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Foreign Exchange

Infrastructure investment: PPP makes a positive impact worldwide

Governments turn to private sector to fund infrastructure.

Governments worldwide recognize that the scale of the infrastructure investment challenge they face is such that they cannot fund it alone. The Intelligent urbanization: roadmap for India study by Booz & Company conducted for the Confederation of Indian Industry shows that as much as $1 trillion is needed to improve basic urban services in India by 2020, and just $26 billion is available from the government, says Anil Menon, president, globalization and smart connected communities at Cisco. "Consequently, there is an increasing use of public-private partnership (PPP) and other models where private parties become involved after the initial build."

Roland Chalons-Browne, chief executive of Siemens’ financial services division, agrees that PPP has gained ground as governments collaborate with the private sector to fund critical infrastructure development in areas such as energy, environment, transport and social infrastructure. "Private lending in infrastructure has increased almost five-fold in the past decade," he adds.

Chalons-Browne notes that in addition to bringing new capital, governments recognize that private sector has other potential benefits. "There is a clear realization among governments around the globe that the private sector needs to be roped in to establish clear, stable and coherent policy and regulatory frameworks," he says.

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