The Global Infrastructure Fund (GIF) is designed to support governments in the preparation of projects to be implemented by private companies or public sector entities operating under commercial parameters. The GIF seeks to improve conditions for infrastructure projects in the region that have a high potential to be financially viable and attract private sector financing. Starting this year, the IDB Group will take the lead in supporting national governments in the region in its capacity as a Technical Partner.
There is no doubt about the importance of infrastructure in generating sustainable economic development and improving equity. To close the gap in infrastructure investment in developing countries will require an estimated US $ 1,300 billion per year between 2014 and 2020. In the case of Latin America and the Caribbean, the region should invest at least 5% of GDP annually over the next 15 to 20 years (equivalent to approximately US $ 250 billion in 2010). What can we do to close this gap?
To begin with, it should be noted that the central problem in developing countries is not the lack of liquidity, but not being adequately prepared to attract private investment projects. This is how the World Bank, with the support of the IDB and other Multilateral Development Banks (MDBs), made the Global Infrastructure Fund (Global Infrastructure Facility) available to national governments. It is based on two premises: first, solving the obstacles to private investment and long-term financing and, secondly, ensuring collective action for this purpose. Starting this year, the IDB Group as Technical Partner of GIF leads support for national governments in the region.
What is the GIF? It is a fund that aims to enable private investment in new complex infrastructure projects in developing economies, by strengthening the activities of project preparation and financial structuring, proper identification and risk mitigation, and finally by promoting the participation of private and institutional infrastructure market investors.
The structure of the GIF comprises the association of public and private institutions that are grouped into three categories: Partners Contributors (institutions that contribute financial resources) Partners Technicians (providing specific technical advice), and Partners Advisers (private investors, banks and institutional agencies involved in the preparation stage of the project).
The GIF is administered by a Board of Directors composed of up to six representatives from contributing partners, up to three technical partners, and up to three representatives of GIF beneficiary, and the Administrative Unit is run by the World Bank.
For the preparation of projects receiving GIF resources, project teams should consist of staff from the Technical Partners.
In order to share the costs and risks during project preparation, the resources allocated by the GIF will be reimbursed by the beneficiaries. The amount of reimbursement depends on the state of the project and the commercial closing or financial closure. It is also dependent on if the project is terminated.
In the case of the IDB Group, as Technical Partner of FGI, operations under FGI resources follow internal policies for reimbursable and non-refundable technical cooperations, as applicable.
In short, the GIF compliments IDB Group tools to boost private infrastructure financing in the region.
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