by James Stewart
17 July 2015
The list of the seventeen Sustainable Development Goals looks impressive on paper and, if they are all achieved, the world will be a very different and better place. However, writing them down is one thing, implementation is a different matter. What are some of the challenges:
- First, it is crystal clear that investment in infrastructure will be critical for the achievement of these ambitious goals. Whether it is dealing with poverty, investing in water and power, investing in health and education or improving cities, infrastructure investment is the primary enabler. Lots of investment in infrastructure running into trillions of dollars is needed to achieve all of this.
- Secondly, Governments on their own simply do not have the necessary resources to fund, i.e. pay for, viable infrastructure projects out of the public purse. So where is the money going to come from? Some benefits can be gained by spreading the cost using PPPs or similar approaches although it has to be recognised that PPPs are not free money. Alternatively, Governments will need to explore other ways of raising funds: higher consumer charges, ring-fenced taxes or value capture schemes.
- Thirdly, given the funding constraints Governments are going to need prioritise more rigorously. However, if the SDGs are going to be achieved there is going to need to be a shift in priorities. Currently there is a heavy emphasis on economic infrastructure as Governments strive for economic growth. The SDGs require more investment in social infrastructure and social inclusion.
- Fourthly, lots of infrastructure projects are stuck in the pre-procurement phase. Despite all the work, capacity building and technical assistance provided over the past decade aimed at increasing the capacity of the public sector, Governments still lack the necessary skills to successfully complete the project preparation phase. In the last two years many initiatives have been launched by Governments and multi-laterals alike to deal with this issue. For example, we are now seeing many more Project Development Facilities being created. The problem is that these initiatives are taking too long to have an impact on the ground.
- Fifthly, Governments need the private sector more than ever before if the ambitious targets are to be achieved over the next fifteen years. The challenge is how to effectively engage with them in an equal partnership over several years. This clearly aligns with the last SDG: Strengthen the means of implementation and revitalize the global partnership for sustainable development.
Finally, all of this infrastructure investment is going to need to be financed. Currently in many of the markets where this investment is most needed, there is a heavy reliance on Government-owned banks and IFIs. If the infrastructure investment needed to deliver the SDGS is to be delivered, accessing private sector capital is going to be essential. This is not going to happen easily or without support. There is significant capacity sitting in the pension funds and other private sector financial institutions but there is a risk gap. In the short term Governments and IFIs are going to have to provide credit enhancement facilities to act as a catalyst for start up of these markets. This should be a short term measure if structured correctly and also will be a more efficient use of their available capital.