G20 Finance Ministers’ and Central Bank Governors’ Meeting
Session III – Investment and Infrastructure
Remarks by Angel Gurría,
Shanghai, 27 February 2016
(As prepared for delivery)
Ministers, Central Bank Governors,
We have just discussed disappointing growth figures and a downgraded outlook. We are all aware that one of the main drivers of the sluggish growth is the weakness of investment. There is still strong hesitation on the part of investors to deploy capital in long-term productive investment, and this is holding back potential growth.
We indeed need more infrastructure investment – a total of USD 93 trillion in transport, energy and water in the next 15 years to meet global infrastructure needs while ensuring the transition to a low-carbon economy – and certainly here the efforts made with the investment strategies last year are heading in the right direction. But as much as public money is a catalyst, it won’t be enough on its own. We need to find a way to leverage public money to crowd-in more private funding for infrastructure, and in this sense, we welcome the G20 commitment to continue working on innovative financing mechanisms for infrastructure.
The OECD has already contributed extensively to this G20 debate, notably with the G20/OECD High-level Principles on long-term investment financing by institutional investors , the G20/OECD report on investment strategies , as well as with the concrete examples of available instruments and incentives for infrastructure financing outlined in our ”taxonomy” report delivered to you in 2015. This year we are proud to lead IOs’ support to assist you in developing a guidance note on recommended policy steps to diversify infrastructure financing instruments, with a special focus on equity financing.
A wealth of analysis has been undertaken, and more action is now needed. For instance, our forthcoming Survey of Large Pension Funds and Public Pension Reserve Funds indicates that despite managing over USD 30 trillion in assets in 2014, pension funds still invest only 1% of their assets directly into infrastructure projects. Progress is too slow in this critical area!
We not only need more infrastructure investment, we also need better infrastructure investment: the problem with delivering quality infrastructure is often not only finance, but also governance. Citizens and businesses voice their concerns over delays, overspending on flagship infrastructure projects, inadequate investment in the maintenance of existing infrastructures, lack of consultation with those most affected by major projects and, too often, corruption. The assessment of the economic relevance of projects is still not rigorous enough. The OECD is developing guidance on how public actors can better manage infrastructure policy to get a good economic and social return on public investment and demonstrate that our public sectors are reliable, competent partners for private investors.
Finally, to ensure that we are locking-in “quality” in our long-term growth, we need to think hard about the mechanisms for transitioning towards low-carbon infrastructure and make the COP 21 commitments a reality. But I will come back to this in the session on green finance.
In this general context, the global connectivity agenda of the Chinese presidency is extremely timely and relevant. It can contribute to the much-needed boost to cross-border trade and to investment, ultimately facilitating knowledge diffusion and spill-overs across countries. But we believe a comprehensive connectivity agenda needs to build on all of the elements I have just mentioned: governance, quality of infrastructure, and lock-in of low-carbon and environmental friendly technologies. The OECD stands ready to support the Chinese Presidency in making the G20 infrastructure investment and connectivity agenda a success. And the OECD will continue supporting the implementation of the G20/OECD Corporate Governance Principles which were approved last year as well as that of the G20/OECD High-Level Principles on SME Financing. Please continue to count on us!