G20 eyes infrastructure boost for developing economies

11/11/2010 | Sid Verma

A range of new plans is being considered by G20 leaders to turbo-charge infrastructure finance in low income economies

G20 nations are mulling a range of new plans to turbo-charge infrastructure finance in low income economies.

South Korea has proposed setting up a high level panel to look into ways to harness “large scale” private capital flows “to invest in infrastructure in lower income countries,” according to a draft development action plan.

The document, drawn up by the G20’s Working Group on Development, highlights a range of infrastructure investment proposals that will be considered by leaders in Seoul.

South Korea is also looking to launch an Infrastructure Investment Facility (IIF), which will work together with bodies such as Nepad, the African Union’s economic development program. The IIF will be capitalized by G20 members, debt finance from the international financial institutions and funding from other public and private investors.

Developing economies in the G20 are also calling on the IMF to differentiate clearly in their fiscal surveillance between state infrastructure spending and other outlays such as public sector salaries. Argentina is lobbying for 10% of future special drawing rights (SDRs), the IMF’s accounting unit, to be transferred to the International Development Association (IDA), the World Bank’s concessional lending arm.

The UK is pushing for a Climate Public Private Partnership fund, which will be capitalized by private investors and will invest in regional climate funds, which will in turn invest in low carbon infrastructure, according to the draft proposals.

The UK is also calling for a Green Africa Power initiative to increase energy capacity through long-term power purchase agreements to renewable energy developers, which would provide security of payment. The GAP would also set up corresponding off-take agreements with national utility companies.

The proposals have been thrashed out in consultation with multilateral organizations and aid experts through the newly created G20 Working Group on Development, in a bid to create consensus on a global anti-poverty agenda.

The strategy’s comprehensive approach to development has strong backing in many quarters of the aid community. “South Korea has established a long-term development vision with strong consultative processes between rich and poor countries,” said Dirk Willem te Velde, economist at the Overseas Development Institute (ODI).

Its pillars are infrastructure, private investment and job creation, human resources development, trade, financial inclusion, growth resilience and food security, governance (tax) and knowledge sharing.

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