The East Asia and Pacific region (EAP) was the only region to show an increase in investment activity in infrastructure last year as investment commitments in developing countries declined sharply in 2016, says a new World Bank Group report.
Investment volumes in the EAP region reached US$24.8 billion in 2016, or 43% higher than the 2015 figure of $17.3 billion, and well above the 2011-2015 regional average of $16.7 billion.
But overall investment commitments in developing countries fell by 37% last year compared to 2015, said the WB’s report “Private Participation in Infrastructure Database” (PPID).
A large drop in investment commitments in Turkey—which in 2015 saw three mega projects reach financial closure, including the $35.6 billion IGA Airport in Istanbul—contributed significantly to the year-on-year decline. Without the Istanbul Airport project, the decline in private investment in infrastructure would be 8%, according to the annual study.
The $71 billion of investment commitments in 2016 also represents a substantial slide from the $121 billion average annual investment charted during the years 2011 to 2015.
The overall trend of lower investment may be attributed to three countries which received more than half of investment commitments for infrastructure projects with private participation in recent years: Turkey, India, and Brazil.
“Infrastructure in developing countries [is] untapped investment opportunities, with only a small percentage of projects attracting private sector investment so far,” said Laurence Carter, senior director for the infrastructure, PPPs and guarantees group at the World Bank.
East Asia bucks downtrend
The PPIDB looked at infrastructure projects in 135 developing countries, but only a few dozen countries saw significant private sector investment in infrastructure.
“A 43 percent increase in commitments in East Asia and an equally significant pick-up in the renewable energy sector were bright spots in an otherwise sluggish year,” it said.
The EAP saw the second largest volume of investment in 2016 after Latin America and the Caribbean, attracting $24.8 billion for 80 projects, or 35% of total investment by private participation.
These projects included 52 energy sector projects, nine transport sector projects, and 19 water sector projects.
With 61 projects, China accounted for the majority, with investments reaching $11.4 billion in 2016, an increase of 75% from the five-year average. The improvement may reflect early success for China’s recently launched PPP program.
Another popular investment destination was Indonesia, where investment volumes rose to $6.9 billion for five projects. Other active countries included the Philippines with seven projects and Thailand with three projects.
The East Asia and Pacific region also had active investors, as bilateral financing from Japan and China in particular has increased. However, support from multilateral development banks has remained even, at around 13% of all deals.
Furthermore, three EAP countries returned to the private infrastructure market in 2016 after zero investment in 2015. Mongolia received $128 million in investment, Myanmar received $200 million, and Vietnam received $205 million.
Renewables see rising appeal
At the same time, investment commitments in renewables continued to rise in 2016, comprising 88% of the 144 electricity generation projects supported by the private sector. The projects are mostly focused on hydropower, solar PV, and onshore wind technologies.
Compared to declining volumes in the transport and water sectors, private sector investment in energy projects increased overall by 11% year-on-year. Volumes in transport and water and sewerage declined by 63% and 65%, respectively. The data also indicates a sixth straight year of declining investment in coal-fired power projects.
The PPI Database is comprised of more than 8,700 infrastructure projects with private participation, dating from 1984 to 2016. It tracks investment commitments in infrastructure projects in low- and middle-income countries with at least 20% private ownership.
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