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Taming the Terra Incognita of PPPs: The case for data as an exploration tool

Fernanda Ruiz Nunez's picture
Image courtesy of history-map.com
The PPP territory spans the globe, and the debate over its effectiveness as a financing tool to achieve development goals reaches equally far and wide.

​Most recently, the Financing for Development Conference in Addis Ababa, Ethiopia sparked even more discussion about the role of public-private partnerships. The official line, spoken in a multitude of tongues, is that PPPs have an important role to play, and results are dependent on projects being procured, managed and regulated well. But one thing is clear in every language: “results” are based mainly on anecdotal evidence and case studies where attribution remains dubious, and findings cannot be generalized as they depend on the particular characteristics of the specific projects.
 
We can do better. As economists, development professionals, finance experts, and explorers of new and creative solutions to solve the problem of poverty, we must do better. And we will – with better data.
 
Lack of data has constrained the empirical literature on PPPs, in turn constraining our ability to tap the territory of PPPs and its potential to transform markets. After all, what do we really know about the economic impact of PPPs? Our first-ever literature review, underway now (the first draft is available at https://www.pppknowledgelab.org/ppp_document/2384), has laid an initial foundation for knowledge, and we have made the first draft available so that colleagues and interested individuals and organizations can contribute their data.

PPI and the poorest: New private participation in infrastructure results highlight critical role of MDBs in IDA countries

Clive Harris's picture
During this week’s Financing for Development conference— sponsored by the United Nations in Addis Ababa, Ethiopia — ongoing discussions have focused on how private sector finance and expertise can be leveraged to help meet the UN’s Sustainable Development Goals. My take on that important conversation has been informed by some of the newest numbers available on trends in private participation in infrastructure in the poorest countries. Today’s update to the PPI Database, which highlights the role of multilateral development banks (MDBs) in the 77 IDA nations, introduces an important perspective to the ongoing debate over how to structure development financing for the best — and most sustainable — outcomes.
 
First, the numbers
The newest PPI Database results show that investment commitments to infrastructure projects with private participation investment in IDA countries from 2009 to 2014 totaled US$72.8 billion. This is significant because it accounts for just seven percent of the total recorded over this period for all emerging markets and developing economies covered in the database. This is not that surprising, but does show that we have a long way to go.
 
The number of projects with private participation in IDA countries is also only 10 percent of the total — a little better, and indicating that, unsurprisingly, projects are smaller on average in IDA countries. (For more information on IDA countries and detailed information on the IDA’s mission, please see: http://www.worldbank.org/ida/what-is-ida.html.)
 
But what does it mean?
Examining these figures in terms of sector activity reveals some especially useful facts for development initiatives — both those underway and those still in the incubation phase. Activity in IDA countries is heavily focused on telecommunications; even energy projects, which remain well represented, take a back seat to telecom. Fully 57 percent of investment commitments in IDA countries were in telecommunications and 31 percent in energy, compared to 32 percent and 41 percent respectively in other (non-IDA) countries. In contrast, only 12 percent of investment in IDA countries was in transport, compared to 25 percent in other countries. As we’ve seen before, telecommunications is the most commercially viable sector.  IDA countries specifically are facing greater difficulties in attracting projects in energy, transport and water.

Achieving trillions out of billions

Bertrand Badré's picture

The release of the joint statement “From Billions to Trillions: Transforming Development Finance” at our Spring Meetings is one of the most satisfying moments during my two-year tenure as Managing Director and World Bank Group CFO.

My one regret is that the title should have been Billions for Trillions.

Why?

Financing the Sustainable Development Goals (SDGs) will require everyone to make the best use of each dollar from every source, and to draw in and increase public and private investment. The SDGs are ambitious and demand equal ambition in using the “billions” of dollars in current flows of Official Development Assistance (ODA) and all available resources to attract, leverage and mobilize “trillions” in investments of all kinds —public and private, national and global.

The traditional foundation of ODA, estimated at US$135 billion a year, provides a fundamental source of financing, especially in the poorest and most fragile countries. But more is needed. Investment needs in infrastructure alone could reach up to $1.5 trillion a year in emerging and developing countries.

​Is infrastructure in emerging markets a good investment?

Laurence Carter's picture
There’s a lot of discussion about attracting more investors to invest in infrastructure in emerging markets. This will be one of the themes of the Financing for Development Conference next week. Last month the PPI Database’s 2014 full year update showed that total investment in infrastructure commitments in emerging markets for projects with private participation in the energy, transport and water and sanitation sectors increased six percent to US$107.5 billion in 2014, compared to 2013.  
 
But what does the evidence tell us about how good those investments might be for investors?
 
One interesting source comes from a Moody’s study based on the performance of over 5,300 projects. This data represents more than 60 percent of all project finance transactions worldwide over 1983-2013. It is broadly representative of worldwide project finance activity by year, industry sector and regional concentration. The data shows that: