OTTAWA—The Liberal government is betting the farm on infrastructure investments, so amplifying every dollar spent raises the chance of returning the economy to faster growth.
To that end, the government announced the creation of the Canada Infrastructure Bank (CIB) in its Fall Economic Statement on Tuesday, Nov. 1.
It is a bold move from the federal government, though the devil’s in the details. The biggest change will be to have the private sector, along with foreign investment, playing the leading role.
The change could also mean less authority for municipalities and provinces, while Canadians get used to paying more tolls and other charges.
The government committed to investing at least $35 billion over 11 years, but the main thrust of the CIB is to attract private sector capital.
“We want to ensure that for every federal dollar, we find a way to crowd in pension funds and institutional investors for four or five additional dollars,” Finance Minister Bill Morneau told reporters.
Getting the private sector involved goes beyond providing capital. The government wants to tap into the private sector’s experience and discipline in managing infrastructure projects.
The CIB’s creation was one of the first three recommendations from the finance minister’s Advisory Council on Economic Growth (ACEG).
“Wherever possible, federal tax dollars spent on infrastructure should be amplified by institutional capital,” said the ACEG in its first report.
The new organization will be at arm’s length from the government—like a Crown corporation—and will be legislated in Budget 2017. The intention is for the CIB to be operational next year.
Build It and They Will Come
The ACEG calls the creation of an infrastructure bank a “once-in-a-generation opportunity for Canada.” It states that the amount of infrastructure investments held by pension funds today is less than 10 percent of the total capital available for these types of investments from pension and sovereign wealth funds alone.
