The Federal Government has revealed plans to collaborate with insurance industry operators on infrastructural development that would elevate the country to the next level.
The Minister of Power, Works and Housing, Babatunde Raji Fashola, disclosed this at the just concluded 2016 National Insurance Conference organised by the Insurance Industry Consultative Council (IICC) in Abuja, that insurers can contribute to the infrastructural development through investment in infrastructural projects and insurance of different stages of the projects across the country.
He informed the insurers that infrastructure does not begin and end with road and power but also includes housing, health care among others. He also said that beyond housing, insurers can go into mortgage financing insurance, which is the retail branch aspect of the business.
He further noted that there are a lot of opportunities for insurance in infrastructural development adding that in terms of risk bearing opportunity, policies on infrastructural insurance alone can only be limited by the operates’ lack of imagination and enterprising spirit.
Another speaker at the conference and a public affairs analyst, Dr. Biodun Adedipe, who described infrastructure as a capital asset that is public in nature and enables economic activities, thus enhancing productivity and the quality of life.
He identified infrastructure to include air and land transport logistics, port facilities, electricity, information communication technology, water, sanitation, social services, among others, adding that they come as critical inputs into the productive activities of enterprises and services for household consumption that largely define the quality of life.
Adedipe said: “When infrastructure is available in the right quantity and quality, it unleashes entrepreneurial and innovative energies that are vital to competitiveness and sustainability.Infrastructure has also been an effective way to provide fiscal stimulus for recessed or slowing economies. “The evidence of this abounds in history, and especially during the recent global financial crisis and economic downturn.
“The resulting improvements in the standard of living and income levels further fuel demand for new infrastructure because the increase in discretionary income through urbanisation raises the demand for automobiles (logistics needs), high-end electronics and modern communication gadgets as well as other high quality consumer goods.
“In essence, economic development (especially income growth) and infrastructure improvement are mutually reinforcing.” He also observed that the state of infrastructure could attract new investments in two different ways. “If it is world-class, it makes the business climate competitive and to attract new investments.
This is the common sentiment of investors in their preference for particular investment destinations. If it is not world-class, it creates opportunities for investments in infrastructure. “The typical measures of international competitiveness and attractiveness in infrastructure include power, telecommunications (telephony services and Internet access), roads, aviation (especially domestic air travel), seaports (container cargo handling), potable (clean) water and sewage.(access to sanitation facilities),” he noted.
He also added that there were many lessons to draw from China and South Korea when it comes to resource mobilisation for infrastructure development from both the public and private sources. According to him, it has also been argued that South Korea is to the Next-11 what China represents to the BRICs, and this indeed reflects in Korea’s peculiar commitment to infrastructure development in the last two and half decades.
For South Korea, the infrastructure gap of the mid-1990’s as its economy grew strongly elicited increased new investments at the rate of 20 per cent annually through the 1990s, while government budget had substantial allocations to infrastructure – 11.2 per cent in 1993, 14.2 per cent in 1997 and 14.6 per cent in 2001.
He said: “The economy is troubled for several reasons, and the signs began to show since early 2013. “Economy is diversified by GDP contributions (non-oil sector was 89.71 per cent in Q1 2016), but over-dependent on hydrocarbons (at about 97 per cent of total exports, 77 per cent of foreign earnings and 74 per cent of government revenue over the last 15 years).”
Proffering a way out of the impasse and looming recession, he noted that there must be actual spending on hard-core infrastructure that enable socio-economic activities towards growth and development, and not a primary focus on the ‘stomach.’
According to him, if economic agents have avenues to release their entrepreneurial and innovative energies, they will earn income and be able to attend to their consumption needs. It is quite unfortunate that the 2016 federal budget that gave such hope was mishandled and weakened before it got approved for implementation.
“Some N792 billion (Forty-nine per cent of proposed total MDA capital expenditure) committed to key socio-economic infrastructure was a huge departure from the meagre allocation of N72.85 billion under the same headings in Budget 2015,” he said.