Private sector funding of capital projects should be encouraged, say Ireland’s leading economists, providing that the returns are sufficiently attractive. And they also predict that there could be a market for private capital investment bonds not only among Irish savers but also among international investors.
As part of this issue’s pre-election survey, several leading financial services economists were asked to respond to the question, ‘What is the scale of private sector financing possible for capital projects?’. All were in favour of this type of funding except for Dr. Dan McLaughlin of Bank of Ireland. He says that ‘private funding of capital projects does not make much sense as the State can generally fund more cheaply than the private sector’ and he argues that this type of funding may be a ‘smokescreen for private sector management’. Instead, he supports introducing private sector management standards into the public sector to increase efficiency and accountability. He does concede however, that providing the return is attractive enough, there would be a market for private capital investment bonds among Irish investors.
While the economists agree that there is a substantial amount of private sector capital available, and Hunt goes so far as to say, ‘I find it difficult to identify capital projects, which could not be financed by the private sector’, all agree that returns must be sufficiently attractive for the scheme to be feasible. McQuaid says that investors want a ‘decent return on their capital, and in projects that are viable and have commercial value’. Of the Dublin Port Tunnel project he says, ‘ it wouldn’t fill me with much confidence if I had invested private capital in it.’ Sutton has a similar viewpoint and says that ‘the rules of the market are relatively simple - good projects that yield solid returns are always welcome.’
The economists were also asked to respond to the following question, ‘Could there be a market for private capital investment bonds among Irish savers?’. The answer to this was a resounding yes, as Power says, ‘The potential is enormous. There is a very limited variety of long-term savings products for Irish savers.’ Hunt agrees, but also feels that there could be significant international appetite for Irish PPP bonds.
McQuaid urges caution on this however, and says that ‘the whole Eircom debacle ahs taken the wind out of the sails of Irish savers as far as trusting government promoted savings schemes’, and the poor take-up to date for the Special Saving Incentive Accounts bears out this theory. |
