by Satish Kanady
DOHA: Qatar’s mammoth infrastructure development activity and its ambitious desire to expand its financial sector offer the country an opportunity to establish a new institution that dominates the global market in financing large scale complex infrastructure projects, a London-based expert said yesterday.
Sharing his concept with The Peninsula, Anthony Holmes (pictured), Director, Institute for Infrastructure Studies, UK suggested Qatar to establish an International Infrastructure Investment Bank (IIIB), a specialist institution that can be located in both Doha and London with initial capital of not less than $5bn, which can be later increased up to $15bn over the next five years.
The IIIB’s mandate will be confined to financing the development phase, i.e. construction through to the commencement of operation of major complex infrastructure projects globally. The development of a similar institution will help create knowledge resource by systematically collecting data from other projects and those in which it participates. Consequently, it can emerge as the global centre of expertise in this substantial asset class and utilize its knowledge base to command a leading position in the syndicated financing of these major assets.
According to Anthony , modern complex infrastructure projects have an elevated risk profile in the post construction pre opening phase, especially when it is necessary to integrate multiple systems into an operating facility. The long delays in the project delivery and repeated cost escalations are often caused because of the lack of sufficient knowledge base about the project costs and delivery mechanisms.
Our research has found most modern projects are delivered late and over budget. The ability to price large complex projects has become so weak that, increasingly we are unable to settle on a budget before commencement. For instance, the UK government feels it is worthwhile to build a new railway line connecting London to Brimingham. With a two year period and well before the project begins, construction an original budget of £32bn has increased to £42bn.
There is a positive correlation between the complexity of the project and the risk of delay and budgetary excess. Unlike the road projects, the constructions of airports are complex and the chances of cost overruns are very high, the knowledge resources of IIIB can perfectly address these issues.
Currently, Qatar is not maximizing its return on investment as it has it has no facility to collect the volume of data generated across the world. These data are of considerable value in understanding the dynamics of large scale, complex infrastructure developments.
The launch of a specialized funding institution would equip Qatar with a unique data base of global significance and provide guidance leading to the more efficient development of its domestic and international projects as well.
Anthony noted the concept is that the institution will deal with more developed nations that are unable or unwilling to finance the development and refurbishment of their infrastructure programmes.