Globalization TrendLab 2015: Overcoming the Infrastructure Gap

Infrastructure needs worldwide have never been greater. Population growth, migration from rural to urban areas, and the rise of the middle class of consumers will in combination create vastly greater needs for transportation, energy, water, and telecommunications. Much of the increased demand will originate from Asia, while repairs and upgrades to existing infrastructure in Europe and the Americas will also add to the gap.

Historically, much of the initiative and the funding for infrastructure was assumed to be governments’ responsibility. Nowadays, given the growing debt burdens of the public sector, the increased complexity of demands on government and the growing consensus that the efficiency orientation of the private sector participation can reduce lifetime costs and deliver better infrastructure, the private sector is expected to play an increasing key role in its financing and management. Although institutional investment capital is presently abundant, it is important to develop ways of matching funding to infrastructure projects using new, innovative structured vehicles. Investors such as institutional funds, sovereign wealth funds, permanent funds, family offices, and private equity firms need to be persuaded to invest in infrastructure through innovative structures so as to complement funding from governments. Infrastructure development will only accelerate, however, to the extent that the different actors involved manage counterparty relations and stakeholder engagement properly and effectively. Interest alignment between concessionaires and owners is also essential to successful outcomes.

The private parties engaged in infrastructure financing and development need to understand the peculiarities of each local institutional context and how policy and regulatory frameworks both enable and circumscribe the value that these projects can deliver over their life-cycle.. Not only is there a dire need for educating the public and policymakers about the realities of infrastructure development, but also the importance must be emphasized of having informed owners who are technically sophisticated and who have the ability to think ahead to the entire project life-cycle.

Read the full report below.

Overcoming the Infrastructure Gap

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