The Law and Finance of Infrastructure Investment

Authors

Daisuke Asaoka, Meiji University

Abstract

Institutional design facilitates the investment of private capital in infrastructure. The Article deals with concessions, which have been a major format for infrastructure privatization in Japan since their legislation in 2011. It argues that the Japanese government, faced with mounting public debt, walks a thin line between attracting private capital and securing public interest in infrastructure under private operation. By comparing concessions with stock sales, the mainstream form of privatization until the legislation, the Article shows that while concessions have advantages in terms of economics and public interest control, they may hinder the strategic growth of private enterprises by limiting operating flexibility. Stock sales give greater flexibility to privatized infrastructure and require more sophisticated regulations on entry, pricing, and equal footing than concessions, which provide a more controlled competitive environment.

To extract the best of these two worlds and promote the use of private capital in infrastructure investment, the Article proposes the use of concessions for corporatized infrastructure, which are government-owned corporations converted from government entities. Through this two-layered form of privatization, the government can resume the privatization of corporatized infrastructure, whose stock sales have lagged since the vigorous shareholder activism of the 2000s. The Article also argues that the use of limited partnerships as a vehicle for concessions will promote investment by institutional investors, which have been discouraged by a requirement that concessionaires have operating capabilities. While providing investor protection for limited partners under fund governance, the vehicle will give the most operating responsibilities to general partners. Further, to improve consistency among the design, building, and operation of infrastructure by means of private capital, the Article proposes that the purview of concessions be expanded to include the building of new infrastructure elements, as opposed to merely the operation of existing ones.

Disciplines

Comparative and Foreign Law | Human Rights Law | International Law | Internet Law | Law | Legislation | Science and Technology Law

Recommended Citation

Daisuke Asaoka, The Law and Finance of Infrastructure Investment, 6 Cardozo Int’l & Compar. L. Rev. 51 (2022).
Available at: https://larc.cardozo.yu.edu/ciclr/vol6/iss1/4