G20 china_web

Investing in infrastructure
KEY TAKEAWAYS
Asian markets are fragmented because
of bottlenecks in infastructure
The Asian Infrastructure Investment
Bank has been created to meet needs
New approaches
to infrastructure
investment
A new type of multilateral development bank has been created
to help investment and overcome the challenges of the global
economy, writes Jin Liqun
Infrastructure forms the foundation of
an economy. Improved infrastructure
facilitates growth and prosperity
and is critically important for the
free movement of goods, services
and labour. It is essential for promoting
development and a good life for the people
of all nations.
In Asia, markets are fragmented, partly
because of inadequate connectivity that
reflects bottlenecks in infrastructure. The
persistence of this market fragmentation
has adversely affected the leveraging of
the vast savings in this region. It has also
compromised regional integration and
economic development.
Meeting demand
With ample capital and a significant need
for investment, we must ask ourselves what
can be done to get funds where they are
desperately needed. We must find a way to
translate need into demand, developing a
supply of bankable projects.
Multilateral development banks (MDBs)
can help mobilise financial resources to
meet the pent-up demand for infrastructure
investment by filling in the funding gaps.
MDBs are also able to provide crucial
advice, help with project preparation,
leverage their own balance sheets and help
governments create a credible environment.
All this is critically important to successful
and sustainable investment.
Against the backdrop of the global
economy, the investment environment has
become more challenging. Sluggish growth,
rising debt and policy uncertainty all pose
formidable risks for investors. There have
been a record number of sovereign credit
rating downgrades by the big three credit
rating agencies (S&P, Moody’s and Fitch)
this year. An unprecedented $13 trillion
in government bonds now carry negative
yields as investors flee for safe assets.
To overcome the plethora of challenges,
we must all work together. MDBs, hand
in hand with borrowers, need to ensure a
stable policy environment that can assuage
concerns from the private sector. We must
reduce project and country risk to boost the
attractiveness of investment.
Existing MDBs have undoubtedly made
meaningful contributions to addressing
major infrastructure needs. However, their
capacity is insufficient for the task. The
Asian Infrastructure Investment Bank (AIIB)
has been created to add capacity and to
meet the needs mentioned above.
Everyone should be encouraged to push
for the creation of something good that will
benefit everyone, as they did for the World
75%
Approximate amount of shares in the
Asian Infrastructure Investment Bank
held by its regional members
132 G20 China: The Hangzhou Summit • September 2016 G7G20.com