World Bank backs $1bn Arab infrastructure fund

The Arab Financing Facility aims to raise up to $1bn to focus on regional infrastructure and public-private partnerships across the Arab countries. The fund is being backed by the World Bank, the IFC and the Islamic Development Bank.

The World Bank, the International Finance Corporation (IFC) and the Islamic Development Bank (IsDB) have teamed up “as potential anchor investors” in a $1 billion infrastructure fund targeting the Arab region – the Arab Financing Facility for Infrastructure (AFFI) – the World Bank announced.

The three partner institutions, together with Arab governments, will try to mobilise support for the fund, which will focus on projects with a regional dimension and public-private partnerships (PPPs).

“Countries interested in supporting AFFI have started a dialogue with the World Bank and IsDB to identify and develop priority projects for AFFI financing. At the same time, we are moving ahead to mobilise private sector money for regional projects and are now in the advanced stages of recruiting a fund manager to oversee the investment vehicle being created,” explained Birama Sidibe, vice president of operations at the IsDB, in a statement.

The fund aims to support PPPs in a number of ways, including through a Technical Advisory Facility that will grant advisory services to develop PPPs. On the financing side, the fund will be able to offer equity and mezzanine – Sharia compliant and non-Sharia – to fund PPPs.

“We envision it being largely a mezzanine fund,” said Denis Clarke, chief investment officer for infrastructure at IFC.

“We think there is quite a bit of private equity out there already chasing good deals. We are more interested in adding something to the market which is currently missing,” he added.

AFFI will also help assuage investor concerns about recent political upheavals in the region:

“This is where the IFIs [International Financial Institutions] can step in to help with financing and mitigating risks faced by private sector,” Shamshad Akhtar, World Bank vice-president for the Middle East and North Africa (MENA), said in a statement. 

The World Bank said the MENA region needs to channel between $75 billion and $100 billion per year to sustain growth rates across the region. The bank estimates “that half of the population in the region does not have adequate access to water and per capita water availability – already less than a fifth of global access – is expected to drop even further in the next 15 years”.

About $30 billion a year will also be required to tackle electricity needs as the population grows, the World Bank added.

The World Bank has been lending over $1 billion a year to the MENA region to projects across the electricity, transport and water sectors, it said. The IFC has also been active in the region, investing over $1 billion in infrastructure projects over the last four years. The IsDB, for its part, has invested more than $1.3 billion annually in the region over the past five years, including $300 million in PPPs.

Alexandra Atiya contributed reporting to this story.