For Laurence Carter and James Close, senior roles at the World Bank Group have granted them global oversight over the fluctuating fortunes of the public-private partnership (PPP) market. We hear about why such transactions continue to drive development across emerging economies.
Water, sanitation and electricity: just a few of the basic services that those of us in the developed world are prone to take for granted. Unfortunately, such services remain out of reach for millions of people across developing countries — despite huge outlays of development assistance. This disappointing reality rarely makes the headlines in today’s 24/7 media cycle, but it remains top of mind for the citizens affected, as well as for the many development professionals who focus on infrastructure standards in the developing world. Laurence Carter and James Close, senior leaders at the World Bank Group (WBG), are highly prominent members of this community.
The WBG, as would be expected for such an important funding institution, has long viewed infrastructure as one of its key priorities, seeing it as critical to supporting social progress and the achievement of the Millennium Development Goals (MDGs). For example, infrastructure support accounted for 37% of its total fiscal 2013 lending, representing its largest business line. However, to meet the MDGs, investment must increase dramatically for projects that are significant in size, scope and complexity. Laurence Carter agrees that the challenges are considerable, but says that the private sector — largely in the form of PPPs — has a huge role to play in helping meet this demand.
The WBG, as would be expected for such an important funding institution, has long viewed infrastructure as one of its key priorities, seeing it as critical to supporting social progress and the achievement of the Millennium Development Goals (MDGs). For example, infrastructure support accounted for 37% of its total fiscal 2013 lending, representing its largest business line. However, to meet the MDGs, investment must increase dramatically for projects that are significant in size, scope and complexity. Laurence Carter agrees that the challenges are considerable, but says that the private sector — largely in the form of PPPs — has a huge role to play in helping meet this demand.
“Most assessments agree that the problem is not lack of financing but lack of well-structured projects,” he points out. “Governments lack the capacity to turn the rhetoric into better projects, and I am hopeful that the current restructuring of the bank will help. WBG President, Dr. Jim Yong Kim, has announced he wants processing times to be reduced by about a third over the next couple of years, and we also need to make sure that when a request comes in from a client, it goes to the right part of the bank — to be better at being joined up, in other words.”
Carter, who is the Director of Advisory Services in PPPs at the WBG’s International Finance Corporation, goes on to say that there is still more to be done. “We need a bigger critical mass at the bank to help governments build their own PPP capacity, prioritize between different potential projects and turn that prioritization into a pipeline,” he says. “This, I see, as the main problem and I think we have quite a bit of work to do in the bank group to ramp up our expertise in this area.”
Enabling the environment
The Public-Private Infrastructure Advisory Facility (PPIAF), a multidonor trust housed by the WBG, is leading the charge in many respects. Its purpose is to enable infrastructure investment by providing technical assistance to governments in developing countries in order to build the institutions and capacity to attract private sector participation. Its program manager is James Close, a former EY partner based in London, recently took up a new role at the WBG as Director for Climate Change.
“PPIAF operates right at the start of the infrastructure investment cycle,” says Close. “Our donors are keen for us to maximize our impact and, as a result, we’ve refocused our strategy. Now we’re seeking to work programmatically on larger-scale and longer-term assignments. We need to show this commitment to our clients to build capacity, rather than just going in, and then going out again. We’re also looking to work more in partnership. I recently returned from a visit to Tunis where I met with the African Development Bank to discuss how we might work together more coherently across the continent.”
A changing climate
Hurricane Sandy in the US and Typhoon Haiyan in the Philippines have demonstrated that the impact of climate change on infrastructure in both developed and developing countries is increasingly evident. Close, in particular, is passionate about this issue, which is perhaps not surprising, given his new role at the WBG.
“Getting to grips with climate change is a (and, when combined with eradicating poverty, the) major challenge for the global community,” he says. As well as operating at the multilateral level and national level, there are opportunities to address climate change and its impact at the regional and city levels. The WBG President, Dr. Yong Kim, has announced a City Creditworthiness Program, which aims to create 300 credit-worthy cities (up from about 20 in the world at the moment). PPIAF is responsible for the City Creditworthiness Academies to support this initiative, and the latest one in Seoul, South Korea, was a great success. There is a recognition that creditworthiness needs to be accelerated in order to enable cities to invest in climate-resistant infrastructure, which is where PPPs will come in to play. Creditworthiness is closely tied to capacity building and creates the incentives for city officials to undertake the hard-edged analysis that supports the steps that cities have to make.”
Cities, of course, are another factor behind infrastructure’s surge up the policy agenda. Rapidly increasing urbanization has huge implications; more than 90% of urban growth takes place in the developing world, with Africa and Asia particularly affected. As a consequence, Laurence Carter says that much WBG work has centered on cities in recent years. “A lot of our activity is focused on cities, and we see a lot of innovation there,” he says. “Often, when someone becomes a mayor, they want to really do something, as they may harbor ambitions to become their country’s next President. So they are often very dynamic and less constricted than leaders at the national level.”
Knowledge bank
A similar focus for the bank, according to Close, is the critical importance of knowledge, and the corresponding need to ramp up its resources in this area. “For us, the real enabler is around knowledge,” he says. “Knowledge will differentiate the bank in the future. It’s fair to say that the knowledge that is embedded in the bank is quite extraordinary, but finding it and extracting it can often be difficult. Knowledge has the potential to increase our impact, and to develop and implement solutions far more quickly. If we try to know everything then we’ll know nothing. For us, the challenge is to access and integrate the information and insight that will enable us to do the transformational work to which we aspire, and make a fundamental difference to the lives of our clients.”
Carter agrees, saying that knowledge is just one differentiator between the WBG and the private sector. “We have a mixed funding model and we charge fees and a small retainer, but the only way we can be retained is through a direct selection process,” he points out. “We always encourage governments to give us feedback about what we’re doing — whether this involves speeding up, getting the private sector more involved or whatever. This is something we’re keen on, as it’s an important way of making the bank work better.”
At the end of the day, though, the total sum of the WBG’s work — from infrastructure to education, finance to public administration — is bound together by the ultimate aim of ending extreme poverty by 2030. “The President, supported by the board and governors, are very clear about the eradication of extreme poverty,” says Close. “I think it’s really important to understand the links between the eradication of poverty and the activities that are under way in each specific country.”
As the clock ticks down to the deadline for the MDGs, the WBG is likely to have an even greater role to play in the coming years and, as investment needs increase, the ability of private companies to help provide new and stronger services is set to move even further up the agenda. Developing PPPs that can deploy the strengths of both the private and public sectors is clearly an important part of the solution.
This feature was first published in the June edition of EY's Dynamics magazine
