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Policies in promoting private financePolicies in promoting private financeForFor
Local Government InfrastructureLocal Government Infrastructure
Washington, 01 October 2004Washington, 01 October 2004
Policies in promoting private financePolicies in promoting private financeForFor
Local Government InfrastructureLocal Government Infrastructure
Washington, 01 October 2004Washington, 01 October 2004
African Development Bank African Development Bank GroupGroup
African Development Bank African Development Bank GroupGroup
AFRICAN DEVELOPMENT BANK 240th Anniversary Edition
Private financing in local government infrastructure?
For
– Aid financing is insufficient and diminishing
– Public sector finance is insufficient
– FDI only around 2.3% of global share
– Estimated annual infrastructure needs about US$20 billion in next 10 years in Africa
– Improvement of the quality of service
– Permit price discovery
– Allow re-allocation of public fund to social sectors
– …. Against
– Increase in service price (this is debatable)
There are many compelling reasons for MDBs to actively promote private financing of local government infrastructure.
The Bank acknowledges that private investment is critical, provided there is an enabling environment
Sector policies
Financial policies
Operational policies and operations in the field
There are many compelling reasons for MDBs to actively promote private financing of local government infrastructure.
The Bank acknowledges that private investment is critical, provided there is an enabling environment
Sector policies
Financial policies
Operational policies and operations in the field
AFRICAN DEVELOPMENT BANK 340th Anniversary Edition
Sector policies
Infrastructure sectors include transport; energy and power; WSS; Irrigation; educational and health facilities; ICT
The Bank has initiated sector reforms policies (water, energy, telecommunication, urban development, private sector operations,…)– To improve the regulatory framework– To promote a separation of the regulatory function and the
delivery of services– To introduce competition– To encourage and support entry into areas that are un-served or
poorly served– To prepare the sectors for privatization
AFRICAN DEVELOPMENT BANK 440th Anniversary Edition
Sector policies (more…) The Bank is working very closely with its members to promote good governance
(good governance policy)– To reduce corruption– To bring more transparency in management of contracts
The Bank encourages and supports decentralization of infrastructures– Where it makes economical sense
The coming new private sector operations policy– supports private investment through PPP– improves regulations– modernizes laws– Encourages reform of property rights and enforcement of contracts
Promotion of regional cooperation and integration in infrastructure development
AFRICAN DEVELOPMENT BANK 540th Anniversary Edition
Once the policy framework has been setup, the Bank has several financial instruments to encourage private finance
Indirect instruments (broad creation of leverage)
– Co-financing Sovereign lending, Commercial lending, and public non-sovereign guaranteed to finance viable investment
activities in a distinct group of public enterprises in African middle-income countries that are commercially run.
– Line of credit.
– Agency line of credit.
– Participation in infrastructure funds or promotion of dedicated funds.
– Development of local capital markets. Issuance of bonds, Syndication of local banks.
AFRICAN DEVELOPMENT BANK 640th Anniversary Edition
The Bank has several financial instruments to encourage private finance (more…)
Direct instruments– Guarantee
Partial credit guarantee, Partial risk guarantee).
– Syndication (B-loan).– Risk sharing facility.
AFRICAN DEVELOPMENT BANK 740th Anniversary Edition
On the ground,… Investment in entities that finance local governments such DBSA, IDC
or INCA.
Equity participation in infrastructure funds such as the African Infrastructure Funds (AIF).
Risk sharing facility with commercial banks to invest in infrastructure projects.
Guarantee of a local banks syndicate to provide CFA resources (MTN-Cameroon).
The Bank promotes infrastructure projects and gives special attention to public-Private Partnership investments (Azito, Ivory Coast).– The key objective is to provide confidence and comfort to other
lenders who may hesitate to participate otherwise due to perceived risks or lack of familiarity with conditions in the host countries.
AFRICAN DEVELOPMENT BANK 840th Anniversary Edition
On the ground, (more…)
African Water Facility (USD 615 million).– An Initiative of AMCOW being hosted and implemented by the
Bank, aims at strengthening and enabling environment to attract investments in the water sector in Africa.
Technical Support to the NEPAD initiative on Infrastructure.– To bridge the infrastructure gap in the region as an important
element in the promotion of growth, trade and regional integration.
– ADB as lead agency, has developed and is already implementing a STAP for facilitation, capacity building, physical capital investments and studies.
AFRICAN DEVELOPMENT BANK 940th Anniversary Edition
The road ahead,…
The Bank will seek to increase its leverage:– by strengthening its technical capacities in project syndication,– by the promotion of public-private partnership (PPP), and– by encouraging joint ventures involving African public and private
enterprises and foreign direct investor.
The Bank is now increasing its emphasis on infrastructure through a variety of instruments designed:– to increase public sector effectiveness,– to strengthen the enabling environment,– to support private sector investment particularly local investors.
Greater Collaboration with development partners– Sharing of experiences between MDBs,– Discussion on possible collaboration with USAID on supporting
local bank credit for infrastructure.
AFRICAN DEVELOPMENT BANK 1040th Anniversary Edition
The road ahead, (more…)
Collaborate with central governments in RMCs to promote more decentralization.– Financially support decentralization policies.
Increase our commitments at the local level through direct or indirect financial instruments.– Show that we understand and believe that this approach can work.
Continue research of the best and sustainable structure to mitigate foreign exchange risk.
Policies in promoting private financePolicies in promoting private financeForFor
Local Government InfrastructureLocal Government Infrastructure
Washington, 01 October 2004Washington, 01 October 2004
Policies in promoting private financePolicies in promoting private financeForFor
Local Government InfrastructureLocal Government Infrastructure
Washington, 01 October 2004Washington, 01 October 2004
African Development Bank African Development Bank GroupGroup
African Development Bank African Development Bank GroupGroup