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BRIEF

Global Infrastructure Facility (GIF)

November 17, 2014

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Developing countries are facing a massive infrastructure deficit. Despite robust growth over the last decade, many people in developing economies and emerging markets still do not have access to reliable and affordable basic services. The lack of infrastructure comes at an economic and social cost. Today 1.2 billion people live without electricity; 2.8 billion still cook their food with solid fuels (such as wood); 1 billion people live more than two kilometers from an all-weather road; 60 percent of the world’s population lack internet access; and at least 748 million people lack access to safe drinking water.


" Today, 1 billion people live more than two kilometers from an all-weather road "

Infrastructure Financing Needs
Developing countries now spend about US$1 trillion a year on infrastructure and need at least an additional trillion per year to meet demand and maintain growth rates. Many countries already face large gaps in the stock and quality of existing transport, power, telecommunications, water and sewer systems, along with rising demand for those services.

Just to illustrate one source of rising demand: in emerging economies, the number of people living in cities is expected to double in the 30 years to 2030, adding 2 billion more people. With them, comes new requirements for basic
services such as water, power and transport.

Infrastructure Financing Gaps
Despite significant needs, financing remains elusive ƒƒ

  • World Bank Group data shows that private infrastructure investment in Emerging Markets and Developing Economies (EMDEs) declined from $183 billion in 2012 to $146 billion in 2013. This is only around 15% of total infrastructure investment.
  • Public sector financial constraints means that governments do not have the funding to fill the gap.
  • Commercial banks’ abilities are constrained. So new sources of long-term financing are required to bring down the cost of investment.
  • ƒThere are substantial long-term financial resources available held by institutional investors and other financiers, such as pension funds, sovereign wealth funds, superannuation funds, insurance companies and reinsurers, and state development banks.
Rationale for the Global Infrastructure Facility

The Global Infrastructure Facility (GIF) has been designed to help bridge the infrastructure financing gap and build a global pipeling of infrastructure investments

  • It is a global, open platform that will facilitate preparation and structuring of complex infrastructure investments that no single institution can realize on its own.
  • The World Bank Group launched the GIF at its October 2014 Annual Meetings.
  • 16 of some of the world’s largest asset management, pension and insurance funds, along with commercial banks have signed agreements to collaborate on the GIF.
  • The Governments of Australia, Canada, Japan and Singapore and Multilateral Banks including: the Asian Development Bank, European Bank for Reconstruction and Development, European Investment Bank, and the Islamic Development
    Bank, have also signed collaborative arrangements, signifying their willingness to partner with the GIF.
  • The GIF platform aims to integrate the efforts of MDBs, private sector investors and financiers, and governments interested in infrastructure investment in EMDE countries through its pipeline of projects and programs. With its global reach, technical expertise in both public and private infrastructure, financial capacities, and convening power, the World Bank Group (WBG) is uniquely placed to host such a global platform.

Activities

The GIF will provide end-to-end support in project design, preparation, and transaction and financial structuring to ensure viable infrastructure projects are brought to market, with a focus on finance options and structures able to attract a wide range of private investors.

The aim is to demonstrate impact – as the World Bank Group President Jim Yong Kim said in October 2014:

“For the private sector, we know decisions about investing come down to assessments of risk and return. And in setting up this Global Infrastructure Facility, we have listened to and heeded the voices of investors and financiers who have told us the biggest constraint to unlocking investment is the lack of a solid pipeline of well prepared projects, designed with commercial viability and long term financing in mind. “ 

Infrastructure is a priority for the World Bank Group. Last year it mobilized $24 billion in financing up from $16.7 billion previous year.

Projects

The GIF has already had interest from developing countries in the innovative way in which it is structured to draw in new sources of finance – particularly from institutional investors.

Starting with a pilot phase, the GIF will demonstrate what can be achieved. Work has already begun on a pipeline selection process and the GIF is looking at several projects with the potential to transform economies in developing countries.

During the three-year pilot phase activities will include:

  • Enabling environment and project definition;
  • Project preparation and investment feasibility;
  • Transaction support and financial structuring; and
  • Financial arranging and credit enhancement.

The Multilateral Banks see building a pipeline of quality – and not just quantity-- infrastructure projects as vital. With that view, selection criteria and processes will be developed with GIF partners, and are expected to take into account the following:

  • Development Impact—projects that support the twin goals of ending extreme poverty and boosting shared
    prosperity; as evidenced by the ability to estimate impacts on access, affordability, jobs, gender, and
    fiscal sustainability;
  • Alignment—projects that are aligned with a government’s priorities and strategies;
  • Complexity—projects that require multiple parties to come together to provide structuring, arranging and financial support, and/or projects which require a blend of financial instruments; and;
  • Catalytic Impact—projects that have significant potential to achieve financial viability, leverage public
    funds, and attract private sector and/or institutional investors-such as through Public-Private Partnership
    (PPP) models, while still meeting governments’ aims to deliver infrastructure.
MEDIA CONTACT: Camille Annette Funnell / +1 (202) 294 4804 / cfunnell@worldbank.org