Infrastructure Financing in APEC Emerging Economies

Transcription

1 2017/FDM1/007 Session: 3 Infrastructure Financing in APEC Emerging Economies Purpose: Information Submitted by: World Bank Group Finance and Central Bank Deputies Meeting Nha Trang, Viet Nam February 2017

2 Infrastructure Financing in APEC Emerging Economies February 2017 Infrastructure Financing Private Sector Financing Sector Inves tors /EPC Institutional Investors Equity Funds & As set Managers Commercial banks Corporate bonds (incl SOE issuances) Funding: User fees Tax base Mobile, Fixed lines, Internet ICT % % Rural telephony, Some fiber optic backbone Public Sector Financing Generation, Distribution Energy % % Trans mission, Some distribution Cons umption (lifeline tariffs ) for poor, Some renewables Ports, Airports, Toll roads, Ra ilroads (esp. rolling stock), Some Mass Transit Op s (especially BRT & Light rail) Transport % Water % 30-70% % Urban & rural roads, Shipping channels, Waterways, Railbeds, Most Mass Tra nsit Infrastructure (es pecially metro s), Ai r Traffic Control Federal, nationa l, local budgets DFIs a nd MDBs P ublic bond financing National Development Banks Some Supply and Wa ter Treatment, Some distribution WW Treatment & Sewerage, Consumption (tariff) s upport for poor, I rri gation, Flood Mgt. Deliv ery: Private PPPs Public All sectors combine user fees and taxes To varying degrees 2 1

3 APEC Asia: Sizeable Infrastructure Needs APEC Asian economies have mixed ratings in infrastructure index: Lead Ratings: HK (China), Singapore Middle: Malaysia, China, Thailand Lower Ratings: Indonesia, Vietnam, Philippines HK Singapore Japan Malaysia China Thail and Indonesia Brunei Vietnam Philippines APEC Asia WEF Global Competitiveness Index 2016/17: Infrastructure Pillar Ranking (ranks out of 138 economies) Estimated Infrastructure Investment Needs Source Time horizon Regional focus US$ Tr ADB Emerging Asia 8.5 HSBC Emerging Asia 11.5 McKinsey ASEAN B Global 57 Source: Bhatta charya y (2012), Man (2013), McKinsey Globa l I nstitute (Ja n 2013, Nov 2014) PPP Volumes in EMDE Core Infrastructure Sectors Are Flat or Declining Investment, Billion, US$ EMDE PPP Investments in Power, Transport & Water Total Volumes (left y axis) and Share of GDP (right y axis) Investment Percent of GDP Source: World Bank, Project PPI Database. Adjusted by 2015 US CPI Investment as Percent of GDP In 2015 investment commitments to PPI was $112b, 10% lower than the average of the last five years Without one mega project (airport in Turkey), it would have decreased by 26% Falling investment in traditional PPI markets-- Brazil and India-- accounted for decline 2

4 EAP Challenges: Urbanization + lagging services + trade = Large, continued infrastructure demand Population without access to services (%), Millions of people lack access 499 million to basic infrastructure 111 million 122 million Sanitation Electricity Water 5 Low use of private infrastructure in EAP 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% Private Participation in Infrastructure (2015) Regional Comparator PPI Investment (% of GDP) PPI Investment $ per Capita 0.1% 7 0.2% 0.2% % 0.8% 1. 3% 73 EAP MNA SAR AFR LAC ECA EAP has highest global level of infrastructure investment as % of GDP EAP also has lowest global level use of private sector in infrastructure 6 3

5 PPI in EAP economies comparison with other APEC Member Economies PPI as a % of GDP (Average of last 5 years) PPI Spending per Capita (Average of last 5 years) PPI Spending per Household (Average of last 5 years) Emerging East Asia Pacific APEC Papua New Guinea 0.00% 0 0 People's Republic of China 0.07% 5 18 Indonesia 0.21% 8 29 Viet Nam 0.75% The Philippines 0.75% Upper MIC East Asia APEC Thailand 0.54% Malaysia 0.49% European APEC Russia 0.22% Latin America APEC Mexico 0.57% Peru 2.42% Chile 1.88% Source: PPI Database, World Bank PPI in EAP economies comparison with other APEC $1, % $900 $800 PPI Spending per Capita (Average of last 5 years) 2.42% 2.50% $700 $600 PPI Spending per Household (Average of last 5 years) PPI as a % of GDP (Average of last 5 years) 1.88% 2.00% $ % $400 $300 $200 $100 $ % 0.21% 0.22% 0.49% 0.54% 0.57% 0.75% 0.75% 1.00% 0.50% 0.00% Source: PPI Database, World Bank 4

6 Private investment is highly sensitive to sovereign risks Strong direct correlation between sovereign risk and private participation in infrastructure (PPI) as compared with FDI overall PPI increases with freedom from corruption, rule of law, quality of regulations, and 3 rd party oversight; decreases with court disputes FDI / GDP Weak correlation between Country Risk and predicted value of FDI/GDP Higher Risk - Country Risk Rating - Lower Risk PPI / GDP Strong correlation between Country Risk and the predicted value of PPI Greenfield/GDP Higher Risk - Country Risk Rating - Lower Risk Source: Effects of Country Risk & Conflict on Infrastructure PPPs, Araya, Schwartz, Andres, World Bank (2013). See also: Institutional and Political Determinants of PPI, Moszoro, Araya, Ruiz-Nunez, Schwartz. (2015). WBG Financing of Infrastructure in EAP, : WBG = $5.7b of which, $3.2 (IBRD) + $1.7 (IDA) + $0.9 (IFC & MIGA ex mobilization) 5

7 Annex Global Infrastructure Facility What (and who) is the GIF? A global partnership with the objective of expanding the market for private finance of infrastructure in EMDEs D F Is, RDBs, SDBs Associations & Infra Quality organizations 6

8 What (and who) is the GIF? Oversees GIF Approves GIF Activities EBRD, IADB, IFC, WB (ADB, EIB pending) Lead implementation of GIF Activities 43 partners include leading banks & institutional investors Sounding board for GIF strategy and knowledge, and for technical teams & Governments at project level IBRD; Australia; Canada; China; Japan; Singapore $100m committed for 3-year pilot period D F Is, RDBs, SDBs Associations & Infra Quality organizations Part of WB PPP CCSA Day-to-day management and coordination; technical support as needed What GIF does: Project support overview Project/Program Definition Grant resources to prioritize & screen potential projects and plan process Expected size up to $500k Project Prep & Structuring High-quality project preparation for infra projects/programs Flexible scope per project: complementing other resources to achieve comprehensive approach No floor or cap on activity size; average c$3-5m Reimbursable on successful financial close Project/ Program Definition Project Prep & Investment Feasibility Transaction Financing Project /program prioritization or planning Pre-feasibility analysis Legal and regulatory assessment Needs review & activity planning Concept-level approval / decision to proceed Detailed feasibility studies Investment appraisal PPP structuring Investment decision Transaction preparation and implementation Early financial structuring and design of stapled credit enhancement as needed Commercial close Support to Government during preparation of financing packages Credit enhancement design Financial close 7

9 What GIF does: Project selection criteria Eligible project types Infrastructure investment project/program Implemented by private entity (e.g. as PPP), or commercial SOE, with substantial private capital investment Energy Water & Sanitation Transport Telecoms and ICT Eligible sectors What projects? Identifiable development impact, via improved infrastructure Aligned with country priorities Viable, sustainable, and value for money Potential to mobilize private capital Complex value-add from GIF platform Thematic focus areas Climate smart: low-emitting, encouraging efficiency, or improving resilience; and/or Trade enabling: enhancing connectivity and trade PLUS diverse portfolio across sectors, regions, country incomes, and overall needs/time to market Annex WB Cascade 8

10 The basic concept of the Cascade Maximize finance for value-adding development investments Promote the judicious use of scarce public and concessional resources to crowd-in commercial capital and minimize the public debt burden on clients while delivering sustainable and affordable infrastructure services 17 User fee or general taxes? Not all infrastructure can be funded by consumers The features of natural monopolies, public goods, and market failures: Managing with exludability, externality and equity challenges High Feasibilit y of cost recovery (excluda bility) Low Some cost recovery Urban Rail Water Treatment Rural Roads No cost recovery Low Rural Telephony Wastewater Treatment Full cost Container Power recovery Terminals Mobile Distribution Licenses Renewable Power Urban Roads Desirability of cost recovery (Externalities, demandside management, poverty and equity concerns) Telecom Backbone No cost recovery High 18 9

11 Current Situation The reality on the ground 17 percent of developing-country water utilities generate enough revenues to be deemed credit-worthy Only two countries in Sub-Saharan Africa charge tariffs high enough to recover the full capital cost of service provision Affordability concerns Who pays? User fees vs. taxes: the poor may be best served by a combination of cost recovery plus targeted subsidies and payment schemes Who finances? Public vs. commercial: commercial financing costs more often a binding constraint for low income countries; but high opportunity cost of public and concessional finance 19 Sustainable infrastructure finance through a Cascade approach Commercial Financing Commercial bank debt Institutional investors x- borders Upstream Capital markets Reforms & & Market bonds Failures Country and Sector Policies Regulations and Pricing Institutions and Capacity Can commercial financing be cost-effectively mobilized for sustainable investment? If not Can upstream reforms be put in place to address market failures? If not Capitalizing on WBG Knowledge Assets to Support Global Public Goods Can risk instruments & credit enhancements cost-effectively cover remaining risks? If not Public and Concessional Resources for Risk Instruments and Credit Enhancements Guarantees Public First Loss and Concessional Financing, including Sub-Sovereign Public finance (incl. national development banks and domestic SWF) MDBs and DFIs Can development objectives be resolved with scarce public financing? 20 10