C20 Argentina: The G20 plan to create an infrastructure ‘asset class’ must be shelved, and replaced with a plan to increase and improve public investment in infrastructure
Eurodad report shows the G20’s plan to develop an ‘infrastructure asset class’ to encourage private investment in developing countries is fundamentally flawed and must be shelved.
- Roadmap to turn infrastructure investments in developing countries into financial products is a dead end that will only hit the taxpayer, says new report.
- Report finds infrastructure has, and will be overwhelmingly publicly financed – the real agenda should be to increase and improve public investment.
The G20’s plan to develop an ‘infrastructure asset class’ to encourage private investment in developing countries is fundamentally flawed and must be shelved.
This is the message in a new report published by the European Network on Debt and Development (Eurodad) ahead of the Civil20 (C20) summit in Argentina next week (6-7 August).
The report spells out three reasons why the G20’s scheme to turn projects like roads, schools and hospitals into tradeable assets that can be bought and sold on international markets like stocks and shares is a mistake.
- The G20 ignores the main issue of how to increase and improve public investment. According to the World Bank, only 15-20 per cent of all infrastructure is funded through private investors. And this is falling.
- Creating an asset class is likely to hurt the public purse and therefore the taxpayer. Creating the high-return opportunities investors demand for risky assets is likely to mean high levels of public subsidy and a transfer of the risks to the public sector. When projects run into trouble it is the public sector which will have to bear the burden of bailouts and guarantees.
- This plan is a leap in the dark. Private finance for infrastructure has fallen in recent years and is a small percentage of total investment. Even worse, less than one per cent of private investment in infrastructure comes through the kinds of financial products the G20 is betting on.
Report author Maria Jose Romero, Policy and Advocacy Manager at Eurodad, said: "If the G20 is serious about increasing infrastructure for development it needs to stop putting private finance first and instead focus on improving and delivering publicly financed infrastructure. One thing is for sure, creating an ‘asset class’ is not the way to get infrastructure built in those developing countries that need it most."
The report also states that the priorities of global leaders should be ending tax dodging, which costs developing countries hundreds of billions of dollars a year; meeting their commitments on aid; and developing an international debt restructuring forum to help poor countries in growing sovereign debt distress.
To read more access the Eurodad report here. María José Romero will also present the report at the C20 summit in Buenos Aires.
Julia Ravenscroft, Communications Manager at Eurodad, [email protected] or +32 2 893 0854.
Natalia Mielech: [email protected].
Notes to editors:
Eurodad (the European Network on Debt and Development) is a network of 47 civil society organisations (CSOs) from 20 European countries, which works for transformative yet specific changes to global and European policies, institutions, rules and structures to ensure a democratically controlled, environmentally sustainable financial and economic system that works to eradicate poverty and ensure human rights for all.