Developing viable infrastructure projects is tough in the best of circumstances. And over the last few years I’ve learned, first-hand, that developing them in emerging markets and developing countries is even tougher. That’s the main reason I joined the small-but-dedicated team of the Global Infrastructure Facility (GIF).
The GIF – which was formed only two years ago – looks to attract private finance to infrastructure projects in those countries that most need it. We serve as a platform where governments can collaborate with international financial institutions and private sector investors to design, structure and implement these complex projects. The potential is big – funding from GIF can lead to multi-million dollar projects at close.
Becoming more effective
We’ve learned a few things after almost two years of operations. First, this isn’t a fast-moving business. Project pipelines in emerging economies tend to be weak, with high risks, which makes potential investors understandably cautious. Furthermore, potential investors don’t have a reliable framework for evaluating potential infrastructure projects.
So far, the GIF has focused on building up a strong project pipeline with the support of its advisors and partners. But is there more we can do to address the other challenges we’ve encountered? At the 4th GIF Advisory Council Meeting held in Washington D.C. last October, we focused precisely on this question. Several new initiatives were introduced as a result:
- Dramatically improving the project preparation process using a new project assessment tool.
- Reducing risks through complementary financing and credit enhancement instruments.
- Encouraging the sale of existing “brownfield” infrastructure assets, with proceeds funding new infrastructure projects.
- More sharply defining infrastructure as an asset class in emerging markets and developing countries through a new emerging markets infrastructure debt index.
The rationale behind these proposals is described in a concise, 35-page report entitled Making Infrastructure Rewarding [PDF] that can be downloaded by anyone interested.
What’s next?The GIF is further developing some of these proposed tools based on the input of its Advisory Council, which consists of representatives of donor governments, multilateral development banks and the private sector. A lot of detail still needs to be worked out, such as pricing mechanisms and the duration of the proposed instruments.
We at the GIF want to do more to address the barriers to infrastructure investment in emerging markets. We welcome your feedback on the report. Please leave us a comment below or send us an email.
We are accepting applications for project preparation and transaction structuring. Please visit the Global Infrastructure Facility website for details.
Related Links:Reasons for optimism in closing the infrastructure financing gap
Public-private investment to close the infrastructure gap
3 lessons on collaboration from the Global Infrastructure Facility