246 privatesector P U B L I C P O L I C Y F O R T H E NUMBER NOTE 2002 Private Infrastructure JUNE The Private Participation A Review of Projects with Private Participation, 1990­2000 in Infrastructure (PPI) Project Database tracks Drawing on the World Bank's Private Participation in Infrastructure Project infrastructure projects Database, this Note provides an overview of private activity in infrastructure in owned or managed by private companies in developing countries between 1990 and 2000. Three main trends characterized energy (electricity and that decade: Private activity in infrastructure grew each year except 1998 and natural gas transmission and distribution), 1999. Most developing countries introduced some form of private activity in NETWORK telecommunications, infrastructure. But Latin America and East Asia captured most of the investment. transport, and water and sewerage. For more The 1990s marked the reemergence of private information on the Investment in infrastructure projects participation in infrastructure in the developing with private participation in developing database see the Web site world after decades of nationalization and public Figure countries, 1990­2000 1 INFRASTRUCTURE at http://www.worldbank. sector management. Between 1990 and 2000, 130 org/html/fpd/privatesector/ 2000 US$ billions developing countries had infrastructure projects AND 150 PPIDBweb/Intro.htm). with private participation, and 54 of them intro- duced private participation in at least three infra- 120 The 2000 update of the SECTOR structure sectors. During that decade developing PPI Project Database was 90 cofinanced by the Public- country governments transferred to the private Private Infrastructure sector the operating or construction risk, or both, 60 PRIVATE Advisory Facility for more than 2,300 infrastructure projects and (PPIAF), a multidonor attracted investment commitments of almost 30 technical assistance US$690 billion.1 Those projects were imple- mented under a range of schemes: management 0 GROUP program (http://www. 19901991 1992 1993 1994 1995 1996 19971998 1999 2000 ppiaf.org). contracts, divestitures, and greenfield facilities (build-operate-own contracts, build-operate- Source: PPI Project Database. BANK transfer contracts, and merchant facilities). 1998 and 30 percent in 1999 as a result of the Recovery of private activity 1998­99 financial crises in developing coun- Investment flows to infrastructure projects with tries. Investment flows grew by roughly 19 per- WORLD private participation boomed in 1990­97, rising cent in 2000. from US$17 billion a year to US$128 billion (fig- Europe and Central Asia accounted for THE ure 1). They then declined by 15 percent in much of the recovery in 2000. In that region P R I V A T E I N F R A S T R U C T U R E A R E V I E W O F P R O J E C T S W I T H P R I V A T E P A R T I C I P A T I O N , 1 9 9 0 ­ 2 0 0 0 Investment in infrastructure projects with private participation in developing Table countries, by region or sector, 1990­2000 (2000 US$ billions) 1 Region or sector 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Total East Asia and Pacific 2.6 4.1 9.3 14.2 18.0 24.4 32.7 40.5 12.2 16.5 19.9 194.2 Europe and Central Asia 0.1 0.3 1.3 1.6 4.2 9.1 12.1 15.3 12.5 9.8 22.2 88.6 Latin America and the Caribbean 14.2 12.4 15.8 18.6 18.7 19.2 28.0 52.8 75.1 37.9 36.6 329.2 Middle East and North Africa 0.0 0.0 0.0 3.5 0.3 0.1 0.4 5.4 3.5 2.7 4.3 20.3 2 South Asia 0.4 0.8 0.1 1.3 3.3 4.3 7.2 8.9 2.7 4.4 4.6 37.9 Sub-Saharan Africa 0.1 0.0 0.1 0.0 0.8 0.8 1.5 4.6 2.6 4.6 3.1 18.2 Electricity 1.2 1.3 8.7 10.8 14.3 20.3 30.9 47.3 23.9 14.0 26.4 199.1 Natural gas transmission and distribution 0.0 0.0 3.8 4.5 1.8 4.0 2.9 3.3 6.3 3.6 2.2 32.4 Telecommunications 6.0 13.1 7.6 10.6 19.7 20.3 29.3 47.0 56.9 42.3 44.4 297.2 Transport 10.0 3.2 4.5 5.6 8.6 11.7 16.9 21.1 19.4 9.2 13.2 123.6 Water and sewerage 0.0 0.1 1.9 7.7 0.5 1.7 1.9 9.0 2.3 6.8 4.5 36.5 Total 17.3 17.7 26.5 39.2 44.9 58.0 81.9 127.6 108.9 76.0 90.7 688.7 zx Source: PPI Project Database. investment flows grew from less than US$10 bil- Sectoral trends lion in 1999 to more than US$22 billion in Telecommunications and electricity led the 2000, driven mainly by mobile telecommunica- growth in private activity in developing coun- tions licenses and by large power plants in tries in 1990­2000 (figure 2). During this period Turkey (table 1). Private activity in East Asia 108 developing countries opened their telecom- and Pacific also contributed to the recovery. munications sector to private activity, raising Investment flows in the region increased from US$297 billion in investment, 43 percent of the less than US$17 billion in 1999 to almost US$20 total investment in private infrastructure proj- billion in 2000, driven mainly by electricity gen- ects. And 79 developing countries introduced eration and transport projects. In Latin private participation in electricity, which America and the Caribbean private activity accounted for US$199 billion in investment dropped from US$38 billion in 1999 to US$37 flows, 29 percent of the total. billion in 2000. In transport, the third most active sector in Electricity and transport, which suffered the past decade, 64 developing countries most from the financial crises of 1998­99, led awarded projects to the private sector. the revival of private activity in 2000. After Transport attracted US$124 billion in invest- falling from US$24 billion in 1998 to US$14 bil- ment commitments, 18 percent of the total. In lion in 1999, investment flows to electricity water and sewerage--where technological recovered to more than US$26 billion in 2000, change has been less pronounced, political bar- the third highest annual level in 1990­2000. In riers to reform can be strong, and subnational transport, investment flows plummeted from governments often play a major role--private US$19 billion in 1998 to US$9 billion in 1999, activity grew more slowly. Thirty-seven develop- then rose to US$13 billion in 2000. Private activ- ing countries allowed private participation in ity in telecommunications also recovered, the sector, which accounted for investment although at a much slower pace. After falling flows of US$37 billion, 5 percent of the total. In from US$57 billion in 1998 to US$42 billion in addition, eight developing economies awarded 1999, investment flows to the sector reached 11 multisector projects that combined the pro- US$44 billion in 2000. vision of electricity and water services. These projects involved investment commitments of Cumulative investment in infrastructure US$6 billion. projects with private participation in Figure developing countries, by sector, 1990­2000 2 Regional trends Natural gas Water and Latin America and the Caribbean and East Asia transmission sewerage and 5% Telecommunications and Pacific led the developing regions in private distribution 43% infrastructure activity in 1990­2000 (figure 3). 5% Latin America and the Caribbean accounted for 48 percent of the investment commitments in Transport 18% 3 infrastructure projects with private participa- tion, while East Asia and Pacific represented 28 percent. Europe and Central Asia, in third place, captured 13 percent. Electricity The other regions also opened infrastructure 29% sectors to private participation in 1990­2000. Total: US$689 billion Investment flows to private infrastructure proj- Source: PPI Project Database. ects in South Asia added up to US$38 billion, 5 percent of the total in developing countries. In Cumulative investment in infrastructure the Middle East and North Africa investment in projects with private participation in Figure developing countries, by region, 1990­2000 private infrastructure projects totaled US$20 bil- 3 lion, while in Sub-Saharan Africa it amounted to Sub-Saharan Middle East and Africa US$18 billion. Each of these regions accounted North Africa Latin America and 3% 3% the Caribbean for 3 percent of total investment. South Asia 48% 6% Europe and Differing approaches Central Asia Developing regions emphasized different types 13% of private participation in infrastructure (figure 4). Latin America and Europe and Central Asia focused on divestitures and management and East Asia operation contracts with major capital expendi- and Pacific 28% ture (that is, concessions). These were part of Total: US$689 billion deeper sectoral reforms aimed at redefining the role of the state and putting infrastructure on a Source: PPI Project Database. more commercial footing. Divestitures and con- cessions accounted for 78 percent of total Investment in infrastructure projects with private participation in developing countries, investment in private infrastructure projects in Figure by region and type of project, 1990­2000 Latin America and 70 percent in Europe and 4 Divestitures Central Asia. Greenfield projects East and South Asia emphasized creating Concessions 2000 US$ billions new assets through greenfield projects that 0 50 100 150 200 250 300 350 serve or complement public sector providers, Latin America and the Caribbean with less attention to deeper or broader sectoral East Asia reforms. Greenfield projects accounted for 57 and Pacific Europe and percent of investment in private infrastructure Central Asia projects in East Asia and 86 percent in South South Asia Asia in 1990­2000. Middle East and North Africa Country concentrations Sub-Saharan Africa Middle-income economies captured most of the investment flows to private infrastructure proj- Source: PPI Project Database. P R I V A T E I N F R A S T R U C T U R E A R E V I E W O F P R O J E C T S W I T H P R I V A T E P A R T I C I P A T I O N , 1 9 9 0 ­ 2 0 0 0 Top 10 developing countries by total Top 10 developing countries by per investment in infrastructure projects capita investment in infrastructure projects with private participation, Table with private participation, 1990­2000 Table 1990­2000 2 3 Total investment Per capita Total investment Country (2000 US$ billions) Projects viewpoint investment (2000 Brazil 123 195 Country (2000 US$) US$ billions) Argentina 78 163 Argentina 2,117 78 Mexico 55 128 Hungary 1,535 15 is an open forum to China 51 253 Malaysia 1,469 34 encourage dissemination of Malaysia 34 59 Panama 1,400 4 public policy innovations for Philippines 32 65 Chile 1,230 19 private sector­led and Korea, Rep. of 30 24 Czech Republic 980 10 market-based solutions for Indonesia 27 60 Brazil 723 123 development. The views India 25 110 Estonia 716 1 published are those of the Thailand 21 68 Belize 688 0.2 authors and should not be Total for Korea, Rep. of 632 30 attributed to the World top 10 474 1,125 Bank or any other affiliated zx Source: PPI Project Database. organizations. Nor do any of zx Note: Data may not sum to totals because of multicountry projects. the conclusions represent Source: PPI Project Database. official policy of the World participation accounted for 68 percent of total Bank or of its Executive ects in developing countries. By 2000, 29 of the investment and 48 percent of projects in Directors or the countries 30 upper-middle-income countries had private 1990­2000. This top 10 list consists of the largest they represent. participation in infrastructure; these accounted developing economies, such as Argentina, for 59 percent of total investment flows and 38 Brazil, China, India, the Republic of Korea, and To order additional copies percent of projects in 1990­2000. Lower-middle- Mexico (table 2). When investment is expressed contact Suzanne Smith, income countries also had significant private in per capita terms, however, the top 10 list managing editor, participation, with 44 of them attracting 30 per- changes substantially. Measuring private partic- Room I9-017, cent of total investment over the period. ipation in infrastructure this way ranks several The World Bank, 1818 H Street, NW, Private participation in infrastructure also small economies--such as Belize, Estonia, and Washington, DC 20433. spread rapidly among low-income countries. In Panama--among the most active countries the first half of the 1990s only 30 low-income (table 3). Telephone: countries opened their infrastructure sectors to 001 202 458 7281 private participation. By 2000, however, 57 low- Fax: income countries had awarded private infrastruc- 001 202 522 3181 ture projects, and 16 had private participation in Note Email: three or four sectors. In 1990­2000 low-income 1. All dollar amounts are in 2000 U.S. dollars. ssmith7@worldbank.org countries accounted for 11 percent of total invest- Nominal figures have been deflated using the U.S. con- ment flows and 18 percent of projects. But these sumer price index. The PPI Project Database records total Copyedited and produced by numbers probably understate the private activity investment in infrastructure projects with private partici- Communications in low-income countries. The data exclude small- pation, not private investment alone. Investment commit- Development Inc. scale private providers, which often play a rela- ments include expenditures on facility expansion, tively large role in these countries (for example, divestiture revenues, and license or canon fees paid by pri- Printed on recycled paper small power suppliers in Cambodia and Yemen vate sponsors to governments. The data include 47 proj- and private water vendors in most developing ects that were canceled by 2000, which account for US$19 countries). billion in investment commitments. Despite the rapid spread of private activity in infrastructure, a few developing countries gar- nered most of the investment. The top 10 ranked by investment in projects with private T h i s N o t e i s a v a i l a b l e o n l i n e : w w w . w o r l d b a n k . o r g / v i e w p o i n t /