Gloom and Doom--Or Opportunity?

I am attending the 2^nd Annual Global Infrastructure Leadership Forum in Washington, DC, USA, an event that might be described as a mating ritual among sponsors of enormous infrastructure projects around the world, consultants who might find financing for these projects and engineers and equipment makers who can serve these projects once they get going. Ordinarily there would be an enthusiastic atmosphere at a meeting like this, but these are not ordinary times.

    The first session had a panel full of long-time experts on major infrastructure building and each member outdid each other in saying that never in their long careers had they seen a financial situation like the one we're in now: "There is no money;" "no private capital;" "the syndication market is closed;" "public equity is closed and private equity is circling like sharks. Blood is in the water and they are waiting for corpses."

    James Bond, the COO of the World Bank Group's Multilateral Investment Guarantee Agency said there are three crises going now, nested into each other "like Russian dolls": a financial sector crisis, a credit crisis and a deep recession. But the World Bank is in good shape financially, he said, because it is a conservative organization. And he predicted that investor confidence will be rebuilt as bond markets come back more regulated.

    But there is light at the end of the tunnel--or maybe even in the tunnel right now. While Mr. Bond said we will get out of the crisis in six months to a year, projects will go on--good, solid projects with good debt-equity ratios and no "bridges to nowhere." Projects should be financially viable, however--not always the case with infrastructure.

    Hezi Kugler, Director-General of Israel's Ministry of National Infrastructure, said performance-based projects are the way to go, ones with guaranteed benefits. He repeated Mr. Bond's call for well-structured projects. And he also is optimistic that in 2009 there will be more confidence and more capital.

    The next session included a panelist that had reason for optimism: Judge Quentin Kopp is the chairman of the California High-Speed Rail Authority. The voters in his state approved an almost-$10 billion bond issue to get this $45 billion project under way. It will be the first high-speed rail network built in the United States. And voters defied contrary public opinion polls to pass the referendum despite the economy.

    At an evening reception, attendees questioned the speaker, Eugene Robinson, a Washington Post columnist and political analyst, on whether the incoming Obama administration will support infrastructure. "There's a rare consensus in Washington now," said Mr. Robinson. "We're all Keynesian. Any recovery will be accompanied by government spending, and the best way is through infrastructure. 2009 will be an economic opportunity."