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infrastructure investment

Moving the juggernaut of institutional investment in EMDEs infrastructure

Jinsuk Park's picture


Photo: cegoh | Pixabay 

In my line of work, we have a Holy Grail that many brilliant people have spoken, written, and toiled to achieve: attracting international institutional investors to infrastructure projects in emerging countries.

Yet, according to the recent World Bank Group report, Contribution of Institutional Investors to Private Investment in Infrastructure, 2011–H1 2017, the current level of institutional investor participation in infrastructure investment in emerging markets and developing economies (EMDEs) is only 0.7 percent of total private participation.

This Bank Group report estimates that emerging countries need to invest $836 billion per year, or 6.1 percent of current service level of existing assets. Meanwhile, the International Monetary Fund (IMF) estimates that more than $100 trillion is held by institutional investors—with around 60 percent of assets held by pension and insurance funds from advanced economies—making the amount mobilized for EMDE infrastructure look even more paltry.

But the siren song still rings clear—these international, long-term, liability-embedded funds could be a game changer for filling the financing gap in EMDEs infrastructure and the World Bank Group’s Maximizing Finance for Development (MFD) agenda. 

SDGs and PPPs: What's the connection?

Mahmoud Mohieldin's picture


Photo: World Bank Group

By committing to the Sustainable Development Goals (SDGs), countries pledge to pursue progress on economic, social, and environmental targets, in a balanced and integrated manner. The SDGs are cross-cutting and ambitious, and require a shift in how we work in partnership. They also push us to significantly change the level of both public and private investment in all countries.

We need creative solutions to leverage each partner’s comparative advantage. We also need to mobilize private sector investment and innovation in support of the SDGs.

One question, eight experts, part four: Richard Abadie

Richard Abadie's picture
Photo: Wikimedia Commons

To gain a better understanding of how innovation in public-private partnerships (PPPs) builds on genuine learning, we reached out to PPP infrastructure experts around the world, posing the same question to each. Their honest answers redefine what works — and provide new insights into the PPP process. This is the question we posed: How can mistakes be absorbed into the learning process, and when can failure function as a step toward a PPP’s long-term success?

Our fourth response in this eight-part series comes from Richard Abadie, who leads the Capital Projects and Infrastructure Group at PwC

Having worked in the infrastructure sector for nearly 20 years, I’ve had time to reflect on what success and failure look like in infrastructure PPPs. Mistakes have been, do, and will continue to be made when using PPPs. It is not perfect — nor is its application — but what in life is?

There are so many horror stories around non-PPP construction cost overruns, delays in completion, poorly specified contracts, weak tender management, corruption, failure to run transparent competitive processes, lack of project readiness, significant post-contract variations, and sporadic asset maintenance and management. PPPs eliminate many of the above structural weaknesses, which rightfully earns it its place as a challenging but effective procurement approach.

The chief criticisms of PPP — that it takes longer to procure and is less flexible than conventional procurement — have some validity. Getting price certainty does take time and requires clear contractual risk allocation through the life of the contract.

Obrigado, Brasil!

Clive Harris's picture
Paving a highway in Brazil. In 2014, Brazil's
 infrastructure investment commitments
​drove an overall global increase.
In March we released the update from the Private Participation in Infrastructure (PPI) Database for the first six months of 2014, covering investment activity in energy, transport, and water and sanitation. The good news of a rebound of investment commitment from a decline in 2013 was noteworthy, alongside the heavy concentration of activity in Brazil.
 
The PPI Database’s 2014 full year update for these sectors has just been released, and it confirms the trends we began tracking for the first six months. Total investment in infrastructure commitments for projects with private participation in the energy, transport, and water and sanitation sectors increased six percent to $107.5 billion in 2014 from levels in the previous year. The total for 2014 is 91 percent of the five-year average for the period 2009-13, which is the fourth-highest level of investment commitment recorded – exceeded only by levels seen from 2010 through 2012. 
 
This increase over 2013 was driven largely by activity in Brazil. Without Brazil, total investment commitments would have fallen by 18 percent, from $77.2 billion in 2013 to $63.4 billion in 2014.  Although this is lower than H1 2014 (57%), Brazil’s large stake is a continuation of a recent trend.
 
The Latin America and the Caribbean (LAC) region saw $69 billion of investment commitments, or nearly 70 percent of the total for 2014. Three of the top five countries by investment commitments in 2014 were from LAC.  The top five, in order, were Brazil, Turkey, Peru, Colombia, and India. 

PPPs: Making a real difference in delivering public services in Bangladesh

Syed Afsor H Uddin's picture
Who first introduced Public-Private Partnerships (PPPs)? This is a question that often leads to endless discussions, provides an opportunity for one-upmanship and is an entertaining diversion for practitioners on the margins of international PPP conferences.

During these debates many examples are quoted – the early 20th century oil concessions in the Persian Gulf, the late 19th century cross continental railway in the USA and the İzmir-Aydın railway concession in present-day Turkey, the Rhine river concession granted in 1438[1] and so on.
 
Photo: Rezwan/flickr

As debate on the origin of PPP continues, the modern-day popularity of PPPs is more commonly acknowledged to have emerged from the United Kingdom, following the introduction of Private Finance Initiatives in 1992’s autumn budget statement by RH Norman Lamont, then Chancellor under John Major’s Conservative government.[2]

In the intervening years, many developed and developing nations have started PPP programs of their own. Indeed, the growth of PPPs in developing countries is nothing short of phenomenal, with the mechanism being used in more than 134 developing countries and contributing to 15–20 percent of total infrastructure investment[3].

This is also true of Bangladesh. In 2009, the Government of Bangladesh announced the introduction of a revised PPP program[4] in the 2009/10 Budget Session, and then introduced a new PPP policy in August 2010 (PPP Policy 2010[5]).