Investment Plans for 2015-2030

Echoes of the 1980-2000 Era?

Nancy Alexander, Director, Economic Governance
October 9, 2017

1432 K Street, #500,
Washington, DC 20005-2540 www.boell.org 2015
Washington, DC . Mexico City . San Salvador . Rio de Janeiro . Santiago de Chile . Lagos . Cape Town
Nairobi . Berlin . Brussels . Warsaw . Prague . Sarajevo . Belgrade . Zagreb . Istanbul Kiev . Moscow
. Tbilisi . Kabul . Lahore . New Delhi . Chiang Mai . Phnom Penh . Beijing
NEEDED: INVESTMENT IN SDGS (2015-2030): $60 Trillion
(US$ 3.9 trillion per year, Current investment US$ 1.4 trillion leaving a gap of around US$ 2.5 trillion so annual
investment gap of between US$ 1.9 and US$ 3.1 trillion)

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UN (194 COUNTRIES) AIM FOR CLIMATE
AND SDGs, BUT FINANCIERS DETERMINE
MEANS OF IMPLEMENTATION
WORLD BANK
AND OTHER DFIS

Means of
Implementation
(MOI) of
United UN Goals
Nations
GOALS Global Capital
Markets

The Green Political Foundation Nancy Alexander, Director of the Economic Governance Program
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Washington, DC 20005-2540 www.boell.org
New Paradigm launched in 2015
“FROM BILLIONS TO TRILLIONS:
TRANSFORMING DEVELOPMENT FINANCE”
Prepared jointly by WBG, AfDB, AsDB, EBRD, EIB, IADB, IMF

“to meet the investment needs of the SDGs, the global
community needs to move the discussion from “billions” in
ODA to “Trillions” in investments of all kinds…”

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The Green Political Foundation Nancy Alexander, Director of the Economic Governance Program
LEAK: Eminent Persons Group (EPG) on Global
Financial Governance: Update for the G20:
October 2017
The EPG is delineating the challenges and opportunities of a
new era, which define the optimal roles of the International Financial
Institutions (IFIs). In its “initial update,” the EPG states: “The big
opportunity lies in crowding in private and institutional capital flows,
which will outstrip the availability of official development finance under
any achievable scenario. This is amply recognised by the multilateral
development banks, but also requires supporting actions by governments.
The collective challenge is to deploy resources to catalyse vastly more
market funding….

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“Billions to Trillions” Paradigm: not exactly for SDGs,
but $90 Trillion in MEGAPROJECTS IN 4 SECTORS:
Energy, Transport, Water, ICT)
Megaprojects and global supply chains are to
facilitate trade in ways that compress time and
space; accelerate production and consumption;
and counteract the huge drop in trade flows
(1.9% in 2016 (import and export volumes)
versus an average of 7.2%/year during pre-
crisis period 2003–2007.
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But, you ask: Isn’t Infrastructure
Needed for SDGs?
SDG 9 calls for resilient infrastructure, but
others require infrastructure: ending poverty
and hunger, promoting health & education &
social protection; ensuring WAT/SAN and
modern energy for all; improving cities and
human settlements; combating climate
change…..
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Yes, but the priority infrastructure
promotes geopolitical competition
Since WWII, US share of global GDP almost halved;
China’s quadrupled
--Rise of China’s Asian Infrastructure Investment Bank;
BRICS New Development Bank
--Expansion of Infrastructure Lending by all banks

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Global Drive for New
Infrastructure Spending Boom….
• Globally, an additional US$60-70 trillion until
2030 (US$ 4 trillion/year) needed.
•In developing countries, double spending by
2020 from US$1 trillion to US$2 trillion/year (or
from 3% GDP to 6%/8% of GDP).
•Weak commitment to changing fuel mix/other
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The Green Political Foundation Nancy Alexander, Director of the Economic Governance Program
Energy “Pipeline of
Bankable Projects” (PIDA)

The Green Political Foundation Nancy Alexander, Director of the Economic Governance Program 16
The Green Political Foundation Nancy Alexander, Director of the Economic Governance Program
Where are the Trillions? The Pot
of Gold?
Pension, insurance funds (staggering gaps;
could go insolvent without higher yields).
So, bundle PPPs in water, electricity, transport
in portfolios for trading. In blended finance,
public sector takes (higher) risk in preparation
and construction; LTII takes (much lower) risk in
implementation.
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The Taxpayer and Users Pay, Demand Declines with

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My hypothesis
We are entering another era such as 1980-2000
except with geopolitical competition, highest
debt levels ever, skyrocketing inequality and
global warming.

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INEQUALITY: DO PPPs PRIVATIZE GAIN
AND SOCIALIZE LOSSES EVEN FURTHER?

The Green Political Foundation Nancy Alexander, Director of the Economic Governance Program
The Green Political Foundation Nancy Alexander, Director of the Economic Governance Program
Debt: Vitor Gaspar, Director, Fiscal Affairs
Department

The Green Political Foundation Nancy Alexander, Director of the Economic Governance Program
Risks of unsustainable investment in
mega-infrastructure
• Carbon lock-in (political and economic)
• PPP CONTRACTS & INVESTMENT LAW: Loss of sovereignty and right to
regulate; poor risk allocation in PPPs
• Human rights abuses (in particular land rights)
• Land grabbing and displacement of people
• Resource extraction (logging, mining) and environmental damage
• Deforestation, Biodiversity loss
• Corruption
• Hidden debt buildup via long term liabilities

The Green Political Foundation Nancy Alexander, Director of the Economic Governance Program 26
2-THE MAGIC BULLET: $84 trillion
WORLD BANK’S Kim: “The infrastructure gap is simply enormous – an estimated $1
trillion to $1.5 trillion dollars more is needed each year. To fill this gap, we need to
tap into the trillions of dollars held by institutional investors – most of which is
sitting on the sidelines – and direct those assets into projects that will have great
benefit for a range of developing countries.”

UN’S Ban Ki-moon: “Urgent action is needed to mobilize, redirect, and unlock the
transformative power of trillions of dollars of private resources to deliver on
sustainable development objectives.” (para 92) “The Road to Dignity by 2030”
ICESDF to General Assembly states: “Engagement in isolated PPPs, managed in silos
should be avoided. The investing public entity should “carry out a number of [PPP]
projects simultaneously and thereby take a portfolio approach for pooling funds for
multiple projects…”

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Mega-PPPs undermining SDGs?

RISK OF PRIVATIZING GAIN AND
SOCIALING LOSSES ON A BIG SCALE.

IMF: PPPs can
-Forecast demand poorly (Korea MRGs)
- Move spending off budget and bypass
spending controls
- Move debt off balance sheet and
create contingent and future liabilities
-Reduce budget flexibility in the long term

--55 percent of all PPPs get renegotiated, on
average every 2 years (tariffs up, concession
fees down, obligations postponed)
*SOURCE: IMF FAD, Managing Risks From
PPPs by Maximilien Queyranne, Yaoundé, March
2014
The Green Political Foundation Nancy Alexander, Director of the Economic Governance Program
To Trillions: The “SILVER BULLET”
Kim: “The infrastructure gap is simply enormous – an estimated $1 trillion to $1.5
trillion dollars more is needed each year. To fill this gap, we need to tap into the
trillions of dollars held by institutional investors – most of which is sitting on the
sidelines – and direct those assets into projects that will have great benefit for a
range of developing countries.”

Ban Ki-moon: “Urgent action is needed to mobilize, redirect, and unlock the
transformative power of trillions of dollars of private resources to deliver on
sustainable development objectives.” (para 92) “The Road to Dignity by 2030”

ICESDF to General Assembly states: “Engagement in isolated PPPs, managed in silos
should be avoided. The investing public entity should “carry out a number of [PPP]
projects simultaneously and thereby take a portfolio approach for pooling funds for
multiple projects…”
1432 K Street, #500,
Washington, DC 20005-2540 www.boell.org
•The first three elements of the model are not new, but the scale and mechanisms for promoting them are new. The fourth element -- potential mobil

Game-Changer Biases & SDGs
1. PPPs preferred over conventional financing of public works; massive
scale-up of PPPs versus a trial and error approach
2. Mega-projects (“transformative” projects) preferred over appropriate
scale
3. Bias against upstream (project selection) or downstream
(safeguard/performance standard concern with
climate/environmental, social, human rights, gender concerns. (See
Declaration of African Governors Caucus)
4. Bias against transparency and participation (PPPs = national security
and business confidentiality).

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WB PPP Evaluation, FY02-12
1. Additionality. “PPPs generally do not provide
additional resources to the public sector. “
2. Results: Of 128 PPPs in sample, little data to
determine results (poverty, access).
3. Failures in water (41%) and energy distribution
(67%)
4. “contingent liabilities are rarely quantified at the
project level.” (Korean disaster with MRGs)
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EIU Infrascope: On PPP Readiness…
18
16
16
14
12
10 9 Nascent
8 Emerging
6 6 Developed
6 5
4 4 Mature
4 3 3
2 1 1
0
0
Latin America and the Asia-Pacific (14) Europe and Cenral
Carribean (19) Asia (25)

The Green Political Foundation Nancy Alexander, Director of the Economic Governance Program
Most countries aren’t ready for PPPs…
18
16
16
14 Even if countries
12 seem to be ready
10 on paper,
9 there is Nascent
8 no guarantee that Emerging
6 6 Developed
6 the projects
4
are 4
5
Mature
4 finally a success.
3 3
2 1 1
0
0
Latin America and the Asia-Pacific (14) Europe and Cenral
Carribean (19) Asia (25)

The Green Political Foundation Nancy Alexander, Director of the Economic Governance Program