China’s Initiative to Boost Private Sector Participation in Infrastructure Projects

Overview of the Initiative

At the annual meeting of the Asia Infrastructure Investment Bank (AIIB) held in Beijing, China’s Minister of Finance, Lan Foan, announced a significant push to encourage private enterprises to engage in infrastructure projects. This includes cross-border connectivity initiatives supported by the AIIB.

Context and Challenges

Lan highlighted the challenges faced by developing countries due to a slowing global economy and a decline in international development aid. These factors have constrained public resources available for connectivity investments.

• Limited public funding for infrastructure development
• Increased need for sustainable financing mechanisms
• Urgency to mobilize private capital for cross-border infrastructure

Policy Measures and Legal Framework

China’s Private Economy Promotion Law, which came into effect last month, serves as a foundation to encourage private sector investment in infrastructure projects. The government is committed to improving systems and creating a favorable environment to attract more private sector participation in cross-border connectivity.

Addressing Risks and Enhancing Confidence

To sustain private sector confidence and willingness to invest, efforts will focus on:

1. Reducing concerns related to geopolitical risks and defaults
2. Improving credit ratings and expected returns of infrastructure projects
3. Coordinating with regional development institutions for better risk management

Contribution to Sustainable Development Goals (SDGs)

This initiative aligns with multiple United Nations Sustainable Development Goals, including:

• SDG 9: Industry, Innovation, and Infrastructure – by promoting resilient infrastructure and fostering innovation through private sector engagement.
• SDG 17: Partnerships for the Goals – through collaboration with regional development institutions and mobilization of private capital.
• SDG 8: Decent Work and Economic Growth – by stimulating economic growth via infrastructure investments.
• SDG 11: Sustainable Cities and Communities – by enhancing cross-border connectivity and sustainable infrastructure development.

Conclusion

Minister Lan emphasized that further mobilization of private capital is essential to overcome the bottleneck caused by insufficient public investment in infrastructure development. This strategic approach supports sustainable economic growth and regional integration, contributing significantly to the achievement of the Sustainable Development Goals.

1. Sustainable Development Goals (SDGs) Addressed in the Article

1. SDG 9: Industry, Innovation and Infrastructure
   • The article focuses on infrastructure projects, cross-border connectivity, and mobilizing private capital for infrastructure development, which directly relates to SDG 9.
2. SDG 17: Partnerships for the Goals
   • The emphasis on cooperation between private enterprises, regional development institutions, and international banks like the Asia Infrastructure Investment Bank (AIIB) highlights the importance of partnerships to achieve development goals.
3. SDG 8: Decent Work and Economic Growth
   • Encouraging private sector investment and improving the business environment supports sustained economic growth and productive employment.

2. Specific Targets Under the Identified SDGs

1. SDG 9 Targets
   • Target 9.1: Develop quality, reliable, sustainable and resilient infrastructure, including regional and transborder infrastructure, to support economic development and human well-being.
   • Target 9.3: Increase the access of small-scale industrial and other enterprises, in particular in developing countries, to financial services, including affordable credit and their integration into value chains and markets.
2. SDG 17 Targets
   • Target 17.3: Mobilize additional financial resources for developing countries from multiple sources.
   • Target 17.17: Encourage and promote effective public, public-private and civil society partnerships.
3. SDG 8 Targets
   • Target 8.2: Achieve higher levels of economic productivity through diversification, technological upgrading and innovation.
   • Target 8.3: Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation.

3. Indicators Mentioned or Implied in the Article to Measure Progress

1. Indicators related to SDG 9
   • Proportion of the rural population who live within 2 km of an all-season road (implied by cross-border connectivity and infrastructure development).
   • Amount of investment mobilized in infrastructure by private sector (implied by mobilizing private capital and improving financing mechanisms).
2. Indicators related to SDG 17
   • Volume of official development assistance and financial flows from multiple sources to developing countries (implied by the mention of declining international development aid and need for alternative financing).
   • Number of public-private partnerships for infrastructure projects (implied by cooperation between private enterprises and development institutions).
3. Indicators related to SDG 8
   • Growth rate of GDP per employed person (implied by encouragement of private sector investment and economic growth).
   • Number of new enterprises created and sustained (implied by the Private Economy Promotion Law encouraging private investment).

4. Table: SDGs, Targets and Indicators

Source: scmp.com