Needs Are Not Enough: The Gravity of Private Cross-Border Infrastructure Investments
Type
working paper
Date Issued
2026-08-12
Author(s)
Abstract
Global infrastructure needs are substantial and exceed what public balance sheets can provide. Therefore, private participation is an essential pillar of the global infrastructure financing mix. Especially in emerging and developing economies, where needs are greater, government budgets are smaller, and the domestic investor base is limited, private cross-border infrastructure investments are crucial in meeting these needs. However, globally, private capital does not flow to where needs are greatest: investment remains concentrated in advanced economies, while many high-need countries attract little investment. This paper explains these global infrastructure investment patterns and asks when infrastructure needs become investable opportunities for private sponsors. In doing so, we develop a two-sided structural gravity framework in which origin-side capital supply, bilateral frictions, and destination-side needs, attractiveness, and bankability jointly determine investment flows. Combining seven deal-level databases, we construct a novel dataset of 49,268 unique private cross-border infrastructure transactions across 169 origin and 214 destination countries from 2005 to 2025. We show that investment follows a pronounced gravity pattern: distance deters flows, while political alignment and prior bilateral experience strongly amplify them. Furthermore, infrastructure needs attract private capital on average but primarily in destinations with stronger governance, deeper financial systems, greater domestic credit capacity, and more stable macroeconomic conditions. Hence, needs alone are not enough: private sponsors finance infrastructure needs when the destination environment makes needs bankable. The scarcest resource in global infrastructure finance is not capital, but bankability.
Language
English (United States)
Keywords
Cross-border Infrastructure Investment
Private Participation
Structural Gravity Model
Infrastructure Needs
Bankability
HSG Classification
contribution to scientific community
Refereed
No
Subject(s)