Back to basics: In infrastructure, four Ps are powerful

Last month, I had the opportunity to speak to the OECD Ambassadors about infrastructure. My message was simple: although infrastructure is a complex system, outsize results are possible from focusing concurrently on four basic areas, or four Ps – which are planning, policy, performance, and partnership.

Drawing on current global developments, I offered the five recommendations below for how governments can act within the 4Ps to leverage infrastructure for economic and social outcomes, and to support the low-carbon transition.

Planning

Recommendation: Create an independent infrastructure agency, or boost the capabilities of the existing agency to define and be accountable for infrastructure strategy and implementation.

Building infrastructure is not an end to itself. Infrastructure’s first purpose is to serve communities by helping deliver the vision we have for society. But it can be difficult to hold onto the vision across political cycles and when working with existing infrastructure (as is often the case in developed economies). That’s one reason why infrastructure development is best and most efficiently done by an independent, strategic infrastructure body or agency that acts as the custodian of a country’s infrastructure master plan and ensures that (a) the right projects are selected to enable a country’s vision and (b) those projects are depoliticised. Governments should not underestimate the benefits of forming and empowering an infrastructure body to realise maximum impact from sustainable infrastructure.

Policy

Recommendation: Implement policies that improve all aspects of your country’s enabling environment.

The ‘enabling environment’ for infrastructure is defined as all the factors that allow or inhibit the development and delivery of quality infrastructure. It is largely a result of government policies. The GI Hub’s InfraCompass defines eight drivers of the enabling environment, and monitors the strength of these drivers in 81 countries.

To have a chance of realising meaningful systemic change, governments need to advance policies that enable them to perform well on each of the eight drivers.

Notably, the enabling environments of developed economies are not always best in class. InfraCompass contains many examples of emerging economies leading the way, and emerging economies should not shy away from developing their own approaches and being ambitious across the eight drivers.

Performance

Recommendation: The multilateral system needs to continue pushing for the convergence of standards and for innovative certification frameworks for global consistency and accountability.

Recommendation: Operationalisation of standards will happen at speed and scale only if governments provide incentives.

The enabling environment is a precursor to success, but how do we ensure the infrastructure planned will deliver on community and societal needs? In recent years, many standards have emerged for this purpose, from macro frameworks like the Sustainable Development Goals to micro-level and industry-specific principles and standards.

Now, there are signs of convergence, with a trend for standards to build on or even integrate previous standards. The infrastructure sector must continue to collectively push for convergence while encouraging action on frameworks that are far enough along in development to be implemented – most of the actions taken will likely be applicable under any future agreed standard frameworks as well. The next step after convergence is certification, and progress on programs like the Blue Dot Network and FAST-Infra should be supported.

Of course, standards will remain complex for governments to grasp and implement. To be successful, there should be incentives for governments to modify their internal processes and institutional frameworks to proactively implement these standards. For example, the Equator principles (which are a benchmark for determining, assessing, and managing environmental and social risk in projects set out by the financial industry) were supported by easier access to debt financing, but broader adoption could be achieved with an incentive of lower cost of financing and/or access to concessional funding.

Considering the impacts of proposed incentives holistically – for example across the enabling environment – can help governments and regulators set up incentives that have the greatest possible impact.

Partnership

Recommendation: Disrupt the procurement race to the bottom by fostering innovation through cross-government cooperation, likely in the form of coopetition.

Strict procurement rules have been successfully enacted in most jurisdictions to avoid red tape. This works for the most part, but one clear downside is that it does not incentivise innovation. As a result, there is insufficient leverage of the capacity and capability of the private sector, where most infrastructure expertise lies.

In an increasingly fragmented world, coopetition – the combination of cooperation and competition – can be used to foster collaboration among countries that joins up their expertise. There is merit to like-minded countries thinking about their opportunities more collaboratively, and specifically developing frameworks in which they agree to cooperate where it makes sense and compete in other places. This allows for a joining of forces between contractors, banks, and institutional investors to maximally leverage their collective strengths while retaining enough competition to drive innovation and performance.

Act in all four areas at once

You might think that none of the points above are ground-breaking, and you are right. So why are these actions not taken? In fact, some of them are, sometimes. But improvement on the 4Ps is sporadic and incremental, and this isn’t enough anymore.

The urgency and scale of our need to increase equality, protect and rebuild the health of the planet, and recover a sound economic footing are too great to allow slow and incremental improvement. We are facing a case of ‘change or fail’.

To scale up infrastructure quickly, governments need to excel at all 4Ps concurrently. There is significant room in both advanced economies and EMDEs to adopt major country and multilateral reforms, and this is what should happen.

Infrastructure sits at the nexus of all we want to achieve, and we often refer to it as the backbone of our economies and communities. If we continue to develop it using norms and mechanisms enacted, in many cases, almost 100 years ago, we are not empowering our economies and serving our communities as they should be served.