Such an interesting article - the case studies, in particular, are fascinating! But I have a couple of qualms: (1) synthetic versions of fiscal/ organisational capacities might be sufficient for get 'spades in the ground' but it's perhaps less clear that they can manage the risks of infrastructure over the life-cycle - and most of the costs of infrastructure relate to capex not opex. How can we ensure that decisions made in year 0 take into account the costs and risks generated by those decisions in years 5, 10 and 15? (2) I worry that a focus on synthetic capacity may impede the work of those who are trying to build fiscal/ organisational capacities locally - a process that only happens, in my view, when local people/organisations face up to the critical problems of their society, and figure out and develop what they need to solve them.
I think this is an important point and I'm working on a structure to address this. As you point our, infra is long term (anywhere from 20 to 50 years) so what happens in year 7 or 8? Depending on the lenders comfort - the synthetic guarantee can be used to backstop availability payments over the 13 years of payment following the construction period. That solves the private lender's problem.
The next question to address is the provider of the synthetic instrument. What prevents the sovereign with weak credit from just reneging on promises 7 or 8 years in because of say, a change in government? In Liberia, we put all our World Bank projects and future access to World Bank financing at risk by going back on our commitment.
On the fears of weakening nascent effort to build institutional capacity - to the contrary. The synthetic products may function as insurance but they are a governance innovation. The goal is to allow the institutional capacity to be built over time, allow the sovereign to build its own "credit history" without having the pay the premium that comes with poor credit.
Mr. Moore, I didn't get the part where other African countries can learn from Liberia's experience since the clock ran out. To be honest you're incredible
Very impressively explained and well dosed by words. I do believe that with the knowledge about financial are arrangement and institutional support the gap can be closed and private sector investment can go into infrastructure investment. As it said before by the CEO of Dow, you need to attract the investment for making profit.
Such an interesting article - the case studies, in particular, are fascinating! But I have a couple of qualms: (1) synthetic versions of fiscal/ organisational capacities might be sufficient for get 'spades in the ground' but it's perhaps less clear that they can manage the risks of infrastructure over the life-cycle - and most of the costs of infrastructure relate to capex not opex. How can we ensure that decisions made in year 0 take into account the costs and risks generated by those decisions in years 5, 10 and 15? (2) I worry that a focus on synthetic capacity may impede the work of those who are trying to build fiscal/ organisational capacities locally - a process that only happens, in my view, when local people/organisations face up to the critical problems of their society, and figure out and develop what they need to solve them.
I think this is an important point and I'm working on a structure to address this. As you point our, infra is long term (anywhere from 20 to 50 years) so what happens in year 7 or 8? Depending on the lenders comfort - the synthetic guarantee can be used to backstop availability payments over the 13 years of payment following the construction period. That solves the private lender's problem.
The next question to address is the provider of the synthetic instrument. What prevents the sovereign with weak credit from just reneging on promises 7 or 8 years in because of say, a change in government? In Liberia, we put all our World Bank projects and future access to World Bank financing at risk by going back on our commitment.
On the fears of weakening nascent effort to build institutional capacity - to the contrary. The synthetic products may function as insurance but they are a governance innovation. The goal is to allow the institutional capacity to be built over time, allow the sovereign to build its own "credit history" without having the pay the premium that comes with poor credit.
Mr. Moore, I didn't get the part where other African countries can learn from Liberia's experience since the clock ran out. To be honest you're incredible
This is very well written and educating. I agree that PPP and innovation around it hold a promise to fund Africa's infrastructural development.
Very impressively explained and well dosed by words. I do believe that with the knowledge about financial are arrangement and institutional support the gap can be closed and private sector investment can go into infrastructure investment. As it said before by the CEO of Dow, you need to attract the investment for making profit.