Infrastructure finance fund to be launched in Sept

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AZM Anas
The government will launch the country's largest local-currency equity fund by September that will focus on social and economic infrastructure such as power, energy and transport, finance officials said Tuesday.
With a seed capital of Tk. 16 billion (US$220million), the Bangladesh Infrastructure Finance Fund (BIFF) will seek to raise billions of dollars from sovereign wealth funds and global institutional investors.
"It's a little drop. (But) it will play a catalytic role in attracting more capital," joint secretary of the Finance Ministry Muhammad Muslim Chowdhury said.
He said a financial institution would be set up to oversee the fund while it will be managed by a global fund manager.
Finance officials said the new fund has already overtaken a Dhaka private equity Brummer and Partners to become the largest taka-denominated fund. It has also surpassed the combined capital of Islami Bank Ltd. and Prime Bank Ltd., two of the country's leading private lenders.
Brummer and Partners, linked to the largest Scandinavian hedge fund, is now managing more than $100 million in Bangladesh and has already snapped up equities in RahimAfroz and BRAC Net.
The move came just after Bangladesh received "sovereign" credit rating from two international rating agencies, with Standard and Poor's giving it 'BB-' for long term and 'B' for short term while the Moody's issuing Ba3.
In 2005, Goldman Sachs listed Bangladesh in the same breath as China, India, Brazil and Russia, calling it one of the hottest emerging markets. So did JPMorgan Chase & Co. naming the country as one of the "Frontier Five" markets in a 2007 analysis.
Manirul Ahsan, the head of investment at the Bangladesh unit of Brummer and Partners, said that the infrastructure fund could draw foreign investors' attention as global power and energy heavyweights are trying to invest in emerging and frontier markets.
He, however, said the fund's success would be contingent upon how faster things move navigating the rough waters of the official, system.
Among the fund's targets in the infrastructure sector are companies that will build power stations, ports, flyovers, bridges and roads and energy exploration.
Bangladesh still spends less on infrastructure than its requirement and the Asian Development Bank said the country should scale up infrastructure investments by at least 12 per cent of its gross domestic product (GDP) to take its economy to the higher growth path.
The Finance Ministry has estimated that Bangladesh requires an investment of more than $11.05 billion to implement its five "priority" infrastructure projects that are to be implemented under the PPP basis. The cost excludes that of the planned deep-sea port in Chittagong.
Official estimates put the total cost of generating 9000 megawatt of electricity by 2015 at $9.0 billion.
Treasury and debt management department at the Finance Ministry is handling the launch of the fund.
"We expect to attract petro-dollars in the Gulf states and also from China and South Korea," Mr. Chowdhury said.
He said the government would initially control the majority shares in the public-private infrastructure projects, while the private investors would be the minority share holders.
But ultimately, he said the government would cede its majority stakes from the projects, thereby allowing private investors to control the majority stakes in the future infrastructure projects.