Opportune Timing for PPPs

LETTER TO THE EDITOR

Opportune Timing for PPPs

Thursday, December 8, 2005

Dear Sir,

After having read the article “Biggest Capital Spending Agreed” in Friday’s edition of your newspaper I felt obliged to submit the following suggestion in regards to our country’s infrastructure development:

“Opportune Timing” for public-private infrastructure partnerships (PPPs).

The fact that government intends to borrow $245 million and spend $235.6 million to fund named capital projects and others in the pipeline leads to the logical conclusion that:

Our government and Caymanians in general should accept and promote private investment in public assets such as roads, hospitals, ports and schools.

The timing is perfect to make these investments given the short-term and long-term development needs of the country, and government’s limited ability to fund these infrastructure projects.

Furthermore, large investors would probably leap at the opportunity to fund such developments which promise stable long-term financial returns. And there is a greater likelihood that these projects would be completed more efficiently i.e. on time and on budget.

Government funded projects rarely include the usual incentives to build and operate efficiently…i.e. the incentives to avoid bankruptcy and make a profit – driving motives behind the investment.

And Government deficits of the 1990’s has left nearly a decade of underinvestment which now has to be made up. The lack of an increasing tax base and restrictions on Government borrowing further exacerbates the issue. Financing of infrastructure projects via markets provides a framework by which we can better assess the economic merits of an investment, and hence use our meagre infrastructure dollars more prudently.

One challenge that needs to be sorted out is the proper pricing of public infrastructure projects that have a profit motive.

We should draw upon the expertise/ experience of other administrations or organizations who have successfully solved this issue. This should enable us to develop pricing that appropriately reflects demand and supply conditions and thus encourage more public-private infrastructure projects in Cayman.

Gregg Anderson, MBA.

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