At its weekly meeting today, the Israeli government will approve the establishment of an official database of infrastructure projects to be carried out in the period 2017-2021. The idea arose in a meeting between Prime Minister Benjamin Netanyahu and the heads of The BlackRock Group, the world's largest asset management company. The BlackRock managers expressed great interest in long-term investment in infrastructure projects, even projects that yield low, single digit annual returns.
The BlackRock managers explained that the global zero interest-rate environment, which is not expected to change in the near future, creates a reality in which investment in low-yield infrastructure projects is preferable to holding cash. When Netanyahu sought to refer these investors to a list of projects in the pipeline, it turned out that the government did not have a pipeline of projects that might interest large international and local investment bodies.
Setting up the database has two additional aims. The first is to raise awareness and expectations among the Israeli public concerning future projects, and thereby to make it difficult for the Ministry of Finance to cut projects every time it needs to make an across-the-board public spending cut. The second is to deepen the use of partnerships between the public and private sectors (PPP) in government ministries. When the list of projects was drawn up, it emerged that currently only 20% of them are planned for the PPP track, the main advantage of which is external, non-budgetary finance not subject to the government spending limit.
The database is intended to include all planned physical projects to be carried out, budgeted, or approved by government ministries and agencies.
The list that will be presented to the government comprises 147 projects worth an aggregate NIS 116 billion. The criteria for inclusion in the list were a project cost of over NIS 100 million; a financial viability study; and a government decision on the project or a budget allocation. The value of projects that did not meet these criteria is a further NIS 40 billion.
The Ministry of Defense and the Ministry of Education did not take part in the compilation of the list, the former on the grounds that its projects were classified; the latter on the grounds that none of its projects were worth over NIS 100 million, even though its five-year development budget is NIS 11 billion.
Among the projects being promoted by the Ministry of Transport are the Green and Purple Lines of the Tel Aviv light rail, the Green Line of the Jerusalem light rail, and the light rail link between Haifa and Nazareth; a railway line alongside Highway 6; a public transport lane on Highway 4 and a network of urban public transport lanes; fast lanes into Tel Aviv and a new road into Jerusalem (Highway 16); strengthening of public transport in Haifa and surrounding communities; and an upgrade of the national road network.
Among the projects of the Ministry of National Infrastructures, Energy and Water are all the private power plant due to be constructed in the coming years, including plants running on renewable energy; water and sewage systems; fuel lines; and water purification installations. The Ministry of Health submitted projects for renovation of the Poriah Hospital in Tiberias and a new hospital in Beersheva. The Ministry of Environmental Protection submitted projects for two waste treatment installations and a project for protecting the coastal cliff from collapse. The Ministry of Agriculture submitted a project for constructing a wholesale market at Tzrifin.
The government will also decide on setting up a steering committee for the initiative.
Prime Minister Benjamin Netanyahu said, "The program will enable the government to provide better service to citizens in transport, energy, health and many other areas." Prime Minister's Office director-general Eli Groner said, "Mapping the projects represents a first and important step in the process of obtaining inward investment in infrastructures, in expanding investment, and in developing the Israeli economy."
The Israel government has not gained extensive experience in PPP projects. So far only NIS 30-40 billion has been invested by this method, with only partial success. Alongside successes such as Highways 6 and 431, there have been several failures, the most prominent one being the Tel Aviv light rail Red Line. Highway 531, and to some extent the Jerusalem light rail Red Line, completion of which has been delayed by four years, are also notable failures. The series of failures in 2010-2011 led to an almost complete halt in new PPP projects and a return to full government control.
Published by Globes [online], Israel business news - www.globes-online.com - on September 3, 2017
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