Private Sector Financing Transforms Infrastructure, But Risks Loom Large
Private companies are now more involved in infrastructure development to make it more efficient and cost-effective. One common method used worldwide is the BOT project model, where a private company invests in, builds, and operates infrastructure on behalf of the government for a set time. The goal is to earn profits and repay loans used for the project. However, BOT projects come with risks for both the public and private sectors. One key aspect is ensuring financial security for lenders in case the project fails. In BOT projects, physical assets like pipelines may not provide enough security if the project fails. This is seen in Sweden's Arlandabanan project, the country's first infrastructure BOT project in a long time, where government funding was debated as a way to finance infrastructure.