Webinar foresees ‘Nike Swoosh’-shaped economic recovery

28 May 2020

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The 14th FIDIC Covid-19 webinar took place on Thursday 28 May 2020 with an event exploring how government economic stimulus is feeding down into developers and clients’ future plans and what this might mean for the construction and infrastructure industry.

“Covid-19: Clients, investors and developers’ perspectives on the fragility of the construction and infrastructure sector” was attended by 388 attendees and examined the issues around the effect of the economic response, how this response is affecting investors and clients’ plans and how they view the infrastructure sector at the present time.

Moderated by FIDIC communications advisor Andy Walker, the speakers at the event included Bill Howard, president of FIDIC, Jason Zhengrong Lu, head and lead infrastructure finance specialist at the Global Infrastructure Facility, Solomon Asamoah, CEO of the Ghana Infrastructure Investment Fund, Rebecca Zofnass, managing partner at Environmental Financial Consulting Group, Søren Adamsen, executive market director at COWI and José María Viñals, a partner at Squire Patton Boggs.

Kicking off the event, FIDIC president Bill Howard commented on the large number of people registering for the series of webinars, which he said showed that FIDIC had struck a chord with the issues under discussion and was supporting the industry through challenging times. Howard highlighted the fact that the need for infrastructure 

Jason Zhengrong Lu, head of the Global Infrastructure Facility, said that governments needed to balance quality and speed when looking at infrastructure development. Consideration of investor risk was critical in delivering successful projects and due diligence was essential, with many lessons to be learned from the previous 2009 financial crisis where maybe there was a rush to develop without adequate preparations. Lu said that the Global Infrastructure Facility had put in place a fund to support infrastructure and was working with governments to ensure that they were aware of best practices in infrastructure development and could learn lessons from previous development.

Solomon Asamoah, CEO of the Ghana Infrastructure Investment Fund (GIF), said that they were able to give comfort to investors as they understood risk sharing with the private sector. Their success is underlined by the fact that for every $1 dollar they have invested they have attracted $10 from elsewhere – an investment of $250m which has brought in $2.5bn, a significant achievement. The lockdown of the economy in Ghana as a result of Covid-19 has had a big effect, with any period of economic activity in a country like Ghana hitting day workers and the poor hard. The government has been looking at international donors to assist in terms of boosting the economy and the GIF has also been playing a key role in that. “Investors and financiers will probably be a bit more conservative for a while, so we have to ensure that projects are well structured and thought out to attract funding going forward,” Asamoah said.

Rebecca Zofnass, managing partner at Environmental Financial Consulting Group, said that historically the construction and infrastructure sector was a resilient sector and it was important to remember that. She said that according to her firm’s recent polling, the majority of the industry thought that the sector would fully recover in 2021. This was optimistic and probably unrealistic she thought, notwithstanding the fact that firms had responded quickly financially to the crisis. The sector’s fragility would come from the fact that the engineering industry is historically slow to adapt, yet the nature of the current pandemic will mean that firms need to be innovate and react in an agile way. “There will be firms that are quick to adapt and innovate who will prosper and the role of technology in this will be key,” said Zofnass.

Søren Adamsen, executive market director at COWI, said that Denmark had been one of the countries that had been least affected by the pandemic and was therefore further on in the reopening of its markets. He said that those markets would be dictated by government stimulus packages as he expected private sector investments to be “more defensive in nature” going forward. Adamsen said that he expected the industry to contract in the future with competitive pricing increasing. In Scandinavia and the UK, he thought there would be an increasing focus on green transformation projects as this was seen as a more fruitful area for investment. He said that there was likely to be a boom in green energy projects, but it was still uncertain whether green transport projects would take off. Developers working in the renewable energy sector were very active, more so than they were in the buildings sector, which was perhaps a sign of the times for the future, he said.

José María Viñals, a partner at internal law firm Squire Patton Boggs, said that the new reality for countries post-Covid would be very different from what it is now. We have seen delays in projects due to lockdowns and quarantines which would have an impact on the industry, as would challenges with supply chains, especially for those depending on the Chinese market. Vinals said that there were very likely to be legal ramifications arising from these project delays and some court cases were inevitable. Government injections of finance were welcome but not all countries were able to do this and therefore the recovery was likely to be uneven in different geographies, he said. However, infrastructure was very much seen as a key economic driver, which should be a positive for the industry, Viñals said. Like other speakers, he saw green development and digital infrastructure that were likely to be seen as “shelter projects” by governments and financial institutions as safer havens for investment.

The panel discussed a very wide range of issues including the role of technology in firms innovating in the future, the need to remember that there was still a big requirement for housing and infrastructure in Africa and Asia and this should not be forgotten about as the world economy recovers from Covid-19. Whether green investment was likely to be a real growth area was also raised, with the panellists clear that they did see that sector as one that would expand post-Covid. The exact shape of the economic recovery was also discussed with the general consensus of panellists being that we were likely to see a “Nike swoosh-shaped” recovery from the pandemic. The hope being, of course, that countries will get on and “Just do it!” when it comes to infrastructure investment.

Closing the webinar, FIDIC president Bill Howard said that there was generally a lag between a major crisis hitting and the economic impact of that crisis and this was likely to be the case again with the current pandemic. Identifying the right projects that are done right would be crucial to investors and economies as countries emerge from the current crisis, he said, and that increased the need for proper planned out and thought through projects. “We need more rigor not less in project planning going forward,” said Howard.

The next FIDIC webinar in the series is “Coming out of Covid - what will the 'new normal' look like and how will we get there?” which takes place on Wednesday 3 June at 12 noon CET. Please register your place as soon as possible as another large turnout is expected for this event.

Click here to book your place on the ‘What will the new normal look like?’ webinar.

Click below to view a recording of the Clients, investors and developers’ perspectives webinar session.

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