Public private partnerships to drive infrastructure... | KPMG | CN

Public private partnerships to drive infrastructure projects in China, finds KPMG report

Public private partnerships to drive infrastructure...

Public private partnerships are set to drive infrastructure projects and help to accelerate urbanisation in China, leveraging both private capital and expertise, finds a new KPMG report.

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Public private partnerships (PPP) are set to drive infrastructure projects and help to accelerate urbanisation in China, leveraging both private capital and expertise, finds a new KPMG report. 

KPMG’s new publication Infrastructure 100: World Markets Report, highlights that public money or debt securities issued by governments were previously the main channels to fund infrastructure developments globally. However, the increased scale of required investment has meant that government finance alone is not sufficient and public institutions generally lack the critical capacity of qualified people required. The private sector therefore is playing an increasingly important role in terms of financing and delivering critical infrastructure projects.

Stephen Ip, Partner and Head of Government and Infrastructure, KPMG China, says: “We see increased engagement by the private sector in China to finance and develop infrastructure projects. The need for financing infrastructure is huge in China and across Asia. China is keen to become a significant player in the infrastructure space domestically and also across the region and in a variety of sectors.”

Infrastructure projects such as railways, public hospitals, vocational schools or universities; and urban public services including urban road transportation, waste water treatment facilities and energy infrastructure are expected to receive stronger support from PPP initiatives in China. 

Separately, the report highlights a number of regions in Asia seeking to attract foreign capital, and welcoming support from international financial institutions, development banks and national export import banks. Meanwhile, others also have an outbound focus and recognize that infrastructure finance is needed at a regional level in order to support cross-border infrastructure efforts. 

China for example, is driving the launch of the Asian Infrastructure Investment Bank, expected to be operational by end-2015. 

Ip adds: “The establishment of the Asian Infrastructure Investment Bank highlights China’s focus on this sector. This is good news, however we do see some challenges in terms of implementation, given the number of stakeholders involved across the Asia region. Private capital will continue to play a critical role, however investors need economic and political stability before committing. Consistency and sustainability are key. PPPs are long-term in nature; they must not only gain current local government support but also continue to receive support and be monitored for the duration of the project or service. Government’s role should be more about setting the regulatory frameworks and monitoring compliance and performance in a transparent way that is clearly codified and accepted in the eyes of private investors.”

The report also identified 100 of the world’s most innovative and impactful infrastructure projects that best represent these markets, including seven from mainland China. These are: 

  • Beijing International Mega-Airport 
  • South-to-North Water Transfer Project 
  • UHV Power Transmission 
  • Turn the Pearl River Delta into One 
  • Jiuquan Wind Power Base 
  • Yangshan Deep Water Port 
  • Sky City    

Ip concludes: “Both foreign and domestic private market participants will be seeking opportunistic areas in China’s continued infrastructure expansion, which is critical for urban development across China. Exciting opportunities will materialize for domestic and international investors as China transforms its methods of infrastructure investment and financing.”   

 

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