The ADB and other multilateral development banks need to
catalyze money from sovereign wealth funds (SWFs)
in order to tap into a rich seam of wealth that could help
close the threatened funding gap for infrastructure and other
long-term projects, a private equity specialist said.
Assets of the worlds half dozen or so major SWFs have
now grown to a massive $4.6 trillion and this will soon exceed
$5 trillion, according to Arvind Mathur, former head of capital
markets in the ADBs private sector department and now
head of his own Indian private equity firm.
These are potentially huge flows of equity and
other types of investment that can be channelled into long-term
investment to help close the infrastructure funding gap in
emerging economies, Mathur told Emerging Markets.
But the environment in these econ-omies has to be made more
friendly in terms of public and corporate
governance before such multi-billion dollar flows can begin in
earnest, said Mathur, who is chairman of Gurgaon-based Private
Equity Pro Partners.
He challenged the view commonly held among multilateral
financial institutions that the world faces a potential drought
of long-term finance for infrastructure and other projects. The
money is there and the funds will flow if the
environment is right, he argued.
In an interview with Emerging Markets, the
ADBs new president, Takehiko Nakao, drew attention to the
need for the Manila-based development bank to catalyze funds
from private sources to supplement its own resources if the
bank is to maintain annual lending levels of around $10
SWFs are now growing in a number of countries, Mathur
pointed out, citing as examples those in China, Norway, Abu
Dhabi, Azerbaijan and Singapore.
The long-term capital available to them is going to
increase significantly. Emerging markets have to find a way to
welcome these SWFs and so long as they feel that their capital
is safe in term of political risk they will invest,
I think this could be a significant source of new
flows of capital in the world that has not existed to the same
extent in the past 20 to 30 years. Its not influenced by
interest rates but it can be adversely affected by host country
policies and attitudes.
The Abu Dhabi Investment Authority (Adia) for one is
interested in investing in India, said Mathur.
They sent several delegations to India saying we
are interested in investing in your country, and Warren
Buffett came to India and also said he wants to invest here.
So, there is interest but for the flows to happen the
environment has to get better.
Within the next few decades, Azerbaijan will have
significant growth of its SWF due to successful production from
its Caspian Sea reserves, while Mozambique will have cumulative
gas revenues of several billion dollars beginning in 2018 due
to gas finds by US and Indian explorers in the offshore Rovuma
basin, he added.
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