REES Alumnus Antti Rauhala (MPhil 2017-19) has just completed the report 'Strengthening the role of private finance in infrastructure development in Eastern Partner countries (2019-20)' for the OECD.
Given the scale of infrastructure investment required over the coming decades, Eastern Partner (EaP) countries, like most countries around the world, are seeking to mobilise more private finance for infrastructure development. Strengthening the role of the private sector in infrastructure offers an opportunity to scale up investment in quality infrastructure and help realise efficiency gains in their operation, but it is difficult to achieve. The complex nature of public-private interaction requires considerable attention from policy makers for defining the modalities of private involvement, reflecting the long-term costs in the budgetary process and adequately sharing the associated risks between the public and private co-contractors.
This review seeks to provide EaP countries with evidence-based analysis to help them more effectively and efficiently mobilise private finance to address the twin challenge of both upgrading existing infrastructures and developing new infrastructure that can underpin sustainable and inclusive growth. It provides a basis for identifying opportunities for expanding and/or diversifying sources of private finance. It can also help to identify impediments that inhibit the flow of private financing for infrastructure investment. It also provides a comparative perspective across the region, promoting knowledge exchange among EaP countries and between EaP and OECD countries.
Estimates indicate that EaP countries will need to invest between 5% and 7% of annual GDP in order to finance the implementation and maintenance of regional infrastructure. Public investments currently cover only between 0.7% and 3.4%. At the same time, governments are facing increased demands on public finances exacerbated by the COVID-19 pandemic, which is creating additional pressure on limited state budgets and making it difficult to close this gap. To this end the Strengthening the role of private finance in infrastructure development in Eastern Partner countries (2019-2020) initiative has issued key recommendations for EaP policy makers including:
- Improve the quality of infrastructure governance
- Offer risk mitigation instruments to enable long-term investments
- Build the capacity of domestic financial systems to support infrastructure investment
You can access full details about the the report here.