Analysis

Global infrastructure demand will require smarter delivery and new ways to charge

Henry Kerali, World Bank

Increasing efficiency and productivity is the key to driving growth from infrastructure investment, says World Bank’s Henri Kerali.

Henry Kerali is the World Bank's Regional Director for the South Caucasus encompassing Armenia, Azerbaijan and Georgia, Europe and Central Asia.

Since July 2012 he has been based in Georgia but since joining the World Bank in 2003 has worked in different regions of the world including Latin America, Africa, East Asia, South Asia, and Europe and Central Asia (ECA).

Following Kerali’s presentation at the recent ACE European CEO conference on the global economic outlook for infrastructure, Infrastructure Intelligence caught up with him to drill into some of the issues raised.

Interview by Antony Oliver

Clearly the global economic downturn has slowed down infrastructure investment growth over the last decade. In what ways do you see the global market improving?

There will be differences across different regions and sub regions and it is clear that demand is growing most strongly in emerging markets. But generally (across the world) I would say that demand for infrastructure will continue to grow in line with economic growth. 

Do you see global evidence of economic growth being driven by investment in infrastructure?

It is not necessarily infrastructure alone that will drive growth as there are usually several factors to take into account. The structure of the economy is a major factor and if a country can increase its productivity relative to others then it attracts investment and its own products become more competitive.

We hear a great deal about the Eurozone economic crisis becoming chronic. Does this raise fears for the UK market?

I think that in reality the UK is quite insulated because of its currency (strength) which provides flexibility but overall I think it is a function of growth. The UK has managed to maintain growth which is at least significantly positive, as compared to the Eurozone which is still stumbling at 1%-2%. But we are now getting to the stage where the Eurozone crisis is being resolved.

Japan has been following a path of quantitative easing (QE) and investment in infrastructure to drives its economy over the last decade. Given that it seems to be falling back into recession should the UK worry that it is taking a similar path?

Not really as I don’t think the UK has followed the Japan model over the past 10 years. In Japan the QE was too much and for too long and they are now starting to come out of that fairly quickly.

The World Bank has money to invest in infrastructure. What advice do you give about what constitutes a good investment proposition?

In all cases projects have to be economically viable. In some cases – not all – the projects should also be financially bankable, particularly those that involve some financial revenue from the private sector. Obviously you have other issues such as environmental sustainability and social equity but the primarily deciders remain economic viability and bankability of projects. 

Tackling corruption is constantly on the World Bank’s agenda – can you guarantee future infrastructure investments will be without corruption problems?

It is a never ending battle and simply something that you cannot afford to take your eye off. Human beings will always try to find a loophole so we should be doing more to try to close those loopholes.

The future will see huge urbanisation and so demand for infrastructure continue. What do you see as the biggest blockers to the investment needed to cope?

Urbanisation simply means that there will be more demand for infrastructure in an enclosed space. So you are going to have to get more efficiency out of the infrastructure that you have and going to have to introduce pricing to control the demand. Then you will have to provide more public services that use the same infrastructure but carry more people at lower cost. And the same rules apply whether you are in the UK or the developing world.