And the road to recovery could be “greener” in the developing markets
Earlier in the year, Build Back Better became a popular rallying cry. The green shoots of recovery were beginning to show, but the trauma caused by the worst days of the pandemic remained fresh in the memory. A consensus had apparently formed: the crisis brought into sharp focus the urgent need to address the climate emergency; it was time to correct the errors of recent history. Talk of shifting paradigms and “the new normal” was common.
A few short months on, and the mood has already shifted. Numerous experts are warning that the talk has so far yielded disappointingly little in the way of action.
However, analysis from the European Bank for Reconstruction and Development (EBRD) paints a more hopeful picture. Sue Barrett, EBRD’s Head of Infrastructure for Turkey, Middle East and Africa, notes significant interest in the region for green financial instruments.
“We’re seeing strong demand for our Green Cities programme. This is the programme by which we encourage cities to develop a future investment plan based on green and sustainability considerations – going forward it will also include smart technologies. In this area we’re seeing clear demand for cleaner urban transport and more investment in metro systems. We’re also seeing investment in water, particularly in regions where water is scarce, and the provision of better systems for wastewater treatment and disposal of solid waste.”
And those same developing markets are a safer destination for private investment than you might assume
“Which region has the lowest default rate on infrastructure debt?” asks Neil Saravanamuttoo, Chief Economist with Global Infrastructure Hub. “Well, the answer is probably not what a lot of people might think. It’s the Middle East, closely followed by Africa. And we find the same results when we look at which regions have the highest recovery rates.”
Nonetheless, long held doubts about private sector enthusiasm for infrastructure investment are not going away. He continues: “One of the major themes from the international development community is that we need to move from a world of billions in infrastructure finance, to a world of trillions. The assumption is that a lot of that will come through private channels, but it is just not happening. Over the past decade, the level of private investment has been lower than we would have hoped for and is not showing signs of increasing.”