41976 PPI data update note 8 December 2007 Private activity in infrastructure continued its recovery in 2006 Investment commitments to infrastructure projects with private participation grew for the third consecutive year in 2006, according to just-released data from the Private Participation in Infrastructure Project Database.1 The number of projects reaching financial or contractual closure also showed a recovery. Investment commitments (hereafter, "investment") in low- and middle-income countries grew by 10% to US$114 billion (table 1). In real terms that was just 20% less than the peak in 1997. But the picture varied across sectors. Telecommunications remained in the US$63­64 billion range, maintaining its highest level ever in real terms (figure 1). The sector accounted for more than 55% of investment in 2006. Transport had growth of more than 30%, reaching its highest level ever in real terms for the second consecutive year. Investment in transport was less concentrated in large transactions (those over US$800 million) than in the previous year: these transactions accounted for 35% of investment in 2006, down from 50% in 2005. Energy investment grew by 9% but in real terms remained at just a third of its peak in 1997. Water investment amounted to US$2 billion, well below its peak but within the US$1­2 billion range of the previous five years (excluding the US$2.5 billion Syabas concession in Malaysia in 2004). The number of private infrastructure projects implemented in 2006 grew by 17% to 271 (table 2). Here again trends differed across sectors. Energy projects remained at around 80, as in the previous two years (figure 2). Telecommunications projects rose by a third to around 30, returning to a level similar to those in 2003 and 2004. Transport had a record year, with 111 transactions. And water projects totaled 48, down slightly from the record 57 in 2005. Figure 1 Investment commitments to infrastructure projects Figure 2 Infrastructure projects with private participation with private participation in developing countries by sector, 1990­2006 in developing countries by sector, 1990­2006 400 Projects 2006 US$ billions* 140 350 120 Total 300 Total 100 250 80 Telecoms 200 60 Energy 150 Telecoms Energy Transport 40 Transport 100 20 Water 50 Water 0 0 1990 1995 2000 2006 1990 1995 2000 2006 Source: World Bank and PPIAF, PPI Project Database. * Adjusted by the 2006 US CPI. Source: World Bank and PPIAF, PPI Project Database. Several factors explain the divergence within sectors between the trends in investment and project numbers. First, new projects accounted for just part of annual investment. Projects achieving financial or contractual closure in 2006 accounted for US$54 billion, or 48% of the total for the year, while projects closing in 1990­2005 represented the other 52% (figure 3). Telecommunications played the biggest part in this: projects reaching closure in 2006 accounted for just 18% of the year's investment in the sector, while those closing in previous years represented 82%. Second, in real terms the median project size in 2006 (US$77 million) was more than twice those for the previous four years. Third, the recovery in energy investment was driven by six large projects (those over US$800 million), which accounted for 45% of commitments in 2006. Finally, new private activity in water focused on smaller projects. 1Data on infrastructure projects with private participation include primarily medium-size and large projects as reported by the media and other public sources. Small-scale projects are generally not included because of the lack of public information. Additional investments in some projects may also have been omitted for the same reason. Country income groups saw diverging trends in 2006. Investment grew in low-income and lower-middle- income countries, driven in both cases by telecommunications and transport (figure 4). Meanwhile, investment fell in upper-middle-income countries, again because of telecommunications and transport. Energy investment remained stable in both low-income and lower-middle-income countries while showing some growth in upper-middle-income countries. Figure 3 Investment commitments to infrastructure projects with Figure 4 Investment commitments to infrastructure projects private participation in developing countries by year of financial with private participation by country income group, 1990­2006 closure, 1990­2006 100 2006 US$ billions 160 2006 US$ billions* Projects 400 90 140 350 80 120 300 70 100 250 60 80 200 50 60 150 40 40 100 30 20 50 20 0 0 10 1990 1995 2000 2006 0 1990 1995 2000 2006 New projects Previously implemented projects Number of new projects Low income (GNI per capita of $875 or less) Low er middle income ($876 ­ $3,465) Upper middle income ($3,466 ­ $10,725) Source: World Bank and PPIAF, PPI Project Database. * Adjusted by the 2006 US CPI. Source: World Bank and PPIAF, PPI Project Database. Investment also showed diverse trends across regions. Three developing regions saw investment grow to record levels: the Middle East and North Africa, South Asia, and Sub-Saharan Africa (figure 5). In South Asia most of the growth came from telecommunications and transport, while in the other two regions most came from telecommunications alone. In Latin America investment showed some recovery for the third consecutive year, while in East Asia it remained stable at around US$18 billion. But in both regions, which had led the boom of the late 1990s, investment stayed well below peak levels. In Europe and Central Asia investment fell by more than 30% from its peak in 2005, mainly because of a lack of large projects like those closing in 2005 (such as the divestiture of Turk Telekom). Trends in the number of projects reaching closure also varied across regions. In South Asia the number of transactions grew to a record level in 2006 (figure 6). In Latin America the number grew for the first time since 2000 but still remained at a third of its peak. In East Asia and Europe and Central Asia the number of projects remained at levels similar to those in 2005. And in the Middle East and North Africa and Sub- Saharan Africa the number reaching closure declined from the record levels in 2005. Figure 5 Investment commitments to infrastructure projects with Figure 6 Infrastructure projects with private private participation in developing countries by region, 1990­2006 participation in developing countries by region, 1990­2006 Projects 180 2006 US$ billions 90 160 140 LAC LAC 120 60 100 EAP EAP 80 ECA 60 SA 30 SA 40 ECA SSA SSA 20 MENA MENA 0 0 1990 1995 2000 2006 1990 1995 2000 2006 Source: World Bank and PPIAF, PPI Project Database. Source: World Bank and PPIAF, PPI Project Database. Projects reaching closure in 2006 accounted for most of the annual investment in East Asia and the Middle East and North Africa. In the other four developing regions, by contrast, previously implemented projects accounted for most of the investment in 2006. The share ranged from around 50% in South Asia and Sub- Saharan Africa to more than 60% in Europe and Central Asia and Latin America. Continuing the trend of the previous four years, private activity in 2006 was more evenly distributed across regions than it had been during the boom of the late 1990s. A forthcoming note will analyze private activity in infrastructure in more depth. Table 1 Investment commitments to infrastructure projects with private participation in developing countries by sector or region, 1996­2006 US$ billions 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Sector Energy 29.4 46.1 29.3 20.9 25.5 17.2 20.2 21.0 15.1 17.8 19.5 Electricity 26.8 42.8 23.3 18.1 23.3 13.8 11.1 16.9 11.9 15.4 15.9 Natural gas 2.6 3.3 6.7 2.9 2.2 3.7 9.0 4.1 3.3 2.4 3.6 Telecommunications 24.6 39.2 51.3 34.9 48.9 45.5 32.7 28.1 43.9 62.7 63.1 Transport 15.6 18.3 15.9 8.1 9.1 8.4 4.6 6.3 7.0 21.7 29.7 Airports 0.4 0.7 3.0 0.5 2.1 1.4 0.2 0.7 0.8 7.5 7.0 Railways 5.9 4.6 3.3 2.9 1.1 1.1 0.2 0.9 1.1 0.9 8.2 Seaports 7.5 9.7 8.1 2.2 3.8 4.7 2.2 2.7 3.5 6.3 10.1 Roads 1.8 3.3 1.5 2.4 2.0 1.3 2.0 2.0 1.6 7.0 4.3 Water and sewerage 1.3 10.2 2.3 6.5 8.6 2.3 1.6 1.5 4.7 1.7 2.0 Region East Asia and Pacific 27.2 36.6 10.1 12.2 18.0 12.6 11.4 17.8 13.4 17.6 18.5 Europe and Central Asia 10.7 14.6 11.9 9.8 25.8 14.2 17.3 12.1 17.2 35.8 23.4 Latin America and the Caribbean 25.6 48.3 68.9 38.0 38.5 33.3 19.3 15.4 17.4 20.6 27.9 Middle East and North Africa 0.1 5.1 3.4 2.9 4.1 4.4 1.6 1.9 7.4 7.1 11.0 South Asia 5.8 6.2 2.3 4.6 3.5 4.9 6.2 4.0 11.4 14.2 21.8 Sub-Saharan Africa 1.4 3.0 2.2 2.9 2.2 4.0 3.3 5.6 3.9 8.7 11.8 Total 70.9 113.7 98.8 70.4 92.0 73.3 59.1 56.8 70.7 103.9 114.3 Source: World Bank and PPIAF, PPI Project Database. Note: Includes annual investment commitments to projects reaching closure in 1990­2006. Table 2 Infrastructure projects with private participation in developing countries by sector or region, 1996­2006 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Sector Energy 127 160 100 83 85 91 112 101 79 84 81 Electricity 119 132 84 74 74 64 64 55 49 58 69 Natural gas 8 28 17 9 11 28 48 46 30 26 12 Telecommunications 88 65 71 40 45 50 14 32 30 23 31 Transport 83 99 100 58 65 40 29 57 44 67 111 Airports 9 7 14 8 18 12 3 3 5 10 15 Railways 12 12 11 11 9 4 2 7 4 3 6 Seaports 21 22 26 18 21 10 9 15 18 37 30 Roads 41 58 49 21 17 14 15 32 18 17 60 Water and sewerage 27 39 33 42 45 41 44 43 52 57 48 Region East Asia and Pacific 99 112 48 46 48 69 84 98 75 87 81 Europe and Central Asia 70 47 47 32 41 33 24 27 27 34 37 Latin America and the Caribbean 106 152 152 83 94 58 61 50 49 36 53 Middle East and North Africa 2 7 9 6 11 14 5 5 13 17 11 South Asia 30 17 20 25 15 19 16 26 24 17 58 Sub-Saharan Africa 18 28 28 31 31 29 9 27 17 40 31 Total 325 363 304 223 240 222 199 233 205 231 271 Source: World Bank and PPIAF, PPI Project Database.