One of the conundrums of institutional infrastructure investing has been a dearth of investments that meet the standards private investors demand. Much of the global infrastructure stock is owned and operated by governments that have different goals and objectives than private investors; namely, they are not concerned with earning a return on investment for equity investors. Most of these assets are financed with public debt. But the trend for many governments globally over the past several decades has been lower taxes, leaving less financing power for infrastructure projects.
Into the breach have come various types of financing arrangements to marry public and private capital ranging from loans and credits and public private partnerships to make these projects and investments more inviting for private investors. Despite these efforts, there remains a mismatch in the private capital available for investment and the infrastructure assets available for this capital. Many groups and agencies, including the OECD and development banks such as the EIB and ADB to the G20 and individual country and state governments are taking steps to help the public sector make more investments palatable to private investors.
To that end, the topic of law firm CMS’ latest report, Infrastructure Index: A new direction, addresses this challenge.
“National governments need to stimulate their economies by creating more projects, which the private sector can invest in,” says Wim Blaasse, managing partner with the Dutch Infrastructure Fund, in the report. “There is a lot of private capital waiting.”
The Netherlands earns the report’s highest marks for being a market that is receptive and accommodating to private capital investment. From a transparent and efficient procurement process for infrastructure to an active transaction market with significant private investment, the Netherlands has achieved what many hope other countries can replicate.
“[The Netherlands has a] consistent policy when it comes to PPPs, as all projects which reach a certain criterion are simply procured as PPPs”, says Blaasse. “It provides certainty, which in turn creates a large pipeline, which means companies can build up large teams in the country.”
The CMS report goes on to highlight The Netherlands has the best infrastructure in the European Union, as measured by the World Economic Forum, with the highest-quality ports, airports and roads and the third-best railroads. “The country hosts one of Europe’s main ports, Rotterdam, and the continent’s third-largest airport, Schiphol,” notes CMS.
