In this video, Mark Bain shares what lies ahead for the
sector as it transitions to new opportunities and models of
operation.
We discuss:
- why economic infrastructure is on the rise
- how next-generation projects will be structured and
financed - how to overcome the headwinds on the horizon
- why the public-private relationship will change
Click here to see other videos in this
series.
Video transcript
Mark Bain (00:07): Hi, welcome. I’m Mark
Bain. I’m a Partner at Torys where I am co-head of the
Infrastructure and Energy Group and head of the Public-Private
Partnerships Practice, here today to talk to you about the future
of economic infrastructure.
Mark Bain (00:23): Economic infrastructure is
on the rise in Canada and around the world for a couple of strong
reasons that are related to each other and build upon each other.
The first is that coming out of COVID, there’s a need to get
from economic recovery to economic prosperity. And to do that, we
need economic infrastructure that will fuel economic activity and
drive growth, drive prosperity, and drive economic activity in the
country. The second is the strong force because governments are
constrained economically and fiscally to have users pay at least in
part for the infrastructure that they use. These two things
interface with each other and have a bit of a symbiotic
relationship. If we can manage to get economic infrastructure built
and delivering, it will deliver economic prosperity that can be
used in part to fuel the social infrastructure and the social
programs that we all want to see in our societies.
Mark Bain (01:22): Looking at what sort of
projects I see ahead in the economic infrastructure sphere, broadly
people would have historically defined these by the nature of the
industry that was going on. So economic infrastructure, broadly
would be seen as power, water, telecom, and
transport—infrastructure that both drives economic activity
and is valuable to users. So there’s some user charge
associated with it. And then the counterpart to that would be
social infrastructure, municipal universities, schools and
hospitals, and things of that nature that don’t traditionally
drive revenue, but are essentially cost centers within government
that drive the invaluable public purpose. So that would be
historically how you divide the economic and social infrastructure
spheres. I think more recently they’re defined not by the
nature of the industry, but by their purpose. So I think economic
infrastructure today is conceived as sectors that get people to
market, get goods to market and get ideas to market.
Mark Bain (02:27): So when looking at how these
projects are going to be delivered in the future, I think they will
be delivered a little bit differently than in the past and that
reflects a couple of things that are going on. One is that the
interface of the public delivery and the private delivery of
economic infrastructure will change. We certainly see projects and
has long seen projects, things like railroads that have been
delivered purely by the private sector. And we’ve seen things
like power systems that traditionally have been delivered
primarily, if not exclusively, by the public sector. I think those
things are going to start to merge in a couple of ways and for a
couple of reasons. One is, the need is just greater and greater
than ever before. The second is, in addition to the public policy
imperative of driving economic activity, other things are being
layered in. So for example, the desire to have more green power,
more green aspect to our economy, the requirement or the desire to
have greater Indigenous economic reconciliation. When you layer
those things on top of projects, we will often find out that
projects are financeable in part on their own attributes, and in
part requiring some taxpayer support in pursuit of the public
policy imperatives that don’t, by themselves, drive revenue. So
I think that will cause us to look at different ways in which the
public and private sector can come together, whether through P3s or
some other model that nimbly combines the two to make sure that the
essential infrastructure is delivered for the essential public
purpose.
Mark Bain (04:05): In looking at the prospects
for economic infrastructure, certainly we see the tailwinds of
public policy desire to get projects moving, desire for economic
activity, and desire of the private sector to be involved. We also
see headwinds, and those are in the nature of things like supply
chain constraints, skilled labour force constraints, and a
regulatory timescale that has valid objectives but has sometimes
slowed down projects more than desirable. So to overcome those
headwinds, we’re going to have to come up with nimble
approaches that allow us to get valuable projects done in a
realistic time scale, and that will probably require something a
little bit more nimble than what we’ve seen. We’ll need to
get away from rigid contracting with rigid approaches to risk
transfer and to allocation of risk between public and private
sectors. We’ll need to have a little bit more collaboration to
drive the kind of impetus and forward progress that we desire for
our economic recovery.
Mark Bain (05:12): As examples of projects that
will bring people, goods and ideas to market. We have seen
different approaches involving public and private collaboration,
but certainly in the getting goods to market, we have seen projects
in the road sector, bridges, ports, and so on. We’re seeing
maritime ports on both, in fact all coasts under consideration,
inland ports as well, international bridges, including the Gordie
Howe Bridge and the TASR Road and other roads. The TASR Road in the
Northwest Territories is really a resource road to get mining to
market and people to market as well. For getting people to market,
we see across the country projects like the VIA High Frequency Rail
project intended to allow intercity travel in a more predictable
way. And we see light rail projects intended to get people to
workplaces in the major metropolitan centres, and those are
everywhere: Ottawa, Toronto, Waterloo, Calgary, Edmonton and
Vancouver. Multiple projects in all of those cities. And the
getting ideas to market is an emerging idea and people would
sometimes not have thought of that as part of our modern
infrastructure. But certainly during COVID, we saw the urban rural
divide playing out so that there was unequal ability to access the
modern markets and to access modern workforces. So we’ve seen a
number of projects intended to bridge that divide, including the
Mackenzie Valley Project in Northwest Territories, the Dempster
Fibre Project in Yukon, and here in Ontario, the Swift Project, for
multiple municipal infrastructure projects, and Ontario’s
project now underway for the accelerated high-speed Internet
program that will connect all unserved and under connected
communities in Ontario by 2025. Those are all important projects to
get goods, people and ideas to market.
Mark Bain (07:13): I predict that government
policy is going to evolve as we come out of COVID from a policy
that was directed largely towards economic survival during COVID to
economic prosperity and growth coming out of COVID. So that will
play out in a couple of ways. I expect that public policy goals are
going to be woven into those economic infrastructure
imperatives—so those are things like green infrastructure,
climate change, Indigenous economic reconciliation and the like
will be woven in. And our projects that are advanced will then have
public policy imperatives that are driven by economic growth, as
well as driven by other public policy imperatives. And so the way
that those will be delivered will likely be a little bit different
than the past. There will need to be a new, nimble, more
collaborative approach between public and private sectors to
deliver those projects in unison. We’ll probably see more
collaboration, we’ll see an evolution of models that we’ve
seen before in the P3 project development, project finance markets.
And I think we will, with the advent of programs like the Canada
Infrastructure Bank, see projects’ finance that are not
completely standalone, financially sustainable, but are partially
financially sustainable and partially driven by public policy
imperatives that brought together will lead to great success.
Coming out of COVID, what I see ahead is I think we’ll see a
pivot in government policy from programs that are aimed at economic
survival to those that are aimed at economic prosperity, and that
economic prosperity will be beneficial to the economy overall, but
will also allow the kind of economic capacity generation, the kind
of economic health in the country that allows for other public
policy imperatives, such as social infrastructure and social
programs to be funded and available. We’ll see these things
coming together probably in a more collaborative way than we have
in the past, so that both the economic and the other social policy
objectives can be delivered through clever, collaborative, nimble
approaches to delivering economic infrastructure. So I think
we’ll see a modernized approach to project development, P3 and
project finance that allows these programs to come together in a
way that satisfies a myriad of objectives, so I wouldn’t
predict good amounts of activity ahead for good and laudable public
purposes.
Mark Bain (09:43): Thank you for your time
today. If you’d like to hear more about our projects practice,
please go to www.torys.com.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
