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.
Private Sector Development
Thanks to a recent knowledge exchange program, yes!
As we can all imagine, Africa’s lush greenery and planted forests offer huge potential but the sector’s expansion faces major barriers like access to land, lack of access to affordable long-term finance and weak prioritization of the sector.
Take Ethiopia, for example. About 66.5 million cubic meters of the country (46% of total wood-fuel demand) is subject to non-sustainable extraction from natural forest, wood- and scrublands, resulting in deforestation and land degradation. In Mozambique, charcoal is still produced from native forests, leading to immense pressure on natural resources, and way beyond its regeneration capacity. Both countries want to know how the forest sector can contribute to their national development plans and help grow their economies and reduce rural poverty, while being environmentally sustainable.
This topic is of even more importance as we celebrate the International Day of Forests on March 21, and helps us raise awareness on the need to preserve forests and use this natural wealth in a responsible and sustainable manner.
Fostering partnerships, relationships and collaboration is crucial to “opening the door” to scaling innovative solutions from social entrepreneurs that help people around the globe pull themselves out of poverty. This was the resounding message that came out of the 2015 Sankalp Africa Summit, held in Nairobi, Kenya on February 5 and 6.
During the course of the two days, nearly 700 participants from 30 countries came together in Nairobi for learning sessions, networking opportunities, and idea sharing all to help end extreme poverty.
Over the years, the World Bank Group’s Development Marketplace has worked with hundreds of social entrepreneurs around the globe. Through our multifaceted process, we have surfaced and supported hundreds of social entrepreneurs, however, we have come to realize that while financial and capacity support and learning opportunities are crucial in helping these social businesses thrive, it is equally important to support and foster networking and public private dialogue opportunities among relevant actors. The challenges in poverty reduction are difficult to say the least. But, when we come together, we can solve the challenges ahead of us.
The Sankalp Africa Summit or similar learning and networking conferences/events allow social entrepreneurs, the World Bank Group, impact investors, foundations, government officials and other players to come together to share concerns, ideas, and joint solutions to the most important development challenges. During one of the sessions led by the Development Marketplace, I was able to sit on a panel with Tim Chambers, co-Founder of Enterprise Projects Ventures Limited. Speaking to and presenting with Tim, I was inspired by his innovation, but more importantly he taught me through a real life example how partnerships and collaboration are a must in scaling innovations. Let me share a bit of Tim’s story with you:
Corrupt cash from secretive international sources – deliberately funneled through ‘shell companies’ to conceal the money’s illicit origins – is often used to buy ‘Towers of Secrecy’ in leading global cities like New York, as documented by a recent New York Times investigation.
Cities exert a magnetism that’s irresistible – attracting not just the most ambitious who seek economic opportunity and the most creative who revel in cultural richness, but also lawbreakers and looters: notably nowadays, the corrupt kleptocrats and tax-avoiding oligarchs whose hot money increasingly flows into the safe haven of prime real estate in the world’s leading cities.
At least part of the trend toward soaring center-city property prices, according to many anticorruption monitors, is due to the impact of illicit financial flows. It’s not just the plutocratic One Percenters who are steadily bidding up real-estate values: Plunderers and profiteers – often concealing their identities, with the aim of shielding their wealth from tax authorities and international asset-trackers – use prestigious parcels of center-city property as a piggybank to shelter their tainted lucre.
The most vibrant and most competitive of Global Cities – notably London, Paris, New York, Hong Kong and Singapore – have long been magnets for money, luring the world’s most enterprising entrepreneurs as well as its most desperate refugees. As their global vocation and vitality have lured the ambitious and the avaricious, however, the “priced out of Paris” syndrome has often taken over: Gentrification has morphed into “plutocratization,” notes Simon Kuper of The Financial Times, with “global cities turning into vast gated communities where the One Percent reproduces itself.”
Meanwhile, “the middle classes and small companies [are] falling victim to class-cleansing," Kuper asserts. "Global cities are becoming patrician ghettos” – with the middle class and the poor being driven ever-further out from the center-city in search of affordable housing, doomed to interminable commutes to sterile suburbs or brooding banlieues.
Most of the property price spiral in world-leading cities is surely attributable to the allure of cosmopolitan life in an age when urbanization is accelerating worldwide. But as two members of the World Bank Group’s unit on Financial Market Integrity (FMI) and the Stolen Asset Recovery (StAR) Initiative recently wrote in a StAR blog post, the melt-up of prime property prices often involves corrupt money and evasive property-registration practices.
Citing a recent New York Times investigative series that meticulously documented suspicious practices within Manhattan real-estate trends, FMI specialists Ivana Rossi and Laura Pop noted that the property-buyers “took several steps to hide their identity as the real owners of the properties. Some of these steps involved buying condos through trusts, limited liability companies or other entities that shielded their names. Such tactics made it very hard to identify the 'beneficial owner': to figure out who owned what, or who was the ultimate controller of a company (or other legal entities) since the names were not shown in the company records.”
“Vast sums are flowing unchecked around the world as never before – whether motivated by corruption, tax avoidance or investment strategy, and enabled by an ever-more-borderless economy and a proliferation of ways to move and hide assets,” said the painstaking New York Times investigation, "Towers of Secrecy," by Louise Story and Stephanie Saul.
Probing “the workings of an opaque economy for global wealth,” the reporters excavated the substrata of this enduring scandal. “Lacking incentive or legal obligation to identify the sources of money, an entire chain of people involved in high-end real-estate sales – lawyers, accountants, title brokers, escrow agents, real-estate agents, condo boards and building workers – often operate with blinders on.”
In a moment of inadvertent self-revelation, a Manhattan real-estate broker confessed her look-the-other-way negligence “when vetting buyers: ‘They have to have the money. Other than that, that’s it. That’s all we need.’ ” A former executive of a property-development firm was equally blunt: “You pretty much go by financial capacity. Can they afford it? They sign the contract, they put their money down with no contingency, and they close. They have to show the money, and that is it. I don’t think you will find a single new developer where it’s different.”
No wonder that the upper reaches of the U.S. real-estate market are “more alluring for those abroad with assets they wish to keep anonymous,” the Times analysis found. “For all the concerns of law-enforcement officials that ‘shell companies’ can hide illicit gains, regulatory efforts to require more openness from these companies have failed.”
The Times’ discoveries, asserted Rossi and Pop, thus underscore the important issues involved in asset disclosure and "beneficial ownership” rules. Many nations require that public officials fully disclose their financial holdings. Such transparency is one important safeguard against the plundering of public wealth by kleptocrats, corrupt clans or well-connected cronies in countries that are vulnerable to chronic larceny.
Yet some dishonest public officials exploit legal loopholes – or flout the law entirely: “As the StAR publication ‘Puppet Masters’ demonstrated, those that do engage in corrupt activities are likely to use entities such as companies, foundations and trusts to hide their ill-gotten wealth,” wrote Rossi and Pop. “These conclusions are also confirmed by a recent Transparency International UK report. It showed that 75 percent of UK properties in the UK, under criminal investigation since 2004 – as the suspected proceeds of corruption – made use of offshore corporate secrecy to hide the owner’s identities.”
Drawing on a new World Bank Group report (which they co-authored with Francesco Clementucci and Lina Sawaqed), “Using Asset Disclosure for Identifying Politically Exposed Persons,” Rossi and Pop argued that accurate and complete financial disclosure by officials in positions of public trust (known in the financial-integrity world as “Politically Exposed Persons”) are an essential safeguard against the diversion of assets. Such disclosures, by themselves, don’t provide a “magic bullet” solution to prevent corruption, yet they are a vital mechanism in building transparency and trust.
“Once there is an ongoing investigation, the information declared can be very helpful as evidence, both in what has been included as well as omitted,” wrote Rossi and Pop. “In many countries, intentionally leaving out information on a house or a bank account carries serious penalties. Furthermore, financial disclosures can help catch a dishonest public official whose lavish lifestyle – including real estate in a prized location – could not be supported by the resources, such as a public-sector salary, indicated in the declaration.” The key factor in ensuring integrity and combating corruption is thus the full disclosure of “beneficial ownership.”
Property prices in Global Cities are already being propelled upward by the gusher of money that is flooding, through fully legal channels, into the world’s most desirable and stable locations – thus threatening to put affordable housing, in many major cities, beyond the reach of all but the fortunate few. The last thing that already-unaffordable cities need is an unchecked flood of illicit billions and furtive real-estate transactions, which will only intensify the pressure that now threatens to create a renewed boom-and-bust cycle of unstable housing prices.
Urban advocates who are working to promote inclusive, sustainable, resilient and competitive cities will applaud the continued vigilance of asset-trackers and corruption-hunters – like the FMI and StAR units, through their work sans frontières
on the disclosure of beneficial ownership – whose efforts to halt illicit financial flows will provide an additional instrument to help ensure that cities will be as inclusive as possible in a relentlessly urbanizing age.
- Financial Market Integrity
- inclusive development
- collaborative governance
- Open Government
- Law and Regulation
- Private Sector Development
- Public Sector and Governance
- urban development
- urban competitiveness. Private sector competitiveness
- Competitive Sectors
- competitive cities
- Competitive Industries
- Competitiveness Policy
- business environment
- Law and Regulation
- Urban Development
- Public Sector and Governance
- Private Sector Development
- Financial Sector
At first sight, SXSW may appear to have little in common with the World Bank Group, the largest development institution in the world. Yet, creativity and technology, the two founding principles of SXSW, are often cited as two key factors for the World Bank Group to tackle the most daunting development challenges of the 21st century. At this year’s SXSW, a number of panel discussions around innovation, entrepreneurship, and technology in emerging markets are bringing the World Bank’s development agenda and Austin’s passion for technology much closer together. Among them two panels focusing on the risk and return of African Tech startups, and the innovation ecosystem in emerging markets, organized by infoDev, a World Bank program that supports innovation and entrepreneurship globally.
As the people of Vanuatu begin the painstaking task of assessing the damage to their homes, businesses, and their communities in the wake of Cyclone Pam, another assessment is underway behind the scenes.
Given the intensity of the category 5 storm and the reports of severe damage, the World Bank Group is now exploring the possibility of a rapid insurance payout to the Government of Vanuatu under the Pacific Catastrophe Risk Assessment and Financing Initiative (PCRAFI).
The Pacific catastrophe risk insurance pilot stands as an example of what’s available to protect countries against disaster risks. The innovative risk-pooling pilot determines payouts based on a rapid estimate of loss sustained through the use of a risk model.
The World Bank Group acts as an intermediary between Pacific Island countries and a group of reinsurance companies – Mitsui Sumitomo Insurance, Sompo Japan Insurance, Tokio Marine and Nichido Fire Insurance and Swiss Re. Under the program, Pacific Island countries – such as Vanuatu, the Cook Island, Marshall Islands, Samoa and Tonga – were able to gain access to aggregate risk insurance coverage of $43 million for the third (2014-2015) season of the pilot.
Japan, the World Bank Group, and the Secretariat of the Pacific Community (SPC) partnered with the Pacific Island nations to launch the pilot in 2013. Tonga was the first country to benefit from the payout in January 2014, receiving an immediate payment of US $1.27 million towards recovery from Cyclone Ian. The category 5 cyclone hit the island of Ha’apai, one of the most populated of Tonga’s 150 islands, causing $50 million in damages and losses (11 percent of the country’s GDP) and affected nearly 6,000 people.
Globally, direct financial losses from natural disasters are steadily increasing, having reached an average of $165 billion per year over the last 10 years, outstripping the amount of official development assistance almost every year. Increasing exposure from economic growth, and urbanization—as well as a changing climate—are driving costs even further upward. In such situations, governments often ﬁnd themselves faced with pressure to draw funding away from basic public services, or to divert funds from development programs.
Investing in Innovative Financial Solutions
The World Bank Group and other partners have been working together successfully on innovative efforts to scale up disaster risk finance. One important priority is harnessing the knowledge, expertise and capital of the private sector. Such partnerships in disaster risk assessment and financing can encourage the use of catastrophe models for the public good, stimulating investment in risk reduction and new risk-sharing arrangements in developing countries.
The Caribbean Catastrophe Risk Insurance Facility (CCRIF) is another good example of the benefits of pooled insurance schemes, and served as the model for the Pacific pilot. Launched in 2007, this first-ever multi-country risk pool today operates with sixteen participating countries, providing members with aggregate insurance coverage of over $600 million with 8 payments made over the last 8 years totaling of US$32 million. As a parametric sovereign risk transfer facility, it provides member countries with immediate liquidity following disasters.
We also know that better solutions for disaster risk management are powered by the innovation that results when engineers, sector specialists, and financial experts come together to work as a team. The close collaboration of experts in the World Bank Group has led to the rapid growth of the disaster risk finance field, which complements prevention and risk reduction.
- disaster recovery; Aceh; tsunami
- disaster response
- disaster relief
- disaster recovery
- disaster preparedness
- Disaster management
- Disaster Funding
- disaster coverage
- Disaster Risk Financing and Insurance Program
- catastrophic risk; livestock; disaster risk management
- Public Sector and Governance
- Private Sector Development
- Financial Sector
- Climate Change
The Latin America and the Caribbean region is crying out for infrastructure improvements. An investment estimated at 5 percent of the region’s GDP — or US$250 billion per year — is required to develop projects that are fundamental for economic development. This includes not only improving highways, ports and bridges, but also building hospitals and creating better transport, public transit and other mobility solutions for smarter cities. Rising demand for infrastructure also is prompting countries to redouble efforts to attract greater private investment
At the Multilateral Investment Fund (MIF), as at the World Bank Group, we believe that public-private partnerships (PPPs) can help governments fill this infrastructure gap. However, the projects must be implemented effectively and efficiently to achieve social and economic objectives.
Governments in the Latin America and the Caribbean region not only lack financing to address the infrastructure gap, but also face challenges in selecting the appropriate large infrastructure projects, planning the projects, managing and maintaining infrastructure assets — and gaining public support for private investment in public infrastructure.
However, PPPs are gaining ground in Latin America and the Caribbean. Beyond the larger economies of Brazil, Colombia and Mexico, assistance from the MIF and the Inter-American Development Bank (IDB) has enabled countries such as Paraguay to develop laws that pave the way for PPP projects. Just this week, Paraguay announced its first such project, which involves an investment of US$350 million to improve and build more than 150 kilometers of roads.
PPPs have been moving beyond classic interventions in public infrastructure, which have typically included roads, railways, power generation, and water- and waste-treatment facilities. The next wave of PPPs increasingly involves and provides social infrastructure: schools, hospitals and health services. In Brazil, IFC, the private sector arm of the World Bank Group, helped create the Hospital do Subúrbio, the country’s first PPP in health, which has dramatically improved emergency hospital services for one million people in the capital of the state of Bahia.
As we extend networks, and in particular broadband, to reach more isolated populations and the bottom 40 percent, we need to foster the development of relevant content in substance (including government services) as well as form (including pictorial and video information for the illiterate).
The private sector is the key driver of this entire change process, which government should facilitate.
The acceleration of technological change – with mobile is at the forefront – is leading to increased convergence between networks, devices, services and content providers. Judging from what I saw and heard during last week’s Mobile World Congress in Barcelona, my sense is that telecommunications regulation (as practiced today) will soon become obsolete, overshadowed by the importance of ensuring an overall balance and flexibility in this broader, converging market.
Consequently, institutions like the World Bank will need to find better ways to ensure that key regulators talk to each other and work towards the greater public good. This includes not only telecom and competition authorities, but also broadcasting, financial services and other regulatory bodies. We should facilitate these conversations between regulators, especially in view of the fast-growing involvement of telecommunications entities in the mobile money space.
Today is International Women’s Day--though personally I think women deserve to be celebrated more than one day a year!
My colleagues and I who work at the Bank on enabling equity in agriculture celebrate women every day and recognize their contributions to their families, communities and countries. We wanted to use this global celebration to update you on some of the things we’ve learned from our work to make women’s lives better.
Women have a big need for reliable and timely access to technical and market information: We believe that information and communication technologies (ICT) have the potential to completely change rural women’s lives, especially women farmers who often have less access to information compared to male farmers. Our recently completed study , which looked at practical ways to integrate ICTs into agriculture projects in Zambia and Kenya, found that rural and agricultural women have a lot to gain from access to ICTs. However we know that the use of ICTs to help women farmers depends on a number of factors, such as literacy, infrastructure and cost. Among the things we learned: ICT can enhance and expand the impact of programs for rural women; it is essential to listen and learn through focus groups and other research approaches to understand women’s specific information needs that can be met by ICT; and women often learn better from other women. This study is the first step in a growing program to understand how we can best support women farmers with ICT.
The conference panel of leading scholars and practitioners on microcredit: From left to right: Esther Duflo, Kate McKee, Lindsay Wallace, Carol Caruso, and Peer Stein.
Photo credit: Michael Rizzo.
On Friday, February 27, researchers, policymakers, investors and practitioners joined forces to move forward in the dialogue around microcredit’s impact on the lives of the poor. Many themes emerged from the day, but perhaps the most salient came from Dean Karlan, who summed things up in 2 words: “Understand clients.”
The conference began with six presentations from researchers Orazio Attanasio, Abhijit Banerjee, Jaikishan Desai, Esther Duflo, Dean Karlan and Costas Meghir, who completed randomized control trials (RCTs) in six countries examining the impact of microcredit. Lindsay Wallace, of the MasterCard Foundation, noted, “These studies may not be new, but they are incredibly important.” While specific findings varied from country to country, the studies confirmed with evidence what many in the field already assumed: that, while microcredit can be good for some, it is no magic bullet for tackling poverty.