Friday, October 23, 2009

Real Money

Vlad Filat received confirmation from the Chinese that they intend to make good on their promise of an investment of $1bn in Moldova's infrastructure (full story here).

It's a match made in heaven - Moldova desperately needs to repair its crumbling transport networks and build a modern energy sector, while on the other hand the Chinese desperately need to diversify out of USD-denominated paper and into real assets that will hold their value.

The Chinese will, of course, expect a return on their investment, and the cost of the infrastructure built will ultimately be borne by Moldovan end-users in the form of road tolls or power bills.  That, however, is the way capitalism works and we just need to get used to it.

What is important is that the money is spent efficiently and not siphoned off into private bank accounts, as so often happens in the Eastern European construction business.  Spending will need to be audited, reviewed and audited again.  Tenders will need to be completely transparent.

The really good news in these troubled times is that the Chinese are one of very few nations that have the money to back their promises.  This isn't a political credit which vapourises at the first whiff of trouble.  It's real money, and all going well will be transformed into assets that will benefit the Moldovan economy for years to come.

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