The World Bank's 2019 report, Beyond the Gap, estimates that the average investment required in infrastructure through 2030 in low- and middle-income countries is around $1.5 trillion per year under the preferred scenario. According to the World Bank's 2021 report Private Participation in Infrastructure, private investment commitments in low- and middle-income countries totaled $76.2 billion in 2021. The private sector’s limited role is due to a combination of factors required to develop PPP programs successfully, including strong political commitment, suitable legal frameworks, and sufficient institutional capacity to prepare, fund, and implement PPPs. Today, a vast majority of developing countries have brought an infrastructure PPP to market; however, the absence of strong PPP frameworks and the lack of institutional capacity leads to foregone economic and social benefits.
PPIAF, a multi-donor technical assistance facility established in 1999, promotes private investment in infrastructure by developing institutional and legislative frameworks for PPPs and building the necessary government capacity. PPIAF support comes early in the investment programming and project cycle. Addressing the critical upstream barriers for private participation in infrastructure can unlock private capital mobilization at scale. Downstream support is often provided by multilateral development partners and global facilities, for example, the Global Infrastructure Facility (GIF), which helps governments develop bankable infrastructure projects, and the International Finance Corporation (IFC), which provides investment funding and helps structure PPP transactions.
Based on this extensive experience, PPIAF established the PPP Institutions Building Program in 2018. The Program analyzed the drivers of the success and failure of PPP programs in developing economies. Based on these findings, it developed a new systematic approach to effectively support client countries in developing, implementing, and monitoring sustainable PPPs. The Program draws on PPIAF’s extensive experience to help low-income and fragile countries build their national PPP frameworks and support the delivery of sustainable and well-structured infrastructure projects. The Program provides intensive capacity building using specific PPP analytical tools and products and made recommendations to strengthen laws, regulations, and institutions tailored to the PPP contexts in 39 client countries.
Fatouma Ahmed Moussa, Director General, of Djibouti’s PPP Unit, speaks at a training event supported by PPIAF’s PPP Institutions Building Program in March 2023. Photo: Bailo Diallo, World Bank.
The Program aims to close the infrastructure financing gap by creating an enabling environment for PPPs. Since its inception in 2018, the Program successfully implemented over 50 activities in 39 countries, strengthened the capacity of over 380 government officials in more than 70 institutions across all regions, and catalyzed the adoption of over 15 PPP laws, regulations, and guidelines. The Program is continuing PPIAF’s contribution to facilitating private investment in infrastructure, estimated to be around $27 billion to date.
Since its establishment in 2018, the Program’s key results include:
- Building stronger regulatory frameworks to enable successful PPP projects, leading to a marked improvement in the robustness and bankability of PPP project pipelines. In Senegal, the Program supported the design and launch of a new PPP framework, the finalization of the PPP law, and the preparation of the PPP decree. Senegal’s National PPP Support Unit (UNAPPP) is bringing its first PPP to market.
- Developing detailed guidelines for a robust PPP process for regional projects in the ECOWAS region, allowing the preparation and procurement of PPPs to be based on in-depth assessments and fiscal accountability.
- Supporting the development of PPP pipelines in Ethiopia, Kenya, Lesotho, Peru, Senegal, and Tanzania and reviewing existing pipelines in ECOWAS and Guinea-Bissau.
- Supporting the government of Panama in operationalizing its PPP implementation governance framework and developing a pre-feasibility study for its first PPP transaction. This will lead to increased private sector investment in the road sector under the Support to Panama PPP Program Development for Recovery project, supported by a $7.5 million World Bank loan. With World Bank support, Panama will procure its first performance-based contract (PBC) in road rehabilitation and maintenance—the Panamerican East PBC.
- Providing extensive upstream support in Kenya that led to the operationalization of the PPP Directorate and the development of a strong PPP pipeline. With assistance from the Program, Kenya facilitated the development of PPP projects by screening the existing pipeline and identifying additional projects. This longstanding support continually improved PPP knowledge and built capacity in both the public and private sectors, which are essential for implementing PPPs in the country. This led to a strong PPP pipeline expected to mobilize $1.25 billion in private capital in the transport, energy, education, and agriculture sectors.
- Developing extensive certification training programs provided to more than 150 officials from national and regional entities responsible for regional PPP development. Country-level support for developing regulatory frameworks was provided in the ECOWAS region in West Africa as well as Indonesia, Lao PDR, Panama, Senegal, Tanzania, and Vietnam.
Bank Group Contribution
The PPIAF Trust Fund, a multi-donor initiative administered by the World Bank Group, provided more than $16 million in funding for the PPP Institutions Building Program. Besides the World Bank Group, the governments of Australia, France, Germany, Netherlands, Norway, Sweden, Switzerland, the United Kingdom, and the United States support PPIAF.
The World Bank partners with donors to raise funds for PPIAF and collaborates with experts to apply relevant expertise. For example, AFD, the French Development Agency, was engaged in country-specific advisory work in the West Africa region and was a partner in the first regional PPP program there. IFC, the African Development Bank, and the Asian Development Bank provide similar support.
Going forward, PPIAF will implement its new Renew Strategy, which aims to accelerate the availability of resilient, affordable, and inclusive infrastructure by enabling private participation. The strategy addresses key trends, significant challenges, and new opportunities, for private participation in infrastructure, building the critical upstream, enabling reform to "leapfrog" to new service delivery models, and identifying innovative sources of finance.
Expanding targeted support is critical for countries to meet their infrastructure needs. PPIAF aims to enhance its PPP Institutions Building Program and lay the foundation for a new era of institutional support to countries. Continuing capacity building and knowledge exchange are key elements of this Program, now in its second phase. Alongside this dissemination and continued country support, analytical work will be undertaken on Project Development Facilities and the treatment of fiscal commitments and contingent liabilities. PPIAF is committed to promoting green, resilient, and inclusive growth. It is also exploring innovative ways to mainstream gender and climate change into PPP projects and infrastructure.
The story was originally published on worldbank.org.