The Arab Petroleum Investments Corporation (Apicorp) and the Islamic Development Bank (IsDB) jointly set up a $1 billion private sector-focused infrastructure financing initiative to bridge the investment gap in utility projects by encouraging more private sector investments and mobilising additional funding.
The funds from the Infra Initiative will be used to finance strategic utility projects that contribute to human and economic development in the two institutions’ member countries, they said in a joint statement on Wednesday.
As a part of the initiative, money will be allocated to electricity generation and transmission projects that utilise renewable energy or natural gas, as well as water and waste management facilities.
Involving private sector at the local, regional and international levels will be a priority in the project selection process, the companies said.
“Increasing private sector investments in the energy sector is a key area of focus for us as part of our strategy to fund the energy transition in the Arab region,” said Ahmed Ali Attiga, chief executive of Apicorp.
Through the Infra Initiative, the two Saudi multilateral lenders aim to address low private sector participation in funding energy projects by incentivising public-private partnerships (PPPs) to bridge the estimated $200 billion investment gap in projects in the Organisation of Islamic Co-operation (OIC) member countries, according to the statement.
The collaboration with Apicorp, which is owned by the 10 members of the Organisation of Arab Petroleum Exporting Countries, “supports our respective commitments to the sustainable development goals”, IsDB president Muhammad Al Jasser said.
Governments in the Gulf region are increasingly turning to the PPP model, which can help finance major infrastructure and utilities projects. Many of them are developing legal frameworks to regulate PPP projects, which are expected to improve transparency and attract investment.
“We recognise that quality infrastructure is key to economic and social development. Hence, addressing the infrastructure needs of our member countries is one of IsDB’s foremost priorities,” Mr Al Jasser said.
The Infra initiative also aims to mobilise funds from other financing channels such as commercial banks, other multilateral development banks, development agencies and the capital markets, the statement said.
To be launched for an initial period of three years, the scope of Infra Initiative will include all OIC countries, with priority given to the 10 member countries common to Apicorp and IsDB.