The need to increase investment in infrastructure is rapidly emerging as a key priority in international financial bodies and institutions, such as the Group of 20, and calculations place developing countries infrastructure spending needs in the range of the hundreds of billions.
While the scale of interventions needed seems to inevitably call for greater involvement of so far untapped financial market sources of funding (e.g. mutual funds, pension funds), working with institutional financiers may carry equal or even greater risks to public finance and its equitable distribution as publicly-funded projects do. The potential of the contractual arrangements required to effect financial firms’ funding to transfer risks to the taxpayers and consumers in the host countries calls for caution. In fact, because of the inherent complexity of such negotiations and agreements and loopholes that allow them to skip budget processes, accountability and monitoring face additional challenges.
In a chapter contributed to a recently-published book, RBW Project Director, Aldo Caliari, focuses on the governance safeguards needed to ensure infrastructure finance is done in ways that do not worsen inequality and protects consumers and taxpayers in host countries. Addressing the fiscal and debt risks of relying on institutional investors to finance infrastructure, he argues for strong checks and balances to ensure a fair distribution of risks and protection of the poorest and most vulnerable.
The book, “Infrastructure: for people or for profit? The crucial role of responsible and democratic governance,” was recently published by the Heinrich Boell Foundation and the Latin American Network on Debt, Development and Rights. It includes perspectives by think tank, civil society and grassroots movements representatives from all parts of the world.
In a prologue to the book, former Colombia Finance Minister and UN Under Secretary General Jose Antonio Ocampo said “The analyses and case studies in this publication . . . remind us that it will be essential to have laws and regulations that implement principles of responsible investment in infrastructure (including in the areas of human rights, gender, environment). These laws and regulations should help realize the commitment to democratic, participatory and accountable governance.”
Rethinking Bretton Woods Project
Center of Concern