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'Infrastructure bonds can aid GCC project finance'

Doha Bank's CEO reportedly said regional contractors suffer delayed payments, and the formation of an infrastructure bond market could boost project finance

Qatar and the GCC should develop an infrastructure bond market, Doha Bank's CEO said.
Qatar and the GCC should develop an infrastructure bond market, Doha Bank's CEO said.

The GCC would benefit from the development of an infrastructure bond market to aid its project finance procurement processes, a senior banking official said. 

Speaking at a conference, Dr R Seetharaman, CEO of Doha Bank, added that banks needed a framework to address project-and contract-financing challenges.

He added: “We also need to bring long-term investors such as pension funds and insurance and mutual funds into the GCC project market.

"Project entities can issue bonds during the construction phase, and banks refinance the bonds upon projects getting operational.

"On the whole, Qatar and GCC should develop [an] infrastructure bond market for project finance,” he continued, according to Arabian Business

One of the greatest challenges faced by contractors in the GCC includes release of payments "beyond the agreed time even against consultant certified invoices". 

He reportedly added: “This in turn affects payment to subcontractors and impacts project profitability.

"Reluctance to assign proceeds or give irrevocable assignment letters to financing banks; absent this, banks have no certainty on project cash receipts to appropriate for settlements.”

Dr Seetharaman rued the position of banks in the existing construction payment chain. 

“Banks are partners in the projects.

"[However}, in certain instances, they are the last to know of any concerns and disputes among the owner and contractor.”

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Construction Week - Issue 754
Nov 23, 2019