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ANALYSIS | INDUSTRY SECTORS


FINANCING PROJECTS


In the traditional sense, governments, non-governmental organisations (NGOs), aid agencies and public bodies have funded essential civil works projects. This, however, is a double- edged sword with countless projects subject to delay or cancellation to suit a political agenda. However, one key trend we have witnessed is the deviation


from this traditional financing model, with the emergence of the EPC and public private partnership models. Speaking in HLPFI’s May/June 2014 issue, KPMG drew


attention to the changing nature of project finance, with privatisation programmes transferring ownership of many basic infrastructure facilities and systems to private sector companies. With the emergence of direct pension investors and dedicated infrastructure funds, a new breed of strategic, long-term financial investor and asset manager has emerged. “This trend is particularly noticeable in more mature private


investment infrastructure markets like Australia, Canada and the UK, where cross-border investment from global institutions is on the rise. However, we expect the trend to spread to other markets as primary investors look to sell into secondary markets.”


decade has driven swathes of development. China’s government launched a huge fiscal package in late 2008 to counteract the effects of the global market downturn and this translated rapidly into work on the ground. “China’s infrastructure programme has basically not


Civil engineering


In the civil engineering sector, the movement of components, structures and construction equipment has been a key traffic stream for heavy lift and project forwarding companies. In fact, in monetary value, the investment into civil infrastructure projects far exceeds that of any other industry vertical covered in the pages of HLPFI. Predictably, the stronger areas have been those involving


projects designed to upgrade important basic infrastructure such as roads, railways, ports, energy supply and water/waste treatment, where much of the funding comes from national and regional governments. Moreover, when governments can recover higher taxation


revenues from the sale of commodities such as oil, gas, metals and minerals, the demand for said projects, and availability of finance, increases. Projects where investment tends to be more privately funded – for example industrial, residential and leisure complexes – in many cases slow down, or grind to a halt, when markets are slack due to lack of finance and business confidence.


China has been the standout investment destination in this field since 2007. Te country’s meteoric growth over the past


stopped, and all the billions or trillions of renminbi that have been pumped into the market have, of course, ensured that everything which was planned is just moving on as if there had been no crisis,” stated Gerhard Janssen, director, marketing and sales, at Rickmers-Linie, back in 2010. While China’s economic growth may have cooled in the subsequent years through to 2017, GDP growth still far exceeds that of its rival European, Asian and North American nations. However, in a bid to maintain its strong economic growth, China launched its USD100 billion Belt and Road Initiative (formerly One Belt One Road), to revive the ancient Silk Roads of Eurasia into a huge network of economic corridors, including new energy and transportation infrastructure, designed to create massive trading opportunities between Europe, Central Asia and China. Middle Eastern civil engineering projects are often driven


by underlying industrial and population demands, rather than government economic stimulus packages. Strong oil prices at the start of the decade with their


resulting massive revenue streams for the producer countries, made huge sums available for government-led projects.


POWER IN THE PHILIPPINES


Commenting on the past ten years, Elmer Sarmiento, president and ceo of Filipino project forwarding specialist Royal Cargo, said: “The entry of wind farm projects gave the excitement but the inconsistent policy on mining was so frustrating.” He added that the downturn of the oil and gas sector also


“adversely affected the industry”. Sarmiento is approaching the coming years with cautious


optimism. “In the short and medium-term, more power plants will be constructed [coal, LNG, wind, solar], hence, we believe that there is something to be busy about.”


HLPFI10 | 63


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