Infrastructure needs more ‘specific’ approach

The US has to change how it views infrastructure as shifting market, demographic, fiscal, and environmental dynamics demand a reassessment, the authors of a white paper released by the Brookings Institution and Kohlberg Kravis Roberts & Co (KKR) assert.

This means thinking of infrastructure in specific rather than general terms and realising that different sub-sectors of infrastructure, such as transport, water, energy, and telecommunications are governed, financed and delivered differently.

Until now, the pursuit of silver-bullet policies without taking into consideration the different characteristics and needs of infrastructure’s sub-sectors has led to the US failing to develop customised solutions to distinctive challenges, according to the paper.

“Over the last 25 years, many infrastructure investments were designed to support a post-industrial economic growth model that prioritised consumption and amenities over investments in innovation and production,” the authors wrote.

Aside from custom-tailoring solutions to specific infrastructure sub-sectors, the conversation also needs to shift from a 'top-down' approach to a 'bottom-up' approach.

“Our suggestion would be – and the whole theme is – let’s go from a top-down to a bottom up [approach],” said Raj Agrawal, KKR’s head of infrastructure for North America and one of the paper’s four authors.

“Let each locality figure out what makes sense that’s pro-growth in that area and then let’s do what we can at a regional, federal, state level to facilitate what makes sense at the metro level,” he added.

Another important trend is the increasing complexity of projects.

“The financing is getting more complex,” co-author Robert Puentes, who is senior fellow with the Brookings Institution’s Metropolitan Policy Programme, told Infrastructure Investor.

“As we try to do more projects within cities and metropolitan areas the complexity level is getting much higher,” he explains, creating a greater need for partnership among the public, private and civic sectors.

The paper also includes successful case studies, such as Virginia’s Rosslyn air rights project; a public-private partnership (PPP;P3) project between KKR and the Bayonne Municipal Utilities Authority; and the West Coast Infrastructure Exchange.

“As a country, we should endeavor to move beyond simplistic notions of ‘privatization’ to a future of infrastructure with true partnerships between government agencies, private firms, financiers, and the general public,” the authors wrote.

“This is how many nations successfully develop infrastructure around the world today.”

To access the full report click here.