Monday, May 8, 2017

Ron Mock on Canada's Infrastructure Needs?

Ron Mock, Ontario Teachers' president and CEO was in Montreal briefly last week following the Milken Institute Conference in Los Angeles to discuss "The Real Infrastructure Questions for Canada" at The International Finance Club of Montreal.

You can read the entire speech here.  In his speech, Ron covered seven questions:
  1. What is our longer-term vision for major-project infrastructure strategy in Canada?
  2. Why should we care?
  3. What are our priorities?
  4. How should we fund these projects?
  5. What are the impediments to execution?
  6. Have other countries figured this out?
  7. Does the public support private capital investments in large infrastructure projects?
    Take the time to read the entire speech here, it's quite short and makes the critical points below:
    • On the first question: "I can’t say strongly enough that this is not about the financing. It is about having the projects with ongoing funding plans, guided by the vision that will lead us to success. My belief is that this vision remains a work in progress and when it is crystallized it will propel us forward."
    • On the second question: Yes, we should all care, Ron is right, "we can't afford not to. For the sake of productivity, global competitiveness and jobs." I would also add for the sake of our environment.
    • On the third question: Ties into the vision for infrastructure. Not investing in infrastructure will lead to more congested roads, ports, airports and impede the flow of goods and services and limit the advancement of technology hubs like the one between Toronto, Kitchener and Waterloo. 
    • On the fourth question: Even though Canada invests quite a bit of its GDP on infrastructure (18%), it's not enough to meet the growing needs of investing far more ($62 billion per year till 2030 to support economic growth). Governments need capital and institutional investors trying to meet their long-dated liabilities are looking for good infrastructure projects to invest in. Moreover, on top of capital, Ontario Teachers [and other large Canadian investors] has a long history of investing in this sector and has the right partners which bring critical knowledge on managing these projects efficiently.
    • On the fifth question: The major impediments to investing in infrastructure in Canada are twofold: first, infrastructure assets are owned by three levels of government and none of them is ready to cede control and second and more importantly, "the political reality of an election cycle, which is far shorter than the time frame needed to deliver an infrastructure project from the ground up." In this regard, all three levels of government will play a critical role, much more important than being a financing partner, in getting everyone on-side and moving in the same direction. Ron was clear on this" I believe the new infrastructure bank of Canada should be a bank on projects, not a bank of cash."And these infrastructure projects require long-term sustainability in which partners can implement realistic user-pay rates and adjust them according to market conditions and offer a critical mass customers, have clarity around government policies and tax incentives, have a clear understanding of the need and role for regulators to protect the public's interest, etc. 
    • On the sixth question: Ron cites examples in Australia, the UK, Belgium and Denmark to make his point that some countries have figured out how the "right governance, structure and  projects" create a "win-win" situation for everyone. 
    • On the last question: Ron was clear: "In order to be successful as a country, if we want to pursue this model, we are going to have to find ways to clearly demonstrate the benefits, and to gain the public trust." Canada has many right things to make this model successful but the devil is in the details and "in an environment where our productivity is declining as our
      demography ages, I hope it won’t take a crisis for us to be forced to finally sort out those details."
    I agree and hope they do get the details right on Canada's new infrastructure bank, government policy, the projects and a lot more.

    Again, take the time to read the entire speech here, it covers the points above in more detail.

    Below, at the Milken Global Conference last week, Ron Mock, Ontario Teachers' Pension Plan CEO, spoke with CNBC's David Faber about the plan's portfolio strategy in the markets right now.

    Also, Hugh O'Reilly, president and CEO of OPTrust recently joined BNN to talk about what he'd like the Canada Infrastructure Bank's mandate to be. Listen carefully to Hugh's comments and concerns, he too raises excellent points. If it doesn't load below, watch it here.



    No comments:

    Post a Comment