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

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.  
 
The role of MDBs
The PPI Database also tracks a number of other key variables, including the presence of MDB support to projects. Among the most significant findings: MDB support played a stronger role in IDA countries than in non-IDA countries and “blend” countries. In IDA countries, approximately 22 percent, or 42 projects, received MDB support. This compares to 11 percent (135 projects) in non-IDA countries and only eight percent (44 projects) in blend countries. This shows that MDBs are playing an important role in helping leverage private finance for infrastructure.    
 
Multilateral involvement in IDA countries was highest in the energy sector, with 37 projects (29 percent of projects) receiving support. Loans from MDBs were used most frequently, but guarantees were deployed 18 percent of the time in IDA countries, compared to 12 percent in blend countries, and two percent in other countries. Deeper analysis, relevant background, country-specific examples, and links to further reading can be found here.
 
I come away from these findings with two closely related thoughts. First, scaling up private finance for infrastructure in the poorest countries is going to require more support from the MDBs. Second, we will continue to have to provide other support, such as capacity building and help constructing an enabling environment, to ensure these projects deliver the intended results. 
 
About the Private Participation in Infrastructure Projects Database:
The Private Participation in Infrastructure Projects Database is a joint product of the World Bank’s Public-Private Partnership Group and the Public-Private Infrastructure Advisory Facility (PPIAF). Its purpose is to identify and disseminate information on private participation in infrastructure projects in low- and middle-income countries. The database highlights the contractual arrangements used to attract private in­vestment, the sources and destination of investment flows, and information on the main investors. The site currently provides information on more than 6,000 infrastructure projects dating from 1984 to 2013 and is updated with last year’s data six months after year-end (July 2014). It contains over 30 fields per project record, including country, financial closure year, infrastructure services provided, type of private participa­tion, technology, capacity, project location, contract duration, private sponsors, and development bank support. This project represents the best efforts of a research team to compile publicly available information on those projects, and should not be seen as a fully comprehensive resource. Some projects—particularly those involving local and small-scale operators—tend to be omitted because they are usually not reported by major news sources, databases, government websites, and other sources used by the PPI Projects database staff. For more information, please visit: http://ppi.worldbank.org.