In 2013, investment commitments to infrastructure projects with private participation declined by 24 percent from the previous year. It should be welcome news that the first half of 2014 (H1) data – just released from the World Bank Group’s Private Participation in Infrastructure (PPI) database, covering energy, water and sanitation and transport – shows a 23 percent increase compared to the first half of 2013, with total investments reaching US$51.2 billion.
A closer look shows, however, that this growth is largely due to commitments in Latin America and the Caribbean, and more specifically in Brazil. In fact, without Brazil, total private infrastructure investment falls to $21.9 billion – 32 percent lower than the first half of 2013. During H1, Brazil dominated the investment landscape, commanding $29.2 billion, or 57 percent of the global total.
Four out of six regions reported declining investment levels: East Asia and the Pacific, South Asia, Africa, and the Middle East. Fewer projects precipitated the decrease in many cases. Specifically, India has experienced rapidly falling investment, with only $3.6 billion in H1, compared to a peak of $23.8 billion in H1 of 2012. That amount was still enough to keep India in the top five countries for private infrastructure investment. In order of significance, those countries are: Brazil, Turkey, Mexico, India, and China.
Sector investments were paced by transport and energy, which together accounted for nearly all private infrastructure projects that were collected in this update. The energy sector captured high investment levels primarily due to renewable energy projects, which totaled 59 percent of overall energy investments, and it is poised to continue growth due to its increasing role in global energy generation.
The energy sector also had the biggest number of new projects (70), followed by transport (28), then water and sewerage (12). However, transport claimed the greatest overall investment, at $36 billion, or 71 percent of the global total.
While we need to see what the data for the second half of 2014 show, what we have to date suggests that infrastructure gaps may continue to grow as the private sector contributes less. It also suggests that, in many emerging-market economies, there is much work to be done to bring projects to the market that will attract private investment and represent a good deal for the governments concerned.
Talk about timing! This week has seen back-to-back initiatives that underscore the growing importance of Islamic finance – and the significant role that the World Bank Group can play in unleashing its potential for financing international development.
This Tuesday, October 29, Prime Minister David Cameron of the United Kingdom announced that the U.K. will become the first non-Muslim country to issue a Sukuk or Islamic bond, with a £200 million issue planned for early 2014. Cameron also announced plans for a new Islamic index on the London Stock Exchange. These initiatives are all part of a grand plan by the U.K. government to turn London into a global capital of Islamic finance.
The very next day, on Wednesday, October 30, World Bank Group President Jim Kim inaugurated the World Bank Global Islamic Finance Center in Istanbul. Envisioned as a knowledge hub for developing Islamic finance globally, the center will conduct research and training as well as provide technical assistance and advisory services to World Bank Group client countries interested in developing Islamic financial institutions and markets.