Why is the “quality” of infrastructure investment essential for building back better?

Even before the COVID-19 pandemic, debt accumulation as a percentage of GDP in developing countries was considered risky. Debt, however, isn’t the problem in and of itself—the real issue is the low productivity of the assets accumulated by the debt. This means future generations would inherit only the debt’s costs, not its benefits, which is not conducive to high-quality growth.

The focus on debt issues leads to several questions: Have investments made so far contributed to capital formation that generates high-quality growth? And is this capital formation durable in a crisis?

The World Bank report “The Changing Wealth of Nations 2021” argues that the COVID-19 pandemic and the increasingly severe impacts of climate change have led to a rethinking of the concept of national wealth. It calls for capturing the value of all assets that generate income and support human well-being through wealth accounting as a balance sheet for a country. In other words, we should aim for high-quality growth contributing to accumulating productive assets for enhancing human well-being. Infrastructure is an essential part of the equation.

Today, there is a lot of discussion about the Build Back Better approach—in essence, creating a green, resilient, and inclusive recovery from the economic impacts of COVID-19. In the context of wealth accounting, what kind of wealth and asset accumulation is needed to achieve quality growth? And what should infrastructure investment look like? 

The World Bank has long focused on quality growth. Its report “The Quality of Growth,” published in 2000, elaborates on the three principles for development necessary for quality of growth: (1) focus on all assets: physical, human, and natural capital, (2) attend to the distributive aspects over time, and (3) emphasize the institutional framework for good governance. Infrastructure investment is related to the first principle—it is primarily a form of physical capital. However, according to the principle of development for quality growth, infrastructure investment should contribute to the formation of human and natural capital under good governance and focus on equity in the long run. 

Isn’t achieving high-quality growth the goal of infrastructure investment?   The Principles for Quality Infrastructure Investment, agreed to at the G20 Osaka Summit in 2019 chaired by Japan, support precisely the infrastructure investment necessary to achieve this objective. The G7 leaders reaffirmed these principles again at last year’s Carbis Bay G7 Summit as crucial for building back better from the COVID-19 pandemic.

The principles call for quality infrastructure investments to be inclusive and resilient to positively impact the economy, environment, society, and development.  The quality of infrastructure investment will also be enhanced by promoting investment in infrastructure through good governance , including eradicating corruption through more transparent infrastructure procurement and ensuring financial sustainability both at the project and macro levels. Helping to build human capital through the transfer of technology and know-how to the people of developing countries through infrastructure investment also enhances quality.

Furthermore, designing and managing infrastructure assets resistant to natural disasters and COVID-19 can also be considered high-quality infrastructure investments. Digital infrastructure is an indispensable part of the future. Digital finance, health, education, and many other services will use digital technology. Infrastructure control systems are also becoming digitalized, which makes the impact of cyberattacks on the supply of infrastructure services potentially devastating. Therefore, cybersecurity risk management in infrastructure is also a way to improve the quality of infrastructure investment, leading to high-quality growth that is durable against crises. In response, Japan is working to mainstream disaster risk management and cybersecurity risk management in partnership with the World Bank and other donors.

Thus, quality infrastructure investment is essential for promoting quality growth, building wealth, and improving well-being.  For that reason, Japan and the World Bank created the Quality Infrastructure Investment (QII) Partnership to support infrastructure investment to promote quality growth. Today, its work contributes to the Build Back Better approach as we recover from COVID-19.

This January, we launched an online course to explore how investing in quality infrastructure can lay the foundations for green, resilient, and inclusive development and support recovery from the economic impacts of COVID-19. Demand was strong: More than 8,000 people in 189 countries worldwide took the course. The importance of considering the quality of infrastructure investment is expected to become increasingly popular. When we invest in infrastructure, our responsibility is to form quality assets and create a better tomorrow. 

The World Bank has created a LinkedIn Page devoted to QII to bring together all kinds of people—government officials, multilateral partners, infrastructure specialists, financiers, academics, and more—to share their knowledge and interest on this topic. I hope you will consider joining.


To learn more about the role of QII in development, visit the QII Partnership website.

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