The role of foreign investment in U.S. infrastructure: opportunities and challenges ahead

Authors

DOI:

https://doi.org/10.17811/ebl.9.3.2020.157-166

Abstract

The U.S. infrastructure has been issued a grade of D+ from the American Society of Civil Engineers because of the low funding for new construction, maintenance, and repair. It is now reaching the end of its useful life and cost estimates have reached as high as $3.6-trillion. The public infrastructure investment is at 2.4% of GDP, which is half of what it was 50-years ago. The U.S. has explored new ways to finance its infrastructure because of funding uncertainty. Investments such as, pensions, foreign investments, and sovereign wealth funds, manage trillions in assets and are forecasted to grow. This paper presents an overview in infrastructure funding and identifies possible approaches in addressing long-term financial needs with foreign capital partnership.

Author Biographies

Iordanis Petsas, Department of Economics and Finance University of Scranton

Associate Professor and Chair,

Department of Economics and Finance

Kania School of Management

University of Scranton

Scranton, PA, USA

Sofia M Vidalis, Penn State Harrisburg, Harrisburg, PA, USA

Associate Professor of Civil Engineering

Department of Civil Engineering/Structural Design & Construction Engineering Technology

Penn State Harrisburg, Harrisburg, PA, USA

References

American Association of State Highway Transportation Officials (AASHTO), Transportation Finance Clearinghouse: Revenue Bonds, http://www.transportation-finance.org/funding_financing/financing/bonding_debt_instruments/municipal_public_bond_issues/revenue_bonds.aspx, Accessed October 2019, 2019.

American Society of Civil Engineers (ASCE), “2017 Report Card for America’s Infrastructure,” March 2017, https://www.infrastructurereportcard.org/americas-grades/, Accessed October 2019.

Balding, Christopher (2012), Sovereign Wealth Funds: The New Intersection of Money and Politics, New York: Oxford University Press.

Balin, Bryan J. (2008), “Sovereign Wealth Funds: A Critical Analysis,” Social Science Research Network, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1477725, Accessed July 2015.

Behrendt, Sven (May 6, 2015), “Sovereign Wealth Funds as Tool for Responsible Governance of Resource Wealth,”Geoeconomica Political Risk Management, Geneva. UNCTAD Global Commodities Forum, 7-8 April 2014.

Bensted, Amy, Julia Goodall and Graeme Terry (2013), “Sovereign Wealth Funds Investing in Infrastructure,” Preqin.

Bureau of Economic Analysis (BEA News) (June 26, 2012), “Value of Foreign Investment in the U.S. Increased More than Value of U.S. Investment Abroad in 2011,” U.S. Department of Commerce, http://blog.bea.gov/2012/06/26/international-investment-2011/, Accessed June 2015.

happatta, Brian (January 16, 2015), “Obama Proposes New Muni Bonds for Public-Private Investments,” Bloomberg Business, http://www.bloomberg.com/news/articles/2015-01-16/obama-proposes-new-muni-bonds-for-public-private-infrastructure, Accessed July 2015.

Council on Foreign Relations (June 2012), “Federal Transportation Infrastructure Policy, Renewing America Progress Report and Scorecard,” www.cfr.org/content/publications/.../Infrastructure_Progress_Report.pdf, Accessed June 2015.

Congressional Budget Office (CBO) (October 2018), “Public Spending on Transportation and Water Infrastructure, 1956 to 2017,” Congressional Budget Office, Washington, DC, https://www.cbo.gov/system/files/2018-10/54539-Infrastructure.pdf, Accessed on October 2019.

Della Croce, R. and J. Yermo (2013), “Institutional Investors and Infrastructure Financing”, OECD Working Papers on Finance, Insurance and Private Pensions, No. 36, OECD Publishing.

Federal Highway Administration (FHWA) (July 17, 2012), “Moving Ahead for Progress in the 21st Century Act (MAP-21): A Summary of Highway Provisions,” Office of Policy and Public Affairs, https://www.fhwa.dot.gov/map21/docs/map21_summary_hgwy_provisions.pdf, Accessed on October 2015.

Federal Highway Administration, TIFIA (2015), U.S. Department of Transportation, Washington, D.C., www.fhwa.dot.gov/ipd/tifia/, Accessed on July 2015.

Gara, Tom (October 8, 2012), “On Questions of National Security, Is Huawei Innocent Until Proven Guilty?,” The Wall Street Journal, http://blogs.wsj.com/corporate-intelligence/2012/10/08/on-questions-of-national-security-is-huawei-innocent-until-proven-guilty/, Accessed October 2015.

Gelb, Alan, Silvana Tordo, Håvard Halland, Noora Arfaa and Gregory Smith (February 2014), “Sovereign Wealth Funds and Long-Term Development Finance: Risks and Opportunities,” The World Bank Poverty Reduction and Economic Management Network Public Sector Governance Unit & Sustainable Development Network Oil, Gas and Mining Unit, Policy Research Working Paper 6776.

Gerard Lyons (2014), “A growing Role for Sovereign Wealth Funds,” McKinsey on Society.

Green, Alastair, Tim Koller, and Robert Palter (June 2015), “A Hidden Roadblock in Public-Infrastructure Projects,” McKinsey & Company, http://www.mckinsey.com/insights/corporate_finance/a_hidden_roadblock_in_public-infrastructure_projects, Accessed June 2015.

International Working Group of Sovereign Wealth Funds, http://www.iwg-swf.org/, Accessed September 2015.

Kirkpatrick, Colin, David Parker, and Yin-Fang Zhang (April 2006), “Foreign Direct Investment in Infrastructure in Developing Countries: Does Regulation Make a Difference?,” Transnational Corporations, Vol. 15, No. 1.

Nash, James (December 3, 2012), “Brown Seeks Sovereign Wealth to Back High-Speed Rail Line,” Bloomber Business, http://www.bloomberg.com/news/articles/2012-12-03/brown-seeks-sovereign-wealth-to-back-high-speed-rail-line, Accessed September 2015.

Levine, Helisse and Paul Greaves (Fall 2013), “Borrowing for the Future: The Unintended Consequences of Build America Bonds on Low Investment Grade Issuers of Municipal Bonds,” Journal of Public Budgeting, Accounting & Financial Management, 25 (3), pp. 556-574.

Lublin, Joann S. and Sayndi Raice (November 5, 2010), “Security Fears Kill Chinese Bid in U.S.,” The Wall Street Journal, http://www.wsj.com/articles/SB10001424052748704353504575596611547810220, Accessed October 2015.

Pomerleau, Kyle (2015), “Senate Approves Three-Month Highway Trust Fund Extension,” Tax Foundation, http://taxfoundation.org/blog/senate-approves-three-month-highway-trust-fund-extension, Accessed September 2015.

Poole, Robert W. Jr. (April 2011), “Transportation Infrastructure Finance and Innovation Act Policy Brief “, Reason Foundation, http://reason.org/files/transportation_infrastructure_finance_brief.pdf, Accessed June 2015.

Preqin (August 2018), “Preqin Special Report: Sovereign Wealth Fund,” https://docs.preqin.com/reports/Preqin-Special-Report-Sovereign-Wealth-Funds-August-2018.pdf, Accessed October 2019.

Preqin (June 2015), “The 2015 Preqin Sovereign Wealth Fund Review,” https://www.preqin.com/docs/samples/2014_Preqin_Sovereign_Wealth_Fund_Review_Sample_Pages.pdf, Accessed October 2015.

Sabol, Patrick and Robert Puentes (April 22, 2015), “Building Better Infrastructure with Better Bonds,” Brookings Report, http://www.brookings.edu/research/papers/2011/03/11-sovereign-wealth-funds, Accessed June 2015.

Sander, Libby and Saulny, Susan (August 2, 2007), “Bridge Collapse in Minneapolis Kills at Least 7,” New York Times, http://www.nytimes.com/2007/08/02/us/02bridge.html?_r=0, Accessed June 2015.

Schwab, Klaus and Xavier Sala-i-Martín (2012), “The Global Competitiveness Report 2012–2013,” World Economic Forum, Insight Report,” http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2012-13.pdf, Accessed October 2015.

Sovereign Wealth Fund (SWF) (October 2013), “Andrew Rozanov – A Global Sovereign Wealth Fund Leader,” https://sovereignwealthfundshistory.wordpress.com/2013/10/03/andrew-rozanov-a-global-sovereign-wealth-fund-leader/, Accessed September 2015.

Thomas, Naveen (2014), “Regulating Sovereign Wealth Funds Through Contract,” http://scholarship.law.duke.edu/cgi/viewcontent.cgi?article=1405&context=djcil, Accessed September 2015.

T.N. (October 14, 2013), “How Can America Pay for its Roads?,” The Economist, Los Angeles, http://www.economist.com/blogs/economist-explains/2013/10/economist-explains-4, Accessed June 2015.

Truman, Edwin, Sovereign Wealth Funds: Threat or Salvation? Washington, D.C.: Peterson Institute for International Economics, 2010. Print.

United Nations Conference on Trade and Development (UNCTAD) (2014), Trade and Development Board, Trade and Development Commission, “Natural Resources Sector: Review and Identification of Opportunities for Commodity-Based Trade and Development,” Multi-year Expert Meeting on Commodities and Development, Sixth Session, Geneva, 9-10 April 2014.

U.S. Department of the Treasury (September 2014), Office of Economic Policy, “Expanding our Nation’s Infrastructure Through Innovative Financing,” U.S. Department of the Treasury.

U.S. Senate Budget Committee (2015), Bernie Sanders, Ranking Member. Repairing Our Infrastructure, Text from: Senate Budget Committee Reports.

Washington State Department of Transportation (WSDOT) (October 14, 2014), “I-5-Skagit River Bridge Replacement-Completed July 2014,” www.wsdot.wa.gov/projects/i5/skagitriverbridgereplacement/, Accessed on July 2015.

White House (October 2019), “Federal Budget by Agency and Account, FY2019 President’s Budget Policy,” https://www.whitehouse.gov/wp-content/uploads/2018/02/27-1-fy2019.pdf, Accessed October 2019.

Downloads

Published

13-12-2020 — Updated on 14-12-2020

Versions

How to Cite

Petsas, I., & Vidalis, S. M. (2020). The role of foreign investment in U.S. infrastructure: opportunities and challenges ahead. Economics and Business Letters, 9(3), 157–166. https://doi.org/10.17811/ebl.9.3.2020.157-166 (Original work published December 13, 2020)