September 19, 2021

The World Stock Markets Tips & Targets, News, Views & Updates

The World Stock Markets Tips & Targets, News, Views & Updates

Monetising infra assets

Determining the government’s ability to fund a new infrastructure programme is not an exact science, but it is easier to discuss in objective, numerical terms, than public perception. There will usually be a projected government budget for infrastructure investment (investment can comprise many factors) and this can be compared to the expected high-level cost of the new infrastructure programme.

In contrast, it is decidedly harder to gauge public perception and how it may evolve. A recent negative experience with privatisation will likely heighten the public’s scepticism for such projects.… A successful asset recycling scheme is predicated on sufficient private sector interest in the assets that are earmarked for recycling to ensure that the sale or lease returns at least fair market value.

If the returns do not justify the agreement, then the government or state will be restricted in the reinvestment process and public sentiment is likely to turn against the sale or lease. If a deal is structured correctly, then it is possible to achieve a win-win-win scenario with respect to the government, the investor and the general public.

It’s equally important that a government truly understands the assets in which the private sector is interested in investing. A government, often through a designated infrastructure agency, can maintain regular dialogue with national and global investors to ensure an up-to-date understanding of investor preferences and expectations.

From “Infrastructure Asset Recycling: Insight for Governments and Investors”

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