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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
"TERRITORIAL DEVELOPMENT POLICY THE ROLE OF INFRASTRUCTURES"