Could public land unlock private investment: Green infrastructure?
Investments in green infrastructure may provide a nation with a variety of financial benefits, including job creation, economic growth, the promotion of sustainable enterprises, and increased resilience to natural disasters and other disturbances. But achieving this goal requires money, and in developing countries, in particular, public investment on its own is rarely sufficient. Private finance is also required, but many of the economic incentives used by governments elsewhere are becoming less and less sustainable. But there is a resource that many governments could wish to exploit to fill their infrastructure finance gap: land.
To understand how large the gap in green infrastructure investment is, keep in mind that, across G-20 countries, private sector-led infrastructure expenditures have stayed below $160 billion in top markets for each of the seven years leading up to the start of the COVID-19 epidemic in 2020. That equates to 0.2 percent of GDP, while studies show that 5.0 percent is required. 1 Even in middle- and low-income nations, where three-quarters of such expenditures are still supported, private infrastructure funding is declining.
In the years leading up to the COVID-19 pandemic, the private sector in a few developing economies benefited from sizable tax breaks, subsidies, and derisking assistance in exchange for investments in crucial infrastructure, including offtake agreements that guaranteed fair returns on energy generation. However, the capacity of many governments to fund the private sector has been constrained by financial strain brought on by the epidemic and increased national debt loads.
To encourage private investment, policymakers typically employ four different types of incentives: first, monetary incentives, such as grants, loans, equity, and credit score guarantees; second, financial incentives, such as tax abatements, exemptions, and expanded depreciation; third, sponsored inputs, such as water, electricity, and feedstock supplied at a discount from their normal cost; and fourth, regulatory incentives, such as patents.
Governments may find it more challenging to implement those incentives when financial constraints increase due to rising inflation, falling global growth rates, and rising public debt levels. Land portfolios are a fifth incentive that coverage makers typically underuse.
One estimate places the value of business and government properties, along with the land they are associated with, at 23% of the global internet well worth in 2020.
As things stand, many governments have substantial portfolios of underutilized real estate that may be monetized through fairness or leasing at a discount. Every incentive should be compared on the following criteria: effect, which is the extent to which an incentive may allow a central authority to attract private investors; and cost, which is the sum of the burden placed on government finances and the stress placed on international obligations.
Disclaimer: The views expressed above are for informational purposes only based on industry reports and related news stories. PropertyPistol does not guarantee the accuracy, completeness, or reliability of the information and shall not be held responsible for any action taken based on the published information.
