India is the fastest-growing major economy in the world with significant Government investments in infrastructure. According to estimates by WTO and OECD, as quoted in a report from the United Nations Office on Drugs and Crime, India: Probity in Public Procurement, the estimated public procurement in India is between 20 and 30 percent of GDP.
This translates to Indian government agencies issuing contracts worth an estimated US$ 419 billion to US$ 628 billion each year for various aspects of infrastructure projects. Ideally, in contractual agreements no disputes would arise and both sides would benefit from the outcome. However, unexpected events occur and many contracts end in dispute. Contractual legal disputes devoid project benefits to the public as time and resources are spent in expensive arbitration and litigation. As a result, India’s development goals are impacted.
Urgent action is needed to mobilize, redirect and unlock trillions of dollars of private resources to ensure global growth and shared prosperity.
Since 1956, the International Finance Corporation (IFC), the World Bank Group’s member focused exclusively on the private sector, leveraged $2.5 billion in paid-in capital from its shareholders to invest over a trillion dollars for private sector development. IFC’s 60 years of experience has demonstrated the private sector’s ability to create innovative, commercially viable solutions that deliver development impact.
“A year ago, we all signed up to the Sustainable Development Goals. The only way to achieve these goals is if private capital funds them and private business implements them,” said Gavin Wilson, CEO of IFC’s Asset Management Company (AMC) during the World Bank Group/IMF Annual Meetings 2016.
“That’s why we came up with the phrase ‘Billions to Trillions’ last year with our multilateral institutions in the run-up to the Addis conference on financing for development,” he added.
But what does “Billions to Trillions” actually mean? Wilson explained that “we must convert billions of official assistance … to the trillions in total financing.” But he raised a very important question:
Last month, a new wind farm began spinning its blades in Jamaica. At 36 megawatts (MW) it became Jamaica’s largest private-sector renewable energy project, set to diversify the country’s energy matrix, reducing its high electricity prices and generating significant environmental and social benefits.
Photo: Inova BH
In English, “Belo Horizonte” means “beautiful horizon,” and this is an apt description of the long-term possibilities for educating the children of Belo Horizonte, the sixth largest city in Brazil and capital of the state of Minas Gerais. As a Brazilian who went through the national school curriculum, I believe that this system should be accessible to all citizens, and so I took a particular interest in the goals of this public-private partnership (PPP).
Greater access to education was a widely-shared ambition among the government team as well. The Municipality of Belo Horizonte already believed that a competitive workforce – and a functioning society – depends on good schools. That’s why it made early education a top priority and sought out advisory services from our Brazil-based team to find out if PPPs could help government make the grade. It seemed like this was a proposal the community could stand behind: Demand for better education was already strong, with over 11,000 children, many underprivileged, on a waiting list to enroll in school.
Translations available in Chinese and Spanish.
Many of you are already familiar with the PPP (Public-Private Partnerships) Group’s Private Participation in Infrastructure (PPI) Database. As a reminder for those who aren’t, the PPI Database is a comprehensive resource of over 8,000 projects with private participation across 139 low- and middle-income economies from the period of 1990-2015, in the water, energy, transport and telecoms sectors.
We recently released the 2015 full year data showing that global private infrastructure investment remains steady when compared to the previous year (US$111.6 billion compared with US$111.7 the previous year), largely due to a couple of mega-deals in Turkey (including Istanbul’s $35.6 billion IGA Airport (which includes a $29.1 billion concession fee to the government). When compared to the previous five-year average, however, global private infrastructure investment in 2015 was 10 percent lower, mainly due to dwindling commitments in China, Brazil, and India. Brazil in particular saw only $4.5 billion in investments, sharply declining from $47.2 billion in 2014 and reversing a trend of growing investments over the last five years.
- private sector
- Private Sector Development
- Global Economy
- Financial Sector
- The World Region
- South Asia
- Middle East and North Africa
- Latin America & Caribbean
- Europe and Central Asia
- East Asia and Pacific
- El Salvador
For the first time in history, the proportion of people living in extreme poverty has fallen below 10%. The world has never been as ambitious about development as it is today. After adopting the Sustainable Development Goals and signing the Paris climate deal at the end of 2015, the global community is now looking into the best and most effective ways of reaching these milestones. In this five-part series, I will discuss what the World Bank Group is doing and what we are planning to do in key areas that are critical for ending poverty by 2030: good governance, gender equality, conflict and fragility, preventing and adapting to climate change, and, finally, creating jobs.
Good jobs are the surest pathway out of poverty. Research shows that rising wages account for 30 to 50% of the drop in poverty over the last decade. But today, more than 200 million people worldwide are unemployed and looking for work — and many of them are young and/or female. A staggering 2 billion adults, mostly women, remain outside the workforce altogether. In addition, too many people are working in low-paying, low-skilled jobs that contribute little to economic growth. Therefore, to end poverty and promote shared prosperity, we will need not just more jobs, but better jobs that employ workers from all walks of society.
- end poverty
- International Development Association (IDA)
- fragile countries
- Fragile and Conflict Afflicted States
- private sector
- financial inclusion
- Information and Communication Technologies
- The World Region
In my previous two blogs: Developing Public to Public Partnerships (P2Ps) that Improve Infrastructure’s Social and Economic Value and 10 tips for Implementing a Public to Public Partnership (P2P), I sought to highlight the importance of organizations working together within the public sector if they want to maximize the value from Public Private Partnerships (PPPs). Regrettably, it’s too frequently the case that the potential of the public sector to maximize the value it achieves from PPPs remains unfulfilled because of relationships within the public sector preventing or inhibiting organizations working effectively together.
If public sector organizations can’t develop effective partnership working among themselves, how can they maximize value from partnerships with the private sector?
Auctions are ubiquitous. On any given day, somewhere in the world, bidders compete for energy, wireless spectrum, used vehicles, agricultural products—the list goes on. Auctions can help resolve uncertainties in the market, convening buyers and sellers to help them achieve the best possible price for goods or services that are otherwise difficult to value.
Auctions can also resolve uncertainties in the development sector, identifying the projects most likely to succeed and determining the right level of funding. To test this hypothesis in the climate arena, the World Bank has been piloting an approach to incentivize green projects in developing countries. The Pilot Auction Facility for Methane and Climate Change Mitigation (PAF) held its second online auction earlier this month, allocating $20 million in funding directly to the private sector for projects reducing methane emissions.
A brilliant analysis by Michael Jacobs of the success factors behind last year’s Paris Climate Agreement appeared in Juncture, IPPR’s quarterly journal recently. Jacobs unpacks the role of civil society (broadly defined) and political leadership. Alas, it’s over 4,000 words long, so as a service to my attention deficit colleagues in aid and development, here’s an abbreviated version (about a third the length, but if you have time, do please read the original).
The international climate change agreement reached in Paris in December 2015 was an extraordinary diplomatic achievement. It was also a remarkable display of the political power of civil society.
Following the failed Copenhagen conference in 2009, an informal global coalition of NGOs, businesses, academics and others came together to define an acceptable outcome to the Paris conference and then applied huge pressure on governments to agree to it. Civil society effectively identified the landing ground for the agreement, then encircled and squeezed the world’s governments until, by the end of the Paris conference, they were standing on it. Four key forces made up this effective alliance.
The scientific community: Five years ago the Intergovernmental Panel on Climate Change (IPCC) was in trouble. Relentless attacks from climate sceptics and a number of apparent scandals – the ‘climategate’ emails, dodgy data on melting Himalayan glaciers, allegations surrounding its chairman – had undermined its credibility. But the scientists fought back, subjecting their work to even more rigorous peer-review and hiring professional communications expertise for the first time. The result was the IPCC’s landmark Fifth Assessment Report, which contained two powerful central insights.
First, the IPCC report introduced the concept of a ‘carbon budget’: the total amount of carbon dioxide the earth’s atmosphere can absorb before the 2°C temperature goal is breached. At present emission rates, that would be used up in less than 30 years. So cutting emissions cannot wait.
The other insight was that these emissions have to be reduced until they reach zero. The IPCC’s models are clear: the physics of global warming means that to halt the world’s temperature rise, the world will have to stop producing greenhouse gas emissions altogether.
The economic community: But it was a second set of forces that really changed the argument. Since the financial crash in 2008–2009, cutting emissions had fallen down the priority lists of the world’s finance ministries. The old orthodoxy that environmental policy was an unaffordable cost to the economy reasserted itself. A new argument was required.
Oxfam’s private sector adviser Erinch Sahan is thinking through the implications of inequality for the businesses he interacts with.
Mention inequality to a business audience and one of two things happens. They recoil in discomfort, or reinterpret the term – as social sustainability or doing more business with people living in poverty. Same goes for the private sector development professionals in the aid community (e.g. the inclusive business crowd).
A good example is the UN Global Compact, which steers companies on how to implement the SDGs. They completely side-step the difficult implications of inequality on business and redefine the inequality SDG as boiling down to social sustainability or human rights / women’s empowerment goal. All good things that we at Oxfam also fight for, but these can all happen simultaneously with increasing concentration of income and wealth amongst the richest – i.e. rising inequalityWe know that rising inequality is one of the great threats to our society and economy. So why is business and the aid world so uncomfortable with tackling it head on?
Inequality is a relative rather than an absolute measure. This often makes it a zero-sum game – to spread wealth and income more equally, someone probably has to lose. But the intersection of business, sustainability and development has become locked into an exclusive focus on win-win approaches where there are no trade-offs and everyone gets their cake and eats it too. Addressing inequality often hits the bottom line – meaning changes to the prices paid to farmers, wages paid to workers, taxes paid to government and prices charged to consumers. But there is hope. Through a new lens (or metric) that should drive how business addresses inequality: share of value.
Don’t confuse this with Creating Shared Value, which is focused on the win-win (without commenting on how the created value is shared). What I’m proposing is a measure that compares businesses on how they share value with workers, farmers and low-income consumers. In fact the concept dates back to the original principles underpinning the fair trade movement some decades ago.