The World Bank Group announced today that its financing commitments in roads, bridges, energy, clean water, and other critical infrastructure projects grew by 45 percent to US$24.2 billion in the fiscal year 2014, up from US$16.7 billion in the previous year. The jump in financing was due to increased demand from developing countries.
The increase comes against a backdrop of an overall decline in private sector investment in infrastructure across the developing world. Such investments–including through public-private partnerships–are considered critical in reducing poverty. Commitments to Public-Private Partnerships (PPPs) and fully private projects declined by nearly 20 percent, from US$181 billion in 2012, to US$146 billion in 2013, according to World Bank Group estimates.
The increase in World Bank Group financing marks the highest level of infrastructure-related lending by the World Bank Group since 2011, with the bulk of investment focused on energy and transport projects. However, with global demand for infrastructure estimated at US$1-1.5 trillion annually above current investment levels, much larger commitments from the private sector are necessary to meet help low- and middle-income countries boost growth and reduce poverty.
“It is clear developing countries badly need more infrastructure, and we are stepping up with more financing to provide clean drinking water for families, electricity so children can study at night, and better roads so farmers can get goods to markets,” said World Bank Group President Jim Yong Kim.
Kim welcomed the announcement this week of a BRICS bank and discussion around an Asian Infrastructure Investment Bank, saying that if those developments eventually provided more funding for infrastructure, the poor would benefit. “Globally, we need additional funding for critical infrastructure projects, and so we welcome efforts that will lead to more long-term financing for transport, energy, clean water, and sanitation projects. We have to remember our real competition is ending extreme poverty as soon as possible and our shared goal is to build opportunities and improve the lives of the poor,” Kim said.
Kim is visiting Singapore where the World Bank Group focuses on leveraging risk instruments, credit enhancements and guarantees to promote public and private investment in infrastructure. The Bank Group includes IBRD, provider of development loans to governments; IDA, the fund for the poorest countries; IFC, a private sector arm; and MIGA, an investment guarantee arm.
Singapore is the final stop of a five-country East Asia tour by President Kim, which included visits to China, Japan, the Philippines, and Vietnam.
In Singapore, President Kim met with Prime Minster Lee Hsien Loong, Emeritus Senior Minister Goh Chock Tong, and Minister of Health Gan Kim Yong, to reinforce the World Bank Group’s partnership with the island state on a range of initiatives, including mobilizing infrastructure investments. President Kim stressed the importance of the proposed development of a Global Infrastructure Facility to work with private and public financing partners, bolster the pipeline of viable investments, and help fill the huge gap in infrastructure financing.
Kim pointed to Singapore’s expertise in infrastructure financing as just one area where the country can share the lessons of its remarkable economic success with neighboring countries.
“Singapore’s success in urban planning, economic development, public housing and health care contain important lessons,” President Kim said. “The World Bank Group is working with Singapore to help bring those lessons to countries around the world.”
Kim said the World Bank Group has created new global practices that are specifically designed to help transfer global development solutions from countries like Singapore to the rest of the world.
Singapore Prime Minister Lee Hsien Loong welcomed the partnership with the World Bank Group.
“Singapore values our partnership with the World Bank. We look forward to enhancing our cooperation with the Bank, and to sharing our experience where useful with other countries,” said Prime Minister Lee Hsien Loong.
In the 1960s and 1970s, Singapore received a total of 14 World Bank loans to improve its infrastructure, environmental management, education system and development finance. Today, Singapore is a shareholder in the World Bank Group and a donor to IDA, the Bank Group’s fund for the poorest countries. Singapore has also invested in IFC’s Asset Management Company for infrastructure.
In Singapore, President Kim met with private sector leaders to discuss bottlenecks to infrastructure finance in emerging economies and the proposed Global Infrastructure Facility. He later visited the Urban Redevelopment Authority, Singapore General Hospital, and the PSA port at Panjang Pagar.