G20 china_web

Investing in infrastructure
IN CONVERSATION
We must
work together
to increase
affordable
financing
John Kirton speaks to President of the Islamic Development Bank
Ahmad Mohamed Ali Al Madani about sustainable development
Q Why is investing in infrastructure a key
driver of sustainable development in the
Islamic world?
A The Islamic world – among the most
vibrant economic blocs consisting of
mostly developing countries – represents
a quarter of the global population with
different social, economic and financial
structures. Like all developing countries,
it faces numerous challenges such as high
rates of poverty, deep-seated inequality,
insecurity, disease, slow economic growth,
undiversified economies and poor standards
of living.
Infrastructure development is critical for
addressing these challenges as well as for a
properly functioning modern economy.
Today, inclusive growth is on the
agenda of every country. One pillar of
inclusive growth is access to basic services:
providing the infrastructure imperatives
of water, electricity, transportation and
telecommunication. These services all
significantly affect the quality of life of
individual citizens and communities broadly.
Q How is the Islamic Development
Bank Group working to advance such
infrastructure investment?
A Over the past seven years, during which
the world economy was hit by a global
financial crisis, the Islamic Development
Bank (IDB) Group has invested more
than $21 billion in infrastructure in its 57
members, spanning Asia, sub-Saharan
Africa, the Middle East, North Africa,
Europe and Latin America. Its potential to
affect economic and social development
and regional integration positively through
infrastructure financing is one of its greatest
strengths. The Sustainable Development
Goals (SDGs) cannot be realised without
properly addressing the huge infrastructure
deficit. In 2014–15, our investments in
energy, transport, water, sanitation and
urban services exceeded $8.3 billion,
representing about 80 per cent of our total
project financing.
Q What are its unique approaches?
A First, some Islamic financing
instruments are debt based, such as leasing,
instalment sale and Istisna’a construction
financing contracts. We plan to develop the
Sukuk market of domestic and international
capital markets to mobilise more funds
from existing liquidity, as well as create an
infrastructure asset class to attract longterm
investors such as pension funds and
sovereign wealth funds.
Second, we need to address the massive
reconstruction needs of post-conflict
countries such as Yemen, Iraq and Syria
and conflict-affected countries such
as Jordan and Lebanon. This requires
closer collaboration among multilateral
development banks (MDBs) and supporting
countries. It also requires new financing
tools and initiatives such as the MENA
Financing Initiative, which we launched
this year with the World Bank and the
United Nations.
Third, addressing the infrastructure
needs of low-income countries is critical to
achieve the SDGs. Low-income countries
cannot rely on capital markets and MDBs.
We must work together to increase the
affordable beneficiary financing available
for them.
Q What large impacts have the IDB’s
infrastructure financing made on the
economic development of its members?
A Infrastructure development continues
to drive economic growth in IDB members.
Four of every five requests for IDB financing
relate to infrastructure – energy, water,
transport and telecommunication.
IDB has scaled up its infrastructure
financing through public-private
partnerships (PPPs), the Arab Financing
Facility for Infrastructure, the New
Mudaraba Infrastructure Investment
Facility: Islamic Infrastructure Fund I and II
and the IDB Infrastructure Fund. It has
facilitated affordable access to energy,
fostered urban development and improved
transportation networks.
Infrastructure continues to receive the
largest allocation of the IDB’s Ordinary
Capital Resources. Approvals covered
128 G20 China: The Hangzhou Summit • September 2016 G7G20.com