Unique features of Infrastructure Projects and Example of Financial Options

The development & use of infrastructure are important from some
important aspects.
Infrastructure is important in ‘determining access to employment,
education and services’ and the ‘physical structure of networked
infrastructure in essence can "look in" physical patterns of land use &
detract from flexibility.’
Inefficiency also occurs if services are priced at less than the real cost.
For some forms of infrastructure, such as schools, hospitals & police
stations, services are rarely charged directly to users, so prices cannot
guide investment or location decisions.

Importance ‘Third Party’ costs
There are also third party costs to consider, such as ….
1. Increased air and water pollution
2. Traffic congestion
Potential environmental damage is a major concern in designing &
operating hydraulic systems.
Public health costs arising from polluted waterways are also relevant.
These costs can be significant.
Third party costs are usually accounted for either indirectly or not at all,
but they can vary significantly according to where the development is
located.
The costs of providing infrastructure & services vary significantly from
location to location.
Important influences are differing terrain & third party cost. The density of
development also has an impact on per unit development costs.

Consideration of Location Cost Variations
The cost of providing infrastructure & services to new residents in different
areas within cities may vary for a range of reasons, including the
geographical & topographical features of the district or the individual site,
the proximity of developments to existing infrastructure and the capacity of
existing infrastructure.

Example of Financial Options : Case of Transport Infrastructure
1. System of Resource flows
2. Options for Mobilizing Internal Resources
a) Revenue increases
b) Expenditure decreases
3. Options for Mobilizing External Resources
a) Suppliers, users & other interested stakeholders
i) BOO – Build, Own, Operate
ii) BOT – Build, Operate, Transfer
iii) BOLT – Build, Own, Lease, Transfer
b) State
c) Financial institution
d) Foreign investors
e) Individual investor

System of Resource flows
Transport infrastructure investments are funded by….
1. Budgetary support from government
2. Loans from financial institutions
3. Public equity
4. Internal resources generated by the agencies
5. Enterprises engaged in providing transport services
Stages of resource flows
1) First Stage Investment planning
It is concerned with efficient allocation of financial resources,
which requires careful project formulation, appraisal &
investment programming.
2) Second Stage Infrastructure Creation
That requires cost effective management of project
construction.
3) Last Stage Service Provision
That involves effective operation & maintencance of
infrastructure and delivery of services produced.
The efficiencies of allocation of investments, creation of assets & asset
utilization in operations, determine the performance record of the provider
enterprise, which in turn influences its credit worthiness in the capital
markets.
Operational efficiency in service delivery, effective demand for services &
pricing policies has a direct impact on the generation of internal resources
for infrastructure investment.
Government’s tax spending policies are the major determinants of
budgetary support for infrastructure investment.
Strategies for financing transport infrastructure depend critically upon the
efficiencies of investment allocation, asset creation and operations as well
as pricing of services and fiscal policies of the government.
Broadly categorize the sources of funds as being internal and external.
1. Internal Sources – Revenue Side or Expenditure Side
2. External Sources – the funds could be from the order could be
from suppliers & users, the state, financial institutions, foreign
investors & individual investors.