Why Infrastructure is Key to the Success of the SDGs

Infrastructure is core to our quality a life—a fact that explains the prevalence of infrastructure, both implicitly and explicitly, in the Sustainable Development Goals (SDGs).

Population growth, migration and urbanization trends demand an increase in infrastructure development, especially in emerging economies and developing countries. For example, energy-related infrastructure and an expansion of the electricity grid is necessary to provide energy access to urban and rural areas. Transportation infrastructure— such as roads, railways, ports, airports—is key for people’s mobility from home to work, and for connecting rural areas to domestic and regional markets, contributing to a country’s economic development. Sustainable water infrastructure will improve people’s lives by providing access to water and help managing scarce resources in a sustainable manner.

By one estimate a total of US$ 57 trillion is needed by 2030, or US$ 3.4 trillion per year, for infrastructure investment. Yet there is currently a finance gap to meet this demand of US$ 500 billion per year (S&P, 2014). Governments are therefore increasingly looking for mechanisms to close this gap, crowd-in private finance, and improve efficiency and effectiveness of infrastructure projects. Innovative approaches to infrastructure finance and sustainable public procurement will be critical to their success.

Infrastructure and the SDGs

The post-2015 development agenda “Transforming Our World: The 2030 Agenda for Sustainable Development” includes 17 Sustainable Development Goals, each with their respective targets and indicators, and a plan for implementation. The United Nations General Assembly is expected to adopt this agenda at the General Assembly meeting in September 2015. Infrastructure appears both as an explicit goal and as an implicit means to implement and achieve other SDGs.

SDG 9—Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation—is the most direct call for increased investment in sustainable infrastructure. But, implicitly, infrastructure development will also play an important role in many other SDGs:

• SDG 1—end poverty in all its forms everywhere—the targets relate to access to basic services, building resilience and reducing vulnerability to climate-related extreme events, and other economic, social and environmental shocks. Good infrastructure is needed to provide this resilience, as well as for public service delivery, such as education, healthcare or access to water and energy.
• SDG 2—end hunger, achieve food security and improved nutrition and promote sustainable agriculture—the targets refer to an increase in investment for rural infrastructure, which illustrates the importance of infrastructure investment, not only in urban but also in rural areas.
• SDG 3—ensure healthy lives and promote well-being for all at all ages—target 3.8 focuses on access to quality essential health-care services for which the development of health centers and hospitals in urban and rural areas will be essential.
• SDG 4—ensure inclusive and equitable quality education and promote lifelong learning opportunities—target 4.a demands the construction and upgrading of learning facilities.
• SDG 5—achieve gender equality and empower all women and girls—target 5.4 points at the need for provision of public services and infrastructure for social protection of unpaid care and domestic work.
• SDG 6—ensure availability and sustainable management of water and sanitation for all—this goal and the underlying targets focus on availability, access, and sustainable water management, all which require carefully planned infrastructure projects.
• SDG 7—ensure access to affordable, reliable, sustainable and modern energy for all—targets 7a and 7b refer explicitly to the promotion of investment in and expansion of energy infrastructure.
• SDG 11—make cities and human settlements inclusive, safe, resilient and sustainable—targets relating to infrastructure planning or issues such as waste management, transportation, climate change mitigation and adaptation, and resource-efficiency, require sustainable infrastructure development to reach this goal.
• SDG 12—ensure sustainable consumption and production patterns—target 12.7 refers to the implementation of sustainable procurement practices and policies that will have to be reflected in the procurement of infrastructure projects as well.
• SDG 13—take urgent action to combat climate change and its impacts—this goal implies that infrastructure projects have to be structured in a way that helps on the mitigation and adaptation front, as well as being explicitly developed to protect the poor and vulnerable groups of the effects of climate change.
• SDG 17—the means of implementation of the SDGs and post-2015 agenda—the targets refer among others to multi-stakeholder partnerships. Public-private partnerships (PPPs) will become increasingly important as a way of delivering infrastructure.

Why sustainable public procurement matters

Public procurement will play a vital role in delivering all of the above. Indeed, the power of the public purse—public procurement represents on average 20 per cent of a country’s GDP —is instrumental in creating the demand for innovative and sustainable infrastructure solutions. This certainty of demand will push domestic industries to transform the market into more sustainable production patterns and will give suppliers to government the incentive to innovate, increase efficiency, and deliver value-for-money across the asset lifecycle.

There are various ways for governments to deliver public infrastructure. They range from traditional procurement methods to a range of public private partnerships (PPPs or P3s). In a PPP model, the different risks and responsibilities are distributed among the public and private partners. The private partner brings in the expertise and efficiency of the private sector and usually carries the operational and technical risks; the public partner that has the mandate to deliver the service or infrastructure project is often responsible for the monitoring, setting the general legal and policy framework, and carries for example the political risk. This mix has the potential of delivering more efficient and effective infrastructure, and thus value-for-money for taxpayers.

For example, in Brazil the first PPP project for roads consisted of a concession contract for the expansion and maintenance of 667 km of federal road in the state of Bahia. It was the first of its kind to introduce performance-based contracting in PPPs in Brazil which allowed it to demand the best available performance, and innovative solutions from the private sector. This project was followed by another PPP for a highway system in Brazil that for the first time demanded (successfully) compliance with the Equator Principles, to guarantee the environmental and social sustainability of the project.

It is essential for the implementation of the SDGs that infrastructure projects are assessed based on value-for-money across the asset lifecycle. Indeed, only then will projects be assessed not only on their initial capital investment but also on the operational cost, maintenance, and disposal of the asset. This will open the door and make the business case for much more sustainable infrastructure projects that are likely to have a higher initial capital cost, but perform much better across the lifecycle.

IISD works with policy makers and provides technical advice on smart PPPs and sustainable public procurement of goods, services and infrastructure. IISD also informs about innovative financing for smart procurement and PPPs that aim to drive a more inclusive, sustainable economy and deliver on smart infrastructure.