New data from the World Bank shows that private participation in infrastructure (PPI) in developing countries, while taking an historic plunge in the first half of 2020 due to COVID-19, saw a very modest uptick in the second half of the year.
The 56 percent drop in PPI in the first half of the year from the previous year moderated to 52 percent for the full year.
Infrastructure investment commitments in 2020 stood at $45.7 billion across 252 projects in developing countries.
“Hopefully, this data signals that the worst effects of COVID-19 on private sector infrastructure finance is now behind most developing countries,” said Imad Fakhoury, the World Bank’s Global Director for Infrastructure Finance, PPPs & Guarantees.
“While this situation remains in flux as the pandemic’s trajectory changes, we’re keen on scaling up private investment in sustainable and quality infrastructure in these countries going forward—but need more resilient frameworks and enabling environments, he added
Fakhoury emphasized, “This is critical for building back better post-pandemic, restoring progress towards the 2030 Sustainable Development Goals, and delivering on climate commitments to ensure green, resilient and inclusive development.”
COVID-19’s global impact on infrastructure was widespread and swift. Since the start of 2020, existing infrastructure projects were delayed or cancelled due to supply-chain disruptions, travel and shipping restrictions, and other obstacles. Decreased demand or required renegotiations also prevented or delayed many projects already in pipelines from achieving financial closure.
Moreover, as public debt globally has risen to record levels and sovereign credit ratings have been downgraded across the developing world, the private sector reacted with caution.
Private investment commitments fell in all regions except Sub-Saharan Africa and the Middle East and North Africa, where development finance institutions played a strong role.
The pandemic’s impact was most severe in East Asia and Pacific with investments commitments of US $9.5 billion, a 75 % decrease from 2019 followed by Latin America and the Caribbean, with US $14 billion, 54% decrease from 2019 total investment.
Europe and Central Asia, and South Asia saw investments of US $4.6 billion, a 42% drop from 2019 and US $10.2 billion, an 18% decrease from 2019, respectively.
Sectorally, transport investment commitments were the lowest in the past decade—due to lockdowns, mass transit services and toll roads were hugely affected. Ports and railways were affected as well, with decreased volumes of cargo.
Investment commitment in the transport sector totaled US $10.5 billion across 41 projects, 78% decrease from 2019 levels while the road subsector continued to dominate the transport sector in 2020 but fell by 70% compared to 2019 investment levels.
A bright spot is that the disruption caused by the pandemic has not affected the longer-term shift towards renewable energy: of the 129 electricity-generation projects tracked in PPI’s data,117 were renewables.
Brazil, China, India, and Mexico retained their positions among countries with the top five investment commitments, with Brazil moving to first place, at $7.7 billion.
Bangladesh is a new entrant to the top five, with financial closure of seven projects, including one megaproject. Burundi, the Democratic Republic of Congo, and Togo had the first PPI transactions recorded in the past five years.
Twenty-one percent of all PPI projects received support from development finance institutions through loans, equity, guarantees, insurance, interest rate swaps, and transaction advisory services.
This underlines the importance of these actors in providing resources, instruments, and de-risking comfort to investors in developing countries, especially in the most difficult contexts.