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Infra-financing may be encouraged through BRICS cross-country tie-ups

Capital Market 

New Development Bank needs to devise innovative funding instruments for infrastructure development

In the BRICS Business Forum session here today on 'Cooperation in Infrastructure and Infrastructure Financing', the panellists agreed that BRICS reflected the potential for the future. Infrastructure development is the need of the hour. There is vast opportunity for the member states and infra-financing may be encouraged through cross-country collaboration . The New Development Bank should work on financial instruments for funding the infrastructural requirements.

K Ramchand, Chairman, BRICS Business Council Working Group on Infrastructure and CEO, IL&FS, said, infrastructure development is one of the major requirement of the BRICS nations. There is an urgent need for cooperation in physical and IT infrastructure funding in innovative ways through different financial instruments, he said.

Raghav Chandra, Chairman NHAI, said that infrastructure is a key pillar of business competitiveness hence we should focus on infrastructure development. However, financing of infrastructural projects comes with several challenges. It needs considerable amount of capital, has long gestation period and the time for break-even too long. Often bank financing is not enough, there is asset liability mismatch and short initial deposit- financing of infrastructure has many hurdles. Moreover, in India the corporate debt market is not very developed. It is also not easy to raise capital through foreign debt. There is almost USD 100 trillion worth patient capital with institutional investors(such as pension funds and insurance) which should be channelised for infrastructure.

Chandra spoke about India's goal of building 10,000 km highway project. He deliberated on the different modes of funding infrastructure like PPP and said that there is huge scope and potential for investment in the highways programme. The New Development Bank, he said, should have the scope for credit enhancement, anchor investors and directly finance the projects.

Alexander Misharin, First Vice President of the JSC Russian Railways & CEO of the JSC High-Speed Rail Linessaid infrastructure is of primary importance and in 2016 we have to position to make a difference. Along with movement of people and goods, we need to have integrated solution for countries, for example, develop the silk route. He said we can use the combination of roads and sea transport so that there is greater economic collaboration. New corridors of national and multinational perspectives need to be encouraged. There are different bilateral initiatives between Russia and India and Russia and China. The countries must focus on identifying possibility for advanced transportation.

South Africa has the most advanced financial market, said George Sebulela, President and Chief Executive, Sebvest Holdings, spoke about the immense opportunities that exist in the African continent. He said that Africa's major developmental challenge is its inadequate infrastructure. An estimated funding of USD 85 billion is required for infrastructure. South Africa is driving a flagship project North South Corridor which encompasses development of road, rail, ports and ICT. There is a need to build a regular value chain. The New Development Bank is definitely an added platform for financing. It has to develop instruments of funding other than the conventional ways.

Dongwei Shi, Vice President, Alibaba Group discussed infrastructure development from an ICT perspective. He highlighted how that the emergence of the internet and digital is transforming the very fabric of an economy and ecommerce has found its place at the heart of this transformation. E-commerce is one of the fastest growing segments as global B2B and B2C business on e-commerce has seen exponential increase. He mentioned how Alibaba, over the last 17 years, has supported the development of global e-commerce infrastructure, enabling enhanced capabilities in logistics, digital payments, and cloud computing.

The digital economy, he said, has enormous potential and Alibaba is committed to working with local partners to explore more opportunities for global SMEs. Close cooperation and partnership among BRICS nations, is the key to envisage this potential, he affirmed. Mr. Drummond, Director of Institutional Relations, Queiroz Galvao, spoke about the infrastructure development initiatives in Brazil. The government has created partnership programs to coordinate with the government and public. The government is zeroing on 33 big infrastructure projects which includes highways, harbours, ports and airports to be completed by next year. Transparency and regulatory methods have been adopted. Joint ventures in the projects are also being encouraged, he said.

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(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Fri, October 14 2016. 10:49 IST