Public Infrastructure – Definition, Examples and Types, Financing

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 for 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 livingHuman Development IndexThe Human Development Index (HDI) is a statistical measure (composite index) developed by the United Nations to assess the social and economic development of countries around the world. The HDI considers three indicators of human development, namely, life expectancy, education, and per capita income.. 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 bodiesSecurities and Exchange Commission (SEC)The US Securities and Exchange Commission, or SEC, is an independent agency of the US federal government that is responsible for implementing federal securities laws and proposing securities rules. It is also in charge of maintaining the securities industry and stock and options exchanges, 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 securitySocial SecuritySocial Security is a US federal government program that provides social insurance and benefits to people with inadequate or no income. The first Social), and other institutions that are considered crucial to the well-being of an economy.

2. Hard Infrastructure

Hard infrastructure is comprised 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 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 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 expansionExpansion ProjectIn the world of finance, an expansion project is literally any project that works to expand the reach of a company. In most cases, such projects involve 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

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  • Capital ExpendituresCapital ExpendituresCapital expenditures refer to funds that are used by a company for the purchase, improvement, or maintenance of long-term assets to improve the efficiency or capacity of the company. Long-term assets are usually physical and have a useful life of more than one accounting period.
  • Gross Domestic Product (GDP)Gross Domestic Product (GDP)Gross domestic product (GDP) is a standard measure of a country’s economic health and an indicator of its standard of living. Also, GDP can be used to compare the productivity levels between different countries.
  • PP&E (Property, Plant, and Equipment)PP&E (Property, Plant and Equipment)PP&E (Property, Plant, and Equipment) is one of the core non-current assets found on the balance sheet. PP&E is impacted by Capex, Depreciation, and Acquisitions/Dispositions of fixed assets.

Resourse: Key:Public Infrastructure

Infrastructure Financing