A growing stream of infrastructure players look for new opportunities – and better yields and margins – in emerging markets.
As competition for investment opportunities in developed markets increases, we are seeing a growing stream of infrastructure players looking to emerging markets for new opportunities – and better yields and margins.
Consider, for example, how multilateral agencies – led by the World Bank – are actively seeking to play a key role in facilitating investment in emerging market infrastructure by promoting the use of ‘blended finance’, where development funding and private finance are combined to increase the flow of investment into emerging markets infrastructure.
This is just one aspect of what we see as an increasing, and important, focus on improving the ‘bankability’ of emerging market opportunities by creating more rigor in the ways projects are prioritized, selected, developed (by undertaking more robust technical and financial feasibility analysis), ‘de-risked’ and procured.
However, as the flow of bankable opportunities increases and new players enter these markets, they will need to understand the risk and reward balance of the projects they take on. Local knowledge is key, not only to understanding the formal rules and regulations but also the business and political context. There is no doubt that there is great opportunity, but there is also significant risk for the uninformed or unwary. Selecting the right business partners to work with will be a critical success factor for new entrants.
This year, we expect to see infrastructure players start to place greater emphasis on exploring emerging market opportunities. And with more focus being placed on properly selecting, preparing and delivering projects, we should also see project volumes rise. Ultimately, this should lead to better infrastructure, higher quality of life and improved global competitiveness in those markets. A welcome step towards greater global equality.