The Infrastructure Recovery and Assets (INFRA) Platform is designed to support counter-cyclical spending on infrastructure and protect existing assets and priority projects with the intention of providing the foundation for rapid recovery and job creation and to promote long term growth. Building on the $17.5 billion committed for infrastructure sectors in FY09, the Bank has already committed another $4.3 billion in the first quarter of FY10. The operations implemented under the INFRA platform have used the full range of World Bank tools and instruments ranging from development policy loans to additional financing. This note highlights some key INFRA interventions in different regions. I. Africa Reductions in private flows and fiscal space as a result of the crisis risks are impacting investments in infrastructure in Africa. The Bank has responded by approving $3.3 billion in lending for infrastructure sectors in FY2009 and an additional $151 million in the first quarter FY2010. i. Ghana. Large capital outflows, depreciation of the currency, fiscal and balance of payments deficits and a quick rise in inflation and interest rates have created a difficult environment for undertaking infrastructure investments in Ghana. In response to the new Government s request for exceptional and urgent support, the World Bank approved $294 million of infrastructure lending in FY2009. Key interventions include: The Economic Governance and Poverty Reduction Credit Program (June 2009), with $51 million infrastructure component, to support the authorities' efforts, in the midst of the current global crisis, to bring their fiscal stance to a sound and sustainable track and protect the country s development objectives. The Development Policy Operation (DPO) involved front loading of IDA assistance for Ghana. The $14 million Small Towns Water Supply and Sanitation Project Additional Finance (May 2009) to help the fiscally constrained Ghana government finance un-anticipated cost overruns in community water supply and sanitation. Ethiopia Ethiopia faces an unusually severe macro-economic environment, including the twin challenges of high inflation and low international reserves, as a result of the crisis. To help the government meet its infrastructure financing requirement in this difficult environment, $311 million in infrastructure lending was approved for Ethiopia in FY09. Key interventions include: i The $238 million Road Sector Development Program and Fourth Adaptable Program Loan Project (June 2009) to restore and expand Ethiopia's road network, which has become an obstacle to the sustainability of the economic development program, and to develop the institutional capacity of road agencies to properly manage the network in addition to infrastructure provision. The Program contributes to economic development by helping to stimulate and provide economic opportunities for the rural poor, providing access to essential services, creating employment in road works and maintenance operations, and assisting the development of appropriate and affordable means of transport. Nigeria The overall fiscal balance of the Nigerian government has worsened as oil prices have collapsed after the onset of the crisis. The consequent increase in financing requirements has created increased pressures on the domestic capital markets. The government continues to demonstrate clear commitment to continue with its public sector-led stimulus of the power sector, even as private investment resources become more 1
limited due to scarce liquidity, shrinking capital markets and dwindling investor appetite. The Bank is assisting the government in this through interventions such as: The Electricity and Gas Improvement Project (June 2009) to: (i) improve the availability and reliability of gas supply to increase power generation in existing public sector power plants; and (ii) improve the power network's capacity and efficiency to transmit and distribute quality electricity to the consumers. The assistance to the project consists of IBRD/IDA loans of $200 million and guarantees of $400 million. II. East Asia and Pacific Having undertaken structural and institutional reforms following the Asian Crisis in 1990 s, economies in the region have been able to better respond to the crisis. To mitigate the impacts of the current crisis, many countries have adopted stimulus packages with significant infrastructure components. The Bank has helped countries in the region prioritize infrastructure investments by approving $3.1 billion of infrastructure lending in FY09 and $403 million in the first quarter of FY10. Some notable interventions have taken place in China and Indonesia. i. China To counteract the effects of the crisis, China has announced a massive stimulus package of $586 billion, of which more than 70% is for infrastructure. This emphasis has been deliberately designed to focus on those sectors in which projects will generate significant and continuing long-term benefits as well as being capable of rapid implementation. The Bank s infrastructure lending to China was 2.1$ billion in FY2009. Key projects include $300 million for the NanGuang Railway Project (June 2009), to provide additional transport capacity and reduce transport time between the less developed western region of southwest China and the relatively more developed Pearl River Delta region. This is one of the first projects approved to support China s stimulus plan. $300 million for the Guiguang Railway Project (April 2009) to construct new double track electrified railway line of about 857 km and railway stations between Guiyang in Guizhou province and Guangzhou in Guangdong province. This project also supports China s stimulus plan. $129 million for the Jiangsu Water and Wastewater Project (June 2009) to improve the efficiency and effectiveness of water and wastewater services and reduce pollution discharges to local rivers in Jiangsu province. Indonesia The global financial and economic crisis has adversely affected access to financing for infrastructure in Indonesia. The cost of capital has increased while the availability of funding from foreign banks for undertaking large infrastructure projects has decreased. As a response to the crisis, the Indonesian Government is implementing a stimulus package of $6.3 billion of which, more than $1 billion has been allocated to infrastructure projects and rural empowerment programs with ability to generate jobs quickly. The Bank approved $0.7 billion of infrastructure lending for Indonesia in FY2009 and an additional $274 million in the first quarter of FY2010. Key projects include: 2
The $250 million Third Infrastructure Development Policy Loan (September 2009) to support Indonesia s effort to increase the level and effectiveness of infrastructure financing, which dropped significantly after the 1997 Asian financial crisis and is now the main constraint to Indonesia s growth potential. The loan is expected to help the government increase capital spending of infrastructure ministries by 25 percent, prepare competitive and transparent tenders for public-private partnership transactions, and result in $300 million worth of new water utility investments. The $100 million Indonesia Infrastructure Finance Facility Project (June 2009) to strengthen and further develop the institutional framework of the financial sector to facilitate financing of commercially viable infrastructure projects and thereby increase provision of private infrastructure in Indonesia. This project is being implemented jointly with several of Indonesia s other development partners including AusAID, ADB, and KfW. III. South Asia The region s economies have also been negatively impacted by the global crisis. The growth outlook of South Asia has been nearly halved from a peak GDP growth rate of 9 percent in 2006 to nearly 5 percent in 2009. There has been tightening of credit markets as seen in portfolio outflows, decline in external commercial borrowing, and an increase in spreads. This has created difficult conditions for undertaking large infrastructure investments. Towards mitigating the impact of the crisis on infrastructure sector, the Bank approved $1.9 billion for infrastructure in the region in FY2009 and $2.2 billion in the first quarter of FY2010. Some key interventions have taken place in India. i. India The impacts of the global crisis on the Indian economy have been more severe than initially anticipated; the demand for exports has fallen, domestic credit is constrained, and there has been a reversal of capital flows into India. New infrastructure projects have run into delays caused by problems in securing the necessary financing. The Indian government has reacted promptly and effectively to the crisis. Three fiscal stimulus packages were announced, accompanied by a series of monetary and financial measures to inject liquidity and support credit growth through the banking system. There is now a widespread recognition that an expanded program of investment in much-needed infrastructure is the appropriate response not just to sustain the domestic economy at a time of reduced global demand, but even more to lay the foundations for stronger future growth. To help maintain credit growth and continued infrastructure investments, the Bank has committed $2.2 billion to infrastructure sectors in India in the first quarter of FY2010, following the $0.9 billion committed in FY2009. Key interventions include: $1.2 billion for the India Infrastructure Finance Company Ltd. (IIFCL) (September 2009) to catalyze private financing for public-private partnerships in (PPPs) in infrastructure and stimulate the development of a long-term local currency debt financing market $1 billion for the Fifth Power System Development Project (September 2009) to help address India s acute deficit of power. The loan will help strengthen five transmission systems in the northern, western and southern regions of the country. This will facilitate the transfer of power from energy surplus regions to towns and villages in under-served regions of the country. $150 million for the Andhra Pradesh Rural Water Supply and Sanitation Project (September 2009), to improve water supply and sanitation services in 2,600 villages across 6 districts of the 3
state. The project aims to provide piped water to 2.1 million people and extend sanitation services to 1 million people who currently do not have access. IV. Eastern Europe and Central Asia After a decade of strong growth, the countries in Europe and Central Asia were the hardest hit by the financial crisis, as they experienced a sudden stop in capital inflows. They have been unable to implement countercyclical macroeconomic policies and infrastructure investments in the region are at risk. In response, the Bank has stepped up its infrastructure lending for the Region under the INFRA Platform by approving $4.9 billion or infrastructure sectors in the region in FY2009 and $ 0.7 billion in the first quarter of FY2010. Some notable interventions under the INFRA Platform have taken place in Kazakhstan and Turkey. i. Kazakhstan The deepening of the world economic crisis since September 2008 has had very negative repercussions in Kazakhstan. Kazakhstan has faced major challenges over the short run for sustaining economic growth, managing the state budget, and regulating the financial sector. It is in need of substantial financing for the construction of infrastructure not only to support investment activity during the time of budgetary difficulties, but also to provide balance of payments support and employment at a time of rising layoffs. The Bank approved $2.1 billion for infrastructure in FY2009 and $48 million in the first quarter of FY2010. A key intervention approved is: The $2.1 billion Kazakhstan South West Roads Project (April 2009) undertaken together with other development partners such EBRD, ADB, JICA, and Islamic Development Bank to increase transport efficiency on the road sections between Aktobe/Kyzylordaoblast border and Shymkent, and to improve road management and traffic safety in Kazakhstan. The project is part of the Government s strategy to stimulate economic growth and reduce poverty, by improving access to markets, as well as providing employment in the construction sector and related services. The project is expected to offer direct and indirect employment opportunities and help the economy come out of the crisis. Turkey The global economic downturn has worsened the outlook for Turkey, with an economic contraction of 3.6% forecast for 2009. In April 2009 the government released new budget estimates forecasting an overall fiscal deficit of 4.6 percent of GDP for 2009, falling to 3.2 percent in 2010 and 2.8 percent in 201. Having relied on substantial positive net capital inflows during the 2002-2007 period of high economic growth, Turkey s faces a major challenge in finding financing for its infrastructure sectors. Financing of suitable medium to long-term tenor is scarce in Turkey, particularly for investments for renewable energy and energy efficiency. Against this backdrop, the Bank committed $1.1 billion of infrastructure lending to Turkey in FY09. Key interventions include: $500 million for Turkey Private Sector Renewable Energy and Energy Efficiency Project (May 2009) to help increase privately owned and operated energy production from indigenous renewable sources within the market-based framework of the Turkish electricity market law, enhance energy efficiency, and thereby help reduce greenhouse gas emissions. A component of the project involves the use of CTF resources with lower interest rates and significantly longer tenor to increase the incentive to undertake RE and EE projects. 4
$ 640 million for the Turkey Programmatic Electricity Sector DPL (June 2009) to support the implementation of the Government's program for the electricity sector, including pricing, market and energy efficiency reforms that are vital or the sector and for the economy as a whole. The DPL will help mitigate the impact of the crisis, protect the composition of public spending and channel adequate resources to crisis mitigation measures, including employment intensive public investment in the electricity sectors. V. Latin America and Caribbean Latin American and Caribbean countries are relying greatly on stimulus packages to respond to the crisis. Infrastructure investments are central part of these stimulus plans. Governments in the region plan to invest an additional US$25 billion in 2009 in public works about 20 percent beyond the originally planned budget allocations. The Bank has supported governments in the region by committing $2.9 billion for infrastructure in FY09 and $0.8 billion in the first quarter of FY10. i. Colombia The government is prioritizing infrastructure investments as part of its countercyclical policy to mitigate the impacts of the crisis. To assist the government, the Bank approved $320 million in lending for infrastructure sectors in the first quarter of FY2010 following $452 million committed in FY2009. Key interventions include: $355 million loan for Third Sustainable Development DPL (December 2008) to support environmental policy. $300 million for Colombia Integrated Mass Transit Systems Projects (August 2009) to: (i) develop high quality and sustainable Bus Rapid Transit System (BRTS) in participating cities to improve mobility along strategic mass transit corridors; (ii) improve accessibility to public transportation for the poor; and (iii) build greater institutional capacity in the Borrower's public transportation institutions in order to formulate integrated urban transport policies, and to improve urban transport planning and traffic management. $20 million for Solid Waste Management Program Project (August 2009) to improve the quality and coverage of integrated solid waste management services, including through construction of solid waste management infrastructure consisting of civil works, equipment and services Brazil To mitigate the impacts of the crisis, the Brazilian government will spend an additional $ 6.3 billion on projects, including $2.5 billion for infrastructure investments, to maintain overall demand. The government sees investments in infrastructure as a key measure to counter the effects of the unfolding global financial and economic crisis. However, the government anticipates a shortfall in revenues in 2009, which will limit its ability to finance priority investment programs, including this program. To help the government prioritize infrastructure in this environment, the Bank committed $729 million for infrastructure sectors in FY2009 and $496 million in the first quarter of FY2010. Key interventions include: $167 million for the Sao Paulo Feeder Roads Project (July 2009) to improve the efficiency of the paved municipal road network. 5
$212 million for the Second Rio de Janeiro Mass Transit Project (July 2009) to: a) improve the level-of-service provided to the suburban rail transport users in Rio de Janeiro Metropolitan Region (RJMR) in a safe and cost-efficient manner; and b) to improve the transport management and policy framework in the RJMR. VI. Middle East and North Africa Middle East and North Africa countries face lower oil revenues, tourism revenues, remittances, and foreign direct investment as a result of the global crisis all of which is likely to weaken economic performance. The Bank committed $1.3 billion for infrastructure sectors in the region in FY2009. i. Tunisia The Tunisian government is undertaking 20% increase in investment in 2009 to finance large infrastructure projects to offset the potential negative impact of the global financial crisis on growth. The Bank committed $22 million for infrastructure projects in Tunisia in FY2009. Key interventions include: $5.5 million for the Energy Efficiency Project (June 2009) to scale up industrial energy efficiency and cogeneration investments, and thereby contribute to the government's new four-year energy conservation program. The direct and indirect social impacts of the project on the population include employment and training in the fields of energy efficiency (EE) and renewable energy (RE) specialists, reduction in pollution levels, and, once EE and RE investments are underway, an eventual reduction in the subsidy budget dedicated to energy that could result in increased government resources going to social sectors $16 million for the Second Water Sector Investment Project (May 2009) to promote more efficient management and operation of selected public irrigation schemes by participating farmers; to improve access and consumption of drinking water for rural households in communities; and to assist Ministry of Agriculture and Water Resources, Ministry of Environment and Sustainable Development, and other stakeholders to make better decisions relating to integrated water resources management in Tunisia 6