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Trends in Private Participation in Infrastructure

David Lawrence's picture
The private sector has long been a major player in infrastructure projects around the globe. Its contribution is important on many levels: besides making financial, technical and managerial resources available for infrastructure projects, its participation has policy implications that impact investment and development.
 
The World Bank’s Public Private Partnership Group and the Public-Private Infrastructure Advisory Facility (PPIAF) support public discussion on the role of private participation in infrastructure, or PPI. To provide relevant information on this topic, they maintain a PPI database that includes information on over 6,000 infrastructure projects implemented from 1984 through 2013 in 92 emerging economies. The information is useful for analysts, policymakers, private sector firms involved in infrastructure, donors, NGOs and other stakeholders.

The data can be used to identify regional or sectoral trends. The recently-released 2013 Global PPI Update, for example, shows that PPI in 2013 in emerging markets fell by 24 percent in comparison with 2012, with decreases in Brazil and India accounting for much of the change. The data also show that investments in telecom and energy top the list, each accounting for 38 percent of global PPI. 



 

Is Somaliland truly “Open for Business”? Moving past the conventional narrative of a fragile state

Steve Utterwulghe's picture

Somalia has the reputation of being a mysterious and conflict-ridden land. Who hasn’t heard of the infamous “Black Hawk down” episode, the militant group al-Shabaab or the pirates off the Somali coast?
 
But in the northwest corridor of war-ravaged Somalia lies Somaliland, a self-declared independent state that claims to be open for business. Really?
 
It’s easy to dismiss the “open for business” claim by Somaliland’s Ministry of Planning as mere fantasy or wishful thinking. Flying from Nairobi on a painfully slow UN-chartered plane, being greeted at the hotel by Kalashnikov-armed guards, or traveling to your meeting in an armored car is enough to discourage even the most adventurous entrepreneur.
 
At first sight, Somaliland has all the characteristics of a fragile and conflict-affected situation (FCS). However, you never want to judge a book by its cover. In Somaliland, I’d argue that the conventional narrative of fragility needs to be revisited. 

Recent World Bank Data Reveal Worrying Trends in Transport

David Lawrence's picture



The World Bank’s Public-Private Partnership Group and Public-Private Infrastructure Advisory Facility report that total private participation in infrastructure (PPI) fell in the transportation sector in emerging markets by 39 percent to $33.2 billion in 2013, compared with 2012 levels.

In part, this reflects a broader trend – overall, PPI in all infrastructure sectors fell by 24 percent. The biggest drop was in South Asia, which saw PPI in transport fall from just over $20 billion in 2012 to approximately $3 billion in 2013, mostly because of significant decreases in India. Two other regions – Latin America & the Caribbean (LAC) and Eastern Europe and Central Asia (ECA) – also saw decreases. PPI in transport increased in East Asia and the Pacific (EAP) and Africa, but not by enough to offset decreases elsewhere.



2013 Transport PPIs by region
 
This is not good news for the world’s poor. Transportation is a critical component of development and growth, enabling people to access schools, hospitals and markets. It facilitates labor mobility and ensures that raw materials and finished goods get to customers. In rural areas, transportation systems provide an economic and social connection with the rest of the country. Within cities, good urban transportation is often the only form of transportation available to the poor. It also improves the flow of goods and services, reduces greenhouse gas emissions, and improves the overall quality of life.

Follow the Money: Corruption and Graft Punish the Poor, Undermine Development, and Corrode Honest Governance

Christopher Colford's picture



Follow the money, and you’ll find out how and why corruption has become "Public Enemy Number Onefor those who are promoting global development – as crony capitalists in the private sector connive with corrupt officials in the public sector to short-circuit sound business practices, reward self-interested insiders, subvert the broad public interest, and undermine the ideals of good governance.

This week’s gathering of the third-ever conference of the International Corruption Hunters Alliance (ICHA) – a global network of prosecutors, lawyers, detectives, forensic accountants and policymakers who track down illegal and unethical financial practices – will underscore the continuing drain on development imposed by public-sector graft, private-sector lawbreaking, and the worldwide flow of illicit funds from sinister financial transactions.

Monday morning’s opening plenary session at the World Bank Group’s headquarters in Washington – headlined by Prince William, the Duke of Cambridge and heir to the British throne, along with Bank Group President Jim Yong Kim – began a week that should help focus worldwide attention on the way that systematic corruption enriches lawbreakers, undermines respect for the rule of law, thwarts good-governance efforts and drains scarce resources from effective development.

The three-day conference should also raise public awareness of the vigorous international action that has been mobilized in recent years, as corruption-related concerns have risen to a leading position on the global diplomatic agenda.

Inspired by then-World Bank President James D. Wolfensohn’s landmark “cancer of corruption” speech at the 1996 Annual Meetings, global action has been steadily gaining momentum – through such channels as the G20 leaders’ working group to tighten policies and procedures; the Financial Action Task Force’s standard-setting vigilance; the OECD’s Anti-Bribery Convention and its continuing monitoring of corruption’s toll; and civil-society organizations’ diligent watchdog efforts to ensure that development dollars will go, not toward graft, but toward the places where aid is desperately needed.

This week’s events at the Bank Group – focusing on the theme of “Ending Impunity,” and pivoting around International Anti-Corruption Day, which the United Nations has designated as this Tuesday – are timed to coincide with the launch of the OECD’s latest Foreign Bribery Report

The World Bank Group continues to champion the anticorruption ideal and good-governance standards: by enforcing a “zero tolerance” policy for corruption, closely tracking furtive patterns of suspicious financial flows, and working with law-enforcement officials worldwide to track down assets that have been looted and hidden by kleptocratic regimes. This week’s conference is organized by the Integrity Vice Presidency – which coordinates the Bank Group-wide effort to expunge all corrupt or unethical practices – with the support of such Bank Group units as the Governance Global Practice and the Stolen Assets Recovery Initiative.

A New Model to Chip Away at the Infrastructure Financing Gap: Brazil Leads the Way

Cara Santos Pianesi's picture



Infrastructure bottlenecks have created seemingly perpetual traffic jams in and around São Paulo. Photo credit: Marcelo Camargo/ABr.

There’s a lot of time for innovative thought when you’re stuck in traffic in São Paulo.
 
Perhaps that’s why, in the words for Deborah L. Wetzel, World Bank Country Director for Brazil, “São Paulo has continuously innovated to overcome its infrastructure bottlenecks, often becoming a model to other states in Brazil.”
 
With a loan signed last month between the state and Banco Santander, and insured by the Multilateral Investment Guarantee Agency (MIGA), the state is at the vanguard of infrastructure financing.
 
Forty-one million people use the state’s transportation networks. While the network is one of the most developed and modern in Brazil, it is still insufficient for the state’s needs.

The State of São Paulo has sought to address the situation for some time, and the World Bank has played an important role through lending and technical assistance. An important component of this work is the São Paulo State Sustainable Transport Project that aims to rehabilitate roads in several key corridors and to reconstruct two bridges.

Yet, with a total cost estimated at $729 million, this project has faced a major financing hurdle. In September 2013, the World Bank approved a $300-million loan toward the initiative. But with growing demand for loans from Brazil’s poorest states, the bank was unable to commit additional funds. The State of São Paulo itself committed $129 million. That left a shortfall of $300 million.

How was the state going to mobilize these funds at a cost that would be acceptable to taxpayers?

A partnership with MIGA was a natural answer. In addition to political risk insurance, MIGA provides credit-enhancement products that protect commercial lenders against non-payment by a sovereign, sub-sovereign or state-owned enterprise.

In an unprecedented move, the State of São Paulo bid out the project to commercial banks with a requirement that their loans be backed by MIGA’s credit-enhancement instrument.

The result:  MIGA issued guarantees to Banco Santander on a $300-million loan. With MIGA’s credit enhancement, the cost of the commercial loan was lower, and the length of the loan was longer, than São Paulo could have achieved on its own. The additional financing will be used to increase the scope of the project’s activities.

It’s Everybody’s Business – So Make Social Issues Strategic: The Private Sector’s Stake in Fighting Gender-Based Violence

Christopher Colford's picture

If you’re in the private sector, and if you somehow imagine that social issues don’t have anything to do with your business, then you’d better think again. The dollars-and-cents costs of chronic social problems and dysfunctional behavior have a direct impact on private-sector productivity and profitability.

As Harvard Business School professor Michael Porter told a World Bank Group audience not long ago, explaining his theory of “creating shared value”: If business leaders are serious about ensuring future private-sector-led growth – and about the long-range stability of the economy – then the corporate sector had better prioritize pro-active steps to address serious social issues as a significant part of their strategy.

Social issues might not readily rise to the top of corporate leaders’ in-boxes, since many hard-headed businessmen – and I use the suffix “men” advisedly – might presume that “soft” human concerns aren’t central to day-to-day business operations. Yet the painful human toll inflicted by social dysfunction is everybody’s business. Corporate executives who truly aim to fulfill a positive leadership role in society, to which they so often aspire rhetorically, have a duty to raise their voices about the many kinds of social trauma that impede socioeconomic progress.

If a sense of social responsibility isn’t enough to get corporate leaders thinking pro-actively, they should at least consider their business’ long-term enlightened self-interest. A workforce that’s de-motivated or demoralized – or, worse, physically injured or emotionally abused – will suffer lower morale and higher absenteeism, will trigger higher health-care costs, will be distracted from seizing new business opportunities, and will fall short of fulfilling its full productive potential. That economic reality should spur the private sector to take constructive, preventive action.

An event on Wednesday at the World Bank Group will offer a reminder of how one vicious form of extreme antisocial behaviorviolence against women and girls – acts as a drag on society, a drain on the economy and an impediment to achieving every development priority. The 2 p.m. event in the J Building auditorium will launch a new World Bank Group report – the “Violence Against Women and Girls Resource Guide” – that surveys a wide range of analyses on the human suffering and social pain caused by gender-based violence.

Jointly sponsored by the Bank Group, the Inter-American Development Bank and the Global Women’s Institute based at George Washington University, the afternoon event will follow a morning panel discussion – at 10 a.m. in GWU’s Jack Morton Auditorium – featuring the authors of a landmark series of analyses of gender-based violence in The Lancet, the UK's pre-eminent medical journal.

Recognizing gender-based violence as a medical and public-health emergency – and reinforcing the World Health Organization’s recent declaration that gender-based violence is a global threat “of epidemic proportions” – The Lancet’s special edition is blunt about the grim toll of violence that deliberately victimizes women and girls: “Every day, millions of women and girls worldwide experience violence. This abuse takes many forms, including intimate physical and sexual partner violence, female genital mutilation, child and forced marriage, sex trafficking, and rape.”

Strawberries, Chocolate and Skill Gaps

Priyam Saraf's picture


Technological changes and globalization have transformed the kind of skills required of workers in many sectors of the economy.  Yet, with employment opportunities becoming more fluid, it has also become harder to predict the skill content of next year’s jobs than it was when Korea, Malaysia and Singapore industrialized through industrial and training policies.

It is in this context that skill gaps have entered public discourse. Employers around the world routinely report large skill gaps and warn of dire consequences for industrial competitiveness if they are not filled. Governments, from India to the United States, have taken up this call.
 
How do employers identify these "skill gaps"? What does this mean for skills delivery systems around the world? These questions were recently discussed at a conference at the World Bank Group in Washington on "New Growth Strategies." Here are some thoughts we presented to kick off that discussion.
 
That the skills gap narrative has become so prominent in recent years does not sit well, for five reasons.
 
  • First, as the 2013 World Development Report reminds us, the world is overflowing with educated workers, many of whom are unemployed or underemployed.
  • Second, the wage returns to secondary education have been falling in many countries. Secondary attainment is the education level most critical to the performance of production tasks in most internationally tradable sectors.
  • Third, vocationally trained workers often do not find jobs.
  • Fourth, employers often don’t act as if there is a skill gap: In many internationally competing sectors, they do not cast a wide net in search of skilled workers, and retention rates are low.
  • Fifth, the high-employment tradable sectors are not very education-intensive. In most economies, workers in agriculture, fishing, forestry, textiles, garments, furniture, food processing and leather-goods production are among their country’s least educated.

 
So, why does this cacophony over skills gaps arise and how can we design skill-development systems that are robust to it? 
 
The confusion arises because we have perverse incentives in place. When we ask employers to identify skill gaps, we do not usually ask them to bear, or even consider, the cost of training workers. This is much like asking them whether they prefer strawberries or strawberries covered in chocolate, without asking them to pay extra for the chocolate.  They therefore routinely report a crippling shortage of chocolate. Yet, behind this strange exercise, there are some industries that are actually seriously skill constrained and there are other industries that are not skill constrained. The way we ask the question simply does not induce them to differentiate themselves.

How Can We Effectively Insure Pacific Island Nations Against Natural Disasters?

Olivier Mahul's picture

Extreme natural events have affected more than 9.2 million people in the Pacific since 1950 and caused associated damage of about US$3.2 billion. From 2012 to 2014, the region experienced several disasters: two severe floods in Fiji, Tropical Cyclone Evan in Samoa, a magnitude 8.0 earthquake and subsequent tsunami in the Solomon Islands, Tropical Cyclone Lusi in Vanuatu, Tropical Cyclone Ian in Tonga, and a storm surge in the Marshall Islands (see figure 1). Pacific Island Countries (PICs) face critical challenges to attain financial resilience against such disasters. Many PIC Governments have a narrow revenue base, are net importers, and rely on aid as an income stream. This can limit their post-disaster financing options and place constraints on the national budget. Alternatives—such as risk transfers—could be used to reduce the drain on limited public funds.

Credit for All: Increasing Women's Access to Finance

Nisha Nicole Arekapudi's picture
Financial inclusion is important for accelerating economic growth, reducing income inequality, and decreasing poverty rates. Unfortunately, women face more difficulty than men in access to credit, limiting the development of their full market potential and hindering economic gain and entrepreneurship. Discriminatory practices in the granting of credit may mean that qualified applicants do not have the same opportunity to receive credit simply due to their gender.

Inclusive Growth as the Path Toward Sustainable Development: A New Initiative on 'Equality of Opportunity in Global Prosperity'

Elaine R.E. Panter's picture

The correlation is simple: Job creation is the hinge connecting the three pivotal elements of economic development: living standards, productivity gains, and social cohesion. Promoting access to the labor market for all, including traditionally marginalized groups, is therefore paramount to achieving real, sustainable growth.
 
Following the success story of "Women, Business and the Law," which focuses on legislative gender discrimination and its impact on the economy, the World Bank Group is now launching a new initiative that will develop a set of indicators measuring discriminatory legislation on the basis of racial and ethnic origin, religion and sexual orientation. The project was presented externally for the first time on November 11 by Federica Saliola, Program Manager and Task Team Leader of the project, speaking at Sexual Orientation and Gender Identity & Development: International Human and Economic Development, LGBT Rights and Related Fields conference, organized by The Williams Institute at UCLA.
 
In her speech, Ms. Saliola reminded the audience that, despite the rapid growth in emerging economies, not all sectors of society have benefitted equally, income inequality has risen, and 1 billion people are still left under the poverty line. In the coming three years, the new project will thus expand the knowledge base of laws, regulations and institutions that discriminate against ethnic, racial, religious and sexual minorities and will collect data across a number of economies covered by the Global Indicators Group. 

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