67829 TRANSFORMATION THROUGH INFRASTRUCTURE FY2012-2015 This volume is a product of the staff of the International Bank for Reconstruction and Development/ The World Bank. The findings, interpretations and conclusions expressed in this paper do not necessarily reflect the views of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The International Bank for Reconstruction and Development/ The World Bank encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, USA, telephone 978-750-8400, fax 978-750-4470, http://www.copyright.com/. All other queries on rights and licenses, including subsidiary rights, should be addressed to the Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA, fax 202-522-2422, e-mail pubrights@worldbank.org. ISBN: 978-1-60244-006-7 TRANSFORMATION THROUGH INFRASTRUCTURE FY2012-2015 FOREWORD I nfrastructure can be a vector of change in addressing some of the most systemic development challenges of today’s world: social stability, rapid urbanization, climate change adaptation and mitigation and natural disasters. Without an infrastructure that supports green and inclusive growth, countries will not only find it harder to meet unmet basic needs, they will struggle to improve com- petitiveness. Today, the infrastructure gap in low and middle-income countries is estimated at US$1 trillion. More and more, countries need to turn to the private sector as well as the public sector to build and operate their essential infrastructure. Infrastructure, comprising transport, water, energy and information and communications technology, has become the single largest business line for the World Bank Group, with $26 billion in commit- ments and investments in 2011. This is the result of a major scale-up, starting in 2003. This strategy update lays out a framework for how to transform the Bank Group’s engagement in infra- structure across sectors in order to respond to demands for more integrated solutions. This requires us to move away from a “retail� approach and towards a clearer World Bank Group value proposition that combines lending, mobilization of other public and private capital, knowledge and advice. This is the next frontier for World Bank Group engagement and, if we get it right, it has the potential to accelerate growth and shift clients towards sustainable development. Rachel Kyte Rashad Kaldany Michel Wormser Vice President Vice President Vice President Sustainable Development Network Global Industries Multilateral Investment The World Bank International Finance Corporation Guarantee Agency ACKNOWLEDGEMENTS P reparation of the strategy was overseen by the World Bank Group Infrastructure Strategy Committee, chaired by Jose Luis Irigoyen, whose members include Nancy Vandycke (lead author and manager of the strategy), Salman Anees, Luis Andres, Aldo Baietti, Dan Biller, Cecilia M. Briceno-Garmendia, Omar Chaudry, Vivien Foster, Jaafar Sadok Friaa, Clive Harris, Olivier Le Ber, Renaud Paubelle, Jordan Schwartz, Tomas Serebrisky, Margaret Peggy Ann Walsh and Jyoti Shukla. The Committee benefited from the guidance of Laurence Carter, Bernie Sheahan, Pierre Guislain, James Bond, Joachim von Amsberg, Stephen Lintner, John Roome, Laura Tuck, Jack Stein, Jamal Saghir, Makhtar Diop, Shubham Chaudhuri, Marianne Fay, Andrew Steer, Pankaj Gupta, Galina Mikhlin-Oliver, Linda Van Gelder, Cyprian Fisiy, Jeni Klugman, Luis Serven and Cesar Calderon. The infrastructure anchor working group, led by Nancy Vandycke, with participation from, Eva Kolker, Adam Diehl, Michele Diez, Jacqueline Dubow, Christine Zhenwei Qiang, Doyle Gallegos, Isabela Manelici, Jacqueline Devine, Peggy Johnston, Marcelino Madrigal, Michael Dalesio, Peter O’Neill, Varun Nangia, Alexander Danilenko and Tito Yepes, provided technical input and data support to the drafting team. Special gratitude is due to Group staff who generously provided the team with valuable recommendations and guidance, including Michel Wormser, Vincent Gouarne, Marc Juhel, Avjeet Singh, Kamal Siblini, Jeffrey Delmon and Cathy Russell. We also acknowledge the assistance of Jacqueline Dubow and Mihae Kim (GIMGA Group) in preparing the manuscript for publication. Guidance received from the Board of Executive Directors of the World Bank Group at the Committee on Development Effectiveness during the discussion of the draft report is gratefully acknowledged. ABBREVIATIONS AND ACRONYMS AAA Analytical and Advisory Assistance ICT Information and Communication Technology AfDB African Development Bank IDA International Development Association AFR Africa Region IEG Independent Evaluation Group AMC Asset Management Company IFC International Financial Corporation AsDB Asian Development Bank IFCOE Infrastructure Finance Center of Excellence ASEAN Association of South East Asian Nations LCR Latin America and Caribbean Region BRT Bus Rapid Transit LIC Low Income Country CAS Country Assistance Strategy MDB Multilateral Development Bank CDM Clean Development Mechanism MIC Middle Income Country CO2 Carbon Dioxide MIGA Multilateral Investment Guarantee Agency CODE Committee on Development Effectiveness MNA Middle East and North Africa Region CSC Corporate Score Card ODA Official Development Assistance CTF Clean Technology Fund OECD Organization for Economic Co-operation and Development DAC Development Assistance Committee (OECD) OPCS Operations Policy and Country Services DPL Development Policy Loan OVP Operational Vice-President DPO Development Policy Operation PPI Private Participation in Infrastructure EAP East Asia and Pacific Region PPIAF Public-Private Infrastructure Advisory Facility EBRD European Bank for Reconstruction and Development PPP Public-Private Partnership ECA Europe and Central Asia Region RTA Reimbursable Technical Assistance EITI Extractive Industries Transparency Initiative SAR South Asia Region ESW Economic Sector Work SDN Sustainable Development Network EU European Union SIAP Sustainable Infrastructure Action Plan FPD Finance and Private Sector Development SOE State Owned Enterprise FY Fiscal Year TA Technical Assistance GAC Governance and Anti-Corruption TTI Transformation through Infrastructure GDP Gross Domestic Product WB World Bank (IBRD/IDA) GEF Global Environment Facility WBG World Bank Group, or Group GET Global Expert Team WBI World Bank Institute GHG Green House Gas WSP Water and Sanitation Program IBRD International Bank for Reconstruction and Development WSS Water Supply and Sanitation TABLE OF CONTENTS Summary ..............................................................................................1 Context .................................................................................................4 Vision ...................................................................................................8 Implementation – Principles and Actions ................................................12 Core Engagement Transformational Engagement Mobilization of Private Capital and Other Sources World Bank Group Regional Action Plans ................................................32 Africa East Asia and Pacific Europe and Central Asia Latin America and Caribbean Middle East and North Africa South Asia Annex A ..............................................................................................83 Achievements under the Sustainable Infrastructure Action Plan, FY08-11 Annex B ..............................................................................................85 World Bank Group Support for Infrastructure, FY03-11 Annex C ..............................................................................................88 Results Framework Annex D ..............................................................................................92 Outcomes of the G20 Summit in Cannes on Infrastructure SUMMARY I nfrastructure development is critical to delivering growth, reducing poverty and addressing broader development goals. To contribute to these impacts, the World Bank Group (“Group�) has made a sustained effort to scaleup its support for infrastructure since 2003. In FY10, the Group emerged as the largest multilateral financier for infrastructure—transport, water, energy and information and commu- nications technology (ICT). It now represents 43 percent of the Group’s assistance. Several external trends are shaping the infrastructure agenda of the future. Lack of access to basic infrastructure services continues to undermine living standards in low-income countries (LICs) and some middle-income countries (MICs). Aspirations for growth are fuelling the expansion of infrastructure net- works across countries. Furthermore, the more systemic development chal- lenges of today’s world—from social stability, to rapid urbanization, climate change, technological changes and globalized issues such as food and energy crises—call for more complex and interconnected infrastructure solutions (Figure 1). Tackling these second-generation issues will require actions by and across sectors. These actions can potentially accelerate growth and shift clients towards a more sustainable development trajectory. In 2010, the Group positioned support for infrastructure as a strategic priority in creating growth opportunities and targeting the poor and vulnerable. Main- taining the Group’s level of engagement in infrastructure in both LICs and MICs and responding to their very diverse needs with Group resources subject to medium-term constraints will require a balanced approach with a significant level of ambition in terms of adaptability, innovation and leverage. In following this approach, the public sector will remain central to the delivery of infrastructure services as a provider or enabler. Transformation through Infrastructure (TTI)— the update to the Sustainable Infrastructure Action Plan, FY08-11—is designed to operationalize this approach, resting on three pillars: Pillar 1, the Group will continue to do what it does well—sector based projects in support of the access and growth agenda. This will continue to represent the core of the Group’s engagement in infrastructure. This engagement, critical for poverty reduction, will continue to be guided by sector strategies of individual sectors. Yet, there is scope for increased selectivity at the country level and increased effective- ness in the areas of poverty, governance, gender and knowledge. 1 8 Pillar 2, Second, the Group will support client demand for addressing the more complex, second-generation infrastructure issues. The capacity of the Group to respond to these issues will require transforming how the Group engages with clients and partners—by broadening the range of interlocutors interested in contributing to the solution, including middle-income countries, traditional and non-traditional donors, responsible businesses and local actors; brokering knowledge; using international fora to advance on certain global issues; collaborating more effectively with other multilateral develop- ment banks (MDBs) on issues and projects of regional or global relevance; helping align bilateral resources in order to access funding at scale; and deliv- ering transformational projects. In this update, by definition, transformational projects are designed to optimize co-benefits across infrastructure sectors, between infrastructure and the environment (green), between infrastructure and social development (inclusive) and heighten spatial benefits (regional). These projects, which can be large or small scale, all have in common that they can accelerate growth and even shift clients towards more sustainable development trajectories. Evolving the infrastructure portfolio over time towards a critical mass of such projects will depend on many factors, including demand from client countries, client leadership and champions and the alignment of resources from multiple partners. Pillar 3, the Group will leverage its capital by bringing more private sector financing into infrastructure. The IFC will ramp up its infrastructure business, with particular attention to third party resource mobilization, MIGA will scale up its guarantee support and the Bank will reinforce its upstream work on the enabling environment in order to attract the private sector. Additionally, the Bank will begin to focus on “capital enabled� for infrastructure, aim- ing to double the mobilization from the private sector, MDBs and other sources of financing in IDA/IBRD projects. Together, the Group will pilot a new approach on Public-Private Partnerships (PPPs) in several joint Bank-IFC focus countries, which will involve developing and testing new instruments and coordinating actions across the Group. In all other countries, the Bank and IFC will enhance their support for the enabling environment and expand their engagement with the private sector. Pillar 3 aims to increase the financing envelope for infrastructure. The new internal and external environment offers exciting opportunities for the Group. Implementation will be key. Six regional implementation action plans anchor the corporate vision into country and regional realities. The strategy update presents a results framework to monitor progress over FY12-15, along with a package of instruments to enhance impact (Figure 2). These elements will ensure that the Group continues to serve its diverse clients towards a more sustainable development path. Figure 1: Infrastructure Engagement in a Changing World Transformational Engagement Climate Change Social Technology Stability Urbanization Globalization Access Infrastructure Growth Core Engagement 2 2 Figure 2: Innovative Tools and Procedures Pillar 1: Core Engagement Pillar 2: Transformational Engagement Pillar 3: Mobilization of Private Capital Poverty Knowledge Brokering Bank • SWAT teams for enhanced poverty focus • South-south/OECD knowledge transfer • Enabling environment support • Enhanced effort on cost recovery Strategic Staffing • Focus on capital enabled for infrastructure Governance • Deep technical expertise+integrative skills • Financial instruments • Project + Sector level engagement • Talent view across silos IFC Gender • Infrastructure Panel • Investment/advisory scale-up • 100% ‘gender informed’ CAS target • Transitional Sector Board for ICT • Third party resource mobilization • Gender targets by sector Partnerships • Global Equity Fund for Infrastructure • SDN Companion Piece • International fora positioning (e.g. Task Force) (managed by AMC), InfraVentures • Sector-specific guidance notes • MDB collaboration on some issues and projects of MIGA Knowledge regional/global relevance • Guarantees scale-up • Global Expert Teams, Chief Technical • Bilaterals Group Specialists, World Bank Fellows – Linking/Leveraging existing funding • Tier 1 countries—Piloting of new instruments • Green Growth Knowledge Platform (e.g. climate-related, project preparation) and coordinated actions across the Group • ICT Knowledge Platform – Engagement with non-traditional donors • Tier 2 countries—Enhanced support for Transformational Projects enabling environment and engagement • Strategic project upstream review with private sector • Transformational by design • Joint Bank-IFC PPP targets • New indicators and data (investment/advisory) • Programmatic country-based approach • Operational incentives • Procurement Social and Environmental Impact • IFC Policy and Performance Standards on Environmental and Social Sustainability (updated) and MIGA Performance Standards • Bank Environmental and Social Safeguard Policies (ongoing updating and modernization) 3 CONTEXT I n May 2011, the Committee on Development Effectiveness endorsed the World Bank Group (WBG, or Group) Infrastructure Strategy—Issues and Concept Note.1 The Note took stock of the Group’s past performance in telecommunication and internet services. There is still a large unmet access agenda; even in MICs, where there is a large endowment of infrastructure, there continues to be a demand for infrastructure to support access and infrastructure and proposed pursuing engagement in core infrastructure growth. Aspiration for growth is fuelling the expansion of infrastructure for basic access and growth and pushing the frontier into two areas: trans- networks across countries. Availability and reliability of infrastructure services formational engagement and mobilization of the private sector (including are viewed as critical to private sector growth and competition on domestic public-private partnerships, PPPs). Transformation through Infrastructure and international markets. Yet, in East Asia and the Pacific (EAP), for ex- – the World Bank Group Infrastructure Strategy Update, FY12-15 (TTI) ample, a quarter of the urban population lack improved water, sanitation and updates the Sustainable Infrastructure Action Plan, FY08-11 (SIAP) as the durable housing. Group’s strategy for infrastructure. It specifies what the Group will do in In addition to access and growth, the infrastructure agenda is increasingly the infrastructure sectors—transport, water, energy and information and shaped by second-generation variables. Social stability calls for the creation communications technology (ICT)—and how it will be implemented and of jobs and broadened opportunities for social outcomes, including gender monitored. TTI tackles, head-on, the question of the future relevance of equality, to which infrastructure can contribute, as well as the continued the Group in infrastructure vis-à-vis a diverse group of clients and rapidly engagement of citizens, with mechanisms in place for accountability changing external and internal contexts. and transparency in public sector service delivery (Box 1). As the world Infrastructure investments have fuelled the acceleration of growth and becomes increasingly connected, issues which used to be local, such reduced income disparities.2 Recent work shows that a ten percent increase as food, water and energy security, are now becoming issues of regional in infrastructure development contributes to one percent growth4 in the long- or global relevance. Rapid urbanization from Asia to Africa is fuelling an term.3 In Sub-Saharan Africa, infrastructure development has contributed increasing demand for more integrated infrastructure solutions. By 2030, about half of the recent acceleration in growth. Between 1990 and 2005, 95 percent of the population growth in the developing world will be located China invested approximately US$600 billion to upgrade its road system in cities, with urban centers contributing up to 70 percent of global GDP. and connect all of its larger cities. It is estimated that aggregate Chinese Adaptation to climate change is feeding demand for infrastructure that is real income is approximately 6 percent higher than it would have been more resilient to natural disasters, while mitigation calls for an infrastructure in 2007 if the expressway network had not been built. India is planning about that is less environmentally damaging. Technological advances are offering US$1 trillion in infrastructure spending over the next five years. Infrastructure new opportunities to leap-frog, while supporting a demand for more sophisti- also featured prominently in the global response to the financial and cated infrastructure solutions. Resolving these issues through infrastructure economic crisis in 2008. Some argue that increased public spending in has the potential to accelerate growth and even shift clients towards more infrastructure in developed countries can generate growth both in devel- sustainable development trajectories. oped and developing countries.5 Responding to these increasingly complex and interconnected issues may Demand for infrastructure continues to grow not only in low-income countries, require a different approach. In many cases, the enormous needs—whether but also in middle-income countries. In LICs, there is a strong demand physical infrastructure or institutional strengthening—are currently being for infrastructure services to meet basic access needs, such as access to met by single sector interventions (e.g., building a road or expanding electricity networked electricity, roads, improved water sources and sanitation and or water connections to provide access to markets, electricity and safe 4 n Box 1: Infrastructure for Better drinking water). This approach may not be enough to tackle some of the more complex issues. For Growth – Achieving Gender Equality example, traditional, centralized water systems may not allow cities to cope with urban needs. Expanding irrigation to ensure food security is simply not sustainable when water competes through Infrastructure Access for other uses, including the production of electricity. Providing hard infrastructure is not sufficient to improve sanitation goals if not combined with support for behavior change and usage The provision of basic services to expectant instruction. Providing infrastructure without the supportive institutional framework to deliver and mothers and improving the availability of clean maintain assets and services is not sustainable. Addressing the range of issues that clients face water and sanitation to households, has been through infrastructure may require looking at synergies and strategic complementarities among shown to substantially close the gender gaps sectors (e.g., multipurpose hydraulic infrastructure which can support irrigated agriculture and thus in excess mortality. Especially in infancy and agricultural productivity and food security goals; green infrastructure, which looks at infrastructure early childhood, excess mortality of girls is which can be sustained over time by integrating environmental considerations into the decision-making rooted in the failure of institutions to provide framework; and urban design, which can promote citizen security and social cohesion). The private clean water, sanitation, waste disposal and sector is already leading the way, with some firms adjusting their business models to create and drainage. For example, in Argentina, improve- exploit synergies among sectors. In sum, energy, transport, water and ICT all have the potential to ments in the water supply have contributed provide solutions to challenges at the global, regional and local levels; their value together may be to decreasing child mortality between 5 and more than the sum of their individual parts. 7 percent, with even greater impact in the Addressing these challenges has implications in the scale of the financing needed. Many estimates poorest areas. exist on the scale of global infrastructure needs, from US$1 trillion to support basic infrastructure Infrastructure can lessen women’s time con- services with a normal growth trajectory,6 to broader estimates which include climate change adaptation straints and free them for greater economic and mitigation. While varying in scale, these estimates all point in the same direction: the public sector participation or leisure time. For example, alone cannot provide funding volumes which are large enough. The private sector must be involved. South Africa’s rural electrification program It is now clear, for example, that the promised investment flows on the order of US$100 billion per helped increase women’s labor force par- annum for the Green Climate Fund can only be achieved with private sector involvement. ticipation by nearly 10 percent in 5 years Throughout the 2000’s, private participation in infrastructure (PPI) has proved a game changer in and yet had no effect on male employment. infrastructure financing. The global investment industry, even after the financial crisis and recent mar- Investments in the other infrastructure sec- ket turbulence, sits on assets worth over US$100 trillion in the form of pension funds, mutual funds, tors can also be influential. In urban settings, exchange-trade funds, insurance funds, private equity funds, hedge funds and sovereign wealth long commutes resulting from poor transport funds. PPI reached an all-time high of US$160 billion in FY10 (compared to US$100 billion in infrastructure can greatly limit women’s abil- FY05). However, the disparity between MICs and LICs has grown: MICs can mobilize huge flows ity to participate in the workforce because of of private money, not only from global infrastructure funds, but also from domestic markets.7 While the time constraints associated with child- investors from these MICs, supported by quasi-private banks, are also investing in LICs,8 such LICs care. In rural Pakistan and Guatemala, the are largely left behind, with the share of private flows to LICs (excluding ICT) falling to virtually zero expansion of rural road networks contributed in FY10. While private sector financing has great potential, it remains highly volatile to financial to increased female mobility and schooling. crises and is concentrated in a few sectors and countries. MICs that have experienced the fastest Source: World Development Report, 2012 economic growth in recent years were also the most capable of attracting private capital and other sources of financing; the LICs with the greatest investment needs also have the greatest difficulty attracting private capital. 5 Figure 3: World Bank Group Infrastructure Commitments, FY03-FY11 Even if the private sector has become a sizeable source of financing, ex- 35 50 perience from the 1990s shows that it cannot substitute for the public 45 30 sector. The public sector remains central to the delivery of infrastructure 40 services, either as a provider or enabler. In China and Brazil, for example, 25 35 a great deal of infrastructure is financed by national development banks. 30 20 In other countries, private investment funds operate with extensive public 25 guarantees. Across the globe, the public sector remains a critical actor— 15 20 meeting basic access needs and enabling regional infrastructure solutions 15 10 in Sub-Saharan Africa, creating jobs in the Middle East and North Africa 10 (MNA), spurring growth in South Asia (SAR), and rebalancing economic 5 5 development in East Asia (EAP), Latin American and the Caribbean (LCR) 0 0 and Europe and Central Asia (ECA). However, while there may be large 2003 2005 2007 2009 2011 expectations for what the public sector can do single-handedly, they will Infrastructure Commitments have to be adjusted within a restricted fiscal space. Infrastructure Percentage of Total WBG Commitments For the Group, infrastructure is at the core of its mandate of growth, poverty reduction and broader development. In FY10, the Post-crisis Directions paper9 identified support for infrastructure as the Group’s Strategic Priority with regard to creating opportunities for growth and targeting the poor and vulnerable. Infrastructure spills over into many Figure 4: Infrastructure and Economic sectors, including urban development, environment, trade, private and Development financial sector development and education. It now represents 43 per- cent of the Group’s assistance in client countries (Figure 3). This high level of support results from efforts sustained since 2003 by the Group to scale up and transform infrastructure into a core business line. 1400 New internal variables are shaping the Group’s agenda in infrastructure. 1200 This update to the SIAP is being developed in a very different internal 1000 Infrastructure Investment context than its predecessors, the Infrastructure Action Plan and SIAP,10 per capita (US$) 800 which were both characterized by lending volume scale-up and growing resources. The overall resource envelope within the Group is projected 600 al ation to remain constrained over the medium term horizon, with expected re- 400 Tran sform percussions in the infrastructure portfolio.11 Projections suggest that 200 the infrastructure envelope may return to a “normal level� relative to the US$29 billion in FY10 (US$30 billion if irrigation and drainage is 0 10 20 30 40 50 included) at the end of the global crisis.12 In addition, flat budgets are placing additional pressures on project preparation and supervision. GDP per capita (US$ thousands) 6 6 This environment triggers new challenges, but also new opportunities for require: (a) getting more mileage from what the Group already does well in the Group: support of the access and growth agenda by applying increased selectivity and effectiveness in specific areas; (b) supporting client demand for second- • The composition of the Group’s infrastructure portfolio will reflect an generation issues by transforming how the Group engages with clients and increase in the share of IDA projects and that IBRD lending may likely partners—through brokering of knowledge, broadening the range of interloc- return to pre-crisis levels. In FY10, IBRD accounted for 74 percent utors, using international fora to advance on some issues of global relevance, of the Bank’s infrastructure response to the global crisis. Going forward, collaborating more effectively with other multilateral development banks with the head-room from IBRD subject to capital constraints and (MDBs) on issues and projects of regional or global relevance; helping to align the IDA16 resource envelope fixed until FY15 (although significantly bilateral resources behind localized and global issues and delivering trans- higher than under IDA15), the share of IBRD infrastructure commit- formational projects (i.e., projects which, by design, focus on the nexus ments in total Bank commitments may fall to fifty percent. Within between sectors and maximize green, regional and inclusive/broader devel- IFC, the share of infrastructure investments located in IDA countries opment benefits); and (c) leveraging the Group’s capital to bring more private is expected to range between 30-40 percent by financing volume sector financing into infrastructure. and 40-50 percent by number of projects financed over FY12-15. This strategy update articulates a new vision in which infrastructure can • The Group faces an increasing demand for more complex and riskier help accelerate growth and shift clients towards a more sustainable devel- infrastructure programs that address second-generation issues. To opment trajectory. Sustainable development rests on integration and a bal- engage effectively on those issues, given the medium-term resource anced consideration of social, environmental and economic goals in public constraints, will require a different type of engagement by the Group— and private decision-making.13 Delivering on this vision will require actions such as adopting more flexibility in terms of length and thematic by and across sectors. This strategy update rests on core principles, which areas, leveraging knowledge through a large systematic program, were elaborated under SIAP and remain valid today, including the centrality or enabling co-financing of projects the Group funds. Strengthened of infrastructure for growth, the need to ensure financial, environmental engagement in MICs will be critical to provide financing and know- and social sustainability and address governance risks in projects and the ledge to support LICs. importance of leveraging further Group support. As was the SIAP, TTI is • More attention will need to be devoted to leveraging resources. Recently, an umbrella strategy that ties together the sector strategies of individual budget constraints have been driving decisions towards consolidating sectors—transport, water, ICT and energy.14 It validates and strengthens in- resources into fewer, but larger, projects and towards pushing the prepa- dividual sector strategies by highlighting their connections. TTI also focuses ration costs down to clients (often through super-vision). As a result, on implementation, including six regional action plans that demonstrate the size of infrastructure projects has doubled since FY08 (average how the corporate vision will be operationalized, taking into account the Bank infrastructure project size in FY11= US$70 million). To maintain demand from the wide range of client countries. the Group’s engagement in the largest number of countries possible, TTI aligns with many of the principles on infrastructure reaffirmed at the it will be critical to increase the effectiveness of its existing resources G20 Summit in Cannes in 2011. In particular, TTI concurs with the impor- and to mobilize the private sector, MDBs and others, whenever possible. tance of infrastructure for growth and job creation in developing countries; The Group’s ability to maintain the same level of engagement within a leveraging resources for infrastructure projects, including from the private resource-constrained environment with more complex issues to resolve is sector, in an increasingly fiscally constrained environment of developed and at the heart of this strategy update. The Group will build on what it has developing countries; scaling up of regional projects; and establishing new achieved over the past ten years in general and under SIAP over FY08-11 in mechanisms to unlock the public and private sector financing in LICs. particular, taking into account new external and internal realities. This will 7 VISION Infrastructure has always been used to transform nature to meet the goals for less than a decade. For instance, sizeable areas of China’s coastal of human societies. Prosperity and success of various societies throughout cities are decaying rapidly after only a decade due to better infrastruc- history have depended on their infrastructure services. Around the world and ture and lower labor costs in China’s interior cities. For China’s cities, across centuries, bridges, highways and ports have been built to facilitate as well as for cities elsewhere, the speed at which they are able to the pace of human progress. In today’s world, access to information and adapt to this new dynamism will determine their future. communication technologies is opening up a range of new opportunities • Supply chains are playing an ever bigger role in a country’s growth. which have the power to transform societies. In today’s world, products may routinely be assembled from com- Infrastructure and growth are closely connected. Figure 4 shows the posi- ponents transported from across the world, with implications not tive correlation between estimated infrastructure investments (per capita) only for transport and ICT, but also energy and water. Therefore, and the level of development (proxied by GDP per capita) of 104 countries.15 while the infrastructure requirements may not necessarily be as The economic literature shows that infrastructure investments can acceler- large as they were in the past, they must be synchronized to feed ate growth,16 while growth causes greater demand for (and usually supply of) the world supply chain. Integration into this supply chain is joining infrastructure. The figure shows that infrastructure investments continue to quality and quantity of production as a determinant of a country’s grow with the level of income, beyond just meeting access needs. Two new growth opportunities. factors call for broadening this vision of infrastructure: rapid changes in the • Demand for products is becoming global. Today’s consumers are better external environment and the complexity and interconnectivity of issues that informed and less loyal to specific brands, with suppliers around the infrastructure solutions aim to address. world competing for the same customers. During the twentieth century, The pace of change in the world has radically shifted over the centuries; companies were able to use marketing to position their brands within with new expectations emerging about the pace at which infrastructure disconnected domestic markets. With the rise of modern communica- should generate benefits. The physical structures and facilities needed tion tools, the Internet at the forefront, products can be marketed to for the operation of a society and its firms have evolved significantly. consumers around the world. Consumer tastes are converging into a In recent years, the transformations expected from infrastructure in- globalized demand, eroding the market share of historically dominant vestment have changed substantially. Infrastructure solutions must brands within many countries. Even in AFR, a region of the world which not only support economic growth, but have the flexibility to adjust to has historically lagged behind in terms of globalizing markets and Inter- a rapidly changing environment: net connectivity, online shopping is growing rapidly. As suppliers must be able to compete world-wide, transportation and communication • Spaces are transforming faster. The pace and scale at which urbaniza- networks are becoming instrumental to competitiveness. tion is taking place has risen dramatically, from Asia to Africa. In East Asia and the Pacific, for example, cities absorb two million new urban • Uncertainty is increasing. Client countries’ prospects for development residents every month and these cities are projected to triple their are subject to numerous uncertainties which need to be integrated built areas in the coming two decades. In the past, main urban areas into infrastructure planning and design. Major uncertainties include remained vibrant for over a century while recent examples have lasted demographic changes, technological innovations, policy performance, 8 Examine: Select: Apply: Deliver: Range of Leverage Points Multidimensional Design Impact Infrastructure Options Bottle ts Accelerated nefi Necks -Be Co n Growth or Gree Changed Missing Regional Development Links Inclusi ve Trajectory Ripple Effects and the environment (e.g., climate change amplitude and patterns, will require an infrastructure that is less damaging to the environment, risks from biodiversity losses and natural disasters). For example, more resilient to natural disasters and other climate risks. Although more increased uncertainty due to climate risk will affect the planning and complex, the potential benefits of resolving these second-generation issues design of many infrastructure projects. Projects will have to be designed are tremendous: they can help accelerate growth and place a country on a to prioritize robustness and resiliency to a greater degree than before. more sustainable development trajectory. In addition, infrastructure solutions are increasingly targeted at resolving What type of infrastructure and how to optimize interventions? The strategy second-generation issues, with the potential of changing the development update seeks to identify infrastructure investments that will ultimately trajectory of clients towards more sustainability. Infrastructure is at the contribute to accelerated growth and even shift clients towards a more intersection of most regional and global issues in today’s world, such as rapid sustainable development trajectory. More specifically, the strategy update urbanization, climate change, natural disasters and food security. Finding posits that this can be achieved in part through projects that seek to opti- solutions to these issues goes beyond the access and growth agenda; it mize co-benefits across infrastructure sectors, between infrastructure and requires tackling the complexity and inter-connectivity among sectors. For environment (green), between infrastructure and social development (inclu- example, responding to rapid urbanization requires coordinated planning in sive) and spatial benefits (regional). More broadly, these projects will result transport, water, ICT and many other sectors, including social development. from an optimization process involving the selection of points of leverage Mitigating the effects of greenhouse gas emissions requires a certain type from among the whole (soft and hard) potential infrastructure universe of a of investment in transport and energy. Investment decisions in the energy country and design of the resulting intervention by opening it up to a range sector have implications on water use and therefore on agriculture and the of possibilities (Figure 5). environment. Meeting environmental goals and adapting to climate change 9 Among the universe of possible infrastructure choices, it is possible to iden- served areas. There are also many opportunities outside the narrowly defined tify and prioritize points of leverage that can unlock the country’s growth and infrastructure boundaries. Enhanced impact can be achieved by design (not development potential. In general, infrastructure investment opportunities necessarily by scale) as follows: are selected out of a pipeline of projects developed by line Ministries. - Projects to generate co-benefits across infrastructure sectors (or focus Each line Ministry identifies its own sector pipeline, with a primary focus on the nexus between sectors). Examples include: a water project on physical infrastructure. It is proposed here to look at the whole universe intervention that is enhanced with ICT solutions to reduce water of infrastructure investment opportunities, not only physical infrastructure leakages; infrastructure works involving drainage pipes, terracing but also institutional strengthening, and select among them the “points of and retrofitting of bridges, which are combined with land-use leverage�. These points are defined as interventions such that “a small invest- planning and disaster risk preparedness assessment tools and ment in one aspect can produce big changes in all aspects�. At the aggregate strategies, to enhance the resilience to natural disasters; ICT- level, a review of the literature suggests three key points of leverage: (a) enabled intelligent transportation systems, which can be utilized infrastructure investments that inter-connect two markets/areas (missing in urban transport planning to reduce congestion; a sanitation links); (b) investments that unlock the volume, cost and quality of economic project enhanced with behavioral change through a hand-washing activity (bottlenecks); and (c) investments that create ripple effects into the component to generate improved health outcomes; and a smart broader economy (ripple effects). grid which can help better integrate renewable energy into the What are the points of leverage? A missing link could be a bridge within a distribution network and thereby optimize power generation. region or a cross-border power inter-connector, international road corridors, or - Projects to generate co-benefits between infrastructure and environment fiber optic links in a region. A bottleneck could be a law on competition that in support of “Green Growth� (green projects). For example, when unlocks the potential of private sector investments, inexistent capital markets, designing buildings in urban centers, one may look at the trans- a trunk investment that opens a new development corridor or a source of clean port of materials, green supplies, electricity, heating and materials water that unlocks women’s time to participate in economic activity. Examples recycling. Environmental considerations may also be used as an of ripple effects include an ICT-application that generates data on sector entry point to design projects, expanding the range of options which performance with ripple effects in sector accountability and governance, a can be used to support energy, transport and water choices. Work is regional power project that has ripple effects beyond the host country or a rural under way through the Green Growth platform and the new environ- infrastructure package that boosts agricultural productivity, with ripple effects ment strategy to redefine and operationalize the “green� concept on rural income and development. for infrastructure that is less damaging to the environment (in terms Once a leverage point is identified, project design can be enhanced by open- of local costs of environmental degradation and long-term costs of ing it to a range of new possibilities. How can their design be enhanced to global warming). Examples of green infrastructure project include: generate additional impact? Within infrastructure sectors, there is a range of green buildings which incorporate energy and water-efficiency opportunities to connect sectors and countries and exploit synergies—such features and use green materials; integrated utility management, as systems which talk to each other, common spaces created to converge which reuses sludge and organic waste as biogas and fertilizer; and with different solutions, or interventions that require proper coordination. renewable energy which reduces greenhouse gas emissions through For example, the civil works of ICT projects (ducts, poles, dark fiber) which displacement of more polluting forms of energy. account for 65 percent of project costs can be coordinated and included - Projects to generate co-benefits between inclusive development in transport infrastructure projects such as roads or rail lines. Similarly, (including gender equality) and infrastructure. Social considerations telecom operators are developing renewable power supply options for their can be used as an entry point to design a project with end-users equipment which can also be used to extend electricity services to under in mind (disaggregated by gender). For example, large infrastructure 10 10 What are transformational projects? In this update, by projects have often been successful in making displaced people the definition, transformational projects are designed to beneficiaries of the project displacing them, as well as achieving development objectives, like the benefit sharing arrangements in hydropower. Consultations optimize co-benefits across infrastructure sectors, be- with users, such as trucking companies and individual vehicle owners and tween infrastructure and the environment (green), be- small communities along the right of way, including residents, women, schools, tween infrastructure and social development (inclusive) farms, industrial sites and local Governments, can enhance the final design of a and heighten spatial benefits (regional). For example, a transport project (e.g., change the alignment, drainage facilities, construction of hydropower project will be a transformational project in bus stops, pedestrian bridges and horizontal and vertical signals). Infrastruc- ture can be designed with universal access in mind by, for example, taking into a given country to the extent that: (i) access to electric- account the needs of people with disabilities (e.g., disability conscious bus rapid ity and power generation represent bottlenecks (the transit system). Urban infrastructure projects can also be designed as part of vio- point of leverage) in a country and (ii) it is chosen lence prevention programs (citizen satisfaction and liveability of urban centers); among a range of technically feasible options over a and ICT can be used to support real-time implementation of any infrastructure more polluting form of energy with the view of maxi- project. Another example includes the extension of infrastructure networks built by mining and oil companies for the exclusive use of their operations to benefit mizing green benefits (green project). According to this the local community, through enhanced partnerships between the public and narrowly defined view of what a transformational project private sectors. is, building a hydropower dam may have large impact, - Projects to generate spatial benefits (regional). Building regional infrastructure can but not always be transformational. For example, in a help spur trade, but can also contribute to regional trust and security, which is country with many large hydro dams already built, the particularly important for fragile states.17 Examples include regional power proj- transformational intervention may be to increase the ects that unlock the electricity production potential of an entire region, with efficiency of the existing system (bottleneck), rather ripple effects beyond the host country and multimodal transport corridor projects that improve transit costs and delays. than building another dam. As another example, a bus-rapid transit system will be transformational to the extent that: (i) it is the missing link (the point of lever- age) in a well-established transport system; and (ii) it is chosen over a range of other technical options (includ- ing building a highway) and is combined with measures to support a behavioral change in modal shift among users, with the view of maximizing co-benefits across infrastructure sectors and with the environment. Trans- formational projects, which can be large or small scale, have all in common that they can accelerate growth and even shift clients towards more sustainable devel- opment trajectories. 11 IMPLEMENTATION–PRINCIPLES AND ACTIONS The strategy update rests on three pillars—core engagement, transforma- projects planned within sectoral boundaries). However, the benefits of such tional engagement and mobilization of private capital and other sources. projects will be substantial for client countries. Efforts sustained by the Group “Core engagement� in infrastructure consists of sector-based interventions over past years to strengthen the quality of the infrastructure portfolio offer a (physical infrastructure and institutional strengthening) to support access to window of opportunity to increase our engagement in high-risk/high-reward basic infrastructure services and growth (Pillar 1). This represents 80 percent projects. Even with the recent scale-up in commitments and reduced project of the Group’s infrastructure portfolio: it is the bedrock of the Group’s involve- preparation time, both associated with the Group’s crisis response, the quality ment in infrastructure. Building on this strength, the update proposes innova- of the Group’s infrastructure portfolio remained high. Eighty four percent of tion and increased impact in two areas: transformational engagements (Pillar the outcome ratings from Bank infrastructure projects completed between 2) and mobilization of private capital and other sources (Pillar 3). FY05 and FY09 were judged moderately satisfactory or better, outperforming the Bank average since FY03. This performance results from continued efforts Catalyzed and leveraged interventions will be at the center of this strat- made by the sectors to improve quality. egy update. Under Pillar 1, the Group will apply increased selectivity at the regional and country level, depending on country needs and expressed demand. It will also increase its effectiveness in four specific areas: pov- erty, governance, gender and knowledge. Under Pillar 2, the Group will Core Engagement transform the way it engages in order to tackle second-generation issues. The Group will consolidate its engagement in infrastructure for basic ac- Depending on country circumstances and client demand, this will take var- cess and growth. Access to electricity, improved water services and sanita- ious forms: the Bank focusing on brokering knowledge between MICs and tion, all-season roads, telecommunications and internet services, which are LICs, or MICs and OECD countries; the Group using new and existing part- still key constraints in many IDA countries, for some population segments nerships to pool resources and knowledge, recognizing that it is no longer in MICs and in fragile states, has been an area where the Group has built an independent actor; and the Group engaging with client countries in a experience and knowledge. The Group has also played a key role in build- dialogue to identify opportunities for transformational projects and sup- ing and expanding modern infrastructure systems, as well as strengthening porting them where there are client champions or alliances that the Group the enabling environment to support these systems (Box 2). The Group can build on. Leveraging the Group’s capital by mobilizing the private will continue to deliver sector-based projects in support of the access and sector, MDBs and others more systematically will be critical to expand growth agenda. This business will be guided by country demand and sector the financing envelope for infrastructure (Pillar 3). Implementation of this strategies of individual sectors. While the private sector can contribute to this strategy update will be monitored by using a set of indicators. core business,18 attracting the private sector requires a high quality investment climate and public investment process. The Group will continue to support While increased Group engagement under Pillar 2 and 3 will entail higher upstream work on the enabling environment including development of appro- risks, the Group has room to engage in more complex endeavors and the priate sectoral policies (e.g., pricing, role of regulator), reform of the legal and associated rewards are potentially very large. For example, some transforma- regulatory environment (e.g., PPP framework) and the public sector. tional projects and public-private partnerships will be complex and may involve higher risks in terms of design and implementation (e.g., projects focusing There are many new opportunities for high impact engagements in client on the nexus between sectors will require a cross-sectoral approach, while countries. For example, promoting policy and institutional reforms through many of our client countries are still organized by sectors, with infrastructure an initial DPL in a country that has relied exclusively on investment lending; 12 helping client countries to fix their own systems and institutions; building in the education sector in terms of skills is equally important. It is increasingly a power plant to provide electricity in a post-conflict country, meeting the recognized that these issues cannot easily be addressed at the project level, primary constraint reported by firms operating in fragile states;19 engaging but require engagement with client countries at a broader, strategic level. client countries on a broader strategic discussion on maintenance for financial In the water sector, for example, the issue of cost recovery has been raised at sustainability of infrastructure solutions at the CAS level, instead of working both the strategic and the project levels. The Bank has made efforts to recover out ad hoc solutions at the project level; and helping client countries shift the costs of operation and maintenance from users in order to enhance the finan- the financial burden from the public sector by supporting the development cial sustainability of investments in the sector, but even further improvements of national investment programs and targets for private sector participation. are being considered: (a) being more explicit about the level of tariff charged Furthermore, there is scope to increase the effectiveness of the core business, to customers, unambiguously recognizing when public transfers are necessary in particular in the areas of poverty, governance, gender and knowledge. in order to sustain the infrastructure should there not be sufficient revenue to Learning from past experiences, the Group will do more to enhance the cover its costs (e.g., public expenditure reviews, analysis of experience on cost delivery of infrastructure services to the poor. Overall, the business has been recovery in a range of projects); (b) offering training courses for utility leaders in biased towards infrastructure investments that promote growth, with expected client countries; and (c) benchmarking the performance of utilities to increase “trickle-down effects.�20 In reality, the results of any trickle down have been transparency and accountability through a database of utility performance. slow. In Bank projects, the poverty impact of sector-based interventions has Effective governance is integral to ensuring sustainability. Weak governance also proved complex to achieve and demonstrate, as recently shown by IEG. 21 and corruption in the infrastructure sectors severely constrain development: Going forward, the Group will continue to implement its sector strategies, they create inefficiencies that are translated into higher unit costs, with with additional actions to step up their poverty focus (Box 3). For example, in some estimates suggesting 10 to 30 percent financial leakage; and they the water sector, Sanitation, Hygiene and Wastewater Support Service (SWAT) allow for government capture and misallocation of public resources. The teams will be mobilized to work with Bank teams to identify opportunities to poor are typically hit the hardest, as they are constrained in their ability to address poverty in water supply and sanitation projects, as appropriate. avoid the outcomes of weak governance and corruption. As one component Financial sustainability of infrastructure services will be critical to ensure of the Governance and Anticorruption (GAC) Strategy, the Bank has been a long-lasting impact on poverty alleviation and growth. Experience has employing different tools to improve governance in Bank-financed projects, shown that it is considerably more difficult to maintain infrastructure ranging from more innovative transparency measures, to the ring-fencing of in good working condition than it is to build it in the first place. Lack of proper projects against fiduciary risks, public debarment and comprehensive investi- maintenance results from not only a lack of funding, poor service provider gations led by the Institutional Integrity Vice Presidency (INT).23 capacity and/or inadequate institutional and regulatory frameworks to provide The next frontier will be to embed a Governance perspective in upstream CAS the right incentives for service providers to perform their duties in meeting the preparation and enhance the capacity of sectors to address governance in needs of users,22 but also from a lack of skills and insufficient human capital. general and corruption in particular. The GAC Update will emphasize support In the transport sector, for example, Bank experience with Road Funds shows to country systems and institutions more comprehensively to enhance account- that success largely depends on local conditions and on the existence of reli- ability and transparency. For infrastructure, this will mean giving emphasis to able institutions to make them work; second-generation Roads Funds, which sector level engagement in support of the traditional project focus. This may involve road users in the management of these Funds, can help address some entail, among others, using economies of scale in institution-building across of these governance issues, but not the overall fiscal challenge of internalizing the infrastructure sectors, deepening the dialogue within sectors to improve the cost of maintenance in overall transport sector spending. Ensuring that how governments run their programs and how they address fraud and corruption overall investments in infrastructure are connected with relevant investments 13 n Box 2: Infrastructure Projects for High Impact Empowering local women to build a more equitable future The Rural Transport Project in Vietnam promoted the idea of having local women work as road maintenance crews. A total of 1,533 ethnic minority women have been trained as rural trans- portation managers; many more eagerly await the opportunity. The project contributed to women achieving a greater voice in community decision-making and a more visible role in managing affairs at the household level, arising from increased economic power and social status. Road maintenance is also now more efficiently managed because local people have clear incentives to promote quality, limit corruption and directly benefit communities. A multipurpose bridge to ensure connectivity along the longest corridor of the Asian Highway Network Connecting two sides of an otherwise uncrossed river, the Padma Bridge Project in Bangladesh will help unlock the potential of the South West region of Bangladesh and impact the lives of 30 million Bangladeshis by contributing to increased connectivity along the longest corridor of the Asian Highway Network. The absence of such a bridge has prevented ready and effective access to markets, medical care and education for an entire region. Innovative EZ latrine to meet demand in peri-urban areas This project funded the design of the innovative EZ Latrine to meet consumer preferences and demand in peri-urban areas. Entrepreneurs were then trained to market and sell the latrines, capitalizing on the market based approach. This project helped immature markets overcome the inability to innovate and respond to the bottom of the socioeconomic pyramid. Road system restructuring to affect urbanization and trade patterns The South West Roads Project in Kazakhstan is contributing US$2.5 billion to the Kazakh highway structure. The project will help strengthen institutional capacity of the Committee for Roads within the GoK, utilizing US$3 million of the loan to implement a road management system for the plan- ning and budgeting of road maintenance, as well as rehabilitation and construction of the country’s road network. Regional backbone networks to reduce wholesale price for broadband capacity In Africa, the Caribbean and the Pacific, the development of regional backbone networks connecting to new submarine fiber optic cables has not been commercially viable. The Bank played a catalytic role by incentivizing private investment in large-scale national and regional backbone facilities for broadband access. The projects have contributed to a 90 percent decrease in wholesale prices for broadband capacity since 2009, while retail high-speed Internet access prices have been reduced by 30 percent in East Africa. Source: World Bank Group, 2011 14 and effecting greater competition among both construction and service Project design will continue to manage carefully environmental and social agents in infrastructure. It will also entail distilling lessons learned for the impacts and risks. On the IFC side, infrastructure projects show a strong re- transport practice from the recent assessment of corruption issues by INT, cord in complying with environmental and social performance standards. including the strengthening of the engineer’s role to oversee cost and quality IFC updated its Policy and Performance Standards on Environmental and of infrastructure investments. High-risk environments will continue to pose Social Sustainability, which will be effective in January 2012. IEG showed a challenge to the adoption of country systems or sector-wide approaches, that the environmental and social impacts and the risks associated with in- in which continued effort is needed on safeguarding investments on a frastructure projects supported by the Bank (especially category A) were project-by-project basis. Work is also underway in about 35 countries to appropriately identified during preparation and appraisal and that resources achieve transparent disclosure of extractive industry revenues and payments were in most cases appropriately allocated at supervision to mitigate the as steps towards accountability and good governance (EITI). The Bank and impacts and risks. The Bank is following complementary process to update IFC will continue to integrate improved revenue management and gover- and consolidate the environmental and social safeguard policies of IBRD and nance, where appropriate, in the design of extractive industry and other IDA. The Bank process will focus on the evolution of the safeguard policies large infrastructure projects. to more effectively address complex issues associated with infrastructure The Bank will scale-up its efforts to increase the efficiency of public spend- and better support joint Bank-IFC initiatives. The update of the Bank’s safe- ing. In many countries, public infrastructure investments do not generate guard policies, which was initiated by Bank Management, is anticipated to large growth dividends due to institutional deficiencies in the investment be completed by the end of calendar year 2013. process. In Sub-Saharan Africa, the efficiency gap in infrastructure spend- More specifically, the infrastructure sectors will scale-up their efforts to ing has been estimated at 3 percent of GDP (or US$17 billion relative to mainstream gender in Bank operations. The World Development Report estimated infrastructure needs of US$93 billion). Subsidies to financing in (WDR) 2012 on Gender, along with its Companion Piece, provided the em- infrastructure could be cut significantly if the public sector was better man- pirical foundations for the infrastructure sectors’ centrality in gender main- aged, less subject to corruption and if users were charged for the cost of the streaming efforts. For example, investments in clean water and sanitation, services they receive. Reforming state-owned utilities is important to im- combined with maternal health services, can help reduce female mortality prove public infrastructure spending and establish a nurturing environment and investments in the access agenda (roads, electricity, ICT) can empow- for private investment. In this context, the regions will continue to roll out er women by moving them out of low productivity/low earning jobs. Thus, public expenditure reviews, support the reform of state-owned utilities and mainstreaming the gender agenda in the Group’s business will require scal- pursue institutional, legal and regulatory reform efforts in sector projects. ing up support for access to infrastructure at the country level. Going for- Modern ICT technologies can improve monitoring and enhanced information ward, 100 percent of Country Assistance Strategies (CAS) will be gender- for greater transparency, if coupled with effective platforms for citizen en- informed, measured through consultations and monitoring and evaluation. gagement. For example, ICT can be used to create feedback loops from citi- But more must and will be done. The energy and mining, transport and zens to their institutions, making institutions more accountable to citizenry. water sector boards will continue to implement ambitious gender targets At the global scale, the Construction Sector Transparency (CoST) initiative for both IDA and IBRD projects over FY12-14, in terms of screening (con- has helped countries to nudge procuring entities in the construction busi- sultations/analysis), responsive-design and responsive monitoring and eval- ness to disclose verified contract management information to the public.24 uation. In addition, the SDN Companion Piece to the WDR 2012 (under 15 n Box 3: Supplemental Actions to Step up the Poverty Focus of Infrastructure Projects By looking at conditions to accelerate growth and change the development trajectory of clients towards more sustainable development, TTI positions increased inclusiveness at the core of Group’s efforts in infrastructure. For the poor, the most dramatic impact of inadequate infrastructure is the lack of access. For example, without roads, the poor are unable to sell their output to the market. In Indonesia, access to electricity has contributed to increased employment and incomes for the poor. TTI proposes additional actions to those already established by the four sector strategies to scale-up the poverty focus of sector projects in support of the core access agenda. Water and Sanitation • Conduct Water Supply and Sanitation (WSS) Portfolio assessment of poverty focus (including poverty assessment, components of projects and results indicators). • Mobilize a Sanitation, Hygiene and Wastewater Support Service (SWAT) team to look for opportunities to do more on poverty in WSS projects. • Create a learning module on WSS and poverty for Bank staff. Transport • Support project teams in strengthening focus on gender-disaggregated access to resources, markets and employment. • Implement the United Nations Convention on the Rights of People with Disability, which promulgates universal accessibility of infrastructure as a legal obligation for its signatory countries. ICT (under preparation) • Re-purpose Universal Access Funds with a focus on the poorest and least connected. • Facilitate the roll-out of mobile financing and using ICT for micro-finance. Energy (under preparation) • Support modern energy access for the poor, including promotion of lifeline rates and other subsidies targeting the poor. • Provide low-cost lighting (e.g., Lighting Africa and Lighting Asia). • Provide access to clean cooking and heating solutions (e.g., deploying modern cooking stoves, promoting switch to cleaner fuels where feasible and promoting efficient and sustainable production of wood fuels). • Extend electricity access to community-based institutions used by the poor, such as schools, clinics and hospitals. • Expand support for renewable energy in low-income/low-access countries, such as through the Program on Scaling-Up Renewable Energy in Low-Income Countries (SREP). Source: World Bank Group, 2011 16 preparation) will identify entry points for gender in operations, disseminate results frameworks for GETs have been developed in FY11, which will help guidance and resources for task teams and create communities of practice. monitoring progress towards a set of pre-defined objectives. Infrastructure projects integrate gender more thoroughly than is recorded The new environment puts an increased premium on the Bank’s ability to ex- in project documents and “guidance notes� exist for almost all sectors. tract knowledge from projects and enhance their design through global knowl- Work is under way to collate, aggregate and disseminate these tools and edge work. In an environment where resources and projects will be fewer and to use them more effectively at the policy, program and project levels. in order to stay relevant, it will be critical to extract lessons learned from Increased effectiveness in delivering knowledge will be critical. The Bank projects, especially in MICs, with the view of replicating them in LICs. The has long produced knowledge reports, flagship or country-based, with anchor will pilot an internal upstream strategic review system aimed at extract- large impact and has a plethora of analytical instruments to support a more ing and transferring the knowledge derived from projects in a more systematic holistic perspective on issues (Box 4). These instruments include low-carbon way and potential for replication in other regions and globally. At the same studies, public expenditure reviews (PER), country infrastructure diagnostics time, the Group’s involvement on global issues and its connection with out- and urbanization reviews. The strategy update does not propose to develop side expertise should feed into projects and inform the dialogue with clients. any new country-level analytical instruments, but rather to maintain existing instruments and increase, wherever possible, their effectiveness. For example, PPP success depends on countries having a fully-fledged national infra- Transformational Engagement structure investment program with targets for private sector participation. Transformation is defined as getting a larger leveraged impact on the key, sec- The strategy update does, however, propose that this new dimension be inte- ond-generation challenges that our clients are facing. In Asia, for example, grated into PERs and the CAS dialogue. There is still a large research agenda it will involve dealing with the challenge of rapid urbanization; in the in infrastructure, such as refining further the concept of green growth through Middle East and North Africa, water scarcity and social stability; in Sub- the Green Growth Platform, conducting Impact Evaluations, developing an Saharan Africa, opening up land-locked countries; and across regions, instrument to operationalize the points of leverage concept in a country the critical component is moving towards a more sustainable development investment program (along the lines of the spatial analysis work initiated by path. Tackling these issues will require transforming “with whom and how� AFR in the Democratic Republic of Congo) and expanding efforts initiated by the Group engages. MNA to assess the ripple effects of infrastructure investments on job creation. Transformational engagement will require broadening the range of actors Enhancing the development impact of the knowledge portfolio will require engaged in contributing to the solution. Developed countries are interested connecting the Bank with outside expertise. As part of the modernization in exporting their technologies, middle-income countries in playing a bigger agenda, the Bank has put in place a suite of new instruments to enhance role—financially and in knowledge transfer and non-traditional donors, the knowledge basis within the Bank, including Global Expert Teams (GET), such as South Korea, in contributing to specific aspects of the transfor- Chief Technical Specialists and World Bank Fellows. For example, the GET mational agenda. Consulting firms and foundations are now advocating PPP has been the vehicle for responding quickly to requests for support on issues of global relevance that cannot be ignored, with some even having from regional departments in the Bank on PPP issues and where needed, gained a seat at the table in international fora such as the G20. Some private assemble teams of experts to address medium- to long-term interventions. firms have not only adopted the principles of corporate social responsibility; Bank-wide efforts are being made to adopt a more strategic approach to they also want to emerge as responsible businesses. Private sector leaders and cross-cutting themes, using GETs as a resource of experts and mechanism good practice firms have factored responsibility into their business models of quality assurance and monitoring of Bank’s activities in the area. New (Box 5). With expectations of the private sector’s role shifting, it is not only 17 n Box 4: Delivering Knowledge for High Impact Using Impact Evaluations for gender-responsive design of projects Impact evaluations of the Decentralized Rural Transport Project in Peru showed that participatory planning is a cost-effective method for identifying investment priorities, particularly with respect to women. Through participation in the Rural Road Committees, women expressed their needs, leading to the rehabilitation of 7,000 kilometers of bridle paths and women comprising 24 per- cent of the road maintenance micro-enterprises. Improving expenditure efficiency and prioritization for action by building comprehensive infrastructure data The Africa Infrastructure Country Diagnostic (AICD), as the first comprehensive data collection effort for infrastructure in Africa, yielded a baseline of needs, measured actual spending and identified inefficiencies and priorities for action. The Bank is currently financing the replication of this effort in selected countries in South Asia. Disseminating best practices in pay-for-use testing helped 666,000 people identify safe water sources In Bangladesh, technical assistance and knowledge exchange contributed to a local government-led replication of a pay-for-use source testing and a marking and switching program covering 78,000 predominantly private, improved water sources. Policy makers learned from local governments, which helped place source switching at the foundation of the revised Implementation Plan for Arsenic Mitigation. These efforts contributed to 660,000 people now consuming water that is safe from arsenic contamination. Spatial analysis to scan infrastructure investment opportunities in the Democratic Republic of Congo By geo-referencing data on productive sectors and infrastructure networks, the study evaluated the returns associated with proposed investments. In addition to detailing the specific infrastructure interventions that would have the highest return, the study found the power sector had the highest returns, while transport investments had low returns unless packaged in a multi-modal framework. Fee-based services to support the establishment of licensing for international internet gateways The Government of Thailand used fee-based services to continue Bank TA for the establishment of the National Telecommunications Commission (NTC), an independent state agency. NTC’s mandate includes regulation and licensing of the telecommunications sector, providing a path for private sector, license-based entry into the sector. The Bank worked with the NTC to establish licensing for international Internet gateways, contributing to a rapid and substantial reduction in Internet access prices. Source: World Bank Group, 2011 18 the price of doing business, but also the key to opportunity and market share In order to support a critical mass of transformational projects, several fac- as financiers and regulators seek standards of performance beyond financial tors will have to be aligned, including demand from client countries, client ones. Working out private sector solutions to infrastructure requires engage- leadership and champions and engagement of multiple partners. It is esti- ment with large and global sponsors, as well as regional and local players. mated that over the SIAP period, about four-fifths of the Group’s projects Addressing issues such as rapid urbanization requires engagement with line focused on access and growth (core engagement), with the rest qualifying as ministries and Ministries of Finance, but also city mayors, provinces, the pri- “transformational�. Going forward, the Group will engage with client coun- vate sector and citizens. tries in a dialogue to identify opportunities for transformational projects. In Transformational engagement will require more leveraging and brokering line with the country-based model, client countries will determine where and of knowledge. There is a keen interest from LICs and other MICs, to learn from which transformational projects will be selected. Provided that the necessary some MICs. For example, India is interested in learning from Mexico, Peru factors are aligned, TTI aims to achieve a critical mass of transformational and Brazil on energy efficiency and Brazil in transferring knowledge to Mozam- projects, evolving from a fifth to a third of the infrastructure portfolio by bique (Box 6). But MICs are also interested in the good practices developed FY15. This critical mass is necessary in order to support the learning associ- in OECD countries. The Bank can help transfer this knowledge by acting as a ated with these projects and achieve the desired results. broker through technical assistance loans, or real-time advice. It can also use Supporting transformational projects will require a new range of data. In- knowledge platforms, such as those for Urban and for “Open Development formation—not only by volume, but also on the quality and spending on Technology Alliance� ICT for accountability and development, to connect the infrastructure and impact including beneficiaries disaggregated by gender Bank with outside expertise. For example, the ICT platform is piloting a new and by sector—is critical to deliver on this complex agenda. The Bank approach, which will connect outside expertise to project teams in order to played a key role in advocating for a Global Benchmarking Initiative through enhance the impact of their projects. Adapting flexibly to this new dynamism the G20. It is also investing tremendous resources in data collection at will be critical to ensure the Group’s relevance in both MICs and LICs. the country level, but more will be done: the Open Data System which, for Where is the next frontier in infrastructure investments? Ongoing dialogue example, helped to streamline and consolidate fragmented data collection ef- with client countries shows opportunities for transformational projects forts, will be expanded further. ICT offers a range of new opportunities in across regions. In Sub-Saharan Africa, transformational projects are regional data generation that the Bank will support. projects, which connect countries with power grids, broadband networks, The increased risks associated with some transformational projects will require transportation corridors and large scale renewable energy projects (e.g., Inga accelerated efforts on safeguards and procurement and a separate track for hydro-power site, West Africa Power Pool, Ethiopia-Kenya Inter-Connector corporate attention. While IFC completed the modernization of its environ- and the North-South Corridor). In East Asia and the Pacific, projects include mental and social performance standards, the Bank is currently undertaking renewable energy investments, low carbon infrastructure, sustainable urban the update of its safeguard policies. Completion of this update is important systems and power trading in the Mekong sub-region. In Europe and Central to support the Group to engage more effectively on complex transforma- Asia, projects feature institutional bottlenecks impeding competitiveness, tional projects (e.g., urban projects with associated risks of resettlements integration and growth. In Latin America and the Caribbean, there is an in- of people living in slums). It will be equally important to continue working creasing demand for projects that tie environmental and social sustainability. with other MDBs to develop procurement procedures that will enable optimal In the Middle East and North Africa, opportunities for transformational implementation efficiency for exceptional projects. Also, some of the more projects lie in strengthening regional integration and social accountability. risky projects will impact the risk exposure of the Group and as such, will be Finally, South Asia sees transformation through projects addressing issues subject to closer scrutiny at a Senior Management level. such as regional integration and green growth/climate change, requiring a programmatic approach and institutional reform. 19 n Box 5: The Role of the Private Sector in Leading the Transformational Agenda The private sector has made tremendous progress in addressing environmental stewardship and social responsibility,25 as well as adopting integrity standards. For example, 67 financial institutions have adopted the Equator Principles, developed in 2003. Companies are also adjusting their busi- ness model to better position themselves to exploit synergies among sectors and thereby develop new infrastructure solutions. Large companies, which used to think along mono-product lines, are diversifying their products and activities into multiple sectors. For example, Veolia expanded its activities beyond water in transport and waste water management; Areva’s business no longer rests on a core nuclear pillar, it has expanded into large-scale bio-mass, wind farms and micro- reactors. Engineering companies, such as CH2M Hill, are now offering multi-disciplinary services that range from water, transportation and communications to nuclear and environmental activities. Innovative technological approaches offer new infrastructure solutions. Electric Smart Metering With electronic democratization, companies such as GE have developed electric smart meter- ing as a first step toward smart grid integration. Electric smart metering enables remote and instantaneous reading, dynamic pricing implementation and monitoring energy quality while being compatible with technology evolutions such as the fluorescent to L.E.D. lamp transition. Whereas smart metering aims at lowering the total energy consumption, they contribute to actively manage the integration of multiple networks, energy providers and renewable energy while enhancing their reliability. Access to Safe Drinking Companies such as DI Environment have developed portable water treatment units, using low cost solar energy, with monitoring and controlling process over satellite or GSM networks. While the emphasis of such systems is to reduce health risks associated with contaminated water and help reduce infant mortality, the concept also supports communities in water resources manage- ment and helps develop local economies by creating jobs for the maintenance of the units. Green Infrastructure Material Refurbishing and recycling of demolition scrap and industrial by-products contribute substantially to decreasing wasted matter for storage and disposal, as well as preserving natural resources. Construction companies of transportation and urban infrastructure, such as Eurovia, pushed this to the next level by developing a vegetable based binder for road and infrastructure building, which consists mostly of renewable, non-edible plant materials. Because of the low temperature application process, it dramatically impacts greenhouse gas emissions and energy consumption. Its translucent property offers options to better integrate infrastructure in the landscape and improve road safety. Source: World Bank Group, 2011 20 The next frontier in staffing and skills will be to address the ability to connect among disciplines. In order for the Bank to stay relevant, it will be Figure 6: MDBs Infrastructure Commitments, FY04-15 critical to continue to have staff with deep technical skills in specific sec- tors and disciplines (e.g., engineering, finance), complemented with access 80 to consultants with deep expertise in specific areas. The current matrix 70 model is well-designed for a two-dimensional mapping between sectors and countries. The two-dimensional approach shows in staffing and skills: there 60 is a tendency to hire highly specialized technical staff in a particular sector. However, the Bank is less equipped to deal with the three-dimensional map- 50 ping found between countries, individual sectors and infrastructure, which often relies on multiple sectors. The establishment of a new “transitional 40 sector board� for ICT—the sector where this multi-disciplinary perspective is intrinsic—is one step in the direction of promoting a more cross-cutting 30 view of infrastructure. Some progress has also been achieved in defining 20 “integrative skills� as a core competency in some SDN specializations. But a much more real knowledge and talent view across silos is needed. The Infra- 10 structure Panel, which is currently filling only a Human Resources function, could, for example, play a larger role as a true “integrative� Sector Board. 0 This is an area under consideration by management. The Group will need to use more effectively international fora to advance WBG AfDB/ADF AsDB IADB on issues of global relevance. Increasingly, the Group is called on to take a IsDB EIB* EBRD* leadership role in international fora. For example, the Group was given a coor- dinating role in the preparation of the G20 MDB Infrastructure Action Plan. In other cases, the Bank has advocated on issues of global relevance, such as climate change and food security, or even acted as a catalyst of resources MDBs have indicated that they plan to introduce similar flexibility in their own to tackle issues at scale. More effectively fulfilling this role will require the procurement guidelines. In addition, the G20 has established a platform Bank to go beyond its country-based business model, developing an ability of engagement in promoting the ‘lead bank’ concept for joint MDB financed to connect to the outside world and work internally across sector and insti- transactions. However, some difficulties still remain with the implementation tutional boundaries in a more systematic way (e.g., through a Task Force set of this concept which primarily relate to differences among MDBs in the ap- up to position the Bank more effectively on selected issues). plication of investment lending policies applicable to sovereign financing Transformational engagement will require more effective collaboration with such as eligibility, cross debarment and environmental safeguards. other MDBs on some issues and projects of regional and global relevance Within the Group, further progress is also needed in terms of linking various that go beyond the individual mandate of MDBs (e.g., MDB Road Safety programs. In FY10, bilaterals channeled US$4 billion to the Group, via 50 Initiative). While the overall infrastructure envelope from MDBs is expected different infrastructure-related Global Partnership Programs (GPP). Of these, to decline, there is scope to increase the effectiveness of existing resources five programs comprised 95 percent of the cash contributions in FY10. Some (Figure 6). The MDB ‘Heads of Procurement’ have recently produced a new programs support specific interventions, which require localized action (e.g., guidance note which focuses on best practice for procurement under PPP Water and Sanitation Program). However, the largest of these GPP support operations when MDBs make sovereign loans. Greater flexibility for PPP pro- projects deal with global issues. For example, climate-related financing is curement was introduced by the Bank in January 2011 and a number of other 21 n Box 6: Leveraging and Brokering Knowledge for High Impact provided through the Clean Development Mechanism, the Global Environmental Facility, the Brazil-Mozambique South-South Knowledge Exchange Climate Investment Funds or Green Growth Funds. The Bank launched a mapping of available infrastructure-related financing with a view of identifying efficiency and complementarity oppor- The Bank is piloting a cross-regional project between tunities vis-à-vis the Bank’s program, repurpose existing funds and directing fund-raising efforts the Governments of Brazil and Mozambique to go for increased aid effectiveness. beyond the one-off transfers of knowledge typical in South-South Cooperation initiatives. This project More broadly, achieving impact at scale may require pooling resources. It is estimated that looks to transfer Brazilian knowledge, technologies bilaterals devoted US$23 billion to infrastructure in FY09, which represents about 20 and practices to Mozambique and includes technical percent of their total foreign assistance. Given the evolving fiscal considerations in assistance, institutional development and commercial donor countries, there is significant uncertainty concerning new money from bilaterals over investment projects between the two countries. the years to come and it will thus be critical to increase the effectiveness of existing resources. For example, the G20 identified the lack of project preparation funding as a serious bottleneck Facilitating Kazakhstan’s EITI experience sharing to large-scale transformational projects and PPPs. It was estimated that in Sub-Saharan with Yemen Africa alone, some $500 billion are needed to unlock high-priority regional projects; even The Bank organized a knowledge exchange seminar more is likely required for low-income countries in Asia. While many project preparation that brought together EITI stake-holders in Yemen facilities exist in Sub-Saharan Africa, none has the scale needed: the largest sources of with peers in Kazakhstan, who had successfully project preparation funds have limits that are significantly lower than what is required navigated the EITI consensus building process. to bring a transformational opportunity to the point of financial disclosure and to attract The seminar helped improve collaboration among private investment. The Bank will launch a mapping of available funding for project prepa- industry, civil society and government and helped ration in existing project preparation facilities, with the view of identifying where oppor- ensure continued partnership of the donor com- tunities exist to increase efficiency. More broadly, the transformational agenda also offers munity. Soon after the exchange, Yemeni authorities an exciting platform to engage non-traditional donors interested in cross-cutting areas, finalized the EITI Validation process. By March 2010, such as Green Growth. In the Bank’s East Asia and the Pacific region, for example, Yemen had received full EITI Validation. collaboration with the Asian Development Bank, Japan International Cooperation Agency India studies Bus Rapid Transit in Latin America (JICA)/Japan Bank for International Cooperation (JBIC) and the Australian Agency for The Bank facilitated a study tour for Indian officials, International Development (AusAid) will be critical to move this agenda forward. visiting Bogota, Colombia and Mexico City to see their Bus Rapid Transport (BRT) systems. Since returning from the tour, the Indian officials have Mobilization of Private Capital and Other Sources announced that they will develop BRT systems in The Group’s current reporting system at the country and sector level focuses on volume of at least two cities. Prior to the tour, their discussions commitments. The Group had a monopoly in infrastructure financing in 1995; however, as a had centered solely on rail-based systems of public result of the competition with other MDBs and the private sector, this is no longer the case. transport in the state capital. The city of Indore is Moreover, its ability to attract co-financiers in projects, such as other MDBs, trust funds making efforts to improve the pedestrian environment and the private sector (excluding government’s counterpart funding) declined. By focusing in the city, with particular attention to integrating on the scale-up of commitment volume, the reporting system also provided little incentives the pedestrian infrastructure with the proposed to look beyond the existing IDA/IBRD envelope. While this was the right reporting focus in Bus Rapid Transit System to improve accessibility. the context of the early 2000s, when the Group decided to scale up its commitments in Source: World Bank, South Knowledge Exchange Library infrastructure, this approach is not sustainable if the Group aims to maintain its level of engagement in infrastructure in an environment subject to medium-term constraints. Going forward, the Group will need to bring in more private sector into infrastructure. There are 22 many entry points to increase private sector participation in infrastructure The Bank is offering several financial instruments to promote infrastructure (PPI)—ranging from supporting the enabling environment to public-private solutions. Several instruments are currently being used, including sub- partnerships (PPP). The focus of the Group will be on three components: (a) national finance and Output-Based Aid (OBA), which draw together the more systematically mobilizing the private sector and other sources of financ- Bank’s pro-poor policies and the IFC’s ability to leverage private sector ing; (b) in some instances, developing joint Bank-IFC solutions and (c) lifting finance and expertise. More recently, the Bank undertook efforts to enhance the game on public-private partnerships (PPPs), as appropriate. A combination the use of IBRD/IDA Guarantees and Enclave Operations (e.g., reducing of mechanisms and actions is required to deliver on this agenda. the level of IBRD guarantee exposure counting against country limits, from The IFC will continue to ramp up private sector financing for infrastructure. 100 percent to 25 percent to align with IDA guarantees to incentivize In so far as financing for private sector projects is concerned, there are mul- governments; streamlining the processing of guarantees in line with those tiple sources, including MDBs, commercial banks, local development banks, for lending to level the playing field; and encouraging Regions to seek bilaterals (such as Export Credit Agencies) and Sovereign Wealth Funds. MDB assistance from specialized units in identifying opportunities for guarantee/ financing for private projects represent an insignificant share of the total enclave operations). These actions are part of a broader effort aimed at volume of PPI financing available globally. IFC, which has been the Group’s modernizing the Bank’s guarantee instrument.26 main instrument for direct assistance (both in financial and advisory support) The Bank will enhance its support for the enabling environment. The bulk to the private sector, expects its infrastructure business to grow over FY12- of Bank assistance on PPI focuses on the enabling environment (e.g., invest- 15, with an increasing portion of the business going to LICs. In this spirit, ment climate and legal and regulatory frameworks to foster new entry and IFC has obtained Board approval for a global equity fund for infrastructure competition into infrastructure sectors, etc.). In line with the Private Sector that seeks to invest across a range of infrastructure sub-sectors in emerging and other sector Strategies,27 the Bank will continue to support reforms of markets. The IFC Global Infrastructure Fund will seek to ramp up private the regulatory environment and development of appropriate sector policies sector financing for investment projects. The IFC Asset Management Com- (e.g., pricing, role of regulator) that are necessary to attract the private sector. pany, a wholly-owned subsidiary of IFC, mobilizes and manages third-party The Group will shift its focus to “capital enabled� for infrastructure. funds for investment in developing and frontier markets. It was created in The Bank will introduce a new indicator—additional capital mobilized in 2009 to expand the supply of long-term capital to these markets, enhanc- IBRD/IDA projects, including from the private sector—tracking progress on ing IFC’s development goals as well as investing profitably for others. And the mobilization of additional capital and reporting on it to the Board. In yet, the private sector continues to have varying appetites across projects FY11, an additional US$4 billion from MDBs, trust funds and the private and regions for financing many large-scale or high-risk projects. sector (of which US$700 million) was mobilized from the US$21 billion MIGA will continue to support the private sector by providing political risk committed from the Bank’s own account (excluding governments’ counter- insurance in high risk environments. Guarantees are one instrument among part funding). By the end of FY15, the Bank proposes to double its mobi- a menu of options that can help client countries mobilize private capital. lization from these sources, including the private sector, provided that cur- MIGA has implemented important changes to expand the application of its rent financial market conditions continue to prevail. The IFC will continue guarantee instruments through amendments to its Convention and imple- to place an emphasis on third party resource mobilization: IFC Investment mentation of changes to its operational regulations. These changes have Department scorecards track financing mobilized from third parties, as an enabled MIGA to scale-up its support for infrastructure. In FY11, guarantees indicator, in addition to investments made from IFC’s own account. In FY11, in infrastructure accounted for 43 percent of the total guarantees issued, a IFC’s mobilization ratio in infrastructure increased to 1.51 from 0.45 in significant increase from previous years. Another notable trend during FY11 FY10. Over the FY12-15 period, IFC expects to raise between US$0.75 and was the significant level of involvement of the public sector in these insured US$1 for every US$1 of its own account investment. investments. This trend is expected to continue and should bring an increase in the number of opportunities where different entities of the Group can work together on transactions to support infrastructure development. 23 Box 7: Conditions for Successful PPPs – the 4 “Cs� Public-private partnership (PPP) is defined as any contractual arrangement between a public entity or authority and a private entity whereby construction and/or operational and/or financing risks are fully or partially transferred to the private entity. Through this agreement, the skills and assets of each sector (public and private) are shared in delivering a service or facility for the use of the general public. In addition to the sharing of resources, each party shares in the risks and rewards potential in the delivery of the service and/or facility. Lessons learned from WBG experience suggest that successful PPPs require: Climate The right enabling, legal, regulatory and institutional environment allows well-structured, balanced PPPs to be offered to market and ensures the projects’ sustainability (e.g., power sector in Romania). Commitment Commitment at highest levels, sustained over time, is necessary to attract private finance, and ensure PPPs remain integrated in investment financing plans (e.g., Jordan, Senegal). Capacity The public sector needs the skills and resources to understand the public-private interface and how to work with the private sector (e.g., governance and transparency reforms, public sector management). Capital LIC countries, where the infrastructure gap is largest, have had the most difficulty attracting private capital (e.g., Ethiopia, Tanzania, Mozambique). “Patient capital�: Where there are large up-front investments (e.g., utility projects), or the private sector requires shorter pay- back periods, governments may need to do early development work and mobilize financing instruments (e.g., sovereign guarantees, loans and risk/credit guarantees from MDBs, direct foreign investment financing) to attract private capital from project developers or commercial lenders. Government liabilities arising from PPPs, whether direct or contingent, which are often known as fiscal risk/contigent liabilities, should be monitored to ensure that the amount of fiscal risk born by the Government reflects the value for money it receives from the PPP project and is manageable. Source: World Bank Group, 2011 24 In order for the Group to deliver joint Bank-IFC projects, alignment of safe- institutional frameworks, PPPs remain a complex endeavor in many cases guards for private sector projects among WBG institutions remains a criti- (Box 7). Overall, it has been difficult to achieve PPPs at scale—an issue cal issue. The key issue to date for joint IFC/Bank projects is that IFC’s that resonates across all MDBs. Performance Standards and the Bank’s safeguards are applied concurrently. Within the WBG, it has proved difficult to collectively mobilize and sustain This issue will be addressed as part of the updating of the Bank’s Safeguards resources over time to deliver on the final outcome, as measured by the Policies, which is expected to be completed by the end of calendar year number of PPP transactions. In IFC, structuring a PPP transaction is a 2013. The IFC updated its Policy and Performance Standards on Environ- specific business of IFC Advisory Services (with appropriate fee compensa- mental and Social Sustainability, which will be effective in 2012. tion from clients). By contrast, in the Bank, there are few incentives to pursue Public-private partnership (PPP) is one instrument among many to crowd costly, risky and time-intensive PPP projects, or joint projects involving both in the private sector in infrastructure. Private participation in infrastructure institutions. Moreover, PPPs are complex from a technical point of view. This has been most common in sectors with a readily identifiable revenue stream, difficulty is further exacerbated by the approximately 20 units and groups con- such as energy and telecom. In a large number of OECD countries, private tributing one way or the other to the PPP agenda (Figure 7). This is inherent participation in infrastructure has in recent decades helped boost both to the nature of this business: it requires working along the entire spectrum of the coverage and efficiency of infrastructure services.28 While mobilization PPP activities—from the enabling environment and upstream policy support, of public and private capital can accelerate infrastructure development, to capital market development support, training, capacity building, transac- particularly in countries with larger domestic markets and stronger legal and tion advisory, design, execution and financing (including guarantees). List of Acronyms Figure 7: WBG Involvement with Public-private partnership 29 FPD: Finance and Private Sector Development PREM: Poverty Reduction and Economic Management WB: World Bank TA: Technical Assistance WB FPD WB WB FEU: Finance, Economics and regions / PPIAF GPOBA MIGA WB Ops PREM sector TA FEU Urban Department GET PPP: Global Expert Team on Public Private Partnerships Upstream Project Transaction Transaction WBI: World Bank Institute Policy Financing Preparation Design Execution WSP: Water and Sanitation Program Support PPIAF: Private Participation in Infrastructure Advisory Facility IFC WB GET IFC IFC Infra- IFC: International Finance Corporation FEU PPP Ventures TA Investment GPOBA: Global Partnership for IFC IFC Output-Based Aid Infra- WSP WBI Ventures MIGA: Multilateral Investment Guarantee Agency WB Ops: World Bank Operations 25 Box 8: Joint Bank IFC Action Plan for PPP Scale-Up Tier 1: Concerted efforts by all Bank, IFC and MIGA PPP-related units to develop the enabling environment to attract the private sector and a pipeline of PPP projects in 6 focus countries, with existing resources (budget, trust funds and expertise) strategically re-aligned. The first phase of the pilot includes Ghana, Kenya, Nigeria, Indonesia, Pakistan and the Caribbean. Other countries, such as Côte D’Ivoire, will be added to the pilot when the enabling environ- ment is in place. The menu of options includes: • New PPP portfolio assessment tool to identify “quick wins,� “transformational� projects and problem PPPs for restructuring or cancellation. Agreement with country directors on PPP priorities for short term and medium term. • Integrated program of activities (joint Bank (SDN/FPD/WBI), IFC and MIGA strategy), based on the findings of the assessment tool for PPP involvement. Strategic realignment of existing resources from the various Group units (including PPIAF). Funding to cover upstream engagement, PPP transaction and implementation. • Dialogue with client countries to support the establishment of targets for private participation in national infrastructure investment programs (including PPPs) and devise a strategy to complement private financing. • Capacity building of client countries, making greater use of south-south knowledge exchange and transferring lessons on the “how to� aspects of PPPs. • Technical support from the Infrastructure Finance Center of Excellence (IFCOE). • Preparatory work to be funded through IFC InfraVentures and country units budget/IFC advisory. • Staff training for PPP skills building. Tier 2: Enhanced support for engaging with the private sector (e.g., Tunisia as a priority). Source: World Bank Group, 2011 26 The Group will pilot a new approach in a few joint Bank-IFC focus countries, suitable for PPPs and to address structural bottlenecks to meet these targets. which involves developing and testing new instruments and coordinating It provides a more integrated approach to project financing by leveraging PPP actions across the Group (Tier 1). In the first phase of the pilot, the new procurement to expand the reach and effectiveness of the investment program; approach will target six countries, which have been jointly agreed by the it also provides discipline to the process of selecting PPPs by not crowding Bank and IFC for coordinated actions (Box 8). The selection of Tier 1 coun- out projects that could have been done on a PPP basis with public money. tries was based on several criteria, including priority given to the Africa Finally, it enlarges the market for PPPs beyond individual projects by offering region, opportunities for an integrated approach to support a PPP program investors a pipeline of projects, thereby increasing the incentives for investors beyond individual transactions and limited engagement of both the Bank to put time and resources into a country. The Bank will support this approach and IFC compared to the country’s potential. Other countries, including by helping governments to devise a strategy to complement private financing post-conflict countries will be added to the list of Tier 1 countries when the (including grants, guarantees, loans and credit guarantees). This strategy may enabling environment is in place. Upon completion of the pilot and using involve setting up a Viability Gap Fund, which would support a share of project lessons learned, the Group will roll out the approach to additional coun- costs for PPPs (along the Indian model), and introducing credit and political tries. This pilot will be supported by a more strategic realignment of exist- risk mitigation for private investors. It may also include measures to address ing resources behind coordinated efforts of the Group. In Tier 2 countries, the quality of institutions and regulations, sector reforms and the manage- the Group will provide enhanced support for the enabling environment and ment of fiscal risks (e.g., structuring and sizing Government guarantees). The engagement with the private sector. Bank will lead such a dialogue with client countries at the macro-economic or strategic level (e.g., CAS). For Tier 1 countries, the Group will pilot a new PPP portfolio assessment tool, with coordinated actions across the Group. Evidence from earlier PPP The Bank will test new approaches for capacity building. These capacity engagement has shown the importance of upstream involvement in promoting building efforts will make greater use of practitioner-to-practitioner south- the PPP agenda for both IFC and the Bank. Other critical elements for PPP south knowledge exchange to transfer lessons on the “how to� aspects of success include the need develop a pipeline of projects (instead of work- PPPs between developing countries with on-going PPP programs, as well ing on individual transactions), to plan for capacity building and to support as an increased focus on governance and reform leadership to address a programmatic approach to PPPs. The new instrument will identify three political economy challenges often encountered in developing PPP programs. categories of PPP projects: (a) those that are “quick wins� and can become The Bank will work with other MDBs and partners in the G20 to strengthen demonstration projects; (b) those that are “transformational� and require long- these practitioner exchanges through networks and secondments between term planning; and (c) those which require either restructuring or cancellation financial institutions and PPP agencies—for example, between private to reduce the reputational risks for the PPP agenda. Using the findings from investment banks of developed countries and banks from developing countries, this PPP portfolio assessment, the Bank (SDN/FPD/WBI/country units), IFC or between utilities in middle-income countries and utilities in LICs.30 and MIGA will articulate an integrated program of activities for the various Using lessons learned from the pilot phase, the operational mandate of the Group units (including PPIAF), and re-align existing resources (budget, trust Infrastructure Finance Center of Excellence (IFCOE) may be expanded to funds and expertise) to support this program. evolve towards a center for PPPs with global reach. In 2009, the Bank, Where there is a demand from client countries, the Bank will help govern- with the Government of Singapore set up the IFCOE as a “global advisor� ments to set targets for private participation against their national investment in selected PPP transactions. Recently, The Group staffed up and co-located programs and devise a strategy to complement private financing. Setting three senior managers from the Bank, IFC and MIGA to this office. The and monitoring these targets creates incentives to identify projects that are IFCOE is ideally positioned to unlock private sector interest in infrastructure 27 by bundling services to clients, advising governments on the full suite of side and in Bank projects. IFC Infrastructure Advisory Services and PPIAF, a Group products and services (including guarantees, equity and local currency multi-donor facility, will continue to more systematically coordinate their debt financing) and by offering credit enhancements for municipal and work.32 The Group will continue to support one-off PPP transactions with revenue bonds. The Group will also continue working with external partners, demonstration value. such as the Public-Private Partnerships in Infrastructure Resource Center Pillar 3 will include joint Bank-IFC targets for PPP projects and PPP and the European PPP Expertise Center. advisory activities. Assuming that current financial market conditions Training for nominated operational staff will be scaled up. The Bank, in prevail, the Group will seek to double by FY15 the number of PPP projects conjunction with GET PPP, IFC, MIGA and industry support including and advisory activities, relative to the FY10 baseline for the Bank (i.e., 19 educational institutions, will undertake dedicated training for nominated PPP projects, 18 PPP advisory + 59 PPIAF advisory) and to the FY08-FY11 staff to develop a cadre of private project finance skills across the Bank. The baseline for IFC (20 advisory). To identify PPP opportunities, the Group will IFCOE will also be integrated to carry out this training and capacity develop- use PPP portfolio assessments, as well as expand the PPIAF PPI platform ment plan. A strategic staffing and skills upgrading plan will be developed, to track down the global pipeline of PPPs that can be tapped. Additional including the recruitment of specialized outside expertise, as warranted by the incentives for staff to undertake PPPs are under consideration, including emerging regional demands and PPP project pipeline. OPEs and a mentoring scheme under the GET PPP. IFC’s InfraVentures will continue to support early stage development costs on a risk capital basis. It will also leverage senior IFC professionals to actively participate in the earliest stages of project development in IDA countries. IFC InfraVentures is an internal, US$100 million 5-year Fund created in 2008 to finance early stage project development expenses and to proactively develop private and PPP infrastructure projects in IDA countries. In the three years since its inception, the Fund has committed to 11 projects representing total project development expenditures for the Fund of US$28.9 million. In FY11, the Fund continued its infrastructure project development activities in IDA countries, including Nicaragua, Pakistan, Rwanda, Tajikistan and Vietnam, and committed four additional project development investments in the water sector in Bangladesh, in the hydropower sector in Georgia and Mali and in the gas distribution sector in Kenya. For Tier 2 countries, the Group will provide enhanced support for engaging with the private sector. The Bank and the IFC Advisory Services will work together to put in place policies and programs to support the enabling environment for private sector development. In line with the Private Sector and other sector Strategies31 the Bank will continue to support reforms of the regulatory environment and development of appropriate sector policies that are necessary to attract the private sector. This support will be pro- vided through policy dialogue and in project preparation on the advisory 28 28 WORLD BANK GROUP REGIONAL ACTION PLANS Regions differ markedly in their infrastructure needs and spending. Over the past few years, the coverage, quality and efficiency of infrastructure services and investments have improved remarkably across regions. Massive infrastructure spending across the world has contributed to meeting the MDGs, in terms of access and poverty reduction. In spite of these achievements, some notable differences exist among regions in terms of access to basic infrastructure services. Water and electricity coverage is now above 85 percent in EAP, LCR and MNA; however, coverage is far lower in AFR. While over 90 percent of the populations in EAP, LCR, MNA and ECA are cov- ered by a mobile cellular network, the coverage figures hover around 60 percent for AFR and SAR. If infrastructure is regarded as critical element in accelerating growth and shifting the devel- opment trajectory across regions, there are significant differences in initial conditions among regions. Table 2 proxies those differences along three dimensions—growth, inclusiveness, and environmental sustainability—which infrastructure investments can help address. Within each region, this table masks huge differences among countries. To respond to these highly differentiated conditions and country needs, the Group will tailor its approach and adopt a flexible response. Regional Implementation Action Plans will show where opportunities exist for the Group to use its resources for the highest impact. In particular, the Action Plans describe what each region of the Bank, IFC and MIGA is planning to do in infrastructure over FY12-15. The plans are based on the fundamental premise that clients will ultimately determine the type of engagements with the Group. This prospective analysis is based on an assessment of past performance and achievements of the Group over the SIAP period. 29 29 Table 1: Status of Infrastructure Needs and Financing, by region AFR EAP ECA LCR MNA SAR Annual investment and maintenance needs (billion, US$)1 93.3 406.7 N/A 81.2 78.5 191.1 Billion US$ 45.3 207.0 N/A 43.5 43.8 46.0 Annual Infrastructure spending2 % GDP 7.1 7.2 N/A 1.9 6.9 4.6 Private participation in infrastructure investment (billion, US$)3 12.5 17.6 32.5 46.8 7.8 34.8 Of which: energy (% of total PPI)4 5.9 40.7 41.0 33.9 7.2 49.6 Water and sanitation (% of total PPI)5 0.3 6.5 1.5 0.9 10.7 0.2 Telecom (% of total PPI)6 88.8 32.2 50.6 38.5 64.9 35.7 Transport (% of total PPI)7 5.0 20.7 6.9 26.7 17.1 14.5 1 Constant 2005 US$; Interim Report for the G20 of the MDB Working Group on Infrastructure, May 2011. 2 2005; Interim Report for the G20 of the MDB Working Group on Infrastructure, May 2011. 3 Annual average 2007-9; Private Participation in Infrastructure Database: Encompasses capital expenditures invested at contract signature or financial closure for projects where private parties have at least 25% participation in the project contract or divestures with at least 5% of equity owned by private parties. Investments recorded encompass total investment in the project, not the private component alone. 4 Energy sector defined as i) electricity generation, transmission and distribution; ii) natural gas transmission and distribution. 5 Water and sanitation sectors defined as i) potable water generation and distribution; ii) sewerage collection and treatment. 6 Telecom sector defined as i) fixed or mobile local telephony; ii) domestic long-distance telephony; iii) international long-distance telephony. 7 Transport sector defined as i) airport runways and terminals; ii) railways (including fixed assets, freight, intercity passenger, local passenger); iii) toll roads, bridges, highways, tunnels; iv) port infrastructure, superstructures, terminals and channels. 8 Constant 2008 US$; OECD, 2009. 30 30 Table 2: Regional Differences in Initial Conditions, Selected Indicators AFR EAP ECA LCR MNA SAR GDP per capita (constant 2000 US$)1 635 2,099 2,785 4,890 1,967 770 Foreign direct investment, net inflows2 (% of GDP) 3.4 2.9 4.4 2.7 3.2 2.5 Growth ODA (DAC/non-DAC) flows to infrastructure (billion US$)3 7.9 1.8 1.4 1.6 2.4 2.5 Public Investment management Index (range, out of 4) 3.53-0.50 2.87-0.77 2.39-1.41 3.12-0.27 2.97-0.80 2.10-1.57 Poverty head count ratio at US $1.25 a day (PPP) (% of population)4 51 17 4 8 4 40 Labor Participation Rate, total (% ages 15+)5 70.7 72.4 59.0 65.5 50.6 58.9 Inclusiveness Ratio of female to male labor force participation (% ages 15 and over)6 77 81 75 65 35 43 Maternal morality ratio (per 100,000 live births)7 650 89 34 86 88 290 Public access to information (0-100)8 37 43 70 75 17 78 Per capital wealth (billions US$)9 13,888 20,669 72,744 79,194 28,992 10,441 Environmental Sustainability CO2 emission (metric tons per capita)10 0.8 4.0 7.2 2.7 3.7 1.2 1 WB national accounts & OECD national accounts, WDI, 2010; MNA data from 2009. 2 IMF, International Financial Statistics and Balance of Payments database, WDI, annual average 2007-9. 3 OECD/DAC Official Development Statistics, 2009. 4 See IMF Working Paper Investing in Public Investment: An Index of Public Investment Efficiency, 2011. 5 WB Development Research Group, 2005. 6 International Labour Organization, Key indicators of the Labour Market database, WDI, 2009. 7 WB Development Research Group, 2009. 8 WHO, UNICEF, UNFPA, WB estimates, WDI, 2008. 9 Global Integrity Indicators, 2008/9. 10 “Wealth� is composed of produced capital (infrastructure and urban land), natural capital (cropland, forests, fish stocks, minerals, etc.) and human resources (human capital, quality of institutions). The Changing Wealth of Nations, WB publication, 2011; data from 2005. 11 Carbon Dioxide Information Analysis Center, Environmental Sciences Division, Oak Ridge National Laboratory, Tennessee, WDI, 2007. 31 WORLD BANK GROUP INFRASTRUCTURE ACTION PLAN AFRICA REGION FY2012-2015 32 1. INFRASTRUCTURE ISSUES Highly heterogeneous region Access Indicators • Low income countries (LICs): Senegal, Uganda Energy – Enormous efforts in infrastructure development in recent years. – Heavily dependent on external finance for infrastructure. Electrification rate (% of population 30.5 • Middle income countries (MICs): Cape Verde, South Africa with access)1 – Best positioned to meet infrastructure needs. Delay in obtaining electrical – Stronger asset maintenance, institutional efficiency and larger urban populations 31.2 connection (days)2 facilitate network rollout. Water and Sanitation • Resource rich countries: Nigeria, Zambia Improved water source (% of population – Generating (or soon to be generating) substantial resource royalties for investment. 59.7 – Experiencing serious governance challenges in converting investments into with access)3 infrastructure assets. Improved sanitation (% of population • Fragile states: Côte d’Ivoire, Democratic Republic of Congo 31.3 with access)3 – Facing a particularly daunting post-conflict infrastructure reconstruction agenda. Delay in obtaining water 29.4 connection (days)2 Regional infrastructure agenda ICT Africa’s infrastructure agenda is inherently regional due to large number of economies under Internet users (per 100 people) 4 8.8 US$10 billion GDP (31), landlocked countries (15) and trans-boundary rivers (60 basins), as well as an uneven distribution of energy resources and load centers. Population covered by mobile cellular • Economic and political interests are not always aligned in development of regional infra- 56 structure and implementation is highly complex. network (%)4 • There exists a large concentration of poverty: poverty rates rose on average by 4.2 percent Delay in obtaining a mainline telephone 30.7 in Africa during the 2008-09 crisis period, although the impact in rural areas may have connection (days)2 been even higher. Transport • There are major access needs: Africa needs 7,000 MW of new power generation capacity each year, but has been installing only 1,000 MW in recent years; less than 5 percent of Motor vehicles (per 1,000 people)3 34.2 agricultural land is irrigated, less than 10 percent of hydropower potential has been tapped and only 58 percent of Africans have access to a clean water source. Firms identifying transportation as a • Exceptionally rapid rates of urbanization are leaving cities struggling to keep pace with 27.1 major constraint in doing business (%)2 burgeoning infrastructure demands. Source: 1International Energy Agency 2010 2 Enterprise Firm Surveys, Enterprise Analysis Unit 3 World Development Indicators 4 Little Data Book on ICT 33 • Infrastructure services can easily cost twice as much as in other developing regions due to lack of scale economies and limited competition; power costs on average US$0.14 per kilowatt-hour. Climate change and disaster vulnerability • AFR has made little contribution to global carbon emissions (4 percent of global greenhouse gas emissions), however suffers high vulnerability to climate change impacts (e.g., weather-dependent rural livelihoods). • Natural disasters are common (e.g., droughts in Niger, cyclones in Madagascar and floods in Mozambique) and increasingly widespread. Governance • The public sector suffers from weak capacity in fragile states. The region has a large number of Fragile and Conflict-Affected States (FCSs), 20 of the World Bank’s 33. • Political instability affects the region (e.g., contested elections in Kenya, Zimbabwe and Côte d’Ivoire; coups and nondemocratic transfers of power in Guinea, Mauritania, Niger and Madagascar). Infrastructure investment and the private sector • Historically, some 40 percent of the region’s infrastructure investment has come from the public sector and a further 40 percent from the private sector. Donors and non- OECD partners have contributed the balance in roughly equal shares. Private finance has remained largely confined to the ICT sector, although there is some willingness to invest in power plants and container terminals. • The region’s infrastructure funding gap has been estimated at US$31 billion per year, with additional systemic inefficiencies draining some US$17 billion a year. This infra- structure deficit cuts per capita growth rates by 2 percentage points annually and there is significant scope for infrastructure policy and institutional reform. • China has become a major partner supporting infrastructure development, particularly in some of the resource rich countries. 34 2. ACHIEVEMENTS AND LESSONS World Bank Group Infrastructure Commitments LEARNED, FY08-11 FY11 FY08 • Bank lending for regional infrastructure projects averaged US$600 million annually over WBG Infrastructure Commitments the FY08-FY11 period, which is close to 80 percent of Africa’s overall regional lending 3.3 3.0 (US$ billion) for that period. The associated projects are contributing some 7,000 kilometers of regional fiber optic backbone and some 2,000 kilometers each of regional power trans- World Bank Infrastructure 3.0 2.6 mission and regional trunk road networks. Commitments (US$ billion) FY11 FY08 • As part of the green growth agenda, the Bank has had some success in tapping climate IFC Infrastructure Commitments WBG Infrastructure Commitments funds for infrastructure development, though mainly for smaller scale interventions. 0.3 3.4 0.1 2.9 There have been over US$750 million of commitments for renewable energy and urban (US$ billion) transport projects in Nigeria, Kenya and Ethiopia. MIGA Infrastructure • The Group has pushed the envelope on the PPP agenda. Examples include 2 joint IDA- 0.03 0.2 Commitments (US$ billion) IFC rural electrification PPPs in Senegal, shared fiber-optic cable systems in East and West Africa and power generation in Botswana. The IFC Infrastructure Advisory Services Total private sector investment were also active, with 10 active and closed mandates, including (i) projects with signifi- 9.5 enabled by IFC (US$ billion) cant fiscal and development impact – Liberia Power and Kenya Telecoms; and (ii) a major port concession, supported by Millennium Challenge Corporation funding in Benin. Source: SAP Business Warehouse, MIGA, IFC • Emphasis on governance and institutional reform has grown, with Bank projects blend- ing investments with institutional, regulatory and administrative reforms. Bank teams are engaged in supporting high-level dialogue on governance and accountability in the Democratic Republic of Congo, assisting with catalytic reforms in Cameroon’s Customs Directorate and advising on transparent oil and gas revenue legislation in Ghana. Ana- lytical and advisory work on the value chain of extractive industries is influencing policy dialogue in Angola, Democratic Republic of Congo, Nigeria and Niger. • The Africa Infrastructure Country Diagnostic (AICD) created a global knowledge base on Africa’s infrastructure sectors. 35 3. ACTION PLAN, FY12-15 Lessons Learned n CORE ENGAGEMENT • The private sector share of total infrastructure spending is far lower in Africa than in other What will constitute the core engagement in infrastructure? regions and extra effort is needed to leverage private capital. The Bank’s infrastructure interventions are grounded in the broader Africa Region Strategy of 2011, based on two central pillars of “competitiveness & employment� and “vulnerability • Regional projects face much larger implemen- & resilience�, building on a cross-cutting foundation of “governance & public sector capacity.� tation challenges than national ones: prepa- In addition, the region has adopted a selectivity approach, which aims at focusing on a smaller ration time is significantly longer, disburse- number of high impact interventions. ment ratios are slower and the percentage of commitments at risk is twice as high. Going • Unmet access needs: continue to focus on expanding access to infrastructure services in forward, the region must adjust allotted time both urban and rural areas, including: electrification, meeting MDG targets in water and and expertise for brokering and implementing sanitation and improving rural road accessibility. regional projects. • Sustainable transport: focus on improving connectivity between key economic nodes, • IDA financing should be complemented by enhancing support to regional integration and trade/transport facilitation, promoting partnership and coalitions, especially with PPPs and leveraging funding, tackling urban mobility bottlenecks and mainstreaming African institutions and actors (e.g., Nigeria’s social accountability in transport projects while supporting capacity building for gas to power; Rwanda Energy Access SWAp; sustainable results. Bujagali hydropower; Democratic Republic of • Sustainable energy: accelerate scale-up of regional power generation and transmission Congo’s Multimodal Transport project and the capacity (target: 8GW of new generation capacity by 2015); complement supply expan- Dakar Toll Road) to deliver greater impact. sion with demand-side management and energy efficiency programs. • Good governance and improved operational • Broadband infrastructure: focus on completing the regional fiber optic network so that all and regulatory capacity are critical for sustain- landlocked countries have access to at least one submarine cable; provide public subsi- able access, services and financial viability. dies to users rather than to service providers where necessary; stimulate transformational • High quality of project preparation and execu- applications of available bandwidth to applications including banking, education, medi- tion is needed to ensure success in PPPs and cine and public administration. deliver sustainable outcomes. • Water resources: focus on regional capacity building for River Basin Organizations to assist them in developing consensual basin-wide investment plans, key focus basins are the Niger, Nile, Senegal and Zambezi. • Disaster risk management: mainstream disaster risks into country strategies and operations; develop national Disaster Risk Management programs in 9 priority countries. 36 What will the region do to secure more/efficient North-South Corridor. For ICT, the region will invest in the completion public sector financing for infrastructure? of the Central Africa Backbone and make connection to the submarine cable possible for a number of small West African countries. • Public Expenditure Reviews (PER): offer on a demand-driven basis. Use of spatial analysis to provide guidance on the prioritization of • Broader development: The region will work on supporting projects that infrastructure investments is a growing area of work. have the potential to unlock broader development benefits. A preeminent example is the development of the Inga hydropower site, which, when • Leveraging finance of other partners: use strong track record to continue fully developed, will be the world’s largest hydropower site (40GW), partnering with other multilateral and bilateral donors, notably the African leading to a huge expansion in the availability of low cost power on the Development Bank. In recent years, every US$1 of IDA resources for continent with major ripple effects for the competitiveness of Africa’s Africa’s infrastructure has leveraged US$3 of donor co-finance. Non- productive sector. OECD financiers are increasingly partnering with IDA, most notably the Arab development banks, while exploring possible parallel co-finance • Green growth: Opportunities for green infrastructure exist in Africa’s with the China Exim Bank. vast unexploited renewable energy resources (hydro-power and geo- thermal), as well as in its substantial volumes of flared gas. The region • Cost recovery and targeted subsidies: promote cost recovery pricing has a strong pipeline of hydropower projects – with schemes identified of key services such as power and water to ensure sustainability in Benin, Burundi, Cameroon, Ethiopia, Guinea, Liberia, Niger, Sierra and possible extension to unserved populations and apply limited Leone, Tanzania – that will help put these countries and their sur- subsidies on a targeted basis. rounding neighbors on a greener development path. Investments are also being made in the development of Kenya’s geothermal potential. n TRANSFORMATIONAL ENGAGEMENT The energy agenda will also look beyond power to sustainable biomass supply and use. Where are the new opportunities for • Co-benefits: Two important areas where the region is pursuing co-benefits “transformational� engagements? are city level engagements and multi-purpose water resource develop- • Regional: The region has a very strong pipeline of regional infrastruc- ment. The region’s urban practice is in the midst of a paradigm shift ture projects, many of them aiming to address critical missing links from piecemeal infrastructure projects to city level engagements that and bottlenecks in the regional transport, power transmission and look at governance, financing and service delivery as an integrated fiber optic networks. The new Regional Integration Assistance Strat- system, often with a multi-sectoral approach. These kinds of engage- egy for Africa sets the framework for these interventions. A number ments are being pursued in Kenya, Mozambique, South Africa and of these projects have attracted the interest of the G20. In the power Tanzania. The region’s water resource practice is also strongly commit- sector, a number of key cross-border transmission projects in West ted to multi-purpose development of water resources that takes into Africa (Côte d’Ivoire-Liberia-Sierra Leone-Guinea interconnector), account the full range of potential water uses in urban supply, hydro- East Africa (Ethiopia-Kenya interconnector) and Southern Africa power, irrigated agriculture, navigation, fisheries and others. Extensive (Mozambique and Zambia) will allow countries to benefit from more analytical work on this issue is paving the way for engagements of this abundant and lower cost power in neighboring states. Efforts in trans- port will be selectively targeted at three major regional ports (Douala, kind on the Niger, Nile and Zambezi. Mombasa and Tema) and their associated hinterland road corridors into Central, East and West Africa respectively. In southern Africa, the region is contributing a number of projects to the high priority 37 What will the Bank do to build client capacity to • Africa’s resource rich countries are working to break out of the enclave support transformational engagement? model through strategic development of resource corridors, leveraging major infrastructure investments from mining companies and other • IDA grants to regional organizations to build capacity for regional projects. resource concessionaires. The Group can facilitate, as for example Regional projects face significant capacity constraints that hold back in Guinea and Liberia. their implementation. New rules allow grant financing for building capacity in regional organizations to support regional project develop- • The Bank plans to scale-up the “Lighting Africa� program to reach ment and operations. 80 million people by 2020. The program has harnessed private sector • Capacity development and training for national and citywide programs initiative to increase availability and reduce cost of decentralized solar of urban slum upgrading, land use planning, street addressing and lighting solutions for Africa’s rural areas. municipal finance, pertaining to a range of municipal infrastructure and service delivery challenges (WBI). Where are the opportunities for public-private partnerships? n INFRASTRUCTURE FINANCING • Considerable potential exists in gas-fired and geothermal power genera- tion, as well as port development. Through the recently Board-approved What will the Bank do to improve the special initiative for infrastructure, IFC will focus on creating PPPs jointly investment climate? with IDA, look to support the second generation of PPI in power sector and help further extractives-related transport initiatives. In addition, IFC • The Bank is developing a new breed of operations— the Growth Poles will pursue opportunities in improved delivery of services and payments Projects—to help African countries deploy a critical mass of reforms, through the ICT sector. IFC Advisory services will, wherever possible, infrastructure investments and skills building for the appropriate en- take a programmatic approach to develop PPP project pipelines, as for vironment to foster industrial investment. Such projects are being example in Nigeria and East Africa. implemented or prepared in Cameroon, the Democratic Republic • On-going reforms to the World Bank’s guarantee instrument, including of Congo, The Gambia, Madagascar and Mozambique. the expansion of partial credit and partial risk guarantee instruments • The Bank will also work on reforming labor and land regulation, as to IDA countries, constitute a mainstreaming of innovative practice well as deploying new approaches to improve the business environ- already underway in the region and will help to facilitate the structuring ment, such as the regulatory “guillotine,� which, combined with of viable PPPs, particularly for Africa’s energy sector. regulatory impact assessment, is a way to reduce the stock and flow of business regulations. What are the opportunities to tap into “green financing�? What will the Group do to help client countries attract more private sector financing? • Clean Technology Fund has three projects in the pipeline for South Africa, including the Energy Efficiency Program, the Sustainable • The region will work more closely with IFC and other actors to increase le- Energy Acceleration Program and the Eskom Renewable Support verage with private capital. From IFC, 20-25 projects are expected annu- Project, with $300 million in CTF going to IFC and the Bank and ally over FY12-14 for IFC own account volumes of US$500-600 million, over US$1.1 billion leveraged from the public and private sector. In with an additional US$300-400 million anticipated in mobilization. addition, the CTF Trust Fund Committee has endorsed an investment plan for Nigeria, and moving forward is contingent upon the availability of funds beyond what is planned for in the current pipeline. 38 • Three countries have been selected to be part of the Strategic Climate Fund’s Program for scaling up Renewable Energy in LICs (SREP), to pilot the viability of low carbon development pathways in the energy sector. Mali, Ethiopia and Kenya can expect to receive between US$25-50 million as part of the program. • There is a potential to link climate finance to Africa’s energy access agenda, particularly if large hydro projects were to become eligible for climate finance. The Bank will build client capacity for access green financing through: i) the Mitigation Action Implementation Net- work; ii) the Regional Carbon Forum; and iii) carbon finance support for Dar es Salaam (WBI). What will the Bank do to tap into knowledge and financing of private foundations, think tanks and others? • The Region is defining a strategy for closer partnership with think tanks in Africa, of which there has been a recent upsurge. 39 WORLD BANK GROUP INFRASTRUCTURE ACTION PLAN EAST ASIA REGION FY2012-2015 40 1. INFRASTRUCTURE ISSUES The East Asia and Pacific region has 59 percent of the world’s population. Countries are in various Access Indicators stages of development with differentiated needs and financing capabilities: • China Energy • Middle Income Countries • IDA Countries Electrification rate (% of population 90.8 • Small Isolated Pacific Islands with access)1 Within countries access to services and infrastructure needs can vary considerably Delay in obtaining electrical (eg., Indonesia or Vietnam). 21.3 connection (days)2 Water and Sanitation Despite significant poverty reduction, significant numbers still lack Improved water source (% of population 87.9 access to infrastructure services with access)3 • With approximately 170 million persons still lacking access to electricity, the region lags Improved sanitation (% of population behind the Latin American and the Caribbean, Europe and Central Asia and Middle East 59.0 and North Africa regions in access to electricity. with access)3 • Almost every second household in the region lacks access to modern cooking fuels or clean Delay in obtaining water and efficient cooking stoves. 27 connection (days)2 • Access to good quality sanitation services is lower than what one might expect at East Asian ICT and Pacific income levels, and in many parts of the region access to good quality water services is still a problem. Internet users (per 100 people)4 24.1 • By 2013, the region is expected to have a population of 2 billion people. About 800 million people already live in urban areas and there is net migration from rural to urban areas. Cities Population covered by mobile cellular absorb two million new urban residents every month and are projected to triple their built-up 93 network (%)4 areas in the coming two decades. The urban areas are the engines of growth; however, it is estimated that about 28 percent of the urban population live in households that lack improved Delay in obtaining a mainline telephone water, improved sanitation, sufficient living area, or durable housing. 10.8 connection (days)2 Transport Environment, Climate Change and Disaster Vulnerability • The region has many of the world’s most polluted cities. Rising inequality could pose a challenge Motor vehicles (per 1,000 people)3 46.7 to future social stability. • Although still relatively low on a per capita basis, the region’s carbon dioxide (CO2) emissions Firms identifying transportation as a 16.4 have more than tripled over the past 20 years, and energy consumption has more than tripled major constraint in doing business (%)2 over the past three decades and is expected to double over the next 2 decades. Source: 1International Energy Agency 2010 2 Enterprise Firm Surveys, Enterprise Analysis Unit 3 World Development Indicators 4 Little Data Book on ICT 41 • Environmental vulnerability is a continued concern, including pollution of water bodies, degradation of watersheds, competition between irrigation and urban water services. • The region has the highest projected annual cost of adapting to climate change amongst all six of the Bank’s geographical regions. • The region is subject to over 70 percent of the world’s natural disasters (e.g., source of 90 percent of the world’s earthquakes). • Cities face the brunt of climate change impacts due to their concentration of people and physical assets, as well as their geographic location. (Most megacities in the region are along the coast). Governance • Political and electoral changes may continue to affect the timing and composition of policy positions and investment programs in a number of countries. • Rising inequality could also pose a challenge to future social stability. • A number of infrastructure subsectors in a number of countries face governance and corruption challenges. Infrastructure Investment and Private Sector • With the exception of a few client countries, historic underinvestment in infrastructure is common and infrastructure expenditures continue to be low, especially since the East Asian Financial crisis: - From 2006-10, the region needed to spend an estimated total US$165 billion per year on infrastructure investments, which amounted to nearly 6.2 percent of Gross Domestic Product (GDP) for the region. - China alone is expected to account for 80 percent of infrastructure expenditures in the region. - There is considerable interest in private investment in infrastructure in many countries, however with a few exceptions private investment still lags behind expectations. 42 2. ACHIEVEMENTS AND LESSONS World Bank Group Infrastructure Commitments LEARNED, FY08-11 Green projects FY11 FY08 • The region’s portfolio hosts about 40 percent of active Bank climate-related projects, WBG Infrastructure Commitments and 63 percent of carbon offset commitments. 5.9 3.5 (US$ billion) • The Bank reached a record in hydropower lending of about US$1 billion in FY11 for projects in Vietnam (Trung Sun) and Indonesia (Upper Cisokan pumped storage). World Bank Infrastructure 4.9 2.7 • The Bank prepared the first Climate Development Policy Operation (DPO) in Vietnam Commitments (US$ billion) FY11 FY08 likely to be approved in FY12. The Vietnam DPO puts a financial framework in place WBG Infrastructure Commitments IFC Infrastructure Commitments that allows the country to target climate financing and allocate budget to climate 6.2 0.6 3.5 0.8 change projects on the basis of clear criteria. (US$ billion) • The region is also supporting several high-speed rail lines in China, and preparing its first MIGA Infrastructure investment for an urban underground rail line. 0.5 – Commitments (US$ billion) • The China Renewable Energy Scale-up Program (CRESP) continues to provide policy Total private sector investment advice and support investments for advanced renewable energy technologies (e.g. 7.2 off-shore wind, concentrated solar power, smart grids). enabled by IFC (US$ billion) • Technical assistance for Carbon Capture Utilization and Storage is also building capacity for Source: SAP Business Warehouse, IFC, MIGA implementation of the transformational low-carbon projects in the power generation sector. Achievements on meeting access needs • Over the last 15 years, rural electrification in Lao PDR has increased from 16 percent in 1995 to about 70 percent in 2010. • Five Bank-financed rural electrification projects (US$127 million total) directly contributed to connecting more than 150,000 households – about 15 percent of all households that have benefited from rural electrification. • A separate US$250 million rural electrification project in Vietnam added 550,000 households to the grid, culminating a long program of electrification in Vietnam and significant Bank support. Consolidation of IFC position as a key player in power sector, with a particular emphasis on renewable energy, including wind, biomass and geothermal. • Highlights include the first wind farm in China financed on a project-finance basis by interna- tional banks, the full privatization of the Philippines Geothermal company as well as financing three of the first four power projects sold to the private sector by the government, and an invest- ment in a China Export-Import Bank sponsored private equity fund targeting the infrastructure sector primarily in the ASEAN region. 43 Mobilization of private financing - The region is working with SOPAC to establish a geonode (open web based warehouse for geospatial data) and organizing training • IFC invested about US$1.7 billion in 57 projects in the infrastruc- for post-disaster needs assessments. ture space, and an additional US$470 million was mobilized from third parties between FY08-11. - The region signed a Memorandum of Understanding (MOU) with ADRC to have a cross-collaborative dialogue on capacity building. • IFC Infrastructure Advisory Services, with 10 active and closed mandates, engaged in off-grid private power supply to increase dependable power and reduce subsidies in a group of Philippines islands, privatization of electricity distribution business in city of Lessons Learned Olongapo, Philippines, and partial privatization of Samoa Airlines. • Governments across the region recognize the need of a greater role Sustained support of the Bank in PPPs for the private sector in developing and financing infrastructure and are attempting to introduce measures to improve the development of • The Bank also supported the government of Vietnam in designing PPPs. However, a number of institutional, governance and financing a PPP Financing Framework through a strategic, multi-year AAA issues remain: engagement supported by the East Asia Infrastructure Growth trust - Weak pipeline of bankable PPP projects and poor quality of project fund (EAAIG). preparation prior to bidding, with inadequate background analysis • Continuing assistance was offered to the government of Indonesia in undertaken prior to tendering resulting in unrealistic expectations. moving its PPP program forward, including setting up of a financing - Lack of market-oriented legal, administrative and institutional and guarantee facility in support of PPP transactions. systems to: (a) promote private investment in infrastructure PPPs; • Support is being provided to the government of the Philippines on (b) clearly define the roles and responsibilities for the public and a new initiative to scale-up PPPs. private sectors throughout the project cycle; (c) mitigate risks • More recently, the region is assisting the Government of Thailand associated with integrating projects into broader systems (e.g., in drafting a new PPP law. light rail to road/bus network), line agencies delays on project site, pricing risk, regulatory approvals, etc; and (d) address key • The Bank has also launched the Infrastructure Finance Center of sector policy issues (e.g., tariff regimes, land acquisition) which Excellence (IFCOE), which will focus on PPPs, expanding the infra- can undermine the viability of PPPs. structure finance advisory work of the Singapore Hub. - Limited government capacity and lack of methodology to determine Continued Support to East Asia and Pacific Region Network of Regulators focuses which projects should be procured publicly and which should be on building capacity, south-south learning and knowledge exchange among PPPs. This includes an unclear and/or inappropriate role of state the main regulators in the region. owned enterprises in the PPP market, which continues to crowd- Establishment of a WBG Hub in Singapore for urban development and infrastructure out private sector investment/expertise. financing solutions, designed to leverage Singapore’s expertise and the Group’s - Inability of local financial markets to provide adequate levels of global development knowledge and operational experience. Together with the long-term local currency financing for infrastructure PPPs. Singapore Cooperation Enterprise (SCE), the Singapore Hub has implemented six cooperation projects in the region last year for China, Indonesia, Mongolia The increasing role of bilateral trade and export promotion agencies and Vietnam. in the PPP market may also start to create distortions and affect the ability of private investors to participate in PPPs. Partnering with several organizations on disaster risk reduction, namely with UN International Strategy for Disaster Reduction (UNISDR) and ASEAN in FY09, with the Pacific Islands Applied Geoscience Commission (SOPAC), and with the Asian Disaster Reduction Center (ADRC) in FY11. 44 3. ACTION PLAN, FY12-15 n CORE ENGAGEMENT • Access to sustainable transport What will constitute the core engagement in infrastructure? - The Bank will focus on supporting countries to ensure sustainable • Access to electricity development of sub-national level roads to ensure good quality, all-year access and value for money in investments (projects are - The Bank will contribute to activities needed to expand access, underway or planned in Vietnam, Indonesia and the Philippines). including finding low-cost options, exploring new solutions for off- grid electrification, making better use of a proven entity (such as - China, Philippines and Vietnam, among others, have requested national and regional distribution utilities), making the supply chain expanded integrated urban transport engagements involving bus for petroleum products more efficient (especially in Pacific Island rapid transit and/or urban rail. countries), supporting fuel switching from solid fuels to cleaner- • Disaster risk management burning fuels where the latter are affordable, and main-streaming - Scale-up of AAA work in the areas of risk assessment, risk mitigation advanced cooking stoves. Some investment projects include the and risk financing over the next two fiscal years. ongoing Laos rural electrification Adaptable Program Loan (APL) and the planned 1,000 islands electrification program in Indonesia - Continued efforts in building climate and disaster resilience into that will focus on replacing high-cost diesel based generation with core investments across sectors, helping countries perform better renewable energy technology in Indonesia’s eastern islands. recovery planning, and making sector investments through Bank instruments such as Emergency Recovery Loans. - Australian Agency for International Development (AusAID) funding will be used to produce AAA work that initially assists with the scaling- - Expand as appropriate the use of the Catastrophe Deferred Draw up of access to clean cooking stoves. Down Option (Cat DDO) instrument. - The Bank will continue to disseminate to key stakeholders products - Access to aviation through an APL for the Pacific Islands aviation of the energy flagship report series (such as “One Goal, Two Paths�) investment project. as more AAA and TA work is produced for the region. What will the Bank do to secure more/efficient • Access to water and sanitation public sector financing for infrastructure? - Substantial AAA work is being conducted with AusAID funding to • In partnership with AusAID, the Bank will develop analytic work prepare demand driven knowledge products in improving water and that will prioritize public financing for infrastructure particularly sanitation access in the region. in the water and sanitation, energy and transport sectors. - Projects such as the Metro Manila wastewater project are under • The Indonesia Infrastructure Development Initiative grants way. Investments in wastewater in China and Vietnam are being will cover costs to provide policy and institutional advice as made. In Indonesia access to water and sanitation will continue well as practical inputs for better targeting of development through the Pamsimas project (it is estimated 3.5 million people aid, application of improved standards of design and greater will receive access to better water facilities and 2 million will resiliency for financing of infrastructure. receive better access to sanitation). • The Bank will work with agencies in key countries to develop - In Vietnam, the Bank will support a more results-based approach national strategies and frameworks that will encourage to rural water supply and sanitation, possibly using the new more efficient public sector financing of infrastructure. program for results instrument, if approved. 45 46 • The Bank is partnering with Cities Alliance to support the development of national slum upgrading strategies in Indonesia, the Philippines and Vietnam. These strategies provide the framework not only for slum upgrading but also for inclusive urban regeneration. • Public expenditure reviews will be undertaken to provide government clients with action plans in order to improve their infrastructure service levels, meet growing demand and increase their borrowing capacity while at the same time ensuring financial sustainability. n TRANSFORMATIONAL ENGAGEMENT Where are the new opportunities for “transformational� engagements? • Integrated urban development that focuses on addressing flooding and slum upgrading while at the same time improving competitiveness of cities and promoting a low carbon growth path. • Low carbon sustainable energy development including renewable and energy efficiency. • Systemic approaches to sustainable hydropower development in Laos and Indonesia. • Opportunities for accelerating green investments are significant. Planned projects include: promoting renewable energy in the Philippines, energy efficiency projects across the region, a bus rapid transit system in the Philippines, sustainable management of water resources at the river basin level in Vietnam, and urban resilience to climate change in the Philippines. • The region’s Low Carbon Cities development strategy is looking at an integrated multi-sectoral approach to identify opportunities for low carbon infrastructure investments. Analytical work is setting the foundation for operationalizing the Low Carbon Cities program especially in China using Global Environmental Facility (GEF) and IBRD funding. • The Eco2 Cities framework is supporting cities and metropolitan areas to plan, manage and invest in sustainable urban systems that are integrated, multi-functional and beneficial in the long-term. This framework was included as a core line of business in the Bank’s urban strategy. The Bank has active programs in Indonesia, Vietnam, and the Philippines utilizing the Eco2 framework. • The Bank is supporting power trading in the Greater Mekong Sub-region, which is creating momentum for greater economic integration and integration of electricity systems across the region’s various countries. 47 What will the Bank do to build client capacity to • IFC expects to deliver about 12-15 projects expected annually over support transformational engagement? FY12-14, with IFC own account volumes of US$400-450 million and an additional US$300-350 million anticipated in mobilization. Through AAA work and capacity building funded by AusAID, the Bank will continue to publish best practice reports series on new initiatives, • In Laos PDR, IFC will continue to work with the Bank in the hydro- while at the same time promote interactions among clients, the public power sector, where it is anticipated that the Bank would provide sector and private sector through workshops and seminars. funding for the government’s portion of the equity investments in some projects, complemented by IFC project finance. n INFRASTRUCTURE FINANCING Where are the opportunities for public-private What will the Bank do to improve the partnerships? investment climate? • On PPPs, the Bank will be: i) actively supporting the Government • The Bank will continue to work with sector agencies in our client of Philippines and Indonesia in implementing their PPP programs; countries to ensure that the policy environment (example: pricing ii) assisting Vietnam in operationalizing pilot PPP projects based permits and land acquisition) is conducive to support private on their PPP framework; iii) supporting the development of a new financing of infrastructure. PPP law in Thailand; and iv) providing technical assistance and • The Bank will also continue to work at a wider macro level with advice to Mongolia on their regulatory and institutional framework countries (example: Indonesia and Philippines) to put in place and programs (specially related to mining infrastructure). legislation, rules and regulations that will facilitate private part- • On PPP advisory services, IFC will be: looking at toll roads, light rail, icipation and financing of infrastructure. regional airports and water supply and irrigation in the Philippines; • The Bank will support specific PPP deals that can have a transport in Thailand; and multi-sectoral opportunities in Indonesia. demonstration effect and help to open up the PPP market. • The financing framework for green investments being developed will largely create new opportunities for public private partnerships in renewable energy and energy efficiency investments. What will the Group do to help client countries • A study is underway to conduct the prefeasibility of a PPP with attract more private sector financing? US$100 million IBRD support for a Philippines liquefied natural • With AusAID support, the Bank is leading two information and gas (LNG) import terminal. knowledge networks including the Infrastructure Finance Network and East Asia Regulatory Forum. These networks aim to strengthen regional partnerships, share knowledge, and build capacity to What are the opportunities to tap into accelerate the financing of infrastructure and economic regulation. “green financing�? • The WB-Singapore Urban Hub will continue to support clients and • AAA work on developing a framework for improving the investment country offices via joint projects, collaboration with ASEAN and climate of green investments is already underway. APEC, and development of knowledge sharing initiatives involving Bank units and Government of Singapore agencies. • Work will continue to initiate new financing structures that need to be developed with an appropriate mix of debt, equity, subsidies, • The Bank is working on a new financing framework to increase the and innovative carbon finance instruments to ensure bankability participation of the banking sector in financing local infrastructure of promising projects. investments in water, sanitation and urban services for Vietnam. 48 • Tapping into CDM, CTF and GEF for green projects. – Indonesia Geothermal CTF project approved in early FY12, with US$125 million in CTF and US$689 million leveraged from the public sector, with another Indonesia renewable energy proj- ect going to the Board in FY12, in which IFC will be receiving US$50 million in CTF financing. – Vietnam distribution efficiency project with US$350 million in Bank funding and US$30 million in CTF funding will finance a smart grid component for power distribution in Vietnam. – Region is mobilizing Carbon Asset Development Funds (CADF) as well as the Partnership for Market Readiness (PMR) fund to identify new operations for post-Kyoto/2012 carbon markets. – A Philippines renewable energy development project is providing financing support (US$45 million CTF, US$100 million IBRD) for investments in renewable electricity rural distribution networks on energy efficiency and supply-side loss reductions. – A Philippines Cebu city bus rapid transit system is being developed as a demonstration project to improve urban mobility and reduce GHG emission per passenger with support from Bank fund- ing and an additional US$15 million in CTF funding. – IFC in the Philippines will have two CTF projects going to the Board in FY12, namely Renewable Energy Accelerator Program (US$20 million CTF and US$210 million leveraged from private sector) and the Sustainable Energy Program (US$10 million CTF and US$497.5 leveraged from private sector). – The Bank will build client capacity to access green financing through: the Mitigation Action Implementation Network; the Regional Carbon Forum; and carbon finance support for Quezon and Jakarta to access carbon offset markets (WBI). What will the Bank do to tap into knowledge and financing of private foundations, think tanks and others? • The Bank works with a number of private and public think tanks on infrastructure issues in China and Vietnam. • Conferences, workshops and knowledge transfer forums are organized in order to promote inclusive growth into the region’s agenda. • The Bank also participates in urban resilience work financed by the Rockefeller Foundation. • The Bank has a partnership agreement with the University of Southern California. • The Bank will participate at the Asia Pacific Cities Summit by presenting findings of AAA AusAID funded work on urban development. 49 WORLD BANK GROUP INFRASTRUCTURE ACTION PLAN EUROPE & CENTRAL ASIA REGION FY2012-2015 50 1. INFRASTRUCTURE ISSUES Europe and Central Asia is a diverse region, 30 countries, 480 million people. Access Indicators • Poor and Fragile: Kosovo, Kyrgyz Republic, Moldova, Tajikistan Energy • Middle Income Countries (MICs): Electrification rate (% of population – EU members: Slovenia, Latvia, Lithuania –––– with access)1 – EU Candidate/ Potential: Croatia, Montenegro, Turkey Delay in obtaining electrical – Lower Income MICs: Armenia, Georgia, Bosnia & Herzegovina 48.8 connection (days)2 – Resource Rich Countries: Kazakhstan, Russia Water and Sanitation • Many of the new EU member states have significant grants available from the EU for Improved water source (% of population infrastructure investments, yet they lack capacity to absorb the available funds and 95.5 comply with EU environmental standards. with access)3 • Former Soviet Union (FSU) countries inherited a legacy of large transportation Improved sanitation (% of population networks and obsolete water and sewerage networks and have not been able to 89.1 with access)3 maintain or upgrade to keep up with demand. Delay in obtaining water 32 connection (days)2 Financial Crisis ICT • The global financial crisis severely affected the region. Industrial production plummeted, leading to higher unemployment and lower gross domestic product (GDP). Currencies depreci- Internet users (per 100 people)4 36.4 ated across the region. Government tax revenues declined sharply, leading to high budget deficits and rising levels of public debt. A tightening credit supply and deteriorating financial Population covered by mobile cellular conditions have limited the ability to borrow in the public and private sector. 91 network (%)4 Delay in obtaining a mainline telephone Access, Demand and Supply Constraints 17.5 connection (days)2 • While many economies inherited a legacy of reasonably good infrastructure, it has badly deteriorated due to inadequate maintenance, poor operational efficiency and deferred Transport investment. Most municipal utilities operate large, obsolete facilities and old networks, in urgent need of rehabilitation. Motor vehicles (per 1,000 people)3 187.3 • Significant financing needs exist in the energy sector, equivalent to about 3 percent of cumulative GDP over the next 20 years. ECA countries waste a lot of energy in production, Firms identifying transportation as a transmission and utilization. The sources of energy waste include low efficiency in power 19 major constraint in doing business (%)2 and heat production, gas flaring and venting, and inefficient industrial stock and buildings. • Funding for transport infrastructure projects has been decreasing at the same time as the Source: 1 International Energy Agency 2010 demand for transport has been rising. 2 Enterprise Firm Surveys, Enterprise Analysis Unit 3 World Development Indicators 51 4 Little Data Book on ICT Climate Change and Disaster Vulnerability • The region faces increasing risks of winter floods, summer droughts, melting permafrost and glaciers, rising sea levels, water shortages and decertification. A legacy of environmental mismanagement exacerbates the region’s vulnerability to climate change: poorly constructed and maintained Soviet-era infrastructure is ill-suited to cope with or protect people from extreme natural occurrences such as heat waves and floods. • CO2 emissions relative to GDP in the region are among the highest in the world. In 2005, Russia was the third-largest CO2 emitter, after the United States and China; Turkey now has the largest annualized CO2 emissions increase in the region. The region’s EU members have a substantial reliance on domestic coal that will not be easy to reduce. Governance • Regional cooperation on electricity production and gas transportation can yield huge economic savings and boost supply security but faces significant challenges, – e.g., Uzbekistan’s opposition to Tajikistan’s plans to construct the Roghun hydropower plant. • With decentralization advancing across the region (due in part to EU policy directives), local governments are assuming increasing shares of total public investments. This should expand the base for IFC sub-national lending and IBRD/IDA in urban and water infrastructure investments, both of which fall under the responsibility of local govern- ments or their utilities. Infrastructure Investment and Private Sector • The financial crisis has dramatically impacted the region’s ability to secure commercial financing in the energy sector to a far greater extent in comparative terms than in the rest of the world. • Limited IBRD resources constrain investments in water and sanitation. 52 2. ACHIEVEMENTS AND LESSONS World Bank Group Infrastructure Commitments LEARNED, FY08-11 FY11 FY08 In the ECA region, the Bank Group has made major contributions in infrastructure sectors WBG Infrastructure Commitments despite the challenges of the financial crisis: 3.4 2.8 (US$ billion) • Maintenance and reconstruction of core infrastructure: The network-wide Road Maintenance and Rehabilitation Program in Poland increased the quality of road infrastructure in good World Bank Infrastructure condition from 52 percent to 60 percent between 2008 and 2010, with a decrease in 2.3 2.1 Commitments (US$ billion) FY11 FY road fatalities from 5,500 to 3,900 over the same period. In Kazakhstan, the Bank financed a US$ 2.125 billion highway loan that will revive the old Silk Road linking Europe to Asia IFC Infrastructure Commitments WBG Infrastructure Commitments through Central Asia. 0.6 3.3 0.7 2.8 (US$ billion) • Support for institutional capacity development: In Romania, the Bank is undertaking a transport MIGA Infrastructure sector Functional Review, which designed a reform program in 2010, and may lead to Reim- 0.4 – bursable Technical Assistance (RTA) for implementation of the reforms. In Bulgaria, the Bank Commitments (US$ billion) has prepared its first Railway DPL designed to support strategic sector reform over the next Total private sector investment decade (2010-2011), and to help EU funds absorption through a potential RTA. In Monte- 7.4 negro, the Bank strengthened the framework for managing private provision of infrastructure enabled by IFC (US$ billion) services,including identification of priority projects for potential private financing. Source: SAP Business Warehouse, MIGA, IFC • Mobilization of partner resources: The Bank has been working with other International Financial Institutions to assist with major investments, for example, the East-West Highway in Georgia, where the Bank financed the first 200km and other IFIs have now taken up support for the remaining sections, and in Azerbaijan, where the Bank is financing about 500km of the Highway network and other IFIs now are getting more involved. • Tapping into green financing: The Bank has two Clean Technology projects in Turkey, the Private Sector Renewable Energy and Energy Efficiency Project and the Commercialized Sustainable Energy Finance Program, with US$122 million in CTF and over US$1.1 billion leveraged from the private and public sectors. Gaziantep, Turkey was the first global pilot of the Energy Man- agement Sector Assistance Programme (ESMAP) developed TRACE (Tool for Rapid Assessment of City Energy) diagnostic tool. It helped the city to identify vital energy saving investments across six areas under city administration control, including urban transport, water/sanitation, solid waste, municipal buildings, street lighting and heating. Implementation of the diagnostic tool is now being rolled out across 5 other cities in the region with the aim of supporting cities to improve their sustainability, while identifying priority green investments. 53 • Continued support for PPP activities and private sector participation: Over Lessons Learned the period FY08-11, IFC invested about US$2.1 billion in 56 projects in the infrastructure space. An additional US$1.5 million was mobilized from third parties. Highlights include (i) multi-pronged engagement in • Capacity of national and local institutions Turkey’s power sector, including corporate financing for a pool of power varies, which limits the pace at which trans- assets, the first long-term financing for a privatized power distribution company and financing for the country’s largest wind farm; (ii) the first formational projects can be undertaken. financing of a new hydropower project under a new regulatory regime to • Advanced clients request a quality of support help Georgia with energy security, as well as the promotion of regional that requires the Bank to strengthen its own integration through power exports to Turkey and (iii) a wind farm in capacity to respond, with possibly more reli- Romania. IFC infrastructure Advisory Services were also very active ance on external technical expertise. in the region, with 13 active and closed mandates, including a power sector PPP in Albania, a solid waste project tin Kosovo and a water • Improving public sector capacity for project distribution concession in Bulgaria. preparation should be a priority for most coun- • Development of new business models for clients: The Group used a fee- tries, especially those with some experience based services model for the St. Petersburg Pulkovo Airport Fee-based with PPPs. service (FBS) (financial close in 2010), which attracted €1.2 billion in • Countries with limited PPP experience should private investment and received the award of “Global PPP Transaction of the Year� from Infrastructure Investors in 2011. In addition, the start by formulating a strategy for the required provision of a partial risk guarantee (PRG) to Enel in Romania for the reforms and policies for PPPs, and consider privatization of two distribution companies indirectly benefited the using risk mitigation instruments. other distribution companies, incentivizing the privatization of three (out of the remaining six) distribution companies. 54 3. ACTION PLAN, FY12-15 n CORE ENGAGEMENT diversification, programs aimed at increasing the trade and utilization of gas, as well as the development of domestic energy resources. In addition, in Central Asia the World Bank is engaged in a regional What will constitute the core engagement in energy-water development program to build energy and water secu- infrastructure? rity through enhanced regional cooperation energy supply efficiency The Bank will continue to offer clients a menu of services based on improvement. Given the state of the energy infrastructure in the region, core products as well as explore opportunities to develop new types supply improvement programs focus on hydropower plant rehabilita- of engagements to match shifting client needs. tion, transmission and distribution rehabilitation and enhancement and district heating infrastructure improvements. • In IDA countries, the Bank will focus on financing core infrastructure investments that improve access to services and look to partner with • Water supply and sanitation: Programs focus on rehabilitation and other multilateral and bilateral partners to leverage more financing expansion of existing infrastructure, optimization of systems, demand for clients. IDA envelopes for ECA countries are very limited and such management and operation efficiency, and compliance with EU stan- partnerships are a way of attracting more financing to support policy dards and wastewater treatment facilities. frameworks developed with Bank expertise. • Transport: The focus will be on improving regional corridors to facilitate • In IBRD or blend countries that are not eligible for EU funds, the Bank trade and integration and provide improved access to markets, for both will finance infrastructure investments but IBRD exposure limits will local produce and for trade with other countries. challenge this model. • In IBRD countries that are eligible for EU funds, the Bank will support What will the Bank do to secure more/efficient countries to improve their absorption (utilization) of EU grant funds. public sector financing for infrastructure? The challenge is to improve the efficiency and effectiveness of insti- • Technical assistance and advisory programs to support policy reforms tutions to plan and implement infrastructure investments. A recent to advance energy market development and pricing reforms in power commitment by the EU to allow the Bank to access WBIF (West Balkan and gas sectors and end-use energy efficiency, provided in conjunction Infrastructure Fund) resources to carry out sector analysis and techni- with investment lending and associated services. cal studies, should provide an important instrument for investment project identification and preparation. • Development policy loans for energy policy and institutions (e.g., the Kyrgyz Republic, Poland, Serbia, Turkey and Ukraine). In all of these countries, the Bank is likely to engage in the following: • Expand Reimbursable Technical Assistance (RTA) for countries to • Energy efficiency and energy security: The Bank will help develop absorb EU grants and undertake structural reforms. (e.g., Romania markets and support services for energy efficiency financing programs and Bulgaria). In other countries, leverage private sector participation through banking intermediaries and energy efficiency funds–in some through use of a broad range of instruments, such as guarantees, cases in conjunction with GEF grant programs. Energy security is a availability payments, securitization, etc. core objective in the region and this is being achieved through energy 55 56 n TRANSFORMATIONAL ENGAGEMENT Where are the new opportunities for “transformational� engagements? Restoring growth and convergence in the region will require tackling bottlenecks to competitiveness, faster productivity growth and more integration. Energy and transport infrastructure develop- ment will be key to restoring growth. Economically sound adaptation and mitigation investments constitute significant opportunities and will require investment in new knowledge and expertise. Growth in the post-crisis world will also require sub-regional approaches to many issues, but the institutional framework to do so is often lacking, particularly for the lower income countries of the region. Some examples of transformational engagements include: • Fee-based services for the upper MICs: The Bank has successfully pursued fee-based-services and the provision of transaction advice to assist countries absorb EU grants and to attract private financing (e.g. Pulkovo Airport in Russia). • Regional energy trade and cooperation: (i) Adaptable Program Loans to support the establishment of an integrated regional market in the South East Europe; (ii) Central Asia/South Asia Regional Electricity Market and the CASA (Central Asia South Asia) 1000 transmission line for power exports from Central Asia to South Asia; (iii) development of the Caspian Development Corporation to facilitate gas exports from Azerbaijan and Turkmenistan to Western Europe and the Balkans (the Western Balkans gas ring is being considered for implementation with the European Commission and other European international financial institutions) and (iv) the Central Asia Energy Water Development Program to build energy and water security for Central Asia through enhanced regional cooperation. • Promoting renewable energy development and clean technology investments: The Bank is supporting countries in increasing the share of renewables in their energy mix. The Bank has pioneered the utilization of the CTF concessional resources for renewable energy scale-up and climate change mitigation with programs in Turkey and in Ukraine to promote low-carbon programs and projects. • Re-engaging on PPP: The Bank is (i) preparing a US$500 million Infrastructure Finance in Russia that will cover also PPP projects (all infrastructure sectors); (ii) including in the water sector possible new PPP on water treatment plants (water policy note and support to reform the management of water utilities); (iii) proposing support for electricity generation investment and distribution privatization through Partial Risk Guarantees and (iv) potential US$ 1.6 mil- lion fee-based service in Romania to support the development of PPP projects in transport. • Improving regional transport corridors to facilitate trade: The US$2.125 billion loan to Kazakhstan, plus US$1.5 billion to Azerbaijan and Georgia, will rebuild parts of the ancient “Silk-Road� transport corridors that link Europe to Asia through the South Caucasus and Central Asia. 57 57 In Eastern Europe, the IBRD is financing US$1 billion of improvements to transport corridors that will link countries of the European Union with n FINANCING OF INFRASTRUCTURE Russia through Ukraine and Belarus. • Promoting Green Transport: A study in Georgia will promote use of What will the Bank do to improve the non-fossil fuels, modal shifts from private to public transport in investment climate? urban areas, and from road to rail for freight transport in order to • As countries transition into the EU and seek to become knowledge reduce GHG emissions and the dependence on imported fuels. based economies, the Bank will continue to support work on knowl- • As cities account for 70 percent of GHG emissions, integrated solutions edge and innovation and upgrading Metrology, Standards, Testing, that draw on the Bank’s strengths across all infrastructure sectors will Quality (MSTQ) infrastructure, as well as on broad regulatory reform. need to be further explored under a Sustainable Cities framework. • The impact of the financial crisis on firms is still a challenge in the region. The Bank will monitor the effects of the credit crunch and declining demand on the enterprise sector, and provide TA for What will the Bank do to build client capacity to corporate restructuring. support transformational engagement? • Support absorption of available EU grant funds (in EU Member states) What will the Group do to help client countries and capacity improvement to implement and maintain infrastructure attract more private sector financing? networks. Introduce more efficient contracting methodologies (in SE Europe, EU neighborhood countries and New Member States) through IFC expects 15-18 projects annually over FY12-14, for IFC’s own technical assistance through exposure to international best practice account volumes of US$400-600 million, with an additional US$350- in infrastructure management and RTA. 450 million anticipated in mobilization. Advisory services or technical support in implementing legal, regulatory or institutional changes can • Develop a water academy in Russia to train and build capacity for water attract private sector participation and improve capital expenditure plan- utilities managers in financial management, water governance and PPP. ning. Additionally, partial risk and partial credit guarantees can help lower • Engage in capacity development support to local governments on the cost of financing and leverage private sector financing that otherwise urban management and planning in urban service delivery, includ- might not be available. Examples of support for enhancing private sector ing PPPs. The program focuses on seven countries of the Western participation include the following: Balkans (WB-Austria Urban Partnership Program for South East Europe). • Use Partial Risk Guarantees to promote electricity distribution privatization (Albania and Romania). Given the reduced appetite • Develop the WB-Austria Danube Region Water and Waste Water for private investment in energy, the expanded use of the guarantee Sector Capacity Building Program, which will provide executive instrument can bring in private investment through public-private training opportunities in sector regulation for utility managers and partnerships and direct investment (e.g., in Kosovo and countries senior government authorities. with higher risk perception). • Enhance trade facilitation measures and transport logistics to improve • Mobilize trust funds to strengthen institutional frameworks and the flow of goods and the movement of people across borders within identify priority projects. In the water and sanitation sector, Austria Europe and Central Asia, and with other countries in Asia and the may provide resources for 10 countries in the Danube basin region Middle East. and Balkans, while Russia may fund activities in member nations of the Commonwealth of Independent States (CIS) countries. 58 • Expand fee-based-services for advice on PPP implementation (e.g., in • Central Asia South Asia (CASA) 1000 - power trade from Central EU countries and other cities/regions of Russia). Asia to South Asia. Support to Kazakhstan on transport PPP Technical Assistance (TA). • Assist Turkey in meeting large infrastructure financing needs, particularly through mobilization of foreign lenders, privatization of existing toll and • Kosovo - proposed support for generation investment and distribution privatization through Partial Risk Guarantees. power generation assets and financing for power distribution and sub- national entities (IFC). • Moldova - restructuring the district heating company and power sectors, with the objective of introduction of PPP. • Seek opportunities for climate friendly investment to reduce losses in existing district heating and power generation in Balkan states, as well • Romania - Functional Review of the Ministry of Economy, energy sector and business environment; assessed private sector participation, past as funding for low cost and efficient power generation in the former results and future options; TA on PPP in the transport sector (proposal). Soviet Union. • Turkey - Third Environmental Sustainability and Energy Sector DPL • Support national development banks through financial intermediation supports distribution and generation privatization. loans than can be used to leverage private financing for sub-national projects (VEB project in Russia, Iller bank in Turkey, etc.). IFC Advisory services will also continue to pursue opportunities in the PPP space, although capacity constraints in the public sector to design and implement PPPs will be an ongoing challenge. Where are the opportunities for public-private partnerships? Turkey and Serbia have been identified as countries with PPP potential and What are the opportunities to tap into where the Bank could bring value through the use of loans and guarantees, “green financing�? contingent on country dialogue and demand, as part of a multi-year effort • Urban transport to shift private car users to green public to develop financing solutions and viable PPP projects. While countries transport (Turkey). such as Albania, Estonia, Latvia, the Slovak Republic and Romania all • Freight transport to shift from road to rail/waterways (Georgia). have some experience from PPPs, the recent crisis has raised the need for stronger public support and better prepared PPP projects. Moreover, • Energy efficiency in the water sector, (energy consumption is usually there is still untapped potential for private participation in several sectors 50 percent of a utility’s expenditure). and at the sub-national level. • Energy Efficiency Study, New Energy Efficiency Law and design of Renewable Energy and Residential Energy Efficiency programs in Russia. Examples of existing and potential PPP engagements include: • Russia - Preparation of US$500 million Infrastructure Finance What will the Bank do to tap into knowledge Financial Intermediary Loan (FIL) with Russian Development and financing of private foundations, think Bank - scope includes PPP (under preparation); FBS to strengthen tanks and others? institutional capacity of new road agency for toll roads and PPP (proposal). • ECA has actively utilized the GET-PPP to provide support on a selective basis; climate change mitigation and adaptation provide opportunities • Armenia - Water Policy Note and PPIAF supporting the reform in for close collaboration with think-tanks and leading universities. management of water utility. 59 WORLD BANK GROUP INFRASTRUCTURE ACTION PLAN LATIN AMERICA & CARIBBEAN REGION FY2012-2015 60 1. INFRASTRUCTURE ISSUES Access Indicators The Latin America and the Caribbean region (LCR) is extraordinarily varied in the natural, financial and human capital available. Such extremes call for a varied approach to investment Energy strategies, technology application, cost recovery and financing mechanisms. • OECD member states: Chile, Mexico Electrification rate (% of population 93.4 • Economic power houses: Brazil with access)1 • Landlocked: Bolivia, Paraguay Delay in obtaining electrical connection • Rural: Nicaragua and Honduras 26.2 • Low Income Country under Stress (LICUS): Haiti (days)2 Water and Sanitation Poverty and Inequality Improved water source (% of population • High Gini coefficients (measures of statistical dispersion) in the region impact infrastructure 93.4 with access)3 service provision, thus, average income levels are a poor measure of a community’s ability to afford basic services. More directly, the quality of services available to the wealthiest deciles Improved sanitation (% of population is not a reflection of the quality of service received by poorer deciles. 79.3 with access)3 Delay in obtaining water 24.8 Population and Urbanization connection (days)2 • The region will add 60 million people, and 64 million people will be moving to cities over the ICT course of the decade, continuing the boom in demand for transport, water, sanitation, energy and housing. The region’s motorization rate—4.4 percent per year—will translate into 138 Internet users (per 100 people)4 31.5 million new vehicles on the region’s roads (double the population growth), unimagined levels of congestion and increased pressure for alternative mass transit services. Likewise, con- Population covered by mobile cellular servative estimates of energy consumption suggest a 40 percent increase by 2020 and 92 a near-doubling of demand by 2030. This means 240 Gigawatts of new generation for the network (%)4 region at a cost of about US$430 billion in less than two decades. Delay in obtaining a mainline telephone 18.5 connection (days)2 Climate Transport • The region contributes 12 percent of total greenhouse gas emissions but contains only 8 percent of the world’s population. Emissions come from energy-driven uses (transport, power, industry) Motor vehicles (per 1,000 people)3 169.5 and from land use changes. Infrastructure is key to both since roads, rail and waterway access facilitate land use change for agriculture extractive industry and urbanization. Firms identifying transportation as a • Natural disasters are common (e.g., earthquakes and hurricanes in Central America and 22.8 major constraint in doing business (%)2 the Caribbean) with devastating consequences for the smallest and poorest economies. Source: 1International Energy Agency 2010 2 Enterprise Firm Surveys, Enterprise Analysis Unit 3 World Development Indicators 4 Little Data Book on ICT 61 Governance • Lack of accountability in public institutions translates to low quality of infrastructure services and inadequate investment decisions. • Absence of sound cost benefit analysis and an adequate portfolio of projects facilitate investment decisions based on political grounds. • Significant barriers to entry to international firms facilitate collusion of local firms or local partners with international firms. • Second generation of regulatory reforms are needed to strengthen performance and accountability of infrastructure service providers, both public and private. This includes the governance structures of SOEs which continue to play an important role in nearly all sectors in the region. Infrastructure Investment and Private Sector • Overall investment levels in infrastructure across the region have been low in recent decades, ranging from 2 to 3 percent of GDP. The poor state roads and rails, the shortfall in power generation reserve margins and the condition of urban assets such as mass transit and water and sanitation networks are testimony to this underinvest- ment. The historical exceptions to this rule: Chile (from private investment) and Costa Rica (from public investment) posted the region’s highest levels of growth through much of the 1990s and 2000s. • Although the region pioneered many forms of Public-Private Partnership, including concessions, joint-stock companies, outright privatizations, Output-Based transfers, pension-fund investments, spectrum and generation auctions, least cost subsidy and least net present value bids, it never succeeded in attracting sufficient levels of private investment to replace anemic levels of public investment. • Private investment has reached over 2 percent of GDP only in Brazil while Peru, Colombia and Chile remain at around 1 percent of GDP. The growing concentration in private investment by country mirrors a trend in Country Risk. The unpredictability of the legal and regulatory framework—as well as unclear pricing and subsidy policies —act as major impediments to attracting higher levels of private sector financing. 62 2. ACHIEVEMENTS AND LESSONS World Bank Group Infrastructure Commitments LEARNED, FY08-11 FY11 FY08 By 2010, Bank infrastructure lending was focused on: WBG Infrastructure Commitments • Strengthening countries against both physical and financial vulnerabilities: pioneering Green 4.1 3.0 Growth DPLs to lock in policy commitments to environmentally friendly investments and (US$ billion) regulations during periods of financial hardship; Catastrophic Draw Down Options to pro- World Bank Infrastructure vide governments with the resources to respond quickly to catastrophic events and Probabi- 3.2 1.9 listic Risk Assessment techniques to help sub-regions anticipate even the most unpredict- Commitments (US$ billion) FY11 FY08 able climate and weather-related events. IFC Infrastructure Commitments WBG Infrastructure Commitments • Short-term and employment growth potential: helping countries to frontload labor intensive 1.0 4.1 1.0 3.0 (US$ billion) activities such as rural road rehabilitation and maintenance. The Bank’s infrastructure com- munity has been central in Haiti’s reconstruction after the earthquake of January 2010. MIGA Infrastructure – 0.2 • Urban quality of life: through a platform of new support to the development of mass tran- Commitments ($US billion) sit systems including Bus Rapid Transit and integrated water solutions combining supply Total private sector investment expansion with sanitation and water resource management. 26.3 enabled by IFC (US$ billion) • Bank analytical and advisory efforts: (i) expanding regional integration for greater efficiency and scale economies in investment; (ii) exploring new approaches to PPPs and private Source: SAP Business Warehouse, MIGA, IFC finance of infrastructure; (iii) dissecting the effects of logistics costs on competitiveness and poverty and (iv) evaluating the region’s performance and regulatory capacity in power, water and transport. • Private sector engagement during FY08-11: including (i) largest ever IFC syndication for a port project in Latin America; (ii) financing for the first new generation hydropower project successfully bid out in Peru and (iii) the first large-scale baseload geothermal plant in Central America in Nicaragua, an IDA country. Over the same period, IFC Infrastructure Advisory Services had 12 active and closed mandates, including (i) projects with significant fiscal and development impact in IDA and small economies, e.g. Privatization of Haiti Telecom and Air Jamaica; (ii) major road projects in Brazil, BR116 and Colombia, Ruta del Sol and (iii) partnering with local and regional develop- ment agencies to promote PPPs in Central America, Jamaica, Brazil and Colombia. 63 Lessons Learned • An integrated approach is critical for continued client demand for Bank financing, where the Bank brings together traditional, sector specific interventions with strategic planning and social and environmental characteristics. • The design of infrastructure projects must focus on infrastructure service provision services instead of physical infrastructure. Setting quality standards is a difficult task for project teams and government counter- parts, while setting monitoring indicators based on service provision is challenging, as benefits usually accrue after project closure. • Infrastructure projects have to take into ac- count fiscal space, contingencies and financ- ing sources. This is particularly important for PPPs, proper accounting of maintenance expenses and user fees. • A regional approach to resolving infrastructure challenges is essential, particularly for energy and transport projects as well as integrated wa- ter resource projects. Interconnection remains a complicated task for energy. • Governance remains a challenge in the region. There is a need to strengthen supervision capacity in infrastructure ministries, improve capacity of infrastructure regulators, SOEs and competition agencies, improve country procurement systems, and strengthen auditing bodies to guarantee proper allocation and use of public funds. 64 3. ACTION PLAN, FY12-15 n CORE ENGAGEMENT recent work has been done jointly with the Government of Brazil to improve the efficiency of public expenditure in transport. Several recommendations produced in the Bank’s reports are being implemented. What will constitute the core engagement in infrastructure? Core engagement will encapsulate the notion of “green and inclusive growth.� n TRANSFORMATIONAL ENGAGEMENT This means projects, knowledge products and advisory services that are: • Socially sustainable: giving all people voice in the development process, Where are the new opportunities for and improving access to markets and basic services across income “transformational� engagements? level, ethnicity, age group and gender. The region’s transformational engagements will be those that encapsulate • Environmentally sustainable: ensuring that the investments do not the notion of green and inclusive growth by promoting greater access and infringe on ecosystems’ ability to continue to provide services, and more efficient and effective service delivery, improving the quality of life improving or minimizing negative impacts on the environment and of users and their communities, while protecting or enhancing the natural the climate overall. endowment of the impacted area. At a sectoral level, this contributes to: • Economically sustainable: providing sufficient financial resources, from • Transportation programs that place networks in the context of territorial users, communities and/or taxpayers, to offer affordable and quality development; encourage a shift to lower emitting modes; and provide services over time. for integrated mass transit systems. • Energy programs that help move the region to a cleaner matrix while What will the region do to secure more/efficient extending services to the unconnected. public sector financing for infrastructure? • Water and sanitation programs that value scarce water resources while Diagnostic of investment needs: The Bank is carrying out an exercise to measure investment needs for several growth scenarios in Central expanding and improving coverage for the underserved. America. This exercise is expected to inform policymakers about the • Urban programs that expand affordable services, utilize the tools of gap and will affect the Public Expenditure Review (PER) being carried land use planning while reducing waste and emissions. out in Central America. PERs will address alternative public sector financing for infrastructure. • Disaster risk management programs that mitigate the human, economic and financial effects of natural disasters, including Project components to improve efficiency of public sector financing: several climate-driven events. Specific Investment Loans (SIL), Development Policy Loans (DPLs) and Technical Assistance Loans (TALs), e.g., in Chile, Argentina, Brazil and • Rural infrastructure programs that increase the productivity, access to Paraguay, include components aimed at increasing competition in public market and independent capacity of local communities. works, improving capacity for official project estimates to reduce the differ- ence between planned, budgeted and actual costs. For example, extensive 65 What will the Bank do to build client capacity to Bank will continue working to establish a sound macroeconomic and legal support transformational engagement? framework that reduces country risk. Examples include: redesign of INCO in Colombia, advice on the new concession laws in El Salvador, Honduras The Bank has already begun to address client capacity for transformational and Chile, establishment of a Competition Regional Center in Mexico City. engagements through institutional reform programs such as the DPL and TAL for the Modernization of the Ministry of Public Works in Chile. Going What will the Group do to help client countries forward, it will blend its analytical, advisory and lending capacity to bring attract more private sector financing? cross-cutting skills and tools to future operations. IFC expects to deliver 25-30 projects annually over FY12-14, with IFC Planning capacity: The Bank is working with client countries throughout own account volumes of US$650-750 million and an additional US$500- the region to strengthen planning capacity to improve the selection of 600 million anticipated in mobilization. In the Caribbean, IFC is looking infrastructure projects; to assess the economic, social and environmental at energy and transport sector investments in Jamaica, and a sub-regional impacts of more complex infrastructure projects and to conceive infrastruc- focus on Central America, water services in Brazil and selective interventions ture as a network with the ultimate objective of abandoning the “piece across in broadband, telecoms infrastructure sharing and media sectors. meal� or silo approach to infrastructure. In addition, IFC is looking to scale-up its renewable energy portfolio across Green infrastructure: The Bank is fostering client capacity on the benefits the region, with continued involvement in large-scale, non-traditional renew- of green infrastructure that is transformational. The greening of infrastruc- able energy investments. ture requires a change in dialogue: many countries see the measures to address climate change, both mitigation and adaptation, as costly and growth reducing. Where are the opportunities for public-private partnerships? Inclusive infrastructure: Transformational investments that consider the costs of externalities such as climate change, local pollutions or biodiver- Through strategic interventions at all levels of government, aimed at en- sity may have important distributional impacts. The Bank’s advisory and hancing credit worthiness, designing PPP strategies, advising on the PPP operational work will help governments weigh the trade-offs associated design and designing specific transactions, IFC and the Bank have been with policies, regulations and investments. If green transformation means assisting clients in building a pipeline of potential PPP projects. These less choices or greater costs, then the Bank will work with governments interventions will continue over the next strategy period. A discussion of to consider these social costs and construct policies to offset them. joint-network and Bank/IFC/WBI for Brazil’s PPP program has begun, in an effort to forge a constructive, multi-sectoral and vertically integrated program of support in PPPs. Beyond Brazil, several other countries and n INFRASTRUCTURE FINANCING sectors will received focused attention from the infrastructure family: • Evaluation of the concession program in Chile through analytical work. What will the Bank do to improve the investment • Redesign of a PPP agency in Colombia. climate? • Technical support to the airports PPP program in Brazil with Bank’s The extent of private sector financing of infrastructure, which typically own budget. involves a sunk investment, depends on country and regional business climate, including regulatory, political and financial risk. To that end, the • Assistance to the Government of Panama to explore PPPs in the Canal reverted areas through a FBS-funded Land Use Strategy. 66 • Legal, regulatory and institutional strengthening of PPP programs in What will the Bank do to tap into knowledge and Uruguay, Honduras and Costa Rica. financing of private foundations, think tanks • Regional growth through PPPs in the Caribbean. and others? • Technical and financial support on private off-grid electricity systems The Bank will continue to build relationships with regulatory associations, in Peru and Nicaragua; co-financing with GEF on select demonstration UNECLAC, private institutions and sub-regional think tanks and research wind and other renewable projects, e.g., Chile and Mexico, and analytical centers across the region. The Bank has established learning and knowledge support across the region on regulatory and technical needs for system programs with universities such as Berkeley and Portland State (mass transit integration, feed-in tariff design for renewables, subsidy reform and the and integrated urban planning); Florida’s Public Utility Research Center and other underlying policy and economic requirements for greater private University of Illinois (logistics for agriculture and spatial economics) to facili- sector involvement in sustainable energy provision. tate cross-infrastructure thematic capacity building and knowledge-sharing. • The Group will continue to provide support for urban transport, Bus Rapid Transit, port reform, airport concession and highway PPPs. What are the opportunities to tap into “green financing�? • Tapping into CDM, CTF, SCF and GEF for green projects: - Clean Technology Fund (CTF) has four WBG projects in the pipeline for the region, including the Sustainable Energy Finance Program in Colombia and the Urban Transport Transformation Project, Efficient Lighting and Appliance Project and Private Sector Wind Development in Mexico. The region and IFC will receive US$277 million in CTF financing and leverage over US$3 billion from the public and private sectors. In addition, the CTF Trust Fund Committee has endorsed an investment plan for Chile, which will move forward depending on the availability of funds. - One country has been selected to be part of the Strategic Climate Fund’s Program for scaling up Renewable Energy in LICs (SREP), to pilot the viability of low carbon development pathways in the energy sector through the use of renewable energy. Honduras can expect to receive between US$25-30 million as part of the program. - The Bank will build client capacity to access green financing through: (i) the Mitigation Action Implementation Network; (ii) the Regional Carbon Forum and (iii) Carbon finance support for Sao Paolo to access carbon offset markets (WBI). 67 WORLD BANK GROUP INFRASTRUCTURE ACTION PLAN MIDDLE EAST & NORTH AFRICA REGION FY2012-2015 68 1. INFRASTRUCTURE ISSUES Access Indicators The Middle East and North Africa region encompasses great diversity of countries with differentiated needs and financing capabilities: Energy • Non borrowing oil-exporting countries: Gulf Cooperation Council nations(GCC), Libya, Algeria. Electrification rate (% of population • Middle Income Countries (MICs): Morocco, Tunisia, Egypt, Jordan, Lebanon, Syria, Iraq and Iran. 90.2 with access)1 • Low Income Countries (LICs): Djibouti, Yemen. Delay in obtaining electrical • Special financing: West Bank and Gaza (WB&G). 60.9 connection (days)2 Water and Sanitation Infrastructure status Improved water source (% of population • Relatively good stock of infrastructure in high-income/oil-exporting countries and some MICS 87.3 but unsatisfactory service quality in most sectors. with access)3 • Low levels of regional economic integration. Huge potential benefits for developing intraregional Improved sanitation (% of population trade and regional infrastructure, including more efficient logistical services. 84.3 with access)3 • Infrastructure deficit in some rural and poor areas hindering access. More acute challenge for LICs. Delay in obtaining water connection 55.7 (days)2 Challenges ICT • Growing backlog of infrastructure investments and rapid urbanization rate (+3 percent per year) leading to congestion, pollution and declining competiveness of the region’s cities and economies. Internet users (per 100 people)4 21.5 • Scarce water resources coupled with unsustainable and inefficient uses. Population covered by mobile cellular • Private investment in infrastructure lags behind other regions. 93 network (%)4 - GCC accounts for about 10% of the region’s population and 50 percent of GDP but over 80% of private infrastructure investment, particularly in Saudi Arabia, United Delay in obtaining a mainline telephone 37.8 Arab Emirates, Qatar and Oman. connection (days)2 - 2011 investment impacted by the political events in the region; increased political risk Transport leads to investor uncertainty and higher pricing. Motor vehicles (per 1,000 people)3 87.6 • Building resilience against climate change and natural hazards and sensitivity to the food crisis; potential to develop green growth via Concentrated Solar Panels (CSPs) and city green growth programs. Firms identifying transportation as a 21.5 • Most countries developed infrastructure stimulus packages to sustain economic growth major constraint in doing business (%)2 and weather the impact of the financial crisis but there is still a US$30-40 billion Source: 1International Energy Agency 2010 per year deficit in infrastructure investment out of US$100 billion of spending needs 2 Enterprise Firm Surveys, Enterprise Analysis Unit estimated by the Bank. Improving governance is critical to give confidence to private 3 World Development Indicators sector to (re)invest in infrastructure. 4 Little Data Book on ICT 69 The 2011 Arab Spring highlighted additional challenges: - Lack of transparency, accountability and social inclusiveness, perception of cronyism and abuses of power (perceived or real). - Contraction of the fiscal space, limiting resources for investment and refocusing Governments’ priorities toward non economic infrastructure/social investments. - Young, unemployed and growing population accentuating the challenge of job creation and how infrastructure investments and maintenance can contribute. 70 2. ACHIEVEMENTS AND LESSONS World Bank Group Infrastructure Commitments LEARNED, FY08-11 • Regional integration: transport/trade diagnostic studies for the Mashreq and Maghreb, tech- FY11 FY08 nical assistance to specific countries, e.g., Tunisia, Morocco and Egypt, investment loans for the development of major infrastructure, e.g., Egypt power plants, airports and railways. WBG Infrastructure Commitments 1.4 1.8 • Urban development: TA and studies for specific countries, e.g. Morocco, Yemen, Egypt, (US$ billion) Jordan and Iran; investment loans, e.g., for improving traffic management in Beirut, Total private sector investment and creating a new peripheral corridor in Amman; development policy loans to Morocco 1.1 0.8 enabled ($US billion) FY11 FY08 to promote policy reforms in urban transport and municipal solid waste management. • Expansion of rural access: investment loans/credit for rural roads upgrading in Morocco IFC PPP advisory transactions WBG Infrastructure Commitments 0.3 1.8 0.6 1.8 and Yemen; Second Rural Access Project in Yemen has provided year round all weather completed (US$ billion) road access to about 475,000 people. MIGA Infrastructure Commit- • Strengthening PPPs: RTAs in GCC countries to support PPP unit in Kuwait and PPP frame- – 0.4 work in Qatar; support of the PPP Central Unit in Egypt in developing its portfolio. ments (US$ billion) • Promoting private sector participation: IFC invested about US$1.5 billion in 38 projects in Total private sector investment the infrastructure space in the region, with an additional US$600 million mobilized from 16.5 enabled by IFC (US$ billion) third parties. Highlights include a regional water company, two private airport concessions in Jordan and Tunisia, the first financing for a private power distribution utility in Jordan, Source: SAP Business Warehouse, MIGA, IFC financing for mobile telecom operators in Iraq and the West Bank and a container terminal in Iraq. Over the same period, IFC infrastructure Advisory Services were also very active in the region, with 10 active and closed mandates, including an airport in Jordan, an airport in Saudi Arabia and a wastewater treatment plant in Egypt. • Mitigation and adaptation to climate change: pilot studies in Morocco, Tunisia, West Bank and Gaza and Yemen; carbon finance project for taxi fleet renewal in Egypt; component of the Morocco urban transport DPL reducing CO2 emissions by 400,000 tons/year. • Transport: increased transport sector contribution to social development through gender and transport studies in Yemen, Morocco and West Bank and Gaza; labor intensive works in the rural roads projects; promotion of access for persons with reduced mobility in Morocco; and a pilot road safety diagnostics study in Yemen. • Water: in Iraq, 2 million people recovered access to safe water and half a million people benefited from sewers rehabilitated by Bank-supported projects; in Egypt, Bank-financed projects helped 850,000 families increase their annual agricultural production by US $35 million; in West Bank and Gaza, the Assessment of Restrictions on Palestinian Water Sector Development resulted in dialogue for improving the joint Israeli-Palestinian gover- nance framework that controls water projects implementation. • Energy: additional power capacity installed in Egypt and Jordan; significant renewable energy projects are under preparation (concentrated solar panels and wind power). 71 3. ACTION PLAN, FY12-15 Lessons Learned n CORE ENGAGEMENT • If political will is paramount in getting What will constitute the core engagement in infrastructure? things done, good governance is essential for public acceptance. The Group can Core engagements will include:33 play a key role helping decision-makers • Boosting the development of economic infrastructure to sustain economic growth, to be more transparent, to consult more enhance competiveness and unlock regional integration benefits. widely and to be more accountable. – Transport: disseminate studies on regional trade and transport in Maghreb and Mashreq; provide technical assistance to develop trade facilitation and logistics • The quality and capacity of national in Egypt, Yemen; produce study on regulation of port operators and transport and local institutions are essential for constraints to employment in Djibouti; support regional transport programs (TA designing and implementing improve- and horizontal Adaptable Program Loans); support Egypt railway sector (studies, ments in sector performance. TA and investment as required). • Change is a long process which requires – Energy: provide ad hoc support to power generation projects including independent sustained effort by Government, local power producers; continue facilitating the regional energy agenda, particularly by authorities and the Group. supporting regional interconnections (Egypt-Saudi Arabia); manage water resources; • Transfer of knowledge, especially inter- support water resource management initiatives, in particular the Tigris-Euphrates national best practices, is in high monitoring program. demand at all levels and essential • Achieving basic infrastructure service provision in rural and poor areas. to promote change. – Develop rural road programs in Yemen, Morocco, Tunisia and Egypt. • The study Optimizing Wheat Import Supply Chains (WISC) indicates that – Pursue large scale irrigation programs in Egypt. Arab countries would save millions of – Explore desalination for horticulture in Morocco. dollars each year by addressing WISC • Supporting integrated and inclusive development of efficient municipal infrastructure bottlenecks, e.g., insufficient storage services in urban and peri-urban areas. capacity which creates clogs in the supply chain or over-reliance on one – Integrated urban development operations: produce studies in Tunisia and Morocco to unloading port which increases supply assess how to improve the delivery of municipal services and help empower local risk. The Bank can help by improving authorities in their role as promoter of local economic growth, social cohesion and existing WISC port logistics, storage quality of life in urban areas. facilities and road networks in-country – Urban transport: produce study on transport and climate change; support urban and by promoting regional cross-border transport programs in Morocco and Egypt (Cairo). trade that may require infrastructure development. 72 – Municipal Solid Waste (MSW): scale up tailored support (DPLs or expand capacity building efforts for Disaster Risk Management by RTAs in Gulf countries) to help governments implement reforms providing support to national and regional institutions of learning. of their respective municipal solid waste sectors. Combine MSW • Modernized water and irrigation schemes: develop wastewater reuse projects, when possible, with CO2 emission reduction schemes. program in Tunisia; develop innovative finance schemes (e.g., PPPs) in – Water supply and sanitation: produce nation-wide studies on irrigation. sector performance and provide ad hoc support to water and sanitation projects. What will the Bank do to secure more/efficient • Engaging with clients on cross-cutting issues. public sector financing for infrastructure? – Rationalization of demand in infrastructure: improve the efficiency of • Continue developing partnerships and further coordination with other uses of natural resources, e.g., water, arable land, and infrastruc- Development Finance Institutions (DFIs) to address the region’s infra- ture assets, e.g., more urban roads versus urban transport system. structure challenges with European partners (EU, EIB, EBRD and – Infrastructure service quality, governance and job creation: produce bilaterals) and with Arab/Islamic partners (Islamic Development studies to assess and maximize the benefits of infrastructure Bank, Arab Funds and bilaterals). development on job creation; develop road asset management • Assess inefficiencies in infrastructure services and devise practical programs and explore labor-oriented technologies; improve the solutions to capture them. performance and governance of the energy sector in capturing inefficiencies, strengthening regulators and creditworthiness. – Development of private sector participation in infrastructure service n TRANSFORMATIONAL ENGAGEMENT provision: support harmonization and foster the PPP agenda; develop use of guarantees; provide ad hoc support to rescue PPP transactions Where are the new opportunities for affected by the Arab Spring. “transformational� engagements? • Managing green growth, climate change adaptation and disaster Core engagements will be considered transformational if they address to a large risk management. extent one or more of the below critical issues in infrastructure development: – Promotion of renewable energy: integrate, leverage climate funds and • Regional integration: supporting regional programs/projects when possible cross-sector approaches while implementing low carbon investments and harmonization of national frameworks to help countries share the (new technologies) and enhancing the efficient use of natural resources benefit of more economic integration. (Jordan); draw lessons from the Ouarzazate project to help replication • Concerns of the Arab Spring: strengthening the Governance Framework of concentrated solar panel programs in the region; scale-up financing (transparency and accountability) of infrastructure service delivery; and TA/RTA for renewable energy programs. and enhancing economic and social inclusion of basic infrastructure – Resilience to climate change: finalize and disseminate studies on and growth. adaptation to climate change in the Arab countries; develop a • Job creation: increasing Bank’s ability to frame competitive infrastructure regional pilot, climate change DPL, in Morocco. projects which can create sustainable jobs (direct, indirect and induced). – Improved disaster risk management (DRM): focus on small-scale, • Green growth and climate change: preparing demonstration projects to labor-intensive work to build resilience at the community level to foster green growth programs. mitigate risk of water scarcity, drought, food insecurity and floods; 73 What will the Bank do to build client capacity to support transformational engagement? • Scale-up institutional capacity building linked with lending operations. • Target technical assistance for project preparation with attention to procurement and public consultation. • Support regional PPP harmonization. n INFRASTRUCTURE FINANCING What will the Bank do to improve the investment climate? • During and since the Arab Spring, citizens have called for greater voice and accountability. The region’s main challenge, loudly proclaimed, is to create sustainable jobs generated by the private sector. The key is improving the enabling environment for private sector players, both large and small. Also key is ensuring fair competition and reducing privileges which have historically benefited solely the elite class. For example, the Bank has two new DPLs focusing on improved accountability and governance in Iraq and in Jordan. The Bank will also be continuing analytical work on economic governance and social safety issues in Egypt, Morocco and Tunisia. What will the Group do to help client countries attract more private sector financing? • Arab Financing Facility for Infrastructure (AFFI): a regional partnership between WBG and the Islamic Development Bank, is designed to promote regional policy dialogue on infrastructure challenges, to catalyze access to public and private finance sources and to support the prepa- ration of sustainable infrastructure projects, in particular PPPs. Its goal is to become a center of excellence for infrastructure financing in the region. • Private sector participation: The region will continue to be a critically important region from an infrastructure perspective for IFC, with 8-10 projects expected annually over FY12-14 for IFC own account volumes of US$400-500 million, with an additional US $200-300 million anticipated in mobilization. There is an appetite for well structured deals in the region with multiple sources of funding available. • Political risk mitigation products: MIGA expects to allocate US$500 million of net insurance capacity and further mobilize an additional US$500 million of reinsurance from the private market for a total of US$1.0 billion for the region. This capacity should meet the market de- mand for guarantees for a period of approximately 15 months. Beneficiaries of this allocation will include large infrastructure projects. 74 • Conflict Affected and Fragile States facility: (currently under develop- The Bank will develop cooperation with existing partners, listed below, ment) will help stimulate Foreign Direct Investment (FDI) flows to on joint activities (conference, knowledge products): some countries. • Marseille Center for Mediterranean Integration. • Arab Water Academy, Arab Water Council, Arab Water Country Where are the opportunities for public-private Utility Association. partnerships? • Arab Center for the Studies of Arid Zones and Dry Lands (ACSAD). • PPP opportunities are spread across sectors (independent power producers, integrated water and power projects, solid waste, toll • Arab Academy and Regional Center for Disaster Risk Reduction. roads, urban transport, ports, airports, logistics hubs, wastewater • League of Arab States. treatment plants, schools, hospitals), but need to be well prepared The Bank will further engage/explore with Gulf countries and funds to and structured to attract investors. finance infrastructure development. • Continued capacity building development in Morocco, Tunisia, Egypt, Syria and Jordan. • Increased lending support as PPPs are rebalanced (less private/ more public) via investment loans and targeted DPLs. • PPP “rescue� operations for bankable projects impacted by the Arab Spring. • Continued IFC Advisory services which pursue opportunities in the PPP space as the Arab Spring puts pressure on regional governments to provide better coverage and quality of infrastructure services; po- tential for reevaluating PPP development pipeline and existing PPPs in tender (opportunities for increased transparency, governance and social prioritization). What are the opportunities to tap into “green financing�? • Concentrated solar power programs and other renewable energies. • City green growth programs. • Municipal solid waste programs. What will the Bank do to tap into knowledge and financing of private foundations, think tanks and others? 75 75 WORLD BANK GROUP INFRASTRUCTURE ACTION PLAN SOUTH ASIA REGION FY2012-2015 76 1. INFRASTRUCTURE ISSUES The South Asia region is one of great diversity of countries, each with different needs and capabilities: Access Indicators • GDP per capita >US$1,400: India (population 1.2 billion), Maldives (population 316,000), Sri Lanka (population 21 million). Energy • Low Income Countries (LICs): Bangladesh, Pakistan (population >140 million each). • Fragile countries: Afghanistan, Nepal. Electrification rate (% of population 62.2 with access)1 Large concentration of poverty, with major access needs Delay in obtaining electrical connection • Large reduction in poverty in last two decades, but still home to more than ½ billion poor people. 48.4 (days)2 Lagging, landlocked/border regions are home to an estimated 50 percent of South Asia’s poor. Water and Sanitation • Huge ranges in access and coverage: electricity coverage ranges from 95 percent in Maldives to 16 percent in Afghanistan. Bangladesh has only 10 percent of its roads paved, India and Nepal Improved water source (% of population 86.7 have 49 and 56 percent respectively, while Sri Lanka 81 percent and Maldives 100 percent. with access)3 Improved sanitation (% of population High population density 35.7 with access)3 • The region already has five cities with a population of over 12 million (Mumbai, Delhi, Kolkata, Dhaka and Karachi), and the region will account for 17 percent of the world urban population Delay in obtaining water 64.2 by 2030. One million people are expected to join the labor force each month for the next two connection (days)2 decades, with labor force doubling by 2050. ICT Climate variability and natural disasters Internet users (per 100 people)4 5.5 • The region suffers an exceptionally high number of natural disasters. Between 1990 and 2008, more than 750 million people—46 percent of the region’s population—were affected by at least Population covered by mobile cellular one weather related disaster, leaving almost 60,000 dead and resulting in about US$45 billion 61 in damages. network (%)4 • The region’s climate variability makes it especially sensitive to the consequences of climate change Delay in obtaining a mainline telephone 31.2 (e.g., 2004 Tsunami in Sri Lanka, India and the Maldives, the earthquakes in Pakistan, recurrent connection (days)2 floods and recent cyclones in Bangladesh [cyclone in SIDR in 2007 and AILA in 2009]). Transport Governance Motor vehicles (per 1,000 people)3 15.7 • For the first time, all countries have elected governments, yet conflict, insurgencies and civil strife are rampant in the region. Firms identifying transportation as a 18.6 • Heterogeneity among countries creates huge opportunities for cross border cooperation. In energy, major constraint in doing business (%)2 for example, Nepal has a huge untapped hydropower potential, while India faces a large power deficit. However, the region is the world’s least integrated; intraregional trade in South Asia Source: 1International Energy Agency 2010 accounts for a mere 5 percent of total trade, the lowest level of any region in the world, which 2 Enterprise Firm Surveys, Enterprise Analysis Unit can be primarily explained by conflicts among countries in the region. Less than 2 percent of 3 World Development Indicators Afghanistan and Nepal’s economically feasible hydropower potential of over 50 GW is actually 4 Little Data Book on ICT used due to lack of regional cooperation. 77 Infrastructure Investment and Private Sector Asia’s private sector investment hosting 380 projects with a total value of US$158 billion, while Pakistan attracted only US$28 • The share of infrastructure investments in GDP varies widely: India: billion in 63 projects and the rest of the region the remaining 5-7 percent of GDP during the last 50 years, with 25-35 percent US$12 billion in 70 projects. For comparison, Brazil received of that investment coming from the private sector; Bangladesh: 3-5 US$270 billion for 467 projects over the same period. percent of GDP during the last 40 years, with 35 percent of invest- ment coming from the private sector in the late 1990s early 2000s. • While South Asia garnered almost no PPP projects before 1993, it has recently become a significant destination for private invest- • The region lags behind almost every other region in number of projects ment. The private sector has mainly played the role of financier with private participation. India makes up the lion’s share of South rather than manager of infrastructure projects. 2. ACHIEVEMENTS AND LESSONS LEARNED, FY08-11 In FY11, the Bank embarked on a strategic shift towards bigger, more innova- prepare the ground to directly finance cross border integration of power tive, higher impact infrastructure projects. Examples include the India Rural systems, e.g., Central Asia South Asia Electricity Transmission and Roads project (US$1.5 billion), Bangladesh Padma Bridge (US$1.2 billion), Trade project, Nepal-India Electricity Transmission and Trade project. India Integrated Coastal Zone Management, National Ganga River Basin project, • Urban development: (i) technical assistance to support sustainable urban and the Eastern Dedicated Freight Corridor project. These projects are expected development policies, e.g., TA for Emerging Towns and Water Supply to be transformational, not only in the magnitude of their expected impact, e.g., and Sanitation Sector in Nepal and South Asia Megacities Improvement Livelihood project lifting 8 million women out of poverty through small com- Program in Mumbai and Dhaka; (ii) project to develop a model integrated munity support, Information and Communication Technologies (ICT) use and solid waste management in Pakistan; (iii) pilot activity in India to promote micro-finance, but also in their design in addressing a broader development the sustainable urban transport technologies adoption; (iv) technical concern, e.g., territorial development - Padma bridge project focus on connec- assistance to build capacity in urban water sector; (v) study on municipal tivity; rapid urbanization and congestion - potential Dhaka gateway project. financing requirements in urban water, sewage and solid waste (Non-lend- ing Technical Assistance to the High Powers Expert Committee on Urban The Bank implemented several projects involving in-depth assessments of Development); and (vi) capacity building and pilot investment to reduce procurement and financial management practices with a view to implementing water source pollution (National Ganga River Basin Project). enhanced governance and accountability measures, e.g., National Solidarity Program Supervision Design in Afghanistan, Procurement and Financial Man- • Rural access: (i) impact evaluation of rural access interventions in Afghani- agement Capacity Building Workshop in India, Procedures for Debarring Firms stan, e.g., Impact Evaluation of National Emergency Rural Access project; that Engage in Fraudulent Practices in Pakistan. The region also implemented (ii) regional and country specific studies on improving rural access to knowledge sharing projects on how civic engagement ensures improved gover- infrastructure services, e.g., Infrastructure Gap in the South Asia region, nance in infrastructure projects. Sri Lanka Infrastructure Assessment; (iii) projects to expand and improve rural roads, e.g., Enhanced Implementation Support for the PMGSY Rural Furthermore, the Bank continued to sustain its analytical and financial Roads Project and Rural Roads Project; (iv) project to finance access to engagement in the following areas: water systems and sanitation facilities, e.g., Punjab Rural Water Supply and Sanitation and (v) project in Afghanistan to support community- • Regional integration: (i) studies, policy notes and training to promote spe- managed reconstruction and development that improve access of rural cific ventures in cross border energy trade, e.g., South Asia Cross Border communities to social and productive infrastructure and services, e.g., Energy Program-India, Nepal, Bangladesh, Sri Lanka; and (ii) studies to Afghanistan: Emergency National Solidarity Project II. 78 • Mitigation and adaptation to climate change and green work: (i) study in India on moving the country towards a low carbon growth path; (ii) projects to improve natural disaster forecasting capacity (Bihar State Flood Management Information System Project and the India National Cyclone World Bank Group Infrastructure Commitments Risk Mitigation Project); (iii) pilot activity in Andhra Pradesh, India, to build a comprehensive and holistic drought resilience program; (iv) build the climate resilience of rural communities FY11 FY08 (Himachal Pradesh Mid-Himalayan Watershed Development Project) and (v) renewable energy, with additional capacity built in Small Hydropower & Renewable-based power generation in WBG Infrastructure Commitments 6.9 3.0 Afghanistan, India, Nepal, Sri Lanka. (US$ billion) • Social development: (i) a pilot program in Afghanistan to enhance the job skills of young women World Bank Infrastructure and facilitate their access to wage employment; (ii) project to facilitate access to employment 6.6 2.0 Commitments (US$ billion) FY11 FY08 opportunities in the garment sector for poor and vulnerable women from Bangladesh and (iii) project to improve access, equity and the quality and relevance of education in Punjab. IFC Infrastructure Commitments WBG Infrastructure Commitments 0.3 6.9 0.9 3.0 • Public-private partnerships: (i) non-lending technical assistance to build capacity and create (US$ billion) enabling frameworks for PPPs, e.g., DEA Non-Lending Technical Assistance, Support to Development of PPP Framework project in Pakistan; (ii) analytical efforts to integrate PPP MIGA Infrastructure – – policy framework in the overall planning efforts of countries, e.g., Sri Lanka Infrastructure Commitments (US$ billion) Assessment; and (iii) Projects to directly finance PPP concessions, e.g., Second Karnataka Highway Improvement project in India. Total private sector investment 13.6 • Private participation: IFC has focused on consolidating its position as a key player in the enabled by IFC (US$ billion) power sector, with a particular emphasis on renewable energy. IFC has also actively diversified Source: SAP Business Warehouse, MIGA, IFC into other sectors. Highlights include the first private sector water project in Bangladesh focused on rural areas with significant development impact, support for the construction of modern warehousing facilities for storing agricultural commodities across India, including a significant component in the low income states and an end-to-end waste recycling company. Lessons Learned • Use of programmatic approach for greater leverage of development impact. • Scaled-up impact by consolidating stand-alone projects into larger sector projects. • Increased selectivity of projects to become more effective, for example by focusing on less transaction-intensive projects. • Need to focus on transformative (i.e., larger more innovative) infrastructure projects with a higher impact on client countries. • Need to mainstream good governance practices for designing and implementing large-scale projects. 79 3. ACTION PLAN FY12-15 n CORE ENGAGEMENT n TRANSFORMATIONAL ENGAGEMENT What will constitute the core engagement in Where are the new opportunities for infrastructure? “transformational� engagements? The Bank will engage in the following core areas: • Regional Integration: Greater connectivity and integration of markets would • AAA products: (i) regional gap analysis (e.g., Infrastructure Gap in increase growth and equality. Thus, there is a need to strengthen regional the South Asia Region); (ii) country level analysis (e.g., Padma bridge cooperation in water, electricity, transport and climate change adaptation/ analysis and Nepal emerging towns); (iii) sector level analysis. mitigation efforts. • Knowledge products: (i) Impact evaluation analyses; (ii) infrastructure – Northeast Electricity Transmission and Trade: facilitate Nepal power analyses (e.g., benchmarking of utilities). trade between Nepal, India and Bangladesh to address power shortages. • Lending projects for: (i) connecting people to prosperity, e.g., First – Northeast Trade and Transport Facilitation Program: ease transport National Highways Interconnectivity Improvement Project in India and congestion at Bangladesh-India and India-Nepal border crossings Afghanistan Rural Access Project; (ii) providing cleaner and more (in collaboration with ADB). Precursor to boosting regional trade secure energy supply, e.g., Kabeli A Hydroelectric Project in Nepal, in subsequent phases of the program. Tarbela Fourth Extension Hydropower Project in Pakistan and Siddhir- – Central Asia-South Asia (CASA) Electricity Transmission Project: gandj Power Project in Bangladesh and (iii) adapting to rural-urban support (with IFC) the preparation of this project to supply 1300 transformation, e.g., Urban Water Supply & Sanitation Modernization MW of surplus power in Tajikistan and Kyrgyz Republic to Afghanistan Project in India. and Pakistan. – AAA: South Asia Trade and Transit Facilitation AAA and TA Program; What will the Bank do to secure more/efficient South Asia Water Initiative (SAWI) and associated Abu Dhabi Dialogue; public sector financing for infrastructure? Regional Electricity Trade: Trading Arrangements and Risk Management. • Multi-donor trust funds: (i) Bangladesh – Multi-Donor Trust Fund for • Green/climate change: mainstreaming hazard risk management, e.g., climate change resilience (US$110 million); (ii) Afghanistan – ARTF Building Resilience to Climate Related Hazards projects in Nepal and for improved effectiveness of the reconstruction. Climate Change Resilience in Bangladesh; AAA: Greener and More • Roll over of infrastructure diagnostic assessments in countries to assess Efficient Infrastructure Systems. infrastructure investment needs and policy reforms needed to improve the • Cross-synergy projects: Integrated Approach for Developing the South provision of infrastructure services (including those needed to increase West of Bangladesh; Metro Colombo Integrated Urban Development the efficiency of public financing for infrastructure). Instruments will be Project, Sri Lanka; AAA: South Asia Water Initiative (SAWI); Sustainable used to engage the planning commissions on mid-term investment plans. Infrastructure for Economic Growth and Social Development of the Sunderbans, India; Greener and More Efficient Infrastructure Systems. 80 • Programmatic approach: bringing transformational projects to fruition • Actions to scale-up the PPP agenda: (i) targeting of selected countries such as National Ganga River Basin project, Dedicated Freight Corridor for PPP scale-up (India, Sri Lanka, Bangladesh, Nepal and Pakistan); project and National Solidarity Program. (ii) supporting the deepening of capital markets (India); (iii) mobilizing outside expertise (IFCOE); (iv) sustaining capacity building for PPP • Institutional reform: using DPLs to support dialogue on institutional scale-up in client countries (India, Sri Lanka, Bangladesh, Nepal and reforms, where engagement dominated by investment lending; Pakistan), e.g., Support for Post-Crisis PPP framework development in integrating governance analytics at all stages of projects and Sri Lanka, support for post award contract management in India. increasing GAC resources and staffing in the field. • Opportunities for PPP projects: targeting traditional sectors - roads, ports, power, logistics parks and “new� areas – supply chains, rural/urban ser- What will the Bank do to build client capacity to vice delivery and effluent treatment plants. support transformational engagement? • Opportunities for PPP advisory services: (i) building awareness, capacity, The Bank will continue to support capacity building programs, using institutions; (ii) assisting country PPP strategy and priorities, e.g., sup- experiences from other regions and promoting south-south knowledge. port PPP policy in India; (iii) sustaining advisory engagement on policy, It will also explore the opportunity to use the Infrastructure Finance regulation; (iv) providing TA on specific transactions, issues, advice; (v) Center of Excellence in the Singapore hub. identifying financing options (annuity, toll, shadow toll). n INFRASTRUCTURE FINANCING What are the opportunities to tap into “green financing�? What will the region do to improve the investment • Bangladesh: Multi-Donor Trust Fund for climate change resilience climate? (US$110 million) and Pilot Program for Climate Resilience (PPCR) (US$110 million) from Climate Investment Fund (CIF). • Strengthen the enabling environment/investment climate for PPPs through TA on (i) policy, e.g., regulatory framework, access to capital • India: Discussions ongoing with Government of India to develop an markets; (ii) incentives, e.g., VGF, PDF and (iii) capacity building, investment plan for CTF support. e.g., PPP unit support. • Nepal: Ongoing preparation for Pilot Program for Climate Resilience (PPCR). • Integrating governance analytics at all stages of projects and increasing • 21 Carbon Offset operations in Bangladesh, India, Nepal and Pakistan, GAC resources and staffing in the field. with Emission Reduction Purchase Agreements (ERPA) signed (or to be signed by 2012) for the total greenhouse gas (GHG) reduction of 51 million tons. What will the Group do to help client countries attract more private sector financing? • IFC expects 12-15 infrastructure projects annually over FY12-14 for What will the Bank do to tap into knowledge IFC own account volumes of US$400-450 million, with an additional and financing of private foundations, think US$250-300 million anticipated in mobilization. tanks and others? • The Bank is working with the Delhi School of Economics, University Where are the opportunities for public-private of Colombo, Royal University of Bhutan, BRAC University and Lahore University of Management Sciences, among others. partnerships? There is immense opportunity for PPP, e.g., in India during the Eleventh Plan (2007-2012), 33 percent of total envisaged infrastructure invest- ment of US$515 billion is projected to come from private sources. 81 82 ANNEX A Achievements under the Sustainable Infrastructure In terms of safeguards performance, infrastructure projects ranked higher than Action Plan, FY08-11 many Bank projects. A recent IEG evaluation showed that the environmental and social impacts and risks associated with Bank infrastructure projects SIAP provided the framework for scaling-up the Group’s engagement in infra- (especially category A), were appropriately identified during preparation structure in support of core access agenda, with some actions initiated in the and appraisal, and that resources were in most cases appropriately allocated emerging areas of climate change, PPP and rapid urbanization. By providing at supervision to mitigate the risks.36 Nonetheless, evolving needs in WBG an integrated platform for action over FY08-11, SIAP took the form more client countries mandate updating the environmental and social safeguard of a strategy than an action plan. Several milestones were reached over policies of the Bank, a task initiated by WBG Management. FY08-11:34 Beyond safeguards compliance, there has been notable progress on integrating • WBG infrastructure commitments exceeding SIAP targets by more the environmental agenda in project design, but relatively less progress on the than US$34 billion over FY08-11. social agenda.37 Infrastructure projects have increasingly integrated climate • High-performance of environmental and social safeguards in infra- change mitigation and adaptation considerations in their design in addition structure projects (design and supervision). to other environmental factors. For example, a larger proportion of transport projects in FY10 relative to FY06 addressed considerations such as water • Increased integration of broader environmental concerns (especially quality, biodiversity loss and change in land use. On the knowledge side, climate change) in the design of infrastructure projects, with relatively the Bank has focused on the impact of climate change (e.g., Transport and less progress made on the social front (e.g., in gender). Climate Change, Water and Climate Change, low-carbon studies), demon- • Accelerated efforts to explicitly integrate governance risks and account- strating the importance of a holistic approach to infrastructure with a closer ability framework in infrastructure projects. link to other sectors, such as environment. There has been comparatively • Increased direct mobilization of private financing for infrastructure less progress on gender, for example. through IFC; slight increase in the number of public-private partner- Efforts to tackle governance risks in infrastructure projects accelerated ships; most of the IBRD/IDA’s leverage effect on the private sector since the endorsement of the 2008 Governance and Anticorruption Strategy. continuing to be largely indirect through knowledge work. Large infrastructure projects are especially vulnerable to rent-seeking The Group significantly scaled-up infrastructure commitments under SIAP. This opportunities and integrity risks, including procurement, transparency performance resulted from the continued push for infrastructure support, as and accountability. Since 2008, support to task teams on governance was well as the demand from client countries during the global financial crisis. By strengthened – 30 good practice notes were issued, just-in-time technical maintaining long-term infrastructure investment programs during the crisis assistance was provided to 9 task teams and sourcebooks on GAC in energy, and by sustaining the potential for private sector-led economic growth and em- transport and water sectors were issued. ployment creation through IFC, the Group played a countercyclical role with Direct mobilization of private finance for infrastructure during SIAP has partners and countries in withstanding the global downturn.35 IFC delivered been notable. IFC increased its support for infrastructure from $7 billion results with existing clients and in co-financing operations, while MIGA pro- during FY04 – FY07 to US$15.3 billion during FY08 – FY11. This support vided guarantees to several key financial institutions in Eastern Europe. This was further leveraged: for example, in FY11, in addition to the US$3.2 surge in the operational work program was, however, not associated with an billion committed from its own account, IFC mobilized US$3.4 billion increase in administrative resources for Group country services. The “implied’ in financing from third parties for its infrastructure clients. While MIGA’s productivity increase was achieved in part through larger project size, which direct support for infrastructure was limited during SIAP, MIGA took doubled for IBRD and increased by thirty percent for IDA. notable steps during this period to adapt its products and expand the potential application of its guarantees. For example, MIGA amended its 83 Convention and updated its Operational Regulations. One of the results of these changes was the introduction of the Non-Honoring of a Sovereign Financial Guarantee product, which is expected to Figure 8. Direct Leverage of IBRD/IDA Projects in Energy, have a significant impact on the underwriting of infrastructure pro- Transport and ICT jects. Other changes include the ability of MIGA to offer coverage for debt transactions and Temporary Business Interruption coverage. 45,000 38,315 The total direct leverage effect of IBRD/IDA support increased over 40,000 FY09-10 (Figure 8). 35,000 Support for PPP was not achieved at scale. The Group is increasingly 30,000 27,128 ICT Energy Transport Total US$ Millions providing integrated support to PPP, from upstream support for 25,000 the enabling environment, to capacity building in client countries, 20,000 transaction advisory and MIGA and IDA/IBRD guarantees to help mitigate specific project risks or backstop government contractual 15,000 10,979 9,890 4,484 8,749 obligations. Bank PPP support centered on the enabling environment, 10,000 825 2,863 561 980 technical assistance to support advisory services for transactions, 5,000 partial risk guarantees and IBRD/IDA lending to support the public 0 portion of the PPP. IFC Infrastructure Advisory Services helped close SIAP SIAP SIAP SIAP SIAP Pre-SIAP Pre-SIAP Pre-SIAP Pre-SIAP Pre-SIAP 20 PPP transactions over FY08-11. MIGA provided guarantees to support eight private infrastructure projects in FY11. While the coordination and information flow among the various teams involved in PPP is improving, more work is needed to provide integrated IBRD/IDA Borrower MDB Private Others support across the Group. Several initiatives are working to encourage Sector teams to move this agenda forward at the country level, such as Note: analysis based on breakdown of project cost by financiers. For this analysis, the pre-SIAP the GET PPP (a virtual team which provides support to regional and SIAP periods are defined as FY06-07, and FY09-10, respectively. In FY10, Energy, Transport teams seeking to advise clients on strengthening PPP programs and ICT lending consitututed 81 percent of total infrastructure lending. or on specific transactions), the Finance, Economics and Urban Development (FEU)-IFC memorandum of understanding on PPP Advisory Services and FEU-MIGA memorandum of understanding on joint transactions. In addition, the Group should further leverage outside expertise (e.g., South-South exchanges, staff exchange program with the private sector and IFCOE in Singapore). 84 84 ANNEX B World Bank Group Support for Infrastructure, FY03-11 WBG Commitments in Infrastructure (US$ Million)a FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 World Bank (IBRD, IDA, Othersb) 5,454 6,508 7,658 8,362 10,596 12,154 18,424 24,573 21,076 International Finance Corporation k 1,022 1,400 1,265 2,302 2,196 4,180 3,770 4,165 3,160 Multilateral Investment Guarantee Agencyi 433 399 393 467 539 757 109 403 908 Total 6,908 8,307 9,316 11,131 13,332 17,091 22,303 29,141 25,145 WBG Commitments by Sector (US$ Million) FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 Energy 2,125 1,810 2,863 4,651 3,839 7,669 8,332 12,947 8,091 Transportation 2,969 4,055 3,471 3,795 5,511 6,103 7,581 10,098 10,073 Water 1,464 1,903 2,447 2,028 3,282 2,544 4,955 4,999 5,366 Information & Comm Tech 305 539 523 555 676 486 957 640 1,496 Other Infrah 45 0 11 101 24 290 479 457 120 Irrigation and Drainagei 235 787 1085 422 912 493 589 1161 - WBG Commitments by Region (US$ Million) FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 East Asia & Pacific 1,644 2,009 1,923 2,045 2,696 3,523 3,916 3,331 5,895 Europe & Central Asia 612 960 1,812 2,252 2,182 2,809 5,741 3,372 3,372 Latin America & Caribbean 1,404 1,373 1,715 2,290 2,422 3,037 4,461 6,634 4,139 Middle East & North Africa 352 911 546 971 778 1,774 1,727 2,022 1,394 South Asia 1,352 1,101 1,594 1,760 1,852 2,959 2,360 5,369 6,896 Africa 1,533 1,828 1,701 1,812 3,332 2,949 4,097 8,406 3,310 Other c 11 125 25 0 69 40 0 6 138 85 Development of Policy Loans FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 Number of Development Policy Loans containing infrastructure 29 21 32 31 40 50 62 50 35 related components Volume of Development Policy Loans containing infrastructure 554 344 551 589 747 1,401 3,379 3,509 2,583 related components (US$ million) World Bank Non-Lending AAA FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 Number of ESW Delivered with Infrastructure Componentsd 120 95 110 92 99 86 81 74 78 Number of Non-lending TA Delivered with Infrastructure 106 91 80 66 112 131 161 168 162 Componentsd Water 1,464 1,903 2,447 2,028 3,282 2,544 4,955 4,999 5,366 Information & Comm Tech 305 539 523 555 676 486 957 640 1,496 Other Infra h 45 0 11 101 24 290 479 457 120 Irrigation and Drainagei 235 787 1085 422 912 493 589 1161 - Quality of Output for Infrastructure Projects FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 (IBRD/IDA) Project performancee Number of Projects 446 441 444 456 484 586 657 695 760 Net Commitment Amount (US$ millions) 40,268 38,620 39,902 41,054 44,972 50,418 61,082 77,500 89,351 Projects at Risk (Percent) 15 15 13 12 16 17 20 20 18 Commitments at Risk (Percent) 13 14 10 10 16 16 17 19 14 Realism (Percent) 76 79 74 83 71 61 62 62 68 Proactivity (Percent) 89 77 79 81 78 83 76 68 63 86 86 Amount Disbursed in Fiscal Year (US$ millions) 4,345 4,233 4,655 4,717 5,150 5,755 6,483 8,222 8,520 Rating of Completed Projects (IEG Evaluation of Infrastructure Sector Board Projects ) f Number of Projects 61 59 57 59 57 58 45 27 2 Net Commitments 4,762 4,369 3,547 5,457 4,540 5,679 3,166 1,260 244 Outcome (% Satisfactory) 81 89 86 86 86 83 82 61 100 Sustainability (% likely) 86 88 84 71 100 - 100 - - Institutional development impact (% substantial) 67 67 55 57 100 - 100 - - Net Disconnect 7 -2 4 3 7 12 11 11 0 Quality of Output for IFC Infrastructure Projects FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 IFC Infrastructure projects rated successful (%) - - - - - - 72 - - Staffing Indicatorsg FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 World Bank Infrastructure Staff (IBRD/IDA) 377 446 461 463 542 595 664 661 667 IFC Infrastructure Staff - - - 142 170 185 171 190 211 a WB figures based on OPCS Sector Codes for water (Sanitation, Solid Waste Management, Water Supply, Flood Protection, Sewerage General Water, Sanitation and Flood Protection), transportation (Roads and Highways, Ports, Waterways and Shipping, Aviation, Railways, General Transportation), ICT (Information Technology, Media, Postal Services, Telecommunications, General Information and Communications), energy and mining (District Heating and Energy Efficiency Services, Mining and Other Extractive, Oil and Gas, Power, Renewable Energy, General Energy) and the Public Ad- ministration of these sectors. World Bank figures include IBRD, IDA, GEF, Guarantees, Carbon Finance, Special Financing and Recipient Executed Activities. IFC figures include Energy, Telecoms, Water and Other Infrastructure projects. MIGA figures include Power, Transportation, Telecommunications and Water (Water, Water and Wastewater). b Based on new commitments approved by the Board; other product lines include GEF, Carbon Finance, Special Financing, Recipient Executed Activities. c “Other� includes World Bank region “Other�and “World� for IFC and MIGA. d Sum of components containing infrastructure-related sector codes (i.e., a AAA project which is 75% INF and 25% Central Government Administration would be considered three-quarters of one AAA infrastructure activity, rather than one full AAA infrastructure activity). e QAG Portfolio Status Indicators for projects with Infrastructure-related Sector Codes. f IEG Evaluation Data of projects mapped to infrastructure-related sector boards is provided in Business Waterhouse. (Projects ending in FY11 have not yet been evaluated by IEG). g Staff includes World Bank (IBRD/IDA) employees, Grade GF and above who are mapped to all Infrastructure Units in the Bank and the Infrastructure Investment/Advisory Departments in IFC. These numbers do not include JPO, JPA, SPA, Secondees, GE and below, Trust-funded staff for the Bank or IFC Regional Department Staff that spends a fraction of their time on the Infrastructure business. h “Other infra� includes financing such as in Infrastructure Funds that cover multiple sectors. i Based on MIGA figures include only signed contracts (commitments). k Figures reflect amounts committed by IFC. l Not included in total. 87 ANNEX C Figure 9: Structure of the Results Chain Tier 1: Results Framework Global Development Context This Strategy Update pilots a newly developed results framework for sector strategies. This results framework is organized in a four-tier structure that groups indicators along the results chain. Tier 1 reflects the long term development outcomes that provide the context for the Group’s work; and What is the development progress in Tier 2 shows results supported by Group operations. These two tiers track elements of development client countries as a group? results (Tiers I and II) and the other two capture elements of Group performance (Tiers III and IV). This results framework monitors, at an aggregate level, whether the Bank is functioning efficiently and adapting itself successfully (Tier IV), and whether it is managing its operations and services effectively (Tier III) to support countries in achieving results (Tier II) in the context of global develop- Tier 2: ment progress and priorities (Tier I). World Bank Group progress in implementing the strategy will Country Results Supported by the Group be measured by indicators in Tier II, III and IV. The results framework is designed to reflect the demand-driven nature of the Group’s work. As How is the Group supporting countries in such, it does not include targets for Tier 1 (global indicators) and Tier 2 (output and outcome achieving results? level indicators). It uses all the relevant results indicators, which are part of the regular report- ing system of the Bank through the Corporate Scorecard38 and standardized sector indicators that are being developed by individual sectors through their sector strategies. Additional indicators are being developed by the Group in the context of an enhanced results focus (for example, in Pillar Tier 3 and 4: 2, an indicator to proxy for knowledge brokerage). Whenever not reported below, baselines for indicators will be established as part of the first year of strategy update implementation. The Operational and Organizational Effectiveness results framework for the WBG Infrastructure Strategy Update contains 30 indicators, out of which 17 are output and outcomes, 23 are input indicators and 7 are knowledge indicators. Is the group managing its activities, skills, capacity and resources efficiently? 88 88 Tier 1: Global Development Context Key Outcomes Global Outcome Indicators Baseline Year Source GDP per capita (constant 2000 US$) 1,873 2009 CSC Private Sector Participation in Infrastructure (current million US$) 1,466 2007-9 PPIAF Growth Foreign Direct Investment net inflows (% GDP) 3.1 2007-9 IMF ODA (DAC/non-DAC) flows to infrastructure (billion US$) 22.6 2009 OECD Overarching Vision Public Investment Management Index (range, out of 4) 3.53-0.27 2011 IMF/PRMPS Population below US$1.25 (PPP) a day 25.4 2005 CSC Employment to population ratio (%) 61.6 2008 CSC Inclusiveness Ratio of female to male labor force participation (%) 66.9 2009 CSC Maternal mortality ratio (per 100,000 live births) 290 2008 CSC Public access to information (0-100) 50 2007 CSC Environmental Per capital wealth° (US$) 5% of which is natural capital 120,475 2005 World Bank sustainability CO2 emission (metric tons per capita): 3.0 2007 CSC Electrification rate (% of population with access) 78.9 2009 IEA Energy Firms identifying electricity as a major constraint in doing business (%) 38.9 Latest available IFC Improved water source (% of population with access) 87 2008 WHO Sector-Level Vision Water Improved sanitation (% of population with access) 61 2008 WHO Delay in obtaining water connection for firms (days) 32.8 Latest Available IFC Fixed broadband Internet subscribers (per 100 people) 9.1 2009 ICT Strategy ICT Population covered by mobile cellular network (%) 80 2009 ITU Delay in obtaining a mainline telephone connection for firms (days) 22.8 Latest Available IFC Roads paved (% of total roads) 49 2008 IRF Transport Firms identifying transportation as a major constraint in doing business (%) 21.4 Latest Available IFC “Wealth� in this context is composed of produced capital (infrastructure and urban land), natural capital (cropland, forests, fish stocks, minerals, etc.) and human resources (human capital, quality of institutions). CSC Corporate Score Card (definitions as agreed with CODE); PPIAF Private Participation in Infrastructure Advisory Facility; IMF International Monetary Fund; OECD Organization for Economic Cooperation and Development; PRMPS PREM Private Sector Governance; IEA International Energy Agency; WHO World Health Organization; IFC International Finance Corporate; ITU International Telecommunications Union; IRF International Road Federation. 89 Tier 2: Country results supported by the Group * Core Sector Indicator (as defined by Sector Board) Global Outcome Indicators Baseline Progress Source Value FY Value FY [ ] IDA only K Knowledge indicator: Number of people newly gaining access to electricity by household connection attributable to Bank projects (million) Energy Strategy, Draft CSC Corporate Score Card (definitions as agreed with CODE); ICT Information Communica- tion Technology; SDV Social Development; EITI Extractive Industries Transparency Initiative; Average electricity interruption frequency per year in project area (WBG contribution to reducing average interruption) Energy Strategy, Draft ICR Implementation Completion and Results Report; GFDDR Global Facility for Disaster Number of countries supported by the Bank that have adopted Reduction and Recovery; PPIAF Private Participation in Infrastructure Advisory Facility. transparency standards for oil, gas and mining industries K 9 FY08-11 EITI All indicators retrieved from sector strategies are subject to change pending implementation Number of people provided with access to “improved water sources� of the respective sector strategy. attributable to Bank projects (million) Water, CSC* Indicator Definitions: Number of people provided with access to “improved sanitation� attributable to Bank projects (million) Water, CSC* Pillar 1 Electrification rate: Electricity access at the household level, i.e. percentage people who Number of rural people with access to an all season road attributable FY10, have electricity in their home. it comprises electricity sold commercially, both on-grid and to Bank projects (million) [8.8] 3 yr aggr. Transport* off-grid. It also includes self-generated electricity for those countries where access to elec- FY10, tricity has been assessed through surveys by government or government agencies; Roads constructed or rehabilitated supported by Bank projects (km) [31,000] 3 yr aggr. Transport, CSC* Number of countries supported by the Bank that have adopted transparency standards for Access to telephone services (fixed mainlines plus cellular phones per 100 people) attributable to Bank projects ICT* the oil, gas and mining industries: As measured by EITI compliance. Access to internet services (number of subscribers per 100 people) Number of countries for supported by the Bank which had adopted an integrated approach attributable to Bank projects ICT* to city management: As measured by the number of Urbanization Reviews completed. Number of countries supported by the Bank that have adopted an Number of countries supported by WBG that systematically consider the value of natural integrated approach to city managementK 3 FY11 Urban Strategy resources in their national investment decisions: As measured by the number of countries Number of countries supported by Group projects with ICT-enabled innovation K ICT Strategy, draft which have estimated comprehensive wealth in their national account systems. Pillar 2 Additional jobs created by Bank projects (#) 69,000 FY10 ICR Review Additional jobs created by Bank projects: Refers to number of jobs specified in ICR as Number of countries supported by WBG that systematically consider a result of the project, where available. Of the 28 projects with ICRs in FY10, only five the value of natural resources in their national investment decisionsK 0 FY10 Environ. Strategy, Draft reported a number for jobs created. An additional eight projects reported on job creation, Number of countries supported by the Bank which consistently however did not give a numerical value to the number of jobs created by the project. have integrated disaster risk into national plans and policies FY06 GFDDR Number of countries supported by the Bank on the enabling environment which have Number of countries supported by the Bank which developed early warning systems for natural disasters 14 FY06-11 GFDDR adopted policies, law and/or regulation to promote private participation in infrastructure: As measured by PPIAF and its Sub-National Technical Assistance program’s outcomes Number of countries supported by the Bank on the enabling as of December 2011. This baseline reflects an assessment of 40 countries, out of a Pillar 3 environment which have adopted plans or strategies for private 21 FY08-11 PPIAF participation in infrastructure K total of 126 in which PPIAF has worked. Number of countries supported by the Bank on the enabling Number of countries supported by the Bank on the enabling environment which have adopted environment which have adopted policies, law and/or regulation 15 FY08-11 PPIAF to promote private participation in infrastructure K plans or strategies for private participation in infrastructure: As measured by PPIAF and its Sub-National Technical Assistance program’s outcomes as of December 2011. This baseline reflects an assessment of 40 countries, out of a total of 126 in which PPIAF has worked. 90 90 Tiers 3 & 4: Operational and Organizational Effectiveness K Knowledge Indicator: Input indicators Baseline Progess FY15 Projection Source Value FY Value FY CSC Corporate Score Card (definitions as agreed with CODE); SDV Social Percentage of infrastructure portfolio with satisfactory environment and social safe- Development; PRMGD Poverty Reduction and Economic Management Gender 96 FY10 90 -100 ICR review guards compliance and Development unit; IFC International Finance Corporation; MIGA Multilateral Pillar 1 Percentage of infrastructure projects that are gender-informed FY10 100 PRMGD Investment Guarantee Agency; GET PPP Global Expert Team on Public Private Partnerships; PPIAF Private Participation in Infrastructure Advisory Facility; Project Document Pillar 2 Percentage of new transformational infrastructure projects 20 FY08-11 25-30 review WBI World Bank Institute. Projections reflect the range of current expected client demand. IFC Mobilization ratio for infrastructure (%) 0.875 FY10-11 0.75-1.00 IFC Indicator Definitions: Additional funding mobilized from other sources for IBRD/IDA infrastructure projects 4,000 FY11 5,000-8,000 World Bank Infrastructure portfolio with satisfactory environment and social safeguards (excluding government’s counterpart funding) (million US$) compliance: As measured by Safeguard rating in ICR, sometimes included Additional funding mobilized from private sources for IBRD/IDA infrastructure projects Project 700 FY11 1,000-1,400 (excluding government’s counterpart and other public sector funding) (million US$) Document review as part of Bank Super-vision rating. Number of MIGA guarantees issued for infrastructure 8 FY11 MIGA Percentage of infrastructure projects that are gender-informed: Based on a desk review at the design stage of four dimensions: (i) analysis of gender Pillar 3 Infrastructure as a percentage of MIGA portfolio 43 FY11 50 MIGA issues at design, (ii) actions considered to ensure the inclusion of women Number of Bank PPP projects approved 19 FY10 25-40 GET PPP in project benefits, (iii) ex-ante impact assessment of potential benefits of the operation for women’s empowerment and (iv) development of a sound Number of IFC PPP advisory activities completed 20 FY08-11 35-45 IFC monitoring and evaluation system. Each dimension is rated on a scale Number of Bank PPP advisory transactions completed 18 FY10 30-40 Bank of 1 to 6 (“highly satisfactory� to “highly unsatisfactory�)and the overall Number of PPIAF PPP advisory transactions completed 59 FY10 60-70 PPIAF rating for a lending operation is the mean of the four dimensions’ scores. A project is rated as’ gender-informed’ if its average score is between 1 and 3. Number of South-South knowledge exchangesK (3) FY11 (10) WBI Transformational infrastructure projects: The Bank will use multiple criteria, Project Document Number of joint WBG projects approved 4 FY11 10-15 including but not limited to, projects integrating other dimensions than those review considered under a traditional cost-benefit analysis 39 in the decision-making Satisfactory Bank infrastructure operations outcomes at completion as rated by IEG (%) 82 FY09 80-85 CSC/IEG framework (e.g., preservation of natural capital, vulnerability to natural IFC infrastructure projects rated successful (%) 72 FY11 75 IFC disasters, macro-policy goal of job creation, innovation/industrial policy; regional development); projects involving multiple sectors or working on Gross disbursement for Bank infrastructure operations (billion US$) 27 FY11 25-30 CSC the nexus between sectors; projects involving more than one country; and projects identified as high-risk/high-reward in ORAF. Disbursement ratio for Bank infrastructure operations (%) 17 FY11 15-20 CSC Effective- ness Additional funding mobilized from private sources for IBRD/IDA infrastructure IFC infrastructure lending commitments (billion US$) 3.16 FY11 3.3-3.8 IFC projects (excluding government’s counterpart and other public sector funding): Number of WB infrastructure staff 667 FY11 650-700 World Bank Project financing that comes from private sources. Does not include financing from other public sector donors. Calculated based on project financing data Number of IFC infrastructure staff 211 FY11 200 -250 IFC retrieved from project appraisal documents. Average cost of preparing a Bank infrastructure lending project (average, US$1,000) 336 FY11 336-400 CSC Additional funding mobilized by IBRD/IDA Bank from other sources (excluding Average annual cost supporting Bank infrastructure project implementation (average, government’s counterpart): Project financing that comes from public and private 89 FY11 80 -100 CSC US$1,000) sector donors, excluding government counterpart funding. This figure is calculated based on project financing data retrieved from project appraisal documents. 91 ANNEX D Outcomes of the G20 Summit in Cannes on impact by leading to increased integration and access to global markets, the Infrastructure G20 did not commit additional funding to support those projects. Instead, it encouraged MDBs to prioritize them. The Strategy Update features four In November 2010, the G20 Summit in Korea identified infrastructure as critical of these regional projects (e.g., Inga Hydropower Site, North-South Corridor, to reduce the development gap in the world. It established the High Level Panel EAPP Ethiopia-Kenya interconnector, WAPP: CLSG interconnector). on Infrastructure Investment, which consisted of leaders from the private sector, public sector and international financial institutions. The Panel was The G20 recognized project preparation funding as an important element in mandated to prepare recommendations for the G20 to scale up and diversify order to deliver these projects. Given existing capital constraints of MDBs financing for infrastructure needs in low-income countries, including from and the evolving fiscal situation of bilateral donors, enhanced project public, semi-public and private sector sources, and identify, with multilateral preparation funding will, however, have to derive from the increased development banks, a list of concrete regional initiatives. The High-level effectiveness of existing resources. In this context, the Bank launched Panel on Infrastructure Investment submitted their recommendations to a mapping of available funding for project preparation in existing Proj- the G20 Development Working Group. Multilateral Development Banks also ect Preparation Facilities, with the view of identifying where opportunities contributed to the G20 preparation process, by drafting several analytical exist to increase efficiency. pieces, including an MDB Action Plan. The outcome of this engagement with The G20 identified bottlenecks and established new mechanisms to unlock the High-Level Panel on Infrastructure Investment and MDBs is contained in public and private sector financing in low-income countries (e.g., High Level Panel the Final Declaration of the G20 - Building our common Future: Renewed Col- Fellowship Program and the Sokoni Africa Infrastructure Marketplace). The Group lective Action for the Benefit of All. will complement these efforts as follows: scaled-up support for the enabling The G20 Summit in Cannes in 2011 reaffirmed the importance of infrastructure environment (e.g., investment climate and legal and regulatory frameworks to for growth and job creation in developing countries. The Strategy Update is foster new entry and competition into infrastructure sectors); local capacity fully aligned with this notion, emphasizing infrastructure’s role in potentially building (e.g., through the public-private partnerships practitioners’ networks); accelerating growth in developing countries, and even changing the develop- harmonization of procurement rules, support for the Construction Transparency ment trajectories of client countries. Initiative (CoST); and infrastructure data benchmarking (e.g., replication of the Africa Infrastructure Country Diagnosis in SAR). The G20 stressed the need for MDBs to focus on leveraging resources for infra- structure projects, including private sector. The Strategy Update concurs with this thrust, by bringing private sector financing at the core of the Group’s future engagement in infrastructure (e.g., reform of the Bank guarantee instrument, to expand its use to IDA-only countries, and ramp up of IFC and MIGA infrastructure business). Leveraging the World Bank Group’s resources by mobilizing the private sector and others is critical to main- taining the Group’s level of engagement in infrastructure. The G20 called for the scale up of regional projects. The Strategy Update calls for the scale up of transformational projects, including regional projects. While the High-Level Panel established criteria to identify exemplary investment projects in cooperation with MDBs and highlighted 11 projects that have the potential to have a transformational regional 92 92 END NOTES 1 See World Bank Group Infrastructure Strategy Update – Issues and 9 See New World, New World Bank Group: Post-Crisis Directions, Concept Note (CODE2011-0030/1, June 15, 2011). Development Committee, April 2010. 2 See for example, Roller and Waveman (2001 for OECD countries, Calde- 10 See World Bank Group Sustainable Infrastructure Action Plan, FY08-11 ron and Serven (2003) in LCR countries, Donaldson (2001) in India. (CODE2008-0028, March 21, 2008). 3 See Calderon, Cesar and Luis Serven, 2010. Infrastructure and Economic 11 See Development Committee, Review of IBRD and IFC Financial Development in Sub-Saharan Africa. Journal of African Economies, Vol. Capabilities (DC2010-0005). 19, Issue Suppl 1, pp 113-187; or Calderon, Cesar et al, 2011. Is infra- 12 This adjustment resulted from the front-loading assistance during the structure capital productive? A dynamic heterogeneous approach. Policy global crisis. Research Working Paper. 13 See United Nations, Rio Plus 20 United Nations Conference on 4 See Calderon, 2009. Sustainable Development. 5 See Justin Yifu Lin, 2011. Bridges to Somewhere. Foreign Policy. 14 See Transport: Safe, Clean, and Affordable... Transport for Development 6 See Infrastructure for Low-Income Countries – Background Paper for the (2007); Water: Sustaining Water for All in a Changing Climate (CODE G20 by the MDB Working Group on Infrastructure, June 2011. Outside May 2010); ICT: World Bank Group ICT Sector Strategy (under prepara- Sub-Saharan Africa, where there was a concerted effort to undertake a tion); and Energy: Energizing Sustainable Development: Energy Sector collection of information on infrastructure, there is no firm data on how Strategy of the World Bank Group (under preparation). much countries are actually investing in infrastructure. 15 Total investments in infrastructure consist of: (a) new investment result- 7 Since 2007, about 166 infrastructure funds, with approximately ing from the variation in infrastructure stocks between 2000 and 2005, $110 billion in commitments were raised globally. However, only valued at unit costs; and (b) requirements for maintenance, resulting from 15 percent of these funds were targeted towards developing countries. multiplying stocks of 200 by a depreciation rate. Infrastructure sectors The IFC launched an infrastructure fund with a target size of $1 billion include paved and unpaved roads, rails, ports, electricity generation and that aims at raising funds from sovereign and pension funds and other electrification, fixed and mobile communications, and water supply and institutional investors. sanitation. The curve is obtained by a three-degree polynomial trend. 8 Sovereign Wealth Funds, which are funds investing state-owned profits 16 See Calderon, 2010. from fiscal surpluses, official foreign current operations, the proceeds 17 See World Development Report, 2011. Conflict, Security and of privatizations, or receipts resulting from exports, of commodities such Development (283). as oil, diamonds and copper, held more than $3.2 trillion in financial assets at the end of 2008. Relatively few investments went to emerging 18 See IFC, 2011. Development Finance Institutions and Infrastructure: economies and were targeted towards infrastructure investments. A Systematic Review of Evidence from Development Additionally. Institute of Development Studies and Engineers Against Poverty. Example include the China-Africa Development Fund, an equity fund that invests in Chinese enterprises with operations in Sub-Saharan Africa, 19 See World Development Report, 2011. Conflict, Security and Development reportedly invested nearly $540 million in 27 projects in Sub-Saharan (158-161). Africa that were expected to lead to total investments of $3.6 billion 20 See Bank, 2006. Scaling Up Infrastructure: Building on Strengths, in 2010. See Shendy, Riham, Zachary Kaplan, Peter Mousley, 2010. Learning from Mistakes. Towards Better Infrastructure – conditions, constraints, and opportu- nities in financing Public-Private Partnerships – Evidence from Camer- 21 See IEG, 2011. Evaluation on Capturing Technology for Development; oon, Cote D’Ivoire, Ghana, Kenya, and Senegal. and IEG, 2010, Water and Development – An Evaluation of World Bank Support, 1997-2008. 93 22 See IEG, 2011. Approach Paper on Sustainable Infrastructure Services capital markets development, construction or infrastructure operation and the World Bank Group Phase I, Transport Sector. activities and inviting them to participate in this program. Bank, private equity firms, concessionaires, contractors and operators would form 23 See also IEG, 2010. World Bank Country-Level Engagements on the core institutions at the outset, although other institutions could be Governance and Anticorruption. included as the program evolves, notably consulting, audit, or law firms. 24 CoST adopts a multi-stakeholder framework, similar to the EITI, where Source: High-Level Panel on Infrastructure, Recommendations to G20 participation by countries and members of the multi-stakeholder groups (final report), October 2011. is voluntary. The Bank has already committed $0.5 million for three 31 See Private Sector Development Strategy – Mid-Cycle Implementation years. A Pilot Phase began in 2008 with eight participating countries: Progress Report, World Bank 2009. Ethiopia, Guatemala, Malawi, Philippines, Tanzania, United Kingdom, Vietnam and Zambia. With an additional $5.5 million per year from 32 PPIAF finances assistance with non-transaction, upstream activities, G20 members, the Cost initiative will be expanded to 25 new countries like feasibility and option studies, contingent liability diagnostic, legal- over the next five years. regulatory reform and policy change, while IFC provides more down- stream transaction assistance needed to close or restructure deals. 25 See Nidumolu R.and al., Why Sustainability is now the key driver of innovation, Harvard Business Review, September 2009, pp 57-64. 33 The mentioned activities are tentative and their confirmation will depend on the evolution of the very fluid political situation in the region. 26 See World Bank, 2011. Modernizing The World Bank’s Guarantee Instrument: Approach Paper. See also, IEG, 2009. World Bank Group 34 See CODE2011-0030/1, June 15, 2011. Guarantee Instruments. 35 See IEG, 2010. Phase 1 – The World Bank Group’s Response to the 27 See Private Sector Development Strategy – Mid-Cycle Implementation Global Economic Crisis. Progress Report, 2009. 36 See IEG, 2010. Safeguards and Sustainability Policies in a Changing 28 See OECD Principles for Private Sector Participation in Infrastructure, World. An independent Evaluation of World Bank Group Experience. 2007, OECD. 37 Results based on a review of all Project Appraisal Documents for 29 Gassner K, Vipul Bhagat, 2011. G20 Presentation on PPP. infrastructure sectors over FY06-07 (pre-SIAP) and FY09-10 (post-SIAP). Methodology based on a set of 25 environmental and 30 In order to contribute to enhancing local capabilities, the High- social proxies/indicators. Level Panel on Infrastructure advocated for the creation of a G20 fellowship program, involving LICs, especially in Africa and private 38 See DC2011-0014. sector companies in G20 countries engaged in PPPs (such as 39 See also IEG, 2010. Evaluation on Cost-Benefit Analysis in Bank Projects. financiers, concessionaires, contractors, and operators), to help strengthen PPP units, supervision capacity and private sector capacity in LICS. Such an exchange program, especially designed for local project teams, would aim at training individuals from LICs and provide them with experience from G20 countries. LICs would send an individual for training at private sector institutions in G20 countries for a one-year period. In exchange, individuals from G20 countries with PPP experience would be sent to LICs to work in public and private institutions for a one-year period. Each participating G20 country would be responsible for identifying private sector companies that are involved in infrastructure, project finance, 94 94 TRANSFORMATION THROUGH INFRASTRUCTURE FY2012-2015 www.worldbank.org/infrastructure