A really excellent and informative session discussing the specific challenges of infrastructure development, investment and financing in emerging markets and developing economies closed the first day of plenary sessions at FIDIC’s Global Infrastructure Conference in Geneva.
Focus on the developing world was chaired by Prashant Kapila, managing director of International Consultants and Technocrats in India. Kapila, who also sits on the FIDIC board, said that it was important to consider the role of the private sector in infrastructure development, including whether public-private partnerships (PPP) still have a role to play. “I think we also need to talk about whether the framework for private sector involvement is well enough defined and we also need to talk about governance and politics because projects often get stuck because of politics, local regional and national, so we need more certainty is that area too, especially around funding,” he said.
Kapila said that another key issue, especially in the developing world, is the importance of capacity. “This is a big challenge and made more difficult due to what might be seen as unintended consequences from elsewhere in the world,” he said. “Given the skills shortages that we see in the so-called advanced economies, we are seeing the phenomenon of these ‘developed’ economies ‘poaching in’ expertise from developing countries in an attempt to fill their own skills gaps. So, one country’s solution to a problem, is another country’s problem,” said Kapila.
Tackle key issues upstream with the right people involved
Chris Chijiutomi, managing director and head of Africa at British International Investment, spoke about the issues from the perspective of someone whose role covers the whole of Africa. He emphasised the different types of infrastructure transaction, with a focus on power and transport and looked at some of the challenges involved in investment and project development. Addressing the issue of corruption and other challenges around the procurement process, Chijiutomi said it was crucial to tackle these upstream through early involvement of the right people at the right time. “Ultimately, it’s about making projects investable,” he said.
Fang Dongping, professor and dean of the School of Civil Engineering at Tsinghua University in China offered some perspectives from academia and addressed the issue of resiliency of infrastructure and its operation with a particular focus on climate change. Of course, the emphasis on this was different in the developing world and made the urgent need to develop resilient infrastructure all the more acute. Dongping said that the lack of resources and funding made this task all the more difficult. He further examined some of the technical issues around resiliency and climate change and the challenge of an ageing infrastructure and the maintenance of current infrastructure.
Addressing the issues from the point of view of a consultant working in the field, Vera Masurat, senior consultant at GOPA Infra, said that consultants needed to be involved in projects much earlier in the process as there were difficult challenges inherent in consultants coming into projects later. “The chances of success of a project can be much higher if consultants are brought on board earlier as then we are able to influence the project and the way it is run for the benefit of all parties,” she said. Masurat said there was real potential to advocate in this area with the development banks and other global funders.
“Having a road is not enough - we need to change lives”
Chair of the Association of Consulting Engineers of Kenya, Jane Mutulili, spoke passionately about the specific challenges of working in emerging markets. “In these markets we need infrastructure development and food security, as a start. Funding is crucial, but how do countries raise funds? That is a challenge because although money can be borrowed, the conditions attached to that can be onerous and increases the need for borrowing which in turn increases debt, which can be bad for developing economies in the long term,” she said. Mutulili also said that some of the terms of trade when infrastructure was being developed were not beneficial to developing countries’ indigenous capacity and capability, especially when foreign contractors are used. That needed to change, she said.
Mutulili said that developing infrastructure wasn’t the only part of the story. Unless that development changed the lives of people and their communities for the better then it wouldn’t be worth the effort. “Having a road is not enough,” she said.
Catalina Greidinger, legal vice president at MinCivil in Colombia, spoke about the importance of local law and authorities willing to apply them. This encouraged predictability, which is one of the main concerns when developing projects, both from the cost and timing perspective, she said. Predictability was a central condition for private investors, project owners and good contractors to complement funding capacity of developing countries to finance infrastructure, she said.
The final speaker in the session Saeed Mohamed, transport specialist with the Islamic Development Bank from Saudi Arabia, highlighted a range of issues related to emerging economies, including economic challenges and access to finance, social-related challenges, including poverty and political challenges in relation to changes of governance, potential unrest and uncertainty. Mohamed also addressed the issue of corruption, which he said was a big challenge in certain parts of the world. “We need rules and regulations, but we also need enforcement because with nothing behind those rules then they are totally ineffective,” he said.
