What is Public Infrastructure?
Public infrastructure refers to infrastructure facilities, systems, and structures that are owned and operated by the “public,” i.e., the government. It includes all infrastructural facilities that are open to the general public to use. Infrastructure includes all essential systems and facilities that facilitate 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, telecommunications, and many more.
Examples of Public Infrastructure
- Transport infrastructure – Bridges, roads, airports, rail transport, etc.
- Water infrastructure – Water supply, water resource management, flood management, proper sewage and drainage systems, coastal restoration infrastructure
- Power and energy infrastructure – Power grid, power stations, wind turbines, windmills, solar panels
- Telecommunications infrastructure – Telephone network, broadband network, WiFi services
- Political infrastructure – Governmental institutions like courts of law, regulatory bodies, etc.; Public security services like the police force, defense, etc.
- Educational infrastructure – Public schools and universities, public training institutes
- Health infrastructure – Public hospitals, subsidized health check-ups, etc.
- 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. It usually requires extensive human capital and is service-oriented towards its population. It includes all educational, health, financial, law and order, governmental systems, and social security systems and institutions that are crucial to the well-being of an economy.
2. Hard Infrastructure
Hard infrastructure makes up of 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 facilities such as the assets used for shelter and heating, telecommunication, public health, agricultural facilities, etc.
Financing of Public Infrastructure
Public infrastructure is financed in a number of ways, including publicly (through taxes), privately (through private investments), and public-private partnerships.
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.
Public infrastructure tends to be high-cost investment projects; the returns on which are extremely high and prosperous. Hence, such projects attract several investment opportunities. 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 share risks and makes the economy prosperous by bringing in investment opportunities, opening up employment opportunities, and increasing the standard of living of the people.
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 resources will be helpful: