Macroscope | China needs urgent reality check on infrastructure needs

In our Apec meetings this year, official worries have exploded on how to get private business to join governments to invest in big infrastructure projects. Consultants say we will need US$50 trillion or more between now and 2030 to fund the world's infrastructure-building needs - much of that in Asia.

These are humungous numbers. Officials across the Apec region look at the need to build roads, ports, railways and mass transit systems, to build power stations, and provide clean water, and add in the cost of urbanisation, or dealing with environmental problems and they reach a single conclusion: taxpayer funds are insufficient. Private sector money is needed on a large scale - and private sector expertise and efficiency too.

So we should be pleased that China recently hosted a major Apec Public Private Dialogue on promoting infrastructure investment through public-private partnerships (PPPs). After all, China is going to account for an awful lot of infrastructure investment. But I came away schizophrenic - encouraged, but concerned. So many seemed to believe that challenges start and end with the supply of money. That is why China is proposing this Asia Infrastructure Investment Bank (AIIB) to supplement the infrastructure-building work being done by the World Bank and the Asian Development Bank.

Unfortunately, my own understanding after dozens of private sector discussions over the past year on the region's infrastructure-building challenges is that even though the dollar numbers are awesome, money shortages are not the main blockage point: on the contrary, two key problems have to be addressed: first, projects need to be properly structured and "packaged" - and governments lack the expertise to construct large, long-term infrastructure project proposals.

Second, the risks unique to long-life infrastructure projects are inadequately addressed. Indeed, most of the morning of China's Infrastructure PPP Dialogue passed without the word "risk" being mentioned. This was troubling, because no private sector money is going to be invested in a 30-year project that does not properly mitigate long-term risks.

For the past four years, the Apec Business Advisory Council has been tackling this problem in an impressively practical way. We have pulled together a group of 70-plus private sector experts in structuring long-life infrastructure projects, and made this task force available to meet any government that wants to discuss (in safely confidential surroundings) why the private sector is at present reluctant to invest in infrastructure PPPs in their economy.