By Moses Nosike
Geoff Haley is the global chairman of the International Project Finance Association. In this chat with Saturday Business, he noted the position ofÂ the Public Private Partnership (PPP) since the global economic meltdown hit most of the big economies of the world.
Some worldâ€™s economies are experiencing global economic meltdown. As the chairman of International Project Finance Association (IPFA), has it by any means affected your association?
Project finance lending activity across the world rose 18% in the first half of 2008 compared to the same period in 2007. We have seen a phenomenal growth in the last 10 to 15 years.
The credit crunch affected project finance by placing constraints on the market, higher funding costs, tighter financial covenants, lower leverage, wider spreads,fewer banks in the market leading to increased costs of lending.
These difficult circumstances have had an effect on value for money and the public sectorâ€™s affordable ceilings.
Likewise, the collapse of Lehman Brothers weakened the market and had a negative effect on the project finance market.
So the UK and European markets and the US P3 programme have been particularly badly hit by the credit crisis.
Other countries in Asia and Africa which initially escaped the credit crunch have now been affected by the reduction in commodity prices.
On the optimistic side, the global stimulus programmes for energy and infrastructure projects are working well and the UK Government Infrastructure Bank has made its first lending to a project.
As the stimulus programmes are increasing public sector debt, more countries are now turning to Public Private Partnership (PPP) to harness private sector debt and use the private sector to carry out services previously run by the public sector.
As the world moves out of recession, we will see a further expansion of PPP across the world. Many governments have this year set up training programmes for their staff so they can float projects in 2010.
We at IPFA have not been affected by the market, in fact our membership is growing for the reasons given.
I attended a presentation recently by the officials from Niger Delta in London explaining which projects they would like to procure through PPP. This is supported by the Commonwealth Business Council.