Bridging the Infrastructure Gap:
Global Integration and the “One Belt One Road” Initiative
1 July 2016
University of Oxford
Conference Presentation Slides*
The OXIIC Global Infrastructure Conference 2016 features a series of insightful keynotes and interactive discussions from leading thinkers across academia, international organisations, government, business and the investment industry to explore the following thematic areas:
- How can policy coordination for global integration and cross-border infrastructure finance and development be enhanced?
- How can cooperative mechanisms for the development of cross-border infrastructure and multinational business be built?
- How can cross-border infrastructure investment for long-term sustainable growth best be fostered and safeguarded?
Eight years on from the start of the global financial crisis, the world economy has remained slow to recover, exhibiting persistently weak growth. During the post-crisis period, calls for infrastructure investment to integrate and revitalise the global economy have come to prominence, both in OECD countries and developing economies. According to the World Bank, every 10% increase in infrastructure provision increases GDP by approximately 1% in the long term. As such, infrastructure is expected to play a significant role in the integration of international economic communities, facilitating new potential businesses and trade as well as providing a much-needed boost to the global economy.
In this context, the “One Belt One Road” (OBOR) initiative was proposed so as to jointly build the new Silk Road Economic Belt and the 21st Century Maritime Silk Road (hereinafter referred to as the ‘Belt’ and ‘Road’, respectively) for promoting economic prosperity of the countries along the Belt and Road and facilitating regional economic cooperation. Its blueprint articulates of the features of a circumnavigation route “connecting the vibrant East Asia economic circle at one end and the developed European economic circle at the other, and encompassing countries with huge potential for economic development”. The new routes will encompass over 60 countries, accounting for 60% of the world’s population and a collective GDP equivalent to 33% of the world’s wealth. The influence of OBOR is already evident in China's overseas investment flows, which rose 16.3% in the first 10 months of 2015 to $92.5bn with specific OBOR related investment rising 36.7% to $13.7bn. According to the China Development Bank, some 900 projects worth a total of $890bn are currently under way or planned. Global engagement and cooperation is prioritised with projects being open to any partner country as well as both international and regional organisations. Yet enhancing policy coordination necessary for the implementation of such cross-border infrastructure projects remains a significant challenge.
Fundamentally, if the OBOR initiative is to be realised, a vast amount of cross-border infrastructure projects will need to be built over the coming decades. Private sector and institutional investors remain vital for bridging the infrastructure gap in the context of public budget constraint. The differing economic and political contexts of the constituent countries that make up the OBOR route is likely to result in inherent risks associated with the economic integration of communities. Such risks will range from the fundamental legal and financial challenges of accessing emerging markets to political and social instability and regional disputes. In light of the OBOR initiative aimed at “encouraging the countries along the Belt and Road to achieve economic policy coordination and carry out broader and more in-depth regional cooperation of higher standards; and jointly creating an open, inclusive and balanced regional economic cooperation architecture that benefits all”2, the nature of the feasible and effective cooperation mechanisms utilised in facilitating participation of private sector and institutional investors (e.g. pension funds, insurers, sovereign wealth funds, etc.) in bridging the infrastructure financing gap and boosting businesses remains critical to the discussion. Furthermore, the quality of infrastructure generated should also be given equal attention, as cross-border and domestic infrastructure projects have long-term consequences for both the economy and sustainability of the regions in which they are built. Ensuring the development of low-carbon and climate-resilient infrastructure will therefore be crucial for the long-term and sustainable development of global economy.
Download: Conference Programme
08:00 – 09:00 Registrations
09:00 – 09:10 Welcome
09:10 – 09:30 Opening Remarks
09:30 – 10:45
Session 1 Enhancing Policy Coordination for Global Integration and Cross-border Infrastructure Development
Infrastructure development is crucial for the integration of international economic communities. The Belt and Road will form part of a global effort to improve connectivity through building an infrastructure network connecting all sub-regions of Asia through to Europe and Africa. Enhancing policy coordination is therefore critical for implementing cross-border infrastructure development. A multi-level communication mechanism could therefore be built for intergovernmental macro economy and policy exchange so as to promote intergovernmental cooperation, enhance mutual political trust and reach new cooperation consensus. Through this approach, countries along the Belt and Road may fully coordinate their economic development strategies and policies, develop plans and measures for regional cooperation, negotiate to solve cooperation-related issues, and jointly provide policy support for the implementation of practical cooperation and large-scale projects. This session will explore how to enhance policy coordination for global integration and cross-border infrastructure development illustrated by way of the OBOR Initiative and the associated global implications.
10:45– 11:15 Networking Break
Session 2 Building Cooperation Mechanism for Infrastructure Investment and Cross-border Businesses (I)
Prior to realising the benefits of global integration and economic revitalisation, vast infrastructure projects will need to be developed over the coming decades. The capital demand for global infrastructure investment is far beyond the capacity of governments alone, thus private investment in infrastructure remains vital for bridging the financial gap. In particular, long-term investors such as pension funds, sovereign wealth funds and insurance companies have growing appetite for infrastructure with stable, long-term and low-risk returns. The blueprint of the OBOR Initiative for connecting Asia and Europe through infrastructure development provides considerable markets and lucrative opportunities for global investors to invest in infrastructure. Yet due to underdeveloped institutional and legal frameworks as well as immature markets, private capital remains limited in infrastructure investment in emerging markets. For instance, only about 0.2% of the 7.2% of GDP spending on infrastructure development in Asian countries comes from private sector. Thus cooperation mechanisms between public and private sectors are needed to facilitate private and institutional investment in infrastructure. This session investigates how to build cooperation mechanisms for facilitating private sector and especially institutional investors to invest in infrastructure for global integration.
12:30 – 13:30 Lunch
13:30 – 14:00 Keynote Speech
14:00 – 14:30 Group Photo/Networking Break
14:30 – 16:00
Session 3 Building Cooperation Mechanism for Infrastructure Investment and Cross-border Business (II)
Fundamentally the development of infrastructure along the OBOR routes aims to facilitate trade and businesses through connecting the continents of Asia, Europe and Africa, thus enhances integration and revitalisation of the global economy. The tremendous growth in demand from countries along the OBOR routes will open up a diverse range of new opportunities on international trade through infrastructure projects, commerce and investment. The nature of the OBOR implies cross-border cooperation, which encompasses multiple stakeholders over the life-cycle of cooperation. Meanwhile, the different economic and political situations of countries along the OBOR routes inevitably generate inherent uncertainties and risks, ranging from legal and financial challenges to political and/or social instability and regional disputes. Innovative cooperation models therefore, such as joint partnership, technology transfer, investment funding, EPC (Engineering-Procurement-Construction) and PPP (Public-Private Partnership), involving multiple stakeholders and operating under complex political and socio-economic contexts, need to be explored further. A greater understanding of such models is especially important so as to fully benefit from the spectrum of opportunities associated with the mutual prosperity resulting from the OBOR Initiative whilst mitigating those associated risks. This session will therefore discuss how to build feasible and effective cooperation mechanisms for connecting economic circles through deploying cross-border businesses along the OBOR routes.
16:00 – 16:30 Networking Break
16:30 – 18:15
Session 4 Safeguarding the sustainability of cross-border infrastructure for long-term green growth
Increasing the amount invested in infrastructure alone, may not foster strong, sustainable and balanced growth. The quality of infrastructure projects should be given equal attention. In light of the recent COP21 Climate Change Conference and the global Paris Agreement on combating climate change, facilitating low-carbon and climate-resilient infrastructure along the OBOR routes will become crucial for ensuring long-term sustainable development. Building the wrong infrastructure will lock in patterns of unsustainable development and will burden countries with debt whilst not yielding the expected growth benefits. A strategic approach to infrastructure investment is required which looks to the long term, recognises the interdependencies between infrastructure investment and economic growth and acknowledges the large uncertainties. This session will explore the evidence for the relationship between infrastructure investment and economic growth. It will address the challenges incorporating uncertainty in infrastructure decision making.
18:15 – 18:30 Concluding Remarks
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