THE CHALLENGES OF FINANCING INFRASTRUCTURES

The successful development of infrastructure is vitally important for economic growth in developed and developing countries alike. Consequently, ensuring that infrastructure projects are successfully undertaken and completed should be a top economic priority for the governments of all countries. However, infrastructure development cannot succeed without adequate financing, and it is clear that infrastructure development in developing economies, especially large-scale projects such as power plants, roadways, dams, bridges, airports, and telecommunications networks, requires substantial amounts of technology and capital. Finance matters for infrastructure development not only for the usual reason of allocative efficiency, but also because of certain distinctive economic characteristics of infrastructure -high capital intensity, elements of natural monopoly, and location-specific investments- all of which affect private sector incentives to commit long-term capital. Currently, there exist two main approaches to financing infrastructure. The first approach is one that I will call the State-Build-Own-Operate (SBOO) approach. The second approach is widely known as the Public-Private-Partnership (PPP) approach. In Turkey like many countries, the first approach has been preferred generally, and most of infrastructure projects, have built, owned, and operated by the government, have been funded by public budget or foreign debt, especially in 1980s. Then, the governments in Turkey started to use new financing methods, such as establishing a special fund and issuing securities. After recognition of funding gap has resulted in a nearly universal acceptance that the private sector can and should play a larger role in the financing of infrastructure in partnership with the public sector, the new models such as BOT (Build Operate Transfer), which have been created have begun to be