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Sadek Wahba calls for new approach to investing in America’s infrastructure

More than 60 members of GIIA gathered in New York last week to hear Sadek Wahba, founder of I Squared Capital and author of a new book on U.S. infrastructure, in conversation with GIIA’s chief executive Jon Phillips

Pictured above: Sadek Wahba in conversation with Jon Phillips at Macquarie’s offices

The fireside-style chat, hosted by Macquarie in its new offices on Fifth Avenue, saw Sadek call for new thinking on how to pay for America’s much needed and overdue infrastructure modernisation programme. A stark contrast to the development of the country’s infrastructure in colonial times when transportation and water had been entirely privately financed. 

Sadek outlined how the responsibility for meeting the costs of modernising infrastructure has shifted from private capital almost entirely to governments, beginning with the Great Depression of 1929 and President Eisenhower’s New Deal, and ending after World War 2. Funding through municipal bonds took off in the 1950s through to the 1970s, creating a culture of public borrowing that persists to this day. The book, he said, was about challenging America’s cultural mindset and the increasingly unsustainable pressure on the country’s enormous and growing public debt.

Surveys showed American citizens were increasingly unconcerned with who owns infrastructure or who finances modernisation, as long as it gets done and works better. But Sadek, who also serves on President Biden’s National Infrastructure Advisory Council, said the U.S. political system mitigated against long-term thinking and over time had lost interest in re-investment to maintain infrastructure assets. 

America now needed to create new mechanisms to raise finance through long-term agreements with the private sector, or U.S. infrastructure would simply continue to deteriorate. 

Build: Investing in America’s Infrastructure’ provides powerful examples of successful public private partnerships (P3s) and private asset management that the author says demonstrate the advantages of private investment, including earlier project delivery, better long-term management and maintenance, stronger economic and social benefits, and sharing of risk for state and local governments. It also acknowledges that some past P3s have gone wrong, but both governments and investors have learnt from these experiences and the industry has since matured towards better and more balanced outcomes.

Build: Investing in America’s Infrastructure is published in north America on 1 October and the rest of the world in December.