Private funds for infrastructure urged

Up to £15 billion is needed to build infrastructure such as roads and bridges and there is no alternative to seeking private finance to back many of these projects, a conference in Co Cavan has been told.

Mr Chris O'Connell, a director of IBI Corporate Finance said EU funding was drying up and the gap would have to be filled by private finance. However, he told The Irish Times that the Government was "saying the right things" about seeking private financing, but it did not seem to be really committed to it.

He said the Department of Finance appeared to believe it had enough money for infrastructure projects and it did not believe it should be using private sector funding and "paying fat margins to banks and other lending institutions".

"Experience in other countries has shown that such projects do not really get off the ground unless there is an element of private-sector funding," he said.

A report was commissioned earlier this year by the Government on involving the private sector in funding and maintaining projects under contract when completed. Such schemes are known as Public Private Partnerships (PPPs) and the report was published last August. It was decided then to run them on a pilot basis. The Department of Finance was to set up a separate unit within its organisation to help co-ordinate them. This was expected to happen within two months.

A Department of Finance spokesman said last night it had been "inundated with ideas" from the private sector since the report's publication.

He said the task force was nearly, but "not quite" established. This is expected to occur shortly. Letters had been sent out to all Government departments seeking ideas for suitable projects and personnel were prepared to undertake preliminary perusals of ideas.

Mr O'Connell, who was speaking at a European Funding and Public Private Partnerships conference, organised by IBEC and sponsored by the European Commission, called for tax incentives to encourage investment in such partnerships. "Current Government thinking appears [to be] against tax incentives to attract investment," he said.

"Experience in Ireland has shown that the best way to attract money to any particular venture is to give a tax incentive to it."

Mr O'Connell said it was important that public authorities, when putting together projects, realised there were certain risks that could not be transferred to the private sector and that certain risks would have a high price. Mr O'Connell said the reward being sought by any sponsor would be a factor of the risk they assumed.

He told the conference: "There is a perception that sponsors will make very high returns on PPPs and that because the Government can borrow at a lower cost the Government is the right body to finance infrastructure projects".

He said that although it was true a government could always borrow at a keener rate than any consortium or private individual, "this ignores the fact that the private sector will be able to deliver projects more cheaply and more efficiently".