IWS Documented News INTERNATIONAL

IWS Documented News Service

_______________________________

Institute for Workplace Studies----------------- Professor Samuel B. Bacharach

School of Industrial & Labor Relations-------- Director, Institute for Workplace Studies

Cornell University

16 East 34th Street, 4th floor---------------------- Stuart Basefsky

New York, NY 10016 -------------------------------Director, IWS News Bureau

________________________________________________________________________

 

OECD

Strategic Transport Infrastructure Needs to 2030 [3 March 2012]

http://www.oecd.org/document/46/0,3746,en_2649_36240452_49830126_1_1_1_1,00.html

 

Main Findings

http://www.oecd.org/dataoecd/19/49/49094448.pdf

[full-text, 21 pages]

 

This publication explores the long-term opportunities and challenges facing major gateway and transport hub infrastructures – ports, airports and major rail corridors – in the coming decades. It uses projections and scenarios to assess the broader economic outlook and future infrastructure requirements, and examines the options for financing these, not least against the backdrop of the economic recession and financial crisis which have significantly modified the risks and potential rewards associated with major infrastructure projects. Building on numerous in-depth case studies from Europe, North America and Asia, this book offers insights into the economic prospects for these key facilities and identifies policy options for improved gateway and corridor infrastructure in the future.

How to obtain this publication

Subscribers and readers at subscribing institutions can access the online edition on the OECD iLibrary.

Press Release 3 March 2012

Massive infrastructure investment needed to meet future demand, says OECD

http://www.oecd.org/document/41/0,3746,en_21571361_44315115_49821929_1_1_1_1,00.html

[excerpt]

Pension funds are likely to become more active in providing financing but before committing large amounts of capital, more transparency and regulatory certainty are needed. As part of the OECD’s strategic transport project, a worldwide survey of pension funds’ investment in infrastructure was conducted in 2011.

 

see --

INTERNATIONAL FUTURES PROGRAMME

PROJECT ON STRATEGIC TRANSPORT INFRASTRUCTURE TO 2030

PENSION FUNDS INVESTMENT IN INFRASTRUCTURE--A SURVEY

http://www.oecd.org/dataoecd/59/33/48634596.pdf

[full-text, 162 pages]

 

TABLE OF CONTENTS

ACRONYMS ................................................................................................................................................ 14

EXECUTIVE SUMMARY ........................................................................................................................... 15

1. Infrastructure Investment – Why is it important and Why Pension Funds are interested .................. 15

2. Setting the Scene – the Infrastructure Market .................................................................................... 16

Key Developments ................................................................................................................................. 17

3. Setting the Scene – The Pension Fund Market ................................................................................... 17

Key Developments ................................................................................................................................. 18

4. Setting the Scene – Regulation ........................................................................................................... 18

5. Evolution of Pension Fund Investment in Infrastructure – Appetite for Infrastructure ...................... 19

Canada .................................................................................................................................................... 20

Australia ................................................................................................................................................. 20

United States .......................................................................................................................................... 20

European Union ..................................................................................................................................... 20

South Korea ............................................................................................................................................ 21

6. Evolution of Pension Fund Investment in Infrastructure – Factors of Growth .................................. 22

7. Barriers to Investment in Infrastructure .............................................................................................. 23

The Investment Opportunities ................................................................................................................ 23

The Investor Capability .......................................................................................................................... 24

The Conditions for Investment ............................................................................................................... 24

8. The Way Forward ............................................................................................................................... 24

9. Main policy actions to promote long-term investments ..................................................................... 25

Government support for long-term investments: designing policy measures that are supportive of long-term investing ................................................................................................................................ 25

Reforming the regulatory framework for long term investment ............................................................ 25

The Conditions for Investment: A Transparent Environment for infrastructure investment ................. 25

PART I A GENERAL PERSPECTIVE ....................................................................................................... 26

1. INTRODUCTION .............................................................................................................................. 27

1.1 The Infrastructure Gap .................................................................................................................... 27

1.2 Importance of Infrastructure ........................................................................................................... 28

1.3 Infrastructure Investment ................................................................................................................ 28

1.4 Pension funds and Infrastructure .................................................................................................... 29

BIBLIOGRAPHY ......................................................................................................................................... 31

2. SETTING THE SCENE ......................................................................................................................... 33

2.1 Infrastructure Investment ................................................................................................................ 33

2.1.1 Public-private partnerships in OECD countries ........................................................................ 36

2.1.2 Impact of the Financial Crisis ................................................................................................... 38

2.1.3 Key Developments .................................................................................................................... 39

10

2.2 Pension funds .................................................................................................................................. 42

2.2.1 Pension Market Maturity ........................................................................................................... 45

2.2.2 Portfolio Allocation ................................................................................................................... 46

2.2.3 Impact of the Financial Crisis ................................................................................................... 48

2.2.4 Key Developments .................................................................................................................... 49

2.3 Regulatory Framework ................................................................................................................... 54

2.3.1 Other Regulation Affecting Pension Fund Investment.............................................................. 56

2.3.2 Key Developments .................................................................................................................... 57

BIBLIOGRAPHY ......................................................................................................................................... 62

3. MAIN FINDINGS AND CONCLUSIONS ........................................................................................... 65

3.1 Evolution of Pension Fund Investment in Infrastructure ................................................................ 65

3.1.1 Appetite for Infrastructure ......................................................................................................... 65

3.1.2 Factors of Growth ...................................................................................................................... 66

3.2 Barriers to investment in infrastructure .......................................................................................... 68

The Investment Opportunities ................................................................................................................ 68

The Investor Capability .......................................................................................................................... 68

The Conditions for Investment ............................................................................................................... 68

3.3 The Way Forward ........................................................................................................................... 69

Main policy actions to promote long-term investments ......................................................................... 69

PART II COUNTRY ANALYSES .............................................................................................................. 72

4. CANADA ........................................................................................................................................... 73

4.1 Country Profile ............................................................................................................................... 73

4.2 The Infrastructure Market ............................................................................................................... 74

4.2.1 Development of PPPs ................................................................................................................ 74

4.3 Pension Market ............................................................................................................................... 76

4.3.1 Key Developments affecting the infrastructure investment ...................................................... 76

4.4 Infrastructure Investment of Canadian Pension Funds ................................................................... 78

4.5 A closer look at a few selected investors ........................................................................................ 79

4.5.1 Appetite for Infrastructure ......................................................................................................... 79

4.5.2 Infrastructure Investment Strategy ............................................................................................ 80

4.5.3 Drivers for investment in infrastructure .................................................................................... 82

4.6 Main barriers to Investment in Infrastructure ................................................................................. 83

4.7 Steps taken to date .......................................................................................................................... 84

4.8 Conclusions ..................................................................................................................................... 87

BIBLIOGRAPHY ......................................................................................................................................... 88

5. AUSTRALIA ......................................................................................................................................... 89

5.1 Country Profile ............................................................................................................................... 89

5.2. The Infrastructure Market ............................................................................................................... 90

5.2.1 Development of PPPs ................................................................................................................ 91

5.3 Pension Market ............................................................................................................................... 92

5.3.1 Key Developments affecting the infrastructure investment ...................................................... 93

5.4 Infrastructure Investment of Australian Pension funds ................................................................... 95

5.5 A closer look at a few selected investors ........................................................................................ 96

5.5.1 Appetite for Infrastructure ......................................................................................................... 96

5.5.2 Infrastructure Investment Strategy ............................................................................................ 97

5.5.3 Drivers for investment in infrastructure .................................................................................... 98

11

5.6 Main barriers to Investment in Infrastructure ............................................................................... 100

5.7 Steps taken to date ........................................................................................................................ 101

5.8 Conclusions ................................................................................................................................... 104

BIBLIOGRAPHY ....................................................................................................................................... 105

6. UNITED STATES ............................................................................................................................... 107

6.1 Country Profile ............................................................................................................................. 107

6.2 The Infrastructure Market ............................................................................................................. 108

6.2.1 Development of PPPs .............................................................................................................. 109

6.3 Pension Market ............................................................................................................................. 111

6.3.1 Key Developments affecting the infrastructure investment .................................................... 111

6.4 Infrastructure Investment of US pension funds ............................................................................ 113

6.5 A closer look at a few selected investors ...................................................................................... 114

6.5.1 Appetite for Infrastructure ....................................................................................................... 114

6.5.2 Infrastructure Investment Strategy .......................................................................................... 115

6.5.3 Drivers for investment in infrastructure .................................................................................. 116

6.6 Main barriers to Investment in Infrastructure ............................................................................... 118

6.7 Steps taken to date ........................................................................................................................ 119

6.8 Conclusions ................................................................................................................................... 122

BIBLIOGRAPHY ....................................................................................................................................... 123

7. EUROPEAN UNION........................................................................................................................... 124

7.1 Country Profile ............................................................................................................................. 124

7.2 The Infrastructure Market ............................................................................................................. 124

7.2.1 Development of PPPs .............................................................................................................. 125

7.3 Pension Market ............................................................................................................................. 127

7.3.1 Key developments affecting infrastructure investment ........................................................... 127

7.4 Infrastructure Investment of European Pension Funds ................................................................. 130

7.5 A closer look at a few selected investors ...................................................................................... 131

7.5.1 Appetite for infrastructure ....................................................................................................... 131

7.5.2 Infrastructure Investment Strategy .......................................................................................... 133

7.5.3 Drivers for investment in infrastructure .................................................................................. 135

7.6 Main barriers to Investment in Infrastructure ............................................................................... 136

7.7 Steps taken to date ........................................................................................................................ 137

7.8 Conclusions ................................................................................................................................... 140

7.9 Additional Information – United Kingdom .................................................................................. 141

7.9.1 The Infrastructure Market ....................................................................................................... 141

7.9.2 Development of PPPs .............................................................................................................. 141

7.9.3 Pension Fund Investment in Infrastructure .............................................................................. 142

7.9.3 Steps Taken to Date ................................................................................................................. 143

BIBLIOGRAPHY ....................................................................................................................................... 145

8 KOREA ................................................................................................................................................ 146

8.1 Country Profile ............................................................................................................................. 146

8.2 The Infrastructure Market ............................................................................................................. 147

8.2.1 Development of PPPs .............................................................................................................. 148

8.3 Pension Funds Market................................................................................................................... 150

8.3.1 Key developments affecting infrastructure investment ........................................................... 150

8.4 Infrastructure Investment of Korean Pension funds ..................................................................... 152

12

8.5 A closer look at a few selected investors ...................................................................................... 153

8.5.1 Appetite for Infrastructure ....................................................................................................... 153

8.6 Main Barriers to Investment in Infrastructure ............................................................................... 155

8.7 Steps Taken to date ....................................................................................................................... 156

8.8 Conclusions ................................................................................................................................... 158

BIBLIOGRAPHY ....................................................................................................................................... 159

ANNEX A ADDITIONAL INFORMATION TO KOREA – PORTFOLIO LIMITS ............................... 161

ANNEX B ADDITIONAL INFORMATION TO KOREA – INFRASTRUCTURE INVESTMENT ...... 162

 

Tables

Table 2.1. PPPs in Infrastructure by sector ............................................................................................... 37

Table 2.2. Size of public pension reserve fund markets in selected OECD countries, 2009 .................... 43

Table 2.3. Investment Regulations ........................................................................................................... 55

Table 5.1. The Australian superannuation industry in 2035 (including SMSFs) ..................................... 94

Table 6.1. 2009 Report Card for America’s Infrastructure & Estimated 5-year Investment Needs ....... 109

Table 8.1. The trend of the Korean government’s allocation of investments by asset in the transportation category – in % ................................................................................................................. 148

Table 8.2. The Private Participation in Infrastructure Trend .................................................................. 149

Table 8.3. Infrastructure Investment – Overseas .................................................................................... 152

Table 8.4. The Different Types of Government Support ........................................................................ 156

Table 8.5. The Government Minimum Revenue Guarantee Provision................................................... 157

 

Figures

Figure 2.1. Government gross fixed capital formation ............................................................................. 33

Figure 2.2. Value of announced PPP deals, 1994-2007 ............................................................................ 36

Figure 2.3. Distribution of the number of contracted PPPs in the OECD ................................................ 37

Figure 2.4. Assets held by institutional investors in the OECD area, USD billions, 1995-2009 .............. 42

Figure 2.5. Pension assets as percentage of GDP in OECD countries, 2009 ............................................ 45

Figure 2.6. Asset allocation of OECD Private Pension Plans 2009 .......................................................... 46

Figure 2.7. Pension funds' nominal investment return in selected OECD countries 2008-2009 .............. 48

Figure 2.8. Ontario Teachers’ Pension Plan – How the policy asset mix has grown more conservative ............................................................................................................................................... 50

Figure 4.1. Evolution of Canadian pension assets 2001-2009 .................................................................. 76

Figure 4.2. Ontario Teachers’ Pension Plan (OTPP) – How the policy asset mix has grown more conservative ............................................................................................................................................... 76

Figure 4.3. Canadian Pension Asset Allocation Aggregate end 1999 versus end 2004 versus end 2009 ........................................................................................................................................................... 77

Figure 5.1. Evolution of Australian pension assets 2001-2009 ................................................................ 92

Figure 5.2. Australian Pension Asset Allocation Aggregate end 1999 versus end 2004 versus end 2009 ........................................................................................................................................................... 94

Figure 6.1. Evolution of American pension assets 2001-2009 ............................................................... 111

Figure 6.2. American Pension Asset Allocation Aggregate end 1999 versus end 2004 versus end 2009 ......................................................................................................................................................... 112

Figure 7.1. Evolution of European PPPs per annum – Value of Projects in Euro million ..................... 126

13

Figure 7.2. Evolution of European pension assets for selected countries 2001-2009 ............................ 127

Figure 7.3. European pension Assets Allocation for selected countries Aggregate end 1999 versus end 2004 versus end 2009 ........................................................................................................................ 128

 

Boxes

Box 1.1. How much is invested in infrastructure? .................................................................................... 30

Box 2.1. Public Private Partnership (“PPP”) ............................................................................................ 35

Box 2.2. Private pension plan: The OECD classification ......................................................................... 44

Box 4.1. Building Canada Plan ................................................................................................................. 86

Box 5.1. Open Ended Funds ................................................................................................................... 103

Box 6.1. The Transportation Infrastructure Finance and Innovation Act (TIFIA) ................................. 120

Box 7.1. EU financial instruments for TEN-T implementation .............................................................. 139.

________________________________________________________________________

This information is provided to subscribers, friends, faculty, students and alumni of the School of Industrial & Labor Relations (ILR). It is a service of the Institute for Workplace Studies (IWS) in New York City. Stuart Basefsky is responsible for the selection of the contents which is intended to keep researchers, companies, workers, and governments aware of the latest information related to ILR disciplines as it becomes available for the purposes of research, understanding and debate. The content does not reflect the opinions or positions of Cornell University, the School of Industrial & Labor Relations, or that of Mr. Basefsky and should not be construed as such. The service is unique in that it provides the original source documentation, via links, behind the news and research of the day. Use of the information provided is unrestricted. However, it is requested that users acknowledge that the information was found via the IWS Documented News Service.