Infra spend rebounds in developing countries: WB

Friday, 20 April 2018 00:00 - - {{hitsCtrl.values.hits}}

Multibillion-dollar projects, more target countries, and more government support fuelled a 37% rebound in private sector investment in developing-country infrastructure projects, said the World Bank.

Despite this optimism, 2017 investment commitment levels still remained 15% below the average for the past five years, according to bank’s 2017 Annual Update of the Private Participation in Infrastructure (PPI) Database.

Fifty-two developing countries received private investment in infrastructure in 2017, up from 37 in 2016. Also, 20 mega-projects with an average size of $2.4 billion accounted for 51% of the total investment, contributing to the increase over 2016 levels. Importantly, government support to projects also increased, from 94 projects in 2016 to 135 in 2017, underlining the critical role played by government policy in encouraging greater private participation in infrastructure.

“It’s encouraging to see the private sector is starting to return to infrastructure investments in developing countries,” said Jordan Schwartz, Director of Infrastructure, PPPs & Guarantees for the World Bank Group.

“Coupled with data demonstrating that governments are playing a bigger role in supporting these public-private investments, this shows that we are going further to meet the infrastructure needs of growing populations by bringing more resources to the table.”

Breaking down the data regionally, East Asia and Pacific (EAP) captured more than half of the total investment measured, overtaking Latin America and Caribbean (LAC) for the first time. This is the highest level of private infrastructure investment ever recorded in EAP, at $49 billion.

Meanwhile, LAC’s share dropped to its lowest level in the past 10 years. The investment level in the Mena region tripled from 2016 levels, while private infrastructure investment in South Asia almost doubled. Only Sub-Saharan Africa saw declining investments, the second lowest level in 10 years.

Investments in the world’s poorest countries also grew strongly, reaching 8.5% of global investments in 2017 compared to 4.3% in 2016. These countries saw $7.9 billion worth of investments across 35 projects in 17 countries. This compares to the past 10-year average of 14 countries.

In addition, renewable energy projects continued to grow in numbers, though their share of electricity generation investment took a dive as multi-billion dollar coal projects in Indonesia captured investment commitments totalling $7.7 billion. Renewable energy projects tend to be smaller, and nearly 70% of large-scale projects still use conventional power sources.

While the World Bank’s PPI Database focuses on projects that have at least 20% private ownership, many of the deals involve public sector or multilateral and bilateral financing. This year, private sources financed 45% investments, public sources financed 25%, while multilateral and bilateral sources financed 30%.