Bridging the Infrastructure Investment Gap: Re-Examining the Case for Partnership Based Procurement Post-Financial Crisis

Anil Kashyap, Jim Berry and Martin Haran

ERES from European Real Estate Society (ERES)

Abstract: Infrastructure provision is a multidimensional problem for governments and businesses globally. Decades of under-investment within developed economies combined with an insatiable appetite for infrastructure within emerging economies has culminated in an infrastructural deficit estimated at circa US$50 trillion over the next 25 years (Ernst and Young, 2010). The scale of the global infrastructural investment challenge markedly exceeds public sector capacity. Indeed, a central theme of national government policies pertaining to infrastructure provision has been premised upon partnership based procurement. Central to the expansion in partnership-based procurement has been the international rollout of the Public Private Partnership (PPP) model, which has now been adopted in more than 40 countries around the world. Within emerging economic markets partnership models are being widely used in the development of transport related infrastructure including roads and ports (air and sea) as well as energy provision. However, investors in complementary sectors such as health and education are using core infrastructure to hedge risk relative to the returns offered in traditional asset classes.This paper utilises Infrastructure Journal (IJ) data to analyse the financial structure (debt-equity ratios) and risk-return characteristics of partnership models globally across the different stages of the infrastructure provision at pre-development, development and post-development stages. Furthermore, the paper will examine key market dynamics within developed nations vis-a-vis emerging economies in terms of the volume of deals reaching financial close as well as highlighting trends in terms of the cost of debt pre and post financial crisis and how this has served to impact on deal size.

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2013-01-01
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