Private sector invests $76.2bln in low, middle-income countries ― World Bank

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New data from the World Bank shows that private investment in low and middle-income countries’ infrastructure is rebounding from the historic lows recorded in 2020 as private investment commitments totalling $76.2 billion in 2021, representing a 49 per cent increase from the previous year.

“The rebound of private sector investment commitments in infrastructure is a positive sign that the recovery from COVID-19 had begun in 2021,” said Imad Fakhoury, the World Bank’s Global Director for Infrastructure Finance, PPPs & Guarantees.

Fakhoury added that “There is a significant opportunity to forge ahead with quality investments in green, resilient and inclusive infrastructure in 2022. But as economic stimulus slows, credit conditions tighten and uncertainty from overlapping crises intensifies, there will be an even greater need for private investment in infrastructure. This will require working collectively to enable private sector solutions and putting in place stronger foundations for post-crisis recovery.”

The Bank noted that although the recovery of private investments is a positive sign, daunting challenges remain. Overall commitments still lag 12 per cent lower than the previous five-year average, an indicator that recovery from the deep recession triggered by COVID-19 is still underway.

It explained that investments were unequal across regions as Europe and Central Asia saw the largest increase in private investment commitments.

“In 2021, commitments in the region totalled $15 billion, a 400 per cent increase compared to 2020 and double the five-year average. An $8 billion airport concession in Antalya, Turkey was a significant contributor to this increase. A public-private partnership programme in Uzbekistan also helped drive $2.2 billion of commitments across five projects, amounting to 3.6 per cent of the country’s national GDP”, the World Bank stated.

However, it observed that the outlook for infrastructure investments in the region is now dampened by the war in Ukraine.

“While Europe and Central Asia reported the largest per cent increase in private-sector commitments, East Asia Pacific posted the largest total commitment — $28.1 billion, a 69 per cent increase compared to 2020. Latin America and the Caribbean also reported a 22 per cent increase in commitments, for a total of $18.6 billion. Brazil led the recovery in the region.

“Private investment commitments decreased in Sub-Saharan Africa by 17 per cent, in South Asia by 16 per cent and by 90 per cent in the Middle East and North Africa.

“The transport sector received $43.8 billion in investments across 82 projects, accounting for 58 per cent of global PPI investments. This marks a return to the decade-long trend for PPI following 2020’s standstill in transport investments.

“Nearly one-third — 29 per cent — of all PPI investments went to the energy sector, a 26 per cent decrease from 2020 levels. Of the $22.4 billion directed to energy projects, 72 per cent went to renewable electricity generation, primarily solar energy,” the World Bank said.

According to the World Bank, private sources contributed 63 per cent of the financing to PPI projects; another 18 per cent came from public sources and 19 per cent from development and export finance institutions (DFI).

The Bank noted that despite the impact of COVID-19, the share of financing across public, private, and DFI sources largely remained the same as that of pre-pandemic distribution, and infrastructure projects continued to be highly reliant on debt in 2021, with total debt raised of US$13.6 billion, or 64 per cent of projects with full financing information available.