Infrastructure Development Thrives Under Robust PPP Regulatory Frameworks, World Bank Report Shows

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World Bank data shows infrastructure PPP investments increase by $488 million when the right regulations are in place.

WASHINGTON, September 25, 2024 – A World Bank analysis finds a strong correlation between regulatory reforms governing public-private partnerships (PPPs) and infrastructure investment. According to Benchmarking Infrastructure Development, countries that made major reforms to their PPP frameworks, saw, on average, a $488 million increase in infrastructure investment between 1990-2022.

"When clear rules are established, the infrastructure sector becomes far less daunting for private investors and improves countries’ access to funding," says Guangzhe Chen, Infrastructure Vice President at the World Bank. "With more financing available, governments are better positioned to deliver essential infrastructure projects that drive growth, create jobs and improve the daily lives of citizens.”

The newest edition of the World Bank’s Benchmarking Infrastructure Development report, first published in 2015, assesses PPP regulatory frameworks in 140 economies and tracks these regulations against internationally recognized good practices. According to the report, 45 economies passed reforms that strengthened their PPP regulatory frameworks between June 2019 and June 2022.

Even though PPP reforms have a strong link with increased investment levels in transport, energy, water, and information and communication technology, regulation is only one ingredient for a successful PPP ecosystem, explains the report. Advancing from one successful standalone PPP project to a sustainable program of infrastructure investments also depends on economic and political stability, public sector commitment, mature financial markets, effective risk allocation, and a government and partners with long-term vision, among other factors.

Gaps remain in the quality and nature of PPP reforms, especially around PPP preparation. This key step in the investment lifecycle, which includes feasibility studies, environmental assessments, and contract transparency, has seen few improvements since the report’s previous edition. For example, market sounding for technology and innovations is only required by 5 percent of the economies, showing a mere 1 percent increase since 2019. Just one-third of the 140 economies covered in Benchmarking Infrastructure Development standardize PPP transaction documents or publish assessments online, and no economies made progress on these factors since 2019.

“One of the biggest obstacles procuring authorities encounter as they try to attract private-sector infrastructure financing is a lack of well-structured, or well-prepared PPP projects,” explains Fernanda Ruiz Nunez, Senior Economist at the World Bank and lead report author. “If more countries implemented recognized project preparation best practices, we would likely see an even greater increase of infrastructure PPPs.”

Benchmarking Infrastructure Development relies on primary data from a survey of more than 10,000 law firms, public officials, chambers of commerce, academics, and other PPP experts. The data span high, middle, and low-income countries with insights that can serve countries across their respective economic trajectories. Given the breadth and depth of the data available, the Benchmarking Infrastructure Development report invites all stakeholders – citizens, practitioners, and government officials – to explore the data to see what progress their country is making and to advocate for additional change.

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Contact: Erin Scronce, World Bank Senior External Affairs Officer, escronce@worldbank.org