Innovative instruments for infrastructure progress: Mobilising the private sector

Throughout my many years of experience working on infrastructure transactions, I have seen firsthand the urgent need to bring together actors from across the private and public sectors to develop and deliver high-quality, resilient and bankable infrastructure projects.

One fundamental fact has never changed: there remains a massive infrastructure financing deficit, which manifests itself most acutely in emerging markets and developing economies. By 2040, we estimate global infrastructure investment needs to reach $18.5 trillion, with emerging market and developing economies accounting for 70% of that shortfall.

Luckily, the multilateral system’s collective capacity (both financial and technical) to fill this gap using innovative approaches to project finance has not changed. 

G20 framework on project preparation

It has been an honour to work this year with South Africa’s G20 Infrastructure Working Group to develop a voluntary, non-binding framework for effective infrastructure project planning and preparation. This framework is intended to support government stakeholders, development partners, private sector actors and other organisations in developing and investing in infrastructure projects, especially where they are most needed. 

The framework rightly acknowledges that although mobilising private capital is increasingly essential to meet growing infrastructure finance demand, it does not happen overnight or in a vacuum. Rather, the private sector only invests in and partners with public actors on projects that meet two critical criteria. 

First, projects must be undertaken in a conducive regulatory and enabling environment. Second, they must be structured with rock-solid technical and legal foundations, particularly in the early stages. Quality and transparency in procurement can drive competition, raise value for money and improve the quality of infrastructure investment. 

The role of data underpins the framework, helping address information asymmetry and driving infrastructure as an asset class to unlock institutional investment, improve project pipelines and strengthen bankability. 

If we wish our private sector counterparts to join us in building the bankable, sustainable infrastructure needed to fuel job creation and jumpstart global growth, we must also be willing to work collaboratively with governments to deliver these two prerequisite conditions. 

Flexible mechanisms for progress

This new framework will indeed help guide the formation of more effective and efficient public-private partnerships for resilient, reliable infrastructure. However, it simply recommends a path forward. 

We at the World Bank share the confidence of our G20 partners in our broad knowledge of complex infrastructure transactions, but we know these approaches are not one-size-fits-all. 

Instead, they must be adapted to national and regional regulatory frameworks, legal requirements, and fiscal realities – and to deliver results they require a diverse array of actors to bring them to life, tailored capacity building and support. 

The Public-Private Infrastructure Advisory Facility helps governments strengthen policies, regulations and institutions to catalyse sustainable and inclusive private participation in infrastructure. Founded 25 years ago, it is the only global facility fully dedicated to the ‘critical upstream’ – strengthening the policy, regulatory and institutional underpinnings of private sector investment in infrastructure in emerging market and developing economies as well as enabling finance for sub-national entities. 

Working across the World Bank system and with technical and financial support from numerous governments, PPIAF has helped catalyse $29 billion in investment across more than 225 distinct projects in 130 countries, and helped train more than 26,000 officials in those countries on best practices in project management.

With a more recent – but nonetheless excellent – track record of mobilising private capital for inclusive, resilient infrastructure, the Global Infrastructure Facility takes a slightly different perspective.

The GIF – a G20 initiative with a different governance architecture from the World Bank – provides a global platform that boosts private capital mobilisation and grows the bankable pipeline of sustainable, high-quality infrastructure investment projects. 

Since 2014, with the support of government donors, it has built a first-class open access architecture that counts 11 multilateral development banks as technical partners and has brought 26 projects to financial close, mobilising an estimated $8.4 billion in private capital. 

Stronger PPPs and the path forward

The strong performance of these instruments helps to prove – and the G20 has similarly acknowledged – two fundamental guiding principles that must inform all efforts to build better infrastructure pipelines in emerging market and developing economies.

First, a coalition-based approach is the only way ahead for navigating increasingly uncertain geopolitical and economic environments. 

And second, while financing is crucial, so too is the capacity building support our platform provides. Countries that implement significant reforms to their PPP frameworks have received, on average, an additional $488 million in annual investments in infrastructure over the last three
decades. 

Ultimately, this is precisely what we at the World Bank are trying to deliver: networked platforms that crowd in private capital and deliver the expertise to inform its effective management, all in pursuit of more robust project pipelines in emerging market and developing economies and globally. Let us now redouble efforts to build the resilient infrastructure that moves, powers and connects our world.