New models for financing infrastructure

Wednesday, 13 November 2013 00:33 - - {{hitsCtrl.values.hits}}

By Shabiya Ali Ahlam To find out the new models available in financing for infrastructure, a session chaired by Asian Development Bank (ADB) Country Director for Sri Lanka Rita O’Sullivan stressed the need for innovation in that sphere. While attempting to explore how innovation can be achieved, O’ Sullivan noted that at the end of the day, with financing comes risks and returns.

“You have got to somehow make that happen in infrastructure financing. The Government needs to create an enabling environment that is needed for investment, whereas the private sector will work on the ground on building and trading,” she said. Speaking on Africa CDC Group UK CEO Diana Noble pointed out that in the region; the supply and demand gap is enormous for power. “If we do aggregate Africa, it is essentially behind the world market. Only 1/3rd of its population has access to electricity and that is that position the USA was 100 years ago. And the gap isn’t being closed fast enough,” she expressed. Noble added that the progress in that area was slower this decade when comparing with the performance two decades ago. Capacity building “The key bottle neck to build in new capacity is investing in early stage projects and that is a sub economic activity. For this we are working on a new approach. In the CTC we are trying to establish the existing power plant and are using this to put together the elements needed for the power projects in Africa. “As the needs for infrastructure in developed countries are different to the needs of the developing countries, equity is the biggest challenge faced,” said PTC India Chairman/MD Deepak Amitabh. Speaking on the situation in India in this regard, the country requires equity of $ 300 billion, and the equity debt ratio considered normal is 70:30. “To do this, Indian companies and the government does not have such money. Therefore money has to flow into the country from outside for development to take place,” stated Amitabh. Contd. on page 16 New models... Touching on the problem faced when getting about financing for infrastructure, Alloy Mtd Group Malaysia President/CEO Dato Azmil Khalili Bin Dato Khalid said that the biggest challenged faced is in convincing that governments that developers are only attempting to assist them. Investor suspicion “In the six countries our company has privatisation, the problem we face in all are the same. The government views the investor in suspicion. The reality of it is that the government cannot continue to fund projects in the usual traditional way. Public Private Partnership (PPP) is the way to look at it,” noted Khalid. Speaking on Sri Lanka, Minister of Investment Promotions Lakshman Yapa Abeywardena highlighted key areas that warrant “serious attention.” “There is a need to identity the areas of investment in infrastructure that would have a direct bearing in the country’s development agenda. This would not only improve the quality and quantity of the infrastructure, but also lower the prevailing income inequality, leading to the significant effect on improving income distribution,” he said and added that by and large, there is a clear correlation between infrastructure, economic growth and wellbeing. Secondly, a paradigm shift is observed in the global context when looking at infrastructure in terms of how it will be build and financed. Infrastructure, Abeywardena observed is becoming vastly global and there is a concentrated focus in countries that was thus far ignored. For the past two decades, developed economies have accounted for more than 70% of global infrastructure investment. However, in the next two decades, emerging and developing economies are likely to account for 40-50% of all infrastructure spread. “With this new trend, more infrastructure projects are seen with governments demanding globally competitive pricing and world class technology,” Abeywardena pointed out.