Swiss Re analysis suggests the adoption of Public-Private Partnership (PPP) schemes in Japan’s public assets represents a near $1 billion annual insurance opportunity and would ease the burden on public coffers.
Analysts note how PPP adoption in this area would ease pressure on already-stretched public finances, bring private-sector driven efficiencies, and boost the overall resilience of the country.
Japan has experienced low growth for several years, and Swiss Re believes a main reason has been ineffective investment.
In 2000 the government introduced PPP schemes in a move aimed at better aligning infrastructure investment with economic development and to finance replacement of aging infrastructure
New PPP schemes were stopped in 2008 due to economic recession, but started up again in 2015, mainly for revenue-generating public infrastructure projects such as airports and toll roads.
Swiss Re sees the broader adoption of PPP schemes in public assets boding well on many fronts, an important contribution given Japan’s high exposure to extreme weather conditions and frequent occurrence of natural catastrophes.
At the same time, analysts believe PPP concessions open the possibility of greater participation by private-sector institutional investors in the financing of public infrastructure.
For example, Japanese authorities are considering developing a secondary market for infrastructure investment by increasing the liquidity of equity of concessionaires.
