Back in 2000, a research assistant and I received a request from a multilateral development bank that wanted a model for how much money was needed for them to invest in Latin America. I put together a very simple model – it was actually more of a benchmarking exercise – asking what kind of infrastructure in roads, energy, and water/sanitation that countries had at that time, based on income, economic structure, and urbanization. Then I created projections in terms of income and urbanization. I thought, “Well, assuming countries grow this way and follow the patterns of the past, it’s quite easy to deduce an investment pattern and an investment amount.” I called this final figure the “infrastructure gap.” Little did I expect it, but the term caught on and a subset of literature of infrastructure investment was born. We’re still talking about the infrastructure gap today, and it is a focus of the upcoming Global Infrastructure Forum 2016.
But a lot has changed in 16 years, and it’s time to re-cast our conversation about the infrastructure gap. In fact, it’s imperative to change the conversation if we want to achieve our goals. And the Forum is the right place to start.
Changing the conversationEven as that first paper came out, I was aware that the approach to identifying the infrastructure gap actually has two problems.
First, it doesn’t assume that there’s anything optimal about it. It’s not saying this is the way to go, it’s just saying this is the pattern we’ve seen in the past. It assumes people follow the same pattern. So if there were under-investments in the past, there would be projections for under-investments in the future.
Second is that the question of infrastructure needs is relative. Imagine I tell you that I want to buy a car, and I ask you how much money I need. You don’t know if I want a Maserati or 10 year old Honda that I’m parking on the street. The answer to the question of how much money I need for a car depends, and that’s the problem I have with the way the term “infrastructure gap” is used now. It’s obfuscating the need for discussion of what it is that countries want, and what it is that they can afford.
Today’s world is dramatically different than even a decade ago. It includes a growing middle class with different expectations in terms of quality, quantity, and availability. It includes the climate change agenda, rapid urbanization, the millennium development goals (MDGs) and the sustainable development goals (SDGs). Given these changes, we have to revisit the question of what we want. We have to have a conversation about what is an appropriate goal. Then you can price this goal.
The other problem with the way the infrastructure gap discussion has evolved is that it’s become a discussion about billions and trillions of dollars rather than a discussion about what our priorities are. Do we want universal access to basic services, which is very cheap? Do we want all countries to have the kind of infrastructure that will attract foreign investments and enable the flourishing of the private sector? Do we want clean infrastructure, do we want resilient infrastructure? How do we combine all these needs and demands, and what can we afford? That leads you immediately into a conversation about how to prioritize and spend better.
The infrastructure gap discussion, as it has evolved so far, is useful because the numbers command attention. A trillion dollar number speaks loudly. But we need to take back ownership of the infrastructure gap conversation so that we are able to tell a story around these numbers -- a story that makes sense. The story is not “We want a trillion dollars.” The story should be “We need this amount of money if we want to have universal access to services. We need this amount of money if we want this investment to last the life cycle that’s expected.” And that’s because the amount you need is a constant. The challenge is not capital investments, the challenge is to put in place systems to maintain our infrastructure so money is well spent and the service is of good quality.
Infrastructure as an “if/then” proposition
The term “infrastructure gap” is a wonderful entry point into an important discussion. It’s how this issue lands on the front page and sparks action all around the world. But it’s our responsibility to ask what is it that we want from infrastructure. This is actually a much more interesting conversation. For example, in the urban transportation sector, for example, we could talk about how having decent urban mobility will cost X dollars if we want to develop our cities the way that Atlanta or Los Angeles was developed. If we want to develop a city like Barcelona, it would cost half of that.
Let’s phrase the discussion about infrastructure as an “if/then” conversation, proposing ideas alongside their consequences. That’s the kind of multifaceted conversation that today’s times require, and I look forward to the new ideas that participants in the Global Infrastructure Forum 2016 bring to the table.
Join the Global Infrastructure Forum 2016, which will bring together leaders of the multilateral development banks (MDBs), development partners and representatives of the G20, G24 and G77 to enhance multilateral collaborative mechanisms to improve infrastructure delivery globally. Watch the event live at 10 AM (ET) on Saturday 4/16 and follow the conversation on Twitter with #InvestInInfra.