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Emerging markets and developing economies

Moving the juggernaut of institutional investment in EMDEs infrastructure

Jinsuk Park's picture


Photo: cegoh | Pixabay 

In my line of work, we have a Holy Grail that many brilliant people have spoken, written, and toiled to achieve: attracting international institutional investors to infrastructure projects in emerging countries.

Yet, according to the recent World Bank Group report, Contribution of Institutional Investors to Private Investment in Infrastructure, 2011–H1 2017, the current level of institutional investor participation in infrastructure investment in emerging markets and developing economies (EMDEs) is only 0.7 percent of total private participation.

This Bank Group report estimates that emerging countries need to invest $836 billion per year, or 6.1 percent of current service level of existing assets. Meanwhile, the International Monetary Fund (IMF) estimates that more than $100 trillion is held by institutional investors—with around 60 percent of assets held by pension and insurance funds from advanced economies—making the amount mobilized for EMDE infrastructure look even more paltry.

But the siren song still rings clear—these international, long-term, liability-embedded funds could be a game changer for filling the financing gap in EMDEs infrastructure and the World Bank Group’s Maximizing Finance for Development (MFD) agenda. 

Investment in emerging and developing economies: Accelerating but still subpar

Dana Vorisek's picture

After a prolonged slowdown, investment growth in emerging markets and developing economies (EMDEs) picked up to 4.5 percent in 2017, and is projected to accelerate to 5.2 percent in 2018 and 2019 (investment refers to real gross fixed capital formation, public and private combined). Yet projected investment growth is below its long-term (1990–2017) average, inhibited by political uncertainty, trade risks, and expectations of rising interest rates. This will likely limit potential output growth and delay per-capita income convergence between EMDEs and advanced economies.