Investing in Infrastructure: Getting the Conditions Right

Maintaining and building new infrastructure that delivers agglomerative benefits is crucial for promoting sustainable economic growth. Capital needs for infrastructure investment are massive. This capital could be sourced especially from pension funds and other institutional investors for whom infrastructure funds are attractive investment vehicles. But in order to mobilise such private capital, the public sector needs to provide the right framework, e.g. by promoting a “Regulated Asset Base” model to improve capital expenditure, by avoiding undue solvency rules and other regulatory obstacles to long-term investment, and by closing the knowledge gap with regard to infrastructure investments. Governments should also avoid crowding out private sector investment, confining interventions to projects where public risk sharing is necessary, and refrain from making frequent short-term changes to the regulatory framework.