INFRASTRUCTURE forms the backbone of global economic development, encompassing not only physical assets like roads and highways, ports, bridges and dams but also critical systems such as IT networks, utilities and telecommunications among others. Directly and indirectly, infrastructure development contributes significantly to a country’s economy with the World Bank estimating that a 1% investment in a country’s infrastructure translates to a 1% increase in the overall GDP. Such is the impact! The significance of a robust infrastructure reaches far and wide, as it is essential for facilitating trade, connecting communities and improving the overall quality of life of the local populace.
From job creation to driving global competitiveness, infrastructure development bolsters national standing for any country. In the Asia Pacific region for instance, the Global Infrastructure Hub estimates that by 2030, more than 14 million new jobs will be created due to investments in infrastructure. Historically, the public sector has been the primary driver of infrastructure projects. However, the scale and complexity of modern infrastructure needs, particularly in developing economies, necessitates significant private sector involvement. Innovative financing solutions and substantial capital are required to bridge the infrastructure gap, making private sector investment increasingly vital.
Blended finance is becoming key to attracting private investment in infrastructure by combining public, philanthropic, and private funds to reduce risks. This approach is particularly useful in sectors with high perceived risks, leveraging public support to unlock private capital and boost infrastructure development in countries like Pakistan. In this context, the use of public-private partnerships (PPPs) dates back to the 1980s, with countries like the UK pioneering the model. The Private Finance Initiative (PFI) in the UK is one of the earliest and most notable examples. PPPs have grown significantly worldwide, particularly in emerging markets. The value of PPP infrastructure projects in developing countries exceeded $100 billion annually in recent years.Countries across Asia illustrate the transformative power of private sector investment. Malaysia, for example, has leveraged public-private partnerships (PPPs) to develop a wide array of infrastructure projects, ranging from highways to public transport systems, with a total investment value of USD 40.6 billion. Similarly, Thailand’s Eastern Economic Corridor has attracted private investment to enhance industrial estates, airports, and seaports, significantly boosting logistics and trade capabilities.
India’s PPP model has also achieved notable success, particularly in energy and transportation sectors, as seen in projects like the Mumbai Metro and the Delhi-Mumbai Industrial Corridor. These examples underscore the potential of private sector investment to drive large-scale infrastructure projects, fostering economic growth and job creation. Moreover, PPP initiatives in India have resulted is some of the largest infrastructure developments like the Hyderabad Metro Rail which one of the largest metro rail projects in the world, and the Jawaharlal Nehru Port Trust Container Terminal to name a few. Pakistan faces a significant infrastructure deficit that hampers economic growth and development. The China-Pakistan Economic Corridor (CPEC) has been a pivotal initiative, attracting billions in investment for infrastructure projects, including roads, energy, and the Gwadar Port. Locally, projects like the Lahore Orange Line Metro Train, the Karachi-Hyderabad (M-9) Motorway, Lahore Ring Road, Gujranwala Waste Management Company, and Sindh Education Foundation (SEF) Schools are some other notable examples of public-private partnerships facilitating overall development in the country.
However, the private sector’s involvement in infrastructure projects remains limited, partly due to challenges in mobilizing capital and mitigating risks.Projections reveal a staggering $15 trillion necessity for global public infrastructure investment by 2044, with Pakistan facing a daunting $124 billion infrastructure deficit over the next two decades. Bridging this gap requires extensive efforts from all stakeholders across the board. The disparity in funding for infrastructure projects stems largely from a lack of trust between financial institutions and developers. Credit enhancement providers play a key role by offering financial guarantees for private sector projects. To further close Pakistan’s infrastructure gap, the government should create a more favorable investment environment through policy reforms, tax incentives, and streamlined regulations. Developing PPP frameworks and green projects can also attract private investment and contribute to sustainable economic growth and improved living standards.
—The writer is an experienced professional with almost 25 years of diverse experience, ranging from banking, strategy consulting& varied energy sector experience. He currently serves as the Chief Investment Officer at InfraZamin Pakistan.
