rowth comes from the ground up, business wisdom tells. Sometimes, that means the ground itself.
From improving transit routes to developing farmland, focusing on a country’s infrastructure needs is one key way to fuel economic growth, both domestically and internationally. Many Kellogg alumni are leading the charge by heading up global infrastructure initiatives around the world, improving on and investing in the canals, telecommunications, roads and other basic components that make a society function.
David Besanko ’82, Alvin J. Huss Professor of Management and Strategy
“I think infrastructure is pervasive. It touches everybody, and even if you use a narrow definition of infrastructure — physical systems and networks that allow modern economies to function — you see it everyday,” says David Besanko ’82, the Alvin J. Huss Professor of Management and Strategy. “Whether it’s roads or water or Internet or the postal system, infrastructure is really fundamental for economic development and sustained economic growth.”
But a project doesn’t start the moment the new power plant generates its first megawatt or even when the first shovel of earth is turned on a new highway. Projects that change nations’ landscapes and lifestyles begin on paper. They start with the referendum where voters have their say. They start with the portfolios where investors and banks finance developments the world over. And they start with the plans where governments reach out to private partners to work for the betterment of all.
Looking to infrastructure improvements as a way to kick-start growth is a trend that continues as these Kellogg grads and their peers help develop new markets and strengthen current ones.
From charity to agribusiness
Ada Osakwe ’11 bridges the gap between public and private sectors in her role as senior investment advisor to the minister of agriculture of Nigeria. While she works for the government, she serves as the liaison for private investors — both domestic and foreign — interested in Nigeria’s long-neglected agricultural sector. The goal, says Osakwe, is to “transform agriculture in Nigeria — to see it as a business that can make money as opposed to something that has been a charity type of project.”
To achieve this goal, the Nigerian government launched the Agricultural Transformation Agenda in May 2011. The public-private focus of the agenda is the first of its kind in Nigeria — one that is already showing signs of success. In the years before the agenda launched, Nigeria had been importing about $11 billion a year in food, including fish, rice, wheat and sugar. By 2012, that number was down to $8 billion. The agenda currently has 30 signed letters of intent from private sector investors totaling more than $4 billion in investments toward Nigeria’s agricultural sector. “Let’s stop shipping jobs abroad,” says Osakwe. “These are things that Nigeria should be producing on our own.”
That $4 billion is already being spent. For example, the U.S. investment firm Blumberg Capital has committed $250 million to development on various infrastructure, such as storage facilities. Dansa Foods, part of the Dangote Group, is investing more than $200 million into the processing of tomatoes, pineapples and other crops into high-value products.
One major focus of the agenda is creating zones for the construction, development and operation of clusters that will process raw agricultural materials into market-ready commodities. These “agro-processing zones” will help create a domino effect of sorts. As zones are developed, they attract more private sector investments, which helps to grow the country’s ability to produce its own food.
Employing the public-private approach is ideal for Nigeria, says Osakwe. Infrastructure development can be fraught with limited funds and resources. Adding an influx of private investors helps combat that problem. In addition, “the private sector allows for efficiency in these projects because they have the know-how and the drive and the motivation of financial return,” she says. “And the government doesn’t have that motivation of financial return.”
And the tab comes to …
John Pollock ’89 serves on the flip side of the infrastructure coin, providing funding for infrastructure projects. As managing director and head of project finance at AIG Asset Management, Pollock manages a $5.5 billion portfolio of 105 projects in 17 countries. He focuses his team’s investments on single-asset, tangible entities that will likely hold value for a very long time, such as airports, toll roads and renewable energy projects. “Google, Netflix — you don’t really know,” Pollock says. “But a hydroelectric power plant or the Copenhagen Airport, you have a pretty good idea that they are going to be around a long time from now.”
John Pollock ’89, Managing Director, AIG Asset Management
In a given year, Pollock’s portfolio can range from a natural gas power plant in Mexico to an offshore wind farm in Belgium. These projects are imperative to developing current markets and creating new ones, Pollock says.
But Pollock would also like to see more of these types of projects in the United States, where he says that the need for investing in infrastructure between now and 2035 exceeds $30 trillion.
“We haven’t been spending enough money on infrastructure, so we’re always trying to catch up,” Pollock says.
Pollock’s team fields more than 70 potential investments each year and ultimately invests in nine to 13 projects. The inquiries — representing a mix of public and private enterprises — come from bankers, developers and current clients, with roughly 90 percent from startups. “What we look for is security that we’re going to get our money back,” he says. This means visiting each asset his team might finance and conducting in-depth audits and interviews to make sure the investment is sound. Pollock’s team checks everything, from whether the site is actually there and what it looks like to how it operates and the quality of the people who run it. And in doing so, he helps continue the efforts to sustain and enhance infrastructure around the world.
A man, a plan, a canal
As inspector general of the Panama Canal Authority, Antonio Dominguez ’88 plays a key role in a massive infrastructure effort — the Panama Canal expansion project. This is the biggest project the authority has undertaken since 1904, when building of the original canal commenced.
The Panama Canal offers ships a shortcut between the Atlantic and Pacific oceans. Its more-than-50-mile route already serves as passage for more than 13,000 vessels each year, a number the expansion project hopes to double. The $5.25 billion project, which Dominguez audits on an ongoing basis, will increase the canal’s capacity by adding a third set of locks.
The eight-year project is vital to expanding Panama’s economy. “It will provide more than double the revenue the country right now receives,” says Dominguez. The Panamanian people clearly understand the benefit of the canal expansion. In 2006, the authority held a referendum to seek public approval for the project. It won with 80 percent of the vote.
A key benefit of the canal is that it is a source of foreign income to the country. The more ships that transit the canal, the more foreign capital floods the Panamanian economy. “Whatever [income] the Panama Canal receives, it’s foreign income — fresh cash,” says Dominguez. This influx of resources not only helps the people of Panama, but also facilitates global growth through more expedient cargo delivery to countless countries.
“And we are going to deliver this expansion project,” says Dominguez. “The canal will deliver.”