Power shortages in India, transportation costs in Africa, the poor grades given to US infrastructure, pollution in China, and the devastation to old and sub-par infrastructure in places like Nepal when disaster strikes are clear reminders that the world needs more and better infrastructure. Infrastructure is the talk of governments, of bodies such as the G20 and international organizations including the World Bank, the OECD and the IMF. The need is real and there is enough cash in global markets to make it happen. Yet, private investment in infrastructure has fallen despite calls to ramp it up as a way to spur inclusive growth, productivity and job creation. So, why isn’t it happening and is help on the way?
Experts estimate the shortfall in global infrastructure debt and equity investment to be at least US$ 1 trillion per year. Governments (which typically fund infrastructure) do not have the financial headroom, and infrastructure projects are complex to manage and prone to corruption and failure. That is especially true where competition and capacity are weak, and laws and regulations not geared to ensuring that such investments succeed over their life-cycle — a.k.a. in most of the world. Sovereign risk is a key predictor of infrastructure investment. Global infrastructure needs cannot be met without private capital and know-how. Insurance and pension funds have invested less than 1% of their $80 trillion in assets in infrastructure, mostly in advanced economies. Private investors — including long-term investors such as pension funds, insurance companies and sovereign wealth funds — say they are hard-pressed to find bankable projects in which to participate. 
Despite unmet and fast-growing demand for infrastructure services, the high transaction costs, poor capacity, political and governance risks, and policy and regulatory barriers found in most emerging markets make investment returns too low to attract private investment. The pipeline of well-prepared projects is small; there is a lack of appropriate financial instruments of sufficient liquidity (e.g. project bonds) to mobilize global investors; daunting inconsistencies persist in contracts, concessions, bidding documents, procedures and purchase agreements (e.g. fuel and power) and critical underlying cost recovery and cash flow challenges plague sectors that need private investment. So billions of people go without reliable access to basic services such as electricity, clean water and transportation; and investment fails to materialize while global growth remains slow and uneven.
A number of international initiatives have been launched to get global capital and private investors off the sidelines and into infrastructure investment. In October 2011, the MDB Working Group on Infrastructure submitted an Infrastructure Action Plan to the G20. It focused on specific initiatives to unlock private funding with technical assistance and targeted financial support (including for regional projects) and to make multilateral banks procedures more amenable to public-private partnerships. Key among its recommendations were the need to improve the transparency and success of infrastructure procurements and projects, including by ramping up the number of countries supported via the 2008 Construction Sector Transparency initiative (CoST) and launching the global Infrastructure Benchmarking Initiative (IBI) to assess the quality and performance of infrastructure spending.
Building on this work, in the Fall of 2014, the G20 and the World Bank launched the Global Infrastructure Facility (GIF) with the support of major asset management and private equity, donor governments and other prominent multilateral institutions for a three-year pilot. It aims for formal collaboration via an Advisory Council made up of international institutions, governments and private investors to prepare and structure complex projects involving public-private-partnerships (PPPs) transparently and efficiently. Up to $200 million in downstream co-financing resources for the GIF is envisioned once the upstream work has taken hold. The GIF is also expected to identify and help to improve legal, regulatory and institutional conditions, to provide new risk mitigation and credit enhancement tools and to help mobilize and finalize financing packages. It is to provide a comprehensive approach with operational activities in both Washington DC and Singapore to develop a diverse portfolio of projects with complexities that might otherwise deter investment, but with a high potential to leverage diverse investors and lasting development impacts.
The G20 and their business advisors, the B20, also agreed in November 2014 to establish a Global Infrastructure Hub in Sydney, Australia to help advance the G20’s infrastructure goals, including to drive increased consistency in project documents and processes, to promote more transparent procurement practices, to highlight global best practices and important challenges, to establish a data base to help match investors (including pension funds and insurance) with projects and to identify and encourage innovative financing models. It also envisions work to provide more efficient ratings of infrastructure projects in particular country and regional contexts (e.g. enforcement risks, policy and regulatory risks, transaction costs, counterparty risks).
The OECD and World Bank are also working on a joint checklist for key steps and best practices on Public-Private Partnerships and Project Preparation. A major G20/OECD project analyzing government and market-based incentives for long term investment financing (such as the new tax credits for infrastructure being discussed in the U.S. Senate) is ongoing. It aims to examine a wide range of options and instruments to facilitate institutional investors participation in infrastructure projects, and to focus on new forms of investment – e.g. partnership and co-investment models between banks and institutional investors – as well as on risk mitigation mechanisms. The aim is to create an agreed framework of instruments and incentives to facilitate the development of infrastructure as an asset class, so as to leverage private capital. The IMF and OECD will also continue work to ensure efficient sovereign debt sustainability and crisis management, which also is key to mobilizing infrastructure investment.
Recognizing infrastructure as a critical need and an opportunity to build its global presence and prestige, China launched a new Asian Infrastructure Investment Bank (AIIB) in Beijing in October 2014. Despite questions raised by the United States, Japan and others about the governance and efficiency of the AIIB, some 58 countries (including 18 European countries, most of the G20 and the majority of the Asian economies) have already signed up as founding members. The World Bank and Asian Development Bank plan to work cooperatively with the AIIB, which is expected to be fully established this year with up to $100 billion in capital. Although the United States has yet to sign on to the AIIB, President Obama said last week that he is “all for” the AIIB, if it maintains high standards and adopts best practices. Japan, which also has yet to join, this week announced at the annual meetings of the Asian Development Bank an initiative on “quality infrastructure” investment, while the ADB also rolled out plans to streamline project approvals and increase flexibility to draw from various capital sources to finance regional infrastructure.
This year will be critical to whether international efforts to assess creatively and de-risk, facilitate and co-finance private investment in much-needed infrastructure can begin to produce efficient investment and help to spur growth and job creation. Like the so-called “natural resource curse”, there is an infrastructure “curse” that also requires transparency, capacity and independent monitoring finally to unlock private investment. This may be the year it finally happens.
 Adrian Blundell-Wignall and Caroline Roulet. Infrastructure Versus Other Investments in the Global Economy and Stagnation Hypotheses: What Do Company Data Tell Us? OECD Journal Financial Market Trends — Volume 2014/2; OECD 2015.
 Comprised of the African Development Bank (AfDB), the Asian Development Bank (ADB), the European Investment Bank (EIB), the Inter-American development Bank (IADB), the Islamic Development Bank (IsDB) and the World Bank Group (WBG).