The time may be right for Queensland to create more so-called "Public-Private Partnerships" (PPPs), using private sector finance, to fund infrastructure projects. To do so, they'll have to create attractive investment options to compete against stiff domestic and foreign competition for capital.
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Information Paper 88: Sustainable Queensland Volume 2
Information Paper 88: Sustainable Queensland Volume 2
Posted : Friday, November 13, 2009
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Sustainable Queensland Volume 2 is the second of a
three-volume series which reports on the challenges created by
Queensland's rapid population growth. Volume 2 examines the options
for financing and managing the state's new wave of infrastructure
construction, expected to be worth more than $70 billion over the
next decade.
Traditionally, the Queensland government has funded its own
infrastructure development programs. Sustainable Queensland
Volume 2 suggests the time may be right for Queensland to
create more so-called "Public-Private Partnerships" (PPPs) using
private sector finance. Globalised supply and demand for capital,
and other resources, will require that Queensland agencies develop
attractive enabling environments and transparent, efficient and
competitive bidding processes.
Australia has large pools of private funds and private expertise
to finance infrastructure. But the involvement of the private
sector in infrastructure projects remains a controversial question.
As Sustainable Queensland Volume 2 substantiates, there is
no compelling case that government borrowing is always to be
preferred due to its low cost of finance or that public-private
partnerships (PPPs) should always be preferred due to the private
sector's ability to access and structure financing arrangements.
Perhaps the single most important key to the choice between private
and public sector is to properly assess the infrastructure
project's risks - using a whole-of-life approach - and assign the
risks appropriately. The proposed benefits of PPP's relating to
financing should be evaluated independently of benefits to other
project phases (e.g. design, construction, operation) and evaluted
on a case-by-case basis.
A review of studies of PPP's around the world indicates
appropriately structured private participation, can:
- bring significant cost savings;
- let governments build infrastructure sooner;
- allow allocation of risk to the party best able to manage that
risk;
- encourage innovation;
- provide access to the latest technology;
- improve customer focus; and
- promote economically sound decision-making.
There is enormous potential to achieve a "win-win" for both the
Queensland public and private sector participants, providing the
two groups understand and address each others needs.
CEDA's view
The first volume in the Sustainable Queensland series
examined the demographic changes underpinning Queensland's growth,
and the insatiable appetite of Queensland industry for skilled
workers. It generated significant discussion and captured the
interest of the media. Given the critical nature of the
infrastructure issue, we expect an even greater response to this
second volume. It tackles one of the most complex, controversial,
yet fundamental enablers of Queensland's growth - the financing of
infrastructure development. We look forward to both the public and
private sector response.
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