This is the message conveyed by an article in the latest edition of the Economist.
Entitled the "The trillion-dollar gap", the article cites a World Economic Report which says that global spending on transport, power, water and communications is a whopping USD one trillion less than what it should be.
According to the paper, the problem is not just confined to emerging economies but is also prevalent in developed countries such as the U.S. It writes: "With the economy weak and borrowing cheap, it is daft that that America's public infrastructure spending is at a 20-year low, even as the country's roads, bridges and dams are rated only D+ by the American Society of Civil Engineers."
The challenge, says the Economist, is not only tapping public money for the necessary investment but also accessing private capital. The big global banks who used to finance infrastructure projects are now less inclined to do because of the new "Basel 3" capital rules which have made lending less attractive. The paper says that the USD 50 trillion or so managed by institutional investors such as insurance companies and sovereign wealth funds could provide a solution. It points out that currently less than one percent of this amount is earmarked for infrastructure investment.
The Economist article also casts a direct spotlight on the recent Swiss Re publication, "Infrastructure Investing. It matters".
Published in conjunction with the Institute of International Finance, the Swiss Re study emphasizes that long-term investing is vital for economic growth. A key plank in the proposals put forward by the report's authors is a private/ public initiative which would leverage the infrastructure finance expertise of international financial institutions, including insurance companies, and multilateral development banks. Ultimately, the report says, such collaboration could help establish a transparent and harmonized infrastructure asset class of the kind needed to close the funding gap.