_Why Infrastructure Financing Facilities Often Fall_<sup>_Short of Their Objectives_</sup> _14_

# IV. CASE STUDIES

31. Due to their potential advantages-lower transaction cost, leveraging of government funds-infrastructure facilities,<sup>at least on a theoretical level, appear to be a</sup> potentially more efficient way to provide government<sup>support during the transition to</sup> private provision of infrastructure. But how<sup>successful have these funds been in practice?</sup> Have they strengthened reform efforts by the<sup>government in the regulatory framework?</sup> Have they been able to attract private investment<sup>or have they indeed facilitated the</sup> transition to private provision of infrastructure?<sup>Have the facilities used the right</sup> instruments? Has the scarcity of long-term financing<sup>been an important impediment to</sup> private investment in infrastructure and have<sup>the facilities employed adequate instruments</sup> to mobilize more long-term financing resources?<sup>What lessons can we learn from recent</sup> experiences? The following analysis of case<sup>studies attempts to answer these questions.</sup> _32. Methodology of Paper._ The analysis will extend<sup>to three infrastructure financing</sup> facilities and two entities targeted at other sectors<sup>of the economy as valuable lessons can</sup> be drawn from these experiences. For each case<sup>a systematic description of the facility</sup> including its objectives, instruments applied,<sup>pricing of instruments, institutional</sup> framework and operative arrangements is presented.<sup>This is followed by an assessment</sup> of the results. The analysis concludes with a brief<sup>review of lessons learned.</sup> 33. _Evaluating Outcomes._ As noted, government<sup>sponsored funds/facilities may</sup> allow for more efficient use of public resources.<sup>A more efficient use of public of public</sup> resources can be measured in terms of three performance<sup>indicators which center on the</sup> extent to which government assistance provided<sup>by the funds/facilities: (i) attract</sup> additional investment by serving as an enabler<sup>of commercially viable projects that</sup> otherwise may not have been financeable; (ii) reduce<sup>cost to project sponsors and to users</sup> of facilities or equipment that are financed in part<sup>from a financing facilities,2 2and/or (iii)</sup> bring beneficial projects to completion earlier<sup>than would have been the case with</sup> traditional financing.

34. _Evaluation Criteria._ Due to their recent inception<sup>and the long gestation period of</sup> the projects they are targeting, the following<sup>analysis focuses on assessing the success of</sup> the facility on the basis of qualitative criteria.<sup>Does the fund: (i) minimize and leverage</sup> government's involvement in the financing of<sup>infrastructure projects; (ii) increase the</sup> efficiency of sector development through the provision<sup>of a transparent and systematic</sup> review of eligible projects; (iii) allocate risks to<sup>those parties best able to manage them (i.</sup> e. distance the government from commercial<sup>risk); and (iv) provide a transitional</sup> mechanism to facilitate the closing of a number of<sup>benchmark transactions which helps to</sup> improve and affirm the working, legal and regulatory<sup>environment for the sector.</sup> 22 However, the reduction in cost is brought about not<sup>by offering financing at below market rates. On the</sup> contrary, the financial viability of projects is improved<sup>through the enhancement of their security package and/or cash</sup> flow for the direct benefit of long-term debt providers<sup>(without exposing the governmen</sup><sup>**t**o commercial risk). This</sup> should result in a direct improvement in the financing<sup>terms (tenor, pricing timing) available to the project.</sup>