India sole Asian nation to benefit from spending rise

Asia, Eastern Europe and Africa have missed out on last year's rebound in private sector spending, according to the World Bank.

The results of a World Bank study released yesterday show that Asia, Africa and Eastern Europe have largely failed to capatalise on the six percent average increase in energy, transport and water sanitation private spending observed last year.

The Private Participation in Infrastructure (PPI) database’s full year results confirmed the increase in investment activity in these sectors already noticeable in the early months of last year, a revival largely owed to high levels of activity in Brazil. India, however, made it to the top five countries in the private investor chart.

“Total investment in infrastructure commitments for projects with private participation in the energy, transport, and water and sanitation sectors increased six percent to $107.5 billion in 2014 from levels in the previous year. The total for 2014 is 91 percent of the five-year average for the period 2009-13, which is the fourth-highest level of investment commitment recorded – exceeded only by levels seen from 2010 through 2012,” the report highlighted.

The study comes amid rumours that India's Modi government, which has issued regulation to enable private investment in airports, power plants and highways, is preparing a ?200 billion (€2.8 billion; $3 billion) programme to establish a company that will buy shares in existing lenders with a view to boost debt available for infrastructure projects.

The government and public sector entities will hold 49 percent of the company, dubbed National Investment and Infrastructure Corporation, with the rest offered to multilateral development banks, sovereign wealth funds, pension funds and other organisations.  

The global overall increase over 2013 was driven largely by activity in Brazil, noted the study. Without Brazil, total investment commitments would have fallen from $77.2 billion in 2013 to $63.4 billion in 2014 – an 18 percent drop.  
The Latin America and the Caribbean (LAC) region saw $69 billion of investment commitments, or nearly 70 percent of the total, for 2014. Three of the top five countries by investment commitments in 2014 were from LAC.  The top five were Brazil, Turkey, Peru, Colombia, and India. 
The Middle East and North Africa region, while having much smaller commitments of $3.3 billion, also saw increases over the previous year. All other regions posted reductions in investment commitments. Sub-Saharan Africa saw a particularly steep fall – from $9.3 billion in 2013 to $2.6 billion in 2014 – because of a drop in energy sector activity.

The World Bank argues that this drops in activity levels in Sub-Saharan Africa are not extraordinary as the figures were similar to levels seen prior to 2012. The multilateral lender also deemed the pick-up observed in countries such as Ghana, Kenya and Senegal particularly encouraging. 
Project value ranked highest in the transport sector (which represented $55.3 billion, or 51 percent of global investment), followed by energy ($48.2 billion, 45 percent), and water and sanitation ($4.1 billion, 4 percent). The energy sector ranked the highest in terms of number of projects.

Greater activity resulted from several large-scale projects in Brazil, Colombia, Peru and Turkey.

Another trend underlined by the report was the move throughout the last decade towards fewer but larger projects. At 239, the number of projects was the lowest seen since 2004; yet 2014 also saw the highest average project size ever recorded in the database.