Annex A. Technical notes
Data source
The official development finance (ODF) data in this report include concessional official development assistance (ODA) and non-concessional developmental other official flows (OOF). It excludes non-developmental OOF, such as officially supported export credits,1 whose main objective is commercial and not developmental. The ODF data was extracted from the Creditor Reporting System (CRS) Aid Activities database (hereinafter “CRS” database), which includes project level information reported to the Development Assistance Committee (DAC) Secretariat by more than 60 bilateral and multilateral development partners. The eligible ODA recipient countries can be consulted in the DAC List of ODA Recipients http://www.oecd.org/dac/stats/documentupload/DAC_List_ODA _Recipients2014to2017_flows_En.pdf.
The private investment data for ODA-recipient countries in this report were mostly derived from the World Bank’s Private Participation in Infrastructure (PPI) project database https://ppi.worldbank.org/, which captures investment flows - both domestic and foreign - and other information of infrastructure projects in developing countries at the project level. In addition, the commercial Dealogic Projectware database was used as a supplementary dataset. This database contains information on trade finance transactions for 31 OECD countries and 80 non-OECD countries, collected directly from banks and organisations involved in deals. While some data may have a component of public or development partner financing, it is not possible to determine their amounts or proportions with this dataset.
The data for amounts mobilised from the private sector in this report was based on the 2016 OECD-DAC Survey Amounts Mobilised from the Private Sector in 2012-2015 by Official Development Finance Interventions which captures amounts mobilised from the private sector through guarantees, syndicated loans, shares in collective investment vehicles, direct investment in companies and credit lines. This survey was based on a sample of 72 development finance institutions (DFIs) and international finance institutions (IFIs).
Screening of transport connectivity projects
All transport projects were screened using the method described below. All amounts are in commitments and in current USD prices since disbursements and constant prices for the data on private flows are unavailable.
ODF data
From the CRS database, Transport & Storage projects (Sector Code 210) were extracted for 2014 and 2015. However, projects with an amount of less than 1% of total commitments for transport connectivity were excluded. The projects were then determined as transport connectivity or not based on the following method.
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Projects under the sub-sector “Water transport” (i.e. port; Purpose Code 21040) were considered connectivity as they generally involved international ports, unless the project description clearly indicated otherwise. The same applied to the sub-sector “Air transport” (Purpose Code 21050) as they also generally involved international airports. Projects in these two sub-sectors are referred to as ports and airports in this report.
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Under the sub-sector “Road transport” (Purpose Code 21020) and “Rail transport” (Purpose Code 21030), projects that were cross-border, connected major cities, or constituted part of a country’s primary network or international transport corridor, were considered connectivity. Projects involving ring-roads, which are usually part of a national primary transport network, were also considered connectivity. On the other hand, projects involving urban and rural transport infrastructure were not considered connectivity projects—therefore, many urban projects with large amounts of funding for metros and city roads were excluded. Furthermore, projects that financed vehicles, rolling stocks, airplanes, ships and other carriers of goods and people that were not part of a fixed infrastructure were also not considered connectivity.
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Projects under “Transport policy & administrative management” (Purpose Code 21010), “Storage” (Purpose Code 21061) and “Education and training in transport & storage” (Purpose Code 21081) that promoted policy dialogue and/or aimed at harmonising regulations, were considered connectivity projects.
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Projects in “Trade facilitation” (Purpose Code 33120) were considered connectivity when they involved reducing barriers to international trade at the location of the transport infrastructure, such as One Stop Border Post or streamlining customs clearance at ports. Projects involving financial support for local companies, small agricultural producers, and banks unrelated to transport projects were excluded.
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General budget support was not considered, as the total amount reported to the DAC each year is small compared to the amount for transport, so estimating the amount benefiting transport connectivity would not make much difference.
Based on the above criteria, of the 4 549 mostly transport projects in the CRS database for 2014 and 2015, 546 projects in 101 ODA recipient countries were considered transport connectivity for this report.
Private investment data
From the PPI and Dealogic Projectware databases, transport sector projects for 2014 and 2015 were screened based on the same criteria as ODF projects in the CRS. However, lease and management, refinancing deals and pure share purchase were excluded. As a result, of the 272 transport projects in the PPI database for 2014 and 2015, 177 projects in 19 ODA-recipient countries were considered transport connectivity for this report.
Private sector mobilisation data
For mobilisation data, projects in 2014 and 2015 were also screened based on the criteria for CRS projects. However, due to confidentiality of disaggregated project information in the OECD-DAC survey on private sector mobilisation, most project descriptions were sought from media coverage and websites of the DFIs that carried out the mobilisation or the private company that provided financing. Transport projects with little or no information were not considered as connectivity. As a result, of the 67 transport projects with amounts mobilised from the private sector, 27 projects in 17 ODA-recipient countries were included.
Other categorisation in ODF data
Hard and soft infrastructure projects
Transport connectivity projects financed by ODF were categorised as either addressing hard or soft infrastructure. Hard infrastructure projects generally involve building, rehabilitating or upgrading physical infrastructure of roads, railways, ports or airports. Soft projects are those that address: policies, regulatory mechanisms, or institutional frameworks of the transport sector; or operational efficiency and functioning of hard transport infrastructure. If a project description included both hard and soft components, the project was considered hard, since in general the hard component tends to cost more. On the other hand, all projects in Transport Policy & Administrative Management (Purpose Code 21010), Education and training in transport & storage (Purpose Code 21081), and Trade facilitation (Purpose Code 33120) were considered soft.
ODF using private sector instruments
Transport connectivity projects in the CRS database that directly supported private sector entities by using private sector instruments (PSI) were also identified, although with difficulty as the Channel Code did not have a specific category for private sector entities.2 Therefore, transport connectivity projects whose Channel Codes were marked “Other” were selected by reducto ad absurdum. In other words, when the recipient organisation was neither the public sector nor non-governmental organisations, they were assumed to be private sector entities. Further screening eliminated recipient organisations that were state-owned enterprises.
Estimates and figures
Estimates on China’s financing for transport connectivity
Transport connectivity infrastructure projects financed by China in 2014-2015 were collected through desk research based on the China Aid database of the William & Mary Research Lab, the Reconnecting Asia database of the Centre for Strategic and International Studies, and the Export-Import Bank of the United States. Projects were considered as transport connectivity financed by China in 2014-2015 if: a) they matched the criteria used in this report, b) the financing amount and the commitment year were clear, and c) they were verified by other sources, such as websites of relevant official institutions, information by state-owned enterprises and media reports. The projects and the links to sources are provided below in Table A.1:
Estimates on current spending and investment gap for transport connectivity
With respect to current spending, the 2015 report Driving Sustainable Development through Better Infrastructure: Key Elements of a Transformation Program by Brookings et al estimated that current global infrastructure spending amounted to around USD 2-3 trillion per year - of this amount, developing countries accounting for roughly two-thirds. However, it is not possible to determine how much of these concerned transport connectivity. Therefore, first, the amounts of current spending for transport infrastructure were calculated based on the United Nations Conference on Trade and Development (UNCTAD)’s World Investment Report (2014) (See Table IV.2 in UNCTAD 2014 report), which indicates that approximately 35% of infrastructure spending was in transport. Second, as 54% of ODF for transport projects in 2014-2015 was considered as transport connectivity, the same proportion was used as a proxy and applied to the estimated annual global spending for transport connectivity. As a result, the current spending on transport connectivity is estimated at USD 315 billion (54% of the 35% of the 2/3 of USD 2.5 trillion - the average of USD 2-3 trillion).
The same calculation method is applied to the estimate for the annual financing gap. Brookings et al estimated the financing gap for global infrastructure at around USD 3.5 billion. Based on this amount, this report thus calculated that the annual financing gap for transport connectivity infrastructure is approximately USD 440 billion (54% of the 35% of the 2/3 of the USD 3.5 trillion).
In addition, the proportion of developing country government spending of roughly 80% was derived by subtracting ODF (USD 15 billion), private investment (USD 52 billion), and export credits (roughly USD 1 billion) from the estimated total current financing (USD 315 billion) and divided by the total (USD 249 billion/315 billion).
Comparison of annual estimates for spending and investment needs of infrastructure and transport
Estimates for the share of mobilisation in private investment for transport connectivity
Mobilised private investment by DFIs and IFIs for transport connectivity amounted to on average around USD 820 million per annum in 2014 and 2015, based on the Mobilisation Survey. It is assumed that a large portion of mobilised amounts for transport connectivity has been captured since the Survey covered two major instruments (i.e. guarantees and syndicated loans) with 90% or 72 of the invited institutions responding. Theoretically, the mobilised amount from the private sector for transport connectivity of USD 820 billion is part of the amount of private investment for transport connectivity of USD 52 billion although they are derived from two separate databases. Based on this assumption, the average mobilised amount from the private sector for transport connectivity was equivalent to around 2% of total private investment for transport connectivity.