APEC finance ministers have been warned of weakness in the global economy, but see infrastructure as a key driver of growth.
Treasurer Joe Hockey and other APEC finance ministers have agreed to help free up the flow of funds to fill an estimated $8 trillion gap in regional infrastructure investment to 2020.
The Asia-Pacific Economic Cooperation finance ministers meeting in Beijing wrapped up on Wednesday with a joint statement which warned of “persistent weakness” in demand.
“Growth is uneven and remains below the pace necessary to generate needed jobs and downside risks persist,” the statement said.
World Bank managing director Sri Mulyani Indrawati told the meeting of the threat posed by weakening commodity prices, the Ebola outbreak in west Africa and instability in Iraq and Ukraine.
“The picture has changed, and 2014 could turn out to be a disappointing year for the global economy,” she said.
“Global growth has been revised downwards and is now expected at 2.6 per cent this year, only marginally up from 2.4 per cent in 2013.”
With infrastructure investment seen as a major driver of growth, the APEC ministers endorsed a “road map” to develop greater use of public-private partnerships (PPPs) to fund major capital works.
“Promoting long-term investment by institutional investors – such as pension funds, insurers and sovereign wealth funds – can expand the financing channel for infrastructure,” the statement said.
But such projects needed clear and consistent policy frameworks from government.
The ministers called for each APEC member to set up PPP “centres” to coordinate policy and development banks to provide greater support.
Australia is pushing the idea of a global “infrastructure hub”, to be discussed during the G20 leaders’ summit in Brisbane, which would not directly invest in major projects but rather help forge and advise on PPPs.
However, China wants to take a more practical step and set up a $57 billion Asian Infrastructure Investment Bank.
The Australian government is weighing up whether to become a founding member of the bank, even though the United States and Japanese governments have expressed concerns about it.
It is understood China intends to launch the bank next month during the APEC leaders’ summit, which will be attended by Prime Minister Tony Abbott.
A G20-led plan to deal with base erosion and profit shifting, and new global standards for exchanging tax information were welcomed as providing a “more equitable and transparent tax policy system”.
An Asia Regions Funds Passport – a project led by Australia, South Korea, New Zealand and Singapore – is set to start in 2016 allowing easier cross-border trade in managed investment schemes between APEC members.
It is estimated the passport could create around 170,000 jobs and save $20 billion a year in costs within the industry.
Mr Abbott will join Chinese President Xi Jinping, US President Barack Obama, Russian President Vladimir Putin and Japanese Prime Minister Shinzo Abe at the APEC leaders’ summit in November.
APEC brings together 21 economies spanning Asia, Oceania and North and South America.