Infrastructure
Infrastructure is the basic physical systems that are vital to the economic development and prosperity of an enterprise, region, or country. They are intensive and high-cost investment, natural monopolies related to the production of public goods or production processes (communication networks, transportation systems, electrical, water and sewage systems). Funding for infrastructure improvements can come from the government, a private entity, or a public-private partnership.
Understanding Infrastructure
Infrastructure can include different physical systems and structures. For example, infrastructure with the equipment involved and the service provided to maintenance districts.
Physical parts and a company's data network are necessary to support business operations. They are also parts of infrastructure.
Infrastructure is often connected to the production of either public goods or goods produced by natural monopolies. Often, the financing, control, oversight, or regulation of infrastructure is a government activity. This is represented as direct state production or monopoly production under careful regulation, with subsidies and legal penalties.
Infrastructure can often have the characteristics of club goods or goods that are most easily produced by localized monopolies when it comes to small organizations.
Types of Infrastructure
In French, infra means "below," structure means "building". In literal translation, "infrastructure" is the foundation. In economics, it is the base for a structure. It was first used in the 1880s, and in 1987 the term "public works infrastructure" was accepted by a group of the U.S. National Research Council. The term referred to the functional systems (highways, airports, telecommunications, and water supply) and the associations that keep them operating.
Some infrastructure types are described below:
Soft Infrastructure consists of human capital and services provided to people. Healthcare, education systems, law and order, financial institutions, and government systems support the economy.
Hard infrastructure consists of the physical systems necessary to manage a modern industrialized country. Roads, highways, bridges and transit vehicles, oil rigs/refineries needed to operate these physical systems.
Critical infrastructure consists of assets identified by the government as necessary for the functioning of society and the economy (health care, education and research, agriculture, housing and heating facilities, telecommunications, waste management, garbage disposal, etc.). The Department of Homeland Security, the Department of Energy, and the Department of Transportation are responsible for critical infrastructure in the USA.
IT Infrastructure
Infrastructure includes many technical systems, there are information technology (IT) infrastructures. For example, networking equipment and servers. They play the most important role in many business environments. To improve operational efficiency, businesses need to exchange information, which must be structured. Many business functions fail when the IT infrastructure is broken.
Investment in Infrastructure
Infrastructure can be considered as an asset class that is more stable than stocks in the long-term perspective and earns higher returns. Investments in infrastructure funds have become quite popular among some companies and individuals because of their protection (funds dealing with transport or water infrastructure).
Private investment in public Infrastructure
For example, a person can fund improvements to certain public infrastructure (improvements to schools, hospitals, or local law enforcement).
Another example, an energy company can invest in the development of a country's infrastructure as an extension of its business (build pipelines and railroads in the country where it plans to process energy resources). Such investments can benefit both the company and the country.
In 2004, Cintra signed a rental agreement on the Chicago Skyway Bridge for 99 years. The city is no longer responsible for maintaining the bridge. It is operated and serviced by Cintra, receiving all of the generated profits. The city has received $1.82 billion for its needs.
