Manufacturing Today - January/February 2017 - 15

MICHAEL ADEBISI | COLUMN BY

about $90 trillion globally. The gap:
Money is available, but not accessible.
What's ironic? Funding for worldwide infrastructure projects has no
reliable 'infrastructure' to comfortably match lenders to borrowers.
It's not for want of trying or passion.
Acronym-shortened organizations
(MDB, Multilateral Development
Bank; IFCOE, Infrastructure Finance
Center of Excellence; FSB, Financial
Stability Board) and many more agencies, banks, insurers, and financial
boards abound. China has money. The
U.S. has funds. Stating the problem is
simple - the answer is not.

15

P RO F I TA B I L I T Y

JANUARY/FEBRUARY 2017 manufacturing-today.com

L AST PAGE

C OVER STORY

M ANAGEMENT

S U P P LY C H A I N

E MPLOYEES

D IALOGUE

C ONTENTS

T ECHNOLOGY

operational and risk analytics from
which to draw. International infrastructure lending requires different
skillsets. The ability of the origination
firms to successfully address scope
and location variables should be considered. Originators' capabilities are
paramount. Knowing who can skillfully match lenders with borrowers
versus hoping that those that say they
can (but maybe cannot) successfully
is profoundly important.
3. Define a market entry strategy -
The crux of this step is understanding
the many risks inherent in international project finance in the U.S. and
abroad. They include:
* Competitor - This risk is related to industry risk, however it focuses more directly on resources
with which the competitor might
be able to circumvent competitive
barriers.
* Contractor - The principal construction risks are schedule delays
and budget overruns. Mitigating
these risks involves scrutinizing
the contractor, specifically the
contractor's experience with similar projects, reputation in the
field, backlog of other projects and
cash flow.
* Country - Country risks cover
the political economy. Examples
of country risk include civil unrest, guerrilla sabotage of projects,
work stoppages, any other form of
force majeure, exchange controls,
monetary policy, inflationary conditions, etc.
* Currency - There are two currency risks facing project companies: The first risk is exchange-rate
fluctuation. The second risk is
currency controls, i.e., the sovereign government limits the project company's access to foreign
exchange or curtails its ability to

N EWS

A ERODEF MANUFACTURING 2017

AH
S R EXPO 2017

M A N U FA C T U R I N G

C ANADA MANUFACTURING

L E A N

There are at least eight critical factors
that will help unclog the pipeline. It
might be called a blueprint for that
infrastructure - the symbolic bridge,
road, technology, phone line, etc. - to
understand the capital flow problem.
The next step is to close the funding
gap for a better world.
Consider these eight factors to ensure better international project finance outcomes.
1. Understand the project scope and
location - Front-end planning (FEP)
assists in identifying the risks that
can plague infrastructure projects.
In the model defined in the © 2016
technical paper "Infrastructure Project Scope Definition Using Project
Definition Rating Index," the authors
unveil research across 26 projects
and 64 industry professionals over 30
organizations. Among the considerations in the built environment that
encompass both scope and location,
the model assesses risks such as rightof-way concerns, utility adjustments,
environmental hazards, logistic problems, and permitting requirements
for projects under consideration.
Government, political, and social
implications can be assessed using
different tools, but an engineering assessment is among the priorities that
cannot be overlooked.
2. Recognize the value of origination capabilities - All origination
research efforts are not equal. Lending to a homeowner, lending to large
corporations, and lending to small or
medium sized businesses have known

F ABTECH

Survival: Food. Water. Healthcare.
And all the things that support those
basics: education, sanitation, transportation. But also, energy and natural resources. Jobs. The projects are
mostly large scale: A single project's
debt and equity capital can range
from hundreds of millions to billions
$US. Risk is a given on all sides. Examples include: contractor, country,
customer, currency, industry, interest rate, political, project, sponsor,
supplier, and more. Overlaid upon
these risks is a sampling of additional
challenges: Over and under regulation. Technology. Unforeseen needs.
Disconnectedness. Language barriers that roll past countries' linguistic
differentiation on through to legal
documents not written properly either by design or by accident.
The stakeholders (lenders, borrowers, builders, countries, families,
everyone alive) are "invested" oftentimes for humanitarian reasons that
supersede the financial. Yet the choices are difficult in the extreme. Social
housing or transportation? Build
new or repair old? Sustainable, environmentally-friendly or 'quick and

What's the answer?

SERVICE

SPACE TECH EXPO

What's at stake?

dirty'? Should financial entities use
traditional funding or instead try the
trendy, cutting-edge fintech services
that are disrupting the way companies and countries invest and borrow
within and across country lines?


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Table of Contents for the Digital Edition of Manufacturing Today - January/February 2017

Table Of Contents
Manufacturing Today - January/February 2017 - Cover1
Manufacturing Today - January/February 2017 - Cover2
Manufacturing Today - January/February 2017 - 1
Manufacturing Today - January/February 2017 - Table Of Contents
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