Building for the future: delivering infrastructure for the post-COVID world

By on 17/02/2021
Into the tunnel: The uncertainties around COVID mean that governments have limited forward vision as they develop infrastructure plans. Illustration: Katy Smith

Infrastructure is key to economic recovery – but the pandemic has raised big questions around both public sector finances, and the kinds of infrastructure that will be required. At the Government Finance Summit, top treasury and finance officials from around the world discussed how to build a platform for future growth

“It is quite clear that we’re not returning to a pre-COVID world,” said Peter Lim, Director of Fiscal Policy at Singapore’s Ministry of Finance. “And while there’s still quite a bit of uncertainty, we should start thinking differently about investing in infrastructure.”

While countries grapple with the immediate issue of how to bring coronavirus under control, the pandemic is likely to have longer-term implications for public sector spending around the world. As Lim explained, stimulus spending has put a huge strain on public finances; as countries seek to pay down their debts, competition for public funds is likely to grow.

“We also know that COVID is likely to sharpen intra- and inter-country inequalities. In fact, it could be one of the biggest inequality events in our lifetime,” he said. And while the precise knock-on economic effects remain uncertain, public finance officials “have a very important role” to play in thinking about how to invest in the future, he said.

The task of funding and planning national infrastructure was the topic of a virtual discussion for senior national finance department and treasury leaders gathered for the Global Government Finance Summit, an annual event hosted this year on Zoom. Having considered finance departments’ responses to the pandemic in previous sessions, in the day’s last discussion the delegates looked ahead – considering which forms of infrastructure will be required in the post-pandemic world, and how countries can best develop them.

Extending digital reach

In Singapore, attention has focused on improving the country’s already-sophisticated digital infrastructure for the city-state’s citizens and businesses. Alongside further streamlining and digitalisation of public services, Lim explained, the pandemic has driven online engagement with previously hard-to-reach groups.

Older citizens, for example, used to be reluctant to interact online, he said; now they’re more receptive to digital tools such as WhatsApp, and many have downloaded the app to receive daily government messages on the number and location of COVID cases. “We also teach them through various programmes how to transact [and] use some of these services,” Lim said. “Simple tools, but they go a long way, because face-to-face services are very resource-intensive.”

The Singaporean government has been encouraging digital payment systems for small businesses. Credit: Markus Winkler/Unsplash

Likewise, the government has been encouraging digital payment systems for small businesses, many of which are “essentially one-man store owners, usually older generation,” who sell food and handle cash. Many have avoided digital payments, but now the group is adopting the tech as people move away from face-to-face cash transactions. “We have a role, the government, to facilitate this. We standardise the QR code, we standardise the payment infrastructure, we even give a bonus for many of them to sign up,” Lim explained.

Adjusting to a re-made world

This new appetite for digital products among older Singaporeans demonstrates how COVID-19 is reshaping public expectations as well as governments’ priorities. Citizens now expect to be able to interact through digital channels, argued Dr Harry Tsavdaris, Worldwide Community Lead for Tax and Revenue at knowledge partner Microsoft. And as public expectations rise, he said, COVID will cause an unemployment crisis which will present an “intensifying scaling challenge”.

“The problem that we need to solve now is that the COVID-19 health crisis has created an economic crisis, forcing let’s say tens of millions of people out of work,” said Tsavdaris. On top of the challenges presented by globalisation and automation, the most vulnerable groups must now “deal with the impact of losing their jobs and businesses because of COVID.” Some of these lost jobs will not return, he added – and many of those which do “will be most likely very different from what they were back before the COVID era.” Tsavdaris pointed out that individuals and employers will often need additional digital skills to get back on their feet.

To address these twin challenges, “the action plan that every government must have is: respond to the crisis, recover, and then rebuild for the future,” he said, pointing out that digital infrastructure and workforce skills will be vital in this endeavour. Compared with many physical infrastructure projects, he noted, digital is relatively “easy to build and deliver. It’s not something like a road where you need, let’s say, five or ten years. It’s much more easy; the skilling is the real challenge.”

National digital infrastructures, noted Tsavdaris, will require two main investments: network infrastructure and security systems. Both of these, he argued, can be delivered by tapping into the capabilities of the private sector.

Long road

For some governments, however, roads are still top of the agenda. Adrian Mosneag, Counsellor at Romania’s Ministry of Public Finance, stressed that each country’s infrastructure needs to reflect the state of its existing assets. The EU’s COVID stimulus plans focus on digital and sustainability investments. But in Romania, infrastructure “was, still is, and will be for 10 years I think, a must,” he said. “And when I say infrastructure, I don’t refer to digital infrastructure or environment infrastructure only, but to basic infrastructure – so motorways, railways, Metro, water, sewage.”

The focus in Romania will be basic infrastructure such as motorways, railways and the Metro. Credit: Eduard Balan/Pexels

The Philippines government, explained the country’s Department of Finance Undersecretary, Gil S. Beltran, also sees hard infrastructure projects such as road, rail, air and utilities as the best way “to achieve inclusive and sustainable growth.” Prior to COVID, the Philippines had a “build, build, build programme” to boost the competitiveness of domestic industries – making up for six decades of under-investment, during which less than 3% of GDP had been spent on infrastructure schemes.

The scale of the country’s infrastructure programme is immense. Departments now have “a total of 104 big ticket infrastructure projects under construction in many parts of the country” with a total cost of US$82.6 billion, Beltran explained: these include road, rail and airport expansion projects, while a further 82 projects worth about US$156bn are under evaluation. The majority of these, he added, are funded by Official Development Assistance (ODA) and public-private partnerships (PPP).

“Infrastructure will always be important in achieving sustainable economic growth, especially in under-developed rural areas,” he said. “Building good infrastructure in an area will catalyse economic activity. Businesses will be encouraged to set up shop in places where there’s easy and convenient access to supplies, ingredients and other products, by way of having well maintained roads and thoroughfares. Farmers and fisherfolk will have more and better access to major trading centres, enhancing both the backward and forward linkages of the economy.”

While COVID has proved a major setback, with depressed revenues and higher spending set to drive up deficits over the next few years, Beltran noted that the government intends to push forward with its infrastructure investments. As well as preparing the country for future growth, he said, these schemes will also help the economy recover from the pandemic.

Changing priorities

In some cases, though, COVID looks set to change governments’ infrastructure strategies and goals. Jennifer Duncan, Vice President for Government Innovation at knowledge partner Mastercard, said the firm has seen increased demand from governments “for things like digitalisation of road tolls, for example, to help them get taxation and also limit contact. Similarly, with underground train projects etcetera, we’re seeing – because of the need to reduce the opportunity for further spread of COVID-19 – this desire and increased acceleration towards contactless.”

Markus Sovala, Director General and Economic Policy Coordinator at Finland’s Ministry of Finance

Markus Sovala, Director General and Economic Policy Coordinator at Finland’s Ministry of Finance, speculated that social distancing could, to some degree, remain over the long term – affecting future infrastructure needs. “Currently, public transportation is in a difficult financial situation,” he noted, with a sharp decline in passenger numbers and fewer people travelling for holidays. While it was difficult to predict whether and how coronavirus might recur in future years, the disease might “decrease demand for road and railroad connections” over future years.

Until the pandemic, added Lim, the government had been contemplating doubling airport and subway capacity. But recent events had prompted leaders to reconsider the design, “not least because it’s now looking more likely that COVID may be endemic; it might recur quite often.” Meanwhile, other forms of infrastructure now look more important: the government is focusing on public health and crisis resilience, Lim explained.

However, both of these changes are still “highly uncertain,” Lim said. “By and large, I think I agree with our friend from the Philippines that as long as the project has strong merits and there’s a huge gap [in capacity], you just go ahead and do it. It gives confidence to the economy, and lets people know that you are still building for the future. And I think that’s a very important signal that government should send, especially in the next six or 12 months.”

This report covers the fourth and final session of Global Government Forum’s 2020 Government Finance Summit. The first session covered Spain’s financial response to the pandemic, and the long-term opportunities facing finance departments. The second explored how governments can best target financial support and restore economic growth. And the third examined how governments are using data to build real-time, multi-faceted pictures of the pandemic’s impact on national economies, industrial sectors and people’s earnings.

About Natalie Leal

Natalie is a freelance journalist whose work has been published by The Sun Online, The Guardian, Novara Media, Positive News, and Welfare Weekly, among others. She also writes reports and case studies on global business trends for behavioural insights agency, Canvas8. Prior to working as a journalist Natalie worked for the public sector in social services for several years. She switched careers in 2013 after winning a fully funded NCTJ in a national writing competition. She holds a Masters degree in social anthropology from Sussex University where she specialised in processes of social change and international conflict and reconciliation processes.

Leave a Reply

Your email address will not be published. Required fields are marked *