Closing the infrastructure funding gap

Prof Dr Uwe Krueger | 22 Jan 2015 | Comments

Infrastructure funding is a complex problem for both developing and developed nations but engineers can provide a way forward. Atkins’ CEO Uwe Krueger provides a perspective from the World Economic Forum in Davos.

Infrastructure funding and development has been a central theme at the World Economic Forum’s Davos annual meeting since 2011, under the umbrella of the Strategic Infrastructure Initiative, and for a very good reason. WEF has described global infrastructure as “the engine of the world’s productivity”.

National governments across the globe are facing ever mounting challenges in the creation and modernisation of infrastructure within their countries and yet the estimated shortfall in global infrastructure debt and equity investment is at least US$ 1 trillion per year.

As population mounts at unprecedented levels around key urban centres so the pressure to provide the infrastructure needed to boost economic growth and social wellbeing increases.

These pressures are, of course, keenly felt in poorer countries. Here the influx of private capital is critical. Back in 2012, Meles Zenawi, Prime Minister of Ethiopia noted that “without the private sector, there is no development.”

While the struggles of parts of Africa to attract investment into infrastructure are well documented we should not forget that this issue also exists in more wealthy nations. Recently US current affairs TV show 60 Minutes took a sobering look at the nation’s infrastructure, noting the US had fallen to 16th in WEF’s league table and would require a staggering $3.6 trillion to fix the problem.

This week, I have been sitting with other governmental, NGO and business leaders to debate how to close the infrastructure funding gap. The solutions to this issue are complex and cannot be easily solved but the WEF’s Infrastructure Investment Policy Blueprint gives us a helpful way forward.

My input to this session focussed on some key points. Firstly, the fact that the investor community perception of the infrastructure sector is key. Therefore a more clearly articulated argument for the benefits of infrastructure is needed.

It is recognised that infrastructure represents an investment asset class. The attraction of matching stable dividend streams from long-term projects to the long-term horizons of pension funds is very apparent to institutional investors and, potentially, a huge source of capital for funding infrastructure

To attract this funding a proactive approach is needed to inform and advise investors.

We need to consider how companies like Atkins can influence the “supply” side to overcome the barriers to investment. How can engineers help governmental organisations to prioritise their needs and strategise on the way their projects are delivered?

Domain knowledge is key. This knowledge, held by engineers and gleaned through due diligence, should be the subject of closer consultation and engagement with fund managers with the aim of better analysing and managing financial risk. Ultimately a more proactive interaction between engineers and the financial community will help stimulate investment. Atkins’ work with the World Bank on advising a National Transport Strategy for Malaysia is a good example of this.

We can add the greatest value by providing a ‘client friend’ role to recipient national governments, building capacity and ensuring an integrated and holistic approach to strategy development is followed through in project implementation.

This article was first published in Infrastructure Intelligence.