International Private Sector Infrastructure

Catalysing private investment in infrastructure in the poorest atalysing private investment in infrastructure in the poorest developing countries for:developing countries for:

- Economic growth - Economic growth - Better services for the poor- Better services for the poor

Gavin McGillivrayHead Private Sector DepartmentUK Department for International Development (DFID)

4 May 2011

Background

In developing countries, especially the poorer ones;

• Hundreds of millions of poor people lack access to decent basic services – electricity, water & sanitation, communications and transport

• Inadequate infrastructure disadvantages private enterprise and puts a severe brake on economic growth

• Governments have nowhere near sufficient resources to extend and upgrade infrastructure to meet the needs of their burgeoning populations

• There are opportunities to catalyse private investment to help meet some of these needs

What prevents private investment in infrastructure?

• Outdated laws, regulations & policies

• Weak government capacity to understand and engage with private investors

• Lack of long-term lending, especially in local currency

• Paucity of well-structured projects to invest in

and, to ensure that privately financed services reach the poor

• Need for clear targeting in design, and

• Well-conceived subsidies

Making infrastructure finance work for poor countries

ProjectPreparation

Enabling Environment

ReachingThe Poorest

TAF

Asia

Africa

Financing

PSI Structure

AffiliatedProgrammes

Private Infrastructure Development Group - PIDG

Programme Management Unit (PMU)

Other TrustsPIDG Trust

PIDG Facilities

TAFAsia

Africa

Other PSI Facilities

Public-Private Infrastructure Advisory Facility (PPIAF)

PPIAF support has resulted in: • the passing of over 51 laws and regulations• the establishment of over 146 sector reform

strategies• the establishment or strengthening of over 74

institutions

Example: Telecommunications, Afghanistan • $468,800 in grant assistance to support the

development of a regulatory framework • Rapid rollout of competitive services, with tariffs falling

95% since 2002• The telecoms sector has attracted over $1.3 billion in

private investment

Electrical distribution network, Kabul

Results and Impacts

Cotonou Port, Benin.

DevCo

Bugoye Hydropower Plant, Uganda.

Emerging Africa Infrastructure Fund

Results and Impacts

Ackruti City Slum Development, India

GuarantCo

Antara Cold Storage, Vietnam.

InfraCo

PIDG Inputs and Outputs

• Total donor spend c.$500m

• 46 projects completed

• $9.4 billion of private investment committed

• 12 million already receiving new or better services

• Est. 30m people will receive new or better services from projects that have reached financial close

• 29 further projects under development, plus more in pipeline.

Distinctive Features of Approach

1. Capitalise on best ideas of group of like-minded agencies within flexible structure

2. Focus on sector-specific government and market failures that prevent private investment

3. Smart, catalytic use of donor capital to correct these failures – and help build financial markets that work for the poor

4. Use of professionally-managed, professionally-governed entrepreneurial facilities

5. Work within geographical and policy frameworks that focus energies on generating outputs that benefit the poor

Opportunities

1. Scale up existing programmes

2. Extend programmes to cover related areas, eg

• Climate-friendly infrastructure

• Agriculture / agribusiness related infrastructure

3. Adopt similar approaches in other sectors, eg

• Agriculture & agribusiness

• Tourism

• Education

• Health