Critically constrained public resources on the one hand, and huge existing infrastructure needs for basic services on the other, make private participation in emerging markets and developing economies (EMDEs) not just critical, but in fact, imperative. Crowding in private finance is essential to spur economic development and meet the twin goals of shared prosperity and elimination of extreme poverty, as well as to achieve the Sustainable Development Goals.
The Private Participation in Infrastructure (PPI) Database, with data spanning over almost 27 years, has become a powerful tool and measure for gauging the level of private investment in infrastructure in EMDEs.
In addition to energy, transport, and water & sewerage,. ICT backbone includes fiber optic cables, mobile towers and other hard assets with an active government component. Tracking private investment in this sector will be increasingly important due to the critical role that ICT plays in development. With some seven billion mobile connections and a 60 percent coverage in terms of 3G networks worldwide, the ICT sector is critical for disruptive innovation and for leapfrogging development and enhancing the impact under the Forth Industrial Revolution.
Megaprojects, more countries and more government support fueled PPI in 2017
The recently-launched. Yet, it remains the second lowest level of investment in the past 10 years and is 15 percent lower than the past 5-year average investment level. On closer examination, the increase over 2016 levels is attributable to a few megaprojects in China and Indonesia as well as a recovery in South Asia, led mainly by Pakistan. Also notable is the fact that the average project size increased by 26 percent in 2017, with some 20 megaprojects averaging $2.4 billion per project and accounting for 51 percent of the total PPI investment.
The upward turn in investment levels in 2017 is certainly positively correlated with the increase in government support to projects, signifying the important role played by government policy, regulation, governance and transparency in encouraging greater private participation in infrastructure. Government support to projects increased from 94 projects in 2016 to 135 in 2017. It should be noted that the declining share of government support to projects corresponded to the decline in investment levels from 2012 to 2016.
East Asia and the Pacific lead PPI globally, while energy dominates sectoral investments
The East Asia and Pacific region received the highest level of investment, while Latin America and the Caribbean and Sub-Saharan Africa received the lowest and the second-lowest level of investment in the past 10 years, respectively..
. The transport sector investments almost doubled from $18.8 billion in 2016 to $36.5 billion in 2017, largely due to mega-projects such as the $6.8 billion worth high-speed railway (HSR) project in China, another $6.0 billion HSR project in Indonesia and a $3.1 billion monorail project in Thailand. For ICT backbone sector, the investments grew from only $462 million in 2016 to $3.0 billion in 2017 due to two megaprojects in network infrastructure development.
How different countries fared in 2017
- China, Indonesia, Mexico, Brazil and Pakistan were the top five investment destinations and together attracted 58 percent of global investments.
- Barring Mexico, with a share of commercial financing of 63 percent, for all the other top five investment destinations the share of commercial financing is quite low with Indonesia raising only 23 percent of its total debt as commercial finance, Pakistan—only 7 percent and Brazil—only 4 percent.
- Egypt saw an unprecedented number of projects, while Brazil, Colombia and Turkey saw a sharp drop in the number of projects.
- , with $7.9 billion worth of investments across 35 projects in 17 countries compared to the past 10-year average of 14 countries.
Other characteristics of 2017 private infrastructure investments in EMDEs
- Renewables continue to increase in numbers in 2017 but saw a drop in the share of electricity generation investment due to coal megaprojects in Indonesia worth $7.7 billion. Of the 197 electricity generation projects in 2017, 173 projects (88 percent) are renewable energy projects. Notably, the share of renewable energy investment in 2017 dropped to 57 percent from the past five-year average of 64 percent.
- Of the total investment, 70 percent was debt-financed, with 24 percent of debt raised from bilateral providers and 22 percent from commercial debt providers. Fifty-five percent of the debt raised was from international sources. Private sources financed 45 percent of investments, public sources financed 25 percent, and development finance institutional sources—30 percent.
On the one hand there is every reason to be optimistic, private investment in infrastructure in EMDEs is showing signs of recovery. But on the other, whether or not this was a one-off spike fueled by a few megaprojects and favorable policy regimes in some countries—only time will tell. Stay tuned to the PPI database site for more updates on private investment levels in EMDEs.
Download the 2017 Private Participation in Infrastructure Annual Report.
The PPI Database is a product of the Infrastructure, PPPs & Guarantees (IPG) Group and is managed by the World Bank Group Singapore Hub for Infrastructure and Urban Development. It the most comprehensive database of private investments in infrastructure in the developing world. This endeavor was carried out by the PPI Database team led by Deblina Saha and comprising Seong Ho Hong, Alex Shao, Akhilesh Modi, and Iuliia Zemlytska.