Allen & Overy (A&O) and Freshfields Bruckhaus Deringer have joined forces with leading US firms and banks to lobby for the expansion of public private partnerships (PPP) in the US.
In a report by Kearsarge Global Advisers entitled “Benefits of Private Investment in Infrastructure”, a group comprised of seven law firms and 11 companies made the case for PPP, or ‘P3’ as it is known in the US.
The group, which also includes Chadbourne & Parke, Debevoise & Plimpton, Fulbright & Jaworski, Mayer Brown and McKenna Long & Aldridge, argued that PPPs can create 1.5m US jobs by using $180bn (£128bn) in available private capital to build infrastructure projects, freeing up government dollars in the process.
Their report said that US projects only made up 15 per cent of global PPP markets of $61bn. Europe, the Middle East and Africa (EMEA) account for 35 per cent of global totals, the UK for 30 per cent and Asia Pacific for 20 per cent.
Freshfields PFI/PPP head Nicholas Bliss said about the PPP in the US: “It has the potential to be a massive growth market.”
A&O US projects senior counsel David Horner, who recently joined from the US Department of Transportation, explained why PPP had not taken off in the US to the extent it had in Europe.
“Unlike in Europe, in the US there is not a strong national government that can dictate a new policy,” he said. “In the UK the audience of powerful decision makers is quite small – you only need to convince a handful of senior civil servants of the merits of a policy and it’s done.
The lobbying to increase PPP activity ties into Barack Obama’s first budget of 26 February, in which he announced the creation of a National Infrastructure Bank with an initial budget of $5bn (£3.6bn) to support “private co-investment”. It is not yet certain that this will directly translate to PPP investment.
“PPP understandably concerns many incumbent interests that operate in the transportation networks in the US today,” said Horner. “They worry that the PPP alternative presents a threat to their institutional interests, organisational interest and reasons for being. That’s not the case, as the UK experience shows.”
The group in full:
A&O,
Abertis,
Barclays Capital,
Carlyle Infrastructure Partners,
Chadbourne & Parke,
Citi Infrastructure Investors (CII),
Credit Suisse,
Debevoise & Plimpton,
Freshfields,
Fulbright & Jaworski,
Mayer Brown,
McKenna Long & Aldridge
Merrill Lynch,
Morgan Stanley,
RREEF,
RBC Capital Markets,
Scotia Capital
UBS.
Why would they follow in our footsteps?
The PPP culture in Britain (and probably elsewhere) has been a silent disaster, leaving our children saddled with huge debts for infrastructure and buildings that will already be in need of repair or replacement by the time that they come to use them. Why would America want to follow us down that route?
PPP has left the country massively in debt despite the strong economy seen throughout New Labour’s years in power. Its only benefit is to government, allowing politicians to take credit for building schools and hospitals without actually paying for them.
Oh, I’ve just answered my earlier question.
Is there another option?
PPPs are just a way of paying for infrastructure that governments do not have the money to pay for. Just like buying a house with a mortgage.
We have now seen that this so called “strong” economy during the last 10 years was just a big bubble. PPPs will increasingly be seen as the only possible way ahead. The alternative? Re-build the infrastructure by incurring massive state debt – as Barak Obama is doing – and then in 10 years general taxation doubles to pay for this debt. Is this any different?