In this paper for the Regulatory Policy Institute’s Westminster conference, I argue that a significant policy gap needs to be addressed in the way investment need is matched up with the finance available in the market.
There is a global problem in infrastructure funding. On one side of the market there is a lot of cash searching for infrastructure assets in which to invest; and on the other side a large number of big strategically important projects or renewals backlogs which need finance. But many of these projects are not getting to market: there is a gap in the middle of the market, between investors and investable assets. Finance is increasingly available, but the flow to market and packaging of assets (particularly greenfield assets which are yet to be constructed), and the volume and structure of the underlying funding, is not yet adequate to draw finance into projects on the right scale.
Governments have a major role to play in identifying strategic need and shaping the project pipeline. The UK’s new National Infrastructure Commission and its equivalents emerging in other countries will help. Bringing projects to market and improving access to capital in a way which establishes efficient financing costs and makes the best use of public sector balance sheets is also critical. The general approach of the Thames Tideway Tunnel, in which a major infrastructure project benefited from a mix of government action to enhance project creditworthiness combined with the use of more familiar regulatory technology, is one which may well be applicable elsewhere.
The ability of all institutions involved to demonstrate the benefits of infrastructure projects, to keep their governance and commercial arrangements transparent, and to show that they offer the best possible value is critical in getting the confidence and support of consumers and the public.
For the full paper follow this link: http://www.rpieurope.org/Events2016/RPrice.pdf
The RPI conference website can be found here: http://www.rpieurope.org/
(The photo is a new water treatment plant in Świętokrzyskie, Poland, not far from one of my old projects in Zawiercie.)