Ambassador Marcia Bernicat
Senior Official for Economic Growth, Energy, and the Environment
U.S. Department of State
Washington, D.C.
April 13, 2021
AS DELIVERED
Thank you, Dr. Bhattacharya, for your kind introduction. It is an honor to be here with you today.
It is clear the resulting pandemic-related economic downturn has affected every aspect of our lives. This is even more acute in low- and middle-income countries where many face heightened debt sustainability risks and liquidity shortfalls. According to World Bank data collected for 2020, private sector investment in infrastructure investments plummeted by 56 percent.
Certainly, this is a difficult time to consider investing in infrastructure development projects as the international community faces the enormous task of recovery and rebuilding from the pandemic, but investment is critical if we are to build back more resilient, inclusive, and greener.
So, let me briefly discuss three areas where we could improve conditions for increasing investments in infrastructure.
First, we must make the right investments. That is why countries should ensure that development projects adhere to internationally accepted standards for environmental and social risk mitigation, build local capacity, prevent corruption, and improve local resilience against climate change and natural disasters.
The U.S. International Development Finance Corporation mobilizes the participation of private sector capital to support sustainable, inclusive economic development and growth, with a focus on emerging markets and less developed economies. DFC project design incorporates International Finance Corporation standards for environmental and social protection and includes an impact quotient, which quantifies each project’s projected and actual contribution to economic growth, inclusion, and innovation.
In addition, the Blue Dot Network launched in 2019 by the United States, Japan, and Australia will be a means to promote quality infrastructure investments by certifying projects that are market-driven, socially and environmentally responsible, financially sustainable, transparent and accountable, and open and inclusive.
Second, we must create the right conditions to attract investment. The most attractive projects, pursued by the most socially conscious investors, will fail to take off unless governments put in place competitive enabling environments that provide fair, transparent, and predictable legal and regulatory frameworks. These frameworks can channel investments to ensure sustainable, resilient and inclusive outcomes.
So, what steps can governments take to attract infrastructure investments? One, create legal frameworks that decrease risk for investors and provide for dispute management. Two, structure public-private partnerships to ensure that projects offer a return on investment over their entire lifecycle and attract reputable investors. Three, manage debt wisely.
Having a well-established, national security-focused investment screening mechanism helps to guard against malign investments while at the same time promotes an open investment environment that can attract high quality infrastructure projects.
On debt, debt sustainability begins with debt transparency. That includes disclosure of public and publicly guaranteed debt and fiscal commitments. Transparency clarifies risk and builds market confidence and sustainability.
I’ll highlight that the OECD Policy Framework for Investment and the Compendium on Infrastructure Good Practices provide specific recommendations to create a competitive investment climate. The roadmap already exists; governments should choose to follow it.
Finally, we should draw on the resources and capabilities of the right institutions. That is why we urge all stakeholders to support the existing mechanisms and institutions for infrastructure investment. The multilateral development banks have a clear advantage in expertise and experience. They have years of experience in development finance, strong technical skills, and adhere to the highest standards – the IFC performance standard, for example. They can also uniquely combine policy advice to support structural reforms with financing for both the public and private sector.
The goal here is to create sustainable and inclusive social and economic value that can create jobs, propel economic growth and opportunity, and improve living conditions for all, especially for the most vulnerable.
Thank You.
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