The hottest PPP improves the efficiency of global

2022-09-20
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PPP improves the efficiency of global infrastructure supply

generalized infrastructure includes not only "economic" infrastructure such as transportation, communication and energy, but also "social" infrastructure such as hospitals, schools and elderly care, which plays a crucial role in meeting people's needs and promoting economic growth. The delivery of infrastructure requires a huge amount of financial support. Although the government and social capital cooperation (PPP) model is not emphasized as a financing method, it not only improves the efficiency of infrastructure supply, but also expands the source of infrastructure funds. Infrastructure capital demand: the global infrastructure investment demand will reach $57trillion by 2030

talking about the financing demand of global infrastructure, the figures of two reports have been widely quoted in recent years. A forecast from McKinsey in 2013 shows that the global infrastructure investment demand will reach $57trillion by 2030; Another report from the Asian Development Bank in 2009 said that the total demand for infrastructure investment in Asia from 2010 to 2020 is expected to be $8.28 trillion. In addition, PwC also judged in 2014 that the global infrastructure expenditure will increase from $4trillion to $9trillion per year in the next 10 years, while such expenditure in Asia and the Pacific will maintain an average annual growth of 7% - 8%, accounting for 60% of the world. In addition, achieving the United Nations Millennium Development Goals, eradicating poverty and addressing climate change all require greater investment in infrastructure. Due to the differences in the scope of assessment, measurement methods, data sources and the definition of infrastructure for the innovative utilization of hemp fiber and wood fiber reinforced composites in the inner and outer door panels developed by Taizhou jingchaoli Molding Co., Ltd., a simple comparison of the forecast figures is of no substantive significance, but the overall trend can be judged that the infrastructure construction in the world, especially in Asia and the Pacific, is facing huge capital needs

sources of infrastructure funds: 90% come from the public sector, and bank loans are the main force. The sources of infrastructure funds can be seen from the needs of the public sector and the private sector. Central and local budget expenditures and policy development institutions constitute the main sources of public sector funds, while the sources of private sector funds are branch financing and project financing. After the Second World War, infrastructure reconstruction in all countries was basically dominated by public sector investment. By the early 1980s, governments all over the world played a larger role in infrastructure construction and operation. In many countries, 90% of infrastructure construction funds came from the public sector, and the government took almost all the investment and operation risks of infrastructure projects. This practice has increased the financial burden of the public sector, and the efficiency bottleneck of the public sector has also led to the decline in the efficiency of infrastructure services, which has further increased the financial burden of the government and the pressure of tax increases. After the UK took the lead in bringing some public goods and services provided by the public sector to the market, there has been a wave of commercialization and marketization of infrastructure throughout the world. At present, in most developed countries except Japan, private sector investment in infrastructure exceeds public sector investment. For example, this proportion is about 1:1 in the new EU Member States and 2:1 in the old EU Member States. According to the 2014 report of the UK Treasury, about 70% of the "economic" infrastructure in the UK is invested by the private sector. In Asian developing countries, including China, this proportion is roughly reversed, and public sector investment is still absolutely dominant. Goldman Sachs said in its 2013 report that the proportion of public sector investment in infrastructure is 90% in the Philippines, 80% in Thailand, 65% in Indonesia and 50% in Malaysia, but the proportion of public sector investment has declined in recent years. For example, India plans to reduce the proportion of public sector and private sector investment in infrastructure from 2:1 to 1:1 between its 11th Five Year Plan (2007-2012) and its 12th Five Year Plan (2012-2017)

although Basel III, adopted after the global financial crisis in 2008, has stricter requirements on the banking system and strictly restricts the provision of project financing, bank loans are still the main source of funds in the field of infrastructure. In developing countries, banks may be reluctant to lend to infrastructure projects that they believe may be risky

in addition, the underdeveloped project bond market and the lack of interest of institutional investors will usually weaken the financing capacity of infrastructure projects. Some countries may seek foreign currency financing, but must bear the risks arising from changes in foreign currency exchange rates

in many developing countries, exchange rate risk cannot be long-term hedged. Although the average loan term has risen from the lowest point of 6 years in 2011 after the global financial crisis to nearly 12 years in 2015, even in countries with relatively developed financial markets, the term of bank loans is usually shorter than the project repayment period or the economic cycle of most infrastructure projects or the PPP agreement cycle

according to the cash flow demand of the whole life cycle of the project, there can be dynamic and phased financing arrangements matching a variety of financial instruments, such as active secondary financing and passive secondary financing. The so-called active secondary financing is to reduce the financing cost by taking advantage of the risk reduction after the completion of the project. The so-called passive secondary financing is a remedial measure after risk control when the market deviates from expectations and the project cash outflow problems. The statistical chart of ijglobal (editor's note: ijglobal is an infrastructure investment database that releases real-time information by tracking global market activities to assist in investment decision-making) shows that the number of project refinancing has increased significantly in recent years

in many countries, a considerable number of companies listed on exchanges are owners of infrastructure assets, including developers, operators, contractors and integrated group companies. Capital markets have become the source of infrastructure financing. Since the prosperity of infrastructure investment in 2000, major global stock indexes have successively launched infrastructure stock indexes, but the countries and industries covered are quite different. For example, the FTSE 100 global infrastructure index includes 839 stocks, including 239 companies in Asia, including 111 from Japan, 59 from Chinese Mainland and 34 from Taiwan, China. The total market value of infrastructure listed companies accounts for about 6% of the total global capital market, which is about 4% of the global GDP

according to a 2014 survey by towerwaston, a consulting firm, about $3trillion was invested directly in infrastructure through funds, mainly in Europe and North America, with only about 22% in Asia. PreQin, another research institution, recorded that about 400 infrastructure funds were launched worldwide from 2004 to 2014, raising a total of more than $300billion. Although such unlisted infrastructure investment has been growing, infrastructure assets account for only 5% of global fund investment, far behind real estate, private placement and hedge funds. Globally, the vast majority of infrastructure funds are equity investment funds, and only about 10% provide debt financing. However, in recent years, funds that provide loans or mezzanine financing for the European debt market are increasing

in addition, infrastructure projects have relatively stable demand and cash flow, and the formation of income is not high, but the risk is low. For risk averse institutional investors, such as large pensions, insurance funds, sovereign wealth funds, etc., investing in infrastructure industry is an ideal important choice to improve the risk return characteristics in the portfolio. In recent years, infrastructure projects or equity investments in infrastructure companies have increasingly been favored by pension funds in Canada, Australia and Northern Europe, while in Asia, sovereign wealth funds have also shown more interest in infrastructure assets. Long term investment in infrastructure assets requires institutional investors to have a strong credit analysis and risk assessment of such assets, as well as experience and ability in the management and operation of relevant industries

geographical distribution of global PPP projects: from Europe and Commonwealth countries to the United States, China

PPP mode is between the traditional public sector led investment and the complete privatization of infrastructure. Between the public and private sectors, through risk sharing, incentive compatible cooperation mechanisms, improve the quantity, quality and efficiency of public goods and public services, including infrastructure. Data from Dealogic, a global data provider, shows that the total investment in global PPP in recent years is about $60billion. The annual output of 30000 tons of Neopentyl 2 alcohol and other products and supporting facilities technological transformation project of Zhangjiagang Huachang new materials technology Co., Ltd. undertaken by China Chemical Engineering No. 4 Construction Co., Ltd. started from $100 billion to $100 billion. In 2014, it was about $72billion, mainly distributed in Europe and Commonwealth countries, Transportation and social infrastructure projects account for about 70%. Recently, the PPP market in the United States has begun to explode. Since 2014, the PPP model has developed rapidly in China, and the number and amount of PPP projects have increased rapidly. As of April 30, 2016, the PPP comprehensive information platform project library of the Ministry of finance of China shows that the total amount of PPP reserve projects in China has reached 9.3 trillion yuan, about 1.43 trillion US dollars. The rapid development of PPP in China will refresh global data

global project financing: bank loans are the main source of funds, and India in the Asia Pacific region is far ahead.

project financing here refers to the financing method that takes the future income and assets of the project as the source of funds to repay the loan and the security guarantee, which is different from the concept of infrastructure project financing mentioned above. Project financing is not only used for infrastructure projects, but also applies to mineral resources development and some industrial fields. As mentioned above, in addition to project financing, infrastructure project financing can also be financed by companies. Similarly, although non recourse project financing is widely used in PPP projects due to the characteristics of high leverage, risk diversification and off balance sheet processing, project financing is not equivalent to PPP, and can also be used for non PPP projects. According to Dealogic, the proportion of PPP projects in project financing remained between 16% and 25%, and was about 18% in 2014. Of course, the participants in the PPP project can also indirectly raise funds for the PPP project from the deputy director general of the General Administration of Customs of the people's Republic of China through corporate financing

ijglobal database makes statistics on global project financing by source. Similar data are from Dealogic, another data provider. 79% of project financing in 2014 came from loans, 12% from equity investment, and 9% from bonds. Thomsonreuters showed the number of project financing loans in major countries in Asia and the Pacific in recent years, with India leading Asia

although China has a large increase in 2014 compared with the previous year, the scale of project financing loans is still small. The traditional corporate financing model does not have high requirements on the ability of financial institutions. Lending only requires asset mortgage, credit mortgage or guarantee. In the past, for local financing platforms, it even looked at the government's promises. To do limited recourse project financing based on project income, financial institutions must have professional judgment on industries and projects. However, due to the defects of talent structure and knowledge structure, Most financial institutions have not yet established operational processes and risk control systems suitable for project financing. Although there are documents of the State Council of China that clarify the innovative financial method of pledge of project usufruct,

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