Financial Measures to Boost Private Investment



Financial Measures to Boost Private Investment

Authors

D Maté, J M Vassallo, Universidad Politécnica de Madrid, ES

Description

Abstract

The Government General Infrastructures Plan for the period 2000-2007 estimates that private investment in infrastructures will be in the order of 21,600 m Euro at the expiration of this term. The Department of Public Works and Development will contribute around 9,000 m Euro to the Plan, which will try to co-ordinate different key aspects such as State budgetary and macroeconomic stability and the compliance with a kind of policy intended to avoid negative economic cycles so as to ensure a budget equilibrium at the same time. This obvious increase in the demand for private capital may in turn cause some tightness in financing supply on the part of the Spanish banking system1. The combination of all these factors evinces the need for novel co-operation mechanisms that should incorporate, not only a wider range of investment potentials through different financial entities, but also the money from personal saving. This modality based on private investment is a common fact in most 15 EU Member States, and especially relevant in recently incorporated countries, where both the national and the TransEuropean transport networks have been developed simultaneously.

The new Act on Concession Contracts, now pending final parliamentary approval, includes a wide range of financing methods. However, the new legal framework in this area would get considerably improved by the implementation of additional financial regulation passed to boost private investment in infrastructures. Section 1 in this paper puts forward some financial measures by way of supplementary regulation to the current concession system. Section 2 outlines the investment potential to be obtained from pension funds. And, lastly, this paper describes the main features of a typical Concession Guarantee Fund to Public Works. In fact, the main objective pursued with this type of fund is to warrant the inflow of capital derived from the issue of securities by the concessionaire companies carrying out the works at the request of specific institutional investors. Likewise, this measure implies a great financial opportunity for capital movements in view of the current market conditions favoured by the orchestration and final application of the European currency unit in 2002. The fund would also - under certain constraints- grant financial guarantee on syndicate loans.

Publisher

Association for European Transport