Improving the Financing and Development of Major Infrastructure Projects

Globally, a number of nations are finding it difficult to finance the growing demand for essential infrastructure through funding alone. With massive infrastructure needs around the world, and the reality of constrained public-sector budgets, bold leadership is needed to prioritise public policy, harness private capital, and bring innovation to infrastructure funding and project delivery. While demand for infrastructure projects has been growing rapidly, supply has been confined by an inability to mobilise capital. The World Bank Group (2019) , found that the estimated annual demand for infrastructure projects in emerging nations is about US $2.0 trillion per annum and current financing for infrastructure mobilised will be US $1.0 trillion, 50 percent of the amount that will be needed to meet investment needs ( Bhattacharya and Romani, 2013 ). These projections are aligned to traditional sectors such as energy, transport and water. If social infrastructure projects was to be included, the investment capital needed could be much higher. For instance, currently spending in the health sector exceeds $4 trillion (nine percent of GDP globally). As shown in this chapter, governments are the primary source of finance for infrastructure projects, usually by raising sovereign debt from local and international markets that are serviced through tax financed budget allocations and retained earnings from national owned enterprises. To meet the increase demand of infrastructure projects, it will be essential to maximise the productivity of infrastructure budgets and tap into new private sources of funding ( European Bank, 2018 ). As stated by the European Bank (2018) , the traditional approach to infrastructure funding and finance has faced barriers. High country indebtedness in a number of emerging economies has deterred public debt driven delivery as a scalable alternative to construct urgently 254 needed infrastructure projects. The fundamental shift of liquidity from banks towards institutional investors in the wake of the global financial crisis has led to further challenges to the traditional financing model for emerging-infrastructure markets. Thus, the overarching aim of this chapter is to explore the theory and practice of infrastructure financing and development.