Civil Infrastructures: Is There a Role for Private Capital Markets?
July 20, 2005
by Richard G. Little
On July 20, 2005, the Keston Institute for Public Finance and Infrastructure Policy convened
a colloquium, "Financing Civil Infrastructures: Is There
a Role for Private Capital Markets?" to discuss whether
and how private capital markets could address the investment
deficit caused by the inability of the public sector to establish
reliable funding streams for these systems. It was concluded
1. There is definitely a role for private capital in the delivery
of infrastructure services although the specific nature of
private involvement will be best determined on a case-by-case basis.
2. The potential availability of private capital is not clear.
For example, a typical REIT has about $3 billion in assets
and a typical mutual fund about $1 billion. When compared
to investment shortfalls in the range of $10’s of billions,
a REIT-like vehicle may not be able to attract sufficient
capital to address the full need. However, private investment
banks seem eager to become involved with existing infrastructure
projects with an established user base and revenue stream.
3. Public-private partnerships offer many potential advantages
for helping to overcome investment deficits. However, the appropriate
knowledge base and skill sets for the public sector to negotiate
these agreements should be determined and legislative or regulatory
barriers to their implementation should be removed.