Why ‘Billions to Trillions’ Has Failed to Attract Investment in Infrastructure

Why It Matters

Translating the high social returns into bankable projects would give pension funds and other asset managers superior risk‑adjusted yields while tackling a core development bottleneck.

Key Takeaways

• Median social return on EMDE roads: 55%
• Returns 8‑14× higher than US private capital
• Private participation in EMDE infrastructure remains minimal
• Construction costs vary $0.5‑$3.2 million per km
• Institutional reforms needed to unlock private funding

Pulse Analysis

The global infrastructure gap remains stark: roughly one billion people live more than two kilometres from an all‑season road, limiting access to jobs, markets and essential services. Multilateral development banks have championed a "billions to trillions" narrative, urging advanced‑economy pension funds and asset managers to channel private capital into EMDE public projects. Yet private inflows have stayed flat, reflecting investors’ discomfort with opaque return data, heightened country risk, and the absence of a liquid market for infrastructure claims.

A recent study by Chari, Henry and Picardo applies a production‑function framework to 55 emerging economies, estimating a median social rate of return of 55% and a mean of 97% for an additional kilometre of two‑lane highway. By contrast, the United States delivers about a 7% return on private capital, implying an eight‑to‑fourteen‑fold upside in developing regions. The analysis also uncovers wide dispersion: marginal products range from $4 million in the Philippines to $0.4 million in Namibia, while construction costs swing between $0.5 million in Mongolia and $3.2 million in Nigeria, producing returns from 230% down to under 30% across countries.

Realising this potential hinges on institutional reforms that lower political, regulatory and currency risk. Strengthening contract enforcement, enhancing transparency, and standardising cost data can make projects bankable and attractive to global investors. With robust risk‑adjustment mechanisms, advanced‑economy savers could capture superior, diversified returns, while developing nations reap the economic boost of better‑connected labor markets and higher productivity. The convergence of high social returns and improved financing structures could finally turn the "billions to trillions" slogan into a tangible capital flow.