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Quality Infrastructure Investment: Ways to Increase the Rate of Return for Infrastructure Investments

Author

Listed:
  • Yoshino, Naoyuki

    (Asian Development Bank Institute)

  • Hendriyetty, Nella

    (Asian Development Bank Institute)

  • Lakhia, Saloni

    (Asian Development Bank Institute)

Abstract

Private–public partnerships in infrastructure have been advocated for many years. Investors currently receive a low rate of return on infrastructure investment. This is because the main sources of revenue from infrastructure investment are user charges. For example, user charges for a water supply cannot be increased since water is a necessary good for everyone. However, a water supply can help to develop regions. For example, new apartments can be constructed, and new businesses can be created in the region where the water is supplied. From this, property tax, corporate income tax, and income tax revenues will rise. In the past, these increased tax revenues have gone to the government rather than being returned to infrastructure investors. If these increased tax revenues were to be returned to investors, the rate of return would rise significantly. Hometown investment trust funds can also provide financing for start-up businesses along with the new infrastructure investments. Land acquisition creates huge difficulties for completing infrastructure investment. Land trusts will solve the issue of owners not wanting to sell their land by giving them the option to keep it and instead lease the land to infrastructure companies and receive long-term rent income, for example for 99 years. In this way, land trusts will smoothen the use of land and transfer the usage rights to infrastructure companies.

Suggested Citation

  • Yoshino, Naoyuki & Hendriyetty, Nella & Lakhia, Saloni, 2019. "Quality Infrastructure Investment: Ways to Increase the Rate of Return for Infrastructure Investments," ADBI Working Papers 932, Asian Development Bank Institute.
  • Handle: RePEc:ris:adbiwp:0932
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    More about this item

    Keywords

    infrastructure; public–private partnerships; tax revenue; rate of return; land trusts;

    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure

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