Maritime Trade and Transport - HWWI

7.2.3 Private funding
Although the Anglo-Saxon countries have been using private funds since the 1970s to finance
infrastructure, these sources have only begun to gain acceptance worldwide very recently.
Thanks to networked capital markets, it will be possible for international private investors to
hold greater shares in the future.
Partnerships between the state and private investors should not be considered the panacea
for revitalizing the public purse, however. They are a fund-raising alternative that can distribute
financing burdens and tap new sources of revenue. A rule of thumb says that each euro invested
by the state attracts three euros in private capital. As compared with conventional funding,
private involvement has several advantages: 96
Studies have shown that the inclusion of private project partners in the operation of infrastructure
can reduce costs by 10%-20%.
Operator and infrastructure companies find themselves in situations that lead to oligopolies
or geographically limited monopolies. Such structures are more efficient than state monopolies.
Increasing competition drives up the range of transport infrastructure – new
regions are developed, and the economic output of the country profits (see Chapter 2 on
mushrooming effects).
Transferring design and construction responsibilities, along with remuneration for private
services, provides significant stimuli for the private sector to complete infrastructure projects
within a shorter period of time.
International experience indicates that the quality of service provided by private sources is
often better than that offered by the state. Contributing to this are a better integration of
services with the project, economies of scale, innovations, and performance incentives and
penalties in contracts between the government and its private partners.
Private investments in infrastructure are concentrated in the energy sector and telecommunications.
The transport sector has been somewhat neglected. In the past 20 years, transport infrastructure
projects amounting to approximately $730 bn have been planned and funded
with private investments (see Fig. 20). 97 Only about half of these projects had been successfully
completed by the end of 2004. The dominance of road and rail in merchandise transport is
reflected in the extent of private financing (see Chapter 6.1). Worldwide, the most money
was channeled into roads, followed by the railroad network. This order applied to all regions
of the world, with the exception of Africa and the Middle East. 98 The preponderance of land
infrastructure, however, is less pronounced than in the distribution of overall investments in
he transport segments. This may mean that participation in a port infrastructure is more attractive
to private investors and can be more easily translated into practice than one in land
infrastructure. The use of private funding for infrastructure is widespread all over the world.
Slightly ahead of the Asia-Pacific region, Europe offers the most comprehensive transport in-
96 See RREEF (2005), Berenberg Private Capital (2006).
97 Regarding the following section, see AECOM Consult (2005).
98 In Africa and the Middle East , due to the low development level,
water projects dominate the infrastructure portfolio.
134 Berenberg Bank · HWWI: Strategy 2030 · No. 4