The Government held a major Foreign Investment Forum in Auckland in mid-March.
They see increased foreign investment as a way to moderate many of our major economic problems: increase our anaemic economic growth, reduce our enormous infrastructure deficit and improve our poor productivity performance.
Photo: Josh Sorenson, Pexels.com.
They see PPP projects (Public, Private Partnerships) as a good way to attract increased foreign investment to New Zealand.
One aim of the forum was to show that New Zealand was open for business and welcomed foreign investment. But New Zealand has been open to foreign investment for a long time.
The current level of foreign investment in New Zealand is already around $540 billion.
Chris Bishop
Infrastructure minister Chris Bishop had a major role at the forum.
He said New Zealand had a $200 billion long-term pipeline of infrastructure projects that were looking for funding.
But it seems that only four relatively small-scale projects were actually ready for discussion at the forum.
This makes the timing of the forum seem unusual. After the forum, there were no announcements of new infrastructure deals being negotiated and funded.
One thing Chris Bishop did tell the forum was that New Zealand is the fourth worst country in the OECD at maintaining its infrastructure assets. We should be ashamed of that.
There seems to be a plea in the government’s invitation to foreign investors that we need them to come into New Zealand to sort out the problems we have in designing and managing large infrastructure projects.
Peter Nicholl
We should also be ashamed of that too.
There is no guarantee that PPP contractors will be better at maintaining infrastructure assets. The priority for the private sector participants in any PPP scheme is to make profits.
In the United Kingdom, for example, when a lot of their rail network was handed over to private companies to manage, maintenance problems continued to exist and, indeed, the problems sometimes got worse, and the maintenance costs ended back on the government’s plate.
If the New Zealand public sector has problems managing these things when they control the whole project, they will have difficulty ensuring that future PPP schemes in New Zealand don’t finish up with the private sector participants getting the lion’s share of the profits and the New Zealand public sector bearing the lion’s share of the risks and costs.
Stormwater. pexels.com
The government has announced it is setting up a new agency, the National Infrastructure Funding and Financing Ltd, to be New Zealand’s ‘shopfront’ for infrastructure investment.
This seems to be a typical New Zealand policy approach to a problem – set up a new agency and tell them it is their job to solve the problem.
But New Zealand has three major problems when it comes to infrastructure investment.
First is the country’s small size. There is nothing this new agency or the government can do about that.
Second is that most infrastructure projects are very long term and will straddle the terms of multiple governments. Only our political parties can work out a way to address that problem.
The third problem is our poor performance at designing and managing infrastructure projects. We really need to be finding ways to solve, or at least reduce, this problem ourselves.
If we contract the solution of this problem to the private participant in our PPP projects, they are more likely to look after their own interests than to solve our problems.
