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The COVID-19 pandemic has challenged macroeconomic fundamentals of both developed and developing countries.

The early responses by many African governments have been on containment of the spread of the virus with restriction of movements of people through border closures, economic and social responses including social protection palliatives for vulnerable citizens, and preservation of businesses using limited monetary and fiscal instruments to mitigate the devastating effects of the pandemic. These early measures might have contributed to limit the spread of the disease. However, this should not make African governments complacent from addressing long-standing healthcare deficiencies and basic services infrastructure deficit. As countries relax the restrictions on movement of people, goods and services, the importance of investing in adequate healthcare infrastructure cannot be overlooked. Beyond spending on testing, protective equipment and ventilators, African countries should focus on improving access to adequate healthcare, clean water and sanitation infrastructure to limit their vulnerabilities to the pandemic and other future epidemics.

This brief argues that the emergence of the COVID-19 pandemic provides renewed urgency for African countries to invest in the inadequate physical infrastructure for basic services such as healthcare, clean water, and sanitation.

Investing in basic services infrastructure now can deliver a huge social and economic value, while making the continent more resilient to pandemics and other health shocks. The World Health Organization (WHO) estimates every US dollar invested in water and sanitation delivers nearly three-fold and four-fold returns, respectively, in Africa.i As the continent braces for a pandemic-induced sharp downturn in economic activities, the region’s health vulnerabilities have become a concern to many.

Therefore, the brief discusses the importance of investing in basic services infrastructure in the region despite dwindling economies caused by the COVID-19 pandemic.

It further discusses challenges of financing infrastructure for basic services, infrastructure quality and maintenance, and offer potential financing solutions. Considering the unsustainability of prolonged restrictions on the movement of people, large-scale social protection and cash handouts, and other immediate fiscal stimuli, long-term investments in infrastructure for basic services has downstream multiplier effects that can provide sustainable economic stimulus to rejuvenating African economies.

The report outlines key factors for fostering the public-private collaboration necessary to close the climate finance gap in emerging markets, as well as policies governments in emerging markets can advance to attract investment to projects in critical areas.

 

COVID-19’s global impact on infrastructure was widespread and swift. The pandemic has left many countries struggling to repay their debts, and a handful of countries defaulted in 2020. Meanwhile, some governments have shifted to prioritize healthcare and social welfare programs. As a result, infrastructure spending took a back seat in 2020.

Since the start of 2020, existing infrastructure projects were delayed or cancelled due to supply-chain disruptions, travel and shipping restrictions, and other obstacles. Decreased demand or required renegotiations also prevented or delayed many projects already in pipelines from achieving financial closure. Public debt globally has risen to record levels, and sovereign credit ratings have been downgraded across the developing world. The growing uncertainty amid the pandemic has also increased the risk for private sector participants in key infrastructure sectors, especially transport.

Nevertheless, as countries bounced back from initial lockdowns, and vaccination rollouts buoyed hopes of a return to normalcy, infrastructure investments rose in the second half of the year. Investment commitments to infrastructure are a cornerstone of efforts to combat climate change, and these efforts will take centre stage in the global economic recovery from the pandemic.

Points clés :

- Investment commitments of US$45.7 Billion in 252 projects in 2020 (-52% / 2019)

- Latin America and the Caribbean (LAC) dominated investments with commitments of US$14 billion, a 54% decrease from 2019 of total investment.

- East Asia and Pacific (EAP), which usually out-invests all other regions, came in third, with commitments of US$9.5 billion, a 75% decrease from 2019.

- South Asia (SAR) was the region with the second highest investment level in 2020, with commitments of US$10.2 billion, an 18% decrease from 2019.

- Europe and Central Asia (ECA) saw investment commitments of US$4.6 billion, a 42% drop from 2019. The region’s investment levels increased 1.5 times from the first half of the year.

- Investment in the Middle East and North Africa (MENA) hit US$1.2 billion dollars, an increase from 2019 but a decrease from previous years.

- Sub-Saharan African (SSA) received US$6.3 billion, a 7% increase in investment levels from 2019. It was the only region other than MENA to report an increase.

 

This thought piece for the G20 Infrastructure Working Group (IWG) is an examination by the Global Infrastructure Hub (GI Hub) of: the need to transition to a circular economy, the role of infrastructure in such a transition and the enablers for this transition. The purpose of this thought piece is to consolidate available literature and industry sentiment on the circular economy, specifically around the drivers, enablers and opportunities surrounding infrastructure’s role in accelerating the transition to a circular economy. This thought piece serves as a baseline for the discussions that will take place at the G20 IWG Workshop on the 30 April 2021.

The extraction, manufacturing and production of materials is responsible for around 45% of global greenhouse gas emissions. A study shows that moving to renewables can only address 55% of these emissions, indicating that the 1.5°C target of the Paris Agreement can only be achieved by combining current efforts on renewable energy and energy efficiency with circular economy approaches.1 The circular economy is therefore a powerful solution for meeting long-term policy objectives related to climate change. The circular economy can also reduce supply chain risks and short-term supply shortages by requiring less material input and establishing local secondary material supply.

The circular economy is centred around the 6R principles for circularity. The aim is to refuse (or significantly reduce) the amount of new materials entering the system. This is achieved by ‘closing the loop’ and maximising the amount of materials recovered and subsequently reused, repaired, refurbished and recycled. Residual materials are those that can no longer be reused or recycled, and the available pathways are to extract the embedded energy (e.g. through waste-to-energy) or to safely dispose of these.

Within this 6R framework, infrastructure has a dual role to play, first by increasing the ‘circularity of infrastructure’ in line with the 6R principles, and second by implementing ‘infrastructure for circularity’ (i.e. providing infrastructure that supports circular economy activity and the delivery of these 6R principles). Six opportunities for infrastructure were mapped to the 6R framework.

 

This report explores the actual and potential use of strategic planning by governments in ITF member countries as a means of improving the quality of major infrastructure policy making and investment decisions. This includes the scope and content of strategic plans, and the extent to which decision making on individual infrastructure projects takes account of the priorities and directions established in the plans.

Secondly, the report investigates the emerging role of independent infrastructure advisory bodies as a tool to help governments adopt a long-term, cross-sectoral approach to infrastructure planning and decision making. Thirdly, it explores current practices and trends in relation to project identification, appraisal and selection, and the role of ex post evaluation.

Strategic planning is a relatively commonly used policy tool and is becoming more widespread. However, the nature and scope of strategic plans vary widely: some are sectorally based, some regionally focused and a few are cross-sectoral, or even have a whole-of-government perspective. Some are limited to the identification of broad strategic orientations and/or objectives, while others identify individual projects – typically those large in scale and/or transformational in impact. Strategic plans enable more co-ordinated decision making, which takes account of synergies between projects, considers the demand for, as well as the supply of, infrastructure services, weighs the competing claims of different sectors and enables investment decisions to be oriented towards national priorities.

There is an apparent correlation between the adoption of strategic plans and the establishment of independent infrastructure advisory bodies. The relatively recent establishment of these bodies in most countries means firm conclusions as to their effectiveness in improving decision making cannot yet be drawn. The widely differing range of responsibilities given to these bodies also complicates such judgements. However, the independent expert advice on infrastructure needs and priorities these bodies provide appears to improve the information base for decision making, as well as enhancing transparency and accountability.

Project appraisal is subject to explicit process and methodological requirements in most countries, and cost-benefit analysis (CBA) is central in virtually all cases. Many countries report proposed projects must meet certain benchmarks (e.g. have a positive net present value [NPV]) to be eligible for approval. Others report CBA is only one among several analyses conducted, and a positive NPV may therefore be neither necessary nor sufficient for a project to be selected. Differences in the scope of CBA may explain some of these apparent differences, with some countries adopting broader CBA by requiring the use of indirect valuation techniques that enable the quantification of many non-market benefits and costs.

Appraisals of large-scale infrastructure projects increasingly include wider economic benefits (WEBs). This adds an element of macroeconomic analysis to the microeconomic approach of CBA. WEB assessment is both data- and resource-intensive. As WEBs are likely to add only 10-30% to traditional benefit estimates for all but the most transformative projects, WEB assessment is generally reserved for projects that are expected to have a large impact on labour markets. Significant uncertainty surrounds most WEB estimates, but WEB analysis can help provide a clearer picture of the beneficiaries of the project.

Many infrastructure assets serve numerous, often quite different economies and societies. Developing shared infrastructure can yield efficiencies of scale and scope and deliver higher quality infrastructure more quickly. By deepening economic inter-dependence, such arrangements can also promote further efficiency gains and function as a force for positive engagement between countries or regions. However, the effective operation of shared infrastructure requires sound institutional architecture, clear policy objectives and agreed allocations of responsibilities.

Strategic infrastructure planning includes the allocation of expenditure between new infrastructure projects and the maintenance and upgrading of existing infrastructure. This means strategic infrastructure planners should address the stewardship of existing assets, as well as the means by which new projects are chosen and developed. Efficient asset management will significantly reduce the life-cycle cost of infrastructure.

 

Projects 5.0 is a new model for the delivery of large capital projects in heavy industry. In this report, we make the case for a radically different approach in the sector, and outline the six fundamental changes that could transform project-delivery performance.

Cost and performance benchmarks in many industries have been redefined in recent years, as incumbents and new market entrants alike adopt new technologies or unconventional operating models. In space flight, for example, the cost of putting a payload into orbit has fallen by 75 percent.

Applying the same underlying principles to large capital projects in heavy industries could achieve a similar step change in performance, with the potential to reduce actual project cost and time by 30 to 50 percent, more than doubling project returns. Yet the sector has struggled to achieve even moderate rates of productivity improvement or to deliver projects on time; a recent survey of senior project executives found that on average, projects overrun their budgets and schedules by 30 to 45 percent.

The coronavirus crisis has further accelerated the urgency for change. Lockdowns, labor shortages, and supply-chain disruptions have set construction programs back by months. The prospect of a long, uncertain period of recovery is forcing companies to rethink future project plans.

At the root of the sector’s unenviable record is a project-delivery model that has remained largely unchanged for a quarter of a century or more. It is a model plagued by issues and inefficiencies: a lack of integrated systems thinking; prioritizing shortterm cost management over long-term outcomes; poor communication between stakeholders; and bespoke projects and rigid planning systems that struggle to identify or adapt to changing demands.

Industry leaders are experimenting with a growing list of new technologies and processes, from digital twins to artificial intelligence–(AI–) enabled planning algorithms. A real transformation of capital-project delivery will require more than targeted interventions, however. At best, narrowly focused tools and technologies can address only a small part of the overall value at stake. At worst, poor technology and process deployment can end up adding unnecessary complexity and confusion to a project.

In this report, we make the case for Projects 5.0, a clean-sheet approach to capital-project delivery. Projects 5.0 is so named because it builds on the Fourth Industrial Revolution’s advances, which introduced automation, machine learning, smart technologies, and the Internet of Things into conventional manufacturing and industrial practices. Incorporating these techniques into a broader set of changes—including stronger partnership networks, greater agility and flexibility, and thoughtful future-proofing—promises to unlock capital projects’ full potential to deliver lasting value.

 

The global market for green construction is projected to hit approximately £278.6 billion GBP by 2022. Not only will demand for this kind of low-impact building grow over the next 25 years, it will also change dramatically. Looking ahead into the future of green construction will help construction firms plan their next moves.