Australia: punching above its global infrastructure weight?

September 2015 | FEATURE | SECTOR ANALYSIS

Financier Worldwide Magazine

Whilst firmly ensconced in the Brisbane Convention and Exhibition Centre during its November 2014 summit, the governments and central bank governors that make up the membership of the G20 took the decision to make Sydney the future base for its Global Infrastructure Hub – an accord the international forum believes will do much to boost the ongoing development of the global economy.

To summarise, the Hub is a centre designed to share ideas about raising commercial funding for public works as well as being a mechanism for unlocking an extra $2 trillion of global infrastructure capacity by 2030. This will be achieved, the G20 claims, by addressing data gaps, lowering barriers to investment, increasing the availability of investment-ready projects, helping to match potential investors with projects, and improving policy delivery.

“Australia is growing and the world is growing,” explains the Hon. Kelly O’Dwyer MP, parliamentary secretary to the treasurer and the dignitary with responsibility for implementing the Australian government’s commitment to the Hub. “Better infrastructure presents growth and opportunities to billions of people. Whether it’s roads, rail, ports, energy, water, telecommunications, the global infrastructure need is large. Establishing the Hub is a significant and practical initiative by the G20 to drive progress on its infrastructure agenda and to move engagement with the private sector.”

A major undertaking and testament to the role Australia has played over the last 20 years in cementing private capital participation in infrastructure projects, establishing the Hub has not, however, been smooth sailing since its inception almost a year ago.

Progress so far

As one might expect, major challenges have faced those responsible for the Hub since the initiative was announced in November last year; but, and perhaps surprisingly for a project of such magnitude, the key milestones have been met.

“Progress to date has focused on getting the Hub to the operational stage,” confirms Tania Zordan, a partner at Piper Alderman lawyers in Sydney. “The Hub has been established as a genuinely independent body and registered as a not-for-profit company under Australian law. This will pay dividends in the long run by having an organisation with recognised credibility.”

“Establishing the Hub has not, however, been smooth sailing since its inception almost a year ago.”

Augmenting this progress has been the A$30m contribution by the Australian government toward the establishment and operation of the Hub until 2018. Further financial contributions totalling A$20m have been made (or pledged) by the United Kingdom, China, Saudi Arabia, New Zealand, the Republic of Korea, Mexico and Singapore. All countries, regardless of G20 membership, can access the expertise gathered by the Hub.

Additionally, multilateral development banks and international organisations, including the World Bank, the IMF and the OECD, have all indicated they stand ready to contribute their skills and experience.

And with Hub chief executive Christopher Heathcote slowly but surely shifting the tone to that of a more operational dynamic, it appears to be a case of so far, so good.

Public-private partnerships expertise

The choice of Sydney as the base for the Hub is said to be in recognition of Australia’s long history and depth of experience in the infrastructure market – experience exemplified by the status of New South Wales (NSW) as the biggest project pipeline in the country.

Indeed, the state government has a strong track record of engaging with the private sector in the development and delivery of new infrastructure. Recent proposals include building, operating and maintaining a 9km tolled tunnel motorway (currently at the early construction stage) and an AUS$20bn investment in new productive infrastructure by recycling capital from leased electricity network businesses.

It is the experience gleaned from negotiating infrastructure initiatives such as these, says Ms Zordan, that the Hub is likely to consider when carrying out its task of assisting governments to bring a greater volume of better prepared projects to market by improving collaboration and knowledge sharing.

Collaborating with the GIF

With the Hub well on the way to being operational under a non-renewable four-year mandate, some commentators have questioned its relationship with the already-established World Bank’s Global Infrastructure Facility (GIF) and suggested that a fair degree of transgression may be on the cards.

“The World Bank has advised that it will work closely with the Hub,” says Ms Zordan. “The difference is that the GIF is a preparation facility focused on specific projects while the Hub assists governments to bring better prepared projects to the market through improved collaboration and knowledge sharing. It will achieve this by developing an open source knowledge platform and being a genuinely independent adviser that can assist governments to speak the same language as the private sector.”

Criteria for success

How, then, is the success of the Global Infrastructure Hub to be measured? According to Ms Zordan, the details will become more apparent once a business plan is developed and approved. “At a high level, success will depend on the extent to which the Hub is able to improve collaboration between the various stakeholders in the infrastructure investment market and assist governments in bringing a greater volume of better prepared projects to market,” she says.

For now, the aim is to have the Hub fully operational in time for the G20 summit in Antalya, Turkey on 15 November 2015.

Fraser Tennant