High-quality economic infrastructure promotes development in emerging economies, growth and employment in developed economies, and trade between all. Everybody is talking about it, governments and investors want it, yet it remains elusive.

The World Economic Forum estimates that US$3.7 trillion is required annually for investment in global infrastructure, yet only US$2.7 trillion is actually invested. That’s a massive US$1 trillion annual investment gap.

The story is the same in Australia, with decades of under-investment in non-mining infrastructure creating a political and funding dilemma.

Governments have a crucial role to play in closing the gap, but a big part of the solution is greater private sector involvement. The business community is ready to play its part – by investing directly in productive infrastructure and partnering with governments to build and manage public investments more effectively.

The greatest barrier to more private involvement in public infrastructure is the absence of a credible pipeline of productive, bankable, investment-ready projects offering acceptable risk-adjusted returns to both public and private investors.

In the emerging markets, China is leading new thinking around the solutions for these problems. The One Belt, One Road (OBOR) initiative and the related Asian Infrastructure Investment Bank (AIIB) stand out.

OBOR is a long-term plan designed to expedite the build-up of urban infrastructure along the old 14th Century Silk Road and the newer Maritime Silk Road to open new markets and facilitate trade, capital flows and economic integration. Investments along the “New Silk Road” will most likely be ports, pipelines, freight railways, water and energy infrastructure, and social infrastructure such as schools and hospitals.

The scale of the initiative is breathtaking - covering 60% of the world’s population, around 30% of the world’s GDP and access to China’s accumulated $3 trillion in foreign reserves.

The implications of this across economies, industries and companies will be immense.

Early iterations of the OBOR map didn’t include Australia. This is changing; President Xi Jinping last month publically nominating Australia’s northern development plan as being relevant to OBOR. That sends a very powerful signal to China’s investors that projects in northern Australia are likely to get outbound investment approval. And, with little publicity, an OBOR team has recently visited Australia to assess other projects for inclusion.

This Friday, in Melbourne, the Australia China OBOR Initiative is being launched. Chaired by Malcolm Broomhead and founded by Jean Dong, the launch will coincide with the release of the first report on what OBOR means in an Australian context. This will be followed over the coming year with a sector focussed analysis of specific opportunities.

What does this mean?

Importantly, OBOR will give Australian companies a chance to take a leading role in the growth of regional infrastructure in the future, and build the framework for regional infrastructure as a new asset class.

OBOR offers not just access to Chinese capital, but the potential for Australian infrastructure contactors, asset managers, financiers, advisors and investors to partner with Chinese counterparts, to build relationships, as well as to leverage each other’s experience to successfully deliver infrastructure projects in Australia, along the New Silk Road, and beyond.

If we apply our mind to the task, OBOR also has the potential to unleash the full potential of Australia’s services sectors.

Infrastructure services

Australian companies have proven records in the design, construction and management of large scale projects across Asia and in other regions. Alongside them, our world-class architectural, design, engineering and environmental services companies provide a full range of project-critical complimentary services.

Financial services

Australia’s financial services sector is second to none in its ability to structure, price and fund major public- private projects. Australian project financiers are skilled at delivering innovative financing options, including Renminbi (RMB) bonds and Islamic bonds. Australian insurers, including government agencies like EFIC, can assist with risk mitigation solutions.

Australia’s funds and superannuation sector is one of the largest and most sophisticated in the region with experience in co-investing with Chinese and international investors, importantly with an increasingly longer- term investment horizon.

Australia has officially signed up to join AIIB as a founding member. As part of the agreement, the government will contribute A$930 million over the next five years as paid in capital. That makes us the sixth largest shareholder in the commercially focussed regional bank and opens opportunities for the private sector to participate in bankable projects.

Sydney is one of only 20 official offshore RMB hubs around the world and is developing a reputation as the go- to hub for RMB cash and securities settlement in the APAC region. With the G20 Infrastructure Hub located in Sydney, a dynamic fintech industry, and the rapidly growing use of RMB as a trade, finance and investment currency, Sydney has the “financial infrastructure” necessary to become a major gateway for capital flows in and out of China.

Professional services

Successful projects require expert advisers. Australia’s cluster of accountants, lawyers, and consultants offers a full suite of services for a variety of business sectors. These professionals can draw on their international expertise to conduct due diligence and valuations, provide advice on tax, legal and risk matters, and provide help in dispute resolution, notably in the area of arbitration.

Information technology services

A key policy objective of OBOR is to create connectivity between markets. Australian firms are ranked among the top in Asia in telecommunications infrastructure, and our rapidly growing expertise in the areas of big data, Internet of Things and e-commerce fits well into the skills needed for OBOR projects.

Beyond infrastructure

OBOR is a potentially the most significant foreign policy initiative of China since its entry into the WTO in 2001. It is not a one year initiative; it will run for decades.

As a strategic partner with China, Australia has a golden opportunity to be an active participant in an initiative that is likely to reshape the global economy as much as the old Silk Road did in in the 14th Century. Let’s be bold, step up and use OBOR as a catalyst to transform our own economy.