05 Jun What We’re Reading in Infrastructure, June 5
The staff of the Bipartisan Policy Center’s (BPC) Executive Council on Infrastructure share some recent publications, speeches, and testimony relevant to infrastructure policy and finance. The views expressed in these pieces do not necessarily represent the views of the council, its co-chairs, members, advisors or BPC.
Infrastructure Investment Policy Blueprint
By the World Economic Forum
“Governments the world over are facing an acute need for new or modernized infrastructure; the estimated shortfall in global infrastructure debt and equity investment is at least US$ 1 trillion per year. There is no fundamental scarcity of private capital – investors are frequently falling short of their target allocations. Despite infrastructure’s in-principle attractiveness as an asset class and the reduced role of traditional financing, investors struggle to find opportunities that are globally competitive on a risk-adjusted return basis.
“Overseen by the Global Agenda Council on Long-Term Investing, the Infrastructure Investment Policy Blueprint offers a practical set of recommendations for governments on attracting private capital for infrastructure projects while creating clear social and economic value for their citizens.” Read the full report here. Read the November 2014 report, Direct Investing by Institutional Investors: Implications for Investors and Policy-Makers, here.
What have we learned from the crises of the last 20 years?
By Stanley Fischer, Vice Chairman, Board of Governors of the Federal Reserve System at the International Monetary Conference, Toronto, Canada
“Nearly seven years after the failure of Lehman Brothers, the economies of the United States, Japan, countries within the Euro zone and other European countries who continue to use their own currencies, among them the United Kingdom, are still struggling to return to sustained growth, two percent inflation rates, and positive real central bank interest rates, and thus to leave behind the imprint of the Great Recession.” Read the full speech.
Partnership Financing: Improving Transportation Infrastructure Through Public Private Partnerships
A report by the Eno Center for Transportation
“While many countries frequently use P3s to deliver transportation infrastructure, experience with this approach in the United States is more limited. Since 1990, only 20 P3 design, build, finance, operate, and maintain (DBFOM) projects have reached financial closure in this country and only a handful of states have experience entering into these types of P3 contracts. The limited use of P3s in the U.S. context to date is partly due to regulatory and legislative barriers that exist at the federal, state, and local levels, and tax-exempt municipal bond markets in the U.S. that create disincentives to P3s securing capital in private markets. However, interest in overcoming these barriers is growing. As of January 2014, 33 states, Puerto Rico, and the District of Columbia had adopted laws authorizing P3s for highway and/or bridge projects. P3 contracts for transportation projects have closed in 15 states, and according to the Public Works Financing Newsletter’s Major International Projects Database, another 30 P3 projects in transportation have been proposed. Still, barriers to successful P3 implementation remain.” Read the full report.
Infrastructure lending must be based on environmental and social safeguards
By Vinod Thomas, Brookings Institution
“Development banks are gearing up for increased infrastructure financing to support the drive for stronger economic growth. That’s good news for narrowing the chronic gaps in energy and transport holding back growth in many economies. But, unless accompanied by protective safeguards, these projects risk damaging the environment, climate, and communities—and actually hindering growth.” Read the full article.
America’s Leaders Need to Tell a New Story About Infrastructure
By Rosabeth Moss Kanter, Harvard Business Review
“Infrastructure has no ideology or party; bridges can collapse in red states as readily as in blue states. A new narrative could show how past infrastructure investments created opportunity. A new vision could look beyond maintenance to investments that build communities, create a foundation for the nation’s future, and spur economic growth. That growth could in turn generate trillions more in returns while improving opportunity and quality of life. Framing it that way would put in perspective the trillions of dollars the OECD and the American Society of Civil Engineers say is required to put American back in the lead.”Read the full article.
Public Footprints in Private Markets
By Robert M. Kimmitt, Foreign Affairs
“In 1953, eight years before its independence from the United Kingdom, Kuwait established the Kuwait Investment Board to invest its surplus oil revenue. That was perhaps the first-ever “sovereign wealth fund” (SWF), although the term would not exist for another 50 years. SWFs are large pools of capital controlled by a government and invested in private markets abroad. Today, they are growing rapidly in both number and size. Twelve SWFs been established since 2005, and altogether SWFs control roughly $2.5 trillion — a figure now growing, according to some estimates, by $1 trillion a year. These developments should not cause alarm, but they do raise legitimate policy questions. Governments should consider the implications of SWFs’ growing importance with calm and precision.” Read the full article.
Northeast Corridor (NEC) Five-Year Capital Plan FY 2016-2020
By Northeast Corridor Infrastructure and Operations Advisory Commission
“The NEC Five-Year Capital Plan integrates capital programs and priorities among its four infrastructure owners, nine passenger rail operators, and government agencies throughout the Northeast. The Plan is a united strategy to reverse decades of deterioration and rebuild the nation’s busiest passenger railroad.”
“The NEC Five-Year Capital Plan is a joint effort among eight states, the District of Columbia, the U.S. Department of Transportation (U.S. DOT), Amtrak, eight commuter rail agencies, and other stakeholders to sustain a national asset that carries 750,000 passengers each day, moves a commuting workforce that contributes $50 billion annually to the gross domestic product, and transports more intercity passengers within the Northeast than all airlines combined. The loss of the NEC for a single day could cost the country $100 million in added congestion, productivity losses, and other transportation impacts.” Read the full plan.
Quality, Not Just Quantity, of Infrastructure Needs Attention
By Greg Ip, The Wall Street Journal
“Federal infrastructure investment is not directed to the projects with the biggest payoff in productivity, safety or environmental protection. Inadequate funding, badly targeted, is a recipe for undermining the country’s long-term economic potential. Bridges raise productivity; bridges to nowhere don’t.
“Outside of a few very small new programs, it is nobody’s job in Washington to figure out which roads or bridges we should invest in,” says Aaron Klein of the Bipartisan Policy Center, a think tank. “It is a decentralized structure where state and local authorities are highly empowered.” Read the full article.