Public Infrastructure

What is Public Infrastructure?

Public infrastructure refers to infrastructure facilities, systems, and structures that are developed, owned, and operated by the government. It includes all infrastructure facilities that are open to the general public for use.

Infrastructure includes all essential systems and facilities that allow the smooth flow of an economy’s day-to-day activities and enhance the people’s standard of living. It includes basic facilities such as roads, water supply, electricity, and telecommunications.

Examples of Public Infrastructure

1. Transportation infrastructure – Bridges, roads, airports, rail transport, etc.
2. Water infrastructure – Water supply, water resource management, flood management, proper sewage and drainage systems, coastal restoration infrastructure
3. Power and energy infrastructure – Power grid, power stations, wind turbines, gas pipelines, solar panels
4. Telecommunications infrastructure – Telephone network, broadband network, WiFi services
5. Political infrastructure – Governmental institutions such as courts of law, regulatory bodies, etc.; Public security services such as the police force, defense, etc.
6. Educational infrastructure – Public schools and universities, public training institutes
7. Health infrastructure – Public hospitals, subsidized health clinics, etc.
8. Recreational infrastructure – Public parks and gardens, beaches, historical sites, natural reserves

Types of Infrastructure

1. Soft Infrastructure

Soft infrastructure refers to all the institutions that help maintain a healthy economy. These usually require extensive human capital and are service-oriented toward the population. Soft infrastructure includes all educational, health, financial, law and order, governmental systems (such as social security), and other institutions that are considered crucial to the well-being of an economy.

2. Hard Infrastructure

Hard infrastructure comprises all the physical systems that are crucial to running a modern, industrialized economy. It includes transport systems such as roads and highways and telecommunication services such as telephone lines and broadband systems.

3. Critical Infrastructure

Critical infrastructure makes up all the assets that are defined by the government as being crucial to the functioning of an economy. It includes assets used for shelter and heating, telecommunication, public health, agricultural facilities, etc. Examples of such assets: natural gas, drinking water, medicine.

Financing of Public Infrastructure

Public infrastructure is financed in a number of ways, including publicly (through taxes), privately (through private investments), and through public-private partnerships.

1. Taxation

Public Infrastructure may be financed through taxes, tolls, or metered user fees. Since public infrastructure is open for use by the general public, the general public pays for the infrastructure facilities through taxes.

2. Investments

Public infrastructure tends to require high-cost investment projects, the returns on which are also extremely high. Sometimes, private companies choose to invest in a country’s infrastructure projects as part of their expansion initiatives.

For example, a power and energy company opts to build railways and pipelines in a country where it wants to refine petroleum. The investment benefits both the company and the domestic economy.

3. Public-Private Partnerships (PPPs)

Public-private partnerships (PPPs) are best described as a partnership or an arrangement between two or more private organizations and the public sector. A public-private partnership is the most popular means of financing large public sector projects. It helps to spread risks and makes the economy prosperous by bringing in investment opportunities, opening up employment opportunities, and increasing the standard of living.

Additional Resources

CFI offers the Financial Modeling & Valuation Analyst (FMVA)® certification program for those looking to take their careers to the next level. To keep learning and advancing your career, the following CFI resources will be helpful:

• Capital Expenditures
• Gross Domestic Product (GDP)
• PP&E (Property, Plant, and Equipment)
• Project Finance
• See all economics resources