TABLE OF CONTENTS By the early 1980s, project finance became a clearly identifiable profitable subsector of the banking world s revenue streams. From airport projects and nuclear power projects in Iraq, copper extraction in Brazil, to extracting oil and gas in Cameroon, and basing petrochemical facilities in developing countries with nascent legal codes, banks were lending billions of dollars to finance the extraction of natural resources from developing countries.
Two key factors have fuelled the substantial increase in the use of project financing techniques over the past two decades.
First, the developed economies tremendous demand for cheap energy and mineral resources, and the meeting of such demand by exploiting natural resources in poor countries with weak governments, typically in diverse and remote geographical areas.
Second, the massive transfer of capital, predominantly debt capital, to the poor countries (euphemistically known as emerging markets). An undoubted factor here is that these countries often have only nascent legal systems, which is an incentive to multinational corporations to abandon less profitable economic activities in home countries that are more greatly regulated.
Until the early 1970s, much of the financing of infrastructure development in emerging countries came from government sources, such as the host country government, multilateral institutions and export financing agencies. The shift towards using private sources of capital is the logical result of the ideological agenda underpinning privatization and the rollback of the state on the presumption that it is an impediment to progress and the will of human beings as...
