As recently as 2006, Timor-Leste was in crisis. Only a few years into independence, the country was torn by riots and political turmoil. Not surprisingly, its business climate was one of the region’s worst.
But . Nonetheless, Timor-Leste remains a fragile state, and with oil accounting for 80 percent of GDP, it is the world’s second most oil-dependent nation.
This month’s Development Finance Forum is bringing together public and private sector leaders to talk about how we can drive more private finance in three sectors that are key to development in East Africa: agribusiness, housing finance and tourism. The region’s leaders see these as critical to sustained growth, job creation and long-term economic transformation for their countries.
The World Bank Group sponsors the Forum annually to connect key stakeholders who, by working together, can change the investment landscape in the least developed countries. We aim to pinpoint what each major player can contribute, as well as explore promising ideas, initiatives and partnerships that need an extra impetus to succeed. It’s an exciting time to be an investment partner in the region with its extremely dynamic economies and a lot of innovation taking place.
Photo: Reychelle Ann Ignacio | Marketplace Designers
Sometimes change creeps up on us. And we can step back and realize that the world is different. This rings true currently in the infrastructure space. Here are three examples:
It’s now commonly agreed that we won’t achieve the Sustainable Development Goals without the involvement of private sector solutions: management, financing, and innovation. Involving the private sector is no longer an “if” question. We’re beyond ideology and calls for more aid transfers. Now we’re looking at “how”—and under what circumstances—crowding in private solutions help deliver better access to infrastructure services while being fiscally, environmentally, and socially sustainable.
This is what the World Bank Group’s Maximizing Finance for Development initiative is about, for infrastructure and other sectors as well. Cameroon’s power sector is a good example, where sector reforms have been supported by public loans, which in turn have helped crowd in private and financing from development finance institutions (DFIs) for large investments like the 216 megawatt Kribi gas project.
Solutions to problems
are easy to find:
the problem’s a great
So wrote the Danish poet, inventor, and mathematician Piet Hein. Development finance wasn’t on his mind when he wrote those words. Neither was private sector development. Yet the observation is unmistakably true for the field: To formulate solutions, we must first understand the nature of the problems we are trying to solve.
It helps crowd in private investment to create markets in difficult places. In an era of limited government resources and donor funds, this is key to achieving sustainable development.
Photo: Andreas Wecker | Flicker Creative Commons
By promoting better standards, methods and benchmarking, development finance institutions can move the mountain that is preventing institutional capital from flowing into infrastructure.
The World Bank Group's initiative to Maximize Finance for Development (MFD) aims to find solutions to crowd in all possible sources of finance, innovation, and expertise in order to achieve the Sustainable Development Goals (SDGs). In the case of infrastructure investment, a significant contribution to long-term sources of private finance is expected from institutional investors such as pension plans, life insurers, and sovereign wealth funds.
These investors have become increasingly interested in infrastructure investment in recent years, in search of new sources of returns, diversification, duration and inflation hedging. However, they cannot be expected to make a substantial and durable contribution to the long-term financing of infrastructure without three important changes:
Photo: People Image Studio | Shutterstock
This World Water Day, the Private Infrastructure Development Group (PIDG) is celebrating the success of the Kigali Bulk Water Project in Rwanda’s capital.
The large-scale water treatment plant, due for completion in 2020, will produce 40 megaliters of clean water per day, equivalent to one-third of Kigali's total supply. Water will be drawn from the Nyabarongo River to be treated before distributing a clean supply to up to 500,000 domestic, commercial, and industrial customers. Kigali Water is one of the first water projects to be developed using a public-private partnership (PPP) model in sub-Saharan Africa.
It is these countries plagued by near-constant political and economic instability that are often the ones most in need of private investment. Yet they are also the places few private investors are willing to go. The risks seem to outweigh the rewards.
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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.
Photo: auphoto / Shutterstock.com
As Washington, D.C.’s infrastructure braces for its first winter freeze and 2017 draws to a close, this feels like the right moment for a recap on what the year has brought us in terms of closing the infrastructure gap across emerging markets and developing economies; policy directions within and outside of the World Bank Group; new instruments, tools, and resources; and—the proof in the pudding—actual investment levels.
There may not be one blog that can capture all of those themes in detail, but here is a brief overview of what 2017 has meant and what is on the docket for 2018 and beyond.
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. For examples of other entries on the IPG blog, click here.