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The infrastructure funding gap is growing exponentially. Back in 2017, the G20 thought it might hit US$15 trillion per year by 2040.1 According to the World Bank, we likely reached that point in 2023.2
All signs suggest the gap is widening on both sides. Governments are trying to balance a range of funding priorities and that is reducing their fiscal capacity for infrastructure. At the same time, demand for new and more resilient infrastructure is climbing, driven by economic, environmental, technical and social pressures. Closing the gap will be a key priority for governments around the world.
Frustratingly, the solution to closing this gap has been obvious for some time. Governments are sitting on a treasure trove of assets. Indeed, a study of 38 countries by the IMF found more than US$100 trillion worth of assets on government books, including key infrastructure such as bridges, roads and utilities. And institutional investors are sitting on a treasure trove of capital. The world's top 500 asset managers collectively manage more than US$128 trillion.3 The alignment is obvious.
Governments recognize the solution but are wary of pursuing it.
What's more, many of the world's leading institutional investors are extraordinarily good at managing and even improving infrastructure assets. As sources of patient capital, their investment strategies align nicely with infrastructure lifecycles. And as fiduciaries of their clients' retirement savings, they are keenly focused on stability across the asset lifecycle.
Yet — with a few notable exceptions — most governments remain reluctant to transfer assets to the private sector. They know they have built up unsustainable levels of public debt. But many consider infrastructure to be the remit of the public sector. And they worry about the impact of privatization on service quality, access and affordability. Simply put, governments recognize the solution but are wary of pursuing it.
Reset 2025
Much will change in 2025. In some countries, rising bond yields on government treasuries will increase the cost of capital for governments. At the same time, we are seeing the retreat of bilateral investment (particularly from China) and development aid which is further undermining emerging market fiscal capacity. For those making local currency investments, a rising US dollar is adding to financial woes.
At the same time, demand for new infrastructure will likely skyrocket this year as citizens put pressure on governments to deliver quick wins, more resilient infrastructure and more modernized services. For many countries, the ability to deliver on these expectations will likely be key to helping ensure social and economic stability going forward.
The good news is that perceptions and biases seem to be rapidly evolving.
The good news is that perceptions and biases seem to be rapidly evolving. Following national elections in more than 60 countries in 2024 (many of which saw incumbents ejected or weakened), we are seeing a change of political perspectives around the world. Many of those new governments are proving to be more commercial, more realist and more open to new ideas than their predecessors.
Citizen openness to the privatization of infrastructure is also on the rise. According to the most recent Edelman Trust Barometer, citizens globally are about 10 percentage points more likely to trust business versus government.4 This suggests that many citizens would now be more comfortable with some infrastructure assets moving into private hands and ownership.
Our prediction and advice
This year, we expect to see significant competition between states to attract and capture patient capital. Some countries will follow India's lead by creating a National Asset Monetization Pipeline (NMP) alongside central bodies to accelerate growth and attract private investment within specific sectors (for example, the NHAI in the roads sector or the SECI in renewable energy)
Many will focus on creating clear and consistent pipelines of assets to bring to market, supported by clear regulatory regimes and transparent oversight that protects citizen outcomes while encouraging innovation, reinvestment and reasonable returns for private sector investors. Clear cost/benefit messaging to citizens — often by aligning the sale of a particular asset with the development of a new asset or service — will likely also be key.
This year, we expect to see significant competition between states to attract and capture patient capital.
In this environment, governments will need to start assessing their portfolios of assets to understand what can be brought to market, what assets require more support to become commercially viable and what assets must remain on the government books. And they will want to provide some guidance to investors around the types of assets they will bring to market and associated timelines. Messaging to citizens and to national pension funds and institutional investors will also be key.
For their part, institutional investors will need to become more proactive as a gradual increase of new assets comes to market, likely sector by sector. Given the complexity of the transactions and the quantum of investment required, institutional investors would be wise to start identifying targets and asset classes that align to their investment strategies and begin their due diligence, outreach and internal discussions as soon as possible.
The Great Privatization is coming. Preparation will be key.
Footnotes
1. Global Infrastructure Outlook, G20, July 2017
2. How can we ensure that "money in the bank" leads to "shovels in the ground?", World Bank Blogs, May 25, 2023
4. 2025 Edelman Trust Barometer, Edelman Trust Institute, 2025
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