The Trillion-Dollar Gap

There was a great editorial in the Economist newspaper this last week (March 22nd-28th).

The world’s infrastructure deficit according to the World Economic Forum is $1.0 trillion/year. Spending runs at $2.7 trillion and the need is $3.7 trillion. For reference, according to the Economist, “the gap is almost as big as South Korea’s GDP. And it is likely to grow as fast.”

At the Globe 2014 conference this last week people were talking about “the gap”. The McKinsey Global Institute study estimated that it will cost $57 trillion to build and maintain the world’s infrastructure between now and 2030. Again, for reference, because trillions are big numbers, more than the value of infrastructure today.

The newspaper’s response? A transformation in the professionalism of project management. Could this also be a case for standards in business case and the risk analysis done? I think so.

The second priority is “to streamline the system for slicing risk unrelated to a project’s commercial viability”.

They highlight the World Bank’s service in this area “but the system in small, fragmented and geared to banks. To encourage growth of a market in infrastructure bonds, the big development organisations, led by the World Bank, ought to provide a bigger and more standardised menu of credit enhancements and guarantees ”.

The response needs to be focused on pension funds, insurers, and impact investors.

To achieve standardization, appeal to the investors with funds to invest, someone has to put a stake in the ground, establish a standard, and push (hard). That is what we, at ii, are doing.

We hope you can support us in our drive for better tools for infrastructure program managers and for standardized infrastructure risk slicing.

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