Guyana fails to attract private investment in infrastructure for almost a decade - IDB

Guyana fails to attract private investment in infrastructure for almost a decade – IDB

Sep 26, 2018 News

This graph forms part of the IDB report

According to the Inter-American Development Bank (IDB), Guyana has failed to attract a single private investment in almost a decade—eight years to be exact. This was recorded in IDB’s recently released report titled, “Better Spending for Better Lives: How Latin America and the Caribbean Can Do More with Less.”
That report examines eight areas of evaluation and the period evaluated varied. When looking at investments in public infrastructure, the IDB examined years 2008-2015.
Among 19 countries in Latin American and the Caribbean, Belize, Guyana and Trinidad and Tobago were the only countries recorded to have not received private investments in infrastructure during the period under review.
IDB said that the decrepit state of infrastructure in Latin America and the Caribbean is well known.
“From pothole-riddled roads and bridges in disrepair to substandard airports and sea ports, the region’s growth and the quality of life of its citizens suffer from its crumbling infrastructure.”
The Bank said that while bricks and mortar alone cannot assure growth and prosperity, without acceptable infrastructure services, a country is hard pressed to compete in today’s world.
“Why is infrastructure so subpar in the region? To begin with, countries in Latin America and the Caribbean do not invest enough in infrastructure. Public and private investment in infrastructure in Latin America and the Caribbean reached an average of 2.75 percent of GDP between 1992 and 2015 and an average of 3.8 percent from 2008 to 2015.”
IDB said that the level of spending in the Caribbean and Latin America is low compared with, for example, China (8.5 percent), Japan and India (5 percent), and the average in industrial countries (4 percent).
Moreover, IDB said that current investment figures have even dipped below those prevailing in the 1980s. The Bank said that to fill the infrastructure gap, the region would need to invest about five percent of its GDP over the next 20–30 years, which is equivalent to an additional $100B a year.
IDB said that, not surprisingly, low investment in infrastructure has led to poor infrastructure services. The quality of infrastructure in most Latin American and Caribbean countries—particularly in Argentina, Brazil, Paraguay, and Venezuela—is considerably lower than it should be, given their income levels.
Only a few exceptions in the region—mostly in Central America (Guatemala, Panama, and El Salvador)—have better- than expected infrastructure quality.
Zeroing in on private investments, IDB noted that policy reforms to attract private sector investment in infrastructure began in the mid-1990s, and increased private investment from a negligible amount to 1 percent of GDP by 2015.
IDB said that despite the growing role of the private sector, the public sector however, accounts for more than two-thirds of total infrastructure investment in Latin America and the Caribbean.
The Bank said that private investment in infrastructure has varied across countries and sectors, and more can be done to mobilize it through policies supported by multilateral development banks (MDBs) in the region.
“But the experience of recent decades in Latin America and the Caribbean shows that the public sector may still play a substantial role in the funding of infrastructure.”
The Bank also noted that the role of the public sector in infrastructure is important not only because the sector makes up the lion’s share of total investment but also because infrastructure investment has public good characteristics, including strong externalities and network effects.
“Providing electricity requires an efficient transmission and distribution network; urban transport systems need both trunk routes and feeders to provide adequate access to jobs and housing. If infrastructure development is not properly planned, the efficiency of services provided by the assets will be low.
In addition, global agreements like the Paris Accord and the Sustainable Development Goals require governments to plan and set standards in order to create infrastructure that is resilient and meets mitigation targets,” the IDB noted.