Private infrastructure investment in Pakistan on the rise

Karachi – Infrastructure is the first step, and it will be followed with trade and investment and industrial cooperation. Efforts to expedite trade and investment also matter and infrastructure improvements such as bilateral agreements on boosting customs clearance and newly opened air links have also increased over the past five years.

More government support fueled a 37 percent rebound in private sector investment in developing-country infrastructure projects, says the World Bank’s 2017 Annual Update of the Private Participation in Infrastructure (PPI) database released. Despite this optimism, 2017 investment commitment levels still remained 15 percent below the average for the past five years, according to the report.

Fifty-two developing countries received private investment in infrastructure in 2017, up from 37 in 2016. Also, 20 mega-projects with an average size of $2.4 billion accounted for 51 percent of the total investment, contributing to the increase over 2016 levels.

Significantly government support to projects also increased, from 94 projects in 2016 to 135 in 2017, underlining the critical role played by government policy in encouraging greater private participation in infrastructure. It is encouraging to see the private sector is starting to return to infrastructure investments in developing countries,” said Jordan Schwartz, Director of Infrastructure, PPPs & Guarantees for the World Bank Group.

Breaking down the data regionally, East Asia and Pacific (EAP) captured more than half of the total investment measured, overtaking Latin America and Caribbean (LAC) for the first time. This is the highest level of private infrastructure investment ever recorded in EAP, at US$49.0 billion. Meanwhile, LAC’s share dropped to its lowest level in the past 10 years. The investment level in the Middle East and North Africa tripled from 2016 levels, while private infrastructure investment in South Asia almost doubled.

Only Sub-Saharan Africa saw declining investments, the second lowest level in 10 years. Investments in the world’s poorest countries also grew strongly, reaching 8.5 percent of global investments in 2017 compared to 4.3 percent in 2016. These countries saw $7.9 billion worth of investments across 35 projects in 17 countries. This compares to the past 10-year average of 14 countries.

In addition, renewable energy projects continued to grow in numbers, though their share of electricity generation investment took a dive as multi-billion dollar coal projects in Indonesia captured investment commitments totaling US$7.7 billion. Renewable energy projects tend to be smaller, and nearly 70 percent of large-scale projects still use conventional power sources.

China-Pakistan Economic Corridor is making space for private investment in the infrastructure. Infrastructure Finance Policy 2017 will facilitate investors to grab opportunities rising around major projects and use private funds for ancillary-support infrastructure projects. The policy was designed to attract foreign direct investment and mobilize private financing for public infrastructure.

Pakistan is among the top 5 countries in infrastructure investment worldwide. It has become one of top five countries across the globe in Private Infrastructure Investment (PPI) during the year 2017 as it received $5.9 billion during the year, according to a report released by the World Bank. Fifty-two countries received PPI investments in 2017, which was a significant increase over the 2016 level of 37 countries, and the past five-year average of 41 countries.

China received $17.5 billion across 73 projects; Indonesia received $15.4 billion across 11 projects; Mexico received $8.6 billion across 20 projects; Brazil received $7.3 billion across 24 projects; and Pakistan received $5.9 billion across four projects. These five countries attracted $54.5 billion, which was 58 per cent of global investment in 2017.

Pakistan also leads among the South Asian countries including India, which received $4.8 billion during the year. South Asia Region attracted $11.7 billion in investments in 2017, which was 90 per cent higher than the 2016 level. This increase was mainly driven by Pakistan, which received $5.9 billion in investments in 2017, far above the 2016 level of $1.7 billion.

In 2017, this rise put Pakistan on the list of the world’s top five PPI investment destinations. For the first time ever, investment in Pakistan surpassed that of India, which has traditionally been the heavyweight in the region. India saw a slight increase in investment from $4.3 billion in 2016 to $4.8 billion in 2017. Notably, for the first time since 2012, Sri Lanka, and Afghanistan each received one investment project.

In 2017, the energy sector overtook other sectors in attracting private sector investment, with $51.9 billion invested in 203 projects which accounted for 56 percent of total PPI.

The transport sector accounted for $36.5 billion in investments in 2017, making up 39 percent of the PPI share. The 66 transport projects had an average size $552.3 million, which was double the investment in the energy sector. The transport and energy sectors comprised 95 percent of the cumulative PPI investments.

The information and communication technology sector received only $3 billion across five projects, followed by the water and sewerage sector, with only $1.9 billion across 30 projects. The $51.9 billion invested in the energy sector in 2017 reflects an 11 percent rise over the previous year’s commitment of $46.8 billion.

Of the electricity generation projects, renewable continued to dominate in 2017 at 173 out of 197 (88 percent) projects from wind, solar, biomass, waste, geothermal, and hydropower.

"Monitoring Desk"

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