10/28/2008
By Debra K. Rubin
Engineering and business scholars urged Bush administration officials to take a page from FDR’s New Deal and invest in infrastructure.
Ninety transportation projects in eight states are ready to go and could generate up to $20 billion in economic activity, according to a letter from 11 professors to Federal Reserve Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson. The letter was sent Oct. 24.
The letter responds to earlier comments by Bernanke raising concerns that infrastructure investment would take too long to make a meaningful change in employment and the economy.
"One of the reasons that policy makers are putting forward not to invest in the nation's infrastructure as fiscal stimulus is that shaping, approving, planning, and developing infrastructure projects takes too long and critics say that it does not create new jobs and spending fast enough," say the academics. "While this may have been true during the Great Depression era, it is simply not true today at a time when hundreds of billions of dollars of infrastructure projects across America have already been approved but are sitting 'on the shelf' due to funding shortfalls."
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Wednesday, October 29, 2008
Infrastructure Is Viable Quick Fix, Academics Tell Bush Administration
Wednesday, October 22, 2008
La oportunidad de la crisis
Por Norman Anderson, CGLA. La inversión en infraestructura, una fórmula para blindar a la región de la debacle financiera global.
La crisis financiera venida del norte ha puesto a América Latina en una posición vulnerable y de alto riesgo. La región venía creciendo a altas tasas, como el 5,5% que consiguió el año pasado. Pero las proyecciones para 2009, según Morgan Stanley, son poco alentadoras: sólo 1,5% para el año que viene. No obstante, es posible impedir que este sombrío 2009 se haga una realidad. Pero para eso hay que tener un plan de acción ya. Déjenme mostrarles una fórmula que, de aplicarse tempranamente, podría traer beneficios de corto y largo plazo en estos tiempos de crisis.
La fórmula: debido a que no hay duda alguna de que la actual crisis financiera se expandirá a América Latina, a través de la rápida vía que implica la caída en los precios de materias primas o commodities (alimentos, minerales y petróleo, entre otros) y a través del camino largo de tener socios comerciales más débiles. La región debe aprovechar este momento de bajos precios e incrementar su inversión a 40.000 millones o US$ 50.000 millones, equivalente al 1,5% del producto interno bruto.
Esta inversión debe enfocarse en proyectos que cumplan dos objetivos esenciales: primero, contribuir a la competitividad de largo plazo de cada país; y, segundo, proveer el mayor número posible de trabajos. Es necesario que este enfoque sea en proyectos de infraestructura básica tales como sistemas multimodales y logísticos, generación y transmisión de electricidad, transporte urbano y sistemas de provisión y tratamiento de agua.
Los beneficios: de esta inversión anticipada y agresiva, la economía latinoamericana obtendrá tres beneficios principales. Primero, el monto total de inversión sería del orden de los US$ 15.000 millones para una economía grande como la brasileña, y de US$ 450 millones para economías más pequeñas como la dominicana. El monto del estímulo a través de todo el continente sería de US$ 40.000 millones y crearía más de 600.000 trabajos directos y más de 1,8 millones de trabajos de forma indirecta.
Segundo, la gente percibiría que sus gobiernos –y las instituciones internacionales– no sólo tomaron acciones decisivas, sino que también decisiones que tienen un impacto directo en su bienestar. La generación de confianza en los ciudadanos es crítica en tiempos de crisis y permite a la sociedad mantener un optimismo que sirva como motor de la economía, sin tener que enfrentar un par de años de recesión global para volver a encontrar crecimiento.
Tercero, y más claramente que las anteriores, dichas acciones crearían una muralla protectora para la economía latinoamericana y la blindarían de la debacle financiera global. Y mientras el sistema financiero internacional está siendo reparado por la elite política y financiera global, la calidad de vida del ciudadano promedio –reflejado en fuentes de empleo y una economía productiva- podría ser atendida domésticamente.
Los resultados: los últimos cinco años han sido muy buenos para América Latina. Aunque no todos han recibido sus beneficios. Para los ricos ha sido un tiempo maravilloso. Para los ciudadanos de clase media han sido inciertos. Y para los pobres, ha sido casi tan difícil, como siempre. Pero en infraestructura –un verdadero Proxy para la competitividad global—la aguja no se ha movido en nada. A pesar de lo que digan los gobiernos de la región (Chile como una permanente excepción y Panamá como una excepción reciente), no ha sobrepasado nunca el 1,5% del PIB en inversión en infraestructura. Se trata de una bajísima cifra para estándares globales.
Tal como me dijo un observador internacional escribiéndome desde el Medio Oriente: “existe tal rezago en la infraestructura de América Latina comparado con América del Norte y otros distantes continentes como Asia, que de continuar así, la región carecerá totalmente de competitividad en el 2015 –si es que no ahora. Honestamente, si no fuera por el atractivo de materias primas nadie invertiría en la región. Cuando escucho a los chinos, coreanos, árabes e italianos afirmando que primero invertirían en África que en América Latina, entiendo plenamente que hay un problema en la región”.
La acción certera y agresiva en el área de infraestructura tiene amplitud de beneficios: permite a la región protegerse de la actual crisis planetaria, puede plantar las bases para mayor productividad y competitividad en el mediano plazo, y le permite demostrar a sus ciudadanos –a todos ellos– un compromiso con el crecimiento equitativo. Si la región incrementa en un 1,5% de su PIB la inversión en infraestructura, puede además ir aumentado la inversión en 0,5% del PIB cada año y así llegar a 2015 con una inversión cercana al 5,5% del PIB y como la región máscompetitiva del mundo. La crisis es una oportunidad. Pero para tomarla hay que tomarla ya.
Norman Anderson estará presente en el Foro de Liderazgo para la Integración de Sudamérica que se realizará en la ciudad de Cartagena, Colombia, el próximo 2 y 3 de diciembre. Únase a un selecto grupo de participantes. Más información www.cg-la.com
Lea otras entrevistas y comentarios de Norman F. Anderson
Thursday, October 16, 2008
Voters Weigh Billions in Bond Issues
Even if bond proposals are approved, states may have trouble selling them in the market
10/15/2008
By Tom Ichniowski, Steven W. Setzer, Joe Florkowski and Lucy Bodilly
Voters from coast to coast on Nov. 4 will decide the fate of billions of dollars’ worth of bonds to finance transportation projects and other infrastructure. If recent trends hold true, most of those measures will pass. But if the severe squeeze in credit markets persists, state and local agencies may be forced to delay selling those newly approved bonds.
Paulson (at lectern), Bernanke, other federal officials outline latest financial rescue actions.
AP/Wideworld
Paulson (at lectern), Bernanke, other federal officials outline latest financial rescue actions.
Pennsylvania, for example, has a $400-million water-and-sewer bond issue on the November ballot. But Gov. Edward G. Rendell (D), says, “It’s not certain that there’ll be takers for those bonds right now.” Rendell says he’s hopeful the steps taken on Oct. 14 by the Treasury and other agencies will ease the credit crunch and reinvigorate the bond market. “But right now it would be very questionable whether we could sell those bonds,” he says.
Arturo Perez, a fiscal analyst with the National Conference of State Legislatures, says, “While there has been a slowdown in municipal bond activity, it has not been shut off entirely.” But, he adds, “It’s anybody’s guess when things will return to normal” in that market.
Voters in eight states will consider 15 statewide bond issues totaling $18.4 billion in November, according to NCSL’s tally. Of that total, issues worth $12.4 billion would go for transportation, water and other public works. Another $1.6 billion would fund renewable-energy work.
Voters from coast to coast on Nov. 4 will decide the fate of billions of dollars’ worth of bonds to finance transportation projects and other infrastructure. If recent trends hold true, most of those measures will pass. But if the severe squeeze in credit markets persists, state and local agencies may be forced to delay selling those newly approved bonds.
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Press Releases: 2nd Annual Global Infrastructure Leadership Forum
Oct 16, 2008 07:00 ET
SOURCE: CG/LA Infrastructure
2nd Annual Global Infrastructure Leadership Forum"The Champions Remaking our World"
Washington, DC * Mayflower Hotel
December 10-12, 2008
WASHINGTON, DC--(Marketwire - October 16, 2008) - CG/LA Infrastructure LLC, the world leader in strategic infrastructure project identification and development, announced today the selection of the Top 100 global infrastructure projects, to be presented by their sponsors at the 2nd Annual Global Infrastructure Leadership Forum. Focused on physical infrastructure opportunities around the world, the GILF2 will take place at the Mayflower Hotel in Washington, DC.
"At a time of severe global financial crisis, the infrastructure sector is the one sector that can insulate the real economy from the worst effects of the crisis -- an additional 1% of GDP, invested globally, would increase investment from the current level of $1 trillion to nearly $1.3 trillion annually, creating more than 40 million direct jobs, and pumping real value directly into the global economy," says Norman Anderson, President & CEO of CG/LA Infrastructure and the Global Infrastructure Leadership Forum.
A Marketplace for Global Projects: The Global Forum is an infrastructure marketplace, bringing the Top 100 global projects together with 500-600 infrastructure executives -- from finance, policy, engineering/construction, and equipment/technology. Key countries include: the US, the BRIC countries, and infrastructure hot spots like Malaysia, the Philippines, Vietnam as well as key countries in the Middle East and Africa. Projects have been confirmed across 17 countries, and 8 sectors, including ports & logistics ($24 billion), oil & gas ($37 billion), strategic ($48 billion), water & wastewater ($5 billion), electricity generation ($6 billion), urban mass transit ($45 billion), digital infrastructure ($3.7 billion), and highways ($6 billion). The total estimated project value will be $175 to $200 billion.
Critical Players: The Global Forum's theme is "The Champion's that are Remaking our World," and leading the Forum are 'champions' like the Managing Director of JBIC, Masaki Omura; Alfredo Elias Ayub, the CEO of Mexico's national electricity company; Peter Barker-Homek, the CEO of Abu Dhabi's national energy company; and John Mizroch, the US Undersecretary of Energy for Renewables.
More than 100 project sponsors will take the stage, and host pre-scheduled private meetings with participants. "These infrastructure champions," according to Mr. Anderson, "are the men and women who are going to build us out of our current difficulties -- the people with the vision, the drive, the imagination and the persistence to get things done, around the world."
Strategic Projects: Each of the projects presented offer strong business opportunities over the next 12 months, thus providing participants with a window on the infrastructure world for 2009. Strategic projects include:
the Iskandar Regional Development project, a $47 billion development
project in Malaysia;
the SEACOM Project, a pan-African submarine cable project valued at
over $600 million;
the Vadinar Port Development Project, a $2 billion project in India;
the California High-Speed Rail Project, valued at over $40 billion;
and
the Gold Horn Bay Bridge project, a $700 million BOT project in
Vladivostock, Russia.
Strategic project workshops will be presented by Vietnam; the Philippines; the Andean Development Corporation; Russia - the Sochi Olympics; Mexico; and Brazil. A Strategic US Projects Roundtable will be hosted by key US political figures supporting the creation of the $60 billion National Infrastructure Bank.
Global Forum Sponsorship: Gold Global Forum sponsors are ACS (the Spanish infrastructure operator), Alliant (Blackstone Group), The Andean Development Corporation - CAF, ESRI, MIGA-World Bank Group, Metro de Madrid, Sterne Agee, Trimble, and the US Department of Energy/Renewables Group.
CG/LA Infrastructure LLC, based in Washington, DC, focuses on creating opportunity in the global infrastructure marketplace by assisting countries, regions, and companies to become increasingly competitive in areas of strategic advantage.
In order to access the Leadership Forum web page please go to: http://www.cg-la.com/global2
Wednesday, October 8, 2008
The Asian Development Bank will lend USD196 million to help construct a hydroelectric plant in Vietnam's central Quang Nam province
VietNamNet Bridge – The Asian Development Bank (ADB) will provide Vietnam with a 196 million USD loan to build the Song Bung 4 hydroelectric power plant in central Quang Nam Province.
An agreement to this effect was signed in Hanoi on Oct. 6 by Governor of the State Bank of Vietnam, Nguyen Van Giau, and the ADB Country Director for Vietnam, Ayumi Konishi.
The project, which is located in one of the poorest and most remote parts of central Vietnam, has a total investment of 265.9 million USD, including 69.9 million USD sourced from the Electricity of Vietnam Group (EVN).
Construction of the 156 MW plant is scheduled to commence later this year and be completed by 2013.
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Tuesday, October 7, 2008
We're Not Headed for a Depression
No, this isn't the crisis that kills global capitalism
In order to promote a much smoother functioning of the financial system, it is paramount to distinguish between the immediate steps needed to cope with the present crisis and the long-run reforms needed to reduce the likelihood of future crises. Let's start with the short-run fixes.
First of all, the magnitude of this financial disturbance should be placed in perspective. Although it is the most severe financial crisis since the Great Depression of the 1930s, it is a far smaller crisis, especially in terms of the effects on output and employment. The United States had about 25% unemployment during most of the decade from 1931 until 1941, and sharp falls in GDP. Other countries experienced economic difficulties of a similar magnitude. So far, American GDP has not yet fallen, and unemployment has reached only a little over 6%. Both figures are likely to get quite a bit worse, but they will nowhere approach those of the 1930s.
The Treasury's announced insurance of all money-market funds, and the full insurance of bank deposits, carry considerable moral hazard risks, but they have not aroused much controversy. The main thrust of the new banking law allows the Treasury secretary to purchase bank assets up to $700 billion in order to increase the liquidity of the banking system. These assets are of uncertain worth since there is essentially no market for many of them, and hence they have no market price. The government hopes to create this market partly through using auctions, where banks would offer their assets at particular prices, and the government would decide whether to buy them. I would have preferred starting with a smaller dollar value of purchases, and up the amount if the situation deteriorates further.
Partly because many consumers are repelled by the intention to bail out companies and their executives who made decisions that got the companies into trouble, the new law includes income and severance pay limits for executives whose firms seek government help. Even though one cannot think much of executives who led their banks into such a mess, that is a bad precedent since it involves too much micromanagement of bank operations. Moreover, such salary controls can be evaded by very generous fringe benefits.
The moral-hazard consequences for banks receiving a bailout now is worrisome since they may expect to get rescued again by the government if their future investments turn sour. Yet while I find helping these banks highly distasteful, moral-hazard concerns should be temporarily relaxed when the whole short-term credit system is close to collapse. Still, the bank bill with its huge bailout does suggest that the $29 billion bailout of the bondholders of Bear Stearns in March was a mistake. It seemed to have a moral-hazard effect by encouraging Lehman Brothers and other investment banks to delay in raising more capital because they too might have expected the government to come to their rescue if times got much worse. Although the government was apparently concerned that foreign central banks were major holders of the bonds, it was unwise to give them and other bondholders such full protection.
One troubling provision is that the government can take an equity stake in banks it helps. Some economists have proposed a similar role for government equity in these banks. I believe it is unwise to give governments equity in private companies, even if the government does not have voting rights in company policies. Many examples in recent history, such as the current Alitalia fiasco, show that political interests outweigh economic ones when governments have some ownership of private companies. This is likely to happen in this bailout if some banks that are helped decide to sharply cut employment in the districts of some congressmen, or to transfer many jobs overseas.
Taxpayers may be stuck with hundreds of billions of dollars of losses from the various government insurance provisions and government purchases of assets. Although the media has made much of this possibility through headlines like "$700 Billion Bailout," such large losses are highly unlikely except in the low probability event that the economy falls into a sustained major depression. Indeed, with efficient auctions, the government may well make money on its actions, just as the Resolution Trust Corporation that took over many savings-and-loan banks during the 1980s crisis did not lose much, if any, money. By buying assets when they are depressed and waiting out the crisis, the government may have a profit on these assets when they are finally sold back to the private sector. Making money does not mean the government involvement is wise, but the likely losses to taxpayers are being greatly exaggerated.
The temporary banning of short sales is an example of a perennial approach to difficulties in financial markets and elsewhere; namely, "shoot the messenger." Short sales did not cause the crisis, but reflect beliefs about how long the slide will continue. Trying to prevent these beliefs from being expressed suppresses useful information, and also creates serious problems for many hedge funds that use short sales to hedge other risks. Their ban can also cause greater panic in other markets.
The main problem with the modern financial system based on widespread use of derivatives and securitization is that while financial specialists understand how individual assets function, even they have limited understanding of the aggregate risks created by the system. That is, insufficient appreciation of how the whole incredibly complex financial system operates when exposed to various types of stress. In light of such limitations, it is difficult to propose long-term reforms. Still, a few reforms seem reasonably likely to reduce the probability of future financial crises.
- Increase capital requirements. The capital requirements of banks relative to assets should be increased after the crisis is over in order to prevent the highly leveraged ratios of assets to capital in financial institutions during the past several years. Possibly a minimum ratio of capital to assets should be imposed by the Fed on investment banks and money funds. As much as possible, the measure of capital should not be its book value but its market value, such as the market value of publicly traded shares of banks. Book value measures, for example, apparently badly missed the plight of Japanese banks during their decade-long banking crisis of the 1990s.
- Sell Freddie and Fannie. The government should as quickly as possible sell Freddie Mac and Fannie Mae to fully private companies that receive no government insurance or other help. These two giants did not cause the housing mess, but in recent years they surely greatly contributed to it, partly through congressional pressure on them to increase their purchases of subprime loans. They have owned or guaranteed almost half of the $12 trillion in outstanding mortgages while having a small capital base. The housing market already has excessive amounts of government subsidies, such as from the tax exemption of interest on mortgages, and should not have government sponsored enterprises that insure mortgage-backed securities.
- No more bailouts. The "too big to fail" approach to banks and other companies should be abandoned as new long-term financial policies are developed. Such an approach is inconsistent with a free-market economy. It also has caused dubious company bailouts in the past, such as the large government loan years ago to Chrysler, a company that remained weak and should have been allowed to go into bankruptcy. All the American auto companies have asked for and received handouts too since they cannot compete against Japanese, Korean and German car makers, partly because these American companies have been incredibly badly managed. A "too many institutions in trouble to fail principle," as in the present financial crisis, may still be necessary on rare occasions, but failure of badly run large financial and other companies is healthy and indeed necessary for the survival of a robust free-enterprise competitive system.
Is this a final "Crisis of Global Capitalism" -- to borrow the title of a book by George Soros written shortly after the Asian financial crisis of 1997-98? The crisis that kills capitalism has been said to happen during every major recession and financial crisis ever since Karl Marx prophesized the collapse of capitalism in the middle of the 19th century. Although I admit to having greatly underestimated the severity of the current crisis, I am confident that sizable world economic growth will resume before very long under a mainly capitalist world economy.
Consider, for example, that in the decade after various predictions of the collapse of global capitalism following the Asian crisis, both world GDP and world trade experienced unprecedented growth thanks to the power of market competition on a global scale. The South Korean economy, for example, was pummeled during that crisis, but has had significant economic growth since. World economic growth will recover once we are over the present severe financial difficulties.
