 Good morning everybody. Thank you for joining us. We are going to start off in just a few moments. My name is Ali Velshi. I'm from Al Jazeera Media Networks. I'm a host at Al Jazeera America. And it is my honor today to be moderating this remarkable discussion on a topic that is probably one of the foremost of our time. It keeps getting bumped out of the news by things that are more sensational. But in fact it is the underpinning of how our societies get built and how our populations prosper and grow. The issue of infrastructure and in particular the financing of the infrastructure gap. Now if you are not fully versed on that you will have something akin to a PhD in it by the time we're finished. But let me just tell you how this is going to work. This is a televised debate which means it will be streamed live. Lots of people can watch this. This will also air on various Al Jazeera television platforms. As such I have a little bit of homework to do at the end of this. I won't do it at the front end but there are just a couple of things I have to do that make it into the magic of television. So I will ask you that when I'm finished it would do me a great service if you didn't all just get up and run out until I finished with the few pieces of TV magic that I have to do. I basically do the introductions and coming up and here's our advertising or whatever the case is. There are just a couple of little things that will take us just a few minutes but I would ask you that unless you have to make a serious trip to the restroom hang out for just a couple of minutes. It won't be long I promise you. This debate will be or this discussion I won't really call it a debate because it may by the way if any of you would like to make it a debate feel free. But this discussion will last an hour probably in the few minutes prior to the ending of it maybe ten minutes or so. I'm going to open this up to questions from you the audience which we welcome. We really want you to ask your questions. I would ask you this however this is a very very smart topic and I imagine if you've all chosen to be here you had other choices that would mean you're all fairly smart folks. I'm hoping that you will limit the degree to which you demonstrate that smartness when asking your question. I often refer to the World Economic Forum as an intellectual Olympics of sort. Do not feel like you are performing when you're asking your question. What we need more than your credentials and the numerous papers you've written on the topic is a good concise hard hitting question that will elicit a response from either whichever of my guests you'd like to hear from or all of them. I always find the questions here to be fantastic from you and I always think what a waste. I just spent 15 minutes asking my own questions and you all have better ones. So I just ask for your cooperation on that front. And I think with that that takes care of all the housekeeping. If we're all ready to go I'll just ask my friends in the control room. They're speaking to me in this little thing. So if you wonder who I'm talking to it's not my imaginary friend. I do have real friends who are talking to me in my ear. So I will ask my real friends in my ear. Does that allow us to begin this conversation. Very good. I want to invite you all to participate with me in this morning's discussion here at the World Economic Forum in Switzerland. The conversation we are having today is about bridging the infrastructure gap the infrastructure financing gap in particular. Now it is a remarkably important topic. Although many people won't understand why there is an infrastructure gap. There has been a remarkable change in the way we finance infrastructure projects in the world over the last several years. Some of it has had to do with the recession that this world felt and the degree to which banks will get involved in infrastructure issues. But as we will hear from our panelists many of these issues are country specific. They are specific to the way in which governments have have handled infrastructure projects the way they've gone the delays they've experienced the cost overruns and the legal issues. And what we are trying to determine today is the best practices around the world that allow us to enjoy our built environments in a way where we can all prosper where our societies can create more jobs where we can become competitive with other countries and attract businesses to our own shores where we can share transportation and communication modalities and allow everyone to enjoy a better standard of living. These are problems that are different depending on where you live in the world in the developed world. There are challenges and constraints which often revolve around politics in getting things done in the developed world. There is a cry for improvements to infrastructure. So we have representation across the board here. I have asked my my guest today not to necessarily start off with some introductory comments because I want to enjoy the debate between them. But I do want to start on my left your right with the former Prime Minister of the United Kingdom Gordon Brown who has headed this initiative at the World Economic Forum to figure out the best practices around the world and share this information with members. For my audience, sir, who may not be all that clear on what this problem is when it comes to financing infrastructure, what is the problem? Well, there are millions of people around the world who without electricity, without the ability to travel, without hospitals, without schools, without water, or they have inadequate provision because we failed to bridge what we call the infrastructure gap. And that is at least a trillion dollars every year that should be being spent on building not just hospitals and schools but building power plants and building roads and rails and improving the condition of these. And what we've realized is as a result of the economic crisis, governments do not have the money that they might have had in the past. We know that the banks are conditioned by new rules and regulations. So we have got to look for better ways where the public and private sector instead of fighting each other are working with each other to deliver new infrastructure. And we have got to find innovative ways of financing infrastructure that yield returns to investors but get the projects that we want up and running built quickly because one of the problems is long delays, inadequate returns, bureaucratic inefficiencies, lack of experience in the public sector, lack of benchmarking of countries that are doing well and badly, as well as the perceived risks that sometimes are exaggerated by those people who have potential investors. And as a politician, there's an element that you have to deal with in terms of what the public perceptions are of infrastructure. So we have some countries where people will vote for somebody who says, I'll give you the infrastructure you need. And we're going to be speaking about India in just a few moments. And you'll be in some countries, particularly some Western countries where people associate infrastructure projects with government inefficiencies, efficiency, with waste, with trying to buy votes. What do we have to do to get people on board with the idea that this will cost money, but it's necessary? Yeah, people have got to know that at some point, whether it's paying for a road or a railway or paying for energy, the bills have got to be met. And investors will not come in and we need these investors unless they know there's a return. But there are more efficient ways that we can devise to deliver infrastructure. We've got to help with project preparation, which is also expensive as well as time consuming. We've got to underpin the loan facilities that are potentially available from investors, sometimes by guarantees from governments in difficult situations. And we've got to make the public sector more efficient and it needs more expertise to enable it to work successfully with the private sector. But the opportunities are immense because the need is great. There is no shortage of capital or savings around the world. And there is no shortage of need. But what we haven't done is produce the bankable projects. If you think of the gap as a trillion dollars and think of it in practical terms, that's perhaps a thousand projects of a billion dollars that could be being built now power stations, water improvement, hospital schools, but of course, roads, rail and other and other transfer. And of course, developments in IT and communications as well. So these are the projects that should be being built now. And there's an economic argument as well because we talk about secular stagnation around the world. And that's basically a problem of demand in the world economy. We have low interest rates. This is the time to invest in infrastructure as long as we can get the right balance between public and private sectors. You've spoken of many things that are at play on the ground in India. Arundhati Bhattacharya heads the state Bank of India. These are all issues you have heard. If you are going to have a conversation about infrastructure around the globe, every single challenge in that realm faces you in India. From 2007 to 2013, Indian banks and financiers lent $153 billion to private corporations for roads, ports, power, telecommunication, railways. This is according to J.P. Morgan, but you had cost overruns and delays. And in some cases, what appears to be an unfair system during which the contractors were chosen. So the mood had soured over infrastructure. So India is desperate for it because you're urbanizing at a remarkable rate. People need this infrastructure. And yet you're facing a world where investors don't want to jump into it. Talk to me about that. Yes. If you look at India today, we have about a million youngsters joining the work stream every month. So we are talking 10 to 12 million jobs a year that needs to be created. No way we can do this unless we have the right kind of infrastructure. Be they power, be it transport, be it communication networks, urbanization, we have a challenge on all fronts. And all of these are something that we have got to get in a short period of time if you are to ensure that the aspirations of our young generation is completely met. Now, if you look at India, we did realize quite early on that this is required. And from the year 2002-2003, we started on the experiment of the public-private partnerships, the PPP projects. But again, what happened was that a number of mistakes were made. There were questions regarding the doling out of natural resources. There were questions regarding transparency. There were delays regarding environmental clearances and land acquisition. And in fact, anything that could go wrong with these projects did go wrong. And as a result, we saw the kind of impact that we had from 2007 to 2013. As you said, the mood-sourced projects became unviable. There were huge cost and time overruns. And today, of course, as a result of all of that, the banking sector, which has been the main financier of this growth, they are sitting with quite a bit of stressed assets. But I think India is currently at the crossroads. We have realized that a number of mistakes have been made. And I think the new government that has come in, it has come in solely on the platform of growth. Their mandate is to ensure that India grows. So we have had a democracy, a very fractious and ruckus democracy, vote for one person and one party, because I think the country as a whole realized that the only way we are going to get out of the poverty trap is if we get in better growth and better infrastructure. Towards that end, therefore, this government has been looking at how they can get projects that are better framed, how they can give single window clearances, and not only that, how they can get in more and more agencies to participate in the funding. Again, as I said, you know, the funding earlier was being done by commercial banks. Commercial banks had 10-year money, and therefore projects that were for 30-year assets, we were asking them to repay in all of eight or nine years. Now, this meant all the repayments were front-ended. As a result, projects got stressed in case there were time and cost overruns. Also, the people who actually promoted the projects couldn't take out any equity for going on to the next project. So a fellow who built a road couldn't take out money in order to go on to the next road. So what he did was he would pledge the shares of his original company and bring that in as equity for the next project, thereby leveraging, over-leveraging the balance sheet. I think these are things that are now all well documented. We realize all of it. So changes are being made in the financing models. Changes are being made by the government in ensuring that the projects are better prepared and the clearances come up front. As for the promoters as well, they also have realized that they cannot spread themselves too thin, and they need to get in a lot more equity to see these projects come to an end. So I think in India we really are at the crossroads, but having said that because today we have the three things of demand, demography, and democracy, I think we are uniquely positioned to take advantage and get on with the infrastructure bill that we need. Although the speed at which India needs to do this and the need is so great that we don't, there's not a lot of room for error, but if it all goes well. I fully agree. Peter Sands from Standard Chartered, you are one of those banks that has historically been very involved in infrastructure. You operate in many of these countries. We're going to speak in a moment about Africa. Standard Chartered has been very, very involved in Africa. Tell me traditionally where banks have been in terms of the degree to which they finance large infrastructure projects, and why that has pulled back to the degree that it has. Well, let me step back a bit and build on the comments of both Gordon and Arundhati. The good news is that, well, start with the bad news. The bad news is there is a big gap, and there's a massive need for infrastructure, and we're not filling it nearly as well as we should be. The good news is, is that the money is there, and that the levers that need to be pulled to get the money into the right places to invest in the projects are ones that are sort of in our control, and that somewhere in the world you can almost always find somebody who has solved that problem already. The difficulty is we haven't disseminated that widely enough. I would break down the problem into two different parts. One is, are the projects investable? And that normally means two things. Are the risks of getting it executed manageable? Will it be built on time and to cost? And then secondly, are the ongoing running economics going to yield a return to the investors? If you have positive answers to both those questions, you've got an investable project. The challenge for most investors and most banks is that most of the projects we see, the answer to one of those questions is no. And not deliberately no, it's often that the bits haven't been put together in a way that makes these projects investable. There's a second set of problems which is around the way the financial system works in the post-crisis world. And there's no doubt that it has been made more difficult for good reasons. The degree of maturity mismatch in bank balance sheets has come down. So banks borrow short and lend long, but we borrow less short and we lend less long, and that's a problem when you come to financing infrastructure than we did before the crisis. And so getting long-dated money, and this is building on our investors' point, into long-dated projects is more of a challenge than it used to be. But that's a solvable problem. If we work with the participants in the financial markets who have naturally long-dated liabilities, pension funds and so on, sovereign wealth funds, we can act as intermediaries to get that investment into the projects. I actually think that bit of it is solvable. The first, the bit that's really difficult is getting projects into investable shape. You can get the projects into, and our problem, I mean we are financing a lot of infrastructure in Africa, a lot of power infrastructure. The problem is not getting the money. The problem is the work needed to get those projects into investable shape. Okay, and this is the crux of the matter. It's also the part many people won't understand. What does that mean? We have things that have to be done, rails, roads, energy that have to be built. They are expensive, they are big, and they sometimes take a long time and run into cost overruns. And everybody has so far said, money's not the issue. Making them into investable projects is the issue. I'm going to turn to Thierry Dio. You've been responsible for many major projects, and you've really spoken to this, both the idea of matching long-term projects with investors who have long-term horizons and taking them out of the realm of people who have short horizons, and at the same time making projects investable. What does that mean, making projects investable? It's actually doing them, and this is what we typically do. So really, when we think about investing in infrastructure, I think you have to change the way of looking at it. Investing is not a financial exercise. Investing in infrastructure is integrating finance, policies, engineering, management, and also communities. And if you can integrate all that, then you can make projects investable. Yes, there is a gap on the capacity of governments in order to deliver infrastructure, but the private sector also has to bridge that gap by bringing in their own capacity. So the way we look at investment in infrastructure is really integrating all these different things. You cannot just be a financer and not engage with the communities on the long term and not engage with the contractors and the engineers to really figure out what is the best infrastructure and the best service you can deliver to the community. And clearly, the community of investors that are looking for infrastructure are very long-term investors. I mean, we have a population of investors that are looking to invest for 25 years. What are they looking for? They're looking to... And who are these people, by the way? These are pension funds and insurance companies, as Peter said? Most of you have their pensions in the type of investors that invest the money in infrastructure. Whether you talk to the teachers of California, the civil servants of Sweden or the national pension of Korea, they all want the same type of long-term investment. And for them, investing in public service, public infrastructure, under public-private partnerships. And this is the really key important theme. But if you want us to bring their own block into this. I want to invite Claver Gattete into the conversation. He's the Minister of Finance and Economic Planning of Rwanda. But for purposes of this conversation, you're representing the entire continent of Africa. Because, like India, it is... When you take Africa as a whole, it is a very large population. And like India, you face very, very similar concerns. Now in Africa, the issue tends to be of all the infrastructure deficits that exist, energy is by far the biggest. In Sub-Saharan Africa, there's a very large population that has no access to energy that connects to a main, electricity that connects to a distributed system. And that is one of the issues. But there are many. And Rwanda has really dealt with tackling those basic infrastructure needs and broadband infrastructure, wireless infrastructure. Tell me how you have achieved financing on these fronts. Yeah, thank you very much. But I hope for the representing Africa, you consented my president. Because that's a big promotion. He's here as well. So we'll speak to him as well. Yeah, thank you so much. Please don't tell him I promoted you. No, thank you very much. I really have been listening carefully because for us it's a learning process. This is what we do on a day-to-day basis. The challenge of infrastructure is so crucial because it's the biggest cost of any kind of investment in any country. We can talk about other methods we are using in terms of attracting investments and also promoting the trade. But if we don't address the issue of infrastructure, the transport, the energy and other kind of infrastructure products, really we cannot, we take us a long time if we don't do this. And that's why in the case of Rwanda the infrastructure alone is taking a third of the budget that almost every year. We realize that we needed, if you have to move fast, we needed infrastructure in the country. We need infrastructure linking our country to our neighbors so that we can be able to promote the trade. But we have had challenges on both sides because in the case of Rwanda what you have from one of the biggest costs as you mentioned was the one of energy. And the energy gap was really so huge that once you take that one into account it's a big cost for anybody who is investing. And what we did was really to have a dialogue with the private sector. The sources of energy in Rwanda, usually the hydro, the peat to power, we have the methane gas to power, we are now exploring also the geothermal. And we've had domestic, the projects that are domestic in nature but others also which are linking us with the region. For example, the 80 million megawatts which is linking us with Tanzania and Burundi, it's at the border. And also the one that we are working on now that is linking us to Burundi and DRC which is 147 megawatts, the season three that we are working on. But also we have so many others that are more domestic in nature. What we realized is that actually we needed to, the government alone can never be sufficient, the resources to your budget. It can't be enough. So we try to incentivize the private sector to go into the generation so that the distribution part is done by the government. But providing as much information, as well as much incentives to the private sector to be able to do the generation part. We found that that way then it would be more sustainable. That's it therefore for energy part. For the road transport mainly the government has been borrowing to be able to fill that kind of gap. But now we are also talking to the private sector to see how they can come in, especially for the tow roads, the road tolls, sorry, which where they can really be able to invest way ahead of time. And together of course for others like airport, like other kind of infrastructure we've been doing that. For the technology of which the president really has been leading in this, knowing that we are a landlocked country with not much natural resources, the service sector is the one that is leading our economy. And to do that the technology has been very, very crucial into this. And that's why it was linked to our vision to make sure that we can have the total infrastructure. And now we have the total almost the country covered. Now we are moving to another level of 4G, LTE, which is going to be completed by the 2017 over the country. The city is already covered almost everywhere. And we are moving to that. We are seeing that one contributing already we are getting the benefits of that. Where we are seeing the whole service sector is being facilitated by the IT. Actually now GDP, now the IT services itself is 3% of GDP. Which is very helpful. Which is above the I think the Africa standard. But then for the regional level it was challenging. We've had so many experiments where we belong to the East African community. Together with Tanzania, with Kenya, with Uganda and Burundi. But then when we wanted to just have infrastructure linking the entire region, we started with an experiment of Northern Ecuador. And here my colleague, the governor of the Central Bank of Kenya is right here has been also partly involved in this. Where we are trying to see how do we make sure that we move the goods back and forth from our own countries to the border. Especially for us who are landlocked. One of the focus areas was actually was the railway. And when it came to the railway from Mombasa in Kenya to Uganda and then to Wana and later on to Burundi and the neighboring countries realize that the cost was too heavy, over 13 billion. How do we finance that? We cannot go and borrow as countries, neighboring countries, to finance this. Otherwise we wouldn't finance anything else. So what the Heads of State agreed on directing us is that actually we should have an infrastructure level. So now we are 1.5% of the of our own imports is infrastructure level. So that we could have our own part of contribution to that. Without disturbing the usual developments that we have in our own countries. Who is that levied on? Imports. Imports. 1.5% of imports. So does have the effect of causing imported goods to become more expensive to Rwandans? No, no, but yeah, but we are selecting somehow, as I mentioned, because we want to make it cheaper. It has already been more expensive because we are using the road. Got it. Once we go to this one here, it will become cheaper. Got it. And that's why we have to have a finance that is going to help us in a more sustainable way. Where you can borrow against this kind of fund and be able to bring in the private sector. But I think as many people Gordon Brown and the scientists have mentioned, you really cannot do it alone. There has to be a private sector. One thing that you mentioned which is very, very crucial is you can do all the studies and come and say, oh, this is viable. But that's not enough, at least from our own experience. We had to hire the Africa 50 and a company that was put in place by the Africa Development Bank. And they say, can you help us? Can you just study the economics on this in as much as they are feasibility studies? And then cater for the needs of the private investors. This is a big deal as we have all spoken about. We've alluded to. And I want to ask Uva Kruger about this. Uva is part of the largest design architecture and engineering firm in one of the largest ones in the world, the largest in Europe. The issue of viability, the issue of as Peter Sands says, will it be built and will it be built to cost? And what is the sustainability? What is the return on that investment? You spoke about the Africa Development Bank, the idea that you need that technical expertise to say this isn't just a political project that gets votes in a particular region by somebody who's running for government. Will this actually work and pay back? And that is something you're responsible for helping countries and projects do. I think these are very, very important aspects probably for the sake of simplicity. Let me just remind all of the audience what we are talking about is not only a subject for the developing world, but if you look at the average status of infrastructure in the U.S., whoever has driven a car and a road in New York and California, you might have been a little bit worried crossing a bridge there. We just lost a bridge in this last week. And in the U.K., let's be clear, we still have a Victorian rail architecture and we are now talking about electrification and the country has taken quite a while. So the subject we are talking about is a really worldwide one and it is about the question of making an investment case. And also let's face it, again, there are only three sources of money at the end of the day. We call it the three T's in infrastructure. It's either taxes or it's tariffs or it's transfer of some kind of private money. And these are the three sources we are talking about. Where we are not doing a good job as the industries that are involved in infrastructure construction engineering is providing certainty with regard to the revenue streams which are coming out of infrastructure assets and providing certainty with regard to the cost of construction. And if these two cases are made in a thorough way, then I agree with Peter, money is not the issue. But to make this connection and to make it as the minister said in a way that not only at the beginning the feasibility study is done in a thorough fashion but then also during the construction that constantly during the implementation of infrastructure cost consciousness and the maintenance cycle of the infrastructure that is being put in place is top of the agenda. Only that guarantees at the end that we don't have cost overruns which we typically had in the past and that this feasibility this investment case remains to be intact towards the end of the construction phase. The good news let me just add two things. The good news is twofold. First of all more and more governments as we see with the example of Rwanda hiring capable engineering consultancy firms all the way through Qatar is another example with the central planning office which helps the Qatari government in managing that. Second technology helps us. Because now we are not talking only about a physical asset that is being constructed. We are having a digital asset as well of the infrastructure that is being put in place which allows us to do scenario planning. How can we do it more cost efficiently? How can we do value engineering? How can we reduce maintenance costs at the end of the day? And that is key to help to make the investment case in the long run. Let me ask you Gordon Brown just as the minister does not feel like representing all of Africa. I am officially not here to represent the United States but I will tell you that in the United States politicians are absolutely 100% the problem in moving forward on infrastructure. 100% in fact might be 120% although I I don't think that's mathematically sound. In the world what all of what we're talking here is about good planning technological expertise. The third runway at Heathrow I mean it's an airport I avoid now because that third runway they've been talking about it for I had hair when they started talking about it. We actually decided to build it and then it was cancelled and that's one of the problems. You have changes of governments you have changes of policy you have people wanting to change the regulatory rules and then you have of course administrative inefficiencies and certainly you do have political calculations. I mean someone said that a politician was someone who promised to build a bridge even when there was no river and there is some truth in the idea that these are prestigious projects that people announce and then don't bother to do the work to make them actually happen. I would say that we pioneered in Britain public-private partnerships. I think we learned a huge amount about the inefficiencies in the public sector that had to be dealt with to make these viable for the future. I think that experience tells me that there are ways that we can construct private-public partnerships that are beneficial both to the public sector and the private sector. And you see the two problems that Irvi and Peter were raising. Is there a return? You've got to answer that question. And is the risk too great? And therefore you've got to find a way of mitigating the political, the regulatory, the sometimes the currency risks, other risks that make people feel that a project is too difficult to contemplate. Now I think a proper relationship between the public and private sector and this often includes the international institutions can help mitigate some of the risk. I think that the advances that we've made in discussing project preparation facilities because remember the upfront costs of doing projects are very high, perhaps 10% on average of the cost of a project, but there is no return for any of that period of time. So we've got to find a way of defraying some of the project preparation costs and again, public-private partnerships can help here. And we need to do more to underpin the debt and credit that has got to be issued to get the projects underway. So I think you've got to break these problems down into specific problems. Of course there are sectoral difficulties and of course there are different country experiences and you need to benchmark each country I think over time and the World Economic Forum which benchmarks competitiveness ought to benchmark the efficiency of countries in dealing with the provision of infrastructure and the setting up of partnerships. But if you can break the problems down into specific issues that have got to be addressed and I think Uvi and Peter were suggesting that then you can actually solve this problem and get projects underway. And I think the more the discussion goes to what are the barriers to project preparation what are the difficulties about delays what are the problems about the efficiency of the public sector in individual countries and then how can you construct a more effective public-private partnership? I think we could make a lot of progress. And what's interesting in the last year and I just finish on that is that you now have a new facility from the G20 an infrastructure knowledge bank you've now got a number of project preparation facilities from the regional development banks and you've now got the big Asian initiative the BRICS initiative and the World Bank initiative to try to provide public finance and if not finance public guarantees and public expertise and the expertise to help get the projects moving. So big momentum now at a time when as I keep saying interest rates are low the potential exist to move forward quickly. This may be the best time in our history to do this. Absolutely. And of course the need in America and Europe as well as in the emerging markets is obvious. Arundhati, you heard when we were talking in the green room I told you I've recently gone to India and on my third visit to the consulate for my visa I mentioned to the fellow didn't you know that that Modi wants to streamline this whole thing? So when you mentioned single window approvals for for big projects I wonder when that's going to happen but I'll tell you that land acquisitions for instance on transportation right? The idea that you need to acquire land to lengthen a road or widen a road has run into to big problems in India. There was an understanding that if you in one case with this pink city expressway that you had four fifths or 80% of the land and the other 20 would come and it didn't come do you feel sometimes that you'd rather be government official in China? Well, not really. I think we quite enjoy Nothing wrong with the Chinese I'm just saying. We quite enjoy being Iraq's democracy as I said but having said that I think you know the government is well seized of this problem it's like this in respect of land the government has just come with an ordinance to try and fix the kind of issues that had stopped land acquisition altogether. I think in India the good thing is that if you really focus on a problem we are able to do that project in a very very cost efficient manner. If you look at the Mars project what the Prime Minister keeps saying and it's a fact the per kilometer cost of that Mars project was less than if you took a taxi ride across Delhi. Okay, so if you look at our medical infrastructure we have some of the best medical tourism again because we are able to deliver it at very reasonable costs. If you look at the recent financial inclusion project that the government had taken up whereby they had said that every household must have one bank account and this has been accomplished in a matter of five months by banks like us at very very minimal costs. Now the fact of the matter is that if you put everybody together and they're focused on a particular objective I think in India we can get it done. We have actually been quite frugal in our usage of capital. We are one of those countries where we have not had investment led growth. So to that extent we have not really been very you know we have not really been wasting capital a lot. But I think what I wanted to ask Mr. Sands was that you said that it is necessary to match long term money with long term usage. I fully agree with you. But in India the problem that we are facing currently is the fact that long term money traditionally belongs to the pension funds and the insurance funds. Now in India itself the pension funds they are interested in putting money only in sovereign debt. Reason being we don't have a social security network and people are afraid of risk and therefore the government also is not mandating that the pension funds get into things like infrastructure bonds. Now given that this that being the situation internally if we look at pension funds abroad and these are funds that are looking for yields the yield in India would be good. But there again I think the problem that is preventing them from coming in is the fear of depreciation. And if you work in a hedging cost of six to seven percent or more then really speaking the returns that we are going to give is not enough. So really speaking I think you know we need to get across this particular one issue before we can see that kind of long-term funding coming in because without that long-term funding the banks that are sitting with matured projects are not able to let these projects go so that they can take up the next round of financing. That's a good point. Yeah I just didn't want maybe for the sake of the audience there's a point that you mentioned by Prime Minister that I thought was very very crucial from our own experience. One first of all you have to get the project off the ground and there has to be private sector coming in. They have a lot of issues some of them we've mentioned the land issues the environment issues the laws that maybe are likely to change tomorrow where they need predictability the issues there are quite so many issues and if it is cross-border it means how about the legal system that is helping me in terms of cross-border and then for example if you are talking about the railway what is going to happen on the road that can give me the assurance. So in other words there is a whole checklist of questions that the people asking themselves apart from saying the project is viable. Now the project preparation would be able to address all those kind of issues to give guarantees that actually all these risks whether they're economic whether they are social whether they are political they are being handled and that way then they can talk on how to move forward on now in the implementation and then you go to the next stage of saying how about the resources? Yes, there are many funds including silver and worth funds there are pension funds and others who could come in but they should come in when everything has been settled and that's where we have the big issues whereby this the way the tradition we've been doing it is that actually we put the project there and say it is viable I'm looking for people to come in but actually there are so many concerns from what you have seen which are very very crucial and I think also another thing that flags is where the leaders in our case we are lucky that in East Africa the presidents were the ones leading giving assurances on this because they know the impact on the economic development and also the other kind of cooperation apart from the leaders is as Gordon Brown mentioned you go to the World Bank they have the global infrastructure facility you go to ADB you go to others they all have these kind of resources how do they work together and together with the national governments and the region for example in East Africa in our case or Wanda to come together and be able to see how do we address this for example in the World Bank alone we had to figure out of saying it's not you giving us money but come with IFC come with MIGA come with others so that they address all the components of the risks which the private sector really care about if you can manage to really have the proper preparation in a coordinated manner if you have the leadership of those countries or regions really coming in and then you have addressed all the concerns of the private sector it means the project can take off no matter how big it is and the financing could be available but then the starting point is getting it right as the Prime Minister mentioned Peter and by the way this issue of currency fluctuation is a big deal although I wonder why Russians and Greeks are not financing American developments in that case because it's a safer bet but it's a good concern I think one of the things that's coming out of this discussion is actually the financing issue needs to be disaggregated some more the financing of the preparatory phase is one issue the financing of the build phase is a second issue with a second set of risks and then there's the financing of the ongoing piece of infrastructure once it's up and running and generating a yield and one of the complexities here is that you need different participants with different concerns at different stages in there and the problem with this is if you can't stitch it all together it tends to collapse on the weakest link because I don't want to finance the preparatory phase if I don't think there's money coming in for the build or I don't think it's sustainable on the ongoing I've got to believe that the other bits of it otherwise I'm going to end up with something that isn't going to pay back there is a big issue as Aaron Dudley said about the way pension funds are set up skilled and regulated in many markets in some places and Canada is probably or Sweden are probably leading examples you have pension funds that actually have the capabilities to invest in infrastructure in other parts of the world and they have the resources the understanding the analytics to be able to manage that kind of risk most pension funds in most parts of the world are miles away from being in that place and even if they were their regulators wouldn't let them and so we do have a fundamental problem because you're not going to finance long-term infrastructure in its ongoing phase through a bank balance sheet that just doesn't work either and so there are a number of sort of market driven and regulatory issues that have to be kind of unpicked and sorted out to make the financing of the different phases work but I don't want us to be negative here I actually think this is really exciting because the prize we may not get all of Gordon's trillion but even if we make a big dent in Gordon's trillion the prize in terms of economic growth and job creation in terms of human wealth health education and so on is a massive prize and it isn't like we're dealing with solvable problems here when we're not trying to solve some mathematical problem that hasn't been solved or discover some molecule that hasn't been discovered the essence of the answer to every bit of these problems has been done somewhere and so if we can pick it out and stitch the things together and make them work we can do this and the thing that we find what we increasingly find ourselves doing is actually the money we put on the table from our balance sheet is almost the least of the value we add the value we add is helping work with the government with the international organizations with pension funds with other with the construction companies and so on to understand their concerns and just try and help stitch the thing together because if you can get those three phases in a coherent way and you've got the right kind of parties involved then you've got it then you can make it work and it's an enormously exciting thing to make that happen Yeah I'd like to put a positive spin because I don't I think the risk perception is way beyond what it is so there's a tendency to sort of blame it all and say government get ready and prepare it and get it all ready so we can invest I don't think this is the case in fact it takes two parties to tango and infrastructure is a dynamic process and you need the private sector to actually engage a bit more in that phase yes you need project preparation but if I give you a simple example Turkey had a 10 billion euro program for healthcare that they launched three or four years ago they awarded all this contract about two years ago and they said oh now build it and of course didn't happen what we did was going to see them and bring in on board the EBRD the original development bank and say we can discuss for six months about how you make a proper contract that is investable they're happy to listen they're happy to take on the comments they made the contract investable on the same side we talked to the contractor brought him in there and say you have to put your money where your mouth is we need a guarantee that you will deliver on time on budget and we've also done the work on the environmental side in the communities and last year we were able to close the first project in Adana which is close to the Syrian border in all places for Turkey 1500 beds that will change the entire city and this is the work that and I'm working on behalf of investors so those people are willing to do so so this is not such an aversion to risk in infrastructure it's really the way that we engage and I really welcome those initiatives that have been done at the G20 the hub the project preparation but we also have to put our part and that is why last year we launched this long-term infrastructure investor association to really engage with government on a number of things one is sustainability and how do we share best practice between public private public and public private and private sector on those type of things the other thing is creating a benchmark for infrastructure making it no longer an invisible asset class but a real one that people can actually refer to and then understand if I'm a pension fund from South Dakota whatever I can actually have a benchmark and invest in infrastructure in India in Europe in Africa in a way that I can compare it and then when I go to my CIO I don't get shot because I have no benchmark right because this is usually what happens and so this work has to come from both sides and the whole purpose of the association which has been really founded with long-term minded investors people like alliance all the people with the big pockets is really there to build that private sector understanding and collaboration and break to the system because it can't be just the government dealing with project preparation and it's not only a question of money I mean just as a bracket on that even project preparation even with billions you will still not make it if people don't focus on training engineers to put them in administrations you know what is the biggest problem in most countries in Africa when you want to launch an infrastructure project the president says I want it everybody want it you get all the parties behind it and they say okay who's gonna project manage this you need somebody who knows technical you know somebody who knows financial that can have a financial advisor somebody who knows the legal side to understand the legal framework and somebody who knows everything else so you need that five-legged sheep to come and be dropped into this and be responsible for delivery and unless 10 years before you actually had people coming out in engineering school and training in the government that are there to do that you can give them billions so this is not gonna happen so there are a number of layers obviously policy has to go in a deeper level in terms of capacity building for administration which is to me the big really piece to actually allow the money for project preparation to become efficient Uwe hang on one second I just want to let the the folks here in our audience that's exactly what I want you to do put up your hand if you have a question we have mics here I'm gonna get that mic to you but for the moment I'm gonna just have Uwe make a quick comment just one one addition to that was what Jerry said besides the fact that you need to get this general approach right on a specific project there's the need for a much more holistic view on how that project be it let's say a desalination plant or be it a piece of transport infrastructure fits in to the whole development of an urban environment so to put it very simply it doesn't help if you get all ducks in a row with regard to a desalination plant but you don't have the energy next door to operate it and even more so our responsibility from a world economic forum perspective goes beyond that it's not only the the physical infrastructure it's also the social infrastructure that has to be cohesive for people actually being in an environment being capable of using it so education comes comes with that and there's a there's an additional dimension to it which I would call a holistic approach to infrastructure development in urban centers which we also have to take an account very good we have a question over there my name is Ahmed Hekel I hear a number of comments that are very nice capital frugality I hear do it on time I hear does it make money does it return there but the problem was many of those projects is once they are get done they get done financed by ECA's and ECA's invariantly they come in and they say we want a contractor from one of our own countries and sometimes this pushes the price up and sometimes it does not meet the heard returns you have any comment on them who'd like to take that I can comment on that if you want but yeah I mean I I think this most ECA pretty much drop these policies and I can find you a number of examples Turkey is one where you have a number of bilateral institutions like ECA's that are financing either local contractors or contractors not from their country so I think this is this wave is behind us it's almost yesterday's story the ECA's and it also has to do with the fact that the local contractors have become much more capable in most countries in this world where you still see international expertise and rightfully so is on the PMC side to the project management side I think that's that's a good thing but on the contracting side to be the others being provided locally I want to ask the gentleman can you give that the mic back to the gentleman you you seem to heartily disagree with this you've done nothing but shake your head in the answer is there something on your mind that you I vehemently disagree I don't disagree I vehemently disagree if you look if you take you know the Chinese ECA's if you take many other somebody tell my audience what an ECA is an export agencies thank you so they they are they finance their contractors to come into one of the countries to build a piece of infrastructure and typically that infrastructure costs much more than if you you take it on the market and that is especially true of Africa because there is no other alternative let me ask let me ask our finance minister from Rwanda about this thank you so much you see I think we have to differentiate the sources of money usually when the government is borrowing directly if you are borrowing internationally you have to tender and get the right person who meets the requirement if it is very cheap money that is coming from some of the countries then there are restrictions on saying we can give you some cheap play but then you have to use our companies and here what we are talking about is actually mobilizing money globally where the private sector is involved whether it is the equity or debt the equity being maybe from other like pension funds and others insurance money global funds once you get into that kind of partnership then that model is not the model that you have to use because it's not one government borrowing from an entity that has specific conditions on how to use their money so that's why I'm saying it depends on the sources of money and now that I still have them the space to speak to comment on what has just been said one of the things really which you mentioned that the banks usually have short money they don't have very long-term resources but as regulators I used to be one of them regulating the insurance and the pension the only thing that you are looking for is that kind of risk it does not prevent them from for example investing in the infrastructure bonds no it is saying how much risk are you taking and that risk is what determines what the regulator is looking at and determining whether or how much you are supposed to be investing but for some of the projects they could have a combination of several private sector coming in and it would be possible even to get long-term resources but it depends on how much government is involved how much the private sector is involved governments would like the private sector to take on these projects and make the money because they have other infrastructure projects to go into I think the world is changing I think our speaker is referring to restrictive practices anti-competitive practices I think we're getting closer to a global market and I think what's significant about this discussion is that we now see that if you can bring together a partnership of the investors the contractors governments regional development banks international agencies like the World Bank you can actually do far more and if we can find better ways of these working together then we can systematically solve the problems that make projects too risky so you take corruption risk there are various ways of dealing with that you take regulatory risk there are various conditions that can be set down you take political risk again you can bind in let's say in Africa the African Union and not just the government of a country as part of a project currency risk once you go through the various risks and as was said earlier my friend from Meridian the perceived risks what people perceive as the risks are greater than the actual risks in my experience but once you go through these risks you can actually deal with them on a systematic basis but it does depend on this idea that it is partnership that is going to be the key to solving many of these problems very good thank you for thank you not just for the question but for so vigorously shaking your head so I knew it was coming on I see a few hands here let's start over here good morning Barbara Novik you mentioned the need to match capital pools pensions and shores with the projects we couldn't agree more how do you see the new tax initiatives that discourage cross-border investment and create problems for pooled vehicles impacting the infrastructure investing thank you very much who'd like to handle this Terry I mean I'm not quite sure which tax initiatives that you are mentioning who are you referring to specifically say that again base erosion project it really designed for multinationals and the tax jurisdiction gaming it spills over to infrastructure I mean what the problem has been solved in a way because even if you are a U.S. pension fund you want to invest in Europe you actually invest in a European vehicle so therefore you do have sort of bilateral issues on the tax which are quite clear today but I don't think we will see any sort of additional negative impact because of the way that investment in infrastructure become very local even though the money may come from across the world from Australia from Korea or California so I don't see many negative impacts from that Peter Sands the one comment I would make is I do think that infrastructure finance is very vulnerable to unintended consequences for from regulatory or tax initiatives designed to achieve another perfectly justifiable objective I mean tax is one aspect another good aspect is long-term derivatives lot of regulatory pressure against long-term derivatives because some of the excesses before the crisis were over structured over complicated derivatives unfortunately if you want to do longer-term project finance in rupees you want to be able to hedge out the interest rate risk and currency risk that's got a lot more expensive and do you really want the people who are borrowing the money to do it on an unhedged basis the fundamental issue out here is that the distinguishing character of infrastructure finance is that it is long-term you put a big bit of money down first and it takes a very long term to time to get the money back and the reason it's so sensitive is that small changes in the amount of risk magnified over a very long term can completely change the risk profile of the proposition and also the way you think and that's why I think you often have issues of perception playing such a role because people are trying to say well hang on I like the government I'm facing at the moment I like the regulatory regime but what's the government 10 years from now going to think about the taxation or the tariffing or the around this because actually the payoff on this project is in that period and that's why I think infrastructure finance requires so much thought about the way projects are structured the contractual attacks the legal stuff around it because it is so long-term in nature My experience of the years is that regulatory impact can be much far greater than tax issues Yeah, I think you're right Solvency too had a much more negative impact on long-term investors and insurance in particular investing in infrastructure rather than any other tax madness that could have happened post crisis so I mean how did they change Solvency too for infrastructure we had to go and actually discuss benchmark with the European regulator to actually move them into considering infrastructure as long-term productive instrument that couldn't fall into the same category as hedge fund or over derivatives so these major changes and it wasn't targeting infrastructure when they were doing it but if you come with the impact and the benchmark and the data to convince them then they changed their mind Here we're actually now talking about the the failures and inefficiencies of the public sector and there's a huge amount I think could be done I remember when President Metron was President of France he compared French railways to British railways and he said he had high speed travel from Paris to Calais and then he crossed the channel and had a chance to have a leisurely look at the English countryside because we were so slow at building infrastructure in Britain and so what do you do about the public sector I think you've got to have more expertise within it I think you've got to have benchmarking of each country and I think the World Economic Forum could place a huge place in that and that would test countries who want infrastructure projects on whether they've performed well in the past I think in cases where you're worried about corruption contracts could be signed outside the country in London, New York or wherever it was thought to be better to do so and then there is an issue that Peter's raised which brings me back to this why does some infrastructure projects take so long the delays the hold-ups and of course you need long-term finance because these are long-term projects but the time it takes from the original conception to getting something up and running is far too long and we've really got to work together and again this is a partnership because it cannot be solved just by the contractor because he's held back by planning permissions and then he's held back by whether he's got the international agencies to give a guarantee but we've got to find a way of doing these things quicker because when you see the need and then you know it will take 20 years before you've actually got the project up and running it's just not good enough we've got to find a way of doing these things quicker and that's political will and it's people working together to make it happen a lot more quickly than most projects do I'm going to end up on that where we've run out of time actually we've gone a few minutes over so I appreciate this this could have been another half an hour or an hour long discussion I thank you to all of our panelists who've really made it very clear what the problems are that we're facing in the world and I thank you the audience here for your fantastic questions that's it for us on behalf of Al Jazeera media networks and the World Economic Forum I'm Ali Velshi thank you for joining us