Private investments in new infrastructures

Publication number: 772
Authors: B. Baarsma, C.N. Teulings, J. Poort, M. de Nooij
Commissioned by: DGI (TU Delft)
Published by: SEO Economic Research

The Lisbon Strategy demands large investments in transport projects, broadband networks and energy infrastructure. Despite the widely-acknowledged need for investments in new infrastructures, European and national public funds are scarce in the current economic climate. Moreover, both policy-makers and economists largely agree that the public financing of such investments should no longer be the standard, as it may have been some decades ago. As a result, private investors become increasingly important when it comes to investments in infrastructure. Yet, such investments are generally high, they involve political risks, and they often have uncertain returns and long payback times, which implies that private parties may also be reluctant to invest. Departing from these drawbacks for private initiatives, we address the question as to what policy-makers can do to improve the climate for private investment in new and innovative infrastructures in the fields of energy supply, telecom and transport. This paper formulates seven imperatives to stimulate private investment in innovative infrastructures: 

  1. Allow private companies to earn a decent profit 
  2. Create political stability and certainty for companies 
  3. Stimulate innovative financing structures 
  4. Allow money to flow 
  5. Refrain from making technological choices 
  6. Allow contractual freedom 
  7. Reduce the administrative burden

Category: 2004