Building infrastructure, building an asset class

An exciting proposition

/Insights InfraCoAsia/John_portrait“A mouse’s impact can make the mark of an elephant.”

John Walker, Executive Chairman of Infrastructure, Utilities and Renewables Asia for Macquarie Capital and Chairman of Macquarie Group, Korea, stepped into his new role with InfraCo Asia because, he says, the big-picture potential of this relatively young company, is panoramic. John was appointed Chair of InfraCo Asia in January 2016, excited to work with an organisation, he says, whose work is blazing a unique trail.

“When I first came across the work of InfraCo Asia and began to understand what it seeks to do, I realised the significance of the gap it fills straight away.”

InfraCo Asia is a facility of the Private Infrastructure Development Group, and currently receives funding from Australia’s Department of Foreign Affairs and Trade (DFAT), Switzerland’s State Secretariat for Economic Affairs (SECO), and the UK’s Department for International Development (UKAid).

“It targets projects that are at stages of development too risky for the private sector to take a bet on, and provides that bridge to enable commercial viability,” John says.

The investment banker was immediately struck by the ways in which InfraCo Asia’s approach is distinct from that of other development lenders, such as the International Finance Corporation or the Asian Development Bank.

“InfraCo Asia complements many institutions. It is there on the ground actually planning, structuring and building projects. It utilises a fruitful partnership model, but at the end of the day, responsibility lies with InfraCo. It is taking control of the project and making it happen, so it’s very tangible.”

Leadership capital

As he settles into his new leadership role with InfraCo Asia, John remarks that it is the organisation itself that is playing one of the most important leadership roles.

“I just love this idea of ‘leadership capital’,” he says.

“At the highest level, InfraCo Asia’s role is providing leadership for private, institutional and strategic investors to come into markets that they may not understand; that they quite justifiably have risk aversion to.”

A seasoned and candid businessman, John acknowledges that the world of infrastructure can be a dry one – “it is not exciting to talk about sewerage plants and roads.”

At the same time, it is important to see the entire scope of the framework required to support vital infrastructure projects in developing Asia.

“I see InfraCo Asia playing a pivotal role in the creation of private infrastructure industries. And that ultimately impacts capital markets,” John says.

Since becoming operational in 2010, InfraCo has successfully established and developed projects while mitigating complex risks unpalatable to private capital.

“From wind farms in Pakistan, to a significant hydro project in Vietnam, this is real, and a few more successes like these will capture people’s imaginations,” John says.

“This will begin to bring that wall of private sector money out there closer to the opportunities. It will not just produce the opportunities, but provide a number of case studies for the larger investment institutions to appraise and act on.”

Public meets private

There’s a passion to the words John Walker chooses when speaking about the work of InfraCo Asia, and he attributes this expressiveness to his experience as a singer-songwriter. People are often surprised when they learn that an infrastructure banker in Asia has recorded two country-rock albums, but when he is in Australia, he is happiest on his farm, near Armidale in New South Wales.

It also seems to be the diversity of John’s path that has led him to a dynamic leadership role in his career. Originally a student of politics, John spent 25 years working in the Australian public service, where heading up a state infrastructure department saw him learning from the frontier wave of privatisation. He believes life prepared him from a very early age to be working in business, amid the complex background of emerging markets.

“At 18 months of age I was picked up and taken to US while my father did his PhD. Up until the age of 18, the pattern of life was moving back and forward between Australia and the US, where we lived in inner-city dormitories. We were mixing with people from all over the world.

“I was ultimately shaped to work in the field I do, because I’m comfortable in many different cultures,” John says.

He is also comfortable riding the boundaries between public and private sector needs, and modes of operating.

“It was really my government career that saw me end up in investment banking, because of that close relationship between government policy and finance,” John explains.

“I started to understand that there were potentials for commercial involvement in areas that had been traditionally financed by taxpayers.

“I learned that often deals aren’t about finance,” he adds, “they’re about management, they’re about operations and they’re about involving all stakeholders.”

Building up a market

John first entered investment banking as Head of Government Business for Banker’s Trust. He joined Macquarie in 1998, and two years later the bank called on John’s experience in facilitating public-private collaboration and sent him to Korea.

“People forget that back in 2000, a lot of people still thought of Korea as a developing country,” John says.

The Korean government had established a central Public Private Partnerships group called PICKO, which was tasked with coordinating various arms of government. The challenge was to design projects, take them to the private sector and coordinate the process of bidding and negotiating concessions agreements.

“The government had grand plans,” John says, “but at end of day they really desperately needed private finance. We spent the first year in advisory roles with construction companies and others that wanted to bid for these projects.”

Most importantly, John and his team invested considerable time with government officials, running seminars and helping them with the process of framing regulations and operating procedures.

“The other thing that we did was to cultivate relationships with the pension funds, insurance companies and banks in Korea, and begin the process of educating them about infrastructure as an asset class,” John says.

This process was the catalyst for a lucrative boom in infrastructure development in Korea, and John says InfraCo Asia is also playing a potentially catalytic role within its own market environment.

“It’s about stimulating all of the different players—the banks, institutions, construction companies, regulators, policy makers—and providing them with a framework that can lead to huge amounts of capital coming into infrastructure.”

Economic and social benefits

Through InfraCo Asia, John is able to be involved in direct action that stimulates and supports the many dreams and ideas for infrastructure development that exist in South and South East Asia. In areas where the way must be smoothed for private investment, InfraCo Asia is equipped to act.

“I once heard someone say, ‘the ultimate social justice is someone being able to get a job’,” John says.

“One of the big things infrastructure does is create jobs in our projects. In Korea, Macquarie estimated we created 44,000 construction jobs through our projects.

“The immediate impact of a project in developing Asia is to get people into jobs in isolated areas. The bigger picture is that when more and more people begin to put capital into projects, we’re creating a new industry. We’re creating a private infrastructure industry, which can create literally thousands upon thousands of jobs,” John explains.

“These jobs will be not just in construction, they’ll be in asset management companies where people are managing investments that they’re making into these projects.”

John returns to the big picture when he reflects on the real potential of closing the infrastructure gap around the world.

“Simply being able to use your telephone and your internet 24 hours a day means that your children can have an education and connect to rest of world. Many of those communities in emerging Asia are young – they are young people with big futures ahead of them. If they have access to all of the social and economic infrastructure their counterparts in other countries have, then in some ways they’re not just the future of Asia, they’re the future of the world.”

So is it too ambitious to see InfraCo Asia playing a pivotal role in unlocking this future?

“I think InfraCo Asia has fantastic potential. In a way, it could become a small doorway into significant infrastructure capital flowing into the region. You open the door and the capital starts to come through, and private investors realise that they can buy de-risked assets that have been professionally developed. It’s a very exciting prospect.”

John’s new album ‘Rain Dreaming’ www.raindreaming.com is available to purchase via iTunes. All proceeds from the sale of the album or individual tracks are directed to humanitarian causes around the world. An album launch is set for 25 March this year in Tokyo, and he will be combining a launch in Manila with a large PPP conference on 1 April. In January 2017, John will perform at the iconic Australian Tamworth Country Music Festival.