You Asked Us: Global infrastructure in 2021

Marie Lam-Frendo was appointed CEO by the Board of the Global Infrastructure Hub (GI Hub) in January 2019. Prior to joining the GI Hub she was the Head of Asia-Pacific for Atkins Acuity, the advisory services business of the SNCL group.

After a bruising 2020, what does recovery actually look like for the sector in 2021? What are the key performance indicators that we should be judging “success” or “failure” against?

Marie Lam-Frendo: This is indeed an important question, and one without a simple answer. Productivity and job creation continue to be important indicators. Another that we believe is critical is transformative investment – particularly in terms of sustainability and resilience. These are key priorities for the private sector and citizens – and increasingly for governments, too.

In terms of gauging success, the GI Hub is currently tracking infrastructure as a stimulus across G20 economies. We have only recently started this, and countries are just beginning to make these announcements, so it isn’t yet possible to monitor capital flows into actual projects. However, we are seeing promising trends in sustainable and digital investment – two sectors that have the potential to achieve long-term transformative outcomes. Our tracking is also showing clear intent from governments to start thinking long-term about how infrastructure investments can achieve transformative outcomes. This tool will be freely available on our website around mid-year 2021.

Our post-COVID-19 efforts should be considered a journey, involving many budgetary and policy considerations, stakeholders and other moving parts. Rather than limiting ourselves to success/failure assessments, we should keep an eye on broad impacts and remember the learnings to be gained from failing fast. Some of the key things to follow are:

• Increasing flows of private capital into infrastructure, by allowing co-creation of innovative solutions between the public and private sectors;
• Transitioning the industry’s capabilities and creating new benchmarks for best practice (this is quite relevant in digital, which aligns with the RICS Industrialised Construction initiative);
• Better measurement of sustainable, resilient and inclusive outcomes, which will also hopefully lead to our being able to better prove these outcomes in the future.

How can developing nations accurately benchmark projects for social value, environmental and financial sustainability, and resilience – particularly where those projects are largely or entirely financed by foreign loans?

ML-F: The Quality Infrastructure Investment (QII) principles are important in this regard – the GI Hub maintains a database of QII resources. The process of embedding the principles can be slow, but they are a priority for the G20, which has demonstrated its ability to achieve such alignment in the past. One example of this would be the Task Force on Climate-related Financial Disclosures (TCFD). As an organisation, the GI Hub is exploring ways to further contribute to practice sharing and regulatory reforms.

Creating and evaluating a global set of criteria for projects is a complex undertaking, and sometimes the solutions themselves can make projects more expensive. There is also a lack of capacity within governments to lead the evaluations. For developing countries, the role of Multilateral Development Banks (MDBs) is crucial for supporting sustainable project development. The G20 Infrastructure Collaboration Platform, which is composed of the major MDBs, has recently released a report on their Common set of Aligned Sustainable Infrastructure Indicators (SII). It’s a commendable effort from the MDBs to find a common path supporting wider adoption of proven sustainability approaches and methods. Their involvement sets out clear expectations on projects that all other investors, domestic or not, will have to follow.

The economic multiplier effect of infrastructure development, while widely accepted within the industry, still seems to be viewed with suspicion by the public at large. Do you think large infrastructure projects have an “image problem”, and if so, how can that be corrected? 

 ML-F: The public usually sees infrastructure through the prism of megaprojects – which are often highly politicised – or when there is a failure. Megaprojects are highly visible and tend to suffer delay and cost evaluation challenges because of their complexity and the ways in which they are planned and structured. So yes, often infrastructure gets attention for issues that are inherent to megaprojects, but less for the benefit to the community. It is still seen too much as a commodity.

But the economic evidence, despite being more complex to grasp by the general public, shows quite a different picture. The GI Hub meta-analysis of GDP multipliers for public investment finds that public infrastructure investment has the highest multiplier of all public spending. This is especially true when investment is made during a contractionary phase.

In addition, infrastructure investment is not only good for the economy; it can also be transformative and contribute to more inclusion, sustainability and resilience. Historically, this fact has been underappreciated and largely unmeasured. The G20 and the GI Hub, through the QII agenda and other related initiatives, are trying to better link those transformative outcomes and help identify best practices. The hope is that, in future, we will have an even fuller set of data that can help shift public perception. One of our roles is to reiterate the message consistently and often, to ensure it gets the coverage it deserves.