Islamic Development Bank unveils success of initial Infrastructure Development Fund
Islamabad: The Islamic Development Bank (IDB), the Muslim world’s premier multilateral financial institution, has unveiled an ambitious range of private funding initiatives to address developmental challenges among Member countries.
Speaking during a press conference at the 2nd World Islamic Economic Forum in Islamabad, Pakistan, IDB’s President, His Excellency Dr Ahmed Mohamed Ali, also announced the latest results from the bank’s pioneering US$730 million IDB Infrastructure Fund, established in 2001, and managed by Emerging Markets Partnership (Bahrain) B.S.C. (c).
The Fund – the first private investment vehicle of its kind in the Muslim world – has now been fully committed to infrastructure and related projects in Member countries, with investments ranging between US$10 million and US$150 million in 11 private sector companies in seven nations.
At the same time, the IDB Infrastructure Fund has returned more than US$420 million in cash to its investors - The Kingdom of Saudi Arabia represented by the Public Pension Agency, The Government of His Majesty the Sultan and Yang Di-Pertuan of Brunei Darussalam, the Kingdom of Bahrain, Dar Al-Maal Al-Islami Trust and a Malaysian Consortium led by Lembaga Tabung Haji.
Of the US$730 million in equity capital, some US$144 million – around 20 per cent of the total – has been committed to various entities in Pakistan.
The Fund’s energy infrastructure investment in Pakistan was through AES Oasis, the majority owner and operator of AES Lal Pir and AES Pak Gen. Each of these projects generates an additional 365 MW towards the country’s power requirements.
“This makes Pakistan the largest single investment destination for the Fund, and underscores IDB’s and the Fund’s confidence in the country’s commitment to continuing economic reform,” Dr Ali said.
“I want to congratulate His Excellency the President, General Pervez Musharraf; His Excellency the Prime Minister, Shaukat Aziz, the Government and the People of the Islamic Republic of Pakistan on the country’s excellent economic performance,” Dr Ali added.
The Fund was designed to be invested in commercially-viable infrastructure projects, in order to attract private equity. Moreover, it was designed to invest primarily for long-term capital appreciation, through making equity and equity-related investments.
In completing its portfolio selection, the Fund has made significant investments in the power and water, petrochemical and transportation sectors. It has also diversified into telecommunications, natural resources, and other infrastructure-related industries.
“As Principal Sponsor of the Fund, together with the other investors and with the General Partner and Manager, EMP (Bahrain), the Islamic Development Bank is proud to have acted as a catalyst in developing private equity investment in infrastructure in the Muslim world,” Dr Ali said.
He added that the IDB remains committed to achieving progress in Member countries, in terms of socio-economic advancement, through the use of similar funds.
“There is clearly a pressing need for similar initiatives to support the industries that contribute to the success of a country’s infrastructure. The estimated cost of remedying the infrastructural deficiencies across the 56 Member countries of the IDB is about US$ 800 billion.”
“The Fund has demonstrated that the private equity investment in infrastructure, which has been so effective in North America, Europe and Australasia can work in the Islamic world too.”
Dr Ali disclosed that the Islamic Development Bank is reviewing its ongoing contribution towards private sector infrastructure in the Muslim world, particularly following the mandate given to the IDB at the Organization for Islamic Countries Summit held in Makkah Al – Mukkarama, Kingdom of Saudi Arabia, in 2005 to take a leading role in sponsoring large-scale infrastructure development among Member countries.
“I am delighted and honoured to announce that the first example of us taking such a leading role would be our Principal Sponsorship of an Indonesian Infrastructure Fund, with a target capital of US$1 billion.
“We are pleased to be facilitating international investors’ attention on the country with the largest Muslim population, a country endowed with excellent human and natural resources” said Dr. Ali.
At the beginning of 2005, the Republic of Indonesia launched a US$145 billion investment programme for infrastructure projects, so making it the cornerstone of the country’s efforts to accelerate GDP growth from 5 per cent in 2004 to 7.6 per cent in 2009. Of the $145 billion sought, some US$90 billion has been targeted from private sector investors.
Indonesia currently offers an attractive investment environment with the economy poised to grow strongly, and the present government is committed to the fast track execution of priority infrastructure projects.
The country also provides investors with an abundant natural resource base coupled with affordable, trained, manpower.
“We hope that this new fund will potentially serve to be an effective vehicle in promoting more foreign direct investment into Indonesia, now that it is firmly on the road to further economic development,” Dr Ali said.
It is anticipated that the Indonesia Infrastructure Fund would proactively participate in the privatization of state-owned enterprises and divestment of residual government ownership in other companies.
This Fund – the first of its type in the country - will be professionally managed by Emerging Markets Partnership with a team based in Indonesia.
At the same time, the Bank is evaluating whether to launch a second multi-country infrastructure fund, similar to the highly successful IDB Infrastructure Fund, but having wider scope and larger equity, Dr Ali said.
About Islamic Development Bank
Islamic Development Bank (IDB) is the Principal Sponsor and Founder of the IDB Infrastructure Fund. IDB is an international financial institution established in pursuance of the Declaration of Intent issued by the Conference of Finance Ministers of Muslim Countries held in Jeddah in Dhul Q'adah 1393H, corresponding to December 1973. The purpose of the Bank is to foster economic development and social progress in its 56 Member Countries and in Muslim communities in non-Member Countries in accordance with the principles of the Shari’ah (Islamic Law). The subscribed capital of IDB is about US$22.0 billion.
The Bank’s principal office is in Jeddah, the Kingdom of Saudi Arabia, with regional offices in: Rabat, Morocco; Kuala Lumpur, Malaysia; and Almaty, Kazakhstan. The Bank also has field representatives in eleven member countries. These are: Indonesia, Iran, Kazakhstan, Libya, Pakistan, Senegal, Sudan, Gambia, Guinea Bissau, Mauritania and Algeria.
About Emerging Markets Partnership (Bahrain) B.S.C. (c)
Emerging Markets Partnership (Bahrain), the General Partner and Manager of the IDB Infrastructure Fund, is a subsidiary of EMP Global. Including the IDB Fund, EMP Global is the principal adviser to over US$6.9 billion of private infrastructure funds, covering all regions of the world. Formed in Washington D.C. in 1992, EMP Global has offices in London, Hong Kong, Bahrain, Johannesburg and Brunei Darussalam.