Photo: Grzegorz Zdanowski / Pexels Creative Commons
Some regard institutional investors—with their deep pockets—as the white knights filling the huge investment gaps in infrastructure development in emerging markets and developing economies (EMDEs). The IMF estimates that some 100 trillion dollars are held by pension funds, sovereign wealth funds, mutual funds, and other institutional investors. Unquestionably, the long-term nature of their liabilities matches the long-term financing requirements of infrastructure projects. So, it’s no surprise that institutional investors are seen as the white knights of infrastructure finance.
Private Sector Development
The APMG PPP Certification Program enables participants to take their skills to the next level, and the Certified PPP Professional (CP3P) credential is a means to officially convey that expertise and ability.
At the core of the program is the PPP Guide, a comprehensive Body of Knowledge that distills globally agreed-upon definitions, concepts, and best practices on PPPs. The program is an innovation of the Asian Development Bank (ADB), the European Bank for Reconstruction and Development (EBRD), the Inter-American Development Bank (IDB), the Islamic Development Bank (IsDB), the Multilateral Investment Fund (MIF), and the World Bank Group (WBG), with financial support from the Public-Private Infrastructure Advisory Facility (PPIAF).
Whether you’re thinking about signing up, or already enrolled, in this series we share some insight from practitioners who have already passed the test. This week, we caught up with Abdul Nafi Sarwari, a Senior Financial & Economic Specialist for PPPs with the Central Partnership Authority within Afghanistan’s Ministry of Finance. Read his answers below.
Photo: Raymond Ward | Flickr Creative Commons
Sector reform is a familiar concept for anyone working in the energy sector, particularly in developing countries. Typically, reforms involve measures such as building an institutional framework that allows for an independent regulator, improving the operational efficiency of utilities (for example, by unbundling vertically-integrated utilities), creating an environment for private sector participation, and last but not least, introducing tariffs that reflect costs. All these measures are designed with one goal in mind: to put the sector on a sustainable path and improve the quality of service for end-users.
While acknowledging the many benefits that sector reforms can bring, one issue we continue to face is the poor financial state of key power utilities. In other words, a lack of creditworthiness. Often, their lack of financial creditworthiness is the most critical obstacle to implementing investment programs. This makes utilities even more dependent on continuous government subsidies.
Welcome to the “10 Candid Career Questions” series, introducing you to the infrastructure and PPP professionals who do the deals, analyze the data, and strategize on the next big thing. Each of them followed a different path into infra and/or PPP practice, and this series offers an inside look at their backgrounds, motivations, and choices. Each blogger receives the same 15 questions and answers 10 or more that tell their career story candidly and without jargon. We believe you’ll be as surprised and inspired as we were.
Photo: Free-Photos / Pixabay Creative Commons
In order for investors to see the potential in developing long-term attractive infrastructure assets, projects must be well prepared. The lack of such primed projects is a major obstacle for ramping up global infrastructure, particularly in developing and emerging economies.
This is one of the priorities for the G20, as Argentinean President Mauricio Macri emphasized in December 2017: "Infrastructure for development" will be one of the key issues of focus during the country's G20 Presidency and it will "…seek to develop infrastructure as an asset class by improving project preparation."
Photo: Dylan's World / Flickr Creative Commons
A decade before the financial crisis, Australia was a bastion of infrastructure successes. The country’s four major airports (Melbourne, Perth, Brisbane and Sydney) were privatized. Numerous greenfield projects were also launched, for example, extensive highway construction, and new projects were continually added to the pipeline.
Some of these new projects, however, faced significant difficulties: some were constructed without robust performance data, leading to overambitious forecasting and overaggressive financial structures. In part, this led Australia to suffer multiple high-profile defaults and brought the country’s infrastructure project pipeline to a halt.
But, The state’s economic growth has reached 3.5%, outstripping the country’s average rate of 2.8%, and even the G20 average (which stands at 3%). As such, NSW’s infrastructure model has likely had a multiplier effect on economic activity—and has been identified as a potential playbook for other jurisdictions.
Photo: BrilliantEye | iStock
As the only global facility specifically dedicated to reinforcing the legal, institutional and policy underpinnings of private sector participation in infrastructure—which we call the critical upstream—we at the Public-Private Infrastructure Advisory Facility (PPIAF) realize we have a key responsibility to developing countries.
That responsibility is to help client governments unlock their potential by de-risking investments and creating an enabling environment for private sector participation, itself a condition to achieving the Sustainable Development Goals and climate-smart objectives. As such, PPIAF fits neatly into the new Maximizing Financing for Development (MFD) approach to crowd in the private sector, an initiative launched by the World Bank Group and other multilateral development banks last year.
Also available in العربية | Français
Two years in the making, last week the Islamic Development Bank Group (IsDBG) and the World Bank Group officially launched the landmark report Mobilizing Islamic Finance for Infrastructure Public-Private Partnerships at a discussion broadcast online from Washington, D.C. We illustrated that, through partnerships, the power of Islamic finance can be instrumental in unlocking financial resources necessary to meet the tremendous demand for critical infrastructure.
In fact, infrastructure PPPs funded with Islamic finance have proliferated in the Middle East, and have flourished in other countries throughout Africa and Asia. Both of our institutions are committed to leverage our competitive advantages, achieve effective interventions, and yield measurable results in scaling up and broadening the use of Islamic finance.
Photo: Scaling Solar project in Zambia
What is a common thread between Argentina, Maldives, and Zambia? In each of these countries, the World Bank provided guarantees to support transparent auctions for renewable energy. Through these, I have seen how the Bank’s involvement helped increase private investors’ confidence, attract world-class developers, and ultimately reduce tariffs.
Drawing on 10 years of diverse experience in the power sector in both public and private organizations, my role is to help bridge the divide between public and private parties and help each side better understand the other. The World Bank is ideally positioned for this. Both sides understand the World Bank carries out a detailed due diligence and ensures the auction meets international standards. Both sides appreciate the World Bank will be an honest broker if issues arise. Because of its long term and continuous involvement in our client countries, the World Bank can help identify and solve issues early on. As such, no World Bank project-based guarantee has ever been called.
Also available in Español
Photo: Dominic Chavez / International Finance Corporation
In the early 1990s, Colombia’s road infrastructure was a maze of poorly maintained roads and bad highways. Difficult geography—the Pacific coast jungle and the Andes branching out into three chains—made it harder to improve road conditions and connect isolated communities. Conflict, corruption, and short-term political priorities contributed to the problems plaguing Colombia’s road system. But just as influential were the problems with the nation’s existing concession contracts that had wrong incentives, created opportunities for renegotiating signed contracts, and assigned unproportioned demand risk to the Government of Colombia.