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How infrastructure crawled back up the international development agenda in the last ten years

The fourth United Nations Conference on the Least Developed Countries (UNLDC IV) in Istanbul next week may be the last chance for the international community to shift the trajectory of the Millennium Development Goal (MDGs) indicators in time to reach the targets by 2015. Whilst infrastructure was not included in the 2000 Millennium Declaration or the UNLDC III Declaration in 2001, there is now widespread belief that few MDGs will be reached unless the infrastructure deficit is bridged.

Yet Africa, in particular, still has massive unmet needs in its infrastructure – estimated to cost $93 billion per year, with power ($40.8bn), water supply and sanitation (WSS) ($21.9bn), and transport ($18.2bn) representing the biggest financing gaps. This presents investment opportunities, but the challenge is to convince potential investors that such opportunities exist in low-income countries (LICs).

With signatories to the UNLDC III Declaration committed to effective follow-up, the continuing infrastructure gaps beg the question: What have signatories done since 2001 to fulfil their solemn UNLDC III pledge?

A wealth of commitments …

The first turning point was in 2005, when the donor community began to scale up contributions to infrastructure financing. The Africa Infrastructure Country Diagnostic (AICD) grew out of the pledge by the G-8 Summit of 2005 at Gleneagles to increase official development assistance (ODA) to Africa by $25 billion a year by 2010, particularly to the infrastructure sector. The AICD Study complements the parallel New Partnership for Africa’s Development (NEPAD) 2003 Medium to Long Term Plan of Action/Strategic Framework (MTLSF) Study.

In 2006 we had the NEPAD-OECD Africa Investment Initiative. The Initiative’s annual expert roundtables have focused on how to maximise investment in Africa’s key infrastructure sectors: WSS (2007 in Lusaka), transport (2008 in Kampala) and energy (2009 in Johannesburg). On March 2007, the OECD Council approved the OECD Principles for Private Sector Participation in Infrastructure.

At the Toronto G-20 Summit in June 2010 the African Union decided that ‘Africa’s partnership with the G-20 should be based on the four key priorities of NEPAD’, including infrastructure. At the latest November 2010 G-20 Summit member countries declared their ‘commitment to work in partnership with other developing countries, and LICs in particular’. The adopted consensus lays out the principles of partnership between the G-20 and the LICs in Annex 1, and outlines a Multi-Year Action Plan on Development to complement the MDGs. The Action Plan, which is discussed by Draper et al. (2011) encompasses nine ‘key pillars’, including infrastructure. NEPAD declared at the G-20 Summit that the Seoul Development Consensus for Shared Growth is also Africa’s consensus.

The revised AU/NEPAD African Action Plan (AAP) 2010-2015 was launched at the 16th AU Summit in January 2011. It combines previous flagship infrastructure programmes into the common AU/NEPAD Programme for Infrastructure Development in Africa (PIDA) 2010-2040.

At the most recent 2011 NEPAD-OECD Ministerial Conference in April in Dakar, the AU, G-20, UN and OECD called for a new development paradigm recognising the role that investment policy and private capital flows can play to stimulate growth and alleviate poverty. The Co-Chair's conclusions call on development partners including the G-20 to take critical action to support infrastructure development in Africa, as I have stressed in my recent ODI research on this issue.

The Co-Chair's conclusions from the NEPAD-OECD ministerial conference in Dakar also welcomed steps taken by Zambia and Mozambique to use the OECD Policy Framework for Investment (PFI) to improve their business climate. Likewise at the 3rd session of the Investment, Enterprise and Development Commission of UNCTAD’s Trade and Development Board earlier this month there were discussions on best practices in optimising inflows of FDI in infrastructure and three prizes were awarded to the Investment Promotion Agencies from Dominican Republic, Peru and Zambia.

But still a long way to go …

The objectives of next week’s UNLDC-IV in Istanbul are to assess the implementation of the Programme of Action for the LDCs for Decade 2001-2010 adopted in Brussels in 2001. According to the Ten-year appraisal and review of its implementation, there are still physical and economic infrastructure deficits, with the exception of the ICT sector. Prices remain high and coverage very low. Domestic and foreign investment in this sector has failed to meet increasing demand. ODA continues to be one of the principal sources of traditional financing for the development along with public capital expenditures in most LDCs. However, a new infrastructure financing landscape is emerging with a range of new actors such as bilateral development finance institutions, private equity and investment banks, and sovereign wealth funds particularly from Southern emerging economies. Nevertheless, the expectations of the Brussels Programme of Action for FDI have only been partially fulfilled.

Key issues for discussion in Istanbul:

  • What are the key opportunities for private investment in the LDCs over the next decade?
  • How to promote a capacity-building programme on Public Private Partnerships in infrastructure to assist LDCs?
  • How can ODA best leverage private infrastructure investments, in partnership with the G-20’s HLP for Infrastructure Investment?
  • How can a G-20 Infrastructure Fund be established that LDCs can access to improve infrastructure and that can help to bridge the financing gap?
  • What are the key UNLDC-IV infrastructure financing messages to be sent to the next G-20 Summit in Cannes?

My hope is that participants in Istanbul will give these issues top priority, now that the pendulum of mainstream development discourse on the role of infrastructure has swung back to the centre of the LDCs’ Programme Agenda.