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Davos MD urges multilaterals to revamp ‘outdated’ model

Richard Samans, a board member of the World Economic Forum, thinks development banks would unlock more private capital for infrastructure if they focused on mitigating risks.

This year’s edition of the World Economic Forum, held in Switzerland’s Davos this week, will feature sessions where political and business heavyweights will brainstorm on how to alleviate the bottlenecks that stymie the greater use of public-private partnerships.

“To achieve sustainable development goals, we need to retrofit today’s infrastructure,” explained Richard Samans, a board member of the non-profit, during the launch of the WEF’s Global Risk Report 2017 last week. But there is simply not enough public money to do it all, he said, implying greater efforts had to be made to remove existing “blockages” to collaboration between public and private entities.

Responding to a question from Infrastructure Investor after the event, Samans said one such blockage was multilateral organisations’ “slightly outdated model”, suggesting that development banks were often playing a role that was no longer needed.

“There is plentiful savings and capital around the world” that could be mobilised to back infrastructure projects, he said. Instead of acting as lenders per se, he pressed multilaterals to do more to mitigate risks inherent to greenfield projects. This “more surgical” assistance, he argued, would allow for a greater pipeline of attractive projects to come to market.

When asked which organisations in particular could benefit from a strategic repositioning, Samans did not respond directly to the question but said the European Bank for Reconstruction and Development, owing to its particular focus on nurturing the private sector, could go a long way in boosting infrastructure projects in its regions of operation.

The EBRD offered one such example of successful risk mitigation when a credit-enhancement mechanism it developed alongside the World Bank’s Multilateral Investment Guarantee Agency allowed the Elazig hospital PPP project in Turkey to raise a €288 million bond rated two notches above the country’s sovereign rating by Moody’s.

A spokesperson for the EBRD indeed indicated that innovative risk mitigation was firmly on the radar of the bank earlier this month, telling Infrastructure Investor that it would be looking to employ similar schemes for other projects this year.