OECD initiative on global value chains, production transformation and development hears from FIDIC president on how to address infrastructure gaps.
With COP26 putting a big focus on sustainability, and with trade and development being so heavily linked to successful transformation and delivery of infrastructure, there are major questions ahead about how gaps can be met and how investors can be engaged.
Speaking at the event, Tony Barry, President of international engineering federation FIDIC, explained that one of the big issues to be faced is the role of planning infrastructure.
“Planning quality infrastructure is itself a project and requires significant definition, expertise and funding to enable it to proceed to a successful planning outcome: fully defined projects or schemes, which are appreciated by both the community they serve and valued by investors that may support them,” he told the OECD.
This is something that private investors have drawn attention to recently, as the world examines how the huge overhaul of global infrastructure can be achieved while insurance funds and pensions make up just 1% of infrastructure investment.
Jerome Haegeli, group chief economist at Swiss Re, recently warned a global meeting of the infrastructure profession that: “There can be more investments done by the multilateral development banks but they also need to encourage investment from the private sector and help to develop a best practice approach.” To do that he suggested the sector needs a tradable market in infrastructure and stressed “We need to unlock private investment and political leaders need to sign off on the risks involved in taking a long-term approach to the challenges facing the world.”
That issue of risk is one that Tony Barry emphasised at the OECD, saying: “It is very clear that right across the industry there are substantial risks to be addressed if the best sources of expertise and funds are to be engaged. In our own industry, there are many risks, being political, regulatory, reputational, health and safety, integrity, governance, lowest price-based competition and taxation, payment and currency risks.”
Some of these risks have contributed to some of the best firms pulling away from infrastructure opportunities in developing markets and the FIDIC president offered some advice on resolving that.
“One of the greatest barriers to managing risk effectively is that governments, investors and banks all stipulate specific requirements, based on their individual experience and perception of risk. In some circumstances these are counter-productive, change a standard form of contract, and change the risk allocation embedded in it. The delivery of projects quickly becomes bespoke and in some cases unique, lessening the benefit of standardisation and the parties’ experience.”