It's no surprise that infrastructure will be high on the agenda when APEC Leaders meet with the APEC Business Advisory Council (ABAC*) on November 10.
Recent B20 public statements have said their analysis shows that improving project preparation, structuring and delivery could increase capacity globally by $20 trillion by 2030. Therefore specific ways to improve infrastructure development and financing in Asia Pacific economies is tipped to be one of the key topics leaders will raise with ABAC representatives as they deliver their annual report.
A key challenge identified by ABAC, G20 among others in meeting the massive infrastructure needs of the region is to encourage private finance into infrastructure projects. To do that, projects must be bankable and undertaken in an environment where governance arrangements protect the interests of long-term investors, as well as those of communities. Risk sharing between governments and private investors is becoming a better understood factor in regional economic development, based on risks being carried by either the government or private investors, depending on which sector is most capable of bearing and managing specific risks in infrastructure development and over the life cycle of an investment.
Infrastructure development has been a work priority in APEC and in ABAC over recent years. Last year under Indonesian leadership of APEC, ABAC strongly supported the establishment of a Centre of Excellence in Public Private Partnerships to be established in Jakarta. ABAC’s support was via the Asia Pacific Infrastructure Partnership (APIP), a group formed in 2011 and led by former Australian ABAC member, Mark Johnson AO. APIP comprises more than 70 experts involved in all facets of infrastructure – from development, planning, contracting and law, management and financing – and involving private sector experts, representatives of think tanks, academia and multilateral development banks.
This year under China’s leadership of APEC, APIP has supported work to promote long-term savings to finance infrastructure and work to improve the efficiency of Public Private Partnership (PPP) agencies in promoting infrastructure investment and development in APEC regional economies. China is moving to establish a PPP agency within the Ministry of Finance and it is likely to form specialist agencies in provinces in China.
Concerns in the region remain over the modus vivendi of PPP projects, but models are being refined and improved and this is leading to a growing acceptance that the massive infrastructure needs of the region will and can only be met by mobilising foreign investment flows into the region and by releasing domestic savings in local economies through the development of local capital markets.
APIP has held important dialogues with Peru, Mexico, Thailand, Philippines, Indonesia, Malaysia and Vietnam and while the dialogues are private to allow open and frank discussions with ministers and senior officials, a summary record of those dialogues is available at the Australian APEC Study Centre. The Centre conducts important training courses for APEC officials from the region involved in central and line agencies responsible for infrastructure.
Australia’s expertise in infrastructure projects is being made available in various ways.These include through the financing of capacity building training programs for regional officials by the Commonwealth Government under the Government Partnership for Development Facility. In addition, support to multilateral development banks helps them to provide guarantees and credit enhancement facilities to developing economies in the region to enable the mobilisation of infrastructure financing. Commonwealth and State government programs mean direct assistance is being provided to regional governments through advice and assistance from Australian private sector experts, including in project design and management. Australian experts also lead the work of APIP.
Australian support for infrastructure is well recognised in the G20. Its business group, the B20 welcomed G20 commitments made in Washington at the recent G20 meeting to progress a Global Infrastructure Centre or Hub. This is a mechanism to support the Global Infrastructure Initiative agreed by G20 Finance Ministers under Treasurer Joe Hockey’s chairmanship. The Hub, hopefully to be agreed and announced by G20 leaders in Brisbane and to be established in Sydney, will collect and disseminate leading practices across the infrastructure life-cycle with the objective of increasing the pipeline of bankable projects, improving productivity of investments and accelerating the development of infrastructure as an asset class.
A regrettable aspect of infrastructure and Public Private Partnerships has been hesitancy in the public sector to engage with the private sector in some countries because of a sense of asymmetry in the information available to public sector officials. Private sector investors are perceived to have much more detailed data available to them, giving the private sector a sharp advantage in negotiating project financing arrangements. APIP and G20/B20 initiatives should go a long way to addressing the problems of information asymmetry and pave the way for a massive lift in infrastructure investment to meet the economic and social needs of the region.