Docstoc

territorial development policy the role of infrastructures OECD

Document Sample
territorial development policy the role of infrastructures OECD Powered By Docstoc
					               CONFERENCE

TERRITORIAL DEVELOPMENT POLICY: THE ROLE OF
             INFRASTRUCTURES

                 2 AND 3 MAY 2002
             LONDON UNITED KINGDOM



                  ISSUE PAPER




                        1
                                             INTRODUCTION



1.        The Conference Territorial Development Policy: the Role of Infrastructures is part of an ongoing
research of the Territorial Development Policy Committee (TDPC) of the OECD on infrastructure policies
in relation to territorial development and is held in collaboration with the UK Department for Transport,
Local Government and Regions (DTLR).

2.        In the last years governments of OECD countries and the OECD Secretariat identified shifts in
the development processes occurring in their countries, regions and local communities as well as in the
policies supporting these processes. These shifts, together with a large consensus regarding the importance
of governance in territorial development, as well as the interests of the co-organising party the United
Kingdom (UK) government, more specifically the DTLR, have been the basis for the choice of the issues
to be discussed and debated upon at the Conference.

3.       Before entering in this choice, it is important to lay out briefly the shifts and the concerns relating
to governance, as identified by OECD members. The shifts taking place in development policies in most
OECD countries are:

   from subsidies to competitiveness-enhancing policies in addressing territorial disparities; and

   from traditional sectoral to space-based sectoral or multi-sectoral actions (both in rural and urban
    areas);

4.       The concerns of the governments relating to governance can be focussed in particular on
innovative solutions in the governance of territorial development policies, namely in the institutional
partnerships among different levels of government and in partnerships involving social partners and civil
society.

5.         The added value of the Conference will be that it provides a forum where representatives coming
from OECD member countries, UK public officials, representatives from the private sector and
international organisations will have the opportunity to share ideas, evaluate, analyse and promote
innovative solutions used in policies of infrastructure development. These policies in turn support and
facilitate territorial development policies for countries, regions and local communities.


Choice of types of infrastructure

6.        Before entering into the outline of the issues that will be discussed at the Conference it is
important to set out the approach the TDPC is undertaking with regard to conducting research on
infrastructures.

7.        The research will aim at covering different types of infrastructures involving hard infrastructures,
soft infrastructures and green infrastructures. In its first phase, consisting of the Conference, attention will
be given to hard infrastructures and in particular to Transport, Energy and ICT infrastructures. These
infrastructures appeared to raise great interest in the OECD countries and in the United Kingdom which is

                                                       2
the host of the event. Nevertheless, in its second phase attention will also be given to other categories of
infrastructures.

8.        At the Conference there will be presentations on research on infrastructure development and
projects regarding the three categories of hard infrastructures mentioned above. On the basis of these
presentations, the chairpersons’ introduction papers and additional documentation circulated at the
conference, an attempt will be made to answer the questions raised, and to fulfil the objectives set out, for
the separate sessions. In view of the fact that the Conference is a first phase in an ongoing research on
infrastructures it will foremost provide the possibility to specify on which issues and in which direction
research on infrastructures will have to be conducted. Starting the research with hard infrastructures, on
which extensive knowledge has already been accumulated over the years, a platform can be created from
which research on "newer" types of infrastructures, soft infrastructures and green infrastructures, can be
undertaken.


Urban, Intermediate and Rural Areas

9.        Next to covering the different types of hard infrastructure, participants at the Conference will
take into consideration, the different types of territorial areas: rural areas, intermediate areas and urban
areas. At the Conference attention will be given to these differences as well as to the particularities of the
different types of areas, in the presentations to be held at the Conferences, as well as in the introduction
papers provided by the Chairpersons.




                                                      3
                                               PROPOSALS



10.       Within the described framework of the research conducted by the Territorial Development Policy
Committee on infrastructures in relation to territorial development, the Territorial Development Service
(TDS) of the OECD supporting this Committee proposes various possibilities to continue the described
research after the Conference.

11.      Before elaborating on these proposals it is important to note a trend concerning the use of the
concept infrastructure.

The research field “infrastructures” has become very vast which can lead to a reduced meaning of the
concept. To put it more clearly the concept infrastructure is applied in many policy areas (for example in
education and healthcare policies, organisation and management policies or environment policies) and
has thereby become a container concept encompassing many meanings. Therefore holding an overall
research on infrastructures without a specific focus loses significance because no general
recommendations or principles can be formulated which apply to this divergence of types of infrastructure.

12.        Nevertheless, within the framework of these different types of infrastructures, it is worthwhile to
do research on infrastructures in relation to territorial development. The issues discussed in the Conference
Territorial Development Policy: the Role, of Infrastructures, integrating infrastructures into territorial
development policies; land purchasing and the Not In My Back Yard issue; horizontal and vertical
governance partnerships and the financing of infrastructures are also of interest in the proposals that will
be raised.

Based on this assumption the proposals are the following:

1. Organise a Conference on different types of so-called “hard” infrastructures with the overall objective
   to better integrate policies to develop these infrastructures into territorial development policies. After
   having focussed on Transport, Energy and ICT infrastructures, this Conference would focus on Health,
   Education and Water Infrastructures (H.E.W.). By focussing on these infrastructures the attention of
   the research is in a relative way redirected from infrastructures supporting primarily economic growth
   to infrastructures which support the effective fulfilment of the basic needs of individual persons.

   In various OECD countries citizens and governments indicate that there is a crisis in their health care
   sector. The OECD engaged itself in 2001 for a three year Health Project. The project focuses on
   measuring and analysing, the performance of health care systems in OECD Member countries and
   factors affecting performance. The purpose of the analysis is to help decision-makers formulate
   evidence-based policies to improve their health systems' performance. The reason for this project is the
   fact that policymakers are facing a number of major policy challenges: A rising demand due mainly to
   population ageing and rapid innovation and diffusion of medical technology; a concern about
   efficiency in provision; and continuing health inequalities. Part of these inequalities is caused by the
   existence of disparities between countries and even between regions with regard to health care facilities
   provided to citizens and communities. Even though the principle that every territorial unit has its own
   development potential and thus not every unit will require the same amount and kind of
   facilities/infrastructures, has gained large support, the equity principle is currently considered essential

                                                      4
   in the provision of health care. Thereby the provision of health care facilities becomes an issue with a
   strong territorial perspective for which the issues mentioned previously could be raised.

   Another basic need to citizens is an effective and efficient provision of education. However also in the
   accessibility to education facilities disparities exist within OECD countries. First of all in remote areas
   the equity and efficiency principles are sometimes viewed incompatible. In certain areas preservation
   of small classes and school facilities is considered to cost too much with as a result the closing of
   school facilities. Consequently the accessibility of education has in physical and financial ways become
   less. The problem becomes even more important for higher education levels where the facilities are
   scarcer and differences between the education quality provided between facilities can become bigger.
   To counter these problems OECD countries have developed in different ways social policies in the
   form of scholarships for students or transport services for children living far from school. However
   new possibilities related to infrastructure development are available to try to solve these problems. One
   of these possibilities is the creation of distance learning, which necessitate the adequate infrastructures,
   such as closed networks or videoconferencing possibilities so that courses can be followed from a
   distance. Next to education programs, the availability of the necessary facilities and equipment is
   essential to create opportunities for children and citizens in general to be able to enjoy a good
   education. Nevertheless differences between existing facilities exist, which relate to the available
   equipment. With these examples it becomes clear that also the provision of education has a territorial
   component. Furthermore the issues raised before are also with regard to education infrastructures more
   or less applicable.

   Water management infrastructures such as dykes, dams, large irrigation systems, or water purification
   systems fulfil various basic needs of citizens, such as the provision of drinking water, the creation of
   opportunities for agriculture in arid regions and upholding security against natural disasters. Certainly
   in view of the increasing emphasis made on national and international level on the scarcity of water
   resources and rising sea and river levels it would be interesting and important to focus on
   infrastructures which would help to solve these problems. In several countries, for example Mexico, r
   the United Sates, Portugal or the Netherlands the mentioned trends have been identified, thereby
   emphasising the need to do research on these infrastructures which (should) take into account the needs
   of territorial entities.

2. It is also possible to organise research on the so-called “soft infrastructures”, which relate to services
   provided in different sectors to stimulate and develop social and human capital. Although “hard
   infrastructures” are a necessary pre-condition for success they are primarily supporting policies to
   stimulate economic growth, guarantee social security and stimulate information and knowledge
   gathering and counter health care problems. Instead of focussing on concrete physical facilities soft
   infrastructures refer rather to the services provided to citizens with a strong human component. They
   are for example networks of citizens and associations and learning communities. The use of the
   concept “soft” infrastructures is ever more increasing in the OECD countries. However, it seems that a
   clear definition of this (relative) new concept has not yet been established. It is therefore wise to start
   the research on these infrastructures in relation to territorial development by a definition process,
   which could take the form of a large survey research, followed by a or several expert meetings.

3. A third proposal is to focus research upon another new concept, which is “green infrastructures”. In
   view of increasing concern regarding the problem of deforestation (last month an international
   Conference of the UN was organised in the Hague regarding the Convention on Biological Diversity)
   and the reduction of greenfields in urban areas, policies are developed to counter these problems. In the
   United States policies are developed to re-introduce trees in urban but also rural areas. The European
   Union provides already for years funding to farmers for not cultivating certain land and preserve green
   areas. The creation of natural parks furthermore contributes to the preservation of so-called “green


                                                      5
infrastructures”. To conclude, in view of their scarcity one might consider them to be and economic
good. These developments have a direct effect upon territorial units and could change next to the
environment their economic position. Next to positively contributing to reducing health care problems,
related to pollution they can also stimulate certain economic sectors such as the tourism and the
pharmaceutical industry. Strongly related to the preservation and the development of green
infrastructures is the development of waste management infrastructures. They have a clear territorial
component and emphasise the problem of negative spillover effects. In view of the demographic
growth that can be discerned all around the world, the waste problem becomes to an increasing amount
urgent. How to deal with this problem by developing waste management infrastructures and at the
same time integrate these infrastructures into territorial development policies to uphold principles of
equity and effectiveness and efficiency is an important question in a globalised world with increasing
environmental concerns. Raising issues such as, integrating the development of green and waste
management infrastructures into territorial development policies, governance partnerships, financing
and Nimbyism is important to accomplish the fulfilment of these principles.




                                                6
SESSION 1 DEVELOPING INFRASTRUCTURES IN VIEW OF STIMULATING ENDOGENOUS
                             DEVELOPMENT




Objective Session I

13.      This Session aims at developing ways to evaluate needs of territorial units for infrastructure
development and determining criteria for evaluating infrastructure development policies. More specifically
the Session will help to set a first step in establishing the criteria, which will enable researchers,
policymakers and politicians to evaluate if the shift in paradigm regarding development policies is
successfully implemented in policymaking processes.


Rationale

14.        The TDPC has identified a general trend towards a more space-based development on the basis
of identifying the development potential of territorial units, their needs and the involvement of private
sector actors as well as actors from civil society in a more bottom-up approach to policy-processes. The
need to use this approach does not fundamentally differ between types of infrastructure. The same
territorial development strategy will be applied to Transport, Energy and ICT infrastructures. Naturally, the
implementation of this strategy can differ between the different types and within the categories of
infrastructure but at the basis the strategy should remain the same.

15.        Infrastructures are facilitating elements, which can support the policies of a territorial unit (local
community, region, country or even trans-national region) to attain maximisation of the assets of the unit
(territorial capital). Instead of being an end to itself infrastructure development is a mean to obtain
economic growth; however it is an important mean. Infrastructures have a direct and physical impact on
the areas in which they are developed. It will thereby directly effect the characteristics of an area and thus
the assets of a territorial unit. As a consequence it is essential that the choice of infrastructure development
is a deliberated one, based on the particularity of a territory and consequently expressed needs. The
principle of particularity was identified in one of the latest publications of the Territorial Development
Service (TDS) Cities for Citizens (OECD, 2001) which includes the principles for Metropolitan
Governance, which have been adopted by the OECD Council. It states that: except where the case of
standardisation is justified, policies and institutions of government must be crafted to fit the unique
circumstances of various parts of the country and to achieve the best cost efficiency Even though this
principle was drawn up for governance in metropolitan regions it can be applied to rural and intermediate
areas as well. The differences between those areas and with urban areas underlines the importance of
focussing on particularity with regard to policymaking.

16.       On the basis of the particularities of a territorial unit, needs occur, which can include for
example: the need for roads, or railways providing a rural region with better accessibility to other regions
and countries. This accessibility in turn, could support economic endogenous development making use of a
technically trained and skilled labour force of a region who can be used for the metal industry and which
uses the iron resources of the region. It is therefore important to take these needs into account and if
possible to anticipate to them by well identifying the development potential of a territorial unit.

                                                       7
17.        For a long time this was not done and a so-called traditional sectoral approach was used for
infrastructure and territorial development. This traditional sectoral approach means that a relatively top-
down approach is conducted in which general policies, discarding specific characteristics of spatial areas,
are formulated. Consequently these policies were and are not able to identify properly the development
potential of a territorial unit, determine the needs of territorial units and distinguish which infrastructures
should be developed to facilitate fulfilment of this potential. It furthermore does not provide sufficient
possibilities, due to its top-down approach, to change needs into demands, which is an important phase in
the initiation of development policies.

18.       In contrast, a space-based approach takes the development potential of territorial units as its
starting point and tries to identify, analyse, evaluate, and if possible anticipate needs.

19.       It does not suffice to determine what are the needs (because there are always plenty of them). It is
also essential to value those needs through evaluation. This means that not only the needs based on the
potential of a unit are taken into consideration but also the obstacles which have led to the fact that the
potential of, for example, a region or country have not been reached. This evaluation has to be done
because a realistic prioritisation in the development of a territorial unit is necessary, due to a restricted
amount of resources.

To give an example:

The potential of a region in a particular sector, e.g. tourism, is minor but the obstacles are major such as
important degradation of cultural and natural assets as well as the fact that the sector would only supply a
small number of extra jobs. However, in the sector of Agricultural industry this region might offer an
important potential, due to an important number of farms in the region and the creation of several
professional schools to train persons to become farmers or for agriculture related jobs. By supporting the
agricultural based industry an important number of jobs could be created, the costs of transportation
could be reduced significantly, because the industry is already on location, and endogenous development
in related sectors could be stimulated.

20.       In view of these two options, it seems more appropriate to choose the second option and focus
investment on infrastructures which facilitate fulfilling the agricultural industry potential. The priority of
development policies will lie in developing this potential and will less focus on stimulating tourism. Both
needs were however expressed but only through evaluation of the potential and the obstacles, prioritisation
could be reached.

21.       To avoid that the wrong need is converted into demand, continuous involvement and active
participation of local level actors is required. A shift to a more bottom-up approach is required to avoid
discrepancies between prioritised citizens’ needs and more centrally determined political demands. The
principle of subsidiarity as identified in Cities for Citizens is then applied not only to the implementation of
policies but also with regard to the initiation of policy processes and formulation of policies. This
involvement furthermore protects policymakers and politicians from the perspective that a single general
approach can be used for territorial development. On the contrary there exists no single model of
development but there is instead a wide variety of paths to growth, as is identified in the Territorial
Outlook (OECD, 2001). Furthermore, sub-national government support but also support from the private
sector and civil society is certainly in the case of infrastructure development vital if decision makers do not
want to have important delays in the development processes and consequently efficiency losses.




                                                       8
Questions Session I

22.     Even though no single model of development exists there is a need to determine the way in which
policymakers and politicians will have to deal with the identified shift and the role of infrastructure
development in relation to this shift. It will therefore be useful to address the following questions:

1)     How do we evaluate the needs of territorial units for infrastructure development and the needs for
       tomorrow (in the longer term)?

2)     On the basis of which criteria do we need to evaluate infrastructure development policies, taking
       into account the paradigm shift?




                                                   9
   OBJECTIVE SESSION II LAND PURCHASING AND ‘NOT IN MY BACKYARD’ (NIMBY)
                                 PROBLEM




Objectives Session II

23.       The aim of Session II is to get a better view of what are the legal problems faced by OECD
countries regarding land purchasing and to identify innovative solutions to solve them as well as solutions
to reduce Nimby sentiments surrounding infrastructure projects.


Rationale

24.        Infrastructure development raises nearly in all cases complex legal issues, which can result in
important delays and even cancellations of projects, if not dealt with in a proper way. These issues relate
not only to the financing of infrastructures for which often various contracts with the private sector have to
established (this will be discussed in Session IV) but also with the issue of expropriations for land
purchasing which is often necessary to develop hard infrastructures. In the paper "Evaluation of
Infrastructure Policies for Accessibility and Growth (OECD/TDPC, 2001) it became very clear that many
OECD countries were and are confronted with delays. An important factor causing these delays is
opposition of citizens to the development of projects. This is very visible during policy processes to decide
upon and implement infrastructure projects. From the numerous examples that can be mentioned we can
name, the creation of, a third airport for Paris/Ile de France, the Betuwelijn connecting the West of the
Netherlands with the German Ruhrgebiet for freight transportation, and the creation of Heathrow Terminal
5 in the United Kingdom. Next to environmental concerns causing a 'Not in my backyard' (Nimby)
attitude, expropriation of citizens from their houses, stimulates public involvement in the policy processes;
an involvement which can be an integrated part of the processes or not.

25.       Confronted with the indicated problems of delays causing important practical, political and
financial constraints, governments in OECD countries are continuously undertaking initiatives to simplify
legal issues concerning expropriation procedures and land purchasing in general. In this case many
countries are confronted with a historical past in which land was considered the primary economic asset
(such as in France or the United Kingdom) and therefore needed to be well protected. Several countries
(the Netherlands, Belgium and Japan) or metropolitan regions (the greater London area, Tokyo or Seoul)
are furthermore confronted with a scarcity of land, which raises the prices of land and which in turn
negatively influence the costs of infrastructure development. The problem is furthermore aggravated by the
trend towards increasing demand for infrastructures to support economic development and a higher level of
quality of life.

26.       Simplifying legal procedures for land purchasing would reduce the previous mentioned
constraints and could be part of the solution, but would also reduce the voice of the citizens in
infrastructure development policies if no counter measures are undertaken. If this is not done in a proper
way, citizens will undertake more radical initiatives and public support will change into public animosity
towards infrastructure projects and possibly territorial development as a whole. Governments in the OECD
countries have acknowledged the fact that citizens are important players in development processes, but

                                                     10
they differ in their approach to include the citizens and the extent to which they involve them in
policymaking processes. In certain countries citizens will be consulted in a way in which they only will
have the possibility to express their agreement or disagreement with a policy or project, while in other
countries they take actively part in the development of the project and in determining the conditions in
which the project will be developed.

27.        It is however important to recognise the fact, as do DTLR and the OECD, that governments are
at the service of citizens and that infrastructures projects are developed to stimulate economic growth but
more importantly to support citizens and facilitate their lives. Solutions need therefore not to come from
citizens who’s ‘Not in my back yard’ attitude is understandable, but from governments who have to
acknowledge the fact that such an attitude means that communication problems exist between them and
their citizens.


Questions Session II

28.      It is interesting to find out in what way OECD countries deal with the dilemma of, on one hand
streamlining legal practices which reduces the time needed to acquire the basic condition of land, to
develop infrastructures, and on the other hand provide sufficient possibilities to citizens to be involved in
the policymaking processes. In view of this dilemma several questions can be formulated which in the
Session can be debated upon.

1)       What are the legal problems that OECD countries are facing in purchasing land for
         infrastructure development?

2)       Which solutions have been developed to solve these legal problems?

3)       In what way do OECD countries try to solve the Nimby problem, without reducing the
         possibilities for citizens to voice their concerns?




                                                     11
         SESSION III GOVERNANCE FRAMEWORK: HORIZONTAL AND VERTICAL
                                 PARTNERSHIPS




Objectives Session III

29.       This Session aims at identifying common measures undertaken by OECD member countries to
develop and strengthen partnerships to support an effective and efficient infrastructure development
strategy for territorial units at all levels.


Rationale

30.        In OECD countries the necessity of developing an adequate framework for governance is
growing in importance and has been identified as one of the major challenges of governments today. The
importance of finding appropriate solutions to develop such frameworks has been recognised by the OECD
which has engaged itself in elaborate research on governance in various policy-fields. In the context of
territorial development governance plays a fundamental role, consisting of co-ordination, communication
and collaboration between actors at different government levels (vertical partnerships) and between a wide
range of actors coming from public and private sector as well as civil society (horizontal partnerships).

31.       In view of the identified shift to a more space-based paradigm the need of establishing
partnerships becomes very important and is probably nowadays the only governance solution capable to
adequately face this paradigm shift. Vertical partnerships anticipate to the need of having a more bottom-
up approach in which sub-national government levels can voice their demands and influence, by actively
taking part in policy processes, decision making. Horizontal partnerships, in which private actors and civil
society take part, are as important and anticipate to the growing trend that citizens show more assertiveness
than before. This is partially due to their higher average education level and also because of the
consumption culture in which citizens are nowadays been raised (especially in the OECD countries), and
the central role the business community plays in the development of territorial units.

32.       The need for these partnerships becomes clearly visible in the case of infrastructure development,
especially major projects, in which a multitude of actors have to be involved, differing from government
actors, to various kinds of companies, to NGO's and active citizens. In the case of infrastructure
development it is very important to know how to deal with this involvement and which arguments/tools
have to be used to acquire support from the business community and the civil society. At the same time it
is very difficult because infrastructures do not always provide in first instance positive effects and to the
eyes of some only negative effects. Certain projects are developed in support of attaining long-term
objectives, such as improving the endogenous development of a region by developing certain economic
sectors.

33.       Partnerships are thus a central technique in opening up governance and find maximum support
financially as well as politically. The concept can, however, be ambiguous and has to be defined clearly.


                                                     12
Successful partnerships need a clear vision; clarity about what partners will do; critical mass and resources;
targeting; leadership, and teamwork/working with conflicting interests and equality between partners.
However before being able to acquire these results one has to question oneself on how to obtain them.

34.      Nevertheless, the establishment of partnerships can be considered as a first phase in developing a
comprehensive governance framework in which territorial development policies can be formulated,
decided upon and implemented effectively. It is important to acknowledge the fact that the distinction
between different types of partnerships (horizontal and vertical) should not result in a lack of
communication, collaboration and co-ordination between these different partnerships. Maybe even more
important than the creation of these partnerships are the interconnections between partnerships, or to use a
more popular word the networks between partnerships.


Questions Session III

35.       This brief analysis of the role of partnerships in improving governance in policy fields, such as
infrastructure development and the need to establish a comprehensive approach consisting of horizontal
and vertical partnerships which are in relation to one another, provide several questions which can be
addressed in the Session.



1)       To what extent are horizontal and vertical partnerships used in OECD member countries in the
         context of infrastructure development?

2)       Which measures have to be taken to develop successful partnerships and are there particular
         measures that need to be taken in the context of infrastructure development?

3)       Which measures are undertaken to establish relations between horizontal and vertical
         partnerships in the context of developing a comprehensive infrastructure development strategy
         which supports endogenous development?




                                                     13
   SESSION IV FINANCING INFRASTRUCTURES: THE ROLE OF THE PRIVATE SECTOR




Objectives Session IV

36.        The primary aim of Session IV is to distinguish innovative solutions for financing infrastructures
and to better determine what role the private sector plays in this context. A good overview of the practices
conducted in the OECD countries and defining conditions for private sector involvement in the financing
of infrastructures would provide a good contribution to further research in the field of infrastructures.


Rationale

37.       The fourth issue, the financing of infrastructures, is next to establishing partnerships, an
important factor to the development of infrastructures. It is a conditioning factor which determines if an
infrastructure project will find daylight or not. Of course, the same can be said for financing territorial
development projects in general. However, the financing of infrastructures is also from an innovative point
of view important.

38.       Infrastructures were traditionally financed by the public sector, but in recent years due to general
processes of globalisation, technological innovation and amplified citizen assertiveness, the demand for
infrastructures has increased as well as the magnitude of the projects. Instead of projects of sub-national or
national importance more and more projects have a trans-national character, which is best exemplified by
the TEN's program conducted by the European Union. As a result of these processes the public sector has a
lack in financial resources to finance the increasing number of projects. Neither the growth of fiscal
capacity, nor borrowing are likely able to satisfy the requirements for public infrastructure financing.
Consequently providers of infrastructures in OECD countries have looked for innovative ways of financing
in the attempt to reduce traditional reliance on publicly-funded debt, including stimulating further
engagement of the private sector in the provision of infrastructure.

39.       Large subsidies are not sufficient any more, resulting in the trend to increasingly involve the
private sector in infrastructure development projects. Many governments experiment financial
constructions in the context of infrastructure development. Public-Private financing is widely used in this
context and also the private financing initiatives used in for example the United Kingdom, have become
more and more common practice.

40.      Nevertheless, private sector involvement requires identifying the specific added-value for private
sector companies to participate in financing infrastructure projects. To put it more bluntly: what's in it for
them?

41.      Part of the answer to this question lies in the fact that well developed infrastructures will facilitate
the endogenous development of a region. These infrastructures can contribute to quicker transportation of
goods and services, and increase the speed of communication (for example broad band infrastructures).
They also improve efficiency in other ways through the re-conversion of waste and the development of
sustainable energy resources, to give a couple of examples.


                                                       14
42.       From a more economic and financial perspective it must be emphasised that infrastructures are
not an end in themselves, but a means for increasing economic activity. They can also be considered as a
mean to improve the marginal productivity of private capital. However, private investors will compare the
expected returns from infrastructure investments to the projected returns from private investments that the
capital expenditure in infrastructure risks crowding out. The economic effects can be divided into short-
term output and employment effects, long-term productivity effect, and indirect structural effects, which
can contribute to the endogenous development competitiveness of a country, region or local community.

43.       Even though these effects exist, important risks raise the risk premium, which is often
particularly high for infrastructure investments finance. The various types of risks present in infrastructure
ventures include economic, technological, market, commercial or revenue risks, moral hazard,
construction, completion and technical risk, political or policy risks, or risks related to inadequate legal and
regulatory frameworks, environmental risks, physical safety risk, or operational risks, financial risks,
among others.

44.      In economic terms, risks are transaction costs, which can be reduced by various ways.
Increasingly sophisticated financial instruments offer opportunities to cover these risks in return for a fee.

45.       Private sector involvement is more likely in infrastructure services in which variable costs are
large relative to fixed investments, in the operation of infrastructure rather than its financing, in highly
profitable ventures, in projects enjoying some monopolistic features, in projects which have explicit or
implicit government guarantees covering various risks, or in projects in which technological developments
have reduced the costs of infrastructure provision.

46.       In view of the risks for the private sector, the conditions in which private sector involvement is
more likely to invest and the fact that the initiative to undertake an infrastructure project resides in the
public sector and is of a political nature, there are three basic methods of involving the private sector:

   The delegation of responsibility for the production of goods and services to the private sector     or
    non-governmental organisations.

   The transfer of management responsibility to the private sector,

   Full-privatisation.

47.       Governments commonly transfer management responsibility in the provision of infrastructure to
the private sector through deregulation, concessions, franchises and contracting, joint public-private
partnerships or ventures, and BOOT-type schemes (BOOT is an abbreviation of Build-Operate-Own-
Transfer). Private financing and control of infrastructure provision, while maintaining their public
provision, can be engaged through specifically negotiated contributions.


Questions Session IV

48.       Nevertheless multiple financing constructions can be found in OECD countries which differ
depending on, among other things, the legislation of a country, state or region, the type of project and the
participants involved. It will therefore be interesting to see what are the experiences of OECD countries,
which innovative solutions they have developed and to what extent the private sector can play a role in
financing infrastructures. Following these interests several questions can be raised which will contribute to
a better understanding of the current practices regarding infrastructure development and possibly provide
new solutions.


                                                      15
1)   To what extent is financing an obstacle in the process of developing infrastructures in OECD
     member countries?

2)   Which innovative solutions are used in the practice of acquiring financing for infrastructure
     development projects?

3)   Which is the optimal distribution of responsibilities between the public and the private sector
     regarding the financing of infrastructures?




                                                16

				
DOCUMENT INFO
Shared By:
Categories:
Tags:
Stats:
views:0
posted:6/21/2013
language:Unknown
pages:16
vivien renata vivien renata
About