Survey calls for Ireland to focus on PPPs

Ireland needs to embrace public-private partnerships in order to compensate for a steep fall in state investment over the coming years as a result of the dire condition of the country’s public finances. This is the recommendation of a study by financial services firm KPMG and a leading business and employer association.

Given the sharp deterioration in its public finances which prompted a bailout from the European Union and International Monetary Fund, Ireland needs to embrace public-private partnerships (PPPs) in order to ensure economic recovery. This is the message of a report entitled “What next for infrastructure? Infrastructure insights for Ireland”, produced by financial services firm KPMG and Irish business and employer association IBEC.

The study’s authors point to Ireland’s four-year plan for the public finances which envisages a near-60 percent reduction in state expenditure by 2014, compared with the peak of public spending in 2008. However, “the demand for infrastructure remains high” and “the pace of economic recovery will be greatly restricted if investment is not maintained”.

Therefore, the private sector “must play a more extensive role both in the provision and funding of a range of services and infrastructure”. The survey points out that Ireland remains an attractive investment destination given a growth potential “well above the EU average”, being constrained only by the liquidity crisis.

It says that commitment to PPPs in the country so far has been “uneven” and that a greater buy-in is needed from stakeholders.

The survey makes a number of recommendations. It calls for a long-term expenditure plan that will provide an anticipated timeline for delivery of capital expenditure projects. This would “give a clear signal to the market, in particular to private contractors, of the anticipated level of activity in the construction market going forward”. On a related point, it asks for the government’s annual budget allocation for PPP projects to be made public.

The report calls for all infrastructure projects above a certain threshold to be tested for procurement as a PPP. It recommends that the test be undertaken by an independent agency with experience in delivering PPPs such as the National Roads Authority or the Railway Procurement Agency.

It also says the government should explore all options available to secure finance “whilst economic uncertainty prevails”, and specifically notes the European Investment Bank’s proposal for a project bond mechanism.

Finally, it recommends the establishment of a National Infrastructure Authority for determining “what and how infrastructure is to be delivered” and adds that special responsibility for infrastructure delivery should be added to the portfolio of a Cabinet Minister.