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Private Sector Development

​Developing municipal credit markets: Experience with pooled finance

Kirti Devi's picture

Urbanization is a defining trend of our time. In 1900, 13 percent of the world’s population was urban. Today more than half of the estimated population of 7.2 billion lives in cities. And this growth has happened in one century.
On the upside: Urbanization and economic development are correlated and there are other benefits of density and agglomeration economies. Production is concentrated in cities, which are also centers of demand and social convergence. No country has achieved high-income status without significant urbanization. However, increasing energy use, accelerating CO2 emissions and more environmental pressures will accompany GDP growth. Mismanaged urbanization will impose social and environmental costs that will be difficult to reverse.
In many countries, this urbanization trend is playing out within the context of increased decentralization and fiscal adjustment, and local governments are increasingly responsible for the provision and financing of public infrastructure for their constituencies. This has placed an increased strain on local financing resources and led to an emphasis on the development of local credit markets and resorting to public-private partnerships (PPPs).

Mission to Myanmar: Promoting the full development potential of an economy in transition

Cecile Fruman's picture
In Yangon, the urban modernization of Myanmar is well under way | Photo by Stephanie Liu

How do you help a burgeoning democracy like Myanmar with its transition to a market-based economy after 50 years of isolation, poor infrastructure and limited capacity for reform? You do it by  engaging closely with the government, the private sector and development partners, and by providing the full range of data, financing and knowledge available across all sectors of the economy.

As I conclude my first visit to Myanmar, a fragile and conflict-affected country where the World Bank Group started our development engagement just three years ago, I've witnessed first-hand how the WBG can best support such an economy in transition. As Myanmar looks forward to its first free and fair election in over two generations – an event coming up in November – the challenge will be to ensure continued reform momentum during a period of dramatic political change.
Seldom have we faced such dramatic circumstances in a country where our engagement is in such an early stage and where the development potential is so great. A country of 50 million people that went from once being the rice basket of Asia to today having the lowest life expectancy and the second-highest rate of infant and child mortality among ASEAN countries as well as vast untapped farmland, Myanmar provides a once-in-a-lifetime development opportunity. This situation offers a chance for the WBG’s Trade and Competitiveness Global Practice to contribute to the transformation of an economy and society by supporting regulatory reforms, improving trade policy and trade facilitation, helping generate investment and improving the ability of the country to compete in one of the world’s most dynamic regions.
I was privileged during my visit to meet with the Minister and Deputy Minister of Commerce and their senior staff, and to open the Third Session of the Trade Sector Working Group, which the WBG co-chairs with the European Union and the Ministry of Commerce. Surrounded by India, China, Bangladesh, Thailand and Lao PDR – countries that together have about 40 percent of the world’s population – Myanmar has markets at its doorstep that are ready to be tapped. The removal of investment and trade sanctions by the West has also opened significant new opportunities farther afield.

​Toward an effective PPP business model: An eight-point plan for closing the infrastructure gap

Thomas Maier's picture
Photo: Wikimedia Commons
The global need for infrastructure is significant, particularly in emerging markets. By consensus estimates from the Organisation for Economic Co-operation and Development (OECD) to the Boston Consulting Group and the World Bank Group, the estimated annual global infrastructure investment need is about US$3.7 trillion – of which only about $2.7 trillion is currently met on an annual basis. 

This much-discussed “infrastructure gap” is large and it is widening. Even if fiscal conditions in developed and emerging economies improve, the need introduced by the infrastructure financing gap is unlikely to be met from public sources alone. This generates an expectation that private capital and user charges must be mobilized to fill these gaps.

But this is an entirely predictable problem, and over many years the international community has made efforts to provide assistance in building public-private partnership (PPP) capacity in emerging markets. Finding ways to leverage private sector investment through sound, consistent and sustained public sector policies should be a focal point for governments around the world.  International financial institutions (IFIs), given their unique relationships with emerging market governments, can and do play an important role. The community of professionals in multilateral development banks (MDBs) is listening; MDBs are willing and able partners.

Of course, stating that idea is one thing; practicing it is another. Here are eight ways that together, we can move from the theoretical to the actual and reach our goals for infrastructure.

Build it and growth will come

Dimitris Tsitsiragos's picture
Solar panels in Morocco. © Dana Smillie/World Bank

By encouraging private investment in infrastructure, we can spur growth in the developing world

Later this month the United Nations is expected to finalize its Sustainable Development Goals, a global action plan designed to end poverty and support long-term growth. One of the goals states, “Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation.” 
In many parts of the developing world, from Asia to Latin America, a massive infrastructure shortfall may be the single most significant obstacle to human and economic development. Addressing it will underpin progress on many of the SDGs.

One question, eight experts, part seven: Robert Puentes

Robert Puentes's picture

To gain a better understanding of how innovation in public-private partnerships (PPPs) builds on genuine learning, we reached out to PPP infrastructure experts around the world, posing the same question to each. Their honest answers redefine what works — and provide new insights into the PPP process. This is the question we posed: How can mistakes be absorbed into the learning process, and when can failure function as a step toward a PPP’s long-term success?

Our seventh response in this eight-part series comes from Robert Puentes, Senior Fellow with the Brookings Institution's Metropolitan Policy Program

Virginia's Pocahontas Parkway.
Photo: Richmond Times-Dispatch

In the U.S., one of the best learning tools for places wishing to engage in PPPs for infrastructure has been past mistakes. From the parking meter deal in Chicago, to Virginia’s Pocahontas Parkway, and a handful of others, American cities and states pay close attention to one another and are loathe to repeat previous problems.

But going forward, institutionalizing such learnings requires a dedicated team. Indeed, assembling a group with the right mix of finance, legal, policy, and communications experience is critical to the success of any PPP project. Public sector agencies looking to procure a limited number of PPP projects or engaging in their first, often use outside advisors for most of these services. This can be a successful strategy as long as public sector decision makers remain in control of the process.

Vlog voice from the field: What's behind the new push for Caribbean PPPs?

Brian Samuel's picture
Last week, the PPP Blog introduced readers to the new Caribbean Regional Support Facility, which is preparing to launch a series of boot camp-style workshops to increase technical capacity among Caribbean government officials and achieve long-sought results. 

In our first video blog from the field, Brian Samuel, a PPP Coordinator with the Caribbean Development Bank (and a former IFC staffer), explains why Caribbean public-private partnerships (PPPs) need this boost and how the PPP boot camp can transform talk into action.
PPP Boot Camps in the Caribbean

Which South Asia do you live in?

Prabha Chandran's picture

This blog is part of the series #OneSouthAsia exploring how South Asia can become a more integrated, thus more economically dynamic region. The blog series is a  lead up to the South Asia Economic Conclave, an event dedicated to deepen existing economic links through policy and investments in regional businesses.

Which South Asia do you live in? The one which offers world-class metros and malls, super-specialty hospitals, gourmet eateries and designer homes where servants make your meals, drive your car or clean your mess? 

Or do you live in the South Asia where sanitation, water and electricity are a luxury, where filth, ignorance and violence means death comes early and more frequently from illness, poverty and natural disasters? Statistically, the latter is more likely.

Having lived in Southeast Asia, where the emergence of the Tigers has transformed the lives of millions of poor through investment in human development, infrastructure and exports producing high growth rates, the visible poverty and chaotic streets of South Asia are troubling. So, too, is the contrast provided by India's dollar billionaires -- the third-largest rich man's club in the world.

How national PPP units can influence regional performance: Korea’s experience

Kang-Soo Kim's picture

Kang-Soo Kim is Executive Director, Public and Private Infrastructure Investment Management Center (PIMAC), at the Korea Development Institute (KDI), the Republic of Korea’s leading think tank on national economic development. In this blog entry, he explains how national Public-Private Partnership (PPP) units can influence regional economic performance.

Photo: Wikimedia Commons

What advice would you give governments creating a PPP unit?

First, for a government considering this, the vision for PPP needs to be established and shared with others. Second, clearly distinguished roles and functions must be institutionalized. Third, expertise needs to be developed in fields like law, finance, accounting, economics, development, and engineering. Fourth, active benchmarking of developed PPP economies and cooperation with other PPP units should be encouraged and promoted

Overall, it’s critical to remember that a PPP unit’s expertise and capacity is not built overnight. So my final piece of advice is that while experience is built, remaining patient is just as important as maintaining a clear vision of PPP.

What makes PIMAC effective?

The legal and institutional system that guarantees independence and objectivity to the evaluation body is the most important element here. A PPP unit should not be in any way influenced by other players in a PPP project — whether the budget authority, the competent authority, or the private concessionaire. The government is vulnerable to political influence although the private sector is the project stakeholder. Independent and objective assessment by the PPP unit is therefore all the more crucial. It is important that the government lends its support, and that all decision-making reflects evaluations made by the PPP unit.

To meet the jobs challenge, maximize the impact of SMEs

Klaus Tilmes's picture

The urgent challenge of generating jobs and incomes – as the world’s working-age population is poised to soar – will require making the most of all the job-creating energies of the private sector and the strategy-setting skill of the public sector. Today in Ankara, Turkey, the World Bank Group renewed its commitment to strengthen the global economy’s most promising and inclusive source of job creation: small and medium-sized enterprises (SMEs).

At a signing ceremony at the B20 conference of global business leaders – coinciding with the G20 forum of government leaders from the world’s largest economies – the Bank Group joined in a partnership with a new organization promoted by the B20: the World SME Forum (WSF), which is to become the global platform to coordinate practical assistance and policy support for SMEs.

Based in İstanbul, WSF has been founded through a partnership between the Union of Chambers and Commodity Exchanges of Turkey (TOBB), the International Chamber of Commerce (ICC), and ICC’s World Chambers Federation.

World Bank Group President Jim Yong Kim – in Ankara, Turkey, on September 4, 2015 – signs a Memorandum of Understanding to confirm the Bank Group's partnership with the World SME Forum. Also signing the document, along with President Kim, is Rifat Hisarciklioglu, the Chairman of B20 Turkey and the President of TOBB (the Union of Chambers and Commodity Exchanges of Turkey).

SMEs are a vital engine of innovation and entrepreneurship, and the success of the SME sector is central to every country’s prospects for job creation and economic growth. Providing support for SMEs is a fundamental priority for the World Bank Group, as we pursue our global goals of eradicating extreme poverty by the year 2030 and boosting shared prosperity.

SMEs are crucial to every economy: They provide as much as two-thirds of all employment, according to a recent survey of 104 countries – and, in the 85 countries that showed positive net job creation, the smallest-size enterprises accounted for more than half of total net new jobs.