A mix of financing options will be needed to deliver the infrastructure that Ireland so badly needs and there can be no holding back, writes Gina Quinn.

There is little disagreement that the Government needs strongly to commit to the continuation of the National Development Plan investment programme in this December's Budget. To do so, it will need to be much more inventive than before in financing the major capital projects which the State so badly needs.

It is important to distinguish the issues the Government faces on day-to-day spending versus what needs to be done on capital spending. With current spending rising at a rate of 20 per cent by end-October compared to revenue increases of 2.3 per cent, one does not need to be Mr Micawber to know that this is a recipe for misery. The Minister for Finance, Mr McCreevy, is well supported by the main commentators in calling for corrective action in December's Budget.

Investment in capital projects, including major transport infrastructure, needs a different perspective. Ireland is still playing catch-up with its main European competitors in bringing our national infrastructure up to speed. If we are to continue to be a serious competitor in attracting mobile international investment, we need to invest heavily in areas such as transport, communications and environmental projects.

There are also serious quality-of-life issues to be addressed. The daily nightmares which so many people face in terms of commutes and affordable accommodation need big-ticket solutions.

Despite a slowing of economic growth, there are still plenty of funds which Government and private sector can draw on to finance capital projects in Ireland.

Government borrowing for road building and other projects which generate positive economic returns is highly justifiable - particularly for an economy which needs to unblock the logjams hindering future growth.

Ireland's AAA rating and its falling debt/GDP ratio (set to fall below 34 per cent by end-2002) mean there are plenty of willing lenders for good projects. But the constraint here lies with the EU Stability and Growth Pact - part of the deal on EMU membership - which is now setting limits on State borrowings.

It matters little that the main European economies, ably abetted by Mr Prodi, are already attempting to rubbish the deal, and push for higher borrowing limits. It seems highly unlikely that Ireland will try to rock that particular boat right now. And so, some new options must be looked at.

Public private partnerships are evolving through a learning process, and several major deals will soon come to fruition.

Connex will begin the operation of the Luas system in little over a year, while there is strong international interest in the Dublin Metro project.

There is now an acceptance that the tolls and charges which future projects will inevitably bring with them are a worthwhile price to pay.

You get what you pay for. Once that becomes a principle, further investment will flow. The National Pension Reserve Fund, for example, has a significant war chest for investment. Far better to invest those funds in good commercial projects in Ireland than on dubious international equities.

A further option is to explore bond financing - but with some fresh thinking. This public-private financing model is widely used in the US, where almost all non-defence infrastructure is financed by bonds issued at levels below the national government.

In Ireland's case, however, a more careful approach is needed, since State-guaranteed bonds would be regarded as State borrowing under another name, and hence infringe on the overall borrowing limits.

A new approach - and this is one which could be done through the National Development Finance Agency - is to create special purpose vehicles for the financing of specific capital projects. Secured against the asset in question, this would allow for the raising of capital through a bond issue, with returns from the investment used to repay the bond.

A recent example from the US relates to a near-total renovation of a major state office building in Massachusetts. This is being financed through an independent special-purpose corporation by a mixture of tax-exempt and taxable bonds. In the new configuration, the state will lease and occupy the bottom half of the building; the higher floors will be leased to commercial tenants; and new residential units built around the base of the building will be sold to private parties.

It is not too difficult to see this model being extended to other capital projects - as long as a commercial approach is taken to the overall development.

Clearly, a mix of financing options will be needed to deliver the infrastructure that Ireland so badly needs. But there can be no holding back. It is time to be more innovative.

Gina Quin is the chief executive of Dublin Chamber of Commerce