Public Roads with Private Money: A Way Ahead
IMF Blog, February 29, 2016
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- Public Roads with Private Money: A Way Ahead
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Bibliographic details
- Authors: iMFdirect
- Published: February 29, 2016
Context and problem statement
- Personal experience of poor infrastructure (potholes, missing bridges, lack of cell coverage) highlights broader systemic gaps linking infrastructure shortfalls to large pools of private capital.
- Huge pools of available assets: pension funds, insurance companies, mutual funds and sovereign wealth funds sit on $100 trillion in assets.
- Comparison benchmark: U.S. nominal GDP in the third quarter of last year was $18 trillion.
- Huge infrastructure investment gap: between $1 to 1.5 trillion per year worldwide.
Key findings from the IMF-linked paper
- By putting to work a small portion of the privately owned $100 trillion for global infrastructure development, the positive impact on the global economy could be bigger than any other source of large-scale private investments.
- The paper referenced is titled: From Global Savings Glut to Financing Infrastructure: The Advent of Investment Platforms.
- New classes of facilitators—examples given include the European Investment Bank and the Asia Infrastructure Investment Bank—are emerging to enhance cooperation between public and private partners.
Risks and governance concerns
- Risks of engaging private investment in inefficient projects, including "bridges to nowhere."
- Risk of granting too generous concession terms, illustrated by the example of high highway tolls.
Proposed solutions and policy recommendations
- Creation of infrastructure securities.
- Creation of a global infrastructure investment platform.
- Use of facilitators (such as the European Investment Bank or the Asia Infrastructure Investment Bank) to enhance public-private cooperation while managing risks noted above.
About the blog and institutional context
- IMFBlog is a forum for the views of the International Monetary Fund (IMF) staff and officials on pressing economic and policy issues of the day.
- The IMF, based in Washington D.C., is an organization of 191 countries, working to foster global monetary cooperation and financial stability around the world.
- The views expressed are those of the author(s) and do not necessarily represent the views of the IMF and its Executive Board.
Public Roads with Private Money: A Way Ahead — iMFdirect, February 29, 2016