The International Finance Corporation’s (IFC) infrastructure and natural resources manager, Wiebke Schloemer, and chief counsel, Jean-Paul Hupez, talk to Hill Choi Lee about the importance and legal framework of infrastructure projects in Asia’s emerging markets
Can you tell us about the work you do at IFC and what trends you have observed in recent times?
Wiebke Schloemer: When I was in Washington, I did a lot of work in Africa at the time. The way we are organised at IFC – while my geographical focus now is East Asia – is being part of the overall, global infrastructure management team. As members of the team, we come together and discuss trends that we are seeing in relation to industries and across different continents. This is extremely helpful as one of those that we are observing here in Asia are strong infrastructure companies from this region being the Korean and some of Chinese companies. There are some Singaporean and Malaysian companies too who aren’t only investing in the region itself but who are also looking to expand their footprint elsewhere outside of Asia for infrastructure related projects. At IFC we work with our clients globally and always in emerging markets which is our expertise.
Jean-Paul Hupez: I worked in New York, Brussels, Washington, New Delhi and Istanbul before relocating to Hong Kong. IFC now has a much larger legal presence in Asia. Our legal team in Asia has about 20 legal professionals. We have teams in Hong Kong, Beijing, Bangkok, New Delhi and Mumbai. IFC also has secondments of local firms in places such as China and India. Asia is a fast-growing part of the world in the middle of a major transition. In the last few years IFC has invested in many renewable energy projects. We are doing more projects with companies from emerging markets either in their own country in Asia as well as in other regions. You have to adapt the way you do business depending on the country and also the type of investors you are dealing with.
Having mentioned India, how have recent developments in the market affected investors’ view on the country?
Hupez: India is the largest country in the IFC portfolio, with some of the largest infrastructure projects. A number of issues have indeed affected the Indian economy. As far as legal issues, India is an extremely regulated environment. Changes are always incremental. It is difficult to assess whether small changes have any significant impact on the sentiment of investors.
There are two schools of thought concerning setting up energy projects in India from a legal perspective. Some say it’s easy, others say there are too many hurdles to overcome. Which one is correct?
Hupez: Both versions are probably accurate to some degree. What you have in India for energy projects, and true for most types of investment in the country, are a lot of steps, approvals and processes. There are many rules that need to be followed. You can look at it as either incredibly complicated, difficult and time-consuming or you can look at it as a well-regulated and systematic process. The system is actually more or less settled, which is in contrast to other legal environments in Asia where you have fewer details and less certainty.
India is one of the jurisdictions in APAC that does not allow international firms to set up an office locally. How does IFC go about choosing a domestic counsel?
Hupez: We have an international panel of law firms in the Asia-Pacific. It was established after extensive search amongst international firms, and we review them every few years. We also have a panel of local firms for several jurisdictions. In India we have established long-term relationships with a number of Indian law firms. We use mostly only Indian firms for projects in India. For every project – especially in the energy sector – we have in-house counsel, and we also appoint external counsel from the panel firms as well as local counsel in the jurisdiction. As a public institution, we tend to use a competitive process for all our projects, where we ask at least three panel firms for proposals.
Which country within the Asia-Pacific has shown very interesting activities lately?
Schloemer: Since I’m focused on East Asia, one that jumps out to me is the opening up of Myanmar. There is a bit of hype now with this country. It’s still somewhat early, but it is also great that there is so much interest. Clearly there is a great need to develop infrastructure in Myanmar. Just to give you a few numbers, in the power sector the electricity access rate is now between 25-30%. Basically, 70% of the population does not have access to electricity. Likewise in the telecommunication space, only 5-10% of the people have access to communication. While you know in the rest of Asia, it’s nearly 100% or higher. There is where we see a huge demand for infrastructure services, and with our colleagues at the World Bank Group, we are very much focusing on sector reform including the private sector. My hypothesis is that in another three years or so, private sector infrastructure in Myanmar in financing will very likely kick off. There is now a lot of preparatory work that we are doing.
Mid-last year, Myanmar has awarded 2 telecom licenses, which were the results of an international competitive tender process. We followed it very closely and the two companies that have been awarded the licenses are Ooredoo out of Qatar and the Telenor Group of Norway. They are longstanding clients of IFC and we are working with them in other countries in other regions. We are actually in discussion with both of them. But I think it is very important for the overall infrastructure space in Myanmar to see what a best practice bidding process needs to be followed through to obtain these licenses. We took this as a very positive sign from the government in establishing best practices in awarding infrastructure concessions.
A legal framework for foreign investment in Myanmar?
Schloemer: Whenever we see a new market open up, we look at what’s in place in terms of legal framework and regulatory framework which will enable any private sector participation. At this point, Myanmar is starting to take the right step. The legal framework has made progress. They have casted the foreign investment law which gave some legal framework for foreign investment in the country. By sector, there was a telecommunication law drafted. The legal structure for the telecom sector has a key cornerstone already. Regulatory framework is not yet fully in place. It will take a bit more time to set up with the independent regulators. The country has taken the right step. In the power sector, there is also an electricity law being discussed.
Where do investors start when the legal framework for foreign investment in Myanmar is still being shaped? And what are the general concerns?
Hupez: It is a little bit of a catch-22 situation. You need successful projects in the first place to attract investors. But it’s difficult to have successful investment unless you have a legal framework in place. You also have different types of investors with different appetites for risk. We are at the same time looking at the framework to create the best possible environment in collaboration with our colleagues from other parts of the World Bank Group; as well as looking at what kind of projects could be done in the existing environment.
Which other country in the Asia-Pacific should not be overlooked when it comes to projects work?
Hupez: We are trying to be very active in Nepal. It has enormous potential. Nepal is the type of post conflict-fragile state IFC is eager to work in and the projects are by no means easy.
Manager, infrastructure and natural resource, East Asia & Pacific region
International Finance Corporation
About the author
Wiebke currently manages IFC’s infrastructure and natural resources business in the East Asia and Pacific region with annual investments of around US$500 million. She has over 15 years of experience in project/corporate finance and private equity in emerging markets infrastructure. Joining IFC in 2004 in the telecoms, media and technology (TMT) group in Washington, DC, she moved to Istanbul in 2009, to lead IFC’s TMT business in Eastern Europe and MENA. In 2011, she relocated to Hong Kong to assume her current responsibility.
Prior to IFC, Wiebke was with the European Investment Bank in Luxemburg, and DEG, the German Investment Corporation, working on infrastructure debt and equity transactions in Africa, Asia and Eastern Europe. Wiebke has a Master degree in Economics and Finance from the University of Goettingen in Germany and holds a Postgraduate degree in Development Policy from the German Development Institute.
Chief counsel, Asia regional head, legal department
International Finance Corporation
About the author
Jean-Paul is manager legal Asia. He leads IFC’s Asia legal team based in the Hong Kong, Beijing, Bangkok, New Delhi and Mumbai offices. Prior to be being posted in Hong Kong, Jean-Paul was posted in the Istanbul office (2003-2006) and in the New Delhi office (1998-2002). He joined IFC’s legal department in Washington DC in 1993. He has more than 25 years of experience with project finance transactions in the US, Europe and emerging markets, having practiced with Stibbe & Simont in Brussels and Simpson Thacher & Bartlett in New York before joining IFC.
Jean-Paul received his JD (Licence en droit) from the University of Liege Law School in 1986 and his LLM from Duke University Law School in 1989. He was admitted to the Brussels and New York Bar.