first published in Infrastructure Investor

As developed countries such as the UK struggle to assemble a meaningful infrastructure investment pipeline, the likes of the Philippines and Mexico are speeding ahead. Clyde & Co's Liz Jenkins examines this discrepancy.

Traditionally, developed countries such as the UK have led the way in utilising private investment models to fund public infrastructure development. However, global investors are now looking further afield when considering which markets to invest in, including emerging markets.

There are a number of factors which influence investor decisions as to where to invest. The sophisticated investor will seek political and regulatory certainty, financial viability of government entities, a market where the risks involved are clearly understood and the availability of a long-term pipeline of infrastructure projects.

Political certainty demands a stable political system that is supportive of private infrastructure investment from global investors and which has prudent fiscal and budgetary discipline.

Regulatory certainty requires a system which has a legislative and institutional framework that provides for and supports private investment in public infrastructure.

Getting up to speed on which countries offer these attributes invariably requires a significant investment in time and money, so investors also seek markets where there is clear visibility of a long-term pipeline of infrastructure projects to invest in.

Impact of global financial crisis

While previously the UK and other developed markets offered all of these attributes, the Global Financial Crisis (GFC) and its aftermath has placed a large question mark over the continued presence of at least some of these elements.

The UK provides a good example. The legacy of the coalition government’s comprehensive spending review in 2010 was to slash the Building Schools for the Future programme, the GBP 1.8 billion (EUR 2.2 billion;USD3.1 billion) social housing Private Finance Initiative (PFI) programme and a number of waste PFI and other schemes.

On top of this, the elections next year and potential change in government creates uncertainty regarding long-term policy on – and the form of – private investment in UK public infrastructure. The referendum on Scottish independence is creating further uncertainty for investors.

Although the UK government has gone some way to addressing the absence of a pipeline of infrastructure projects with the National Infrastructure Plan (NIP) – which sets out a long-term plan for UK infrastructure to 2020 – many have criticised the NIP for being a government wish list rather than a pipeline.

The example of the UK is in strong contrast to a number of emerging markets with a long-term commitment to PPP projects and significant pipelines, such as Turkey, Chile, Colombia, the Philippines and Mexico. Emerging markets often demonstrate a combination of significant infrastructure need with limited public finance resources and this gives rise to substantial opportunities for global investors. The Philippines and Mexico both provide good cases in point.


In the Philippines, the country’s inadequate infrastructure, resulting from low historic levels of public and private sector investment, has been identified as a critical constraint to economic growth. The government released the Philippine Development Plan 2011–2016, which focused on facilitating infrastructure development to ensure high economic growth, job generation and poverty reduction.

The huge investment requirements for infrastructure development, coupled with the government’s need to observe fiscal discipline, led to a greater recourse to the private sector (and the PPP model) for financing, construction, operation, maintenance and rehabilitation of major infrastructure. The government therefore set about further improving the national environment for PPPs.

The Filipino government implemented a series of policy initiatives to encourage foreign investment in PPP projects, including an amendment to the BOT Law Implementing Laws and Regulations to promote the accelerated processing of PPP projects, increased transparency in the bidding and award of projects, and improved governance and accountability mechanisms.

Further to this, the Public-Private Partnership Centre (the PPP Centre) of the Philippines was instituted in 2010. The PPP Centre is the main driver of the government’s PPP programme and serves as the central coordinating and monitoring agency for all PPP projects in the Philippines.

It provides technical assistance to national government agencies, government- owned and controlled corporations, state universities and colleges and local government agencies as well as to the private sector to help develop and implement critical infrastructure and other development projects. Since its institution, a series of PPP projects have been rolled out.

Seven PPP projects have been awarded under the current administration, the latest being the Mactan-Cebu International Airport Project, which was awarded to the Megawide-GMR consortium on 4 April. The project is for the expansion of an existing passenger terminal and the construction of a new passenger terminal that will address the growing influx of passengers to the country’s second-busiest airport.

The other projects already awarded include two expressways, two programmes for classroom construction nationwide, the modernisation of the Philippines Orthopaedic Centre and the implementation of an automatic fare collection system for Metro Manila’s LRT and MRT Lines. The PPP Centre has publicised a total of 48 projects that are in the pipeline.

The success of the governmental initiatives in respect of PPPs and the PPP Centre is demonstrated both by the number of projects awarded in a relatively short period of time and the number of further PPP projects in the pipeline.


Mexico’s National Infrastructure Plan was launched in 2007 under the administration of President Calderon with the recognition that infrastructure development was essential to increase economic development. The main challenge was to increase private investment as public funds alone could not resource the planned development. A Public-Private Partnership Law was published on 16 January 2012 covering a number of aspects of PPPs, including the risk allocation in PPP contracts.

In July 2012, Enrique Pena Nieto was elected President and he again emphasised the importance of infrastructure development to Mexico’s wider economic development. On 15 July 2013, Nieto announced his own government’s National Infrastructure Plan for 2013-2018. The plan will invest about USD 320 billion of public and private funding in roads, rail, ports and airports.

This includes the completion and maintenance of a road network that connects the country’s strategic regions, renewal of public transport, the building of strategic railroads, maintenance of four world class ports, an increase to the ports’ capacity, a resolution to the overcapacity issues at Mexico City International Airport, promotion of regional connections and expansion of the coverage of telecom networks.

A large proportion of this infrastructure is expected to be funded by PPPs. Mexico’s National Infrastructure Fund Fonda Nacional de Infraestructura (Fonadin) is the Mexican government agency set up to manage the development of national infrastructure in Mexico via PPPs. Fonadin provides support in relation to the financing, planning, construction and transfer of projects developed by the private sector.

These initiatives have together led to significant private sector investment in Mexico, from Europe, the US, Japan and South Korea.

Restoring confidence requires commitment

Increasingly, emerging markets are demonstrating a long-term commitment to the PPP model and a significant pipeline of infrastructure projects. This is in contrast to a number of Western economies which have demonstrated a wavering and unpredictable commitment and absence of a significant pipeline.

In the UK, in addition to the National Infrastructure Plan, fully restoring confidence in the long-term availability of private investment opportunities in UK public infrastructure will require:

  1. Confirmation of the UK’s commitment to private investment in public infrastructure after the next election; and
  2. A wider government economic plan containing significant investment opportunities, including opportunities for social infrastructure such as housing, health, education and regeneration, which are not currently included in the NIP.