MAXIMIZING FINANCE FOR DEVELOPMENT STORIES COLOMBIA Connecting people to markets, jobs, opportunities Colombia’s Fourth Generation Roads Concession Program (4G) is Highlights of World a large-scale plan to create a nationwide toll road network with private sector participation. At the request of the government, Bank Group Support the World Bank Group provided integrated advisory and financ- IBRD and IFC supported im- ing support to lay the foundation for the program. As a result, provements in the regulatory and Colombia has a stronger enabling environment for public-private institutional framework that enabled partnership (PPP) transactions and better capacity to manage local and international private sector them. Over $14 billion are expected to be mobilized for the 4G investment in infrastructure. program. IFC’s transaction advice directly and indirectly assisted in the prepara- Development Challenge tion and award of 32 road projects Since 2002, Colombia has enjoyed economic growth, an increase in jobs, and a representing $14.8 billion. IFC also reduction in poverty. But further growth and competitiveness are being hampered invested $70 million in Colombia’s by poor road infrastructure. To continue its development, Colombia needs more national infrastructure development roads to connect its cities and main commercial centers with its ports. In 2011, bank, FDN, and $50 million in a the government requested support from the World Bank Group to transform local infrastructure debt fund. the sector through the ambitious Fourth Generation Road Concession Program, which required an estimated $26 billion for 8,100 kilometers of roads. MIGA provided support for in- frastructure development finance The MFD Approach through a loan guarantee for FDN. The World Bank Group’s engagement in the Colombian road sector is a good example of how the Maximizing Finance for Development (MFD) approach can have a positive effect. Working closely with the government, the World Bank Group used an integrated approach, including: (i) assistance in developing an enabling environment, (ii) support for the preparation of PPP transactions, (iii) capacity building for both officials and local investors, and (iv) direct investment in Financiera de Desarrollo Nacional (FDN). Photo © Agencia Nacional de Infraestructura Setting up the regulatory and institutional transaction documents and streamline processes. This framework reduced transactions costs and increased efficiency. IFC also supervised transaction advisors in three 4G Significant improvements were necessary to build Colom- road projects among the first set of concessions taken bia’s policy, institutional, and financial structures to create to market. an enabling environment for private sector investment in key sectors. • Financing. IFC helped finance the program in collab- oration with development partners. The Inter-Ameri- • Improved legislation. The International Bank for Re- can Development Bank (IDB) provided debt finance construction and Development (IBRD) and the Inter- for one of the first projects implemented under the national Finance Corporation (IFC) helped the gov- 4G program. IFC and the Corporación Andina de Fo- ernment prepare PPP umbrella legislation. This passed mento (CAF), a Latin American development bank, in 2012, incorporating best international practices. In invested $78 million and $50 million respectively in 2014, experts from IBRD, IFC, and the Multilateral FDN. In addition, IFC and CAF are anchor investors Investment Guarantee Agency (MIGA) provided fur- in a local infrastructure fund that mobilized domestic ther policy and technical advice for reforms allowing institutional investors who further invested in one of new sources of local domestic financing in infrastruc- the 4G projects. IDB also provided financing through ture. senior debt. By March 2017, 32 projects in the 4G • New institutions. IBRD provided technical assistance program were successfully awarded, for a total expect- that supported the creation of a new transport infra- ed initial investment of $14.8 billion. structure concessions body, the Agencia Nacional de Infraestructura (ANI). The World Bank Group also Results helped the government establish FDN, Colombia’s national development bank, with IFC’s initial invest- World Bank Group engagement in the 4G program ment of $70 million and IBRD’s technical advice. achieved two key outcomes. First, the new road projects are expected to have a 1.5 percent multiplier effect on • New financing structures. IFC and FDN co-invested GDP during the construction period, with long-term in the Colombia Infrastructure Collective Debt Vehi- GDP growth reaching 4.6 to 5.6 percent. A long-term cle, which facilitates investments in infrastructure by reduction in unemployment of 1.5 percent is also expect- institutions such as pension funds. Joint IBRD-IFC ed. Second, the program closed the financing gap in the technical assistance helped FDN establish a standard- Colombian road sector by increasing private participation ized project bond structure and associated guarantee, in toll road projects. As of December 2017, ANI had develop relevant regulations, improve pricing bench- awarded 32 projects and achieved financial close for nine, marks, and train domestic institutional investors. representing $4.6 billion. The new regulatory and procurement framework in- The PPP program creased efficiency and competition significantly. About Prior to 4G, the government awarded three concessions $1.7 billion was from international financiers and $2.9 totaling $2.6 billion for the Ruta del Sol toll highway billion from national bankers. The legal and institutional with IFC support. Drawing on this success and its framework significantly increased Colombia’s capaci- extensive global experience, IFC helped the government ty to manage and finance infrastructure projects. ANI expand the implementation and financing of the 4G and FDN were instrumental in achieving these positive program: results. • PPP implementation process. IFC acted as an “ad- visor of advisors,” helping the government standardize WHAT IS MFD? Achieving the Sustainable Development Goals to end extreme poverty by 2030 will require about $4.5 trillion annually, far more than multilateral development banks or donors can provide by themselves. To face this challenge, the WBG adopted the MFD approach, which entails working with governments to crowd in the private sector while optimizing the use of scarce public resources. This ap- proach is guided by the Hamburg Principles adopted by the G20 in 2017 and builds on the substantial experience across the institution. www.ifc.org www.worldbank.org www.miga.org