When you drive over potholes on downtown streets, are forced to make large detours to cross rivers lacking bridges, and finally arrive to find no cell coverage, connections between the global infrastructure investment gap and your pension fund might not be the immediate thing that comes to mind. But it should, because:
- Huge pools of available assets: pension funds, insurance companies, mutual funds and sovereign wealth funds sit on $100 trillion in assets. To compare: U.S. nominal GDP in the third quarter of last year was $18 trillion.
- Huge infrastructure investment gap: between $1 to 1.5 trillion per year worldwide.
By putting to work a small portion of the privately owned $100 trillion for global infrastructure development, the positive impact on the global economy could be bigger than any other source of large-scale private investments.
In a new paper, From Global Savings Glut to Financing Infrastructure: The Advent of Investment Platforms, several economists at the IMF, in academia, and business explored the problem of how to lure badly needed private investment into meaningful infrastructure projects on a global scale.
To enhance the cooperation between public and private partners, there is a new class of facilitators like the European Investment Bank or the Asia Infrastructure Investment Bank. But how can they avoid engaging private investment in inefficient infrastructure projects, bridges to nowhere, or avoid granting too generous concession terms, like high highway tolls?
The paper makes a number of suggestions, including the creation of infrastructure securities and a global infrastructure investment platform.
Filed under: Advanced Economies, Finance, IMF, International Monetary Fund, Investment | Tagged: GDP, IMF, iMFdirect, infrastructure development, insurance, mutual funds, pension funds, private investment, public-private partnerships, sovereign wealth funds |