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Commentary

Tue 27 Nov 2018 / Global

Countries victims of 'ninja' loans

Countries need infrastructure in much the same way that US families needed houses before the 2008 financial crisis. The 'American dream' was to provide everyone with their own home. Similarly, poorer countries dream of infrastructure, to propel them to prosperity. People in the US bought houses through 'no income, no jobs, no assets' ('ninja') loans, unsure of how to reimburse their bank. Countries are doing the same to fund infrastructure projects. Both groups were lured by easy financing conditions.

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Wed 14 Nov 2018 / Africa

Zambia's infrastructure habit

Infrastructure development in Zambia is a powerful tool for swaying public opinion. However, despite its importance to economic growth, it is contentious. Past projects are associated with high costs, opaque tender processes and rising public debt. The tension between development and debt dominates, and the two issues often lead back to China and its funding of Zambian infrastructure projects. In a nation that emerged out of colonialism, fears of its reoccurrence in a different form are well founded.

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Thu 6 Sep 2018 / Global

'Tokenisation' of infrastructure assets

A large funding gap exists in the infrastructure space. Available funding covers only 10% of sanctioned projects, while 90% of financing for Asian infrastructure projects comes from the public sector. Private sector participation has been prescribed as a remedy for the funding shortfall – but this solution demands a supportive framework to make the assets more tradable and palatable to investors. The 'tokenisation' of assets through blockchain technology can play an important role in developing this structure.

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Wed 8 Aug 2018 / Global

Pension funds for infrastructure

A gigantic problem bedevils efforts to harness development funds for much-needed infrastructure investment in emerging markets. Massive volumes of financial resources controlled by pension funds and other long-term financial institutions around the world are held back from investment in developing countries because of fears of unmanageable political risk. But improvements could be on the way if the precepts of an 'eminent persons group' assembled by the G20, due to report in coming weeks, are properly implemented.

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Mon 21 May 2018 / Asia Pacific,North America,Europe

Flexibility in allocation strategy

Bonds have been one of the worst-performing asset classes over five, 10 and 20 years, and oil prices have declined dramatically since 2014. This combination of forces, exacerbated by a decade of quantitative easing, low interest rates, slow productivity growth and aging populations in advanced economies, has led to heated debate over which asset classes and strategies public investors should pursue. It has also helped to intensify the shift into alternative assets, particularly real estate and infrastructure.

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Mon 9 Apr 2018 / Europe

Chinese investment divides EU

Views on Chinese investment into the EU are dividing core and peripheral member states. Moves by the Commission to strengthen screening of foreign investment have found support in France and Germany, whose governments worry about the move of assets considered important for public security into Chinese hands. Businesses also fear the transfer of know-how and its ability to transform China into a competitive tech hub. But they are at odds with Europe's crisis-hit south, which views China as a source of much-needed foreign funds.

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Mon 26 Mar 2018 / Latin America Caribbean

IDB bets on Latin America reformers

The leaders of Latin America's flagship development bank, the Inter-American Development Bank, asserted at its annual general meeting that it would lend its financial influence to the hemisphere's reformers. Latin American governments spend barely 3% of GDP on infrastructure, a marked difference from the investment in Asia or the Middle East, and little more than sub-Saharan Africa. One European finance minister called it 'the semi-secret, unknown tragedy of a part of our world that has squandered so much for so long'.

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Wed 20 Dec 2017 / Latin America Caribbean

Latin America's shift

On the eve of a year when several leading Latin American countries go to the polls, Chile has voted decisively for a right-wing billionaire whose agenda confirms a regional trend away from populism and towards no-nonsense pragmatism. Sebastián Piñera needs no introduction to his people — he was president in 2010-14. The return to power of the former airline magnate is based on a go-for-growth manifesto, including policies for cutting corporate taxes, spending billions on infrastructure and reshaping labour laws to create a possible 1m new jobs.

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Wed 6 Dec 2017 / North America

Trump's muted tax cut

In OMFIF's January 2017 report on the US economy under Donald Trump, we predicted the president's tax proposals would 'create a divergence between domestically operating firms which lack the option of booking profits offshore, and multinationals which take advantage of lower rates'. On Monday, the the first trading day after Trump's plan passed a key vote in the Senate, both the S&P 500 and Russell 2000 fell. With monetary policy tightening and labour markets near full capacity, the effect of Trump's tax cuts will be muted.

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Wed 8 Nov 2017 / Asia Pacific,Latin America Caribbean,Middle East,Africa

Filling the infrastructure financing gap

There is a sizeable gap between the world economy's infrastructure needs and available financing. Investment in this field has fallen short of what is needed to support potential growth. At the same time, financial resources in world markets have contended with low long-term interest rates, while opportunities for greater returns from potential infrastructure assets are missed. The development of properly structured projects will help to close the gap between private sector financing and infrastructure.

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