Economies with Private Participation in Infrastructure by Number of Sectors, 1990-2001 ' -' INFRASTRUCTURE SECTORS •Energy •Telecommunications No data No sectors - 1 sector 2 sectors - 3 sectors - 4 sectors •Transport •Water and sewerage - ........ --- I , illl •". New Zealand , L Th is map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of Th e World Bank Group, any iudgment on the legal status of any territory, or any endorsement or acceptance of such boundaries . Anrarctica Foreword x Acknowledgments xiii Overview Overview Growth and Decline of Private Activity in Infrastructure 2 Regional Trends 2 Sectora I Trends 3 Trends by Type of Private Activity 4 Trends by Country Income Group 5 Country Concentrations 6 Regional Review Sectoral Review 2 East Asia and Pacific 23 8 Electricity 93 Electricity 23 Natural Gas Transmission and Distribution 24 9 Natural Gas Transmission and Distribution 106 Telecommunications 24 Transport 25 1OTelecommunications 115 Water and Sewerage 26 11 Transport 126 3 Europe and Central Asia 35 Airports 127 Electricity 35 Railways 128 Natural Gas Transmission and Distribution 36 Seaports 129 Telecommunications 36 Toll Roads 130 Transport 37 Water and Sewerage 38 12Water and Sewerage 144 4 Latin America and the Caribbean 47 Electricity 48 Appendixes Natural Gas Transmission and Distribution 49 Telecommunications 49 Criteria and Terminology of the Private Transport 50 Participation in Infrastructure Project Database 155 Water and Sewerage 51 2 Annual Investment in Infrastructure Projects with 5 Middle East and North Africa 61 159 Private Participation in Developing Countries Electricity 61 Natural Gas Transmission and Distribution 62 Telecommunications 62 Transport 62 Water and Sewerage 63 6 South Asia 71 Electricity 71 Natural Gas Transmission and Distribution 72 Telecommunications 72 Transport 72 Water and Sewerage 73 7 Sub-Saharan Africa 81 Electricity 82 Natural Gas Transmission and Distribution 82 Telecommunications 82 Transport 83 Water and Sewerage 83 iv Boxes 1.1 Private Participation in Infrastructure Project Database 7 1.2 Canceled Infrastructure Projects with Private Participation 8 1.3 Private Sector Share ofT otal Investment in Infrastructure 9 1.4 Top Sponsors of Infrastructure Projects with Private Participation in Developing Countries 11 2.1 Largest Infrastructure Projects with Private Participation in East Asia and Pacific 27 2.2 Top Sponsors of Infrastructure Projects with Private Participation in East Asia and Pacific 28 3.1 Largest Infrastructure Projects with Private Participation in Europe and Central Asia 39 3.2 Top Sponsors of Infrastructure Projects with Private Participation in Europe and Central Asia 40 4.1 Largest Infrastructure Projects with Private Participation in Latin America and the Caribbean 52 4.2 Top Sponsors of Infrastructure Projects with Private Participation in Latin America and the Caribbean 53 5.1 Largest Infrastructure Projects with Private Participation in the Middle East and North Africa 64 5.2 Top Sponsors of Infrastructure Projects with Private Participation in the Middle East and North Africa 65 6.1 Largest Infrastructure Projects with Private Participation in South Asia 74 6.2 Top Sponsors of Infrastructure Projects with Private Participation in South Asia 75 7.1 Largest Infrastructure Projects with Private Participation in Sub-Saharan Africa 84 7.2 Top Sponsors of Infrastructure Projects with Private Participation in Sub-Saharan Africa 85 8.1 Largest Electricity Projects with Private Participation in Developing Countries 96 8.2 Top Sponsors of Electricity Projects with Private Participation in Developing Countries 97 9.1 Largest Natura I Gas Transmission and Distribution Projects with Private Participation in Developing Countries 108 9.2 Top Sponsors of Natural Gas Transmission and Distribution Projects with Private Participation in Developing Countries 109 10.1 Largest Telecommunications Projects with Private Participation in Developing Countries 118 10.2 Top Sponsors ofTelecommunications Projects with Private Participation in Developing Countries 119 11.1 Largest Transport Projects with Private Participation in Developing Countries 131 11.2 Top Sponsors ofTransport Projects with Private Participation in Developing Countries 132 12.1 Largest Water and Sewerage Projects with Private Participation in Developing Countries 146 12.2 Top Sponsors of Water and Sewerage Projects with Private Participation in Developing Countries 147 Figures Crying Out for Reform: Public Provision of Infrastructure in Developing Countries in the Early 1990s x 2 The Legacy of Public Provision of Infrastructure: Cost Recovery Levels in Developing Countries in the Early 1990s xi 1.1 Annual Investment in Infrastructure Projects with Private Participation, Developing Countries, 1990-2001 12 1.2 Infrastructure Projects with Private Participation by Year of Financial Closure, Developing Countries, 1990-2001 12 1.3 Annual Investment in Infrastructure Projects with Private Participation by Destination, Developing Countries, 1990-2001 13 1.4 Annual Investment in Infrastructure Projects with Private Participation by Sector or Subsector, Developing Countries, 1990-2001 13 1.5 Annual Investment in Infrastructure Projects with Private Participation by Region, Developing Countries, 1990-2001 14 1.6 Cumulative Investment in Infrastructure Projects with Private Participation by Region, Developing Countries, 1990-2001 14 1.7 Cumulative Investment in Infrastructure Projects with Private Participation by Region and Type, Developing Countries, 1990-2001 15 1.8 Cumulative Investment in Infrastructure Projects with Private Participation by Sector or Subsector, Developing Countries, 1990-2001 16 1.9 Annual Investment in Infrastructure Projects with Private Participation by Type, Developing Countries, 1990-2001 17 Regional Review Sectoral Review 8 Electricity 93 2 East Asia and Pacific 23 Electricity 23 24 9 Natural Gas Transmission and Distribution 106 Natural Gas Transmission and Distribution Telecommunications 24 25 1OTelecommunications 115 Transport Water and Sewerage 26 11 Transport 126 35 Airports 127 3 Europe and Central Asia 35 Railways 128 Electricity 36 Seaports 129 Natural Gas Transmission and Distribution 36 Toll Roads 130 Telecommunications Transport 37 38 12Water and Sewerage 144 Water and Sewerage 4 Latin America and the Caribbean 47 Electricity 48 Appendixes Natural Gas Transmission and Distribution 49 Telecommunications 49 Criteria and Terminology of the Private Transport 50 Participation in Infrastructure Project Database 155 Water and Sewerage 51 2 Annual Investment in Infrastructure Projects with 5 Middle East and North Africa 61 159 Private Participation in Developing Countries Electricity 61 Natural Gas Transmission and Distribution 62 Telecommunications 62 Transport 62 Water and Sewerage 63 6 South Asia 71 Electricity 71 Natural Gas Transmission and Distribution 72 Telecommunications 72 Transport 72 Water and Sewerage 73 7 Sub-Saharan Africa 81 Electricity 82 Natural Gas Transmission and Distribution 82 Telecommunications 82 Transport 83 Water and Sewerage 83 v Figures 1.10 Annual Investment in Infrastructure Projects with Private Participation by Income Group, Developing Countries, 1990-2001 18 1.11 Cumulative Investment in Infrastructure Projects with Private Participation by Sector or Subsector, Upper-Middle-Income Countries, 1990-2001 18 1.12 Cumulative Investment in Infrastructure Projects with Private Participation by Sector or Subsector, Lower-Middle-Income Countries, 1990-2001 19 1.13 Cumulative Investment in Infrastructure Projects with Private Participation by Sector or Subsector, Low-Income Countries, 1990-2001 19 2.1 Annual Investment in Infrastructure Projects with Private Participation, East Asia and Pacific, 1990-2001 29 2.2 Infrastructure Projects with Private Participation by Year of Financial Closure, East Asia and Pacific, 1990-2001 30 2.3 Cumulative Investment in Infrastructure Projects with Private Participation by Type, East Asia and Pacific, 1990-2001 31 2.4 Cumulative Investment in Infrastructure Projects with Private Participation by Sector or ' Subsector, East Asia and Pacific, 1990-2001 32 2.5 Cumulative Investment in Infrastructure Projects with Private Participation by Sector and Type, East Asia and Pacific, 1990-2001 33 2.6 Annual Investment in Electricity Projects with Private Participation by Type, East Asia and Pacific, 1990-2001 33 2.7 Electricity Projects with Private Participation by Year of Financial Closure and Type of Activity, East Asia and Pacific, 1990-2001 34 3.1 Annual Investment in Infrastructure Projects with Private Participation, Europe and Central Asia, 1990-2001 41 3.2 Infrastructure Projects with Private Participation by Year of Financial Closure, Europe and Central Asia, 1990-2001 42 3.3 Cumulative Investment in Infrastructure Projects with Private Participation by Type, Europe and Central Asia, 1990-2001 43 '" 3.4 Cumulative Investment in Infrastructure Projects with Private Participation by Sector or I• Subsector, Europe and Central Asia, 1990-2001 44 3.5 Cumulative Investment in Infrastructure Projects with Private Participation by Sector and Type, Europe and Central Asia, 1990-2001 45 3.6 Annual Investment in Electricity Projects with Private Participation by Type, Europe and Centra I Asia, 1990-2001 45 4.1 Annual Investment in Infrastructure Projects with Private Participation by Destination, Latin America and the Caribbean, 1990-2001 54 4.2 Annual Investment in Infrastructure Projects with Private Participation, Latin America and the Caribbean, 1990-2001 55 4.3 Infrastructure Projects with Private Participation by Year of Financial Closure, Latin America and the Caribbean, 1990-2001 55 4.4 Cumulative Investment in Infrastructure Projects with Private Participation by Type, Latin America and the Caribbean, 1990-2001 57 4.5 Annual Investment in Electricity Projects with Private Participation by Destination, Latin America and the Caribbean, 1990-2001 58 4.6 Cumulative Investment in Infrastructure Projects with Private Participation by Sector or Subsector, Latin America and the Caribbean, 1990-2001 58 4.7 Cumulative Investment in Infrastructure Projects with Private Participation by Sector and Type, Latin America and the Caribbean, 1990-2001 59 4.8 Annual Investment in Electricity Projects with Private Participation by Type, Latin America and the Caribbean, 1990-2001 59 4.9 Annual Investment in Telecommunications Projects with Private Participation by Destination, Latin America and the Caribbean, 1990-2001 60 5.1 Annual Investment in Infrastructure Projects with Private Participation, Middle East and North Africa, 1990-2001 66 5.2 Infrastructure Projects with Private Participation by Year of Financial Closure, Middle East and North Africa, 1990-2001 67 5.3 Cumulative Investment in Infrastructure Projects with Private Participation by Type, Middle East and North Africa, 1990-2001 68 5.4 Cumulative Investment in Infrastructure Projects with Private Participation by Sector or Subsector, Middle East and North Africa, 1990-2001 ~ 69 5.5 Cumulative Investment in Infrastructure Projects with Private Participation by Sector and Type, Middle East and North Africa, 1990-2001 70 vi Figures 6.1 Annual Investment in Infrastructure Projects with Private Participation, South Asia, 1990-2001 76 6.2 Infrastructure Projects with Private Participation by Year of Financial Closure, South Asia, 1990-2001 77 6.3 Cumulative Investment in Infrastructure Projects with Private Participation by Type, South Asia, 1990-2001 78 6.4 Cumulative Investment in Infrastructure Projects with Private Participation by Sector or Subsector, South Asia, 1990-2001 79 6.5 Cumulative Investment in Infrastructure Projects with Private Participation by Sector and Type, South Asia, 1990-2001 80 7.1 Annual Investment in Infrastructure Projects with Private Participation, Sub-Saharan Africa, 1990-2001 86 7.2 Infrastructure Projects with Private Participation by Year of Financial Closure, Sub-Saharan Africa, 1990-2001 87 7.3 Cumulative Investment in Infrastructure Projects with Private Participation by Type, Sub-Saharan Africa, 1990-2001 88 7.4 Cumulative Investment in Infrastructure Projects with Private Participation by Sector or Subsector, Sub-Saharan Africa, 1990-2001 89 7.5 Cumulative Investment in Infrastructure Projects with Private Participation by Sector and Type, Sub-Saharan Africa, 1990-2001 90 8.1 Annual Investment in Electricity Projects with Private Participation, Developing Countries, 1990-2001 98 8.2 Annual Investment in Electricity Projects with Private Participation by Destination, Developing Countries, 1990-2001 98 8.3 Electricity Projects with Private Participation by Year of Financial Closure, Developing Countries, 1990-2001 99 8.4 Cumulative Investment in Electricity Projects with Private Participation by Type, Developing Countries, 1990-2001 99 8.5 Annual Investment in Electricity Projects with Private Participation by Type, Developing Countries, 1990-2001 100 8.6 .Cumulative Investment in Electricity Projects with Private Participation by Region, Developing Countries, 1990-2001 101 8.7 Annual Investment in Electricity Projects with Private Participation by Segment, Developing Countries, 1990-2001 103 8.8 Cumulative Number of Developing Countries with Private Participation in Electricity, 1990-2001 104 8.9 Cumulative Investment in Greenfield Electricity Projects with Private Participation by Segment, Developing Countries, 1990-2001 104 8.10 Cumulative Investment in Privatized Electricity Companies by Segment, Developing Countries, 1990-2001 105 8.11 Privatizations of Electricity Distribution Companies and Integrated Utilities by Year of Fi nancia I Closure, Developing Countries, 1990-2001 105 9.1 Annual Investment in Natural Gas Transmission and Distribution Projects with Private Participation, Developing Countries, 1990-2001 110 9.2 Natural Gas Transmission and Distribution Projects with Private Participation by Year of Financial Closure, Developing Countries, 1990-2001 110 9.3 Cumulative Investment in Natural Gas Transmission and Distribution Projects with Private Participation by Type, Developing Countries, 1990-2001 111 9.4 Cumulative Investment in Natural Gas Transmission and Distribution Projects with Private Participation by Region, Developing Countries, 1990-2001 112 9.5 Annual Investment in Natural Gas Transmission and Distribution Projects with Private Participation by Segment, Developing Countries, 1990-2001 114 10.1 Annual Investment in Telecommunications Projects with Private Participation, Developing Countries, 1990-2001 120 10.2 Annual Investment in Telecommunications Projects with Private Participation by Destination, Developing Countries, 1990-2001 120 10.3 Telecommunications Projects with Private Participation by Year of Financial Closure, Developing Countries, 1990-2001 121 10.4 Cumulative Investment in Telecommunications Projects with Private Participation by Type, Developing Countries, 1990-2001 121 10.5 Cumulative Investment in Telecommunications Projects with Private Participation by Region, Developing Countries, 1990-2001 122 vii Figures 10.6 Annual Investment in Telecommunications Projects with Private Participation by Segment, Developing Countries, 1990-2001 125 11.1 Annual Investment in Transport Projects with Private Participation, Developing Countrie~ 1990-2001 133 11.2 Transport Projects with Private Participation by Year of Financial Closure, Developing Countries, 1990-2001 133 11.3 Cumulative Investment in Transport Projects with Private Participation by Type, Developing Countries, 1990-2001 134 11.4 Cumulative Investment in Transport Projects with Private Participation by Region, Developing Countries, 1990-2001 135 11.5 Annual Investment in Transport Projects with Private Participation by Subsector, Developing Countries, 1990-2001 137 11.6 Cumulative Investment in Airport Projects with Private Participation by Region, Developing Countries, 1990-2001 138 11 .7 Cumulative Investment in Railway Projects with Private Participation by Region, I• Developing Countries, 1990-2001 139 11 .8 Cumulative Investment in Seaport Projects with Private Participation by Region, Developing Countries, 1990-2001 141 11 .9 Cumulative Investment in Toll Road Projects with Private Participation by Region, Developing Countries, 1990-2001 142 12.1 Annual Investment in Water and Sewerage Projects with Private Participation, Developing Countries, 1990-2001 148 12.2 Water and Sewerage Projects with Private Participation by Year of Financial Closure, Developing Countries, 1990-2001 148 12.3 Cumulative Investment in Water and Sewerage Projects with Private Participation by Type, Developing Countries, 1990-2001 149 12.4 Cumulative Investment in Water and Sewerage Projects with Private Participation by Region, Developing Countries, 1990-2001 150 12.5 Cumulative Number of Developing Countries with Private Participation in Water and I\ Sewerage, 1990-2001 151 12.6 Annual Investment in Water and Sewerage Projects with Private Participation by Segment, Developing Countries, 1990-2001 152 Tables 1.1 Private Participation in Infrastructure by Region, Developing Countries, 1990-2001 15 1.2 Private Participation in Infrastructure by Sector, Developing Countries, 1990-2001 16 1.3 Private Participation in Infrastructure by Type, Developing Countries, 1990-2001 17 1.4 Top 10 Developing Countries by Cumulative Investment in Infrastructure Projects with Private Participation, 1990-2001 20 1.5 Top 10 Developing Countries by Per Capita Cumulative Investment in Infrastructure Projects with Private Participation, 1990-2001 20 1.6 Top 10 Developing Countries by Cumulative Investment in Infrastructure Projects with Private Participation as a Share of GDP, 1990-2001 21 2.1 Annual Investment in Infrastructure Projects with Private Participation by Sector, East Asia and Pacific, 1990-2001 29 2.2 Top Five Countries by Cumulative Investment in Infrastructure Projects with Private Participation, East Asia and Pacific, 1990-2001 30 2.3 Top Five Countries by Per Capita Cumulative Investment in Infrastructure Projects with Private Participation, East Asia and Pacific, 1990-2001 31 2.4 Infrastructure Projects with Private Participation by Sector and Type, East Asia and Pacific, 1990-2001 32 2.5 Annual Investment in Transport Projects with Private Participation by Subsector, East Asia and Pacific, 1990-2001 34 3.1 Annual Investment in Infrastructure Projects with Private Participation by Sector, Europe and Central Asia, 1990-2001 41 3.2 Top Five Countries by Cumulative Investment in Infrastructure Projects with Private Participation, Europe and Central Asia, 1990-2001 42 3.3 Top Five Countries by Per Capita Cumulative Investment in Infrastructure Projects with Private Participation, Europe and Central Asia, 1990-2001 43 I "" viii Tables 3.4 Infrastructure Projects with Private Participation by Sector and Type, Europe and Central Asia, 1990-2001 44 3.5 Annual Investment in Transport Projects with Private Participation by Subsector, Europe and Central Asia, 1990-2001 46 4.1 Annual Investment in Infrastructure Projects with Private Participation by Sector, Latin America and the Caribbean, 1990-2001 54 4.2 Top Five Countries by Cumulative Investment in Infrastructure Projects with Private Participation, Latin America and the Caribbean, 1990-2001 56 4.3 Top Five Countries by Per Capita Cumulative Investment in Infrastructure Projects with Private Participation, Latin America and the Caribbean, 1990-2001 56 4.4 Infrastructure Projects with Private Participation by Sector and Type, Latin America and the Caribbean, 1990-2001 57 4.5 Annual Investment in Transport Projects with Private Participation by Subsector, Latin America and the Caribbean, 1990-2001 60 5.1 Annual Investment in Infrastructure Projects with Private Participation by Sector, I• Middle East and North Africa, 1990-2001 66 5.2 Top Five Countries by Cumulative Investment in Infrastructure Projects with Private Participation, Middle East and North Africa, 1990-2001 67 5.3 Top Five Countries by Per Capita Cumulative Investment in Infrastructure Projects with Private Participation, Middle East and North Africa, 1990-2001 68 5.4 Infrastructure Projects with Private Participation by Sector and Type, Middle East and North Africa, 1990-2001 69 5.5 Annual Investment in Transport Projects with Private Participation by Subsector, Middle East and North Africa, 1990-2001 70 6.1 Annual Investment in Infrastructure Projects with Private Participation by Sector, South Asia, 1990-2001 76 6.2 Top Five Countries by Cumulative Investment in Infrastructure Projects with Private Participation, South Asia, 1990-2001 77 6.3 Top Five Countries by Per Capita Cumulative Investment in Infrastructure Projects with Private Participation, South Asia, 1990-2001 78 6.4 Infrastructure Projects with Private Participation by Sector and Type, South Asia, 1990-2001 79 6.5 Annual Investment in Transport Projects with Private Participation by Subsector, South Asia, 1990-2001 80 7.1 Annual Investment in Infrastructure Projects with Private Participation by Sector, Sub-Saharan Africa, 1990-2001 86 7.2 Top Five Countries by Cumulative Investment in Infrastructure Projects with Private Participation, Sub-Saharan Africa, 1990-2001 87 7.3 Top Five Countries by Per Capita Cumulative Investment in Infrastructure Projects with Private Participation, Sub-Saharan Africa, 1990-2001 88 7.4 Infrastructure Projects with Private Participation by Sector and Type, Sub-Saharan Africa, 1990-2001 89 7.5 Annual Investment in Transport Projects with Private Participation by Subsector, Sub-Saharan Africa, 1990-2001 90 8.1 Electricity Projects with Private Participation by Type, Developing Countries, 1990-2001 100 8.2 Private Participation in Electricity by Region, Developing Countries, 1990-2001 101 8.3 Top Five Developing Countries by Cumulative Investment in Electricity Projects with Private Participation, 1990-2001 102 8.4 Top Five Developing Countries by Per Capita Cumulative Investment in Electricity Projects with Private Participation, 1990-2001 102 8.5 Private Participation in Electricity by Segment, Developing Countries, 1990-2001 103 9.1 Natural Gas Transmission and Distribution Projects with Private Participation by Type, Developing Countries, 1990-2001 111 9.2 Private Participation in Natural Gas Transmission and Distribution by Region, Developing Countries, 1990-2001 112 9.3 Top Five Developing Countries by Cumulative Investment in Natural Gas Transmission and Distribution Projects with Private Participation, 1990-2001 113 9.4 Top Five Developing Countries by Per Capita Cumulative Investment in Natural Gas Transmission and Distribution Projects with Private Participation, 1990-2001 113 9.5 Private Participation in Natural Gas Transmission and Distribution by.Segment, Developing Countries, 1990-2001 114 ix Tables 10.1 Telecommunications Projects with Private Participation by Type, Developing Countries, 1990-2001 122 10.2 Private Participation in Telecommunications by Region, Developing Countries, 1990-2001 123 10.3 Top Five Developing Countries by Cumulative Investment in Telecommunications Projects with Private Participation, 1990-2001 123 10.4 Top Five Developing Countries by Per Capita Cumulative Investment in Telecommunications Projects with Private Participation, 1990-2001 124 10.5 Private Participation in Telecommunications by Segment, Developing Countries, 1990-2001 124 11.1 Transport Projects with Private Participation by Type, Developing Countries, 1990-2001 134 11.2 Private Participation in Transport by Region, Developing Countries, 1990-2001 135 11.3 Top Five Developing Countries by Cumulative Investment in Transport Projects with Private Participation, 1990-2001 136 11.4 Top Five Developing Countries by Per Capita Cumulative Investment in Transport Projects with Private Participation, 1990-2001 136 11.5 Private Participation in Transport by Subsector, Developing Countries, 1990-2001 137 I• 11.6 Private Participation in Airports by Region, Developing Countries, 1990-2001 138 11.7 Private Participation in Airports by Segment, Developing Countries, 1990-2001 139 11.8 Private Participation in Railways by Region, Developing Countries, 1990-2001 140 11.9 Private Participation in Railways by Segment, Developing Countries, 1990-2001 140 11.10 Private Participation in Seaports by Region, Developing Countries, 1990-2001 141 11.11 Private Participation in Seaports by Segment, Developing Countries, 1990-2001 142 11.12 Private Participation in Toll Roads by Region, Developing Countries, 1990-2001 143 11.13 Private Participation in Toll Roads by Segment, Developing Countries, 1990-2001 143 12.1 Water and Sewerage Projects with Private Participation by Type, Developing Countries, 1990-2001 149 12.2 Private Participation in Water and Sewerage by Region, Developing Countries, 1990-2001 150 12.3 Top Five Developing Countries by Cumulative Investment in Water and Sewerage Projects with Private Participation, 1990-2001 151 12.4 Top Five Developing Countries by Per Capita Cumulative Investment in Water and Sewerage Projects with Private Participation, 1990-2001 152 12.5 Private Participation in Water and Sewerage by Segment, Developing Countries, 1990-2001 153 A2.1 Annual Investment in Infrastructure Projects with Private Participation by Region and Type, Developing Countries, 1990-2001 159 A2.2 Annual Investment in Infrastructure Projects with Private Participation by Sector and Type, Developing Countries, 1990-2001 160 A2.3 Annual Investment in Infrastructure Projects with Private Participation by Income Group and Sector, Developing Countries, 1990-2001 161 A2.4 Annual Investment in Infrastructure Projects with Private Participation by Sector and Segment, Developing Countries, 1990-2001 162 x Foreword Governments around the world, rich and poor alike, struggle with the challenge of providing modern, efficient, and affordable infrastructure services for their people. This challenge is particularly acute for developing countries, where inadequate infrastructure acts as a significant constraint on economic growth and has a direct impact on the living standards of households. Indeed, some 1.2 billion people lack access to electricity and adequate sanitation, more than 1 billion lack access to clean water, and many have never used a telephone. For most of the 20th century developing countries looked to their public sectors as the exclusive financiers and operators of infrastructure services. Too often, however, the results proved disappointing. State-owned monopolies were typically charged with multiple objectives, subject to relentless political interference, and plagued by inefficiency. Infrastructure prices in particular tended to be driven by short-term political considerations, often resulting in inadequate revenues even to maintain services, let alone finance service expansion. Costs of technical inefficiency and mispricing were large relative to total public investment (figure 1). Figure 1 Crying Out for Reform: Public Provision of Infrastructure in Developing Countries in the Early 1990s 200 150 100 ., "' > ., a_ ~ 50 ~ :0 ~ Vl :::> 0 Subsidies through Costs of technical Public investment mispricing inefficiency Source: World Bank, World Development Report 1994 (New York: Oxford University Press, 1994). By the late 1980s growing frustration with these problems, coupled with budget constraints, led to a search for alternatives. Reflecting positive experience in Chile and the United Kingdom, the key feature of the new approach was for the state to focus on its role as a policymaker and a regulator and to delegate the financing and operation of services to private firms. Involving the private sector in the financing and operation of infrastructure promised several benefits. Well-designed arrangements for private participation allow commercial discipline to be introduced in the delivery of services, improving efficiency and lowering costs. In activities where competition is feasible, private participation is a critical strategy for tapping the additional benefits competition can offer in efficiency and consumer responsiveness. And in activities where competition is not feasible-which, despite technological progress, xi is still the case for many services-private participation can be used as a mechanism for governments to enter into credible commitments to cost-covering tariffs and commercial operation, thus helping to break past patterns of political interference and unsustainable pricing. The result can be more and better services and a reduced burden on strained public budgets. Experience in 1990-2001-the period covered by this book-shows that the promised benefits can indeed be realized. 1 Involving the private sector in the management and operation of existing enterprises has in most cases been accompanied by dramatic improvements in service quality and coverage. And the private sector has helped finance and operate a range of new infrastructure assets-from power plants and telecommunications networks to roads and gas pipelines-with improvements in operating efficiency and significant savings to taxpayers. Reflecting this positive experience, in 1990-2001 nearly 2,500 private infrastructure projects were implemented in 132 developing countries, mobilizing investment of some $754 billion. But experience over this period also shows that implementing the new paradigm is not easy. There are myriad technical issues surrounding the design of effective policy and regulatory frameworks, ranging from details of risk allocation to the design of markets, subsidy schemes, regulatory institutions, and tariff adjustment mechanisms. Notions of best practice on these issues have been evolving rapidly, particularly on how best to adapt models from industrial countries to the circumstances of developing countries. But in many cases the key challenge is political rather than technocratic: how to manage the transition to infrastructure provision on a more commercial basis. In this respect a major challenge facing many governments has been how to implement and sustain commitments to cost-covering tariffs for services that had long been heavily subsidized under public ownership. Reflecting a legacy of past practices, this challenge is typically more acute for water and electricity than for telecommunications (figure 2). Indeed, progress in introducing private participation to a large degree reflects these sectoral differences. Figure 2 The Legacy of Public Provision of Infrastructure: Cost Recovery Levels in Developing Countries in the Early 1990s 1.8 1.6 1.4 1.2 1.0 Vl ..... Vl 8 0.8 .8 Vl Q) ::::l 0.6 c Q) ~ 0.4 4-- 0 0 0.2 ·~ 0:: 0 Telecoms Gas Power Water Source: World Bank, World Development Report 1994 (New York: Oxford Un iversity Press, 1994). xii Experience in 1990-2001 shows, too, that private participation in infrastructure is not immune from broader economic shocks. Crises in East Asia, the Russian Federation, and Argentina tested the durability of private infrastructure schemes. Those stresses were greatest for services that involved financing commitments in foreign currency yet depended on revenues in local currency. Experience in East Asia also highlighted that those stresses can be further exacerbated when governments have focused on introducing private participation in greenfield bulk supply projects before ensuring that the retail segments of these industries were operating on a fully commercial basis. Annual investment flows to private infrastructure projects in developing countries grew dramatically from 1990 to 1997, but by 2001 had fallen back to the levels of the mid- l 990s. Recent declines can be explained by several factors. Investment flows tend to be lumpy, and the record highs in 1997 and 1998 reflected major privatization transactions in Brazil that would have been difficult to sustain in any environment. But the broader environment also deteriorated from the late 1990s. Economic crises in several developing regions had a chilling effect on many investors, as did attempts by some governments to repudiate their contractual commitments. And toward the end of this period corporate-level problems affecting some of the major international investors, coupled with declining equity markets in industrial countries, also curbed interest in developing country infrastructure projects. Future prospects will depend on the willingness and ability of governments to grapple with the underlying reforms and to create opportunities attractive to private investors, who can be expected to be more discriminating than in the mid- l 990s. This book looks at how the private infrastructure paradigm played out in developing countries in 1990-2001, examining trends globally and in particular sectors and regions. The data it presents are drawn from the World Bank's Private Participation in Infrastructure Project Database. The database was created in the early 1990s by what is now the Private Provision of Public Services Group of the World Bank. At the time the database was created the trend toward private participation was still in its infancy, and few expected that private infrastructure would grow beyond a niche activity in a few countries. It is hoped that this book will help to illuminate one of the most remarkable stories in infrastructure delivery in generations. Warrick Smith MANAGER Private Provision of Public Services Group The World Bank Note 1. See Clive Harris, "The Beginning of the End or the End of the Beginning? A Review of Private Participation in Infrastructure in Developing Countries," Report 24691-PE (World Bank. Wash- ington, D.C., 2003). ':l - - xiii Acknowledgments This book was prepared by a team led by Ada Karina Izaguirre and comprising Shelly Hahn, Kathy Khuu, and Jonathan Nellis. Timothy Irwin and Warrick Smith provided valuable comments and contributions. The book draws on the Private Participation in Infrastructure Project Database, which was launched in the early 1990s under the direction of Michael Klein and has been developed by the work of numerous consultants and research assistants since that time. Monika Kosior provided invaluable assistance with the production of the book. Preparation of the book benefited from the financial support of the Public-Private Infrastructure Advisory Facility (PPIAF). I\ I Overview 1 1 Overview The coverage and quality of a country's infrastructure play a vital part in economic growth, with direct and indirect effects in reducing poverty. From the 1950s until the 1990s most developing countries relied on public sector monopolies to deliver electricity, telecommunications, transport infrastructure, and water and sewerage services. Progress in expanding service coverage has been slow. An estimated 1.2 billion people in the developing world have no access to electricity, more than 1 billion lack access to clean water, and nearly 1.2 billion lack adequate sanitation. 1 Moreover, inefficiency has been high. Technical inefficiencies in roads, railways, power, and water alone caused losses estimated at $55 billion a year in the early 1990s-equivalent to 1% of the GDP of all developing countries, • a quarter of their annual investment in infrastructure, and twice the annual development finance for infrastructure in the developing world. 2 Disenchantment with past approaches to providing infrastructure services, coupled with tightening budget constraints, led governments to explore how best to harness the benefits of private participation. In doing so, governments also reexamined their own role and are seeking to transform it-moving away from being the exclusive financiers, managers, and operators of infrastructure to being facilitators and regulators of services provided by private firms. All this launched a trend of liberalizing and privatizing infrastructure, beginning in a few countries in the 1980s. According to the World Bank's Private Participation in Infrastructure (PPI) Project Database, 26 developing countries awarded 72 infrastructure projects with private participation in 1984-89, attracting almost $19 billion in investment commitments. 3 In the 1990s the trend turned into a wave that swept the developing world, with 132 low- and middle-income countries pursuing private participation in infrastructure-57 of them in three of the sectors covered here or in all four (transport, energy, telecommunications,. and water and sewerage). In 1990-2001 developing countries transferred to the private sector the operating risk for almost 2,500 infrastructure projects, attracting investment commitments of more than $750 billion. (Actual investment may have been somewhat lower; for example, the figures for 1990-2001 include some canceled projects. See boxes 1.1 and 1.2.) Those projects were implemented under schemes ranging from management contracts to divestitures to greenfield facilities under build-operate-own (BOO) contracts, build-operate-transfer (BOT) contracts, or merchant facilities. This book provides an overview of trends in private participation in infrastructure in developing countries in 1990-2001. 4 It draws on the World Bank's PPI Project Database, which tracks infrastructure projects newly owned or managed by private companies in developing economies. While counting projects with private participation and investment is challenging for many reasons, the analysis reveals clear trends: • Investment commitments for infrastructure projects with private participation grew rapidly from 1990 to 1997, after which they declined. • Telecommunications and electricity were the leading sectors. • Latin America and East Asia were the leading regions. • Greenfield projects and divestitures were the leading types of private participation, whether measured by value of investment commitments or by number of projects. • Upper-middle-income countries accounted for the most private activity in infrastructure, measured by value. • Almost all developing countries had some private activity in infrastructure by 2001. I 2 Overview Private Participation in Infrastructure: Trends in Developing Countries in 1990 • 2001 Growth and Decline of Private Activity in Infrastructure Annual investment commitments for infrastructure projects with private participation grew strongly in 1990-97, surging from $18 billion to a record $128 billion (figure 1.1). 5 The investment levels in 1996 and 1997 were driven mainly by divestitures of infrastructure companies in Latin America and greenfield power plants and mobile telecommunications companies in Asia. The number of projects with private participation also increased rapidly, from just over 65 in 1990 to a peak of 361 in 1997 (figure 1.2). Investment commitments for infrastructure declined in the wake of the East Asian financial crisis and subsequent crises in the developing world, starting in September 1997, and by 2001 they had returned to a level similar to that in 1995 . The number of new infrastructure projects with private participation fell by about half. In 1998 private activity was sustained mainly by Brazil, which accounted for 46% of investment that year. Most of that went to the privatizations of the Telebras system and electricity distribution companies. After 1998 Brazil's share fell but was still significant at around 20% of annual investment. The decline in investment commitments was driven mainly by a reduction in investments directed to acquiring government assets (state-owned enterprises and licenses or concessions to provide infrastructure services). This type of investment fell by almost 80% between 1997 and 2001, while investment directed to sector expansion dropped by around 40% (figure 1.3) . The trends in private participation in developing countries were similar to those in privatizations in industrial countries: the value of completed European privatizations grew rapidly in the 1990s, peaked in 1998, and has declined since then. 6 Telecommunications and electricity had both the biggest growth and the biggest declines in private activity in 1990-2001 (figure 1.4). Annual investment commitments for telecommunications grew from $6 billion in 1990 to $57 billion in 1998, then dropped to $32 billion in 2001, 55% of the peak in 1998. Annuahnvestment in electricity projects rose from around $1 billion in 1990 to $49 billion in 1997, then fell to about $11 billion in 2001, the lowest level since 1992. Among the developing regions, Latin America and East Asia accounted for most of the boom and decline in private activity. In Latin America annual investment grew from $15 billion in 1990 to $76 billion in 1998, then fell to $23 billion in 2001, the lowest level since 1995 (figure 1.5). In East Asia annual investment rose from $3 billion in 1990 to $41 billion in 1997, then dropped to $17 billion in 2001, only 40% of the peak in 1997. Although private activity in infrastructure has declined considerably in the past few years, it is still significant. In 2001 around 150 new infrastructure projects with private participation reached financial closure, and investment commitments in that year amounted to $58 billion, only 10% below the average for 1990-2001 and considerably higher than the level at the beginning of the decade. Private participation has accounted for a significant share of the total investment in infrastructure-around 25% (box 1.3). Regional Trends Among developing regions, Latin America and the Caribbean led the growth in private activity in 1990-2001, accounting for 48% of the cumulative investment (figure 1.6). In this region private participation in infrastructure has been part of broader sectoral reforms aimed at enhancing performance through private operation and competition and generating I Overview 3 the financial resources needed to improve service coverage and quality through tariff adjustments. The reforms were also designed to improve public sector finances. Under this approach divestitures and concessions of existing assets predominated, accounting for 75% of the cumulative investment in private infrastructure projects in Latin America during the period (figure 1. 7). fu other developing regions have opened infrastructure to private pamc1pation, Latin America's dominance of investment in private infrastructure projects has diminished. Its share in annual investment fell from 80% in 1990 to 40% in 2001. East Asia and Pacific had the second most private activity in infrastructure. This region focused on creating new assets through greenfield projects that served or complemented . investments by public sector providers, devoting less attention to deeper or broader sectoral reforms. Greenfield projects accounted for 61 % of the investment in East Asia in 1990- 2001. The 1997 financial crisis in East Asia highlighted the limitations of this approach (unresolved sector inefficiencies and demand risk left with the government through take-or- pay agreements or traffic guarantees), leading most governments to consider deeper reforms. The region's share in annual investment in private infrastructure projects grew from 15% in 1990 to 40% in 1996. But at the peak of the financial crisis in 1998 it declined to 11 % before recovering to 28% in 2001. Europe and Central Asia was the third most active developing region. Most countries in this region introduced private participation in infrastructure as part of deeper sectoral [>. reforms aimed at redefining the role of the state, putting infrastructure operations on a more commercial footing, and in some cases complying with the requirements for accession to the European Union. This approach was reflected in an emphasis on divestitures and concessions of existing business, accounting for 55% of the cumulative investment in private infrastructure projects in the region. South Asia and the Middle East and North Africa followed an approach similar to that in East Asia and Pacific. Greenfield projects accounted for nearly 90% of cumulative investment in South Asia, and for 50% in the Middle East and North Africa. In Sub-Saharan Africa countries focused primarily on opening the telecommunications sector by divesting incumbent state-owned operators and issuing greenfield mobile licenses. Although the region captured only 3% of the cumulative investment in 1990-2001, its share in annual investment grew from 2% in 1996 to 8% in 2001 and it accounted for 7% of infrastructure projects with private participation over the 12-year period (table 1.1). Sectoral Trends Telecommunications led the growth of private infrastructure activity in developing countries, accounting for 44% of the cumulative investment in 1990-2001 (figure 1.8; table 1.2). Facilitating this strong growth have been technological changes that have reduced entry costs, allowed major reforms in market structure, and spurred competition. All this helped lead to a telecommunications boom in the 1990s, reflected in the growing share of this sector in private infrastructure business. The sector's share in annual investment in private infrastructure projects rose from 35% in the early 1990s to 56% in 1999 and has remained above 50% since then. I 4 Overview Private Participation in Infrastructure: Trends in Developing Countries in 1990 • 2001 In all developing regions investment in private telecommunications projects has been driven mainly by the diffusion of new services such as mobile telecommunications. In Latin America and in some countries in Europe and Central Asia and Sub-Saharan Africa investment has also been fueled by the privatization of incumbent public operators. Energy, which includes electricity and the transmission and distribution of natural gas, attracted the second largest share of investment. Electricity was by far the more dynamic subsector, accounting for 28% of the cumulative investment in private infrastructure projects in 1990-2001. Private activity in electricity has been propelled by new technological developments that have reduced the minimum size of efficient power plants. Most of the investment in electricity occurred in 1994-97, during the boom in greenfield projects for independent power producers implemented through BOO or BOT contracts. That boom helped raise electricity's share in annual investment in infrastructure projects with private participation from less than 10% in 1990 to 38% in 1997, though it then declined to less than 20% by 2001. Private participation in electricity varied across regions. In Latin America and Europe and Central Asia it was directed mainly to privatizing existing electricity companies. By contrast, in Asia and to some degree in the Middle East and North Africa and Sub-Saharan Africa the focus was on expanding generation capacity through greenfield projects. Natural gas transmission and distribution attracted much less investment than electricity mainly because of its early stage of development in most developing countries. The PPI Project Database includes only private activity in transport capacity through pipelines. Nat~ral gas production and exploration are excluded. Private activity has lagged in transport and water and sewerage, where technological change has been less pronounced, political barriers to reform G:an be strong, and subnational governments often play a major role. Transport accounted for 18% of the cumulative investment in 1990-2001, and much of this share went to toll roads, the subsector receiving much of the public investment in transport. Countries introducing private participation in transport have focused on transferring existing assets through concessions and constructing toll roads through greenfield projects. In introducing private participation in water and sewerage, most governments have focused on transferring vertically integrated water utilities through concessions. Most of the activity has occurred in countries that had already introduced private activity in other infrastructure businesses, such as electricity and telecommunications. Although private participation has also been used to expand bulk capacity for water treatment through BOO and BOT contracts, such contracts represented only a small share of private activity in the sector. Trends by Type of Private Activity Greenfield projects were the most common type of private participation in infrastructure in developing countries and also attracted the most investment in 1990-2001 (table 1. 3). Annual investment commitments for greenfield projects rose from $8 billion in 1990 to $46 billion in 1997, then declined to $28 billion in L.001 (figure 1.9). The investment was driven mainly by greenfield projects for independent power producers and mobile telecommunications operators and, among the regions, by East Asia and Pacific. Overview 5 Divestitures were the second most common type of private participation, attracting about the same amount of investment as greenfield projects. Annual investment commitments for divestitures grew from $6 billion in 1990 to $53 billion in 1998 and have dropped since then. By 2001 annual investment had fallen to $23 billion, the lowest level since 1995. This sharp decline had been expected to some extent, because the large privatizations in electricity and telecommunications in Brazil in 1997 and 1998 would have been difficult to sustain. The investment in divestitures was directed mainly to telecommunications and electricity in Latin America and the Caribbean. Concessions of existing assets accounted for the rest of the investment in infrastructure projects with private participation (a 16% share). Annual investment commitments for infrastructure concessions peaked in 1997, when large concessions were granted-such 1 ' as those for the electricity and water utility in Casablanca, Morocco; for the water utility in Manila, Philippines; and for transport in Brazil. Concessions were used primarily in transport and water and sewerage and, among regions, Latin America and East Asia. Management and lease contracts have been used to introduce private participation in infrastructure without requiring the private sector to assume investment risks-and often without undertaking major tariff reforms. Such contracts were involved in 100 projects, 4% of the total. They were used primarily in water and sewerage (41 projects) and transport (44). Among regions, they were most common in Europe and Central Asia (30 projects) and Sub-Saharan Africa (25). , Trends by Country Income Group Countries in the upper-middle-income group attracted the most private activity m infrastructure, capturing 59% of the cumulative investment in 1990-2001 (see the inside front cover for a list of countries by income group). Annual investment in these countries peaked in 1997-98, when Brazil privatized its electricity distribution and telecommunications companies (figure 1.1 O). Of the 38 upper-middle-income countries, 29 had private activity in infrastructure, mainly in telecommunications (figure 1.11). Lower-middle-income countries also attracted a large share of private act1v1ty in infrastructure, with 30% of the cumulative investment. Annual investment peaked in 1997, driven by private activity in China, Colombia, Morocco, and the Philippines. In this income group 47 of 55 countries had private activity, with a large share of it in electricity and telecommunications (figure 1.12). Private participation in infrastructure has also grown among low-income countries. These countries accounted for the remaining 11 % of the cumulative investment, much of it in India and Indonesia. Annual investment fluctuated between $6 billion and $8 billion in 1998-2001, showing more resilience than that in the other income groups. Of the 64 low-income countries, 57 had private activity in infrastructure, most of it in electricity and telecommunications (figure 1.13). Private activity in low-income countries is larger than the numbers suggest. The data do not include small-scale private providers in the informal sector, which often play a major role in these countries-such as small power suppliers in Cambodia and the Republic of Yemen and private water vendors in most developing countries (see appendix 1 for the criteria for projects included in the PPI Project Database). I 6 Overview Private Participation in Infrastructure : Trends in Developing Countries in 1990 • 2001 Country Concentrations Although private activity in infrastructure spread rapidly among developing countries, a few countries accounted for most of the investment. The 10 countries attracting the most investment in projects with private participation captured 68% of the cumulative investment in 1990-2001 and accounted for 47% of the projects. The largest Latin American economies, such as Brazil, Argentina, and Mexico, all made the group of top 10, as did the main Asian economies, such as China, Malaysia, the Republic of Korea, the Philippines, and India (table 1.4). Measuring investment in per capita terms, however, brings Hungary, Panama, Chile, Estonia, and Belize into the group of top 10 (table 1.5). And when investment is expressed as a percentage of GDP, Bolivia, Panama, the Lao People's Democratic Republic, and Cape Verde become the top 4 countries (table 1.6). But regardless of how investment is measured, Argentina and Malaysia are among the most active countries, appearing in all three groups of top 10. Although private parnc1pation in infrastructure was spread among a large number of sponsors, the top sponsors accounted for a significant share of the total investment commitments (box 1.4). I• Notes 1. World Bank, World Development Re- port 1994 (New York: Oxford University Press, 1994), p. 1. 2. World Bank, World Development Re- port 1994 (New York: Oxford University Press, 1994), p. 11. 3. All dollar amounts are in 2001 U.S. dollars. Nominal figures have been deflated using the U.S. consumer price index. 4. Although the PPI Project Database tracks private participation in infra- structure in developing economies from 1984 on, this analysis focuses on 1990- 2001, when most of the private activity took place. Before 1990 only Chile engaged in large privatization programs, while other countries awarded just a few projects. 5. The PPI Project Database attempts to track private investment in infrastruc- ture projects in developing economies. But private financing is difficult to calculate for projects developed through partnerships between the private and public sectors. For this type of project the database records total investment rather than private investment alone (see box 1.1 and appendix 1 for further explanation). 6. The Economist, "Coming Home to Roost," 27 June 2002, pp. 63-65. Box 1.1 Overview 7 Private Participation in Infrastructure Project Database The World Bank's Private Participation in Infrastructure (PPI) Project Database covers infrastructure projects that have reached financial closure and are owned or managed by private companies in developing (low- and middle-income) economies (see inside front cover for a list of the economies). The database includes projects in transport, energy (electricity and natural gas transport), telecommunications, and water and sewerage. Very small projects are not included because information on them is rarely available. Investments in infrastructure projects with private participation are expressed in billions of U.S. dollars in most of the tables. An entry of 0.0 indicates that investment was less than $50 million. Data in tables may not sum to totals because of multicountry projects or rounding. The database classifies infrastructure projects with private participation in four categories: • Management and lease contracts. A private entity takes over the management of a state-owned enterprise for a given period. The facility is owned by the public sector, and investment decisions and financial responsibilities also remain with the public sector. • Concessions (or management and operation contracts with major private capital expenditure). A private entity takes over the management of a state-owned enterprise for a given period during which it also assumes significant investment risk. • Greenfield projects. A private entity or a public-private joint venture builds and operates a new facility for the period specified in the project contract. The facility may return to the public sector at the end of the concession period. • Divestitures. A private entity buys an equity stake in a state-owned enterprise through an asset sale, public offering, or mass privatization program. The boundaries between these categories are not always clear, and some projects have features of more than one category. In these cases projects have been classified in the category that better reflects the risk borne by the private sector. The database records total investment in infrastructure projects with private participation, not private investment alone. The data on investment in such projects therefore overstate private investment. Investments in infrastructure projects are classified as one of two types: investments in expanding and modernizing facilities and expenditures on acquiring government assets such as state-owned enterprises or rights to provide services in a specific area or to use radio spectrum. Funds for acquiring government assets are usually paid through divestiture revenues, license fees, or canon payments. Investments in infrastructure projects have generally been recorded on a commitment basis in the year of financial closure (for which data are typically available). Actual disbursements are not tracked. Where divestitures are phased or where investment requirements are defined by commitments on service coverage and quality and data are available (such as for large privatized electricity and telecommunications companies), the investments are recorded in the years in which the transactions take place. Where investments in acquiring government assets are due over the period of a concession, an estimate of their present value is recorded in the year of financial closure. For more information on the criteria and terminology of the PPI Project Database, see appendix 1. 8 Overview Box 1.2 Canceled Infrastructure Projects with Private Participation Private participation in infrastructure in developing countries has not been free of difficulties. By one estimate more than 40% of the contracts for infrastructure projects (excluding those in telecommunications) have been or are being renegotiated. 1 Renegotiation can mean simply fine-tuning the terms and conditions of a contract in response to changing circumstances, or it may be more serious. Even so, only 46 projects reaching financial closure in 1990-2001 had been canceled by 2001. 2 These 46 projects represented only 2% of the roughly 2,500 infrastructure projects with private participation in the developing world during that period-and less than 3% of the investment commitments in those projects (tables 1 and 2). Many of the contracts canceled were for toll road projects in Mexico, Indonesia, Thailand, and Hungary. Several projects for independent power producers in Indonesia were also canceled. Among the largest infrastructure projects canceled by 2001 were the Dhabol liquefied natural gas power plants (phases I and II) in India, the lndah urban sewerage project in Malaysia, and the Azurix provincial water concession in Buenos Aires, Argentina. 3 '. , :Tallie 1 Canceled Infrastructure Projects with Private Participation by Sector, Developing Countries, 1990-2001 Canceled projects Investment in canceled projects As a share As a share Number of total (O/o) 2001 US$ billions of total (O/o) Total Note: The table shows projects that both reached financial closure and were canceled between 1990 and 2001. Source: World Bank, PPI Project Database. , Table 2 Canceled Infrastructure Projects with Private Participation by Region, Developing Countries, 1990-2001 1. J. Luis Guasch, "Concessions and Canceled projects Investment in canceled projects Regulatory Design: Determinants of .:;;;;;;;;;;;;;;:;~~;:::;;=~;;;;===::;;:;:;;:;:===~~~ Performance-Fifteen Years of Evidence" As a share As a share (World Bank, Washington, D.C.; and Region Number of total (O/o) 2001 US$ billions of total (O/o) University of California, San Diego, 2001). 2. In addition, two projects that reached financial closure in 1989 were canceled by 2001. 3. For further discussion of canceled projects, see Clive Harris, John Hodges, Michael Schur, and Padmesh Shukla, "Infrastructure Projects: A Review of Canceled Private Projects," Viewpoint 252 (World Bank, Private Sector and Infrastructure Network, Washington, D.C., 2003). Total Note: The table shows projects that both reached financial closure and were canceled between 1990 and 2001. Source: World Bank, PPI Project Database. Box 1.3 Overview 9 Private Sector Share of Total Investment in Infrastructure What share of the total investment in infrastructure in developing countries does the private sector contribute? Answering this question precisely is not easy, because there are no aggregate data on total or public investment in infrastructure. Although some estimates can be made based on the World Bank's Private Participation in Infrastructure (PPI) Project Database, such estimates are subject to several caveats. First, the data recorded by the PPI Project Database overestimate investment in infrastructure projects with private participation. The reason is that the database includes not only investments in new assets but also government proceeds from divestitures, license fees, and canon payments. While investments in new assets represent additional investments in the sector, government proceeds do not. Second, the share of private financing in infrastructure projects with private participation varies significantly across countries and sectors: • In telecommunications by the late 1990s, the private sector accounted for most if not all the investment in many of the largest Latin American economies (Argentina, Brazil, Chile, Mexico, Peru, and Republica Bolivariana de Venezuela). By contrast, in most East Asian countries, particularly China, state-owned enterprises accounted for a large share of the investment. • In electricity the private sector accounted for most of the investment in just a few countries (such as Argentina, Chile, El Salvador, and Guatemala). In other countries (such as Brazil, China, India, and Mexico) the public sector is still the source of a large share of the investment. • In natural gas transport the private sector was the source of most of the investment in a few countries (Argentina, Chile, Hungary, and Kazakhstan). In other countries (such as Colombia and Mexico) the private sector took over or developed main sector assets. In the rest of the countries with a natural gas transport industry the public sector still plays a dominant role. • In transport private participation also varied significantly. In the airport subsector private firms were responsible for investing in major assets in some countries (Argentina, Bolivia, Madagascar, Mexico, Peru, and the Philippines)-while in others private investment was limited to minor assets (India) or was nonexistent (Brazil). In the toll road subsector just a few countries (Argentina, Chile, and China) transferred main assets to the private sector, while the rest of the countries limited private investment to minor assets. • Similarly, in water and sewerage just a few countries (such as Argentina and Chile) transferred investment responsibilities for a significant share of main assets to the private sector. Most countries limited private investment to a few key assets (Indonesia, Morocco, and the Philippines) or minor sector assets (India, Mexico, and Peru). For all infrastructure projects with private participation in developing countries, the private sector accounted for 8 5-90% of total investment. Finally, because of the lack of aggregate data on public investment in infrastructure, it is unclear what impact private investment has on total investment. Data from Latin America show that trends in total investment in infrastructure differed across countries in the 1990s. According to one estimate, in Argentina, Brazil, and Mexico total investment in infrastructure declined in the 1990s because the growth in private investment failed to compensate for the decline in public investment. 1 By contrast, in Chile and Peru total investment in the 1990s remained at levels similar to those in the 1980s because the increase in private investment made up for the decline in public investment. And in Colombia total investment grew jn the 1990s because private investment was added to stable public investment. 10 Overview Box 1.3 (continued) Private Sector Share of Total Investment in Infrastructure With those caveats in mind, the private sector's share of the total investment in infrastructure can be estimated. Investment commitments for infrastructure projects with private participation amounted to around 1% of the GDP of all developing countries in 1990-2001, according to the World Bank's PPI Project Database and World Development Indicators Database. If it is assumed that developing countries invest on average 4% of their GDP in infrastructure-as estimated in the World Bank's World Development Report 1994-the private sector accounted for roughly 25% of all investment in infrastructure in developing countries in 1990-2001. Although investment in infrastructure projects with private participation averaged around 1% of GDP in 1990-2001, that share varied among country income groups, amounting to 0.6% in low-income countries, 0.7% in lower-middle-income countries, and 1.5% in upper-middle-income countries. It also varied over time, reaching peak levels in 1997-98 (see figure). Annual Investment in Infrastructure Projects with Private Participation as a Share of GDP by Income Group, Developing Countries, 1990-2001 3.0 * Upper middle income 2.5 -a-- Low and middle income 2.0 Cl Low income 1.5 Lower middle income 1.0 a_ 0.5 Cl 10 0 ~ 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: World Bank, PPI Project Database. Figure 1.11 Cumulative Investment in Infrastructure Projects with Private Participation by Sector or Subsector, Upper-Middle-Income Countries, 1990-2001 Seaports 20/o Airports 1 O/o Natural gas transmission and distribution 50/o Water and sewerage 60/o Toll roads 120/o Telecommunications 490/o Electricity 200/o Source: World Bank, PPI Project Database. Total $448 billion Overview 19 Figure 1.12 Cumulative Investment in Infrastructure Projects with Private Participation by Sector or Subsector, Lower-Middle-Income Countries, 1990-2001 Railways 20/o Airports 20/o Seaports 30/o Natural gas transmission and dist ribution 40/o Water and sewerage 60/o Toll roads 100/o Electricity 380/o Telecommunications 340/o Source: World Bank, PPI Project Data base. Total $224 billion Figure 1.13 Cumulative Investment in Infrastructure Projects with Private Participation by Sector or Subsector, Low-Income Countries, 1990-2001 Toll roads 20/o Airports 1 O/o Water and sewerage 20/o Railways 00/o Natural gas transmission and distribution 40/o Seaports 50/o Electricity 470/o Telecommunications 420/o Source: World Bank, PPI Project Database. Total $83 billion 20 Overview Private Participation in Infrastructure : Trends in Developing Countries in 1990 • 2001 Table 1.4 Top 10 Developing Countries by Cumulative Investment in Infrastructure Projects with Private Participation, 1990-2001 • Investment Country (2001 US$ billions) Projects -·- - Brazil 135.4 203 Argentina 82.6 165 Mexico 60.0 130 China 53.8 283 _Malaysia 36.6 63 Korea, Rep. of 33.2 26 - Philippines 32.1 67 Indonesia 28.9 62 India 27.7 122 Thailand 23.9 73 Total for top 10 513.1 1,188 Total for all developing countries 754.1 2,494 Source: World Bank, PPI Project Database. Table 1.5 Top 10 Developing Countries by Per Capita Cumulative Investment in Infrastructure Projects with Private Participation, ·1990-2001 -- Per capita investment Total investment Country (2001 US$) (2001 US$ billions) Argentina 2,203 82.6 Hungary 1,607 16.0 Malaysia 1,535 36.6 Panama 1.417 4.1 Chile 1,361 21.0 Czech Republic 1,094 11.2 II Estonia 991 1.3 Belize 928 0.2 Brazil 784 135.4 Korea, Rep. of 696 33.2 Source: World Bank, PPI Project Database. Overview 21 Table 1.6 Top 10 Developing Countries by Cumulative Investment in Infrastructure Projects with Private Participation as a Share of GDP, 1990-2001 Investment as a share of GDP Investment Country (percent) (2001 US$ billions) Bolivia 6.0 4.9 Panama 4.3 4.1 Lao PDR 3.6 0.8 Cape Verde 3.6 0.2 Philippines 3.5 32.1 Malaysia 3.5 36.6 Morocco 3.0 13.0 Hungary 2.8 16.0 Chile 2.7 21.0 Argentina 2.6 82.6 Source: Wor ld Bank, PPI Project Database. Regional 23 2 East Asia and Pacific East Asia and Pacific, the developing region with the second most private acnv1ty in infrastructure, attracted more than $210 billion in investment commitments for infrastructure projects with private participation in 1990-2001. During that period 17 of the 22 countries in the region awarded 611 such projects. Private activity in the region began early, with major programs in Malaysia and the Philippines in the second half of the 1980s, and grew rapidly in the 1990s. Annual investment commitments for infrastructure projects with private participation boomed from $2.6 billion in 1990 to $41 billion in 1997, then declined sharply as a result of the financial ,. crisis in the region (figure 2.1; table 2.1). Although all major regional economies contributed to the surge in private activity, three countries-China, Indonesia, and the Philippines- accounted for much of the peak investment levels in 1996 and 1997. But in 1999-2001 the Republic of Korea drove the recovery of private activity in the region, accounting for more than 40% of annual investment. The number of projects with private participation also grew strongly until 1997, peaking at 117, and then declined sharply (figure 2.2). The five largest economies in the region-China, Malaysia, Korea, the Philippines, and Indonesia-garnered the most investment in infrastructure projects with private participation, accounting for nearly 90% of the regional total in 1990-2001 (table 2.2). When investment is measured in per capita terms, however, Thailand and Fiji number among the top five (table 2.3). China also accounted for a large share of the region's private activity in terms of projects (see figure 2.2). Although private participation in infrastructure was spread among a large number of projects and sponsors in the region, the biggest projects and the top sponsors accounted for a significant share of the total investment commitments (boxes 2.1 and 2.2). One characteristic of the private participation in infrastructure in East Asia and Pacific was its use to complement investment by state-owned enterprises. This approach resulted in an emphasis on building new assets through greenfield projects rather than using private participation to increase the efficiency of existing enterprises (figure 2.3). Greenfield projects dominated private activity, accounting for 50-95% of annual investment except in 1990 and 1999, when their share fell to less than 40%. They also led by number of projects (table 2.4). Divestitures ranked second by investment, usually representing 10-25% of annual investment. Divestitures in the region usually took the form of public offerings of minority stakes, which allowed state-owned enterprises to raise capital while the government retained control of the companies. Most of the investment commitments for divestitures went to telecommunications and involved incumbent national operators. Electricity Ten countries in East Asia and Pacific awarded 234 electricity projects with private participation in 1990-2001. Annual investment commitments for such projects rose from less than $100 million in 1990 to a peak of $15 .1 billion in 1997 and then fell sharply. Electricity was the infrastructure sector most affected by the financial crisis in the region. In 1999 and 2001 annual investment in private electricity projects dropped to its lowest levels 24 Regional Private Participation in Infrastructure: Trends in Developing Countries in 1990 • 2001 since 1991, and the sector's share in annual investment in all private infrastructure projects fell from 30-50% in 1992-98 to 18% in 2001. Even so, electricity accounted for the largest share of private activity in the region in terms of both investment and number of projects over the 12-year period (see figure 2.4 and table 2.4). Before the financial crisis in East Asia private participation in electricity was oriented mainly toward building generation capacity in the form of independent power producers. This approach reflected the need to expand generation capacity to keep pace with expected demand for power and the slow progress in implementing deeper sectoral reforms. Greenfield projects to construct new power plants dominated private activity, accounting for more than 85% of annual investment in the sector and most of the electricity projects in the region in 1991-98 (figures 2.5, 2.6, and 2.7) . After the East Asian crisis private activity in greenfield electricity projects declined significantly, in part because of excess generating capacity in most countries. Divestitures, the second most common type of private participation in electricity in the region, took several different forms: public offerings of minority stakes in China, Malaysia, and Thailand 1; partial sales of power plants in China; full privatization of the largest distribution company in the Philippines; and sales of generating plants in Thailand. The priority given to expanding generation capacity was also reflected in other forms of private participation pursued in the region's electricity sectors. The 12 concessions signed in the region involved rehabilitating and expanding existing generation facilities . By the end of the 1990s East Asian governments had begun pursuing deeper reforms. China, Indonesia, Korea, the Philippines, and Thailand passed new sector laws that would introduce competition and deregulation in the electricity sector and pave the way for privatizing state- owned assets in the coming years. Natural Gas Transmission and Distribution Private activity in the transmission and distribution of natural gas in East Asia and Pacific was directed to 31 projects in the seven countries with access to this resource-China, Indonesia, Korea, Malaysia, Myanmar, the Philippines, and Thailand. Investment commitments for private transmission and distribution projects in 1990-2001 amounted to more than $6 billion-3% of the regional total for all private infrastructure projects. The investment in the sector was concentrated in 1995, when the Yadana pipeline (from Myanmar to Thailand) began and Malaysia partially privatized its natural gas company (Petronas Gas) . Divestitures and greenfield projects accounted for equal shares of the cumulative investment in private transmission and distribution projects in 1990-2001 (see figure 2.5). Greenfield projects far outnumbered divestitures, however. These projects included transmission pipelines (5 projects) and small distribution systems (21). The projects involving distribution systems were awarded mainly in China as part of the development of the west-east gas pipeline. In addition, five divestitures of state-owned natural gas operators occurred m China, Korea, Malaysia, and Thailand through public offerings of minority stakes. Telecommunications In the telecommunications sector 15 East Asian countries awarded 65 projects with private participation in 1990-2001. Annual investment commitments for telecommunications Regional 25 swelled from more than $1 billion in 1990 to just less than $12 billion in 1997 and then declined. The sector usually accounted for 20-30% of the annual investment in infrastructure projects with private participation in the region, though in 1990 and 1999 it captured more than 50%. Over the 12-year period telecommunications attracted the second largest share of investment in private infrastructure projects in the region-31 % of the total. It ranked third in number of projects, after electricity and transport. In East Asia and Pacific private participation in telecommunications occurred mostly in sectors dominated by state-owned enterprises and with limited progress in introducing competition in fixed line markets. In this context divestitures took the form of initial public offerings on local stock exchanges, such as in China, Indonesia, Korea, and Malaysia. 2 Meanwhile, governments used greenfield projects to create competitive mobile phone markets throughout the region, complementing investments by state-owned enterprises in Thailand, and to introduce managed competition in basic services in Korea and Malaysia and full-fledged competition in the Philippines. Greenfield projects accounted for most of the private activity in telecommunications in terms of both cumulative investment and projects, followed by divestitures. Concessions were awarded in Indonesia, with private sponsors taking over the assets of the incumbent state-owned operator in most of the country's regions and agreeing to manage and expand the network during the contract period. Transport Ten East Asian countries awarded 229 transport projects with private participation in 1990- 2001. Annual investment in such projects rose from more than $1 billion in 1990 to a peak of $10 billion in 1996, then fluctuated between $2 billion and $7 billion. Over the period as a whole, transport attracted $56 billion in investment, 26% of the regional total for private infrastructure projects (table 2.5) . Airports. Seven countries (Cambodia, China, the Lao People's Democratic Republic, Malaysia, the Philippines, Thailand, and Vietnam) introduced private participation in airports in 1990-2001, awarding 17 projects that attracted investment of $3 billion. China accounted for most of the projects and investment, with most of its private activity taking the form of divestitures through public offerings on local or regional stock exchanges. Malaysia also used a public offering of a minority stake to privatize its airport operator. The other countries expanded airport capacity through greenfield projects or concessions. Railways. China, Malaysia, and Thailand awarded the 11 railway projects with private participation in the region, attracting investment commitments of $10 billion. 3 The projects in Malaysia and Thailand were aimed at building new metropolitan light railway networks to reduce traffic congestion, while those in China were partial divestitures through initial public offerings. Seaports. Private activity in seaports occurred in eight countries (China, Indonesia, Korea, Malaysia, Myanmar, the Philippines, Thailand, and Vietnam). These countries awarded 52 seaport projects attracting investment commitments of $9 billion over the 12-year period. China, Indonesia, and Malaysia accounted for most of the investment. Most of the I Private Participation in Infrastructure: Trends in Developing Countries in 1990 • 2001 26 Regional seaport projects involved concessioning existing assets or constructing new facilities through greenfield projects. Toll Roads. Six countries in the region (China, Indonesia, Korea, Malaysia, the Philippines, and Thailand) introduced private participation in toll roads. These countries granted 149 toll road projects that attracted $34 billion in investment, making toll roads by far the most active transport subsector in the region. China, accounting for almost 50% of the investment in toll roads, drove activity in this subsector except in 2000-01, when Korea attracted most of the investment. Most of the private activity took the form of greenfield projects, which captured 59% of the investment in toll roads. Water and Sewerage China, Indonesia, Malaysia, Papua New Guinea, the Philippines, Thailand, and Vietnam all introduced private activity in water and sewerage in 1990-200 l, awarding 51 projects. Investment commitments for private water and sewerage projects totaled more than $15 billion, 7% of the regional total for all private infrastructure projects during the period. The concessioning of Manila's water and sewerage system, the largest in the developing world, accounted for more than 40% of the cumulative investment in private projects in the sector, explaining the peak activity in 1997. The Philippines accounted for the most investment ($6 billion), followed by Malaysia ($6 billion) and Indonesia ($1 billion). But China had the most projects (24), again followed by Malaysia (8) and Indonesia (7). In introducing private participation in the sector, governments focused on awarding concessions for water and sewerage networks and building bulk water treatment facilities through greenfield projects. Indonesia and the Philippines transferred operating and investment responsibilities for main network assets to private consortia. By contrast, China, Malaysia, Papua New Guinea, Thailand, and Vietnam focused private activity on rehabilitating and expanding bulk facilities. Notes 1. The analysis excludes the public of- ferings of Korea Electric Power Company because they started in 1989. 2. The analysis excludes the divestiture of SK Telecom, a main telecommunica- t ions operator in Korea, because the process started in 1989. 3. These figures exclude the Bangkok Elevated Road and Tra in System (Thailand). This project, involving both the railway and the road subsectors, is included in figures for toll roads. Box 2.1 Regional 27 Largest Infrastructure Projects with Private Participation in East Asia and Pacific The 10 largest private infrastructure projects in East Asia and Pacific accounted for more than 20% of all investment commitments for such projects in 1990-2001. Although these projects spanned most infrastructure sectors, they were concentrated in telecommunications (see table). Indonesia and the Republic of Korea accounted for more than half the projects. Top 10 Infrastructure Projects with Private Participation, East Asia and Pacific, 1990-2001 Investment Project (2001 US$ billions) Sector Country Korea Telecom 11.9 Telecommunications China Mobile HK Manila Water and Wastewater Hanaro Telecom TelecomAsia PLC PT Paiton Energy lndah Wastewater Urban Sewer Kimpo Airport Expresswll'{ a. Canceled in 2000. Source: World Bank, PPI Project Database. 28 Reg i ona l Box 2.2 Top Sponsors of Infrastructure Projects with Private Participation in East Asia and Pacific In East Asia and Pacific the top 10 sponsors of infrastructure projects with private participation in 1990-2001 accounted for more than 17% of the projects, and their projects captured just over 23% of all investment (see table). In contrast with other regions, in East Asia and Pacific all the top sponsors were regional companies except SUEZ and Mirant (formerly known as Southern Energy). Most of the top sponsors invested in two or more infrastructure sectors, although a few, such as Hopewell, Hyundai, and New World Infrastructure, focused mainly on transport projects. East Asia and Pacific is the only region where the top sponsor, SUEZ, concentrated mainly on water and sewerage projects. SUEZ implemented most of its electricity projects through its subsidiary Tractebel. Top 10 Sponsors of Infrastructure Projects with Private Participation, East Asia and Pacific, 1990-2001 Projects by sector Investment" Natural gas (2001 US$ transmission Telecommuni- Water and Sponsor billions) Projects Electricity and distribution cations Transport sewerage SUEZ 9.7 25 7 0 0 2 16 Hopewell Holdings 7.2 7 0 0 6 0 SAMSUNG 7.0 2 0 0 0 Hyundai 6.8 7 0 5 0 Mirant (formerly Southern Energy) 6.5 7 7 0 0 0 0 Daewoo International Corporation 6.4 3 0 0 LG Group 6.3 5 2 0 2 0 DACOM 6.3 2 0 0 2 0 0 New World Infrastructure 6.1 56 5 0 0 42 9 Benpres Holdings 5.5 5 0 0 2 2 Tota lb 48.0 104 23 0 5 59 17 a. Investment from all sources in projects in which sponsor had an equity participation of 150/o or more. b. Data may not sum to totals because projects can be associated with more than one sponsor. Source: World Bank, PPI Project Database. Regional 29 ' Figure 2.1 Annual Investment in Infrastructure Projects with Private Participation, East Asia and Pacific, 1990-2001 50 ~ - China, Indonesia, and the Philippines 40 Rest of region 30 20 Vl c: ~ 10 Vt Vl ::J 0 0 N 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: World Bank, PPI Project Database. Table 2.1 Annual Investment in Infrastructure Projects with Private Participation by Sector, East Asia and Pacific, 1990-2001 (2001 US$ bill ions) Natural gas transmission and Telecommuni- Water and Year Electricity distribution cations Transport sewerage Total 1990 0.1 1.3 1.2 0.2 1.3 0.7 5.6 .9 1.9 6.5 .0 0.7 9.8 .1 11.8 1.3 .6 0.0 3.6 2.3 .6 0.9 9.9 2.4 16.0 0.9 6.7 5.4 16.9 0.7 5.0 7.5 16.6 6.0 65.0 55.7 210.6 .. Zero. Source: World Bank, PPI Project Database. 30 Regional Private Participation in Infrastructure : Trends in Developing Countries in 1990 • 2001 Figure 2.2 Infrastructure Projects with Private Participation by Year of Financial Closure, East Asia and Pacific, 1990-2001 120 ~ - China 100 Rest of region 80 60 40 20 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: World Bank, PPI Project Database. Table 2.2 Top Five Countries by Cumulative Investment in Infrastructure Projects with Private Participation, East Asia and Pacific, 1990~2001 Investment Investment as a share (2001 US$ billions) of regional total (O/o) 53.8 Source: World Bank, PPI Project Database. Regional 31 Table 2.3 Top Five Countries by Per Capita Cumulative Investment in Infrastructure Projects with Private Participation, East Asia and Pacific, 1990-2001 Per capita investment Total investment Country (2001 US$) (2001 US$ billions) Malaysia 1,536 37 Korea, Rep. of 696 33 Philippines 417 32 Thailand 391 24 Fiji 186 0.15 Source: Wo rl d Bank, PPI Project Data base. Figure 2.3 Cumulative Investment in Infrastructure Projects with Private Participation by Type, East Asia and Pacific, 1990-2001 Divestitures 220/o Greenfield projects 61 O/o Concessions 170/o Sou rce : World Bank, PPI Project Database. Total $211 billion Private Participation in Infrastructure : Trends i n Developing Countries in 1990 • 2001 32 Regional Table 2.4 Infrastructure Projects with Private Participation by Sector and Type, East Asia and Pacific, 1990-2001 I II II Greenfield Management and lease Sector Concessions Divestitures projects contracts Total === Electricity 12 44 177 0 233 : ' -;-; -;c Naturafgas~ ,, 1. ' and~ 0 ' 5 ,_ 26 0 31 Telecommunications 7 10 46 2 65 - Transport 11~ I 29 75 9 229 Airports 5 7 4 1 17 - Railways 2 2 6 1 11 Seaports 20 2 24 6 52 Toll roads 8 18 41 1 149 Water and sewerage 24 2 22 3 51 Water and electricity 1 1 0 0 2 Total 160 91 346 14 611 Source : World Bank, PPI Project Database. Figure 2.4 Cumulative Investment in Infrastructure Projects with Private Participation by Sector or Subsector, East Asia and Pacific, 1990-2001 Toll roads 160/o Railways 50/o Seaports 40/o Airports 1O/o Telecommunications 31 O/o Natural gas transmission and distribution 30/o Electricity 330/o Source: World Bank, PPI Project Database. Total $211 billion Regional 33 Figure 2.5 Cumulative Investment in Infrastructure Projects with Private Participation by Sector and Type, East Asia and Pacific, 1990-2001 80 f::<:·::<:< <::I 70 Greenfield projects rr. - 60 Concessions 50 Divestitures 40 30 -~ 20 ..0 ""' ~ 10 Ci 0 N 0 Electricity Natural gas Telecommunications Transport Water and transmission and sewerage distribution Source : World Ban k, PP! Project Database. Figure 2.6 Annual Investment in Electricity Projects with Private Participation by Type, East Asia and Pacific, 1990-2001 16 (:<::<:<:<:I 14 Greenfield projects ~ 12 10 8 6 - Concessions Divestitures ~ 4 ,g ..0 ~ V1 2 ::::i Ci ~ 0 ..__..__.___ 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source : World Bank, PP! Project Database. 34 Regional Private Participation in Infrastructure : Trends in Developing Countrie s in 1990 • 2001 Figure 2.7 Electricity Projects with Private Participation by Year of Financial Closure and Type of Activity, East Asia and Pacific, 1990-2001 60 ~ - Other electricity 50 projects 40 Greenfield independent power producers 30 20 10 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: World Bank, PPI Project Database. Table 2.5 Annual Investment in Transport Projects with Private Participation by Subsector, East Asia and Pacific, 1990-2001 (2001 US$ billions) Year Airports Railways Seaports Toll roads Total 1.2 1.2 0.0 2.5 2.5 0.3 0.8 1.1 0.6 0.1 1.9 2.6 0.5 0.8 3.7 5.0 0.1 3.0 3.9 8.2 0.1 3.0 5.6 10.0 1.4 4.0 7.3 0.6 1.6 2.3 0.2 0.7 2.4 0.4 0.2 1.2 3.5 5.4 2001 0.6 2.0 0.3 4.6 7.5 Total 2.6 10.1 8.8 34.1 55.7 .. Zero. Source: World Bank, PPI Project Database. Regional 35 3 Europe and Central Asia Ranking third among developing regions in private activity in infrastructure, Europe and Central Asia attracted investment commitments of $97 billion for infrastructure projects with private participation in 1990-2001. During this time 25 of the 27 countries in the region awarded 568 such projects. Private activity in the region grew rapidly in the 1990s, with annual investment reaching $15.7 billion in 1997 before declining. But in 2000 it surged to a record high of $22.8 billion (figure 3.1; table 3.1). The strong recovery in 2000 was driven mainly by investments in mobile telecommunications, the privatization of telecommunications in Poland, and the construction of large power plants in Turkey. The number of projects rose from 3 in 1990 to 75 in 1995, then fell thereafter (figure 3.2). The large number of projects dosing in 1993 is explained by the voucher privatization program in the Russian Federation, through which many electricity and telecommunications companies were privatized. 1 The top five countries by investment-Turkey, Hungary, Poland, the Russian Federation, and the Czech Republic-accounted for 75% of the total in the region (table 3.2). When investment is measured in per capita terms, however, smaller countries-Estonia, Croatia, and Latvia-move into the top five (table 3.3). Private participation in infrastructure was spread among a large number of projects and sponsors in the region. But the biggest projects and the top sponsors accounted for a significant share of total investment commitments (boxes 3.1 and 3.2). Countries in Europe and Central Asia used private participation as an integral part of reform in infrastructure-reform aimed at redefining the role of the state, improving, sector productivity, putting infrastructure operations on a more commercial footing, and, for many countries, complying with requirements for accession to the European Union. Thus the emphasis was on transferring state-owned assets to the private sector rather than complementing public sector investments. Accordingly, divestitures accounted for the largest share of investment and projects (figure 3.3; table 3.4). The mechanisms of divestiture varied across countries. Hungary and Kazakhstan usually opted for selling controlling stakes to strategic investors, while the Czech Republic and the Russian Federation often used mass privatization programs based on vouchers. Voucher privatizations usually involved the transfer of minority stakes in infrastructure companies. But in telecommunications most countries (except for the Russian Federation) privatized companies by selling controlling stakes to strategic investors. Greenfield projects accounted for the second largest share of investment and projects in the region. These projects were mainly in telecommunications (to set up mobile telecommunications networks) and electricity (to build power plants). Electricity Fifteen countries introduced private participation in electricity in 1990-200 l, awarding 157 projects. Annual investment commitments for private electricity projects increased rapidly from less than $100 million in 1990 to $3.5 billion in 1996, then declined except in 36 Regional Private Participation in Infrastructure : Trends in Developing Countries in 1990 • 2001 2000, when they reached a record high of $4.6 billion. Over the 12-year period investment in private electricity projects totaled $19 billion, 20% of the investment in all private infrastructure projects in the region (figure 3.4). Countries in Europe and Central Asia used different approaches to private participation in electricity. Most opted for divestitures, although through different schemes. Azerbaijan, Georgia, Hungary, Kazakhstan, Poland, and Ukraine sold controlling stakes in vertically unbundled companies, while smaller economies, such as Estonia and Lithuania, sold controlling stakes in vertically integrated utilities. And countries such as Albania, the Czech Republic, and the Russian Federation transferred minority stakes through mass privatization programs. Divestitures accounted for half the investment in electricity but for a much larger share of the projects, mainly because of the voucher privatization schemes (figure 3.5). Most of this investment took place in 1994-97, when Hungary and Kazakhstan divested their electricity companies (figure 3.6). Greenfield projects, aimed at expanding generation capacity, were the second most common type of private participation in electricity, accounting for half the investment in the sector. Most of these projects were implemented under build-operate-own (BOO) and build- operate-transfer (BOT) schemes in largely unreformed markets such as Croatia and Turkey. Natural Gas Transmission and Distribution Private activity in the transmission and distribution of natural gas in the region did not start until 1995. Nevertheless, by 2001, 12 countries had awarded 35 projects. Annual investment commitments for private transmission and distribution projects hovered around $1 billion in 1995-98 but then declined sharply. Investment in the sector totaled more than $4.7 billion in 1990-200 l, 5% of the investment in all private infrastructure projects in the region. The focus was on privatizing existing assets, with divestitures accounting for most of the investment and projects. Two export-oriented greenfield pipeline projects and two concessions accounted for the rest of the investment in the sector. Just as in the electricity sector, the mechanisms of privatization differed across countries. Hungary and Kazakhstan sold controlling stakes to private consortia, an approach reflecting their priority on improving the efficiency and reliability of existing assets. The Czech Republic and the Russian Federation opted for mass privatization programs. And countries such as Armenia, Estonia, Latvia, Lithuania, and Moldova privatized their natural gas companies by creating joint ventures with RAO Gazprom, the Russian Federation's partially privatized and vertically integrated natural gas monopoly. Telecommunications Twenty-five countries in the region awarded 296 telecommunications projects in 1990- 2001. Annual investment commitments for private telecommunications projects grew from $355 million to $12 billion in 1991-97 and then declined except in 2000, when they peaked at $16 billion. Telecommunications dominated annual investment in private infrastructure projects in the region in the second half of the 1990s.- 1t also led in cumulative investment over the 12-year period, accounting for 67%. I Regional 37 Countries in the region with private activity in telecommunications followed two approaches. One group, mainly those applying for membership in the European Union, followed an approach similar to that in Latin America: establishing deadlines for ending monopoly rights in fixed voice telephony, privatizing the main operators, setting up new regulatory frameworks aimed at promoting private investment and competition, and opening new services (mobile telephony) to competition through greenfield projects. These reforms were reinforced by the European Union's requirement that any country applying for membership must adopt its pro-competition policy in the sector. Another group of countries, including Azerbaijan, Belarus, Moldova, and the Russian Federation, relied on private participation to introduce new services such as mobile telephony through greenfield projects, but did less to allow competition in fixed line telecommunications. The Russian Federation also privatized local service operators through its mass privatization program. Divestitures and greenfield projects accounted for fairly equal shares of the investment in private telecommunications projects in Europe and Central Asia, though greenfield projects outnumbered divestitures. Transport Private activity in transport took place in 10 countries, which awarded 43 transport projects in 1993-2001 (the region had no private activity in transport in 1990-92). Annual investment ranged from $100 million to $900 million except in 1998, when it reached a peak of $1.3 billion (table 3.5). The peak in private activity was driven by two toll road projects in Croatia and an airport privatization in the Russian Federation. Investment in private transport projects amounted to $5 billion in 1990-2001, accounting for 5% of the regional total for all private infrastructure projects. Hungary garnered the most investment in transport projects with private pamc1pation ($1.4 billion), followed by Turkey ($790 million) and Poland ($7 40 million). These three countries accounted for 57% of the transport investment in the region. Airports. Armenia, the Czech Republic, Hungary, Poland, the Russian Federation, and Turkey have all opened the airport business to private participation. In 1990-2001 these countries awarded 14 projects that attracted investment of $1. 5 billion, making airports the second most active transport subsector in the region. Three projects (the concession of the Czech Ruzyne airport, the partial divestiture of the Russian Domodedovo airport, and the concession of a terminal in Istanbul, Turkey) accounted for most of the investment in airports. Railways. The Czech Republic and Estonia have recently introduced private participation in railways, awarding seven projects that attracted investment of $300 million. Most of that went to Eesti Rauditee, an Estonian railway company that was partially privatized in 2001. In 1997 the Czech government awarded regional railway leases to private operators willing to maintain local services. Since then it has privatized some of the previously leased companies, with the goal being to transfer loss-making routes to private operators rather than to raise revenue. Seaports. Private participation in seaports in the region started in 1996, and by 2001 live countries (Latvia, Poland, Romania, the Russian Federation, and Turkey) had introduced private activity in the subsector. These countries awarded 16 projects that attracted investment of nearly $700 million, with 2 Turkish projects accounting for most of the total. - I • 38 Regional Private Participation in Infrastructure: Trends in Developing Countries in 1990 • 2001 Toll Roads. Croatia, Hungary, and Poland have introduced private participation in toll roads. These countries awarded six projects-all concessions of existing assets-that attracted investment of less than $3 billion. II II Water and Sewerage Twelve countries in Europe and Central Asia granted 37 water and sewerage projects in 1994-2001 (the region had no private activity in the sector in 1990-93). Annual investment in private water and sewerage projects usually amounted to less than $500 million, but two peak years broke the pattern. In 1996 a greenfield project was awarded to build a water system in Izmit, Turkey, and in 2000 the water concession in Bucharest, Hungary, was awarded. Investment in water and sewerage totaled more than $3 billion in 1990-2001, 3% Ir of all investment in private infrastructure projects in the region. Turkey led the region in investment ($1 billion), followed by Romania ($1 billion) and the Czech Republic ($300 million). But the Czech Republic led in projects (16), followed by Hungary (5) and Poland and Romania (both with 3). In introducing private participation in the sector, governments focused on transferring operational control of existing assets to the private sector, mainly through long-term management or lease contracts. Of the 37 water and sewerage projects in the region, 21 involved such contracts. The emphasis on management and lease contracts reflected the • priority given to productivity and efficiency gains through private management. With most countries in the region having relatively well-developed water networks, expanding networks was less important. The region awarded seven water and sewerage concessions involving significant investment, including those for utilities in the capital cities of Bulgaria (Sofia), Hungary (Budapest), and Romania (Bucharest). These projects accounted for 45% of the investment in the sector. Five greenfield projects, with 45% of the investment, were awarded to develop wastewater treatment facilities and a new industrial area, most of these in Turkey. Four divestitures claimed the other 6% of the investment. ,. Note 1. The Russian voucher privatization program granted each citizen an equal number of vouchers that could be exchanged for shares in state-owned enterprises at preestablished ratios. See World Bank, Development Econom- ics Vice Presidency, "Creating Private Enterprises and Efficient Markets," Development Brief 46 (1995) [http: //www.worldbank.org/html/dec/ - Pu bl ications/Briefs/DB46. htm I). . Box 3.1 Regional 39 Largest Infrastructure Projects with Private Participation in Europe and Centra I Asia The 10 largest private infrastructure projects in Europe and Central Asia captured 36% of investment in such projects in 1990-2001. Two of these projects were in electricity (power plants), while all the rest were in telecommunications-involvin g the privatization of dominant telecommunications companies or the introduction of new mobile service providers (see table). Although the projects were spread throughout the region, Turkey had the most, with 4 of the 10. Top 10 Infrastructure Projects with Private Participation, Europe and Central Asia, 1990-2001 Investment (2001 US$ Project billions) Matav Rt. 6.8 Telecommunfkacja Polska SA SPTTelecom Turkcell IS-TIM lnterGen 6ebze Adapazari lsmi Svyazinvest Russian Federation Birecik Power Plant Turkey Kazakhtelecom Kazakhstan Polska Telefonia Cyfrowa 1.5 Total 35.2 Source: World Bank, PPI Project Database. 40 Regional Box 3.2 Top Sponsors of Infrastructure Projects with Private Participation in Europe and Central Asia Telecommunications companies were the 10 largest sponsors of private infrastructure projects in Europe and Central Asia in 1990-2001, reflecting that sector's dominance of private activity in the region (see table). Their projects accounted for 43% of the investment in private infrastructure projects in the region. Among the top 10 sponsors, most were Western European telecommunications companies that are the dominant operator in their domestic market (such as Deutsche Telekom, France Telecom, and Sonera). The exceptions were Ericsson, a telecommunications equipment supplier, and Cukurova, a Turkish company. Top 10 Sponsors of Infrastructure Projects with Private Participation, Europe and Central Asia, 1990-2001 Projects by sector Natural gas transmission and Telecommuni- Water and Sponsor distribution cations Transport sewerage Deutsche Telekom 0 0 France Telecom 6 0 0 0 0 0 0 0 0 Telecom Italia 0 0 Ericsson Cukurova Holding Telia AB lsbank 3.6 0 Tota lb 42.0 40 0 0 0 a. Investment from all sources in projects in which sponsor had an equity participation of 150/o or more. b. Data may not sum to totals because projects can be associated with more than one sponsor. Source: World Bank, PPI Project Database. Regional 41 Figure 3.1 Annual Investment in Infrastructure Projects with Private Participation, Europe and Central Asia, 1990-2001 25 20 15 10 V1 c -~ ..0 5 w Vl ::::J 0 0 N 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: World Bank, PPI Project Database. Table 3.1 Annual Investment in Infrastructure Projects with Private Participation by Sector, Europe and Central Asia, 1990-2001 (2001 US$ billions) Natural gas transmission and Telecommuni- Water and distribution cations Transport sewerage Total 0.1 1.2 0.9 1.1 0.4 0.0 15.9 0.9 1.4 22.8 0.0 4.5 0.3 0.5 6.5 4.7 64.9 5.1 3.3 97.1 .. Zero. Source: World Bank, PPI Project Database. 42 Regional Private Part ici pat ion i n Infrastructure: Trend s in Developing Countries in 1990 • 2001 Figure 3.2 Infrastructure Projects with Private Participation by Year of Financial Closure, Europe and Central Asia, 1990-2001 ~ 180 - Russian Federation 150 Rest of region 120 90 60 30 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: World Bank, PPI Project Database. Table 3.2 Top Five Countries by Cumulative Investment in Infrastructure Projects with Private Participation, Europe and Central Asia, 19~0-2001 Investment Investment as a share Country (2001 US$ billions) of regional total (%) :o=============;:;:~:;;;------=-iiiiiiiii Turkey Hungary Poland Russian Federation Czech Republic Total Source: World Bank, PPI Project Database. Regional 43 Table 3.3 Top Five Countries by Per Capita Cumulative Investment in Infrastructure Projects with Private Participation, Europe and Central Asia, 1990-2001 Per capita investment Total investment Country (2001 US$) (2001 US$ billions) Hungary 1,607 16 Czech Republic Estonia Croatia Latvia Source: Wo rld Ba nk, PPI Project Database. Figure 3.3 Cumulative Investment in Infrastructure Projects with Private Participation by Type, Europe and Central Asia, 1990-2001 Concessions 60/o Greenfield projects 450/o Divestitures 490/o Source: World Bank, PPI Project Database. Total $97 billion 44 Regional Private Participation in Infrastructure: Trends in Developing Countries in 1990 • 2001 Table 3.4 Infrastructure Projects with Private Participation by Sector and Type, Europe and Central Asia, 1990-2001 u Management ISector II II II Greenfield and lease Concessions Divestitures projects contracts Total Electricity ~I 2 131 20 4 157 Natural gas transmission a distribution . ~ 2 .)I 2 0 35 bt: Telecommunications 115 181 0 296 Transport 17 11 5 43 Airports 4 5 5 0 14 Railways 0 4 0 3 7 Seaports 0 8 6 2 16 Toll roads 6 0 0 0 6 Water and sewerage 7 4 5 21 37 Total 21 298 219 30 568 Source: World Bank, PPI Project Database. Figure 3.4 Cumulative Investment in Infrastructure Projects with Private Participation by Sector or Subsector, Europe and Central Asia, 1990-2001 Water and sewerage 30/o Toll roads 30/o Seaports 1O/o Airports 20/o Natural gas transmission and distribution 50/o Railways 00/o Telecommunications 670/o Electricity 200/o Source: World Bank, PPI Project Database. Total $97 billion Regional 45 Figure 3.5 Cumulative Investment in Infrastructure Projects with Private Participation by Sector and Type, Europe and Central Asia, 1990-2001 70 [:::::•·:::::I Greenfield projects 60 50 40 30 - Concessions Divestitures ~ 20 ~ .D ti 10 ::::> 0 0 N 0 Electricity Natural gas Telecommunications Transport Water and transmission and sewerage distribution Source : World Bank, PPI Project Database. Figure 3.6 Annual Investment in Electricity Projects with Private Participation by Type, Europe and Central Asia, 1990-2001 5 I·. :..- ·. <::<1 Greenfield projects FIA - 4 Concessions 3 Divestitures 2 V1 c:: 0 =1 :.0 0 0 N 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: World Bank, PPI Project Database. 46 Regional Private Participation in Infrastructure : Trends in Deve loping Count ries i n 1990 • 200 1 Table 3.5 Annual Investment in Transport Projects with Private Participation by Subsector, Europe and Central Asia, 1990-2001 (2001 US$ billions) Railways Seaports Toll roads Total 0.5 0.8 0.3 0.1 0.5 1.3 0.4 0.9 2001 0.3 Total 5.1 .. Zero. Source: World Bank, PPI Project Database. Regional 47 4 Latin Anierica and the Caribbean Latin America and the Caribbean led the wave of private participation in infrastructure in developing countries in 1990-2001. With 887 private infrastructure projects in 28 of the 32 countries, the region attracted $361 billion in investment commitments over the period. Private activity in the region started in the 1980s with road projects in Mexico and a comprehensive privatization program in Chile, but grew considerably in the 1990s. Annual investment in infrastructure projects with private participation rose from $14.6 billion in 1990 to a peak of $75.6 billion in 1998-then dropped sharply as a result of the conclusion of major divestiture programs and, to some degree, the economic crisis in most of the region's countries in the late 1990s (table 4.1). The decline in private activity in 1999-2001 was driven mainly by the decrease in acquisitions of government assets (licenses, concessions, and state-owned companies, based on the highest price offered), which dropped by more than 70% in 1998-2001. By contrast, investment in sector expansion fell by only 33% during that period (figure 4.1). Although private activity in infrastructure boomed across Latin America, Brazil has dominated investment in the region since 1996 (figure 4.2). The peak investment levels in 1997-98 were driven mainly by Brazil's privatization of its electricity distribution companies and its entire telecommunications sector. In 1997 Brazil captured 50% of all investment in private infrastructure projects in the region-and in 1998, 66%. In the following years its share fluctuated between 43% and 52%. The number of private infrastructure projects in the region also boomed, rising from 41 in 1990 to a peak of 140 in 1997 and 1998, then fell substantially (figure 4.3). Brazil accounted for a significant share of the projects. Attracting the most investment in 1990-2001 were Brazil, Argentina, Mexico, Chile, and Colombia, the region's largest economies (table 4.2). But when investment is measured in per capita terms, two small economies-Panama and Belize-appear among the top five (table 4.3). Panama divested its electricity and telecommunications sectors and introduced private participation in its water and main transport sectors. Belize transferred Belize Electricity Limited and Belize Water to the private sector and developed an export-oriented electricity project (Maca/Mollejon hydroelectric). Although private participation in infrastructure was spread among a large number of projects and sponsors in the region, the biggest projects and the top sponsors accounted for a considerable share of the total investment commitments (boxes 4.1 and 4.2). Countries in Latin America and the Caribbean tended to use private participation in infrastructure as an integral part of deeper sectoral reforms. These reforms were aimed at enhancing sector performance through private management and competition and, by adjusting tariffs, allowing the sector to generate the revenues needed to improve service coverage and quality. This approach meant an emphasis on transferring state-owned assets to the private sector rather than complementing public sector investments. Thus divestitures claimed the largest share of cumulative investment in 1990-2001 (figure 4.4). They also dominated annual investment, though their share in the regional total fell from 75% in 1992 to 47% in 2000 before recovering to 56% in 2001. I 48 Regional Private Participation in Infrastructure: Trends in Developing Countries in 1990 • 2001 The divestitures of infrastructure companies usually occurred in phases. In the first phase a controlling stake in the company was sold through a competitive tender to a strategic investor, which committed to manage the company and comply with a predefined investment program. In later phases more shares were sold through initial public offerings on local stock exchanges and the New York Stock Exchange. Greenfield projects ranked second in investment but first in number of projects (table 4.4). Their share in annual investment rose from 4% in 1990 to 35% in 2000, then fell slightly in 2001. Greenfield projects in electricity and telecommunications typically took place in reformed markets where governments moved away from providing services and focused on setting the rules for market players. Electricity In the electricity sector 25 countries in Latin America and the Caribbean awarded 301 projects with private participation in 1990-2001. Annual investment commitments for such projects increased from less than $1 billion in 1990 to $23 billion in 1997 before declining sharply. The growth of investment commitments in 1997 was driven by the acquisition of government assets, particularly divested electricity companies in Brazil (figure 4 .5). The subsequent decline was due mainly to the slowdown in new divestitures. Investments in sector expansion, by contrast, remained stable in 1997-99, increased in 2000, and declined only in 2001. Brazil, with the privatization of its main distribution companies, dominated private activity in the sector, accounting for around 60% of annual investment in private electricity projects in the region during 1997-2001. With electricity the infrastructure sector most affected by the regional financial crisis, its share in annual investment in private infrastructure projects fell to 16% in 2001, after having grown from 6% in 1990 to 43% in 1997. Annual investment in private electricity projects in 2001 dropped to its lowest level since 1994. Even so, electricity ranked second in investment and first in number of projects over the 12-year period (figure 4.6). Private participation in Latin American countries often took place in conjunction with the vertical separation of the sector into its three basic business units (generation, transmission, and distribution). Governments transferred generation and distribution (and sometimes transmission) to the private sector, established new regulatory frameworks, and introduced market mechanisms to encourage competition. This strategy was reflected in an emphasis on divestitures, which accounted for most of the investment in electricity projects with private participation in 1990-2001 (figure 4.7). The share of divestitures in annual investment gradually declined, however, from almost 90% in 1992 to 47% in 2001 (figure 4.8). Greenfield projects also played a big part in private activity in electricity. They ranked second (after divestitures) in cumulative investment in 1990-2001, though their share in annual investment grew from 11%in1992 to 53% in 2001. Greenfield projects also slightly outnumbered divestitures in the sector. Of the 149 greenfield electricity projects, 56 were merchant power plants introduced in reformed markets, representing investment commit"inents of more than $12 billion (see appendix 1 for a definition of merchant facilities). Ten other greenfield projects were also awarded in these markets-eight stand-alone transmission lines and two distribution projects-attracting investment commitments of almost $2 billion. • Regional 49 Latin America developed independent power producers under build-operate-own (BOO) or build-operate-transfer (BOT) structures with power purchase agreements with state-owned enterprises (though these projects were less popular than in Asia; see chapters on East and South Asia). The 83 projects for independent power pro.ducers that reached financial closure in the region by 2001 represented investment commitments of $12 billion. Most of these are in Brazil, Colombia, the Dominican Republic, Guatemala, and Nicaragua, countries that had already embarked on comprehensive reform of their electricity sectors. The rest were developed in Belize, Costa Rica, Cuba, Ecuador, Honduras, Jamaica, and Mexico, countries that had initially limited private involvement to the development of generation capacity. Natural Gas Transmission and Distribution Private activity in the transmission and distribution of natural gas in the region was directed to 71 projects in seven countries (Argentina, Bolivia, Brazil, Chile, Colombia, Mexico, and Uruguay). Annual investment in private projects in the sector fluctuated between $1 billion and $2 billion during much of 1992-2001 (there was no private activity in 1990-91). But it reached much higher levels in 1992, when Argentina privatized its natural gas transmission and distribution system, and in 1998, when four export-oriented gas pipelines reached financial closure and Mexico started awarding concessions for natural gas distribution. Investment in private transmission and distribution projects amounted to $20 billion over the period, accounting for 5% of the investment in all private infrastructure projects in the region. As in other sectors, most of the countries introducing private participation in the transmission and distribution of natural gas did so as part of broader reforms. These reforms usually established new regulatory frameworks and vertically separated the sector into its three basic business units (production, transmission, and distribution). To promote competition, the new regulatory frameworks have required open access to the pipelines for third parties. Argentina and Chile have pursued the most market-oriented reforms in the region, creating competitive market structures, transferring all investment decisions to the market, and allowing full private ownership of transmission and distribution assets. The natural gas reforms in Latin America have usually been part of broader energy reforms, with five of the seven countries launching these reforms at the same time that they were liberalizing electricity. Latin American countries have chosen different forms of private participation, depending on the initial development of their natural gas facilities. Countries with a fully developed network (Argentina) or some transport assets (Bolivia and Brazil) have opted for divestitures, while those with limited transport networks or none at all (Chile, Colombia, Mexico, and Uruguay) have turned to greenfield projects to construct facilities. Divestitures captured the most investment in 1990-2001, followed by greenfield projects. But greenfield projects outnumbered divestitures. Telecommunications In 1990-2001, 23 countries in the region awarded 120 telecommunications projects with private participation. 1 Annual investment in such projects grew from $5 billion in 199D to $40 billion in 1998, then declined. The peak of private activity in 1998 was driven mainly by acquisitions of government assets, particularly the Telebras system (figure 4.9). The subsequent decline largely reflected the absence of any major acquisitions of such assets. I 50 Regional Private Participation in Infrastructure: Trends in Developing Countries i n 1990 • 2001 Brazil was the last major Latin American economy to divest its telecommunications sector. Annual investment in expansion of telecommunications rose from 1990 to 1999, then dropped-but only slightly. Brazil dominated private activity in telecommunications after it started to bring in the private sector in 1997. In 1998, when it privatized the Telebras system, Brazil accounted for 75% of the annual investment in private telecommunications projects in the region. Although Brazil's share declined after that, it was still around 50% in 2001. Telecommunications led private activity in Latin America over the 12-year period, accounting for 45% of the investment in all private infrastructure projects in the region. The sector ranked third in number of projects, after electricity and transport. Private participation in telecommunications in most Latin American countries was a key part of sectoral reforms. The reforms also included opening the sector to competition or establishing clear deadlines for ending monopoly rights, transferring main sector assets to private firms, and setting up new regulatory frameworks aimed at promoting private investment and encouraging competition. Reflecting this approach, divestitures dominated annual investment in private telecommunications projects, though their share fell from 95% in 1990 to 64% in 2000 before recovering in 2001. Greenfield projects outnumbered divestitures in the sector but ranked second in investment- with their share increasing from 5% in 1990 to 49% in 1997 before declining. In the first half of the 1990s Latin American countries used greenfield projects mainly to introduce new services (such as mobile telephony) and to create a degree of competition (such as through duopolies) in mobile service markets. Later, greenfield projects were used to deepen competition in the mobile markets and introduce competition in basic telecommunications services as the transitional monopolies of privatized incumbents expired. Transport In transport, 19 countries in Latin America and the Caribbean awarded 295 projects with private participation in 1990-2001. While annual investment in these projects was $9 billion in 1990, it fell to less than $1 billion in 1991 before steadily rising to $14 billion in 1998. After that it declined sharply. Investment in private transport projects amounted to $68 billion over the period, 19% of the regional total for private infrastructure projects (table 4.5). Airports. Twelve countries introduced private participation in airports, with 32 projects garnering investment of $7 billion in 1990-2001. The concession of the Argentine airport system in 1998 accounted for a large share of the investment in these projects. Most airport projects in the region were implemented through concession contracts that bundled most airport services (terminals and runways). Railways. Ten countries in the region introduced private pamc1pation m railways in 1990-2001, awarding 48 projects that attracted $18' billion in investment. The investment was concentrated in 1996-99, when Argentina, Brazil, and Mexico undertook railway concession programs. Most railway projects in Latin America and the Caribbean were implemented through concession contracts for the operation and rehabilitation of existing assets. These contracts were awarded to domestic companies, often in partnership with an I Regional 51 experienced international operator and sponsored by a major freight customer. Another feature of railway projects in the region was a tendency to keep rail services and fixed assets together when introducing private participation. Seaports. Thirteen countries in the region introduced private pamc1pation in seaports. Awarding 78 projects, these countries attracted investment of $6 billion in 1990-2001. Brazil's award of several large seaport projects in 1997 accounted for the peak in investment in that year. Most seaport projects in the region were implemented through concession contracts. Toll Roads. Private activity in toll roads occurred in 13 Latin American and Caribbean countries in 1990-2001. These countries awarded 137 toll road projects with private participation, attracting investment of $37 billion. Annual investment in this subsector reached peak levels in 1990, when Argentina and Mexico had large-scale private participation in existing road programs, and in 1997 and 1998, when some state governments in Brazil launched toll road concession programs. Most countries in the region used concession contracts to introduce private participation in toll roads, though Mexico opted for building new toll roads through greenfield projects. Water and Sewerage Fifteen Latin American countries awarded 100 water and sewerage projects with private participation in 1990-2001. Annual investment in such projects grew from less than $100 million in 1991 to more than $3 bjlJion in 2000 and then declined. Annual investment reached peak levels in 1993, when Aguas Argentinas was concessioned, and in 1999, when most of the Chilean water privatizations took place. Over the 12-year period investment in private water and sewerage projects totaled $21 billion, 6% of the investment in all private infrastructure projects in the region. Argentina accounted for the most investment ($10 billion), followed by Chile ($4 billion) and Brazil ($3 billion). But Brazil ranked first in number of projects (32), followed by Mexico (21) and Argentina (12). Countries with private activity in water and sewerage focused on transferring operational control of existing facilities to the private sector through concessions and divestitures. Most of the concession contracts involved water utilities that treat and distribute potable water as well as provide sewerage services. Greenfield projects, the second most common type of private participation in the sector, were used mainly to build bulk water treatment facilities. These projects were mostly in Brazil and Mexico. Note 1. In addition, nine Caribbean countries had long-established private telecom- munications monopolies, and Chile privatized its telecommunications sector in the 1980s. 52 Regional Box 4.1 Largest Infrastructure Projects with Private Participation in Latin America and the Caribbean In Latin America and the Caribbean the 10 largest private infrastructure projects in 1990- 2001 accounted for more than 29% of the total investment in such projects. Nine of these projects were in telecommunications; the tenth was an electricity distribution company (see table). Brazil and Argentina accounted for most of the projects. Top 10 Infrastructure Projects with Private Participation, Latin America and the Caribbean, 1990-2001 Investment (2001 US$ billions) Sector Country Telefonos de Mexico (Telmex)• 30.4 Telecommunications Mexico Tele Norte Leste Participa~oes (TNL) 10.9 Telecommunications Brazil Telesp Participa~oes SA 10.6 Telecommunications Brazil Telecom Argentina 10.6 Telecomrnu!Jitat1ons Arge.ntina Telefonica de Argentina 10.2 Telecommunications Argentina Compaflia An6nima Nacional Telefonos de Venezuela 9.7 Telecornmun1C9ti0ns Venezuela, RB Telefonica del Peru 7.5 Telecommunications Peru Embratel Participa~oes 5.7 elecommunications Brazil Brasil Telecom 4.7 elecommunications Brazil Light-Servi~os de Eletricidade 4.5 Total 104.8 a. Including fixed and mobile lines as well as long-distance services. Mobile services were spun off in 2001 to America Movil. Source: World Bank, PPI Project Database. Box 4.2 Regional 53 Top Sponsors of Infrastructure Projects with Private Participation in Latin America and the Caribbean In Latin America and the Caribbean the top 10 sponsors of private infrastructure projects in 1990-2001 accounted for more than 15% of such projects-and their projects for almost 44% of investment. Most of the top sponsors in the region were international operators, such as the AES Corporation and France Telecom. But regional players, such as Andrade Gutierrez and Carso Global Telecom, also emerged as top sponsors (see table). Among the top 10 sponsors, half specialized in one sector, while the other half operated in two or more. Top 10 Sponsors of Infrastructure Projects with Private Participation, Latin America and the Caribbean, 1990-2001 Projects by sector Natural gas Investment• transmission (2001 US$ and Telecommuni- Water and sponsor b"ll" 1 ions) proJec . ts El ec t nc1 . "ty d"1st"b n uf ion ca f ions Tran par se wea r ge 'ICarso Global Telecom 34.8 5 0 0 5 0 0 Telefonica 33.7 11 0 0 11 0 0 i Telecom Italia 25.7 13 0 0 13 0 0 SUEZ 17.1 24 6 6 0 2 10 AES Corporation 15.9 25 24 0 1 0 0 IC::DI Andrade Gutierrez 14.7 9 1 1 1 1 lnepar 13.9 12 7 0 5 0 France Telecom 13.2 5 0 I 0 5 0 0 Enron Corporation 11.4 29 9 15 0 0 5 Aguas de Barcelona 10.6 14 0 0 0 0 14 Tota lb 158.6 138 47 22 37 7 25 ~ - a. Investment from all sources in projects in which sponsor had an equity participation of 15% or more. b. Data may not sum to totals because projects can be associated with more than one sponsor. Source: World Bank. PPI Project Database. 54 Regional Private Participation in Infrastructure: Trends in Developing Countries in 1990 • 2001 Table 4.1 Annual Investment in Infrastructure Projects with Private Participation by Sector, Latin America and the Caribbean, 1990-2001 (2001 US$ billions) Natural gas transmission Telecommuni- Water and Year Electricity and distribution cations Transport sewerage Total .. Zero. Source: World Bank, PPI Project Database. Figure 4.1 Annual Investment in Infrastructure Projects with Private Participation by Destination, Latin America and the Caribbean, 1990-2001 80 ~ - 70 Acquisitions of government assetsa 60 Sector expansion 50 40 30 .~ 20 - ~ 10 0 0 N 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 a. Divestiture revenues, license fees, and canon payments. Source: World Bank, PPI Project Database. Regional 55 Figure 4.2 Annual Investment in Infrastructure Projects with Private Participation, Latin America and the Caribbean, 1990-2001 80 FM - 70 Brazil 60 Rest of region so 40 30 ~ 20 :0 ~ ~ 10 0 0 N 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: World Bank, PPI Project Database. Figure 4.3 Infrastructure Projects with Private Participation by Year of Financial Closure, Latin America and the Caribbean, 1990-2001 140 FM - 120 Brazil 100 Rest of region 80 60 40 20 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: World Bank, PPI Project Database. Private Participation in Infrastructure: Trends in Developing Countries in 1990 • 2001 56 Regional Table 4.2 Top Five Countries by Cumulative Investment in Infrastructure Projects with Private Participation, Latin America and the Caribbean, 1990-2001 Investment Investment as a share Country (2001 US$ billions) of regional total (O/o) Brazil 135.4 38 Argentina Mexico Chile Colombia Total Source: World Bank, PPI Project Database. Table 4.3 Top Five Countries by Per Capita Cumulative Investment in Infrastructure Projects with Private Participation, Latin America and the Caribbean, 1990-2001 Per capita investment Total investment I Country (2001 US$) (2001 US$ billions) Argentina 2,203 82.6 .· Panama 1,417 ~· '..... ·• ·. .. :x . 4.1 Chile 1,361 21.0 " ·. . Belize -~ .·•. J ··.. ~·· 0:2 Brazil 784 135.4 Source: World Bank, PPI Project Database. Regional 57 Figure 4.4 Cumulative Investment in Infrastructure Projects with Private Participation by Type, Latin America and the Caribbean, 1990-2001 Greenfield projects 250/o Divestitures 560/o Concessions 190/o So urce: World Bank, PPI Project Database. Total $361 billion Table 4.4 Infrastructure Projects with Private Participation by Sector and Type, Latin America and the Caribbean, 1990-2001 Management Greenfield and lease Sector Concessions Divestitures projects contracts Total Electricity 7 143 149 2 301 Natural gas transmission and distribution 2 25 44 0 71 Telecommunications 0 30 90 0 120 Transport 7 52 14 295 Airports 3 32 Railways 48 Seaports 78 Toll roads 137 Water and sewerage 100 Total 287 887 Source: World Bank, PP I Project Database. Private Participation in Infrastructure : Trends in Developing Countries in 1990 • 2001 58 Regional Figure 4.5 Annual Investment in Electricity Projects with Private Participation by Destination, Latin America and the Caribbean, 1990-2001 25 ~ - Acquisitions of government assetsa 20 Sector expansion 15 10 c .~ i5 5 ~ Vl ::::> 0 0 N 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 a. Divestiture revenues, license fees, and canon payments. Source: World Bank, PPI Project Database. Figure 4.6 Cumulative Investment in Infrastructure Projects with Private Participation by Sector or Subsector, Latin America and the Caribbean, 1990-2001 Water and sewerage 60/o Toll roads 100/o Railways 50/o Seaports 20/o Airports 20/o Telecommunications 450/o Natural gas transmission and distribution 50/o Electricity 250/o Source: World Bank, PPI Project Database. Total $361 billion Regional 59 Figure 4.7 Cumulative Investment in Infrastructure Projects with Private Participation by Sector and Type, Latin America and the Caribbean, 1990-2001 180 L:: - ·. ·.·· 1 Greenfield projects 150 120 90 - Concessions Divestitures 60 Electricity Natural gas Telecommunications Transport Water and transmission and sewerage distribution Source: World Bank, PPI Project Database. Figure 4.8 Annual Investment in Electricity Projects with Private Participation by Type, Latin America and the Caribbean, 1990-2001 25 f:::·::::·::::·::::·::::-) Greenfield projects ~ - 20 Concessions 15 Divestitures 10 "' c 0 ~ 5 - Vl ::::i Ci ~ 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: World Bank, PPI Project Database. 60 Regional Private Participation in Infrastructure: Trends in Developing Countries in 1990 • 2001 Figure 4.9 Annual Investment in Telecommunications Projects with Private Participation by Destination, Latin America and the Caribbean, 1990-2001 40 35 30 25 - - Acq uisi t ions of government assetsa Sector expansion 20 15 .~ 10 :0 YT ~ 5 0 0 N 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 a. Divestiture revenues, license fees, and canon payments. Source : World Bank, PPI Project Database. Table 4.5 Annual Investment in Transport Projects with Priv~te Participation by Subsector, Latin America and the Caribbean, 1990-2001 (2D01 US$ bill ion s) Year Airports Seaports Toll roads Total 9.1 0.8 .. Zero. Source : World Bank, PPI Project Data base. Regional 61 5 Middle East and North Africa Annual investment in private infrastructure projects in the Middle East and North Africa fluctuated markedly in 1990-2001 (figure 5.1; table 5.1). The peaks in investment were driven by a few projects in Morocco: the export-oriented Maghreb Gas Pipeline in 1993, the concession of the electricity and water utility in Casablanca in 1997, the concession of the electricity and water utility in Rabat in 1998, and the privatization of Maroc Telecom, the national telecommunications company, in 2000. The number of projects increased in line with investment in the second half of the 1990s (figure 5.2). By 2001, 12 of the 16 countries in the region had awarded 5 5 infrastructure projects with private participation, attracting nearly $23 billion in investment commitments. ,,. Morocco attracted the most investment in private infrastructure projects in 1990-200 l, with 57% of the regional total, followed by the Arab Republic of Egypt, Algeria, Oman, and Jordan (table 5.2). Measuring private activity in per capita terms, however, brings two smaller countries, Lebanon and Tunisia, into the top five (table 5.3). The 10 largest projects accounted for most of the investment commitments to private infrastructure in the region (box 5.1). The top 5 sponsors similarly accounted for much of the total (box 5.2). Countries in the Middle East and North Africa used private participation in infrastructure mainly to complement investment by state-owned enterprises. Thus they emphasized building new assets through greenfield projects rather than using private participation to increase the efficiency of existing enterprises. Greenfield projects dominated private activity in the region in terms of both investment and number of projects (figure 5.3; table 5.4). Most of the region's greenfield projects were in telecommunications and electricity. Concessions were the second most common type of private participation in infrastructure in the Middle East and North Africa. Most of the region's 10 infrastructure concessions involved transport projects, but the bulk of the investment went to the two electricity and water concessions in Morocco. The three divestitures in the region involved the sale of controlling stakes in telecommunications companies to strategic investors. Electricity Private participation in electricity in the region started in 1994, and by 2001 six countries or territories (Bahrain, Egypt, Morocco, Oman, Tunisia, and West Bank and Gaza) had awarded 10 projects. In addition, 3 multiutility (electricity and water) concessions were granted by 2001. Annual investment in private electricity projects varied considerably. Investment reached peak levels in 1997, when two concessions were awarded in Morocco (one for an electricity and water utility in Casablanca and the other for Jorf Lasfar Energy Company); in 1998, when an electricity and water concession for Rabat was granted in Morocco; and in 1999, when two power plants reached financial closure (Sidi Krir 3&4 in Egypt and Rades II in Tunisia). In 1990-2001 stand-alone electricity projects accounted for 18% of the investment in infrastructure projects with private participation in the region. Most common among these were greenfield projects for independent power producers. Three projects bundling I 62 Regional Private Participation in Infrastructure : Trends in Developing Countries in 1990 • 2001 electricity and water services (the Casablanca and Rabat concessions in Morocco and a project involving a power plant and a desalination plant in Oman) accounted for another 21 % of the investment in private infrastructure projects. Natural Gas Transmission and Distribution Algeria, Egypt, Morocco, and Tunisia introduced private participation in the transmission and distribution of natural gas through four greenfield projects between 1990 and 2001. Investment in these projects amounted to about $4 billion over the period. Most of the investment occurred in 1993, when the export-oriented Maghreb Gas Pipeline project was awarded. The other three projects were small transmission pipelines for domestic markets. Telecommunications Eight countries or territories (Egypt, the Islamic Republic of Iran, Jordan, Lebanon, Morocco, the Syrian Arab Republic, West Bank and Gaza, and the Republic of Yemen) introduced private participation in telecommunications in 1990-2001. Annual investment in private telecommunications projects fluctuated significantly, reaching peak levels in 1998, when Jordan privatized its national operator; in 1999, when Egypt issued two national mobile licenses; and in 2000, when Morocco privatized its national operator. Over the 12-year period telecommunications led private activity, capturing 35% of the investment in private infrastructure projects in the region and accounting for the largest number of projects (figure 5.4). Countries and territories with private participation in telecommunications opted for two different approaches. Jordan and Morocco followed the Latin American approach, selling controlling stakes in national operators to strategic investors, defining clear deadlines for ending monopoly rights in basic services, implementing tariff reforms, and opening mobile telecommunications services to competition. The other countries or territories focused on introducing new services (mobile telephony) in unreformed telecommunications markets through greenfield projects. The greenfield projects in telecommunications far outnumbered the divestitures. But because of the large size of the incumbent operators that were privatized, the three divestitures accounted for more than half the investment in private telecommunications projects (figure 5.5). Transport Private activity in transport started in 1997 in the Middle East and North Africa, and by 2001 six countries (Egypt, Jordan, Lebanon, Oman, Saudi Arabia, and the Republic of Yemen) had introduced private participation in the sector. Annual investment in transport projects with private participation reached a peak of $600 million in 2000, driven mainly by two seaport projects (one in Egypt and the other in Lebanon). Investment in private transport projects in 1990-2001 amounted to only 8% of the investment in all private infrastructure projects in the region. Even so, transport accounted for the second largest number of projects in the region, after telecommunications. Egypt had the most private activity in transport ($1 billion), followed by the Republic of Yemen and Lebanon (both with around $210 million). These three countries accounted for 83% of the investment in transport projects with private participation in the region. Regional 63 Among transport subsectors, seaports led in private participation (table 5.5). Five countries (Egypt, Lebanon, Oman, Saudi Arabia, and the Republic of Yemen) awarded eight seaport projects, attracting $900 million in investment commitments. In airports, with seven projects in two countries (Egypt and Oman), private activity added up to more than $700 million. In railways, private activity took place only in Jordan, which awarded a project involving investment of $190 million. The region had no private participation in toll roads by 2001. Water and Sewerage In 1990-2001 three countries or territories in the region (Egypt, Jordan, and West Bank and Gaza) had private participation in water and sewerage, with seven projects that received almost $5 billion in investment. Four of these projects involved stand-alone water and sewerage companies and attracted investment of $60 million. The rest of the investment went to three multiutility projects that included both electricity and water services (see section on electricity). Of the four stand-alone water projects, three involved management or lease contracts (two for wastewater facilities and one for a vertically integrated water utility) and were awarded in Egypt and West Bank and Gaza. The fourth was a concession of a water treatment plant in Jordan. I 64 Regional Box 5.1 Largest Infrastructure Projects with Private Participation in the Middle East and North Africa Of the 10 largest private infrastructure projects in the Middle East and North Africa in 1990-2001, 5 were in telecommunications and 6 were in Morocco (see table). Investment numbers for these projects show that the region's private activity in infrastructure is still concentrated in a few projects: the top 10 accounted for 75% of the investment in private infrastructure projects in 1990-2001. Top 10 Infrastructure Projects with Private Participation, Middle East and North Africa, 1990-2001 Investment (2001 US$ Project billions) Country Lyonnaise des Eaux de Casablanca 3.4 Morocco Maghreb Gas Pipeline (Algeria-Morocco) 2.8 Morocco Maroc Telecom 2.2 Morocco Jorf Lasfar Energy Company 1.9 Morocco Medi Telecom 1.6 Morocco Misrfone 1.4 Egypt, Arab Rep. MobilNil 1.3 Egypt, Arab Rep. Rabat Utility Concession 1.1 Miskar Gas Pipeline 0.8 Jordan Telecommunications Company 0.6 Total 17.0 Source: World Bank, PPI Project Database. Box 5.2 Regional 65 Top Sponsors of Infrastructure Projects with Private Participation in the Middle East and North Africa Ranked by investment, the top five sponsors of private infrastructure projects in the Middle East and North Africa in 1990-2001 accounted for projects attracting $10.9 billion in investment, 48% of the regional total (table 1). Dominating this list of top five were sponsors of the largest projects in the region, such as the concession of the electricity and water utility in Casablanca, involving Electricite de France, SUEZ, and Endesa; the export- oriented Maghreb Gas Pipeline project, in which Gas Natural is the main private sponsor; and the Maroc Telecom privatization, in which Vivendi is the sponsor. Moreover, the top sponsors in the region are European-based infrastructure operators. When sponsors are ranked by number of projects, however, Orascom, a regional telecommunications operator, emerges among the top five (table 2). Table 1 Top Five Sponsors of Infrastructure Projects with Private Participation by Investment, Middle East and North Africa, 1990-2001 Projects by sector ===-;;;;;;;;;;;;;= ~:::;:;;;;;;;::::;;;;;;;;;;;::=;;;::;;:;;~!::;;:::=!!::~I Natural gas Investment• transmission (2001 US$ and Telecommuni- Water and Sponsor billions) Projects Electricity distribution cations Transport sewerage Electricite de France 4.1 4 4 0 0 0 0 I SUEZ 3.9 4 1 0 u 0 2 Vivendi 3.5 3 0 0 2 0 I 1 Endesa (Spain) 3.4 1 1 0 0 u 0 Gas Natural 2.8 1 0 1 0 0 0 ~ Tota lb 10.9 11 5 1 2 0 3 Ii a. Investment from all sources in projects in which sponsor had an equity participation of 150/o or more. b. Data may not sum to totals because projects can be associated with more than one sponsor. Source: World Bank, PPI Project Database. Top Five Sponsors of Infrastructure Projects with Private Participation by Number of Projects, Middle East and North Africa, 1990-2001 Activity by sector Natural gas transmission and Telecommuni- Sponsor Projects Electricity distribution cations 1 :::-======-===-~~=======-=~ .....=====- 0 ra scom Electricite de France France Telecom SUEZ 3.9 Vivendi 3.5 18 lU) a. Investment from all sources in projects in which sponsor had an equity participation of 150/o or more. b. Data may not sum to totals because projects can be associated with more than one sponsor. Source: World Bank, PPI Project Database. 66 Regional Private Participation in Infrastructure: Trends in Developing Countries in 1990 • 2001 Figure 5.1 Annual Investment in Infrastructure Projects with Private Participation, Middle East and North Africa, 1990-2001 6 WA 5 4 3 - Morocco Rest of region 2 V\ c ,g .D ~ Vl ::::J 0 0 N 0 1990 1991 1992 1993 1994 1995 1996 1997 1998. 1999 2000 2001 Source: World Bank, PPI Project Database. Table 5.1 Annual Investment in Infrastructure Projects with Private Participation by Sector, Middle East and North Africa, 1990-2001 (2001 US$ billions) Natural gas Electricity transmission and and Water and water and Year distribution sewerage Total 1990 0.0 1991 1992 1993 1994 1995 1996 0.2 1997 1.7 1998 1999 1.7 O.t 2.9 2000 3.0 3.8 2001 0.8 1.0 0.4 2.8 Total 4.1 3.9 8.1 4.9 22.8 .. Zero. Source: World Bank, PPI Project Database. Regional 67 Figure 5.2 Infrastructure Projects with Private Participation by Year of Financial Closure, Middle East and North Africa, 1990-2001 10 8 6 4 2 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: World Bank, PPI Project Database. Table 5.2 Top Five Countries by Cumulative Investment in Infrastructure Projects with Private Participation, Middle East and North Africa, 1990-2001 Investment Investment as a share Country (2001 US$ billions) of regional total (O/o) Morocco 13.0 57 Egypt, Arab Rep. 5.2 Algeria 2.8 Oman 1.1 Jordan 1.1 Total 20.4 Source: World Bank, PPI Project Database. 68 Regional Private Participation in Infra structure : Trends in Developing Countries in 1990 • 2001 Table 5.3 Top Five Countries by Per Capita Cumulative Investment in Infrastructure Projects with Private Participation, Middle East and North Africa, 1990-2001 Per capita investment Total investment Country (2001 US$) (2001 US$ billions) Oman 450 1.1 Jordan 209 1.1 Lebanon 0., Tunisia 109 1.1 Source: World Bank, PPI Project Database. Figure 5.3 Cumulative Investment in Infrastructure Projects with Private Participation by Type, Middle East and North Africa, 1990-2001 Greenfield projects 500/o Concessions 320/o Source: World Bank, PPI Project Database. Total $23 billion Regional 69 Table 5.4 Infrastructure Projects with Private Participation by Sector and Type, Middle East and North Africa, 1990-2001 Management Greenfield and lease Sector Concessions Divestitures projects contracts Total Electricity 0 9 0 10 Natural gas transmissio and distribution 0 0 4 -0 4 Telecommunications 0 18 Transport 3 16 Water and sewerage 3 4 Electricity and water and sewerage 2 0 0 3 Total 10 3 36 6 55 Source: World Bank, PPI Project Database. Figure 5.4 Cumulative Investment in Infrastructure Projects with Private Participation by Sector or Subsector, Middle East and North Africa, 1990-2001 Seaports 40/o Railways 1O/o Electricity and water and sewerage 21 O/o Telecommunications 350/o Water and sewerage 00/o Natural gas transmission and distribution 170/o Electricity 180/o Source: World Bank, PPI Project Database. Total $23 billion 70 Regional Private Participation in Infrastructure : Trends in Developing Countries in 1990 • 2001 Figure 5.5 Cumulative Investment in Infrastructure Projects with Private Participation by Sector and Type, Middle East and North Africa, 1990-2001 .. 9 j::: ::::<: :::::) 8 Greenfield projects - 7 Concessions 6 5 4 3 Vl c ."2 2 15 ~ l/) ::::i 0 ~ 0 Electricity Natural Telecommunications Transport Water and Electricity and gas sewerage water and transmission and sewerage distribution Source: World Bank, PPI Project Database. Table 5.5 Annual Investment in Transport Projects with Private Participation by Subsector, Middle East and North Africa, 1990-2001 · (2001 US$ bil lions) Total 0.7 0.2 0.9 1.8 .. Zero. Source: Wor ld Bank, PPI Project Database. Regional 71 6 South Asia South Asia attracted almost $40 billion in investment commitments for infrastructure projects with private participation in 1990-2001. During this time Bangladesh, India, Nepal, Pakistan, and Sri Lanka awarded 187 such projects. Aside from a few earlier projects, private activity in infrastructure in South Asia started in the 1990s. Annual investment in private infrastructure projects grew to a peak of $6. 7 billion in 1997, driven mainly by greenfield projects for independent power producers in India and Pakistan and the granting of telecommunications licenses in India (figure 6.1; table 6.1). Annual investment dropped in 1998 but recovered during the rest of the period. The recovery was explained mainly 1,. by greenfield projects for independent power producers and mobile service licenses in India. The number of projects with private participation peaked at 35 in 1995, then declined (figure 6.2). Among the five countries in the region with private activity, India dominated in both investment and number of projects (see figures 6.1 and 6.2 and table 6.2) . But when private activity is measured by per capita investment, Sri Lanka rises to the top (table 6.3). Although private participation in infrastructure was spread among a large number of projects and sponsors in the region, the biggest projects and the top sponsors accounted for a considerable share of the total investment commitments (boxes 6.1and6.2). A characteristic feature of private participation in South Asia was its use to complement investment by state-owned enterpris.es in a context of limited progress in sectoral reform. This approach resulted in the dominance of greenfield projects (figure 6.3; table 6.4). Divestitures, which accounted for most of the remaining investment, were implemented through two methods. One method, used mainly in telecommunications, was the sale of minority stakes on stock exchanges. The other, used mainly in electricity, was the sale of controlling stakes to strategic investors. Electricity Electricity led private activity in the region in both investment and number of projects (figure 6.4). The five countries granted 90 electricity projects with private participation in 1990-2001. Annual investment in such projects rose to a peak of $4.6 billion in 1996, driven by the first greenfield projects for independent power producers awarded in India and Pakistan. After that year investment declined sharply except in 1999 and 2000, when another group of greenfield projects for independent power producers reached financial closure in Bangladesh, India, Nepal, and Sri Lanka. Large projects included the Dabhol liquefied natural gas power plant, phase II, and the Jayamkondam power plant in India; AES Meghnaghat in Bangladesh; and AES Kelanitissa in Sri Lanka. Private participation in electricity in South Asia was oriented mainly toward building generation capacity in the form of independent power producers. As in East Asia, this focus reflected a need to expand generation capacity to keep pace with expected demand in a context of limited progress in deeper sectoral reform. Over the 12-year period greenfield projects to construct new power plants accounted for most of the investment (97%) m private electricity projects in the region as well as most of the projects (figure 6.5). I 72 Regional Private Participation in Infrastructure: Trends in Developing Countries in 1990 • 2001 The five divestitures in the sector captured most of the remaining 3% of the investment. Completed in the late 1990s, these transactions transferred controlling stakes in generation and distribution assets to the private sector in two Indian states. The remaining project was a concession aimed at expanding generation capacity through the rehabilitation of a power plant. Natural Gas Transmission and Distribution Private activity in the transmission and distribution of natural gas was directed to three projects in India. Two projects were divestitures of minority stakes in state-owned enterprises, while the third involved the development of new distribution facilities. The investment in these projects accounted for 1% of the total for all private infrastructure projects in South Asia in 1990-2001. lllr Telecommunications Bangladesh, India, Nepal, Pakistan, and Sri Lanka awarded 52 telecommunications projects with private participation in 1990-2001. Annual investment in such projects grew to a peak of $4.4 billion in 1997, driven mainly by telecommunications licenses granted in India and the partial divestiture of the main Indian operators. After that year new investment declined sharply except in 2001, when India awarded another group of mobile telecommunications licenses. Telecommunications ranked second (after electricity) in investment and number of projects. In bringing private participation into telecommunications, South Asian countries focused 1· mainly on creating competitive mobile phone markets. In addition, India used private participation to introduce competition in basic services, Bangladesh to complement investment by state-owned enterprises in basic services, and Sri Lanka to transfer management of the incumbent operator to the private sector. Greenfield projects dominated private activity in telecommunications in terms of both investment-capturing 71-100% of annual investment-and number of projects. Divestitures, accounting for the rest of the private activity in the sector, took the form of public offerings of minority stakes in state- owned enterprises in India and Pakistan and the sale of a controlling stake to a strategic investor in Sri Lanka. Transport Private activity in transport in the region started in 1990 with a toll road concession in India. That country and three others-Bangladesh, Pakistan, and Sri Lanka-granted 41 transport projects with private participation that attracted investment commitments of $2.4 billion by 2001. As in other sectors, India accounted for most of the private activity. The private activity in transport was focused on building new assets through greenfield projects and, to a lesser extent, concessioning existing assets. Seaports were the most active transport subsector in the region, with roughly $1.8 billion in investment commitments for 13 projects in India, Pakistan, and Sri Lanka (table 6.5). Toll roads, the second most active subsector, had investment commitments of $450 million for 26 projects in Bangladesh and India. In airports, private activity totaled more than $140 million and involved two projects in India. There was no private participation in railways in South Asia. ·~ Regional 73 Water and Sewerage Private participation in water and sewerage in the region began with one greenfield project in 2000, to develop a water and sewerage system in Tiruppur, in the Indian state ofTamil Nadu. Investment in this sector represented 1% of the regional total for all private infrastructure projects in 1990-2001. 1... I 74 Regional Box 6.1 Largest Infrastructure Projects with Private Participation in South Asia Of the 10 private infrastructure projects attracting the most investment in South Asia in 1990-2001, 7 were in electricity and 3 in telecommunications (see table). Most were in India. The top 10 projects accounted for 28% of the investment in private infrastructure projects in the region in 1990-2001. Top 10 Infrastructure Projects with Private Participation, South Asia, 1990-2001 Videsh Sanchar Nigam Limited Jayamkondam Power Project 0.8 Uch Power Ltd. 0.8 BSES Oahanu Power 0.8 Reliance Telecom 0.8 Paguthan Power Plant 0.7 Total 11.1 Note: LNG is liquefied natural gas. a. Canceled in 2001. Source: World Bank, PPI Project Database. Box 6.2 Regional 75 Top Sponsors of Infrastructure Projects with Private Participation in South Asia The top sponsors of private infrastructure projects in South Asia in 1990-2001 were concentrated in electricity and telecommunications, reflecting the dominance of these two sectors in private activity in the region (see table). Regional conglomerates such as Tata and Reliance emerged among the top sponsors. These conglomerates were the only ones that invested in more than one sector. The top 10 sponsors accounted for 22% of the private infrastructure projects in the region in 1990-2001-and their projects for more than 45% of the investment. Top 10 Sponsors of Infrastructure Projects with Private Participation, South Asia, 1990-2001 Projects by sector Natural gas Investment• transmission (2001 US$ and Telecommuni- Water and Sponsor bi llions) Projects Electricity distribution cations Transport sewerage 3.2 6 3 3.0 2 2 2.3 4 2 2.3 2 2 2.3 10 0 Xenel 1.9 AT&T 1.7 2 0 AE 7 7 GVK Group 1.3 4 4 Bombay Suburban Electric Supply Corporation 1.3 5 5 Tota lb 17.7 41 25 0 16 0 0 a. Investment from all sources in projects in which sponsor had an equity participation of 150/o or more. b. Data may not sum to totals because projects can be associated with more than one sponsor. Source: World Bank, PPI Project Database. 76 Regional Private Participation in Infrastructure: Trends in Developing Countries in 1990 • 2001 Figure 6.1 Annual Investment in Infrastructure Projects with Private Participation, South Asia, 1990-2001 8 ~ 7 6 5 4 - India Rest of region 3 Vl ~ 2 :.0 tl7 ~ 1 c; 0 N 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: World Bank, PPI Project Database. Table 6.1 Annual Investment in Infrastructure Projects with. Private Participation by Sector, South Asia, 1990-2001 (2001 US$ billions) Natural gas transmission and Telecommuni- Water and Year Electricity distribution cations Transport sewerage Total .. Zero. Source: World Bank, PPI Project Database. Regional 77 Figure 6.2 Infrastructure Projects with Private Participation by Year of Financial Closure, South Asia, 1990-2001 40 - 35 India 30 Rest of region 25 20 15 10 5 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: World Bank, PPI Project Database. Table 6.2 Top Five Countries by Cumulative Investment in Infrastructure Projects with Private · Participation, South Asia, 1990-2001 Investment Investment as a share Country (2001 US$ billions) of regional total (O/o) India 27.7 70 Pakistan 8;3 21 Bangladesh 1.9 5 . Sri Lanka 1.4 4 ' Nepal 0.3 1 Total 39.6 100 Source: World Bank, PPI Project Database. 78 Regional Private Participation in Infrastructure: Trends in Developing Countries in 1990 • 2001 Table 6.3 Top Five Countries by Per Capita Cumulative Investment in Infrastructure Projects with Private Participation, South Asia, 1990-2001 Per capita investment Country (2001 US$) Sri Lanka 72 Source: World Bank, PPI Project Database. Figure 6.3 Cumulative Investment in Infrastructure Projects with Private Participation by Type, South Asia, 1990-2001 Concessions 20/o Divestitures 120/o Greenfield projects 860/o Source: World Bank, PPI Project Database. Total $40 billion Regional 79 Table 6.4 Infrastructure Projects with Private Participation by Sector and Type, South Asia, 1990-2001 Management Greenfield and Sector projects Total Total 17 11 · source: World Bank, PPI Project Database. Figure 6.4 Cumulative Investment in Infrastructure Projects with Private Participation by Sector or Subsector, South Asia, 1990-2001 Water and sewerage 1% Toll roads 1% Telecommunications 370/o Seaports 50/o Natural gas transmission and distribution 1% Airports 00/o Electricity 550/o Source: World Ban k, PPI Project Database. Total $40 billion 80 Regional Pr ivat e Particip ation i n Infra structure: Trend s in Developing Countrie s in 1990 • 2001 Figure 6.5 Cumulative Investment in Infrastructure Projects with Private Participation by Sector and Type, South Asia, 1990-2001 25 j::: :::: <:I 20 15 - Greenfield projects - Concessions Divestitures 10 Vl c:: .~ 5 :;::; ~ V1 ::::i 0 0 N 0 Electricity Natural gas Telecommunications Transport Water and transmission and sewerage distribution Source: World Bank, PPI Project Database. Table 6.5 Annual Investment in Transport Projects with Private Participation by Subsector, South Asia, 1990-2001 (2001 US$ billions) Year Airports -- Railways ......,_ Seaports -- Toll roads Total 1990 .. .. .. 0.0 0.0 1991 .. .. ''"·· - .. 1992 .. .. .. .. .. 1993 .. . .. ., . .. .. .. 1994 0.1 .. .. .. 0.1 1995 .. .3 .. 0.3 1996 .. .. 0.1 0.0 0.1 1997 .. - 0.5 0.1 0.6 1998 .. .. 0.1 0.2 0.2 1999 .. .. 0.5 0.2 0.8 2000 .. .. 0.1 .. 0.1 2vut .. .. 0.1 .. 0.1 Total 0.1 .. 1.8 ... 0.5 2.4 .. Zero. Source: World Bank, PPI Project Database. • Regional 81 7 Sub-Saharan Africa Sub-Saharan Africa attracted more than $23 billion in investment commitments in 1990-2001. Over the 12-year period 45 of the 48 countries in the region awarded 186 infrastructure projects with private participation. But private participation in infrastructure has been more extensive than these figures suggest, for several reasons. First, the investment levels, though low, are significant relative to the small size of most economies in Sub-Saharan Africa. Second, initial efforts to attract the private sector to the region have focused on strengthening capacity through management and lease contracts, with donors funding investment programs. Third, the domestic private sector 1. in most Sub-Saharan African countries has been an important provider of infrastructure services through private wells, power generation plants, and informal, small-scale suppliers. The PPI Project Database has not tracked such private activity, mainly because these projects are too small to be reported in commercial databases or the international press (see appendix 1 for the criteria for projects included in the database). Finally, there has been a long history of private participation in the francophone countries of West Africa. After a few projects in the l 980s-such as management contracts for toll roads in South Africa and the lease of Libreville International Airport in Gabon-private activity in infrastructure in Sub-Saharan Africa grew significantly in the 1990s. Annual investment in infrastructure projects with private participation reached a peak of $4.8 billion in 1997, then fluctuated between $2.7 billion and $4.7 billion (figure 7.1; table 7.1). The peak investment levels were driven by the privatization of South African Telkom and the award of mobile licenses, particularly those for Vodacom and MTN in South Africa. Sub-Saharan Africa's share in annual investment in private infrastructure projects in developing countries grew from 0.3% in 1990 to 8% in 2001. The number of projects with private participation increased from 1990 to 1999, then declined (figure 7.2). Attracting the most investment in 1990-2001 were South Africa, Cote d'Ivoire, Nigeria, Tanzania, and Zimbabwe, accounting for 73% of the regional total (table 7.2). South Africa dominated private activity in the region, capturing 54% of the investment. But its share of the private infrastructure projects in the region was much smaller-only 12% (see figure 7.2). When private activity is measured in per capita terms, Gabon leads the top five and other countries-Cape Verde, Mauritius, and Seychelles-enter the group (table 7.3). Although private participation in infrastructure was spread among many projects and sponsors in the region, the 10 biggest projects and the top 5 sponsors accounted for most of the investment commitments (boxes 7.1 and 7.2). In introducing private participation in infrastructure, Sub-Saharan African countries tended to use greenfield projects, to increase capacity. This type of project, used mainly for mobile telecommunications, led private activity in investment and number of projects (figure 7.3; table 7.4). Divestitures captured the second largest share of investment. In Sub-Saharan Afric~ these transactions usually involved the sale of controlling stakes, through international tenders; to strategic investors, which committed to manage the companies and comply with predefined investment programs. Most divestitures took place in telecommunications and involved incumbent national operators. I 82 Regional Private Participation in Infrastructure: Trends in Developing Countries in 1990 • 2001 Electricity Twenty-two countries in Sub-Saharan Africa introduced private participation in electricity in 1990-2001. These countries awarded 29 stand-alone electricity projects as well as 7 multiutility projects involving electricity and water services (such as Societe d'Energie et d'Eau du Gabon). Annual investment in electricity projects with private participation rose in 1990-98, fell in 1999 and 2000, then recovered in 2001. Over the period as a whole electricity ranked second in investment and third in number of projects (figure 7.4). Greenfield projects such as the Azito power plant in Cote d'Ivoire dominated among stand- alone electricity projects, accounting for 60% of the investment in such projects in 1990-2001 (figure 7.5). Divestitures followed, with more than 30% of the investment. Greenfield projects also ranked first in number, followed by concessions and management and lease contracts. The seven multiutility projects were in Cape Verde, Chad, Comoros, Gabon, Guinea-Bissau, Mali, and Sao Tome and Principe. These projects raised investment commitments of $1.6 billion, 7% of the regional total for private infrastructure projects in 1990-2001. Private participation in electricity took several different forms in Sub-Saharan Africa. Vertically integrated electricity companies were transferred to the private sector through concessions in six countries (Cameroon, Comoros, Gabon, Guinea, Guinea-Bissau, and Mali), through divestitures in Cape Verde and Senegal, and through management or lease contracts in Chad, Namibia, and Sao Tome and Principe. Private participation was limited to the generation business in some countries-through greenfield projects in six countries (Burkina Faso, the Republic of Congo, Kenya, Mauritius, Nigeria, and Tanzania), through divestitures in Zambia and Zimbabwe, and through different types of private participation in Ghana and South Africa. Cote d'Ivoire used a concession for its vertically integrated electricity company (Compagnie Ivoirienne d'Electricite) and greenfield projects for expanding generation capacity. Natural Gas Transmission and Distribution Private activity in the transmission and distribution of natural gas started in 1995 with one greenfield pipeline project (the CI-11 gas pipeline) in Cote d'Ivoire. The only other project involved the privatization of a distribution system in South Africa in 2000. Investment in private projects in the sector totaled $60 million over the 12-year period, less than 1% of the investment in all private infrastructure projects in the region. Telecommunications Thirty-nine Sub-Saharan African countries introduced private pamc1pation in telecommunications in 1990-2001. Annual investment in telecommunications projects with private participation increased in 1990-97, declined in 1998, then recovered to reach a peak of $3.2 billion in 2001. Telecommunications led private activity in Sub-Saharan Africa over the 12-year period in both investment and number of projects. The countries introducing private participation , in ~ telecommunications followed two approaches. Fourteen countries-including Cote d'Ivoire, Ghana, Guinea, Senegal, and South Africa-opted for the Latin American approach: transferring main sector assets to the private sector, establishing deadlines for ending monopoly rights in fixed line telephony, setting up new regulatory frameworks, and opening mobile phone services to Regional 83 private investment through greenfield projects. And three of these-Ghana, Mauritania, and Uganda-used greenfield projects to introduce competition in local and long-distance services. The other countries relied on private participation to introduce mobile phone services and create competition in mobile markets through greenfield projects while preserving the monopolies of state-owned enterprises in fixed line telephony. Greenfield projects and divestitures dominated investment, each accounting for roughly half the total in 1990-2001. But with no divestitures taking place until the second half of the 1990s, greenfield projects accounted for all the investment in the sector before 1995. Greenfield projects also outnumbered divestitures over the period as a whole. Transport Private participation in transport took place in 17 Sub-Saharan African countries through 38 projects in 1993-2001 (there was no new private activity in the sector in 1990-92). Annual investment in transport projects with private participation rose to a peak of $1.2 billion in 1999, then declined. Over the period as a whole investment in private transport projects amounted to $2.7 billion, 12% of the regional total for all private infrastructure projects. South Africa attracted the most investment in transport ($1.98 billion), followed by Mozambique ($476 million) and Cote d'Ivoire ($191 million). These three countries accounted for 98% of the investment in transport projects with private participation in Sub-Saharan Africa. Among types of private participation, concessions transferring assets to the private sector accounted for the most investment, followed by greenfield projects. Concessions also led in number of projects, followed by management and lease contracts. Among transport subsectors, toll roads led private participation in the region (table 7.5). Toll roads attracted $1.9 billion in investment commitments, directed to nine projects in four countries (Cote d'Ivoire, Mozambique, South Africa, and Zimbabwe). Seven countries (Cameroon, Cote d'Ivoire, Kenya, Madagascar, Mauritius, South Africa, and Tanzania) awarded 10 airport projects, involving investment commitments of $323 million. Private activity in railways totaled $259 million, directed to nine projects in 11 countries. And private activity in seaports added up to $173 million, involving 10 projects in seven countries (Djibouti, Equatorial Guinea, Ghana, Kenya, Mauritius, Mozambique, and Tanzania). Water and Sewerage In water and sewerage private participation took place in five countries through 10 projects in 1990-2001. These projects-in the Central African Republic, The Gambia, Mozambique, Senegal, and South Africa-attracted investment of $232 million. In addition, Sub-Saharan Africa had seven multiutility projects involving both electricity and water services (see section on electricity). The 10 stand-alone water projects were implemented through seven management or lease contracts, two concessions (Siza water company and Nelspruit in South Africa), and one greenfield project (Durban wastewater in South Africa). South Africa, with those three projects, accounted for almost all investment in stand-alone water projects. In the odier countries, where management or lease contracts were preferred as a strategy to improve company management, donors remain.e d the main source of funding for investment. I 84 Regional Box 7.1 Largest Infrastructure Projects with Private Participation in Sub-Saharan Africa The 10 largest infrastructure projects with private pamc1pation in Sub-Saharan Africa accounted for 63% ($14.8 billion) of the investment in all such projects in the region in 1990-2001. Five of the 10 involved telecommunications companies, and half were in South Africa (see table). Top 10 Infrastructure Projects with Private Participation, Sub-Saharan Africa, 1990-2001 Investment Project (2001 US$ billions) Sector Country Telkom SA South Africa Vodacom Mobile Telecommunications Network NJ Toll Road Cote d'Ivoire Telecom Groupcmcnt SHEC Societe d'Energie et d'Eau du Gabon 0.7 African Power 0.7 Econet Wireless Nigeria 0.6 N4 Toll Road 0.5 Total 14.8 Source: World Bank, PPI Project Database. Box 7.2 Regional 85 Top Sponsors of Infrastructure Projects with Private Participation in Sub-Saharan Africa In 1990-2001 the top five sponsors of private infrastructure projects in Sub-Saharan Africa, ranked by investment, accounted for projects attracting 54% of the total investment. Among these top five, all except Bouygues were specialized telecommunications operators, reflecting the dominance of telecommunications in private activity in infrastructure in the region (table 1). And all except Bouygues and France Telecom directed most of their investment to the South African telecommunications market. When sponsors are ranked by number of projects, the list of top five changes significantly. Now the group includes sponsors not specializing in telecommunications, such as Vivendi, as well as regional operators, such as Orascom (table 2). And the telecommunications operators in the group are mobile operators that invested in a large number of countries. Table 1 Top Five Sponsors of Infrastructure Projects with Private Participation by Investment. Sub-Saharan Africa, 1990-2001 Projects by sector Natural gas Investment• transmission (2001 US$ and Water and Sponsor billions) Projects Electricity distribution sewerage Telecom Malaysia 9.1 5 0 SBC Communications 8.6 2 0 Vodafone 3.0 4 0 Bouygues 1.7 12 5 5 France Telecom 1.6 9 0 0 0 Tota lb 12.6 29 5 0 17 2 5 a. Investment from all sources in projects in which sponsor had an equity participation of 150/o or more. b. Data may not sum to totals because projects can be associated with more than one sponsor. Source: World Bank, PPI Project Database. Table 2 Top Five Sponsors of Infrastructure Projects with Private Participation by Number of Projects, Sub-Saharan Africa, 1990-2001 Activity by sector Investment• Telecommuni- (2001 US$ Sponsor Projects billions) Orascom 14 0.3 Bouygues 14 1.7 MSI Cellular Investments Holdings BV 12 0.5 France Telecom 9 1.6 Vivendi 8 1.5 Tota lb 56 4.8 a. Investment from all sources in projects in which sponsor had an equity participation of 150/o or more. b. Data may not sum to totals because projects can be associated with more than one sponsor. Source: World Bank, PPI Project Database. 86 Regional Private Parti cipation in Infrastructure : Trend s in Developi ng Countries in 1990 • 2001 Figure 7.1 Annual Investment in Infrastructure Projects with Private Participation, Sub-Saharan Africa, 1990-2001 5 ~ 4 3 -South Africa Rest of region 2 V\ c .<:::> :.0 "" V1 :::i 0 0 N 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: World Bank, PPI Project Database. Table 7.1 Annual Investment in Infrastructure Projects with Private Participation by Sector, Sub-Saharan Africa, 1990-2001 · (2001 US$ billions) Natural gas Electricity transmission and water and Telecommuni- Water and and Year Electricity distribution cations sewerage sewerage Total 1990 0.1 0.1 1991 0.0 1992 0.1 1993 Q.O 1994 0.8 1995 0.9 1996 1.5 1997 4.a 1998 1999 2000 2001 0.7 Total 3.1 0.1 .. Zero. Source: World Bank, PPI Project Database. Regional 87 Figure 7.2 Infrastructure Projects with Private Participation by Year of Financial Closure, Sub-Saharan Africa, 1990-2001 30 ~ 25 20 15 - South Africa Rest of region 10 5 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: World Bank, PPI Project Database. Table 7.2 Top Five Countries by Cumulative Investment in Infrastructure Projects with Private Participation, Sub-Saharan Africa, 1990-2001 Investment Investment as a share Country (2001 US$ billions) of regional total (O/o) Nigeria Tanzania Zimbabwe Total Source: World Bank, PPI Project Database. 88 Regional Private Participation in Infrastructure: Trend s in Developing Countries in 1990 • 2001 Table 7.3 Top Five Countries by Per Capita Cumulative Investment in Infrastructure Projects with Private Participation, Sub-Saharan Africa, 1990-2001 Per capita investment Total investment Country (2001 US$) (2001 US$ millions) Gabon 607 766 Mauritius ScytheHes South Africa 289 12,574 Source: World Bank, PPI Project Database. Figure 7.3 Cumulative Investment in Infrastructure Projects with Private Participation by Type, Sub-Saharan Africa, 1990-2001 Divestitures 41 O/o Greenfield projects 440/o Source: World Bank, PPI Project Database. Total $23 billion Regional 89 Table 7.4 Infrastructure Projects with Private Participation by Sector and Type, Sub-Saharan Africa, 1990-2001 Management and Greenfield lease Sector Concessions Divestitures projects contracts Total Electricity 5 3 16 5 29 Natural gas transmission and distribution 0 0 2 Telecommunications 0 15 85 0 100 Transport 3 1iQ 11 38 Water and sewerage 0 7 10 Electricity and water and sewerage 2 7 Total 25 23 113 25 186 Source: Worl d Bank, PPI Project Dat abase. Figure 7.4 Cumulative Investment in Infrastructure Projects with Private Participation by Sector or Subsector, Sub-Saharan Africa, 1990-2001 Railways 1O/o Seaports 1O/o Airports 1Ofo Electricity and water and sewerage 70/o Water and sewerage 1Ofo Natural gas transmission Telecommunications 680/o and distribution 00/o Electricity 130/o Source : World Bank, PPI Project Database. Total $23 billion 90 Regional Private Participation i n Infrastructure : Trends i n Developing Countries in 1990 • 2001 Figure 7.5 Cumulative Investment in Infrastructure Projects with Private Participation by Sector and Type, Sub-Saharan Africa, 1990-2001 20 !: :<: .::..: <:] 15 10 - - Greenfield projects Concessions Divestitures Vl .~ 5 :.0 ~ Vl ::::l 0 0 N 0 Electricity Natural Telecommunications Transport Water and Electricity gas sewerage and water transmission and and sewerage distribution Source: World Bank, PPI Project Database. Table 7.5 Annual Investment in Transport Projects with Private Participation by Subsector, Sub-Saharan Africa, 1990-2001 (2001 US$ billions) Total o.o 0.0 0.0 0.5 0.3 1.2 0.1 0.5 Total 0.3 0.3 0.2 1.9 2.7 .. Zero. Source: World Bank, PPI Project Database. Sectoral 93 8 Electricity Electricity ranked second among infrastructure sectors in private activity in the developing world in 1990-2001. With 832 projects involving private participation in 83 countries, the sector attracted $213 billion in investment commitments. The recent wave of private activity in electricity began in the 1980s with a comprehensive privatization program in Chile and a few projects in other developing countries. The private activity grew rapidly in the 1990s, with annual investment commitments for private electricity projects in the developing world rising from just over $1 billion in 1990 to a peak of $49 billion in 1997 (figure 8.1). Investment commitments then dropped sharply as a result of the economic crises and heightened perceptions of risk in developing countries and the reduced financial capacity of many large sponsors. The peak investment levels in 1996 and 1997 were propelled by greenfield power plants in Asia. Brazil also drove private activity in the sector, accounting for 32% of investments in 1997-98, when it privatized most of its large distribution companies. Even in a much more favorable environment it would have been difficult to sustain the investment flows of the late 1990s given the absence of massive privatization programs in other large economies. The decline in acquisitions of government assets accounted for part of the fall in annual investments (figure 8.2). Total annual investment flows in low-income countries in 1997- 2001 were smaller than those in Brazil and were not subject to the same volatility. Like investments, the number of projects with private participation grew rapidly (figure 8.3). The voucher privatization program in the Russian Federation explained most of the surge in activity in 1993, while greenfield projects in East Asia and Latin America and divestitures in Latin America accounted for most of the electricity projects in 1994-97. Although private participation in electricity was spread among a large number of projects and sponsors in developing countries, the biggest projects and the top sponsors accounted for a significant share of the total investment commitments (boxes 8.1 and 8.2). One feature of private activity in electricity was the focus on private ownership and management. This emphasis was reflected in the dominance of greenfield projects and divestitures in both investment and number of projects (figures 8.4 and 8.5; table 8.1). Greenfield projects were used mainly to increase generation capacity through independent power producers. But the features of the projects varied depending on the structure of the market in which they were implemented. In largely unreformed electricity markets where state-owned enterprises had a monopoly on transmission and distribution, greenfield projects were selected by these enterprises and usually included power purchase agreements. Under these agreements state-owned enterprises guarantee the purchase of the electricity produced by the power plants at specified tariffs (typically indexed to the exchange rate) over the life of the contract. In addition, government guarantees often backstop the obligations of the power purchasing utilities. This type of greenfield project was used by most countries in Asia and the Middle East and North Africa and a few in Latin America (Costa Rica and Mextco) and Europe and Central Asia (Turkey). In reformed electricity markets where competition had been introduced in generation, greenfield projects involved power purchase agreements with privatized distribution companies and large business customers. In these markets 94 Sectoral Private Participation in Infrastructure : Trends in Developing Countries in 1990 · 2001 governments committed to keep retail electricity tariffs at cost-recovering levels rather than guaranteeing power purchase agreements. Most of these greenfield projects were awarded in Latin America and the Caribbean. Divestitures took different forms across regions. In Latin America and some countries in Europe and Central Asia divestitures were usually structured as the sale of controlling stakes to strategic operators, which took control of the privatized companies. In other countries in Europe and Central Asia divestitures took the form of voucher privatizations and the government retained control of the privatized companies. In East Asia and Pacific divestitures were commonly carried out through public offerings of minority stakes on stock exchanges, again with the government retaining control of the companies. Latin America and the Caribbean and East Asia and Pacific dominated private activity in the sector, leading in both investment and projects (figure 8.6; table 8.2). Latin America's dominance of investment was driven mainly by private activity in the region in 1996-2000, when Brazil privatized its distribution companies and awarded greenfield projects. Most Latin American countries introduced private participation in electricity as part of broader reforms that usually included establishing more competitive market structures (see chapter on Latin America for further discussion). In East and South Asia private activity in the sector mainly took the form of private financing of new generation capacity in markets dominated by state-owned monopolies (see chapters on East and South Asia for further discussion). Thus in East Asia most of the investment took place during the boom in greenfield projects I• for independent power producers in 1992-97. In Europe and Central Asia some countries followed the Latin American approach to private participation in electricity, while others limited the participation to greenfield projects for independent power producers. In this region investment in electricity was concentrated mainly in 1995-97 and 2000, when Turkey ·awarded large greenfield projects for independent power producers and the Czech Republic and Hungary privatized their electricity sectors and also awarded greenfield projects for independent power producers. In the Middle East and North Africa most countries followed the Asian approach to private participation in electricity. In Sub-Saharan Africa some countries limited private activity in the sector to the generation business through greenfield projects or divestitures, while others transferred the operation of the main integrated utilities through concessions or management or lease contracts. Most of the electricity investment in the region took place after 1995, raising the region's share in annual investment in the sector from 0% to 8% in 2001. Private activity was initially concentrated in six countries (Cote d'Ivoire, Chile, India, the Philippines, the Republic of Korea, and Turkey), but it began to spread as more countries introduced private participation in electricity. The top five countries in 2001-Brazil, Malaysia, Poland, Oman, and China-accounted for only 52% of annual investment, while the top five countries over the period-Brazil, China, Argentina, the Philippines, and India-captured the same share of the cumulative investment in 1990-2001 (table 8.3). When private activity is measured in per capita terms, smaller countries-such as Belize, Gabon, and Cape Verde-emerge among the most active (table 8.4). Among segments, the generation business led in investment and projects, with independent power producers (including greenfield projects and divestitures) usually attracting 50-90% I n Sectoral 95 of annual investment in electricity (figure 8.7; table 8.5). The stand-alone distribution business was the second most active segment, followed by vertically integrated utilities. But most developing countries with private participation in electricity had at least some private activity in distribution (figure 8.8). The distribution of investment among electricity segments varied significantly for different types of private participation. Of the investment in greenfield projects, 98% went to independent power producers and the other 2% to stand-alone transmission facilities (figure 8.9). Investment in divestitures was more evenly divided between generation and stand- alone distribution, the two segments attracting the most investment (figure 8 .10). Vertically integrated utilities followed in third place. By the late 1990s a clear trend had emerged of separating the sector into its three basic business units (generation, transmission, and distribution) and establishing new regulatory frameworks before privatizing assets. Annual investment figures for privatized stand-alone distribution companies and vertically integrated utilities were similar until 1997, after which stand-alone distribution companies started to attract greater investment (see figure 8.7). Similarly, distribution companies have outnumbered integrated utilities among divestitures since the mid-1990s (figure 8 .11). Investment in stand-alone generation facilities in East and South Asia was channeled mainly through build-operate-o wn (BOO) and build-operate-tr ansfer (BOT) programs to expand generating capacity. In Latin America and the Caribbean stand-alone generation businesses emerged from three types 9~ transactions: BOO and BOT schemes (83 projects), privatization of vertically separated electricity facilities (66), and merchant power plants in unbundled, competitive markets (56). Most projects involving stand-alone distribution facilities were awarded in Latin America· and the Caribbean, Europe and Central Asia, and Sub-Saharan Africa. Private participation in stand-alone transmission facilities took place in Latin America and Europe and Central Asia. Developing countries used two schemes to introduce private participation in integrated utilities. In most cases minority stakes were sold in state-owned enterprises, a common approach in Europe and Central Asia and East Asia and Pacific. In the other cases management was also transferred to the private sector, an approach used in Latin America, Sub-Saharan Africa, and the Middle East and North Africa. 96 Sectora l Box 8.1 Largest Electricity Projects with Private Participation in Developing Countries The 10 largest electricity projects with private pamc1pation in developing countries accounted for 14% of the investment in such projects in 1990-2001. These projects spanned the range of service bundling, from independent power producers and stand-alone distribution companies to vertically integrated utilities. Brazil accounted for the largest number of the projects (see table). Top 10 Electricity Projects with Private Participation, Developing Countries, 1990-2001 Investment Project (2001 US$ billions) Country Light-Servi~os de Eletricidade 4.5 Brazil lyonnaise des Eaux de Casablanca 3.4 Morocco Elektra Eletricidade e Servi~os (Sao Paulo) 3.3 Brazil Companhia Paulista de Fo~ e Luz 3.2 Brazil PT Paiton Energy Company 2.9 Indonesia Edesur 2.6 Shandong China Power Company 2.4 Shajiao Coal-Fired Plant 2.4 Companhia de Eletricidade do Estado da Bahia (COELBA) 2.3 lnterGen Gebze Adapazari Izmir 2.3 Total 29.2 Source: World Bank, PPI Project Database. Box 8.2 Sectoral 97 Top Sponsors of Electricity Projects with Private Participation in Developing Countries The top 10 sponsors of private electricity projects in developing countries accounted for 24% of the projects in 1990-2001-and their projects for just over 40% of the investment (see table). A breakdown of the major players by region shows that most have a large business base in Latin America and the Caribbean, with five of them specializing in that region. The concentration of the top sponsors' activity in Latin America and the Caribbean was driven by the extensive sector reform in the region. Another trend is the emergence of regional operators as top sponsors, such as the Chilean companies Enersis and Endesa. Most of the top 10 sponsors took over projects involving varied approaches to bundling electricity services, from independent power producers and stand-alone distribution companies to fully integrated utilities. This was the case for AES Corporation, Electricite de France, Endesa (Spain), Enron Corporation, Electricidade de Portugal, and Mirant. Other top sponsors focused on one type of business, such as SUEZ and Endesa (Chile) with independent power producers and Enersis with stand-alone distribution companies. SUEZ invested in electricity projects mainly through its subsidiary Tractebel. Top 10 Sponsors of Electricity Projects with Private Participation, Developing Countries, 1990-2001 Projects by region Europe Latin Middle Investment' East and East and Sub- (2001 US$ Asia and Central North South Saharan Sponsor billions) Projects Pacific Asia Africa Asia Africa AES Corporation 21.6 57 4 Electricite de France 15.5 28 7 SUEZ 11.8 44 0 Endesa (Spain) 11.4 12 0 Mirant 0 3 0 Enron Corporation 3 2 0. Enersis 0 8 0 0 Endesa (Chile) 0 0 14 0 0 0 Electricidade de Portugal 6.6 8 0 0 6 0 Iberdrola 6.3 9 0 0 9 0 0 0 Tota lb 86.2 198 39 28 99 9 11 12 a. Investment from all sources in projects in which sponsor had an equity participation of 150/o or more. b. Data may not sum to totals because projects can be associated with more than one sponsor. Source: World Bank, PPI Project Database. 98 Sectoral Private Participation in Infrastructure : Trends in Developing Countries in 1990 • 2001 Figure 8.1 Annual Investment in Electricity Projects with Private Participation, Developing Countries, 1990-2001 50 Cl Total 40 30 • Low-income countries 20 Vl <: 0 ~ 10 .D w V1 ::::J Ci ~ 0 LJljjl:;;~~!!!ml--~~~~~~~~~~~~~~-=~__:-=-~~~-=~- 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: World Bank, PPI Project Database. Figure 8.2 Annual Investment in Electricity Projects with Priyate Participation by .. Destination, Developing Countries, 1990-2001 50 - Acquisitions of government assetsa 40 Sector expansion 30 20 <: i? .D 10 w V1 ::::J Ci ~ 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 a. Divestiture revenues, license fees, and canon payments. Source: World Bank, PPI Project Database. Sectoral 99 Figure 8.3 Electricity Projects with Private Participation by Year of Financial Closure, Developing Countries, 1990-2001 140 120 100 80 60 40 20 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: World Bank, PPI Project Database. Figure 8.4 Cumulative Investment in Electricity Projects with Private Participation by Type, Developing Countries, 1990-2001 Concessions 50/o Divestitures 400/o Greenfield projects 550/o Source: World Bank, PPI Project Database. Total $213 billion 100 Sectoral Private Participation in Infrastructure : Trend s in Developing Countries in 1990 • 2001 Figure 8.5 Annual Investment in Electricity Projects with Private Participation by Type, Developing Countries, 1990-2001 50 ::::>::<:· ~uL~'.:':~.i<('it .· Europe and Central Asia 16 '·• ;: ';t/ '•'.: 157 ·'; Latin America and the Caribbean 25 301 90 ·,_. Middle East and North Africa 6 13 .. :·•·,}'_:'» i1 South Asia 5 90 22 Sub-Saharan Africa 22 36 9 Total 83 832 213 Source: World Bank, PPI Project Database. 102 Sectoral Private Participation in Infrastructure: Trends in Developing Countries in 1990 • 2001 Table 8.3 Top Five Developing Countries by Cumulative Investment in Electricity Projects with Private Participation, 1990-2001 Investment Investment as a share of Country (2001 US$ billions) developing world total (O/o) Brazil 41.3 19 10 9 7 6 52 Source: World Bank, PPI Project Database. Table 8.4 Top Five Developing Countries by Per Capita Cumulative Investment in Electricity Projects with Private Participation, 1·990-2001 Per capita investment Total investment Country (2001 US$) (2001 US$ billions) Belize 728 0.2 0.7 8.0 18.4 0.2 Source: World Bank, PPI Project Database. Sectoral 103 Figure 8.7 Annual Investment in Electricity Projects with Private Participation by Segment, Developing Countries, 1990-2001 30 Cl Generation 25 --0-- Distribution 20 * Integrated utilities 15 10 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: World Bank, PPI Project Database. Table 8.5 Private Participation in Electricity by Segment, Developing Countries, 1990-2001 I Investment Segment Projects (2001 US$ billions) Generation 600 150.2 . Distribution 89 . . 29.4 .. Transmission 18 2.7 Integrated utilities . .- .. >:. . . . '< 103. ·{>.·~:·§ r 2()..1 Distribution and generation 14 6.8 -~ ·- : ·. ·J -..... Generation and transmission .... . · .2 . 0.5 Distribution and transmission 6 3.4 u Total '832 213.2 Source: World Bank, PPI Project Database. Private Participation in Infrastructure: Trends in Developing Countries in 1990 • 2001 104 Sector a I Figure 8.8 Cumulative Number of Developing Countries with Private Participation in Electricity, 1990-2001 90 80 ~ Countries without - private electricity 70 distribution 60 Countries with private electricity 50 distribution 40 30 20 10 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: World Bank, PPI Project Database. Figure 8.9 Cumulative Investment in Greenfield Electricity Projects with Private Participation by Segment, Developing Countries, 1990-2001 Transmission 20/o Generation 980/o Source: World Bank, PPI Project Database. Total $117 billion Sectoral 105 Figure 8.10 Cumulative Investment in Privatized Electricity Companies by Segment, Developing Countries, 1990-2001 Distribution and transmission 40/o Generation and transmission 1O/o Distribution and generation 80/o Generation 360/o Integrated utilities 150/o Transmission 1O/o Source: World Bank, PPI Project Database. Total $85 billion Figure 8.11 "· Privatizations of Electricity Distribution Companies and Integrated Utilities by Year of Financial Closure, Developing Countries, 1990-2001 75 60 .. .. Integrated utilities Stand-alone 45 distribution companies 30 15 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: World Bank, PPI Project Database. 106 Sectoral Private Participation in Infrastructure: Trends in Developing Countries in 1990 • 2001 9 Natural Gas Translllission and Distribution Thirty-three developing countries introduced private participation in natural gas transmission and distribution (transport) in 1990-2001. These countries awarded 146 projects with private participation in the sector, attracting investment commitments of $34 billion-5% of the investment in all private infrastructure projects in developing economies. 1 Driving the increasing participation of the private sector was a growing demand for gas transport facilities coinciding with a growing consensus in favor of private participation in infrastructure and tightening constraints on public sector budgets. And driving the increasing demand for transport facilities were strong growth in energy demand, the discovery of new I., gas fields, and environmental concerns. The diverse development levels of the natural gas sector in developing countries raise policy issues quite different from those in other infrastructure sectors. Except in Europe and Central Asia and some parts of Asia and Latin America, most developing countries have limited transport facilities or none at all. Some have promoted private involvement in existing facilities, while others have relied on the private sector to establish new gas networks. Still others have no gas network-public or private. Recent private activity in natural gas in developing countries started in 1992, when 1; Argentina privatized its transmission and distribution assets. Annual investment in gas transport projects with private participation grew to a peak of $6.5 billion in 1998, then declined (figure 9.1). Three export-oriented gas pipelines (one from Bolivia to Brazil and two from Argentina to Chile) and the partial divestiture of RAO Gazprom in the Russian Federation explained the peak in investment in 1998. The number of projects with private participation also grew, with the peak in 1995 driven by. the privatization of distribution companies in the Czech Republic and Hungary and that in 1997 by the greenfield projects to build and operate gas distribution networks in Mexico (figure 9 .2). Although private participation in natural gas transport involved numerous projects and sponsors, the biggest projects and the top sponsors accounted for most of the investment commitments (boxes 9.1 and 9.2). Private participation in natural gas transport tended to focus on private ownership and management. This approach was reflected in the predominance of divestitures and greenfield projects, which led the sector in both investment and projects (figure 9.3; table 9.1). As might be expected, divestitures predominated in countries with well-developed pipeline networks, while greenfield projects occurred mainly in countries with little or no transport infrastructure for natural gas. Divestitures in the sector took different forms across regions. In Latin America and some countries in Europe and Central Asia (such as Hungary and Kazakhstan) divestitures were usually structured as the sale of controlling stakes to strategic operators, which took control of the privatized companies. In other countries in Europe and Central Asia (such as the Czech Republic) divestitures took the form of voucher privatizations, with control of the priV'atized companies remaining with the government. In East Asia and Pacific (China, the Republic of Korea, Malaysia, and Thailand) natural gas transport facilities were divested through public offerings of minority stakes on local or regional stock exchanges, with the government retaining control of the companies. I Sectoral 107 Latin America and the Caribbean led in investment in the sector, followed by East Asia and Pacific (figure 9.4). Latin America and the Caribbean also led in projects, followed by Europe and Central Asia (table 9.2). Most Latin American countries undertook natural gas reforms as part of broader reforms aimed at liberalizing energy markets (see chapter on Latin America and the Caribbean for further discussion). In East Asia and Pacific most countries partially privatized state-owned operators and used greenfield projects to expand transport capacity. In Europe and Central Asia the focus was on privatizing existing assets. In the other developing regions private activity in natural gas transport was limited to a few greenfield projects. Initially concentrated in a few countries, private activity in natural gas transport spread over time. Private investment in the sector began in 1992, when the five most active countries accounted for 100% of the annual investment in natural gas infrastructure projects with private participation. In 2001 the top five countries still accounted for 99% of investment. During this period the group of top five consisted of Argentina, Brazil, Algeria and Morocco (combined), Mexico, and Bolivia, which together drew 58% of the cumulative investment in natural gas transport projects with private participation in 1990-2001 (table 9.3). When investment is measured in per capita terms, however, Hungary, Uruguay, and Chile move into the top five (table 9.4). Private activity in the sector focused on vertically separated facilities. Stand-alone transmission pipelines dominated investment, with 33 projects accounting for 57% of the investment in private natural gas transport projects in 1990-2001 (table 9.5; figure 9.5). This predominance of transmission r.rojects is due largely to two big export-oriented projects (the Maghreb and Bolivia-Brazil gas pipelines). Of the 33 stand-alone transmission projects, 22 were awarded in Latin America and the Caribbean. Projects for stand-alone distribution facilities, capturing 33% of the investment in private natural gas transport projects, were awarded mainly in Latin America and the Caribbean (50 projects) and Europe and Central Asia (25). Just nine projects involved vertically integrated gas utilities, most in Europe and Central Asia (ArmRosGazprom in Armenia, Eesti Gaas in Estonia, Latvijas Gaze in Latvia, Lietuvos Dujo in Lithuania, Moldovagaz in Moldova, and RAO Gazprom in the Russian Federation). The other companies were scattered across regions (Gujarat Gas Company in India, Nile Valley Gas in the Arab Republic of Egypt, and Petronas Gas in Malaysia). In countries without gas fields, developing or expanding a domestic natural gas industry requires international gas trade-and thus, typically, export-oriented pipelines. Nine export- oriented pipeline projects with private participation, attracting investment of $8 billion, Notes reached financial closure in 1990-2001: the Yadana pipeline from Myanmar to Thailand, the 1. The PPI Project Database covers Maghreb pipeline from Algeria to Morocco to Europe, the Bolivia-Brazil pipeline, sections projects that transport natural gas to end users. Captive pipelines owned by of the Yamal pipeline in Belarus and Poland, Gasoducto Cruz del Sur from Argentina to private upstream gas producers and condensate operations are not included. Uruguay and Brazil, and four pipelines from Argentina to Chile (GasAndes, GasAtacama, 2. Alejandro Jadresic, "Investment in Gasoducto del Pacifico, and NorAndino). The last four projects, which launched the Natural Gas Pipelines in the Southern Cone of Latin America," Policy Research development of the natural gas business in Chile, were developed by fully private consortia Working Paper 2315 (World Bank, Private Sector Advisory Services on a competitive basis. 2 Department, Private Participation in Infrastructure, Washington, D.C., 2000) [http://econ.worldbank.org/docs/ 1069.pdf]. I 108 Sectoral Box 9.1 Largest Natural Gas Transmission and Distribution Projects with Private Participation in Developing Countries In 1990-2001 the 10 largest natural gas transport projects with private participation in developing countries accounted for half the investment in such projects (see table). These 10 projects covered the range of approaches to bundling services-from stand-alone distribution companies to vertically integrated utilities to export-oriented pipelines. Most were in Latin America, which led the developing regions in private participation in natural gas transport. Top 10 Natural Gas Transmission and Distribution Projects with Private Participation, Developing Countries, 1990-2001 Investment Project (2001 US$ billions) Country Transportadora de Gas del Su r SA (TGS) 2.9 Argentina Maghreb Gas Pt~llnc GasAtacama Korea Gas Corporation Total Source: World Bank, PPI Project Database. Box 9.2 Sectoral 109 Top Sponsors of Natural Gas Transmission and Distribution Projects with Private Participation in Developing Countries The top five sponsors of private natural gas transport projects in developing countries in 1990-2001 accounted for more than 26% percent of such projects-and their projects for just over 47% of the investment (see table). A breakdown of the major players by region shows that most have a large business base in Latin America and the Caribbean, reflecting that region's predominance in private participation in natural gas transport. The top three sponsors participated in large cross-border transmission projects, while the fourth and fifth focused on transport assets for the domestic market. Top Five Sponsors of Natural Gas Transmission and Distribution Projects with Private Participation, Developing Countries, 1990-2001 Projects by region Latin Middle Investment" America East and Sub- (2001 US$ and the North Saharan Sponsor billions) Projects Asia Caribbean Africa South Asia Africa Enron British Gas Total" 16.1 0 a. Investment from all sources in projects in which sponsor had an equity participation of 150/o or more. b. Data may not sum to totals because projects can be associated with more than one sponsor. Source: World Bank, PPI Project Database. Private Participation in Infrastructure: Trends in Developing Countries in 1990 • 2001 110 Sectoral Figure 9.1 Annual Investment in Natural Gas Transmission and Distribution Projects with Private Participation, Developing Countries, 1990-2001 8 ~ Argentine privatization 6 Maghreb gas pipeline 4 ~ - Bolivia-Brazil gas pipeline Vl c 2 Rest of projects ,g i) ~ V1 ::::> 0 0 N 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: World Bank, PPI Project Database. Figure 9.2 Natural Gas Transmission and Distribution Projects with Private Participation by Year of Financial Closure, Developing Countries, 1990-2001 35 30 25 20 15 10 5 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source : World Bank, PPI Project Database. Sectoral 111 Figure 9.3 Cumulative Investment in Natural Gas Transmission and Distribution Projects with Private Participation by Type, Developing Countries, 1990-2001 Concessions 30/o Greenfield projects 420/o Divestitures 550/o Source : World Bank, PPI Project Database. Total $34 billion Table 9.1 Natural Gas Transmission and Distribution Projects with Private Participation by Type, Developing Countries, 1990-2001 Type of private participation Projects Concessions 4 Divestitures Greenfield projects Management and lease contracts Total 146 Source: World Bank, PPI Project Database. 112 Sectoral Private Participation in Infrastructure : Trends in Developing Countries in 1990 • 2001 Figure 9.4 Cumulative Investment in Natural Gas Transmission and Distribution Projects with Private Participation by Region, Developing Countries, 1990-2001 Sub-Saharan Africa 00/o Middle East and North Africa 11 OJo South Asia 1 OJo Latin America and Europe and the Caribbean 570/o Central Asia 140/o East Asia and Pacific 1 70/o Source: World Bank, PPI Project Database. Total $34 billion Table 9.2 Private Participation in Natural Gas Transmission and Distribution by Region, Developing Countries, 1990-2001 Investment Region Countries Projects (2001 US$ billions) East Asia and Pacific 7 31 6.0 Source : World Bank, PPI Project Databa se. Sectoral 113 Table 9.3 Top Five Developing Countries by Cumulative Investment in Natural Gas Transmission and Distribution Projects with Private Participation, 1990-2001 Investment Investment as a share of Country (2001 US$ billions) developing world total (O/o) Argentina 10.6 31 Brazil Algeria and Morocco Bolivia Mexico Total Source: World Bank, PPI Project Database. Table 9.4 Top Five Developing Countries by Per Capita Cumulative Investment in Natural Gas Transmission and Distribution Projects with Private Participation, 1990-2001 Per capita investment Total investment Country (2001 US$) (2001 US$ billions) Bolivia 314 2.7 Argentina Hungary Uruguay Chile Source: World Bank, PPI Project Database. 114 Sectoral Private Participation in Infrastructure : Trends in Developing Countries in 1990 • 2001 Table 9.5 Private Participation in Natural Gas Transmission and Distribution by Segment, Developing Countries, 1990-2001 Investment Projects (2001 US$ billions) Source: World Bank, PPI Project Database. Figure 9.5 Annual Investment in Natural Gas Transmission and Distribution Projects with Private Participation by Segment, Developing Countries, 1990-2001 5 c Transmission 4 --a- Distribution 3 * Transmission and distribution 2 Vl c ,g :0 Y} Vl ::::J Ci 0 N 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: World Bank, PPI Project Database. Sectoral 115 10 Telecolllllluni cations Among infrastructure sectors, telecommunications led in private participation in developing countries in 1990-2001, attracting $331 billion in investment commitments. During that period 115 developing countries awarded 651 telecommunications projects with private participation. Private activity in telecommunications started in the second half of the 1980s as a few countries (such as Chile and Guinea-Bissau) privatized their main telecommunications operators and issued the first mobile licenses. But it turned into a worldwide trend in the 1990s. Developing countries saw annual investment in telecommunications projects with 1 1 private participation grow from $6.2 billion in 1990 to a peak of $57 billion in 1998 before it began to decline (figure 10.1). The fall was explained mainly by the decline in acquisitions of government assets, which had peaked in 1998 with the divestiture of the Telebras system in Brazil. By contrast, annual investments in sector expansion continued to grow until 1999. They then declined, but only slightly, as a result of the economic crises in developing countries and the reduced financial capacity of key sponsors (figure 10.2). Brazil has been among the main drivers of private activity since 1998, when it privatized its entire telecommunications sector. Brazil accounted for more than 50% of the investment that year and for 20-25% in 1999-2001. Even in a much more positive market environment it would have been difficult to sustain the peak investment flows of the late 1990s given the absence of massive privatization programs in other large economies. Annual investment flows in low-income countries over this period, which were smaller than those in Brazil, did not show the same volatility. Like investment in the sector, the number of projects with private participation also grew rapidly. The voucher privatization program in the Russian Federation explained most of the peak in 1993 (figure 10.3). Although private participation in telecommunications was spread among a large number of projects and sponsors in developing countries, the biggest projects and the top sponsors accounted for a significant share of the total investment commitments (boxes 10.l and 10.2). Private activity in telecommunications was defined by a strong focus on private ownership and management. This trend was reflected in the predominance of divestitures and greenfield projects in both investment and projects (figure 10.4; table 10.1). Divestitures in the sector took different forms across regions. In East and South Asia divestitures were commonly carried out through public offerings of minority stakes on local or regional stock exchanges, with the government keeping control of the companies. In the other developing regions divestitures were usually structured as the sale of controlling stakes to strategic operators. In the first half of the 1990s governments opting for this type of divestiture often granted the privatized companies 5- to 10-year monopoly rights in basic services. But toward the late 1990s governments started to use shorter monopolies or approaches favoring competition more, such as duopolies or even free entry. Greenfield projects were used mainly to introduce mobile services and to create competition in telecommunications markets. Thus the growth in their share in annual investment-from I 116 Sectoral Private Participation in Infrastructure : Trends in Developing Countries in 1990 • 2001 9% in 1990 to 43% in 200 I-reflects the rapid development of mobile telecommunications markets and the rising number of countries opening basic services to competition. Latin America and the Caribbean, which pioneered private activity in the sector, dominated investment in the 1990s as most countries in the region transformed telecommunications into an entirely private activity (figure 10.5). But the region's share in annual investment in telecommunications fell from 75% in 1990 to 45% in 2001 as other regions opened the sector to private operators. East Asia and Pacific and Europe and Central Asia accounted for most of the remaining investment-and Europe and Central Asia led in projects with private participation (table 10.2). In East and South Asia the private sector entered a business dominated by state-owned enterprises. By contrast, most countries in Europe and Central Asia followed the Latin American approach to private activity, although a few limited private participation to mobile services. Private participation in telecommunications also grew rapidly in Sub-Saharan Africa, with the region's share in annual investment rising from 0% in 1993 to 10% in 2001. In most African countries the private sector focused on providing mobile services, while state-owned enterprises continued to play a major role. But 13 Sub-Saharan African countries also privatized their telecommunications operators. In the Middle East and North Africa private activity was limited to the provision of new services except in Jordan and Morocco, which privatized incumbent operators. Initially concentrated in a few countries, private activity in telecommunications began to spread over time. At the beginning of the 1990s the top five countries accounted for 98% of annual investment in telecommunications projects with private participation, but by 2001 the share of the top five had fallen to 59%. The five countries with the greatest cumulative investment in 1990-2001 as a whole were some of the largest economies in Latin America and East Asia (table 10.3). But when investment is expressed in per capita terms the list of top five changes significantly, with smaller economies such as Estonia and Panama appearing among the most active (table 10.4). Among segments, fully integrated providers and stand-alone mobile operators dominated investment (table 10.5). Most integrated providers were privatized incumbent companies bundling fixed line local, long-distance, and mobile phone services. Although such companies accounted for the largest share of cumulative investment in 1990-2001, their share in annual investment fell from more than 90% in the early 1990s to 33% in 2001 . The main reason for the decline is the rapid growth in stand-alone mobile services, reflecting the worldwide boom in mobile telephony in the 1990s (figure 10.6). Almost all stand-alone mobile service companies were created through greenfield projects. Underlying the trends in private participation in telecommunications have been major technological and other developments that have facilitated the emergence of competition. Technological changes in the past decade have reduced entry costs, allowed major reforms in market structure, and spurred competition. The growing demand for more and better telecommunications services in developing countries in a context of tight fiscal constraints has prompted governments to turn to private investment for expanding and modernizing networks-and to reform legal and regulatory frameworks to allow private participation and competition. And their commitments to sector reform have been strengthened by international agreements. By 2001, 63 developing countries had signed the World Trade Organization's Basic Agreement on Telecommunications, which created binding commitments for its signatories to liberalize telecommunications. Sectoral 117 Thus private activity in telecommunications has taken place in increasingly competitive I ~ markets. By 2001 most developing economies with private participation had exposed I mobile phone services to competition, though they were taking a more cautious approach to basic services. I ! I In 1990-2001 almost 400 private operators provided mobile services on a stand-alone basis I or combined with basic services in 119 countries. Many of these countries also encouraged competition for the market by awarding mobile phone licenses through competitive tenders. By 2001 more than half had three to six competing mobile operators, and more than a quarter had duopoly mobile phone markets. Most of those with monopoly markets for mobile services were small economies in East Asia, Latin America, and Sub-Saharan Africa. In most countries introducing competition, consumers benefited through lower tariffs, expanded networks, and better service. Competition also emerged in the provision of long-distance services. Of the 73 developing countries that allowed private participation in long-distance services, 19 opened the segment to some competition by 2001. Market structures ranged from unrestricted entry (Argentina, Chile, El Salvador, Guatemala) to managed competition (the Republic of Korea, Malaysia) to transitional duopoly (Brazil, Ghana, Mauritania). Most of the other countries awarded temporary exclusive licenses to privatized incumbent monopolies. The number of countries with competition in long-distance services will grow as those temporary monopolies end in the coming years and as other developing countries introduce sector reforms aimed at creating competitive markets-the most recent example being India. Other countries, particularly those in Eastern Europe!. ~re expected to liberalize their markets in 2002-03. Some developing countries introduced competition in local fixed line services. Of the 7 4 countries with private activity in this segment, 26 introduced some competition by 2001. Some of these allowed free entry (Argentina, El Salvador, Guatemala, Mexico). Others introduced controlled competition (the Republic of Korea, Malaysia) or transitional duopolies (Brazil, India, Uganda). The other 48 countries awarded transitional monopoly rights to privatized incumbent operators (the Czech Republic, Hungary, Pakistan, South Africa) or introduced private investment to complement the incumbent's (Bangladesh, Indonesia, Thailand). 118 Sectoral Box 10.1 Largest Telecommunications Projects with Private Participation in Developing Countries In 1990-2001 the 10 largest telecommunications projects with private participation in developing countries were fully or partially privatized incumbent operators providing all telecommunications services (see table). These projects, mainly in Latin America, accounted for 35% of the investment in private telecommunications projects during the period. Top 10 Telecommunications Projects with Private Participation, Developing Countries, 1990-2001 Investment Project (2001 US$ billions) Country Telefonos de Mexico (Telmex)• Tele Norte Leste Participa~oes (TNL) Telesp Partictpa~Oes SA 10.6 Telecom Argentina 10.6 TelefOnica de Argentina 10.2 Compania An6nima Nacional Telefonos de Venezuela 9.7 Telefonica del Peru 7.5 Matav Rt. 6.8 China Mobile HK 6.5 Total 115.1 a. Including fixed and mobile lines as well as long-distance services. Mobile services were spun off in 2001 to America Movil. Source: World Bank, PPI Project Database. Box 10.2 · Sectoral 119 Top Sponsors of Telecommunications Projects with Private Participation in Developing Countries The top 10 sponsors of private telecommunications projects in developing countries in 1990-2001 accounted for 15% of the projects-and their projects for 52% of the investment (see table). This concentration of investment among the top sponsors was driven mainly by their focus on privatized incumbent operators providing all telecommunications services. One exception to this approach was BellSouth Corporation, which focused on stand-alone mobile phone companies through greenfield projects. Most of the top 10 sponsors concentrated their activity in Latin America and the Caribbean, where there has been extensive liberalization in the sector. Top 10 Sponsors of Telecommunications Projects with Private Participation, Developing Countries, 1990-2001 Projects by region Europe Latin Middle East and America East and Sub- Asia and Central and the North South Saharan Sponsor Asia Caribbean Asia Telefonica Carso Global Telecom Telecom Italia France Telecom 0 0 7 5 0 0 5 0 0 BellSouth Corporation 10.4 11 0 0 11 Portugal Telecom 9.9 6 0 0 2 Tota lb 172.2 100 5 22 52 a. Investment from all sources in projects in which sponsor had an equity participation of 150/o or more. b. Data may not sum to totals because projects can be associated with more than one sponsor. Source: World Bank, PPI Project Database. 120 Sectoral Private Part icipation in Infrastructure: Trends in Developing Countries i n 1990 • 2001 Figure 10.1 Annual Investment in Telecommunications Projects with Private Participation, Developing Countries, 1990-2001 60 Cl Total 50 Excluding Brazil 40 * Low-income countries 30 20 V\ t: .<:2 :.0 10 ~ V1 :::J 0 0 N 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: World Bank, PPI Project Database. Figure 10.2 Annual Investment in Telecommunications Projects with Private Participation by Destination, Developing Countries, 1990-2001 60 - Acquisitions of 50 government assetsa 40 Sector expansion 30 20 V\ t: .<:2 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 a. Divestiture revenues, license fees, and canon payments. Source: World Bank, PPI Project Database. Sectoral 121 Figure 10.3 Telecommunications Projects with Private Participation by Year of Financial Closure, Developing Countries, 1990-2001 120 100 80 60 40 20 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: World Bank, PPI Project Database. Figure 10.4 Cumulative Investment in Telecommunications Projects with Private Participation by Type, Developing Countries, 1990-2001 Concessions 30/o Divestitures 590/o Greenfield projects 390/o Source : World Bank, PPI Project Database. Total $331 billion 122 Sectoral Private Parti c ipation in Infrastructure : Trends in Developing Countries in 1990 • 2001 Table 10.1 Telecommunications Projects with Private Participation by Type, Developing Countries, 1990-2001 Type of private participation Projects Concessions Divestitures Greenfield projects Management and lease contractS Total 651 Source: World Bank, PPI Project Database. Figure 10.5 Cumulative Investment in Telecommunications Projects with Private Participation by Region, Developing Countries, 1990-2001 Sub-Saharan Africa 50/o Middle East and North Africa 20/o South Asia 40/o Europe and Latin America and Central Asia 200/o the Caribbean 490/o East Asia and Pacific 200/o Source: World Bank, PPI Project Database. Total $331 billion Sectoral 123 Table 10.2 Private Participation in Telecommunications by Region, Developing Countries, 1990-2001 Investment Region Countries Projects (2001 US$ billions) Total 115 651 331.4 Source: World Bank, PPI Project Database. Table 10.3 Top Five Developing Countries by Cumulative Investment in Telecommunications Projects with Private Participation, 1990-2001 Investment Investment as a share of Country (2001 US$ billions) developing world total (O/o) Brazil Indonesia Total Source: World Bank, PPI Project Database. 124 Sectoral Pr ivate Participation in Infrastructure: Trends in Developing Countries in 1990 • 2001 Table 10.4 Top Five Developing Countries by Per Capita Cumulative Investment in Telecommunications Projects with Private Participation, 1990-2001 Per capita investment Total investment (2001 US$) (2001 US$ billions) Source: World Bank, PPI Project Database. Table 10.5 Private Participation in Telecommunications by Segment, Developing Countries, 1990-2001 Investment Segment Projects (2001 US$ billions) Long distance, local, and mobile 51 119.8 Source: World Bank, PPI Project Database. Sectoral 125 Figure 10.6 Annual Investment in Telecommunications Projects with Private Participation by Segment, Developing Countries, 1990-2001 25 Cl Mobile 20 Long distance, local, and mobile -0- Long distance and local 15 -a-- Local and mobile 10 Long distance * Vl c ~ 5 Local :0 tA- V'l ::::l Long distance and 0 ~ 0 LJCb=~E:!l~&i~~'=i~~~~;~~~~~~~~~t~mobile 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: World Bank, PPI Project Database. 126 Sectoral Private Participation in Infrastructure: Trends in Developing Countries in 1990 • 2001 11 Transport In 1990-2001 private activity in transport took place in 66 developing countries. These countries awarded 662 transport projects with private participation that attracted $13 5 billion in investment commitments. Private activity in transport started in the 1980s, with 13 developing countries awarding 25 projects (mainly toll road projects in Mexico, Malaysia, and Thailand) attracting more than $12 billion in 1984-89. The private activity grew rapidly in the 1990s. Annual investment in transport projects with private participation exceeded $10 billion in 1990, driven mainly by toll road projects awarded in Argentina and Mexico. Investment declined sharply in 1991 .. but then gradually grew to a peak of almost $22 billion in 1997 (figure 11.1). Investment fell after that, though it recovered slightly in 2000 and 2001. Concessions of toll roads in Brazil and China, railways in Brazil, and the airport system in Argentina accounted for a large share of the investment during the years of peak activity (1996-98). The number of projects showed a similar pattern, rising to a peak (103) in 1997, then falling (figure 11.2). Private participation in transport was spread among a large number of projects and sponsors in developing countries. The biggest projects and the top sponsors accounted for a significant share of the total investment commitments (boxes 11.1 and 11 .2). But investment was less concentrated among top projects and sponsors in transport than in other sectors. Countries introducing private participation in transport tended to focus on transferring the management of existing assets to the private sector while keeping legal ownership of those assets in the public sector. This approach was reflected in the predominance of concessions, which led in both investment and projects (figure 11.3; table 11.1). Greenfield projects, mainly for building roads and seaport facilities, were the second most common type of private participation. Countries also used various forms of divestitures in transport. China, which accounted for half the divestitures in the sector, offered minority stakes on stock exchanges, allowing state- owned enterprises to raise capital while the government retained control of these companies. Using this approach, China partially privatized large toll road, railway, and airport operators. The Russian Federation carried out divestitures through voucher privatization schemes. And the Latin American countries that divested transport companies (Bolivia and Chile) used public tenders of controlling stakes. Latin America had the most private activity in transport, followed by East Asia (figure 11.4; table 11.2). The growth of the sector in these two regions coincided with the opening of other infrastructure sectors to private activity and, particularly in Latin America, with progress toward establishing legal and regulatory institutions that promote private participation. In the other developing regions private participation in transport took place mostly in the second half of the 1990s and mainly in one or two subsectors. Private activity focused on toll roads and airports in Europe and Central Asia, seaports in South Asia, toll roads and seaports in Sub-Saharan Africa, and seaports and airports in the Middle East and North Africa (see regional chapters for further discussion). I Sectoral 127 In 1990 just five countries accounted for 100% of the annual investment in transport projects with private participation. But by 2001 the share of the top five had dropped to 76%. Over the 12-year period the top five countries-China, Brazil, Argentina, Mexico, and Malaysia-captured 68% of the cumulative investment in private transport projects (table 11.3). Measuring investment in per capita terms changes the top five list, introducing smaller economies-Panama, Chile, and Estonia-among the most active (table 11.4). Airports Thirty-five developing countries introduced private participation in airports in 1990-200 l, granting 82 projects involving 224 airports (table 11.5). Private interest in the airport sector had been spurred by the growth in air transport and airport revenues-growth fueled by deregulation and the establishment of "open skies" agreements among countries. Annual investment in airport projects with private participation grew from zero in 1990 to $5.3 billion in 1998, then declined (figure 11.5). The peak in 1998 was driven mainly by the concession of the airport system in Argentina. Concessions dominated private activity in airports, accounting for 76% of the investment and 49% of the projects in 1990-2001. Developing countries opted for concessions rather than divestitures to avoid political resistance to private participation, as airport assets tend to be seen as strategic for national security. Divestitures ranked second in investment, attracting a 15% share over the period. Airport divestitures took different forms. Seven of the 16 divestitures-in Bolivia, the Russian Federation, and South Africa-introduced private management through the sale of controlling stakes. In China, Malaysia, and Poland state-owned enterprises used public stock offerings to raise funds for rehabilitating and expanding airports but continued to operate the facilities. The 19 greenfield airport projects attracted 8% of the investment in 1990-2001. Other than the new terminal in Hungary's main airport, greenfield projects involved stand-alone cargo terminals or secondary airports. Management and lease contracts were scarce, involved in only two projects in Colombia and one each in Cuba, India, the Lao People's Democratic Republic, Madagascar, and Mauritius. The scarcity of such contracts may result from an interest by governments in engaging the private sector primarily as a way to raise funds for infrastructure rather than as a preferred approach to management. Latin America and the Caribbean led the regions in private activity in airports, with 57% of the investment and 32 projects in 1990-2001 (figure 11.6; table 11.6). Driving these results was the concession of the Argentine airport system. The concession, which transferred most of the system to private sponsors, accounted for 30% of investment commitments to airports in the region. Concessions were the predominant type of private participation in airports in Latin America. East Asia and Pacific was the second most active region, with 21 % of the investment in airport projects with private participation. Of the 17 airport projects in the region, 7 were divestitures, accounting for almost half the investment. The 5 airport concessions in the region accounted for most of the other investment. I 128 Sectoral Private Participation in Infrastructure : Trend s in Developing Countries in 1990 • 2001 Among countries, Argentina captured the most investment ($4.0 billion), followed by China ($1.7 billion), Mexico ($1.3 billion), theArab Republic of Egypt ($704 million), and the Dominican Republic ($499 million). Together, these five awarded projects involving 89 airports . When countries are ranked by number of projects, China comes out on top (10 projects), followed by Chile (8) and Egypt (6) . Argentina, Colombia, Mexico, the Russian Federation, and South Africa had 4 projects each. Most private activity in airports was directed to projects bundling terminal and runway facilities. Developing countries awarded 54 such projects in 1990-2001, involving investment commitments of more than $10.1 billion (table 11.7). Stand-alone terminals were the second most common type of project, with 26 projects attracting $1.9 billion in investment. Airport projects including terminals tend to be more attractive because they give access to nonaeronautical revenues, which usually have been unregulated and may offer large income streams. Stand-alone runway projects, whose revenues have tended to be regulated and more stable, were less common: only two such projects were awarded in 1990-2001. Projects bundling airport networks rather than facilities became more common at the end of the 1990s, especially in Latin America and the Caribbean. Of the 13 network projects awarded by 2001, 11 were granted in 1998-2001. The largest of these projects was in Argentina, where private sponsors committed to operate and maintain 33 airports for 30 years. Railways Private activity in railways took place in 27 developing countries in 1990-2001. Annual investment commitments for railway projects with private participation grew from zero in 1990 to almost $7 billion in 1996, then declined. The peak of activity in 1996 was driven mainly by railway concessions in Brazil. Over the 12-year period railways captured 21 % of the investment in transport projects with private participation, ranking second among subsectors. Concessions were the most common type of private participation in railways, accounting for 70% of the investment in the subsector in 1990-2001. Concessions were used to improve the management of loss-making railways and rehabilitate deteriorating infrastructure. The length of railway concessions varied with investment needs. Where the operator invested only in rolling stock, concession contracts ranged from 10 to 15 years. But where the operator had to invest in substantial restoration of the track, contracts were up to 90 years . Most railway projects in Latin America and the Caribbean were implemented through concess10ns. Greenfield projects ranked second in investment, capturing a 27% share. Of the seven greenfield projects in railways, six were awarded in rapidly growing cities of East Asia and Pacific. This regional concentration mirrors the pattern in gas, electricity, and water and sewerage. In all these sectors private participation in Asia focused on expanding capacity in response to rapid urbanization and growing demand for infrastructure services rather than improving the efficiency of existing public operators. Greenfield projects were also distinguished by their concentration by segment: all were for metropolitan light or "heavy" rail systems rather than for long-distance freight lines. The nine divestitures in railways followed no standard model. They included full and partial privatizations aimed at transferring operation to a strategic investor (Brazil, Chile, and Estonia) or raising revenue (China). I Sectoral 129 Latin America and the Caribbean led the regions in private actlv1ty in railways (figure 11.7; table 11.8). Countries in East Asia and Pacific awarded fewer contracts, although the projects' size and type (greenfield) meant more private investment per project. Other regions had only a few railway projects with private participation, while South Asia had none. Among countries, Brazil led in investment ($6.7 billion), followed by Argentina ($6.1 billion), Malaysia ($5.6 billion), Mexico ($4.3 billion), and Thailand ($3.3 billion). When countries are ranked by number of projects, Argentina moves into first place (15 projects), followed by Brazil (14), Malaysia (6), Mexico (6), and the Czech Republic (4). Private activity focused on vertically integrated companies-projects that bundle rolling stock and fixed assets. This type of project accounted for 73% of the investment and 64% of the projects in 1990-2001 (table 11.9). Introducing competition in the railway business was not a major concern for governments because railways, even as regional monopolies, usually face competition from other modes of transport. Most of the other private activity in railways was directed to freight and passenger rail services, with the government retaining the operation of fixed assets. Seaports Forty-one developing countries opened the seaport business to private pamc1pation in 1990-2001. Annual investment in seaport projects with private participation grew from zero in 1990 to $4.6 billion in 1997, then fluctuated significantly. Among transport subsectors, seaports ranked second in number of projects and third in investment. Concessions were the most common type of private participation in seaports, accounting for 53% of the investment and 46% of the projects. These projects fostered the rehabilitation of terminals and the renewal of superstructure, such as cranes and yard equipment. With few exceptions, public authorities retained obligations for investing in berths and breakwater facilities and maintaining access channels. The seaport concessions were implemented mainly in Latin America and the Caribbean (52 projects) and East Asia and Pacific (20). Greenfield projects were the second most common type of private participation in seaports, with 44% of the investment and 33% of the projects. These projects took place mainly in East Asia and Pacific (24 projects), where rapid growth in trade and insufficient infrastructure created a need for new port facilities. Divestitures played a limited role in the seaport business, accounting for only 13 projects. There was no standard model for these privatizations. The Russian Federation transformed seaports into publicly traded companies through voucher privatizations. Brazil divested captive port facilities in privatizing oil, steel, and mining, then opened the facilities to third- party access. China sold minority stakes in port operators on local stock exchanges. East Asia and Pacific led developing regions in investment in seaport projects with private participation, with 8 countries granting 52 projects (figure 11.8; table 11.10). In Latin America and the Caribbean, ranking second in investment, 13 countries awarded 78 seaport projects. The other regions had only a few seaport projects involving private participation. Among countries, China garnered the most investment ($3.1 billion), followed by Indonesia ($2.2 billion), Malaysia ($2.1 billion), Brazil ($1.7 billion), and India ($1.1 billion). When 130 Sectoral Private Participation in Infrastructure : Trends in Developing Countries in 1990 • 2001 countries are ranked by number of projects, Brazil moves to the top (23 projects), followed by China (22), Mexico (18), Argentina (13), and the Russian Federation (9). Private activity in seaports focused mainly on stand-alone terminals, which drew 7 4% of the investment in seaport projects with private participation in 1990-2001 (table 11.11). Among types of terminals, container terminals accounted for the largest share of investment and projects. Private participation in seaport projects involving all facilities was also common. Forty such projects were awarded, attracting 25% of the investment. Only two channel dredging projects were awarded in 1990-2001. Toll Roads Twenty-eight developing economies introduced private activity in toll roads in 1990-2001, awarding 327 projects. Annual investment in toll road projects rose to a peak of $11.3 billion in 1997, declined in 1998 and 1999, then recovered in 2000 and 2001. Argentina and Mexico accounted for most of the investment in 1990, while China and Brazil did in 1996- 98. The Republic of Korea drove most of the recovery in 2001. Over the 12-year period toll roads led private activity in transport, in both investment and number of projects. Concessions attracted the most investment in toll roads in 1990-2001, with a 51 % share, followed by greenfield projects (44%). Most of these projects were awarded in two regions. Latin America and the Caribbean granted 102 concessions, and East Asia and Pacific 89. And East Asia and Pacific granted 41 greenfield projects, and Latin America and the Caribbean 35. Latin America and the Caribbean dominated investment in toll road projects with private participation, followed by East Asia and Pacific (figure 11.9). But East Asia and Pacific led in number of projects, followed by Latin America and the Caribbean (table 11.12). The top five countries by investment were China ($17 billion), Brazil ($13 billion), the Republic of Korea ($10 billion) , Mexico ($8 billion), and Malaysia ($6 billion)-together attracting 72% of the investment in toll road projects with private participation in 1990- 2001. When countries are ranked by number of projects, China again tops the list (107 projects), followed by Brazil (36), Mexico (30), India (25), and Argentina (24). Among segments, highways dominated private activity in toll roads, accounting for 94% of the investment in 1990-2001 (table 11.13). Most of the toll road projects connected major metropolitan areas, where large traffic flows supported the projects' financial viability. I Box 11.1 Sectoral 131 Largest Transport Projects with Private Participation in Developing Countries Among the 10 largest transport projects with private participation in developing countries in 1990-2001, most were toll road or railway projects-an d most were in the largest economies of Latin America and East Asia (see table). The 10 projects captured 18% of the investment in private transport projects during the period. Top 10 Transport Projects with Private Participation, Developing Countries, 1990-2001 Investment Project (2001 US$ billions) Argentina Airport System 3.9 Trenes de Buenos Aires {TBA) 2.7 Kimpo Airport Expressway 2.6 Transportacion Ferroviaria Mexkana 2.5 Guangzhou-Shenzhen Superhighway 2.5 China PUTRA-LRT 2.4 Malaysia Daegu-Pusan Expressway 2.0 Korea, Rep. of Bangkok Transit System Corp.• 2.0 Thailand Cheonan-Nonsan Expressway 1.9 Korea, Rep. of Malha Paulista 1.9 Total 24.4 a. Canceled in 1997. Source: World Bank, PPI Project Database. 132 Sectoral Box 11.2 Top Sponsors of Transport Projects with Private Participation in Developing Countries In 1990-2001 the top 10 sponsors of transport projects in developing countries were involved in projects accounting for more than 30% of the investment. Unlike in other infrastructure sectors, in transport most of the top sponsors were companies from developing countries that specialized in the region in which they were based (see table). The only international companies among the top sponsors were Grupo Dragados (Spain) and Societa Esercizi Aeroportuali (Italy). This trend reflects the fact that most transport contracts were awarded to consortia of local companies, often operating in other industries, such as construction. The main exceptions were airport projects. Consortia for these projects usually included at least one experienced operator, which most developing countries lacked in the 1990s. Most of the top sponsors of transport projects concentrated on toll roads, with the exceptions being Hutchison Whampoa (seaports) and Renong (railways). This trend reflects the predominance of toll roads in private activity in transport. Concessions and greenfield projects were the most common types of participation for the top 10 sponsors. Top 10 Sponsors of Transport Projects with Private Participation, Developing Countries, 1990-2001 Projects by region Europe Latin Middle Investment' East and America East and Sub- (2001 US$ Asia and Central and the North South Saharan Sponsor billions) Projects Pacific Asia Caribbean Africa Asia Africa '" ICA SA de a/ 5.7 15 0 0 15 0 0 0 3 _; Hopewell Hotdi"IS 5.:2 :;-6 6 . O,_, 0 o' .. 0 0 Grupo Tribasa SA de a/ 4.9 16 0 0 16 0 0 0 , .· Grupo Dr"8dos .· > ·. le u 19 .. ''~o ' ) 0 ·-,·.,.I 18 ';;· 0 ;'"' .. 0 1 New World Infrastructure 4.3 42 42 0 0 0 0 0 ;. I•• --~, Hutchison Whampoa 4.1 14 12 0 , 0 1 Benito Roggio e Hijos SA 4.1 13 0 0 13 0 0 0 Renong Berhad 4.0 3 3 0 I• () 0 0 0 Odebrecht 3.9 6 0 0 6 0 0 0 Societa Escrcizi . . .. . . ~- 1: . , AeroportUali and 1 Corporation America SA 3.9 1 0 -0 1 () . 0 0 Tota lb 41.4 127 63 0 62 0 0 2 " a. Investment from all sources in projects in which sponsor had an equity participation of 15% or more. b. Data may not sum to totals because projects can be associated with more than one sponsor. Source: World Bank, PPI Project Database. Sectoral 133 Figure 11.1 Annual Investment in Transport Projects with Private Participation, Developing Countries, 1990-2001 25 ~ 20 15 - Brazil and Ch ina Rest of countries 10 c:: ~ 5 :.0 ~ l/) ::J 0 0 N 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: World Bank, PPI Project Data base. Figure 11.2 Transport Projects with Private Participation by Year of Financial Closure, Developing Countries, 1990-2001 120 100 80 60 40 20 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: World Bank, PPI Project Database. Private Participation in Infrastructure : Trends in Developing Countries in 1990 • 2001 134 Secto ra I Figure 11.3 Cumulative Investment in Transport Projects with Private Participation by Type, Developing Countries, 1990-2001 Greenfield Concessions 580/o projects 3 70/o Source: World Bank, PPI Project Database. Total $135 billion Table 11.1 Transport Projects with Private Participation by Type, Developing Countries, 1990-2001 Type of private participation Projects Concessions 384 Divestitures Greenfield projects Management and tease contracts Total 662 Source: World Bank, PPI Project Database. Secto ra I 135 Figure 11.4 Cumulative Investment in Transport Projects with Private Participation by Region, Developing Countries, 1990-2001 Sub-Saharan Africa 20/o Middle East and North Africa 1O/o South Asia 20/o Europe and Central Asia 40/o Latin America and the Caribbean 500/o East Asia and Pacific 41 O/o Source: World Bank, PPI Project Database. Total $135 billion Table 11.2 Private Participation in Transport by Region, Developing Countries, 1990-2001 Investment Region Countries Projects (2001 US$ billions) East Asia and Pacific 10 229 55.7 Europe and Central Asia 5.1 Latin America and the Caribbean 67.6 Middle East and North Africa 1.8 South Asia 4 41 2.4 Sub-Saharan Africa 17 38 2.7 Total 66 662 135.3 Source: World Bank, PPI Project Database. 136 Sectoral Private Participation in Infrastructure: Trends in Developing Countries in 1990 • 2001 Table 11.3 Top Five Developing Countries by Cumulative Investment in Transport Projects with Private Participation, 1990-2001 Investment Investment as a share of Country (2001 US$ billions) developing world total (O/o) China 23.6 17 Source: World Bank, PPI Project Database. Table 11.4 Top Five Developing Countries by Per Capita Cumulative Investment in Transport Projects with Private Participation, 1990-2001 Per capita investment Total investment Country (2001 US$) (2001 US$ billions) Source: World Bank, PPI Project Database. Sectoral 137 Table 11.5 Private Participation in Transport by Subsector, Developing Countries, 1990-2001 Investment Subsector Projects (2001 US$ billions) Airports 82 12.5 Railways Seaports Toll roads Total Source: World Bank, PPI Project Database. Figure 11.5 Annual Investment in Transport Projects with Private Participation by Subsector, Developing Countries, 1990-2001 12 Toll roads 10 * Railways 8 Seaports Cl 6 Airports 4 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: World Bank, PPI Project Database. 138 Sectoral Private Participation in Infrastructure : Trends in Developing Countries in 1990 • 2001 Figure 11.6 Cumulative Investment in Airport Projects with Private Participation by Region, Developing Countries, 1990-2001 Middle East and North Africa 60/o South Asia 1O/o Europe and Central Asia 120/o Latin America and the Caribbean 570/o East Asia and Pacific 21 O/o Source: World Bank, PPI Project Database. Total $12 billion Table 11.6 Private Participation in Airports by Region, Developing Countries, 1990-2001 Region Countries Projects East Asia and Pacific 7 17 Europe and Central Asia 6 14 Latin America and the Caribbea~ 12 32 Middle East and North Africa 2 7 South Asia 1 2 Sub-Saharan Africa 7 10 Total 35 82 Source: World Bank, PPI Project Database. Sectoral 139 Table 11.7 Private Participation in Airports by Segment, Developing Countries, 1990-2001 Investment Segment Projects (2001 US$ billions) =; All facilities 54 10.1 Terminals 26 1.9 Runways 2 0.5 Total 82 12.5 Sou rce: World Ban k, PPI Project Data base. Figure 11.7 Cumulative Investment in Railway Projects with Private Participation by Region, Developing Countries, 1990-2001 Sub-Saharan Africa 1Ofo Middle East and North Africa 1Ofo Latin America and Europe and Central Asia 1Ofo the Caribbean 620/o East Asia and Pacific 350/o Sou rce : World Bank, PPI Project Database. Total $29 billion 140 Sectoral Private Participation in Infrastructure: Trends in Developing Countries in 1990 • 2001 Table 11.8 Private Participation in Railways by Region, Developing Countries, 1990-2001 Source: World Bank, PPI Project Database. Table 11.9 Private Participation in Railways by Segment, Developing Countries, 1990-2001 Investment Segment Projects (2001 US$ billions) a. Fixed assets and any rail service (freight or passenger). Source: World Bank, PPI Project Database. Sectoral 141 Figure 11.8 Cumulative Investment in Seaport Projects with Private Participation by Region, Developing Countries, 1990-2001 Sub-Saharan Africa 1O/o Latin America and the Caribbean 31 O/o Middle East and North Africa 50/o South Asia 1QO/o Europe and Central Asia 40/o East Asia and Pacific 490/o Source: World Bank, PPI Project Database. Total $18 billion Table 11.10 Private Participation in Seaports by Region, Developing Countries, 1990-2001 Region Countries Projects East Asia and Pacific 8 52 . Europe and Central Asia ·. 6. ' 16: ' Latin America and the Caribbean 13 78 ., Middle East and North Africa '•, \ .. ··c ,•• s ... .•: 8 South Asia 3 13 .• Sub-Saharan Africa , ' ,,, ' '·•,. 1 i. ./ •, ·. ; , 10 Total 41 177 Source: Wor ld Bank, PPI Project Data base. 142 Sectoral Private Participation in Infrastructure : Trend s in Developing Countries in 1990 • 2001 Table 11.11 Private Participation in Seaports by Segment. Developing Countries, 1990-2001 Investment Segment Projects (2001 US$ billions) Container terminals 83 11.3 Dry bulk termimils Multipurpose terminals liquid bulk terminals Channel dredging All faciJities Total Source: World Bank, PPI Project Database. Figure 11.9 Cumulative Investment in Toll Road Projects with Private Participation by Region, Developing Countries, 1990-2001 Sub-Saharan Africa 30/o South Asia 1 O/o Europe and Central Asia 30/o Latin America and the Caribbean 480/o East Asia and Pacific 450/o Source: World Bank, PPI Project Database. Total $76 billion Sectoral 143 Table 11.12 Private Participation in Toll Roads by Region, Developing Countries, 1990-2001 Region Countries .. Projects East Asia and Pacific 6 149 Europe and Central Asia .. 3 •. .·.. 6 Latin America and the Caribbean 13 137 . Middle East and North Africa I ,& ;·· ' . ' .. ·· ·•": i O:·~ . ,<. South Asia 2 26 <.· .\ Sub-Saharan Africa 4 9 Total 28 327 Source: World Bank, PPI Project Database. Table 11.13 Private Participation in Toll Roads by Segment. Developing Countries, 1990-2001 Investment Segment Projects (2001 US$ billions) Highways 271 71.4 Bridges 32 ~·) .. k ..·/c. %.0 ;:~ ·•.: . .. Tunnels 2 0.2 Highways and bridges 19 2.3 .. Highways and tunnels 2 0.1 Highways, tunnels, and bridges 1 on Total 327 76.0 Source: World Bank, PPI Project Database. 144 Sectoral Private Participation in Infrastructure: Trends in Developing Countries in 1990 • 2001 12 Water and Sewerage Private activity in water and sewerage grew significantly in 1990-2001 as 43 developing countries awarded 203 projects with private participation, attracting investment commitments of almost $40 billion. Annual investment in water and sewerage projects with private participation fluctuated strongly over the 12-year period (figure 12.1). A few transactions explained the peaks, such as the concession of the water utility in the city of Buenos Aires, Argentina, in 1993; that of the utility in Manila, Philippines, in 1997; and the privatization of the largest water utilities in Chile in 1999. The number of projects rose gradually to a peak in 1999, then fell (figure 12.2). Although private participation in infrastructure was spread among a large number of projects and sponsors in the region, the biggest projects and the top sponsors accounted for most of the investment commitments (boxes 12.1 and 12.2). Introducing private participation has been more difficult in water and sewerage than in other infrastructure sectors because of broad resistance to raising tariffs to cost-recovering levels, which increasestheriskoflong-terminvestmentinsectorassets.Anotherfactor has been decentralization. In most countries water and sewerage services are under the jurisdiction of local or provincial governments, which often have little experience with private participation in infrastructure. Concessions dominated private activity in water and sewerage, reflecting the focus on transferring management of existing assets to the private sector while keeping legal ownership of those assets in the public sector (figure 12.3; table 12.1). Concessions of water utilities have been attractive to governments because they transfer operational and investment responsibilities-as well as the associated commercial and investment risk-to the private sector. Because these transactions involve private investment in distribution as well as bulk supply, they maximize potential efficiency gains. But they also require substantial government commitment and efforts to create a credible regulatory environment for private investment. Greenfield projects, mainly for constructing bulk water treatment facilities, were the second most common type of private participation in the sector. Most of the concessions and greenfield projects were awarded in Latin America and the Caribbean (83 projects) and East Asia and Pacific (46). Management and lease contracts were also common, accounting for 20% of water and sewerage projects. Such contracts were intended to improve the performance of public utilities while leaving the public sector primarily responsible for new investments. Management and lease contracts have been attractive in countries where the private sector perceived investment risk as particularly high or where investment requirements for network expansion were small and emphasis was placed on improving efficiency. Management and lease contracts were awarded mainly in Europe and Central Asia (21 projects) and Sub- Saharan Africa (7). Latin America and the Caribbean had the most private activity in water and sewerage, followed by East Asia and Pacific (figure 12.4; table ~ 12.2). The growth of the sector in these two regions coincides with the opening of other infrastructure business to the private sector and, particularly in Latin America, progress toward establishing legal and regulatory institutions that promote private participation. I Sectoral 145 In Europe and Central Asia, the third most active region, private activity in the sector was focused on management and lease contracts. But most of the investment went to a few concessions. In Sub-Saharan Africa private activity was limited mostly to management and lease contracts. The Middle East and North Africa had a small but growing amount of private involvement in water and sewerage. In addition to four water projects, three projects involving water and electricity utilities were awarded in the region, including the large Casablanca concession in Morocco. In South Asia private activity in the sector started in 2000 with one greenfield contract for a water system in a new industrial area in India. Private activity steadily spread across countries in 1990-2001, though investment remained fairly concentrated (figure 12.5). In the early 1990s two countries accounted for 100% of the annual investment in water and sewerage projects involving the private sector, while in 2001 the top five countries captured 75%. Over the 12-year period the five attracting the most investment were Argentina, the Philippines, Malaysia, Chile, and Brazil (table 12.3). When investment is expressed in per capita terms, however, smaller economies-Urugua y and Trinidad and Tobago-move into the top five (table 12.4). The main water project with private participation in Uruguay was the water and sewerage concession for the province of Maldonado, while in Trinidad and Tobago it was a desalination treatment plant. Brazil led in projects (32), followed by China (24), Mexico (21), the Czech Republic (16), and Argentina (12). Among segments, the 75 projects involving vertically integrated water and sewerage utilities (potable water and sewerage networks) dominated investment (figure 12.6; table 12.5). In addition, 28 projects involving vertically integrated water companies (excluding sewerage services) were awarded to private operators during the period. The preference for awarding integrated water utilities reflected government objectives in the sector. Water utilities in most developing countries not only faced a need to expand capacity and distribution networks but also had high levels of inefficiency and unaccounted-for water. Projects detaching the expansion of network capacity from the management of distribution networks can exacerbate system inefficiencies (for example, expanding water treatment capacity can increase unaccounted-for water by raising water pressure in the network). Because concessions of vertically integrated water utilities encourage better management and maintenance of the entire network, they are usually more effective in tackling sector problems than projects dealing with a specific part of the network. Second most common were projects involving stand-alone potable water treatment plants. The 33 such projects were implemented through greenfield contracts with state-owned utilities. Eight stand-alone water distribution projects were awarded. Stand-alone sewerage projects were also awarded, most of them in countries with the well-developed water infrastructure and increasing wealth needed for municipal governments to extend sewerage services. But stand-alone sewerage plants were rare, perhaps because of the difficulty of unbundling sewerage services from water supply: sewerage requires water, and sewerage services cannot be cut off for nonpayment without also cutting off water supply. The other 29 projects bundled water and sewerage services in different ways. Most common among these were contracts involving water distribution and sewage collection (14 projects). I 146 Secto r al Box 12.1 Largest Water and Sewerage Projects with Private Participation in Developing Countries Among the 10 largest water and sewerage projects with private participation in developing countries in 1990-200 l, most involved vertically integrated water utilities in Latin America and the Caribbean and East Asia and Pacific (see table). These projects accounted for 56% of the investment in private water and sewerage projects during the period. Top 10 Water and Sewerage Projects with Private Participation, Developing Countries, 1990-2001 Investment Project (2001 US$ billions) Country Aguas Argentinas 4.9 Argentina Manila Water and Wastewater (west zone) 4.4 Philippines lndah Wastewater Urban Sewerage• 2.9 Malaysia Empresa Mttroj>btttana de Obras de Santiago de Chile (E 2.5 Chile Manila Water and Wastewater (east zone) 1.9 Sabah Water Supply 1.6 Aguas Provinciales de Santa Fe 1.2 1.1 Bucharest Water 1.0 1.0 22.4 a. Canceled in 2000. b. Canceled in 2001. Source: World Bank, PPI Project Database. Sectora l 147 Box 12.2 ipation in Top Sponsors of Water and Sewerage Projects with Private Partic Developing Countries and sewerage in developing A few major companies domin ate private partici pation in water of the private projects in the countries. The top five in 1990- 2001 accoun ted for 45% period (see table). These top sector, and these projects for 64% of the invest ment during the manag ement or lease contracts five were involved mainly in concessions (30 projects) and (7). (27), more rarely in greenfield projects (17) and divestitures companies (often operat ing in Many contracts were awarded to consor tia made up ofloca l nies. A breakd own of the other industries) and one or two experienced interna tional compa tional companies. Except for major players by region highlights the predom inance of interna operat ing in several regions. Benpres Holdin gs, the top sponsors were interna tional players Private Participation, Top Five Sponsors of Water and Sewerage Projects with Developing Countries, 1990- 2001 Projects by region Europe and America East and Sub- Investment' East Central and the North South Saharan (2001 US$ Asia and Asia Caribbean Africa Asia Africa Sponsor billions) Proj ects Pacific 14 10 2 0 2 SUEZ 18.1 44 16 Sociedad General de 0 0 10.6 14 0 0 14 0 Aguas de Barcelona 0 0 0 0 0 Benpres Holdings 4.4 2 2 2 3 0 0 0 Thames Water 3.3 13 11 6 0 2 Vivendi 25 5 29 27 28 3 0 4 Tota lb 25.5 91 an equity participation of 150/o or more. a. Investment from all sources in projects in which sponsor had with more than one sponsor. b. Data may not sum to totals because projects can be associated Source: World Bank, PPI Project Database. 148 Sectoral Private Participation in Infrastructure: Trends in Developing Countries in 1990 • 2001 Figure 12.1 Annual Investment in Water and Sewerage Projects with Private Participation, Developing Countries, 1990-2001* 10 ~ Aguas Argentinas concession 8 Manila water system concessions 6 - Chile privatization 4 Vl c Rest of projects .2 :.0 2 VT V1 ::::i Ci 0 N 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 • Note: Data refer to investment commitments. Source: World Bank, PPI Project Database. Figure 12.2 Water and Sewerage Projects with Private Participation by Year of Financial Closure, Developing Countries, 1990-2001 40 35 30 25 20 15 10 5 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: World Bank, PPI Project Database. Sectoral 149 Figure 12.3 Cumulative Investment in Water and Sewerage Projects with Private Participation by Type, Developing Countries, 1990-2001 Divestitures 140/o Greenfield projects 1 70/o Concessions 690/o Source: World Bank, PPI Project Database. Total $40 billion Table 12.1 Water and Sewerage Projects with Private Participation by Type, Developing Countries, 1990-2001 Type of private participation Projects Concessions 90 Divestitures 16 Greenfield projects 56 Management and lease contracts 41 Total 203 Source: World Bank, PPI Project Database. 150 Sectoral Private Participation in Infrastructure : Trend s in Developing Countrie s in 1990 • 2001 Figure 12.4 Cumulative Investment in Water and Sewerage Projects with Private Participation by Region, Developing Countries, 1990-2001 Middle East and North Africa 00/o Sub-Saharan Africa 1O/o South Asia 1O/o Latin America and the Caribbean 520/o Europe and Central Asia 80/o East Asia and Pacific 380/o Source: World Bank, PPI Project Database. Total $40 billion Table 12.2 Private Participation in Water and Sewerage by Region, Developing Countries, 1990-2001 - Investment Region Countries Projects (2001 US$ billions) East Asia and Pacific 7 51 15.3 Europe and Central Asia 12 37 3.3 Latin America and the Caribbean 15 100 20.7 Middle East and North Africa 3 4 0.1 South Asia 1 1 0.2 Sub-Saharan Africa 5 10 0.2 - Total 43 203 39.8 Source: World Bank, PPI Project Database. Sectoral 151 Figure 12.5 Cumulative Number of Developing Countries with Private Participation in Water and Sewerage, 1990-2001 w. 45 40 - Countries without private water distribution 35 30 Countries with private water distribution 25 20 15 10 5 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: World Bank, PPI Project Database. Table 12.3 Top Five Developing Countries by Cumulative Investment in Water and Sewerage Projects with Private Participation, 1990-2001 Investment Investment as a share of Country (2001 US$ billions) developing world total (O/o) Argentina 9.6 24 Philippines 6.4 16 Malaysia 6.1 15 Chile 4.2 11 1 Brazil 3.1 8 Total 29.4 74 Source: World Bank, PPI Project Database. 152 Sectoral Private Participation in Infrastructure: Trends in Developing Countries in 1990 • 2001 Table 12.4 Top Five Developing Countries by Per Capita Cumulative Investment in Water and Sewerage Projects with Private Participation, 1990-2001 Per capita investment Total investment Country (2001 US$} (2001 US$ billions} Chile 271 4.2 Malaysia Argentina Uruguay Trinidad and Tobago Source: World Bank, PPI Project Database. Figure 12.6 Annual Investment in Water and Sewerage Projects with Private Participation by Segment, Developing Countries, 1990-2001 8 c Water and sewerage 7 networks -a-- 6 Potable water generation * 5 Potable water 4 generation and distribution 3 ~ 2 ~ .0 ti :::J 1 8 Q L..J;JIL._.~.....t:;;....-l:J-~l:Si11!!!!!!11~~1.___::.::~~~::::=~!fi::~~ N 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Source: World Bank, PPI Project Database. Sectoral 153 Table 12.5 Private Participation in Water and Sewerage by Segment, Developing Countries, 1990-2001 Investment Segment Projects (2001 US$ billions) Potable water and sewerage networks 75 25.1 Potable water treatment Water treatment and distribution Sewage collection and treatment Sewage treatment Water distribution Others 29 3.0 Total 203 39.8 Source: World Bank, PPI Project Database. Criteria and Terminology of the Private Participation in Infrastructure Project Database Append ix 1 155 Project Coverage The Private Participation in Infrastructure (PPI) Project Database covers infrastructure projects in the following categories: • Projects that have reached financial closure and are owned or managed by private companies in developing economies. • Projects that directly or indirectly serve the public. Captive facilities (such as cogeneration power plants and private telecommunications networks) are excluded. • Projects that reached financial closure after 1983. Small projects such as windmills and movable assets (buses, planes) are excluded, as are informal sector projects. Sectoral Coverage The database classifies infrastructure projects in four sectors: • Energy-electricity (generation, transmission, and distribution) and natural gas (transmission and distribution). • Telecommunication s-fixed or mobile local telephony, domestic long-distance telephony, and international long-distance telephony. 1 • Transport-airports (runways and terminals), railways (fixed assets, freight, intercity passenger, and local passenger), seaports, and toll roads (bridges, highways, and tunnels). • \\:later-potable water (generation and distribution) and sewerage (collection and treatment). Country and Regional Coverage The database covers projects awarded in low- and middle-income economies, as defined and classified by the World Bank. This book uses the 2000 classification (see the inside front cover for a list of countries by income classification). If a country shifted from one category to another during 1990-2001, it was classified in the category to which it belonged in 2000. Low- and middle-income economies are classified in six developing regions: East Asia and Pacific, Europe and Central Asia, Latin America and the Caribbean, the Middle East and North Africa, South Asia, and Sub-Saharan Africa. · Definition of Private Participation A project is considered to have private participation if a private company or investor bears a share of the project's operating risk. A foreign state-owned enterprise is considered a private entity. Definition of a Project A project in the database is usually the corporate entity created to operate infrastructure facilities in the hosting country. When the same corporate entity operates two or more physical facilities (such as power plants or toll roads), all of them together are considered one project. Definitions of Types of Private Participation The database classifies private infrastructure projects in four categories: • Management and lease contracts. • Concessions (or management and operation contracts with major private capital expenditure) . • Greenfield projects. • Divestitures. 156 Appendix 1 Private Participation in Infrastructure: Trends in Developing Countries in 1990 • 2001 Most infrastructure projects with private participation fit in one of these four categories. But the boundaries between these categories are not always clear, and some projects have features of more than one category. In these cases projects have been classified in the category that better reflects the risk borne by the private sector. Management and Lease Contracts. A private entity takes over the management of a state-owned enterprise for a given period. The facility is owned by the public sector, and investment decisions and financial responsibilities also remain with that sector. There are two subclasses of management and lease contracts: • Management contract. Usually the government pays a private operator to manage the facility and retains much of the operating risk. • Lease contract. A private operator typically pays a fee to the government for the right to manage the facility and takes on most of the operating risk. Concessions. A private entity takes over the management of a state-owned enterprise for a given period during which it also assumes significant investment risk. The database classifies concessions in the following categories: • Rehabilitate, operate, transfer. A private sponsor rehabilitates an existing facility, then operates and maintains the facility at its own risk for the contract period. • Rehabilitate, lease or rent, transfer. A private sponsor rehabilitates an existing facility at its own risk, leases or rents the facility from the government owner, then operates and maintains the facility at its own risk for the contract period. • Build, rehabilitate, operate, transfer. A private developer builds an add-on to an existing facility or completes a partially built facility and rehabilitates existing assets, then operates and maintains the facility at its own risk for the contract period. Greenfield Projects. A private entity or a public-private joint venture builds and operates a new facility for the period specified in the project contract. The facility may return to the public sector at the end of the concession period. The database classifies greenfield projects in four categories: • Build, lease, own. A private sponsor builds a new facility largely at its own. risk, transfers ownership to the government, leases the facility from the government and operates it at its own risk, then receives full ownership of the facility at the end of the concession period. The government usually provides revenue guarantees through long-term take-or-pay contracts for bulk supply facilities or minimum traffic revenue guarantees. • Build, own, transfer, or build, own, operate, transfer. A private sponsor builds a new facility at its own risk, owns and operates the facility at its own risk, then transfers ownership of the facility to the government at the end of the concession period. The government usually provides revenue guarantees through long-term take-or-pay contracts for bulk supply facilities or minimum traffic revenue guarantees. • Build, own, operate. A private sponsor builds a new facility at its own risk, then owns and operates the facility at its own risk. The government usually provides revenue guarantees through long-term take-or-pay contracts for bulk supply facilities or minimum traffic revenue guarantees. • Merchant. A private sponsor builds a new facility in a liberalized market in which the government provides no revenue guarantees. The private developer assumes construction, operating, and market risk for the project (for example, a merchant power plant). Divestitures. A private entity buys an equity stake in a state-owned enterprise through an asset sale, public offering, or mass privatization program. The database classifies divestitures in two categories: • Full The government transfers 100% of the equity in the state-owned company to private entities (an operator, institutional investors, and the like). • Partial The government transfers part of the equity in the state-owned company to private entities (an operator, institutional investors, and the like). The private stake may or may not imply private management of the facility. Appendix 1 157 Definition of Financial Closure The database includes only projects that have reached financial closure. The definition of financial closure varies among types of private participation. For greenfield projects and concessions, financial closure is defined as the existence of a legally binding commitment of equity holders or debt financiers to provide or mobilize funding for the project. The funding must account for a significant part of the project cost, securing the construction of the facility. For management and lease contracts, a contract authorizing the commencement of management or lease service must exist. For divestitures, the equity holders must have a legally binding commitment to acquire the assets of the facility. Definition of Sponsors Sponsors are private entities that have an equity participation of at least 15% in the project. Recording of Investment Investments in infrastructure projects are classified as one of two types: investments in expanding and modernizing facilities and expenditures on acquiring government assets such as state-owned enterprises or rights to provide services in a specific area or to use radio spectrum. Funds for acquiring government assets are usually paid through divestiture revenues, license fees, or canon payments. Investments in infrastructure projects have generally been recorded on a commitment basis in the year of financial closure (for which data are typically available). Actual disbursements are not tracked. Where divestitures are phased or where investment requirements are defined by commitments on service coverage and quality and data are available (such as for large privatized electricity and telecommunications companies), the investments are recorded in the years in which the transactions take place. Where investments in acquiring government assets are due over the period of a concession, an estimate of their present value is recorded in the year of financial closure. Definition of Canceled Projects Canceled projects are those from which the private sector has exited in one of the following ways: • Selling or transferring its economic interest back to the government. • Removing all management and personnel from the concern. • Ceasing operation, service provision, or construction for 15% or more of the license or concession period, following the revocation of the license or repudiation of the contract. Sources of Information The database is updated every year through a comprehensive review of activity in each of the 157 low- and middle- income economies covered using the following sources: • Commercial news databases (such as the Gale Group's Business and Industry Database and the Economist Intelligence Unit's databases). • Specialized and industry publications (such as McGraw-Hill's International Private Power Quarterly, Thomson Financial's Project Finance International, and Euro money's Project Finance International). • Internet resources (such as Web sites of developers, sponsors, and regulatory agencies). If required, information is also requested from or verified with: • Developers and sponsors. • Regulatory agencies. Note 1. Other te lecommunications services-such as facsimile, pag ing, radio communications, and value added services such as data transmission and videotext-are excluded because they are provided on a stand-alone basis. Annual Investment in Infrastructure Projects with Private Participation in Developing Countries Appendix 2 159 Table A2.1 Annual Investment in Infrastructure Projects with Private Participation by Region and Type, Developing Countries, 1990-2001 (2001 US$ billions) Region and type of private participation 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Total East Asia and Pacific Concessions 5.9 10.2 2.0 2.1 1.0 36.0 Dwestitures 5.5 7.5 1.3 8.1 6.6 46.1 Greenfield projects 21.8 23.6 8.8 5.8 9.4 8.9 128.4 Management and lease contracts 0.0 Total 2.6 4.3 9.6 14.6 18.6 24.7 33.2 41.3 12.2 16.0 16.9 16.6 210.6 .. Europe and Central Asia Concessions 2.0 0.3 5.8 Divestitures 47.5 Greenfield projects 0.1 o. 12.4 2.5 43.6 Management and lease contracts o.o 0.2 Total 0.1 0.4 1.4 1.5 4.3 9.4 12.2 15.7 12.9 9.9 22.8 6.5 97.1 Latin America and the Caribbean Concessions 2.9 Divestitures 5.0 Greenfield projects 6.7 Management and lease contracts Total 14.6 Middle East and North Africa Concessions Divestitures Greenfield projects I 0.0 " .. .. .. .. ± ·, o.o .. 3.6 Jli.4 . - ,.. . ... : ·. .. . -·· ().1 .· .. '. . ;o.2 .. 0.1 .. .. ·'" . 5.t. .. '0.$, .. ·. . 1.1 " 0.8 ~ - 0.3 0.2 n !t lP .. 0.2 2.9 0.9 0.4 0.3 1.8 7.3 4.2 11.3 ... ... . ·· ,. \· Management and lease contracts .. .. .. ? I·•" ;.' ·°' ... . . .... ,; : .. .. .. .. .. Total 0.0 " 0.0 - 0.0 3.6 0.4 0.1 0.4 5.6 3.2 II 2.9 " 4.1 2.4 22.8 South Asia Concessions 0.0 Divestitures Greenfield projects 0.4 0.8 Management and lease contracts Total 0.4 0.8 Sub-Saharan Africa Concessions Divestitures 0.1 .. .. .. : -- .. 0.0 .. 0.0 .. 0.0 0.1 0.0 0.5 2.7 1.2 0.0 1.2 1 '> II 2.0 no I.:> II n1 l./ " 3.5 9.7 Greenfield projects .. .. 0.0 I o.o 0.8 0.7 1.0 I 0.9 1.4 1.5 1.1 ?A 10.2 Management and lease contracts .. 0.0 .. .. .. .. I 0,0 .. .. 0.0 0.0 0.0 0.0 Total 0.1 0.0 .. 0.1 0.0 0.8 II 0.9 1.5 4.8 J..7 4.7 3.4 4.6 23.4 II Total 17.8 18.2 27.3 40.1 46.6 58.9 82.6 128.4 109.3 77.1 89.4 58.3 754.1 .. Zero. Note: Data may not sum to totals because of rounding. Source: World Bank, PPI Project Database. 1 60 Append ix 2 Private Participation in Infrastructure: Trends in Developing Countries in 1990 • 2001 Table A2.2 Annual Investment in Infrastructure Projects with Private Participation by Sector and Type, Devel oping Countries, 1990-2001 (2001 US$ billions) Sector and type of private participation 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Tota l Electricity Concessions 0.1 11.2 Divestitures 0.7 84.6 Greenfield projects 0.6 117.4 Management and lease contracts 0.0 Total 1.3 213.2 Natural gas transmission and distribution Concessions 0.9 Divestitures Concessions Divestitures Greenfield projects Management and lease contracts Total 331.4 Transport Concessions 78.1 Divestitures 7.3 Greenfield projects 49.8 Management and lease contracts 0.0 Total 135.3 Water and sewerage Concessions 0.1 Divestitures Greenfield projects Management and tease contracts 0.0 Total 0.1 Total 17.8 18.2 27.3 40.1 46.6 58.9 82.6 128.4 109.3 77.1 89.4 58.3 754.1 .. Zero. Note: Data may not sum to totals because of rounding . Source: World Bank, PPI Project Database. Appendix 2 161 Table A2.3 Annual Investment in Infrastructure Projects with Private Participation by Income Group and Sector, Developing Countries, 1990-2001 (2001 US$ billions) Income group and sector 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Total Low-income countries Electricity 0.2 0.8 0.2 T.3 3.3 5.8 9.5 6.0 2.7 3.2 38.8 Natural gas transmission and ~stribution 1.0 Telecommunications 34.7 Transport 6.8 Airports 0.5 Railways 0.2 Ii' Seaports 4.3 Toll roads Water and sewerage 0.2 0.2 0.0 0.2 .4 Total 0.6 0.5 1.9 5.7 10.7 17.6 15.0 6.3 8.7 6.5 Lower-middle-income countries Electricity 0.2 0.5 6.1 10.1 20.2 9.2 2.6 84.9 Natural gas transmission and distribution 4.3 0.3 1.2 1.1 0.7 11.0 Telecommunications 0.2 1.3 6.5 7.2 17.0 5.5 77.0 Transport 1.1 1.8 3.2 7.0 4.6 37.9 Airports 0.5 0.3 0.3 Railways Seaports Toll roads Water and sewerage 12.9 Total 1.4 4.3 6.4 12.2 16.1 223.7 Upper-middle-income countries Electricity 4.5 5.0 5.7 4.9 7.1 89.5 Natural gas transmission and distribution 4.0 0.3 1.6 Telecommunications Transport Airports Railways Seaports Toll roads Water and sewerage Total Total 17.8 18.2 27.3 40.1 46.6 58.9 82.6 128.4 109.3 77.1 89.4 58.3 754.1 .. Zero. Note : Data may not sum to tota ls beca use of rounding. Source : World Bank, PPI Project Database. 162 Appendix 2 Private Participation in Infrastructure : Trends in Developing Countries in 1990 • 2001 Table A2.4 Annual Investment in Infrastructure Projects with Private Participation by Sector and Segment, Developing Countries, 1990-2001 (2001 US$ billions) Sector and segment 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Total Electricity Generation 0.9 1.1 5.4 Distribution 0.3 0.2 1.4 Transmission 0.0 Integrated utilities 0.1 0.0 1.6 Distribution and generation 0.0 0.0 0.2 Generation and transmission 0.0 0.0 0.3 Distribution and transmission 0.0 0.0 0.0 Total 1.3 1.3 8.9 Natural gas transmission and distribution Transmission Distribution Distribution and transmission Tota l Telecommunications Mobile Local and mobile Local Long distance Long distance and mobile Local and long distance Local, mobile, and long distance Total Transport Freight and passenger Freight 0.0 Passenger Fixed assets 0.2 Total 3.5 2.8 1.2 2.5 28.8 Appendix 2 163 Sector and segment 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Total Transport Dry bulk terminals Multipurpose terminals 0.3 Liquid bulk terminals 0.1 0.0 0.7 Channel dredging 0.1 0.1 All facilities 0.2 0.3 0.7 4.6 "' Total 0.3 0.5 2.7 1.2 18.0 Toff tOd$ Highways Bridges Tunnels Highways and bridges Highways and tunnels Highways, tunnels, and bridges Total 10.3 6.2 5.6 8.7 76.0 Water and sewerage Potable water and sewerage networks 4.9 0.0 1.4 0.0 - 6.9 0.9 5.5 3.9 Potable water treatment 0.1 0.1 1.5 0.4 0.1 0.4 0.2 Water distribution 0.1 0.1 Water treatment and distribution 1.1 0.6 0.7 0.0 Sewage collection and treatment 0.1 0.1 Sewage treatment 0.1 0.0 Sewage collection Potable water treatment and distribution and sewage collection 0.1 Potable water treatment and distribution and sewage treatment 0.0 0.0 Water distribution and sewage treatment 0.0 0.0 Water distribution and sewage collection 0.0 0.0 0.5 Water distribution and sewage collection and treatment 0.2 0.0 0.0 0.6 0.8 Potable water treatment and sewage treatment 0.0 0.1 0.1 Potable water treatment and sewage collection 0.5 0.5 Total 0.1 7.9 0.5 1.8 1.9 2.4 6.9 4.8 2.3 39.8 Total 40.1 58.9 82.6 77.1 .. Zero. Note: Data may not sum to totals beca use of roundi ng. Source: World Bank, PPI Project Database.