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Innovative Financing And Governance Structures To Solve The Greenfield Infrastructure Gap: A Case Study Of New South Wales, Australia

TitleInnovative Financing And Governance Structures To Solve The Greenfield Infrastructure Gap: A Case Study Of New South Wales, Australia
Publication TypeWorking Paper
Year of Publication2016
AuthorsNowacki, C, Levitt, R, Monk, A
KeywordsWorking Paper
Abstract

As public debt rises, governments struggle to fund and finance new infrastructure. Partnering with the private sector is a potential solution, but private investors’ appetite has so far been skewed toward existing assets, while the majority of the global infrastructure needs lie in building new infrastructure. Governments have attempted to attract institutional investors, primarily pension funds, into greenfield projects, notably using innovative structures such as “platforms,” but with limited success. New South Wales (NSW) in Australia has put in place a novel mechanism to obtain funds from investors’ interest in existing cash-flow-generating assets and systematically use it to develop new infrastructure projects. The mechanism relies on a new vision of the role of government as an efficient, effective and risk-taking investor in infrastructure. Based on interviews and publicly available information, we present a single case study about New South Wales’ mechanism to fund new infrastructure through an independent government agency (InNSW) and an asset recycling fund (RestartNSW). Our analysis of InNSW reveals that an independent government agency staffed with professionals from the private sector, with the power to require government departments to follow private sector’ processes for decision-making, and reporting directly to the highest ranked political leader, are factors supporting change in the government’s infrastructure planning, financing and construction process. This study also concludes that using a fund to ensure that the proceeds of the lease of existing assets fund new infrastructure, increases public support, and can be a way for governments to increase funding sources. However, it requires that the government be able to structure a competitive bid driving up the sale price, prioritize new projects and secure funding for their operation and maintenance, and finally that it acquires the skills and knowledge to take on construction and potentially patronage risk. 

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