A new facility funded by both private and public sector bodies aimed at ensuring infrastructure projects can be pushed through from financing to the construction stage is to be launched as soon as this week, GlobalMarkets can reveal.
The Infrastructure Project Preparatory Facility (IPPF) is one of a series of initiatives to be unveiled at this week’s ADB annual meetings as the focus of policymakers and investors broadens from financing projects to getting them off the ground. The IPPF is a semi-autonomou agency that will be part of a new public/private development bank known as Global Bank that will focus on infrastructure financing and other areas of development worldwide. Global Bank is a California-based institution being set up and which, unlike other multilateral development institutions, is expected to include both governments and private investors among its shareholders, GlobalMarkets has learned.
It is also expected to tap the wealth of sovereign wealth funds and other sources of institutional money to fund a wide range of infrastructure and other projects in both advanced and developing economies. In this sense, it will more closely resemble the European Investment Bank than other multilateral development banks.
In March, the ADB more than doubled its previous estimate of annual investment needed for infrastructure in the Asia Pacific region to $1.5tr a year between now and 2030, or $1.7tr a year ($22.6tr in all), if projects are adapted to cope with climate change. “Everyone recognises the fact that there is a huge global shortage of infrastructure but the problem is less one of finance but more one of there being few projects that are “shovel ready,” said William Thomson, who will become non-executive chairman of the IPPF.
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He said it typically took around three years to get infrastructure project feasibility studies done, and get projects ready to break ground.. Thomson, a former ADB vice president said: “That is what the IPPF would be designed to do — to finance the initial work to get the project up and ready for finance.” According to Ron Nechamia, president of the Global Bank, the IPPF aims making infrastucture projects “bankable”. “Few projects that are bankable will fail to attract finance.”
The IPPF aims to receive “mobilisation” funds at an inaugural board meeting later this month, followed by a public offering of securities to raise “operating funds” from private and public sector investors.Typically clients — a government or agency— using the IPPF’s services would do so on a fee-paying basis. Ryuichi Kaga, head of the ADB’s Office of Public-Private Partnership, said there was an urgent need to improve the infrastructure project “implementation capacity” of many developing countries in Asia. “In my experience, viable and bankable projects for PPP are somewhat limited but we are able to increase [the number] if implementation capacity is increased in governments,” he told GlobalMarkets.
