Investment commitments in infrastructure projects with private participation in developing countries declined sharply in 2016, falling by 37 percent compared to 2015, but the falling investment can be attributed to shifts in activity in a few prominent countries.
According to the annual report of the Private Participation in Infrastructure Database, one mega-project in 2015 – the US$35.6 billion airport project in Istanbul, Turkey – accounted for more than one-quarter of all private investment commitments in infrastructure projects in developing countries that year. Without the Istanbul Airport project, the decline in private investment in 2016 would only be 8 percent.
Sluggish investor activity in countries that normally attract significantly higher levels of private investment further contributed to the fall in commitments, at US$71 billion in 2016 compared to US$121 billion on average during the years 2011 to 2015.
Three of these countries – Turkey, India, and Brazil – accounted for more than half of infrastructure projects with private participation. Without the three countries, investment commitments in developing countries stayed steady, remaining on average at US$50 billion annually.
The East Asia and Pacific region was a bright spot, however, as the only region to show an increase in private investment activity in infrastructure. Investment volumes in the EAP region increased by 43 percent in 2016.
China took second place only to Brazil as the country with the most private investment activity, with commitments reaching US$11.4 billion. This is a 75 percent increase from the country’s previous five-year average of US$6.5 billion, and may reflect early success of China’s new PPP program.
The PPI Database looks at infrastructure projects in 135 developing countries, but only a few dozen countries see significant private sector investment in infrastructure.
Other key findings of the report, prepared by a team of the WBG’s Public Private Partnerships Cross-Cutting Solutions Group based in Singapore, outline the challenges and opportunities of attracting more private sector participation in infrastructure – a key priority for the World Bank Group.
These findings are:
- There are fewer infrastructure projects with private participation in emerging markets and developing countries reaching financial closure year on year. The 242 projects recorded in 2016 is 27 percent less than the 334 projects registered in 2015, and a little more than half the average number of projects during the years 2011 to 2015.
- Average project sizes are relatively constant from 2011 to 2016, at approximately $240 million. The declining trend in investment is due to fewer projects, not smaller project sizes.
- Low-income countries saw a modest increase in private investment commitments, with US$2.9 billion in commitments reaching financial closure for 14 projects across seven low-income countries. Though the amount committed in 2016 is 8 percent higher than in 2015, it is also only half of the US$5.7 billion average during the years 2011 to 2015. Ghana and Honduras reported the most private investment activity out of the low-income countries.
- Multilateral and bilateral institutions participated in 21 percent of all deals, higher than the 17 percent annual average from the previous 5-year period. Support from multilateral development banks stayed mostly even at an average of 13 percent, while bilateral institutions- particularly from China and Japan- have expanded their presence to 11 percent.
- Though the East Asia and Pacific region showed increased private investment activity, the largest amount of investment commitments – US$33.2 billion – took place in the Latin America and Caribbean region.
- Brazil, a popular destination for private participation in infrastructure projects, attracted US$15.2 billion in commitments - the highest level of investment in 2016. Though this is a higher investment level than in 2015, it remains less than half of Brazil’s annual average investment from 2011 to 2015.
- Private sector investment in the energy sector increased by 12 percent in 2016 year-on-year, while the transport and water sectors saw less private investment activity.
- Investment commitments in renewable energy continued to rise in 2016, totaling US$20.4 billion and comprising 88 percent of the 144 electricity generation projects supported by the private sector. Only five coal-related projects reached financial closure in 2016, compared to a previous five-year average of 14 projects a year.