Kirill Dmitriev, the CEO of Kremlin-backed fund RDIF and
chairman of the B20's business group taskforce on investments
and infrastructure, created during Russia's presidency of the
G20, said the proposals came as a result of a meeting with more
than 50 institutional investors, capital markets specialists
and operators of international infrastructure projects who
gathered in London on Tuesday.
"We discussed project bonds and project finance at length.
Project finance is one of the fastest, the most interesting
growth areas in the market because governments are trying to
figure out how to securitize cash flows and how to make sure
that projects get done," Dmitriev told Emerging
Markets after the meeting.
"There was a clear understanding that that is a growing
market, a very interesting market. Canada has done very well
there. This is a huge opportunity."
Asked whether his fund created in 2011 to make equity
investments mainly in Russia would invest in such a
project bond, he said: "We would consider it."
During a media briefing after the meeting, which was held at
the EBRD headquarters in London, Dmitriev said that consultancy
company McKinsey estimates $57 trillion would be invested in
infrastructure between 2013 and 2030, but that there were many
"There is huge inefficiency in being able to finance the
first steps of the projects, when the project documentation is
prepared," he said.
Governments in emerging markets want to build infrastructure
such as roads and power plants but need money for the
documentation and feasibility studies for these projects in
order to bring them to the attention of investors. The amounts
needed can vary between $500,000 and $1 million or even more,
depending on the complexity of the project.
"That money typically is very difficult to find," Dmitriev
said. "This is a simple market inefficiency. Investors find it
too risky at this stage."
"We are making a recommendation to create a joint [G20] fund
to fund this kind of inefficiency."
FREE CAPITAL FLOWS
He noted that while in Western Europe more than half of
infrastructure spending came from private capital, in
developing countries the participation of private investors was
much smaller only 17% in Asia, 35% in Latin America and
27% in Eastern Europe according to analysis by Ernst &
The main reason were the higher risks associated with the
mostly Greenfield nature of investment in infrastructure, poor
corporate governance and changing market rules.
Other recommendations to the G20 will be removing barriers
from the free flow of capital to help cross-border investment
activity, strengthening capital markets to enable them to
create the instruments to bring private capital into
infrastructure and the application of best practices, he
Thomas Maier, managing director for infrastructure at the
EBRD, said that the problem was not just financing, but
"bringing the big infrastructure projects to the market," and
this is a process that would take time.
"There is no silver bullet. Infrastructure is a business
where you have to walk before you run," he said.
Earlier this month, EBRD President Suma Chakrabarti told
Emerging Markets that the bank was trying to involve
institutional investors such as
pension funds and sovereign wealth funds in
co-financing projects in infrastructure in its countries of
At the beginning of May, Asian Development Bank President
Takehiko Nakao said in an interview that low interest rates hindered
investment and the bank was looking for additional
sources of funds if it is to maintain recent annual lending
levels of around $10 billion.
Participants at the ADB meeting in Delhi discussed about
creating a new infrastructure funding bank for
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