The secret to infrastructure success? Strong PPP frameworks

What could developing countries do with an extra $500 million per year for infrastructure? That kind of money could finance around 83 kilometers of bus rapid transit service, easing congestion and improving public transport. It could add 570 megawatts of installed solar power, doubling some of Africa’s largest solar plants. Or it could fund 500 additional kilometers of four-lane roads, boosting connectivity and economic growth.

Imagine the vast possibilities for developing countries: fleets of electric buses, sprawling solar farms, interconnected highways, and other highly visible megaprojects that make a real difference in people’s lives, connecting them to jobs and services.

But is this kind of investment really possible? Can countries achieve such a transformation? Our latest research is optimistic, showing that some countries are already on their way. Surprisingly though, the secret sauce for this change isn’t advanced technology, highly skilled workers or state-of-the-art equipment. Instead, it’s something you can’t touch or see: Robust regulatory frameworks. A new World Bank report,  Benchmarking Infrastructure Development, suggests a significant correlation between regulatory reforms relating to public-private partnerships (PPPs) and PPP infrastructure investments.

Long before construction can begin, there is a huge amount of behind-the-scenes work. Local financial markets need to be prepared, regulations must be clear and stable, and project managers must ensure their teams have the necessary skills to manage procurement, bidding, and contracting.

Governments must also establish practices for successfully executing PPPs—an important vehicle for funding and completing infrastructure projects. Evidence from our report indicates that these “invisible” regulatory reforms are just as important as the cranes and bulldozers that build our bridges and roads. It shows that countries that strengthened their PPP frameworks between 1990 and 2022 saw an average increase of $488 million in infrastructure investment each year. 

Why do these behind-the-scenes actions matter so much?  Clear, well-established rules make it easier and less risky for private investors to participate in infrastructure projects. Countries with robust regulatory frameworks are better positioned to secure financing for essential infrastructure, freeing up critical resources that can be used to meet other pressing needs in health, education, the environment, and beyond.

Of course, regulatory reforms are just part of the story. Every country’s path is unique, there isn’t a one-size-fits-all solution. For example, Kenya and the Philippines started renewable energy projects and gradually moved to larger, more complex initiatives. Colombia was among the few countries to develop PPPs in the transport sector early on. And Australia successfully implemented PPPs without a standalone PPP law. The key is having a framework that encourages investment and adapts to local conditions.

Despite the different approaches, more countries are adopting PPP-specific laws. As of June 2023, 109 of the 140 economies (78 percent) examined in our report had a PPP-specific regulatory framework on the books and 79 economies enacted PPP laws (56 percent). From 2019 to 2022, seven economies—Armenia, the Dominican Republic, Ghana, Montenegro, Qatar, Saudi Arabia, and Sudan—introduced their first PPP laws, and 60 countries made changes to their regulations.

While progress has been made, significant gaps remain, especially in project preparation, a crucial area that still needs improvement. For instance, only 5 percent of the economies looked at require market sounding for technology and innovations, and just one-third standardize PPP transaction documents or publish assessments online. These areas have seen no progress since 2019.

These gaps are a crucial reason why the World Bank works with client countries on PPP best practices and infrastructure development. To that end, the Infrastructure Vertical at the World Bank hosts three donor-funded partnerships: The Public-Private Infrastructure Advisory Facility (PPIAF), which strengthens policies, regulations, and institutions that enable private sector participation in infrastructure projects; the Global Infrastructure Facility (GIF), which helps client countries build sustainable, quality infrastructure project pipelines; and the Quality Infrastructure Investment (QII) Partnership, which provides support for incorporating quality principles to build the foundation for achieving sustainable, resilient, and inclusive infrastructure. Together, these three entities help countries make effective changes at every phase of the infrastructure project lifecycle, which can make a world of difference.

To keep progressing, countries need to refine their strategies and make full use of resources like the World Bank’s Benchmarking Infrastructure Development report, which provides thousands of data points on PPP regulations globally and illustrates how individual countries evolve over time. Whether you are a private citizen, a practitioner, or government official, we encourage you to explore this new data, assess your country's progress, and push for further reforms.

As stakeholders in our collective future, it’s up to us to advocate for the changes needed to attract more investment and build the infrastructure that drives growth and improves lives.