News & Analysis

Infra sector in need of innovation, says Deloitte

Old and traditional approaches to infrastructure funding should give way to an innovative and creative approach in order to narrow infrastructure gaps, according to a report on infrastructure published by Deloitte. A second report compares the changing trends in infrastructure funding pre and post the credit crisis.

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The infrastructure sector is in need of innovation and creativity in order to bridge the gap between needed and available funding, according to a report on global infrastructure by Deloitte.

The report, Partnering for Value – Structuring Effective PPPs for Infrastructure, calls for a three-step approach to using PPPs in infrastructure financing and delivery.

This includes analysing the legal framework and political realities surrounding the procurement process, establishing the project's needs and determining how it can get done quickly as well as ensuring a proper division of risks for each project, amongst other elements.

“Careful, informed analysis at the outset of a project will help to ensure that limited resources are put to their best possible use, while putting government organizations in the best position to achieve their infrastructure objectives in today’s challenging climate,” Deloitte said.

A second report by Deloitte, Changing Landscapes in Infrastructure Funding and Fnancing, outlines two trends evident in the aftermath of the global financial crisis. Firstly, governments are using increased infrastructure spending as an economic stimulus tactic.

“This is good for the infrastructure sector but will diminish interest in engaging private sector in government projects since there is an infusion of public money in infrastructure,” explains Irene Walsh, one of the authors of the report. 

Secondly, tightened credit markets are posing an obstacle to raising debt finance for public and private infrastructure delivery since the sector depends on high levels of up-front capital repaid over the long-term via user fees or general taxation.

The report concludes by saying the infrastructure sector is in flux following the credit crisis, highlighting the latter has changed the dynamics of global PPPs.