London Economy – Infrastructures are a fundamental strategy for all the countries that are following an important levels of growth. Micaela Cappellini of the Sole24Ore (monday 17 of January 2011) underlines as the Turkey has a growing annual percentage rate of 8.2. The country is investing in airports, transports, wind power of 1300 MegaWatt attracting foreign investitors. The most important bank for the infrastructure and development in Italy is BIIS(Banca Infrastrutture Innovazione e Sviluppo) that has the mission of promoting development of major infrastructures and economic growth in the countries in which it operates. We have interviewed Simone Urbani Grecchi Chief Manager of the International Department in London for a better understanding of the infrastructure’s role.
The financial crisis has imposed on economic actors to revisit their strategies. Which policies or strategies were revised by the BIIS?
We have improved our offer. BIIS is a bank that goes against the prevailing trend. When the economy is in crisis the others come to us because we create infrastructures such as highways, ports, hospitals and infrastructure for energy. Following the crisis, many protagonists of the economy have turned to the side of Keynesian economics, and we were among the main actors to play the role of economic development. Since the crisis affected the private sector, the most have turned to the public side strengthening the economy in crisis. We did not change strategies. Our mission has always been combined the needs of the public and the private operators in infrastructures. During the crisis we have been called to play our role even more than before.
What about the funding system for the infrastructures? Have you found new financial products that meet the need of innovation from this point of view?
In Italy last year we have been involved in wind power and photovoltaics.
The project financing is a winning option. In Italy we soffer the problem of lack of private capital. We have some availability of private capital but it is not on the scale of the Anglo-Saxon countries. All parties must be called to play its role inclused the public sector because the renewable energy sector is very important and it has major financial difficulties if there is no funding public.The green certificates are subsidies
that the public sector uses in supporting of the price of energy generated with renewable sources. Without these subsidies the renewable energy is still not competitive with traditional energy sources based on fossil fuels.
Are PPP (Public Private Partnership) used to finance social infrastructures?
The Public-Private Partnership is the set under which various activities are held. One of these is the Project Financing. In Italy it is quite less developed than in England. For social infrastructure PPP are the best way because it means that everyone (private bank, the public) put their sources at disposal of the common good. Italy is moving in this path and it is an important steps ensuring that all stakeholders are able to play their role:venture capital, commercial debt of the banks but also the public.
An European classification shows the infrastructure facilities of each country. Germany is first, France second , England thirteenth and Italy fiftieth . How we can justify this gap?
Italy is really below the European average and this is a serious problem. The reasons are historical resulting from localism that characterized the country’s history. The localism is then poured into legislation that often allows a small local authorities tohave veto power about infrastructures of national interest. This power of veto does not exist in many european countries.
We often associate the word infrastructures with something tangible (highways, railways, bridges). Afterwards we observed the emergence of Internet networks. What are the new infrastructures in the future?
The intangible assets are increasing their importance. The banking group is involved in the digitization services of the Public Administration. It increases the efficience of the service. These infrastructures could be more and more important in the future.
How the BIIS is cooperating with emerging countries such as China, India and Brazil?
The bank is watching with great interest these countries. We have realized a recent mission in Brazil and the group has shares in a Chinese bank. The BIIS has a policy of missions and stakes in emerging countries every year. The bank wish to help the Small Medium Enterprises to internationalize their structure.
There are also recent cases of funds designed to indian export. Though their small and medium-sized some enterprises have the know-how and the expertise to deal with foreign countries.
Are the emerging countries following the same path of growth of the West? Are they proposing new way of growing?
China has developed a huge development in infrastructures but it still lacking in domestic consumption. This fact creates problems of instability in the future considering that China is not a democracy. The India despite being ahead for civil rights , has, however, the caste system and the wealth is concentrated. So it is a stretch to say that they are following our model. Economies are growing strongly but with their particular cases. India is developing the field of technological know-how while Russia is rich in natural resources.
Is the main difference in the government system?
Certainly the government system has a dramatic impact on the method of production and consumption.The average income per capita is still low in countries such as China and India. In this way an imbalances is reflected on the monetary system. China has got a huge financial surplus made by the foreign wealth. They have 2.5 trillion of wealth in dollar currency, is a very delicate situation. I do not think this development model is very stable.
What are the infrastructures in project for the GB?
In Britain BIIS is following the right system for offshore wind energy, along the English Channel. These facilities will be completed by 2011 but there is already a second wave of projects because the UK is focusing much on renewable energy in particular offshore.
These systems improve the production of energy. What else needs to be improved?
The mix of energy sources because the UK has a pretty good mix of energy but the country still depend very much on the gas and its source of energy in the North Sea are running out.Moreover these facilities will not reduce the bill of the consumers because often the announce effect is distorsive. We need to Improve production method ,the independence from other countries and create efficience in the prices.
Soon I am going to interview Angela Knight, Chief Executive of British Bankers’ Association. Would you like to ask her a question?
I would ask her how she considers the division of banks between commercial banks and investment banks.