Annex 1
FURTHER INFORMATION ABOUT INFRACO
RATIONALE, OBJECTIVES
AND BUSINESS
PLAN
The rationale for Infraco is that there are
few international private investors willing to invest in early
stage infrastructure project development activity in low income
developing countries; and few national private investors with
the requisite expertise and resources. Infraco has been created
to act as principal—ie co-owner—with the objective
of developing projects to the point where private sector expertise
and funding can be secured to take the projects forward. Projects
will be sold on to the "true" private sector at or prior
to financial close with Infraco as appropriate remaining as a
minority partner in the ventures. In this way Infraco will be
truly catalytic—with a small but high risk investment leveraging
in large amounts of private sector capital into projects which
either would not have proceeded at all, or not as quickly had
Infraco not been involved.
Infraco has clear guidelines for prioritising
its activities set out in the approved Operating Policies. These
prescribe the countries where it may operate (low income developing
countries), the priority that must be given to pro-poor activities
and establishing the requirement that priority be given to projects
where the national government is supportive and where Infraco's
involvement is likely to catalyse new investment.
INFRACO STRATEGY
Infraco's strategy has been formulated to conform
to the objectives and Operating Policies agreed by PIDG. A number
of innovative features of the strategy have been identified, each
designed to enhance the poverty reducing impact of Infraco. They
include: (i) innovative mechanisms for accessing private sector
expertise and finance for publicly-owned water and sanitation
developments; (ii) leveraging existing infrastructure assets currently
used solely by mining companies for the benefit of poor people
living in the region; (iii) new approaches to stimulating infrastructure
investment to support agribusiness investment—centred on
creation of infrastructure service companies that would own and
lease infrastructure eg small dams for irrigation by small farmers;
and (iv) the creation of renewable energy services companies.
Several of these ideas have already been progressed by Infraco.
PROGRESS TO
DATE
The many discussions that have taken place in-country
with national governments, local governments, State-owned infrastructure
enterprises (SOIEs) and national private sector companies have
strongly confirmed the need for Infraco. In almost all visits
there has been great enthusiasm for what Infraco intends to do
and a definite view that it will address an urgent currently-unmet
need. This is particularly the case in countries such as Ghana,
Uganda, Mozambique etc where there is a strong commitment by national
governments to expanding the role of the private sector in infrastructure
combined with a real sense of frustration about the very limited
private investment currently taking place. As a result, for example,
the Privatization Unit of the Ministry of Finance of Uganda has
already invited InfraCo to assist in the development of two additional
infrastructure projects (in addition to the Bidco agricultural
infrastructure project), namely the expansion of the Kampala Sanitation
System and the rehabilitation of the rail line from Kampala to
Kasese (at the border of the DRC) which ceased operations in 1998.
An MOU for the development of the Kampala Water System has been
concluded with the National Water & Sewerage Corporation of
Uganda and is currently being reviewed by the Ministry of Justice
(Solicitor General's Office). InfraCo is currently investigating
the viability of reopening the Kasese line before concluding an
MOU with the Government of Uganda. Similarly a visit to Zambia
led to an urgent request from the Minister of Finance for Infraco
to shortlist for development three projects—one in the power
sector and two in agribusiness. This positive response has not
been limited to Africa eg in Vietnam there is strong interest
in Infraco involvement in a hydro-power project and in other infrastructure
development activities.
There has been an equally strong positive response
from many of the DFIs with whom Infraco has been engaged. The
IFC and ADB in particular are very enthusiastic about the potential
for Infraco to get things moving on the ground and as a result
the IFC has signed a cooperation agreement and the ADB is expected
to do so as well in the near future.The EIB is also enthusiastic
about the contribution Infraco can make to accelerating financial
close of infrastructure projects.
Discussions have also taken place with ECOWAS
and NEPAD about a possible role for Infraco in helping accelerate
development of their major infrastructure investment plans, a
large part of which are intended to be PPPs. Infraco has indicated
a willingness in principle to become involved, subject to the
availability of additional resources.
INFRACO PROJECTS
Table 1 summarises the projects that Infraco
has been asked to consider working on after the first nine months
of activity. Key features are:
— There are 18 projects of which 15
are in Africa (six in West Africa, five in East Africa, four in
Central/Southern Africa) and three in Asia.
— The sector breakdown is: four in
power, five in agribusiness infrastructure, four in water and
sanitation, two in housing development, two in transport and one
in gas distribution.
— At least eight of them clearly fall
within Infraco's definition of particularly High Development Value
projects.
— Three of the water and sanitation
projects are in DAC three countries.
— If all projects were to proceed the
total additional investment would be in excess of $1,000 million,
a very high leverage of the small investment in Infraco.
— Most of the projects create new potential
for lending, inter alia, by EAIF and DFIs and the private sector
and several offer new opportunities for Guarantco to mobilise
additional domestic savings for investment in national infrastructure.
Table 1
February 2006
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