THE Southeast Asian private sector’s role in infrastructure is likely to grow given the current constraints on governments in generating funding, experts said at a forum organized by the Asian Infrastructure Investment Bank (AIIB) Thursday.
“Given that there are fiscal constraints, I expect larger spending (on infrastructure) through private sector participation in whatever form it may be. I think most members are realizing that they have limited fiscal space, but at the same time, they have to be spending on these sectors so we will see greater private sector participation,” Rajat Misra, director general at the Infrastructure Investment Department of the AIIB, said.
Governments around the world are facing fiscal constraints due to the pandemic, which caused them to ramp up their spending on disease containment and stimulus, at a time of weak tax collections due to sluggish economies.
Accelerating infrastructure spending is viewed as one of the items in the toolbox for stimulating economic activity and fast-tracking recovery.
Sachin Patwardhan, head of project and export finance at Standard Chartered Bank, said tapping the private sector to fund infrastructure development will reduce the upfront capital the government needs to put up to proceed with projects, and will help governments conserve their funds.
He said liquidity is ample for public-private partnership (PPP) infrastructure projects but coming up with a suitable deal structure is critical.
While the prospects of PPP seem promising, actual implementation is not easy.
In Australia, the government succeeded with its PPP initiatives, after starting out with heightened public criticism, according to Cyril Cabanes, head of infrastructure transactions for Asia Pacific at Caisse de depot et placement du Quebec.
The Australian government ramped up its infrastructure program in the past 10 years while exploring various models of PPP, which caused privately-led infrastructure projects to increase in size and scope.
“In a country where everybody hates to use the privatization word, it tends to be still quite politically sensitive. It’s not an easy path to take but it worked incredibly well,” Mr. Cabanes said.
“It allowed state and federal governments to multiply the amount of money they’ve been able to inject into infrastructure development considerably. I think the political sensitivity has also reduced because the general public has seen what you get out of this if it’s done well, and managed well,” he added. — Beatrice M. Laforga