Tuesday, April 12, 2011

World Bank Helps Establish Fund for Middle East Infrastructure Projects

Sources: WSJ: World Bank: New Arab Fund To Leverage Infrastructure Investment
Reuters: World Bank to Set Up Arab infrastructure Fund
ABC Live: World Bank Supports AFFI Infrastructure Development for Arab Region

With violence, unrest, and political uncertainty continuing to grip the Middle East, foreign investors have become increasingly reluctant to invest funds in the region. In an effort to fill this investment void, the World Bank, in conjunction with the Arab Development Bank, recently announced that it would seek to create a $1 billion fund to foster development in the region.

The goal of the fund, which is called the Arab Financing Facility for Infrastructure (AFFI), will be to invest in projects aimed at developing basic infrastructure, such as improving access to water and electricity. The fund will support both traditional financing and Sharia-compliant financing. Sharia (the name for Islamic law) places certain restrictions on the terms of financing.

The funding comes at a critical time for the region, where infrastructure has been long neglected by some countries in the regions, especially those countries governed by the leaders that have been, or are currently, the target of protests. To illustrate the extent of the neglect, it is estimated that half of the population in the region do not have ready access to water. However, the fund will provide only a small portion of funding to cover the estimated $75-100 billion annual funding requirement needed to meet the infrastructure needs of region. For example, because of its rapidly growing population, the region is expected to need approximately $30 billion a year to meet the corresponding increase in demand for electricity.

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