_15 Why Infrastructure Financing Facilities Often Fall Short of Their Objectives_ 35. _Lessons Learned._ The analysis concludes with a review of what lessons can be drawn from the case study to determine necessary preconditions, if any, for establishing infrastructure financing facilities and to learn what factors in the design of the facility are crucial to ensure the success of a financing facility.

36. _Sources for the Analysis._ Only published sources (i. e. World Bank reports) or interviews with experts familiar with individual facilities were employed. In the future, as greater attention is focused on providing efficient government support to infrastructure, there is hope that quantitative data will be available.

37. _Selection of Cases for Detailed Analysis._ We selected three IFFs for a more detailed analysis that were at a different stage in the development of the facility to exemplify various types of policy issues that may arise in the design of the facility and may adversely affect its success. The three IFFs are (i) Colombia, (ii) India, and (iii) Pakistan. As there is limited experience with the use of contingent instruments by infrastructure financing facilities, two government sponsored facilities targeted at noninfrastructure sectors which had a track record with contingent instruments were included in the analysis. These are (iv) Argentina, and (v) Moldova.

# A. **Colombia: "Infrastructure Facility"**<sup>**23**</sup>

38. _Rationale and Objectives._ During the last several years, the Colombian govemment, as part of its "Economic Modernization Program", has attempted to improve resource allocation by attracting private sector investment in infrastructure while focusing public resources in social sub-sectors. In support of this policy a number of laws were passed in the transport, energy, telecommunications, and water sanitation sub-sectors during 1993 and 1995. Moreover, the government has been working on setting up an infrastructure facility to (i) increase private capital flows to the infrastructure sectors, (ii) improve the conditions of debt financing, and (iii) better allocate risk between public and private enmities.

39. _Sectors Targeted and Instruments offered._ At the time of the drafting of the paper, it was envisioned that the facility would start on a pilot basis in the transport sector. It was envisioned to extend the reach of the facility to other projects once the regulatory and policy environment of other sector was considered adequate.<sup>24</sup> The facility would offer three instruments to be provided by two separate entities: (i) local and international market refinancing commitments, and (ii) a put options for local investors, and (iii) a liquidity support facility (available in US$ and local currency).

40. Local and international market refinancing commitments are call options targeted at financial market interruption risk and jump starting the development of the (local) debt market for limited recourse financing. They provide a commitment from the facility to

> 23 For more detail see: The World Bank, Report No. 17154-Co, January 1998.

> 24 At that stage, any projects that are tendered by the Colombian Governmen **t** hrough a competitive bidding project are eligible for subscription to the facility's instruments.