Private sector investment in both green field infrastructure projects and existing government assets has become and increasingly important phenomenon in Asia over the last two decades. It is, however, still at a teething stage in the ex-soviet countries of Central Asia and South Caucasus where governments are still learning - they should draw on the lessons learned from the case histories of a growing number of now mature private infrastructure projects in East Asia and the Indian subcontinent.
Traditional allocation matrices apportion major forms of project risks to the relevant stakeholders: government counterparts, investors, bank financiers and third parties such as insurers. Intensely negotiated risk allocation issues arise when parties without ability to manage them or mitigate them are compelled to take on exposure. The newest risk on the horizon is the looming shortage of project finance debt with the shrinking pool of specialist project bank lending limits. If no one can cover the debt finance, is this the end of modern project finance as we know it? Can the growing pool of "infrastructure funds" address the shrinkage of the debt market through additional equity?
The issues of private infrastructure projects in Central Asia and South Caucasus as new " frontier markets" for private infrastructure focus on" early stage development risk." A prospective private developer would usually put millions of dollars at risk for an individual project proposal or bid. What level of commitment to project preparation needs to be demonstrated by the government in order that the transaction be successful? What is the risk - reward profile for developers that bid for projects when project preparation on the government side does not fully meet international standards? In light of recent preparation on the government side does not fully meet international standards? In light of recent failed bids in the region, what can governments do to better assess whether prospective investors are seriously ready to bid for a project?
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Mr. Stephen Wermert, Private Sector Unit Head, Central Asia and South Caucasus; Private Sector Operations Department, Asian Development Bank
- Wednesday, 11 April 2012
- 12.15 p.m. - 1.30 p.m.
Seminar Room 2-2
Level 2, Manasseh Meyer
Lee Kuan Yew School of Public Policy
469C Bukit Timah Road