PU BL IC -P RIV AT EI NF RA ST RU CT UR EA DV ISO RY FA CI LIT Y ANNUAL REPORT T EN OPM VEL E DE TUR RUC AST FR IN G TIN POR SUP ARS YE 17 PPIAF is the only global facility dedicated to strengthening the policy, regulatory and institutional underpinnings of private-sector invest- ment in infrastructure in emerging markets and developing countries. We call this the critical upstream. While many initiatives focus on developing infrastructure projects with private-sector participation, PPIAF sets the stage to make this possible. By building institutions; reducing policy, regulatory and institutional risks; and building the capacity of counterparties, this foundation allows governments to generate a pipeline of bankable projects. The Critical Upstream that is PPIAF’s focus turns hundreds of thou- sands in grant financing into hundreds of millions in infrastructure investment. This is the role of PPIAF. 1 THE CRITICAL ROLE OF PPIAF WHAT WE DO / WHY INSTITUTIONS MATTER 2 ADDRESSING GLOBAL CHALLENGES 4 17 YEARS OF IMPACT 6 17 YEARS HELPING GOVERNMENTS FACE GLOBAL CHALLENGES 8 10 YEARS OF SUB-NATIONAL TECHNICAL ASSISTANCE 10 OUR KNOWLEDGE SYSTEM 20 25 REVIEW OF FY17 AND THE STRATEGY PERIOD FY15-17 HIGHLIGHTS OF FY17 26 HIGHLIGHTS OF SUPPORT TO THE REGIONS: FY15-17 30 HIGHLIGHTS OF FY17 RESULTS 50 HIGHLIGHTS OF OUTCOME REALIZATIONS: FY15-17 52 PORTFOLIO PERFORMANCE 53 55 PROGRAM FINANCES SOURCES AND USES OF PPIAF FUNDS 56 LIST OF ACTIVITIES APPROVED IN FY17 58 All dollar amounts are in United States dollars ($) unless otherwise indicated. Annual Report 2017 | i MESSAGE FROM THE PROGRAM MANAGER I am pleased to share with you PPIAF’s annual report PPIAF succeeded in meeting many qualitative targets for fiscal year (FY) 2017. With the close of FY17, we and performance indicators in accordance with our completed our 2015–2017 strategy period, giving us Work Program for FY17: the opportunity to look back and analyze long-term hhSeventy percent of approved activities to Interna- trends in regards to our mandate and strategy tar- tional Development Association (IDA) countries, gets. This report provides the reader with a qualita- with 42 percent to the least developed and low- tive cross-section of the breadth and width of PPIAF’s er-income countries; portfolio of activities, with snapshots of specific hhGrant disbursements, the best proxy for the imple- outcomes and achievements to illustrate the impact mentation of our support, continued to grow over of our work as we help developing countries create the previous years’ levels, reaching $15.1 million; an enabling environment for private-sector participa- and tion in infrastructure. hhA stronger emphasis on timely delivery of support As per the guidance of its Program Council, PPIAF has led to a reduction of activities delayed by more is in a stronger position today to report on results than 12 months (these now account for just over from the changes implemented in the last three seven percent of the total portfolio). years. This fiscal year has seen the adoption of a However, the level of our commitments in support of new, improved version of our results framework and Sub-Saharan Africa (SSA) countries, while remaining the launch of a new website, including access to a strong at 42 percent of country-oriented grants, fell greatly expanded repository of documents and activ- short of the 50 percent targeted. Similarly, the share ity-linked reports and outputs specifically for donors. of commitments supporting fragile or conflict-affect- A greater emphasis on programmatic support has ed countries (10 percent) fell short of the target (17 meant targeting specific interventions and issues—an percent). These geographic and thematic priorities, approach we are taking further in the next five years maintained over the next business plan period, will with the introduction of strong thematic elements, be monitored closely to ensure better delivery. such as climate change or fragility, and a focus Also noticeable is the reinforcement of our field pres- on generating impact in 30 priority countries. The ence with the creation of a new Asia/Pacific regional strengthening of PPIAF’s results monitoring allows us office in Singapore in November, complementing our to better evidence the catalytic role played by PPIAF already existing offices in West Africa (Dakar), East in enabling infrastructure investments. More robust Africa (Nairobi), and Eastern Europe (Pristina). This financial-portfolio monitoring gives further assurance enables the Program Management Unit (PMU) to to our contributors about the high standard to which better engage both with our beneficiary government we hold our fiduciary obligations. counterparts and our World Bank country offices on While FY17 was marked by a consolidation—total the ground. new grants approved reached $18.5 million, a 31 Overall, PMU costs have decreased from $3.7 to $3.4 percent decrease over the previous year—the volume million in FY17, thanks to budget savings linked to of our grant approvals remains in line with the annu- the partial replacement of outgoing staff. In FY17, al average level observed before FY16. PPIAF reduced the number of its budgeted staff by two positions, thanks in particular to the position of ii | Public-Private Infrastructure Advisory Facility Regional Leader for West, Central & North Africa, As part of the newly-formed Infrastructure, PPPs, and based in Washington and filled by a secondee by the Guarantees group, PPIAF finds itself at the heart of Agence Française de Développement, at no cost to the newly-adopted Maximizing Finance for Develop- PPIAF. This effort will be maintained in the immediate ment (MFD) approach to crowd in the private sector. future in view of new funding constraints. We were also re-mapped within the World Bank We are fully aware that our business model, based Group to the Global Themes Vice Presidency—a on grants rather than reimbursable funding, re- move which puts us together with other corporate quires constant support and replenishment by our priority dimensions such as climate change, fragility, donors, who in turn must have comfort that their gender, and knowledge. This strengthens our ability money is being put to good use by PPIAF, thereby to implement many of our grants. Looking forward leveraging and optimizing what they could achieve to the next five-year strategy period, I am confident on their own. This is the challenge we must contin- that PPIAF, with the support of our donors and the uously meet—demonstrating long-term impact on dedication of its team, will continue to ensure quality the ground to secure the continuous support of our implementation and transformational impact of donors. activities that make a difference in the lives of the people in the countries where we operate. The pages that follow provide more information on the technical assistance we have provided in FY17, as well as an expanded focus on the last three-year strategy period. We also illustrate successful activi- ties and partnerships and status updates of activities funded through PPIAF’s various trust funds. François Bergere Annual Report 2017 | iii DONOR PARTNERS SWITZERLAND’S SECO Switzerland’s State Secretariat for Economic Affairs As such, infrastructure is one of the core themes (SECO) has long been one of the World Bank Group’s of SECO’s development strategy, accounting for key donor partners in addressing developmental chal- about 25 percent of its developmental assistance. lenges across the globe. Examples of this cooperation Infrastructure is essential for stimulating economic include programs in financial sector reform, urban development and reducing poverty: basic services, resilience, corporate governance, and improving the such as water, sanitation, power, waste manage- investment climate. It has also participated in PPIAF’s ment, and transportation must be available if people work since its inception, helping to promote the and job-providing businesses are to thrive. But infra- development of reliable, affordable infrastructure in structure is costly to build and maintain, especially in emerging markets and developing countries. the face of challenges such as urbanization, climate SECO’s overall mandate is to promote sustainable, change, population growth, and conflict. broad-based and inclusive growth in its partner coun- PPIAF’s work in infrastructure is important for SECO’s tries. Many of its programs are related to the private overall portfolio on three levels: promoting invest- sector, which it sees as a key driver for economic ment, improving governance, and encouraging growth. This strategy fits in well with the World reforms that support economic growth and social de- Bank Group’s new MFD approach, which purports velopment in a climate-friendly way. This gives part- to crowd in the private sector to reach the 2030 ner countries access to advice, training and expertise Sustainable Development Goals. necessary for governments to address these chal- lenges in both low- and middle-income countries, enabling them to attract much-needed investment. iv | Public-Private Infrastructure Advisory Facility SECO’s position among PPIAF donors is unique in bian development bank, IFC, and the United States that it currently contributes to four of our six ac- Agency for International Development (USAID) to tive trust funds—the Multi-Donor Trust Fund, the deliver a program under the World Bank’s City Cred- Sub-National Technical Assistance Program, the Cli- itworthiness Initiative, which SNTA supports along mate Change Trust Fund for Infrastructure, and the with the Rockefeller Foundation. dedicated SECO-Middle Income Trust Fund. Altogeth- These are some of the key reasons SECO, and other er, SECO has contributed a total of $48 million since donors, are in PPIAF. Moving ahead, SECO looks PPIAF’s inception. forward to its ongoing work with PPIAF to tighten, Dagmar Vogel, Head of Infrastructure Financing at and ultimately close, the infrastructure financing gap SECO, sees great value in its partnership with PPIAF in emerging markets and developing countries. for advancing SECO’s objectives. “PPIAF helps part- ner countries improve their infrastructure financing WE THANK OUR DONOR PARTNERS strategies, whether public or private,” she said. “It FOR THEIR SUPPORT also helps governments create proper regulatory frameworks and more efficient institutions to achieve their developmental goals.” Another facet of PPIAF that appeals to SECO is that it effectively complements other initiatives by filling in gaps that other stakeholders may not have the capacity to fully address. For example, it pinpoints regulatory weaknesses and draws on global best practices to address them. It uses regional approach- es to transfer knowledge, which encourages South- South cooperation. It also creates a platform that enables various stakeholders, including government, Wichtiger HINWEIS ! Innerhalb der Schutzzone (hellblauer Rahmen) darf kein anderes Element platziert werden! the private sector, civil society, and communities, Ebenso darf der Abstand zu Format- resp. Papierrand die Schutzzone nicht verletzen! Hellblauen Rahmen der Schutzzone nie drucken! to coordinate more efficiently. This leads to better Siehe auch Handbuch „Corporate Design der Schweizerischen Bundesverwaltung“ Kapitel „Grundlagen“, 1.5 / Schutzzone management of infrastructure project development www. cdbund.admin.ch by government and hence more financing options, including from both public and private sources. A good example of fruitful collaboration between PPIAF and SECO is the Sub-National Technical Assis- tance program (SNTA), which was launched in 2007 together with the International Finance Corporation (IFC), the World Bank, and the United Kingdom’s De- partment for International Development (DFID). The program is unique in its global reach, targeting both middle- and low-income countries, and its emphasis on developing a sustainable, market-based approach for infrastructure financing. Since its inception, SNTA Owned and directed by its donors, PPIAF is governed by a has provided support of approximately $40 million Program Council composed of its donors and supported by for technical assistance activities in developing coun- an independent Technical Advisory Panel. It is managed by tries, facilitating over $900 million in sub-national the World Bank through a Program Management Unit. transactions. The Program Council meets annually to review PPIAF’s stra- SNTA activities are aligned with other donor initia- tegic direction, achievements, and financing requirements tives in the field, enabling it to draw from a rich and is responsible for defining our policies and strategies, body of knowledge and experience. For example, in approving the annual work program and financial plan, Colombia, SECO partnered with Findeter, a Colom- and reviewing performance through ex-post evaluations by the Technical Advisory Panel. Annual Report 2017 | v THE CRITICAL ROLE OF PPIAF WHAT WE DO PPIAF’S SUPPORT IN THE PPP PROJECT CYCLE ENABLING CAPACITY PIPELINE ENVIRONMENT BUILDING ASSESSMENT UPSTREAM PROJECT INFRASTRUCTURE TRANSACTION STRUCTURING & MANAGEMENT DESIGN/BID FEASIBILITY DOWNSTREAM PPIAF is the only global facility dedicated to strength- opment financial institution present in over 100 ening the policy, legal, and institutional underpin- countries—as well as links to the major bilateral nings of private-sector investment in infrastructure. development agencies, allow it to span a wide range We call this the “critical upstream.” Often govern- of engagements and apply unique insights to its ments lack the necessary policies, laws, regulations, activities. institutions, and capacity needed to encourage PPIAF promotes informed decision-making by gov- private investment for the benefit of the public and ernments and stakeholders. We focus on both the private sectors and the general population. PPIAF quantity and quality of private participation, putting was created to address this gap. emphasis on whether it provides value-for-money In developing countries, increased private investment and sustainable services for all segments of the pop- is mainly limited by public-sector shortcomings and ulation, particularly the poorest ones. challenges in providing efficient and competitive Not all PPIAF support leads to private participation markets. PPIAF has 17 years of experience in select- in infrastructure—sometimes we recommend public ing, designing, and supporting activities that have procurement or financing as the optimal solution for resulted in significant leverage. Its global reach and improving services. partnership with the World Bank—a global devel- 2 | Public-Private Infrastructure Advisory Facility WHY INSTITUTIONS MATTER Institutions provide the rules of the game that inviting investment climate that attracts more invest- structure human interactions in societies. Good ment. When the government counterparty is knowl- institutions are arguably the main reason why some edgeable, has a clear strategy, and operates within a countries are rich and others poor. Good gover- solid regulatory framework, investors are more likely nance, strong rule of law, contract enforcement, to invest. These realities are not just anecdotal: the and property rights protection mean less uncertainty, academic community has shown empirically that lower transaction and information costs, and more stable rule of law and high-quality bureaucracies investment. In short, infrastructure cannot be sepa- attract more private investment in infrastructure. The rated from the quality of the institutions or broader presence of good institutions also enables a greater governing structures. impact of infrastructure investment on econom- Infrastructure investments characterized by large ic growth. Quality institutions promote inclusive sunk costs, low mobility of assets, and site spec- infrastructure development that reduces poverty by ificity face the risk of opportunistic behavior by boosting economic activity, creating jobs, reducing governments. For this reason, investors scrutinize production and transportation costs, expanding pro- the effectiveness of the legal and regulatory institu- duction capacity, connecting markets, and improving tions as part of the due diligence process. Investors, access to key facilities such as health, education, and understandably, want credible and enforceable “rules other basic services. of the game.” Good institutions contribute to an For PPIAF, “investing in the upstream” means deploying technical advice and resources to build con- sensus and knowledge in areas such as: hh Policy, legal, and regulatory reforms; hh Strategy development; hh Capital investment program and finance planning; hh Robust decision-making and operating procedures; hh Development, selection, and screening for project pipelines with private-sector participation; hh Strengthening oversight institutions and counterparties; hh Operational guidance and response capacity on unsolicited proposals; hh Improving the viability of service providers, including state-owned enterprises; hh Diagnosing and rating the credit of sub-national entities; hh Increasing the capacity of implementation agencies (national and local); and hh Supporting financial intermediaries of sub-national entities. Annual Report 2017 | 3 ADDRESSING GLOBAL CHALLENGES High costs, technical complexity, involvement of multiple stakeholders, and the need for experi- enced, rock-solid management are only some of the broader obstacles facing infrastructure devel- opment. Other trends, such as climate change, urbanization, and post-conflict fragility present new challenges that PPIAF is prepared to address. CLIMATE URBANIZATION The cost to developing countries to adapt Infrastructure capital requirements in urban to climate change is estimated at $70-100 areas over the next 15 years are estimated billion annually at $50 trillion The world’s existing stock of infrastructure Cities are important engines of economic accounts for more than 60 percent of global growth but are vulnerable to social and environ- greenhouse gas emissions. Nearly all projected mental perils. These will only increase because emissions growth is expected to come from of rapid urbanization: Today, 50 percent of the developing countries where rapid urbanization, global population lives in urban areas; by 2050, higher growth, and structural changes are un- almost three-quarters will. derway. Over the next 35 years, the urban population of More frequent catastrophic weather events, Africa is likely to triple; that of Asia is expected such as droughts, flooding, and storms will put to increase by 61 percent. More megacities— new and existing infrastructure assets at risk, with populations of more than 10 million—are particularly in developing countries. Damage expected to emerge in Africa, Asia, and Latin estimates are as high as $150 billion per year. America. Furthermore, in the next two decades, about 290 emerging cities—with populations Furthermore, the cost to developing countries between one and 10 million—will account for a of adapting to climate change is estimated at quarter of global income growth and a third of between $70–100 billion per year. It is expected energy-related emissions growth. that the infrastructure sector, particularly trans- port, will bear the largest share of these future As urban populations grow, infrastructure cap- climate adaptation costs. ital requirements will strain local governments and sub-national service providers where capac- Without further action to curb climate change, ity and resources are weak. The type of invest- 100 million more people will be at risk of being ments needed to develop sustainable urban pushed into poverty by 2030. areas—such as transportation infrastructure, water and waste management systems, and renewable energy—are complex and carry high upfront costs. This puts them out of reach for See Djibouti story on page 43. many small towns and emerging cities. 4 | Public-Private Infrastructure Advisory Facility WHAT IS SUSTAINABLE INFRASTRUCTURE? In short, it is infrastructure that is planned, de- signed, constructed, and operated to be economi- cally, socially, and environmentally sustainable and resilient to changes in climate over the long term. Economically sustainable infrastructure provides FRAGILITY jobs and helps boost GDP. It does not burden governments with unpayable debt or users with painfully high charges. It also seeks to build the Fragile and conflict-affected states capabilities of local suppliers and developers. are home to about 18 percent of the Socially sustainable infrastructure is inclusive and world’s population living with extreme respects human rights; it is designed to meet the poverty, economic disintegration, soci- needs of the poor by increasing access, supporting etal upheaval, and human tragedy poverty reduction, and reducing vulnerability to cli- mate change. For example, distributed renewable Infrastructure development in fragile and power in previously unelectrified rural areas can conflict-affected states poses an arduous increase household income and improve gender challenge. In many cases, key economic equality by reducing time spent on household assets have been destroyed or are in the chores. control of hostile groups. Interventions in failed situations are difficult to implement Environmentally sustainable infrastructure miti- and may unwittingly trigger further con- gates carbon emissions during construction and flict. Citizens live in extreme poverty and operation and contributes to the transition to a have few employment opportunities to lower-carbon economy, for example through high help them escape it. Consequently, fragile energy-efficiency standards. It also addresses local countries develop more slowly and have environmental challenges, especially around water greater needs. provision and air quality. Climate resilient infrastructure endures the impacts By 2030, poverty will be increasingly of climate-related events such as flooding, sea concentrated in fragile states—even in a level rise, and increased extreme weather events. best-case scenario, they will account for an What is Resilience? The capacity of economic, estimated 50 percent of the world’s poor. social, and environmental systems to cope with a Fragility can also be found in higher-capac- hazardous event or trend or disturbance, respond- ity countries, as in the MENA region, or at ing or reorganizing in ways that maintain their es- sub-national levels as seen in northeast- sential function, identity, and structure, while also ern Nigeria. Fragile countries will also be maintaining the capacity for adaptation, learning, affected by urbanization—60 percent of and transformation. their populations will live in cities by 2030. What is “Climate-Smart” Infrastructure? Infra- structure that is low carbon as well as resilient is See Kosovo story on page 42. considered climate-smart. Annual Report 2017 | 5 17 YEARS OF IMPACT $17.1 billion leveraged 276 institutions strengthened 1828 140 policies, laws & activities regulations adopted $902 million raised by sub-national entities 6 | Public-Private Infrastructure Advisory Facility 84 sub-national entities 17,674 officials credit rated trained +1 million visits to PPIAF-funded websites in FY17 PPPIRC = 914,594 | PPP Lab = 100,369 3 out of 4 ongoing activities on track to achieve intended outcomes Annual Report 2017 | 7 17 YEARS OF HELPING 1999 2000 2000 2001 BIRTH OF PPIAF WATER SUPPLY MILLENIUM ELECTRICITY IN & SANITATION IN DEVELOPMENT NICARAGUA KOSOVO GOALS ADOPTED PPIAF delivers the 2001 In the aftermath Eight international comprehensive study of the war, PPIAF development goals “Nicaragua: Sustainable provides funding to for the year 2015 are Off-Grid Electricity support private-sector established following Service Delivery MONTERREY participation in water the Millennium Summit Mechanisms,” which supply in the Gjakovë- of the United Nations plays an important role in CONSENSUS ON Rahovec region,where and following the identifying problems and FINANCING FOR proposing initial solutions post-war outbreaks of adoption of the United DEVELOPMENT water-borne illnesses Nations Millennium to the many challenges and service interruptions Declaration. All 191 of providing electricity Aims to address the cause concern. This United Nations member service in rural areas. challenges of financing for development around support complements the states at that time, and the world, particularly Kosovo Emergency Water at least 22 international in developing countries. Supply and Sanitation organizations, commit to 2003 The goal is to eradicate Project, funded by the help achieve these goals. poverty, achieve World Bank and Finland. 2002 sustained economic growth, and promote AFGHANISTAN sustainable development as we advance to a fully TELECOMS inclusive and equitable WATER SUPPLY In the aftermath global economic system. & SANITATION IN of its conflict in KOSOVO 2002, Afghanistan recognizes that strong 2001 2002 The Gjakovë and telecommunications Rahovec Water Supply would be critical to Management Contract rebuilding the country. is signed with private Developing the sector WATER SUPPLY operator Gelsenwasser becomes a high priority. VIETNAM WATER AG to manage the water & SANITATION IN The country takes early utility in Gjakovë. The steps to promote private KOSOVO SECTOR SUPPORT contract (financed by entry, focusing on PPIAF funds a broader PPIAF provides support to the World Bank) goes getting the policy and analysis of the Lim and Minh Duc, two into effect in January regulatory framework institutional framework small towns in Vietnam for an initial period of right. PPIAF supports and the organization that lacked access to up to three years. The these efforts by helping of water services in the piped water to help them management contract in the development of Gjakovë sub-region, develop a design-build- is performance based, a regulatory framework as well as drafting of lease (DBL) model to with a $1 million fixed and improving the terms of reference attract private operators fee and a performance capacity of the and preparation of to manage their water bonus based on the Telecommunications bidding documents for a systems. achievement of selected Regulatory Board. management contract. performance targets. 8 | Public-Private Infrastructure Advisory Facility GOVERNMENTS FACE 2004 2005 2006 2006 WATER SUPPLY AFGHANISTAN VIETNAM WATER ELECTRICITY IN & SANITATION IN TELECOMS SECTOR SUPPORT NICARAGUA KOSOVO The Telecommunications Contracts are Through the World A consolidated water Law, drafted with competitively bid, water Bank’s Off-Grid Rural utility, Hidrosistemi PPIAF support, is systems are installed, Electrification project, Radoniqi, is set up to passed in 2005. The and water delivery to photovoltaic battery supply the towns of law establishes an customers begins in charging stations are Gjakovë, Rahovec, independent regulatory early 2007. The bid financed to provide Lumbardhi, and authority—the received is for a 12-year energy to approximately 56 villages in the Afghanistan Telecom period, with a two-year 350 homes in several surrounding area. Over Regulatory Authority— design and build period, Miskito communities. the contract period, by merging the followed by a 10-year Telecommunications lease of the systems. 2006 the utility becomes financially viable and Regulatory Board The water companies records operating profits. and the State Radio and local authorities Connections increase by Inspection Department retain ownership of the 42%, consumers metered under the Ministry assets and construction of Communications. is financed by grants BODY OF expand from 10% to 86%, and consumers The new authority from Switzerland KNOWLEDGE ON billed expand from 20% assumes responsibility and Finland. Almost INFRASTRUCTURE to 100%. Service quality for telecommunications 90% of households in REGULATION also improves, particularly licensing as well as participating towns agree at the high altitudes of promoting sustainable to connect to the new PPIAF supports the Rahovec, which for the competition in the sector. water systems. development of this first time starts receiving online resource in a 24-hour supply of collaboration with the water year-round in all Public Utility Research parts of town. Center at the University of Florida. 2006 PPP PROGRAM SUPPORT IN KENYA 2007 SUPPORT FOR NEW TOLL ROAD IN SENEGAL The Government of Kenya, intending to use public- PPIAF helps establish the institutional and regulatory private partnerships (PPPs) more often as a mechanism framework for the transport sector in Senegal, for procuring and financing infrastructure projects and specifically supporting the National Agency for the services, asks for PPIAF assistance to find advisors for the Promotion of Investments and paving the way for the development of a strategic implementation framework Dakar–Diamniadio Toll Highway project. to create an environment conducive to private investment. GLOBAL CHALLENGES 2006 2007 LAUNCH OF PPPIRC PPP PROGRAM SUPPORT IN KENYA 2008 GLOBAL FINANCIAL PPIAF supports the PPIAF’s work results in a draft PPP policy framework CRISIS development of a website aiming to articulate the government’s commitment to provide information to PPPs, and provide a policy basis for the PPP legal on legal and contractual framework as well as a foundation for the PPP issues in PPPs. institutional framework. 2009 2009 SUPPORT FOR NEW PPP PROGRAM 2011 ELECTRICITY IN TOLL ROAD IN SUPPORT IN KENYA NICARAGUA SENEGAL The government Through the World The government implements detailed PPP Bank’s Off-Grid Rural of Senegal adopts guidelines. Electrification project, the action plan for electricity access is 2010 the development of extended to about 1,500 contractual arrangements homes in El Ayote and for the construction and 2,300 homes in El Cuá management of the Bocay. Dakar-Diamniadio toll SUPPORT FOR NEW highway. Subsequently, TOLL ROAD IN the government signs a 30-year concession for the construction and operation of the 20.4 SENEGAL The larger segment of the road, to be funded through a PPP 2012 PPP PROGRAM km Pikine-Diamniadio road segment of the toll arrangement, reaches SUPPORT IN KENYA highway with SENAC, financial close. This PPIAF provides technical owned by Eiffage Group. segment receives 41% of assistance to help funds ($93 million) from operationalize Kenya’s private sources. new PPP Unit, including how it coordinates with other government bodies 2010 2011 PPP PROGRAM RAILWAY REFORM TOOLKIT for project development, information dissemination, and capacity building. The activity also involves SUPPORT IN KENYA Development of an easy-to-use resource on the rail reviewing the PPP A PPP unit is set up at the industry as well as an experience-based set of best Legal Framework and Ministry of Finance. practices to aid in the planning and execution of railway commenting on the draft reforms. PPP Law. 2013 INSTITUTIONAL AND POLICY SUPPORT FOR DEVELOPING A PPP PROGRAM IN JORDAN Despite successful PPPs in specific sectors (e.g., Queen Alia International Airport), legal ambiguities stymied the government’s ability to use PPPs to develop more projects. Thus, it reaches out to PPIAF for support in setting up a PPP unit, reviewing legal and regulatory gaps, identifying a PPP pipeline and developing a PPP strategy. 2013 PPP PROGRAM SUPPORT IN KENYA 2014 2013 PPP PROGRAM LAUNCH OF PPIAF Kenya’s PPP Act is adopted by Parliament and published SUPPORT IN KENYA IMPACT STORIES in the Kenyan Gazette on January 25. PPIAF continues PPIAF continues to supporting capacity building for the PPP Unit. provide support to the Kenyan government to develop its PPP Program, strengthening its design 2014 2015 and implementation. INSTITUTIONAL AND POLICY SUPPORT FOR DEVELOPING A PPP PROGRAM IN JORDAN PPIAF support results in a prioritized list of possible PPP 2015 LAUNCH OF PPP INSTITUTIONAL AND POLICY SUPPORT FOR DEVELOPING A projects, including a leave-behind methodology that can SHORT STORIES PPP PROGRAM IN be used to evaluate future projects. A PPP law is passed COMPETITION JORDAN in November, and a PPP unit, with a model based on PPIAF recommendations, is established. The Cabinet passes PPP regulations. 2015 2016 2017 SET UP OF PPP ADOPTION OF PPP PROGRAM SUPPORT IN KENYA KNOWLEDGE LAB SUSTAINABLE PPIAF approves continued programmatic support An MDB initiative to DEVELOPMENT to national and local institutions making up the PPP compile and curate the Framework in Kenya to successfully bring projects to GOALS AND 2030 best knowledge on PPPs. market and manage public-side obligations in a way that AGENDA FOR attracts robust interest from the private sector. SUSTAINABLE DEVELOPMENT Annual Report 2017 | 11 10 YEARS OF SUB-NATIONAL TECHNICAL ASSISTANCE In the last decade, the Sub-National Technical As- municipal financial managers together to learn how sistance (SNTA) Program has provided $40 million municipalities can become creditworthy and gain in grant funding that helped sub-national entities access to private financing for infrastructure. Pio- (SNEs) around the world raise over $900 million in neered by the Urban Global Practice and developed financing for infrastructure projects. Established in in collaboration with SNTA, the program evolved to a 2007 with funding from DFID, IFC, SECO, and the standalone initiative implemented in partnership with World Bank, the SNTA Program builds the systems the Rockefeller Foundation. As a result, participat- and capacities of SNEs in developing countries to ing municipalities are now preparing to borrow on improve their access to market-based financing. commercial terms. SNTA launched a similar initiative (Current SNTA donors are the Agence française de with the Water Global Practice—Financing Universal développement (AFD), the Australian Agency for Access to Water Supply and Sanitation—which aims International Development, DFID, and SECO.) to facilitate access to financing for water utilities. SNTA’s flexible approach to addressing the many Given its experience, knowledge, history, and SNE constraints faced by SNEs and emphasis on a sus- niche, SNTA is well-placed to play a stronger, more tainable, market-based approach for infrastructure proactive role as a thought leader and ambassador in financing is unique in the development world. this space. It is well-positioned to share knowledge Two independent evaluations have shown that and insights on building the viability and creditwor- our work has helped many SNEs around the world thiness of sub-national entities. Sub-national issues achieve important outcomes such as better public have been raised in high-level summits such as the financial management, improved credit ratings, 2015 Financing for Development Conference in stronger institutional capacity and systems, and more Addis Ababa, the 21st Conference of the Parties, successful implementation of innovative debt financ- and the United Nations General Assembly’s adoption ing transactions. of the Sustainable Development Goals. Given the increasing importance of urban development, SNTA’s SNTA has also incubated successful programs such mission will remain relevant and in high demand for as the City Creditworthiness Initiative, which brought the foreseeable future. SUB-NATIONAL ENTITIES ELIGIBLE FOR SUPPORT Special-purpose government entities: Utilities, authorities, special districts, and state-owned enterprises with a primary focus on utilities delivering natural-monopoly infrastructure services. General purpose sub-national government entities (provinces, states, municipalities) with infrastructure service delivery responsibilities: Entities that mix general infrastructure service delivery responsibilities with sector- specific service delivery responsibilities and that cannot easily separate the revenues related to each set of responsibilities. Development finance institutions: Development banks and funds with a primary focus on infrastructure lending. 12 | Public-Private Infrastructure Advisory Facility EXAMPLES OF ACTIVITIES THAT LED TO IMPROVED ACCESS TO FINANCING SERGIPE, BRAZIL (2010) SNTA helped strengthen the creditworthiness of Companhia de Saneamento de Sergipe- DESO, the water company of the Northeastern State of Sergipe. It also provided support in making financial projections and preparing a credit memorandum for prospective lenders. In November 2010, IFC closed a seven-year loan to DESO for 18.9 million Brazilian reais (approximately $11 million) to implement investments for reducing water losses, for example by purchasing water meters. QUINTANA ROO, MEXICO (2010) The first transaction of its kind in Mexico helped raise $196 million to be invested in sub-national infrastructure. SNTA support included the structuring of debt transactions by a state financing facility, including assistance in debt restructuring, borrowing at better terms and tenor, and reducing financing costs. LIMA, PERU (2011) SNTA assisted eight regional and municipal entities by facilitating credit ratings, implementing financial assessments, training, supporting transaction preparation, and helping the central government monitor and evaluate the financial health of local authorities. Ultimately, the municipality of Lima signed two significant deals: a $70 million commercial bank loan with BBVA Banco Continental in 2010 (partially backed by a $32 million IFC guarantee), and a subsequent $120 million loan with BBVA and Scotiabank in 2013. The technical assistance also helped the regional government of Arequipa obtain a $10 million commercial bank loan in 2011 to finance a road rehabilitation project. IZMIR, TURKEY (2012) SNTA activity supported a pilot of potential borrowing transactions to finance priority infrastructure projects in selected municipalities. It also helped the central government strengthen its coordination mechanisms and policy framework for financing sustainable cities, which resulted in an IFC loan of €28 million to the IZSU General Directorate, the water and sewerage administration of the Izmir Metropolitan Municipality, to help finance its wastewater treatment program. DAKAR, SENEGAL (2015) SNTA helped the city with a financial management diagnostic and a public expenditure and financial accountability assessment. This assistance helped Dakar to obtain a 20-year loan from AFD for €10 million ($15.8 million at the time of the transaction) to support a public lighting program. Annual Report 2017 | 13 SOUTH AFRICA FEATURE STORY: SNTA SUPPORT LEADS TO INNOVATION Most SNEs in Southern Africa, including South Africa, project funded by the World Bank and AFD to sup- do not have sufficient financial management capacity port development of the power sector. EDM is also to effectively access finance for infrastructure services partnering with Brazilian companies to support the without such guarantees. The SNTA’s mission, there- development of solar thermal energy transmission in fore, is relevant and fully in-line with the country’s Mozambique. economic and government priorities. SNTA partnered with the Municipal Institute of Learn- Since 2009, SNTA has provided nearly $3 million ing (MILE) to train 40 public finance managers from in grant support for SNEs in South Africa and the the Southern Africa region in a revenue management Southern Africa region to enhance their creditwor- master class held in Durban. MILE has continued to thiness, improve the enabling environment, and deliver workshops on specific subjects in public finan- build their capacity. SNTA support has led to several cial management, for example, budget management. important accomplishments in the region. SNTA’s support for Tax Incremental Financing is en- SNTA supported credit assessments and recommen- abling the City of Johannesburg to respond in inno- dations for restructuring processes to improve the vative ways to finance infrastructure, with potential technical and financial performance of four entities replication elsewhere. in southern Africa. Two of these successfully accessed Source: Universalia. Independent Evaluation of the Public-Private financing and developed new, strategic partnerships. Infrastructure Advisory Facility’s Sub-National Technical Assistance Program: Annex II – Case Study – South Africa, April 2016. In 2012, the World Bank approved a $460 million credit to Zesco, Zambia’s state-owned power compa- ny, to improve and expand its network. Electricidade de Moçambique (EDM), a power company, was selected as one of the implementing agencies for a 14 | Public-Private Infrastructure Advisory Facility FEATURE STORY: SNTA KENYA A LONG-TERM TRANSFORMATIVE ENGAGEMENT Since 2008, the SNTA Program in Kenya has helped PDF aims to help communities access loans to build SNEs improve their financial management capacity, or maintain water infrastructure and deliver safe wa- access market-based financing, and enhance their ter to their residents. SNTA was able to broker deals own source revenues. In total, 47 SNEs and oth- for private-sector funding for 32 communities that er entities were supported by SNTA, including six received loans, with partial guarantees from USAID’s state-owned firms and one municipality (Nairobi). Development Credit Authority. SNTA grants of approximately $3 million supported SNTA’s work also included capital markets transaction activities in all Kenyan infrastructure sectors, as well support for the Kenya Roads Board and the Kenya as the housing sector. Wildlife Service, and bond issuance support for the For example, SNTA supported a debt finance review National Housing Corporation. The bond issue is still of the Kenya Airports Authority (KAA) to assess its pending. options for commercial financing. Shortly thereafter, An independent evaluation conducted in 2016 KAA obtained concessional loans from the AFD and showed that the financial management capacities the European Investment Bank totaling $186 million and creditworthiness of several SNEs increased and to build a new terminal. are being sustained, making SNTA support particular- Another success is the SNTA-funded Project Develop- ly relevant within the Kenyan context and SNE needs. ment Facility (PDF) for community-based water orga- nizations, developed in partnership with the Water Source: Universalia. Independent Evaluation of the Public-Private Infrastructure Advisory Facility’s Sub-National Technical Assistance and Sanitation Program, the Water Trust, K-Rep Bank Program: Annex I – Case Study – Kenya, April 2016. and the Global Partnership on Output-Based Aid. The Annual Report 2017 | 15 INDONESIA A FRAMEWORK FOR THE FUTURE BACKGROUND OUR ROLE Indonesia, the world’s fourth most populous nation, PPIAF has played an important role in this effort is home to more than 260 million people spread over by supporting initiatives to improve the legislative a vast archipelago. Infrastructure development is a and institutional framework for PPPs, as well as top priority for government to keep pace with the sector-specific assistance for energy PPPs. Overall country’s strong economic growth. Since 2000, GDP interventions totaled $5.4 million. per capita has quadrupled to $3,600 in 2016; today, it is the world’s 10th largest economy. ENABLING THE INSTITUTIONAL AND POLICY FRAMEWORK Disaster risk and preparedness also create demand for infrastructure. Being located on the Ring of Fire, PPIAF support from 2006–16 led to the following a seismically-active line snaking 40,000 kilometers results: around the Pacific Basin, puts much of the country at hhDevelopment of an infrastructure risk management risk of natural disasters. In recent years, earthquakes, framework to enable government to support proj- volcanoes, and tsunamis have wrought tremendous ects with guarantees and subsidies while managing damage to homes, buildings, and infrastructure, with consequent liabilities and fiscal risks; loss of life numbering in the tens of thousands. hhEstablishment of the PPP Unit by the Ministry of Government has been open to private-sector par- Finance to assist with PPP project structuring; ticipation in the sector to access financing, and has hhCreation of the Infrastructure Guarantee Fund worked closely with the World Bank Group to enable (IGF) as a single window to provide guarantees public-private partnerships for infrastructure proj- for government obligations, which greatly reduces ects. Between 1990 and 2016, private-sector invest- the risks in PPP contractual arrangements; the IGF ment in infrastructure totaled $38 billion, with 100 guarantee has been approved for 15 projects with total capital cost of $15 billion; projects reaching financial closure. The World Bank’s Benchmarking Public-Private Partnerships Procure- hhDevelopment of a Viability Gap Financing Tool that ment 2017 reports that Indonesia scored above the enables the use of government grants to improve average in East Asia Pacific countries in preparing, the financial viability of projects; and procuring, and managing PPP contracts. hhEstablishment of a Project Development Fund to assist in project preparation and delivery. 16 | Public-Private Infrastructure Advisory Facility FEATURE STORY: PPIAF SUPPORTING LOCAL ENERGY SOURCES In the energy sector, PPIAF supported the Ministry of ASSESSING Energy and Mineral Resources in 2006–08 to identify and address the barriers that had deterred private investment in geothermal power projects. In partic- IMPACT ular, this addressed the upstream risks associated Impact assessments are independent eval- with resource identification and development. The uations of PPIAF’s portfolio of activities in PPIAF-funded outputs included: a specific country where PPIAF’s assistance hhA geothermal development plan to increase totaled over $2 million since FY06. These confidence in government commitment, including assessments are impartial reviews led by tax incentives and a stimulating tariff regime to the Technical Advisory Panel with the improve project financial viability; purpose of examining the link between hhTariff pricing policies that clearly recognize the PPIAF’s support and (i) the capacity of higher costs and risks of geothermal development governments to improve the investment in comparison to other forms of energy, as well as climate for private participation through the benefits of cleaner, greener energy develop- the development, adoption, and imple- ment; and mentation of policies, regulations, and hhA set of recommendations for Indonesia to utilize programs; and (ii) the capacity of sub-na- its extensive database of resource assessments for tional entities to access market-based fi- a large number of geothermal prospects to better nancing to improve infrastructure services, inform potential developers of project risks and without sovereign guarantees. ways to mitigate them. Over this strategy period the Panel As a result, two geothermal electricity generation PPP conducted five country-level impact projects financed by private banks reached financial assessments—Indonesia, Malawi, Nigeria, close and are currently under construction: Medco Senegal, and Vietnam—where the results Sarulla (340 megawatts) and Muara Laboh (220 linked to PPIAF’s support over a 10-year megawatts). PPIAF-supported activities also led to period were assessed through interviews the creation of the Geothermal Development Fund in with government officials, private-sector 2012 (initially for $300 million) to finance upstream representatives, and implementing part- resource development by the public sector. ners, as well as a desk review of project Significantly, the first pilot project where government documentation. Please see the feature takes the risk for resource development has recently story on the following page for more in- been approved by the ministry. Exploration is pro- formation on the results captured by the ceeding and will be followed by procurement of a FY17 Senegal impact assessment. power-generation PPP when the resource develop- ment phase is completed in 2018. Annual Report 2017 | 17 SENEGAL A 16-YEAR PPIAF ENGAGEMENT With PPIAF’s support, Senegal’s PPP readiness is TRANSPORT above average in comparison to other African econ- Also as a follow-up to the Country Framework Re- omies. This is good news for the country’s 15-plus port, PPIAF helped establish the institutional and reg- million people—Senegal is one of West Africa’s fast- ulatory framework for the transport sector in 2007. est-growing economies and infrastructure will need The PPIAF grant supported technical assistance to the to keep pace with demand. National Agency for the Promotion of Investments to ENERGY consolidate the institutional framework and develop contractual arrangements for the Dakar–Diamniadio Following recommendations from the Country Toll Highway, the first toll road PPP in West Africa. Framework Report—a comprehensive study of the country’s infrastructure sector—the Senegalese WATER government initiated the Rural Electrification Pro- With the aim of reaching the Millennium Devel- gram in 2003 as a priority program through pri- opment Goals—halving the level of poverty and vately-operated concessions. In 2008, a PPIAF grant increasing access to sustainable water and sanita- financed a market survey and pre-feasibility study for tion services by 2015—the government engaged the Matam–Bakel–Kanel–Ranérou rural electrifica- in reforms with PPIAF support. In 2005, a reform tion concession. This helped the rural electrification was introduced to transfer the maintenance of rural agency consider different structuring options for the systems from the Department of Water Infrastructure transaction, leading to a review and update of the Maintenance to the private sector. To help implement financial model of the Senegalese electricity utility, the reforms, the Ministry of Hydraulics requested SENELEC, in 2012. technical assistance from PPIAF in 2007 to increase 18 | Public-Private Infrastructure Advisory Facility FEATURE STORY: PPIAF the reliability of water services in rural areas by LAYING THE FOUNDATION supporting small-scale operators in maintaining rural 2000 boreholes. In 2009, PPIAF supported two studies to assess the feasibility of alternative contractual and PPIAF initially supported a Country Frame- institutional PPP arrangements to ensure sustainable work Report on the country’s infrastructure sector development from 2011–25. sector. The study specifically examined the telecommunications, water and sanitation, RESULTS TO DATE energy, and transport sectors. The report Since 2000, Senegal has implemented 21 infra- clearly sets the tone of discussion for the structure projects leading to nearly $1.8 billion in following decade and contributed to the investments—45 percent in energy, 40 percent in results of the telecom reforms and the Da- transport, and the remainder in information and kar-Diamniadio toll road. communication technologies (ICT) and water. 2005 Between 2000 and 2016, PPIAF supported 18 activi- PPIAF helped measure the shortfall in cap- ties. As of June 2015, overall PPIAF support amount- ital investment required for supporting in- ed to $2.6 million, the more recent activities adding a frastructure development. This resulted in a further $1.4 million. rigorous analytical system being developed The rural electrification program has made an ongo- for estimating underfunded infrastructure ing contribution to rural electrification, although it needs and identifying how to meet them. did not result in a concession in the northern region as intended. For example, the methodology it intro- 2006–2007 duced was used to electrify 55 villages, with another PPIAF supported the development of a 70 villages in the pipeline. model for delegated contract manage- Following the adoption of the institutional and regu- ment based on the Beninese experience latory framework for the the Dakar–Diamniadio Toll and lessons learned in Sub-Saharan Africa, Highway, a concession contract was awarded in Sep- which was followed by a flurry of legislation tember 2009. The 30-year, $240 million concession updating the concession law. required the concessionaire to build, finance, oper- 2009 ate, and maintain 20.4 kilometers of roads between Pikine and Diamniadio and to operate and maintain PPIAF helped set up a strategic framework other road sections. The Dakar toll road was inaugu- for prioritizing infrastructure investments. rated in August 2013 and was the first greenfield toll The final report of the study included a road PPP in West Africa. An additional contract was detailed action plan, with an associated awarded in 2014 to extend the toll road to the new budget, for the development of transport airport. infrastructure in secondary cities. In the rural water sector, a concession was allocated 2013 to la Société d’exploitation d’ouvrages hydrauliques At the government’s request, PPIAF pro- in 2014. The service in the contract zone in central vided funding for PPP training for senior Senegal serving 500,000 inhabitants is operating government officials to enhance PPP successfully: the production of drinking water has awareness and strengthen their capacity in almost tripled, unit prices have fallen, and the billing the management of PPP contracts with a recovery rate has risen from about 25 to 80 percent. special emphasis on build-operate-transfer arrangements. Annual Report 2017 | 19 OUR KNOWLEDGE SYSTEM Lessons are distilled and PPIAF technical compiled as knowledge assistance activities products for global provide lessons dissemination Lessons captured help inform and improve future PPIAF technical activities & global projects PPIAF works with various strategic parners to develop knowledge solutions for wider infrastructure problems PPIAF’s emphasis on capturing and using knowledge and strengthen sub-national creditworthiness in is central to its role as a center of excellence. developing countries. PPIAF systematically and routinely distills lessons learned from its technical assistance activities. LOCAL LESSONS = GLOBAL We also play a key role in capturing the expert KNOWLEDGE knowedge of strategic partners, such as multilateral In our 17 years of operation, PPIAF has participated development banks and the private sector. PPIAF’s in almost 2,000 projects. We systematically capture knowledge products are invaluable to clients, the the lessons generated from those technical assistance development community, and investors who seek to activities to create knowledge goods that both help increase private-sector participation in infrastructure inform future PPIAF activities and create a reposito- 20 | Public-Private Infrastructure Advisory Facility ry. This, in turn, plays a vital role in helping clients edge Lab, the PPP Reference Guide, and the PPP address developmental challenges. Certification Program. The cumulative knowledge that PPIAF has captured is PPIAF’s support is not confined to virtual platforms then made available on a variety of online platforms alone. As a leader in this field, PPIAF continues to to reach the widest audience possible. These plat- fund public-private infrastructure investment fora forms are accessible to all our stakeholders, even in and communities of practices to offer stakeholders countries where security prevents physical access, at opportunities to network and share information. a scale and reach that cannot be achieved by single Such fora can be effectively used by countries to activities. This includes websites such as the PPP engage local as well as international private-sector Knowledge Lab and the Public-Private Partnership in players on a shared agenda. Infrastructure Resource Center (PPPIRC). Deploying this knowledge through online platforms offers a THE KNOWLEDGE TO IMPROVE way to scale up rigorous screening of project pipe- ENABLING ENVIRONMENTS lines through peer reviews and market reactions. One of the limitations in evaluating the effectiveness In the same way, capacity-building programs deliv- of upstream initiatives and understanding how they ered through online global platforms, such as Cour- impact downstream infrastructure investment is the sera’s massive open online courses, or partnerships lack of information about the different attributes with training institutions such as the Public Utility making up the enabling environment for PPPs and Research Center and APMG (for the PPP Certification sub-national financing. Program), ensure that access to knowledge is cost Thus, we supported the development of products effective. In this respect, PPIAF contributes to innova- that specifically addressed this need by funding the tive and strategic developments or specific improve- Economist Intelligence Unit’s 2015 Infrascope for ments for these platforms. Africa and the Benchmarking PPP Procurement study. PPIAF is also funding The State of PPPs in Fragile BUILDING PARTNERSHIPS and Conflict States, a study that aims to identify the In addition to capturing knowledge through its own challenges to the development of more sustainable activities, PPIAF develops knowledge with various and robust approaches for PPPs in fragile countries. It strategic partners such as educational institutions, has also supported the development of the Guidance development institutions, and PPP knowledge centers on PPP Contractual Provisions to assist developing to help tackle wider infrastructure problems. An countries to implement PPP projects in a consistent example of this type of collaboration is our partner- and efficient manner through the development of ship with the Public Utility Research Center at the standardized contractual provisions. University of Florida, which resulted in an update to These products represent examples of the support the Body of Knowledge for Infrastructure Regulation that PPIAF has continuously provided in developing and the development of tailored training solutions knowledge about enabling environments that is crit- targeted primarily to fragile and conflict-affected ical for attracting the private sector and contributing states. Our close collaboration with the World Bank to well-structured projects. Group and other multilateral development institu- tions resulted in the development of the PPP Knowl- Annual Report 2017 | 21 KEY KNOWLEDGE PRODUCTS FY15–FY17 APMG PPP CERTIFICATION PROGRAM PPIAF has been a key player in the development of a multilateral development bank (MDB) collaboration for the creation of the APMG PPP Certification Program, which consists of a standard certification process to enhance basic understanding of PPPs in low- and middle-income countries. PPIAF funded the development of the body of knowledge and curriculum development process and turned knowledge into action by supporting training in key client countries, such as Kenya, Rwanda, and Uganda. This innovative, collaborative approach to setting standards for PPP professionals is expected to result in better designed PPP projects that better meet the needs of users. This is the first time MDBs have come together to support a global curriculum on PPPs, which is accessible to anyone with an Internet connection—with parts offered for free. The PPP Certification Program is an innovation of the Asian Development Bank, the European Bank for Reconstruction and Development, the Inter-American Development Bank (IADB), the Islamic Development Bank (ISDB), the Multilateral Investment Fund, and the World Bank Group. It is produced and administered by APMG International. MOBILIZING ISLAMIC FINANCE FOR INFRASTRUCTURE PPPS Islamic finance has been growing rapidly across the globe. The global Islamic finance market currently stands at around $1.9 trillion. However, Islamic finance is still a relatively untapped market for PPP financing, which makes Mobilizing Islamic Finance for Infrastructure PPPs—a joint publication of the World Bank Group and ISDB, with the support of PPIAF—an important resource for governments, private sponsors, lenders, and academics. This initiative represents the first systematic effort to capture and share knowledge on applying Islamic finance to infrastructure PPP projects. It fills a critical information gap that exists among many development practitioners, and can help developing countries explore Islamic finance as an resource to meet growing infrastructure needs. The report aims to provide information on how Islamic finance has been used in infrastructure projects through PPPs, the structural challenges and solutions, and what can be done to deepen and maximize its use for this purpose. POLICY GUIDELINES FOR MANAGING UNSOLICITED PROPOSALS When it comes to infrastructure projects, “unsolicited proposals” (USPs) represent an alternative to the traditional project initiation method. But USPs can lead to many challenges, including diverting public resources away from the strategic plans of the government, providing poor value for money, and leading to patronage and lack of transparency, particularly in developing countries. To ensure governments can mobilize the strengths of the private sector while protecting the public interest, USPs, when accepted, POLICY GUIDELINES FOR MANAGING UNSOLICITED PROPOSALS should be managed and used with caution as an exception to the public procurement IN INFRASTRUCTURE PROJECTS method. The World Bank Group, with the support of PPIAF, launched an effort in 2015 VOLUME I MAIN FINDINGS & RECOMMENDATIONS to provide guidance for governments considering the development of a policy for USPs in infrastructure projects. This tool, Policy Guidelines for Managing Unsolicited Proposals in Infrastructure Projects, is a three-document series that includes the Main Findings, the Policy Guidelines for Managing USPs, and the Review of Experiences—an in-depth review of global best practices with USP policies and projects. 22 | Public-Private Infrastructure Advisory Facility BUILDING PPP CAPACITY Good institutions and regulatory frameworks are hhIn Kenya, which enacted a PPP law in 2013 and an important component of a robust environment has a functional PPP Unit to champion the govern- for developing infrastructure. But institutions and ment’s infrastructure development agenda, PPIAF legislation alone are not enough. Governments need is strengthening the institutions that form part of critical skills if they are to develop roadmaps for infra- the PPP mechanism. This includes participation in structure development, identify and assess potential the AMPG PPP Certification Program, post-con- tract monitoring, and even a PPP simulation game. projects, determine optimal ways to finance them, These interventions focus on skills development and work with the many stakeholders—particularly and the building-up of physical and technical sup- the private sector—involved in executing infrastruc- port resources, which enhance work efficiency and ture projects. Without these skills, even promising address capacity constraints. infrastructure projects may stall or never get off the hhIn Uganda, PPIAF is supporting the government in ground. conducting a PPP diagnostic study that will guide In East Africa, PPIAF is actively engaged with govern- ongoing and future infrastructure development ments to strengthen this critically-needed capacity, work. PPIAF is also contributing to an assessment often in tandem with work on developing project framework to select PPP projects. pipelines: hhThe government of Rwanda has developed hhPPIAF is supporting the government of Lesotho policies and procedures for using PPPs to attract in the development of the PPP framework and private-sector investment to build infrastructure. building much-needed capacity for PPP imple- PPIAF’s work is supporting the development of sec- mentation. In June 2017, officials from various tor strategies, fiscal risk management, and pipeline ministries, including Finance, Health, Works, assessment and prioritization. A training program Development Planning, and Energy, participated in for key decision makers and technical staff will the AMPG PPP Certification Program, an initiative provide the skills needed to roll out PPP projects. by MDBs that prepares candidates for the Certified These innovative initiatives are succeeding in setting Public-Private Partnership Professional credential standards and using knowledge to create a new class exam. The training provided valuable information of PPP professionals in East Africa and throughout and skills at a critical time. The Contracts Manager the globe. With ongoing support from PPIAF, MDBs, at the Ministry of Finance, Mathabo Mpale, said: and other partners, these efforts will lead to infra- “The training was very useful and well-timed, as it comes at a time that we are finalizing the PPP structure projects that meet the needs of people in Policy and also reviewing the draft PPP Law.” developing countries and emerging economies. Annual Report 2017 | 23 REVIEW OF 2017 & THE STRATEGY PERIOD HIGHLIGHTS OF FY17 $18.2 MILLION $0.5 IN GRANT APPROVALS LEVERAGED FOR EVERY $1 >60 10% FOR FRAGILE & NEW ACTIVITIES CONFLICT-AFFECTED STATES PPIAF approved $18.2 million for 60 new technical Disbursements in activities increased to $15.1 million, assistance and knowledge activities in FY17. For ev- bettering last year’s total of $14.5 million. As a pro- ery dollar approved by PPIAF, 50 cents was leveraged portion of approvals, FY17 disbursements stand at 86 from other development partners. Compared to last percent of approvals versus 53 percent in FY16. This year, the average size of current activities remained ratio is significantly improved, but one that reflects stable at $385,000, yet the total number of live activ- the natural time lag between higher approvals from ities increased slightly, from 116 to 131. Despite the last year, commitments, and corresponding disburse- increase in size of programmatic, multi-annual activ- ments during this year. ities, the average age of our portfolio has remained stable at around 14 months. APPROVED WORK PROGRAM VS ACTUALS Approved Work Program Actual Mobilization Achievement Type of Intervention Base Case ($million) (%) ($million) Technical Assistance 22 14.7 67 • Programmatic 11 4.9 45 • Coverage 11 9.8 89 Knowledge 3 3.4 114 Total 25 18.2 73 26 | Public-Private Infrastructure Advisory Facility PPIAF aims to achieve greatest impact by focusing providing 43 percent to LICs and 10.5 percent to predominantly in low-income, low-capacity and frag- fragile countries. Funding provided from PPIAF’s core ile countries. In pursuit of this aim, in FY17, PPIAF Multi-Donor Trust Fund (MDTF) tells a different story: sought to deploy 50 percent of its geographically 56 percent of funds approved from the MDTF will tagged resources in low-income countries (LICs) and support technical assistance in LICs and 21 percent 17 percent in fragile countries. When considering will support activities in fragile states. all funding provided, PPIAF fell short of this aim— PPIAF SUPPORT TO FRAGILE COUNTRIES IN FY17* Activity Description WEST BANK AND GAZA: Non- The objective of this support for Non-Revenue Water (NRW) Performance Based Contracts in West Revenue Water Performance- Bank and Gaza is to improve the capacity of the municipal water department of Hebron to manage Based Contract its non-revenue water, implement a pilot performance-based contract for NRW management (if found feasible), and use this transaction to teach Palestinian water-sector institutions about PPPs. This will enable it to play a role in the overall water sector reform program. Furthermore, the support will strengthen the capacity of the Palestinian Water Authority, leading private-sector participation (PSP) in the water sector. AFGHANISTAN: Supporting the The objective of this activity is to further support the government in increasing its capacity to Development of a PPP Program: identify and develop a PPP project pipeline that can support its national development strategy. Phase II Phase II will build on the pipeline work initiated under Phase I, with a specific focus on energy (particularly renewables), solid waste, and transport/logistics sectors (based on the National Infrastructure Plan). It will also include a PPP country readiness diagnostic, developing a business plan and budget for the new institution established within the Ministry of Finance in charge of PPPs. It will also help prepare guidelines to implement the PPP Law. * A third activity in a fragile country, Timor-Leste, establishing a Project Management Unit for the management of the Tibar Bay Port Concession, was approved for $377,025 in FY17Q1. However, the activity was cancelled due to an increase in implementation risk. This recipient-executed grant was supposed to be implemented alongside a World Bank project that was cancelled as well. Thus, the ability for the Bank to oversee the PPIAF activity directly in the field was also curtailed. DAC1 DAC3 PPIAF TECHNICAL 34% 34% ASSISTANCE BY DEVELOPMENT ASSISTANCE COMMITTEE (DAC) LEVEL DAC 2 DAC 4 9% 23% Annual Report 2017 | 27 SUB-SAHARAN AFRICA RECEIVES GREATEST SHARE OF PPIAF RESOURCES In line with the decrease in volume of PPIAF activi- of $10.7 million in 2016). This represents 42 percent ties to closer to historically normal levels, support to of country-specific grants approved from all PPIAF Sub-Saharan Africa—our priority region—returned funding, by far the largest share. to $6.5 million in FY17 (after an unprecedented high AMOUNT APPROVED FOR SSA FY10-FY17 (INCLUDING SNTA) 12 10 8 $ millions 6 4 2 0 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 28 | Public-Private Infrastructure Advisory Facility Driven by a relative increase in the volume of PPIAF’s (EAP), Europe and Central Asia (ECA), and Middle non-core funds, specifically SECO’s priority middle in- East and North Africa (MENA), saw their allocations come fund and SNTA, regions with a higher number of funding grow by five, one, and six percent respec- of middle-income countries, such as East Asia Pacific tively between FY16 and FY17. Trust Fund 2015 % of total 2016 % of total 2017 % of total MDTFII $9,570,494 56% $18,632,409 68% $10,124,254 56% SNTA $3,783,814 22% $3,900,550 14% $3,286,639 18% SECO MIC $1,692,982 10% $1,330,000 5% $2,152,950 12% Japan $749,950 4% $0 0% $0 0% NOR/NL/SECO CC $658,650 4% $2,399,157 9% $1,305,000 7% USAID Water $497,100 3% $1,022,150 4% $1,301,809 7% Total $16,952,990 100% $27,284,266 100% $18,170,652 100% TECHNICAL ASSISTANCE BY REGION, FY15–17 USAID WATER 25 SNTA SECO MIC 200 NOR/NL/SECO CC MDTFII $ millions 15 Japan 10 5 0 SSA EAP SA LAC MENA ECA GROWTH IN NON-CORE FUNDS PUSHES MORE RESOURCES TO MIDDLE- INCOME COUNTRIES (MICs) Annual Report 2017 | 29 HIGHLIGHTS OF SUPPORT TO THE REGIONS SUB-SAHARAN AFRICA FY17 FY15–17 FUNDS DEPLOYED $6.5 million $23.8 million CO-FUNDING LEVERAGED $3.6 million $10.3 million NEW ACTIVITIES APPROVED 21 63 ACTIVITIES COMPLETED 16 65 30 | Public-Private Infrastructure Advisory Facility It is no secret that infrastructure investment needs in Capacity in the UEMOA Region, implemented in SSA are high. The continent has an annual infrastruc- partnership with AFD and the World Bank and lever- ture financing gap of roughly $100 billion, but often aging over $2 million in co-funding, has helped build untold is the great market opportunity for infrastruc- the necessary institutional architecture and capacity ture investors. SSA boasts four of the world’s ten at both the regional and member state level so that fastest growing economies, has 52 cities with pop- key infrastructure PPPs can be delivered over the next ulations greater than one million (with urbanization decade. on the rise), and abundant natural resources. Proper Support from SNTA focused on financing local urban policies and capacity to implement and oversee development projects in South Africa, strengthening complicated PPPs are the key challenges preventing financial management and creditworthiness of utili- successful matches between infrastructure investors ties in Kenya, Central African Republic, and Malawi, and projects. For these reasons, over FY15–17 most and helping key municipalities in Senegal strengthen PPIAF support worked to build institutional capacity their financial management practices so they are within client counterparts to render them capable of better positioned to provide essential urban services screening, prioritizing, and implementing infrastruc- to low-income areas. ture projects with private investment. Much of this important capacity and institutional strengthening PPIAF’s maintained focus in SSA was facilitated work was and is still being delivered through four during this period through the re-opening of its key programs—occurring at a regional level in West regional office in Dakar, Senegal and additional staff Africa, and in Kenya, Madagascar, and Tanzania. The at the Nairobi, Kenya office. largest of these programs, Building PPP Institutional APPROVALS BY SECTOR IN SUB-SAHARAN AFRICA | FY15–17 ICT 6% TRANSPORT 10% ENERGY MULTI-SECTOR 13% 57% WATER 14% Annual Report 2017 | 31 FEATURE STORY: SSA WEST AFRICA BUILDING PPP INSTITUTIONS & GOVERNMENT CAPACITY The West Africa Region, with a population of 355 bodies responsible for implementing PPP programs million, includes 16 diverse countries with different and overseeing projects. developmental needs. It includes several low-income Francophone countries do not have the same level countries and fragile states, where nearly half the of experience with PPPs, so PPIAF’s intervention was population lives below the poverty line. Popula- tailored. In Benin, Burkina Faso, Guinea, Mali, Mau- tions vary significantly as well—from just over half a ritania, and Togo, PPIAF support began with detailed million in Cape Verde to over 177 million in Nigeria. assessments of legal, regulatory, and institutional Gross domestic product ranges from $800 in Niger environments, including reform efforts. In countries to $4,400 in Cape Verde. Eight of these countries— with more advanced PPP programs, such as Côte Benin, Burkina Faso, Côte D’Ivoire, Guinea, Mali, d’Ivoire and Senegal, PPIAF focused on building the Mauritania, Senegal, and Togo—are francophone. capacities of existing institutions. Except for Guinea and Mauritania, all are members of the West African Economic and Monetary Union RESULTS (UEMOA) and share a common currency. PPIAF support led to key reforms in a number of As disparate as these countries are, all share one countries in the region, and in some cases, led to major obstacle to economic growth and pover- additional support from other donors and multilater- ty alleviation: low-quality and poorly-maintained al development banks, including: infrastructure. Notwithstanding ongoing efforts, the hhStaff from eight institutions in eight countries, collective infrastructure gap is expected to represent including PPP units and line ministries, have been approximately 20 percent of GDP by 2020. This sti- trained in the fundamentals of developing and fles employment, reduces regional competitiveness, managing the PPP process. and keeps living standards stagnant. hhMali (2016), Guinea (2017) and Mauritania (2017) Because infrastructure development and scale-up adopted PPP laws. requires significant investment, francophone govern- hhConsensus was achieved on the optimal institu- ments have been eager to move away from a tradi- tional design of PPP units in Guinea, Mali, Maurita- tional public-service delivery model towards one with nia, and Togo. PPP units are in the process of being private-sector participation. This has created a strong set up in Guinea and Mali. Existing PPP units in demand for well-structured PPPs. In this context, Côte D’Ivoire and Senegal were strengthened. PPIAF has been providing ongoing support. hhAn online toolkit was developed and launched in As part of its 2015–2017 strategy, PPIAF approved Senegal, supported by new guidelines, training on using the toolkit, and validation sessions. over $5.6 million in grants to support francophone countries in establishing and/or reinforcing PPP hhThe governments of Guinea, Mali, and Mauritania institutions and building the capacity of government agreed on a harmonized pipeline of bankable proj- ects that aligned with national development plans. 32 | Public-Private Infrastructure Advisory Facility FEATURE STORY: SSA EAST AFRICA THE NILE EQUATORIAL LAKES SUBSIDIARY ACTION PROGRAM The Nile is the world’s longest river, snaking 6,853 ki- NELSAP is responsible for preparing a portfolio of in- lometers through 10 countries with a basin covering frastructure projects on behalf of Nile Basin countries approximately three million square kilometers—an and seeking potential sources of financing. Although area equivalent to nearly 10 percent of Africa’s total its coordination unit was experienced at facilitating landmass and home to approximately 250 million public finance, it had limited knowledge of how to people. This figure will increase substantially—the attract interest from the private sector. Embracing region’s population is forecast to reach over 500 its mission to eradicate poverty, promote economic million by 2030. growth, and reverse environmental degradation, The potential economic benefit from the use of NELSAP approached the World Bank Group for Nile water is significant. Irrigation and hydropower support in exploring the development of PPP options generation alone is estimated to be worth over $11 and mobilizing private investment for its projects. billion. However, there is a growing need for infra- This led to a workshop organized by the World Bank structure investments to attain the full potential of and IFC in October 2016 for senior NELSAP officials this resource. This will be vital for addressing poverty that covered the fundamentals of PPPs. Using a case and food insecurity in the region—according to the study of a hydropower project in Uganda, the train- 2016 Human Development Report, seven Nile Basin ing covered the structure, risk allocation, and roles of countries are among the bottom 25 in terms of their various actors at each stage of the process. Human Development Index score. PPIAF built on this knowledge by developing a PPP Since February 2016, PPIAF has played an active pipeline screening methodology in conjunction with role in addressing the region’s infrastructure needs NELSAP, the World Bank, and IFC. The methodology in partnership with the Nile Basin Equatorial Lakes was applied to 15 potential projects shortlisted and Subsidiary Action Program (NELSAP), an investment prioritized by NELSAP consisting of a mix of hydro- program that supports cooperative inter-country and power, water, and irrigation infrastructure. PPIAF’s in-country investment projects related to the com- screening criteria provided deeper insights on the mon use of the Nile Basin’s water resources. NELSAP potential of these projects to be developed as PPPs; promotes investments in power development and two were considered good candidates for PPPs in the trade, river basin management and development, short term. agricultural trade and productivity, as well as fisheries PPIAF has been strengthening the capacity of NEL- and watershed management. Critically, its work also SAP’s coordination unit staff to provide them with addresses environmental degradation in the sub-re- the knowledge and skills to screen potential PPP proj- gion. ects themselves. It is also strengthening the capacity NELSAP is administered by the Nile Basin Initiative of representatives from the Ministries of Finance, (NBI), an intergovernmental partnership of 10 Nile Water, and Energy to enable them to review projects Basin countries established to foster regional cooper- for potential PPP financing at the national level. ation and economic integration through sustainable resource management and development. Since1999, NBI has catalyzed investments worth over $1.5 billion in large-scale projects, with over $4.5 billion more in development. Annual Report 2017 | 33 HIGHLIGHTS OF SUPPORT TO THE REGIONS EAST ASIA AND PACIFIC FY17 FY15–17 FUNDS DEPLOYED $2.9 million $7.6 million CO-FUNDING LEVERAGED $0.3 million $3.4 million NEW ACTIVITIES APPROVED 7 20 ACTIVITIES COMPLETED 3 16 34 | Public-Private Infrastructure Advisory Facility Well-maintained transport networks in East Asia help rapid urbanization, PPIAF sees increasing opportuni- grease the wheels of the region’s trade, particularly ties to support development of urban transit net- with the economic giant China. So it is no surprise works, with Mongolia and the Philippines receiving that over the last business-plan period the lion’s share such support over the FY15–17 period. Beyond trans- of PPIAF support to the region focused on transport port, the region received support to improve water at the regional, state, and local levels. and sanitation service delivery and manage water as Support to the aviation industry in the Pacific Islands a scarce resource when developing hydropower. is helping develop a pioneering transaction for a The SNTA Program has also been very active in the Regional Airport Performance Based Infrastructure region. Municipalities in China, Indonesia, and Mon- Maintenance Contract with a view toward improv- golia are working with the World Bank and SNTA to ing air safety standards and building client capacity. improve their financial management and planning Indonesia, Laos, Timor-Leste, and Vietnam received capacity to finance needed urban infrastructure (in technical assistance support to strengthen their Mongolia, support specifically targets the transport ability to manage private investment in key transport sector). And in Vietnam, SNTA is helping develop subsectors. Vietnam also received support to develop a City Infrastructure Financing Facility that aims to community and gender-inclusive performance-based increase the flow of finance from commercial banks contracts for local road maintenance. This activity will to municipal infrastructure projects. help inform PPIAF as it looks to include gender con- siderations across its operations. Given the region’s APPROVALS BY SECTOR IN ASIA PACIFIC | FY15–17 ENERGY 3% WATER 18% TRANSPORT 49% MULTI-SECTOR 30% Annual Report 2017 | 35 FEATURE STORY: EAP PHILIPPINES INSTITUTIONAL SUPPORT FOR URBAN RAILWAY PPPS The metropolitan area of Manilla, with 23 million LRT1. The line was successfully turned over to LRMC people, is one of the biggest urban centers in the in September 2015. world…and with traffic to match. The city’s light Within two weeks of the handover, the conces- rail transit (LRT) system bears much of the urban sionaire embarked on an assessment of the trains, transportation burden, but has been hampered by substations, tracks, and passenger terminals to deter- underfunding and maintenance issues. The govern- mine the extent of work needed to improve light rail ment plans to build an extension and upgrade the service. Plans are to upgrade the passenger terminals, existing line, and is looking to the private sector for including facilities such as escalators and elevators investment. that need to be repaired and overhauled. LRMC has Building government capacity and strengthening begun restoring lighting at all passenger terminals to institutions is critical if PPPs are to play a major role improve safety. The concessionaire broke ground for in closing the country’s infrastructure gap, especially the pre-construction work on the extension, rehabili- in the transportation sector. The government ap- tated the existing line, and deployed refurbished light proached the World Bank for assistance in building rail vehicles. Tracks were upgraded to accommodate the capacity of the Ministry of Transportation and speeds up to 60 kilometers per hour, resulting in its attached agency—the Light Rail Transit Authority much-improved service. (LRTA)—to effectively manage its PPP portfolio, using The capacity and monitoring tools provided by PPIAF, a learning-by-doing approach. The LRT Line 1 Cavite including a monitoring manual using key perfor- Extension PPP (LRT1), which had been awarded to a mance indicators to regulate the PPP concession, a private concessionaire and was in the early phase of booklet providing an overview of the PPP project, implementation, was selected as a focal project. and contract management training, have enabled PPIAF guided and assisted the LRTA in its new role LRTA to more effectively oversee the project. The as a regulator and, in parallel, a competitive tender knowledge and experience garnered from this was organized by the government and a consortium project will smooth the path for future infrastructure of suitable parties. The Light Rail Manila Corporation initiatives with participation from the private sector. (LRMC) won the concession to operate and maintain 36 | Public-Private Infrastructure Advisory Facility PERU FEATURE STORY: LAC SANITATION MADE EASY For 2.4 million households in Peru, having a safe, This included pre-screening the municipal develop- well-built, multi-use bathroom was a dream out ment banks that supported the program, conducting of reach. Why? Mainly because of cost. A lack of market research, designing micro-lending products, credit contributed to the problem—the only way to and implementing a monitoring and evaluation construct an in-house bathroom would be to pay the program. entire construction cost upfront. The support of microfinancing institutions was crit- In response, the World Bank Group, supported by ical. They developed ad-hoc micro-loan and saving the SNTA Program, addressed this financing chal- products specifically for Mi Baño. Collaboration with lenge for households with inadequate or non-exis- other partners, including manufacturers, logistic op- tent sanitation. The result was the Mi Baño product: erators, IT services, communal promoters, and small a bathroom-in-a-box delivered to a client’s door hardware stores, was also important for reducing ready to install, which could be paid for through a costs. microfinancing mechanism designed exclusively for The results were profound. The cost of a Mi Baño its commercialization. With an untapped market esti- bathroom was only 40 percent of what families mated at $500 million, the initiative attracted interest would have to pay to finance similar facilities on their from the private sector. own. And it was affordable, thanks to the financing Mi Baño offered a practical solution for households packages offered by micro-lenders. As of 2015, the with access to a water supply but without adequate complete bathroom package was only five percent of sanitation. But acceptance by targeted beneficiaries the average household expenditures of the poorest remained a challenge. This involved more than mar- 40 percent of the population. keting—it also required behavior change for people Mi Baño is now a widely-accepted brand. A survey unaccustomed to indoor flush toilets. A holistic showed that 99 percent of respondents consid- approach that included promotion through media, ered the bathroom-in-a-box, ready to install, as the information distribution, and in-person education best way to provide households with comfortable, contributed to widespread acceptance of the model. functional bathrooms. The World Bank Group is now Affordability was another obstacle. In response, looking to replicate this initiative in other countries in PPIAF supported micro-finance initiatives that would other parts of Latin America and beyond. enable potential customers to purchase the product. Annual Report 2017 | 37 HIGHLIGHTS OF SUPPORT TO THE REGIONS LATIN AMERICA & THE CARIBBEAN FY17 FY15–17 FUNDS DEPLOYED $1.73 million $5.4 million CO-FUNDING LEVERAGED $0.37 million $1.33 million NEW ACTIVITIES APPROVED 6 13 ACTIVITIES COMPLETED 1 19 38 | Public-Private Infrastructure Advisory Facility Many countries in the LAC region—namely, Argenti- the Central American Bank for Economic Integration. na, Brazil, Chile, Colombia, Mexico, and Peru—em- Similar support is being provided at the national braced PPPs early. In the late 1990s, they attracted level in Paraguay, where PPIAF is helping implement significant private investment in infrastructure. The the first-generation transport PPP projects under the 2001 financial crisis in Argentina, however, damp- country’s new PPP law. ened these inflows. Only recently has the region Subnational activities in the region have focused attracted pre-2000 investment levels. on the water and transport sectors. In Haiti, rural While many LAC countries have improved their legal and small towns hope to see improved water and and policy frameworks for PPPs in the last twenty sanitation because of a PPIAF grant helping intro- years, better preparation of bankable projects is duce private-sector participation in the sector. The necessary if they are to attract more private-sector SNTA Proram is providing support to Jamaica’s solid investors to infrastructure projects. Being the world’s waste management facility and to the water utility of most urbanized region, subnational governments in Tegucigalpa in Honduras. SNTA has also been active LAC will play an increasingly important role in provid- in Colombia, where it is helping the government ing infrastructure services. explore tax increment financing as a new source of Given this landscape, PPIAF engaged in LAC at infrastructure finance for cities. In transport, SNTA is sub-regional, national, and subnational levels to supporting Quito, Ecuador to access market-based improve institutional capacity and build project financing. And through support from PPIAF’s SECO pipelines, thereby helping the region overcome its MIC fund, Lima, Peru is exploring possibilities for inadequate infrastructure. Working at the sub-re- land value capture to finance transit oriented de- gional level, PPIAF supported two multi-year pro- velopment alongside Line 2 of the Metro system. grams. The first, in the Caribbean, is being delivered Finally, the region received support related to climate in partnership with the World Bank Group, IADB, change—in Panama to help spur energy efficiency and the Caribbean Development Bank. The second, PPPs, and in Colombia to help with renewable energy in Central America, is being delivered with support project development. from the Millenium Challenge Corporation, IADB and APPROVALS BY SECTOR IN LATIN AMERICA & CARIBBEAN | FY15–17 TRANSPORT 8% WATER 13% MULTI-SECTOR ENERGY 64% 15% Annual Report 2017 | 39 HIGHLIGHTS OF SUPPORT TO THE REGIONS EUROPE AND CENTRAL ASIA FY17 FY15–17 FUNDS DEPLOYED $1 million $2.6 million CO-FUNDING LEVERAGED $0.15 million $0.5 million NEW ACTIVITIES APPROVED 2 7 ACTIVITIES COMPLETED 3 9 40 | Public-Private Infrastructure Advisory Facility Many countries in ECA are still transitioning from a also supported the update to a sector study that legacy of centrally planned infrastructure and tariffs highlighted the key pitfalls in the financial sustain- that are below cost recovery. The region is also ability of the sector and offered recommendations marked by existing pockets of fragility, namely in for addressing them. Armenia, a country that has Kosovo and the Balkans and in parts of Ukraine and demonstrated that water sector PPPs can work, Tajikistan. Given these dynamics and that ECA is not received funds to review its history of water-sector a priority region for PPIAF, technical assistance funds PPPs to glean lessons learned as it heads into the deployed over the FY15–17 period targeted sector next round of PPPs. Other activities included capacity reforms with a view towards building capacity in building for Tajikistan’s PPP unit, a Balkan activity ex- governments to enable them to attract private invest- amining how to best commercialize fiber-optic capac- ment in key infrastructure sectors down the line. This ity of energy utilities on a regional scale, and support included support to Ukraine’s railway reform efforts for Ukraine to develop its Sustainable Logistics Action that helped identify reform options, including key Plan, co-funded by the Korean Green Growth Trust options for private-sector investment. In the Kyrgyz Fund. Republic, where the energy sector has fallen into the vicious cycle of poorly-maintained energy assets, leading to poor service, and thus less willingness to pay by end users, PPIAF provided capacity building support to the newly-formed energy regulator. PPIAF APPROVALS BY SECTOR IN EUROPE AND CENTRAL ASIA | FY15–17 WATER 10% TRANSPORT MULTI-SECTOR 22% 38% ENERGY 30% Annual Report 2017 | 41 FEATURE STORY: ECA KOSOVO CONNECTING THE UNCONNECTED In Kosovo, broadband internet access is not available policymakers did not know how to move forward in many areas, particularly rural ones. The reason? and promote it. The cost of building the necessary infrastructure to To make sharing of fiber infrastructure assets hap- extend broadband access is too high. pen, KOSTT, policymakers, and regulators needed Infrastructure sharing is one approach to alleviating best practice knowledge and greater capacity to this problem. This means tapping unused optical fi- implement it. This is where PPIAF stepped in. ber in existing high-voltage energy transmission lines A grant from PPIAF provided support to KOSTT, as to provide internet access—basically, using existing well as the Ministry of Economic Development, which infrastructure more efficiently. By avoiding costly is a shareholder of an energy utility, and manages all construction of new infrastructure, service can be energy and ICT activities for Kosovo. This grant: delivered more quickly, at a lower cost, and to more hhProvided support for the development of a GIS- households. This directly benefits customers, private based Broadband Infrastructure Atlas for the Min- internet service providers, the energy utility, and its istry displaying existing and planned infrastructure stakeholders. routes and access points across the country that The public electricity transmission company, KOSTT could be used for the broadband network deploy- J.S.C., policymakers, and regulators in Kosovo ment understood the benefits of infrastructure sharing hhConducted a broadband market demand study and wanted to proceed with unlocking synergies elucidating telecom industry dynamics between energy and telecom sectors. But obstacles hhDeveloped a costing model and conducted a quickly became apparent. For example: sensitivity analysis to enable KOSTT to price excess hhTelecom sector players did not know how much infrastructure to sell to telecom operators fiber in excess of KOSTT’s capacity was available for hhProvided an expert to provide hand-holding in the leasing. process of KOSTT’s operationalization of infrastruc- hhKOSTT did not have an operational framework for ture sharing and turning it into a new business line infrastructure sharing. hhAlthough infrastructure sharing presented an excellent business opportunity for public utilities, 42 | Public-Private Infrastructure Advisory Facility FEATURE STORY: MENA DJIBOUTI RURAL ELECTRIFICATION Djibouti, a small country in the Horn of Africa with hhRecommendations for legal and regulatory chang- a population of 942,000, faces major challenges in es that would provide private operators with the its power sector. Only half its population—mainly incentive to maintain mini-grids in urban areas—has access to electricity. Currently, hhWorkshops, seminars, and public meetings includ- about 90 percent of its power comes from hydroelec- ing a pilot project appraisal and trainings tricity imports from Ethiopia. But electricity prices are The studies led to several new initiatives. As of March among the highest in Africa, and unplanned out- 2017, rural electrification through solar mini-grids ages are common, especially during the dry season. was progressing in three villages with support from Djibouti’s own power generation, which relies on the Korea International Cooperation Agency. The diesel and heavy fuel oil, is insufficient for meeting capacity of the mini-grids ranges from 100 to 200 its needs and leaves it vulnerable to fuel market-price kilowatts, serving approximately 50 to 100 house- fluctuations. Increasing access to electricity, especially holds per village. Additionally, a 50-megawatt, for underserved rural regions, is therefore a priority centralized solar operations and maintenance project for the government. is ongoing with the private operator Green Enesys at PPIAF helped the Government of Djibouti explore ru- Grand Barra. ral electrification options for underserved villages. It According to the Djibouti Social Development provided a technical assistance grant of $400,600 to Agency, the PPIAF-funded study accelerated the finance the necessary technical, economic, and finan- implementation of rural solar electrification due to cial feasibility assessments for potential private-sector the well-defined scope and technical specifications, participation options for solar mini-grids, as well which proved to be important for donors supporting as the institutional arrangements necessary for the these projects. The PPIAF-funded study also demon- implementation and maintenance of the mini-grid strated that the very small size of these projects is model. The project resulted in: a major hurdle for private-sector participation. It hhAnalyses, including a pre-feasibility analysis of a recommended operations and maintenance contracts PPP option study for 12 mini-grids supported by public or donor fund- hhRecommendations for a PPP operations and main- ing. Under this approach, the solar equipment would tenance contract be either provided to or leased to the private sector. Annual Report 2017 | 43 HIGHLIGHTS OF SUPPORT TO THE REGIONS MIDDLE EAST AND NORTH AFRICA FY17 FY15–17 FUNDS DEPLOYED $2.1 million $5.2 million CO-FUNDING LEVERAGED $0.9 million $5.02 million NEW ACTIVITIES APPROVED 5 15 ACTIVITIES COMPLETED 4 15 44 | Public-Private Infrastructure Advisory Facility The MENA region is in turmoil, with active conflicts programs build institutional capacity and assess read- in Iraqu, Libya, Syria and Yemen. Millions of refugees iness. Egypt, a priority MIC, received funds to support have fled into other countries—many of which are airport sector planning and to identify private-sector fragile or economically strapped themselves. Given solutions for the Abu Tartour Port. Tunisia, another this backdrop, private investment in infrastructure priority MIC, received support for its water, sanita- has fallen since 2010, the year the Arab Spring start- tion, and irrigation sectors. At the sub-national level, ed. Providing quality infrastructure services is import- SNTA is helping Amman, Jordan improve its munici- ant to rebuild citizens’ faith in their governments and pal finances. It is also helping Morocco strengthen its spur economic growth. urban transit sector. Meeting the region’s infrastructure needs cannot be MENA is also benefiting from two regional activities. met by the public purse alone. To that end, PPIAF First, the Pan-Arab Regional Energy Trading Platform, support in the region targeted fragile states—which which aims to promote regional energy trade and received more than one-third of funds deployed— reduce greenhouse gas emissions, is being planned and priority middle-income countries. The West Bank as a multi-year, programmatic engagement delivered and Gaza benefited from four PPIAF activities that in partnership with the Energy Sector Management strengthened water and sanitation services, devel- Assistance Program, the Arab Coordination Group, oped PPP and municipal lending frameworks, and and the OPEC Fund for International Development. helped the Palestine Energy and Natural Resource A second initiative provided technical assistance to Authority identify potential private-sector partners improve PPP project identification capacity in the for solar projects. Lebanon and Djibouti, also fragile transport sectors in Egypt, Morocco, and Tunisia. countries, received support to help their nascent PPP APPROVALS BY SECTOR IN MIDDLE EAST AND NORTH AFRICA | FY15–17 ENERGY 14% MULTI-SECTOR 31% TRANSPORT 25% WATER 30% Annual Report 2017 | 45 HIGHLIGHTS OF SUPPORT TO THE REGIONS SOUTH ASIA FY17 FY15–17 FUNDS DEPLOYED $1.42 million $5.95 million CO-FUNDING LEVERAGED $1.96 million $6.1 million NEW ACTIVITIES APPROVED 4 12 ACTIVITIES COMPLETED 6 10 46 | Public-Private Infrastructure Advisory Facility South Asia faces several major challenges in the years tifying first-mover projects. Bangladesh and Sri Lanka to come, including high numbers of people living in also received support—institutional capacity building extreme poverty, significant infrastructure needs, and and project pipeline identification—to help develop severe threats caused by climate change. their PPP programs. Over the last business plan period, much of PPIAF’s The region also received PPIAF and SNTA support support focused on these three challenges. For ex- for municipalities and utilities. Chittagong, Ban­ ample, PPI­ AF deployed close to one-third of its funds gladesh hopes to improve its public transport system in energy-starved Nepal, providing complementary through investments in priority bus routes. A PPIAF technical assistance alongside a World Bank IDA grant is helping inform decision making related to operation designed to reform the country’s energy this. Through an SNTA grant, Karachi, Pakistan will sector and develop sustainable hydro resources. In undergo a fiscal and financial assessment to assess Odisha, India, PPIAF supported two back-to-back its creditworthiness. And finally, the Faisalabad water activities to build institutional capacity and public utility received two PPIAF grants over the last three awareness needed to crowd in private investment for fiscal years to reduce its non-revenue water through renewable energy. Afghanistan received $850,000 performance-based contracts—these activities are in PPIAF funds and more than $2 million in donor part of a larger PPIAF program aiming to address this funds to kick-start its PPP program by developing the problem globally. necessary legal and institutional framework and iden- APPROVALS BY SECTOR IN SOUTH ASIA | FY15–17 WATER 8% TRANSPORT 10% ENERGY 47% MULTI-SECTOR 35% Annual Report 2017 | 47 FEATURE STORY: SOUTH ASIA INDIA ENABLING ODISHA TO COMBAT CLIMATE CHANGE PPIAF support was instrumental in enabling the planning for the development of a large-scale solar scale-up of renewable energy in Odisha, a state on park. To date, two potential sites have been iden- the east coast of India. Improvements in the state’s tified in the Balasore district: one for a 250-mega- enabling environment catalyzed the development of watt solar park in Bahagana, and another for a a 1,000-megawatt solar park through a PPP. 400-megawatt park in Bhograi. As one of India’s poorest states, Odisha is extremely hhSensitization of state policy for renewable en- ergy. In April 2017, the World Bank Group hosted vulnerable to climate change. Its direct impacts are two workshops to sensitize the key elements of the expected to deepen poverty and undermine the new renewable energy policy to local stakeholders state’s current growth strategy. and build consensus among private developers, A grant of $291,000 provided by PPIAF’s dedicat- investors, and the Odisha government. This made ed Climate Change Trust Fund for Infrastructure it possible to map the way forward for developing supported technical assistance to develop a new a 1,000-megawatt solar park in Odisha through renewable energy policy. An additional $75,000 innovative PPP models. grant provided crucial communications support for PPIAF’s upstream technical assistance support made the dissemination of the new policy and community the project feasible. As a result, IFC took over the outreach for the solar park. The project was imple- transaction structuring and preparation of procure- mented with the support and collaboration of the ment guidelines, including a standardized set of World Bank energy team and IFC. documents needed to develop solar parks through PPIAF’s intervention led to the following results: PPP models. hhThe development of a state policy for renew- This activity has aided in the removal of key barriers able energy. Odisha’s first comprehensive renew- for private-sector participation and helped build local able energy policy framework identified a clear institutional capacity, all instrumental in creating target of 2,750 megawatts to be installed in the a climate-smart enabling environment and trans- state by 2022. The Renewable Energy Policy was forming Odisha’s energy sector. The development approved by Odisha’s cabinet in November 2016; of untapped renewable energy generation through an implementation plan for the policy was devel- the achievement of 2,750 megawatts of capacity by oped for the Government of Odisha in June 2017. 2022 will eventually increase access to electricity for hhThe development of a land bank for renewable the poor. In addition, renewable energy parks will energy. A landbank assessment was conducted utilize state land for more productive purposes and that identified key sites for development of the create employment opportunities for local residents. solar park. This had been a critical obstacle for the private sector—identifying potential sites expedited 48 | Public-Private Infrastructure Advisory Facility THEORY OF CHANGE & RESULTS FRAMEWORK Monitoring and evaluating results is an important private-sector participation in infrastructure develop- element of PPIAF’s work—it ensures that projects are ment projects globally. Within this broader theory of effective, efficient, relevant, and timely. PPIAF pur- change, PPIAF’s Results Framework focuses on de- sues the assessment of results and the monitoring of veloping client countries’ capacity to identify, assess, progress with great seriousness because we expect and enable private-sector participation opportunities, that the activities that we fund enhance developing adopt appropriate policies and regulations, and put countries’ capacity to increase the availability of, and institutions in place that catalyze PSP infrastruc- access to, higher quality infrastructure services for ture delivery. At the subnational level, we focus on their citizens, especially the poor. supporting subnational entities’ capacity to access PPIAF has set in place a monitoring, evaluation, and market-based financing without sovereign guaran- learning system focused on each phase of the project tees and improving their administrative, technical, life cycle—from design to completion and post-com- and fiscal capacity to raise finance. pletion phases. Once activities have closed we conduct outcome re- In FY14, PPIAF developed a theory of change that alization assessments—three years after their closing describes the infrastructure gap problem and the date—to measure progress towards the anticipated necessary institutional, regulatory, financial, and outcomes and learn the reasons behind any lack of market changes that need to happen to increase progress towards outcome achievement. INTERMEDIATE OUTCOME 1 INTERMEDIATE OUTCOME 2 INTERMEDIATE OUTCOME 3 INTERMEDIATE OUTCOME 4 PPP CAPACITY POLICIES SUB-NATIONAL SUB-NATIONAL & REFORM CONSENSUS & INSTITUTIONS FINANCING FINANCING Public institutions in PPIAF PPIAF client countries adopt Sub-national entities are able Sub-national entities client countries are better policies, regulations, and to access increased financing improve their administrative, able to identify, assess, institutions that catalyze in infrastructure without technical, and fiscal capacity, and enable private-sector private-sector participation in sovereign guarantees and increase capability to participation opportunities infrastructure service delivery (in countries raise finance with higher capacity) OUTCOMES Governments in PPIAF priority countries are systematically capable of, and are adopting policies, regulations, and programs that improve the investment climate for PPPs and sub-national financing IMPACT Increase in available infrastructure in PPIAF large-investment countries Annual Report 2017 | 49 HIGHLIGHTS OF FY17 RESULTS INTERMEDIATE OUTCOME 1 tions and maintenance project is underway, managed PPP CAPACITY & REFORM CONSENSUS by a private operator. Two PPIAF publications made valuable contributions Furthermore, the government is exploring expanding to our growing PPP knowledge bank. The first, Inves- its power capacity through geothermal energy. The tigating the Infrastructure Financing Gap, assesses Djibouti Office for the Development of Geothermal the key factors that determine the degree of private Energy led a geothermal exploratory drilling program financing in infrastructure projects with a special in the Lake Assal area with support from IDA, the focus on institutional, political, and governance char- OPEC Fund for International Development, the Afri- acteristics. The paper explains how to make well-in- can Development Bank, the Sustainable Energy Fund formed, evidence-based decisions about policies and for Africa, and AFD. An ongoing World Bank lending specific interventions for multilaterals, international operation will support a new phase of exploration in financial institutions, and developing country govern- 2018, which will include a technical feasibility study ments hoping to create a better investment climate for a proposed 50-megawatt geothermal power for private participation in infrastructure. plant. The PPIAF-funded Power Sector PPP Viabili- The second, South Africa’s Renewable Energy IPP ty Report established that an IPP arrangement can Procurement Program: Success Factors and Lessons, effectively be used to engineer, procure, construct, examines lessons learned from the renewable energy finance, operate, and maintain such infrastructure. IPP procurement program (REIPPP) in South Africa. INTERMEDIATE OUTCOME 2 The REIPPP process was the major contributing factor POLICIES & INSTITUTIONS in South Africa’s being named as one of the top 10 countries for securing renewable energy financing in PPIAF’s work in Vietnam has strengthened the capac- 2012. The paper analyzes the process in-depth and ity of the country’s institutions. For example, a PPIAF assesses the results of the REIPPP investment pro- grant financed guidance documentation for the Min- gram. The report’s recommendations on attracting istry of Transport: Viability Gap Funding Mechanisms investments in renewables has made it a reference and Fiscal Management Framework. The Ministry guide on renewable energy auctions throughout used these tools in the design of the Dau Giay-Phan Africa. Government officials visiting South Africa’s IPP Thiet Expressway pilot PPP project (still pending pro- unit use the paper to better understand the players curement as of July 2017). As a result, the Ministry and decisions involved in designing similar programs now has greater capacity, awareness, and under- in their own countries. The report was produced in standing of the issues and mechanisms involved partnership with the University of Cape Town. when developing infrastructure using PPPs. PPIAF also contributed to the implementation of rural In Myanmar, PPIAF’s support to the telecommunica- solar electrification projects in Djibouti. Since March tions sector contributed to the adoption of policies 2017, three villages have benefitted from solar mini- and regulations for the liberalization of the sector. grids funded by donor agencies, primarily the Korea PPIAF support led to an operational sector road International Cooperation Agency. Mini grids have a map and training for staff from the Post and Tele- capacity that ranges from 100 to 200 kilowatts and communications Department (PDT). Key regulations serve an average of 50–100 households per village. were also developed. As of March 2017, several had Additionally, a 50 megawatt, centralized solar opera- already been approved, including Interconnection, Access and Licensing Regulations, and the Spectrum 50 | Public-Private Infrastructure Advisory Facility and Numbering Rules. With these regulations in PPIAF’s support to the West African Power Pool place, PDT launched a competitive license issuance Secretariat led to an 81-megawatt Power Purchase process with Telenor (Norway) and Ooredoo (Qatar). Agreement among Côte d’Ivoire, Guinea, Liberia, As of March 2017, there were four licensed mobile and Sierra Leone in 2016. A PPIAF grant enabled operators with 60 percent penetration for mobile an assessment of the financial viability of the regional service and 25 percent for internet services (up from transmission network. The utilities in the participat- 20 and 10 percent respectively in 2014). ing countries also defined the new tariffs based on In Egypt, PPIAF developed a strategy for enhancing the financial model produced under the PPIAF grant. the role of the private sector in the municipal solid Construction of the power line is underway and is waste management sector to improve its efficien- expected to be completed by 2020. cy and effectiveness. The recommendations in the INTERMEDIATE OUTCOMES 3 & 4 report were confirmed at a stakeholder workshop that included representatives from the government SUB-NATIONAL FINANCING of Egypt, informal, private-sector garbage collectors, PPIAF’s support to the municipality of the Central and donor agencies. This increased awareness of District in Honduras resulted in a $53 million syn- the policy actions necessary to enhance private-sec- dicated loan leveraged without a sovereign guaran- tor participation in the municipal solid waste man- tee. A PPIAF grant financed the Public Expenditure agement sector and built much-needed consensus and Financial Accountability report on the Central among the government, private sector, and informal district’s management of public finances. The report operators. enabled the municipality to establish a baseline of the district’s public financial management status PPIAF support also facilitated three transactions and practices, and served as a reference for overall which were completed as of June 2017. performance analysis. In Nigeria, a PPIAF grant supported the $880 million The availability of this baseline gave confidence to Azura Edo IPP transaction, which reached financial banks—FICOHSA, Banco Atlantida, and Banco de closure with participation of local commercial banks Occidente—to provide a syndicated loan with the in December 2015. Thirteen institutions provided municipality for investments in urban transport debt funding totaling $690 million, including the infrastructure and refinancing of existing short-term largest share ($150 million) from a local commercial debt. The $53 million syndicated loan was arranged lender, Other First City Monument Bank. by IFC and supported by an IFC guarantee of up to PPIAF support led to the award of two performance- 50 percent of the loan. based contracts for improving water service delivery Furthermore, PPIAF’s support to Windhoek, Namibia in Colón, Panama in 2013—a $17.8 million perfor- strengthened the city’s capacity and understand- mance-based management contract financed by the ing regarding the implications of their cash-based World Bank and a $2.4 million supervision contract. accounting if they were to introduce accrual-based PPIAF supported the design and preparation of the accounting in order to produce future financial state- bidding documents. The Project Indicators Evaluation ments in accordance with recognized accounting Report found that efficiency and metering indicators standards on a systematic basis. exceeded the targets set in the contracts. Annual Report 2017 | 51 HIGHLIGHTS FROM OUTCOME REALIZATIONS FY15–17 For the past strategy period, we analyzed a sample of 109 activities representing 37 percent of all funded activities that closed between 2011–14. A breakdown of the results is presented below. FY15 FY16 FY17 Total Average Outcome realization FY15-17 Activities reviewed 47 46 16 109 36 Activities effective in achieving objectives 30 29 12 71 24 (at least satisfactory rating) Activities effective in achieving objectives 64 63 75 N/A 67 (at least satisfactory rating) (%) Activities not effective in achieving their objective 17 17 4 38 13 (unsatisfactory rating) FY15 FY16 FY17 Total Objective 1: PPP capacity and reform consesus # of participants/government officials with enhanced capacity 550 5082 0 5632 # of times consensus was achieved on PPP reforms 3 3 1 7 PPP pipeline developed 1 2 0 3 PPP knowledge/information developed 0 3 2 5 Objective 2: Policies and institutions Institutions whose capacity is strengthened 2 3 2 7 Policies, laws, and regulations adopted 8 3 2 13 Plans/strategies developed 1 3 1 5 PPP transactions supported that materialized 5 4 3 12 Objective 3: Sub-national financing Financing projects developed 38 3 0 41 $ millions of financing leveraged without sovereign guarantee 0 120 53 173 Objective 4: Sub-national capacity and creditworthiness Sub-national entities whose capacity was strengthened/ 9 3 2 14 creditworthiness improved Plans/strategies adopted by sub-national entities towards 1 3 1 5 enhancing access to finance 52 | Public-Private Infrastructure Advisory Facility PORTFOLIO PERFORMANCE PPIAF is results-oriented. Throughout the activity formance of the strategic fitness score. In terms of life-cycle, we closely monitor implementation to en- implementation, there is still room for improvement sure the timeliness and quantity of our work. regarding the timeliness at completion. Only three The balanced scorecard below showcases overall out of 10 activities were delivered in accordance with performance against our targets. This fiscal year, our the original estimated schedule. In FY17, 64 percent activities were closely aligned to the strategic pri- of our activities achieved highly satisfactory scores, orities as shown by the higher-than-targeted per- and 88 percent scored satisfactory and above. DESIGN Baseline Performance Annual Target Indicator FY16 FY17 FY17 Approvals in LIC* 60% 41% 50% Approvals in Sub-Saharan Africa** 49% 42% 50% Activities with strategic fitness score rated standard or outstanding fit 95% 99% 98% IMPLEMENTATION Baseline Performance Annual Target Indicator FY16 FY17 FY17 PPIAF Financial Utilization Score 4.2 4.8 6 Activities with quality rated satisfactory or above 91% 95% 95% Activities “on track” 57% 41% 75% COMPLETION Baseline Performance Annual Target Indicator FY16 FY17 FY17 Activities with quality rated as highly satisfactory 73% 64% 80% Activities “on track” at closing 31% 31% *** N/A POST-COMPLETION Baseline Performance Target Indicator FY16 FY17 FY17 Outcome realization evaluations reporting outcome satisfactorily 63% 75% 75% achieved * Relative to the total amount of approved country- and region-specific grants (excludes global and cross-regional knowledge products). FY17 target for both LIC and SSA is 60 percent at MDTF level and 50 percent at PPIAF consolidated level. Performance as of end-June 2017 at MDTF level was 59 percent for LIC and 43 percent for SSA. ** Equivalent to 49 percent if SSA share of our Rapid Support Framework program (currently captured under cross regional) is accounted for. *** Change of methodology in the second quarter of FY17: Timeliness of the activity delivery at closeout is now assessed solely based on differences observed between the initial and actual completion dates. Thus no target was set at the start of the fiscal year. In past quarters, activities were scored based on comparing actual and latest implementation schedules agreed to by the team, regardless of whether or not the activity’s completion date had already been extended. The 30 percent “on track” indicator means that 7 out of 10 activities completed over the period encountered some delay in implementation. The baseline for FY16 has been retroactively calculated. Annual Report 2017 | 53 PROGRAM FINANCES SOURCES AND USES OF PPIAF FUNDS The table below compares the outgoing year’s finan- While inflows were 20 percent lower compared to cial inflows and uses to those of the previous fiscal FY16, disbursements remained at the same level, year. Total inflows reached $16.1 million, including allowing for an increased ratio of disbursements to $13.2 million in new contributions, while disburse- grants. ment was $18.6 million, of which activity disburse- ments represented $15.1 million. PMU expenses were contained and reduced, from $3.7 million to $3.4 million, reflecting a tighter HR structure. BALANCE POSITION IN FY17 ($ thousands) Balance position Changes in FY17 Opening balance 22,582 Inflows Contributions 13,207 Investment income 610 Reflows 2,271 Total inflows 16,088 Uses Administrative fees 114 Direct activity disbursements 15,085 PMU expenses 3,422 Subtotal disbursements 18,621 Provisions Activity commitments 3,649 Activity grants in process -2,547 PMU commitments -26 PM provisions -1,299 Subtotal provisions -223 Total uses 18,398 Fund balance (2,310) Ending balance 20,272 56 | Public-Private Infrastructure Advisory Facility In FY17, PPIAF received $13.2 million in new donor Altogether, over the three years of the Business Plan contributions, 27 percent less than what it received period, contributions amounted to $41.2 million, or in FY16. Of this, the contribution for PPIAF core ac- $13.7 million on average per year, falling 63 percent tivities received through its Multi-Donor Trust Fund II short of the anticipated amount of $65.7 million. amounted to $10.2 million. The SNTA fund received $2 million. USAID Non-Core Trust Fund for Water and Sanitation in Sub-Saharan Africa received $1 million during the fiscal year (see table below). MEMBER CONTRIBUTION RECEIPTS, FY15–17 ($ thousands) Core MDTF II FY15 FY16 FY17 Total FY15–17 Australia 3,856 1,498 1,500 6,854 France -- -- 763 763 Germany -- 552 561 1,113 IFC -- -- 100 100 MCC -- 500 500 1,000 Netherlands -- -- -- -- Norway -- 369 -- 369 Switzerland 750 1,188 -- 1,938 UK/DFID -- 5,393 6,738 12,131 USAID -- -- -- -- Subtotal 4,606 9,500 10,162 24,268 Non-Core TFs USAID Water in SSA 597 766 1,000 2,363 Switzerland MIC 2,250 3,000 -- 5,250 Switzerland Climate Change 1,000 2,000 -- 3,000 Global Financial Crisis -- (3,174)* -- (3,174) Netherlands Climate Change -- 2,000 -- 2,000 Subtotal 3,847 4,592 1,000 9,439 SNTA Donor Contributions UK/DFID -- 2,429 1,282 3,711 Switzerland-SECO 1,500 1,500 -- 3,000 France/AFD -- -- 763 763 Australia-DFAT -- -- -- -- Subtotal 1,500 3,929 2,045 7,474 GRAND TOTAL 9.953 18,021 13,207 41,181 * Reallocation of DFID and SECO contributions from closed-down GFC TF to MDTF II. Annual Report 2017 | 57 LIST OF ACTIVITIES APPROVED IN FY17 COUNTRY/REGION TITLE TOTAL DAC AMOUNT STATUS APPROVED Afghanistan/South Asia Supporting the Development of a PPP Program: Phase II 350,000 DAC1 Green Growth Investment Fund Africa (GGIFA) - Feasibility SSA 200,000 NA Study West Africa Regional Air Transport Reforms: Benchmarking West Africa/SSA 350,000 NA Fees/Charges/Taxes to Enable Private-Sector Investments Support to the Water Sector Reform Through a Pilot PPP Angola/SSA 500,000 DAC1 Transaction in Cabinda Burkina Faso/SSA PPP Pipeline Development and Institutional Framework Support 228,700 DAC1 Strengthening Regulation to Accelerate Services by Domestic Cambodia/EAP 300,000 DAC1 Private Water Providers Cameroon/SSA Support to the PPP Program 574,267 DAC3 Central African Rep./SSA ENERCA: From Recovery to Sustainable Strategy 300,000 DAC1 Review of Institutional, Policy and Regulatory Framework to Colombia/LAC 690,000 DAC4 Support Private-Sector Participation in Clean Energy Regional Airports Performance-Based Infrastructure EAP 100,000 Maintenance Contract Development of a Master Plan for National Airports in Egypt Egypt/MENA and identification of a Pipeline of Potential Public-Private 309,950 DAC4 Partnership Projects Non-Revenue Water Reduction Program through Performance Ethiopia/SSA Based Contract for Addis Ababa Water and Sewerage 308,031 DAC1 Authority (AAWSA) Strengthening Private-Sector Participation in Community Water Ghana/SSA 295,000 DAC3 Supply A Guide to Incorporate Gender Considerations into the PPP Global 50,000 NA Project Cycle From Waste to Resource: Why and How Should We Plan and Global 140,000 NA Invest in Wastewater? Global Review - Public Infrastructure Funds facilitating PPPs in a Global 184,444 NA Fiscally Prudent Manner Global Guidebook on PPP Railway Station Redevelopment 180,000 NA How to Foster Private-Sector Participation in Nascent Sectors by Global Creating Data Sharing and Reporting Standards: The Off-Grid 200,000 NA PAYG Solar Case Study 58 | Public-Private Infrastructure Advisory Facility COUNTRY/REGION TITLE TOTAL DAC AMOUNT STATUS APPROVED International Experience with Subnational Debt Financing of Global 94,867 NA Infrastructure in China Making the Most Out of Public Finance for Sustainable Global 100,000 NA Transport Migration of PPP Reference Guide to an Interactive Online Global 95,000 NA Platform (PPP Knowledge Lab) Operational Guidebook and Training Module for Municipal Global 200,000 NA Administrators on Property Tax Reform Practical Guide on the Establishment and Operation of Global Investment Funds Designed to Leverage Private-Sector 537,000 NA Participation in Infrastructure Development Global Procuring Infrastructure PPPs 2018 200,000 NA Global Selecting and Screening Projects for Implementation as PPPs 150,000 NA Global State of PPPs in Fragile and Conflict States 50,000 NA Strengthening Regulatory Management Capacity in FCS to Global Foster Private-Sector Provision of Services (Phase 3: Improving 324,970 NA Infrastructure Regulation Program) U.S. Experience with Pooled Financing of Infrastructure in Small Global 52,022 NA Municipalities Improving Access to Finance of Tegucigalpa Municipality Water Honduras/LAC 199,700 DAC3 Utility Promoting Private-Sector Participation for Renewable Energy India/South Asia 75,000 DAC3 Development in Odisha Assistance to the National SWM Authority to Assess Financing Jamaica/LAC 98,300 DAC4 Options for their Solid Waste Management Programme Greater Amman Municipality: PEFA Assessment and Design of Jordan/MENA 220,000 DAC4 Technical Assistance for Strengthening Municipal Finance Component 1 of the Financing Universal Access to Water Kenya/SSA 135,000 DAC2 Supply and Sanitation-Kenya Country Assessment Financial Advisory Services for Kenya Energy Utilities (KENGEN Kenya/SSA 536,750 DAC2 & KPLC) Kenya/SSA PPP Support Program – Phase 1 412,500 DAC2 Sustainable Hydropower Development and Integrated Water Lao PDR/EAP 740,000 DAC1 Resource Management Strengthening Governance of Energy Sectors in Colombia and LAC 100,000 Brazil Under Conditions of Stress Lesotho/SSA PPP Policy and Framework Support 205,000 DAC1 MENA Pan-Arab Regional Energy Trading Platform (PA-RETP) 400,000 Ulaanbaatar City Capital Investment Plan and Financial Mongolia/EAP 300,000 DAC3 Assessment for Urban Transport Service Delivery Mozambique/SSA Support to Water and Sanitation Infrastructure Board (AIAS) 250,000 DAC1 Private Sector-Based Delivery of Electricity Services in Rural Niger/SSA 397,356 DAC1 Areas Niger/SSA Support to Urban Sludge Management (USM) in Niamey 348,650 DAC1 PPP Project Prioritization and Institutional Strengthening for Nigeria/SSA 259,811 DAC3 Kaduna State Annual Report 2017 | 59 COUNTRY/REGION TITLE TOTAL DAC AMOUNT STATUS APPROVED Non Revenue Water Reduction Program through Performance Pakistan/South Asia Based Contract for Faisalabad Water and Sanitation Agency 198,500 DAC3 (F-WASA) - Phase II Towards NDC Implementation Through Public – Private Energy Panama/LAC 340,000 DAC4 Efficiency Initiatives in Panama Developing a Transit Oriented Development (TOD) Project via Peru/LAC Public-Private Partnership (PPP) in Lima, Peru: Evaluation of 300,000 DAC4 Potential for Lima Metro’s Line 2 Project PPP Framework for Private-Sector Participation in the Road Senegal/SSA Sector in Senegal and Development of a Strategy for Urban 350,000 DAC1 Transport Investment Non-Revenue Water Reduction Program through Performance South Africa/SSA 346,000 DAC4 Based Contracts for South Africa PPP Capacity Building in Sri Lanka and Identification of Project Sri Lanka/South Asia 800,000 DAC3 Pipeline Tajikistan/ECA Support to the Government of Tajikistan’s PPP Program 226,900 DAC2 Developing Framework for Reducing Non-Revenue Water Tanzania/SSA through Performance Based Contract in Dar es Salaam Water 158,159 DAC1 and Sewerage Corporation (DAWASCO) Tanzania/SSA PSP Options Analysis for Urban Water Sector Reform 250,000 DAC1 Establishing a Project Management Unit for the Management Timor-Leste/EAP 377,025 DAC1 of the Tibar Bay Port Concession Tunisia/MENA Support for PPPs in Rural Water Supply and Irrigation 497,000 DAC4 City Creditworthiness Initiative – Technical Assistance for Five Turkey/ECA 750,000 DAC4 Municipalities in Turkey City Creditworthiness Initiative – Implementation of Action- Uganda/SSA 400,000 DAC1 Plans for Selected Ugandan Local Authorities Uganda/SSA PPP Program Support 219,750 DAC1 Improving Sanitation Services Sustainability in Vietnam’s Vietnam/EAP 355,000 DAC3 Coastal Cities Vietnam/EAP Railways Sector Strengthening 700,000 DAC3 West Bank & Gaza/MENA Non-Revenue Water Performance-Based Contract 660,000 DAC3 Total grants approved 18,670,652 60 | Public-Private Infrastructure Advisory Facility 61 | Public-Private Infrastructure Advisory Facility ABBREVIATIONS AFD Agence française de développement MIC Middle-Income Country (French Development Agency) MILE Municipal Institute of Learning DBL Design-Build-Lease MOOC Massive Open Online Course DFID Department for International Development NBI Nile Basin Initiative (United Kingdom) NELSAP Nile Basin Equatorial Lakes Subsidiary Action ECA Europe and Central Asia Program EDM Electricidade de Moçambique NRW Non-Revenue Water GDP Gross Domestic Product PDF Project Development Facility GPOBA Global Partnership on Output-Based Aid PDT Post and Telecommunications Department ICT Information Communication Technologies (Myanmar) IDA International Development Association PMU Program Management Unit IADB Inter-American Development Bank PPIAF Public-Private Infrastructure Advisory Facility IFC International Finance Corporation PPP Public-Private Partnership IGF Infrastructure Guarantee Fund PPPIRC Public-Private Partnership in Infrastructure Resource Center ISDB Islamic Development Bank PSP Private-Sector Participation KAA Kenya Airports Authority SECO State Secretariat for Economic Affairs LAC Latin America and the Caribbean (Switzerland) LIC Low-Income Country SNEs Sub-National Entities LRMC Light Rail Manila Corporation SNTA Sub-National Technical Assistance LRT Light Rail Transit SSA Sub-Saharan Africa LRTA Light Rail Transit Authority (Philippines) UEMOA West African Economic and Monetary Union MDB Multilateral Development Bank USAID United States Agency for International MDTF Multi-Donor Trust Fund Development MENA Middle East & North Africa USP Unsolicited Proposal MFD Maximizing Finance for Development PHOTO CREDITS Cover @ jif2003/iStock. Used with permission. Pages 16-17 @ holgs/iStock. Used with permission. Page 8 @ Apa Nova. Used with permission. Pages 18-19 @ Jeff Attaway/Creative Commons Page 9 @ Yuri Mechitov/World Bank Page 32 @ Ludwig Troeller/Creative Commons Page 10 @ Julie Bayking/IFC Page 33 @ efrem/iStock. Used with permission. Page 11 @ Knut-Erik Helle/Creative Commons Page 36 @ holgs/iStock. Used with permission. Page 13 (top to bottom) @ Rodrigo Cavalcante, dronepicr, Laila Page 37 @ World Bank Goubran, Cayhun (Jay) Isik, eutrophication & hypoxia/Creative Page 42 @ Brilliant Eye/iStock. Used with permission. Commons Page 43 @ Konstantin Novakovic/iStock. Used with permission. Page 14 @ Nico Saporiti/IFC Page 48 @ Jamie Fergusson/IFC Page 15 @ W.L. Davies/iStock. Used with permission. 62 | Public-Private Infrastructure Advisory Facility While PPIAF operates by giving grants, our value-added extends far be- yond the funds provided. LAYING THE FOUNDATION. PPIAF strengthens the regulatory and institutional frameworks that govern infrastructure development at the macro level. Our work may initially benefit a specific investment project, but it also benefits future projects, thereby extending our impact. BUILDING PARTNERSHIPS. PPIAF is a neutral and trusted partner. This helps bring various stakeholders, such as governments and private investors, to the same page when addressing complex issues related to infrastructure development. ASSESSING IMPACT. PPIAF’s strong development impact assessment capacity ensures that projects with PPIAF involvement are sound and have been thoroughly vetted. CAPTURING AND SHARING KNOWLEDGE. PPIAF’s knowledge system ensures lessons learned from one project are collected and applied to future ones as well as shared through a multitude of global platforms. WORLD BANK GROUP. As a part of the World Bank Group, PPIAF can draw from the resources, knowledge, and experience of the organization as needed. Established in 1999, PPIAF is a multi-donor technical assistance facility financed by 11 multilateral and bilateral donors and housed inside the World Bank Group. Our mission is to help eliminate poverty and increase shared prosperity in developing countries by facilitating private sector involvement in infrastructure. PPIAF catalyzes 1999 private involvement in infrastructure in emerging markets through public-private partnerships (PPPs) as well as commercial financing of sub-national entities. ppiaf.org