Private Participation in Designing Infrastructure InvestmentMon, 11/05/2018 - 17:02
While infrastructure investment is directly related to the evolution of the economy and cities, not all industry outlays are appropriate. Roberto Calvet, Director General Mexico of AECOM, believes that scarce resources demand a thorough expenditure plan that tackles the most urgent needs. “Infrastructure investment must be carefully designed to prioritize projects that innovate in cost-reduction while increasing efficiency and sustainability,” he says.
For wiser investment, Calvet says the private sector’s participation is crucial to creating a long-term planning that coordinates projects in a more efficient way. “The private sector’s contribution starts as a solution to address the need for financial resources but transcends to providing the technical knowledge that companies have to optimize the use of capital,” he says.
Beyond securing financial resources and supplying specialized expertise, involving the private sector in public infrastructure development can also work as a way to distribute risk. “The construction and start-up phases are the riskiest of a project. PPPs are a great strategy for risk management in infrastructure,” says Calvet. He mentions that hospitals make a great case for successful collaborations between the public and private spheres.
To bring about closer collaboration between both sectors, AECOM is promoting the creation of a national infrastructure council with the private sector’s participation. To address the need for a long-term view, Calvet also hopes to see the prompt creation of a National Planning Institute that ensures the continuity of infrastructure projects across political administrations. “Mexico needs a long-term planning entity that can help to preserve all the lessons learned from past projects and initiatives. It will also aid guaranteeing projects’ social, environmental and financial sustainability,” he says.
The lack of a long-term infrastructure plan makes investors cautious about their next bets. “Investors want to understand how the next infrastructure projects and programs will be decided,” he says. “The industry is waiting to see which public policies will enhance infrastructure-related sectors such as energy and oil and gas. He says AECOM has a significant responsibility in NAIM so it continues to be one of the company’s priorities. “We will also keep advising the oil and gas sector regarding infrastructure, social, environmental and logistic matters,” he adds.
In the meantime, the company has a private capital division reviewing the future behavior of the market. “AECOM Capital is analyzing where seed capital would be more successful in fostering growth,” he says. “This is our strategy for taking on some project risk while acknowledging that we are not the project developer.” Calvet believes the capital branch is the company’s key differentiator against its competitors. Of the world’s Top 5 engineering and project management companies, AECOM is the only one with such a division.
As a global firm, AECOM also participates in multiple markets to shield itself against uncertainty hindering infrastructure projects. “Each market is like a piston for us so the company’s car can keep rolling even when the inertia of one market tries to brake it,” he says.
Despite the industry suspense over the transition between two political administrations, Calvet remains optimistic about the future of the sector. “The need for infrastructure is imminent. No leader would make decisions to the detriment of the industry that powers economic growth and social development,” he says. “I think the new infrastructure cabinet has the adequate people and that AECOM will be able to collaborate for the benefit of the sector in analyzing the much-needed macro strategies.”