Emerging Market Infrastructure

Infrastructure in Emerging Market

On-going rebalancing in global economic power has given rise to unprecedented involvement in investment plans in infrastructure in the emerging markets. Though there are common drivers on infrastructure increase in emerging markets like the requirement of added infrastructure together with goals of sustaining the economic growth and managing the fast growing urbanisation, there is a vast difference in the environment and the challenges faced. While engaging in these opportunities, engineering and construction operations, infrastructure management companies, private materials and financial firms need to consider on –

• Who could be the right local and global infrastructure partners?

• What would be the differences in infrastructure in funding structures?

• How would the bid occur for mega projects?

• Are there any demands for green infrastructure?


For instance, as per PwC and Oxford Economics’ Capital Project and Infrastructure spending outlook to 2025 report, the Asian Pacific market, due to China’s growth is expected to represent around sixty percent by 2025 of the global infrastructure spending while Western Europe’s share is expected to decrease to less than 10% twice as from the last few years back. Infrastructure is defined in various emerging markets with provision to insights on goals, risks and opportunities, challenges that are connected with infrastructure developments in those markets, in PwC’s Emerging Markets Infrastructure Series.

Urbanization – Trend in Emerging Market 

Urbanization is the only trend in the emerging market which means that infrastructure needs to keep up with the pace. As the income tends to rise in several countries, there is a need to indulge in the purchase of cars and roads would tend to be used with the need to have new ones built.

 According to Magee, `in developing markets, private sectors tend to play an important role financially in roads, telecom and power plants and water as well as waste water investment would be critical. Water related companies tend to have a small part of infrastructure universe though are expected to become much more significant going ahead while in Europe, they are in the early stage of transforming power generation from coal. Germany on the other hand needs to make some headway since their nuclear power plant are closing, while China will have to gradually move away from coal incorporating cleaner energy sources from power generation’.

Country Risk/Infrastructure Risk

Emerging markets are about country risk while infrastructure risk is about not taking risk though in the case of infrastructure asset sector, there are provisions of investment and growth and the emerging markets are avenues where there is a great demand for infrastructure capital. Emerging market infrastructure investment does not have to carry the full country risk of the host nation. Sovereign risk is often under the coverage of sovereign risk insurance which is purchased in the commercial market or provided by International Financial Institute – IFI, like the World Bank or any other related global institution.

The net return on sovereign risk after the insurance premiums will exhaust the yield on the credit of the surety provider and when combined with structured project risk, on properly evaded investment, the net return would not probably reach 30% though it could almost reach 20% which according to an asset-based uncorrelated investment could be quite good. Those on the lookout for yield, emerging market infrastructure investment could be part of the solution and for those with global diversification; real assets could be another option to the various listed securities.

Dedicated Card and Payment Crime Unit

DCPCU – Protect Security of Card Payment

The function of UK Cards Association is to protect the security of card payments system with focus on tackling organised criminal activity. In order to accomplish this, the UK Cards Association, funds a specialist policing team known as the Dedicated Card and Payment Crime Unit – DCPCU to identify organised payments fraud. The Dedicated Card and Payment Crime Unit, a special police unit comprises of police officers who have been appointed from the City of London Police as well as the Metropolitan Police Services who operate together with industry fraud investigators.

Their focus lies in identifying and targeting the organised criminal gangs which are responsible in attacking the payment industry. The Unit was established in April 2002 and is fully sponsored by the card and retail banking industries which was created due to the rising growth in payment card crime during 1999 and 2001. From the time of its establishment, the banking industry has been put in an investment of around £4 million per year for the operation of the Unit.

Experts have attributed to the growing incidents of organised crime in the area and the lack of dedicated police investigatory. The main purpose of the DCPCU is to identify, check and seek appropriate prosecution of offenders who have been responsible for organised cheque and payment card crimes.

Organised Criminal Gangs - Targeted

It is headed by a Detective Chief Inspector who brings together the officers as well as civilian staff from the City of London Police and Metropolitan Police forces. Moreover, expertise and payments industry knowledge is also given by industry secondees. Though it is a London based unit, investigations are nationwidewhere the organised criminal gangs responsible for payment related fraud are targeted. Some of its achievement since its formation is –

• Achievement of £450 million in the form of saving from reduce fraud activity equating to £800,000 weekly
• Recovery of around 700,000 counterfeit card
• Recovery of 346,000 compromised card numbers
• Secured 346 convictions on matters related to fraud, which is an average of more than one successful prosecution per fortnight over the past decade.

Areas of Priority 

The impact on a wider perspective is the link to organised and serious crimes. The Unit’s investigation has established that a significant proportion of fraud has been committed by these criminal gangs, having strong links to other kinds of serious crimes, which also includes people, drugs, and trafficking as well as violent crimes. The Unit has also been responsible in providing key fraud prevention messages to the people such as with the help of television and radio work as well as through direct meeting with groups that represent consumers who could be at high risk. The Unit’s priority areas are:

• Project Sandpiper – The Unit secured European Commission funding in 2013 which was funded by UK Cards Association and PFF in order to finance the project focused in tackling Romanian criminality that affected the UK payment industry. This involved connecting with the UK payments industry as well as law enforcement individuals in Romania in tackling its organised criminal groups.
• Staff Insider – Work with banks that sponsored to reduce harm caused by dishonest staff and targeting organised criminal groups.
• Social Engineering – Telephone – To locate criminal groups responsible in fast rising fraud cases who are aiming vulnerable individuals as well as businesses causing great harm to the UK payment industry.

Right of Rescission/Right to Cancel

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Right to Rescission – A Known Power/Law

A person has the privilege by law, with the right to cancel a mortgage refinance or home equity loan if they tend to act quickly and adhere to the rules. A known power or the law known as the `right to rescission provides the borrower with the ability in some situations, the right to cancel their loan deals within a period of three days with no questions asked and be free.

 In other words it could mean as another way of saying `right to rescind’ or `cancel’a given contract without losing any money. Within a period of 20 days, the lender then has to give up its claim to the property as collateral and should refund the fees which may have been paid by the borrower. According to Margot Saunders, counsel or the National Consumer Law Centre, states that it has been designed with a view to provide lenders with accurate disclosures and that consumers do not sign up for loans which are different than what could have been described to them.

This right is intended to safeguard the consumer from the risk of using family home or the equity in order to secure a loan and is not applicable in situations where the mortgage is made to buy the house itself. Nessa Feddis, Vice President and Senior Counsel to American Bankers Association, states that it is not to protect the (home) purchaser but to protect the person having equity in the home.

Covers Mortgages – Companies/Banks Etc.

Categories where the right of rescission are applicable are – home equity loan which is often known as second mortgage, mortgage refinance – if the new loan does not come from the same lender which had financed the original home purchase loan, home equity line of credit, cash-out refinance – irrespective of whether it is a new loan that comes from the same lender who had made the original home purchase loan though only the new money is covered by the right of rescission. According to Saunders, it does not matter what kind of lenders the money is borrowed from and the right of rescission covers loans from mortgage companies, banks as well as other lenders.

No exclamation is essential in the case of cancellation of the transaction within a three days’ time, as per Carole Reynolds, Senior Attorney with the Federal Trade Commission and the fact that the said loan is not needed is sufficient enough for an exclamation.

The Truth in Lending Act

The law - `The Truth in Lending Act’ was for the purpose of shielding borrowers from unscrupulous lenders with the right of rescission and was intended to oppose smooth talking lenders intending to fleece borrowers out of their money and their homes. Some of the borrowers may be under the wrong impression that there is a right of rescission with all types of mortgages which is not so.

Since state and local statutes differ, the federal right of rescission is specific which is mentioned in the Truth in Lending Act. Saunders state that there is no right of rescission for the purchase money mortgages and some of these categories with regards to the right of rescission which is not applicable are –loans made to purchase a house, any loans either 1st or 2nd mortgages, refinancing mortgages, etc., which involve properties which are not the primary residence and business loans.

Complication and Implication of Virtual Water- II

Fresh Water – Concern on Global Food Security

For several parts of the world, fresh water has become a scarcity and over exploited natural resource has now given rise to concern on global food security as well as damage to fresh water ecosystems. Situation seems to increase with the FAO making its estimate that the food production should be double by 2050 and hence food chains should be more efficient with regards to the usage of consumptive water. For geographically and small well defined Australian mango industry, with an average annual production of 44,692 ton of marketable fresh fruit, was 2298.1 kg−1 of average virtual water content, which is a sum of green, blue as well as grey water, at the orchard gate.

Due to wastage however, in the distribution as well as the consumption level of product life cycle, the virtual water average content of 1 kg of Australian grown fresh mango used by Australian household was 52181. This figure compared to an Australian equivalent water footprint of 2171 k−1is the volume of the usage of water in Australia with equivalent capabilities in contributing to water scarcity. Nationally, the distribution and consumption waste in food chain of Australian grown fresh mango to the consumers, indicate an annual waste of 26.7 Gl of green water with 16.6. Gl of blue water

Intervention in Reducing Food Chain Waste – Great Impact on Fresh Water 

These discoveries indicate that the intervention in reducing food chain waste would probably have a great or even a greater impact on freshwater resource available like other water use efficiency measures in food production and agriculture. Analyses of evolution and the structure of trade in virtual water had shown that a number of trade connections together with volume of virtual water trade had doubled for the past few decades. Developed countries have been drawing on the rest of the world to ease the pressure on domestic water resources.

Three studies have been done though it fills three important gaps in the research on global virtual water trade, the first being that in previous studies, virtual water volumes were put together from countries which were envisaging various degrees of water scarcity which was incorporated into assessments of virtual water flows. Secondly some previous studies assessing virtual water networks in terms of immediate water was used for food production though refrained from indirect virtual water used in the supply chains underlying all traded goods.

Global Virtual Water Network Structure

In the analysis, the use of input-output analysis included indirect virtual water, noting the existing conflicting views on whether trade in virtual water could lead to overall savings in global water resources. A re-visit to the Hechscher-Ohlin Theorem was done in the context of direct and indirect virtual water, to determine if international trade could be seen as feasible demand management tool in reducing the water scarcity. It was found that the global virtual water network structure changes significantly on adjusting for the purpose of scarcity.

Besides, the Heckscher-Ohlin Theorem can be validated when indirect virtual water is appraised. Water once seen as an infinite resource is in fact, a finite resource. Moreover, fresh water is an important resource to plants, animals, human and all living things on the planet Earth. Geographic zone of abundance and scarcity is due to unequal global distribution of fresh water and global climatic changes tend to redistribute precipitation away from geographic locations which has sufficient or excess supply to cope up with the population.

Complication and Implication of Virtual Water- I

Water – Huge Number of Characteristics – Important Economic Good

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Water, though not a normal economic good has a huge number of characteristics which distinguishes it from the other goods and these characteristic individually may not be important but its combination makes water an important economic good.`Virtual water’ term was first used in the context of water scarce in Middle Eastern and Northern African countries that imported huge quantity of their food and thereby reduced substantially the demand of water in domestic food production as well as compensated for lack of water.

Importing food was virtually equal to trading water for these countries. Allan (1966) termed water - embodied in food import as virtual water. The terminology as well as the scope of virtual water over the years is extended beyond the original purpose. Presently the definition accepted on virtual water is the water requirement for production of commodities and since food production in several countries is by the largest water user, topics on virtual water problems have been targeted primarily on food commodities.

Virtual water is politically silent and economically invisible (Allan 2003a) and in the past, this has made it possible for water scarce countries to manage with water deficit through food import without a policy discourse of national water scarcity.

Debates – Usefulness of Concept/Feasibility to Import Virtual Water

The term virtual water came into focus in mid 1990s and since then has drawn growing awareness among policy makers, general public and scientific communities. It has become a topic which is discussed recurrently at several international conferences as well as meetings, especially the World Water Forum organized by the World Water Council as well as the Stockholm World Water Week which is an annual event and convened by the Stockholm International Water Institute.

Relevant issues publications have been rapidly on the rise in the international journals. There have been intense debates on the usefulness of the concept as well as the feasibility to import virtual water to reduce local scarcity of water. More than a decade of efforts have been made in virtual water studies and it is time now for a critical review to be done on relevance of virtual water concept in heightening our understanding of real water resources management.

Water – Limiting Factor/Significant Impact

Water is now becoming an increasing limiting factor for sustainable growth and development of economy in many countries, its allocation having a significant impact on the whole economic efficiency especially the mounting physical scarcity in some regions. Need for huge water supply tends to increase the vulnerability in the affected areas.

Moreover, water has also become a strategic resource which involves disputes among those who tend to be affected differently by various policies. Some papers tend to analyse various policy interventions focused at improving water allocation decisions with a novel approach which could incorporate macro as well as micro level options in a unified analytical guidelines which could facilitate assessment of different linkages with other policies as well as their impacts in individual sectors and the wide economy.

Policy impacts comparison indicates the usefulness of the guidelines in information, which the policy makers could use to rank policy intervention as per the emphasis given on various policy objectives.