After having read the article ‘New revenue measures’ in the 30 November edition of the Caymanian Compass, I felt obliged to submit the following suggestion in regards to our country’s infrastructure development:
Opportune timing for public-private infrastructure partnerships.
The fact that government intends to borrow $207 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 assts 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 development, 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 1990s have 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 that 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.