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Tackling the vital challenge of financing the world’s water infrastructure needs

Guangzhe CHEN's picture
President of Hungary János Áder (left), President of Mauritius Ameenah Gurib-Fakim (middle) and Guangzhe CHEN, Senior Director for World Bank Water Global Practice (left) hosting a press conference at the Budapest Water Summit 2016.

We cannot talk about water and Sustainable Development Goal (SDG) 6 without also looking at everything that depends on it: from climate, food and electricity to families, farms and ecosystems. It is thus quite simple, if we don’t get it right on water, then we will not succeed in achieving the other SDGs either.

Water and climate change are also intertwined, with some regions at risk of losing up to 6 percent of GDP by 2050 if the growing challenge of water scarcity is not properly addressed.

So
what is standing in between humanity and the SDGs related to water? 

One of the biggest hurdles is the lack of sufficient sources of finance. Financing the SDG sub-targets for water supply and sanitation alone will cost triple historic financing levels - an estimated $114 billion per year between now and 2030. The shortfall for financing irrigation and water resource management sub-targets will likely be as large, if not larger.

Small public-private partnerships: inevitable and essential

Aijaz Ahmad's picture
Local governments are under pressure to provide more and better services. But in most cases, they cannot do this alone. An examination of the World Bank Group’s PPI database and the PPP databases of some key countries reveals that while there is a preponderance of larger public-private partnerships (PPPs), several small-scale PPPs with promising results have also been undertaken, especially at sub-national levels of government and by autonomous bodies affiliated with governments.

The PPI database suggests that approximately 40 percent of all projects are valued at less than $50 million, and approximately 25 percent of all projects are less than $25 million (Figure below). However, the database misses out on projects in several emerging sectors at the sub-national level. While non-traditional sectors are captured in country and sub-national databases, few of these databases are readily available in the public domain.
Source: Ahmad, A. and Shukla, S., A Preliminary Review of Trends in Small-Scale Public-Private Partnerships, World Bank Group 2014.

Access to finance is biggest challenge for firms in Namibia

Joshua Wimpey's picture

The private sector continues to be a critical driver of job creation and economic growth. However, several factors can undermine the private sector and, if left unaddressed, may impede development.  Through extensive face-to-face interviews with managers and owners of firms, the World Bank Group's Enterprise Surveys benchmark the business environment based on actual experiences of firms. A series of blogs, starting today, share the findings from recently analyzed surveys conducted in several countries.

The Namibia Enterprise Surveys consisted of 580 interviews with firms across three regions and three business sectors – manufacturing, retail, and other services. So what are some key highlights from the surveys?

Exports take on average 8 days to clear through customs but varies according to firm size
In 2013, it took a firm in Namibia about eight days to clear exports through customs, which is considerably more than the two days it took in 2006. Despite this increase, the average time to clear direct exports through customs is still about the same as in the upper middle income countries (8 days) and lower than the Sub-Saharan Africa regional average (10 days). Moreover, there is a wide variation across firm size. For a small firm, it takes about 17 days on average to clear exports through customs, compared to around six days for medium-sized firms and about two days for large firms.

Clearing imports, in contrast, through customs is considerably faster in Namibia (five days) than the average for upper middle income countries (11 days) and Sub-Saharan Africa average (17 days).


 

Financial viability support: global efforts to create commercially viable PPPs

Kalpana Seethepalli's picture
Credit: Paul Carmona 

The story of infrastructure financing revolves around varying infrastructure needs—from basic to complex, interconnected infrastructure. And as this narrative develops, it’s becoming clear that by 2030, the additional infrastructure financing required to keep up with projected global GDP growth is an estimated $57 trillion.

Because public finances are overstretched, governments must consider alternative financing models to leverage private capital into infrastructure, along with strategic use of International Financial Institutions (IFI) financing to crowd in private investments. At the same time, developments in global financial markets are fundamentally reshaping how capital is transmitted and invested around the world, including in infrastructure. A key element of attracting private sector debt and equity into infrastructure is to make the underlying transactions commercially viable through clear, transparent Financial Viability Support (FVS) mechanisms.
 
During the past few years, our Singapore-based team has spent significant time exploring the way that FVS mechanisms can make a difference in PPPs around the world. In the new issue of Partnerships IQ, we discuss in great detail how FVS is being implemented across the globe, and its potential for even greater impact. Here, we’d like to discuss FVS a little more broadly, introducing our ideas for how and where it might operate most efficiently.

10 reasons to watch Africa in 2016

Caroline Kende-Robb's picture

In 2016, the world faces uncertainty and volatility – as well as huge opportunities for significant progress. Africa stands not just to gain from these major shifts, but also to lead some of them.
 
The global landscape is certainly challenging, with the political and economic news dominated by slowing growth, rocky stock markets, falling commodity prices, risks in emerging markets (especially China), increasing numbers of refugees, geopolitical tensions and the threat of violent extremism. 

Indonesian Public-Private Partnerships now speak with one voice

Sinthya Roesly's picture
City and traffic lights at sunset in Jakarta, Indonesia

Translation of PPP Reference Guide into Bahasa Indonesia strongly supports national PPP delivery efforts

Indonesia’s strategy to become one of the 10 major world economies by 2025 – part of a long-term program outlined in its Masterplan for Acceleration and Expansion of Indonesia's Economic Development (MP3EI) – relies heavily on how quickly it can build new infrastructure to support its rapid growth. This entails cooperation among the central government, local governments, state owned enterprises, and the private sector. Of the four parties, according to experts on the ground, “the private sector has a vital role to play in this masterplan (in the form of PPP schemes), as it is expected to contribute the bulk of financing.”

Innovative Finance in the Water and Sanitation Sector

Joel Kolker's picture

The World Bank at World Water Week 2015

As the global focus shifts to the Sustainable Development Goals (SDGs), and achieving universal access to water and sanitation, there will clearly be a need to mobilize private capital to help finance the necessary infrastructure. The Global Water Practice at the World Bank has been working with key public and private sector partners in over ten countries to mobilize domestic credit and address operating inefficiencies which negatively impact on the delivery of water and sanitation. To scale up (“billions to trillions”) it will be necessary to consider the incentives needed to attract and sustain such capital flows.

Going, going, gone – timeline of an innovative auction that aims to reduce methane emissions

Scott Cantor's picture
Pilot Auction Facility for Methane and Climate Change Mitigation (PAF)








Private investors bought price guarantees for 8.7 million tons of methane emission reduction in an innovative auction, attracting bidders from across the globe.
 
The Pilot Auction Facility for Methane and Climate Change Mitigation (PAF) provides support to businesses that invest in climate friendly projects.  The first pilot auction was held online on July 15, 2015, auctioning off price guarantees, or put options, targeting methane reducing projects. 
 
By providing a floor price for captured methane, the PAF offers private investors a financial incentive to fund carbon capture. Using an auction maximizes the impact of public funds dedicated to slowing climate change.
 
Here’s my journal entry from the day – July 15 – auction day (at last!)

Weekly wire: The global forum

Roxanne Bauer's picture
World of NewsThese are some of the views and reports relevant to our readers that caught our attention this week.
 

Drones for Development
Project Syndicate
Unmanned aerial vehicles have populated both the imagination and nightmares of people around the world in recent years. In April, the United States Navy announced an experimental program called LOCUST (Low-Cost UAV Swarming Technology), which officials promise will “autonomously overwhelm an adversary” and thus “provide Sailors and Marines a decisive tactical advantage.” With a name and a mission like that – and given the spotty ethical track record of drone warfare – it is little wonder that many are queasy about the continued proliferation of flying robots. But the industrial use of the lower sky is here to stay. More than three million humans are in the air daily. Every large human settlement on our planet is connected to another by air transport.

Confronting the Crisis of Global Governance
Commission on Global Security, Justice & Governance
Today’s global challenges, from mass violence in fragile states and runaway climate change to fears of devastating cross-border economic shocks and cyber attacks, require new kinds of tools, networks, and institutions if they are to be effectively managed. Climate change, economic shocks, and cyber attacks are likely to have lasting and far-reaching consequences, and the marked and visible increase in mass atrocities in one country after another has reversed the trend of declining political violence that began with the end of the Cold War.  Dealing with each of these issues calls for policies and actions beyond the writ or capabilities of any state and threatens to escape the grasp of present international institutions.

From Ronaldo and Buffon to teamwork: what finance ministries can learn from the beautiful game

Mario Marcel's picture
South Africa is steadily preparing for the 2010 Soccer World Cup while the enthusiasm at ground level builds. Photo: © John Hogg/World Bank

If you were a football (soccer) player, who would you be? Representatives of Ministries of Finance from 20 African countries were confronted with this question at a CABRI-sponsored conference in Johannesburg last April.


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