My boss got slightly philosophical for a bit and lamented that infrastructure developments follow not the pace of the fundamental demand for infrastructure but simply the fiscal plans of government. Traditionally, infrastructure belongs solely to the domain of the government. The vast amount of capital needed was typically only mobilised by governments in the days when economies were much more domestic and cross-border capital and investments were heavily channeled towards industrial output and real estate assets rather than infrastructure.
In fact, through the recent downturns, all the talks about infrastructure seem not to stem from the need for infrastructure to catch up with growth and development but for fiscal investments into infrastructure as a means of generating growth. Even Knowledge@Wharton wrote any article co-opting this viewpoint. Yet for most part, this is largely a kind of illusionary financial play – actual growth can only really be generated out of making fundamental, strategic investments that will support the growth of those areas that will boom when the demand uptick arrives.
Assuming this, is a downturn still a good timing for governments to do infrastructure or to invest in infrastructure? It critically depends on financing costs; and in a climate where governments have flushed the entire world with liquidity and max-ed out their monetary policies, financing costs have been artificially reduced for a while. Nevertheless, the fundamentals will still have to be matched: infrastructure projects that taps on cheap financing will ultimately need to have the proper guarantees and safeguards to the lenders in order to match the kind of returns profile of the appropriate lenders/investors.