Now is the time for more and smarter infrastructure investment
Road and railways, communication lines and power grids, ports and dams … these are the building blocks that bind countries and citizens together, contribute to economic cohesion and open for new economic activities. Good infrastructure is a key requirement for a dynamic economy, as shown in our new Sustainable Development Brief. But infrastructure investments are also necessary to meet social needs and environmental challenges. For example, addressing climate change will require an additional 5 per cent on top of the almost $90 trillion infrastructure investment needed just to maintain current growth to 2030.
However, while the impact of infrastructure on growth and productivity is generally positive, studies show important differences across countries. Economies with particularly poor infrastructure benefit the most from infrastructure investments. Addressing infrastructure bottlenecks there can bring significant rewards.
Moreover, efficiency considerations influence the relationship between infrastructure investment and development outcomes. It is not a question only of spending more but of spending better, avoiding pitfalls such as high costs in the design or poorly located roads or railways. This is why the work in UNECE to develop coherent international networks and masterplans for road, rail, inland waterways is so important.
However, long-term trends suggest that there has been an overall decline in the availability of infrastructure. In a number of developed countries, perceptions on the quality of infrastructure, as surveyed by the World Economic Forum, have deteriorated due to insufficient maintenance spending and the aging of networks. Invesment in inland transport infrastructure in OECD countries fell to 0.8 per cent of GDP in 2013, the lowest level since 1995!
The ultimate aim of infrastructure is the delivery of certain services to users. What matters, therefore, is not only its physical existence but the way in which infrastructure is managed. Improvements can be made by new pricing schemes that encourage more efficient use or from improved standards and regulations that facilitate transport flows. UNECE’s work on Intelligent Transport Systems is a good example of how technological and organizational systems, applications and services can be deployed to reduce congestions and promote safer and cleaner transport.
Governments have a particular responsibility in encouraging infrastructure development, as a public good. However, close collaboration with the private sector can help to address the financing and efficiency constrains that often hamper public initiatives in this area. UNECE’s work on Public-Private Partnerships (PPPs) facilitates the involvement of the private sector in infrastructure, including through the development of PPP standards. The policy challenge is to create an institutional, regulatory and policy environment that can lead to quality infrastructure investments.
The current macroeconomic conditions, characterised by still weak investment, sluggish growth and low long-term financing costs, define a favourable environment for infrastructure investments, where the positive impact of additional spending could be particularly large. We must seize this moment and address infrastructure needs. We need more infrastructure spending but also smarter infrastructures and more efficient spending.
It is time to build roads, railways and bridges to sustainable development.
If you wonder why the animal accompanying my blog is a cow, it is because cows are fascinating animals; the cows of our host country, Switzerland, are famous for their quality; and because I am still a farmer, and miss the cows I had in Denmark. Now I got one back.