Three key pillars to address
Based on initial research, discussion with industry experts and leaders, the challenge of incentivizing the investments can be categorized into the subsequent three pillars. The grouping of the issues under the pillars try and give a perspective on what could be some of the potential areas to work on so that an environment can be created to enable higher investments specially in the LDC, LLDC or the SIDS if the eventual target of connecting the 2.9 billion people needs to be met by 2030.
Under each pillar, there is a detailed list of issues to factor in to be able to make large scale investments in the most under connected regions of the world:
Innovative financing
The financing ecosystem is evolving today which includes many different avenues for a country to leverage for financing. However, most of the developing nations are yet to take full advantage of this emerging trend due to multiple factors:
- Divergent financing models and complexities
- Financing models linked to type of project (e.g. backbone, last mile, capacity or digital infrastructure)
- Leveraging new developments like blockchain and cryptocurrencies and associated security
Project viability
For any project to be a success and be able to achieve the objectives, it is important that the project environment has strong stability and continuity. Any changes either in terms of laws, regulation or political environment will influence the viability of the project. Some of the key issues impacting the viability are:
- Attractiveness of business cases on stand-alone basis dependent on ecosystem
- Compliance with the local economic, political and social environment
- Political and regulatory risk profile – impact on state of ecosystem and local co-operation and ease of doing business
- Alignment to local needs and expertise development - high dependence on expensive foreign skills/resources
Investor constellation
To achieve the goal of connecting 2.9 billion people will mean that the investor community may have to focus on and help the target countries to be able to achieve the sustainable changes. The traditional investment methods will have to relooked and reassessed. Some of the factors to weigh in are:
- Traditional donor aids as primary source of funding
- Co-financing between IDBs and private investors
- Focus of private investors on LDCs/LLDCs/SIDS
- Cyber risk assessment and execution related challenges for complex infrastructure projects
- Governance model influencing the investment climate