The Best Project Financing Option

for Infrastructure Projects in Developing Nations



By Sisira Lohawiboonkij

Thailand and France



Around the world, infrastructure investment gaps have been a significant problem, and even more severe in developing nations where the needs for more infrastructure facilities are particularly massive. Thus, to address the investment gaps, this paper revolves around infrastructure financing options in the developing world, using a Multi-Attribute Decision Making (MADM) analysis to analyze various financing mechanisms used in infrastructure projects and rank them according to selected criteria and their relative importance. Subsequently, the non-dimensional data technique is applied to, finally, determine the best financing option for infrastructure projects in developing economies. The findings of the paper reveal that project finance is the most preferred financing alternative for infrastructure projects mainly due to its risk allocation feature.

Keywords: Project financing, project funding, infrastructure projects, construction, developing nations, public-private partnerships, infrastructure finance



Infrastructure is, undeniably, a highly important element for the development of a nation. The quality and number of accumulated infrastructure facilities differentiate developed from developing countries regarding economic performance and growth, living standard, and social development. Investment in infrastructure has always been the center of policy discussions for the governments across the globe to keep pace with economic and demographic growth. In 2015, the world spent $9.5 trillion—14 percent of global GDP—on infrastructure.

As the needs for infrastructure facilities are rising continuously across the globe while governments’ budgets are limited, investment gaps have become a serious issue, particularly in developing countries where the infrastructure needs and deficits are particularly huge. By 2035, the global investment need has been estimated to reach $69.4 trillion, 63 percent of which will be in emerging economies, due to an improved GDP growth outlook and some technical improvements. Despite a recent increase in investment in economic infrastructure, the gaps remain.[1] Governments and organizations are working to fill in the gaps by searching for alternative funding sources to make sure infrastructure projects are realized.

Every project needs money to start with. As capital-intensive as an infrastructure project is, financing is the essence of the project success; a gap in funding poses a significant obstacle to the execution and the delivery of the infrastructure project. Therefore, it is highly essential that the project has enough funding at disposal at the right time to perform project activities that mark the way to the completion and success of the project. Accordingly, in project management view, choosing the proper financing mechanism helps ensure the sound execution and success of an infrastructure project.

The slow development of infrastructure facilities in developing nations stems from many factors, from political, economic, financial, to environmental causes.[2] One main reason is the fact that the local governments have limited budget or do not have the incentive to invest in the public infrastructure. The latter can, in turn, be linked to corruption problems in the developing countries.[3] Another critical factor that slows the infrastructure development in the developing world is the limited alternative financing sources, given current constraints on traditional sources of public and private financing.[4] In construction projects, the EPC (engineering, procurement, and construction) phase is often risky. Banks have become more careful when making a loan decision, and their lending capacity has grown limited since the Great Financial Crisis in 2008.[5] The riskier the project is, the higher the debt financing cost.

Consequently, debt financing is not an ideal option for poor governments. Finally, the lack of technical expertise and managerial competency in managing infrastructure projects also impede the infrastructure development in the emerging economies. These factors combine to give rise to the need for an innovative financing mechanism that serves to address these causes of the problem the tradition government budget financing has failed to solve.


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How to cite this paper: Lohawiboonkij, S. (2019). The Best Project Financing Option for Infrastructure Projects in Developing Nations, PM World Journal, Vol. VIII, Issue I (January). Available online at https://pmworldjournal.net/wp-content/uploads/2019/01/pmwj78-Jan2019-Lohawiboonkij-best-project-financing-options-for-infrastructure.pdf

Editor’s note: This paper was prepared for the course “International Contract Management” facilitated by Dr Paul D. Giammalvo of PT Mitratata Citragraha, Jakarta, Indonesia as an Adjunct Professor under contract to SKEMA Business School for the program Master of Science in Project and Programme Management and Business Development.  http://www.skema.edu/programmes/masters-of-science. For more information on this global program (Lille and Paris in France; Belo Horizonte in Brazil), contact Dr Paul Gardiner, Global Programme Director, at [email protected].


About the Author

Sisira Lohawiboonkij

Thailand and Paris, France




Sisira Lohawiboonkij is from Thailand and currently an MSc student in Project, Program & Portfolio Management and Business Development at SKEMA Business School in Paris, where she had a Contract Management course under the tutorage of Dr. Paul D. Giammalvo, an active member of Guild of Project Controls. She has a Bachelor’s Degree in Business Administration and Finance from Ludwig Maximilian University in Munich, Germany where she, after graduation, worked in Finance at Deutsche Bank as a Financial Analyst. Afterward, she embarked on another career path in Education Technology at Klett Group in Stuttgart where she worked on a school administration software project until 2018 before moving to Paris to pursue a Master’s Degree in Project Management. She is also an active member of PMI® and The Guild of Project Controls.

Sisira has recently attained various Project Management-related certifications, such as CAPM, Lean Six Sigma, AgilePM, PRINCE2, and IPMA Project Excellence certifications. She is currently based in Paris, France and can be contacted at [email protected]


[1] Woetzel, J., Garemo, N., Mischke, J., Kamra, P., & Palter, R. (2017, October). McKinsey Global Institute Bridging Infrastructure Gaps – Has the world made progress? Discussion Paper in Collaboration with McKinsey’s Capital Projects and Infrastructure Practice. Retrieved from https://www.mckinsey.com/~/media/mckinsey/industries/capital%20projects%20and%20infrastructure/our%20insights/bridging%20infrastructure%20gaps%20has%20the%20world%20made%20progress/bridging%20infrastructure%20gaps%20how%20has%20the%20world%20made%20progress%20v2/mgi-bridging-infrastructure-gaps-discussion-paper.ashx

[2] Root cause analysis by author (Figure 1)

[3] Hausmann, R. (2018, April 30). The PPP Concerto. Project Syndicate The World’s Opinion Page. Retrieved from https://www.project-syndicate.org/commentary/improving-public-private-partnerships-infrastructure-by-ricardo-hausmann-2018-04  

[4] Inderst, G., & Stewart, F. (2014, March). Institutional Investment in Infrastructure in Emerging Markets and Developing Economies. Public-Private Infrastructure Advisory Facility (PPIAF), 4. Retrieved from http://documents.worldbank.org/curated/en/748551468337163636/pdf/913070BR0SecM20itutional0investment.pdf

[5] Posener, M. (2013, April). Funding options Alternative Financing for Infrastructure Development April 2013. Deloitte, 2. Retrieved from https://www2.deloitte.com/content/dam/Deloitte/au/Documents/public-sector/deloitte-au-ps-funding-options-alternative-financing-infrastructure-development-170914.pdf