement issued Thursday by the heads of the African Development Bank, the Asian Development Bank, the European Bank for Reconstruction and Development, the European Investment Bank, the Inter-American Development Bank, the Islamic Development Bank, the World Bank and the International Monetary Fund.
The hub, initially floated last September by the world’s 20 leading economies to bolster global economic growth through infrastructure development, will be based in Sydney and funded — at least for now — mainly by Australia, Prime Minister Tony Abbott told The Australian newspaper Monday ahead of the G-20 Summit in Brisbane this weekend. He added that the hub harness the power of innovation and private sector engagement in public works projects like roads and railways, share knowledge about matching investors with projects and cut red tape as part of the G-20 agenda for private sector-led global economic growth.
“It will be a significant focus for international thinking and be a way of getting our … quite innovative approach to infrastructure before other countries,” Abbott explained. One for the first big corporations to sign up to the initiative is local telecommunications giant Telstra, which has committed project funding and personnel.
MDBs stressed in the statement they already provide over $130 billion in annual financing for infrastructure and said they are working on new schemes to spur private sector investment through regulatory reforms in those countries where the business climate is not ideal.
Infrastructure, the statement reads, “is key to tackling poverty and promoting inclusive growth” as it “helps improve access to basic services, especially for poor people, links producers to markets and connects countries to the opportunities in the global economy” as an “enabler of private sector-led growth.”
However, the combined resources of all MDBs are still not enough to meet infrastructure demands that reach an estimated $1 trillion a year in developing and emerging economies.
That’s where the BRICS New Bank and China’s Asian Infrastructure Investment Bank — both of which were not part of the joint statement, especially the latter which has yet to be formally established — are vying for space. Australia has been invited to join AIIB but to has yet to respond to Beijing’s proposal, as well as South Korea.
In the statement, MDBs explained what while they may not have the cash on hand, they do have the capacity to leverage new sources of financing — including of course the private sector and pushing for more public-private partnerships. The single greatest challenge to build and upgrade infrastructure in the developing world, the institutions noted, is not a lack of money but of “bankable” projects ready to be implemented in the pipeline.