Projects in the Middle East and North Africa feature prominently on the list of the first 10 facilities to be considered for the World Bank’s new guarantee scheme. The guarantees will support private infrastructure projects by helping to mobilise commercial lending and providing cheap long-term finance.
The guarantees come in the form of partial risk cover, providing relief in case governments fail to perform on sovereign contractual obligations, and partial credit guarantees. The aim is to encourage international banks to join syndications which will part-finance major infrastructure schemes sponsored by private investors. The World Bank’s involvement gives security to lenders and will help borrowers achieve lower margins than would otherwise be possible, World Bank officials say. Partial credit guarantees also offer the chance for borrowing with longer maturities than the market will offer.
The first 10 projects now being considered for the guarantees include:
Algeria: the Rhourde el-Baguel enhanced oil recovery scheme, for which the World Bank is considering a $200 million partial risk guarantee (see Algeria).
Lebanon: a roads rehabilitation scheme aimed at creating a new roads agency to rebuild and maintain highways. The autonomous agency will raise funds from a surcharge on fuel and the vehicle licence fee. The project, discussed by World Bank officials with the Public Works Ministry and Prime Minister Rafiq Hariri in Beirut in August, could receive backing from a $75 million partial risk guarantee and $40 million World Bank loan to supplement commercial lending.
Morocco: construction of a 240-kilometre gas pipeline on a build-own- operate (BOO) or build-operate-transfer (BOT) basis by private sponsors, to be chosen through international competitive bidding. The total cost is estimated at $200 million, of which the World Bank could provide a partial risk guarantee of up to $50 million to back a commercial loan, and an additional estimated $50 million in the form of a loan.
Pakistan: the Uch power scheme in Baluchistan. The World Bank is considering providing a partial risk guarantee of $60 million against government payment obligations.
Other guarantees are being considered for Chile, Colombia, China, the Dominican Republic, Russia and Ukraine. Other Middle East countries could be in line for guarantees in the coming months, World Bank officials say.
The guarantees are an expansion of a facility for private infrastructure projects known as the expanded cofinancing opportunities (ECO) facility, pioneered for the Hub River power project in Pakistan. The new programme was announced in September 1994, but it has taken time to refine the instrument, making it easier for project sponsors and banks to get access to cover.